Annual Report 2018Year ended March 31, 2018

Contributing to
the Construction ofSocial InfrastructureAbout the Furukawa Company GroupThe key to the success of the Furukawa Company Group, which recently celebrated the 143th anniversaryof its founding, began with the development of the Ashio Copper Mine by founder Ichibei Furukawa. At
the time, the Company introduced world-leading mine development technologies that have become thefoundation for its technological expertise today. Since then, we have developed and advanced our technologies, amassed through mine development, to build our two core business domains: the Machinery businessand the Materials business. Through both of these businesses, we will continue providing products that theworld needs. At the same time, we will strive constantly to achieve the objectives of our Vision for 2025,
entitled “FURUKAWA Power & Passion 150,” as we approach our 150th anniversary in fiscal 2026.
Ashio Copper Mine (around 1920)

The Furukawa Company Group will remain indispensable to society byalways embracing a spirit of challenge, advancing the technologies thathave underpinned the foundation of society that originated in mining
development.

Management
Philosophy

In order to live up to our Management Philosophy, we put our Action
Guidelines of Innovation, Creativity and Harmony into practice, while
always bearing in mind the three key words, Luck, Stolidity andPerseverance that best represents the spirit of our founder.
Action Guidelines

Innovation: We will work constantly at self-innovation by embracing
a future-oriented mindset.
Creativity: We will seek to create reliable, appealing products thatmeet market needs.
Harmony: We will improve management transparency andcontribute to the development of a society that is inharmony with the environment.

Vision for 2025:“FURUKAWA Power & Passion 150”

1 Increase the value of the Furukawa brand throughmarketing-based management
Develop products and technologies that match market needs
Reinforce technological sales capabilities (proposals and solutions)reflecting customer needs
Achieve category-leading positions by concentrating on niche
products that have competitive advantages and using
differentiation strategy
Cultivate and create new markets and product categories; build a
new business model2 Sustainably expand the Machinery Business1

2

Increase the value ofthe Furukawa brand throughmarketing-based management

Sustainably expand
the Machinery Business

Reinforce revenue bases in growing overseas markets mainly inbusiness related to infrastructure and resource development
Strengthen and enhance stock businessMaximize business opportunities by demonstrating comprehensive
Group competences and reinforcing engineering strengths

3 Strengthen and expand our human resource bases

5

Policies forachievingvision for 2025

Establish a robust
corporate foundation

3
Strengthen andexpand ourhuman resource bases

Build vibrant human resources and corporate culture for a new
Furukawa
Secure, utilize, and develop diverse human resources in Japan andoverseas
Put even more effort into training sales and marketing personnel

4 Actively promote investments to increase corporate value
Make proactive capital investments necessary for growth
Expand business through strategic M&A and alliances

4
Actively promote investments toincrease corporate value

5 Establish a robust corporate foundation
Increase corporate value by improving profitability and capitalefficiency, targeting ROE of more than 10%
Establish a strong financial baseAchieve balanced appropriations between investments for growth
and return to shareholders

Furukawa’s Technological Genealogy

Mining technologies
Transport / Mineral processing
technologies

Exploitation technologies

Hydrauliccontrol
technologies

Drilling
technologies

Slurrytransportation
technologies

Grinding
technologies

Smelting technologies

Exhaust gas
treatment
technologies

Flash smelting
technologies

Sulfuric acidproduction
technologies

Electric
technologies

Rock Drill Machinery

UNIC Machinery

Industrial Machinery

MetalsChemicalsElectronics

Hydraulic breakers,
hydraulic crushers,
hydraulic crawler drills,
tunnel drill jumbos,
mining drill jumbos

UNIC cranes,
mini crawler cranes,
UNIC carriers,
UNIC ocean cranes,
UNIC PAL

Pumps,
environmental machinery,crushers, bridge structures,
belt conveyors, castings

Electrolytic copper,
gold,
silver,sulfuric acid

Cuprous oxide,
sulfuric acid,aluminum sulfate,
ferric polysulfate
solution,
cupric oxide

High-purity metallic
arsenic,
gallium phosphide
polycrystals,
scintillator crystals,
aluminum nitride,coils, lenses

Machinery Business

Materials Business

Machinery Business PerformanceYear ended March 31, 2018

Net sales (¥ millions)

Net sales

Machinery business sales (¥ millions)¥167,696

millionMachinery business operating margin (%)
75,841

62,63944,31347,02553,19856,852

71,11175,99072,232

66,80373,453

9.0

2.8

-6.8

-1.2

3.7

5.1

7.5

8.6

8.1

5.4

6.9

Machinery business sales¥73,453

million

240,000

10

180,000

5

Operating margin

4.7％

120,000

0

60,000-5Machinery business
operating margin

6.9

％

0

-10

’8/3

’9/3

’10/3

’11/3

’12/3

’13/3

’14/3

’15/3

’16/3

’17/3

’18/3
Annual Report 20181

Message from the President

Conveying Our Approach to Stakeholders
We have a long history dating back 143 years. Since our establishment as a mining company, we have undertaken various
changes, including business transformation and diversification,
while overcoming multiple periods of hardship. This history is
embodied in today’s Furukawa Company, which is the core entity of the Furukawa Company Group.
The first thing I thought about when I assumed office aspresident in 2013 was how I’d like to guide the Company into
the future. With the existing management, maintaining the current status was challenging, and I was concerned that the situation would deteriorate over time. With this in mind, I exploredways to continue maintaining our sustainability as a company.
At that time, our 150th anniversary, in 2025, was a little morethan 10 years away. Moreover, companies were facing pressure
to formulate and announce medium- and long-term businessplans in response to Japan’s Corporate Governance Code andother social demands.

Vision for 2025
In order to plan and execute growth strategies on a sustainable basis under such circumstances, I felt the strong needto enunciate our corporate philosophy and put forward aclear vision so as to motivate our executives and employees. I
came to realize that without a clear philosophy and vision wecannot move forward. We subsequently engaged in various
investigations and discussions, and used 2015—our 140th
anniversary—as an opportunity to revamp our management
philosophy, and then formulated our first long-term vision
as a company. “The Furukawa Company Group will remain
indispensable to society by always embracing a spirit of challenge, advancing the technologies that have underpinned
the foundation of society that originated in mining development.” This is our management philosophy, which simply
expresses how we wish the Group to continue in the future.
I believe that the Group’s role in society is to utilize its
amassed technologies, as well as technologies advanced anddeveloped by transforming and harnessing such amassed
technologies, to resolve today’s social problems. We hope toconnect various technologies used in mining development tomodern technologies. We will also transform our strengths invarious areas—including products used in civil engineering,President and Representative Director

Naohisa Miyakawa

2

FURUKAWA CO., LTD.

transportation, port infrastructure development, and disastercountermeasure projects, as well as materials used in energy
saving, environmental protection, and new technology development—into trusted and appealing products and technologies
that reflect social needs.
In the approach to its 150th anniversary in fiscal 2026, theFurukawa Company Group formulated its Vision for 2025.
Under the vision, entitled “FURUKAWA Power & Passion 150,”
we will strive to “Become a corporate group that leverages its
reputation for category leadership and uniqueness to deliver
growth” and generate consolidated annual operating income
regularly in excess of ¥15 billion. Utilizing experience andtechnologies amassed to date, all executives and employees of
the Group will unite with a sense of power and passion in aneffort to realize Vision for 2025. This vision underscores ourcommitment to earning the renewed trust of all stakeholders
by meeting their expectations, and articulates targets to aim forand five policies for achieving those targets. The five policies
are: “Increase the value of the Furukawa brand through marketing-based management” (the central policy), “Sustainably
expand the Machinery business,” “Strengthen and expand
our human resource bases,” “Actively promote investments toincrease corporate value,” and “Establish a robust corporate
foundation.”

Marketing-based management“Marketing-based management” means “providing new value
to customers by solving their problems.” This entails incorporating marketing into the core of management and having executives and employees act with a marketing-driven approachto demonstrate leadership, with value creation for customers
firmly in mind. Outside the Group, “customers” means all
stakeholders, while inside the Group it means all related parties, including individuals and departments that are connectedby work. Also, “problems” includes problems not yet manifested. While our first priority is to solve problems recognized bycustomers, we will also identify and resolve problems that have
not yet materialized—problems that, if solved, would greatly
benefit customers. In these ways, we are expressing our desire
to deepen ties with customers, grow sustainably, and enhance
corporate value.

Medium-Term Business Plan 2019
The next step after formulating Vision for 2025 is the medium-term business plan. We conducted various training sessions,
including on analytical methods, for executives and employees
who spearhead formulation of business plans, and started workon our next plan formulation. We then undertook backcastingfrom our Vision for 2025, which we divided into three phases,
and set milestone performance indicators for fiscal 2023 andfiscal 2020. Phase 1 is the three-year period covered by our
Medium-Term Business Plan 2019 (April 2017 to March 2020),
announced last year. This is positioned as a period of “Building
foundations for renewed growth.” Meanwhile, I have conveyed
my thoughts to all executives and employees, that “All executives and employees must accelerate their efforts to create a
new Furukawa Company Group with one common aspiration.”
Everything begins from the heart. In order to realize our future
vision, all executives and employees need to work together
with a shared feeling, and they have begun this process.
Going forward, I want to use various opportunities toengage in more proactive dialogue with stakeholders, withthe aim of disseminating our thoughts, attitudes, and current
status more broadly and thus ensuring a deeper understanding.
We will reflect the valuable opinions obtained through suchdialogue in our ongoing quest to achieve growth together withstakeholders and continuously improve our ability to generate
income as a corporation. We will bring together the wisdom
and enthusiasm of each and every executive and employee tomeet your expectations.
August 2018

Naohisa Miyakawa
President and Representative Director

Annual Report 20183

Interview with President Miyakawa

Strategies for Achieving Vision for 2025
We have now completed the first year of Medium-Term Business
Plan 2019, aimed at achieving our Vision for 2025, “FURUKAWA
Power & Passion 150.” In this section, President Miyakawa
talks about the future of Furukawa and offers his thoughts forachieving Vision for 2025, while looking back on the first yearof the business plan.

Q1
How do you evaluate the Company’s performance in fiscal 2018 (ended March 31, 2018)?
We posted consolidated net sales of ¥167,696 million and operating income of ¥7,821 million, with both figures exceeding our
initial consolidated forecasts. Although it was just the first year of
Medium-Term Business Plan 2019, we reached practically all of ourtargets. On the other hand, our performance was swayed by theMetals segment. Due to rising copper prices, we revised our full-year
performance forecasts upwards when announcing our second- andthird-quarter results. Toward the end of the fiscal year, however,copper prices fell sharply and the yen appreciated, so we did not
end the year as planned and failed to reach our higher forecasts,
which was disappointing. Since taking office, I have promoted ashift in emphasis to our Machinery business in order to embrace amanagement structure that is not vulnerable to conditions in themetals market. Given our results in fiscal 2018, I felt once again astrong desire to continue this shift.
On a positive note, I felt that recognition of the need to address the issues and consider related initiatives have finally spreadto our executives and employees. During the fiscal year, we clarified
various priorities in this regard. We have positioned Phase 1 of
Vision for 2025, covering the three-year period from April 2017
to March 2020, as a period of “Building foundations for renewed
growth.” Fiscal 2018 was the first year of sowing the seeds for thesecond and third phases.

Positioning of Medium-Term Business Plan 2019: “Building foundations for renewed growth”
Vision for 2025 (ideal image for 150th anniversary of foundation)
Increase
corporate
value

Phase

Phase 1

Phase 2Phase 3Time period

FY2018–2020

FY2021–2023

FY2024–2026

Positioning

Build foundations
for renewed growth

Expedite growth andfurther improve profitability

Complete realization of
Vision for 2025

Operatingincome¥8.5 billion range

̶Regularly in excess of¥15 billion

ROE

6–7% range

̶More than 10%

Performanceindicators

4

Targeting consolidated annual operating
income regularly in excess of ¥15 billion

Become a corporate group that leverages
its reputation for category leadership anduniqueness to deliver growth

FURUKAWA CO., LTD.

Special Feature

Q2
What issues and problems became clear in fiscal 2018, and what are your targets for fiscal 2019?
When we launched Medium-Term Business Plan 2019, we clarified
the strategies of the Rock Drill Machinery segment and the UNIC
Machinery segment—both parts of our core Machinery business. In
the Rock Drill Machinery segment, we strengthened our life cycle
support (LCS) capabilities with the aim of expanding profits in both
our flow business and stock business. In the UNIC Machinery segment, we sought to capture stable earnings in the domestic market
and expand earnings from overseas sales.
In the Industrial Machinery segment, we worked to shake off
the label of a simple equipment manufacturer in order to reinforce
our engineering strengths. However, our approach to engaging inspecific initiatives is not yet confirmed and remains vague, even after many discussions on the issue. Nevertheless, we managed tosee progress with the plan–do–check–act (PDCA) cycle of Medium-Term Business Plan 2019. In April 2018, we also implemented a reorganization to focus on a selection and concentration
strategy, under which we will not hesitate to make any necessary changes. By combining the sales and design functions into abusiness divisional system, we can accurately grasp the issues andrequests of customers, which will enable us to make problem-solv-

ing proposals. Although the Industrial Machinery segment still faces
many difficulties, we will further strengthen its engineering capabilities with the aim of transitioning from a mere vendor to a strategic
partner with our customers.
In fiscal 2019, ending March 31, 2019, our forecast for operating
income is ¥7.0 billion (as announced on August 6, 2018), which islower than the fiscal 2018 result. This reflects our assumption ofa ¥105/US$1 exchange rate and the yen’s appreciation. Despite anumerical decline in operating income, the most important pointin the three years covered by Medium-Term Business Plan 2019is whether or not we can build foundations for renewed growth
aimed at achieving Vision for 2025. Our final target for fiscal 2020,
the final year of Medium-Term Business Plan 2019, is operating
income in the ¥8.5 billion range. Between now and then, we will facechallenges, including changes in exchange rates, nonferrous metal market conditions, interest rates, overseas country risk, andlegal regulations. Looking at the big picture, however, we aremoving steadily forward, and I feel that individual measures taken
by each business, department, and headquarters are progressing
smoothly.

Industrial Machinery Segment: Organizational Change
BeforeSales Division

New
Sales Department - I

Fluid Machinery Division

Pump Sales Department

Sales Department - II

Plant Engineering Sales Department

Sales Department - III

Technical Department

Service Department(Technical Service)

Material Machinery Division

Material Machinery Sales Department
Technical Department

Manufacturing Division
Oyama Tochigi Works(Tochigi Prefecture)

Design Department

Infrastructure Division

Steel Structure Sales Department
Project Business Department
Technical Department

Q3
Please tell us about particular strategies of focus in your quest to achieve the goals of
Medium-Term Business Plan 2019.
I believe that improving profit margins is most important in orderto achieve the final targets of the plan, which is operating incomein the ¥8.5 billion range and return on equity (ROE) in the 6–7%
range. To achieve this ROE target, we will need a return on salesof 2.85% (profitability), total asset turnover rate of 0.78 times(efficiency), and financial leverage of 2.65 times. Our policy of
reducing interest-bearing debt will lead to deterioration of financial
leverage, so improving ROE will require us to switch to an income
structure that emphasizes profit margins, especially in the Machinery business.
Annual Report 20185

As part of this initiative, the UNIC Machinery segment is making
capital investments of approximately ¥9.0 billion in the Sakura Plant
over three years from fiscal 2017, and the Rock Drill Machinery segment will spend roughly ¥6.5 billion in the Yoshii Plant over a fouryear period from fiscal 2019. By introducing automation, robotics,
and other technologies, we plan to dramatically improve efficiency
and productivity and thus enhance our operating margin. To trans-

form our management structure, meanwhile, we have decided toemphasize management that focuses on return on assets (ROA) for
each business segment. In addition to basic strategies implemented
by each department, we expect that these efforts will help improveoverall profitability. I recognize that we are at a critical point in ourquest to build foundations for renewed growth and pave the way
for Phase 2 of our vision.

Efforts to Improve ROE
ROE=Profitability(Return on sales)

X

Efficiency(Asset turnover)

X

Leverage(Financial leverage)

FY2015:
15.9% (result)

5.68%

0.85 times

3.29 times

FY2016:
7.5% (result)

3.12%

0.80 times

2.98 times

FY2017:
5.9% (result)

2.84%

0.74 times

2.80 times

FY2018:
5.9% (result)

2.85%

0.78 times

2.65 times

FY2020:
6–7% range (target)

Profitability: Improved

Efficiency: Improved

Leverage: Reduced

Q4
Please tell us your thoughts on ESG and SDGs initiatives from the perspective of Furukawa.
In recent newspaper articles, hardly a day goes by without a mentionof environmental, social, and governance (ESG) issues, and interest in the United Nations Sustainable Development Goals (SDGs),
as well as the Paris Agreement and other social issues, has been
rising internationally since 2015. Let’s look back on our own history.
After our founding in 1875, we incrementally introduced theworld’s most advanced mine technologies in the Ashio Copper
Mine. We also built Japan’s first hydroelectric power plant forresidential power generation. The Ashio Copper Mine had ahistory associated with pollution, which is unfortunate, but wemade extraordinary, pioneering efforts to overcome that problem.
For example, we carried out emergency mine pollution prevention
work, developed innovative self-smelting technologies to combat
air pollution, and took other measures to minimize various pollution issues. We subsequently provided assistance to various copper

6

FURUKAWA CO., LTD.

production companies related to our self-smelting technologies,
and engaged in Japan’s first occupational safety campaign to translate and promote the “Safety First” slogan that started in Europe
and North America. In addition, we have applied mine-related technologies to foster domestic infrastructural development. This history
paved the way for our current approach to ESG and the SDGs.
The history of our pioneers has been inherited as an importantpart of our DNA. We have always believed that corporate social
responsibility (CSR) activities are a key component of management
and that we should fulfill our social responsibilities through ourbusiness activities. Based on this belief, we will promote a mindset
that integrates business and CSR activities. We have also started
in-house training, discussions, and reviews aimed at determining
how we can approach and contribute to achieving the 17 SDGs andthe associated 169 targets.

Special Feature

Q5
Please introduce examples of how the Company’s business activities have helped resolve social problems.
Many of our business activities are related to the construction ofsocial infrastructure. By building sustainable, robust infrastructure,
we have contributed to social advancement and people’s lives.
To cite a recent example, we installed a long-distance belt
conveyor, a large-scale crusher, and other earth-moving equipment
in a project for relocating people to higher ground in Rikuzentakata
City, Iwate Prefecture, which was affected by a major earthquake
and tsunami. Compared with using dump trucks, this shortened theearth-moving time to about one-third, which helped accelerate therestoration of the disaster-affected area. A new town has alreadysprung to life, and when the local people expressed their appreciation
I realized that the Company played a role in resolving an urgent social
problem.
In another example, our long-distance curved conveyor has been
adopted as part of earth-moving equipment in the Tokyo Gaikan
Expressway project, underscoring recognition of our track recordand our ability to handle all processes, from design to construction
and operation. We are currently in the process of installing a belt
conveyor in the middle section of the expressway. However, theaforementioned long-distance curved conveyor will stretch to around4.7 kilometers (including multiple curved sections) in a single line,
making it one of the world’s largest belt conveyors. Compared withusing dump trucks, this is expected to prevent traffic jams and be
more friendly to the surrounding environment. In addition to this, weare in discussions about multiple projects aimed at addressing social
issues related to earth-moving.
Meanwhile, many of our rock drill products are installed at
infrastructure construction and mining sites. Tunnel construction
and mining projects in emerging countries are particularly dangerous and harsh for workers, so operators are required to provide
safer, more comfortable workplace environments. By introducing
the Internet of Things (IoT), artificial intelligence (AI), and other sensing and automation technologies, we will continue striving to reduce the burden on local workers and provide products that emphasize safety, in addition todeveloping new products.

