SHOKUBUN CO., LTD.

The Company's prepared meal delivery business competes with dining-out formats such as family restaurants and fast food, as well as general retailers such as supermarkets. If competitors emerge that surpass the Company in quality, price, or service level, the number of customers may decline, potentially affecting business performance. The Company seeks to differentiate itself by maintaining its advantage in menu development by registered dietitians and nutritional balance.

Expanding the number of sales routes requires securing an appropriate scale of sales personnel; if such personnel cannot be secured or if the delivery operation system fails to be developed, this may affect business expansion and performance. As countermeasures, the Company is strengthening recruitment activities, conducting training, utilizing delivery efficiency systems, and unifying instructions and policies through company-wide morning meetings.

Since it takes a certain period of time from deciding the contents of the menu booklet to procuring vegetables, meat, and seafood, sudden changes in vegetable prices due to abnormal weather or large-scale disasters, as well as fluctuations in meat and seafood prices due to rising feed and fuel costs or the outbreak of disease, affect business performance. Furthermore, there is also a risk that disasters could make the procurement of ingredients itself difficult, and a collapse in the supply-demand balance could directly impact earnings.

The Company applies accounting standards related to impairment of fixed assets, and depending on land price trends and the earnings status of the fixed assets in question, additional impairment losses may be recorded. Recording an impairment loss poses a risk of directly affecting the Company's business performance. The Company seeks to reduce this impairment risk by working to improve profitability.

The Company procures necessary funds through borrowings from financial institutions, and the ratio of interest-bearing debt (borrowings and lease obligations) to total assets stands at a high level of 30.1%. Although interest-bearing debt is on a declining trend, fluctuations in interest rate conditions and other financial market movements may affect business performance. In a rising interest rate environment, there is a risk that increased financial costs will squeeze earnings.

The Company records deferred tax assets in respect of tax loss carryforwards and deductible temporary differences; however, if it is determined that these are not recoverable due to significant changes in business performance or the operating environment, the deferred tax assets may be reduced, potentially affecting business performance. A similar risk may also arise in the event of tax reforms, including changes in tax rates, or revisions to accounting standards.