New Constructor's Network Co., Ltd.

Economic downturn, significant interest rate increases, land price increases, changes in housing taxation, and other factors may reduce the purchasing intent of home buyers. In addition, the decline in Japan's population and number of households could become a long-term factor reducing housing demand. Such market fluctuations may directly affect the Group's business results and financial position.

If a violation of applicable laws such as the Building Standards Act, the Construction Business Act, or the Architects Act occurs, the Group may be subject to sanctions such as penalties or dispositions, damaging its social credibility. In addition, if it becomes difficult to secure qualified personnel required under the Construction Business Act, the Architects Act, or similar laws, or if applicable laws are revised or abolished, or new regulations are introduced, this could also affect business results. The Group currently holds the necessary licenses and permits (registration as a first-class architect office, specific construction business license, and real estate transaction business license) and has established a response system through compliance training and other measures.

The distribution prices of laminated timber, wood, plywood, and particle board used in the SE Construction Method (Housing Sector) fluctuate due to changes in supply-demand balance, and escalating tensions in the Middle East could lead to shortages of crude oil and naphtha, causing a spike in construction material prices. If price increases cannot be passed on to sales prices in a timely manner during periods of sharp price fluctuation, profit margins may be squeezed. The Group strives to secure appropriate profits by passing on price increases to sales prices, but the risk of delayed pass-through remains.

The Group secures a competitive advantage through integrated management of the SE Construction Method (Housing Sector), covering everything from structural calculation to construction, inspection, and performance guarantees. However, competition with companies possessing superior capital strength, sales capabilities, and brand power may prevent the Group from expanding its business as planned. Intensifying competition could affect the expansion of the registered contractor network and order acquisition, and adversely affect business results and financial position.

The SE Construction Method (Housing Sector) outsources the processing of laminated timber to designated structural processing plants nationwide. If a plant's business performance deteriorates or an accident makes it difficult to continue operations, delays in the supply of structural processed products may occur, potentially leading to claims for damages from customers and registered contractors. Given the high degree of dependence on specific external plants, if alternative procurement cannot be secured quickly, the impact on business results could be significant.

In the Wooden Seismic-Resistant Design Business (Single Segment), the majority of sales are recognized upon delivery of structural processed products. Therefore, if construction start delays occur due to natural disasters, accidents, shortages of construction materials, or other factors, the timing of sales recognition may shift, affecting business results. Shortages of construction materials due to crude oil and naphtha shortages stemming from escalating tensions in the Middle East are explicitly cited as a factor contributing to construction start delays.

The Group utilizes various systems for core business functions, including architectural drawing data input, structural calculation, energy-saving calculation, and coordination with structural processing plants. The development or purchase of new systems may require significant expenditure. In addition, system failures, large-scale disasters, computer viruses, and similar events could affect databases or cause service interruptions, impacting business results. The Group addresses this through redundancy and database backups, but the risk cannot be completely eliminated.

Structural calculations are performed for all buildings using the SE Construction Method (Housing Sector), but if issues such as legal revisions or falsification of structural calculation documents occur, business results could be affected. In addition, since the Group provides a long-term warranty system through the SE Housing Performance Guarantee, if an unexpected serious quality problem occurs during the long-term support period, the Group may bear the burden of damages or other costs.

As the business expands, securing and developing excellent human resources has become an important challenge, and difficulty in securing personnel or outflow of personnel to outside the company may affect business development. In addition, the Group is dependent on the experience and knowledge in the timber, housing, and construction industries of Mr. Ikuo Tagusari, Representative Director, President and Executive Officer, and if it becomes difficult to secure a successor upon his resignation or retirement, this could affect business results and business development. The Group aims to reduce this dependence by strengthening its management organization and expanding staff with specialized skills.

The Group intends to continue investing in businesses with group synergies. However, if the business performance of an investee company deteriorates and shares in subsidiaries or investment securities become subject to impairment losses, a loss arising from the write-down of asset value may occur, affecting business results and financial position. In addition, impairment processing of internally used software may also be required if the profitability of each business deteriorates, which could affect the Group's finances.