ASNOVA Co., Ltd.

New equipment center openings are decided after carefully examining trade area population, competitive conditions, land prices, etc., but if profits do not materialize as planned, impairment losses may need to be recognized. In particular, in cases where a premium is added at the time of land acquisition, when profitability declines, the net sale value must be evaluated as the recoverable amount, creating a structure prone to impairment losses. Withdrawals or closures may also result in opportunity losses, potentially having a significant impact on business performance and financial condition.

The company positions M&A and business alliances as important strategies for business expansion, but if it cannot identify effective investment opportunities or fails to achieve expected investment effects, this could affect business performance. In deals that generate goodwill, if the business plan is not achieved due to changes in the post-acquisition business environment or competitive landscape, there is a risk of goodwill impairment losses. It should also be noted that entering new business areas and markets brings additional inherent risks.

Securing and developing excellent personnel to support growth is an important challenge, and if the company cannot secure and develop personnel as planned due to changes in employment conditions and other factors, this could affect business operations, performance, and financial condition. Although the company is working to strengthen recruitment activities and enhance education and training, given the labor shortage across the construction industry as a whole, the likelihood of this risk materializing is assessed as moderate.

The company's core business of construction temporary equipment rental is directly affected by construction investment trends, which are linked to private capital investment and public works budgets. If construction investment declines and demand for rental of temporary equipment decreases, this could have a material impact on business performance and financial condition. No specific countermeasures are explicitly stated, but the company seeks to mitigate the impact through demand diversification and multi-location expansion.

Keiji Ueda, Representative Director and President, has been the central figure since the company's founding and plays an important role in overall business activities, including formulating management policies and business strategies. While the company is working to expand and develop its management team and strengthen its organizational structure through delegation of authority, if it becomes difficult for him to perform his duties, this could have a material impact on business performance and financial condition.

The company procures most of the funds for purchasing temporary equipment through borrowings, and the balance of interest-bearing debt for FY2026 (ending March 2026) stood at a high level of ¥7,734,435 million (67.7% of total assets). Interest expenses for the same period increased significantly to ¥103,240 million from ¥46,731 million in the previous period, and if interest rates rise further in the future, the financial burden could expand further. The equity ratio remains at 26.0%, and the structure with high financial leverage amplifies the risk of performance fluctuations.

Order delivery deadlines for customer small and medium-sized scaffolding contractors tend to concentrate at the end of March, resulting in a structure where net sales are weighted toward the third quarter. Quarterly net sales for FY2026 (ending March 2026) were ¥902,918 million in the first quarter, ¥1,318,869 million in the second quarter, ¥1,404,100 million in the third quarter, and ¥1,289,292 million in the fourth quarter, with an operating loss of ¥121,975 million in the first quarter. Since fixed costs such as depreciation and equipment center operating expenses are incurred regardless of net sales, the risk of losses during off-peak periods is structurally inherent.

The main raw material for the temporary equipment handled by the company is steel products, and manufacturers' selling prices are heavily influenced by steel raw material market conditions. If purchase prices rise significantly due to market fluctuations, and it is difficult to pass this on to selling prices or rental prices, this could affect operating results and financial condition through a decline in profit margins.

In the business of purchasing and selling temporary equipment through the EC site "ASNOVA Ichiba" launched in May 2023, the circulation of stolen goods has become a social problem as the reuse market expands. Although the company has taken measures such as maintaining used goods ledgers and cooperating with police authorities, given the nature of the business, it is difficult to completely prevent the purchase of stolen goods, and a decline in trust due to trouble occurring could affect business performance.

The company listed on the Tokyo Stock Exchange Growth Market in December 2023, but the tradable share ratio remains at 26.29%, only slightly above the 25% listing maintenance standard. Major shareholders (the Representative Director and President and the affiliated general incorporated association Nichiren) hold 73.22% of issued shares, and if liquidity declines, trading in the market could stagnate, potentially adversely affecting the supply-demand balance of the shares.