Challenges to be Addressed and Business Risks
Challenges to be addressed
The Furuya Metal Group (the “Group”) faces several ongoing challenges, including the development of high value-added products, the promotion of cost-reduction initiatives, the stable procurement of precious metals, and the enhancement of its environmental, safety, and governance frameworks.
First, in developing high value-added products and promoting cost reduction, the Group aims to accurately identify market needs and drive differentiation and value creation through close collaboration among its sales, development, and manufacturing divisions. At the same time, we are pursuing the standardization and automation of production processes and improving operational efficiency to ensure consistent quality, enhance asset efficiency, and achieve sustainable cost reductions.
Next, to ensure a stable supply of precious metals, we are making proactive capital investments to strengthen our recovery capabilities by advancing recovery technologies and establishing new refining systems.
In addition, we will continue to maintain and reinforce our close business relationships with Tanaka Kikinzoku Kogyo K.K. and mining companies as a key policy for securing a stable and reliable supply of precious metals.
Furthermore, in pursuit of continuous growth and the enhancement of corporate value, the Group remains committed to environmental and safety initiatives while further strengthening its governance framework.
We recognize the enhancement of corporate governance and the effective operation of internal control systems as critical management priorities and will continue to make dedicated efforts toward their realization.
Business risks
The following section outlines the principal factors that the Group believes may pose potential risks to its business operations.
In addition, certain matters that may not necessarily constitute business risks are disclosed proactively to ensure transparency for investors, where such information is considered important for making informed investment decisions or for understanding the Group’s business activities.
The Group recognizes the potential occurrence of these risks and seeks to prevent or mitigate them through appropriate management measures, while also ensuring timely and effective responses should such risks materialize.
However, investment decisions regarding the Group’s shares should be made only after careful consideration of the information provided on this website and in the Securities Report.
Please note that the following statements do not encompass all possible risks associated with an investment in the Group’s shares.
Furthermore, any forward-looking statements on this website represent the Group’s judgments as of September 25, 2025.
Factors affecting business performance
The business performance of the Group is influenced by the level of capital investment and production activity among manufacturers in the electronics industry, including those involved in mobile phones, liquid crystal displays, electronic components and devices, semiconductors, optical glass, and catalysts. Accordingly, any downturn in these industries may have an adverse effect on the Group’s operating results and financial position.
However, the Group has not been significantly affected by tariff issues in the United States.
Precious metal prices
The raw materials used in the Group’s products consist largely of costly precious metals.
Because the Group also holds a certain volume of these metals to ensure a stable supply and respond flexibly to market demand, fluctuations in precious metal prices have a direct impact on the Group’s business performance.
Among platinum group metals (PGMs), the trading prices of iridium and ruthenium—both handled in significant quantities by the Group—are determined based on benchmark prices published by major precious metal dealers.
These prices fluctuate due to various factors, including demand trends for products using these metals, speculative market activity, political and economic conditions in producing and consuming countries, and foreign exchange movements.
Similarly, platinum and palladium—both actively traded on international commodity markets—are subject to price volatility driven by these same factors.
Such fluctuations can directly affect the Group’s net sales and profitability.
To mitigate these risks, the Group works to minimize the impact of raw material price fluctuations by maintaining close relationships with overseas mining companies, diversifying procurement channels, and increasing the proportion of recycled materials used.
Nevertheless, it is difficult to eliminate exposure to market volatility entirely.
Accordingly, depending on market trends during production and inventory periods, fluctuations in precious metal prices may affect the Group’s business performance and financial position.
Procurement of precious metals
The Group’s products use rare metals such as iridium and ruthenium as key raw materials.
Because production sites and output volumes for these metals are limited, the Group maintains a certain level of raw material inventory to mitigate procurement risks.
However, if production or distribution volumes decline due to political or economic instability in producing countries, regulatory changes, or global supply–demand imbalances, such developments could adversely affect the Group’s business performance and financial position.
Impact of foreign exchange fluctuations
The Group engages in import and export transactions for raw materials and products denominated in foreign currencies.
In addition, the financial statements of its overseas consolidated subsidiaries are prepared in foreign currencies, exposing the Group to foreign exchange risks.
Exchange rate fluctuations affect the Group’s revenues and expenses related to import and export transactions, as well as the yen-equivalent value of foreign currency–denominated assets and liabilities.
They also influence the Group’s business performance and financial position through the translation of overseas subsidiaries’ financial statements into yen.
To mitigate the impact of exchange rate volatility, the Group utilizes foreign exchange forward contracts and securitization of receivables.
However, depending on market conditions, such measures may not fully offset the effects of currency fluctuations.
Risks related to major shareholders and other affiliated companies
As of the end of the current fiscal year, Tanaka Kikinzoku Kogyo K.K. holds 17.32% of the total voting rights of the Group and is classified as both a major shareholder and an affiliated company of the Group.
Its parent company, Tanaka Kikinzoku Group Co., Ltd., and FIELD IN & CO., Ltd. are also classified as affiliated companies of the Group.
