Ota Floriculture Auction Co.,Ltd.

Flowers are highly discretionary products, and changes in consumption patterns—such as the downsizing of ceremonial occasions following the end of the COVID-19 pandemic and the decline in disposable income due to soaring prices—are altering the consumption structure. There is uncertainty as to whether the middle-aged and older consumers who form the core of the purchasing base will continue to maintain their consumption appetite, which could affect business performance and financial condition. As a countermeasure, the Company is strengthening its appeal to younger generations (including demand for "oshi-bana" (flowers dedicated to one's favorite idols/characters)) and allocating management resources from a consumer's perspective.

The commercial value of flowers is affected by weather on both the supply and demand sides, and if the balance between supply and demand is disrupted by climate change, including global warming, this will affect transaction volumes and prices. Because quality is affected from the production stage through to the retail stage, there is a risk of impact spreading to business performance and financial condition. As a countermeasure, the Company is strengthening its cold storage warehouse facilities, striving to maintain quality and improve customer support.

In the event of an emergency such as a natural disaster or disease outbreak, the Company could suffer human and physical damage, and major changes in social conditions could make it difficult to continue all or part of its business. Given the characteristics of the flower distribution business, which deals in perishable goods, the impact of a business suspension would directly affect performance within a short period. As a countermeasure, the Company has formulated a Business Continuity Plan (BCP) and established response procedures for emergencies.

Because flower retailers handle flowers with a short commercial value period, inventory can quickly turn into losses, creating a high risk that a business partner's management and cash flow will deteriorate. Although the Company manages credit based on business partners' creditworthiness and payment terms and records allowances for doubtful accounts, if bad debt losses occur, this could affect business performance and financial condition. As a countermeasure, the Sales Division, together with other departments on a cross-functional basis, conducts customer management and receivables management.

The Company is subject to regulation under the Wholesale Market Act and the Tokyo Metropolitan Central Wholesale Market Ordinance, among others. As a result of the significant deregulation brought about by the June 2020 revision of the Wholesale Market Act, the competitive environment for the Group, which positions its flower wholesale business as the linchpin of distribution, is changing. New entrants and changes to the distribution structure resulting from deregulation could affect business performance and financial condition. As a countermeasure, while thoroughly ensuring legal compliance, the Company is strengthening its infrastructure functions from a consumer's perspective as a platformer for flower distribution.