OIE SANGYO CO., LTD.

The Group operates a food and beverage material wholesale business for the restaurant industry with a nationwide trading area, and deterioration in the restaurant industry's business conditions due to changes in economic trends and personal consumption trends may affect its business performance. While there is no dependence on specific items or specific business partners, a contraction in overall demand from the restaurant industry poses a risk that directly impacts net sales.

Procurement prices for some of the food and beverage materials that are the Group's main handled items may fluctuate significantly due to changes in international prices and foreign exchange rates. If increases in procurement prices cannot be passed on to selling prices, profit margins may decline, which could adversely affect business performance.

The application of the overtime work cap regulation for truck drivers has intensified constraints on transport capacity and labor shortages, and delivery freight charges and labor costs are on an upward trend. The Group is working to control costs through the promotion of joint delivery, expansion of partner logistics companies, and optimization of delivery routes; however, if cost increases beyond expectations occur or securing vehicles becomes difficult, this could affect business performance and other results.

Because the products handled are food items, meticulous quality control and food hygiene management systems must be established. The Group operates warehouses and delivery vehicles equipped with refrigeration and ambient temperature facilities and conducts on-site inspections of contract manufacturing plants using its own proprietary checksheets; however, if any food safety or hygiene issue arises, it could have a material impact on business performance and other results.

The outbreak, spread, or prolongation of infectious diseases could lead to restaurant closures, a decline in accommodation facility occupancy rates due to reduced inbound foreign visitors, and restraint on banquets and similar events, resulting in a significant decrease in sales. In addition, delays in product procurement due to the suspension of operations at overseas factories and delays or suspensions in logistics and services could also affect business performance.

While the Group procures from domestic manufacturers and producers, some of the products and raw materials they handle depend on imports from overseas. If production is halted due to political instability or conflicts in various countries, or if imports are disrupted due to transportation accidents, this could impede product procurement and affect business performance and other results.

For trade receivables, the Group obtains and analyzes financial information on business partners and sets credit limits; however, if there is a deterioration in the business performance or creditworthiness of customers or suppliers with large transaction amounts, this could result in bad debt losses or disruptions in procurement, affecting business performance and other results.

Computer systems are used throughout the overall business, including order receipt, inventory management, ordering, accounting, and personnel management, and there is a risk that system outages or breakdowns caused by large-scale disasters or computer virus infections could lead to business disruption. The Group stores its core system servers at an external data center equipped with disaster countermeasures and has established a backup system, while continuously implementing countermeasure software and employee training.

If it is determined that future cash flows from held fixed assets fall below their book value due to significant changes in the business environment or deterioration in profitability, an impairment loss must be recognized, which could affect business performance and other results. The Group regularly assesses indications of impairment, and when indications are present, calculates future cash flows to recognize and measure impairment.

The Group holds shares for purposes such as strengthening relationships with business partners, and if the market value of held shares falls significantly below book value due to future economic conditions or trends in corporate earnings, a valuation loss must be recorded, which could affect business performance and other results.