JAPAN POWER FASTENING CO.,LTD.

The Group's business performance is heavily dependent on market trends in the housing and construction industries, its key sales fields. Should these markets decline, there is a possibility of a direct impact on net sales and profit. As countermeasures, the Group is strengthening information gathering on market trends and working to expand market share in each market.

In the industrial fastener (screws, springs, etc.) field, there are more than 1,000 screw manufacturers in Japan alone, and competition with imported products from China, Taiwan, and other regions is also intense. Intensifying price competition may put pressure on profitability. The Group has adopted a policy of countering this through the development of proprietary products and strengthening price competitiveness.

While the Group has established a quality control system, including obtaining ISO9001 certification at the Toyooka Plant, if defects occur in products due to unforeseen circumstances, costs associated with inspections, recalls, etc. may arise and affect business performance. The Group strives to build a thorough quality control system while maintaining a stance of placing the highest priority on product quality.

The Group uses iron and stainless steel wire rods and steel strips as its main raw materials, and fluctuations in steel market prices directly affect business performance. If market prices fluctuate significantly, rising production costs may put pressure on profitability. The Group seeks to mitigate the impact through rationalization of production, diversification of procurement sources, and passing on costs to product prices.

The Group outsources production of some of its own planned products to overseas partner factories, with a high proportion outsourced to partner factories in China. Should changes occur in China's economic trends, diplomatic policy, geopolitical risk, laws, tax system revisions, foreign exchange policy, or environmental policy, this may disrupt the procurement and production system and affect business performance.

The Group's largest customer is Sekisui House, Ltd., and sales to this company in the fiscal year under review amounted to ¥1,345 million, accounting for 26.6% of the Group's total net sales. Should transactions with this company shrink or cease, there is a possibility of a material impact on business performance. Diversifying business partners and developing new customers are challenges.

The Group imports from overseas partner factories and holds foreign currency-denominated assets, and significant fluctuations in exchange rates may affect procurement costs and asset values. In particular, in a yen depreciation phase, there is a risk that rising import costs will put pressure on profitability. The securities report does not describe specific hedging measures.

The Group raises funds through borrowings from financial institutions and others, and if interest rate conditions fluctuate significantly, this may affect business performance and financial condition through an increase in interest expenses. In particular, if there is a high proportion of variable-rate borrowings, there are concerns about an increase in financial burden during a period of rising interest rates.

The Group has business sites and partner factories in Japan and overseas, including its plant in Hyogo Prefecture, and large-scale earthquakes and other natural disasters, as well as the occurrence and spread of infectious diseases, may disrupt the production system, sales activities, raw material procurement, and supply chain, affecting business performance and financial condition. In the event of an outbreak, the Group strives to reduce the impact on business activities through measures such as working from home, staggered work hours, and the use of web conferencing systems.

The Group utilizes systems for production control, sales management, accounting, and other operations, and has implemented measures such as VPN connections, firewalls, and antivirus software; however, the risk of loss or external leakage of confidential information, or suspension of information systems due to cyberattacks, unauthorized access, computer virus infection, etc., cannot be completely eliminated. Should such events occur, there is a possibility of an impact on business performance and credibility.