FUJI OOZX Inc.

The Engine Valve, the company's core product, is a component for vehicles equipped with internal combustion engines. If the global acceleration toward EV/FCEV adoption causes a significant decline in internal combustion engine vehicle production, demand for the company's core products could decline substantially, potentially having a material impact on net sales and profitability. In response, the company has established a dedicated department (Structural Reform Department) to explore new businesses leveraging its existing technologies and to consider business expansion outside the automotive industry, including through M&A.

The company's major domestic production sites are concentrated in western Shizuoka Prefecture, an area within the anticipated epicenter zone of a Nankai Trough earthquake. A large-scale earthquake or intensifying typhoons and torrential rains could disrupt the supply chain, cause prolonged production stoppages, and result in substantial recovery costs. While the company has implemented measures such as seismic reinforcement, BCP formulation, disaster drills, and regular maintenance of private power generation equipment, there remains a possibility that disasters exceeding these assumptions could occur.

Among the company's five domestic and three overseas consolidated subsidiaries, some that were established or became subsidiaries less than 10 years ago are still in the process of stabilizing their earnings base, and there is a risk that their performance could fall significantly short of initial business plans. Problems arising in sales activities, production systems, or cash flow could adversely affect consolidated business results and financial condition. The company seeks early stabilization through monthly management reporting meetings and monitoring by the departments in charge.

Intensifying competition for talent creates a risk that the company may be unable to hire the necessary personnel as planned, as well as a risk of existing personnel leaving the company, which could adversely affect business continuity and operating results. In response, the company is improving the workplace environment through engagement surveys, strengthening recruitment branding using social media and other channels, streamlining the selection process, and developing training programs by job level.

Steel, the company's main raw material, is procured from the parent company group at prevailing market prices, and delays in passing on price increases to customers during periods of sharp price hikes could affect the company's operations. In addition, there is a risk that rising energy prices, such as electricity, driven by global conditions could increase manufacturing costs. The company is addressing this through the introduction of a surcharge system, renegotiation of individual contracts with electric utilities, and utilization of solar power generation.

Although the company has established a rigorous quality assurance management system, an unforeseen quality nonconformity could result in substantial countermeasure costs, damages, and loss of social credibility, potentially having a material impact on business results and financial condition. The company implements quality control at each process based on IATF16949, progress management through monthly quality meetings and an annual quality control committee, and root cause analysis and recurrence prevention measures for significant issues at management meetings.

If an information leakage incident occurs due to external factors such as cyberattacks or computer virus infections, or due to internal factors, it could result in the corruption or loss of important data and business disruption due to system outages, potentially adversely affecting business operations, operating results, and financial condition. The company is strengthening its information management system and security measures through continuous updates to its internal regulations.

As the company conducts business activities both domestically and internationally, future enactment or revision of laws and regulations, as well as changes in interpretation due to shifts in social conditions, could adversely affect operating results and financial condition. The company works to reduce this risk through regular internal control system audits, compliance training for all employees at least once a year, and business audits of all group companies in Japan and overseas conducted by the Audit Department.

To maintain market competitiveness, the company is promoting the development of new technologies and processes for existing products as well as next-generation new products. However, there is a risk that development delays or technical challenges could reduce competitive advantage and result in lost order opportunities. The company addresses this through continuous investment of human and financial management resources in R&D and active participation in joint development with customers.

If governance issues arise, such as environmental pollution from industrial waste, social issues including human rights violations and discrimination within the supply chain, or deficiencies in internal controls, this could result not only in legal sanctions and liability for damages but also in loss of social credibility and damage to brand value, potentially having a material impact on business results and financial condition. The company is promoting the phased implementation of waste reduction processes, integrating the SDGs into its business strategy, and ensuring transparency in the nomination and remuneration decision-making processes through its Governance Committee.