NIPPON CERAMIC CO., LTD.

The Group's products are supplied worldwide through the home appliance and automotive industries, among others, with sales to overseas customers and production by overseas subsidiaries. The Group may be affected by natural disasters, epidemics and other calamities, changes in political and economic conditions, fluctuations in personal consumption trends, and significant exchange rate fluctuations in various countries and regions around the world. Due to the global scope of business activities, the structure is such that risks in a single region can easily spread to overall business performance.

The Group places importance on the environment in all its business activities and operates its business in accordance with various laws and regulations surrounding the enterprise. Violation of these laws and regulations may, in addition to a loss of social credibility, adversely affect business performance and financial condition. Due to global expansion, the applicable jurisdictions are diverse, resulting in a high degree of complexity in regulatory compliance.

The Group is protecting the results of its research and development through patents and other intellectual property rights; however, if a third party infringes on these rights, or if the Company infringes on the intellectual property rights of a third party, business performance and financial condition may be adversely affected. Intellectual property disputes involve litigation costs and the risk of suspension of product sales, and may also affect business continuity.

The Group must continuously invest in research and development, plant construction, and production facilities to develop new products and increase production capacity, leading to increased expenses and depreciation burden. As products become more sophisticated and customer companies' development plans become longer, the period until mass production begins is lengthening, resulting in an upfront investment situation. A mismatch between the expense burden from investment and the revenue recovery period from mass-produced products may affect business performance and financial condition.

The Group's main raw materials are ceramic and other raw materials as well as electronic components, and raw material prices are constantly fluctuating due to changes in exchange rates and resource prices. While the Group's policy is to absorb such fluctuations through cost reductions and other measures, trends in raw material prices may affect operating results. If exchange rate fluctuations and resource price fluctuations occur simultaneously, there is a risk that cost absorption will become difficult.

There are product fields in which competition with competitors is intensifying as the range of product applications expands, potentially leading to a decline in sales prices. While the Group's policy is to secure profitability through selecting profitable items and developing new materials, unpredictable industry trends causing declines in product prices may affect operating results.

The Group implements strict quality control and inspection, and produces and ships products after agreeing on detailed specifications with customer companies; however, there is no guarantee that all products will be completely free of defects in the future. Should a recall or claim for damages occur, business performance may be affected. As a manufacturer, product defects are directly linked to credibility risk, and the impact is not limited to financial aspects alone.

On April 5, 2025, the Company's servers were subject to a ransomware attack, and it was confirmed that some confidential information and other data had leaked externally. The Group is strengthening its security and monitoring systems with advice and checks from external specialists, and is building further countermeasures; however, there are concerns about a decline in social credibility and effects on business performance and financial condition. Continuous response to unauthorized external access such as cyberattacks is required.

The Group holds information related to production, development, and sales, as well as confidential information of business partners and personal information, and has established information security regulations and implemented technical, human, and physical countermeasures. However, if important operations are interrupted due to unforeseen circumstances such as natural disasters or system failures, this may lead to a decline in social credibility and affect business performance and financial condition. In light of the ransomware incident, continuous strengthening of the response framework remains a challenge.