KIMURA CHEMICAL PLANTS CO., LTD.

Changes in the economic conditions of key client industries such as chemicals, textiles, medical, and food-related sectors may have a significant impact on business performance. The company's core products, chemical machinery equipment and Energy & Environment-related equipment, are all built to order and depend on domestic capital investment trends, so postponement or cancellation of capital investment plans directly affects operating results and financial condition. A business structure with high dependence on specific industries and the domestic market underlies this vulnerability.

In the Engineering Business and Chemical Machinery Business, large-scale, long-duration plant projects carry the risk of delivery/construction delays and cost increases due to difficulty securing workers. Because the business model involves undertaking a full range of work from planning and proposal through trial operation, the scope of impact is wide when technical or quality issues arise. If these risks materialize, they may affect operating results and financial condition.

The Energy & Environment Business (nuclear field) is heavily influenced by national policy, and external factors such as accidents or shifts in public opinion that lead to policy changes may have a substantial impact on business performance. Nuclear policy is highly susceptible to political and social factors, making business continuity in this field highly uncertain. The company group has not disclosed specific alternative measures, and this risk is recognized as one with high dependence on the external environment.

Although the company has established a quality control system and strives to ensure and maintain high quality, the possibility of unforeseen serious quality problems cannot be ruled out. If a serious quality problem occurs, the company may face product liability claims, and operating results and financial condition may be affected. Building a quality control system that leverages extensive experience and know-how has been implemented as a countermeasure.

In the course of business activities, significant litigation related to intellectual property infringement, product liability, and similar matters may be brought against the company. Although the company strives for legal compliance and proper contract performance, if litigation is initiated, it may affect operating results and financial condition. The materialization of litigation risk can lead not only to damages liability but also to a decline in corporate credibility.

The company holds listed shares with market value as investment securities, and there is a risk that the valuation of held securities will decline due to stagnation in the stock market or deterioration/bankruptcy of investee companies. If there is no prospect of recovery, recording of valuation losses becomes necessary, which may affect operating results and financial condition. As this risk depends on stock market conditions, it is highly sensitive to changes in the external environment.

Human and physical damage from unforeseen disasters such as major earthquakes, typhoons, tsunamis, floods, and fires may affect operating results and financial condition. Measures such as regular maintenance, inspection, and drills of disaster prevention equipment, taking out property and casualty insurance, introducing safety confirmation systems, and securing means of fundraising have been implemented, but the risk of disruption to business continuity remains in the event of a severe disaster.

If employees' business activities become restricted due to the spread of infectious disease, operating results and financial condition may be affected. The company has established an infection control response headquarters and implements measures such as remote work, staggered commuting hours, and thorough visitor management based on internal regulations and action manuals, with a system in place to minimize the impact on business continuity. Cooperation on infection prevention measures is also requested from business partners.

Although the company recognizes "securing and developing engineers" as one of its most important challenges, if there is a shortage of specialized personnel such as engineers, this may result in business contraction or disruption to business continuity. The company has set strengthening its "technical base," "sales base," and "organizational base" as management policies and strives to secure and develop capable personnel, but there is a risk that intensifying competition in the specialized talent market will make recruitment difficult.

The company holds and manages information assets such as corporate information, development information, personal information, technical information, and financial information of business partners and cooperating companies. If damage occurs due to unauthorized access, information leakage, virus infection, system failure, or similar incidents, it may cause substantial harm to customers and others and affect operating results and financial condition. The company has established an Information Security Committee and implements countermeasures through risk assessment and management, review of regulations, and dissemination and awareness-raising activities for users.