Contributing to
the Construction ofSocial Infrastructure

Contributing to
the Construction ofSocial Infrastructure

Annual Report(Integrated Report)
2020
Year ended March 31, 2020

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

Contents
About the Furukawa Company Group1

The Furukawa Company Group’s Value Creation Process

2

Interview with President Miyakawa

4Management Innovation for Realizing Our Ideal Future Vision

9

Review of Operations

12

Topics18

ESG Information

Target Period: April 2019–March 2020
(Some activities before and after this period are also included.)		The Furukawa Company Group’s ESG Activities

19		 CSR and ESG Issues

20		Marketing-Based Management That Incorporates CSV Perspectives 21
		Corporate Governance

Annual Report (Integrated Report)

Directors and Audit & Supervisory Board Members

Annual Securities
ReportCorporate Governance
Report

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

22
24

		
Message from an Outside Independent Director

25

		
Risk Management26		Compliance27		Environmental Initiatives

28

		Social Initiatives

30

Financial Information

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

		Consolidated Six-Year Financial Summary32

		Financial Review

33

Corporate Data and Stock Data

73

Corporate History74

About the Furukawa Company GroupThe key to the success of the Furukawa Company Group, which recently celebrated the 145th anniversary of its founding, began with thedevelopment of the Ashio Copper Mine by founder Ichibei Furukawa. Since then, we have moved in line with the times and developed
and advanced our technologies, amassed through mine development, to build our two current
business domains: the Machinery business and the Materials business. Today, we are increasing
our focus on niche products that reflect our expertise and boast a high market share. We arealso stepping up efforts to practice Marketing-Based Management*1 by deploying our unique
technologies and past experience. In particular, our Machinery business, positioned as a corebusiness, responds to market needs and contributes to the development of social infrastructure.
By continuing to offer products that are indispensable to society, we aim to resolve various
social issues and help realize a sustainable society. We are working hard every day to achieve our
Ashio Copper Mine (around 1920)
Vision for 2025, entitled FURUKAWA Power & Passion 150*2, as we approach fiscal 2026, the150th anniversary of our founding.
*1 Marketing-Based Management“Marketing-based management” means incorporating marketing into the core of management to provide products and services recognized as valuable 		in changing markets, as well as to identify and resolve issues and problems faced by customers, with the aims of deepening ties with customers, achieving
sustainable growth, and increasing corporate value.
*2 FURUKAWA Power & Passion 150
The “Power & Passion” symbol expresses the “power and speed” and the “passion and enthusiasm” aspects of our businessapproach. The perfect red circle conveys the connections and bonds we have with customers, and “150” represents the 150th
anniversary of our founding in 2025, which is the year for achieving our vision.

Management Philosophy

Action Guidelines

The Furukawa Company Group will remain

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

indispensable to society by always embracing a spirit of challenge, advancing thetechnologies that have underpinned thefoundation of society that originatedin mining development.

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

Financial / Non-Financial Performance
2020/3

2019/3

2018/32017/3

2016/3

2015/3

165,216

174,117

167,696

149,830

161,799

172,544

Operating income (Millions of yen)

8,693

8,915

7,821

6,546

7,989

8,925

Profit attributable to owners of parent (Millions of yen)

4,432

4,654

4,774

4,254

5,056

9,793

Profit attributable to owners of parent
per share (Yen)

112.23116.23118.16105.29125.13242.34Return on equity (ROE) (%)

5.8

5.7

5.9

5.9

7.5

15.9

Return on sales (%)

2.7

2.7

2.8

2.8

3.1

5.7

Total asset turnover (Times)

0.7

0.7

0.7

0.7

0.8

0.8

CO2 emissions (Thousand t)

22

26

26

25

24

27

Total emissions including waste, etc. (t)

7,039

7,160

6,884

5,347

6,832

6,266

Employees

2,755

2,757

2,690

2,616

2,521

2,456

Fiscal year

Net sales (Millions of yen)

Annual Report 2020

1

The Furukawa Company Group’s Value Creation Process
The Furukawa Company Group has a long history of 145 years. Since our beginning in mine development, we have undergone varioustransformations, diversified our operations, and overcome many difficulties. This history forms the foundation of today’s Furukawa Company
Group. Embracing the philosophy of Ichibei Furukawa, our founder, we have practiced marketing-based management that incorporates
CSV* perspectives by developing mines and other technologies that support social infrastructure. As a result, we have continued to innovate
products and services that are reliable and appealing and satisfy social and market needs. With a commitment to “category leadership anduniqueness,” we aim to create “corporate value” by providing infrastructure, products, technologies, services, and the like that help resolve
social issues. At the same time, we will continue fostering the creation of “social value” by improving social infrastructure and realizing asafe, environmentally friendly, and prosperous society.

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

Mining technologies
Exploitation
technologies

Drilling
technologies

Transport / Mineral processing
technologies

Hydrauliccontrol
technologies

Slurrytransportation
technologies

Grinding
technologies

Exhaust gas
treatment
technologies

StrategyRock Drill Machinery

UNIC Machinery

Industrial Machinery

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

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

Manufacture and sale of pumps,
crushers, and other materialrelated machines, bridges,
belt conveyors and heat- andwear-resistant castings; various
construction contracts

Vision for 2025
Medium-Term Business Plan

ROE
ROA

Machinery Business

CSR
ESG

“Corporate Value”“Marketing-Based Management”

2

FURUKAWA CO., LTD.

Seeking to realize our Management Philosophy, we are currently implementing our Vision for 2025 in the approach to our 150th
anniversary in fiscal 2026. The vision is divided into three phases, each with its own medium-term business plan. In our business activities,
which center on the Machinery business and the Materials business, we will bring together technologies cultivated over many years and new
strategies while also taking return on equity (ROE), return on assets (ROA), business portfolio management, corporate social responsibility(CSR), ESG, and risk management into account. We will also help achieve the Sustainable Development Goals (SDGs) and continue
contributing to the realization of a sustainable society by resolving various social issues, including national resilience challenges and a
declining workforce. This is the Group’s value creation process for realizing its Management Philosophy.
* Creating shared value (CSV): This is a management framework that enables companies toco-create social value and corporate value by tackling social, environmental, and other issues.

Smelting
technologies“Category leadership and uniqueness”
Flash smelting
technologies

MetalsSulfuric acidproduction
technologies

ChemicalsElectric
technologies

Electronics

Products /Technologies /Service“Social Value”
Creation

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

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

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

Business
Portfolio
Management

Materials Business

Creation through Business Activities

Risk
Management

Social Issues /Needs
Incorporated CSV* Perspectives

Annual Report 20203

Interview with
President Miyakawa

Naohisa Miyakawa
President and Representative Director

Pathway to Achieving Medium-Term Business Policy 2022 (Phase 2 of Vision for 2025)
In this section, President Miyakawa reflects on evaluations and issues related to Medium-Term Business Plan 2019, which
was Phase 1 of the Group’s Vision for 2025. He also talks about the pathway to achieving Medium-Term Business Policy
2022 (Phase 2), the objective of which is to “Expedite growth and further improve profitability.”

Q1. Please tell us about your responses to the

COVID-19 crisis and your understanding of thecurrent situation.

COVID-19, which is said to have started in January 2020, has since
spread to Japan and all over the world. The Group’s top priority is
to ensure the safety of its employees and ensure the sustainability of each business. First, in order to prevent infections among
employees as much as possible, we introduced staggered working
hours on February 27 and working from home on March 27 for
employees in affected areas who received urgent requests fromtheir local governments. In addition, we raised ¥10 billion fromfinancial institutions for use as working capital and sold investment
securities in order to have cash and deposits on hand for immediate response to sudden funding needs. As of June 30, however,
we confirmed that the Group’s supply chain had not been significantly affected by the pandemic, although we will closely monitor
the situation and work to ensure stable procurement.
The situation remains uncertain due to the pandemic, butthings will eventually return to normal. The most important priority
for the Group right now is to respond as much as possible tothe current situation and do our utmost to recover our businessperformance once the situation is resolved. It is often said that“big changes don’t happen until the going gets tough.” With thisis mind, we see the current situation as an opportunity to take4

FURUKAWA CO., LTD.

proper care of employees in terms of their physical and mental
health, making them strong in mind and body and prepared fora fresh start.

Q2. Please summarize the Group’s performancein fiscal 2020 and give your assessment ofMedium-Term Business Plan 2019 and its
challenges.
For the year, we reported year-on-year declines in revenue andearnings, with consolidated net sales down 5.1%, to ¥165,216
million, and operating income down 2.5%, to ¥8,693 million.
The Rock Drill Machinery segment posted declines in sales andoperating income, reflecting a pull-back from the previous year
when shipments of equipment complying with Tier 3 exhaust gas
emissions were strong, as well as deteriorating market conditions
overseas. On the other hand, the Industrial Machinery segment
and UNIC Machinery segment both reported steady growth,
together compensating for declines in the Rock Drill Machinery
segment. As a result, profit attributable to owners of parent
decreased 4.8%, to ¥4,432 million.
Fiscal 2020 was also the final year of Medium-Term Business
Plan 2019, positioned as Phase 1 of our Vision for 2025. Ouroperating income target under the plan was ¥8,500 million, andwe exceeded this figure in the final two years of the plan: ¥8,915

Interview with President Miyakawa

million in fiscal 2019 and ¥8,693 million in fiscal 2020. We recognize that expansion of the Machinery business, positioned as a corebusiness, contributed significantly to this result.
Also, operating income in the Machinery business accounted for
83% of total operating income in fiscal 2020, exceeding our 72%
target under Medium-Term Business Plan 2019 and well above the
53% figure reported in fiscal 2017, the year before the plan started. In short, the Machinery business helped us achieve our performance indicators. At the beginning of the plan, we made it clearthat the Rock Drill Machinery segment and the UNIC Machinery
segment should play key roles. At that time, however, we did notenvision how the Industrial Machinery segment would perform. So
we conducted repeated examinations under the plan–do–check–act(PDCA) cycle and reinforced our engineering capabilities following an organizational restructuring in April 2018. As a result, we
received multiple orders for large-scale project equipment, suchas belt conveyors and crushers, which greatly contributed to ourimproved business performance. Now, we can clearly see thedirection we should take, but the challenge is to improve accuracy
and probability when pursuing orders for large-scale projects. In
addition, the Rock Drill Machinery segment is still not fully functioning despite efforts to strengthen its overseas marketing capabilities.
As managers, we need to reflect on this. I believe we must rebuild
our mindset and our systems by returning to the basic principles ofmarketing, including self-analysis and sales strategy planning. This isan urgent issue.
Another performance indicator under the plan was ROE. In fiscal
2020, we posted ROE of 5.8%, falling short of the plan’s target of
6–7%. The direct cause of this was deterioration in profit attributable to owners of parent resulting from a ¥1,030 million loss on
impairment of investment securities, posted as an extraordinary
loss. With respect to strategically held shares, we will continue

monitoring the suitability of maintaining holdings and sell unnecessary shares as appropriate. Going forward, I want all employees
to understand the frontline key performance indicators (KPIs)
presented in our “ROE Tree” and incorporate them into their own
work. In particular, they need to work on improving the return onsales (profitability) and total asset turnover (efficiency), which aredecomposition factors of ROE, from Phase 2 onward.
As for Phase 1, my assessment is that we achieved some of
our objectives as planned, while others remain to be addressed inPhase 2. Regarding the slogan of Phase 1, “Building foundations
for renewed growth,” I believe we succeeded in building suchfoundations, driven by our core Machinery business. We also
made good progress with our marketing-based management
approach, but more work is required in the future.

Q3. In May 2020, you made a partial revisionof Vision for 2025. What was the purpose andbackground of this revision?
The environment surrounding corporations and the way society
views them are changing rapidly. Our aim is to provide products
and services that are valued even amid such dramatic change,
and to deepen ties with our customers by finding solutions totheir problems and issues, so that we can achieve sustainablegrowth and increase our corporate value. As we entered Phase 2
of Vision for 2025, we reaffirmed our Purpose and Mission, which
are incorporated in our Management Philosophy: “The Furukawa
Company Group will remain indispensable to society.” We also
redefined “marketing-based management” to incorporate CSV
perspectives. The Group’s view of CSV is to simultaneously createsocial value and corporate value by tackling social issues, such as
the SDGs. Natural disasters, such as torrential rains and typhoons

Positioning of Medium-Term Business Policy 2022: Accelerate Growth and Further Improve Profitability
Vision for 2025 (ideal image for 150th anniversary of foundation)
Creation of“corporate value” and“social value”

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

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

Phase 1

Phase 3Phase 2Time period

FY2018–2020

FY2021–2023

FY2024–2026

Positioning

Build foundations
for renewed growth

Expedite growth andfurther improve profitability

Complete realization of
Vision for 2025

OperatingincomeApprox. ¥8.5 billion [¥8.6 billion*]

Regularly in excess of ¥15 billion

ROE

Approx. 6–7% [5.8%*]

New Medium-Term Business Plan(announce when formulated)

Performanceindicators

More than 10%* Figures in brackets represent actual results for fiscal 2020.

Annual Report 20205

Interview with President Miyakawa

Vision for 2025
“FURUKAWA Power & Passion 150”
Become a corporate group that leverages
its reputation for category leadership anduniqueness to deliver growth
We are targeting consolidated operating income regularly
in excess of ¥15 billion as we approach our 150th
anniversary in fiscal 2026.

Strategies for Achieving Vision for 2025
❶ Increase the value of the Furukawa brand through 				 “marketing-based management” that incorporates CSV		perspectives
We will incorporate marketing into the core of management toprovide products and services recognized as valuable in changing
markets, as well as to resolve issues and problems faced bycustomers, with the aims of increasing corporate value andachieving sustainable growth. We will also strive to achieve theSustainable Development Goals (SDGs) and otherwise resolve
various social issues, including such domestic issues as building
national resilience and the declining working-age population,and thus help realize a sustainable society.

