TOKAI Holdings Corporation

As the Tokai region (Nankai Trough earthquake) and Kanto region (Tokyo Metropolitan earthquake) are the Group's main business areas, in the event of a large-scale earthquake or wind/flood damage, in addition to damage to personnel and facilities, if power supply outages, communication line failures, or transportation infrastructure disruptions become prolonged, significant impediments to business continuity may occur. The Group has formulated a BCP and taken precautions, but it may not be able to fully respond to disasters that exceed expectations.

In the Energy Business and Information & Communications Business, there are numerous competitors with greater capital strength and technological capabilities, and competition is intensifying due to the liberalization of city gas and electricity retail sales and the spread of NTT's fiber-optic line wholesale services. Combined with cross-energy competition among LP gas, city gas, and electricity, there is a risk that expansion of the revenue base as planned may become difficult. As countermeasures, the Group is working to acquire customers through M&A and prevent cancellations through bundled discounts, but if competition intensifies beyond expectations, it may affect business performance.

In the Information & Communications Business and CATV Business, technological innovation is progressing rapidly, and delayed responses could lead to obsolescence of products and services and loss of market share. Insufficient capital investment for providing new services may also lead to a decline in competitiveness. The Group is enhancing education and training programs for securing and developing engineers, but if it fails to keep pace with technological innovation, it may affect business performance and financial condition.

LP gas procurement prices are highly dependent on imports and are directly affected by geopolitical factors, supply-demand balance, and foreign exchange fluctuations. The Group conducts hedging transactions to mitigate the risk of sharp price increases, but if the commodity price falls significantly contrary to expectations at the time of actual procurement, losses due to price fixing may occur. As the Energy Business is a core business, fluctuations in market conditions and foreign exchange rates may have a broad impact on business performance.

Interest-bearing debt has increased due to expanded investment such as M&A based on the medium-term management plan, making the Group more susceptible to interest rate rise risk. The Group is addressing this through optimizing the balance of short-term and long-term debt and procuring long-term borrowings at fixed interest rates, but if interest rates rise sharply, financial costs may increase, affecting business performance and financial condition.

As a personal information handling business operator holding a large volume of customer information, there is a risk of large-scale customer information leakage due to unauthorized logins or cyber attacks. Cyber attacks have become increasingly sophisticated and elaborate in recent years, and while the Group has established a cross-departmental security system and CSIRT, if an attack exceeding these countermeasures causes significant disruption to core information systems, it may affect business performance through loss of social credibility and payment of damages.

The Group actively promotes M&A and business alliances aimed at creating synergies with existing services and introducing new services, but if the partner business or acquired business does not progress as planned, it may need to record impairment losses on acquired shares, etc. The responsible business division continuously monitors the profit and loss status of individual investment projects and revises business plans, but if the expected results are not achieved, it may affect business performance and financial condition.

In the Energy Business, Information & Communications Business, and CATV Business, the Group is making substantial capital investments to expand operations, and sudden changes in economic and market trends or an unexpected decline in demand may make it impossible to achieve the initially expected investment returns. The Group periodically verifies investment effectiveness and revises plans accordingly, but if it becomes difficult to respond to environmental changes, impairment of fixed assets may be required, affecting business performance and financial condition.

The Group is subject to a wide range of laws and regulations, including the LP Gas Safety Act, the Gas Business Act, the Broadcast Act, the Telecommunications Business Act, the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, and the Building Lots and Buildings Transaction Business Act, and applicable laws and administrative guidance tend to increase due to the strengthening of consumer protection administration. There is also a possibility that legal regulations not currently foreseeable may be established in the future, and if the Group fails to respond appropriately, it may affect business performance through administrative guidance, exposure, or loss of social credibility from regulatory authorities.

In the Software Development business, there is a high degree of dependence on specific system integrators, and in the mobile business, the Group operates an agency business for SoftBank Corp. and an MVNO business through line leasing from NTT DOCOMO, meaning changes in each company's business strategy, agency policies, and line leasing prices directly affect performance. Broadband services also have a structure that is susceptible to changes in the business strategies of carrier operators and consumer electronics retailers. If the business conditions or strategies of these business partners change, it may affect business performance and financial condition.