The Group develops business in countries across the world, including Japan, North America, Europe and Asia. It is possible that an economic downturn, social and economic disruptions caused by an epidemic, and the resulting decline in demand in these markets could affect the Group’s operating results, financial standing and other matters.

The Group constantly monitors changes in the economic conditions of countries in the world, and the head office and overseas sites unite in taking measures that suit the situation.

The Group has been active in expanding into overseas markets. Overseas, it is possible that unexpected changes to legal regulations, the occurrence of unpredictable events mainly caused by local customs, and others could affect the Group’s operating results, financial standing and other matters.

The Group proactively gathers local information and shares it internally in order to respond appropriately to local issues such as legal regulations and customs. In this regard, internal seminars and others will be held to improve education for employees.

The Group’s main customers are Honda Motor Co., Ltd., and its group companies (hereinafter referred to as "Honda Motor"), and they account for more than 90% of net sales in the Resin processed product business.

It is possible that fluctuations in the number of vehicles produced and sales trends of Honda Motor could affect the Group’s operating results, financial standing and others.

The Group is carrying out new technological innovations by combining its unique resin processing technology and chemical materials technology, thereby winning new customers in the mobility field.

In addition, the Group has pushed forward with optimally allocating resources and business portfolios and aims to expand into other business fields.

The Group purchases raw materials, merchandise, and parts (hereinafter referred to as “purchased items”) from a great number of external suppliers. However, the Group depends on a limited number of suppliers for several purchased items that are used for production and sale of products. Therefore, in the event that the Group cannot receive stable supplies of these purchased items from major suppliers for any reason, it is possible that the Group’s production and sales activities could be impacted, ending up affecting its operating results, financial standing and other matters.

To safeguard the stable procurement of purchased items, the Group is working to diversify its supply chains so as to get hold of multiple suppliers while confirming new moves with customers.

• Procure goods from multiple business sites in and outside Japan.
• Secure suppliers in regions in which the Group has a business site.
• Get hold of multiple suppliers who can supply purchased items that have the same quality

The Group manufactures products in accordance with internationally recognized quality control standards. In the event that a serious quality defect occurs with a manufactured product, it is possible that such a defect could cause huge amounts of costs or influence the Group’s evaluation by others, ending up affecting the Group’s operating results, financial standing and other matters.

Having been certified with ISO 9001 for its quality management system and ISO/TS 16949 for its automotive industry quality management system, the Group produces various products and performs quality management in accordance with the above standards and endeavors to maintain and improve quality.

Should a problem occur, the Group has a system in place to enable response to the market quickly and without fail.

The Group engages in diverse business transactions and sells products on credit to buyers in and outside Japan, and this exposes the Group to credit risk. Although the Group makes efforts to procure merchandise and products in a stable and continuous manner, it may become difficult to do so due to a deterioration in the financial standing or bankruptcy of suppliers and others. It is possible that the manifestation of such risks could affect the Group’s operating results, financial standing and others matters.

The Group collects information on the creditworthiness of business partners constantly to share the information internally. Based on this information, the Group revises trading terms and conditions and places a cap on monetary amounts of transactions depending on business trends and financial conditions, thereby managing credit limits and suppliers to mitigate credit risk.

The Group advances the development of new products to satisfy customers. It is possible that the failure of new products or technologies that the Group developed gaining support from customers and markets could lower future growth and profitability, ending up affecting the Group’s operating results, financial standing and other matters.

The Group expands development of innovative new products and technologies. The Group carries out R&D activities while grasping market needs through exchanging opinions with people in the industry on occasions such as technological presentations made to customers and when displaying newly developed products in domestic and overseas exhibitions.

The Group handles petrochemical products made from naphtha in a broad range of fields, including resins, industrial chemicals, organic chemicals, paints, oil and fat processing, electronic materials, and automobiles. Since petrochemical products form unique market conditions for each product, depending on the factors of the raw material market conditions and the supply-demand balance, it is possible that these fluctuations could affect the Group’s operating results, financial standing and other matters.

The Group has taken measures to lower the risk of fluctuations in the market conditions, such as concluding transaction contracts based on a system that links the pricing of petrochemical products with naphtha prices.

As for in-stock merchandise, the Company proceeds with concluding transaction terms and conditions that are not influenced by market conditions through actions such as entering into contracts that fix volumes and prices of the lot with business partners.

