TERASAKI ELECTRIC CO.,LTD.

The Group's earnings are directly affected by domestic and overseas capital expenditure trends. Although forecasts of capital expenditure trends are incorporated into profit plans, if fluctuations exceed expectations, this could affect operating results. As power distribution and control systems for ships, buildings, and factories are among the Group's mainstay products, sensitivity to capital expenditure cycles is high.

Marine Power Distribution & Control Systems is one of the Group's core businesses, resulting in a high degree of dependence on the marine shipping and shipbuilding industry as customers. If the operating results of this industry deteriorate, it could directly affect the Group's operating results. Although the Group has adopted a policy of expanding sales to markets other than marine applications, reduction of this dependence is currently still in progress.

The Group sells and purchases products denominated in foreign currencies, and sharp fluctuations in exchange rates could have a material impact on operating results. Although hedging measures such as forward foreign exchange contracts have been implemented as risk mitigation measures, there remains a risk that sudden fluctuations cannot be fully addressed.

Raw materials and parts such as copper, silver, and steel are used in manufacturing, and a surge in copper prices in particular has a significant impact on operating results. There is a risk of price surges or difficulty in procurement due to changes in the global economic situation or the environment in producing countries, and while the Group strives for stable procurement and cost reduction activities, complete avoidance is difficult.

The Group provides products and services related to the safety of electricity supply and control, and product failures carry the risk of causing serious losses to customers. Although the Group carries product liability insurance, if compensation costs exceed the insurance coverage limit or fall outside the scope of coverage, this could have a material impact on operating results.

The Group conducts production and sales activities in Europe, China, Southeast Asia, and other regions, and if unforeseen circumstances such as labor disputes arising from local legal regulations or customs occur, this could affect operating results and financial condition. While the Group's policy is to monitor local conditions at all times and respond appropriately, there are limits to its ability to respond to geopolitical risks and regulatory changes.

If impairment losses arise due to continued deterioration of operating results, significant deterioration of the business environment, a decline in the market value of fixed assets, or changes in the scope or method of use, this could have a material impact on operating results and financial condition. As a manufacturing business holding substantial fixed assets, particular attention is required regarding impairment risk during economic downturns.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on plan assets. If retirement benefit expenses increase due to a decline in the fair value of pension assets or changes in these assumptions, this could have a material impact on operating results and financial condition. Changes in the interest rate environment or a decline in the stock market could be direct triggers.

There is a risk that manufacturing facilities could be damaged and operations suspended due to natural disasters such as earthquakes and typhoons, fires, war, terrorism, or computer viruses. Although measures such as disaster prevention drills, the introduction of safety confirmation systems, and insurance coverage (excluding earthquake insurance, etc.) have been implemented, there is no guarantee that all recovery costs or losses from production delays will be covered by insurance, and this could have a material impact on operating results.

In the markets where the Group operates, price competition is extremely severe, and downward pressure on selling prices continues. Although cost reduction measures such as model changes, new product development, and production system reforms have been implemented, further intensification and prolongation of competition could make it difficult to secure stable profits, potentially affecting operating results.