●		 Reinforce technological sales capabilities (proposals and		 solutions) reflecting customer needs●		 Develop products, technologies, and services that meet		 market needs●		 Achieve category-leading positions by concentrating on
		 niche products that have competitive advantages and using		 differentiation strategy●		 Cultivate and create new markets and product categories;
		 build a new business model●		 Enhance our products, technologies, and services, which		 underpin our social infrastructure, to help resolve social issues❷ Sustainably expand the Machinery business●		 Reinforce revenue bases in growing overseas markets mainly		 in business related to infrastructure and resource development●		 Strengthen and enhance stock business●		 Maximize business opportunities by demonstrating
		 comprehensive Group competencies and reinforcing
		 engineering strengths❸ Strengthen and expand our human resource bases●		 Build vibrant human resources and corporate culture for a		 new Furukawa●		 Secure, utilize, and develop diverse human resources in		 Japan and overseas● 	 Put even more effort into training sales and marketing personnel❹ Actively promote investments to increase corporate value●		 Make proactive capital investments necessary for growth●		 Expand business through strategic M&A and alliances❺ Establish a robust corporate foundation●		 Increase corporate value by improving profitability and		 capital efficiency, targeting ROE of more than 10%●		 Establish a strong financial base●		 Achieve balanced appropriations between investments for		 growth and return to shareholders●		 Increase corporate value by emphasizing business practices
		 that reflect CSR and ESG issues recognized and to be solved
		 by the Group* Changed sections are underlined.

6

FURUKAWA CO., LTD.

caused by climate change, are becoming more and more severe,
underscoring the increasing responsibilities we must fulfill as aGroup. These include such domestic challenges as disaster prevention and mitigation, as well as the need to build infrastructure fornational resilience. Another social issue for the Group is to foster
advances in automation and unmanned operations of construction
sites, which are facing labor shortages due to a declining working-age population. We must also help save energy and reduce
CO2 emissions. From this perspective, we clarified our intention to“Increase corporate value by emphasizing business practices thatreflect CSR and ESG issues recognized and to be solved by theGroup” as part of our strategy to “Establish a robust corporate
foundation” under Vision for 2025. The Group will step up efforts
to generate corporate value by providing infrastructure, products,
technologies, and services that help resolve social issues. At thesame time, we will continue striving to create social value, including by building social infrastructure and realizing a safe, environmentally friendly, and prosperous society.

Q4. Meanwhile, you formulated Medium-TermBusiness Policy 2022. Please tell us about the
purpose and content of this policy.
The Group had been preparing to announce its Medium-TermBusiness Plan 2022, to be positioned as Phase 2 of Vision for2025. However, we decided to postpone the announcement inconsideration of the COVID-19 pandemic, which caused majorchanges in the operating environment and business conditions
that form assumptions for the plan. Instead, we formulated our
Medium-Term Business Policy 2022 in order to clarify management strategies, priority issues, and other matters that need to beaddressed in Phase 2. Phase 1 of Vision for 2025 was positioned
as a period of “Building foundations for renewed growth.” Under
Medium-Term Business Policy 2022, we will make all-out efforts
to solidify the foundations built in Phase 1, in order to “Expedite
growth and further improve profitability.”In the Rock Drill Machinery segment, we will strengthen andrebuild our overseas marketing capabilities, which is an important and urgent priority. We will also focus on building businessmodels using Life Cycle Support (LCS) approaches. In the Industrial Machinery segment, meanwhile, we will continue pursuinginnovations aimed at revolutionizing our income structure withthe goal of transitioning from a simple equipment manufacturer.
And in the UNIC Machinery segment, we will steadily enhance
our overseas product, sales, and service technology capabilities.
In particular, we will continue striving to “Sustainably expand
the Machinery business”—positioned as a core business underMedium-Term Business Plan 2019 (Phase 1)—in order to clearly
identify priority investments and growth businesses. We will also
step up alliances and M&As to achieve discontinuous growth. In
addition, we will work to improve ROE, an issue remaining from
Phase 1. Here, we will make individual investment decisions while
paying attention to profitability and taking into account risks andcapital costs associated with each investment. We will also step up
efforts to improve efficiency and profitability. At the same time,
we will pursue overall optimization of business resource allocations

Interview with President Miyakawa● ROE Tree for Creating Corporate ValueManagement / Performance Indicators
Be disclosed

Breakdown into Strategies and Measures

In-Group KPI (Performance Indicator [Improvement Driver])

Expand business areas;develop new businesses
and products
Gross margin

Expand business areas
Develop new businesses;
launch new(high-value-added) products

Increase sales prices(unit prices)

Control sales prices

Reduce cost-of-sales
ratio

Reduce defective products

Promote centralized purchasing[Profitability]

Operating margin[ROA]

Net income
Total assets[ROE]

Net income
Net worth

Reduce logistics costs

Operating income
Net sales

Reorganize operations;sell businesses
Reduce labor costs

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

Automate; save labor
Increase productivity

KPIs into Frontline Operations(Examples)

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

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

SG&A expense ratio

Operating income
Total assets[Efficiency]

Current asset turnover

Total asset
turnover

Reduce costs;
improve cost-effectiveness

Reduce R&D expenses
Reduce sales promotion
and advertising expenses

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

Increase sales volume

Increase market share

Sales volume; market share

Increase accounts
receivable turnover

Shorten accounts receivable
collection period

Accounts receivable turnover
period (days / months)

Shorten lead times
Increase inventory
turnoverNet sales
Total assets

Reduce inventories

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

Improve capacity utilization rate
Improve capital
investment efficiency

Fixed asset turnover

Tangible fixed asset turnover
period (days/months)

Sell idle assets[Financial leverage]

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

Increase shareholder
returns

Increase cash dividends
Share repurchase andretirement

Increase interest-bearing debt

Total shareholder return ration/a (no set KPI)

and improve corporate value by incorporating cost of capital in ourbusiness portfolio management.

while developing products that simultaneously improve customer
satisfaction and benefit the global environment.

Q5. Please tell us about the Group’s efforts to
reduce CO2 emissions.

Q6. Please tell us about your corporate governance reforms.

Amid growing worldwide concern about climate change and various
disasters caused by global warming, we recognize that reducing CO2
emissions is a major challenge for the Group as well. In fiscal 2020,
the Group emitted approximately 22,000 tons of CO2, down 16%
from the previous fiscal year. We set reduction targets each year
and pursue reduction initiatives in each department, but we needto step up these efforts in the future. On the other hand, our forest
holdings absorb around 8,000 tons of CO2 per year, equivalent toroughly 36% of the Group’s total emissions in fiscal 2020. Furthermore, we believe we can also reduce CO2 emissions by enhancing
the efficiency of our machinery and improving work efficiency forour customers. Accordingly, we are strengthening efforts to reduce
CO2 emissions from our products by setting specific targets for eachproduct in line with development roadmaps for the Group’s main
product lines. Through this initiative, we will work to raise awareness among employees about the importance of social contribution

We have been reforming our corporate governance for the pastseven years with the aim of creating a forum for free and vigorous
discussion by the Board of Directors.
We also regarded Japan’s Corporate Governance Code,released by the Financial Services Agency and the Tokyo Stock
Exchange in June 2015, as an opportunity and have been making
gradual reforms ever since. In terms of structure, we discontinued the reciprocal dispatch of directors to cross-shareholding
companies and replaced all three outside directors with independent outside directors who meet the Company’s independence
standards. Our current Board of Directors consists of six internal
directors and three independent outside directors, one of whom
is a woman. We are working to share knowledge and information
between internal and outside directors. For example, we organize
plant tours and other events for outside directors, provide them
reports in advance on Management Committee agenda items,

Annual Report 20207

Interview with President Miyakawa

and give them briefings from each of our business divisions. Thanks
partly to these efforts, our Board of Directors’ meetings are now
managed with more time and care than before and feature lively
debate about the varying opinions and requests that are expressed.
The Company also established a Nomination & Remuneration
Committee to serve as an advisory body to the Board of Directors.
It consists of three outside directors (including the chairperson) and
one internal director (the president and representative director) andmet four times between November 2019 and May 2020. The main
topics of discussion included processes for appointing the next andsubsequent presidents and the executive remuneration system.
We also hold meetings for outside directors only and meetings
for outside directors together with the president, aiming to create
environments that facilitate the frank expression of opinions. As
the Group’s activities become more and more global in nature, we
believe we will need to address social issues on a global scale fromthe perspectives of ESG and the SDGs.

Q7. What are the most important steps you aretaking to realize Vision for 2025?
As I mentioned earlier, we live in era in which social issues are
becoming more serious and complex, and this will increasingly
call into question what kind of social value we can create for theworld. And because we are in a time of uncertainty, I believe it isimportant to promote management based on unshakable foundations. These foundations are reflected in our marketing-based
management, which has been redefined to incorporate CSV
perspectives, and in our Medium-term Business Policy 2022, whichis Phase 2 of Vision for 2025.
In order to resolve the issues remaining from Phase 1 and realize
Vision for 2025, our most important task in Phase 2 and thereafter
is to inspire Groupwide awareness about the need for innovation. In our view, innovation goes beyond technological advances
pursued by our engineering divisions to include a variety of innovative initiatives that emanate from the immediate surroundingsof all employees. We believe it is vital that all employees embracea passion for innovation and create innovation in their daily work.
The history of our Machinery business began when we imported
single-man hand-held rock drills and adapted them to suit theJapanese physique. This was the start of our Rock Drill Machinery
segment. By modifying and improving things around us, we canopen up new markets that better match the needs of customers.
A recent example is a 4.8 km-long belt conveyor we supplied
for the Tokyo Gaikan Expressway construction project. It featuresa unique design that combines three elements of conveying—
long-distance, curved, and folded—into a single belt, and is agood illustration of how our innovation-orientated mindset is used
to create completely new products through the combination ofexisting technologies. This product is also a typical example of ourmarketing-based management that incorporates CSV perspectives
to help resolve social issues, including CO2 emission reduction. In
order to continue launching such unique category-leading products, it is essential that all employees have a heightened sense ofinnovation. And the president and our entire management teammust take responsibility for reminding employees of their
responsibilities so they can maintain their constant pursuit of innovation.

8

FURUKAWA CO., LTD.

At this stage, it is extremely difficult to predict how the
COVID-19 pandemic will affect us in the future. No matter what
happens, however, we will humbly accept the changes of thetimes and reinforce our innovation-oriented mindset while listening to the markets. In this way, we will fulfill our main missionof entrenching marketing-based management. By changing our
thinking and turning current difficulties into opportunities, we will
implement Medium-Term Business Policy 2022 and thus realize our
Vision for 2025.

Q8. Can you give a brief closing message to yourstakeholders?
One of the policies of Vision for 2025 is to achieve a balance
between growth-oriented investments and shareholder return. In
fiscal 2020, we paid annual dividends of ¥50.00, for a consolidated
dividend payout ratio of 44.6%. In addition to returning increased
profits to our shareholders, we make sure to retain funds that areneeded for capital investments and R&D, which are essential for
securing profits. To this end, we allocate profits after comprehensively considering future business development and other factors.
Business conditions for the Group are expected to continuechanging dramatically in the future. To help stakeholders understand our responses and approach, we believe it is more important
than ever to provide information and communicate with them.We
deliver information through a variety of tools, including this Annual
Report (Integrated Report) and our CSR Report. We are also
increasing opportunities for direct dialogue with stakeholders so
we can receive their valuable opinions and suggestions. We believethat such two-way communication will give birth to ideas andapproaches that will serve as guidelines for future management.
Going forward, we will continue listening closely to ourstakeholders and work to realize the goals of Vision for 2025 while
asking all employees to embrace a sense of urgency. We look forward
to your ongoing understanding and support.

S pecial F eatureManagement Innovation for Realizing Our Ideal Future Vision
In our pursuit of sustained increases in corporate value, we formulated Vision for 2025 as a long-term business plan. We also created an “ROE Tree”
centered on improving return on assets (ROA), introduced cost of capital andbusiness portfolio management, enhanced the effectiveness of the PDCA
cycle, and so on. We have been striving to realize our ideal future vision bytaking these various measures and initiatives, which together are embodiedin our “FKK (Furukawa Co., Ltd.) Model.”Senior Executive Officer
General Manager for Management Strategy
Corporate Planning Dept.

Osamu Miyazaki

First Steps to Realize Our Ideal Future Vision
In 2015, when we celebrated our 140th anniversary, we formulated our Management Philosophy and Action Guidelines. We alsoannounced our Vision for 2025, entitled “FURUKAWA Power &Passion 150,” in order to put the Management Philosophy into
practice.
In these ways, we all took our first steps, united as one, byemphasizing “marketing-based management” in order to become“a corporate group that leverages its reputation for category
leadership and uniqueness to deliver growth.”
Vision for 2025 is a long-term business plan that represents
a departure from our single-year plan-driven management
approach of the past, in terms of implementing operational
management measures. It is positioned as an extremely importantfirst step in delivering management innovation.
We will continue to innovate measures and initiatives in relation
to our management strategies, structures, processes, methods,
and so forth by utilizing the PDCA cycle.

Innovation Built into Vision for 2025
We took the enactment of Japan’s Corporate Governance Codein June 2015 as an opportunity to take measures under Vision for2025 aimed at realizing our ideal future vision. Built into Vision
for 2025 are the essential elements of management innovation:
performance indicators, intangible assets, discontinuous growth,
capital strategies and cash flow allocation, and sustainability.
(1) Performance Indicators: Our performance indicators are		 simple, consisting of consolidated operating income, which		 is the source of corporate value, and ROE, which represents		 return on investment against shareholders’ equity. Moreover,		 we deliberately excluded net sales from our performance		 indicators to focus on improving corporate value, thus		 breaking the curse of focusing on revenue scale.
(2) Intangible assets: We expressed our policy of emphasizing
		 intangible assets (technology, brands, human resources, and		 the like) as a source of corporate value, by clarifying the way		 of increasing the value of the Furukawa brand through		 marketing-based management and expanding and		 strengthening our human resource base.
(3) Discontinuous growth: This means targeting business		 expansion through strategic alliances and M&As.
(4) Capital strategies and cash flow allocation: We specified
		 our intentions, including achieving a balance between
		 growth-oriented investments and shareholder return and		 establishing a robust corporate foundation, in order to clarify
		 our policy of pursuing an optimal capital structure based on a		 strategy to improve our credit rating.
(5) Sustainability: On May 8, 2020, we partially revised Vision for		 2025. Under the revision, we redefined “marketing-based		 management” to incorporate CSV perspectives. At the same		 time, we clarified our intention to “Increase corporate value
		 by emphasizing business practices that reflect CSR and ESG
		 issues recognized and to be solved by the Group” as part of		 our strategy to “Establish a robust corporate foundation.”
		 Accordingly, we will continue to step up sustainability-related
		 initiatives related to CSR, ESG, the SDGs, and the like.

