MOLITEC STEEL CO., LTD.

The proportion of internal combustion engine (ICE)-related parts in the Company's non-consolidated sales is approximately 70%, and there is a risk that sales could decline by 30% or more in the future as electrification progresses. Although the pace of BEV adoption has slowed in some areas, there has been no change in the medium- to long-term direction toward electrification, and structural transformation in major customer segments is expected to continue. As a countermeasure, the Company is promoting a shift in its sales composition through investment and human resource reallocation toward the six priority fields and EV-related businesses.

The Group procures a large proportion of its steel materials mainly from Nippon Steel Trading Corporation, which accounts for a high share of total purchases. If there were changes in the supplier's supply capabilities, stable procurement of raw materials could become difficult, potentially affecting the Group's financial position and operating results. The securities report does not specify concrete countermeasures such as securing alternative suppliers.

The Group holds substantial fixed assets, and if changes in the business environment lead to a decrease in estimated future cash flows or a significant decline in the market value of assets, impairment losses may need to be recognized. If impairment is recognized, it could have a material impact on the Group's financial position and operating results. The securities report does not specify concrete countermeasures.

In addition to foreign currency-denominated settlements arising from overseas business operations and import/export transactions, the Group also extends loans between overseas subsidiaries, exposing it to foreign exchange rate fluctuation risk. Although the Group seeks to mitigate this risk through forward exchange contracts and other measures, sudden exchange rate fluctuations could affect its financial position and operating results.

The Group procures working capital mainly through borrowings from financial institutions, and the ratio of interest-bearing debt to total assets stood at 15.1% as of the end of FY2026 (ending March 2026). If the Group's financial condition deteriorates or borrowing interest rates rise, resulting in increased interest expenses, this could affect its financial position and operating results. Currently, fundraising, including refinancing, is proceeding smoothly.