ICHIMASA KAMABOKO CO.,LTD.

Surimi from Alaska pollock, a key raw material, faces price increase risk due to tightened fishing regulations, rising international demand, and exchange rate fluctuations. There are also concerns about supply shortages and price increases for auxiliary materials caused by unfavorable weather affecting agricultural products and avian influenza, as well as lengthening delivery times for production equipment parts due to labor shortages even after the easing of the semiconductor shortage. In response, the Company is diversifying suppliers, fish species, and fishing grounds, examining alternative materials, and formulating advance equipment introduction plans and securing spare parts.

If a quality problem occurs in products sold and health damage spreads, large-scale product recalls may occur, potentially leading to damage to social credibility, decline in corporate value, and deterioration in business performance. There is also a risk of being affected by ripple effects when a major quality problem occurs across the food industry as a whole. The Company has strengthened traceability through acquisition of certifications such as ISO22000, FSSC22000, and GLOBALG.A.P. and introduction of production control systems, and has built a quality control system across the entire value chain.

Cyberattacks such as targeted attack emails, unauthorized access, and ransomware infections are becoming more sophisticated and advanced, and if information leaks or system failures occur, this could result in suspension of business activities, damage to social credibility, and damages claims, having a material impact on business performance. There is also a coexisting risk of equipment damage and information loss due to natural disasters or power outages. The Company is taking countermeasures through strengthened monitoring by a dedicated department, introduction of multi-layered defense, collaboration with external specialized organizations, and regular security education.

While the Bank of Japan raised its policy interest rate to around 0.5% in January 2025, advancing the shift to a "world with interest rates," the US Federal Reserve's interest rate policy and administration-related factors are significantly affecting the yen-dollar exchange rate, and interest rate increases or excessive yen depreciation beyond expectations could impact business performance and financial condition. This also directly affects the cost of imported raw materials such as surimi and the translation of overseas business earnings. The Company continuously monitors Japanese and US monetary policy and exchange rate trends, and considers the use of hedging measures as necessary.

The Company has 7 domestic production sites, 1 cultivation center, 4 branch offices, and 8 sales offices, and if a large-scale earthquake, typhoon, heavy rain disaster, or plant fire occurs, this could lead to widespread suspension of administrative department functions, damage to production facilities, supply chain disruption, and restrictions on sales activities. The Company has established a task force setup system based on its BCP and natural disaster response manual, and has built a system of dispersed and mutually complementary supply and logistics functions at two locations in the east and west of Japan.

Sales and profit in the fish paste products and prepared foods business and the mushroom business are concentrated in the second quarter of the consolidated fiscal year (net sales for the second quarter of the current consolidated fiscal year were ¥11,708,805 million, with operating profit of ¥1,075,667 million), and performance for oden ingredients, maitake mushrooms, and similar products is affected by temperature fluctuations from autumn through early spring. If mild winters continue due to progressing global warming, there is a risk of reduced sales opportunities. The Company is promoting new product development and enhanced proposals for ways to enjoy products aimed at leveling sales throughout the year.

With the acceleration of the declining birthrate and aging population and increasing employment mobility, securing personnel, particularly among younger workers, is expected to become difficult, and personnel outflow or delays in development plans could impact business performance and financial condition. There is also a risk of worsening labor shortages at manufacturing, sales, and administrative sites. The Company is addressing labor shortages by developing a workplace environment that emphasizes life-work balance, enhancing company-wide training plans, and promoting DX and factory automation.

Amid an expected long-term contraction of the domestic market due to the accelerating declining birthrate and aging population, the launch of new products by competitors and enhanced sales promotions could lead to a decline in the competitive advantage and market share of the Group's products. Intensifying price competition with multiple competitors is also a concern for mainstay products such as fish paste products and mushrooms. The Company is promoting rapid response to consumer needs, new product development, and approaches to younger generations through SNS utilization via its Marketing Development Headquarters (established July 2024), as well as pursuing overseas market development.

The Company exports domestically manufactured products and manufactures and sells fish paste products through its consolidated subsidiary in Indonesia, but unforeseen circumstances such as economic conditions, political trends, food safety regulations, and legal changes in export destinations and within Indonesia could prevent business from proceeding as planned. Exchange rate fluctuations also directly affect overseas business earnings. The Company has strengthened its management system from both business promotion and risk response perspectives by dispatching personnel well-versed in overseas operations and manufacturing to local sites and maintaining communication through continuous meetings.

New enactment or amendment of domestic and overseas regulations such as the Food Sanitation Act, Product Liability Act, Act against Unjustifiable Premiums and Misleading Representations, Labor Standards Act, and environmental laws could constrain corporate activities, and violations could result in penalties, increased response costs, damage to social credibility, and decline in corporate value. The introduction of carbon pricing and strengthened environmental regulations in response to climate change could also become an additional cost factor. The Risk Management Office and each responsible department work together to ensure thorough legal compliance through regular compliance training and distribution of the "Compliance Guidebook."