Building Foundations for Renewed Growth

A n nu al R ep o r t 2 0 1 7Year ended March 31, 2017

About the Furukawa Company GroupThe key to the success of the Furukawa Company Group, which recently celebrated the 142th anniversaryof its founding, began with the development of the Ashio Copper Mine by founder Ichibei Furukawa.
At the time, the Company introduced world-leading mine development technologies that have become
the foundation for its technological expertise today. Since then, we have developed and advanced ourtechnologies, amassed through mine development, to build our two core business domains: the Machinery business and the Materials business. Through both of these businesses, we will continue providing
products that the world needs. At the same time, we will strive constantly to achieve the objectives of
our Vision for 2025, entitled “FURUKAWA Power & Passion 150,” as we approach our 150th anniversary
in fiscal 2026.

Ashio Copper Mine (around 1920)

Management Philosophy
The Furukawa Company Group has a wealth of mine development and other technologies that underpin its social foundation. By
advancing these technologies and always embracing a spirit of challenge, we will remain indispensable to society.

Action Guidelines
To demonstrate our Management Philosophy, we will practice our Philosophy of Innovation, Creativity, and Harmony. These embody
the three key words—Luck, Stolidity, and Perseverance*—that best represent the spirit of our founder.

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.
H a r m o n y : We will contribute to the development of a society that is in harmony with the environment.
* This means that while humans may place highest importance on “luck,” getting important things done requires “stolidity” and “perseverance.”

Vision for 2025: “FURUKAWA Power & Passion 150”
“Become a corporate group that leverages its reputation for category leadership and uniqueness to deliver growth”—Targeting consolidated annual operating income regularly in excess of ¥15 billion as we approach our 150th anniversary in fiscal 2025.—

Policies for Achieving Vision for 2025
( 1) Increase the value of the Furukawa brand through “marketing-based management*”① Develop products and technologies that match market needs② Reinforce technological sales capabilities (proposals and solutions) reflecting customer needs③ Achieve category-leading positions by concentrating on niche products that have competitive advantages and using differentiation strategy④ Cultivate and create new markets and product categories; build a new business model(2) Continuously expand the Machinery business① Reinforce profit foundation in growing overseas markets centered on infrastructural and resource development② Strengthen and enhance stock business③ Maximize business opportunities by demonstrating comprehensive Group strengths and strengthening engineering capabilities(3) Strengthen and expand our human resource foundation① Build vibrant human resources and corporate culture for new Furukawa② Secure, utilize, and develop diverse human resources in Japan and overseas③ Strengthen priority on sales and marketing personnel(4) Actively promote investments to increase corporate value① Make proactive capital investments necessary for growth② Expand business through strategic M&As and alliances(5) Establish a robust corporate foundation① Increase corporate value by improving profitability and capital efficiency, targeting ROE of more than 10%② Establish strong financial base
③ Achieve balanced appropriations between investments for growth and return to shareholders* See Page 4.

Furukawa’s Technological Genealogy
Mining technologies
Transport / Mineral processing
technologies

Exploitation technologies

Drilling
technologies

Hydrauliccontrol
technologies

Slurrytransportation
technologies

Grinding
technologies

Smelting technologies

Exhaust gas
treatment
technologies

Flash smelting
technologies

Sulfuric acidproduction
technologies

Electric
technologies

Rock Drill Machinery

UNIC Machinery

Industrial Machinery

MetalsChemicalsElectronics

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

UNIC cranes,
mini crawler cranes,
UNIC carriers,
UNICPAL

Pumps,
environmental machinery,crushers,
bridge structures,
castings

Electrolytic copper,
gold,
silver,sulfuric acid

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

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

Machinery Business

Materials Business

Financial Highlights For the years ended March 31
Millions of yen

2017/3

2016/3

2015/3

2014/3

2013/3For the year:
149,830

161,799

172,544

163,026

165,540

Operating income

6,546

7,989

8,925

6,886

3,363

Profit before income taxes

6,711

6,631

6,160

7,092

5,433

Profit attributable to owners of parent

4,254

5,056

9,793

3,976

2,976

Net sales

Capital expenditures

5,424

2,869

2,557

11,4302,926

Depreciation and amortization

3,138

3,191

3,223

2,828

3,015

Research and development expenses

2,464

2,680

2,227

2,539

2,559

Total assets

208,034

195,650

207,317

199,408

186,076

Net assets

79,584

68,26270,581

56,31351,507

10.53

12.51

9.84

7.37

At year-end:

Per share amounts:
Basic earnings

Yen

24.23

5.00

5.00

5.00

3.00

2.00

192.20164.48170.22135.34123.99Return on equity (ROE) (%)

5.9

7.5

15.9

7.6

6.2

Equity ratio (%)

37.3

34.0

33.2

27.4

26.9

Cash dividends
Net assets

1

To Our Stakeholders

President and Representative Director

Naohisa Miyakawa

Business Conditions and Performancethe sale of mines. Among other expenses, there was a ¥125 million loss on sales and retirement of noncurrent assets, a ¥102 mil-In fiscal 2017, ended March 31, 2017, the Japanese economy

lion impairment loss, and a ¥276 million provision for deposition­continued recovering moderately, but improvements in some areas

field restoration (to cover costs for strengthening the earthquake

were delayed. Although domestic corporate earnings are graduallyresistance of deposition fields, the final disposal sites for mining

recovering, the economic situation overseas requires a cautious

residues and the like). Accordingly, profit before income taxes rose

approach in the wake of the United Kingdom’s decision to exit the

1.2%, to ¥6,711 million. Profit attributable to owners of parent

European Union and the birth of the Trump administration/­election

declined 15.9%, to ¥4,254 million.

of President Trump in the United States. Under these circumstances, the Furukawa Company Group sought to provide products
and services deemed to be valuable by the market, adopting the

Medium-Term Business Plancustomer’s perspective in an effort to increase the value of the

In the approach to its 150th anniversary in fiscal 2026, the­Furukawa brand through “marketing-based management.”

Furukawa Company Group formulated its Vision for 2025. Under

For the year, consolidated net sales amounted to ¥149,830

the vision, entitled “FURUKAWA Power & Passion 150,” we will

million, down 7.4% from the previous year. This was due to reve-strive to “Become a corporate group that leverages its reputationnue declines in the three Machinery-related segments—Industrial

for category leadership and uniqueness to deliver growth.” To real-

Machinery, Rock Drill Machinery, and UNIC Machinery—as well asize this vision, we have split the next nine-year period into three

the Metals segment. Operating income declined 18.1%, to ¥6,546

phases. For phase 1, covering the three-year period from April

million, due mainly to decreased earnings in the Industrial Machin-2017 to March 2020, we have taken the first step with the formu-

ery and Rock Drill Machinery segments.

lation of a medium-term business plan with the slogan, “Building

Among other income, we posted a ¥1,756 million gain on dividend income from Nusa Tenggara Mining Corporation following
2

foundations for renewed growth.”
While including specific targets, such as consolidated operating

Net Sales

income in the ¥8.5 billion range and ROE in the 6–7% range, the(Billions of yen)ultimate objective of the plan is to realize the “ideal image of theGroup when it celebrates its 150th anniversary” further into the165.5 163.0 172.5 161.8 149.8

future. To this end, we will strive over the next three years toincrease the value of the F­ urukawa brand through the full-scale
entrenchment of “
­ marketing-based management.”
Positioning the Machinery business as a core domain, we willbuild foundations for renewed growth according to the basic strategies of each business segment. This will entail not only effectively
addressing domestic demand related to construction in the future
but also creating new business models, advancing our overseas'13/3 '14/3 '15/3 '16/3 '17/3

operations, and other initiatives. In addition, we will strengthen
and upgrade our personnel base, make proactive investments toenhance corporate value, reinforce our management foundation,
create a product development promotion system, and otherwise
establish frameworks for effectively implementing the medium-termbusiness plan.
Operating Income(Billions of yen)

Dividend Policy

3.4

6.9

8.9

8.0

6.5

Furukawa places great importance on improving returns of profits
to all shareholders while retaining earnings required to finance capital expenditures and research and development expenses necessary
to bolster earnings. Our basic policy is to appropriate profits after
comprehensive consideration of future business development andvarious other factors.
In fiscal 2017, the Company declared a year-end cash dividend of¥5.00 per share. In fiscal 2018, we plan to pay a year-end dividendof ¥50.00* per share, with no interim dividend scheduled.

'13/3 '14/3 '15/3 '16/3 '17/3

We look forward to the understanding and support of all stakeholders as we tackle the challenges of the future.

August 2017
Profit Attributable to
Owners of Parent(Billions of yen)
3.0

4.0

9.8

5.1

4.3

Naohisa Miyakawa
President and Representative Director'13/3 '14/3 '15/3 '16/3 '17/3*	Effective on October 1, 2017, the Company will implement a 1-for-10 reverse stock
split. Accordingly, on June 29, 2017 the Company increased its planned year-end
dividend for the fiscal year ending March 2018 by 10 times, from ¥5.00 to ¥50.00
per share.

3

Achieving Vision for 2025
Positioning and Strategies of Medium-Term Business Plan 2019
In May 2017, the Furukawa Company Group announced its “Medium-Term Business Plan 2019—Building Foundations for
Renewed Growth.” The new plan is positioned as Phase 1 of the Group’s Vision for 2025, “FURUKAWA Power & Passion
150,” and the its steady implementation will represent the first step in realizing the vision.

“Marketing-based management*”“Marketing-based management” means
incorporating marketing into the core ofmanagement to provide products and services
recognized as valuable in changing markets,
as well as to identify and resolve issues andproblems faced by customers, with the aimsof deepening ties with customers, achieving
sustained growth, and increasing corporate
value.

1. Vision for 2025
In 2015, the Group took the opportunity of its 140th anniversary to formulate its Vision for2025, entitled “FURUKAWA Power & Passion 150.” This vision clarifies the ideal image ofthe Group in fiscal 2026, when it celebrates its 150th anniversary. Seeking category leadership and uniqueness in each of our specialist fields, we will strive to achieve sustainablegrowth by addressing customers’ needs with highly distinctive technologies that are unrivaled in the industry. Under Vision for 2025, we have articulated five policies, including acommitment to “marketing-based management,” as we target consolidated annual
operating income regularly in excess of ¥15 billion.

Vision for 2025: FURUKAWA Power & Passion 150“Become a corporate group that leverages its reputation for category leadership and uniqueness to deliver growth”
Policies for achieving Vision for 2025

Increase the value of the Furukawa brand through “marketing-based management”

Continuously expand
the Machinery business

Strengthen and expand ourhuman resource foundation

Actively promote investments
to increase corporate value

Establish a robust
corporate foundation

Towards 2025 (150th anniversary of foundation)
Consolidated annual operating income regularly in excess of ¥15 billion

2. Positioning of Medium-Term Business Plan 2019
To realize Vision for 2025, we have divided the next nine-year period into three phases. The
new medium-term business plan represents Phase 1, covering the three-year period from
April 2017 to March 2020, which is positioned as a period of “Building foundations forrenewed growth.” We regard it as a period of preparation, during which we will lay solid
foundations for expediting growth in Phase 2 and Phase 3.
In the new medium-term business plan, we clarify our business strategies, operating
cash flow allocation policy, and capital strategies, as well as our efforts to improve returnon equity (ROE). Through constructive dialogue in this way with stakeholders, including
shareholders and other investors, we will work hard to deliver sustainable growth andimproved corporate value, in addition to further enhancing corporate governance.

4

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

Consolidated annual operating income
regularly in excess of¥15 billion

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

¥8.5 billion range

̶Regularly in excess of¥15 billion

6–7% range

̶More than 10%

Operating
Performance income
indicators
ROE

3. Performance Indicators and Business Policies

Operating income scenario: FY2020(Millions of yen)In the fiscal year ending March 2020, the final year of the medium-term business plan, weare targeting consolidated operating income of ¥8.5 billion range and ROE of 6–7% range.
In order to generate consolidated annual operating income regularly in excess of ¥15
billion—a key performance indicator of Vision for 2025—it is crucially important that we
strive to increase the value of the Furukawa brand by deeply entrenching “marketingbased management” throughout the Group. In addition, we must undertake Groupwide
mindset reforms with priority on profitability and efficiency, while developing internal
structures to facilitate such reforms.
Furthermore, we have adopted a policy of striving for sustained expansion of the­Machinery business, earmarked as a core
Operating income scenario: FY2020*
business domain. To this end, we will

Machinery business

6,250

Industrial Machinery

1,250

Rock Drill Machinery

1,600

UNIC Machinery

3,400

Materials business

1,400c­ oncentrate managerial resources—human,material, and financial—on the Machinery
business and step up efforts to strengthen
and expand our human resource foundation, actively promote investments toincrease corporate value, and establish arobust corporate foundation.

