NATORI CO., LTD.

The company procures a wide range of raw materials, including marine products such as squid, dairy products, livestock products, agricultural products, and packaging materials, and faces risks of fluctuations in procurement volume and cost due to climate change, changes in global food supply and demand, and changes in import tariffs. Because the ratio of raw materials and supplies to total assets and the ratio of raw material prices to manufacturing costs are both high, sharp price increases can have a significant impact on business performance. As countermeasures, the company avoids dependence on specific raw materials and suppliers, manages inventory, switches to sustainable raw materials, and implements price revisions and specification changes.

Raw materials dependent on overseas sources account for approximately 60% of the total, of which about 40% are affected by exchange rate fluctuations. If exchange rates fluctuate sharply due to the impact of U.S. trade policy or other factors, procurement costs could increase significantly, potentially affecting business results and financial position. The company seeks to minimize this risk by building a multi-currency purchasing structure, shifting some raw material procurement back to domestic sources, and expanding overseas exports, but the ultimate risk remains with the company.

Since the company's main business is food manufacturing and sales, any quality or safety problems could lead to decreased sales and increased costs due to product recalls or suspension of sales. In response, the company has introduced FSSC22000, holds monthly cross-departmental Food Safety Steering Committee meetings, and has established a system to prevent intentional contamination by incorporating the concept of food defense. However, if an unforeseen event occurs beyond expectations, it could have a material impact on business results and financial position.

The company imports raw materials from around the world, processes goods at overseas cooperating factories, and exports overseas, creating risks that changes in laws in each country, terrorism, war, political, economic, or social turmoil, or the outbreak of epidemics could make it difficult to continue operations. Deterioration of the situations in Russia-Ukraine and the Middle East are recognized as specific risk examples. As countermeasures, the company is preparing to shift production back to Japan and to third-country processing, but if turmoil exceeding expectations occurs, it could affect business results and financial position.

Packaging materials such as packaging film and various types of energy used in manufacturing and logistics are affected by crude oil market conditions, and a worsening of the Middle East situation is expected to raise packaging material and energy costs. Although procurement sources are currently secured, further deterioration or prolongation of the situation could have an impact exceeding expectations. The company seeks to absorb costs through packaging material reviews, energy-saving activities, and price revisions, but if the impact exceeds the limits of these measures, it will affect business results and financial position.

If natural disasters such as earthquakes and typhoons damage business facilities, delay logistics networks, cause shortages of raw material procurement, or reduce factory production capacity, or if logistics disruptions occur due to large-scale events, or social disruption occurs due to the spread of a global infectious disease, unforeseen circumstances may arise in purchasing, production, and sales. The company seeks to minimize this risk by diversifying suppliers, but if an event exceeding the company's response capacity occurs, it will affect business results and financial position.

The company holds information on business partners and personal data, creating risks of system outages, information leaks, and data tampering due to computer virus infections or unauthorized access. If the information system is compromised due to intervention by malicious third parties, business interruption and increased security countermeasure costs could result. The company implements appropriate security management, backup systems, and employee training, but there are limits to responding to events exceeding expectations.

If food safety incidents occur, such as outbreaks of livestock epidemics like avian influenza or African swine fever, or contamination by harmful substances or foreign matter, increased costs are expected due to changes in production and procurement sources. The company promotes traceability, provides guidance to and diversifies suppliers, and ensures accurate business processing, but if an event exceeding expectations occurs, it could affect business results and financial position.

The company is subject to restrictions under the Food Labeling Act, Food Sanitation Act, Product Liability Act, Containers and Packaging Recycling Act, Act against Unjustifiable Premiums and Misleading Representations, and other laws, and delayed response to legal revisions or new regulations carries the risk of legal penalties or social sanctions. Each relevant department works with the legal department to maintain a system for compliance with related laws and regulations, but if a situation arises that cannot be addressed by the deadline, it could affect business results and financial position.

Product development that responds to market changes such as diversifying consumer preferences, increasing health consciousness, the declining birthrate and aging population, and changing purchasing patterns is a key challenge for business growth, and in the snack industry, intensifying competition makes it inevitable that share and sales will decline with existing products alone. The company seeks to maintain and expand market share by strengthening new product development and renewing existing products, but if it fails to provide products that meet customer needs, it could affect business results and financial position.