ROKKO BUTTER CO., LTD.

Since the majority of natural cheese and nuts are procured from overseas, raw material prices may fluctuate due to climate changes in overseas production regions or shifts in international supply-demand balance, potentially affecting business performance. While the Company addresses this by carefully considering purchasing contract methods and timing, price fluctuation risk cannot be completely eliminated.

Since the main raw materials, natural cheese and nuts, are procured from overseas, a weaker yen could raise costs and adversely affect business performance. The Company hedges risk on a portion of foreign-currency-denominated liabilities through derivative transactions such as forward exchange contracts, but it is explicitly stated that this does not avoid all risk.

The Group faces intense competition in many markets, and price competition may affect business performance. In addition, if tariff levels on dairy products are lowered through trade liberalization negotiations such as WTO agricultural negotiations, TPP, FTAs, and EPAs, direct imports from overseas may increase, further intensifying the competitive environment. The Company strives to secure a competitive advantage through the development and launch of new products.

As consumer concern about food safety and security grows, not only quality issues specific to the Group but also quality issues or negative rumors affecting the food industry as a whole could impact business performance. The Company has obtained certification under the food management system FSSC 22000 at all plants, and strives to strengthen quality control through independent inspection systems for raw materials and products, as well as traceability from raw material procurement through the manufacturing process.

If production facilities are damaged by a large-scale natural disaster such as an earthquake and operations are suspended for an extended period, this could disrupt product supply and affect business performance. In addition, the outbreak of unknown infectious diseases, such as COVID-19, could affect business performance through the deterioration of economic activity and economic stagnation.

The Company employs a lump-sum retirement benefit plan, a defined benefit corporate pension plan, and a defined contribution corporate pension plan. For the defined benefit corporate pension plan, investment performance and asset valuation of pension assets, as well as the outcome of the plan, may affect business performance. Consolidated subsidiaries also employ lump-sum retirement benefit plans, so the Group as a whole bears risk related to retirement benefits.

In November 2025, the Company established QBB ASIA COMPANY LIMITED in Vietnam to manufacture and sell cheese, and plans to make large-scale capital investments there. If the expected expansion in production volume cannot be achieved due to deterioration in market conditions or the business environment, profit margins may decline due to the burden of fixed manufacturing costs, mainly depreciation. In addition, if the estimated future cash flows decrease due to idling of existing facilities or a decline in utilization rates, there is a risk that an impairment loss on fixed assets could occur.

The Company depends on specific business partners for product sales and procurement of major raw materials, and these trading relationships are currently stable. However, if a sudden change occurs in such trading relationships or contract terms are significantly altered, this could affect business performance through changes in sales or procurement channels, or fluctuations in transaction volume and prices.

Although the Company has implemented thorough information management systems and security measures such as maintenance, protection, and anti-virus measures against system failures, if a system failure occurs due to unforeseen circumstances, it could affect business performance. The risk remains that complete protection against threats such as cyberattacks and internal misconduct cannot be guaranteed.

If tariff levels on dairy products are lowered through negotiations and the entry into force of agreements such as WTO agricultural negotiations, TPP, FTAs, and EPAs, this would provide a cost-reduction benefit in the procurement of raw material cheese, while on the sales side, there is a risk that direct imports from overseas would increase, significantly changing the competitive environment. Trends in trade policy may directly affect the Group's business structure.