ENDO Lighting Corporation

Since the Company's main products, LED lighting fixtures, are intended for building equipment, its business performance is affected by construction demand and corporate capital investment trends. If an economic downturn or sluggish construction demand occurs, it could have a significant impact on the Group's business performance and financial position. High dependence on specific sectors constitutes a vulnerability.

As technological innovation in LED elements accelerates, the shortening of product life cycles is increasing the risk of inventory obsolescence. If projected sales volumes cannot be secured, losses on disposal of inventory assets may arise, potentially having a significant impact on business performance and financial position. Although the Company strives for thorough parts inventory management, responding to rapid environmental changes remains a challenge.

If the Company fails to keep pace with changes in market needs and rapid technological innovation in the industry, it may become difficult to provide competitively advantageous products, potentially having a significant impact on business performance and financial position. As countermeasures, the Company is working on formulating product roadmaps, planned implementation of major changes, and strengthening the development of competitively advantageous products in the fields of dimming/color-tuning technology and wireless technology.

The lighting fixture industry faces a severe price competition environment due to new market entrants, which may force unexpected reductions in selling prices or special pricing responses to secure large-scale demand. If price declines proceed further than expected, this will affect business performance and financial position. To secure profitability, the Company continues to work on reducing procurement and manufacturing costs and enhancing the added value of its products.

The Group operates manufacturing and sales subsidiaries in Thailand, China, India, the United Kingdom, Singapore, and Vietnam, and may face country risks such as political instability, uncertainty in economic trends, and differences in religion and culture. If unforeseen events occur, this will affect business performance and financial position. The Group seeks to respond nimbly through close communication between local subsidiaries and headquarters and by actively gathering local information.

The manufacture of lighting fixtures uses steel, aluminum, resin, and other materials as main raw materials, and is directly affected by fluctuations in crude oil prices and other raw material prices. If these procurement prices fluctuate sharply, this may affect business performance and financial position.

The Company has a high ratio of overseas imports of LED elements, power supplies, and other components, and its business structure, under which the majority of products manufactured by subsidiaries in China and Thailand are sold in Japan, is affected by foreign exchange fluctuations. In addition, the translation of the financial statements of overseas consolidated subsidiaries into yen is also affected by exchange rate fluctuations. Although the Company takes hedging measures such as forward exchange contracts, sudden exchange rate fluctuations may affect business performance and financial position.

If a natural disaster such as an earthquake or typhoon, or a fire accident occurs, it could have a major impact on domestic and overseas supply chains due to damage to facilities or business interruption, and the resulting facility restoration costs may have a significant impact on business performance and financial position. In addition, employee absences due to the spread of a serious infectious disease and stagnation of the market economy could likewise have a significant impact.

The Company holds a large amount of information, including confidential technical and business information, and if an information leak occurs due to computer virus infection, unauthorized access, or similar causes, it may result in liability for damages, a decline in market evaluation, loss of social credibility, and loss of customers. Although the Company constantly implements optimal information security measures, it is difficult to completely eliminate this risk.

At the end of the current consolidated fiscal year, the Company recorded deferred tax assets of ¥1,113 million and goodwill of ¥2,315 million. If a deterioration in business performance requires partial write-down of deferred tax assets, or if business development does not proceed as planned and impairment of goodwill becomes necessary, this may affect business performance and financial position.