Vertex Corporation

In the Concrete Business, Pile Business, and Segment Business, the competitive environment remains severe against the backdrop of structural changes in domestic construction demand and regional supply-demand fluctuations, and if product groups that are difficult to differentiate are exposed to price competition beyond expectations, this could have a material impact on business performance. In the Concrete and Segment Businesses, the Group is working to maintain profitability by increasing the proportion of orders for high-value-added products, while in the Pile Business it is strengthening sales centered on the Hyper-Straight construction method and concentrating sales areas in regions of strength.

The Group holds confidential customer information as well as confidential business and technical information, and there is a risk of leakage or loss due to cyberattacks, unauthorized access, internal misconduct, loss of information devices, and similar events. In recent years, cyberattacks have become increasingly sophisticated and diverse, and the level of information security risk has also been changing. The Group has established information management regulations, conducted training, implemented access authority management, and taken technical countermeasures, but complete elimination of this risk is difficult even with these measures, and if an incident occurs, business performance may be affected through damages claims, loss of trust, and other consequences.

The Group must comply with a wide range of legal regulations, including the Construction Business Act, the Product Liability Act, the JIS Act, and various environmental and labor-related laws. Changes in the interpretation of laws and regulations or inadequate compliance responses could lead to administrative sanctions, business suspension, damages claims, and other consequences. Each Group company holds a construction business license from the Ministry of Land, Infrastructure, Transport and Tourism, and failure to meet standards at the time of license renewal also constitutes a material risk. The Group monitors regulatory amendment trends and conducts compliance training, but complete elimination of this risk is considered difficult.

As the Group operates sales offices and factories nationwide, if business sites are damaged by a large-scale earthquake, storm or flood damage, the spread of infectious disease, or similar events, disruptions or interruptions in the procurement of raw materials and the supply of products may occur, affecting business continuity. In the event of a serious accident or industrial disaster at a factory or construction site, personal and property damage, compensation costs, and production stoppages could affect business performance and financial condition. The Group is advancing BCP formulation, the establishment of a disaster response headquarters, and backup systems for head office functions, but the risk of prolonged recovery remains in the event of a wide-area disaster exceeding expectations.

In the Concrete Business, Slope Disaster Prevention Business, and Segment Business, a substantial portion of sales depends on public works projects, and future changes in the scale of public works or budget allocation could have a material impact on business performance. The Group is focusing on public works areas where priority budget allocation is expected, centering on national resilience, disaster prevention and mitigation, and responses to aging infrastructure, while also promoting the expansion of product supply for private-sector demand in areas near urban centers. However, if there is a significant reduction in public works budgets or similar events, the risk could materialize over the medium to long term.

Since public works-related transactions account for a certain proportion of business, orders and construction tend to be concentrated in the second half of the fiscal year, resulting in seasonal fluctuation with a higher proportion of sales in the second half compared to the first half. If fluctuations become even greater due to unfavorable weather or changes in the timing of public works orders, quarterly business performance may be affected, and there is also a risk that delays in progress or inspection/acceptance of construction near the fiscal year-end could push sales recognition into the following period. The Group is working to mitigate this through expanding products and services for the private sector and leveling out production and construction systems.

Cement and steel, the Group's main raw materials, and petroleum, its fuel source, are highly subject to market conditions, and there is a risk that prices could fluctuate significantly due to international circumstances, foreign exchange, and supply-demand trends. In addition, product transportation costs have been rising year by year against the backdrop of chronic labor shortages in the logistics industry and the work-style reform-related laws that took effect in April 2024. The Group is working to reduce costs through productivity improvements, shifting production to factories closer to delivery locations, and revising selling prices, but if cost increases cannot be fully passed on through pricing, business performance may be affected to a certain extent.

Against the backdrop of chronic labor shortages in the construction industry, securing human resources for the Group has become difficult, and if recruitment does not proceed as expected and the Group is unable to respond to customer needs, business performance may be affected. The Group is working to strengthen its recruiting capabilities, reduce working hours, introduce flextime, and enhance flexible leave systems including childcare and family care leave, in order to develop an environment supporting diverse working styles. In the production division, the Group has also begun introducing robots to reduce labor requirements, but the risk of medium-term labor shortages is expected to continue.

Through ongoing capital investment aimed at improving quality and productivity, as well as M&A activities, the Group holds tangible fixed assets and intangible fixed assets including goodwill, and if the expected cash flows cannot be generated, recognition of impairment losses may become necessary. If a large impairment loss is recognized, this could have a material impact on business performance. The Group strives to maintain and enhance investment value through more careful consideration of expected effects at the time of investment decisions and active involvement in management guidance and synergy creation following M&A transactions.

The Group established the Technology Research Institute in April 2023 and has developed a cross-Group research and development system, but there is no guarantee that these activities will lead to future earnings, and depending on the results, business performance may be affected. In parallel with the growth of the Concrete, Pile, and Slope Disaster Prevention Businesses, the Group is also exploring other businesses and new business areas, and if the expected results are not achieved, there is a risk of delayed investment recovery or additional costs. The Group carries out appropriate procedures for acquiring and protecting intellectual property rights, but if rights are not sufficiently protected or if third-party rights are infringed, there is a possibility of lost earnings opportunities or damages claims.