The following are important matters that may become risk factors for our group’s business and other activities.
The forward-looking statements in the text are based on our judgment as of the date of submission of the Annual Securities Report, but the following description does not cover all the risks associated with our group’s business and investment in our stock.
Dependency on sales to major customers
Potential for risk manifestation: Small
Impact on business results: Large
Our group’s main customer is NISSAN MOTOR CO., LTD. and the table below shows sales to that company.
Since our dependence on NISSAN MOTOR CO., LTD. for sales is continuously at a high rate, any change in the business situation with that company could have a negative impact on our group’s business performance.
NISSAN MOTOR Group’s sales results are the sum of sales to NISSAN MOTOR CO., LTD., NISSAN MOTORSPORTS & CUSTOMIZING CO., LTD., NISSAN JIDOSHA HANBAI(Nissan’s dealerships nationwide), DONGFENG MOTOR CO., LTD. in China and other Nissan Motor affiliates, etc. in China.
Our company has concluded agreements with Nissan Motor Co., Ltd. such as “Vehicle Transportation Consignment Agreement” and “Basic Contractor Agreement” which are concluded for each individual operation such as vehicle transportation work and new vehicle inspection and maintenance work. In addition, a Nomination Letter has been signed by this company and it has been agreed in principle that the agreement will continue until the end of March 2027.
Our company are also in discussions to continue the program after that date.
To date, our company have achieved the goals set forth by NISSAN MOTOR CO., LTD. and will continue to renew the contract by striving to maintain and improve the quality of our work.
However, our group’s business performance may be adversely affected if, for various reasons, our company are unable to continue doing business with NISSAN MOTOR CO., LTD.
As a countermeasure to this business risk, our company will strive to strengthen our relationship with NISSAN MOTOR CO., LTD. by promoting collaboration in transportation systems and other measures.
Pertaining to specific legal regulations
Regulations under the Motor Truck Transportation Business Act, etc.
Potential for risk manifestation: Small
Impact on business results: Large
The premise of our group’s main business activity, vehicle transportation service, is the approval for the general motor truck transportation business based on Article 3 of the Motor Truck Transportation Business Act as a general cargo carrier (Director-General of Kanto District Transport Bureau (Kan-Jikan 2) No. 1992, etc.) and the second-class consigned freight forwarding business based on Article 20 of the Consigned Freight Forwarding Business Act as a consigned freight forwarding service operator (Director of the Multimodal Freight Forwarding Division of the Policy Bureau (National Freight Forwarding Business Law No. 6-4-25)) , the validity period of these licenses and permits held by our group is indefinite.
These laws provide detailed provisions on licensing of business operators, criteria for business licenses, prohibited acts, drafting and approval of conditions of carriage, transportation safety centering on prevention of overworked drivers, appointment of operation managers and qualification tests to ensure operation and safety of commercial vehicles, business improvement orders from supervisory authorities, and licensing and approval of prohibition of lending of a business name, transfer and acquisition of a business, and suspension and discontinuance of a business. In addition, Article 33 of the Motor Truck Transportation Business Act and Article 33 of the Consigned Freight Forwarding Business Act stipulate grounds for revocation of approvals and licenses.
At this time, our group is aware of no facts that would constitute grounds for revocation of these licenses and permits.
As mentioned above, our group's main business activities require the approval for the general motor truck transportation business and the second-class consigned freight forwarding business in order to continue, but If these approvals or licenses are revoked in the future due to violations of laws and regulations, our group may be unable to conduct some or all of its main business activities, which may adversely affect our group's business performance.
In addition, future changes in the content of these laws may result in new costs, which may adversely affect our group's business performance.
Various Regulations Concerning Exhaust Emission Control
Potential for risk manifestation: Medium
Impact on business results: Small
Our group's domestic automobile-related business and general cargo business have been affected by the “Law Concerning Special Measures for Reduction of Nitrogen Oxides and Particulate Matter Emitted from Automobiles in Specified Areas” (Automobile NOx and PM Law), which came into effect on October 1, 2002.
