KANTSU CO.,LTD.

As of the end of February 2025, interest-bearing debt stood at approximately ¥6,200 million (approximately 60% of total assets), indicating a high level of financial leverage, with variable-rate borrowings exposed to interest rate rise risk. If interest rates rise beyond expectations, this could lead to deteriorating cash flow due to increased interest payment burden and reduced capacity for new investment. In the event of tightened fund procurement conditions, the company may be forced to borrow under unfavorable terms or issue shares (diluting shareholder value).

The company makes upfront investments in logistics centers, equipment, and information systems, but recovery of invested funds may become difficult due to customers' poor business performance or suspension of payments. Investment amounts in logistics facilities and IT systems are substantial, and if impairment losses arise on held assets due to changes in the business environment, the impact on financial indicators could be significant. Funds raised from capital markets may also end up being allocated to purposes different from those originally planned.

In its logistics outsourcing operations and software provision, the company handles customers' confidential information, and if information leaks or data loss occur externally, this could lead to a decline in social credibility and claims for damages. Cyberattacks on the in-house developed warehouse management system or system downtime due to disasters could cause serious disruption to operations. The risk of confidential information leakage due to inadequate information management at outsourcing partners cannot be completely eliminated.

The company outsources transportation and delivery, and rising fuel costs due to crude oil price and exchange rate fluctuations, as well as increases in vehicle procurement costs due to vehicle and driver shortages and changes in related laws and regulations, may push up transportation and delivery costs. Major outsourcing partners are concentrated in Sagawa Express and Yamato Transport, and while the company strives to build relationships with alternative vendors, its dependence remains high. Combined with rising utility costs and personnel expenses and labor procurement costs, if countermeasures do not prove effective, this could impact the company's financial position and business results.

The company's main customers are EC operators, and if growth in the EC market stagnates or contracts due to deterioration in the domestic economy or other factors, the volume of business handled may decline. In the logistics industry, major companies are advancing the deployment of automated and unmanned warehouses, and industry restructuring is progressing; there is a risk of customer attrition and market share decline due to competitors' low-price strategies and service expansion. Delayed response to changes in market trends could result in missed business opportunities and impact business results.

The Logistics Services Business is a labor-intensive industry, requiring the securing of on-site personnel and development of management staff, while in the IT Automation Business, securing specialized personnel such as software developers is an important issue. If the company is unable to continuously recruit and retain the necessary personnel, this could hinder the execution of its business plans. Increases in personnel expenses and other costs incurred to secure human resources could also affect the company's financial position and business results.

The company leases many logistics centers from external parties, creating a risk that facilities could become unexpectedly unusable due to early termination or refusal to renew contracts at the lessor's discretion. If alternative facilities cannot be secured promptly, this could disrupt service provision, and the closure of key facilities could affect the entire logistics network and lead to customer attrition. Significant rent increases upon contract renewal due to rising rents in the surrounding area could also increase cost burdens and make it difficult to continue business relationships.

The company may engage in M&A and capital/business alliances for sustainable growth, but changes in the business environment after implementation may prevent the originally expected results from being achieved. If impairment losses occur on goodwill or investments accounted for using the equity method, this could affect the company's financial position and business results. Similar risks may also materialize in the event of dissolution or modification of capital/business alliances and similar arrangements.

President and Representative Director Hisahiro Tatsujo has been the top management figure since the company's founding, and management policy and strategy are highly dependent on him. If, for any reason, he becomes unable to carry out his duties, this could affect the company's financial position and business results. In addition, the founder's family holds approximately 50.74% of voting rights, creating a risk that minority shareholders' opinions may not be sufficiently reflected, and that conflicts of interest between the controlling shareholder and general shareholders could materialize.

The company is subject to regulations under the Warehousing Business Act, the Act on Motor Truck Transportation Business, the Child Welfare Act, the Act on Comprehensive Support for Persons with Disabilities, and other laws, and strengthened environmental and safety regulations may require further cost burdens. If a violation of laws or regulations occurs, there is a risk of administrative sanctions such as business suspension or revocation of licenses and permits. Although the company has established a Compliance Committee to ensure legal compliance, increased costs for responding to regulatory tightening could affect the company's financial position and business results.