NISSO PRONITY Co.,Ltd.

Under a pure holding company structure, the Group is pursuing business expansion through M&A, but there is a possibility that execution may become difficult due to unsuccessful condition negotiations or due diligence results. Even after an investment is executed, if the business operations of the subsidiary do not proceed as planned, this could have a material impact on financial position and operating results, including the recognition of impairment losses on goodwill and fixed assets. As countermeasures, the Group conducts prior deliberation by the Board of Directors, thorough due diligence by external experts, and regular post-investment monitoring together with early issue identification through management meetings.

If the Group is unable to sufficiently secure and develop the necessary human resources, business expansion may be constrained, potentially affecting performance. In particular, since M&A is positioned as the top priority in management strategy, developing next-generation management talent capable of running subsidiaries is essential. As countermeasures, the Group is strengthening recruitment of diverse talent, promoting in-house employees to president and executive positions, and accumulating management experience by dispatching Group employees to managerial roles.

Capital expenditures and M&A are funded through internal funds or borrowings from financial institutions, but there is a possibility that timely procurement on desired terms may become difficult due to a sudden economic downturn, deterioration of market conditions, or a worsening business outlook. If fund procurement is delayed, this would significantly affect financial position and performance. As countermeasures, the Group works to build good relationships with and diversify its financial institution counterparties, and has established a system for consulting with financial institutions on a project-by-project basis.

If a large-scale natural disaster or unforeseen event exceeding expectations occurs at a production site and disrupts business activities for an extended period, this could have a material impact on financial position and performance. Production sites are dispersed across the country, which reduces the risk of concentrated impact if a specific site is affected, but in the event of a wide-area disaster, simultaneous impact on multiple sites is a concern. As a countermeasure, the Group has established

A large proportion of the Group's products and services are directed at the construction industry, so a sharp cooling of the domestic residential and non-residential construction-related markets would directly affect performance. In a market contraction phase, significant declines in sales and profits are a concern. As countermeasures, the Group is promoting differentiation through improved value-added proposal capabilities via M&A and by strengthening business synergies through an increased number of Group companies.

In the Metal Processing Business, there is a risk that procurement of steel, a key raw material, may become difficult when supply-demand conditions tighten, and when prices rise, profits may decline due to delays in passing on price increases to product prices or due to a rising cost ratio. The Tile Business is also affected by trends in city gas prices and exchange rate fluctuations, which impact procurement prices. As countermeasures, the Group diversifies and strengthens relationships with trading companies, engages in timely price pass-through negotiations, and reduces costs through Group-wide design reviews and productivity improvements.

If price competition intensifies due to aggressive pricing policies by competitors or a significant decline in demand, maintaining price competitiveness may become difficult, potentially affecting performance. In a contracting construction-related market, price competition with competitors is expected to become even more intense. As countermeasures, in addition to Group-wide cost reduction and productivity improvement, the Group is promoting differentiation and added value through an integrated materials-and-construction order style that includes installation work.

The Group is investing in new businesses for medium- to long-term growth, but since stable profitability requires a certain amount of time, if progress does not proceed as planned due to changes in the market environment or customer trends, or unforeseen technological innovation, there is a possibility that the recovery of investment may be delayed or become difficult, affecting financial position and performance. As countermeasures, the Group conducts thorough prior review by the Board of Directors and verifies the appropriateness of progress and investment decisions through regular monitoring.

To meet needs for large-lot orders and short delivery times, the Group is systematically introducing state-of-the-art, large-scale equipment, but if demand for the target products falls short of expectations or profitability deteriorates due to declining sales prices, this could affect financial position and performance. As countermeasures, the Group conducts thorough prior review by the Board of Directors based on customer needs and market trends, and has established a verification system through regular reporting on order outlook and operating status after investment execution.

If trade receivables become uncollectible due to deterioration in a business partner's creditworthiness or bankruptcy, this could affect performance. The Group extends credit to business partners, and the risk of deterioration in partners' financial condition increases during economic downturns. As countermeasures, the Group has established a management system including the conclusion of basic trading agreements, setting of credit limits according to creditworthiness, and recognition of allowances for doubtful accounts.