MORIYA TRANSPORTATION ENGINEERING AND MANUFACTURING CO.LTD

Key raw materials such as steel, wire ropes, and motors are affected by the steel market and Middle East conditions, and some are procured in foreign currency, entailing exchange rate fluctuation risk. If market prices rise or procurement becomes difficult, manufacturing costs may increase, potentially affecting financial position and operating results. As countermeasures, the Group is promoting the pass-through of costs to selling prices and strengthening relationships with multiple domestic and overseas suppliers.

If wages at the Company and its subcontractors rise due to inflation, labor shortages, or minimum wage increases, manufacturing costs and selling, general and administrative expenses may increase, potentially affecting financial position and operating results. Labor shortages are becoming more severe in the construction and manufacturing industries, and upward pressure on labor costs is expected to continue. The Company intends to pass on cost increases to selling prices when absorption is difficult.

Amid worsening labor shortages across the construction and manufacturing industries as a whole, if it becomes difficult to secure and train engineers and maintenance personnel, or if personnel attrition progresses, this may hinder the sustainable growth of the business and affect financial position and operating results. As countermeasures, the Company is actively hiring new graduates and experienced personnel, improving wages and benefits, and enhancing its education and training system to retain existing employees.

Freight Elevators (for Buildings) are affected by demand for construction of logistics facilities and factories, while Marine Elevators are affected by demand for newbuild vessels. If demand weakens due to changes in the business environment, this may result in a decline in the number of new orders and a decline in product and service prices, potentially affecting financial position and operating results. The Company aims to reduce risk through a combination of in-house and outsourced manufacturing, installation, and maintenance, as well as cost reduction and fixed cost compression by expanding raw material procurement sources in Asia.

If the Group's four bases in Yokohama City and Tochigi Prefecture, as well as domestic and overseas sales and service locations, are affected by a large-scale natural disaster or infectious disease outbreak, damage to production equipment, supply chain disruption, and employees' inability to work may occur, potentially hindering business operations. The Group has already formulated a BCP, and is advancing the diversification of production sites by establishing a system at the Haga Plant, scheduled for full operation in March 2026, that will enable painting of components manufactured at the Utsunomiya Plant.

If a serious malfunction or accident occurs in the Company's mainstay Freight Elevators (for Buildings) for logistics facilities, resulting in a prolonged shutdown, this could lead not only to individual liability for damages but also to broad social impacts such as the halting of operations at logistics facilities as a whole and disruption of supply chains. If the Company receives administrative guidance such as a business improvement order or suspension of operations from regulatory authorities, this would have a significant impact on financial position and operating results. Through an organizational change in April 2025, the Company established a dedicated renewal department, strengthening proactive proposals for maintenance and repair and its system for preventing accidents before they occur.

The Company holds confidential information including customers' technical, manufacturing, and sales activities as well as personal information. If a cyberattack or unauthorized access results in information leakage, data destruction, or system shutdown, this may result in substantial response costs and damage to the Company's social credibility, potentially affecting order-taking activities. Although the Company has implemented appropriate security measures, risks associated with increasingly sophisticated threats continue to exist.

Mr. Sadao Moriya, the Representative Director and President, plays an important role in determining management policy and strategy and in driving business operations. If, for any reason, he becomes unable to continue performing his duties, this may affect financial position and operating results. The Company has established a Nomination and Compensation Committee as an advisory body to the Board of Directors, and is advancing the formulation and implementation of a succession plan as well as the establishment of a management structure that does not depend on him.

The Company conducts its business under a general construction business license (machinery and equipment installation work) and an elevator manufacturing license. If grounds for license revocation arise, or if violations of laws and regulations such as the Building Standards Act, the Industrial Safety and Health Act, or the Ship Safety Act occur, this could seriously impede business continuity and affect financial position and operating results. Through the establishment of internal regulations and education and training for officers and employees to ensure thorough legal compliance, the Company states that there are currently no facts that would constitute grounds for revocation.

If a serious defect or construction deficiency occurs in the manufacturing, installation, or maintenance of elevators, this could give rise to liability for damages and damage the Company's social credibility, thereby affecting order-taking activities and potentially impacting financial position and operating results. Although the Company has obtained ISO9001 certification and implements quality control in its production, installation, and other processes, given the nature of its products as social infrastructure, there is an inherent risk that the scope of impact could be extensive.