KYOWAKOGYOSYO CO.,LTD.

The sales ratio to construction machinery in the fiscal year ended April 2025 was extremely high at 95.6% (¥10,002 million), resulting in a structure in which business performance is heavily influenced by domestic and overseas construction machinery demand trends. Sales decreased from the 65th fiscal year (¥10,476 million) to the 66th fiscal year (¥10,002 million), making the impact of demand fluctuations evident. As a countermeasure, the company is focusing on developing demand areas outside the construction machinery segment; however, dependence has remained in the 93–96% range over the past five fiscal periods, and the diversification effect has continued to be limited.

Steel, the main raw material, accounted for 59.8% of total manufacturing costs and 48.5% of net sales in the fiscal year ended April 2025, giving it an extremely large impact on the cost structure. Since steel prices fluctuate due to external factors such as domestic economic conditions, exchange rates, and crude oil prices, there is a risk that rising prices could directly squeeze profits. As a countermeasure, the company is strengthening information sharing and collaboration with material suppliers and working to promptly pass on price increases to customers.

Since all or part of product manufacturing is outsourced to partner companies, deterioration in the business environment leading to higher outsourcing costs could affect the company's financial position and business results. There is also a risk that partner companies may discontinue operations due to a lack of successors, which could threaten the maintenance of a stable production system. As countermeasures, the company is promoting the establishment of a stable production system through collaboration with key partner companies, as well as improving production efficiency by internalizing processing operations and accumulating manufacturing know-how in-house.

The combined sales ratio of Automotive-Related Parts, Bolts for Industrial Machinery, and other segments remained at only 4.4% (¥454 million) in the fiscal year ended April 2025, showing a downward trend from 6.8% in the 62nd fiscal year to 4.4% in the 66th fiscal year. If diversification of demand areas to stabilize business performance does not progress, there is a risk that alternative revenue sources will fail to function during downturns in the construction machinery market. The company states that it will continue to focus on developing demand areas outside the construction machinery segment, but concrete results remain limited in numerical terms.