FINANCIAL
SECTION
2020
Year Ended March 31, 2020

KANEKA CORPORATION

FINANCIAL REVIEWKANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIESSALESNET INCOME

The Kaneka Group’s business performance for the fiscal
year from April 1, 2019 to March 31, 2020 (FY 2020) was
marked by lower earning on lower sales of ¥601,514
million (down 3.1% year on year).

For the year, the Group recorded net income attributableto owners of parent of ¥14,003 million, down 37.0%
from the previous fiscal year.

OPERATING EXPENSES AND OPERATING INCOME
During FY2020, the cost of sales decreased by 3.1% to¥432,374 million. The cost of sales ratio was 71.9%, sameas FY2019. SG&A expenses increased 3.2% to ¥143,124
million, and the ratio of SG&A expenses to sales increased
from 22.3% to 23.8%. Operating income during FY2020
decreased 27.8% to ¥26,014 million.

Net sales

As of March 31, 2020, total assets were ¥653,262 million, down ¥6,325 million from March 31, 2019, due
mainly to decreases in accounts receivable and investment securities. The ratio of net income attributable toowners of parent to total assets (ROA) was 2.1%, down
1.3% from the previous fiscal year. Interest-bearing
debt stood at ¥130,843 million, up ¥10,324 million fromMarch 31, 2019. Net assets decreased ¥6,631 million
to ¥354,094 million, reflecting a decrease in valuationdifference on available-for-sale securities, and foreign
currency translation adjustments. As a result, the equity
ratio came to 50.7%. The D/E ratio (ratio of interest-bearing debt to equity capital) was 0.39.

Operating income(Millions of yen)

600,000

FINANCIAL CONDITION

596,142621,043(Millions of yen)

601,514555,227 548,222

40,00038,22036,88836,041

33,16430,00026,014400,000
20,000200,000
10,000

0

0
2016

1

KANEKA CORPORATION

2017

2018

2019

2020

2016

2017

2018

2019

2020

CASH FLOWS

Financial Index Trends

Cash and cash equivalents at March 31, 2020 were¥37,606 million, ¥2,364 million less than at March 31,
2019.
Net cash provided by operating activities was¥39,983 million, ¥1,130 million less than in the previous fiscal year. The main contributors to the decrease
were income before income taxes and non-controllinginterests of ¥19,797 million, and depreciation and amortization of ¥34,340 million, which were partially offset
by notes and accounts payable-trade of ¥11,120, andincome taxes paid of ¥6,531 million.
Net cash used in investing activities amounted to¥41,807 million, ¥5,421 million less than in the previous
fiscal year. The principal use of cash was ¥42,977 million
for the purchase of property, plant and equipment.
Financing activities used net cash of ¥479 million,¥475 million less than in the previous fiscal year. This
mainly reflected cash dividends paid of ¥6,848 million
and payments from changes in ownership interests in
subsidiaries that do not result in change in scope of
consolidation of ¥4,574 million, and proceeds from loans
payable of ¥11,117 million.

Net income attributable to owners of parent(Millions of yen)

30,000Year ended
Year ended
Year ended
Year ended
Year ended
March 31, 2016 March 31, 2017 March 31, 2018 March 31, 2019 March 31, 2020
Shareholders’equity ratio

50.6%

51.5%

50.9%

51.1%

50.7%

Shareholders’equity ratio basedon market value

55.4%

46.1%

53.9%

41.0%

25.9%

Interest-bearing
debt coverage
ratio

1.9

2.3

2.3

2.9

3.3

Interest coverage
ratio

50.9

34.2

29.6

20.5

23.2

Shareholders’ equity ratio: equity capital/total assets
Shareholders’ equity ratio based on market value: total market value of stock/
total assets
Interest-bearing debt coverage ratio: interest-bearing debt/cash flows
Interest coverage ratio: operating cash flows/interest expenses paid
Notes:
1. All items were calculated according to financial figures on a consolidated
basis.
2. The calculation of the total market value of stock was based on the total
number of shares outstanding, excluding treasury stock.
3. “Operating cash flows” refers to cash flows from operations.
4. The scope of interest-bearing debt is all liabilities in the Consolidated Balance Sheets for which interest is payable.
5. Paid interest is based on the amount of interest paid shown in the Consolidated Statements of Cash Flows.

Total assets(Millions of yen)

600,000

20,985

20,484

21,571

639,780
577,251

659,587 653,262

592,900

22,23820,000400,000
14,003

10,000200,000

0

0
2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

FINANCIAL SECTION 2020

2

FINANCIAL REVIEW

BUSINESS RISKS AND UNCERTAINTIES

business performance, and status of cash flows.

(1) Basic Risk Management Policy② Risks related to the Group’s ability to maintain operational
advantages and trends in the Japanese and overseas
economic environment
The Group licenses or merges advanced technologies
from outside with its internally developed technologies
to develop and commercialize high-value-added products
in a wide range of fields, continuously opening new markets to ensure the competitive advantage of its businesswhile working to strengthen its management foundation
by advancing business structure reforms. However, theoccurrence of sudden changes in the economic environment, rapid advances of technology innovation, or theoccurrence of natural disasters or pandemics could havea negative impact on the Group’s financial situation, business performance, and status of cash flows.

Our basic risk management policy is that each division
identifies operational risks and other types of risks thatit may face, takes appropriate preventive measures, andresponds appropriately in cooperation with other relevant
divisions if a risk manifests itself.
For preventive measures against potential risks
including those related to ethics and legal compliance,
the Compliance Subcommittee of the ESG Committee
oversees the development and implementation of thecompany-wide plans.
When a risk occurs or is likely to occur, the ESG Committee handles the risk in cooperation with the relevant
divisions.
We regularly check whether the above-mentioned
activities are implemented properly to prevent our risk
management system from falling into mere formality,
and strive to maintain and improve its effectiveness.

(2) Business-Related Risks
The following are examples of items that could have amaterial impact on the Group’s financial situation, business performance, and status of cash flows among theitems related to the status of operations and financial
information listed in the annual securities report.
The items described here are deemed by the Groupto be risks as of the end of the fiscal year under review;
however, they do not cover all of the risks related to theGroup.
① Risks related to the novel coronavirus (COVID-19) pandemic
The Group makes aggressive use of telework and otherinitiatives to rigorously prevent infections, giving first priority to the safety and health of employees, while also taking steps to achieve a full-scale reopening of its corporate
activities. We have also taken the acceleration of socialchange driven by COVID-19 as an opportunity for transformation, and we are designing a new approach to work
(New Style Work Culture). However, the Group’s businessactivities are conducted through a science and technology supply chain that connects across national borders
on a global scale. If the impact of the pandemic were to
become prolonged, a stoppage in this supply chain could
have a negative impact on the Group’s financial situation,

3

KANEKA CORPORATION③R
 isks associated with the globalization of our business(fluctuations in foreign exchange rates and overseas
business development)
The Group has always maintained a global vision, andpromoted the development of its business ahead ofother companies. Currently, it has adopted “glocal”(locally originated business development) as a central
concept, and is accelerating the development of technologies and materials tailored to local characteristics
around the world. Business activities overseas are subject to risks such as unforeseeable changes including
those in laws, regulations, and taxation systems, theapplication of taxes under transfer pricing systems,
sudden fluctuations in exchange rates, and social andpolitical unrest driven by terrorism, conflict, and so forth.
To prevent these risks form materializing, or to mitigate
their impacts, we have strengthened the governanceof Group companies, established a system of experts,
strengthened exchange-rate resilience, purchased damage insurance, and taken measures for employee safety.
However, the materialization of these risks could have anegative impact on the Group’s financial situation, business performance, and status of cash flows.
④R isks of price fluctuations of raw materials and fuel
The Group has built and implemented a system for procurement of raw materials and fuels at the most favorable terms by combining global purchasing with purchas-ing through medium- to long-term contracts and the spot
markets. Since most of these items are international
market commodities, unanticipated market fluctuations
could have a negative impact on the Group’s financial situation, business performance, and status of cash flows.
⑤ Risks associated with product liability, industrial accidents
and large scale disasters
The Group has built and implemented strong quality anddistribution systems for the products that it supplies
to customers, and it has purchased liability insurance
to cover the entire Group in the unlikely event of an
accident. Moreover, the Group prioritizes safety in allareas and follows laws and regulations in its businessactivities. However, there is a risk that an unexpected
accident or large scale natural disaster, such as an earthquake, could damage our main production facilities andcause losses that exceed the scope of property insurance coverage. The occurrence of such a situation could
have a negative impact on the Group’s financial situation,business performance, and status of cash flows.
⑥ Risks associated with the protection of intellectual
property rights
The Group makes certain to obtain rights for its researchand development results in the form of patents and otherintellectual property, aiming to quickly provide solutions
that can contribute to resolve social issues. On the other
hand, we respect other companies’ intellectual property
and work to avoid contention by making certain to conduct patent surveys at each stage of business development, such as theme proposal, commercialization, andspecification changes, thereby ensuring that we havesecured patent clearance. However, due to globalization,
advances in information technology, and other factors,
there is a risk that technological expertise developed by
the Group could be subject to leaks, unauthorized use, orlegal contention regarding usage licenses and so forth.
The occurrence of such a situation could have a negative
impact on the Group’s financial situation, business performance, and status of cash flows.
⑦ Impact of environment related regulations
In accordance with the ESG Charter, the Group aims torealize the sustainable development of an abundant society by working to protect the earth’s environment, pre-serving resources, and reducing environmental impacts
at each stage of the entire product life cycle. However,environmental regulations are becoming stricter eachyear and in some cases they could restrict activities inthe business supply chain and so forth, which could havea negative impact on the Group’s financial situation, business performance, and status of cash flows.
⑧R isks associated with legal action
The Group emphasizes compliance in management,
and works to ensure compliance with laws, regulations
and social norms. However, in the process of conducting business in Japan and overseas, there is a risk that
the Group could be subject to unforeseeable lawsuits,administrative measures, and so forth. The occurrence ofa serious lawsuit or other such event could have a negative impact on the Group’s financial situation, businessperformance, and status of cash flows.
⑨ Other risks
The Group holds shares of its business partners andfinancial institutions with the goal of building, maintaining, and strengthening medium- to long-term business
relationships. A significant fall in the market value, etc. ofthese shares at the fiscal year end could cause the Groupto recognize impairment losses due to the adoption of the
Accounting Standards for Financial Instruments.
With regard to noncurrent assets, a dramatic deterioration of the business environment or a decline in the fairvalue of idle land held by the Group and so forth could
oblige the Group to recognize impairment losses due tothe adoption of the Accounting Standard for Impairmentof Fixed Assets.
With regard to retirement benefit obligations, a marked
decrease in the underlying discount rate assumed for actuarial calculations or a sharp deterioration in the operation ofpension assets could cause a significant shortfall in funds.
With regard to deferred tax assets, recoverability is
calculated based on forecasts for future taxable income
and so forth against future temporary deductible differences. However, a difference between actual taxable
income and the forecast could necessitate a reversal ofdeferred tax assets.
The occurrence of any of the above situations could
have a negative impact on the Group’s financial situation,business performance, and status of cash flows.

FINANCIAL SECTION 2020

4

CONSOLIDATED BALANCE SHEETSKANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2020 and 2019

AssetsMillions of yen

Thousands of
U.S. dollars (Note 1)

2019

2020

2020

Current assets:
Cash and cash equivalents (Note 5)¥

37,606¥39,970$345,550

Notes and accounts receivable - trade (Note 5)

134,110

147,993

1,232,294

Inventories (Note 8)

117,259

112,434

1,077,452

Short-term loans receivable from unconsolidated subsidiaries and affiliates

1,819

1,722

16,715

Other current assets

17,366

13,363

159,570

Allowance for doubtful accounts (Note 5)(1,303)(1,237)(11,973)

Total current assets

306,858

314,2452,819,611

Property, plant and equipment (Note 12):Land

31,30431,354

287,645

Buildings and structures

207,065

199,621

1,902,648

Machinery, equipment and vehicles

593,774

577,115

5,455,983

Construction in progress

27,03826,338248,444

Other

4,750

3,697

43,654

863,933

838,127

7,938,375

Less accumulated depreciation(600,876)(586,205)(5,521,241)

Property, plant and equipment, net

263,056

251,9222,417,134

13,18013,424

121,115

Intangible assets (Note 12):Investments and other assets:
Investment securities (Notes 5, 6 and 12):
Unconsolidated subsidiaries and affiliates

3,422

4,114

31,447

Other

45,25857,640415,865

Long-term loans receivable (Note 5)

1,005

1,100

9,242

Deferred tax assets (Note 11)

10,035

6,864

92,215

Other

10,684

10,53698,180

(241)

(260)

(2,220)Allowance for doubtful accounts (Note 5)
Total investments and other assets

70,166¥

See notes to consolidated financial statements.

