Risk Factors
Financial Results (Kessan Report) for FY2010
a. Risks related to trends in the automatic identification system industry
At the present time, a large percentage of the Group's net sales derive from bar code-related products, reflecting the widespread use of bar codes throughout society. The market for bar codes benefited in its early days from the dissemination of point-of-sale (POS) system in the retail industry and from applications in production control systems, including those related to distribution and factory automation. In recent years, the market has been expanding because of demand for traceability systems for healthcare providers and within the food industry, and for EDI (electronic data interchange) systems. Although capital investment trends, industry realignments and other factors could impact the market in any of these areas, the Group believes that usage and demand for bar codes will continue to expand.
In the automatic identification system industry, research and development is proceeding apace on RFID technologies that enable users to input large amounts of information into IC tags/labels. The Group believes that the growing popularity of RFID represents an opportunity to expand its business. The Group has engaged in research and development on these technologies and has introduced a number of RFID-related products in selected markets. At the same time, while they offer the advantage of contact-free recognition of multiple items via radio waves, there are a number of issues facing RFID that need to be resolved, particularly; concerns over protection of privacy, high costs and limitations regarding its usage in certain environments. The Company believes, therefore, that a certain amount of time will be required before the technologies are accepted by society in general and have evolved to an appropriate degree. It consequently remains unclear how much these products will contribute to the Group's financial performance in the future.
The policy of the Group is to continuously meet the needs of its customers. That said, however, the Group's financial performance could be affected by trends in demand for products related to bar codes and RFID.
b. Currency fluctuations
The Group's pursuit of manufacturing and sales on a global scale exposes it to the effects of currency fluctuations. Its response has been to minimize risk through financial strategies such as forward exchange contracts. Since it is never possible to completely eliminate foreign currency risks from commercial activity, any significant shift in currency values could have an impact on the Group's financial results.
c. Country risks
The Group is engaged in production and sales in a wide variety of countries. Unforeseen circumstances, including economic fluctuations, revisions to laws and regulations, or the outbreak of armed conflict, natural disasters, and infectious disease epidemics in such countries could have an impact on the Group's financial results.
