Our Group, which supplies products to the growth industries of automobiles and social infrastructure, is constantly vying with competition in the global market and technological development. It is also important for us to keep a close eye on supply-demand balances and price fluctuations caused by the properties of raw materials.
Identifying the various risks associated with our business and their degree of importance, we will continue to conduct sound and positive management from a medium- to long-term perspective.
The main risks faced in the Group’s business, details of the impact on the Group’s financial results and so on if those risks occur, and countermeasures are described below.
Lead is a key raw material used in lead-acid batteries, the Group’s main product, and lead price fluctuations cannot be reflected immediately in its product prices, thus possibly affecting the Group’s performance and financial position.
At any time in the next fiscal term
The Group will promote an overall optimization of its production system to further reduce costs, and also build an optimal supply system.
The Group is exposed to intense competition in respective markets of its businesses, and it has been difficult to set advantageous prices for the Group. On top of domestic rivals in the same business domain, the entry of foreign companies supplying lower-cost products has further intensified the competition, diminishing the Group’s prospect of expanding or even maintaining market share or of securing profitability in the future. If business profitability declines as a result, it may cause impairment of noncurrent assets and other risks, thus possibly affecting the Group’s performance and financial position.
At any time in the next fiscal term
The Group promotes measures to reduce all costs and strengthen sales capabilities.
The Group operates in Japan, Asia, North America, Europe, and other areas. Account items such as sales, expenses, and assets denominated in local currency of each site are converted into yen for compilation of consolidated financial statements. Even if the value of these items is unchanged in local currencies, the value after converted into yen may be affected by exchange rates at the time of conversion.
A possible appreciation of local currencies in the areas where the Group is engaged in production may push up the manufacturing and procurement costs there, and medium- to long-term currency fluctuations may impede the Group’s ability to procure, manufacture, distribute, and sell goods as planned. Exchange rate fluctuations may thus affect the Group’s performance and financial position.
At any time in the next fiscal term
The Group conducts currency-hedge transactions in an effort to minimize the adverse impact of short-term exchange rate fluctuations.
The Group is engaged in production and sales in Japan, Asia, North America, Europe, and other areas. These business activities overseas face the following potential risks, which may affect the Group’s performance and financial position.
(1) Unexpected changes in laws or regulations
(2) Difficulty in hiring and securing human resources
(3) Possibility of unestablished technological infrastructure affecting the Group’s manufacturing and other activities or undermining the reputation of its products among customers
(4) Social turmoil stemming from terrorism, wars, and other factors
At any time in the next fiscal term
The Group will build a system to provide products and services promptly in response to the needs in regions around the world, by strengthening the communication between the headquarters and each regional office.
The Group regards mergers and acquisitions (M&A) as an important and effective means for future business expansion. In carrying out M&A, the Company examines the transaction thoroughly from a broad range of perspectives such as the financial standing of the target company and potential synergy with the Group’s businesses. If the acquired business doesn’t perform as initially planned due to drastic changes in business environment or other factors, however, the Group may fail to recover its invested funds or incur goodwill impairment losses, possibly affecting its performance and financial position.
The Group needs to be considerably aware that the risk may occur
The Group monitors its performance on a monthly basis.
Recognizing climate-related issues as one of its important management issues, the Group declared its endorsement for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and has been working on the reduction of greenhouse gas emissions in its business operations. If events or unforeseen circumstances occur that would make it extremely difficult for the Group to adapt to environmental regulations, that could lead to more-than-expected increases in environmental costs, damage to facilities due to storms and floods, or other causes, and resultant restrictions of business operations, consequently affecting the Group’s performance and financial position.
It is difficult to fully predict the risks
The Group will seek to help reduce greenhouse gas emissions in the entire society through such measures as promotion of renewable energy
leveraging its storage battery technologies, and will further promote information disclosure in accordance with the TCFD recommendations.
If earthquakes, storms and floods, snowstorms, or other national disasters occur or if fires, explosions, destructions, or other accidents occur at the Group’s business sites, that entails risks of unforeseen circumstances arising.
At any time in the next fiscal term
The Group has been working on the creation of a guideline compiling measures against earthquakes, floods and snowstorms, and the enhancement of fire-prevention and disaster-prevention management.
The Group’s interest-bearing liabilities include those that may be affected by interest rate fluctuations. Therefore, an increase in interest rates may push up its funding costs.
