KOIKE-YA Inc.

As consumer interest in food safety increases, quality issues that exceed the scope of the Group's efforts or industry-wide quality issues, if they occur, may adversely affect business performance and financial condition. The Group has built a food safety management system through the introduction of an audit and guidance system based on the AIB International Inspection Unified Standards and the acquisition of FSSC22000 certification, but industry-wide risks such as the acrylamide issue also remain latent. As countermeasures, the Group continuously works to strengthen collaboration with suppliers and address foreign object contamination.

There is a risk that rising grain prices will drive up the cost of edible oil and corn snack raw materials, and that surging crude oil and other energy prices will impact fuel costs and packaging material prices, thereby pressuring business performance. In particular, escalating tensions in the Middle East significantly affect crude oil prices, and if these cost increases cannot be absorbed through internal efforts or passed on to selling prices, business performance and financial condition may be adversely affected. The Group strives for stable raw material procurement by maintaining favorable trading relationships with suppliers, but there is also a risk of potato supply shortages and rising procurement prices due to unexpectedly poor harvests.

There is a risk that during periods of yen appreciation, the yen-converted amount of overseas revenue will decrease, adversely affecting profit margins, while during periods of yen depreciation, cost pressure will increase due to higher raw material costs. The Group has established regulations regarding financial derivative transactions and closely monitors exchange rate movements, but if measures prove insufficient due to uncertainty in international conditions or increased market volatility, financial condition and business results may be adversely affected.

In addition to the impact of abnormal weather on sales and profits, there is a risk of direct and indirect damage from large-scale natural disasters, such as equipment damage, deterioration of social infrastructure, material supply shortages, and logistics disruptions. Furthermore, if a carbon tax is fully introduced, an impact on business costs is expected, and the spread of infectious diseases such as COVID-19 could disrupt production and sales activities. The Group addresses these risks through appropriate production and inventory management based on weather forecasts, as well as by improving work-from-home environments and strengthening factory hygiene management, but it may not be able to fully cope with situations that far exceed expectations.

With business expansion in Taiwan, Vietnam, Thailand, the United States, and other regions, country risk has relatively increased due to local political, economic, and social changes as well as the outbreak of terrorism or war. In particular, the possibility of an armed conflict between China and Taiwan is recognized as a new risk, and if it materializes, it could affect business activities worldwide, including in Taiwan. If such risks materialize, business performance and financial condition may be adversely affected due to supply chain disruptions, equipment damage, difficulty in securing personnel, and difficulty in continuing operations.

The Group gathers information, disseminates it internally, and conducts training to comply with laws and regulations in Japan and overseas, but if violations of various laws and regulations occur, business activities worldwide, including in Japan, may be affected due to penalties or license revocation. Responding to changes in the regulatory environment of each country amid global business expansion remains an ongoing challenge.

Because the Group uses various information systems to improve business and operational efficiency, if a system failure or leakage of confidential information occurs due to cyberattacks, disasters, or other unforeseen events, business performance and financial condition may be adversely affected through the suspension of information systems, decline in social credibility, and incurrence of response costs. With the advancement of digitalization, continuous strengthening of countermeasures against cyber risk is required.

Maintaining domestic logistics and transportation systems has become a challenge due to the declining labor force population and the expansion of the e-commerce market, and if transportation costs surge or measures are delayed, business performance and financial condition may be adversely affected. The Group promotes measures such as encouraging pallet transportation, reducing waiting times, joint delivery, and improving cargo handling efficiency, and plans to utilize the Chubu plant, scheduled to begin operations in 2025, as a nationwide distribution hub to improve logistics efficiency. The Group is also advancing value chain optimization to flexibly respond to climate change and demand fluctuations.