TKK Report 2023
Financial Section(Fiscal year ended March 31, 2023)

Analysis of Operating Environment and Results

During the fiscal year under review, capital expenditureand consumer spending gradually recovered in Japan as
pandemic-related restrictions on economic activities
were lifted. Nevertheless, rising commodity prices andsupply chain bottlenecks, especially for producer goods,
continued as headwinds. Consequently, the outlook for
the Japanese economy remains unclear.

This material is the Financial Section of the TKK Report 2022, theintegrated report published by Toyo Kanetsu K.K. that summarizes
the financial information for the Company’s fiscal year 2021 (Apr.
2021 to Mar. 2022).

CONTENTS
1

Analysis of Operating Environment and Results

2

Business Risks

7

Approaches and Initiatives for Material Issues

12Consolidated Balance Sheet

14

Consolidated Statement of Income and Comprehensive Income

15

Consolidated Statement of Changes in Equity

17

Consolidated Statement of Cash Flows

19

Notes to Consolidated Financial Statements

53

Independent Auditor’s Report

58

Corporate Data

58

DirectoryIn this economic climate, the Logistics Solutions
Business continued to benefit from strong demand forautomation and labor-reducing equipment as companies
worked to overcome labor shortages and handle
increased shipments of goods for online shopping andco-ops. On the other hand, demand for baggage
handling systems for airports was slow; the drop in air
travel continued to hold back capital spending.
At the same time, the Plant Business continued to see
more orders for maintenance services at oil refineries inJapan. In response to growing calls for carbon neutrality,
the Next-Generation Energy Development Businessfocused on researching and developing new energy
solutions, while continually handling inquiries for new
storage tank projects.
The Business Innovation and Other Businesses segment
includes three different businesses: Among them, theIndustrial Machinery Business subsegment saw a pickup
in demand from the second half of the fiscal year,
despite delays in plans for investing in plant andmachinery in some parts of the industry; The Building
Construction Business subsegment, however, continued
to face difficult market conditions caused by steeply
rising building material prices and subcontracting costs;
The Environmental Business subsegment benefited frommarket growth despite public sector demand remaining
flat, though private sector demand grew following
revisions to asbestos-related laws and regulations.

Logistics Solutions BusinessIn the Logistics Solutions Business, despite an increasein automated warehouse equipment sales—incorporating
the Company’s Multishuttle pallet automated storage
and retrieval system (ASRS)—to e-commercebusinesses, retailers, co-ops, and manufacturers, there
were disruptions in global supply chains that made itdifficult to procure parts. Consequently, net sales fell by
15.0% to ¥28,032 million and operating profit fell 17.3%
to ¥2,605 million. Orders received, however, edged up
0.3% to ¥32,051 million year on year.

Plant Business
The Plant Business posted net sales of ¥8,508 million, adecrease of 38.8% year on year, from the maintenanceof oil refineries in Japan. Excluding the impact ofapplying a different annual accounting method forrevenue recognition (for the first time in the previous
fiscal year), however, the year-on-year decrease would
amount to only 3.0%. Operating profit came to ¥560
million, a rise of 1.7%. Orders received totaled ¥7,065
million, down 45.0% year on year.
Next-Generation Energy Development Business
The Next-Generation Energy Development Businessposted net sales of ¥1,043 million, a decrease of 5.9%
year on year, from sales of new storage tanks. This
segment also posted an operating loss of ¥734 million,
compared with a loss of ¥717 million in the previous
fiscal year. Orders received totaled ¥878 million, down
11.5% year on year.
Business Innovation and Other Businesses
Despite higher subcontracting costs and parts shortages
caused by supply chain disruptions, the Industrial
Machinery Business posted record-high profits bystepping up sales for mainstay winches and balancers.
The Building Construction Business posted a
substantial decline in sales resulting from fewer
largescale construction projects compared with theprevious fiscal year. However, profits increased year on
year, the result of contributions from building renovation
work, construction gondola rentals, and temporary
installation services.
The Environmental Business secured steady earnings byproviding 24-hour environmental monitoring systems togovernment agencies and municipalities. With a growing
market, this business segment extended asbestos
assessment and analysis services while effectively
leveraging Group-wide synergies for more sales. As aresult, both sales and income rose substantially.
Reflecting the factors above, net sales came to ¥9,767
million, a decrease of 12.7% year on year. Nevertheless,operating profit rose 87.3% to ¥1,071 million, mainly
due to solid contributions from Group companies aswell as having no asset retirement obligations
associated with real estate operations being recorded in
the previous fiscal year.

TKK Report 2023 Financial Section

1

Business Risks

Toyo Kanetsu’s risk management system includes a risk
management officer—appointed from among thedirectors who oversee the risk management of theCompany and the Group—as well as a Group-wide risk
management department, under the command of therisk management officer who identifies risks andmonitors evaluations and results. Important risks are
regularly reviewed after considering changes in thebusiness environment and the status of risk responses,
and we strive to ensure that effective risk
countermeasures are being quickly implemented.
Of all the risks that could affect our business activities,some risks with a possible significant impact are shown
below. However, this is not an exhaustive list of risks
related to the Group and there are risks that are difficult
to foresee.
Forward-looking statements in the text are based on
assessments as of March 31, 2021, the date of the fiscal
year ended.

In addition, the Group recognizes that public trust could
be lost if we or one of our subsidiaries causes anenvironmental accident or disaster. To mitigate this risk,
we have acquired and periodically renew our ISO 14001
certification, and we have established and actively
implement a compliant environmental management
system in accordance with our environmental policies.

1. Impact of climate change

2. Risks related to the execution of projects

The TKK Group places great importance on the
promotion of ESG management and the international
goals set out in the SDGs and Paris Agreement.
Especially, we recognize that “responding to changes inthe business environment caused by climate change” isone of our most important material issues for
management. Growing awareness of global
environmental issues and the transition to a low-carbon
or decarbonized society are accelerating the shift tousing clean energy. Accordingly, the Company’s
operating environment is inevitable unfavorable due todeclining demand for tanks used to store LNG, crudeoil, and other fossil fuels. Recognizing these trends,
and with the goal of helping achieve a low-carbon
society, the Group is applying our technologies todevelop large-scale storage containers for liquidhydrogen, and drawing on our strengths to proactively
build and supply increasingly needed equipment andinfrastructure for storing and using hydrogen andammonia as fuel.

In the Logistics Solutions Business, project management
and the ability to execute operations are becoming
increasingly important. This is because the role of
distribution centers in the supply chain is growing withthe expansion of the e-commerce market and more
outsourcing of logistics operations, and because there isa tendency for distribution centers to grow larger in linewith the streamlining of logistics operations and theconsolidation of bases.

The TKK Group as a whole has been promoting
initiatives for decarbonization and realizing a lowcarbon economy, including the development of
products and services that save energy and the2adoption of renewable energy, especially by installing
solar panels. In May 2022, the Group declared the goalof becoming carbon neutral by 2050 by reducing
greenhouse gas emissions (Scopes 1 and 2). We alsobegan disclosing information about climate-related risks
and opportunities, starting from fiscal 2022, based on
the recommendations of the Task Force on ClimateRelated Financial Disclosures (TCFD). Recognizing our
response to climate change as an excellent opportunity
for considering ways of dealing with long-term climaterelated risks and opportunities, the Group’s
management intends to disclose information and to
dialogue with investors and other stakeholders.

TKK Report 2023 Financial Section

For these reasons, we carefully manage delivery
deadlines—from sales proposals through toconstruction—and strive to reduce costs and workloads
by standardizing processes and improving productivity.
We also established a system for executing sustainableprojects and increased the number of companies using
this system. However, unexpected costs could beincurred due to various factors, such as shortened
construction periods due to unexpected changes inconstruction plans under pressure to reduce delivery
times and delivery deadline adjustments due to carryingout multiple large projects simultaneously within acertain time period.
Moreover, some of the core products provided by thisbusiness segment include products purchased from
specific overseas business partners. The execution ofprojects could be affected if these products cannot bepurchased consistently due to changes in the business
policies and environment of our business partners,
demand and supply fluctuations, or due to natural
disasters, accidents, and so on.
The Plant & Next-Generation Energy Development
Business repairs storage tanks, mainly at oil refineries inJapan. Our ability to execute these projects could be
negatively affected by a shortage of construction
workers, a sharp rise in the costs of materials andequipment, or when the skills of site managers andforemen are passed down too slowly. Therefore, wehave taken steps to improve ties with subcontractors
and suppliers, have set up a stable construction
organization, and have established TKK Plant
Engineering K.K. as a new subsidiary to hire and train
workers for construction sites. Furthermore, we have set
up a centralized organization led by a team of experts tocollect information and manage all stages of new tankinstallation projects, from receiving orders through toconstruction work, in order to execute projects more
quickly and efficiently.
The TKK Group conducts some operations overseas,
primarily by the Plant & Next-Generation Energy
Development Business. Further, our consolidated
subsidiary in Indonesia works on local construction
projects and processes steel materials, including steel
used for storage tanks. Our local subsidiary in Malaysia
maintains baggage handling equipment at local airports
and maintains equipment at local petrochemical plants.
These overseas operations carry inherent risks, as
stated below, and the TKK Group’s business results
and financial position could be adversely affected bythese risks.
(1) Unexpected changes in laws and regulations(2) Political and economic instability(3) Difficulties in securing human resources(4) Tax system revisions that could be unfavorable to
the TKK Group(5) Social disorder due to terrorism, war, epidemics,
disasters, or other factors.

risks and the impact of the COVID-19 pandemic.
In addition, when working on a project, we take out
product liability insurance for that project, and toensure quality, the Group has established internal
regulations and put in place a quality management
system to strengthen quality control. We have alsoestablished a system that enables a quick response toquality problems by placing the department responsiblefor quality control directly under the president.
However, in the unlikely event of serious quality
complaints or problems with a product, not only would
profits from the project deteriorate due to repair costs
and indemnification, this could also lead to a decline in
the Group’s social reputation, which could adversely
affect our business results and financial position.

3. Impact on securing and developing humanresources
The TKK Group recognizes that securing and developing
human resources are two of our most important issues,and that any drain of human resources and increasing
recruitment costs could affect our business activities.
Therefore, through several initiatives, we have broadened
our hiring practices to recruit a more diverse range of
employees and have worked hard to improve employee
retention by creating a more comfortable workplaceenvironment and by being more flexible. For example, wehave created an action plan to promote women’s
participation and advancement in the workplace, and wehave implemented programs to train and promote female
employees to management positions. We also allow
employees to choose staggered work hours, and are
striving to improve the rate of taking paid leave as wellas male employees taking childcare leave. As a result of
these initiatives, the Company was certified as a HealthManagement® Excellent Corporation 2023 (Large
Corporation Category).
In addition, the Company opened an education centerat the Chiba Plant to improve employees’ skills andprovide safety training for our Logistics Solutions
Business operations.

The TKK Group is working to reduce risks by making earlyarrangements against steeply rising prices and shortagesof parts affected by the materialization of geopolitical
TKK Report 2023 Financial Section

3

4. Impact of intensifying competition for orders
The TKK Group’s main businesses are order based,
exposing us to severe competition for orders, so
unreasonable downward pressure on profitability could
adversely affect our business results and financial
position. Further, customer policies and plans, changes
in the business environment of the industry, and industry
restructuring could affect our ability to obtain orders.
In response to these risks, in the Logistics Solutions
Business we are expanding our customer areas in Japanand overseas, and providing optimal solutions by flexibly
introducing outside technologies, while at the sametime promoting in-house production and standardized
products to strengthen price competitiveness. We aretaking on other initiatives, such as revamping ourinternal systems, to further improve the efficiency of
our operations.
In the Plant & Next-Generation Energy Development
Business, as the severe business environment drags on,
we are improving and developing our core technology fortank EPC (engineering, procurement, construction)
contracts, and are working to obtain orders by taking
advantage of our superior quality, as well as expanding
our business domains through overseas subsidiaries.

7. Compliance risks

5. Risks related to the launch of new businesses

Therefore, in addition to putting in place anorganizational structure, such as of setting up theCompliance Committee and appointing supervisors, theCompany has established regulations, including TKKGroup Charter of Corporate Behavior and we arepromoting initiatives to maintain compliance, such as
ensuring all Group directors and employees are fully
informed of their social responsibility and public mission.

For a long time, the TKK Group has been developing two
main business segments: Logistics Solutions and Plant &Next-Generation Energy Development. So far, these twobusinesses have underpinned the Group’s earnings in acomplementary way, but we recognize that fluctuationsin the environmental surrounding these businesses arelarge and the volatility of earnings is high.
To mitigate this risk, we are pursuing opportunities toestablish a third main business segment through all
available means, including mergers, acquisitions, setting
up corporate venture capital, and collaborations withstartups. If, however, a lengthy amount of time is taken
to launch a third mainstay business segment, theGroup’s business results and financial position could be
negatively affected.

Furthermore, with intense competition for orders, theTKK Group develops a wide range of technologies bycollaborating with domestic and overseas companies
that have leading technologies, by partnering withstartups using corporate venture capital, and throughjoint research with universities and research institutes.
With these initiatives, the Group intends to continually
increase our value and contribute to the prosperity ofsociety based on our management vision, which focuseson providing innovative solutions through cutting-edge
technologies and leadership.

6. Impact on occupational health and safety

However, as the lifecycle of products and technologies
becomes shorter and shorter, any delays in meeting
market requests could result in a decline in the Group’s
competitiveness, adversely affecting our business results
and financial position over the medium to long term.

However, in the event of problems or an accident, eventhough countermeasures have been taken, they could
not only interfere with plant operations and customer
service, but could also lead to compensation fordamages, criminal penalties, administrative punishment,
and the loss of social trust, which could affect ourbusiness activities and financial position.

On a consolidated basis, the Group owns both tangible
and intangible fixed assets, and continually monitors
financial performance as a means to forecast when it
may be difficult to secure returns on investments in these4

assets. If we determine that these assets are lessprofitable or cannot generate sufficient cash flow due tosignificant changes in the operating environment orbusiness situation, we might record an impairment loss
on the assets, which could negatively affect ourconsolidated financial results and financial condition.

TKK Report 2023 Financial Section

The TKK Group considers safety to be our highest
priority. Under our Occupational Safety and Health
Policy, we strive to ensure and improve the health andsafety of our employees by acquiring and renewing
OHSAS 18001 and ISO 45001 certifications, establishinga supervisory department directly under the president,
holding group safety meetings, conducting on-site
patrols, and maintaining and improving safety systems,
including at partner companies.

