The Shibusawa Warehouse Co., Ltd.

There is a risk that changes in economic trends due to domestic and overseas economic conditions, social circumstances, weather, etc. could significantly affect the performance of the Logistics Business. Heightened geopolitical risks, including the situation in the Middle East, raise concerns about restrictions and delays in transportation routes and a global slowdown in cargo movement in international logistics. The Real Estate Business may also be affected by changes in the supply-demand balance and market conditions in the Tokyo metropolitan area's office leasing market.

The Logistics Business is subject to various legal permits and regulations both domestically and internationally, concerning facility and equipment safety, safe vehicle operation, trade, taxation, foreign exchange control, environment, fair trading, and other matters. If these legal regulations are amended or abolished, or new regulations are introduced in the future, this may affect the business and its performance. This also includes the risk of changes in local laws and regulations in overseas markets where the Company operates.

Since the Company owns a large number of facilities in both the Logistics and Real Estate businesses, damage caused by natural disasters such as earthquakes and typhoons may significantly affect business performance and financial condition. As countermeasures, the Company has taken out comprehensive corporate property insurance and is sequentially conducting seismic diagnoses and seismic retrofitting work on buildings constructed before the 1981 revision of the Building Standards Act.

Fuel procurement is essential for vehicle operation in the Logistics Business, and market prices for fuel oil fluctuate in line with crude oil prices, which are affected by global economic trends, the situation in Middle Eastern oil-producing regions, and inflows of speculative funds. Although the Company strives to stabilize and reduce procurement costs, rising prices pose a risk of directly increasing business costs.

The Company procures working capital and capital expenditure funds mainly through external borrowings for continuous capital investment in leased real estate and warehousing facilities. Although the Company is fixing interest rates through fixed-rate borrowings and interest rate swap transactions, the portion procured at variable rates is subject to the effects of interest rate fluctuations, which may increase future funding costs.

There is a possibility of failures such as unauthorized external access to various logistics information systems or infection by computer viruses. Although the Company has introduced security software and established remote data backup centers, if trouble were to occur, it could disrupt information exchange with customers and work efficiency until recovery is achieved.

The Company handles personal information in operations such as trunk room storage and moving services, and if personal information leakage occurs due to unexpected unauthorized access or computer viruses, this may have a material impact on the business and performance through claims for damages. The Company has taken measures including the development of information protection regulations and thorough enforcement among all officers and employees, liability insurance coverage, and transition to ISO/IEC 27001:2022 (November 2024).

If impairment losses are recognized due to deterioration in the profitability of fixed assets or a decline in market value, this may affect business performance and financial condition. In addition, the balance of investment securities at the end of the fiscal year under review was ¥31,666 million, and if the market value or substantial value declines due to poor performance of investee companies or deterioration in securities markets, and no recovery is expected, there is a risk of additional valuation losses.

Overseas, the Company conducts business in cooperation with local subsidiaries and agents, but changes or abolition of local laws and regulations, changes in tax systems, exchange rate fluctuations, adverse political and economic factors, and social disruptions such as war, terrorism, and infectious diseases may affect business performance. Since these country risks can occur in combination, they constitute a risk factor for the stability of earnings in the International Transportation Business.

In addition to facility damage, disruption of transportation networks, and decreased labor productivity due to high temperatures caused by abnormal weather such as heavy rain and typhoons, there is a risk of increased operating costs due to stricter greenhouse gas regulations and the introduction of carbon pricing. As countermeasures, the Company is promoting a modal shift, reducing greenhouse gas emissions through logistics efficiency improvements, and strengthening the resilience of facilities, and has identified this as a materiality issue in its Basic Policy for Sustainability Promotion.