Mitsuuroko Group Holdings Co.,Ltd.

Demand for the company's core products, petroleum products (kerosene) and LP gas, is affected by temperature, and sales fluctuate significantly due to weather variations such as warmer-than-usual winters. Given the structural reliance on highly seasonal energy products as core offerings, weather risk directly impacts operating results. No particular hedging measures have been disclosed by the company.

Procurement costs for petroleum products, LP gas, and electricity are linked to fluctuations in crude oil prices, LP gas CP, foreign exchange rates, and wholesale electricity market prices, causing significant fluctuations in cost of sales. The company implements hedging transactions such as futures and diversifies procurement sources as risk mitigation measures, but it is explicitly stated that complete avoidance is not possible. There is a risk that earnings pressure will materialize during periods of elevated or sharply rising energy prices.

Competition for customer acquisition among industry peers is intensifying due to expanding freedom of energy choice and escalating price competition. Customer attrition and declining sales prices may impact profitability, affecting both the Energy Business and the Electric Power Business. As liberalization of electricity retail progresses, the competitive environment may become even more severe.

The company holds petroleum product and LP gas storage facilities and power plants at its various business locations, creating a risk that a large-scale earthquake or other disaster could cause leakage accidents or asset impairment. While the company conducts statutory periodic inspections, voluntary safety management, and regular refurbishments, there are limits to complete preparedness for large-scale disasters. In the event of an accident, in addition to disruption to business continuity, there is also a risk of reputational damage and liability for damages.

Regarding investments such as the establishment of subsidiaries and affiliated companies or capital alliances both domestically and overseas, there is a risk that all or part of the investment could result in a loss if the financial condition of the investee deteriorates due to changes in the business environment or unforeseeable circumstances. Losses may similarly arise if share prices fall below a certain level. The company conducts prior risk assessments and periodic checks on the recoverability of investments, but this does not completely eliminate the risk.

The company holds numerous business-use fixed assets, and depending on land price trends and changes in profitability, impairment losses may occur, potentially affecting financial condition and operating results. While the company currently recognizes that it generates sufficient cash flow, it addresses this risk by periodically checking the recoverability of investment value. There is a possibility that impairment risk could materialize if the future business environment deteriorates.

The Energy Business is subject to a wide range of laws and regulations including the High Pressure Gas Safety Act, the Fire Service Act, and the Electricity Business Act, while the Foods Business must comply with food-related laws, among others. Violations could result in penalties, liability for damages, and reputational decline, potentially disrupting business continuity. There is also a risk that substantial capital investment may become necessary if future regulations are significantly revised or tightened.

Against the backdrop of intensifying global efforts to reduce CO2 emissions and demands for decarbonization, the company may become subject to new legal constraints such as greenhouse gas emission regulations and the introduction of carbon taxes. The Energy Business, which relies on petroleum products and LP gas as core offerings, is particularly susceptible to the impact of tightening regulations, and capital investment or a shift in the business model may become necessary in response. Disclosure of specific countermeasures is currently limited.

The company conducts overseas business in the Asian region and bears risks inherent to overseas operations, including foreign exchange risk as well as changes in each country's political, economic, and social conditions and changes in various laws and regulations. Should unforeseen circumstances arise, business continuity could be disrupted, potentially affecting financial condition and operating results. Country risk specific to overseas operations is more difficult to control compared with domestic operations.

With the aim of strengthening its management foundation, the company actively establishes subsidiaries and affiliated companies and forms capital alliances with external parties both domestically and overseas, making group-wide risk management more complex. If the business environment of an investee deteriorates or unforeseeable circumstances arise, there is a risk that this could spread to the financial condition of the entire group. The company conducts prior risk assessments and periodic checks on recoverability of investments, but governance challenges may increase as the group expands.