NODA CORPORATION

The building materials industry to which the Group belongs is affected by trends in new housing starts, and there is a particularly strong relationship between construction trends for owner-occupied and detached houses for sale and business performance. A decline in housing starts poses a risk directly linked to a decrease in sales and profits. In response, the Group is focusing on developing the non-residential market, such as facilities for the elderly, and the renovation market, in order to reduce its dependence on housing start trends.

Imported plywood, MDF, and certain other raw materials are susceptible to price fluctuations due to international market conditions and exchange rate trends, and significant changes in purchase prices may affect business performance. There is also an inherent risk that procurement may become difficult due to logging restrictions imposed by timber-resource countries, among other factors. In response, the Group utilizes various measures to curb the impact of exchange rate fluctuations and promotes diversification and decentralization of procurement pipelines for products and raw materials.

In procuring imported plywood, MDF, and similar materials, exchange rate trends directly affect purchase costs, and in a yen depreciation phase, profitability may deteriorate due to rising costs. Since this is also linked to fluctuations in international market prices, there exists a compound risk of cost increases. The Group works to minimize the impact of exchange rate fluctuations by implementing various hedging measures.

Depending on policy trends such as logging restrictions in timber-resource countries, there is a risk that procurement of major raw materials such as imported plywood and MDF may become difficult. Procurement shortages could lead to a slowdown in production activities and a decline in product supply capacity, potentially affecting business performance. The Group is taking measures to reduce dependence on specific countries or specific routes through diversification and decentralization of procurement pipelines.

In the event of a large-scale natural disaster, fire, or other accident, business performance and financial condition may be significantly affected by the suspension of production activities, delays in delivery, and damage to inventory or machinery and equipment. The Group implements measures such as earthquake-resistance measures at production and sales sites, regular inspection and improvement of equipment, establishment of emergency contact systems, and disaster prevention drills. In addition, the Group hedges risk through casualty insurance to cover physical damage, restoration costs, and opportunity losses arising from operational suspension.

The Wood-based Building Materials Business and the Plywood Business are exposed to intense competition from domestic competitors, and if competition among companies intensifies further, there is a risk that profitability may decline due to falling product selling prices or decreasing sales volumes. This may affect business performance and financial condition. The Group aims to mitigate this risk through differentiation via the development of high-value-added products and efforts to increase market share.

If quality problems arise due to product defects, costs such as damage compensation may be incurred, potentially affecting business performance and financial condition. Since quality defects in building materials products also relate to the safety of housing, there is also a risk of brand damage and customer attrition. The Group strives to reduce this risk by establishing a quality control system with meticulous attention to detail.

The spread of infectious diseases such as novel viruses poses a risk of slowing economic activity, which may affect the Group's production and sales activities as well as its business performance and financial condition. The Group has established internal guidelines with the prevention of workplace clusters as the top priority, and has set up flexible work arrangements such as staggered commuting, telework, and the introduction of web conferencing systems. In addition, the Group has taken measures to minimize the impact on production and sales activities, such as restricting business trips to and visits to factories based on infection status and social conditions, and thoroughly implementing basic infection prevention measures.