Orion Breweries, Ltd.

There is a risk that prices of key raw materials and supplies will surge due to fluctuations in commodity markets and foreign exchange markets, increasing cost of sales and adversely affecting business performance and financial condition. Rising utility costs due to geopolitical factors and foreign exchange fluctuations are also recognized as having a significant impact. The company is responding through diversification of procurement sources, foreign exchange forward contracts, maintaining appropriate inventory levels, and considering and implementing price revisions.

There is a risk that market contraction due to worsening domestic economic conditions, declining real wages, and the declining birthrate and aging population could lead to fluctuations in shipments of key products and declines in unit prices. Beer-type product sales for Okinawa Prefecture accounted for 71.0% of the total in FY2026 (ending March 2026), making the company particularly dependent on regional economic trends. Under the Medium-Term Management Plan, the company is promoting the strengthening of channels outside Okinawa Prefecture and expanding overseas operations to reduce dependence on specific regions.

Beer-type products (beer, happoshu, and new-genre products) account for more than 80% of the sales of the Alcoholic Beverages & Soft Drinks Business in FY2026 (ending March 2026), and losing consumer support due to changing preferences or generational shifts could have a material impact on business performance and financial condition. The Medium-Term Management Plan sets out "expanding the earnings base" and "developing new growth drivers" as key strategies, aiming to enhance the product lineup beyond beer-type products.

Production of beer-type products is concentrated at a single location, the Nago Plant in Nago City, Okinawa Prefecture, creating a risk that production activities could be significantly halted in the event of a natural disaster (earthquake, flood, typhoon) or accident (fire, explosion). In the event of a supply chain disruption, there are also concerns about prolonged production line stoppages due to delays in the supply of raw materials and manufacturing equipment parts. For RTD (Canned Chu-Hi, etc.) and soft drinks, the company diversifies geographic risk by outsourcing to multiple manufacturers and has formulated a BCP (Business Continuity Plan).

Against the backdrop of rising prices and government-led wage increase initiatives, increases in recruitment wages for mid-career hires and starting salaries for new graduates are being considered, which could directly affect management figures. The company recognizes that rising labor costs are unavoidable in order to secure and retain quality personnel, with effects expected over both the short and medium-to-long term. The company has formulated a multi-year, medium-to-long-term wage level improvement plan linked to the Medium-Term Management Plan, and is maintaining close communication with the labor union.

The hotel business is heavily influenced by the number of visitors to Okinawa Prefecture, and a sharp decline in inbound demand due to political conditions could adversely affect business performance. Sales within Okinawa Prefecture in the Alcoholic Beverages & Soft Drinks Business are similarly affected by fluctuations in visitor numbers. The company aims to stabilize earnings by promoting tenant attraction within hotel facilities and enhancing the food and beverage division to encourage dining and banquet use by customers within the prefecture.

There is a risk that information security incidents, such as leaks of customer information or cyberattacks, could damage the company's reputation and result in liability for damages. Delays or suspensions of operations due to system failures are also a concern. The company has established information security regulations, organized a security committee, conducts ongoing employee training, and implements both systemic and physical countermeasures.

Based on the comprehensive business alliance concluded with Asahi Breweries since 2002, there are agreements for the sale of "Asahi Orion" outside Okinawa Prefecture and for the licensing of manufacturing and sale of "Asahi Super Dry" within Okinawa Prefecture. If either agreement were to lapse, there is a risk that the company's profits would decrease. The company strives to maintain a favorable relationship through the development of competitive products, promotion of expansion outside the prefecture, and regular dialogue at each level from management to staff.

The reduced liquor tax measures for beer, etc. based on the Okinawa Reversion Special Measures Law will be abolished in October 2026, and the reduced tax measures for Awamori will also be abolished in May 2032. A decrease in consumption due to rising sales prices could affect business performance and financial condition. As a countermeasure, the company has expanded the sales composition ratio outside the prefecture and overseas from approximately 12% in FY2020 (ending March 2020) to approximately 27% in FY2026 (ending March 2026), and has also improved the operating margin of the Alcoholic Beverages & Soft Drinks Business from 10.9% to 15.2%.

The outstanding balance of the term loan originating from the LBO stood at ¥15.4 billion as of March 2026 (83.5% of total capital), with covenants requiring the maintenance of profit (no two consecutive years of ordinary loss) and net assets. There are also risks of increased fundraising costs due to rising interest rates, increased raw material procurement costs due to foreign exchange fluctuations, and additional tax burdens due to differences in views with tax authorities. The company is working to reduce these risks by reviewing loan terms and considering early repayment, reducing foreign exchange risk through agreements on yen-denominated procurement prices, and mitigating tax risk through the use of a tax advisor.