SINANEN HOLDINGS CO., LTD.

The Cabinet's approval of the 7th Strategic Energy Plan toward carbon neutrality by 2050, along with the spread of energy-efficient appliances and population decline, continues to drive a downward trend in domestic petroleum and gas demand. Crude oil prices have been trending softly due to observations of increased production by OPEC Plus and China's economic slowdown, while propane CP has remained firm. These fluctuations in procurement prices and changes in demand structure could have a material impact on business performance, etc. In response, the Company is working to reduce risk through the expansion of the Housing and Lifestyle Business, expansion into the renewable energy business, and active investment in non-energy businesses such as the Comprehensive Building Maintenance Service and the bike-sharing business.

The Energy Business, which accounts for 92.3% of total sales across all segments, carries temperature fluctuation risk. In particular, since winter is the peak demand season for household kerosene, a warm winter could cause deviations from sales plans and impact prices. In addition, regarding electricity, the electricity supply-demand environment continues to change drastically against the backdrop of global fuel price surges. In response, the Company is expanding electricity sales for summer demand, transitioning to Oil Square with enhanced diesel fuel shipping capacity, adopting market-linked plans, and outsourcing supply-demand management by participating in balancing groups.

Against the backdrop of deregulation, accelerating decarbonization, and population decline, competition among energy sources—petroleum, city gas, LP gas, and electricity—crossing traditional boundaries is intensifying, and customer acquisition competition in the LP gas industry as well as competition among gas stations in the petroleum industry continue. Delays in responding to carbon neutrality by 2050 could have a material impact on business performance, etc. In response, the Company is pursuing acquisitions of business rights and M&A in the LP Gas Safety & Distribution Business, has begun selling carbon-neutral LP gas, is supplying renewable energy power through off-site corporate PPAs, and has begun handling next-generation biodiesel fuel.

In facilities related to the sale of petroleum and LP gas, losses may arise if accidents such as leaks occur. Although the Company implements comprehensive risk management including safety audits and joint risk financing with Sompo Japan Insurance Inc., accident risk cannot be completely eliminated. In response, the Company reduces risk by conducting voluntary safety inspections in addition to statutory inspections and performing daily leak inspections.

The Company conducts credit sales primarily in wholesale sales, and as of the end of March 2026, the balance of trade receivables including notes and accounts receivable amounted to ¥35.6 billion. In the event of unforeseen circumstances, collection of trade receivables could be hindered, potentially affecting business performance, etc. In response, the Company is shortening collection cycles, utilizing advance payment arrangements, thoroughly managing credit through computer systems, and setting annual credit limits based on credit research agency databases.

The Company conducts some foreign currency-denominated transactions in the export and import of petroleum products, import of bicycles, and export of antibacterial agents, and exchange rate fluctuations could affect business performance. In addition, while the Company's main products, petroleum and LP gas, are purchased from domestic wholesalers, there is also a risk that import prices of crude oil and LP gas could indirectly affect procurement prices. In response, the Company conducts hedging transactions through forward exchange contracts and the setting of assumed exchange rates, although complete avoidance is considered difficult.

The book value of tangible fixed assets, including petroleum wholesale facilities, LP gas filling facilities, gas station facilities, and land, as of the end of March 2026 amounted to ¥25.9 billion, and there is a risk that new impairment losses may arise upon periodic evaluation of recoverable amounts. In response, the Company has set improvement of capital efficiency as a qualitative target under the Third Medium-Term Management Plan, promoting improved profit margins through business efficiency and effective utilization of underutilized assets.

In the establishment of subsidiaries and affiliated companies and capital alliances, business performance, etc. may be affected if the operating results or financial condition of investee companies deteriorate more than expected. Regarding strategic shareholdings, there is also a risk of stock price declines and valuation losses due to unpredictable fluctuations in the Japanese economy and overseas conditions. In response, the Company has established a system of prior review by the Management Committee and the Investment Committee, regular monitoring after investment, and mechanisms for issuing improvement or withdrawal instructions based on withdrawal review criteria.

The Company holds personal information such as consumer data from the Energy Business and customer data from the Non-Energy Business, and if an external leak occurs for any reason, it could affect business performance, etc., through a decline in sales due to loss of trust. In response, the Company has established a personal information protection policy and regulations, conducts regular training, and has introduced security systems including encryption. The group company Minos Co., Ltd. has obtained Privacy Mark certification as well as ISO/IEC 27001:2022 and JIS Q 27001:2023 certifications.

If assets such as petroleum wholesale facilities, LP gas filling facilities, gas station facilities, antibacterial business manufacturing facilities, bicycle business warehouses, and bike-sharing equipment are damaged by large-scale typhoons, earthquakes, tsunamis, floods, etc., normal business activities may become impossible, potentially affecting business performance, etc. In response, the Company reduces risk by installing emergency power sources at core facilities such as filling stations and by making buildings seismic isolation, earthquake-resistant, and vibration-control structures.