C.E.Management Integrated Laboratory Co.Ltd

In the Testing & Inspection Services business, orders from general contractors and similar clients account for more than 90% of the total, resulting in a very high dependency ratio on public works. Changes in public investment trends, such as deterioration in national and local government finances or project reviews, may affect business performance. As countermeasures, the Company is working to expand orders for general private-sector projects, expand its business domain, and level out order intake by balancing public works and private-sector projects.

Public works projects tend to be concentrated toward the fiscal year-end (end of March), leading to a slow period from April onward, creating a structure prone to fluctuations in sales and earnings throughout the year. This concentration of orders may also affect cash flow and the efficiency of personnel allocation. The Company seeks to level out order intake by balancing public works and private-sector projects.

If a testing center responsible for core operations is affected by a disaster or other unforeseen event, damage to testing and analysis equipment, damage or loss of data, or downtime of IT network-based business processing systems could have a material impact on business performance. As a countermeasure, the Company has distributed operations across three locations—Chikuma City, Nagano Prefecture (Central Testing Center), Sendai City, Miyagi Prefecture (East Japan Testing Center), and Yamaguchi City, Yamaguchi Prefecture (West Japan Testing Center)—and is enhancing equipment at each center to ensure business continuity.

Because the Company centers its field work on full-time employees in order to provide stable technical capabilities, securing a certain number of workers is essential for business expansion. If the Company is unable to secure sufficient personnel due to the declining birthrate and aging population and tight employment conditions in the construction consulting industry, business performance may be affected. As countermeasures, in addition to promoting operational efficiency (such as automation), the Company has introduced the PS (Partnership) system and the FC system, working to resolve technical staff shortages through collaboration with partner contractors nationwide.

While the impact of COVID-19 on the construction consulting industry was limited, if a new infectious disease were to spread and persist over the long term in the future, it could affect business results. Given the business's field-work-centered nature, the spread of infectious disease carries a risk directly linked to constraints on personnel deployment. The securities report does not disclose specific countermeasures.

A global surge in crude oil and raw material prices could raise fuel costs and construction material prices, increasing expenses related to construction sites, which may affect the pricing of the Company's orders and make it difficult to secure orders at appropriate prices. If cost increases cannot be passed on to order prices, this could lead to lower profitability. The securities report does not disclose specific countermeasures.