Corporate Report 2018

Financial Section
Consolidated Financial Summary

1Management’s Discussion and Analysis

3

Consolidated Balance Sheet

7

Consolidated Statement of Income

9

Consolidated Statement of Comprehensive Income

9

Consolidated Statement of Changes in Net Assets

10Consolidated Statement of Cash Flows11

Notes to Consolidated Financial Statements

12

Independent Auditor’s Report

31

Shareholder Information

33

Consolidated Financial Summary
Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the years ended March 31

2008

2009

2010

2011

2012

2013

2014

2015

2016

2018

2017

2018
（Thousands of U.S. dollars) *2

Operating results (Millions of yen)
Net sales
Operating income
Ordinary income
Net income attributable to owners of the parent
Equity in earnings of affiliates¥519,329
47,36661,75940,20921,312447,647(3,103)
6,975
7,014
14,706451,033
23,36336,394
18,95017,873

384,528
4,090
7,365
5,827
8,794

452,217
9,083
26,116
12,327
20,532534,443
11,48830,804
14,921
20,466467,979
11,421
27,651(7,793)19,045593,502
34,01845,432
34,134
16,683

529,570
14,99642,00043,34627,895635,90962,74180,71160,531
18,277556,480
43,76262,43048,013
21,125$ 5,985,589
590,559
759,704
569,757
172,035（Thousands of U.S. dollars) *2

Financial position (Millions of yen)

¥268,659
601,386
213,530
312,021150,573

Current assets
Total assets
Current liabilities
Net assets
Interest-bearing debt

215,298
530,592
161,088
272,083
174,934

244,522577,045
182,527
288,257
182,679

218,082
539,431
160,297
278,094
165,848

254,037
595,250
193,464
292,111
185,185

287,642
657,838
178,897
323,858
204,489

261,397
613,908
195,438
294,895
182,644

341,237
739,582
214,676
423,135
181,427

372,166
790,784
225,068
422,851
215,614391,009792,489
207,078
519,144
106,964

326,674
738,188
188,426
473,370
118,713$ 3,680,431
7,459,422
1,949,153
4,886,521
1,006,815（Thousands of U.S. dollars) *2

Cash flows (Millions of yen)

49,027(41,253)
11,54153,065¥ 40,394(20,907)(22,251)
37,235

Operating activity cash flow
Investing activity cash flow
Financing activity cash flow
Total cash and cash equivalents at end of year

39,773(24,626)(1,849)46,76831,326(33,662)(15,354)
36,04837,348(37,274)(9,876)35,701

27,182(29,883)
7,124
37,31031,169(30,818)(14,356)
26,907

84,671(31,922)(47,335)
75,82876,982(23,531)(25,005)
72,67890,720(33,614)(33,038)
90,30482,711(31,119)(60,217)67,177$ 853,916(316,397)(310,975)
850,000

Per share data (Yen)
Earnings per share (EPS)*
Net assets per share *1

1¥ 174.02
1,308.49

30.61
1,171.80

25.78
1,191.13

83.85
1,230.50

54.56
1,246.92(34.50)1,256.81

66.07
1,382.52

191.94
1,672.25

153.85
1,707.01

221.83
1,967.94

281.392,187.99

9.1
13.7
10.2
50.3

(0.7)
2.5
1.2
49.9

1.1
2.2
1.4
49.9

5.2
6.9
6.5
48.2

2.0
4.4
4.5
47.3

2.4
(2.8)
4.6
46.2

2.1
5.0
4.8
47.5

2.8
12.6
5.8
47.8

5.7
9.0
5.9
51.0

7.9
12.0
8.4
57.5

9.9
13.6
10.5
59.0

$
$

（U.S. dollars) *2

2.65
20.60

Rations (%)
Operating income margin
Return on equity (ROE)
Return on assets (ROA)
Equity ratio

9.9
13.6
10.5
59.0
（Thousands of U.S. dollars) *2

Others (Millions of yen)

35,11928,934
14,707
4,902¥ 39,448
24,521
13,562
4,686

Capital expenditure
Depreciation and amortization
Research and Development cost
Number of employees

42,423
27,763
17,4495,216

35,40028,95016,3804,979

27,56729,535
16,1984,920

25,40923,52816,122
5,445

30,98223,096
15,332
5,323

30,512
26,70518,936
8,176

22,226
23,77016,8738,254

30,95927,027
18,987
8,009

35,01025,631
19,2678,034$ 291,406
254,396
178,718
8,009*1 With and effective date of October 1, 2016, MGC conducted a reverse stock split for MGC's ordinary shares on a 2:1 basis.
As a result, each amounts per share in the above table are calculated assuming that the reverse stock split had been conducted at the beginning of FY2007.
*2 U.S. dollar amounts are translated from yen, for convenience only, at the approximate rate of ¥106.24= US$1 prevailing on March 31, 2018.

Net sales / Operating income / Ordinary income■■Operating income■■Ordinary income

Net sales■(millions of yen)
100,000(millions of yen)
600,000

80,000400,000

60,00040,000200,000

20,000
0

1

2014

2015

2016

2017

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 20182018 (FY)0

Ordinary income by business segment

Cash flows■Natural Gas Chemicals ■Aromatic Chemicals ■Specialty Chemicals■Information & Advanced Materials ■Others■■Operating activity cash flow■■Investing activity cash flow
Free cash flow■■Interest-bearing debt

(millions of yen)
100,000(millions of yen)
250,000■(millions of yen)
100,000
80,00075,00060,00050,00040,00025,00020,0000

0(25,000)(20,000)(50,000)

2014

2015

2016

2017

Interest-bearing debt / Net debt to equity ratio

2018 (FY)Net debt to equity ratio■(Times)0.6
0.5

200,000

0.4

150,000

0.3
100,000

0.2

50,000

2014

2015

2016

2017

2018 (FY)

0

0.1

2014

2015

2016

2017

2018 (FY)0

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 20182

Management’s Discussion and Analysis
1. Results of Operations
1) Net Sales & Operating Income
In fiscal 2017, MGC Group posted consolidated net sales of¥635,909 million, a year-on-year increase of 14.3%, andconsolidated operating income of ¥62,741 million, a
year-on-year increase of 43.4%.
There was a significant increase in revenue andearnings at the Group operating income level, with anincrease in sales volume of engineering plastics, chemicals
for semiconductors, m-xylene and specialty aromatic
chemicals, in addition to that there was also a large
improvement in market conditions for methanol, purified
isophthalic acid, polycarbonate, methanol derivatives,
alongside a weaker yen.
2) Non-operating Revenue
The Group posted non-operating revenue of ¥27,288
million, a year-on-year decrease of 4.1%. This was primarily
due to the decrease in equity in earnings of overseas
methanol-producing companies.
Non-operating expenses were ¥16,608 million, a
year-on-year increase of 49.2%. This was primarily due to theincrease in loss on valuation of investment securities.
As a result, net income attributable to owners of theparent was ¥60,531 million, a year-on-year increase of
26.1%.
3) Dividend
The year-end dividend payout for FY2017 was ¥35 pershare. Since the interim dividend payout was ¥24, theannual dividend for FY2017 is ¥59 per share.

2. Segment Information
1) Natural Gas Chemicals
Net sales in the natural gas chemicals segment were¥167,035 million, a year-on-year increase of 16.9%, andsegment income was ¥14,928 million, a year-on-yearincrease of 4.0%.
The methanol business recorded higher revenue due toa rise in market conditions.
For methanol and ammonia-based chemicals, despite arise in the price of raw materials, improved market
conditions for neopentyl glycol and MMA-related products
led to higher revenue and earnings.
Crude oil and other energy sources improved slightly
due to higher crude oil prices.
2) Aromatics Chemicals
Net sales in the aromatics chemicals segment were
¥212,050 million, a year-on-year increase of 10.5%, andsegment income was ¥25,106 million, a year-on-yearincrease of 43.2%.
Specialty aromatic chemical products recorded higher
revenue and earnings primarily owing to an increase in thesales volume of m-xylenediamine and aromatic aldehydes
and a weaker yen.

3

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

Commodity aromatic chemical products posted
significantly higher revenue and earnings due to theincrease in sales volume associated with the restarting ofoperations of the one series m-xylene production facility
that had been suspended, in addition to the significant
improvement in market conditions of purified isophthalicacid, which is in increasing demand for PET bottles,
especially in emerging countries.
The foamed plastics business achieved higher sales
due to product price revision, accompanied by an increasein sales volume and a rise in the price of raw materials, but
profit suffered a slight drop due primarily to the rise in raw
fuel prices.
3) Specialty Chemicals
Net sales in the specialty chemicals segment were¥203,561 million, a year-on-year increase of 19.1%, andsegment income was ¥38,633 million, a year-on-yearincrease of 44.1%.
Inorganic chemicals recorded higher revenue andearnings due to higher sales volume of chemicals forsemiconductors in line with a market expansion for
semiconductors.
The engineering plastics business posted significantly
higher revenue and earnings. Major positive factors include
substantially improved performance in the polycarbonate
market amid continued strong demand primarily in China, in
addition to higher sales volume in special polycarbonatesand polycarbonate sheets and films.
4) Information & Advanced Materials
Net sales in the information & advanced materials segment
were ¥52,735 million, a year-on-year increase of 5.1%, andsegment income was ¥6,349 million, a year-on-yearincrease of 3.6%.
Electronics materials posted higher revenue andearnings due to reasons including strong sales volume of
BT materials for semiconductor packages, primarily formemory applications.
Oxygen absorbers such as Ageless posted higher sales
volume centered on exports, and lower earnings comparedwith the previous year due to fixed costs rose fromproduction commencement at a new plant.
5) Other
Net sales in the other business segment were ¥526 million,a year-on-year decrease of 4.9%, and segment income was¥261 million, a year-on-year decrease of 20.4%.

3. Financial Position
As of March 31, 2018, total consolidated assets were¥792.4 billion, ¥54.3 billion higher than at the end of theprevious fiscal year.
Current assets increased by ¥64.3 billion to ¥391.0
billion. The main causes were increases in cash anddeposits and trade notes and accounts receivable.
Noncurrent assets decreased by ¥10.0 billion to ¥401.4

billion primarily due to an decrease in investment securities.
Total liabilities increased by ¥8.5 billion to ¥273.3 billion.
Current liabilities increased by ¥18.6 billion primarily due toincreases in trade notes and accounts payable. Noncurrent
liabilities fell by ¥10.1 billion primarily as a result of
reductions in long-term loans payable.
Net assets increased by ¥45.7 billion to ¥519.1 billion.
This was attributable primarily to an increase in retained
earnings resulting from the reporting of net income
attributable to owners of the parent company.
As a result, as of March 31, 2018, the shareholders’equity ratio was 59.0%, compared to 57.5% on March 31,
2017. Net assets per share at the end of the fiscal year
were ¥2,187.99, compared to ¥1,967.94 at the end of theprevious fiscal year.

4. Cash Flow
As of March 31, 2018, total cash and cash equivalents
were ¥90.3 billion, ¥23.1 billion higher than at the end of theprevious fiscal year.
1) Operating Activity Cash Flow
Net cash provided by operating activities increased by ¥8.0
billion from the previous year to ¥90.7 billion. This wasprimarily due to increases in income before income taxes
and dividends received from affiliates accounted for by theequity method.
2) Investing Activity Cash Flow
Net cash outflow from investing activities was ¥33.6 billion,
an increase of ¥2.4 billion from the previous year. This wasprimarily due to higher expenditures for the purchase ofnoncurrent assets.
3) Financing Activity Cash Flow
Net cash outflow from financing activity was ¥33.0 billion, adecrease of ¥27.1 billion from the previous year. This wasprimarily due to lower expenditures for repayment oflong-term debt and redemption of corporate bonds.

5. Capital Expenditure
MGC Group (including MGC and consolidated subsidiaries)
capital expenditures for the consolidated fiscal year were¥30,959 million.
By segment, capital expenditure of ¥6,076 million,¥11,301 million, ¥11,004 million, ¥1,937 million, and ¥640
million were made in natural gas chemicals, aromatic
chemicals, specialty chemicals, information and advanced
materials, and other business segments and company-wide
assets, respectively.

6. Research and Development
In fiscal 2017, the final year of the MGC Advance 2017
medium-term management plan, we continued working toachieve the Group vision of “creating values to share withsociety” conducting active research and development
aimed at the fundamental objectives of strengthening theearning power of existing businesses, with a focus on corebusinesses, and creating and developing new businesses.
Together, the four companies’ research anddevelopment divisions; the Advanced Business
Development Division, which serves as the corporate
research and development arm; and the Research &Development Division, the corporate support division,
created a structure for leveraging synergies, advancing theeffort to strengthen the earning power of existing
businesses and create new businesses.
The Advanced Business Development Division isaccelerating efforts to create business in new fields byengaging in research and development activities throughoutside partnerships, including participation in investment
partnerships, collaboration with venture firms, and joint
studies with public-sector research institutions. It also
continues to promote commercialization of its own researchand development themes, and has announced its entry into
the short-range optical routing and factory-grown vegetablebusinesses.
There are a total of 884 MGC Group research anddevelopment personnel, including those in affiliate researchand development divisions, making up around 11% of thetotal workforce. Expenditures on research totaled ¥18,987
million.
Research and development costs by segment were as
follows:
Natural Gas Chemicals Company: ¥3,618 million
Aromatic Chemicals Company:¥5,302 million
Specialty Chemicals Company:¥4,632 million
Information and Advanced
Materials Company:¥5,434 million

7. Risk Factors
The following are the main foreseeable risks that have thepotential to affect MGC Group’s operating results, stock
price and financial condition. Please note that the following
does not represent an exhaustive list of risks. All
forward-looking statements in the text are based on the
judgment of MGC Group as of the date of submission offinancial statements (June 26, 2018).
1) Economic Conditions
The business revenues of MGC Group are affected byeconomic conditions in the countries and regions where theGroup’s products are sold. In particular, market-sensitive
commodities such as methanol, methanol derivatives,
general-purpose aromatic chemicals, and polycarbonate
resin are generally prone to declines in sales volume andselling prices during times of economic downturn, which
adversely affects MGC Group’s operating results andfinancial condition. In addition, rapid increases in raw
material prices could also have an adverse effect on MGC
Group’s operating results and financial condition.

