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Listed below are some of the items that could have a material bearing on the decisions of investors. NEG Group’s business and other related risks are not limited to these items. Forward-looking statements contained herein are based upon assessments made by NEG as of March 31, 2008.
1. Drastic Changes to Demand and Market Structure
The Information and Communications sector is a core business area of NEG Group (NEG and its consolidated subsidiaries), 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, with the market focusing on new devices, the demand for existing products could decline, which could negatively impact the business operations, financial results, and/or operational results of the Group.
In addition, disruption of the balance between supply and demand, or significant fluctuations in product price or supply volume as a result of intense market competition, may substantially impact the Group’s business operations, financial results, and/or operational results.
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 for production efficiency. The Group strives to put in place new production facilities and implement continuous improvements to the existing facilities in a timely and optimal manner. However, in case of substantial changes to forecasts, in case predicted production efficiency or production capacity is not achieved, or in case the prices for major parts used in such facilities rapidly appreciate due to changes in market conditions, business operations, financial results, and/or operational results of the Group could face substantial impacts.
3. Risks related to Certain Products
There are certain products that NEG Group produces for the use of 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, financial results, and/or operational results.
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, financial results, and/or operational results 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 govern areas such as acquisition of investment approval, import and export restrictions, business transactions, antimonopoly issues, product liability, environment, labor, patents, taxes, and currency exchange. Changes to laws and restrictions in such areas could impact the Group’s business operations, financial results, and/or operational results.
6. Risks related to Intellectual Property Rights
NEG Group endeavors to acquire intellectual property rights that will prove 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 juridical actions regarding intellectual property rights, the Group’s business operations, financial results, and/or operational results could be impacted.
7. Environmental Risks
NEG Group strives to develop environmentally conscious products and conduct improvements to 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 further environmental restrictions are implemented and the social expectations towards environmental issues become stricter, the Group’s business operations, financial results, and/or operational results could be impacted.
8. Risks related to Currency and Interest Rates
NEG Group’s business activities take place 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 out forward exchange contracts. As a result, the Group’s business operations, financial results, and/or operational results could be impacted by the changes in the exchange rate.
Also, interest rate fluctuations could impact the Group’s business operations, financial results, and/or operational results.
9. Risks related to Overseas Business Operations
NEG Group’s business activities take place in Japan and Asia, as well as all over the world. Listed below are some of the underlying risks regarding overseas operations.
- Unexpected changes to law and regulations
- Risks stemming from international taxation methods such as transfer price taxation
- Business practices that are unique to a particular country or area
- Changes to political or social conditions
- Social confusion due to terrorism, war, infectious diseases, or other causes
10. Securing Human Resources
NEG Group looks upon its human resources strategy as one of the key factors in its business operations. We acknowledge the need to secure and educate appropriate employees 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, financial results, and/or operational results.
11. Impairment Accounting for Fixed Assets
Due to changes in market trends and the Group’s profitability, impairment accounting related to fixed assets in connection with equipment and facilities used in current operations could impact the Group’s business operations, financial results, and/or operational results. The Group works as needed to organize, sell, and convert unused property, plant, and equipment. However, depending on future economic and real estate trends, disposition loss could occur with the application of impairment accounting for fixed assets.
12. Risks related to Information Management
NEG Group may acquire classified 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 the corporate image of the Group could become damaged.
In addition, a leak of classified information regarding new technology could have an impact on the Group’s business operations, financial results, and/or operational results.
13. Risks related to Natural Disasters and Accidents
Natural disasters such as earthquakes and typhoons or accidents such as fires have the potential to seriously damage the Group’s facilities and equipment. 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, financial results, and/or operational results could be greatly impacted.