KINDEN CORPORATION

Price has become the largest competitive factor in orders for electrical equipment construction work, and fierce price competition continues. If construction demand stagnates or contracts, price competition may intensify further, adversely affecting business performance and financial condition through deterioration in construction profitability. The Company is addressing this through the development and strengthening of its business foundation under the medium-term management plan 'Sustainable Growth 2026'.

There is a risk that orders from government agencies will decrease due to policies restraining construction investment by the government and local authorities. Construction work for government agencies constitutes an important part of the Group's operating revenue, and a decline in orders may directly and adversely affect business performance and financial condition. The Group is working to diversify demand by developing business strategies that take SDGs and ESG perspectives into account.

The Group has been actively expanding into overseas infrastructure equipment construction, but changes in the economic conditions or laws and regulations of the countries in which it operates may adversely affect business performance and financial condition. Country-specific risks and regulatory change risks unique to overseas operations are more difficult to predict compared to domestic operations and could affect business continuity.

A sharp rise in material prices or an increase in subcontracting labor unit prices, caused by factors such as exchange rate fluctuations, may reduce the profitability of contracted construction work. If sudden price fluctuations exceeding expectations occur, they may adversely affect business performance and financial condition through an increase in construction costs.

The Group receives orders for distribution and power construction work from the Kansai Electric Power Group, a major customer, and continuously bears fixed costs such as construction personnel, construction vehicles, machinery and equipment, and business offices to respond to such orders. If the Kansai Electric Power Group restrains its capital expenditure, the fixed cost burden may put pressure on earnings and adversely affect business performance and financial condition.

The Group performs construction work and collects payment based on contracts with customers, but there is a risk of bad debts arising if a customer becomes bankrupt or otherwise. If a substantial amount of bad debt occurs, it may adversely affect business performance and financial condition, and the Group is working to address this through strengthened credit management.

If facilities such as office buildings, vehicles, and construction equipment, or employees, are affected by a large-scale natural disaster or a pandemic, or if the economy or society is disrupted, it may become difficult to continue business activities, adversely affecting business performance and financial condition. Given the nature of the construction business, there is a high degree of reliance on on-site work, making the impact of physical damage significant.

The Group holds confidential information, including customer information and personal information, through its business activities. If such information were to leak due to a cyberattack or other external factors, it may adversely affect business performance and financial condition through a decline in social credibility and the occurrence of damages liability. The Group is addressing this through information management in compliance with laws and regulations, the establishment of information security systems, and raising employee awareness.

The Group recognizes addressing environmental issues, including climate change, as an important management issue, and announced its support for the TCFD recommendations in May 2022, identifying climate change-related risks within its disclosures based on the TCFD framework. If these risks materialize, they may affect business activities and asset value, adversely affecting business performance and financial condition.