Nippon Ski Resort Development, Co.,Ltd.

Given the nature of ski resort operations, reduced operating days due to insufficient snowfall or degraded access due to heavy snow directly impact visitor numbers and sales. Heavy snowfall or heavy rain can also lead to lift suspensions and associated lift ticket refunds, putting pressure on earnings. As countermeasures, the Group is promoting active introduction of snowmaking machines and strengthening the Green Season Business.

The Group's earnings depend heavily on the ski resort business in the HAKUBA VALLEY area, and business trends in this area have an extremely significant impact on the Group as a whole. Because the business structure is specialized in ski resort operations, diversification of business risk has not been achieved, and the Group's ability to respond to unforeseeable events such as large-scale earthquakes and disasters is not sufficient. While the Group pursues improvements in services and know-how through deepening its business, risk diversification remains a challenge.

In the event of a natural disaster such as a major earthquake or a terrorist incident, there is a risk that visitor numbers could decline substantially due to facility damage or impacts on transportation and lifeline infrastructure. In the event of a pandemic caused by a novel infectious disease, requests from the government for business suspension or restrictions on outings could reduce visitor numbers, potentially materially affecting business performance and financial position. Although each resort facility is located in a dispersed manner, the specialization in the ski resort business limits alternative sources of revenue.

Due to acquisitions of ski resort businesses and capital expenditures made every fiscal year, fixed assets account for a high proportion of total assets on the consolidated balance sheet. The Group regularly conducts impairment testing at the cash-generating unit level for each ski resort, and impairment losses may be recognized in periods of business deterioration. The recognition of impairment losses would adversely affect operating results and financial position.

The acquisition and expansion of ski resort businesses is an important pillar of the Group's growth strategy, but risks exist, including a lack of appropriate acquisition opportunities, failure to reach agreement on acquisition terms, difficulty in obtaining favorable financing, and failure to achieve expected profits and cash flows. If these issues arise, the Group may be unable to achieve its medium- to long-term growth targets. As the Group is constantly considering acquisition opportunities, including large-scale and highly significant deals, there is also a risk of increasing financial burden.

Nippon Parking Development Co., Ltd., the parent company, holds 68.6% of voting rights and has de facto decision-making authority over important matters such as the appointment and dismissal of directors and auditors, organizational restructuring, and dividends of surplus. Decisions may be made that do not necessarily align the interests of other shareholders with those of the parent company. To protect minority shareholders, the Group has established a system requiring prior approval by the Board of Directors, in which independent outside directors account for at least one-third of the members.

In addition to domestic economic issues such as the declining birthrate and aging population, population decline, sluggish consumption, and rising energy prices, there are concerns about intensifying competition with domestic rivals due to a future decline in the skiing population. While the Group is promoting the expansion of inbound demand as a growth strategy, geopolitical risks and fluctuations in the global economic environment—such as the reduction in flights caused by Russia's invasion of Ukraine—could significantly affect visitor numbers. The Group's structure thus carries exposure to demand fluctuation risk both domestically and internationally.

The Group is subject to a wide range of regulations, including the Railway Business Act (aerial ropeway business licensing), the Secondhand Articles Dealers Act, the Act against Unjustifiable Premiums and Misleading Representations, the Food Sanitation Act, the Travel Agency Act, and labor laws, among others. Non-compliance could result in substantial costs from damages claims, administrative sanctions, or civil litigation. Major amendments to laws and regulations, changes in interpretation, or the introduction of stricter standards could increase costs and capital expenditures associated with rebuilding the compliance framework. The Group continues to respond to periodic audits by supervisory authorities.

Skiing is a sport that involves confronting nature, and it is difficult to completely eliminate the risk of visitor injury, just as it is difficult to completely prevent employee errors or troubles. In the event of a serious accident, in addition to brand damage and loss of credibility, litigation and damages claims may arise, potentially affecting business performance and operations. The Group carries out slope maintenance, active patrolling, and mutual inspections by safety management personnel at each ski resort, and responds to audits by the transport bureau and discloses aerial ropeway safety reports.

Sustainable growth requires continued employment and development of capable management with leadership and competent employees. However, intensifying competition for talent or unforeseen mass resignations could result in the loss of organizational know-how and a decline in competitive advantage. Failure in successor development and rising costs associated with increased employee benefit expenses could also affect business performance. Given the highly seasonal nature of the ski resort business, securing sufficient staffing during peak periods remains an ongoing challenge.