5

KANEKA CORPORATION

653,262¥

79,994

644,732

659,587$ 6,002,593

Liabilities and net assets

Millions of yen

Thousands of
U.S. dollars (Note 1)

2019

2020

2020

Current liabilities:
Short-term loans payable (Notes 5 and 12)¥

Current portion of long-term loans payable (Notes 5 and 12)
Current portion of bonds payable (Notes 5 and 12)76,760¥63,981$

705,324

12,074

3,687

110,948－

10,000－Notes and accounts payable (Note 5):Trade73,50984,797675,448

Construction

12,222

11,545112,307

Other

16,824

18,681

154,590

Income taxes payable

2,408

2,864

22,127
123,951

Accrued expenses

13,48913,763

Other current liabilities

4,310

4,592

39,609Total current liabilities

211,599

213,912

1,944,309

Noncurrent liabilities:
Bonds payable (Notes 5 and 12)

10,000－91,886Long-term loans payable (Notes 5 and 12)

33,29345,122305,922Net defined benefit liability (Note 13)

38,30834,985352,006

317

266

2,920

Provision for directors' retirement benefits
Deferred tax liabilities (Note 11)

1,576

2,137

14,485

Other noncurrent liabilities

4,071

2,437

37,412

Total noncurrent liabilities

87,56884,948804,634

Contingent liabilities (Note 14)
Net assets (Note 15):
Shareholders’ equity:
Capital stock
Authorized—150,000,000 shares
33,04633,046

303,655

Capital surplus

Issued— 68,000,000 shares

30,96232,784

284,500

Retained earnings

280,265

272,9442,575,260(11,583)(11,601)(106,434)

332,691

327,173

3,056,981

14,246

19,642130,909

(103)

(110)

(947)

(7,395)(4,008)(67,953)

Remeasurements of defined benefit plans(7,956)(5,705)(73,109)

Total accumulated other comprehensive income(1,208)

9,818(11,100)

482

431

4,435

Less treasury stock, at cost—2,774,049 shares in 2020
2,778,423 shares in 2019
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments

Subscription rights to shares (Note 16)
Non-controlling interests
Total net assets¥

22,12823,302

203,334

354,094

360,726

3,253,650

653,262¥

659,587$

6,002,593

See notes to consolidated financial statements.

FINANCIAL SECTION 2020

6

CONSOLIDATED STATEMENTS OF INCOME
KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2020, 2019 and 2018

Millions of yen

Net sales

Thousands of
U.S. dollars (Note 1)

2020

2019

2018

2020

¥ 601,514¥ 621,043¥ 596,142$ 5,527,098

Cost of sales

432,374446,254426,959

3,972,938

Gross profit

169,139

174,789

169,183

1,554,160

Selling, general and administrative expenses

143,124

138,747

132,294

1,315,119

Operating income

26,01436,04136,888239,041

Interest and dividend income

1,684

1,920

1,602

15,475Interest expenses(15,749)

Other income (expenses):(1,714)(2,014)(1,692)Gain on sales of investment securities

627

1,515

－

Gain on sales of property, plant and equipment

315

427

－

2,901

Loss on disposal of property, plant and equipment

5,767(1,916)(2,521)(1,745)(17,610)Foreign exchange gains (losses), net

(968)

(333)

454

(8,903)Equity in earnings of affiliates, net

150

29

146

1,384

Gain on negative goodwill (Note 17)

－

－

954

－

(996)

(1,683)(1,087)(9,157)－

Litigation expenses
Restructuring charges (Notes 9 and 10)－(1,851)(1,781)

－

443

1,429

－

Settlement received

－

－
1,051

Gain on contribution of securities to retirement benefit trust

378

1,608

－

3,474

Other, net(3,777)(2,725)(2,879)(34,709)

Income before income taxes and non-controlling interests

19,79731,90931,085

181,915

Gain on step acquisitions (Note 17)－

Environmental expenses
Provision of allowance for doubtful accounts

－

－

－

(566)

－

(637)
－

－

Income taxes (Note 11)
Current

4,809

7,893

8,371

44,193

Deferred

(490)

40

(83)

(4,511)

Net income

15,47923,975

22,796142,233

Net income attributable to non-controlling interests

1,475

1,736

1,224

13,560Net income attributable to owners of parent¥

14,003¥

22,238¥21,571$

U.S. dollars(Note 1)Yen

Net income per share – basic (Note 2)¥

214.70¥339.15¥328.46

128,672$

1.97

Net income per share – diluted (Note 2)

214.28338.59328.05

1.96

Cash dividends applicable to the year (Note 15)100.00

64.00

18.00

0.91

See notes to consolidated financial statements.

7

KANEKA CORPORATIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2020, 2019 and 2018

Millions of yen
2019

2020

Net income¥

15,479¥23,975

Thousands of
U.S. dollars (Note 1)

2018

¥

22,7962020$

142,233

Other comprehensive income:
Valuation difference on available-for-sale securities(5,437)(5,164)2,440(49,966)

7

(1)

(47)

66

Foreign currency translation adjustments(3,668)(1,178)2,116(33,708)

Remeasurements of defined benefit plans(2,280)

1,800

2,153

(20,950)

Deferred gains or losses on hedges

Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income (Note 3)
Comprehensive income

(0)

(5)

2

(3)

(11,379)(4,549)6,665(104,561)

¥

4,099

¥

19,425¥29,462

$

¥

2,976

¥

17,996¥

27,958$37,671

Comprehensive income attributable to:Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

1,123

1,429

1,503

27,351
10,319See notes to consolidated financial statements

FINANCIAL SECTION 2020

8

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSKANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2020, 2019 and 2018

Millions of yen

Thousands of
U.S. dollars (Note 1)

2018

2020

2019

2020

Shareholders’ equity
Capital stock
Balance at beginning of year¥

33,046¥33,046¥33,046$

303,655

Changes of items during the period
Total changes of items during the period
Balance at the end of current period

－

－

－

－

33,04633,04633,046

303,655

32,78432,79932,813

301,241

Capital surplus
Balance at beginning of year
Changes of items during the period
Change in treasury shares of parent arising from transactions
with non-controlling interests(1,821)

(14)

(14)

(16,741)

Total changes of items during the period(1,821)

(14)

(14)

(16,741)

Balance at the end of current period

30,96232,78432,799284,500

272,944

264,963248,523

2,507,988(6,848)(5,906)(5,933)(62,928)

167

－

823

1,539

14,003

22,23821,571

128,672

(1)

(0)

(21)

(11)

Retained earnings
Balance at beginning of year
Changes of items during the period
Dividends from surplus - ¥100.00 per share
Change of scope of consolidation
Net income attributable to owners of parent
Disposal of treasury stock
Cancellation of treasury stock
Total changes of items during the period
Balance at the end of current period－(8,351)

－

－

7,321

7,980

16,44067,272

280,265

272,944

264,963

2,575,260(11,601)(18,683)(16,753)(106,606)

Treasury stock
Balance at beginning of year
Changes of items during the period
Purchase of treasury stock(4)(1,767)(2,618)(40)

Disposal of treasury stock

23

498

687

212

Cancellation of treasury stock

－

8,351

－

－

Total changes of items during the period

18

7,081

(1,930)171(11,583)(11,601)(18,683)(106,434)

19,642

24,73022,338

180,490

Net changes of items other than shareholders' equity(5,395)(5,087)

2,392(49,581)

Total changes of items during the period(5,395)(5,087)

2,392(49,581)

Balance at the end of current period

14,246

19,642

24,730130,909

(110)

(108)

(61)

(1,014)

Balance at the end of current period
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at beginning of year
Changes of items during the period

Deferred gains or losses on hedges
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity

7

(1)

(47)

66

Total changes of items during the period

7

(1)

(47)

66

(103)

(110)

(108)

(947)

Balance at the end of current period

9

KANEKA CORPORATIONMillions of yen

Thousands of
U.S. dollars (Note 1)

2020

2019

2018

2020

(4,008)(3,035)(5,105)(36,828)(3,387)

(972)

2,069

(31,124)

Foreign currency translation adjustments
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period(3,387)

(972)

2,069

(31,124)

Balance at the end of current period(7,395)(4,008)(3,035)(67,953)(5,705)(7,526)(9,653)(52,427)

Remeasurements of defined benefit plans
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity(2,250)

1,820

2,126

(20,682)

Total changes of items during the period(2,250)

1,820

2,126

(20,682)

Balance at the end of current period(7,956)(5,705)(7,526)(73,109)

431

300

271

3,968

Subscription rights to shares
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity

50

131

29

466

Total changes of items during the period

50

131

29

466

Balance at the end of current period

482

431

300

4,435

23,302

20,112

16,130214,120

Non-controlling interests
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity(1,173)

3,190

3,981

(10,786)

Total changes of items during the period(1,173)

3,190

3,981

(10,786)

Balance at the end of current period

22,12823,302

20,112

203,334

360,726

346,599

321,551

3,314,589(6,848)(5,906)(5,933)(62,928)

167

－

823

1,539

14,003

22,23821,571

128,672

Total net assets
Balance at beginning of year
Changes of items during the period
Dividends from surplus- ¥100.00 per share
Change of scope of consolidation
Net income attributable to owners of parent
Purchase of treasury stock(4)(1,767)(2,618)(40)

Disposal of treasury stock

21

498

666

200

Cancellation of treasury stock

－

－

－

－

Change in treasury shares of parent arising from transactions
with non-controlling interests(1,821)

(14)

(14)

(16,741)

Net changes of items other than shareholders' equity(12,149)(920)

10,552(111,641)

Total changes of items during the period
Balance at the end of current period(6,631)

14,12725,047(60,938)¥ 354,094¥ 360,726¥ 346,599$ 3,253,650

See notes to consolidated financial statements.

FINANCIAL SECTION 2020

10

CONSOLIDATED STATEMENTS OF CASH FLOWSKANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2020, 2019 and 2018

See notes to consolidated financial statements.
11

KANEKA CORPORATION¥¥

19,79734,340
－
－
－
－
(378)
896
67
(1,684)
1,714
53
(627)
(150)
13,197(5,572)(11,120)(4,083)46,4501,787(1,721)－(6,531)
39,983Thousands of
U.S. dollars (Note 1)

2018

2020

2019

2020

Cash flows from operating activities
Income before income taxes and non-controlling interests
Depreciation and amortization
Gain on step acquisitions
Gain on negative goodwill
Restructuring charges
Settlement received
Gain on contribution of securities to retirement benefit trust
Increase (decrease) in net defined benefit liability
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Loss (gain) on disposal of property, plant and equipment
Gain on sales of investment securities
Equity in earnings of affiliates, net
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
OthersSubtotalInterest and dividend income received
Interest expenses paid
Settlement package received
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales and distributions of investment securities
Proceeds from redemption of investment securities
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Proceeds from purchase of shares of subsidiaries resulting in change
in scope of consolidation
Purchase of stocks of subsidiaries and affiliates
Payments for transfer of business
Payments of loans receivableCollection of loans receivable
OthersNet cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from sales and leasebacks
Repayments of lease obligations
Proceeds from share issuance to non-controlling shareholders
Cash dividends paid
Cash dividends paid to non-controlling interests
Purchase of treasury stock
Proceeds from sales of treasury stock
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from change of scopeof consolidation
Cash and cash equivalents at end of period

Millions of yen¥

31,90932,150
(443)
－
1,851
(1,051)(1,608)2,244(11)(1,920)2,014
445(1,515)(29)(5,329)(9,868)(141)
139
48,833
1,997(2,009)1,051(8,760)41,113¥31,08530,323(1,429)
(954)
1,781
－
－
3,026
638
(1,602)
1,692
531
－
(146)
(12,053)(6,176)
8,568
1,704
56,988
1,752(1,681)－(7,309)49,750$181,915315,542－－－－(3,474)
8,237
616(15,475)
15,749496(5,767)(1,384)
121,267(51,206)(102,179)(37,521)426,814
16,421(15,822)－(60,019)
367,393(42,977)725(3,297)
(175)
867
4,000
－

(43,987)
1,705(1,809)(1,607)
1,635－－(34,113)61(1,405)(1,384)156－(1,463)(394,906)
6,666(30,302)(1,609)7,973
36,754－37－－(1,238)872(620)(41,807)227(1,878)－(1,220)1,162(1,454)(47,229)

780
－
(331)
(933)
895
(1,057)(38,796)341－－(11,383)
8,015(5,704)(384,154)

14,121
1,362(4,366)
10,000(10,000)
－
(244)
390
(6,848)
(314)
(4)
0

13,6483,810(10,880)
－
－
－
(127)
245
(5,906)(351)(1,767)
395

6,702
5,628
(9,169)
－
－
232
(266)
－
(5,933)(358)(2,618)475

129,756
12,519(40,124)
91,886(91,891)－(2,245)
3,584(62,928)(2,890)(40)
4(4,574)(479)(201)(2,505)39,970

(21)
(954)
(373)
(7,443)47,413(82)(5,390)231
5,795
41,018(42,034)(4,403)(1,855)(23,020)367,273141
37,606¥－39,970¥600
47,413$

1,297
345,550

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Kaneka Corporation (the “Company”) and its consolidated domestic
subsidiaries maintain their official accounting records in Japanese
yen and in accordance with the provisions set forth in the Financial
Instruments and Exchange Law in Japan and its related accounting
regulations and accounting principles generally accepted in Japan(“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements have been
restructured and translated into English with some expanded descriptions and the inclusion of consolidated statements of changes in net
assets from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by
the Financial Instruments and Exchange Law in Japan. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is

not presented in the accompanying consolidated financial statements.
The accounts of consolidated overseas subsidiaries were prepared for consolidation purposes in accordance with either International Financial Reporting Standards or U.S. Generally Accepted
Accounting Principles, with adjustments for the specified items asapplicable in compliance with ASBJ Practical Solution No. 18, “Tentative Treatment of Accounting for Foreign Subsidiaries in Preparing
Consolidated Financial Statements.”
The translation of the Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside
Japan, using the prevailing exchange rate on March 31, 2020 whichwas ¥108.83 to U.S.$1.00. The translations should not be construed
as representations that the Japanese yen amounts have been, could
have been or could in the future be converted into U.S. dollars at thisor any other rate of exchange.
The disclosed amounts have been rounded down under one
million yen.

