SHINPO CO.,LTD.

If further sharp increases in beef prices or rising labor costs occur at yakiniku restaurants, which are the primary sales destination for the Company's smokeless roasters, new store openings, existing store renovations, and entry from other industries may decline, potentially leading to a downturn in orders received by the Group. While there is a tailwind from growing consumer preference for beef, a deteriorating cost environment inherently carries the risk of directly suppressing the investment appetite of key customers.

Some competitors are seeking to expand sales through low-price competition, and this, combined with rising costs due to surging raw material prices, may put pressure on the Group's profitability. The Group is countering this through quality improvement, enhanced maintenance services, and the provision of high-value-added products, but the risk that intensifying price competition will affect business performance continues to exist.

Manufacturing costs are rising due to surging raw material prices, and situations in which passing on costs to prices becomes difficult are anticipated under a low-price competitive environment. If cost increases and downward pressure on selling prices occur simultaneously, the Group's profit margins may decline, potentially adversely affecting business performance.

If the Group fails to appropriately respond to changes in market and industry needs, future growth and profitability may decline. The Group is continuously working on the development of high-quality, high-value-added products and systems, but if it falls behind in responding to technological innovation or rapidly changing customer needs, there is a risk that its competitive advantage will be impaired.

If unexpected defects occur in products, the Group may face product liability and other obligations. Although the Group has PL insurance both domestically and overseas, if costs arise on a scale that insurance cannot cover, there is a risk of a material impact on business performance. The Group manages this risk internally under strict quality and reliability standards, working to reduce it.

The Group holds numerous patents and trademarks related to its products, and this intellectual property serves as an important foundation for business growth. If the Group is unable to broadly protect its intellectual property, or if it is illegally infringed upon, its competitive advantage may be impaired, potentially affecting business activities.

The Group holds listed and unlisted shares, and if a broad and significant decline in stock prices occurs, valuation losses may arise on the securities held, potentially affecting business performance. In a market-wide downturn, there is a risk that losses will materialize regardless of the type of shares held, raising concerns about the impact on the Group's financial condition.

If a pandemic caused by an unknown virus or similar occurs, business performance and financial condition may be affected by a decline in orders received or changes to work arrangements. The Group is working to minimize the impact by prioritizing the safety of customers, business partners, and employees, but depending on the scale and duration of the spread of infection, there is a risk that business continuity could be disrupted.