CHUBUSHIRYO CO.,LTD.

The Group, for which the feed business accounts for more than 90% of net sales, is affected by changes in government agricultural policy and shifts in the trade environment such as expansion of CPTPP membership and the coming into effect of FTAs. Escalating tensions in the Middle East could cause sudden swings in international crude oil prices and disruptions to supply chains, leading to higher energy costs and price increases that could adversely affect performance. The Group recognizes geopolitical risk as a key risk and continuously monitors changes in the business environment.

There is a risk that livestock infectious diseases such as avian influenza, African swine fever (ASF), PED (porcine epidemic diarrhea), foot-and-mouth disease, and BSE, as well as deterioration of rearing environments such as red tide, could cause a significant decline in the number of animals raised and a decrease in demand for livestock and marine products due to consumer purchase restraint. This could reduce feed sales volume, and deterioration in the financial condition of business partners could give rise to receivables collection problems, potentially affecting performance. Disease risk is a structural risk that is constantly present in the feed business.

If the Group fails to respond appropriately to declining feed demand associated with demographic changes, this could affect the performance of the feed business. In addition, if the Group is unable to secure the diverse human resources needed for each business due to a shrinking working-age population or shifts in employment conditions, there is a risk that competitiveness could decline over the long term, adversely affecting performance. The Group positions securing human resources as a key priority for the stable supply of products and services.

There is a risk of reputational damage if the market perceives the Group's response to environmental regulatory tightening, such as the introduction of a carbon tax, or its climate change initiatives, as insufficient. Changes to or strengthening of legal regulations beyond expectations, or growing societal demands for environmental action, could result in costs exceeding projections and affect performance. The Group is actively working to reduce its environmental burden through measures such as energy conservation and greenhouse gas emission reductions.

The Group relies on imports for more than 90% of the raw materials used in compound feed, and raw material costs fluctuate significantly due to changes in grain market prices, exchange rates, and ocean freight rates. If the Group is unable to pass on increases in raw material costs to selling prices during sudden and unforeseen market fluctuations, profit margins could deteriorate and affect performance. In addition, changes in the contributions the Group must pay, as a compound feed manufacturer, to the ordinary and extraordinary compensation funds under the compound feed price stabilization system also affect performance.

There is a risk that large-scale earthquakes, water-related disasters, and other natural disasters, as well as the intensification of extreme weather caused by climate change, could halt the operation of plant facilities or damage infrastructure. There are also concerns about raw material price spikes and quality deterioration resulting from reduced grain production, and the Group's performance could be adversely affected by decreased sales due to production stoppages, restoration costs, increased fund contributions from sharp rises in grain prices, and higher processing costs.