MUTO SEIKO CO.

Overseas production sites in Vietnam, China, and Thailand account for 67.1% of product net sales, and the company benefits from tax incentive measures for foreign-invested companies in each country. If these incentives are abolished or reduced due to future policy changes in each country, the cost structure could deteriorate, potentially affecting business performance. There is currently no description of specific countermeasures.

With the shortening of the cycle from order receipt to shipment, a certain degree of forecast-based production has become necessary. A divergence between order volume and forecast-based production volume could result in long-term excess inventory, potentially leading to inventory valuation losses and deteriorating capital efficiency. In particular, since the design and sale of molds for new products requires a certain period of time, sudden changes in economic conditions could delay the start of manufacturing and affect business results.

There is a risk that production capacity could decline due to accidents or natural disasters at domestic and overseas manufacturing sites or during transportation. Although the company has established production systems, such as securing outsourced production routes for emergencies, depending on the scale of an accident or disaster, the impact on business performance cannot be completely avoided. Supply chain disruptions and plant operation constraints due to power shortages are also anticipated.

Intra-group transactions and transactions involving overseas-produced products for domestic customers are basically denominated in US dollars. The company seeks to minimize foreign exchange risk by balancing US dollar-denominated receivables and payables; however, complete avoidance is not guaranteed, and exchange rate fluctuations could affect business performance.

There is a risk that the spread of virus infections, war, and other factors causing heightened global tensions could result in damage to manufacturing sites, stagnation of economic activity, and supply chain disruptions. The surge in raw material and energy prices driven by war and other factors has continued, and if the situation becomes prolonged or worsens, it could further affect business performance and financial condition.

In FY2026 (ending March 2026), the top three major customers accounted for 35.8% of net sales, indicating a high degree of dependence on specific customers. Although the company has maintained stable business relationships with these customers over many years, if the relationships change for any reason, it could have a material impact on business performance and financial condition.

Although the company continuously works to reduce costs and secure stable procurement, there is a risk that it may become difficult to pass on higher raw material prices to product prices. If such cost increases cannot be passed on, it could affect business performance and financial condition through a decline in profit margins.

While securing and developing excellent human resources is essential for continued growth, if the hiring environment significantly deteriorates or the outflow of personnel continues to increase, it may become difficult to secure human resources as planned. This could affect business performance and financial condition over the medium to long term, and a shortage of personnel, particularly in the technology and manufacturing fields, would directly impact business competitiveness.

If fixed assets such as business equipment and real estate fail to generate the expected cash flows, the resulting decline in profitability may make it impossible to recover the invested amounts, necessitating impairment accounting. Recognition of impairment losses could directly affect the financial condition and business performance.