Annual Report 2019Year ended March 31, 2019

Contributing to
the Construction ofSocial Infrastructure

Contents
Editorial Policy
This “Annual Report” is a publication for the Furukawa Company Group’s
shareholders and other investors. It is an integrated report that includes
financial information from the Group’s “Annual Securities Report” andenvironmental, social, and governance (ESG)-related information from its“Corporate Governance Report” and “CSR Report.” The intention of thisAnnual Report is to foster a more accurate understanding of the integrated
thinking, strategies, and actions of the Group while covering the information necessary for shareholders and other investors.
In addition to these report, we disclose financial statements, financial
results briefing materials, and post various other information on our corporate website in a timely and appropriate manner.

https://www.furukawakk.co.jp/ir/library/
Target Period: April 2018–March 2019
(Some activities before and after this period are also included.)

Annual Report

Annual Securities
ReportCorporate Governance
Report

CSR
Report(Financial information)(ESG information)(ESG information)

Forward-Looking Statements
This Annual Report contains information about the Furukawa Company Group’splans, strategies, and future prospects. Such information, which is based on
information currently available and reflects determinations deemed rational by
the Group at the present time, includes various risks and uncertainties. Actual
results may differ significantly from forecasts contained herein due to thesechanging uncertain factors.

About the Furukawa Company Group1

Furukawa Company Group’s Value Creation Process2

Message from the President

4Interview with President Miyakawa

6

Special Feature ~Improving ROE~

10

Review of Operations

12

Topics16

ESG Information
		 The Furukawa Company Group’s ESG Activities

17		 CSR Goals

18

		 Corporate Governance

19

		 Message from an Outside Independent Director

21		 Directors and Audit & Supervisory Board Members

22

		 Risk Management

23

		Compliance24

		 Environmental Initiatives

25

		Environmental Management

26

		 Social Initiatives

28

Financial Information
		 Consolidated Six-Year Financial Summary

30

		 Financial Review

31

Corporate Data and Stock Data

66

Corporate History

67

About the Furukawa Company GroupThe key to the success of the Furukawa Company Group, which recently celebrated the 144th anniversary of its founding, began with thedevelopment of the Ashio Copper Mine by founder Ichibei Furukawa. At the time, the Company introduced world-leading mine development
technologies that have become the foundation for its technological expertise today. Since then, we have developed and advanced ourtechnologies, amassed through mine development, to build our two business domains:
the Machinery business and the Materials business. In particular, our Machinery business,positioned as a core business, responds to growing market needs and contributes to society
through the development of social infrastructure. In the spirit of our founder, we keep our
relationship with the environment and society constantly in mind when conducting ourbusiness activities.
We will continue to leverage our Machinery business and our Materials business toprovide products that the world needs. At the same time, we will strive constantly toachieve the objectives of our Vision for 2025, entitled “FURUKAWA Power & Passion 150,”
as we approach our 150th anniversary in fiscal 2026.
Ashio Copper Mine (around 1920)

Management Philosophy

The Furukawa Company Group willremain indispensable to society by always

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

embracing a spirit of challenge, advancing
the technologies that have underpinned thefoundation of society that originatedin mining development.

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

Financial / Non-Financial Performance
Fiscal year (Millions of yen)

2014/3

2015/3

2016/32017/3

2018/3

2019/3163,026

172,544

161,799

149,830

167,696

174,117

Operating income

6,886

8,925

7,989

6,546

7,821

8,915

Profit attributable to owners of parent

3,976

9,793

5,056

4,254

4,774

4,654

Profit attributable to owners of parent
per share (Yen)

98.40

242.34125.13105.29118.16116.23Return on equity (ROE) (%)

7.6

15.9

7.5

5.9

5.9

5.7

Return on sales (%)

2.4

5.7

3.1

2.8

2.8

2.7

Total asset turnover (Times)

0.82

0.85

0.80

0.74

0.78

0.79

CO2 emissions (Thousand t)

23

27

24

25

26

26

Total emissions including waste, etc. (t)

7,746

6,266

6,832

5,347

6,884

7,160

Employees

2,413

2,456

2,521

2,616

2,690

2,757

Net sales

Annual Report 20191

Furukawa Company Group’s Value Creation Process
During its long history dating back 144 years, the Furukawa Company Group has undergone various transformations andovercome many difficulties. This history reflects the strong commitment to safety and the environment that we have today.
Embracing the philosophy of Ichibei Furukawa, our founder, we have practiced marketing-based management by
developing mines and other technologies that support social infrastructure. As a result, we have innovated products
and services that are reliable and appealing and satisfy market needs. With a commitment to “category leadership anduniqueness,” we aim to remain a company that is indispensable to society.

Management Philosophy
The Furukawa Company Group will remain indispensable to society by always embracing a spiritof challenge, advancing the technologies that have underpinned the foundation of society thatoriginated in mining development.

Mining technologies
Exploitation
technologies

Drilling
technologies

Transport / Mineral processing
technologies

Hydrauliccontrol
technologies

Slurrytransportation
technologies

Grinding
technologies

Exhaust gas
treatment
technologies

StrategyRock Drill Machinery

UNIC Machinery

Industrial Machinery

Manufacture and sale ofhydraulic breakers, hydrauliccrushers, hydraulic crawler drills,
tunnel construction and mining
machinery, environmental
machinery, etc.

Manufacture and sale of UNIC
cranes, mini crawler cranes,
ocean cranes, UNIC carriers,
etc.

Manufacture and sale of pumps,
crushers, and other materialrelated machines, environmental
machines, bridges, andheat- and wear-resistantcastings; various construction
contracts

Vision for 2025
Medium-Term Business Plan

ROE
ROA

Machinery Business

ESG

Business Activities

Marketing-Based Management

2

FURUKAWA CO., LTD.

Seeking to realize our Management Philosophy, which embodies this commitment, we are currently implementing our
Vision for 2025 in the approach to our 150th anniversary in fiscal 2026. The vision is divided into three phases, each with
its own medium-term business plan. In our business activities, which center on the Machinery business and the Materials
business, we will bring together technologies cultivated over many years and new strategies while also taking ROE/ROA,
business portfolio management, ESG, and risk management into account. In this way, we will help resolve social issues ineach era and continue building social infrastructure and realizing a safe and environmentally friendly society. This has
been the Group’s value creation process since its foundation.

Smelting technologies“Category leaderships and uniqueness”
Flash smelting
technologies

MetalsSulfuric acidproduction
technologies

ChemicalsElectric
technologies

Electronics

Products /Services

Value
Creation

Establish social infrastructure
Realize a prosperous society that issafe and environmentally friendlySale of electrolytic
copper, electrolytic
gold, electrolytic
silver, sulfuric acid,etc. (produced bysmelting on
consignment)

Manufacture andsale of sulfuric acid,polyferric sulfate
aqueous solution,
sulfate band,
cuprous oxide,
copper oxide, etc.

Manufacture andsale of high-purity
metal arsenide,
crystal products,
core coils,
aluminum nitride,
opticalcomponents, etc.

Business
Portfolio
Management

Materials Business

Risk
Management

Social Issues /
Needs

nt

Annual Report 20193

Message from the President

Vision for 2025 and Medium-TermBusiness Plan 2019
We have a long history dating back 144 years. Since ourestablishment as a mining company, we have undertaken
various changes, including business transformation anddiversification, while overcoming multiple periods of hardship.
This history is embodied in today’s Furukawa Co., Ltd., whichis the core entity of the Furukawa Company Group. Our rolein society is to help resolve the social issues of the times byapplying our accumulated technological expertise to create
reliable and attractive products, technologies, and services
tailored to market needs. To realize our Management Philosophy, which reflects this role, we formulated our Vision for2025 with a view to our 150th anniversary in fiscal 2026. We
announced the vision, entitled “FURUKAWA Power & Passion
150,” in 2015 when we celebrated our 140th anniversary. As
performance indicators, the vision sets out two targets:consolidated annual operating income regularly in excess of¥15 billion and ROE of more than 10%. Phase 1 of the vision
is the three-year period covered by our Medium-Term Business
Plan 2019 (April 2017 to March 2020). This is positioned as aperiod of “Building foundations for renewed growth.” In fiscal
2020, the final year of the plan, we are targeting consolidated operating income in the ¥8.5 billion range and ROE in the
6–7% range.

4

FURUKAWA CO., LTD.

Fiscal 2019 Review and Fiscal 2020 Initiatives
Fiscal 2019, ended March 31, 2019, was the second year of
Medium-Term Business Plan 2019. We are satisfied with our
performance as we enter fiscal 2020, the plan’s final year.
In fiscal 2019, we posted consolidated operating incomeof ¥8,915 million, up 14.0% from the previous fiscal year
and 4.9% higher than the ¥8.5 billion target set underMedium-Term Business Plan 2019. By business, the Machinery
business performed well, with operating income at 5.1%
higher than our target under the plan. Within the
Machinery business, the Industrial Machinery segment wasparticularly strong, with operating income at 67.1% higher
than the target. By contrast, operating income of theMaterials business was 0.3% below the target, due todeteriorating profitability of smelting and refining operationsin the Metals segment, where operating income was 16.9%
below target. Meanwhile, operating income of the Real
Estate segment was 16.4% above the target. As a result, theMachinery business was able to compensate for inconsistentprofitability of the Metals segment, making fiscal 2019 a yearof progress as we closed in on our objective of becoming acompany that is not dependent on the performance of theMetals segment.
We have set ¥8.5 billion as our consolidated operating
income target for fiscal 2020, the final year of Medium-Term

Business Plan 2019. To reach this milestone target, we haveset operating income goals for each business segment andimprovement of ROE as our most important priorities.
Particularly urgent is the need to improve ROE, which was
5.7% in fiscal 2019. ROE reflects a combination of profitability, efficiency, and leverage. Of these three factors, improving
profitability and efficiency is the top priority for the Group,and Companywide mindset reforms and initiatives are
essential to this end. In order to link frontline operations andmindset reforms to improved ROE, the Group is promoting
business management using ROA (Operating income on total
assets) as a key performance indicator (KPI) for each businesssegment.
Medium-Term Business Plan 2019 identifies the Machinery
business as our core business. To this end, we will continue“building foundations for renewed growth” so that we canachieve Phase 2 of Vision for 2025, which calls for us to“expedite growth and further improve profitability.”

Shareholder Return Policy
One of the policies of Vision for 2025 is to achieve a balance
between growth-oriented investments and shareholder return.
In addition to returning increased profits to our shareholders,
we make sure to retain funds that are needed for capital
investments and R&D, which are essential for securing profits.
To this end, we allocate profits after comprehensively
considering future business development and other factors. In
principle, we aim to pay annual dividends of ¥50.00 per shareor higher for a consolidated dividend payout ratio of 30% or
higher, based on consolidated earnings (excluding extraordinary income / loss situations). This reflects our policy ofreturning profits to shareholders in a stable and ongoingmanner. For fiscal 2019, the Company declared annual
dividends of ¥50.00 per share, for a consolidated dividend
payout ratio of 43.0%. The Company also bought back its
own shares in fiscal 2019, pursuant to a resolution of theBoard of Directors on November 26, 2018. A total of 861,700
shares were bought back, for a total acquisition price of¥1,208 million. As appropriate, we will consider buying backand canceling our own shares, taking stock price trends,
capital efficiency, cash flow, and other factors into properconsideration.
Going forward, I want to use various opportunities toengage in more proactive dialogue with stakeholders, withthe aim of disseminating our thoughts, attitudes, and current
status more broadly and thus ensuring a deeper understanding. We will reflect the valuable opinions obtained throughsuch dialogue in our ongoing quest to achieve growth
together with stakeholders and continuously improve ourability to generate income as a corporation. We will bring
together the wisdom and enthusiasm of each and every
executive and employee to meet your expectations.

The “Power & Passion” symbol expresses
the “power and speed” and the “passion
and enthusiasm” ­aspects of our businessapproach. The perfect red circle conveys
the connections and bonds we have withcustomers, and “150” represents the 150th
anniversary of our founding in 2025, whichis the year for achieving our vision.

Vision for 2025 “Furukawa Power & Passion 150”
❶ Increase the value of the Furukawa brand through		 marketing-based management*●		 Develop products and technologies that match market needs●		 Reinforce technological sales capabilities (proposals and		 solutions) reflecting customer needs●		 Achieve category-leading positions by concentrating on
		 niche products that have competitive advantages and using		 differentiation strategy●		 Cultivate and create new markets and product categories;
		 build a new business model❷ Sustainably expand the Machinery business●		 Reinforce revenue bases in growing overseas markets mainly		 in business related to infrastructure and resource development●		 Strengthen and enhance stock business●		 Maximize business opportunities by demonstrating
		 comprehensive Group competences and reinforcing
		 engineering strengths❸ Strengthen and expand our human resource bases●		 Build vibrant human resources and corporate culture for a		 new Furukawa●		 Secure, utilize, and develop diverse human resources in Japan		 and overseas● 	 Put even more effort into training sales and marketing personnel❹ Actively promote investments to increase corporate value●		 Make proactive capital investments necessary for growth●		 Expand business through strategic M&A and alliances❺ Establish a robust corporate foundation●		 Increase corporate value by improving profitability and capital		 efficiency, targeting ROE of more than 10%●		 Establish a strong financial base●		 Achieve balanced appropriations between investments for		 growth and return to shareholders* Marketing-Based Management“Marketing-based management” means incorporating marketing
into the core of management to provide products and services
recognized as valuable in changing markets, as well as to identify
and resolve issues and problems faced by customers, with the aimsof deepening ties with customers, achieving sustained growth, andincreasing corporate value.

August 2019

Naohisa Miyakawa
President and Representative Director
Annual Report 20195

Interview with President Miyakawa

Strategies for Achieving Vision for 2025
Fiscal 2020, ending March 31, 2020, is the final year of Medium-Term Business Plan 2019, which is Phase 1 of our Vision for 2025.
In this section, President Miyakawa shares his thoughts and enthusiasm on issues and strategies for achieving Vision for 2025.

Q1

How do you evaluate the Company’s performance in fiscal 2019, ended March 31, 2019. Also, pleasetell us about the future challenges of the three segments that comprise the Machinery business, whichis positioned as central to realizing Medium-Term Business Plan 2019 and Vision for 2025.
In fiscal 2019, we achieved year-on-year increases in consolidated net sales and operating income, both of which exceeded our
initial targets. It was a solid performance backed by growth in the
Machinery business. We also reported operating income in excessof ¥8.5 billion range, our target for the final year of Medium-TermBusiness Plan 2019, which is Phase 1 of our Vision for 2025.
However, there are some points of reflection. At the beginningof fiscal 2019, we predicted a year-on-year decline in operating
income. In the course of producing quarterly business reports,
however, we made a succession of upward revisions, which

Positioning of Medium-Term Business Plan 2019: “Building foundations for renewed growth”
Vision for 2025 (ideal image for 150th anniversary of foundation)
Become a corporate group that leverages
its reputation for category leadership anduniqueness to deliver growth

Increase
corporate
value

Phase

Phase 1

Phase 2Phase 3Time period

FY2018–2020

FY2021–2023

FY2024–2026

Positioning

Build foundations
for renewed growth

Expedite growth andfurther improve profitability

Complete realization of
Vision for 2025

Operatingincome¥8.5 billion range

̶Regularly in excess of¥15 billion

ROE

6–7% range

̶More than 10%

Performanceindicators

6

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

FURUKAWA CO., LTD.

showed a lack of precision in our forecasts. Our initial forecast,which reflected the Company’s steadfast and conservative
approach, disappointed many shareholders and other investors,
and the fact that we ultimately delivered a good performance issomething, we should reconsider. Although each segment faces
difference circumstances, I feel that we need to re-evaluate ourmarket analysis, planning, and risk-taking methods, which
together form the basis for our performance forecasts.
The Industrial Machinery segment succeeded in attracting
multiple large-scale orders for belt conveyors. Due to the natureof the contractor business, however, it is difficult to envisagein advance the assumptions and risks that may occur. Because
we analyzed these risks too cautiously, we were forced to makesignificant changes in profit forecasts as construction progressed.
It goes without saying that risk should be managed rigorously, but
we also need to reassess how we incorporate such risk into ourforecasts without being overly conservative. On the other hand,transporting earth and sand via belt conveyor can help address
various social issues, so we will continue working to attract orders
for large-scale projects in the contractor business. At the sametime, we will rigorously manage projects that are already inprogress.
In the Rock Drill Machinery segment, our top priority is tobolster overseas sales of hydraulic crawler drills. Overseas sales
outside of North America are declining, and we are examining thissituation closely. We need to focus all our efforts on understanding and resolving issues related to our sales capabilities, productappeal, inventory control, and other factors. In Japan, we areenjoying healthy demand for tunnel drill jumbos used in
mountainous tunnel construction. However, this demand will

decline one day, so we need to swiftly establish a foundation andsystems for overseas sales expansion. Meanwhile, we are goingahead with initiatives for our Life Cycle Support (LCS) activities,
which include launching a hydraulic crawler drill operational
management service in Japan. Although this will take time to help
our bottom line, we are making steady progress.
In the UNIC Machinery segment, we completed rolling out ourfull lineup of UNIC cranes in response to partial revision of mobile
crane structural standards, and are currently promoting sales of
the “G-FORCE” series of cranes that feature easy operability andsafety. Meanwhile, we completed a three-year capital investment
plan aimed at upgrading the Sakura Works to “mother factory”
status, and expect this to produce benefits in fiscal 2020. In Japan,
where demand for trucks is expected to gradually decline, we will
aim to differentiate ourselves by offering higher-value-added UNIC
cranes while exploiting the benefits of capital investments toenhance profitability. We will also forge ahead with modelchanges of our mini crawler crane lineup. Overseas, we will stepup sales activities tailored to each region, but building markets inemerging countries remains a challenge.
In fiscal 2020, we will concentrate on overcoming problems
one step at a time, with emphasis on the Machinery business,in order to compensate for inconsistent earnings in the Metals
segment and achieve targets of Medium-Term Business Plan 2019,
which is Phase 1 of Vision for 2025. In this way, we hope to makegood progress in “Building foundations for renewed growth,” theslogan of the plan, and pave the way for Phase 2 of the vision.

Q2

You have been elected to continue as president. Please tell us about the election process and yourfuture aspirations.
In line with the revision of Japan’s Corporate Governance Codein June 2018, the Company established the Nomination & Remuneration Committee in November 2018 to strengthen corporate
governance. The Committee, which consists of three outside
directors and the president, received inquiry from the Board of
Directors and met on multiple occasions to consider nominationsof directors for the next fiscal period. It concluded that I remain
in my position as president and representative director. The Boardof Directors showed respect for and approved the Committee’s
nominations, and the candidates were elected at the Shareholders’ Meeting.
Since becoming president in June 2013, I have been engaged inrenewing our Management Philosophy and formulating Vision for2025 and Medium-Term Business Plan 2019. During that time, we
believe we have made good progress in communicating the

Furukawa Company Group’s aspirations and goals to executives
and employees. However, we still have work to do in transforming various bodies of the Company into forums for free discussion about corporate strategies and tactics. These include theBoard of Directors and the Management Council, as well as theManagement Committee, which spearheads implementation of
medium-term business plans. If we can transform the core ofmanagement into a culture of more open discussion about varying
agendas, we will naturally foster a culture in which all employees
can think and debate freely. I recognize that in-house mindset
reforms and cultural reforms are essential for realizing our Vision
for 2025. With this in mind, I want to lead the charge in providing forums for freer and more open discussion. I believe that the
spread of such open and free debate will surely help foster our
next generation of leadership candidates.

Annual Report 20197

Q3

Improvement of ROE and introduction of a cost of capital are two central elements of the Group’s
management reforms. Please tell us about your aims and initiatives in this regard.
In order to realize Vision for 2025, our most important priority
is to increase corporate value, and boosting ROE is a crucial partof that process. ROE reflects a combination of profitability (netincome margin), efficiency (total asset turnover), and financial
leverage. Of these three factors, increasing profitability andefficiency is the top priority for the Group. To make it easier forour business segments, we use ROA for each segment—based on
operating margin instead of net income margin—to measure profitability and set performance indicators. Using ROA as an improvement driver, we have created a breakdown of specific strategies
and measures, incorporated KPIs into frontline operations, andlaunched initiatives aimed at improving the work practices of eachand every employee. I think our executive-level people recognize
why ROA needs to be improved, but more rigorous efforts will
be required until individual employees think and take action. We
created an “ROE Tree” to help align the behavior of individual
employees on the frontlines with the Group’s corporate policies
and share a common mindset.
We also recognize the crucial importance of introducing costof capital in order to improve ROE. To calculate the cost ofcapital, we adopted the weighted-average cost of capital (WACC)
method, based on a capital asset pricing model (CAPM), to set thehurdle rate (>WACC). In managing the portfolios of our businesssegments, we use a corporate value creation standard, and forcapital investments, M&A, and investment-based alliances thatgenerate cash flows, we set hurdle rate standard. In these ways,
we endeavor to optimize overall allocations of management resources. Using cost of capital to optimize portfolios not only helps
strengthen our business but also enables us to consider and selectfrom a wide range of options—including business downsizing /withdrawal, new business development, M&A, and alliances—
starting from a zero base. My greatest hope is that it will lead tomindset reforms and business reforms.
By simply extending our current business portfolio, we believe
we cannot regularly achieve consolidated operating income inexcess of ¥15 billion, a key target of Vision for 2025. To this end,
we must implement discontinuous strategies to raise operating
income, which will entail creating and developing new markets inaddition to existing ones, while building new businesses, including
through M&A. To put such strategies into practice, it is essentialthat we transform the attitudes and mindsets of directors andexecutives. As president, I consider this as a very serious responsibility.

Corporate Value Improvement Process
Cost of capital introduction

Business portfolio management
Consolidated
subsidiarymanagement

Business segment
management

New:“3 – 5 year rule”
New and existing:“Impairment loss of
subsidiaries' stocks”“Excess of debts”

Corporate value
creation standard
ROIC – WACC＞０

Capital investments
M&A
Investment-based
alliances

Hurdle rate standard

Establish optimal business portfolio andpursue overall optimization in
management resource allocation
Improving ROE

Improving corporate value

Q4

Recent years have seen growing interest in ESG and the Sustainable Development Goals (SDGs).
Please tell us your thoughts on the Furukawa Company Group’s approach to ESG and the SDGs.
We are working on our own approach to ESG and the SDGs,
which are attracting more and more attention in society. Given
our historical background, it can be said that our business, initself, has been an embodiment of corporate social responsibility(CSR). With regard to the environment, in particular, we havelaunched new businesses in succession based on our own reflections and experiences, including how we addressed past pollution
problems. It can be said that concern for the environment in
imprinted in the DNA of our employees, and the environmentis closely related to our existence as a company.
With regard to governance, we have increased our responses
more than ever since the establishment of Japan’s Corporate
Governance Code. We have been promoting reforms of the Boardof Directors in response to the needs of the times. These include
discontinuing the appointment of outside directors from affiliatedcompanies, which had been pointed out before, as well as theappointment of highly independent outside directors.

