SHIBAURA MACHINE CO., LTD.

Due to the nature of capital goods business, net sales and operating income/loss tend to concentrate toward the fiscal year-end, and if a portion of sales or profit slips into the following period, it may affect business performance. The seasonality and year-end concentration risk is structural in nature, making order management and progress management important.

In the capital goods market for injection molding machines, machine tools, and other products, competition with other companies in the same industry is occurring in terms of quality, price, and service. If demand declines or excess supply occurs, intensified sales competition may adversely affect the Group's business performance.

Overseas sales account for 69.7% of total sales, and changes in the political, economic, and social conditions of various regions around the world, various regulations, exchange rate fluctuations, and sudden external factors may affect business performance. In addition, there is a risk of rising ocean freight rates and difficulty securing vessels due to deteriorating supply-demand balance in international maritime logistics.

Procured goods such as semiconductors, electrical components, and materials carry the risk of delivery delays and price increases due to international supply-demand balance, energy prices, and exchange rate effects. For products with a long period between order receipt and sales recognition, fluctuations in estimated costs directly affect business performance, so the Group aims to mitigate risk by securing multiple procurement resources and utilizing alternative procured goods.

Part of business funds is procured through borrowings from financial institutions, and fluctuations in current interest rate levels may affect business performance and financial condition. Although the Group's policy under its medium-term management plan is to focus on strengthening its financial structure, an increase in funding costs is a concern in a rising interest rate environment.

Employee retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets. If actual results diverge from these assumptions or if the assumptions are changed, the impact accumulates and is recognized in future expenses and obligations. Fluctuations in the discount rate and investment yield may affect business performance and financial condition.

As the Group operates manufacturing and sales sites globally, the occurrence of natural disasters such as major earthquakes or floods, the spread of infectious diseases, or conflicts and terrorism could cause significant disruption to production activities, including securing procured goods, potentially having a serious impact on business performance and financial condition. Diversifying geopolitical risk through multi-site operations remains a challenge.

The Group holds confidential information such as personal information and business information, and there is a risk of unauthorized access, tampering, leakage, or loss due to cyberattacks and other causes. Although measures such as establishing management systems and handling regulations and utilizing advice from external specialized institutions have been implemented, if an information leak or similar incident occurs, it may have a serious impact on business performance and financial condition.