Long-distance belt conveyor

Q6
Please tell us about initiatives aimed at achieving Vision for 2025.
Fostering exceptional human resources is essential to fulfilling our
Vision for 2025. In this era of dramatically changing business conditions, it is particularly important to create a free and vigorous culture that maximizes the capabilities of executives and employees.
In order to achieve sustainable growth, I believe it is important tofoster human resources with a view to the next generation. In fiscal
2018, we introduced a management human resource development
program to conduct training of selected people who will form thecore of next-generation management. It seems to be effective, as
executives and employees who have participated so far are alreadydisplaying leadership qualities. Meanwhile, we will continue conducting overseas dispatch training programs aimed at fostering human resources who can excel globally, as well as a comprehensive
job recruitment program for non-Japanese. We are also focusing on
nurturing female employees. For the first time, we have promoted
regular female employees to career-track employee status and undertaken mid-career recruitment of female managerial personnel. In
fiscal 2020, we will comprehensively review our personnel systemwith the aim of being a company that provides employees with asense of motivation.
Although we have a long history as a company, we also havea serious, gentle corporate culture. I would like to open up thisculture and encourage executives and employees to think and act
independently to demonstrate leadership and incorporate their surroundings into their work. This is the corporate culture I would liketo foster.

In another initiative, we are further strengthening corporate governance. In fiscal 2018, we increased the number of independent
outside directors by one, for a total of three, to raise the transparency of management. Currently, the Board of Directors receives
various questions and suggestions from outside directors, providing
a forum for active discussion. Seeking to clarify the responsibilities
of executive officers, meanwhile, we changed their existing employment contracts to engagement agreements.
We will continue listening
carefully to the voices of our various stakeholders, and we hopethat all of our executives andemployees will embrace a senseof urgency as they forge ahead torealize our Vision for 2025.

Annual Report 20187

Review of Operations

Machinery% of Net Sales

43.8%

Industrial Machinery
In fiscal 2018, we booked sales from bridge-related projects,
including those associated with the Yokohama Cyclic Northwest
Line, as well as higher sales of crushers, grinders, and other industrial
machinery. However, revenue from pump plants declined. In largescale projects, sales related to a belt conveyor project for the Tokyo
Gaikan Expressway (outer ring road) remained mostly unchanged
from the previous fiscal year. As a result, sales in the Industrial
Machinery segment increased 13.0% year on year, to ¥15,872
million, and operating income rose ¥901 million, to ¥1,005 million.
Net Sales

Operating Income(Billions of yen)(Billions of yen)

18.5 16.7 14.9 14.0 15.9

1.9

’14/3 ’15/3 ’16/3 ’17/3 ’18/3’14/3 ’15/3 ’16/3 ’17/3 ’18/3

1.7

1.0

0.1

Going forward, we will increase our involvement in certain partsof plant construction projects and large-scale projects and otherwise
expand our contractor business with the aim of transitioning from a
simple equipment manufacturer. To achieve this, we will strengthen
our engineering strengths and enhance our business foundation in
the domestic market.

1.0

Crushers

Belt conveyors

Steel bridges● Machinery Business: Priority Fields and Domestic Market ShareTUNNEL PROJECTSCONCRETECIVIL ENGINEERING ANDCONSTRUCTION WORKSITES

Hydraulic crawler drills
Crushers
Mini crawler cranes

Tunnel drill jumbos
Belt conveyors

Crushes andcuts bedrock
into small pieces

Hydraulicbreakers

Material for
concrete and the like
To mine for gravel and limestone, which are raw
materials for concrete, we supply hydraulic crawler drills
that are used to drill holes in rock, in which gunpowder
is inserted for blasting. We also have hydraulic breakers,
which are used to break large rocks into small pieces,and crushers and screens, used at plants to achieve thedesired rock sizes. These products contribute to demandfor concrete in various areas.

8

FURUKAWA CO., LTD.

Hydrauliccrushers

UNIC cranes

Shield pumps
We develop and manufacture tunnel drill jumbos,
which are used to create openings for loading
gunpowder needed for rock blasting in mountaintunnel projects. We also develop and make shield
pumps, which use water to pump excavated earth andsand in underground tunnel projects. Here, our drilling
and wastewater treatment technologies, amassed
through mine development, come to the fore.

A single UNIC crane can transport and unload building
materials and the like. In addition to UNIC cranes,
we offer mini crawler cranes, which can operate
independently in places inaccessible by truck, andhydraulic crushers that play a major role at demolition
sites. Our construction machines feature exceptional
functionality, operability, and safety and are also
environmentally friendly.

トンネRock Drill Machinery
In this segment, we posted an increase in shipments of tunnel drill
jumbos for domestic projects, including Kumamoto earthquake
restoration and reconstruction work, the Linear Chuo Shinkansen
Line, and a new Shinkansen line in Hokkaido. Sales were also bolstered by increased demand for hydraulic breakers on the back offirm construction investments. Amid favorable economic conditions
overseas, we reported steady shipments of hydraulic crawler drills,
mainly to Europe and North America, as well as increased shipmentsof tunnel drill jumbos to China and South America, resulting inoverseas sales growth. As a result, sales in the Rock Drill Machinery
segment increased 11.9%, to ¥30,200 million, and operating income surged 98.8%, to ¥1,783 million.
Net Sales(Billions of yen)

26.8 30.9 30.1 27.0 30.2

0.3

’14/3 ’15/3 ’16/3 ’17/3 ’18/3’14/3 ’15/3 ’16/3 ’17/3 ’18/3

1.2

2.2

0.9

Global Market
Share

30%
Japanese
Market Share65%

Hydraulic crawler drills

Operating Income(Billions of yen)

Looking ahead, by strengthening our life cycle support (LCS)
capabilities, we will increase income from both our flow businessand stock business and reinforce revenue bases for our drill productlineup. To achieve this, we will upgrade our domestic service support system and establish overseas sales channels.

1.8Japanese
Market ShareJapanese
Market Share

80%

40%

Tunnel drill jumbos

Hydraulic breakers

UNIC Machinery
In the mainstay UNIC crane category, we reported increased domestic shipments of our latest-model “G-FORCE” series, featuring a full
lineup from small to large models. Benefiting from healthy overseas
economic conditions, we posted steady shipments of mini crawler
cranes to Europe and North America, as well as increased shipmentsof UNIC cranes to China and Southeast Asia, which bolstered overseas sales. As a result, sales in the UNIC Machinery segment climbed
6.2% year on year, to ¥27,382 million, while operating income
declined 11.0%, to ¥2,295 million.
Net Sales

Operating Income(Billions of yen)25.7 28.4 27.2 25.8 27.4

(Billions of yen)

3.1

3.6

2.6

2.6

2.3

Seeking to ensure stable income from domestic sales and expand
income from our stock business and overseas sales, we will distinguish our UNIC crane lineup by promoting advanced functions andhigher added value, in order to strengthen our competitiveness. At
the same time, we will promote our second-hand business, reestablish our overseas sales network, and enhance our sales capabilities.

Japanese
Market ShareJapanese
Market Share

50%

50%
UNIC carriers

UNIC cranes’14/3 ’15/3 ’16/3 ’17/3 ’18/3’14/3 ’15/3 ’16/3 ’17/3 ’18/3

Japanese
Market ShareMini crawler cranes

40%

Initiatives of the Rock Drill Machinery Segment
In the fiscal year under review, we began work to install and operate a hydraulic crawler drill monitoring
system in Japan, with the aim of enhancing our life cycle support (LCS) capabilities. Through thissystem, we will collect drilling data and information on the operational status of on-site machinery
for conversion into data, enabling us to provide optimal parts replacement and maintenance services.
In the future, we will help customers improve their productivity through automation of and optimal
support for drilling operation according to rock quality, while also contributing to safety at worksites.
Overseas, where our stock business is weak, we will strengthen our LCS capabilities to build a businessmodel that includes our sales dealers.

Managing director(In charge of Rock Drill Machinery segment)

Kiyohito Mitsumura

Annual Report 20189

Materials% of Net Sales

53.7%

MetalsAfter starting the fiscal year at US$5,817/ton in April 2017, the priceof electrolytic copper rose to US$7,216/ton in December 2017 due
to concerns about mining strikes and the accelerating global economy. The price then declined amid weakening global stock prices
and fears about protectionist trade policies, finishing the fiscal year
at US$6,685/ton on March 31, 2018. The domestic price of electrolytic copper began the fiscal year at ¥690,000/ton in April 2017 andended the fiscal year at ¥740,000/ton on March 31, 2018. Demandfor copper products remained steady during the fiscal year, while
demand for electric cable began to recover in the second half. In
fiscal 2018, the Company’s sales of electrolytic copper in volume
terms declined 1,190 tons, to 90,104 tons, reflecting a focus ondomestic sales and reduction of exports. For the fiscal year, sales of

Net Sales

electrolytic copper increased due to higher overseas market prices
and the yen’s depreciation, but deterioration of purchasing conditions led to a decline in profit. Overall sales in the Metals segment increased 14.0%, to ¥77,334 million, and operating income
declined 50.1%, to ¥867 million.
Due to deteriorating purchasing conditions stemming from tightening supply and demand for copper concentrate, it will be difficult
to generate profit. Nevertheless, we will continue to work to establish an optimal production and sales system with an emphasis on
profitability, in order to improve our earnings foundation.

Operating Income(Billions of yen)(Billions of yen)

78.7 81.5 74.2 67.9 77.3

1.5

’14/3 ’15/3 ’16/3 ’17/3 ’18/3’14/3 ’15/3 ’16/3 ’17/3 ’18/3

1.4

1.2

1.7

0.9

Electrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Gibraltar Copper Mine in Canada

Onahama Smelting and Refining Co., Ltd.

● Copper Prices and Foreign Exchange Rates
2014/3

2015/3

2016/32017/3

2018/3

LME copper price (average; US$/ton)

7,104

6,554

5,215

5,154

6,444

JPY rate per US$ (average for fiscal year)

100.24109.93120.13108.42110.85

2014/3

2015/3

2016/32017/3

2018/3Copper production volume (tons)

87,76790,44786,466

84,06288,004

Copper sales volume (tons)

94,966

96,67594,327

91,294

90,104● Copper Production and Sales Volume** Furukawa Metals & Resources Co., Ltd.

10 FURUKAWA CO., LTD.

Electronics
In the fiscal year under review, sales of high-purity metallic arsenic—a mainstay product in this segment—increased on the backof higher volume sales stemming from healthy demand for compound semiconductors, a major application for that material. Meanwhile, sales of scintillator crystal products were bolstered by healthy
demand for crystals in individual semiconductor devices. As aresult, the Electronics segment posted an 8.4% increase in sales,to ¥6,308 million, and a ¥312 million jump in operating income, to¥330 million.

5.4

Net Sales

Operating Income(Billions of yen)(Billions of yen)

5.7

5.5

5.8

6.3

’14/3 ’15/3 ’16/3 ’17/3 ’18/3

(0.1)

0.1

(0.4)

0.0

Looking ahead, we will continue striving to capture steadyincome from high-purity metallic arsenic and scintillator crystal
products. At the same time, we will aim to reinforce our earnings
structure by enhancing the appeal of such strategic products ascoils, aluminum nitrides, and optical components.
Global Market
Share

60%

High-purity metallic arsenic—
high-purity gallium arsenide
semiconductor materials usedin mobile phones and otherelectronic devices, red laser
diodes, and LEDs

Japanese
Market Share

90%
0.3

’14/3 ’15/3 ’16/3 ’17/3 ’18/3

Coils used in automobile electronic
control devices

Chemicals
In fiscal 2018, we reported a year-on-year increase in sales ofcuprous oxide owing to growth in demand for its use in marine
antifouling paint, a mainstay application, ahead of the enactmentof regulations under the Ballast Water Management Convention.
As a result, sales in the Chemicals segment rose 19.8%, to ¥6,345
million, and operating income jumped ¥336 million, to ¥451 million.
Going forward, we will work to expand income from cuprous
Net Sales
6.0

6.0

5.3

oxide and other existing products and swiftly commercialize andfoster newly developed products, such as metallic copper powder.
Japanese(Production)
Market Share45%

Operating Income(Billions of yen)

6.1

Owing to its excellent thermal
conductivity, thermal radiation, andelectrical insulation properties,
aluminum nitride is a basic material
used in semiconductor device
fabrication components andsubstrates.

(Billions of yen)

6.3

’14/3 ’15/3 ’16/3 ’17/3 ’18/3

0.3

0.3

0.2

0.1

Cuprous oxide is a red powdery
substance used to prevent biofoulingon the underside of marine vessels.

0.5’14/3 ’15/3 ’16/3 ’17/3 ’18/3

Cupric oxide used for copper plating

Real Estate and Others
1.0

Sulfuric acid production plant

Net Sales

Operating Income(Billions of yen)(Billions of yen)

2.5

3.0

3.1

3.3

(0.0)

0.8

1.3

1.3

1.3

Real Estate
In the Real Estate category, fiscal 2018 saw the smooth operation of
our rental business associated with the Muromachi Furukawa Mitsui
Building (commercial name: COREDO Muromachi 2). Accordingly,
category sales grew 8.6% year on year, to ¥3,339 million, andoperating income climbed 5.8%, to ¥1,340 million.

’14/3 ’15/3 ’16/3 ’17/3 ’18/3’14/3 ’15/3 ’16/3 ’17/3 ’18/3
Annual Report 201811

T O P I C SApril 1, 2017–March 31, 2018

Top world-level laser welding technology for pure copper developed
The Company’s Electronics segment has developed a “beam mode control technology”
Under processing
using diffractive optical elements (DOEs). In collaboration with Furukawa Electric Co.,
Ltd., we subsequently succeeded in establishing a new laser welding technology that
greatly reduces defects when welding pure copper. Used in combination with high-energydensity beams—a strength of the Company—beam mode control technology ensuresthat the optimal beam mode is selected during welding, resulting in a 95% reduction
in welding defects (sputtering and blow holes) compared with existing methods. This
makes it possible to improve the efficiency of welding and inspection processes for auto- Beam mode controlled Beam mode uncontrolled(Normal condensing)
motive motors and inverter power semiconductors. We will continue collaborating with
Furukawa Electric to improve welding technology for industrial fiber lasers while rollingout solutions that apply this technology.
Sales of FURUKAWA SEEPEX PUMP launched
The Company’s Industrial Machinery segment has formed an original design manufacturing (ODM) agreement with Nippon Seepex Co., Ltd., the Japanese subsidiary of SEEPEX
GmbH, which develops and manufactures uniaxial screw pumps used in more than 70
countries, including in Europe, North America, and Asia. We subsequently launchedsales of the FURUKAWA SEEPEX PUMP in November 2017. This product is a uniaxial
screw pump that excels in the quantitative supply of highly viscous liquids and solids.
We aim to expand sales to many sectors, including local government (for sewage treatment
facilities and the like), plant manufacturers, chemical and paper companies, and foodand beverage companies.

FURUKAWA SEEPEX PUMP

Latest “G-FORCE” series of UNIC cranes expanded and upgradedIn 2017, the Company’s UNIC Machinery segment undertook a full model change of
cranes for mounting on small and large trucks, following a similar model change formedium-sized trucks in 2016. The latest “G-FORCE” series of models, highly acclaimed
by customers, is based on the “pursuit of reliable performance” concept. Under themodel change, we upgraded the basic performance of the series. For example, we
installed digital load gauges as standard on all models to prevent breakage of cranes
and overturning accidents due to overload, which enables us to visualize hanging load
easily and accurately. Also equipped as standard is “JOY,” a new-model liquid crystal
display (LCD) radio-controller that significantly improves the accuracy and operability of
the hanging load display. Other additions include a special safety specifications packageof safety devices. We have also enhanced our high-performance models in our pursuitof reliable performance.

“G-FORCE” series

Product development system restructured to strengthen the Group’s integrated
technological capabilities
On October 1, 2017, we restructured our organization with the aims of reinforcing theGroup’s technical strategy planning and execution capabilities and further strengthening
our technical leadership capabilities. In order to realize our Vision for 2025, it is essential that we step up efforts to advance and entrench our proprietary technologies andaccelerate their applications in products, while keeping abreast of the latest technology
trends. We also need to consider applications for the Internet of Things (IoT) and othercontrol, information, and communication technologies, not only in machinery products
but also in plant facility control and production management. Under the new structure,
we will continue enhancing the comprehensive technological capabilities of the entire
Group while working closely with Group companies across all fields, from materials tomachinery and equipment. In these ways, we will strongly promote developments aimed
at realizing our Vision for 2025.
Recognized by the Tokyo Metropolitan Government Bureau of Sewerage as an
exceptional performance contractor for 10 consecutive years
The Company has been selected and awarded by the Tokyo Metropolitan Government
Bureau of Sewerage as an “exceptional performance contractor for 10 or more years.”This reflects the contribution of our Industrial Machinery segment, in its pump-related
projects, to the development of the sewage business by delivering consistently goodoutcomes over the 10-year period from fiscal 2007 through fiscal 2016. Our capabilities
in safety management, quality control, and process control in the construction of sludge
pumps and peripheral equipment in sewage treatment plants have been highly regarded
for a long time. This award gives the Company additional points in bidding processes
that use comprehensive evaluations based on assessment of technological track records.
12 FURUKAWA CO., LTD.

Technology Division
Technological Strategy Department
Advanced Technology Department
Control System Section
Technological Research & Development Section
Material Research & Development Department
Nitride Semiconductors Department
Intellectual Property Department

E

The Furukawa Company Group’s
ESG Activities

S

nvironmentGocietyovernance

Furukawa’s Approach to ESG
Since its founding in 1875, the Furukawa Company Group has learned a lot of lessons from its experience at the Ashio
Copper Mine, which had a history of pollution. The experiences and efforts of our early pioneers have paved the way forour approach to ESG and the SDGs today. Promoting an integrated mindset that combines our business and CSR activities
ensures that we carry on the DNA cultivated by our pioneers. At the same time, it enables us to realize a sustainable society
and continue advancing as a company.

CSR Promotion System
To powerfully promote CSR activities, we established the CSR Promotion Meeting, which spearheads efforts to clarify our responsibilities to stakeholders, identify priority issues to be addressed, andactively engage in CSR activities. The CSR Promotion Meeting ischaired by the president, and meetings are held at the CSR Promotion Department. The Meeting discusses a whole range of issues related to CSR, and its main roles include formulation of basic policies,
promotion systems, and action plans for CSR activities, as well asverification and evaluation of activity status and planning of priority
measures. The CSR Promotion Meeting consists of four committees(Risk Management Committee, Compliance Committee, Environmental Management Committee, and Product Safety Committee)
and two departments (Human Resources & General Affairs Department and Purchasing Department). The Meeting collaborates witheach Group company and the headquarters, which is the executive
division for CSR activities, to advance a PDCA cycle of planning,
implementation, evaluation, and improvement.

● CSR Overview

Complianceresponsibility
Localcommunities

1

Suppliers

3
Shareholders
andother investors

1. Management Philosophy, Action Guidelines
2. Corporate Conduct Charter
3. Directors’ and Employees’ Code of Behavior
Interaction

Implementation bodyGroup companies / departments

Guidance/ Instruction

Compliance Committee
Environmental Management Committee

Reporting

Product Safety Committee
Human Resources & General Affairs Department

CSR Promotion
Department

2

Employees

Risk Management Committee

2

Economic responsibility
1Committee / Department

ReportingCustomers

Realizing asustainable society● CSR Promotion System
Guidance / instruction

Globalenvironment

P Plan: Formulate the plan

Reports ateach PDCA
stage

D Do: Execute the plan
C Check: Check the outcome

A Action: Take countermeasures as necessary

Purchasing Department

1. President and Representative Director
2. CSR Promotion Meeting

Relationships with Stakeholders
In the course of strengthening CSR activities and demonstrating
our Management Philosophy, we have identified our stakeholders
as follows: Customers, suppliers, shareholders and other investors,
employees, local communities, and the global environment. Our
quest is to clarify our responsibilities to each stakeholder group andmaintain close communications, in order to build relationships oftrust and thus maximize corporate value.

● Responsibility to Stakeholders
Stakeholder

Responsibility

Customers

We shall provide customers with high-quality products andservices in order to increase satisfaction levels.

Suppliers

We shall build mutually beneficial relationships conduciveto harmonious coexistence through stable procurement
activities based on the principles of fairness and economic
rationality.

