SUGIMOTO & CO., LTD.

The end consumers of the Group's products (machinery, equipment, tools) are primarily domestic factories, and business performance is directly and significantly affected by trends in capital expenditure and manufacturing utilization rates in industries such as automobiles, semiconductors, and electronic components. While the Group is diversifying its customer industries and expanding its trading area through new store openings, a decline in manufacturing capital expenditure and utilization rates would inevitably have a direct impact on performance.

For the Group, whose basic policy is to enhance customer satisfaction, securing and developing sales engineers who handle proposal-based sales is an important management challenge. Greater investment in human resources than before is required to continue business expansion and new store openings, and insufficient recruitment and development could have an indirect and gradual impact on business development.

If natural disasters such as earthquakes, floods, or infectious diseases cause damage to sales facilities, the logistics network, information infrastructure, or personnel, business continuity could become difficult. Logistics operations are structured across three locations nationwide, but information infrastructure is concentrated at the head office; this risk has been mitigated by establishing backup facilities in Tokyo in September 2020.

Competitors that have built large-scale information systems and distribution centers are expanding internet sales utilizing IT, and there is also a growing trend among users toward centralized purchasing. While the Group has launched the e-commerce site "Yoishina," it is also differentiating itself by enhancing face-to-face, problem-solving proposal-based sales that leverage close customer relationships.

With growing reliance on ICT, system vulnerabilities and external attacks such as malware could disrupt business activities, and the leakage of confidential information could damage the Group's reputation, potentially having a significant direct and indirect impact on performance. The Group is implementing measures such as strengthening information security systems, improving employee literacy, and establishing backup systems for core systems, but states that complete elimination of the risk is difficult.

Strengthening of legal regulations aimed at reducing greenhouse gas emissions and changes in industrial structure and corporate activities could have a significant impact on the Group's business performance. Given the worldwide movement toward carbon neutrality, companies are required to respond proactively and promptly, and delays in response could become a business risk.