Business Risks
Risks with the potential to significantly influence investment decisions are presented below. Forward-looking statements included in this section are the conclusions of the AIDA ENGINEERING Group as of the date of submission of the securities filing.
1. International Activities and Overseas Operations
The AIDA ENGINEERING Group conducts manufacturing and sales activities in various regions throughout the world, including Japan, the Americas, Europe, and Asia. These overseas business operations involve inherent risk factors, including
- 1. Unanticipated changes in policies, laws and regulations.
- 2. Substantial and abrupt changes in foreign exchange rates.
- 3. Terrorism, epidemics, war and other causes of social upheaval.
The situation in local areas may have a material impact on the operating results and financial position of the Group.
2. Product Quality Assurance
The AIDA ENGINEERING Group manufactures a range of products in factories located in countries around the world, in accordance with internal quality control standards that comply with the laws and regulations of those countries. However, there is no guarantee that all products will be completely free of defects, or will not be subject to a future recall. Further, although the Company has product liability insurance, there is no guarantee that this insurance will be sufficient to cover the entire final amount of damages incurred. It is also not certain that the Group will be able to continue to obtain product liability insurance under acceptable terms. Should the Company's products be found to have defects that lead to a large-scale recall or a product liability claim, this could lead to substantial expense, or negatively affect the reputation of the Group. This may result in decreased sales, and may have a material impact on the operating results and financial position of the Group.
3. Fluctuations in the Purchase Price of Raw Materials
The AIDA ENGINEERING Group's products are made primarily of steel. Drastic fluctuations in the price of raw materials may have a material impact on the operating results and financial position of the Group.
4. Heavy Dependence on a Particular Industry (Automotive Industry)
The AIDA ENGINEERING Group derives two-thirds of its product sales from the automotive industry. Trends in the business conditions and capital expenditures of the automotive industry may have a material impact on the business, operating results and financial position of the Group.
5. Effects of Competition
The forming machinery that comprises the main products of the AIDA ENGINEERING Group is subject to competition in global markets from other companies in terms of quality, price, delivery terms and service. Should competition for sales intensify as a result of excessive supply or sharp decline in demand in the industry, this may have a material impact on the operating results and financial position of the Group.
6. Retirement Benefit Obligations and Expenses
The AIDA ENGINEERING Group calculates employee retirement benefit obligations and expenses based on assumptions determined through computation of discount rates and other numerical factors. Should actual results vary from these assumptions, or should there be a change in the assumptions, the effects will be amortized over future accounting periods, and the expenses recognized and obligations recorded in future accounting periods. This may have a material impact on the operating results and financial position of the Group.
7. Effects of Earthquakes and Other Natural Disasters
AIDA ENGINEERING's main factory is located in the northwest region of Kanagawa Prefecture, in the southern area of the Kanto Plain, where a major earthquake is predicted to occur at some point in the future. Should a major earthquake or other natural disaster occur in this area, this may have a material impact on the operating results and financial position of the Group.
