T.O. Holdings CO.,LTD.

The construction segment may be materially affected in net sales by fluctuations in public investment, while the real estate leasing segment may be affected by changes in the market value of owned real estate. In addition, the distribution and automotive-related segments' net sales are also influenced by weather conditions and changes in consumption trends. Should multiple such external factors coincide, there is a risk of compounded adverse effects on the Group's overall operating results.

The Group sells lumber and building materials to retailers, construction firms, and builders nationwide. Although the Group monitors the business conditions of its customers, uncollectible accounts receivable may arise if a customer experiences financial difficulties. Should such credit risk materialize, it could adversely affect the Group's operating results and financial position. The annual securities report does not specify concrete credit management measures.

The distribution, construction, and real estate leasing businesses are subject to a wide range of legal regulations, including the Large-Scale Retail Store Location Law, the Building Standards Act, and the City Planning Act. If these regulations prevent the Group from opening new stores, expanding existing stores, or carrying out construction as planned, execution of its growth strategy could be constrained, potentially affecting operating results. Changes in the regulatory environment or administrative decisions could also disrupt the operation of existing businesses.

The automotive-related segment has entered into exclusive dealership agreements with specific business partners such as Nissan Motor Co., Ltd., and the vehicles it sells are limited to products manufactured and supplied by these partners. If a specific business partner changes its business strategy, or if production or supply is halted or delayed due to a disaster or other event, alternative procurement options are limited, posing a risk of a direct impact on operating results. The structure is highly concentrated among specific business partners, and no diversification measures are specified in the annual securities report.

Funds for store equipment and consumer loan financing in the distribution segment, as well as funds for acquiring leasing equipment in the real estate leasing segment, are procured primarily through borrowings from financial institutions. The interest-bearing debt dependency ratio stood at a high level of 67.8% in FY2025 (ending May 2025) (total interest-bearing debt of ¥11,526,112 thousand against total assets of ¥17,002,899 thousand). If interest rate levels rise, interest expenses (¥160,063 thousand in FY2025 (ending May 2025)) could increase further, potentially adversely affecting operating results and financial position. The interest-bearing debt dependency ratio over the past three fiscal years has remained elevated at 70.3% → 66.4% → 67.8%, raising concerns about an increasing financial burden in a rising interest rate environment.

The home center operations within the distribution business and the automotive-related segment conduct face-to-face business through stores and maintenance facilities. In the event of a natural disaster, fire, or similar event, store operations or maintenance facility operations could be suspended. Because the business model relies heavily on physical locations, sales losses and recovery costs in the event of a disaster would directly affect operating results and financial position. The annual securities report does not specify the status of concrete BCP (business continuity plan) preparations.