NIPRO CORPORATION

Some key components depend on specific suppliers, and production activities may be affected by sudden demand surges or supply delays and disruptions. In addition, for products using petrochemical products such as plastics as raw materials, there is also a risk of increased procurement costs due to soaring raw material prices. As countermeasures, the Group is promoting diversified procurement of raw materials from different grades and regions of origin, as well as establishing multiple production sites for key products.

Some products in Japan are affected by reductions in medical service fees, drug prices, and reimbursement prices for insured medical materials, and competition among companies is intensifying against the backdrop of global healthcare cost containment measures. If selling prices decline beyond expectations, this could materially affect business results and financial condition. As a countermeasure, the Group is working to reduce manufacturing costs by expanding production capacity and establishing a stable supply system.

The Group is subject to various laws and regulations, including the medical insurance system and the Pharmaceutical and Medical Device Act, and there is a risk that the Group may be slow to respond to environmental changes if unpredictable system reforms are implemented. If the response to such reforms is inadequate, this could materially affect business results and financial condition. As a countermeasure, the Group is promoting the development of new products and technologies through active research and development activities.

In the fiscal year under review, overseas sales accounted for 51.4% of total sales, and the Group primarily conducts transactions denominated in foreign currencies such as the US dollar and euro, meaning that exchange rate fluctuations directly affect business performance. If exchange rate fluctuations exceed expectations, this could materially affect business results and financial condition. As a countermeasure, the Group hedges risk through forward foreign exchange contracts covering some foreign currency-denominated export receivables.

The Group raises funds through borrowings from financial institutions, corporate bonds, commercial paper, and other means, but there is a possibility that it may become unable to raise necessary funds on desired terms due to turmoil in financial markets or a significant downgrade of its credit rating. In addition, some borrowings are subject to financial covenants, and if these are breached, the Group could lose the benefit of the term and its cash flow could be affected. As a countermeasure, the Group has entered into commitment line agreements with multiple financial institutions to secure liquidity.

If unexpected malfunctions or side effects occur during the use of medical devices or pharmaceuticals and cause damage to third parties, this could give rise to claims for damages based on product liability, among other grounds. The Group carries liability insurance and product liability insurance, but if claims exceeding the coverage are approved, additional measures would be required. The Group has established its own quality standards to continuously improve product quality and safety and to thoroughly comply with relevant laws and regulations.

If unexpected events such as cyberattacks, unauthorized access, or natural disasters occur, core systems could be halted and important data could be damaged or leaked, potentially affecting business results and financial condition. As a company handling highly confidential information in the medical field, information leaks could seriously affect business continuity and reliability. As a countermeasure, the Group implements security measures such as appropriate server management and data backups to protect its information assets.

The amount of investment securities recorded on the consolidated balance sheet at the end of the fiscal year under review was ¥18,902 million, and there is a possibility that investment value could decline significantly due to a downturn in the stock market or deterioration in the financial condition of issuers. Changes in accounting treatment methods could also be a factor affecting investment value. The Group holds these securities for the purpose of strengthening business relationships and gathering information on new product development and new business opportunities, but depending on market conditions, there is a risk of significant valuation losses.

The Group is working to strengthen its business foundation through M&A and business alliances, but if undisclosed liabilities are discovered or business integration and expansion do not proceed as planned, this could materially affect business results and financial condition. In particular, overseas M&A carries heightened integration risk due to differences in culture and systems. As a countermeasure, the Group conducts detailed due diligence before and after execution, along with ongoing monitoring.

If natural disasters such as fires or earthquakes, terrorism, war, or political and economic changes occur in regions where the Group operates, production, sales, logistics, and service provision could be delayed or halted. Large-scale outbreaks of infectious diseases could also disrupt supply chains, halt factory operations, or cause sharp declines in demand, potentially affecting business results and financial condition. The Group strives to ensure business continuity through measures such as stockpiling infection prevention supplies and establishing work-from-home and remote work environments.