The followings are considered important issues related to the business of the Fuji Oil Group (the “Group”) that might have a significant impact on investors’ decisions.

Forward-looking statements contained here are based on the judgment of the Group as of March 31, 2023, and business risks are not limited to the issues listed below.

Business activities of the Group are subject to laws and regulations (including environmental regulations) in Japan and other countries where we operate. Any future revisions to these laws and regulations may affect the Group’s operations and performance.

The Group holds some of its assets and liabilities in US dollars, and purchases many of the raw materials in US dollars. In order to mitigate the impact of exchange rate fluctuations, we use forward foreign exchange contracts. However, it is impossible to completely eliminate exchange rate fluctuation risk, and it may affect the Group’s performance.

Falls in the prices of crude oil and other raw materials produce inventory valuation losses due to negative effect of inventory valuation (effect on cost of sales arising from inventory valuation using the gross average method and the lower of cost or market method), and such losses push up the cost of sales. Besides, oil product market conditions fluctuate significantly depending on external factors such as supply and demand and trends in crude oil prices. We strive to control such market volatility risk by conducting thorough inventory management of raw materials and manufactured products, and by appropriately hedging against mainly such transactions that are exposed to the volatility risk of overseas markets. However, it is impossible to completely eliminate such risk, and it may affect the Group’s performance. Fluctuations in the tanker market may also affect the Group's performance.

The Group has long-term and short-term interest-bearing debt. If interest rates rise, it increases non-operating expenses. To mitigate the impact of interest rate fluctuations, we use interest-rate swap transactions against long-term interest-bearing debt to stabilize the interest rates. However, if the situation concerning interest rates changes, it may affect the Group’s financial position.

The Group operates production facilities and offices in Japan and an office overseas. In the event of failures in production facilities, information systems and others due to natural disasters or other accidents, we may be forced to restrict or suspend production activities. To address such a risk, we have formulated a business continuity plan (BCP) and have put in place a system for maintaining continuity of business and restoring operations as soon as possible. However, prolonged restriction or suspension of business activities may affect the Group’s performance.

We, as one of the business entities carrying on a critical infrastructure-related business which is essential to ensuring the stability of daily lives of citizens and the national economy, make it our basic policy to continue supplying oil products even in the event of an outbreak of infectious disease such as COVID-19. If infection is confirmed in our executives or employees, we may be forced to scale back our business due to the need to take such measures as restricting the number of personnel coming to work to prevent the spread of infection.

In addition, if economic stagnation is prolonged due to the epidemic of infectious diseases and causes a major impact on oil demand, it may seriously affect the Group’s performance. 

While the Group procures its crude oil mainly from the Middle East, it also imports crude oil from other regions than the Middle East to diversify the risk of supply disruption. If procurement of crude oil is hindered due to changes in the international political situation, it may affect the Group's operations and performance.

The domestic demand for oil products is continuing the trend of structural decline, reflecting such factors as declining birthrate, aging population, widespread use of fuel-efficient vehicles. The Group can be exposed to a highly competitive environment over the domestic demand due to refineries’ excess refining capacity disproportionate to the domestic needs.

Looking at the world demand for oil products, while it is projected to make a strong rebound from the COVID-19 shock, most-advanced large refineries, new or expanded, are slated to come on stream over the next several years mainly in China, India and the Middle East on a scale exceeding the expected increase in the demand. Depending on the progress of those refinery projects, the Group could face even more intense competition.

Although we will strive to reinforce the base of the oil refining business by maintaining and enhancing operational reliability, strengthening cost competitiveness, and establishing a competitive advantage based on its medium- to long-term management strategy, intensifying competition over those oil demands may affect the Group's operations and performance.

The movement toward carbon emission reduction and decarbonization, including reduction of global warming gas emissions and conservation of energy, is progressing especially in developed countries. Recognizing it our social responsibility as well as the most important management issue for the future of the Group to contribute to a low-carbon, recycling-oriented society, we will strengthen the efforts towards a decarbonized society based on our the medium- to long-term management strategy. But if demand for oil products declines faster than expected due to a rapid progress of low-carbonization and decarbonization, it may affect the Group's operations and performance.

We have formulated “Regulations concerning Risk Management” that stipulate the system and action rules for risk management at normal times and for response in the event of materialization of risks that may seriously affect the business purposes of the Company and its subsidiaries (“business crisis”) in order to prevent the materialization of such risks, respond appropriately to the business crisis if they materialize, and minimize the Group's losses resulting from the occurrence of such business crisis.

Specifically, in accordance with the basic risk management policy established by the Board of Directors, the chief risk management officer supervises overall risk management of the Group at normal times, and in the event of a business crisis, he/she deals with the crisis under the direction of the President.