Regional, Foreign Exchange and Regulatory Risks Associated with Overseas Expansion

「Against this backdrop, Thai Mitchi Corporation Ltd. in Thailand, Mitsuchi Corporation of America in the United States, 三之知通用零部件（蘇州）有限公司 in China, and Mitsuchi India Pvt.Ltd. in India currently manufacture and sell custom fasteners, respectively. Overseas sales accounted for 35.8% of consolidated net sales for the fiscal year.」

「In the automotive parts industry, one of the Group’s major customers’ industries, production volumes in North America remained solid, but price negotiations among parts manufacturers and procurement-related burdens continued due to tariff measures and higher component costs. In China, production volumes were trending upward, while Japanese manufacturers’ sales share continued to decline. Meanwhile, production volumes in Japan and Southeast Asia remained below the previous-year period, resulting in differing market conditions by region. Against this market backdrop, the Group’s order environment remained difficult.」

「Under these conditions, Thai Mitchi Corporation Ltd. manufactures and sells custom fasteners in Thailand, Mitsuchi Corporation of America does so in the US, and 三之知通用零部件（蘇州）有限公司 does so in China. Overseas sales accounted for 33.0% of consolidated sales during the fiscal year. In addition, Mitsuchi India Pvt.Ltd. was established in India in June 2025. Accordingly, the Group’s business performance may be affected by trends in the automotive and automotive parts industries in Asia and North America, fluctuations in foreign-exchange rates in overseas markets, economic conditions and other factors. In addition, unpredictable risks currently exist, including changes in laws and regulations, changes in political and economic conditions, difficulties in recruiting and securing personnel, changes in tax systems, and social disruption caused by terrorism, war and other factors.」

「In the automotive parts industry, one of the Group’s major customers’ industries, Japanese automakers’ sales share declined significantly, particularly in East Asia, while vehicle production in Japan, North America and Southeast Asia followed a downward trend year on year, leaving conditions difficult to predict.」

「In the automotive parts industry, one of the Group’s major customers’ industries, production adjustments due to semiconductor supply shortages were easing, but costs for steel materials and auxiliary materials continued to rise. In China, the impact of production cuts by Japanese customers due to rapid structural changes in the automotive market continued.」

「However, the outlook remained uncertain due to the prolonged conflict in Ukraine, heightened tensions in the Middle East, the slowdown in the Chinese economy and unstable exchange rates in anticipation of monetary adjustments in Japan and overseas.」

「During the six-month period ended [the second quarter], the global economy continued to recover, supported by solid employment and income conditions, although economic activity slowed, particularly in Europe and the US, due to efforts to contain inflation and the effects of monetary tightening. However, the outlook remained uncertain due to the prolonged conflict in Ukraine, geopolitical impacts including the situation in Gaza, the slowdown in the Chinese economy, and unstable exchange rates in anticipation of monetary adjustments in Japan and overseas.」

「During the three-month period ended [the first quarter], the global economy remained uncertain due to persistently high raw material and energy prices stemming from Russia’s invasion of Ukraine and unstable exchange rates associated with monetary tightening in various countries.」

「Accordingly, the Group’s business performance may be affected by trends in the automotive and automotive parts industries in Asia and North America, fluctuations in foreign-exchange rates in overseas markets, economic conditions and other factors. In addition, unpredictable risks currently exist, including changes in laws and regulations, changes in political and economic conditions, difficulties in recruiting and securing personnel, changes in tax systems, and social disruption caused by terrorism, war and other factors.」

「During the nine-month period ended [the third quarter], the Japanese economy showed signs of a moderate recovery. However, surging raw material and energy costs and inflation caused by the yen’s depreciation had a significant impact on corporate activity and personal consumption. Globally, the outlook remained uncertain amid concerns about a recession resulting from monetary tightening, particularly in the US and Europe, to contain inflation.」

「During the six-month period ended [the second quarter], economic activity recovered as restrictions associated with COVID-19 were gradually eased. However, the outlook remained uncertain due to the prolonged situation in Ukraine, inflation resulting from higher raw material prices, monetary tightening centered in the US and Europe to address inflation, and rapid fluctuations in the yen exchange rate.」

「During the three-month period ended [the first quarter], economic activity normalized as restrictions associated with COVID-19 were eased in most regions, and economic conditions showed signs of recovery. However, the outlook remained uncertain due to the prolonged situation in Ukraine, the global semiconductor shortage, rising prices resulting from higher crude oil and raw material prices, and the rapid depreciation of the yen.」

「During the nine-month period ended [the third quarter], the global economy initially recovered rapidly as COVID-19 vaccinations progressed, but the pace of recovery subsequently slowed due to renewed COVID-19 infections in Europe, the US and Southeast Asia, strict restrictions on activity under China’s zero-COVID policy ahead of the Beijing Olympics, and escalating tensions surrounding Ukraine. In Japan, the outlook also remained uncertain due to renewed COVID-19 infections and the impact of globally rising resource prices.」

「In the automotive parts industry, one of the Group’s major customer industries, global demand for new vehicles remained strong. However, semiconductor shortages at automakers had a significant impact, and customers continued to adjust production.」

