Of the matters concerning the business situation, financial situation, etc., described in the Securities Report, the following are some that may have a significant impact on investor judgments. Also, we have not included information regarding the likelihood and timing of the materialization of this risk, or the impact it would have on our Group’s financial results, as these are difficult to reasonably foresee.
The forward-looking statements contained herein are based on the judgments made by our Group as of the end of the consolidated fiscal year.
- Risks relating to dependence on specific business partners
Our Group’s sales are highly dependent on Nippon Telegraph and Telephone Corporation and its affiliates (hereinafter referred to as “the NTT Group”). Going forward, if the NTT Group’s construction investments decrease significantly more than expected for any reason, this could have an adverse effect on our Group’s operating results and financial condition. Since 2006, our Group has been working to expand its business segments outside of the NTT Group through private sector renovation projects and the acquisition of new customers utilizing our building lifecycle (LC) total solutions.
- Business partner-related risk
In the event of a deterioration in the creditworthiness of a Group business partner, this could result in bad debts on accounts receivable, which could have an adverse effect on our Group’s operating results and financial condition. Our Group has established a risk management manual covering order acceptance and has procedures in place to thoroughly investigate creditworthiness at the start of a transaction and to have the matter reviewed at Management Council meetings depending on creditworthiness.
- Risks relating to material procurement prices
If the prices of equipment and materials handled by our Group increase due to shortages of materials such as iron and copper, or fluctuations in market prices, this could have an adverse effect on our Group’s operating results and financial condition. As the Hibiya Engineering Group, we calculate appropriate estimated prices by carefully assessing market conditions for materials and equipment before accepting an order. After having received an order, we strive to reduce costs by, for example, conducting pre-order review meetings and centralized purchasing through our Purchasing Center.
- Risks relating to occurrence of unprofitable construction projects
In the event of an unprofitable construction project arising due to unexpected additional construction costs or other factors during the construction phase of a project undertaken by our Group, we will be required to record a provision for construction losses, which could have an adverse effect on our Group’s operating results and financial condition. Our Group has designated key management sites and is enhancing its support systems by having on-site staff and office personnel work together to address risk factors such as project delays and occurrences of additional construction costs.
- Safety-related risks
Our Group has carried out numerous renovation projects on NTT Group buildings. Were personal injury, property damage, or equipment failure to occur in the execution of such renovation work, it would cause serious disruption to highly information-based public communications. In the event of a serious construction accident, we may be required to pay substantial compensation, which could have an adverse effect on our Group’s operating results and financial condition. Our Group ensures safety and quality through thorough safety and quality patrols, the implementation of safety education and training for partner companies, and the utilization of our Haneda Safety Training Center.
- Risks relating to retirement benefit plans
Within our Group, the submitting company and some of its consolidated subsidiaries are members of the comprehensive Air Conditioning and Sanitation Corporate Pension Fund. Depending on revisions to the system resulting from any deterioration in the fund’s financial condition, this could lead to an increase in our Group’s retirement benefit expenses and potentially have an adverse effect on our Group’s operating results and financial condition.
- Risks relating to securities, etc.
With regard to the shares held by our Group, impairment may occur if the market value declines significantly due to stock market conditions and the performance of the companies whose shares we hold. This may also result in the non-receipt of the dividends expected at the beginning of the fiscal year.
With regard to bonds, there is a possibility that interest and principal may not be recoverable due to the issuer’s default. Furthermore, for bonds with interest rates that are linked to exchange rates, market interest rates, and other market indicators, depending on market conditions the interest rate received may not be the amount expected at the time of acquisition or at the beginning of the fiscal year.
- Risks relating to the recoverability of deferred tax assets
The deferred tax assets in our Group’s consolidated financial statements are recorded based on the results of scheduling the expected fiscal years for future reversals of future deductible temporary differences in valuation losses.
If the performance of the submitting company and its consolidated subsidiaries deteriorates in the future, we may have to reduce deferred tax assets based on an assessment of their recoverability, which could have an adverse effect on our Group’s operating results and financial condition.
- Risks relating to the leakage of important information
In the course of its business operations our Group handles important information such as the technical data and customer data held by our customers and others. If due to unforeseen circumstances this important information were to be leaked from our Group, it could damage customer trust and adversely affect our Group’s operating results and financial condition due to potential liability for damages. Having put in place and into operation an information security management system, our Group has worked to create a system that fully recognizes the importance of information management and obtained information security management system (ISMS) certification.
- Risks relating to leakages of important information
Were any officer or employee of our Group to engage in conduct that violates laws and regulations, our Group’s business activities may be restricted, which could adversely affect our Group’s operating results and financial condition. Our Group is working to further strengthen its internal audit functions, ensure thorough dissemination of internal regulations and internal reporting systems, and enhance compliance education.
- Risks relating to occurrences of natural disasters, etc.
In the event of unforeseen circumstances—such as a natural disaster or a large-scale outbreak of an infectious disease and the resulting disruption of lifelines; an interruption or delay in construction due to shortages of fuel, materials, or personnel; or damage to a building or equipment on business premises—our Group’s operating results and financial condition may be adversely affected. In preparation for natural disasters and other emergencies, we strive to avoid risks and minimize damage as a Group by ensuring business continuity while prioritizing the avoidance of human casualties. This is achieved through measures such as securing disaster relief supplies, conducting training, developing BCP manuals, and building an internal information infrastructure that enables teleworking.
In response to the recent COVID-19 pandemic, we took measures to prevent infection and its spread, based on government policies and requests, including the implementation of infection prevention measures within our workplaces, promoting staggered work hours and teleworking, reviewing meeting procedures, and restricting business travel.
- Seasonal fluctuations in performance
Our Group’s net sales figures show a significant difference between the first and second halves of the consolidated fiscal year because, under normal business conditions, a larger proportion of construction projects are completed in the second half of the year compared with the first half. As a result, there are seasonal fluctuations in our Group’s performance between the first and second halves of the fiscal year.