KANEMITSU CORPORATION

Sales of automotive parts, including pulleys, the Company's mainstay products, are significantly affected by changes in U.S. tariff policy, energy price surges caused by global conflicts, trends in automobile production volumes in various countries, and the trend toward electrification. Depending on trends in the Japanese and Asian markets, this may have a material impact on business performance and financial condition. As a countermeasure, the Company is promoting the development and expansion of sales of automotive parts other than pulleys, such as Transmission Parts, xEV Parts, and Motor Core Parts, as well as entry into non-automotive industries such as robot parts.

The Company is promoting new product development centered on plastic forming technology at three sites: the Kasai Plant Technical Center, the Nagasaki Plant Research Center, and the Thailand Technical Center. However, new product development is inherently uncertain, and if the development of products and technologies suited to market needs is delayed, this may affect business performance and financial condition. As a countermeasure, the Company plans to improve development capability and shorten development periods through active use of KAVS, and to expand its business into xEV Parts responding to the EV shift and into non-automotive fields.

In the automotive industry, demands for price reductions from automakers and parts manufacturers are tending to intensify further, and if the Group's price competitiveness declines, this may affect business performance and financial condition. As a countermeasure, the Company is proceeding with the commercialization of value-added products leveraging plastic forming technology, cost reduction through improved productivity and quality, and the restructuring of its production system, including overseas sites, from the perspective of optimal allocation of resources to appropriate locations.

The Group conducts part of its production, sales, and development activities in overseas markets, and is inherently exposed to a complex set of risks, including unexpected changes in laws and regulations, adverse political and economic factors, adverse tax effects, sharp exchange rate fluctuations, and social disruption caused by terrorism, war, or infectious diseases (delays or suspension of material procurement, production, sales, and transportation). If these risks materialize, they may have a certain degree of impact on business performance and financial condition.

The ratio of overseas sales to consolidated net sales for FY2026 (ending March 2026) was 26.4%, and since sales, expenses, and assets denominated in local currencies are converted into yen when preparing the consolidated financial statements, the yen-converted value is affected by fluctuations in exchange rates. As the Company intends to continue expanding overseas sales going forward, its exposure to foreign exchange fluctuation risk may increase.

Raw materials and parts used in product manufacturing are procured from multiple external suppliers, but some are dependent on specific suppliers. If stable and efficient procurement becomes difficult due to uncontrollable factors such as market fluctuations or disasters, this may have a material impact on business performance and financial condition.

The Company manufactures products in accordance with quality control standards based on many years of experience, but it cannot guarantee that all products will be free of defects or that recalls will never occur. If a large-scale recall or product liability claim occurs, this may affect business performance and financial condition through significant cost burdens, damage to corporate reputation, and a decline in sales.

The Group works with the assistance of specialists to protect its own technology through patents and confidentiality and to prevent infringement of other companies' intellectual property rights, but it cannot completely rule out the possibility that products currently or in the future sold may infringe on third parties' intellectual property rights. If a patent right of which the Group is unaware is established, the Group may be subject to claims for damages from third parties, which may affect business performance and financial condition.

If a large-scale earthquake, fire, flood, storm, or other natural disaster occurs, this could significantly impede business activities and affect business performance and financial condition. Regarding regional conflicts, although there are impacts based on economic sanctions and regulations in various countries, the impact is currently expected to be minor; nevertheless, the Company is implementing necessary measures to ensure employee safety and address the risk of soaring raw material and logistics costs.

The Company has implemented measures such as internal regulations, training, and the establishment of information security systems to prevent the leakage of personal information and confidential information, and has also set forth "continuous strengthening of information security" as a company-wide issue in its 10th Medium-Term Management Plan. However, if an information leak occurs, this could result in a loss of trust and liability for damages, and if an information system failure occurs due to a cyberattack or computer virus infection, this may affect business performance and financial condition.