NITCHITSU CO.,LTD.

The Machinery-related Business serves industries such as thermal power plants and steelmaking facilities that are affected by the societal trend toward decarbonization, and is therefore subject to fluctuations in capital investment. In the Resources-related Business, the High Silica segment is significantly affected by market fluctuations arising from the silicon cycle, and is also unavoidably impacted by specification changes accompanying technological innovation in electronics, which could lead to deterioration in business performance. As countermeasures, the Machinery-related Business is diversifying the industries it serves, while the High Silica segment is shifting toward higher value-added products and developing new fields.

The Company procures raw materials and auxiliary materials from suppliers including those overseas, and bears the risk of rising procurement costs or supply unavailability due to fluctuations in commodity markets. Soaring electricity and gas prices also affect manufacturing costs, potentially causing production stoppages and an increase in the cost-to-sales ratio. The Company is responding through diversification of suppliers, securing inventory, utilizing foreign exchange forward contracts, thorough energy conservation, and consideration of introducing solar power generation systems.

The direct impact of the situations in the Middle East and Ukraine, as well as U.S. tariff policy, is currently considered limited; however, future changes in the global situation could lead to production stoppages and deterioration in business performance. There is a high degree of uncertainty regarding the outlook, and there exists a risk of spillover effects on the supply chain and import/export costs. The Company's policy is to respond appropriately while closely monitoring the situation.

Product quality and production volume depend on personnel who possess techniques and skills cultivated over many years, but the departure of retiring employees due to mandatory retirement and other reasons is inevitable, and insufficient succession of techniques and skills could lead to a decline in quality and a decrease in production volume. The Company is pursuing new recruitment activities, including TV commercials, use of social media, comeback and referral hiring, and providing work experience opportunities to local high school students. Personnel acquisition and human resource development plans, including the acceptance of overseas trainees, are also being formulated and implemented.

The Company works to prevent mining damage from closed/abandoned mines based on laws and regulations such as the Mine Safety Act, but amendments to related laws and regulations could result in new cost burdens, and construction costs for measures to prevent physical and human damage caused by natural disasters and other factors could arise, potentially leading to a decrease in net income. The Company conducts regular maintenance of mine drainage treatment facilities and is also examining and implementing measures such as improving treatment capacity.

If a natural disaster such as an earthquake, tsunami, or typhoon occurs at a factory or business site, human and physical damage could cause production activities to stagnate, potentially resulting in factory shutdowns and substantial costs for recovery measures. In addition to regular facility inspections, the Company aims to minimize damage by appropriately reviewing its medium- to long-term outlook for facility renovation and renewal.

If an epidemic infectious disease spreads and requires a long time to be contained, it could significantly affect management through the stagnation of production activities and deterioration of business performance. The Company's policy is to minimize the impact on production activities through measures such as alternative work arrangements, and its head office and indirect departments at some group companies have introduced staggered work hours, shift-based telework, and core time systems.