FUMAKILLA LIMITED

The Company continuously engages in market-creating new product development and product renewals, but it may not always be able to accurately predict market needs, and if sales end up sluggish, this could reduce future growth potential and profitability. The Company utilizes consumer surveys and purchasing analysis information from market research firms, and has established a daily management system by item through its sales system, reflecting this in the plans of the development, sales, and production departments.

The Company's main products are aimed at general consumers, and it is constantly in a severe competitive situation with competitors and new entrants. Depending on changes in the competitive environment, this could affect business performance, and the Company responds through the development of differentiated new products and marketing investment based on market research and competitor product analysis.

In the Japan market (34.4% of sales composition), the ratio of seasonal products such as Insecticides, pollen countermeasure products, and Gardening Products is high, and business performance is greatly affected by temperature and the length of seasons. Seasonal fluctuations are pronounced, with returns occurring from October to January after the peak demand season has passed. The Company responds through strengthening year-round sellable products such as alcohol-based disinfectants and measures to reduce returns (expansion of internet sales, distribution inventory adjustments, etc.).

If multiple risks such as demand forecasting uncertainty, intensifying competition, seasonal fluctuations, and rising raw material prices materialize simultaneously, merchandise and products may become stagnant, necessitating write-downs that could affect business performance. The Company aims to suppress inventory stagnation through the countermeasures for each of the above risks.

The Company procures solvents, propellants, chemicals, resins, steel (for cans), and other materials from suppliers both domestically and internationally, and business performance is affected when raw material prices fluctuate due to exchange rate movements or international circumstances such as the situation in the Middle East. The Company works to mitigate cost fluctuation risk through price pass-through, stable procurement from multiple suppliers, and VA/VE activities.

In the fiscal year under review, overseas sales reached ¥50,733 million (65.6% of overseas sales composition), and fluctuations in figures converted into yen due to exchange rate movements, as well as changes in overseas procurement costs, directly affect consolidated business performance. The Company responds by monitoring fluctuations in major currencies and their impact on the business, and sharing information internally in a timely manner.

The Company actively expands overseas business primarily in Asia, Europe, and Central and South America, and business performance may be affected if sudden economic, political, or social events such as terrorism, civil unrest, or human rights issues occur. The Company has established a system in which a person in charge is designated at each overseas location, striving to obtain the latest local information.

In addition to operations within Japan, the Company conducts business through subsidiaries in Indonesia, Malaysia, Thailand, Vietnam, Myanmar, India, Mexico, and Italy, as well as in Europe, Central and South America, Africa, the Middle East, and other regions, and is subject to a variety of laws and regulations in each region. If a regulatory violation occurs, there is a risk of loss of credibility, penalties, and litigation involving substantial damages. The Company responds by promptly obtaining information on amendments to relevant laws and regulations and thoroughly ensuring legal compliance through employee education.

The Company holds a large amount of important information, including personal information and confidential information, and business performance may be affected if an unforeseen event such as an information leak occurs. In addition to operating internal regulations and codes of conduct based on its privacy policy, the Company works to protect information assets through education to improve IT literacy and technical reinforcement (both hardware and software) against cyberattacks.

The Company's product lineup, which includes pharmaceuticals, quasi-drugs, and agricultural chemicals, is required to maintain high quality standards, and business performance may be affected if consumers are harmed due to quality defects or similar issues. The Company has established a thorough manufacturing system covering everything from design and verification to incoming inspection, manufacturing, and shipment, through the establishment of internal manufacturing standards based on relevant laws and regulations and the acquisition of ISO9001-2015 certification.