Okamura Foods Co.,Ltd.

Changes in the marine environment due to global warming may render fishing grounds and aquaculture sites for seafood species handled by the Group unsuitable for habitation, reducing catch volumes and aquaculture production. A decline in the volume of seafood distributed could cause raw material procurement prices to surge, potentially adversely affecting operating performance. The Group seeks to reduce concentration risk at specific sites through diversification of business segments and aquaculture/manufacturing locations.

There are concerns that an increase in the frequency and severity of natural disasters such as typhoons, heavy rains, and red tides due to climate change could cause direct damage and affect production and logistics in Aomori City, where the main plant is located, in Fukaura and Imabetsu towns where aquaculture sites are concentrated, and around Musholm Island in Denmark. Increased rough seas may also damage sea-surface aquaculture cages, impair fish growth, and increase equipment and insurance costs. The Group is working to build a loss-absorption framework by diversifying its businesses and locations.

In its overseas business operations, the Group is exposed to a variety of risks including political instability, exchange rate fluctuations, unforeseen changes in laws and regulations, difficulty in securing human resources, and competition with multinational companies. In particular, as of the filing date of this document, the situation in Myanmar, where a plant is located, remains unstable, and the plant continues to operate at reduced capacity; if conditions worsen further, this could affect the processing capacity of the overseas processing business. There is also the possibility of impairment losses related to investments in overseas companies or withdrawal from markets, and the Group is closely monitoring the situation while prioritizing the safety of its employees.

In the overseas processing business, more than half of the outsourced processing of salmon and mackerel products is dependent on a single company, the Trung Son group in Vietnam. If this company's operations are affected or its trading terms change significantly, this could affect the Group's operating results. Although the Group is hedging this risk by expanding its own plants and diversifying processing partners, a high degree of dependence continues at present.

Amid growing consumer interest in and demands for food safety, quality problems, if they occur, could lead to consumer health harm and damage to corporate credibility. The Group has established a Quality Control Office reporting directly to management, implementing HACCP, obtaining food safety management system certification, and conducting microbiological testing, while also requiring equivalent management standards from overseas partner plants. The Group also continues to develop check systems for food labeling to prevent misleading representations.

Under fish disease quarantine agreements between countries, salmon eggs for domestic aquaculture (accounting for roughly 30% of total aquaculture volume) are restricted to procurement from the United States or Canada, and the Company currently procures eyed eggs from a specific supplier in the United States. If procurement from this supplier is disrupted for any reason, it could have a significant impact on the domestic aquaculture business. Because securing alternative suppliers is institutionally difficult, addressing the risk of supply disruption remains a challenge.

If viral diseases such as IHN and IPN, which are unresponsive to antibiotics, spread in salmon aquaculture, mass mortality could occur, significantly affecting business performance. As countermeasures, the Group prohibits the use of seedlings from other companies, manages the entire aquaculture process in-house from eyed eggs, installs bird-deterrent nets, and disinfects all personnel and vehicles upon entry to facilities. The Group also actively cooperates with vaccine development companies in their clinical trials.

Prices of the seafood products handled by the Group fluctuate significantly depending on catch volumes and market conditions, and since these price movements affect procurement and sales with a time lag, profit margins are exposed to significant volatility risk. In recent years, market prices for salmon and roe raw materials have risen substantially amid unstable global conditions, and a subsequent decline is also anticipated, creating an environment in which market fluctuation risk is likely to materialize. The Group strives to mitigate this risk through timely monitoring of catch volumes and market conditions and by adjusting procurement and sales in response to the situation.

As of the end of June 2025, inventory balances (excluding supplies) stood at a high level of ¥17,378 million (42.1% of total assets), and since much of this is financed by borrowings, the balance of interest-bearing debt reached ¥17,288 million, with the liability ratio to total assets at 41.9%. Future changes in interest rate conditions could affect operating performance, and reducing the debt ratio is recognized as a financial challenge. The Group is working to strengthen its financial structure by enhancing shareholders' equity.

Representative Director and President Koichi Okamura and his related parties hold 64.6% of the Company's total issued shares, giving them substantial influence over voting outcomes at shareholders' meetings. If the major shareholder's holdings were to decline significantly for any reason, this could affect the market price of the shares and the outcome of voting. While Mr. Okamura is said to have a policy of giving consideration to the interests of minority shareholders, the high degree of dependence on a controlling shareholder structure remains a point of attention from a governance perspective.