Of the factors affecting the business and accounting conditions covered on this website, those that could seriously influence investors' judgments have been noted below. Statements regarding the future contained herein comprise the Toppan Group's (Toppan and its consolidated subsidiaries) views as of the end of the consolidated accounting year.
1. Characteristics of the printing business
Advances in information technology and networks are changing the market environment requiring the printing industry to create new business areas and strengthen price competitiveness. Should the Toppan Group fail to increase sales in new business areas and improve price competitiveness through cost reduction measures, the Group's performance could be affected.
2. Characteristics of the electronics business
The Toppan Group's electronics business mainly comprises display-related products such as liquid crystal color filters and TFT LCDs and semiconductor related products such as photomasks.
This is a business where profits may be generated by developing state-of-the-art technology and responding accurately to the market. Any shortening of product life cycles however or a faster than expected evolution in technology may impact on the Toppan Group's results in this area.
In addition, while this business lends itself to becoming highly reliant on particular customers, we consider it a plus to have business relationships with a stable field of customers. Various factors involved with a small number of such customers however, such as product pricing levels, product volumes and types, delays in payment or even non-payment, or unfavorable amendments to terms of payment, can have an impact on the Toppan Group's annual performance and overall financial position.
3. Securing the human resources to support business growth
The Toppan Group recognizes the importance of improving the quality of existing products and developing new products and services through introduction of advanced new technologies to achieve continuous growth in the future.
For this purpose, exceptional human resources with advanced technical and planning abilities are essential. The Toppan Group focuses on systematic recruitment and training, but should we be unable to secure or train outstanding human resources, the Group may be unable to continue growing in the future.
4. Intense market competition and price competition
The Toppan Group endeavors to continuously develop and market new products and services whilst reducing costs of existing products. However, product development and pricing competition with rival companies has intensified in recent years. Should our products and services fail to maintain their lead in the market or fierce competition cause prices to drop, the Toppan Group's performance could be affected.
5. Risks associated with capital expenditure
The Toppan Group has engaged in capital expenditure, procuring the necessary funds from operational cash flow, the issuance of corporate bonds and bank loans. With these kinds of capital expenditure, changes in market conditions might make the investment recovery period longer than the anticipated one which was decided in making on the capital expenditure; excessive depreciation costs might make performance suppress; large-scale capital expenditure decreases the return on asset ratio; and interest payment associated with fund procurement decreases the each profit ratio. Any and all of these factors could affect the Toppan Group's performance.
6. Smooth capital procurement
The Toppan Group considers capital expenditure to be necessary in terms of expanding business and responding to rapid technological innovation. We procure capital from external sources in accordance with our business plan, but there may be times when we are unable to procure sufficient, necessary additional capital under fair conditions for reasons such as substantial changes in interest rate conditions.
7. Risks associated with overseas operations
The Toppan Group engages in business operations in countries including the U.S., China and other countries in Southeast Asia. In the future, we may establish new operations overseas, including developing countries. We recognize the following risks inherent to doing business in developing regions;
- Insufficient technical infrastructure may affect production and other operations and result in unacceptable products and services to our customers
- Unstable political and economic factors
- Unexpected legal or regulatory changes (including taxation)
- Foreign currency fluctuations
- Changes in trade restrictions and/or tariffs
- The occurrence of epidemics or large-scale disasters
8. Strategic partnerships, investment and acquisitions
The Toppan Group engages in many activities through strategic partnerships, joint-ventures and investments, and we may acquire other companies in the future. These activities comprise an important means of acquiring new technology, launching new products and entering new markets. However, should we be unable to maintain these partnerships or achieve the anticipated results for any variety of reasons, the Toppan Group's performance could be affected.
9. Risks associated with production operations
In production operations, for quality control, the Toppan Group has paid sufficient attention to the product in order not to cause any accidents and complains. We strive to ensure, from the perspective of quality control, that none of our products result in accidents or complaints, but the future accidents with products could affect the performance.
