Business and Other Risks

Among the matters concerning the situation of the business described in the financial statements and situation of accounting, the matters with the possibility to cause the important effect for the investor’s judgment are as follows.

(1) Risks Related to Dependence on Specific Business Partners

To improve the efficiency of its sales activities, the Advanex Group has undertaken a policy to raise its sales weighting to strategic customers. As a result, the earnings of major customers, their outsourcing strategies, and other factors beyond the Advanex Group’s control could have a negative impact on the Group’s earnings and financial condition.

(2) Risks Related to International Activities and Overseas Expansion

The Advanex Group holds production and sales activity in the United States, Europe, and Asia. Unanticipated changes in law or restriction, terrorism, battle action, or occurrence of epidemic in those countries might cause adverse effect to our group achievement and financial position.

(3) Risks Related to Fluctuation in Foreign Exchange Rates

In line with the Advanex Group’s international activities and overseas expansion, the Group is exposed to the following currency risks, and a substantial fluctuation in foreign exchange rates could have a negative impact on the Group’s earnings and financial condition.

  1. Increase and decrease in local currency conversion for net sales and purchase at foreign currency in exporting and importing.
  2. Loss and gain of credit and debt at foreign currency under the market value.
  3. Increase and decrease of yen currency conversion amount of foreign currency at consolidated financial statements.

(4) Risk of Natural Disasters

The main production site of the Advanex Group is Kashiwazaki Prefecture, Shimotsuke City in Tochigi Prefecture in Japan. There is a possibility that the production capacity of precision spring and precision assembly parts of our group decreases remarkably and the distribution may cause a delay when large-scale disasters occur in these regions.

(5) Risks Related to Fluctuations in Raw Material Prices

There is a possibility of leading to an increase in the cost of manufacturing of the Advanex Group and the deterioration of the profit, if it is difficult to reflect material cost increase to the sales price under the environment of fierce price competition with the competitors when the price of metal and plastic material such as stainless and copper is increased by the increase of demand for a resource such as iron and oil or political change of those producing countries.

(6) Risks Related to Post-Employment Benefit Obligations

Advanex moved to defined contribution pension system from approved retirement annuity system as of November 1, 2011. Post-employment benefit obligations for employees and provisions for post-employment benefit obligations are calculated based on basic rates and prerequisite condition in actuarial calculations, which include discount rates and the expected return on pension assets. These calculations also reflect past performance in the management of pension assets. Deterioration in discount rates or performance in pension assets management could have a negative impact on the Group’s earnings and financial condition.