Sanoyas Holdings Corporation

The Group's business is significantly affected by domestic economic trends, with each segment—construction elevators, industrial machinery, amusement rides, etc.—being influenced by fluctuations in construction demand, manufacturing demand, and leisure demand, respectively. The Group has previously experienced a significant impact on business performance during the COVID-19 pandemic, and a similar impact could recur in the event of another pandemic. In addition, the Group is focusing on overseas exports centered on Emulsifying & Stirring Equipment, and may also be affected by trends in local demand and changes in laws and regulations overseas.

Against the backdrop of geopolitical risks such as the deteriorating situation in the Middle East and the Russia-Ukraine conflict, prices of raw materials including steel, copper and other non-ferrous metals, as well as petroleum and coal, along with energy prices such as electricity, have been rising. Due to the nature of the business, which is centered on made-to-order production, it is difficult to pass on cost increases to order prices, making the impact on business performance more likely to materialize. In particular, the recent deterioration in the Middle East situation has already caused difficulties in procuring petroleum- and naphtha-derived materials and has led to price increases, raising concerns about the future impact on business performance.

If additional work not initially anticipated arises during the construction phase, cost increases may result in unprofitable projects, requiring the recording of a provision for construction losses. In a business model centered on made-to-order production and contracted construction work, managing profitability on a project-by-project basis is a critical risk directly linked to the stability of business performance. The Group has not disclosed any specific countermeasures, and if such a situation occurs, it may adversely affect operating results and financial position.

Since the Bank of Japan's termination of its negative interest rate policy, interest rates have entered a rising phase, and further increases are expected over the medium to long term. This may lead to increased interest expenses on the Group's interest-bearing debt and a deterioration in net financial income. Although there is no disclosure of the specific balance of interest-bearing debt or interest rate sensitivity, the Group's financial cost structure is directly affected by changes in the interest rate environment.

Most of the investment securities held by the Group are listed stocks, and significant fluctuations in stock market prices could affect business performance and financial position. The holding policy is described in the Corporate Governance section of the Securities Report, but exposure to market risk remains.

The Leisure Business, in particular, involves import and export transactions, and fluctuations in foreign exchange rates could affect the performance of this business. There is no disclosure of specific hedging measures or exchange rate sensitivity, and the information on the Group's response to foreign exchange risk remains limited.

The Group manufactures products, performs installation work, and conducts maintenance in accordance with quality control standards; however, if costs arise from warranty work or product liability claims, the portion not covered by insurance or other means could affect business performance and financial position. As the Group handles products such as amusement rides and industrial machinery that require a high degree of safety, the liability risk in the event of an accident or defect is correspondingly significant.

If the market value of business assets such as manufacturing equipment declines significantly, or if profitability deteriorates with no prospect of recovery, the Group may record an impairment loss on fixed assets. In addition, the Group has recorded goodwill in connection with acquisitions, and if the profitability of the relevant business deteriorates, the Group may record an impairment loss on goodwill, which could affect business performance.

If information assets are lost or leaked due to computer virus infection, unauthorized access, or other causes, this could affect business performance as well as the Group's credibility and reputation. As countermeasures, the Group, centered on the Systems Planning Department, is developing and updating its information management system, including IT systems, and providing employee training; however, risks associated with the increasing sophistication of cyber threats continue to exist.

Due to restrained hiring during the downturn in the Shipbuilding Business, there is an imbalance in the age composition of employees, making the transfer of skills and the securing of immediately effective personnel a challenge. As countermeasures, the Group continues to hire a certain number of new graduates and mid-career employees regardless of business conditions, and completed the introduction of a mandatory retirement age of 65 across the entire Group in April 2025. However, depending on labor market trends, the Group may not be able to secure human resources as planned, which could affect business performance.