Kurita Water Industries Ltd.

Both the Electronics Market and the General Water Treatment Market have business structures linked to customers' factory utilization rates and capital investment trends, and if a global economic downturn or revisions to customers' capital investment plans and production adjustments occur, demand fluctuates, affecting business results. Geopolitical risks, trade policy and export control regulations, energy policy, and changes in resource prices and interest rate environments also spill over into profitability through customers' business activities and investment plans. The Group strives to secure stable revenue by expanding its service business and offering its services to a wide range of industries.

Due to market fluctuations, geopolitical risks, changes in trade policy, rising energy prices, and other factors, procurement price increases and supply chain disruptions may occur, potentially leading to increased manufacturing costs, delays in the supply of raw materials and components, delays in production and construction, and shifts in the timing of revenue recognition. The Group works to mitigate these impacts by appropriately passing on costs to sales prices and maintaining appropriate inventory levels.

Amid an accelerating pace of change in the business environment driven by technological innovation, increasingly sophisticated customer needs, and changes in the competitive landscape, if the Group is unable to timely and continuously provide new products, services, and business models with competitive advantages, this could lead to reduced order opportunities and intensified price competition, affecting business results. The Group is working to continuously strengthen its competitive advantage through enhanced technology development, business development based on customer and social value, and the expansion of CSV business.

In business development in overseas markets, if unforeseen changes in laws and regulations, political and economic turmoil, conflicts, terrorism, or other events materialize in various countries and regions, this could disrupt sales activities, construction execution, procurement, collection of payments, and the operations of local affiliated companies, affecting business results through reduced order opportunities and other factors. In the event of deteriorating public safety or social unrest, this could also affect the safety of officers and employees as well as business continuity. The Group strives to reduce risk by gathering information from external organizations such as the Ministry of Foreign Affairs and consultants, utilizing local experts, and strengthening safety measures for overseas business travelers and expatriates.

With the overseas sales ratio reaching 47.4% under global business operations, the local currency-denominated financial statements of each overseas affiliated company are translated into yen and reflected in the consolidated financial statements. Therefore, even without changes in performance in local currency terms, fluctuations in exchange rates affect business results and financial position. The Group strives to reduce foreign exchange risk through the use of forward exchange contracts and derivatives such as currency swap agreements.

In water treatment equipment construction orders, differences in assumptions such as raw water conditions and issues in design and construction may result in quality problems, additional costs, and construction delays. If significant defects, failure to meet performance requirements, or delivery delays occur, rework construction or the recording of provisions may become necessary. In particular, for large-scale projects, the unprofitability of individual projects can have a significant impact on the Group's overall earnings. The Group works to control this risk through prior confirmation based on internal standards, strengthened management of construction progress and profit/loss, and the establishment of engineering review and business process review systems.

As of the end of March 2026, the balance of goodwill reached ¥61,497 million. If, due to changes in the business environment or other factors, the profitability and growth potential assumed at the time of acquisition cannot be secured, and a discrepancy arises between estimated and actual future cash flows, an impairment loss will occur, affecting business results and financial position. In addition, there is a risk of impairment loss on tangible fixed assets installed at customers' factories, such as in the Ultrapure Water Supply Business, if profitability declines due to reductions in customers' production, business withdrawal, or changes in contract terms. The Group strives to reduce this risk through review and monitoring by the Investment Committee and careful examination at the time of investment decisions.

As dependence on information systems and digital technology increases, cyberattacks (such as unauthorized access and ransomware infection) or breaches via the supply chain could disrupt the functioning of information systems. If such events occur, business operations may be halted or delayed, and the leakage of important information could lead to a decline in trust from business partners and customers, as well as the occurrence of damages and recovery costs, affecting business results and financial position. The Group is working to reduce the impact through security measures based on the Kurita Group Digital Management Policy and Digital Guidelines, as well as by strengthening its incident response systems.

Given the nature of the business, which involves the operation and maintenance of water treatment equipment related to customers' production activities and wastewater treatment, quality defects in products and services, equipment failures, human error, or inadequate monitoring could result in the supply or discharge of treated water that does not meet standards. If such an event occurs, it could lead to a loss of social trust, disruption to customer operations, environmental impact, the occurrence of damages and recovery costs, and effects on the continuation of business relationships, thereby affecting business results and financial position. The Group works to reduce this risk through the establishment of a quality management system and continuous improvement activities.

In business activities that require compliance with laws and social norms both in Japan and overseas, if legal violations or inappropriate conduct occur, this could result in restrictions on business activities, fines, litigation, and loss of social trust, affecting business results and financial position. Increased costs associated with regulatory tightening are also anticipated. The Group continues to strengthen its compliance systems and efforts that place importance on integrity.