NICHICON CORPORATION

Uncertain factors such as difficulties in procuring raw materials and other supplies and price surges due to the situation in the Middle East, persistently high energy prices, the Russia-Ukraine situation, and U.S. tariff issues are numerous, and the outlook for the global economy remains extremely uncertain. The Group manufactures and sells Aluminum Electrolytic Capacitors, Film Capacitors, circuit products, and other items around the world, and economic conditions in each country and region may directly affect business operations and operating results and financial condition. As a countermeasure, the Company closely monitors economic conditions at monthly management meetings and the annual Global Business Plan Promotion Meeting, and implements agile sales strategies and production systems.

The Group has numerous transactions denominated in foreign currencies, and fluctuations in exchange rates when translating amounts into yen for the preparation of consolidated financial statements may affect operating results and financial condition. To mitigate foreign exchange risk, the Company enters into forward exchange contracts as necessary, but there is no guarantee that the impact can be completely eliminated. Sharp exchange rate fluctuations are also explicitly cited as an economic environment risk for FY2027 (ending March 2027), and this is an item requiring continued close monitoring.

If price competition with competitors intensifies in core businesses such as Aluminum Electrolytic Capacitors, Film Capacitors, and circuit products, this may adversely affect the business, operating results, and financial condition. The Group is promoting the establishment of a global structure and the strengthening of production sites in Japan and overseas, but pricing competitive pressure remains a continuous risk. As countermeasures, the Company continues to plan and develop new products that enhance competitive advantage, strengthen cost competitiveness, manage selling prices appropriately, and promote proposal-based sales activities.

If the Group's ability to respond to increasingly diverse and sophisticated customer requirements, its capability to develop and produce new products in a timely manner at appropriate cost, and its ability to forecast industry and market changes are insufficient, this may adversely affect the business, operating results, and financial condition. As technological innovation accelerates on a global scale, the importance of technologies that solve customer and societal issues is increasing, and there is a risk of development delays and technological obsolescence. As countermeasures, the Company has established R&D bases in Japan and China to build an integrated R&D system starting from materials development, and is promoting a comprehensive industry-academia collaborative research agreement with the Institute of Industrial Science, the University of Tokyo, as well as open innovation.

If significant changes occur in laws and regulations, tax systems and tax rates, laws and regulations related to import/export, or other political, economic, or social changes in the countries and regions where the Group operates, this may adversely affect the business, operating results, and financial condition. In particular, the Group has manufacturing bases for Aluminum Electrolytic Capacitors and other products in Wuxi and Suqian, China, and there is a risk that unexpected events in the local political, legal, or economic environment could disrupt business operations. As a countermeasure, the Company carefully monitors changes in political and economic conditions globally at management meetings and other forums, and takes appropriate action according to the situation.

A surge in purchase prices of raw materials for major products, which are significantly affected by international market conditions, may adversely affect operating results and financial condition. Against the backdrop of the situation in the Middle East and persistently high energy prices, there is a risk that upward pressure on raw material costs will continue in FY2027 (ending March 2027). As countermeasures, the Company promotes consideration of alternative materials and diversification of procurement sources, and follows a policy of appropriately reflecting increases in procurement costs that cannot be absorbed in product selling prices while monitoring market prices.

Although the Group manufactures products in accordance with global quality control standards, defects may occur in the products and services provided, and losses arising from such defects may adversely affect the business, operating results, and financial condition through substantial costs or a decline in corporate reputation. The Company has product liability insurance, but there is no guarantee that the insurance coverage will be sufficient to cover any damages. As countermeasures, the Company has introduced production management systems at all manufacturing sites with the aim of achieving "zero defects," and maintains the latest quality control standards and operational systems through the acquisition and renewal of ISO9001 and IATF16949 certifications.

The Group's business is subject to various environmental laws and regulations, and if environmental regulations become stricter in the future and obligations to remove hazardous substances are added, the associated costs may adversely affect the business, operating results, and financial condition. The Group continuously bears environmental liability risks related to past, present, and future production activities. As a countermeasure, under the Nichicon Group Environmental Charter established in 1997 (revised in 2015), the Company has obtained ISO14001 certification at 13 manufacturing sites in Japan and overseas, and promotes initiatives toward environmental conservation.

There is no guarantee that adverse effects from natural disasters, accidents, changes in circumstances, or incidents can be completely prevented or mitigated, and damage to production facilities or suspension of operations may adversely affect the business, operating results, and financial condition. The Group has multiple manufacturing bases in Japan and overseas, and there is a risk that a disaster at a specific site could spread to affect the entire supply system. As countermeasures, the Company conducts regular disaster prevention inspections and checks at all manufacturing sites, establishes systems for ensuring life safety and confirming employee safety, and works on reviewing and additionally building Business Continuity Plans (BCP) and Business Continuity Management (BCM).

Amid numerous cyberattacks targeting companies and information leaks caused intentionally or negligently by employees, if confidential information obtained from customers and business partners (such as business partner information, personal information, trade secret information, and technical information) is leaked, this may adversely affect business performance through loss of social trust, economic losses such as system restoration and compensation costs, and suspension of business activities. In addition, regulations and laws related to data protection and personal information protection are being established and strengthened around the world, and penalties for violations are becoming more severe. As countermeasures, the Company has established various regulations such as a basic information security policy and conducts education and training, implements technical measures such as malware countermeasures, access control, and 24/7 monitoring of PCs by external specialized organizations, and has taken out cybersecurity insurance across the entire Group.