NOZAWA CORPORATION

The company's mainstay product, Asrock (Extruded Cement Panel), is strongly affected by public investment, private capital investment, and new housing starts. If private capital investment or housing investment declines due to a deterioration in the economic environment, this could impact business performance and financial condition. Public investment does not necessarily move stably depending on policy, and demand fluctuation risk is structurally high.

Sales of Extruded Cement Panel products account for 78% of total net sales, forming the core of the business. If the sales volume or selling price of this product fluctuates, it could have a direct and significant impact on the performance and financial condition of the group as a whole. Due to the high degree of business concentration, sensitivity to downside risks in demand and price is particularly high.

Cement, the main raw material, is procured domestically, but some imported raw materials from China, India, and other countries are also used, and energy such as natural gas and kerosene is used in the manufacturing process. If raw material and energy prices rise, exchange rates fluctuate, or embargo measures arise due to the materialization of geopolitical risk, procurement costs may increase and stable procurement may become difficult, potentially impacting business performance and financial condition. As a countermeasure, the company stockpiles a certain quantity of imported raw materials.

Lawsuits are pending in various courts in which construction material workers and their bereaved families seek damages from the national government and building material manufacturers, including the company, arising from past asbestos use. The company has recorded a provision for litigation losses for cases where the likelihood of loss is deemed high, but depending on the rulings or settlement content of other pending cases, additional losses may arise and impact business performance.

Product delivery is outsourced to external transport companies, and if the shortage of truck drivers becomes severe due to the so-called 2024 problem and other factors, shipment delays and significant increases in logistics costs may occur, potentially impacting business performance and financial condition. As countermeasures, the company recommends the use of expressways, improves loading at factories, requests shortened unloading times, and requests that logistics costs be reflected in selling prices.

If information leakage or system failures occur due to natural disasters, communication troubles, computer viruses, cyberattacks, etc., this could result in loss of social credibility, interruption of business activities, and claims for damages, potentially impacting business performance and financial condition. As a countermeasure, the company has established an "Information Security Policy" that defines basic principles to be observed by officers, employees, and staff.

If laws and regulations related to the environment are revised or new regulations are introduced, increased compliance costs and restrictions on business activities could impact business performance and financial condition. The company is promoting initiatives that consider the three elements of environment, society, and corporate governance under the medium-term management plan "NOZAWA NEXT3" and ESG management, but the cost of responding to regulatory changes involves uncertainty.

If the profitability of assets declines and recovery of the invested amount is no longer expected, it becomes necessary to write down the book value to a level commensurate with recoverability (impairment loss), which could impact business performance and financial condition. As a manufacturer, the company holds substantial fixed assets such as production facilities, making impairment risk more likely to materialize when the demand environment deteriorates.

If the company is unable to secure excellent human resources due to a decline in the working population from the declining birthrate and aging population, mass retirements, or human resource development not proceeding as planned, this could impact business performance and financial condition. Securing and developing human resources and building an environment where they can utilize their abilities are essential for achieving sustainable growth and a stable management structure, and the company is promoting initiatives based on its sustainability policy.

The company holds shares of business partners and financial institutions, and if stock prices fluctuate due to a deterioration in the economic environment or the earnings or financial condition of the issuers, write-downs may become necessary, potentially impacting business performance and financial condition. The company regularly monitors market values and the financial condition of issuers, and continuously reviews its holdings while taking into account relationships with business partners.