2. SIGNIFICANT ACCOUNTING POLICIESConsolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which
the Company has power of control through majority voting rights orexistence of certain other conditions evidencing control (together,
the “Companies”). Investments in nonconsolidated subsidiaries andaffiliates over which the Company has the ability to exercise significant influence over operating and financial policies are accounted forby the equity method, except for insignificant investments which arerecorded at cost.
The Company has 88 consolidated subsidiaries (83 in FY2019
and 84 in FY2018) and 3 affiliates accounted for by the equity
method (3 in FY2019 and 4 in FY2018). For the year ended March
31, 2020, the accounts of 20 consolidated subsidiaries were included
based on a fiscal year that ended on December 31. When significant
transactions occur at those subsidiaries between their fiscal year end
and that of the Company, the transactions are included in consolidation. Intercompany transactions and accounts have been eliminated.
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to non-controlling shareholders, are evaluated using the fair value at the time
the Company acquired control of the respective subsidiary.

Cash and cash equivalents
Cash on hand, readily available deposits and short-term highly liquid
investments with maturities not exceeding three months at the timeof purchase are considered to be cash and cash equivalents.

Allowance for doubtful accounts
The allowance for doubtful receivables is provided to cover possible
losses on collection. With respect to normal trade accounts receivable,
it is based on the actual rate of historical bad debts, and for certain
doubtful receivables, the uncollectible amount is individually estimated.

Securities
The Companies hold equity securities issued by subsidiaries andaffiliated companies and available-for-sale securities. Equity securities
issued by subsidiaries and affiliated companies which are not consoli-

dated or accounted for using the equity method are stated at moving
average cost. Available-for-sale securities with available fair values arestated at fair value. Unrealized gains and unrealized losses on thesesecurities are reported, net of applicable income taxes, as a separate
component of net assets. Realized gains and losses on the sale ofsuch securities are computed using moving average cost. Securities
with no available fair value are stated at moving average cost.

Derivatives and hedge accounting
Derivative financial instruments are stated at fair value, and changes
in the fair value are recognized as gain or loss unless the derivative
financial instruments are used for hedging purposes. If derivative
financial instruments are used as hedges and meet certain hedging
criteria, the Companies defer recognition of gain or loss resulting
from a change in the fair value of the derivative financial instrument
until the related loss or gain on the hedged item is recognized. Also,
if interest rate swap contracts are used as hedges and meet certain
hedging criteria, the net amount to be paid or received under theinterest rate swap contract is added to or deducted from the intereston the assets or liabilities for which the swap contract was executed.

Inventories
Inventories are principally valued at cost as determined by the average cost method. If the profitability of the inventories decreases, thebook value is reduced accordingly.

Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated loss from impairment. Cumulative amounts of recognizedimpairment loss are deducted from acquisition costs. Depreciation iscomputed over the estimated useful life of the asset mainly by thestraight-line method. Repairs, maintenance and minor renewals arecharged to expenses as incurred. Property, plant and equipment capitalized under finance lease arrangements are depreciated over theestimated useful life as measured by the lease term of the respective asset by the straight-line method. The residual value is zero or
the guaranteed residual value.

FINANCIAL SECTION 202012

Goodwill
Goodwill, except for minor goodwill, is amortized by the straight-line
method within 20 years. Minor goodwill is expensed as incurred.

Liability (asset) for retirement benefits
The Company has an unfunded lump-sum benefit plan generally covering all employees. Under the terms of the plan, eligible employees
are entitled upon mandatory retirement at age 60 or earlier voluntarytermination to a lump-sum severance payment based on compensation at the time of severance and years of service.
In addition to the unfunded lump-sum plan, the Company
participates in a noncontributory funded pension plan, which covers
substantially all employees. Consolidated domestic subsidiaries have
similar lump-sum benefit plans and pension plans. Certain overseas
consolidated subsidiaries have defined contribution plans.
The Companies provide employees’ severance and retirement
benefits based on the estimated amounts of projected benefit obligation, actuarially calculated using certain assumptions, and the fairvalue of the plan assets. The estimated benefit is attributed to eachperiod based on the plan’s benefit formula. Prior service costs arerecognized as expense using the straight-line method over mainly 5
years, a term within the average of the estimated remaining service
years of the current employees. Actuarial gains and losses are recognized using the straight-line method over mainly 10 years, a term
also within the average of the estimated remaining service years of
employees, commencing with the following period.

Provision for directors’ retirement benefits
Directors and statutory auditors terminating their service with certain
consolidated domestic subsidiaries are entitled to receive retirement
benefits based on compensation and years of service, subject to theapproval of shareholders. Certain consolidated domestic subsidiaries
accrue the liability for their plans in amounts sufficient to provide forbenefits arising from services performed through the balance sheet date.

Research and development expenses
Expenses related to research and development activities are charged toincome as incurred. Research and development expenses for the years
ended March 31, 2020, 2019 and 2018 were ¥29,389 million ($270,052
thousand), ¥28,963 million and ¥28,039 million, respectively.

Income taxes
The tax effects of temporary differences between the carrying
amounts of assets and liabilities for tax and financial reporting arerecognized as deferred income taxes. The asset-liability approach isused to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.

Net income per share
The computations of net income per share of common stock arebased on the weighted average number of shares outstanding during
each period. The Company implemented a 5 to 1 consolidation ofshares of common stock with October 1, 2018 as the effective date.
Net income per share is calculated based on the assumption that theconsolidation had been implemented at the beginning of FY2018.

Application of tax effect accounting for the transition from theconsolidated tax payment system to the group taxation system.
Having regard to paragraph 3 of “Practical Solution on theTreatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (PITF
No.39, March 31, 2020), the Company and its domestic consolidated
subsidiaries did not follow paragraph 44 of “Implementation Guidanceon Tax Effect Accounting” (ASBJ Guidance No. 28, February 16,2018) but applied provisions of pre-amended tax laws when calculating the amounts of deferred tax assets and liabilities that relate totransitioning to the group taxation system and related amendments of
tax laws for transitioning to the single tax payment system.

Reclassifications
Certain prior year amounts have been reclassified to conform to the2020 presentation.
In addition, prior year amounts have been rounded down under
one million yen according to the current consolidated fiscal year.
These changes had no impact on previously reported results ofoperations or shareholders’ equity.

Additional information(Transfer of Company shares to the employees through an employee
stock ownership trust)
The Company has introduced a plan to transfer Company shares tothe employees’ share holding association through a trust in order toprovide the Company group’s employees to promote the benefit andwelfare of the employees of the Company and to provide incentives
to increase the enterprise value of the Company. The transaction
was completed in FY2019.
(1) Outline of the transactions
The Board of Directors approved a resolution on October 9, 2015
to introduce the “Employee Stock Ownership Plan (ESOP) Trust”(the “Plan”) to provide employees an incentive toward achieving
medium- to long-term growth in corporate value. The Plan was anincentive plan in which all employees of the Company who weremembers of the “Kaneka Share Holding Association”(“Share Holding Association”) could participate. According to theplan, the Company created a trust with employee members of the
Share Holding Association who met certain requirements as beneficiaries. During a predetermined period, the trust acquired a numberof the Company’s shares that the Association was then expected toacquire over the next five years.
Afterwards, the trust sold the shares to the Share Holding
Association in accordance with the plan. The remaining funds were
to be distributed according to each employee’s contribution ratio
when there were trust earnings resulting from an upward swing inthe stock price when the trust ended. There was no additional riskof loss to the employees when a loss was incurred as a result of adecrease in the stock price as the Company would pay back the loan
based on a guarantee clause in the loan agreement.
The trust completed its purpose and terminated in FY2019.

Application of consolidated taxation system(2) Stocks remaining in the trust
The book value (excluding incidental expenses) of stock remaining in
the trust is included as “treasury stock” in net assets in the consolidated balance sheets. As of March 31, 2019, since the trust has
ended, there will be no remaining shares of Company stock.

The Company and certain domestic consolidated subsidiaries apply aconsolidated taxation system.

(3) Book value of loans recorded using the gross price method

13

KANEKA CORPORATION

There is no book value of borrowings recorded as the trust had
ended as of March 31, 2019.
(The global COVID-19 pandemic)
The global COVID-19 pandemic has had an impact on the global
economy. The Group’s business fields cover a wide range of areas
both in Japan and overseas. It is difficult to estimate the environmental factors, such as recovery in demand, normalization of crude
oil prices, and exchange rate trends, that are needed to determine
business forecasts in each business field.
In this situation, the Group has made accounting estimates suchas impairment of noncurrent assets based on the assumption thatthe pandemic impacts will continue for a certain period of time in thenext fiscal year (the fiscal year ending March 31, 2021).
(Changes in accounting policies)
Subsidiaries using International Financial Reporting Standards started toapply IFRS No.16 Lease (hereinafter referred to as “IFRS16”) from thecurrent fiscal year. In accordance with IFRS16, lessees are required torecognize almost all leases as assets or liabilities in the balance sheet.
Having followed the transitional treatment regarding the applicationof IFRS 16, the cumulative effects of the changes in the accounting
policies are recognized from the current consolidated fiscal year.
As a result, in the consolidated balance sheet of the current
consolidated fiscal year, “Property, plant and equipment” increasedby ¥2,466 million ($22,668 thousand). In addition, “Other current
liabilities” and “Other non-current liabilities” increased by ¥382 million($3,511 thousand) and ¥2,191 million ($20,132 thousand), respectively.
The effects on the consolidated statement of income for thecurrent consolidated fiscal year were inconsequential.
(Standards and guidance not yet adopted)
1 Accounting standard for revenue recognition• ”Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 31, 2020)• ”Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The above standard and guidance provide comprehensive principles
for revenue recognition. Under the standard and guidance, revenue
is recognized by applying the following 5 steps:
Step1: Identify contract(s) with customers.
Step2: Identify the performance obligations in the contract.
Step3: Determine the transaction price.
Step4: Allocate the transaction price to the performance obligation in
the contract.
Step5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(2) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(3) Effects of application of the standards
The Company and its domestic consolidated subsidiaries are currently in the process of determining the effects of these new standards on the consolidated financial statements.
2 Accounting Standard for Fair Value Measurement• “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019)•”Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019)•“Accounting Standard for Measurement of Inventories” (ASBJ
Statement No. 9, July 4, 2019)• ”Accounting Standard for Financial Instruments” (ASBJ Statement
No. 10, July 4, 2019)• ”Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
In order to enhance comparability with internationally recognizedaccounting standards, “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard for Fair
Value Measurement” (together, hereinafter referred to as “Fair Value
Accounting Standards”) were developed and guidance on methods
measuring fair value was issued. Fair Value Accounting Standards areapplicable to the fair value measurement of the following items:• Financial instruments in “Accounting Standard for Financial Instruments”; and• Inventories held for trading purposes in “Accounting Standard for
Measurement of Inventories.”
Also, the “Implementation Guidance on Disclosures about Fair Valueof Financial Instruments” has been revised. Along with this revision,notes on fair value information of financial instruments by level of
inputs have been set.
(2) Effective date
Fair Value Accounting Standards and guidance will be effective fromthe beginning of the fiscal year ending March 31, 2022.
(3) Effects of application of the standards
The Company and its consolidated subsidiaries are currently in theprocess of determining the effects of these new standards on the
consolidated financial statements.
3. Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections• ”Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 31, 2020)(1) Overview
The purpose of this is to show the overview of the principles in the
adopted accounting treatment and process if the regulation of therelevant accounting standard is not apparent.
(2) Effective date
Effective from the end of the fiscal year ending March 31, 2021.
4. Accounting Standard for Disclosure of Accounting Estimates• “Accounting Standard for Disclosure of Accounting Estimates”(ASBJ Statement No. 31, March 31, 2020)(1) Overview
The purpose of this overview is to disclose to the users of the financial statement the information about the contents of risky items in
the amounts of the accounting estimates recognized in the financial
statement for the fiscal year that significantly impact the financial
statement for the next fiscal year.
(2) Effective date
Effective from the end of the fiscal year ending March 31, 2021.

