Katakura Industries Co.,Ltd.

Domestic production plants, shopping centers, and overseas cooperating factories may be damaged by earthquakes, typhoons, floods, fires, pandemics, terrorism, and other events. In the event of a disaster, there is a risk of impact on employee safety, a decline in the value of owned real estate, and suspension of production and business activities. While the Group conducts drills utilizing safety confirmation systems and develops/reviews its Business Continuity Plan (BCP), complete avoidance of large-scale disasters is difficult.

There is a possibility that new entrants from competitors, intensified price competition, rapid decline in market share due to changes in the political and social situation, and impacts on product development, sales, and service provision due to changes in government regulations may occur. While each Group company strives to grasp market trends and understand the situation of competitors, if it is unable to sufficiently respond to sudden changes in the external environment, this may have a material impact on business results and financial condition.

The Group holds highly marketable shares, and there is a risk that the value of these holdings will decline significantly due to a fall in the stock market. In addition, although foreign exchange risk is managed through forward exchange contracts, if exchange rate fluctuations exceed expectations, or if interest rates rise substantially when procuring funds for real estate development or new business investment, this would lead to increased interest payments and deteriorating business results. Furthermore, because the Group adopts a defined benefit retirement benefit plan, fluctuations in long-term interest rates and declines in the stock market may affect retirement benefit obligations.

In the shopping center business, there is a risk that if a major tenant withdraws due to a deterioration in economic conditions, this could make the building difficult to utilize and result in substantial demolition costs. In particular, because certain business partners operate as core tenants across multiple shopping centers, the withdrawal of such a business partner could have a wide-ranging impact on business results. In addition, if environmental issues or soil contamination are discovered on owned fixed assets, this may result in additional costs, changes to development schedules, and impairment losses.

In real estate development and investment in plants and equipment, there is a risk that investment profitability will decline due to economic deterioration, decreased demand, and rising construction costs. Regarding M&A, sudden changes in the market and competitive environment may prevent the achievement of expected synergies, resulting in unexpected contingent liabilities or impairment losses. In addition, the process of structural reform and business restructuring of unprofitable businesses may result in increased costs or temporary losses, which could affect business results and financial condition.

The development of pharmaceuticals requires substantial research and development costs and a long period of time, and there is a risk that development may be discontinued due to failure to demonstrate efficacy or the occurrence of serious side effects during the development process. Healthcare cost containment policies and tightening of pharmaceutical regulations may affect product development, manufacturing, and sales, and constraints in manufacturing capacity and supply systems, as well as issues in procuring raw materials, may hinder stable supply. These uncertainties directly affect the profitability of the Pharmaceuticals Business and impact the business results and financial condition of the Group as a whole.

The Group positions securing and developing excellent human resources as an important issue and conducts training by job level and management training. However, if the number of employees leaving exceeds expectations, or if securing and developing necessary personnel does not proceed smoothly, this may hinder business development. In addition, if labor-related compliance violations such as employment issues, harassment, or human rights violations occur, this may lead to litigation risk and damage to corporate image. These matters may affect business results and financial condition.

Because the sources of supply for certain specialized materials are limited and the Group depends on specific suppliers, if such a supplier suspends operations or the supply chain is disrupted, this could seriously hinder product manufacturing. There is also a risk that cost increases due to exchange rate fluctuations, soaring raw material prices, and rising energy costs will make it difficult to maintain stable management costs. These events may affect business results and financial condition.

While the Group implements measures to prevent leakage of information assets, including personal information, and conducts security assessments by third-party organizations, there is a risk that system failures, data tampering, or information leaks may occur due to human error in operations, disasters, or increasingly sophisticated cyberattacks. Should such events occur, this could lead to business suspension, damages compensation to customers and business partners, and loss of corporate trust, which may affect business results and financial condition.

In the Machinery Business and other businesses, manufacturing is conducted based on the Group's own strict standards, but if a product defect leading to product liability compensation occurs, or if the manufacturing schedule is delayed due to unforeseen circumstances, this may affect business results and financial condition. Product defects carry the risk of damages compensation to customers, product recall costs, and damage to brand reputation, which directly affects the competitiveness of the Machinery Business.