Others(40)

Subtotal

8,610

Adjustments

(110)

Total

8,500

Real estate business

12%

Materials business16%* Other businesses
excluded in calculation

Machinerybusiness

72%

Metals

700

Electronics

300

Chemicals

400

Real Estate

1,000

Assumptions¥110=US$1.00, ¥115=€1.00
LME copper price: US$6,000/t

4.Segment-Specific Strategies
Machinery BusinessWe envisage that the Machinery business, our core domain, will account for 72% ofconsolidated operating income in fiscal year ending March 2020. Domestic demand willremain firm in light of various projects, including the Linear Chuo Shinkansen Line, new
Shinkansen lines, the Building National Resilience Plan, regional rejuvenation initiatives,
and the 2020 Summer Olympics and Paralympics in Tokyo. In addition to steadily
addressing such demand, we will build a foundation for renewed growth based on thefundamental strategies of each business segment.
Industrial MachineryWe will increase our involvement in section plant construction projects and large-scale
projects and otherwise expand our contractor businesses with the aim of transitioning
from a standalone machinery manufacturer. To achieve this, we will strengthen ourengineering capabilities and enhance our business foundation in the domestic market.

Section plantPart of the processing stage of the overallplant.
Contractor businesses
Civil engineering and construction-related
businesses that handle construction,­operational management, and the like, bycontract agreements and other contracts.
Engineering capabilities
The ability to deploy experiences, technologies,
and knowledge derived from sales activities astools to deliver optimal proposals to customers
which are considered a total balance of factors,
including function, cost, usage environment,
and safety.
5Life cycle support (LCS)
Support to provide optimal management­services aimed at minimizing machinery holding
and operating costs as much as possible acrossthe total life cycle of machinery (selection anddelivery, operation and maintenance, largescale repair and regeneration, disposal andreplacement).
Stock businessBusiness targeting the after-sales market(including sales of maintenance parts, provisionof maintenance services, trade-in and salesof used products) and the rental market, as
opposed to the “flow business” (product sales),which is easily impacted by economic factors.
We will continuously expand and reinforce ourstock business, earmarked as one of “Foundations for Renewed Growth,” because it
generates relatively stable income.
Blast hole drill
A machine that drills holes for blasting­purposes and is used for relatively largescale blasting associated with mines, crushedstones, civil engineering work, and the like.
Used within the Group, it is a generic term thatcovers crawler drills, down-the-hole drills, androtary drills used on the surface.

Rock Drill Machinery
By strengthening our life cycle support (LCS) capabilities, we will increase income fromboth our flow business and stock business and reinforce the income foundation for our
drill product lineup (blast hole drills and drill jumbos). To achieve this, we will upgrade ourdomestic service support system and establish overseas sales channels.
UNIC Machinery
Seeking to ensure stable income from domestic sales and expand income from our stockbusiness and overseas sales, we will distinguish our UNIC crane lineup by promoting
advanced functions and higher added value, in order to strengthen our competitiveness. At
the same time, we will promote our second-hand business, reestablish our overseas sales
network, and enhance our sales capabilities.
Materials BusinessIn the Metals segment, we will work to establish an optimal production and sales system with
an emphasis on profitability, in order to improve our earnings foundation. In the Electronics
segment, we will shift our focus from mature products to strategic products in an effort torestore Electronics as a strong business segment. In the Chemicals segment, we will work to
expand income from existing products and swiftly commercialize and foster newly developed
products with the aims of transforming existing businesses and securing steady income fromnew businesses.
Real Estate
We will strive to secure stable income from the Muromachi Furukawa Mitsui Building(­commercial name: COREDO Muromachi 2) and effectively utilize income from other properties
owned by the Group with the aim of reinforcing our income foundation.

5. ROE Improvement, Operating Cash Flow Allocation andCapital Strategies

ROE improvement
A key priority of the new medium-term business plan is to step up and entrench efforts
to improve ROE. Although ROE is broken down into three elements—return on sales(profitability), total asset turnover (efficiency), and financial leverage—the Group will placeparticularly high priority on enhancing profitability and efficiency.

ROE Improvement Initiatives
ROE
FY2020:
6–7% range

Strengthen andextend initiatives=

Profitability
Return on sales

X

Efficiency
Total asset turnover

X

Leverage
Financial leverage

Profitability: Improve

Efficiency: Improve

Leverage: Reduce・ Optimally allocate Group management
resources and optimize business portfolio

・ Strength examination of investments
and prioritize each investment

・ Reduce interest-bearing debt

・ Reduce costs through productivity
improvements

・ Expand cash management service(CMS) coverage

・ Reduce external procurement costs

・ Improve efficiency of working capital(lower inventories, tighten control ofaccounts receivable)

・ Make highly functional, high-value-added,
distinctive products
・ Expand and upgrade stock businesses

・ Sell and/or effectively utilize idle assets
・ Reassess strategic shareholdings

Operating cash flow allocation and capital strategies
We will actively promote investments to increase corporate value while establishing asolid financial base. At the same time, we will allocate operating cash flows with due
consideration to shareholder returns.

6Capital investments
Over the period of the medium-term business plan, we plan to make cumulative capital
investments of around ¥16 billion, of which ¥12 billion will be allocated to our core
Machinery business, with the aim of strengthening Groupwide profitability and efficiency.

Capital Investment Plan to Strengthen Manufacturing Capabilities
Capital investment(3-year cumulative senario)

Machinery business
Materials business
OthersTotal¥12 billion¥ 2 billion¥ 2 billion¥16 billion¥ 2 billion¥ 4 billion¥ 6 billion

Industrial Machinery: Maintain, renew, etc.
Rock Drill Machinery: Expand and reform layout of Yoshii Plant, etc.
UNIC Machinery: Reinforce “mother factory” function of Sakura Plant, etc.

Dividends
Our policy is to return profits to shareholders in the form of dividends appropriated fromretained earnings. Specific dividend amounts are based on consolidated profits/losses. With
the exception of special profit/loss circumstances, we endeavor in principle to pay annual
cash dividends of ¥50.00* per share with a consolidated payout ratio of 30% or higher. In
this way, we strive for stable, continuous shareholder returns.
Treasury stock purchase and cancellation
With respect to purchase and cancellation of treasury stock, our policy is to properly consider
all relevant factors, including share price movements, capital efficiency, and cash flows.

*	Effective on October 1, 2017, theCompany will implement a 1-for-10
reverse stock split. Accordingly, on June29, 2017 the Company increased its
planned year-end dividend for the fiscal
year ending March 2018 by 10 times,
from ¥5.00 to ¥50.00 per share.

Optimal Allocation Scenario of Operating Cash Flows
Capital investment(3-year cumulative scenario)¥16 billion

Capital investment focusing on Machinery business (core business)
Dividends

Operating cash flows(3-year cumulative
scenario)¥25 billion(3-year cumulative scenario)¥ 6 billion

Endeavor in principle to pay annual cash dividends of ¥50.00 per share with a consolidated
payout ratio of 30% or higher
In this way, we strive for stable, continuous shareholder returns
Interest-bearing debt reduction(3-year cumulative scenario)¥ 3 billion

Maintain/strengthen resistance to business performance declines associated with economic andmarket changes
Ensure fund procurement capability for strategic investments, such as M&As and alliances
Share buybacks/cancellation
Consider as appropriate based on stock price movements, capital efficiency, cash flows, etc.

6. Medium-Term Business Plan 2019: Milestone for Realizing Vision for 2025
We have positioned the new medium-term business plan as the most important milestone forr­ealizing Vision for 2025. It is also a key transformation period, during which we will shift ourm­ anagement focus to profitability and capital efficiency. In the Machinery business, which is broader
in scope than the Materials business, we have appointed a vice president in charge of promoting the
medium-term business plan in each of the three segments (Industrial Machinery, Rock Drill
Machinery, and UNIC Machinery), and we have set up an LCS Division in the Rock Drill Machinery
segment. In these and other ways, we will establish execution and responsibility frameworks toachieve the objectives of the medium-term business plan. To foster mindset and business reforms,
moreover, we have set up a “Business Process Reengineering Department,” which will spearhead
efforts to standardize and enhance administrative efficiency, increase productivity, and reconstruct
our business processes.
In our quest to achieve Vision for 2025, we will also consider M&As and alliances with peripheralbusiness companies that can complement and create continuity with our core Machinery business.
We will also look at companies that can help us create a completely different segment to serve as
the fourth pillar of the Machinery business.
Through these efforts, we will continue striving to give new life to the Group. Medium-TermBusiness Plan 2019 represents the important first step toward realizing Vision for 2025, and theGroup will harness all of its efforts to ensure the plan’s success.

7

Review of Operations

Machinery% of Net Sales

44.6%

Industrial Machinery
Going forward, we will strengthen our services related to pumps
and industrial machinery by expanding our stock business and improving our consulting capabilities. We will also strive to win orders
for steel structures and bridges. With respect to belt conveyor andbridge projects for the Tokyo Gaikan Expressway, for which wehave received orders, we will work extensively to ensure safety andcontrol costs in order to secure profits.

In fiscal 2017, the Industrial Machinery segment posted a year-onyear decline in sales, due mainly to the completion in September
2015 of a large-scale earth-moving project for relocating people
to higher ground in Rikuzentakata City, Iwate Prefecture. This was
despite increased sales related to a belt conveyor project for the
Tokyo Gaikan Expressway (outer ring road). During the period, we
took measures to address malfunctions with electrostatic precipitators, which negatively affected earnings. As a result, the segment
posted sales of ¥14,042 million, down 5.9% from the previous
fiscal year. Operating income fell 90.0%, to ¥104 million.
Net Sales

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

1.9

1.7

1.0

Japanese
Market Share

60%

0.1

12.9 18.5 16.7 14.9 14.0

0.8

'13/3 '14/3 '15/3 '16/3 '17/3'13/3 '14/3 '15/3 '16/3 '17/3

Sludge pump

Belt conveyor

BridgeRock Drill Machinery
In the Rock Drill Machinery segment, domestic sales remained
mostly unchanged from the previous year in the wake of a steadyrecovery in construction spending. Overseas, however, shipmentsof hydraulic breakers and hydraulic crawler drills were generally
weak, reflecting a significant decline in construction demand,
mainly in resource-rich countries, amid weak crude oil prices anduncertainty over the economic outlook. As a result, the Rock Drill
Machinery segment posted a 10.3% decline in sales, to ¥26,979
million, and a 59.5% fall in operating income, to ¥897 million.

Looking ahead, in Japan we will strengthen our lineup of hydraulic breakers and hydraulic crushers to meet healthy construction demand, and will make a full-scale launch of hydraulic crawler
drills compliant with exhaust gas regulations in order to boost
sales. With respect to new Shinkansen lines and the Linear Chuo
Shinkansen Line, which are progressing well, we will strengthen
our service structure to capture orders for tunnel drill jumbos.
Overseas, we will actively sell hydraulic crawler drills and hydraulicbreakers, mainly in Southeast Asia and India, where infrastructure■ Machinery Business: Priority Fields and Domestic Market Share

CONCRETE

Hydraulic crawler drills

TUNNE
PROJEC

Crushers
Hydraulic breakers

Crushes and cuts bedrock
into small pieces

Material for concreteand the like

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

8

We develo
openings
projects. W
excavated
wastewatcome to th

in whichs, used at

Global Market

demand is strong, as well as the United States, where investments
in aging infrastructure are anticipated. We will also continue­promoting increased sales of drill jumbos for tunnel and mining
projects.

Net Sales

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

23.3 26.8 30.9 30.1 27.0

'13/3 '14/3 '15/3 '16/3 '17/3

(0.1)

0.3

1.2

2.2

0.9

'13/3 '14/3 '15/3 '16/3 '17/3

Share

30%
Japanese
Market Share

65%
Japanese
Market ShareJapanese
Market Share

Hydraulic crawler drill

80%

40%

Tunnel drill jumbo

Hydraulic breaker

UNIC Machinery
In fiscal 2017, we reported a decrease in shipments of UNIC cranes
amid weakness in domestic registrations of trucks on which suchcranes are mounted, as well as a fall in demand for large-scalerentals. As a result, sales in the UNIC Machinery segment declined
5.3% year on year, to ¥25,783 million, and operating income wasdown 1.8%, to ¥2,579 million.
Going forward, we will work to increase sales of UNIC cranes bybolstering sales of fully remodeled machines, as well as mini crawler cranes, ocean cranes, and forestry cranes. For overseas markets,
Net Sales

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

20.7 25.7 28.4 27.2 25.8

2.2

3.1

3.6

2.6

we will work to capture steady unit sales, mainly in Europe, North
America, and Southeast Asia. We will also promote our threepronged global production system, with operations in Japan,
Thailand, and China. Under this system, we will continue making
proactive capital investments in the Sakura Plant, which will fulfill a“mother factory” role, while promoting production with emphasison optimal costs and high quality according to demands in various
world regions.
Japanese
Market ShareJapanese
Market Share

50%

50%

2.6
UNIC carrier

UNIC craneJapanese
Market Share40%'13/3 '14/3 '15/3 '16/3 '17/3

TUNNELPROJECTS

Mini crawler crane'13/3 '14/3 '15/3 '16/3 '17/3

CIVIL
ENGINEERINGANDCONSTRUCTION
WORKSITES

Tunnel drill jumbos

Hydrauliccrushers

Mini crawler cranes

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 mountain tunnel
projects. We also develop and make shield pumps, which use water to pump
excavated earth and sand in underground tunnel projects. Here, our drilling andwastewater treatment technologies, amassed through mine development,
come to the fore.

