Grandy House Corporation

With new housing sales accounting for the majority of consolidated net sales, fluctuations in economic conditions, interest rates, demographics, and housing tax systems directly affect customers' purchase intentions. If demand declines, this could impact operating results and financial condition through decreased sales volume and increased inventory. The Company continues to monitor market trends and mitigates risk by flexibly adjusting development and construction plans as well as the number and pricing of inventory units.

In Tochigi Prefecture, the Company's home base, competition with new market entrants is occurring, while in other prefectures where the Company is expanding, competition with established operators is occurring. If product superiority cannot be secured, this could lead to decreased sales volume or price declines. In addition, large-scale supply of condominiums for sale associated with urban redevelopment may create indirect competition in the detached housing market. The Company maintains its competitive advantage through differentiation in quality and service, and follows a policy of avoiding excessive price competition.

The Company procures the majority of its business funds—including for land acquisition, land development, building construction, and purchase of leased properties—through borrowings, and a rise or prolonged elevation in market interest rates would increase the burden of interest expense. If borrowing constraints arise due to a financial crisis or a decline in creditworthiness, the Company could be forced to revise its business plans. The Company is working to strengthen its financial base by maintaining and strengthening good relationships with financial institutions, securing liquidity on hand, and improving capital efficiency.

With respect to land for sale, which underpins the detached housing sales business, if difficulties arise in acquiring well-located land, if there is an imbalance in area distribution, or if land acquisition prices rise sharply, the Company may be unable to procure land as planned, which could affect operating results. Land shortages directly lead to a decrease in the number of units sold, making this a critical risk for business continuity. The Company is focusing on securing quality land by strengthening cooperation with real estate brokerage firms and establishing area-dedicated teams.

If prices rise sharply due to market fluctuations or exchange rate movements affecting lumber and petroleum-related materials used in new housing construction, profitability could be squeezed in cases where cost reduction or price pass-through is difficult. If a shortage of materials procurement occurs, major revisions to production plans would be required, potentially leading to delivery delays and lost opportunities. The Company aims for stable procurement by balancing transactions within and outside the Group through the Building Materials Sales business and by strengthening cooperation with suppliers.

Detached housing for sale is produced on a build-to-forecast basis, and since it typically takes 8 to 9 months from land acquisition to building completion, changes in economic conditions or the emergence of competing properties after acquisition can readily lead to excess inventory or product shortages. Even if sales significantly exceed the plan, gaps in subsequent supply can occur, becoming a factor in performance fluctuations. The Company continuously monitors the market supply-demand balance and has established a production system that can flexibly adjust construction timing and the number of inventory units.

As part of its growth strategy, the Company has a policy of continuously considering and executing M&A, and if actual results diverge significantly from initial plans due to marked changes in market conditions or other factors, this could affect operating results and financial condition through the recognition of impairment losses on related assets. While the Company conducts due diligence on target companies, evaluates synergies, and examines post-integration business development, integration risk cannot be completely eliminated.

The Company conducts business under licenses and permits granted pursuant to the Building Lots and Buildings Transaction Business Act, the Construction Business Act, the Architects Act, and other laws, and revisions, abolitions, or new enactments of laws and ordinances may result in additional compliance costs or prolonged review periods. If a license or permit is revoked or renewal is denied, this would significantly impede the Company's core business activities and could have a severe impact on operating results and financial condition. The Company thoroughly complies with laws and regulations and strives to properly maintain and renew its licenses and permits.

In the Real Estate Sales business, the Company handles large volumes of personal information, including specific personal information of customers and suppliers, and if such information is leaked due to cyberattacks or removal of information by employees, this could result in loss of trust and damages, affecting operating results and financial condition. The Company thoroughly manages information based on its personal information management regulations and information security policy, and has strengthened the security of its information systems.

The Company recognizes that if transition risks associated with climate change (such as stricter regulations and costs of responding to decarbonization) and physical risks (such as asset damage and business interruption from more frequent natural disasters) materialize, this could have a significant impact on operating results and financial condition. The Company is working to reduce risk through land acquisition and development that takes natural disaster risk into account, provision of housing with disaster-resistant performance, and establishment of a system for early business normalization.