KOHSOKU CORPORATION

Fluctuations in crude oil prices and other factors cause changes in the shipping prices of packaging materials manufacturers such as trays, directly affecting the gross profit of the Group, which is centered on the wholesale business. The Group works to prevent a decline in gross profit by explaining the situation to customers and proposing alternative products, positioning this as a sales opportunity that leverages its wide product lineup not biased toward specific manufacturers.

If a natural disaster such as an earthquake on the scale of the Great East Japan Earthquake occurs, the Group's business results and financial condition could be materially affected. The Group has established BCPs in cooperation with suppliers and manufacturers, and operates its core information systems and order data in a cloud environment (Tokyo), with dual backup in Osaka, establishing a system for restoration and resumption of operations in the event of a failure. In addition, infrastructure operations are monitored from Tokyo and Sendai to strengthen business continuity.

The active pursuit of M&A aimed at business expansion carries risks of integration failure or failure to achieve expected synergies. The Group maintains a strict principle of limiting M&A targets to the packaging materials manufacturing and sales business, and after an M&A, avoids hasty business integration, allowing sufficient independence while working to realize Group synergies.

Amid the difficult economic environment, the occurrence of bad debts is unavoidable, and delays in the collection of trade receivables or bad debt losses could affect the Group's finances. The Group strives for early collection of trade receivables and prevention through the gathering of credit information, and since dependence on specific customers is low, the impact would be limited even if bad debts were to occur.

If problems that undermine food safety, such as food mislabeling, occur, this would have a major impact on the sales activities of the Group, which is centered on the wholesale business of light packaging materials for food. However, since the Group's customers are not concentrated in a specific industry, a decline in sales in one industry tends to be offset by other industries, dispersing the impact.

There is a risk that the Group's competitive environment could deteriorate due to entry from other industries or direct entry into the wholesale business by manufacturers. In response, the Group aims to become indispensable to customers by enhancing its expertise through strengths such as a wide range of procurement routes not biased toward specific manufacturers, specialized knowledge of packaging materials, and logistics know-how unique to packaging materials.

The loss of talented personnel is a risk directly linked to a company's survival, and the Group is no exception. The Group addresses this through the establishment of a consultation hotline based on the Kosoku Group Code of Ethics, employee satisfaction surveys, regular workplace interviews, workplace environment improvements based on workplace environment audit reports, and fostering understanding of management policy and motivation to work through internal and external training.