Business Risks

Of the matters related to our Group’s business, consolidated financial statements and non-consolidated financial statements, etc., the following matters may have a significant impact on investors’ decisions.

Highly dependent sales destination

Honda Motor Co., Ltd., holds 20% or more of the outstanding shares of our Company, and the company is one of other affiliated companies of our Company.
Our Group mainly manufactures automotive body frames, and sells them to multiple automobile manufacturers, etc., where the biggest sales destination is the Honda Group (Honda Motor Co., Ltd., the company’s consolidated subsidiaries and the equity method affiliates). Since sales performance for the group in the consolidated revenue for the previous FY accounts for approximately 90%, if the volume of orders received from the group decreases in the future, the financial position and business results, etc., of our Group may be affected through a decrease in revenue.

Development of new technologies

The automobile industry is undergoing a period of innovative changes, including electrification and expansion of CASE and MaaS, and customer demands for technological development are diversifying. Under such circumstances, if the market and customers accept products using new materials or new manufacturing technologies that replace our Group’s existing products and manufacturing methods, the financial position and business results , etc., of our Group may be affected by a decline in market share.

Product quality

Our Group has established a quality assurance system based on international quality control standards, and strives to maintain and improve the quality of products. However, if our Group’s products have critical defects and we are held liable for serious accidents, complaints, recalls, etc., the financial position and business results, etc., of our Group may be affected by a decline in the volume of orders received due to considerable costs incurred for countermeasures and/or a deterioration in valuation of our Group.

Financial accounting estimates

The financial position and business results of our Group may be affected by financial accounting valuations of assets and liabilities, including the following financial accounting factors, changes in accounting standards, and new applications.

1．Tangible fixed assets and intangible assets

If the book values of tangible fixed assets and intangible assets used for business cannot be expected to recover due to changes in the business environment, etc., the financial position and business results of our Group may be affected by recording impairment losses on the target assets.

2．Retirement benefit accounting

Liabilities relating to retirement benefits fluctuate depending on trends in retirement benefit obligations and pension assets, and if actuarial assumptions fluctuate or pension assets decrease due to deterioration in the operating environment, etc., the financial position and business results, etc., of our Group may be affected.

3．Deferred tax assets

Deferred tax assets are recorded by evaluating the recoverability of future deductible temporary differences etc., based on expectations regarding future taxable income, but if it is determined that they cannot be recovered due to deterioration in business conditions or in the event of tax system reforms, including changes in tax rates, the financial position and business results of our Group may be affected due to a reduction in the amount of deferred tax assets.