Daido Signal Co., Ltd.

If a serious quality defect or contractual non-conformance occurs in railway signaling-related products such as ATC and operation management systems, this may adversely affect business performance and financial condition due to repair costs, potential liability for damages, and loss of customer trust. Because the company provides products directly linked to the safety and security of railway transportation, the impact of quality problems can be particularly severe. The company treats thorough quality control, quality improvement, and prevention of recurrence of past defects as top-priority issues.

Currently, railway passenger demand remains solid due to personal consumption, leisure demand, and inbound demand, and stable continuation of orders is expected. However, in the long term, structural reforms by railway operators aimed at efficiency and workforce reduction may progress, potentially leading to streamlining of facilities and operations. Depending on changes in railway operators' capital expenditure plans, this poses a risk of adverse impact on the Group's business performance and financial condition. The Group works to secure appropriate orders through detailed sales activities based on relationships of trust with customers.

Due to the business characteristics of producing a wide variety of products in small quantities, many of which have long manufacturing periods, if orders for products with long manufacturing periods become concentrated, production capacity may become strained, adversely affecting business performance and financial condition. The Group works to secure appropriate orders by improving customer satisfaction and conducting detailed sales activities based on long-cultivated relationships of trust with users.

Many of the materials used in the company's products depend on overseas products, and the company may be affected by geopolitical risk and foreign exchange fluctuations in the form of cost increases through suppliers. In particular, there are concerns that rising raw material costs and unstable procurement conditions for parts and materials, particularly semiconductors, may continue over the long term, adversely affecting business performance and financial condition. The company plans to work even harder than before to improve the efficiency of its production system.

If large-scale natural disasters such as earthquakes, floods, typhoons, or volcanic eruptions, terrorism, or a major infectious disease outbreak occur, concerns about reduced production capacity and other impacts could adversely affect business performance and financial condition. From the perspective of diversifying manufacturing risk, production sites are spread across Tokyo, Fukushima, Yamanashi, and Morioka, but the possibility that multiple sites could be simultaneously affected in the event of a wide-area disaster cannot be ruled out.

Various factors, including political and social factors and economic trends in overseas export destinations, may adversely affect the development of overseas business. If geopolitical tensions increase or regulatory changes occur in export destination countries, this could affect the profitability and continuity of overseas business.

A Group company has experienced fire damage in the past, and measures to prevent recurrence are being implemented; however, should a fire occur, it may adversely affect business performance and financial condition depending on the scale of the damage. The company plans to implement recurrence prevention measures while striving to minimize damage in the event of a fire.

While the company strives to maintain its core railway signaling technology and take on challenges related to new technologies, there are situations in which responding to new technologies is required amid changes in the business environment. If the company falls behind in responding to technological innovation, this could lead to a decline in competitiveness and insufficient response to customer needs, adversely affecting business performance.