8

FURUKAWA CO., LTD.

In the meantime, we consider our social initiatives to be top
priority. We have pursued workstyle reforms, diversity, theadvancement of women, and other efforts in a timely manner, but
we are still exploring what we should aim for as a Group. Rather
than simply establishing systems and rules, we are currently engaging in discussions aimed at making the Furukawa Company Groupa unique organization, not an imitation of other companies.
On the other hand, the Industrial Machinery segment is an area
in which we can use ESG and the SDGs as business opportunities.
Our belt conveyors of the Industrial Machinery segment, in particular, have been adopted to help address social issues, including
reduction of carbon dioxide (CO2) emissions, in various projects.
These include relocating people to higher ground in Rikuzentakata City, providing earth-moving equipment in the Tokyo Gaikan
Expressway project, and establishing intermediate storage facilities
in Fukushima Prefecture. The Industrial Machinery segment willplay an increasingly important role in the context of Japan’s aging

infrastructure, including dams and bridges. Using innovative ideas
combined with past experiences, we have the potential to convert
these challenges into business opportunities.
In retrospect, we can say that our history of more than 140
years has been one of solving social problems. We will continue
working on ESG and the SDGs while remaining aware of ourcorporate social responsibilities and integrating our business andCSR activities.

Q5

Please tell us about the Group’s corporate governance reforms.
We have been promoting mindset reforms at the Board of Directors
over the last several years. Rather than approving proposals as aformality, which was the case previously, we endeavor to engage inproper debate while spending considerable time on proposals andagendas. I would like the Board of Directors to function as a forum
for discussing proposals and agendas, not as a voting body. Another key challenge going forward is to make changes to the Board of
Directors that enable members to freely discuss the future of theGroup.
The new Board of Directors for fiscal 2020 consists of five newly
elected members and four re-elected ones. As Phase 1 of Vision
for 2025 comes to fruition, we thought it necessary to appoint
executives who will adopt a long-term vision together with newperspectives and ideas. In addition, we elected a woman to serve
as one of our three outside independent directors. This is part ofour efforts to promote diversity, and we expect our directors to use
their diverse perspectives in management discussions. We want ouroutside directors to correctly identify issues and problems that go
unnoticed by people inside the Company. There have been times
in the past when outside directors made harsh comments that
resulted in changes to the Company’s systems and structure.
By encouraging directors to make more suggestions and comments
than ever before, we hope to make our corporate governancesystem function more soundly.
It is also important for directors to have the same perspective asshareholders. Our Nomination & Remuneration Committee pointed
out the need to for a performance-linked remuneration system, andwe will consider this going forward. Currently, executive officers are
obliged to hold shares of the Company when they are elected. We
will keep in place mechanisms that encourage officers to engage inbusiness while remaining aware of the standpoint of shareholders.
In the future, we believe that changing times and social expectations will necessitate flexible corporate governance reforms, and to
this end we will promote a more open Board of Directors.

Board of Directors
Internal Directors

(R)

(R)

(R)

(N)

Outside Directors

(N)

(N)

(R)

(N)

(N)

(R) Reappointment(N) New appointment

Q6

What challenges must be addressed over the long term to realize Vision for 2025?
In order to realize Vision for 2025 and our subsequent aspirations,
we will pursue initiatives with somewhat long-term horizons. They
key here is to foster human resources who are capable of realizing
our vision. We expect the business environment to change dramatically in the future due to advances in robotics, artificial intelligence(AI), and other technologies. Under such circumstances, we needinnovative ideas that combine knowledge and wisdom, whichmeans we must foster human resources who are able to conceive
new ideas that transcend existing parameters. Achieving this will
require liberal arts-like education, sensitivity, and aesthetics, which
differ from specific areas of specialization. I am hopeful that we

can develop an innovative corporate culture by nurturing people
with flexible and broad perspectives and thinking, and by developing new human resources who are not constrained by conventional
training and education. My most important personal mission is todevelop director and executive officer candidates who can spearhead our next generation of management.
The business environment surrounding the Group will change
significantly in the future. In this context, I will do my utmost to
help realize Vision for 2025 while listening to the voices of ourvarious stakeholders.

Annual Report 20199

Special Feature

Improving ROE
Seeking to realize Vision for 2025, the Furukawa Company Group has set
a policy of increasing corporate value by improving profitability and capitalefficiency, targeting ROE of more than 10%. United as a Group, we will work toincrease ROE by rebuilding corporate value creation processes, through introducing
cost of capital and business portfolio management.
Senior Executive Officer
General Manager for Management Strategy
Corporate Planning Dept.

Osamu Miyazaki

Corporate Value Creation : Image & Formula
ROIC
>
WACC

Cost of capital

Introducing Cost of Capital
To achieve consolidated operating income regularly in excessof ¥15 billion, as stated in Vision for 2025, we must “increase
corporate value by improving profitability and capital efficiency,
targeting ROE of more than 10%.” This requires introductionof cost of capital. In addition to cost of debt stemming frompayments of actual financial expenses, we will calculate and“visualize” the cost of equity, which is an invisible cost. This
will make it easier to clarify and share management issues andsignificantly enhance our efforts to promote corporate value
improvement. Cost of capital is based on the WACC concept
described above, and the cost of equity is based on the widelyused capital asset pricing model (CAPM) calculation method.
As ROIC surpasses WACC, our “corporate value creation power*”
becomes positive and new levels of corporate value are created.
We will use this concept to accurately grasp corporate value
creation in the Group, and also to review our business portfolio
and allocate capital investments and other management resources.

recommends that companies maintain ROE higher than 8% as theminimum requirements. In June 2018, meanwhile, the Tokyo Stock
Exchange announced its revised Corporate Governance Code,which requires companies to explain in an easy-to-understandmanner their approach to cost of capital and how it is used inmanagement. In compliance with the revised Code, we will
formulate business strategies and plans based on an accurate
understanding of our own cost of capital in order to improve ROE
and enhance corporate value.

Net operating profit
after taxes

Cost of debt
(amount)
Cost ofshareholders’ equity(amount)(+) Amount of corporate value
created/year*

ROIC
<
WACC

Net operating profit
after taxes

ROIC

Cost of capital

Enhancing Corporate Value
One of the Group’s stated policies for realizing Vision for 2025
is to “increase corporate value by improving profitability andcapital efficiency, targeting ROE of more than 10%.” Corporate
value is the sum of shareholder value (market capitalization) anddebt value (net interest-bearing debt), and the key to improving
corporate value lies in what the Company calls “corporate
value creation power*,” which is return on invested capital(ROIC) minus weighted-average cost of capital (WACC). To raise
shareholder value, a component of corporate value, it is essential
to achieve ROE in excess of cost of capital, and Japan’s Ito Review－

Cost of debt
(amount)

Cost ofshareholders’ equity(amount)

WACC(–) Amount of corporate value
created/year*
Corporate value＝ creation power*

Formula(Corporate value creation power* x Invested capital) ÷ 100 ＝

10 FURUKAWA CO., LTD.

Bubble Chart Aiming for Business Portfolio
Identification & Visualization
Three performance indicators calculated by each business segment
X-axis: Corporate value creation power* (= ROIC – WACC)
Y-axis: Compound annual growth rate (CAGR)
Bubble size: Amount of corporate value created/year* [= (Corporate value
creation power* x Invested capital) ÷ 100]

Compound annual growth rate (CAGR)

Illustrating the three performance indicators of each business segment onto thegraph below enables the corporate value creation status of each business segment
to be identified and visualized.

Growth potential

Introducing Business Portfolio Management
In the course of achieving improvements in medium- andlong-term corporate value, we will consider a wide range ofoptions—including startup and development of new businesses;
expansion and reinforcement of existing businesses; businessdownsizing, withdrawal, and sell-off; and forming alliances—froma zero base. We believe it is important to undertake businessportfolio management in order to optimize management resource
allocations totally. The key point is for management to have an
accurate understanding of whether or not each business segment
is generating corporate value. To visualize this evaluation, we use
a Bubble Chart based on segment-specific “corporate value creation
power*,” “amount of corporate value created* / year”[ =( “corporate value creation power*” × invested capital ) ÷100], and compound annual growth rate (CAGR) of net sales.
This enables us to share issues related to our business portfolio
and implement rational management decisions that are not overly
influenced by our historic approach to resolving issues. Businesssegments with a negative “corporate value creation power*” areregarded as unprofitable, even if they are profitable on paper, andwe will consider various options, including withdrawal and sell-off,
if improvement in corporate value during a specified time period is
not achieved.

Amount of corporate value
created/ year*

Top priority in investments:
Selective investments:
Growth businesses
Next-generation businesses

X%
Rebuilding:Business restructuring
Withdrawal / Sell-off

Stable profit:
Core businesses

0%
Corporate value creation power* (= ROIC – WACC)
Corporate value creation power** Both “Corporate value creation power” and “Amount of corporate value
created/year” are terms coined by Furukawa Co., Ltd.

Groupwide Initiatives
Improving ROE is crucial to enhancing corporate value. ROE isbroken down into ROA and financial leverage (total assets / equity).
We use ROA as our performance indicator. To make ROA easier forindividual employees to understand and accept, we use operating
income for calculation purposes, and break down ROA further into
profitability (operating margin) and efficiency (total asset turnover).
Efforts to increase profitability include cultivating new sales
partners, expanding business areas, increasing selling prices, andraising market share. To improve efficiency, we endeavor to shorten
the accounts receivable collection period, reduce inventories,
increase capacity utilization, and the like. We will also set KPIs

linked into frontline operations. Promoting mindset reforms ofindividual employees is another urgent priority that will lead toGroupwide efforts to improve ROE.
Although reducing interest-bearing debt has a negative impact
on improving ROE, for the time being, we will give priority to
reducing interest-bearing debt with a view to ensuring financial
soundness and improving our credit rating. By implementing
comprehensive capital policies, including payment of continuousand stable dividends, as well as share repurchase and othershareholder return measures, we will also work on the appropriate
use of financial leverage.

ROE Tree for Creating Corporate ValueManagement / Performance Indicators
Be disclosed

In-Group KPI (Performance Indicator [Improvement Driver])Breakdown into Strategies and Measures

Expand business areas;develop new businesses
and products
Gross margin

Increase sales prices(unit prices)

Expand business areas
Develop new businesses;
launch new(high-value-added) products
Control sales prices
Promote centralized purchasing

Reduce cost-of-sales
ratio[Profitability]

Operating margin[ROA]

Net income
Total assets[ROE]

Net income
Net worth

Reduce logistics costs

Operating income
Net sales

Reorganize operations;sell businesses
Reduce labor costs

Operatingincome is usedinstead of net
income incalculations ofsegment-specific
ROA.

Reduce defective products

Automate; save labor
Increase productivity

KPIs into Frontline Operations(Examples)

Priority sectors / regions(domestic, overseas, countries) /new products/strategic products /new businesses
Unit price (selling price)
Variable cost reduction
amount / rate
Defective productamount / rate

Ratio of labor costs to net sales
Sales per employee
Operating income per employee

SG&A expense ratio

Operating income
Total assets[Efficiency]

Current asset turnover

Total asset
turnover

Reduce costs;
improve cost-effectiveness

Reduce R&D expenses
Reduce sales promotion
and advertising expenses

Ratio of R&D expenses to net sales
Ratio of sales promotion /advertising expenses to net sales

Increase sales volume

Increase market share

Sales volume; market share

Increase accounts
receivable turnover

Shorten accounts receivable
collection period

Accounts receivable turnover
period (days/months)

Shorten lead times

Lead time (time for delivery)

Increase inventory
turnoverNet sales
Total assets

Reduce inventories

Inventory turnover period (days / months)
Disposal of slow‐moving inventories
for a long time

Improve capacity utilization rate
Improve capital
investment efficiency

Fixed asset turnover

Tangible fixed asset turnover
period (days/months)

Sell idle assets[Financial leverage]

Total assets
Net worthInterest-bearing debt
ratioInterest-bearing
debt / EBITDA
Interest coverage ratio

Increase shareholder
returns

Increase cash dividends
Share repurchase andretirement

Increase interest-bearing debt

Total shareholder return ration/a (no set KPI)

Furukawa Company Group’s Strategy for
Improving ROE
Improving corporate value is key to realizing the Group’s Vision
for 2025. This in turn requires improvement in ROE, as well as
ROE that continuously exceeds the cost of capital, as absolute
prerequisites. With regard to ROE improvement, we focus mainly
on enhancing profitability and efficiency rather than relying
excessively on financial leverage. By regularly monitoring KPIs

linked into frontline operations of each department and site, wewill make ROE improvements more reliable while repeating theplan–do–check–action (PDCA) cycle. By also visualizing the invisible
cost of capital, we will identify management issues more clearly andmake resolute efforts to address them.

Annual Report 201911

Review of Operations% of Net Sales

44.6%

Machinery% ofOperating Income

In fiscal 2019, total sales of the Machinery business—consisting of the Industrial
Machinery, Rock Drill Machinery, and UNIC Machinery segments—amounted to ¥77,580
million, up 5.6% year on year, and operating income was ¥6,567 million, up 29.2%.
For the fiscal year, the Machinery Business accounted for 44.6% of consolidated net
sales and 73.7% of operating income.

73.7%

Industrial Machinery
The Industrial Machinery segment posted a year-on-year increasein sales. Factors included higher sales of materials-related machinery,such as crushers, screens, and grinding mills for an intermediatestorage facility (Futaba-machi, Futaba-gun, Fukushima Prefecture),
as well as steady sales of belt conveyors for construction of the Tokyo
Gaikan Expressway and cargo handling equipment for a large-scale
project involving construction of an international bulk terminal at
the Port of Onahama. We also booked sales from a new order for
belt conveyors for an intermediate storage facility (Okuma-machi,
Futaba-gun, Fukushima Prefecture). Consequently, segment sales
increased 13.2% year on year, to ¥17,971 million, and operating
income jumped 107.9%, to ¥2,089 million.
Net Sales

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

Roll crusher

16.7 14.9 14.0 15.9 18.0

1.7

'15/3 '16/3 '17/3 '18/3 '19/3'15/3 '16/3 '17/3 '18/3 '19/3

1.0

0.1

1.0

Going forward, we will continue working to reinforce ourengineering strengths and expand the foundation of our businessin the domestic market, transitioning from a simple equipment
manufacturer to a strategic partner for our customers. In pumps
and materials-related machinery, we will strengthen our core sales
capabilities, and in the contractor business we will enhance ourconsulting-based sales capabilities to attract new orders.

2.1

Belt conveyor installation work
(Tokyo Gaikan Expressway)

Belt conveyor installation work
(Onahama)

Machinery Business: Priority Fields and Domestic Market ShareTUNNEL PROJECTSCONCRETE
Hydraulic crawler drills

CIVIL ENGINEERING ANDCONSTRUCTION WORKSITES

Crushers
Mini crawler cranes

Tunnel drill jumbos
Belt conveyors

Crushes andcuts bedrock
into small pieces
Material for
concrete andthe like

Hydraulicbreakers

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

12 FURUKAWA CO., LTD.

Hydrauliccrushers

UNIC cranes

Shield pumps
We develop and manufacture tunnel drill jumbos,
which are used to create openings for loading
gunpowder needed for rock blasting in mountaintunnel projects. We also develop and make belt
conveyors for transporting large amounts of earthand sand, as well as shield pumps, which use waterto pump excavated earth and sand in undergroundtunnel projects. Here, our drilling and wastewater
treatment technologies, amassed through minedevelopment, come to the fore.

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

トンRock Drill Machinery
The Rock Drill Machinery segment reported increased sales on theback of healthy domestic shipments of tunnel drill jumbos, as well as
higher demand for hydraulic breakers, hydraulic crushers, andhydraulic crawler drills stemming from steady construction
investments. We also enjoyed growth in overseas sales thanks tosteady shipments of hydraulic breakers and hydraulic crawler drills
in North America, although overseas sales outside of North America
decreased. Consequently, sales in the Rock Drill Machinery segment
edged up 0.6%, to ¥30,372 million, and operating income decreased
5.2%, to ¥1,690 million.
Going forward, we will continue expanding earnings in both theflow business and stock business by strengthening our LCS capabilities. To reinforce our revenue base for drill products, we will work
to upgrade our domestic service support system and establish a solid
Net Sales

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

1.2

'15/3 '16/3 '17/3 '18/3 ’19/3'15/3 '16/3 '17/3 '18/3 '19/3

0.9

1.8

Global Market
Share

30%
Japanese
Market Share65%
Hydraulic crawler drills

Japanese
Market Share

30.9 30.1 27.0 30.2 30.4

2.2

overseas sales service network. In fiscal 2020, we have launcheda standard installation service for equipment used to control theoperations of hydraulic crawler drills shipped in Japan. Analyzing
the status of operational systems will help reduce equipment
downtime and improve our customers’ drilling operations andwork efficiency.

40%

1.7

Hydraulic crushers

Hydraulic breakers

UNIC Machinery
In the UNIC Machinery segment, we enjoyed an increase in domestic
sales thanks to higher shipments of mainstay UNIC cranes in thewake of a partial revision of mobile crane structural standards enacted in March. Healthy shipments of mini crawler cranes and unit carriers also contributed to revenue. Meanwhile, overseas sales increasedon the back of steady shipments of UNIC cranes, mainly in China,
and mini crawler cranes in Europe and North America. Accordingly,
segment sales rose 6.8%, to ¥29,237 million, and operating income
climbed 21.5%, to ¥2,789 million.

Net Sales(Billions of yen)

28.4 27.2 25.8 27.4 29.2

(Billions of yen)

2.6

2.3

Japanese
Market ShareJapanese
Market Share

Operating Income

3.6. 2.6

Looking ahead, we will seek to secure stable earnings fromdomestic sales while expanding our stock business and boostingearnings from overseas sales. To this end, we will deploy our
high-performance, high-value-added UNIC cranes to achievedifferentiation and strengthen our competitiveness. We will also
reorganize our overseas dealer network and reinforce our sales
capabilities. In addition, we will fortify our production systems inJapan, China, and Thailand by strengthening the “mother factory”
functions of the Sakura Plant, which has undergone transformation into a next-generation facility.

2.8

50%

50%

UNIC carriers

UNIC cranes'15/3 '16/3 '17/3 '18/3 '19/3'15/3 '16/3 '17/3 '18/3 '19/3

Japanese
Market ShareMini crawler cranes

40%

Initiatives of the UNIC Machinery Segment
Investment in Sakura Works to improve productivity and efficiency

At the Sakura Works, our domestic production base for UNIC cranes, we have been making
capital investments since fiscal 2017 with the aims of further improving productivity and quality
and of increasing profitability. These include investments to reform our hydraulic equipment
manufacturing processes. Specifically, we have concentrated our processing machines in a newly
established hydraulic machinery works within the Sakura Works, and the results have exceeded
our expectations. We have also reformed our coating processes, installing cationic electrodeposition and other coating equipment to improve the quality of coating. In the future, we will also
double the number of our capacity of mounting crane in our mounting processes reform and thus
further enhance profitability.
The Sakura Works supplies hydraulic equipment, which is a key part of UNIC machinery, toworks in Thailand and China, and also provides technical guidance. We will work to further
enhance the role of the Sakura Works as a mother factory.
Minoru Nakatogawa
Director(In charge of UNIC Machinery segment)
Annual Report 201913

% of Net Sales

53.3%

Materials
The Materials business—consisting of the Metals, Electronics, and Chemicals segments—
posted a 3.0% increase in sales, to ¥92,722 million, and a 15.3% decline in operating
income, to ¥1,396 million. The Materials business accounted for 53.3% of consolidated net
sales and 15.7% of operating income.

% ofOperating Income

15.7%

MetalsAfter starting the fiscal year at US$6,756/ton in April 2018, theprice of electrolytic copper rose to US$7,348/ton in June 2018,
then trended downward. Due to concerns about intensifying trade
friction, the price look set to fall below the US$6,000/ton mark,but subsequently recovered and ended the fiscal year at US$6,485/
ton on March 31, 2019. The domestic price of electrolytic copper
began the fiscal year at ¥760,000/ton in April 2018 and ended
the fiscal year at ¥740,000/ton on March 31, 2019. Demand forcopper products softened in the fourth quarter amid a slowdown
in the Chinese economy and other factors, while demand forelectric cable remained strong for construction and automotive
applications. In fiscal 2019, the Company’s sales of electrolytic
copper declined due to a 4,957-ton decrease in volume sales, to85,146 tons, but sales of electrolytic gold increased on the back ofhigher production volume. Meanwhile, deterioration of purchasing
conditions led to a decline in segment profit. For the fiscal year,
Net Sales

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

81.5 74.2 67.9 77.3 80.1

1.4

'15/3 '16/3 '17/3 '18/3 '19/3'15/3 '16/3 '17/3 '18/3 '19/3

1.2

1.7

0.9

0.6

sales in the Metals segment increased 3.5%, to ¥80,068 million, andoperating income declined 32.9%, to ¥582 million.
We expect purchasing conditions to further worsen as the supplydemand situation for copper concentrate tightens. Meanwhile,
equipment at our smelters is aging and capital expenditures toaddress environmental issues are rising, making it difficult to generateearnings. Nevertheless, we will continue striving to enhance earnings
by managing our copper smelting and refining business steadily andestablishing an optimal production and distribution system with anemphasis on profitability.

Electrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Gibraltar Copper Mine in Canada

Onahama Smelting and Refining Co., Ltd.

● Copper Prices and Foreign Exchange Rates
2015/3

2016/32017/3

2018/3

2019/3

LME copper price (average; US$/ton)

6,554

5,215

5,154

6,444

6,341

JPY rate per US$ (average for fiscal year)

109.93120.13108.42110.85110.91

2015/3

2016/32017/3

2018/3

2019/3Copper production volume (tons)

90,44786,466

84,06288,004

81,346

Copper sales volume (tons)

96,67594,327

91,294

90,10485,146● Copper Production and Sales Volume** Furukawa Metals & Resources Co., Ltd.

