FUKUVI CHEMICAL INDUSTRY CO.,LTD.

As the Company's core business is housing construction materials, trends in personal consumption, housing-related tax systems, consumption tax revisions, and long-term interest rates directly affect demand for new construction and renovation of detached houses and condominiums. Should demand decline occur, it may become necessary to recognize impairment losses or valuation losses on fixed assets and inventory assets, which could affect operating results and financial condition. The Group continuously assesses the recoverability of book values and works to reduce this risk.

General-purpose plastic resins such as vinyl chloride and olefins, which are the main raw materials for the Company's key products, carry the risk of price increases due to fluctuations in exchange rates, energy prices, and crude oil prices. In addition, supply constraints arising from geopolitical risks may hinder production activities and procurement. If these effects cannot be absorbed through the Company's own efforts alone, operating results and financial condition may be adversely affected.

As the Company's main customers are major building materials wholesalers and major trading companies, if the risk of bad debt materializes due to unexpected credit deterioration of a customer, additional losses or provisions may need to be recorded. The Company supplements credit through the use of trade credit insurance and diversification of credit risk, but the possibility of unintended concentration cannot be ruled out. Materialization of bad debt risk may affect operating results and financial condition.

If developed products or similar items cause unexpected quality problems, this could develop into a large-scale compensation issue. The Company addresses this through clarification of quality control standards, strict quality control during the development process, and the maintenance of liability insurance; however, if the amount or scope of compensation exceeds expectations, operating results and financial condition may be affected.

As the core of the Company's production and logistics bases is concentrated in Fukui Prefecture, there is a risk that large-scale disasters such as earthquakes, typhoons, and heavy snowfall could cause interruption of business activities, destruction of production facilities, and paralysis of logistics functions. While consideration is given to diversifying bases, disruption or damage to the supply chain caused by pandemics or large-scale disasters may also affect operating results and financial condition.

The Company is subject to various laws and regulations concerning the environment, product liability, intellectual property rights, the construction industry, labor affairs, and other matters, and the enactment or amendment of related laws and regulations may affect business activities. The Company strives to keep timely track of related laws and regulations and prepare responses in advance, but costs of responding to regulatory changes and business restrictions may affect operating results and financial condition.

The Company holds a large amount of personal information and confidential information, and if an information leak occurs, there is a risk of loss of social trust and claims for damages, among other things. In addition, business suspension caused by unauthorized access or cyberattacks may lead to a decrease in sales, an increase in inventory, and the occurrence of losses. The Company addresses this through appropriate management based on internal regulations and continuous improvement of its internal control systems, but it is difficult to completely eliminate this risk.