YAMAZEN CORPORATION

The Company operates two businesses, industrial products and consumer products, and demand fluctuates significantly depending on corporate capital expenditure sentiment and personal consumption trends. Uncertainty regarding the global economic outlook is increasing due to U.S. trade policy trends and the deterioration of the situation in the Middle East, and in a downturn phase of global capital expenditure-related demand or domestic personal consumption, there is a possibility that profitability will decline and inventory valuation losses will occur. Although resilience is being strengthened through the combination of the two businesses and overseas expansion and new market development are being pursued, complete avoidance is difficult.

The Company has bases in the U.S., China, Southeast Asia and elsewhere, and overseas sales reached ¥96,439 million in FY2026 (ending March 2026). There is a risk that the impact on the supply chain from the deteriorating situation in the Middle East could lead to higher procurement and logistics costs and delivery delays, and in other regions there are also risks of merchandise supply delays and business disruption due to inflation, political instability, and conflicts. The Company strives to manage and avoid risk through means such as obtaining country risk information, but if such risks materialize, they may affect business performance and financial condition.

The Company hedges foreign currency-denominated import/export transactions through forward exchange contracts and other means, but if foreign exchange rates fluctuate significantly beyond expectations, substantial foreign exchange gains or losses may occur, or sales may decline due to customers holding back purchases of handled products. In addition, there is translation risk when converting the foreign currency-denominated financial statements of overseas local subsidiaries into yen, which affects the consolidated financial statements. The Company strives to minimize risk through hedging, but there may be cases where unexpected fluctuations cannot be fully addressed.

Under the medium-term management plan "PROACTIVE YAMAZEN 2027," the Company is pursuing its business strategy with ROE, basic operating cash flow, and equity ratio as key management indicators, but the plan may not progress as planned due to composite risks such as economic fluctuations, country risk, and foreign exchange fluctuations. If these risks materialize, the Company may be unable to achieve its management indicators within the initially planned period. The Board of Directors and other bodies regularly evaluate risk response policies.

Under the medium-term management plan, the Company is pursuing active business investment aimed at acquiring new revenue sources and achieving sustainable growth, but if the expected effects are not obtained from such business investment, it may affect future growth, business performance, and financial condition. The transition to new business models involves uncertainty, and there is a risk that investment returns may fall short of the plan.

Under its management philosophy of "management centered on developing people," the Company positions human capital as its most important management resource, but declining birthrates, an aging population, and a shrinking labor force may make it difficult to acquire capable talent. The Company is strengthening its human capital through a human capital management strategy based on "the spirit of challenge and proactive thinking" and the promotion of diversity, but if a talent shortage materializes, it may affect future growth, business performance, and financial condition.

The Company extends credit to business partners both domestically and overseas, and the balance of trade receivables reached ¥113,084 million as of the end of March 2026. The Company strives to reduce risk through credit management based on internal management regulations, but if unexpected circumstances lead to a business partner's default or if corporate bankruptcies increase due to an economic downturn, the recording of bad debt losses and other items may affect business performance and financial condition.

The Company is expanding the development and sale of private brand products, and their share of total transaction volume has been increasing year by year. The Company has taken measures such as establishing quality control regulations, setting up a Quality Control/PL Subcommittee under the Crisis Management Committee, and taking out product liability insurance, but if a large-scale recall or product liability claim occurs, substantial resolution costs may arise and profitability may decline due to damage to the corporate brand value.

The Company utilizes computer systems and IT networks across its overall business operations, and there is a risk of leakage, falsification, or destruction of personal information and corporate information due to unauthorized external access, computer virus intrusion, and other causes. The Company has established IT governance management regulations and a basic information security policy, built a backup system, and conducts regular employee training, but if a system outage occurs, it may lead to lost business opportunities and a loss of social trust, potentially affecting business performance and financial condition.

There is a risk of lost sales opportunities due to stricter regulations such as greenhouse gas emission regulations and tightening regulations in the supply chain. The Company also recognizes the risk of declining social trust if it is deemed to have given insufficient consideration to global environmental change, as well as physical risks from natural disasters. In response to climate change risk, the Company has established a basic sustainability policy and is promoting initiatives to reduce greenhouse gas emissions, but new or strengthened regulations may affect business performance and financial condition.