OKUMA Corporation

Demand for machine tools is directly linked to economic conditions and capital expenditure demand in Japan, the Americas, Europe, and Asia including China. The overseas sales ratio for the current consolidated fiscal year was high at 73.3% (70.1% in the previous period), and economic deterioration in overseas consumption regions has a direct impact on business performance. While export risk management through regional diversification is implemented, there is no complete defense against a sharp decline in demand in specific regions.

Trade policy, particularly that centered on the United States, has fluctuated significantly in recent years, and continuation or new introduction of tariff measures may change in a short period, making the impact difficult to predict. The Group strives to pass on cost increases through price adjustments, but if changes in trade policy alter customers' capital expenditure trends or if constraints arise in passing on costs to prices, this could lead to a decline in profitability. Given the Group's manufacturing bases in China and Taiwan, this risk is also linked to geopolitical risk.

Through manufacturing operations in China and Taiwan and sales/service operations in the Americas, Europe, and Asia-Pacific, the Group is exposed to risks from political deterioration and unexpected changes in laws and regulations. Regarding transfer pricing taxation among group companies, the Group pays close attention to compliance with regulations in Japan and counterpart countries, but tax authorities may point out impropriety in transaction prices, and if intergovernmental consultations fail to reach agreement, double taxation or additional taxation could occur, potentially affecting business performance.

Due to global sales and production activities, there is a large volume of foreign currency-denominated transactions, which are affected by exchange rate fluctuations. Rising interest rates may lead to increased interest payments, potentially adversely affecting business performance; while diversification of export regions and hedging transactions are implemented, complete avoidance is difficult. The Group also holds shares in business partners and financial institutions, and a significant decline in stock prices could result in valuation losses on investment securities, affecting business performance.

The Group records tangible and intangible fixed assets, including business-use assets and goodwill arising from corporate acquisitions, and applies impairment accounting standards. If significant changes occur in the business environment or if the prices of fixed assets such as land decline, impairment losses may arise, potentially affecting business performance. This also encompasses valuation risk for overseas subsidiary assets associated with global expansion.

Prices of castings, steel materials, and other major raw materials for machine tools fluctuate depending on crude oil prices and international supply-demand conditions, becoming a cost-increasing factor. Surges in ocean freight rates also lead to increased transportation costs. While the Group's policy is to address this through cost reduction efforts and passing costs on to product prices, continued sharp price increases raise concerns about the impact on business performance.

The Group's head office functions and major manufacturing bases are concentrated in Aichi and Gifu prefectures, which are designated as disaster prevention reinforcement areas for the Tokai earthquake, and a large-scale earthquake could cause substantial damage. While measures such as seismic retrofitting, disaster drills, and employee awareness programs are implemented, in the event of an epidemic outbreak, suspension of operations or temporary furloughs at major manufacturing bases are also anticipated. Due to global business expansion, the Group is simultaneously exposed to various risks including terrorism.

Production stagnation at suppliers due to natural disasters, epidemics, conflicts, and supply tightness due to manufacturing industry busyness may make it difficult to procure component parts and units, hindering stable production. While the Group continuously monitors causes of procurement difficulties, responds quickly, and works to diversify suppliers and secure alternative means, there may be limits to its response in the event of widespread supply disruptions.

In September 2025, a server of consolidated subsidiary Okuma Europe GmbH was subjected to unauthorized access by a third party and infected with ransomware, an incident that has materialized cyberattack risk. As a result of the investigation, no leakage of personal or confidential information or impact on business partners or customers has been confirmed, and preventive measures were implemented with the involvement of external experts, along with reconstruction of a secure environment, allowing local business operations to normalize at an early stage. As digitalization of operations expands, the risk of information leakage continues to rise, requiring continuous strengthening of cybersecurity measures.

If a power supply shortage occurs due to power plant outages or other causes, stable production may be hindered by power-saving measures. As a manufacturing company, the Group has a high dependence on electricity, and the impact on major domestic manufacturing bases in particular is a concern. At present, there is no specific detailed description of countermeasures in the securities report, and enhancing risk management could be a challenge.