Innovation in PDCA
In formulating our PDCA framework, we adopted a backcasting
method*1 to envision our ideal future vision, then clarified thepositioning of each of the three phases. We also used SWOT
analysis to incorporate what needs to be done into our strategies
and formulated individual and specific action plans that correspond to long-term and medium-term timelines and linked themto our KPIs.
In addition, we have adopted a three-year forward rolling
method*2, under which each medium-term business plan is rolled
out annually over a three-year period, enabling us to seamlessly
develop and announce our medium-term business plans to the
public at the start of each phase. PDCA milestones (undisclosed)*3
are set in advance in Phase 1 and 2, and action plans are reviewed(accelerated, augmented, revised, and the like) at each rollingstage in order to prevent deviations from the milestones.

*1 Backcasting: A method of thinking that focuses on what needs to be done now in order to realize an optimal discontinuous future vision that is not an
extension of the past or present.
*2 Three-year forward rolling method: A method of maintaining a three-year plan at all times by adding one year to the final year each year. This is done insynchronization with the single-year business planning process.
*3 PDCA milestones (undisclosed): Predetermined PDCA figures (undisclosed) that are replaced with officially disclosed figures each time a medium-termbusiness plan is announced.

Annual Report 20209

Special Feature

By building this mechanism into our system, we work to avoid
the “bird feather phenomenon”*4, in which targets are revised
downward at each rolling stage and initial medium-term businessplan targets are never achieved.

Furthermore, we have established a new dedicated PDCA
committee with direct involvement of top management. Our aim
here is to increase the effectiveness of the PDCA cycle in relation
to medium-term business plans, action plans, and businessportfolio management, and thus ensure optimal operations.

*4 Bird feather phenomenon: A management term that stands for “rolling weakness.” Based on the luck of improvement in corporate performance,
a medium-term business plan is repeatedly revised downwards and the previous targets are replaced with new, lower targets each time the plan is rolled(appearing to draw a bird’s feather on a graph), and original medium-term business plan targets are never achieved.

PeriodFiscal 2018–2020

Positioning

Building foundations forrenewed growth

Phase 2
Fiscal 2021–2023
Expedite growth andfurther improve profitability

Phase 3

Milestones

Phase 1

Milestones

Phase

Fiscal 2024–2026

Goals

Medium-Term Business Plan & PDCA Cycle

Complete realization of
Vision for 2025

Medium-Term Business Plan 2019(announced publicly)
Rolling Medium-Term Plan (PDCA)
Rolling Medium-Term Plan (PDCA)

Backcasting+
3-year rolling method+
Milestones+
Effective PDCA

New Medium-Term Business Plan(announce when formulated)
Rolling Medium-Term Plan (PDCA)
Rolling Medium-Term Plan (PDCA)
Medium-Term Business Plan 2025
(announce publicly)Long-Term Action Plan (to be implemented steadily through PDCA cycle of medium-term action plans)

Analyses of Innovation in Performance Management
Indicators and Improvements in ROA in Phase 1

ROA and financial leverage. In calculating ROA, which is one of
our performance indicators, we use operating income generated
by our core business, which is also a source of corporate value.
Furthermore, ROA reflects a combination of operating margin(profitability) and total asset turnover (efficiency). The GroupIn Phase 1, we promoted the “ROE Tree” as a Groupwide initiative,
incorporating it into our strategies and measures and establishing KPIs for frontline operations. ROE reflects a combination ofComparison between Fiscal 2017 and Fiscal 2020
[ROA (based on operating margin), total asset turnover, operating margin, and operating income](%)
13

UNIC Machinery (FY2020)
Industrial Machinery (FY2020)

Bubbles indicate operating income amounts
11

UNIC Machinery (FY2017)

Operating margin

9

Chemicals (FY2020)

7

Consolidated(FY2020)

5Consolidated(FY2017)

Metals (FY2017)3

1

Chemicals (FY2017)

-1
0.20

10 FURUKAWA CO., LTD.

Rock Drill Machinery (FY2017)

Rock Drill Machinery (FY2020)
Electronics (Operating income -35) (FY2020)
0.40

0.60

Industrial Machinery (FY2017)

Metals (FY2020)

Electronics (FY2017)
0.80

1.00

Total asset turnover

1.20

2.50 (Times)

Special Feature

focuses on improving both of these elements in its effort toenhance ROA while also striving to improve ROE without excessive
reliance on financial leverage.
Unfortunately, ROE fell short of the Medium-Term Business
Plan 2019 target of 6–7%, ending fiscal 2020 at 5.8%, or 0.1
point lower than 5.9% reported in fiscal 2017 (benchmark year
for comparison purposes). However, ROA improved from 3.2%
in fiscal 2017 to 4.1% in fiscal 2020. This was due to increases
in the consolidated operating margin (profitability), which rose
0.9 point from 4.4% in fiscal 2017 to 5.3% in fiscal 2020, owing
mainly to improved operating margins in the Industrial Machinery,
UNIC Machinery, and Chemicals segments, which compensatedfor declines in the Rock Drill Machinery, Electronics, Metals, andReal Estate segments.
Total asset turnover (efficiency) also worsened, mainly in the
UNIC Machinery and Rock Drill Machinery segments, where we
made large-scale capital investments during the three-year period
from fiscal 2018 to fiscal 2020. However, we reported an improvement in the Industrial Machinery segment, which generated
healthy sales from multiple large-scale projects. We also posted
improvements in the Chemicals and Metals segments. As a result,consolidated total asset turnover (efficiency) improved by 0.1
times, from 0.7 times in fiscal 2017 to 0.8 times in fiscal 2020.

Innovation in Business Portfolio Management

Real Estate) and use them to make investment decisions on capital
investment, equity-based alliances, and the like.
Furthermore, we have incorporated management of eachconsolidated subsidiary, which cannot be done from a corporate
value creation perspective alone, into our business portfolio management system.
To visualize and better understand our business portfolio, we
have produced a bubble chart in which the three elements ofcorporate value creation power are plotted along the X axis, compound annual growth rate (CAGR) for net sales is plotted along
the Y axis, and each bubble size indicates an amount of corporate
value created/year.
By basing our decisions on this built-in perspective on corporate
value creation, we will make rational business decisions that are
not excessively influenced by our history and emotional attachments to our company.
Businesses with negative potential for corporate value creation
are considered unprofitable, even if they are currently in the black.
If we see no improvement in a business’ corporate value during a
specified period, we will consider sell-off or withdrawing from it.

By introducing cost of capital into our business portfolio management and calculating cost of capital for each of our seven businesssegments, we endeavor to grasp the reality of our corporate value
creation efforts. We have also set hurdle rates (WACC+α%) for
each of our three business divisions (Machinery, Materials, andCorporate Value Improvement Process
Cost of capital introduction

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

Business segment
management

Capital investments
M&As
Investment-based
alliances

Corporate value
creation standard

Hurdle rate standard

ROIC – WACC＞０

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

Improving corporate value

ROIC
>
WACC

Cost of capital

Corporate Value Creation: Image & Formula

Net operating profit
after taxes

In order to realize Vision for 2025, it is essential that we improve
our corporate value. Therefore, we must improve ROE, an important
performance indicator. Unfortunately, we were unable to reach
our ROE target in Phase 1. However, we noticed signs of improvement in ROA, which we use as a performance indicator within theGroup. In Phase 1 of Vision for 2025, we made multiple largescale capital investments. When these become operational and wehave built our new business model, we will vigorously promote a
variety of measures and initiatives to further improve profitability
and efficiency.
Bubble Chart Aiming for Business
Portfolio Identification & Visualization
Illustrating the three performance indicators of each business segment onto thegraph below enables the corporate value creation status of each businesssegment to be identified and visualized.

Cost of debt
(amount)
Cost ofshareholders’ equity(amount)

Net operating profit
after taxes

ROIC

Cost of capital

ROIC
<
WACC

−

Growth potential(+) Amount of corporate value
created/year*5

Cost of debt
(amount)

Cost ofshareholders’ equity(amount)

WACC(–) Amount of corporate value
created/year*5＝

Formula(Corporate value creation power*5 x Invested capital) ÷ 100 ＝

Corporate value
creation power*5
Amount of corporate value
created / year*5

Compound annual growth rate (CAGR)

Business portfolio management

Selective investments:
Next-generation businesses

Top priority in investments:
Growth businesses

X%
Rebuilding:Business restructuring

Stable profit:
Core businesses

Withdrawal / Sell-off

0%

Corporate value creation power* (= ROIC – WACC)
Corporate value creation power*5*5 Both “Corporate value creation power” and “Amount of corporate value
created/year” are terms coined by Furukawa Co., Ltd.
Annual Report 202011

Review of Operations

Machinery
The Machinery Business consists of three segments: Industrial Machinery (pumps, materials-related machines, steel bridges, etc.),
Rock Drill Machinery (mining machinery, tunnel construction machinery, etc.), and UNIC Machinery (truck-mounted cranes and othercargo handing machines).
In fiscal 2020, total sales of the Machinery Business—consisting of
the Industrial Machinery, Rock Drill Machinery, and UNIC Machinery segments—amounted to ¥82,692 million, up 6.6% year
on year, and operating income was ¥7,344 million, up 11.8%.
This performance was driven by increased sales and income in
the Industrial Machinery and UNIC Machinery segments, which
contrasted with declines in sales and income in the Rock Drill
Machinery segment.
For the year, the Machinery Business accounted for 50.1%
of consolidated net sales and 84.5% of operating income.
Compared with 53% in fiscal 2017 (the previous fiscal year of
Medium-Term Business Plan 2019), the share of total operating
income increased significantly by more than 30 percentage points.
Of the Machinery Business’ total sales, the Industrial Machinery
segment accounted for 28.1%, the Rock Drill Machinery segment
for 33.5%, and the UNIC Machinery segment for 38.4%. Of theMachinery Business’ operating income, however, the Industrial
Machinery segment accounted for 43.7%, the Rock Drill
Machinery segment for 1.9%, and the UNIC Machinery segment
for 54.4%.
During the period covered by Medium-Term Business Policy
2022, we expect domestic demand to remain steady for services

related to new Shinkansen lines, the Linear Chuo Shinkansen Line,national resilience, and regional revitalization, as well as Osaka
Kansai Expo in 2025. In addition to capturing business related
to these projects, we will strengthen our earnings foundationin expanding overseas markets, centered on infrastructure andresource-related development.
Machinery Business% of Net Sales
50.1%(Billions of yen)

Operating Income (Right)
100

20

72.2

% of
Operating Income
84.5%

66.8

73.5

77.6

82.7

50

10

5.9
3.6
0

5.1

6.6

7.3

'16/3 '17/3 '18/3 '19/3 '20/3

0

Hydraulic crawler drills

産業機械部門Crushes andMachineryBusiness: Priority
Fields and Domestic Market Share
Hydrauliccuts bedrock
breakers
Hydraulic crawler drills

into small pieces
Material for
concrete andthe like

Hydraulic crawler drills
Hydraulicbreakers

Crushes andcuts bedrock
into small pieces
Material for
concreteandCrushes andthecutslike
bedrock
into small pieces
Material for
concrete andthe like

Concrete

Hydraulicbreakers

Crushers0

Crushers

Crushers

Tunnel drill jumbos

Tunnel projects
Belt conveyors
Tunnel drill jumbos
Shield pumps

Shield pumps

Mini crawler cranes

CO., LTD.
12 FURUKAWA
Hydrauliccrushers

機械事業
営業利益
構 成 比

0

38.4%

holes in rock, in which gunpowder is inserted for blasting. We also
20
40
have hydraulicbreakers, which
are used60to break large80rocks into 100
small pieces, and crushers and screens, used at plants to achieve the
ユニック部門ロックドリル部門
desired rock産業機械部門
sizes. These products
contribute to demandfor concrete
54.4%
43.7%
1.90%
in various areas.

20

40

60

80

100

We develop and manufacture tunnel drill jumbos, which are used tocreate openings for loading gunpowder needed for rock blasting inmountain tunnel projects. We also develop and make belt conveyors
for transporting large amounts of earth and sand, as well as shield
pumps, which use water to pump excavated earth and sand inunderground tunnel projects. Here, our drilling and wastewater
treatment technologies, amassed through mine development, come
0
20
40
60
80
100
to the fore.

0

Shield pumps
Mini crawler cranes

Hydrauliccrushers

ユニック部門33.5%

Belt conveyors

Civil engineering and construction worksites

Mini crawler cranes

ロックドリル部門

Belt conveyors

Tunnel drill jumbos

Hydrauliccrushers

28.1%

機械事業
売 上 高 To mine for gravel and limestone, which are raw materials for構 成 比 concrete, we supply hydraulic crawler drills that are used to drill

UNIC cranes

UNIC cranes

UNIC cranes

20

40

60

80

100

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

Industrial Machinery
Features of the Industrial Machinery segment
1. Stable domestic demand that accounts for majority of sales
2. Encompasses section plants (such as pumps and materials-related machinery) in addition to
product sales
3. Includes contractor business, where orders consistently cover everything from design toinstallation (steel bridges and belt conveyors)
Furukawa Industrial Machinery Systems Co., Ltd.
President and Representative Director

Katsuhira Kawashita

Review of Fiscal 2020 Performance
The Industrial Machinery segment reported increased sales frommaterials-related machines for an intermediate storage facility(Futaba-machi, Futaba-gun, Fukushima Prefecture). It also generated higher sales from large-scale projects, including sales of belt
conveyors for construction of the Tokyo Gaikan Expressway, cargohandling equipment for an international bulk terminal at the Portof Onahama, belt conveyors for an intermediate storage facility(Okuma-machi, Futaba-gun, Fukushima Prefecture), and enclosed
hanging belt conveyors for the Sakaigawa-Kanamori retention
basin project (Machida City, Tokyo). Consequently, segment sales
increased 29.3% year on year, to ¥23,237 million, and operating
income jumped 53.6% to ¥3,208 million.
Review of Medium-Term Business Plan 2019
In the Industrial Machinery segment, we reorganized our businessand strengthened our engineering capabilities*1 with the aim oftransitioning from a simple equipment manufacturer to a strategic partner for our customers, with very good outcomes. Our
proprietary belt conveyor technologies were adopted in multiple
large-scale construction projects, enabling us to expand ourcontractor business. In addition to a specified cemented waste
treatment facility (Naraha-machi, Futaba-gun, Fukushima Prefecture), for example, we provided belt conveyors for construction of
the Tokyo Gaikan Expressway, cargo handling equipment for aninternational bulk terminal at the Port of Onahama, belt conveyors
for an intermediate storage facility (Okuma-machi, Futaba-gun,
Fukushima Prefecture), and enclosed hanging belt conveyors for
the Sakaigawa-Kanamori retention basin project (Machida City,
Tokyo). In materials-related machinery, we provided crushers
for an intermediate storage facility (Futaba-machi, Futaba-gun,
Net Sales (Billions of yen)

Fukushima Prefecture), which is a section plant project, and we
attracted orders for screens, briquetting machines, and certain
types of plant equipment.
Future Measures
Going forward, we will continue our strategy stated underMedium-Term Business plan 2019 of “Increasing our involvement
in section plant construction projects and expanding our contractor business, including large-scale projects for both the public andprivate sectors, in order to transition from a standalone machinery manufacturer, strengthen our engineering capabilities, andenhance our business foundation in the domestic market.” As ourbasic strategy to establish a solid growth trajectory, we will attract
new orders by providing technical proposals for section plant
construction and other projects, cultivate demand for SICON®*2
enclosed hanging conveyors, and strengthen our earnings foundation by capturing new demand for pumps and materials-related
machines. In the contractor business, we will continue striving
to win orders for large-scale construction projects by envisaging
unexpected situations and engaging in rigorous risk management
and project management, while proposing conveyance technologies using our own belt conveyors, with the aim of resolving
various social issues.
*1 Engineering capabilities: The ability, as part of the sales process, to use
experience, technology, and knowledge as tools in order to make
optimal proposals to customers based on consideration of acomprehensive balance of all factors, including functions, costs,
operating environment, and safety.
*2 SICON® is a registered trademark of ContiTech Transportbandsysteme
GmbH.