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

9Materials% of Net Sales

52.7%

MetalsAfter starting the fiscal year at US$4,880/ton in April 2016,
the price of electrolytic copper decreased following the United
Kingdom’s decision to exit the European Union in June, but
increased in November as a result of the U.S. presidential election.
After January 2017, it recovered to the US$6,000/ton range, before
finishing the fiscal year at US$5,849/ton on March 31, 2017.
During the year, demand for copper for use in automobiles andsemiconductor devices grew steadily, but demand for ­electrolytic
copper for mainstay construction use was sluggish.
In fiscal 2017, the Company’s sales of electrolytic copper in volume terms declined 3,033 tons, to 91,294 tons. Overall sales in the
Metals segment decreased 8.5%, to ¥67,854 million, and operating income jumped 50.5%, to ¥1,738 million.

Net Sales

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

1.5

1.5

1.2

Purchasing conditions are expected to weaken gradually due
to a tightening supply–demand situation for copper concentrates,
while generating income from smelting will also be difficult. Nevertheless, we will continue establishing optimal production andsales systems with emphasis on profitability in order to improve ourearnings structure.

Electrolytic copper

Hibi Kyodo Smelting Co., Ltd.

Gibraltar Copper Mine in Canada

Onahama Smelting and Refining Co., Ltd.

1.7

77.9 78.7 81.5 74.2 67.9

0.3

'13/3 '14/3 '15/3 '16/3 '17/3'13/3 '14/3 '15/3 '16/3 '17/3● Copper Prices and Foreign Exchange Rates
2013/3

2014/3

2015/3

2016/32017/3

LME copper price (average; US$/ton)

7,855

7,104

6,554

5,215

5,154

JPY rate per US$ (average for fiscal year)

83.10

100.24109.93120.13108.42

2013/3

2014/3

2015/3

2016/32017/3Copper production volume (tons)

90,38787,76790,44786,466

84,062

Copper sales volume (tons)

96,78994,966

96,67594,327

91,294● Copper Production and Sales Volume** Furukawa Metals & Resources Co., Ltd.

10

Electronics
In the fiscal year under review, sales of high-purity metallic arsenic,a mainstay product in this segment, continued to struggle due toharmful rumors stemming from the Fukushima nuclear power plant
accident. However, we enjoyed increased sales of scintillator crystal
products and optical components, as well as improved profitabilityof coil products. As a result, the Electronics segment posted a 6.2%
increase in sales, to ¥5,817 million, and operating income of ¥18
million, compared with an operating loss of ¥368 million in theprevious fiscal year.
Going forward, our aim is capture steady income from mature
products, notably high-purity metallic arsenic and scintillator crystals, despite their ongoing challenges. We will also reassess our
production base for coil, a strategic product, to ensure production
stability and quality improvement.

5.0

Net Sales

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

5.4

5.7

5.5

5.8

(0.3) (0.1)

In addition, we will aim to enhance our earnings structure
by reinforcing the product appeal of our aluminum nitride and­optical components.

Global Market
Share

50%
Japanese
Market Share

70%

0.0

0.1 (0.4)

Core coils used in automobile
electronic control devices'13/3 '14/3 '15/3 '16/3 '17/3

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

'13/3 '14/3 '15/3 '16/3 '17/3

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

Chemicals
In fiscal 2017, we reported a year-on-year decrease in sales ofcuprous oxide due to a major decrease in demand for its use inmarine antifouling paint, a mainstay application. As a result, sales
in the Chemicals segment declined 11.3%, to ¥5,298 million, andoperating income fell 41.6%, to ¥115 million.
Looking ahead, we will do our utmost to maintain equipment
and operational stability in order to improve profitability. We will
also foster this business into a new earnings foundation by upgrading our lineup of copper-related products.

5.1

Net Sales

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

6.1

6.0

6.0

5.3

'13/3 '14/3 '15/3 '16/3 '17/3

0.3

0.3

0.3

0.2

Japanese (Production)
Market Share45%

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

0.1'13/3 '14/3 '15/3 '16/3 '17/3

Cupric oxide used for copper plating

Sulfuric acid production plant11

Real Estate
and Others% of Net Sales

2.7%

Real Estate and Others
In the Real Estate category, fiscal 2017 saw the smooth operationof our rental business associated with the Muromachi Furukawa
Mitsui Building (commercial name: COREDO Muromachi 2). Accordingly, category sales grew 1.0% year on year, to ¥3,074 million, and operating income edged down 0.9%, to ¥1,266 million.
Total sales in the Real Estate and Others segment, which also
includes the transport business, rose 3.4%, to ¥4,057 million, andoperating income declined 5.4%, to ¥1,139 million.

1.8

Net Sales

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

1.8

3.3

3.9

4.1

'13/3 '14/3 '15/3 '16/3 '17/3

0.2 (0.1)

0.6

1.2

1.1

'13/3 '14/3 '15/3 '16/3 '17/3

Full-scale mass production of coil products started
In the Electronics segment, we began full-scale mass production of automotive
coils, which are growing in demand due to the proliferation of electronic controls
in automobiles. Coil products are used in large numbers in electric vehicle battery
chargers, electric power steering, engine control units, and the like, with sales volumecontinuing to increase. We recently relocated part of the processing function, previously
outsourced to China, to a mass production facility in the Philippines, allowing further
increases in production volume and cost improvements.

Coil products

Philippines’ Plant

Joint development of aluminum hot chamber die casting machinewith superior resistance to molten aluminum damage
During the year, we developed an aluminum casting machine, called “Aluminum Hot
Chamber Die Casting Machine” (provisional name), in collaboration with Hishinuma
Machinery Co., Ltd. The machine features “Tokenite,” a special steel that suppresses
elution of iron into molten aluminum. Because Tokenite is highly resistant to ironerosion caused by aluminum molten metal, it increases the lifetime of consumableparts, making it possible to develop new methods for aluminum casting. It also enables
increases in purity of aluminum cast parts, and is expected to facilitate advances inthinning and strengthening of aluminum die cast parts for automobiles.

Aluminum hot chamber die castingmachine developed jointly with
­Hishinuma Machinery Co., Ltd.

Full model change for medium-sized truck-mounted cranes(UNIC Cranes)
In November 2016, we started selling the URG 370 Series of fully remodeled mediumsized truck-mounted cranes (UNIC cranes). In this full model change, basic performancehas been upgraded with the addition of features included as standard on all models,
namely a “digital purity load meter,” which prevents breakage and overturn of cranes
due to overload, and two functions that enhance safety: an “automatic winding stop
device” and a “boom-outrigger warning alarm device.” In terms of environmental
performance, we further enhanced the U-Can ECO Series, which received the industry’s
first energy-saving grand prize, to further increase energy efficiency and environmental
protection.
12

Radio remotecontrol

UNIC crane, “G-FORCE”

Corporate Social Responsibility
In addition to business activities developed through full-scale manufacturing and systems built to date, the Furukawa
Company Group engages in a variety of other activities, including environmental protection, social contribution, and humanresource development. All of these activities conform to our Management Philosophy, Action Guidelines, Corporate Conduct
Charter, and Directors’ and Employees’ Code of Behavior. We will continue fulfilling our corporate social responsibility (CSR)
while reinforcing our governance and compliance systems.

The Furukawa Company Group’s Management Philosophy is embodied in its CSR activities.
Since commencing operations in the copper mining businessin1875, we have sought relentlessly to transform ourselves througheverlasting awareness reforms oriented toward the future. At thesame time, we have earned people’s trust by constantly addressing
the needs of the times and acquiring powerful product manufacturing capabilities. In the process, we have developed multiple businesses and made a significant contribution to Japanese i­ndustry.
Through compliance, corporate governance, risk management,
and other activities, we strive to raise operational transparency andfurther strengthen our manufacturing capabilities for the future.
We will also help create a sustainable, environmentally friendly society while deepening communication with our various s­ takeholders.
The Furukawa Company Group has formulated Action Guidelines, the Corporate Conduct Charter, and the Directors’ andEmployees’ Code of Behavior. Every effort is made to ensure that
all members of the Group are fully aware of and practice theprinciples contained in each. We have also formed a CSR Promotion Meeting to powerfully promote CSR initiatives. To clarify the
purpose of our activities, we adopt a proactive CSR approach thatinvolves setting core priorities for initiatives to be undertaken.

■ CSR Overview■ Responsibility to Stakeholders

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

Stakeholder
Globalenvironment

Customers

Realizing asustainable society

Customers

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

Business
partners

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

Complianceresponsibility
Localcommunities

Economic responsibility

Business
partners

Shareholders We shall work to maximize corporate value throughcommunications focusing on timely, appropriate informaand otherinvestors
tion disclosure and IR activities.
Employees

1

Employees

2

3
Shareholders
andother investors

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

Responsibility

We shall create safe, healthy, motivating workplaces inwhich our diversified human resources can excel while
adopting appropriate evaluation standards and fair
incentives.

We shall build and maintain favorable relationships ofLocal
communities trust by pursuing social contribution activities aimed atharmonious coexistence with local communities.
We shall protect biodiversity by developing environmenGlobal
environment tally friendly technologies and products while minimizing
the environmental impact of our activities through savingsof energy and resources and reduction of waste.

■ CSR Promotion System
Guidance/instruction
Reporting1

Committee/department

Guidance/instruction

Environmental Management Committee
Product Safety Committee
Human Resources & General Affairs Department

CSR Promotion
Department
1. President and Representative Director
2. CSR Promotion Meeting

Purchasing Department

Implementation bodyGroup companies/departments

Risk Management Committee
Compliance Committee

2

Interaction

Reporting

P Plan: Formulate the plan
Reports ateach PDCA
stage

D Do: Execute the plan
C Check: Check the outcome
A Action: Take countermeasures as necessary13Environmental Protection and Social Contribution Activities
The protection of the environment is one of the most important management issues at the Furukawa Company Group. Our
fundamental policy is that each employee should strive to perform all corporate activities in harmony with the environment, consider
the improvement of the environment, and contribute to the development of a sustainable society.
Biodiversity is disappearing at an alarming rate on a global scale due to the destruction of ecosystems and extinction of species
stemming from the socioeconomic activities of humans. Aware of the importance of protecting biodiversity, the Group formulated a
set of “Biodiversity Action Guidelines.”
We recognize the key role we play in giving back to the community as a good corporate citizen.
Environmental Management
Environmental Management System
Important items related to environmental protection are put forward and discussed by the Central Committee for Environmental
Management, in which top personnel from each production baseparticipate.
Furthermore, the Environment and Safety Promotion Committee
meets every year, bringing together the people who directly guideand manage environmental and safety initiatives in each Group
company. At these meetings, the Committee aims to convey andensure the enforcement of decisions made by the Environmental
Management Committee, help improve the competency of environmental protection supervisors at each Group company, prevent
accidents and disasters by sharing information, and verify revisions
to environment-related regulations.
Environment and Safety Audits
The Furukawa Company Group conducts regular annual “Environment and Safety Audits.” The aim of such audits is to emphasize“preventative measures” rather than “correctional measures.” In
addition to regular site audits, in fiscal 2017 we conducted audits
to confirm compliance status related to legally required inspectionsof important machinery and equipment operating in our factories.
Our aim here was to identify, acknowledge, and eliminate weaknesses in the business strategies and processes undertaken by eachGroup company in our quest to realize Vision for 2025, as well as
to help formulate strategies to create winning opportunities andavoid the worst risks that stem from our weaknesses.
In the event of a major disaster or ongoing disasters, we undertake proper discussion with the onsite manager to determine thecause, then formulate measures to prevent a recurrence. In theseand other ways, we work continuously to ensure safety in theworkplace.
Biodiversity Action Guidelines
The Furukawa Company Group places importance on biodiversity
and in September 2012 formulated its Biodiversity Action Guidelines, a set of specific guidelines aimed
at contributing to sustainable social
development as outlined in its Basic
Environmental Management Principle.
At present, we are working to foster
an understanding of the importance of
biodiversity among all employees andto grasp how biodiversity is impacted by Japanese serow (Ashio Town,
the Group’s ongoing business activities. Nikko City)
Environmental Protection Activities
The Furukawa Company Group’s energy-saving activities center onachieving medium-term targets for energy and resource consumption set every five years. We are currently pursuing activities basedon our third medium-term reduction targets (fiscal 2014–2018) asshown to the right.

14

Third Medium-Term Reduction Targets
Category

Fiscal 2018 target*2

CO2 emissions*1

3%

Water

2%

Waste discharge

5%*1 Forms of electricity used: Gasoline, kerosene, diesel oil, heavy oil, LPG, city gas,and electricity*2 Reduction targets for fiscal 2018, with fiscal 2013 as base year
● Highest-Level Environmental Rating Received from DBJ for
Third Consecutive YearThe Development Bank of Japan Inc. (DBJ) assigns DBJ Environmental Ratings to companies receiving financing, and the Furukawa
Company Group obtained DBJ’s highest-level environmental ratingon November 30, 2016. We earned this rating in recognition of our“especially advanced efforts in consideration of the environment,”
not only for environmental activities but
also for our long-term management vision,­“FURUKAWA Power & Passion 150,” in which
we have identified eight key issues amongbroad-ranging social problems, as well as aspirational CSR initiatives undertaken throughthe PDCA cycle by committees addressing various issues. It was the third consecutive year
for the Group to receive the top rating.

