Sanoh Industrial Co.,Ltd.

The Group conducts business globally across Japan, North and South America, Europe, China, and Asia, and fluctuations in economic conditions in each country/region may affect business performance and financial condition. There is an inherent risk that an economic downturn or decline in demand in a specific region will directly impact sales and profits.

Production adjustments or stoppages by major customers, domestic and overseas automakers, directly affect order status. In addition, if required parts change rapidly due to strengthening EV policies and regulations in each country, sales and profits may fluctuate significantly. As a countermeasure, the Group has formulated a medium-term management policy centered on establishing a high-profitability, high-quality foundation, expanding the thermal solutions business, and creating next-generation core businesses.

In FY2026 (ending March 2026), the ratio of overseas sales to consolidated net sales reached 79.5%, and a stronger yen may have a negative impact on business performance and financial condition. Although the Company implements hedging operations such as forward exchange contracts, there remains a risk that extreme exchange rate fluctuations at the fiscal year-end could result in valuation losses on derivatives, causing non-operating income and expenses to fluctuate.

Retirement benefit obligations are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets, and declines in these rates or deterioration in the investment environment may give rise to actuarial differences. Declines in the discount rate and long-term expected rate of return, as well as deterioration in the investment environment, may adversely affect business performance and financial condition.

The Company's products are classified as critical safety components and are manufactured in accordance with international quality management standards such as IATF16949 and ISO9001; however, there is no guarantee that defects or recalls will be completely eliminated for all products in the future. In the event of a large-scale recall, substantial costs may be incurred, and product liability insurance may not provide sufficient coverage. The Company has established and operates a system for preventing quality problems and their recurrence through review and improvement of APQP.

The Group procures raw materials from outside the Group, and fluctuations in raw material prices may adversely affect business performance and financial condition. While the Company strives to minimize fluctuation risk by synchronizing price changes with customers and suppliers, there is a risk that profitability could be squeezed during periods of sharp price increases.

In the event of natural disasters such as earthquakes, large-scale typhoons, or torrential rains associated with climate change, or unexpected accidents, damage to employees, production facilities, and the supply chain may occur, potentially disrupting procurement, production, and sales. The Company reviews and reassesses the effectiveness of its BCP and other measures through regular BCM activities, and has established a system to prioritize the protection of human life and achieve early recovery and continuity of operations should a risk materialize.

Confidential information such as technical and manufacturing information, customer sales information, and employees' personal information is managed on information systems, and system outages or information leaks may occur due to carelessness or intentional acts by employees or outsourcing companies, or cyberattacks. In addition to employee training and use of external experts to improve information literacy, the Company has taken out cyber risk insurance to minimize cost burdens and opportunity losses.

In conducting global business operations across North and South America, Europe, China, and Asia, unexpected changes in laws and regulations, unfavorable political and economic factors, international tax risks such as transfer pricing taxation, labor disputes, and social disruption caused by terrorism, war, disease, or similar events may adversely affect business performance and financial condition. The Company strives to resolve issues at an early stage and minimize unforeseen damage through status confirmation and information gathering via the information networks of overseas resident staff and regular web conferences organized by function and region.

If market and business conditions deteriorate to a level not anticipated at the time of an investment decision, and the expected cash flow cannot be generated due to a divergence from the business plan, this may adversely affect the Company's financial position and results of operations through impairment of tangible fixed assets and effects on the valuation of shares in affiliated companies and loans to consolidated subsidiaries. The appropriateness of investment decisions is ensured through performance management monitoring by the R.O.C. (Regional Operation Committee) established in each region, and through deliberation and resolution by the Board of Directors.