Operating Income (Billions of yen)

14.9 14.0 15.9 18.0 23.2

1.0

'16/3 '17/3 '18/3 '19/3 '20/3'16/3 '17/3 '18/3 '19/3 '20/3

0.1

1.0

2.1

3.2

Belt conveyor installation work
Belt conveyor installation work
(Sakaigawa-Kanamori retention basin project) (Tokyo Gaikan Expressway)

Annual Report 202013

Rock Drill Machinery
Features of the Rock Drill Machinery segment
1. Over 50% of sales derived from overseas demand
2. High market share as sole comprehensive rock drill manufacturer in Japan
3. Hydraulic equipment, which forms the heart of rock drill machines, made in-house(using high-precision machining / heat treatment)
Furukawa Rock Drill Co., Ltd.
President and Representative Director

Hiroyuki Abe

Review of Fiscal 2020 Performance
The Rock Drill Machinery segment benefited from healthy domestic shipments of hydraulic breakers and hydraulic crawler
drills on the back of continued steady demand for urban redevelopment and construction investments. We also shipped tunnel
drill jumbos to construction projects related to the Linear Chuo
Shinkansen Line, new Hokkaido Shinkansen lines, and the Chubu
Odan Expressway. However, revenue declined against the previous
fiscal year, when we made steady shipments of tunnel drill jumbos
for Kumamoto earthquake restoration and reconstruction work.
Overseas, there was a decrease in shipments of hydraulic crawler
drills, especially to North America, compared with the previous
fiscal year when shipments of equipment complying with Tier 3
exhaust gas emissions were strong. In other regions, sales declined
as deteriorating market conditions dampened overall demand.
Consequently, sales in the Rock Drill Machinery segment were
down 8.9%, to ¥27,663 million, and operating income fell
91.6%, to ¥143 million.
Review of Medium-Term Business Plan 2019
In order to strengthen our stock business*, which is a priority issue, we reinforced our Life Cycle Support (LCS) capabilities to recognize the value of products across the entire life cycle, not just attime of sale. In May 2018, for example, we established our own
maintenance facilities in the Tohoku and Kansai regions. In aneffort to create a comprehensive LCS system, meanwhile, in May
2019 we launched a standard installation service for equipmentused to control the operations of hydraulic crawler drills. By collecting and analyzing operational data using IT, we are strengthening proposals to help improve productivity of our customers’facilities. In the tunnel business, earmarked for steady growth indemand, we expanded and upgraded our lineup of domestic drill
jumbo peripheral work machines, such as rock bolters, concrete
spraying machines, and erectors. We also enhanced our lineup of
super-large hydraulic breakers to handle demolition work

Net Sales (Billions of yen)

Future Measures
Going forward, we will continue expanding earnings in boththe flow business and stock business by strengthening our LCS
capabilities. We will also reinforce our earnings foundation fordrill products (blast hole drills and drill jumbos), while adopting abasic strategy of developing new markets and introducing new
products to increase profits. Domestic demand for tunnel drill
jumbos, which are well suited to mountain tunnel construction,
will eventually decline. In response, we will step up efforts tobuild an overseas foundation for our drill jumbo business while
fortifying our overseas business in blast hole drills. In the process,we will work to strengthen and rebuild our overseas marketing
capabilities, which is a priority. One of our most pressing issues is
to use LCS to build business models with the aim of strengthening
our stock business by providing various services that benefit customers’ businesses (such as extended warranty, full maintenance,and proposals for using ICT-based operation support systems toenhance work efficiency). We will also further enhance our lineup
of products that contribute to safety and efficiency at tunnel
excavation sites, such as fully automatic drill jumbos andautomatic rock bolters, through joint development efforts with
the Technology Division.
* Stock business: Refers to after-market business (sales of spare parts,
maintenance services, used product trade-ins and sales, etc.) and rental
business, as opposed to flow business (product sales), which is more
susceptible to economic fluctuations.

Operating Income (Billions of yen)

30.1 27.0 30.2 30.4 27.7

2.2

'16/3 '17/3 '18/3 '19/3 '20/3'16/3 '17/3 '18/3 '19/3 '20/3

14 FURUKAWA CO., LTD.

accompanying urban redevelopment and infrastructure development projects. In October 2017, we started a capital investment
plan aimed at increasing the production capacity of the Takasaki
Works and other facilities. Although we completed the first stageof this plan, we decided to postpone and reassess capital investment from the second stage in light of this segment’s businessperformance and other factors.

0.9

1.8

1.7

0.1

Tunnel drill jumbos

Hydraulic crawler drills

UNIC Machinery
Features of the UNIC Machinery segment
1. Around 80% of sales derived from domestic demand
2. Domestic market share of 50% for both truck-mounted cranes and UNIC carriers
3. In-house design and manufacture of cylinders, valves, and other core components of 		
our hydraulic equipment
Furukawa UNIC Corporation
President and Representative Director

Minoru Nakatogawa

Review of Fiscal 2020 Performance
In the UNIC Machinery segment, we enjoyed an increase indomestic sales thanks to higher shipments of mainstay UNIC
cranes, reflecting a rush in demand and increased orders ahead ofa partial revision of mobile crane structural standards enacted in
March 2019. There was also a rush in demand prior to enactmentof exhaust emission standards for light trucks in September. In
addition, we posted healthy shipments to major rental companies. Meanwhile, overseas shipments and sales of UNIC cranes
declined, due mainly to economic slowdown in Southeast Asian
countries. Accordingly, segment sales rose 8.7%, to ¥31,791
million, and operating income climbed 43.1%, to ¥3,993 million.

of a capital investment program that started in April 2016, aimed
at reinforcing the “mother factory” functions of our Sakura Plant,
which has a three-pronged production system (Japan, China,
and Thailand). In addition, we reformed our hydraulic equipment
manufacturing processes by consolidating processing machineryin a newly established hydraulic equipment factory to enhance
production efficiency. We also reformed our coating processes,
installing cationic electrodeposition and other coating equipment
to improve the quality of coating. Moreover, we reformed our
body mounting processes by cutting outsourcing costs andshortening delivery times to improve profitability while also doubling our crane-mounting capacity.

Review of Medium-Term Business Plan 2019
Over the period of Medium-Term Business Plan 2019, we sought
to secure stable earnings and further enhance competitivenessby increasing the functionality and added value of UNIC cranes.
In October 2018, for example, we started selling newest models
in our “G-FORCE” series of UNIC cranes. This series featuresmodels, from small to large, with higher safety levels that comply
with revised structural standards for mobile cranes, enacted by
the Ministry of Health, Labour and Welfare. Subsequently, we
made all of our UNIC cranes compliant with the revised standards,
specifically, our super-large UNIC cranes (January 2019), mini
crawler cranes (February 2019), and small truck-mounted UNIC
cranes (March 2019). As a result, we have completed our full
lineup of safety-enhanced models that meet the revised structural
standards for mobile cranes. We also approached the completion

Future Measures
Looking ahead, we will seek to secure stable income fromdomestic sales and expand income from overseas sales, bypromoting advanced functions and higher added value in orderto strengthen our competitiveness, advancing the stock business,and reinforcing our overseas product, sales, service, and technologicalcapabilities. Accordingly, we will work to maximize the benefitsof capital investments in the Sakura Plant and promote further
automation. At the same time, we will enhance competitivenessby increasing functionality and high added value of our UNIC
cranes, mini crawler cranes, and UNIC carriers, while developing
new functions and options to meet diversifying applications.
We will also reinforce our service system by expanding ouroverseas sales network and strengthening our sales capabilities
at the retail level.

Net Sales (Billions of yen)

27.2 25.8 27.4 29.2 31.8

Operating Income (Billions of yen)

2.6

2.6

2.3

2.8

4.0

UNIC cranes

Mini crawler cranes'16/3 '17/3 '18/3 '19/3 '20/3'16/3 '17/3 '18/3 '19/3 '20/3

UNIC carriers

Annual Report 202015

Materials

Materials Business% of Net Sales
48.0%

The Materials business—consisting of the Metals,
Electronics, and Chemicals segments—posted a 14.4%
decline in sales, to ¥79,367 million, and a 44.4% fall in
operating income, to ¥777 million. The Materials
business accounted for 48.0% of net sales and 8.9%of operating income.

(Billions of yen)

Operating Income (Right)
1,000

% of
Operating Income
8.9%

79.4

79.0

1.9

500

1.6

2

1.4

1.0

0

MetalsIn 2019, the price of electrolytic copper ranged between
US$5,500/ton and US$6,000/ton amid prolonged U.S.–China
trade friction and tensions in the Middle East. The price thenrecovered to US$6,300/ton in January 2020 due to anticipation
about the U.S.–China trade agreement, but subsequently plummeted to US$4,797/ton at fiscal year-end amid predictions of aslowdown in global economic growth stemming from the spreadof COVID-19. Demand for copper products for electronic equipment
maintained a recovery trend, but softened in the fourth quarter,
while demand for copper wire for construction work remained firm.
The Company’s sales of electrolytic copper declined due to a
1,282-ton decrease in volume sales, to 83,864 tons, as well as
falling overseas market prices. Sales of electrolytic gold declined
due to a decrease in production volume. Accordingly, sales in the
Metals segment sales declined 16.1% year on year, to ¥67,150
million, and operating income fell 48.2%, to ¥302 million.

4

90.0 92.7

85.6

0.8

'16/3 '17/3 '18/3 '19/3 '20/3

0

Our metals business is impacted by trends in international
markets and purchasing conditions for copper concentrate, whichcause revenue to fluctuate significantly. Going forward, ourchallenge is to identify profitability and future potential ofcontracted copper smelting business, then conduct a fundamental
review of it.

Furukawa Metals & Resources Co., Ltd.
President and Representative Director

Masanori Saito

Operating Income (Billions of yen)

Net Sales (Billions of yen)

Electrolytic copper

Gibraltar Copper Mine in Canada

74.2 67.9 77.3 80.1 67.2

1.2

'16/3 '17/3 '18/3 '19/3 '20/3'16/3 '17/3 '18/3 '19/3 '20/3

1.7

0.9

0.6

0.3

● Copper Prices and Foreign Exchange Rates
2016/32017/3

2018/3

2019/32020/3

LME copper price (average; US$/ton)

5,215

5,154

6,444

6,341

5,860

JPY rate per US$ (average for fiscal year)

120.13108.42110.85110.91108.74

2016/32017/3

2018/3

2019/32020/3Copper production volume (tons)

86,466

84,06288,004

81,346

77,068

Copper sales volume (tons)

94,327

91,294

90,10485,146

83,864● Copper Production and Sales Volume** Furukawa Metals & Resources Co., Ltd.

16 FURUKAWA CO., LTD.

Electronics
In the fiscal year under review, sales of high-purity metallic arsenic
declined due to sluggish demand for compound semiconductors,
a major application for that material, stemming from inventory
adjustments among users in Japan and overseas that began inearly 2019. Sales of crystal products also decreased due to softening demand for individual semiconductor devices. As a result, theElectronics segment posted a 15.6% decrease in sales, to ¥5,506
million, and an operating loss of ¥35 million, compared with operating income of ¥408 million in the previous fiscal year.
Our basic strategy going forward is topromote growth and new market launchesof aluminum nitrides and diffractive opticalelements (DOEs), which are strategic products, as well as hybrid coils. In aluminum
nitrides, we will utilize our high-value-added
firing technology to target business expansion while developing aluminum nitrides
with high levels of thermal conductivity
High-purity metallic
and toughness. In DOEs, we will deploy ourarsenic—high-purity
microfabrication technology to expand sales
gallium arsenide
channels. And in hybrid coils, we will employ semiconductormaterials used ina high degree of design freedom to develop
mobile phones andattractive product samples.
other electronic

Furukawa Denshi Co., Ltd.
President and Representative Director

Hitoshi Iida

Operating Income (Loss) (Billions of yen)

Net Sales (Billions of yen)

5.5

5.8

6.3

5.5

6.5

'16/3 '17/3 '18/3 '19/3 '20/3

(0.4)

0.0

0.3

0.4

(0.0)

'16/3 '17/3 '18/3 '19/3 '20/3

devices, red laser
diodes, and LEDs

Chemicals

In fiscal 2020, we reported a year-on-year increase in sales ofsulfuric acid despite a decline in sales volume. This was due torising unit prices stemming from price revisions implemented since
the second half of 2018, as well as an increase in the sales volumeof high-value-added products. Sales of cuprous oxide and cupricoxide used for copper plating also increased in both volume andvalue terms. As a result, sales in the Chemicals segment rose 9.5%
year on year, to ¥6,711 million, and operating income jumped
25.5%, to ¥510 million.
Going forward, our basic strategy is to expand income fromcuprous oxide and other existing products while start commercializing and fostering newly developed products, suchas metallic copper powder. In sulfuric
acid, we will further differentiate ourselves through our high-quality offerings,
and in metallic copper powder we will
enhance product quality, establish mass
production and sales systems, and devel- Cuprous oxide is a red
powdery substance used to
op attractive product samples to expand prevent biofouling on thesales channels.
underside of marine vessels.