Social Contribution Activities
The Furukawa Company Group seeks to live in harmony with local
communities through stewardship and maintenance of forests
owned by Furukawa and involvement in afforestation programs.
We also participate in factory neighborhood cleanup activities andpreservation of Nikko-Suginamiki (“Cedar Avenue of Nikko”), as
well as accept internships and host factory visits. Other initiatives
include fund-raising activities, arranging blood-donor drives, sponsorship of community events, helping preserve biodiversity, holding
original environmental activities, and loaning our land for free tolocal environmental associations.
● Eighth Ashio Cherry Tree-Planting Drive
As part of an independent forestation initiative, the Furukawa
Company Group formed the Ashio Cherry Blossom Planting
Group with the aim of planting 1,000 cherry blossom seedlingson land owned by Furukawa in the Ashio area, and held its firsttree-planting ceremony in March 2009. The tree-planting activity has been held annually since then, and in March 2017 manyGroup employees and their families took part in the Eighth Ashio
Cherry Tree-Planting Drive. Cherry blossoms planted at the second
tree-planting ceremony were in full bloom, raising expectations
among participants.

Corporate GovernanceThe basic corporate governance policies of the Furukawa Company Group are to raise management transparency, continue corporate
structural innovations to build an efficient management system, generate stable income to increase corporate value, and contributeto the interests of shareholders and other stakeholders.
Under these basic policies, each company in the Group will pursue flexible management based on clear asset management andprofit/loss responsibilities while maintaining the Group as a united entity. Our aim is to maximize the corporate value of the entire
Group by offering products and services that satisfy customers.
System of Corporate Governance
The Board of Directors oversees the execution of the Furukawa Company Group’s operations and in principle meets once every month,with additional meetings held as required. It has six full‐time members
and three outside directors.
To clearly separate management oversight functions from executive functions, accelerate decision-making, and clarify responsibilities,
Furukawa has adopted an executive officer system. Executive officers,
who are responsible for execution of business according to businessplans decided at meetings of the Board of Directors’, give progress
reports to the Board of Directors and the Management Committee. At
present, we have 16 executive officers, three of whom concurrently
hold positions as directors.
The Management Council sets the Furukawa Company Group’s
fundamental management policies and strategies and makes decisions
on important matters. There is also a Management Committee, whichmeets monthly to discuss the execution of business operations of
Furukawa and its core companies, and provides consideration anddirection. Decisions made by the Management Council on important
issues with large-scale financial amounts or other important management issues must be discussed and approved by a resolution of theBoard of Directors. Furthermore, important matters that have been
determined by individual Group companies are discussed and reviewed
by the Board of Directors and other relevant bodies.
Furukawa uses a company auditor, with an Audit & Supervisory Board composed of two full-time members and two outside
members. Pursuant to an audit policy formulated by the Audit &Supervisory Board, members attend meetings of the Board of Directors, the Management Council, the Management Committee, andother important management meetings. In addition, they receive
business reports from directors and others, audit business sites andsubsidiaries, and monitor the performance of duties carried out by
directors and others. The audit function is further reinforced by theInternal Audit Department, the organization in charge of internal­auditing. The Internal Audit Department is composed of five members
who engage in auditing of Group-wide activity management and theexecution of business operations.
Audit & Supervisory Board members, Accounting Auditors, and The
Internal Audit Department exchange information from time to timeand interact with each other in an effort to reinforce Group-wide­governance.
Compliance and System of Risk Management
The Furukawa Company Group has formulated a Corporate Conduct
Charter and the Directors’ and Employees’ Code of Behavior. Every effort is made to ensure that all executives and employees of the Groupare fully aware of and practice the principles contained in each. Recognizing effective risk management as an important aspect of its businessactivities, Furukawa identifies and assesses potential risk and formulates preventive and response measures, as well as remedial initiatives.
We also established the Compliance Committee and the Risk
Management Committee to comprehensively study ways to improve
the Group’s compliance and risk management, including formulationof basic policies and establishment of relevant frameworks.

■ Corporate Governance and Internal Control Systems

As of June 29, 2017

Shareholders' Meeting
Elect/recalls

Elect/recalls
Reports

Accounting Auditors

Exchanges opinions/information

AuditsBoard of Directors

Reports

9 members(6 full-time, 3 outside)

Reports

Representative Director
Reports

Directs

Oversees

Management
Committee
Reports

Audit & Supervisory Board
4 members(2 full-time, 2 outside)

Reports

Oversees
Reports

Elect/recalls

Reports

Management
CouncilAuditsDirects

Executive Officers(16 members)

AuditsInternal Control DivisionInternal Audit
Department

AuditsCSR Promotion Meeting

Business execution

Accounting Dept.,
othersAuditsAuditsReports

All Divisions and Group Companies
15

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

2017/3For the year:
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Profit (Loss) before income taxes
Profit (Loss) attributable to owners of parent¥ 149,830
126,207
23,623
17,077
6,546
6,711
4,254

2016/3

2015/3

2014/3

2013/3

2012/3¥ 161,799 ¥ 172,544 ¥ 163,026 ¥ 165,540 ¥ 157,566
136,447
146,657
139,777
144,225
138,097
25,352
25,887
23,24921,315
19,46917,363
16,962
16,363
17,952
17,314
7,989
8,925
6,886
3,363
2,155
6,631
6,160
7,092
5,433
(2,663)
5,056
9,793
3,976
2,976
(1,659)Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

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

10,241(10,892)
3,318

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

4,978(3,153)(3,782)

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 (loss)
Cash dividends
Net assets
Profitability:
Cost of sales margin (%)
Gross margin (%)
SG&A expense margin (%)
Operating margin (%)
Return on sales (%)
Efficiency and soundness:
Return on equity (ROE) (%) (Note 1)
Return on assets (ROA) (%) (Note 2)
Debt-to-equity (D/E) ratio (Times) (Note 3)
Equity ratio (%) (Note 4)
Investment indicators:
Dividend payout ratio (%) (Note 5)
Dividends on equity (DOE) ratio (%) (Note 6)
Price book value ratio (PBR) (Times) (Note 7)
Stock price at fiscal year-end (Yen)

5,424
3,138
2,464

2,869
3,191
2,680

2,557
3,223
2,227

11,430
2,828
2,539

2,926
3,015
2,559

3,588
3,329
2,622

¥ 208,034
79,57959,79077,65879,58473,507¥ 195,650 ¥ 207,317 ¥ 199,408 ¥ 186,076 ¥ 193,971
76,31580,56476,83879,50881,49759,75063,87073,97674,43974,80766,45968,78354,694
50,11046,022
68,26270,581
56,31351,50747,66876,241
82,053
77,21980,63485,795¥¥

Yen

Notes: 1. Return on equity (ROE) = Profit (Loss) attributable to owners of parent /		 Average total equity × 100
2. Return on assets (ROA) = Profit (Loss) 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

16

10.53
5.00
192.2012.51 ¥ 24.23 ¥9.84 ¥
7.37 ¥(4.11)
5.00
5.00
3.00
2.00
0.00
164.48170.22135.34123.99113.88
%

84.2
15.8
11.4
4.4
2.8

84.3
15.7
10.7
4.9
3.1

85.0
15.0
9.8
5.2
5.7

85.7
14.3
10.0
4.2
2.4

87.1
12.9
10.8
2.0
1.8

87.6
12.4
11.0
1.4
(1.1)

5.9
2.1
0.9
37.3

7.5
2.5
1.1
34.0

15.9
4.8
1.2
33.2

7.6
2.1
1.4
27.4

6.2
1.6
1.6
26.9

(3.6)
(0.9)
1.9
23.7

47.5
2.7
1.1
205

40.0
2.9
1.0
166

20.6
3.2
1.2
212

30.5
2.2
1.4
186

27.2
1.6
0.9
109

—
—
0.7
80

5. Dividend payout ratio = Total cash dividends / Profit attributable to owners of parent × 100
6. Dividends on equity (DOE) ratio = Total cash dividends / Average net assets × 100
7. Price book value ratio (PBR) = Stock price (fiscal year-end) / Net assets per share

Financial Review■ Revenue and Expenses

In fiscal 2017, ended March 31, 2017, consolidated net sales totaled ¥149,830 million, down 7.4% compared with the previous fiscal year. The Industrial Machinery
segment posted a 5.9% decrease in sales, to ¥14,042 million, due mainly to thecompletion in September 2015 of a large-scale earth-moving project for relocating
people to higher ground in Rikuzentakata City. This was despite increased sales related to a belt conveyor project for the Tokyo Gaikan Expressway (outer ring road).
The Rock Drill Machinery segment reported a 10.3% decline in sales, to ¥26,979 million, due mainly to general weakness in overseas shipments of hydraulic breakers andhydraulic crawler drills, reflecting a significant decline in construction demand, mainly
in resource-rich countries, amid weak crude oil prices and uncertainty over the economic outlook. This was despite growth in overseas sales of tunnel drill jumbos. The
UNIC Machinery segment recorded a 5.3% decrease in sales, to ¥25,783 million, amid
weakness in domestic registrations of trucks on which UNIC cranes are mounted, as
well as a fall in demand for large-scale rentals. The Metals segment posted a 8.5%
decline in sales, to ¥67,854 million, due largely to the yen’s appreciation.
Cost of sales declined 7.5%, to ¥126,207 million, and the cost of sales margin
edged down 0.1 percentage point, to 84.2%.
Selling, general and administrative (SG&A) expenses declined 1.6%, to ¥17,077
million.
As a result, operating income fell 18.1% from the previous fiscal year, to ¥6,546
million. Main reasons for the decline were a 59.5% decrease in operating income in
the Rock Drill Machinery segment, to ¥897 million, and a 90.0% drop in operating
income in the Industrial Machinery segment, to ¥104 million. Accordingly, the operating margin was down 0.5 percentage point, to 4.4%.
Among other income, we posted a ¥1,756 million gain on dividend income from
Nusa Tenggara Mining Corporation following the sale of mines. Among other expenses, there was a ¥125 million loss on sales and retirement of noncurrent assets, a¥102 million impairment loss, and a ¥276 million provision for deposition field restoration (to cover costs for strengthening the earthquake resistance of deposition fields,
the final disposal sites for mining residues and the like). Accordingly, profit before­income taxes rose 1.2%, to ¥6,711 million. Income taxes (the sum of inhabitants’ tax,
enterprise tax, and corporate tax) totaled ¥2,297 million. As a result, Profit ­attributableto owners of parent declined 15.9%, to ¥4,254 million.
Return on equity (ROE) was down 1.6 percentage points, to 5.9%, and basic earnings per share declined from ¥12.51 to ¥10.53.
■ Financial Position

At March 31, 2017, total assets amounted to ¥208,034 million, down 6.3% from ayear earlier. The decline stemmed mainly from an increase in investment securities due
to rising prices of our shareholdings.
Despite a 3.6% decrease in interest-bearing liabilities (debt), to ¥73,507 million,
total liabilities edged up 0.8%, to ¥128,450 million. This was due mainly to an increase in payables—trade.
Net assets at fiscal year-end stood at ¥79,584 million, up 16.6% from a year earlier.
This was mainly due to an increase in unrealized holding gain on securities, net of income taxes. Consequently, total equity amounted to ¥77,658 million, and the equity
ratio rose 3.3 percentage points, to 37.3%. The debt-to-equity (D/E) ratio declined
from 1.1 to 0.9 times.

Net Sales(Billions of yen)

165.5 163.0 172.5 161.8 149.8'13/3 '14/3 '15/3 '16/3 '17/3

Operating Income(Billions of yen)

Operating Margin
(%)

3.4

6.9

8.9

5.2

4.2

6.5

8.0

4.9

4.4

2.0

'13/3 '14/3 '15/3 '16/3 '17/3
Operating Income
Operating Margin

Profit Attributable to
Owners of Parent(Billions of yen)

Return on Sales
(%)
3.0

4.0

9.8

5.1

4.3

5.7

1.8

2.4

3.1

2.8

'13/3 '14/3 '15/3 '16/3 '17/3
Profit Attributable to
Owners of Parent
Return on Sales17

■ R&D and Capital Expenditures

The Furukawa Company Group is actively engaged in R&D on new materials and highvalue-added products that meet diversified market needs. In the year under review,
total research and development expenses amounted to ¥2,464 million, down 8.1%
from the previous fiscal year. Of this total, ¥250 million was allocated to the Industrial
Machinery segment, ¥881 million to the Rock Drill Machinery segment, ¥395 million
to the UNIC Machinery segment, ¥740 million to the Electronics segment, and ¥194
million to the Chemicals segment.
Capital expenditures (including purchase of intangible fixed assets) amounted to¥5,424 million. Of this total, ¥207 million was allocated to the Industrial Machinery
segment, ¥595 million to the Rock Drill Machinery segment, ¥3,524 million to the
UNIC Machinery segment, ¥162 million to the Metals segment, ¥97 million to theElectronics segment, and ¥152 million to the Chemicals segment, aimed primarily at
improvements in production efficiency. In addition, ¥114 million was allocated to theReal Estate segment, mainly for maintenance of buildings, and ¥570 million went to
the Others segment, mainly for vehicles to be used in the transportation sector. Funds
for these expenditures are sourced from internal funds and borrowings. Depreciation
and amortization edged down 1.7%, to ¥3,138 million.
The Group’s capital expenditure budget is based on comprehensive considerationof various factors, including demand forecasts, production plans, and investment benefits. From the year ending March 31, 2018, the Group plans to invest a total of¥7,500 million, 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¥9,819 million, up 28.3% from the previous fiscal year. Main factors included profit
before income taxes and interest and dividend income.
Net cash used in investing activities totaled ¥3,585 million, up 25.6% from theprevious year. The primary factor was purchases of property, plant and equipment.
Net cash used in financing activities was ¥5,030 million, down 38.4%. This was
mainly due to repayment of long-term debt.
As a result, cash and cash equivalents at the end of the fiscal year totaled ¥13,225
million, up ¥1,062 million, or 8.7%, from a year earlier.