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 20184

Management’s Discussion and Analysis2) Overseas Business
MGC Group has established subsidiaries and affiliates andconducts manufacturing and sales in Asia, North America,
South America, the Middle East and other regions. MGC
Group makes large investments in plant and equipment atoverseas subsidiaries and affiliates. The Group takes
various measures to mitigate risks, but the situation in eachcountry, such as political instability including war, terrorist
attacks, and riots, or social or economic turmoil, can cause
difficulties for local manufacturing activities, remittance ofdividends, and recovery of investment.
Other risks that could have an adverse effect on MGC
Group’s operating results and financial condition include
problems due to differences in legal systems, the possibilityof restrictions on investments or nationalization or
expropriation of assets by foreign governments, andpersonnel or labor issues.
3) Business Characteristics
MGC Group manufactures and sells a variety of products
ranging from chemical and material products to functional
products including those in the information communicationand medical- and food-related fields, and conducts its
business in a competitive environment. The Group
competes mainly on the basis of price in commodity
products, and on the basis of categories including price,
market trends, quality, function, delivery time and customer
service in specialty products and high-value-added
products. A rise in the level of competition in these areas
could lead to lower selling prices or a decrease in sales
volume.
In addition, because of their characteristics, thebusinesses of MGC Group have risks such as thosedescribed below.
For example, MGC Group purchases raw materials
including mixed xylene and electric power from outside
suppliers. The Group takes measures such as purchasingfrom various suppliers to reduce the risk that procurement
will become impossible. However, the inability of a major
supplier to deliver necessary raw materials or other items
could be detrimental to the Group’s production activities.
Many of MGC Group’s manufacturing bases havemultiple production facilities that share electricity, watersupply, steam, and other utilities. Consequently, if a sharedutility at any base shuts down due to an accident or othertrouble, the production activities of the entire base could besuspended.
The products manufactured and sold by MGC Group
include some products that are sold only to specificcustomers. MGC Group reduces risks with measures suchas entering into long-term supply contracts with thesecustomers; however, sales could decline if customers
discontinue using these products.
Electronic material products, for which the electronics
industry is the primary customer segment, typically have ashort product life and are constantly exposed tocompetition in technological innovation. Therefore, sales
could decline if existing products become obsolete or if new

5

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

product development is delayed.
For products other than commodity and basic
chemicals, including engineering plastics and electronicmaterials, selling prices could drop and sales volume could
decline due to the emergence of alternative products
offering the same functions.
MGC Group takes all possible measures to mitigate
these risks, but they could have an adverse effect on theGroup’s operating results and financial condition.

Group’s operating results and financial condition.

4) Product Defects

MGC Group handles hazardous chemical substances
including poisonous and deleterious substances, hazardous
materials and high-pressure gas as part of its business, andis subject to various legal restrictions, both in Japan andoverseas, at each stage, including manufacturing, storage,
distribution and sale. In addition, with rising environmental
awareness worldwide, regulations on chemical substances
are becoming increasingly stringent, which could disrupt
MGC Group’s business activities.
Accordingly, the Group’s operating results and financial
condition could be adversely affected by penalties, social
sanctions, remediation costs and other consequences ofthe failure of MGC Group to comply with legal regulations
related to its business activities as well as restrictions on
business that may result in the event of changes in laws
and regulations or their interpretation or operation, or thetightening of regulations, and increase in costs to addressthese changes.

As stated earlier, MGC Group is engaged in a wide range ofbusinesses and nearly all of its manufacturing bases
conduct production activities in accordance with globally
recognized quality management standards and ship
products that conform to specifications agreed upon withcustomers. However, the possibility exists that defective
products could be manufactured or shipped. In the eventthat a product with a quality defect is shipped, MGC Groupmay have to compensate the customer who used thedefective product, users of final products, or others not only
for direct damages but also for opportunity loss. In addition,
MGC may lose social credibility.
To deal with this type of risk, MGC Group has obtained
product liability insurance and other liability insurance.
However, the full amount of the damages for which
MGC Group is ultimately liable may not be covered by thisinsurance, and therefore MGC Group’s operating results
and financial condition could be adversely affected.
5) Exchange Rate Fluctuations
The Group’s business results and financial situation havebeen affected by exchange rate fluctuations. With regards
to the impact of exchange rate fluctuations on transactions
in foreign currencies such as imports and exports, MGC
Group has, to a degree, hedged risk through forward
exchange transactions. However, it is impossible tocompletely hedge the risk of exchange rate changes.
Depending on the trend of exchange rates, there is thepossibility of a negative impact on the Group’s businessresults and financial situation such as decreased sales orincreased losses.
Financial balance data that is valued in local currencies
for MGC Group overseas subsidiaries are translated into
yen when creating the Group’s consolidated balance sheet.
Depending on the exchange rate at the time, MGC Group’sbusiness results and financial situation could be adversely
affected.
6) Interest Rate Fluctuations
When procuring essential funds, MGC Group considers
their terms, financial situation, and financial environment,
and determines factors such as the amounts to procure
and the period and method of procurement. The Group
combines fixed and variable interest rates when procuring
funds in order to hedge against future interest rate changes.
However, if interest rates rise, the amount of interest
payments also rises, which may adversely affect MGC

7) Marketable Security Market Price Fluctuations
MGC Group’s assets include market priced marketablesecurities. If the market prices of the Group’s marketablesecurities were to fall sharply, appraisal losses might occur,
adversely affecting the Group’s operating results andfinancial condition.
8) Legal Restrictions9) Natural Disasters
MGC Group has manufacturing bases not only in Japan but
also in the rest of Asia, North America, South America, theMiddle East and other regions. The production activities atthese bases could be suspended or otherwise disrupted if
equipment is damaged or trouble occurs due to the effects
of natural disasters such as earthquakes, windstorms andfloods. In some cases, material loss or opportunity loss
caused by natural disasters may be excluded from thecoverage of casualty insurance, and thus could have an
adverse effect on MGC Group’s operating results andfinancial condition.
10) Accidents and Disasters
MGC Group routinely handles hazardous chemical
substances including poisonous and deleterious
substances, hazardous materials and high-pressure gas aspart of its business. Although MGC Group makes efforts toensure maintenance and stable operation of production
facilities while doing its best to construct a security anddisaster prevention system, explosions, fires, toxic gas
leaks or other accidents may occur as a result of equipment
malfunction or human error. Such events could not only
damage production facilities and harm employees, but also,
depending on the circumstances, damage the areasurrounding the production facility, harm customers, orcause environmental pollution and other damage. MGC
Group takes out fire insurance, profit insurance, oil pollution
insurance, liability insurance and other insurance against

these risks. However, MGC Group’s operating results andfinancial condition could be adversely affected if thisinsurance does not cover the full amount of the damages
for which MGC Group is ultimately liable.
11) Research and Development
MGC Group conducts basic and applied research todevelop new products and processes and improve existingproducts and processes. Research and development iscomplex and long-term, and results are uncertain. If MGC
Group does not continue to develop new products that are
accepted in the market, or if the markets for products newly
developed by MGC Group do not grow as much as
anticipated, the Group’s future operating results andfinancial condition could be adversely affected.
12) Joint Ventures
MGC Group owns a number of production joint ventures
not only in Japan but also overseas including Saudi Arabia,
Venezuela, Thailand, China, and South Korea, and procuresand sells a variety of other products. Although the Group
strives to maintain its profit through joint ventureagreements and other business-related agreements, there
is no guarantee that the joint venture partners will makedecisions that are best for MGC Group or the joint ventures
as the Group does not control its joint venture partners.
Moreover, these agreements might also not be renewed.
Such circumstances could have an adverse effect on MGC
Group’s operating results and financial condition.
13) Intellectual Property
MGC Group files and obtains patents in Japan andoverseas to protect the research findings used in its
businesses and licenses. The Group also imposes
confidentiality obligations on the parties of numerous patent
licensing agreements and technology agreements in aneffort to protect intellectual property while striving not toinfringe on the rights of others. However, there is apossibility that MGC Group may fail to protect its own rightor get involved in a dispute with a third party. Suchcircumstances could adversely affect the Group’s operating
results and financial condition.
14) Lawsuits
MGC Group faces the risk of lawsuits and other legal risks
in its domestic and overseas businesses. If a major lawsuit
were to be filed against the Group in the future and if theverdict were unfavorable, it could have an adverse effect on
the Group’s operating results and financial condition.

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 20186

Consolidated Balance Sheet
Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
March 31, 2018
Thousands of
U.S. dollars(note 2)

AssetsMillions of yen
2017

2018

¥ 75,017

165,606

138,410

1,558,791

121

139

1,139

103,753

94,630

Deferred income taxes (note 9)

6,759

Other current assets

14,847

Trade notes and accounts receivable (note 19)
Inventories

Less allowance for doubtful receivables
Total current assets

2017

2018

Current liabilities:¥ 101,090

Short-term investments (note 4)

Millions of yen
2018

2018

Current assets:
Cash (note 3)

Thousands of
U.S. dollars(note 2)

Liabilities and Net Assets$

951,525

Trade notes and accounts payable¥ 88,720¥ 68,506$

835,090

Short-term debt and current installments of long-term debt (note 6)

71,25674,770670,708

Accrued expenses

16,591

15,171

156,165

976,591

Accrued income taxes (note 9)

4,133

3,394

38,902

5,818

63,620Accrued bonuses

5,422

5,351

51,035

13,725

139,750

Other current liabilities (note 9)

20,954

21,233

197,233

Total current liabilities

207,078

188,426

1,949,153

1,170

1,067

11,013391,009326,674

3,680,431
Non-current liabilities:
Long-term debt (note 6)

35,70743,942

336,098

Buildings and structures

203,544

199,782

1,915,889

Net defined benefit liability (note 8)

4,592

5,936

43,223

Machinery, equipment and vehicles

450,543

449,490

4,240,804

Provision for directors’ retirement benefits (note 8)

339

387

3,191

Land

38,458

38,114361,992

16,64017,309156,627

Property, plant and equipment (note 6):

Leased assets
Construction in progress
Other

Deferred income taxes (note 9)

760

807

7,154

Other non-current liabilities (note 7)

8,986

8,814

84,582

12,347

12,233

116,218

Total non-current liabilities

66,26676,391

623,739

Total liabilities

273,345

264,817

2,572,901

41,97041,970395,049

46,923

46,877

441,670

752,577

747,305

7,083,744

531,859529,248

5,006,203

220,717

218,057

2,077,532

Stockholders’ equity:
Less accumulated depreciation
Net property, plant and equipment
Intangible assets, net:
Goodwill

3,911

4,258

36,813

14

22

132

Software

2,141

1,722

20,152

Other

2,343

2,367

22,054

8,411

8,370

79,170

Leased assets

Net intangible assets

Common stock (note 10):
Authorized 492,428,000 shares; issued 231,739,199
and 241,739,199 shares in 2018 and 2017
Additional paid-in capital (note 10)34,57835,602

325,471Retained earnings (note 11)399,033

357,245

3,755,958

Treasury stock, at cost; 18,135,027, and 25,923,628
shares in 2018 and 2017(19,966)(21,829)(187,933)

455,616

412,989

4,288,554

162,472

Total stockholders’ equity
Accumulated other comprehensive income:

17,261

18,101

Deferred losses on hedges

(0)

(0)

(0)

Surplus on revaluation of land

222

222

2,090

Foreign currency translation adjustments(7,614)(6,249)(71,668)

Remeasurements of defined benefit plans (note 8)

1,878

(351)

17,677

11,747

11,722

110,570

Net unrealized gain on other securities (note 4)
Investments and other assets:
161,391

175,461

1,519,117

Long-term loans receivable

2,632

2,658

24,774

Deferred income taxes (note 9)

2,137

2,161

20,115Net defined benefit asset (note 8)

1,221

12

11,493

Other investments and other assets (note 5)

5,522

5,475

51,977Less allowance for doubtful receivables

555

683

5,224

Total investments and other assets

172,350

185,085

1,622,270

Investments in securities (notes 4, 5 and 6)

Total accumulated other comprehensive income
Non-controlling interests

51,78048,658487,387

Total net assets

519,144473,370

4,886,521¥ 792,489¥ 738,188$ 7,459,422

Commitments and contingencies (note 20)
Total assets¥ 792,489¥ 738,188$ 7,459,422

Total liabilities and net assets

See accompanying notes to consolidated financial statements.

