Naikai Zosen Corporation

The New Shipbuilding (Ocean-going Vessels) business involves a long period from order receipt to completion and delivery, and the proportion of materials and equipment prices in manufacturing costs is high, so fluctuations in steel and equipment prices significantly affect costs. Due to the escalation of tensions in the Middle East, costs of paint, thinner, and other materials have risen and delivery lead times have lengthened, and if the difficulty in obtaining such materials becomes severe, there is a risk that vessels cannot be painted, making delivery to customers impossible. As countermeasures, the company is reviewing specifications and quantities, improving yield rates, and implementing lot ordering, overseas procurement, and early ordering with paint manufacturers.

Order prices may fluctuate due to cargo movement volume and the supply-demand relationship for vessels associated with global economic trends, which could affect the financial position and business performance. Since the New Shipbuilding (Ocean-going Vessels) business is the mainstay, the company carries a risk that a decrease in orders or a decline in prices during market downturns directly impacts business performance. The company seeks to reduce this risk through order-taking activities based on a product mix, coordination with the Ship Repair & Conversion business, and the development of new customers.

Significant fluctuations in exchange rates may affect the financial position and business performance. In principle, contracts for New Shipbuilding (Ocean-going Vessels) are denominated in yen, but when foreign currency-denominated contract vessels exist, the company is exposed to foreign exchange fluctuation risk. For foreign currency-denominated contracts, the company hedges through forward exchange contracts while closely monitoring exchange rates.

If the necessary personnel for the shipbuilding business cannot be secured, this may affect the financial position and business performance through a decline in productivity. As short-term countermeasures, the company is developing dormitories for single employees, assigning instructors to new graduates, and utilizing foreign human resources through the technical intern training and specified skilled worker programs. In the long term, the company strives to build a talent pipeline through continuous recruitment and by accepting visits to launching ceremonies from local elementary and junior high schools. The company also utilizes diverse recruitment channels, including referral hiring and mid-career hiring.

The company bears litigation risks related to criminal, civil, tax, product liability, intellectual property, environmental, and labor issues, and the outcomes of such litigation may affect the financial position and business performance. The company is working to foster compliance awareness through the use of external experts and internal meetings and training.

If an infectious disease spreads among employees, this may affect the financial position and business performance through temporary operational suspensions and other impacts. The company has established internal rules such as prohibiting travel to countries with high infection risk, refraining from business trips across prefectures, and mandating work from home in principle, and strives to prevent the spread of infection by revising these rules as needed according to the situation.

If a major earthquake, typhoon, or other natural disaster, an unexpected accident, or riots or terrorist activities occur at business sites or in regions where business is conducted, this may make business operations difficult due to human and physical damage, affecting the financial position and business performance. The company has formulated a BCP (Business Continuity Plan) and established a response system for risks during disasters and emergencies.

If an information security incident occurs, such as the leakage of important confidential information due to cyberattacks including unauthorized access from outside, this may affect the financial position and business performance through damage compensation and loss of credibility. The company addresses this through the introduction of security equipment and services and the establishment of regulations related to information security.

If the outlook for future cash flows declines due to changes in the business environment or other factors, the company may recognize an impairment loss on fixed assets, which may affect the financial position and business performance. The company applies the "Accounting Standard for Impairment of Fixed Assets" and strives to identify risks at an early stage by continuously verifying the presence or absence of indications of impairment each period.