The following risks may affect the Group’s future operating results, stock prices, financial circumstances and other matters.
Note: Matters reported herein regarding the future were determined by the Group as of the securities report submission date.
The Group manufactures and sells aluminum electrolytic capacitors, film capacitors, circuit products and other products worldwide. Consequently, demand for the Group’s products may, as a result of the economic situation of the countries or regions where the products are sold, directly affect our business operations, business results, and financial status.
In response, we at the NICHICON Group are closely monitoring changes in the global economic situation, at our monthly Management Meetings and our semiannual Global Business Plan Promotion Meetings, and are taking measures to allow us to respond to the situation, such as planning flexible sales strategies and production systems.
With regard to projections of the economic environment for the fiscal year ending March 31, 2023, factors such as the spread of the novel coronavirus and sharp rises in raw material prices and supply chain disruption concerns amid heightened geopolitical risk have caused a severe lack of transparency and clarity that is still ongoing. We will continue to monitor trends and take a variety of countermeasures to guarantee our business performance.
（2）Risk of exchange rate fluctuations
In the Group’s business operations, operating results and financial condition, items denominated in foreign currencies have been converted into yen in order to prepare the consolidated financial statements. The values of these items after the conversion to yen may be affected by exchange rate fluctuations Although the Group enters into forward exchange contracts when necessary to reduce/hedge exchange risks, there is no guarantee that effects on the Group’s operating results and financial circumstances can be completely eliminated.
（3）Risk of price competition
The Group aims to strengthen its core businesses, comprising aluminum electrolytic capacitors, film capacitors and circuit products, and create a global business framework by strengthening our production bases and expanding sales structures in Japan and overseas by expediting the development of new products. These efforts notwithstanding, as the Group’s products and services face price competition from other businesses, the Group’s business operations, operating results and financial circumstances may be adversely affected.
The NICHICON Group will also strive, in its various business fields, to attain customer satisfaction by promoting proposal-based sales while strengthening our cost power and paying attention to proper sale price management, in addition to continuously planning and developing new products that enhance our competitive advantage.
（4）Development risk of new products
The Group believes that it will continue to be able to develop and supply new and attractive products that anticipate customer needs. However, if the Group lacks the following abilities, its business operations, operating results and financial situation may be adversely affected.
- 1) Ability to deal with increasingly diverse and sophisticated customer needs
- 2) Ability to develop and produce new products on a timely basis at a reasonable cost
- 3) Ability to induce customers to use the Group’s new products
- 4) Ability to use and develop new products, services and technologies
- 5) Ability to improve existing products, services and technologies
- 6) Ability to effectively predict changes in the industry and market
Amidst the technological revolution in all fields continuing on a global scale, technology that can quickly solve the problems facing customers and society is growing ever more important. In order to respond to these challenges, the NICHICON Group has established research and development bases in both Japan and China, and we are building a consistent research and development system from material development on, for each of our product fields. Through close cooperation between the research and development departments and the production departments, we are achieving an ever speedier practicalization and productization of our latest technologies. Furthermore, in order to successfully respond to a severely change-prone market environment, we are proactively networking with universities, research facilities, and companies that are skilled in the required technological fields, and, through the “open innovation” that accelerates research and development activities and a comprehensive industry-academia collaborative research agreement with the Institute of Industrial Science of the University of Tokyo, we are putting effort into the raising of human resources that will be responsible for the future of technological management.
（5）Potential risk of overseas presence
Factors in countries and regions where the Group conducts business activities that may have harmful effects on the Group’s businesses, operating results or financial circumstances include: significant changes in laws and regulations; changes in the taxation system or tax rate; other economic, social, and political fluctuations; shifts in foreign exchange policy; and export/import regulatory changes.
The Group has manufacturing bases in China for aluminum electrolytic capacitors and other products in Wuxi and Suqian. Unforeseen developments in the political climate, legal environment or economic situation could negatively impact business in China, adversely affecting the Group’s business operations, operating results and financial circumstances. We at the NICHICON Group are, as explained in “(1) Economic Situation,” closely monitoring changes in global politics and the global economic situation, and are taking measures to allow us to respond to the situation.
