MORIYA CORPORATION

The construction business, the core operation of the Group, is directly affected by deterioration in the economic conditions of its operating regions and declines in public investment, both of which have a direct impact on order intake. Given the business structure's high dependence on public works, a macroeconomic downturn or fiscal austerity by the government may adversely affect the Group's business performance and financial condition. The securities report does not describe specific countermeasures.

Because contractors for private-sector construction are determined through competitive quotations and those for public works through bidding, the loss of price competitiveness directly results in lost order opportunities. If intensifying competition causes order prices to decline significantly, the resulting deterioration in profitability may adversely affect business performance and financial condition. The securities report does not describe specific countermeasures.

A surge in the prices of construction materials such as steel and cement, and increases in unit labor costs for construction workers, reduce price competitiveness by pushing up estimated prices, and directly affect construction periods and costs when they occur during a project. If cost increases cannot be passed on to order prices, the resulting decline in profit margins may adversely affect business performance and financial condition.

Because construction projects require a considerable period from order receipt to completion, there is a constant risk that the client's financial condition may deteriorate before delivery, leading to delayed collection or non-collection of construction payments. The Group has established order screening regulations, credit management practices, and preventive measures through its Legal & Compliance Office; however, if these measures fail to be effective due to sudden changes in financial conditions or economic circumstances, this may adversely affect business performance and financial condition.

Because the construction business requires public interest and safety considerations and involves a long liability period, if non-conformity with contracts occurs in constructed works or services, the Group may be held liable not only for direct damages but also for indirect damages. Given the business characteristics requiring high technical and construction capabilities, the impact of any non-conformity that occurs could be extensive, potentially adversely affecting business performance and financial condition.

The construction business is subject to a wide range of legal regulations, including the Construction Business Act, the Building Standards Act, the Act on Land and Building Transaction Business, the Companies Act, and the Financial Instruments and Exchange Act. While the Group currently conducts its operations in compliance with these regulations, any future changes to such regulations may adversely affect business performance and financial condition through constraints on business operations or increased compliance costs.

In the construction business, a track record of construction based on highly qualified personnel and advanced technical capabilities is fundamental to the continuation and expansion of operations, making the acquisition and retention of excellent personnel essential. Although the Human Resources Department focuses on securing personnel, if the necessary personnel cannot be secured as planned, this may adversely affect business performance and financial condition through a decline in construction capability or the loss of order opportunities.

Construction work is carried out in a variety of environments, including urban areas, underground, and mountainous areas, and often involves hazardous work such as work at heights, creating an environment prone to accidents causing harm to third parties and occupational injuries to workers. If a large-scale accident or disaster occurs, temporary burdens such as recovery costs and compensation payments may arise, adversely affecting business performance and financial condition.

The Group holds assets such as real estate for its business operations, and if the market value of such assets declines significantly due to market price fluctuations or other factors, it may become necessary to recognize impairment losses. The recognition of impairment losses directly reduces net income for the period, which may adversely affect business performance and financial condition.

Large-scale natural disasters or the spread of epidemics carry the risk of causing a sharp deterioration in economic conditions, disruption of supply chains, suspension or significant delay of construction due to requests from government authorities, damage to owned facilities, and a decline in the workforce. Should these risks materialize, business activities may be constrained in both order receipt and construction execution, potentially adversely affecting business performance and financial condition.