KANDENKO CO.,LTD.

If construction-related investment and power facility investment decrease more than expected, or if other significant changes occur in the business environment, this may affect business results. The TEPCO group accounts for approximately 20% of net sales, resulting in a high degree of dependence on that group's investment trends. As a countermeasure, the company is taking measures to adapt to the business environment based on its management policy.

If material and labor costs rise significantly and the increase cannot be reflected in contract prices, profitability may deteriorate and affect business results. Given the nature of the construction industry, cost increases after contract conclusion pose a risk of directly squeezing profits. As countermeasures, the company is negotiating to reflect price changes in construction contracts and working to reduce costs through diversification of the supply chain, among other measures.

If a serious personal injury accident or a major quality defect or accident occurs during construction work, this may affect business results. Given the nature of the construction industry, on-site accidents carry the risk of leading to damages claims, construction delays, and loss of order opportunities. The company is strengthening risk management through its Safety and Quality Department, conducting analysis and formulating countermeasures at the Central Safety Committee and Central Quality Committee, and promoting the dissemination and establishment of countermeasures through safety and quality training and hazard prediction activities.

In the construction industry, individual contracts often involve large contract amounts with payment terms under which large sums are paid upon delivery of the completed work; if a counterparty experiences credit difficulties before payment is received, this may result in a large amount of uncollectible receivables, affecting business results. The time lag between construction completion and payment collection is a structural factor that heightens credit risk. As a countermeasure, the company thoroughly checks the creditworthiness of business partners and works to prevent the occurrence of bad debts.

The company holds assets such as real estate and securities for operational necessity; if the market value of held assets declines significantly, or if the profitability of business-use real estate deteriorates significantly, impairment losses and other effects may occur, affecting business results. Regarding cross-shareholdings, the significance of holding and asset efficiency are reviewed annually by the Board of Directors and other bodies, and the policy is to sell shares in principle when the significance of holding has declined. Business-use real estate is managed by identifying impairment risk and other factors.

If pension asset market values decline, or if assumptions used to calculate retirement benefit obligations, such as investment yields and discount rates, change, retirement benefit expenses and obligations may increase, affecting business results. The structure is such that changes in the interest rate environment and capital markets directly affect financial figures. As a countermeasure, the company has established a basic policy for pension asset management and regularly evaluates managed assets.

The company is subject to legal regulations such as the Construction Business Act, the Antimonopoly Act, and the Industrial Safety and Health Act; if these regulations are abolished, newly established, or their application standards changed, or if administrative sanctions are imposed, this may affect business results. Because the construction industry is subject to a wide range of legal regulations, there are risks related to the cost of responding to regulatory changes and the risk of business suspension due to sanctions. Each business execution department and the legal department continuously monitor trends in legal regulations and work to ensure legal compliance by confirming response measures and compliance status.

If a cyberattack results in the theft of information or the tampering with or loss of system data, large damages claims may arise, affecting business results. As a company engaged in infrastructure-related construction work, it holds highly confidential information and is at risk of being targeted by cyberattacks. In addition to developing internal regulations, strengthening the security of information systems, and providing employee training, the company has established an in-house CSIRT to clarify the roles and reporting structure of its incident response system.

If business activities are interrupted or delayed due to natural disasters such as large-scale earthquakes or typhoons, this may affect business results. Since the construction industry centers on on-site work, construction interruptions caused by natural disasters carry the risk of directly leading to construction delays, additional costs, and delays in recording sales. The company has implemented measures such as developing internal regulations and communicating them to employees, implementing power outage countermeasures at business sites, and promoting the stockpiling of emergency supplies.