14 FURUKAWA CO., LTD.

Electronics
In the fiscal year under review, sales of high-purity metallic
arsenic—a mainstay product in this segment—benefited fromongoing healthy demand for compound semiconductors, a major
application for that material. Toward the end of the fiscal year,
however, a softening of demand caused total sales to decline.
Meanwhile, sales of scintillator crystal products were bolstered byhealthy demand for crystals in individual semiconductor devices.
As a result, the Electronics segment posted a 3.5% increase insales, to ¥6,527 million, and a 23.6% jump in operating income,to ¥408 million.
Looking ahead, we will continue striving to capture steadyincome from high-purity metallic arsenic and scintillator crystal

5.7

Net Sales

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

5.5

5.8

6.3

6.5

0.1 (0.4) 0.0

0.3

products. At the same time, we will aim to reinforce our earnings
structure by enhancing the appeal of such strategic products ascoils, aluminum nitrides, and optical components.
Global Market
Share

60%

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

Japanese
Market Share

90%

0.4

Coils used in automobile electronic
control devices'15/3 '16/3 '17/3 '18/3 '19/3'15/3 '16/3 '17/3 '18/3 '19/3

Chemicals
In fiscal 2019, we reported a year-on-year decrease in sales ofcuprous oxide due to a recoil in demand for its use in marine
antifouling paint, a mainstay application, following the enactment
in September 2017 of regulations under the Ballast Water Management Convention. Meanwhile, sales of sulfuric acid increased
due to a price revision in the second half of the period. As aresult, sales in the Chemicals segment slipped 3.4%, to ¥6,127
million, and operating income declined 9.8%, to ¥407 million.
Net Sales

6.0

5.3

6.3

Going forward, we will work to expand income from cuprous
oxide and other existing products and swiftly commercialize andfoster newly developed products, such as metallic copper powder.
Japanese(Production)
Market Share40%

Operating Income(Billions of yen)

6.0

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

(Billions of yen)

6.1

'15/3 '16/3 '17/3 '18/3 '19/3

0.3

0.2

0.1

0.5

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

0.4'15/3 '16/3 '17/3 '18/3 '19/3

Real Estate and Others
Real Estate
In the Real Estate category, tenants have been vacating the
Furukawa Osaka Building ahead of that building’s scheduled
closure at the end of December 2019. In addition, revenue fromour rental business associated with the Muromachi Furukawa

Cupric oxide used for copper plating

Mitsui Building (commercial name: COREDO Muromachi 2) declined
due to a decrease in floor space occupied by large tenants. Accordingly,
category sales decreased 10.2% year on year, to ¥2,999 million, andoperating income declined 13.1%, to ¥1,164 million.
We will continue making effective use of real estate owned by theGroup while securing stable earnings from the Muromachi Furukawa
Mitsui Building (commercial name: COREDO Muromachi 2).

2.5

Muromachi Furukawa Mitsui Building(commercial name: COREDO Muromachi 2)

Sulfuric acid production plant

Net Sales

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

3.0

3.1

3.3

3.0

'15/3 '16/3 '17/3 '18/3 '19/3

0.8

1.3

1.3

1.3

1.2

'15/3 '16/3 '17/3 '18/3 '19/3
Annual Report 201915

Topics
Strengthened Hydraulic Breaker Maintenance Services in Japan
In the Rock Drill Machinery segment, we started providing maintenance services
for hydraulic breakers in Japan’s Tohoku and Kansai regions in order to expand andstrengthen our stock business. By broadening our independent maintenance services
in this way, we will strengthen our LCS capabilities and contribute greatly to earnings
growth in both our flow business and stock business. Hydraulic breakers, which areattached to hydraulic excavators, are widely used in construction and civil engineeringsites, such as quarries and limestone mines. Although we have the top domestic
market share of around 40% (according to in-house research), we will step up
post-delivery support for customers to further enhance our position in the market.
Hydraulic breaker

Reinforced Product Lineup to Meet Demand for Demolition
In the Rock Drill Machinery segment, we developed and launched super-large hydraulicbreakers and large-scale hydraulic crushers for use in various types of demolition projects.
These include demolition of buildings as part of Japan’s urban redevelopment, demolition oflarge manufacturing plants, and demolition of bridges and other aging infrastructure. Suchlarge-scale demolition projects require stronger and more destructive demolition equipment.
Our “Fxj1070” super-large hydraulic breaker, which has the greatest striking force in our
lineup, features improved durability and low noise for reduced worker fatigue. For demolition of Steel-frame Reinforced Concrete (SRC) structures, we also developed the ”Vz-7”
large-scale hydraulic crusher, featuring improved strength and durability, as well as enhanced
wear resistance for longer life. Both of these new machines will facilitate efforts to reduce
maintenance costs, improve operability and work efficiency, and shorten work periods.

Hydraulic crusher“Vz-7”

Hydraulic breaker“Fxj1070”

Started Sales of Special Parts for Aluminum Low-Pressure Casting
Machines for Automakers

Oxide layer

In the Industrial Machinery segment, we began selling “Tokénite Downsprue Bush,”
Modified layera consumable component for use in low-pressure casting machines. The bush ismade of Tokénite, a special steel that suppresses elution of iron into molten aluminum.
The high heat-retention property of Tokénite prevents the temperature of molten
aluminum from dropping and minimizes casting defects around the downsprue, whichhelps improve the casting quality rate of engine parts. Amid efforts to reduce vehicle
Base organization
weight for better fuel efficiency and to develop eco-friendly cars, there are calls foraluminum casting parts to be thinner and stronger. For this reason, we anticipate steadydemand for Tokénite Downsprue Bush as a special component that suppresses elution
Surface material structureof iron into molten aluminum during the manufacturing process.
of Tokénite

Tokénite Downsprue
BushCompleted Lineup of UNIC Products That Comply with New Standards
In the UNIC Machinery segment, we have been promoting sales of the “G-FORCE”
series of UNIC cranes. This series features models with higher safety levels that comply
with revised structural standards for mobile cranes, enacted by the Ministry of Health,Labour and Welfare. In October 2018, we achieved compliance for small,medium-sized, and large trucks, and by spring 2019 all of our super-large UNIC cranes,
mini crawler cranes, and small truck-mounted UNIC cranes were compliant with therevised standards. We then started sales of these cranes, which are now equipped with
rated load indicators as standard. As a result, we have completed our full lineup ofsafety-enhanced models that meet the revised structural standards for mobile cranes.
Mini crawler crane

UNIC crane

16 FURUKAWA CO., LTD.

E

nvironment

SG

ocietyovernance

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

Approach to ESG
The Group engages in corporate activities based on an integrated
thinking that balances its business and CSR activities. To make iteasier for investors and other shareholders to understand our CSR
activities, we have reorganized them into three parts: environment(E), social (S), and governance (G). Our environmental and social
activities are described in our CSR Report, and our governanceactivities are covered in our Securities Report and our Corporate
Governance Report.

CSR Promotion System
To powerfully promote CSR activities, we established the CSR
Promotion Meeting, which spearheads efforts to clarify our
responsibilities to stakeholders, identify priority issues to beaddressed, and actively engage in CSR activities. The CSR

Promotion Meeting is chaired by the president, and meetings areheld at the CSR Promotion Department. The Meeting discusses awhole range of issues related to CSR, and its main roles include
formulation of basic policies, promotion systems, and action plans
for CSR activities, as well as verification and evaluation of activity
status and planning of priority measures. The CSR Promotion Meeting consists of four committees (Risk Management Committee,
Compliance Committee, Environmental Management Committee*,and Product Safety Committee) and two departments (Human
Resources & General Affairs Department and Purchasing Department). The Meeting collaborates with each Group company and theheadquarters, which is the executive division for CSR activities, toadvance a PDCA cycle of planning, implementation, evaluation, andimprovement.

● CSR Promotion System

1

Guidance / Instruction

Committee / Department

Reporting

Risk Management Committee

Interaction

Implementation bodyGroup companies / departments

Compliance Committee

2

Environmental Management Committee*
Product Safety Committee

Reporting

Human Resources & General Affairs Department

CSR Promotion
Department

P

Guidance /Instruction

Reports ateach PDCA
stage

Plan: Formulate the plan

D Do: Execute the planC

Check: Check the outcome

A Action: Take countermeasures
as necessary

Purchasing Department

1. President and Representative Director
2. CSR Promotion Meeting* The name of the committee was changed to the Environment & Safety Management Committee following the renaming of the department responsible for the 		
committee to the Environment & Safety Management Department on July 1, 2019.

Relationships with Stakeholders

CSR推進会議代表取締役社長

In the course of strengthening CSR activities and demonstrating
our Management Philosophy, we have identified our stakeholders
指針・指示
as follows: Customers,
business partners, shareholders
and other
委員会および主管部署
investors, employees, local communities, and the global environ-グループ各社・各部門

危機管理委員会

答申・報告

コンプライアンス委員会

Stakeholder

Responsibility

Customers

製品安全委員会
We shall provide customers with high-quality products andservices in order to increase satisfaction levels.

Business
partners

ment. Our quest is to clarify our responsibilities to each stakeholder group and maintain close communications, in order to build
relationships連携
of trust and thus maximize執行部門
corporate value.

環境管理委員会

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

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

P Plan 活動計画の策定
Responsibility
D Do 活動の実行
PDCA各段階報告
We shall create
safe, healthy, and motivating workplaces in
での報告
Check
which our diversified human resources
can活動実績のexcel while
Employees
チェックand fairadopting appropriate evaluation standards
incentives.
指示・指針

Stakeholder

We shall build and maintain favorable relationships of trust

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

Annual Report 201917

The Furukawa Company Group’s ESG Activities

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

2019

2025

Medium-Term CSR Targets(Fiscal 2018–2020)
Risk Management Committee● Improve response capabilities in event of a crisis● Examine countermeasures for crises other than earthquakes
Compliance Committee● Increase opportunities for compliance training● Implement compliance checks
Environmental Management Committee● Promote environmental protection and healthand safety activities● Rigorously manage abandoned mines
Product Safety Committee● Improve product and service quality● Improve safety
Human Resources & General Affairs Department● Develop human resources● Promote work–life balance● Promote diversity
Purchasing Department● Enhance management (QCD*1 + CSR) at major
business partners● Foster partnerships with suppliers● Promote CSR-focused procurement

2030

CSR2025 Goals (Fiscal 2021–2026)

Developing a Sustainable Society by 2030

Risk Management Committee● Establish a Groupwide risk
management system
Compliance Committee● Ensure that all employees have a highawareness of compliance that resonateswith the international community
Environmental Management Committee● Promote environmental and safety
activities (Reduce environmental
impacts, ensure no accident and disasterin environment and safety, promotebiodiversity, publish environmental
safety activity outcomes, and continue
safety-oriented operations at abandoned
mines)
Product Safety Committee● Aim for the top category in improving
Furukawa product brand strength
Human Resources & General
Affairs Department● Utilize diverse human resources andpromote diversity in workstyles● Create motivational workplaceenvironments where individual
employees can fully demonstrate theirabilities to create new value
Purchasing Department● Pursue QCD*1 based on CSR-oriented
procurement aimed at sustainable
manufacture and sales of products
trusted by customers

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

Identifying Priority Issues
The Group identifies important issues and reinforces its CSR activities to ensure that its business activities contribute tosociety in the broader sense. To identify CSR priority issues, we selected important CSR-related issues from the perspectives of both stakeholders and the Group, then analyzed and evaluated the importance of those issues and finalized theGroup’s CSR priority issues.
● Steps to Identify CSR Priority Issues

Extract issues

Evaluate importance tostakeholders and the Group

Analyze the importanceof issues

Decide and approvepriority issues

Responses by Business Process

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

Main activities

Business process[Overall business process]Ensure rigorouscompliance
Promote diversity
Promote work–lifebalance
Assure occupational
health and safety
Promote employee
health management

Development and design

Procurement

Manufacturing

Development and designof products that takeenvironment, safety, andquality into consideration
Confirmation of design
review (DR) implementation
statusTraining of FMEA*2 leaders

Promoting CSR-oriented
procurement activities
Providing technicalguidance to suppliers
Pursuing QCD*1 based on
CSR-oriented procurement

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

Sales and service

Improving follow-up services
Pursuing customer satisfaction
Producing quality assurance
guidelines
Disseminating information on
eco-friendly products
Promoting effective
transportation system
Conducting risk assessment of
products to ensure customer
safetyDisposal

Reducing total emissions(including waste) and/or
converting into valuable
resources* 1. QCD : 		Abbreviation for quality (Q), cost (C), and delivery (D)* 2. FMEA : Abbreviation for Failure Mode and Effects Analysis. A systematic analysis method that predicts the causes of quality problems and prevents them at				 the design and process planning stage.
18 FURUKAWA CO., LTD.

The Furukawa Company Group’s ESG Activities

Corporate Governance
The Group’s basic corporate governance policies are to increase management transparency, continue reforming thecorporate structure and build an efficient management system, generate stable profits to increase corporate value, andconvey benefits to shareholders and other stakeholders. Under this basic policy, each of the Group’s operating companies
assumes clear asset and profitability management responsibilities while maintaining unity as a Group. We aim topromote agile management and provide products and services that satisfy our customers and maximize the corporate
value of the entire Group.
Management Council and Management Committee
The Management Council sets the Group’s fundamental
management policies and strategies and makes decisions onimportant matters. There is also a Management Committee,
which meets monthly to discuss the business execution of theCompany and its core business companies, and provides consideration and direction. Decisions made by the Management Council
on important management issues, especially amount and content,
are also taken up for discussion by the Board of Directors.

Overview of Corporate Governance System andReasons for Its Adoption
The Company has adopted a company system with a Board of
Directors and an Audit & Supervisory Board to supervise businessexecution. In addition, we have appointed outside directors toensure the validity of decision-making and the objectivity andtransparency of management. The Audit & Supervisory Board
Members consist of managers of other companies and persons
with knowledge of financial accounting, who use their specialized
knowledge and experience to give advice to management andcheck the status of operations. We consider that management
oversight is functioning effectively under the current system.

Audit & Supervisory Board
The Audit & Supervisory Board was chaired by Minoru Iwata, afull-time member. It holds meetings in a timely manner to discussand decide on audit policies, methods of auditing business decisions and the status of financial assets, and other matters related
to the execution of duties by members. Since June 27, 2019,
the Company has had four Audit & Supervisory Board members(including two outside members).

Board of Directors
The Board of Directors, chaired by President Miyakawa, meetsonce a month and other times as necessary, and supervises thebusiness execution of the entire Group as a supervising body.
Since June 27, 2019, the Board has had nine members, including
three outside directors.

Internal Control DivisionInternal audits are implemented by the Internal Control Division,
centered on the Internal Audit Department. The Internal Audit
Department consists of five members, including its General
Manager.

Executive Officer System
The Company has adopted an executive officer system in order
to separate the management oversight and business executionfunctions, speed up decision-making, and clarify responsibilities.
Executive officers perform their tasks according to business plans
determined by the Board of Directors, and report the status ofbusiness execution as appropriate to the Board of Directors andthe Management Committee. Since June 27, 2019, there havebeen 16 executive officers, including four serving concurrently as
directors.

Nomination & Remuneration Committee
In November 2018, the Company established the Nomination& Remuneration Committee, consisting mainly of outside independent directors. Serving as an advisory body to the Board of
Directors, the Committee discusses matters related to personnel
and remuneration for directors and Audit & Supervisory Board
Members.

● Corporate Governance System
Shareholders' Meeting
ElectsElectsElectsReports
AuditsReports

Accounting Auditors
Exchanges opinions /information

Audit & Supervisory Board

Board of Directors
Oversees

Reports
Reports

Directs

Oversees

Management
Committee

AuditsReports

Representative Director

Reports

Reports

Management
Council

Directs

Executive Officers

Reports
AuditsAuditsAuditsInternal Control DivisionInternal Audit
Department

CSR Promotion Meeting

Accounting Dept.,
othersBusiness execution

AuditsReports

All Divisions and Group CompaniesEnvironmentSocietyGovernance

Annual Report 201919

The Furukawa Company Group’s ESG Activities

Evaluating the Effectiveness of the Board of Directors
In order to analyze and evaluate the effectiveness of the Board of
Directors, the Company conducts questionnaire-based surveys of
directors and Audit & Supervisory Board members and exchanges
opinions with outside officers. The results of these activities arereported to the Board of Directors for discussion.
In fiscal 2019, we noticed an overall improvement trend
compared with fiscal 2018. To achieve further improvement, we
confirmed the need for action in several areas. These include
stepped-up exchanges of opinions about information dissemination aimed at improving shareholder value, enhancing reports onhuman resource development, compliance, and new products andtechnologies, and fuller discussion about medium-term businessplans. By providing timely information, we will continue stimulating discussion at Board of Directors’ meetings to further enhancethe effectiveness of the Board.

Internal Control System
The Group has a Basic Policy on Establishing an Internal Control
System, which covers corporate governance, risk management,compliance, and internal audits. In addition to ensuring efficient and appropriate business execution, the Policy stipulates
that internal control shall be handled with an emphasis on CSR.
Moreover, the Group makes constant reassessments in an effort
to build an effective and efficient internal control system that
ensures the appropriateness of operations.

Outside Directors and Outside Audit &Supervisory Board Members
The Company appoints outside directors and outside Audit & Supervisory Board members with abundant experience and expertisein various fields, as well as impartial perspectives. This is to ensure
the appropriateness of the Company’s management decisions andthe effectiveness of oversight and audits of management. Since
June 27, 2019, the Company has had three outside directors andtwo outside Audit & Supervisory Board members.
In addition, the Company stipulates that outside officers(outside directors and outside Audit & Supervisory Board members, including candidates) do not fall under the following criteria
concerning independence. Outside officers who meet such criteria
are designated and registered as independent directors / auditors
under the rules of the Tokyo Stock Exchange. Since June 27,
2019, the Company has had four independent officers.
Independence standards for outside officers(Must not meet the following criteria)(1) Executive directors, and employees of the Group(2) Business partners of the Group (those who provide products orservices mainly to the Group and whose transactions with
the Group were equivalent to more than 2% of net sales of
the Group in the most recent fiscal year of the business
partner) or executives of business partners(3) Main business partners of the Group (those who are provided
products or services by the Group and whose transactions
with the Group were equivalent to more than 2% of net salesof the Group in the most recent fiscal year of theGroup) or executives of business partners(4) Executives of financial institutions that are major lenders to
the Group (lenders whose loan amounts were equivalent tomore than 2% of the Group’s consolidated total assets at themost recent fiscal year-end)(5) Individuals earning ¥10 million or more per year from theGroup in monetary or other benefits as specialists (including
consultants, accountants, and lawyers) in addition to
executive remuneration, or individuals employed by companies
earning ¥100 million or more per year from the Group
20 FURUKAWA CO., LTD.

(6) Individual shareholders who hold 10% or more of theCompany’s voting rights (or executive directors, executive
officers, or employees of corporations that hold 10% or moreof the Company’s voting rights)(7) Individuals who have fallen under (1) to (6) above in the past
three-year period(8) Relatives (second degree or closer) of persons who fall under(1) to (7) above

Remuneration for Directors and Audit &Supervisory Board Members
Remuneration for directors of the Company is determined upon
discussion by the Board of Directors based on performance andother matters in accordance with director remuneration standards
set by the Nomination & Remuneration Committee. Specificremuneration for each director is decided by the president andrepresentative director upon resolution by the Board of Directors.
Directors (excluding outside directors) are required to contributepart of the fixed portion of their remuneration to the Executive
Shareholding Association (as a stock acquisition-type compensation mechanism) for a medium-to-long-term incentive.
Remuneration for Audit & Supervisory Board members isdetermined through consultation between such members.
● Total Remuneration by Officer Type

Officer type

Total remuneration by type(Millions of yen)
NumberTotalof eligible
remuneration
PerformanceRetirement officers(Millions of yen) Fixedlinkedbenefitcompensation

Directors(Excluding outside
directors)

118

118

—

—

6

Audit & Supervisory
Board members(Excluding outside
members)

16

16

—

—

2

Outside directors

28

28

—

—

3

Outside Audit &Supervisory Board
members

16

16

—

—

2

Total

180

180

—

—

13

Strategic Shareholdings
The Company owns strategic shareholdings for the purpose of
improving corporate value over the medium and long terms by
maintaining and strengthening relationships with importantbusiness partners. Each year, the Board of Directors examines
each stock in the Company’s strategic shareholdings and verifies
the appropriateness of continual ownership after comprehensive
consideration—both qualitative and quantitative—of various
factors, including purpose of holding and associated benefits
and risks. The Company then moves to sell shares deemed by
the Board not to be meaningful.

Message from an Outside Independent Director

Two years have passed since I assumed office as an outside independent director. In the meantime,
I have been working as a member of the Board of Directors from the perspective of a stakeholder
representative. I am particularly aware of my role in checking to ensure that the Board of Directors
is functioning soundly and the Company is practicing appropriate corporate governance.
The Board of Directors engages in discussion until a sufficient mutual understanding between
officers is reached, giving courteous and polite explanations to address doubts and questions
without impeding the speed of decision-making. In some cases, the Board meets on multiple
occasions to ensure proper discussion. I applaud the fact that this is being practiced effectively
as a matter of course.
The Company is focusing heavily on the Machinery business. We have steadily improved
machine design, manufacturing, and inspection technologies, expanded and refined our lineup,and broadened our domestic and overseas sales networks and alliances. The Machinery businesshas thus grown into a core part of our operations, which I believe is the result of the preparedness
and efforts of past and present management. Leveraging this amassed infrastructure, the Grouphas been united in its quest to achieve the challenging revenue targets of its long-term vision,
which ends in fiscal 2026. Achieving these targets will be a major turning point for our future. To
reach a new dimension, however, we need to strengthen our sales capabilities in the Machinery
business. This, in turn, requires us to address two enduring and urgent priorities: expand our overseas bases and develop human resources who can perform internationally.
When I was president of my first company, I navigated the business through tumultuous times
that included the global financial crisis, the Great East Japan Earthquake, and the China shock.
I believe this experience was one of the reasons I was invited to become an outside independent
director. I will utilize this experience, as well as my knowledge on resources and smelting, to serve
as a representative of stakeholders. At times, I may need to push the executive team and makethem consider differing opinions, but I am committed to helping the Group achieve sustainable
development while paying close attention to the soundness of corporate governance.

Tatsuya Tejima
Outside Independent Director

Annual Report 201921

Directors and Audit & Supervisory Board Members(As of June 27, 2019)

Naohisa Miyakawa

Tatsuya Tejima

President and Representative Director

Outside Independent Director

As the Company’s President and Representative
Director, Mr. Miyakawa has demonstrated strong
leadership and has been a driving force formanagement. He has promoted various
management reforms aimed at realizing Vision
for 2025 (“FURUKAWA Power & Passion 150”)
and Medium-Term Business Plan 2019.
For these reasons, Mr. Miyakawa has been
appointed as a director.

