TOHBU NETWORK CO.,LTD.

There is a tendency toward concentration in certain specific business partners, and changes in market share within the partners' industries or fluctuations in transaction volume due to partner circumstances could have a material impact on business performance. As a countermeasure, the Group is promoting diversification of business partners and leveling of transaction volume by expanding into new logistics business areas, such as expanding industrial gas transportation operations.

Since the Motor Truck Transportation Business is the core operation, fuel usage is indispensable, and if fuel costs rise sharply due to fluctuations in the global oil situation, transportation costs could increase and have a material impact on business performance. Although the company currently receives stable supply at appropriate prices, fundamental means of avoiding the risk of external environmental fluctuations are limited.

The company conducts hazardous materials transportation operations using large trailers and special vehicles, and if a major accident occurs, in addition to a decline in trust and social credibility among business partners, substantial damages claims and administrative sanctions such as business suspension could have a material impact on business performance. Given the nature of the hazardous materials transportation business, the impact of an accident could be particularly severe.

With the advancement of DX in logistics management operations, if the company is subject to sophisticated cyberattacks utilizing generative AI, intrusion into internal networks and systems could result in severe impacts such as theft, destruction, tampering of information, or system shutdown. As DX advances and system dependency increases, the sophistication of cyberattacks is also progressing simultaneously, increasing the risk.

The company is subject to various legal regulations such as the Motor Truck Transportation Business Act and the Freight Forwarding Business Act, and if regulatory content is changed or tightened in the future, it could affect business development and performance through increased costs, among other factors. The transportation industry continues to face a changing regulatory environment, including labor regulations (such as the so-called 2024 issue), making this an area requiring continuous monitoring.

If existing tenants at company-owned rental facilities and leased-and-subleased facilities cancel their leases, fail to renew contracts, or request rent reductions, rental income could decrease and have a material impact on business performance. Although operations are currently proceeding without issue, since the Real Estate Leasing Business is a revenue source alongside the logistics business, tenant trends can have a significant impact on overall performance.

Stable securing and education/training of excellent personnel is necessary for continuous growth, but if the securing and development of human resources is insufficient, it could hinder appropriate personnel allocation and affect business performance and future business development. As the labor shortage across the transportation industry as a whole becomes more severe, securing personnel including drivers has become a structural challenge common to the entire industry.

The company may engage in M&A or capital alliances expecting synergy effects with its existing business base, and although prior investment analysis and due diligence are conducted, if unexpected results occur after an acquisition or alliance and the business plan does not proceed as originally planned, it could affect business performance. Unexpected costs arising during the integration process and impairment of business value are the main risk factors.

If natural disasters such as earthquakes or storm and flood damage occur, in addition to damage to rental commercial facilities, logistics facilities, and business offices, decline in social infrastructure functions such as electricity and roads could have direct and indirect impacts on business operations. Although the company strives to develop disaster prevention manuals and other measures, damage cannot be completely avoided, and this could have a material impact on business performance and financial condition.

The company has recorded numerous tangible and intangible fixed assets for business use, and if significant changes occur in the business environment or if the price of fixed assets such as land declines, impairment losses could occur and affect business performance. For the Group, which operates the Real Estate Leasing Business, fluctuations in the value of fixed assets are a risk factor directly linked to financial condition.