ORIENTAL CHAIN MFG. CO., LTD.

The Chain Business has reached the maturity stage as a product category, and there is a risk that added value will decline due to a decrease in factory production volume caused by falling order prices and increased imports resulting from competition with low-priced Asian products. In addition, Power Transmission Roller Chains face the risk of decreased export sales due to a downturn in overseas economies, which could affect overall sales.

Although products in the Metal Injection Molding Business have gained traction, there is a risk that orders will fluctuate significantly due to short product life cycles and intense model changes. The company handles products related to conveyance equipment and medical devices, but its business performance is structured to be affected by customers' product replacement cycles.

Consolidated subsidiary Oriental GB Co., Ltd. plans to conduct an investment business involving the holding and trading of gold bullion and other assets, but purchases were suspended during the current consolidated fiscal year in consideration of the deteriorating situation in the Middle East, among other factors. If unforeseeable fluctuations occur in the market levels or volatility of the financial products handled in the future, the company may incur losses.

The company uses special steel produced by domestic steel manufacturers as its main raw material. If purchase prices rise significantly due to increases in iron ore and iron scrap prices, increased demand from China, or other factors, manufacturing costs may increase and adversely affect business performance. If cost pass-through is difficult, this could lead to a decline in profit margins.

Approximately 15% of the Group's sales are made to overseas markets, and since many of these transactions are denominated in U.S. dollars, the Group is exposed to foreign exchange risk. Although measures have been taken to avoid or mitigate exchange rate risk, fluctuations in exchange rates may affect business performance and financial condition.

The Group is working to improve asset efficiency in order to reduce interest-bearing debt, but if market interest rates rise, there is a risk that interest expenses will increase and profits will decrease. Changes in the interest rate environment have a structure that directly affects financial costs.

As a manufacturer, if product complaints or recalls occur, and if the resulting damages cannot be covered by product liability insurance or other means, this could have a material impact on business performance. Maintaining the quality control system remains an ongoing challenge.

If it is determined that all or part of the deferred tax assets are not recoverable due to significant changes in business performance or the operating environment, or if there are changes in tax systems or accounting standards, deferred tax assets may be reduced, affecting business performance and financial condition. Deferred tax assets are recorded based on current standards after considering the sufficiency of future taxable income, but future uncertainty cannot be eliminated.