The TKK Group operates in the field of social
infrastructure, a field that cannot exist without the trustof society. We recognize that compliance with laws andregulations is one of the most important fundamentals oftrusted business operations.

However, in the unlikely event that laws and regulationsin Japan or overseas are violated, large surcharges anddamages could occur, which would not only adversely
affect the Group’s business results and financial position
but would also reduce the public’s trust in the Groupand affect our business continuity.

8. Risks related to natural disasters, epidemics, etc.
To prepare for fires, earthquakes, large-scale natural
disasters, and epidemics, the TKK Group has written abusiness continuity plan (BCP) manual, and we havetaken all necessary steps for business continuity, suchas establishing a contact system, building up stockpilesof emergency supplies, conducting seismic
reinforcement work, and setting up shelters at major
manufacturing and development bases in Japan.
However, serious physical injury caused by a greaterthan-expected disaster could have a significant impact
not only on the health of employees but also on theoperation of our plants, and although appropriate
coverage is taken out through non-life insurance, thedirect and indirect damage and recovery costs could belarger than anticipated, which would adversely affect ourbusiness results and financial position.

infection. Human resource systems were updated toallow remote working and encourage paid days off, andimprovements were made to IT systems, such as
electronic application systems and cloud storage, tofacilitate the changes in workplace conditions.

9. Impact of information security and maintaining
the information infrastructure
The TKK Group handles, while doing business, a rangeof confidential information, including customer andtechnical information. To strengthen the management of
this information, we have organized the Information
Security Committee to thoroughly communicate theimportance of information security, for instance throughemployee education, and to implement security
measures for information systems.
However, cyberattacks, including via computer viruses,
could interfere with the functioning of these information
systems, and if confidential information were lost or
leaked, it could damage the Group’s reputation for
reliability and affect business activities.
The Group uses the Box file-sharing service andpassword protection (to block email file attachments) toguard against cyberattacks, effectively manage
intellectual property, and to safeguard the privacy of
customers and business partners.
Moreover, while the Group aims to transform thebusiness model through IT, including by automating andstreamlining operations through robotic process
automation (RPA), and by introducing businessstandardization systems, if we lag behind in these digitaltransformation (DX) initiatives, we will not be able toestablish a competitive advantage and could lose out on
business opportunities.

In right of the recognition that the impact of the global
spread of COVID-19, poses risks at many levels, theTKK Group has issued infection prevention guidelines,
compiled a manual for dealing with practical situations,and put measures in place to prevent the spread of
TKK Report 2023 Financial Section

5

Approaches and Initiatives for Material Issues

10. Risks related to market trends
In the Logistics Solutions Business, we supply products
and systems mainly for the retail, wholesale, and co-op
industries. We also provide baggage handling systems,
primarily to airports in Japan. Consequently, thisbusiness segment could be affected if investments inlogistics facilities slow due to a lower volume in logistics
as a result of a recession or declining birthrate and aging
population or trends in demand for air travel. We are
therefore intensifying our business operations using AI
and IoT technologies.
In the Plant & Next-Generation Energy Development
Business, we supply tanks for LNG plants and refineries,
as well as perform maintenance on existing crude oiltanks, etc. This segment’s results could be adversely
affected due to a plant owner discontinuing, postponing,or making major revisions to investment plans due toglobal economic trends. Other factors that could affectbusiness results are the economic and social conditionsof oil and gas producing and consuming countries;
trends in energy and environmental policies in eachcountry; trends in crude oil and LNG prices; and otherfactors. We are therefore strengthening initiatives that
improve the profitability of maintenance projects, in thisway establishing a business structure that is resistant
to fluctuations in orders and that secures a stablesource of income.
In addition, risks such as the following are possible due
to a deterioration of the economic environment:a) Fluctuations in foreign exchange rates
The TKK Group’s business activities include theoverseas manufacture of products, sales of materials,
and construction work, and transactions that are mainly
conducted in U.S. dollars. Currently, we view the risk offluctuations in foreign exchange rates as low because
foreign currency-denominated transactions and theamount of assets held in foreign currencies are relatively
small, but the unexpected fluctuation could adversely
affect the Group’s business results and financial positionin the future.
b) Fluctuations in interest rates
To establish credit for trade receivables and to acquire
fixed assets, the TKK Group secures funding fromfinancial institutions that consider the balance of shortand long-term purchasing ratios. Although low interest

6

TKK Report 2023 Financial Section

rates have continued due to large-scale monetaryeasing, etc., funding costs could increase if interest rates
rise, which could adversely affect the Group’s
performance and financial position.
c) Valuations of held securities
The TKK Group holds securities with market value andredetermines their value based on share prices as of the
final day of each fiscal quarter. If share prices fallsignificantly, the Group’s business results and financial
position could be adversely affected.

Basic Approach to Sustainability
The Toyo Kanetsu Group has identified 10 importantmaterial issues to prioritize in order to raise the value forstakeholders through business activities. By devisingsolutions for these issues, the Group is working to growsustainably while helping accomplish the UN’s
Sustainable Development Goals (SDGs) and realize asustainable planet. Our sustainability actions areorganized around two categories of material issues:
responding to changes in the business environment
caused by climate change, as well as the training andutilization of human resources.
For information about the Group’s specific initiatives,
please refer to our integrated report, TKK Report 2023.

1. Governance
Governance related to the business risks that could
affect the TKK Group is overseen by the Company’s Risk
Management Committee, which is chaired by a director
designated by the Board of Directors. This committee
formulates and executes all necessary plans. The
Company’s Risk Management Office serves as thecommittee’s executive office. The members of the Risk
Management Committee are selected from among thedirectors or executive officers in charge of relevantbusinesses in each division. This facilitates the sharing of
knowledge and experience in countering risks andaddressing climate change issues, etc., when
formulating plans for implementation.

2. Strategy(1) Disclosure of information based on therecommendations of the Task Force on ClimateRelated Financial Disclosures (TCFD)
The Group has endorsed the TCFD recommendations
and with the assistance of a team of outside experts
has disclosed information based on the framework of
the recommendations. Based on therecommendations, a scenario analysis was conducted
to identify climate change risks and opportunities that
could significantly impact the Group’s operations.
The period up to 2050 was covered in this analysis,

and we referred to several existing scenarios publishedby the International Energy Agency (IEA), theIntergovernmental Panel on Climate Change (IPCC),
and other organizations from three perspectives:short-term (about 3 years), medium- term (up to 2030),
and long-term (up to 2050). The analysis was
exhaustive, assuming a world view based on two
climate change scenarios (one with an averagetemperature increase of less than 2°C from theIndustrial Revolution to the end of the century, and one
with an average temperature increase of 4°C).
We examined the risks and opportunities for the Group
based on the two scenarios and their associatedbusiness and financial implications. Looking ahead to2050, we believe that the opportunities outweigh therisks associated with their overall financial impact on
the Group’s three core businesses (Logistics Solutions
Business, Plant Business, and Next-Generation Energy
Development Business) which accounted for roughly
80% of the Group’s operations.
In the Logistics Solutions Business segment,
opportunities are expected to significantly outweighrisks as demand for labor- and energy-saving systems
at logistics facilities is projected to continue growing
due to the environmental impact on logistics facilities
caused by climate change, as well as the impact of theaging of Japan’s population.
For the Plant Business segment , although demand
for maintaining oil and gas storage tanks is forecast
to gradually decline, these tanks are expected to be
replaced with others for storing methylcyclohexane(MCH) and ammonia, expected to be nextgeneration energy sources, driving up demand for
upgrading and maintenance.
For the Next-Generation Energy Development Businesssegment, while demand for upgrading oil and gas
storage tanks is on the decline due to fossil fuelrestrictions, this decline is expected to be offset bydemand for new tanks that store hydrogen andammonia fuel, considered alternative energy sources forthe next generation, as well as for liquid carbon dioxide.
Based on the 4°C temperature increase scenario,
among the most acute physical risks is a highprobability of water damage from swollen rivers,
typhoons, and floods impacting the operation of
TKK Report 2023 Financial Section

7

facilities in the supply chain. Rising sea levels, among
the most impactful physical risks, could by the end of
the century affect our business sites. However, ouranalysis up to 2050 concluded that the financial
impact would be minor. The TKK Group will takesteps to mitigate the impact of these physical risks
on operations and manufacturing plants.
(2) Policies and Strategies for Developing Human
Resources and Improving Workplace Conditionsa) Basic Policies
Under the slogan, Action for the Future, the Grouphas formulated a basic policy to train and capitalize
on human resources that excel in creativity, exercise
critical thinking, and possess specialized expertise.
The goal is to realize the management vision of
becoming a solution innovator that helps resolve
social issues through advanced technology andbusiness execution.
The Group also recognizes that promoting diversity
and fostering employee-friendly workplaces lead tovalue creation. For this reason, we introduced varied
training programs and an employee evaluation
system for helping to motivate employees andimprove their skills.
Basic policies for developing human resources andbettering workplace conditions are outlines below.
Human Resource Development Policy
As a basic policy for developing human resources,
the Group proactively promotes highly talented
individuals to management positions regardless of
their gender, nationality, or current job position,
especially those with managerial skills and the ability
to produce results. For this reason, the Group
provides many opportunities for all employees toreceive training both on and off the job while
encouraging them to continue learning, with anawareness of the skills and expertise they need.
Guided by this policy, the Group has set up generaltraining programs for every category and job level,
specialized training for specific areas, as well as
training programs designed to boost skills andknowledge about the wider issues that society isfacing. By offering these programs on a regular basis,the Group can determine what knowledge and which

8

TKK Report 2023 Financial Section

skills are required, particularly for women, employees
from overseas, and mid-career hires, then offer
opportunities for acquiring those skills throughtraining. In addition, English-language classes areprovided to all employees regardless of their job level
as well as career development training to those being
assigned to new jobs.
Policy for Improving the Workplace
As a basic policy, the Group fosters employeefriendly workplaces that stress the importance of awork-life balance in order to retain and attract diverse
human resources. At the same time, we arepromoting a workplace environment where every
employee’s opinions and values are respected andtheir health and wellbeing are protected. Throughthese actions, the Group will improve the corporate
culture and employee engagement.
In line with this policy, workplaces have adopted
remote working and flex-time systems that are making
it easier for employees to take childcare and nursing
care leave regardless of their gender, while we
proactively hire people with disabilities. In addition,
employee self-evaluations are being used for
assignments to job positions that consider personal
preferences, aptitude, and skills.
b) Human Resource Initiatives
Providing a wide array of training opportunities anda multiple-track personnel promotion system
The Group has adopted a two-track career program
to train highly specialized people how are capable ofrealizing our management vision and to nurture highly
skilled managers who can leverage the abilities andunique talents of diverse employees.
Further, while stressing the importance of careerdevelopment paths based on the abilities andaptitude of individual employees, the Group isproviding training opportunities in many fields,
including training programs for business skills andspecializations, interpersonal and management skills,
as well as self-development.
New trainee program
The Group has set up a trainee program for new
employees to determine whether new hires who haveno specializations can start a career in a designatedfield. After joining the Group, the new employees
participate in the program for six months up to an

official job assignment and gain work experience inseveral workplaces. To the extent that it is possible,
the trainees are assigned to the positions they
request after completing the program and reach anunderstanding of their duties and the work
processes. Through this self-selection process, thetrainees are expected to become employees whotake responsibility for their work and areconscientious at all aspects of their job.
Promoting diversity
Volatility, uncertainty, complexity, and ambiguity arewords used to describe our current age. In thiscontext, the Group recognizes that incorporating
diverse ways of thinking into decision-making isessential for increasing the value we provide tocustomers. To meet this requirement, we have, forinstance, initiated projects that promote theadvancement of women. Open to everyone
regardless of gender or personal beliefs, theseprojects have attracted many participants fromacross the Group. These projects allow employees tovoice their opinions in discussions about improving
job satisfaction and workplace conditions, makeproposals to management, and become involved incarrying out initiatives.
In addition, the Group is recruiting mid-career
professionals to secure self-motivated employees
who have advanced skills and extensive experience,
which encourages other employees and brings vitality
to the Company.

responding to the Group’s overall business risks.
For information about the Group’s risk management,
please refer to Business Risks on page 2.

4. Metrics and Targets(1) Disclosing Information Based on TCFD
Recommendations(Reducing greenhouse gases (GHGs) with the goal ofachieving carbon neutrality)
GHGs to be reduced:
Scope 1 and 2 GHG emissions from Toyo Kanetsu
and our consolidated subsidiaries worldwide*Scope 1 emissions: Direct emissions of GHGs from inhouse fuelconsumption*Scope 2 emissions: Indirect emissions of GHGs from purchased
electricity and heat

GHG reduction targets:Achieve carbon neutrality by 2050
50% reduction of GHGs by 2030 compared withamounts in fiscal 2019
The TKK Group intends to become carbon neutral
by 2050 by reducing GHG emissions, including
energy conservation and employing renewableenergy sources.
We will also work to reduce Scope 3 emissions
across the value chain in partnership with suppliersand customers.
*Scope 3 emissions: Indirect emissions of GHGs (aside from Scopes
1 and 2) from operations within the supply chain

3. Risk management
As the environment surrounding the Company becomes
more complex and diverse, the Group is placing greater
importance on the appropriate management of risks that
could significantly impact business, and the practice of
sophisticated risk management has been included as
one of the Group’s key management issues. The Risk
Management Committee meets at least twice a year andperiodically reports to the Board of Directors andmanagement councils. The councils handle important
discussions and make decisions based on the reports
and findings of the committee. The Board of Directors
reviews reports on the committee’s and councils’
discussions and decisions, then oversees the execution
and progress of the Group’s policies as well as plans for

The TKK Group’s GHG emissions across the supply
chain have been calculated based on the standards ofthe Greenhouse Gas Protocol.
Combined Scope 1 and 2 emissions for the entire TKKGroup worldwide (tonnes of CO2 equivalent):
5,276 in FY2019, 4,993 in FY2020, 5,142 in FY2021,
and 3,600 in FY2022
Scope 1 and 2 GHG emissions from the entire TKKGroup worldwide were reduced by 32% in FY2022
compared with FY2019 levels.
Scope 3 emissions for the entire TKK Group worldwide(tonnes of CO2 equivalent):
348,949 in FY2020 and 382,849 in FY2021

TKK Report 2023 Financial Section

9

*O
 f this total, 235,447 fell under Category 11, “use of sold products,”
and 132,276 fell under Category 1, “purchase of goods andservices.” Combined, the results for these two categories accounted
for 96.0% of Scope 3 emissions in fiscal 2021.
Adding up all the fiscal 2021 results (above), total GHG emissions
across the supply chain came to 387,991 tonnes of CO2 equivalent,of these Scope 1 and 2 emissions made up 1.3% and Scope 3
emissions accounted for 98.7%.

