FINE SINTER CO., LTD.

Violations of legal regulations in various countries or actions contrary to social expectations may result in penalties, litigation, or social sanctions. Following the discovery of improper accounting in 2024, the company is implementing recurrence prevention measures including compliance and risk management training and strengthening of the internal reporting system, and continues efforts to ensure these are firmly established within the company. An Internal Control Committee has been established, with a system in place for regular reporting to the Board of Directors.

The majority of consolidated net sales consists of automotive parts such as engine parts and shock absorber parts, so structural transformation or contraction of the automotive industry directly affects business performance. Sales to Toyota Motor Corporation and its local subsidiaries account for 19.8% of consolidated net sales, and there is also dependence on specific customers. As countermeasures, the company is strengthening development of electrification-related products and has established a "New Business Development Office" to promote expansion into non-automotive fields such as railway vehicles and Hydraulic Equipment Products.

In production and sales activities overseas, unforeseen events resulting from changes in the political and economic conditions of each region may affect business performance. The company has established a system to appropriately and timely grasp and respond to local developments by utilizing the information networks of overseas staff. If geopolitical risks or regulatory changes materialize, there is a risk of disruption to production and sales activities.

Being drawn into price competition with a wide range of domestic and overseas competitors may adversely affect business performance. The company has established a "Technical Center" that integrates a dedicated organization covering digital design through mass production with development and production engineering departments, aiming to maintain competitiveness by strengthening development capabilities and accelerating mass production. Development of differentiated products such as electrification products is key to maintaining competitive advantage.

If sharp increases in the price of metal powders such as iron powder, which are raw materials for powder metallurgy products, cannot be passed on to product prices, business performance may be adversely affected. In addition, accidents at suppliers, changes in the political and economic conditions of resource-producing countries, or human rights violations in the supply chain could lead to raw material shortages or damage to the company's image, potentially resulting in a decline in share price or investor divestment. As countermeasures, the company is promoting cost reduction through improved product yield, development of cobalt-free materials, and mineral procurement activities that take human rights and the environment into consideration.

In businesses including overseas production and sales activities, consolidated business results fluctuate due to the impact of exchange rates when converting local currency-denominated items into yen. The impact of exchange rate fluctuations on full-year consolidated operating profit is disclosed as approximately ¥10 million per ¥1/US dollar movement. The company is working to build a business structure capable of securing profits even amid yen appreciation, through manufacturing reforms and rationalization efforts such as automation.

Disasters caused by abnormal weather may affect production activities, and increased costs from stricter regulations may impede corporate activities. Risks exist across all processes including product development, procurement, production, logistics, and sales. The company has formulated a long-term vision toward carbon neutrality by fiscal 2050, and is promoting energy-saving technology development and other measures with a target of reducing CO2 emissions by 50% by fiscal 2030.

Employee retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on pension assets. If actual results diverge from these assumptions due to factors such as a decline in the discount rate or a decrease in pension assets, this may significantly affect future expenses and obligations. The company strives to reduce risk in the management of pension assets through diversified investment and regular monitoring.

If business operations are suspended or technical information and other data are leaked externally due to computer virus infection, hacking, system failure, or similar incidents, this may adversely affect business performance and financial position. The company conducts evaluation and analysis of information security risks and monitors the situation, progressively strengthening human, organizational, and technical countermeasures. As a manufacturer holding important assets such as technical information, responding to cyberattacks remains an ongoing challenge.

If sluggish product demand or stalled production due to the spread of infectious diseases continues, this may have a material impact on financial position, business results, and cash flows. The company thoroughly implements hygiene management and business operations such as telework, and in the event of an emergency, follows a policy of minimizing risk through measures such as adjusting operating days, reducing fixed costs, and flexible short-term fundraising.