Mitsubishi Kakoki Kaisha, Ltd.

The outlook for the economic environment remains uncertain amid rising prices and interest rates both in Japan and overseas, and increasing geopolitical risk including U.S. trade policy. If capital investment plans in the chemical, oil, gas, and marine transport industries as well as public sewage treatment, which are the Company's main customers, are scaled back or postponed, this could adversely affect business results and financial condition. As countermeasures, the Company is working to secure a revenue base load through the expansion of after-sales services and maintenance work, and to promote expansion into growth fields through the "GX Business" segment newly established in April 2025.

Since orders are mainly received under contract-based arrangements, if the Company is unable to maintain a price advantage over competitors amid intensifying price competition, this could lead to lost order opportunities and deteriorating profitability, adversely affecting business results and financial condition. The Company strives to maintain its price advantage through deepening and creating differentiating technologies and strengthening cost competitiveness.

Many projects involve long construction periods, and if a sharp rise in material prices occurs after an order is received, the Company may be unable to fully absorb the resulting cost increases due to the nature of contract-based orders, which could adversely affect business results and financial condition. The Company is working to reduce material costs through passing costs on to sales prices, early ordering, reviewing its procurement structure, and strengthening group procurement and joint purchasing.

Significant repair and compensation costs arising from product defects, or accidents and disasters occurring at construction sites, could adversely affect business results and financial condition. The Company has established safety and quality management systems for manufactured products and construction work, and strives to secure and maintain high quality.

If the Company is unable to recruit and develop the necessary personnel and engineers with specialized technical skills amid a rapidly changing employment environment, this could reduce its ability to carry out business operations and adversely affect business results and financial condition. The Company is responding through proactive recruitment of new graduates and experienced personnel, continuation of training by department and job level, and strengthening measures to improve employee engagement.

If the yen appreciates in foreign currency-denominated transactions, this could lead to translation losses and a decline in export competitiveness, adversely affecting business results and financial condition. The Company has established foreign currency handling standards and works to minimize foreign exchange risk through the use of forward exchange contracts.

Financial covenants are set forth in the syndicated commitment line agreement and term loan agreement, and if these are breached, the Company could lose the benefit of the term and this could have a material adverse effect on business results and financial condition. The Company strives to conduct its operations in a manner that stably satisfies the required standards of the financial covenants.

Damage to facilities and products at major production sites or disruption to the supply chain caused by disasters such as earthquakes and floods, or delays in processes and a decline in customers' capital investment due to the spread of infectious diseases, could adversely affect business results and financial condition. The Company has taken preventive measures such as maintaining insurance coverage, periodically reviewing its business continuity plan (BCP), conducting regular facility inspections, and managing employee health.

In addition to the increasing severity and frequency of natural disasters caused by global warming, stricter environmental regulations accompanying the transition to a low-carbon and decarbonized society could adversely affect business results and financial condition through impacts on overall management, including product research, development, and production, as well as on the supply chain. Detailed response policies are disclosed in the Company's approach to and initiatives on sustainability, and the Company is also addressing transition risk through the promotion of the GX Business.

If confidential information such as customer information and personal information held through business activities is leaked due to external cyberattacks or other causes, this could lead to a decline in social credibility and the occurrence of damages, adversely affecting business results and financial condition. The Company is working to establish a strict management system for information system operations, enhance and expand relevant regulations, and raise employee awareness through e-learning and other means.