SHOEI CORPORATION

The purchase price of plastic film is linked to crude oil (naphtha) market conditions, and procurement costs, including for raw materials used in cosmetics and quasi-drugs, fluctuate accordingly. The Company seeks to contain such costs through procurement from multiple manufacturers, overseas procurement, and price negotiations; however, if there is a delay in passing on sharp increases in purchase prices to selling prices, this may affect business results and financial condition.

The Company is affected by foreign exchange fluctuations due to overseas procurement from Asian regions such as China and Thailand and the existence of overseas consolidated subsidiaries. Although risk mitigation measures such as forward exchange contracts are implemented, medium- to long-term exchange rate fluctuations cannot be completely hedged, and significant changes in exchange rates may affect business results and financial condition.

As of the end of FY2026 (ending March 2026), interest-bearing debt accounted for 30.5% of total assets, with funding raised mainly through borrowings from financial institutions. As the proportion of fixed-rate funding is 93.1%, the short-term impact is considered limited; however, if interest rates rise in the future and funding costs increase, this may affect business results and financial condition.

The Company procures products from Asian regions such as China and Thailand, and gathers economic, political, and regulatory information through consultants residing in each country. However, if unforeseen political changes, currency crises, natural disasters, infectious disease outbreaks, or other events disrupt product procurement, this may adversely affect business results and financial condition.

The Company pursues corporate acquisitions and business alliances for the purpose of business expansion, and conducts performance monitoring at Board of Directors meetings. However, if expected cash flows cannot be generated due to deterioration in market or business conditions that were not anticipated at the time of the investment decision, impairment of goodwill or intangible assets recorded through M&A may occur, which may affect financial condition and business results.

Cosmetics-related products come into direct contact with the scalp and skin of general consumers, and there is a risk of health damage or product recalls due to contamination or other issues during the manufacturing process. The Company addresses this through the establishment of work manuals, employee training, quality inspections, and enrollment in product liability insurance; however, in the event of an incident, loss of client trust and response costs may affect business results and financial condition.

The Company is subject to numerous laws and regulations, including the Act on Pharmaceuticals and Medical Devices, the Food Sanitation Act, the Containers and Packaging Recycling Act, and the Personal Information Protection Act, and holds licenses such as a quasi-drug and cosmetics manufacturing license. Although the Company responds through coordination with its legal department and legal counsel, insufficient response to strengthened or revised regulations, or the occurrence of illegal acts, may result in penalties such as license revocation or business suspension, which may affect business results and financial condition.

Given the nature of its business, which centers on plastic film packaging materials, the Company is directly affected by stricter environmental regulations, such as those addressing marine plastic waste issues. Although the Company is working on product development using biomass and biodegradable materials, if future regulatory tightening or demands for social responsibility constrain business activities, unplanned capital investment or additional environmental measure costs may arise, which may affect business results and financial condition.

The cosmetics OEM business, centered on hair care cosmetics for beauty salons and barbershops, is expected to face market contraction due to a decline in the number of people receiving hair treatment services amid Japan's declining population. As an OEM manufacturer, the Company's business is affected by clients' product development, sales, and outsourcing strategies; while the Company responds by strengthening its research and development and manufacturing divisions and enhancing its proposal capabilities, unexpected changes in the competitive environment or divergence from customer needs may affect business results and financial condition.

The Company handles personal information of customers of its business partners, and maintains its Privacy Mark certification (obtained in December 2005), maintains a personal information management system, and conducts training and education for all officers and employees. However, if information is leaked or misused due to intentional acts or negligence by related parties or business partners, this may result in legal liability, including claims for damages, and a significant loss of social trust, which may affect business results and financial condition.