YONEX CO., LTD.

China-related sales account for approximately 50% of consolidated sales, and sales are notably concentrated in the Asia region. Changes in the external environment, such as diplomatic and security developments, changes in trade policy or legal systems, and import/export regulations, could have a material impact on business activities and profitability. Logistics disruptions, supply chain fragmentation, and changes in local systems also pose risks to business performance and financial condition.

In Japan, a medium- to long-term population decline due to the declining birthrate and aging population is anticipated, and demand from younger age groups is expected to shrink, particularly for products aimed at school physical education and club activities. This could lead to a decrease in sales and profits. In overseas markets that have matured, delays in responding to changes in purchasing behavior and preferences pose a risk of competitive disadvantage.

While emerging regions expected to see population growth and rising incomes present opportunities for market expansion, low average purchase prices and low barriers to entry could intensify competition. Delayed responses relative to competitors could lead to a decrease in sales and profits. Flexible responses tailored to the differing business environments of each market are required.

Since overseas markets account for approximately 70% of consolidated sales, transactions denominated in foreign currencies are directly affected by exchange rate fluctuations. Revenues, expenses, assets, and liabilities of overseas subsidiaries denominated in local currencies are affected by exchange rate movements when translated into yen, causing figures in the consolidated financial statements to fluctuate even if the value in local currency remains unchanged. Significant fluctuations in exchange rates could adversely affect business performance and financial condition.

The Group procures a variety of raw materials and products from suppliers both in Japan and overseas, and sharp increases in raw material prices could affect business performance. If supply is halted or delayed due to large-scale natural disasters, pandemics, bankruptcies, strikes, or other events, this could have a material impact on production and sales activities. Additionally, if human rights and environmental responses across the supply chain are deemed inadequate, this could pose a risk to procurement activities and business performance.

Since the Group's products are primarily sport-specific, if people's activities are halted due to pandemics, large-scale natural disasters, conflicts, terrorism, or other events, demand in sales markets could be significantly affected. The entire supply chain, including the Group's own and outsourced manufacturing plants, warehouses, and transportation providers, could be affected, potentially impacting the entire business, including manufacturing and sales. The business characteristic of sports activities being closely linked to consumption amplifies this risk.

Each factory manufactures products according to its own quality control standards, but there is no guarantee that defects will not occur across all products. If a product defect occurs, the Group may be held liable for damages, and a decline in product reliability could adversely affect business performance and financial condition. This also carries a risk of reputational damage as a global brand.

Counterfeit versions of the Company's products are increasing year by year, primarily in China and Southeast Asia, and legal frameworks concerning intellectual property rights in various countries remain incomplete. If the Company is unable to prevent intellectual property infringement or the manufacture and sale of counterfeit products by third parties, this could adversely affect business performance and financial condition due to a decline in brand strength. Because the Company is widely recognized as a global brand, the scope of damage from counterfeit products is extensive.

The Group holds important confidential information, such as customers' personal information and technical information, and has implemented measures such as strengthening security systems and providing employee training. However, if information is leaked due to an unforeseen event, this could result in damage to corporate value, loss of social trust, and compensation to customers, thereby affecting business performance and financial condition.

The Group implements capital expenditures centered on its own factories as well as acquisitions with third parties, and while profitability and recoverability are examined in advance, there is no guarantee that the expected results will be achieved. If expected results are not achieved due to significant deviation from business plans or changes in the market, impairment losses on fixed assets and other items may occur, potentially affecting business performance and financial condition.