Among the matters related to situations of business and accounting, etc., major risks recognized by management as those that may have a significant impact on the financial condition, business performance, and cash flow status of a consolidated company are as described below.
Based on the recognition of the possibility of these risks, it is our policy to work to avoid them or properly respond to them if they arise. Meanwhile, please note that the matters described concerning future situations are determined by the Company as of the end of the consolidated fiscal year under review, and that they entail uncertainty and do not cover all of the investment-related risks.
Economic Situation
Demand for automobile-related products, which account for a significant portion of net sales in each segment of our Group, is heavily influenced by economic conditions in the countries and regions where we sell our products.
Social and economic disruptions caused by such events as global economic downturns and pandemics may reduce demand for automobiles and for the Group’s products.
In particular, economic trends in Japan, North America, China, Asia, and Europe, which are major automotive markets, may affect the Group’s financial condition and operating results.
Impact of Specific Business Partners
As part of our management strategy, the Group is working to diversify our customer base by expanding sales to domestic automakers.However, at present, Mazda Motor Corporation and its consolidated subsidiaries and equity-method affiliates (collectively, the “Mazda Group”) represent the bulk of our sales.For the fiscal year ended March 2026, sales to the Mazda Group reached 74.6% of our Group consolidated sales.
For this reason, if the Mazda Group’s automobile production volume decreases due to, for example, the Mazda Group’s sales trends, or external factors along its supply chains, it may affect our Group’s financial condition and operating results.
Risks Inherent International Activities and Overseas Expansion
The Group’s production and sales activities are conducted in Japan, North America, the ASEAN region, and China. In addition to internal risks related to business operations, expanding into these overseas markets involves the inherent risks listed below. Should any of these materialize, they may affect the Group’s financial situation and business performance.
1.Unexpected changes in laws and regulations, or adverse changes in tax systems
2.Occurrence of adverse political or economic factors (e.g., tariff policies)
3.Risks related to difficulties in recruiting and retaining talent and labor issues
4.Adverse impacts on business operations resulting from inadequate social infrastructure
5.Social or economic disruption caused by geopolitical risks, natural disasters, infectious diseases, or other factors
Respect for Human Rights
Believing that respect for human rights is the foundation of our business operations, the Group formulated a “Human Rights Policy” in May 2025 and has been implementing a diversity and inclusion promotion project.We are also working to reform work styles and promote health and productivity management. However, mandatory requirements regarding respect for human rights are increasingly being introduced globally.
Given the situation, if we fail to respond to unexpected legal or regulatory changes swiftly enough, insufficient understanding of diverse values and a lack of employee-friendly work environment may lead to human rights violations, and a decline in social trust and brand image may in turn affect the Group’s financial condition and operating results.
Intellectual Property Rights
The Group has obtained intellectual property rights, such as patents related to products and production technologies, in order to differentiate our products from those of other companies.We also conduct patent searches as necessary to prevent infringement of the intellectual property rights of third parties.
If our patented product is produced in a country or region where complete protection by intellectual property rights is difficult or only limited protection is ensured, or if, in the future, the Group’s products or manufacturing technologies are deemed to infringe on a third party’s intellectual property rights, it may affect the Group’s financial situation or business performance.
New Product Development and Technological Capabilities
To respond to market and customer demand for environmentally friendly,lightweight, and cost-competitive products, our Group is actively developing and proposing plastic products as an alternative to metal or glass and working on initiatives to realize closed-loop recycling for plastics and promoting greater use of local resources.However, the process of developing and marketing new products is, by its very nature, complex and uncertain and involves various risks, including those listed below.
1.There is no guarantee that our long-term investments or allocation of resources will lead to the creation of new products or technologies.
2.There is no guarantee that our new products or technologies will be well-received by customers or that their sales will be successful.
3.Technological advances and market changes may lead to a rapid decline in the value of our products.
In addition to the risks described above, if the Group is unable to adequately anticipate changes in the industry and market, thereby failing to develop attractive new products or achieve customer acceptance of its products, it may hinder our future growth and profits and affect the Group’s financial situation and business performance.
