ASMO CORPORATION

Because the ASMO Trading business centers on sales of beef, pork, and similar products, earnings have in the past fluctuated significantly due to outbreaks of livestock epidemics and the invocation of safeguard measures targeting imported beef and pork. Although the company is working to expand the variety of products handled and develop new procurement routes, a sharp change in the price or volume of products handled could affect its earnings. In the nursing care service business as well, fluctuations in the number of users and the volume of services provided directly affect earnings.

Raw materials (beef, pork, etc.) account for a major portion of sales in the ASMO Trading business, and because differentiation from competitors is difficult, there is a risk of becoming caught up in severe price competition. The company seeks to differentiate itself by focusing on Mexican beef, where competition is limited, and by diversifying its BtoC sales routes through mail order, but the structural dependence on specific products continues.

Procurement prices for food ingredients can fluctuate significantly due to weather conditions in Japan and overseas, import restriction measures, and exchange rate movements. Should procurement prices change sharply due to livestock epidemic outbreaks, disruptions in global distribution systems, or poor harvests of crops and livestock feed, the company's earnings could be affected. While measures such as increasing domestic production and processing and diversifying procurement routes have been implemented, the company recognizes that a certain degree of risk is unavoidable.

The ASMO Food Service business operates restaurants and provides catering services, and if a food poisoning incident occurs, business suspension orders from public health authorities could affect earnings. The company states that current risk is kept low through thorough day-to-day management of ingredient quality and hygiene, but food poisoning incidents in related industries could also be a contributing factor. Response manuals have been prepared in case such an incident occurs.

The ASMO CATERING (HK) business operates outlets overseas, including in Hong Kong, and earnings could fluctuate if competing outlets open within the same trading area amid intensifying competition with local dining establishments. The company strives to obtain early information on local conditions and seeks to differentiate itself through flexible store expansion and menu composition.

Ongoing logistics delays caused by climate change and instability in world affairs continue to disrupt the stable supply of products, and fluctuations in procurement prices are expected across the group as a whole. Should facilities become inoperable due to large-scale natural disasters such as earthquakes or tsunamis, war, terrorism, epidemics, or similar events, this could lead to a decline in sales and the incurrence of extraordinary expenses. The company's policy is to identify the causes of external factors and work to minimize their impact.

Each business is subject to general laws such as the Companies Act, the Financial Instruments and Exchange Act, and the Labor Standards Act, as well as various industry-specific regulations, and new costs are expected to arise when regulations are tightened. In particular, the ASMO Care Service business is subject to the Long-Term Care Insurance Act, and legal revisions to long-term care insurance fee schedules could directly affect revenue. The company's policy is to minimize this risk by expanding services outside the scope of long-term care insurance.

If impairment processing becomes necessary for owned fixed assets due to earnings fluctuations or other factors, this could affect earnings. Currently, impairment processing has been concentrated in the ASMO CATERING (HK) business, stemming from deteriorating profitability caused by intensifying competition and external factors. The company aims to curb impairment losses by promptly establishing a profitable business model with a view to conditions normalizing.

Securing and developing management personnel, managers, qualified specialists, and frontline staff is essential, and if recruitment of personnel is insufficient, this could lead to a decline in service quality and affect earnings. The ASMO Care Service business states that it has prioritized personnel training and retention as the most important issue, and as a result has succeeded in achieving staff retention and stable service provision. The company's policy is to reduce this risk through continued improvements in compensation, training, and working environment.

All businesses work to prevent accidents through employee training and adherence to operational manuals, but if an accident occurs during service provision and results in food poisoning or the spread of infectious disease, this could affect business operations and earnings. While various measures keep the risk of accidents low, the company recognizes that, by its nature, the risk cannot be said to be zero. Response manuals have been prepared to prevent loss of credibility in the event such an incident occurs.