AIR WATER INC.

While the Company is promoting overseas business expansion through M&A, primarily in the United States and Asia, differences in language, legal systems, tax systems, and tariff policies, as well as political, social, and economic security risks, may cause business stagnation and affect operating results and financial condition. As countermeasures, the Company is collecting and sharing political, economic, and social information on countries where it operates, developing security-related regulations, providing export control guidance, and strengthening its overseas business partner screening system.

Against the backdrop of the declining birthrate and aging population, the government continues to promote medical system reforms aimed at controlling and optimizing healthcare costs. If large-scale revisions to medical fee schedules or drug prices are implemented in the future, this may affect the performance and financial condition of the Medical Products business. As a countermeasure, the Company is promoting the development and expansion of products and services that support operational efficiency and work-style reform for medical institutions and healthcare professionals, thereby responding to changing market needs.

The increasing frequency of natural disasters such as earthquakes, tsunamis, typhoons, and heavy rain may cause declines or suspensions in production capacity, decreases in sales due to delays or suspensions of supply and delivery, and recovery and preventive costs, which may affect performance and financial condition. In particular, the Agri & Foods business is concerned about disruptions to processing plant operations due to fluctuations in vegetable yields, a key raw material. As countermeasures, the Industrial Gas business has deployed the highly efficient, compact liquefaction unit "VSU" and dispersed logistics bases, the Energy business has deployed LP Gas-specification mobile power vehicles in Hokkaido, and the Agri & Foods business has diversified vegetable production regions.

The Company provides products and services across a wide range of industries, including the manufacture and sale of high-pressure gases and related equipment. If defects, quality issues, or failures occur, this may affect operating results and financial condition through loss of customer trust and liability for damages. As countermeasures, the Company implements quality control that meets legal and customer requirements, complies with international quality management systems, and is building a management system applicable across diverse industries.

The Industrial Gas business faces risks from rising electricity costs and difficulty procuring helium due to geopolitical factors; the Energy business faces the risk of holding high-cost inventory due to crude oil price fluctuations; the Agri & Foods business faces rising raw material prices due to unusual weather, changes in supply and demand, and currency fluctuations; and the Biomass Power business faces risks from tight supply-demand conditions and price surges for overseas fuel—all of which may affect performance. As countermeasures, the Company is implementing timely and appropriate sales price revisions, increasing domestic storage volumes, securing alternative sources and fuels, and developing new procurement routes.

In the Logistics business, large vehicles such as trucks and tank lorries are used to transport general cargo and hazardous materials including high-pressure gases. If a serious accident occurs, this may result in liability for damages and administrative sanctions such as vehicle use suspension or business office operation suspension, which may affect performance. As countermeasures, the Company strictly establishes safety management regulations and traffic safety management regulations, thoroughly manages vehicle operations, and conducts safety education as part of its daily safety activities.

The Company holds numerous overseas subsidiaries, procures helium gas and specialty gases for semiconductors from overseas, and has domestic subsidiaries engaged in foreign-currency-denominated imports and exports as well as overseas subsidiaries in the Global Engineering business. Sharp fluctuations in exchange rates may affect performance and financial condition. As countermeasures, the Company utilizes forward exchange contracts, diversifies and multiplies procurement routes, and minimizes foreign exchange risk by unifying transaction currencies at overseas subsidiaries.

If regulations are tightened through the enactment or revision of environmental laws in Japan and overseas, restrictions on business activities and increased costs may affect performance and financial condition. This impact is particularly significant for the Industrial Gas business, which consumes large amounts of electricity in its manufacturing processes, due to the strengthening of greenhouse gas emission regulations such as carbon taxes and emissions trading systems. As a countermeasure, the Company positions climate change response as an important management issue in its medium-term management plan and basic environmental policy, and has set reduction targets for total greenhouse gas emissions as a KPI.

There are risks of customers' personal information, confidential information, and the Company's proprietary technical information being leaked externally through cyberattacks and similar incidents, as well as risks of unauthorized access to production facilities and management systems leading to destruction, tampering, or leakage of information. Such incidents may affect performance through loss of trust, liability for damages, or business suspension. As countermeasures, the Company is addressing this through both strengthening security systems for information terminals, servers, and networks ("system-based measures") and developing group regulations, e-learning, targeted phishing email training, and establishing security personnel at each group company ("organizational and educational measures").

The Company holds numerous non-financial assets, including property, plant and equipment, goodwill, and intangible assets. If impairment losses occur, this may affect business development, performance, and financial condition. In particular, for goodwill and intangible assets with indefinite useful lives, impairment tests are conducted every period regardless of whether there are indications of impairment, and the significance of this risk is heightened as the balance of such assets increases due to overseas business expansion through M&A. As a countermeasure, the Company has established a system to assess valuations through regular impairment testing and to process them appropriately.