Business and other risks
Of the matters related to business conditions, the status of accounting, etc., matters with the potential to have a serious impact on investor decisions include the following.
Furthermore, the forward-looking statements included in these materials are judgments made by our Group at the end of the FY2016 consolidated accounting year.
- Fluctuations in raw material prices
The main raw materials we use, including soybeans, palm oil, and cacao beans, are subject to the influence of market price fluctuations due to factors such as production site weather and balance in supply and demand. As such, we implement various measures, including currency futures transactions and reflect cost increases in sales prices, to reduce price fluctuation risks. However, sudden, sharp increases in raw material prices could have a negative impact on Group earnings and financial status.
- Fluctuations in currency market
Currency market fluctuations can impact the Japanese yen conversion amounts of assets and liabilities generated from the Group's transactions conducted in foreign currencies. There also is the possibility that raw material, product, and service prices as well as net purchases and net sales for transactions conducted foreign currency may be impacted. We conduct currency futures transactions and other risk hedging to reduce these risks but sudden fluctuations in currency markets could have a negative impact on Group earnings and financial status.
- Risks inherent to engaging in overseas markets
One of our core strategies is the expansion of overseas business, and we are engaged in business expansion on the global level. As such, in the event we are faced with various risks including protective restrictions unique to specific countries, unanticipated legal or regulatory changes, the occurrence of unfavorable tax circumstances for our Group due to complex international tax administration or tax system revisions, or in the event of political or social risks, there is a possibility such circumstances could have a negative impact on Group business, earnings and financial status.
- Capital expenditure recovery risks
Our Group aggressively conducts forward-looking investments for future growth. During investment activities, we make investment decisions with a focus on future demand projections and our Group's competitive potential. However, changes in economic trends, competitor engagement, or changes in consumer trends can result in the inability to secure originally predicted production volume or net sales. As a result, there is a possibility such circumstances could have a negative impact on Group earnings and financial status.
- Fixed asset impairment risks
Our Group retains various fixed tangible assets associated with our operations and intangible fixed assets such as goodwill incidental to the acquisition of businesses. Dramatic changes in our operating environment may result in some facilities being idle or in reduced operating rates, resulting in performance at purchased businesses that is below initial targets. This can lead to a reduction in future cash flow projected from retained assets and result in impairment losses due to the application of fixed asset impairment accounting. As a result, there is a risk of an impact on Group earnings and financial status.
- Food safety
Concern among consumers regarding food safety is growing. In Japan, we receive documentation from raw materials manufacturers to prove they are not in violation of the Food Sanitation Act, the Law Concerning Standardization, etc. of Agricultural and Forestry Products, and other relevant laws. We employ a thorough system that includes conducting quality confirmation and implementing measures to ensure food safety. However, in the event of a serious quality problem that exceeds expectations, there is a risk that the Group could incur massive costs as well as serious damage to the reputation of all the Group's products, which would reduce sales and could have a negative impact on Group earnings and financial status.
- Supply chain environmental and social risks
Our Group mainly handles agricultural produce. As such, we work with suppliers and other stakeholders to practice procurement activities respect the environment and human rights. With palm oil in particular, we have drafted our "Responsible Palm Oil Procurement Policy" to promote the prevention and reduction of environmental and human rights risks along the supply chain (farms). However, issues during business operations or along the supply chain such as an environmental issue attributable to farm development or human rights issues such as child labor or forced labor could have a negative impact on Group earnings and financial status.
- Legal regulations
As a food company, our Group is subject to regulations outlined in relevant law, including the "Food Hygiene Law", "Law Concerning Normalization of Agricultural and Forest Products", "Product Liability Law", "Law for Promotion of Sorted Collection and Recycling Concerning Containers and Packaging," and the "Waste Disposal and Public Cleansing Law". We also are subject to the laws and regulations unique to the countries in which we operate. We operate under the assumption of compliance with these laws but if legal or regulatory revisions, strengthening, or additional regulation by new laws leads to cost increases, this could have a negative impact on Group earnings and financial status.
- Risks related to disasters and accidents
A stoppage of production operations is projected in the event that a major earthquake or other natural disaster, power outage, fire or explosion, infectious disease epidemic, conflicts, terrorism, or violent demonstrations occur in any of the regions in which our production facilities are located. Such conditions could have a negative impact on our Group earnings or financial status.
- Risks related to information systems and information security
Our Group has established an appropriate system management structure and implements appropriate security measures. However damage to our information systems due to power outage, disaster, unexpected cyberattack, unauthorized access, or computer virus infection, or a leak of internal information could have a negative impact on our Group earnings or financial status.
- Risks related to company acquisitions
Our Group has outlined growth strategies in Towards a Further Leap 2020, our new medium-term management plan. We will continue to evaluate business acquisitions for the purpose of securing our global competitive advantage but results that underperform expectations due to various unforeseeable uncertainties could have a negative impact on our Group earnings or financial status.
- Risks related to human resource hiring and development
Our Group views the hiring and development of human resources capable of performing on the global stage as a vital issue. We promote diversity and are proactively building an environment that enables the hiring and development of personnel capable of taking on challenges in global markets. However, the inability to conduct the hiring and development of elite human resources in accordance with plans could have a negative impact on our Group earnings or financial status.