Nippi,Incorporated

Since the Company relies on cattle hide, pig hide, fish skin, and fish scales as principal raw materials, there is a risk that raw material prices may rise sharply due to supply-demand trends in raw material markets. Although the Company strives for stable procurement by diversifying its sourcing, price pass-through can be difficult given the wide range of products sold across multiple markets, and in periods of rising raw material prices, only manufacturing costs may increase, potentially affecting business results.

Production plants for the core businesses of Collagen Casing, Gelatin, and Collagen Peptide are concentrated in Shizuoka Prefecture, so a large-scale natural disaster such as an eruption of Mt. Fuji could cause severe damage to key production facilities. In addition, in the event of an infectious disease outbreak, production and sales activities could be suspended due to employee infections or supply chain disruptions, and demand could also decline due to changes in overall consumer behavior.

As the Company imports raw materials and products and exports products, it is affected by fluctuations in foreign exchange rates. Although the Company seeks to mitigate this risk through hedging instruments such as forward foreign exchange contracts, a sharp change in exchange rates could affect business results.

Since some of the products sold and many of the raw materials used in manufacturing are imported and subject to tariffs, the Company is affected by changes in tariff rates resulting from amendments or abolitions of trade agreements and other laws. In addition, products sold both domestically and overseas are required to comply with standards and regulations appropriate to their intended use, and the introduction of new rules or legal changes may affect the Group's transactions.

The Company has made capital investments in production facilities and other assets to strengthen its competitiveness; however, if the market size shrinks significantly from initial assumptions, production capacity may become excessive, making it difficult to recover the investment amount. As a result, the Company may need to record impairment losses or losses on disposal of facilities, which could affect business results.

The Company is proceeding with redevelopment of the former sites of leather manufacturing plants in Tokyo and Osaka, with land development largely complete and operations proceeding smoothly. However, due to the nature of the real estate development business, there is a risk of recording unexpectedly large extraordinary losses or extraordinary gains, which could affect business results.

Since the Company conducts sales and production activities across a wide range of regions including Asia, Europe, and North America, there is a risk of being affected by unforeseen legal changes or political and economic turmoil in those regions. These geopolitical and regulatory changes could affect the Group's business results.

The Company holds personal information and confidential information of customers and business partners, as well as important information related to sales, technology, and human resources, and has established an information management system and security measures. However, if unauthorized access, data destruction, tampering, or leakage occurs due to cyberattacks or other causes, it could affect business results.

In manufacturing its products, the Company complies with laws and regulations and implements strict quality control, and also carries product liability (PL) insurance. However, there is no guarantee that PL insurance will cover the full amount of damages, and if a quality issue occurs, it could result in loss of customer trust and affect business results.

The Company conducts production planning, raw material procurement, and inventory management based on demand forecasts; however, if demand contracts causing prolonged inventory stagnation or a significant decline in product sales prices, there is a risk of recording valuation losses or disposal losses on inventory. This could affect the Group's business results.