YURTEC CORPORATION

Tohoku Electric Power Co., Inc. and Tohoku Electric Power Network Co., Inc., which account for approximately 40% of net sales, may suppress construction order volumes or expand competitive bidding, raising concerns about a decline in construction orders received and intensifying order competition. In response, the Company is enhancing competitiveness through productivity improvements, while also diversifying revenue by expanding into areas outside Tohoku and Niigata and increasing orders for general and public-sector construction work.

If construction demand stagnates due to the progression of the declining birthrate and aging population, population decline, instability in global affairs, or a deterioration in economic conditions, there are concerns about a decline in construction orders received and intensifying order competition. As countermeasures, the Company is working to secure earnings by maintaining and strengthening relationships with existing customers, expanding orders for indoor wiring and air-conditioning piping work, expanding orders for information and telecommunications construction work, and thoroughly pursuing operational efficiency.

If large-scale natural disasters such as earthquakes or typhoons, or the spread of new infectious diseases, cause construction interruptions or significant delays, or damage to business sites, business activities may stagnate, potentially affecting operating results and financial condition. The Company is strengthening its BCP through the review of disaster prevention plans at each business site based on hazard maps and the implementation of disaster prevention drills, while continuing infection prevention and containment measures.

If material and labor costs surge due to rising raw material prices resulting from instability in global affairs or labor shortages, there is a risk that the additional costs cannot be reflected in construction contract amounts or absorbed internally. In response, the Company is engaging in negotiations to pass on price increases in construction contracts, expanding competitive bidding and centralized purchasing to achieve volume discounts, and further promoting cost management.

Recognition of construction revenue depends heavily on estimates of total construction revenue, total construction costs, and percentage of completion, and there is a risk that losses may arise if the underlying assumptions of these estimates are undermined by changes in construction conditions. In addition, overseas construction contracts may require unfavorable terms not typically encountered domestically. The Company addresses this by conducting appropriate cost estimation domestically and legal checks by external legal experts for overseas contracts.

If laws and regulations such as the Construction Business Act, the Antimonopoly Act, the Labor Standards Act, and the Industrial Safety and Health Act are amended, abolished, or newly enacted, or if compliance violations occur, this may damage the Company's corporate image and social credibility, potentially affecting operating results and financial condition. The Company thoroughly ensures legal compliance among officers and employees by establishing a Corporate Ethics Committee, appointing an officer responsible for promoting compliance, establishing and disseminating the

If an investee company experiences deterioration in business performance, construction defects, or misconduct, this may damage the Group's brand and adversely affect operating results and financial condition. In response, the Company seeks to reduce risk by conducting pre-investment due diligence with external experts and by reliably carrying out post-investment management, guidance, and support.

If cyberattacks, unauthorized access, or information leaks occur, this may undermine the Group's credibility and affect operating results and financial condition. The Company implements technical measures such as access rights management and network defense based on its information security policy, works to raise awareness and ensure thorough operational practices through internal education and training for employees including those at Group companies, and continuously reviews its response measures in light of evolving threat trends.