Yashima & Co.,Ltd.

The Group is highly dependent on its main supplier, Hitachi, Ltd., which accounted for 51.6% of consolidated purchases in FY2026 (ending March 2026). Although the trading relationship based on the dealership agreement is stable, if grounds for contract termination arise, or if the supplier changes its dealership policy or undertakes business restructuring, or if there is a disruption in product supply, quality defects, or changes in trading terms, stable procurement of products may become difficult, which could have a material impact on the Group's business, results of operations, and financial condition. Although the Company's policy is to maintain the ongoing trading relationship, this risk cannot be entirely eliminated.

The Group is highly dependent on the Railway Business segment. In consolidated net sales for FY2026 (ending March 2026), JR East accounted for 18.2%, JR West for 13.9%, and JR Central for 13.9%, with the top three companies together accounting for approximately 46%. Given this structure, in which trends in capital investment plans of these JR companies and changes in the business environment of the railway industry directly affect the Group's performance, there is a risk that net sales and profitability could fluctuate significantly if industry-wide investment restraint or policy changes occur. As customer diversification is limited, the Group is highly vulnerable to a shift in policy by specific customers.

The Group operates globally with bases in China, the Philippines, Vietnam, Indonesia, India, and other countries, and is inherently exposed to economic risks such as international financial and economic fluctuations, export restrictions, and tariff barriers, as well as political and social risks such as war, terrorism, changes of government, and infectious diseases. In addition, capturing growth opportunities in overseas markets may require substantial investment well in advance of the expected timing of revenue recognition, giving rise to a risk of delayed recovery of investment. As these risks include events that are currently unforeseeable, it is difficult to devise complete countermeasures against them.

For long-term contract work such as domestic construction projects and overseas ODA railway infrastructure development projects, the Group recognizes revenue based on the percentage-of-completion method, and therefore changes in significant assumptions such as total estimated costs, total estimated revenue, and contract risk directly affect performance. Cost fluctuations can arise from factors beyond the Group's control, and there is also the possibility of contract cancellation; if initial estimates need to be revised, a risk of loss may arise. The Group's policy is to recognize expenses at the time an expected loss is confirmed, but the risk of fluctuation in the estimates themselves cannot be eliminated.

Due to its global business operations, the Group is affected by exchange rate fluctuations in import/export transactions and other activities, and translation differences arising from converting the financial statements of overseas consolidated subsidiaries into yen also affect consolidated results. Although the Group strives to mitigate this risk by matching foreign currency-denominated assets and liabilities, complete avoidance is not possible, and a sharp change in exchange rates could affect its business, results of operations, and financial condition. This risk is made more complex by exposure spanning multiple currencies, particularly in China, Southeast Asia, and India.

The Group holds confidential information and personal information of business partners, and if an information leak occurs due to human or technical error or unauthorized access, there is a risk of being held liable or subject to regulatory action. In addition, if information system facilities are damaged by a natural disaster or accident, or if a communication line failure causes a system outage or data loss, business activities could be disrupted, potentially damaging trust with business partners and society. Although the Group implements security measures, complete protection is difficult to achieve given the increasing sophistication of cyberattacks and other factors.

If quality issues concerning specifications or standards arise in delivered products, there is a risk of significant financial burden and loss of credibility. In addition, if delivery delays occur due to unforeseen factors in suppliers' material procurement or production, or due to disruption of logistics networks caused by natural disasters, there is a possibility of liability for damages to customers. Although the Group works to thoroughly manage quality discussions with suppliers and delivery schedules, risks arising from external factors in the supply chain cannot be completely eliminated.

Securing excellent personnel with specialized knowledge is essential to promoting globalization and sustainable growth. If the Group is unable to secure the necessary personnel due to changes in the recruitment environment, is unable to implement education as planned, or loses capable personnel, this could affect its business and performance. Although the Group promotes enhanced recruitment and training programs, human capital management initiatives, and measures to improve employee engagement, the difficulty of securing personnel is increasing due to intensifying competition in the labor market.

The Group bears compliance risk arising from changes in laws, regulations, policies, accounting standards, and differences in interpretation both domestically and overseas; if a violation occurs, the Group could be subject to fines, social sanctions, damage to credibility, or revocation of business licenses. In addition, society as a whole is calling for a reduction in greenhouse gas emissions and environmentally conscious handling of products in response to climate change and toward a decarbonized society, and if the Group fails to respond appropriately, there is a risk of suspension of transactions, administrative penalties, or loss of business opportunities. The complexity of applicable regulations is increasing as the countries and regions in which the Group operates diversify.

As of March 31, 2023, the Company's tradable share ratio fell below the listing maintenance criteria (25% or more) for the Standard Market of the Tokyo Stock Exchange, and the Company submitted an improvement plan as a result. Although all criteria have been met since March 31, 2024, if the tradable share ratio declines again and fails to meet the requirement, maintaining the listing on the Standard Market could become difficult, potentially adversely affecting the share price and liquidity. Although the Company continues efforts such as requesting cooperation from major shareholders, financial institutions, and corporate entities, as well as strengthening IR activities, the risk remains that the ratio could decline again due to changes in market conditions.