Business Risk Factors
Listed below are matters that may impact the operational status and financial condition of the Air Water Group’s business development and may significantly influence investor decisions. The forward-looking statements in the section below are based on the Group’s judgment as of the end of the current consolidated fiscal period.
The steel, electronics, automobile and shipbuilding industries are major customers of industrial gases, such as oxygen and nitrogen, manufactured and marketed by the Air Water Group. Therefore, changes in demand from these industries could influence sales of industrial gases.
If electricity charges rise due to soaring crude oil prices, the manufacturing costs of industrial gases, such as oxygen and nitrogen, manufactured and marketed by the Group will increase. If the Group is unable to fully pass the increases in manufacturing costs on to customers, earnings of the Industrial Gases Business could be adversely affected.
The prices of LP gas and kerosene marketed by the Air Water Group are subject to fluctuations in CP and crude oil prices. If the Group is unable to promptly reflect changes in purchasing costs in its sales prices, earnings of the LP gas and kerosene businesses could be adversely affected.
2.Soaring prices of fuel oils
If diesel prices rise due to soaring of crude oil prices, distribution costs, such as diesel oil prices, fuel oil prices, sea freight charges and air freight charges, will increase accordingly. If the Group is unable to fully pass the cost increases on to customers, earnings of the Group could be adversely affected.
3.National Health Insurance (NHI) drug price system
The Air Water Group provides medical institutions with medical gases and services. Therefore, changes in drug prices could influence the Group’s sales of medical gases and services.
4.Safety and quality
The Air Water Group manufactures and markets high-pressure gases in accordance with the High Pressure Gas Safety Act and the Liquefied Petroleum Gas Act. If any accident occurs at the Group’s plants, the operating results and financial condition of the Group could be adversely affected. The Group manufactures, imports and markets medical gases and equipment in accordance with the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices. The occurrence of a recall or a product defect that leads to product-liability compensation could have a negative impact on the operating results and financial condition of the Group. The Group manufactures and markets foods, including frozen foods, ham, and delicatessen items, in accordance with the Food Safety Basic Act, the Food Sanitation Act, and the JAS Act (standards for quality labeling). If a quality problem occurs, the Group will lose consumer confidence, and consequently, the operating results and financial condition of the Group could be adversely affected.
The Air Water Group has recently striven to expand business through engaging in M&A activity. If the Group’s business investments do not progress as planned, the operating results and financial condition of the Group could be adversely affected.
Each business of the Air Water Group faces competition with various companies. There are also potential competition risks, including new entries from different industries. Therefore, if the Group fails to take adequate measures in a timely manner to cope with competitors’ moves, such as business expansion and cost reductions, the operating results and financial condition of the Group could be adversely affected.
As the Air Water Group is subject to environment-related laws and regulations in and outside Japan, it conducts business activities by complying with such laws and regulations. If regulations are strengthened by the revision of environment-related laws and regulations, a large amount of extra fees and charges corresponding to the revision could have a negative impact on the operating results and financial condition of the Group.
The occurrence of natural disasters, such as earthquakes, could significantly damage the Group’s production bases, causing a drastic decline in production capacity or a delay in production activities. In such case, the operating results and financial condition of the Group could be adversely affected.
9.Lawsuits, regulatory authorities’ measures and other legal procedures
In the course of conducting business activities, the Air Water Group faces the risk of being targeted by lawsuits, regulatory authorities’ measures and other legal procedures. The Group may be subject to litigation for damages and fines or limitation on business activities imposed by regulatory authorities, which could have a negative impact on the businesses, operating results and financial condition of the Group.
The Air Water Group engages in business in China, Taiwan, Southeast Asia, India, North America and so on. The following are risks that the Group’s business activities may face in these areas, primarily China and Southeast Asia. The occurrence of these events could adversely affect the operating results and financial condition of the Group.
- (i) Unforeseen changes in laws and regulations as well as taxation systems that may have detrimental effects on the Group;
- (ii) Adverse effects on the Group’s activities caused by inadequate social common capital (infrastructure);
- (iii) The occurrence of unfavorable political events;
- (iv) Social disruption caused by acts of terror, war and infectious diseases;
- (v) Unforeseen drastic changes in the labor environment; and Unexpected fluctuations in exchange rates
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May 28, 2020 15:00
Financial Results for FY2019
Stock ChartTSE 1st (Code:4088)
Date Provided by Jiji Press, Ltd.
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