TOA CORPORATION

The Group operates in four overseas segments—Asia Pacific, Europe, Middle East & Africa, Americas, and China & East Asia—and has overseas production subsidiaries in Indonesia, Taiwan, and Vietnam. Should an economic downturn, changes in laws or regulations, adverse political factors, terrorism, war, conflict, or similar events occur, they may affect the Group's business results and financial condition. As countermeasures, the Group seeks to mitigate risk through geographic diversification across multiple countries and regions and through a demand structure targeting both government and private-sector demand.

Since overseas sales are generally denominated in foreign currencies, fluctuations in exchange rates directly affect the Group's business results and financial condition. In addition, since the foreign-currency-denominated sales, expenses, assets, and liabilities of overseas subsidiaries are translated into Japanese yen when preparing consolidated financial statements, translation risk also exists. The Group seeks to reduce this risk by promoting a local production-for-local consumption business model to achieve same-currency transactions and by utilizing currency matching, but the impact remains in the event of sharp exchange rate fluctuations.

The Group invested ¥3,380 million in research and development expenses in FY2026 (ending March 2026), approximately 6% of consolidated net sales, and the continuous introduction of new products is essential for sustaining the business. However, the outcomes of research and development are uncertain, and there is a risk that substantial spending will not necessarily translate into results. The Group strives to reduce this risk through the formulation and updating of product and technology roadmaps, understanding of customer needs, and gate evaluations at each development stage.

Securing and developing personnel with extensive experience and specialized knowledge, including in research and development, is essential for sustainable growth and enhancement of corporate value. However, against a backdrop of labor shortages and increasingly active job-changing, there is a risk that excellent personnel will leave the company. Failure to secure and develop human resources may affect the Group's growth, business results, and financial condition. As countermeasures, the Group is promoting sustained base pay increases, continued tiered training programs, and the allocation of personnel and creation of environments that leverage diversity.

In the event of a large-scale disaster such as an earthquake, business activities including procurement of raw materials, product manufacturing, and supply may be disrupted, which may affect the Group's business results and financial condition. The Group is advancing countermeasures in production, financial, and information systems, including maintaining information and communication networks through the construction of backup systems, formulating large-scale disaster response manuals, and conducting annual BCP drills. It has also established a cross-functional response system based on personnel assignments and functional axes such as sales, production, and administration in anticipation of emergencies.

The Group procures raw materials and electronic components, including semiconductors, from both domestic and overseas sources for product manufacturing. If procurement difficulties or price increases continue, this may affect production activities, business results, and financial condition. The Group strives to adjust procurement lead times based on advance order forecasts and to maintain appropriate inventory levels, but risk remains if supply constraints become prolonged. It addresses this through cost reduction and production efficiency improvements via automation of production processes, expansion of production capacity, and standardization of production management systems, as well as through appropriate pricing.

There is a risk of information leakage, destruction, product malfunction, or service disruption due to external attacks such as unauthorized access or employee negligence, which may affect business results and financial condition through loss of trust or the occurrence of damages compensation costs. The Group has established a company-wide management structure centered on its Information Security Committee, conducting employee training, evaluation of operational status, and establishment of an incident response headquarters. It is also working to strengthen the security of its products and services, including obtaining ISO/IEC 27001 and ISO/IEC 27017 certifications and acquiring the JC-STAR conformance label.

In manufacturing and selling a diverse range of products and services globally, the occurrence of a product defect could result in liability not fully covered by product liability insurance, the burden of significant corrective costs, and damage to brand value, which may affect business results and financial condition. Based on the "TOA Quality Basic Policy" and the "Quality Manual," the Group conducts thorough checks at each stage from product planning through production and launch.

The leakage of technology and know-how, brand imitation, disputes related to infringement or unauthorized use of patents and other rights, or the inability to use or changes in the conditions of intellectual property rights licensed from other companies could affect business results and financial condition. The intellectual property department works with the product development and new business development departments to strengthen creative intellectual property activities that expand rights from both technical and intellectual property perspectives, while also working on AI-driven reform of intellectual property operations.

Because the timing of budget execution for government agencies and private-sector facilities tends to be concentrated in the second half of the fiscal year, the Group's sales and profits tend to increase more in the second half than in the first half, resulting in a seasonal skew in performance. Since first-half results do not necessarily reflect the outlook for the second half, investors should exercise caution when evaluating performance.