Risk Factors

The main business risks recognized by the Group are described below. If these risks become reality, they may have a major effect on the Company’s business performance and financial position. In recognition of these risks, our TRM (Total Risk Management) Committee will develop a risk management system with the aim of avoiding risks and minimizing the effect of such risks if they occur.

The Group’s products mainly consist of the precious metals such as gold, silver, platinum and palladium; the main raw materials used in their production are the recycled raw materials containing the various precious metals. As a general rule, the purchase price is based on the market price for precious metal bullion and the market prices are affected by changes in the international commodities market and fluctuation in exchange rates. The prices of these products are also determined based on the market price. The Group employs commodity forward dealing to avoid pricing risk attendant to fluctuating prices, but it is possible that changes in the price of precious metals could affect its operating results.

A large portion of the Group’s processed raw materials for food products, which consist mainly of surimi fish paste and other seafood, livestock products, and agricultural products, come from overseas. Both the purchase and sales price of these products are affected by fluctuations in commodity market prices and exchange rates. The Group works to mitigate fluctuations in prices through forward exchange contracts and adjustments to sales prices to pass on costs to customers. However, declines in sales prices due to factors such as changes in the supply-demand balance for commodities could result in losses such as inventory valuation losses, which may affect the Group’s operating results.

The Group purchases a wide range of products from overseas for the food business segment, including processed seafood ingredients comprised mainly of surimi fish paste, shrimp, crab, squid ,octopus, processed agricultural products comprised mainly of fresh, dried, and frozen vegetables, and processed livestock products comprised mainly of various types of meat of beef, chicken and others, and chicken eggs. The Group also sells these products to food manufacturers of surimi fish paste, frozen food, processed meat, prepared food, confectionery and other food products on a wholesale basis. The Group carries out strict labeling of food products as specified by law, and make every effort to strengthen its quality control training and contamination countermeasures for overseas food products. However, its operating results could be affected if food safety problems occurred and measures such as a ban on imports were imposed.

There is a trend towards stricter environmental laws as a result of growing societal concern over environmental issues. If regulations of the precious metals business segment were tightened, various measures such as increasing capital expenditures might become necessary. The Group also conducts various operations including collecting, transporting and disposing of waste as a business covered by the Waste Disposal and Public Cleaning Law, and the continuation of our business is based on the major assumption that the Group complies with the various laws.

The Group works to ensure compliance across all management activities, in line with the Matsuda Sangyo Group Global Code of Conduct, which is the highest internal standard governing the Group’s business activities and other social activities, and the Group’s Compliance Regulations, which set out measures necessary to ensure compliance.

The Group uses poisonous and toxic substances at the production stages but appropriately processes the waste liquid and atmospheric emissions, taking the environment into consideration. However, operating results could be affected if a problem occurred to the management of these materials for any various reasons, including an accident at the plant.

The Group’s precious metals business segment and food business segment both conduct business activities in various countries and regions overseas, exposing them to the risk of unforeseen developments in those markets due to changes in political, economic, social and other conditions, which could affect the Group’s operating results and financial position.

Earthquakes, floods and other natural disasters that occur in countries and regions where the Group operates could affect the Group’s business activities. To prepare for a large-scale natural disaster, the Group has introduced an employee safety confirmation system, conducts disaster training drills, and has implemented various measures to ensure business continuity. However, these measures may be insufficient to fully insulate the Group from damage, which could affect the Group’s operating results and financial position.
Also, the production of products handled by the Group’s food business segment and other business activities may be affected by abnormal weather conditions caused by climate change or other factors, which could affect the Group’s operating results and financial position.In addition, outbreaks of previously unknown infectious diseases could interrupt production and other activities, which may affect the Group’s operating results. To address outbreaks of infectious diseases, the Group works to protect employees and other personnel from infection through the use of work-from-home systems and other teleworking, staggered work arrival times and shift work. The Group has also put in place systems to support the continued supply of products, commodities and services. However, the spread of infection inside or outside the Group could disrupt or halt procurement and other business activities, which may affect the Group’s operating results and financial position.

The Matsuda Sangyo Group engages in many business activities that make use of computer systems and communication networks. As such, factors such as disruptions or breakdowns and defects in the computer systems and communication networks, or a halt in the functioning of the data center, could potentially disrupt business activities and affect business performance. Moreover, a leakage of various personal information, including customer information, as a result of cyberattacks or other unexpected circumstances, could be very costly and bring about a loss in social trust. This could also affect the Group’s operating results and financial position.