OCHI HOLDINGS CO.,LTD.

The Building Materials Business and Processing Business sell housing-related materials, and business performance is affected by fluctuations in new housing starts. If demand declines due to economic downturn, changes in tax or housing-related policies, or a shortage of supply and price surges of materials such as lumber, it could have a particularly significant impact on operating results. As countermeasures, the Group is expanding sales of Decarbonization-related Products, capturing reform/renovation demand, developing the non-residential market, and otherwise focusing on growth areas and expanding the scale of business outside the housing construction field.

Many of the housing-related materials and construction materials handled by the Group use petroleum-derived raw materials, and if procurement difficulties or price surges occur due to geopolitical risks, it could result in delivery/construction delays and deteriorating profitability, which could have a particularly significant impact on operating results. As countermeasures, the Group strives to diversify its supply chain, secure appropriate inventory levels, and negotiate price pass-throughs as necessary.

Many of the Group's business partners are small and medium-sized enterprises such as building materials/lumber retailers and construction contractors, and the risk of insolvency increases during economic downturns. Although allowances for doubtful accounts are recorded, if actual bad debt losses exceed these allowances, it could have a particularly significant impact on operating results. The holding company centrally manages credit control across group companies to ensure thorough management.

Expanding the business portfolio through M&A is one of the Group's management strategies; however, even after due diligence and careful consideration, subsequent changes in market conditions or unforeseen circumstances may prevent the initially expected effects from being achieved, and the value of an acquired company may decline significantly. Should such a situation occur, it could have a particularly significant impact on operating results. The Group strives to avoid such risks through prior due diligence and careful examination of investment effectiveness.

If offices, factories, or other facilities are damaged by natural disasters such as earthquakes or storm/flood damage, or by a large-scale outbreak of infectious disease, or if building materials manufacturers halt operations, shortages and price surges of purchased goods and disruptions to the supply chain may occur, which could have a particularly significant impact on operating results. Although measures such as the formulation of a business continuity plan (BCP) have been implemented, it may not be possible to completely avoid damage.

The Group uses information systems and communication networks for sales management, accounting, human resource management, and other functions. If system outages, information leaks, or data tampering occur due to computer virus infection, unauthorized access, natural disasters, or other causes, it could disrupt the provision of products and services and delay or disrupt business operations, which could have a particularly significant impact on operating results. The Group has implemented measures such as strengthening security, installing servers at data centers, and utilizing cloud services.

Personnel with specialized knowledge, practical experience, and construction-related qualifications are essential to the business. If the Group is unable to sufficiently recruit and develop the necessary personnel due to changes in the recruitment environment or other factors, or if a large number of key personnel leave, it could hinder business activities and have a particularly significant impact on operating results. The Group promotes measures such as recruiting and developing excellent new graduates, hiring experienced mid-career personnel, utilizing diverse talent including the promotion of women's participation, and conducting engagement surveys.

Competitors exist in each of the Group's five business segments—Building Materials, Environmental Amenity, Processing, Engineering, and Others. If new entrants from other industries or oligopolization through M&A or capital alliances by competitors occur, the Group may be forced to lose customers or lower sales prices, which could have a significant impact on operating results. The Group strives to build a business foundation capable of withstanding competition by providing products and services that respond to customer needs and changes in the environment.

Various regulations exist regarding licenses and permits for the construction business, waste disposal regulations, taxation, nursing care insurance, and other laws. Failure to comply with these regulations could result in the revocation of business licenses or restrictions on business activities, which could have a significant impact on operating results and social credibility. In addition, the revision or abolition of regulations, or the establishment of new public regulations, could also result in restrictions on business activities. The Group places emphasis on compliance-oriented management and strives to ensure thorough legal compliance.

The Group holds tangible fixed assets such as real estate and machinery/equipment, intangible fixed assets such as goodwill, and investment real estate. If the economic value of these assets declines significantly due to future deterioration in market conditions or a decrease in demand, additional impairment losses may need to be recognized, which could have a significant impact on financial position and operating results. Although the necessary impairment processing has been implemented as of the end of the current consolidated fiscal year, risks arising from future changes in the environment remain.