Statements made on this website with respect to risks related to Mabuchi Group’s operation and others are those of main items which are thought to have serious influence on investors’ decisions. Statements which are not necessarily related to risks but might affect investors’ decisions are also made on this website to show our active stance toward the information disclosure. Having taken note of these risks, Mabuchi Group will try not to be getting involved in such risks and mitigate the damages once such risks may be realized. Forward-looking statements on this website are based on management's assumptions and beliefs in light of the information as of the date of March 30, 2009 when we submitted our annual securities report.
Changes in Economic Conditions
The demand for Mabuchi products, which are incorporated into our customers' products, is influenced by the economic conditions present in the diverse markets in which our group operates. Consequently, our group's business results and financial position may be adversely affected by economic recessions and corresponding contractions in demand in Mabuchi's key markets, including Japan, North America, Europe and Asia.
Fluctuations in Foreign Exchange Rates
Items denominated in local currencies on the financial statements of our overseas subsidiaries are converted into Japanese yen to prepare the consolidated financial statements. Consequently, amounts that are to be recorded after being converted into Japanese yen are subject to the foreign exchange rates at the time of conversion. In particular, appreciation of the Japanese yen against the U.S. dollar has a negative effect on our group's consolidated business results, and conversely, any depreciation of the Japanese yen has a positive effect. Appreciation of local currencies in regions where the Mabuchi Group carries out production pushes up manufacturing and procurement costs, which are denominated in those local currencies. Such increased costs lower our group's profit margins and price competitiveness, and negatively affect our business results.
Development of New Products and New Technologies
The new product development and sales processes, by their very natures involve both complexities and uncertainties, and include a broad array of risks. In the event our group cannot fully predict changes in market needs, is unable to develop appealing new products in a timely fashion, or a technological innovation or the like emerges that causes our products to become obsolete could have a significant adverse effect on our group's business results and financial position.
Price Competition
Our customers are businesses in a diverse range of sectors that belong to the electrical/electronic equipment and machinery manufacturing industries, and price competition in these industries is extremely severe. In these environments, prices are a major contributing factor to competition in all sectors, and with the rise of rival Chinese manufacturers, competition is becoming even more intense. The inability of our cost-reduction activities to keep up with falling prices over the long term could have a significant adverse effect on our group's business results and financial position.
Potential Risks in International Economic Transactions and Expanding Business Overseas
The majority of our group's business activities are conducted in various countries in Europe, North America and Asia. These overseas business activities involve certain intrinsic risks, including changes in political and economic environments, inadequate infrastructures, changes in laws, tax affairs and various other systems, and social upheaval. For example, much of our group's production takes place in China and Vietnam. The occurrence of an unexpected event (such as a change in the political or legal environment, a change in economic conditions, or a change in the social environment, including the employment environment) may lead to significant problems for our production and/or sales activities, and these may have a significant adverse effect on our group's business results and financial position.
Product Quality
There is no guarantee that all of our group products will have no major quality issues. If a quality issue occurs, the amount of compensation may be influenced by the effect on the quality of the final product in which the Mabuchi product is incorporated. The unlikely event of a product defect that leads to a large-scale recall or product liability compensation may trigger an accrual of large amount of costs or downturn in sales due to a loss of credibility, and may have significant adverse effects on our group's business results and financial position.
Protection of Intellectual Property
We recognize that the acquisition of intellectual property can greatly influence the growth of the Mabuchi Group. However, in certain regions, for certain inherent reasons, our group's intellectual property rights may not be completely protected. In such instances, any third party may use our group's intellectual property without permission to manufacture similar products, and we may suffer damage as a result. In addition, our competitive superiority may suffer from outflows of other of our technologies or expertise, which was then exploited by other companies. Furthermore, the Mabuchi Group could face claims of infringing on the intellectual property of another company. The failure of protection by or the violation of intellectual property rights, or the outflow of intellectual property could have significant adverse effects on our group's business results and financial position.
Securing and Developing Human Resources
The Mabuchi Group operates in a highly competitive corporate arena. This situation renders essential the recruitment and development of employees who are highly skilled in related areas: engineers with specialist scientific and technological expertise, and managers with top business strategy acumen and executive capacities. Mabuchi is fully cognizant of the need for the continuous enhancement and improvement of its human resources for the next generation and beyond. The failure to recruit and cultivate such a workforce on an ongoing basis through the requisite expenditure and long-term human resource development vision would invite adverse impact on the Group's future performance and financial position.
Procurement of Raw Materials
Depending on the type of raw material that our group procures from external sources, we may be dependent on a limited number of suppliers. There is a possibility that the supply of a raw material may be suspended due to an accident befalling a supplier or for some other reason, or that a shortage of supply may transpire due to a sudden upsurge in demand. If such conditions continue over a long period of time and it is difficult to obtain alternative materials, our group's production activities could be affected dramatically, which in turn would undermine the assurance of delivery and quality of products to our customers. Also possible are sharp increases in the prices of such materials, which would trigger a rise in manufacturing costs. If such an event were to occur, our group's business results and financial position may be subject to significant adverse effects.
Natural Disasters and Accidents
The Mabuchi Group has established a specialized international system. We conduct business activities in various countries throughout the world, and at each of our bases we own facilities and equipment, including factories and offices. Our group has implemented measures to prevent our exposure to risks associated with the occurrence of disasters and accidents at these bases, and we have implemented measures to reduce damage from disasters and accidents, including insurance. However, there is no guarantee that such measures will completely protect us against, or can reduce as planned, the effects of disruptions to our business activities caused by disasters or accidents at our Head Office or individual bases. In the event these kinds of unforeseeable events occur, our group's business results and financial position may be subject to significant adverse effects.
