Business Risks

The following are risks that may have a significant impact on the Group’s financial condition and business performance. These do not cover all the risks faced by the Group, and unforeseen risks beyond those listed may exist. If such risks materialize, they could affect the Group’s performance and financial condition. The forward-looking statements in this document reflect judgments made by the Group as of the end of the current consolidated fiscal year.

(1) Social Conditions, etc.

The Group operates globally, and changes in political, economic, and social conditions or policies in various regions, including domestic and international, such as conflicts, terrorism, social unrest, investment regulations, repatriation restrictions on earnings, import and export regulations, foreign exchange regulations, and tax systems, could impact the Group's performance. In particular, economic conditions in major markets such as Japan, the United States, and Europe can have a significant impact on our business. While it is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, we will continue to monitor them closely to respond promptly if they do.

(2) Market Environment

The green maintenance markets in Japan and various overseas countries, which are the Group’s main markets, as well as industries related to agriculture, forestry, construction, civil engineering, and steel, could be significantly impacted by changes in agricultural policies, public investment, industry structures, private equipment investment trends, and other supply-demand dynamics, and it is possible the Group’s performance will be affected. While it is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, we will continue to monitor them closely to respond promptly if they do.

(3) Competition with Other Companies

Competition with other companies is intensifying in the Group's various business areas, particularly regarding new product development, price reductions, and enhancements in after-sales service. If the Group falls behind in terms of quality or trading conditions compared to competitors, it could impact our performance. It is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, but the Group continuously develops high-value-added new products in each of its business areas in response to customer needs. Regarding price competition, we aim to achieve customer satisfaction without lowering prices by supplying high-value-added products.

(4) Fluctuations in Exchange Rates and Financial Markets

Since more than half of the Group's sales are in foreign currencies, mainly US dollars, fluctuations in foreign exchange rates and increases in interest expenses due to rising interest rates could impact the Group's performance. Typically, a stronger yen against other currencies negatively affects our performance, while a weaker yen has a positive effect. In addition, fluctuations in foreign exchange rates can impact the relative prices of products sold by the Group and foreign companies in the same market, as well as the costs of materials used in product manufacturing. To mitigate this, the Group strives to reduce risk by establishing global production bases. We also hedge transactions to minimize the impact of short-term exchange rate fluctuations, but unexpected changes in exchange rates could affect our performance.

(5) Procurement of Raw Materials and Parts

The Group strives to ensure a stable supply of raw materials and parts, but significant increases in raw material prices could suppress profits and affect our performance. In addition, if the supply of raw materials becomes unstable, it may lead to difficulties in production and loss of sales opportunities, impacting our performance. While it is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, the Group has established an environment that enables the stable procurement of raw materials by not only achieving volume discounts through the standardization of parts, etc., but also by closely monitoring the financial status and other aspects of the supply capabilities of our suppliers.

(6) Matters Related to Safety, Environmental Regulations, and Climate Change, etc., in Each Country

The Group’s main products, such as small gasoline engines, are subject to gas emissions regulations. Tightened or new safety and environmental regulations worldwide on products manufactured and sold by the Group, as well as increased efforts to reduce greenhouse gases, which are believed to be a factor in climate change, could lead to increased development costs and capital investments to comply with these regulations. Failure to comply could also result in an inability to sell products in certain markets, impacting our performance. However, generally, new or revised regulations are announced in advance, and even when the regulations are put into place, transitional measures are often implemented, allowing us to adequately respond even to the materialization of such risks. The Group monitors trends in each country around the world and engages in forward-looking and planned research and development of environmental technologies, with the aim of complying with those regulations, etc., as quickly as possible. In addition, we are also building a responsive business structure by promoting activities aligned with TCFD recommendations.

(7) Product Liability

Although the Group prioritizes safety and reliability in product development and manufacturing, defects or unforeseeable events during product use could harm our brand value and reduce sales, impacting our performance. It is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, but the Group always fosters a safety-first organizational culture, enhances product inspection systems, and includes warning labels to prevent incorrect use. We have established a system to respond quickly to the market in the event of a problem. In addition, we have also enrolled in product liability insurance as a precaution.

(8) Compliance

The Group has established a cross-functional compliance system, including the creation of a Compliance & Risk Management Committee and the formulation of the Yamabiko Compliance Program to enhance our legal compliance framework. However, if compliance issues arise related to violations of laws or social ethics, such as regulatory actions, lawsuits, or loss of social trust, these could significantly impact the Group's performance.

(9) Acquiring Human Resources

Acquiring talented individuals is crucial for the Group's ongoing growth. If significant worsening of the recruitment environment or increased human resource attrition continues, it could hinder our ability to acquire human resources as planned, affecting our future growth and potentially impacting our performance in the medium to long term. In Japan, declining birth rates are expected to make it increasingly difficult to secure human resources. Therefore, the Group is strengthening not only new graduate recruitment but also mid-career hiring for specialized roles. We are also developing mechanisms to accommodate diverse working styles, such as the "Job Return System" for rehiring employees who left for reasons such as marriage, child-rearing, or caregiving. Moreover, we are revising our human resources system to focus on roles and performance to invigorate people and organizations.

(10) Weather, Natural Disasters, and Infectious Diseases, etc.

Severe weather events such as cold damage, typhoons, and floods can lead to significant damage to domestic crops, reducing farmers' purchasing power due to a decrease in income. Similarly, droughts and other extreme weather conditions affecting plant growth in Japan and overseas could decrease the demand for our main products, such as trimmers and brushcutters, thereby affecting the Group's performance.
Further, if the Group's production facilities suffer direct damage due to natural disasters or outbreaks of infectious diseases, or if transportation networks, information networks, power supplies, or supply chain production, etc., are disrupted for an extended period, even without direct damage to the Group, the Group's production activities, etc., may be hindered, potentially affecting the Group's performance. While it is difficult to make a reasonable assessment of the likelihood and timing of these risks materializing, the Group regularly conducts equipment inspections and evacuation drills to minimize direct damage from disasters. In addition, we are also developing a Business Continuity Plan (BCP) to ensure that critical operations can continue during disasters or outbreaks.

(11) Information Security and Intellectual Property, etc.

The Group handles customer information, personal data, and confidential business and technical information in its business activities. We take the utmost care in handling and maintaining the confidentiality of all such information, and have established a management system and implemented reasonable technical measures to protect against unauthorized access, tampering, destruction, leakage, and loss of this information, and have otherwise formulated appropriate safety measures. Despite these efforts, if information leakage or similar incidents occur due to increasingly sophisticated and advanced cyber-attacks in recent years, it could impact the Group's performance.
In addition, if there are infringements or legal actions related to intellectual property rights due to misuse or other issues by third parties, it may lead to legal liabilities, compensation obligations, payment obligations due to lawsuits, etc., and other damage to our brand value, affecting the Group's performance. We are committed to building robust confidentiality protection systems and regularly conducting information security training for employees to prevent such risks.