CHOFU SEISAKUSHO CO., LTD.

Sales of air conditioning and heating equipment are affected by weather conditions such as cool summers and warm winters, and fluctuations in meteorological conditions may impact business performance. As a countermeasure, the Company seeks to diversify risk through a diverse product lineup including Water Heating Equipment, Air Conditioning Equipment, System Equipment, Solar Equipment & Others, and the Engineering Division.

Raw material costs account for more than half of manufacturing costs, and fluctuations in the prices of key materials such as stainless steel, copper, aluminum, and resin directly affect business performance. As a countermeasure, the Company strives to reduce costs through review of work processes and more efficient procurement of materials, as well as passing on costs to sales prices.

Demand for the Company's core products, housing equipment for general households, is linked to trends in new housing starts, and a decline in housing starts may impact business performance. As a countermeasure, the Company is focusing on expanding sales channels by developing new markets such as the multi-family housing market, cold-region markets, and overseas markets.

The Company is affected by exchange rate fluctuations because it exports products and imports materials, but since transactions are mainly conducted through trading companies or denominated in yen, the primary risk is indirect effects such as a decline in export competitiveness due to yen appreciation, rather than direct impact. The Company strives to minimize the impact of exchange rate fluctuations by taking various measures.

The Company conducts business in compliance with a wide range of legal regulations, including product recycling (the Act on Promotion of Effective Utilization of Resources, the Home Appliance Recycling Act, etc.), the environment (the Ozone Layer Protection Act, etc.), and energy conservation (the Act on the Rational Use of Energy, etc.), and bears environmental responsibility risk. If regulations are further tightened in the future, a significant increase in product development and manufacturing costs may impact business performance, and the Company strives to identify impacts at an early stage through timely information gathering.

The water heating equipment market is a mature market, with several companies competing fiercely in the equipment markets using electricity, gas, and oil as heat sources, and price declines due to competition may impact business performance. Additionally, if other companies develop superior new technologies or services, there is no guarantee that the Company can maintain its current market position, creating a risk of declining profitability. As a countermeasure, the Company strives to develop highly value-added and unique products and to bring products addressing social issues and environmental concerns to market.

While the Company pays close attention to maintaining quality, including safety, based on prescribed quality standards, there is no guarantee that defects will not occur in all products, and if a defect occurs, the Company may bear liability for damages not fully covered by product liability insurance. This poses a risk of not only a substantial cost burden but also a decline in social credibility, and in the event of an emergency, the Company has established a response headquarters headed by the president to respond promptly.