Furukawa Chemicals Co., Ltd.
President and Representative Director

Kazuyoshi Iwama

Net Sales (Billions of yen)

6.0

5.3

6.3

6.1

6.7

'16/3 '17/3 '18/3 '19/3 '20/3

Operating Income (Billions of yen)

0.2

0.1

0.5

0.4

0.5

'16/3 '17/3 '18/3 '19/3 '20/3

Real Estate
Our Real Estate segment posted a year-on-year sales decline due to adecrease in floor space occupied by large tenants in the Muromachi
Furukawa Mitsui Building (commercial name: COREDO Muromachi
Net Sales (Billions of yen)

3.0

3.1

3.3

3.0

2.4

'16/3 '17/3 '18/3 '19/3 '20/3

Operating Income (Billions of yen)

1.3

1.3

1.3

1.2

0.7

'16/3 '17/3 '18/3 '19/3 '20/32), which is our main facility, as well as withdrawal of tenants fromthe Furukawa Osaka Building, which closed on December 31, 2019.
Accordingly, segment sales decreased 20.4% year on year, to ¥2,386
million, and operating income fell 36.8%, to ¥736 million.
Looking ahead, our basic strategy is to continue making effective
use of real estate owned by theGroup, including the Furukawa Osaka
Building, while securing stable earnings from the Muromachi Furukawa
Mitsui Building. Another challenge
is to decide our future plan for the
Furukawa Osaka Building, which is
now closed.
Muromachi Furukawa Mitsui Building(commercial name: COREDO Muromachi 2)

Annual Report 2020

17

TOPICSINDUSTRIAL MACHINERY

Industrial Machinery segment: Belt conveyors that address social issues
Transporting earth and sand using belt conveyors
Traditionally, dump trucks have been used widely to transport
earth and sand generated during civil engineering and construction projects. However, the population of truck drivers is decreasing due to Japan’s declining working-age population. In addition,
many dump trucks come and go during the construction period,
causing concern over traffic jams and accidents on surrounding
roads, as well as deterioration of the local environment due todust and CO2 emissions. To resolve these social issues, more andmore companies are using belt conveyors instead of dump trucks
to transport earth and sand.
In the Industrial Machinery segment, we have solid experienceand transportation technologies cultivated in mine development,
as well as the technical ability to make integrated responses
covering design, manufacture, machining, assembly, and installation.
Utilizing these traits, we have built a proven track record.
For example, our belt conveyors are used in various large-scale projects,
including relocation of people to higher ground in Rikuzentakata Cityand tunnel construction related to the Tokyo Gaikan Expressway.
In recent years, Japan has been subject to flood damage causedby frequent large-scale typhoons and linear rain bands stemmingfrom climate change. Indeed, record-breaking heavy rainfalls haveresulted in enormous damage from river overflows, floods, andProject for relocating people to higher
ground in Rikuzentakata City (installation
completed in fiscal 2015, demolition in
fiscal 2017)

Belt conveyors provided to the Tokyo
Gaikan Expressway project(installation completed in fiscal 2020)

The structure of the SICON® belt conveyor
SICON® enclosed hanging belt conveyors will be used in the
Kanamori Basin project. Unlike regular belt conveyors, materials
conveyed (such as earth and sand) are wrapped in a pear-shaped“pouch” that is suspended and transported in monorail fashion tominimize spills, dust, noise, and the like. This enables materials to
be conveyed quietly without being dropped. In addition, conventional belt conveyors require transfer points to accommodatechanges in direction. With SICON® belt conveyors, however, thedirection of the conveyance line can be changed without the need
ard

forw

Enclosed hanging belt conveyor provided to the Sakaigawa–Kanamori retention
basin project (Machida City, Tokyo)

landslides. In response, various local government
entities are taking measures to prevent rivers from flooding. Oneof these is the construction of retention basins that temporarily
store water from rising rivers.
Under its Torrential Rain Measures Basic Policy, the Tokyo
Metropolitan Government is planning to build the Kanamori Basinon the Sakaigawa River, which flows through Machida City inTokyo’s southwest. This project will require the conveyance oflarge amounts of earth and sand. Because it is adjacent toresidential areas, however, there were concerns about using
dump trucks for this purpose. These are related to environmental
impacts from exhaust gas, dust, noise, and vibration, as well as
the need to prevent accidents and otherwise ensure public safety.
In consideration of the neighborhood living environment andsafety, a decision was made to use SICON® enclosed hanging belt
conveyors, made by the Group’s Industrial Machinery
segment, to convey earth and sand generated during the project.

for transfer points. This makes it possible to adopt optimal
conveyance configurations in small spaces according to site
conditions. By complementing its lineup of belt conveyors andother machines with engineering capabilities that bring together
experience and new ideas, the Group’s Industrial Machinery
segment will continue making proposals to help resolve social
issues. These include the need for disaster prevention andmitigation measures, building national resilience, environmental
problems, and a declining working-age population.

pulleyrollerrn

retu

rollerOn both the forward and return routes, the conveyed materials arewrapped and hermetically sealed in a pear-shaped pouch, making it
possible to prevent foreign matter from entering and materials fromfalling out. Moreover, since the rollers only rotate during conveyance,noise and vibration are minimized.

* SICON® is a registered trademark of ContiTech Transportbandsysteme GmbH.

18 FURUKAWA CO., LTD.

SICON® has a high level of strength against bending, which negates the needfor additional transfer points along the conveyance line and minimizes noise anddust buildup associated with such transfer points.

Environment

ESG Information

Society

Governance

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

Remaining a Company That Is Indispensable toSociety
Under its long-term Vision for 2025, the Group is working to increase the value of the Furukawa brand through “marketing-based
management” that incorporates CSV perspectives. The vision also
clarifies our commitment to “increase corporate value by emphasizing business practices that reflect CSR and ESG issues recognized
and to be solved by the Group.” By promoting an integrated
thinking that combines our business and CSR activities, we will
work to create social value and corporate value by helping resolve
various social issues faced by stakeholders. These include achieving
the SDGs, the need to build national resilience in Japan, and a
declining working-age population.

CSR Promotion System
We need to pursue CSR initiatives in order to solidify our
foundation for conducting business activities. The Group’s CSR
policy is to promote business activities on a foundation that isfirmly responsive to the environment and society, in addition to
governance. To powerfully promote CSR activities, we established
the CSR Promotion Meeting to clarify our responsibilities to stakeholders and spearhead CSR activities. Chaired by a representative
director, the Meeting deliberates various CSR-related issues, suchas basic CSR activity policy, the CSR promotion system, formulation of activity plans, verification and evaluation of activity status,and development of priority measures. The CSR Promotion Meeting consists of four committees (Risk Management Committee,
Compliance Committee, Environmental & Safety Management
Committee, and Product Safety Committee) and two departments(Human Resources & General Affairs Department and Purchasing
Department). The Meeting collaborates with each Group company
and the headquarters, which is the executive division for CSR
activities, to advance a PDCA cycle of planning, implementation,
evaluation, and improvement.

CSR Promotion System
Guidance / Instruction

Committee / Department

Reporting

Risk Management Committee

Interaction

Group companies / departments

Compliance Committee

1

Implementation Body

2
Environmental & Safety Management Committee
Product Safety Committee

Guidance /Instruction

Reporting

Human Resources & General Affairs Department

P Plan: Formulate the plan
Reports ateach PDCA
stage

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

A Act: Take countermeasures
as necessary

CSR Promotion
Department

Purchasing Department

1. President and Representative Director
2. CSR Promotion Meeting

Relationships with Stakeholders
In the course of strengthening CSR activities and demonstrating
our Management Philosophy, we have identified our stakeholders

as listed below. Our quest is to clarify our responsibilities to eachstakeholder group and maintain close communications, in orderto build relationships of trust and thus maximize corporate value.

Stakeholder

Responsibility

Stakeholder

Responsibility

Customers

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

Employees

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

Business
partners

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

Local
communities

We shall build and maintain favorable relationships oftrust by pursuing social contribution activities aimed atharmonious coexistence with local communities.

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

Globalenvironment

We shall protect biodiversity by developing environmentally friendly technologies and products while minimizing theenvironmental impact of our activities through savings ofenergy and resources and reduction of waste.

Annual Report 2020

19

The Furukawa Company Group’s ESG Activities

CSR and ESG Issues
The Group has added a new policy as part of its Vision for 2025. The policy states our commitment to “increase corporate value by emphasizing practices that reflect CSR and ESG issues recognized and to be solved by the Group” as a corefoundation of management. We also clarified the relationship between ESG, CSR priority issues, medium-term CSR goals(fiscal 2021–2023), and relevant major SDGs.

Establishing a Robust Management Foundation:
Increase corporate value by emphasizing
practices that reflect CSR and ESG issues recognized and to be solved by the Group

stakeholders and the Group, then analyzed and evaluated theimportance of those issues and finalized the Group’s CSR priority
issues.

In order to pursue its business activities and fulfill its corporatesocial responsibility, the Group has identified CSR priority issues,
formulated medium-term CSR goals to resolve these issues, and is
stepping up CSR-related efforts through the PDCA cycle. Throughthese initiatives, we aim to help accomplish the SDGs, which wereunanimously adopted by the United Nations for achievement
around the world by 2030.

Steps to Identify CSR Priority Issues
Extract issues

Evaluate importance to stakeholders and the Group

Identifying CSR Priority Issues

Analyze the importance of issues

The Group identifies CSR priority issues and reinforces its CSR
activities to ensure that its business activities contribute to society
in the broader sense. To identify priority issues, we selected
important CSR-related issues from the perspectives of both

ESG Section

CSR Priority Issues

Decide and approve priority issues

Medium–Term CSR Goals (FY2021–2023)

Achieve CO2, water, and waste reduction targets
Thoroughly implement “5S” activities targeting zero accidents /disasters and strengthen prevention● Promote accurate correction of environmental and safety audit
points and strengthen prevention● Ensure sound management of company-owned forests andpromote animal / plant regeneration activities for biodiversity●●

E(Environmental)

Promoteenvironmental
protection activities

Strengthen management of changes aimed at improving
product quality● Strengthen education and information management to raiseawareness about quality●

Offer products andservices that satisfy
customers

S(Social)

Build fair andimpartial business
relationships andrelationships ofreciprocal trust withbusiness partners
Promote social
contribution activities
Realize comfortableworkingenvironments for
employees and givethem fair evaluationand treatment
Build a meticulous
group governancesystemG(Governance)

Communicate withshareholders andother investors●

Strengthen quality assurance management●

Review and improve product safety evaluation system

Build CSR-oriented procurement system
Strengthen supplier management● Strengthen internal CSR activities●●

Promote social contribution activities aimed at coexistencewith local communities● Maintain and build good relationships of trust with local communities●

Develop talented human resources
Promote health management● Promote diversity● Improve working environments
●
●

●
●

Ensure timely and appropriate information disclosure
Increase corporate value through communication via IR● Strengthen the IR system●●

Strengthen awareness-raising education to entrench compliance
Thoroughly disseminate the Charter of Corporate Conduct andthe Code of Behavior for Officers and Employees● Develop and expand various guidelines and manuals● Entrench timely and appropriate reporting of compliance violations●

Strengthen
compliance

20 FURUKAWA CO., LTD.

Build crisis management system
Build robust risk management system●

Major Related SDGs

Marketing-Based Management That Incorporates CSV Perspectives
The Group will generate corporate value by providing infrastructure, products, technologies, and services that help
resolve social issues, while at the same time striving to create social value.
Of the 17 SDGs, we are focusing particular attention on achieving Goal 11 (“Make cities and human settlements inclusive, safe, resilient and sustainable”) and Goal 9 (“Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation). We will also strive to create social value by building social infrastructure as stated in“The Furukawa Company Group’s Value Creation Process” (please see pages 2–3), while realizing a safe, environmentallyfriendly, and prosperous society.

Helping Achieve the SDGs through Marketing-Based Management That Incorporates CSV Perspectives
SDGs with High Contribution Levels ( ◎ : Especially Important; 〇 : Important)
Main Products, Technologies,
and Services

○
Pumps

Tunnel drill
jumbosUNIC cranes

Belt conveyors

Hydrauliccrawler drills

Mini crawler
cranes

◎

◎

◎

○

◎

◎

○

◎

◎

◎

◎

◎

◎

◎

◎

○

◎

Steel bridges
and steelstructures○

Hydrauliccrushers◎

Ocean cranes

MetalsUNIC MachineryRock Drill Machinery

Industrial Machinery

Segment○

ChemicalsElectronics

Electrolytic
copper○High-purity
metallic arsenic

Coils

Opticalcomponents(lenses)○
Sulfuric acid

Aluminumsulphate○◎

Ferrous sulfate

Annual Report 2020

21

The Furukawa Company Group’s ESG Activities

Corporate Governance
The Group maintains fundamental policies regarding corporate governance with respect to heightening managerial transparency,
building an effective managerial framework through ongoing efforts to transform its corporate structure, increasing its corporate
value by generating consistent profits, and contributing to its shareholders and other stakeholders.
Under these policies, each of the Group’s operating companies assumes clear asset and profitability management responsibilities
while maintaining unity as a Group. We aim to promote agile management and provide products and services that satisfy our customers and maximize the corporate value of the entire Group.