In addition, failure to correspond appropriately to change and improvement in production lines associated with establishment of new plants and transfer of equipments could cause the problem of delivery delay to customers and fall of productivity, and those could make decrease of sales.
10. Production outsourcing
The Toppan Group outsources production mainly in printing related business as appropriate as an effective way of coping with factors such as fluctuations in production volume, production schedule, and delivery deadlines. Should an outside supplier be subject to an accident or natural disaster, delivery delays, faulty products or other production problems could occur.
11. Securing raw materials
The Toppan Group procures certain raw materials such as paper, ink and glass almost entirely from outside manufacturers. Securing an adequate and stable supply of raw materials at a fair price is critical to the Group's business. Should outside manufacturers supply substantially inadequate quantities or delay deliveries, or a steep rise in raw material prices occur, the Toppan Group's performance could be adversely affected.
12. Employees' severance and pension benefits
Employees' severance and pension benefits and other expenses payable to group employees are provided in line with the Toppan Group's retirement benefits and corporate pension system. For the stability of pension financing, the Toppan Group reviewed the corporate pension system in relation to the transfer of the substitutional portion of the company's employee pension fund to the government and made a lump sum contribution to its special premium. However, should conditions such as the assumed discount rate or the rate of expected return on plan assets change as a result of future fluctuation in economic conditions, the Toppan Group's performance and financial condition could be affected.
13. Fluctuations in actual value of marketable securities
The Toppan Group owns marketable securities. Fluctuations in factors such as interest rates and the equity market affect the actual value of securities and could affect the Group's performance and financial condition.
14. Fluctuations in foreign exchange rates
The Toppan Group has been expanding into overseas markets as the domestic printing market matures. Revenue and expense items for overseas subsidiaries that are denominated in local currencies are converted into yen to facilitate calculations when preparing the Group's consolidated financial statements, and could be affected by fluctuations in exchange rates at the time of exchange.
Fluctuations in exchange rates can be expected to affect the prices of locally sold Toppan products, the production and procurement costs of locally produced products, and selling prices in Japan. Accordingly, they could also affect the Toppan Group's performance.
15. Protection of intellectual property
Developing innovative products and services is essential to enhancing market competitiveness. This makes patents and intellectual property a crucial factor in competitiveness. The Group strives to protect our original technologies with a combination of patents, trademarks and other intellectual property rights, but we recognize the following risks;
- The Toppan Group's pending patents may not be approved
- Measures taken to prevent wrongful use or infringement of the Toppan Group's intellectual property may not be successful
- The Toppan Group's technology could be deemed to be infringing on other companies' intellectual property rights
Should the Toppan Group's intellectual property incur interference, its business operations and performance could be affected.
16. Environmental laws and regulations
National and local laws and regulations in Japan and overseas impose substantial potential liability on the Toppan Group for improper use or disposal of toxic substances and any resulting environmental pollution such as soil contamination and atmospheric pollution.
The Toppan Group uses certain toxic substances in its manufacturing processes and research and development, and has to manage waste disposal. We are extremely careful to comply with applicable regulations. However, we cannot eliminate all risk of accidental pollution or discharge, or the damage resulting from such occurrences. In the unlikely event of an accident occurring, it could have an adverse effect on the Toppan Group's business operations.
17. Information security
The Toppan Group employs a stringent information security management system for internal confidential information as well as confidential and personal information collected, stored and managed on behalf of customers as one of its services.
The Toppan Group employs the very strictest of measures for information management, but in the unlikely event of an employee or subcontractor leaking or misusing information, the Group's reputation will be damaged and this could have an adverse effect on its performance.
18. Risks associated with natural disasters, accidental damage and epidemics
The Toppan Group implements earthquake-resistance measures and regular inspections as well as emergency drills at all of its workplaces. However, should a natural disaster such as an earthquake or typhoon or other accidents such as fire or an epidemic occur, equipment and employees could be severely damaged or hurt, partially or entirely interrupting operations and delaying both production and shipment. Repairing damaged equipment could require massive expenditure, which in turn could adversely affect the Toppan Group's business operations, performance and financial condition.