SG HOLDINGS CO.,LTD.

The Group outsources approximately 70% of residential deliveries and the majority of route transportation operations to partner companies, and if a sufficient number of contractors cannot be secured, personnel costs may increase beyond expectations or delivery delays may occur. Risks also exist from addressing the "2024 Problem," labor shortages due to the declining birthrate and aging population, and rising outsourcing costs due to inflation and wage increases. As countermeasures, the Group promotes the "SAGAWA Partner Program," conducts unit price revision discussions through the "Fair Trade Promotion Committee," and provides partner support through SD Transline Corporation, established in August 2025.

In Japan, where the declining birthrate and population decline are progressing, intensifying competition for talent recruitment and retention is a critical challenge for the Group, which operates a labor-intensive business, and a shortage of human capital could lead to failure to achieve the long-term vision and medium-term management plan targets, or a decrease in operating revenue. The Group aims to secure and retain talent through operational reviews via DX, continuous base salary increases, the introduction of a group-wide open recruitment system, challenge system, and free agent system, and the introduction of a stock compensation system (stock grant ESOP trust). If these initiatives fail to produce the intended effect, this could impact the Group's financial position and business performance.

As global warming progresses, wind and flood damage and wildfires are occurring more frequently, increasing the risk of physical damage to logistics infrastructure. Additionally, following the Japanese government's declaration of carbon neutrality by 2050, addressing GHG emission reductions in the transportation sector has become an urgent task, and the Group may be forced to incur increased costs or change its business operations in connection with the decarbonization transition. As business expansion through M&A both domestically and internationally progresses, the scope of climate change risk exposure is also expanding, requiring continuous strengthening of adaptation and mitigation measures.

If information leakage or loss, or suspension of business systems occurs due to cyber attacks or similar incidents, this could lead to a decline in social credibility, claims for damages, and additional costs required for information security measures. The Group holds large volumes of confidential information, including pickup and delivery location data and customer companies' trade secrets, and is exposed to risks such as unauthorized access and computer virus infections. As countermeasures, the Group continuously conducts periodic assessments by third-party organizations, vulnerability diagnostics, has established SGH-CSIRT, is a member of the Nippon CSIRT Association, and conducts information security education and training for employees.

The Delivery Business is a core business accounting for over 60% of consolidated operating revenue, and if personal consumption or corporate logistics decline due to economic downturn or geopolitical risks, this could significantly impact the Group's overall business performance. To diversify its business, the Group positions the Logistics Business and Global Logistics Business as priority businesses under its long-term vision, targeting ¥600.0 billion in operating revenue for the Global Logistics Business in FY2031 (ending March 2031). However, if these initiatives do not progress as planned, this could impact the Group's financial position and business performance.

For the Group, which uses a large number of trucks and other transportation equipment, fuel costs fluctuate depending on crude oil prices and exchange rate trends, and a sharp rise in fuel prices due to deteriorating conditions in the Middle East or similar factors could materialize as a cost increase risk. If demand decreases due to price pass-through to service prices, or if cost increases cannot be passed on through freight rates, this could impact the Group's financial position and business performance. As countermeasures, the Group has introduced environmentally friendly vehicles such as natural gas trucks, and its policy is to continue actively introducing energy-saving vehicles and vehicles powered by alternative energy sources.

In the parcel delivery market, competition among the three major companies is intensifying, and in the Logistics Business, competition with peer companies in 3PL and forwarding operations is also increasing. If the Group's relative competitive advantage declines, or if further intensified competition leads to a decline in service prices, this could impact the Group's financial position and business performance. As a countermeasure, the Group aims to strengthen service competitiveness and increase market share through total logistics proposals centered on "GOAL."

In FY2026 (ending March 2026), an increase in parcel volume beyond expectations actually resulted in temporary suspension of pickups and delivery delays, and if troubles such as damage to transported goods, incorrect delivery destinations, or delays occur frequently, this could lead to a decline in social credibility and increased damage compensation claims. The Group is advancing countermeasures with priority placed on improving demand forecasting, improving operations, and strengthening relay functions, and continuously implements improvement measures such as databasing the causes of incidents and providing training for sales drivers. The Group aims to strengthen its transportation network through the Kanto Hub Center (scheduled to begin operations in July 2026) and the development of large-scale relay centers in Kansai and Kyushu.

The Group operates in various overseas countries, primarily in Asia, and faces risks including sharp fluctuations in exchange rates and ocean/air freight rates due to intensifying trade friction or conflicts, deterioration of economic conditions in regions where the Group has operations, unexpected changes in laws and regulations, and worsening political conditions or increased terrorist activity. As the Group positions strengthening of the Global Logistics Business as a pillar of its growth strategy, the materialization of these risks could directly impact its business expansion plans. As overseas business expansion through M&A progresses, improving sensitivity to diverse risks, including climate change, has also become a challenge.

The Group actively utilizes M&A and business alliances to expand its business and enhance corporate value, and if results as planned are not achieved, this could result in impairment of goodwill or stock acquisition costs, the emergence of unforeseen business issues, or the burden of transaction-related expenses. Regarding capital and business alliances and joint venture establishments, if it is determined that the intended results have not been achieved, this could also result in contract termination or dissolution of the partner company. As countermeasures, the Group requires thorough due diligence on target companies and mandates that the appropriateness of investment and acquisition prices be examined by an investment review committee that includes outside directors and outside audit and supervisory board members.