SBS Holdings, Inc.

A significant downturn in the domestic economy leading to sluggish consumption, extreme yen appreciation, or a severe recession overseas causing a decline in export/import volumes and downward pressure on freight and transport rates could affect business performance and financial condition. The Group addresses this through risk diversification by promoting business diversification and expanding its client base, as well as by enhancing and optimizing its business portfolio.

For fuel such as diesel and gasoline, which are essential to the logistics business, price increases beyond expectations due to global crude oil price surges or exchange rate fluctuations constitute a cost increase factor. If such cost increases cannot be passed on through rates, this could adversely affect business performance and financial condition. The Group is promoting a shift toward fuel-efficient logistics services through the promotion of eco-driving and the phased introduction of next-generation vehicles.

Funds necessary for M&A and logistics facility development are primarily raised through borrowings from financial institutions, and deterioration in the financial environment could make it difficult to raise funds for strategic investments or lead to rising financing rates. Some borrowings are subject to financial covenants, and breaching these poses a risk of affecting business performance and financial condition. The Group addresses this through the securitization of logistics facilities, promoting repayment of interest-bearing debt using operating cash flow, and fixing interest rates.

The Group actively pursues M&A and capital participation/alliances to expand existing businesses and enter new business areas, but if unforeseen circumstances cause significant delays in the progress of business plans following an acquisition or alliance compared to original plans, this could affect business performance and financial condition. The Group addresses this through thorough prior due diligence and careful coordination with the management of acquired companies.

New development of logistics facilities is premised on securing customers in advance, but sales and profits may be concentrated in specific periods or delayed depending on order timing, scale, specifications, completion timing, and sales timing. This can affect the overall earnings stability of the real estate business, which comprises the development business and leasing business. The Group addresses this by thoroughly ensuring that logistics facility development is premised on securing customers in advance.

The Group is subject to a wide range of laws and regulations across the logistics business (Trucking Business Act, Warehousing Business Act, Customs Business Act), real estate business (Building Standards Act, Financial Instruments and Exchange Act), and staffing business (Worker Dispatching Act), among others. Amendments, tightening, or changes in interpretation of these laws in response to changes in social conditions could require new cost burdens or changes to business operations. The Group addresses this by gathering information through industry associations and taking measures in anticipation of legal and regulatory changes.

The Group has many logistics facilities in the Tokyo metropolitan area, and if a large-scale natural disaster occurs, damage to client companies or the Group's own facilities, disruption or confusion of transportation networks, and interruption of utilities could make business continuity difficult. The Group has established disaster scenario assumptions and countermeasures in its BCP (Business Continuity Plan), and is promoting regular drills, ensuring earthquake resistance of major buildings, and diversifying business locations.

The Group uses computer networks extensively, from operational systems to internal systems, and system downtime caused by computer failures, virus infections, external hacking, or large-scale natural disasters could lead to suspension or restriction of operations, and delays or confusion in business processing. The Group is promoting network monitoring through SOC services, AI-based virus monitoring, the introduction of next-generation firewalls, and Group-wide security measures through the "SBS Group Information Security Promotion Council."

If the Group is unable to secure the necessary human resources, if a large number of personnel leave the company, or if human resource development does not proceed as planned, this could significantly affect business development, performance, and growth strategy. The Group is actively engaged in recruitment activities for both new graduates and mid-career hires, and provides training and education for employees of Group companies based on its basic policy on human resource development, supporting skill improvement and career development.

Rising sea levels associated with climate warming could cause flood damage to business locations in port areas; abnormal weather events (heavy rain, heavy snow, typhoons) could disrupt transportation networks and interrupt utilities; heat stroke could pose health risks to employees; and stricter CO2 emission regulations or the introduction of carbon pricing could become cost increase factors. The Group has formulated a business and environmental strategy premised on decarbonization, including the promotion of eco-driving, phased introduction of next-generation vehicles, and introduction of energy-saving equipment, and is addressing these risks with a long-term perspective.