RINKO CORPORATION

The Group engages in hazardous work involving heavy machinery, trucks, and work at heights. In the event of an unforeseen serious occupational accident, in addition to a decline in customer trust and social reputation, costs such as accident compensation may arise. Although a safety-first framework has been established through hazard prediction activities and accident countermeasure meetings, it is difficult to completely eliminate this risk.

Many of the Group's businesses, such as port cargo handling, truck transportation, hotel service and cooking, and machinery maintenance, are labor-intensive, and there is a risk that continuously securing appropriate personnel will become difficult due to labor shortages caused by the declining birthrate and aging population. The Group is responding through wage increases, work-style reforms, planned training, and mid-career hiring, but if the labor shortage intensifies, it may adversely affect the Group's financial position and business results.

As a labor-intensive industry, the Group incurs substantial outsourcing expenses and also bears significant energy costs for heavy machinery, trucks, temperature-controlled warehouses, and hotel facilities. While the Group is working to improve labor productivity and collect appropriate fees, if increases in outsourcing costs or energy costs exceed these efforts, it may adversely affect the Group's financial position and business results.

If a large-scale earthquake, tsunami, or similar disaster occurs at the Port of Niigata, the Group's main business location, and causes severe damage to port facilities, it may seriously adversely affect the business activities of the Transportation Segment. There is also a risk that reputational damage from natural disasters could adversely affect customer traffic at the Hotel Business Segment. Although the Group has established action guidelines for when such events occur and an evacuation system prioritizing human life, damage cannot be completely prevented.

The Group holds substantial fixed assets, including port facilities, warehouses, sheds, and hotel facilities. If the estimated amount of future cash flows decreases due to changes in the business environment or other factors, it will be necessary to record impairment losses. Although the Group applies accounting standards for impairment of fixed assets and regularly verifies recoverability, if a substantial impairment loss occurs, it may have a material adverse effect on the Group's financial position and business results.

The Group procures funds necessary for business activities and debt repayment through operating cash flow, reduction of policy-held shares, and borrowings from financial institutions. However, if financial institutions' lending stance changes due to sudden fluctuations in financial markets or economic conditions, or due to deterioration in the Group's own financial position, there is a risk that the Group will be unable to procure necessary funds on appropriate terms. If restrictions on fund procurement or increases in procurement costs occur, it may adversely affect the Group's financial position and business results.

The Group procures a portion of its business funds through borrowings from financial institutions. If interest rates fluctuate significantly due to the Bank of Japan's monetary policy or other factors, borrowing costs may increase, affecting the Group's financial position and business results. Under a policy of restraining outstanding borrowings, the Group is working to strengthen its own capital by securing operating cash flow and reducing policy-held shares.

If there is a significant fluctuation in stock market conditions or deterioration in the financial condition of unlisted companies whose securities the Group holds, impairment treatment may become necessary, potentially affecting business results and financial position. For policy-held shares in listed companies, the Group regularly verifies the effectiveness of holding such shares and adopts a policy of considering the sale of shares deemed to have insufficient effectiveness.

The Group examines the recoverability of deferred tax assets based on estimates of future taxable income and the timing of the reversal of temporary differences. However, if it is determined that sufficient future taxable income cannot be secured due to declining profitability, deferred tax assets will need to be reversed, resulting in substantial tax expenses. In this case, it may adversely affect the Group's financial position and business results.

There is a risk that rising crude oil prices due to escalating tensions in the Middle East and other factors could cause gasoline and diesel prices to surge, increasing fuel cost burdens for trucks and cargo-handling machinery, while shortages of raw materials for petroleum-related products could reduce trading partners' production activities and slow cargo movement. In the machinery maintenance business as well, if difficulty in obtaining oil and other supplies persists over the long term, part of the maintenance business may be restricted. The Group, which operates critical infrastructure businesses such as port transportation and trucking, is directly exposed to the effects of supply chain disruptions.