Risks in sourcing fresh produce due to weather and natural disasters

「長引く天候不順（台風、長雨等）や地震等の影響で各種野菜の生育不良・品質不良が発生し、価格が高騰したため、売上総利益率が想定以上に大きく下振れました。」

「Although some products were affected by price increases resulting from extreme heat, the fresh produce business appropriately responded to market fluctuations by strengthening management of procurement costs and inventory and reducing disposal losses, helped by the centralized procurement system at headquarters introduced this fiscal year, and by further improving field-operating efficiency through optimization of staffing and logistics.」

「Although some items were affected by price increases resulting from the extremely hot summer, the successful introduction of the centralized head-office procurement system launched this fiscal year enabled stricter management of procurement costs and inventory and reduced disposal losses. We also further improved the efficiency of on-site operations by optimizing staffing and logistics, allowing us to respond appropriately to market fluctuations.」

「Prolonged adverse weather, including extended rain and record heat, caused poor growth and poor quality in various vegetables, and soaring purchase prices, including for imported products, became a factor behind lower profit.」

「The second quarter was affected by special factors, including the spread of a fire from neighboring premises at the Nara facility of the consolidated subsidiary デリカフーズ㈱ and a sharp rise in purchase prices for various vegetables, including tomatoes, amid record summer heat. In the third quarter, as weather conditions stabilized, vegetables remained in good condition. Together with the effects of improving selling prices after carefully explaining the situation to business partners, this enabled the company to steadily build earnings.」

「Under record summer heat, poor growth and poor quality occurred in various vegetables, including tomatoes, and purchase prices surged as market supply declined.」

「In recent years in particular, abnormal weather has affected agricultural harvests worldwide.」

「Profit was also affected by deteriorating market conditions for leafy vegetables due to prolonged rain in the summer, lower temperatures in September and insufficient sunshine. Operating loss was ¥709 million, compared with an operating loss of ¥1,354 million in the same quarter of the previous year, while ordinary loss was ¥611 million, compared with an ordinary loss of ¥1,015 million in the same quarter of the previous year.」

「In recent years in particular, abnormal weather has affected agricultural harvests worldwide.」

「The fresh produce distribution industry continues to face extremely difficult operating conditions. Consumers remain strongly inclined to economize because of the October 2019 consumption tax increase and concerns about future increases in social security burdens, while labor and logistics costs are rising because of labor shortages. Natural disasters affected the second half, and the spread of COVID-19 rapidly dampened consumer sentiment.」

「The food-related industry also continues to face difficult operating conditions. Consumers remain strongly inclined to economize because of concerns about the October consumption tax increase and future increases in various burdens, while labor costs and logistics costs are rising because of labor shortages and adverse weather and natural disasters have affected the industry since July.」

「The food-related industry also continues to face difficult operating conditions, as consumers remain strongly inclined to economize, while labor shortages are becoming more serious, logistics costs are rising, and adverse weather and natural disasters have affected the industry since July.」

「Although performance was significantly affected in the first half by soaring procurement prices and disposal losses caused by adverse weather including record heat and torrential rain, typhoons and earthquakes, relatively calm weather in the second half stabilized fresh produce procurement prices and quality. In addition, customers, mainly in the food service industry, understood the situation and cooperated with price revisions, enabling the company's performance to return to a recovery trend.」

「Although profit was significantly affected in the first half by soaring vegetable procurement prices and disposal losses caused by adverse weather including record heat and torrential rain, typhoons and earthquakes, the weather was favorable in the current third quarter and vegetable procurement prices and quality stabilized.」

「With regard to profit, production areas nationwide suffered severe damage from record heat after the end of the rainy season, torrential rains in western Japan, the 2018 Hokkaido Eastern Iburi earthquake and successive powerful typhoons. Harvests declined for almost all vegetables, resulting in soaring vegetable prices due to procurement difficulties, a substantial deterioration in work efficiency and yield due to lower quality, and substantial disposal losses.」

「The effects of the poor harvest, which lasted for nearly six months, led not only to higher prices but also to deteriorating quality and a significant decline in work efficiency in processing and shipping, resulting in extremely difficult operating conditions overall.」

「With regard to profit, the effects of soaring vegetable procurement prices and deteriorating quality caused by insufficient sunshine from the prolonged rain and cloudy conditions from late July, and by typhoons and low temperatures from October onward, continued into the current third quarter.」

「There were very few rainy days during this year's rainy season. In addition, the prolonged rain and cloudy conditions from late July caused low temperatures and insufficient sunshine, resulting in soaring vegetable procurement prices and disposal losses from August onward.」

「Repeated typhoons making landfall during the summer caused severe damage to production areas nationwide, particularly Hokkaido, a major production area. Supplies remained tight, particularly for root vegetables, and market prices rose. In addition, record low sunshine said to occur once in 30 years caused a substantial decline in fresh produce harvests and significant deterioration in quality, resulting in extremely difficult operating conditions throughout the year.」

「In the fresh produce industry, repeated typhoons making landfall, a stalled autumn rain front and record low sunshine said to occur once in 30 years caused a substantial decline in fresh produce harvests and deterioration in quality, resulting in record price increases, particularly for leafy vegetables and root vegetables. The effects of repeated typhoons making landfall from August onward, record low sunshine and low temperatures continued into the current third quarter, including soaring vegetable prices and deterioration in quality.」

「Repeated typhoons making landfall, a stalled autumn rain front, and record low sunshine and temperatures said to occur once in 30 years caused a substantial decline in fresh produce harvests and deterioration in quality. Prices rose to record levels, particularly for leafy vegetables and root vegetables. The resulting surge in vegetable prices showed signs of continuing for an extended period.」

「Despite these measures, if production and harvesting of fresh produce were to decline substantially because of weather, climatic conditions or natural disasters, the Group's financial condition and operating results could be adversely affected by soaring purchase prices or lost sales opportunities, among other factors.」