Miroku Corporation

The Hunting Guns Business generates more than 90% of its sales from the Browning Group, making it heavily dependent on political and economic conditions in the United States and Europe, its primary sales regions. If gun regulations are tightened, the market contracts due to economic downturn, or tariffs increase, this could lead to a decline in order volume or an increase in associated costs. Geopolitical risks in Ukraine and the Middle East could also affect business partners and logistics, and the Company is working to strengthen relationships with the Browning Group through regular technical meetings and monthly video conferences.

In the Hunting Guns Business, sales concentration on a single company, the Browning Group, is extremely high at over 90%, creating a risk that changes in the group's policies or deterioration in its business performance could directly affect the Group's operating results. In the Automotive-Related Business as well, sales of the mainstay product, steering handles, are limited to Toyota Motor Corporation, and a decrease in order volume due to changes in the main customer's policies could affect the Company's financial position. Both businesses are addressing this risk by maintaining good relationships with customers and working on new product development.

Export transactions with the Browning Group in the Hunting Guns Business are conducted in yen, meaning the Browning Group bears the direct foreign exchange risk. However, if there is a sharp appreciation of the yen or a prolonged yen appreciation trend, price negotiations with the group may become necessary, potentially creating downward pressure on selling prices. In addition, in the Machine Tools Business, there is a risk that profitability could deteriorate if increases in raw material prices cannot be passed on to selling prices.

In the Hunting Guns Business, in addition to management by the Quality Assurance Department, a cross-organizational quality control system has been established. However, if a defect or malfunction occurs that leads to a large-scale product recall or product liability compensation claims, this could result in substantial costs, production line stoppages, and a decline in sales, in addition to a significant loss of social credibility. Although the Company has product liability insurance in place as a precaution, the risk of damages exceeding the insurance coverage cannot be ruled out.

The Hunting Guns Business procures raw materials and parts from numerous suppliers, including overseas suppliers, but since suppliers of specialized parts are limited to a small number, there is a risk of supply disruption due to a supplier's bankruptcy, business withdrawal, or disaster. In addition, if political and economic conditions change in the countries from which overseas parts are procured, or if raw material prices surge, profitability could deteriorate in cases where it is difficult to pass these costs on to selling prices. The Company is working to reduce this risk through diversification of suppliers for key parts and advance procurement.

As Japan's only comprehensive gun drill manufacturer, the Machine Tools Business develops deep hole drilling machines, tools, and contract processing services. If the Company fails to respond accurately to changes in industry needs or if product development does not proceed as planned, this could lead to a decline in market share. Although the Company is working to strengthen sales activities and develop high-value-added products to expand profitability, there is a risk that competitiveness could decline depending on technological innovation and competitor trends.

The Machine Tools Business uses a large amount of cast iron as a primary raw material, and steel prices fluctuate depending on market conditions. If raw material prices rise due to unexpected changes in economic conditions and the Company is unable to pass on the increase to selling prices, or if such a situation continues over the long term, profitability could deteriorate, which may affect the Group's operating results and financial position.

The Cloud Solutions Business is a new business aimed at expanding the Company's business domain and achieving sustainable growth, and inherently carries the risk that development may not proceed as planned. If research and development costs or expenses for securing human resources exceed the planned amounts, this could adversely affect the Group's operating results and financial position. There is also a risk that market uncertainty and changes in the competitive environment specific to new businesses could delay monetization.

If a large-scale natural disaster or a global pandemic of an unknown infectious disease, such as COVID-19, occurs, the suspension of production activities could affect the Group's operating results and financial position. In addition to disaster prevention inspections, equipment maintenance, and investment in safety measures, the Company has established a crisis management committee to ensure employee safety and prepare a system for business resumption; however, it is difficult to completely eliminate the risk of sudden, unforeseen events.

The Group holds important information such as business partner information, product development information, technical information, and employees' personal information. If information leakage occurs due to unpredictable cyberattacks or computer virus intrusions, this could result in damage compensation claims and a decline in brand value. Although measures are being taken through information security training for employees and regular meetings of IT managers at each Group company, the risk associated with the increasing sophistication and diversification of cyber threats continues to exist.