Basic Earnings per Share
(Yen)

7.37

9.84 24.23 12.51 10.53'13/3 '14/3 '15/3 '16/3 '17/3

Total Assets(Billions of yen)

Return on Assets (ROA)(%)
186.1 199.4 207.3 195.7 208.0
4.8

2.5

2.1

2.1

1.6

'13/3 '14/3 '15/3 '16/3 '17/3
Total Assets
Return on Assets (ROA)

Net Assets(Billions of yen)

Return on Equity (ROE)(%)

51.5 56.3 70.6 68.3 79.6
15.9

6.2

7.6

7.5
5.9

'13/3 '14/3 '15/3 '16/3 '17/3
Net Assets
Return on Equity (ROE)18

■ Capital Strategies
Furukawa places great importance on improving returns of profits to all shareholders.
Our basic policy is to appropriate profits after comprehensive consideration of various
factors, including retained earnings required to finance capital expenditures and research and development expenses necessary to bolster earnings, as well as futurebusiness development and other factors. In principle, we appropriate retained earnings to shareholders twice a year in the form of interim and year-end cash dividends.
The decision-making body for appropriations from retained earnings is the Annual
General Meeting of Shareholders. The Articles of Incorporation states that “subject toresolution of the Board of Directors, interim dividends may be paid, with September
30 of each year as the date of record.”
For fiscal 2017, the Company has declared a year-end dividend of ¥5.00 per share.
Facing rapidly changing economic conditions in Japan and overseas, we will deploy
retained earnings to further enhance our business performance and improve ourfinancial position. Specifically, we will make careful and effective investments aimed
at strengthening the technological capabilities of our Machinery business while promoting further business development overseas. In the Metals segment, meanwhile,
we will invest in mines and promote development activities aimed at new product­commercialization.
■ Business Risks(1) Foreign Exchange Fluctuations
The Furukawa Company Group engages in production and sales activities in Japanand overseas, and therefore is at risk of foreign exchange fluctuations in connection
with its export business, the import of raw materials, primarily copper ore, and smelting and processing income. While the Group utilizes foreign exchange contracts andother 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 othernonferrous metals are decided by the London Metals Exchange (LME) in U.S. dollars toreflect international market conditions. Such prices fluctuate according to the international supply–demand balance, speculative transactions, international political andeconomic circumstances, and the like. The Group utilizes 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 andfinancial position.
(3) Interest Rates
The Group’s fiscal year-end balance of interest-bearing liabilities (debt) was ¥73,507
million, equivalent to 35.3% of total assets. Any increase in debt-related costs arisingfrom changes in interest rates may adversely affect the Group’s operating results andfinancial position.

Equity Ratio
(%)

33.2
26.9

34.0

37.3

27.4

'13/3 '14/3 '15/3 '16/3 '17/3

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

1.6

1.4

1.2

1.1

0.9

'13/3 '14/3 '15/3 '16/3 '17/3

Dividends on Equity (DOE)
Ratio
(%)

3.2

2.9

2.7

2.2
1.6

'13/3 '14/3 '15/3 '16/3 '17/3(4) Investment Securities and Land
Historically, the Furukawa Company Group has maintained relatively high balances ofmarketable securities and land. As of March 31, 2017, the carrying value of investment securities as stated in the balance sheets was ¥30,588 million, while land stood19

Capital Expendituresat ¥54,987 million. Accordingly, the Group’s operating results and financial position
are at risk of impairment losses, losses from devaluation, and losses on sales due tomovements in stock and land prices.

(Billions of yen)

Depreciation andAmortization(Billions of yen)(5) Retirement Benefit Obligation
The employees of the Furukawa Company Group are covered by defined benefit corporate pension plans, and non-contributory funded employee pension plans. Liability
for retirement benefits are provided at an amount calculated based on the retirement
benefit obligation and the fair value of pension plan assets at the balance sheet date.
In calculating retirement benefit obligation, the Group adopts assumptions in connection with the discount rate and expected rate of return on plan assets, as well asother assumptions. Accordingly, the Group’s operating results and financial position
are at risk in the event the actual discount rate and expected rate of return on plan
assets differs materially from the assumptions, as well as in the event of a change in
the assumptions 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 affectits operating results and financial position.
(7) Environmental Protection
The Furukawa Company Group places the highest importance on environmental protection, environmental safety, and prevention of pollution at its various business sites,
both in Japan and overseas, respecting all laws and regulations. Furthermore, in Japan
the Group is vigilant in preventing water run-off from idle mines from contaminatingwater supplies and in preventing the buildup of slag or slurry. However, in the eventof changes in legislation and the like, there is a possibility that the Group’s performance results and its financial position could be influenced.
(8) Official Regulations
The Furukawa Company Group engages in business in Japan and overseas and thus issubject to legal regulations of various nations, including rules related to licensing,taxation, the environment, labor, antitrust, and security. The Group takes care tofaithfully comply with such official regulations, but the formulation of new regulations
or amendments to existing ones may lead to increased costs and affect the Group’sbusiness continuity, which could affect its operating results and financial position.

3.0
2.9

20

3.2

3.2
2.6

2.9

3.1
5.4

'13/3 '14/3 '15/3 '16/3 '17/3
Capital Expenditures
Depreciation and Amortization

Cash Flows(Billions of yen)

5.5

2.0 10.2 7.7 9.8
0.3 (4.6) 3.3 (8.2) (5.0)(2.3) (3.1) (10.9) (2.9) (3.6)'13/3 '14/3 '15/3 '16/3 '17/3
Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities

Cash Dividends per Share
(Yen)
2.00

(9) Country Risk
The Furukawa Company Group conducts its production, procurement, and sales­activities on a global basis in order to expand its sales network, strengthen cost-­
competitiveness, and reduce currency risk. Any number of local events could hamper
the Group’s smooth business operations. These include local political unrest, sharp
economic slowdown, trade sanctions, cultural and legal differences, special labor–
management relations, and terrorism. Such events could affect the Group’s operating
results and financial position.

2.8
11.4

3.00

5.00

5.00 5.00'13/3 '14/3 '15/3 '16/3 '17/3

Fin ancial S e c ti o n
Consolidated Balance Sheets

22

Consolidated Statements of Income

24

Consolidated Statements of Comprehensive Income

25

Consolidated Statements of Changes in Net Assets

26

Consolidated Statements of Cash Flows28

Notes to Consolidated Financial Statements

29

Independent Auditor’s Report

52

21

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2017 and 2016

Thousands of
U.S. dollars (Note 3)

Millions of yen

2017

ASSETS2017

2016

Current Assets:
Cash and cash equivalents¥

13,225¥

12,163$

117,870

Receivables—trade

26,75524,702

238,458

Finished products

13,802

13,910123,012Work in process

7,690

7,985

68,538Raw materials and supplies

11,616

11,987

103,529

Deferred tax assets (Note 13)

662

1,370

5,900

Other current assets

6,032

4,428

53,762

Allowance for doubtful accounts

(203)

(230)

(1,809)79,57976,315709,260

Land and timberlands

56,83956,980506,586

Buildings and structures

55,48652,338494,528

Machinery and equipment

41,827

40,629372,790

Lease assets (Note 9)

1,438

1,537

12,816

		Total current assets

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

347

242

3,093

155,937

151,726

1,389,813

Accumulated depreciation(68,560)(66,412)(611,052)

		 Property, plant and equipment, net

87,37785,314

778,761

Investment securities (Notes 4 and 5)

32,343

23,971

288,262

Investments in affiliates

3,228

3,663

28,770Long-term loans receivables

4,021

3,739

35,838

522

1,616

4,652

1,550

1,617

13,815Construction in progress

Investments and Other Assets:

Deferred tax assets (Note 13)
Other assets
Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

22

¥

(586)

(585)

(5,223)41,07834,021

366,114208,034¥

195,650$

1,854,135

Thousands of
U.S. dollars (Note 3)

Millions of yen

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

2017

¥

Long-Term Liabilities:
Long-term debt (Note 5)
Lease obligations (Note 5)
Provision for environmental measures
Provision for deposition field restoration
Liability for retirement benefits (Note 12)
Deferred tax liabilities (Note 13)
Deferred tax liabilities on surplus on the revaluation of land
(Note 13)
Asset retirement obligations
Other long-term liabilities
		 Total long-term liabilities
Net Assets (Note 6):
Shareholders’ equity:
Common stock without par value:
		Authorized—800,000,000 shares
		Issued—404,455,680 shares
Retained earnings
Treasury stock, at cost:		2017—412,928 shares		2016—398,486 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

¥

9,656
13,384249
15,065
7,917
710
0
—
1,212
11,597
59,790

2017

2016

¥

12,65615,181259
14,012
7,877
361
1
9
—
9,394
59,750$86,061
119,287
2,219
134,269
70,5616,328
0—10,802
103,360
532,887

50,468
578
132
534
6,533
5,843

48,405
526
134
1,526
8,326
4,125

449,804
5,152
1,176
4,759
58,22652,077

1,811

1,831

16,141

218
2,543
68,660214
2,551
67,638

1,943
22,665611,943

28,20835,74828,20833,467

251,408
318,610(66)—
63,890(63)—
61,612(588)—
569,430

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

4,514
157
3,583
543
(3,950)4,847
1,803
68,262
195,650

104,794945
31,515
1,426(15,971)
122,709
17,166709,305
1,854,135¥$

The accompanying notes are an integral part of these statements.

23

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

Thousands of
U.S. dollars (Note 3)

Millions of yen

2017

Net Sales¥

Cost of Sales (Note 15)

2017

2016

149,830¥(126,207)

161,799$

1,335,383(1,124,839)(136,447)

		Gross profit

23,62325,352

210,544

Selling, General and Administrative Expenses (Note 8)(17,077)(17,363)(152,202)

6,546

7,989

58,342

Interest and dividend income

2,446

642

21,800Equity in earnings (losses) of affiliates

(421)

(142)

(3,752)

Interest expense

(669)

(807)

(5,963)

Other income (expenses), net (Note 16)(1,191)(1,051)(10,614)

		 Profit before income taxes

6,711

6,631

59,813Current(1,294)(1,162)(11,533)

Deferred(1,003)(305)(8,940)		 Total income taxes(2,297)(1,467)(20,473)

Profit

4,414

5,164

39,340

Profit Attributable to Non-controlling Interests

(160)

(108)

(1,426)

		Operating income
Other Income (Expenses):

Income Taxes (Note 13):

Profit Attributable to Owners of Parent

¥

4,254

¥

5,056

$

Yen

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

24

¥

10.53
192.2037,914
U.S. dollars (Note 3)

¥

12.51
164.48

$

0.09
1.71

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

Thousands of
U.S. dollars (Note 3)

Millions of yen

2017Profit

¥

2017

2016

4,414

¥

5,164

$

39,340

Other Comprehensive Income (Loss):
7,249(4,918)64,608Deferred gain (loss) on hedges

(59)

393

(526)

Surplus on the revaluation of land, net of income taxes

—

103

—

Translation adjustments

(393)

(281)

(3,503)Retirement benefits liability adjustments
Share of other comprehensive income (loss) of associates­accounted for using equity method
		 Total other comprehensive income (loss) (Note 7)

2,158

(215)

19,234

(13)

(470)

(116)

8,942

(5,388)79,697

Comprehensive Income (Loss)

13,356(224)

119,037

13,222(298)

117,843

134

74

1,194

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

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

25

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

For the year ended March 31, 2017

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

Shareholders’ equity
Commonstock

404,456—————
404,456¥¥

28,208—————28,208For the year ended March 31, 2017¥¥

Retainedearnings

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

¥

¥

(63)
—
—
(3)
—
—
(66)

Total
shareholders’equity¥61,612(2,020)
4,254
(3)
47
—
63,890¥Millions of yen
Accumulated other comprehensive income
Unrealized
holding gain
Deferred gain
(loss) on(loss) on
securities, net
hedgesof income taxes

Balance at beginning of year
¥ 4,514 ¥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
7,244
Balance at end of year
¥ 11,758 ¥Surplus on therevaluation ofland, net ofincome taxes

157 ¥
—
—
—
—
(51)
106 ¥

Translation
adjustments

3,583 ¥
—
—
—
—
(47)
3,536 ¥

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 12)
interests

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
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Net change during the year
Balance at end of year26

— ¥ 1,803 ¥68,262——(2,020)
—
—
4,254
—
—
(3)
—
—
47
—
123
9,044
— ¥ 1,926 ¥79,584

543 ¥ (3,950) ¥ 4,847 ¥
—
—
—
—
—
—
—
—
—
—
—
—
(383)
2,158
8,921
160 ¥ (1,792) ¥ 13,768 ¥For the year ended March 31, 2016

Total
net assets

404,456————

Shareholders’ equity
Common
stock

¥

—
—
404,456

28,208
—
—
—
—

¥

—
¥

—
28,208Retainedearnings

Treasury stock,at cost30,258(2,020)
5,056
—
173

¥

(0)
¥

—
33,467

(58)
—
—
(5)
—

Total
shareholders’equity

¥

—
¥

—
(63)

58,408(2,020)
5,056
(5)
173
(0)

¥

—
61,612

For the year ended March 31, 2016

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

Balance at beginning of year
¥ 9,427 ¥Cash dividends paid—
Profit attributable to owners of parent—
Purchase of treasury stock—Reversal of surplus on the revaluation of land—
Change in treasury shares of parent arising from—transactions with non-controlling shareholders
Net change during the year
(4,913)
Balance at end of year
¥ 4,514 ¥Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments(235) ¥————

3,655 ¥
—
—
—
—

—

—

392
157 ¥

(72)
3,583 ¥

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 12)
interests

1,263 ¥ (3,735) ¥ 10,375 ¥
—
—
—
—
—
—
—
—
—
—
—
—
—

—

53 ¥ 1,745
—
—
—
—
—
—
—
—

—

—

(720)
(215)
(5,528)543 ¥ (3,950) ¥ 4,847 ¥For the year ended March 31, 2017Total
net assets¥70,581(2,020)
5,056
(5)
173

—

(0)

(53)
58
— ¥ 1,803(5,523)¥68,262

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

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

Commonstock

Retainedearnings$ 251,408—————$ 251,408$ 298,280(18,004)
37,914—420—$ 318,610

Treasury stock,at cost

$

$

(562)
—
—
(26)
—
—
(588)

Total
shareholders’equity$ 549,126(18,004)
37,914(26)420—$ 569,430

The accompanying notes are an integral part of these statements.