Shareholders We shall work to maximize corporate value through communications focusing on timely, appropriate informationand otherdisclosure and IR activities.
investors
Employees

We shall create safe, healthy, motivating workplaces in which
our diversified human resources can excel while adopting
appropriate evaluation standards and fair incentives.
We shall build and maintain favorable relationships of trust

Local
by pursuing social contribution activities aimed at harmonicommunities ous coexistence with local communities.
We shall protect biodiversity by developing environmentallyfriendly technologies and products while minimizing the
Globalenvironment environmental impact of our activities through savings ofenergy and resources and reduction of waste.

Annual Report 201813

The Furukawa Company Group’s ESG Activities

Our Goals
Our CSR activities are designed to help the Group achieve its medium-term CSR goals for fiscal 2020 and realize its ideal
CSR image envisioned for fiscal 2026. We will also promote ongoing medium-to-long-term initiatives aimed at achieving
the SDGs set for 2030 by the United Nations General Assembly.

Developing a Sustainable Society by 2030

2030

In September 2015, the United Nations General Assembly adopted
its Sustainable Development Goals (SDGs) and presented an action
plan for human and environmental prosperity. Consisting of 17 goals
and 169 targets, the SDGs clarify priority global-scale issues related
to sustainable development and are intended to encourage
global-scale initiatives to address those issues.
At the Furukawa Company Group, we will strive to help achieve
the SDGs, which were established with international community
cooperation, through our business activities and efforts to fulfill our
corporate social responsibilities.

CSR2025 Goals (Fiscal 2021–2026)
Risk Management
Committee

Establish Groupwide risk management system

Compliance Committee

Ensure that all employees have a high awareness of compliance that resonates with the international community

Promote environmental and safety activities
Environmental
Management Committee (Reduce environmental impacts, ensure no accident and disaster in environment and safety, promote biodiversity,

2025

publish environmental safety activity outcomes, and continue safety-oriented operations at abandoned mines)

Product Safety
Committee

Aim for the top category in improving Furukawa product brand strength

Human Resources &General Affairs
Department

Enhance our human resource foundation(Become a rewarding company by creating work-friendly environments that enable individual
employees to fully demonstrate their strengths to create new levels of value)

Purchasing Department Pursue QCD based on CSR-oriented procurement aimed at sustainable manufacture and sales of

products trusted by customers

Medium-Term CSR Goals (Fiscal 2018–2020)

2019

Risk Management
Committee

Establish Groupwide crisis management system
Consider risk assessments as premise to undertaking Groupwide risk management

Compliance
Committee

Improve compliance awareness by continuing to disseminate compliance news while conducting various training
programs and confirming degree of understanding
Create international versions of behavioral standards for executives and employees (in English and other languages)
Ensure spread of compliance manual and update it
Convey to outside parties that a compliance system is in place

Environmental
Management
Committee

Promote environmental and safety activities(Reduce environmental impacts, ensure no accident and disaster in environment and safety, promote biodiversity,
publish environmental safety activity outcomes, and continue safety-oriented operations at abandoned mines)

Product Safety
Committee

Improve product quality• Common guidelines (Index and establish common rules for product quality targets; reduce / eliminate product claims)• Design quality (Promote design reviews and design FMEA)• Manufacturing quality (Step up operation of quality control system; implement more stringent criteria for process handover)• Quality of our overseas products (Overseas procurement; quality control at overseas plants)• Service quality (Collect / provide necessary information; offer consulting-type services)
Improve safety• Establish system for providing safe products

Human Resources &General Affairs
Department
Purchasing
Department

14 FURUKAWA CO., LTD.

Foster human resources, promote work–life balance, and promote diversity
Strengthen collaboration with suppliers based on QCD+CSR concept
Promote CSR activities to suppliersContinue Groupwide CSR-oriented procurement activities

Responses by Business Process

Development and design of products that take environment,
safety, and quality into consideration
Confirmation of design review implementation status
Training of FMEA*1 leaders*1 FMEA: Failure Mode and Eﬀects Analysis

Development anddesignMain activities

Business process

Main activities

The business activities of the Furukawa Company Group have an impact on society and the environment across all processes
in the supply chain, and the magnitude of impact is increasing as business activities advance. We are working to address
CSR issues in each process to help resolve various social problems while considering the aforementioned impact.

Procurement

Ensuring quality and safety
Ensuring stable supply of products
Promoting global warming countermeasures and energy
conservation measures associated with business activities
Strengthening the safety management system of chemical substances
Pursuing activities aimed at reducing equipment, environmental,
and occupational accidents

Manufacturing

Promoting CSR-oriented procurement activities
Providing technical guidance to suppliers
Pursuing QCD*2 based on CSR-oriented
procurement*2 QCD: Quality, Cost, Delivery

Approach to Procurement
The Furukawa Company Group aims to build and maintain mutually beneficial and reciprocal trust-based relationships by exchanging
information with suppliers and otherwise emphasizing communication. Here, we adhere to the principles of fairness and equity,
comprehensive economic rationality, and the spirit of compliancewith laws and confidentiality as set out in the Furukawa Company
Group Basic Procurement Policies. At the same time, we collaborate
with suppliers to encourage procurement activities that take CSR
into consideration.

CSR Activities in the Supply Chain
Envisaging its desired image in 2025, the Group strives to “pursue QCD based on CSR-oriented procurement aimed at sustainable
manufacture and sales of products trusted by customers.” This initiative is essential not only for the Group but also for the entire
supply chain, including customers and suppliers.
In order to establish cooperative relationships, in fiscal 2018 we
conducted additional surveys on human rights, the environment,
and other matters with the aim of further increasing understandingof our CSR Promotion Guidelines. Expanding this initiative to otherbusiness sites, we also conducted surveys of the major suppliers ofmaterials-related companies to foster a broader understanding of
our CSR activities.
Going forward, we will carry out individual interviews and thelike as necessary to further strengthen CSR activities throughout the
supply chain.

Reducing total emissions(including waste) and/or
converting into valuable
resources

Disposal

Sales and service

Improving follow-up services
Pursuing customer satisfaction
Producing quality assurance
guidelines

Disseminating information on eco-friendly products
Promoting efficient transportation system
Conducting risk assessment of products to ensure
customer safety

Copper Ore Procurement
Furukawa Metals & Resources Co., Ltd. procures copper ore frommines around the world for use as the raw material in its main
products, which are copper ingots and their by-products (gold andsilver products). Basically, most of its procurement activities are notdirectly related to mine operations. Nevertheless, that company
works to reduce the impact on the global environment in various
ways. Specifically, its closely monitors the real status of environmental conservation, human rights, employment and labor issues,and other aspects of the mines from which it undertakes procurement. It also pays attention to ensure that the mines are practicing
sustainable development and appropriate operations. With respects
to minerals produced in areas known for human rights violations
and/or conflict, it emphasizes procurement in a manner that is notcomplicit with armed groups.

Gibraltar Copper Minein CanadaEnvironmentSocietyGovernance

Annual Report 201815

The Furukawa Company Group’s ESG Activities

Corporate GovernanceThe basic corporate governance policies of the Group are to raise management transparency, continue corporate structural
innovations to build an efficient management system, generate stable income to increase corporate value, and contributeto the interests of shareholders and other stakeholders.
Corporate Governance System
Furukawa Co., Ltd., the operating holding company of the Group,
has a Board of Directors and an Audit & Supervisory Board to supervise and audit business execution. To clearly separate management supervisory functions from executive functions, accelerate
decision-making, and clarify responsibilities, the Company has adopted
an executive officer system.
Directors and Board of Directors
The Board of Directors holds regular meetings once a month, plus
extraordinary meetings as necessary, to supervise the Group’s overall business execution. As of June 28, 2018, the Board had nine
members, including three outside directors.
Executive Officer System
Executive officers are tasked with executing business under thebusiness plans determined by the Board of Directors. They reporton the status of business execution as appropriate to the Board of
Directors and the Management Committee. As of June 28, 2018,
the Company had 18 executive officers, including three serving
concurrently as directors.
Management Council and Management Committee
The Management Council sets the Group’s fundamental management policies and strategies and makes decisions on important matters. There is also a Management Committee, which meets monthly
to discuss the business execution of the Company and its core companies, and provides consideration and direction. Decisions made by
the Management Council on important management issues are also
taken up for discussion by the Board of Directors.

● Corporate Governance and Internal Control Systems
Shareholders’ Meeting
ElectsElectsAudit & Supervisory Board

ElectsBoard of Directors

Supervises

Accounting Auditors

Directs

Representative Director

Supervises

Management
CouncilManagement Committee

1

Directs
Executive Officers

Internal Control
Division

Business execution

Internal Audit Department
Accounting Department, others

CSR Promotion Meeting

All Divisions and Group Companies
AuditsReports

16 FURUKAWA CO., LTD.

1 Exchanges opinions / information

Auditors and Audit & Supervisory Board
Pursuant to an audit policy formulated by the Audit & Supervisory Board, members attend meetings of the Board of Directors, theManagement Council, the Management Committee, and otherimportant management meetings. In addition, they receive business
reports from directors and others, monitor business sites and subsidiaries, and audit business execution by directors and others. The
Audit & Supervisory Board has four members, including two outside
members, and meets as appropriate.
Internal Audit System and Accounting Auditors
The organization in charge of internal auditing is the Internal
Audit Department, which engages in auditing of Groupwide activity
management and business execution. The Company has appointed
Ernst & Young ShinNihon LLC to be its Accounting Auditors. Audit& Supervisory Board members, the Internal Audit Department, andAccounting Auditors interact with each other in an effort to reinforce Groupwide governance.
Outside Directors and Outside Audit & Supervisory Board
Members
The Company makes full use of the expertise and experience of outside directors and outside Audit & Supervisory Board members, whoprovide advice and checks from objective viewpoints to guarantee
the objectivity and transparency of management and the adequacyof decision-making. As of June 28, 2018, the Company had threeoutside directors and two outside Audit & Supervisory Board members, including three independent officers under the rules of theTokyo Stock Exchange.
Evaluating the Effectiveness of the Board of Directors
In order to analyze and evaluate the effectiveness of the Board of
Directors, the Company conducts questionnaire-based surveys of
directors and Audit & Supervisory Board Members and exchanges
opinions with outside officers. The results of these activities arereported to the Board of Directors for discussion.
In fiscal 2018, we noticed many areas of improvement comparedwith fiscal 2017. To achieve further improvement, we confirmed theneed for action in several areas. These include training programsfor the next generation of top management personnel, stepped-up
exchanges of opinions and reports on each project, and consideration aimed at establishing an optional nomination committee.
By providing timely information, we will continue stimulating
discussion at Board of Directors’ meetings to further enhance theeffectiveness of the Board.
Internal Control System
The Group has a Basic Policy on Establishing an Internal Control
System, which covers corporate governance, risk management,compliance, and internal audits. In addition to ensuring efficientand appropriate business execution, the Policy stipulates thatinternal control shall be handled with an emphasis on CSR. Moreover, the Group makes constant reassessments in an effort to build
an effective and efficient internal control system that ensures theappropriateness of operations.

Risk Management
The Group’s business activities could potentially be badly impacted by various risks related to such factors as accidents,
natural disasters, and epidemic diseases. To protect human life and property and minimize damage and loss when suchrisks materialize, the Group, spearheaded by its Risk Management Committee, is working to establish and strengthen its
risk management systems. In addition, our Product Safety Committee works to raise the product safety and quality levelsof the entire Group.
Formulation and Operation of Business Continuity Plan (BCP)
Preemptive BCP Measures
We have placed transceivers at each of our business sites to handle
emergencies when regular communication channels do not function. We are also reviewing the content and management methodof stockpiled items, such as food and beverages.

safety levels, in fiscal 2018 we achieved a 5.9% year-on-year reduction in the number of product claims—set as one of our KPIs.
● Product Safety Management System

Furukawa Co., Ltd.
Product Safety Committee

Training for Safety Confirmation and Disaster Reporting
We conduct periodic training on the use of safety confirmation systems and training on use of transceivers for disaster reporting inorder to swiftly confirm the safety of employees and damage statusof various sites in the event of emergency.
Business Continuity Management (BCM)
We have finished production of a first-response BCM manual andhave almost finished revamping the BCP manuals of core Group
companies. Going forward, we will focus on BCM while promoting
BCP management.
Identifying Potential Groupwide Risks
We have identified potential risks, such as earthquakes, floods, andlandslides, at major business sites and are developing BCPs for risks
that may have a high impact on our operations.
Quality Control
The Furukawa Company Group is committed to constantly providing safe, high-quality products and services to customers. For thisreason, we strive to undertake manufacturing with proper attention
to product safety and reliability in order to improve customer satisfaction. This covers all processes, from development and design toprocurement, manufacture, sales, services, and final disposal.
Product Safety Management System
The Furukawa Company Group strives to manufacture productsthat comply with regulations related to manufacturing and productquality verification and products that customers can use safely withpeace of mind. These efforts are based on the Group’s Product Safety Basic Policy and Product Safety Action Guidelines. Specifically,
the Product Safety Committee of Furukawa Co., Ltd. holds productsafety meetings attended by product safety officers of core Group
member companies and has formed subcommittees to divide work
between mechanical and materials systems.
The product safety meetings are aimed at improving Groupwide
product safety and evaluating activities related to product safety.
Attendees seek to improve product safety levels by first considering
ways to improve product reliability.
In fiscal 2018, we confirmed the status of risk assessment activities that have been ongoing since the previous fiscal year with aview to preemptive prevention. We also promoted more effective
activities by stepping up various initiatives, spearheaded by the subcommittee closest to each respective site. Through the efforts of the
product safety meetings and various subcommittees to raise productProduct Safety Council

Development Planning Department(Secretariat)

Core operating companies
Machinery Subcommittee

Materials Subcommittee

Furukawa Industrial
Machinery Systems Co., Ltd.
Furukawa Rock Drill Co., Ltd.
Furukawa UNIC Corporation

Furukawa Metals &Resources Co., Ltd.
Furukawa Denshi Co., Ltd.
Furukawa Chemicals Co., Ltd.

Electronic Information Security
The Group regards information security as an important management priority. In order to ensure and protect the confidentiality,
integrity, and accessibility of our electronic information assets as awhole, we implement various measures related to information security, based on the “Furukawa Company Group Electronic Information Security Basic Regulations” and the “Furukawa Company
Group Electronic Information Security Standards.” Through collective training, including postings on our in-house portal site and training of new employees, we also issue alerts about various potential
threats and thoroughly inform everyone about countermeasures.

Management of Personal Information
In April 2005, the Group established its “Personal Information
Protection Policy” and “Precautions for Appropriate Handling andManagement of Personal Information.” Since then, we have complied with Japan’s Personal Information Protection Act and otherregulations concerning personal information protection. We believe
it is our social responsibility to handle information about customers,
shareholders, and other stakeholders in an appropriate manner, andwe are working to protect such information.
To ensure safe and meticulous management of personal information held by the Group, we have adopted three policies: “Takenecessary security measures,” “Do not use personal information for
purposes other than originally intended,” and “Do not disclose orprovide personal information to third parties.” Under these policies,
we handle personal information properly.

EnvironmentSocietyGovernance

Annual Report 201817

The Furukawa Company Group’s ESG Activities

ComplianceIn addition to complying with laws and regulations, the Group believes it has a corporate obligation to take serious andresponsible actions in terms of social and ethical aspects. To fulfill this obligation, we established the Compliance Committee, which discusses important matters concerning compliance. Matters discussed by the Committee are reported to the
CSR Promotion Meeting as appropriate, reflecting efforts to share information on groupwide compliance.

Internal Reporting System
The Group has introduced an internal reporting system for the early
detection and correction of compliance violations. By establishingcontact points for reports and consultation requests inside and outside (law office) the Group, we have established a system that allows wide-ranging reporting and inquiring. We also keep the names
and personal information about callers in strict confidence.
When a report or consultation request comes in, the Compliance
Committee conducts an investigation and takes necessary countermeasures. Regarding our internal reporting system, we post thecontent of our internal reporting system on our in-house portal siteand distribute brochures to Group officers and employees.

Compliance Education
We issue “Compliance News” as a compliance information source
to all Group officers and employees. Representatives of top
management also speak about the importance and priority of compliance, reflecting our efforts to foster a corporate culture thatemphasizes compliance.
In fiscal 2018, we held compliance training sessions as part ofstratified training given to new recruits, mid-level employees, andnewly appointed managers. We also held a compliance training session for officers and other top management personnel.
In addition, we held training on specific items, such as the Act
against Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors.

Compliance throughout Entire Supply Chain
In order to maintain compliance as a Group, we need all parties
across the entire supply chain, including suppliers, to also practicecompliance with laws and regulations. With this in mind, we established “CSR Promotion Guidelines” for suppliers to help themrigorously comply with laws and regulations and practice corporate
ethics.
Legal Compliance and Corporate Ethics(1) We shall respect domestic and international laws and social
			 norms.
(2) We shall not provide or receive benefits that are contrary to			 laws and accepted business practices.
(3) We shall not act in ways that impede fair and free competition.
(4) We shall have nothing to do with antisocial forces.
(5) We shall not infringe on the intellectual property rights of			 third parties.
(6) We shall establish frameworks for fraud prevention, early			 detection, and countermeasures.
(7) We shall not use minerals mined in conflict areas, and we			 shall not use raw materials that, during the production
			 process, are connected to human rights violations or environ			 mental destruction.

The Furukawa Company Group’s
Corporate Conduct Charter
1. The Group shall pursue research and development
activities to introduce technologies that help tocreate an affluent society, and shall develop andprovide safe, high-quality products and services thatare satisfying and reliable for customers.
2. The Group, recognizing the importance of global
environmental conservation, shall make even moreenvironment-friendly innovations and efforts as it
engages in every area of its corporate activities thatare in harmony with the environment, and shall aim
to develop with the local communities.
3. The Group, on top of ensuring legal complianceat home and abroad, shall engage in its corporate
activities in a fair, transparent manner based on the
ethical values expected of corporations and businesspersons as members of society.
4. The Group shall sever any relations with and shalltake a firm attitude against antisocial forces.
5. The Group shall manage confidential information ofGroup companies properly, and shall work to prevent
unauthorized use or disclosure and leakage of suchinformation.
6. The Group shall appropriately disclose financial andother important information relating to the Group inaccordance with relevant laws, regulations and rules
in an effort to be a highly transparent corporate entity.
7. The Group shall accept diverse values of individuals,
and shall strive to create a corporate climate in which
there are no human rights violations or discrimination
while individuals receive fair evaluations and are
motivated to work.
8. The Group shall establish and shall enhance its
working environment while ensuring compliancewith labor-related laws and regulations to become acorporate entity in which individuals can work safely
and comfortably.

E
18 FURUKAWA CO., LTD.

nvironmentSocietyGovernance

The Furukawa Company Group’s ESG Activities

Environmental Initiatives
Based on its Corporate Conduct Charter and Basic Philosophy on Environmental Management, the Furukawa Company Group is determined to contribute to the realization of a sustainable society. With respect to countermeasures against global warming issues, theGroup is currently pursuing activities for the achievement of the Third Medium-term Reduction Targets covering the period from fiscal
2015 to fiscal 2019. Furthermore, we are in the process of formulating the Fourth Medium-term Reduction Targets starting from fiscal
2020 to realize our Vision for 2025.
In continuing our environmental conservation activities, we place an emphasis on the implementation of preventative measures while
enhancing and reinforcing responses to risks. Furthermore, we will continue our business activities in consideration of the environment
through the improvement of daily operations with the aim of reducing impacts on biodiversity as much as possible.
Environmental Ratings
The Development Bank of Japan Inc. (DBJ) assigns DBJ Environmental Ratings to companies receiving financing, and the Furukawa Company Groupobtained DBJ’s highest-level environmental rating on November 30, 2017.
We earned the highest rating for four years in a row in recognition of our“especially advanced efforts in consideration of the environment,” mainly
in relation to the following achievements: 1) the Company having realized
the improvement of both productivity and the reduction of environmental
impact by implementing ongoing improvement of production processes involving all employees, with environmental management developed throughout the Company Group, notwithstanding the diversified business domains;and 2) the Company having formulated the CSR Medium-term Plan toward the realization of the Vision
for 2025, “FURUKAWA Power & Passion 150,” under
the top commitment to implement CSR management
across the entire range of business processes consisting of research and development, procurement,
production and sales including the provision of environment-friendly products, and promotion of CSR
procurement.

