SINTOKOGIO,LTD.

With the advancement of electrification and the spread of car sharing, a decline in demand for casting parts and a slowdown in overall market growth in the automotive industry are anticipated. This may lead to restrained capital expenditure by automakers and parts manufacturers, potentially reducing order volumes for the Company's products. Although the Group is pursuing various measures to maintain and strengthen its competitiveness, a decline in sales and other factors could have a material impact on operating results, financial position, and cash flows.

In the Group's major markets, intense competition with local manufacturers continues across regions worldwide. If the capital expenditure environment fluctuates rapidly and competition intensifies further, there is a possibility of declines in order volumes and order prices. As a result, this could have a material impact on operating results, financial position, and cash flows.

The Group operates sales offices in 23 countries, and changes in tariff policies in various countries and shifts in international relations, such as the situation in Russia and Ukraine, the situation in the Middle East, and U.S.-China trade friction, may affect business activities. Export restrictions, technology transfer restrictions, tariff increases, and similar measures could constrain sales, procurement, production, and transportation, potentially disrupting product supply. The Group strives to minimize such risks through continuous monitoring via each site and the establishment of a global response framework.

The Group's earnings are affected by fluctuations in exchange rates such as the Japanese yen, U.S. dollar, Euro, Chinese yuan, and Brazilian real. Although the Group seeks to reduce risk through overseas localization and local production for local consumption initiatives, the impact cannot be entirely avoided, and the consolidated financial statements are also affected by foreign currency translation. If exchange rates fluctuate significantly, this may affect operating results and financial position.

Investment securities held by the Group accounted for 15.4% (¥34,983 million) of consolidated total assets at the end of the current consolidated fiscal year, representing a significant portion of asset scale. A decline in stock market conditions or deterioration in the business performance of issuers could cause a substantial decline in investment value. In such a case, this could have a material impact on operating results and financial position.

An increase in the prices of raw materials such as steel and scrap leads to higher manufacturing costs, and if these cannot be sufficiently passed on to product sales prices, profitability may be adversely affected. In addition, the manufacture of consumables for core products uses a large amount of electricity, so the Group is also exposed to the risk of rising energy costs due to fluctuations in electricity rates and crude oil prices. Although the Group is promoting energy-saving measures and other initiatives, a sharp rise in prices due to international supply-demand tightness or other factors could have a material impact on operating results and cash flows.

The Group holds tangible and intangible assets, including fixed assets such as buildings and manufacturing equipment, as well as goodwill arising from corporate acquisitions. If profitability declines due to changes in the business environment and recovery of book value is no longer expected, or if changes occur in market conditions or research and development policy, new impairment losses may be recognized. In such a case, this could have a material impact on operating results and financial position.

The Group holds important confidential information such as technical information, as well as personal information of customers and related parties, and has implemented measures such as the development of internal regulations, employee training, and strengthening of security systems. However, if unforeseen circumstances cause damage to, suspension of, or disruption in information systems, or if confidential information is leaked, this could result in damage to corporate value, loss of social credibility, and the occurrence of compensation to customers, among other consequences. These may affect operating results, financial position, and cash flows.

In Aichi Prefecture, where the Group's main manufacturing sites are concentrated, there are concerns about the occurrence of a large-scale earthquake, which could significantly reduce production capacity if it occurs. In addition, natural disasters such as typhoons, heavy rain, and floods caused by climate change, the occurrence of pandemics, and disruptions to infrastructure such as electricity, transportation, and communications could impede business operations. Although the Group has implemented BCP development and emergency drills, an event exceeding expectations could have a material impact on operating results, financial position, and cash flows.

Since the Group's products include made-to-order items with a labor-intensive character, securing personnel with a certain level of skill is essential. If the necessary personnel cannot be secured due to the declining birthrate and a tightening labor market, this may lead to a decline in competitiveness or constraints on business development. In addition, some outsourced processed products are difficult to substitute and depend on specific suppliers, and if continuous, timely procurement at appropriate cost cannot be achieved, this may result in production delays or increased costs. The Group is promoting labor-saving and workforce-reduction initiatives, as well as diversifying suppliers and discovering and developing new suppliers, but delays in these responses could have a material impact on operating results and financial position.