Pentax 2008 Annual Report Download - page 53

This report is provided by the Hoya Group solely for the purpose of reference to those investors making their own evaluation of the Company at
their own risk. We accept no liability whatsoever for any direct or consequential loss arising from any use of this report.
Disclaimer
The main items believed to be potential risk factors for development of
the businesses of the Hoya Group are described below. Matters
concerning forward-looking activities included in these statements are
based on information evaluated by Hoya’s management as of the date
these materials were prepared.
Fluctuation of Exchange Rates
As the Hoya Group develops its business on a global scale, if the currencies
of those countries in which the Hoya Group has major manufacturing
operations appreciate, export prices of its products would rise, which would
incur an increase in costs on a consolidated basis. If the currencies of those
countries in which the Hoya Group has major sales operations depreciate, it
would bring about a decrease in sales.
Influence of International Situations
In the event that the future movement of people, goods or money were to
be extraordinarily restrained in certain regions, or if certain unexpected
events took place in those countries in which the Hoya Group has business
operations—including changes in the political, economic or legal
environments, labor shortages, strikes, accidents or natural calamities,
etc.—certain problems may arise in the execution of business operations.
Our Business as in Production Goods
Every part of the Electro-Optics product range, which constitutes a major
portion of Hoya Group revenue, involves intermediate production goods,
components or materials. Therefore, growth of the business thereof is
affected substantially by the market conditions of such end-consumer
products such as personal computers and digital home appliances that are
manufactured utilizing the resultant products.
Emergence of Discounters and Lowering of Prices in the Consumer
Goods Sector
In recent years, discount shops of an unprecedented type have emerged and
brought about a lowering of prices. If the influence of such discount shops swells
to an extent that cannot be absorbed by the Hoya Group’s cost reduction efforts
and strategies for adding high value both in Japan and abroad, the business
results and financial condition of the Hoya Group might be adversely affected.
Competence for Developing New Products
The Hoya Group strives at all times to develop state-of-the-art technologies.
However, if the Hoya Group fails to sufficiently predict changes in the sector
and markets or to develop new products that meet customer needs in time, the
business results and financial condition of Hoya Group might be adversely affected.
Competition
The Hoya Group, which has the top market share for its many products in
their respective sectors, is constantly exposed to relentless competition.
There is no guarantee that the Hoya Group can maintain its overwhelming
market share and compete efficiently in future. If customers shift allegiance
due to cost pressures or inefficiency of Hoya’s competitiveness, the business
results and financial condition of Hoya Group might be adversely affected.
Production Capacity
At present, the Hoya Group reinforces its production capacity so as to meet
orders that exceed existing production capacity in multiple business areas.
However, if the setting up of such capacity were delayed for any reason, it
would affect not only the Hoya Group’s results but also the production and
sales plans of its customers, which might bring about increased market
share for its competitors, etc., and adversely affect the business results and
financial condition of the Hoya Group.
New Business
New business is important for future growth. In the event that no promising
new business is developed, the growth of the Hoya Group might not be achieved
as planned. Besides, the Hoya Group may carry out mergers and acquisitions
as a part of its business strategy. If unexpected obstacles emerge after such
acquisition and unscheduled time and costs are required, the business
results and financial condition of the Hoya Group might be adversely affected.
Risk of Information Leaks
In the course of its operations, the Hoya Group retains a substantial amount
of personal and confidential information, and the Group has numerous
measures in place to manage this information. Nevertheless, in the unlikely
event that an outflow of information were to occur, the Hoya Group could
experience a loss of trust from society and face significant liability for damages.
Intellectual Property Risk
In its new product development and manufacturing, as well as its sales
activities, the Hoya Group conducts thorough advance research to avoid
infringing upon other companies’ intellectual property rights. Nevertheless,
these efforts cannot eliminate the risk of a third party asserting
infringement of their intellectual property rights. In such an event, in
addition to legal costs and depending on the outcome of litigation, the
Hoya Group might be unable to take advantage of said technology and
could become liable for substantial damage compensation payments.
Product Quality Risk
The Hoya Group manufactures a wide variety of products according to
stringent quality standards. However, if a quality issue were to arise,
necessitating a recall or resulting in product liability, in addition to the cost
of collecting such products the Group could incur significant damage to its
reputation with customers. Also, depending on the product the Group
could be liable for substantial damage compensation payments.
Risk Related to Human Resource Retention and Training
The ongoing growth of the Hoya Group is largely dependent on its ability to
retain and train superior personnel in a wide range of fields. However, the
Hoya Group’s growth and operating performance could be negatively
affected if the swiftly diversifying employment environment resulted in a
situation that halted the flow of capable human resources or impeded the
recruiting and training of new personnel.
Risk in Procuring Raw Materials and Other Items
Some of the raw materials and parts the Hoya Group uses in its
manufacturing activities are of a specialty nature, such that suppliers are
limited, so the selection of alternative suppliers would be problematic.
Therefore, a natural calamity or accident on the part of a supplier could
result in a sudden rise in purchase costs or the inability to secure a stable
supply of parts from suppliers. This situation could cause the Hoya Group to
delay product shipments or result in lost opportunities, thereby having a
negative effect on the Group’s operating performance and financial position.
Risk of Loss in Corporate Value from Hostile Takeover
The Hoya Group believes that management’s responsibility is not to create
measures defending it against corporate acquirers. However, as the people
entrusted by shareholders management believes that it is important to
achieve future corporate growth, enhancing corporate value by raising the
Group’s operating performance and financial soundness. If a hostile
takeover were to occur nevertheless, the Hoya Group’s operating
performance and financial condition could be negatively affected.
Business Risk
HOYA ANNUAL REPORT 2008 51