PIGEON CORPORATION

The Group's core business of manufacturing and selling childcare products may experience fluctuations in total demand and resulting declines in net sales due to decreasing birth rates both domestically and internationally. The declining birth rate is progressing not only in Japan but also in major markets such as China and other parts of Asia, and could have a structural impact on the Group's overall revenue base. The Annual Securities Report does not describe specific countermeasures, and this is recognized as a risk.

There is a risk that manufacturing costs will rise due to price surges in key raw materials linked to market fluctuations such as crude oil prices and pulp prices. Depending on market conditions, it may be difficult to pass on these costs through selling price increases, which could compress profit margins. The Group states that it has implemented risk hedges, but cannot exclude the possibility of an impact on business results from unforeseeable factors.

The Group manufactures products in Japan, Thailand, China, Turkey, Indonesia, and India, and operates businesses in Asia, Oceania, the Middle East, North America, Europe, and elsewhere, so foreign exchange fluctuations exceeding forecasts may affect business results. In particular, given the high proportion of overseas businesses such as the China Business, Singapore Business, and Lansinoh Business, yen appreciation or local currency depreciation acts as a factor pushing down the yen-converted amounts of net sales and profit. The Group states that it implements risk hedges to the extent possible, but complete elimination is difficult.

As a manufacturer of childcare products, women's products, and nursing care products, if a product defect or unexpected accident occurs, this may adversely affect business results through losses associated with product recalls and decreased sales due to customer attrition. Although the Group strives to ensure quality and safety from the design stage through to mass production, the risk of quality incidents exceeding prior expectations remains, including at outsourced manufacturing partners. This could also lead to a mid- to long-term decline in competitiveness through brand damage.

The Group holds important information such as customer personal data, research results, and confidential product development information, and there is a risk of information system collapse, outage, information leakage, or tampering due to power outages, disasters, computer virus infections, unauthorized access, and similar events. If such an event occurs, it could disrupt business operations and affect business results and financial condition. The Group states that it implements appropriate security measures, but there are limits to responding to events that exceed the anticipated scope.

Through the provision of products and services to consumers, the Group holds a large amount of personal information, and an external leak due to some cause could affect business results. The Group strives to strengthen customer information management and mandates personal information protection training for all employees, but states that it cannot completely eliminate the risk of leakage. If a personal information leak were to occur, a combination of impacts is anticipated, including legal liability, brand damage, and customer attrition.

Outbreaks of terrorism or war, epidemics or pandemics of infectious diseases, and unexpected changes in international trade policy (such as tariffs) could cause social and economic disruption in the markets where the Group operates, including Japan, Asia, the Middle East, North America, and Europe, and could affect business results. In particular, overseas businesses such as China, Singapore, and Lansinoh (North America) depend on local political and economic conditions, and strengthened trade regulations could be a factor increasing procurement and sales costs. The Group states that it implements risk hedges to the extent possible.

The Group operates childcare, daycare, and early childhood education businesses, caring for many infants and toddlers, which inherently carries the risk of unexpected injuries or accidents. While no accidents or compensation issues that would affect business operations have occurred to date, the Group cannot rule out the possibility of such occurrences in the future. Should a serious accident occur, compensation issues, loss of social trust, and impacts on business continuity could arise.

Sudden disasters, natural calamities, or unforeseen accidents could damage manufacturing and logistics facilities, resulting in loss of assets or losses recorded due to product stagnation, which could affect business results. The Group recognizes climate change as a common global challenge, announced its support for the TCFD recommendations in December 2021, and discloses information through publications such as the "Pigeon Group TCFD Report 2025." Since manufacturing sites are dispersed across Japan, Thailand, China, Turkey, Indonesia, and India, there is a risk that a disaster in a specific region could spread across the entire supply chain.

There is a risk that receivables held by the Group may become uncollectible due to the bankruptcy or deteriorating creditworthiness of business partners in Japan and overseas. Because the Group operates globally, a downturn in the economic environment could cause simultaneous credit deterioration among multiple business partners. Should such a situation arise, the Group states that this would affect business results through the recording of bad debt losses.