Toyo Seikan Group Holdings, Ltd.

There is a risk that production costs, including raw material and energy prices, labor costs, and logistics costs, may fluctuate due to foreign exchange movements and the intensification of international tensions (such as the situation in the Middle East). While the Company is advancing selling price setting linked to raw material prices and pass-through of prices, there is a concern that profitability may decline depending on the degree of achievement. The Company is also promoting improvement of its cost structure through the review of aging facilities and fundamental reviews toward labor-saving and energy-saving equipment.

There is a risk that procurement of raw materials both domestically and internationally may become difficult due to the intensification of international tensions or disruptions in the supply chain. Not only imported goods but also domestically procured goods use crude raw materials originating overseas, and any interruption in procurement would directly affect business results and profitability. The Company is working to achieve stable procurement by diversifying suppliers and strengthening relationships with suppliers.

Against the backdrop of risks such as a Taiwan contingency, U.S.-China tensions, the situation in Russia and Ukraine, and the situation in the Middle East, there are concerns that supply chain disruptions, difficulty in raw material procurement, price surges, import/export restrictions, and the introduction of new tariffs may affect business performance. As the Company operates globally across Asia, Europe, and the Americas, deteriorating political situations, exchange rate fluctuations, and changes in laws and regulations in each region may also affect business performance. The Company implements responses based on its Group Overseas Business Crisis Management Regulations and continuously monitors overseas safety information.

The transition to a circular economy is progressing both domestically and internationally, and regulatory risk related to packaging containers is increasing, particularly due to strengthened single-use regulations for plastic packaging containers. In addition to increased costs to respond to stricter regulations, there are concerns that changes in customer needs may affect the manufacture and sale of products, thereby impacting business results and financial condition. Under the Medium-Term Management Plan 2030, the Company has set a target of raising the proportion of environmentally friendly products and services in total sales to 50% or more by 2030, and is working on initiatives such as conversion to alternative materials.

In the container market, in addition to intensifying price competition with competitors, customers continue to expand in-house manufacturing of containers, raising concerns that the Group's price negotiating power may decline and that the downward trend in product prices may intensify further, potentially making it difficult to secure an appropriate profit level. The Company is responding through a differentiation strategy based on innovative multi-material products and services.

There are concerns that security incidents such as system outages, malfunctions, or information leaks caused by cyberattacks by malicious third parties may occur, making it difficult to continue business operations. Leakage of personal information or trade secrets could damage reputation and affect competitiveness and procurement capability. The Company promotes security measures through understanding of the current situation via the Group Information Management Committee and collaboration with external experts.

There are concerns that if the Group's or its business partners' employees or production facilities suffer significant damage due to large-scale natural disasters such as earthquakes or typhoons, or accidents, this could adversely affect business results and financial condition. This also includes the risk of restrictions on business activities due to the spread of infectious diseases, and the risk of loss of trust due to insufficient hygiene management. The Company is implementing measures such as BCP formulation, diversification of suppliers, establishment of backup systems, securing appropriate inventory levels, and taking out insurance.

Amid the declining birthrate, aging population, and shrinking working-age population, securing human resources continues to be difficult, and there are concerns that failure to secure and develop capable leaders and excellent talent responsible for future sustainable growth could adversely affect future growth. The Company is responding through the switch to unified Group-wide recruitment for new hires from April 2021 onward, and the core talent management framework introduced in fiscal 2017. The Company is also promoting labor savings through digitalization and the use of AI.

There are concerns that, in aggressive investment and financing activities such as corporate acquisitions, capital participation, and capital expenditures, failure to achieve the expected results could have a significant impact on business results and profitability. The Company has established an Investment Management Committee, clarified decision-making procedures and evaluation criteria, and conducts regular monitoring after investments and loans are made, with a system in place to make withdrawal decisions for projects that fail to achieve expected effects.

There are concerns that if deficiencies in the risk management system lead to situations where the Company's corporate social responsibility is called into question, reputational risk will increase, significantly damaging trust and evaluation, and affecting the continuity of business activities. The Company recognizes that the risk of violating the Antitrust Act in particular would have a significant impact, and has designated April 20 of each year as "Antitrust Act Violation Prevention Awareness Day" to thoroughly ensure compliance across the Group. The Company has established a cross-organizational management system through the Group Risk and Compliance Committee.