TAKAKITA CO., LTD.

Structural issues related to agriculture exist, including shifts in government agricultural policy, the aging of agricultural workers, and the decline in the number of farming households due to a shortage of successors. If the agricultural market stagnates due to these changes in the external environment, this may affect the operating results and financial condition of the Agricultural Machinery Business, the Company's core business. Continuous monitoring is required as a medium- to long-term risk of contraction in demand for agricultural machinery.

Sales to the top three customers account for 57.2% of total sales (FY2026 (ending March 2026)), indicating a high degree of dependence on specific customers. Although stable business relationships have been maintained over many years, if any change occurs in these business relationships for any reason, it may have a material impact on operating results and financial condition. There is a latent risk of changes in customers' management strategies or of customers switching to competitors.

If procurement prices for raw materials and purchased parts rise sharply, or if there is any disruption in procurement volumes, this may cause changes in production and sales plans, potentially affecting operating results and financial condition. There is also dependence on specific suppliers and subcontractors, and similar risks may materialize if these business partners change their management strategies, experience deteriorating profitability, or encounter quality issues. While the Company continues to work toward cost reductions and stable procurement, the vulnerability of the overall supply chain remains a challenge.

The fourth quarter in winter (January to March) is an off-season for the Agricultural Machinery Business, during which profitability declines compared to other quarters, potentially resulting in an operating loss. In addition, if poor weather leads to poor harvests, demand for agricultural machinery may decline, potentially affecting operating results and financial condition. Seasonality and weather risk combine structurally to amplify fluctuations in performance.

In addition to trade transactions with multiple overseas countries, the Company operates an agricultural machinery joint venture business in China, and significant changes in the political, economic, social, or legal systems of overseas countries, as well as supply chain disruptions caused by terrorism or war, may constrain business activities. There is also a risk that business profitability may deteriorate due to sharp rises in raw material prices and ocean freight rates, significant fluctuations in exchange rates, and substantial increases in tariffs. Against the backdrop of heightened geopolitical risk, uncertainty regarding overseas operations is increasing.

In the production processes at the Head Office Plant (Nabari City, Mie Prefecture) and the Sapporo Plant (Sapporo City, Hokkaido), it is difficult to guarantee the elimination of defects in all products, and defects may occur due to various factors. When defects occur, in addition to the costs of countermeasures and compensation, a decline in confidence regarding product quality may affect operating results and financial condition. Although the Company has established a system to promptly implement countermeasures, the financial impact could be significant if large-scale responses such as recalls become necessary.

Since production is based on sales forecasts and order trends, if sales plans are not achieved, surplus or stagnant inventory may arise, potentially resulting in substantial valuation losses on inventories. Although the Company strives to reduce inventories through commonization of parts, shortening of procurement lead times, improving the accuracy of production and sales plans, and multi-item small-lot production, inventory risk tends to materialize readily during sudden changes in market conditions. The occurrence of valuation losses has a direct impact on operating results and financial condition.

The Company holds a large amount of customer information and confidential information necessary for production activities, and events exceeding expectations—such as power outages, disasters, software failures, computer virus infections, or unauthorized access—may cause disruption or shutdown of core business systems, or the loss or leakage of internal information including customer data. Although appropriate security measures have been implemented, information security risk remains an ongoing threat against the backdrop of increasingly sophisticated cyberattacks. If constraints on business activities occur, this may affect operating results and financial condition.

The agricultural machinery market is subject to a severe competitive environment involving higher-functionality products, lower prices, and enhanced after-sales service, and failure to respond appropriately to changes in the market environment may affect operating results and financial condition. There is also a structural background in which market contraction due to the decline in the number of agricultural workers further intensifies competition. While the Company aims to maintain competitiveness through continuous product development and service provision, differentiation from major manufacturers in competition remains a challenge.

While recruiting and developing excellent human resources is an important policy for achieving continuous growth, if there is a shortfall relative to recruitment plans or continued outflow of personnel, this may cause a slowdown in operations in the relevant departments, potentially affecting operating results and financial condition. Against the backdrop of the declining birthrate and intensifying competition in the labor market, difficulty in securing human resources in the manufacturing industry has become a structural problem. There is also a risk that delays in the transfer of technology and know-how could spread to affect product development capabilities and production efficiency.