Integrated Report 2020

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LINTEC Integrated Report 202061related risks; etc. For the first and second quarters of the fiscal year ending March 31, 2021, the Group is forecasting declines in orders, etc., due to a worsening demand environment in a variety of business fields. The Group’s assumption is that business activi-ties will start to return to normal from the third quarter. However, if the influence of the infectious disease lengthens, the Group’s business environment and operating results could be affected.2 Risks of Changes in Selling PricesDue to intense competition in both the domestic and overseas markets in which the Group operates, the Group may be unable to maintain selling prices to preserve sufficient earnings or sales share. The Group will work to maintain its market share by achieving differentiation from its competition and refining cus-tomer services, and to secure profits by reducing costs. However, if these initiatives are difficult, then the Group’s business results could be affected.3 Risk of Changes in Raw Material PricesThe Group uses a large quantity of pulp for paper and petro-chemical products as raw materials and fuel. The prices of these materials and fuels fluctuate in accordance with market condi-tions, such as inventories and the supply–demand balance. The Group purchases raw materials in light of careful monitoring of market trends. However, a dramatic change in raw material prices could affect the Group’s business results.4 Risks Related to Overseas OperationsThe Group conducts manufacturing and business operations in markets worldwide. In the fiscal year ended March 31, 2020, the overseas sales ratio was 49.4%. In the countries where the Group conducts manufacturing or business operations, the following events could hinder the Group’s overseas business activities and affect the Group’s business results: political instability or a dete-rioration in security due to such factors as terrorism, a political change, or a coup d’état; labor disputes involving employees; infectious diseases; and unpredictable changes in laws and regu-lations, such as those involving tax systems, foreign exchange, or customs clearance; etc. In addition, the risk of foreign exchange rate fluctuations has increased. The Group is focusing on trends in the U.S. dollar and in major Asian currencies, such as the Korean won, Chinese yuan, and Taiwan dollar. The Group is also working to reduce risk through the use of forward exchange contracts, etc. However, the Group’s business results could be affected by fluctuations in foreign exchange rates that exceed expectations.5 New Product DevelopmentThe Group pursues R&D activities with a view to realizing com-prehensive technological capabilities that cater to market demand and bringing to market competitive, high-value-added products. Accordingly, the Group is stepping up allocations of management resources to increase its number of researchers and to pursue such initiatives as joint research with other compa-nies and academic institutions. However, there is no guarantee that such investment of management resources in R&D will result in the development of new products or increase operating income. Due to such factors as extended development periods, it could become necessary to discontinue development, and if product development costs cannot be recovered, it could affect the Group’s business results.6 Intellectual Property RightsThe Group takes necessary measures to protect intellectual property rights in Japan and overseas for various original produc-tion technologies that it has developed. However, legal measures alone do not provide complete protection, possibly preventing the Group from effectively protecting the rights it has obtained. Furthermore, in the event that a lawsuit is filed by a third party regarding intellectual property rights infringement associated with the Group’s products, the Group’s business results could be affected.7 Significant LawsuitsIn conducting business in Japan and overseas, the Group may be subject to lawsuits or other claims related to product liability, environmental, or intellectual property rights issues. Lawsuits or claims, depending on their content, could affect the Group’s business results.8 Legal and Regulatory SystemsIn the countries in which it conducts business operations, the Group is subject to various legal and regulatory systems, and as such is working to ensure rigorous compliance with these sys-tems. In the event that the systems are strengthened or changed, the Group’s business activities could be restricted or the Group’s business results could be affected.Financial InformationStrategyOverviewFoundation