Hayashikane Sangyo Co.,Ltd.

The Group has a high degree of dependence on Heishoku Co., Ltd. (handling aquaculture feed, accounting for 10.2% of consolidated net sales) and Umios Co., Ltd. (handling fish paste products and aquaculture feed, accounting for 12.0% of consolidated net sales), with the two companies combined accounting for approximately 22.2% of net sales. If any disruption occurs in these transactions, a significant decline in sales could have a material impact on business performance. The Group is working to reduce this risk through diversification of sales countries and expansion of new business partners.

The Group handles large volumes of agricultural, livestock, and marine products in both sales and procurement, creating a risk of significant price fluctuations due to supply-demand conditions, abnormal weather, natural disasters, and disease outbreaks. If price fluctuations exceed expectations, a decline in net sales or an increase in raw material costs could have a significant impact on business performance. The Group strives to diversify this risk through diversification of sales and procurement sources, acquisition of new distribution routes, and diversification of transaction forms.

Sales of compound feed involve long collection periods, and some customers, including marine and livestock product producers with limited creditworthiness, are included among the Group's sales destinations. If the business performance of these customers deteriorates due to a decline in marine or livestock product market prices, natural disasters such as typhoons or red tide, or disease outbreaks such as African swine fever or avian influenza, a large amount of trade receivables could become difficult to collect. The Group addresses this through thorough credit management and the recording of certain allowances for doubtful accounts, but if bad debts significantly exceed these allowances, business performance could be significantly affected.

The Group is affected by foreign exchange rate fluctuations in the export of products and import of raw materials, and a prolonged trend of yen depreciation in particular could cause increased raw material costs to have a significant impact on business performance. The Group hedges against risk in foreign-currency-denominated transactions through forward foreign exchange contracts, but complete risk avoidance is difficult.

The Group procures necessary funds through borrowings from financial institutions and finance leases. If interest rates rise due to future changes in interest rate conditions or deterioration in the Group's creditworthiness, an increase in interest expenses could affect business performance. The Group is working to reduce its reliance on interest-bearing debt by reducing the balance of borrowings.

The Group has established a quality assurance system through ISO 22000 certification and coordination among the Quality Control Committee, Quality Assurance Department, and quality control divisions at production plants. However, if events beyond expectations occur, or if food safety problems affecting society as a whole arise, this could result in a loss of trust or reputational damage leading to a decline in net sales. In addition, if an unforeseen accident during the manufacturing process results in a large-scale product recall or substantial product liability claims, this could have a significant impact on business performance.

The Group operates food and feed manufacturing plants, hog farms, and eel farms primarily in the western Japan region. In the event of a large-scale natural disaster such as a typhoon or earthquake, business activities could be delayed or suspended, and substantial recovery costs could be incurred. The Group has established a Crisis Management Regulation and a response system for emergencies, but if business partners also suffer greater-than-expected damage, the impact on business performance could be significant.

At farms operated by the consolidated subsidiary Kirishima Dream Farm Co., Ltd., there is a risk of disease outbreaks such as African swine fever, and an unprecedented viral infection resulting in the mass culling of fattening pigs could have a significant impact on business performance. In addition, at major aquaculture farms that are supplied with aquaculture feed, unexpected environmental changes such as elevated water temperatures or red tide could cause mass mortality of farmed fish, potentially leading to a suspension of feed supply. The Group has implemented disease prevention measures and preventive/medical response by staff at Aqua Medical Lab, but it is difficult to avoid all such risks.

Under its Compliance Management Declaration, all officers and employees are working to ensure thorough compliance with laws and regulations and corporate ethics. However, it may not be possible to completely avoid the risk of compliance violations, including individual misconduct, or damage to social credibility. Should a violation of laws or regulations occur, the resulting loss of social trust and additional costs could have a significant impact on business performance.