Environmental Management
Environmental Management Committee
Important items relating to environmental conservation are put forward anddiscussed by the Environmental Management Committee, in which top personnel from each production base participate. At the Committee meeting
held in April 2018, the result of the evaluations of environmental and safety
activities for fiscal 2018 and the targets of environmental and safety activities
for fiscal 2019 were reported, discussed and approved. Concurrently, active
discussions were held among the Committee members concerning measuresfor environmental impact reduction in the quest to realize the Vision for 2025.
Environment and Safety Audits
The Company Group conducts regular annual “Environment and Safety Audits.”. The aim of such audits is to emphasize not just “correctional measures”
to address accidents and disasters that have already occurred but also “preventative measures.” Based on the policy stipulated in Medium-term Business
Plan 2019, the environment and safety audits for fiscal 2019 were conductedwith the aim of supporting the efforts of each section for the achievement of
the Group’s targets clarified in the Vision for 2025, including the expansionof the human resource base associated with environment and safety, and thepromotion of improvement activities directly relating to business operations,while contributing to the improvement of daily operational levels.
In the event of a major disaster or ongoing disasters, we undertake proper
discussion with the on-site manager to determine the cause, then formulate
measures to prevent a recurrence. In these and other ways, we work continuously to ensure safety in the workplace.

Environmental Accounting
Since fiscal 2003, the Furukawa Company Group has endeavored to conserve
the environment and improve environmental efficiency by recognizing costs
required for environmental conservation in reference to the Ministry of theEnvironment’s Environmental Accounting Guidelines.
● Environmental Conservation Benefit● Environmental Conservation Cost (Categories Corresponding to Business Activities)

Total investments for fiscal 2018 reached ¥263 million. The Group has introduced energy-saving equipment and enhanced
preventative measures with the aim of promoting environmental conservation. As a result, pollution prevention costs accountfor 85% of the total cost totaled ¥2,286 million, the breakdown of which is mainly the costs for promoting environmental
conservation activities such as the maintenance and management of pollution control equipment and conservation of forests.
Category

Content of the principal activities(1) Business area cost: Cost for preventing

air pollution and water pollution

Investments

Costs

261

1,949

Cost for preventing air pollution and water pollution

223

1,777

Global environmental conservation cost

Cost for saving energy and maintenance and management of mountain forests ownedby the Company

32

48

Resource circulation cost

Cost for recycling, disposal of industrial waste and effective use of water

6124(2) Upstream and downstream costs

Cost for recycling, recovering and re-commercialization of products that have been
output into business areas

0113(3) Administration cost

Cost for operating ISO 14001 standards, environmental education, landscaping and greening of business sites

057(4) R&D cost

R&D cost to develop products that contribute to environmental conservation

2165(5) Social activity cost

Cost associated with various social activities including cleanup of neighborhood areas, planting of greenery, etc.

02(6) Environmental remediation cost

Cost allocated for recovery from environmental degradation due to business activities

0

0

Total

263

2,286

Breakdown

Pollution prevention cost

● Environmental Conservation Benefit

The economic impact deriving from resource circulation (gains on sale of valuables, etc.) for fiscal 2018 was ¥162 million, a
year-on-year increase of ¥41 million, as a result of subdividing the resources.
Environmental conservation benefit categories

from the previous
Environmental performance indicator (unit) Fiscal 2017 Fiscal 2018 Differencefiscal
year
Total energy input volume (thousand GJ)

458

483

Input volume of water (thousand m3)

671

623

Volume of greenhouse gas emissions
Environmental conservation benefit related to(thousand t-CO2)
waste or environmental impact originating frombusiness activities
Total waste emissions volume (t)2526Increased by
25 thousand GJ
Decreased by
48 thousand m3
Increased by
one thousand t-CO2

5,347

6,884

Increased by 1,537 t

Environmental conservation benefit related toresources input into business activities

E

nvironment(Millions of yen)Content of the benefit

AmountResource
Gains on salecirculation (gainsof stainlesson sale ofsteel, iron, etc.
valuables, etc.)

162

Reduction ofelectric powerpurchasing
costs due tooperation of
steam turbine
generators

Energy-saving
effect

Total

44

206

● Breakdown of Environmental
Conservation Cost Invested
Globalenvironmental
conservation
cost

12.2%

Other

3%
Total investment inenvironmental
conservation in
fiscal 2018
(Millions of yen)263

SocietyG

Cost forpreventing
pollution

84.8%
overnance

Annual Report 2018

19

The Furukawa Company Group’s ESG Activities

Environmental Targets and Results
Results of the Environmental and Safety Activities (Fiscal 2018)
1. Operation and promotion of effective environmental management
systems by each Group company

3. Promoting biodiversity protection activities● The status of mandatory inspections of machinery and facilities was checked● We have promoted research to understand how biodiversity is impacted byunder the environment and safety audit, and guidance was provided
concerning problems identified, if any.
● Information on laws and ordinances associated with the environment wascommunicated promptly for horizontal dissemination.
● The environmental manager of each plant was encouraged to properlyfamiliarize him/herself with the information communicated, and make it
known to each work place in a horizontal manner.
● Based on the measurement of industrial wastewater, preventative measuresagainst exceeding drainage standards were promoted by analyzing thechanges and trend of the density of restricted substances.
● Educational information concerning environmental conservation was communicated and horizontally disseminated as necessary to promote educationfor enhancing awareness based on our education plan.
2. Promotion of continuous improvement for the reduction of environmental impact● We failed to achieve the reduction target due mainly to the increase in production.

This was despite our efforts in regard to introducing energy-saving equipment andreviewing production processes by sharing information about leading energy-saving
equipment.
● Effective water-saving measures were implemented while “visualization”
was promoted at each plant, contributing to the achievement of the target.
● We failed to achieve the reduction target due to the increase in production
volume, despite our efforts in regard to promoting the use of returnablecontainers and improving packing methods.
● Despite our management efforts to prevent volatilization of paint andimprove spraying methods, we failed to achieve a reduction due to theincrease in production volume and the use of paints designated by customers.

the environmental load imposed by the operation of each plant.

● We have implemented tree-planting activities including a cherry tree-planting

drive in the Ashio area and a tree-planting drive at Furukawa-no-mori, while
promoting the management of forests owned by Furukawa.

4. Enhancement of preventative measures against accidents and disasters● The system used at each plant for preventing environmental and safety

accidents and disasters was checked under the environment and safety audit,
and guidance was provided concerning problems identified, if any.

● The status of implementation of environmental and safety education programs

was checked at each plant, and guidance was provided concerning problems
identified, if any.
● Despite our continued efforts for “zero accidents,” one accident occurred at
our facilities. No environmental accidents occurred.
● Despite our efforts for “zero accidents,” six accidents requiring one lost
workday or more (of which, five accidents required four lost workdays ormore) occurred.

Environmental and Safety Activity Targets for Fiscal 2019
1. Operation and promotion of effective environmental management systems ofeach Group company● Promoting continuous improvement of operations in accordance with the revised EMS standard● Properly responding to the establishment and amendment of environment-related laws and ordinances● Enhancing responses to demands from inside and outside the Company● Promoting preventative measures through effective use of environment-related data

3. Promotion of biodiversity protection activities

2. Promotion of continuous improvements toward the reduction of environmental load
● Reducing the emission of greenhouse gases (by improving efficiency of● Enhancing the environmental and safety management system● Enhancing education to improve the capabilities of personnel responsible for● Reducing the use of water resources (including promoting the reduction of● Reducing the number of facility and environmental accidents, setting the● Reducing total emissions including waste and converting waste into valuables● Reducing the volume of emissions of chemical substances to the atmosphere● Reducing the industrial accidents rate (Target: Severity rate of 0.03 or lower)● Promoting research on measures for reducing the environmental impact on biodiversity● Promoting continuous tree-planting, forest management and biodiversity

restoration activities

4. Enhancement of preventative measures to realize zero disasters

the environment and safety

production facilities and manufacturing processes)
impacts on aquatic environments)

target at zero

The Third Medium-term Reduction Targets and the Results of the Fourth Year
The Furukawa Company Group has been implementing measures to achieve the goals set under the Third Medium-term Reduction Targets
covering the period from fiscal 2015 through fiscal 2019. The results of the reduction efforts in fiscal 2018, the fourth year, are detailed below.
The failure to achieve the target for reduction of CO2 emissions can partly be attributed to the fact that in some regions all electricity was provided by hydroelectric power generation when the Third Medium-term Reduction Targets were first formulated (fiscal 2014), while at present
we also use electric power provided by the Tokyo Electric Power Company.
● The Third Medium-term Reduction Targets and the Results of the Fourth Year
Details of the effectReduction rate targets for fiscal 2019

Reduction rate results in fiscal 2018

CO2 emissions
Water resource used
Total emissions including waste

3%
2%
5%

-13%
2%
-8%

Water resource input

Total energy input● Material Flow of the Furukawa Company Group (Fiscal 2018)
Category

Volume used

INPUT
Category

Volume used

Category

Volume used

Volatile oil(gasoline)

31 kl

Fuel oil A

252 klCity gas569
thousand m3

Kerosene

368 klLiquefied petroleum gas
(LPG)

304 t

Electricity

42,234thousand kWh

Industrial water500
thousand m3

Diesel oil

166 klWaterworks

122
thousand m3

20 FURUKAWA CO., LTD.

OUTPUT

GroundwaterOne
thousand m3

CO2
emissions26
thousand t-CO2

Drain volume

410
thousand m3

Total emissions
including waste

6,884 tEnvironmental Data / Environmental Efficiency Indicator● Energy (thousand GJ)
454

I
N
P
U
T

474

● Water Resources (thousand m3)

429

458

483

800

800

600

600

400

400

200

200

0

’14/3

’15/3

’16/3

’17/3

23

O
U
T
P
U
T

27

24

651

666

671

623

’14/3

’15/3

’16/3

’17/3

’18/3

0

’18/3

Despite an increase in the volume of water usedin the Chemicals, UNIC Machinery and Electronics
segment due to expanded production, the volume
of water used decreased by 7% year on year,
which was attributable to strict management ofwater inflow by newly installed flowmeters.

Energy use recorded a 6% increase year on year
due to an increase in production at the UNIC
Machinery segment and the Electronics segmentdespite our efforts to reduce energy consumption
by introducing energy-saving equipment andreviewing the operation methods of facilities.

● CO2 Emissions (thousand t)

633● Drain Volume (thousand m3)
429

26

25

455

471

465

● Total Emissions Including Waste, etc. (t)7,746 6,266 6,832 5,347 6,884

410

40

800

8,000

30

600

6,000

20

400

4,000

10

200

2,000

0

0

0

’14/3

’15/3

’16/3

’17/3

’18/3

’14/3

’15/3

’16/3

’17/3

’18/3

4,743

3,098

3,458

2,858

3,003 3,168 3,374 2,489 2,928

’14/3

’15/3

’16/3

’17/3
Valuables

Energy usage increased 6% year on year. CO2
emissions rose 4% due to the CO2 emissions
factor.

Water usage declined 7% year on year.
Wastewater volume fell 12% due to increased
production of water-based products.

3,956

’18/3
Waste

Total emissions including waste increased by 29%
year on year due to the increase in production byeach Group company. The volume of valuables
increased by 18% year on year as we promoted
the subdivision of resources.

Management of Chemical Substances
In fiscal 2018, the number of chemical substances handled that are required to be reported under the PRTR system decreased by one from theprevious fiscal year to 14. Reflecting the increase in the volume of production at some plants, organic solvents use increased, resulting in an
increase in release to the atmosphere of xylene, toluene and ethylbenzene.
● Emission and Transfer of the Substances Required to Be Reported under the PRTR* System
Numbers in blue: Decreased from the previous fiscal year
Numbers in red: Increased from the previous fiscal year (unit: kg/year; or mg-TEQ/year for dioxin only)

Emissions
Substanceno.

Chemicals

Atmosphere

Public waters

2016

Volume transferred
Soil

2017

2016

2017

Landfill at plant

Transfer to sewer

Outside of plant

2016

2016

2016

2017

2,509

2016

2017

2017

2017

37,20240,038

0

0

0

0

0

0

0

0

2,310

53

Ethylbenzene

75

Cadmium and its compounds

0

0

0

0

0

0

0

0

0

0

2,515

4

Xyleneand chromium
87 Chromium(III) compounds
243 Dioxins
salts (water-soluble,
272 Copper
except complex salts)
296 1,2,4-trimethylbenzene

57,24057,642

0

0

0

0

0

0

0

0

4,087

4,544

3

3

0

0

0

0

0

0

0

0

0

7

12.3

8.5

0

0

0

0

0

0

0

0

0.12

0.07

0

0

0

0

0

0

0

0

5

7

0

0

4,753

4,110

0

0

0

0

0

0

0

0

252

363

300 Toluene

2,838

80

54,85754,868

0

0

0

0

0

0

0

0

2,840

308 Nickel

2

0

0

0

0

0

0

0

0

0

0

0

332 Arsenic and its inorganic compounds
fluoride and its
374 Hydrogenwater-soluble salts
412 Manganese and its compounds

0

0

0

0

0

0

0

0

0

0

1,361

1,987

0

0

12

14

0

0

0

0

0

0

1,424

1,436

39

55

0

0

0

0

0

0

0

0

63

28

438 Methylnaphthalene

16

16

0

0

0

0

0

0

0

0

0

0

453 Molybdenum and its compounds
0* PRTR: Pollutant Release and Transfer Register

0

0

0

0

0

0

0

0

0

0

1

E

nvironmentSocietyGovernance

Annual Report 2018

21

The Furukawa Company Group’s ESG Activities

Human Resource Management
The Furukawa Company Group has been promoting workstyle reforms with the aim of improving labor productivity andcreativity based on the development of each employee and realizing workplace environments that are healthy and comfortable for all members of our diverse workforce by reducing overtime work and encouraging employees to take morepaid annual leave.
Promotion of Diversity
Workstyle Reform and Numerical Targets● Three Fields of Workstyle Reform and Examination Item
Automatization and systematization, review of layouts,
Improvement ofof personnel allocation, shortening meeting
work environment review
times, effective management of meetings
Review of systems Increase in departments using a flextime system,
and working
introduction of teleworking, discretionary work system
conditions
and no-overtime days
people conscious about improvement of
Reform of mindset Making
efficiency● Numerical Targets of Workstyle Reform
Fiscal 2018

Fiscal 2020 target

Prescribed working hours (a) 1,891 hours 1,891 hours
Extra working hours (b)322 hours

Hours of paid annual
leave taken (c)70 hours

Total actual working
hours (a) + (b) − (c)26.85 hours/month⇨15.50 hours/month
9.0 days/year
78 hours⇨10 days/year

186 hours

2,143 hours 1,999 hours

Furukawa Co., Ltd. has been placing an emphasis on supporting theparticipation of female employees and providing support for employees
who are raising children, while also proactively hiring and empowering
women. On April 1, 2016, the Company formulated the Action Plan
for Promoting Support for Female Employees to expand its systems to
support the participation of female workers.
Since April 2015, the Company has expanded its support systems for
employees raising children by making some parental leave paid leave. It
also encourages male employees to take parental leave to ensure theyalso have the opportunity to participate in child rearing.
● Action Plan for Promoting Support for Female Employees(April 1, 2016 to March 31, 2021)
The percentage of females among new graduate hires shallTarget No. 1
be 20% or higher
Target No. 2 The number of female managers shall be 10 or more
Establishment of a return-to-work system (a reemployment
Target No. 3
system for retirees)
Encouraging the taking of paid annual leave at an average
Target No. 4
rate of 12 days per person per year
Encouraging male employees to take parental leave:
Target No. 5
10 or more male employees per year
● Numerical Targets of Workstyle Reform

Work–Life Balance
Creating a Comfortable Work Environment
We have been promoting activities to help employees maintain theirhealth and achieve a good work–life balance through reducing overtime
and improving the rate at which they take paid annual leave.
Activities for Fiscal 2018
・Strict management of working hours through prior application for		 overtime and its prior approval
・Establishment of day for encouraging employees to take paid
		annual leave
・Trial expansion of the number of departments using the flextime system
・Consideration of the introduction of a teleworking system

Rate of taking parental leave: 87.8%
of takingMale 35 male employees Rateparental leave: 85.4% Average number of days: 13.9
of taking parental Average number of days: 421.5
Female 8 female employees Rateleave: 100.0%

Hiring Foreign Nationals
The Company Group is proactively pursuing overseas business expansion and does not make hiring decisions based on nationality. We haveadopted 585 foreign national employees (as of March 31, 2018), havebeen deepening our partnerships with our non-Japanese employees andpromote a spirit of mutual respect for individual differences.

Hiring Retired Older Workers● Status of Overtime Hours (Monthly Average)（Hours）
30
20

25.50

26.27

’14/3

’15/3

23.80

26.85

20.65

10
0

’16/3

’18/3

’17/3

● Status of Taking Annual Paid Leave
（％）
55
50

48.8

45
40

44.5

44.3

’14/3

’15/3

47.6
45.5

48.7
47.4

49.4

（％）

48.2

3.0

’17/3

’18/3

* Source: “General Survey on Working Conditions” by the Ministry of Health, Labour and Welfare

22 FURUKAWA CO., LTD.

4.0

Employment rate of persons with disabilities
Statutory employment rate
3.35

1.0

3.49

2.55

2.33

2.19

2.0

2.0

2.0

2.0

2.0

’14/3

’15/3

’16/3

’17/3

’18/3

2.0

35

’16/3

Hiring People with Disabilities
The Company hires people with disabilities at various workplaces and forvarious types of work, promoting their independence and participation
in society.
● Trend of Employment Rate of Persons with Disabilities(Furukawa Co., Ltd.)

Rate of taking paid leave in the Furukawa Company Group
National average*

47.1

In accordance with its Continued Employment Rules, the Company
rehires employees who want to continue working after reaching theofficial retirement age of 60. Such employees who return to work after
retiring focus on handing down the skills they have developed over theirlong career to mid-level and younger employees. The number of employees continuing to work after reaching the age of retirement under
the continued employment system is 107 (as of March 31, 2018).

0Workplace Reform
The Furukawa Company Group wants each and every employee to demonstrate leadership and think and act independently. For this reason, we strive to build personnel evaluation systems and workplace environments that reward challenging
efforts, while respecting human rights as a top priority. At the same time, we are promoting education and developmentof professional human resources.
Efforts for Industrial Safety and Health

Cultivation of Human Resources

Safety Measures and Educationumn

The Company Group systematically implements internal training programs for all employees by job grade and job function sothat they learn principles for safe and efficient operation methods, understand the importance of safety, and acquire expertise.
We also proactively implement education programs considered
useful for preventing industrial disasters even when they are not mandatory, in addition to the education provided at the time of employment
based on the Industrial Safety and Health Act, the education provided at
the time of changing operations, special education programs, and skills
training for personnel engaging in safety and health duties.

olPersonnel Evaluation System
We apply our own ability-based grade system to categorize each employee according to his/her ability to perform duties. By evaluating thework performance, eagerness, capability, etc., of each employee under
the personnel evaluation system in view of the assigned ability-based
grade, we endeavor to guide, cultivate and develop the potential of ouremployees as well as ensure appropriate job placement. Furthermore,
we continue to improve the workplace environment by ensuring a fair
and appropriate system of wages, bonuses, retirement benefits, promotion, etc., so that motivated employees can work with confidence.

The Company Group has also implemented various industrial safety
and health activities based on its Basic Philosophy on Industrial Safety
and Health and Policy on Industrial Safety and Health to improve its
safety and health performance. In particular, we promote safety andhealth education and training programs for our own employees andthose of subcontractors working within our plants with the aim ofcreating comfortable workplace environments. We also believe thatbasic activities such as holding pre-operation meetings, ensuring KYT(hazard prediction training), activities concerning near-miss incidents
and collecting improvement proposals must be conducted regularly.
Furthermore, efforts made in regard to compliance with laws andordinances and responses to amended laws and ordinances are madeknown to relevant personnel.