7

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 20188

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2018

Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2018
Thousands of
U.S. dollars(note 2)Millions of yen

Net sales (note 19)
Cost of sales (note 13)
Gross profit
Selling, general and administrative expenses (notes 12 and 13)
Operating income
Other income (expenses):
Interest income
Dividend income
Interest expenses
Equity in earnings of affiliates

2018

2017

2018

¥ 635,909
481,326
154,583
91,84162,741¥ 556,480
425,231
131,249
87,486
43,762$ 5,985,589
4,530,553
1,455,036
864,467
590,559

Millions of yen
Stockholders’ equity

Balance as of April 1, 2016

Commonstock(note 10)Retainedearnings(note 11)

Treasurystock¥ 41,970¥ 35,603¥ 311,250¥ (15,566)

Cumulative effects of changes
in accounting standards atoverseas affiliates
Restated balances asof April 1, 2016

(3,392)
41,97035,603

Total

Net
unrealized
gain on othersecurities(note 4)

Deferred
losses onhedgesSurplus onrevaluationof land¥ 373,258¥ 9,816

¥ (3)

¥ 222

RemeasureForeign
ments ofcurrency
definedtranslation
benefit plansadjustments(note 8)¥ (4,613)(3,392)

307,858(15,566)

369,865

9,816

(3)

222

(4,613)

Total

Noncontrollinginterests

Total net
assets¥ (1,736)¥ 3,686¥ 46,190¥ 423,135

(118)

(118)

(1,855)3,568(3,510)46,190419,624

Changes arising during year:

Gain on sale of investments in securities (note 4)

485
2,096
(1,069)18,277423
1,789(1,346)21,125

4,565
19,729(10,062)
172,035

1,926

761

18,129Rent expenses(1,264)

Loss on valuation of investments in securities
Provision for loss on guarantees
Loss on liquidation of subsidiaries and affiliates (note 15)
Personnel expenses for seconded employees
Loss on sale/disposal of property, plant and equipment
Impairment loss (note 14)
Other, net(8,297)(1,088)
(162)

(454)

(1,449)(1,115)(11)
2,352

Profit before income taxes(11,898)−−(667)(1,646)(634)(1,124)(888)
17,33761,09910,68073,421(78,097)(10,241)(1,525)

Cash dividends(6,986)(6,986)(6,986)

Profit attributable to ownersof parent

48,01348,01348,013

Change of the scopeof consolidation

(16)

(16)

(16)

Change of the scopeof equity method

8,377

Purchase of treasury stock
Disposition of treasury stock0

Change in treasury stockof parent arising fromtransactions with noncontrolling shareholders(1)(13,639)

Net changes other thanstockholders’ equity(10,495)(104)
22,139Total changes during
the year
Balance as of March 31, 2017

Income taxes (note 9):
Current
Deferred

7,640
30
7,671

9,330
(1,842)
7,487¥ 53,427
5,414¥ 48,013¥ 65,933
5,402¥ 60,531$

8,377(6,264)(6,264)

0

1

1

(1)

(1)

—

8,284

3

—

(1,636)

1,503

8,154

2,467

10,622(0)49,387(6,263)

43,123

8,284

3

—

(1,636)

1,503

8,154

2,467

53,746¥ 41,970¥ 35,602¥ 357,245¥ (21,829)¥ 412,989¥ 18,101

¥ (0)

¥ 222

¥ (6,249)¥ (351)¥ 11,722¥ 48,658¥ 473,370

Changes arising during year:

100,527

Cash dividends(9,927)(9,927)(9,927)

691,086

Profit attributable to ownersof parent

60,53160,53160,531(7,010)87,820(17,338)
70,473$

8,377(6,264)—Purchase of treasury stock

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Accumulated other comprehensive income

Additional
paid-in
capital(note 10)620,604
50,847569,757(7,010)(7,010)

Disposition of treasury stock

0

0

0

Retirement of treasury stock(8,873)

8,873

Transfer to additional
paid-in capital fromretained earnings

8,816

Change in treasury stockof parent arising fromtransactions with noncontrolling shareholders(966)

Balance as of March 31, 2018

See accompanying notes to consolidated financial statements.

(8,816)—(966)

Net changes other thanstockholders’ equity
Total changes during
the year

0
—

(966)

(839)

(0)

—

(1,365)

2,229

24

3,122

3,146

—

(1,024)

41,787

1,863

42,626

(839)

(0)

—

(1,365)

2,229

24

3,122

45,773¥ 41,970¥ 34,578¥ 399,033¥ (19,966)¥ 455,616¥ 17,261

¥ (0)

¥222

¥ (7,614)¥ 1,878¥ 11,747¥ 51,780¥ 519,144

Total

Noncontrollinginterests

Total net
assets$ 110,335$ 458,001$ 4,455,666

Thousands of U.S. dollars (note 2)
Stockholders’ equity

Remeasurements of defined benefit plans

Surplus onrevaluationof land

Foreign
Remeasurecurrency
ments oftranslation
definedadjustments benefit plans$ (0)$ 2,090$ (58,820)

Retainedearnings$ 395,049$ 335,109$ 3,362,622$ (205,469) $ 3,887,321

Cash dividends(93,439)(93,439)(93,439)

Profit attributable to ownersof parent

569,757

Balance as of March 31, 2017

Treasury
stock

Total

$ 170,378$ (3,304)

Changes arising during year:

Thousands of
U.S. dollars(note 2)Millions of yen

ProfitOther comprehensive income arising during the year (note 16) :Net unrealized (loss) gain on other securities
Deferred (losses) gains on hedges
Foreign currency translation adjustments

Deferred
losses onhedgesAdditional
paid-in
capitalConsolidated Statement of Comprehensive Income
Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2018

Accumulated other comprehensive incomeNet
unrealized
gain on othersecurities

Common
stock

2018

2017

2018

¥ 65,933¥ 53,427$ 620,604

(827)
(0)
2,102
2,204

8,264
3
(2,192)
2,113

Purchase of treasury stock0

Retirement of treasury stock(83,518)

83,518Transfer to additional
paid-in capital fromretained earnings

82,982

Change in treasury stockof parent arising fromtransactions with noncontrolling shareholders(9,093)

Total changes during
the year(297)(16,707)

1,702¥ 67,636

7,891¥ 61,319

16,020$ 636,634

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥ 60,555
7,080¥ 56,908
4,410$ 569,983
66,642(65,983)00

Net changes other thanstockholders’ equity(1,775)569,757(65,983)

Disposition of treasury stock(7,784)(0)
19,78520,745

Shares of other comprehensive income of affiliates accounted forby the equity method
Total other comprehensive income arising during the year
Comprehensive income

569,757(65,983)

Balance as of March 31, 2018

0——

(82,982)(9,093)—(9,639)393,326$ 395,049$ 325,471$ 3,755,958(9,093)(7,897)(0)—(12,848)

20,981

226

29,386

29,612401,224(7,897)(0)—(12,848)

20,981

226

29,386

430,845$ (187,933) $ 4,288,554$ 162,472$ (0)$ 2,090$ (71,668)$ 17,677$ 110,570$ 487,387$ 4,886,521

17,536

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

9

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201810

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2018

Mitsubishi Gas Chemical Company, Inc. and Consolidated Subsidiaries
For the year ended March 31, 2018

Millions of yen

Thousands of
U.S. dollars(note 2)

1. Summary of Significant Accounting Policies(a) Basis of Presenting Consolidated Financial Statements

2018

2017

2018

¥ 73,421¥ 61,099$ 691,086

27,027
1,094
11
—
236
162
(18,277)
4

25,631
538
1,124
987
870
667
(21,125)
246

254,396
10,297
104
—
2,221
1,525
(172,035)
38

Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors’ retirement benefits
Increase in provision for loss on guarantees
Interest and dividend income
Interest expenses
Gain on sale of short-term investments and investments in securities
Loss on devaluation of short-term investments and investments in securities
Increase in trade notes and accounts receivable
Increase (decrease) in inventories
Increase in trade notes and accounts payable

43
33
1,088
(2,581)
1,069(2,146)
8,327(28,607)(9,759)21,357405
311
10,241(24,294)
10,062(20,200)
78,379(269,268)(91,858)
201,026

Other, net
Sub totalInterest and dividend received
Dividend received from affiliates accounted for by the equity method
Interest paid
Income taxes paid
Proceeds from subsidy income
Other, net
Net cash provided by operating activities

2,443
74,9482,545
20,008(974)(5,838)—29
90,720(1,158)(141)—(2,213)
1,346
(690)
240
(3,930)3,948
8,416(2,301)73,555
2,409
12,288(1,391)(5,226)1,015
59
82,711(36,546)2,141(1,548)
4,949
(642)
804

(32,291)875(2,308)
2,482
177
—

(343,995)
20,152(14,571)
46,583(6,043)
7,568

Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash
provided by operating activities:
Depreciation and amortization
Loss on sale/disposal of property, plant and equipment
Impairment loss
Loss on reduction of non-current assets
Loss on business withdrawal
Loss on liquidation of subsidiaries and affiliates
Equity in earnings of affiliates
Increase in allowance for doubtful receivables

Cash flows from investing activities:
Capital expenditures
Proceeds from sale of property, plant and equipment
Purchase of investments in securities and subsidiaries
Proceeds from sale of investments in securities(Increase) decrease in long-term loans receivable
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Payments for sales of shares of subsidiaries resulting in change in scope of consolidation
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Decrease in short-term debt
Proceeds from long-term debt
Payments on long-term debt
Redemption of bonds
Purchase of treasury stock
Dividends paid to stockholders
Dividends paid to non-controlling stockholders of subsidiaries
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of year (note 3)

22,995705,459
23,955
188,328(9,168)(54,951)—273
853,916

—

(313)

—

(2,773)(33,614)260(31,119)(26,101)(316,397)(7,300)10,359(14,143)—(7,010)(9,927)(2,024)(4,063)
1,741(27,828)(15,000)(6,266)(6,986)(1,654)(68,712)97,506(133,123)—(65,983)(93,439)(19,051)(2,883)—(27,137)

(108)

(158)

(1,017)(33,038)(60,217)(310,975)(939)
23,127
67,177(48)(8,673)75,828(8,838)217,686
632,314—22—¥ 90,304¥ 67,177$ 850,000

Mitsubishi Gas Chemical Company, Inc. (the Company) and its
domestic subsidiaries maintain their books of account andprepare their financial statements in conformity with financial
accounting standards of Japan, and its foreign subsidiaries inconformity with those of the countries of their domicile.
“Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for Consolidated Financial
Statements” (ASBJ Practical Issues Task Force (PITF) No. 18,
May 17, 2006) and “Practical Solution on Unification of
Accounting Policies Applied to Associates Accounted for by
the Equity Method” (ASBJ Practical Issues Task Force (PITF)
No. 24, March 10, 2008) require that for the preparation of
consolidated financial statements, the accounting policies andprocedures applied to a parent company and its subsidiaries
for similar transactions and events under similar
circumstances should be unified, in principle, and financial
statements prepared by foreign subsidiaries in accordancewith IFRSs or the generally accepted accounting principles in
the United States (U.S. GAAP) tentatively may be used for the
consolidation process, however, the items listed in the PITF
should be adjusted in the consolidation process so that profit(loss) is accounted for in accordance with Japan GAAP unlessthey are not material. The Company made necessary
modification to the consolidated financial statements
according to the PITF.
The accompanying consolidated financial statements
have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act
and its related accounting regulations, and in conformity withaccounting principles and practices generally accepted inJapan, which may differ in certain respects from accounting
principles and practices generally accepted in countries andjurisdictions other than Japan.
In preparing the accompanying consolidated financial
statements, certain reclassifications have been made in thefinancial statements issued domestically in Japan in order topresent them in a form which is more familiar to readers
outside Japan. In addition, the notes to the consolidated
financial statements include information which is not required
under accounting principles generally accepted in Japan but
is presented herein as additional information.
(b) Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and 70 subsidiaries (71 in 2017).
The Company and its consolidated subsidiaries are collectively
referred to as “MGC.”
All significant intercompany accounts and transactions
have been eliminated in consolidation.
JAPAN PIONICS CO., LTD. was excluded from the scopeof consolidation due to the sale of the entirety of shares
during the year ended March 31, 2018.
Investments in an unconsolidated subsidiary and 15

affiliates (15 in 2017) are accounted for by the equity method.
The Accounting Standards for Consolidation require thecontrol or influence concept for the consolidation scope ofsubsidiaries and affiliates. Under the control or influence
concept, a company in which the parent company or its
consolidated subsidiaries, directly or indirectly, are able toexercise control over operations is fully consolidated, and acompany over which the parent company and/or its
consolidated subsidiaries have the ability to exercise
significant influence is accounted for by the equity method.
The difference between the cost and the underlying net
assets at the date of investments in subsidiaries or affiliates isallocated to identifiable assets and liabilities based on fairmarket value at the date of investments.
The unallocated portion of the difference, which isrecognized as goodwill, is being amortized using thestraight-line method over an expected benefit period by each
investment within 20 years.
The fiscal year-ends of 31 consolidated subsidiaries (31 in2017) are December 31. For consolidation purposes, theCompany uses their financial statements as of December 31
with necessary consolidation adjustments made to reflect any
significant transactions which occurred between January 1
and March 31.
(c) Cash and Cash Equivalents
For the purpose of the statement of cash flows, MGC
considers all highly liquid investments with insignificant risk ofchanges in value, which have maturities of generally threemonths or less when purchased, to be cash equivalents.
(d) Short-term Investments and Investments in Securities
Under the Accounting Standards for Financial Instruments,
securities are classified into four categories – “trading
securities,” “held-to-maturity securities,” “investments inaffiliates” and “other securities.” Securities classified as “trading
securities” are stated at fair value and unrealized gains orlosses are recorded in the consolidated statement of income.
Securities classified as “held-to-maturity securities” are stated atamortized cost. Securities classified as “other securities” withfair value are stated at fair value and unrealized gains or losses,
net of related taxes, are excluded from earnings and reported asaccumulated other comprehensive income in the consolidatedbalance sheet. Debt classified as “other securities” for which
fair value is not available are stated at the amortized cost.
Equity securities classified as “other securities” for which fairvalue is not available are stated at the moving-average cost.
Realized gains and losses on the other securities arecomputed using the moving-average cost. Securities held by
the Company are classified as held-to-maturity securities,
investments in affiliates and other securities.
(e) Inventories
Inventories held for sale in the ordinary course of business aremeasured at the lower of cost or net selling value, which isdefined as the selling price less additional estimatedSee accompanying notes to consolidated financial statements.

