TAKASE CORPORATION

In the logistics industry, cost increase pressure from rising minimum wages and soaring fuel costs is intensifying, while demand from customers to reduce logistics costs remains strong, leading to intensifying competition within the industry. Going forward, accelerated industry consolidation is also expected, and a decline in price competitiveness or loss of customers could adversely affect the Group's business performance and financial condition. As a countermeasure, the Group is working to provide competitive logistics services, but the structural risk of profit pressure continues.

If a client company reviews its logistics operations for management strategy reasons, there is a risk that contracts may be terminated due to changes in outsourcing arrangements or rejection of proposals in competitive bidding. Termination of contracts with major clients would directly lead to a significant decline in operating revenue, and could have a material adverse effect on business performance and financial condition. This is a risk that can arise regardless of business type, and managing dependence on specific clients remains a challenge.

In the logistics industry, labor-related issues such as labor shortages due to a declining working population, an aging workforce, and the 2024 Problem have become apparent, and securing and developing executive-level personnel is also an essential challenge. If the Group is unable to secure and develop capable and diverse personnel, it may become difficult to provide high-quality logistics services, which could adversely affect growth, business performance, and financial condition. The Group positions the provision of high-quality services at appropriate prices as the foundation of its business growth, and the impact of human resource risk extends broadly.

With business locations in Hong Kong, China, and the United States, the Group is exposed to unpredictable geopolitical risks, including the Middle East issues centered on the U.S. and Iran in 2026, various issues between Taiwan and mainland China, and the escalating situation in Ukraine. If unexpected changes in laws, tax systems, or regulations occur, or if adverse political or economic factors, terrorism, war, epidemics, or other social disruptions arise, this could adversely affect the business performance and financial condition of overseas operations. The Group maintains a policy of agilely assessing the future and deciding whether to advance or withdraw even after entering a market, but it remains difficult to eliminate such risks entirely.

For historical reasons, the Group has concentrated its major warehouses and other facilities in areas around the Keihin ports, and if a large-scale earthquake or prolonged power outage were to occur in Tokyo or Kanagawa, storage and delivery capacity could be significantly reduced. Due to the structural characteristic of concentrated locations, a single disaster event is likely to have a wide-ranging impact on the entire business, raising concerns about adverse effects on business performance and financial condition. Developing a business continuity plan (BCP) is an important challenge.

The Group operates port transport business, customs brokerage business, warehousing business, and freight transport business, among others, and is subject to a wide range of laws and regulations in addition to industry-specific laws, including traffic safety, environmental, and worker dispatch regulations, as well as government regulations both in Japan and overseas. Failure to comply with laws and regulations could result in restrictions on business activities or increased costs for compliance, potentially adversely affecting business performance and financial condition. Responding to changes in the regulatory environment remains an ongoing management challenge.

The Group has registered as a "Minato SDGs Partner" and obtained "Green Management Certification," and has also set a Group target to reduce greenhouse gas emissions by 3% year-on-year from 2022 to 2030. However, if environmental regulations restricting business activities are implemented beyond expectations, this could adversely affect business performance and financial condition. The Group continues its efforts toward achieving carbon neutrality by 2050, but depending on the pace of regulatory tightening, there is a risk of additional costs arising.

The Group handles a wide range of customer information across its business operations, and if information were to leak externally due to inadequate management or other causes, this could result in a decline in social credibility and claims for damages. The Group bears a duty of confidentiality regarding customer information, and maintaining and strengthening its information management system is an essential challenge. The occurrence of an information leakage incident carries not only a direct impact on business performance and financial condition but also the long-term risk of brand damage.

Although collection periods in the logistics industry are often short, a sudden deterioration in the credit standing of a client with large transaction volumes could adversely affect the Group's business performance and financial condition. The Group has traditionally worked to manage credit risk and records what it considers sufficient allowances against bad debts, but it may be difficult to respond to a sudden deterioration in the creditworthiness of a major client.

The Group holds substantial fixed assets such as logistics warehouses, and if changes occur in the assumptions or premises underlying business plans due to changes in the market environment, impairment processing may become necessary, potentially adversely affecting business performance and financial condition. Under the applicable accounting treatment, if undiscounted future cash flows fall below book value, the asset is written down to its recoverable amount and an impairment loss is recognized. The Group manages this on a grouping basis by business department, but the risk of recognizing large-scale impairment losses remains in the event of a sudden change in the business environment.