TANAKA SEIMITSU KOGYO CO..,LTD.

Global economic fluctuations and declines in consumer demand may affect product demand through the automobile market. The Group operates in four countries—Japan, United States, Thailand, and Vietnam—and bears the risk that changes in economic conditions and market trends in each country will directly affect business performance. As a countermeasure, the Group has built production and sales structures across multiple regions to diversify the impact of market fluctuations and strengthen mutual complementary systems among its sites.

Since the Group's main business is the manufacture and sale of automobile parts, its performance is heavily influenced by trends in the automobile industry. In particular, the market structure is changing significantly due to the progress of electrification, and delays in responding to this change may affect business performance. Based on the long-term management plan "Next35," the Group is promoting the expansion of xEV-related products and new businesses to diversify its earnings base.

Sales to Honda Motor Co., Ltd. and its affiliated companies, the Group's primary sales destination, accounted for 60.5% of consolidated net sales in the current consolidated fiscal year, meaning that production and sales trends at the Honda Group directly affect business performance. Although this ratio has declined from 66.1% in the previous consolidated fiscal year, it remains at a high level, and a review of the capital relationship with the Honda Group is also underway. The Group is strengthening relationships with existing customers through customer involvement from the early stages of development, and is diversifying its customer base through new customer development and expanded transactions.

Rocker Arm Assy, an automobile engine part, is a key source of revenue accounting for 49.1% of consolidated net sales in FY2026 (ending March 2026), and a structural decline in demand for internal combustion engine-related products accompanying the progress of electrification may affect business performance. There is also concern about decreased orders due to the emergence of alternative products through technological innovation and changes in the competitive environment. The Group is promoting the diversification of its earnings base through the development and order expansion of xEV-related products, a shift to higher value-added products, and expansion into new products and new business areas.

Quality defects occurring in manufacturing processes and other areas may result in product repair costs, a decline in customer trust, and impacts on the supply system. As an automobile parts manufacturer, quality problems are a risk directly linked to the continuation of business relationships, and the impact on business performance could be severe. The Group is working to strengthen its global quality assurance system, thoroughly manage quality from the development stage through mass production, and prevent the occurrence and recurrence of defects.

Fluctuations in the exchange rates of the US dollar and Thai baht may affect the yen-converted amounts of overseas subsidiaries' sales and expenses, material procurement costs, and profitability. Sudden fluctuations in exchange rates carry the risk of deteriorating business performance due to delays in price pass-through, and translation effects at the time of preparing consolidated financial statements also affect financial position and business results. The Group strives to reduce the impact through continuous monitoring of exchange rate fluctuations, timely review of transaction terms, and the use of hedging methods such as forward exchange contracts as necessary.

The occurrence of natural disasters, infectious disease outbreaks, wars, terrorism, strikes, and similar events may affect production sites, procurement networks, and logistics networks. If these events are prolonged, they carry the risk of materially affecting business activities, financial position, and business results. The Group is promoting the diversification of production sites, diversification of procurement sources, strengthening of risk management across the entire supply chain, and the development and operation of business continuity plans.

Domestic production and sales sites are concentrated in Toyama Prefecture, and if a large-scale disaster or similar event occurs in this region, production and sales activities may be significantly affected. Concentration in a single region is a structural risk that increases vulnerability in terms of business continuity. The Group addresses this through the diversification of production functions using overseas production sites, diversification of procurement systems, development of mutual complementary systems among sites, and strengthening of business continuity systems.