CAPITA Inc.

The purchase price of petroleum products has a structure that is directly affected by fluctuations in crude oil market conditions. Although the Company sets sales prices taking procurement costs into account, there is a possibility that business performance could be affected if cost increases cannot be sufficiently passed on to sales prices due to competition with other companies. In particular, during periods of sharp increases in crude oil prices caused by international circumstances (such as the closure of the Strait of Hormuz), there is a risk that the gap between purchase prices and sales prices could widen.

Crude oil prices have been rising sharply against the backdrop of the closure of the Strait of Hormuz stemming from the U.S. attack on Iran, and the situation continues with no end in sight. If crude oil prices continue to rise and the Company is unable to pass on the resulting increase in purchase prices to sales prices, this could have a material impact on the business performance of the Company Group.

Although the sales plan for the Petroleum Business takes seasonal fluctuations into account, if weather changes such as an unexpectedly warm winter occur, demand for heating-related oil products such as kerosene and A-type heavy fuel oil could decline significantly, potentially affecting business performance. If the long-term trend of warmer winters progresses due to climate change, this could become a structural risk of demand decline.

There is a risk of soil contamination and river water quality contamination due to leakage of petroleum products at service stations. The Company addresses this through daily leak checks of storage tanks and piping, as well as by taking out liability insurance. However, if a leakage accident occurs and the amount of damages significantly exceeds expectations, costs that cannot be covered by insurance may arise, potentially affecting business performance.

The Company holds a variety of personal information, including customer information, at its stores, and works to ensure thorough awareness through the establishment of the "Personal Information Management Regulations" and staff training. However, if personal information is leaked, this could affect business performance due to loss of credibility, damages liability, and other factors.

If information systems become unusable for an extended period due to natural disasters such as earthquakes or fires, or mechanical failures, or if large-scale data destruction occurs, this could have a material impact on business operations. Specific details of the current system redundancy and backup arrangements are not disclosed in the securities report.

In the automobile and bicycle maintenance business, if the Company Group's negligence causes damage to customers or third parties, although the Company has product liability insurance, there is a possibility that it may not be able to cover the full amount of losses incurred. While the Company strives to ensure maintenance safety through a thorough system, in the event of a serious accident, this could affect its financial position and operating results.

If an abnormal situation such as a natural disaster (earthquake, typhoon, etc.), pandemic, large-scale disaster, or conflict occurs, business operations of the Company Group and its business partners could become difficult, potentially affecting the Company Group's financial position and operating results. The Company has established internal rules and a BCP (Business Continuity Plan) for emergency response and has put in place a system to respond according to the situation.

The Company judges the recoverability of deferred tax assets based on projections of future taxable income. However, if future taxable income projections change and it is determined that all or part of the deferred tax assets are unrecoverable, it will become necessary to reduce the deferred tax assets. In this case, this could affect the financial position and operating results of the Company Group.

Due to the application of accounting standards related to impairment, if the business environment changes significantly in the future, it may become necessary to recognize impairment losses on fixed assets held by the Company. For the Company Group, which has a store network centered on the Petroleum Business, changes in demand structure and declining profitability could become factors that increase the risk of impairment of fixed assets.