FUJIDIE Co., Ltd.

The Group's mainstay Cemented Carbide Tools use rare metals such as tungsten carbide and cobalt as raw materials. Procurement of tungsten carbide relies almost entirely on imports from China, while cobalt depends on production in Africa and smelting in China. China's export restrictions on critical mineral resources and the recent surge in APT (ammonium paratungstate) prices are cited as current concerns, and surging raw material prices, foreign exchange fluctuations, and geopolitical disruptions could have a material impact on the Group's financial position and business results. As countermeasures, the Group maintains a certain level of raw material inventory, plans and executes purchases of recycled materials, and continuously considers new procurement sources.

Medium- to long-term growth depends heavily on securing, developing, and appropriately deploying excellent and diverse human resources. Difficulty recruiting as planned, delays in developing personnel with necessary skills, and outflow of excellent personnel outside the company could make it difficult to achieve business objectives. The Medium-Term Management Plan (FY2025 (ending March 2025) - FY2027 (ending March 2027)) adopts as its basic concept a

If natural disasters such as earthquakes or typhoons cause collapse or damage to buildings and facilities, or disruption of lifelines, transportation routes, or information infrastructure, this could result in production halts or disruption of product supply to customers, potentially affecting the Group's financial position and business results. The Group conducts regular disaster prevention drills and safety confirmation drills, has installed disaster prevention equipment, has taken out fire insurance, and has formulated a BCP, and has established a system to promptly set up a response headquarters headed by the Representative Director and President.

The Medium-Term Management Plan sets forth the "establishment of new businesses" as a key policy, aiming to create new growth engines mainly through M&A and business alliances. However, given the many uncertain factors involved, if the initially expected effects are not achieved, this could affect the Group's financial position and business results. In the previous consolidated fiscal year, the Group launched a new business organization to promote commercialization activities, and has adopted a policy of conducting due diligence using external experts such as lawyers, tax accountants, and certified public accountants when implementing M&A.

As many of the Group's sales items are capital goods significantly affected by capital expenditure demand, a slowdown or contraction in the domestic and overseas economy leading to reduced capital expenditure demand could result in decreased orders and sales. The Group has established a system to share and analyze information from the Japan Machine Tool Association and customer information obtained through sales activities company-wide, enabling swift responses to changes in market trends, while also strengthening cooperation with overseas subsidiaries to identify overseas market trends at an early stage. The Group views the expansion of demand for EV-related products and resource conservation through the use of 3D printing technology as growth opportunities.

As the Group holds a large amount of customer information and confidential information, if unforeseen events such as cyberattacks result in information leakage, destruction, or tampering, or in the suspension of information systems, this could lead to loss of social trust, damages costs, and business suspension, potentially affecting the Group's financial position and business results. During the current consolidated fiscal year, the Group implemented various measures in response to vulnerability assessment results, and has continuously conducted security education, including targeted email attack drills, to strengthen information security.

Inventories are valued using the cost method based on the individual identification method (with the book value write-down method based on declining profitability). If product costs exceed selling prices due to surging raw material prices or declining utilization rates, a valuation loss could arise due to declining profitability, potentially affecting the Group's financial position and business results. This risk is highly likely to materialize in conjunction with the raw material procurement risk, making continuous monitoring of raw material price trends important.

In manufacturing operations using many production facilities and sales activities using automobiles, if a serious industrial accident or traffic accident occurs, this could disrupt production and sales activities and incur compensation costs, potentially affecting the Group's financial position and business results. In the previous consolidated fiscal year, the Group newly established a Safety Management Department within the Quality Assurance Headquarters, and in the current consolidated fiscal year has focused on safety awareness activities, including workplace inspections at each business site and education using in-house produced videos related to industrial accidents.

As the Group operates globally, primarily in Japan and Asia, if changes in the political and economic conditions or social unrest in countries/regions where it operates result in production halts or logistics disruptions, this could affect the Group's financial position and business results, and is also closely related to the raw material procurement risk. The Group has strengthened its information-gathering activities, including regarding U.S. tariff increases and retaliatory measures by various countries, and monitors the political and economic conditions of countries where it operates across the entire Group through regular subsidiary performance reporting meetings and other means.

The consolidated balance sheet as of the end of the current consolidated fiscal year recorded ¥9,731 million in property, plant and equipment. If indications are found that the book value of assets cannot be recovered, an impairment test is conducted, and if it is determined that sufficient future cash flows will not be generated, an impairment loss is recognized. If a substantial impairment loss is recognized, this could affect the Group's financial position and business results, and this risk is accumulating amid continued capital expenditure aimed at improving production capacity and productivity.