DAITO KOUN CO.,LTD.

The Group handles food products, steel and non-ferrous metals, chemical industrial products, machinery, and daily necessities in its port transportation operations, and handling volumes may fluctuate depending on economic and market trends, which could affect business performance. Due to the nature of the port transportation business, revenue is directly affected by changes in the domestic and overseas economic environment. No specific countermeasures are explicitly stated.

With respect to the handling of imported food cargo, which is a core business, the relevant authorities may impose import suspension measures from the perspective of ensuring food safety, which could directly affect business performance. Even in the absence of import suspension measures, there is a risk that import volumes may be curtailed due to changes in consumption trends. Given the business structure's high dependence on food, this risk is particularly significant.

The Group has a high proportion of imported cargo handling, and as the yen depreciates, there is a risk that Japanese companies may lose out to overseas companies in competitive purchasing. As a result, handling volumes may fluctuate, which could affect business performance. Specific hedging measures against foreign exchange risk are not explicitly disclosed in the annual securities report.

A surge in crude oil prices may lead to increased transportation costs for handled cargo through rising fuel oil prices. The Group states that it strives to reduce transportation costs, but if it is unable to fully absorb the cost increase, business performance may be affected. Given the nature of the port transportation and transportation business, fuel costs are a major variable expense and have a significant impact.

If a natural disaster or accident such as an earthquake, typhoon, tsunami, or fire occurs at the Keihin or Hanshin ports, which serve as the Group's operational bases, business performance may be affected. As earthquake countermeasures, the head office work spaces employ a vibration control structure and the system room employs a seismic isolation structure, and disaster preparedness supplies (three days' worth of food) are stocked company-wide; however, depending on the extent of damage, the risk remains that business continuity could become difficult.

Even after COVID-19 was reclassified as a Category 5 infectious disease under the Infectious Diseases Control Law, future pandemic outbreaks could cause supply chain disruptions and stagnation, hindering business operations. While the Group continues infectious disease countermeasures in line with government policy while working to normalize economic activity, the risk of a recurrence of large-scale infectious disease cannot be eliminated. Given the business characteristic of relying primarily on food imports, the impact of logistics disruption is particularly significant.

If physical issues arise in procurement, sales, transportation, and other operations due to heightened environmental awareness, changes in consumption trends, and an increase in natural disasters caused by climate change, business performance may be affected. The Group has positioned climate change as one of its key challenges and has indicated a policy of actively addressing it across the entire Group, but specific countermeasures are not detailed in the annual securities report.

Depending on the content and speed of DX (Digital Transformation) in the external environment, the value of the Company's knowledge and skills may diminish. The Company is continuously working on improving internal systems and implementing RPA (Robotic Process Automation), but there is a risk that competitiveness could decline if it falls behind in responding to changes in the external environment.

Due to the bankruptcy of business partners, declines in collateral value, or other unforeseen circumstances, the recorded allowance for doubtful accounts may prove insufficient, necessitating an increase. The Company records an allowance for doubtful accounts for general receivables based on historical loan loss rates, and for specific receivables based on individual assessments of collectability, but the risk remains that unforeseen credit deterioration cannot be fully addressed.

The Group holds both marketable and non-marketable securities. In the event of a significant decline in the share price of marketable securities, impairment or valuation losses may occur, and for non-marketable securities, impairment may occur if the substantial value of the issuing company declines significantly, which could affect business performance and financial condition. The scale and composition of the securities held are not detailed in the annual securities report, but the Group is directly exposed to stock market volatility risk.