SEKI.co.,LTD.

Demand for paper-based media continues to decline due to the digital shift in information media, intensifying order competition among industry peers. As a result, order unit prices tend to decline, which may adversely affect the performance of the Printing Business. Our group operates the Printing Business as a core business, and this structural market contraction is a factor putting downward pressure on earnings over the medium to long term.

If raw material costs such as printing ink rise due to soaring crude oil prices, this may affect the performance of the Printing Business. In a competitive environment where it is difficult to pass on increased raw material costs to order unit prices, there is a risk that profitability will decline. No specific hedging measures by our group are disclosed in the annual securities report.

Although products are manufactured under thorough quality control, if product defects occur due to deficiencies in the manufacturing process caused by human factors, this may affect the performance of the Printing Business through customer compensation claims or loss of credibility. While a quality control system has been established, it is difficult to completely eliminate human error, and this remains a latent risk.

In the paper distribution industry, the traditional business practice of "one company per prefecture" had previously existed, but this practice is breaking down, and competition may intensify going forward. Our company is a secondary distributor, and there is a risk that both sales volume and margins will be squeezed by intensifying competition. This could lead to a deterioration in the performance of the Paper & Paperboard Sales Business.

If purchase prices for printing paper rise due to soaring crude oil prices or production suspensions/cutbacks by paper manufacturers, this may affect the performance of the Paper & Paperboard Sales Business. If increases in purchase prices cannot be passed on to sales prices, there is a risk that the profitability of this business will decline. The business structure is such that performance is affected by paper manufacturers' production trends and crude oil market conditions.

The SEKI Museum of Art, opened in 1997 (located in the Dogo Onsen area of Matsuyama City, Ehime Prefecture), has recorded an operating loss every fiscal period, with operations entrusted to the consolidated subsidiary Sekikosan Co., Ltd. Art acquisition expenses for the current consolidated fiscal year amounted to ¥0.7 million, and the policy is to continue investing to enrich the collection going forward. Although this is positioned as an essential business aimed at improving corporate image and contributing to the local community, there is a risk that the continued recording of losses will put pressure on the overall performance of the group.

Our group handles databases containing customers' personal information and manages it based on a personal information protection policy, having obtained JIS Q 15001 (Privacy Mark) certification. However, if personal information is leaked for any reason, this may affect the overall performance of the group through damage claims or loss of credibility. Since personal information is also handled in the Catalog Sales Business and the EC Consulting Business, the scope of this risk is broad.

Although fire prevention and earthquake resistance measures have been implemented for major equipment such as manufacturing facilities, if a disaster occurs and results in the suspension of power supply or delays in the delivery of raw materials, this could significantly affect the production system. If production suspension becomes prolonged, there is a risk that lost order opportunities and compensation claims from customers could adversely affect the group's performance.

Fierce order competition with industry peers in the printing industry continues, and order unit prices tend to decline. Combined with market contraction due to the digital shift, competition is intensifying further, and there is a risk that deteriorating profitability due to price competition could affect the performance of the Printing Business. No specific differentiation strategy for our group is disclosed in the annual securities report.

Our group operates a wide range of businesses through 9 consolidated subsidiaries, including the Printing Business, the Paper & Paperboard Sales Business, the Publishing & Advertising Agency Business, the Art Museum Business, the Catalog Sales Business, and the EC Consulting Business. Each business is exposed to different market environments and competitive structures, and there is a risk that a deterioration in the performance of a specific business could spread to the group's overall finances. Having a business such as the Art Museum Business that continually records operating losses may put pressure on the group's overall profitability.