NIHON KOGYO CO., LTD.

If the prices of major raw materials such as sand, gravel, cement, and steel, energy costs such as heavy oil used in the manufacturing process, and delivery costs using large vehicles rise beyond expectations, this could have a significant impact on operating results and financial position, including profits. This is positioned as a risk that has already materialized, and its impact is high. As countermeasures, the Group is promoting strengthened management and improved efficiency across all departments, appropriate pricing of products, and improved delivery efficiency centered on the Group company Sun Carry Co., Ltd.

The Civil Engineering Materials Business and the Landscape Materials Business depend heavily on sales of products for public works projects, and if orders for public works decrease or progress is delayed, this could have a significant impact on sales, operating results, and financial position. This is a risk that has materialized in the past and is recognized as one that could occur again in the future. As countermeasures, the Group is pursuing the development of private-sector demand from commercial facilities and educational institutions, proposing products and construction methods addressing the themes of "disaster prevention/mitigation" and "maintenance/repair," and securing orders through the development of new products and construction methods.

With sales offices nationwide and production facilities concentrated mainly in western Japan, if natural disasters such as earthquakes or typhoons occur, sales and production activities may be disrupted, potentially having a significant impact on sales, operating results, and financial position. There are concerns that the frequency and scale of large-scale natural disasters will increase as climate change progresses. As countermeasures, the Group is building and operating a company-wide BCP (Business Continuity Plan), collaborating with regional competitors, and developing alternative production and delivery systems at production facilities unaffected by disasters.

If an infectious disease such as COVID-19 spreads, this could force a reduction in sales of the Company's products due to a reduction in private building exterior construction work, among other factors, potentially having a significant impact on operating results and financial position. This is a risk that has materialized in the past and is recognized as one that could occur again in the future. As countermeasures, the Group has organized an emergency response headquarters, is promoting telework and staggered work hours, and is refraining from in-person meetings, training sessions, and business trips to prevent infection while maintaining communication with customers.

If a shortage of crude oil supply becomes prolonged due to deteriorating international conditions, procurement of heavy oil used in the manufacturing process of precast concrete products could become difficult, leading to suspension of manufacturing and shipping or an inability to deliver products, potentially affecting operating results and financial position. Since delivery of heavy products depends on large vehicles, the impact of a fuel supply disruption would extend to both manufacturing and logistics. This is positioned as a risk that could occur in the future.

While the Group is working to establish patents and other intellectual property rights and to investigate third-party rights in advance, if an unexpected intellectual property dispute with a third party arises and a ruling unfavorable to the Group is made, this could affect operating results and financial position. For a group actively promoting technology and product development, the risk of rights infringement is potentially present. This is recognized as a risk that could occur in the future.

If unexpected product defects result in product recalls or liability claims, although the Company has taken out insurance to prepare for such compensation, in cases where the insurance cannot fully cover the situation, this could affect not only operating results and financial position but also the Company's social reputation. Since precast concrete products are used in infrastructure and public facilities, the social impact of any defects would be significant. This is positioned as a risk that could occur in the future.

If an industrial accident occurs at a factory, although the Company has insurance to cover its own assets, a loss of social trust and lost business opportunities due to the suspension of production activities could occur, potentially affecting operating results, financial position, and social reputation. As a manufacturer operating multiple production facilities, maintaining a record free of accidents and disasters is a prerequisite for business continuity. This is recognized as a risk that could occur in the future.

Despite efforts to secure human resources in a planned manner, if the necessary personnel structure cannot be secured at the required time, this could hinder business activities and affect operating results and financial position. Against the backdrop of the declining birthrate, aging population, and intensifying competition in the labor market, securing personnel in the manufacturing and construction fields has become an industry-wide challenge. This is positioned as a risk that could occur in the future.

While operating an information network connecting core business systems with all business locations, if information leakage or network failures occur due to cyberattacks or other causes, this could delay or disrupt operations, hindering business activities and affecting operating results and financial position. Although the Company implements security measures and employee training, the sophistication and diversification of cyber threats make complete protection difficult. This is recognized as a risk that could occur in the future.