WARABEYA NICHIYO HOLDINGS CO.,LTD.

The ratio of sales to Seven-Eleven as a percentage of consolidated net sales remained at a high level of 75.1% (¥167,037 million) in FY2025 (ended February 2025). If Seven-Eleven changes its management strategy, including store expansion, sales policy, or pricing policy, or if the trading relationship changes due to intensified competition with other companies, this could have a material impact on the Group's business performance. The Company's policy is to maintain the continuous trading relationship that has existed since June 1978, but disclosure of specific measures to reduce dependence remains limited.

In the prepared foods business, competition over price, quality, and convenience is intensifying among a diverse range of business formats, including supermarkets, drugstores, prepared-food specialty stores, takeout bento shops, and providers of bento delivery services to workplaces. Deterioration in the competitive environment may affect sales volumes and prices, potentially putting pressure on the Group's net sales and profit margins. The Company's stated policy is to respond by improving customer satisfaction through providing 'safety and peace of mind' and 'valuable products and services.'

Increases in raw material prices and labor costs may raise manufacturing costs, potentially affecting the Group's profitability. Given the characteristics of the food manufacturing industry, there are limits to the extent that cost increases can be passed on through sales prices, creating a risk of margin decline. The Company aims to address this through enhancing added value via differentiation from competitors, but the ongoing impact of rising costs represents a direct downward pressure on business performance.

As a food manufacturer, if an incident related to food safety, such as food poisoning, foreign object contamination, or quality defects, occurs, it could have a material impact on the Group's business performance and social credibility. The Company has established a system based on HACCP methodology to ensure thorough quality and hygiene control throughout the entire food chain, from ingredient procurement to manufacturing and delivery; however, the risk of events exceeding expectations cannot be eliminated. The Company has developed its response framework under the guiding principle that 'thorough hygiene control takes priority over all other operations.'

The Company is required to comply with legal regulations related to the food business, such as the Food Sanitation Act, the Water Pollution Control Act, and the Product Liability Act (PL Act). If new, currently unanticipated legal regulations are implemented, response costs and other factors could affect business performance. Responding to tightened regulations may require capital investment or a review of management systems, creating a risk of additional cost burdens. The Company makes every effort to comply with current regulations, but the costs of responding to future regulatory changes involve uncertainty.

If a large-scale natural disaster, such as an earthquake, occurs in a region where the Group's business locations are situated, the resulting disruption of lifelines such as electricity and water supply, or the severance of logistics networks, could halt manufacturing and delivery functions and affect business performance. Given the characteristics of the food manufacturing industry, a halt in the operation of manufacturing sites would lead directly to lost sales, and also risks disrupting stable supply to Seven-Eleven, the Company's major customer. The Company has established a policy of prioritizing human life above all else and responding in accordance with its business continuity manual.

Physical risks associated with climate change (impacts on business locations and the supply chain from abnormal weather, flooding, etc.) and transition risks (additional costs from carbon taxes, tightened regulations, etc.) may affect the Group's business performance. As a food manufacturer, the Company has business characteristics that make it susceptible to the effects of climate change on raw material procurement and manufacturing processes. Detailed response policies are described in the climate change response section of the Company's sustainability philosophy and initiatives.

If an infectious disease spreads domestically or in areas where the Group operates, restrictions on movement and a slowdown in economic activity could affect the Group's business performance and financial condition. The main anticipated risk factors are fluctuations in demand for prepared foods sold at convenience stores and reduced manufacturing capacity due to infections among factory employees. The Company has established a policy of prioritizing the safety of customers, business partners, and employees, and of responding in accordance with its business continuity manual, taking into account announcements and requests from the government and local authorities.