Origin Company, Limited

The performance of the Electronics Business and Mechatronics Business is significantly affected by customers' capital investment trends and economic fluctuations. Although the Company seeks to mitigate performance fluctuations through new product development, there is no guarantee that it will always be able to accurately forecast future demand and introduce new products in a timely manner. If it fails to do so, this may affect not only the mitigation of performance fluctuations but also the business and overall performance.

The Company continues to depend on specific suppliers for some raw materials and components, and if procurement becomes difficult due to uncontrollable factors such as accidents, production capacity may decline and affect business performance. In addition, if logistics disruptions, delays in the delivery of materials, or surges in energy prices occur due to escalating geopolitical risks including the situation in the Middle East, there is a risk of failure to fulfill supply obligations to customers, rising costs, and declining demand. While measures such as multiple sourcing and diversification of procurement routes have been implemented, complete elimination of this risk remains difficult.

The Company promotes original product development aimed at achieving niche-top positions, but if new products cannot be brought to market in a timely manner or are not accepted by the market, there is a risk of lost sales opportunities and difficulty recovering research and development investments. There is also a constant risk that domestic and overseas competitors may develop and launch products with superior performance or pricing, which could threaten the Company's competitive advantage. The Company aims to maintain its competitive advantage by focusing on research and development and the development of high value-added products.

The overseas sales ratio has remained at a high level, at 38.0% in FY2024 (ending March 2024), 38.3% in FY2025 (ending March 2025), and 37.6% in FY2026 (ending March 2026), and exchange rate fluctuations directly affect the Company's financial position and business results. In the Mechatronics Business, large exchange rate fluctuations affect both raw material costs and sales, and the performance of overseas group companies is also affected by exchange rates used when converting into yen. The Company considers risk hedging as necessary, but complete avoidance of this risk is difficult.

As cyberattacks become more sophisticated and diverse, becoming a social issue, there is a risk that if confidential information or personal information of business partners or the Company's group is leaked, it could result in loss of credibility, legal liability, and impact on business operations. As countermeasures, the Company is building IT infrastructure aimed at achieving zero trust, and has established an authentication and authorization platform that combines measures against unauthorized access, malware countermeasures, device management, ID management, and data leakage prevention. The Company is also strengthening the development of security personnel, but complete elimination of this risk remains difficult.

Across the Company's five businesses (Electronics, Mechatronics, Chemitronics, Components, and Semiconductor Devices), there is no guarantee that the shipment of defective products can be completely eliminated due to effects on the stability of the production process and yield. If a product defect occurs, product recalls and compensation to customers may require substantial costs and could lead to a loss of social credibility. Although the Company has product liability insurance, there is no guarantee that it will sufficiently cover the final amount of compensation. The Company strives to reduce this risk through ISO9001 certification and monthly quality checks.

The Company's group, which operates domestically and internationally, is subject to a wide range of laws and regulations, including export restrictions, tariffs, trade regulations, antitrust laws, patents, and environmental recycling regulations. There is a risk that if the Company cannot respond in a timely manner to regulatory changes in each country or region, its production activities may be disrupted. Failure to comply with regulations could result in restrictions on business activities, loss of social credibility, and penalties from regulatory authorities, which may affect the Company's financial position and business results. The Company strives to ensure compliance through the collection of information on regulatory trends, the development of internal regulations, and continuous employee education.

If forecasts and assumptions regarding future taxable income change and it is determined that the recovery of deferred tax assets is difficult, deferred tax assets may be reduced, which could affect the Company's financial position and business results. As a result of careful consideration based on recent business performance trends, the Company reversed deferred tax assets and recorded ¥923 million in adjustment of income taxes, and the risk of additional reversal remains if performance deteriorates further. This is a risk that requires particular attention in situations where there is high uncertainty regarding future taxable income forecasts.

Securing and developing core personnel in the fields of technological development capability, production capability, sales capability, and management capability is essential for business continuity, but if the Company is unable to secure or develop the necessary personnel, this may affect its financial position and business results. The Company continues to implement employee education and training and to work on securing capable personnel, but given the intensifying competition in the labor market, there is no guarantee that it can reliably secure such personnel.

If the fair value of fixed assets declines significantly or business profitability deteriorates, an impairment loss may occur, which could affect the Company's financial position and business results. In addition, some borrowings, such as commitment line agreements, are subject to financial covenants, and there is a risk that violation of these covenants could affect the Company's business, financial position, and business results. The Company also faces the risk that if actuarial differences arise due to deterioration in the investment environment for pension assets, retirement benefit expenses and obligations related to retirement benefits may increase.