THE YONKYU CO.,LTD.

The fresh fish sales business accounts for approximately 60% of Group net sales, and exhibits seasonality with sales volumes increasing during the year-end/New Year period and during the fry stocking season (first half of the fiscal year). The feed sales business also tends to have sales concentrated in the second and third quarters. Combined with industry trends and price movements, these factors may cause fluctuations in operating results. In particular, profit tends to be weighted toward the first half, when fry sales are concentrated.

The Group's earnings structure depends on "sales volume × a fixed margin per kilogram," and selling prices tend to decline when there is oversupply of farmed fish and rise when there is undersupply. Large price swings can also affect sales volumes and margin width, potentially adversely affecting operating results. Expanding sales volume is the top priority, but this inherently carries risk that is subject to market conditions.

The artificial hatching business, mainly targeting sea bream, is a highly profitable business that contributes significantly to Group earnings. However, if unforeseen events such as disease-related mass mortality occur, they could materially affect the operating results of this business. Given the nature of the business, biological risk cannot be entirely eliminated, and continuous maintenance of management systems is required.

In the tuna farming business, there is a risk of mass mortality of farmed tuna due to natural disasters such as typhoons and tsunamis, or due to marine environmental pollution and red tide outbreaks. Should such events occur, they could significantly affect the Group's operating results. Because this risk stems from natural phenomena, it is characteristically difficult to avoid in advance.

In the eel farming business, poor catches of fry (glass eels) can cause procurement prices to spike, raising production costs. Unforeseen events such as disease-related mortality could also significantly affect operating results. Because glass eel catch volumes are subject to natural conditions, securing a stable supply is a structural challenge.

Natural disasters such as typhoons and tsunamis, as well as environmental pollution and red tide outbreaks, can cause large-scale damage not only to the Group but to the aquaculture industry as a whole. Depending on the extent of damage, this could significantly affect the Group's operating results and financial position. This is a systemic risk that spreads across the entire industry, and there are limits to what can be addressed at the individual company level.

A variety of legal regulations apply to the Group's business, including the Basic Act on Food Safety, the Food Sanitation Act, the JAS Act, and the Product Liability Act, and tightening of regulations or the introduction of new legal requirements could affect operating results. In addition, even quality issues that are not specific to the Company but occur across society at large could significantly affect operating results. The Group has built its own safety management system to respond to these risks, but continued attention to changes in the external environment is necessary.

If producers suffer inventory impairment due to a significant decline in fish prices or mass mortality of farmed fish, the risk of bad debt on the Group's trade receivables may increase. Depending on the extent of the damage, this could significantly affect operating results and financial position. The Group has implemented countermeasures such as stricter credit management and appropriate provisioning of allowances for doubtful accounts.

If the fair value of the Group's business assets declines significantly, or if a decline in profitability makes it unlikely that invested amounts can be recovered, impairment losses may be recorded, affecting operating results and financial position. Fixed assets such as aquaculture-related facilities are susceptible to market conditions and natural disasters, and impairment risk could materialize. The occurrence of impairment can be a factor that significantly worsens financial figures on a temporary basis.