Product Defects
The Group performs daily quality control of our products based on international quality control standards and in accordance with our quality assurance system covering development through production. However, there is no assurance that none of the Group’s products will have a defect leading to a product recall in the future.
Although we have insurance coverage for product liability claims, we may still incur significant additional costs, depending on the nature of the defects, which may affect the Group’s financial situation and business performance.
Price Competition
The Group is endeavoring to maintain prices by increasing added value through technological development while responding to various market needs, such as consideration of the environment, weight reduction, and affordability. However, in response to intensifying price competition in the automotive industry, competition among parts manufacturers has also been intensifying.
Given this situation, receiving orders at low selling prices may make it difficult for the Group to maintain or expand net sales and secure profits. Such a situation may affect the Group’s financial condition and operating results.
Insufficient Supply of Raw Materials and Other Supplies
The Group purchases raw materials and parts from a diverse range of suppliers to produce products but relies on a limited number of suppliers for certain procured items used in the production and sale of products.
Accordingly, as we place orders for such items, we take steps to mitigate risks such as by identifying alternative products, closely monitoring market developments, checking the financial health of the suppliers, and maintaining strict quality control. However, if we become unable to secure stable supply of materials or energy due to factors such as supply uncertainties or unexpected accidents at suppliers, it may hinder the Group’s production and sales operations and potentially affect the Group’s financial situation and business performance.
Rising Labor Costs
To maintain sustainable growth and improve productivity, the Group is working to revise wages with the aim of ensuring long-term stability and improvement in working conditions, taking into account our financial capacity. If, however, external factors—such as government policies in various countries or rising prices—compel us to increase wages to levels that exceed our payment capacity, and if we are unable to pass on the resulting cost increases to product prices, it may affect the Group’s financial situation and business performance.
Information Security
To address information security risks, the Group has established systems to block, detect, and eliminate unauthorized access by external perpetrators and is working to strengthen security through employee awareness campaigns and training. However, there remains the risk that cyberattacks or computer viruses may cause confidential information to be leaked to external parties, some information to be lost, or our information systems to be disrupted. If such a situation arises, it may affect the Group’s financial situation and business performance.
Exchange Rate Fluctuations
The group has multiple overseas business sites in North America, the ASEAN region, and China, and conducts transactions denominated in foreign currencies. Some of our consolidated subsidiaries enter into forward exchange contracts for foreign currency-denominated trade receivables, trade payables, and borrowings in an effort to mitigate foreign exchange risk. The value of foreign currency-denominated transactions and the financial figures of overseas affiliates used in our consolidated financial statements may fluctuate when converted into yen, potentially affecting the Group’s financial situation and business performance.
Interest Rate Fluctuations
Since the Group has obtained some of its borrowings at variable interest rates, it is exposed to the risk of interest rate fluctuations. Depending on future interest rate trends, this may affect the Group’s financial condition and operating results.
Retirement Benefit Obligations
The Group calculates retirement benefit expenses and liabilities based on assumptions such as the discount rate for retirement benefit obligations and the expected rate of return on pension assets, which are set in actuarial calculations. If actual investment returns decline or the discount rate fluctuates, retirement benefit obligations may increase, potentially resulting in additional expenses or funding shortfalls. This may affect the Group’s financial condition and operating results.
Impairment of Fixed Assets
If the Group incurs impairment losses on its non-current assets as a result of a decline in profitability due to such factors as a significant deterioration in the business environment, or a drop in market prices, it may affect the Group’s financial situation and business performance.
Legal Regulations
Even if the Group maintains compliance with environmental protection and product safety laws and regulations in each country and establishes a rigorous compliance system, it cannot completely eliminate the risk of violating laws and regulations. Should any violations of laws and regulations, or fraudulent or illegal acts resulting from unethical conduct or negligence by our employees occur, it may significantly undermine the public’s trust in the Group.
Furthermore,changes to, or the tightening of, laws and regulations may result in additional compliance-related costs.This may affect the Group’s financial condition and business performance.