Legal and Regulatory, Political, Social, Labor and Foreign Exchange Risks in Overseas Operations

「However, business could be disrupted by differences from Japan in language, legal and tax systems, as well as political, social and economic security risks, potentially affecting the Group's operating results and financial position.」

「The North American business remained in difficult conditions, including the partial withdrawal from the cryogenic equipment business following a sharp decline in hydrogen-related demand stemming from U.S. policy.」

「The company is establishing a group-wide risk management system while drawing on the expertise and knowledge gained through overseas M&A, including strengthening its system for screening business partners and end users through the introduction of KYC, a compliance tool.」

「The high-output UPS (uninterruptible power supply) business performed well, as the company won a new project for a large data center in Southeast Asia, where the market is growing against a backdrop of expanding generative AI use, in addition to the resolution of construction delays and other issues in Asia and Europe.」

「For overseas subsidiaries, the company is establishing a risk management system in cooperation with the business units and Engineering Center responsible for managing each subsidiary.」

「In the North American industrial gases business, orders for cryogenic containers and gas supply equipment remained firm amid growing demand for hydrogen energy and decarbonization-related products, but production stagnated because of delays in procuring components, resulting in difficult conditions. The high-output UPS (uninterruptible power supply) business was recovering in Southeast Asia as the impact of COVID-19 eased, but in Europe it was affected by customers postponing investment plans and other factors.」

「In the industrial gas-related equipment field of the overseas engineering business, conditions remained favorable as demand for equipment driven by decarbonization, including liquefied hydrogen tanks, expanded and orders for carbon dioxide-related equipment also increased. By contrast, the high-output UPS field faced difficult conditions and underperformed the same period of the previous year, as ongoing construction was delayed because restrictions on movement and economic activity, particularly in Singapore and neighboring countries, lasted longer than expected, while delays in starting new projects continued, mainly in Asia.」

「In the high-output UPS market, projects in Europe and the United States were on a recovery trend as economic activity normalized. However, the continuing impact of lockdowns and travel restrictions in Southeast Asia resulted in construction delays and other effects.」

「In the industrial gas-related equipment field of the overseas engineering business, performance remained solid in North America, its main market, as the company addressed demand for decarbonization-related equipment, including liquid hydrogen tanks for station applications. By contrast, the high-output UPS business fell substantially below the previous fiscal year due to lockdowns and movement restrictions in Europe, Singapore and other key locations, which led to the postponement of maintenance work and capital investment plans.」

「In the overseas engineering business, sales of liquefied hydrogen tanks for station applications and carbon dioxide-related equipment for water treatment remained firm in the industrial gas-related equipment field, despite continued restraints on customer investment in the United States, the main market. By contrast, the high-output UPS (uninterruptible power supply) business fell below the prior-year period, mainly in Singapore, due to delays in the construction of data centers under construction amid tighter restrictions on economic activity.」

「In addition, in June 2019 the company established the Global Strategy Office and Global Coordination Office, and is building a group-wide risk management structure while drawing on the expertise and knowledge gained through its overseas M&A activities to date.」

「The Group operates in China, Taiwan, Southeast Asia, India, North America and other regions. In particular, its business activities in China and Southeast Asia face the following risks: ① unexpected changes in laws, regulations and tax systems that have adverse effects; ② adverse effects on the Group's activities due to inadequate social infrastructure; ③ the emergence of adverse political factors; ④ social disruption caused by terrorism, war, infectious diseases and other events; ⑤ unexpected rapid changes in labor conditions; and ⑥ foreign-exchange fluctuations beyond expectations.」