TOMOE ENGINEERING CO.,LTD.

The Machinery Manufacturing & Sales Business is affected by capital expenditure trends and public investment trends in the chemical and food industries, while the Chemical Industrial Products Sales Business is affected by trends in the chemical, construction, automotive, steel, and semiconductor industries as well as raw material supply-demand and price trends. In the Chemical Industrial Products Sales Business, supply-demand adjustments occur over a short period, while in the Machinery Manufacturing & Sales Business, performance is affected through long-term capital expenditure cycles. There is also price and service competition with competitors, and the loss of large-scale transactions could directly affect performance.

The Group operates business across a wide range of regions including the United States, China, Southeast Asia, India, and Europe, and unforeseen circumstances such as local political instability, changes in laws and regulations, changes in tax systems, and difficulty securing personnel may affect performance. In particular, risks are explicitly noted in China and the United States whereby business activities could be constrained by US-China tensions, Japan-China relations, a Taiwan contingency, and US tariff policy, among other factors. While the Group pays close attention to understanding local laws and conditions and strives to respond in a timely manner, complete avoidance is difficult.

The Group holds foreign currency-denominated import/export transactions and foreign currency-denominated receivables and payables, and sudden fluctuations in exchange rates may affect performance and financial condition. Hedging such as forward exchange contracts is implemented for large transactions, but complete elimination of risk is difficult. In addition, valuation risk arising from exchange rate fluctuations also occurs when translating the foreign currency-denominated financial statements of overseas subsidiaries into yen.

In addition to holding shares of business partner companies as part of its business strategy, the Group holds shares as part of pension asset management, and performance and financial condition may be affected by stock price fluctuations or deterioration in the financial condition of investee companies. Regarding policy shareholdings, the Group confirms the rationale for holding each stock every year based on the cost of capital, and strives to reduce holdings in stocks lacking rationale.

Parts and raw materials for the Centrifuge depend on multiple external suppliers outside the Group, and prices and delivery times are significantly affected by market price fluctuations, changes in labor costs, and changes in transportation costs. If price increases cannot be passed on to selling prices, or if inventory valuation losses occur when prices decline, or if supply is disrupted due to the bankruptcy or withdrawal of a supplier, this may lead to production delays and cost increases. The Group addresses this through consideration of alternative materials, promotion of in-house production of key parts, securing multiple suppliers, and thorough inventory management.

If a serious safety or quality problem occurs with a manufactured and sold product, it could result in substantial damages, loss of social trust, and damage to the product brand, potentially affecting performance and financial condition. Similar risks arise from operational suspension due to accidents such as natural disasters, fires, or power outages at plants and manufacturing sites, as well as the resulting equipment restoration costs. The Group strives to ensure quality through the establishment and adherence to an ISO9001-certified quality management system, designs that prioritize product safety, and thorough product inspections.

Against the backdrop of the declining birthrate, aging population, and shrinking labor force, competition to secure and develop highly specialized personnel such as engineers in the Machinery Manufacturing & Sales Business is intensifying. If the acquisition or development of talented personnel does not proceed as planned, or if the transfer of skills and know-how from veteran and experienced employees to younger employees is delayed, this may hinder the continuity of sales, design, manufacturing, and R&D operations, potentially affecting performance. The Group is working to expand recruitment of new graduates, mid-career hires, and personnel of diverse backgrounds, and to strengthen development through on-the-job training and hierarchical training programs.

If customer confidential information or personal information is leaked due to cyberattacks or other causes, this may affect performance and financial condition through damage to social credibility and brand image and the payment of damages. In light of the increasing sophistication and cunning of cyberattacks, the Group is promoting measures such as migrating key business systems to the cloud, controlling connections of external devices, establishing systems for remote data deletion of mobile devices, and multi-factor authentication for remote work.

The Group is subject to a wide range of laws and regulations both in Japan and overseas, including import/export regulations, environmental regulations, product regulations, and chemical substance regulations, and violations of regulations or regulatory tightening may constrain business activities and increase costs. In addition, compliance violations due to individual misconduct cannot be completely avoided, and if a serious legal violation occurs, it will affect social credibility, performance, and financial condition. The Group has established systems such as a code of corporate conduct, a corporate ethics committee, a help line, and internal audits to respond to this.

In business expansion investments such as establishing new companies, capital expenditures, and M&A, there is a risk that if earnings do not reach the planned level, this could delay capital recovery or require additional funding. Although decisions are made after carefully examining profitability and the feasibility of investment recovery in advance, performance and financial condition may be affected by events that cannot be foreseen or prevented even with sufficient prior consideration.