UEX,LTD.

The Group operates its business mainly within Japan, and domestic economic trends and fluctuations in demand may affect its operating results and financial condition. In addition, if the Group becomes relatively disadvantaged compared with competitors in terms of price, delivery times, or quality, similar effects may occur.

Sales of stainless steel account for 88.2% of the Company's net sales, and the ratio of sales from inventory reaches 68.9% of net sales, creating a risk that gross profit margin could decline sharply in the event of a rapid drop in stainless steel prices. Stainless steel prices fluctuate depending on domestic and overseas supply-demand trends and raw material prices such as nickel and ferrochrome. As a countermeasure, the Company holds regular inventory adjustment meetings to analyze and review sales, ordering, and inventory conditions.

The Group procures a substantial portion of its working capital and capital expenditure funds through borrowings in order to secure product inventory and enhance storage and cutting/processing facilities, and consolidated interest-bearing debt at the end of the fiscal year under review amounted to ¥13,876,160 thousand. In the event of future interest rate increases, procurement costs may rise, potentially adversely affecting operating results and financial condition.

Since the majority of transactions with customers are conducted on a credit basis, there is a risk of losses arising from delayed or uncollectible receivables. Although the Group operates under strict credit management regulations, if customer credit risk materializes due to unforeseen circumstances, this may affect operating results and financial condition.

The Group conducts trading operations with China and other regions in Asia, and political and economic instability or unexpected changes in laws and regulations in these regions may disrupt business activities. Should such events occur, they may affect operating results and financial condition.

The Group's business sites are widely dispersed, which helps diversify risk related to natural disasters or infectious disease outbreaks concentrated in a specific area; however, if damage exceeding expectations occurs, business activities may be restricted. This could, in turn, affect operating results and financial condition.