「In the automotive parts industry, one of the Group’s major customer industries, global demand for new vehicles was recovering. However, production by automakers had not returned to pre-pandemic levels due in part to supply constraints, while the renewed spread of COVID-19 infections in Southeast Asia and semiconductor shortages had a significant impact, and customers continued to adjust production.」

「In the automotive parts industry, one of the Group’s major customer industries, demand for new vehicles, particularly in China, was recovering. However, the outlook remained difficult to assess as customers repeatedly adjusted production due in part to semiconductor supply shortages.」

「During the nine-month period ended [the third quarter], the global economy remained in difficult conditions due to stagnating economic activity caused by the global spread of COVID-19. Although the US and China showed signs of recovery as economic activity gradually resumed and economic stimulus measures took effect, uncertainty continued.」

「In overseas markets, the Chinese economy was moving toward recovery, while the US and European economies followed an unstable course, slowing again after beginning to recover due to the impact of a renewed spread of infections.」

「As a result, although domestic orders were gradually recovering, the substantial impact of suspended economic activity due to COVID-19 at overseas consolidated subsidiaries caused consolidated sales for the first quarter to decline significantly to ¥2,474 million, down 30.5% year on year.」

「Conditions remained extremely difficult as automakers in Japan and overseas suspended plant operations for a certain period due to the global spread of COVID-19.」

「In the automotive parts industry, one of the Group’s major customer industries, automakers temporarily halted production both in Japan and overseas due to the global spread of COVID-19, and conditions remained uncertain.」

「During the six-month period ended [the second quarter], the Japanese economy remained uncertain despite signs of recovery in domestic employment conditions, due to the prolonged trade friction between the US and China, geopolitical risks arising from tensions between the US and Iran, and the impact of the spread of COVID-19 infections on the Chinese economy.」

「The automotive parts industry, one of the Group’s major customer industries, remained solid in Japan due to an increase in vehicle sales. However, vehicle sales declined in the US and China, leaving the outlook uncertain.」

「During the fiscal year, the Japanese economy continued to recover moderately against a backdrop of solid corporate earnings and improving employment conditions. However, the outlook for the economy remains uncertain due to the impact of disruption surrounding the UK’s withdrawal from the EU, trade friction between the US and China, and slowing growth in Asian countries, particularly China.」

「During the nine-month period ended [the third quarter], the Japanese economy continued to recover moderately against a backdrop of solid corporate earnings and improving employment conditions. However, the outlook for the economy remains uncertain amid concerns that trade friction between the US and China, the impact of the UK’s withdrawal from the EU and slowing growth in Asian countries could cause the global economy to stagnate.」

「During the six-month period ended [the second quarter], the Japanese economy continued to recover moderately against a backdrop of solid corporate earnings and improving employment conditions. However, the outlook for the economy remains uncertain amid concerns that escalating trade friction between the US and China could cause the global economy to stagnate.」

「In terms of profit, operating profit was ¥19 million, down 24.5% year on year, due in part to higher steel material prices and increased manufacturing expenses resulting from higher tariffs.」

「The automotive parts industry, one of the Group’s major customer industries, remained solid in both Japan and overseas. However, tariffs on steel and aluminum products were substantially increased following the US imposition of import restrictions under Section 232 of the Trade Expansion Act, which is expected to have a significant impact on the outlook.」

「However, the outlook for the economy has become uncertain following the substantial increases in tariffs on steel and aluminum products resulting from the US imposition of import restrictions under Section 232 of the Trade Expansion Act.」

「During the six-month period ended [the second quarter], the Japanese economy expanded moderately, as exports increased on the relatively solid performance of the US and European economies and corporate capital investment increased, resulting in improvements in corporate earnings and employment conditions, despite rising geopolitical risks.」

「However, the outlook for the economy remains uncertain due to uncertainty surrounding political and economic conditions overseas and rising geopolitical risks.」

「In some emerging markets, including Thailand, both production and sales showed a declining trend due in part to the effects of the economic slowdown.」

「The decline in domestic production in Thailand due to the effects of the economic slowdown resulted in sales of ¥1,393 million, down 18.9% year on year. A decline in orders from customers resulted in sales of ¥298 million, down 29.6% year on year.」

「In some emerging markets, including Thailand and China, both production and sales showed a declining trend due in part to the effects of the economic slowdown. The decline in domestic production in Thailand due to the economic slowdown resulted in sales of ¥930 million, down 20.8% year on year. A decline in orders from customers resulted in sales of ¥194 million, down 28.0% year on year.」

「In some emerging markets, including Thailand and China, both production and sales showed a declining trend due in part to the effects of the economic slowdown.」

「Accordingly, the Group’s business performance may be affected by trends in the automotive and automotive parts industries in Asia and North America, fluctuations in foreign-exchange rates in overseas markets, economic conditions and other factors. In addition, unpredictable risks currently exist, including changes in laws and regulations, changes in political and economic conditions, difficulties in recruiting and securing personnel, changes in tax systems, and social disruption caused by terrorism, war and other factors.」