Earth Corporation

Demand for Insect Control Products is concentrated in the approximately five-month period from April to August each year, with roughly 80% of annual market sales occurring during this period. In FY2025 (ending December 2025), quarterly operating income showed profits of ¥6,269 million in Q1 and ¥7,284 million in Q2, contrasted with substantial losses of ¥281 million in Q3 and ¥5,185 million in Q4, reflecting pronounced seasonal skew in earnings. If the market contracts during this period due to unfavorable weather or other factors, it could directly impact annual performance.

The Group procures raw materials from multiple countries and regions, and given the high proportion of petrochemical products used, crude oil price trends directly affect procurement costs. Changes in supply and demand caused by climate change, exchange rate fluctuations, geopolitical risks, and other factors could lead to sharp increases in purchase prices, affecting business performance. As countermeasures, the Group is pursuing continuous cost reductions through formulation changes, multi-vendor purchasing, and global procurement.

Insecticidal active ingredients, a core raw material for Insect Control Products, have a limited number of primary users, and for some ingredients, suppliers are limited to a small number of manufacturers. If it becomes difficult to continue transactions with such manufacturers, or if procurement prices fluctuate significantly, finding alternative sources may prove difficult, potentially affecting business performance. While supply and demand as well as market prices are currently stable, a structural vulnerability to supply disruption risk exists.

The Group is prioritizing expansion in the Asia region, centered on local subsidiaries in Thailand, Vietnam, Malaysia, the Philippines, and China, but progress on these plans could be delayed by tightened regulations imposed by foreign governments, changes in overseas conditions, or deterioration in economic environments. There is also a risk that consolidated results could fluctuate significantly due to exchange rate movements when translating local-currency items of overseas subsidiaries into yen.

The Group is pursuing expansion of business domains and geographic areas through M&A and other means to achieve sustainable growth, but if unexpected events or changes in the environment occur after such transactions and the anticipated results are not achieved, business performance could be affected. As risk countermeasures, the Group accurately monitors the management conditions of each group company and shares progress and issues on important matters, but integration risk following M&A remains.

The Household Products Business is subject to regulations such as the Pharmaceuticals and Medical Devices Act, the Agricultural Chemicals Regulation Act, and the Fertilizer Control Act, while the Integrated Environmental Sanitation Business is subject to regulations such as the Building Sanitation Act and the Poisonous and Deleterious Substances Control Act, and the Group operates under manufacturing and marketing business licenses, manufacturing business licenses, and agricultural chemical sales notifications. Future legal amendments or tightened regulations could result in additional compliance costs, and in particular, revocation of licenses or business suspension orders in the Household Products Business could seriously impede business operations.

As the Group handles pharmaceuticals, quasi-drugs, and other products requiring high-level quality control, product defects arising from manufacturing processes or unforeseen product incidents could damage brand image and social credibility, thereby affecting business performance. As countermeasures, the Group is working to increase the implementation rate of regular quality audits at its own factories and contract manufacturing facilities, as well as improving the implementation rate of its annual education and training plan.

The Group utilizes IT infrastructure and information systems to improve operational efficiency and customer service, and holds a large volume of customer personal information through its marketing activities. Increasingly sophisticated cyberattacks, computer viruses, system failures, and human error could result in information leaks, tampering, or system outages, potentially causing operational disruption and loss of social credibility that affects business performance. The Group is implementing defensive measures through the introduction of optimal security measures, development of internal regulations, and thorough employee training.

If the declining working-age population due to the falling birthrate and aging society, along with changes in employment conditions, make it difficult to systematically secure, develop, and retain specialized talent, achievement of medium- to long-term growth targets could be hindered. Furthermore, if a corporate culture that respects diversity fails to develop, this poses risks of lost opportunities as well as business stagnation due to talent attrition. In response, the Group has established four talent-related materiality themes and is promoting structural reform of its organization and functions.

The proliferation of social media has created an environment in which critical evaluations and reputational damage toward companies can spread instantaneously. As the Group's marketing activities utilizing social media increase year by year, criticism of inappropriate or careless expressions spreading through social media could significantly diminish brand value and corporate credibility. This risk also carries the potential to amplify credibility damage in conjunction with other risks such as climate change and quality incidents.