The Group has entered into a capital and business alliance agreement with Tanaka Kikinzoku Kogyo K.K.
As a major shareholder, Tanaka Kikinzoku Kogyo K.K.’s views regarding the Group’s management policies and exercise of voting rights may influence the Group’s business operations and corporate governance.
Furthermore, if Tanaka Kikinzoku Kogyo K.K., Tanaka Kikinzoku Group Co., Ltd., or FIELD IN & CO Ltd.were to change their views on the Group’s management policies or their policy on shareholding, such changes could affect the Group’s share price, business performance, financial position, and cash flow.
Relationship with major shareholders
Relationship with Tanaka Kikinzoku Kogyo K.K.
As of the end of the current consolidated fiscal year (for the fiscal year ended June 30, 2025), Tanaka Kikinzoku Kogyo K.K. holds 17.29% of the Group’s total issued shares excluding treasury shares and is therefore classified as a major shareholder.
Business transactions
At its meeting on February 7, 2011, the Group’s Board of Directors resolved to enter into a capital and business alliance agreement with Tanaka Kikinzoku Kogyo K.K.
The purpose of this agreement is to ensure a stable supply of iridium bullion and other precious metals.
Based on this agreement, the Grouppurchases iridium and other principal raw materials from Tanaka Kikinzoku Kogyo K.K.
The amount of purchases, percentage of total purchases, and accounts payable balance at fiscal year-end are as follows:
| Fiscal year ended June 30, 2025 | |
|---|---|
| Amount of purchases (million yen) | 166 |
| Percentage of total purchases (%) | 0.4 |
| Accounts payable at year-end (million yen) | 132 |
Furthermore, the amount of sales to Tanaka Kikinzoku Kogyo K.K., the percentage of total net sales, and the accounts receivable balance at the end of the fiscal year are as follows:
| Fiscal year ended June 30, 2025 | |
|---|---|
| Net sales (million yen) | 139 |
| Percentage of total net sales (%) | 0.2 |
| Accounts receivable at year-end (million yen) | 23 |
As described above, in both the procurement of raw materials and the sale of products, the Group leverages the strong and stable procurement capabilities and diverse sales channels of Tanaka Kikinzoku Kogyo K.K.
By capitalizing on Tanaka Kikinzoku Kogyo K.K.’s exceptional strengths in procurement and marketing, the Group believes it is well positioned to respond effectively to the growing demand for industrial precious metal products.
The Group intends to maintain a sound relationship and continue its business transactions with Tanaka Kikinzoku Kogyo K.K. going forward.
However, any significant change in this relationship could affect the Group’s business performance through fluctuations in raw material procurement volumes or product sales.
Personnel relationship
Based on the capital and business alliance agreement with Tanaka Kikinzoku Kogyo K.K., Kazunori Ochiai, a full-time advisor to Tanaka Kikinzoku Kogyo K.K., was nominated as a candidate for Director.
Following the recommendation of the Nomination and Compensation Advisory Committee, approval by the Board of Directors, and subsequent approval at the General Meeting of Shareholders, he was appointed as an Outside Director of Furuya Metal Co., Ltd.
Ensuring independence
Although Kazunori Ochiai, a full-time advisor to Tanaka Kikinzoku Kogyo K.K., was nominated and appointed as an Outside Director of the Furuya Metal Co., Ltd. pursuant to the capital and business alliance agreement, neither Tanaka Kikinzoku Kogyo K.K., Tanaka Kikinzoku Group Co., Ltd., nor FIELD IN & CO., Ltd. holds any authority to pre-approve or require prior consultation on the Group’s management decisions.
The Group conducts its business operations and makes management decisions independently, based on its own judgment, and there are no circumstances under which Tanaka Kikinzoku Kogyo K.K., Tanaka Kikinzoku Group Co., Ltd., or FIELD IN & CO., Ltd. interferes with the Group’s business activities or decision-making processes.
Nevertheless, as stated above, given the significant business relationship between the parties, any change in the relationship with Tanaka Kikinzoku Kogyo K.K., Tanaka Kikinzoku Group Co., Ltd., or FIELD IN & CO., Ltd. could affect the Group’s share price, financial position, operating results, or cash flows.
Securing and developing human resources
For the Group to achieve sustainable growth and expand its business operations, it is essential to secure and nurture personnel with specialized expertise in precious metal processing technologies.
Accordingly, the Group recognizes the recruitment and development of such human resources as a key management priority.
The Group seeks to attract talented individuals through both mid-career and new graduate recruitment, while continuously strengthening recruitment initiatives and enhancing its education and training programs.
However, if the Group fails to secure or develop the skilled personnel required for business expansion, or if a significant outflow of employees occurs for any reason, such circumstances could adversely affect the Group’s business operations and performance.
Impact of intensified industry competition
Among the Group’s products—such as ruthenium targets, various sputtering targets, thermocouples, and scientific instruments—some are subject to intense market competition and downward pricing pressure.
