FUKUTOME MEAT PACKERS, LTD.

The Group recorded an operating loss for the eighth consecutive fiscal year in the current consolidated fiscal year, and operating cash flow has been negative for four consecutive fiscal years, giving rise to events that raise material doubt about the going concern assumption. In October 2025, the Group formulated a "Business Restructuring Plan" and is implementing seven improvement measures, including profit expansion through new products, improved profitability of existing businesses, function consolidation, and operational efficiency improvements. The Group has secured financial flexibility through cash and deposits, investment securities, and undrawn balances under overdraft agreements, and has determined that no material uncertainty exists regarding the going concern assumption; however, the progress of plan execution is key to a recovery in business performance.

Livestock products used as raw materials for meat for sale and for Ham & Pressed Ham/Sausage are procured both domestically and internationally, and if livestock disease outbreaks such as ASF, BSE, avian influenza, or foot-and-mouth disease occur, or if import restrictions arise from safeguard measures, there is a possibility of restrictions on procurement volumes or increases in procurement prices. In addition, price fluctuations in crude oil may also cause procurement prices for containers and packaging materials to fluctuate. As countermeasures, the Group is diversifying procurement routes, examining alternative raw materials, and expanding original brand products.

If a serious defect in product quality occurs, such as foreign matter contamination, distribution of mislabeled products, or other quality issues, this may affect business performance and financial condition. As countermeasures, the Group has obtained ISO 22000 certification (Hiroshima Plant, Kumamoto Plant, and Okayama Subaru Plant, certified in March 2022) and external HACCP certification, and is strengthening its traceability system and food defense measures. A rigorous quality assurance framework has been established through the Quality Assurance Department, with ongoing operational improvements underway.

The Group operates its business centered on core systems, and if unforeseen events such as natural disasters, large-scale power outages, or unauthorized access result in information leakage or system failure, this may lead to a decline in trust and affect business performance and financial condition. As countermeasures, the Group has established network security through VPN construction, introduced security software and antivirus software, and stores highly confidential information at a data center.

The Group is subject to numerous legal regulations, including the Food Sanitation Act, the Act on Standardization and Proper Labeling of Agricultural and Forestry Products, and the Act against Unjustifiable Premiums and Misleading Representations, and if laws are revised or newly enacted, or if legal violations occur, this may result in new costs or restrictions on business activities. As countermeasures, the Group gathers information through membership in various industry associations, has assigned legal personnel to the General Affairs and Human Resources Department, and is strengthening its overall legal compliance framework.

Large-scale natural disasters such as earthquakes and typhoons may cause severe damage to facilities at production, logistics, and sales sites, and disruption of transportation networks, cessation of energy supply, or communication outages may disrupt business operations and delay or halt production. As countermeasures, the Group has established the "FRA (Fukutome Ham Risk Management Action) Committee" and set up a disaster response headquarters system for when disasters occur. In addition, to diversify disaster risk away from the Hiroshima Plant and Kumamoto Plant, the Okayama Subaru Plant was newly established and began operations in May 2019.

The Group holds tangible and intangible fixed assets used in its business, and for assets showing indications of impairment, if the total amount of future cash flows falls below book value, it becomes necessary to write down the book value to the recoverable amount and recognize an impairment loss. In particular, under the business environment of eight consecutive fiscal years of operating losses, the risk of impairment due to declining profitability of fixed assets may increase. Should impairment processing become necessary, this would affect business performance and financial condition.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate, and if actual results differ from these assumptions due to changes in the interest rate environment or other factors, or if the assumptions themselves change, this may have a significant effect on retirement benefit expenses and the obligations recognized. In addition, revisions to the retirement benefit system may result in additional burdens. These factors may affect business performance and financial condition.