11

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201812

Notes to Consolidated Financial Statements

manufacturing costs and estimated direct selling expenses,
determined principally by the average method.
( f ) Property, Plant and Equipment
Property, plant and equipment is carried substantially at cost.
Depreciation of the property, plant and equipment is provided
principally by the straight-line method based on the estimateduseful lives.
The estimated useful lives are as follows:
Buildings and structures
7-50 years
Machinery, equipment and vehicles 8-15 years(g) Intangible Assets
Intangible assets are carried at cost less accumulated
amortization. The expenses for internal use computer
software are deferred and amortized by the straight-line
method over the estimated useful lives (5 years). Intangible
assets other than software are deferred and amortized by thestraight-line method at rates based on the estimated useful
lives of the respective assets.
(h) Impairment of Long-lived Assets
The standard for the impairment of long-lived assets requiresthat fixed assets be reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying
amount of an asset or asset group may not be recoverable.
An impairment loss would be recognized if the carrying
amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.
Recognized impairment losses, except for those to be
deducted directly from acquisition costs of corresponding
fixed assets, are included in accumulated depreciation on the
consolidated balance sheet.
( i ) Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided at an
amount of uncollectible receivables based on historical loss
ratios and an amount that takes into consideration thepossibility of specific liabilities.
( j ) Retirement Benefits
In calculating retirement benefit obligation, the benefit formulabasis is used for the method of attributing expected
retirement benefits to the periods up to the end of the current
fiscal year.
Past service costs are amortized by the straight-line
method over a certain period within the average remaining
years of service of the eligible employees (10 years) whensuch past service costs occur.
Actuarial gains and losses are amortized by the
declining-balance method over a certain period within the
average remaining years of service of the eligible employees

13

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

(10 years) from the year following the year in which the gains
or losses occur.
The Company and certain subsidiaries have unfunded
defined benefit pension plans for directors, corporate
auditors and executive officers. The provision for the plans
has been made in the accompanying consolidated financial
statements for the vested benefits to which directors,
corporate auditors and executive officers are entitled if they
were to retire or sever immediately at the balance sheet
dates (See note 8).

(o) Asset Retirement Obligations(k) Leases

The Company provides a reasonably estimated amount ofstructural reform costs for unprofitable business.

All finance lease transactions are capitalized. Leased assets
related to finance lease transactions without title transfer are
depreciated on a straight-line method, with the lease periods
as their useful lives and no residual value.
( l ) Foreign Currency Translation
Under the Accounting Standards for Foreign Currency
Transactions, foreign currency transactions are translated into
yen on the basis of the rates in effect at the transaction dates,
receivables and payables denominated in foreign currencies
are translated into yen at the rate of exchange as of thebalance sheet dates, and gains or losses resulting from thetranslation of foreign currencies are credited or charged toincome. Assets and liabilities of overseas subsidiaries aretranslated into yen at the rate of exchange as of the balance
sheet date, and revenues and expenses of them aretranslated into yen using the average rate in the year, and acomprehensive adjustment resulting from translation ispresented as “Foreign currency translation adjustments” and“Non-controlling interests” in a component of net assets.
(m) Income Taxes
Income taxes in Japan applicable to the Company and its
domestic consolidated subsidiaries consist of corporate tax,
inhabitant tax and business tax.
The Accounting Standards for Income Taxes require thatdeferred income taxes be accounted for under the asset andliability method. Deferred tax assets and liabilities arerecognized for the expected future tax consequences of
events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets andliabilities are measured using enacted tax rates expected toapply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled, and the effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the periodthat includes the enactment date.
(n) Accrual for Environmental Measures
An accrual for environmental measures is provided at an
estimated amount of disposal and transport costs ofpolychlorinated biphenyl waste based on the handling cost
publicized by Japan Environmental Storage & Safety
Corporation. The Act of Special Measures for Proper Handlingof Polychlorinated Biphenyl Waste requires proper handling ofpolychlorinated biphenyl waste.

The Company recognized an asset retirement obligation
which is statutory or similar obligation with regard to theremoval of assets as a liability. An asset retirement obligationis recognized as a liability at the time that the asset is incurredby its acquisition, construction, development or ordinary use.
When an asset retirement obligation is recognized as a liability,
the asset retirement cost corresponding to it is included in thecost of the relevant asset by the same amount.
(p) Accrued Business Structure Improvement Expenses(q) Provision for Loss on Liquidation of Subsidiaries andAffiliates
The Company provides a reasonably estimated amount for
loss to be incurred in association with liquidation ofsubsidiaries and affiliates.
(r) Reclassifications
Certain reclassifications have been made to the prior years’
consolidated financial statements to conform to thepresentation used for the year ended March 31, 2018.
(s) Additional Information(Adoption of IFRS by Overseas Affiliates)
In applying the equity method to the financial statements ofJapan Saudi Arabia Methanol Company, Inc. (JSA Methanol),an affiliate of the Company, the equity method was applied tothe investments in SAUDI METHANOL COMPANY, an
overseas affiliate of JSA Methanol, to recognize the affiliate’s
profit and loss, which were included in the financial
statements of JSA Methanol. From the fiscal year ended
March 31, 2018, JSA Methanol applies the equity method tothe financial statements of SAUDI METHANOL COMPANY
prepared in accordance with IFRS.
In addition, the Company applies the equity method tothe financial statements of Tai Hong Circuit Industrial Co.,
Ltd., an overseas affiliate of the Company, prepared inaccordance with IFRS from the fiscal year ended March 31,
2018.
These changes have been applied retrospectively and theprior year consolidated financial statements have been
restated.
As a result, profit before income taxes for the year ended
March 31, 2017 increased by ¥51 million ($480 thousand)compared to the amount previously determined before
retrospective application. In addition, retained earnings as ofApril 1, 2016 decreased by ¥3,392 million ($31,928 thousand)reflecting the cumulative effects on the beginning balance of
net assets in the prior year.
(t ) Accounting Pronouncements Not Yet Adopted

Revenue Recognition” (ASBJ Guidance No. 30, issued by
the Accounting Standards Board of Japan on March 30,
2018)
The International Accounting Standards Board (IASB) and US
Financial Accounting Standards Board (FASB) jointly
developed comprehensive revenue recognition standards andissued “Revenue from Contracts with Customers” in May
2014 (IASB’s IFRS 15 and FASB’s Topic 606). Consideringthat IFRS 15 shall apply to fiscal years beginning on or afterJanuary 1, 2018, and Topic 606 shall apply to fiscal years
beginning after December 15, 2017, the ASBJ developed acomprehensive accounting standard on revenue recognition
and thus issued the accounting standard together with theimplementation guidance.
The ASBJ established the accounting standard onrevenue recognition by following the basic policies indeveloping it. The basic policies were: firstly, incorporating thecore principle of IFRS 15 as the starting point from theperspective of facilitating comparability among financial
statements, which is one of the benefits of ensuringconsistency with IFRS 15; secondly, adding alternative
treatments, but to the extent not impairing comparability,
where consideration should be given to the practice having
been used in Japan.
These ASBJ statement and implementation guidance will
be applied from the fiscal year beginning on April 1, 2021.
The impact of the application of the Accounting Standard
for Revenue Recognition on the consolidated financial
statements is currently under evaluation.

2. Financial Statement Translation
The translations of the yen amounts into U.S. dollars areincluded solely for the convenience of the readers, using theprevailing exchange rate as of March 31, 2018, which was¥106.24 to U.S. $1. This translation should not be construed
as a representation that the amounts shown could be
converted into U.S. dollars at such rate.

3. Cash and Cash Equivalents(a) Reconciliation between “Cash” in the consolidated balance
sheet and “Cash and cash equivalents” in the consolidated
statement of cash flows as of March 31, 2018 and 2017 is
as follows:
Millions of yen

CashTime deposits with maturities of over three months
Short-term investments
Cash and cash equivalents

Thousands of
U.S. dollars

2018

2017

2018

¥ 101,090¥ 75,017$ 951,525(10,907)(7,979)(102,664)

121¥ 90,304

139¥ 67,177

1,139$ 850,000- “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, issued by the Accounting Standards
Board of Japan on March 30, 2018)- “Implementation Guidance on Accounting Standard for

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201814

Notes to Consolidated Financial Statements(b) Details of the assets and liabilities of subsidiaries that havebeen excluded from the scope of consolidation due tosales of share
As of March 31, 2018
JAPAN PIONICS CO., LTD. has been excluded from thescope of consolidation due to the sale of the entirety ofshares. The components of assets and liabilities at the timeof the sale, the selling price and net proceeds from sales ofshares of JAPAN PIONICS CO., LTD. are as follows:

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Loss on sales of shares
Selling price of shares
Cash and cash equivalents
Payments for sales of shares ofsubsidiaries resulting in change inscope of consolidation

Millions of yen
2018

Thousands of
U.S. dollars
2018¥ 2,100
1,049(1,091)(3)(1,245)¥ 808(4)$ 19,767
9,874(10,269)(28)(11,719)$ 7,605(38)¥$ 7,568804

As of March 31, 2017
KOKUKA SANGYO CO., LTD. and its five subsidiaries havebeen excluded from the scope of consolidation due tosales of a part of shares. The components of assets andliabilities at the time of sales, the selling price and net
payments for sales of shares of KOKUKA SANGYO CO.,LTD. and its five subsidiaries are as follows:
Millions of yen
2017

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net unrealized gain on other securities
Non-controlling interests
Investment account after sale ofsharesLoss on sales of shares
Selling price of shares
Cash and cash equivalents
Payments for sales of shares ofsubsidiaries resulting in change inscope of consolidation¥ 2,007
18,249(3,481)(15,418)
(4)
(339)
(675)
¥

¥

(127)
210
(523)
(313)

4. Short-term Investments and Investments in
Securities
Balance sheet amount, fair value and gross unrealized gain
and loss of held-to-maturity securities with fair value as ofMarch 31, 2018 and 2017 are summarized as follows:

15

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

Millions of yen
Gross
Gross
unrealized
unrealized
gain
loss

Balancesheet
amountMarch 31, 2018
Government
bond securities

March 31, 2017
Government
bond securities

¥

0 ¥

0

¥

— ¥

0

¥

0 ¥

0

¥

— ¥

0

¥

0 ¥

0

¥

— ¥

0

¥

0 ¥

0

¥

— ¥

0

Thousands of U.S. dollars
Gross
Gross
unrealized
unrealized
gain
loss

Fair value

$

0 $

0

$

— $

0

$

0 $

0

$

— $

0

Balance sheet amount, acquisition cost, and grossunrealized gain and loss of other securities with fair value as ofMarch 31, 2018 and 2017 are summarized as follows:
Millions of yen
Gross
Gross
unrealized
unrealized
gain
loss

Acquisition
cost

March 31, 2018
Equity securities ¥ 48,573
Other securities
9¥ 48,584¥ 25,512—¥ 25,512¥ (589)(0)¥ (589)¥ 23,65010¥ 23,661

March 31, 2017
Equity securities ¥ 52,454
Other securities9¥ 52,465¥ 26,365—¥ 26,365¥ (530)(0)¥ (530)¥ 26,61910¥ 26,629

Balancesheet
amountBalancesheet
amountThousands of U.S. dollars
Gross
Gross
unrealized
unrealized
gain
loss

Acquisition
cost

March 31, 2018
Equity securities $ 457,201
Other securities85$ 457,304$ 240,136 $ (5,544)—(0)$ 240,136 $ (5,544)$ 222,609
94$ 222,713

Securities classified as other securities for which fair value
is not available are unlisted equity securities amounting to¥4,267 million ($40,164 thousand) and ¥11,405 million as ofMarch 31, 2018 and 2017, respectively.
For the years ended March 31, 2018 and 2017, proceedsfrom the sale of other securities are ¥4,716 million ($44,390
thousand) and ¥1,960 million, respectively. Gross realized
gains are ¥2,066 million ($19,447 thousand) and ¥860 million
for the years ended March 31, 2018 and 2017, respectively.
Gross realized losses are ¥1 million for the year ended March
31, 2017.
The Company recognized impairment losses on securitiesof ¥8,327 million ($78,379 thousand) and ¥240 million for theyears ended March 31, 2018 and 2017, respectively.
The Company recognizes impairment losses on securities
with market value when the market value declines by morethan 50 percent. When the market value declines by more

The aggregate carrying amounts of investments in affiliates asof March 31, 2018 and 2017 are ¥108,900 million($1,025,038 thousand) and ¥111,969 million, respectively.

