TSUDAKOMA Corp.

The Group has recorded operating losses and ordinary losses for five consecutive periods since the fiscal year ended November 2019, and although it temporarily returned to profitability in the fiscal year ended November 2024, it recorded operating and ordinary losses again in the current consolidated fiscal year, and has not achieved stable profit generation. The funding plan includes the renewal of borrowings from major financial institutions, and delays in business performance recovery due to external factors could affect cash flow. It is explicitly stated that material uncertainty regarding the going concern assumption is currently recognized, and this impact is not reflected in the consolidated financial statements.

If the economy stagnates in China, the primary market for the Textile Machinery Business, customers may postpone capital expenditure plans, which could adversely affect the Group's business performance. China is the most important market for the Group, resulting in a structure highly dependent on its economic trends. As countermeasures, the Group is pursuing diversification targeting three markets—industrial materials, high-end sports brands, and general apparel—and expanding sales channels into India, Vietnam, Taiwan, and Indonesia.

In China, the primary market for the Textile Machinery Business, the United States is an important export destination for textile products. If political conflict between the US and China, trade friction, or additional tariff hikes reduce textile product exports, this would adversely affect Chinese customers' capital expenditure. On the other hand, the phenomenon of production base relocation from China to neighboring countries is also occurring, and the Group views this as a new business opportunity. The Group is diversifying risk by expanding sales to Asian countries other than China.

Changes in Japan-China relations could stagnate the business environment in China and adversely affect the Group's business performance. The Group has a high export ratio and a large degree of dependence on the Chinese market, so heightened political tensions could directly affect orders and sales. Descriptions of specific countermeasures in the securities report are limited, and structural vulnerability to geopolitical risk remains.

The Company generally contracts exports in yen, but a sharp appreciation of the yen creates yen procurement risk for the counterparty, which could reduce customers' willingness to invest in capital expenditure. In addition, funding risk arising from exchange rate fluctuations between customers and their final destination countries affects customers' capital expenditure. Rising interest rates could also increase financial costs.

The Company delivers products to customers mainly via container shipping, and container shortages causing logistics delays could lead to soaring ocean freight rates, resulting in a risk that costs exceed the freight rates anticipated at the time of export contracts. Soaring energy prices, such as crude oil and electricity, could also adversely affect business results and financial condition. As a countermeasure, the Company is passing costs on to sales prices to improve profitability, but there is significant dependence on external factors.

The Textile Machinery Business has a structure highly dependent on the Chinese market, making it directly susceptible to economic slowdown and geopolitical risk. Based on the "Medium-Term Management Plan 2026," the Company is promoting sales of the Air Jet Loom ZAX001neo Plus, strengthening the Water Jet Loom business, and expanding into the industrial materials field, but establishing a structure capable of securing profits even at low operating rates remains a challenge. If improvements in selling prices and cost reductions cannot both be achieved, there is a risk of continued loss recognition.

The Machine Tool Related Business is required to respond to the electrification of the automobile industry and diversification of drive components, and changes in conventional demand for internal combustion engine applications could affect the business. The Company is promoting sales of the NC Rotary Table (TDB Series) and tilting NC rotary tables, and introducing new AWC (Auto Work Changer) System products to address automation and labor-saving needs, but there is a risk that product development may not keep pace with the speed of market transition. Entry into new fields such as aerospace and clean energy is also still in the development stage.

The Group's funding plan includes the renewal of borrowings from major financial institutions, and there is a risk that maintaining relationships with financial institutions and renewing borrowings could become difficult if the recovery in business performance is delayed. The Company states that it maintains close relationships by regularly explaining the funding plan and progress of the medium-term management plan to its financial institutions, but the situation in which stable profitability has not been achieved continues, raising concerns about the impact on cash flow. The sale of cross-shareholdings is also positioned as one measure to secure funds.

The securities report explicitly states that sudden extensions of parts lead times are an external factor affecting the feasibility of countermeasures. Delays in parts procurement could disrupt product delivery schedule management, potentially leading to delays in recording sales and reduced customer satisfaction. The Group is promoting improvements in production efficiency, operational efficiency, and delivery schedule management through the use of DX, but its response to global supply chain disruptions is largely dependent on the external environment.