The following matters related to business, accounting, and other factors concerning the Tsukishima Holdings Group have the potential to significantly impact decisions by investors.
Any forward-looking statements below reflect judgments made as of March 31, 2023.
Since local governments are the primary customers of the Water Environmental Business, fluctuations in public investment in water purification plants, sewage treatment plants, and other facilities can affect the results of the Water Environmental Business. As for the Industrial Business, various geopolitical risks, including intensifying U.S.-China trade friction and the Russian invasion of Ukraine, need to be closely monitored. These and other factors that create uncertainty in global economic outlook, including the skyrocketing cost of raw materials, exchange rates and other fluctuations, and chip shortages, affect capital investment decisions by our customers in industries such as chemicals, steel, foodstuffs, environment, and energy, which in turn can affect the results in the Industrial Business.
A look at Tsukishima Holdings Group net sales shows that the completion and inspections of government and public works projects for the Water Environmental Business tend to cluster toward the end of the fiscal year, particularly in the fourth quarter. Additionally, delays in projects the Group companies undertake, which can extend into subsequent periods for reasons including customer decisions, delays in separately ordered civil engineering and construction work, chip delivery delays, and rising steel costs can affect the Group’s business results.
Various factors can affect the results of the Tsukishima Holdings Group’s overseas businesses. These include fluctuating exchange rates and costs for crude oil and other resources, political unrest and systemic change in individual nations, including Russia’s invasion of Ukraine, terrorism, lockdowns in response to COVID-19 or other infectious diseases, abrupt changes in economic conditions, and unanticipated changes in laws, regulations, or taxation systems.
The Group draws on foreign exchange forward contracts and other hedging instruments to mitigate the risk of exchange rate fluctuations.
The business results of the Tsukishima Holdings Group can be affected by accidents, disasters, and other unforeseen events occurring at plants under construction or completed by the Group or at the sites where individual devices are manufactured.
Tsukishima Holdings has established a Quality Assurance and Safety Management Office to ensure quality and safety by developing and maintaining quality assurance and occupational safety management systems.
The Tsukishima Holdings Group’s businesses are based on production to order. Actual production costs may differ from estimates at the point contracts are concluded due to various factors including material procurement costs, demand and supply conditions, outsourcing costs, and other expenses that drive up costs after orders are received. Installation work may involve unforeseen additional costs due to design changes or modifications during construction. Defects or other issues in products delivered or in plants designed and constructed may generate costs associated with repairs, remedial work, or compensation provided to customers, as well as the potential for litigation or disputes such as compensation claims if customers or other parties sustain damages.
Subsidiary Tsukishima Technology Maintenance Service Co., Ltd. provides comprehensive maintenance and management services to water purification plants and sewage treatment plants in Japan. These services include facility repairs and the provision of chemicals, fuel, and electricity. While Tsukishima Technology Maintenance Service consults with the clients when fluctuations in fuel or electricity prices occur, payments covering such price fluctuations may not be made promptly by clients.
Any of these factors can affect the Tsukishima Holdings Group’s business results.
Tsukishima Holdings holds shares of stock and other investment securities. Abrupt changes in stock market prices can affect business results.
Business results for the Tsukishima Holdings Group can be affected by fluctuations in the market value of Group pension assets, changing investment yields, and other factors.
The Tsukishima Holdings Group is subject to various laws and regulations, including the Construction Business Act, Product Liability Act, Measurement Act, and Waste Management and Public Cleansing Act. While the Group makes every effort to comply with applicable laws and regulations, business results may be affected if laws and regulations are strengthened or otherwise introduced or amended in unexpected ways.
Damage to production equipment, products, lifeline infrastructure, etc. caused by earthquakes, floods, fire, snow damage, and other large-scale natural disasters or by other disasters affecting Tsukishima Holdings Group production facilities, business sites, construction sites, or business partners’ business facilities may impair or halt production functions. This, in turn, can affect Group business results.
