ZERO CO.,LTD.

Core systems for order management, vehicle dispatch management, accounting, and labor management face increasingly sophisticated cyberattack risks, including ransomware attacks, targeted attacks, and DDoS attacks, which could disrupt business continuity due to system outages or damage trust through personal information leaks, leading to potential compensation claims and regulatory sanctions. As countermeasures, the company is enhancing firewalls, access rights management, vulnerability assessments, and backup systems, in addition to providing security training for all officers and employees, formulating a BCP, and considering enrollment in cyber insurance.

Sales to the Nissan Motor group amounted to ¥21,086 million in FY2025 (ending June 2025)(14.3% of total sales), continuing a high level of dependency. The basic agreement with the company is scheduled to continue until the end of March 2027, but contract renewal thereafter is not guaranteed, and any change in the transaction status could have a material adverse effect on business performance. As a countermeasure, the company is working to strengthen the relationship by promoting integration of transport systems.

Continuation of the core business requires the General Freight Motor Vehicle Transport Business permit (Kanto District Transport Bureau Director (Kanji-ka 2) No. 1992, among others) and the Second-Class Consigned Freight Forwarding Business license. If these licenses or permits are revoked due to legal violations or other reasons, part or all of the core business would be suspended. The revised Improvement Standards Notification, which came into effect in April 2024, introduced caps on overtime work and shortened restraint hours, which may increase costs for measures such as hiring additional drivers and installing digital tachographs. At present, the company recognizes no facts constituting grounds for license revocation or any material violations.

If business activities are suspended due to natural disasters such as earthquakes, tsunamis, or typhoons, fires, or information system outages, it could have a material adverse effect on business performance. As a countermeasure, the company has established a mutual backup system among its 36 logistics hubs (CS Centers) nationwide, enabling neighboring hubs to provide alternative support even if a particular hub suffers catastrophic damage.

The company holds trade and other receivables of ¥17,431 million, inventories of ¥3,137 million, property, plant and equipment of ¥22,468 million, and goodwill and intangible assets of ¥5,306 million; if valuation losses or impairment occur due to declining profitability or natural disasters, fires, etc., this could affect business performance and financial condition. In the current consolidated fiscal year, the company recognized a partial impairment loss on goodwill at Soing Co., Ltd. within the Domestic Automotive-Related Business due to a divergence from the business environment assumptions at the time of acquisition, and is addressing this through thorough profit and loss management after investment and early implementation of recovery plans.

Transition risks, such as policy and regulatory tightening and technological changes, as well as physical risks, such as the intensification and increased frequency of extreme weather events, may affect business activities and performance. The company identifies and assesses climate-related risks based on the TCFD framework, addressing physical risks by strengthening business continuity systems at logistics hubs nationwide, and transition risks through technological innovation and business process reviews aimed at reducing environmental impact.

Due to stricter overtime regulations under the Work Style Reform-related laws and the application of the Improvement Standards Notification, the company may not be able to maintain sales revenue at previous levels, particularly during the busy season (March). There are concerns about increased costs associated with revising work systems and securing personnel, and the company is considering and implementing measures such as planning temporary staffing, securing outsourcing capacity with partner companies, and changing drivers' work arrangements. Depending on future regulatory tightening and trends in legal application, further response costs are expected to arise.

With the increasing size and electrification of merchandise vehicles, the risk of exceeding semi-trailer length limits and weight restrictions is rising, which may force a reduction in the number of vehicles loaded. If cost increases due to reduced transport efficiency cannot be passed on to transport fees, business performance may be adversely affected; the company continues to negotiate revisions to appropriate transport fees.

Exhaust gas regulations such as the Automobile NOx/PM Act and diesel vehicle driving restriction ordinances are expanding nationwide, requiring vehicle replacement and installation of exhaust gas control devices in the Domestic Automotive-Related Business and General Freight Business. If regulatory content is further strengthened in the future, additional costs may be incurred, potentially adversely affecting business performance.

With the progression of the declining birthrate and aging population combined with economic recovery, the effective job openings-to-applicants ratio remains high, particularly for "automobile driving occupations," making it difficult to secure personnel to staff the vehicle transport, transportation service, and staffing businesses. Failure to secure necessary personnel may adversely affect business performance; the company is implementing measures to curb the aging of its workforce, such as launching new graduate recruitment for driving positions.