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Listed below are representative items that could have a material effect on the decisions of investors. NEG Group’s business and other related risks are not limited to these items.
The statements of prospective matters contained herein are based upon assessments made
by NEG Group (NEG and its consolidated subsidiaries) as of June 30, 2011.
1. Drastic Changes to Demand and Market Structure
Glass for electronic and information devices is a core business area of NEG Group, and drastic changes could occur in regards to devices, components, and materials due to technological innovation in this area. The Group endeavors to meet new and emerging needs with its extensive and advanced specialty glass technology. Nevertheless, due to change to new devices, the demand for existing products could decline, which could negatively impact the business results, and/or financial results of the Group.
In addition, significant fluctuations in product price or supply volume as a result of disruption of the balance between supply and demand and intense market competition, may substantially impact the Group’s business operations, business results, and/or financial situations.
2. Capital Expenditure Risks
NEG Group produces various types of specialty glass products, with those used in connection with display devices being core products. Substantial funds and time are necessary when creating new facilities for the production thereof. Existing facilities also require continuous improvements in production efficiency.
The Group strives to put in place new production facilities in a timely and optimal manner and implement continuous improvements in the existing facilities. However, in case demand forecasts change substantially, in case predicted production efficiency or production capacity is not achieved, or in case the prices for major parts for the construction of such facilities rapidly change due to their market conditions, business operations, business results, and/or financial situations of the Group could face substantial impacts.
3. Risks related to Certain Products
There are certain products that NEG Group produces for the supply to specific customers. In regard to such products, the investment plans, sales plans, or procurement policies of such customers could have impacts on the Group’s business operations, business results, and/or financial situations.
4. Risks related to Procurement of Materials and Other Items
In connection with NEG Group’s production, the dependence on procuring raw materials and fuels from overseas is quite high. Some types of materials used in production can only be purchased from a limited number of suppliers. In the case of a supply shortage or delay, or in the case of a sudden increase in material prices, the Group’s business operations, business results, and/or financial situations could be impacted.
5. Risks related to Legal Restrictions
NEG Group is subject to various laws and regulations in the countries and areas in which it operates. Such laws and restrictions are relating various areas such as approval of investments, import and export restrictions, business transactions, antitrust, product liability, environment, labor, patents, taxes, and currency exchange. Although the Group strives to comply with these laws and regulations and conduct fair corporate activities, should the results of lawsuits or legal procedures against the Group for violation of laws and regulations or restrictions be unfavorable to the Group, the Group’s business operations, business results, and/or financial situations could be impacted.
The Group is presently asked to provide information with respect to investigation of potential violations of competition laws regarding CRT glass from EU and other competition law authorities and regarding LCD glass from EU competition law authority. The investigation is not yet concluded at present, however, these authorities could impose monetary penalties on one or more companies in the Group if they are found liable as a result of the investigation by the authorities.
6. Risks related to Intellectual Property Rights
NEG Group endeavors to acquire intellectual property rights that are and will be useful in current and future business activities. We also examine such rights owned by other companies to prevent any legal dispute. In case the Group is subjected to legal actions regarding intellectual property rights, the Group’s business operations, business results, and/or financial situations could be impacted.
7. Environmental Risks
NEG Group is mainly engaged in glass business which consumes a lot of resources and energy and imposes considerable burdens on environment. NEG Group strives to develop environmentally conscious products and conduct improvements in facilities and management systems that will help reduce environmental burdens. We also improve production efficiency by implementing indexes to ensure that energy and natural resources are being used effectively and optimally. We will promote “3R” activities (reduce, reuse, and recycle) to reduce environmental burdens. However, if environmental restrictions or the social expectations towards environmental issues become stricter, the Group’s business operations, business results, and/or financial situations could be impacted.
8. Risks related to Fluctuations in Exchange and Interest Rates and Others
NEG Group is conducting its business mainly in Japan and Asia, but also in other parts of the world. Therefore, the Group tries to reduce currency risks stemming from exchange rate fluctuations by taking measures such as holding exchange contracts. The Group’s business operations, business results, and/or financial situations could be impacted by the changes in the exchange rates.
Also, interest rate trends and fluctuations in securities markets could impact the Group’s business operations, business results, and/or financial situations.
9. Risks related to Overseas Business Operations
NEG Group is conducting its business mainly in Japan and Asia, but also in other parts of the world. Overseas operations have potential risks such as
- Unexpected changes to laws and regulations
- Risks stemming from international taxation systems such as transfer price taxation
- Business practices that are unique to a particular country or area
- Changes to political or social situations
- Social confusion due to terrorism, war, infectious diseases, or other causes
10. Securing Human Resources
NEG Group places its human resources strategy as one of the key factors in its business operations. We acknowledge the need to secure and educate employees appropriately for future business development. In the event that it becomes difficult to secure appropriate human resources, the Group’s business operations could become limited and opportunities could be lost, resulting in an impact on the Group’s business operations, business results, and/or financial situations.
11. Impairment Accounting for Fixed Assets
Depending on market trends and the Group’s profitability, disposal of a loss may be required due to impairment accounting related to fixed assets in connection with equipment and facilities used in current operations and such disposal could impact the Group’s business operations, business results, and/or financial situations. The Group implements, as needed, disposal, sales and conversion of a part of unused property, plant, and equipment. However, depending on the movement of future economic situations and real estate prices, disposal of a loss could occur with the application of impairment accounting for fixed assets.
12. Risks related to Information Management
NEG Group may acquire confidential information regarding clients, other associations, and/or individuals (including employees) during the course of its business activities. The Group endeavors to treat such information with extreme care and to implement measures to prevent any leakage of information, but it is impossible to completely deny the possibility of leakage.
In case such information is leaked to an outside party, an impacted party could seek compensation for damages, and/or the corporate image of the Group could become damaged. In addition, a leak of confidential information regarding new technology could have an impact on the Group’s business operations, business results, and/or financial situations.
13. Risks related to Natural Disasters and Accidents
Natural disasters such as earthquakes and typhoons or accidents such as fires could cause seriously damages to the Group’s facilities and equipment as well as difficulties in the supply of electricity, gas or water. This could result in the halting of all or part of the Group’s production, which could in turn lead to delays in production and distribution. Large expenditures could also become necessary to repair damaged equipment in such a case. As a result, the Group’s business operations, business results, and/or financial situations could be substantially impacted.