OILES CORPORATION

Since the company's core products serve the automotive, industrial machinery, and building/construction sectors, a global economic downturn or slowdown in economic growth could reduce product demand through declines in vehicle production volumes and construction starts, potentially affecting business performance and financial condition. In particular, since automotive-related sales account for 49.6% of the total, sensitivity to trends in the automotive market is high. Although the company is expanding into non-automotive fields as an effective demand diversification measure, its structure of high dependence on specific industries continues.

With automotive-related sales accounting for 49.6% of consolidated net sales, progress in CASE (Connected, Autonomous, Shared, Electric) trends, the rise of new entrants, and changes in component composition due to industrial structural shifts could affect business performance. There is a risk that demand for conventional internal combustion engine components will shrink as electrification progresses, and delayed response could result in the loss of the company's core market. The company is advancing new development with CASE in mind, expanding its technological scope and accelerating development speed to respond to this transformation.

Prices of major materials such as steel, copper alloys, and resin-based raw materials fluctuate due to supply-demand balance and exchange rate movements, and procurement sources for some materials are limited. In addition to the emergence of procurement risks from global raw material cost inflation, tariff policies, and international conflicts, there is also latent procurement risk related to economic security. The company is responding through supply chain reviews, diversification of procurement sources, selection of alternative materials, and passing costs on to sales prices, but if rapid price fluctuations beyond expectations occur, this could affect business performance and financial condition.

Overseas sales account for 39.0% of consolidated net sales, and the company is affected by exchange rate fluctuations through foreign currency-denominated transactions and the yen conversion of overseas subsidiaries' financial statements. Although the company implements hedging through local procurement of raw materials and currency swap contracts, if fluctuations beyond expectations occur, this could affect business performance and financial condition. Translation risk is also inherent, whereby financial figures fluctuate due to conversion differences even when the value of foreign currency items held by overseas subsidiaries does not change.

The company has manufacturing and sales bases in North America, Europe, and Asia, with the overseas sales ratio reaching 39.0%, but business could be affected by economic downturns in various countries, changes in political, social, and economic systems, and geopolitical risks (such as the conflicts in Ukraine and the Middle East). Geopolitical risk is recognized as a material risk due to the magnitude of its impact, and the Corporate Planning Department and business divisions coordinate to exchange information with overseas subsidiaries and conduct continuous monitoring. However, if rapid changes beyond expectations occur, this could affect business performance and financial condition.

Global competition is intensifying across all industries, including the automotive industry, and the growth of low-priced products driven by the rise of manufacturers in emerging markets could lead to price reduction demands from customers. If cost reductions and price pass-through cannot sufficiently offset rising raw material prices and labor costs, this could affect business performance. The company is countering this by providing added value through the development of high-quality products with technological superiority, proposal-based technical sales, and enhancement of its product lineup, but the competitive environment is becoming increasingly severe.

The company's products are used in a wide range of applications, including social infrastructure fields such as automobiles, railways, bridges, and Seismic Isolation Devices, and if accidents, recalls, or production stoppages at customers occur due to serious defects, this could lead to a decline in social credibility and substantial compensation expenses, adversely affecting business performance and financial condition. The company thoroughly manages quality through ISO9001 and IATF16949 certification, design reviews from the early stages of development, and utilization of past quality trouble information, but even global product liability insurance may not necessarily sufficiently cover losses such as damages.

The company holds confidential information related to research and development, production, and sales, as well as personal information of customers and employees, and if a serious failure of information systems occurs due to cyberattacks, unauthorized access, computer viruses, etc., this could adversely affect its business, performance, and financial condition. The company is strengthening its security framework through ISO27001 certification, network redundancy, backup of critical data, and introduction of incident detection systems, but information security risk has been increasing in recent years and requires ongoing response.

In addition to the risk of business damage caused by disasters resulting from global warming, insufficient decarbonization measures could result in the risk of exclusion from customers' supply chains and the risk of losing the trust of ESG-focused shareholders and investors. The company has set a target of reducing total CO₂ emissions by 46% by fiscal 2030 compared to fiscal 2013, and has established carbon neutrality by 2050 as an environmental goal, but failure to achieve these targets could lead to the loss of business opportunities. The company has built an environmental management system in line with ISO14001 and strives to comply with environmental laws and regulations.

If large-scale earthquakes, flood damage, fires, pandemics, terrorism, or political instability due to conflict occur at manufacturing and sales bases in Japan and overseas, damage to raw material procurement, logistics networks, production facilities, and human resources could disrupt the supply chain and halt product supply. Although the frequency of occurrence is said to be low, if such an event were to occur, it is said that it would have a significant impact on business performance and financial condition. The company is advancing preventive measures such as BCP formulation, disaster mitigation measures, diversification of procurement sources, and selection of alternative materials, but insurance may not necessarily cover all damages, and complete avoidance of the risk is said to be difficult.