Nishimatsu Construction Co., Ltd.

Because it is difficult to accurately forecast future material procurement prices at the time of order receipt for long-term construction projects, there is a risk that construction costs may increase substantially during the construction period. If such cost increases cannot be reflected in the contracted construction amount, construction profit and loss may fluctuate, potentially having a material impact on business performance. In response, the Company works to secure construction profit and loss through negotiations with clients, quantitative evaluation of price fluctuation risk, and early procurement of key materials.

With the decline in Japan's working-age population, the shortage of engineers in the civil engineering and building construction fields is becoming more serious, posing a significant possibility of hindering future business continuity and growth. The Company monitors the adequacy of engineer staffing, productivity improvements through technological innovation, turnover and recruitment trends, and progress of technical skill transfer, and plans to implement additional measures as necessary. The shortage of candidates for site manager positions is similarly recognized as a risk affecting business continuity and growth, against a backdrop of imbalanced age distribution among employees and changing values.

Due to the decline in the working-age population and the decrease in new entrants to the construction industry, there is a significant possibility that changes in the subcontracting structure will lead to rising labor costs and difficulty securing partner companies. The Company continuously monitors the number of construction workers, the number of subcontractors and partner companies, the status of member companies in the N-Net network, and the trends of competitors, and considers and implements necessary measures accordingly.

If design and construction information, or personal information and confidential information of customers and business partners, is leaked or lost due to cyberattacks (such as ransomware or targeted email attacks) or employee negligence or internal misconduct, this could result in damages compensation or recovery costs, potentially having a material impact on business performance. In addition to formulating an information security policy and implementing technical measures such as prevention of unauthorized external access and virus countermeasures, the Company continuously strengthens human-related measures such as employee training and targeted email attack drills.

If a serious defect occurs in a constructed structure, this could result in loss of customer trust as well as damages compensation based on liability for nonconformity with the contract, potentially having a material impact on business performance. The Company strives to maintain quality control through construction in accordance with internal standards, quality patrols, company-wide sharing of defect cases, and various training programs.

In overseas businesses centered on Southeast Asia and South Asia, country risks such as terrorism, changes in political and economic conditions, and legal and regulatory changes, as well as fluctuations in order volume due to restrictions on foreign companies' activities or a slowdown in investment by Japanese companies, could have a material impact on business performance. The Company checks the Ministry of Foreign Affairs' danger level information and conducts periodic country risk assessments, while also working to stabilize its business by expanding engagement in local and foreign-affiliated projects and localizing its operational structure.

If construction demand decreases or the real estate market contracts due to economic deterioration or other factors, this could lead to a decline in construction order volume and a slowdown in real estate sales and leasing businesses, potentially having a material impact on business performance. The Company pursues its business activities based on the long-term vision "Nishimatsu-Vision2035" and the "Medium-Term Management Plan 2028," and has established a framework to appropriately revise its plans if environmental changes exceed expectations.

If exit strategies cannot be executed as planned due to deterioration of the real estate market, or if profitability declines due to poor performance of investees, this could have a material impact on business performance. The Company strives to reduce the impact on business performance through establishing a business management structure, project risk assessment, timely review of business plans, and securing alternative exit strategies, and conducts sensitivity analyses incorporating expert and third-party opinions for new businesses.

If an unexpected serious accident or occupational injury occurs during construction, this could result in loss of trust from customers and stakeholders, potentially having a material impact on business performance. The Company works to prevent occupational accidents through company-wide sharing of past cases, regular site patrols, and continuous implementation of safety education for its own employees as well as foremen and workers of partner companies.

Significant fluctuations in exchange rates could have a material impact on business performance through overseas businesses and the procurement of overseas materials and equipment for domestic construction projects. For overseas construction projects, the Company avoids foreign exchange risk by matching the currencies of construction receipts and construction expenditures in principle, and for the procurement of overseas materials and equipment in domestic construction projects, it seeks to reduce the impact on business performance by considering measures such as forward exchange contracts.