T.RAD Co., Ltd.

The Company Group operates overseas bases in the United States, Europe, Asia, and China, but inherent risks exist including unpredictable changes in legal regulations such as tariff systems, political instability factors, disruptions caused by terrorism, war, or infectious diseases, and fluctuations in foreign exchange rates. If these risks materialize, they may affect business results and financial condition. As a countermeasure, the Company is promoting diversified expansion across multiple regions, but it is difficult to completely eliminate risks unique to each country.

Demand for the Company Group's products is affected by economic conditions in Japan, the United States, Europe, Asia, and China, and a decrease in demand accompanying economic downturns may affect business results and financial condition. In particular, sales volume of Construction & Industrial Machinery Heat Exchangers fluctuates significantly with economic booms and busts, but since production facilities and personnel are maintained at levels prepared for increased sales volume, fixed cost burdens become heavy during periods of significant sales decline, resulting in a large impact on management.

The Company Group's sales are highly dependent on OEM products, and poor business performance, price discount demands, and procurement policy changes by automobile manufacturers, construction and industrial machinery manufacturers, and others may have a substantial impact on business results and financial condition. Additionally, due to the nature of OEM transactions, it is difficult for the Company Group to independently decide on management strategies such as business withdrawal, creating a risk that the Company may be forced to continue unprofitable businesses.

The purchase prices of aluminum, copper, and other non-ferrous metals, which are the main raw materials, are affected by market fluctuations and exchange rate movements, and there are cases where price increases cannot be passed on to customers or where there is a timing gap in passing on such increases. Furthermore, increases in costs such as electricity, logistics, and labor costs also require individual negotiations with customers, and there are cases where such costs cannot be passed on; if these cannot be absorbed through improved production efficiency and rationalization, this may affect business results and financial condition.

Although raw materials and parts are procured from multiple suppliers, shortages of raw materials and parts may occur due to sudden accidents at suppliers, production halts caused by the spread of infectious diseases, or problems in the logistics network. In addition, if supply disruptions of key components such as semiconductors occur at supply destinations such as automobile manufacturers, this may spread to the Company Group's production through production cuts by automobile manufacturers, and production interruptions, increased procurement costs, and increased logistics costs may have a substantial impact on business results and financial condition.

The Company Group, which has business bases both domestically and overseas, is advancing the establishment of a BCM system in response to natural disasters such as earthquakes, typhoons, and floods, as well as epidemics caused by novel viruses; however, if damage on a scale exceeding expectations causes significant impact on physical and human resources or disruption of lifelines and transportation routes, this may have a substantial impact on business results and financial condition due to production interruptions and other factors. Even in cases where there is no direct damage to the Company Group, there is also a risk of being forced to suspend production due to significant impact on business partners.

The Company Group positions the establishment of a global quality assurance system as a top priority issue and is promoting quality assurance at each process and learning activities based on past defects; however, if an unexpected quality defect occurs in a major product, this may have a substantial impact on business results and financial condition. Given the high degree of dependence on OEM products, quality problems could also have a significant impact on relationships with customers.

The Company Group, which requires substantial capital expenditures to accommodate new models and other needs, strives to curb investment amounts through means such as standardization of equipment, but a certain level of capital expenditure is unavoidable. If expected profits cannot be secured due to sales decline or other factors in a business where substantial capital expenditure has been made, a significant impairment loss may occur, potentially having a substantial impact on business results and financial condition; the Company conducts risk assessment through investment recovery analysis at the time of new investment and monitors actual investment recovery.

If the response to tightening fuel efficiency and emissions regulations and the expansion of electrification is insufficient, there is a transition risk that sales of the Company's products may decrease. There is also a physical risk that factory operations may be suspended or the supply chain disrupted due to the intensification and increased frequency of abnormal weather events such as floods; the Company Group supports the TCFD and is addressing these risks by conducting specific scenario analyses.

The Company Group uses various information technology systems to improve business efficiency, and while it is strengthening countermeasures against external cyberattacks and conducting awareness and education activities for employees, if confidential information is leaked or lost due to cyberterrorism or computer virus intrusion, this may impede the continuity of operations such as production, potentially having a substantial impact on business results and financial condition.