Mr. Tejima has been engaged in corporate
management for many years and accumulated
abundant experience and wide-ranging knowledge as a manager. Accordingly, he is able
to provide useful advice to and appropriately
supervise the Company’s management from an
objective and independent perspective. For thesereasons, Mr. Tejima has been appointed as an
outside director.

Kiyohito Mitsumura

Yoichi Mukae

Managing Director

Outside Independent Director

After serving in important positions at the Company, Mr. Mitsumura was appointed President
and Representative Director of Furukawa Rock
Drill Co., Ltd. Since then, he has led the Group’s
Rock Drills business and contributed to enhancement of corporate value. For these reasons,
Mr. Mitsumura has been appointed as a director.

For many years, Mr. Mukae held important positions at
the Ministry of Economy, Trade and Industry and, since
his retirement from government, has been involved inmanagement of private companies. In the process, hehas gained wide-ranging knowledge and experience.
He also has excellent personal traits and insights and isable to provide useful advice to and appropriately supervise the Company’s management from an objective
and independent perspective. For these reasons, Mr.
Mukae has been appointed as an outside director.

Masahiro Ogino

Kazumi Nishino

Director and Managing Executive Officer

Outside Independent Director

With a wealth of experience and track record in
the Materials business and overall management,
Mr. Ogino has led the Group’s Materials businesssince taking office as director. He has also helped
enhance corporate value in wide-ranging ways,
including through business plans, public relations,and investor relations. For these reasons, Mr.
Ogino has been appointed as a director.

As an associate professor at Hitotsubashi
University Graduate School, Ms. Nishino specializes in management strategy theory. In particular,
she has expert knowledge and a proven practicalresearch record in such areas as business model
analysis, new business creation logic, and productdevelopment management. She is also able
to provide useful advice to and appropriately
supervise the Company’s management from an
objective and independent perspective. For thesereasons, Ms. Nishino has been appointed as an
outside director.

Tatsuki Nazuka
Director and Senior Executive Officer

Mr. Nazuka has been in the technology division
for many years and has specialized knowledge
and a track record in engineering and productdevelopment. Since June 2017, he has served as
general manager of the Development Division(presently general manager of Technology Division) and contributed to technological strategies
and development. For these reasons, Mr. Nazuka
has been appointed as a director.

Hiroyuki Sakai
Director and Senior Executive Officer

Mr. Sakai has held important positions at the Company and other Group Companies and has vast
experience and knowledge in the administrative
field. As general manager of the Business Process
Re-Engineering Department since June 2017, moreover, he has helped standardize and enhance theefficiency of operations, increase productivity, andreorganize business processes. For thesereasons, Mr. Sakai has been appointed as a director.

Minoru Iwata
Audit & Supervisory Board Member

Mr. Iwata has been in the accounting division for many years and been
involved in management of the Company as director since 2013. He has
gained a wealth of knowledge in finance and accounting and extensive
experience in general management and is able to conduct objective andappropriate audits. For these reasons, Mr. Iwata has been appointed as an
Audit & Supervisory Board member.

Kazuo Inoue
Audit & Supervisory Board Member

Mr. Inoue has been in the accounting division for many years and also
been involved in management as director of another Group company andexecutive officer of the Company. He has gained a wealth of knowledge infinance and accounting and extensive experience in general management
and is able to conduct objective and appropriate audits. For these reasons,
Mr. Inoue has been appointed as an Audit & Supervisory Board member.

Tetsuro Ueno
Outside Independent Audit & Supervisory Board Member

Minoru Nakatogawa
Director and Senior Executive Officer

After many years in the legal division, Mr. Nakatogawa
has held important positions at the Company andother Group companies. As President and Representative Director of Furukawa UNIC Corporation sinceJune 2018, he has led the Group’s UNIC Machinery
business and contributed to enhancement of corporate value. For these reasons, Mr. Nakatogawa has
been appointed as a director.

22 FURUKAWA CO., LTD.

Mr. Ueno has been engaged in corporate management for many years andgained abundant experience and wide-ranging knowledge as a manager.
He is able to conduct effective audits from a perspective that is independent of management. For these reasons, Mr. Ueno has been appointed as
an outside Audit & Supervisory Board member.

Masayuki Yamashita
Outside Audit & Supervisory Board Member

Mr. Yamashita has a wealth of experience at financial institutions and a
track record as outside corporate auditor at other companies. He is able toconduct effective audits from a perspective that is independent of management. For these reasons, Mr. Yamashita has been appointed as an outside
Audit & Supervisory Board member.

The Furukawa Company Group’s ESG Activities

Risk Management
The Group recognizes managing the risk of losses as an important part of its operations. Accordingly, we constantly
monitor and examine the risk status of our business activities and work to prevent risks before they occur, as well as
address and correct any risks that materialize.

Risk Management System
The Group’s business activities could potentially be badly impacted
by various risks related to such factors as accidents, natural disasters, and epidemic diseases. To protect human life and property andminimize damage and loss when such risks materialize, the Group,
spearheaded by its Risk Management Committee, is working toestablish and strengthen its risk management system.
● Risk Management System
Risk Management Committee
Furukawa Co., Ltd.
(Secretariat of Risk Management Committee)

Business Risk Review Subcommittee*

Furukawa Co., Ltd.

Furukawa Metals & Resources Co., Ltd.

Furukawa Industrial Machinery Systems Co., Ltd. Furukawa Denshi Co., Ltd.
Furukawa Rock Drill Co., Ltd.

Furukawa Chemicals Co., Ltd.

Furukawa UNIC Corporation* Group companies represented in the Business Risk Review Subcommittee are
the same as those represented in the Risk Management Committee.

From Business Continuity Planning (BCP) to
Business Continuity Management (BCM)
We have finished our BCP reviews of core Group companies.
Going forward, we will formulate BCP strategies at consolidated
affiliates and step up BCM activities.
● Group BCP System
Headquarters for BCP
Director-generals of headquarters for BCP
Vice Director-generals of headquarters for BCP
Committee Members of headquarters for BCP

Secretariat of headquarters for BCP
General Affairs Team
Human Resources Team

Headquarters in
an Emergencyof each company

Product Safety

Quality Control
The Furukawa Company Group is committed to constantly providing safe, high-quality products and services to customers. For thisreason, we strive to undertake manufacturing with proper attention to product safety and reliability in order to improve customer
satisfaction. This covers all processes, from development and design to procurement, manufacturing, sales, services, and disposal.
Product Safety Management System
The Furukawa Company Group strives to manufacture productsthat comply with regulations related to manufacturing and productquality verification and products that customers can use safely withpeace of mind. These efforts are based on the Group’s Product
Safety Basic Policy and Product Safety Action Guidelines. Specifically, the Product Safety Committee of Furukawa Co., Ltd. holds
product safety meetings attended by product safety officers ofcore Group member companies and has formed subcommittees
to divide work between mechanical and materials systems.
The product safety meetings are aimed at improving Groupwide
product safety and evaluating activities related to product safety.
Attendees seek to improve product safety levels by first considering
ways to improve product reliability.
In fiscal 2019, we confirmed the status of risk assessment
activities that have been ongoing since the previous fiscal year witha view to preemptive prevention. We also have subcommittees
consisting of members able to engage in discussion from frontline
perspectives. In addition to discussions with managers of thedesign department and other entities not related to product quality, the subcommittees worked to raise awareness about quality
management and quality assurance throughout each factory. As
a result of efforts to improve product safety levels, spearheadedby the Product Safety Committee and the subcommittees, we
had “zero market complaints” in Materials Subcommittee in fiscal
2019. To continue this track record in fiscal 2020, we will work to
improve out quality assurance system, including highly reliable design, prevention of flow-out defective product, product procured
overseas.
● Product Safety Management System

Furukawa Co., Ltd.
Product Safety Committee

Public Relations Team
Finance Team
Information Analysis Team

Secretariat of headquarters for BCD

Product Safety Council

Technological Strategy(Secretariat)

Core operating companies
Machinery Subcommittee

Materials Subcommittee

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

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

E

nvironmentSocietyGovernance

Annual Report 201923

The Furukawa Company Group’s ESG Activities

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

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

Compliance Education
We issue “Compliance News” as a compliance information source
to all Group officers and employees. Representatives of top management also speak about the importance and priority of compliance,
reflecting our efforts to foster a corporate culture that emphasizes
compliance.
In fiscal 2019, we held compliance training sessions as part ofstratified training given to new recruits, mid-level employees, andnewly appointed managers. We also held a compliance training
session for officers and other top management personnel. In addition,
we held training on specific items, such as the Act against Delay inPayment of Subcontract Proceeds, Etc. to Subcontractors.

Compliance throughout the Entire Supply Chain
In order to maintain compliance as a Group, we need all parties
across the entire supply chain, including suppliers, to also practicecompliance with laws and regulations. With this in mind, weestablished “CSR Promotion Guidelines” for suppliers to help themrigorously comply with laws and regulations and practice corporate
ethics.
Human Rights and Labor(1) We shall respect human rights.
(2) We shall not become involved in child labor, forced labor,or unfair low-wage labor, whether directly or indirectly.
(3) We shall establish work environments that are free from any
discrimination and harassment against employees.
(4) We shall observe labor-related laws and strive to improve ourworkplace environments.

Legal Compliance and Corporate Ethics(1) We shall respect domestic and international laws and social
norms.
(2) We shall not provide or receive benefits that are contrary tolaws and accepted business practices.
(3) We shall not act in ways that impede fair and free competition.
(4) We shall have nothing to do with antisocial forces.
(5) We shall not infringe on the intellectual property rights ofthird parties.
(6) We shall establish frameworks for fraud prevention, early
detection, and countermeasures.
(7) We shall not use minerals mined in conflict areas, and weshall not use raw materials that, during the production
process, are connected to human rights violations orenvironmental destruction.
Furukawa Company Group's CSR Promotion Guidelines (excerpt)

The Furukawa Company Group’s Corporate
Conduct Charter
1. Providing high-quality products and services
The Group shall pursue technology developmentthat helps to realize a sustainable society, and shallprovide products and services that are satisfying tocustomers.
2. Harmony with the global environment
The Group shall work on reducing environmental
risks and pursue corporate activities that are inharmony with the global environment.
3. Ensuring compliance
The Group shall engage in its corporate activities
in a fair manner based on the ethical values 		
expected of corporations and business persons as
members of society.
4. Highly transparent corporate activities
The Group shall appropriately disclose its corporate
information and engage in constructive dialogue
with a wide range of stakeholders to build trust.
5. Respect for human rights
The Group shall respect the human rights of all
individuals.
6. Enhancement of work environment
The Group shall establish a work environmentthat takes into consideration the health and safety
of individuals and realize work styles that respect thediverse values of officers and employees.
7. Participation in and contribution to society
The Group shall actively participate in society andcontribute to development of society.

E
24 FURUKAWA CO., LTD.

nvironmentSocietyGovernance

The Furukawa Company Group’s ESG Activities

Environmental Initiatives

Addressing Chemical Emissions
Based on Japan’s Chemical Substances Control Law, the Group
works proactively to improve its control of chemical substances andtakes measures to prevent environmental problems from arising.
For example, we report our activities under the Pollutant Release
and Transfer Register (PRTR) system to gain an understanding of
the amount of chemical substances generated. We then compare
this with emission data published by the national government andcheck the proportion of our own emissions, and reflect the resultsin our future management activities. In the Materials business, weappropriately manage our chemical substances by using safety data
sheets (SDS) to disseminate information on the associated potential
hazards.
Note: Amounts of chemical substances emitted / relocated under PRTR
reporting requirements are disclosed in the Group’s CSR Report 2019.

umol

To address global warming, the Group formulated its Third
Medium-Term Reduction Targets and has been working to reduce
CO2 emissions, water resource usage, waste, and the like. In thecurrent fiscal year, we are formulating our new Fourth
Medium-Term Reduction Targets.
We are also working to identify potential risks and take all
possible precautions. In addition to quickly sharing risk-related
information throughout the Group, we are strengthening ourfrontline capabilities at each production site in order to enhanceand reinforce our disaster response and business continuity
capabilities. To minimize impacts on society and ecosystems,
meanwhile, we are promoting business activities with a greater
emphasis on environmental impact reduction. These include
developing environmentally friendly products and technologies, inaddition to complying with various laws and regulations.

C

Global Warming and Environmental Protection
Initiativesn

Our basic approach to the environment is embodied in our Corporate Conduct Charter and our Basic Philosophy on
Environmental Management. We are committed to reducing environmental risks and realizing a sustainable society inwhich our corporate activities are in harmony with the global environment. Based on this commitment, we formulated
our Environmental Protection Action Policy and set numerical targets for environmental performance (reductions in CO2emissions, water consumption, waste generated, use of chemical substances, and the like) and engage in environmental
protection activities accordingly.

Ashio Copper Mine: Learn from thePast, Use in the Future
The Ashio Copper Mine, where the Group built its
foundation, is said to be a source of pollution problems
in Japan. However, it was also the birthplace of pollution
prevention technology and a national safety campaign,
Anzen Senichi (safety first). The Group has always
taken a serious approach to past challenges, constantly
considering the best interaction between corporations
and the environment and developing pollution prevention
technologies. We are addressing various challenges related
to the management of suspended mines, including the
Ashio Copper Mine, reflecting our basic commitment tocontinued operational safety. These challenges include
ensuring the safety of mine wastewater treatment
facilities, the safe management of dumping sites andunderground mines, and the transfer of technologies
related to management of suspended mines. Treatmentof mine wastewater is particularly important. Heavy rain,
typhoons, and other natural weather events have a major
impact on the volume of drainage water containing heavy
metals that emerge from the Ashio Copper Mine. To
prevent such water from flowing into public waterways,
we operate the Nakasai Water Treatment Plant, a mine
wastewater treatment facility, 24 hours 365 days. To
ensure safety at all times, moreover, we conduct systematic
education programs for employees and work to prevent
environmental accidents.

Relationship with the Mining BusinessIn the copper business, and particularly at mine development sites,
there are concerns that resource development activities may lead toincreased environmental impacts. Recognizing such concerns, weare promoting various initiatives to prevent this from happening.
For example, we develop and adopt new technologies to satisfy
increasingly stringent requirements aimed at minimizing impacts
on ecosystems and water resources, and restoring sites to their
original condition after development. In addition, our miningrelated machines have been widely used in resource development
and infrastructure development projects, not only in Japan but
also in many countries worldwide, thus contributing to economic
development. In recent years, we have been promoting products to
help minimize environmental impacts at worksites through reduced
CO2 emissions, reduced noise, improved work efficiency, and thelike. Although copper is a product created through resource development, it has attracted more and more attention in recent years
for its specific material-based characteristics, which can be used
to minimize environmental impacts. For example, it is used in the
renewable energy sector to reduce CO2 emissions and is an indispensable material in the development of electric vehicles (EVs) andinfrastructure in emerging countries. Through our involvement in
the copper business, therefore, we believe we are contributing to
the environment and society.

Anzen Senichi (safety first) sign at the entrance of the Ashio Copper MineThe Nakasai Water Treatment Plant operates 24 hours a day.

E

nvironmentSocietyGovernance

Annual Report 201925

The Furukawa Company Group’s ESG Activities

Environmental Management
Environmental Management Committee*

Environmental Rating

Important items relating to environmental conservation are put
forward and discussed by the Environmental Management
Committee, in which top personnel from each production baseparticipate. At the Committee meeting held in April 2019, theresult of the evaluations of environmental and safety activities forfiscal 2019 and the targets of environmental and safety activities
for fiscal 2020 were reported, discuss, and approved. The resultsof the Third Medium-Term Reduction Targets were also reported
and discussed, following which the Committee talked about the
Fourth Medium-Term Reduction Targets.
* On July 1, 2019, the Committee’s name was changed to the Environment& Safety Management Committee. This was because the name of the
body responsible for the Committee was changed to the Environment &Safety Management Department.

Environmental and Safety Audits
Each year, we conduct regular annual Environmental and Safety
Audits. The purpose of these audits is to enhance “corrective measures” for accidents and disasters that occur, and to focus on “preventive measures” before they occur. The specific goals for the audit
conducted in fiscal 2019 were to resolve issues cited for correction,
improve environmental performance (CO2 emissions, water resource
usage, total waste generated, and the like), support efforts in various
locations to eliminate accidents and disasters, and help improve thequality of day-to-day operations.
We are also promoting activities to ensure the ongoing safety of
workplace environments in the event of serious accident or multiple
disasters. These include providing guidance in formulating preventive
measures based on proper discussion of potential causes with local
staff.

We has received financing based on the “DBJ
Environmentally Rated Loan Program” of the Development Bank ofJapan (DBJ), and earned the highest rating under DBJ rules asof November 30, 2018. This rating reflects our united Groupwide
operation of our environmental management system, which includes introduction of environmental load monitoring and remote
operation systems at each site. Through continuous improvements
in production processes, we have worked actively to enhance
productivity and reduce environmental impacts. In our wide-ranging
fields of business, we have specified environmentally conscious
products for each business and sought toincrease sales of those products. We havealso conducted in-depth training of employees and sales representatives involvedin product manufacturing and sought toprovide value to society through our multifaceted products. For these reasons, theGroup has received the highest rating for its“particularly advanced efforts in consideration of the environment” for five consecutive years.

Environmental Accounting
The Furukawa Company Group has endeavored to conserve
the environment and improve environmental efficiency by recognizing costs required for environmental conservation in reference
to the Ministry of the Environment’s Environmental Accounting
Guidelines in 2005.

● Environmental Conservation Cost (Categories Corresponding to Business Activities)

Total investments for fiscal 2019 reached ¥402 million. The Group has introduced energy-saving equipment andenhanced preventive measures with the aim of promoting environmental conservation. As a result, pollution
prevention costs accounts for 71% of the total cost of ¥1,187 million, the breakdown of which is mainly thecosts for promoting environmental conservation activities such as the maintenance and management of pollution
control equipment and conservation of forests.
Category

Content of the principal activities

Investments(1) Business area cost: Cost for preventing

air pollution and water pollution

Costs

357

764
570

Cost for preventing air pollution and water pollution

285

Global environmental conservation cost

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

6837

Resource circulation cost

Cost for recycling, disposal of industrial waste, and effective use of water4157(2) Upstream and downstream costs

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

0185(3) Administration cost

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

2862(4) R&D cost

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

17

174

(5) Social activity cost

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

02(6) Environmental remediation cost

Cost allocated for recovery from environmental degradation due to business activities

0

0

Total

402

1,187

Breakdown

Pollution prevention cost

● Environmental Conservation Benefit

The economic impact deriving from resource circulation (gains on sale of valuables, etc.) for fiscal 2019 was¥204 million, a year-on-year increase of ¥42 million, as a result of subdividing the resources. In addition,
the commissioning of a turbine generator at the Osaka Plant of Furukawa Chemicals Co., Ltd. led to a reductionof approximately ¥43 million in the cost of electricity purchased, similar to the previous fiscal year.

● Environmental Conservation Benefit(Millions of yen)Content of the benefit

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

204

Energy-saving
effectTotal

Total energy input volume (thousand GJ)

483

511

Input volume of water (thousand m3)

623

692

Environmental impact originating from business Volume of greenhouse gas emissions(thousand t-CO2)
activities and environmental conservation
benefit related to waste
Total waste emissions volume (t)

26

26

6,884

7,160

Increased by 276 t

Environmental conservation benefit related toresources input into business activities

26 FURUKAWA CO., LTD.

43

247

● Breakdown of Environmental Conservation
Cost Invested
Other

12.2%

from the previous
Categories of environmental conservation benefit Environmental performance indicator (unit) Fiscal 2018 Fiscal 2019 Differencefiscal
year
Increased by
28 thousand GJ
Decreased by
69 thousand m3
Increased by
0 thousand t-CO2

Reduction ofelectric powerpurchasing
costs due tooperation of
steam turbine
generators

Total investment inenvironmental
conservation in
fiscal 2019
(Millions of yen)

Globalenvironmental
conservation
cost

16.9%

402

Pollution
prevention
cost

70.9%

The Furukawa Company Group’s ESG Activities

Environmental Targets and Results
Third Medium-Term Reduction Targets and Resultsof Fifth (Final) Year
The Group worked hard to achieve its Third Medium-Term Reduction
Targets, covering the period from fiscal 2015 to fiscal 2019. The
table below shows the results for fiscal 2019, the fifth and final yearof the targets. There were several reasons for discrepancies between
targets and results in fiscal 2019. After setting the targets, for example, we announced our Vision for 2025, following which core Group

companies made production plans that were not fully reflected in
the reduction targets. When the Third Medium-Term Reduction
Targets were formulated (in fiscal 2014), moreover, all of the electricity supplied in some locations came from hydroelectric power,
whereas currently we also use electricity from power companies
in those locations. Based on the results of our Third Medium-Term
Reduction Targets, we are currently formulating our Fourth
Medium-Term Reduction Targets, covering the 10-year period
from fiscal 2020.

● Reduction Rate Results in Fiscal 2019
Details of the effectReduction rate targets for fiscal 2019

Reduction rate results in fiscal 2019

3%
2%
5%

-13%
-9%
-13%

CO2 emissions
Water resource used
Total emissions including waste

Water resource input

Total energy input● Material Flow of the Furukawa Company Group (Fiscal 2019)OUTPUT

Category

Volume used

INPUT
Category

Volume used

Category

Volume used

Volatile oil(gasoline)

33 kl

Fuel oil A

221 klCity gas889
thousand m3

Kerosene

301 klLiquefied petroleum gas
(LPG)

359 t

Electricity

43,593thousand kwh

Diesel oil

195 klWaterworks

141
thousand m3

CO2
emissions26
thousand t-CO2

477
Drain volume thousand m3
550
thousand m3

Industrial water

Groundwater● Energy (thousand GJ)
474

429

458

0
thousand m3

Total emissions
including waste

7,160 t● Water Resources (thousand m3)
483

511

520

651

666

671

623

692

’15/3

’16/3

’17/3

’18/3

'19/3

700

490
460

I
N
P
U
T

650

430
400

600

’15/3

’16/3

’17/3

’18/3

'19/3

We have sought to reduce energy consumption by introducing
energy-saving equipment and modifying product-line to minimize
standby time, while reducing the travel distance of cargo handlingequipment. Due to increased production in the UNIC Machinery andElectronics segments, however, total energy consumption increased 6%
year on year in fiscal 2019. Meanwhile, Furukawa Co., Ltd. has received
the highest rating (S Class) under an evaluation system for Specified
Business Operators based on Japan’s Energy Conservation Law for four
consecutive years since the system was launched in fiscal 2016.

