Japan Engine Corporation

Demand for new vessel construction and After-Sales Service may fluctuate depending on global economic conditions, vessel supply-demand balance, and shipping market trends, which could affect the Company's orders, sales, and business results. Because the shipping industry is strongly affected by economic cycles, there is a risk that a sharp decline in demand could directly impact business performance. No specific countermeasures are explicitly stated in the Annual Securities Report.

The Company relies on external procurement for many of the components used in its main products, marine main engines, and some key components are concentrated among specific suppliers. If procurement becomes unstable due to a supplier's business condition or production troubles, this could disrupt manufacturing and delivery schedules and affect business results. No specific countermeasures, such as diversification of procurement sources, are explicitly stated in the Annual Securities Report.

The Company's products have a high ratio of raw material and purchased parts costs within manufacturing costs, meaning that a structure exists in which price surges directly affect business results and financial condition. The Company continuously works to reduce costs, such as through low-cost procurement domestically and developing new procurement sources including overseas, but future risk of price surges cannot be completely eliminated.

Since some purchased parts are procured from overseas, and transactions with customers involve foreign currency-denominated transactions such as in US dollars and euros, exchange rate fluctuations may affect business results and financial condition. Hedging through forward exchange contracts and other means is sometimes implemented, but not all risks can be hedged, and sudden exchange rate fluctuations could impact profit and loss.

The Company holds accounts receivable from business partners, and if rapid changes in market conditions or sudden credit concerns regarding business partners occur, bad debts or credit losses may arise, affecting business results and financial condition. While the Company continuously monitors the business conditions of credit customers in light of changes in financial conditions and economic trends and takes measures to prevent the occurrence of bad debts, there are limits to responding to sudden credit concerns.

The plant strives to secure and level out work volume by taking on machining and assembly work for parts destined for other products in addition to marine main engines, but if work volume falls significantly below planned levels, this could affect business results and financial condition due to deterioration in operating rates and other factors. There is a risk that profitability could decline as the relative burden of fixed costs increases, making stable order intake an important management challenge.