Marumae Co., Ltd.

The Group is exposed to boom-and-bust cycles specific to the semiconductor industry (silicon cycle) and the FPD industry (crystal cycle), and its performance is significantly affected by capital expenditure trends among manufacturers. While the Group is working to mitigate this impact by focusing on fields such as consumables where stable orders can be expected, the impact of economic fluctuations on business performance and financial condition cannot be eliminated.

In the fiscal year under review, the top three customers by sales composition ratio reached 50.0%, indicating an extremely high degree of dependence on specific customers. Although sales activities are being conducted to expand new business partners, if transactions with major customers were to contract for any reason, this could have a severe impact on business performance and financial condition.

The ultra-high-purity aluminum raw materials (such as 6N ingots) used in the Functional Materials Business are supplied by a practically limited number of manufacturers, and due to the oligopolistic nature of the market, price and supply volatility is high. Amid continued increases in raw material prices due to yen depreciation and geopolitical risks, if cost increases cannot be absorbed through cost reductions or price pass-through, this could have a material impact on business performance and financial condition.

Goodwill arising from corporate acquisitions stood at ¥4,696 million at the end of the consolidated fiscal year. Although the Group manages this risk through financial covenants, if the expected effects are not realized due to changes in the business environment or other factors, an impairment loss may need to be recognized, which could significantly affect business performance and financial condition.

The Group has adopted a policy of pursuing M&A as an option for expanding into new fields and acquiring new technologies. However, if M&A activities disrupt the financial balance or if acquired companies or businesses fail to achieve the expected results, this could have a material impact on business performance and financial condition.

Although measures such as ISO27001 certification and the establishment of an Information Security Committee have been implemented, if system failures or customer data leaks occur due to cyberattacks, unauthorized access, computer virus infections, or similar causes, this could have a material impact on business performance and financial condition through business interruption and loss of trust.

The Group's major production sites are concentrated in Izumi City, Kagoshima Prefecture, and Omuta City, Fukuoka Prefecture. In addition to natural disasters such as wind and flood damage and earthquakes, the Izumi City site also faces disaster risk from the Sendai Nuclear Power Plant, located within a 30km radius. If such disasters occur, the resulting loss of production capacity could have a severe impact on business performance and financial condition.

Although all production sites have obtained ISO9001 certification and established quality control systems, defective products may occur due to various factors. If product defects occur, this would significantly undermine trust in the Group, and there is a risk that the Group could face product liability claims from end users and others due to design or manufacturing defects.

Securing and developing human resources is essential for continuous business operations, and the Group is working on measures such as strengthening new graduate recruitment, implementing performance-linked compensation systems, and improving the working environment. However, if the Group is unable to secure personnel in a timely manner, experiences a mass departure of employees, or if development does not proceed as planned, this could affect business performance and financial condition.

Interest-bearing debt at the end of the consolidated fiscal year reached ¥13,531 million (53.2% of total assets), part of which is borrowed at variable interest rates. Substantial interest-bearing debt, after deducting cash and deposits of ¥4,252 million, was ¥9,278 million (substantial dependence ratio of 36.5%). If interest rates rise due to changes in the financial environment, this could affect business performance through increased financial costs.