NISSHIN SEIFUN GROUP INC.

Progress in CPTPP, Japan-EU EPA, Japan-US Trade Agreement, and other agreements is accelerating trade liberalization, and lower border measures could intensify competition and lead to changes in wheat management methods including state trading, potentially affecting the flour milling and processed food businesses overall. As countermeasures, the company continues to work on developing a global production system, closing small domestic plants and consolidating production into large coastal plants, promoting low-cost operations, and accelerating overseas business expansion.

Conflicts, infectious diseases, abnormal weather, and geopolitical risks could cause sharp price increases or supply shortages of wheat and other key raw materials, and profits could deteriorate if rising labor and logistics costs cannot be sufficiently passed on to sales prices. Insufficient response to environmental and human rights issues in the supply chain also risks damaging corporate brand and competitiveness. The company works to diversify procurement sources, explore alternative raw materials, pursue a high-value-added strategy, and promote responsible procurement activities to maintain stable procurement and appropriate value.

With overseas sales ratio hovering around 30%, unexpected political and economic changes, changes in laws and regulations, terrorism, conflicts, and infectious disease outbreaks in overseas businesses centered on Asia, North America, and Oceania could impair performance or business continuity. The company addresses this through continuous monitoring of local business environments via an overseas safety committee and external experts, ensuring the safety of local employees, and training for dispatched employees.

In alliances, acquisitions, and new business investments both domestically and overseas, if progress does not go as originally expected due to changes in the market environment or increased difficulty in realizing business hypotheses and synergies, the company may fail to generate expected cash flows and could record substantial impairment losses. The company seeks to reduce this risk through prior verification based on its own guidelines, continuous monitoring of profitability after investment execution, and enhancement of PMI (post-merger integration) activities.

Large-scale natural disasters (Nankai Trough earthquake, wind and flood damage, volcanic eruptions, etc.), fires, explosion accidents, and infectious disease outbreaks could damage plant facilities or halt product supply to customers. The company is strengthening its business continuity capabilities through seismic reinforcement and flood countermeasures at key plants, development of BCPs and timelines, regular drills, and maintaining a system of infectious disease response meetings.

Cyberattacks, unauthorized access, and system failures could disrupt operations and lead to leaks of personal information or trade secrets, affecting business activities and social credibility, while delays in responding to DX, including generative AI, could weaken business competitiveness. The company addresses this through education and training based on its basic information security regulations, redundancy of core servers, security assessments by third-party organizations, and group-wide promotion of digitalization and talent development.

Tightening environmental regulations and rapidly rising stakeholder demands for environmental measures could result in costs exceeding expectations, and insufficient response to climate change, water issues, food waste, and packaging plastic waste could reduce corporate brand value. The company is advancing a CO2 reduction roadmap, introducing internal carbon pricing (ICP), conducting and disclosing scenario analysis based on TCFD recommendations, and promoting group-wide responses through its Sustainability Committee and Environment Committee.

Amid growing social interest in food safety and reliability, unexpected events, including external factors, could lead to product recalls or unshippable products, significantly affecting the business and brand. Based on quality assurance from a consumer perspective, the company works to maintain and improve its quality assurance system through safety reviews, strengthened food defense, acquisition and maintenance of international certifications such as ISO and FSSC, and thorough enforcement of equivalent management standards at outsourcing partners.

Foreign exchange fluctuations in the overseas procurement of raw materials and products could increase procurement costs, affect the price of wheat bran (a byproduct in the flour milling business), and adversely affect the yen-converted amounts of overseas business profits and financial condition. The company has established a group-wide foreign exchange committee that sets forward contract rules and conducts information sharing and countermeasure discussions to mitigate the impact on performance.

A declining labor force population and changes in employment conditions could make it difficult to secure and develop the diverse talent needed to advance business strategy (digital talent, global talent, next-generation management, etc.), potentially weakening competitiveness over the long term. The company is strengthening its talent strategy through group-wide unified recruitment, referral and alumni hiring, enhanced education and training for developing next-generation management, digital, and global talent, and initiatives to promote women's advancement.