KeePer Technical Laboratory Co., Ltd.

The materials for the company's core body glass coating products (DKC, Resin 2) are jointly developed with SONAX, and purchases of products manufactured under contract with SONAX accounted for 42.1% of total purchases in FY2025 (ended June 2025). If changes in SONAX's business policy or business restructuring make it difficult to continue the relationship, supply of core products could be disrupted, potentially having a material impact on business performance. Although the relationship with SONAX is currently described as favorable and stable, securing alternative procurement sources would require considerable time and cost, making this a structural risk.

In FY2025 (ended June 2025), imports from overseas accounted for 48.4% of total purchases, meaning that approximately half of procurement costs are directly affected by exchange rate movements. In a rapid yen depreciation scenario, procurement costs could rise significantly, and if price pass-through cannot keep pace, this could compress profit margins. The annual securities report contains no specific description of measures to address exchange rate fluctuations, which could pose a challenge to the effectiveness of risk management.

SONAX, the company's key supplier, is based in Germany, and if geopolitical risks surrounding Europe materialize, SONAX's development and manufacturing activities could be disrupted, potentially affecting the company's product procurement. The structure of depending on a single supplier accounting for 42.1% of purchases exposed to geopolitical risk increases supply chain vulnerability. The annual securities report contains no specific description of alternative procurement measures or inventory buffers.

The company's business model employs a unique employee training process in which technical skills, customer service skills, and management capabilities are acquired through hands-on training within the KeePer LABO Operating Business. If the pace of new store openings accelerates, developing employees with mastery of the necessary skills and know-how takes time, which could constrain the pace of growth. The structure of relying on in-house personnel development carries the risk of declining store quality or inadequate management systems during periods of rapid expansion.

Since the company's founding, Mr. Yoshimichi Tani's leadership and management decisions have driven business expansion, and the company continues to be highly dependent on him. As a countermeasure, Mr. Sosuke Kaku (Director, President and Co-COO) and Mr. Rikichika Suzuoki (Senior Managing Director and Co-COO) have been appointed, and the company is progressing toward a collective leadership structure, but the succession process has not yet been completed. As long as this dependence on an individual remains, an unforeseen event affecting him poses a risk to management continuity.

The main sales destination for the KeePer Products-Related Business is gas stations, and if industry restructuring or business strategy shifts progress due to the spread of EVs and declining fuel demand, the company's sales channels could shrink, potentially affecting business performance. The number of gas stations has been on a long-term declining trend, and if business model conversions or closures among sales destinations accelerate, the foundation of the company's wholesale business could be shaken. The annual securities report contains no specific description of measures to diversify sales channels.

As a retail and service business, the company holds and manages a large volume of customer personal information, and there is a risk that power outages, disasters, unauthorized access, or other events could cause information system failures or the leakage or falsification of personal information. While the company has established a "Personal Information Protection Policy" and an "Information Security Management Policy" and conducts employee training, if information were to leak externally, this could result in damage compensation costs and adverse effects on business activities due to a decline in social trust. Furthermore, since the internet is the top customer acquisition channel, a system failure would also directly lead to lost sales opportunities.

Since internet information is the top motivator for store visits, the company is highly dependent on online customer acquisition. On the other hand, if false negative reviews or slander are spread through social media and other channels, the resulting decline in corporate image could directly reduce customer acquisition capability. The annual securities report explicitly states that the likelihood, extent, and timing of this risk materializing are difficult to predict, acknowledging the limits of proactive countermeasures. The greater the reliance on digital marketing, the greater the impact of this risk becomes.

The company's policy for directly-operated stores is, in principle, not to purchase land but to lease it from landowners and others. If a lessor becomes insolvent or its creditworthiness deteriorates during a long-term lease contract, the company could be forced to terminate the contract, making it difficult to continue operating the store in question. Since the profit base of directly-operated stores depends on the stability of lease contracts, the impact on business performance could be significant if problems occur simultaneously at multiple stores. While the company verifies the creditworthiness of counterparties at the time of opening a store, measures to address changes in creditworthiness during the long-term contract period are limited.

The company strictly applies the "Accounting Standard for Impairment of Fixed Assets" to fixed assets related to directly-operated stores, and if a store's profit or loss or cash flow deteriorates, impairment accounting could occur, potentially affecting business performance and financial condition. As the balance of fixed assets increases amid accelerated new store openings, a downturn in store profitability due to economic deterioration or intensified competition could pose a risk of expanding impairment losses. While impairment measurement procedures are in place, the absolute magnitude of this risk tends to increase as the number of stores grows.