Tokai Senko K.K.

Because the Dyeing & Processing Business and Sewn Products Sales Business mainly handle spring/summer materials, there is a seasonal concentration of sales and profit in the second half of the fiscal year (mainly spring/summer). In FY2026 (ending March 2026), out of net sales of ¥13,783,753 million, the second half accounted for 51.9%, and operating profit for the second half accounted for 61.6%. Although efforts to strengthen the autumn/winter materials business are being reinforced, the risk of seasonal fluctuation continues.

The highly fashion-sensitive fabric and textile fields for major apparel companies and SPAs are sensitive to trends, and whether the Company can develop and provide products that match current trends in a timely manner directly affects business results. Misreading trends or delays in development may lead to lost sales opportunities. While the Company is working on differentiated product development, specific details of countermeasures have not been disclosed.

Overseas sales accounted for 29.9% of net sales in the fiscal year under review, and imported apparel products, which form the core of merchandise sales, are mainly produced through outsourcing to overseas sewing factories. If unforeseen events occur in various countries, such as changes in political systems, economic conditions, laws and regulations, conflicts, or the spread of infectious diseases, this may affect business results through supply chain disruptions or loss of sales opportunities.

The Company holds foreign currency-denominated transactions and foreign currency-denominated assets and liabilities, and is exposed to foreign exchange fluctuation risk. Although forward foreign exchange contracts are used to avoid risk, derivative transactions cannot necessarily eliminate all risk, and residual risk may affect business results.

Wood chips, the main energy source for the Dyeing & Processing Business, have been trending upward in price, and when heavy oil prices surge, this significantly affects the procurement costs of related raw materials. In addition, the Company is highly dependent on imported dyes, chemicals, and other materials, and a collapse in the supply-demand balance due to environmental regulations, import/export regulations, disasters, or accidents could push up procurement prices and worsen business results.

The business is subject to the Product Liability Act, the Act on the Control of Household Products Containing Harmful Substances, total pollutant load control regulations for wastewater, and other regulations. Currently, the Company implements capital investment for legal compliance, regular environmental audits, and risk hedging through some insurance policies, but if these laws are amended in the future, additional capital investment or operational changes may be required, potentially affecting business results.

In the Dyeing & Processing Business, artisan-level personnel who can create sensory added value such as "color" and "texture" are indispensable, and the Textile Sales Segment and Sewn Products Sales Segment also require specialized personnel well-versed in trends. While the Company is implementing measures such as enhancing in-house training programs, documenting technical manuals, and transferring skills to local subsidiaries, if these measures do not succeed, the loss of technology and know-how could affect business results.

The Company has multiple business locations, offices, and childcare facilities both in Japan and overseas. If a global pandemic of an infectious disease such as COVID-19 or a large-scale natural disaster exceeding expectations occurs, business operations could become difficult, potentially having a significant impact on business results. Specific details of a business continuity plan (BCP) have not been disclosed in the securities report.