Sansha Electric manufacturing Co.,Ltd.

Order volumes and order prices may be affected by a wide range of external factors, including trade regulations, tariff changes, pandemics, and trends in private-sector capital investment. Although the Company adopts a sales strategy that is not concentrated in specific regions or industries, a global economic downturn or contraction in demand is recognized as a risk that could exceed manageable limits. Countermeasures are being implemented by promptly grasping information from customers, suppliers, and financial institutions, and thoroughly sharing information among management executives.

The Power Supply Equipment Business uses large amounts of materials such as copper, steel, and resin. If sharp price fluctuations occur, delays in passing on costs to product prices during the period from inquiry to order receipt and delivery could affect business performance. In addition to cost reduction, productivity improvement, and expense reduction, the Company strives to secure appropriate profits through timely price negotiations that take manufacturing lead times into account.

Various external factors—such as longer procurement lead times due to increased demand for automotive parts, the impact of customs policies in various countries, transportation risks from regional conflicts and terrorism, and transportation delays and cost increases due to tight container supply and demand—may make it difficult to secure necessary parts in a timely manner. The Company continues to consider alternative procurement sources, select multiple suppliers, and develop new procurement sources, while also continuously monitoring changes in lead times for each part and arranging procurement in advance to minimize the impact of supply chain disruptions.

As the Company operates sales and production sites overseas, social unrest caused by war, riots, terrorism, infectious diseases, natural disasters, and similar events could halt operations at local factories, result in uncollectible receivables, or increase transportation costs, potentially having a material impact on business performance. In addition, changes in tariff rates in various countries could affect the price competitiveness of products, leading to the risk of lower-than-expected sales results. The Company is addressing this through information gathering via the Overseas Sales Headquarters and overseas subsidiaries, risk avoidance measures for individual projects, price pass-through, and supply chain restructuring.

The Company is exposed to competition from other companies both domestically and internationally, and if price competition intensifies more than expected and selling prices decline, business performance could be affected. The Company is pursuing differentiation through continuous development investment, quality improvement, increased local procurement of raw materials, production cost reduction, and enhanced maintenance services, while concentrating management resources in areas where its own strengths can be leveraged through a review of its product portfolio.

If personal information or confidential information of customers and business partners is leaked, destroyed, or tampered with due to cyberattacks, unauthorized access, human error, or similar causes, or if information systems are disrupted, business performance could be affected. The Company is working to develop and strengthen its information management system through group-wide security enhancement, appropriate management of outsourcing partners, and employee training.

Against the backdrop of a declining working-age population in Japan, competition to secure talented personnel is intensifying, and failure to secure necessary human resources could hinder business expansion and affect performance. In addition to securing and developing personnel through enhanced employment systems and education/training programs, the Company aims to minimize the impact on business expansion and performance by improving productivity per employee through the promotion of digital transformation (DX).

In production, sales, and procurement activities conducted worldwide, there is exchange rate fluctuation risk related to foreign-currency-denominated receivables and payables. Although this is hedged through forward exchange contracts and similar measures, it is not possible to eliminate all of the impact, which could affect business performance. In addition, fluctuations in the exchange rates used to translate the sales, expenses, and assets of sales subsidiaries in each region into yen also affect consolidated business performance. The Company seeks to mitigate this risk by combining local production for local consumption to maintain currency balance with the use of forward exchange contracts.

The Company holds substantial long-lived assets such as tangible fixed assets, and if it is determined that the residual value cannot be recovered through future cash flows, impairment may need to be recognized. If capital investment demand falls significantly below expectations, an excessive depreciation expense burden could also arise. The Company considers appropriate measures through continuous monitoring of indicators and prior discussion of cash flow improvement measures when indicators are recognized.

The Company is required to comply with environmental regulations in various countries, such as the European RoHS Directive and the China RoHS Directive, and failure to comply or increased response costs due to future regulatory changes could affect business performance. In addition, if an accident involving the release of chemical substances used in production activities occurs, there are risks such as loss of social credibility, compensation costs, and production suspension. The Quality and Environmental Planning Office, in coordination with related departments and outsourced manufacturing partners, continuously collects information on legal regulations in Japan and overseas and strives to establish a system for rapid response.