Possible Risk Factors
Below is a list of possible risk factors in our business that could affect investors. We are fully aware of these factors and we intend to take every measure to prevent them from creating any negative situations. However, in case of negative occurrences, we will do our best to improve the situation and solve any resulting problems.
The risk factors include foreseen items. These items are listed based on our judgment on February 12, 2021 when the financial results were published. Risk factors are not limited to these items.
Stock price fluctuations
The Group owns ¥14,600 million of marketable securities mainly of its business partners and affiliated companies and is subject to risk of stock price fluctuations. As of the end of the current fiscal year, the valuation based on the market price yielded an unrealized gain on marketable securities; however, this may affect the operating results and financial position, depending on the future trend of stock prices.
Recording of impairment loss
The Group owns ¥58,400 million of property, plant and equipment such as hotel properties as of the end of the current fiscal year. The future fall in real estate prices exceeding a certain range or deteriorating business income may lead to an impairment loss in a part of property, plant and equipment.
Continued use or earlier termination of leased property
In the hotels business, such as the Washington Hotels, some of the hotel properties are on long-term lease. In case any owner of such properties is forced into bankruptcy, etc., making continued use difficult, it may negatively affect our operating results. Additionally, if the Group may intentionally choose to cancel a long-term lease contract before its expiration for whatever reason, it may be required to assume obligation to pay the rent or compensate for part of the lease payment, which is ¥80,200 million for the remaining portion of the lease period.
Natural disaster and pandemic outbreak
In the case of natural disasters including a massive earthquake, volcanic eruption, typhoon, or extraordinary weather conditions occur, or a pandemic such as COVID-19 or new strains of influenza breaks out, temporary suspension of business operations or cancelation of trips and a decline in inbound demand due to entry restrictions into Japan and overseas travel advisories are expected, and may negatively affect the Group’s financial position and business.
Loss from withdrawal of real estate-related businesses
The Group was once actively involved in property sales business, and currently continues with peripheral businesses such as infrastructure including road and water, and property management. Many of them are low profit or non-profitable, and if we decide to exit from these businesses, a considerable amount of loss may be temporarily incurred.
Deferred tax assets
The Group recorded ¥3,400 million of deferred tax assets for deductible temporary differences. Deferred tax assets are recorded through evaluation of recoverability based on a forecast of future taxable income, etc.; however, in cases where the actual taxable income would be much lower than the forecast, the recoverability would be revised, and deferred tax assets may be reversed to the recoverable amount, negatively affecting the Group's operating results and financial position.
Incidents including food poisoning, etc.
We pay close attention to safety and hygiene; however, if by any chance food poisoning does occur, it would damage our customer confidence and may lead to temporary suspension of business operations.
Fluctuation in Japanese yen interest rate
Among ¥64,700 million of loans payable as of the end of the current fiscal year, ¥12,600 million is loans with floating interest rates, which may result in increased interest payments if the yen interest rate rises due to recovery of Japanese economy in the future.
Fluctuation in exchange rate
The revenues and expenses as well as debts and liabilities from operating activities of the Group's overseas businesses are denominated in foreign currencies. Consequently, the results could beaffected by exchange rate fluctuations when converting financial results of overseas subsidiaries to yen amount.
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