NIPPON CHUZO K. K.

There is a risk that procurement difficulties and price surges in raw materials, fuel, and materials caused by the worsening Middle East conflict situation cannot be passed on to sales prices. In addition, trends in private-sector capital investment and public-related projects may adversely affect the business environment of customers in steel, plants, industrial machinery, construction machinery, bridges, construction, and automobiles, potentially leading to a decline in sales volume and sales prices. As countermeasures, the Company is strengthening cooperation between manufacturing and procurement departments, reducing costs through productivity improvement, and securing competitiveness by promoting the development of high-value-added products such as metal 3D additive manufactured products.

Since the Company procures overseas OEM products, there is a risk that procurement prices will rise due to yen depreciation. The Company mitigates the impact of exchange rate fluctuations by using foreign currency receipts to fund payments, and is also taking measures to respond to yen depreciation.

There is a possibility that interest expenses on borrowings will increase due to rising interest rates. As countermeasures, the Company is working to reduce borrowings and diversify lenders, while improving its financial condition by optimizing the ratio of long-term borrowings, reducing inventory, and shortening the collection period for trade receivables.

There is a possibility of a decline in the market value of held stocks and land, and of impairment losses on fixed assets due to declining profitability. Regarding the suspended Ikegami Plant, the Company has ordered removal work for equipment with little expected future use, and has already recorded an impairment loss equivalent to the restoration cost. The Company manages the risk of asset value impairment by carefully selecting assets to hold based on the purpose and benefits of holding them.

There is a possibility that retirement benefit expenses will increase due to changes in the assumptions used in calculating retirement benefit obligations (such as the discount rate). In FY2025, as a result of revising the discount rate in response to rising interest rates, retirement benefit expenses decreased. The Company has established a system to grasp the impact of changes in assumptions in a timely and appropriate manner.

There is a risk that trade instability arising from U.S. tariff policy, or import restrictions, additional tariffs, and export suspensions resulting from deteriorating relations with China, could affect the business. As countermeasures, the Company is proposing a shift to domestic procurement for customers with concerns, preparing a domestic production system within Japan, investigating alloy and material supply sources, and prohibiting or restricting overseas travel and business trips.

If business-related laws and regulations such as those concerning the environment, occupational health and safety, taxation, antitrust law, and the Construction Business Act are revised or changed, this may affect business performance. The Company keeps abreast of trends in the revision of laws and public regulations in a timely manner, and is also responding to the "Act on Prevention of Delay in Payment, etc. to Subcontractors" by reviewing payment terms.

The occurrence of serious quality complaints or delivery delays, or frequent complaints, could reduce customer trust, leading to a significant loss of market share and adversely affecting business performance. As countermeasures, the Company is preventing falsification of inspection data through the renewal of testing equipment, strengthening management of critical materials, conducting company-wide QA education, and promoting PDCA activities aimed at eliminating defective products.

There is a risk that important or confidential information could be leaked or lost due to computer viruses or cyberterrorism. As countermeasures, the Company is re-examining vulnerabilities and strengthening its security framework, conducting education on countermeasures against computer viruses and cyberterrorism as well as targeted email attack drills, and using highly secure external storage for data exchange with outside parties.