Among matters relating to the status of business and the status of accounting, etc. described in the financial statements, etc., the following matters may have significant impacts on the decision-making of investors.
Please note that forward-looking statements included in the following are based on the judgment of Daio Paper (“the Company”) as of the date of submission of the annual securities report.

1. Impacts of Changes in Demand and Market Conditions

The Daio Paper Group is engaged in the Paper and Paperboard Business, Home and Personal Care Business, and other businesses. A significant decline in demand for our mainstay products (paper and
containerboard products, and household paper products), or a downturn in market conditions for such products may affect the Group’s financial position and operating results.

2. Impacts of Changes in Raw Material and Fuel Prices and Fluctuations in Foreign Exchange Rates

The Daio Paper Group purchases raw materials and fuels, such as woodchips, recovered paper, chemicals, heavy oil, and coal, both domestically and from overseas. Therefore, changes in the prices of raw materials and fuels, as well as fluctuations in foreign exchange rates for procurements of raw materials and fuels paid for in foreign currencies may affect the Group’s financial position and operating results. In order to reduce the impact of fluctuations in foreign exchange rates on operating results, the Group uses forward exchange contracts to hedge certain transactions. Fluctuations in foreign exchange rates may also affect the Group’s overseas sales activities.

3. Impacts of Overseas Businesses

The Daio Paper Group is making efforts, led by the Home and Personal Care Overseas Division, to develop business mainly in China, South Korea, Russia, and Southeast Asia as one of its growth strategies. Overseas business expansion activities may be exposed to risks from fluctuations in foreign exchange rates, and changes in the economic environment due to regulations implemented by the government of each country or political instability, etc., which may affect the Group’s financial position and operating results

4. Impact of Interest Rate Changes

The Daio Paper Group has been working on reducing interest-bearing debts. However, if there is a significant increase in interest rates, it may affect the Group’s financial position and operating results.

5. Impacts of Price Changes of Investment Securities

Available-for-sale securities with market value are stated by the market value method based on the market price on the closing date, etc. Depending on the share prices of investment securities on the closing date, their price changes may affect the Group’s financial position and operating results.

6. Impacts of Disaster

In the event of a disaster in areas where the Group’s production and logistics bases are located, the Group’s financial position and operating results may be affected due to damage to production facilities, disruption and delay of operations, incurrence of restoration costs, suspension of logistics functions, and loss of products and merchandise, etc.

7. Impacts of Lawsuits

The Daio Paper Group is making efforts to strengthen its compliance framework by complying with various laws and regulations, environmental regulations, and social norms, etc. However, the Company is exposed to the risk of lawsuits, etc. regarding such laws and regulations in our domestic and overseas business activities. Depending on the results, such lawsuits, etc. may affect the Group’s financial position and operating results.

8. Impacts of Loan Agreements with Financial Covenants

Daio Paper has signed syndicated term loan agreements, and those agreements contain financial covenants that set financial standards the Company is required to maintain, such as the amount of net assets reported in the consolidated balance sheet at the end of each fiscal year and ordinary profit/loss reported in the consolidated statement of income of each fiscal year. If Daio Paper fails to comply with the financial covenants, the Company will be required to repay borrowings, which may affect the Company’s financial position and operating results.

9. Impacts of Impairment Accounting on Non-current Assets

Daio Paper owns non-current assets such as property, plant and equipment and goodwill. We apply impairment accounting to these non-current assets and verify if the carrying amount of assets can be recovered through future cash flows generated from the assets, and we apply the appropriate accounting treatment for assets that require the recognition of an impairment loss. If there is a decrease in estimated future cash flows due to changes in the future business environment, we will be required to recognize an additional impairment loss, which may affect the Group’s financial position and operating results.

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