SHOEI CO., LTD.

In advanced motorcycle markets such as Japan, the US, and Europe, the average age of riders has aged to the fifties, and if the declining birthrate and aging population prevent an increase in younger riders, the number of customers could decline in the future. As countermeasures, the Company is promoting the launch of retro-type, new material, and IT-integrated models, customer retention through the PFS Service, and the capture of demand in emerging markets such as Asia excluding Japan.

The ratio of overseas sales to consolidated net sales for FY2025 (ending September 2025) was high at 82.5%, and significant fluctuations in foreign exchange rates directly affect business results. As countermeasures, the Company is promoting the expansion of yen-denominated export transactions, price increases during yen appreciation, and an increase in the domestic profit share, while also maintaining ample retained earnings and cash and deposits in preparation for a continuation of historic yen appreciation.

The ratio of raw materials to the manufacturing cost of Motorcycle Helmets (Premium Helmets) in FY2025 (ending September 2025) was 43.2%, and if raw material prices rise significantly due to fluctuations in crude oil and materials markets, business results could be affected. As countermeasures, the Company is promoting price pass-through through the introduction of competitive products, efforts to reduce raw material usage, and securing a cost absorption buffer through more efficient manufacturing processes.

As a company specializing in motorcycle helmets, management resources are concentrated in a single business, and if a paradigm shift occurs in the business environment or industry surrounding motorcycle helmets, the impact could be devastating. As a countermeasure, the Company has begun expanding into new business fields, launching BMX (competition) helmets in September 2024, with a carry case scheduled for launch in January 2026 as the second product.

If an earthquake, abnormal weather, fire, or similar event occurs at the locations of the Company's two domestic factories, factory operations could be suspended for a certain period, potentially significantly affecting business results. In preparation for the suspension of operations at one factory, the Company has established the necessary response measures, funding, and a coverage system using the other factory, and has accumulated ample retained earnings and cash and deposits to secure the necessary funds.

A global outbreak of an infectious disease, as exemplified by COVID-19, could significantly affect business continuity. Based on experience from the previous COVID-19 pandemic, the Company has established measures to minimize the risk of infection spreading within offices and factories (thorough handwashing, mask wearing, use of remote meetings, etc.), and plans to implement similar measures according to the situation should a similar risk materialize.

Claims for damages arising from product defects have occurred in major sales regions (particularly North America), and if unforeseen PL cases materialize, business performance could be affected. The Company has entered into PL insurance contracts both domestically and overseas and outsources damage compensation and negotiation, but risk remains if payments exceed the insured amount. Insurance premiums, including PL insurance premiums, for FY2025 (ending September 2025) amounted to ¥88,157 thousand (recorded as selling, general and administrative expenses), and the number of newly occurring and unresolved cases was zero in both of the most recent two fiscal years (FY2024 (ending September 2024) and FY2025 (ending September 2025)).

While the Company strives to secure intellectual property rights such as patents, designs, and trademarks in order to maintain its position as a Premium Helmet maker, if it infringes on the intellectual property rights (industrial property rights) of other companies, business results could be affected depending on the content of any dispute. The Quality Assurance Department takes the lead in responding to claims from other companies and securing the Company's own rights while incorporating expert opinions, and the Company has taken out intellectual property insurance against the risk of infringing undisclosed patents.

The sale of Motorcycle Helmets (Premium Helmets) requires compliance with legal regulations and various safety standards, including Japan's PSC, North America's FMVSS No. 218, and Europe's UN-ECE Regulation 22, and delayed responses to new legislation, legal amendments, or changes in safety standards could affect business performance. The Quality Assurance Department monitors regulatory trends in countries around the world on a daily basis, takes countermeasures in cooperation with development, production, and sales, and discusses risks at monthly management and development meetings.