Overview of Corporate Governance System andReasons for Its Adoption
The Company employs a company system with a Board of
Directors and an Audit & Supervisory Board to supervise businessexecution. In addition, we have appointed Outside Directors toensure the validity of decision-making and the objectivity andtransparency of management. The Audit & Supervisory Board
Members are managers of other companies and persons withknowledge of financial accounting, who use their specialized
knowledge and experience to give advice to management andcheck the status of operations. We consider that management
oversight is functioning effectively under the current system.
Directors and Board of Directors
The Board of Directors, chaired by President and Representative
Director Naohisa Miyakawa, holds regular meetings once amonth, and extraordinary meetings as necessary and supervises
the business execution of the entire Group as a supervising body.
The Board consists of nine members as of June 26, 2020, including three Outside Directors.
Executive Officer System
The Company employs an Executive Officer System which facilitates quicker decision making and defined responsibilities interms of keeping management supervisory functions separate
from executive functions. Executive Officers perform their tasks
according to business plans determined by the Board of Directors,
and report the status of business execution as appropriate to theBoard of Directors and the Management Committee. The Company has 16 Executive Officers as of June 26, 2020, including four
serving as Directors.

matters. Meanwhile, the Management Committee meets monthly
to report on the business execution of the Company and its core
operating companies, and accordingly reviews such matters andprovides direction in that regard. Key managerial issues addressedby the Management Council are referred to the Board of Directors
for discussion and decisions.
Audit & Supervisory Board and Its Members
The Audit & Supervisory Board is chaired by Minoru Iwata, a fulltime member. It holds meetings in a timely manner to discuss anddecide on audit policies, methods of investigating businessdecisions and the status of financial assets, and other mattersrelated to the execution of duties by members. The Audit &Supervisory Board consists of four members as of June 26, 2020,
including two outside members.
Internal Control DivisionInternal audits are implemented by the Internal Control Division,
centered on the Internal Audit Department. The Internal Audit Department consists of five members, including its General Manager.
Nomination & Remuneration Committee
The Nomination & Remuneration Committee serves as an optional
advisory body to the Board of Directors. It receives request for
advice from the Board of Directors regarding candidates for Directors and Audit & Supervisory Board Members, as well as selection
and dismissal of Representative Directors and Executive Directors
and remuneration for Directors, then deliberates and reports asnecessary. The Committee met four times between November
2019 and May 2020. It consists of the following four members.
Chairman: Tatsuya Tejima, Outside Director
Member: Yoichi Mukae, Outside Director
Member: Kazumi Nishino, Outside Director
Member: Naohisa Miyakawa, President and Representative Director

Management Council and Management Committee
The Management Council sets the Group’s fundamental management policies and strategies, and makes decisions on important● Corporate Governance System

Shareholders’ Meeting
Election and Dismissal

Election and Dismissal

Board of Directors

nine directors(including three outside directors)
Advisory

AuditsAudit & Supervisory Board

four members(including two outside members)

Cooperation

Election and Dismissal

Accounting Auditors

ReportNomination &Oversees Reports Reports
Remuneration Committee

AuditsCooperation

Cooperation Audits＜Management＞
Representative Director

Reports

Accounting Dept., others

Management Council
CSR Promotion Meeting
Management Committee
Executive Officers 16 members＜Internal Control Division＞
AuditsAll Divisions and Group Companies
22 FURUKAWA CO., LTD.

Internal Audit Department

Environment
Evaluating the Effectiveness of the Board of Directors
To analyze and evaluate the effectiveness of the Board of Directors,
the Company conducts questionnaire-based surveys of Directors
and Audit & Supervisory Board Members, and exchanges opinionswith Outside Officers. The results of these activities are reported
to the Board of Directors for discussion. Note that the questionnaire-based survey for fiscal 2020 was conducted through athird-party organization in pursuit of greater objectivity.
The matters identified as issues to address for improvement in fiscal
2020 have largely been addressed, and the Board of Directors received
relatively high marks for matters related to structure and management.
In fiscal 2021, the Board of Directors will strive to further improve its effectiveness through five initiatives: (1) Promoting thedigitization of documents; (2) Improving explanations and descriptions relating to proposals; (3) Adding supplementary explanations
and the like relating to Management Council meeting agendas toreported matters; (4) Expanding the provision of information about
Group companies to Outside Officers; and (5) Exchanging opinions
about IR activities and detailed reports on the status of investor
dialogue.

Internal Control System
The Group’s Basic Policy on Establishing an Internal Control
System encompasses corporate governance, risk management,compliance, and internal audits. Under the policy, internal controls
are to be implemented with an emphasis on promoting CSR, in
addition to ensuring efficient and appropriate business execution.
Moreover, the Group continually reassesses its internal control
systems and otherwise strives to build effective and efficientsystems in order to ensure the appropriateness of operations.

Independence of Outside Directors and Outside
Audit & Supervisory Board Members
The Company appoints Outside Directors and Outside Audit & Supervisory Board Members with abundant experience and expertisein various fields, as well as impartial perspectives. This is to ensure
the appropriateness of the Company’s management decisions andthe effectiveness of oversight and audits of management. As ofJune 26, 2020, the Company has three Outside Directors and two
Outside Audit & Supervisory Board Members.
In addition, the Company stipulates that Outside Officers(Outside Directors and Outside Audit & Supervisory Board Members,
including candidates) do not fall under the following criteria
concerning independence. Outside Officers who meet such
criteria are designated and registered as Independent Directors /Auditors under the rules of the Tokyo Stock Exchange. As of June
26, 2020, the Company has four Independent Officers.
Independence Standards for Outside Officers(Must not meet the following criteria)(1) Executive Directors, and employees of the Group(2) Business partners of the Group (those who provide products
		 or services mainly to the Group and whose transactions with		 the Group were equivalent to more than 2% of net sales of		 the business partners in the most recent fiscal year of such		 business partners) or executives of such business partners(3) Main business partners of the Group (those who are provided
		 products or services by the Group and whose transactions
		 with the Group were equivalent to more than 2% of net
		 sales of the Group in the most recent fiscal year of the		 Group) or executives of such business partners(4) Executives of financial institutions that are major lenders to		 the Group (lenders whose loan amounts were equivalent		 to more than 2% of the Group’s consolidated total assets
		 at the most recent fiscal year-end)(5) Individuals earning ¥10 million or more per year from the		 Group in monetary or other benefits as specialists (including
		 consultants, accountants, and lawyers) excluding executive
		 remuneration, or individuals employed by companies earning

Society

Governance		 ¥100 million or more per year from the Group(6) Individual shareholders who hold 10% or more of the		 Company’s voting rights (or Executive Directors, Executive
		 Officers, or employees of corporations that hold 10% or		 more of the Company’s voting rights)(7) Individuals who had fallen under (1) to (6) above in the past		 three-year period(8) Relatives (second degree or closer) of persons who fall under		 (1) to (7) above

Remuneration for Directors and Audit & Supervisory Board Members
Remuneration for Directors of the Company is determined by the
Board of Directors upon discussion based on performance and othermatters in accordance with Director remuneration standards by the
Nomination & Remuneration Committee, whose membership mainly
consists of Independent Outside Directors. Specific remuneration foreach Director is decided by the President and Representative Director upon resolution by the Board of Directors.
Remuneration for Directors (excluding Outside Directors) consistsof basic remuneration, added Director portion, added Representative Director portion, and stock-based remuneration. Basic remuneration accounts for around 80% of total remuneration, while stockbased remuneration accounts for 10–15%. Basic remuneration islinked to short-term performance. The Company has announced
consolidated operating income as a performance indicator, andbasic remuneration will fluctuate up and down by around 10%
according to actual results against this indicator. For stock-based
remuneration, which is a medium-to-long-term incentive, Directors(excluding Outside Directors) are required to contribute to the
Executive Shareholding Association. Remuneration for Audit &Supervisory Board Members is determined through consultation
between such members.
Officer type

Directors (Excluding
Outside Directors)
Audit & Supervisory
Board Members(Excluding Outside
Members)
Outside Directors
Outside Audit &Supervisory Board
Members
Total

Total remuneration by type(Millions of yen)
Total
Numberremuneration
Performance- Retirement of eligible(Millions of yen) Fixed
officers
linkedbenefitcompensation

106

106

—

—

9

16

16

—

—

3

28

28

—

—

5

16

16

—

—

2

167

167

—

—

19

Notes:
1. Regarding remuneration for Directors (excluding Outside Directors), in July 2020 theCompany incorporated a new mechanism linked to short-term performance tocalculate basic remuneration. The remuneration figure for Directors (excluding Outside
Directors) in the above table reflects actual payments made in fiscal 2020 before theintroduction of the new mechanism.
2. The Company resolved to abolish its retirement allowance system for Directors andAudit & Supervisory Board Members at the conclusion of the 140th Annual
Shareholders’ Meeting held on June 28, 2007.
3. The above figure for total fixed remuneration does not include payments (totaling¥50 million) by five subsidiaries of the Company to seven Directors concurrently
serving as Directors or Audit & Supervisory Board Members of those subsidiaries.
It also does not include payments (totaling ¥21 million) by six subsidiaries of theCompany to three Audit & Supervisory Board Members concurrently serving as
Directors or Audit & Supervisory Board Members of those subsidiaries.

Strategic Shareholdings
The Company owns strategic shareholdings for the purpose of improving corporate value over the medium and long terms by maintaining and strengthening relationships with important business partners. Each year, the Board of Directors examines each stock of theCompany’s strategic shareholdings and verifies the appropriatenessof continual ownership after comprehensive consideration—both
qualitative and quantitative—of various factors, including purpose ofholding and associated benefits and risks. The Company then moves
to sell shares deemed by the Board not to be meaningful.
Annual Report 202023

Directors and Audit & Supervisory Board Members(As of June 26, 2020)

Naohisa Miyakawa

Director and Senior Executive Officer, General Manager
of Business Process Re-engineering Department
In charge of Business Process Re-engineering Department,
Real Estate Business, CSR Promotion Department, Accounting Department, Financial Department, Legal Department,
Information System Department and Internal Audit Department
April 1982: Joined the Company
June 2013: General Manager, Financial Department
June 2015: General Manager, Accounting Department
and General Manager, Financial Department
June 2017: Executive Officer and General Manager, Business
Process Re-engineering Department
June 2019: Director, Senior Executive Officer, and General
Manager, Business Process Re-engineering
Department (current position)
Holdings in the Company: 5,500 shares

Kiyohito Mitsumura

Tatsuya Tejima

Managing Director
Assistant to the President; in charge of Industrial
Machinery Segment, Rock Drills Segment, andPurchasing Department
April 1980: Joined the Company
June 2012: Executive Officer and General Manager,
Corporate Planning Department
Sep. 2013: Executive Officer, General Manager,
Corporate Planning Department, and General
Manager, CSR Promotion Department
April 2014: Executive Officer and General Manager,
Corporate Planning Department
June 2014: Senior Executive Officer of the Company,
President & Representative Director of Furukawa
Rock Drill Co., Ltd.
June 2015: Director and Senior Executive Officer of theCompany, President & Representative Directorof Furukawa Rock Drill Co., Ltd.
June 2018: Managing Director and Managing Executive
Officer of the Company, President & Representative Director of Furukawa Rock Drill Co., Ltd.
June 2019: Managing Director (current position)
Holdings in the Company: 8,400 shares

Outside Independent Director
April 1969: Joined Toho Zinc Co., Ltd.
June 2003: Representative Director and Managing
Director, and Managing Executive Officer of
Toho Zinc Co., Ltd.
June 2005: Representative Director and Senior Managing
Director, and Senior Managing Executive
Officer of Toho Zinc Co., Ltd.
June 2006: Representative Director and COO of Toho
Zinc Co., Ltd.
June 2008: Representative Director and President of
Toho Zinc Co., Ltd.
June 2017: Advisor of Toho Zinc Co., Ltd., Director of
the Company (current position)
Holdings in the Company: 0 shares

Masahiro Ogino

Yoichi Mukae

Director and Managing Executive Officer,
General Manager of Corporate Planning
Department
In charge of Corporate Planning Department, Materials
Business, Environmental & Safety Management Department, and Human Resources & General Affairs Department
April 1982: Joined the Company
June 2015: Executive Officer of the Company, President& Representative Director of Furukawa
Metals & Resources Co., Ltd.
June 2017: Director, Senior Executive Officer, andGeneral Manager, Corporate Planning
Department
June 2019: Director, Managing Executive Officer, andGeneral Manager, Corporate Planning
Department (current position)
Holdings in the Company: 5,400 shares

Minoru Nakatogawa

Director and Managing Executive Officer
In charge of UNIC Machinery Segment and Rock Drills
Segment
April 1983: Joined the Company
June 2017: Executive Officer of the Company, Executive
Vice President & Director of Furukawa UNIC
Corporation (In charge of Promotion of Midterm Business Plan)
June 2018: Executive Officer of the Company, President& Representative Director of Furukawa UNIC
Corporation
June 2019: Director and Senior Executive Officer of theCompany, President & Representative Director of Furukawa UNIC Corporation
June 2020: Director and Managing Executive Officer of
the Company, President & Representative
Director of Furukawa UNIC Corporation(current position)
Holdings in the Company: 4,700 shares

Tatsuki Nazuka

Director and Senior Executive Officer, General
Manager of Technology Division
In charge of Technology Division
April 1981: Joined the Company
June 2015: Executive Officer and Deputy General Manager,
Development Division
June 2017: Executive Officer and Deputy General Manager,
Development Division
Oct. 2017: Executive Officer and General Manager,
Technology Division
June 2019: Director, Senior Executive Officer, and General
Manager, Technology Division (current position)
Holdings in the Company: 5,300 shares

24 FURUKAWA CO., LTD.

Hiroyuki Sakai

President and Representative Director
In charge of management
April 1975: Joined the Company
June 2007: Executive Officer, General Manager,
Human Resources & General Affairs
Department, and General Manager,
Secretary Department
June 2009: Executive Officer of the Company,
President & Representative Director of
Furukawa Denshi Co., Ltd.
June 2011: Director and Senior Executive Officer of
the Company, President & Representative
Director of Furukawa Denshi Co., Ltd.
June 2013: President & Representative Director(current position)
Holdings in the Company: 30,900 shares

Outside Independent Director
April 1975: Joined Ministry of International Trade andIndustry
June 2004: Director-General for Commerce andDistribution Policy, Minister’s Secretariat of
Ministry of Economy, Trade and Industry
August 2006: Managing Director of The Shoko Chukin
Bank, Ltd.
August 2008: Advisor of The Kansai Electric Power Company,
Incorporated
June 2009: Managing Director of The Kansai ElectricPower Company, Incorporated
June 2013: Director, Managing Executive Officer of The
Kansai Electric Power Company, Incorporated
June 2015: President & Representative Director of
The Kanden L&A Company, Limited andPresident & Representative Director of
KANDEN EL AUTO SYSTEM Co., Ltd.
June 2019: President & Representative Director of
The Kanden L&A Company, Limited,
President & Representative Director of
KANDEN EL AUTO SYSTEM Co., Ltd., andDirector of the Company
June 2020: Advisor of The Kanden L&A Company,
Limited, Representative Director of ResearchInstitute of Economy, Trade and Industry,
President of GS1 Japan, and Director of theCompany (current position)
Holdings in the Company: 0 shares

Kazumi Nishino

Outside Independent Director
April 1992: Joined Fuji Photo Film Co., Ltd.
April 2006: Associate Professor, Department ofManagement of Science & Technology,
Graduate School of Management of Science& Technology
April 2017: Associate Professor, Graduate School ofCommerce and Management of Hitotsubashi
University
June 2019: Associate Professor, Graduate School ofBusiness Administration, Hitotsubashi
University, and Director of the Company(current position)
Holdings in the Company: 900 shares

Minoru Iwata

Tetsuro Ueno

Audit & Supervisory Board Member (Full-Time)
April 1979: Joined the Company
June 2011: Executive Officer and General Manager,
Accounting Department
June 2013: Director, Senior Executive Officer, andGeneral Manager, Accounting Department
June 2015: Director
June 2016: Managing Director
June 2019: Audit & Supervisory Board Member(Full-time) (current position)
Holdings in the Company: 8,600 shares

