TAKIZAWA HAM CO.,LTD.

There is a concern that global supply-demand changes, foreign exchange rate movements, outbreaks of diseases such as BSE, avian influenza, and foot-and-mouth disease, and the invocation of safeguard measures against imported beef and pork may lead to restrictions on procurement volumes or increases in procurement prices. If significant fluctuations occur in raw material prices, this may affect business performance and financial condition. As a countermeasure, the company diversifies procurement across various production areas to secure stable volumes and avoid concentration on specific suppliers.

Product incidents may occur due to raw material issues, contamination during the manufacturing process, or allergen problems. If a large-scale product incident occurs, this may affect business performance and financial condition due to the incurrence of substantial costs such as product recalls and a decline in net sales. The company addresses this by working to produce safe food under FSSC and ISO22000 certification, and by enhancing facilities, strengthening its management system, and taking out product liability insurance, among other measures.

The company is subject to a wide range of laws and regulations, including the Food Sanitation Act, the Product Liability Act, the JAS Act, and environmental and recycling-related laws, and business activities may be restricted by amendments to or strengthening of existing regulations or the enforcement of new regulations. The company thoroughly emphasizes compliance, but future regulatory changes may affect business performance and financial condition.

The company builds and operates an internal control system related to financial reporting centered on the Audit Department; however, if the system does not function effectively and a material weakness requiring disclosure exists as of the fiscal year-end, this may affect the reliability of financial reporting. Deficiencies in internal controls also carry the risk of undermining investor confidence.

Working capital is procured through borrowings from financial institutions, and if financial market instability or fluctuations in interest rate levels occur, funding costs may increase. In a rising interest rate environment, this may affect business performance through increased financial expenses.

If owned fixed assets and leased assets become idle, or if the market value of land declines significantly, impairment processing may become necessary. If it is determined that the book value cannot be recovered through future cash flows, an impairment loss must be recognized, which may affect business performance and financial condition.

The company may become subject to lawsuits, disputes, or other legal proceedings in connection with its business, and if significant litigation is filed in the future, this may affect business performance and financial condition. Although the presence of specific pending disputes is not explicitly disclosed in the Annual Securities Report, given the nature of the food manufacturing industry, there is a latent litigation risk arising from product incidents and similar causes.

If it is determined that continuing business activities in a business area is difficult due to a large-scale disaster such as an earthquake or the spread of an infectious disease, the company may take measures to suspend business activities. Suspension of business may lead to a loss of net sales and the continued burden of fixed costs, potentially having a material impact on business performance.

Operating losses have continued to occur since the previous consolidated fiscal year, and events or conditions exist that raise material doubt about the going concern assumption. As countermeasures, the company is promoting four initiatives: strengthening product development capabilities, improving productivity, reforming its cost structure, reducing procurement risk, and securing human resources. In the current consolidated fiscal year, the company recorded positive operating cash flow, and based on the status of secured cash on hand, it has judged that there is no material concern regarding cash flow; however, the risk remains that a delay in the recovery of business performance could have a material impact on financial condition.