OHMORI CO.,LTD.

The core construction business is highly dependent on public works related to the development and maintenance of social infrastructure, and if public works budgets are significantly reduced, this could lead to a decline in construction orders and have a material impact on business performance. As a countermeasure, the Group is actively pursuing M&A to make quality construction companies subsidiaries and expanding its business area beyond Tokyo, thereby working to diversify its order base.

If low-price bidding and excessive competition in public works tenders intensify, this could lead to a decline in the gross profit margin on completed construction contracts and affect business performance. On the other hand, underground construction work in central Tokyo is a highly difficult environment where subways, cables, gas and water pipes are densely concentrated, and the Group seeks to maintain competitive advantage through its half-century track record in Tokyo waterworks and sewerage construction and the inheritance and refinement of its technical capabilities, knowledge and experience.

Since construction projects require a long period from order receipt to completion, if construction material prices and labor costs surge during the construction process and cannot be passed on to the contract price, this could reduce gross profit on completed construction contracts. The estimating department within the Civil Engineering Division constantly monitors price fluctuations and reflects them in bid price calculations, and responds to sharp fluctuations during the construction period by proposing alternative construction methods.

Since the construction business involves large transaction amounts per contract, if the business performance of a contracting party or partner company deteriorates or credit concerns arise, delays in collecting construction payments or bad debts may occur, affecting business performance. The Group conducts credit checks and due diligence on new business partners, and for ongoing partners, collects information in partnership with credit research agencies to work toward securing its receivables.

Although the Group makes every effort to ensure thorough quality control, if liability for defects, product liability, or other damages arises, this could result in large claims for damages and affect business performance. The Group has obtained ISO 9001 certification and thoroughly implements quality control based on work manuals by construction method, and conducts internal inspections by Civil Engineering Division officers upon completion of construction to confirm quality.

Although the Group makes every effort regarding disaster prevention and accident prevention during construction, if unexpected construction accidents or industrial accidents occur, this could reduce order opportunities due to suspension of qualification and affect business performance. The Group has established a safety management structure centered on top management, reports the results of on-site patrol monitoring to the management meeting, and also conducts patrols and improvements to construction methods through a disaster prevention council centered on partner companies.

In the construction business, it is mandatory to assign nationally qualified managing engineers to each project, and if stagnation in recruitment or an increase in employee turnover occurs against the backdrop of a declining working population in the construction industry, this could lead to a decrease in completed construction contract value and gross profit. The Group works to secure personnel through active recruitment activities, enhancement of continued employment after retirement age, and active hiring of women who wish to work in construction management.

The Group is subject to legal regulations such as the Construction Business Act, the Building Standards Act, the Building Lots and Buildings Transaction Business Act, and the Industrial Safety and Health Act, and if these are abolished, newly enacted, or the applicable standards are changed, this could affect business performance. The responsible department monitors trends in regulatory changes and formulates and disseminates response policies throughout the Group, and at the general meeting held in principle once every three months, the Representative Director and President and the director in charge explain the importance of legal compliance.

If economic conditions deteriorate due to a financial crisis or sharp market fluctuations, this could hinder the procurement of construction funds and other capital, as well as raise procurement costs, affecting business performance. The Group works to secure appropriate cash liquidity and reduce the risk of rising procurement costs by entering into multi-year commitment line agreements.

The Group holds real estate for sale and tangible fixed assets such as land, and if a deterioration in the domestic real estate market necessitates write-downs or impairment losses, this could affect business performance. Real estate acquisitions are examined at management meetings and board of directors meetings, and after acquisition, the Group monitors occupancy rate improvements and monthly operating status, seeking to minimize risk by holding only useful assets while taking market value into consideration.