● CO2 Emissions (thousand t)
27

O
U
T
P
U
T

24

25

26

During the year, we sought to enhance water intake
management (through visualization) and improveequipment for water supply and drainage. Due toincreased production in the UNIC Machinery andElectronics segments, however, total water
consumption increased 11% year on year.

● Drain Volume (thousand m3)
26

455

471

465

410

● Total Emissions Including Waste, etc. (t)477

6,266 6,832

28

480

8,000

26

460

6,000

24

440

4,000

22

420

2,000

20

400

’15/3

’16/3

’17/3

’18/3

'19/3

Total energy consumption increased 6% year on
year, while CO2 emissions increased 2% due to theeffect of the CO2 emission factor.

3,098 3,458

5,347

2,858

6,884 7,160

3,956 3,803

3,168 3,374 2,489 2,928 3,357

0

’15/3

’16/3

’17/3

’18/3

'19/3

Water consumption increased 11% year on year.
However, the amount of wastewater generated
increased 16% due to a decrease in productionof items that use water as the main raw material.

E

’15/3

’16/3

’17/3

’18/3

'19/3

Waste
Valuables
Due to increased production at each Group
company, the total amount of waste generated
was 4% higher than the previous year. Due to theadoption of resource segmentation, the volume ofvaluable recyclables increased 15% year on year.

nvironmentSocietyGovernance

Annual Report 201927

The Furukawa Company Group’s ESG Activities

Social Initiatives
Since our early days in mine development, our basic approach to social initiatives has been to contribute to society by
evolving and advancing technologies that support social infrastructure and provide a wide range of products and services
that make customers and other stakeholders happy. As part of our commitment to realizing a sustainable society,we must also look at every touchpoint between our corporate activities process and society. We are also aware ofvarious social issues—from global challenges to issues rooted in local communities—and we conduct activities that help
resolve them.

Workplace and Workstyle Reforms
We are implementing workplace and workstyle reforms to not only
improve the health and safety of workers but also create workplaces
where employees can work with vigor and pride. We believe that
we need workplaces that encourage problem-solving and respects
diversity in such areas as gender, nationality, individual career differences, birth, and life stage. At the same time, each individual must
be willing to respect the Company’s social mission in these changing
times, but also have their own opinions and not reject alternative
viewpoints and respect each other. The Group aims to be aself-supporting organization that embraces diversity as an advantage
rather than an obligation.
In addition, we engage in “Business Process Re-engineering
Activities” as part of our workplace and workstyle reforms. Throughthese activities, we aim to eliminate waste at our business departments so they can concentrate on higher-value-added work aimed
at realizing the Group's long-term vision. We also promote
automation and systematization of routine tasks to improve productivity, giving workers more time and mental capacity to concentrateon higher-value-added work. Details of such higher-value-added
work will be explained in medium-term action plans that each core
Group company will formulate with a view to realizing our Vision for2025. As a corporation, meanwhile, we will provide education andtraining opportunities enabling individual employees to acquire theknowledge and professional skills they need, in order to support thegrowth of each employee.
The Group believes that these workplace and workstyle reforms
will help create a sustainable society and resolve social issues.
● Three Fields of Workstyle Reform and Examination Items
Improvement of
workplaceenvironment

Automation and systematization, review of layouts,
review of personnel allocation, shortening meetingtimes, effective management of meetings

Review of systems Increase in departments using a flextime system,
and working
introduction of teleworking, discretionary work
conditions
system and no-overtime days
people conscious about the improvement
Reform of mindset Makingof efficiency● Numerical Targets in the Workstyle Reform
Fiscal 2019

Fiscal 2020 target

Prescribed working hours (a) 1,891 hours 1,891 hours
Extra working hours (b)305 hours

186 hours

25.40 hours/month⇨15.50 hours/month

Hours of paid annual
leave taken (c)79 hours

78 hours

Achieved
the 3-year target(Oct. 2018)

Total actual working
hours (a) + (b) − (c)2,117 hours 1,999 hours

Work–Life Balance

Creating a Comfortable Workplace Environment
We have been promoting activities to help employees maintaintheir health and achieve a good work–life balance through reducing
overtime and improving the rate at which they take paid annual
leave.

Activities for Fiscal 2019
・Considered introduction of employment system for meticulous
management of working hours
・Establishment of day for encouraging employees to take paid
annual leave, encouraging employees with low vacation uptake rates (less than 5 days) to take annual leave
・Trial of telework system
・Holding seminars on balancing work with childcare or nursing
care duties● Status of Overtime Hours (Monthly Average)（Hours）
30
20

26.27

23.80

25.40

’18/3

'19/3

10
0

’15/3

’16/3

’17/3

● Status of Taking Paid Annual Leave(%)

Rate of taking paid leave in the Furukawa Company Group

55
50
45

44.3

45.5

’15/3

’16/3

47.4

48.2

’17/3

’18/3

51.0

40
35

'19/3

Promoting Diversity

Support for Advancement of Female Employees
The Company actively recruits and empowers women. On April 1,
2016, we formulated our Action Plan for Promoting Support for
Female Employees, and we have since been expanding our systems to support the advancement of women.
● Action Plan for Promoting Support for Female Employees(April 1, 2016 to March 31, 2021)
The percentage of women among new graduate hires shallTarget No. 1
be 20% or higher
Target No. 2 The number of female managers shall be 10 or more
Establishment of a return-to-work system (a reemployment
Target No. 3
system for retirees)
Encouraging the taking of paid annual leave at an average
Target No. 4
rate of 12 days per person per year
Encouraging male employees to take parental leave:
Target No. 5
10 or more male employees per year

Support for Employees Raising Children
We have expanded the scope of employees who can access ourvarious childcare support systems, and enhanced our support for
employees who are raising children, such as by allowing them totake part of their childcare leave in the form of paid annual leave.
We also encourage male employees to take childcare leave to givethem more opportunities to participate in the raising of children.

Rate of Taking Parental Leave: 88.6%
Men 33 male employees Rate of taking
parental leave: 86.8% Average number of days: 21.4
female employWomen 6ees

28 FURUKAWA CO., LTD.

26.85
20.65

Rate of taking
parental leave: 100.0% Average number of days: 468.7

The Furukawa Company Group’s ESG Activities

Hiring Foreign Nationals● Training Activities by Specialty and Function

The Company Group is proactively pursuing overseas businessexpansion and does not make hiring decisions based on nationality.
We have adopted 590 foreign national employees (as of March 31,2019), deepening our partnerships with our non-Japanese employees
and promoting a spirit of mutual respect for individual differences.

Hiring Retired Older Workers
In accordance with its Continued Employment Rules, the Company
rehires employees who want to continue working after reaching theofficial retirement age of 60. Such employees who return to work
after retiring focus on handing down the skills they have developed
over their long career to mid-level and younger employees. The
number of employees continuing to work after reaching the age ofretirement under the continued employment system is 105 (as ofMarch 31, 2019).

Hiring People with Disabilities
The Company hires people with disabilities at various workplaces andfor various types of work, promoting their independence andparticipation in society.
● Trend of Employment Rate of Persons with Disabilities(Furukawa Co., Ltd.)
(%)
4.0
3.0

Employment rate of persons with disabilities
Statutory employment rate
3.49
3.35

2.19

1.0

Personnel Appraisal System
On July 1, 2019, we decided to abolish our existing professional
qualification grade system and introduce a role-grading systemthat sets the grade according to the magnitude of each employee’s expected role, to more effectively give employees the roles
we expect them to fulfill. In conjunction with this, we will modify
our personnel appraisal system, which will come into effect on
April 1, 2020. Under the system, we will assess such factors aswork performance, goal achievement levels, motivation, andcapability. We will also step up efforts to guide and train employees, develop their skills, and allocate them appropriately, thus
creating an environment in which motivated employees can workwith peace of mind.

Respect for Human Rights
3.48

2.55

2.0

We offer appropriate programs according to the specialty,function, and qualification of the participants, providing themwith a wide range of expertise concerning the relevant fields
and specified skills. At the same time, we proactively encourage
our employees to participate in external seminars on specialized
subjects, and to obtain public qualifications. We also endeavor tocultivate employees with expertise in cutting-edge technologies
and social trends by supporting their participation in external
educational organizations and academic societies.

2.0

2.0

2.0

2.0

2.2

’15/3

’16/3

’17/3

’18/3

'19/3

0

Cultivation of Human Resources

Basic Approach
We employ human resources who are willing to seize any challenge,
based on our fundamental belief that “people” are the key to unlocking the unlimited potential of our company. We are also working tobuild a motivating corporate culture that recognizes the diverse valuesof individuals, rejects human rights violations and discrimination, andfairly evaluates its employees.
Cultivation of Human Resources
The Company Group seeks to optimize its business framework andmaximize its corporate value through the development of professional
human resources and creation of workplace environments where
employees can exercise their abilities to the fullest.
● Training Programs Implemented by Job Grade
A variety of educational programs are provided to different classes of
employees such as the newly hired, employees in their second year,
third year, fifth year, and eighth year, newly assigned managers, andsection managers to help them attain the basic knowledge required
for their job as well as the ability to respond to changes in the social
environment. In the training program for newly hired employees, thehistory, countermeasures against pollution, and the present status ofsafety management and tree-planting activities of the Ashio Copper
Mine is included.

The Furukawa Company Group’s Corporate Conduct Charterstipulates that we will “accept diverse values of individuals, andstrive to create a corporate climate in which there are no humanrights violations or discrimination while individuals receive fairevaluations and are motivated to work,” and prohibits all formsof harassment and discrimination. We take resolute measuresagainst harassment and discrimination based on our internal rules.
Our Code of Behavior for employees provides that basic
human rights should be respected and discriminatory language
and behavior is prohibited. All newly hired employees of the Company Group participate in the human rights seminar while managers are required to join internal training concerning harassment in
the workplace. Thus, specific case studies of actions leading to thecreation of comfortable workplaces are learned, along with
examples of actions that constitute human rights violations.

Efforts for Industrial Safety and Health
The Company Group has also implemented various industrial
safety and health activities based on its Basic Philosophy on
Industrial Safety and Health and Policy on Industrial Safety and
Health to improve its safety and health performance. In particular,
we promote safety and health education and training programsfor our own employees and those of subcontractors working
within our plants with the aim of creating comfortable workplaceenvironments. We also believe that basic activities such as holding
pre-operation meetings, ensuring KYT (hazard prediction training),
activities concerning near-miss incidents and collecting improvement proposals must be conducted regularly. Furthermore, efforts
made in regard to compliance with laws and ordinances andresponses to amended laws and ordinances are made known torelevant personnel.

EnvironmentSocietyGovernance

Annual Report 201929

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

2019/3For the year:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Profit before income taxes
Profit attributable to owners of parent

2018/3¥ 174,117
147,675
26,442
17,526
8,915
7,003
4,654

2017/3

2016/3

2015/3

2014/3¥ 167,696 ¥ 149,830 ¥ 161,799 ¥ 172,544 ¥ 163,026
142,427
126,207
136,447
146,657
139,777
25,26923,62325,352
25,887
23,24917,44817,077
17,363
16,962
16,363
7,821
6,546
7,989
8,925
6,886
6,595
6,711
6,631
6,160
7,092
4,774
4,254
5,056
9,793
3,976

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

11,785(3,387)(4,205)5,350(5,855)(2,529)9,819(3,585)(5,030)7,652(2,855)(8,166)

10,241(10,892)
3,318

1,983
(3,129)(4,562)

Capital expenditures
Depreciation and amortization
Research and development expenses
At year-end:
Total assets
Current assets
Current liabilities
Total equity
Net assets
Interest-bearing liabilities
Per share amounts:*
Basic earnings
Cash dividends
Net assets
Profitability:
Cost of sales margin (%)
Gross margin (%)
SG&A expense margin (%)
Operating margin (%)
Return on sales (%)
Efficiency and soundness:
Return on equity (ROE) (%) (Note 1)
Return on assets (ROA) (%) (Note 2)
Debt-to-equity (D/E) ratio (Times) (Note 3)
Equity ratio (%) (Note 4)
Total asset turnover (Times) (Note 5)
Investment indicators:
Dividend payout ratio (%) (Note 6)
Dividends on equity (DOE) ratio (%) (Note 7)
Price book value ratio (PBR) (Times) (Note 8)
Stock price at fiscal year-end (Yen)*

5,442
3,474
1,505

5,021
3,260
2,293

5,424
3,138
2,464

2,869
3,191
2,680

2,557
3,223
2,227

11,4302,828
2,539¥ 215,368
87,44160,377
78,21780,44772,597

Yen¥ 116.23
50.00
1978.09

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

30 FURUKAWA CO., LTD.

¥ 222,211 ¥ 208,034 ¥ 195,650 ¥ 207,317 ¥ 199,408
87,486
79,57976,31580,56476,83879,322
59,79059,75063,87073,97685,011
77,65866,45968,78354,69487,086
79,584
68,26270,581
56,31373,31173,50776,241
82,053
77,219¥ 118.16 ¥ 105.29 ¥ 125.13 ¥ 242.34 ¥ 98.40
50.00
50.00
50.00
50.00
30.00
2,104.07 1,922.04 1,644.81 1,702.21 1,353.41
%

84.8
15.2
10.1
5.1
2.7

84.9
15.1
10.4
4.7
2.8

84.2
15.8
11.4
4.4
2.8

84.3
15.7
10.7
4.9
3.1

85.0
15.0
9.8
5.2
5.7

85.7
14.3
10.0
4.2
2.4

5.7
2.1
0.9
36.3
0.79

5.9
2.2
0.9
38.2
0.78

5.9
2.1
0.9
37.3
0.74

7.5
2.5
1.1
34.0
0.80

15.9
4.8
1.2
33.2
0.85

7.6
2.1
1.4
27.4
0.82

43.0
2.4
0.7
1,393

42.3
2.4
0.9
1,985

47.5
2.7
1.1
2,050

40.0
2.9
1.0
1,660

20.6
3.2
1.2
2,120

30.5
2.2
1.4
1,860

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

Financial Review

other expenses, we booked a ¥1,610 million impairment loss on
Revenue and Expenses
the Furukawa Osaka Building, which we deemed no longer viable
In fiscal 2019, ended March 31, 2019, consolidated net sales
as a competitive rental tenant building. In the previous fiscal year,
totaled ¥174,117 million, up 3.8% compared with the previous
there was a ¥1,042 million loss on provision
cost of removal
fiscal year.
NetforSalesof office tenants. We posted ¥150 million
in equity
The Industrial Machinery segment posted a 13.2% year-on-year(Billionsof yen)in losses ofaffiliates mainly due to losses caused by deterioration in earnings ofincrease in sales, to ¥17,971 million. Factors included higher sales of
161.8
149.8 167.7
174.1
equity-method affiliates in the172.5
miningand smelting
sectors.
(In thematerials-related machinery, such as crushers, screens, and grinding
previous fiscal year, we posted ¥367 million in equity in earnings ofmills for an intermediate storage facility (Futaba-machi, Futaba-gun,affiliates.) Accordingly, profit before income taxes increased 6.2%,
Fukushima Prefecture), as well as steady sales of belt conveyors forto ¥7,003 million.
construction of the Tokyo Gaikan Expressway and cargo handling
Total income taxes (including corporation tax, inhabitants’ tax,
equipment for a large-scale project involving construction of anand enterprise tax) amounted to ¥2,150 million, up 28.9%. Theinternational bulk terminal at the Port of Onahama. We also booked
effective tax rate increased 5.4 percentage points, to 30.7%,
sales from new orders for belt conveyors for a specified waste
due largely to the posting of equity in losses of affiliates. Profit
cement solidification treatment facility (Naraha-machi, Futaba-gun,
attributable to non-controlling interests jumped 30.1%, to ¥199
Fukushima Prefecture) and an intermediate storage facility (Okuma'15/3 '16/3 '17/3 '18/3 '19/3
million.
machi, Futaba-gun, Fukushima Prefecture).
As a result, profit attributable to owners of parent decreased
The UNIC Machinery segment reported a 6.8% rise in sales,
2.5% year on year, to ¥4,654 million. ROE decreased by 0.2 points
to ¥29,237 million. Domestic sales were up thanks to higher
to 5.7%. Profit attributable to owners of parent per share was
shipments of mainstay UNIC cranes in the wake of revised structural
down 1.6%, to ¥116.23.
standards for mobile cranes enacted in March. Healthy shipmentsof mini crawler cranes and unit carriers also contributed to revenue.
Meanwhile, overseas sales increased on the back of steady
Medium-Term Business Plan 2019: Targets andshipments of UNIC cranes, mainly in China, and mini crawler cranes
Progress by Business Segment
Operating
Incomein Europe and North America.
In fiscal 2019, we reported consolidated
net salesof ¥174,117(Billions ofcomparedyen)
Sales in the Metals segment grew 3.5%, to ¥80,068 million. For
million, representing a progress rate of 103.9%
with our
OperatingMarginthe fiscal year, the Company’s sales of electrolytic copper declined
target for fiscal 2020 (final year) underMedium-TermBusiness Plan(%)
due to a 4,957-ton decrease in volume sales, to 85,146 tons, but
2019. By segment, the progress rate of the Machinery business,sales of electrolytic gold increased on the back of higher production
positioned as a core business, wasthe
8.9 92.2%,
8.0 while
6.5 rates
7.8 for 8.9
volume.
Net SalesMaterials business and the Real Estate segment both exceeded
Cost of sales rose 3.7%, to ¥147,675 million, and the cost of (Billions of yen)100%.
sales margin edged down 0.1 percentage point, to 84.8%. Selling,
Operating income in fiscal 2019 was ¥8,915 million, for a
172.5 161.8 149.8 167.7 174.1
general and administrative (SG&A) expenses were up 0.4%, toprogress rate of 104.9% against ourbillion KPI target
5.2 ¥8.54.9
5.1
4.7 for
4.4
fiscal 2020. The progress rate for the Industrial Machinery segment¥17,526 million.
was 167.1% and the overall Machinery business was healthy, at
As a result, operating income climbed 14.0% from the previous
105.1%. Due to deterioration in smelting profits, the progress
fiscal year, to ¥8,915 million. Main contributors were the Industrial
rate of the Metal segment was 83.1% and the Materials business
Machinery segment (with operating income of ¥2,089 million, up'15/3Estate'16/3segment'17/3 '18/3'19/3
was 99.7%. The rate for the Realwas 116.4%.
107.9%), which benefited from higher sales, as well as large-scale
Under Medium-Term Business Plan 2019, we have positioned the
projects and profitable projects related to bridges, and the UNIC
Operating Income
Machinery business as a core business, and the three years of theMachinery segment (¥2,789 million, up 21.5%), buoyed by higher
Operating Marginplan as'19/3
a period of “Building foundations for renewed growth.”
segment sales. By contrast, the Metals segment reported
a 32.9%'15/3'16/3 '17/3 '18/3
In fiscal 2019, the Machinery business accounted for 72.0% of
decline in operating income, to ¥582 million, due to worsening
consolidated operating income, compared with our 72.2% target
conditions in the mining sector.
for fiscal 2020.
Among other income, we posted ¥952 million in interest andWe are also stepping up efforts to increase ROE. Among thedividend income, ¥224 million in gain on sales of noncurrent assets,components of ROE, we are placing top priority on improvingand ¥215 million in gain on sales of investment securities. Among

Profit Attributable to
Owners of Parent

Operating Income(Billions of yen)

Return on Sales(%)(Billions of yen)

172.5 161.8 149.8 167.7 174.1(Billions of yen)

Operating Margin

Net Sales

8.9

5.2

8.0

4.9

6.5

4.4

(%)

7.8

4.7

8.9

9.8

'15/3 '16/3 '17/3 '18/3 '19/3
Operating Income
Operating Margin

4.3

4.8

4.7

5.1
5.7

'15/3 '16/3 '17/3 '18/3 '19/3

5.1

3.1

2.8

2.8

2.7

'15/3 '16/3 '17/3 '18/3 '19/3
Profit Attributable to Owners of Parent
Return on Sales
Annual Report 201931

our Thailand factory, which is a production base for machinery
profitability and efficiency. Compared with fiscal 2017 (the year
exports, and established a knockdown parts warehouse and export
before the start of Medium-Term Business Plan 2019,) as the basemachinery shipment facility, in addition to rebuilding our dealer
year, ROE has edged down 0.2 percentage point, to 5.7%. This is
network and strengthening our sales capabilities. Our plan is tomainly because of a ¥1,610 million impairment loss (reported at
upgrade the Sakura Plant to “mother factory” status, reinforce
extraordinary loss) on the Furukawa Osaka Building in fiscal 2019,
our production systems in Japan, Thailand, and China, and reduce
which negatively affected return on sales.
Basic Earnings per Shareproduction costs.
Industrial Machinery: Compared with our targets for fiscal 2020
(Yen)
Metals: Compared with our targets for fiscal 2020 under Mediumunder Medium-Term Business Plan 2019, the progress rates for242.34 125.13
105.29118.16sales
116.23
Term Business Plan 2019, the progress
rates forsegment
andsegment sales and operating income were 89.9% and 167.1%,
operating income were 119.1% and 83.1%, respectively. ROA has
respectively. ROA has improved from 0.5% in fiscal 2017 to 9.2%
declined from 6.2% in fiscal 2017 to 1.8% in fiscal 2019 (2.7% in
in fiscal 2019 (4.6% in fiscal 2018), with large-scale projects, bridge
fiscal 2018), due to falling operating margins. Profit in this segment
construction, and other profitable projects making an ongoingfluctuates significantly, because raw copper ore and bullion
contribution to operating margins since fiscal 2018. Many of the
products are affected by international market trends, and smelting
products provided by this segment are manufactured to order, so
profitability is impacted by iron ore purchasing conditions. We are
it is essential that we accurately understand customers’ issues andworking to reduce the effects of these fluctuations by entering
demands for each project and make proposals to address them.
forward exchange contracts, hedging through futures contracts, andFor this reason, we undertook a reorganization on April 1, 2018'15/3 '16/3 '17/3 '18/3 '19/3
the like. To improve earnings, we are also establishing an optimal
aimed at strengthening our engineering capabilities. This entailed
production and sales system with an emphasis on profitability.
integrating the sales and design departments—previously separated
Electronics: Compared with our targets for fiscal 2020 underfrom each other and coordinated by the head office—into each
Medium-Term Business Plan 2019, the progress rates for segment
business segment. The reorganization is gradually bearing fruit.
sales and operating income were 102.0% and 136.0%, respectively.
Rock Drill Machinery: Compared with our targets for fiscal 2020
ROA has improved from 0.2% in fiscal 2017 to 5.7% in fiscal
under Medium-Term Business Plan 2019, the progress rates for2019 (4.5% in fiscal 2018). High-purity metallic arsenic, which issegment sales and operating income were 90.7% and 105.6%,
positioned as a mature product, has generated improved earnings
respectively. Thanks to increases in the operating margin, ROA has
thanks to strong performances of compound semiconductors—
improved from 2.9% in fiscal 2017 to 4.9% in fiscal 2019 (5.7% in
Net Assets
the main application for this product—as well as solid demand forfiscal 2018). To further improve the profitability and efficiency of this(Billions of yen)
crystal products used in individual semiconductor devices.
segment, we are working to enhance our LCS capabilities. Specific
Return on Equity (ROE)
Chemicals: Compared with our targets for fiscal
business strategies include building an operational management(%)2020 underMedium-TermBusiness
Plan
2019,
the
progress
rates forsystem, expanding sales of parts, and growing and strengthening
Basic Earnings per Share
70.6 68.3 79.6 87.1 80.4
our domestic maintenance business. We are also investing a total(Yen) segment sales and operating income were 102.1% and 101.6%,
respectively. ROA has improved from 0.7% in fiscal 2017 to 2.5%of ¥6.8 billion in the Yoshii Works over a five-year period starting
242.34 125.13
in fiscal116.23
2019 (2.8% in fiscal 2018). In the previous fiscal year, we
in fiscal 2018, with the aims of enhancing production capacityand 105.29 118.16
reported a year-on-year increase in sales of cuprous oxide owing
productivity, improving environmental performance and product15.9 antifouling paint, ato growth in demand for its use in marine
quality, and strengthening our LCS capabilities.
mainstay application, ahead of the enactment of regulations under
UNIC Machinery: Compared with our targets for fiscal 2020
7.5
5.9
5.9
the Ballast Water Management Convention. This helped
improve
under Medium-Term Business Plan 2019, the progress rates for5.7
the operating margin in that year. In fiscal 2019, there was a recoil
segment sales and operating income were 95.5% and 82.0%,
in cuprous oxide demand, but sales of sulfuric acid increased due torespectively. ROA has declined from 11.2% in fiscal 2017 to 9.7%
'15/3 '16/3 '17/3 '18/3 '19/3
a price revision, which contributed to segment earnings.
in fiscal 2019 (8.9% in fiscal 2018), due to various factors. These
Net Assets
Real Estate: Compared with our targets
for fiscal 2020 underinclude an increase in total assets stemming from large-scale capital'15/3 '16/3 '17/3 '18/3 '19/3
Return on Equity (ROE)
Medium-Term Business Plan 2019, the progress rates for segment
investments since fiscal 2017, rising prices of steel, increases insales and operating income were 120.0% and 116.4%, respectively.
production costs associated with making capital investments while
ROA has remained mostly unchanged from 4.0% in fiscal 2017
manufacturing is in progress, and declines in total asset turnover(4.3% in fiscal 2018). In this segment, we have sought to secureand operating margins. In Japan, we developed safety-enhanced
stable income through the steady operation of the Muromachi
models that comply with revised structural standards for mobile
Furukawa Mitsui Building (commercial name: COREDO Muromachi
cranes enacted by the Ministry of Health, Labor and Welfare. The
2) and the sale of idle land, while improving asset efficiency throughnew models went on sale in October 2018. Overseas, we expanded
Total Assets

