Sanyo Homes Corporation

External factors such as trends in the housing and real estate markets, raw material and materials prices, land price fluctuations, interest rates, housing and consumption tax systems, and employment conditions may affect operating results and financial position. These external factors involve high uncertainty and can act in combination, potentially exerting a broad impact on the overall business. The Group has established a Risk Management Committee and formulated risk management regulations to address these risks.

The Group operates a condominium business (land acquisition, development, and sales) in the four major metropolitan areas, and a deterioration in the domestic real estate market may affect operating results and financial position. When market value or rental prices decline, write-downs of held real estate may become necessary, and there is also an impairment risk for fixed assets across the Group as a whole. Since the real estate market is influenced by external conditions, it is difficult to avoid such risks entirely in advance.

A sharp rise in prices of key housing materials such as steel and lumber, or an increase in labor costs due to a declining working population, could push up procurement costs and affect operating results and financial position. Since materials prices are also affected by international supply and demand trends, profitability may deteriorate in situations where cost pass-through is difficult. The Group strives to respond through its risk management structure, but there are limits to its ability to respond to sudden fluctuations.

As a result of expanding borrowings from financial institutions to increase inventory assets in line with the aggressive expansion of the condominium business, the balance of interest-bearing debt (excluding lease obligations) at the end of the consolidated fiscal year under review stood at ¥19,464 million, accounting for 40.7% of total assets. In a rising interest rate environment, an increase in interest payments would raise funding costs, potentially adversely affecting operating results and financial position. The Group manages interest rate rise risk by combining short-term and long-term borrowings, but the impact could expand depending on market interest rate trends.

Under the Soil Contamination Countermeasures Act, if contamination is discovered on acquired land, this may result in removal costs, changes to project schedules, and additional recognition of asset retirement obligations, potentially affecting operating results and financial position. Although historical and contamination surveys are conducted in advance, it is difficult to identify all contamination beforehand, and there are cases where sellers cannot bear liability for defects. When contamination is confirmed, the Group either halts land acquisition or has specialized contractors carry out removal work.

Since revenue from condominium sales is recognized at the time of delivery to customers, deliveries tend to concentrate in August-September and February-March, causing sales recognition to be skewed toward the second and fourth quarters. In FY2025 (ended March 2025), fourth-quarter net sales were ¥19,553 million, accounting for approximately 43% of full-year net sales of ¥45,518 million, and in FY2026 (ending March 2026) as well, fourth-quarter sales of ¥22,598 million accounted for approximately 45% of full-year sales of ¥50,502 million, reflecting significant quarter-to-quarter fluctuation in performance. This seasonal variation tends to result in operating losses in the first half, making it difficult to forecast full-year performance.

Although quality control is implemented based on industrialized housing performance certification and ISO9001 certification, if unforeseen liability for defects arises, substantial repair costs may be incurred and corporate reputation may be significantly damaged, potentially affecting operating results and financial position. The Group is subject to insurance or deposit system requirements under the Act on Assurance of Performance of Specified Housing Defect Warranty Liability, and costs of complying with legal obligations are incurred on an ongoing basis. Maintaining and strengthening the quality control system remains an ongoing challenge.

The Group conducts business under licenses and registrations such as construction business licenses, real estate brokerage licenses, architectural design office registration, and condominium management company registration. Amendments or abolition of laws, introduction of new regulations, or any violation of laws could restrict business activities and affect operating results and financial position. The Group is also subject to environmental and recycling-related regulations and reporting obligations for product accident information under the revised Consumer Products Safety Act, resulting in ongoing regulatory compliance costs. The Group has strengthened its corporate governance and compliance promotion structure in response, and at present there is no violation of provisions that could lead to license revocation.

Given the nature of the housing and real estate business, the Group handles large volumes of customers' personal information, and any leakage of such information could significantly damage trust and affect operating results and financial position. The Group continuously implements company-wide personal information protection measures, but it is difficult to completely eliminate risks such as cyberattacks and internal misconduct. In the event of an information leak, a combination of impacts is anticipated, including customer response costs, legal liability, and a decline in orders due to brand damage.

Amid a declining working population due to the falling birthrate and aging society, securing the excellent personnel and skilled construction workers needed to expand the housing and condominium business may become difficult, posing a risk to operating results and financial position. The Group is promoting efficiency through IT adoption, automation, and workflow reviews, while actively hiring new graduates and mid-career employees, and also training new graduates and foreign technical intern trainees at its Carpenter School. However, if the labor shortage across the construction industry as a whole worsens or if personnel attrition increases, business execution could be hindered.