Neturen Co., Ltd.

If market conditions deteriorate in the automotive, civil engineering/construction, construction machinery, machine tools and other industries, or if political and economic conditions change, or if unforeseen events such as natural disasters or infectious disease outbreaks occur, orders from customers may decrease, and the burden of fixed costs such as personnel expenses and depreciation may become relatively heavier, potentially affecting business performance. In addition, if the recovery of capital expenditure funds is not expected, there is a risk that impairment losses on fixed assets may occur. As countermeasures, the Group utilizes know-how from production innovation activities, continues cost reduction activities, promotes multi-skilling of workers, and promotes investment in equipment automation, and has established a system for prudent investment decisions based on the internal regulation "Business Investment Guidelines."

The Group actively promotes M&A and capital participation, but if future business plans deteriorate more than expected due to changes in the business environment, impairment losses on goodwill may occur. Although a system for careful decision-making based on the "Business Investment Guidelines" and other rules has been established when executing M&A, a certain degree of risk remains regarding environmental changes after acquisition. For group companies, monitoring is conducted through group meetings held twice a year and monthly management reports.

If quality issues occur in products used in critical parts of automobiles, construction machinery, and other equipment, this may result in human and social harm, potentially having a significant impact on the Group's credibility and business performance. As countermeasures, the Group has obtained certification for quality management systems such as ISO9001, and operates a global quality assurance system in which the Quality Assurance Headquarters and the quality assurance sections within each division's factories work together. The Group strives to prevent quality nonconformities through factory-specific quality control, quality audit activities, and activities to prevent the occurrence of serious quality problems.

The Group's manufacturing processes, which center on heat treatment technology, mainly use electricity as an energy source, and electricity charges are an important element of manufacturing costs. Rising electricity charges due to soaring resource and energy prices may directly affect business performance. As countermeasures, the Group strives to reduce electricity charges by updating to the latest energy-efficient equipment, actively introducing solar power generation systems, utilizing large-volume contracts covering multiple sites, and continuing negotiations with electric power companies.

Raw material prices, particularly for steel, which is the main material used in the Products Division Related Business, have risen and remained high, and if prices fluctuate more than expected, this may affect business performance through an increase in manufacturing costs. There is also a risk that it may become difficult to obtain the materials necessary for production. As countermeasures, the Group strives to pass on cost increases to sales prices, while the Procurement Headquarters takes the lead in continuously ensuring stable supply and negotiating procurement prices.

A shortage of drivers and increases in transportation costs in the logistics industry may affect the Group's business performance. As a countermeasure, the Group promotes initiatives that are conscious of both cost and environmental aspects through thorough efficient transportation management. The Group has established the "Netsuren Group Green Procurement Guidelines" and conducts open and fair procurement in cooperation with suppliers, contributing to reducing environmental impact and to social development.

The Group conducts business globally and bears country risks such as changes in the political and economic conditions of the countries in which it operates, changes in legal systems, and deterioration of public security. If unexpected changes in political and economic conditions or legal systems occur, this may affect the Group's business performance. As countermeasures, the Group has established a system in which the responsible division works in cooperation with the Business Development Headquarters, Administration Headquarters, and Corporate Planning Office, and conducts monitoring through the setting of withdrawal criteria based on the "Business Investment Guidelines" as well as group meetings held twice a year and monthly management reports.

In global business operations, it is anticipated that investment amounts will become large and be affected by exchange rate fluctuations, and if sudden fluctuations occur in the financial and foreign exchange markets, this may affect the Group's business performance. The Group has established a system in which each functional headquarters cooperates to identify issues and consider countermeasures at each stage, from the formulation of business plans in the countries of operation through to each process of business operations. The Management and Executive Officers' Meeting, held in principle twice a month, also serves as a forum where the management status of each company, including regional conditions, is reported.