In fiscal 2022 electricity consumption accounted for 53%
of Scope 1 and 2 emissions, while gasoline and diesel oil
consumption accounted for 37%. Accordingly, theGroup recognizes the need for the following measures toreduce GHG emissions:
Installing solar panels onsite for producing energy	Procuring electricity from zero-emission andrenewable-energy sources
Switching over company vehicles to EVs
Introducing energy-saving equipment
The TKK Group has examined initiatives for each categoryof Scope 3 emissions, such as reducing electricity
consumption over the product lifecycle. We are also
working with suppliers and customers to develop andimplement measures for reducing GHG emissions.
In addition, the Group introduced an internal carbon
pricing system in fiscal 2022. By using specified internalcarbon prices for calculating reference costs when
considering capital investment plans, the Group is
integrating this system into investment decisions, while
promoting investments in decarbonization.
For more information on corporate governance and risk
management, please refer to sections (3) of BasicApproach to Sustainability (above).
(2) Indicators and Targets for Developing Human
Resources and Improving Workplace Conditions
Targets of indicators
Percentage of female managers:		
10% by FY2024
	Percentage of male employees taking childcare leave:
70% by FY2023
Percentage of annual paid vacation taken:
		
70% by FY2024

Results
The following results and indicators extend over the past three years.

Indicators

FY2020

FY2021

FY2022

Percentage of female managers (%)

2.7

5.4

6.9

Male employees taking childcare leave (%)

25.0

50.0

61.5

Female employees taking childcare leave (%)

100.0

100.0

100.0

Mid-career employees hired (%)

50.0

66.7

65.7

Mid-career managers hired (%)

37.8

35.1

38.0

Annual paid vacation taken (%)

68.4

66.8

71.8

Percentage of employees submitting proposals
to the commendation system

72.3

70.7

79.8

59.4

60.6

62.1

59.9

61.2

62.7

38.9

45.2

31.2

All employees
Average wage
difference between
Full-time employees
male and female
Part-time and temporary employees
employees (%)

Note: Targets and results are applicable to employees of the Company on a non-consolidated basis.
For more information about corporate governance and risk management, please refer to sections (3) of Basic Approach to Sustainability (above).

10

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

11

Consolidated financial statements, etc.

(Millions of yen)

(1) Consolidated financial statements(i) Consolidated balance sheet

Previous fiscal period(As of March 31, 2022)(Millions of yen)Previous fiscal period(As of March 31, 2022)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade, and contract
assetsInvestments in leases
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Retirement benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

12

TKK Report 2023 Financial Section

Current fiscal period(As of March 31, 2023)

*1

8,759

*1

6,989

*2

25,327*2

23,649

220
32
795
2,550
670
(24)
38,332*4*4*4*4, *5

*3

4,157
773
376
10,374608
31
16,321
667
7,663
234
449
847
(224)
8,970
25,95864,290

35
19
1,117
4,787
1,156
(20)
37,734*4*4*4*4, *5

*3

4,206
568
434
10,092543
58
15,903
877
8,059
240
514
894
(221)
9,486
26,26764,001

Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term borrowings
Current portion of long-term borrowings
Accrued expenses
Income taxes payable
Contract liabilities
Provision for bonuses
Provision for loss on orders received
Provision for warranties for completed construction
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

*4

*4

*5

*5

1,761
8,120
–
4,887
774
655
434
–
299
1,269
18,202
1,000
4,580
1,644
1,095
392
799
98
9,610
27,813Current fiscal period(As of March 31, 2023)

*4
*4

*4

*5

1,243
5,357
1,700
4,715
908
2,138
423
45
202
696
17,430
1,000
3,380
1,730
1,095
392
800
84
8,483
25,914

18,5801,273
17,533(2,936)34,45018,5801,273
18,135(3,200)34,789

2,632
3
106
(878)
160
2,024
2
36,47764,290

3,374
(6)
684
(899)
140
3,293
4
38,08764,001*5

TKK Report 2023 Financial Section

13

(ii)

Consolidated statement of income and comprehensive income(Millions of yen)Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Gain on sale of scraps
Subsidy income
Reversal of allowance for doubtful accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of non-current assets
Gain on sale of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Loss on revision of retirement benefit plan
Impairment losses
Extra retirement payments
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable toProfit attributable to owners of parent
Profit attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

14

TKK Report 2023 Financial Section*1*2*3, *4*6(iii) Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2021 to March 31, 2022)(Millions of yen)

Current fiscal year
(From April 1, 2022
to March 31, 2023)

59,17749,016
10,161
7,352
2,808

*1
*2

*3, *4

Shareholders’ equity

47,35136,543
10,807
8,310
2,497

6
273
163
77
107
0
109
737

6
252
100
38
33
0
68
499

62
8
71
3,474

82
17
100
2,896

50
333
14
398

149
880
0
1,030

96
59
–
–
0
157
3,716
1,331
50
1,382
2,334

74
–
304
111
27
518
3,408
1,257
(228)
1,028
2,379

*5

2,334
0

2,378
1

(1,305)
(6)
(44)
(34)
(1,390)
943

742
(9)
(20)
(20)
691
3,071

*6

943

3,069

0

1

Share capital
Balance at beginning of
periodCapital surplus

18,580Retained earnings

Treasury shares

Total shareholders’equity16,148(2,933)33,068

1,273

Changes during period
Dividends of surplus

(949)

(949)

Profit attributable toowners of parent

2,334

2,334

Purchase of treasury
shares(3)(3)

Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

–

–

1,384

(3)

1,381

18,5801,273

17,533(2,936)34,450

Accumulated other comprehensive income
Valuationdifference on Deferred gains Revaluation
availableor losses onreserve forfor-salehedgeslandsecurities
Balance at beginning of period

3,937

9

106

Foreigncurrencytranslation
adjustment
(833)

Total
Remeasureaccumulated
ments ofother
definedcomprehensive
benefit plansincome195

3,415

Noncontrolling Total net assetsinterests

0

36,484

Changes during period
Dividends of surplus(949)

Profit attributable to owners ofparent2,334

Purchase of treasury shares
Net changes in items otherthan shareholders’ equity(3)(1,305)

(6)

–

(44)

(34)

(1,390)2(1,388)

Total changes during period(1,305)

(6)

–

(44)

(34)

(1,390)2(7)Balance at end of period

2,632

3

106

(878)

160

2,024

2

36,477TKK Report 2023 Financial Section

15

Current fiscal year (From April 1, 2022 to March 31, 2023)(Millions of yen)(iv) Consolidated statement of cash flows(Millions of yen)

Shareholders’ equity
Share capital
Balance at beginning of
periodCapital surplus

18,580Retained earnings

Treasury shares

Total shareholders’equity17,533(2,936)34,4501,273

Changes during period
Dividends of surplus(1,197)(1,197)

Profit attributable toowners of parent

2,378

2,378

Purchase of treasury
shares
Disposal of treasury
shares
Reversal of revaluation
reserve for land

(302)

(302)

38

38

(577)

(577)

Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

–

–

602

(263)

339

18,5801,273

18,135(3,200)34,789

Accumulated other comprehensive income
Valuationdifference on Deferred gains Revaluation
availableor losses onreserve forfor-salehedgeslandsecurities
Balance at beginning of period

2,632

3

106

Foreigncurrencytranslation
adjustment
(878)

Total
Remeasureaccumulated
ments ofother
definedcomprehensive
benefit plansincome160

2,024

Noncontrolling Total net assetsinterests

2

36,477

Changes during period
Dividends of surplus(1,197)

Profit attributable to owners ofparent2,378

Purchase of treasury shares(302)

Disposal of treasury shares

38

Reversal of revaluation
reserve for land
Net changes in items otherthan shareholders’ equity

16

(577)
742

(9)

577

(20)

(20)

1,269

1

1,270

Total changes during period

742

(9)

577

(20)

(20)

1,269

1

1,610

Balance at end of period

3,374

(6)

684

(899)

140

3,293

4

38,087TKK Report 2023 Financial Section

Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Impairment losses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in retirement benefit liability
Decrease (increase) in retirement benefit asset
Increase (decrease) in provision for loss on orders
received
Increase (decrease) in provision for warranties forcompleted construction
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Loss (gain) on valuation of investment securities
Loss (gain) on sale of investment securities
Loss (gain) on sale of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in trade receivables and contract
assetsDecrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments to suppliers
Increase (decrease) in trade payables
Increase (decrease) in contract liabilities
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of non-current assets
Proceeds from sale of non-current assets
Purchase of investment securities
Proceeds from sale and redemption of investment
securities
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Other, net
Net cash provided by (used in) investing activities*2

Current fiscal year
(From April 1, 2022
to March 31, 2023)

3,716
745
1
–
7
40
(66)

3,408
783
1
304
(7)
(10)
(92)

(30)

45

(48)

(97)

(279)
62
(166)
96
(333)
(50)
0

(258)
82
(110)
74
(880)
(129)
3

(10,362)

1,689

330
5,953
231
1,243
(1,782)
916
225
279
(63)
(1,539)(1,097)185(2,541)
(164)
(697)
1,478
(1,054)
2,013
258
(82)
(1,083)
1,105

(102)
102
(1,013)
0
(43)

(102)
138
(1,187)
507
(55)

644

1,565

(619)

–

200
(830)

(39)
826

TKK Report 2023 Financial Section

17

(Millions of yen)Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Purchase of treasury shares
Proceeds from disposal of treasury shares
Proceeds from share issuance to non-controllingshareholders
Dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period*1Current fiscal year
(From April 1, 2022
to March 31, 2023)

Basis of presenting the consolidated financial statements

4,164
–
(8)
(3)
–

(2,763)
500
–
(302)
38

2

–

(945)
3,208

(1,193)(3,719)

64

53

1,345
7,309
8,654

(1,733)
8,654
6,921

*1

Notes
The accompanying consolidated financial statements of the Company and its domestic consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. The accounts of overseas consolidated subsidiaries are based on theirfinancial statements prepared in conformity with generally accepted accounting principles and practices prevailingin the respective countries in which the subsidiaries are incorporated.
Significant accounting policies for preparation of the consolidated financial statements
1. Disclosure of scope of consolidation
Number of consolidated subsidiaries: 12 companies
Names of major consolidated subsidiaries are omitted since those names are described in “TKK Group Companies.”
2. Disclosure about application of the equity method
Not applicable
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
Of the Company’s consolidated subsidiaries, Kankyo Research Institute Inc., Toyo Kanetsu Corporate Venture
Investment Partnership, Toyo Kanetsu Corporate Venture Fund Ⅱ, PT Toyo Kanetsu Indonesia, Toyo Kanetsu
Singapore Pte. Ltd. and Toyo Kanetsu (Malaysia) Sdn. Bhd. have a closing date of December 31. In preparation of
the consolidated financial statements, their financial statements as of December 31 are used. However, for majortransactions that occurred between that date and the consolidated balance sheet date, the necessary adjustments are
made in the consolidated financial statements.
4. Disclosure of accounting policies(1) Accounting policy for measuring significant assets(i) Securitiesa) Held-to-maturity bonds: Stated at amortized cost (straight-line method)b) Available-for-sale securities
Securities other than shares that do not have a market value are stated at fair value (valuation differences
are directly charged or credited to net assets, and cost of securities sold is determined by the movingaverage method).
Shares that do not have a market value are valued at cost determined by the moving-average method.
(ii)

Derivatives
Derivatives are valued at fair value.

(iii) Inventoriesa) Finished goods: Primarily, at cost using the first-in first-out method(The value on the balance sheet is written down to reflect a decline in profitability.)b) Work in process: Primarily, at cost using the specific identification method(The value on the balance sheet is written down to reflect a decline in profitability.)c) Raw materials: Primarily, at cost using the weighted-average method(The value on the balance sheet is written down to reflect a decline in profitability.)

18

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section19

(2) Accounting policy for depreciation of significant assets(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries use the declining-balance method, and overseas
consolidated subsidiaries use the straight-line method in accordance with provisions of accounting standards intheir respective countries.
However, the Company and its domestic consolidated subsidiaries use the straight-line method to depreciatebuildings (excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached
to buildings and structures acquired on or after April 1, 2016.
The estimated useful lives of major items are as follows:
Buildings and structures
3 to 57 years
Machinery and equipment
2 to 13 years(6) Accounting policy for hedging(i) Method of hedge accounting
In principle, the deferral accounting is applied. The allocation method is applied to forward foreign exchange
contracts that meet requirements thereof, and the exceptional treatment is applied to interest rate swaps that meetrequirements thereof.
(ii) Hedging instruments and hedged items
Hedging instruments: ......... Forward foreign exchange contracts, Interest rate swaps
Hedged items: ..................... Forecast transactions denominated in foreign currencies and borrowings(iii) Hedging policy
In accordance with the “Rules on Handling of Derivative Transactions” established by the Company, theCompany and its consolidated subsidiaries (collectively, the “Group”) do not enter into any derivativetransaction for speculative purposes but use derivative transactions only to hedge exchange rate fluctuation risk
and interest rate fluctuation risk.

(ii) Intangible assets
Intangible assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated useful life as internallydetermined (5 years).
(3) Accounting policy for significant provisions(i) Allowance for doubtful accounts
To cover losses from bad debts for trade receivables, loans receivable and others, an allowance for doubtful
accounts is provided based on historical experience of bad debts for general receivables. For specific receivables
such as highly doubtful receivables, the collectability is individually considered and the estimated amount of
uncollectible accounts is provided as the allowance.
(ii) Provision for bonuses
To pay bonuses to employees, out of the estimated amount to be paid in the following fiscal year, an amountattributable to the current fiscal year is recorded.
(iii) Provision for loss on order received
To make provision for losses on orders received, as for existing construction, for which an amount of loss canbe reasonably estimated at the end of the current fiscal year, an expected amount of loss in future is recorded as
the provision.
(iv) Provision for warranties for completed construction
To cover costs of warranty against defects and after-sales service for completed construction, an amount isrecorded based on the historical loss rate as well as consideration of an amount for individual construction thatis expected to incur in future at the end of the current fiscal year.
(4) Method of accounting for retirement benefits(i) Method of attributing estimated retirement benefits to periods
For the purpose of attributing estimated retirement benefits over the period up to the end of the current fiscal
year in the calculation of retirement benefit obligations, the benefit formula method is applied.

