JSP Corporation

In the medium-term management plan "Change for Growth 2026," the ARPRO Business, building/housing insulation materials, and FPD surface protection materials are positioned as growth drivers, but progress may not proceed as planned due to demand, economic conditions, technological trends, and changes in laws and regulations. In particular, for FY2027 (ending March 2027), uncertainty over the demand outlook is increasing due to escalating tensions in the Middle East. In response, the Company is promoting a transformation strategy focused on expansion into new business domains and sustainability management.

Raw materials and fuel costs are significantly affected by fluctuations in crude oil and naphtha prices, and in periods of rising prices, performance tends to deteriorate due to delays in passing costs through to product prices. In FY2027 (ending March 2027), the escalating situation in the Middle East and the potential closure of the Strait of Hormuz are creating uncertainty in raw material procurement, and raw material prices are expected to remain elevated for some time even after any closure is lifted. In response, the Company is promoting the adoption of price formulas with business partners and working to reduce costs.

As the Company conducts business widely across North America, South America, Europe, and Asia, political and economic factors, environmental regulations, transfer pricing taxation, labor disputes, difficulty in securing human resources, and exchange rate fluctuations in each region may hinder business activities. In particular, in the Asian region, intensifying price competition is expected due to the entry and rise of local companies. The Company is working to strengthen its internal control functions through PDCA cycle management by the Global Business Division and enhanced group governance.

With respect to held fixed assets, impairment losses may arise due to a significant deterioration in the business environment, a decline in profitability, or a fall in market prices, which could affect business results and financial position. The asset group for the EPS Business had continued to show negative results through the previous consolidated fiscal year, but turned positive in the current consolidated fiscal year due to optimization of selling prices and reductions in production costs, and at present no indication of impairment is considered to exist. However, if the underlying assumptions change due to changes in market conditions or other factors, an impairment loss may be recognized in the following consolidated fiscal year.

Against the backdrop of the Paris Agreement, the SDGs, and increased attention to ESG issues, momentum toward plastic recycling, conversion to alternative materials, and moving away from plastics is intensifying, with progress in the circular economy accelerating particularly in Europe. If the Company's response to these trends is insufficient or delayed, it could affect the Group's business. In response, the Company is actively promoting the provision of environmentally friendly products and initiatives such as material recycling and thermal recycling of waste plastics and the use of recycled raw materials.

The Company has numerous manufacturing plants both in Japan and overseas, and there is a possibility that production facilities may be damaged by plant accidents, industrial accidents, or natural disasters. In particular, the probability of a Nankai Trough megaquake occurring is considered high, and if plants in the Yokkaichi area are affected, the Company could suffer substantial losses due to the suspension of production activities or damage to facilities; the Kansai Plant, being located in a mountainous area, also faces risks of heavy rain, flooding, and landslides. The Company is working to develop systems in normal times through the purchase of earthquake and other insurance, the formulation of disaster response manuals and BCPs, and the conducting of disaster prevention drills.

With the sophistication of IT technology, the risk of serious failures in information system infrastructure and communication lines, or the destruction or theft of confidential management information, cannot be completely eliminated. The Group strives to ensure confidentiality, integrity, and availability through the development of related regulations, while also responding to external cyberattacks and conducting regular drills assuming emergency situations. The Group manages risks such as information leakage by presenting guidelines for the continuous improvement of risk management levels.

The shortage of the working population due to the declining birthrate and aging population, along with the shortage of highly specialized personnel due to the digital revolution, is becoming increasingly severe year by year, making it difficult to secure human resources in a timely manner. The labor shortage is becoming a factor pushing up costs in production and logistics, which could affect the Group's business results. In response, the Company is enhancing its human resource development systems and implementing measures such as shortening production processes and automating manufacturing lines.

Many of the Company's products are used as components of final products such as food containers, automotive parts, and building/housing insulation materials, and unexpected quality defects or product liability lawsuits could result in significant damage to customers. The Company is working to strengthen its quality assurance system, including actively pursuing certification of quality management systems at each plant.

As the Company conducts business globally, changes in laws and regulations in various regions around the world may make compliance difficult, and there is not zero possibility of legal violations occurring, creating risks of new costs arising for compliance or restrictions on business activities. The Company strives to strengthen its compliance system through thorough dissemination of its code of corporate conduct common to Japan and overseas, and by establishing an internal reporting system available to all Group employees.