F-TECH INC.

The Group manufactures and sells automotive parts globally, and if consumer purchasing sentiment declines due to economic downturns or price trends in the countries where the Group operates, this could affect business results through reduced production by major customers. As a countermeasure, the Group closely monitors market trends in each country and takes swift and appropriate action regarding decisions on production line installation and capital investment, as well as personnel allocation and expense management.

Sales to Honda Motor Co., Ltd. and its affiliated companies accounted for 64.3% of sales in the current fiscal year, and if that group's sales decline or unexpected loss of orders occurs, this could have a direct and significant impact on the Group's business and results. As a countermeasure, the Group strives to maintain and expand transactions with the Honda Motor group, while also actively promoting sales activities aimed at expanding transactions with other customers.

Overseas sales accounted for an extremely high 90% of sales in the current fiscal year (North America 76%, Asia 14%), and fluctuations in foreign exchange rates could have a significant impact on business results and financial condition. As a countermeasure, the Group utilizes hedging instruments such as forward foreign exchange contracts to mitigate exchange rate fluctuation risk on foreign currency-denominated transactions.

The Group's interest-bearing debt stood at a relatively high level of ¥68,954 million (37.8% of total assets) as of the end of FY2026 (ending March 2026), and a significant rise in interest rates in the financial markets of the countries and regions where the Group operates could affect its financial condition and business results. As a countermeasure, the Group cross-monitors the business, investment, and funding plans of internal departments and Group subsidiaries, and requires Board of Directors' approval as a precondition for borrowings and debt guarantees.

Some of the parts and raw materials used in product manufacturing depend on specific suppliers, and if such suppliers halt operations or supply chain disruptions occur, this could affect the Group's production and business results. As a countermeasure, the Group continuously reviews and strengthens its supply chain, and has established a system for swift response through monitoring of parts supply conditions and collaboration with suppliers.

If a natural disaster, power outage, or other unexpected disruption requires a long period to restore production capacity, this could affect the Group's business results. As a countermeasure, the Group conducts regular equipment inspections and preventive maintenance checks to minimize the risk of manufacturing line interruptions.

If an unexpected quality issue occurs, depending on the severity of the problem, legal liability or compensation costs may arise, potentially affecting business results and corporate image. As a countermeasure, the Group has established a quality control system based on strict quality control standards globally, and has put in place a framework to respond swiftly through a process based on consultation with each country's standards and customers should a quality issue occur.

As the Group operates globally, it is subject to a wide range of laws and regulations, including labor laws, antitrust laws, and various environmental laws, and violations of these could result in legal liability. As a countermeasure, the Group investigates the laws and regulations of the countries and regions in which it operates and conducts appropriate business operations in compliance with the legal systems of each country.

If the profitability of held fixed assets declines due to a significant deterioration in the business environment or other factors, impairment losses may occur, affecting financial condition and business results. As a countermeasure, the Group has set

In addition to the risk that an increase in the frequency and impact of natural disasters caused by climate change could disrupt procurement, logistics, and energy supply networks, an inadequate response to the trend toward decarbonization aimed at carbon neutrality by 2050 could adversely affect operating results and financial condition. As a countermeasure, the Group has set targets of achieving carbon neutrality for Scope 1/2 emissions by 2035 and net-zero for Scope 3 emissions by 2050, and is promoting energy-saving activities, upgrades to high-efficiency equipment, and the introduction of renewable energy.