NTN CORPORATION

Overseas sales account for more than 50% of consolidated net sales and are expected to increase further, so fluctuations in exchange rates between the yen and local currencies directly affect financial position and operating results. The operating results of overseas subsidiaries are translated into yen, and many export transactions are conducted in foreign currencies. The Group hedges through forward exchange contracts and expanded local procurement, but the impact cannot be completely avoided.

Market prices for some bearing products have fallen due to the rise of products from emerging countries, including China, and in the automotive industry, which accounts for more than half of sales, requests for price reductions are intensifying against the backdrop of global price competition. The Group is addressing this through continued cost reduction efforts and the development of high value-added new products, but downward price pressure may squeeze profitability.

In addition to rising steel prices, which account for a large proportion of material costs, higher logistics costs such as ocean freight rates and fluctuations in tariff rates affect profitability. The Group addresses this through price pass-through, yield improvement, VA/VE activities, and supply chain review, but if costs rise beyond expectations, this could adversely affect financial position and operating results.

Approximately half of the Bearing division and the majority of the CVJ & Axle division are for the automotive industry, resulting in a high degree of dependence on a specific industry. The Group is working to improve the business composition balance by expanding sales in the industrial machinery field, but if a sharp change in demand occurs in the automotive field, it could have a significant impact on the financial position and operating results of the Group as a whole.

With overseas sales accounting for more than 50% of consolidated net sales, the Group is exposed to a wide range of risks, including unexpected changes in tax systems, trade policies and regulations in various countries, difficulty in securing human resources, unstable labor relations in emerging countries, and political instability. The Group strives to prevent and avoid these through information gathering within the Group, but if these events occur, they may hinder business operations.

If a serious defect occurs in a product, it could lead to a serious accident, complaints, or a recall, resulting in significant product compensation costs. The Group thoroughly implements quality control on a global basis and has product liability insurance, but insurance may not cover all losses such as damages.

If information leakage or destruction, falsification, or system shutdown of important data occurs due to cyberattacks, unauthorized access, computer virus intrusion, etc., this could damage the Group's credibility and disrupt production and sales activities. The Group strives to ensure appropriate information management through the establishment of internal regulations and employee education, but complete protection is difficult.

The Group is subject to a variety of laws and regulations in the countries and regions where it operates, including tax laws, environmental regulations, antitrust laws, anti-dumping laws, anti-bribery related laws, and trade and foreign exchange regulations. If unfavorable outcomes result from lawsuits or legal proceedings due to violations of laws and regulations, or if laws and regulations are amended or newly enacted, this could affect financial position and operating results.

The Group is exposed to both the risk of operational and business suspension due to abnormal weather (heavy rain, floods, storms, etc.) associated with rising temperatures, and the risk of increased raw material and energy procurement costs due to stricter environmental regulations such as the introduction of a carbon tax. The Group conducts scenario analysis in line with the TCFD recommendations, and details are described in its sustainability-related disclosures.

Natural disasters such as earthquakes and floods, fires, and the spread of infectious diseases could damage the business sites of the Group and its business partners. The Group has implemented various measures such as introducing a safety confirmation system, conducting disaster prevention drills, and stockpiling supplies for infectious disease countermeasures, but complete risk avoidance is difficult, and this could affect financial position and operating results.