Net Assets(Billions of yen)(Billions of yen)

Basic Earnings per Share(Yen)

242.34 125.13 105.29 118.16 116.23

Equity Ratio

Return on Equity (ROE)
(%)

(%)

70.6 68.3 79.6 87.1 80.4

207.3 195.7 208.0 222.2 215.4

15.9
7.5

'15/3 '16/3 '17/3 '18/3 '19/3

5.9

34.0

37.3

38.2

36.3

5.7

'15/3 '16/3 '17/3 '18/3 '19/3
Net Assets
Return on Equity (ROE)

32 FURUKAWA CO., LTD.

33.2
5.9

'15/3 '16/3 '17/3 '18/3 '19/3

Total Assets
Equity Ratio

● Consolidated Net Sales, Operating Income, and Progress Rates: Medium-Term Business Plan 2019
Consolidated
Net Sales

FY2020(Estimation)

FY2019Progress rate(%)

84,10077,58092.2%

Machinery
Industrial Machinery

20,00017,971

89.9%

Rock Drill Machinery

33,50030,372

90.7%

UNIC Machinery

30,60029,237

95.5%

Materials

79,60092,722116.5%

Metals67,20080,068119.1%

Electronics

6,400

6,527

102.0%

Chemicals

6,000

6,127

102.1%

Real Estate

2,500

2,999

120.0%

Others

1,400

814

58.1%

167,600

174,117103.9%Total

FY2020(Estimation)

Consolidated
Operating Income

FY20196,250

Machinery

Composition ratio*

72.2%

Industrial Machinery

1,250

Rock Drill Machinery

1,600

UNIC Machinery

3,400

6,567
105.1%
Capital Expenditures
72.0%－(Billions of yen)

2,089
167.1%
Depreciation
andAmortization
1,690(Billions of yen)105.6%
2,7895.4

1,400

Materials

16.2%

Composition ratio*

Progress rate(%)

5.4
5.0 82.0%

1,396
3.2
2.6

3.2
3.1
15.3%
2.9

99.7%
3.3－ 3.5

582

83.1%

408

136.0%

Metals

700

Electronics

300

Chemicals

400 '15/3 '16/3
407'17/3 '18/3
101.8%'19/3
1,000Real Estate

Composition ratio*

11.6%

OthersSubtotal

Capital 1,164
Expenditures 116.4%
Depreciation
12.7%and Amortization
－

(40)

(147)

－

8,610

8,980

－

Adjustment amount

(110)

(64)

－

Total

8,500

8,915

104.9%* Calculated as a percentage of the total, minus other adjustments.

● ROA Transition by Segment
ROA
Total Asset(Operating Turnover
Income)(Times)

FY2017

Consolidated

3.2%

Cash Flows

Capital Expenditures

0.7(Billions of yen)

Operating Operating
Depreciation and FY2019
IncomeMargin(Millions ofAmortization
yen)

4.4%

6,546

(Billions of yen)

Consolidated
5.4
5.0
Industrial
Machinery
3.5
3.3
3.1 Rock
Drill
Machinery

ROA
Total Asset(Operating Turnover
10.2
Income)(Times)OperatingMargin
9.8

7.7

4.1%

0.8

9.2%

3.3
0.9

4.9%

0.9

UNIC
Machinery

9.7%

1.0

5.4

(Billions of yen)

5.1%

Operating
11.8
Income(Millions of yen)
5.4

8,915

Industrial
Machinery

0.5%

0.9

0.6%

Rock Drill
Machinery

2.9%

0.9

3.3% 2.6

UNIC
Machinery

11.2%

1.1

9.9%

Metals

6.2%

2.4

2.6%

Metals'15/31,738'16/3 '17/3 '18/3
'19/3

1.8%

(10.9)
2.4

Electronics

0.2%

0.8

0.3%

Capital Expenditures
18
Electronics
Depreciation
and Amortization

5.7%

Chemicals

0.7%

0.3

2.1%

115

Chemicals

2.5%

Cash Flows 6.2%
from Operating 408
Activities
0.9
Cash Flows from Investing Activities
Cash Flows from Financing Activities
0.4
6.6%
407

Real Estate

4.0%

0.1

39.4%

1,266

Real Estate

4.0%

0.1

104
3.2

3.2
2.9
897

2,579

Capital Expenditures

Cash Flows(Billions of yen)

10.2

(Billions of yen)

5.4

3.2
2.6

2.9

3.2

3.1

5.0
3.3

11.8

9.8

5.6%
(3.6)

1,690
(2.5)

(4.2)
(3.4)
9.5%
(5.0) (5.9)2,789
(8.2)

0.7%
582
'15/3 '16/3 '17/3 '18/3 '19/3

38.5%

1,164

(Yen)

50.00 50.00 50.00 50.00 50.00

7.7

5.4

2,089

Cash Dividends per Share

(Billions of yen)

Depreciation andAmortization

(2.9)

9.9%

5.4
3.5

3.3

(2.9)

(8.2)

'15/3 '16/3 '17/3 '18/3 '19/3
Capital Expenditures
Depreciation and Amortization

(3.6)

(2.5)

(5.0) (5.9)

(4.2)
(3.4)

(10.9)'15/3 '16/3 '17/3 '18/3 '19/3'15/3 '16/3 '17/3 '18/3 '19/3
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

Annual Report 201933

the effective use of other real estate holdings. At its meeting in April
2019, the Board of Directors decided to sell the Furukawa Daimyo
Building (Fukuoka City, Fukuoka Prefecture). We are currently
considering the future plan for the Furukawa Osaka Building, whichis scheduled to close at the end of December 2019.
Financial Position
At March 31, 2019, total assets amounted to ¥215,368 million,
down 3.1% from a year earlier. The decline stemmed mainly froma decrease in investment securities due to falling prices of ourshareholdings. Interest-bearing liabilities (debt) edged down 1.0%,
to ¥72,597 million. At fiscal year-end, total liabilities amounted to¥134,921 million, down 0.2% from a year earlier.
Net assets at fiscal year-end stood at ¥80,447 million, down
7.6%. Consequently, total equity amounted to ¥78,217 million,
and the equity ratio slipped 1.9 percentage points, to 36.3%. The
debt-to-equity (D/E) ratio remained unchanged, at 0.9 times.
R&D and Capital Expenditures
The Furukawa Company Group is actively engaged in R&D on
high-value-added products and new materials that meet wideranging market needs. In the fiscal year under review, total researchand development expenses amounted to ¥1,505 million, down
34.4% from the previous fiscal year. Of this total, ¥159 million was
allocated to the Industrial Machinery segment, ¥86 million to theRock Drill Machinery segment, ¥143 million to the UNIC Machinery
segment, ¥25 million to the Metals segment, ¥99 million to theElectronics segment, and ¥136 million to the Chemicals segment.
Capital expenditures (including purchase of intangible fixed
assets) amounted to ¥5,442 million. Of this total, ¥269 million
was allocated to the Industrial Machinery segment, ¥2,386
million to the Rock Drill Machinery segment, ¥1,765 million to
the UNIC Machinery segment, ¥67 million to the Metals segment,¥190 million to the Electronics segment, and ¥118 million to theChemicals segment, aimed primarily at improvements in production
efficiency. In addition, ¥15 million was allocated to the Real Estatesegment, mainly for maintenance of buildings, and ¥629 million
went to the Others segment, mainly for investments in facilities toprevent accidents at suspended mines. Funds for these expendituresare sourced from internal funds and borrowings. Depreciation andamortization increased 6.6%, to ¥ 3,474 million.
The Group’s capital expenditure budget is based oncomprehensive consideration of various factors, including demand
forecasts, production plans, and investment benefits. As of March
31, 2019, the Group plans to invest a total of ¥10.3 billion, mainly
for the purchase of new facilities and repair of existing ones. We
expect to procure these funds via borrowings and/or internal funds.
Cash Flows
In the year under review, net cash provided by operating activities
amounted to ¥11,785 million, up 120.3% from the previous
fiscal year. This was due mainly to profit before income taxes,
depreciation and amortization, impairment loss, and other noncapital-related items, as well as a decrease in inventories and otherchanges in assets and liabilities.
Net cash used in investing activities totaled ¥3,387 million, down
42.2% from the previous fiscal year. The main factor was ¥4,760
million in purchases of property, plant and equipment, including
investments in equipment for strengthening the “mother factory”
functions of the Sakura Plant, investments to increase production
capacity at the Yoshii Plant, and other investments related to
implementing Medium-Term Business Plan 2019. However, thisfigure was lower than the previous fiscal year. Moreover, we posted
an increase in proceeds from sales of property, plant and equipment(including idle assets) aimed at improving asset efficiency.
Net cash used in financing activities was ¥4,205 million,
up 66.3%. This was mainly due to an increase in expendituresassociated with a purchase of treasury shares (861,700 shares)
implemented in November 2018.
Consolidated Operating Cash Flow Allocation and Capital
Strategy
The Furukawa Group is currently implementing Medium-TermBusiness Plan 2019, covering the three-year period from April
2017 to March 2020. With respect to allocation of consolidated
operating cash flows, our policy under the plan is to “actively● Consolidated Operating Cash Flow Progress Rates

Consolidated Operating Cash Flows(Millions of yen)

Cumulative amountfor 3 fiscal years(Estimation)

25,000
Reducing interest-bearing debt *1

3,000

Capital expenditures*2

16,000Cash dividends*3

6,000

Acquisition of treasury stock—

Allocation

FY2019Cumulative amount from
FY2018 to FY2019

Progress rate

11,785

17,136

68.5%

714

910

30.3%

5,442

10,464

65.4%

2,020

4,040

67.3%

1,208

1,210

－

*1 Refers to borrowings (short- and long-term) only, and does not include lease obligations.
*2 Refers to purchase price. Purchases of tangible and intangible fixed assets in fiscal 2019 amounted to ¥4,827 million, and cumulative purchases in fiscal 2018 andfiscal 2019 totaled ¥10,223 million.
*3 Refers to total dividend payments. Dividends paid in fiscal 2019 amounted to ¥2,020 million, and cumulative dividend payments in fiscal 2018 and fiscal 2019 totaled¥4,039 million.

34 FURUKAWA CO., LTD.

promote investments that contribute to increased corporate value”
while aiming to establish a robust financial foundation. At the sametime, we endeavor to make optimal allocations of cash flows in
consideration of shareholder returns.
Under our Medium-Term Business Plan 2019, our cumulative
three-year projection (fiscal 2018 to fiscal 2020) for operating cash
flows was around ¥25 billion. The cumulative amount for the past
two fiscal years (fiscal 2018 to fiscal 2019) was ¥17,136 million,
or 68.5% of the total, which generally reflects our projection.
The table on the previous page shows how capital inflows wereallocated in fiscal 2019 and the progress status.
Since the end of fiscal 2018, we have reduced interest-bearing
debt by ¥910 million, for a progress rate of 30.3%. However, this ismostly the same as the progress rate assumed under Medium-TermBusiness Plan 2019, so we are moving ahead according to plan.
As for allocation of capital expenditures, our cumulative threeyear projection was around ¥16 billion, mostly for investment in
the Machinery business, which is positioned as a core business. The
cumulative amount for the past two fiscal years (fiscal 2018 to fiscal
2019) was ¥10,464 million, or 65.4% of the total, which generally
reflects our plan.
We place great importance on improving returns of profits toall shareholders. Our basic policy is to appropriate profits after
comprehensive consideration of various factors, including retained
earnings required to finance capital expenditures and research anddevelopment expenses necessary to bolster earnings, as well as
future business development and other factors. We strive to return
profits to shareholders in a stable and ongoing manner. In principle,
we aim to pay annual dividends of ¥50.00 per share or higher for a
consolidated payout ratio of 30% or higher, based on consolidated
earnings (excluding extraordinary income / loss situations). For fiscal
2019, the Company declared annual dividends of ¥50.00 per share,
for a consolidated payout ratio of 43.0%.
Business Risks(1) Foreign Exchange Fluctuations
The Furukawa Company Group engages in production and sales
activities in Japan and overseas, and therefore is at risk of foreignexchange fluctuations in connection with its export business, theimport of raw materials, primarily copper ore, and smelting andprocessing income. While the Group utilizes foreign exchange
contracts and other methods to mitigate this risk, its operating
results and financial position may be adversely affected by
movements in exchange rates.
(2) Fluctuations in Nonferrous Metals Markets
International prices of electrolytic copper, a mainstay product of
the Group, and other nonferrous metals are decided by the London
Metals Exchange (LME) in U.S. dollars to reflect international market
conditions. Such prices fluctuate according to the international
supply–demand balance, speculative transactions, international
political and economic circumstances, and the like. The Grouputilizes forward delivery transactions and other hedging techniques
to minimize the impact of fluctuating LME prices. However,
movements in such prices may adversely affect the Group’s
operating results and financial position.
(3) Interest Rates
The Group’s fiscal year-end balance of interest-bearing liabilities(debt) was ¥72,597 million, equivalent to 33.7% of total assets. Any
increase in debt-related costs arising from changes in interest rates
may adversely affect the Group’s operating results and financial
position.

(4) Investment Securities and Land
Historically, the Furukawa Company Group has maintained relatively
high balances of marketable securities and land. As of March 31,
2019, the carrying value of investment securities as stated in thebalance sheets was ¥28,042 million, while land stood at ¥53,911
million. Accordingly, the Group’s operating results and financial
position are at risk of impairment losses, losses from devaluation,and losses on sales due to movements in stock and land prices.
(5) Retirement Benefit Obligation
The employees of the Furukawa Company Group are covered bydefined benefit corporate pension plans, and non-contributory
funded employee pension plans. Liability for retirement benefits areprovided at an amount calculated based on the retirement benefit
obligation and the fair value of pension plan assets at the balance
sheet date as of March 31, 2019. In calculating retirement benefit
obligation, the Group adopts assumptions in connection with thediscount rate and expected rate of return on plan assets, as wellas other assumptions. Accordingly, the Group’s operating results
and financial position are at risk in the event the actual discountrate and expected rate of return on plan assets differs materiallyfrom the assumptions, as well as in the event of a change in theassumptions on which retirement benefit obligation are made.
(6) Earthquakes and Other Natural Disasters
Earthquakes and other natural disasters, as well as major accidents,
could cause substantial damage to the Group’s production facilities
and procurement sources, leading to failure of its production
equipment and distribution network. Such an event may prevent
the Group from supplying products in a reliable manner, which
could affect its operating results and financial position.
(7) Environmental Protection
The Furukawa Company Group places the highest importance on
environmental protection, environmental safety, and prevention ofpollution at its various business sites, both in Japan and overseas,
respecting all laws and regulations. Furthermore, in Japan theGroup is vigilant in preventing water run-off from idle mines fromcontaminating water supplies and in preventing the buildup of slag
or slurry. However, in the event of changes in legislation and thelike, there is a possibility that the Group’s performance results andits financial position could be influenced.
(8) Official Regulations
The Furukawa Company Group engages in business in Japan andoverseas and thus is subject to legal regulations of various nations,
including rules related to licensing, taxation, the environment,labor, antitrust, and security. The Group takes care to faithfullycomply with such official regulations, but the formulation of new
regulations or amendments to existing ones may lead to increased
costs and affect the Group’s business continuity, which could affectits operating results and financial position.
(9) Country Risk
The Furukawa Company Group conducts its production,
procurement, and sales activities on a global basis in order toexpand its sales network, strengthen cost-competitiveness, andreduce currency risk. Any number of local events could hamper theGroup’s smooth business operations. These include local politicalunrest, sharp economic slowdown, trade sanctions, culturaland legal differences, special labor–management relations, andterrorism. Such events could affect the Group’s operating results
and financial position.

Annual Report 201935

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2019 and 2018
Thousands of
U.S. dollars (Note 4)

Millions of yen

ASSETS
Current Assets:
Cash and cash equivalents
Receivables—tradeFinished products
Work in process
Raw materials and supplies
Other current assets
Allowance for doubtful accounts
		Total current assets

2019

¥

Property, Plant and Equipment, at Cost (Notes 6, 7 and 20):
Land and timberlands
Buildings and structures
Machinery and equipment
Lease assets (Note 11)
Construction in progress

14,21830,668
14,966
11,087
12,5644,076(138)
87,441

2019

2018

¥

10,20031,321
15,576
8,028
17,5695,284(132)
87,846$

128,075
276,267
134,819
99,874
113,183
36,715(1,244)
787,689

Accumulated depreciation
		 Property, plant and equipment, net

55,75958,01344,612
1,391
1,135
160,911(72,622)
88,28956,75356,371
43,0091,391
2,105
159,629(70,663)
88,966502,292
522,595
401,871
12,533
10,226
1,449,516(654,189)
795,327

Investments and Other Assets:
Investment securities (Note 5)
Investments in affiliates
Long-term loans receivables
Deferred tax assets (Note 15)
Asset for retirement benefits (Note 14)
Other assets
Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

29,774
3,293
4,135
1,183
210
1,636
(594)
39,638215,368

36,240
3,719
4,074
367
—
1,572
(573)
45,399222,211

268,209
29,662
37,250
10,6601,896
14,736(5,351)
357,063
1,940,079

36 FURUKAWA CO., LTD.

¥

¥

$

Thousands of
U.S. dollars (Note 4)

Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term debt (Note 7)
Current portion of long-term debt (Note 7)
Lease obligations (Note 7)
Payables—trade
Electronically recorded obligations
Accounts payable—other
Income taxes payable
Provision for environmental measures
Provision for deposition field restoration
Provision for cost of removal of office tenants
Other current liabilities
		 Total current liabilities

2019

¥

Long-Term Liabilities:
Long-term debt (Note 7)
Lease obligations (Note 7)
Provision for environmental measures
Provision for deposition field restoration
Provision for cost of removal of office tenants
Liability for retirement benefits (Note 14)
Deferred tax liabilities (Note 15)
Deferred tax liabilities on surplus on the revaluation of land
(Note 15)
Asset retirement obligations
Other long-term liabilities
		 Total long-term liabilities
Net Assets (Note 8):
Shareholders’ equity:
Common stock without par value:
		Authorized—80,000,000 shares
		Issued—40,445,568 shares
Retained earnings
Treasury stock, at cost:		2019—904,102 shares		2018—41,964 shares
		 Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities, net of income taxes
Deferred gain (loss) on hedges
Surplus on the revaluation of land, net of income taxes
Translation adjustments
Retirement benefits liability adjustments
		 Total accumulated other comprehensive income
Non-controlling interests
		 Total net assets
		 Total liabilities and net assets

¥

9,738
7,467
258
12,691
12,233
9,895
761
4
219
432
6,680
60,377

2019

2018

¥

9,225
26,728260
13,072
10,644
14,225
600
—
282
—
4,286
79,322$87,722
67,262
2,321
114,325
110,196
89,135
6,855
34
1,970
3,887
60,177543,885

55,392
405
68
—
—
8,801
6,018

37,358
555
134
391
579
4,676
7,524

498,986
3,650
612
—
—
79,27954,212

1,477

1,779

13,304224
2,159
74,544220
2,587
55,803

2,022
19,446
671,50928,20841,892

28,20838,573

254,105
377,376(1,277)—
68,824(68)—
66,713(11,500)—
619,981

9,340
12
2,781
(350)
(2,390)9,393
2,230
80,447215,368

14,518
46
3,465
182
87
18,2982,075
87,086222,211

84,134111
25,050(3,155)(21,529)
84,611
20,093
724,685
1,940,079¥$

The accompanying notes are an integral part of these statements.

