G-TEKT CORPORATION

Changes in consumer behavior resulting from economic downturns, tax system changes, heightened geopolitical risks, and rising prices may lead to a decline in automobile sales, which could affect the business performance of the Group. As the Group operates businesses in various countries around the world (Japan, North America, China, Asia, South America, and Europe), it faces the risk of simultaneous demand decline in multiple regions. The Group seeks to mitigate the impact through prompt responses in capital expenditure decisions, personnel allocation, and expense management.

The shift from internal combustion engine vehicles to EVs may significantly affect conventional parts demand and production systems due to changes in vehicle body structure, reduction in the number of parts, and progress in software integration. In addition, since the degree of EV adoption progress differs by region, there is a risk that changes in the power source composition different from expectations could affect business performance. The Group has set forth "Establishment of EV-related Business" as a management strategy, allocating priority resources to R&D expenses and capital expenditure, while working to develop products compatible with multiple power sources and strengthen its development structure through external alliances.

Honda Motor Co., Ltd. and its group companies account for approximately more than 50% of consolidated net sales, and changes in the production and sales trends, business strategies, or purchasing policies of the Honda group could directly and significantly affect the Group's business performance. Honda Motor Co., Ltd. also qualifies as another affiliated company holding 20% or more of total voting rights. The Group is working to diversify its customer base by developing sales strategies based on price-competitive development proposals, thereby reducing dependence risk.

As environmental regulations are strengthened in various countries and decarbonization demands from stakeholders become increasingly sophisticated, failure to appropriately manage, disclose, and reduce greenhouse gas emissions—not only Scope 1 and 2 but also Scope 3, including the supply chain—may result in a decline in social reputation and loss of business opportunities, thereby affecting business performance. The Group has set a target of "Carbon Neutrality by FY2050" and is working on considering conversion to manufacturing methods for steel sheets that reduce environmental impact, as well as establishing development and production technologies for aluminum products.

The spread of new materials such as aluminum, the expanding application of new manufacturing methods such as gigacasting, and the progress in adoption of composite materials may change vehicle body structures and manufacturing methods, potentially leading to competition with and substitution of the Group's products, which mainly consist of conventional steel sheet press parts. The Group has established mass production technology for aluminum press processing and conducts production at its European base, while also promoting development and research toward the commercialization of Large Integrated Products using aluminum die-casting technology and hot stamping technology, as well as proposal activities to customers.

Approximately 80% of consolidated net sales are generated through local production by overseas subsidiaries, and fluctuations in the value of foreign currencies against the Japanese yen affect the Group's financial position and business performance through translation differences. In addition, sharp and significant exchange rate fluctuations may also affect business performance with respect to exports of production equipment such as Dies and Jigs/Tools. Regarding exports, the Group seeks to mitigate the impact of fluctuations through means such as forward exchange contracts.

Increasingly sophisticated and advanced cyberattacks are expanding risks across a broad range of areas, including control systems for factory equipment, and attacks conducted through the supply chain could, if they result in business interruption or information leakage, affect business performance and social credibility. The Group is strengthening the management of IT assets and equipment mainly through its information security department, establishing a global monitoring, detection, and rapid response system, and conducting continuous education and training for employees.

Natural disasters, infectious diseases, heightened geopolitical risks, resource price fluctuations, and responses to human rights and environmental regulations in various countries may disrupt the procurement of key parts and raw materials. In particular, there is some dependence on die manufacturers for which securing alternative sources is difficult. The Group seeks to reduce disruption risk and achieve early recovery through hazard map surveys of key suppliers, understanding of disaster recovery systems, securing alternative sources, and shortening lead times and diversifying processes for die manufacturing.

If geopolitical risks such as political instability, political tensions between nations, or wars and conflicts occur in the countries and regions where the Group operates, disruptions to the supply chain or restrictions on business activities may occur. In addition, there is also a risk that strengthened regulations and policies in various countries from the perspective of economic security could affect business operations. The Group addresses this by strengthening information sharing on geopolitical risks in each country within the Group and by promoting autonomy in procurement and other functions in each region.

In addition to a tightening labor market, intensifying competition for talent in highly specialized fields such as EV and digital technology, as well as challenges in skill transfer, may make it difficult to secure and develop the necessary human resources. The Group is working to improve benefits and treatment through the review and expansion of its personnel systems, reduce workload through automation of on-site labor, and promote the creation of a comfortable working environment through workplace diagnostics, striving to foster an environment and corporate culture in which diverse talent can grow.