Togami Electric Mfg. Co., Ltd.

The Industrial Power Distribution Equipment Business accounts for a high proportion of both net sales and profit, and if major customers curtail capital expenditures beyond expectations, this could have a material impact on business performance. The Group has a long history and high technological capability as a specialized manufacturer of Automatic Power Distribution Switches and power distribution systems, but no explicit diversification measures against the risk of concentration in a specific segment have been disclosed at this time.

The Group is a leading company in high-quality power distribution equipment, but it may not always be able to set prices that secure appropriate profits. If price competition with competitors intensifies further going forward, this could adversely affect business performance through a decline in profit margins.

Raw materials used in products are procured both domestically and internationally, but disasters and geopolitical risks, including tensions in the Middle East, could result in sudden price increases or delivery delays. Although the Group strives for stable procurement and to maintain appropriate prices, procurement disruptions caused by external factors could lead to higher production costs and delays in product supply, thereby affecting business performance.

Although thorough quality control is implemented under ISO9001:2015 certification, there is a risk of market recalls or product liability claims arising from, for example, defective components mixed in among externally procured parts. While the Group has product liability insurance, there is no guarantee that it will sufficiently cover the final amount of damages, and a large-scale claim could affect sales and business performance through the incurrence of substantial costs and a decline in corporate reputation.

Saga City, Saga Prefecture, the location of the Group's main base, is a region relatively prone to wind and flood damage, and there is also a risk of a large-scale earthquake occurring across Japan as a whole. Natural disasters, outbreaks of infectious diseases, and geopolitical risks could damage production facilities and disrupt the securing of raw material procurement and logistics routes, potentially affecting business performance through temporary suspension of production and sales.

There is a risk of information leakage or business disruption arising from computer virus infection, hacking, failure of network equipment, or loss or theft of devices. These threats have been increasing in recent years, and a prolonged shutdown of information systems could impair business continuity and have a material impact on business performance. The Group is proactively addressing information security, but this does not guarantee complete protection.

Passing on the skills and know-how cultivated over many years to the next generation is a challenge, and if this transfer of skills is hindered by a decline in new hires or an increase in employee turnover, this could lead to a decline in production and development capabilities. A mid- to long-term labor shortage could hinder the maintenance of product competitiveness and affect business performance.

Capital expenditures are implemented in a planned manner based on the medium-term management plan and annual plans, but sudden changes in industry technology trends or the supply-demand balance could force large-scale equipment renewal. If unexpected large-scale renewal occurs, substantial capital expenditure could arise, posing a risk to finances and business performance.

The Group's business activities are subject to legal regulations concerning taxation, patents, labor, the environment, foreign exchange, and other matters, and changes to or the introduction of new such regulations could affect business performance. If costs of responding to regulatory changes increase or business activities are constrained, there is a risk of an adverse impact on profitability.

Because the fiscal year-end month of major customers is concentrated in March, the Group's net sales also tend to increase in March. If projects scheduled to be recognized as sales in the final month of the fiscal period are delayed due to factors on the customer side, this could affect quarterly and full-year business performance.