DAIHEN Corporation

If demand fluctuates sharply in the Energy Management (power transmission/distribution equipment renewal and decarbonization-related), Factory Automation (EV and production automation), and Material Processing (semiconductor manufacturing equipment and shipbuilding) segments, this may affect business performance, including net sales. Since demand in each segment is influenced by domestic and overseas capital investment trends and policy changes, particular attention is required for scenarios in which multiple external factors deteriorate simultaneously.

In addition to declines in selling prices due to intensifying market competition, there are concerns over rising raw material prices driven by surging copper and other material prices and the situation in the Middle East. The Group is taking measures such as cost reduction through production automation, review of selling prices, and securing alternative procurement sources; however, depending on circumstances, this may adversely affect net sales and profit margins.

To address foreign exchange fluctuation risk in export transactions, the Group adjusts its foreign-currency-denominated receivables and payables position through product procurement from overseas production bases and expanded overseas procurement, and hedges through forward exchange contracts. However, if sudden fluctuations occur in exchange rates, business performance and financial position may be affected.

The ratio of overseas sales to consolidated net sales in FY2026 (ending March 2026) was 20.6%, and further expansion is anticipated going forward; however, there are uncertain factors regarding market growth potential, and unforeseen events such as changes in the political and legal environment may hinder business execution. Since overseas expansion is mainly conducted through local subsidiaries, responding to country-specific risks in each country is a challenge.

The Group holds numerous tangible and intangible fixed assets for business use, and if the profitability of these assets significantly declines due to changes in the business environment, recognition of impairment losses may affect business performance and financial position. Sudden changes in the business environment and obsolescence due to technological innovation are cited as the main risk factors.

The Group holds equity interests and investments in numerous companies, and also manages part of its pension assets in equities. If stock market conditions deteriorate or the financial condition of investee companies worsens, resulting in impairment of held securities or deterioration in pension asset investment performance, this may adversely affect business performance and financial position.

As of the end of March 2026, the balance of consolidated interest-bearing debt (total long-term and short-term borrowings) stood at ¥84,649 million. The Group is working to secure long-term stable funding at fixed interest rates and to reduce interest-bearing debt through improved capital efficiency and inventory reduction across the Group. However, since variable-rate borrowings and refinancing are affected by interest rate conditions, sudden fluctuations in interest rates may cause changes in business performance and financial position.

If information leakage or service disruption occurs due to cyberattacks or other incidents targeting customer information and technical information held by the Group, this may adversely affect business performance and financial position through loss of competitiveness and technological advantage, suspension of business activities, decline in social credibility, and occurrence of damages liability. The Group has established an Information Security Committee and is working to strengthen security across the Group through the introduction of the latest security systems, employee training, and thorough enforcement of rules through internal audits.

Against the backdrop of an increase in natural disasters associated with climate change, if large-scale disasters such as earthquakes or floods exceeding expectations occur at the Group's production and sales sites, this may lead to damage to production facilities, suspension of procurement of raw materials and parts, and paralysis of logistics and sales functions, resulting in suspension of operations and adversely affecting business performance and financial position. The Group has established crisis management regulations and business continuity plans tailored to risk events, and also recognizes pandemics, conflicts, and terrorism as similar risk factors.