Br. Holdings Corporation

The proportion of sales in the construction business attributable to government agencies and public bodies (including the Japan Railway Construction, Transport and Technology Agency and expressway companies) is extremely high at approximately 80%, resulting in a structure highly dependent on public works projects. If orders from government agencies and public bodies are reduced more than expected, this could have a direct and material impact on business performance. There is no explicit disclosure in the securities report regarding countermeasures such as diversification.

In the construction business, the company strives to contract at appropriate levels for material prices and subcontractor labor unit costs at the time of order receipt; however, if material prices or subcontractor labor costs surge, there may be cases where it is difficult to reflect this in contract amounts even with escalation clauses. If cost increases cannot be passed on to contract amounts, construction profitability may deteriorate, potentially affecting business performance.

The Group holds fixed assets such as property, plant and equipment and software, and significant changes in the business environment or deterioration in profitability may necessitate recognition of impairment losses. Due to the holding company structure, if an impairment loss occurs at an operating subsidiary, a corresponding loss related to investments and loans to that subsidiary would also need to be recognized in the Company's non-consolidated financial statements, potentially having a dual impact on the Company's business performance and financial position.

Due to the nature of the construction contracting business, increases in large-scale, long-term projects have significantly increased the need for advance funding, and working capital is primarily procured through borrowings from financial institutions. As of the end of March 2025, interest-bearing debt stood at ¥19,366 million, with an interest-bearing debt dependency ratio of 46.2% (up 5.8 percentage points from the previous fiscal year-end), a high level. A significant rise in interest rates could increase financial costs and affect business performance and financial position. As countermeasures, the Group utilizes a CMS (Cash Management System) contract to improve group-wide fund efficiency and makes use of a commitment line.

The Group's construction business is subject to regulation under the Construction Business Act, with BR Holdings Co., Ltd., Kyokuto Kowa Co., Ltd., and East Japan Concrete Co., Ltd. each holding construction business licenses (general or specific). If the Group violates the Construction Business Act and receives administrative dispositions such as an order for full or partial suspension of business or license revocation, this could seriously impede business continuity and affect business performance. The Company currently recognizes no facts that violate legal regulations and strives to comply with relevant laws and regulations.

Because the construction business involves outdoor production, it is susceptible to natural conditions such as seasonal factors and weather, and in recent years Japan has experienced frequent large-scale natural disasters such as earthquakes, typhoons, and landslides caused by heavy rain. If construction work is interrupted or significantly delayed due to a large-scale natural disaster, this could affect business performance through increased costs and delayed recognition of sales associated with construction delays. The Group addresses this by exercising utmost care in construction management.

The Company operates under a holding company structure, supplying funds necessary for the operation of operating subsidiaries through investments and loans. If the financial position of an operating subsidiary deteriorates, such as through recognition of impairment losses on fixed assets, this could trigger a chain reaction of loss recognition related to investments and loans in the Company's non-consolidated financial statements, representing a structural risk that could affect the Company's business performance and financial position.