Outside Audit & Supervisory Board Member
April 1976: Joined The Dai-Ichi Kangyo Bank, Ltd.
April 2009: Deputy President (Representative Director)
and Deputy President & Executive Officer ofMizuho Bank, Ltd.
April 2011: Advisor of Mizuho Bank, Ltd.
June 2011: Deputy Chairperson and Executive Officer of
Chuo-fudosan Co., Ltd.
June 2012: Representative Director and President of
Seiwa Sogo Tatemono Co., Ltd.
June 2013: Representative Director and President of
Seiwa Sogo Tatemono Co., Ltd., Audit &Supervisory Board Member of Chuo-fudosanCo., Ltd.
June 2015: Representative Director and President of
Seiwa Sogo Tatemono Co., Ltd., Audit &Supervisory Board Member of Chuo-fudosanCo., Ltd., and Audit & Supervisory Board
Member of the Company
June 2018: Special Advisor of Seiwa Sogo Tatemono
Co., Ltd., Audit & Supervisory Board Memberof the Company (current position)
Holdings in the Company: 400 sharesKazuo Inoue

Masayuki Yamashita

Audit & Supervisory Board Member (Full-Time)
April 1980: Joined the Company
June 2011: General Manager, Real Estate Division
June 2014: Executive Officer, General Manager,
Corporate Planning Department
June 2016: Senior Executive Officer and General
Manager, Corporate Planning
Department
June 2017: Audit & Supervisory Board Member(Full-time)(current position)
Holdings in the Company: 4,000 shares

Outside Audit & Supervisory Board Member
April 1980: Joined Asahi Mutual Life Insurance Company
April 2016: Representative Director and Senior Executive
Officer of Asahi Mutual Life Insurance
Company
June 2016: Representative Director and Senior
Executive Officer of Asahi Mutual Life
Insurance Company, Audit & Supervisory
Board Member of the Company
April 2018: Director, Asahi Mutual Life Insurance
Company, Audit & Supervisory Board
Member of the Company
June 2018: Director, Asahi Mutual Life Insurance
Company, President & Representative
Director, Info Techno Asahi Co., Ltd.,
Audit & Supervisory Board Member of theCompany
July 2018: President & Representative Director, Info
Techno Asahi Co., Ltd., Audit & Supervisory
Board Member of the Company (current
position)
Holdings in the Company: 0 shares

Message from an Outside Independent Director
I assumed office as an Outside Independent Director of the Company in June 2019. I believe that the main responsibility of Outside
Independent Directors is to ensure that management decisions are appropriate and are made objectively and transparently.
At meetings of the Board of Directors, we discuss a wide range of matters and engage in repeated deliberations on particularly
important issues. My conclusion is that the Company is being managed appropriately and carefully.
Fiscal 2020 was the final year of Phase 1 of our Vision for 2025. While our results differed by business segment, we reached
our target for operating income, which I believe will be favorably received. In fiscal 2021, as we enter Phase 2, there are concernsthat the COVID-19 pandemic will cause drastic changes in the business environment. Accordingly, fiscal 2021 will be the year that
determines how effectively we overcome the crisis, expedite growth, and further improve profitability. To this end, top managers
are under increasing pressure to exercise leadership by taking initiative in driving the Company forward. In the coming era, we willneed to address ESG and the SDGs, which are crucial matters from the perspective of sustainability.
In addition to being able to respond quickly to emergencies, the Board of Directors faces otherbig challenges, such as the need to address major issues and train successors who can overcome
difficult situations.
Going forward, I will continue fulfilling my responsibilities as an Outside Independent Director
so that all members of the Company can unite as one to demonstrate greater responsiveness andovercome the current challenges.

Yoichi Mukae
Outside Independent Director

Annual Report 202025

The Furukawa Company Group’s ESG Activities

Risk Management
The Group recognizes risk management as an important part of its operations and constantly analyzes and evaluatesrisks in its business activities. At the same time, we are working on risk treatments (avoidance, reduction, sharing, orretention) and countermeasures by investigating, evaluating, and reconsidering risks after they materialize.

Framework for Promoting Risk Management
The Group’s business activities could potentially be badly impacted
by various risks related to such factors as accidents, natural disasters, and epidemic diseases. To protect human life and property
and minimize damage and loss when such risks materialize, theGroup, spearheaded by its Risk Management Committee, isworking to establish and strengthen its risk management system.
For particularly important issues, the Board of Directors and theManagement Council engage in meticulous deliberations andmake decisions. For matters related to environmental protection
and product safety, we established the Environmental & Safety
Management Committee and the Product Safety Committee,
respectively, to manage specialized deliberations and investigations and implement countermeasures.
● Risk Management System
Risk Management Committee
Furukawa Co., Ltd.
(Secretariat of Risk Management Committee)

Business Risk Review Subcommittee*

Furukawa Co., Ltd.

Furukawa Metals & Resources Co., Ltd.

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

Furukawa Chemicals Co., Ltd.

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

Shifting from Business Continuity Plan (BCP) to
Business Continuity Management (BCM)
We have almost finished BCPs for our core operating companies.
Going forward, we will formulate BCP strategies at consolidated
affiliates and step up BCM throughout the Group.
● Group BCP System
Headquarters for BCP

Product Safety
Quality Control
The Furukawa Company Group is committed to constantly
providing safe, high-quality products and services to customers.
For this reason, we undertake manufacturing with proper attention to product safety and reliability in order to improve customer
satisfaction. This covers all processes, from development anddesign to procurement, manufacturing, sales, services, and final
disposal after use.
Product Safety Management System
The Furukawa Company Group strives to manufacture products that comply with regulations related to manufacturing andproduct quality verification and products that customers can use
safely with peace of mind. These efforts are based on the Group’s
Product Safety Basic Policy and Product Safety Action Guidelines.
Specifically, the Product Safety Committee of Furukawa Co., Ltd.
holds Product Safety Council meetings attended by product safety
officers of core operating companies and has formed subordinates
to divide work between mechanical and materials sessions.
The role of our Product Safety Council is to spearhead improvements in product safety levels. Based on the approach that weshould work constantly to enhance product reliability, the Council focuses on quality assurance and works to raise Groupwide
quality assurance levels and evaluate activities related to quality
assurance and product safety.
In fiscal 2020, we sought to strengthen quality assurance
systems at each business site. For example, we promoted
visualization of “change points” (defined as the maincauses of frontline complaints), and we introduced ICT in
our manufacturing and inspection processes to enhance
operational efficiency. In fiscal 2021, we will promote
preventive measures to address complaints, as well as goals
not achieved in the previous fiscal year. For example, we will
aggregate “change point control” data to identify priority items
and reflect them in quality assurance education. We will also
strengthen our checking capabilities to reduce risk in the earlystages of business processes in order to build a robust quality
assurance system.
● Product Safety Management System

Director-generals of headquarters for BCP

President and Representative Director

Vice Director-generals of headquarters for BCP

CSR Promotion Meeting

Committee members of headquarters for BCP

Secretariat of headquarters for BCP
General Affairs Team
Human Resources Team
Public Relations Team

Headquarters inan emergencyof each company

Guidance・Instruction

ReportCSR Promotion
Department

Furukawa Co., Ltd.
Product Safety Committee

Technological Strategy(Secretariat)

Product Safety Council

Finance Team
Information Analysis Team

Secretariat of headquarters for BCP

26 FURUKAWA CO., LTD.

Core Operating Companies
Machinery Subcommittee

Materials Subcommittee

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

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

Compliance

Environment

Society

GovernanceIn addition to complying with laws and regulations, the Group believes it has a corporate obligation to take serious andresponsible actions in terms of social and ethical aspects. To fulfill this obligation, we established “The Furukawa Company Group’s Charter of Corporate Conduct” and “The Furukawa Company Group’s Code of Conduct for Officers andEmployees.” We strive to ensure that all officers and employees of the Group carry out their duties with a full understanding of the importance of compliance.

Framework for Compliance
The president of Furukawa Co., Ltd. serves as head of compliancemanagers of the Group. We also have compliance managers ineach department and Group company. In addition, we established
the Compliance Committee to promote compliance activities
throughout the Group. The Committee deliberates on importantmatters related to compliance and strives to improve the framework for compliance and raise awareness. The Committee strives
to share information on Groupwide compliance by reporting
matters it has discussed to the CSR Promotion Meeting as
appropriate.

Internal Reporting System
The Group has adopted an internal reporting system to facilitate
early detection and correction of compliance violations. This has
involved developing a framework that enables an extensive rangeof reporting and inquires by establishing points of contact forreporting and consultation requests inside and outside (law office)the Group. We also stringently safeguard confidential and personal
information regarding whistleblowers.
The Compliance Committee conducts investigations uponreceiving notification or consultation, and subsequently takes
necessary action to address such matters. We also facilitateawareness of the internal reporting system by posting suchcontent to our in-house portal site and distributing brochures
to Group officers and employees.

Compliance Education
The Group strives to instill a corporate culture that emphasizes
compliance through efforts that include issuing our “ComplianceNews” twice a year as a source of information on compliance toall Group officers and employees, and having top managementoccasionally give talks on the importance and priority we place
on compliance.
In fiscal 2020, we held compliance training sessions as partof our employment hierarchy-specific training for newly hired,
mid-level employees, and newly assigned managers. We also
continued holding training on specific topics, such as export
control and Japan’s Act against Delay in Payment of Subcontract
Proceeds, Etc. to Subcontractors (the “Subcontract Act”).

Compliance throughout the Entire Supply Chain
In order to maintain compliance as a Group, we need all parties
across the entire supply chain, including suppliers, to also practicecompliance with laws and regulations. With this in mind, we established “The Furukawa Company Group CSR Promotion Guidelines” for suppliers to help them respect human rights and labor,
comply with laws and regulations, and practice corporate ethics.
Human rights and labor(1) Respect human rights.
(2) Have no involvement with child labor, forced labor, or		 unlawfully cheap labor, whether directly or indirectly.
(3) Achieve a work environment with no discrimination or		 harassment of any sort committed against employees.
(4) Comply with labor laws and provide positive working
		 conditions.

Legal compliance and corporate ethics
1. Comply with Japanese and overseas laws and social norms.
2. Do not provide or receive benefits in contravention of laws
		 or commercial practices.
3. Do not commit acts that hinder fair and free competition.
4. Do not maintain any relationships with antisocial forces.
5. Do not infringe on the intellectual property rights of		 third parties.
6. Establish structures for the prevention, quick discovery, and		 handling of improper conduct.
7. Do not use minerals unearthed in conflict-affected areas
		 and materials produced in production processes that		 infringe on human rights or damage the environment as		 raw materials.
The Furukawa Company Group CSR Promotion Guidelines (excerpt)

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

Annual Report 2020

27

The Furukawa Company Group’s ESG Activities

Environmental Initiatives

With respect to measures to address global warming, we formulated our new Fourth Medium-Term Reduction Targets for the
10-year period from fiscal 2020 based on our Vision for 2025, andwe are pursuing activities according to these targets. As part ofour environmental protection initiatives, we are taking preventive
measures to improve and strengthen our ability to address risks.
We also promote initiatives to reduce the negative impact of ourbusiness activities on ecosystems, as well as activities to conserve
biodiversity, including the sound development of forests.

Environmental & Safety Management Committee
The Environmental & Safety Management Committee, which consists of the heads of each production site, proposes and deliberates
on important matters related to environmental management.
The Committee was scheduled to meet in person in fiscal 2019,
but the meeting was handled in written form due to the spreadof COVID-19. At the meeting, the Committee reiterated its instructions to relevant parties pertaining to (1) implementing the Fourth
Medium-Term Reduction Targets, and (2) taking rigorous preventive
measures to ensure that no accidents nor disasters occur.

Addressing Chemical Emissions
Based on Japan’s Chemical Substances Control Law, the Group
works proactively to improve its control of chemical substances
and takes measures to prevent environmental problems fromarising. For example, we report our activities under the Pollutant
Release and Transfer Register (PRTR) system to gain an understanding of the amount of chemical substances generated. Wethen compare this with emission data published by the national
government and check the proportion of our own emissions, andreflect the results in our future management activities. In the Materials
business, we appropriately manage our chemical substances by using
safety data sheets (SDS) to disseminate information on the associatedpotential hazards.

um
n
C
ol

Global Warming and Environmental Protection
Initiatives

1

Our basic approach to the environment is embodied in our Charter of Corporate Conduct, our Basic Environmental Management
Principle and our Environmental Conservation Activity Policies. We are committed to reducing environmental risks and realizing asustainable society in which our corporate activities are in harmony with the global environment. Based on this commitment,
we formulated numerical targets for environmental performance (CO2 emissions, water resource used, total emissions including
waste) and engage in environmental protection activities accordingly.

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

Note: Amounts of chemical substances emitted / relocated under PRTR
reporting requirements are disclosed in the Group’s CSR Report 2020.

Relationship with the Mining BusinessIn the copper business, and particularly at mine development sites,
there are concerns that resource development activities may lead toincreased environmental impacts. Recognizing such concerns, weare promoting various initiatives to prevent this from happening. For
example, we are working to develop and adopt new technologies,
as well as existing ones, to satisfy increasingly stringent requirements
aimed at minimizing impacts on ecosystems and water resources
and restoring sites to their original condition after development. In
addition, our mining-related machines have been widely used inresource development and infrastructure development projects, notonly in Japan but also in many countries worldwide, thus contributing
to economic development. In recent years, we have been promoting products to help minimize environmental impacts at worksites
through reduced CO2 emissions, reduced noise, improved work
efficiency, and the like. Although copper is a product created throughresource development, it has attracted more and more attention inrecent years for its specific material-based characteristics, which canbe used to minimize environmental impacts. For example, copper isused in the renewable energy sector to reduce CO2 emissions and isan indispensable material in the development of electric vehicles (EVs)and infrastructure in emerging countries. Through our involvement in
the copper business, therefore, we believe we are contributing to theenvironment and society.
28 FURUKAWA CO., LTD.

Anzen Senichi (safety first) sign at the entranceof the Ashio Copper Mine
(Trademark registration acquired in March 2020)

The Nakasai Water Treatment Plant operates 24 hours a day.

Note: Please refer to CSR Report 2020 for more details on our environmental
initiatives.

