DOWA HOLDINGS CO., LTD.

In addition to plant operation suspensions and increased facility management costs due to weather-related disasters, changes in the investment environment resulting from the introduction of carbon pricing (such as carbon taxes) and the institutionalization of climate-related information disclosure may affect operating results and financial condition (impact level: medium to large). The Group has set carbon neutrality by 2050 as its goal, established GHG emissions reduction targets and contribution targets through products and services as interim targets for FY2030, and formulated a roadmap in May 2023. In addition to energy conservation, renewable energy, fuel switching, and electrification, the Group is also promoting in-house development of biomass fuel and ammonia burners.

Centered on the Smelting & Refining Division, the Group is significantly exposed to fluctuation risk in non-ferrous metal prices such as gold, silver, PGM, copper, and zinc, as well as in foreign exchange rates (mainly the US dollar) (impact level: medium to large). Sensitivity estimates for the FY2026 earnings forecast are as follows: a ¥1/$ change in exchange rates impacts operating profit by ¥630 million, a $100/t change in zinc prices impacts it by ¥460 million, and a $100/t change in copper prices impacts it by ¥30 million. The Group utilizes derivative transactions such as non-ferrous metal forward contracts and foreign exchange forward contracts as hedging tools to avoid and mitigate risk.

Accidents and disasters associated with production activities and transportation/logistics activities may threaten the safety and health of employees or make it difficult to operate as planned (impact level: medium to large). The Environment & Safety Department leads efforts to strengthen risk assessments, conduct safety audits for new businesses, operate the construction work standard rules "DOWA Production Technology Management Standard (DTMS)," and implement preventive measures such as heatstroke countermeasures. The Group has also formulated a "Health Management Declaration" and is working to maintain and promote the health of employees and their families.

If environmental pollution occurs or environmental-related laws and the Mine Safety Act are revised, this may affect operating results and financial condition (impact level: medium to large). The Group has established environmental management systems utilizing ISO14001 and Eco Action 21 at major domestic and overseas business sites, setting in-house standard values stricter than legal regulatory values and conducting monitoring. Even for all domestic mines that have already ceased operations, the Group continues patrol inspections based on the Mine Safety Act, striving to prevent environmental pollution and mining damage caused by mine drainage and other factors.

As of the end of the consolidated fiscal year, the Group held marketable securities totaling ¥53,239 million, mainly in business partners, and bears the risk of share price fluctuations (impact level: small to medium). For each individual holding, the Board of Directors verifies the alignment with the purpose of holding and the balance against the cost of capital, conducting periodic reviews. The policy is to sequentially sell off holdings judged not to contribute to enhancing corporate value, while giving consideration to market impact.

The balance of interest-bearing debt at the end of the consolidated fiscal year was ¥90,691 million (11% of total assets), and sharp fluctuations in interest rates may affect operating results and financial condition (impact level: small to medium). The Group reduces the risk of rising interest rates by keeping interest-bearing debt with variable interest rate terms within a certain range, while also optimizing the balance of funding methods and funding sources to reduce fundraising risk and costs.

If it is estimated that future cash flows commensurate with the amount of investments and loans cannot be obtained, there is a risk of recognizing impairment losses, which may affect operating results and financial condition (impact level: small to medium). The Group conducts an annual review of major investment projects, confirming the latest future cash flow projections, and reflects countermeasures in the following year's implementation plan when deviations from the plan are recognized.

If confidential information or personal information of customers, business partners, or within the Group is leaked, tampered with, or destroyed due to cyberterrorism or other causes, this may lead to loss of credibility or claims for damages, affecting operating results and financial condition (impact level: medium). The Group works to reduce this risk through the conclusion of confidentiality agreements, compliance with information-related regulations, and the introduction, operation, training, and employee education related to security measure systems such as malware countermeasures and multi-factor authentication.

Against the backdrop of a declining domestic working population due to the falling birthrate and aging population, and intensifying competition for recruitment, it may become difficult to secure the human resources necessary for business continuity at some manufacturing sites, creating a risk of disruption to maintaining operational systems and loss of opportunities to enter new businesses (impact level: medium). The Group is working to reduce this risk through extending the retirement age, work-style reform, developing systems that enable diverse and flexible work styles, and improving efficiency and labor-saving in operations through digital technology as well as enhancing human resource development programs.

The Environment & Recycling, Smelting & Refining, Electronic Materials, Metal Processing, and Heat Treatment Divisions each face the risk of declining demand due to economic downturns, changes in industrial structure, and the development of alternative technologies. Supply chain disruptions and changes in tariff policy arising from country risk are also cited as company-wide common risks. In response, the Group has built a unique business portfolio composed of multiple businesses with differing risk characteristics, striving to diversify risk across the Group and secure stable business performance.