Nippon Yakin Kogyo Co.,Ltd.

There is a risk that the increase in production capacity for General Materials in Asian regions, including China, may worsen the supply-demand balance and product prices. A decline in selling prices due to intensifying competition would directly affect the Group's earnings. The Group aims to address this through the expansion of the High-Performance Materials business and diversification of its product portfolio based on the Medium-Term Management Plan 2026-2028.

There is a risk that changes in trade policies in various countries, including the United States, and heightened geopolitical risks, may lead to strengthened tariffs and quantity restrictions on steel trade. The Group's High-Performance Materials rely on overseas markets for approximately 60% of sales, making the impact on exports particularly significant. The Group will promote strengthening and diversification of its business foundation through the execution of measures under the Medium-Term Management Plan 2026-2028.

There is a risk that price fluctuations or procurement difficulties may arise for key raw materials such as nickel, chromium, and molybdenum, due to international supply-demand balance, resource nationalism, international conflicts, speculative trading, and other factors. A sharp rise in raw material costs would directly affect the Group's manufacturing costs and profitability. The Group addresses this through diversification of procurement sources and expanded use of recycled materials (urban mining).

The Group conducts foreign currency-denominated transactions for exports of special stainless steel products and imports of raw materials, among others, and there is a risk of being affected on both the profit and loss sides by significant fluctuations in exchange rates. Based on the "Hedge Transaction Regulations," the Group hedges risk by utilizing commodity derivative transactions and foreign exchange forward contracts as necessary.

If a serious accident or occupational injury occurs at a major facility, there is a risk that production activities will be disrupted. The Group has introduced an OSHMS (Occupational Safety and Health Management System) to improve safety and health levels, and aims to achieve stable, safe operations and improve the working environment through strategic capital investments under the Medium-Term Management Plan 2026-2028.

There is a risk that, in strategic investments for increased production of High-Performance Materials and carbon neutrality-related initiatives under the Medium-Term Management Plan 2026-2028, delays in construction progress or operational troubles may prevent the expected investment effects from being achieved, adversely affecting business results and financial condition. The Group addresses this by accurately grasping changes in circumstances during the execution process and making appropriate revisions as needed.

Since major manufacturing facilities are concentrated at the Kawasaki Works, there is a risk that if this facility is affected by a large-scale natural disaster or infectious disease outbreak, production activities would be severely impacted, resulting in a significant decrease in sales revenue, supply shortages to customers, and substantial facility restoration costs. The Group continuously formulates, trains for, and reviews its BCP (Business Continuity Plan), and has also separately established a BCP for infectious disease response.

There is a risk that interest rate conditions and other financial market fluctuations may affect borrowing interest rates and fund procurement costs. In addition, there is a risk of loss of the benefit of time on borrowings, including syndicated loans with financial covenants, if the Group's financial condition deteriorates. The Group hedges this risk by utilizing interest rate swap transactions based on the "Hedge Transaction Regulations."

As an energy-intensive steel industry, there is a risk of future burdens from carbon pricing, rising electricity and fuel prices, increased capital investment for CO2 emissions reduction, and delayed response to changes in demand structure. The Group has formulated a roadmap aiming for net-zero CO2 emissions by fiscal year 2050 and is steadily implementing measures toward carbon neutrality.

There is a risk that external cyberattacks or physical destruction could cause information system outages or the leakage or loss of technical and management information, which would constrain corporate activities such as production and sales, as well as result in the payment of damages. The Group is working to strengthen its internal response framework while also maintaining cyber insurance coverage.