TAKASHO CO., LTD.

The Company sells gardening products to domestic and overseas business partners such as exterior wholesalers, home centers, and garden centers. If a customer faces unforeseeable financial difficulties, collection of trade receivables may become difficult, potentially affecting the Group's financial position and business results. Although the Group exercises the utmost care in receivables management, the risk of deterioration in a customer's financial condition cannot be completely eliminated.

Approximately 50% of products are imported from overseas (mainly China) denominated in foreign currencies such as the US dollar and euro, meaning that purchase costs and accounts payable are directly affected by exchange rate fluctuations. Although hedging measures such as forward exchange contracts are employed, exchange rate movements exceeding short-term and medium- to long-term forecasts may affect the Group's financial position and business results.

The Group uses market-linked raw materials such as aluminum ingots and steel, and procurement costs fluctuate depending on domestic and overseas economic conditions and exchange rate trends. Although measures such as cost reductions, pass-through to selling prices, procurement methods that anticipate aluminum ingot needs over a certain period, and part standardization/multiple sourcing are implemented, there is no guarantee that all impacts of price surges can be absorbed, and this may affect business results.

In handling a wide variety of products, the Group bears the risk of unsold seasonal products and non-standard specification products. If sales fall below expectations due to weather changes or other factors, it may become difficult to maintain appropriate inventory levels. In the event of a sharp decline in sales, inventory valuation losses may be recorded in accordance with internal regulations, potentially affecting business results. The Group is working to improve sales forecast accuracy through analysis of past performance.

Because the gardening industry's market is formed around outdoor garden spaces, sales are subject to seasonal fluctuations, and weather factors such as typhoons, cool summers, and prolonged winters may directly affect operations, sales conditions, and business results. As weather risk is an external factor that is difficult for the Group to control, improving inventory management and sales forecast accuracy remains an ongoing challenge.

The Group applies impairment accounting to tangible fixed assets and other assets, verifying the recoverability of book values through future cash flows. However, if estimated future cash flows decline due to future changes in the business environment, additional impairment losses may become necessary. If additional impairment occurs, it will affect the Group's financial position and business results.

The Group considers M&A and alliance strategies aimed at business expansion and operational efficiency as important measures. However, if investments do not generate the expected returns due to sudden changes in the business environment, this may affect the Group's business results through impairment losses and similar measures. This entails a risk that the realization of synergy effects is directly linked to business performance.

The Group operates production and sales bases in Asia, Europe, Australia, the United States, and other regions, and country risks such as unforeseen changes in laws and regulations or shifts in industrial infrastructure are ever-present. If such risks materialize, they may affect the Group's business results. Operations spanning multiple regions provide risk diversification while also increasing management complexity.

If the investment performance of pension assets differs from the assumed conditions, the resulting actuarial differences are recognized as expenses over three years starting from the following consolidated fiscal year. If pension asset investment returns deteriorate or the discount rate declines, this may affect the Group's financial position and business results from the following consolidated fiscal year onward.

Natural disasters such as earthquakes and floods, accidents such as fires and power outages, and the spread of infectious diseases could damage production, sales, and logistics bases and equipment, or cause operational suspensions due to employee infections. Although the Group conducts regular equipment inspections, disaster prevention drills, and infection prevention measures in coordination with each site, if damage occurs, restoration efforts and the suspension of business activities may affect business results and financial position.