CRESTEC Inc.

Given the company's predominantly BtoB business structure, an economic downturn poses a risk of directly impacting performance through production cutbacks, business restructuring, or delayed product development by major Japanese manufacturer clients. As countermeasures, the company is promoting expansion into new business fields with high economic resilience, such as pharmaceuticals and daily necessities, diversifying its customer base to include foreign-affiliated manufacturers, and expanding the regions in which it provides services.

In the current consolidated fiscal year, sales in China and Southeast Asia / South Asia accounted for approximately 59% of consolidated net sales, representing a high degree of geopolitical concentration risk. If major clients withdraw or reduce production due to legal or policy changes, rising labor costs, diplomatic issues, or similar factors, the impact on performance could be significant. The company seeks to diversify this risk through continuous monitoring of the political and economic situation in each country and by strengthening cooperation with client companies.

In the current consolidated fiscal year, overseas sales accounted for approximately 71% of consolidated net sales, meaning that sharp fluctuations in either the appreciation or depreciation of the yen directly affect performance after foreign currency translation. Foreign-currency-denominated assets and liabilities are also exposed to exchange rate fluctuation risk, resulting in a high degree of financial uncertainty. The company strives to mitigate this risk by adjusting the balance of foreign-currency-denominated bank borrowings and other items to balance its net position.

At the end of the current consolidated fiscal year, interest-bearing debt (the total of corporate bonds, borrowings, and lease obligations) stood at ¥6,030 million, accounting for approximately 34% of total assets, representing a relatively high level of financial leverage. Since borrowings are, in principle, at variable interest rates, there is a risk that rising market interest rates could increase financial expenses and put pressure on performance. The company seeks to mitigate interest rate fluctuation risk through the use of some fixed-rate borrowings.

As Japanese manufacturers account for the majority of major clients both domestically and overseas, there is a risk that global production restructuring or the relocation of manufacturing bases due to legal or policy changes in various countries could lead to a sharp decline in sales in the affected region. The company aims to maintain business relationships even after such relocations by strengthening cooperation with client companies as a key part of the supply chain, while also promoting the expansion of overseas support bases and expanding transactions with foreign-affiliated manufacturers.

Due to business restructuring among domestic electronics manufacturers, the manual production industry is on a shrinking trend, and intensifying competition is expected within the limited market. Overseas as well, local manufacturers have improved their QCD (quality, cost, delivery), leading to a decline in the company's competitive advantage. The company seeks to differentiate itself domestically by deepening its production capabilities in specialized fields (technical writing, translation, etc.), and overseas by pursuing QCD improvements and strengthening its

Paperless adoption of instruction manuals is progressing, particularly for consumer digital products, and sales for such products have already declined significantly due to the contraction of the digital product market driven by the spread of smartphones. Going forward, if the multifunction printer and printer market contracts due to office digital transformation (DX), the impact on major customer segments may expand further. The company seeks to relatively mitigate this impact by focusing sales efforts on pharmaceutical and daily necessities manufacturers and by expanding transactions in package products (cosmetic boxes, packaging materials, cushioning materials, etc.).

As the company handles development information related to clients' unpublished new products and product renewals, as well as personal information, an information leakage incident could result in significant impacts such as claims for damages, loss of credibility, and suspension of business relationships. The company positions information security as the most critical item in its risk management, and has established an Information Security Subcommittee, developed relevant internal regulations, conducted awareness-raising activities for officers and employees, and implemented external network vulnerability diagnostics.

In the production, editing, and printing of instruction manuals as well as the manufacturing of package products, there is a risk that defective products—such as misprints, page misordering, or editing errors—could reach the market, leading to claims for damages or a loss of customer trust. The Quality Assurance Office, which reports directly to the Representative Director, President and Executive Officer, oversees quality control across the entire group, and the company continuously conducts quality education and training for employees to improve and enhance quality.

As the company has numerous locations both domestically and overseas, large-scale disasters such as natural disasters, fires, riots, or terrorism, as well as infectious disease pandemics, could cause facility damage, employee harm, or production stoppages, potentially having a significant impact on performance. The company has established a BCM Subcommittee to build a business continuity backup framework for emergencies, and seeks to minimize risk through the introduction of telework and staggered working hours.