NittoBest Corporation

The Group, whose main business is food manufacturing and sales, may suffer material adverse effects on its business and financial condition if product recalls, litigation, damages claims, or suspension of transactions with customers occur due to foreign matter contamination, mislabeling, or similar issues. The Group addresses this risk through ISO9001 and FSSC22000 quality management system certifications, establishment of dedicated quality assurance departments and committees, and enrollment in liability insurance.

Various factors including livestock diseases (BSE, avian influenza, ASF, etc.), abnormal weather, changes in international circumstances, yen depreciation, surging crude oil prices, and safeguard measures may make it difficult to procure meat, agricultural and marine products, and other raw materials, leading to price increases. These factors could also lead to higher manufacturing and logistics costs, adversely affecting business performance and financial condition. The Group addresses this through diversifying production regions, securing alternative raw materials, and raising product prices.

Due to Japan's declining working-age population and changes in the employment environment including minimum wage increases, there is a risk that securing and training necessary personnel may not proceed as planned. Labor shortages directly reduce productivity at manufacturing sites, significantly impacting business performance. The Group addresses this through utilizing the foreign technical intern program, investing in automation and labor-saving measures, and transferring product manufacturing to partner factories.

If cyberattacks, ransomware attacks on network systems, system troubles, or information leaks occur, business delays or suspensions could adversely affect business performance and financial condition. Indirect effects may also arise if business partners suffer similar attacks. The Group is promoting countermeasures such as strengthening security, migrating to cloud services, and outsourcing to highly secure vendors.

Changes in management policy, deterioration of financial condition, or corporate restructuring through M&A at major customer companies could affect the Group's sales conditions, adversely impacting business performance and financial condition. The Group seeks to mitigate this risk by strengthening relationships with customer companies, developing new customers, and differentiating through improved product quality.

The Group competes not only with food manufacturers but also with diverse business formats such as restaurant operators and food delivery businesses. The emergence of competitors with superior capital, technology, or marketing capabilities could adversely affect business performance and financial condition. The Group addresses this through continuous environmental analysis to grasp market needs, enhancing service value-added, and improving productivity while curbing unprofitable projects.

Natural disasters, fires, or the outbreak and spread of infectious diseases at business locations or business partners' sites could disrupt business continuity, including raw material procurement, factory operations, and product delivery. If the overall domestic economy stagnates due to a state of emergency declaration or similar events, the scope of impact could expand further. The Group is strengthening its crisis management system and advancing BCP formulation and review.

Logistics costs are expected to rise due to labor shortages in the logistics industry and overtime work regulations (the so-called 2024 Problem). Delayed responses could adversely affect business performance and financial condition. The Group is addressing this through promoting logistics efficiency, but profitability could be affected if cost pass-through proves difficult.

The frequency of changes to laws and regulations such as the Food Sanitation Act and Product Liability Act, as well as the introduction of new regulations, is increasing. Delays in response or inability to respond could adversely affect business performance and financial condition. The Group addresses this by promptly gathering information on regulatory changes, verifying legal compliance, and implementing measures ahead of enforcement.

If impairment processing becomes necessary due to a substantial decline in the value of held assets (including investment securities) or a decline in profitability, or if changes in forecasts of future taxable income lead to a determination that some or all deferred tax assets are unrecoverable, this could adversely affect business performance and financial condition. The Group continuously evaluates and reviews held assets in businesses of impairment concern, and regularly assesses forecasts and assumptions related to deferred tax assets.