（6）Escalation of raw materials purchase price
Purchase prices of raw materials used for the Group’s main products are significantly affected by international market conditions. Escalation of those prices may adversely affect the Group’s operating results and financial circumstances.
In order to respond flexibly to shifts in the market for raw materials, the Group is promoting the consideration of substitute materials and multiple purchases, and for the increased procurement costs that cannot be absorbed, we are striving to appropriately reflect the market price in the product selling price.
Although the Group imposes rigorous quality control measures and manufactures its products according to the highest international quality control standards, the possibility of defective products and services provided by the Group remain. In addition, although covered by product liability insurance, the Group cannot guarantee that claimable amounts will be fully recompensed.
Losses resulting from any defect may adversely affect the Group’s business operations, operating results, and financial circumstances due to the large costs involved as well as damage to the reputation of the Group.
The NICHICON Group has, at all of our manufacturing facilities, implemented a production management system whereby it can be reliably checked when, where, and what product was built under what circumstances. This is intended to thoroughly manage quality by means of a system and to achieve stable manufacturing by the elimination of defects. By establishing this effort towards “zero defects” as a business plan in each of our production worksites, and going through the initial acquisition and renewal examination for ISO 9001 and IATF 16949, which are international standards for quality assurance systems, we are always on the cutting edge when it comes to establishing the latest quality management standards and operating systems.
（8）Effect of environmental regulations, etc.
The business activities of the Group are subject to various environmental laws and regulations, and environmental responsibility is assumed for past, current, and future production activities. If environmental regulations are tightened in the future and additional obligations to remove hazardous and other substances are imposed, the costs of meeting such requirements may adversely affect the Group’s business operations, operating results and financial circumstances.
In order to promote environmental protection activities at all of our Group companies, with the aim of coexistence with the earth, the NICHICON Group’s CSR Charter was established in December 1997 (revised in August 2015) with maximum priority placed on the efficient use of resources and the prevention of environmental pollution, and we have been promoting efforts toward the protection of the environment. Currently, we have obtained ISO 14001 (environmental management system standard) certification at 13 of our manufacturing facilities in Japan and abroad, and all of our Group companies are striving to provide technologies and products that are mindful of the environment.
（9）Effect of accidents, etc.
Although the Group regularly inspects and checks all production facilities in order to prevent accidents, it is not guaranteed that the adverse effects of natural disasters, accidents, changes of circumstances, etc., can be completely prevented or alleviated. They may adversely affect the Group’s business operations, operating results, and financial circumstances.
The NICHICON Group is preparing for the occurrence of disasters, etc., and in addition to putting in place a system to ensure the protection of lives and to facilitate safety confirmation, we have been making efforts to reexamine and add to our business continuity plan (BCP) and business continuity management (BCM), as well as a system aiming for early recovery in the event that we have had to halt our key operations, in addition to considering exactly how to proceed in the event that our key operations do not need to be halted.
As a response to government orders to restrict movement as a result of the spread of the novel coronavirus in places like China and Malaysia, where we have manufacturing bases, we have utilized a BCP measure (parallel production) that we have implemented before, and transferred, as appropriate, from Chinese factories to Japanese or Malaysian ones, or from Malaysian factories to Chinese or Japanese ones, and have been implementing risk mitigation measures for product delivery to customers and limiting factory operation. We will continue, going forward, to promote countermeasures appropriate to the changes in circumstances.
The risk factors listed above do not cover all the risks regarding the business activities and other matters concerning the Group. Other risks, such as legal risks relating to intellectual property rights, information security risks relating to information leakage, customer credit risks, and risks relating to the training and securing of human resources, may develop, and may adversely affect the Group’s business operations, operating results, and financial circumstances.
In response to these various risks, the Group has been striving to have all directors and employees thoroughly follow the “NICHICON Group Code of Conduct” (established in October 2002; revised in April 2013), and to inculcate a corporate culture and to promote education and enlightenment activities that encourage work in accordance with not only laws, ordinances, and company regulations, but also sound social and ethical norms. Furthermore, as a system to ensure these measures, we established the Sustainability Promotion Committee in April 2022. Formerly named the CSR Promotion Committee, it has strengthened functions and is chaired by the president & COO.