For the year ended March 31, 2017

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

Surplus on therevaluation ofland, net ofincome taxes

Translation
adjustments

Total
accumulated
Retirement
Subscription
otherbenefits liability
rights toadjustments comprehensive
Non-controllingsharesincome(Note 12)
interests

Balance at beginning of year
$ 40,232 $ 1,399 $ 31,934 $ 4,840 $ (35,205) $ 43,200 $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
64,562(454)(419)(3,414) 19,234
79,509Balance at end of year
$ 104,794 $945 $ 31,515 $ 1,426 $ (15,971) $122,709 $Total
net assets— $16,070 $608,396—— (18,004)——
37,914
—
—
(26)
—
—
420
—
1,096
80,605— $17,166 $709,305

The accompanying notes are an integral part of these statements.

27

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

Thousands of
U.S. dollars (Note 3)

Millions of yen

2017

Operating Activities:
Profit before income taxes
Foreign exchange (gains) losses
Depreciation and amortization
Equity in losses of affiliates
Impairment loss
Increase in net defined benefit liability
Gain (Loss) on sales of property, plant and equipment
Compensation income
Increase (Decrease) in provision for deposition field restoration
Interest and dividend income
Interest expense
Changes in operating assets and liabilities:
Receivables—trade
Inventories
Payables—trade
Other		Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Income taxes refunded
Compensation received
		 Net cash provided by operating activities

¥

6,711
105
3,138
421
102
1,212
107
—
220
(2,446)
669

2017

2016

¥

6,631
196
3,191
142
207
1,321
(230)
(391)
(883)
(642)
807

$

59,813936
27,967
3,752
909
10,802954—
1,961(21,800)
5,963(2,253)
348
1,360
(401)
9,293
2,436
(699)
(1,853)
642
—
9,819

(576)
(396)
2,409
(3,423)
8,363
626
(816)
(2,258)
1,346
391
7,652

(20,080)
3,102
12,121(3,575)82,82521,711(6,230)(16,515)
5,722—
87,513

Investing Activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from liquidation of investment securities
Increase in long-term loans receivables
Collection of long-term loans receivables
Other
		 Net cash used in investing activities(3,812)
52
599
(825)
501
(100)
(3,585)(2,575)
478
—
(789)
2
29
(2,855)(33,975)463
5,339(7,353)
4,465(891)(31,952)

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

15,600(15,314)
5,627(8,627)(2,018)(284)(14)(5,030)(142)
1,062
12,163
13,225

10,000(15,746)
6,324(6,326)(2,014)(318)(86)(8,166)(184)(3,553)
15,716
12,163139,037(136,488)
50,152(76,889)(17,986)(2,531)(125)(44,830)(1,266)
9,465
108,405
117,870

The accompanying notes are an integral part of these statements.

28

¥

¥

$

Notes to Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2017 and 2016

1. Basis of Presentation
The accompanying consolidated financial statements of Furukawa
Co., Ltd. (the “Company”) and consolidated subsidiaries(together, the “Furukawa Group”) are prepared in accordancewith accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, andare compiled from those prepared by the Company as required
under the Financial Instruments and Exchange Law of Japan.
The notes to the consolidated financial statements include
2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 35 subsidiaries and 11 affiliates as of March
31, 2017 (37 subsidiaries and 11 affiliates as of March 31,2016). The consolidated financial statements included theaccounts of the Company and 35 subsidiaries as of March 31,2017 (37 subsidiaries as of March 31, 2016).
Compared with the previous year, the number of subsidiaries
decreased by 2 subsidiaries due to liquidation.
For the purpose of preparing the consolidated financial
statements, all significant inter-company 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, 2017and 2016. Marketable securities classified as other securities arecarried at fair value with changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net
assets. Fair value is determined based on the average of themarket value during the last month of the fiscal year. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.

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

(4) Inventories
Finished products and work in process relating to copper
products are stated at cost determined by the moving averagemethod (the balance sheet amounts of inventories are stated at
the lowered book values reflecting potential decline inprofitability). Other inventories are mainly stated at cost
determined by the average method (the balance sheet amounts
of inventories are stated at the lowered book values reflecting
potential decline in profitability).
(5) Allowance for Doubtful Accounts
In order to cover probable losses on collection, the allowance for
doubtful accounts is calculated based on the historical default
rates for normal receivables plus 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 the earthquake protection.
(7) Provision for Environmental Measures
Provision for environmental measures is provided to cover the
disposal costs anticipated to be incurred with respect to the“Law Concerning Special Measures for Promotion of Proper
Treatment of PCB Wastes.”(8) 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 theestimated 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 is29

calculated by the straight-line method over the lease term withno residual value.
(9) 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.
(10) 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 ¥1,739 million ($15,499
thousand) and ¥1,793 million as of March 31, 2017 and 2016
respectively.
(11) 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 thetemporary differences are expected to reverse, are reflected in
the consolidated financial statements.
The Company and its domestic wholly-owned subsidiaries
file a consolidated corporation tax return.
(12) 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.
30

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.
(13) 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.
(14) 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.
(15) Shareholders’ Equity
The Company Law of Japan provides that an amount equal to
10% of the amount to be distributed as distributions of capitalsurplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common stock
account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if
certain conditions are met, but neither the capital reserve nor
the legal reserve is available for distributions.

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

The translation of yen amounts into U.S. dollar amounts is
included solely for convenience, as a matter of arithmetic
computation only, at ¥112.20=US$1.00, the exchange rate
prevailing on March 31, 2017. This translation should not be

4. Investment Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31,2017 and 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

2017
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks¥

Carrying value

15,338¥ 14,699$ 267,709 $ 136,702 $ 131,007——

Acquisition cost

30,037 ¥—Government bonds
Corporate bonds

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

2017
Unrealized gain
(loss)—

Acquisition cost—

Unrealized gain
(loss)

—

—

—

—

—

—

—

30,037

15,338

14,699267,709

136,702

131,007

551

608

(57)

4,911

5,419

(508)

Government bonds

—

—

—

—

—

—

Corporate bonds

—

—

—

—

—

—

551

608

(57)

4,911

5,419

(508)

30,588 ¥15,946 ¥Total¥

14,642$ 272,620 $ 142,121 $ 130,499

Millions of yen

2016
Carrying value

Securities whose carrying value exceeds theiracquisition cost:
Listed stocks¥

Acquisition cost

18,677 ¥

12,434

Unrealized gain
(loss)¥

6,243

Government bonds

—

—

—

Corporate bonds

—

—

—

18,677

12,434

6,243

2,944

3,455

(511)

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

—

—

—

Corporate bonds

—

—

—

Total

¥

2,944

3,455

(511)

21,621 ¥15,889 ¥

5,732

31

Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2017 and 2016 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2017

Sales proceeds

¥

2017

2016

1

¥

$

0

9

Aggregate gains

1

0

9

Aggregate losses

—

—

—

5. Short-Term Debt, Long-Term Debt and Lease Obligations
Short-term debt, most of which are unsecured, represented notes payable to banks, with the average interest rates of 0.3% and 0.5%
as of March 31, 2017 and 2016, respectively.
Long-term debt as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2017 to 2032¥

63,852
63,852¥(13,384)

Current portion of long-term debt¥

50,468

¥

2016

2017

63,586
63,586$ 569,091
569,091(15,181)(119,287)

48,405$ 449,804

The average interest rates applicable to the above debt amounting to ¥63,852 million ($569,091 thousand) and ¥63,586 million
were 0.7% and 0.8% as of March 31, 2017 and 2016, respectively.
The aggregate annual maturities of long-term debt subsequent to March 31, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017Years ending March 31,¥

13,384$ 119,287

2019

26,714

238,092

2020

6,621

59,011

2021

2,130

18,984

2018

2022

1,218

10,8562023 and thereafter

13,785

122,861

63,852$ 569,091¥
Lease obligations as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

Lease obligations due 2017 to 2024

¥

827

¥

827
¥

32

578

785

$

(2,219)

(259)
¥

526

7,371
7,371

785

(249)

Current portion of lease obligations

2017

2016

$

5,152

The aggregate annual maturities of lease obligations subsequent to March 31, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017Years ending March 31,

¥

2018

249

$

2,219

2019

210

1,872

2020

184

1,640

2021

95

847

2022

68

606

2023 and thereafter

21¥

The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥35,014 million ($312,068 thousand) with 23
banks and ¥35,092 million with 23 banks as of March 31,2017 and 2016, respectively. The borrowings outstanding and

827

187
$

7,371

the unused balances under these credit facilities amounted
to ¥9,656 million ($86,061 thousand) and ¥25,358 million($226,007 thousand), respectively, as of March 31, 2017, andamounted to ¥12,656 million and ¥22,436 million, respectively,
as of March 31, 2016.

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2017 and 2016 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2017

Investment securities
Property, plant and equipment, net

2017

2016

¥

—
1,489

¥

237
1,510

$

—
13,271

¥

1,489

¥

1,747

$

13,271(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2017

¥

Long-term debt (including current portion)

2017

2016

997

¥

1,010

$

8,886

6. Net Assets(1) Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2016

Increase

Decrease

As of March 31,
2017

Shares issued:
Common stock		 Total

404,455——

404,455

404,455­——

404,455

398

15

—

413

398

15

—

413

Treasury stock:
Common stock (Note)		 Total

Note: The increase of 15 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.			

33

7. Other Comprehensive Income
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2017

2016

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

Reclassification adjustments for gains and losses included in profit

8,912

¥

(6,762)(1)—$

79,430(9)

Amounts before tax effect

8,911(6,762)

79,421

Tax effect(1,662)

1,844(14,813)

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

7,249(4,918)64,608Amounts arising during the year

466

1,153

4,153

Adjustment on the acquisition cost of assets

(561)

(601)

(5,000)

Amounts before tax effect

(95)

552

(847)

Tax effect

36

(159)

321

Deferred gain (loss) on hedges

(59)

393

(526)

—

103

—

(393)

(281)

(3,503)

2,244(1,190)20,000

783

1,057

6,979

Amounts before tax effect

3,027

(133)

26,979Tax effect

(869)

(82)

(7,745)

2,158

(215)

19,234

(44)

(427)

(392)

31

(47)

276

(13)

(470)

(116)

Deferred gain (loss) on hedges:

Surplus on the revaluation of land, net of income taxes:
Tax effectTranslation adjustments:
Amounts arising during the year
Retirement benefits liability adjustments:
Amounts arising during the year
Reclassification adjustments for gains and losses included in profit

Retirement benefits liability adjustments
Share of other comprehensive income (loss) of associates 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 associates accounted for using
equity method
Total other comprehensive income (loss)

¥

8,942

¥

(5,388)$79,697

8. Research and Development Expenses
Research and development expenses, included in selling, general and administrative expenses and cost of sales, for the years ended
March 31, 2017 and 2016 amounted to ¥2,464 million ($21,961 thousand) and ¥2,680 million, respectively.

