KAWADA TECHNOLOGIES,INC

The steel bridge and PC bridge business is primarily dependent on orders from national and local governments and expressway companies, and there is a possibility that order volumes may fall significantly below expectations due to policy changes or deterioration in fiscal conditions. In addition, the market is shifting from new construction to repair and maintenance, and if the company fails to appropriately respond to the business transformation from factory-centered production to on-site construction-centered operations, this may affect business performance. As countermeasures, the company is promoting the strengthening of order-taking activities for new construction and enhancing its capabilities for renewal and maintenance business.

Since the bridge, steel structure, and building construction businesses operate on a contracting basis, there is a risk that if the costs of steel and other raw materials, transportation costs, and labor costs rise during the construction period after contract conclusion, it may be difficult to pass these increases on through the contract amount, resulting in deteriorated profitability. Prolonged procurement of raw materials and price surges due to supply chain disruptions may also affect production and construction plans. As countermeasures, the company is implementing early procurement, securing diverse procurement sources, and incorporating price escalation clauses into contracts.

Due to the nature of the bridge and steel structure businesses, the company constantly incurs advances of working capital, and this tendency has been strengthening due to the increasing scale and duration of projects. As of the end of March 2026, total borrowings amounted to ¥17.4 billion, and if fundraising becomes difficult or procurement interest rates rise, this may affect business operations and performance. The company strives to secure smooth funding through the flexible use of overdraft agreements with 14 partner banks and the procurement of long-term borrowings.

In a business primarily involving factory production and on-site construction, if an accident occurs, in addition to direct damages and compensation costs, it may adversely affect subsequent order-taking activities and business performance through measures such as suspension of qualification for bidding and impacts on construction performance ratings. The company has established a dedicated safety management department to build a company-wide safety management system, and works to prevent serious accidents through the horizontal deployment of occupational accident case studies and patrols conducted by officers and employees.

If a serious defect occurs in product manufacturing or on-site construction, in addition to incurring correction and recovery costs and damages, this may affect business performance due to loss of customer trust and reputational risk. The company has established a rigorous quality management system based on ISO9001, and works to prevent such occurrences through the establishment of a dedicated quality control department and the horizontal deployment of quality defect case studies.

The company holds factories at five locations nationwide as fixed assets related to the Steel Structures and Civil Engineering Segments' businesses, and if profitability at these factories deteriorates, it may become necessary to recognize impairment losses, which could affect business performance. The company aims to maintain and improve profitability through product diversification, manufacturing process efficiency improvements, and cost reductions at each factory, while also carefully examining future market conditions and investment returns with respect to capital expenditures.

With the advancement of ICT and networking, if data loss or damage, or leakage of personal or confidential information occurs due to external cyberattacks or employee misconduct, this may result in restoration costs and damages, as well as a significant impact on business operations and loss of social trust. The company has established an "Information Security Policy" and continuously implements technical measures as well as human resource management measures such as education and awareness-raising.

Transition risks such as strengthened environmental regulations may lead to a loss of competitiveness and order opportunities if the company is unable to provide environmentally conscious products and services, and physical risks from rising temperatures may cause deteriorating working conditions leading to reduced work efficiency, increased operating costs, and difficulty in securing human resources. The company has set greenhouse gas emission reduction targets certified by SBTi and formulated a climate transition plan, while also working to reduce labor and workload through the use of robots and AI as part of DX promotion.

Due to the declining birthrate and aging population, changes in the labor market, and the advancement of technological innovation, there is a risk that it may become difficult to recruit and retain personnel with the necessary skills, and if employee engagement declines or personnel attrition occurs, this may lead to a loss of competitiveness and deteriorating business performance. The company is working to secure and retain human resources by improving the workplace environment, including the introduction of a referral recruitment system, individual interviews conducted by supervisors, and the expansion of leave systems.

In businesses subject to various legal regulations such as the Construction Business Act and the Industrial Safety and Health Act, in the unlikely event of a legal violation, this may have a significant impact on business performance and corporate reputation due to sanctions such as suspension of qualification for bidding or suspension of business operations. The company strives to ensure thorough legal compliance through training sessions and awareness activities conducted by the legal department, internal audits conducted by the audit department, and on-site patrols conducted by officers.