Risk Information

Our Group, which supplies products to the growth industries of automobiles and social infrastructure, is constantly vying with competition in the global market and technological development. It is also important for us to keep a close eye on supply-demand balances and price fluctuations caused by the properties of raw materials.

Identifying the various risks associated with our business and their degree of importance, we will continue to conduct sound and positive management from a medium- to long-term perspective.

The main risks faced in the Group’s business, details of the impact on the Group’s financial results and so on if those risks occur, and countermeasures are described below.

1. Risks related to raw material markets fluctuations

Lead is a key material used in lead-acid batteries, the GS Yuasa Group’s main product. However, changes in the market price of lead cannot be reflected immediately in our product prices, so the Group’s earnings and financial standing could be affected.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Optimizing production systems and working to reduce costs while building an optimum supply structure.

2. Intensification of price competition

The GS Yuasa Group is exposed to intense price competition in each of the markets where it conducts business, and setting prices at advantageous levels has become difficult. We not only face the same competitors as in Japan, but also must deal with low-cost products supplied by overseas companies, which make competition more intense. It may not be easy to maintain and expand market share and secure profitability in the future. If business profitability declines as a result, there may be an impact on the Group’s earnings and financial standing including the risk of impairment of fixed assets.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Cutting costs and implementing measures to strengthen marketing power.

3. Foreign exchange rate fluctuations

The GS Yuasa Group conducts business in Japan, the rest of Asia, North America, Europe, and other regions. Financial statement items that are denominated in local currencies outside of Japan, such as sales, expenses, and assets, are converted into yen for consolidated financial statements. The yen value of these amounts can change depending on the exchange rate, even if the amounts have not changed in local currencies.

When local currencies appreciate in areas where the Group carries out overseas production, manufacturing and procurement costs can rise in these areas, and medium- to long-term currency fluctuations may impede the Group’s ability to procure, manufacture, distribute, and sell goods according to plan. Therefore, it is possible for foreign exchange rate fluctuations to influence the Group’s earnings and financial standing.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Conducting forex-hedged transactions in an effort to hold the adverse effects of short-term foreign exchange rate fluctuations to a minimum.

4. Risks related to international activities and overseas expansion

The GS Yuasa Group manufactures and markets products in Japan, the rest of Asia, North America, Europe, and elsewhere. The following risks are intrinsic to these markets, and they could affect the Group’s earnings and financial standing.

  1. Unforeseen changes to laws or regulations
  2. Difficulty in hiring and keeping human resources
  3. The possibility that inadequate technology infrastructure will affect the Group’s manufacturing and other activities, or lower the reputation of GS Yuasa products among customers
  4. Social disturbances caused by terrorism or war

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Strengthening communications between headquarters and our various sites to build a framework capable of rapidly supplying products and services that meet needs in each region of the world.

5. Environmental regulations

In China, the central government shows signs of strengthening environmental regulations on lead-acid battery manufacturers and lead smelters. Some manufacturing activities at GS Yuasa Group companies could be affected.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Established this Fundamental Environmental Policy to outline our basic Group-wide approach to environmental efforts. The policy aims to clarify our social responsibility toward the environment and guide our contributions to the emergence of a sustainable society. Also, developing and using environmental management systems that will help to reduce environmental impacts and prevent any accidents that could cause environmental pollution.

6. Risks related to M&A

The GS Yuasa Group considers M&A to be a useful and effective tool for business expansion. When the Group carries out M&A, the transaction is considered from a range of viewpoints, including the target company’s financial standing and potential synergy with the Group’s businesses. Due to drastic changes in the business environment or other factors, however, an acquired business might not perform as planned. If invested funds cannot be recovered or a loss on goodwill is recorded, the GS Yuasa Group’s earnings and financial standing could be affected.

Degree of likelihood and timing of occurrence of risks

Awareness of the likelihood of occurrence is necessary

Countermeasures

Monitoring results on a monthly basis.

7. Climate change

Climate change is a problem that can have major impacts on countries and regions, and is a social issue that needs to be addressed by the entire world. For example, cool summers and warm winters result in a narrower temperature range, which is favorable for maintaining battery performance, so replacement demand would decline under these conditions. As a result, the sales volume of automotive batteries (replacement), the GS Yuasa Group’s main product, would fall below normal levels, and this could have an impact on the Group’s earnings and financial standing.

Degree of likelihood and timing of occurrence of risks

Some possibility of occurrence in the next fiscal term

Countermeasures

Factors caused by climate change cannot be accurately forecast, making it difficult to take adequate countermeasures in advance, but the Group will fully demonstrate the strengths of its brand and increase the weighting of high value-added products. In addition, we will deliver highly satisfying products to customers by continuously developing high performance, high quality products.

8. Disasters and accidents

If a natural disaster such as an earthquake, storm or flood damage, or major snowstorm or if an accident such as a fire, explosion, or damage were to occur at a Group business site, there is a risk of unforeseen events occurring.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Creating earthquake, flood, and snowstorm response manuals and working to enhance fire-prevention management and disaster preparedness.

9. Interest rate fluctuations

The GS Yuasa Group’s interest-bearing debt burden includes some debt with variable interest rates. Therefore, if interest rates rise, the Group’s cost for procuring funds could increase.

Degree of likelihood and timing of occurrence of risks

Some possibility of occurrence in the next fiscal term

Countermeasures

During the Fifth Mid-Term Management Plan, interest-bearing debts are expected to increase somewhat in order to activate growth investment, but we will strive to keep the debt redemption period within three years and to achieve both growth and financial discipline.

10. Lawsuits and other legal proceedings

In carrying out business, the GS Yuasa Group may be sued by suppliers or third parties, and there is a risk that regulatory authorities could take legal action against the Group.

Degree of likelihood and timing of occurrence of risks

Some possibility of occurrence in the next fiscal term

Countermeasures

Continuously surveying the rights, patents, and other intellectual property of other companies and working to minimize the risks by reinforcing internal information sharing.

11. Economic conditions

Demand for the GS Yuasa Group’s products is influenced by economic conditions in the markets where products are sold. Therefore, in the Group’s main markets, which include Japan, the rest of Asia, North America, and Europe, economic setbacks and accompanying demand contractions, could adversely affect the Group’s earnings and financial standing.

Degree of likelihood and timing of occurrence of risks

Some possibility of occurrence in the next fiscal term

Countermeasures

Providing reassurance and confidence to customers through business operations based on a fundamental stance that emphasizes quality, and working to enhance corporate value and build corporate infrastructure for sustainable growth in the future in accordance with our corporate philosophy of innovation and growth.

12. COVID-19 pandemic

If the spread of the COVID-19 interferes with the Group’s production or other business activities, there may be an impact on the Group’s earnings and financial standing.

Degree of likelihood and timing of occurrence of risks

At any time in the next fiscal term

Countermeasures

Establishing a crisis management headquarters chaired by the president, gathering and analyzing crisis information, and implementing safety measures including encouraging employees to work from home.