NIKKON Holdings Co.,Ltd

Fuel costs for transportation vehicles are affected by fluctuations in crude oil prices and foreign exchange rates. If it becomes difficult to secure appropriate freight rates through negotiations with client companies during periods of sharp fuel price increases, this could adversely affect business results and financial condition. While the Company conducts fee negotiations with client companies to address rising costs, the risk remains that such negotiations may fail to reach agreement.

In the trucking business and freight forwarding business, the Company is subject to regulations such as the Automobile NOx/PM Law and local living environment conservation ordinances, and minimizes cost impacts through vehicle replacement and installation of exhaust emission reduction devices. If regulatory content changes in the future, additional costs are expected to arise, which could affect business results. The Company continues to respond effectively and efficiently while closely monitoring trends toward stricter regulation.

In the event of a serious traffic accident or similar incident, in addition to a decline in trust from society and customers, the Company could be subject to administrative measures such as suspension of business operations at offices or revocation of business licenses. This entails the risk of losing licenses that are directly linked to business continuity, raising concerns about impacts on the business foundation itself. The Company strives to prevent accidents by prioritizing business activities based on a spirit of legal compliance.

The Company holds substantial fixed assets, primarily in the Warehousing Business, Packing Business, and Testing Business. If changes in the business environment or a decline in profitability make it impossible to recover the invested amounts, impairment losses will need to be recognized. The occurrence of impairment losses would directly and adversely affect business results and financial condition. Given the large scale of fixed assets, it should be noted that the financial impact could be relatively significant during a downturn in performance.

If transportation routes are cut off or office facilities are damaged due to earthquakes, wind and flood damage, or similar events, or if system outages occur due to power failures, business continuity could become difficult, potentially affecting business results and financial condition. Since the Company operates offices nationwide, there is also a risk that multiple locations could be affected simultaneously in the event of a wide-area disaster.

Sales to the automotive industry account for more than 50% of consolidated net sales, and if major client companies undergo production adjustments or a decline in logistics demand, this could have a direct and significant impact on the Group's business results and financial condition. The high degree of dependence on a specific industry is a factor that increases vulnerability to business cycles and structural changes (such as the shift to EVs) in that industry.

The Company considers M&A as one option for expanding its business domain and acquiring capabilities, and examines the appropriateness of acquisition prices after conducting due diligence. However, if business plans are not achieved due to changes in the post-acquisition business environment or competitive landscape, impairment of the share acquisition price or goodwill may occur. Recognition of impairment losses would adversely affect business results and financial condition, and depending on the scale of the M&A, the impact could be material.

In addition to the decline in the working population due to Japan's declining population and aging society with fewer children, the logistics industry faces challenges in responding to the 2024 problem (regulations capping overtime hours for vehicle driving duties), creating a risk that it may become difficult to secure the necessary human resources. If the Company is unable to secure the personnel needed to maintain and expand its business, this could affect business results and financial condition. The Company is addressing this by promoting diverse hiring, improving working environments, and enhancing training programs.

The Company utilizes a variety of information systems in conducting its operations, and faces risks from cyberattacks such as unauthorized access by third parties, computer virus infections, and ransomware. Should these risks materialize, leakage or falsification of important data or system outages could delay business activities, disrupt the supply chain, incur recovery costs, and damage social credibility, potentially having a material impact on financial condition and business results.