RHYTHM CO.,LTD.

With the expansion of overseas operations, foreign currency-denominated transactions and receivables/payables have increased, and sharp fluctuations in exchange rates may affect operating results. The Group hedges through forward exchange contracts and currency options, but it is difficult to eliminate the risk entirely. Efforts to strengthen overseas sales are also being pursued in parallel.

Products of the Household Products Business are mainly produced overseas, and production bases are concentrated abroad. Changes in political and economic conditions overseas, changes in laws and regulations, or unforeseen events could disrupt production activities and product supply. There is concern about the impact on business operations and operating results.

If the market value of held assets declines significantly or the profitability of a business deteriorates, an impairment loss on fixed assets may arise through the application of impairment accounting. The recognition of an impairment loss would directly and adversely affect operating results and financial position.

The Group is working to strengthen its business through M&A and business alliances, conducting detailed due diligence on target companies prior to execution. However, if business development does not proceed as planned, this may adversely affect operating results and financial position.

If a large-scale natural disaster occurs at production or sales sites deployed around the world, it could disrupt production activities and product supply, and recovery costs and other factors could affect operating results and financial position. In addition, if a pandemic such as COVID-19 affects the global economy, further adverse effects may occur.

Raw materials and components used in product manufacturing are procured from external suppliers, and the Group has built cooperative relationships to ensure stable supply. However, if raw materials or components become insufficient due to price surges or shortages caused by changes in market conditions, or due to accidents at external suppliers, this could lead to increased manufacturing costs and reduced sales resulting from production stoppages, affecting operating results and financial condition.

Design, manufacturing, and quality control are carried out based on international quality management systems and customers' strict standards. However, in the event of a quality defect or recall, significant costs may be incurred. This could also lead to a decline in corporate reputation and a resulting decrease in sales, having a material impact on operating results and financial condition.

Changes in trade regulations in major domestic and overseas markets, deterioration in economic conditions, and significant fluctuations in stock and bond markets may affect operating results and financial condition. For the Group, which conducts business globally, changes in the external environment, including geopolitical risk, could have wide-ranging effects.