AIRPORT FACILITIES Co.,LTD.

Japan Airlines, All Nippon Airways, and Japan Airport Terminal are important customers accounting for 33.4% of the Group's sales. If aviation demand declines or these companies undertake business rationalization, effects such as a decline in real estate occupancy rates and a decrease in the usage volume of heat supply and water supply/drainage services are anticipated. Based on its medium- to long-term management plan, the Group strives to mitigate this risk by responding flexibly to diverse customer needs and maintaining long-term relationships of trust.

The Group has been designated as an airport function facility operator under the Airport Act and manages and operates domestic cargo terminals. Changes in airport plans or operating policies by the national government, administrative authorities, or airport companies may affect the Group's business plans and management/financial condition. As countermeasures, the Group closely monitors developments by the national government and administrative authorities, and is also working to diversify risk through new business development both inside and outside airports and overseas.

If a disaster such as a natural catastrophe or fire occurs, damage to owned facilities or the suspension of airport functions could have a material impact on the business plan and management/financial condition. The Group conducts seismic diagnostics at all facilities and carries out reinforcement work as necessary, while also maintaining fire insurance coverage and establishing internal and external communication systems and rapid recovery frameworks with related organizations.

The Heat Supply Business and Water Supply & Drainage Operations Business are susceptible to seasonal factors such as temperature increases. In a cool summer or warm winter, decreased demand for heating/cooling and water supply/drainage services poses a risk of sales falling below forecasts. Conversely, in a severe heatwave or harsh winter, sales may exceed expectations, meaning weather conditions have a structure that directly affects management and financial condition.

In overseas business development, fluctuations in exchange rates, unforeseen events arising from local political, economic, or social conditions, and unexpected changes in laws and regulations may affect business performance. The Group works to mitigate country risk by gathering information through local outsourcing partners and other means.

As the Group operates the Real Estate Leasing Business, if a significant deterioration in profitability or a decline in market value occurs with respect to invested fixed assets, impairment losses may be recognized under impairment accounting, affecting operating results and financial condition. Because these are specialized real estate properties related to airport facilities, this risk inherently involves a structure in which fluctuations in aviation demand directly affect asset value.

The Group determines the recoverability of deferred tax assets based on forecasts and assumptions regarding future taxable income. If future taxable income forecasts are revised, part or all of the deferred tax assets may be reduced, affecting operating results and financial condition. This creates a structure in which the accuracy of taxable income forecasts directly affects financial figures.

In addition to the risks listed above, the Group bears risk from changes in the business environment arising from contingent events, which could affect operating results and financial condition. While no specific events have been identified, given the nature of the business, which is closely related to airports as public infrastructure, there is a risk that unforeseen changes in the external environment could spread to affect business performance.