There is a considerable possibility of the risk occurring at any time in the next fiscal term
In the Sixth Mid-Term Management Plan, the Group predicts that the interest-bearing liabilities will increase reflecting its efforts to boost growth investment, yet limits the debt redemption period to three years or less in an effort to achieve the balance between growth and financial discipline.
In carrying out its businesses, the Group faces risks of being sued by business partners or third parties or going through legal proceedings by regulatory authorities.
There is a considerable possibility of the risk occurring at any time in the next fiscal term
The Group seeks to minimize the risk by continuously monitoring the rights, patents, etc. held by other companies, and reinforcing internal sharing of information.
The demand for the Group’s products can be affected by the economic conditions of various markets where its products are sold. Therefore, the possible economic recession and resultant demand contractions in Japan, Asia, North America, Europe and other key markets of the Group may affect the Group’s performance and financial position.
There is a considerable possibility of the risk occurring at any time in the next fiscal term
The Group will seek to provide reassurance and confidence to customers through business operations based on its quality-conscious basic stance and to build a business platform toward enhancing corporate value and ensuring future sustainable growth under its corporate philosophy of “Innovation and Growth.”
The Group operates in Japan, Asia, North America, Europe, and other areas, and sales and profits/losses in the businesses there are greatly impacted by the market environment and economic trend of each country. The Group holds a consolidated subsidiary in the Republic of Türkiye, which struggles with serious inflation and the depreciation of the Turkish lira. If the currency further declines due to continued inflation and other factors, the Group may face substantial exchange rate losses depending on the balance of credits and debts and trading volume associated with overseas sales and procurement conducted in the country, thus possibly exerting a serious impact on the Group’s operating results, etc.
At any time in the next fiscal term
The Group will seek to reinforce information sharing between the headquarters and each regional office, and respond promptly and flexibly to risks associated with market environment fluctuations.
The Group operates in Japan, Asia, North America, Europe, and other areas, and its supply chain extends to the entire world. A disruption in the supply chain in each country or region could impede the Group’s ability to procure parts and materials and sell products, possibly affecting its performance and financial position.
At any time in the next fiscal term
The Group will seek to strengthen communication between the headquarters and each regional office, to promote an overall optimization of its production system, and to build an optimal supply system.
The Group possess important and confidential information such as technical, management, and marketing information in business operations. An information leakage due to improper handling of information devices or information leakage or tampering due to external cyberattacks may force the Group to suspend its business operations, thus possibly affecting its performance and financial position.
At any time in the next fiscal term
The Group has stepped up its efforts to prevent malware infection of endpoints and build a system for early detection and swift response to any such infection. The Group also prevents unauthorized access through continuous monitoring of communications and the use of an unauthorized connection detection system. It also offers educational programs to raise employee awareness for compliance with internal rules to improve their information security levels. The Group also conducts an inspection on security measures at Group companies overseas in light of Japanese standards and provides guidance to address any vulnerability.
The Group promotes initiatives aimed at improving the quality of products and services to be provided by the entire Group to its customers based on its basic quality policy. However, in case any defect is found in the Group’s product or service, the Group may have to bear the liability for the damages caused by the defect or pay substantial costs to deal with the defect.
At any time in the next fiscal term
To improve the quality of its products and services, the Group has formulated the “GS Yuasa Quality Management System” based on the ISO 9001 standard under which it promotes a crosssectional quality management system spearheaded by top management.
The Group aims to start operating production lines for mass production of lithium-ion batteries for BEVs in fiscal 2027. However, the Group is still in the development phase of such batteries and has not started production yet. It has yet to be made clear if the Group can begin production in the target year and the overall trend and competition in the BEV market could also influence the situation, thus possibly affecting its financial position and operating results, etc.
At any time in the next fiscal term
The Group promotes the development of batteries for BEVs as a measure for business structure reforms in the “Sixth Mid-Term Management Plan” formulated in April 2023, and Honda GS Yuasa EV Battery R&D Co., Ltd., which was established to engage in the research and development of high-capacity, high-output lithium-ion batteries, started its business in August 2023. Leveraging the knowledge, it has accumulated in lithium-ion batteries for HEVs, PHEVs, and EVs, the Group will promote the development of highly competitive lithium-ion batteries for BEVs as a new pillar of its growth strategy. The Group will also seek to build a production plant for BEV batteries through its joint investment with Honda Motor Co., Ltd. and the utilization of government subsidies, aiming to begin the operation of production lines at an early stage and expand its production capacity.