In addition, the Tokyo Metropolitan Government's “Ordinance on the Environment to Ensure the Health and Safety of Tokyo Citizens” and other ordinances regulating the driving of diesel vehicles have been in effect since October 1, 2003, beginning in the Tokyo metropolitan area and expanding throughout the country.
Our company group has been promoting the replacement of new vehicles or the installation of anti-emission devices to comply with various regulations. However, if the regulations are tightened in the future, our company may incur further costs, which may adversely affect our group's performance.
Regulations under the Road Traffic Act
Potential for risk manifestation: Small
Impact on business results: Medium
In our company group's transportation operations, our company comply with the Road Traffic Act, respect human life, and do our best to ensure traffic safety.
However, in the event of a serious traffic accident or other incident, our group could lose credibility and our group's performance could be adversely affected.
Regulations of the Vehicle Restriction Order of the Road Act
Potential for risk manifestation: Small
Impact on business results: Medium
Our group's semi-trailers for transporting vehicles are subject to the Vehicle Restriction Order of the Road Act, which sets restrictions on overall length, as well as length, height, and weight of loaded vehicles.
Semi-trailers for transporting vehicles are originally designed to be able to carry 6 to 7 vehicles. However, with the recent increase in the size of product vehicles, they may not fit into the semi-trailer size when loaded and may overhang.
In addition, as vehicles become more electrically powered, their weight is increasing and may exceed the weight limit for semi-trailers.
At the time of vehicle dispatch at each distribution center, our company mixes small cars so that they do not exceed the limit, and makes adjustments when loading.
However, in the case of new car transportation where it is difficult to mix small cars, our company may be forced to reduce the number of cars loaded.
Our company will continue our efforts to negotiate appropriate transportation rate revisions. However, our group's business performance may be adversely affected in the event that regulatory changes are implemented and transportation rates do not reflect the increased costs resulting from decreased transportation efficiency.
Labor Standards Act and Other Regulations
Potential for risk manifestation: Small
Impact on business results: Medium
Labor management for drivers' overtime work and continuous driving must be based on the Labor Standards Act and the Improvement Standards Notification, etc.
Recent labor administration moves include the strengthening of guidance and supervision by supervisory authorities regarding long working hours and the revision of the Industrial Safety and Health Act, which is now in effect, requiring companies to pay more attention to labor management and safety for employees.
Although our company are aware that there is currently no evidence of any violation of laws and regulations, there is a possibility that our group's business performance may be adversely affected by increased costs, depending on future trends in regulatory tightening and legal adaptation.
Furthermore, with the implementation of the Work style reform laws, which tightens regulations on overtime hours, and the implementation of the law in the automobile driving business from April 1, 2024, it may not be possible to maintain the same sales and earnings as before in March, the peak season for automobile transportation.
Revisions to the Worker Dispatch Law, etc.
Potential for risk manifestation: Small
Impact on business results: Small
The “Act on Ensuring the Proper Operation of Worker Dispatching Services and Protecting Dispatched Workers” (hereinafter referred to as the “the Worker Dispatch Law”) was partially amended in 2012, followed by another partial amendment in 2015 based on a supplementary resolution at the time of the amendment.
The revision incorporates mandatory employment security measures, individual and establishment-based term limits, and other measures.
In the temporary staffing industry, competition is expected to become even tougher as client companies are switching to outsourcing and direct employment.
The Worker Dispatch Law has been amended in response to changes in the labor and employment environment, and future amendments and other changes in the business environment could have a negative impact on the performance of our group, which operates a temporary staffing business in the human resource business.
As for measures to address business risks related to these regulations, our company will strive to instruct and educate related departments to comply with the Motor Truck Transportation Business Act, the Labor Standards Act, and other laws and regulations, and at the same time, our company will strive to collect information on other legal regulations as early as possible, respond promptly, and disclose such information.
