KIMURA CO.,LTD.

The majority of the Group's net sales consist of housing-related materials, and its business performance is affected by housing market trends such as fluctuations in new housing starts. Should demand for housing-related materials decline due to future population decrease or stagnation of the domestic economy, this could have a material impact on business performance. As a countermeasure, the Group maintains diversification of its product lineup, but measures against fundamental demand fluctuation risk remain limited.

Of the Wholesale Business's net sales of ¥9,547,902 million, direct-shipment transactions account for ¥4,834,413 million. Since products in such transactions are shipped directly from suppliers to customers, the Company does not handle the shipping itself, making it relatively difficult to verify facts related to sales. The Company strives to mitigate this risk by cross-checking against external evidence such as delivery slips issued by suppliers and by confirming accounts receivable balances.

In the home center industry, competition with peers and other industries is intensifying, consumer behavior is diversifying due to factors such as online sales, and consolidation is leading to increased market concentration. New store openings by competitors or entrants from other industries near the five large-format home centers operated by the Company, as well as declines in seasonal product demand due to unseasonable weather such as cool summers or warm winters, could affect business performance. The Company currently does not recognize this risk as having heightened.

Approximately 90% of the Group's consolidated net sales are generated within Hokkaido, making its business performance highly dependent on Hokkaido's specific economic environment and construction demand trends. The deepening population decline problem in Hokkaido is expected to affect both the Wholesale Business and the Retail Business. To reduce this regional concentration risk, the Company is promoting expansion of business operations outside Hokkaido, but a high degree of regional dependence is expected to continue for the time being.

Deterioration in the business performance or cash flow of major business partners such as building materials retailers, construction firms, and construction-related contractors could result in bad debt losses. If sudden changes in the external environment worsen the financial condition of business partners, the resulting inability to collect trade receivables could affect business performance and financial position. The Company strives to diversify this risk by setting credit limits, continuously monitoring the financial condition of business partners, and arranging trade credit insurance.

Should business facilities or stores be damaged by disasters such as earthquakes or fires, this could result in delays or stagnation in business operations and damage to products. If major damage occurs to infrastructure or the supply chain, securing products may become difficult, which could affect business performance. The Company has implemented safety measures such as system operations at specialized facilities, but since disaster occurrence cannot be predicted, it plans to respond through rapid information gathering when such events occur.

Should the value of held fixed assets decline significantly, additional impairment processing may become necessary, which could affect business performance and financial position. The Company implements appropriate impairment processing based on impairment accounting standards, but there is a risk of unexpected impairment arising from changes in market conditions or other factors. As of the filing date, the Company does not recognize any fixed assets for which impairment risk has heightened.