MASARU CORPORATION

The core waterproofing construction business operates on a contract basis, exposing it to the risk that order volumes may fluctuate depending on the conditions of ordering parties. If competition for orders with competitors intensifies and leads to lower profitability, this could result in reduced earning power. The structure is such that changes in the market environment directly affect business performance.

If credit concerns arise regarding ordering parties or partner companies, unexpected events such as concerns over fund recovery or delays in construction schedules could occur and affect business performance. While the Group implements risk avoidance measures such as conducting credit reviews of business partners and gathering information on credit concerns, complete elimination of this risk is difficult. In particular, deterioration in the management of partner companies is directly linked to the construction system, thereby embedding risk in both financial and operational aspects.

If an unexpected serious accident occurs during construction, there is a risk of administrative sanctions from relevant government authorities. Such administrative sanctions may include suspension of business operations and could directly damage order-taking activities and net sales. While the Group states that it takes thorough measures for safety management, the uncertainties inherent to construction sites cannot be eliminated.

As a characteristic of the construction industry, both order intake and net sales tend to be concentrated in the first half of the fiscal year, resulting in a significant gap between the first half and second half. This seasonal fluctuation affects the efficiency of cash flow management and personnel allocation, and also reduces the accuracy of full-year performance forecasts. This is a risk that investors should keep in mind when evaluating quarterly performance.

If defects occur in constructed works such as waterproofing construction, in addition to loss of customer trust, damages may arise based on warranty liability for defects, potentially affecting business performance. While the Company states that it takes thorough measures for quality control, the risk that defects become apparent after construction cannot be completely eliminated. Depending on the scale of damages, the financial impact could reach a non-negligible level.

In new waterproofing construction, renovation construction, directly ordered construction, and equipment construction, if price increases for waterproofing materials or other materials occur between the conclusion of the order contract and the completion of construction, it may become difficult to pass these costs on through the contract price, thereby compressing profit margins. In phases of rising raw material prices, the nature of fixed-price contracts may force the Company to absorb cost increases. In an environment where material prices remain elevated for a prolonged period, this becomes a continuous downward pressure on the earnings structure.

If a natural disaster such as an earthquake, tsunami, or wind/flood damage occurs, the assets held by the Group and its employees may be directly affected, resulting in damages. In the case of a large-scale disaster, the business environment itself may change, creating a risk of disruption to order-taking activities and the continuation of construction work. For the Group, whose primary business area is within Japan, preparedness for natural disasters, including earthquake risk, remains an ongoing challenge.