ALINCO INCORPORATED

The Construction Materials & Equipment Business and the Rental Business are highly susceptible to trends in construction investment, and a decline in construction demand or significant fluctuations in related prices may affect business performance. As a countermeasure, the Group is promoting stability of its business foundation through deepening related businesses and expanding the scale of other businesses.

Since Rental of Temporary Equipment for Low-Rise Buildings within the Rental Business is mainly used during housing construction, increases or decreases in new housing starts directly affect business performance. As housing starts are influenced by various factors such as general economic conditions, interest rates, land prices, and tax systems, the Group is promoting the establishment of a business foundation through deepening related businesses and expanding the scale of other businesses as a countermeasure.

In manufacturing, sales, and rental activities in China and Southeast Asia, significant changes in political conditions, deterioration of economic conditions, occurrence of terrorism or conflict, and unexpected changes in laws and regulations may cause a contraction or suspension of business activities. As a countermeasure, the Group closely monitors international conditions and policy and regulatory trends in each country, and reviews its strategies as appropriate through strengthened communication and monitoring with each business division and location.

In the Housing Equipment Business, overseas contract production is conducted mainly in China through multiple companies including Suzhou Alinco Metal Products Co., Ltd., and changes in the political and economic conditions or laws and regulations of the relevant country may affect business performance. As countermeasures, the Group strives to minimize risk through diversifying production bases, strengthening relationships with suppliers, and reinforcing the production management system at each overseas production base.

Overseas contract production is conducted in the Construction Materials & Equipment Business and the Housing Equipment Business, among others, and the proportion of foreign currency-denominated purchases to total purchases is large, with most transactions denominated in US dollars. As a result, fluctuations in exchange rates may affect business performance. As a countermeasure, the Group conducts foreign exchange hedging through forward foreign exchange contracts to stabilize procurement costs.

The main raw materials for the core products, Temporary Construction Equipment (Scaffolding Boards, etc.) and Ladders, Stepladders, Aluminum Lifting Equipment, are steel and aluminum, and a sharp rise in raw material and energy prices due to unstable international conditions or a continued yen depreciation beyond expectations may affect operating results. As countermeasures, the Group is reviewing procurement sources, reducing costs including through production rationalization, and partially passing on costs to product prices (price increases).

If unexpected nonconformities or defects are found in products or construction work, this may have a material impact on business performance and social credibility. As a countermeasure, the Group has established a basic policy on a voluntary action plan emphasizing a "customer perspective" and "on-site perspective" (covering legal compliance, quality control, safety management, collection of accident information, response to serious accidents, and maintenance of a product safety management system), and strives to manage quality and safety.

The general construction business license for "scaffolding and earthwork construction business and interior finishing construction business" obtained by the Rental Business is essential for transactions with major customers such as housing companies, construction companies, local building contractors, and remodeling businesses, and revocation or suspension of the license may affect business performance. While the Group currently does not recognize any likelihood of this risk materializing, it continues to thoroughly promote compliance with related laws and regulations.

The Group holds customer information, confidential information of business partners, personal information, and other data. If information leakage or destruction of important data occurs due to cyberattacks or computer virus infection, this may affect business performance through suspension of production or operations or loss of social credibility. As countermeasures, the Group implements technical measures such as introducing security equipment and software in response to changes in the external environment, as well as human measures such as employee education and training.

As Japan's declining birthrate and aging population progress, failure to secure excellent and diverse human resources or insufficient development of such resources may affect operating results. As countermeasures, the Group is working to enhance various training programs and acquire highly specialized personnel, while promoting the fostering of a workplace culture that respects diverse human resources and developing a work environment that enables diverse working styles.