The Group conducts transactions denominated in foreign currencies. It is possible that yen-translated prices in transactions denominated in foreign currencies, resulting from fluctuations of exchange rates, could affect the Group’s operating results, financial standing and other matters. The Group has subsidiaries overseas and prepares financial statements denominated in foreign currencies. The preparation of consolidated financial statements is subject to currency translation risks arising from conversion from foreign currencies to the yen.

The Group hedges its foreign currency transactions with forward foreign exchange contracts to minimize the risk of foreign currency fluctuations.

The Group procures funds for its operating and investment activities by borrowing funds from financial institutions, etc. However, some interest-bearing liabilities are subject to the condition that interest rates vary. Therefore, it is possible that interest rate trends in the future could affect the Group’s operating results, financial standing and other matters.

The Group, in preparation for a rise in interest rates in the future, takes measures to mitigate risks accompanying interest rate trends, such as choosing fixed rates for long-term funds.

The Group has marketable stocks. Therefore, it is possible that a fluctuation in these stocks could affect the Group’s operating results, financial standing and other matters.

The Group has taken measures to mitigate risks, such as continuously reviewing and reducing its shareholdings.

The Group endeavors to accumulate unique technologies and know-how and acquire intellectual property rights. It is possible that an infringement of intellectual property rights by a third party could affect the Group’s business activities. In addition, the Group develops products and technologies while taking into consideration the intellectual property rights of third parties. However, in the case that the Group is judged to be infringing on the intellectual property rights of third parties and is sued for damages, etc., it is possible that such an event could affect the Group’s operating results, financial standing and other matters.

The Group protects its technologies and others through owning or acquiring patents and trademarks for the products that it manufactures. Moreover, the Group strives to perform risk management so as to avoid infringements of intellectual property rights of other companies.

The Group runs operations in countries around the world. In areas where a large-scale natural disaster, infectious disease, war, terrorism, riot, or industrial action has occurred, it is possible that purchases of raw materials and parts, production and sales of products, logistics service, etc. could be delayed, disrupted and suspended. It is possible that a case where such an event is prolonged could affect the Group’s operating results, financial standing and other matters.

The Group places the highest priority on ensuring the health and safety of its employees and implements countermeasures in accordance with its crisis management policies and guidelines, depending on the nature of the incident. Depending on details of the damage caused, the Group is ready to set up an emergency response headquarters, headed by the President, to address the situation in a group-wide effort.

The Group is subject to diverse legal regulations, such as on sales of merchandise, safety standards, hazardous substances and levels of contaminated substances discharged from production plants, in countries in which the Group operates. Accordingly, the Group conducts business activities in compliance with such related laws and regulations.

However, in the case that these legal regulations are tightened or new ones are enacted in the future, the Group’s business activities can be restricted or costs for complying with these regulations can inevitably rise. It is possible that such events could affect the Group’s operating results, financial standing and other matters.

The Group is active in gathering information and sharing it internally in order to respond appropriately to changes to legal regulations and others.

Should the Group violate legal regulations, the Group has a system in place for responding to the market swiftly and without fail.

The Group possesses confidential and personal information necessary for its business. It is possible that cases of any leakage or loss of confidential information resulting from external cyber terrorism and computer virus infection, or infrastructure failure caused by natural disasters could affect the Group’s operating results, financial standing and other matters.

The Group has formulated information system security regulations that clarify appropriate handling methods for information system resources, and has implemented safety measures to protect information assets such as hardware, software, and data. Additionally, the Group provides information security education to its employees, thereby making their knowledge and mindset regarding information security take root.

The Group owns non-current assets such as property, plant and equipment. Therefore, in the case that the need for reporting an impairment loss of non-current assets arises in the wake of a drastic change to the management environment of businesses to which the assets or the asset groups belong, or aggravation in the revenue state, it is possible that such a case could affect the Group’s operating results, financial standing and other matters.

The Group judges whether or not there are signs of an impairment loss of non-current assets. In the case that the Group detects an asset or an asset group that has signs of impairment loss and the total of undiscounted future cash flows to be gained from the asset or the asset group is below its book value, the Group makes it a rule to decrease the book value to the recoverable amount and record an impairment loss appropriately.