Eidai Co.,Ltd.

The Group's sales are strongly influenced by fluctuations in new housing starts, and if the number of housing starts changes due to economic conditions, interest rate trends, tax system changes, etc., it may affect business performance and financial condition. Structural factors such as population decline and changes in household composition are expected to lead to a further decrease going forward. As a countermeasure, the Group is working to reduce its dependence on new housing starts by strengthening sales in the non-residential field and the renovation/remodeling field.

Some raw materials for flooring plywood and adhesives are procured from overseas, and are therefore significantly affected by fluctuations in international market prices and foreign exchange rates. Some items are difficult to switch suppliers for, or depend on a limited number of specific suppliers, and soaring crude oil prices are also a factor pushing up adhesive prices. As a countermeasure, the Group is promoting the use of domestically produced base materials and conducting research and development toward the utilization of particleboard, working to mitigate the impact.

In a shrinking market due to the structural decline in new housing starts, intensifying price competition among home builders may intensify order competition among housing materials manufacturers, creating downward pressure on sales prices. This may affect the Group's business performance and financial condition. As a countermeasure, the Group is working to mitigate the impact by launching new products with competitive advantages that leverage its wood material processing technology, and by appropriately revising sales prices when raw material prices rise.

Due to the recording of an impairment loss on fixed assets related to consolidated subsidiary EN Board Co., Ltd., the company is in breach of the financial covenant (maintaining net assets plus total borrowings from the parent company, etc. at ¥0 or above) stipulated in loan agreements with certain financial institutions. The Group has obtained consent from the financial institutions concerned not to exercise their right to accelerate the loss of benefit of time, and has determined that there is no material uncertainty regarding the going concern assumption; however, if profitability does not improve, it may affect the Group's financial condition. As a countermeasure, the Group is working to improve profitability through productivity improvements and cost optimization.

The surge in domestic timber prices (the Wood Shock) caused by the collapse of the supply-demand balance for timber became apparent in FY2022 (ending March 2022) and had a significant impact on the performance of the Group, for which timber is a main raw material. If the impact becomes prolonged, it is also directly linked to a decrease in new housing starts, raising concerns about the impact on business performance and financial condition. As a countermeasure, the Group is working to stabilize procurement through cost reduction via productivity improvements, requests for sales price revisions, and the adoption of EN Board's particleboard as a substitute for plywood.

If a large-scale natural disaster such as a major earthquake occurs, it may affect business performance and financial condition through the suspension of production activities, delivery delays, and the incurrence of facility restoration costs. In the 2018 typhoon disaster, the Osaka business office (Sakai City, Nishi Ward) suffered severe damage, and full recovery took a long time, resulting in a significant deterioration in business performance. As a countermeasure, the Group is strengthening its business continuity framework by renewing its business continuity plan, diversifying production sites, and reforming its logistics and information systems.

If a computer virus intrusion, cyberattack, etc. causes system outages or the leakage of customer information or confidential information, it may result in disruption to business activities, system restoration costs, damage compensation, and loss of trust, which may affect business performance and financial condition. As a countermeasure, the Group has established information security regulations, thoroughly conducted employee training, and established usage standards, and in April 2026 established an IT Risk Committee to oversee IT risk in general.

If related laws and regulations such as the Building Standards Act, the Housing Quality Assurance Act, and the Personal Information Protection Act are revised or abolished, or new regulations are enacted, it may affect business performance and financial condition. Similar impacts may also arise if companies constituting the supply chain become subject to regulatory tightening, as in the case of the 2024 issue in the logistics and transportation industry. As a countermeasure, the Group closely monitors trends in related laws and regulations, shares information internally when revisions occur, and strives to comply with legal regulations.

Heightened tensions between countries, including the situation in the Middle East, have already had a visible impact on raw material prices and logistics, and may lead to supply chain stagnation and supply delays. If the impact becomes prolonged, it may affect business performance and financial condition. As a countermeasure, the Group is working to mitigate the impact through the development of a BCP, cost reduction via productivity improvements, and requests for sales price revisions.

The Group applies impairment accounting to fixed assets, and if future changes in the operating environment reduce total future cash flows, an impairment loss will be recorded, which may affect business performance and financial condition. There has already been a case in which the recording of an impairment loss at EN Board Co., Ltd. resulted in a breach of financial covenants. As a countermeasure, the Group makes investment decisions after rigorously examining the cost-effectiveness of capital expenditures such as the acquisition of fixed assets.