FINANCIAL SECTION 202014

3. COMPREHENSIVE INCOME
Millions of yen

Thousands of
U.S. dollars (Note 1)

2018

2020

2019

2020

Valuation difference on available-for-sale securities
Increase (Decrease) during the year¥

Reclassification adjustments
Subtotal, before tax(6,826)¥(4,299)

¥

3,539

$

(62,727)(883)(2,911)(14)(8,113)(7,709)(7,210)3,525(70,841)Tax expense

2,271

2,046

(1,084)20,874

Subtotal, net of tax(5,437)(5,164)2,440(49,966)

Deferred gains or losses on hedges
Increase (Decrease) during the year

477

223

(1,061)

4,392

Reclassification adjustments

(466)

(226)

998

(4,283)

Subtotal, before tax

11

(2)

(62)

108

Tax expense

(4)

0

14

(41)

Subtotal, net of tax

7

(1)

(47)

66

(3,668)(1,153)

2,116(33,708)

Foreign currency translation adjustment
Increase (Decrease) during the year
Reclassification adjustments
Subtotal, before tax
Tax expense
Subtotal, net of tax

－

(25)

－

－

(3,668)(1,178)2,116(33,708)

－

－

－

－

(3,668)(1,178)2,116(33,708)(40,834)

Remeasurements of defined benefit plans
Increase (Decrease) during the year

(4,443)651

482

Reclassification adjustments

1,149

1,941

2,643

10,562

Subtotal, before tax(3,294)

2,592

3,126

(30,271)

Tax expense

1,014

(792)

(972)

9,321

Subtotal, net of tax(2,280)

1,800

2,153

(20,950)

Share of other comprehensive income of associates accounted
for using equity method
Increase (Decrease) during the year

(0)

(76)

2

(3)

Reclassification adjustments

－

71

－

－

Subtotal, net of tax

(0)

(5)

2

(3)

Total other comprehensive income¥ (11,379)¥(4,549)

¥

6,665

$

(104,561)

4. STATEMENTS OF CASH FLOWSMillions of yen

Important non-cash transactions
Cancellation of treasury stock

15

KANEKA CORPORATION

2019

2020

¥

－

¥

8,351

Thousands of
U.S. dollars (Note 1)

2018

¥

－

2020

$

－

5. FINANCIAL INSTRUMENTS
1. Matters regarding financial instruments(1) Policy for handling financial instruments
The Companies procure funds necessary for the manufacturing andsales business primarily through borrowings from financial institutions or by issuing corporate bonds based upon the plan and budget
for capital investments. In principle, temporary surplus funds arecentralized by the Cash Management System (CMS) and invested inhighly safe financial assets. Derivative transactions are used to hedge
against risks described below, but never for speculative purposes.
(2) Description of financial instruments and inherent risks
Notes and accounts receivable - trade, which are operating receivables, are exposed to customer credit risk. Operating receivables
denominated in foreign currencies generated from global business operations are exposed to foreign exchange fluctuation risk.
Marketable securities and investment securities, primarily shares ofcompanies with which the Companies maintain business relations,are exposed to the risk of market price fluctuations.
Notes and accounts payable, which are operating payables,
are basically settled in the short-term with a deadline set within ayear. Operating payables include payables denominated in foreign
currencies for importing materials and are exposed to foreignexchange fluctuation risk. However, they remain within the rangeof the balance of operating receivables denominated in the same
foreign currencies. Short-term borrowings are primarily for procuring operating capital and long-term debt, and bonds are issued toobtain necessary funds mainly for capital expenditures. A portion of
the short-term debt and the long-term debt is exposed to interest
rate fluctuation risk, but the effect is limited.
Derivative transactions such as foreign exchange forward
contracts, currency swaps and interest rate swaps are used tohedge against the foreign currency fluctuation risk and interest rate
fluctuation risk associated with operating receivables and payables
denominated in foreign currencies, investment assets, loans receivable, etc. Since all derivative transactions correspond to assets andliabilities on the balance sheets, foreign exchange fluctuation risk ishedged and the fluctuation risk of market interest rates is renderedinsignificant.
(3) Risk management system related to financial instruments(a) Credit risk management (risk pertaining to breach of contract on the part of business partners)
The Company aims to mitigate credit risk by quickly identifying any
concerns about the collection of operating receivables resulting
from the deterioration of a business partner’s financial position orother factors. Also, each business division periodically reviews thestatus of our main business partners and regularly monitors deadlines, balances and credit status for each partner. The consolidated
subsidiaries also manage operating receivables in accordance withthe practices of the Company.
As for debt securities, the credit risk is insignificant since theCompany only handles those with high ratings or issued by companies with existing business relations with the Company and whose

creditability is verifiable. Furthermore, the Company periodicallyverifies the financial position of issuers to mitigate risk. Since thecounterparties to the derivative transactions are highly creditworthy
financial institutions, the Company considers the risk of theirbreach of contract as almost nil.
The maximum credit risk exposure of financial assets is represented by their carrying amounts on the balance sheet as of March
31, 2020.
(b) Market risk management (foreign exchange and interest
rate fluctuation risk)
The Company and some consolidated subsidiaries identify foreignexchange fluctuation risk associated with operating receivables oroperating payables denominated in foreign currencies by currency
and by month. Such risk is hedged by using foreign exchange
forward contracts, principally up to the amounts to be settled after
netting operating payables or operating receivables denominatedin foreign currencies. Note that the Company defines the monthly
execution limit and the operating standard based upon its Procedures for Foreign Exchange Management and enters into foreignexchange forward contracts within the scope provided by theprocedures. Also, the Companies utilize interest rate swaps mainly
to hedge against the fluctuation risk of market interest rates.
For marketable securities and investment securities, the Company periodically identifies fair values and the financial positionsof the issuers (business partner companies). For securities otherthan held-to-maturity bonds, the Company continuously revises theholding status taking into consideration the business relationshipwith the business partner companies.
The Financial Department of the Company executes derivativetransactions based upon its Transaction Regulations for Derivative
Financial Products, which defines the basic policy, the scope ofoperations, the personnel responsible for execution, the basis for
decision making and the management system. Consolidated subsidiaries enter into derivative transactions based upon resolutions
passed by their respective bodies upon the Company’s approval.
The Company ensures an effective internal checking system bysegregating the execution function from the monitoring and managing function. Also, the Director of the Company’s Financial Department performs evaluations for hedge effectiveness of all derivativetransactions entered into by the Companies and reports the results
together with a description of the underlying assets and liabilities to
the President and the CFO on a monthly basis.
(c) Liquidity risk management relating to fund procurement(risk of non-execution of payments by deadlines)
The Company manages liquidity risk by timely preparing and updating cash flow plans by the Financial Department and by maintaining
a liquidity facility, which is the sum of liquidity on hand and commitment lines, in the approximate amount of one month’s consolidated
net sales. In addition, the Companies mitigate liquidity risk in principle by centralizing the Companies’ funds using CMS. Accordingly,
the Companies consider that no significant liquidity risk exists.

FINANCIAL SECTION 202016

(4) Supplementary explanation for matters regarding fair valueof financial instruments
The fair value of financial instruments is based on market price. If
a market price is not available, another valuation method is used.
Such methods include variable factors and assumptions, and theresults of a valuation may differ depending on which factors andassumptions are used.
The contract amounts related to the derivative transactions
shown in “Derivative Transactions” do not indicate the market risks
associated with the derivative transactions themselves.

The table below shows the amounts of financial instruments
recorded in the consolidated balance sheets as of March 31, 2019(the consolidated accounts settlement date for the year ending
March 31, 2019), their fair values and any differences between thebalance sheet amounts and the fair values. Financial instruments
whose fair values were deemed extremely difficult to assess were
not included (see Note 2).

2. Matters regarding the fair value of financial instruments(1) Cash and cash equivalents(2) Notes and accounts receivable - trade(3) Marketable and investment securities
Available-for-sale securities(4) Long-term loans receivable
Allowance for doubtful accounts (*1)

The table below shows the amounts of financial instruments
recorded in the consolidated balance sheets as of March 31, 2020
(the consolidated accounts settlement date of the year ending
March 31, 2020), their fair values and any differences between thebalance sheet amounts and the fair values. Financial instruments
whose fair values were deemed extremely difficult to assess were
not included (see Note 2).
Millions of yen
Consolidatedbalance sheet
amount(1) Cash and cash equivalents(2) Notes and accounts receivable - trade(3) Marketable and investment securities
Available-for-sale securities(4) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets(1) Notes and accounts payable - trade(2) Short-term loans payable(3) Current portion of bonds payable(4) Accounts payable - other(5) Bonds payable(6) Long-term loans payable
Total liabilities
Derivative transactions (*2)
– Hedge accounting not applied– Hedge accounting applied¥

37,606
134,110

Fair value¥

37,606
134,110Difference¥——

41,014
1,005
(0)
1,005
213,737
73,50988,835—28,755
10,00033,293
234,392

41,014—

1,009
213,741
73,50988,835—28,755
11,18733,309235,596

3
3
—
—
—
—
1,187
16
1,203

62
360

62
360

—
—

Millions of yen
Consolidatedbalance sheet
amount¥Total assets(1) Notes and accounts payable - trade(2) Short-term loans payable(3) Current portion of bonds payable(4) Accounts payable - other(5) Bonds payable(6) Long-term loans payable
Total liabilities
Derivative transactions (*2)
– Hedge accounting not applied– Hedge accounting applied

39,970147,993

Fair value¥

39,970147,993

Difference¥——

49,232
1,100
(0)
1,100
238,296
84,797
67,66810,00029,533—45,122
237,122

49,232—

1,108
238,304
84,797
67,66810,08029,533—45,090237,170

8
8
—
—
80
—
—
(32)
48

(12)
(96)

(12)
(96)

—
—

The table below shows the amounts as of March 31, 2020 calculated into U.S. dollars.
Thousands of U.S. dollars (Note 1)
Consolidatedbalance sheet
amount(1) Cash and cash equivalents(2) Notes and accounts receivable - trade(3) Marketable and investment securities
Available-for-sale securities(4) Long-term loans receivable
Allowance for doubtful accounts (*1)
Total assets(1) Notes and accounts payable - trade(2) Short-term loans payable(3) Current portion of bonds payable(4) Accounts payable - other(5) Bonds payable(6) Long-term loans payable
Total liabilities
Derivative transactions (*2)
– Hedge accounting not applied– Hedge accounting applied$

Fair value

Difference

345,550 $
345,550 $1,232,294
1,232,294——

376,868
9,242
(0)
9,242
1,963,956
675,448816,273—
264,220
91,886
305,922
2,153,751

376,868—

9,278
1,963,992
675,448816,273—
264,220
102,795
306,070
2,164,808

35
35
—
—
—
—
10,909148
11,057

570
3,313

570
3,313

—
—

 he amount of allowance for doubtful accounts, which is recorded for eachTlong-term loan receivable, is excluded.
(*2)
Assets and liabilities arising from derivative transactions are stated as a net
amount. The figures in parenthesis indicate net liabilities.
(*1)

17

KANEKA CORPORATION

Note 1.
Matters regarding the determination of fair value for financial instruments,
marketable securities and derivative transactions
Assets(1) Cash and cash equivalents
The fair value of time deposits approximates book value because of theirshort-term nature. Thus, the book value is used as the fair value.
(2) Notes and accounts receivable - trade
The fair value of notes and accounts receivable - trade settled in a shortperiod of time approximates book value. Therefore, the book value isused as the fair value. The fair value of long-term notes and accounts
receivable - trade is based on the present value calculated by discounting receivable amounts classified by certain periods at a rate that takes
into account the time to maturity and credit risk.
(3) Marketable and investment securities
The fair value of equity securities is measured by market prices on
exchanges. The fair value of debt securities is based on market prices
on exchanges or by prices obtained from financial institutions. Debt
securities without available market prices are measured at present value
by discounting future cash flows generated by the financial assets. Refer
to “Securities” for matters regarding securities classified by the purpose
for which they are held.
(4) Long-term loans receivable
The fair value of long-term loans receivable is measured at the present
value of future cash flows classified by the length of term and by risk
category, according to the Company’s credit risk management, at a ratewith credit spread added to appropriate indices such as JGB yields.
The fair value of borrowings with special concern is measured at theamounts deemed collectable because of the existence of collateral and/or guarantees.
Liabilities(1) Notes and accounts payable - trade, (2) Short-term loans payable and(4) Accounts payable - other
The fair value of notes and accounts payable - trade, short-term loans
payable and accounts payable - other approximate book value because
they are mostly settled in a short period of time. As a result, the bookvalue is used as the fair value. When it cannot be determined whether
or not the settlement is made in a short period of time, the fair value
is measured at the present value of future cash flows classified by acertain period at a rate that takes into account the time to maturity andcredit risk.
(3) Current portion of bonds payable and (5) Bonds payable
The fair value of bonds payable issued by the Company is measured
based on the market price.
(6) Long-term loans payable
The fair value of long-term loans payable is measured at the present
value calculated by discounting the total amount of principle and interest
at an interest rate for similar new borrowings.

