LUCKLAND CO., LTD.

Dependence on the food and beverage retail industry accounted for 35.5% of consolidated sales in FY2025 (ending December 2025) (up from 27.4% in the previous fiscal year), while the food service industry accounted for 16.0% (down from 18.4% in the previous fiscal year); together, these two industries account for more than half of net sales. If a sudden change occurs in economic conditions or in the business environment of these industries, it may affect the Group's business performance and financial position. Although the Group continues to promote diversification of business partners through new customer development, the level of dependence remains high.

Because performance is affected by customer companies' store opening policies and plans, business results are subject to seasonal fluctuations. In FY2024 (ending December 2024), the Group recorded operating income of ¥1,111 million in the first half, while posting an operating loss of ¥877 million in the second half, reflecting significant variation between quarters. In addition, if the delivery timing of large-scale projects extends beyond the fiscal period-end due to construction delays or other factors, there is a risk that the Group's performance for that period may fluctuate.

The Group has established a dedicated quality control department and conducts multiple quality checks throughout the design and construction process. However, if unexpected defects occur or checks are overlooked, substantial rework costs or compensation payments to customers may arise, potentially affecting the Group's business performance.

The Group has established an integrated management system covering everything from credit investigations to receivables collection, and in principle prohibits contracts with deferred payment terms; however, allowances for doubtful accounts are recorded individually for deferred receivables arising from special circumstances. If the customer's industry deteriorates rapidly due to a sudden change in the economic environment or other factors, stagnation of receivables or bad debts may occur, potentially affecting the Group's business performance.

Licenses and permits for specific construction business and general construction business (Construction Business Act), first-class architect offices (Architects Act), and real estate transaction business (Real Estate Transaction Business Act) are essential to the continuation of the Group's core businesses; if grounds for revocation, business suspension, or similar measures arise, it could significantly impede business operations. In addition, revisions to or abolition of, or the introduction of new regulations under, the Large-Scale Retail Store Location Act, the Food Sanitation Act, and other laws applicable to the supermarket and food service industries to which the Group's customers belong may also affect business performance. As of December 31, 2025, the Group is not aware of any facts that would give rise to revocation or similar measures.

With the aim of securing revenue through in-house handling of design, construction, and maintenance operations, the Group has been proactively promoting personnel recruitment and the training of specialized technical staff for several years. However, if training does not progress as planned and it becomes difficult to secure the necessary number of skilled workers, this may affect the Group's business performance and financial position.

The Group has established a cost management system that suppresses fluctuations in material prices by immediately ordering refrigeration and cold storage equipment and other key construction materials upon receipt of orders. However, if it becomes difficult to reflect rising raw material prices in contract prices, this may affect the Group's business performance and financial position.

The Group holds cross-shareholdings with the aim of strengthening relationships with existing customers and developing new customers, with a balance of ¥84 million as of the end of FY2025 (ending December 2025). If stock prices decline significantly due to a downturn in the stock markets of industries to which customer companies belong or other factors, valuation losses may arise, potentially affecting the Group's business performance.

The Group carries out acquisitions of companies and businesses as well as organizational restructuring with the aim of enhancing corporate value, conducting thorough investigation, analysis, and examination in the process. However, if unforeseen circumstances such as a decline in profitability that could not have been anticipated at the time of acquisition occur, or if synergies among group companies fall short of initial expectations, this may affect the Group's business performance and financial position.

While the Group makes every effort to ensure safety and management at construction sites, if an unexpected serious accident occurs, it may affect business performance and social credibility. In addition, if a large-scale disaster such as an earthquake or wind/flood damage occurs, it may also affect business performance and financial position.