6. Short-term and Long-term Debt
Short-term debt is represented by bank loans which are due
within one year. The weighted average interest rate ofshort-term debt is 0.7% and 0.5% as of March 31, 2018 and2017, respectively.
Long-term debt as of March 31, 2018 and 2017 issummarized as follows:

Millions of yen
2018
2017

Loans, principally frombanks, maturing ininstallments through 2026
with weighted averageinterest of 1.37% as of March ¥ 42,752
31, 2018, partially secured by
mortgage of property, plantand equipment and securities¥—

Thousands of
U.S. dollars
2018¥

Thousands of
U.S. dollars

13,650
2,813
5,794
1,251

$ 128,483
26,47854,537
11,775

Millions of yen

Year ending March 31,
2020
2021
2022
2023

¥

—
10,000——Thousands of
U.S. dollars$—
94,127——

Property, plant and equipment and securities with a bookvalue as of March 31, 2018 of ¥17,626 million ($165,907
thousand) were mortgaged to secure certain debts.
As is customary in Japan, both short-term and long-termbank loans are under general agreements which provide that
security and guarantees for present and future indebtedness
will be given upon request of the bank, and that the bank shallhave the right, as the obligations become due or in the eventof default, to offset cash deposits against obligations due thebanks.

$ 402,410

7. Asset Retirement Obligations(a) Asset retirement obligations recognized on the
consolidated balance sheet

Loans, principally frombanks, maturing ininstallments through 2021
with weighted averageinterest of 1.28% as of March
31, 2017, partially secured by
mortgage of property, plantand equipment and securities—

47,095—

Lease liabilities maturing ininstallments through 2025 asof March 31, 2018

478

—

4,499

Lease liabilities maturing ininstallments through 2023 asof March 31, 2017

—

547

—

Unsecured bonds, due 2021
with interest of 0.572%

10,00010,00094,12753,23057,642501,035

17,423
13,600100
100¥ 35,707 ¥ 43,942

163,997941$ 336,098

Less current installments:
Loans
Lease liabilities

Year ending March 31,
2020
2021
2022
2023

Millions of yen

The aggregate annual maturities of bonds after March 31,
2019, are as follows:

5. Investments in Affiliates

Balancesheet
amountMarch 31, 2018
Government
bond securities

Fair value

than 30 percent but less than 50 percent, the Company
recognizes necessary impairment losses as a result ofconsidering the possibility of recovery. The Company
recognizes impairment losses on securities without market
value when the value declines significantly due to an issuer’s
financial condition.

Note : The weighted average interest rates on lease liabilities
as of March 31, 2017 and 2018 are omitted because
lease liabilities were recorded in the consolidatedbalance sheet based on the total lease payment which
includes assumed interests portion.

The Company is obliged to restore its natural gas mining
facilities except for mentioned below (b) according to law andland lease contracts. The asset retirement obligations are
based on estimated future cash flows for the restorations.
The obligations are calculated by using the estimated mine
lives of 12 to 76 years and discounted rate of 0.828% to2.385%.
Asbestos are used in part of fixed assets held by theCompany and certain consolidated subsidiaries. The
Company is obliged to conduct a special treatment whenasbestos are removed. The asset retirement obligations are
based on estimated future cash flows for the treatment. The
obligations are calculated by using the estimated useful livesof the fixed assets mainly of 8 years and discounted rate
mainly of 1.035%.
The Company and certain consolidated subsidiaries are
obliged to restore their head offices and plant premises
according to leasehold contracts. The asset retirement
obligations are based on estimated future cash flows for the
restorations. The obligations are calculated by using theestimated lease terms of 31 to 50 years and discounted rate
mainly of 2.295%.
The following table provides a total asset retirement
obligation for the years ended March 31, 2018 and 2017:

The aggregate annual maturities of loans after March 31,
2019, are as follows:

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201816

Notes to Consolidated Financial Statements

Millions of yen
2018
2017

Balance at beginning ofyear
Liabilities incurred due tothe acquisition
Accretion expenses
Liabilities settled
Other
Balance at end of year

Thousands of
U.S. dollars
2018¥ 3,930¥ 3,912$ 36,992

17

11

160

75
(80)
—
¥ 3,94366(65)
5¥ 3,930

706
(753)
—
$ 37,114(b) Asset retirement obligations not recognized on the
consolidated balance sheet
The Company is obliged to restore its natural gas mining
facilities according to law and land lease contracts, and theCompany plans to use part of the facilities as storage facilities
after mining continuingly. The Company and certain
consolidated subsidiaries are obliged to restore their piers andpipelines according to law and lease contracts, and the piersand pipelines can be used for a substantial long-term withappropriate repair. Asset retirement obligations relating tothese assets are not recognized because it is extremely difficult
to estimate the time of fulfilling the obligations reasonably.

8. Retirement Benefits
MGC has defined retirement benefit plans such as lump-sum
retirement benefit plans and defined benefit corporate pension
plans, besides defined contribution pension plans.
In addition, the Company has also set up retirement
benefit trusts.
Certain consolidated subsidiaries apply the simplified
method in computing net defined benefit liability andretirement benefit expenses for their defined benefit corporate
pension plans and lump-sum retirement benefit plans.
Defined benefit plans(a) Reconciliation between retirement benefit obligations
at beginning of year and end of year (excluding plans
applying the simplified method):
Millions of yen
2018
2017

Retirement benefit obligation¥ 40,775 ¥ 42,432
at beginning of year
Service costs
2,164
2,181
Interest costs
370
372
Actuarial gains and losses(121)
21
arising during year
Retirement benefits paid
(1,965)(4,197)
Other
23
(34)
Retirement benefit obligation¥ 41,246 ¥ 40,775
at end of year

Thousands of
U.S. dollars
2018$ 383,801
20,3693,483(1,139)(18,496)216$ 388,234(b) Reconciliation between plan assets at beginning ofyear and end of year (excluding plans applying thesimplified method):

17

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

Millions of yen
2018
2017

Plan assets at beginning of¥ 36,289 ¥ 34,943
year
Expected return on plan407
460
assetsActuarial gains and losses
2,497
2,003
arising during year
Contribution from employer
1,577
1,566
Retirement benefits paid
(1,366)(2,665)
Other
33
(18)
Plan assets at end of year
¥ 39,438 ¥ 36,289

Thousands of
U.S. dollars
2018

3,831
23,503
14,844(12,858)311$ 371,216

Net defined benefit liability at¥ 1,438
beginning of year
Decrease due to change—of scope of consolidation
Retirement benefit
257
expenses
Retirement benefits paid
(73)
Contribution to plans
(81)
Other
22
Net defined benefit liability at¥ 1,563
end of year

Thousands of
U.S. dollars
2018¥ 1,589$ 13,535

(80)

—

293

2,419

(291)
(76)
3

(687)
(762)
207

¥ 1,438$ 14,712(d) Reconciliation between retirement benefit obligations
and plan assets at end of year and net defined benefit
asset and defined benefit liability on the consolidatedbalance sheet:
Millions of yen
2018
2017

Funded retirement benefit
obligation
Plan assets¥ 41,230¥

Unfunded retirement benefit
obligation
Net balance of liability andasset recorded on the¥
consolidated balance sheet¥ 40,428(41,015)(37,750)215 ¥ 2,678

Thousands of
U.S. dollars
2018$(386,060)
2,024
29,697¥

5,924$ 31,730

Net defined benefit asset¥ (1,221) ¥Net defined benefit liability
4,592
Net balance of liability andasset recorded on the¥ 3,371 ¥consolidated balance sheet

(12)
5,936

$ (11,493)
43,223

3,371

5,924

Service costs¥ 2,164
Interest costs
370
Expected return on plan(407)
assetsAmortization of actuarial(99)
gains and losses
Amortization of past service
81
costs
Retirement benefit expenses
applying the simplified
257
method(41)
Other
Retirement benefit expenses¥ 2,324
under defined benefit plans¥ 2,181372$ 20,369
3,483

(460)

(3,831)

291

(932)

126

762

293

2,419

—

(386)

¥ 2,805$ 21,875(f ) Components of items recorded in remeasurements ofdefined benefit plans in other comprehensive income,before tax, are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Past service costs
Actuarial gains and losses
Total

¥

81
2,367
¥ 2,449

¥

126
2,171
¥ 2,297$762
22,280$ 23,052(g) Components of items recorded in remeasurements ofdefined benefit plans in accumulated othercomprehensive income, before tax, are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Unrecognized past service
(76)
¥
costs
Unrecognized actuarial gains(3,513)and losses
Total¥ (3,590)

4

¥

$

(715)

(1,146)(33,067)¥ (1,141)$ (33,791)$ 388,084

3,246

3,155

Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

$ 341,576(c) Reconciliation between net defined benefit liabilities ofplans applying the simplified method at beginning ofyear and end of year:
Millions of yen
2018
2017

(e) Retirement benefit expenses and components thereof:(h) Plan assets( i ) Components of plan assets
Percentages to total plan assets by major category are as
follows:
Debt securities
Equity securities
Cash
Other
Total

2018

2017

36%
42
3
19
100%

31%
48
4
17
100%

$ 31,730( i i ) Determination of expected long-term rate of return on plan
assets
The expected long-term rate of return on plan assets isdetermined considering current and expected allocation ofplan assets and current and expected long-term rate of return
derived from various components of plan assets.

(i ) Actuarial assumptions
Discount rate
Expected long-term rate of return onplan assets

2018

2017

Mainly0.8%
Mainly2.0%

Mainly0.8%
Mainly2.5%

Defined contribution plans
The required contribution of MGC to the defined contributionplans amounted to ¥493 million ($4,640 thousand) and ¥471
million as of March 31, 2018 and 2017, respectively.
Directors, corporate auditors and executive officers are
not covered by the plans described above. For such persons,the Company and certain subsidiaries had unfunded defined
benefit pension plans. Under the plans, directors, corporate
auditors and executive officers are entitled to lump-sum
payments based on the current rate of pay and length ofservice when they leave the companies. MGC provides for theamount of the vested benefits to which directors, corporate
auditors and executive officers are entitled if they were to
retire or sever immediately at the balance sheet dates. As of
March 31, 2018 and 2017, the liabilities for retirement andseverance benefits related to the plans were ¥339 million($3,191 thousand) and ¥387 million, respectively.

9. Income Taxes
The Company and its domestic subsidiaries are subject toJapanese corporate, inhabitant and business taxes based on
income which, in the aggregate, result in a statutory tax rateof approximately 30.9% in 2018 and 2017.
A reconciliation of the statutory tax rate and the effective
tax rate as a percentage of profit before income taxes for theyears ended March 31, 2018 and 2017 is as follows:
Statutory tax rate
Equity in earnings of affiliates
Dividend income eliminated inconsolidation
Valuation allowance
Income not credited for tax purposes
Succession of operating loss carryforward associated with liquidation ofsubsidiaries
Foreign taxes
Adjustments of loss on valuation ofshares of subsidiaries and associates
Other
Effective tax rate

2018

2017

30.9%
(7.7)

30.9%
(10.7)

10.4

8.0

(4.7)
(10.6)

(5.7)
(8.1)

(0.0)

(0.2)

0.6

1.9

(3.9)

(0.3)

(4.9)
10.2%

(3.2)
12.6%

Significant components of deferred tax assets andliabilities as of March 31, 2018 and 2017 are as follows:

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201818

Notes to Consolidated Financial Statements

Deferred tax assets:¥
Tax loss carryforward
Net defined benefit liability
Devaluation loss on investments in securities
Accrued bonuses
Intercompany profits
Depreciation
Impairment loss
Asset retirement obligations
Other
Valuation allowance
Deferred tax liabilities:
Net unrealized gain onother securities
Gain by contributing theassets to the trust
Tax purpose reserves etc.
regulated by Japanese
tax law
Asset retirement cost
Retained earnings ofoverseas consolidated
subsidiaries and others
Other
Net deferred tax liabilities

Millions of yen
2018
2017

Thousands of
U.S. dollars
20188,749 ¥
6,291

15,947
6,216$ 82,351
59,215

3,273

1,262

30,808

1,559
1,520
605
3,165
1,247
4,001
30,413(20,401)
10,011

1,569
1,720
695
3,254
1,241
4,420
36,329(27,085)
9,244

14,67414,307
5,695
29,791
11,73837,660286,267(192,027)
94,230(7,444)(7,513)(70,068)(1,356)(1,402)(12,764)(1,982)(2,118)(18,656)

(330)

(357)

(3,106)(4,898)(5,459)(46,103)(1,984)(1,980)(18,675)(17,997)(18,832) (169,399)¥ (7,985) ¥ (9,587) $ (75,160)

Net deferred tax assets and liabilities as of March 31,2018 and 2017 are reflected in the accompanying
consolidated balance sheet under the following captions:
Millions of yen
2018
2017

Current assets- Deferred income taxes
Investments and otherassets- Deferred income taxes
Current liabilities- Other current liabilities
Non-current liabilities- Deferred income taxes

¥

6,759
2,137

¥

Thousands of
U.S. dollars
2018

5,818

$ 63,620

2,161

20,115

(242)

(256)

(2,278)(16,640)(17,309)(156,627)

10. Common Stock
Under the Companies Act, the entire amount of the issue
price of shares is required to be designated as statedcommon stock account although a company in Japan may,by resolution of its Board of Directors, account for an amountnot exceeding 50% of the issue price of new shares asadditional paid-in capital.

