KADOYA SESAME MILLS INCORPORATED

Sesame seeds are highly dependent on overseas sources, and geopolitical factors, import/export regulation changes, and changes in quarantine conditions in major producing countries may affect raw material price fluctuations and procurement stability. While the basic approach is to pass on increases in raw material prices, there is a risk that profitability could deteriorate if such pass-through is insufficient. As countermeasures, the Group is diversifying procurement sources, exploring new production regions and supply suppliers, and building relationships with leading local suppliers.

The Group positions the U.S. market as a growth area, but changes in trade policy or the introduction of tariff measures may lead to increases in product prices and changes in demand structure, potentially affecting sales volume and profitability. On the other hand, differences in tariff conditions relative to competitors could work favorably. The Group is responding flexibly in both procurement and sales while closely monitoring exchange rate movements and purchasing price trends.

If problems related to the quality or safety of products or services occur due to unforeseeable factors, this may affect business performance and financial condition. In particular, concerns exist regarding increased quality and safety risk associated with in-house production or outsourcing of new-category products as the Group focuses on new business areas. As countermeasures, the Group has obtained and operates under FSSC22000 certification, has established an audit system through the Quality Assurance Department, and has taken out product liability insurance and product recall expense insurance.

If a large-scale natural disaster such as an earthquake or major typhoon occurs, damage to production facilities or business interruption may affect business performance and financial condition. The Group diversifies this risk by operating multiple production sites: the Shodoshima Plant (Kagawa Prefecture), the Sodegaura Plant (Chiba Prefecture), and the Neyagawa Plant (Osaka Prefecture). The Group also mitigates risk through the establishment of a "Natural Disaster and Accident Response Manual" and by taking out insurance covering earthquakes, flood damage, and other events.

Due to Japan's declining birthrate, aging population, and population decline, a decrease in product sales volume is expected as the market contracts, which may affect business performance and financial condition. If no particular measures are taken, the Group recognizes that this risk would materialize roughly in proportion to the degree of population decline. As countermeasures, the Group is pursuing the creation of new demand for Sesame Oil, the development of high-value-added products, the exploration of new businesses, and the expansion into overseas markets.

Due to the declining birthrate and aging population, it may become difficult to secure the human resources that form the foundation for advancing business plans, and failure to secure sufficient personnel could hinder the execution of business plans, potentially affecting business performance and financial condition. The Group is working to retain talent through diversity-conscious hiring, including the recruitment of foreign nationals, the development of a comfortable working environment, and support for talent development and career advancement.

In addition to domestic laws such as the Food Sanitation Act, the Food Labeling Act, and the Product Liability Act, the Group is also subject to U.S. food-related regulations, tax laws, and labor laws due to the establishment of its U.S. subsidiary, and changes in laws or differences in interpretation may result in unexpected legal violations, disputes, or administrative responses. In particular, overseas operations carry risks of disputes and litigation arising from tax treatment and employment/labor matters. The Group continuously strengthens its compliance framework through the development of internal regulations, employee training, and the use of outside experts.

As cyberattack methods become more sophisticated and advanced, unauthorized access, ransomware attacks, system failures, and similar incidents may affect business performance and financial condition through information leaks, business suspension, and responses required with business partners. The scope of impact is broad, as external services and systems related to logistics and core operations are also affected. The Group addresses this risk through continuous improvement of related regulations, security education and training, strengthening of network defense and monitoring systems, and by taking out cybersecurity insurance.

Mitsubishi Corporation, Mitsui & Co., and MC Agri Alliance are major sales agents and major suppliers with significant transaction volumes, and if these transaction relationships were to be terminated, it is expected that securing alternative companies would be difficult. In addition, the Group has accepted outside corporate auditors from these related parties, raising concerns about the impact on independence. However, the fairness of transaction terms has been confirmed through third-party comparisons, and the Group judges the likelihood of the relationships being terminated to be low.

If an infectious disease outbreak occurs, restrictions on business activities due to employee infections or instability in logistics functions, as well as economic downturn associated with a slowdown in economic activity, may affect business performance and financial condition. The Group's policy is to focus on securing a stable product supply system under a company-wide infectious disease response that prioritizes the safety of customers, business partners, and employees above all else.