(iv) Method of assessing the hedging effectiveness
The Group confirms effectiveness by comparing and examining cash flows of hedging instruments and hedged
items in advance. However, the Group omits assessment of effectiveness on interest rate swaps to which the
exceptional treatment is applied.
(7) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents include cash in hand, readily available deposits and short-term investments withmaturities of three months or less from the purchase date whose value is not subject to significant fluctuation risk.
Notes - Significant accounting estimates(Construction contracts for which revenue is recognized based on degree of progress)(1) Amount recognized in the consolidated financial statements for the current fiscal year
(Millions of yen)Previous fiscal year
Net sales

Revenue is recognized using the cost recovery method in cases where recovery of incurred costs is likely but
reasonable estimation regarding the degree of progress is not possible.
In addition, no adjustments are made to significant financing components because consideration for business
transactions is mainly received within 180 days of having satisfied a performance obligation.

20

TKK Report 2023 Financial Section

12,497(2) Information on the content of significant accounting estimates related to identified items
With respect to construction contracts for which revenue is recognized based on degree of progress, the Group
records net sales based on the progress rate calculated as the proportion of construction cost incurred corresponding
to value of work done at the end of the current fiscal year, relative to the total amount of estimated cost of
construction work.
The estimated amount of total cost of construction work has been determined on the basis of management’s best
estimate and judgments based on past experience and available information collected as well as individual work
specifications. However, changes to original estimates may occur due to price fluctuations in the market, changes
to specifications, natural disasters and others, and such changes may have a significant effect on the amountrecognized in the consolidated statement of income for the next fiscal year.

(ii) Method of amortizing actuarial gain or loss and past service cost
Past service costs are recorded as an expense in the year they are incurred.
With regard to actuarial gain or loss, the amount is amortized by the straight-line method over a certain term
within the average remaining service period of the eligible employees (5 years) for each applicable fiscal year,
and expensed from the year following the year in which the gain or loss is recognized.
(5) Accounting policies for significant revenues and expenses
The Group enters into long-term construction contracts mainly in the Logistics Solutions Business, the Plant
Business and the Next-Generation Energy Development Business, such that entail assuming obligations to deliver
merchandise and finished goods such as logistics facilities and storage tanks pursuant to such construction contracts.
Given that costs with respect to any such construction contract are deemed to arise in proportion to appreciation ofcustomer-controlled assets, revenue in relation to a construction contract is recognized according to the degree ofprogress thereof. The degree of progress is calculated as the proportion of construction cost incurred to date relative
to total estimated cost under the construction contract.

20,556

Current fiscal year

Notes - Changes in accounting policies
Not applicable
Notes - New accounting standards to be applied“Accounting Standard for Current Income Taxes” (ASBJ Statement No. 27, issued by the Accounting Standards
Board of Japan on October 28, 2022)• “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, issued by the
Accounting Standards Board of Japan on October 28, 2022)• “Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, issued by the AccountingStandards Board of Japan on October 28, 2022)(1) Overview
In February 2018, “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.
•

TKK Report 2023 Financial Section

2128) and other standards (hereinafter “ASBJ Statement No. 28, etc.”) were released, completing the transfer ofpractical guidelines on tax effect accounting from the Japanese Institute of Certified Public Accountants to the
Accounting Standards Board of Japan. In the course of deliberation, the following two issues, which were to bereviewed after the release of ASBJ Statement No. 28, etc., were discussed and published:Classification of tax expenses (taxation on other comprehensive income)• Tax effect on the sale of shares in subsidiaries, etc. (shares of subsidiaries or affiliates) when the group tax sharing
system is applied(2) Scheduled date of application
These ASBJ statement and guidance will be applied at the start of the fiscal year beginning on April 1, 2024.
(3) Effects of application of the accounting standard, etc.
The impact of the application of the Accounting Standard for Current Income Taxes on the consolidated financial
statements is currently under evaluation.

Notes - Consolidated balance sheet*1.

The following amounts have been restricted by a bank in return for its issuing a bank guarantee, which wasprovided by the Company:
Previous fiscal year
(As of March 31, 2022)•

Notes - Additional information
1. Accounting estimates in association of the spread of COVID-19
With regard to the impact of COVID-19, although under the current situation, it is difficult to predict how it will
spread in the future and when the spread will end, the Group thinks at present that impact on accounting estimatesfor recoverability of deferred tax assets and others will be limited.

Cash and deposits*2.

¥1 million

Notes receivable - trade
Accounts receivable - trade
Contract assets

The Company has introduced a performance-linked share-based compensation using a trust for Directors(excluding Directors who are Audit and Supervisory Committee Members and outside Directors), and Managing
Officers who are not Directors and other Executive Officers in a higher rank (hereinafter collectively referred to as“Directors, etc.”) from FY2019, for the purpose of increasing the incentive to improve the Company’s medium- tolong-term performance and enhance the corporate value more than ever by clarifying the linkage between
remuneration of Directors, etc., and the Company’s medium- to long-term performance and stock value, andsharing profits and risks resulting from the linkage with stock price between Directors, etc. and shareholders.
To the accounting treatment for this trust agreement, “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts” (ASBJ PITF No. 30, issued on March 26, 2015) isapplied correspondingly.

Current fiscal year
(As of March 31, 2023)¥673 million
9,011
15,642¥652 million
10,733
12,263

Accumulated depreciation of property, plant and equipment are as follows:
Previous fiscal year
(As of March 31, 2022)

However, if the timing of when the spread of COVID-19 will come to an end and its impact on economic
environment change, the financial position and operating results may be affected.
2. Transaction of granting the Company’s own shares to Directors, etc. through a trust¥1 million

Of the amount stated for notes and accounts receivable - trade, and contract assets, amounts of receivables fromcontracts with customers are as follows:
Previous fiscal year
(As of March 31, 2022)*3.

Current fiscal year
(As of March 31, 2023)

Current fiscal year
(As of March 31, 2023)¥12,556 million*4.

¥12,341 million

Assets pledged and liabilities secured

Assets pledged and liabilities secured as collateral are as follows:
Assets pledged
Previous fiscal year
(As of March 31, 2022)
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

Current fiscal year
(As of March 31, 2023)¥235 million
0
0
5,458

[¥235 million][0][0][5,458]¥207 million
0
0
5,458

[¥207 million][0][0][5,458]5,694[5,694]

5,666[5,666]

Liabilities secured as collateral(1) Outline of transaction
Money is entrusted to a trust designated by the Company (hereinafter referred to as the “Trust”), which acquires
shares of the Company. Points are given to each Director, etc. at the end of each fiscal year of the medium-termbusiness plan in accordance with the Share Delivery Regulations established by the Company’s Board of Directors,
and shares of the Company are delivered through the Trust in a certain period during the tenure of the Director, etc.
specified in the Regulations for the Provision of Shares for the Performance-linked Share-based Remuneration
Plan for officers, or at the time of retirement of the Director, etc. in the number corresponding to the number ofpoints accumulated by then.
(2) The Company’s shares remaining in the Trust
Shares of the Company remaining in the Trust have been recorded at the book value in the Trust (excluding theamount of incidental costs) as treasury shares in net assets. The book value and number of these treasury shares forthe previous fiscal year were ¥144 million and 81,200 shares, respectively, and for the current fiscal year were¥105 million and 59,400 shares, respectively.

Previous fiscal year
(As of March 31, 2022)
Short-term borrowings
Current portion of long-term borrowings
Long-term borrowings
Total

Current fiscal year
(As of March 31, 2023)¥1,670 million–
1,980[¥1,670 million]–[1,980]¥1,246 million
500
1,480

[¥1,246 million]
500[1,480]3,650[3,650]3,226[3,226]In the above table, figures in brackets present mortgages on factory foundation and the relevant debts. The amountsof land are after revaluation.
*5.

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on March 31, 1998), theCompany revalues its land for business use and, as for the valuation difference, records an amount equivalent
to tax relating to the valuation difference as “deferred tax liabilities for land revaluation” in the liabilities section
and an amount after deducting said amount as “revaluation reserve for land” in the net assets section.
- Method of revaluation – The Company revalues the land by the calculation method where a value based on theassessed value of fixed asset tax set forth in Article 2, Item 3 and road rating set forth in Article 2, Item 4 of the22

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

23

“Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 promulgated on March 31,
1998) is reasonably adjusted.
- Date of revaluation – March 31, 2002
Previous fiscal year
(As of March 31, 2022)
Difference between the year-end value ofrevaluated land and the book value after therevaluation¥(2,479) million

Current fiscal year
(As of March 31, 2023)¥(2,455) million

Notes - Consolidated statement of income and comprehensive income*1.

Revenue from contracts with customers

Revenue from contracts with customers and revenue other than that from contracts with customers are not statedseparately with respect to net sales. Amounts of revenue from contracts with customers have been presented in “Notes- Revenue recognition, 1. Information on disaggregation of revenue from contracts with customers” of theconsolidated financial statements.
*2.

¥(30) million*3.

Salaries and allowances
Bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts*4.

¥2,274 million
632
93
101
7

Next-Generation Energy
Development Business

Machinery, equipment and vehicles

Toyo Kanetsu (Malaysia) Sdn. Bhd.
(Bintulu, Malaysia)

Same as above

Tools, furniture and fixtures

PT Toyo Kanetsu Indonesia(Batam, Indonesia)

Same as above

Machinery, equipment and vehicles(2) Circumstances leading to recognition of impairment losses
For asset groups of which cash flows arising from operating activities continued, or were expected to continue, tobe negative, the carrying amount was reduced to the recoverable amount, and the reduced amount was recorded as
impairment losses in extraordinary losses.
(3)

Amount of impairment losses and breakdown of the amount by type of major non-current assets
Type

Amount (Millions of yen)

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥2,441 million
617
157
132
(7)

Tools, furniture and fixtures

0
266
9

Intangible assets

27

Total

304

(4)

Method of grouping assets

In principle, the Group’s assets for business use are grouped on the basis of the business, and the Group’s idle
assets are grouped by each asset. In addition, as for Head Office, the assets are grouped as commonly used assets.
(5)

Method of calculating the recoverable amountThe recoverable amount of this asset group is measured at value in use, and the amount calculated by discounting
future cash flows at weighted average cost of capital of 5.20% is applied.

Total of research and development expenses included in general and administrative expenses and manufacturingcosts for the period
Previous fiscal year
(From April 1, 2021
to March 31, 2022)¥602 million*5.

¥45 million

Type

Head Office (Koto-ku, Tokyo)

Machinery, equipment and vehicles
Current fiscal year
(From April 1, 2022
to March 31, 2023)

Major components of selling, general and administrative expenses are as follows:
Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Use

Buildings and structures

Provision for loss on order received included in cost of sales
Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Location

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥568 million

Impairment losses

Previous fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable
Current fiscal year (From April 1, 2022 to March 31, 2023)
The Company recorded impairment losses on the following asset groups.
(1)

24Outline of asset groups on which impairment losses were recognized

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

25

*6.

Reclassification adjustments and tax effects relating to other comprehensive income
Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Valuation difference on available-for-salesecurities:
Amount recorded during the period
Reclassified amountNotes - Consolidated statement of changes in equity

Current fiscal year
(From April 1, 2022
to March 31, 2023)

Number of shares at
beginning of period¥(1,547) million(333)¥1,928 million(880)

Pre-adjustment of tax effectTax effect amount(1,881)
575

1,048
(306)

Valuation difference on available-forsale securities(1,305)742

Amount recorded during the period

0

(10)

Reclassified amount

(9)

(3)

(8)

(13)
4
(9)

Deferred gains or losses on hedges:

Pre-adjustment of tax effectPrevious fiscal year (From April 1, 2021 to March 31, 2022)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares

Tax effect amount2

Deferred gains or losses on hedges(6)

Reclassified amountPre-adjustment of tax effectTax effect amountForeign currency translation adjustment
Remeasurements of defined benefit plans, netof tax:Amount recorded during the period
Reclassified amount

(44)
–
(44)
–
(44)

(20)
–
(20)
–
(20)

28

(73)

Pre-adjustment of tax effect(49)

Tax effect amount

15

(58)
(29)
9

Remeasurements of defined benefit
plans, net of tax

(34)

(20)

(1,390)691

Total other comprehensive income(Thousands of shares)
Number of shares at
end of period

Common shares

9,323

–

–

9,323

Total

9,323

–

–

9,323

Common shares (Notes 1 and 2)

1,144

1

–

1,145

Treasury shares(Notes) 1.
2.

2.

Total
1,144
1
–
1,145
The number of treasury shares of common shares includes shares of the Company held by the benefit trust for officers(81 thousand shares at beginning of period, 81 thousand shares at end of period).
The total number of treasury shares of common shares increased by one thousand shares because of an increase due
to purchase of shares less than one unit.

Matters concerning dividends(1) Dividends paid
Resolution

Total
dividends

Class of shares

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 29,
Common shares¥949 million¥115
March 31, 2021
June 30, 2021
2021
(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 29, 2021
includes dividends on shares of the Company held by the benefit trust for officers of ¥9 million.

(2)
23

Number of shares
decreased in period

Issued shares

Foreign currency translation adjustment:
Amount recorded during the period

Number of shares
increased in period

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next fiscal
year

Resolution

Class ofsharesTotal
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting ofCommonRetained¥1,197 million¥145
March 31, 2022
June 29, 2022
Shareholders on Junesharesearnings
28, 2022(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 28, 2022
includes dividends on shares of the Company held by the benefit trust for officers of ¥11 million.

Current fiscal year (From April 1, 2022 to March 31, 2023)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares

9,323

–

–

9,323

Total

9,323

–

–

9,323

Common shares (Notes 1, 2 and
3)

1,145

111

21

1,235

Treasury shares(Notes) 1.
2.
3.