Our company will raise awareness of compliance through special audits by the Audit Department.
Securing Human Resources
Potential for risk manifestation: Small
Impact on business results: Small
Although our company are working to secure and develop human resources as a key management priority, our group's business performance may be adversely affected if our company are unable to secure the necessary human resources due to the shortage of human resources caused by the declining birthrate and aging population or the soaring labor costs associated with the economic recovery.
In particular, the “automobile driving occupation,” which is responsible for the vehicle transportation business in the domestic automotive related businesses and the pick-up and drop-off business and temporary staffing business in the human resource business, is at risk of soaring labor costs because the ratio of effective job offers remains high.
In response to this business risk, several years ago our company began hiring new graduates for drivers, and our company are taking other measures to secure drivers and halt the aging of the workforce.
Damages due to natural disasters and other large-scale disasters
Potential for risk manifestation: Small
Impact on business results: Large
Our group's business activities could be severely affected by natural disasters such as earthquakes, eruptions, tsunamis, and typhoons, as well as accidents such as fires and outages of information systems including communication networks, which could have a significant negative impact on our group's business performance.
As a countermeasure to this business risk, our company have 36 logistics bases (customer service centers) throughout Japan for vehicle transportation, so that even if any particular area or base is devastated, our company have a system in place to provide backup at neighboring bases.
Risks related to price declines of assets held
Potential for risk manifestation: Medium
Impact on business results: Large Medium
If our group were to post a write-down or write-down our trade and other receivables (17,326 million yen), inventories (2,979 million yen), property, plant and equipment (24,845 million yen), goodwill and intangible assets (5,328 million yen) due to a decline in their profitability, etc, Our group's business performance and financial position may be affected in the event of a decline in profitability or other factors.
As measures to address this business risk, with respect to trade receivables, our company will emphasize thorough credit management and prompt information management for each customer, and with respect to inventories, our company will downsize prospective orders and thoroughly manage inventories.
With regard to property, plant and equipment, goodwill, and intangible assets, our company will improve the accuracy of assessing business profitability prior to investment, and after investment, our company will thoroughly manage profit and loss, and if profitability declines, our company will promptly introduce a recovery plan to minimize the risk exposure.
In the current fiscal year, our company identified signs of impairment in non-financial assets related to the CKD business in its overseas related businesses due to a decision by a major customer to exit the business.
Risks Related to Used Vehicle Export Business
In the used car export business to Malaysia of our subsidiary World Windows Corporation, there are risks related to exchange rate fluctuations, changes in legal regulations, collection of receivables, and securing ship slots for car carrier ship.
Fluctuation of exchange rates
Potential for risk manifestation: Large
Impact on business results: Small
Our group does not hedge its transactions with Malaysian importers of used cars, as these transactions are denominated in yen.
However, if the yen were to appreciate sharply, the price of used cars exported from Japan would become less competitive, and our group's export volume would decrease, which could affect our business performance and financial position.
Changes in Legal Regulations in Malaysia
Potential for risk manifestation: Small
Impact on business results: Medium
In Malaysia, import tariffs and import conditions for used vehicles are based on policies for the protection of the automobile industry and preferential policies for ethnic Malays, and changes in these policies could affect our group's business performance and financial position.
Collection of Receivables
Potential for risk manifestation: Large
Impact on business results: Small
Our group conducts credit checks at the start of each transaction, sets a credit limit for each company, and continuously monitors the sales status in order to manage credit. However, our group's business performance and financial position could be affected in the event of bankruptcy or payment delays by our business partners.
Secure ship slots for car carrier ship
Potential for risk manifestation: Large
Impact on business results: Small
Our group mainly uses car carrier ship for exporting used cars from Japan to Malaysia, and the availability of slots on these car carrier ship depends on the export trend of new cars.
In the event that exports of new cars are strong and our company is unable to secure a ship slot for a dedicated car carrier ship, this could affect cash flow due to a backlog of cars in inventory or could affect sales revenue by limiting the number of cars exported.