THE TORIGOE CO.,LTD.

Unforeseen fluctuations in economic conditions and industry trends may affect the financial position and operating results of the Group. In addition, there is a risk of incurring losses due to bankruptcy of investees, business partners, and others. The Group is strengthening its structure to be less susceptible to the impact of such fluctuations, but it is difficult to avoid them completely.

The progress of trade globalization and liberalization, including the entry into force of the CPTPP, the Japan-EU Economic Partnership Agreement, and the Japan-US Trade Agreement, may significantly affect import trends for wheat and barley, the main raw materials, as well as for products such as wheat flour, mixes, and secondary processed products. Intensified competition from imported products could directly affect the Group's sales volume and prices, posing a risk of deteriorating business performance.

The state trading system and domestic wheat policy have undergone revisions, including the introduction of a market-linked pricing system for the government-set selling price of foreign wheat, a shift to an immediate sale method, and the introduction and expansion of the SBS (Simultaneous Buy and Sell) method. If the Company is unable to pass on raw material price fluctuations resulting from such system changes to product prices in a timely and appropriate manner, profitability may be squeezed, adversely affecting business performance.

Wheat, barley, and naked barley, the main raw materials, are strongly affected by weather and can experience significant fluctuations in production volume. In addition, geopolitical risks such as the prolonged situation in Ukraine and issues in the Middle East, as well as tightening global grain demand, may make it difficult to stably procure the required volumes. If procurement shortfalls or quality deterioration occur, this could adversely affect the Group's performance through quantitative and qualitative impacts on products.

In addition to rising procurement costs for raw wheat due to exchange rate fluctuations, various costs such as labor and logistics costs are increasing. If the Group is unable to sufficiently pass on these cost increases to product prices, profit margins may decline, affecting the Group's business performance.

As needs and regulations regarding "food safety and security" strengthen year by year, if a food safety issue exceeding expectations occurs within the Group or in society at large, it could have a material impact on business performance through product recalls, loss of trust, and increased costs for regulatory compliance. The Group has established a Quality Assurance Office and is working to strengthen its quality control system.

If an infectious disease outbreak spreads among the Group's employees, it may become difficult to continue production and sales activities. In addition, if business partners scale back or suspend their business activities, this could disrupt raw material procurement and sales channels, potentially affecting the Group's business activities and performance.