NISSEI ASB MACHINE CO., LTD.

The Group operates solely in the single business of manufacturing and selling Stretch Blow Molding Machines, Dedicated Molds, Auxiliary Equipment and parts, and thus carries the risk that a decline in demand for PET bottles and other plastic containers or a decrease in capital investment appetite due to domestic and overseas economic conditions will directly affect business performance. In addition, if a technological innovation occurs that leads to the development of new packaging containers to replace PET bottles, it could have a major impact on the entire business. As a countermeasure, the Group continuously conducts advanced research and development to promote container development related to new materials and new fields.

With the overseas sales ratio reaching approximately 90% and production in India on an expanding trend, the business's dependence on overseas operations is extremely high. Changes in political, economic, and social conditions in each market and region, as well as trends in international taxation such as transfer pricing taxation and various regulations, may cause significant fluctuations in the business environment, including product supply and demand conditions. The Group works to minimize such impacts by establishing a diversified structure that does not depend on sales in any specific region.

With the overseas sales ratio at a high level of approximately 90%, an appreciation of the yen against foreign currencies would have a negative impact on business performance. Exchange rate fluctuations also affect the relative price competitiveness of products and material costs, making them a multifaceted risk factor. While the Group works to mitigate short-term impacts through increasing the overseas production ratio and utilizing forward foreign exchange contracts, a yen appreciation phase exceeding the planned rate may have an adverse impact on operating results.

The Group faces intense competition in many of the markets in which it operates, and there are markets and product areas where it cannot necessarily maintain a competitive advantage in terms of price. Being forced into severe price competition may have an adverse impact on operating results. The Group aims to strengthen its competitiveness through proactive research and development of new materials, new products, and new fields, as well as reducing manufacturing costs by enhancing the production systems at its India plant and domestic plants.

If the rising trend in crude oil and material prices continues or becomes prolonged, it will become a factor increasing material costs for products, which may have an adverse impact on operating results. In addition, a surge in the price of resin materials such as PET may reduce customers' willingness to invest in capital equipment, posing a risk of pressure on performance from the demand side as well. The Group addresses this through strengthening overseas production, reducing costs, passing costs on to product prices, and reducing customers' PET resin usage through proprietary technology.

Many production functions are concentrated at three sites: the Head Office Plant (Komoro City, Nagano Prefecture), the Chikumagawa Plant (Saku City, Nagano Prefecture), and the India Plant (Ahmednagar City). In the event that a natural disaster or other unforeseen event disrupts the production process, it may have an adverse impact on operating results. By effectively utilizing the plant site acquired in 2021 and optimizing the production system on a global scale, the Group aims to resolve its concentration on and dependence on specific sites.

The Group holds a certain amount of inventory for planned production at the India plant, as well as for responding to short delivery times, developing new applications, and promoting sales, which carries the risk of excess inventory arising if a significant change in the market occurs. Should excess inventory arise, it may have an adverse impact on operating results through the recording of inventory valuation losses, disposal losses, and the like. The Group works to mitigate this risk by closely monitoring the status of inventory and conducting appropriate inventory management.

If a technological innovation occurs that leads to the development of new packaging containers to replace PET bottles, it may have a major impact on the performance of the Group, which operates in a single business. This also carries the risk that stricter environmental regulations on plastic containers and the spread of alternative materials will change the demand structure. The Group strengthens its response to changes in the external environment by continuously conducting advanced research and development to promote container development related to new materials and new fields.

With the overseas sales ratio reaching approximately 90%, trends in international taxation, such as transfer pricing taxation, and various regulations may have a significant impact on the business environment. Regulatory changes and tax reforms in various countries and regions can directly affect product supply and demand conditions and profit structure. The Group aims to minimize the impact of regulatory changes on the entire business by establishing a diversified structure that avoids dependence on sales in specific regions.

With the aim of reducing manufacturing costs and strengthening product competitiveness, the Group is actively promoting the expansion and increased utilization of production equipment at the India Plant (Ahmednagar City), and some of its mainstay products are delivered to countries around the world through planned production at the India Plant. If changes in India's domestic political, economic, and social conditions, or fluctuations in the labor environment, disrupt production activities, it may affect the entire global supply system. Through the optimization of the global production system utilizing the plant site acquired in 2021, the Group aims to resolve excessive dependence on a single site.