Annual Report 201937

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2019 and 2018
Thousands of
U.S. dollars (Note 4)

Millions of yen

2019

Net Sales¥

Cost of Sales (Note 17)

2019

2018

174,117¥(147,675)

167,696$

1,568,479(1,330,284)(142,427)

		Gross profit

26,44225,269238,195

Selling, General and Administrative Expenses (Note 10)(17,526)(17,448)(157,882)

8,915

7,821

80,312

Interest and dividend income

952

804

8,572

Equity in earnings (losses) of affiliates

(150)

367

(1,356)

Interest expense

(577)

(581)

(5,194)

Other income (expenses), net (Notes 6 and 18)(2,137)(1,816)(19,248)

		 Profit before income taxes

7,003

6,595

63,087

Current(1,665)(1,155)(15,002)

Deferred

(485)

(513)

(4,368)

		 Total income taxes(2,150)(1,668)(19,371)

Profit

4,853

4,927

43,716

Profit Attributable to Non-Controlling Interests

(199)

(153)

(1,788)

		Operating income
Other Income (Expenses):

Income Taxes (Note 15):

Profit Attributable to Owners of Parent

¥

4,654

¥

4,774

$

Yen

41,928
U.S. dollars (Note 4)

Profit Attributable to Owners of Parent per Share

¥

116

¥

118

$

1.05

Net Assets per Share

¥

1,978

¥

2,104

$

17.82

The accompanying notes are an integral part of these statements.

38 FURUKAWA CO., LTD.

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2019 and 2018
Thousands of
U.S. dollars (Note 4)

Millions of yen

2019Profit

¥

2019

2018

4,853

¥

4,927

$

43,716

Other Comprehensive Income (Loss):(5,180)2,759

Deferred gain (loss) on hedges

(63)

(24)

(564)

Translation adjustments

(318)

(46)

(2,865)Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates­accounted for using equity method
		 Total other comprehensive income (loss) (Note 9)(2,477)

1,879(22,311)

(204)

50

(1,838)(8,242)

4,618(74,242)Comprehensive Income (Loss)(3,389)9,545(30,526)(3,566)

9,375(32,125)

178

170

1,599

Unrealized holding gain (loss) on securities, net of income taxes(46,664)

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

Annual Report 201939

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

For the year ended March 31, 2019

Millions of yen
Number ofshares ofcommonstock(thousands)

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

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208For the year ended March 31, 2019

Retainedearnings

Treasury stock,at cost38,573(2,020)
4,654
—
685
—
41,892

¥

¥

¥

¥

(68)
—
—
(1,209)——(1,277)

Total
shareholders’equity¥¥66,713(2,020)4,654(1,209)685—
68,824

Millions of yen
Accumulated other comprehensive income
Surplus on the
Unrealized
revaluation ofholding gain onland, net of
securities, net of Deferred gain
income taxes (loss) on hedges income taxes

Balance at beginning of year
¥ 14,518 ¥Cash dividends paid—
Profit attributable to owners of parent—
Purchase of treasury stock—Reversal of surplus on the revaluation of land—
Net change during the year
(5,178)
Balance at end of year
¥ 9,340 ¥Translation
adjustments

46 ¥ 3,465 ¥
—
—
—
—
—
—
—
—
(33)
(685)
12 ¥ 2,781 ¥Total­accumulated
Retirement
other
benefits liability
comprehensive Non-controlling
adjustments
incomeinterests(Note 14)182 ¥87 ¥ 18,298 ¥ 2,075 ¥ 87,086————(2,020)
—
—
—
—
4,654
—
—
—
—
(1,209)————685(533) (2,477) (8,905)
156(8,750)(350) ¥ (2,390) ¥ 9,393 ¥ 2,230 ¥ 80,447

For the year ended March 31, 2018

Millions of yen
Number ofshares ofcommonstock(thousands)

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

40 FURUKAWA CO., LTD.

Total
net assets

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208¥¥Retainedearnings

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

¥

¥

(66)
—
—
(2)
—
—
(68)

Total
shareholders’equity¥¥63,890(2,020)
4,774
(2)
71
—
66,713

For the year ended March 31, 2018

Millions of yen
Accumulated other comprehensive income
Surplus on the
Unrealized
revaluation ofholding gain onland, net of
securities, net of Deferred gain
income taxes (loss) on hedges income taxes

Balance at beginning of year
¥ 11,758 ¥Cash dividends paid—
Profit attributable to owners of parent—
Purchase of treasury stock—Reversal of surplus on the revaluation of land—
Net change during the year
2,760
Balance at end of year
¥ 14,518 ¥Translation
adjustments

106 ¥ 3,536 ¥
—
—
—
—
—
—
—
—
(60)
(71)
46 ¥ 3,465 ¥Total­accumulated
Retirement
other
benefits liability
comprehensive
adjustments
income(Note 14)

Non-controllinginterests

Total
net assets

160 ¥ (1,792) ¥ 13,768 ¥ 1,926 ¥ 79,584————(2,020)
—
—
—
—
4,774
—
—
—
—
(2)
—
—
—
—
71
22
1,879
4,530
149
4,679
182 ¥
87 ¥ 18,298 ¥ 2,075 ¥ 87,086

For the year ended March 31, 2019

Thousands of U.S. dollars (Note 4)
Shareholders’ equity

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

Commonstock

Retainedearnings$ 254,105—————$ 254,105$ 347,480(18,198)
41,928—6,167—$ 377,376

Total
shareholders’equityTreasury stock,at cost

$

(611)
—
—
(10,889)——$ (11,500)$ 600,974(18,198)
41,928(10,889)
6,167—$ 619,981

The accompanying notes are an integral part of these statements.

For the year ended March 31, 2019

Thousands of U.S. dollars (Note 4)
Accumulated other comprehensive income
Surplus on the
Unrealized
revaluation ofholding gain onland, net of
securities, net of Deferred gain
income taxes (loss) on hedges income taxes

Balance at beginning of year
$130,780 $Cash dividends paid—
Profit attributable to owners of parent—
Purchase of treasury stock—Reversal of surplus on the revaluation of land—
Net change during the year
(46,646)
Balance at end of year
$ 84,134 $Translation
adjustments

Total­accumulated
Retirement
other
benefits liability
comprehensive
adjustments
income(Note 14)

Non-controllinginterests

Total
net assets

410 $ 31,217 $ 1,643 $782 $164,831 $ 18,691 $784,496
—
—
—
—
—
— (18,198)
—
—
—
—
—
—
41,928—————— (10,889)
—
—
—
—
—
—
6,167
(299) (6,167) (4,797) (22,311) (80,220)
1,401 (78,818)
111 $ 25,050 $ (3,155) $(21,529) $ 84,611 $ 20,093 $724,685

The accompanying notes are an integral part of these statements.

Annual Report 201941

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2019 and 2018
Thousands of
U.S. dollars (Note 4)

Millions of yen

2019

Operating Activities:
Profit before income taxes
Depreciation and amortization
Equity in earnings (losses) of affiliates
Impairment loss
Increase (decrease) in net defined benefit liability
Loss (gain) on disposal and sales of property, plant and equipment
Loss (gain) on sales of investment securities
Increase (decrease) in provision for deposition field restoration
Increase (decrease) in provision for cost of removal of office tenants
Interest and dividend income
Interest expense
Receivables—trade
Inventories
Payables—trade
Accounts payable—other
Other
		Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Income taxes refunded		 Net cash provided by operating activities

¥

7,003
3,474
150
1,610
(68)
(146)
(215)
(454)
(147)
(952)
577
470
2,225
1,719
(4,980)2,326
12,593953(575)(1,662)476
11,785

2019

2018

¥

6,595
3,260
(367)
142
788
94
(21)
(1,073)
579
(804)
581
(4,493)(7,976)
559
7,463
724
6,052
791
(559)
(1,741)
807
5,350

$

63,087
31,294
1,356
14,503(610)(1,316)(1,933)(4,092)(1,328)(8,572)
5,194
4,236
20,042
15,484(44,858)
20,955
113,442
8,585(5,181)(14,968)
4,285
106,163

Investing Activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Increase in short-term loans receivables
Increase in long-term loans receivables
Collection of long-term loans receivables
Other
		 Net cash used in investing activities(4,760)
1,246
(506)
444
(364)
—
691
(138)
(3,387)(5,326)
26
(6)
48
(318)
(198)
2
(82)
(5,855)(42,878)
11,222(4,558)4,001(3,275)—
6,223(1,243)(30,508)

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

25,713(26,912)
7,555(7,035)(1,209)(2,020)(275)(22)(4,205)(177)
4,017
10,20014,21813,605(13,398)
8,505(8,918)(1)(2,020)(282)(21)(2,529)9(3,025)
13,225
10,200231,624(242,431)
68,061(63,370)(10,889)(18,197)(2,481)(198)(37,882)(1,590)36,18391,891
128,075

The accompanying notes are an integral part of these statements.

42 FURUKAWA CO., LTD.

¥

¥

$

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2019 and 2018

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa
Co., Ltd. (the “Company”) and consolidated subsidiaries(together, the “Furukawa Group”) are prepared in accordancewith accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from those prepared by the Company as required
under the Financial Instruments and Exchange Law of Japan.
The notes to the consolidated financial statements include
information which is not required under accounting principles

2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 33 subsidiaries and 11 affiliates as of March
31, 2019. The consolidated financial statements included
the accounts of the Company and 33 subsidiaries as of March
31, 2019.
For the purpose of preparing the consolidated financial
statements, all significant intercompany transactions, accountbalances and unrealized profits among the Furukawa Group
have been eliminated.
Certain foreign subsidiaries have been included on the basisof a fiscal year ended on December 31, but prior to the parent
company’s fiscal year ended on March 31. Relevant adjustments
have been made for significant transactions with such
subsidiaries during the intervening period from January 1 toMarch 31.
Investments in subsidiaries and affiliates which are notaccounted for by the equity method are carried at cost becauseof their immaterial impact on the consolidated financial
statements.
(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investmentswith a maturity of three months or less when purchased.
(3) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries andaffiliates are classified into three categories: trading, held-tomaturity or other securities. The Furukawa Group does not holdany trading or held-to-maturity securities as of March 31, 2019and 2018. Marketable securities classified as other securities arecarried at fair value with changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net
assets. Fair value is determined based on the average of themarket value during the last month of the fiscal year. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.

generally accepted in Japan but is presented herein as additional
information.
In preparing these statements, the Company makes certain
reclassifications and rearrangements to the consolidated financial
statements prepared in Japan in order to present these statements
in a form which is more familiar to readers outside Japan.
Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation.

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

Annual Report 201943

estimated useful lives of the assets. The range of useful lives ofproperty, plant and equipment is summarized as follows:
Buildings and structures
2 to 60 years
Machinery and equipment
2 to 22 years
Amortization is calculated by the straight-line method for
intangible assets except for lease assets.
Depreciation of lease assets arising from finance leasetransactions that do not involve transfer of ownership is
calculated by the straight-line method over the lease term withno residual value.
(10) Retirement Benefits
The retirement benefit obligation for employees is attributed toeach period by the straight-line method over the estimated yearsof service of the eligible employees.
Actuarial gain or loss is amortized in the year following theyear in which the gain or loss is recognized primarily by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by thestraight-line method over periods (mainly 15 years), which areshorter than the average remaining years of service of theemployees.
Unrecognized actuarial gains and losses and unrecognizedprior service costs are recorded in “Retirement benefits liability
adjustments” in net assets after adjusting income tax effect.
(11) Surplus on the Revaluation of Land
Pursuant to the Law Concerning the Revaluation of Land, land
used for the Company’s business operations was revalued on
March 31, 2002. The income tax effect of the difference
between the book value and the revalued amount has beenpresented under liabilities as “Deferred tax liabilities on surplus
on the revaluation of land” and the remaining balance has beenpresented under net assets as “Surplus on the revaluation ofland, net of income taxes” in the accompanying consolidatedbalance sheets. Revaluation of land was determined based on
the official notice prices published by the Commissioner of the
National Tax Authorities in accordance with Paragraph 4, Article
2 of the “Enforcement Ordinance Concerning Land Revaluation,”with relevant adjustments. The carrying value of the land after
revaluation exceeded its fair value by ¥1,643 million ($14,796
thousand) and ¥1,817 million as of March 31, 2019 and 2018,
respectively.
(12) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts
currently payable for each year. Deferred income taxes arisingfrom temporary differences between financial reporting and tax
bases of the assets and liabilities, which were measured using
the enacted tax rates and laws that will be in effect when the
44 FURUKAWA CO., LTD.

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

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

3. Changes in Presentation Method
Change in presentation method due to adoption of Partial
Amendments to Accounting Standard for Tax EffectAccounting
The Company has adopted the Partial Amendments to
Accounting Standard for Tax Effect Accounting (ASBJ Statement
No. 28, issued on February 16, 2018) from the beginning of the
fiscal year ended March 31, 2019. Deferred tax assets are now
being presented in the investments and other assets section of
the balance sheet, deferred tax liabilities are now being
presented in the long-term liabilities section of the balance
sheet, and notes related to tax effect accounting (Note 15) havebeen changed.

As a result, on the consolidated balance sheet as of March
31, 2018, the amount of deferred tax assets within currents
assets was decreased by ¥856 million, and that of deferred tax
assets within investments and other assets was increased by¥316 million. The amount of deferred tax liabilities withincurrent liabilities was decreased by ¥16 million, and that ofdeferred tax liabilities within long-term liabilities was decreasedby ¥524 million.
In addition, deferred tax assets and deferred tax liabilities ofsame taxpayer are offset, and the amount of total assets in theprevious period was decreased by ¥540 million.

4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is
included solely for convenience, as a matter of arithmetic
computation only, at ¥111.01=US$1.00, the exchange rate
prevailing on March 31, 2019. This translation should not be

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

5. Investment Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31,
2019 and 2018 were as follows:
Millions of yen

Thousands of U.S. dollars

2019
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks

¥

2019

Acquisition cost

24,442 ¥Unrealized gain
(loss)

12,030 ¥12,412Carrying value

Acquisition cost

Unrealized gain
(loss)$ 220,177 $ 108,365 $ 111,812

Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

24,442

12,03012,412

220,177

108,365

111,812

3,601

4,196

(595)

32,43437,795(5,361)

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

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

32,43437,795(5,361)

Total

¥

3,601

4,196

(595)

28,042 ¥16,225 ¥11,817$ 252,612 $ 146,160 $ 106,452

Annual Report 201945

Millions of yen

2018
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks

Acquisition cost

Unrealized gain
(loss)

33,700 ¥15,026 ¥Government bonds

—

—

—

Corporate bonds

—

—

—

33,70015,026

18,674

808

922

(114)

—

—

—

¥

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

¥

18,674

—

—

—

808

922

(114)

34,508 ¥15,948 ¥18,560Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2019 and 2018 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2019

¥

Sales proceeds

2019

2018

444

¥

48

$

4,001

Aggregate gains

215

21

1,933

Aggregate losses

(0)

—

(0)

6. Long-Lived Assets
The Furukawa Group recognized an impairment loss of ¥1,610
million ($14,503 thousand) in other expense related to thebuildings, structures and equipment asset group for businessproperty in Osaka City due to significant decreases of businessprofitability, and the idle asset group due to significant decreases
in fair value. The carrying amount of the relevant assets were
written down to the recoverable amount for the year ended
March 31, 2019.

7. Short-Term Debt, Long-Term Debt and Lease Obligations
Short-term debt, most of which are unsecured, represented notes payable to banks, with the average interest rates of 0.6% and 0.4%
as of March 31, 2019 and 2018, respectively.
Long-term debt as of March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2019 to 2038¥

62,85962,859¥55,392¥(7,467)

Current portion of long-term debt

¥

2018

2019

64,08664,086$ 566,248
566,248(26,728)(67,262)

37,358$ 498,986

The average interest rates applicable to the above debt amounting to ¥62,859 million ($566,248 thousand) and ¥64,086 million
were 0.6% and 0.7% as of March 31, 2019 and 2018, respectively.

46 FURUKAWA CO., LTD.

The aggregate annual maturities of long-term debt subsequent to March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019Years ending March 31,

¥

2020

7,467

$

67,262

2021

3,008

27,099

2022

2,119

19,092

2023

5,114

46,070

2024

8,927

80,4162025 and thereafter

36,224

326,31062,859$ 566,248¥
Lease obligations as of March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

Lease obligations due 2019 to 2026

¥

663

¥

663
¥

405

$

815

(2,321)

(260)
¥

555

5,971
5,971

815

(258)

Current portion of lease obligations

2019

2018

$

3,650

The aggregate annual maturities of lease obligations subsequent to March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019Years ending March 31,

2020

¥

258

$

2,321

2021

168

1,514

2022

137

1,234

2023

80

717

2024

19

175

2025 and thereafter

1

10

¥
The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥37,014 million ($333,429 thousand) with 24
banks and ¥37,014 million with 24 banks as of March 31,
2019 and 2018, respectively. The borrowings outstanding and

663

$

5,971

the unused balances under these credit facilities amounted
to ¥8,764 million ($78,948 thousand) and ¥28,250 million($254,482 thousand), respectively, as of March 31, 2019, andamounted to ¥8,596 million and ¥28,418 million, respectively,
as of March 31, 2018.

Annual Report 201947

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2019 and 2018 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2019

¥

Property, plant and equipment, net

2019

2018

1,414

¥

1,432

$

12,741(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2019

¥

Long-term debt (including current portion)

2019

2018

1,707

¥

1,568

$

15,381

8. Net Assets
Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2018

Increase

Decrease

As of March 31,
2019

Shares issued:
Common stock		 Total

40,446——40,44640,446­——40,446

42

862

—

904

42

862

—

904

Treasury stock:
Common stock (Note)		 Total

Note:	The increase of 862 thousand shares of equity in treasury stock was due to the purchase of shares based on the resolution of
the Board of Directors on November 26, 2018.
		 The increase of 0 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.
Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2017

Increase

Decrease

As of March 31,
2018

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

404,455—

364,00940,446404,455­—

364,00940,446

413

3

374

42

413

3

374

42

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

48 FURUKAWA CO., LTD.

9. Other Comprehensive Income
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2019

2018

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

(6,528)¥(215)

Reclassification adjustments for gains and losses included in profit

3,934$ (58,802)(16)(1,934)

Amounts before tax effect(6,742)

3,918(60,736)

Tax effect

1,562(1,159)14,072

Unrealized holding gain (loss) on securities, net of income taxes(5,180)2,759(46,664)

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

(473)

536

(4,259)Adjustments on the acquisition cost of assets

358

(552)

3,224

Amounts before tax effect(1,035)

(115)

(16)

Tax effect

52

(8)

472

Deferred gain (loss) on hedges

(63)

(24)

(564)

(318)

(46)

(2,865)(3,941)

2,259(35,505)

(27)

414

(242)

Amounts before tax effect(3,968)2,673(35,747)

Tax effect

1,492

(794)

13,436Retirement benefits liability adjustments(2,477)

1,879(22,311)

(200)

(41)

(1,804)

(4)

91

(33)

(204)

50

(1,838)4,618$ (74,242)

Translation adjustments:
Amounts arising during the year
Retirement benefits liability adjustments:
Amounts arising during the year
Reclassification adjustments for gains and losses included in profit

Share of other comprehensive income (loss) of affiliates accounted forusing equity method:Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Share of other comprehensive income (loss) of affiliates accounted for using
equity method
Total other comprehensive income (loss)¥(8,242)¥

10. Research and Development Expenses
Research and development expenses, included in selling, general and administrative expenses and cost of sales, for the years ended
March 31, 2019 and 2018 amounted to ¥1,505 million ($13,556 thousand) and ¥2,293 million, respectively.

Annual Report 201949

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

(4) Supplementary explanation on the estimated fair value of financial instruments		The value of financial instruments is based on their quoted market place, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in “13.
Derivative Transactions” are not necessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2019 and 2018 and estimated fair value
are shown as follows. The following table does not include financial instruments for which it is extremely difficult to determine thefair value. (Please refer to Note 2 below.)
Millions of yen

Thousands of U.S. dollars

2019

2019

Carrying value

Estimated fair value

Difference

Assets:(1) Cash and cash equivalents(2) Receivables—trade(3) Investment securities
Total assets¥ 14,329
30,66828,042
73,040¥ 14,329
30,66828,042
73,040¥Liabilities:(1) Payables—trade(2) Electronically recorded obligations(3) Accounts payable—other(4) Short-term debt (*1)(5) Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 12,691
12,233
9,895
9,738
62,859107,416¥23¥ 12,691
12,233
9,895
9,738
62,978
107,535¥
23¥¥

Carrying value

Estimated fair value

Difference

—
—
—
—

$ 129,080
276,267
252,612657,959$ 129,080
276,267
252,612657,959

$

—
—
—
—

—
—
—
—
119
119
—

$ 114,325
110,196
89,13587,722566,248967,626$206$ 114,325
110,196
89,13587,722567,322968,700
$
206

$

—
—
—
—
1,074
1,074
—

$

Millions of yen

2018
Carrying value

Estimated fair value

Difference

Assets:(1) Cash and cash equivalents¥

10,200¥

10,200¥—(2) Receivables—trade

31,321

31,321—(3) Investment securities

34,50834,508—76,02976,029—Total assets
Liabilities:(1) Payables—trade¥

13,072¥

13,072¥—(2) Electronically recorded obligations

10,644

10,644(3) Accounts payable—other

14,225

14,225—(4) Short-term debt (*1)

9,225

9,225

—

(5) Long-term debt (*1)

64,086

64,13347

Total liabilities
Derivatives (*2)

111,252¥

138—

111,299
¥

138

47
¥

—

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

Annual Report 201951

Notes:1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets(1) Cash and cash equivalents, (2) Receivables—trade		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Investment securities		The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to“5. Investment Securities” to the consolidated financial statements.
Liabilities(1) Payables—trade, (2) Electronically recorded obligations, (3) Accounts payable—other, (4) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(5) Long-term debt
		The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivative transactions
Please refer to “13. Derivative Transactions” to the consolidated financial statements.
2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2019 and 2018
Thousands of
U.S. dollars

Millions of yen

2019

¥

Unlisted stocks

2019

2018

5,024

¥

5,451

$

45,260Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are
not included in the above table of “(3) Investment securities.”
3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2019 and 2018 are as follows:
For the year ended March 31, 2019
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

14,29430,66844,963Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2018
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

10,15031,321
41,471

Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2019
Thousands of U.S. dollars

Due in one
year or less

Cash deposits
Receivables—trade
Total$ 128,767
276,267$ 405,034

Due after one year
through five years

Due after five years
through ten years

$

$

$

—
—
—

$

—
—
—

Due after
ten years$$

4. The redemption schedule for long-term debt is disclosed in “7. Short-Term Debt, Long-Term Debt and Lease Obligations.”

