EAGLE INDUSTRY CO.,LTD.

Approximately 50% of the Group's sales are directed toward the automotive industry and the automotive parts industry, and fluctuations in automotive production and sales trends directly affect business performance. There is also a risk of declining demand for existing internal combustion engine-related products due to the spread of electric vehicles and fuel cell vehicles. As countermeasures, the Group is pursuing thorough TCD (Total Cost Down), waste-reduction activities, and the establishment of a global production system.

If it becomes difficult to respond to technological innovation and quality requirements in each industry, or if the technologies held by the Group become obsolete, this may affect business operations. In response to the carbon-neutrality trend, there is demand for products for electric vehicles and for labor-saving and miniaturization of onboard equipment. The Group is promoting research and development targeting the next-generation mobility and next-generation energy markets, based on its long-accumulated sealing technology.

If a product defect occurs that leads to a large-scale recall or product liability claims, this could have a material impact on business performance and financial condition due to substantial response costs and a decline in social credibility. Manufacturing is conducted at each production site in accordance with globally recognized quality management standards, but risk cannot be reduced to zero. The Group continues to implement quality improvement activities under the slogan "Eternal Zero" to prevent such occurrences.

As the Group expands its overseas business into Asia and Oceania, Europe, and other regions, changes in overseas conditions, exchange rate fluctuations, supply-demand trends in overseas markets, and changes in local laws and regulations may affect business performance. In addition, future alliances and overseas business expansion, including the joint venture with EagleBurgmann Germany GmbH, may affect the Group's financial position and operating results. The Group's basic policy of optimal-location production is used to build a product supply system that supports customers' overseas expansion.

Some special raw materials and parts depend on a limited number of suppliers, and supply disruptions may occur due to disasters, accidents, bankruptcy, as well as heightened geopolitical risk and disruptions in international logistics. If a supply shortage occurs due to a surge in demand or other factors, there is a risk of impact on business performance. The Group seeks to secure stable supply through procurement from multiple suppliers.

If confidential information or personal information—such as customer and business partner information, or sales, technical, and intellectual property information—is lost, tampered with, or leaked due to cyberattacks, computer virus infections, or similar incidents, this may affect business activities and performance through a decline in social credibility or claims for damages. The Group has established a dedicated department to strengthen information security across the entire Group, and is continuing to implement security education as well as establish and operate related rules and standards.

If social infrastructure is damaged by a large-scale earthquake, natural disaster, pandemic, or other event exceeding expectations, significant disruptions to production and sales activities may occur, affecting business performance. Placing the highest priority on ensuring employee safety, the Group is building Business Continuity Management (BCM) through setting target recovery periods, disaster mitigation measures, securing safety stock, and diversifying procurement sources.

In the joint venture with EagleBurgmann Germany GmbH, which manufactures and sells mechanical seals and other products mainly in Germany, the future direction of the alliance and business development may affect the Group's financial position and operating results. If differences in policy with the joint venture partner arise or the business environment changes, there is a risk that this could hinder the execution of the Group's overall strategy. The Group promotes the joint venture and maintains collaboration in the manufacturing and sale of mechanical seals and other products for the General Industrial Machinery Business.