TVE Co.,Ltd.

A significant portion of the Valve Business's revenue depends on the domestic electricity market (products and maintenance for nuclear and thermal power plants), and market changes driven by diverse factors such as natural disasters, judicial rulings, regulations, power generation technology innovation, fuel conversion, and electricity market liberalization could have a material impact on business performance. Currently, the restart of 12 units at 6 PWR nuclear power plants is expected to provide stable revenue from periodic inspections, but there is a risk of reverting to a revenue structure that is excessively dependent on nuclear power. It is essential to respond to changes such as the shift toward zero-emission fuels including hydrogen and ammonia, and the evolution of plant management technologies utilizing AI and IT, and the Company is addressing market changes through continued active research and investment.

The Company's manufacturing facilities consist of only two domestic sites: the head office plant in Amagasaki City, Hyogo Prefecture (valve manufacturing) and the Iga Plant in Iga City, Mie Prefecture (cast steel parts manufacturing). These two plants are not mutually substitutable, so damage to either would directly disrupt the production process. The head office plant is located in an area expected to be affected by a potential Nankai Trough mega-earthquake, and many of its buildings, constructed in the 1960s, carry risks related to seismic resistance and fire resistance; the 1995 Great Hanshin Earthquake caused long-term disruption to plant operations. As countermeasures, the Company acquired land in Ohi Town, Fukui Prefecture in December 2024 and in Port Island, Chuo Ward, Kobe City, Hyogo Prefecture in June 2025, and is planning to build and relocate plants; however, these measures require substantial funding, and any delay in implementation could result in an extremely serious impact on business performance.

The Company Group's products are used in critical components of various industrial plants, including nuclear power plants, and if manufacturing defects or maintenance faults cause malfunctions leading to serious accidents or plant shutdowns, this could develop into liability issues and have a material impact on business performance. As countermeasures, the Company is working to maintain a high level of quality by thoroughly instilling quality awareness among employees, appropriately operating its quality management system, and combining these with its internal control system. The Company intends to continue strengthening its quality assurance framework to prevent the materialization of this risk.

As a business operator engaged in the nuclear power industry, extremely strict management of customer information and transaction information is required, and unauthorized access to computer systems or information leaks caused by human factors could significantly impact business performance. As countermeasures, the Company employs system monitoring using next-generation antivirus (NGAV) and endpoint detection and response (EDR), data redundancy, preventive controls through hardware restrictions and operation log collection, and information security education. However, given today's internet environment, information leaks are considered practically irreversible, and complete prevention is recognized as difficult.

Some businesses require general or specific construction business licenses under the Construction Business Act, and maintaining these licenses requires meeting personnel requirements. In addition, products and maintenance for nuclear and thermal power plants require compliance with numerous regulations, standards, and licenses, as well as the deployment of personnel with sufficient years of experience, certified skills, and qualifications; amid recent difficulties in hiring and a shortage of human resources, there is a risk of significant concern regarding securing qualified personnel. Although the Company implements planned human resource development and process management, failure to respond appropriately due to capability or personnel constraints could have a material impact on business performance.

In the highly public field of valve products and services for nuclear power plants, any compliance issue that undermines customer and public trust could pose a fatal risk that threatens the very existence of the Company. The diversification of violation types, including harassment and the improper spread of information via social media, is also progressing. Compliance is ensured through organizational audits by the Audit and Supervisory Committee, accounting auditors, the Internal Audit Office, and the Quality Assurance Supervisory Office, together with the operation of the internal control system. The Company conducts training and awareness-raising activities based on compliance awareness surveys targeting all employees, but recognizes that complete elimination of this risk is difficult.

With growing awareness of environmental issues stemming from global warming, and given that thermal power plants, a major customer segment, are one of the largest sources of carbon dioxide emissions, an impact on sales activities is unavoidable. In terms of costs, addressing greenhouse gas reduction requirements associated with the large amount of electricity consumed in the cast steel manufacturing process (equipment improvements, purchase of non-fossil certificates, etc.) will require substantial costs, which could have a significant impact on business performance. The Company intends to mitigate this risk by closely monitoring societal and customer responses and taking swift, proactive countermeasures.

The Company's main raw materials are metal materials centered on iron and stainless steel, as well as rare metals such as chromium, nickel, and tungsten, and there is always a risk of rising procurement prices or procurement disruptions due to market fluctuations. In addition to global conflicts and exchange rate fluctuations, cost pressures are increasing from multiple directions, including rising demand for scrap due to blast furnace shutdowns in the steel industry and substantial electricity and fuel consumption in casting and heat treatment processes, which could have a significant impact on business performance. Although the Company hedges this risk through transactions with multiple reliable suppliers, the risk of significant price surges or procurement disruptions always remains.

The shift from time-based monitoring to condition-based monitoring maintenance for valve maintenance, as well as achieving efficient production in large-scale capital investments for aging plants, make the utilization of IT and DX a key challenge. If the Company falls significantly behind and is unable to break out of conventional approaches, it could fall behind competitors in both product competitiveness and cost competitiveness, significantly impacting business performance. The Company has established a system centered on its R&D Center to provide one-stop development of IT/DX talent, integration with products and services, and business process development.

Workplace accident risk is ever-present at manufacturing and maintenance sites, and there have been several accidents resulting in work absences in recent years. The occurrence of workplace accidents not only threatens employee safety but also leads to decreased productivity and work delays, and depending on the severity, could disrupt sales activities through loss of customer trust or suspension of designation, thereby significantly impacting business performance. The Company is promoting the establishment of a system to prevent accidents through improvements to work systems, individual training, strengthening teamwork, and investing resources in physical safety measures.