Rather than engaging in excessive price competition, the Group focuses on proposal-based sales activities that prioritize customer needs and emphasize added value.
The Group will continue to advance management initiatives in line with this approach. However, persistent or intensified market competition could result in a decline in sales or profitability, which may adversely affect the Group’s operating results.
Product development and related activities
The Group analyzes information obtained from customers and external institutions to identify changes in product life cycles and market trends.
Building on these insights, the Group engages in the development of new products and materials, as well as the cultivation of new markets and applications.
However, if market conditions change more rapidly or drastically than anticipated, or if development activities do not progress as planned, the competitiveness of the Group’s products may decline.
Such circumstances could adversely affect the Group’s business performance.
Product quality
The Group’s products are required to meet stringent quality standards and precise customer specifications.
To ensure consistent quality, the Group has implemented robust manufacturing process controls and a quality management system compliant with ISO 9001, while continuously striving for further improvement.
Nevertheless, if any products fail to meet required standards or specifications, or if nonconformities arise, significant quality claims could occur.
In the event of a defect, the Group may be required to provide replacements, reimbursements, or compensation for damages, and could face suspension of transactions or deliveries.
Such incidents may harm the reputation and credibility of the Group’s products, potentially affecting relationships with other customers.
If such cases involve major clients, they could have a material adverse impact on the Group’s business performance and financial position.
Concentration of production sites
Since relocating and consolidating its production facilities to the Tsukuba Plant in Chikusei City, Ibaraki Prefecture (formerly Shimodate City) in 1990, the Group has conducted the majority of its manufacturing operations at this location, benefiting from improved efficiency through the concentration of production activities.
The Group has partially diversified its production bases by establishing the Tsuchiura Plant in December 2007 as a core refining and recovery facility, the Chitose Plant in Chitose City, Hokkaido in October 2010 to internalize quartz protection tube production, and a second phase of the Tsuchiura Plant in April 2011 to expand iridium recovery and refining lines.
Nevertheless, overall diversification of production site remains limited. Accordingly, natural disasters or other external events that disrupt manufacturing operations could adversely affect the Group’s business performance and financial position.
Impact of accidents on operations
The Group operates key production equipment—including plasma melting furnaces and high-frequency induction furnaces—under high-temperature and high-pressure conditions, and uses substantial quantities of chemicals in its precious metal refining processes.
While the Group maintains rigorous safety and accident-prevention measures, any serious operational incident could disrupt production and adversely affect the Group’s business performance.
Environmental risks
The Group places strong emphasis on prevention in managing environmental risks.
At both the Tsukuba Plant and the Tsuchiura Plant, the Group operates an environmental management system certified under ISO 14001 to reduce potential risks.
However, incidents such as chemical leaks or environmental contamination caused by natural disasters, equipment deterioration, or human error in the handling of raw materials or chemicals could occur.
If such incidents were to be significant, they could result in additional costs or other burdens, which may adversely affect the Group’s business performance and financial position.
Risks related to intellectual property
The Group has accumulated proprietary technologies and know-how that differentiate it from competitors.
To protect these assets, the Group secures patents and other intellectual property rights and, at the same time, takes measures to prevent infringement of third-party rights. These efforts are carried out primarily by the R&D division, with the cooperation of external experts such as legal advisors and patent attorneys.
Nevertheless, the Group may not always be able to accurately or fully determine whether its current or future products infringe upon third-party intellectual property rights.
In addition, patents or other rights unrecognized by the Group may subsequently be granted, potentially leading to claims, lawsuits, or demands for compensation.
Such events could adversely affect the Group’s business performance and financial position.
Dependence on borrowings
The Group primarily finances the procurement of precious metals—its principal raw materials—and capital expenditures through borrowings from financial institutions.
As of the end of the current consolidated fiscal year, outstanding borrowings totaled ¥28,600 million, representing a debt-to-total-assets ratio of 23.1%. For the fiscal year, the ratio of interest expenses to net sales for the Group was 2.2%.
The Group aims to strengthen its financial base through surplus operating cash flows and equity financing.
However, increased borrowings resulting from higher raw material procurement or a rise in market interest rates could increase interest expenses and adversely affect the Group’s business performance.
Some of the Group’s borrowings are subject to financial covenants. In the event of a breach of such covenants or if deteriorating performance hinders new financing, the Group’s business development could be adversely affected.
Risks related to deferred tax assets
The Group recognizes deferred tax assets in accordance with prevailing accounting standards, based on evaluations of company classification, the sufficiency of future taxable income, and the expected timing of reversals of deductible temporary differences.
In particular, deferred tax assets related to refining and recovery costs for raw materials are scheduled in accordance with planned future refining and recovery activities. However, these plans may be influenced by fluctuations in product orders or changes in international precious metal prices.
Furthermore, if significant changes occur in the Group’s business performance or operating environment, or if amendments to tax laws or accounting standards—including changes in tax rates—are enacted, the Group may be required to reduce part or all of its deferred tax assets.
Such adjustments could adversely affect the Group’s business performance and financial position.