YUTAKA FOODS CORPORATION

More than 60% of net sales are derived from sales to Toyo Suisan Kaisha, Ltd., and changes in that group's sales strategy, consolidation or reorganization of its production bases, or restructuring of its efficient production and logistics system may have a material impact on the Company's business results and financial condition. The Company serves as a production base for the Chubu region, undertaking contract manufacturing of instant noodles, chilled foods, and other products, and possesses many years of seasoning manufacturing technology and equipment; however, its scope for autonomous response to changes in the group's policy is limited.

There is no guarantee that complaints or product recalls will not occur for any of the Company's products, and complaints involving substantial costs may affect business results and financial condition. Although the Company carries product liability insurance, there is no guarantee that the insurance will fully cover the final amount of any compensation.

Weather fluctuations such as extremely hot or cool summers may affect net sales, and if manufacturing facilities are damaged by large-scale natural disasters such as earthquakes or typhoons at production sites, this may result in decreased sales due to reduced manufacturing capacity and increased facility repair costs. Although the Company implements quality control based on the FSSC22000 standard, it is not possible to completely eliminate natural or man-made problems.

The outbreak of new infectious diseases or food-related issues such as pesticide residue problems may cause sharp increases in procurement prices or a slowdown in consumption, thereby affecting net sales and other results. The Company strives to provide safe and reliable products through quality control based on the FSSC22000 standard, but it is difficult to completely shut out risks arising from the external environment.

The Company is subject to a wide range of legal regulations, including the Food Safety Basic Act, the Food Sanitation Act, the Product Liability Act, environmental and recycling-related laws, and the Act against Unjustifiable Premiums and Misleading Representations, and the strengthening or amendment of regulations, or the establishment of unforeseen new regulations, may affect business results and financial condition. Although the Company strives for legal compliance under its compliance-oriented management, responding to future changes in the regulatory environment remains a challenge.

Regardless of whether any violation of laws has occurred, the Company may be subject to litigation concerning matters such as product liability and intellectual property rights, and either the filing of a lawsuit itself or its outcome may result in a loss of customer trust, thereby affecting business results and financial condition. The Company addresses this through enhancement of internal control functions, strengthening of compliance-oriented management, and cooperation with retained legal counsel, but the risk cannot be completely eliminated.

Fluctuations in the market value of securities held for purposes other than trading may affect business results and financial condition. All securities with market value are marked to market, and there is a risk of valuation losses arising when market conditions deteriorate.

In the seasoning business, creating added value based on taste and smell is at the core of operations, making personnel with advanced knowledge, skill, and experience essential; failure to recruit and develop such personnel in a timely manner may affect business results and financial condition. Although the Company has established a policy for recruiting and developing personnel well-versed in technology, securing specialized personnel remains an ongoing challenge.

With labor-intensive lines in its manufacturing processes, there is a risk that the Company may not be able to secure personnel for manufacturing sites as planned due to Japan's declining working-age population and intensifying competition for talent. In addition, if changes in the working environment occur due to responses to legal amendments such as minimum wage increases, this may affect the Company's business results and financial condition.