KFC Ltd

The Group's core businesses are the sale of construction materials such as Post-installed Anchor and Rock Bolt, and road/tunnel facility construction work. There is a risk that orders may decrease due to trends in the construction industry, such as reductions in public investment, or fluctuations in capital expenditure. The Group is addressing this risk by building multiple revenue bases and strengthening its business portfolio based on its medium-term management plan.

If procurement prices rise due to soaring prices of steel and petroleum products, the main raw materials, it may become difficult to pass on the increase to selling prices, which could affect business performance. In addition, if labor costs rise significantly during the period from order receipt to construction start, or when the construction period is extended, it may become difficult to secure the profit estimated at the time of order receipt. The Group is building a stable procurement system by strengthening business relationships with multiple domestic and overseas suppliers and partner contractors.

Price competition with competitors has intensified in recent years in the sales and construction markets, and there is a risk that business performance will deteriorate if it becomes difficult to maintain appropriate prices. The Group is working to improve profitability through the development and market introduction of high value-added products and construction methods, as well as cost reduction measures, but profitability may decline depending on changes in the competitive environment.

The Group is subject to legal regulations such as the Construction Business Act and the Building Standards Act, and operates its business after obtaining construction business licenses and registrations. If a license is revoked due to a violation of laws and regulations, it could seriously impede business operations and materially affect the Group's financial position and business results. In addition, business performance may also be affected by amendments or abolition of related laws or the establishment of new legal systems or standards.

The Group carries out several hundred construction projects annually across the country, and since the work is mainly outdoor work surrounded by heavy machinery, the Group recognizes that there is a higher risk of serious industrial accidents compared to other industries. If a serious accident such as a fatal accident occurs, it could result in a loss of social credibility, compensation costs, and deterioration of profitability due to construction delays. The Group is working to reduce risk through thorough safety education by a dedicated department, regular patrols, and enrollment in various types of insurance.

The Group's main customers are general contractors, subcontractors, trading companies, and agencies, and there is a risk that customers may go bankrupt due to economic conditions. Since construction work takes a long time to complete and involves large transaction amounts, losses could become significant if a business partner falls into financial distress before the completion of construction. The Group hedges this risk by conducting credit investigations through multiple research firms and utilizing credit guarantee institutions.

In the construction of Post-installed Anchor products and road/tunnel facility construction work, unexpected obstacles may lead to deterioration of construction quality or extension of the construction period. If a claim for damages arises due to a defect, it could affect business performance. The Group is working to reduce this risk by obtaining ISO 9001 certification at its main business locations, establishing its own quality standards, and enrolling in liability insurance.

In recognizing revenue from construction contracts, there is a high degree of uncertainty in the estimation of the progress toward satisfying performance obligations and the costs to completion, and if actual results deviate from estimates, it could adversely affect business performance and financial position. The Group has adopted the input method (cost-to-cost method) and addresses this risk through revenue and expenditure management and construction schedule management for each construction contract, as well as the development and operation of internal controls.

If a pandemic caused by an unknown infectious disease or a large-scale natural disaster such as a massive earthquake occurs on a scale exceeding expectations, it may become difficult to operate multiple business sites and logistics facilities, which could affect the Group's financial position and business results. The Group is working to minimize business risk by decentralizing business operation functions and offices, establishing multiple logistics locations, formulating a business continuity plan (BCP), and changing working arrangements such as telework and staggered commuting hours.

If the Group is unable to secure high-quality personnel over the long term due to labor shortages caused by the declining birthrate and aging population, service quality and operational efficiency may deteriorate, which could affect the Group's financial position and business results. In addition to strengthening new graduate recruitment activities, the Group is working to secure a stable workforce across the entire Group by revising its recruitment system, including mid-career hiring and rehiring of former employees (comeback hiring).