NITTO KOHKI CO., LTD.

There is a risk that pandemics or natural disasters could make it difficult to conduct normal business activities. This could result in a decrease in orders and sales, delays in parts procurement, and the suspension of transportation, potentially affecting business performance. As countermeasures, the Group is promoting BCP responses such as staggered work hours, telework, advancing parts orders, and securing logistics routes.

The Group uses materials such as iron, stainless steel, brass, and aluminum, and there is a risk that a weaker yen, rising crude oil prices, or material price surges caused by natural disasters or war could push up the cost ratio. While price pass-through is implemented for some products, when full pass-through is not possible, it will reduce profit. The Group is working to reduce costs, but in phases of rising material prices, an impact on profit is also assumed to be unavoidable in some cases.

The Group has a manufacturing subsidiary in Thailand, to which it outsources the manufacture of some Quick Fluid Coupling, Machine Tools, and Linear Drive Pump products. If force majeure events occur in Thailand, such as changes in laws and regulations, political instability, terrorism, riots, war, natural disasters, or pandemics, there is a risk that product supply could be temporarily disrupted, affecting business performance. Securing alternative manufacturing means is a challenge.

The Group outsources part of its manufacturing to partner companies and intends to continue utilizing partner companies going forward. If the Group becomes unable to secure partner companies with the necessary technology, this could lead to a decline in manufacturing capacity and affect business performance. Maintaining and securing partner companies with technical capabilities remains an ongoing challenge.

The Group sells mainly through agents, and if an unforeseen event occurs at a business partner, there is a risk of bad debt losses on accounts receivable and a decrease in sales due to the temporary loss of sales channels. The Group strives to minimize this risk by protecting accounts receivable in accordance with internal regulations (credit management), but although most of its business partners are companies with which it has long-standing relationships, complete elimination of the risk is difficult.

The budget rates assumed for FY2027 (ending March 2027) are 1 US dollar = ¥150, 1 euro = ¥174, 1 British pound = ¥199, and 1 Thai baht = ¥4.70, among others. A weaker yen against the currencies of sales subsidiaries in the US, Europe, Australia, and India would boost sales and profit, while a weaker yen against the Thai baht, the currency of the Thai manufacturing subsidiary, would lead to higher costs. When US dollar fluctuations are linked to other currencies, the impact on sales and procurement is said to offset each other, resulting in a minor impact on profit, but the impact amount differs by currency.