J-OIL MILLS, INC.

Because major raw materials such as soybeans and rapeseed are procured from overseas, fluctuations in grain market prices, foreign exchange rates, and ocean freight rates directly affect procurement costs. During the current period, raw material costs for soybeans, rapeseed, and palm oil remained at elevated levels, and the yen continued to trade at its weakest levels against the dollar in 30 years. Global inflation concerns stemming from U.S. tariff policy and heightened tensions in the Middle East have added further pressure, raising concerns over increased procurement costs and stable sourcing. In response, the Company hedges through commodity futures transactions and foreign exchange forward contracts, jointly operates the oil extraction process through its joint venture with Nisshin OilliO Group, "Seiyu Partners Japan" (an oil-pressing joint venture), and continues to implement ongoing product price revisions.

There is a risk that the medium- to long-term contraction of the domestic oils and fats market due to the declining birthrate, aging population, and population decline, along with changes in demand structure accompanying the diversification of consumer lifestyles, could reduce the competitiveness of core businesses. In addition, if consolidation and restructuring among customers proceed amid intensifying competition, changes in trading partners' procurement and sales policies could affect sales share and profitability. In response, the Company is working on developing high-value-added products and services, expanding into overseas markets, and developing new businesses including non-edible fields such as SAF (Sustainable Aviation Fuel). This risk is a newly established management risk for FY2026 (ending March 2026).

Large-scale earthquakes, typhoons, torrential rains, fires, explosions, and other accidents, as well as the spread of infectious diseases, may cause human casualties, facility damage, operational shutdowns, and supply chain disruptions, potentially impeding stable supply. This was selected as a focus discussion theme by the Management Risk Committee in FY2025 and continues to be a focus discussion subject in FY2026 (ending March 2026) as well. In response, the Company is reviewing and strengthening its crisis management system, diversifying production and supply systems through a review of its Business Continuity Plan (BCP), and developing infectious disease response systems through the promotion of remote work.

Health hazards, legal violations, foreign matter contamination, food mislabeling, data falsification, and production equipment failures caused by aging facilities that halt product supply could damage brand trust and impact the financial position and business results. This was selected as a focus discussion theme by the Management Risk Committee in FY2025, and in the current period, "production equipment failure due to aging facilities, etc." has been newly added as a specific risk. In response, the Company operates under ISO9001 and ISO22000/FSSC22000 certification, conducts supplier quality audits, maintains traceability systems, and promotes a medium- to long-term renewal plan based on preventive maintenance.

Increasingly diverse and sophisticated cyberattacks (unauthorized access, ransomware, etc.) that result in information leakage, data tampering, or the shutdown of ICT infrastructure and production lines could affect business results and the fulfillment of social responsibilities. This was selected as a focus discussion theme by the Management Risk Committee for FY2026 (ending March 2026), reflecting recognition of increasing urgency and likelihood of occurrence. In response, the Company has implemented intrusion prevention systems, strengthened its CSIRT, is promoting a transition to a zero-trust security infrastructure, and continuously conducts security education for all employees.

Concerns include increased production costs due to stricter CO2 emission regulations, decline in corporate value due to insufficient environmental measures or legal violations, and loss of social trust due to inadequate response to biodiversity and water resource risks. In the current period, "water risk" has been added as a new element, reflecting the need to respond to growing social demands regarding natural capital and biodiversity. In response, the Company is pursuing ISO14001 certification at each plant, initiatives for energy conservation, CO2 reduction, plastic-free measures, and effective use of water resources, as well as promoting understanding of natural capital conditions and biodiversity conservation.

As overseas business expansion is a key management objective, changes in laws and tax systems, geopolitical risks (conflicts, terrorism, shifts toward protectionist trade policies), and natural disasters may affect the financial position, business results, and employee safety. In particular, the impact of changes in the economic environment due to heightened tensions between nations and shifts toward protectionist trade policies has increased in recent times. In response, the Company collects risk information using external consultants, overseas information services, and information from the Ministry of Foreign Affairs, and strengthens internal controls and conducts regular audits at overseas subsidiaries.

Rising market interest rates leading to increased interest burden, difficulty in fundraising due to financial market turmoil, and deterioration in fundraising conditions due to declines in credit ratings or ESG evaluations may affect the financial position and business results. In the current period, "decline in evaluation of ESG initiatives" has been added as a new element, reflecting the growing importance of sustainability response. In response, the Company reduces interest rate fluctuation risk by combining fixed-rate financing, monitors indicators such as the equity ratio and D/E ratio, improves capital efficiency by reducing cross-shareholdings, and strengthens ESG information disclosure.

With respect to tangible and intangible fixed assets, including goodwill acquired through corporate acquisitions, if impairment losses arise due to declines in fair value, rising interest rates, or significant underperformance of acquired businesses relative to plan, this may affect the financial position and business results. In response, the Company deliberates on the appropriateness of acquisition prices through its Investment Committee and Management Committee, conducts regular monitoring toward the realization of post-acquisition synergies, and performs periodic reviews of future cash flow estimates to identify early signs of impairment.

Amid the declining birthrate, aging population, shrinking labor force, and diversification of values, if the securing, development, and appropriate placement of highly specialized talent, next-generation talent, and diverse talent do not proceed as planned, this could lead to a decline in R&D and technical capabilities and a slowdown in business operations. In addition, labor troubles such as workplace accidents, violations of labor-related laws, and harassment could result in claims for damages and a decline in social trust. In response, the Company promotes human capital management, DE&I initiatives, health management, and continues to set occupational safety and health targets and conduct safety and health education.