Yokohama Maruuo Co., Ltd.

As a wholesaler of fresh food products, quality control is a matter of the highest importance, and if a quality problem occurs in a handled product, substantial compensation losses may arise, potentially affecting the financial position, business performance, and cash flows. As countermeasures, the Company has established a Quality Control Office, and is implementing improvements to check functions through on-site guidance, employee training, and sharing of the latest information using a company-wide communication tool.

The Company holds shares related to financial institutions and business partners, and the dividend income from these shares has a significant impact on profit and loss. If an investee company's earnings deteriorate and it suspends dividend payments, dividends received may decrease, potentially affecting the financial position, business performance, and cash flows. The Company manages this risk by comprehensively considering business strategy and business relationships for each individual security when deciding whether to continue holding or dispose of shares.

While purchasing is conducted with consideration of market conditions, since products are held for a certain period, there is exposure to market price fluctuation risk, and deterioration of the supply-demand balance could result in excess inventory and disrupted cash flow. Recording of valuation losses on inventory may also affect business performance. Each business location holds an inventory meeting once a month to share market condition information and check for stagnant inventory, aiming to maintain appropriate inventory levels.

In the Marine Products Wholesale Business, which is the Company's core business, factors such as fluctuations in catch volumes due to weather conditions, and legal regulations or import restrictions on fishery resources, may cause large fluctuations in the market supply volume and prices of marine products, potentially reducing net sales. Even if a decline in catch volume of a specific fish species occurs, the Company, as the Yokohama City and Kawasaki City Central Wholesale Market operator, works to minimize the impact by procuring other fish species.

If abnormal weather, such as global temperature rise, causes changes in the marine environment and shifts the distribution ranges of fishable species, a significant decrease in catch volumes could occur. In addition, if a large-scale natural disaster such as an earthquake occurs, business operations could be temporarily suspended, making procurement and product delivery difficult and potentially reducing net sales. Through a system that procures a variety of fish species from fishing grounds and business partners throughout Japan, the Company takes measures to minimize impact by maintaining stable procurement of other fish species from other locations even when procurement of a particular species declines.

Due to the prolonged Russia-Ukraine conflict, the Company group, which purchases and holds a certain volume of Russian marine products in inventory, may face restrictions on the handling of Russian marine products by business partners. In addition, cost increases due to detour routes avoiding Russian airspace continue for marine product imports from Europe, and a further prolongation of the conflict could lead to continued price surges and shortages, including for substitute products. The Company works to maintain appropriate inventory levels while closely monitoring the conflict situation, and aims to cover the impact through procurement and sale of domestic and overseas substitute products.

With the prolongation of the Middle East conflict triggered by the attack on Iran by the United States and Israel, energy prices and various raw material prices have surged and supply chains have been disrupted, and rising logistics costs due to soaring fuel prices may affect the financial position, business performance, and cash flows. The Company is implementing measures to mitigate the impact by building an efficient procurement system through group information sharing and by securing a procurement network specialized in Kanagawa Prefecture products through strengthened networks with fishery cooperatives.

Legal regulations and import restrictions on fishery resources, among other factors, may cause large fluctuations in the market supply volume and prices of marine products, potentially reducing net sales. If tightened regulations restrict the volume handled for a specific fish species, this would have a direct impact on the earnings of the Marine Products Wholesale Business, the Company group's core business. The Company works to disperse and mitigate the impact of regulations through its procurement system for a diverse range of fish species as the operator of the Yokohama City and Kawasaki City Central Wholesale Market.

If various risks materialize and adversely affect financial soundness, it may become difficult to cover working capital and capital expenditure with internal funds. In such a case, the Company's policy is to resolve and improve the situation by procuring funds through bank borrowings. If multiple risk factors materialize simultaneously, the impact on cash flow could expand, making the maintenance of a sound financial base an important issue.