NAKAMOTO PACKS CO.,LTD.

The Group conducts business with client companies across a wide range of industries for the domestic market. If domestic demand weakens, personal consumption stagnates due to rising prices or the spread of infectious diseases, or if major clients experience a decline in market share, this could lead to a decrease in order volume or a decline in order unit prices. Although the Group maintains a business structure that avoids dependence on specific industries, a deterioration in the macroeconomic environment could affect overall business performance.

Plastic materials such as resin and film, which are the main raw materials for packaging materials and processed films, are directly affected by international commodity markets for crude oil and naphtha and by exchange rate fluctuations. If there are significant fluctuations in crude oil prices, electricity costs, and fuel costs, or if supply chain disruptions make it difficult to procure resin, ink, and other materials or cause their prices to surge, this could adversely affect business performance through an increase in manufacturing costs.

The Group plans to expand overseas sales primarily in Daily Living Materials-related Products, IT & Industrial Materials-related Products, and automotive interior materials, and the impact of exchange rate fluctuations is expected to increase going forward. If sudden exchange rate fluctuations occur, this could lead to a surge in raw material import prices or a decline in product export prices, as well as significant foreign exchange losses upon settlement of receivables and payables, which could affect business performance.

The Group has five consolidated subsidiaries in China, one in the United States, and one in Vietnam, and is exposed to risks arising from political issues (trade friction, conflicts, terrorism, etc.), economic fluctuations (exchange rate fluctuations, etc.), social issues (labor issues, etc.), and differences in business customs. The Group responds carefully to these risks by obtaining advice from domestic business partners, audit firms, tax advisors, and legal advisors who are well-versed in overseas business. However, if problems exceeding expectations materialize, this could significantly affect business performance through a reduction in production activities, disruption of the supply chain, or stagnation of sales activities.

The Group has obtained ISO9001 and ISO14001 certifications and is working to establish a quality control system. However, if unforeseen quality defects lead to product liability claims, the Group may incur compensation costs and additional costs associated with reproduction. Quality problems could also lead to a loss of customer trust, which could affect business performance through a decrease in order volume.

The Group conducts business using plastic materials as its main raw materials, and recognizes environmental conservation as an important management issue, implementing strict controls. However, if future tightening of environmental regulations or increased demands for social responsibility places constraints on business activities, this could result in unplanned capital expenditures or additional burdens for environmental measures, which could affect business performance.

The Group has established multiple manufacturing sites both domestically and overseas to diversify risk, and is working on earthquake resistance measures, inspections, and fire drills. However, if natural disasters such as earthquakes or typhoons exceeding expectations occur, if infectious diseases spread, or if accidents such as fires occur, this could result in the suspension of raw material procurement, damage to facilities and employees, or the suspension or reduction of factory operations, leading to a decrease in sales volume and significant repair costs, which could affect business performance.

The Group possesses proprietary know-how in its core products, including thick sheet printing and laminating, and expects to maintain selling prices and a certain market share. However, in areas where the Group's uniqueness and competitive advantage cannot be fully leveraged, if competitors' low-price strategies or imitation become apparent, this could adversely affect business performance through a decline in selling prices or market share.

The Group continues to invest in research and development to secure future growth potential. However, research and development may not proceed as planned, or sufficient results may not be obtained despite substantial investment. In addition, if unforeseen and rapid technological innovation occurs, the competitiveness of existing technologies and products may decline, which could affect business performance.

The Group recognizes that securing excellent personnel with advanced technical skills and planning capabilities is essential for maintaining growth and profitability, and actively conducts not only new graduate recruitment but also mid-career hiring of personnel with diverse expertise. However, if the recruitment and development of necessary personnel does not proceed as planned, this could affect business performance through a decline in technical capabilities and competitiveness.