Note 2.
Financial instruments whose fair values are deemed extremely difficult toassessConsolidated balance sheet amountUnlisted equity securities

2020

2019

2020

¥

7,857 ¥

12,644 $72,199The financial instruments shown above are not included in the tables in “(3)Marketable and investment securities” because their market prices were notavailable and their fair values were deemed extremely difficult to assess.
Note 3.
Redemption schedules after the consolidated balance sheet date for monetary
receivables and securities with maturity dates
Millions of yen
2020
Over oneyear to fiveyears

Withinone year
Cash and cash equivalents
Notes and accounts receivable - trade¥ 37,606
134,110¥——

Over five
years to ten
years

¥

—
—

Over ten
years

¥

—
—

Marketable and investment securities
Available-for-sale securities withmaturities (corporate bonds)
Long-term loans receivable
Total

108

108

—

38
¥ 171,864

584
693

369
369

¥

¥

—
13
13

¥

Millions of yen
2019Over oneyear to fiveyears

Withinone year
Cash and cash equivalents
Notes and accounts receivable - trade¥ 39,970
147,993¥——

Over five
years to ten
years

¥

—
—

Over ten
years

¥

—
—

Marketable and investment securities
Available-for-sale securities withmaturities (corporate bonds)
Long-term loans receivable
Total

—
36
¥ 188,000

222
¥

589
811

—
¥

458
458

—
15
15

¥

Thousands of U.S. dollars (Note 1)
2020
Over oneyear to fiveyears

Withinone year
Cash and cash equivalents
Notes and accounts receivable - trade

Derivative transactions
Refer to Note 7, “Derivative financial instruments and hedging transactions.”

Millions of yen

Thousands of
U.S. dollars(Note 1)Type

$ 345,550
1,232,294$——

Over five
years to ten
years

$

—
—

Over ten
years

$

—
—

Marketable and investment securities
Available-for-sale securities withmaturities (corporate bonds)
Long-term loans receivable
Total

1,000

1,000

—

—

355
$ 1,579,200

5,370
6,370

3,391
3,391

125
125

$

$

$

Note 4.
Maturity schedules after the consolidated balance sheet date for bonds andlong-term debt refer to Note 12, “Short-term loans payable and long-term
debt.”FINANCIAL SECTION 202018

6. SECURITIESThe following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fair values as ofMarch 31, 2020:

Securities with book value exceeding acquisition cost:
Millions of yen

Thousands of U.S. dollars (Note 1)

2020
Acquisition cost

Equity securities¥

15,096

Bonds

Book value¥—¥

15,09636,403¥Acquisition cost

Book value

Difference

21,307$ 138,711$ 334,498$ 195,786

—

—

—

—

21,307$ 138,711$ 334,498$ 195,786—¥

36,403

Securities with book value not exceeding acquisition cost:

¥

2020

Difference

Millions of yen

Thousands of U.S. dollars (Note 1)

2020
Acquisition cost

Equity securities
Bonds

¥
¥

5,192
—
5,192

Book value

¥
¥

4,611
—
4,611

Difference

¥
¥

(581)
—
(581)

2020
Acquisition cost$$

47,710—47,710Book value$$

42,369—42,369Difference$$(5,340)—(5,340)The following table summarizes sales of available-for-sale securities as of March 31, 2020:
Millions of yen

Thousands of U.S. dollars (Note 1)

2020

Equity securities
Bonds

¥
¥

Sales

Gain on sales

Loss on sales

784
—
784

¥

¥

¥

627
—
627

¥

—
—
—

2020
Sales

$
$

7,204
—
7,204

Gain on sales

Loss on sales

$

$

$

5,767
—
5,767

$

—
—
—

The following tables summarize acquisition costs and book values (fair values) of available-for-sale securities with available fair values as ofMarch 31, 2019:

Securities with book value exceeding acquisition cost:

Millions of yen
Acquisition cost

Equity securities
Bonds

¥
¥

17,289—17,289¥¥46,158—46,158

Securities with book value not exceeding acquisition cost:

¥
¥

3,545
—
3,545

¥
¥

KANEKA CORPORATION

28,868—28,8682019
Difference

¥
¥

3,074
—
3,074

¥
¥

(471)
—
(471)

Millions of yen
Sales

19

¥

Book value

The following table summarizes sales of available-for-sale securities as of March 31, 2019:

Equity securities
Bonds

¥

Millions of yen
Acquisition cost

Equity securities
Bonds

2019
DifferenceBook value

1,697
—
1,697

Gain on sales

2019
Loss on sales

¥

¥

¥

1,515
—
1,515

¥

—
—
—

7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING TRANSACTIONS
Derivative transactions to which hedge accounting was not applied as of March 31, 2020 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
Contract amountForeign exchange forward contracts
Sell contracts
U.S. dollar
Euro
British pound
Thai baht
Currency swap contracts
Pay Malaysia Ringgit and receive Singapore dollars

¥

5,255
46
28
1,091

Fair value

¥

52
(0)
1
(4)

641

Contract amount$

48,294427
262
10,033

Fair value

$

479
(0)
15
(38)

5,891

12

115

Derivative transactions to which hedge accounting was applied as of March 31, 2020 were as follows:
Thousands of
U.S. dollars (Note 1)

Millions of yen
Contract amountCurrency swap contracts
Pay U.S. dollars and receive Malaysia Ringgit
Pay Japanese Yen and receive Malaysia Ringgit

¥

1,605
4,753

Fair value

¥

(12)
372

Contract amount$

14,75043,682Contract amount¥

Fair value

500

(*)

$

(113)
3,426

Thousands of
U.S. dollars (Note 1)

Millions of yen

Interest rate swap
Pay floating and receive fixed

Fair value

Contract amount$

Fair value

4,594

(*)

Derivative transactions to which hedge accounting was not applied as of March 31, 2019 were as follows:
Millions of yen
Contract amountForeign exchange forward contracts
Sell contract
U.S. dollar
British pound
Thai baht
Buy contract
U.S. dollar
Currency swap contracts
Pay Malaysia Ringgit and receive Singapore dollars

¥

1,920
231
690

Fair value

¥

(4)
(1)
(2)

333

(0)

678

(2)

Derivative transactions to which hedge accounting was applied as of March 31, 2019 were as follows:
Millions of yen
Contract amountCurrency swap contracts
Pay U.S. dollars and receive Malaysia Ringgit
Pay Japanese Yen and receive Malaysia Ringgit

¥

2,352
4,753

Fair value

¥

(115)
19

Millions of yen
Contract amountInterest rate swap
Pay floating and receive fixed¥

Fair value

500

(*)

(*) Because interest rate swaps are processed with loans payable, the fair value is included in the fair value of the loans payable (Note 5).

FINANCIAL SECTION 2020

20

8. INVENTORIESInventories at March 31, 2020 and 2019 consisted of the following:
Millions of yen
2019

2020

Merchandise and finished goods¥

66,057

Thousands of
U.S. dollars (Note 1)

¥

2020

61,609$606,976

Work-in-process

8,727

9,365

80,195

Raw materials and supplies

42,474

41,459390,280¥ 117,259¥ 112,434$ 1,077,452

9. RESTRUCTURING CHARGESIn 2018, the demand for high thermal conductive graphite sheets expanded drastically with the arrival of IoT and AI in social media applications.
In addition, the structure of high thermal conductive graphite sheets had changed dramatically.
Therefore, the production process for sticker of high thermal conductive graphite sheets was reviewed in light of the rising quality requirements, and we decided to restructure and dispose of old production facilities and inventories.
As a result, the Companies posted a restructuring charges with loss on valuation of inventories accounting for ¥996 million.
After reviewing the future planning of River Seiko Corporation by new productions and reforming the business operation structure tostrengthen profitability in the digestive system and electrophysiology fields, the book value of goodwill and other assets was written down to
the recoverable value, and the Companies posted an impairment loss of ¥671 million.
In 2019, in order to develop and launch high-efficiency solar cells in the solar cell business where demand is expected to expand, the Grouphas radically reinvented the production processes based on technologies accumulated from the past.
Following these structural reforms, the following losses were recorded as restructuring costs for obsolete manufacturing facilities and inventories.
The main component of this was inventory valuation loss of ¥1,578 million.
With regard to machinery and equipment for which there was no prospect of future use due to the business restructuring, the book value
has been reduced to the recoverable value, and the reduction of ¥272 million has been included in business restructuring expenses as
extraordinary loss.

10. IMPAIRMENT LOSSThe Companies recognized impairment loss in other expenses for the year ended March 31, 2018.
Location

Use

Type

–

Other

Goodwill etc.

The Companies group their assets mainly according to Solution Vehicle. For businesses run mainly by subsidiaries, the Companies group assets according to subsidiary units.
After reviewing the future planning of River Seiko Corporation through restructuring, the book value of goodwill and other assets was written down
to its recoverable value, and the Companies posted an impairment loss of ¥671 million. Of this amount, goodwill accounted for ¥634 million.
The recoverable value of the above asset groups were estimated by net sales values based mainly on inheritance tax values by roadside land prices.
The Companies recognized impairment loss in other expenses for the year ended March 31, 2019.
Location

Use

Type

Toyooka, Hyogo

Business assets

Machinery, equipment and vehicles, etc.

The Companies group their assets mainly by the Solutions Vehicles of the Company, and among these, the businesses of the consolidated
subsidiaries are grouped by the relevant subsidiaries. Idle assets are grouped by individual assets in the current consolidated fiscal year, thebook value of machinery and equipment the use of which is no longer expected due to business structural reform was reduced to the recoverable value, and a reduction of ¥272 million was included in business structural reform expenses as extraordinary loss. The major component
was machinery and equipment ¥202 million in addition, the recoverable value was measured by the net selling price and evaluated by thememorandum price.
21

KANEKA CORPORATION

11. INCOME TAXESThe Company and its consolidated domestic subsidiaries are subject to a number of taxes based on income, which, in the aggregate, indicate a statutory
rate in Japan of approximately 30.58% for the years ended March 31, 2020 and 2019, approximately 30.81% for the year ended March 31, 2018.
The significant differences between the statutory and effective tax rate for the years ended March 31, 2020, 2019 and 2018 were as follows:
Statutory tax rate
Permanently non-deductible expense
Permanently non-taxable income
Elimination of dividends on consolidation
Tax credits primarily for research and development expenses
Change in valuation allowance
Tax rate differences of foreign subsidiaries
Amortization of goodwill
Impairment loss of goodwill
Gain on negative goodwill
Gain on step acquisitions
Adjustment of deferred tax assets (liabilities) by the changes of tax rate
Other
Effective tax rate

2020

2019

2018

30.58%
1.07%(9.62%)
9.19%(8.09%)(1.25%)(1.49%)
0.84%
–%
–%
–%
–%
0.58%
21.81%

30.58%
0.62%(6.70%)
6.35%(3.80%)(3.18%)
0.88%
0.43%
–%
–%
(0.42%)–%
0.10%
24.86%

30.81%
0.65%(6.26%)
6.00%(7.85%)
4.19%
1.37%
0.52%
0.63%
(0.95%)(1.42%)(2.22%)
1.18%
26.66%

Significant components of deferred tax assets and liabilities as of March 31, 2020 and 2019 were as follows:
Millions of yen

Deferred tax assets:
Net defined benefit liability
Tax loss carryforwards
Loss on valuation of investment securities
Excess bonuses accrued
Impairment loss on non-current assets
Unrealized gain
Tax credit carryforwards
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Depreciation of foreign subsidiaries
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

2019

2020

¥

11,424
1,767
826
1,838
1,549
698
4,337
3,359
25,802(6,874)18,928¥

8,459

10,371
1,223
826
1,922
2,169
1,408
3,668
2,790
24,380(7,122)
17,2582020$(8,370)(2,508)(1,652)(12,531)(6,213)(2,537)(1,718)(10,468)¥

Thousands of
U.S. dollars (Note 1)

¥

4,726

104,976
16,244
7,594
16,895
14,2396,416
39,85130,871
237,090(63,167)
173,923(57,089)(23,317)(15,786)(96,193)$

77,730FINANCIAL SECTION 202022

12. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
Short-term loans payable are generally unsecured notes for three months with average interest rates of 0.91% and 1.52% at March 31,
2020 and 2019, respectively. Such borrowings are generally renewable at maturity.
Long-term loans payable and bonds payable at March 31, 2020 and 2019 consisted of the following:
Millions of yen

Thousands of
U.S. dollars (Note 1)

2019

2020

2020

Secured:Loans principally from banks and insurance companies at interest rates from 0.00% to 2.53%
in 2020 and 2019, maturing serially through 2024

¥

763

¥

962

$

7,017

Unsecured:
Loans from banks and insurance companies at interest rates from 0.00% to 8.60%
in 2020 and 2019, maturing serially through 2033
Bonds at interest rate of 1.67%, due September 13, 2019

44,60447,847

409,854—

10,000—Bonds at interest rate of 0.11%, due September 12, 2024

5,000

—

45,943

Bonds at interest rate of 0.24%, due September 12, 2029

5,000

—

45,943

Less amounts due within one year

55,36858,809508,757(12,074)(13,687)(110,948)¥

43,293¥45,122$397,808

At March 31, 2020 and 2019, assets pledged as collateral for secured long-term loans payable, short-term loans payable and trade payables
totaling ¥1,029 million ($9,464 thousand) were as follows:
Millions of yen
2019

