Kanda Holdings Co.,Ltd.

Fuel costs related to transport vehicles such as trucks and heavy machinery fluctuate depending on crude oil prices and foreign exchange trends, and rising crude oil prices due to changes in the situation in the Middle East may put pressure on earnings. There is also a risk that domestic logistics demand may fluctuate due to disruptions in international supply chains. The Company Group is responding by utilizing the fuel surcharge system, promoting price pass-through to customers, and optimizing vehicle allocation and improving loading efficiency, but if it becomes difficult to recover increased costs during a sharp price rise, business results may be affected.

Due to the increase in logistics demand from the expansion of the online retail market and the diversification of customer needs, securing excellent personnel proficient in each business operation has become essential. In particular, for drivers, the upper limit regulation on overtime working hours has been applied since April 2024, requiring responses such as improving treatment and strengthening working hour management. The Company Group is working to review its personnel systems and compensation structures and to maintain a sound working environment, but if it is unable to develop and secure personnel as planned, continuing business operations may become difficult.

As the Company Group's main business is motor truck transportation, it is required to respond to safety measures led by the Ministry of Land, Infrastructure, Transport and Tourism, and social responsibility as a transportation operator is being increasingly scrutinized. The Company Group strives to prevent accidents by strengthening driver skill training and providing education to transport managers and safety advisors, but in the event that a major accident occurs, the Company may be subject to administrative disposition or a business suspension order. Loss of social credibility could make it difficult to continue business operations, and could also have a material impact on the financial position and business results.

The Company Group holds a large amount of personal information, including customer information of shippers and delivery destinations as well as information of officers and employees, and there is a risk of information leakage due to external cyberattacks, unauthorized access, computer viruses, and the like. In particular, in recent years, the sophistication of ransomware and targeted attacks has increased, raising the likelihood of significant impacts such as system failures, business suspension, recovery costs, and damages claims. The Company Group has taken measures such as obtaining ISO/IEC 27001 certification and conducting information security training and internal audits, but if the risk materializes, it could lead to loss of social credibility and difficulty in continuing business operations.

IT controls that comprehensively manage transportation, delivery, vehicle allocation, delivery routes, and logistics form the foundation of the business, with group companies (K-COM Co., Ltd. and Softage Co., Ltd.) responsible for system development, maintenance, and operation. If business operations are temporarily suspended due to a system failure caused by external unauthorized access, hacking, virus infection, or the like, significant costs may arise from customer claims for damages, among other things. No major system trouble has occurred to date, but the Company Group continues operations aimed at avoiding this risk.

The Company Group holds important licenses and permits, including a motor truck transportation business license (granted by the Ministry of Land, Infrastructure, Transport and Tourism under the Motor Truck Transportation Business Act) and an industrial waste collection and transportation business license (granted by the Ministry of the Environment under the Waste Management Act, valid for five years). If a violation of laws and regulations occurs and results in the suspension or revocation of a license or permit, continuing business operations could become difficult, and this could also have a material impact on the financial position and business results. The Company Group strives to comply with relevant laws and regulations, but the industrial waste collection and transportation business license requires renewal every five years, necessitating continuous legal compliance efforts.

The Company Group is actively pursuing alliances involving capital and personnel relationships to expand business and enhance corporate value, executing them after conducting detailed due diligence. However, if the synergies anticipated at the time of due diligence do not progress as planned, or if unrecognized liabilities or impairments arise, this could affect the financial position and business results. The delegation of authority to each group company also entails inherent risks such as fraud risk and insufficient checks and balances becoming apparent.

The Company Group relies on large-scale facilities such as transport vehicles, logistics centers, and warehouses as its main service infrastructure, and if a large-scale natural disaster causes disruption of transportation routes, collapse of facilities, or interruption of power supply, continuing business operations could become difficult. In recent years, natural disasters such as heavy rain, typhoons, and earthquakes have intensified due to the effects of climate change, increasing the risk of damage to logistics facilities. The Company Group is taking measures such as securing emergency power supply and developing BCPs, but if a disaster of a scale exceeding expectations occurs, this could have a material impact on the financial position and business results.

In the Motor Truck Transportation Business, it is necessary to secure personnel and materials during periods of seasonal demand increase such as year-end and New Year holidays and corporate relocations and personal moves, and increases in operating revenue and operating profit are anticipated during these periods. However, if progress does not proceed as planned due to economic and industry trends or business conditions of business partners, significant fluctuations may occur in quarterly business results. In addition to seasonal factors, responding to diversifying demand accompanying the expansion of the online retail market is also required, making the control of personnel allocation a management challenge.

With increases in cargo volume and handling volume, it is necessary to develop logistics facilities, and the Company Group implements planned capital expenditures in vehicles, transportation equipment, and machinery. However, if the planned cargo volume and handling volume are not achieved and the expected investment effect is not obtained, impairment losses and depreciation expenses on held assets may put pressure on profits. The Company Group conducts regular maintenance to enhance safety while making planned investments, but there is a risk that changes in the business environment could make it difficult to recover the investment.