34

9. Leases
Leases’ accounting
Finance lease transactions that do not involve transfer of ownership
1. Leased asset quality
Tangible assets
Mainly machinery and equipment
2. Depreciation method of leased assets
Refer to “(8) Property, Plant and Equipment and Depreciation” in “2. Summary of Significant Accounting Policies.”
10. Financial Instruments
1. Overview(1) Policy for financial instruments
		 In consideration of the annual financial plan, the Furukawa Group raises funds through mainly bank borrowings and bond		 issues. 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, the		 Furukawa 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 of		 other 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 Group		 utilizes rate swap transactions as a hedging instrument for each contract. The assessment of effectiveness is omitted since it		 meets 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.
		 The Furukawa Group also 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 “(14) 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 creditworthiness of their main customers periodically, and monitors due dates and outstanding balances			 by individual customer.
				 In utilizing derivatives, the Furukawa Group has transactions with major financial institutions or trading companies which			 have 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, the			 Furukawa 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 of			transaction-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.
35

(4) Supplementary explanation on the estimated fair value of financial instruments		The value of financial instruments is based on their quoted market place, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in “11.
Derivative Transactions” are not necessarily indicative of the actual market risk involved in derivative transactions.
2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2017 and 2016 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

2017

2017

Carrying value

Estimated fair value

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

Difference¥ 13,225
26,75530,58770,567¥ 13,225
26,75530,58770,567¥

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

¥ 15,065
7,917
9,656
63,85296,490¥153¥ 15,065
7,917
9,656
64,00396,641¥
153¥¥

Carrying value

Estimated fair value

Difference

—
—
—
—

$ 117,870
238,458
272,611
628,939$ 117,870
238,458
272,611
628,939

$

—
—
—
—

—
—
—
151
151
—

$ 134,269
70,561
86,061
569,091
859,982$
1,364$ 134,269
70,561
86,061
570,437
861,328
$
1,364

$

—
—
—
1,346
1,346
—

$

Millions of yen

2016
Carrying value

Estimated fair value

Difference

Assets:(1) Cash and cash equivalents¥(2) Receivables—trade

12,163¥24,702(3) Investment securities
Total assets

12,163¥—24,702—

21,621

21,621—

58,48658,486—

Liabilities:(1) Payables—trade¥

14,012¥

14,012¥—(2) Electronically recorded obligations

7,877

7,877

—

(3) Short-term debt (*1)

12,656

12,656—(4) Long-term debt (*1)
Total liabilities
Derivatives (*2)¥

63,58563,906

321

98,13098,451

321

248

¥

248

¥

—

(*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.
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.
36

(3) Investment securities		The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to“4. Investment Securities” to the consolidated financial statements.
Liabilities(1) Payables—trade, (2) Electronically recorded obligations, (3) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(4) Long-term debt
		The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivative transactions
Please refer to “11. Derivative Transactions” to the consolidated financial statements.
2. Financial instruments of which it is extremely difficult to determine the fair value as of March 31, 2017 and 2016
Thousands of
U.S. dollars

Millions of yen

2017

¥

Unlisted stocks

2017

2016

4,984

¥

6,014

$

44,421

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are
not included in the above table of “(3) Investment securities.”
3. Redemption schedule for receivables and marketable securities with maturities after March 31, 2017 and 2016 are as follows:
For the year ended March 31, 2017
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Investment securities:
Other securities with maturity:		 (1) Bonds (Municipal bonds)
		 (2) Bonds (Corporate bonds)
Total

¥

¥

13,11026,755——39,865Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—

—
—
—

¥

—
—

—
—
—

Due after
ten years

¥

—
—

—
—
—

¥

For the year ended March 31, 2016
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Investment securities:
Other securities with maturity:		 (1) Bonds (Municipal bonds)
		 (2) Bonds (Corporate bonds)
Total

¥

¥

12,04824,702——36,750Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—

—
—
—

¥

—
—

—
—
—

Due after
ten years

¥

—
—

—
—
—

¥

For the year ended March 31, 2017
Thousands of U.S. dollars

Cash deposits
Receivables—trade
Investment securities:
Other securities with maturity:		 (1) Bonds (Municipal bonds)
		 (2) Bonds (Corporate bonds)
Total

Due in one
year or less

$ 116,845
238,458——$ 355,303

Due after one year
through five years

Due after five years
through ten years

$

$

$

—
—

—
—
—

$

—
—

—
—
—

Due after
ten years$$

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

—
—

—
—
—
37

11. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding as of March 31, 2017 and 2016 for which
hedged accounting have been applied are as follows.
1. Currency-related transactions
Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

As of March 31, 2017
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

1,178
264
7,679

—
—
—

¥

(12)
1
123

Accounts receivables
Accounts receivables

¥

206
115

—
—

(*)
(*)

Accounts payables

¥

—

—

(*)

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, 2016
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

248
56
6,820

—
—
—

¥

17
2
268

Accounts receivables
Accounts receivables

¥

311
349

—
—

(*)
(*)

Accounts payables

¥

2,681

—

(*)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

As of March 31, 2017
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables$

10,4992,353
68,440

—
—
—

$

(107)
9
1,123

Accounts receivables
Accounts receivables

$

1,836
1,025

—
—

(*)
(*)

Accounts payables

$

—

—

(*)

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.
38

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, 2017
Contract amounts¥

20,775Maturing after one year¥

Fair value

16,379(*)

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, 2016
Contract amounts¥

26,304

Maturing after one year¥

Fair value

20,791(*)

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, 2017
Contract amounts$

185,160

Maturing after one year$

Fair value

145,980(*)(*) The fair values by means of the special accounting procedure for interest rate swap contracts are included in the fair values of thehedged long-term debt because the derivative transactions are treated as a part of hedged long-term debt.
3. Commodity-related transactions
Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2017
Contract amounts¥—

Maturing after one year¥912

Raw material—

Fair value

¥

—

—

43

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material

As of March 31, 2016
Contract amounts¥

Raw material—

Maturing after one year

¥

526

—

Fair value

¥

67

—
(39)

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

Raw material
Raw material

As of March 31, 2017
Contract amounts

$

—
8,128

Maturing after one year$——

Fair value

$

—
383

Note: The fair values of forward product contracts are based on the price provided by trading companies.
(*) Since some of the short position trades are dependent on copper price at the time when copper will be received, contract amountand the fair value as of March 31, 2017 and 2016 does not exist and is not disclosed.

3912. Retirement Benefit Plans
For the year ended March 31, 2017
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, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

Retirement benefit obligation at April 1, 2016
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2017¥¥19,662
961
127
(338)
(514)
(71)
—
19,827$ 175,241
8,564
1,132
(3,012)(4,581)(633)—$ 176,711

The changes in plan assets during the year ended March 31, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

Plan assets at April 1, 2016
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2017¥¥11,337
278
1,806
463
(529)
(61)
—
13,294$ 101,043
2,478
16,096
4,127(4,715)(544)—$ 118,485

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

Millions of yen

2017

Funded retirement benefit obligation
Plan assets at fair value¥

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

40¥

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

$ 171,070(118,485)
52,585
5,641
58,226$58,22658,226

The components of retirement benefit expense for the year ended March 31, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

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

¥

¥

961
127
(278)
19
764
1,593

$

$

8,566
1,132
(2,478)169
6,809
14,198

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

Millions of yen

2017

Prior service cost
Actuarial loss
Total

¥
¥

19
3,008
3,027

$
$

169
26,81026,979Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

124
2,114
2,238

$
$

1,105
18,842
19,947

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

Bonds
StocksCash on hand and in banks
Other
Total

21%
66%
1%
12%
100%

Note: 55% of total plan assets are in a “Retirement Benefit Trust” for corporate pension plans and non-contributory funded employee		 pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.4%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.7%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥12 million($107 thousand).
41

The changes in the retirement benefit obligation during the year ended March 31, 2016 are as follows:
Millions of yen

2016

Retirement benefit obligation at April 1, 2015
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2016¥¥

17,937
872
206
1,523
(873)
(3)
—
19,662The changes in plan assets during the year ended March 31, 2016 are as follows:
Millions of yen

2016

Plan assets at April 1, 2015
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2016¥¥

11,063
80
473
572
(851)
0
—
11,337

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2016 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

2016

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

42¥

19,063(11,337)
7,726
600
8,326
8,326
8,326

The components of retirement benefit expense for the year ended March 31, 2016 are as follows:
Millions of yen

2016

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

¥

872
206
(80)
26
1,031
2,055

¥

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, 2016 are as follows:
Millions of yen

2016

Prior service cost
Actuarial loss
Total

¥

26
(159)
(133)

¥

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2016 are as follows:
Millions of yen

2016

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥

143
5,122
5,265

¥

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2016 are as follows:
2016

Bonds
StocksCash on hand and in banks
Other
Total

22%
64%
2%
12%
100%

Note: 51% 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
3.7%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the fiscal year is ¥12 million.

43

13. Income Taxes
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the statutory tax rates for theyears ended March 31, 2017 and 2016 were summarized as follows:

Statutory tax rate
Non-deductible expenses for tax purposes
Non-taxable dividends and other income
Tax deduction such as R&D expenses
Inhabitants’ per capita tax
Equity in earnings and losses of affiliates
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

2017

2016

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

33.1%
0.6
(0.6)
(2.3)
1.2
0.7
(6.6)
1.9
(4.4)
(1.5)
22.1%

Deferred tax assets and liabilities as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

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

¥

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

2017

2016

¥

7,533
2,168
7,199
1,866
471
989
20,226(8,658)
11,568(1,272)(3,020)(7,021)(1,212)(183)(12,708)¥ (1,140)¥ (1,831)$

61,6499,822
54,037
16,6584,777
8,992
155,935(69,260)
86,675(11,266)(26,916)(62,415)(25,615)(1,988)(128,200)$ (41,525)$ (16,141)

Associated with the enactment on November 18, 2016 of the “Act for Partial Amendment of the Partial Amendment of theConsumption Tax Act and Others for the Drastic Reform of the Taxation System for Ensuring Stable Financial Resources for Social
Security” (Act No. 85 of 2016) and of the “Act for Partial Amendment of the Partial Amendment of the Local Tax Act and Local
Allocation Tax Act for the Drastic Reform of the Taxation System for Ensuring Stable Financial Resources for Social Security” (Act No.
86 of 2016), the effective date of raising the consumption tax rate to 10% has been postponed from April 1, 2017 to October 1, 2019,
and the abolition of the local corporation special tax, the accompanying restoration of the corporate enterprise tax, and changes instatutory tax rates of the local corporation tax and the corporate inhabitants’ tax have been postponed from fiscal years beginning on
or after April 1, 2017 to fiscal years beginning on or after October 1, 2019.
Although there was no change in the effective statutory tax rate used to measure the Company’s deferred tax assets and liabilities,
as tax rates shifted between national tax and local tax, deferred tax assets decreased by ¥73 million ($651 thousand) after offsetting
deferred tax liabilities, deferred income tax increased by ¥73 million ($651 thousand) and deferred gain (loss) on hedges increased by¥0 million ($0 thousand).
44

14. Contingent Liabilities
Contingent liabilities as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

Notes receivable discounted and endorsed¥

Loans guaranteed
Repurchase obligation of the securitization of receivables

2017

2016

107

¥

154

$

954

4,506

962

40,160

850

1,484

7,576

15. Write-Down of Inventories
The amount of write-down of inventories included in cost of sales for the year ended March 31, 2017 totaled ¥(5) million ($(45)thousand). For the year ended March 31, 2016, the Company reversed write-down in the amount of ¥60 million and credited it to costof sales.
16. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

Gain on sales of noncurrent assets
Compensation income
Payments for idle mines
Loss on foreign exchange
Provision for deposition field restoration
Loss on sales and retirement of noncurrent assets
Impairment loss
Other, net

¥

¥

17
—
(564)
(8)
(276)
(125)
(102)
(133)
(1,191)

2017

2016

¥

¥

309
391
(601)
(797)
—
(79)
(207)
(67)
(1,051)$152—(5,027)(71)(2,460)(1,114)(909)(1,185)$ (10,614)

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

Main products and services belonging to each segment are as follows:(a) Industrial Machinery
		 Manufacture and sell environmental machinery, pumps, industrial machinery, steel structures and heat-resistant and wear		resistant castings(b) Rock Drill Machinery
		 Manufacture and sell rock drill machines such as hydraulics breakers, hydraulics crushers, boring drills, tunnel and mining
		 drill jumbos, and environmental machinery(c) UNIC Machinery
		 Manufacture and sell UNIC cranes, mini crawler cranes, ocean cranes and UNIC carriers(d) Metals
		After buying ore, sell electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by joint smelting
company45

(e) Electronic Materials
		Manufacture and sell high-purity metallic arsenic, crystals, cores and coils, aluminum nitride ceramics, optical components andgallium nitrides(f) Chemicals
		 Manufacture and sell cuprous oxide, ferric polysulfate solution, aluminum sulfate, sulfuric acid, cuprous dioxide and copper		 dioxide, and sell titanium dioxide(g) Real Estate		 Trade, intermediate and lease of real estate
The accounting method used for reportable segments is the same as that method stated in “2. Summary of Significant Accounting
Policies.” Operating income (loss) of reportable segments is based on operating income in the consolidated statements of income.
Intersegment sales and transfers are recorded based on the actual market prices.
Segment information of the Furukawa Group for the years ended March 31, 2017 and 2016 was as follows:Year ended March 31, 2017

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

Millions of yen
Real Estate

OthersAdjustments

Consolidated¥ 5,298 ¥ 3,074 ¥983 ¥— ¥149,830
53
135
1,459
(4,954)
—
5,351
3,209
2,442
(4,954) 149,830¥
115 ¥ 1,266 ¥ (127) ¥(44) ¥ 6,546¥ 15,947 ¥ 31,510 ¥ 3,404 ¥ 45,911 ¥208,034
211
591
81
46
2,963
—
—
6
—
3,183
315
152
102
145
3,843

