Risk factors

Major operational and other risks that may have a significant impact on the Group are as follows.
However, this does not include all the risks, and the Group may be subject to the impact of any risk in the future that cannot be foreseen or is not perceived as significant at the present time.

(1) Number of new residential constructions

The building materials industry to which the Group belongs is affected by new residential construction trends. In the area of new housing, the performance of the Group has a close connection with the construction trends of owner-occupied houses and houses built for sale, but we are working to reduce the impact of this by focusing on further development of the non-residential market such as in facilities for elderly, the remodeling market, and other markets.

(2) Raw material price fluctuations, etc.

Imported plywood, MDF, and some raw materials of the Group products are vulnerable to price fluctuations due to international market and currency movements, and the performance of the Group may be affected if there is a significant change in purchase prices. Moreover, there is an inherent risk that procurement may become difficult depending on developments in the regulation of logging in countries with wood resources.
The Group takes various measures to minimize the impact of currency fluctuation and is working to reduce those risks by diversifying and decentralizing procurement pipelines for products and raw materials.

(3) Impact of natural disasters, etc.

In the event of a major natural disaster, fire, or other accidents, the performance and financial position of the Group may be severely affected due to factors including suspension of production activities, delay in delivery, and damage to inventory assets as well as machinery and equipment.
To prepare for natural disasters such as earthquakes and typhoons, as well as fires, the Group establishes seismic countermeasures, implements regular facility inspections and improvements, establishes emergency contact systems, reviews emergency response manuals, conducts disaster drills, and takes other measures at its production and sales bases. The Group also hedges risks through non-life insurance to compensate for property damage, restoration costs, and lost opportunities due to suspension of operations.

(4) Decline in selling prices

The products and services of the building material business and plywood business operated by the Group are subject to intensified competition with domestic competitors. If the competition among companies becomes more intense in the future, there may be a fall in profitability due to a decline in selling prices and decrease in sales volume, and this may affect the performance and financial position of the Group.
The Group is working to reduce those risks by continuing to closely monitor the supply and demand conditions of the market and by working on differentiation through development of high added-value products and increasing market share.

(5) Quality of products

The Group pays close attention to the quality control of its products. However, if any quality problems should occur due to product defects, compensation and other costs may be incurred for damage caused by defects, and this may affect the performance and financial position of the Group.

(6) Infectious disease

The spread of infectious diseases such as new viruses poses the risk of stagnation in economic activities, which may affect the production and sales activities, performance and financial position of the Group.
The Group has established internal guidelines that place the highest priority on preventing clusters from occurring in the workplace, in order to ensure the safety of human life and the continuation of production and sales activities, and takes measures to minimize the impact on its production and sales activities, including the following: establishing flexible work systems such as the implementation of staggered working hours and remote work, and introduction of web conferencing systems; restricting business trips and visitors to our factories based on the infection situation, social conditions, and other factors; and implementing thorough, basic preventative measures.