YOKOREI CO.,LTD.

Rising temperatures may increase power costs (electricity charges) required for cooling inside cold storage warehouses, and electricity rate hikes associated with global warming regulations could put pressure on business performance. In the Food Sales Business, there is a risk that changes in the natural environment or the outbreak of viruses and pests could reduce catch volumes and production output, while rising procurement costs due to increased feed costs could disrupt product supply. As countermeasures, the company conducts risk assessments referencing TCFD recommendations and has formulated quantitative targets of reducing greenhouse gas emissions by 40% by 2030 (compared to 2015) and achieving a natural refrigerant adoption rate of 80% or higher.

Large-scale natural disasters such as typhoons, heavy rain, floods, and earthquakes could damage cold storage warehouse facilities and equipment, increasing repair costs and potentially halting logistics functions. In the Food Sales Business as well, there is a risk of impact on performance through reduced catch volumes, aquaculture production, or reduced harvests of agricultural and livestock products. As countermeasures, the company has formulated a disaster BCP, established a crisis management framework, and is promoting the construction of disaster-resistant cold storage warehouses.

The spread of infectious diseases such as COVID-19 could, in the Cold Storage Warehousing Business, lead to reduced storage volumes due to shippers strengthening inventory management and disruptions in logistics, with the risk of business suspension or reduction if employees become infected. In the Food Sales Business, there is a possibility that reduced consumption, poor sales in the restaurant industry, and weak performance at procurement sources and production sites could affect business results. As countermeasures, in addition to thorough infection prevention measures, the company is promoting labor and workforce savings through the introduction of cargo navigation systems and truck reservation acceptance systems.

Changes in economic conditions and the business environment could, in the Food Sales Business, lead to deteriorating performance due to soaring procurement prices for goods and reduced consumption, as well as risks from industry restructuring. In the Cold Storage Warehousing Business, while there are concerns that shippers strengthening inventory management could reduce storage volumes, there is also a possibility of a supply shortage arising from increased storage demand due to growing demand for frozen foods. Changes in the business environment constitute a complex risk that can have opposing effects on the two business segments.

Resource competition arising from population explosion overseas and changes in dietary habits could significantly impact business performance if procurement and sales prices fluctuate substantially. In particular, major products such as marine and livestock products are highly susceptible to international supply-demand trends, creating a risk that price fluctuations could directly hit profitability. As countermeasures, the company is working to diversify procurement sources through the development of new procurement destinations and production sites and the strengthening of the aquaculture business, as well as optimizing inventory to spread risk.

If profitability declines due to changes in the business environment or the occurrence of natural disasters, impairment or disposal of fixed assets may occur, potentially having a material impact on business performance. Since the Cold Storage Warehousing Business is a capital-intensive industry holding large-scale fixed assets, the financial impact of declining utilization rates or asset value impairment is significant. The disclosure in the securities report provides only limited description of specific countermeasures, with monitoring of the business environment being the primary management approach.

Since the Cold Storage Warehousing Business and Food Sales Business are operated through a nationwide online system, if equipment failures due to disasters or unauthorized access/computer viruses cause the business system to stop or lead to information leaks, it may become difficult to provide services to business partners or operate the business. As countermeasures, the company has reorganized its systems department into an IT Management Department and established an IT Strategy Planning Section to strengthen its structure, while conducting regular server renewals and implementing appropriate security measures.

The company executes investments and loans, including loans receivable, to strengthen relationships with overseas trading partners and secure stable resource procurement, and there is a risk that performance could be affected if terrorism, political instability, economic fluctuations, or unexpected changes in laws and regulations occur in countries where it operates. After making an investment or loan, the Business Comprehensive Planning Department regularly reports management plans, budget-to-actual analysis, and financial results to the Board of Directors, and the company also regularly monitors held investment securities and reviews whether to continue holding them. The company seeks to avoid concentration risk by expanding procurement and sales routes and increasing outsourced processing, but geopolitical risk cannot be completely eliminated.

Since export and import transactions of goods and raw materials constitute part of the company's main business, it is exposed to foreign exchange fluctuation risk in foreign-currency-denominated transactions. While the company seeks to mitigate this risk through forward exchange contracts, if sudden currency fluctuations occur, such transactions may not fully cover the risk, potentially affecting business performance. In particular, during periods of yen depreciation, rising import procurement costs pose a risk of squeezing profitability in the Food Sales Business.

In the Cold Storage Warehousing Business, "employee operations," in which employees themselves perform in-warehouse work, is a strength of the business, making the recruitment and development of excellent personnel key to business continuity. If securing personnel becomes difficult due to intensifying competition for recruitment amid Japan's declining birthrate, aging population, and population decline, it could become difficult to continue the Cold Storage Warehousing Business, potentially affecting performance. As countermeasures, the company is promoting planned year-round recruitment and development, strengthening in-house education systems, creating workplaces where diverse personnel can work comfortably, and actively introducing labor-saving and automation systems.