Kobe Electric Railway Co.,Ltd.

The Group operates its businesses based on legal regulations such as the Railway Business Act and the Road Transportation Act, and there exist requirements for revocation of railway business licenses (violation of laws and regulations, disqualification events, etc.). It is difficult to predict the impact of new enforcement or changes to laws, regulations, and accounting standards, and business activities may be subject to restrictions. At present, no factors have arisen that would impede the continuation of the Group's main business activities.

The Group conducts business primarily in the areas along its rail lines, centered on the railway business, and if population decline along these lines and intensifying competition with other companies continue, this may affect the Group's financial position and business results. Demographic changes due to the declining birthrate and aging population are a structural challenge, and there is a risk that this could lead to a long-term contraction in transportation demand.

Due to the characteristics of the rail lines that cross the Rokko mountain range, there is a high risk of damage and service suspension caused by natural disasters such as heavy rainfall, typhoons, and earthquakes. There is an actual track record of damage and service suspensions caused by heavy rainfall and large typhoons resulting from recent abnormal weather, and while the Group is proceeding with disaster prevention works such as reinforcement of bridges, tunnels, and slopes, a large-scale disaster could have a material impact on the Group's financial position and business results.

In its public transportation businesses such as railway and bus operations, the Group transports a large volume of passengers, and if a large-scale accident occurs resulting in a prolonged suspension of services, this may affect the Group's financial position and business results. The Group strives for safety management through the maintenance of safety and security facilities and thorough employee training, but it is difficult to completely eliminate this risk.

Amid the development of labor-intensive businesses, securing personnel has become difficult due to the decline in the working population and the outflow of human resources caused by the diversification of values. The Group is taking measures such as improving engagement to curb turnover, strengthening career-track hiring, extending employment for retirees past the mandatory retirement age, considering the hiring of foreign nationals, and improving efficiency through IT adoption and equipment introduction, but if personnel plans continue to fall short of targets, this may affect the Group's financial position and business results.

Interest-bearing debt is excessive relative to operating cash flow, resulting in high sensitivity to interest rate fluctuation risk. The Group seeks to avoid this risk by procuring the majority of its borrowings, etc. at fixed interest rates, but if interest rates continue to rise over a prolonged period, this may affect the Group's financial position and business results.

With respect to business-use fixed assets, including land and buildings for lease, impairment losses may arise if deteriorating economic conditions or intensifying competition lead to declining profitability, or if there is a significant decline in land prices. In addition, if the market prices of held securities decline significantly, valuation losses, etc. may arise, which may affect the Group's financial position and business results.

The Group strives to raise awareness of legal compliance and to educate and inform employees, but if unlawful acts or inappropriate incidents occur, this could not only damage social credibility but also lead to claims for damages, etc., which may affect business results.

If an infectious disease outbreaks or spreads, changes in lifestyle may lead to a decrease in customers in the transportation, real estate, and distribution businesses, and infections among employees may cause personnel shortages, potentially leading to business contraction or closures. In addition, if a cluster infection occurs at a childcare facility, etc., there are concerns about the impact of reputational damage, and if such circumstances are prolonged, this may have a material impact on the Group's financial position and business results.

Due to the large amount of electricity consumed in the railway business and the use of diesel and other fuels by bus and taxi vehicles, the Group is exposed to the risk of fluctuations in electricity charges and fuel costs. If these prices rise significantly, this may affect the Group's financial position and business results through increased costs.