Toyo Kanetsu K.K.

The accelerating transition toward a low-carbon/decarbonized society may reduce demand for LNG, crude oil, and other storage tanks, potentially adversely affecting the business environment of the Plant Business. As countermeasures, the Company supports the TCFD recommendations and is advancing analysis of climate change risks and opportunities, while continuing R&D on large liquid hydrogen tanks (50,000 m³ class), aiming to construct a bench-scale test tank in FY2026 (ending March 2026) and complete demonstration testing in FY2027 (ending March 2027).

In the Logistics Solutions Business, there is a risk of unexpected costs arising from shortened delivery times and the simultaneous progress of multiple large-scale projects, while in the Plant Business, a shortage of construction workers, rising prices of materials and equipment, and delays in the transfer of technical skills among site supervisors may affect business execution. In response, the Company has brought Kimoto Sangyo Co., Ltd. into the group, is increasing the number of engineers and site supervisors jointly with TKK Plant Engineering Co., Ltd., and is promoting improvements to the working environment through the use of DX.

If a serious quality claim or product trouble occurs, repair costs and compensation could not only worsen project profitability but also damage the Group's social reputation. As countermeasures, the Company has taken out product liability insurance, established a quality management system, and placed the department responsible for quality control under the direct authority of the President to enable a rapid response system.

Both the Logistics Solutions Business and the Plant Business are order-based industries, and if intense order competition results in downward pressure on profitability, it may adversely affect business performance and financial condition. In addition, delayed response to the shortening life cycles of products and technologies poses a risk of declining competitiveness over the medium to long term. As countermeasures, the Logistics Solutions Business is strengthening price competitiveness through in-house production and standardization of products, while the Plant Business is enhancing tank EPC execution capabilities and expanding its business domain through overseas subsidiaries.

If profitability declines due to significant changes in the business environment or business conditions, and it is determined that sufficient cash flow cannot be generated from tangible and intangible fixed assets, recording an impairment loss may affect business performance and financial condition. The Company strives to continuously monitor performance and take countermeasures before investment recovery becomes difficult.

In M&A activities and CVC initiatives aimed at reducing earnings volatility, if the business environment changes drastically after an M&A transaction, or if the business does not progress as planned for unforeseen reasons, this may affect financial condition and business results. As countermeasures, the Company conducts detailed due diligence with internal and external experts and strengthens regular monitoring through the Management Committee and the Board of Directors.

In handling confidential information such as customer information and technical information, cyberattacks, unauthorized access, or computer virus infections could lead to information leaks, data tampering, or system outages, which may affect business performance. As countermeasures, the Company implements access control based on zero trust, multi-layered defense measures, ISMS certification, and cyberattack response drills, as well as management of outsourcing partners to ensure the safety of the entire supply chain.

A decline in the working population due to the falling birthrate and aging population, intensifying competition for talent, and diversifying career attitudes leading to employee turnover may make it difficult to secure sufficient workforce. As countermeasures, the Company is implementing measures to improve treatment and engagement, formulating an action plan to promote women's participation, obtaining certification as a "2026 Certified Health & Productivity Management Outstanding Organization (Large Enterprise Category)", and promoting skills enhancement and safety education through the Education Center in the Logistics Solutions Business.

In the Logistics Solutions Business, an economic downturn or the declining birthrate and aging population could lead to reduced logistics volumes and stagnation in investment in logistics facilities; in the Plant Business, changes in the economic and social conditions of oil- and gas-producing countries or shifts in energy and environmental policies in various countries could cause plant owners to cancel, postpone, or significantly revise their investment plans, which may adversely affect business performance. As countermeasures, the Company is expanding its business domain through the use of AI and IoT technologies and securing stable revenue sources by improving the profitability of maintenance projects.

Unexpected foreign exchange fluctuations in overseas business, which mainly involves transactions denominated in US dollars, an increase in funding costs during periods of rising interest rates, and a significant decline in the stock prices of cross-shareholdings, may adversely affect business performance and financial condition. At present, the volume of foreign-currency-denominated transactions and the amount of assets held are relatively small, and the Company recognizes the foreign exchange fluctuation risk as low; regarding cross-shareholdings, the Board of Directors reviews the rationale for holding each stock every fiscal year and sells shares for which the rationale for holding has diminished.