KIMURA KOHKI Co.,Ltd.

Prices of key raw materials such as copper and aluminum, as well as major components such as outdoor units and compressors, may rise significantly or become difficult to procure due to the impact of economic conditions, international circumstances, and exchange rate fluctuations. Similarly, service provision by outside contractors may be affected by cost increases and difficulty securing personnel, potentially leading to a slowdown or halt in production and sales activities. The Company is taking measures such as reviewing its supply chain, stockpiling raw materials and key components, changing designs, and developing new outsourcing partners; however, if a situation exceeding these measures arises, it may affect business performance and financial condition.

As cyberattacks become more sophisticated and elaborate, the risks of ransomware damage and confidential information leakage are becoming more serious. If core systems or important systems such as product development and production management are disrupted, there is a risk of a significant impact on business operations, including the suspension of product development, production, and sales. In addition to preventive measures such as technical countermeasures, employee training, and the use of external advisory services, the Company is working to reduce risk through the formulation of a business continuity plan and enrollment in cyber insurance. If damage exceeding these measures occurs, it may affect business performance and financial condition.

The Company's business activities are dependent on domestic economic conditions, and it faces risks such as significant exchange rate fluctuations, rising interest rates, a decrease in domestic capital investment, and difficulty procuring raw materials. Rising crude oil prices and instability in maritime shipping due to tension in the Middle East could also lead to a decrease in domestic capital investment in Japan. The Company is working to gather information on domestic market trends and respond promptly, as well as improve operations, enhance product competitiveness, and improve its financial structure; however, if a situation arises that cannot be absorbed through corporate efforts, it may affect business performance and financial condition.

Rising labor and temporary staffing costs due to population decline and the aging society with a low birthrate may make it difficult to secure the personnel necessary for business continuity. In addition, if the Company's appeal, including treatment of employees, declines, it may result in an outflow of talent, hindering the maintenance of competitiveness. The Company is implementing appropriate wage increases, improving the working environment, streamlining business processes, and investing in education and reskilling; however, if these measures do not have a sufficient effect, it may affect business performance and financial condition.

As efforts toward carbon neutrality become essential to corporate conduct, delays in addressing greenhouse gas measures or inferior environmental adaptability could lead to a decline in the Company's competitiveness. The Company is taking measures such as strengthening its response to the SDGs, using refrigerants with low global warming potential (chilled/hot water, etc.), and reducing refrigerant usage and preventing leakage through packaging and system technology for equipment. If these measures do not have a sufficient effect, it may affect business performance and financial condition.

There is a risk that product competitiveness may decline due to a perceived high price relative to performance or delays in research and development. The Company is taking measures such as marketing activities that incorporate customer feedback, cost reduction, productivity improvement, and continued investment in research and development; however, if differentiation from competitors cannot be maintained, it may affect sales and earnings. If digital transformation (DX) initiatives do not progress appropriately, operational efficiency may also lag behind other companies, entailing a risk of declining market competitiveness.

Revisions to related laws and regulations, such as the Act on Promotion of Subcontracting Small and Medium-sized Enterprises' Transaction Optimization, the Construction Business Act, the Waste Management and Public Cleansing Act, and the Fluorocarbons Recovery and Destruction Act, as well as tightening environmental regulations, may restrict product development and business expansion. If a violation of laws or regulations occurs, business issues such as the revocation of licenses and permits may also arise. The Company is taking proactive measures in response to legal revisions and stricter environmental regulations, monitoring by its legal department, and conducting regular checks through internal audits; however, if these measures do not function sufficiently, it may affect business performance and financial condition.

Wars and terrorism occurring around the world may cause supply chain disruptions, economic bloc formation, and intensified conflict among major powers, resulting in direct or indirect impacts on the Company's business operations. Domestic conditions may also be affected, potentially leading to increased procurement costs or supply disruptions for raw materials and components. The Company is taking measures such as reviewing its supply chain and stockpiling key components; however, if a situation beyond expectations arises, it may affect business performance and financial condition.

If sexual harassment, power harassment, misconduct by employees, or similar issues occur, a wide range of risks may arise, including theft of money and goods, removal of confidential information, claims for damages, outflow of talent due to a deteriorating work environment, loss of customer trust, and impact on the stock price. The Company is taking measures such as thoroughly enforcing internal controls, providing employee training, and establishing an internal reporting system; however, if damage exceeding these measures occurs, it may affect business performance and financial condition.

With its head office, eight sales offices, and three production sites located throughout Japan, the Company faces the risk that earthquakes or wind and flood damage caused by typhoons resulting from climate change could damage facilities and affect employees, causing direct or indirect impacts on business operations. The Company is taking measures such as formulating a business continuity plan, improving facilities at each site, and maintaining insurance coverage; however, if damage exceeding expectations occurs, it may affect business performance and financial condition.