GEOLIVE Group Corporation

The majority of products handled, including plywood, building materials, and housing equipment, are housing-related materials, and performance is affected by increases or decreases in new housing starts. Against the backdrop of population decline and the aging society with fewer children, a future decrease in new housing starts is anticipated, and changes to preferential housing loan interest rate measures or stagnation in the domestic economy could lead to a slump in demand. As countermeasures, the company is promoting improvement of the gross profit margin, strengthening of the renovation segment, and development of business domains that do not depend on new construction demand.

Sales counterparties are mainly building materials retailers, construction contractors, and construction-related businesses, and against the backdrop of the declining trend in new housing starts, there is a possibility that bad debts may arise due to deterioration in the financial condition of sales counterparties. The company sets credit limits for each sales counterparty and monitors and manages their financial condition through obtaining financial statements, evaluations from credit research firms, and regular visits by sales representatives. Allowance for doubtful accounts is recorded based on the historical bad debt ratio for general receivables, and individually assessed collectability for receivables with doubtful collectability, etc.

As a practice in the housing-related industry, there are purchase rebates based on the amount of purchases, and within the company group, receipt of these tends to be concentrated at the end of the second quarter and the end of the fourth quarter. Depending on trends in housing demand and demand for housing-related materials, the amount received may fluctuate, potentially affecting performance. The company strives to reduce the impact through thorough sales at appropriate prices, improvement of the gross profit margin, and cost reductions.

The company actively promotes M&A and alliances as means of business expansion, but there is a possibility that expected effects may not be achieved due to changes in market conditions or the emergence of new risks, resulting in a significant decline in the value of target companies. The company recognizes that this risk exists to a certain degree, and conducts financial and legal due diligence in advance using third-party organizations. When disadvantages or risks are discovered, the company considers the impact and response policy, and implements appropriate PMI (Post-Merger Integration) to mitigate risk.

Plywood and lumber, as well as products produced overseas, are significantly affected by market price fluctuations and exchange rate fluctuations, and performance may be affected when prices cannot be passed on during sudden fluctuations or when temporary inventory arises. There are various factors such as geopolitical risk and changes in the political situation, making accurate prediction difficult, but the company strives to continuously gather information from suppliers and implement appropriate purchasing. Overseas purchasing is in principle conducted through specialized trading companies to avoid exchange rate fluctuation risk, and forward foreign exchange contracts, etc. are utilized for dollar-denominated payments, so the impact on performance is recognized as minor.

The housing-related industry is subject to legal regulations such as the Building Standards Act, the Energy Conservation Act, and the Construction Business Act, and violations of laws leading to revocation of licenses or restrictive guidance, or amendments, abolitions, or new enactments of laws, may affect performance. At present, the company does not recognize a likelihood of this risk materializing, but strives to ensure thorough awareness of legal compliance through training sessions and awareness activities utilizing the email system.

The company procures funds through borrowings from financial institutions, and sudden interest rate fluctuations or changes in the fund procurement environment could result in increased financial costs or constraints on fund procurement. Since this depends on the actions of the government and the Bank of Japan, risk prediction is difficult, but the company has introduced financial methods such as deferred hedge accounting to prepare for sudden interest rate fluctuations. At present, there are no problems with fund procurement and the company does not recognize a likelihood of this risk materializing, but strives to mitigate risk by implementing optimal procurement in response to fund demand.

In the event of a natural disaster such as a large-scale earthquake, tsunami, or wind and flood damage, severe damage could occur to the business locations and major infrastructure of the company group, business partners, and product manufacturers, making business execution difficult and potentially affecting performance. The company has established a BCP manual and conducts regular training to build a system for business continuity and early recovery in the event of a disaster, striving to minimize the impact on damage and performance. As a company whose main products are housing materials and construction materials, the company positions support for recovery and reconstruction in disaster-affected areas as a social responsibility.

As part of its business, the company undertakes construction work contracts, and if abnormalities arise due to construction defects, etc., there is a possibility of claim risk such as damage compensation claims. At present, the company does not recognize a likelihood of this risk materializing, and given that this business accounts for a small proportion of overall performance, the impact is considered to be minor. The company strives to prevent the materialization of this risk through strengthening construction management systems and enhancing training.