NADEX CO., LTD.

The Group conducts business across multiple countries including the United States, Canada, Mexico, China, Thailand, and Indonesia, and economic trends in each country may have a material impact on the Group's financial position and results of operations. Geopolitical risks such as US-China trade friction and the situation in Ukraine, as well as unexpected changes in laws and regulations, also exist as sources of uncertainty. As countermeasures, the Group collects and analyzes statistical data on economic trends and information on regulatory changes, and works to reduce risk through information sharing among group companies.

Major customers are concentrated in automotive-related companies, and trends in capital investment and production plans in that industry may have a material impact on the Group's business performance. The automotive industry is undergoing a once-in-a-century transformation driven by accelerating electrification, making it urgent to respond to changing customer needs. In addition to proactive research and development and capital investment, the Group is also working to expand its customer base into industries beyond automotive-related businesses.

The Group procures raw materials, including electronic components such as semiconductors, from external sources. If shortages or price surges occur due to changes in market conditions, this may lead to production delays, lost sales opportunities, and increased manufacturing costs, potentially having a material impact on the Group's financial position and results of operations. The Group strives to secure a stable production and supply system through measures such as considering alternative products, redesigning products to use available materials, and advance ordering of long-lead-time items.

The Group develops joining solutions primarily centered on resistance welding products and laser processing technology. If development progress is delayed or market advantage cannot be maintained, this may have a material impact on the Group's financial position and results of operations. Among automotive-related companies, there is growing demand for joining difficult-to-weld materials and dissimilar materials, and delays in technical response would directly lead to a loss of competitiveness. In addition to market needs surveys and monitoring of competitor trends, the Group promotes joint development through collaboration among industry, academia, and government.

Although the Group has established a quality control system based on ISO9001, it cannot guarantee the elimination of defects in all products or the absence of future claims. While the Group carries product liability insurance, if the final amount of damages cannot be covered by insurance, this may have a material impact on the Group's financial position and results of operations. The Group is committed to the continuous improvement and enhancement of its quality control system through ISO9001-based activities.

If the Group is unable to secure sufficient human resources due to the decline in the working population caused by the falling birthrate and aging population, this may hinder the transfer of technologies cultivated by the Group over many years, potentially having a material impact on the Group's financial position and results of operations. The Group is improving the working environment through the promotion of diversity and work-style reforms, and is conducting mid-career hiring of experienced personnel in addition to new graduate recruitment.

If confidential information or personal information is leaked or disclosed due to external cyberattacks, unauthorized access, computer virus infections, or similar incidents, this may lead to a decline in social trust and claims for damages, potentially having a material impact on the Group's financial position and results of operations. The Group is establishing various regulations related to information security and conducting employee education and awareness activities centered on the Information Security Committee.

The Group implements M&A as one of its growth strategies, and as a result of acquiring shares in Tamari Kogyo Co., Ltd. and Uptime EV Charger, Inc., goodwill of ¥820 million and customer relationship assets of ¥449 million are recorded on the consolidated balance sheet. If the estimated amount of future cash flows decreases due to significant changes in the business environment or other factors, an impairment loss may be recorded, potentially having a material impact on the Group's financial position and results of operations. The Group conducts thorough financial due diligence on target companies at the time of M&A execution and promotes business strategies aimed at maximizing synergy effects.

Many of the Group's business sites are located in areas designated for intensified disaster prevention measures against the Tokai earthquake, and in the event of a large-scale earthquake or other disaster, business activities may be delayed or suspended, potentially having a material impact on the Group's financial position and results of operations. There is also a risk of lost opportunities in production and sales activities if suppliers of raw materials or products are affected by disasters. The Group is working to strengthen the resilience of its supply chain by reinforcing cooperation with suppliers and diversifying its supplier base.

Since the financial position and results of operations of overseas subsidiaries in the United States, Canada, Mexico, China, Thailand, and Indonesia are translated into yen, fluctuations in exchange rates may affect the yen-translated value even if the value in local currency remains unchanged. In addition, exchange rate fluctuations may have a material impact on business performance with respect to foreign-currency-denominated sales to some overseas customers. The Group works to mitigate fluctuation risk through hedging transactions such as forward exchange contracts.