C

Development of Human Resources
The Company Group seeks to optimize its business framework andmaximize its corporate value through the development of professional
human resources and creation of workplace environments where employees can exercise their abilities to the fullest.
In the training programs implemented by job grade, a variety ofeducational programs are provided to different classes of employees
such as the newly hired, employees in their third year, fifth year andeighth year, newly assigned managers, and section managers to help
them attain the basic knowledge required for their job as well as theability to respond to changes in the social environment. In the training program for newly hired employees, the history, countermeasuresagainst pollution and the present status of safety management andtree-planting activities of the Ashio Copper Mine is included.
In the training activities by specialty and function, we offer appropriate programs according to the specialty, function and qualificationof the participants, providing them with a wide range of expertise
concerning the relevant fields and specified skills. At the same time,
we proactively encourage our employees to participate in external seminars on specialized subjects, and to obtain public qualifications. We alsoendeavor to cultivate employees with expertise in cutting-edge technologies and social trends by supporting their participation in external
educational organizations and academic societies.

Respect for Human Rights
The Furukawa Company Group’s Corporate Conduct Charter stipulates
that we will “accept diverse values of individuals, and strive to create a
corporate climate in which there are no human rights violations or discrimination while individuals receive fair evaluations and are motivatedto work,” and prohibits all forms of harassment and discrimination. Wetake resolute measures against harassment and discrimination based on
our internal rules.
Our Code of Behavior for employees provides that basic humanrights should be respected and discriminatory language and behavior
is prohibited. All newly hired employees of the Company Group participate in the human rights seminar while managers are required to joininternal training concerning harassment in the workplace. Thus, specificcase studies of actions leading to the creation of comfortable workplaces are learned, along with examples of actions that constitute humanrights violations.
In 2017, details of our activities were included in a handbook titled“Good Practice Examples of Measures against Workplace Harassment”
published under the Creating Comfortable Workplaces initiative of the
Ministry of Health, Labour and Welfare. This handbook is distributedat prefectural labor bureaus and Labor Standards Inspection Offices
nationwide.

The Furukawa Company has a long history of occupational
health and safety initiatives going back to its roots in themining industry. Our Ashio Copper Mine was the firstplace in Japan to translate the “Safety First” slogan, which
originated in the United States, and undertake initiatives
associated with it. This is regarded as the origin of Japan’s
safety movement, and we have long been a leader involuntary safety initiatives.

EnvironmentSocietyGovernance

Annual Report 201823

Consolidated Six-Year Financial Summary
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31
Millions of yen

2018/3For the year:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Profit before income taxes
Profit attributable to owners of parent¥ 167,696
142,427
25,26917,448
7,821
6,595
4,774

2017/3

2016/3

2015/3

2014/3

2013/3¥ 149,830 ¥ 161,799 ¥ 172,544 ¥ 163,026 ¥ 165,540
126,207
136,447
146,657
139,777
144,225
23,62325,352
25,887
23,24921,315
17,077
17,363
16,962
16,363
17,952
6,546
7,989
8,925
6,886
3,363
6,711
6,631
6,160
7,092
5,433
4,254
5,056
9,793
3,976
2,976

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

5,350(5,855)(2,529)9,819(3,585)(5,030)7,652(2,855)(8,166)

10,241(10,892)
3,318

1,983
(3,129)(4,562)5,491(2,253)
252

Capital expenditures
Depreciation and amortization
Research and development expenses
At year-end:
Total assets
Current assets
Current liabilities
Total equity
Net assets
Interest-bearing liabilities
Per share amounts:*
Basic earnings
Cash dividends
Net assets
Profitability:
Cost of sales margin (%)
Gross margin (%)
SG&A expense margin (%)
Operating margin (%)
Return on sales (%)
Efficiency and soundness:
Return on equity (ROE) (%) (Note 1)
Return on assets (ROA) (%) (Note 2)
Debt-to-equity (D/E) ratio (Times) (Note 3)
Equity ratio (%) (Note 4)
Investment indicators:
Dividend payout ratio (%) (Note 5)
Dividends on equity (DOE) ratio (%) (Note 6)
Price book value ratio (PBR) (Times) (Note 7)
Stock price at fiscal year-end (Yen)*

5,021
3,260
2,293

5,424
3,138
2,464

2,869
3,191
2,680

2,557
3,223
2,227

11,430
2,828
2,539

2,926
3,015
2,559

¥ 222,751
88,702
79,33885,01187,08673,311¥ 208,034 ¥ 195,650 ¥ 207,317 ¥ 199,408 ¥ 186,076
79,57976,31580,56476,83879,50859,79059,75063,87073,97674,43977,65866,45968,78354,694
50,11079,584
68,26270,581
56,31351,50773,50776,241
82,053
77,21980,634¥ 118.16
50.00
2,104.07¥ 105.29 ¥ 125.13 ¥ 242.34 ¥ 98.40 ¥ 73.65
50.00
50.00
50.00
30.00
20.00
1,922.04 1,644.81 1,702.21 1,353.41 1,239.94

Yen

Notes: 1. Return on equity (ROE) = Profit attributable to owners of parent /		 Average total equity × 100
2. Return on assets (ROA) = Profit attributable to owners of parent /		 Average total assets × 100
3.	Debt-to-equity (D/E) ratio = Interest-bearing liabilities (fiscal year-end) /Total equity [Shareholders’ equity] (fiscal year-end)
4.	Equity ratio = Total equity [Shareholders’ equity] (fiscal year-end) /Total assets (fiscal year-end) × 100

24 FURUKAWA CO., LTD.

%

84.9
15.1
10.4
4.7
2.8

84.2
15.8
11.4
4.4
2.8

84.3
15.7
10.7
4.9
3.1

85.0
15.0
9.8
5.2
5.7

85.7
14.3
10.0
4.2
2.4

87.1
12.9
10.8
2.0
1.8

5.9
2.2
0.9
38.2

5.9
2.1
0.9
37.3

7.5
2.5
1.1
34.0

15.9
4.8
1.2
33.2

7.6
2.1
1.4
27.4

6.2
1.6
1.6
26.9

42.3
2.4
0.9
1,985

47.5
2.7
1.1
2,050

40.0
2.9
1.0
1,660

20.6
3.2
1.2
2,120

30.5
2.2
1.4
1,860

27.2
1.6
0.9
1,090

5. Dividend payout ratio = Total cash dividends / Profit attributable to owners of parent × 100
6. Dividends on equity (DOE) ratio = Total cash dividends / Average net assets × 100
7. Price book value ratio (PBR) = Stock price (fiscal year-end) / Net assets per share* The Company conducted a 1-for-10 stock consolidation of shares of common stock,effective October 1, 2017. In the above table, per-share figures for the fiscal year
ended March 2017 and prior years have been recalculated based on the number ofshares outstanding after the stock split.

Financial Review

Revenue and Expenses
In fiscal 2018, ended March 31, 2018, consolidated net sales totaled ¥167,696 million, up 11.9%
compared with the previous fiscal year.
The Industrial Machinery segment posted a 13.0% increase in sales, to ¥15,872 million, due
mainly to increased sales from bridge-related projects, including those associated with the
Yokohama Cyclic Northwest Line, as well as higher sales of crushers, grinders, and other industrial machinery. The Rock Drill Machinery segment reported an 11.9% increase in sales, to¥30,200 million. This was due to an increase in shipments of tunnel drill jumbos for domestic
projects, including Kumamoto earthquake restoration and reconstruction work, the Linear Chuo
Shinkansen Line, and a new Shinkansen line in Hokkaido. Segment sales were also bolstered byincreased demand for hydraulic breakers on the back of firm construction investments. Amid
favorable economic conditions overseas, we reported steady shipments of hydraulic crawler drills,
mainly to Europe and North America, as well as increased shipments of tunnel drill jumbos toChina and South America. The UNIC Machinery segment recorded a 6.2% increase in sales, to¥27,382 million. This was due to increased domestic shipments of our latest-model “G-FORCE”
series, featuring a full lineup from small to large models. Benefiting from healthy overseas economic conditions, we posted steady shipments of mini crawler cranes to Europe and North America, as well as increased shipments of UNIC cranes to China and Southeast Asia. The Metals
segment posted a 14.0% rise in sales, to ¥77,334 million. The Company’s sales of electrolytic
copper in volume terms declined 1,190 tons, to 90,104 tons, reflecting a focus on domestic sales.
For the fiscal year, sales of electrolytic copper increased due to higher overseas market prices andthe yen’s depreciation. The Chemicals segment reported a 19.8% increase in sales, to ¥6,345
million. This was due to higher sales of cuprous oxide owing to growth in demand for its use inmarine antifouling paint, a mainstay application, ahead of the enactment of regulations underthe Ballast Water Management Convention.
Cost of sales rose 12.9%, to ¥142,427 million, and the cost of sales margin edged up 0.7
percentage point, to 84.9%. Selling, general and administrative (SG&A) expenses increased
2.2%, to ¥17,448 million.
As a result, operating income climbed 19.5% from the previous fiscal year, to ¥7,821 million.
Main contributors were the Industrial Machinery segment (with operating income of ¥1,005
million), the Rock Drill Machinery segment (¥1,783 million), the Electronics segment (¥330 million), and the Chemicals segment (¥451 million). By contrast, the UNIC Machinery segment
posted a 11.0% decline in operating income, to ¥2,295 million, due largely to surging prices ofsteel materials and the impact of upfront capital investments in the Sakura Plant, and the Metals
segment reported a 50.1% fall in operating income, to ¥867 million, due mainly to deteriorationof purchasing conditions. Accordingly, the operating margin edged up 0.3 percentage point, to
4.7%.
Among other income, we posted ¥804 million in interest and dividend income, ¥367 million
in equity in earnings of affiliates, and a ¥21 million gain on sales of investment securities. Amongother expenses, there was a ¥1,042 million loss on provision for cost of removal of office tenants.
Accordingly, profit before income taxes decreased 1.7%, to ¥6,595 million.
Income taxes (the sum of inhabitants’ tax, enterprise tax, and corporate tax) totaled ¥1,668
million. As a result, profit attributable to non-controlling interests was ¥153 million, and profit
attributable to owners of parent increased 12.2%, to ¥4,774 million.
Return on equity (ROE) remained unchanged, at 5.9%, and basic earnings per share rose, to¥118.16.

Net Sales(Billions of yen)

163.0 172.5 161.8 149.8 167.7’14/3 ’15/3 ’16/3 ’17/3 ’18/3

Operating Income(Billions of yen)

Operating Margin
(%)

6.9

8.9

4.2

5.2

8.0

6.5

4.9

7.8

4.7

4.4

’14/3 ’15/3 ’16/3 ’17/3 ’18/3
Operating Income
Operating Margin

Profit Attributable to
Owners of Parent(Billions of yen)

Return on Sales
(%)

4.0

9.8

5.1

4.3

4.8

5.7
3.1
2.4

2.8

2.8

’14/3 ’15/3 ’16/3 ’17/3 ’18/3
Profit Attributable to Owners of Parent
Return on Sales
Annual Report 201825

Financial Position
At March 31, 2018, total assets amounted to ¥222,751 million, up 7.1% from a year earlier. The
increase stemmed mainly from rises in raw materials and stocks in the Metals segment, as well as
an increase in investment securities due to rising prices of our shareholdings. Despite a 0.3%
decrease in interest-bearing liabilities (debt), to ¥73,311 million, total liabilities rose 5.6%, to¥135,665 million. This was due mainly to an increase in accrued payables.
Net assets at fiscal year-end stood at ¥87,086 million, up 9.4% from a year earlier. This was
mainly due to an increase in unrealized holding gain on securities, net of income taxes. Consequently, total equity amounted to ¥85,011 million, and the equity ratio rose 0.9 percentage
point, to 38.2%. The debt-to-equity (D/E) ratio remained unchanged, at 0.9 times.

Basic Earnings per Share(Yen)

98.40 242.34 125.13 105.29 118.16’14/3 ’15/3 ’16/3 ’17/3 ’18/3

R&D and Capital Expenditures
The Furukawa Company Group is actively engaged in R&D on new materials and high-valueadded products that meet diversified market needs. In the fiscal year under review, total researchand development expenses amounted to ¥2,293 million, down 6.9% from the previous fiscal
year. Of this total, ¥87 million was allocated to the Industrial Machinery segment, ¥771 million to
the Rock Drill Machinery segment, ¥395 million to the UNIC Machinery segment, ¥116 million to
the Electronics segment, and ¥134 million to the Chemicals segment.
Capital expenditures (including purchase of intangible fixed assets) amounted to ¥5,021
million. Of this total, ¥358 million was allocated to the Industrial Machinery segment, ¥535
million to the Rock Drill Machinery segment, ¥3,321 million to the UNIC Machinery segment,¥110 million to the Metals segment, ¥139 million to the Electronics segment, and ¥51 million to
the Chemicals segment, aimed primarily at improvements in production efficiency. In addition,¥23 million was allocated to the Real Estate segment, mainly for maintenance of buildings, and¥481 million went to the Others segment, mainly for vehicles to be used in the transportation
sector. Funds for these expenditures are sourced from internal funds and borrowings. Depreciation and amortization increased 3.9%, to ¥3,260 million.
The Group’s capital expenditure budget is based on comprehensive consideration of various
factors, including demand forecasts, production plans, and investment benefits. As of March 31,
2018, the Group plans to invest a total of ¥11,600 million, mainly for the purchase of new
facilities and the repair of existing ones. We expect to procure these funds via borrowings and/orinternal funds.
Cash Flows
In the fiscal year under review, net cash provided by operating activities amounted to ¥5,350
million, down 45.5% from the previous fiscal year. This was due to several factors, including an
increase in notes and accounts receivable associated with higher net sales, as well as an increasein provision for deposition field restoration (to cover costs for strengthening the earthquake
resistance of deposition fields, the final disposal sites for mining residues and the like). There wasalso a decrease in interest and dividend income compared with the previous fiscal year, when the
Company received dividend income from Nusa Tenggara Mining Corporation.
Net cash used in investing activities totaled ¥5,855 million, up 63.3% from the previous fiscal
year. The main factor was purchases of property, plant, and equipment, including equipment forstrengthening the “mother factory” functions of the Sakura Plant.
Net cash used in financing activities was ¥2,529 million, down 49.7%. This was mainly due torepayments of short- and long-term debt. As a result, cash and cash equivalents at the end of the
fiscal year totaled ¥10,200 million, down ¥3,025 million, or 22.9%, from a year earlier.

Note: The Company conducted a
1-for-10 stock consolidation of sharesof common stock, effective October 1,
2017. In the above graph, per-share
figures for the fiscal year ended March2017 and prior years have been recalculated based on the number of shares
outstanding after the stock split.

Total Assets(Billions of yen)

Return on Assets (ROA)(%)

199.4 207.3 195.7 208.0 222.8

4.8

2.5

2.1

2.1

2.2

’14/3 ’15/3 ’16/3 ’17/3 ’18/3
Total Assets
Return on Assets (ROA)

Net Assets(Billions of yen)

Return on Equity (ROE)(%)

56.3 70.6 68.3 79.6 87.1

15.9

7.6

7.5

5.9

5.9

’14/3 ’15/3 ’16/3 ’17/3 ’18/3

26 FURUKAWA CO., LTD.

Net Assets
Return on Equity (ROE)Allocation of Consolidated Operating Cash Flows and Capital Strategies
The Furukawa Group is currently implementing its medium-term business plan, covering thethree-year period from April 2017 to March 2020. With respect to allocation of consolidated
operating cash flows, our policy under the plan is to actively promote investments to increase
corporate value while aiming to establish a robust financial base. At the same time, we endeavor
to make optimal allocations of cash flows in consideration of shareholder returns.
Furukawa places great importance on improving returns of profits to all shareholders. Our basic
policy is to appropriate profits after comprehensive consideration of various factors, including
retained earnings required to finance capital expenditures and research and development
expenses necessary to bolster earnings, as well as future business development and other factors.
We strive to return profits to shareholders in a stable and ongoing manner. In principle, we aim
to pay annual dividends of ¥50.00 per share or higher for a consolidated dividend payout ratio of
30% or higher, based on consolidated earnings (excluding extraordinary income/loss situations).
For fiscal 2018, the Company declared annual dividends of ¥50.00 per share, for a consolidated
dividend payout ratio of 42.3%.
Business Risks(1) Foreign Exchange Fluctuations
The Furukawa Company Group engages in production and sales activities in Japan and overseas,
and therefore is at risk of foreign exchange fluctuations in connection with its export business,the import of raw materials, primarily copper ore, and smelting and processing income. While theGroup utilizes foreign exchange contracts and other methods to mitigate this risk, its operating
results and financial position may be adversely affected by movements in exchange rates.
(2) Fluctuations in Nonferrous Metals Markets
International prices of electrolytic copper, a mainstay product of the Group, and other nonferrous
metals are decided by the London Metals Exchange (LME) in U.S. dollars to reflect international
market conditions. Such prices fluctuate according to the international supply–demand balance,
speculative transactions, international political and economic circumstances, and the like. The
Group utilizes forward delivery transactions and other hedging techniques to minimize theimpact of fluctuating LME prices. However, movements in such prices may adversely affect theGroup’s operating results and financial position.

Equity Ratio
(%)

33.2

34.0

37.3

38.2

27.4

’14/3 ’15/3 ’16/3 ’17/3 ’18/3

Debt-to-Equity (D/E) Ratio(Times)

1.4

1.2

1.1

0.9

0.9

’14/3 ’15/3 ’16/3 ’17/3 ’18/3(3) Interest Rates
The Group’s fiscal year-end balance of interest-bearing liabilities (debt) was ¥73,311 million,
equivalent to 32.9% of total assets. Any increase in debt-related costs arising from changes ininterest rates may adversely affect the Group’s operating results and financial position.
’14/3 ’15/3 ’16/3 ’17/3 ’18/3(4) Investment Securities and Land
Historically, the Furukawa Company Group has maintained relatively high balances of marketablesecurities and land. As of March 31, 2018, the carrying value of investment securities as stated in
the balance sheets was ¥34,508 million, while land stood at ¥54,902 million. Accordingly, theGroup’s operating results and financial position are at risk of impairment losses, losses from devaluation, and losses on sales due to movements in stock and land prices.

Dividends on Equity (DOE)
Ratio
(%)

3.2
2.2

2.9

2.7

2.4

(5) Retirement Benefit Obligation
The employees of the Furukawa Company Group are covered by defined benefit corporate pension plans and non-contributory funded employee pension plans. Liability for retirement benefits’14/3 ’15/3 ’16/3 ’17/3 ’18/3
Annual Report 201827

are provided at an amount calculated based on the retirement benefit obligation and the fairvalue of pension plan assets at the balance sheet date. In calculating retirement benefit obligation, the Group adopts assumptions in connection with the discount rate and expected rate of
return on plan assets, as well as other assumptions. Accordingly, the Group’s operating results
and financial position are at risk in the event the actual discount rate and expected rate of returnon plan assets differs materially from the assumptions, as well as in the event of a change in theassumptions on which retirement benefit obligation are made.
(6) Earthquakes and Other Natural Disasters
Earthquakes and other natural disasters, as well as major accidents, could cause substantial
damage to the Group’s production facilities and procurement sources, leading to failure of its
production equipment and distribution network. Such an event may prevent the Group fromsupplying products in a reliable manner, which could affect its operating results and financial
position.
(7) Environmental Protection
The Furukawa Company Group places the highest importance on environmental protection,
environmental safety, and prevention of pollution at its various business sites, both in Japan andoverseas, respecting all laws and regulations. Furthermore, in Japan the Group is vigilant inpreventing water run-off from idle mines from contaminating water supplies and in preventing
the buildup of slag or slurry. However, in the event of changes in legislation and the like, there isa possibility that the Group’s performance results and its financial position could be influenced.
(8) Official Regulations
The Furukawa Company Group engages in business in Japan and overseas and thus is subject tolegal regulations of various nations, including rules related to licensing, taxation, the environment, labor, antitrust, and security. The Group takes care to faithfully comply with such official
regulations, but the formulation of new regulations or amendments to existing ones may lead toincreased costs and affect the Group’s business continuity, which could affect its operating
results and financial position.
(9) Country Risk
The Furukawa Company Group conducts its production, procurement, and sales activities on a
global basis in order to expand its sales network, strengthen cost-competitiveness, and reduce
currency risk. Any number of local events could hamper the Group’s smooth business operations.
These include local political unrest, sharp economic slowdown, trade sanctions, cultural and legal
differences, special labor–management relations, and terrorism. Such events could affect theGroup’s operating results and financial position.