26

TKK Report 2023 Financial Section

Total
1,145
111
21
1,235
The number of treasury shares of common shares includes shares of the Company held by the benefit trust for officers(81 thousand shares at beginning of period, 59 thousand shares at end of period).
Total number of treasury shares of common shares increased by 111 thousand shares because of an increase due toacquisition of treasury shares based on a resolution by the Board of Directors of 110 thousand shares and an increase
due to purchase of shares less than one unit of 0 thousand shares.
Total number of treasury shares of common shares decreased by 21 thousand shares due to a disposal of treasury
shares to the benefit trust for officers based on a resolution by the Board of Directors.

TKK Report 2023 Financial Section

27

2.

Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 28,
Common shares ¥1,197 million¥145
March 31, 2022
June 29, 2022
2022
(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 28, 2022
includes dividends on shares of the Company held by the benefit trust for officers of ¥11 million.

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next fiscal
yearClass ofsharesResolution

Total
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting ofCommonRetained¥1,197 million¥147
March 31, 2023
June 29, 2023
Shareholders on Junesharesearnings
28, 2023(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 28, 2023
includes dividends on shares of the Company held by the benefit trust for officers of ¥8 million.

(Lender)
Finance lease transactions(1) The components of investments in leases
Current assets

Lease payments receivable

Previous fiscal year
(As of March 31, 2022)

Current fiscal year
(As of March 31, 2023)¥191 million¥28 million

Estimated residual value

38

11

Amount equivalent to interest income

(10)

(5)

Investments in leases

220

35

(2)

Amounts expected to be collected on lease payments receivable of investments in leases after consolidatedbalance sheet dateCurrent assets(Millions of yen)Previous fiscal year (As of March 31, 2022)
Within 1 year
Investments in leases

159

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

31

–

–

–

–

Notes - Consolidated statement of cash flows*1

Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Current fiscal year
(From April 1, 2022
to March 31, 2023)

Cash and deposits
Time deposits with maturity over 3 months
Restricted deposits¥8,759 million
(102)
(1)

¥6,989 million
(66)
(1)

Cash and cash equivalents

8,654

6,921

*2

(Millions of yen)

Reconciliation of ending balance of cash and cash equivalents with account balances on the consolidated balance
sheet

Current fiscal year (As of March 31, 2023)
Within 1 year
Investments in leases

28Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

–

–

–

–

–

Significant non-cash transactions
Newly recorded asset retirement obligations
Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Asset retirement obligations¥572 million

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥– million

Notes - Leases(Borrower)
Operating lease transactions
Future lease payments under non-cancelable operating leases

Within 1 year
Over 1 year
Total

28

TKK Report 2023 Financial Section

Previous fiscal year
(As of March 31, 2022)

Current fiscal year
(As of March 31, 2023)¥74 million¥75 million

176

146

251

222

TKK Report 2023 Financial Section

29

Notes - Financial instruments
1.
Status of financial instruments(1) Policy on treatment of financial instruments
The Group raises funds necessary to run its business smoothly by bonds payable and borrowing from banks. In thecase where the Group has temporary surplus funds, it invests them only in safe financial instruments.
The Group uses derivative transactions to hedge various risks described in (2) in accordance with the “Rules on
Handling of Derivative Transactions” established by the Company and has a policy not to enter into any speculativetransaction.
(2) Content and risks of financial instruments and risk management system therefor
The Group’s notes and accounts receivable - trade are subject to credit risk of its customers, and its certain
receivables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigatesthe credit risk of its customers by periodically confirming whether there is any overdue receivable using an aging
schedule and other documents and the exchange rate fluctuation risk such as by borrowing in foreign currencies asneeded.
The Company’s securities are subject to credit risk of its investees, but the Company invests surplus funds in safe
financial instruments with high ratings through prescribed internal procedures.
The Group’s investment securities are subject to credit risk of its investees and market price fluctuation risk. They
are equity securities of listed companies with which the Group has business relationships, most of which are
categorized as available-for-sale securities, and the Group periodically ascertains the fair value thereof.
The Group’s notes and accounts payable - trade and accrued expenses are subject to liquidity risk, and its certain
payables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigates theliquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents and theexchange rate fluctuation risk by forward exchange contracts and other means as needed.
Of bonds payable and borrowings, short-term borrowings are primarily for daily business transactions, and longterm borrowings and bonds payable are primarily for temporary advances on large-scale projects. Variable-rateborrowings are subject to interest rate fluctuation risk, and the Group uses interest rate swaps as hedging
instruments for respective contracts for most of the long-term borrowings in order to hedge the fluctuation risk of
the interest rates to be paid and fix interest expenses. The Group limits interest rate swaps to those to which the
exceptional treatment can be applied and omits assessment of hedge effectiveness thereon. The Group mitigates
the liquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents.
The Group executes and manages derivative transactions in accordance with the Company’s Rules on Handling of
Derivative Transactions and, when using derivatives, enters into transactions with financial institutions with highratings to mitigate credit risk. Please see “Accounting policy for hedging” of “Disclosure of accounting policies”
in “Significant accounting policies for preparation of the consolidated financial statements” described previously
for the hedging instruments, hedging policy, method of assessing the hedging effectiveness and other information
on hedge accounting.
(3) Supplementary explanation concerning fair values of financial instruments
As several variable factors are incorporated in measuring fair value of financial instruments, the resulting amount
may vary depending on the different preconditions employed. In addition, the contract amounts of derivativetransactions, mentioned in “Notes - Derivatives” in Notes, should not be considered indicative of the sizes of themarket risks involved in the derivative transactions.

2.
Fair values of financial instruments
Carrying amounts on the consolidated balance sheet, fair values and differences therebetween of the financial
instruments are as shown below.
Previous fiscal year (As of March 31, 2022)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet
6,209(1) Investment securities (*2)
Total assets(1) Bonds payable(2) Long-term borrowings(including within 1 year)
Total liabilities
Derivatives (*3)
(1) Those not qualifying for hedge accounting(2) Those qualifying for hedge accounting
Total derivatives

Fair value

Difference

6,209

–

6,209
1,000

6,209
1,008

–
8

4,580

4,644

64

5,580

5,653

73

–
0

–
0

–
–

0

0

–

Current fiscal year (As of March 31, 2023)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet
6,595(1) Investment securities (*2)
Total assets(1) Bonds payable(2) Long-term borrowings(including within 1 year)
Total liabilities
Derivatives (*3)
(1) Those not qualifying for hedge accounting(2) Those qualifying for hedge accounting

Fair value

Difference

6,595

–

6,595
1,000

6,595
1,006

–
6

5,080

5,157

77

6,080

6,164

84

2
12

2
12

–
–

Total derivatives
1414–(*1) This information has been omitted with respect to “cash and deposits,” “notes receivable - trade,” “accounts receivable –trade,” “notes and accounts payable - trade,” “short-term borrowings,” and “accrued expenses” because they are cash or theirfair values approach the carrying amounts given that they are settled on a short-term basis.
(*2) Shares that do not have a market value have not been included in “(1) Investment securities.” The carrying amount of suchfinancial instruments on the consolidated balance sheet is as follows:(Millions of yen)Classification

Previous fiscal year

Current fiscal year

Unlisted equity securities, etc.
1,453
1,464
(*3) Net receivables and payables arising from derivative transactions are presented in their net amounts.

30

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

31

(Notes) 1. Projected redemption amounts for monetary claims and securities with maturities after the consolidated balance sheet
date
Previous fiscal year (As of March 31, 2022)(Millions of yen)Over 1 year
Over 5 years
Within 1 year
Over 10 years
to 5 years
to 10 years
Deposits
Notes receivable - trade
Accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities
Total

8,724
673
9,011
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–

–
–

–
–

–
–

18,410–––In cases where multiple inputs which have a material effect on the measurement of fair value are used, the fairvalue is categorized at the level with the lowest priority in the fair value measurement among the levels to which
the respective inputs belong.
(1) Financial instruments recorded on the consolidated balance sheet at fair value
Previous fiscal year (As of March 31, 2022)
Classification(Millions of yen)Over 5 years
to 10 years

Over 10 years

6,950
652
10,733
–

–
–
–
–

–
–
–
–

–
–
–
–

–
–

–
–

–
–

–
–

18,336–––

Within 1 year

2. Scheduled repayment amounts of bonds payable, long-term borrowings and other interest-bearing liabilities after the
consolidated balance sheet datePrevious fiscal year (As of March 31, 2022)(Millions of yen)Over 1 year
Over 2 years
Over 3 years
Over 4 years
Over 5 years
to 2 years
to 3 years
to 4 years
to 5 years
Bonds payable
Long-term borrowings
Total

–
1,700

–
2,480

–
400

–
–

1,000
–

1,700

2,480

400

–

1,000

Current fiscal year (As of March 31, 2023)

Bonds payable
Long-term borrowings
Total

3.

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

–
2,480

–
400

–
–

1,000
–

–
500

2,480

400

–

1,000

500

Matters regarding the breakdown of financial instruments by each fair value level
The fair values of financial instruments are categorized into the following three levels, in accordance with theobservability and significance of the inputs used in the measurement of fair value.
Level 1 fair value:
Level 2 fair value:
Level 3 fair value:

32(Millions of yen)Over 1 year
to 2 years

TKK Report 2023 Financial Section

Fair value is measured using the market price related to the asset or liability subject tomeasurement of fair value formed in an active market, from among the observable inputs
used in fair value measurement.
Fair value is measured enlisting the inputs used in the measurement of fair value, otherthan the Level 1 inputs, from among the observable inputs used in fair value measurement.
Fair value is measured enlisting the unobservable inputs used in fair value measurement.

Level 3

Total

Available-for-sale securities
Stocks

6,209

–

–

6,209

–

0

–

0

6,209

0

–

6,209

Derivative transactions
Currencies

Current fiscal year (As of March 31, 2023)
Classification(Millions of yen)
Fair value
Level 1

Level 2

Level 3

Total

Investment securities
Available-for-sale securities
Stocks

Total

Level 2

Investment securities

Current fiscal year (As of March 31, 2023)

Deposits
Notes receivable - trade
Accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

Level 1

Total assets

Over 1 year
to 5 years(Millions of yen)

Fair value

6,595

–

–

6,595

–

3

–

3

6,595

3

–

6,598

–

11

–

11

–

11

–

11

Derivative transactions
Currencies
Total assets
Derivative transactions
Currencies
Total liabilities(2) Financial instruments other than those recorded on the consolidated balance sheet at fair value
Previous fiscal year (As of March 31, 2022)
Classification

Level 1

Bonds payable
Long-term borrowings (including within 1
year)
Total liabilities

Level 2

Level 3

Total

–

1,008

–

1,008

–

4,644

–

4,644

–

5,653

–

5,653

Current fiscal year (As of March 31, 2023)
Classification(Millions of yen)

Fair value(Millions of yen)
Fair value
Level 1

Level 2

Level 3

Total

Bonds payable
–
1,006
–
Long-term borrowings (including within 1
–
5,157
–
year)
Total liabilities
–
6,164
–
(Note) Explanation of valuation methods used to measure fair value and inputs relating to fair value measurement
Investment securities
Listed stocks are valued using quoted market prices. The fair value of listed stocks is classified as level 1 fair value giventhat listed stocks are traded in active markets.
Derivative transactions
The fair values of interest rate swaps and forward exchange contracts are measured using the discounted present value
method (DCF method: discounted cash flow method) with observable inputs, such as interest rate and currency exchange

1,006
5,157
6,164

TKK Report 2023 Financial Section

33

rate. They are categorized as the Level 2 fair value. The fair value of interest rate swaps that are accounted for using
exceptional treatment is included in fair value of “Liabilities (2) Long-term borrowings (including within 1 year),” as thoseinterest rate swaps are treated together with the long-term borrowings that are subject to hedging (refer to “Long-termborrowings,” below). The fair value of forward exchange contracts is measured enlisting the discounted cash flow method
using observable inputs such as exchange rates.
Bonds payable
The fair value of bonds payable issued by the Company is measured enlisting the discounted cash flow method based oninterest rates considering the sum of principal and interest, and the interest rates considering the remaining duration andcredit risk of the bonds payable, and is categorized as Level 2 fair value.
Long-term borrowings
The fair value of long-term borrowings is measured enlisting the discounted cash flow method based on interest rates
considering the sum of principal and interest, and the interest rates considering the remaining duration and credit risk of theobligation, and is categorized as Level 2 fair value. Long-term borrowings with variable interest rates are subject to
exceptional treatment of interest rate swaps (refer to “Derivative transactions,” above), and their fair values are measured
using the sum of principal and interest accounted for with the relevant interest rate swaps.

Current fiscal year (As of March 31, 2023)
Type(1) Stocks

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Previous fiscal year (As of March 31, 2022)(1) Stocks

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(Millions of yen)

Carrying amount on
the consolidatedbalance sheet

Acquisition cost

6,209

2,631

3,578

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

6,209

2,631

3,578

–

–

–

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

–

–

–

Subtotal(1) Stocks(2) Bonds

Subtotal(Note)(Note)––(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

6,595

1,969

4,625

–

–

–

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

–

–

–

3.

Available-for-sale securities that were sold
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount644

Total gain on sales
331(Millions of yen)
Total loss on sales
–

–

–

–

–
–
21

–
–
2

–
–
–

665

333

–

Current fiscal year (From April 1, 2022 to March 31, 2023)

Total
6,209
2,631
3,578
“Available-for-sale securities” in the above table do not include shares that do not have a market value (unlisted equity
securities; carrying amount on the consolidated balance sheet of ¥1,453 million).

TKK Report 2023 Financial Section

–

Total
6,595
1,969
4,625
“Available-for-sale securities” in the above table do not include shares that do not have a market value (unlisted equity
securities; carrying amount on the consolidated balance sheet of ¥1,464 million).

Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

34

(i) Government
bonds andmunicipal bonds,
etc.

Subtotal

Difference(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost

4,625

(2) Bonds

Available-for-sale securities (securities classified as other securities under Japanese GAAP)

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

1,969(1) Stocks

Current fiscal year (As of March 31, 2023)
Not applicable

Type

Difference

6,595

Subtotal

Held-to-maturity bonds
Previous fiscal year (As of March 31, 2022)
Not applicable2.

Acquisition cost(2) Bonds

Notes - Securities
1.