2020

Property, plant and equipment, net

¥

4,916

¥

5,845

Investment securities

¥

5,096

¥

6,450

2020

$

45,179$53,707

1,354

928

The aggregate annual maturities of long-term loans payable and bonds payable were as follows:

8,527

Millions of yen

Thousands of
U.S. dollars (Note 1)

2020

2020

Years ending March 31,
2021

Thousands of
U.S. dollars (Note 1)¥

12,074$110,948

2022

8,939

82,137

2023

5,549

50,992

2024

8,167

75,045

2025

9,919

91,1512026 and thereafter

10,717

98,481¥

55,368$508,757
Millions of yen

Years ending March 31,
2020

2019

¥

13,6872021

13,049

2022

8,123

2023

4,928

2024

8,018

2025 and thereafter

11,002¥23

KANEKA CORPORATION

58,80913. PROVISION FOR RETIREMENT BENEFITSDefined benefit plans(1) Movement in retirement benefit obligations, except plan applying simplified method
Millions of yen
2019

2020

Balance at beginning of year¥

Service cost

117,923

Thousands of
U.S. dollars (Note 1)¥

117,567

2020

$

4,250

4,229

1,083,561
38,860Interest cost

890

898

8,178

Actuarial loss (gain)336(1,032)

3,092(4,082)(3,777)(37,509)(50)

19

Benefits paid
Other
Balance at the end of year¥

119,246¥

117,923(2) Movements in plan assets, except plan applying simplified method
Millions of yen¥

86,3281,095,717

Thousands of
U.S. dollars (Note 1)

2019

2020

Balance at beginning of year

(465)
$

¥

83,516

2020$

793,242

Expected return on plan asset

2,107

2,087

19,360

Actuarial gain (loss)(4,107)(381)(37,741)

Contributions paid by the employer

1,858

1,751

17,074

Benefits paid

(2,624)(2,646)(24,113)

Contribution of securities to retirement benefit trust
Balance at the end of year

2,000

868
¥

84,431¥

86,328(3) Movement in liability for retirement benefits of defined benefit plan applying the simplified method
Millions of yen

¥

3,389

775,806

Thousands of
U.S. dollars (Note 1)

2019

2020

Balance at beginning of year

7,983
$

¥

3,274

2020

$

31,148Retirement benefit cost

467

429

4,298

Benefits paid

(361)

(310)

(3,319)

Other
Balance at the end of year

(2)

(3)
¥

3,492

¥

3,389

(4) Reconciliation from retirement benefit obligations and plan assets to liability and asset for retirement benefits

Funded retirement benefit obligation¥

115,338

32,095

Millions of yen

Thousands of
U.S. dollars (Note 1)

2019

2020

2020

Plan asset

(32)
$

¥

114,018$

1,059,804(84,432)(86,330)(775,822)

30,90527,687283,981

Unfunded retirement benefit obligations

7,403

7,297

68,024

Total net liability (asset) for retirement benefits

38,30834,985352,006

Liability for retirement benefits

38,30834,985352,006－

Asset for retirement benefits
Total net liability (asset) for retirement benefits¥

38,308－¥34,985－$352,006

FINANCIAL SECTION 202024

(5) Retirement benefit costs¥

Interest cost

4,229

Thousands of
U.S. dollars (Note 1)

2018

2020

2019

2020

Service cost

Millions of yen

¥

4,250

¥

4,274

$

38,860

890

898

880

8,178

Expected return on plan assets(2,107)(2,087)(2,033)(19,360)

Net actuarial loss amortization

1,149

1,941

2,643

10,562

467

429

432

4,298

Retirement benefit expenses calculated by simplified method
¥

4,629

¥

5,431

¥

6,197

(6) Remeasurements for retirement benefits

Actuarial gains and losses¥(3,294)¥

2,592

Thousands of
U.S. dollars (Note 1)

2018

2020

¥

3,126

(7) Accumulated remeasurements for retirement benefits
Millions of yen¥

11,549

$

¥

8,255

(30,271)

Thousands of
U.S. dollars (Note 1)

2019

2020

Actuarial gains and losses that are yet to be recognized

42,539Millions of yen
2019

2020

$

2020

$

106,125(8) Plan assets
1. Plan assets comprise:
2020

2019

Bonds

53%

50%

Equity securities

23%

26%

General account

15%

14%

Other

9%

10%

100%

100%

2. Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered in determining
the long-term expected rate of return.
(9) Actuarial assumptions
The principal actuarial assumptions
2019

2020

2018

Discount rate

Mainly0.72% Mainly

0.72% Mainly

0.72%

Long-term expected rate of return

Mainly2.50% Mainly

2.50%

2.50%

Defined contribution plans
Millions of yen
2019

2020

The amount of contributions to the defined contribution plan

25

KANEKA CORPORATION

¥

490

¥

446

Thousands of
U.S. dollars (Note 1)

2018

¥

424

2020

$

4,510

14. CONTINGENT LIABILITIESAt March 31, 2020 and 2019, contingent liabilities were as follows:
Millions of yen
2019

2020

Notes endorsed¥

4

Thousands of
U.S. dollars (Note 1)

¥

11

2020

$

40

Notes discounted

53

15

487

Guarantees

315

318

2,902

Letters of awareness

180

132
¥

505

¥

526

1,214
$

4,644

15. NET ASSETS
Under the Japanese Corporate Law (“the Law”), the entire amount
paid for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price ofthe new shares as additional paid-in capital, which is included incapital surplus.
Under the Law, in cases in which a dividend distribution of
surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the totalof legal earnings reserve and additional paid-in capital must be set
aside as legal earnings reserve or additional paid-in capital. Legalearnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Legal earnings reserve and additional paid-in capital may not be
distributed as dividends. By resolution of the shareholders’ meet-ing, legal earnings reserve and additional paid-in capital may betransferred to other retained earnings and capital surplus, respectively, which are potentially available for dividends.
On May 14, 2020, the Board of Directors authorized cash dividends to shareholders of record at March 31, 2020 on the sharesof stock then outstanding at the rate of ¥50.0 ($0.45) per share or a
total of ¥3,261 million ($29,966 thousand). The appropriations had
not been accrued in the consolidated financial statements as ofMarch 31, 2020.
Such appropriations are recognized in the period in which they
are approved by the Board of Directors.
Cash dividends per share applicable to the fiscal year ended
March 31, 2020, comprise interim dividends of ¥50.0 ($0.45) and
year-end dividends of ¥50.0 ($0.45).

FINANCIAL SECTION 202026

16. STOCK OPTIONS(1) The Company
The Company has implemented a stock option plan by which subscription rights to shares were granted to directors of the Company.
The Company conducted a consolidation of shares of common stock at the ratio of five shares to one share on October 1, 2018. The
figures after conducting the consolidation of shares are shown as following in the table below.
The following table summarizes the Company’s stock option plan.
Stock options
granted on
August 9, 2019

Stock options
granted on
August 9, 2018

Stock options
granted on
August 9, 2017

Stock options
granted on
August 9, 2016

Stock options
granted on
August 11, 2015

Stock options
granted on
August 11, 2014

Stock options
granted on
August 9, 2013

Category and numberof people granted
stock options

Company
directors, 10
Executive
officers, 22Company
directors, 9
Executive
officers, 20

Company
directors, 9
Executive
officers, 16Company
directors, 10Company
directors, 10Company
directors, 10Company
directors, 10

Number of stock
options granted bycategory of stock

26,200 shares ofcommon stock

24,400 shares ofcommon stock

22,600 shares ofcommon stock

14,800 shares ofcommon stock

14,800 shares ofcommon stock

15,000 shares ofcommon stock

13,000 shares ofcommon stock

Vesting conditions

No provision

No provision

No provision

No provision

No provision

No provision

No provision

Exercise period

From August 10,
2019 throughAugust 9, 2044 (*)

From August 10,
2018 throughAugust 9, 2043 (*)

From August 10,2017 throughAugust 9, 2042 (*)

From August 10,2016 throughAugust 9, 2041 (*)

From August 12,2015 throughAugust 11, 2040 (*)

From August 12,2014 throughAugust 11, 2039 (*)

From August 10,
2013 throughAugust 9, 2038 (*)

Stock options
granted on
August 9, 2012

Stock options
granted on
August 10, 2011

Stock options
granted on
August 10, 2010

Stock options
granted on
August 11, 2009

Stock options
granted on
August 11, 2008

Stock options
granted on
September 10, 2007

Category and numberof people granted stock
options

Company
directors, 12Company
directors, 12Company
directors, 13Company
directors, 12Company
directors, 13Company
directors, 13

Number of stock options
15,000 shares ofgranted by categorycommon stockof stock

15,000 shares ofcommon stock

15,000 shares ofcommon stock

15,000 shares ofcommon stock

15,000 shares ofcommon stock

11,400 shares ofcommon stock

Vesting conditions

No provision

No provision

No provision

No provision

No provision

No provision

Exercise period

From August 10,2012 throughAugust 9, 2037 (*)

From August 11,
2011 throughAugust 10, 2036 (*)

From August 11,2010 throughAugust 10, 2035 (*)

From August 12,2009 throughAugust 11, 2034 (*)

From August 12,2008 throughAugust 11, 2033 (*)

From September 11,
2007 throughSeptember 10, 2032 (*)(*) If a holder of subscription rights to shares loses his/her position as a Company director during the above stated exercise period, the holder may exercise thoserights only within the 10-day period beginning the day after losing such position.

27

KANEKA CORPORATIONThe following table summarizes the movements and prices of subscription rights to shares.
Stock options
granted on
August 9, 2019

Stock options
granted on
August 9, 2018

Stock options
granted on
August 9, 2017

Stock options
granted on
August 9, 2016

Stock options
granted on
August 11, 2015

Stock options
granted on
August 11, 2014

Stock options
granted on
August 9, 2013

Unvested stock options
Beginning of term
GrantedExpired or forfeited
VestedUnvested balance

—

—

—

—

—

—

26,200

—

—

—

—

—

—
—

—

—

—

—

—

—

—

26,200

—

—

—

—

—

—

—

—

—

—

—

—

—

Vested stock options
Beginning of term—

24,40022,60011,600

10,200

9,400

5,200

26,200

—

—

—

—

—

—

Exercised

—

1,200

1,200

1,000

1,000

1,000

—

Expired or forfeited

—

—

—

—

—

—

—

Unexercised balance

26,20023,20021,40010,600

9,200

8,400

5,200

1

1

1

1

1

1

1

VestedExercise price (yen)Weighted average market value per stock at
the dates exercised (yen)Fair value per stock at the date granted (yen)Exercise price (USD)
Weighted average market value per stock at
the dates exercised (USD)
Fair value per stock at the date granted (USD)

—

4,155

4,155

4,155

4,155

4,155

—

2,957

4,900

3,880

3,605

4,735

2,510

2,790

0.01

0.01

0.01

0.01

0.01

0.01

0.01

—

38.18

38.18

38.18

38.18

38.18

—

27.17

45.02

35.65

33.13

43.51

23.06

25.64

Stock options
granted on
August 9, 2012

Stock options
granted on
August 10, 2011

Stock options
granted on
August 10, 2010

Stock options
granted on
August 11, 2009

Stock options
granted on
August 11, 2008

Stock options
granted on
September 10, 2007

Unvested stock options
Beginning of term

—

—

—

—

—

—

Granted

—

—

—

—

—

—

Expired or forfeited

—

—

—

—

—

—

Vested

—

—

—

—

—

—

—

—

—

—

—

—

Unvested balance
Vested stock options
Beginning of term

4,200

3,600

2,600

2,200

2,400

600

Vested

—

—

—

—

—

—

Exercised

—

—

—

—

—

—

Expired or forfeited

—

—

—

—

—

—

Unexercised balance

4,200

3,600

2,600

2,200

2,400

600

1

1

1

1

1

1

—

—

—

—

—

—

1,815

2,060

2,280

3,110

3,000

4,415

0.01

0.01

0.01

0.01

0.01

0.01

—

—

—

—

—

—

16.68

18.93

20.95

28.58

27.57

40.57

Exercise price (yen)Weighted average market value per stock at
the dates exercised (yen)Fair value per stock at the date granted (yen)Exercise price (USD)
Weighted average market value per stock at
the dates exercised (USD)
Fair value per stock at the date granted (USD)

Expenses related to stock options were included in selling, general and administrative expenses and amounted to ¥77 million ($711 thousand), ¥119 million and ¥87 million for the years ended March 31, 2020, 2019 and 2018, respectively.
The fair value of options granted was estimated using the Black-Scholes model with the following assumptions.

Expected volatility

Stock options granted on August 9, 2019

Stock options granted on August 9, 201827.16%

30.88%

Expected holding period

3 years

4 years

Expected dividend

100 yen

90 yen (*)

Risk free interest rate

(0.261%)0.081%(*) T he Company conducted a consolidation ofshares of common stock at the ratio of five
shares to one share on October 1, 2018. The
expected dividend is shown as though theshare consolidation took place beginning of
the fiscal year ended March, 2019.

