Risks of Business, etc.

Most of the raw materials for finished goods produced in our Group are petrochemical products, and purchase prices are closely related to crude oil market conditions and foreign exchange trends. An increase in raw material prices due to changes in the supply-demand balance, an increase in crude oil prices caused by geopolitical risks, and foreign exchange fluctuations could all affect the Group’s business performance and financial position. Changes in raw material prices are periodically reported and confirmed by the Board of Directors and at management meetings, etc., and measures to improve profits are considered as appropriate.

Many of the finished goods we sell in our Group are in fierce competition with other companies. Therefore, a decline in the selling price of our finished goods or a decrease in sales volume due to market price trends may impact our Group’s business performance and financial position, such as causing a decrease in sales and profits. With regard to sales price trends, the Board of Directors, management meetings, etc., scrutinize competitive situations and the balance between demand and prevailing prices. We also thoroughly manage sales prices by tier as well as sales and profit targets.

In order to prepare for losses arising from bad debts, our Group considers the recoverability of general receivables based on the actual rate of bad debts and that of specific receivables such as doubtful accounts individually, and records an allowance for doubtful accounts. However, something like a significant business partner going bankrupt could have an impact on the Group’s business performance and financial position, such as by the occurrence of bad debt losses significantly exceeding the allowance for doubtful accounts. Our Group has taken measures to mitigate credit risk, such as setting transaction limits for each business partner under a credit management system.

Our Group is conducting basic research on new materials and processing technologies to enhance our future competitiveness. However, due to the nature of R & D activities, results are uncertain, and so we may not be able to develop new finished goods that are sufficiently competitive. In such cases, the Group’s business performance and financial position may be affected. For important R & D projects, the Board of Directors, management meetings, etc., deliberate on investment, periodically report on the progress of development, and strive to reduce risks to business, etc.

Our Group handles various chemical substances as raw materials and we conduct business activities in compliance with regulations aimed at reducing our environmental impact both in Japan and overseas. However, due to factors such as these stricter regulations, there is a possibility that substantial costs may be incurred or business activities may be restricted. In such cases, the Group’s business performance and financial position may be affected. Our Group complies with laws and regulations aimed at reducing environmental impact. We also strive to minimize risks by identifying information at an early stage.

Our Group holds marketable shares. In the event of a significant decline in stock price, there is a possibility that the Group’s business performance and financial position may be affected, such as a write-down of the shares held. Regarding the shares held, the significance of holding, stock price, etc., are regularly checked by the Board of Directors and at management meetings, etc.

Our Group calculates employee retirement benefit obligations and expenses based on assumptions set in actuarial calculations, such as discount rates, and the expected return on pension assets. Therefore, changes in the actual level of interest rates or deterioration in the investment yields of pension assets may affect the Group’s business performance and financial position. With regard to pension assets, we strive to develop an appropriate investment environment for reserve funds by periodically monitoring their investment status.

Our Group has numerous business sites in Japan. In the event that a large-scale natural disaster causes significant damage to production, distribution facilities, information systems, etc., the Group’s business performance and financial position may be affected, such as through the suspension of production activities and substantial restoration costs. We have drawn up a business continuity plan for disaster risk and are continuously conducting comprehensive inspections. In accordance with our business continuity plan, we are currently implementing disaster risk measures, focusing on production and distribution facilities.

Our Group’s sales may decrease due to changes in demand caused by an epidemic. Furthermore, there are concerns that a prolonged epidemic may impact production and supply chains. In situations where there is concern about the spread of an epidemic, we will work to prevent the spread by refraining from visiting businesses and working from home, while promoting measures to maintain operational quality and customer service in accordance with our business continuity plan.