SAFTEC CO.,LTD.

Trends in public works budgets and private-sector construction, as well as the fiscal condition of local governments, could significantly affect business performance. If demand contracts or budgets are cut, there is a risk that net sales could decline. As a countermeasure, the Company is working to build a revenue base that is not dependent on market trends by developing competitive new products and strengthening sales capabilities.

A portion of purchases are imported from China, and if disruptions to product supply occur due to China's economic conditions or policy changes, this could affect business performance. Geopolitical risks and changes in trade regulations are also potential concerns. As a countermeasure, the Company maintains relationships with domestic suppliers of equivalent products and has established an alternative procurement system for products with similar functions.

If the economic value or profitability of owned fixed assets significantly declines, impairment accounting may be required, which could adversely affect business performance. In particular, for the Company Group, which holds substantial fixed assets such as rental assets and high-value products, impairment of asset value could constitute a material financial risk. No specific countermeasures are described in the Annual Securities Report.

Because the depreciation period of rental assets does not necessarily coincide with the period over which rental revenue is recognized, during periods of business expansion, rental revenue may not be recorded in proportion to the increase in depreciation expense recorded as cost of sales, potentially worsening annual business performance. Because the Company is actively renewing and expanding assets to meet growing rental demand, this timing-lag risk continues to exist. As a countermeasure, the Company sets unit prices and rental utilization periods so that rental revenue exceeds the input cost.

Purchases of high-value products are primarily financed through lease contracts, and if such products do not contribute to sales, the recording of depreciation expenses and repayment of lease obligations will continue, potentially adversely affecting both earnings and cash flow. Because these are high-value products, unexpected fluctuations in the rental utilization period can significantly impact profit. As a countermeasure, the Company sets unit prices and utilization periods to ensure profitability and selects products and quantities based on projected demand.