TADANO LTD.

Mobile cranes (mobile LE) have long durability and product life and are highly susceptible to economic conditions, resulting in demand fluctuations that tend to exceed the magnitude of economic swings. If demand declines beyond expectations due to changes in economic, political, or social conditions in various countries around the world, this may have a material impact on business performance and financial condition through decreased orders, increased customer cancellations, and increased inventory. The Group seeks to diversify this risk by establishing global sales and service networks.

Stationary cranes (stationary LE) are mainly produced on a build-to-order basis, and for large-scale projects, detailed cost estimation and cost scrutiny that takes unforeseen cost increases into account are conducted prior to order receipt. However, if procurement environment fluctuations exceeding expectations result in cost increases or delivery delays, contractual penalties may arise, potentially affecting business performance and financial condition. The Group addresses this by thoroughly scrutinizing risks at the order consideration stage.

Unforeseen sharp increases in raw material prices or shortages, as well as suppliers' insufficient supply capacity, supply stoppages, bankruptcy, or quality issues, may cause delays or decreases in production and shipment. While the Group works on cost reduction and productivity improvement through SVE (Super Value Engineering) activities, it is difficult to completely eliminate risks across the entire supply chain. Measures such as diversifying procurement sources are required.

Domestic production functions for the Group's main product, Construction Cranes, are concentrated in Kagawa Prefecture, and due to legal regulations, the Honshu-Shikoku Bridge cannot be used, making the Group dependent on maritime transport via ferries and barges. If ferries or barges become unavailable due to deterioration in the operating companies' financial condition or other reasons, this may result in decreased shipment volumes and increased shipping costs, potentially affecting business performance and financial condition. The Group seeks to secure transport capacity through measures such as introducing its own barges.

The Group's overseas operations, which are conducted globally, are affected by fluctuations in exchange rates. While the Group seeks to reduce risk through forward foreign exchange contracts for import/export settlements and offsetting of receivables and payables, unforeseen exchange rate fluctuations may affect business performance and financial condition. In particular, due to the structure of having development and manufacturing bases in Japan, Europe, and the Americas, exposure exists across multiple currencies.

Under the "World No. 1 in LE" strategy, the Group may carry out corporate acquisitions, business acquisitions, and capital alliances both domestically and internationally. While thorough due diligence and risk assessment are conducted in advance, if expected synergies cannot be realized or unforeseen liabilities or issues come to light after the fact, this may affect business performance and financial condition. The skill of the post-merger integration (PMI) process after M&A execution is a critical factor determining outcomes.

Products including Construction Cranes are subject to automobile and crane-related laws and regulations (such as emissions regulations) in Japan and overseas destination countries, the content of which differs by country and is revised from time to time. Amendments to legal regulations may result in compliance costs or hinder research and development, production, sales, and service activities. The Group continuously gathers information on legal regulations in each country and takes appropriate action.

If large-scale recalls due to product defects or damages liability based on product liability arise, and costs not covered by insurance or other means are incurred, this may have a material impact on business performance and financial condition. The Group has established a Product Safety Committee and a Quality Improvement Committee, and is committed to product development, manufacturing, and service with safety and quality as top priorities. Given the business characteristics of handling high-risk products such as Construction Cranes, product safety management is a particularly important risk area.

The Group, which holds confidential information and personal information of business partners, is exposed to risks of system failures, information leaks, and data tampering due to power outages, disasters, software defects, computer virus infections, unauthorized access, and other causes. While the Group implements maintenance and protective measures such as operating servers at external data centers and storing backup data at multiple locations, unforeseen events may affect business performance and financial condition. Given the increasing sophistication of cyberattacks, continuous strengthening of countermeasures is required.

If earthquakes or other natural disasters, large-scale fires, terrorism, conflicts, or infectious disease pandemics cause significant damage to the Group or its supply chain, this may result in operational suspensions, delays or decreases in production and shipment, and decreased sales. In particular, since production functions are concentrated in Kagawa Prefecture, the impact could be significant if regional concentration risk materializes. The Group takes necessary measures to ensure business continuity, including formulating BCPs, preparing disaster prevention manuals, and establishing communication systems.