Impact of Natural Disasters and Epidemics on the Supply Chain and Raw Material Procurement

「While responses to fluctuations in the supply volumes and procurement prices of agricultural and fishery products are required, consumers are showing a stronger inclination to economize and greater selectivity regarding prices against a backdrop of rising food prices.」

「In addition, heightened international tensions, wars and conflicts, and growing geopolitical risks may lead to surging energy prices, shortages of raw materials and packaging materials, disruption to maritime transport networks, and higher logistics costs.」

「During the cumulative second quarter period under review, Japan's economy showed signs of a gradual recovery as economic and social activity moved toward normalisation, including increased movement of people and a recovery in inbound demand following the reclassification of COVID-19 as a Class 5 disease.」

「The overseas manufacturing subsidiaries reported higher revenue and profit as sales to hotels and restaurants recovered following the easing of restrictions on socioeconomic activity related to COVID-19.」

「In addition, the Group's results and financial position may be adversely affected by disruptions to domestic and overseas supply chains, a decline in consumption resulting from requests to refrain from going out, sluggishness in the food service and tourism industries, weak demand for food-service products, government restrictions on activities and social disruption, and significant changes in consumer spending and purchasing patterns due to psychological factors, arising from outbreaks of new diseases such as COVID-19, for which no signs of containment are currently visible anywhere in the world.」

「Overseas manufacturing subsidiaries recorded higher revenue and profit as sales to hotels and restaurants recovered following the easing of restrictions on socioeconomic activity related to COVID-19.」

「In addition, the rapid spread of the seventh wave of COVID-19 infections has left the outlook for Japan’s economy uncertain.」

「Although demand from the food service and tourism industries remained weak due to temporary restaurant closures, reduced operating hours and calls for consumers to refrain from going out, signs of a gradual recovery began to emerge.」

「In Japan’s food industry, demand from retailers such as food supermarkets and drugstores remained stable. However, demand from the food service and tourism industries fell further as the areas subject to declarations of a state of emergency and priority preventive measures were expanded. The difficult operating environment therefore continued.」

「In Japan’s food industry, demand from retailers such as food supermarkets and drugstores remained stable as stay-at-home consumption increased. However, demand from the food service and tourism industries fell sharply because restrictions on serving alcoholic beverages and reduced operating hours at restaurants, as well as calls for consumers to refrain from going out, continued as a result of intermittent declarations of a state of emergency in certain regions and the application of priority preventive measures. The difficult operating environment therefore continued.」

「Domestic manufacturing subsidiaries recorded higher revenue and profit as demand from supermarkets and other retailers increased with the spread of COVID-19 and 株式会社香り芽本舗 was brought into the group. Overseas manufacturing subsidiaries, however, recorded lower revenue and profit due to the impact of partial lockdowns in Singapore and Malaysia and lower sales to hotels and the aviation-related sector.」

「If the deterioration in economic conditions caused by the spread of COVID-19 continues for an extended period, it could have a further impact on the group’s financial position, operating results and cash flows.」

「Against this backdrop, domestic subsidiaries recorded higher revenue as stay-at-home demand increased with the spread of COVID-19. Overseas subsidiaries, however, recorded lower revenue because some subsidiaries were forced to suspend operations as a result of the partial lockdown implemented in Singapore during the period, while hotels, restaurants and other customers suspended or scaled back their operations.」

「As the spread of COVID-19 led to increased stay-at-home consumption, domestic subsidiaries recorded a significant increase in profit. Overseas subsidiaries, however, saw sales decline as economic and social activity was restricted, and, as a result of conservatively estimating this impact, recorded allowances for inventories and accounts receivable.」

「In addition, if the emergence of a new epidemic such as COVID-19, which continues to spread worldwide, causes material changes in consumer behaviour or purchasing patterns due to government restrictions on activities, social disruption or psychological factors, impairment of fixed assets may result from deterioration in the operating results of the group’s subsidiaries, and impairment of goodwill may result if the business plans assumed at the time of acquisition fail to progress as planned. This could affect the group’s business results and financial position.」

「Natural disasters such as major earthquakes, torrential rain and tornadoes could damage, flood or destroy the buildings and equipment and machinery inside the group’s offices, factories and other facilities.」