11. Retained Earnings and Dividends
The Companies Act provides that an amount equal to 10% of
distributions from retained earnings paid by the Company andits Japanese subsidiaries be appropriated as a legal reserve.
No further appropriations are required when the total amountof the additional paid-in capital and the legal reserve equals

19

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

25% of their respective stated capital. The Companies Act
also provides that additional paid-in capital and legal reserve
are available for appropriations by the resolution of thestockholders. Balances of the legal reserve are included inretained earnings in the accompanying consolidated balance
sheet.
Cash dividends charged to retained earnings for the years
ended March 31, 2018 and 2017 represent dividends paidout during those years. The amount available for dividends isbased on the amount recorded in the Company’s
non-consolidated books of account in accordance with theCompanies Act.

12. Selling, General and Administrative Expenses
Significant components of selling, general and administrative
expenses are as follows:
Millions of yen
2018
2017

(a) Dividends paid during the year ended March 31, 2017

Freight
Stevedoring and warehouse
fee
Salaries
Employees’ bonuses
Pension cost
WelfareTransportation
Depreciation

The following was approved by the Board of Directors held on
May 26, 2016.

13. Research and Development Costs( i) Total dividends(ii) Cash dividends per common share(iii) Record date(iv) Effective date

¥3,533 million¥8
March 31, 2016
June 9, 2016

The following was approved by the Board of Directors
held on November 2, 2016.
( i) Total dividends(ii) Cash dividends per common share(iii) Record date(iv) Effective date

¥3,453 million¥8
September 30, 2016
December 6, 2016

Thousands of
U.S. dollars
2018¥ 21,047¥ 19,353$ 198,108

4,076

4,182

38,366

17,574
5,599
1,168
3,532
2,828
5,084

16,908
5,458
1,312
3,400
2,683
4,741

165,418
52,701
10,99433,245
26,61947,854

14. Long-lived Assets

16. Other Comprehensive Income

Year ended March 31, 2018

The reclassification adjustment and the related income tax
effects allocated to each component of other comprehensive
income for the years ended March 31, 2018 and 2017 are as

Impairment loss on long-lived assets was immaterial for theyear ended March 31, 2018. The relevant disclosure is,therefore, omitted.

( i) Total dividends(c) Dividends to be paid after the balance sheet date but
the record date for the payment belongs to the year
ended March 31, 2018
The following was approved by the Board of Directors held on
May 25, 2018.
¥7,476 million($70,369 thousand)(ii) Dividend source
Retained earnings(iii) Cash dividends per common share ¥35 ($0.33)(iv) Record date
March 31, 2018(v) Effective dateJune 7, 2018

Location

Niigata City,
Niigataprefecture

Usage

Natural gas
chemicals
manufacturing facilities

Millions ofyenClassification

Buildings,
Machineryandequipment, etc.

¥ 1,029

The long-lived assets that are used for business aregrouped according to the classification which is used formonitoring the profit and loss continuously under the
management accounting system, and the idle assets aregrouped individually by each item.
A part of natural gas chemicals manufacturing facilities
owned by the Company was written down to a recoverable
amount by considering the circumstances of the operation.
The recoverable amount was measured using the value in
use and evaluated at the memo value because future cash
flows were negative.
Impairment loss on the asset groups consisted of thefollowing:( i) Total dividends

Millions of yen
2017

Buildings and structures
Machinery and equipment
Other
Total

¥ 513

¥ 162

¥

183
766
79
¥ 1,029

Net unrealized (loss) gain onother securities:
Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)
Net-of-tax amountDeferred (losses) gains onhedges:Arising during the year
Reclassification adjustment
Before tax amountTax benefit (expense)
Net-of-tax amountForeign currency translation
adjustments:
Arising during the year
Reclassification adjustment
Net-of-tax amountRemeasurements of defined
benefit plans:Arising during the year
Reclassification adjustment
Before tax amountTax expense
Net-of-tax amount
Share of other comprehensive income of affiliates
accounted for by equity
method:Arising during the year
Reclassification adjustment
Net-of-tax amount
Total other comprehensive
income¥$ 1,525

Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

MGC reviewed its long-lived assets for impairment and, as aresult, recognized an impairment loss in the amount of ¥1,124
million for the significant asset groups which are as follows:¥5,179 million($48,748 thousand)(ii) Cash dividends per common share ¥24 ($0.23)(iii) Record date
September 30, 2017(iv) Effective date
December 6, 2017

Thousands of
U.S. dollars
2018

Provision for loss on
liquidation of subsidiaries
and affiliates

Year ended March 31, 2017( i) Total dividends

MGC recorded a loss on liquidation of subsidiaries andaffiliates in the amount of ¥162 million ($1,525 thousand) and¥667 million associated with the liquidation of a consolidated
subsidiary for the years ended March 31, 2018 and 2017,
respectively.
Components of loss on liquidation of subsidiaries andaffiliates for the years ended March 31, 2018 and 2017 are as
follows:

Research and development costs charged to income for theyears ended March 31, 2018 and 2017 are ¥18,987 million($178,718 thousand) and ¥19,267 million, respectively.

The following was approved by the Board of Directors held on
May 26, 2017.

The following was approved by the Board of Directors
held on November 1, 2017.

15. Loss on Liquidation of Subsidiaries andAffiliates

Millions of yen
2018
2017

(b) Dividends paid during the year ended March 31, 2018

¥4,747 million($44,682 thousand)(ii) Cash dividends per common share ¥22 ($0.21)(iii) Record date
March 31, 2017(iv) Effective dateJune 8, 2017

Impairment loss on long-lived assets other than the above
facilities was immaterial for the year ended March 31, 2017.
The relevant disclosure is, therefore, omitted.

782 ¥ 12,320(1,714)(783)(932)
11,537104(3,273)
(827)
8,264

$ 7,361(16,133)(8,773)979(7,784)

(0)
0
(0)
0
(0)

(0)
5
4
(1)
3

(0)
0
(0)
0
(0)

2,081
20
2,102

(2,192)—(2,192)

19,588188
19,785

2,615
(166)
2,449
(244)
2,204

1,997
299
2,297
(184)
2,113

24,614(1,563)23,052(2,297)
20,745(1,775)—(1,775)

(253)
(44)
(297)

(16,707)—(16,707)

7,891$ 16,020¥ 1,702¥

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201820

Notes to Consolidated Financial Statements

17. Per Share Information

Millions of yen
2018
2017

(a) Earnings per share
Earnings per share, and reconciliation of the numbers and theamounts used in the earnings per share computations for theyears ended March 31, 2018 and 2017 are as follows:
Yen

Earnings per share

U.S. dollars
2018

2018

2017

¥ 281.39¥ 221.83

2.65

Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Profit attributable to owners¥ 60,531
of parent
Profit not applicable to—common stockholders
Profit attributable to com¥ 60,531
mon stockholders of parent$¥ 48,013$ 569,757——¥ 48,013$ 569,757

Number of shares
2018
2017

Weighted average number ofshares outstanding on which
earnings per share is
calculated

215,117,047

216,444,168

The diluted earnings per share for the years ended March
31, 2018 and 2017 are not presented because there are no
dilutive potential shares as of March 31, 2018 and 2017.
(b) Net assets per share
Net assets per share as of March 31, 2018 and 2017 are as
follows:
Yen
2017

2018

Net assets per share¥ 2,187.99 ¥ 1,967.94

U.S. dollars
2017$ 20.59

18. Leases
Operating lease
Future minimum lease payments required under
non-cancellable operating leases as of March 31, 2018 and2017 are as follows:
Millions of yen
2018
2017

Within one year
Over one year

¥ 1,238
2,846¥ 4,084

¥
¥

1,368
2,485
3,854

Thousands of
U.S. dollars
2018$ 11,653
26,788$ 38,441

19. Balances and Transactions with Related Party
The Company has a 50% equity ownership in Mitsubishi
Engineering-Plastics Corporation as of March 31, 2018 and2017.
Balances with the company as of March 31, 2018 and2017 and related transactions for the years then ended aresummarized as follows:

21

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

Balances:
Trade accounts receivable ¥Transactions:
Sales

Thousands of
U.S. dollars
2018

13,089 ¥8,102 $ 123,202

37,67031,977354,575

The Company has a 50% equity ownership in BRUNEIMETHANOL COMPANY SDN. BHD. as of March 31, 2018and 2017.
As of March 31, 2018 and 2017, the Company has
guaranteed ¥7,001 million ($65,898 thousand) and ¥9,373
million of the company’s loans to financial institutions,
respectively.
The affiliated company of the Company has a 35% equity
ownership in CARIBBEAN GAS CHEMICAL LTD. as of March
31, 2018 and 2017.
As of March 31, 2018 and 2017, the Company has
guaranteed ¥17,682 million ($166,434 thousand) and ¥6,719
million of the company’s loans to financial institutions.
The condensed financial information of all of 16 affiliates(17 in 2017) accounted for by equity method, including thesignificant affiliate, Japan Saudi Arabia Methanol Company,
Ltd., are as follows:
Millions of yen
2018
2017

Total current assets
Total non-current assets

Thousands of
U.S. dollars
2018¥ 205,101 ¥ 170,149 $ 1,930,544
216,184
237,979 2,034,864

Total current liabilities
Total non-current liabilities

125,081
68,886

100,451
65,9001,177,344
648,400

Total net assets

227,318

241,776

2,139,665

Sales
Profit before income taxes
Profit361,599
73,56943,652

314,774
63,33758,1903,403,605
692,479
410,881

20. Commitments and Contingencies
As of March 31, 2017, MGC was contingently liable withrespect to recourse obligations related to trade notes
receivable transferred in the amount of ¥9 million.
The Company guarantees certain obligations of its
associated companies and employees, etc. As of March 31,2018 and 2017, guarantees for affiliates and employees, etc.
loans amounted to ¥25,160 million ($236,822 thousand) and¥15,223 million, respectively.

21. Financial Instruments
Conditions of financial instruments(a) Management policy
MGC raises necessary funds through bank borrowings andissue of bonds in accordance with a funds management plan.
Surplus funds are invested in highly safe financial instruments.
MGC raises funds through bank borrowings for short-term
operating fund. MGC uses derivatives to avoid risks
mentioned below and does not enter into derivatives for
speculative purposes.
(b) Financial instruments and risks
Trade notes and accounts receivable are exposed tocustomer’s credit risk. Maturities of trade notes and accounts
payable are mostly within one year. Part of trade receivables
and payables is denominated in foreign currency and is
exposed to fluctuation risk of foreign exchange rates. MGC
uses foreign exchange contracts to hedge the net position.
Short-term investments and investments in securities aremainly held-to-maturity bonds and equity securities held forbusiness relations and are exposed to market fluctuation risk.
Borrowings, bonds and lease obligations for financeleases are mainly for financing of funds for capital expenditureand operating. Part of the liabilities is with variable interest rate
and thus is exposed to interest rate fluctuation risk. MGC
uses interest rate swaps to hedge the risk.
MGC uses foreign exchange contracts to hedge futurefluctuation of foreign exchange rates of operating receivables
and payables and forecasted transactions denominated inforeign currencies, interest rate swaps and currency swaps tohedge future fluctuation of interest rates and foreign exchange
rates of borrowings.
Hedge accounting is applied for certain derivativetransactions. MGC applies the deferral hedge accounting
method for hedge accounting. MGC has entered into forward
exchange contracts for receivables and payables andforecasted transactions denominated in foreign currencies,
and interest rate swap agreements to manage interest rate
exposures on certain borrowings. Hedges for fluctuation riskof foreign exchange rates that meet certain criteria areaccounted for using the allocation method. If interest rate
swap agreements are used as hedges and meet certain
hedging criteria, the difference in amounts to be paid or
received on the interest rate swap agreements is recognizedover the life of the agreements as an adjustment to interest
expense. MGC employs derivative transactions within actual
demand and does not hold or issue derivative financial
instruments for speculative purposes. The hedge
effectiveness is assessed based on the fluctuation ratio ofhedged items and hedging instruments by comparing the
cumulative market fluctuations or cash flow fluctuations ofhedged items and those of related hedging instruments. The
Company omits to assess hedge effectiveness of interest rate
swaps which qualify for hedge accounting and meet certain
criteria.

