KOSAIDO Holdings Co., Ltd.

There are concerns that intensifying price competition with competitors could lead to a decline in profit margins. In particular, in the Funeral Services business, downward price pressure is increasing due to a rise in the number of competitors offering low-priced services. If a sharp economic downturn and shrinking demand occur simultaneously, the impact on business performance could become significant.

In the printing business, the advance of paperless practices is anticipated; in the Human Resources services business, sudden changes in employment conditions and customer demand are anticipated; and in the Funeral Services business, following a temporary increase in demand due to population aging, demand for traditional-style services is expected to decline as the population decreases and family funerals and direct cremations increase. Structural market changes spanning multiple businesses may affect business performance.

Raw material prices are highly susceptible to market influences, and if a sharp price surge occurs, it may become difficult to reduce costs or pass on the increase to selling prices, potentially worsening business performance. In addition, if disruptions or restrictions to the supply of raw materials occur due to international conflicts or political friction, adjustments in materials procurement may become necessary.

If product defects arise due to deficiencies in the manufacturing process, or if quality maintenance proves insufficient relative to rising customer expectations for Funeral Services, this could lead to claims for damages or loss of trust. Although a thorough quality control system has been established, it is difficult to completely eliminate such risks.

The operation of crematoriums within the Funeral Services business is subject to regulation under the "Act on Cemeteries, Interment, etc.," and the Human Resources services business is subject to labor-related laws and regulations. If new legal regulations are established in the future, this may impose restrictions on business operations or generate additional costs, thereby affecting business performance.

The company manages its own confidential information as well as confidential information and personal data entrusted by business partners. In the event of information leakage or misuse, there are concerns about loss of corporate trust and adverse effects on business performance. Although a rigorous information security management system has been established, it is difficult to completely eliminate risks such as cyberattacks and internal misconduct.

The company holds a diverse range of assets, including real estate such as land, inventories, tangible fixed assets, intangible fixed assets such as goodwill, and investment securities. If impairment accounting becomes necessary due to changes in the market or business environment, this could have a material impact on business performance. In particular, impairment of goodwill recorded through M&A could be a factor causing temporary deterioration in profit and loss.

A portion of investments and capital expenditures is funded through borrowings from financial institutions. Although reliance on interest-bearing debt is on a declining trend, fluctuations in the current interest rate level could affect business performance and financial condition through an increase in financial expenses.

If natural disasters such as earthquakes or typhoons, accidents such as fires, or a pandemic of an infectious disease such as COVID-19 occur, damage to manufacturing facilities or difficulty in continuing business operations could have a material impact on business performance. Although fire prevention and earthquake resistance measures have been implemented for key facilities, there are limits to the ability to respond to large-scale disasters.