KIBUN FOODS INC.

Regarding marine resources such as walleye pollock surimi, the main raw material for the company's core Surimi Products, there is a possibility that procurement costs may increase due to reduced supply resulting from stricter fishing regulations and changes in international demand, as well as rises in packaging material prices caused by tight crude oil supply-demand conditions. As a countermeasure, the company is working to stabilize its supply chain by consolidating procurement functions at its subsidiary Kibun Sangyo, securing multiple procurement routes, and strengthening relationships with strategic partners.

Rising average annual temperatures and the intensification of extreme weather disasters may cause disruptions to the supply chain and changes in consumer purchasing behavior, and future tightening of regulations such as the introduction of a carbon tax could also affect business costs. The company is conducting impact analysis and information disclosure based on the TCFD recommendations and promoting risk mitigation and adaptation measures.

If quality problems occur with products offered by the company, in addition to health impacts on consumers, there is a possibility of significant impact on business performance due to loss of social credibility and the incurrence of product recall and compensation costs. Learning from a voluntary recall incident that occurred in September 2025, the company is further strengthening its quality and hygiene management system, including hygiene management based on HACCP, obtaining food safety management system certification, and establishing a safety evaluation framework in the new product development process.

Demand for the company's core Surimi Products and Prepared Foods is concentrated in the third quarter (October to December). In FY2026 (ending March 2026), net sales and operating profit for that quarter were ¥35,848 million and ¥3,070 million respectively, compared to net sales of ¥23,989 million and an operating loss of ¥773 million in the second quarter, indicating a large seasonal gap. The first and second quarters are particularly susceptible to changes in the external environment, and the company is promoting year-round business expansion through the development of spring and summer products and the expansion of overseas sales.

If a large-scale outbreak of an infectious disease such as COVID-19 occurs globally, there is a possibility that sales may decline and costs may rise due to factory shutdowns caused by employee infections and disruptions to the supply chain. The company has established an efficient business operation system through thorough hygiene management, promotion of remote meetings, and telework and staggered work hours.

If a large-scale earthquake or flood damage exceeding anticipated levels occurs at the company's major manufacturing sites located in Chiba, Kanagawa, Shizuoka, Okayama, and Hokkaido prefectures, there is a possibility of decreased sales due to factory shutdowns, incurrence of facility repair costs, and logistics disruptions. The company has formulated a business continuity plan (BCP) and is working to establish a system for rapid supply recovery in the event of an emergency.

As the company procures raw materials from overseas and engages in manufacturing, sales, and import/export transactions overseas, there is a possibility that business performance may be affected if sharp exchange rate fluctuations exceeding forecasts occur. The company hedges this risk through the use of yen-denominated transactions and forward exchange contracts.

The company maintains multiple retirement benefit plans, primarily defined benefit plans, and there is a possibility that fluctuations in pension asset management performance and retirement benefit obligations may result in significant retirement benefit costs and a decrease in net assets. The company aims to reduce this impact through periodic reviews of its asset management policy and management institutions, as well as annual reviews of actuarial assumptions.

If systems are halted or disrupted due to increasingly sophisticated cyberattacks, or if personal information is leaked externally due to unauthorized access to online shops, there is a possibility of business suspension, incurrence of litigation costs, and deteriorating sales due to loss of social credibility. The company addresses this through cyberattack countermeasures, employee education and training, and the establishment and operation of personal information management regulations and information security guidelines.

In FY2026 (ending March 2026), the borrowing dependence ratio (ratio of long-term borrowings, short-term borrowings, and corporate bonds to total assets) was 31.1%. If interest rate levels unexpectedly rise in the future, it may become difficult to raise funds on desired terms, resulting in increased interest expenses. The company aims to reduce this risk by selecting fixed or variable interest rates according to interest rate trends, utilizing derivatives such as interest rate swaps, and promoting the strengthening of its financial structure under the Medium-Term Management Plan 2026.