(c) Financial instruments risk management( i ) Credit risk
To mitigate and quickly capture the collectability issues, sales
administration divisions regularly monitor major customers’
credit status, and perform due date controls and balance
controls for each customer in accordance with tradereceivables and credit control rules. Held-to-maturity
securities are debt securities readily convertible into cash
which are invested in accordance with investment of surplus
funds rules.
Maximum risk as of March 31, 2018 and 2017 isrepresented by the carrying amount of financial assets
exposed to credit risk.
(ii) Market risk
The finance departments have executed the transactions withmarket risk with the director’s approval in accordance with thefinance rules and the derivatives control rules.
To mitigate the foreign currency fluctuation risk
recognized by currency and month, MGC enters into aforward exchange contract for hedging the cash flow
fluctuation risk associated with operating receivables andpayables and forecasted transactions denominated in foreign
currencies and surplus funds. To mitigate the foreign currency
and interest rate fluctuation risk, MGC enters into an interest
rate swap and a currency swap for hedging the cash flow
fluctuation risk associated with borrowings.
MGC regularly monitors a price and an issuer’s financial
condition, and continuously considers whether MGC holds
the short-term investments or the investments in securities
except for held-to-maturity bond.
(iii) Liquidity risk
To mitigate the liquidity risk, a finance department preparesand updates a funds management plan as necessary, andmaintains an appropriate level of liquidity.
(d) Supplemental explanation regarding fair value offinancial instruments
Fair value of financial instruments is measured based on thequoted market price, if available, or reasonably assessedvalue if a quoted market price is not available. Fair value offinancial instruments for which a quoted market price is notavailable is calculated based on certain assumptions, and thefair value might differ if different assumptions are used. In
addition, the contract amount of the derivative transactions
described below in Fair value of financial instruments does
not represent the market risk of the derivative transactions.
Fair value of financial instruments
Balance sheet amount, fair value, and differences as of March
31, 2018 and 2017 are as follows.
Financial instruments, of which it is extremely difficult tomeasure the fair value, are not included in the table below.
(Please see “<2> Financial instruments of which the fair value
is extremely difficult to measure.”)MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201822

Notes to Consolidated Financial Statements

Millions of yen

March 31, 2018
Assets:(1) Cash(2) Trade notes and accounts receivable(3) Short-term investments and investments insecurities
Total assets
Liabilities:(1) Trade notes and accounts payable(2) Short-term borrowings(3) Accrued expenses(4) Bonds(5) Long-term borrowings
Total liabilities
Derivative transactions (*):
Hedge accounting not applied
Hedge accounting applied
Total derivative transactions

Balance sheet
amountFair value¥ 101,090
165,606¥ 101,090
165,606

51,96853,638¥ 318,665¥ 320,335¥¥

Differences¥——$ 951,525
1,558,791$ 951,525
1,558,791

1,670

489,157

504,876¥

1,670$ 2,999,482$ 3,015,201$

15,719

—
—
—
74
636
711

$ 835,090
669,757
156,165
94,127
238,404$ 1,993,552$ 835,090
669,757
156,165
94,823244,399$ 2,000,254

$

—
—
—
697
5,986
6,692

—
(9)
(9)

$

$

$

88,72071,155
16,591
10,00025,328¥ 211,795

88,72071,155
16,591
10,07425,965¥ 212,507

¥

¥

¥

¥

¥

(124)
—
(124)

¥

(124)
(9)
(134)

Thousands of U.S. dollars
Balance sheet
amountFair value
Differences

¥

¥

$

(1,167)—(1,167)$(1,167)(85)(1,261)$——
15,719

$

$

—
(85)
(85)

Millions of yen

March 31, 2017
Assets:(1) Cash(2) Trade notes and accounts receivable(3) Short-term investments and investments insecurities
Total assets
Liabilities:(1) Trade notes and accounts payable(2) Short-term borrowings(3) Accrued expenses(4) Bonds(5) Long-term borrowings
Total liabilities
Derivative transactions (*):
Hedge accounting not applied
Hedge accounting applied
Total derivative transactions

Balance sheet
amount¥75,017
138,410

Fair value¥

75,017
138,41055,63353,884¥ 269,061¥ 267,312¥¥

68,506
74,66915,171
10,10734,011¥ 202,465

¥

¥

¥

¥

¥

¥

(60)
(23)
(84)

Derivative Transactions:
Please see note 22 Derivative Financial Instruments.

Liabilities:
・ Trade notes and accounts payable, Short-term borrowings,
and Accrued expenses<2> Financial instruments of which the fair value is extremely difficult to measure
Millions of yen
2018
2017

Thousands of
U.S. dollars
2018¥ 109,545 ¥ 119,968$ 1,031,109* It is extremely difficult to measure the fair value, and thus
above are not included in “Assets (3) Short-term
investments and investments in securities.”<3> Projected future redemption of monetary claim and securities with maturities as of March 31, 2018——
(1,749)68,506
74,66915,171
10,00033,495¥ 201,842

(60)
—
(60)

¥

The carrying amount approximates fair value because of theshort maturity of these instruments.
・ Bonds
The fair value of bonds issued by the Company is calculated
by market price.
・ Long-term borrowings
Fair value of long-term borrowings is based on the present
value of future cash flows discounted using the current
borrowing rate for similar debt of a comparable maturity.

Assets:・ Cash and Trade notes and accounts receivable
The carrying amount approximates fair value because of theshort maturity of these instruments.
・ Short-term investments and Investments in securities
The fair value of equity securities is calculated by quoted
market price and the fair value of bond securities is
estimated based on quotes from counterparties. Please see
note 4 Short-term Investments and Investments in
Securities for information by category.

Unlisted equity securities

Differences¥<1> Fair value measurement of financial instruments¥¥

Due within
one year(1,749)(1) Cash(2) Trade notes and accounts receivable(3) Short-term investments and investments in securities:
Held-to-maturity securities:
Government bonds
Total

—
—
—
107
515
622

—
(23)
(23)

*Derivative receivables and payables
are on net basis. Items that are net
payables are shown in parenthesis.

¥¥

101,090
165,606

0266,697

Due within
one year(1) Cash(2) Trade notes and accounts receivable(3) Short-term investments and investments in securities:
Held-to-maturity securities:
Government bonds
Total

$

951,525
1,558,791

Millions of yen
Due after
Due after
one year throughfive years throughfive years
ten years

¥

—
—

0
0

¥

¥

¥

—
—

—
—

Due after
ten years¥0$ 2,510,326

—
—

0
0

$

$

$

—
—

—
—

—
—

¥

Thousands of U.S. dollars
Due after
Due after
one year throughfive years throughfive years
ten years$——

Due after
ten years

$

—
—

—
—

$

<4> The annual maturities of the bonds and long-term borrowings as of March 31, 2018

Due within
one year

Bonds
Long-term borrowings¥—
17,423

Due within
one year

Bonds
Long-term borrowings

23

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018$—
163,997

Due after
one year throughtwo years¥—
13,650Due after
one year throughtwo years$—
128,483

Millions of yen
Due after
Due after
two years throughthree years throughthree years
four years¥

10,000
2,813

¥

—
5,794

Thousands of U.S. dollars
Due after
Due after
two years throughthree years throughthree years
four years$

94,127
26,478$—54,537

Due after
four years throughfive years

¥

—
1,251

Due after
five years¥

Due after
four years throughfive years$—
11,775—
1,818

Due after
five years$—
17,112

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201824

Notes to Consolidated Financial Statements

22. Derivative Financial Instruments
The contract or notional amounts and fair value of derivative
financial instruments held as of March 31, 2018 and 2017 aresummarized as follows:
Derivative financial instruments to which hedge
accounting is not applied are summarized as follows:(a) Forward exchange contracts and currency swap
agreements

Fair value

March 31, 2018
Forward exchange contracts:
To sell foreign currency:¥ 17,305 ¥U.S. dollar
Euro
2,289
New Taiwan dollar
554
To buy foreign currency:
654
U.S. dollar
1,008
Canadian dollar
New Taiwan dollar
5
Currency swap agreements:
Receive/U.S. dollar,
547
Pay/Japanese Yen
Receive/U.S. dollar,
582
Pay/Thai Baht
¥ 22,946 ¥March 31, 2017
Forward exchange contracts:
To sell foreign currency:¥ 18,447 ¥U.S. dollar
Euro
1,410
New Taiwan dollar
446
To buy foreign currency:
1,520
U.S. dollar
0
New Taiwan dollar
Currency swap agreements:
Receive/U.S. dollar,
340
Pay/Japanese Yen
Receive/U.S. dollar,
582
Pay/Thai Baht
¥ 22,747 ¥Valuation
gain(loss)

(0) ¥
17
(7)

(0)
17
(7)

3
(40)
(0)

3
(40)
(0)

(18)

(18)

(20)

(20)

(67) ¥(67)

25

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

March 31, 2017
Interest rate swap agreements:
Receive/floating and¥ 5,620
pay/fixed

Fair value

Valuation
gain(loss)

(57)

¥

(57)

5 ¥
7
(35)

5
7
(35)

(30)
(0)

(30)
(0)

(4)

(4)

3

3

(53) ¥

(53)

(0) $
160
(66)

(0)
160
(66)

28
(377)
(0)

28
(377)
(0)

(169)

(169)

(188)

(188)

(631) $

(631)

U.S. dollar¥

U.S. dollar

(7)

¥

(7)

To buy foreign currency:$ (537)*The fair value of interest rate swap agreements is estimatedbased on quotes from counterparties.

7

(0)

23
1,526 ¥

(0)44

Accounts
receivable

To sell foreign currency:
U.S. dollar
Euro
Chinese Yuen¥

3,051 ¥
85
42

(0)
0
0

2,094
84

(16)
(1)

4

(0)

—
5,362 ¥—
(18)

Accounts
payableU.S. dollar
Euro
Forecasted
transactions

To sell foreign currency:
U.S. dollar

Forecasted
transactions

To buy foreign currency:
U.S. dollar¥

Hedgeditems

Thousands of U.S. dollars
Contract
or notionalamounts
Fair value

March 31, 2018
Forward exchange contracts:
To sell foreign currency:

Accounts
receivable

U.S. dollar
To sell foreign currency:$ 14,072 $U.S. dollar

424

Forecasted
transactions

U.S. dollar
To buy foreign currency:

Hedged
items

(0)

66
Forecasted
transactions

216$ 14,364 $

(0)
414

*The fair value of forward exchange contracts is estimatedbased on quotes from counterparties.

Millions of yen
Contract
or notionalamounts
Fair value

March 31, 2018
Interest rate swap agreements:
Receive/floating andLong-term¥
borrowings
pay/fixed
March 31, 2017
Interest rate swap agreements:
Receive/floating andLong-term
borrowings
pay/fixed

Hedgeditems

March 31, 2017
Forward exchange contracts:

To buy foreign currency:$ 41,331

45

Forecasted
transactions¥¥

1,495 ¥

Forecasted
transactions

U.S. dollar

Thousands of U.S. dollars
Contract
Valuationor notionalgain
amounts
Fair value(loss)March 31, 2018
Interest rate swap agreements:
Receive/floating and$ 56,278
pay/fixed

Accounts
receivable

To sell foreign currency:
To sell foreign currency:¥

Millions of yen
Contract
or notionalamounts
Fair value

March 31, 2018
Forward exchange contracts:

Derivative financial instruments to which hedge accounting isapplied are summarized as follows:

Thousands of U.S. dollars
Contract
Valuationor notionalgain
amounts
Fair value(loss)March 31, 2018
Forward exchange contracts:
To sell foreign currency:$ 162,886 $U.S. dollar
Euro21,546
New Taiwan dollar
5,215
To buy foreign currency:
6,156
U.S. dollar
9,488
Canadian dollar
New Taiwan dollar
47
Currency swap agreements:
Receive/U.S. dollar,
5,149
Pay/Japanese Yen
Receive/U.S. dollar,
5,478
Pay/Thai Baht
$ 215,983 $Hedgeditems

Millions of yen
Contract
or notionalamounts(b) Interest rate swap agreements(a) Forward exchange contracts(b) Interest rate swap agreements

March 31, 2018
Interest rate swap agreements:
Receive/floating and¥ 5,979
pay/fixed

Millions of yen
Contract
or notionalamounts* The fair value of forward exchange contracts and currency
swap agreements is estimated based on quotes fromcounterparties.

¥

2,535 ¥

(9)4,805 ¥

(20)

Thousands of U.S. dollars
Contract
or notionalamounts
Fair value

March 31, 2018
Interest rate swap agreements:
Receive/floating andLong-term$ 23,861 $borrowings
pay/fixed(85)* The fair value of interest rate swap agreements is estimatedbased on quotes from counterparties.

23. Investment and Rental Property
The Company and certain consolidated subsidiaries own landand buildings for rent in Tokyo and other areas (hereafter“rental property”).
The amounts recognized in the consolidated balance
sheet and fair values related to the rental property for theyears ended March 31, 2018 and 2017 are as follows:
Millions of yen
2018
2017

Thousands of
U.S. dollars
2018

Consolidated balance sheet
amount:Balance at beginning of¥
the year
Increase/(decrease)
Balance at end of the year ¥10,828 ¥5,955 $ 101,920

814
11,642 ¥

4,873
7,662
10,828 $ 109,582

Fair value

14,410 ¥13,805 $ 135,636¥

Notes:
1. Consolidated balance sheet amount is its cost minus
accumulated depreciation and accumulated impairment
loss.
2. Increase for the year ended March 31, 2018 and 2017
were mainly due to new rents executed by the Company of¥1,093 million ($10,288 thousand) and ¥4,938 million,
respectively.
3. Fair value is based on roadside value, etc.
Rent income from the rental property is ¥334 million($3,144 thousand) and ¥313 million for the years ended
March 31, 2018 and 2017, respectively.
Gain on sales from the rental property is ¥144 million($1,355 thousand) and ¥15 million for the years ended March
31, 2018 and 2017, respectively.

