NITTOC CONSTRUCTION CO., LTD.

Approximately 80% of orders received depend on public works projects. If public works spending is reduced beyond expectations, this could have a material impact on business performance, including a decline in net sales and profit. As a countermeasure, the company is working to expand orders for private-sector and overseas construction projects, but the degree of dependence remains at a high level.

Given the order-based nature of the construction industry, intensifying competition with other companies could worsen profitability, potentially affecting business performance through declines in net sales and profit. At present, the company states that it does not recognize any major changes in the market or business environment that would significantly affect performance.

A sharp rise in construction material prices and labor unit costs, as well as a shortage of skilled workers, could worsen the profitability of construction projects or delay construction progress, potentially leading to a decline in net sales and profit and a deterioration in profitability. In response, the company is limiting the proportion of large-scale projects with construction periods exceeding one year, negotiating with clients when material and labor costs rise, and implementing measures such as training multi-skilled workers and coordinating skilled workers across branches through the head office.

If a serious disaster or major accident/trouble occurs during construction work, it could affect business performance through declines in net sales and profit and a deterioration in profitability. In addition to complying with the Industrial Safety and Health Act, the company implements safety management under its own strict internal standards, shares past accident case studies horizontally across the organization, and conducts intensive inspections through safety patrols.

Because a considerable period elapses from order receipt to collection of construction payments, deterioration in a business partner's financial condition could cause delays in payment collection or bad debt losses, potentially affecting business performance. In addition to thorough credit management, the company utilizes receivable-guarantee factoring under the subcontractor receivables protection support program to avoid or reduce losses in the event of bad debts.

If damages arise from non-conformance with contracts or product liability, this could result in compensation payments and a decline in net sales and profit, affecting business performance. In addition to on-site quality patrols by the construction department and horizontal sharing of past trouble case studies, the company established a Quality Department within the Safety, Environment and Quality Division in fiscal 2020 to strengthen and thoroughly enforce quality control.

Significant changes in political and economic conditions, legal regulations, and foreign exchange rates overseas, as well as sharp increases in material prices and labor unit costs, could hinder the securing of construction profits and construction progress, potentially affecting business performance. Currently, the share of overseas business in both net sales and profit relative to the group as a whole is small, and the impact on performance is considered minor; the company seeks to avoid risk by receiving orders from Japanese companies operating overseas and through information gathering.

The introduction of greenhouse gas emission regulations and carbon taxes associated with the transition to a decarbonized society, as well as the intensification of disasters due to global warming, could affect the group's business performance. The company is promoting research and development and construction methods that contribute to reducing CO2 emissions, as well as energy conservation at offices and on-site offices.

The company is subject to various legal regulations, including the Construction Business Act, and changes in laws could affect business performance. At present, the company states that it does not recognize any legal changes that would affect the market or business performance, but continued monitoring of the regulatory environment is necessary.

If personal information or confidential information is leaked, this could damage the company's social credibility and lead to claims for damages, affecting business performance. The company strives to strengthen information management and raise employee awareness through the establishment of information management regulations, thorough employee compliance, and regular information security training.