Risk Factors

a. Business in Japan

The SATO Group operates its business by providing customers with optimal solutions for using auto-identification technology media such as barcodes, 2D codes and RFID by integrally combining mechatronic products, supply products, and software technology. Since the SATO Group operates primarily in the supply products business in a broad range of industries including not only distribution and retail, but also manufacturing, transportation, medical, and food processing, the Group is resistant to the effects of economic trends. Nevertheless, in order to accumulate the know-how and create the sales tools to provide the value-added aspect required in a solutions-based business, we must allocate a large portion of operating revenues to selling, general and administrative expenses. A sudden drop in net sales due to broad-reaching and severe downturn in the economy could significantly affect the Group’s financial results.

b. Business overseas

The SATO Group possesses multiple production and sales subsidiaries in various regions including the Americas, Europe, Asia and Oceania. In conducting business in these overseas markets, the Group exposes itself to the following risks.

(a) Unexpected changes in laws and regulations.
(b) Occurrence of unexpected political or economic factors.
(c) Changes to the tax system or tax rate which have adverse effect.
(d) Social turmoil, etc. caused by terrorist attacks, wars, natural disasters, infectious disease epidemics, or by other factors.

Any of the above events could significantly affect the Group’s financial results.

c. Currency fluctuations

The SATO Group carries out manufacturing and sales on a global scale and conducts transactions between the Company and overseas subsidiaries in multiple foreign currencies. A considerable currency fluctuation could significantly affect the Group’s product competitiveness, profitability and other aspects of its financial results.

d. Intellectual property rights

The SATO Group conducts surveys and negotiations to avoid trouble with respect to intellectual property rights, and it proactively pursues the acquisition of intellectual property rights. At present, there are no cases of the Group breaching the intellectual property rights of a third party. There is a risk, however, that in the future, the Group could be involved in a legal suit. A situation whereby the Group is disadvantaged by such a legal suit could significantly affect the Group’s financial results.

e. Procurement of raw materials, etc.

The SATO Group procures raw materials and parts from numerous external sources. If the Group is unable to obtain these at the planned quantity or price due to any reason and is unable to reduce costs or pass on that extra cost to the price of the finished product, such a situation could significantly affect the Group’s financial results.

f. Disposal or loss on valuation of inventories

The SATO Group pays adequate attention to quality, environmental standards and inventory management for its finished products and parts. However, if it becomes necessary to revise the values of finished products and work in process because of sudden changes in market trends, technological innovation, or the product lifecycle, and if inventories are disposed of or loss on valuation is recorded on them, such a situation could significantly affect the Group’s financial results.

The forecasts mentioned in this page are estimates based on available information as of March 31st 2017, and hence, contain risks and uncertainties.