MIYAJI ENGINEERING GROUP, INC.

The core business of bridge and other steel structure construction is centered on public works projects, and there is a risk that order volumes and amounts could be constrained by trends in national and local government fiscal policy. To mitigate this risk, the company conducts sales activities targeting a broad customer base including national and local governments as well as expressway companies, railway companies, and major construction companies; however, a structural dependence on specific products and customers remains.

In bridge and other steel structure construction, steel is used as the primary raw material, and there is a risk that price spikes or shortages could lead to construction delays and deteriorating profitability. In addition, instability in the Middle East situation could affect crude oil supply, potentially making procurement of paint and thinner difficult, raising concerns about increased procurement costs and impacts on construction schedules. While the company strives to secure necessary quantities and confirm profitability through early preliminary notifications and orders, market fluctuation risk cannot be entirely eliminated.

With the Chiba Plant and Ichihara Plant as its main production bases using large-scale machinery and equipment, there is a risk that operations could be halted in the event of a serious accident, natural disaster, or spread of infectious disease. Although the company has established a BCP (Business Continuity Plan) and set up a system for prompt recovery, a disaster on a scale exceeding assumptions could have a significant impact on the head office and construction sites as well.

While order volumes for new bridge construction on a weight basis are trending downward due to the effects of rising prices, order results are fluctuating significantly depending on whether specific large-scale expressway projects are won, and it remains difficult to forecast production timing. Since it is difficult to level out plant operating rates, instability in operations could have a significant impact on profit and loss.

Bridge and other steel structure construction work involves handling extremely heavy objects, and much of the work is conducted in close proximity to urban areas, roads, and operating railway lines, meaning that once an accident occurs, it could lead to serious damage. In the event of an accident, coverage under third-party liability insurance has limits, and in addition to direct damages, the company could suffer a loss of social credibility and face administrative sanctions such as suspension of qualification to bid from ordering entities. Although accident prevention measures such as holding safety and health conventions and establishing emergency contact systems are in place, the risk cannot be entirely eliminated.

The company is subject to legal regulations such as the Construction Business Act, and failure to comply with laws and regulations could result in suspension of qualification to bid from ordering entities, administrative or criminal sanctions, civil lawsuits, and resulting damages, which could affect business performance and financial condition. The company strives to ensure thorough legal compliance through the establishment of a Compliance and Risk Management Committee and regular compliance training.

If a serious case of liability for non-conformity with contracts arises with respect to constructed properties, it could affect business performance. The company strives to manage quality by establishing a department responsible for safety and quality and by setting up a system for prompt communication and information sharing in the event that defects occur; however, given the nature of the business handling large-scale structures, the impact of any defects that do occur could be substantial.

The company procures part of its working capital through borrowings from banks and other financial institutions, and a sharp rise in interest rates could affect business performance through increased interest expenses. In particular, where variable-rate borrowings exist, changes in the financial environment become a direct factor increasing costs.