JMC Corporation

As a result of recording an impairment loss on fixed assets of ¥1,319 million in the fiscal year under review due to deteriorating profitability in the Casting Business, the Company recorded a net loss of ¥1,263 million, giving rise to material events that raise significant doubt about its going concern assumption. Although the Company breached the financial covenants of its commitment line agreement (outstanding borrowings of ¥50 million), it has already obtained consent from the financial institution not to exercise its right to accelerate the loss of benefit of time, and the Company judges that no material uncertainty currently exists. The Company continues to promote measures to improve profitability in the Casting Business, including support for larger-scale prototypes, establishment of a mass-production system, and portfolio diversification.

The Company holds tangible fixed assets such as factory buildings and production machinery and equipment, as well as intangible fixed assets such as software, and if business profitability declines due to intensifying competition or other factors, recognition of impairment may become necessary, potentially affecting operating results and financial position. In the fiscal year under review, this risk materialized, with an impairment loss of ¥1,319 million recorded due to deteriorating profitability in the Casting Business. The Company is promoting profitability improvement measures in parallel with restraining capital expenditures.

Some of the Company's short-term borrowings, including the commitment line agreement for working capital purposes, and long-term borrowings for capital expenditure purposes, are subject to financial covenants, and if these covenants are breached, there is a risk that the Company could lose the benefit of time and be required to repay the amounts in full. In the fiscal year under review, the Company already breached the financial covenants of its commitment line agreement, and has obtained a grace period from the exercise of rights through consultation with the financial institution. The Company strives to secure liquidity on hand by establishing funding arrangements with multiple financial institutions.

If an economic downturn occurs in the transportation equipment field, including automobiles, or in the FA (factory automation) field, order volumes and order amounts may decrease, potentially affecting operating results and financial position. The Company's business structure is susceptible to factors such as automakers' reductions in development budgets, changes in development schedules, and shifts in model change cycles. The Company seeks to diversify this risk by expanding transactions with multiple customers and making proactive capital investments in fields where future demand growth is expected.

If the "prototype-less" approach, in which manufacturers conduct verification solely using CAD software, becomes mainstream in the future, demand for prototype production may decline, potentially reducing orders. Although prototyping development methods vary by manufacturer, there is a risk that the shift toward development processes that bypass physical prototypes will accelerate as digitalization advances. The Company aims to mitigate this impact by expanding its order base to include mass-production areas and strengthening its capabilities in prototyping and proposals for large-scale castings, an area with high barriers to entry for competitors.

There is a risk that the demand growth driven by the spread of low-priced consumer 3D printers may not continue, and as equipment prices decline and options expand, existing customers may increasingly bring prototype production in-house, leading to a decrease in orders. Combined with an increase in the number of competitors, this could affect the Company's business, operating results, and financial position. The Company seeks to differentiate itself by introducing high-end resin 3D printers to pursue high quality, high precision, and short lead times, and by building a comprehensive support system that includes equipment sales and raw material resin sales.

While the Company is making proactive capital investments to expand production capacity, it is difficult to predict economic and market trends, and if orders do not expand as expected, the burden of depreciation expenses could squeeze profitability, creating a risk of equipment retirement or impairment. In the fiscal year under review, this risk materialized in the form of an impairment loss on Casting Business equipment, illustrating a structure in which the precision of capital investment decisions directly impacts the Company's finances. The Company has established a system in which investment decisions are made through deliberation, giving maximum consideration to market and competitive trends.

Representative Director, President and CEO Daichi Watanabe and Senior Managing Director and COO Hiroyuki Suzuki have served as the persons responsible for the 3D Printer, Casting, and CT businesses since their respective inceptions, playing important roles ranging from management policy and strategy decisions to sales and manufacturing technology. If either of them were to leave the Company or become unable to perform their duties, this could affect the Company's business, operating results, and financial position. The Company is working to reduce excessive dependence on these individuals by establishing a management meeting system, building out its organizational structure, and enhancing budget management sophistication.

The Company frequently handles confidential customer information related to new product development, and if such confidential information were to leak externally due to unforeseen circumstances, this could affect operating results and financial position through loss of orders due to reputational damage and the occurrence of damages compensation expenses. Confidentiality is positioned as one of the most important management issues, and the Company implements comprehensive management from both hardware and software perspectives, including networks, firewalls, and access controls, as well as regular internal training.

The Casting Business uses aluminum, magnesium alloys, chemical wood, and casting sand, while the 3D Printer Business uses various resin materials including epoxy, and if the recent upward trend in material prices continues or becomes prolonged, this could affect operating results and financial position. The Company works to pass on costs to product prices within a reasonable range, and strives for stable material procurement, including negotiating with suppliers to secure materials based on advance notification of medium- to long-term requirements.