CREATE CORPORATION

Demand for Piping & Plumbing Equipment products, the company's core sales items, is heavily influenced by construction investment trends such as new housing starts, public works projects, and private-sector capital investment. If construction investment stagnates, this will directly affect sales and profits. As a countermeasure, the company positions integrated material-and-construction orders (combining sales and construction) as a key strategy, and is promoting optimization of its business portfolio and a shift toward a business structure resilient to environmental changes.

As global procurement by suppliers becomes more complex, geopolitical risks such as natural disasters, infectious diseases, and the situation in the Middle East are increasing instability in the procurement of raw materials for housing supplies, including chemical products, raising the risk of supply restrictions or sudden order stoppages. In addition, the decline in transportation capacity among freight carriers due to the "2024 problem" may undermine the company's just-in-time competitive advantage. As countermeasures, the company is securing stable inventory, diversifying procurement across multiple suppliers, arranging orders in advance, and strengthening collaboration with freight carriers as a shipper.

Procurement prices for Piping & Plumbing Equipment products are linked to fluctuations in raw material prices, and gross profit may be squeezed if price pass-through is delayed or does not proceed. Materials procured overseas are subject to foreign exchange fluctuations, and while the company uses forward exchange contracts to mitigate this risk, unexpectedly large fluctuations or movements in currencies not covered by hedges could affect business performance. The company addresses this through enhanced information sharing with suppliers and purchasing from multiple suppliers.

If personal information or confidential information belonging to business partners or the company itself is leaked due to cyberattacks, unauthorized access, computer viruses, or similar causes, this could significantly affect the company's financial position and business results through loss of trust, damages costs, and other consequences. As countermeasures, in addition to technical security measures, the company has established an Information Strategy Committee and is working to raise employees' information security awareness through tiered training and e-learning education.

The Piping & Plumbing Equipment industry is a mature market with low barriers to entry, resulting in excessive price discounting competition. Metal products manufactured by consolidated subsidiary Daidore Corporation face risks of price declines and excessive competition due to the accelerating shift toward resin-based and commoditized products. There is also a risk of losing customers due to difficulties in business succession stemming from the aging of customer company owners. The company is addressing this by shifting toward next-generation core businesses, including expanded sales of housing equipment, expansion of logistics functions, and integrated material-and-construction orders.

If the company is unable to secure and develop sufficient personnel due to intensifying competition for talent or employee turnover, this could lead to a decline in competitiveness. In particular, the shortage of delivery drivers and other labor shortages across the logistics industry as a whole is becoming more severe, potentially leading to higher transportation costs and lost sales opportunities. The company addresses this through diversified recruitment methods (new graduates, mid-career, and referral hiring), the promotion of human capital management, and improved delivery efficiency through its group of transportation subsidiaries.

As the company expands its construction contracting business with integrated material-and-construction orders as a key strategy, significant costs may arise from serious workplace accidents, construction delays, or repair costs and sharp increases in material and labor costs due to non-conformance with contracts. There is also a risk that orders may not be realized due to a shortage of construction management engineers. The company addresses this through risk assessment at the time of order acceptance and strict management of quality, cost, and safety and health, although complete elimination of this risk is difficult.

Large-scale natural disasters such as earthquakes, typhoons, and torrential rains, as well as unpredictable events such as infectious diseases, fires, and cyberattacks, could disrupt logistics and delivery operations at sales offices and distribution centers nationwide. Although the company has formulated a BCP and established alternative delivery systems from nearby locations, if environmental changes or impacts exceed expectations, this could significantly affect the company's financial position and business results.

At transportation subsidiaries brought into the group through M&A, the company may need to recognize impairment losses on goodwill or shares due to contingent or unrecognized liabilities or failure to achieve business plans. To mitigate this risk, the company conducts thorough due diligence at the time of each M&A transaction, and after completion, carries out integration work to strengthen governance structures and monitors the subsidiaries through outside directors dispatched from the parent company.

Drainage joints and manholes manufactured by Daidore Corporation are subject to regulations such as the Building Standards Act, and changes in laws or applicable standards could affect business performance. In addition, a serious legal violation could damage the company's social credibility and disrupt operations in its main businesses. The company addresses this through distribution of a compliance handbook to all officers and employees, tiered training, and regular in-house awareness and education activities.