NIPPON SHINDO CO.,LTD

Copper and zinc, the main raw materials, are internationally traded commodities, and sharp fluctuations in market prices can generate unrealized gains or losses on inventory, as well as raw material shortages or production disruptions caused by hoarding through speculative funds. In addition, if raw material prices continue to rise, there is a risk that customers will switch to alternative materials other than brass, leading to a decline in demand for brass rods and wires. As a countermeasure, the Company enters into derivative transactions related to copper and zinc to hedge these risks.

The Company manufactures brass alloys by melting copper and zinc in electric furnaces, and if a deterioration in domestic power supply conditions prevents securing sufficient electricity, production disruptions may occur. While it is difficult to predict the degree and timing of this risk materializing, the Company envisions alternative production at other plants within the Group that are not affected by deteriorating power supply conditions as a countermeasure.

If a business partner becomes insolvent, all or part of the trade receivables may become uncollectible, potentially affecting business results. The Company appropriately monitors the creditworthiness of major business partners and seeks to avoid this risk by obtaining trade credit insurance for partners deemed necessary.

In the event of a large-scale earthquake, natural disaster, accident, or similar occurrence, damage to plant facilities or employees, or disruption of the supply chain, may affect business results. As a countermeasure, the Company has formulated a Business Continuity Plan (BCP) and is working to strengthen its supply chain by establishing alternative production systems at other plants within the Group and diversifying procurement sources.

Although products are manufactured in accordance with various standards and quality control criteria, if a product defect occurs, costs associated with product liability and similar matters may arise. While every effort is made to maintain and improve quality, it is difficult to completely eliminate the risk of defects occurring.

The Company plans to continue considering M&A and business alliances as effective means of business expansion going forward; however, unforeseen changes in economic conditions or the business environment may prevent the originally intended results from being achieved. Although the Company intends to conduct thorough information gathering and consideration, risk arising from changes in the external environment remains.

Although the COVID-19 pandemic has settled down, if a large-scale pandemic caused by a new virus or similar pathogen results in a cluster infection within the Company, production disruptions may occur and adversely affect business results. Disclosure in the securities report of specific countermeasures is limited, and details of risk management are not clearly indicated.