Capital Expenditures(Billions of yen)

Depreciation andAmortization(Billions of yen)

11.4

5.4
2.8 2.6 3.2 2.9 3.2

’14/3

3.1

5.0
3.3

’15/3 ’16/3 ’17/3 ’18/3

Capital Expenditures
Depreciation and Amortization

Cash Flows(Billions of yen)

10.2

9.8

7.7

5.4

3.3

2.0
(3.1)
(4.6)

(2.9) (3.6)(10.9)’14/3(8.2) (5.0)

(2.5)
(5.9)

’15/3 ’16/3 ’17/3 ’18/3

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

Cash Dividends per Share(Yen)

30.00 50.00 50.00 50.00 50.00’14/3’15/3 ’16/3 ’17/3 ’18/3

Note: The Company conducted a
1-for-10 stock consolidation of sharesof common stock, effective October 1,
2017. In the above graph, per-share
figures for the fiscal year ended March2017 and prior years have been recalculated based on the number of shares
outstanding after the stock split.

28 FURUKAWA CO., LTD.

F i n a n c i a l S e c ti o n
Consolidated Balance Sheets
30
Consolidated Statements of Income
32
Consolidated Statements of Comprehensive Income
33
Consolidated Statements of Changes in Net Assets
34
Consolidated Statements of Cash Flows
36
Notes to Consolidated Financial Statements
37
Independent Auditor’s Report59

Annual Report 201829

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2018 and 2017
Thousands of
U.S. dollars (Note 3)

Millions of yen

2018

ASSETS2018

2017

Current Assets:
Cash and cash equivalents¥

10,200¥13,225$95,982

Receivables—trade

31,321

26,755

294,730

Finished products

15,576

13,802

146,570

Work in process

8,028

7,690

75,543

Raw materials and supplies

17,56911,616

165,324Deferred tax assets (Note 13)

856

662

8,055

Other current assets

5,284

6,032

49,723

Allowance for doubtful accounts

(132)

(203)

(1,242)

88,702

79,579834,685

Land and timberlands

56,75356,839534,045

Buildings and structures

56,371

55,486

530,451

Machinery and equipment

43,00941,827404,714

Lease assets (Note 9)

1,391

1,438

13,089Construction in progress

2,105

347

19,808

159,629

155,937

1,502,107

Accumulated depreciation(70,663)(68,560)(664,938)

		 Property, plant and equipment, net

88,96687,377

837,169

Investment securities (Note 4)

36,24032,343341,018

Investments in affiliates

3,719

3,228

34,996Long-term loans receivables

4,074

4,021

38,336

Deferred tax assets (Note 13)

51

522

480

1,572

1,550

14,793

		Total current assets

Property, Plant and Equipment, at Cost (Notes 5 and 18):

Investments and Other Assets:

Other assets
Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

30 FURUKAWA CO., LTD.

¥

(573)

(586)

(5,392)45,08341,078424,231

222,751¥

208,034$

2,096,085

Thousands of
U.S. dollars (Note 3)

Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term debt (Note 5)
Current portion of long-term debt (Note 5)
Lease obligations (Note 5)
Payables—trade
Electronically recorded obligations
Accounts payable—other
Income taxes payable
Deferred tax liabilities (Note 13)
Provision for deposition field restoration
Other current liabilities
		 Total current liabilities

2018

¥

Long-Term Liabilities:
Long-term debt (Note 5)
Lease obligations (Note 5)
Provision for environmental measures
Provision for deposition field restoration
Provision for cost of removal of office tenants
Liability for retirement benefits (Note 12)
Deferred tax liabilities (Note 13)
Deferred tax liabilities on surplus on the revaluation of land
(Note 13)
Asset retirement obligations
Other long-term liabilities
		 Total long-term liabilities
Net Assets (Note 6):
Shareholders’ equity:
Common stock without par value:
		Authorized—80,000,000 shares
		Issued—40,445,568 shares
Retained earnings
Treasury stock, at cost:		2018—41,964 shares		2017—412,928 shares
		 Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities, net of income taxes
Deferred gain (loss) on hedges
Surplus on the revaluation of land, net of income taxes
Translation adjustments
Retirement benefits liability adjustments
		 Total accumulated other comprehensive income
Non-controlling interests
		 Total net assets
		 Total liabilities and net assets

¥

9,225
26,728260
13,072
10,644
14,225
600
16
282
4,286
79,338

2018

2017

¥

9,656
13,384249
15,065
7,917
7,406
710
0
1,212
4,191
59,790$86,807
251,5102,447
123,007
100,160
133,857
5,646
151
2,654
40,330746,569

37,358
555
134
391
579
4,676
8,048

50,468
578
132
534
—
6,533
5,843

351,539
5,223
1,261
3,679
5,448
44,00175,732

1,779

1,811

16,740220
2,587
56,327218
2,543
68,6602,070
24,343530,036

28,20838,57328,20835,748265,437
362,972(68)—
66,713(66)—
63,890(640)—
627,769

14,518
46
3,465
182
87
18,2982,075
87,086
222,751

11,758
106
3,536
160
(1,792)
13,768
1,926
79,584
208,034

136,614433
32,606
1,713
819
172,185
19,526
819,480
2,096,085¥$

The accompanying notes are an integral part of these statements.
Annual Report 201831

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2018 and 2017
Thousands of
U.S. dollars (Note 3)

Millions of yen

2018

Net Sales¥

Cost of Sales (Note 15)

2018

2017

167,696¥(142,427)

149,830$

1,578,018(1,340,237)(126,207)

		Gross profit

25,26923,623

237,781

Selling, General and Administrative Expenses (Note 8)(17,448)(17,077)(164,185)

7,821

6,546

73,596

804

2,446

7,566

Equity in earnings (losses) of affiliates

367

(421)

3,453

Interest expense

(581)

(669)

(5,467)

Other income (expenses), net (Note 16)(1,816)(1,191)(17,089)

		 Profit before income taxes

6,595

6,711

62,059Current(1,155)(1,294)(10,869)

Deferred(513)(1,003)(4,827)

		 Total income taxes(1,668)(2,297)(15,696)

Profit

4,927

4,414

46,363

Profit Attributable to Non-Controlling Interests

(153)

(160)

(1,440)		Operating income
Other Income (Expenses):
Interest and dividend income

Income Taxes (Note 13):

Profit Attributable to Owners of Parent

¥

4,774

¥

4,254

$

Yen

Profit Attributable to Owners of Parent per Share
Net Assets per Share
The accompanying notes are an integral part of these statements.

32 FURUKAWA CO., LTD.

¥

118
2,104

44,923
U.S. dollars (Note 3)

¥

105
1,922

$

1.11
19.80

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2018 and 2017
Thousands of
U.S. dollars (Note 3)

Millions of yen

2018Profit

¥

2018

2017

4,927

¥

4,414

$

46,363

Other Comprehensive Income (Loss):
Unrealized holding gain (loss) on securities, net of income taxes

2,759

7,249

25,962(226)

Deferred gain (loss) on hedges

(24)

(59)

Translation adjustments

(46)

(393)

(433)

Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates­accounted for using equity method
		 Total other comprehensive income (loss) (Note 7)

1,879

2,158

17,681

50

(13)

471

4,618

8,942

43,455Comprehensive Income (Loss)

9,545

13,35689,818

9,375

13,222

88,218

170

134

1,600

Comprehensive Income (Loss) Attributable to:
Owners of parent
Non-controlling interests
The accompanying notes are an integral part of these statements.

Annual Report 201833

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2018 and 2017

For the year ended March 31, 2018

Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208For the year ended March 31, 2018¥¥

Retainedearnings

Treasury stock,at cost35,748(2,020)
4,774
—
71
—
38,573¥¥

Total
shareholders’equity

(66)
—
—
(2)
—
—
(68)

¥

¥

63,890(2,020)
4,774
(2)
71
—
66,713

Millions of yen
Accumulated other comprehensive income
Unrealized
holding gain on
securities, net of Deferred gain
income taxes (loss) on hedges

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year

¥ 11,758
—
—
—
—
2,760
¥ 14,518¥¥

Surplus on therevaluation ofland, net ofincome taxes

106 ¥
—
—
—
—
(60)
46 ¥

Translation
adjustments

3,536 ¥
—
—
—
—
(71)
3,465 ¥

Total
accumulated
Retirement
other
benefits liability
comprehensive Non-controlling
adjustments
income(Note 12)
interests

160 ¥ (1,792) ¥ 13,768 ¥
—
—
—
—
—
—
—
—
—
—
—
—
22
1,879
4,530
182 ¥
87 ¥ 18,298 ¥For the year ended March 31, 2017

34 FURUKAWA CO., LTD.

1,926 ¥79,584—(2,020)
—
4,774
—
(2)
—
71
149
4,679
2,075 ¥87,086

Millions of yen
Number ofshares ofcommonstock(thousands)

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year

Total
net assets

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208¥¥Retainedearnings

Treasury stock,at cost33,467(2,020)
4,254
—
47
—
35,748

¥

¥

(63)
—
—
(3)
—
—
(66)

Total
shareholders’equity¥¥61,612(2,020)
4,254
(3)
47
—
63,890For the year ended March 31, 2017

Millions of yen
Accumulated other comprehensive income
Unrealized
holding gain on
securities, net of Deferred gain
income taxes (loss) on hedges

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year¥

4,514 ¥
—
—
—
—
7,244
¥ 11,758 ¥Surplus on therevaluation ofland, net ofincome taxes

157 ¥
—
—
—
—
(51)
106 ¥

Total accumulated othercomprehensive
incomeNon-controllinginterests

Total
net assets

543 ¥ (3,950) ¥ 4,847
—
—
—
—
—
—
—
—
—
—
—
—
(383)
2,158
8,921
106 ¥ (1,792) ¥ 13,768¥ 1,803————123¥ 1,926¥68,262(2,020)
4,254
(3)
47
9,044
¥79,584

Translation
adjustments

3,583 ¥
—
—
—
—
(47)
3,536 ¥

Retirement
benefits liability
adjustments(Note 12)For the year ended March 31, 2018

Thousands of U.S. dollars (Note 3)
Shareholders’ equity

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year

Commonstock

Retainedearnings$ 265,437—————$ 265,437$ 336,388(19,007)44,923—668—$ 362,972

Total
shareholders’equityTreasury stock,at cost

$

$

(621)
—
—
(19)
—
—
(640)

$ 601,204(19,007)44,923(19)668—$ 627,769

The accompanying notes are an integral part of these statements.

For the year ended March 31, 2018

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income
Unrealized
holding gain on
securities, net of Deferred gain
income taxes (loss) on hedges

Balance at beginning of year
Cash dividends paid
Profit attributable to owners of parent
Purchase of treasury stockReversal of surplus on the revaluation of land
Net change during the year
Balance at end of year

Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments$ 110,643$ 997 $ 33,274 $
—
—
—
—
—
—
—
—
—
—
—
—
25,971(564)(668)$ 136,614 $433 $ 32,606 $

1,506
—
—
—
—
207
1,713

Retirement
benefits liability
adjustments(Note 12)

Total accumulated othercomprehensive
income$ (16,863) $129,557
—
—
—
—
—
—
—
—
17,682
42,628$819 $172,185

Non-controllinginterests

Total
net assets$18,124
—
—
—
—
1,402
$19,526$748,885(19,007)44,923(19)
668
44,030$819,480

The accompanying notes are an integral part of these statements.

Annual Report 201835

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2018 and 2017
Thousands of
U.S. dollars (Note 3)

Millions of yen

2018

Operating Activities:
Profit before income taxes
Depreciation and amortization
Equity in earnings (losses) of affiliates
Increase in net defined benefit liability
Increase (Decrease) in provision for deposition field restoration
Increase (Decrease) in provision for cost of removal of office tenants
Interest and dividend income
Interest expense
Changes in operating assets and liabilities:
Receivables—trade
Inventories
Payables—trade
Accounts payable—other
Other
		Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Income taxes refunded		 Net cash provided by operating activities

¥

6,595
3,260
(367)
788
(1,073)
579
(804)
581

2018

2017

¥

6,711
3,138
421
1,212
220
—
(2,446)669$

62,05930,677(3,453)
7,415(10,097)
5,448(7,566)
5,467(4,493)(7,976)
559
7,463
940
6,052
791
(559)
(1,741)807
5,350(2,253)
348
1,360
521
(608)
9,293
2,436
(699)
(1,853)642
9,819(42,279)(75,054)
5,260
70,227
8,845
56,9497,443(5,260)(16,383)
7,594
50,343

Investing Activities:
Purchases of property, plant and equipment
Proceeds from liquidation of investment securities
Increase in short-term loans receivables
Increase in long-term loans receivables
Collection of long-term loans receivables
Other
		 Net cash used in investing activities(5,326)
—
(318)
(198)
2
(15)
(5,855)(3,812)
599
—
(825)
501
(48)
(3,585)(50,118)—(2,992)(1,863)19(141)(55,095)

Financing Activities:
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from short-term debt
Repayment of short-term debt
Cash dividends paid
Repayment of finance lease obligations
Other
		 Net cash used in financing activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

13,605(13,398)
8,505(8,918)(2,020)(282)(21)(2,529)9(3,025)
13,225
10,20015,600(15,314)
5,627(8,627)(2,018)(284)(14)(5,030)(142)
1,062
12,163
13,225

128,023(126,075)
80,032(83,918)(19,007)(2,654)(199)(23,798)85(28,465)
124,447
95,982

The accompanying notes are an integral part of these statements.

36 FURUKAWA CO., LTD.

¥

¥

$

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2018 and 2017

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa
Co., Ltd. (the “Company”) and consolidated subsidiaries(together, the “Furukawa Group”) are prepared in accordancewith accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from those prepared by the Company as required
under the Financial Instruments and Exchange Law of Japan.
The notes to the consolidated financial statements include
2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 35 subsidiaries and 11 affiliates as of March
31, 2018. The consolidated financial statements included
the accounts of the Company and 35 subsidiaries as of March
31, 2018.
For the purpose of preparing the consolidated financial
statements, all significant intercompany transactions, accountbalances and unrealized profits among the Furukawa Group
have been eliminated.
Certain foreign subsidiaries have been included on the basisof a fiscal year ended on December 31, but prior to the parent
company’s fiscal year ended on March 31. Relevant adjustments
have been made for significant transactions with such
subsidiaries during the intervening period from January 1 toMarch 31.
Investments in subsidiaries and affiliates which are notaccounted for by the equity method are carried at cost becauseof their immaterial impact on the consolidated financial
statements.
(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investmentswith a maturity of three months or less when purchased.
(3) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries andaffiliates are classified into three categories: trading, held-tomaturity or other securities. The Furukawa Group does not holdany trading or held-to-maturity securities as of March 31, 2018and 2017. Marketable securities classified as other securities arecarried at fair value with changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net
assets. Fair value is determined based on the average of themarket value during the last month of the fiscal year. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.

information which is not required under accounting principles
generally accepted in Japan but is presented herein as additional
information.
In preparing these statements, the Company makes certain
reclassifications and rearrangements to the consolidated financial
statements prepared in Japan in order to present these statements
in a form which is more familiar to readers outside Japan.
Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation.

(4) Inventories
Finished products and work in process relating to copper
products are stated at cost determined by the moving averagemethod (the balance sheet amounts of inventories are stated at
the lowered book values reflecting potential decline inprofitability). Other inventories are mainly stated at cost
determined by the average method (the balance sheet amounts
of inventories are stated at the lowered book values reflecting
potential decline in profitability).
(5) Allowance for Doubtful Accounts
In order to cover probable losses on collection, allowance for
doubtful accounts is calculated based on the historical default
rates for normal receivables plus the estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers who are experiencing financial difficulties.
(6) Provision for Deposition Field Restoration
Provision for deposition field restoration is provided to cover thestabilization costs with respect to earthquake protection.
(7) Provision for Environmental Measures
Provision for environmental measures is provided to coverdisposal costs anticipated to be incurred with respect to the Law
Concerning Special Measures for Promotion of Proper Treatmentof PCB Wastes.
(8) Provision for Cost of Removal of Office Tenants
Provision for cost of removal of office tenants is provided tocover compensation costs anticipated to be incurred withrespect to the removal of office tenants.
(9) Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciationof property, plant and equipment except for lease assets ismainly calculated by the straight-line method based on the

Annual Report 201837

estimated useful lives of the assets. The range of useful lives ofproperty, plant and equipment is summarized as follows:
Buildings and structures
2 to 60 years
Machinery and equipment
2 to 22 years
Amortization is calculated by the straight-line method for
intangible assets except for lease assets.
Depreciation of lease assets arising from finance leasetransactions that do not involve transfer of ownership is
calculated by the straight-line method over the lease term withno residual value.
(10) Retirement Benefits
The retirement benefit obligation for employees is attributed toeach period by the straight-line method over the estimated yearsof service of the eligible employees.
Actuarial gain or loss is amortized in the year following theyear in which the gain or loss is recognized primarily by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
Unrecognized actuarial gains and losses and unrecognizedprior service costs are recorded in “Retirement benefits liability
adjustments” in net assets after adjusting income tax effect.
(11) Surplus on the Revaluation of Land
Pursuant to the Law Concerning the Revaluation of Land, land
used for the Company’s business operations was revalued on
March 31, 2002. The income tax effect of the difference
between the book value and the revalued amount has beenpresented under liabilities as Deferred tax liabilities on surplus on
the revaluation of land and the remaining balance has beenpresented under net assets as Surplus on the revaluation of land,
net of income taxes in the accompanying consolidated balance
sheets. Revaluation of land was determined based on the official
notice prices published by the Commissioner of the National Tax
Authorities in accordance with Paragraph 4, Article 2 of the“Enforcement Ordinance Concerning Land Revaluation,” with
relevant adjustments. The carrying value of the land after
revaluation exceeded its fair value by ¥1,817 million ($17,098
thousand) and ¥1,739 million as of March 31, 2018 and 2017,
respectively.
(12) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts
currently payable for each year. Deferred income taxes arisingfrom temporary differences between financial reporting and tax
bases of the assets and liabilities, which were measured using
38 FURUKAWA CO., LTD.

the enacted tax rates and laws that will be in effect when thetemporary differences are expected to reverse, are reflected in
the consolidated financial statements.
The Company and its domestic wholly-owned subsidiaries
file a consolidated corporation tax return.
(13) Amounts per ShareProfit attributable to owners of parent per share is computed
based on the profit available for distribution to shareholders ofcommon stock and the weighted-average number of shares ofcommon stock outstanding during the year.
Net assets per share are computed based on the net assets
excluding non-controlling interests and the number of common
stock outstanding at the year-end.
(14) Foreign Currency Translation
Foreign currency-denominated monetary assets and liabilities
are translated into Japanese yen using the rates of exchange in
effect at the balance sheet date. Differences arising from thetranslation are included in the consolidated statements ofincome.
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in
effect at the balance sheet date, except for the components of
net assets excluding non-controlling interests, which aretranslated at their historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange
in effect during the year. Differences arising from the translation
are presented as translation adjustments and non-controllinginterests in the consolidated financial statements.
(15) Hedging Activities
The Furukawa Group uses derivative financial instruments forthe purpose of hedging the risks of adverse fluctuations inforeign exchange rates on the trade receivables, trade payables
and forecast transactions denominated in foreign currencies,
commodity prices and interest rates. All derivative financial
instruments except those below are stated at fair value andrelated gain or loss on the changes in the fair values of derivative
financial instruments is deferred as a component of net assets inthe balance sheet until the recognition of gain or loss on hedged
items when those derivative financial instruments qualify forhedge accounting.
Trade receivables, trade payables and forecast transactions
denominated in foreign currencies are translated at thecontracted rates if the relating forward contracts qualify forhedge accounting.
The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not carried at fair value,
but any differences paid or received on the interest rate swaps
are recognized as adjustments to interest expense or income
over the life of each swap, thereby adjusting the effective
interest rate on the hedged items.

