Morinaga Milk Industry Co., Ltd.

If the subsidy system or tariff system for dairy products under the "Act on Stabilization of Livestock Farming" related to raw milk transactions is significantly changed or abolished, this could directly affect raw material costs and the competitive environment, potentially adversely affecting business performance and financial condition. The Group works closely with relevant government ministries and various organizations, and strives to respond appropriately to changes by supporting dairy farmers on-site through technical assistance and information provision.

The prices and delivery times of major raw materials are affected by domestic and international supply-demand conditions, tariff systems, and exchange rate fluctuations, and rising procurement costs could worsen business performance and financial condition. The Group implements multifaceted measures under the "Morinaga Milk Industry Group Procurement Policy," including purchasing from multiple regions and suppliers, securing alternative raw materials, and using foreign exchange forward contracts and foreign currency settlements.

If quality control in the manufacturing process or supply chain is inadequate, large-scale product recalls or product liability claims may occur, potentially having a material impact on business performance and financial condition. The Group has established the "Morinaga Milk Industry Group Quality Policy" and has built a quality assurance system spanning from manufacturing sites to the entire supply chain.

In overseas M&A, new businesses, and capital investments, if business plans are not achieved due to foreign exchange risk, local political situations, regulations, market uncertainty, and other factors, impairment losses may occur, potentially affecting business performance and financial condition. The Group strives to proactively avoid future impairment risk through strengthening the oversight function for each investment project and conducting regular monitoring and progress checks after M&A transactions.

Tightening regulations or reputational issues related to fossil energy use, plastic use, water risk, and other factors may necessitate a review of product strategy and lead to increased capital investment and energy/raw material procurement costs, potentially affecting business performance and financial condition. The Group manages targets based on ISO14001 under the "Sustainability Mid- to Long-Term Plan 2030" and the "Morinaga Milk Industry Group Environmental Policy," and is also promoting responses to TCFD and TNFD.

If natural disasters such as earthquakes and storms, fires, terrorism, or the spread of infectious diseases occur at business sites, this could result in prolonged business suspension or supply disruptions due to logistics disruptions, potentially affecting business performance and financial condition. The Group prioritizes the protection of human life above all else and strives to build an early recovery system by establishing manuals such as business continuity plans.

Since information systems are utilized across the entire business, including order receiving, ordering, manufacturing instructions, and accounting processes, if a system outage or information leak occurs due to disasters, power outages, computer virus infections, unauthorized access, or other causes, this could lead to an inability to supply products and a decline in social credibility, potentially affecting business performance. The Group has established an Information Security Subcommittee, strengthened hardware aspects such as vulnerability countermeasures and backups, and built an incident response system through the Morinaga Milk Industry CSIRT.

Amid a declining working population due to the falling birthrate and aging population, and increasing talent mobility driven by an active job-change market, if it becomes difficult to secure necessary personnel, resulting in increased turnover and personnel shortages, this could impede business operations and affect business performance and financial condition. The Group is working to develop and retain talent through diversification of job-based and career-track recruitment, an internal job posting system, and career training.

Since the Group holds financial liabilities such as borrowings and financial assets such as deposits, if interest rate levels rise due to future changes in monetary policy or other factors, this could increase procurement costs for new fundraising or refinancing of existing borrowings, potentially affecting financial strategy and business performance. The Group conducts regular analysis of its financial condition and continuous monitoring of the financial environment, and comprehensively examines its approach to fundraising and the level of interest-bearing debt.

The occurrence or prolongation of conflicts or confrontations between nations could disrupt supply chains and logistics, impeding raw material procurement and product supply, and causing surges in energy and raw material prices, potentially affecting business performance and financial condition. The Group strives to reduce the impact through diversification of procurement sources, securing alternative raw materials, diversifying the supply chain, and strengthening risk monitoring.