SE Corporation

Approximately 60% of net sales are directed toward the domestic construction market, and there is a possibility that the long-term gradual decline in public investment and changes in policy priorities due to fiscal consolidation, rising interest rates, and increased defense spending may adversely affect business performance. While the likelihood of a sudden materialization in the short term is judged to be low, the risk of a contraction in private-sector capital investment also coexists. As countermeasures, the Group is promoting the development of new revenue-generating businesses, diversification of product types, and overseas expansion.

Raw material costs account for approximately 70% of the manufacturing cost of the Group's core product lines, and since many market-sensitive materials such as steel, PC steel wire, and wire rod are used, a sharp rise in raw material prices directly affects business performance and financial condition. Currently, price increases in certain raw materials such as steel products are affecting purchase prices, impacting the Construction Materials & Equipment Manufacturing and Sales Business, Building Materials Manufacturing and Sales Business, and Repair and Reinforcement Construction Business segments. The Group seeks to mitigate the impact through appropriate pass-through to selling prices and diversification of procurement routes.

While manufacturing sites are located throughout the country, production of the core Cable Products is concentrated solely at the Yamaguchi Plant, creating a risk of operational suspension in the event of disasters such as torrential rainfall or a Nankai Trough earthquake. Given the high degree of dependence on a single site, the adverse impact on business performance and financial condition would be significant if the site were damaged. The Group is addressing this through diversification of production sites and updates to its business continuity plan (BCP).

In pursuit of realizing the 2030 Vision, the Group is actively expanding its business in Asian markets, particularly Vietnam, but potential risks exist due to differences in language, geographic factors, legal systems, tax systems, political conditions, and business customs. Insufficient response to these risks may adversely affect business performance and financial condition. The Group is addressing this by strengthening its information-gathering functions and developing its overseas management framework.

Against the backdrop of tightening CO2 emissions regulations in various countries and growing demand from institutional investors for sustainability disclosure, there is a risk that the burden of corporate response will increase. In Japan as well, disclosure systems are being revised, and failure to respond appropriately could have a significant impact on the sustainability of the company. The Group is addressing this through information gathering, consideration and implementation of quantitative countermeasures, and appropriate disclosure.

While measures such as thorough infection prevention and the introduction of work-from-home regulations have been implemented, if an infectious disease outbreak beyond expectations causes a suspension of business activities or changes in lifestyle, this could adversely affect business performance and business continuity. The Group is addressing this through infection control measures and maintenance of a work-from-home system.

In order to respond to the long-term decline in public investment, the Mid-Term Management Plan 2030 calls for active investment in new businesses and research and development; however, if the expected results are not achieved or unexpected serious problems arise, this could adversely affect business performance and financial condition. The Group secures a financial risk buffer through reviewing investment efficiency according to the commercialization stage and enhancing shareholders' equity.

The securing and development of personnel with highly specialized knowledge and skills in civil engineering and construction significantly affects the Group's sustainable growth, and if this does not proceed as expected, it could adversely affect business performance and financial condition. The Group is addressing this by strengthening its recruitment capabilities and enhancing job satisfaction.

A portion of the manufacturing of accessory components for products sold is outsourced to subcontractors; however, if a subcontractor experiences bankruptcy or business closure due to credit concerns or a lack of successors, this could disrupt product supply and adversely affect business performance and financial condition. The Group seeks to diversify procurement risk by stabilizing order volumes and increasing the number of outsourcing partners.

An escalation of tensions in the Middle East could amplify the risks of declining construction investment, rising raw material prices, overseas business expansion, and climate change response through effects such as rising crude oil prices, logistics constraints, and impacts on domestic demand. Regarding the tariff policy of the Trump administration in the United States, there are currently no planned exports to the United States, but the impact on the overall economy is difficult to reasonably foresee and has not been incorporated into the current plan. The Group states that it will promptly disclose any necessary revisions to its earnings forecasts should the need arise from any of these risks.