52 FURUKAWA CO., LTD.

———

13. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding as of March 31, 2019 and 2018 for which
hedged accounting have been applied are as follows.
1. Currency-related transactions
Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Accounts receivables
Accounts receivables
Accounts payables

As of March 31, 2019
Contract amounts¥

Maturing after one year

895
12
8,082

—
—
—

Fair value

¥

0
0
(21)

Accounts receivables
Accounts receivables

¥

—
142

—
—

(*)
(*)

Accounts payables

¥

2,828

—

(*)

Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

As of March 31, 2018
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

1,062
—
13,505

—
—
—

¥

(4)
—
259

Accounts receivables
Accounts receivables

¥

111
267

—
—

(*)
(*)

Accounts payables

¥

8,076

—

(*)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Accounts receivables
Accounts receivables
Accounts payables

As of March 31, 2019
Contract amounts$

Maturing after one year

8,065
105
72,801———

Fair value

$

6
5
(190)

Accounts receivables
Accounts receivables

$

—
1,281

—
—

(*)
(*)

Accounts payables$

25,480—(*)

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

Annual Report 201953

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

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2019
Contract amounts¥

15,131Maturing after one year¥

Fair value

12,533(*)

Millions of yen
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2018
Contract amounts¥

16,379Maturing after one year¥

Fair value

2,073

(*)

Thousands of U.S. dollars
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2019
Contract amounts$

136,299

Maturing after one year$

Fair value

112,900(*)(*) The fair values by means of the special accounting procedure for interest rate swap are included in the fair values of the hedged
long-term debt because the derivative transactions are treated as a part of hedged long-term debt.
3. Commodity-related transactions
Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2019
Contract amounts

Maturing after one year

Fair value

Raw material

¥

—

¥

—

¥

—

Raw material

¥

1,720

¥

16

¥

43

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2018
Contract amounts

Maturing after one year

Fair value

Raw material

¥

1

¥

—

¥

(0)

Raw material

¥

7,256

¥

21

¥

(117)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2019
Contract amounts

Maturing after one year

Raw material

$

—

$

—

$

—

Raw material$

15,492

$

142

$

384

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

54 FURUKAWA CO., LTD.

Fair value

14. Retirement Benefit Plans
For the year ended March 31, 2019
The employees of the Company and most of its domestic consolidated subsidiaries are covered by defined benefit corporate pension
plans and non-contributory funded employee pension plans as defined benefit plans. The employee retirement benefit plans provide
for lump-sum payments. The employee pension plans, which are funded, were instituted to replace a certain portion of the benefits
under the retirement benefit plans with respect to employees who retire at the mandatory retirement age. Certain consolidated
subsidiaries (both domestic and foreign) have defined contribution plans.
The changes in the retirement benefit obligation during the year ended March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

Retirement benefit obligation at April 1, 2018
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Prior service cost
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2019¥¥

20,166912
122
127(1,231)76(37)—
20,136$ 181,662
8,215
1,102
1,145
(11,091)
685
(332)
—
$ 181,385

The changes in plan assets during the year ended March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019Plan assets at April 1, 2018
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2019¥¥15,491234(3,752)
355
(745)
(38)
—
11,545$ 139,542
2,108(33,795)
3,194(6,709)(339)—$ 104,002

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2019 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2019

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

19,444(11,545)
7,899
691
8,590

$ 175,159(104,002)
71,1576,226
77,383Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits in the balance sheet

8,801
(210)
8,590

79,279(1,896)
77,383Funded retirement benefit obligation
Plan assets at fair value

¥

¥

$

Annual Report 201955

The components of retirement benefit expense for the year ended March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of actuarial loss
Retirement benefit expense

¥

¥

912
122
(234)
24
(51)
773

$

8,215
1,102
(2,108)
219
(461)
6,967

$

Note: Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit
obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end
are included in “Service cost.”
Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2019 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2019

Prior service cost
Actuarial loss
Total

¥
¥

(52)
(3,917)(3,968)$(466)(35,281)$ (35,747)

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2019

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

156
3,377
3,533

$
$

1,408
30,421
31,829The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2019 are as follows:
2019

Bonds
StocksCash on hand and in banks
Other
Total

18%
58%
1%
23%
100%

Note: 47% of total plan assets are in a Retirement Benefit Trust for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.2%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.6%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥18 million($158 thousand).

56 FURUKAWA CO., LTD.

The changes in the retirement benefit obligation during the year ended March 31, 2018 are as follows:
Millions of yen

2018

Retirement benefit obligation at April 1, 2017
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2018¥¥19,827927
145
345(1,025)(55)
220,166The changes in plan assets during the year ended March 31, 2018 are as follows:
Millions of yen

2018

Plan assets at April 1, 2017
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2018¥¥13,294
305
2,506
350
(905)
(59)
—
15,491

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

2018

Funded retirement benefit obligation
Plan assets at fair value¥

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

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

The components of retirement benefit expense for the year ended March 31, 2018 are as follows:
Millions of yen

2018

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

¥

¥

927
145
(305)
19
395
1,181

Note: Retirement benefit expense for consolidated subsidiaries adopting the simplified method which assumes retirement benefit
obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at fiscal year-end
are included in “Service cost.”

Annual Report 201957

Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2018 are as
follows:
Millions of yen

2018

Prior service cost
Actuarial loss
Total

¥

19
2,654
2,673

¥

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

2018

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥

105
(540)
(435)

¥

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

Bonds
StocksCash on hand and in banks
Other
Total

13%
67%
2%
18%
100%

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

58 FURUKAWA CO., LTD.

15. Income Taxes
The reconciliation between the effective tax rate reflected in the consolidated statements of income and the statutory tax rate for theyear ended March 31, 2018 was summarized as follows:
2018

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

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

The above information for 2019 has not been presented because the difference between the effective tax rate and the statutory
tax rate was less than 5% of the statutory tax rate.
Deferred tax assets and liabilities as of March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

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

¥

7,365
1,526
4,190
1,869
67
173
1,659
16,849(7,495)
9,353(1,342)(3,020)(7,003)(2,471)(352)(14,188)¥ (4,835)¥ (1,477)

2019

2018

¥

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

66,346
13,74437,745
16,835603
1,563
14,943
151,778(67,520)
84,258(12,092)(27,203)(63,083)(22,261)(3,170)(127,809)$ (43,551)$ (13,304)

Annual Report 201959

16. Contingent Liabilities
Contingent liabilities as of March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019

Notes receivables discounted and endorsed¥

Loans guaranteed
Repurchase obligation of the securitization of receivables

2019

2018

179

¥

183

$

1,610

3,736

3,627

33,652

861

1,320

7,757

17. Write-Down of Inventories
The amount of write-down of inventories, included in cost of sales for the year ended March 31, 2019 totaled ¥(110) million ($(993)
thousand). For the year ended March 31, 2018, the Company reversed write-down in the amount of ¥312 million and credited it tocost of sales.

18. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2019 and 2018 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019Gain on sales of noncurrent assets
Gain on sales of investment securities
Payments for idle mines
Financial cost
Provision for cost of removal of office tenants
Impairment loss
Other, net

¥

¥

224
215
(673)
(280)
—
(1,610)(12)(2,137)

2019

2018

¥

¥

12
21
(607)
73
(1,042)(142)(132)(1,816)

$

2,016
1,933
(6,061)(2,521)—(14,503)(112)$ (19,248)

19. Segment Information
The reportable segments are constituent units of the Furukawa Group for which separate financial information is available. The Boardof Directors periodically examines these segments for the purpose of deciding the allocations of management resources and evaluating
operating performance.
The Company mainly manufactures and sells machinery, smelts on consignment and sells copper, and manufactures and sells
electronic materials and chemicals.
Under the holdings company structure, each main Group company plans domestic and overseas comprehensive strategies about
their products, and the Company manages and supervises them.
The Furukawa Group therefore categorizes segments classified by products based on main Group companies. The seven reportablesegments are as follows: Industrial Machinery, Rock Drill Machinery, UNIC Machinery, Metals, Electronics, Chemicals and Real Estate.
Main products and services belonging to each segment are as follows:(a) Industrial Machinery
		 Manufacture, sell, conduct installation work and manage operation for pumps, steel structures, steel bridges, industrial
machinery (crushers, grinding mills, screens, briquetting machines, material handling system, environmental machinery,recycling machines, and so on) and heat-resistant and wear-resistant castings(b) Rock Drill Machinery
		 Manufacture and sell rock drills such as hydraulic breakers, hydraulic crushers, boring drills (air pressure crawler drills, hydrauliccrawler drills, down-the-hole drills, and so on), tunnel and mining drill jumbos (tunnel drill jumbos, concrete sprayers used inmine cavities, drill jumbos used in mines, and so on), and environmental machinery(c) UNIC Machinery
		 Manufacture and sell UNIC cranes, mini crawler cranes, ocean cranes and UNIC carriers

60 FURUKAWA CO., LTD.

(d) Metals
		 After buying ore, manufacture and sell electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by
joint smelting company, dig and distribute limestone(e) Electronics
		 Manufacture and sell high-purity metallic arsenic, crystals, cores and coils, aluminum nitride ceramics and optical components(f) Chemicals
		 Manufacture and sale cuprous oxide, ferric polysulfate aqueous solution, aluminum sulfate, sulfuric acid, cuprous dioxide andcopper dioxide, and sale titanium dioxide(g) Real Estate		 Trade and lease of real estate
The accounting method used for reportable segments is the same as that method stated in “2. Summary of Significant Accounting
Policies.” Operating income (loss) of reportable segments is based on operating income in the consolidated statements of income.
Intersegment sales and transfers are recorded based on the actual market prices.
Segment information of the Furukawa Group for the years ended March 31, 2019 and 2018 was as follows:Year ended March 31, 2019

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

Rock Drill
Machinery

Electronics

30,372 ¥
130,373
1,690 ¥

29,237 ¥139
29,3762,789 ¥

80,068 ¥230
80,298
582 ¥

6,527
1
6,528
408

21,605 ¥320—
262

36,562 ¥
630
—
1,370

30,289 ¥
870
95
2,284

29,771 ¥
227
2,929
55

7,096
276
214
112

Millions of yen
Chemicals¥¥¥

Real Estate

OthersAdjustments

Consolidated

6,127 ¥
53
6,180
407 ¥

2,999 ¥
20
3,020
1,164 ¥

814 ¥
1,647
2,461
(147) ¥

— ¥ 174,117(5,294)—(5,294)
174,117(65) ¥
8,915

16,176 ¥210—
84

27,754 ¥564—
24

3,045 ¥
106
21
16

43,070 ¥ 215,368
52
3,255
—
3,260
620
4,827

Year ended March 31, 2018

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

Metals17,971 ¥3,204
21,1752,089 ¥

Year ended March 31, 2019

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

UNIC
Machinery¥¥¥

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronics

15,872 ¥3,023
18,895
1,005 ¥

30,200 ¥129
30,3291,783 ¥

27,382 ¥151
27,533
2,295 ¥

77,334 ¥236
77,570
867 ¥

6,308
1
6,309
330

23,657 ¥325—
287

31,838 ¥572—
390

27,026 ¥
711
88
3,980

35,887 ¥
221
3,393
79

7,333
295
205
113

Annual Report 201961

Year ended March 31, 2018

Millions of yen
Real Estate

Chemicals

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

Consolidated

3,339 ¥
23
3,362
1,340 ¥

916 ¥
1,578
2,494
(195) ¥

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

16,068 ¥212—
113

30,901 ¥582—
129

3,508 ¥
105—
86

45,993 ¥ 222,221
56
3,079
—
3,686
219
5,396

Thousands of U.S. dollars
Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronics$ 161,889 $ 273,600 $ 263,376 $ 721,268 $
28,864
6
1,253
2,071
190,753
273,606
264,628
723,340$ 18,817 $ 15,223 $ 25,124 $
5,241 $

58,800758,8073,673$ 194,623 $ 329,359 $ 272,852 $ 268,185 $
2,882
5,673
7,838
2,046
—
—
856
26,3842,361
12,33920,578495

63,922
2,485
1,931
1,011

Year ended March 31, 2019

Thousands of U.S. dollars
Real Estate

Chemicals

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

Adjustments

6,345 ¥
53
6,398
451 ¥

Year ended March 31, 2019

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

Others$$55,195 $474
55,6683,663 $

Others27,020 $181
27,200
10,482 $$ 145,715 $ 250,013 $
1,889
5,083
—
—
754
215

Adjustments

7,333 $
14,83622,169(1,325) $Consolidated— $ 1,568,479(47,691)—(47,691) 1,568,479(584) $ 80,312

27,431 $ 387,979 $ 1,940,079
952
470
29,318
192—
29,363141
5,589
43,483(Related information)
Years ended March 31, 2019 and 2018
1. Information regarding products and services
Year ended March 31, 2019

Millions of yen
CopperSales for outside customers¥

60,852UNIC cranes¥

Year ended March 31, 2018¥

65,178UNIC cranes¥

Year ended March 31, 2019

62 FURUKAWA CO., LTD.

94,472¥

174,117

17,770¥167,696

Others¥84,748

Total

Thousands of U.S. dollars
CopperSales for outside customers

¥

Total

Millions of yen
CopperSales for outside customers

18,792Others$548,167

UNIC cranes$

169,286

Others$851,026

Total$ 1,568,479

2. Geographic segment information(1) Net sales
Year ended March 31, 2019
Millions of yen
Japan

¥

Asia

137,305¥

Others20,883¥

Total

15,930¥174,117¥

167,696

Year ended March 31, 2018
Millions of yen
Japan

¥

Asia

128,209¥

Others22,548¥

Total

16,939Year ended March 31, 2019
Thousands of U.S. dollars
Japan

Asia

$ 1,236,866$

Others188,114$

Total

143,499$ 1,568,479(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2019 and 2018 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2019
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥ 28,310

MetalsYear ended March 31, 2018
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥ 26,306

MetalsYear ended March 31, 2019
Thousands of U.S. dollars
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$255,023

Metals

4. Impairment loss on property, plant and equipment
Millions of yen
Year ended March 31, 2019

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

Year ended March 31, 2018

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

Year ended March 31, 2019

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

Metals—Electronics

Chemicals

Real Estate— ¥ 1,561 ¥—Others49

Adjustments

Consolidated— ¥ 1,610

Millions of yen
Metals—Electronics—

Chemicals

Real Estate

— ¥

1 ¥

Others141

Adjustments

Consolidated

— ¥

142

Thousands of U.S. dollars
Metals—Electronics—

Chemicals

Real Estate— $ 14,063 $Others440

Adjustments

Consolidated— $ 14,503

5. Amortization of goodwill and unamortized goodwill in reportable segments
Not applicable.
6. Gain on negative goodwill in reportable segments
Not applicable.
Annual Report 201963

20. Investment and Rental Properties
The Company and certain consolidated subsidiaries own office buildings for lease mainly in Tokyo and other areas. For the year ended
March 31, 2019, rental income was ¥1,555 million ($14,004 thousand), gain on sales of rental properties was ¥206 million ($1,856
thousand), impairment loss on rental properties was ¥1,600 million ($14,409 thousand) and other loss was ¥2 million ($17 thousand).
For the year ended March 31, 2018, rental income was ¥1,603 million, gain on sales of rental properties was ¥5 million, loss onretirement was ¥10 million and impairment loss on rental properties was ¥102 million.
The carrying value, net changes in the carrying value and the fair value of those properties as of and for the years ended March 31,
2019 and 2018 are as follows:Year ended March 31, 2019
Carrying value
As of March 31, 2018

Fair value

Net change

As of March 31, 2019

As of March 31, 2019

Millions of yen¥

34,699¥(3,067)¥

31,632¥

34,186

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

Fair value

Net change

As of March 31, 2018

As of March 31, 2018

Millions of yen¥

35,209

¥

(510)

¥

34,699¥36,541

Year ended March 31, 2019
Carrying value
As of March 31, 2018

Net change

Fair value
As of March 31, 2019

As of March 31, 2019

Thousands of U.S. dollars$

312,578$(27,630)$

284,948$

307,954

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation and cumulative impairment loss.
2.	Net change in carrying value for the year ended March 31, 2019 mainly consists of acquisition of land and buildings in the amountof ¥17 million ($151 thousand) and decreases mainly due to amortization in the amount of ¥479 million ($4,312 ­thousand), impairment loss on rental properties in the amount of ¥1,600 million ($14,409 thousand) and sales of land in the amount of ¥1,003 million($9,033 thousand). Net change in carrying value for the year ended March 31, 2018 mainly consists of increases related to change
of use in the amount of ¥75 million and acquisition of land and buildings in the amount of ¥22 million and decreases mainly due toamortization in the amount of ¥504 million, impairment loss on rental properties in the amount of ¥102 million and sales of landand buildings in the amount of ¥2 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.

21. Subsequent Event
The following appropriations of retained earnings of the Company, which have not been reflected in the accompanying consolidated
financial statements, were approved at a shareholders’ meeting held on June 27, 2019:
Thousands of
U.S. dollars

Millions of yen

Year-end cash dividends (¥50.00=$0.45 per share)
Transfer to legal reserve¥¥

64 FURUKAWA CO., LTD.

1,977
198
2,175

$
$

17,8101,781
19,591

Annual Report 201965

Corporate Data and Stock Data
Directors and Auditors (As of June 27, 2019)

Corporate Data (As of March 31, 2019)
Company Name:

Furukawa Co., Ltd.

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

President and Representative Director

Naohisa Miyakawa

Managing Director

Kiyohito Mitsumura

Director

Masahiro Ogino

Director

Tatsuki Nazuka

Director

Hiroyuki Sakai

Director

Minoru Nakatogawa

Outside Independent Director

Tatsuya Tejima

Outside Independent Director

Yoichi Mukae

Outside Independent Director

Kazumi Nishino

80,000,000 shares

Audit & Supervisory Board Member

Minoru Iwata

Number of Shares Outstanding:

40,445,568 shares

Audit & Supervisory Board Member

Kazuo Inoue

Number of Shareholders:

20,874

Stock Transfer Agent:

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

Outside Independent Audit &Supervisory Board Member

Tetsuro Ueno

Outside Audit & Supervisory Board Member

Masayuki Yamashita

Tel:
Date of Foundation:

August 1875

Date of Establishment:

April 1918

Stock Exchange Listing:Tokyo

Securities Code Number:

5715

Employees:

2,757 (Consolidated)

Corporate Data (As of March 31, 2019)
Number of Shares Authorized:

Principal Shareholders

Executive Officers (As of June 27, 2019)

Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

Managing Executive Officer

Masahiro Ogino

Asahi Mutual Life Insurance Co.

2,373

6.00

Managing Executive Officer

Hiroyuki Abe

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

1,893

4.78

Senior Executive Officer

Tatsuki Nazuka

Seiwa Sogo Tatemono Co., Ltd.

1,503

3.80

Senior Executive Officer

Hiroyuki Sakai

The Yokohama Rubber Company, Limited

1,341

3.39

Japan Trustee Services Bank, Ltd. (trust account)

1,052

2.66

Senior Executive Officer

Minoru Nakatogawa

Furukawa Electric Co., Ltd.

877

2.21

Senior Executive Officer

Katsuhira Kawashita

Fuji Electric Co., Ltd.

862

2.18

Senior Executive Officer

Osamu Miyazaki

Sompo Japan Insurance Inc.

839

2.12

Senior Executive Officer

Atsushi Takano

Chuo Real Estate Co., Ltd.

687

1.73

Senior Executive Officer

Takeshi Miyajima

JUNIPER

664

1.68

Executive Officer

Kenichi Kurita

Executive Officer

Atsushi Otani

Executive Officer

Tatsuyuki Muramatsu

Executive Officer

Masanori Saito

Executive Officer

Hitoshi Iida

Executive Officer

Tsutomu Kaneko

Executive Officer

Masayuki Kunou

Notes: 1. The above excludes the Company’s holdings of treasury stock, totaling 904,102 shares.
2. The Company’s holdings of treasury stock, totaling 904,102 shares, are excluded		from shareholding ratio calculations.

Composition of Shareholders
Financial Instruments Firms(Securities Companies)

1.65%

Foreign Institutions

18.59%

Other Japanese Companies

24.95%

66 FURUKAWA CO., LTD.

Treasury stock

2.23%

Individuals andOthers25.43%
Financial
Institutions

27.15%

Corporate History
1875
1877
1900
1914
1918
1944

Began the operation of the
Ashio Copper Mine in Tochigi.

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

1951
1962

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

1989
1990

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

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

2005

2006
2007

Bought Osaka Smelter of Toa
Chemical Smelting Co., Ltd., andestablished it as Osaka Cementation and Refining. Entered into
the chemical business.

2008
At the Oyama Works, pumps
and mining machinery for copper mines were manufactured,
not only for internal use but
also to sell externally.

Built the Takasaki Works of theRock Drill Division in Gunma.

2009

Established a sales company ofrock drill products in Holland.

Established a joint company forthe manufacturing and distribution of UNIC cranes in China.
Spun off the Machinery business,
Metals business, and Electronic
Materials and Chemicals businessand shifted to a group management structure as the Furukawa
Company Group to enhance
management.

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

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

Completed the Furukawa /Outokumpu flash smelting plant
at Ashio Smelting and Refining.

Bought UNIC Corporation(manufacturer of truck-mounted
cranes).
The Japanese name changed
from Furukawa Kogyo Kabushiki Kaisha to Furukawa Kikai
Kinzoku Kabushiki Kaisha.
Bought an American breaker sales
and manufacturing company.

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

Formed a capital and businessalliance for the GaN semiconductor epi-wafer business with
POWDEC K.K.
Set up the Nitride Semiconductors Department as a GaN andrelated nitride semiconductorrelated research organization.

Acquired interest in Canadiancopper mine.

2011

Established a sales company ofrock drill products in India.

2012

Established a sales company ofrock drill products in Panama.

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

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

2014

The Group exited the paints business with the sale of all of its sharesin Tohpe Corporation.
Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.
Established a coil processing
company in the Philippines.

1997

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

Built the laboratory of the Nitride
Semiconductors Department inOyama.

2010

2013“UNIC” has become asynonym for truck-mounted
cranes in Japan.

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

Established a rock drills sales
company in China.

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

Completed research anddevelopment of high-purity(99.999%) metallic arsenic andcommenced with sales of it.

1987

2003

Manufactured the first rock drillin Japan.

Built the Oyama Works of theMachinery Division of the Ashio
Copper Mine in Tochigi.

1950

1998

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

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

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

Established a manufacturer of
UNIC products / components
in Thailand.

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

2018

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

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

Established sales company forrock drills and other products in
Malaysia.
Annual Report 201967

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

https://www.furukawakk.co.jp