FUJI P.S CORPORATION

Public civil engineering projects account for approximately 70% of the Group's sales, and while these are on an increasing trend due to national resilience measures, mid- to long-term continuity is uncertain given fiscal conditions. If expansion of the building construction business does not progress, this could have a material impact on business performance. The Group is diversifying by strengthening order-taking activities outside of public works.

If material purchase unit costs or subcontractor labor unit costs surge due to various factors, this could directly compress profitability and affect business performance in cases where price escalation clauses in contract amounts are not applied. The Group works to mitigate this risk by maintaining close negotiations with clients and encouraging the application of escalation clauses.

The shortage of construction engineers and skilled workers has become pronounced due to the advancing decline in birthrate and aging population, as well as structural issues in the construction industry. Failure to respond appropriately could lead to reduced construction capacity and affect business performance. The Group mitigates this risk by promoting precast construction methods on-site and actively hiring female and foreign engineers.

The construction industry involves many hazardous operations such as work at height, and has the highest incidence rate of serious accidents among industries. Should an industrial accident occur, this could negatively affect construction performance ratings and lead to suspension from bidding by relevant ordering authorities, thereby affecting business performance. The Group works toward zero accidents by establishing health and safety committees at each branch office and regularly conducting safety patrols and KY (hazard prediction) activities.

Although the Group exercises thorough quality control, should liability for non-conformity with contract terms or product liability result in damage compensation or repair work, this could affect business performance through the incurrence of substantial repair costs or suspension from bidding. The Group ensures rigorous quality control through process checks such as design review after order receipt and regular quality patrols.

The main products driving expansion of the building construction business are factory-manufactured components, requiring the ownership of factory facilities to supply regional markets. Since private building investment is heavily influenced by economic conditions, prices, and employment trends, a decline in factory utilization rates due to reduced demand from economic downturns could affect business performance. The Group has built a structure to avoid excessive dependence on private building investment by promoting precast methods in the civil engineering business.

If local governments maintain or strengthen the application of the Public Procurement Promotion Act as part of regional development measures, there may be an increase in cases where the Group subcontracts to or forms joint ventures with local small and medium-sized enterprises. Should a local company in a joint venture fall into credit difficulty, this could affect business performance. The Group mitigates this risk by conducting appropriate credit checks on business partners prior to contract.

Cyberattacks, including ransomware, have been increasing in recent years, potentially resulting in leakage of confidential data such as construction project information, intellectual property, and personal information, as well as serious impacts on business continuity. The Group conducts information security training, deploys malware detection software, and protects data through backups at other locations, while also defining rapid response procedures in the event of infection within its business continuity plan.

Large-scale natural disasters such as earthquakes and typhoons, as well as outbreaks of infectious diseases, could directly or indirectly affect business execution and thereby affect business performance. In addition to formulating a business continuity plan, the Group mitigates this risk by conducting evacuation drills and safety confirmation drills in anticipation of large-scale disasters.

The civil engineering and building construction businesses hold a specified construction business license under the Construction Business Act (Minister of Land, Infrastructure, Transport and Tourism License (Special-4) No. 2301, valid until November 25, 2027). If the license was fraudulently obtained or a disqualification clause is violated, the license would be revoked under Article 29 of the Construction Business Act. Revocation of the license could have a material impact on business performance and financial condition. The Group mitigates this risk through periodic confirmation of license conditions and legal compliance by its legal department.