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201826

Notes to Consolidated Financial Statements

24. Segment Information
The Company introduced company-based organization forclarifying management’s responsibility in operation and for
managing efficiently. Each company develops a businessstrategy for their products and services and conducts
business.
The reported segments of the Company are thebusiness units for which the Company is able to obtainrespective financial information separately in order for the
Board of Directors to conduct periodic investigation todetermine distribution of management resources andevaluate their business results. “Natural gas chemicals
business,” “Aromatic chemicals business,” “Specialty
chemicals business” and “Information and advanced
materials business” are the Company’s reported segments.
Natural gas chemicals business mainly produces andsells methanol, ammonia, amines, methacrylates, polyols,
functional food materials and crude oil.
Aromatic chemicals business mainly produces and sells
meta-xylenediamine, MX-Nylon, meta-xylene, purified
isophthalic acid and foaming plastics.
Specialty chemicals business mainly produces and sells

inorganic chemicals and engineering plastics.
Information and advanced materials business mainly
produces and sells printed circuit board materials andoxygen absorber (AGELESS).
Segment sales, profit, assets, liabilities and others arecalculated by accounting methods similar to those employed
to prepare the accompanying consolidated financial
statements. Segment profit are calculated based on“Keijo-soneki” disclosed in the consolidated statement ofincome under accounting principles generally accepted inJapan (See note 25). Intersegment revenue and transfer are
based on arm’s-length transactions.
(Adoption of IFRS by overseas affiliates)
As described in Note 1 (s), effective from the year ended
March 31, 2018, the Company’s overseas affiliate and an
overseas affiliate of the Company’s affiliate have adopted
IFRS. Those changes have been applied retrospectively andthe prior year segment information has been restated. As aresult, for the year ended March 31, 2017, segment profit of
Natural gas chemicals business increased by ¥72 million($678 thousand) and Specialty chemicals businessdecreased by ¥21 million ($198 thousand) compared to therespective amount before retrospective application of IFRS.

The reported segment information for the Company and its consolidated subsidiaries for the years ended
March 31, 2018 and 2017 is summarized as follows:

Natural gas
chemicals

Sales:
Sales to third parties
Inter-segment sales¥¥
Segment profit¥
Segment assets¥
Others:¥Depreciation and amortization
Amortization of goodwill
Interest income
Interest expenses
Equity in earnings (losses) of affiliates
Investments in affiliates accounted forby the equity method
Capital expenditures¥¥
Segment profit¥
Segment assets¥
Others:¥Depreciation and amortization
Amortization of goodwill
Interest income
Interest expenses
Equity in earnings (losses) of affiliates
Investments in affiliates accounted forby the equity method
Capital expenditures

Sales:
Sales to third parties
Inter-segment sales¥¥¥

5,145 ¥
—
70
89
9,391

212,050
3,429
215,479
25,106215,481Specialty
chemicals¥¥¥¥

8,527 ¥
241
190
644
(121)

203,561
1,553
205,115
38,633233,080¥

Other

Adjustments

Consolidated¥¥¥

52,735 ¥39
52,774 ¥6,349 ¥
77,071 ¥

526 ¥
79
606 ¥
261 ¥
31,181 ¥— ¥(17,546)(17,546) ¥(4,567) ¥51,374 ¥635,909—
635,90980,711
792,489

9,170 ¥
0
212
650
7,930

3,595 ¥
—
27
107
899

19 ¥
129
0
7
177

568 ¥
—
(17)
(429)
—

27,027
370
485
1,069
18,27756,916457

22,344

10,318

3,548

(88)

93,496

6,076

11,301

11,004

1,937

0

640

30,959Adjustments

Consolidated

142,901
10,656
153,557
14,359178,974

Aromatic
chemicals¥¥¥¥

5,069 ¥—
101
152
12,848

191,933
2,546
194,480
17,533
192,047

Specialty
chemicals¥¥¥¥

8,506 ¥
241
187
799
7

170,894
1,326
172,220
26,809209,897

Millions of yen
2017
Information
and advanced
materials

¥

Other

¥
¥
¥

50,197 ¥250,200 ¥6,129 ¥
73,067 ¥

553 ¥
68
622 ¥
328 ¥
38,783 ¥— ¥(14,600)(14,600) ¥(2,730) ¥45,417 ¥556,480—
556,480
62,430738,188

8,671 ¥
0
118
777
6,835

3,027 ¥
—
23
138
1,208

20 ¥
33
1
13
225

335 ¥
—
(8)
(535)
—

25,631
275
423
1,346
21,12561,384567

21,029

9,798

3,341

877

96,998

9,009

10,556

8,172

6,674

7

589

35,010Adjustments

Consolidated

Natural gas
chemicals

Aromatic
chemicals$ 1,572,242
117,131$ 1,689,383$ 140,512$ 1,734,742$ 1,995,953
32,276$ 2,028,229$ 236,314$ 2,028,247

Segment profit
Segment assets
Others:$Depreciation and amortization
Amortization of goodwill
Interest income
Interest expenses
Equity in earnings (losses) of affiliates
Investments in affiliates accounted forby the equity method
Capital expenditures

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018¥

Natural gas
chemicals

Sales:
Sales to third parties
Inter-segment sales

27

167,035
12,444
179,480
14,928184,299

Aromatic
chemicalsMillions of yen
2018
Information
and advanced
materials

48,428 $—659
838
88,394

Thousands of U.S. dollars
2018
Information
Specialty
and advanced
chemicals
materials
Other$ 1,916,049
14,618$ 1,930,676$ 363,639$ 2,193,901

80,262 $
2,268
1,788
6,062
(1,139)$$$$496,376 $367
496,743 $
59,761 $725,442 $

4,951 $
744
5,704 $
2,457 $
293,496 $86,314 $
0
1,995
6,118
74,642

33,838 $
—
254
1,007
8,462

179 $
1,214
0
66
1,666

— $ 5,985,589(165,154)—(165,154) $ 5,985,589(42,988) $ 759,704
483,566 $ 7,459,422
5,346 $—
(160)
(4,038)—254,396
3,483
4,565
10,062
172,035

535,730

4,302

210,316

97,12033,396(828)

880,045

57,191

106,372

103,577

18,232

0

6,024

291,406

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201828

Notes to Consolidated Financial Statements

Notes:

Related information

1. Other includes listed affiliates and real estate business
which are not included in reported segments.
2. Adjustments in the above tables are made for thefollowings:

1. Information by products and services
Disclosures are omitted because the classification of
products and services are same as the classification of thereported segments.

(1) Adjustments in segment profit
Thousands of
U.S. dollars
2018

Millions of yen
2018
2017

Elimination of intersegment transactions
Unallocated companywide expenses

¥

¥

99 ¥

49 $
(2,780)(4,567) ¥(2,730) $ (42,988)(43,919)* Company-wide expenses are administrative expenses,
financial income and expenses and other income andexpenses which are not allocated to reported segments.
(2) Adjustments in segment assets

Elimination of intersegment balances
Unallocated companywide assets

Thousands of
U.S. dollars
2018¥

75,748

Japan
Asia:
China
Other
U.S.A.
Other
Total

¥

282,671¥

95,707
149,533
51,36756,630635,90951,374 ¥45,417 $ 483,566(3) “Adjustments in depreciation and amortization” of ¥568
million ($5,346 thousand) and ¥335 million are
depreciation and amortization of company-wide assets
which are not allocated to reported segments for theyears ended March 31, 2018 and 2017, respectively.
(4) “Adjustments in interest income” of ¥(17) million ($(160)thousand) and ¥(8) million are mainly elimination ofintersegment transactions for the years ended March 31,2018 and 2017, respectively.
(5) “Adjustments in interest expenses” of ¥(429) million ($(4,038) thousand) and ¥(535) million are mainly
elimination of intersegment transactions for the years
ended March 31, 2018 and 2017, respectively.
(6) “Adjustments in investments in affiliates accounted for by
the equity method” of ¥(88) million ($(828) thousand) and¥877 million are mainly investments which are notallocated to reported segments for the years ended
March 31, 2018 and 2017, respectively.
(7) “Adjustments in capital expenditures” of ¥640 million($6,024 thousand) and ¥589 million are related tocompany-wide assets which are not allocated toreported segments for the years ended March 31, 2018and 2017, respectively.
3. Segment profit is adjusted with “Keijo-soneki” disclosed in
the consolidated statement of income under accounting
principles generally accepted in Japan (See note 25).

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

Thousands of
U.S. dollars
2018¥262,772 $ 2,660,683¥

78,060900,857
125,893
1,407,502
50,279483,500
39,474
533,038
556,480 $ 5,985,589

Note: Geographical sales are classified by customer’s
location.

Impairment loss¥—

Aromatic
chemicals¥

Natural gas
chemicals

Impairment loss¥

— ¥Millions of yen
2018
2017

Japan
Asia
Other
Total

¥

¥

162,150
36,732
21,834
220,717¥¥

Thousands of
U.S. dollars
2018

Impairment loss$

Specialty
chemicals

11

¥

—

— ¥

Aromatic
chemicals

$

— $

¥

—

Other

¥

Millions of yen
2017
Information
and advanced
materials

Specialty
chemicals—¥—

Adjustments

—

¥

—

¥

—

$

—

¥

102

¥

Other

¥

Adjustments

Thousands of U.S. dollars
2018
Information
Specialty
and advanced
chemicals
materials
Other

104

$

—

$

—

—

Adjustments

Consolidated¥

11

Consolidated

¥

1,124

Consolidated

—

$

104

Information of balance of goodwill by reported segments

Natural gas
chemicals

Goodwill¥

164,134 $ 1,526,261
36,223345,745
17,699205,516
218,057 $ 2,077,532

3. Information by major customers
Disclosures are omitted because no particular customer
whose sales are over 10% of sales in the consolidated
statement of income exists.

1,124

Aromatic
chemicals

Natural gas
chemicals(2) Property, plant and equipment

888,404*Company-wide assets are cash, investments in securities,
and deferred taxes assets which are not allocated toreported segments.

29

Millions of yen
2018
2017

¥ (43,009) ¥ (30,331) $ (404,829)
94,384Natural gas
chemicalsMillions of yen
2018
Information
and advanced
materials

2. Geographical information(1) Sales

932(4,666)

Millions of yen
2018
2017

Information of impairment loss on fixed assets by reported segments—

Aromatic
chemicals¥

Natural gas
chemicals

Goodwill¥—

Aromatic
chemicals¥

Natural gas
chemicals

Goodwill$—

3,911 ¥

4,155 ¥

Aromatic
chemicals$

36,813 $Millions of yen
2018
Information
and advanced
materials

Specialty
chemicals

—

¥

—

Other

¥

Millions of yen
2017
Information
and advanced
materials

Specialty
chemicals

0¥—

Adjustments

Other

¥

Adjustments

Thousands of U.S. dollars
2018
Information
Specialty
and advanced
chemicals
materials
Other

—

$

—

$

—

—

Adjustments

—

$

—

Consolidated

¥

3,911

Consolidated

¥

4,258

Consolidated$

36,813

Information of negative goodwill incurred by reported segments
No negative goodwill was incurred for the years ended March 31, 2018 and 2017.

25. The Statement of Income Disclosure under Accounting Principles Generally Accepted in Japan
Under accounting principles generally accepted in Japan, an
ordinary income, “Keijo-soneki” should be disclosed in thestatement of income. The ordinary income is an income figure
with certain adjustments made to profit before income taxes.
Followings are the summary information of the statementof income under accounting principles generally accepted inJapan.

Millions of yen
2018
2017

Sales
Gross profit
Operating income
Ordinary income
Profit before income
taxes
Profit¥Thousands of
U.S. dollars
2018

635,909 ¥154,583
62,74180,711

556,480 $ 5,985,589
131,249
1,455,036
43,762590,559
62,430759,704

73,421

61,099691,086

65,93353,427620,604

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201830

Independent Auditor’s Report

31

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 2018

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201832

Shareholder Information
Information for Shareholders (As of March 31, 2018)
Composition of shareholders

ListingFirst Section of the Tokyo Stock Exchange
Ticker symbol
4182
Total number of authorized shares
492,428,000
Number of outstanding shares
231,739,199
Stock transaction units
100 - shares
Number of shareholders
20,088

Individuals and others

14.8％

Financial institutions

Foreign investors

2018.3

34.9％

38.1％

Securities companies

1.9％
Other companies in Japan

10.3％

Major shareholders
Number of shares held
(thousands)

Percentage of total
outstanding shares

Japan Trustee Services Bank, Ltd. (Trust Account)

10,155

4.8%

The Master Trust Bank of Japan, Ltd. (Trust Account)

9,119

4.3%

Meiji Yasuda Life Insurance Company

8,797

4.1%

Nippon Life Insurance Company

8,795

4.1%

The Norinchukin Bank

5,026

2.4%

Asahi Glass Co., Ltd.

4,835

2.3%

CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

4,048

1.9%

GOVERNMENT OF NORWAY

3,896

1.8%

Japan Trustee Services Bank, Ltd. (Trust Account 9)

3,836

1.8%

Mitsubishi Tokyo UFJ Trust and Banking Corporation

3,506

1.6%

Name of shareholder

1. MGC holds 18,135 thousand shares of treasury stock, which is not included in the above list of major shareholders.
2. Percentage to Total Shares Outstanding does not include treasury stock.

Monthly stock price range and trading volume■■Trading volum(yen)(Thousand of stocks)

4,000

40,0003,000

30,0002,000

20,0001,000

10,000Stock price range (based on closing price at end of month)002015.42016.42017.4

Dividend per share■Interim ■Fiscal year-end
(yen)
60

59
35

40
20
0

33

28
14

32
16

38
22

14

16

16

2015.32016.32017.3

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201824

2018.3

Notes: With and effective date of October 1, 2016, MGC conducted a reverse stock split
for MGC’s ordinary shares on a 2:1 basis. As a result, the share price, market
trading volume and dividend per share in the graph are calculated assuming thatthe reverse stock split had been conducted at the beginning of April, 2014.

MITSUBISHI GAS CHEMICAL COMPANY, INC. Corporate Report 201834