MINO CERAMIC CO.,LTD.

Production sites are concentrated in areas such as Mizunami City in Gifu Prefecture, Handa City in Aichi Prefecture, and Yokkaichi City in Mie Prefecture, and in the event of a large-scale earthquake such as a Nankai Trough megaquake, considerable seismic intensity is expected in these areas, which could significantly impact the production system. In addition, if the spread of infectious disease leads to a prolonged contraction of the domestic construction industry or curtailment of capital expenditure by business partners, this may also impact the Group's financial position and business results. The Group has implemented measures such as conducting seismic diagnostics and early detection of equipment deterioration through periodic inspections.

The Refractory Ceramics Business is primarily focused on the cement market, and is significantly affected by fluctuations in cement demand resulting from trends in the domestic construction industry and government public works policy. The Plant Business is affected by capital expenditure trends, while the Building Materials & Paving Materials Business is also influenced by public works trends. Should demand fluctuations occur, this may impact the Group's financial position and business results.

Refractory raw materials and fuels such as heavy oil are procured from multiple domestic and overseas suppliers, and the Group seeks to mitigate price fluctuation risk through measures such as foreign exchange forward contracts, but it may still be affected by exchange rate fluctuations. In particular, if procurement prices for raw materials and fuel fluctuate significantly, this may impact the Group's financial position and business results.

The Group has obtained ISO9001 quality assurance certification and conducts production based on established quality control standards, but there is a possibility that significant additional costs, such as product warranty and repair work, may arise in response to complaints regarding product defects. Although the Group has taken measures such as taking out product liability insurance to minimize the impact on its business results, this may still impact its financial position and business results.

Sales of bricks for cement manufacturing equipment and engineering account for approximately 40% of the Group's total sales, resulting in high dependence on the domestic construction industry. While the Group aims to transform its business structure through expanding overseas sales channels and strengthening the Plant Business, fluctuations in cement demand may impact its financial position and business results.

Some of the Group's major production equipment has been in use for a long time since its installation, and while the Group strives to maintain normal operations through periodic repairs, if operational troubles including equipment failure or unexpected abnormal shutdowns occur, this may impact its financial position and business results. Delays in updating aging equipment could lead to a decline in production capacity or an increase in unexpected repair costs.

The Group applies accounting standards related to impairment of fixed assets, and if impairment losses occur on held fixed assets due to a significant deterioration in the business environment leading to reduced profitability, this may impact its financial position and business results. As a manufacturing business with a large scale of capital expenditure, particular attention is required regarding the risk that deteriorating market conditions could trigger impairment.

A high proportion of transactions in raw material procurement for the Refractory Ceramics Business and outsourcing of refractory-related construction work is concentrated with specific business partners. While stable trading relationships are currently maintained, if changes in business strategy, deteriorating profitability, or quality issues occur at suppliers or subcontractors, this may impact the Group's financial position and business results.

The Group has implemented measures such as introducing virus detection software and establishing and enforcing internal regulations to protect personal information and confidential technical and business information, but if such information is leaked outside the company due to computer virus infection or unauthorized access, this may impact its financial position and business results. Information security incidents also carry the risk of damaging corporate trust.

The Group has implemented measures such as offering attractive employment conditions and providing continuous training and development, but if the recruitment and development of personnel does not proceed as planned, or if key personnel leave the company, this could result in a decline in competitiveness or constraints on business expansion, impacting the production system, financial position, and business results. From the perspective of skills transfer in manufacturing, human resource risk is also a medium- to long-term challenge.