NISSIN SHOJI CO., LTD.

Changes in the trends of oil-producing countries and shifts in international circumstances may cause fluctuations in the procurement prices of petroleum products. If increases in procurement prices cannot be passed on to selling prices due to domestic demand trends and competition with rivals, profit margins may decline. If price pass-through is delayed during a sharp rise in crude oil prices, or if market prices fall at a pace exceeding the decline in procurement prices during a sharp drop, this may affect the financial position and operating results. The Group is addressing this through detailed, fine-tuned pricing.

There is a risk that demand for petroleum products will contract over the long term due to growing awareness of decarbonization and the SDGs, as well as the promotion of electric vehicle adoption. If the shift to alternative energy sources accelerates faster than expected due to tax incentives or technological progress, this could result in lost sales opportunities. The Group has formulated the long-term vision "nissin Vision 2030" and is strengthening its efforts in new businesses such as the Renewable Energy-Related Business.

Demand for heating-related oil types such as kerosene and heavy fuel oil A, as well as heavy fuel oil for power generation, is heavily influenced by average temperatures in winter and summer. If winter temperatures are high or summer temperatures are low, reduced operation of heating and cooling equipment may cause a substantial decline in sales of these oil types. If such demand declines continue, this may affect the financial position and operating results.

The Group has entered into an agency sales agreement with ENEOS Corporation and procures the majority of the petroleum products it sells from ENEOS. If changes to the agency sales agreement occur due to shifts in ENEOS's management strategy, or if stable supply is disrupted due to changes in international circumstances, this could result in lost sales opportunities. Heavy dependence on a single supplier is a factor concentrating supply risk.

If petroleum products leak into the ground due to aging underground storage tanks or cracks or damage to piping, costs for contamination removal, containment measures, and compensation for damages to residents may arise, potentially affecting the financial position and operating results. The Group adopts double-shell underground storage tanks when opening new SS locations and conducts regular inspections of equipment, including piping, to prevent leaks.

The sale of petroleum products is subject to regulations such as the Fire Service Act, the Act on the Quality Control of Gasoline and Other Fuels, and the Waste Management Act, and each SS is required to have at least one qualified hazardous materials handler (Class B, Type 4) on-site during business hours. If the Group fails to respond appropriately to these regulations, it could disrupt SS operations and affect the financial position and operating results.

The Group holds and manages various information, including personal information, primarily at each SS. If unauthorized leakage or loss of information occurs, this could damage social trust and affect the financial position and operating results. In addition, if system failures caused by natural disasters or destruction or tampering of information systems caused by computer viruses occur, business operations could be disrupted. The Group works to prevent personal information leaks through the establishment of regulations and the provision of instructions and guidance.

The Group holds fixed assets such as SS buildings and equipment and leased real estate. If the profitability of these fixed assets declines due to changes in the business environment or fluctuations in real estate prices, impairment losses may occur, potentially affecting the financial position and operating results. A significant decline in land prices due to a downturn in the real estate market could also be a factor leading to impairment losses.

The Group makes investments and pursues M&A primarily in areas where synergies with existing businesses are expected, conducting sufficient examination including financial and business due diligence. However, if the business environment changes suddenly or unforeseen events occur after implementation, and the initially expected results cannot be achieved, this may affect the financial position and operating results.

Interest-bearing debt is procured primarily through borrowings from financial institutions and corporate bonds. While there are currently no issues with fundraising, major changes in the financial system or financial conditions, or changes in the lending stance of financial institution partners in response to growing awareness of the SDGs and ESG, could affect fundraising and borrowing terms. In addition, if the recoverability of deferred tax assets declines and a write-down becomes necessary, this could also affect the financial position.