RIX CORPORATION

Sales of industrial machinery and parts, centered on High-Pressure Hydraulic Application Equipment, are affected by capital investment trends in the Steel, Automotive, and Electronics & Semiconductors industries. While the impact is limited under normal business cycles, it is recognized that the degree of impact would become significant in the event of a global economic downturn caused by geopolitical risk or U.S.-China conflict. The structure, in which customer concentration in specific industries amplifies risk, is also a factor.

The medium-term management plan positions the expansion of overseas business as a key strategy, and exchange rate fluctuations or sudden changes in the international situation in the countries/regions of expansion could adversely affect the financial position and business results. Overseas sales currently account for approximately 10% of the total, and the risk is assessed as limited at this time, but exposure is expected to increase as expansion proceeds.

The company guards against credit risk by setting credit limits for customers and assessing the eligibility of suppliers and subcontractors for transactions, but there remains a possibility that unforeseen circumstances at business partners could lead to uncollectible receivables or liability for damages arising from suspension of supply. Since most major business partners are high-quality companies, the impact is judged to be limited, but complete elimination of this risk is difficult.

If a product recall or product liability claim occurs, it could adversely affect the financial position and business results through substantial costs, losses, and a decline in sales. The company holds product liability insurance, but there is no guarantee that it will sufficiently cover the amount of damages. However, since the products handled are equipment and devices for factory use and are not delivered directly to end consumers, the likelihood of damages exceeding insurance coverage is judged to be extremely small.

The company holds marketable securities for the purpose of strengthening relationships with business partners and managing funds, and a decline in stock market prices could result in valuation losses. Given the book value and holding amount of the shares held, the impact is assessed as limited, but there is a risk of adverse effects on the financial position in the event of a sudden change in market conditions.