Year ended March 31, 2016

Millions of yen
Industrial
Machinery

46

Electronic
Materials¥ 20,170 ¥ 31,044 ¥ 24,556 ¥ 28,218 ¥ 7,274
328
575
569
245
317
—
—
70
2,911
196
257
467
2,161
136
108
Chemicals

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

Metals¥ 14,042 ¥ 26,979 ¥ 25,783 ¥ 67,854 ¥ 5,817
2,874
78
145
204
6
16,916
27,05725,92868,058
5,823
¥
104 ¥
897 ¥ 2,579 ¥ 1,738 ¥18Year ended March 31, 2017

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

UNIC
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials¥ 14,927 ¥ 30,077 ¥ 27,229 ¥ 74,193 ¥ 5,477
2,742
5
92
370
72
17,66930,082
27,321
74,563
5,549¥ 1,038 ¥ 2,217 ¥ 2,627 ¥ 1,155 ¥ (368)¥ 19,609 ¥ 30,976 ¥ 21,695 ¥ 27,645 ¥ 7,492
346
599
565
312
294
—
—
—
—
—
—
—
65
3,235
267
855
328
421
140
450

Year ended March 31, 2016

Millions of yen
Chemicals

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

Adjustments

Consolidated¥ 16,056 ¥ 31,995 ¥ 3,514 ¥ 36,668 ¥195,650
193
588
66
18
2,981
—
—
—
—
—
—
—
51
—
3,618
183
93
81
40
2,591
Thousands of U.S. dollars
Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials$ 125,151 $ 240,455 $ 229,795 $ 604,759 $ 51,845
25,615
695
1,292
1,819
53
150,766 241,150 231,087 606,578
51,898$927 $
7,995 $ 22,986 $ 15,490 $160$ 179,768 $ 276,684 $ 218,859 $ 251,497 $ 64,831
2,923
5,125
5,071
2,184
2,825
—
—
624
25,945
1,747
2,291
4,162
19,2601,212963Year ended March 31, 2017

Thousands of U.S. dollars
Chemicals

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

Others5,974 ¥ 3,045 ¥877 ¥— ¥161,799
58
135
1,606
(5,080)
—
6,032
3,180
2,483
(5,080) 161,799
197 ¥ 1,277 ¥(73) ¥(81) ¥ 7,989

Year ended March 31, 2017

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

Real Estate

Real Estate

OthersAdjustments

Consolidated$ 47,219 $ 27,398 $ 8,761 $— $1,335,383
472
1,203
13,004(44,153)—
47,691
28,601
21,765(44,153) 1,335,383$ 1,025 $ 11,283 $ (1,132) $(392) $ 58,342$ 142,130 $ 280,838 $ 30,339 $ 409,189 $1,854,135
1,881
5,267
722
410
26,408——53—
28,369
2,807
1,355
909
1,292
34,25147

(Related information)
Years ended March 31, 2017 and 2016
1. Information regarding products and services
Year ended March 31, 2017

Millions of yen
Copper¥Sales for outside customers

52,261

UNIC cranes¥

Year ended March 31, 2016

17,266

Others¥80,303

Total¥

149,830¥

161,799

Millions of yen
CopperSales for outside customers¥

Others60,687¥

Year ended March 31, 2017

101,112

Total

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

465,784

UNIC cranes$

153,886

Others$715,713

Total$ 1,335,383

2. Geographic segment information(1) Net sales
Year ended March 31, 2017
Millions of yen
Japan

¥

Asia

116,151¥

Others

19,412¥

Total

14,267¥

149,830¥

161,799

Year ended March 31, 2016
Millions of yen
Japan

¥

Asia

123,038¥

Others21,739¥Total

17,022

Year ended March 31, 2017
Thousands of U.S. dollars
Japan

Asia

$ 1,035,214$

173,012

Others$Total

127,157$ 1,335,383(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2017 and 2016 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2017
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥20,051

MetalsYear ended March 31, 2016
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥23,321

MetalsYear ended March 31, 2017
Thousands of U.S. dollars

48

Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$178,708

Metals4. Impairment loss on property, plant and equipment
Millions of yen
UNIC
Machinery

MetalsElectronic
Materials

43

—

—

—

Year ended March 31, 2016

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials

Impairment loss onproperty, plant andequipment

—

—

—

—

—

Year ended March 31, 2017

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronic
Materials— $ 383———

Year ended March 31, 2017

Impairment loss onproperty, plant andequipment

Industrial
Machinery

Rock Drill
Machinery— ¥Chemicals

Real Estate

— ¥

1 ¥

Others58

Adjustments Consolidated

— ¥

102

Millions of yen
Chemicals

Real Estate

— ¥

5 ¥

Others202

Adjustments Consolidated

— ¥

207

Thousands of U.S. dollars

Impairment loss onproperty, plant andequipment

Chemicals

Real Estate

— $

9 $

Others

517

Adjustments Consolidated

— $

909

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

4918. Investment and Rental Properties
The Company and certain consolidated subsidiaries own office buildings for lease mainly in Tokyo and other areas. For the year ended
March 31, 2017, rental income was ¥1,460 million ($13,012 thousand), gain on sales of rental properties was ¥5 million ($45
thousand), loss on retirement was ¥5 million ($45 thousand) and impairment loss on rental properties was ¥102 million ($909
thousand).
For the year ended March 31, 2016, rental income was ¥1,477 million, gain on sales of rental properties was ¥300 million, loss onretirement was ¥19 million and impairment loss on rental properties was ¥207 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 31,2017 and 2016 are as follows:Year ended March 31, 2017

Carrying value
As of March 31, 2016

Net change

Fair value
As of March 31, 2017

As of March 31, 2017

Millions of yen¥

35,150¥59¥

35,209¥34,473

Year ended March 31, 2016

Carrying value
As of March 31, 2015

Net change

Fair value
As of March 31, 2016

As of March 31, 2016

Millions of yen¥

35,758

¥

(608)

¥

35,150¥32,897

Year ended March 31, 2017

Carrying value
As of March 31, 2016

Net change

Fair value
As of March 31, 2017

As of March 31, 2017

Thousands of U.S. dollars$

313,280$526$

313,806$

307,246

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, 2017 mainly consists of increases related to change of use in the 		amount of ¥565 million ($5,036 thousand) and acquisition of land and buildings in the amount of ¥114 million ($1,016 thousand)and decreases mainly due to amortization in the amount of ¥501 million ($4,465 thousand), impairment loss on rental properties
in the amount of ¥102 million ($909 thousand) and sales of land and buildings in the amount of ¥20 million ($178 thousand). Netchange in carrying value for the year ended March 31, 2016 mainly consists of increases related to acquisition of land and buildings in the amount of ¥193 million and decreases mainly due to amortization in the amount of ¥496 million, impairment loss onrental properties in the amount of ¥207 million and sales of land and buildings in the amount of ¥160 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.
19. Subsequent Event
Changes in the number of shares per share unit and consolidation of shares
At the Board of Directors’ meeting held on May 24, 2017, a resolution was made to present proposals on consolidation of shares andto partly amend the articles of incorporation regarding the changes in the number of shares per unit and total number of authorizedshares to the 150th ordinary general meeting of shareholders to be held on June 29, 2017. Both proposals were passed at theshareholders’ meeting.
(1) Purpose
Domestic stock exchanges published the “Action Plan for Consolidating Trading Units,” aiming all domestic listed companies
complete the transition to a single trading unit of 100 shares by October 1, 2018.
		 The Company, respecting this intention as a listed company on the Tokyo Stock Exchanges, will change the number of shares
per unit of the Company from 1,000 shares to 100 shares, consolidate 10 shares of the Company’s stock to one share to
maintain the price level per trading unit of the Company’s share after the change in the number of shares per unit and reduce theCompany’s total number of authorized shares from 800 million shares to 80 million shares.

50

(2) Details of consolidation of sharesa. Class of stock to be consolidated: Common stockb. Consolidation ratio: Consolidate every 10 shares to one share on October 1, 2017 for shares held by shareholders listed in the		 Register of Shareholders as of the end of the day on September 30, 2017 (practically September 29, 2017)c. Decrease in number of shares due to consolidation:
Number of outstanding shares before consolidation(as of March 31, 2017)404,455,680 shares

Decrease in number of shares after consolidation

364,010,112 shares

Number of outstanding shares after consolidation

40,445,568 shares

Note: “Decrease in number of shares after consolidation” and “Number of outstanding shares after consolidation” are theoretical			 values calculated based on “number of outstanding shares before consolidation” and the consolidation ratio.
		 d. Handling of fractional shares:
			 If a fraction of less than one share is created due to the consolidation of shares, such fractional shares will be sold together in			 accordance with Article 235 of the Companies Act, and the proceeds will be distributed to shareholders who held the frac			 tional shares in proportion to the number of fractional shares held.
(3) Scheduled effective date of these changes
October 1, 2017(4) Impact on profit attributable to owners of parent and net assets per share
Profit attributable to owners of parent and net assets per share for the years ended March 31, 2017 and 2016 assuming that
consolidation of shares had been carried out at the beginning of the year ended March 31, 2016, are as follows:
March 31

Net assets per share of common stock

2017

2016

¥ 1,922.04¥ 1,644.81($17.13)
Profit attributable to owners of parent per share of common stock¥105.29¥125.13($0.94)
Note: Only the information on profit attributable to owners of parent per share of common stock is provided and information on		 diluted profit attributable to owners of parent per share of common stock to reflect the diluting effect is not provided, because		 there were no dilutive potential common stocks for the year ended March 31, 2017.

51

52

53

Corporate Data
(As of March 31, 2017)

   Directors and Auditors(As of June 29, 2017)
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

Senior Managing Director

Toshio Matsumoto

Managing Director

Minoru Iwata

Tel:Managing Director

Shigeo Matsudo

Date of Foundation:

August 1875

Date of Establishment:

April 1918

Outside Director

Masao Yoshida

Number of Shares Authorized:

Nobuyuki Tomotsune

800,000,000 shares

Outside Independent Director

Number of Shares Outstanding:

404,455,680 shares

Outside Independent Director

Tatsuya Tejima

Number of Shareholders:

22,685

Director

Kiyohito Mitsumura

Stock Exchange Listing:Tokyo

Director

Masahiro Ogino

Audit & Supervisory Board Member

Saburo Saruhashi

Audit & Supervisory Board Member

Kazuo Inoue

Securities Code Number:

5715

Employees:

2,616 (Consolidated)

Stock Transfer Agent:

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

Outside Audit & Supervisory Board Member Tetsuro Ueno
Outside Audit & Supervisory Board Member Masayuki Yamashita

   Executive Officers(As of June 29, 2017)
Senior Managing Executive Officer

Shigeo Matsudo

Senior Executive Officer

Kiyohito Mitsumura

Senior Executive Officer

Masahiro Ogino

Senior Executive Officer

Hiroyuki Abe

Executive Officer

Katsuhira Kawashita

Executive Officer

Kenichi Kurita

Executive Officer

Atsushi Otani

Executive Officer

Minoru Nakatogawa

Executive Officer

Tatsuyuki Muramatsu

Executive Officer

Masanori Saito

Executive Officer

Kiyoshi Sano

Executive Officer

Tatsuki Nazuka

Executive Officer

Osamu Miyazaki

Executive Officer

Hiroyuki Sakai

Executive Officer

Atsushi Takano

Executive Officer

Takeshi Miyajima

Principal Shareholders
Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

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

26,540

6.56

Asahi Mutual Life Insurance Co.

23,734

5.86

Japan Trustee Services Bank, Ltd. (trust account)

23,104

5.71

Seiwa Sogo Tatemono Co., Ltd.

15,034

3.71

The Yokohama Rubber Company, Limited

13,411

3.31

Sompo Japan Insurance Inc.

10,756

2.65

Fujitsu Limited

9,617

2.37

Furukawa Electric Co., Ltd.

8,777

2.17

Fuji Electric Co., Ltd.

8,620

2.13

Chuo Real Estate Co., Ltd.

6,877

1.70

Composition of Shareholders
Foreign Institutions

13.56%

54

2.40%

Financial Institutions
Other Japanese Companies

25.24%

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

URL: http://www.furukawakk.co.jp/

Financial Instruments Firms(Securities Companies)

35.20%

Individuals and Others

23.60%

Corporate History

1875

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

1997

Established a manufacturer of
UNIC products / components
in Thailand.

1877

Began the operation of the
Ashio Copper Mine in Tochigi.

1998

Established a sales company ofrock drill products in Holland.

1900

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

2003

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

1914

Manufactured the first rock drillin Japan.

2005

1918

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

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.

1944

1951
1962

1989
1990

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.

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

1987

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

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

1950

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

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

Established a rock drills sales
company in China.

2007

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

2008

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

2009“UNIC” has become asynonym for truck-mounted
cranes in Japan.

Built the laboratory of the Nitride
Semiconductors Department inOyama.

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

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

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

2010

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

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

The Japanese name changed
from Furukawa Kogyo Kabushiki Kaisha to Furukawa Kikai
Kinzoku Kabushiki Kaisha.
Bought an American breaker sales
and manufacturing company.

2006This is an affiliate company for
the UNIC business establishedin Rayong, Thailand, which
manufactures truck-mounted
cranes and other products.

2013

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

2014

Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.

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

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

Coil processing company establishedin the Philippines.
Established the Tsukuba Development Center, which integrates atechnology research operation.

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

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

55

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

http://www.furukawakk.co.jp