FINANCIAL SECTION 202028

(2) Cemedine Co., Ltd.
Cemedine Co., Ltd. has implemented a stock option plan by which subscription rights to shares were granted to directors of the company.
The following table summarizes the company’s stock option plan.
Stock options
granted on
July 8, 2019
Category and numberof people granted stock
options

Company
directors, 5

Number of stock options
21,000 shares ofgranted by categorycommon stockof stock

Stock options
granted on
July 9, 2018

Stock options
granted on
July 10, 2017

Stock options
granted on
July 7, 2016

Stock options
granted on
July 9, 2015

Stock options
granted on
July 10, 2014

Stock options
granted on
July 9, 2013

Company
directors, 4Company
directors, 4Company
directors, 5Company
directors, 4Company
directors, 6Company
directors, 7

13,000 shares ofcommon stock

15,000 shares ofcommon stock

32,000 shares ofcommon stock

26,000 shares ofcommon stock

38,000 shares ofcommon stock

53,000 shares ofcommon stock

Vesting conditions

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

Exercise period

From July 9, 2019
through
July 8, 2039 (*)

From July 9, 2018
through
July 8, 2038 (*)

From July 11, 2017
through
July 10, 2037 (*)

From July 8, 2016
through
July 7, 2036 (*)

From July 10, 2015
through
July 9, 2035 (*)

From July 11, 2014
through
July 10, 2034 (*)

From July 10, 2013
through
July 9, 2033 (*)

Stock options
granted on
July 12, 2012

Stock options
granted on
July 14, 2011

Stock options
granted on
July 26, 2010

Stock options
granted on
August 11, 2009

Stock options
granted on
October 20, 2008

Category and numberof people granted stock
options

Company directors, 8 Company directors, 8 Company directors, 8 Company directors, 7 Company directors, 7

Number of stock options
58,000 shares ofgranted by categorycommon stockof stock

64,000 shares ofcommon stock

67,000 shares ofcommon stock

58,000 shares ofcommon stock

58,000 shares ofcommon stock

Vesting conditions

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

After people granted
stock option lose
their position as
Company director.

Exercise period

From July 13, 2012
through
July 12, 2032 (*)

From July 15, 2011
through
July 14, 2031 (*)

From July 27, 2010
through
July 26, 2030 (*)

From August 12,2009 throughAugust 11, 2029 (*)

From October 21,
2008 throughOctober 20, 2028 (*)(*) If a holder of subscription rights to shares loses his/her position as a Company director during the above stated exercise period, the holder may exercise thoserights only within the 10-day period beginning the day after losing such position.

29

KANEKA CORPORATIONThe following table summarizes the movements and prices of subscription rights to shares.
Stock options
grantedon July 8, 2019

Stock options
granted on
July 9, 2018

Stock options
granted on
July 10, 2017

Stock options
granted on
July 7, 2016

Stock options
granted on
July 9, 2015

Stock options
granted on
July 10, 2014

Stock options
granted on
July 9, 2013

Unvested stock options
Beginning of term—

13,00015,00022,00018,00012,00014,00021,000

—

—

—

—

—

—

Expired or forfeited

—

—

—

—

—

—

—

Vested

—

4,000

4,000

9,000

9,000

6,000

7,000

21,0009,000

11,00013,000

9,000

6,000

7,000

GrantedUnvested balance
Vested stock options
Beginning of term

—

—

—

—

—

—

—

Vested

—

4,000

4,000

9,000

9,000

6,000

7,000

Exercised

—

4,000

4,000

9,000

9,000

6,000

7,000

Expired or forfeited

—

—

—

—

—

—

—

Unexercised balance

—

—

—

—

—

—

—

Exercise price (yen)Weighted average market value per stock at
the dates exercised (yen)Fair value per stock at the date granted (yen)

1

1

1

1

1

1

1

Exercise price (USD)
Weighted average market value per stock at
the dates exercised (USD)
Fair value per stock at the date granted (USD)

—

—

—

—

—

—

—

885

938

664

441

415

388

388

0.01

0.01

0.01

0.01

0.01

0.01

0.01

—

—

—

—

—

—

—

8.13

8.62

6.10

4.05

3.81

3.57

3.57

Stock options
granted on
July 12, 2012

Stock options
granted on
July 14, 2011

Stock options
granted on
July 26, 2010

Stock options
granted on
August 11, 2009

Stock options
granted on
October 20, 2008

Unvested stock options
Beginning of term

12,000

7,000

8,000

8,000

8,000

Granted

—

—

—

—

—

Expired or forfeited

—

—

—

—

—

5,000

—

—

—

—

7,000

7,000

8,000

8,000

8,000

VestedUnvested balance
Vested stock options
Beginning of term

—

—

—

—

—

Vested

5,000

—

—

—

—

Exercised

5,000

—

—

—

—

Expired or forfeited

—

—

—

—

—

Unexercised balance

—

—

—

—

—

Exercise price (yen)Weighted average market value per stock at
the dates exercised (yen)Fair value per stock at the date granted (yen)

1

1

1

1

1

—

—

—

—

—

Exercise price (USD)
Weighted average market value per stock at
the dates exercised (USD)
Fair value per stock at the date granted (USD)

352

342

293

273

163

0.01

0.01

0.01

0.01

0.01

—

—

—

—

—

3.23

3.14

2.69

2.51

1.50

Expenses related to stock options were included in selling, general and administrative expenses and amounted to ¥15 million ($142 thousand), ¥11 million and ¥10 million for the years ended March 31, 2020, 2019 and 2018, respectively.
The fair value of options granted was estimated using the Black-Scholes model with the following assumptions.
Stock options granted on July 8, 2019
Expected volatility
Expected holding period

Stock options granted on July 10, 201837.80%

40.72%

6 years and 2 months

4 years and 11 months

Expected dividend

10 yen

10 yenRisk free interest rate

(0.270)%(0.120)%FINANCIAL SECTION 202030

17. BUSINESS COMBINATION DUE TO ACQUISITION(Business Combination due to Acquisition)
1. Summary of Business Combination(1) Name of acquired company and its business
Name of acquired company
Tobu Chemical Co., Ltd.
Business
Manufacture and sale of PVC special resin(2) Reasons for executing business combination
Promotion of downstream deployment of business in Material
Solutions Unit.

3. Additional acquisition of shares in acquired company
Acquisition cost and consideration paid
Millions of yen

Consideration paid for the acquisition
Fair value of common stock of Tobu Chemical held before
the business combination

¥

915

¥

1,838

Fair value of additional common stock acquired as of
the business combination
Acquisition cost923

4. Main acquisition related costs(3) Date of business combination
January 19, 2018(4) Legal form of business combination
Share acquisition in exchange for cash

Advisory fees : ¥6 million

5. D ifference between acquisition cost of the acquired company and the total acquisition cost of individual transactions
until the business combination
Gain on step acquisitions : ¥1,429 million(5) Name of company after combination
There was no change in the company name.
(6) Share of voting rights acquired
Share of voting rights held immediately before the date of businesscombination
26.26%
Share of voting rights additionally acquired on the date of businesscombination
26.50%
Share of voting rights held after acquisition
52.76%(7) Rational behind determining the company to be acquired
The Company acquired a majority of the voting rights and clearlyhas control over the decision making body of the acquiree.

2. Period of results of the acquired company included in the
consolidated financial statements
The acquired company’s financial results from January 1, 2018
to March 31, 2018 are included in the consolidated statement ofincome for the year ended March 31, 2018 as the acquisition dateis regarded as January 1, 2018.

31

KANEKA CORPORATION

6. A
 mount of gain on negative goodwill recognized and reason
for recognition(1) Amount of gain on negative goodwill recognized¥954 million(2) Reason for recognition
The acquisition cost was less than the net asset value at the dateof business combination.

7. V alue of assets and liabilities assumed as of businesscombination
Millions of yen

Current assets

¥

5,709

Total assets

¥

8,240

Current liabilities

¥

2,856

¥

2,946

Non-current assets

2,530

Non-current liabilities
Total liabilities908. Estimated effect on consolidated statement of operations
assuming the business combination was concluded at the
beginning of the fiscal year ended March 31, 2018 and methods for calculation
Millions of yen

Net sales

¥

4,441

Operating income

363

Income before income taxes and non-controlling interests

218

Net income attributable to owners of parent

8
Yen

Net income per share

¥

0.03

(Methods for calculating estimated amounts)
The difference between net sales and profit and loss accounts
calculated assuming the business combination was concluded at
the beginning of the fiscal year ended March 31, 2018 and thecorresponding figures in the accompanying consolidated statementof operations were used.
The amounts shown above have not been audited.

(Additional acquisition of subsidiary’s shares)
1. Summary of business combination(1) Name of acquired company and its business
Name of acquired company
AB-Biotics, S.A.
Business
Development, manufacturing and sales of Probiotics(2) Date of business combination
August 16, 2019 and November 7, 2019(3) Legal form of business combination
Acquisition of shares from non-controlling interests(4) Name of company after combination
There was no change in the company name.
(5) Other matters regarding summary
In the previous consolidated fiscal year, the company became aconsolidated subsidiary according to the control standards, and also
made a tender offer in July-August 2019 and October-November
2019.
Through the business combination, the Company expects
to strengthen its management structure and expedite decision
making.

2. Summary of accounting treatment applied
Pursuant to the “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21, issued on September 13, 2013)
and the “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No. 10, issued on September 13, 2013), the business combination under common control was treated as a transaction with non-controlling interests.

3. Additional acquisition of shares in subsidiary
Acquisition cost and consideration paid
Consideration paid for acquisition: Cash and cash equivalents in theamount of ¥3,723 million ($34,212 thousand)

4. C hanges in the portion held by the Company in connection
with the transactions with non-controlling interests(1) Main reasons for changes in capital surplus
Additional acquisition of subsidiary’s shares(2) Decreases in capital surplus due to transactions with
non-controlling interests¥2,282 million ($20,969 thousand)

FINANCIAL SECTION 202032

18. SEGMENT INFORMATION(Segment Information)
1. Overview of Reporting Segments
Kaneka’s reporting segments aim to gather financial informationfrom the Company’s separate business units to facilitate decisions by the Board of Directors on the allocation of management
resources and allow for the Board’s regular review of businessperformance.
The Company has established the “Solutions Vehicle” asorganizations for executing its growth strategies from a solutions
perspective. There are ten Solutions Vehicles grouped into four
solution domains called “Solutions Unit.” Each Solutions Unit hasestablished a global Group strategy for its products and services,bringing together subsidiaries in Japan and overseas to develop its
business activities.
The Company, therefore has four reporting segments categorized by Solution Unit: the “Material Solutions Unit,” “Quality ofLife Solutions Unit,” “Health Care Solutions Unit” and “Nutrition
Solutions Unit.”
The Material Solutions Unit contributes to environmental
protection and comfortable living by providing solutions in the formof high-performance materials to support the development of social
infrastructure and mobility (i.e. weight reduction and improved fueleconomy), and cutting-edge materials such as biopolymers thatassist directly with the realization of environmental societies. The
Quality of Life Solutions Unit contributes to energy conservationand the creation of high quality lifestyles by providing solutions in
the form of high performance materials and unique services that
respond to the need for energy conservation and adoption of smart
technologies in housing and daily infrastructure. The unit is also
responding to innovation in information driven societies, such as
the advance of the IoT and AI. The Health Care Solutions Unit contributes to a society with greater longevity and more sophisticatedmedical care by providing valuable solutions that combine devices
and pharmaceuticals in fields such as medicine, health and nursing care. The unit is also developing a unique healthcare businessbased on advanced medical technologies such as biopharmaceuticals and regenerative and cellular medicine. The Nutrition Solutions Unit contributes to health and high-quality food by providing
a wide range of solutions in the form of distinctive materials andsupplements that meet needs in food diversification and healthpromotion. The unit also provides solutions that contribute to foodproduction support in the fields of agriculture, livestock and fishery.

The Solutions Vehicles and main products that belong to eachreporting segment are as follows:
Solutions Unit
(Reporting
Segments)

Material
Solutions Unit

Quality of Life
Solutions Unit

Health Care
Solutions Unit

Solutions Vehicle

Main products

Vinyls and Chlor-Alkali

General PVC resins, Caustic soda,
Specialty PVC resins

Performance
Polymers (MOD)Modifiers, Epoxy masterbatch,
Biodegradable polymers

Performance
Polymers(MS)Modified silicone polymers

Foam & Residential
Techs

Expandable polystyrene resins andproducts,
Extruded polystyrene foam boards,
Bead-method polyolefin foam,
Solar circuit construction method(external insulation and double
ventilation construction) products

E & I Technology

Polyimide films, Optical materials,
Graphite sheets

PV & Energy
management

Photovoltaic modules,
Energy storage batteries forresidences

Performance Fibers

Acrylic synthetic fibers

Medical Devices

Medical devices

Pharma &Low-molecular pharmaceutical
Supplemental Nutritionmaterials, API, Biopharmaceuticals(Pharma)Pharma &Supplemental Nutrition Functional foodstuffs(Supplemental Nutrition)

Nutrition
Solutions Unit
Foods & Agris

Margarine, Shortening,
Bakery yeast, Spices,
Antifreeze materials,
Dairy products,
Functional fertilizers and feeds

2. B asis of Calculation of Monetary Amounts for Net Sales,
Profit or Loss, Assets, Liabilities, and Other Items by
Reporting Segment
Accounting treatment and procedures for reporting segments are
the same as those shown in the “Notes to Consolidated Financial
Statements.” Intersegment transactions are based on prevailingmarket prices.

