BOURBON CORPORATION

The Company relies heavily on overseas procurement for many of its raw materials, creating a risk that purchase prices could surge beyond expectations due to global extreme weather events, heightened geopolitical risks, strengthened economic sanctions, sharp foreign exchange fluctuations, and international price volatility driven by speculative capital inflows. Should these factors combine, profitability could decline significantly, potentially affecting business performance and financial condition. While the Company works with suppliers to maintain stable procurement and stable pricing, preparing for situations that exceed the scope of such measures remains a challenge.

The Company has strengthened its inspection systems for hazardous substances such as pesticide residues, harmful chemicals, and radioactive contamination, and has implemented traceability systems and food defense measures. However, if a food safety incident occurs that exceeds the scope of these measures, it could result in reduced sales and production due to a decline in social credibility, as well as product recall costs. Although the Company complies with relevant laws and regulations such as the Basic Act on Food Safety, the Food Sanitation Act, and the Food Labeling Act, there is a risk that unforeseen events could significantly impair profitability.

Production plants are concentrated in Niigata Prefecture, creating a risk that a large-scale natural disaster affecting a wide area could simultaneously damage multiple plants, resulting in a situation exceeding the assumptions of the business continuity plan (BCP). While the Company has formulated a BCP that includes seismic reinforcement, introduction of safety confirmation systems, and the ability to supply products from other plants, the geographic concentration heightens vulnerability. If plant operations are suspended for an extended period, this could have a material impact on business performance and financial condition.

The Company works to respond to changing consumer preferences and to develop health-conscious products, but there is a risk that new products developed through capital investment may fail to meet consumer needs, resulting in sales plans not being achieved. Powerful new product launches, price reductions, increased promotional spending, and enhanced advertising by new entrants and competitors, both domestic and overseas, could cause the Company to lose its competitive advantage, leading to lower profitability.

There is a risk that information systems could fail due to targeted attack emails, unauthorized access using technology beyond what is anticipated, or computer virus infections. Should a system failure occur, it could delay or halt overall corporate activities and lead to the leakage of internal or personal information, potentially affecting business performance and financial condition. While the Company has implemented measures such as antivirus software and unauthorized access prevention, risks associated with increasingly sophisticated technology continue to exist.

The Company holds substantial tangible fixed assets due to continuous capital investment aimed at new product development, quality improvement, and productivity enhancement. If future cash flows generated by these assets decline significantly due to changes in the business environment or other factors, the Company may need to recognize impairment losses, which could affect business performance and financial condition.

In the confectionery industry, production volumes are trending downward while import values are reaching record highs for many product categories, meaning changes in import/export tariff rates could significantly affect business activities. In addition to sluggish consumption stemming from Japan's declining birthrate and aging population, there is a risk that difficulty in securing the labor force necessary to conduct business could affect business performance and financial condition.

The Company is subject to a wide range of legal regulations, including the Companies Act, the Financial Instruments and Exchange Act, the Act against Unjustifiable Premiums and Misleading Representations, the Product Liability Act, the Unfair Competition Prevention Act, and environmental and recycling-related laws and regulations. Should a legal violation occur that exceeds the scope of the Company's compliance efforts, this could affect business performance and financial condition. In addition, while the Company takes care not to infringe on third-party intellectual property rights in research, development, and product development, a similar risk exists should the Company become subject to an unforeseen intellectual property infringement lawsuit.

The Company has established an infectious disease response committee, conducts production activities based on strict hygiene management standards, and has put in place infection prevention systems including the promotion of telework and restrictions on business travel. However, should an unknown new infectious disease spread widely, there is a risk that reduced demand and disruptions to logistics and distribution systems could hinder production and sales activities. Should such a situation occur, it could affect business performance and financial condition.

The Company is pursuing overseas business expansion, but there is a risk that changes in local political and economic conditions, unforeseen enactment or revision of laws and regulations, outbreaks of infectious disease, or natural disasters could result in restrictions on local employees' operations, limitations on sales activities, or the closure of production plants. Should profitability decline as a result, this could affect the business performance and financial condition of the Group.