NIHON SEIKO CO.,LTD

Since China designated antimony-related items as subject to export controls on September 15, 2024, export volumes of raw metal ingots and processed Antimony Trioxide products have decreased significantly. Since Antimony Trioxide, the Company's core product, uses raw metal ingots procured overseas as its main raw material, there is a risk that raw material procurement will fall short due to export control and resource protection policies implemented by China and other producing countries. The Company strives to secure supply sources that avoid dependence on specific countries, but recognizes further diversification of procurement sources as an important issue.

In the Antimony Business, raw metal ingots are imported in US dollars, so fluctuations in raw metal ingot prices and the yen-dollar exchange rate directly affect operating results. In the Metal Powder Business as well, fluctuations in the market prices of raw materials such as silver, copper, and nickel during the period from purchasing to sale significantly affect profitability. As countermeasures, the Company optimizes inventory quantities, shortens lead times, utilizes foreign exchange forward contracts, and sets yen-denominated prices for export products.

In the Japanese Antimony Trioxide market, imported products traditionally accounted for approximately half of the volume, of which about 80% were Chinese products; however, since China implemented export controls, imports of European and other products have increased, and competition continues. Amid intensifying price competition with imported products, the Company differentiates itself by reducing costs through DX and labor-saving in production processes, and by focusing on manufacturing and selling special-specification, high-quality products.

Antimony products are used in a wide range of applications including flame retardants, catalysts, brake materials, and glass fining agents, and are linked to production trends in various industries such as automobiles, home appliances, OA equipment, and textiles. If crude oil and naphtha prices rise due to worsening conditions in the Middle East, or if economic activity is restricted due to economic fluctuations or a pandemic, demand could decline sharply, potentially affecting operating results. The Company strives to maintain a flexible production and sales system that can respond promptly to changes in demand trends and to secure stable procurement of production materials.

Since June 1, 2017, Antimony Trioxide has been designated as a Class 2 controlled substance under the Ordinance on Prevention of Hazards Due to Specified Chemical Substances (Tokkasoku). The Company is obligated to implement emission control measures, workplace environment measurements, and special health examinations at its business sites. Customers may also need to take similar measures, which could affect product demand. The Company works to minimize the impact on its business by establishing a legal compliance system through facility upgrades and employee training, and by proposing specially processed products exempt from the Tokkasoku regulations.

Products in the Antimony Business include deleterious substances under the Poisonous and Deleterious Substances Control Act and Class I Designated Chemical Substances under the Act on Confirmation, etc. of Release Amounts of Specific Chemical Substances in the Environment and Promotion of Improvements to the Management Thereof. If loss, dropping, or scattering occurs during storage or transport, it could cause environmental pollution. In addition to legal compliance, the Company thoroughly manages operations in accordance with standard documents and procedure manuals based on its quality and environmental management manual.

With the declining working-age population due to the falling birthrate and aging population, both the Antimony Business and Metal Powder Business are experiencing worsening labor shortages and intensifying competition for recruitment. In particular, in the Metal Powder Business, the Company is proceeding with expansion of the Tsukuba Plant and enhancement of production capacity; if human resource acquisition is insufficient, it could affect operating results through a decline in production capacity, technical capability, and service quality. The Company aims to reduce this risk through measures such as diversifying recruitment activities, strengthening human capital initiatives, and promoting labor-saving and automation.

Metal powder is used as a material for automotive parts, home appliance parts, and electronic equipment components, and is strongly dependent on capital investment and production trends in the automotive, electrical, and electronics industries. If economic activity is restricted due to worsening conditions in the Middle East, economic fluctuations, a pandemic, or other factors, demand could decline sharply, potentially affecting operating results. The Company aims to reduce this risk by improving production efficiency, reducing costs, and securing stable procurement of production materials.

In the Metal Powder Business, there is a risk that plant operations could be suspended due to natural disasters such as major earthquakes, fires, or equipment failures, disrupting product delivery to customers. The Company disperses this risk through a two-site structure consisting of the Noda Head Office Plant (Noda City, Chiba Prefecture) and the Tsukuba Plant (Ushiku City, Ibaraki Prefecture), and conducts regular education and training. Going forward, the Company plans to advance BCP formulation for wind and flood damage from large typhoons and torrential rains, as well as for unknown infectious diseases.

With the miniaturization and increasing performance of electronic components, demand for fine metal powders and new alloy powders is increasing; however, technical factors tend to lower product yield and increase costs. A decline in profitability could affect operating results, and the Company addresses this by securing appropriate processing fee unit prices and establishing efficient manufacturing methods through improvements in its proprietary water atomization technology.