(16) Shareholders’ Equity
The Company Law of Japan provides that an amount equal to
10% of the amount to be distributed as distributions of capitalsurplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common stock
account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if
certain conditions are met, but neither the capital reserve nor
the legal reserve is available for distributions.

3. U.S. Dollar Amounts
construed as a representation that yen have been, could havebeen or could in the future be converted into U.S. dollars at theabove or any other rate.

The translation of yen amounts into U.S. dollar amounts is
included solely for convenience, as a matter of arithmetic
computation only, at ¥106.27=US$1.00, the exchange rate
prevailing on March 31, 2018. This translation should not be

4. Investment Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31,2018 and 2017 were as follows:
Millions of yen

Thousands of U.S. dollars

2018
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks

¥

2018

Acquisition cost

33,700 ¥15,026

Unrealized gain
(loss)

Carrying value¥ 18,674$ 317,117 $ 141,395 $ 175,722

Acquisition cost

Unrealized gain
(loss)

Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

33,70015,026

18,674

317,117

141,395

175,722(1,073)

Securities whose carrying value does not exceed
their acquisition cost:
Listed stocks

808

922

(114)

7,603

8,676

Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

7,603

8,676

(1,073)

Total

¥

808

922

(114)

34,508 ¥15,948 ¥18,560$ 324,720 $ 150,071 $ 174,649

Millions of yen

2017
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks¥

Acquisition cost

30,037 ¥15,338

Unrealized gain
(loss)¥ 14,699

Government bonds

—

—

—

Corporate bonds

—

—

—

30,037

15,338

14,699

551

608

(57)

—

—

—

Securities whose carrying value does not exceed
their acquisition cost:
Listed stocks
Government bonds
Corporate bonds
Total

¥

—

—

—

551

608

(57)

30,588 ¥15,946 ¥14,642

Annual Report 201839

Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2018 and 2017 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

Sales proceeds

¥

2018

2017

48

¥

$

1

452

Aggregate gains

21

1

198

Aggregate losses

—

—

—

5. Short-Term Debt, Long-Term Debt and Lease Obligations
Short-term debt, most of which are unsecured, represented notes payable to banks, with the average interest rates of 0.4% and 0.3%
as of March 31, 2018 and 2017, respectively.
Long-term debt as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2018 to 2033¥

64,08664,086¥(26,728)

Current portion of long-term debt¥

37,358

¥

2017

2018

63,852
63,852$ 603,049
603,049(13,384)(251,510)

50,468$ 351,539

The average interest rates applicable to the above debt amounting to ¥64,086 million ($603,049 thousand) and ¥63,852 million
were 0.7% and 0.7% as of March 31, 2018 and 2017, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018Years ending March 31,¥

26,728$ 251,510

2020

6,652

62,595

2021

2,219

20,881

2022

1,334

12,553

2019

2023

4,329

40,7362024 and thereafter

22,824

214,774

64,086$ 603,049¥
Lease obligations as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

Lease obligations due 2018 to 2024¥

Current portion of lease obligations¥

40 FURUKAWA CO., LTD.

815

2018

2017

¥

827

$

7,670

815

827

7,670

(260)

(249)

(2,447)

555

¥

578

$

5,223

The aggregate annual maturities of lease obligations subsequent to March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018Years ending March 31,

¥

2019

260

$

2,447

2020

234

2,202

2021

144

1,355

2022

112

1,054

2023

54

508

2024 and thereafter

11¥

The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥37,014 million ($348,301 thousand) with 24
banks and ¥35,014 million with 23 banks as of March 31,2018 and 2017, respectively. The borrowings outstanding and

815

104
$

7,670

the unused balances under these credit facilities amounted
to ¥8,596 million ($80,888 thousand) and ¥28,418 million($267,413 thousand), respectively, as of March 31, 2018, andamounted to ¥9,656 million and ¥25,358 million, respectively,
as of March 31, 2017.

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2018 and 2017 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2018

¥

Property, plant and equipment, net

2018

2017

1,432

¥

1,489

$

13,475(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2018

¥

Long-term debt (including current portion)

2018

2017

1,568

¥

997

$

14,755

6. Net Assets
Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2017

Increase

Decrease

As of March 31,
2018

Shares issued:
Common stock (*1, 2)
		 Total

404,455—

364,00940,446404,455­—

364,00940,446

413

3

374

42

413

3

374

42

Treasury stock:
Common stock (*1, 3, 4)
		 Total(*1) On October 1, 2017, a share consolidation was undertaken at a ratio of 1 share for 10 shares of the Company’s common stock.
(*2) The decrease of 364,009 thousand shares of equity in common stock was due to the stock consolidation.
(*3) The increase of 3 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.
(*4) The decrease of 374 thousand shares of equity in treasury stock was due to the stock consolidation.

Annual Report 201841

7. Other Comprehensive Income
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2018

2017

Unrealized holding gain (loss) on securities, net of income taxes:
Amounts arising during the year

¥

3,934

¥

(16)

Reclassification adjustments for gains and losses included in profit

8,912

$

37,019(151)(1)

Amounts before tax effect

3,918

8,911

36,868Tax effect(1,159)(1,662)(10,906)

Unrealized holding gain (loss) on securities, net of income taxes

2,759

7,249

25,962

Deferred gain (loss) on hedges:
Amounts arising during the year

536

466

5,044

Adjustments on the acquisition cost of assets

(552)

(561)

(5,194)

Amounts before tax effect

(16)

(95)

(151)

Tax effect

(8)

36

(75)

Deferred gain (loss) on hedges

(24)

(59)

(226)

(46)

(393)

(433)

2,259

2,244

21,257

414

783

3,896

2,673

3,027

25,153

Translation adjustments:
Amounts arising during the year
Retirement benefits liability adjustments:
Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Amounts before tax effectTax effect
Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates accounted forusing equity method:Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Share of other comprehensive income (loss) of affiliates accounted for using
equity method
Total other comprehensive income (loss)

¥

(794)

(869)

(7,472)

1,879

2,158

17,681

(41)

(44)

(386)

91

31

857

50

(13)

471

4,618

¥

8,942

$

43,455

8. Research and Development Expenses
Research and development expenses, included in selling, general and administrative expenses and cost of sales, for the years ended
March 31, 2018 and 2017 amounted to ¥2,293 million ($21,577 thousand) and ¥2,464 million, respectively.

42 FURUKAWA CO., LTD.

9. Leases
Leases’ accounting
Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality
Tangible assets
Mainly machinery and equipment
2. Depreciation method of leased assets
Refer to “(9) Property, Plant and Equipment and Depreciation” in “2. Summary of Significant Accounting Policies.”
10. Financial Instruments
1. Overview(1) Policy for financial instruments
In consideration of the annual financial plan, the Furukawa Group raises funds through mainly bank borrowings and bondissues. Further, the Furukawa Group raises short-term capital through mainly bank borrowings. The Furukawa Group uses
derivatives for the purpose of reducing risk and does not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivables—are exposed to credit risk in relation to customers. In addition, theFurukawa Group is exposed to foreign currency exchange risk arising from receivables denominated in foreign currencies. In
principle, the foreign currency exchange risks deriving from the trade receivables denominated in foreign currencies are hedged
by forward foreign exchange contracts.
Investment securities are exposed to market risk. Those securities are composed of mainly the shares of common stock ofother companies with which the Furukawa Group has business relationships.
Substantially all trade payables—trade notes, electronically recorded obligations and accounts payables—have payment due
dates within one year.
Short-term debt is raised mainly in connection with business activities, and long-term debt is taken out principally for the
purpose of making capital investments. Long-term debt with variable interest rates is exposed to interest rate fluctuation risk.
However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Furukawa Grouputilizes rate swap transactions as a hedging instrument for each contract. The assessment of effectiveness is omitted since itmeets conditions of specific matching criteria for interest rate swap.
Regarding derivatives, the Furukawa Group enters into forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies. The Furukawa Group also enters into
interest rate swap transactions to reduce fluctuation risk deriving from interest payable for debt bearing interest at variable rates.
In addition, the Furukawa Group enters into forward commodity exchange contracts to reduce fluctuation risk of the commodity
price of inventories. Information regarding the method of hedge accounting, hedging instruments, hedged items, hedging
policy and the assessment of effectiveness of hedging activities is found in “(15) Hedging Activities” in “2. Summary of Significant
Accounting Policies.”(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
		 In accordance with the internal policies of the Furukawa Group for managing credit risk arising from receivables, each related
division monitors the credit worthiness of their main customers periodically, and monitors due dates and outstanding balancesby individual customer.
			 In utilizing derivatives, the Furukawa Group has transactions with major financial institutions or trading companies whichhave high credit to reduce credit risk.
(b) Monitoring of market risk (the risk arising from fluctuations in foreign exchange rates, interest rates and others)		 For trade receivables and payables denominated in foreign currencies, the Furukawa Group identifies the foreign currency
exchange risk for each currency on a monthly basis and principally enters into forward foreign exchange contracts to hedge
such risk. In order to mitigate the interest rate risk for loans payable and bonds bearing interest at variable rates, theFurukawa Group enters into interest rate swap transactions.
			 For investment securities, the Furukawa Group periodically reviews the fair values of such financial instruments.
			 In conducting or managing derivative transactions, each division makes transactions by approval of the directors oftransaction-related divisions.
(c) Monitoring of liquidity risk (the risk that the Furukawa Group may not be able to meet its obligations on scheduled due dates)
		 Based on the report from each division, the Furukawa Group prepares and updates its cash flow plans on a monthly basis to
Annual Report 2018 43
manage liquidity risk.

(4) Supplementary explanation on the estimated fair value of financial instruments		The value of financial instruments is based on their quoted market place, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in “11.
Derivative Transactions” are not necessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2018 and 2017 and estimated fair value
are shown as follows. The following table does not include financial instruments for which it is extremely difficult to determine thefair value. (Please refer to Note 2 below.)
Millions of yen

Thousands of U.S. dollars

2018

2018

Carrying value

Estimated fair value

Assets:(1) Cash and cash equivalents(2) Receivables—trade(3) Investment securities
Total assets

Difference¥ 10,200
31,321
34,50876,029¥ 10,200
31,321
34,50876,029

¥

—
—
—
—

$

Liabilities:(1) Payables—trade(2) Electronically recorded obligations(3) Accounts payable—other(4) Short-term debt (*1)(5) Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 13,072
10,644
14,2259,225
64,086111,252¥138¥ 13,072
10,644
14,2259,225
64,133111,299
¥
138

¥

—
—
—
—
47
47
—

$ 123,007
100,160
133,857
86,807603,049
1,046,880
$
1,299

¥

Carrying value

95,982294,730
324,720
715,432

Estimated fair value$

Difference

95,982294,730
324,720
715,432

$

—
—
—
—

$ 123,007
100,160
133,857
86,807
603,491
1,047,322
$
1,299

$

—
—
—
—
442
442
—

$

Millions of yen

2017
Carrying value

Estimated fair value

Difference

Assets:(1) Cash and cash equivalents¥

13,225¥

13,225¥—(2) Receivables—trade

26,75526,755—(3) Investment securities

30,58730,587—70,56770,567—

Total assets
Liabilities:(1) Payables—trade¥

15,065¥

15,065¥—(2) Electronically recorded obligations

7,917

7,917

—

(3) Accounts payable—other

7,406

7,406

—

(4) Short-term debt (*1)

9,656

9,656

—

(5) Long-term debt (*1)

63,85264,003151

Total liabilities
Derivatives (*2)

103,896¥153

104,047
¥

153

151
¥

—

(*1) Current portion of long-term debt is included in long-term debt.
(*2) The value of assets and liabilities arising from derivatives is shown at net value, with the amount in parentheses representing net
liability position.

44 FURUKAWA CO., LTD.

Notes:1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and cash equivalents, (2) Receivables—trade		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Investment securities		The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to“4. Investment Securities” to the consolidated financial statements.
Liabilities(1) Payables—trade, (2) Electronically recorded obligations, (3) Accounts payable—other, (4) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(5) Long-term debt
		The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivative transactions
Please refer to “11. Derivative Transactions” to the consolidated financial statements.
2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2018 and 2017
Thousands of
U.S. dollars

Millions of yen

2018

¥

Unlisted stocks

2018

2017

5,451

¥

4,984

$

51,294

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are
not included in the above table of “(3) Investment securities.”
3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2018 and 2017 are as follows:
For the year ended March 31, 2018
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

10,15031,321
41,471

Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2017
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

13,11026,75539,865Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2018
Due in one
year or lessThousands of U.S. dollars

Cash deposits
Receivables—trade
Total

$

95,511
294,730$ 390,241

Due after one year
through five years

Due after five years
through ten years

$

$

$

—
—
—

$

—
—
—

Due after
ten years

$
$

—
—
—

4. The redemption schedule for long-term debt is disclosed in “5. Short-Term Debt, Long-Term Debt and Lease Obligations.”

Annual Report 201845

11. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding as of March 31, 2018 and 2017 for which
hedged accounting have been applied are as follows.
1. Currency-related transactions
Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
		U.S. dollars
Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
Buy:
		U.S. dollars

Major object of hedge

As of March 31, 2018
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

1,062
—
13,505

—
—
—

¥

(4)
—
259

Accounts receivables
Accounts receivables

¥

111
267

—
—

(*)
(*)

Accounts payables

¥

8,076

—

(*)

Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
		U.S. dollars
Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
Buy:
		U.S. dollars

Major object of hedge

As of March 31, 2017
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

1,178
264
7,679

—
—
—

¥

(12)
1
123

Accounts receivables
Accounts receivables

¥

206
115

—
—

(*)
(*)

Accounts payables

¥

—

—

(*)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Allocation method

Type of transaction

Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
		U.S. dollars
Forward foreign exchange contracts
Sell:
		U.S. dollars
		EUR
Buy:
		U.S. dollars

Major object of hedge

As of March 31, 2018
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

$

9,993
—
127,082

—
—
—

$

(38)
—
2,437

Accounts receivables
Accounts receivables

$

1,045
2,512

—
—

(*)
(*)

Accounts payables$

75,995—(*)

Note: The fair values of forward foreign exchange contracts are based on exchange rates or prices provided by financial institutions.
(*) The fair values by means of the allocation method for forward foreign exchange contracts are included in the fair values of thehedged accounts receivables and payables because the derivative transactions are treated as a part of hedged accounts receivables
and payables.
46 FURUKAWA CO., LTD.

2. Interest-related transactions
Millions of yen
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2018
Contract amounts¥

16,379Maturing after one year¥

Fair value

2,073

(*)

Millions of yen
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2017
Contract amounts¥

20,775Maturing after one year¥

Fair value

16,379(*)

Thousands of U.S. dollars
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2018
Contract amounts$

154,126

Maturing after one year$

Fair value

19,507(*)(*) The fair values by means of the special accounting procedure for interest rate swap are included in the fair values of the hedged
long-term debt because the derivative transactions are treated as a part of hedged long-term debt.
3. Commodity-related transactions
Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2018
Contract amounts¥

1

Maturing after one year

¥

7,256

Raw material—

Fair value

¥

21

(0)
(117)

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2017
Contract amounts¥

Raw material—

Maturing after one year

¥

912

—

Fair value

¥

—

—

43

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material
Raw material

As of March 31, 2018
Contract amounts$

9

Maturing after one year$

68,279—198

Fair value$(0)(1,101)

Note: The fair values of forward product contracts are based on prices provided by trading companies.

Annual Report 201847

12. Retirement Benefit Plans
For the year ended March 31, 2018
The employees of the Company and most of its domestic consolidated subsidiaries are covered by defined benefit corporate pension
plans and non-contributory funded employee pension plans as defined benefit plans. The employee retirement benefit plans provide
for lump-sum payments. The employee pension plans, which are funded, were instituted to replace a certain portion of the benefits
under the retirement benefit plans with respect to employees who retire at the mandatory retirement age. Certain consolidated
subsidiaries (both domestic and foreign) have defined contribution plans.
The changes in the retirement benefit obligation during the year ended March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

Retirement benefit obligation at April 1, 2017
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2018¥¥19,827927
145
345(1,025)(55)
220,166$ 186,572
8,723
1,364
3,246
(9,645)(518)
20$ 189,762

The changes in plan assets during the year ended March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

Plan assets at April 1, 2017
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2018¥¥13,294
305
2,506
350
(905)
(59)
—
15,491$ 125,096
2,870
23,581
3,294(8,516)(555)—$ 145,770

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2018 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2018

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet
Liability for retirement benefits
Net liability for retirement benefits in the balance sheet

48 FURUKAWA CO., LTD.

¥

19,494(15,491)
4,003
673
4,676
4,676
4,676

$ 183,438(145,770)
37,6686,333
44,001$44,00144,001

The components of retirement benefit expense for the year ended March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Retirement benefit expense

¥

¥

927
145
(305)
19
395
1,181

$

$

8,723
1,364
(2,870)179
3,717
11,113

Note: Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit
obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end
are included in “Service cost.”
Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2018 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2018

Prior service cost
Actuarial loss
Total

¥
¥

19
2,654
2,673

$
$

179
24,97425,153

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

105
(540)
(435)

$
$

988
(5,081)(4,093)

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 are as follows:
2018

Bonds
StocksCash on hand and in banks
Other
Total

13%
67%
2%
18%
100%

Note: 59% of total plan assets are in a Retirement Benefit Trust for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.3%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.6%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥15 million($141 thousand).

Annual Report 2018

49

The changes in the retirement benefit obligation during the year ended March 31, 2017 are as follows:
Millions of yen

2017

Retirement benefit obligation at April 1, 2016
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2017¥¥19,662
961
127
(338)
(514)
(71)
—
19,827The changes in plan assets during the year ended March 31, 2017 are as follows:
Millions of yen

2017

Plan assets at April 1, 2016
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2017¥¥11,337
278
1,806
463
(529)
(61)
—
13,294

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

2017

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet
Liability for retirement benefits
Net liability for retirement benefits in the balance sheet

50 FURUKAWA CO., LTD.

¥19,194(13,294)
5,900
633
6,533
6,533
6,533

The components of retirement benefit expense for the year ended March 31, 2017 are as follows:
Millions of yen

2017Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Retirement benefit expense

¥

961
127
(278)
19
764
1,593

¥

Note: Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit
obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end
are included in “Service cost.”
Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2017 are as follows:
Millions of yen

2017

Prior service cost
Actuarial loss
Total

¥

19
3,008
3,027

¥

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2017 are as follows:
Millions of yen

2017

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥

124
2,114
2,238

¥

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 are as follows:
2017

Bonds
StocksCash on hand and in banks
Other
Total

21%
66%
1%
12%
100%

Note: 55% of total plan assets are in a Retirement Benefit Trust for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.4%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.7%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥12 million.

