Ahjikan Co.,Ltd.

The Company uses chicken eggs, kanpyo (dried gourd strips), shiitake mushrooms, burdock, and fish surimi as principal raw materials, and procurement prices and volumes may be affected by crop conditions, natural disasters, market price fluctuations, catch restrictions, and other factors. In particular, the nationwide spread of avian influenza has reduced the number of laying hens, raising concerns about significant price volatility and difficulty in stable procurement due to a breakdown in the supply-demand balance. The Company seeks to avoid concentration risk through contract purchasing and diversified procurement, but complete elimination of this risk is difficult.

Procurement prices for auxiliary raw materials such as seasonings and edible oils, as well as packaging materials, fluctuate depending on crude oil prices, grain prices, and foreign exchange trends. If crude oil prices or ocean freight costs rise due to heightened geopolitical risk in the Middle East, this could lead to increases in packaging material prices, logistics costs, and energy costs, as well as delays in the arrival of materials or difficulty in procurement, potentially disrupting production activities.

The prepared foods sector, including the Company's main business partners such as supermarkets and convenience stores, is strongly affected by changes and diversification in consumer preferences. Competitors' launches of new products and sales promotion activities may reduce the competitiveness of the Company's products or reduce sales opportunities. In addition, changes in the business condition or sales policies of business partners may affect sales opportunities and sales prices.

Since the Company handles imported goods from overseas, fluctuations in foreign exchange rates directly affect procurement costs. Although the Company implements hedging measures through forward exchange contracts, it is impossible to completely eliminate the impact of such fluctuations, which may affect the Company's financial position and business results.

Retirement benefit expenses and retirement benefit obligations are calculated based on assumptions such as the discount rate and the long-term expected rate of return on pension assets. If these assumptions change due to changes in the economic environment or if the actual investment performance of pension assets declines, this may affect the Company's financial position and business results.

The Company holds a large number of fixed assets, including land, buildings, and machinery and equipment, and verifies investment effectiveness and recoverability in advance when investing in new plants and other facilities. However, if a rapid change in the external environment or a decline in market value makes it impossible to expect recovery of the investment amount, the Company may recognize an impairment loss, which may affect its financial position and business results.

A shortage of personnel responsible for production and sales may affect business activities. Many part-time workers, temporary staff, and foreign technical intern trainees are engaged at production sites, and if laws and regulations concerning the employment of these workers are amended, manufacturing costs may rise, potentially affecting the Company's financial position and business results. The Company is working on continuous new graduate and mid-career recruitment as well as improving the working environment to promote retention.

There is a risk that food safety issues, such as outbreaks of avian influenza, unauthorized additives, or mislabeling of product origin, may occur across the industry as a whole. Although the Company has obtained ISO9001, HACCP, and FSSC22000 certifications and has established traceability and food defense systems, if a food safety issue occurs that is specific to the Company or affects society at large, this may affect the Company's financial position and business results.

The Company has multiple business sites in Japan as well as in China and the United States, and if a large-scale earthquake, storm, flood damage, or other natural disaster occurs, business activities at each site may be disrupted. Although the Company has established a BCP (Business Continuity Plan) and built a system for early recovery, it is difficult to prevent natural disasters in advance, and the emergence of new infectious diseases may also affect future business activities.

The Company develops, produces, and supplies products for Japan, the United States, Asia, and Oceania through affiliated companies in China and production contractors in Southeast Asia, and in recent years has also strengthened its domestic sales business in China and overseas sales business through its U.S. subsidiary. If unforeseen changes in the political and economic environment, changes in laws, regulations, or tax systems, the occurrence of anti-Japanese demonstrations, the spread of avian influenza infection, or other factors make it difficult to produce, procure, or sell products, this may have a material impact on the Company's financial position and business results.