Obara Group Incorporated

The Welding Equipment Business primarily serves automotive-related companies, the Surface Grinding Equipment Business primarily serves electronics-related companies, and the Electrical Equipment Business primarily serves the electric power industry. Fluctuations in capital expenditure, production trends, and power distribution infrastructure investment in each industry directly affect performance. This risk is recognized as potentially materializing every fiscal period, and the Company responds by closely monitoring industry trends and collecting and analyzing information from business partners.

Resistance welding equipment has strengths in joining thin steel sheets used in automobile bodies, but if technological innovation in vehicle body materials reduces the use of thin steel sheets, there is a concern that the performance of the Welding Equipment Business could deteriorate. In addition, since Polishing Machines (Surface Grinding Equipment) are intended for the electronics industry, which requires cutting-edge manufacturing technology, there is a risk that technological innovation in polishing processes could make it difficult to respond to customer requirements. In the Electrical Equipment Business as well, the Company may not always be able to meet demands for improved product reliability and workability, raising concerns about deterioration in the performance and financial condition of each business.

The electronics industry, a key customer of the Surface Grinding Equipment Business, experiences large cyclical demand fluctuations, which can cause significant volatility in performance. While the automotive and electric power industries are expected to have relatively stable market trends, fluctuations in the electronics industry may affect the performance and financial condition of the Group as a whole.

The Group has overseas subsidiaries in Asia, the Americas, Europe, and other regions. Since the revenues, expenses, and assets of overseas subsidiaries are translated into yen when preparing consolidated financial statements, fluctuations in exchange rates affect performance and financial condition. The Group seeks to mitigate this risk through forward exchange contracts and currency option transactions; however, the impact on business results cannot be ruled out if exchange rate fluctuations exceed expectations.

Copper alloy, a key material for the Welding Equipment Business, is strongly affected by international commodity market conditions, so a rise in copper prices directly leads to increased costs. The Group responds through copper futures contracts, commodity swap transactions, and passing costs on to sales prices, but if cost increases cannot be fully absorbed, this will affect performance and financial condition. Price increases in raw materials other than copper, as well as petrochemical products, pose similar risks.

The proportion of the Group's overseas production and sales activities in Asia, the Americas, Europe, and other regions has been increasing year by year, and unforeseen events such as natural disasters, terrorism, war, social unrest, industrial accidents, and strikes in host countries could disrupt business operations. The Group recognizes that the timing and extent of such risks materializing are currently difficult to predict, and it strives to gather information and respond appropriately through Group-wide management utilizing the information networks of its overseas bases.

Since Resistance Welding Guns are used around the world through global expansion, any quality issues that arise carry the risk of spreading on a global scale. If costs such as repair expenses are incurred, this could affect performance and financial condition. The Group addresses this through Group-wide quality control and continuous quality improvement activities.

If a global disease outbreak develops into a pandemic, worldwide economic deterioration could lead to adjustments in production and capital expenditure by major customers, and supply chain disruptions could cause difficulties in procuring materials and price surges, affecting performance and financial condition. The Group has diversified its production and sales activities across Japan, Asia, the Americas, Europe, and other regions, but there is a concern that the effectiveness of this diversification may be limited in the case of a global pandemic.

The Group consists of 30 subsidiaries and 1 affiliated company, operating three businesses: the Welding Equipment Business, the Surface Grinding Equipment Business, and the Electrical Equipment Business. The complexity of managing and controlling numerous Group companies both domestically and internationally is increasing, and fluctuations in the performance of individual companies could affect the financial condition of the Group as a whole.