NAKAMURAYA CO., LTD.

The Company has established an integrated quality assurance system spanning planning and development, raw material procurement, production, and sales, and has introduced food safety standards such as FSSC22000. However, if a food safety incident occurs that exceeds the scope of these initiatives, it may affect business performance and financial position. Although the Analysis and Evaluation Technology Research Center conducts allergen testing and residual pesticide testing to strengthen self-management systems, complete elimination of such risks is difficult.

For raw materials used in mainstay products, price fluctuation risk is mitigated through securing stable suppliers, planned inventory stockpiling, advance price negotiations, and appropriate foreign exchange settlement. However, if unforeseen circumstances arise, such as unusual weather or natural disasters in production areas, import restrictions, or speculation-driven price surges beyond expectations, this may affect business performance and financial position. Raw materials dependent on overseas imports are particularly vulnerable, and there is a risk that rising costs will squeeze profitability.

Raw materials for some products are procured from overseas, and if procurement becomes difficult due to various country risks such as political, economic, or social conditions, the Company may be forced to suspend supply of certain products. For raw materials where securing alternative procurement sources is difficult, there is a risk that business continuity could be directly affected.

Many products are outsourced for production to partner companies, and if a contracted partner is unable to conduct sufficient production, stable product supply may be undermined, affecting business performance and financial position. In addition, sales to certain customers account for a high proportion of net sales, and if transactions decrease substantially due to changes in the sales policy of such customers, there is a risk of a material impact on business performance.

In addition to mainstay products, the Company sells many seasonal products, and abnormal weather such as cool summers, warm winters, or prolonged rainy periods may not only reduce sales performance but also cause excess inventory due to disruptions in product supply, affecting business performance and financial position. Long-term trends in climate change carry the risk of altering the very structure of demand for seasonal products.

If natural disasters such as earthquakes or typhoons occur at retail stores and manufacturing plants nationwide, business continuity may be disrupted. Although measures such as disaster prevention manuals, disaster drills, safety confirmation systems, and BCP formulation have been implemented, there may be cases where natural disasters exceed the scope anticipated by crisis management measures, which may affect business performance and financial position.

Part of the funds required are procured through borrowings from financial institutions, and if rapid and substantial interest rate fluctuations occur, increased interest burden may affect business performance and financial position. Although countermeasures are continuously implemented, in a scenario of sharp interest rate increases there is a risk that rising financial costs will squeeze profitability.

The Company holds available-for-sale securities, and all securities with market value are measured at fair value. Accordingly, if significant fluctuations in market value occur, this may affect business performance and financial position through the recognition of valuation losses, among other effects. In a deteriorating market environment, there is a risk that the value of held securities could be substantially impaired.

Information related to production, sales, and management is managed by computer systems, and maximum measures are implemented to prevent virus infection, hacking, and information leakage. However, unforeseen events could cause system failures or external leakage of internal information. In such cases, this may affect business performance and financial position due to the incurrence of response costs and disruption to business operations.

The Company operates a commercial building leasing business, and if demand for commercial buildings, which is highly susceptible to economic conditions, deteriorates due to an economic downturn, this may adversely affect the real estate leasing business and lead to a decline in the value of owned assets. A decrease in rental income poses a risk of undermining the profitability of this business, which contributes to diversification of the Company's earnings base.