MAEDA KOSEN CO., LTD.

The Social Infrastructure Business accounts for approximately 60% of net sales, and its main customers are general contractors and others engaged in public works construction, meaning that budget cuts resulting from shifts in government policy could directly affect business performance. The Group is working to diversify through prompt response to disaster prevention, mitigation, and aging-infrastructure countermeasure needs, as well as by strengthening sales capabilities targeting private-sector demand; however, the high degree of dependence on public works remains a structural risk.

The Company's mainstay civil engineering materials use synthetic resins and synthetic fibers as their primary raw materials, and rising crude oil prices, a key component thereof, push up raw material costs. If price pass-through is delayed or cannot be achieved, there is a risk that profitability will be directly squeezed; the Group addresses this through multi-supplier procurement by diversifying production areas and suppliers, including overseas, and through efforts to pass costs through to selling prices.

The Group registers patents and other rights for new products and construction methods, but there remains a possibility of rights infringement occurring both domestically and internationally. In addition, if the Group unknowingly infringes on a third party's intellectual property and is subject to a claim for damages or compensation, this could affect business performance. The Group strives to prevent infringement through infringement investigations and employee education.

If defects in products such as civil engineering materials, agricultural materials, forged automotive wheels, and industrial materials cause harm to life, health, or property, this could result in litigation or disputes, leading to reduced creditworthiness and compensation burdens. While no significant litigation has been filed to date, the Group strives to prevent accidents through quality improvement at the design and development stages, thorough durability testing, and prior consultation with business partners.

Because the Group's major manufacturing facilities are concentrated in the Hokuriku region, if logistics are disrupted by localized flooding, snow damage, earthquakes, or similar events, delays in raw material arrivals, production stoppages, or reduced production capacity could occur, impeding product supply. The Group is addressing this through the promotion of multi-supplier procurement, diversification of production sites, and securing inventories of key materials at major sites.

Securing outstanding engineers in the R&D department, skilled technicians in manufacturing, and management personnel is essential to maintaining competitiveness; however, competition among companies for talent is intensifying, and difficulty in securing or retaining such personnel could affect growth. The Group is addressing this through strengthened cooperation with local communities and schools, year-round recruitment (including second-time new graduates and career hires), and the formulation and implementation of training plans by dedicated training personnel.

Because a portion of raw materials and goods are procured from imports, significant fluctuations in exchange rates could affect business performance through their impact on procurement costs. The Group partially utilizes derivative transactions (forward foreign exchange contracts) to mitigate this risk, but hedging also carries the risk of forgoing profits that would otherwise have been obtained. The Group avoids significant imbalances by visualizing the Group-wide fund position by currency.

The earnings of consolidated subsidiaries BBS Japan Inc. and BBS Motorsport GmbH are significantly affected by automobile sales trends, demand in the aftermarket, and economic conditions in key markets. A contraction in demand due to economic downturn or disruption to the automotive parts and raw materials supply chain could affect business performance and financial position; the Group addresses this through diversification of order sources and establishment of an increased production capacity system.

If the Group fails to adequately respond, in terms of technology and design, to the increasingly sophisticated needs of automakers and core users, there is a risk of losing market and customer support, leading to shrinking demand. The Group strives to maintain competitiveness by pursuing weight reduction, higher rigidity, and higher strength, improving design quality, and reducing manufacturing costs.

While due diligence is conducted for investments including corporate acquisitions and capital participation, there is no guarantee that the expected profits or synergies will be achieved, and unforeseen circumstances such as sudden changes in the business environment could affect business development, performance, and financial position. The Group strives to avoid excessive investment or the acquisition of low-profitability businesses by concretizing internal M&A guidelines, and conducts multifaceted analysis in cooperation with external specialists.