Shinwa Co., Ltd.

System scaffolding, the company's core product, is temporary construction material used for building scaffolding. If the entire temporary construction industry is affected by changes in domestic economic trends in Japan or shifts in the economic environment of the construction market, this could impact the business activities and performance of the Group. In a downturn in construction investment, demand directly decreases, resulting in a significant impact on net sales.

Steel materials used as raw materials for products, such as pipes and coils, are subject to price fluctuations due to commodity market conditions, foreign exchange rates, political situations, and supply-demand gaps. While the Group seeks to mitigate this risk by securing multiple procurement routes, a sharp rise in prices could adversely affect performance through an increase in manufacturing costs.

The Company has entered into syndicated loan agreements with multiple financial institutions, and there is a risk of losing the benefit of time if it violates the terms of these agreements. Should this occur, it could have a material impact on the Group's financial position and business results.

As of the end of the current fiscal year, goodwill of ¥12,284,217 thousand is recorded, accounting for a high proportion of 38.4% of total assets. The main components consist of ¥9,221,769 thousand associated with the acquisition of former Shinwa③ and ¥3,042,882 thousand associated with the acquisition of the Yagumi Group in April 2024. As the Group has adopted IFRS, amortization does not occur every period; however, if the profitability of the underlying businesses declines, the recognition of impairment losses could have a material impact on performance.

Most of the Group's products are manufactured at the Tsuchikura Plant in Gifu Prefecture, and logistics operations are also concentrated primarily in the Tokai area, centered on Gifu and Aichi Prefectures. If production at the Tsuchikura Plant is disrupted due to a natural disaster or an accident within the plant, or if major arterial roads or ports in the Tokai area are severed, stable supply to customers may become difficult, potentially impacting performance.

Regarding subcontracted work for product plating processing and in-house manufacturing operations, outsourcing is concentrated with a single company in each case. If the supply from these highly relied-upon subcontractors becomes unstable, or if outsourcing costs rise, the stability of product supply may be compromised, potentially affecting business results.

While there is no established practice in the temporary construction industry of clearly defining a warranty period, substantial quality assurance is required under the Product Liability Act, the Industrial Safety and Health Act, and other regulations. If a serious accident occurs due to a significant non-conformance or defect in a product, this could result in a loss of social trust and adversely affect performance; the Group seeks to mitigate this risk through the purchase of liability insurance.

The Group has received certification and approval under the "Certification System for Temporary Equipment" and "Approval System" of the Japan Temporary Facilities Association (a general incorporated association), which are inspection systems for safety and standard compliance aimed at preventing industrial accidents and facilitating construction work. In the unlikely event that the Group is unable to obtain or renew such certifications, this could hinder product sales and impact performance.

Securing and developing excellent human resources is essential to the Group's business operations. If recruitment or development proves difficult, or if personnel leave the Group, this could adversely affect business operations and performance. In particular, in the highly specialized field of temporary construction materials, the quality of personnel is directly linked to competitiveness.

The Group utilizes IT, including core systems, across a broad range of operations from order receipt to shipment. If a failure occurs in information systems due to cyberattacks, computer viruses, program defects, or other causes, this could impact business activities and performance through operational disruption, loss of important data, and incurrence of response costs. The Group seeks to mitigate this risk through measures such as firewall configuration and physically distributed data backups.