Wel-Dish.Incorporated

The Chinese production subsidiary Weihai Shiyuan Foods Co., Ltd. accounts for 2.9% of consolidated net sales, and domestic sales of beef jerky rely 100% on products manufactured by this subsidiary. Changes in the policy and trade environment between Japan and China, or sudden domestic policy measures in China (such as zero-COVID policies), could halt sales both domestically and internationally. As a countermeasure, the Group is considering diversifying product supply sources by expanding overseas sales, particularly in China.

If the policy and trade environment between Japan and China changes in a manner similar to the U.S.-China trade friction, importing and selling products manufactured by the Chinese production subsidiary into Japan could become difficult. Since domestic sales of beef jerky depend entirely on production in China, the impact of regulatory changes would directly affect business continuity. While the Group judges that no event with an immediate significant impact has occurred at present, this risk continues to exist.

In the beverage market, the continuation of consumers' thrift-oriented behavior combined with a declining core customer base due to the falling birthrate is causing market contraction and intensifying competition. If unit price declines, customer attrition, and a significant increase in sales promotion expenses occur, the impact on sales could grow. The Group recognizes that this risk is materializing in stages and aims to maintain sales through product renewals and active sales promotion.

The Group is pursuing M&A as part of its efforts to expand its business domains and develop new businesses, conducting prior due diligence, risk assessment, and analysis of normalized earning power for target companies. However, if the business environment changes after an acquisition and the initial business plan is not achieved as expected, impairment losses on goodwill or valuation losses on shares may occur, potentially affecting business results and financial condition. While prior due diligence helps reduce certain risks to some extent, future changes in the business environment cannot be entirely eliminated.

If the development of internal control systems fails to keep pace with the rapid expansion of the business, appropriate business operations may become difficult, potentially affecting business results. The Group recognizes the need to ensure the appropriateness of operations, the reliability of financial reporting, and thorough legal compliance, and positions effective corporate governance as essential to enhancing corporate value. The Group is currently working continuously to strengthen its internal control systems.