(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Sales amount
1,544

Total gain on sales
880(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

1,544

880

–

TKK Report 2023 Financial Section

35

4. Securities subject to the recognition of impairment loss
In the previous fiscal year, impairment loss of ¥96 million (shares in available-for-sale securities: ¥96 million)
was recognized on securities. In the current fiscal year, impairment loss of ¥74 million (shares in available-forsale securities: ¥74 million) was recognized on securities.
In the treatment for impairment loss, impairment loss is recognized in principle when the fair market value atthe period-end decreased by 50% or more compared with the acquisition cost, and impairment loss is recognized
to the extent of the amount considered necessary in light of materiality of the amount, recoverability and otherfactors when the fair market value at the period-end decreased by approximately 30% to 50%.
Notes - Derivatives

Current fiscal year (As of March 31, 2023)(Millions of yen)Contract amount Portion of contract
amount over
1 yearValuation gain or
loss

Fair value

Forward exchange
contract

Contract
amount

385

–

385

–

Total

33

–

35

2

33

–

35

2

2. Derivative transactions to which hedge accounting is applied(1) Currencies
Previous fiscal year (As of March 31, 2022)

Fair value

Fair value iscalculated
based on theprice provided
bycounterparty
financial
375 institutions orother prices.
375(Millions of yen)Classification

Type of derivativetransaction, etc.

Principal hedged
items

Exceptional
treatment ofinterest rate swaps

Interest rate swap
transactions
Receive variable,
pay fixed

Long-term
borrowings

Contract
amount(Note)

2,700

Portion ofcontract
amount over
1 year2,700

Fair value

Fair value
calculation
method(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that of corresponding
long-term borrowings, as those interest rate swaps are treated as an adjustment to long-term borrowings as hedged items.

Current fiscal year (As of March 31, 2023)(Millions of yen)

(Millions of yen)Type of derivativetransaction, etc.

Classification

Principal hedged
items

Portion ofcontract
amount over
1 yearContract
amountForward exchange
contract
Allocation method
for forward
exchange contract

Buy contract
Euro

Total

36

TKK Report 2023 Financial Section

Accounts
payable - trade
21

–

21

–

Fair value

Fair value
calculation
methodFair value iscalculated
based on theprice provided
bycounterparty
financial
21 institutions orother prices.

Fair value
calculation
method(2) Interest rates
Previous fiscal year (As of March 31, 2022)

Buy contract
U.S. dollar

Portion ofcontract
amount over
1 year

Accounts
payable - trade

Total(Millions of yen)Transaction other thanmarket transaction

Buy contract
U.S. dollar

Current fiscal year (As of March 31, 2023)

Type of derivativetransaction, etc.

Principal hedged
items

Forward exchange
contract
Allocation method
for forward
exchange contract

1. Derivative transactions to which hedge accounting is not applied
Previous fiscal year (As of March 31, 2022)
Not applicable

Classification

Type of derivativetransaction, etc.

Classification

Classification

Type of derivativetransaction, etc.

Principal hedged
items

Exceptional
treatment ofinterest rate swaps

Interest rate swap
transactions
Receive variable,
pay fixed

Long-term
borrowings(Note)

Contract
amount3,200

Portion ofcontract
amount over
1 year
2,000

Fair value

Fair value
calculation
method(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that of corresponding
long-term borrowings, as those interest rate swaps are treated as an adjustment to long-term borrowings as hedged items.

21

TKK Report 2023 Financial Section

37

(3)

Notes - Retirement benefits
1. Summary of retirement benefit plans adopted
The Company and certain consolidated subsidiaries have defined benefit corporate pension plans as defined benefit
plans, and certain consolidated subsidiaries have a small and medium sized enterprise retirement allowancecooperative plan and lump-sum retirement plans.
In addition, the Company and certain consolidated subsidiaries have defined contribution corporate pension plans.
The Company and certain consolidated subsidiaries participate in Nihon Sangyo Kikai Kougyo Kigyonenkin Kikin(pension fund of Japan industrial machinery manufacturers) or Zenkankyo Kigyonenkin Kikin (pension fund for
employees in the environmental measurement certification sector nationwide). For this fund, since the amount ofpension plan assets corresponding to contributions by the respective companies cannot be reasonably calculated, thefund is accounted for similar to defined contribution plans.

Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Retirement benefit obligations under
funded system
Pension plan assets
Retirement benefit obligations under
unfunded system
Net amount of assets and liabilities statedin the consolidated balance sheet
Retirement benefit liability
Retirement benefit asset

2. Defined benefit plans(1) Reconciliation between beginning balance and ending balance of retirement benefit obligations
Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Beginning balance of retirement benefit
obligations
Service cost
Interest expenses
Unrecognized net actuarial gain or loss
Retirement benefits paid
Past service cost
Increase due to acquisition of new
consolidated subsidiary
Other
Ending balance of retirement benefit
obligations(2)

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥3,361 million¥3,925 million

241
13
(16)
(225)
44

237
12
25
(342)
(40)

497

–

8

1

3,925

3,817

Beginning balance of pension plan assets
Expected return on plan assets
Unrecognized net actuarial gain or loss
Amount of employer contribution
Retirement benefits paid
Increase due to acquisition of new
consolidated subsidiary
Other
Ending balance of pension plan assets

Net amount of assets and liabilities statedin the consolidated balance sheet(4)

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥3,982 million
36
53
268
(407)

Service cost
Interest expenses
Expected return on plan assets
Amortization of net actuarial gain or loss
Amortization of past service cost
Retirement benefit expenses pertaining todefined benefit plans

230

–

7

5

3,982

3,939

(Note)(5)¥3,925 million¥3,817 million(3,982)(3,939)

57

122

–

–

57

122

392
(449)

392
(514)

57

122

Previous fiscal year
(From April 1, 2021
to March 31, 2022)¥241 million
13
(38)
(74)
44

112

–

111

Extra retirement payments are included in “extra retirement payments” under extraordinary losses.

Remeasurements of defined benefit plans on consolidated statement of income and comprehensive income

The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2021
to March 31, 2022)
Past service cost
Actuarial gains and losses
Total

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥– million(49)¥– million
(29)

(49)

(29)

(6) Remeasurements of defined benefit plans on consolidated balance sheet
The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:

Unrecognized past service cost
Unrecognized net actuarial gain or loss
Total

TKK Report 2023 Financial Section

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥237 million
12
(36)
(59)
(40)

186

Previous fiscal year
(From April 1, 2021
to March 31, 2022)

38

Current fiscal year
(From April 1, 2022
to March 31, 2023)

Retirement benefit expenses and components thereof

Extra retirement payments (Note)

Reconciliation between beginning balance and ending balance of pension plan assets
Previous fiscal year
(From April 1, 2021
to March 31, 2022)¥3,707 million
38
31
206
(240)

Retirement benefit obligations and pension plan assets at the end of the fiscal year and reconciliation ofretirement benefit liability and retirement benefit asset on consolidated balance sheet

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥– million(230)¥– million
(203)

(230)

(203)

TKK Report 2023 Financial Section39

(7) Pension plan assets(i) Major components of pension plan assets
Ratio of major components for total pension plan assets is as follows:

The proportions in (ii) above are not consistent with the proportions actually funded by the Group.
(2)

Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Current fiscal year
(From April 1, 2022
to March 31, 2023)

24%
43
26
7

23%
42
29
6

100

100

Bonds
SharesGeneral account
Other
Total

(ii) Method of establishing expected long-term rates of return on plan assets
In order to determine the expected long-term rates of return on plan assets, the current and forecast distributionof plan assets and the current and expected future long-term rates of return from the diverse assets that comprisethe plan assets are taken into consideration.

Previous fiscal year
(As of March 31, 2021)

Current fiscal year
(As of March 31, 2022)

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve¥8,839 million¥9,341 million

6,848

7,023

Net amount

1,990

2,318

(ii) Group’s proportion of total contributions to planPrevious fiscal year
1.21%
(From April 1, 2021 to March 31, 2022)
Current fiscal year
1.27%
(From April 1, 2022 to March 31, 2023)(iii) Supplementary explanation
The proportions in (ii) above are not consistent with the proportions actually funded by the Group.

(8) Matters relating to the basis for actuarial calculations
Main basis for actuarial calculations
Discount rate
Expected long-term rates of return on pension
plan assets

Zenkankyo Kigyonenkin Kikin (pension fund for employees in the environmental measurement certification
sector nationwide)(i) Funded status of multi-employer planPrevious fiscal year
(As of March 31, 2022)

Current fiscal year
(As of March 31, 2023)

0.25%

0.25%

1.00%

1.00%

Notes - Share options, etc.
Not applicable

3. Defined contribution plans
The required contribution from the Company and its consolidated subsidiaries into the defined contribution pension
plans was ¥76 million in the previous fiscal year and ¥76 million in the current fiscal year.
4. Multi-employer plan
The required contribution amount to the corporate pension fund plan under the multi-employer plan, which isaccounted for in the same manner as a defined contribution plan, was ¥96 million in the previous fiscal year and ¥99
million in the current fiscal year.
(1) Nihon Sangyo Kikai Kougyo Kigyonenkin Kikin (pension fund of Japan industrial machinery manufacturers)(i) Funded status of multi-employer planPrevious fiscal year
(As of March 31, 2021)

Current fiscal year
(As of March 31, 2022)

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve¥14,292 million¥15,269 million

20,854

20,314

Net amount(6,562)(5,045)(ii) Group’s proportion of total contributions to planPrevious fiscal year
7.71%
(From April 1, 2021 to March 31, 2022)
Current fiscal year
7.71%
(From April 1, 2022 to March 31, 2023)(iii) Supplementary explanation
Major factors for the net amount in (i) above are the balance of past service liabilities (¥8,658 million as of March
31, 2022 and ¥7,281 million as of March 31, 2023) and surplus amount (¥2,096 million as of March 31, 2022 and¥2,096 million as of March 31, 2023) for pension financing calculation.
The principal and interest of past service liabilities in this plan are amortized equally over 10 years and 6 months,
and the Group recorded special contributions applied to such amortization (¥68 million as of March 31, 2022 and¥70 million as of March 31, 2023) as expenses in the consolidated financial statements.

40

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

41

Current fiscal year (As of March 31, 2023)

Notes - Tax effect accounting
1. Significant components of deferred tax assets and liabilities(Millions of yen)Previous fiscal year
(As of March 31, 2022)
Deferred tax assets
Tax loss carry-forward (Note)
Accrued business tax
Retirement benefit liability
Provision for bonuses
Allowance for doubtful accounts
Provision for loss on order received
Loss on valuation of investment securities
Loss on valuation of investments in capital
Impairment loss
Depreciation
Asset retirement obligations
Other¥134 million
63
73
135
76
–
225
233
339
124
200
242

¥155 million
68
72
131
74
13
225
247
255
252
245
345

1,849

2,087

(134)

(150)

(1,114)(1,085)

Valuation reserve subtotal(1,249)(1,235)

Total deferred tax assets
Offset with deferred tax liabilities

599
(365)

852
(611)

Net deferred tax assets

234

240

Deferred tax assets subtotal
Valuation reserve for tax loss carryforwards (Note)
Valuation reserve for the total of deductible
temporary differences, etc.

Deferred tax liabilities
Revaluation reserve for land
Valuation difference on available-for-salesecurities
Reserve for tax purpose reduction entry of
non-current assets
Retirement benefit asset
Other
Total deferred tax liabilities

Over 2
years to 3
years

Over 3
years to 4
years

Over 4
years to 5
years

Over 5years

Tax loss carry-forwards
(*)

7

4

55

4

18

64

155

Valuation reserve

(2)

(4)

(55)

(4)

(18)

(64)

(150)

Deferred tax assets

4

–

–

–

–

–

4

1,095

1,095

974

1,302

861

856

141
32

161
22

3,105

3,437

Over 4
years to 5
years

Over 5years

Tax loss carry-forwards represent the amount multiplied by the statutory effective tax rate.

Previous fiscal year
(As of March 31, 2022)

Current fiscal year
(As of March 31, 2023)

Statutory effective tax rate
Adjustments
Increase/decrease in valuation reserve
Expenses not deductible for income tax
purposes, such as entertainment expenses
Income not included for income tax purposes,
such as dividends received
Per capita levy of inhabitant taxes
Effect of differences in tax rates applicable tosubsidiaries from tax rate applicable to theCompany
Retained earnings of overseas subsidiaries
Tax credits
Other

30.62%

30.62%

5.07(3.48)

0.85

1.74(0.37)(0.38)

0.99

1.04

0.82

0.80

(0.12)(0.62)(0.04)(0.18)(0.49)
0.51

Actual effective tax rate

37.19

30.19

Notes - Asset retirement obligations(Millions of yen)Over 3
years to 4
years

Total

2. Main components causing significant differences between the statutory effective tax rate and the actual effective
tax rate after application of tax effect accounting

Previous fiscal year (As of March 31, 2022)
Within 1
year

Over 1 year
to 2 years

Over 2
years to 3
years

Tax loss carry-forwards
(*)

79

2

–

49

3

–

134

Valuation reserve

(79)

(2)

–

(49)

(3)

–

(134)

Deferred tax assets

–

–

–

–

–

–

–

TKK Report 2023 Financial Section

Over 1 year
to 2 years(*)

Offset with deferred tax assets
(365)
(611)
Net deferred tax liabilities
2,740
2,826
(Note)
Amounts of tax loss carry-forwards and related deferred tax assets by carry-forward period

42

Within 1
year

Current fiscal year
(As of March 31, 2023)

Total

Of asset retirement obligations, items recorded on the consolidated balance sheet
1. Outline of asset retirement obligations
The Group assumes obligations to restore the original state of certain facilities for rent, such that are associatedwith costs of removing asbestos from buildings containing asbestos and real estate lease agreements for
manufacturing facilities and other owned sites situated on leased land under the Ordinance on Prevention ofAsbestos Hazards and other such regulations.
2. Calculation method for determining asset retirement obligation amountWith respect to facilities containing asbestos, this amount is not discounted because the estimated period of use
has already elapsed. Estimates regarding future costs of removing asbestos are recognized as asset retirement
obligations.
With respect to obligations to restore the original state of sites associated with real estate lease agreements, theamount of asset retirement obligations was calculated using a discount rate of 0.643% assuming an estimated periodof use of 28 years from acquisition.

