The Kumiai Chemical Industry Group (the Company and its consolidated subsidiaries) strives to mitigate risks by, among other actions, avoiding a variety of foreseeable risks that could arise in the course of business operations and through measures to disperse risks. These efforts notwithstanding, the following are risks that could have a material impact on the decisions of investors regarding the Group. These risks were those deemed plausible by the Group as of the end of the current fiscal year. However, readers should bear in mind that actual risks, should they arise, could surpass the level or degree forecast by the Group. Furthermore, while the following represents key risks, the risks stated are not neither exhaustive nor all-inclusive of the variety of risks faced by the Group.
(1) Risks related to development of new products
The commercialization of agricultural chemicals, the mainstay products of the Group, requires human resources and other costly R&D expenditures, as well as a battery of testing and research over long periods of time. Testing results for products under development could, depending on the outcome, also lead to the unavoidable termination of development efforts. Furthermore, changes in the market environment, the progression of technological standards, the development status of competing products, and other factors during development could potentially affect development success.
(2) Risk related to intellectual property
Intellectual property rights pertaining to the Group’s mainstay products, agricultural chemicals, are not fully protected in certain countries, which could enable the unauthorized use of the Company’s technologies, as well as the manufacture and sale of similar products, by an outside party. Similarly, depending on the country, it is conceivable that an outside party could market the same products upon the expiration of applicable patents.
(3) Risks related to currency exchange rate volatility
Transactions outside of Japan account for 40.5% of the Group’s net sales. Moreover, the Group has three consolidated subsidiaries based overseas. For these reasons, currency exchange rate volatility could impact the Group’s business performance and financial position.
Generally, the yen’s appreciation with respect to other currencies has a negative impact on the Group’s business performance, while a weaker yen has a beneficial effect.
(4) Risks related to weather volatility
Sales of the Group’s mainstay products, agricultural chemicals depend on the season and sales also tend to be affected by the weather. Weather conditions could result in missed opportunities for agricultural chemical dispersal, significant fluctuations in the emergence of harmful pests, as well as greater or fewer opportunities for agricultural chemical dispersal.
(5) Risks related to legal and regulatory changes
The Group’s mainstay products, agricultural chemicals, are subject to laws in Japan and elsewhere pertaining to the handling of agricultural chemicals. Regulations governing agricultural chemicals are also likely to become more stringent going forward. Accordingly, changes in relevant laws and regulations could led to increased testing expenses and a reduction in sales.
(6) Risks related to quality of products
The Group strives to maintain a robust quality assurance framework and to cover all areas pertaining to quality management, anchored by quality management systems at each production site. Nevertheless, the potential remains for the appearance of unforeseen quality defects.
(7) Risks related to overseas business development
The Group’s policy is to further expand business activities outside of Japan. However, business development efforts could be impacted by various factors in other countries, including changes in legal, regulatory, political and economic circumstances, and conditions in the agricultural industry.