TAKEUCHI MFG.CO.,LTD.

Overseas sales account for more than 95% of consolidated net sales, and the Group is directly affected by fluctuations in the US dollar, British pound, and euro. Foreign exchange gains or losses may also arise from the translation of receivables and payables at the fiscal year-end. Although the Group hedges through forward exchange contracts and increased foreign-currency-denominated procurement, fluctuations exceeding expectations could have a material impact on business performance.

There is a risk that manufacturing costs may increase due to fluctuations in the market price of steel, a key raw material. In addition, since construction machinery is exported to Europe, the United States, and other regions by sea, surges in ocean freight rates and changes in tariff rates may also affect business performance. As countermeasures, the Company is implementing cost reductions such as rationalization of production lines and reviewing selling prices.

Products consist of a wide variety of parts, including engines, hydraulic equipment, electronic components, fabricated metal parts, and rubber products. If procurement from suppliers becomes difficult, production activities may be restricted, affecting business performance. Through cross-functional initiatives combining the purchasing and development departments, the Company is diversifying risk by procuring from multiple suppliers.

Since the main production sites are concentrated in northern Nagano Prefecture, if production facilities are damaged by natural disasters such as earthquakes or by fire, operations could be suspended and production delayed, potentially having a material impact on business performance. The Company is considering diversifying its production sites over the medium to long term, and a plant in South Carolina, United States began operations in September 2022.

Products are primarily intended for urban civil engineering works such as housing foundation construction, living infrastructure works, and public and private construction investment, and changes in these market conditions and market needs directly affect business performance. To prevent inventory shortages and overproduction, the Company monitors market conditions and reflects closer customer engagement in new product development.

The construction machinery industry has many competitors, and competition is intense worldwide. If competitors introduce products that surpass the Company's products in quality, performance, or price, market share may decline, affecting business performance. The Company is working to expand market share by differentiating through appeals to the superiority of its products in quality and performance, and by expanding its sales network.

Efforts to reduce greenhouse gas emissions are being strengthened worldwide, and if unexpected regulations are established and the Company's response is delayed, business performance may be affected. The Company is working on information disclosure recommended by the TCFD and formulating and executing long-term management strategies through scenario analysis.

External cyberattacks, human error, internal misconduct, or system failures could result in the leakage of confidential information, loss or falsification of important data, and disruption of business activities. This carries the risk of reduced production and sales, liability for damages, and decline in brand value and social credibility. The Company has implemented multi-layered measures including network security settings, intrusion monitoring, restriction of connected devices, and employee training.

Securing personnel with advanced development skills is essential for the continuous launch of new products, and securing excellent personnel to strengthen the sales and management structure is also a key challenge. If the Company is unable to secure sufficient personnel, its research and development capabilities and business growth potential may decline, affecting business performance. The Company is working on building personnel and compensation systems, strengthening education and training, practicing health management, and improving work-life balance.

If quality or safety defects occur in products, liability risk may arise, affecting business performance. The Company continues efforts to further improve quality, while hedging risk by purchasing product liability insurance.