TBK Co.,Ltd.

Business results may be affected by market trends in the automobile, construction and industrial machinery, and agricultural machinery industries and by economic conditions in each country, including increased costs for North America-bound products due to changes in U.S. trade and tariff policy, sluggish sales in Thailand due to stricter auto loan screening, and decreased demand due to a downturn in China's real estate market. In addition, heightened geopolitical risk and rising raw material, energy, and logistics costs, as well as sudden currency fluctuations, may disrupt the supply chain and production activities. The Group is responding to these risks while closely monitoring trends in its key markets (Japan, Thailand, China, India, and the United States).

The Group remains highly dependent on the domestic standard truck (payload of 4 tons or more) related business and holds a high market share in this area, making its business results susceptible to trends in this market. The construction and industrial machinery related business is also significantly affected by demand trends such as public investment, infrastructure development, and private capital investment. If these markets weaken, both sales volume and profit margins could be materially affected.

For drum brakes, the Company's mainstay product, stricter brake regulations in China have led to the adoption of disc brakes in some vehicle models, and there is a risk of competition from disc brakes in the domestic standard truck market as well. In addition, progress in the electrification (EV) of commercial vehicles may reduce demand for the Company's pump products. In response, the Company is strengthening its capabilities for disc brake products and promoting the development of electric pumps and thermal management related products for commercial vehicles.

Because the production sites in Thailand, China, and India mainly manufacture and sell locally, foreign exchange risk associated with imports and exports is minor. However, since the financial statements of overseas subsidiaries denominated in local currencies are translated into yen when preparing the consolidated financial statements, the yen-translated value may be affected by exchange rate fluctuations. In periods of sharp yen appreciation, the yen-translated value of overseas subsidiaries' results declines, affecting consolidated results.

Brakes for commercial vehicles, the Group's mainstay product, are critical safety components, and any quality defect could lead to a serious accident, resulting in substantial cost burdens and a significant loss of social trust. As countermeasures, the Company has established a quality management system in compliance with IATF16949, and conducts shipment inspections by internally certified inspectors and process control for critical safety components by internally certified operators. A monitoring system through regular internal audits has also been established.

Delays or shortages in the procurement of materials and parts due to increased demand or sudden market changes, price increases, or equipment accidents, natural disasters, or bankruptcy of suppliers may disrupt production activities and affect business results and financial condition. As risk mitigation measures, the Company is promoting diversification of procurement sources, such as dual sourcing, and regularly monitoring supply chain information.

At production sites in Japan, Thailand, China, and India, large-scale natural disasters such as earthquakes and typhoons, infectious disease pandemics, fires, and other accidents may reduce plant operating rates and affect business results. As countermeasures, the Company has formulated a business continuity plan (BCP), and is implementing emergency response systems, crisis response drills, and regular inspections of firefighting equipment, as well as establishing systems for telework and staggered working hours.

At overseas sites in Thailand, China, and India, business activities may be suspended due to major changes in laws, regulations, or tax systems, labor disputes, social infrastructure failures, or political instability, war, terrorism, etc. The Group has formulated a BCP based on scenarios anticipated to have a significant impact, and is working to strengthen systems for the continuity and recovery of critical business operations.

As the Group operates globally, if a violation of relevant laws and regulations in any country occurs, particularly if the violation is severe or the subsequent response lacks appropriateness, social trust could be significantly diminished, affecting business results and financial condition. As risk mitigation measures, the Company has established a group company management system, a risk and compliance system, and an internal reporting system, and is working to prevent misconduct and legal violations before they occur.

Intensifying competition for talent and the aging of the workforce may delay recruitment, development, and skill transfer of human resources, potentially affecting future business development. As countermeasures, the Company is promoting employee health and work-life balance, improving employee satisfaction, developing compensation systems, and providing planned career development support.