Matsuya R&D Co., Ltd

The Group had net sales of ¥5,210,936 million to the Omron Group in the fiscal year under review (53.3% of consolidated net sales), and including semi-finished product transactions of ¥1,988,745 million with Dalian Gaoli Technology Development Co., Ltd., the total reaches ¥7,199,681 million (73.7% of consolidated net sales). If the business environment of customers with a high sales ratio deteriorates significantly, or if such customers withdraw from their business, this could have a material impact on operating results. Although the Group is working to expand its customer base, the situation of high dependence continues.

The Group's sales are significantly affected by business conditions in the healthcare and automotive industries, its main customer base. Changes in the quality, price, and delivery times of overseas-produced products, changes in industry production policies, and technological innovation may cause the Group's products and technologies to fail to meet needs, which could affect sales strategy and business development. As globalization progresses in both industries, responding to changes in the competitive environment remains an ongoing challenge.

The majority of production for the Sewn Products business is handled by the subsidiary Matsuya R&D (Vietnam) Co., Ltd., resulting in a concentration of production bases in Vietnam. If unforeseeable circumstances arise due to legal regulations or differences in business practices stemming from political factors, or if factory operations are disrupted by infectious diseases, earthquakes, or other natural disasters, this could affect the Group's financial position and operating results. There is no explicit mention of measures such as diversification of production bases.

The Group depends on overseas markets for the majority of its sales, and its customer base includes countries that are politically, geopolitically, or economically unstable. Labor disputes, terrorism, war, currency crises, infectious diseases, natural disasters, and similar events could result in the freezing of foreign exchange transactions, defaults, or seizure of invested assets, potentially making it difficult to continue business or manage overseas operations. In addition, changes in regulations such as import/export restrictions on textile products or transfer pricing taxation could also affect the Group's financial position and operating results.

As the Group's main customers are in the healthcare and automotive industries, certifications such as ISO9001 and ISO14001 are prerequisites for initiating and continuing transactions with the Omron Group. If the products provided fail to meet customer requirements, or if grounds for revocation stipulated by each certification body are triggered, this could have a material impact on the continuation of major transactions. As of the filing date of this document, no factors impeding the continuation of certification have arisen.

The Group conducts transactions denominated in foreign currencies with numerous overseas customers, but currently does not implement foreign exchange risk measures (such as forward contracts). If sharp currency fluctuations result in foreign exchange losses, this could affect operating results. The implementation of forward exchange contracts remains under continued consideration, and the risk currently remains unhedged.

In the Automated Sewing Machine business, profit margins differ by order, and quarterly profit margins fluctuate depending on the accumulation of individual projects. There may be cases of strategically accepting unprofitable orders, or cost increases due to delivery date or specification changes requested by customers; if unprofitable projects accumulate more than expected, this could affect operating results. The Group records a provision for losses on order backlog for projects expected to incur future losses as of the fiscal year-end.

While the Group allocates resources intensively to the research and development department in the Automated Sewing Machine business, if it fails to keep pace with technological innovation and develop new products that meet customer and market demand, or if the launch and market penetration of new products is delayed, this could affect operating results. Although efforts to secure human resources continue, keeping pace with the speed of technological innovation remains an ongoing challenge.

While the Group appoints personnel to key positions and allocates staff appropriately, if a significant number of employees leave within a short period, or if the securing and development of human resources does not proceed as planned, the efficiency of business operations may decline. The Group plans to enhance human resource development, staff reinforcement, and internal management systems in line with business expansion, but if this does not proceed as planned, it could affect operating results.

The Group strictly manages customer information, personal information, and information related to outsourced business, but if such information were to leak externally, this could damage the Group's credibility and affect operating results. As the Group handles highly confidential information in transactions with major customers in the healthcare and automotive industries, the impact on business relationships in the event of an information leak is considered significant.