Konoshima Chemical Co.,Ltd.

The company's core products, fiber cement building materials, are primarily oriented toward housing applications, and a medium- to long-term decline in housing starts due to the declining birthrate, aging population, and population decrease is unavoidable. A significant fluctuation in housing starts could directly impact business performance. As a countermeasure, the company is promoting diversification of its business portfolio through expansion of the Chemical Products Business and expansion of the Building Materials Business into non-residential fields.

The company uses LNG, LPG, electricity, paint, caustic soda, and other materials in product manufacturing, and the procurement costs of these inputs are affected by fluctuations in crude oil and naphtha market conditions. If crude oil and naphtha prices surge due to factors such as conditions in the Middle East, this could have a significant impact on business performance. No specific hedging measures against price fluctuation risk are disclosed in the securities report.

The company previously manufactured products containing asbestos, and there is a risk that lawsuits seeking damages for health hazards caused by such products may be filed. If large amounts of damages or litigation costs are incurred, this could impact business performance. Potential litigation risk remains ongoing, and the financial impact, including provisions, requires consideration.

The Building Materials Business is subject to the Building Standards Act, the Chemical Products Business is subject to the Pharmaceuticals and Medical Devices Act and the Food Sanitation Act, and factory operations are subject to a wide range of regulations including the Water Pollution Control Act and the Air Pollution Control Act. If revisions to these laws or the enforcement of unforeseen new regulations require new capital investment, this could affect business performance and financial condition. There is a risk that increased compliance costs will put pressure on profitability.

The company has two manufacturing sites in eastern and western Japan to diversify regional manufacturing risk, but if a large-scale natural disaster strikes, production activities could be disrupted, impacting business performance. Although the company works to mitigate potential impacts through regular disaster prevention inspections and equipment maintenance, there are limits to complete preparedness against large-scale disasters. A certain degree of concentration risk in manufacturing sites remains.

The company holds a large amount of personal information and confidential information in the course of its business operations, and states that it has established a thorough management system. However, if information leakage occurs due to unforeseen circumstances, response costs and a decline in social trust could impact business performance. Against the backdrop of increasingly sophisticated cyberattacks, information security risk is rising across all industries.

The company positions efforts toward realizing a decarbonized society as an important management issue, but if such efforts are deemed insufficient, this could lead to a loss of social trust and have a significant impact on business performance and financial condition. The company is promoting initiatives toward providing "environmental response" and "resource-recycling products," but is required to respond to tightening regulations and rising ESG expectations from investors and customers.

The company applies accounting standards for impairment of fixed assets and conducts impairment tests and asset valuations, and currently states that there is no need to recognize impairment losses. However, if there is a significant future deterioration in business performance or a decline in real estate prices, impairment losses could arise, impacting business performance. Amid continued structural contraction of the housing market, close attention is needed to the declining profitability of fixed assets related to building materials.

The company recognizes human resource development as essential to enhancing corporate value, and states that it secures the necessary personnel through mid-career hiring and planned development of new employees. However, if the company is unable to secure excellent talent as planned amid a declining population, this could make smooth business operations and agile business expansion difficult, impacting business performance. Strengthening recruitment and development will become increasingly important in future business expansion phases.

The company conducts some overseas raw material imports and product exports to overseas markets substantially in foreign currency, and in principle aims to maintain a neutral risk position by managing the amounts of imports and exports. However, if foreign exchange rates fluctuate significantly, timing discrepancies between procurement and export could impact business performance. In a weak yen environment, there is a risk that rising raw material procurement costs will put pressure on profitability.