TOYODA GOSEI CO., LTD.

Sales to the Toyota Motor Group accounted for 58.0% of consolidated revenue in the current fiscal year, meaning fluctuations in the group's production volume, purchasing policies, and changes in adoption rates directly affect business performance. In addition, unexpected accidents at raw material and parts suppliers or geopolitical risks that halt production at finished vehicle manufacturers could have a chain-reaction impact.

With Japan, the Americas, Europe & Africa, China, Asia, and India as major markets, there is a risk that economic downturns or social and economic disruption caused by the spread of infectious diseases could shrink automobile demand. As the group operates globally, an economic deterioration in a specific region could have a wide-ranging impact on financial position and operating results.

Fluctuations in foreign exchange rates at the time of settlement and translation of foreign currency-denominated transactions affect price competitiveness, transaction prices, and the yen-translated amounts of overseas affiliated companies' financial statements. As the group has a global production and sales structure, fluctuations in major currencies could have a direct impact on consolidated business performance.

The group conducts production and sales activities in the Americas, Europe & Africa, China, Asia, and India, which involve various inherent risks such as unexpected changes in laws and regulations, unfavorable changes in tax systems, geopolitical risks, and social disruption caused by natural disasters and infectious diseases. Should these events occur, they could adversely affect the group's financial position and operating results.

Although the company manufactures products in accordance with global quality control standards, there is no guarantee that quality defects will be completely eliminated or that recalls will never occur. Should a large-scale recall or product liability claim arise, it would result in substantial costs and a significant impact on corporate reputation. The company carries product liability insurance, but there is no guarantee that it would fully cover the ultimate amount of damages.

While the company actively promotes research and development under its corporate policy of "pursuing the potential of polymers," there is no guarantee that sufficient investment funds and resources will be allocated, and there is a risk that the commercial value of products could decline sharply due to rapid technological progress or changes in market needs. Delays in bringing new products and new technologies to market and the resulting loss of revenue opportunities could also affect financial position and operating results.

The company procures raw materials and parts from multiple suppliers outside the group, but there is a risk of price spikes or shortages due to market changes, unexpected accidents at suppliers, production halts or delivery delays due to geopolitical risks, and disruptions to logistics. Should these occur, they could lead to increased product costs or production stoppages, affecting financial position and operating results.

Price competition in the automotive parts business is extremely severe, and in addition to price reduction requests from finished vehicle manufacturers, the emergence of new competitors and alliances among existing competitors could further intensify the competitive environment. While the company's basic policy is to supply high-quality, high-value-added products, there is no guarantee that it will be able to compete effectively in the future, which could affect profitability.

The company regards cyberattacks as a significant management risk and is working on formulating a medium-term promotion plan, intrusion prevention and detection measures, employee training, audits of domestic and overseas affiliated companies, and ensuring safety across the entire supply chain. However, should an external cyberattack or computer virus cause an internal information system outage or leakage of confidential information, depending on the scale of damage, it could affect financial position and operating results.

Although regular inspections and checks of production facilities are conducted, many domestic plants and suppliers are concentrated in the Chubu region, raising concerns about wide-ranging impacts on production activities in the event of a large-scale disaster in that region. Including disasters at suppliers and delivery destinations, there is no guarantee that the impact of production line interruptions can be completely prevented or mitigated, which could affect financial position and operating results.