SANRIN CO. ,LTD.

LP Gas and petroleum products are highly dependent on overseas sources, and procurement costs may fluctuate significantly due to international price trends and geopolitical factors, which could have a material impact on operating results and financial position. Fluctuations in exchange rates also directly affect import costs, posing a risk of undermining the stability of earnings. As a countermeasure, the Group gathers information from suppliers and strives to secure appropriate profits by reviewing selling prices in line with procurement prices.

If gas storage, filling, and supply facilities or petroleum storage facilities are damaged by natural disasters such as earthquakes, fuel supply interruptions and substantial costs for restoring facilities may occur, potentially reducing sales. In addition, due to the characteristics of the mountainous business areas served, transportation route disruptions caused by heavy snowfall in winter may delay the arrival of products and deliveries, raising concerns about sales declines due to supply shortages. The Group strives to minimize such risks through regular training sessions and seminars, as well as emergency response manuals.

Because the Group handles flammable gas, petroleum and oil products, organic solvents, and other substances, in the event of an unforeseen leakage, substantial expenditures may arise for repair costs to prevent and remove contamination, damages, and facility restoration. Although operations are conducted under diligent management, it is difficult to completely eliminate such risks. The Group conducts inspections and training based on laws and regulations every year to minimize such risks.

The Group is subject to numerous laws and regulations, including the Fire Service Act, the High Pressure Gas Safety Act, the Liquefied Petroleum Gas Act, the Building Standards Act, and the Pharmaceutical Affairs Act, which have been repeatedly amended from the standpoint of consumer protection. Each time laws are amended, substantial capital investment has been required, such as improvements to supply facilities and the installation of microcomputer-type gas meters, and future legal amendments prompted by measures such as responses to large-scale earthquakes may require additional capital investment. The Group addresses this through information gathering via membership in various industry associations, information sharing among related departments, employee training, and system development.

In the energy industry, price competition is accelerating due to new entrants crossing traditional industry boundaries, industry restructuring, and intense competition for customers among operators, and combined with consumers' growing inclination to curtail energy consumption, the business environment is becoming increasingly severe year by year. This may generate demand for funds to strengthen competitiveness, and there are cases where thorough customer service alone cannot avert such situations. The Group enhances its ability to respond to market changes by securing sufficient borrowing facilities with financial institutions and by grasping and accumulating customer needs through customer visits and interviews.

With the advent of a labor-shortage economy due to population decline and aging, new hiring may not proceed as planned. In addition, rising personnel costs, such as wage increases, may hinder the securing of profits. The Group strives to secure a stable workforce across the entire Group by strengthening new graduate recruitment activities and actively conducting mid-career hiring.

Cyber risks exist, including malware infections, ransomware attacks, phishing scams, unauthorized access, data tampering and theft, and misconduct by insiders, and these risks are increasing as attacks become more sophisticated and elaborate. If a significant security breach occurs, it may result in decreased revenue due to interruption or delay of business operations, loss of credibility with business partners, legal liability and fines due to leakage of confidential information, damage to brand image, and other consequences that could adversely affect the Group's financial position and operating results. While the Group has implemented various measures, including formulating an information security policy, introducing security software, and conducting regular security audits and education and training, it states that building complete defensive measures is difficult.