JK Holdings Co., Ltd.

If new housing starts decline significantly due to soaring housing material prices, rising mortgage interest rates, consumption tax hikes, or other factors, this could have a material impact on the performance of the Group, which primarily handles products related to wooden detached houses. As a countermeasure, the Group is promoting the expansion of sales channels into the housing renovation market and the wood-based non-residential market, striving to reduce its dependence on new construction of wooden detached houses.

Plywood, a core product, is a market-based commodity; domestic products are subject to price fluctuations based on supply-demand balance, while imported products are affected by domestic conditions in log-producing countries and exchange rate trends. Sudden and significant market fluctuations may impact performance. The Group seeks to stabilize prices through agile production and procurement adjustments at manufacturing subsidiaries, and by using the largest plywood port warehouse in the Greater Tokyo area, located in Kisarazu City, to adjust supply and demand.

Japan Kenzai Co., Ltd., the Group's core company, has approximately 10,000 business partners nationwide. Credit risk has increased more than before due to rising prices of building materials and housing equipment, continued repayment of "zero-zero loans," and changing cash flow conditions caused by rising interest rates. If bankruptcies increase substantially in the housing industry, this could result in bad debts exceeding expectations and significantly affect performance. The Group is addressing this through diversification of credit exposure, systemization of credit management across the Group, and enhanced dynamic monitoring.

Import prices of plywood are affected by exchange rate fluctuations and the manifestation of country risk, and rapid currency fluctuations could impact performance. Economic sanctions against Russia have already made it difficult to procure Russian-made sawn timber and wood-based materials. Japan Kenzai Co., Ltd. hedges a certain percentage or more of contract amounts through forward foreign exchange contracts, while also working to secure supply by identifying and procuring alternative materials.

The housing-related industry to which the Group belongs is subject to legal regulations such as the Construction Business Act and the Building Standards Act. New enactment, amendment, or abolition of laws, or changes in applicable standards, could affect business activities and impact performance. In addition, legal violations could lead to regulatory restrictions on business operations or loss of credibility. The Group addresses this by obtaining early information on amendments to relevant laws and regulations and strengthening compliance awareness among officers and employees.

The Group's sustainable development is heavily dependent on human resources. Failure to recruit and develop capable personnel, or failure to prevent their departure, could affect sustainable development. Under the HR policy of "pursuing an organization worth working for," the Group is working to realize an organization that combines ease of work with a sense of fulfillment, and is reducing this risk by carrying forward its corporate culture of "a company is its people, and people are its heart."

The Group, which manages production, sales, accounting, human resources, and other operations across the board through IT systems, could become a target of increasingly active cyber attacks worldwide. An attack exceeding expectations could disrupt business activities, lead to loss of confidential information, leakage of personal information, claims for damages, and increased security cost, thereby affecting performance and financial condition. The Group addresses this through the introduction of anomaly detection alarm systems, redundancy of hardware and networks, and security education.

Transition risks and physical risks arising from climate change could affect business operations. Based on the TCFD framework, the Sustainability Study Group conducts discussions and analyses. Response strategies for identified risks are implemented following reporting to the Sustainability Committee and decisions by the Board of Directors, and the Group recognizes that proactive engagement can also lead to profit opportunities.

In the housing-related industry, where mid- to long-term market contraction is anticipated, the Group is actively pursuing corporate acquisitions to expand and strengthen its sales base. However, if the value of an acquired company declines significantly, this could impact performance. The Group has established a dedicated M&A department internally and reduces risk by conducting appropriate due diligence and PMI for each individual case.

In the event of a large-scale natural disaster, accident, or infectious disease pandemic, sales and manufacturing sites, the head office, the supply chain, and employees could suffer serious damage. The Group has formulated and maintains a Business Continuity Plan (BCP), and strives to improve its effectiveness by reviewing and refining its content each time the BCP is activated.