Beauty Kadan Holdings Co.,Ltd.

While the number of funerals is expected to increase due to the declining birthrate and aging population, the simplification of funerals is progressing, and the general downward trend in funeral service prices continues. If price declines progress significantly, sales prices of flower altars and floral offerings may also be forced down, potentially adversely affecting business performance. The Company addresses this through differentiation based on its proposal capability and technical skill in creative altar design, and through cost reductions in manufacturing achieved by the processing and logistics group established in March 2011.

Currently, there are few competitors with nationwide operations and a flower wholesale business, and the Company is recognized as having an advantage in quality, training systems, customer base, and procurement. However, if circumstances change significantly in the future, such as a substantial change in funeral formats, this advantage could be lost, potentially affecting business performance. In the flower wholesale business as well, if price competition intensifies following the 2009 deregulation of wholesale market commissions, and if large-scale retailers or entrants from other industries increase their market entry, there is a risk that it will become difficult to maintain the competitive advantage of the business model.

Training technicians for the flower altar business requires a long period of time, and there is a risk of insufficient skill levels arising if training cannot keep pace with rapid business expansion, or if there is a shortage of part-time and temporary staff for ancillary duties, preventing technicians from focusing on their core work. If the Company is unable to secure sufficient skilled personnel, it will become difficult to maintain the Group's technical advantage. The Company addresses this through its own training system and skill certification program, but personnel supply could become a constraint during phases of rapid business expansion.

Because flowers are agricultural products, their production and harvest are affected by climate and weather conditions. If abnormal weather or natural disasters such as typhoons significantly reduce production and harvests, market prices may surge, substantially raising costs in the flower altar business. While this may increase profits in the flower wholesale business, it would lead to a significant decline in profits in the flower altar business, affecting the overall performance of the Group. The Company addresses this by securing multiple supply channels and building an information-sharing network with producers nationwide.

If the exchange rate trends toward yen depreciation, the yen-denominated purchase price of imported flowers will increase, raising procurement costs. Depending on market competitive conditions, the Company may not be able to appropriately pass on the cost increase to sales prices, potentially leading to a decline in profit margins. The Company has established multiple supply channels and a system for gathering and comparing market information, but responding may become difficult in the event of rapid yen depreciation.

In the bridal industry, to which the bridal floral decoration business—a priority business for the Company—belongs, the number of marriages has been on a long-term declining trend, falling to 485,063 couples in 2024 (down from a peak of 1,100,000 couples in 1972). In addition to the decline in the number of marriages, decreases in the number of wedding ceremonies and reductions in wedding expenses may cause the unit price of bridal floral decorations to fall, raising concerns about an impact on the profitability of this business.

The Company actively promotes capital and business alliances with businesses expected to generate synergies with its existing operations, carefully examining such alliances based on the opinions of experts such as lawyers, certified public accountants, tax accountants, and social insurance and labor consultants. Nevertheless, if a defect in an alliance is not discovered, it could adversely affect the entire Group. As the number of M&A and alliance deals increases, risks stemming from the limitations of due diligence may become apparent.

If an infectious disease such as COVID-19 spreads or becomes widespread, there are concerns about its impact not only on the Company's Group but on the entire industry to which it belongs. If economic activity stagnates due to administrative guidance and requests aimed at containing the spread of infectious disease, and if this leads to an economic downturn or a decline in consumer sentiment, it could affect business performance and financial condition. Because both the funeral and bridal businesses involve in-person, gathering-based services, they are particularly susceptible to impact during periods of infectious disease outbreaks.