Sun Messe Co.,Ltd.

The core Printing Business is exposed to changes in the market environment, including the ongoing shift to paperless operations. If sales expansion in new business areas proves insufficient, or if cost reduction measures aimed at improving price competitiveness are inadequate, this could affect business performance and financial condition. Because a wide range of business activities—including development, production, distribution, sales, and procurement—are linked to changes in the economic environment and demand trends, responding to structural market contraction remains a challenge.

The company competes with numerous companies in the printing market, and declines in order prices due to intensifying price competition have already occurred. While the company continues internal efforts such as cost reduction, efficiency improvement, and the development and proposal of high-value-added products, if these efforts cannot absorb price declines, this could adversely affect business performance and financial condition.

Printing paper, which accounts for the majority of the main materials used in products, is subject to price fluctuations depending on market conditions. If there is a time lag in passing on rising procurement costs to sales prices during periods of rapid market change, or if such costs cannot be fully passed on, this could put pressure on earnings and affect business performance and financial condition.

Raw materials such as printing paper and ink are procured from external manufacturers, and geopolitical risks—including instability in the Middle East—or supply disruptions could result in significant supply shortages or delivery delays. Since procurement at appropriate prices and volumes is a precondition for business continuity, any procurement disruption could affect business performance and financial condition.

As information systems become increasingly important to business activities, system failures caused by cyberattacks or human factors could result in the suspension of critical operations and services, or the leakage of confidential and personal information. Although the company has obtained Privacy Mark certification and ISO27001 certification and has established management systems, unforeseen information leaks could damage corporate image and social credibility and adversely affect business performance.

Natural disasters such as earthquakes and storms and flood damage, as well as wars, terrorism, infectious diseases, and energy supply disruptions, could impede the continuation of business activities. While the company is prioritizing seismic reinforcement work and developing a Business Continuity Plan (BCP), if a large-scale disaster actually occurs, it could result in operational suspension, facility damage, and substantial recovery costs, affecting business performance and financial condition.

In addition to business interruption risk and raw material procurement risk arising from larger typhoons and increased frequency of floods or droughts, the introduction of climate change countermeasure regulations domestically and internationally could impose constraints on business activities and increase costs. While the company is working on reducing CO2 emissions and developing products with reduced environmental impact, depending on the pace of regulatory tightening, compliance costs could affect business performance and financial condition.

The company is subject to a wide range of laws and regulations, including labeling systems and regulations related to ink solvents, chemical substance regulations, and the Personal Information Protection Act. The enactment and introduction of new regulations in the future could impose constraints on business activities and increase costs. Ongoing compliance with related laws and regulations concerning investment, environmental protection, and personal information protection is continuously required.

At the end of the consolidated fiscal year under review, total investment securities amounted to ¥6,890 million, the majority of which consisted of stocks with market value. Depending on fluctuations in stock market conditions, valuation losses on held securities could occur, affecting business performance and financial condition.

The company is working to enhance its quality assurance system, including ensuring product quality and establishing an early warning system. However, if a product defect occurs due to unforeseeable causes, this could result in recall costs, damage to social credibility, customer compensation, litigation costs, and damages, affecting business performance and financial condition.