WELLNEO SUGAR Co., Ltd.

The Sugar segment accounts for approximately 80–90% of revenue, with refined sugar as the core product, creating a structure in which the declining trend in domestic refined sugar consumption and changes in market conditions directly affect business performance. The business is subject to the "Act on Price Adjustment of Sugar and Starch" and other regulations, and is also affected by government agricultural policy and international economic agreements. As countermeasures, the company is promoting cost reduction initiatives, strengthening high-value-added products, and diversifying its portfolio through expansion into business areas beyond Sugar.

The refined sugar industry operates under regulations such as the "Act on Price Adjustment of Sugar and Starch," and changes in government agricultural policy or international economic agreements directly affect the business environment. Delayed responses to changes in regulatory content or policy could adversely affect the earnings structure and competitiveness. The company addresses this by continuously gathering and analyzing information on government agricultural policy and market trends.

Imported raw sugar, the raw material for refined sugar, as well as the energy and materials used in the manufacturing process, are subject to fluctuations in overseas commodity markets and exchange rates. If raw material prices surge sharply due to heightened geopolitical risk, changes in supply-demand balance, speculative market movements, or other factors, and price pass-through cannot be implemented in a timely and appropriate manner, profitability may decline. The company works to reduce this risk through continuous monitoring of market and exchange rate trends, optimization of procurement methods, manufacturing cost reductions, and negotiations with business partners to establish appropriate pricing.

The company is investing in new business areas to achieve sustainable growth in the future, but this involves uncertainties such as changes in market conditions, fluctuations in demand trends, and intensifying competition. If business plans are not achieved or expected returns cannot be secured due to changes in the business environment, the company may recognize impairment losses on fixed assets or investments. The company addresses this through careful review by the investment review committee, management meetings, and the board of directors, as well as periodic monitoring following investment execution.

As a company handling food products, ensuring product safety and quality is a top priority, and there is a risk that quality issues may arise due to problems originating from raw materials or manufacturing processes, or due to unpredictable external factors. If product recalls, damage compensation, or reputational damage occur, this could affect business performance and financial condition. The company is working to develop a quality assurance system and build mechanisms to prevent quality defects before they occur.

Group company Tsukioka Film Pharma Co., Ltd. handles pharmaceutical-related materials, and if issues related to product safety, quality, or side effects occur, there is a risk of product recalls, damage compensation, and reputational damage. Manufacturing and management are carried out under the high quality standards specific to pharmaceuticals, but it is difficult to completely eliminate such issues. If this risk materializes, it could affect the performance and financial condition of the entire group.

Natural disasters such as earthquakes and typhoons, or the spread of large-scale infectious diseases, pose a risk of disrupting production activities and logistics functions, or causing store closures and reduced customer numbers. If lifeline disruptions such as power, gas, and water outages occur simultaneously, business continuity could be seriously impaired. The company addresses this by establishing a risk management structure and promoting an environment that positions employee safety and health as a management foundation.

If a serious accident such as a fire or explosion occurs due to aging equipment and machinery or external factors, this could affect business performance through the suspension of production activities and recovery costs. The company conducts regular equipment inspections and maintenance management, as well as employee safety education and disaster response training, but it is difficult to prevent all accidents in advance. If recovery takes time, there is a risk that the impact on earnings could become prolonged.

The company makes extensive use of information systems in operations such as production, sales, and management, and if unauthorized access, malware infection, or system failures occur, this could lead to business disruption or information leakage. The company has implemented multi-layered countermeasures in accordance with the Ministry of Economy, Trade and Industry's "Cybersecurity Management Guidelines" and related laws, but complete prevention is difficult. If such events materialize, they could affect business performance and financial condition.

Given the nature of the business, which uses agricultural products such as sugarcane as raw materials, there is a risk that climate change could affect raw material procurement. If the company's response to strengthened environmental regulations or changes in social expectations is delayed, this could lead to a decline in product competitiveness and damage to corporate value. The company recognizes climate change as an important management issue and is promoting sustainability initiatives. Details are described in the sustainability-related disclosures (climate change-related).