KONISHI CO., LTD.

The Group operates sales and production facilities in China and Southeast Asia (Thailand, Indonesia, Vietnam), which entails social and political risks such as legal regulations and financial conditions in each country. If business activities at local operations are constrained, this could affect the Group's business performance and financial condition. As a countermeasure, the Group has established a business operation framework through local subsidiaries; however, complete prevention against unforeseen circumstances is difficult.

Although trade receivables are managed through credit limit setting, collateral acquisition, and allowance provisioning, unexpected bad debt losses may arise due to credit concerns at business partners. In particular, in the Chemical Products segment, trade receivables have tended to increase due to larger transactions with fewer major customers and longer collection periods, heightening this risk. If unexpected bad debts occur, this could affect the Group's business performance and financial condition.

Core products such as adhesives and sealants use petrochemical products as raw materials, so fluctuations in crude oil prices have a significant impact on raw material costs. In addition, since petrochemical products are the main products sold in the Chemical Products segment, both selling prices and purchasing costs may be significantly affected. Sharp increases or decreases in crude oil prices pose a risk of directly impacting profitability.

The Group strives to develop proprietary technologies and protect intellectual property rights to differentiate its products from those of competitors; however, it is difficult to completely prevent third parties from manufacturing and selling similar products. There is also a risk that the Group's products may be deemed to infringe on the intellectual property rights of others. In either case, this could affect the Group's business performance and financial condition.

To prevent the shutdown of manufacturing equipment, the Group conducts equipment inspections, enhances safety devices, and carries out disaster prevention drills, and has adopted a two-plant system (Shiga and Tochigi) in eastern and western Japan to ensure stable product supply. However, if manufacturing equipment is damaged due to a large-scale industrial accident or natural disaster, production activities may be halted, potentially causing a significant impact on the Group's business performance and financial condition.

The Group uses many petrochemical substances as raw materials for adhesives and sealants, and if new laws and regulations are enacted or existing regulations are tightened or changed, the Group may face increased compliance costs or restrictions on sales activities. If product formulation changes or capital investment are required to comply with regulations, this poses a risk of affecting the Group's business performance and financial condition.

The Group implements quality control under a quality management system compliant with ISO9001 (operated via self-declaration of conformity since May 2012), and maintains recall expense insurance and product liability insurance. However, if a serious quality issue exceeding the scope of insurance coverage occurs, this could damage trust in the products and the company, potentially affecting the Group's business performance and financial condition.

IT-related materials, electronic component-related substrates, thin-film materials, and other main products sold in the Chemical Products segment are heavily influenced by demand trends in the electronics/electrical and automotive industries. If these industries face an economic downturn or structural changes, this could affect the Group's business performance.

Because the Construction Business involves long project periods, there is a risk that profitability may deteriorate if the future business environment changes significantly. In addition, if a serious accident involving personal injury or the construction target occurs, this could also affect the Group's business performance and financial condition.

If a severe infectious disease requiring movement restrictions or quarantine measures occurs, the resulting stagnation in economic activity could significantly affect business activities and financial condition. As a countermeasure, the Group has established an emergency response headquarters to enable prompt and flexible implementation of necessary measures while assessing environmental changes and their impact.