STI Foods Holdings,Inc.

The proportion of consolidated net sales accounted for by Seven-Eleven Japan Co., Ltd. and its designated sales outlets was extremely high, at 87.7% in FY2023 (ended December 2023), 89.3% in FY2024 (ended December 2024), and 81.8% in FY2025 (ended December 2025). If the trading relationship changes due to changes in the company's store expansion, sales policy, or pricing policy, or due to intensifying competition with other companies in the same industry, this could have a material impact on business results. As a countermeasure, the Group is working to strengthen the partnership through differentiation via proprietary manufacturing technology, including patented technology, and continuous improvement of quality and development capabilities.

Demand for the main raw materials, marine ingredients (salmon, mackerel, etc.), is expanding against the backdrop of a global rise in health consciousness and population growth in emerging countries, and securing global marine resources is becoming increasingly difficult, with prices rising accordingly. There are concerns about lost sales opportunities due to difficulty in securing necessary volumes and a decline in profit margins due to soaring purchase prices. As a countermeasure, the Group is promoting the expansion of direct trade and diversification of domestic suppliers, as well as a sustainable shift of raw materials from wild-caught to farmed fish.

The proportion of raw materials purchased from overseas is high, and if raw material purchase prices rise due to exchange rate fluctuations (particularly yen depreciation), passing this on to sales prices through negotiations with customers may be delayed or impossible, which would put pressure on profit margins. As a countermeasure, the Group enters into forward exchange contracts at the same time as determining foreign currency prices, limiting such contracts to those of the same amount and same due date that satisfy the allocation treatment requirements for hedge accounting, and has explicitly stated a policy of not engaging in any speculative derivative transactions.

Securing human resources is a critical issue for maintaining operations at ingredient and food manufacturing plants that operate on a 24-hour basis in principle. In addition to a deteriorating hiring environment due to the decline in the domestic working-age population, there is a growing risk of a decrease in foreign human resources (technical intern trainees and specified skilled workers) due to the ongoing depreciation of the yen. As a countermeasure, the Group is promoting both the securing of foreign human resources through active recruitment activities and labor-saving through the introduction of mechanization and AI technology in parallel.

If unforeseen product complaints or defective products occur, unexpected costs such as product recall expenses and compensation to victims may arise, potentially affecting business results and corporate credibility. As a countermeasure, the Group thoroughly implements hygiene and quality control at its domestic and overseas factories, and has established a system to comply with relevant laws and regulations such as the Food Sanitation Act and the Food Labeling Act.

The Group holds numerous fixed assets, including operating fixed assets such as plant and equipment, and goodwill. If it is determined that sufficient cash flow cannot be generated due to a decline in business profitability caused by intensifying competition or other factors, the application of impairment accounting could affect business results. As a countermeasure, the Group regularly evaluates the recoverability of the residual value of assets based on estimates of future cash flows.

Computer systems are utilized throughout the business, and if information leakage occurs due to unauthorized access or computer virus intrusion, or if system downtime occurs due to natural disasters or accidents, this could affect business operations and results. As a countermeasure, the Group has established the Group Information System Management Basic Regulations and an Information Security Policy, and has implemented enhanced security measures and a backup system.

The Group operates factories in the Tohoku, Kanto, Tokai, Kansai, and Kyushu areas. If production facilities suffer severe damage from large-scale earthquakes, typhoons, or other natural disasters, manufacturing and supply could become difficult due to disruptions in electricity, water, and gas supply, logistics interruptions, or system failures, potentially having a material impact on business results. As a countermeasure, the Group has formulated a Business Continuity Plan (BCP) and established a system for automatically storing backup data of core systems at remote locations.

The Group actively promotes M&A activities, such as acquiring shares of companies in the same industry or entering into business alliances, with the aim of enhancing corporate value. However, if there are significant changes in the market or competitive environment after implementation, or if the expected profits are not achieved, this could affect business results. As a countermeasure, the Group has a policy of proceeding with M&A only after fully considering market trends, the target company's business performance and financial condition, technological superiority, and risk analysis results.

The Group is subject to legal regulations such as the Food Sanitation Act, the Food Labeling Act, the Basic Act on Food Safety, the JAS Act, and the Product Liability Act. If business activities are restricted due to unforeseen future legal amendments or new administrative regulations, this could affect business results. As a countermeasure, the relevant departments of each subsidiary work in cooperation with the company's Development Department, Quality Assurance Department, and Risk Management and Compliance Committee to establish a legal compliance system, and no material legal violations have occurred to date.