Tsukishima Holdings Group has established a Business Continuity Plan (BCP) to contribute to the continuity and rapid recovery of business in the event of an earthquake with an epicenter in the greater Tokyo area or other disasters, and will take steps to increase the efficacy of the BCP through means such as holding periodic drills.
Information held by the Tsukishima Holdings Group includes trade secrets and confidential information on customers and business partners obtained through business activities. Leaks of information, destruction of vital data, unauthorized alteration of data, system downtimes, and other consequences brought about by stronger than anticipated cyberattacks, unauthorized access, or computer viruses can affect Group business results.
The Tsukishima Holdings Group has established “Basic Rules on Information Security” and “Information Security Measures Standards” to safeguard against incidents or accidents concerning information security. Based on these documents, the Group implements information security measures from both human resource and information systems perspectives. From the human resource perspective, the Group promotes employee training and activities to promote awareness and understanding of information security issues and related concepts. From the perspective of information systems, the Group strives to improve and enhance security measures to keep them up to date. In these ways, the Group seeks to minimize information security risks.
The Tsukishima Holdings Group strives to acquire and appropriately manage and utilize intellectual property rights to maintain a competitive edge in individual devices and processes. Infringements of intellectual property rights held by the Tsukishima Holdings Group may occur, for example, in emerging economies during the course of domestic or international business activities. It is also possible that the Group’s activities may infringe upon intellectual property rights belonging to others. Such cases may lead to Group liability for damages and such, which can affect Group business results.
In recognition of the importance of intellectual property rights, Tsukishima Holdings is making progress on securing intellectual property rights and building patent network structures in key fields and technologies. In addition to rigorously defending its own intellectual property, Tsukishima Holdings makes every effort with regard to the correct handling of intellectual property rights held by others.
The Tsukishima Holdings Group regards its human resources as its most important management resource for achieving growth and progress. The Group’s businesses and business results could be affected in the event that smooth business activities are impeded by difficulties in securing specialized human resources on a continual basis as a result of factors such as low birth rates, the aging population, and decreasing numbers of highly experienced engineers in Japan.
Tsukishima Holdings plans to boost productivity through personnel-saving measures and higher efficiency achieved through AI, IoT, and digital technologies, while training human resources through tier-based training and e-learning in accordance with levels of skills or knowledge of employees. Tsukishima Holdings is striving to build and diversify its engineering workforce through the exchange of human resources with design facilities overseas. It is also undertaking active midcareer hirings to enhance and strengthen its ranks of highly skilled human resources.
Risks associated with climate change include the risk of declining demand for Tsukishima Holdings’ equipment and processes as existing customers transform their business operations or manufacturing processes in response to stronger regulations toward decarbonization. Other risks include lower productivity and construction delays at construction and manufacturing sites as average temperatures rise, alongside damage and rising costs of recovery and response as natural disasters grow more frequent. These factors may affect the business results of the Tsukishima Holdings Group.
The Tsukishima Holdings Group recognizes climate change as a key societal issue. To advance initiatives to help realize a sustainable society consistent with its corporate philosophy—Building a Better Tomorrow with Environmental Technologies—it established a Sustainability Committee and declared its support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). The Group will strive to mitigate climate change risk by helping to establish a decarbonized society through its business activities, including efforts to promote the use of sewage sludge as an energy source and to build equipment and plants to produce lithium-ion secondary battery materials.
The Tsukishima Holdings Group started to operate under a holding company structure in April 2023. Subpar performance by the holding company in areas such as governance and group management, including appropriate allocation of business resources, reviews of Group strategies, and the supervision and oversight of Group companies, may have significant consequences for Group business results and financial standing.
In addition, the bulk of the holding company’s revenues consist of consulting fee income, outsourcing service income, and dividend income received from subsidiaries directly owned by Tsukishima Holdings. These subsidiaries may be unable to pay dividend income to Tsukishima Holdings if they cannot generate sufficient profits.
Tsukishima Holdings will make strategic decisions and allocate business resources appropriately for the entire Group based on business reports from Group companies and the results of analyses thereof.