SHINKI BUS CO.,LTD.

Since subsidy systems are utilized to maintain unprofitable routes, if subsidies are abolished or reduced in the future, this could lead to a reduction in business scale due to route discontinuation, a decline in credibility with local communities, and adverse effects on business performance. Balancing the social mission as a public transportation operator with profitability remains a challenge.

The company is heavily dependent on crude oil as a power source for its buses, and fluctuations in crude oil prices directly affect business performance. It is estimated that a 1 yen change in the purchase unit price would impact annual operating profit by approximately ¥20 million. Even if the company transitions to EV buses, this risk is expected to continue, as electricity prices are linked to crude oil prices.

Given the nature of the automobile transportation business, if a fatal or serious accident occurs, in addition to the incurrence of compensation costs, administrative sanctions may restrict new business plans, and the resulting loss of social credibility could spill over into businesses other than transportation, potentially shaking the management foundation depending on the scale. As a countermeasure, under the basic philosophy that "safety takes priority over everything," the company has established five safety goals and is working to build a safety management system uniting top management and frontline staff.

If the recruitment and development of necessary personnel and labor, including driving staff, does not proceed as planned, business plans may stagnate, potentially adversely affecting operating results and financial condition. As a countermeasure, the company is promoting human capital management based on three pillars: securing driving staff and strengthening their expertise, shifting personnel to growth businesses, and supporting self-development and improving treatment.

The loss of transactions with specific business partners, such as major leased properties in the real estate business or specific contracted transportation in the automobile transportation business, could adversely affect business performance. In addition, in franchise contracts such as those in the Leisure Services business, changes in the franchisor's management policy, deterioration in its business performance, or serious defects in the products or services provided could affect business strategy. The company addresses this through diversification of business partners to spread risk and close consultation with franchisors.

If a highly contagious infectious disease for which no treatment has been established spreads, as was the case during the COVID-19 pandemic, the profitability of businesses dependent on the movement of people, such as automobile transportation, travel charter, and Leisure Services, could decline, adversely affecting business performance and cash flow. The company strives to minimize the impact through flexible scheduling, fixed cost reductions, and the restructuring of unprofitable businesses.

In the event of natural disasters such as typhoons or earthquakes, damage to held assets and increased costs due to detour operations may occur, while abnormal weather such as cool summers, warm winters, prolonged rain, or heavy snow could reduce the profitability of the travel charter and Leisure Services businesses. The company has formulated a Business Continuity Plan (BCP) and strives for swift recovery and minimization of damage based on manuals for asset protection, including vehicles, and restoration of bus operations.

The core businesses of route bus and chartered passenger automobile transportation are licensed businesses under the Minister of Land, Infrastructure, Transport and Tourism pursuant to the Road Transportation Act. Violations of laws and regulations or significant regulatory changes could restrict business activities and incur compliance costs, potentially affecting operating results and financial condition. The company is strengthening governance and enhancing its compliance system through the establishment of a Compliance Promotion Council and an internal whistleblowing hotline.

If cyberattacks, unauthorized access, internal misconduct, or similar incidents occur against information systems that hold extensive customer information, this could result in information leakage, business disruption, loss of social credibility, and the incurrence of recovery costs and liability for damages, potentially having a material impact on operating results and financial condition. The company has established access controls, regular security training, EPP/EDR deployment, and a 24-hour monitoring system in cooperation with external specialist organizations.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the expected rate of return on pension assets. If actual results diverge from these assumptions due to investment performance, interest rate fluctuations, or unexpected changes in employee numbers, the impact will be cumulatively reflected in expenses over future periods. Depending on future investment conditions and interest rate trends, this could adversely affect business performance.