Business and Other Risks

Because of the fact that they can have a serious impact upon the judgment of investors, we regard risks to the business and other areas of the Group as a major issue. However, there are other factors, not necessarily equating to risk factors like these, that can also be viewed as exerting a major influence on the attitudes of investors and we disclose such matters in line with our proactive stance on providing information.

There are items included on this page that relate to the future but they are based purely upon the judgment of the Group about such issues at the time that these financial statements were submitted.

1. Changes in the Product Environment

The Group is subject to product price risks from market fluctuations for products in which we deal in areas related to resources and metallic materials. There is a possibility that, as a result of shortening the periods for which they are stored as inventory, risk can be reduced by negotiating annual sales volumes per product in advance but, in circumstances in which short-term market fluctuations exceed expectations, this factor may have an effect upon the performance of the Group.

2. Fluctuations in Currency Markets

The Group is vulnerable to risks associated with changes in foreign exchange rates because sourcing and sales activities are denominated mainly in foreign currencies. To reduce exposure to this risk, we use exchange rate hedging contracts for all trading contracts. Consequently, we believe that short-term volatility in foreign exchange rates will have only a negligible effect on our performance. However, in the event of volatility that is more than expected, there may be an impact on the Group’s business performance.

3. Trends in the Economy and Capital Investment

The products in which the Group deals are related to industrial and construction machineries and environmental equipments, and they are mainly used in factories operated by manufacturing industry and by waste-water treatment facilities run by local authorities, etc. Because demand, not only for sales of machineries and equipments, but also in maintenance-related areas is constant, and also because our customer base is principally in private sector demand-related and concentrated in manufacturing industry and spread across a wide range of sectors, we think that a certain degree of stability in earnings can be maintained. However, the possibility remains of the Group's earnings being affected by trends in the general economy and by fluctuations in levels of capital investment. Moreover, because the products that the Group handles in chemical-related areas are supplied as raw materials to clients in a wide range of fields including automobiles, construction materials, electric power, and electronics, the Group's earnings may be subject to the impact of fluctuations in economic trends both in Japan and overseas.

4. Seasonality in Earnings

The Group's earnings performance is related to industrial and construction machineries and environmental equipments and so is also related to the implementation of capital expenditure budgets at its clients and so there is a tendency for both revenues and earnings to be concentrated in the 4th quarter.

5. Natural Disasters, etc.

If the infrastructure and suppliers of the products below suffer catastrophic damage as a result of a flood or other natural disaster, accident, terrorist activity, or other factor unforeseeable by the Group, results of operations may be affected. Furthermore, if any of these events damage the Group’s facilities to the extent that major restoration work is required, results of operations may be affected.
The Group implements a policy of conducting daily and regularly scheduled maintenance and inspections of its facilities as well as a safety program. But in the event of physical damage to assets or injury to employees from an accident, there may be an impact on the Group's business performance.
Although the state of emergency in Japan due to COVID-19 has ended, it is still impossible to predict how much longer this crisis will continue. The Rasa Group established a Crisis Management Headquarters and has been making decisions as needed concerning the continuation of business operations. If this crisis does not end in the near future, there may be a negative impact on the group’s business operations.

6. Reliance upon Specific Products

• 1. Zircon Sand
  Most of the zircon sand is sourced from the world-leading Australian mineral sands producer Iluka Resources, Ltd. with which the Group has concluded a exclusive agency contract for Japan. We have established a firm relationship with this company but, since zircon sand is a mined resource, in circumstances in which stable volumes of mined material from the company is not secured, or if there should be an alteration in the business policies of the company, there is a possibility that this could have an impact upon the Group's earnings.
• 2. Slurry Pumps
  The Group has concluded an Exclusive Distributorship Agreement for the sale of slurry pumps with the Pacific Machinery & Engineering Co., Ltd. which is a related company of the Group. In addition to its capital relationship with the company, the Group also acts as import/export agent for it and sends out executives to the company, etc. Consequently, there is a very strong connection between the two companies but if there were to be a change in the relationship between the Group and the company, then this might affect the Group's business performance.

7. Legal Restrictions

The Group is subject to regulations deriving from legislation governing overseas trade, environmental issues, and a large number of other laws and ordinances. Should these regulations be amended or abolished and new regulations introduced in their place, then there is a possibility that the Group's earnings would be affected.

8. Securing of Human Resources

Because it is essential to the maintenance of the Group's operations to employ staff with specialist skills and experience, we concentrate very heavily on training engineers and similar staff possessing high levels of product knowledge and technical ability. However, if we should find that we are unable to secure the human resources that we plan to employ then this could well have a exert a significant impact on the performance of the Group.

9. Effect of improper accounting method

In the fiscal year that ended in March 2021, a problem involving an improper accounting method was discovered at Asahi Tec Corporation, which is a consolidated subsidiary of Rasa. An internal committee was established to investigate this incident. The investigation resulted in the revision of financial statements in prior years. Depending on upcoming responses and other activities of the Rasa Group concerning this incident, there may be an effect on the group’s business activities, results of operations and financial position.