Business & Other Risks
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 the Mabuchi Group sells. Consequently, the Group's business results and financial position may be adversely affected by economic recessions and the corresponding contraction in demand in its 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 when the consolidated financial statements are prepared. Consequently, amounts which 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 will have a negative effect on the Mabuchi Group's consolidated business results, and conversely any depreciation of the Japanese yen will have a positive effect.
Appreciation of local currencies in regions where the Group carries out production will push up manufacturing and procurement costs which are denominated in those local currencies. Increased costs will lower Group's profit margins and price competitiveness, and will impact negatively on its business results.
Development of New Products and New Technologies
The development and sale of new products, by their very nature, involve both complexities and uncertainties, and include a broad array of risks.
In the event the Mabuchi Group cannot fully predict the changing needs of the market, or cannot develop appealing new products in a timely fashion, or in the event a technological innovation emerges which causes its products to become obsolete, then the Group's business results and financial position may be subject to significant adverse effects.
Our customers are businesses in a diverse range of sectors that belong to the electrical and electronic equipment and machinery manufacturing industries, and price competition in these industries is extremely severe. In these kinds of environments, prices are a major contributing factor to competition in all sectors, and with the prominence of rival Chinese manufacturers, competition is becoming even more intense.
If our cost-reduction activities cannot keep up with falling prices over the long-term, then the Mabuchi Group's business results and financial position may be subject to significant adverse effects.
Potential Risks in International Economic Transactions and in Expanding Business Overseas
The majority of the Mabuchi Group's business activities are conducted in the various countries in Europe, North America and Asia.
Within these overseas business activities there are certain inherent risks, including changes in political and economic environments, undeveloped infrastructures, changes in laws, tax affairs or various other systems, or social unrest.
For example, much of the Group's production activity is conducted in China and Vietnam. The occurrence of an unexpected event (such as changes in the political or legal environment, changes in economic conditions, problems related to the employment environment, or other changes to the social environment) may lead to significant problems for our production and/or sales activities, and these may lead to the Group's business results and financial position being subject to significant adverse effects.
There is no guarantee that all Mabuchi 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 product complaint, 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 the 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, the Group's intellectual property rights may not be completely protected. In such instances, the Group's intellectual property may be used without authority by third parties, and through the manufacture of similar products, we may suffer damages. Or we may lose our competitive advantage through the outflow of other technology or expertise, and then having it exploited by other companies. Or even still, there is a possibility that it could be claimed that the Group has impinged on the intellectual property of another company.
The failure of protection or the violation of intellectual property rights, or the outflow of other intellectual property may lead to the Group's business results and financial position being subject to significant adverse effects.
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. The Group is fully cognizant of the need for the continuous enhancement and improvement of its human resources for the next generation and beyond. Meanwhile, the Group should put in a great deal to recruit and develop such a workforce.
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 the Mabuchi Group procures from external sources, we may be dependent on a limited number of suppliers. There is a possibility that supply of the raw material is suspended due to an accident befalling the supplier or for some other reason, or that a shortage of supply transpires due to a sudden upsurge in demand. If such conditions were to continue long-term and alternative materials were not easily available, then there is a possibility that the Group's production activities would be affected dramatically, and in turn this would undermine the assurance of delivery and quality of products to its customers. It is also possible, that the prices of such materials would escalate, which would trigger a rise in manufacturing costs.
If such an event were to occur, then the Group's business results and financial position may be subject to significant adverse effects.
Natural Disasters and Accidents
The Mabuchi Group has established a system of international division of labor. We conduct business activities in countries throughout the world, and we own facilities and equipment at our various bases, including plants and offices. The Group has implemented measures to prevent its exposure to risks associated with the occurrence of disasters and accidents at these centers, and it has implemented measures to reduce damages, including by insuring. However, there is no guarantee that completely protects us against, or which 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 occurred, the Group's business results and financial position may be subject to significant adverse effects.
About Environmental Measures
The Group strives to prevent environmental damage by complying with various environmental laws and regulations, and by preventing harmful substances from leaking out and properly disposing of waste. However, if the situation becomes severe and further environmental measures are required, the business, performance, and financial position of the Group could be significantly affected.