MARUYAMA MFG. CO., INC.

The Agricultural & Forestry Machinery segment accounts for more than 70% of net sales, and there is a risk that product demand could decline due to changes in agricultural policy direction, such as revisions to acreage reduction policies. In the Industrial Machinery and Other Machinery segments as well, declines in private capital investment and public investment due to economic downturns directly affect net sales. No specific countermeasures by the Group are explicitly disclosed.

Approximately 30% of net sales depend on overseas markets, and since the Group has operations in Thailand, Vietnam, the United States, and China, changes in the economic conditions and political systems of each country affect business performance. Approximately 40% of overseas sales are exports to the U.S. market, and a significant appreciation of the yen against the dollar could have a material impact on business performance and financial condition. Although measures are taken to mitigate foreign exchange risk, complete hedging is difficult.

In the Agricultural & Forestry Machinery segment, which accounts for more than 70% of net sales, there is a risk that a decline in farmers' income due to natural disasters such as typhoons, cool summers, and earthquakes could reduce farmers' purchasing willingness, leading to a decline in net sales. In addition to operational disruptions caused by disasters at the Company's own sites, delays in the receipt of raw materials or procurement difficulties caused by disasters at suppliers' factories could also affect business performance. Given the high dependence on agricultural and forestry machinery, the business impact of weather and disaster risk is particularly significant.

The Company has entered into commitment line agreements, term loan agreements, and electronically recorded monetary claims purchase agreements with seven banks, each of which includes financial covenants. Specifically, the Company is required to maintain net assets at or above 75% of the amount as of the reference settlement date, and to avoid recording an ordinary loss for two consecutive fiscal periods. If these covenants are breached, there is a risk of lump-sum repayment of borrowings and contract termination. Since the loss of financing means directly translates into liquidity risk, maintaining financial soundness is an important management issue.

Approximately 30% of net sales depend on the top three major customers, creating a risk of concentration on specific customers. Although stable business relationships have been maintained over many years, if changes occur in the relationship with these companies for any reason, it could affect operating results, financial condition, and share price, among other factors. No specific countermeasures, such as diversification of business partners, are explicitly disclosed in the securities report.

Agricultural and forestry machinery is highly susceptible to seasonality and weather fluctuations, and if sales fall short of plan due to shrinking demand or intensified competition, there is a risk of surplus or stagnant inventory. If the net realizable value of inventory falls below book value due to declining profitability or long-term stagnation, valuation losses could arise, affecting operating results and financial condition. The Company strives for stable procurement through multiple sourcing and global procurement, but improving the accuracy of demand forecasting remains a challenge.

The Company strives to secure a stable supply of raw materials and parts through multiple sourcing and global procurement, but if supply becomes unstable due to surges in raw material and parts prices or disasters, it could affect business performance and financial condition. Because the Company relies on a global supply chain, it is structurally susceptible to geopolitical risks and natural disasters. Rising procurement costs directly affect product costs, becoming a factor that pressures profitability.

Although the Company has established a quality policy and rolled out quality improvement activities involving all employees, and has also taken out product liability insurance, there is no guarantee that defects in all products can be completely eliminated during the manufacturing process. The Company may bear liability for damages not covered by the product liability insurance it has taken out, and unforeseen circumstances, including recall responses, could affect business performance and financial condition. In the event of an unforeseen incident, the Company has established a system whereby the quality assurance department responds promptly in accordance with laws, regulations, and internal rules.

Although the Company implements strict controls over technical information, trade secrets, and personal information, if unauthorized access due to cyberattacks or computer viruses, or information leakage, tampering, or system failures caused by employees' intentional acts or negligence occur, this could affect operating results through liability for damages, among other factors. The Company has established an appropriate information security system and conducts employee training, and in the event a risk materializes, it has built a system to respond promptly and disclose information in accordance with its Business Continuity Management (BCM).

Securing and developing excellent human resources is an important factor for continuous growth, but if a significant deterioration in the hiring environment or an increase in employee turnover continues, human resource acquisition may not proceed as planned, potentially affecting future growth. This is stated as potentially affecting business performance and financial condition over the medium to long term, and in particular, a shortage of technical and development personnel could lead to a decline in product competitiveness. Specific details of recruitment and development measures are not explicitly disclosed in the securities report.