TKK Report 2023 Financial Section43

3. Increase (decrease) in total asset retirement obligations

Notes - Revenue recognition

Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Current fiscal year
(From April 1, 2022
to March 31, 2023)

Beginning balance
Increase due to acquisition of property, plantand equipment
Increase due to change in estimates
Adjustments associated with passage of time
Decrease due to settlement of asset retirement
obligations¥230 million¥799 million

Ending balance

144

–

427
0

–
0

(3)

(0)

799

800

1. Information on disaggregation of revenue from contracts with customers
Information on disaggregated revenue by timing of revenue recognition is as follows:
Previous fiscal year (From April 1, 2021 to March 31, 2022)

Logistics
Solutions
Business

Notes - Real estate for lease, etc.
The Company and certain subsidiaries rent out a space such as in their business places as well as land mainly forrental housing and buildings in the Tokyo metropolitan area and other areas. Rental profit related to the real estate forrent, etc. for the previous fiscal year was ¥255 million (rent income is recorded in net sales, and rent expenses arerecorded in cost of sales). Rental profit related to the real estate for rent, etc. for the current fiscal year was ¥123
million (rent income is recorded in net sales, and rent expenses are recorded in cost of sales).
Carrying amounts on the consolidated balance sheet, changes during period for the previous and current fiscal years
and fair values of the real estate for rent, etc. are as follows:(Millions of yen)
Current fiscal year
(From April 1, 2022
to March 31, 2023)

Previous fiscal year
(From April 1, 2021
to March 31, 2022)

4,746

4,489

Increase (decrease)during period

(257)

487

Balance at end of
period

4,489

4,976

Fair value at end of period
3,199
3,393
(Notes) 1. Carrying amount on the consolidated balance sheet is calculated by subtracting accumulated depreciation andimpairment loss from acquisition cost.
2. The increase (decrease) during period for the previous fiscal year primarily consists of a decrease in rentable space(¥249 million) and a decrease due to depreciation (¥8 million). The increase (decrease) during period for the current
fiscal year primarily consists of an increase in rentable space (¥798 million) and a decrease due to sale (¥311 million).
3. Fair value of property whose amount has significance at the end of the period is an amount based on a value
investigation report by an external real property appraiser, and that of other property whose amount has little
significance is an amount based on an index which is believed to reflect a market value appropriately.

(Millions of yen)
BusinessInnovation andOther Business

Total

Goods and services transferred at a
7,035
–
76
8,371
15,484point in time
Goods and services transferred
25,951
13,897
1,032
1,954
42,836over time
Revenue from contracts with
32,987
13,897
1,108
10,32658,320
customers
Other revenue (Note)
–
–
–
857
857
Sales to external customers
32,987
13,897
1,108
11,18359,177(Note)
Other revenue consists of lease revenue and other such amounts pursuant to the Accounting Standard for Lease
Transactions.

Current fiscal year (From April 1, 2022 to March 31, 2023)

Logistics
Solutions
Business

Carrying amount on the consolidated balance
sheet
Balance at beginning of
periodReportable segments
NextGeneration
Plant Business
EnergyDevelopment
Business

Reportable segments
NextGeneration
Plant Business
EnergyDevelopment
Business(Millions of yen)
BusinessInnovation andOther Business

Total

Goods and services transferred at a
7,459
–
70
8,806
16,335point in time
Goods and services transferred
20,573
8,508
973
325
30,380over time
Revenue from contracts with
28,032
8,508
1,043
9,131
46,716customers
Other revenue (Note)
–
–
–
635
635
Sales to external customers
28,032
8,508
1,043
9,767
47,351(Note)
Other revenue consists of lease revenue and other such amounts pursuant to the Accounting Standard for Lease
Transactions.

2. Information that serves as a basis for understanding revenue from contracts with customers
Information that serves as a basis for understanding revenue from contracts with customers has been presented in,“Notes - Significant accounting policies for preparation of the consolidated financial statements, 4. Disclosure ofaccounting policies, (5) Accounting policies for significant revenues and expenses.”
3. Information on the relationship between satisfying performance obligations pursuant to contracts with customers
and cash flows from such contracts, and the amount and timing of revenue expected to be recognized fromcontracts with customers that existed at the end of the current fiscal year and are expected to be recognized insubsequent fiscal years(1) Balance of contract assets and contract liabilities
Receivables from contracts withcustomers
Contract assets
Contract liabilities

As of March 31, 2022

(Millions of yen)
As of March 31, 2023

9,685

11,386

15,642655

12,263
2,138

Of the revenues recognized in the current fiscal year, ¥600 million is included in the balance of contract liabilities
as of the beginning of the fiscal year.

44

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section45

(2) Transaction price allocated to remaining performance obligations
Unsatisfied performance obligations are ¥38,977 million as of March 31, 2022. These performance obligations
mainly involve construction contracts in the Logistics Solutions Business, the Plant Business and the NextGeneration Energy Development Business, with respect to which approximately 90% is to be recognized asrevenue within one year subsequent to the end of the fiscal year and the remaining 10% is to be recognized asrevenue within two to five years.
Unsatisfied performance obligations are ¥41,402 million as of March 31, 2023. These performance obligations
mainly involve construction contracts in the Logistics Solutions Business, the Plant Business and the NextGeneration Energy Development Business, with respect to which approximately 90% is to be recognized asrevenue within one year subsequent to the end of the fiscal year and the remaining 10% is to be recognized asrevenue within two to five years.
Notes - Segment information, etc.
[Segment information]
1. Description of reportable segments
The reportable segments of the Company are components for which discrete financial information is available andwhose operating results are regularly reviewed by the Board of Directors of the Company to make decisions about
resource allocation and assess their performance.
The Group develops comprehensive business strategies and engages in business activities for respective products
and service of divisions by product and service in the Company.
Accordingly, the Company is comprised of segments by product and service, and its reportable segments consistof “Logistics Solutions Business,” “Plant Business,” “Next-Generation Energy Development Business,” and“Business Innovation and Other Business.”“Logistics Solutions Business” develops, designs, and builds material handling systems focusing on sorting,picking and conveying systems that integrate IT, and provides maintenance services and other operations for thesesystems. “Plant Business” provides maintenance services and other operations for storage tanks for LNG, LPG,
crude oil and other gas and liquid. “Next-Generation Energy Development Business” designs, builds, and executes
construction works of, storage tanks for LNG, LPG, crude oil and other gas and liquid. “Business Innovation andOther Business” undertakes construction works, manufactures and sells industrial equipment and machinery,surveys, measures and analyzes asbestos and other materials, provides maintenance and management services forenvironmental measurement equipment, conducts environmental surveys, and conducts real estate leasing, leasing,and other businesses.
In accordance with the formulation of the Group Medium-Term Business Plan (fiscal 2022–2024), from the current
fiscal year, the Company has divided “Plant & Machinery Business” into two segments: “Plant Business” and“Next-Generation Energy Development Business,” while dividing “Other Businesses” into “Business Innovation
and Other Business.”
Accordingly, the reportable segments of the Company were changed from the previous two segments of “Logistics
Solutions Business” and “Plant & Machinery Business” to the four segments of “Logistics Solutions Business,”“Plant Business,” “Next-Generation Energy Development Business,” and “Business Innovation and Other
Business.”
Segment information for the previous fiscal year was prepared and disclosed based on the classification ofreportable segments after the corporate reorganization.

3. Disclosure of sales, profit (loss), asset, and other items for each reportable segment
Previous fiscal year (From April 1, 2021 to March 31, 2022)(Millions of yen)

Reportable segments

Sales
Sales to externalcustomers
Transactions
with othersegments
Total

Logistics
Solutions
Business

Plant
Business

NextGeneration
EnergyDevelopment
Business

BusinessInnovation
and OtherBusiness

Total

32,987

13,897

1,108

11,18359,177–

59,177

–

–

–

397

397

(397)

–

Adjustment

Total

32,987

13,897

1,108

11,581

59,575(397)

59,177

Segment profit(loss)

3,149

550

(717)

572

3,554

(746)

2,808

Segment assets

33,180

5,872

2,506

14,84256,402

7,888

64,290

424

15

4

282

726

19

745

610

16

147

410

1,184

82

1,267

Other items
Depreciation
Increase inproperty, plantand equipment,
and intangible
assets

2. Method of measurements of sales, profit (loss), asset, and other items for each reportable segment
The accounting procedures for the reporting operating segments are nearly the same as those stated in “Significant
accounting policies for preparation of the consolidated financial statements.” Profits of the reportable segments are
based on operating profit. Intersegment transactions are based on actual transaction amounts.

46

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

47

Current fiscal year (From April 1, 2022 to March 31, 2023)(Millions of yen)

Reportable segments

Sales
Sales to externalcustomers
Transactions
with othersegments
Total

Logistics
Solutions
Business

Plant
Business

NextGeneration
EnergyDevelopment
Business

28,032

8,508

1,043

9,767

47,351–47,351

–

14

–

222

237

(237)

–

BusinessInnovation
and OtherBusiness

Total

Adjustment

2. Information about geographical area
(1) Sales
Japan

Total

(Note)(Millions of yen)Southeast Asia

Total

Other

58,124
1,044
8
Sales are classified by country or region on the basis of construction sites.

59,177(2) Property, plant and equipment

28,032

8,522

1,043

9,989

47,588(237)

47,351

Segment profit(loss)

2,605

560

(734)

1,071

3,503

(1,005)

2,497

Segment assets

34,955

6,135

2,083

14,37057,545

6,456

64,001

433

12

17

284

748

35

783

Other items
Depreciation
Increase inproperty, plantand equipment,
and intangible
assetsJapan(Millions of yen)Southeast Asia

16,194

Oceania

Total

87

39

16,321

3. Information for each of main customers
Name of customer

Sales

Amazon Japan G.K.

Relevant segment¥9,663 million

Logistics Solutions BusinessCurrent fiscal year (From April 1, 2022 to March 31, 2023)
1. Information for each product and service

604

32

48

471

1,157

6

4. Differences between total amounts for reportable segments and amounts in the consolidated financial statements
and main details of these differences (matters relating to difference adjustments)
Profit(Millions of yen)
Current fiscal year

Previous fiscal year

Reportable segments total
Corporate expenses (Note)
Other adjustments

3,554
(745)
(0)

3,503
(996)
(9)

Operating profit in the consolidated financial
2,808
2,497
statements(Note) Corporate expenses mainly represent expenses related to administrative divisions such as the general affairs division,
which are not attributable to the reportable segments.
(Millions of yen)
Asset

Previous fiscal year

Reportable segments total
Corporate assets (Note)
Other adjustments

Current fiscal year
56,402
7,903(15)(Millions of yen)

1,164

57,545
6,487(30)

Total assets in the consolidated financial
64,29064,001statements(Note) Corporate assets mainly represent assets related to divisions managing cash and deposits, investment securities and otherassets of the Company, which are not attributable to the reportable segments.

Material handlingsystemStorage tank, etc.
equipment, etc.
Sales to external customers

28,032

Maintenanceservices ofstorage tanks

1,043

Other

8,508

9,767

2. Information about geographical area
(1) Sales
Japan(Note)

Total
47,351(Millions of yen)Southeast Asia

Total

Other

46,2691,006
76
Sales are classified by country or region on the basis of construction sites.

47,351(2) Property, plant and equipment
Japan(Millions of yen)Southeast Asia

15,829

Oceania
36

Total
37

15,903

3. Information for each of main customers
Name of customer

Sales

Amazon Japan G.K.

Relevant segment¥9,598 million

Logistics Solutions Business[Disclosure of impairment loss on non-current assets for each reportable segment]
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable[Information associated with reportable segments]

Current fiscal year (From April 1, 2022 to March 31, 2023)

Previous fiscal year (From April 1, 2021 to March 31, 2022)(Millions of yen)

1. Information for each product and service
Reportable segments(Millions of yen)
Material handlingsystemStorage tank, etc.
equipment, etc.
Sales to external customers

32,987

1,108

Maintenanceservices ofstorage tanks
13,897Other
11,183

Total

Logistics
Solutions
Business

59,177
Impairment losses

48

TKK Report 2023 Financial Section–

Plant Business

NextGeneration
EnergyDevelopment
Business

BusinessInnovation andOther Business

–

304

–

Adjustment

Total

–

304

TKK Report 2023 Financial Section49

[Amortization and unamortized balance of goodwill for each reportable segment]

3.

Previous fiscal year (From April 1, 2021 to March 31, 2022)
In the “Business Innovation and Other Business” segment, the Company has recognized goodwill associated withhaving made Eco Analysis Corporation a subsidiary. The increase in goodwill due to this event was ¥9 million in thefirst quarter of the previous fiscal year.
Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable[Gain on bargain purchase for each reportable segment]
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable

Profit attributable to owners of parent¥2,334 million¥2,378 million

Average number of shares during the period

8,177
thousand shares

8,099
thousand shares(1)

Reason for acquisition of treasury shares
The Company will acquire treasury shares in order to flexibly implement capital strategy.

(2)

Matters pertaining to the transactions(i) Class of shares to be acquired
Common shares of the Company(ii) Total number of shares to be acquired 430,000 shares (maximum)(Equivalent to 5.3% of the total number of issued shares, excluding treasury shares)(iii) Total acquisition cost of shares¥1,200 million (maximum)(iv) Acquisition period
From May 19, 2023 to August 29, 2023(v) Acquisition method
Open market purchase via trust scheme

Current fiscal year (From April 1, 2022 to March 31, 2023)

Close
Yasukofamilymember of Yanagawa
an officer(Note)––

Ratio ofAmount ofRelationship
Nature of voting
transactions
Itembusiness or rights, etc. with related Transactions(Millionsparties
occupation holdingof yen)(held) (%)
Close
Renovation
family––of housing
18–
member of
facilities
an officer

Endingbalance(Millionsof yen)–The terms and conditions for the renovation work were determined based on arm’s length transactions.

2. Notes concerning the parent company or important affiliated companies
Not applicable

Basic earnings per share(Notes) 1.
2.

50

(v)

Annexed consolidated detailed schedules

Annexed consolidated detailed schedule of bonds payable
Type of bondDate ofissuance

Toyo Kanetsu
K.K.

1st Series ofUnsecured Bonds

Toyo Kanetsu
K.K.

2nd Series ofUnsecured Bonds

Company name

Total

Notes - Per share information

Net assets per share–

Profit attributable to owners of parent
pertaining to common shares(2) Transactions between the company submitting the consolidated financial statements and related parties
A. Officers, major shareholders (individuals only), etc. of the company submitting the consolidated financial
statements
Previous fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable

Location¥2,378 million–

At its meeting of the Board of Directors held on May 12, 2023, the Company resolved matters pertaining to theacquisition of treasury shares based on the provisions of Article 156 of the Companies Act as applied by replacing
certain terms under Article 165, Paragraph (3) of the Companies Act.

