NIHON SEIKAN K..K.

Against a backdrop of domestic population decline and the relocation of customers overseas, demand in the 18L can market has been on a medium- to long-term declining trend. Rising product prices resulting from increases in steel prices, printing costs, logistics costs, energy prices and other costs may promote substitution to alternative containers, potentially causing further market contraction. The Group is working to maintain market share and improve capacity utilization through strengthening cost competitiveness, shifting to higher value-added products, and improving quality.

In the Art Can field, delays in the start-up of new equipment, among other factors, have affected net sales, and the competitive environment is changing as some customers increasingly adopt multi-sourcing procurement. This risks dispersing orders from existing customers and destabilizing the earnings base. The Group is working to strengthen its earnings base by pursuing new customer development and new product development.

Prices of steel, the Group's principal raw material, fluctuate under the influence of market conditions and international circumstances, and logistics costs, printing costs, subsidiary material prices, labor costs and other costs have also continued to trend upward. If sharp price fluctuations occur, the Group may be unable to adequately pass on the resulting cost increases to product prices, which could adversely affect the Group's business performance. The Group strives to appropriately pass on costs to product prices, but delays or timing mismatches in such pass-through constitute a risk.

As of the end of March 2026, the Group's external liabilities consisted of short-term borrowings of ¥120 million, long-term borrowings (including current portion) of ¥2,330 million, and lease obligations (including current portion) of ¥672 million, totaling ¥3,123 million. Should interest rate levels fluctuate significantly going forward, this could affect the Group's business performance through increased interest expense, among other effects. Depending on the proportion of variable-rate borrowings, there is a risk of increased financial costs in a rising interest rate environment.

The Group owns a steel-frame, three-story leased building with a total floor area of 11,493 square meters on the site of its head office, and fluctuations in the occupancy rate of this leased real estate may affect business performance. If tenants vacate or new tenant move-ins are delayed, rental income could decline, adversely affecting earnings. Maintaining and improving occupancy rates is key to securing stable earnings.

The metal can industry as a whole continues to face a medium- to long-term declining demand trend, and faces structural challenges such as excess capacity and intensifying price competition. Industry consolidation and other developments may progress going forward, and changes in the competitive environment pose a risk of affecting the Group's business strategy and profitability. The Group is working to strengthen its competitiveness through improving production efficiency, shifting to higher value-added products, and improving quality.