Naito & Co.,Ltd.

The company's main product groups (Cutting Tools, Measurement, Industrial Equipment & Machine Tools, etc.) are closely linked to the automotive industry, and business performance is strongly affected by trends in production activity and capital investment in that industry. If unforeseen economic fluctuations occur, this may materially affect operating results and financial condition. No explicit countermeasures are described, and this is recognized as a structural dependency risk.

As the number of client companies with aging management increases, there is a risk that the customer base will shrink due to business closures or bankruptcies resulting from a lack of successors. A decrease in the number of customers directly leads to a decline in net sales, which may affect operating results and financial condition. No specific countermeasures are described in the annual securities report.

Regarding business funds procured through borrowings, if significant fluctuations occur in the short-term financial market, interest expenses and other costs may increase or decrease, which may affect operating results and financial condition. Particularly during periods of rising interest rates, there is a risk that increased funding costs will squeeze profitability. No specific hedging measures or other countermeasures are described in the annual securities report.

If the creditworthiness of business partners deteriorates beyond expectations due to worsening economic conditions or other factors, accounts receivable and other amounts may become uncollectible, which may affect operating results and financial condition. The company states that it thoroughly manages credit to ensure preparedness, but states that unexpected credit deterioration due to economic fluctuations cannot be ruled out.

In order to establish an immediate delivery system, the company holds a wide variety of inventory, mainly Cutting Tools, and there is a risk of excess inventory arising due to changes in product market conditions. Excess inventory may lead to delays in cash flow and the recording of inventory valuation losses, which may affect operating results and financial condition. No specific countermeasures for inventory optimization are described in the annual securities report.

If increases in product purchase prices and expenses such as transportation costs resulting from price inflation cannot be appropriately passed on to selling prices, profit margins may decline, which may affect operating results and financial condition. Depending on negotiating power for price pass-through and the competitive market environment, there is a risk that it may become difficult to absorb the increased costs. No detailed description of the progress or specific measures for price pass-through is provided in the annual securities report.

Natural disasters such as earthquakes, fires, accidents, and outbreaks of infectious diseases may damage or restrict the activities of the company's and its business partners' sales and distribution locations and employees, potentially having a severe impact on business activities. A halt in logistics functions or a shortage of personnel poses a risk of directly impeding sales activities and inventory supply. No specific countermeasures such as a BCP (Business Continuity Plan) are described in the annual securities report.

If a cyberattack or unexpected system failure occurs, information assets may be leaked or damaged, and business operations may be suspended, which may affect operating results and financial condition. The company has established a basic information security policy and is promoting company-wide countermeasures through the development of regulations and infrastructure and cooperation with its parent company, but states that the risk cannot be completely eliminated.

If the decrease in the working-age population due to the declining birthrate and aging population impedes the securing and development of necessary human resources, this may affect operating results and financial condition through a decline in business operating capability. A shortage of personnel in sales, logistics, administration, and other functions poses a risk of leading to a decline in service quality and operational efficiency. No specific recruitment or training measures are described in the annual securities report.