Yushin Company

Demand for the Group's products is directly linked to the economic conditions in the countries where products are sold and to capital expenditure trends in the plastic injection molding industry. If capital expenditure demand contracts due to economic fluctuations, this could have a material impact on the Group's business results and financial position through a decline in net sales. Although the Group seeks to diversify risk by expanding sales bases globally, it faces the structural challenge of high dependence on specific industries.

As the Group conducts sales through local subsidiaries established in various countries around the world, fluctuations in exchange rates affect consolidated business results through the translation of subsidiaries' financial statements. The parent company mitigates direct foreign exchange impact by principally conducting transactions denominated in yen; however, in sales conducted through overseas consolidated subsidiaries, the subsidiaries themselves bear the exchange rate fluctuation risk. Given exposure across multiple currencies, significant fluctuations in exchange rates could have a corresponding impact on consolidated business results.

In the industrial robot and automation equipment industry to which the Group belongs, fierce competition is being waged globally, and competitors continue to engage in aggressive price cutting. The Group strives to minimize this risk through reductions in manufacturing and sales costs and the development of new products; however, if the Group is forced to follow competitors' price reductions, this could lead to a decline in product selling prices, thereby deteriorating profitability and impacting business results and financial position.

The Group has established a quality control system compliant with international standards with the aim of providing high-quality products; however, it is impossible for any manufacturer to completely eliminate the risk of product defects. In the event of a serious quality issue, although the Group has taken out contractor liability insurance and product liability insurance, these insurance policies may not necessarily cover the full amount of compensation, and the resulting compensation costs or loss of credibility could impact the Group's business results and financial position.

The Group secures multiple suppliers to ensure the timely procurement of high-quality raw materials and parts; however, if supply chain disruptions occur due to natural disasters or accidents, or if supply restrictions or production stoppages occur due to deterioration in suppliers' business conditions, this could impede production activities. In addition, since some raw materials are linked to market prices, price surges caused by expanding demand or inflows of investment funds could push up product costs and adversely affect profitability.

The Group is working to recruit, develop, and retain the human resources necessary to accelerate its global business expansion; however, if the Group is unable to secure sufficient human resources to keep pace with the speed of business expansion, or if specialized personnel resign or take leave, there is a risk of lacking the necessary expertise and technical capabilities. In addition, sharp wage increases, particularly in emerging countries, could push up labor costs and impact the Group's business results and financial position.

Through its business activities, the Group holds confidential business and technical information belonging to its business partners, and it is strengthening information security measures and providing education and awareness activities for officers and employees. However, if cyberattacks, computer virus infections, unauthorized access, system malfunctions, or similar incidents result in the leakage of information or the destruction, falsification, or shutdown of critical data or systems, this could lead to a decline in social credibility, interruption of business activities, incurrence of countermeasure costs, and suspension of transactions, potentially having a material impact on the Group's business results and financial position.

The Group records customer-related assets arising from corporate acquisitions on its consolidated balance sheet. If the expected cash flows fail to materialize due to divergence from future business plans or other factors, it will be necessary to recognize an impairment loss. Recognition of an impairment loss could directly impact the Group's business development and business results, embodying a risk that depends on the success or failure of its M&A strategy.

As the Group conducts business globally and engages in cross-border intra-group transactions, it is exposed to international tax risks such as those related to transfer pricing taxation. The Group strives to minimize this risk by working with specialists to prepare transfer pricing documentation and other measures; however, differences in views with tax authorities could result in unexpected additional tax burdens, impacting business results and financial position.

Revenue recognition for robots and similar products is, in principle, based on the acceptance inspection method, and there is a tendency for acceptance inspections to be concentrated in the fourth quarter. Depending on the delivery schedules of other companies' products delivered and inspected during the same period, or the status of customers' acceptance inspections, timing discrepancies may occur in which planned net sales and cost of sales are recorded in the following consolidated fiscal year, which could impact the business results and financial position for the relevant period.