NIPPON PALLET POOL CO.,LTD.

If deteriorating business sentiment or declining corporate earnings intensify customers' tendency to curb logistics costs, this could create downward pressure on rental unit prices for pallets and other logistics equipment, potentially affecting business results and financial condition. Because the Company's business structure has a high proportion of rental revenue, it is highly susceptible to economic fluctuations. As a countermeasure, with support from Nippon Express Co., Ltd. and Japan Freight Railway Company, the Company is working to expand revenue outside of rentals by strengthening sales of logistics-related products such as fold decks.

Since wooden and plastic pallets are periodically purchased from external suppliers, a shortage of raw timber or a surge in crude oil prices could raise procurement costs, potentially affecting business performance and financial condition. If the increase in procurement costs cannot be sufficiently passed on to rental unit prices, profitability would be directly squeezed. As a countermeasure, the company works to diversify its suppliers in order to mitigate cost fluctuation risk and secure a stable supply of newly manufactured pallets.

The share of customer companies related to the petrochemical resin industry is particularly high, resulting in a structure where business performance is easily affected by conditions in that industry. If production adjustments or inventory reductions become pronounced in that industry, rental demand could decline, potentially affecting operating results and financial condition. As countermeasures, the company is expanding its product lineup, including fold decks and power-assist suits, and introducing new pricing plans such as "Anshin Pack" and "Choki Anshin-kun," thereby expanding its business domain and diversifying its sources of revenue.

In the rental business based on integrated palletization, the company cannot fully track the location of loaned assets such as pallets during the distribution process of customer cargo, making full recovery difficult. As a result, some assets may ultimately become unrecoverable, which could affect business performance and financial condition. The company is working to strengthen recovery through enhanced operational functions leveraging information systems and improvements to its work structure. In addition, it is stepping up recovery of long-stagnant pallets in cooperation with each manufacturer, and is utilizing "FUKU LOW" to reduce loss and unauthorized use.

If significant changes in the business environment or a deterioration in profitability necessitate recognition of impairment losses on held fixed assets, the Company's business results and financial condition may be affected. In accordance with accounting standards related to impairment of fixed assets, the Company regularly assesses indicators of impairment and estimates future cash flows. It aims to reduce this risk by promptly collecting information from sales and service locations nationwide and accurately grasping the profitability of each business.

If information system or communication failures exceeding expectations occur, or if cyber attacks of increasing scale, frequency, and sophistication result in the destruction or theft of confidential information, business activities could be seriously affected, potentially impacting business results and financial condition. The Company has established the "System Risk Management Regulations," the "Information System Security Basic Policy," and the "Information System Security Measures Standards," and is working to build an appropriate usage environment. In addition, the Company continuously conducts employee education utilizing e-learning and other means.

The company has a high proportion of employees seconded from Nippon Express Co., Ltd. and Japan Freight Railway Company, and the average age of employees is on an upward trend. If the company is unable to secure young and specialized personnel, it may hinder business continuity and affect operating results and financial condition. The workforce composition, which relies heavily on seconded employees, inherently entails the risk of a fragile in-house talent base. As a countermeasure, the company is promoting the securing and development of human resources through the active expansion of new graduate and mid-career hiring.

In the event of a large-scale natural disaster such as an earthquake, tsunami, or typhoon, the supply chain could be disrupted, making it difficult to stably supply rental products to customers, which could affect the company's business results and financial position. The company has established a Risk and Crisis Management Committee and is working to build a crisis management system that minimizes damage and losses by formulating response rules for disaster events and ensuring their thorough implementation company-wide.

If infectious diseases such as COVID-19, influenza, or norovirus spread among employees, the company may be forced to temporarily suspend business activities, which could affect its business results and financial position. In particular, in response to COVID-19, which caused a global pandemic, the company has promoted telework and expanded its IT support system. Through concrete measures such as regular ventilation and handwashing in offices, the company is working to minimize infection risk while prioritizing the safety and health of employees.