IWATANI CORPORATION

The Company imports LP gas from the Middle East and the United States and is affected by fluctuations in import prices. The sales price system is linked to CP and MB indices to smooth out price movements; however, due to the approximately three-month time lag between import and sale, a decline in prices results in a profit-decreasing factor as high-cost inventory is sold at lower prices. In the fiscal year under review, this resulted in a profit-decreasing effect of ¥5,700 million.

LP gas, the Company's main product, is a fossil fuel, and there are concerns that future tightening of climate change-related regulations could affect business performance. On the other hand, the Company is also focusing on expanding the adoption of decarbonization products such as hydrogen, and the Sustainability Promotion Committee discusses risks and opportunities and confirms progress.

LP gas sales volume is affected by air and water temperatures, exhibiting seasonality with a decrease in summer and an increase in winter, resulting in a revenue structure in which profits are weighted toward the second half of the fiscal year. If unusual weather fluctuations occur, they may have an additional impact on sales volume.

Full liberalization of electricity and gas retail markets, as well as Japan's declining population and rural depopulation, are changing the competitive environment both among industry peers and across energy sources. If such structural changes continue, they may affect the Company Group's customer base and sales volume.

The Company bears foreign exchange risk in trade transactions and seeks to hedge this risk through forward exchange contracts and other means; however, in the event of a sudden change in exchange rates, it may be difficult to eliminate the risk entirely. A depreciation of the yen may adversely affect business performance through an increase in import costs.

There is demand for funds associated with strategic investments, such as M&A aimed at expanding LP gas direct-sale customers and capital expenditures in the Industrial Gas & Machinery Business, and in a rising interest rate environment, this may affect business performance through an increase in financial costs.

The Company handles LP gas and industrial gas under the High Pressure Gas Safety Act and other regulations. If a large-scale earthquake or other natural disaster causes severe damage to shipping facilities such as bases or to consumption equipment on the customer side, stable supply may become difficult. A large-scale outbreak of infectious disease could similarly disrupt the supply system.

The Company conducts overseas business operations and trade transactions mainly in Asia, and deterioration in the political and economic conditions of the regions concerned, unexpected changes in laws, regulations, or tax systems, and deterioration in public security may affect business performance.

The Company extends credit to business partners in various forms and takes measures such as setting credit limits and obtaining collateral or guarantees; however, if receivables become uncollectible due to the bankruptcy of a business partner or other reasons, this may adversely affect business performance.

The Company conducts business under various laws, regulations, and social norms both in Japan and overseas, and is strengthening its legal compliance system through the establishment of a Compliance Committee and the formulation and dissemination of the "Iwatani Code of Business Ethics." If a situation arises in which laws or regulations are violated, this may affect business performance through administrative sanctions, litigation, or a decline in social credibility.