Annual Report 201851

13. Income Taxes
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the statutory tax rates for theyears ended March 31, 2018 and 2017 were summarized as follows:

Statutory tax rate
Non-deductible expenses for tax purposes
Non-taxable dividends and other income
Tax deduction such as R&D expenses
Inhabitants’ per capital tax
Equity in earnings and losses of affiliates
Undistributed profits of subsidiaries
Changes in valuation allowance
Different tax rates applied to subsidiaries
Decrease in differed tax liability due to the revision of statutory income tax rate
Other
Effective tax rate

2018

2017

30.9%
0.6
(0.7)
(2.7)
1.2
(1.7)
2.4
(1.6)
(0.3)
(1.7)
(1.1)
25.3%

30.9%
0.5
(2.6)
(3.3)
1.2
1.9
—
3.2
1.8
1.1
(0.5)
34.2%

Deferred tax assets and liabilities as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

Deferred tax assets:
Liability for retirement benefits
Investment securities
Net operating loss carryforwards
Land
Provision for deposition field restoration
Provision for cost of removal of office tenants
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Statutory reserves provided for tax purposes
Gain from establishment of trust for retirement benefit plans
Land
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities
Deferred tax liabilities on surplus on the revaluation of land

¥

6,317
1,047
5,072
1,869
206
242
1,100
15,853(7,276)
8,577(1,248)(3,020)(7,003)(4,033)(430)(15,734)¥ (7,157)¥ (1,779)

2018

2017

¥

6,917
1,102
6,063
1,869
536
—
1,009
17,496(7,771)
9,725(1,264)(3,020)(7,003)(2,874)(223)(14,384)¥ (4,659)¥ (1,811)$

59,443
9,852
47,727
17,587
1,938
2,277
10,352
149,176(68,467)
80,709(11,744)(28,418)(65,898)(37,951)(4,046)(148,057)$ (67,348)$ (16,740)

In the United States, the “Tax Cuts and Jobs Act” was enacted on December 22, 2017. As a result, the federal income tax rate
which is applied to consolidated subsidiaries in the United States was changed from 35% to 21%. The impact of the announced
reduction of the federal income tax rate was to decrease deferred tax liabilities, after offsetting deferred tax assets, and deferredincome tax by ¥110 million ($1,035 thousand), respectively.

52 FURUKAWA CO., LTD.

14. Contingent Liabilities
Contingent liabilities as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

Notes receivables discounted and endorsed

¥

2018

2017

183

¥

107

$

1,722

Loans guaranteed

3,627

4,506

34,130

Repurchase obligation of the securitization of receivables

1,320

850

12,421

15. Write-Down of Inventories
The amount of write-down of inventories, included in cost of sales for the year ended March 31, 2018 totaled ¥312 million ($2,936
thousand). For the year ended March 31, 2017, the Company reversed write-down in the amount of ¥(5) million and credited it to costof sales.
16. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

Gain on sales of noncurrent assets
Gain on sales of investment securities
Payments for idle mines
Provision for cost of removal of office tenants
Provision for deposition field restoration
Loss on sales and retirement of noncurrent assets
Impairment loss
Other, net

¥

¥

12
21
(607)
(1,042)
(113)
(107)
(142)
162
(1,816)

2018

2017

¥

¥

17
1
(564)
—
(276)
(125)
(102)
(142)
(1,191)$

113
198(5,712)(9,805)(1,063)(1,007)(1,336)
1,523$ (17,089)

17. Segment Information
The reportable segments are constituent units of the Furukawa Group for which separate financial information is available. The Boardof Directors periodically examines these segments for the purpose of deciding the allocations of management resources and evaluating
operating performance.
The Company mainly manufactures and sells machinery, smelts on consignment and sells copper, and manufactures and sells
electronic materials and chemicals.
Under the holdings company structure, each main Group company plans domestic and overseas comprehensive strategies about
their products, and the Company manages and supervises them.
The Furukawa Group therefore categorizes segments classified by products based on main Group companies. The seven reportablesegments are as follows: Industrial Machinery, Rock Drill Machinery, UNIC Machinery, Metals, Electronic Materials, Chemicals and Real
Estate.

Main products and services belonging to each segment are as follows:(a) Industrial Machinery
		 Manufacture and sell pumps, industrial machinery, environmental machinery, steel structures and heat-resistant and wearresistant castings(b) Rock Drill Machinery
		 Manufacture and sell rock drills such as hydraulics breakers, hydraulics crushers, boring drills, tunnel and mining drill jumbos,
and environmental machinery(c) UNIC Machinery
		 Manufacture and sell UNIC cranes, mini crawler cranes, ocean cranes and UNIC carriers(d) Metals
		 After buying ore, sell electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by joint smelting
company
Annual Report 201853

(e) Electronic Materials
		 Manufacture and sell high-purity metallic arsenic, crystals, cores and coils, aluminum nitride ceramics, optical components andgallium nitrides(f) Chemicals
		 Manufacture and sale cuprous oxide, ferric polysulfate solution, aluminum sulfate, sulfuric acid, cuprous dioxide and copper
dioxide, and sale titanium dioxide(g) Real Estate		 Trade, intermediate and lease of real estate
The accounting method used for reportable segments is the same as that method stated in “2. Summary of Significant Accounting
Policies.” Operating income (loss) of reportable segments is based on operating income in the consolidated statements of income.
Intersegment sales and transfers are recorded based on the actual market prices.
Segment information of the Furukawa Group for the years ended March 31, 2018 and 2017 was as follows:Year ended March 31, 2018

Millions of yen
Industrial
MachinerySales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets¥¥¥

Rock Drill
Machinery

27,382 ¥151
27,533
2,295 ¥

77,334 ¥236
77,570
867 ¥

6,308
1
6,309
330

23,677 ¥325
0287

31,864 ¥572
0
390

27,084 ¥
711
88
3,980

36,303 ¥
221
3,393
79

7,341
295
205
113

Millions of yen¥¥¥

Real Estate

OthersAdjustments

Consolidated

6,345 ¥
53
6,398
451 ¥

3,339 ¥
23
3,362
1,340 ¥

916 ¥
1,578
2,494
(195) ¥

0 ¥ 167,696(5,194)0(5,194)
167,696(55) ¥
7,821

16,078 ¥212
0113

30,901 ¥582
0129

3,510 ¥
105
0
86

45,993 ¥ 222,751
56
3,079
0
3,686
219
5,396

Year ended March 31, 2017

Millions of yen
Industrial
Machinery

54 FURUKAWA CO., LTD.

Electronic
Materials

30,200 ¥129
30,3291,783 ¥

Chemicals

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Metals15,872 ¥3,023
18,895
1,005 ¥

Year ended March 31, 2018

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

UNIC
Machinery¥¥¥

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

14,042 ¥2,874
16,916104 ¥

26,979 ¥78
27,057897 ¥

25,783 ¥145
25,9282,579 ¥

67,854 ¥204
68,058
1,738 ¥

5,817
6
5,823
18

20,170 ¥328—
257

31,044 ¥575—
467

24,556 ¥
569
70
2,161

28,218 ¥
245
2,911
136

7,274
317
196
108

Year ended March 31, 2017

Millions of yen
Chemicals

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets¥¥¥

Real Estate

Consolidated

3,074 ¥
135
3,209
1,266 ¥

983 ¥
1,459
2,442
(127) ¥

— ¥ 149,830(4,954)—(4,954)
149,830(44) ¥
6,546

15,947 ¥211—
315

31,510 ¥591—
152

3,404 ¥
81
6
102

45,911 ¥ 208,034
46
2,963
—
3,183
145
3,843

Thousands of U.S. dollars
Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials$ 149,356 $ 284,182 $ 257,664 $ 727,712 $
28,446
1,214
1,421
2,221
177,802285,396
259,085
729,933$
9,457 $ 16,778 $ 21,596 $
8,158 $

59,359959,3683,105$ 222,800 $ 299,840 $ 254,860 $ 341,611 $
3,058
5,383
6,691
2,080
0
0
828
31,9282,701
3,670
37,452
743

69,079
2,776
1,929
1,063

Year ended March 31, 2018

Thousands of U.S. dollars
Chemicals

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Adjustments

5,298 ¥
53
5,351
115 ¥

Year ended March 31, 2018

Sales and operating income (loss):
Outside customers
Intersegment
Total
Operating income (loss)
Others:Segment assets
Depreciation
Investments in equity-method affiliates
Increase in tangible fixed assets and intangible fixed assets

Others$$59,706 $499
60,205
4,244 $

Real Estate

31,420 $216
31,636
12,609 $$ 151,294 $ 290,778 $
1,995
5,477
0
0
1,063
1,214

Others8,619 $
14,85023,469(1,833) $Adjustments

Consolidated

0 $ 1,578,018(48,876)
0(48,876) 1,578,018(518) $ 73,596

33,029 $ 432,794 $ 2,096,085
986
527
28,9730034,685809
2,061
50,776

Annual Report 2018

55

(Related information)
Years ended March 31, 2018 and 2017
1. Information regarding products and services
Year ended March 31, 2018

Millions of yen
Copper¥Sales for outside customers

65,178UNIC cranes¥

Year ended March 31, 2017

17,770

Others¥84,748

Total¥

167,696¥

149,830

Millions of yen
CopperSales for outside customers¥

52,261

UNIC cranes¥

Year ended March 31, 201817,266

Others¥80,303

Total

Thousands of U.S. dollars
Copper$Sales for outside customers

613,325

UNIC cranes$

167,216

Others$797,477

Total$ 1,578,018

2. Geographic segment information(1) Net sales
Year ended March 31, 2018
Millions of yen
Japan

¥

Asia

128,209¥

Others22,548¥

Total

16,939¥167,696¥

149,830

Year ended March 31, 2017
Millions of yen
Japan

¥

Asia

116,151¥

Others

19,412¥

Total

14,267

Year ended March 31, 2018
Thousands of U.S. dollars
Japan

Asia

$ 1,206,446$

212,177

Others$Total

159,395$ 1,578,018(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2018 and 2017 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2018
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥26,306

MetalsYear ended March 31, 2017
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥20,051

MetalsYear ended March 31, 2018
Thousands of U.S. dollars
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$247,539

Metals56 FURUKAWA CO., LTD.

4. Impairment loss on property, plant and equipment
Millions of yen
Year ended March 31, 2018

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Year ended March 31, 2017

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

43

—

—

—

Year ended March 31, 2018

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Chemicals

Real Estate

— ¥

1 ¥

OthersAdjustments Consolidated

141

— ¥

142

Millions of yen

Impairment loss onproperty, plant andequipment— ¥Chemicals

Real Estate

— ¥

1 ¥

OthersAdjustments Consolidated

58

— ¥

102

Thousands of U.S. dollars
Chemicals

Real Estate— $OthersAdjustments Consolidated

9 $ 1,327— $ 1,336

5. Amortization of goodwill and unamortized goodwill in reporting segments
Not applicable.
6. Gain on negative goodwill in reportable segments
Not applicable.

Annual Report 201857

18. Investment and Rental Properties
The Company and certain consolidated subsidiaries own office buildings for lease mainly in Tokyo and other areas. For the year ended
March 31, 2018, rental income was ¥1,603 million ($15,084 thousand), gain on sales of rental properties was ¥5 million ($47
thousand), loss on retirement was ¥10 million ($94 thousand) and impairment loss on rental properties was ¥102 million ($960
thousand).
For the year ended March 31, 2017, rental income was ¥1,460 million, gain on sales of rental properties was ¥5 million, loss onretirement was ¥5 million and impairment loss on rental properties was ¥102 million.
The carrying value, net changes in the carrying value and the fair value of those properties as of and for the years ended March 31,2018 and 2017 are as follows:Year ended March 31, 2018
Carrying value
As of March 31, 2017

Fair value

Net change

As of March 31, 2018

As of March 31, 2018

Millions of yen¥

35,209

¥

(510)

¥

34,699¥36,541

Year ended March 31, 2017
Carrying value
As of March 31, 2016

Fair value

Net change

As of March 31, 2017

As of March 31, 2017

Millions of yen¥

35,150¥59¥

35,209¥34,473

Year ended March 31, 2018
Carrying value
As of March 31, 2017

Net change

Fair value
As of March 31, 2018

As of March 31, 2018

Thousands of U.S. dollars$

331,316$(4,799)$326,517$343,851

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.
2.	Net change in carrying value for the year ended March 31, 2018 mainly consists of increases related to change of use in theamount of ¥75 million ($706 thousand) and acquisition of land and buildings in the amount of ¥22 million ($207 thousand)and decreases mainly due to amortization in the amount of ¥504 million ($4,743 thousand), impairment loss on rental properties
in the amount of ¥102 million ($960 thousand) and sales of land and buildings in the amount of ¥2 million ($19 thousand). Netchange in carrying value for the year ended March 31, 2017 mainly consists of increases related to change of use in the amountof ¥565 million and acquisition of land and buildings in the amount of ¥114 million and decreases mainly due to amortization in
the amount of ¥501 million, impairment loss on rental properties in the amount of ¥102 million and sales of land and buildings in
the amount of ¥20 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.
19. Subsequent Event
The following appropriations of retained earnings of the Company, which have not been reflected in the accompanying consolidated
financial statements, were approved at a shareholders’ meeting held on June 28, 2018:
Thousands of
U.S. dollars

Millions of yen

Year-end cash dividends (¥50.00=$0.47 per share)
Transfer to legal reserve¥¥

58 FURUKAWA CO., LTD.

2,020
202
2,222

$
$

19,008
1,901
20,909Annual Report 201859

Corporate Data and Stock Data
(As of March 31, 2018)

Corporate Data

Directors and Auditors (As of June 28, 2018)

Company Name:

Furukawa Co., Ltd.

President and Representative Director

Naohisa Miyakawa

Head Office:Senior Managing Director

Toshio MatsumotoTel:

2-3, Marunouchi 2-chome, Chiyoda-ku,
Tokyo 100-8370, Japan+81-3-3212-6570 Fax: +81-3-3212-6578

Managing Director

Minoru Iwata

Date of Foundation:

August 1875

Managing Director

Shigeo Matsudo

Date of Establishment:

April 1918

Managing Director

Kiyohito Mitsumura

Stock Exchange Listing:Tokyo

Outside Director

5715

Masao Yoshida

Securities Code Number:
Employees:

2,690 (Consolidated)

Outside Independent Director

Nobuyuki Tomotsune

Outside Independent Director

Tatsuya Tejima

Director

Masahiro Ogino

Stock Data
Number of Shares Authorized:

80,000,000 shares

Audit & Supervisory Board Member

Saburo Saruhashi

Number of Shares Outstanding:

40,445,568 shares

Audit & Supervisory Board Member

Kazuo Inoue

Number of Shareholders:

20,284

Outside Audit & Supervisory Board Member Tetsuro Ueno

Stock Transfer Agent:

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan

Outside Audit & Supervisory Board Member Masayuki Yamashita

Principal Shareholders

Executive Officers (As of June 28, 2018)
Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

The Master Trust Bank of Japan, Ltd. (trust account)

3,217

7.96

Asahi Mutual Life Insurance Co.

2,373

Japan Trustee Services Bank, Ltd. (trust account)

Senior Managing Executive Officer

Shigeo Matsudo

Senior Managing Executive Officer

Kiyohito Mitsumura

5.87

Senior Executive Officer

Masahiro Ogino

1,779

4.40

Senior Executive Officer

Hiroyuki Abe

Seiwa Sogo Tatemono Co., Ltd.

1,503

3.72

Senior Executive Officer

Kiyoshi Sano

The Yokohama Rubber Company, Limited

1,341

3.31

Executive Officer

Sompo Japan Insurance Inc.

1,075

2.66

Katsuhira Kawashita

Fujitsu Limited

961

2.38

Executive Officer

Kenichi Kurita

Furukawa Electric Co., Ltd.

877

2.17

Executive Officer

Atsushi Otani

Fuji Electric Co., Ltd.

862

2.13

Executive Officer

Jeff Crane

Chuo Real Estate Co., Ltd.

687

1.70

Executive Officer

Minoru Nakatogawa* Percentage of total shares is calculated after deducting treasury shares.

Executive Officer

Tatsuyuki Muramatsu

Composition of Shareholders

Executive Officer

Masanori Saito

Executive Officer

Hitoshi Iida

Executive Officer

Tatsuki Nazuka

Executive Officer

Osamu Miyazaki

Executive Officer

Hiroyuki Sakai

Executive Officer

Atsushi Takano

Executive Officer

Takeshi Miyajima

Foreign Institutions

15.40%

Financial Instruments Firms(Securities Companies)

1.53%
Financial Institutions

Other Japanese Companies

25.47%

35.15%

Individuals andOthers

22.45%

Forward-Looking Statements
This annual report contains statements about the Company’s plans, strategies, performanceoutlooks, and the like, and includes forward-looking statements that are not historical facts.
Such statements reflect expectations, estimates, forecasts, projections, and plans based on
information currently available to the Company and are subject to various risks, uncertainties,
and assumptions.
These changing factors may cause actual results to differ materially from those projected.

60 FURUKAWA CO., LTD.

Corporate History
1875

Began the operation of the Kusakura Copper Mine in Niigata(Company foundation).

1877

Began the operation of the
Ashio Copper Mine in Tochigi.

1900

Set up a machinery works at the
Ashio Copper Mine and enteredinto the machinery business.

1914

Manufactured the first rock drillin Japan.

1918

Spun off mining business from
Furukawa General Partnershipand established Furukawa Mining Co., Ltd.

1944

1951
1962

The first domestic rock drill
was developed (for the
Ashio Copper Mine).

Bought Osaka Smelter of Toa
Chemical Smelting Co., Ltd., andestablished it as Osaka Cementation and Refining. Entered into
the chemical business.
Built the Oyama Works of theMachinery Division of the Ashio
Copper Mine in Tochigi.

1950

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

At the Oyama Works, pumps
and mining machinery for copper mines were manufactured,
not only for internal use but
also to sell externally.

1998

Established a sales company ofrock drill products in Holland.

2003

Established a joint company forthe manufacturing and distribution of UNIC cranes in China.

2005

Spun off the Machinery business,
Metals business, and Electronic
Materials and Chemicals businessand shifted to a group management structure as the Furukawa
Company Group to enhance
management.

2006

Established a rock drills sales
company in China.

2007

Formed a capital and businessalliance for the GaN semiconductor epi-wafer business with
POWDEC K.K.

2008

Set up the Nitride Semiconductors Department as a GaN andrelated nitride semiconductorrelated research organization.

2009

Built the laboratory of the Nitride
Semiconductors Department inOyama.

Built the Takasaki Works of theRock Drill Division in Gunma.

Began manufacturing oftitanium dioxide and cuprous
oxide at Osaka Cementation
and Refining.

Made Tohpe Corporation, which
manufactures and distributes
paints and chemicals, into a consolidated subsidiary.

At the Takasaki Works, rock
drills were mass produced, andwe established the position of aleading rock drill manufacturer.

Completed the Furukawa /Outokumpu flash smelting plant
at Ashio Smelting and Refining.
Completed research anddevelopment of high-purity(99.999%) metallic arsenic andcommenced with sales of it.

1987

Bought UNIC Corporation(manufacturer of truck-mounted
cranes).

1989

The Japanese name changed
from Furukawa Kogyo Kabushiki Kaisha to Furukawa Kikai
Kinzoku Kabushiki Kaisha.

1990

Bought an American breaker sales
and manufacturing company.

1997

Established a manufacturer of
UNIC products / components
in Thailand.

Arsenic is one of the byproducts generated during
the smelting stage of copper
concentrates.

2010

Acquired interest in Canadiancopper mine.

2011

Acquired interest in Canadiancopper mine.

2012

Established a sales company ofrock drill products in Panama.

This is an affiliate company for
the UNIC business establishedin Taian, Shandong, China,
which manufactures and distributes truck-mounted cranes
and other products.

In 2009, the laboratory of the
Nitride Semiconductors Department was built in Oyama.

With the sale of all of its shares inFurukawa Commerce Co., Ltd.,the Group has withdrawn fromthe fuels business.

2013

The Group exited the paints business with the sale of all of its sharesin Tohpe Corporation.

2014

Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.
Coil processing company establishedin the Philippines.

“UNIC” has become asynonym for truck-mounted
cranes in Japan.

Muromachi Furukawa Mitsui Building, consisting of a commercial
facility (COREDO Muromachi 2),
offices, and rental accommodation.

Established the Tsukuba Development Center, which integrates atechnology research operation.

2015
This is an affiliate company for
the UNIC business establishedin Rayong, Thailand, which
manufactures truck-mounted
cranes and other products.

This is an affiliate company forthe construction and mining
machinery business established in
Utrecht, Holland, which distributes
rock drills and other products.

Formulated Management Philosophy, Action Guidelines, and Vision
for 2025.

An affiliated company in theelectronic materials businessmakes coils in Bulacan Province,
Philippines.

Annual Report 201861

2-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8370, Japan

http://www.furukawakk.co.jp