Meiji Machine Co.,Ltd.

In the Plant Engineering Business and Industrial Machinery Products manufacturing and sales business, which are core businesses, a decline in capital expenditure by major customers in the feed and flour milling industries would have a direct impact on order intake and net sales. The Group's performance is dependent on the investment cycle of specific industries, and the risk of deteriorating performance increases when the industry as a whole restrains capital expenditure.

If competitors offer competitive pricing or high value-added new products and services, the Group's competitiveness may fall behind, hindering order acquisition. Intensifying price competition also directly leads to a decline in profit margins, making the maintenance of sustained competitive advantage a challenge.

Order acquisition and revenue recognition tend to be concentrated in the second half of the fiscal year, with delivery deadlines also concentrated in March, the fiscal year-end. If an unexpected event occurs near the fiscal year-end and makes sales activities or construction progress difficult, there is a risk of a concentrated and severe impact on performance for that period.

If steel prices, labor costs, raw material costs, or outsourcing costs rise significantly beyond budget after a contract or order has been concluded, it directly squeezes profits since it is difficult to pass on the increase to selling prices. In addition, if supply chain disruptions make raw material procurement difficult, there is a possibility of construction delays or delayed revenue recognition.

Since a portion of borrowings is procured at variable interest rates, a sharp rise in interest rate levels increases financial burden through higher interest payments. In addition, since a portion of raw materials is imported and denominated in foreign currencies, significant fluctuations in exchange rates may increase procurement costs and affect performance.

The consolidated subsidiary Meiji Machine (Tokushu) Co., Ltd. manufactures and sells flour milling rolls at its base in China, and further export expansion beyond Japan is expected going forward. Changes in overseas political and economic conditions, fluctuations in foreign exchange, taxation, or legal regulations, the occurrence of terrorism, war, or riots, and sharp increases in material prices or tightening of labor supply and demand could affect the continuity of this subsidiary's business and the overall performance of the Group.

If the Company is unable to secure necessary personnel such as those holding national qualifications, or if specialized knowledge, know-how, and techniques are not successfully passed on from veteran and skilled employees to younger staff, this will impede the continuity of operations in sales, design, manufacturing, R&D, and other areas. Against the backdrop of intensifying competition in the labor market due to the declining birthrate and aging population, the shortage of human resources has become a medium- to long-term management challenge.

The Company holds confidential corporate information, personal information, customer information, and business partner information, and if such information were to leak due to unauthorized external access or other causes, it could damage the Company's credibility and result in legal liability. Despite efforts to strengthen information management and exercise care in handling such information, the increasing sophistication of cyberattacks makes complete protection difficult.

The Industrial Machinery Business is subject to a wide range of legal regulations, including the Construction Business Act, the Building Standards Act, the Food Sanitation Act, the Labor Standards Act, the Industrial Safety and Health Act, the Product Liability Act, and the Subcontract Act. If these laws are amended, it could lead to increased compliance costs and constraints on business activities, potentially affecting performance.

If a natural disaster such as an earthquake or a global outbreak of infectious disease were to occur, it could damage owned facilities, halt production due to difficulty in the supply of electricity, gas, water, and other utilities, and cause delays in construction periods and delivery deadlines. Given the business characteristic of delivery deadlines being concentrated at the fiscal year-end, there is a risk that a disaster occurring near the fiscal year-end would have a greater impact on performance.