Okayama Paper Industries Co.,Ltd.

The Company's net sales are composed of approximately 90% from the Paperboard Business and slightly over 10% from the Decorative Corrugated Board Business, both of which are domestic demand-oriented businesses and are therefore significantly affected by a decline in demand resulting from a downturn in the domestic economy. Should demand decline occur, it may adversely affect the Company's business results and financial condition. As countermeasures, the Company strives to maintain demand through sales activities across multiple fronts, the discovery of new business partners, the promotion of overseas exports of raw paper through sales agents, and the implementation of production in line with demand.

Both the Paperboard Business and the Decorative Corrugated Board Business are domestic demand-oriented, and should market prices decline due to a downturn in the domestic economy, it may adversely affect the Company's business results and financial condition. The Company is working to maintain appropriate sales prices by strengthening its development capabilities to discover new business partners and by promoting overseas exports.

The purchase price of waste paper, the Company's primary raw material, fluctuates according to supply and demand trends in China, the Asian region, and Japan, and a rise in prices may adversely affect the Company's business results and financial condition. The Company works to reduce this risk by securing multiple suppliers and maintaining a stable stockpile, but the structure remains susceptible to international fluctuations in supply and demand.

The purchase price of industrial gas, the Company's primary fuel, is affected by fluctuations in international market conditions and exchange rates, and a rise in prices may adversely affect the Company's business results and financial condition. The Company works to reduce this risk by securing multiple suppliers and maintaining a stable stockpile.

Should a natural disaster such as a typhoon, heavy rain, or earthquake occur, it may adversely affect the Company's business results and financial condition through a decline in production capacity, an increase in manufacturing costs, and other effects. As countermeasures, the Company has formulated risk management regulations and emergency response regulations, and has established a system whereby, in the event of an actual disaster, an emergency response headquarters is immediately set up to minimize damage at an early stage.

Should unforeseen circumstances other than natural disasters, such as accidents, occur, it may likewise adversely affect the Company's business results and financial condition through a decline in production capacity, an increase in manufacturing costs, and other effects. The Company seeks to minimize damage through the formulation of risk management regulations and emergency response regulations, as well as a system for the swift establishment of an emergency response headquarters.