NIRECO CORPORATION

The Company Group serves customers across a wide range of industries, including steel, paper, chemicals, printing, food, and semiconductors, so capital investment trends both in Japan and overseas directly affect business performance. Geopolitical risks and policy changes in various countries continue, including the situation in Russia/Ukraine, the situation in the Middle East, China's export restrictions, and changes in US tariff policy, and the business environment is expected to remain uncertain, including fluctuations in raw material prices. If these factors combine, they could have a material impact on the Company Group's business, performance, and financial condition.

The Company Group is exposed to intense competition, and particularly in overseas expansion centered on Asian countries, competition with Western global companies and local companies in terms of both price and functionality is becoming fiercer. If the Company Group is unable to maintain an advantage over competitors, loss of order opportunities and downward price pressure could have a material impact on business performance and financial condition. While the Company Group is responding through company-wide unified business operations, responding to changes in the competitive environment remains an ongoing challenge.

Many of the Company Group's customers purchase products and services on deferred payment terms, resulting in substantial accounts receivable. Although the Company Group pays close attention to customers' creditworthiness, if credit risk materializes due to deterioration in the performance of major customers, substantial bad debt losses could occur, materially impacting business performance and financial condition.

The Company Group maintains a production system premised on the timely and appropriate procurement of raw materials and parts, but for some raw materials and parts, suppliers are limited and switching is difficult. If supply delays or interruptions occur at subcontractors or suppliers, production of products may become difficult and delivery times may be extended, and switching to alternative suppliers may increase purchasing costs. These events could have a material impact on the Company Group's business, performance, and financial condition.

The Company Group's growth depends on the development and sale of new products, and the Group continues to promote ongoing new product development. However, if development does not proceed as planned or must be abandoned midway, this could have a material impact on business, performance, and financial condition. This risk inherently includes delays in bringing new products to market and losses on development costs directly affecting profitability.

The Company Group provides products and services in accordance with strict quality control standards, but many products require high levels of safety in customers' production lines, and defects carry the risk of causing serious losses to customers. If liability for damages arising from product defects is pursued or customer trust declines, business performance and financial condition could be materially impacted.

The Company Group is actively pursuing M&A as part of its growth strategy, but if the integration of business operations, organizational culture, personnel systems, etc. does not proceed as planned, or if key officers or employees leave, the expected synergies may not be realized. In addition, if expected returns cannot be secured due to changes in the business environment, the Group may be forced to record impairment losses on goodwill and other assets, affecting business performance and financial condition. Furthermore, if the Company Group itself becomes a takeover target, the risk of personnel outflow accompanying changes in management structure and business policy could affect business continuity.

The Company Group has established production and sales bases in China, Taiwan, and South Korea to promote global expansion, but is exposed to risks such as political changes, economic fluctuations, unexpected changes in laws and regulations, and underdeveloped technical infrastructure in each country of expansion. If these risks materialize, significant obstacles to the continuation of local operations and securing profits could arise, potentially having a material impact on the Company Group's business, performance, and financial condition.

Natural disasters such as earthquakes, fires, and floods, or the spread of epidemics, could cause devastating damage to the Company Group's various sites, supply chain companies, and product users. If such an event occurs, the suspension of production and sales activities or a sharp decline in demand could materially impact the Company Group's business, performance, and financial condition.

The Company Group's retirement benefit expenses and obligations may increase due to a decline in the market value of pension assets or changes in the assumptions used for calculation, such as expected rate of return and discount rate. If these assumptions change unfavorably, increases in retirement benefit expenses and expansion of unrecognized obligations could have a material impact on business performance and financial condition.