33

KANEKA CORPORATION

3. Segment Information by Business Category
Millions of yen
Reporting Segment

2020

Material
Solutions
Unit

Quality of Life
SolutionsUnit

241,795¥

Health Care
Solutions
Unit

Nutrition
Solutions
Unit

Others(Note 1)

Total

Total

Consolidated(Note 2)Adjustments

Sales
Customers¥

Intersegment
Total

154,837¥

46,352¥

157,431¥

600,416

¥

1,097

¥

601,514¥—¥

601,514

1,015

24

—

33

1,073

1,088

2,162

(2,162)—242,811

154,861

46,352

157,465

601,4902,186

603,676(2,162)

601,514Segment profit (loss)

20,625

14,189

8,917

5,647

49,379547

49,927(23,912)26,014

Segment assets

233,548

181,176

64,979110,440

590,145365

590,51062,751

653,262

11,55911,395

2,692

4,547

30,19519

30,215

3,904

34,120

32

—

315

108

456

—

456

88

544

Other Items
Depreciation
Amortization of goodwill
Investment in equity method
affiliates
Increase in assets

67

2,249

—

—

2,316

—

2,316

—

2,316

13,09913,518

4,313

6,052

36,983

162

37,146

10,66347,809Notes 1: “Others” is a business segment that is not included in the reporting segments and includes property and life insurance agency business.
Notes 2: Segment profit (loss) is reconciled with operating income in the consolidated financial statements.

Millions of yen
Reporting Segment

2019

Material
Solutions
Unit

Quality of Life
SolutionsUnit

255,918¥

Health Care
Solutions
Unit

Nutrition
Solutions
Unit

Others(Note 1)

Total

Total

Consolidated(Note 2)Adjustments

Sales
Customers
Intersegment
Total

¥

156,674¥

47,442¥

158,968¥

619,002

¥

2,040

¥

621,043¥—¥

621,043

1,203

18

—

28

1,250

1,089

2,340

(2,340)—257,122

156,692

47,442

158,996620,2533,130

623,383(2,340)621,043

Segment profit (loss)

25,961

15,092

10,583

5,930

57,5691,464

59,034(22,992)

36,041

Segment assets

237,437

173,350

59,956

113,500

584,245795

585,040

74,547

659,587

10,747

10,979

2,462

3,913

28,10319

28,122

3,755

31,877

34

—

332

—

367

—

367

86

454

Other Items
Depreciation
Amortization of goodwill
Investment in equity method
affiliates
Increase in assets

67

2,124

—

—

2,191

—

2,191

—

2,191

13,47020,500

3,927

9,251

47,149387

47,537

6,056

53,594

Notes 1: “Others” is a business segment that is not included in the reporting segments and includes property and life insurance agency business.
Notes 2: Segment profit (loss) is reconciled with operating income in the consolidated financial statements.

FINANCIAL SECTION 202034

Millions of yen
Reporting Segment

2018

Material
Solutions
Unit

Quality of Life
SolutionsUnit

238,880¥

Health Care
Solutions
Unit

Nutrition
Solutions
Unit

Others(Note 1)

Total

Total

Consolidated(Note 2)Adjustments

Sales
Customers
Intersegment
Total

¥

149,360¥

45,856¥160,930¥

595,028

¥

1,114

¥

596,142¥—¥596,142

1,267

27

0

30

1,325

1,209

2,534

(2,534)—

240,148

149,387

45,856160,960

596,3532,324

598,677(2,534)596,142

Segment profit (loss)

27,10913,730

9,849

6,531

57,221520

57,741(20,853)

36,888Segment assets

230,547

158,341

57,841

108,722555,452819

556,272

83,508

639,780

10,157

10,458

2,376

3,751

26,74317

26,7603,360

30,121

35

—

448

—

483

—

483

46

529

Other Items
Depreciation
Amortization of goodwill
Investment in equity method
affiliates
Increase in assets

70

2,085

—

1,436

3,591

—

3,591

—

3,591

13,202

10,439

4,321

3,616

31,58073

31,654

9,263

40,917

Notes 1: “Others” is a business segment that is not included in the reporting segments and includes property and life insurance agency business.
Notes 2: Segment profit (loss) is reconciled with operating income in the consolidated financial statements.

Thousands of U.S. dollars (Note 1)
Reporting Segment

2020

Material
Solutions
Unit

Quality of Life
SolutionsUnit$ 2,221,776$ 1,422,742

9,333

220

2,231,110

1,422,962

Health Care
Solutions
Unit

Nutrition
Solutions
Unit

Total

425,912$ 1,446,585$ 5,517,016

—

307

9,861

425,912

1,446,893

5,526,878

20,087

Others(Note 1)

Total

Adjustments

Consolidated(Note 2)

10,081$ 5,527,098

10,005

19,867(19,867)—$ 5,527,098—

5,546,965(19,867)

5,527,098

Sales
Customers
Intersegment
Total

$

$

$

Segment profit (loss)

189,524

130,380

81,93751,888453,7315,032

458,763(219,722)

239,041

Segment assets

2,145,998

1,664,768

597,071

1,014,800

5,422,638

3,353

5,425,991

576,601

6,002,593

106,218

104,710

24,741

41,788277,458182

277,641

35,877

313,518

301

—

2,896

996

4,193

—

4,193

812

5,005

Other Items
Depreciation
Amortization of goodwill
Investment in equity method
affiliates
Increase in assets

621

20,666——

21,288—21,288—21,288120,365

124,214

39,63955,612339,832

1,494

341,327

97,980439,307

Notes 1: “Others” is a business segment that is not included in the reporting segments and includes property and life insurance agency business.
Notes 2: Segment profit (loss) is reconciled with operating income in the consolidated financial statements.

35

KANEKA CORPORATION

4. Reconciliation Between Segment Total and Consolidated Statements of Income (Adjustments)

2020

Millions of yen

Thousands of U.S.
dollars (Note 1)

2018

2020

2019

Income¥Segment total

49,379¥57,569¥$57,221

453,731

Income classified under "others"

547

1,464

520

Elimination of intersegment transactions

(0)

11

(7)

(6)

(23,933)(23,091)(20,909)(219,917)

Companywide expenses (Note)

21

Other adjustments¥

Operating income in the consolidated statements of income

87

26,014¥36,041

5,032

201

63
¥

$

36,888239,041

Note: Companywide expenses are primarily expenses for basic R&D that are not allocable to any reporting segments.

2020

Millions of yen

Thousands of U.S.
dollars (Note 1)

2018

2020

2019

Assets¥Segment total

590,145¥584,245¥$555,452

5,422,638

365

795

819

3,353

Elimination of intersegment transactions(16,179)(14,184)(13,500)(148,663)

Companywide assets (Note)

77,373

88,16896,442710,960

Other adjustments

1,556

563

566

Assets classified under "others"¥

Total assets in the consolidated statements of income

653,262¥

659,587¥

14,304$

639,780

6,002,593

Note: Companywide assets are working capital, investment securities and land that are not allocable to any reporting segments.

Segment total
2020

2019

2018

¥ 30,195¥ 28,103¥ 26,743

36,98347,14931,580

Others2020

2019

Millions of yen
Consolidated

Adjustments

2018

2020

2019

2018

2020

2019

2018

17

¥ 3,904¥ 3,755¥ 3,360¥ 34,120¥ 31,877¥ 30,121

73

10,663

6,056

9,263

47,80953,59440,917

Other Items
Depreciation
Increase in assets

¥

19
162

¥

19
387

¥

Note: “Others” is primarily expenses for basic R&D that are not allocable to any reporting segments.

Segment total

Others2020

2020

Thousands of U.S. dollars (Note 1)
Adjustments
Consolidated
2020

2020

Other Items
Depreciation
Increase in assets$

277,458
339,832

$

182
1,494

$

35,877
97,980$313,518
439,307

Note: “Others” is primarily expenses for basic R&D that are not allocable to any reporting segments.

FINANCIAL SECTION 2020

36

(Related Information)
Related information at March 31, 2020, 2019 and 2018 consisted of the following.

1. Information by Product and Service
No information is reported because product and service classifications are the same as the reporting segment classifications.

2. Geographic Area
(1) Sales
2020

Millions of yen
Japan

¥

364,960

Asia¥

109,344

North America¥

47,306

Europe¥53,426

Other areas¥

26,475

Total

¥

2019

601,514
Millions of yen

Japan

¥

371,315

Asia¥

115,661

North America¥

48,841

Europe¥59,264

Other areas¥

25,961

Total

¥

2018

621,043
Millions of yen

Japan

¥

359,739

Asia¥

109,961

North America¥

44,724

Europe¥58,813

Other areas

¥

2020

22,902

Total¥

596,142

Thousands of U.S. dollars (Note 1)
Japan

$

3,353,494

Asia$

1,004,728

North America$

434,681

Europe$490,917

Other areas$

243,275

Total$

5,527,098

Note: Sales are classified into countries or regions based on the geographic location of customers.

(2) Property, plant and equipment
2020

Millions of yen
Japan

¥

187,723

Malaysia¥

24,119Asia-Other¥

11,431

North America¥

18,083

Europe and others¥

21,698

Total

¥

2019

Millions of yen
Japan

¥

176,884

Malaysia¥

27,713Asia-Other

¥

8,967

North America¥

18,952Europe and others

¥

2020

19,404

Total¥

251,922

Thousands of U.S. dollars (Note 1)
Japan

$

37

263,056

KANEKA CORPORATION

1,724,926

Malaysia$

221,625

Asia-Other$

105,040

North America$

166,158

Europe and others$

199,383

Total$

2,417,134

3. Information on Major Customers
No information is reported because no sales to any external customer represented more than 10% of net sales on the consolidated statements of income.

(Information on Impairment Loss on Fixed Assets by Reporting Segment)
Information on impairment loss on fixed assets by reporting segment at March 31, 2020, 2019 and 2018 consisted of the following.
The figures in FY2020 are omitted because it is not significant in terms of monetary amount.
Millions of yen
Segment Information(Impairment loss)

¥

—

¥

273

Nutrition
Solutions
Unit

Health Care
Solutions
Unit

Quality of Life
Solutions
Unit

Material
Solutions
Unit

2019

¥

—

¥

—

Total

¥

273

Others¥—Adjustments¥—

Consolidated¥

273

Millions of yen
Segment Information(Impairment loss)

Quality of Life
Solutions
Unit

Material
Solutions
Unit

2018
¥

—

¥

114

Nutrition
Solutions
Unit

Health Care
Solutions
Unit

¥

671

¥

—

Total

¥

785

Others¥—Adjustments¥—

Consolidated¥

FINANCIAL SECTION 2020

785

38

(Information on Amortization of Goodwill and Unamortized Balances by Reporting Segment)
Information on amortization of goodwill and unamortized balances by reporting segment at March 31, 2020 and 2019 consisted of the following.
Millions of yen
Segment Information
Nutrition
Solutions
Unit

Health Care
Solutions
Unit

Quality of Life
Solutions
Unit

Material
Solutions
Unit

2020

Total

OthersAdjustments

Consolidated(Goodwill)
Amortization

¥

32

¥

43

Balance

—

¥

—

315

¥

108

1,631

¥

965

456

¥

2,640

—

¥

—

88

¥

665

544
3,306

Millions of yen
Segment Information
Nutrition
Solutions
Unit

Health Care
Solutions
Unit

Quality of Life
Solutions
Unit

Material
Solutions
Unit

2019

Total

OthersAdjustments

Consolidated(Goodwill)
Amortization¥

34

Balance

¥

78

—

¥

—

332

¥

—

2,015

¥

1,117

367

¥

3,212

—

¥

—

86

¥

769

454
3,981

Thousands of U.S.
dollars (Note 1)
Segment Information

2020

Nutrition
Solutions
Unit

Health Care
Solutions
Unit

Quality of Life
Solutions
Unit

Material
Solutions
Unit

Total

OthersAdjustments

Consolidated(Goodwill)
Amortization$

Balance

301
397

$

—
—

$

2,896

$

14,992

996
8,870

$

4,193
24,260

$

—
—

$

812
6,117

$

5,005
30,378

Note: “Adjustments” includes amortization expense mainly related to basic research and development activities that is not attributed to any specific reporting segment.

(Information on Gain on Negative Goodwill by Reporting Segment)
In the Material Solutions Unit, the Company recorded gain on negative goodwill of ¥954 million in conjunction with the acquisition of additional shares of an affiliate and its conversion into a consolidated subsidiary on March 31, 2018.
The figures in FY2020 are omitted because it is not significant in terms of monetary amount.

39

KANEKA CORPORATION

FINANCIAL SECTION 2020

40

41

KANEKA CORPORATION

FINANCIAL SECTION 202042

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