KURIYAMA HOLDINGS CORPORATION

Overseas sales account for 62.2% of consolidated net sales, with global operations centered on North America, Europe, and Central and South America. Unpredictable events arising from changes in economic and consumer trends, political and social conditions, legal regulations, and customs in each region where the Group operates may affect operating results. The Group's basic policy of local production and local sales is used to respond to this risk, along with efforts to improve price competitiveness and enhance product added value.

Since overseas sales account for 62.2% of consolidated net sales, fluctuations in exchange rates directly affect consolidated business performance and financial position through the translation of local-currency-denominated financial statements into yen. In addition, mid- to long-term exchange rate fluctuations may affect operating results in foreign-currency-denominated procurement transactions for raw materials and merchandise. The securities report does not describe specific hedging measures, and structural exposure remains.

Since the price of resin, the main raw material for resin hoses, is linked to fluctuations in crude oil prices, changes in the crude oil market directly affect manufacturing costs. The Group implements cost reductions through large-volume, bulk annual contracts and price negotiations with suppliers, but it is explicitly stated that there is no guarantee that productivity improvements and price pass-through to customers will produce the expected effects. Global inflation-driven price increases have compounded the need for broad-based price pass-through.

Sales to public investment projects such as roads and civil engineering account for approximately half of sales in the Sports & Construction Materials Business, so trends in public investment directly affect operating results. There is a risk that orders may decline due to changes in government fiscal policy or budget allocation. As a countermeasure, the Group is expanding original products such as Super Materials (large-format ceramic tile) for private commercial facilities to reduce dependence on public investment.

Because the business model involves manufacturing and procuring goods in advance of customer orders and maintaining a certain inventory level, errors in demand forecasting may lead to lost sales opportunities, discounted sales of excess inventory, and recognition of inventory valuation losses or write-offs. The Group strives to maintain appropriate inventory levels by obtaining purchasing information, production increase/decrease information, and design change information from customers in a timely manner and sharing it with manufacturing subsidiaries and partner companies.

Kuriyama Japan Co., Ltd. consolidates its inventory and logistics functions through a 3PL contract with an external logistics company, but if the logistics center concerned becomes inoperable due to a disaster or other event, this could affect operating results and financial position. In addition, while overseas locations seek to differentiate themselves by utilizing optimal transportation methods, they also face the risk of increased logistics costs. The external logistics company has formulated a BCP to minimize risk, and overseas the Group works to optimize logistics costs through price negotiations with delivery companies.

Many of the overseas Group's products and merchandise are sold through local sales agents, who also handle competing products, so changes in their purchasing policies may affect operating results. While the Group states that it is not significantly dependent on any specific agent, the risk of agents changing their policies remains structurally present. The Group works to secure the trust of its agents by improving price competitiveness through cooperation between manufacturing and sales subsidiaries, enhancing product added value and quality, and shortening delivery times.

If the Group is subject to cyber attacks such as targeted emails, malware infections, or unauthorized access, this could result in the suspension of business activities and adversely affect the Group's corporate reputation. The Group conducts security education and training for all Group employees, strengthens communication systems in the event of an incident, and promotes security standardization. Some Group companies have established 24/7/365 security monitoring systems and have comprehensively subscribed to cyber risk insurance.

Kuriyama Japan Co., Ltd. is subject to regulations such as the Building Standards Act and the Construction Business Act because it handles the installation and construction of products, and it holds licenses (special construction business and general construction business) from the Minister of Land, Infrastructure, Transport and Tourism. Should the company receive administrative sanctions or other measures from regulatory authorities, this could affect operating results. The Group strives to maintain its compliance system through information gathering from various industry associations and regular risk assessment and response discussions through Group management meetings.

Because the Group operates globally, unexpected natural disasters, outbreaks of infectious diseases and epidemics, terrorism, war, and social unrest pose risks that could adversely affect its financial position and operating results. The Group strives to minimize such risks by advancing the formulation of BCPs, but the expanding scope of its global operations may increase the extent of the impact.