Chuo Gyorui Co.,Ltd.

Fluctuations in catch volumes due to natural conditions such as weather and ocean currents, catch restrictions on fishery resources, import/export restrictions, and changes in overseas conditions and foreign exchange rates may cause significant fluctuations in the volume and price of marine products arriving at market, affecting both procurement and sales. This is a risk that could affect sales and profit in the short term, and the Group is working to minimize the impact by strengthening relationships with shippers nationwide and diversifying overseas suppliers.

The Marine Products Wholesale Business is subject to regulations such as the Wholesale Market Act, the Food Sanitation Act, and the JAS Act, and legal amendments or incidents related to legal regulations may affect market operations and business performance. The June 2020 revision of the Wholesale Market Act shifted the system from a licensing system to a certification system and eased trading rules such as third-party sales and direct consignment, which could have a significant impact on business performance over the medium to long term. The Company views this not as a threat but as an opportunity, and is responding by leveraging the functions of Group companies to strengthen marine product distribution functions both inside and outside the market.

The repayment burden of unsecured loans taken during the COVID-19 pandemic, rising procurement costs due to overseas conditions and foreign exchange fluctuations, and increased out-of-market distribution have weakened the financial strength of some customers, increasing the risk of bad debts on trade receivables. Advance payment receivables to shippers also carry a similar risk due to fluctuations in catch volumes, raising concerns about short-term impact on business performance. As countermeasures, the Company is strengthening information gathering and credit management, reducing advance payment receivables, and increasing allowances for doubtful accounts.

If any failure, including those caused by external factors, occurs in the network system connecting Group companies, it could significantly affect the Group's overall business operations. This risk is expected to have a short-term impact, and the Group is addressing it by decentralizing business locations and advancing security measures.

Because business activities are concentrated in the Tokyo metropolitan area, a large-scale natural disaster such as an earthquake could cause significant damage—including damage to wholesale market facilities, refrigerated warehouse facilities, and real estate facilities, as well as human casualties—potentially resulting in the temporary or medium- to long-term suspension of all or part of the business. Impact on business performance is expected over the short to medium term, and the Company is addressing this through decentralization of business locations, seismic diagnosis, seismic reinforcement, seismic isolation, and the formulation of business continuity plans.

Since the Group mainly handles fresh food and frozen products, problems with temperature control or hygiene management could affect business operations and performance. The frequency of occurrence is recognized as roughly once every few years, and concerns exist regarding short-term impact on business performance. The Group addresses this through various training programs, manual development, and guidance and improvement led by dedicated quality control personnel.

Rising logistics costs and increasing difficulty in cargo collection are anticipated, which could have a certain degree of adverse impact on the Group's business performance. The Group is working to strengthen collection capability and curb logistics costs by accelerating information sharing through digitalization and restructuring logistics routes, while in the Refrigerated Warehouse Business it is conducting trials of labor-saving and automation measures to improve the efficiency of cargo handling operations and shorten waiting times.

Climate change—including rising seawater temperatures, sea level rise, and abnormal weather—may reduce fishery resources and make fishing operations more difficult, potentially leading to raw material procurement difficulties and price increases. In addition, increased risks of marine pollution and red tide occurrence could reduce food safety, significantly affecting the Group's operations and business performance. As a countermeasure, the Company is advancing system development to strengthen traceability of marine resources.

The combination of an increasing number of retirees due to the aging of employees and the growing difficulty of recruiting younger workers due to population decline could significantly affect the Group's business operations over the medium to long term. The Company is promoting the recruitment of diverse talent, including women, older workers, mid-career hires, people with disabilities, and foreign nationals, while addressing wage disparities, providing talent development opportunities, revising childcare and family care leave systems, and expanding the post-retirement re-employment system to improve the working environment.

In the course of conducting business both domestically and internationally, the Group may become a party to litigation or other legal proceedings, and if significant litigation is filed or restrictions are imposed on business operations, this could adversely affect the Group's business, performance, and financial condition. While the frequency of occurrence cannot be predicted, there are concerns about short-term impact, and the Group is addressing this by enhancing its compliance and risk management systems.