SEVEN INDUSTRIES CO.,LTD.

As products for the new housing market account for the majority of sales, the declining trend in housing starts accompanying the progression of the declining birthrate and aging population directly impacts business performance. The surge in energy and materials prices and supply chain disruptions caused by the situation in the Middle East, combined with the resulting suppression of housing starts and rising housing prices, may cause new housing starts to remain at low levels. As a countermeasure, the company is promoting diverse product proposals leveraging its custom-order capabilities and expanding its business domain into the non-residential field, thereby reducing dependence on specific markets.

A substantial portion of net sales depends on a limited number of specific customers, and sudden contract terminations or shifts in procurement policy due to changes in customer performance trends or management policies could have a material impact on sales and profit. There is also a risk that profit margins could decline in situations where the company has no choice but to comply with customers' requests for price reductions. The company continues to pursue new customer development and is working to move away from excessive dependence on specific customers.

The company is highly dependent on overseas sources for materials procurement, and fluctuations in the international supply-demand balance, policy changes in countries of origin, and foreign exchange rate fluctuations affect business performance and financial condition. The company has secured a stable supply through its own procurement structure centered mainly in Southeast Asia, particularly Vietnam, and through collaborative relationships with leading suppliers in Japan and overseas; however, risks arising from external factors cannot be eliminated. As a measure to mitigate the impact of exchange rate fluctuations, the company is also working to expand the use of domestic and regional timber.

Amendments to and introduction of new regulations under a wide range of laws, including the Building Standards Act, the JAS Act, the Product Liability Act, and the Housing Quality Assurance Act, could have a material impact on business operations. In particular, a major revision of the Building Standards Act poses a risk of requiring a review of product specifications and materials procurement systems, and there are also concerns about new capital expenditures and response costs arising from tightened environmental regulations. No major amendments have been confirmed at this time, but the company's policy is to closely monitor legislative developments and take necessary measures.

Since wood is an organic material, it may undergo changes over time or develop defects depending on environmental conditions such as temperature and humidity, which could lead to product defects. In particular, if defects are found in structural members such as columns and beams, in addition to the cost of remediation, this could lead to a loss of trust from home builders and construction contractors, potentially having a material impact on business performance and credibility. The company has established and operates a thorough management system based on its quality control system, and no significant quality claims have occurred to date.

Since major production sites are concentrated in the eastern part of Gifu Prefecture, depending on the regional employment environment, it may be difficult to secure the necessary personnel, or the departure of talented personnel could disrupt business operations and affect performance. The company is actively promoting recruitment of new graduates and experienced personnel and continuously developing human resources; the turnover rate currently remains at a low level, and stable staffing is being achieved. The company is also working to invigorate the organization through reduced working hours, promotion of work-life balance, and the appointment and development of diverse personnel.

Since the main plants are concentrated in the eastern part of Gifu Prefecture, the risk of natural disasters such as river flooding and landslides is relatively high, and there are also concerns about the impact of the Tokai and Tonankai earthquakes. If plants and other facilities are destroyed or burned down by a major earthquake, this could have a material impact on business operations and performance, including lost profits due to a halt in operations; the company has not taken out earthquake insurance due to limitations in coverage. The company has taken preparatory measures in normal times, including the formulation of a BCP, the introduction of a safety confirmation system, the deployment of satellite phones, and the stockpiling of emergency food supplies.