Business and Other Risk Factors

 The main risks that have a possibility of affecting the Company Group’s operation results, share price, and financial situation, include but are not limited to, those stated below.
 Matters in the text that are related to the future are those that were judged by the Company Group as of the end of this consolidated fiscal year.

Financial situation

 Of the worldwide business revenue of the Company Group, demand for large-format inkjet printers and plotters, which account for an important portion, is influenced by the economic situation of the country or region in which the Company Group is selling products. In many cases, it cannot be said that for customers it is essential to purchase the Company Group’s products.
Accordingly, the economic recessions in the Company Group’s major markets, including Japan, North America, Europe, and Asia, and the resulting contraction of demand, have a possibility of negatively affecting the Company Group’s performance and financial situation.

Fluctuations of exchange rates

 The Company Group’s business includes production and sales of products throughout the world. The local currency items that include sales, expenses, and assets in each region are converted to Japanese yen for the purpose of creating consolidated financial statements. Even if the value of those items in the original local currency does not change due to the exchange rate at the time of conversion, there is a possibility that the value will be affected after conversion to yen. In general, a strong yen against other currencies (particularly a strong yen against the US dollar and the euro, which make up an important part of the Company Group’s sales) has a negative influence on the Company Group’s business, and a weak yen has a positive influence on the Company Group’s business.
 There is a possibility that increases in currency values in regions where the Company Group is conducting production will drive up the costs of manufacturing and procurement in those regions. Cost increases lower the Company Group’s profit ratio and price competitiveness, and there is a possibility that they will have a negative influence on performance. The Company Group is conducting currency hedge transactions and striving to minimize the negative influences of short-term fluctuations of exchange rates between major currencies, including the US dollar, the euro, and the yen, but because there are also cases in which it is not possible to infallibly conduct planned procurement, manufacturing, distribution, and sales activities due to medium and long-term currency fluctuations, there is a possibility that exchange rate fluctuations will have a negative effect on the Company Group’s performance and financial situation.

Price competition

 Competition in the large-format inkjet printer and plotter industry has become very intense. It is expected that the Company Group will face escalating competition in each of the product markets and regional markets to which it belongs. There are manufacturers and distributors at the competitors, and in some cases, they have more research, development, manufacturing, and sales resources than those of the Company Group. The Company Group believes that it is technologically superior to other companies and that it creates products with high quality and added value and is one of the world’s leading manufacturers, but that is not a guarantee that it will be able to validly compete in the future.

Potential risks for international activities and overseas expansion

 The Company Group’s sales activities are being conducted outside Japan as well, in markets such as Europe, North America, Central and South America, Asia, Oceania, and the Middle East. For business expansion into those foreign markets, there are several inherent risks such as those listed below.

(ⅰ)
Unexpected changes of laws or regulations
(ⅱ)
Disadvantageous government or economic factors
(ⅲ)
Difficulty of hiring and securing personnel
(ⅳ)
The possibility that inadequate technological infrastructure will have a negative influence on the Company Group's activities or on customers' support for the Company Group's products or services
(ⅴ)
Latent disadvantageous tax influence
(ⅵ)
Social turmoil caused by terrorism, war, and other factors

 Accordingly, there is a possibility that these events will have a negative influence on performance and the financial situation.

Limits on protection of intellectual property

 The Company Group has accumulated technology and know-how that makes it possible to differentiate it from other companies’ products, but due to legal restrictions in certain regions, it is either impossible to completely protect some of the Company Group’s unique technology and know-how under intellectual property rights, or it is only possible to protect them in a limited way. For that reason, it is possible that we cannot effectively prevent third parties from using the Company Group’s intellectual property and manufacturing similar products. In addition, there is a possibility that we cannot prevent other companies from developing similar or better technologies than those of the Company Group or copying or reverse engineering the Company Group’s patents or company secrets. Furthermore, there is a possibility that the Company Group’s future products or technologies will infringe other companies’ intellectual property in the future.

Product defects

 The Company Group manufactures different types of products in accordance with quality management criteria that are recognized throughout the world. However, this is not a guarantee that there are no defects in any products and that there will not be any recalls in the future. In addition, although we are covered by insurance for product liability, it is not a guarantee that the insurance can sufficiently cover the amount of compensation that will ultimately be borne. Further, it is not necessarily the case that the Company Group can continue to be covered under the conditions for which it is permitted to enroll in this kind of insurance.
 There is a possibility that a product defect that leads to a large-scale recall or product liability compensation will have a serious influence on substantial costs or the Company Group’s evaluation, thereby causing a decline in sales and having a negative influence on the Company Group’s performance and financial situation.

Official restrictions

 In each of the countries in which the Company Group is expanding, various government regulations apply, such as permission for business and investment, restrictions on exports in order to ensure national security and for other reasons, and other import and export regulations, such as Customs. Laws and regulations related to trade, antitrust, patents, consumers, taxation, exchange controls, the environment, and recycling are also applied. In the event that it is not possible to comply with these regulations, there is a possibility that the Company Group’s activities will be restricted. In addition, in the event that regulations cannot be complied with, there is a possibility that it will lead to an increase of costs. Accordingly, there is a possibility that these regulations will have a negative influence on the Company Group’s performance and financial situation.

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