Nippon Tungsten Co.,Ltd.

In the four markets of hygiene products/medical equipment components, semiconductors/electronic components, automotive parts, and industrial equipment/parts, there is a risk that sales could decline significantly due to sudden changes in the market environment, restraint of capital expenditure by major customers, price competition that is difficult to respond to, and technological innovation. Sudden changes in tariff policies in various countries could also affect the supply chain. As countermeasures, the Group is promoting the launch of next-generation new products into target markets, cost reduction activities, and flexible responses to supply chain diversification.

Rare metals such as tungsten and cobalt, which are raw materials for powder metallurgy products, are mainly imported from China and Europe, and there is a risk that procurement could become impossible due to changes in the political and economic situation in these regions or a global supply-demand tightening. Prices may also fluctuate sharply due to geopolitical risks or market conditions, raising concerns about the impact on procurement costs. As countermeasures, the Group is collecting related information, reviewing appropriate inventory levels, procuring from multiple suppliers, and strengthening its global procurement system.

If planned new product development is not achieved or is delayed, the Group could lose market competitiveness, which may affect its business results and financial condition. Amid the need for continuous and speedy creation of new products for growth markets, there is a risk that a shortage of development resources or changes in the external environment could hinder development plans. As countermeasures, the Group is strengthening the allocation of human resources to new product development, promoting joint research with external research institutions, and strengthening monitoring by the Board of Directors.

In overseas business activities and export transactions with overseas parties, fluctuations in exchange rates may affect the value after conversion into yen, which may affect the Group's business results and financial condition. As the Group has affiliated companies in the United States, Italy, China, and Thailand, it is exposed to foreign exchange risk across multiple currencies. As countermeasures, the Group is working to reduce risk by promoting yen-denominated transactions and managing the balance of foreign-currency-denominated receivables and payables.

Regarding fixed assets related to capital expenditures made at domestic and overseas business sites, there is a possibility that impairment losses may need to be recognized due to significant changes in the business environment or deterioration in earnings. In addition, signs of impairment may be identified due to the review of production sites accompanying business portfolio restructuring or the emergence of idle assets. As countermeasures, the Group formulates mid- to long-term management plans that take into account future demand forecasts, market analysis, and investment efficiency, and conducts thorough deliberation at Board of Directors meetings.

At affiliated companies in the United States, Italy, China, and Thailand, changes in political and economic factors, revisions to legal regulations and tax systems, and labor disputes or social unrest may occur, which could affect the Group's business results and financial condition. There is also a risk that rising raw material prices and intensifying price competition with local competitors could put pressure on earnings. As countermeasures, the Group is strengthening local information gathering and sales systems, launching new products, and conducting cost reduction activities.

If a cyberattack causes disruption to business systems, suspension of production and shipping operations, or leakage of confidential or personal information, this could damage the company's image, result in damage compensation claims, or cause loss of technological advantage, any of which may affect the Group's business results and financial condition. As a manufacturer, the leakage of technical know-how held by the Group directly poses a risk to its competitiveness. As countermeasures, the Group is thoroughly managing information, improving issues identified through external information security diagnostics, and continuously strengthening its systems.

If a quality defect occurs in a manufactured and sold product, and the amount of damage compensation exceeds the amount covered by the product liability insurance the Group has taken out, this could affect the Group's business results and financial condition. As the Group handles products requiring high quality standards, such as medical device components, quality issues could directly lead to a loss of customer trust. As a countermeasure, the Group is promoting the strengthening of its quality control system through process improvement and enhanced management.

If a compliance violation occurs within the Group, it could hinder business operations due to liability for damages or loss of credibility, which may affect the Group's business results and financial condition. As the Group has business locations both in Japan and overseas, it is required to comply with the laws and regulations of each country. As countermeasures, the Group is building a compliance framework including an internal whistleblowing system, promoting education to instill a compliance-first mindset, and conducting monitoring by the Board of Directors and the Risk Management Committee.

If a natural disaster such as a typhoon or earthquake, or an unforeseen accident such as a fire occurs, damage to production facilities and inventory assets and interruption of production and sales activities could affect the Group's business results and financial condition. In addition, if a serious industrial accident or equipment accident occurs, there are concerns about the incurrence of large compensation and restoration costs, administrative penalties, and a decrease in orders due to reputational damage. As countermeasures, the Group is promoting the development of initial response manuals and BCPs in the event of a disaster at each factory, as well as building a labor safety and health and disaster prevention management system.