CTS Co., Ltd.

The civil engineering and construction industry, which is the Group's primary customer base, is significantly affected by trends in public and private capital investment. If a marked decrease in public investment or contraction in construction demand occurs, it could adversely affect the Group's order intake and business performance. The structure is such that overall trends in the construction market directly link to revenue.

The Group specializes in business development targeted at customers in the civil engineering and construction industry. If a sharp or prolonged contraction in the construction market occurs, there is an increased risk of shrinking profits and rising bad debts due to price declines from order competition and deterioration/bankruptcy of business partners. As countermeasures, the Group thoroughly manages credit and works to diversify its customer base by expanding market share.

There is a risk that deliveries of core rental and sales products in the DDS Business and SMS Business could be delayed for a prolonged period due to external factors such as natural disasters or issues originating with suppliers. There is also a possibility that business performance could be affected if customer demand changes rapidly due to sudden technological innovation. The Group aims to avoid such risks by closely monitoring customer demand trends and maintaining appropriate inventory management.

The Group holds a substantial amount of rental assets as the core of the DDS Business and SMS Business, and there is concern that sudden changes in the market environment, technological innovation, or the emergence of new competitor products could necessitate asset replacement or result in obsolescence. If impairment losses or disposals become necessary, this could have a material impact on business performance. The Group addresses this by closely monitoring demand trends and appropriately managing asset purchases and replacements.

In the Other business, the Group undertakes direct-managed construction work such as house installation and road-related projects. The occurrence of accidents at construction sites relates to accident management by the contractor and can affect subsequent order intake. In particular, for Road Marking & Signage Construction, which is mainly comprised of public works, there is a possibility of penalties such as suspension of bid eligibility for government-ordered projects, raising concerns about the impact on business performance. The Group aims to avoid such risks through thorough legal compliance and safety education.

Unpredictable events such as earthquakes and other natural disasters, the spread of infectious diseases, and large-scale accidents or terrorism may make it difficult to conduct business activities. If business facilities and equipment suffer catastrophic damage, substantial costs may be required for repair and reconstruction, which could affect the Group's business performance.

As the Group utilizes information systems, communication networks, and cloud services, and holds important information assets such as customer information, personal information, and confidential information, there is a risk of information leaks or system failures resulting from unauthorized access, malware infection, ransomware attacks, internal misconduct, or incidents originating from outsourcing partners. This could affect business performance through disruption to business operations, recovery costs, and loss of social credibility. The Group has implemented measures such as multi-factor authentication, vulnerability management, security monitoring, and establishment of an incident response framework.