UNIVERSAL ENGEISHA CO.,LTD

Rental Green sales, the core business of the Group, are highly profitable. If corporate bankruptcies, business suspensions, or cost reductions occur due to an economic downturn, this could lead to a decrease in new contracts or cancellations of existing contracts. Since Rental Green also has spillover effects on other businesses (fresh flowers, gifts, landscaping, etc.), the impact of an economic downturn could spread to the entire business. No specific countermeasures are currently disclosed.

There are no legal restrictions on new entrants into this industry, and competition is intensifying not only with existing competitors but also with new entrants. The Group operates a labor-intensive business in which maintaining appropriate pricing is essential; however, if price declines due to intensifying competition exceed expectations, there is a risk that cost reductions alone will not be sufficient, making sales expansion difficult. The Group cites its own-fleet delivery network across the three cities of Tokyo, Osaka, and Nagoya, as well as its customer base and quality, as the basis for its competitiveness.

Seasonal decorative products such as those for Chugen, Seibo, and Mother's Day tend to see their associated customs reassessed with the times, and a slowdown in market growth rates or changes in procurement conditions could lead to deterioration in sales of existing seasonal products. In addition, Rental Green is not an essential service, and there is a risk that the market could shrink if substitute gardening-related products or other products become widespread. The Group is working to secure stable sales through diversification of the Green Business, but the underlying risk of demand disappearance remains.

The Group uses a large number of vehicles and also uses heavy oil and kerosene for greenhouse heating in winter. Petrochemical fuels are also used in the production of purchased products (such as pot covers) and ceramics. If fuel prices rise more than expected or if price pass-through is insufficient, transportation costs, heating costs, and procurement costs will increase, adversely affecting business results. While the Group is working on cost reductions by department, there are limits to how it can respond to price fluctuations caused by external factors.

The Group's business is labor-intensive and requires specialized skills and knowledge, and the stable securing and training of excellent personnel is recognized as an important challenge for continued growth. While the Group is working to strengthen recruitment activities company-wide and build training and educational systems, if it is unable to secure and train personnel as planned, there is a risk that business operations could be hindered. A shortage of personnel also carries the risk of directly leading to a loss of competitiveness through a decline in service quality.

Most of the know-how accumulated by the Group in areas such as customer management and product management, as well as employee skills, are difficult to protect legally. If such know-how flows outside the company along with departing personnel, and this leads to the provision of similar services or the emergence of new competitors, there is a possibility that the Group's differentiated competitive advantage could be lost, affecting business results. No specific countermeasures regarding the establishment of effective legal protection measures are currently disclosed.

The Group handles a large amount of customer information, and if inadequate management leads to information leaking outside the company, there is a risk of a decline in social trust and claims for damages. While the Group is working to establish a management system through the conclusion of contracts with business partners and the development of internal regulations, there is no detailed disclosure regarding responses to cyberattacks or internal misconduct.

The Group conducts its sales and service activities using a large number of vehicles, and in the event of a serious traffic accident, administrative penalties such as suspension of vehicle use, suspension of business office operations, or revocation of business licenses could be imposed. In addition, strengthening of environmental regulations such as the Automobile NOx/PM Act and the Tokyo Metropolitan Environmental Security Ordinance requires planned vehicle replacement in response to bans on the use of non-compliant vehicles and entry restrictions. While the Group takes measures through organizational responses such as its Compliance Committee and Health and Safety Committee, as well as the development of manuals, the risk to business continuity in the event of violations or accidents remains.

The landscaping construction, civil engineering construction, building construction, and interior finishing construction businesses conducted by the Group are subject to the registration and licensing system under the Construction Business Act, which stipulates the scale of construction work and contract amounts that can be undertaken. If, for any reason, such licenses were to be revoked, the Group could become unable to win major contracts such as landscaping construction, which could have a material impact on business results. While the Group currently holds all necessary licenses, ongoing compliance efforts are required to maintain them.

The Group operates businesses overseas, and there is a risk that unexpected events could occur due to political and economic instability, foreign exchange rate fluctuations, natural disasters, war and terrorism, changes in laws and regulations, and differences in culture and customs. Since the financial statements of overseas group companies are prepared in local currencies, exchange rate fluctuations may affect business results and financial position when translating these into yen for consolidated financial statement purposes. No specific hedging measures or other countermeasures are explicitly disclosed in the securities report.