TPR CO., LTD.

The Group's core products, powertrain products (Piston Rings, Cylinder Liners, etc.), are mainly used in internal combustion engines. If the number of vehicles sold with internal combustion engines decreases due to the progress of electrification and sharing services, this could have a significant impact on consolidated business results. As a countermeasure, the new mid-term management plan through FY2026 (ending March 2026) promotes a dual-pillar management approach, strengthening development for multi-fuel and HEV/PHEV applications while shifting resources to new products and new businesses such as rubber and resin products and CASE-related products.

The global economy continues to face an uncertain outlook due to the prolonged high-interest-rate environment, geopolitical tensions including the situation in the Middle East, US-China conflict, fluctuations in energy and resource prices, and trends in US trade and tariff policy, among other factors, with automobile production volumes showing varying strength by country and region. If these uncertainties materialize, they could adversely affect the Group's financial position, operating results, and cash flows through increased import/export costs for products and raw materials, and impacts on finished vehicle production and parts supply.

In industries such as powertrain products, automotive exterior parts, and rubber and resin products, customer demands regarding quality, technology, and price are becoming increasingly stringent against the backdrop of intensifying development competition among global automakers. The Group seeks to maintain and expand its market share through intellectual property strategy and the development of products with superior performance, but there is no guarantee of stable results, and if market opportunities are lost, this could adversely affect the Group's financial position, operating results, and cash flows.

Market prices for raw materials used in core products, such as stainless steel, pig iron, rare metals, and naphtha, fluctuate due to supply-demand balance and exchange rate movements. If market prices surge and the impact cannot be absorbed through internal efforts such as productivity improvements or by passing costs on to sales prices, this could adversely affect future profitability.

As the Group operates globally and conducts foreign currency transactions in multiple currencies, it is affected by exchange rate fluctuations. Although the Group utilizes hedging instruments such as forward foreign exchange contracts, exchange rate fluctuations could affect its financial position, operating results, and cash flows.

The Group holds customer information, personal information, and confidential business and technical information, and cyberattacks on companies have become increasingly sophisticated and severe in recent years. Although the Group is strengthening virus countermeasures and employee training, if an incident such as an information leak occurs, there are risks of production stoppages, loss of social credibility, and litigation, which could adversely affect the Group's financial position, operating results, and cash flows.

The Group has adopted "zero customer complaints" as its quality policy and has received quality awards from many customers. However, if a serious quality defect occurs and causes damage to a customer, this could result in substantial cost burdens and a significant impact on the Group's corporate reputation. Although the Group continues to strengthen its quality control system, complete elimination of quality defects across all products is not guaranteed.

While the Group follows a policy of procurement from multiple suppliers, it is dependent on specific suppliers for certain procured parts. If the required procurement volume cannot be secured due to sudden changes in demand, reduced supply capacity resulting from a supplier being affected by a disaster, or disruption of logistics due to natural disasters or conflicts, this could adversely affect the Group's financial position, operating results, and cash flows through impacts on production.

As part of its management strategy, the Group undertakes corporate acquisitions and investments in startups and other companies, and it judges that the resulting goodwill appropriately reflects future earning power. However, if the expected earnings or results are not achieved due to internal or external uncertainties, this could adversely affect the Group's financial position, operating results, and cash flows through impairment of goodwill and other effects.

In Japan, a decrease in the number of employees is expected due to an increase in retirees, while the continuous acquisition and retention of young and specialized personnel to promote dual-pillar management also remains a challenge. The Group is implementing measures such as extending retirement age, enhancing re-employment systems, promoting technology transfer through DX, and strengthening new graduate and career recruitment, but if these measures do not achieve the expected effects, this could adversely affect the Group's business, financial position, and operating results.