1. Related party transactions(1) Transactions between the company submitting the consolidated financial statements and related parties
Not applicableType¥2,334 million

Profit not relating to common shareholders

Acquisition of treasury shares[Information associated with related parties]

Sharecapital or
stake(Millionsof yen)Current fiscal year
(From April 1, 2022
to March 31, 2023)

Notes - Significant events after reporting period

Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable

Name ofcompany,etc.

The basis for calculation for basic earnings per share is as follows:
Previous fiscal year
(From April 1, 2021
to March 31, 2022)–(Note)
Previous fiscal year
(From April 1, 2021
to March 31, 2022)

Current fiscal year
(From April 1, 2022
to March 31, 2023)¥4,460.55¥4,708.95¥285.43¥293.63

BeginningbalanceEndingbalance

Interest rate(%)

Collateral

Date ofmaturity

500

0.39

None

September
24, 2027

500

500

0.41

None

March 24,
2028

1,000

1,000

–

–

–

(Millions ofyen)(Millions ofyen)

September25, 2020

500

March 25,
2021–

Projected redemption amounts for five years after the consolidated balance sheet date are as follows:(Millions of yen)Over 1 year
to 2 years

Within 1 year–

Over 2 years
to 3 years–

Over 3 years
to 4 years–

Over 4 years
to 5 years
–

1,000

The amount of diluted earnings per share is not provided because there are no potential shares.
In the calculation of “net assets per share,” shares of the Company held by the benefit trust for officers are included
in treasury shares deducted from the total number of shares issued at the end of the fiscal year (81,200 shares in theprevious fiscal year, 59,400 shares in the current fiscal year).
In addition, in the calculation of “basic earnings per share,” such shares are included in treasury shares deducted in
the calculation of the average number of shares during the period (81,200 shares in the previous fiscal year, 65,223
shares in the current fiscal year).

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

51

(TRANSLATION)

Annexed consolidated detailed schedule of borrowings
Beginning balance

Classification(Millions of yen)

Short-term borrowings

Ending balance(Millions of yen)

Average interest
rate (%)

INDEPENDENT AUDITOR’S REPORT

Repayment due

8,120

5,357

0.362

–

–

1,700

0.744

–

Long-term borrowings (excluding
current portion)

4,580

3,380

0.875

Between 2025 and 2030

Total

12,70010,437–

Current portion of long-termborrowings(Notes) 1.
2.

June 28, 2023
To the Board of Directors of
Toyo Kanetsu K.K.
GYOSEI & CO.
Tokyo Office–

In calculating the average interest rate, the weighted average interest rate on the ending balance of borrowings, isshown.
Repayment of long-term borrowings (excluding the current portion) scheduled within five years after the
consolidated balance sheet date is as follows:(Millions of yen)Over 1 year
to 2 years

Classification
Long-term
borrowings

2,480Over 2 years
to 3 years
400

Over 3 years
to 4 years

Over 4 years
to 5 years––

Designated Partner
Engagement Partner
Certified Public Accountant

Tetsuo Noguchi

Designated Partner
Engagement Partner
Certified Public Accountant

Akira Mishima

Audit of Financial Statements
Annexed consolidated detailed schedule of asset retirement obligations

Audit Opinion

A schedule of asset retirement obligations has been omitted since matters to be stated in the schedule are stated as
notes prescribed in Article 15-23 of the Regulation on Terminology, Forms, and Preparation Methods of Consolidated
Financial Statements.

(2) Other information
Quarterly information for the current fiscal year
First quarter(Cumulative)(Cumulative period)
Net sales(From April 1, 2022
to June 30, 2022)

Third quarter(Cumulative)(From April 1, 2022
(From April 1, 2022
to September 30, 2022) to December 31, 2022)

Current fiscal year

(From April 1, 2022 toMarch 31, 2023)(Millions of yen)

10,61921,66533,24047,351

Profit before income taxes(Millions of yen)

671

1,208

1,529

3,408

Profit attributable to owners ofparent(Millions of yen)

379

738

1,142

2,378

Basic earnings per share

46.72

91.07

141.04293.63First quarter

Second quarter

Third quarter

Fourth quarter

46.72

44.40

49.98

152.75(Yen)(Accounting period)
Basic earnings per share

52

Second quarter(Cumulative)

TKK Report 2023 Financial Section(Yen)

Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited the accompanying consolidated financial statements of Toyo Kanetsu K.K. (the “Company”), which comprisethe consolidated balance sheet as of March 31, 2023, and the consolidated statements of income and comprehensive
income, the consolidated statement of changes in equity, the consolidated statement of cash flows for the fiscal year
from April 1, 2022 to March 31, 2023, and significant accounting policies for preparation of the consolidated financial
statements, other notes, and annexed consolidated detailed schedules, all expressed in Japanese yen.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries (the “Group”) as of March 31, 2023, and theconsolidated results of their operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements” section of our report. We are independent of the Group in accordance with the ethical requirements thatare relevant to our audit in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of theconsolidated financial statements of the current fiscal year. These matters were addressed in the context of our auditof the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.

TKK Report 2023 Financial Section

53

Consideration of the estimate of total cost of construction work involving contracts for which revenue is recognizedbased on degree of progress
Description of key audit matters and reason for
How we addressed the matter in our audit
determining the matter
As stated in the “Notes - Significant accounting In examining appropriateness of the estimate of total costestimates,” net sales under contracts for which revenue is of construction work involving contracts for which
recognized based on degree of progress recorded in the revenue is recognized based on degree of progress, weconsolidated statement of income and comprehensive mainly implemented the following audit procedures.
income for the current fiscal year by the consolidated(1) Assessment of internal control
group of Toyo Kanetsu K.K. (hereinafter referred to as
the “Company”) are ¥12,497 million. Most of the amount We assessed design of internal control related to
was recorded in the Company’s Logistics Solutions estimation of total cost of construction work, andBusiness. Therefore, for auditing purposes, there is effectiveness of the operational status.
significance of the amount in it.
(2) Assessment of reasonableness of the estimate of total
The Company records sales based on degree of progress, cost of construction work
which is calculated as the proportion of construction cost
incurred corresponding to value of work done at the end With regard to the estimate of total cost of constructionof the current fiscal year, relative to the total amount of work as at the end of the current fiscal year, we mainly
estimated cost of construction work. The estimated implemented the following audit procedures.
amount of total cost of construction work has been - We questioned the person responsible for thedetermined on the basis of management’s best estimate managerial unit of the division estimating total cost ofand judgments based on past experience and available construction works to understand the overview of theinformation collected as well as individual work construction work, and examined consistency between
specifications, and changes to original estimates may the description of the work understood and major
occur due to price fluctuations in the market, changes to components of the total cost of construction work.
specifications, natural disasters and others. Therefore, forauditing purposes, there is qualitative significance in it. - We checked materials supporting estimation of cost of
construction work such as quotations received from
Due to the above factors, we have judged that the subcontractors and suppliers of products against
estimate of total cost of construction work that the components of the total cost of construction work, andCompany recognizes as revenue based on degree of examined appropriateness of the estimated amount of the
progress in the Logistics Solutions Business is a key audit total cost of construction work.
matter.
- With regard to total cost of construction work for which
the cost rate was estimated to be lower in light of pastrecords, we asked questions about reasons why the cost
rate was estimated to be lower in light of past results, andexamined reasonableness of the estimate.
- With regard to construction works that were completed
or delivered in the current fiscal year, we compared theestimated amount of total cost of construction work withthe actual amount, verified appropriateness of theestimate of total cost of construction work as at the endof the previous fiscal year ex post facto, and checked
whether there was any matter to be taken into account inexamining appropriateness of the estimated amount of
total cost of construction work as at the end of the current
fiscal year.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate
to prepare the consolidated financial statements with the assumption of the Group’s ability to continue as a going
concern, and for disclosing matters related to going concern, as applicable in accordance with accounting principles
generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing the Directors’ execution of duties relating todesigning and operating the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibilities are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion on the consolidated financial statements based on our audit from an independent point of view. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
In accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, and design and perform audit procedures responsive to those risks. Selecting audit procedures to be
applied is at the discretion of the auditor. Obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.

•

Consider, in making those risk assessments, internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, while the purpose of the audit of the consolidated financial
statements is not expressing an opinion on the effectiveness of the Group’s internal control.

•

Evaluate the appropriateness of accounting policies used by management and their method of application, as wellas the reasonableness of accounting estimates made by management and related notes thereto.

•

Conclude on the appropriateness of management’s use of the going concern basis for preparing the consolidated
financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
notes to the consolidated financial statements or, if such notes are inadequate, to express a qualified opinion withexceptions on the consolidated financial statements. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Company to cease tocontinue as a going concern.

•

Evaluate whether the overall presentation of the consolidated financial statements and the notes thereto are inaccordance with accounting principles generally accepted in Japan, as well as the overall presentation, structure
and content of the consolidated financial statements, including the notes thereto, and whether the consolidated
financial statements represent the underlying transactions and accounting events in a manner that achieves fairpresentation.

Other information
The other information comprises the information included in the Annual Securities Report aside from the consolidated
financial statements, the non-consolidated financial statements, and the auditor’s reports thereon. Management is
responsible for preparing and disclosing the other information. The Audit and Supervisory Committee is responsible
for overseeing Directors in executing their duties with respect to developing and administering the reporting process
for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.

54

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

55•over financial reporting in the report on internal control. The audit procedures for internal control auditing selected
and applied depend on the auditor’s judgment, including the significance of effects on the reliability of financial
reporting.

Obtain sufficient appropriate audit evidence regarding the financial information of the Group to express an opinion
on the consolidated financial statements. We are responsible for the direction, supervision and performance of theaudit of the consolidated financial statements. We remain solely responsible for our audit opinion.

We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit,
significant audit findings, including any significant deficiencies in internal control that we identify during our audit,
and other matters required by auditing standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethicalrequirements in Japan regarding independence, and communicate with it all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards in order to eliminate or
reduce obstruction factors.
We determine which of the matters discussed with the Audit and Supervisory Committee were of most significancein the audit of the consolidated financial statements of the current fiscal year and therefore are the key audit matters,
and describe the matters in the auditor’s report. However, we do not describe such a matter, if law or regulationprecludes public disclosure about the matter, or if in extremely rare circumstances, we determine that the matter should
not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Audit of Internal Control
Audit Opinion
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited management’s report on internal control of the Company as of March 31, 2023.
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of the Company as of March 31, 2023 was effective, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.

•

Evaluate disclosures on the scope, procedures and results of the assessment of internal control over financial
reporting made by management, as well as evaluate the overall presentation of the report on internal control.

•

Obtain audit evidence that is sufficient and appropriate regarding the results of the assessment of internal control
over financial reporting in the report on internal control. We are responsible for the direction, supervision andperformance of the audit of the report on internal control. We remain solely responsible for our audit opinion.

We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the internal
control audit, results of the internal control audit, significant identified deficiencies in internal control that should be
disclosed, results of their correction, and other matters required by auditing standards for internal control.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethicalrequirements in Japan regarding independence, and communicate with it all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards in order to eliminate or
reduce obstruction factors.
Conflicts of Interest
Our firm and its engagement partners do not have any interest in the Group which is required to be disclosed pursuant
to the provisions of the Certified Public Accountants Act of Japan.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.
Please note that the other information contained in the TKK Report 2023 Financial Section differs from the otherinformation contained in the Annual Securities Report.

Basis for Audit Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial
reporting generally accepted in Japan. Our responsibilities under the auditing standards for internal control overfinancial reporting are further described in the “Auditor’s Responsibilities for the Audit of the Report on Internal
Control” section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management and the Audit and Supervisory Committee for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting, and for the
preparation and fair presentation of the report on internal control in accordance with assessment standards for internal
control over financial reporting generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing and verifying the design and operation ofeffective internal control over financial reporting.
There is a possibility that misstatements may not be completely prevented or detected by internal control over financial
reporting.
Auditor’s Responsibilities for the Audit of the Report on Internal Control
Our responsibilities are to obtain reasonable assurance about whether the report on internal control is free frommaterial misstatement, and to issue a report on audit of internal control that includes our opinion on the report oninternal control based on our internal control audit from an independent point of view.
In accordance with auditing standards for internal control over financial reporting generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We also:•

56

Perform audit procedures in order to obtain audit evidence regarding the evaluation results for internal control

TKK Report 2023 Financial Section

TKK Report 2023 Financial Section

57

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

9,323,074

Number of Shareholders

12,715

Security Traded

Tokyo Stock Exchange, Prime Market

Transfer Agent and Registrar

The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head Office11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-1952
URL: https://www.toyokanetsu.co.jp/global/

Domestic Subsidiaries
Toyo Kanetsu Builtec K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com

Toyo Service System K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3171
URL: https://www.toyoservice.co.jp

Toyo Koken K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: https://www.toyokoken.co.jp/en

Kankyo Research Institute Inc.
6-22, Okadomachi, Hachioji-shi, Tokyo 192-0054, Japan
Tel: +81-42-627-2810 Fax: +81-42-627-2820
URL: http://www.kankyo-research.co.jp/

Eco Analysis Corporation
84, Takedakitamitsuguicho, Fushimi-ku, Kyoto-shi, Kyoto
612-8419, Japan
Tel: +81-75-643-0341 Fax: +81-75-644-0645
URL: http://www.kankyou-keisoku.co.jp/

Scrum Software Co.,Ltd
Dainichi Minamisenba Building, 3rd Floor, 5-21, Minamisenba
1-chome, Chuo-ku, Osaka-city, Osaka 542-0081, Japan
Tel: +81-6-6264-4976 Fax: +81-6-6264-4970
URL: https://scrumsoftware.co.jp/

58

TKK Report 2023 Financial Section

Wakayama Plant
457, No, Arida, Wakayama 649-0314, Japan
Tel +81-737-85-3120

Chiba Plant
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Overseas Subsidiaries
PT Toyo Kanetsu Indonesia(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62-21-570-7805 / 7739 Fax: +62-21-570-3950
URL: http://www.pttki.com/

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60-86-338-122 Fax: +60-86-338-123

Contact

TOYO KANETSU K.K.
Corporate Planning Department
Corporate Division
TEL: +81-3-5857-3333 FAX: +81-3-5857-3170
E-MAIL: tkkreport@toyokanetsu.co.jp
URL: https://www.toyokanetsu.co.jp/global/