Operational and Supply Chain Disruptions Caused by the Spread of COVID-19

「During the cumulative second quarter, there were no material changes in matters concerning the business and financial conditions described in this quarterly securities report that could have a material impact on investors' decisions, nor in the risks associated with the business and other matters described in the securities report for the previous fiscal year.」

「During the cumulative first-quarter period, there were no occurrences of matters described in this quarterly securities report concerning the business or financial condition that could have a material impact on investors' decisions, and no material changes to the "Business and Other Risks" described in the annual securities report for the previous fiscal year.」

「We have formulated a business continuity plan (BCP) and, in the event of an emergency such as a natural disaster, including an earthquake or typhoon, or the spread of an infectious disease, we will respond based on the crisis-management manuals and other measures stipulated in the BCP, including issuing evacuation instructions, ensuring employee safety and establishing a disaster-response headquarters for early recovery. However, if the emergence of a new infectious disease or a recurrence of a global pandemic causes factory shutdowns or supply-chain disruptions, this could affect our business operations, financial position and operating results.」

「During the cumulative nine-month period, Japan’s economy gradually became less affected by COVID-19, and socioeconomic activity continued to normalize. However, the end of COVID-19 infections in Japan and overseas remains unforeseeable. The prolonged Russia-Ukraine situation and other disruptions in the international community have driven up raw material and energy costs, while interest rates have fluctuated as a result of monetary policies in countries around the world. Consequently, the outlook remains uncertain.」

「During the cumulative second quarter, Japan's economy moved toward normalization of socioeconomic activity as restrictions related to COVID-19 were gradually eased. However, in addition to the impact of a resurgence in infections caused by new variants, disruptions in the international community, including the prolonged situation between Russia and Ukraine, drove up raw material and energy costs, while the widening interest-rate differential between Japan and the United States led to a sharp depreciation of the yen.」

「In the housing industry, which has close ties with us, supply and demand for housing materials remained tight due to the impact of extensions to the emergency declaration and priority preventive measures, the wood shock originating in Europe and the United States, and delivery delays caused by the global shortage of transport vessels. In February, the invasion of Ukraine by Russia caused housing-material prices to rise further.」

「In the housing industry, which has close ties with our Group, housing-material supply and demand tightened and material prices surged due to delays in deliveries caused by the emergency declaration, the wood shock originating in Europe and the United States, lockdowns in Asian countries accompanying the renewed spread of COVID-19, and the global shortage of transport vessels.」

「In addition, sales volume of domestic products increased as replacement demand for insufficient imported MDF, due to the shortage of container vessels during the COVID-19 pandemic and factory shutdowns caused by local lockdowns.」

「Sales volume increased, driven by substitution demand for domestic products and other factors, as arrivals of imported MDF were delayed due to the shortage of container ships during the COVID-19 pandemic and the sharp increase in U.S. housing starts.」

「The decline in new housing starts, caused by housing-related companies curtailing business activities and weakening consumer sentiment amid the spread of COVID-19, has also affected our results.」

「The business environment surrounding the housing market remained weak due to the effects of the spread of COVID-19, with the cumulative number of housing starts from April through November down 10.0% year on year.」

「The housing industry, with which we have close ties, was also affected by the spread of COVID-19. The business environment surrounding the housing market deteriorated as housing-related companies refrained from sales activities and consumer sentiment weakened. New housing starts decreased, particularly for owner-occupied homes, falling 11.6% year on year on a cumulative basis from April through August.」

「Although the housing industry, with which we have close ties, benefited from government subsidies and tax reductions related to home purchases, other preferential policies and low mortgage rates, the business environment surrounding the housing market deteriorated as housing-related companies refrained from sales activities and consumer sentiment weakened due to measures to prevent the spread of COVID-19. New housing starts decreased, particularly for owner-occupied homes, falling 12.6% year on year on a cumulative basis for April and May.」

「In addition, the spread of COVID-19, which became apparent at the beginning of 2020, has become global. To prevent the spread of infection, we have implemented thorough hygiene controls and efficient operating measures, including staggered working hours and telecommuting. However, if the spread of infection increases further, our business operations, financial position and operating results may be affected by plant shutdowns caused by employee infections and supply chain disruptions.」