SUKEGAWA ELECTRIC CO., LTD.

Sales in the nuclear power industry sector account for approximately 45% of total sales, and if demand in this sector further declines amid the prolonged reduction and freeze of nuclear power generation since the Fukushima Daiichi Nuclear Power Plant accident, this could adversely affect the Company's business performance and financial condition. Although the Company is focusing on expanding orders and sales in other industry sectors, it remains dependent on this sector for approximately half of its sales composition.

Sales of heating equipment, temperature sensors, and other products for semiconductor and FPD manufacturing equipment account for approximately 25% of total sales, and if demand for manufacturing equipment and related facilities declines significantly due to fluctuations in demand for final products, this could adversely affect the Company's business performance and financial condition. The Company seeks to maintain competitiveness by focusing on proposing differentiated and new products that leverage its proprietary technologies, such as heating technology and temperature measurement and control technology.

In the Energy-related Business and Industrial Systems-related Business, which operate on a build-to-order basis, the Company may receive orders for products with high technical difficulty and large order amounts for which it has no prior manufacturing experience. If technical uncertainty at the time of order receipt results in unexpectedly large design and manufacturing costs, this could adversely affect business performance.

The Company concentrates approximately 90% of its total sales' production at the Takahagi Plant, thereby achieving improved production efficiency and centralized quality control. On the other hand, if the plant's production capacity is significantly disrupted due to disasters such as earthquakes or fires, or accidents within the plant, this could adversely affect the Company's business performance and financial condition. This high degree of dependence on a single site poses a structural challenge that heightens business continuity risk.

The Company handles confidential information such as customer information, technical information, and management information, as well as personal information, and faces risks such as information leakage or loss due to cyberattacks, unauthorized access, computer virus infection, malfunction of in-house facilities, or disasters, as well as large-scale failures of core systems and loss or theft due to removal of information. If these risks materialize, they could affect the Company's business performance and financial condition, and although the Company has implemented security measures, complete elimination of these risks remains difficult.