KAWANISHI WAREHOUSE CO.,LTD.

The Group handles import and export cargo based at major ports including Tokyo, Yokohama, Nagoya, Osaka, and Kobe, and its cargo volume is directly affected by economic activity and consumption trends in the regions where it operates, as well as by downturns in shipping market conditions. While the Group recognizes that its mainstay imported food products carry a relatively low risk of sudden demand fluctuations, exports carry the risk of being affected by economic conditions in destination regions. As a countermeasure, the Group is diversifying the types of cargo handled and expanding its business into multiple regions to spread risk.

For the Group's core business of importing food cargo (agricultural products, livestock products, and processed food products), there is a risk that relevant authorities may impose import restrictions or suspensions targeting specific countries from a food safety standpoint. In addition, control of import volumes based on domestic inventory levels and consumption trends may affect the Group's financial position and operating results. The Group is working to reduce this risk not only through imports but also by expanding operations into diverse regions.

The Company is registered as a warehousing operator with the Minister of Land, Infrastructure, Transport and Tourism, and there is a risk of business suspension or registration revocation in the event of violations of the Warehousing Business Act or fraudulent conduct. Amendments, abolitions, or new enactments of related laws such as the Port Transportation Business Act, the Customs Business Act, and the Freight Forwarding Business Act may also affect operating results. As a countermeasure, the Group holds study sessions in each relevant field and conducts compliance training every fiscal year.

In the event of a large-scale disaster such as an earthquake, the Company's facilities could be damaged, potentially causing disruption to logistics operations, and the Group recognizes that this risk is ever-present due to geographic factors. In addition, the spread of infectious diseases caused by unknown viruses or similar agents could disrupt the logistics system, business activities, and human resources. The Group addresses this through the development of a business continuity plan (BCP) and disaster-prevention measures at its facilities.

In its domestic and international logistics operations, the Group handles a large amount of customer information, and in the event of an information leak due to an unforeseen incident, there is a risk of loss of social trust and claims for damages. The Group addresses this through the formulation of an information security policy, the establishment of an information security committee, and the implementation of training every fiscal year, and recognizes the likelihood of this risk materializing as low.

Damage to equipment or software caused by disasters could render systems inoperable or result in the loss of internal information, and there is also a risk of system failure, information leakage, or data tampering due to unauthorized external access or computer virus infection. The Group addresses this through the implementation of security measures and the development of a BCP through migration of systems to the cloud, but recognizes that such risks can materialize at any time.

The Group plans to actively expand its business both domestically and internationally, but if its management plan, profit plan, and capital expenditure plan do not proceed as initially planned, the plan for recovering invested capital could decline, stall, or be interrupted. The Group also recognizes an increasing risk of higher borrowings as a result of aggressive business expansion under its medium-term management plan. The Group monitors its business plans on an ongoing basis and maintains a structure capable of implementing necessary measures as needed.

The Group procures capital expenditure funds primarily through bank borrowings, and since it currently relies mainly on long-term borrowings at fixed interest rates, the short-term impact is limited; however, future funding costs may be affected by interest rate fluctuations. Borrowings are on an increasing trend due to aggressive business expansion under the medium-term management plan, and the Group recognizes that this risk is increasing. For a portion of its borrowings, the Group uses interest rate swap contracts to manage fluctuations between fixed and variable interest rates.

The Group is expanding its warehousing business and increasing investment in the ASEAN region, centered on Indonesia and Vietnam, but there is a risk that changes in political and economic conditions, unexpected changes in laws and regulations, natural disasters, terrorism, war, and similar events could make it difficult to continue operations. The Group also recognizes the possibility of this risk materializing through impacts on consumption due to exchange rate fluctuations and economic slowdowns. The Group seeks to reduce this risk through a phased approach to investment expansion.

The warehousing and logistics industry has many competitors and is highly competitive, and there is a constant risk that competition could reduce revenue and profit margins. While the Group seeks to differentiate itself through its refrigerated and general warehousing facilities and its expertise in handling imported food products, it recognizes that competitive risk is an ever-present risk in business operations. The Group addresses this by building logistics solutions tailored to customer needs and leveraging its expertise in handling food products.