Hakuto Co.,Ltd.

The Electronic Components Business and Electronic & Electrical Equipment Business are heavily dependent on overall market trends in the electronics industry, and sluggish demand for consumer and industrial products as well as prolonged inventory adjustments are putting pressure on performance. Rising trade costs due to U.S. tariff policy are forcing a review of supply chains, and the Group is also exposed to economic fluctuations in various countries including those in Asia, Europe, and the United States. As countermeasures, the Group continuously monitors trends among suppliers, customers, and competitors, and works to reflect changes in macroeconomic and industry trends in its management policies.

Due to the nature of handling a large volume of imported semiconductors and other foreign products, there is a time lag between the collection of trade receivables and the payment of trade payables, and the CCC expanded to 5.5 months in FY2024 (ending March 2024) (5.1 months in FY2025 (ending March 2025)). Combined with the tendency for inventory to increase from a BCP perspective, there is a risk that rising procurement costs for working capital could affect business performance. In addition, if inventories become stagnant due to market trends or customer inventory conditions, write-downs of book value for non-profitable inventory may occur, potentially worsening business performance.

The Group, which conducts business across multiple countries primarily in Asia, transacts in a wide range of currencies including Japanese yen, U.S. dollars, euros, and various local currencies, and sudden foreign exchange fluctuations may affect business performance and cash flow. Overseas procurement amounted to ¥46,630 million (non-consolidated basis) in FY2025 (ending March 2025), and foreign exchange exposure remains substantial. As a countermeasure, the Group implements hedges such as forward foreign exchange contracts based on the “Market Risk Management Regulations” and the “Foreign Exchange Forward Contract Manual.”

In the Electronic Components Business and Electronic & Electrical Equipment Business, business rights based on agency agreements with suppliers form the foundation of operations; however, business restructuring through M&A in the electronics industry has become more active, creating a risk of losing business rights due to the disappearance of supplier companies, the establishment of sales subsidiaries by suppliers, or changes in distribution channels to competing agents. Loss of business rights would have a direct impact on the Group's business performance and business plans. The Group makes continuous efforts to maintain and newly acquire business rights, but the right of termination is held by both the Group and its suppliers.

Customers in the electronic components, electronic and electrical equipment, and industrial chemicals fields constantly demand cost reductions amid intensifying competition and a shrinking domestic market, and the progression of commoditization and reduced added value in semiconductor devices and other products is making it difficult to differentiate from competing suppliers and agents. Intensifying price competition carries the risk of lowering profit margins. As countermeasures, the Group is working to differentiate itself through solutions business leveraging its technological capabilities, and is striving to secure profitability by improving operational efficiency through the promotion of DX and digitalization.

The electronic components, electronic and electrical equipment, and industrial chemicals products handled by the Group carry the risk of becoming obsolete and losing competitiveness as competing products are introduced to the market through technological innovation. In recent years, companies in emerging countries, particularly China, have introduced many products with advantages in both technology and price, which could become an impeding factor for the Group, which positions the strengthening of local business in the Asian region as part of its growth strategy. It is difficult to predict the timing and likelihood of this risk materializing, and there are concerns about its impact on business performance and business plans.

The risk of information assets being leaked externally due to cyberattacks is increasing, and if an information leak occurs, whether accidental or intentional, it could result in criminal and civil liability, as well as indirect damages such as recovery costs and reputational decline. As countermeasures, the Group has established an “Information Security Basic Policy” and “Information Security Countermeasures Standards,” set up an “Information Security Committee,” and conducts cybersecurity assessments by external specialized organizations to detect and resolve vulnerabilities.

The Group, which has locations both in Japan and overseas, is subject to legal regulations in each country, and there is a trend toward strengthening security trade control regulations, particularly due to geopolitical risks stemming from the prolonged U.S.-China conflict. Failure to comply with laws and regulations could result in restrictions on business activities imposed by authorities in various countries, potentially having a significant impact on future business plans. As a countermeasure, the Group conducts education for employees, including those at subsidiaries and affiliated companies, and works to prevent direct and indirect exports to regulated regions.

Overseas sales account for approximately 40% of consolidated net sales, and overseas subsidiaries, primarily in Greater China and ASEAN, are exposed to risks that differ from those in Japan, including local business practices, legal regulations, and geopolitical risks. Insufficient group control or coordination could delay responses to changes in local political and social conditions or in laws and tax systems, and litigation cases or inappropriate conduct by employees could affect business performance and social credibility. As countermeasures, the Group has appointed regional general managers for Greater China and ASEAN, and is working to strengthen governance through the development of group regulations and compliance training.

If it becomes difficult to recruit and develop personnel with excellent skills, know-how, and experience necessary for sustainable corporate growth, or if there is greater-than-expected turnover of personnel, this could affect business plans and performance over the medium to long term. As countermeasures, in addition to strengthening recruitment of new graduates and mid-career hires, the Group operates a new personnel system focused on “transparency in personnel management” and “career development,” and supports diverse working styles by expanding career paths and systematically developing female managers.