Yuki Gosei Kogyo Co., Ltd.

The top 10 customers account for 68.8% of net sales, resulting in a high degree of dependence on specific customers. If sudden changes in transaction terms or termination of contracts with these customers occur, it could have a material impact on the Company's business performance. While the Company addresses this through building good relationships of trust, the concentration risk remains structural.

The purchase prices of raw materials used are affected by domestic and overseas market conditions and trends in crude oil and naphtha prices, and some raw materials are dependent on specific suppliers. While the Company strives to avoid the impact through cost reductions and passing on costs to selling prices, a surge in raw material prices could put pressure on business profitability.

In the food additives product group, price competition has intensified for certain products against a backdrop of improving quality of overseas products. While the Company is working to create added value and reduce costs, continued competition could adversely affect business performance through declines in selling prices.

In the event of a sharp decline in selling prices due to a significant deterioration in market conditions or prolonged inventory holding periods, the Company may be forced to recognize inventory valuation losses. While the Company strives to optimize inventory levels based on sales demand forecasts, there is a risk that it may be difficult to respond to sudden market fluctuations.

Production is concentrated solely at the Joban Plant in Iwaki City, Fukushima Prefecture. In the event of damage from natural disasters such as earthquakes, fires, or flooding, production functions could be suspended until recovery is achieved. Although measures such as BCP formulation, earthquake resistance measures, and disaster prevention drills have been implemented, reliance on a single plant constitutes a significant risk to business continuity.

Financial covenants are attached to the syndicated loan (balance of ¥4,593 million at the end of the fiscal year) and commitment line contracts with correspondent financial institutions. If these covenants are breached, the Company may lose the benefit of the term for the borrowings, posing a risk of a material impact on its financial position.