Investor Relations

Business Risks

Other factors not related to Dunlop Sports Co. Ltd. business operations may have significant influence in investment decisions. Our company recognizes these potential risks and is working to avoid and appropriately handle these risks should they actualize. The items listed below were discussed by Dunlop Sports Co. Ltd. on March 25, 2015.

Our company's sports merchandise operations belong to the sports leisure industry. When compared with industries involved with everyday necessities, the demand for service and products from leisure industries is easily affected by the weather, economic trends, and changes in societal conditions. Due of this, our company's performance may be impacted by such changes.

The Japan market for sports equipment shrank under the influence of the economic downturn beginning in the 1990s, and harsh conditions are expected to continue for the foreseeable future. Due to an increase in health consciousness among consumers, we predict mid- and long-term market growth and sports diversification; however, if the number of golfers and tennis players were to decrease, so would demand, which might have an impact on our company's performance.

Our company's products are primarily sports and leisure products and consumer trends and tastes in those fields may change in the short term. Through the promotion and advancement of our brand image in advertisements and publicity in all media formats, promotional contracts with professional athletes, and investment in new products, our company is working to distinguish its products from the rest and maintain our competitiveness. However, there is a possibility that our growth and performance may be negatively impacted in the event we misread changes in consumer trends and are not able to make all necessary adjustments.

Dunlop Sports Group operations are conducted in many regions both in Japan and overseas, and there is always a possibility that they will be affected either directly or indirectly by natural disasters, disease, war, terrorism, or other calamities. In addition to the humanitarian consequences, such events can have a negative effect on the business results of the Group.

Sales of golf clubs and balls constitute the majority of our sales, and manufacturers within the golf equipment industry continue to fiercely compete in the area of technological development. It is our policy at Dunlop Sports to continue to invest in products which apply new technology and to develop new features, new materials, and new theoretical concepts to support our unique technology; however, since the development and sale of new products depends on complex and unreliable factors, the successful sale and development of such products cannot be guaranteed.

Golf equipment manufactured and sold by our group meets the regulations set forth in the rules for the R&A (Royal and Ancient Golf Club of St. Andrews) and the USGA (United States Golf Association). Should the need arise to alter golf equipment specifications or sales policy due to alterations in those rules, our company's financial position and operating results may be affected.

XXIO brand golf clubs are central to our company's sales, and sales trends for the club can greatly affect company performance. From its introduction in 2000 through the current fifth-generation, our XXIO golf club has steadily sold well. However, since the development and sale of golf clubs depends on unreliable factors, as mentioned previously, we cannot guarantee the continued success of the brand.

In addition to selling the Srixon brand in Japan as a product targeting intermediate and advanced golfers, our company is promoting it and establishing it as a major brand overseas. The results of Srixon's efforts to promote its market share and brand recognition overseas may have an influence on our company's performance and growth.

Our company follows established quality control standards in purchasing materials and manufacturing products. However, there is no guarantee that no product will have defects, nor that compensable product liability claims will not occur. We hold insurance for product liability claims through Sumitomo Rubber Industries, Ltd.; however, if a product liability issue calls into question our corporate responsibility and our social reputation declines, our company's financial position and operating results may be adversely affected.

Imports account for a significant number of the raw materials and products that our company handles, including golf parts such as club heads, golf shoes, and tennis rackets, and we settle our accounts for these goods with foreign currency. While our company also engages in exporting, the amount of our purchases of materials from abroad greatly exceed the amount of our sales overseas, so that if exchange rate shifts devalue the yen, our performance may be adversely affected.

Our policy is to reduce the risk of exchange rate fluctuations by increasing our overseas sales ratio as well as by arranging forward exchange contracts to hedge against this risk, but the risk cannot be completely avoided.

The main raw materials in golf balls and clubs, our biggest sales products, are metals, such as titanium, and petrochemicals, including carbon fiber, synthetic rubber, and other chemicals. Price fluctuations for steel and crude oil can influence company performance.

In addition, the vast majority of club heads, an indispensible component of the golf clubs we manufacture and sell, are produced in China. We have secured a number of golf club head manufacturers in order to guarantee a steady supply of club heads, and our affiliate companies EVERMORE ENGINEERING CORP. and EVERMORE INDUSTRY (BVI) COMPANY LTD. will handle the management of the manufacturers to ensure a steady supply. However, should changes in political or economic climate in the region produce obstacles to the purchasing operations of our company, our performance may be adversely affected.

On May 11, 2005, our company signed an Industrial Property Rights Transfer Agreement with Sumitomo Rubber Industries, Ltd., and purchased the industrial property rights to trademarks and patents.

As of March 25, 2015, there have been no lawsuits concerning intellectual property rights; however, it is possible that such suits, should they arise, might adversely influence product development and lead to a deterioration in brand image. Since infringement suits concerning intellectual property rights in particular would incur a significant amount of time and expense, our company's financial position and operating results may be adversely affected.

Dunlop Sports Group is in possession of fixed assets that include tangible fixed assets, trademarks, and brand names. From among the applicable assets, in the event that an asset or asset group is recognized as exhibiting signs of loss and the recoverable value (either the total post-discounted future cash flow of the applicable asset or asset group or the net sale value of the applicable asset or asset group, whichever is greater) is less than the book value, the book value will be reduced to the amount of the recoverable value and the amount of the devaluation will be capitalized as a loss in profits. For this reason, there may be a negative effect on the business results of this Group if it is necessary to capitalize a loss of fixed assets due to a marked change in the operating environment or loss of earning capacity in an operation to which the applicable asset or asset group belongs.

Concerning the recoverability of deferred tax assets for tax-effect accounting, determination is made based on factors such as scheduling for temporary disparities and sufficiency of taxable income; however, if it is determined that it is not possible to schedule for temporary disparities or sufficient taxable income cannot be secured due to reduced earnings capacity, the tax expense will be capitalized by demolishing the deferred tax asset, which may have a negative effect on the business results of this Group.

  • Large
  • Normal
  • Small
  • Print
Page top