Environment

Society

GovernanceFourth Medium-Term Reduction Targets andFirst-Year Results
Our Fourth Medium-Term Reduction Targets for the 10-year
period from fiscal 2020 to 2029 are based on production plans
formulated under our Vision for 2025. Following discussions witheach of our core operating companies about expected improvements in environmental performance, we set targets to reduce
CO2 emissions by 2%, water resource used by 2%, and total
emissions including waste by 3% by fiscal 2029. In fiscal 2020,
the first year of the Fourth Medium-Term Reduction Targets, weachieved our reduction targets for CO2 emissions and total emissions including waste. However, we fell slightly short of our water
resource used reduction target. In the second year of the Fourth
Medium-Term Reduction Targets, we are taking an overall management approach based on increases and decreases in operating
volume at each company in order to achieve the reduction targets.

FY2020FY2019FY2018FY2017FY2016

438
680

511
692

483
623

458
671

429
666

22
CO2 emissions (Thousand t)
477
Drain volume (Thousand m3)
Total emissions Including
7,039
waste, etc. (t)3,203Valuables
3,836
Waste

26
477

26
410

25
465

24
471

7,160

6,884

5,347

6,832

3,357
3,803

2,928
3,956

2,489
2,858

3,374
3,458

INPUT

Energy (Thousand GJ)
Water resources (Thousand m3)
OUTPUT● Fourth Medium-Term Reduction Targets: First-Year Results
FY2020 (1st Year)
Reduction targets Actual reduction rate

2%
2%

0.2%
0.2%

18%
- 0.3%

3%

0.3%

1.7%

um
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C
ol

CO2 emissions
Water resource used
Total emissions
including waste

2

FY2029Reduction targets*

The amount of CO2 absorbed by our forest holdings
is approximately 8,000 tons of CO2 per year, which isequivalent to roughly 36% of the Group’s total CO2
emissions in fiscal 2020. The Group promotes its own
tree-planting activities through the Furukawa Forest Tree
Planting Association and activities to plant cherry trees
in Ashio.

* Reduction targets vis-à-vis FY2029 environmental performance forecast● Material Flow of the Furukawa Company Group (Fiscal 2020)
OUTPUT

INPUT
Category

Volume used

Volume used

34㎘
231㎘
204㎘
211㎘

CO2
21,930 t-CO2
emissions

Water resource
input

Total energy input

Volatile oil (gasoline)
Kerosene
Diesel oil

Fuel oil A
Liquefied petroleum
381t
gas (LPG)
848 thousand m3
City gas
Electricity

36,441thousand kwh

Waterworks

120 thousand m3

Industrial water

560 thousand m3

Groundwater

0 thousand m3

Drain
volume477
thousand m3

Totalemissions
includingwaste

7,039 t

CO2 Absorption by Our Forests

CO2 emissions fromour business activities

CO2 absorbed by
our forests

Fiscal 2020 CO2 emissions
Approx. 22,000 tons

Approx. 8,000 tons

CO2
CO2

CO2

● Environmental Conservation Costs and Benefits
The Group uses the Ministry of the Environment’s “Environmental Accounting Guidelines” as a reference to understandthe costs of environmental conservation and to improve environmental efficiency. In fiscal 2020, total environmental
conservation investments amounted to ¥639 million. These included investments in new painting facilities, rainwaterdrainage work, renewal of plant heating systems, and other investments to prevent pollution and save energy. Strengthening preventive measures is an important part of our investment policy, with the result that pollution prevention costs
accounted for approximately 70% of total environmental conservation costs in fiscal 2020. For the year, environmental
conservation costs amounted to ¥1,047 million, which included expenses for promoting environmental conservation
activities, such as maintenance and management of pollution control equipment and forest conservation.

● Economic Benefit of Environmental Conservation
In fiscal 2020, the commissioning of a turbine generator at the Osaka Plant of Furukawa Chemicals Co.,
Ltd. led to a reduction of approximately ¥44 million
in the cost of electricity purchased. The economic
benefit derived from resource circulation (gains onsale of valuables, etc.) in fiscal 2020 was ¥132 million, down ¥72 million year on year. This was due toa decline in the total amount of waste generated.

(Millions of yen)
Cost category

Principal activities

Investments

Cost

611

843

Preventing air and water pollution

434

576

Saving energy and maintaining / managing Company-owned forests

172

55

Recycling, disposal of industrial waste, and effective use of water5212(2) Upstream and downstream Recycling, recovering, and re-commercializing products that have entered the market

08(3) Administration

Maintaining ISO 14001 standards, environmental education, and landscaping / greeningof business sites

861(4) R&D

Developing products that contribute to environmental conservation

20

133

(5) Social activity

Various social activities (neighborhood cleanup events, tree planting, etc.)

0

2

0
639

0
1,047

Breakdown(1) Business area cost: Cost for preventing air pollution and water pollution
Pollution prevention
Global environmental
conservation
Resource circulation(6) Environmental remediation Recovery from environmental degradation due to business activities
Total

Benefit related to resources input
into business activities

Environmental performance indicator(Unit)FY2019FY2020Year-on-year change

Total energy input volume (Thousand GJ)

511

438

–73

Water input volume (Thousand m3)

692

680

–12

26,147

21,930–4,217

7,160

7,039

–121

Environmental impact from business Greenhouse gas emissions (Thousand t-CO2)
activities and conservation benefit
Total waste emissions (t)related to waste

AmountResource
circulation (gains
on sale ofvaluables, etc.)

Gains on saleof stainlesssteel, iron, etc.

132

Energy-saving
effectReduction ofelectric powerpurchasing costs
due to operationof steam turbine
generators

44

Total

176

Breakdown of Environmental Conservation
Cost Investments
Resource circulation cost

0.8%

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

R&D cost

3.1%

Administration cost

1.3%

FY2020 Environmental
Conservation
Cost Investments(Millions of yen)

Globalenvironmental
conservation
cost

639

Pollution
prevention
cost

67.9%

26.9%

Annual Report 2020

29

The Furukawa Company Group’s ESG Activities

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

Workplace and Workstyle Reforms
The Group respects diversity in such areas as gender, nationality,
career background, and life stage. Our aim is to create workplaces
where employees can work in with vigor and pride and take theinitiative to solve problems. We engage in “Business Process
Re-engineeing Activities” as part of our workplace and workstylereforms. Through these activities, we aim to eliminate waste
at our business departments so they can concentrate on higher-value-added work aimed at realizing our Vision for 2025. As acorporation, we will provide education and training opportunities
enabling individual employees to acquire the knowledge andprofessional skills they need, in order to support the growth ofeach employee. Specifically, we are promoting the workplace andworkstyle reforms described below.
● Three Priorities for Realizing a Fulfilling Work Environment
Develop diversified human resources according to years
Develop and of service, job title, work content, ability, and the like;utilize
optimally utilize talented human resources regardless of
humanemployee course; and set challenging personal goals andresources
conduct proper evaluations
Implement
workstylereforms

Establish more comfortable work environments throughautomation and systemization, shorter and more efficientmeeting times, and flexible adoption of various work
arrangements (flextime, teleworking, staggered work
hours, and the like); and emphasize mindset reforms to
improve work efficiency

Providehealthy
workplaces

Reduce total annual working hours, improve paid annual
leave uptake rate, improve regular health checkup rate,and implement active health-related initiatives

Enhancing Health and Productivity Management
The Group investigates and analyzes the health status of its
employees and the state of its organization through healthchecks, stress checks, and health-related productivity loss measurement programs, and assesses the relevance of these programs
to management issues outlined in Vision for 2025. Based on the
results of such efforts, we engage in a variety of activities under
our Health Declaration, Health Objectives, and Health Action
Guidelines to help our employees improve their health and solve
management issues.
● Health Objectives
Total annual working hours: Less than 2,000 hours
Percentage of employees receiving regular health checks: 100%
Enforcement of smoking time limits

T

O

P

I

C

S

Recognized as The Certified Health and Productivity
Management Organization (Large Enterprise Category)
Furukawa Co., Ltd. was recognized as“The Certified Health and Productivity
Management Organization 2020
(Large Enterprise Category)” under
the Ministry of Economy, Tradeand Industry’s Health & Productivity
Management Outstanding
Organization Recognition Program.
This system recognizes companies thatconsider employee health management from a managerial perspective
and work strategically to manage the health of their employees.

30 FURUKAWA CO., LTD.

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

Support for Employees Raising Children
We are expanding the range of employees who can access ourvarious childcare-related systems. We are also enhancing support
for employees who are raising children, including by converting part of their childcare leave into paid leave. In addition, we
encourage male employees to take childcare leave to give themmore opportunities to participate in childcare.
Hiring People with Disabilities
The Company hires people with disabilities at various workplaces
and for various types of work, promoting their independence andparticipation in society.
Hiring Foreign Nationals
In its proactive pursuit of overseas business expansion, the Groupmakes hiring decisions irrespective of nationality. We are committed to deepening partnerships with our non-Japanese employees
while emphasizing mutual respect for individual differences.
Hiring Retired Older Workers
Effective April 1, 2020, we extended the retirement age from 60
to 65 in order to give employment stability to older workers andexpand their range to utilize their talents. We believe that older
workers can continue playing an active role in the training ofyoung and mid-level employees by passing on the skills they haveacquired over the years to the next generations.

Respect for Human Rights
Prohibiting Harassment and Discrimination
The Group is committed to “creating a motivating corporate culture that rejects human rights violations and discrimination whileembracing the diverse values of individuals and evaluating themfairly.” Based on this commitment, we make resolute measuresagainst harassment and discrimination based on our internal rules.
Human Rights Training
Our Code of Behavior for employees provides that basic humanrights should be respected and discriminatory language andbehavior is prohibited. All newly hired employees are required toattend human rights seminars, while employees who participate injob-grade-based training are also required to join internal training
concerning harassment in the workplace. This enables them tolearn about creating comfortable workplaces and specific cases ofactions that constitute human rights violations.

Environment

Society

Governance

Human Resource Development
We employ human resources who are willing to seize any
challenge, based on our fundamental belief that “people” are thekey to unlocking the unlimited potential of our company. We also
work to build a motivating corporate culture that recognizes thediverse values of individuals and rejects human rights violations
and discrimination. In developing human resources, we aim to
optimize our business framework and maximize corporate value
by fostering professional human resources and creating work
environments where employees can fully demonstrate theircapabilities.

by supporting their participation in external educational organizations and academic societies.
Personnel Appraisal System
On July 1, 2019, we decided to abolish our existing professional
qualification grade system and introduce a role-grading systemthat sets the grade according to the magnitude of each employee’s expected role, to more effectively give employees the roles we
expect them to fulfill. This role-grading system includes a personnel appraisal system, based on which we assess such factors
as work performance, goal achievement levels, motivation, andcapabilities. In this way, we are working to guide and train employees, develop their skills, and allocate them appropriately, andthus create an environment in which motivated employees canwork with peace of mind.

Job-Grade-Based Training Programs
We provide a variety of educational programs to different classesof employees, such as the newly hired, employees in their second
year, third year, fifth year, eighth year, and tenth year, as well as
newly assigned managers and section managers. These programs
are designed to help them attain the basic knowledge required fortheir jobs and the ability to address changes in the social environment. Our training program for newly hired employees includes
information about the Ashio Copper Mine, such as its history,
countermeasures against pollution, and current safety management and tree-planting activities.

Industrial Safety and HealthIndustrial Accident Prevention Activities
The Group is working to prevent industrial accidents by establishing safety and health committees and conducting regular safety
patrols at each factory and office, as well as providing systematic
education and training for employees. Regarding education, we
work with management supervisors to clarify criteria for skills thatthe candidate managers should acquire. After providing education, we then evaluate whether or not the candidates have theability to carry out the required work, and if there are any insufficiencies, we instruct them to undergo re-education. In addition,
eliminating accidents and disasters requires reinforcement of
workplace patrols, pre-operation danger prediction training, andthe like. For this reason, we are stepping up guidance to management supervisors and employees.

Training Activities by Specialty and Function
We offer appropriate programs according to the specialty, function, and qualification of participants, providing them with a wide
range of expertise concerning the relevant fields and specified
skills. At the same time, we proactively encourage our employees
to participate in external seminars on specialized subjects, and toobtain public qualifications. We also endeavor to cultivate employees with expertise in cutting-edge technologies and social trends

Work–Life Balance

Activities in Fiscal 2020
- Introduced employment system for meticulous management ofworking hours- Established day for encouraging employees to take paid
annual leave and encouraged employees with low vacation
uptake rates (less than 5 days) to take annual leave- Introduced teleworking system and expanded applicability offlextime system- Held seminars on balancing work with childcare and/or nursing
care duties

Creating Comfortable Workplace Environments
We promote activities to help employees maintain their healthand achieve a good work–life balance by reducing overtime andimproving the rate at which they take paid annual leave.

● Work–Life Balance (Target: Non-Managerial Employees of Furukawa Co., Ltd.)Unit

FY2016FY2017FY2018FY2019FY2020

Persons
Persons
％
％
Days
Days

25
4
68.6
100
21.8
293.0

35
7
97.2
100
3.5
517.6

35
8
85.4
100
13.9
390.5

33
6
86.8
100
21.4
499.0

18
10
93.3
100
6
320.3

Percentage of employees returning towork after having taken parental leave

％

100

100

100

100

100

Number of employees taking caregiver
leave

Persons

0

0

0

1

0

Number of employees taking
parental leave
Percentage of employees taking
parental leave
Average number of days taken forparental leave

Male
FemaleMale
FemaleMale
FemalePrescribed working hours

Hours

1,891

1,891

1,891

1,891

1,891

Extra working hours

Hours

286

248

322

305

268

Hour of paid annual leave taken

Hours

72

75

76

79

76

Total actual working hours

Hours

2,105

2,064

2,138

2,117

2,083

Overtime hours (monthly average)

Hours

23.80

20.65

26.85

25.40

22.36

Percentage of paid annual leave taken

％

45.5

47.4

48.2

51.0

53.2

Note: Please refer to CSR Report 2020 for more details on our social initiatives.

Annual Report 202031

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

Millions of yen

2020/3

2019/3

2018/32017/3

2016/3

2015/3For the year:
Net sales
Cost of sales
Gross profit¥ 165,216
138,941
26,275¥ 174,117 ¥ 167,696 ¥ 149,830 ¥ 161,799 ¥ 172,544
147,675
142,427
126,207
136,447
146,657
26,44225,26923,62325,352
25,887

Selling, general and administrative expenses

17,582

17,526

17,44817,077

17,363

16,962

Operating income

8,693

8,915

7,821

6,546

7,989

8,925

Profit before income taxes

7,281

7,003

6,595

6,711

6,631

6,160

Profit attributable to owners of parent

4,432

4,654

4,774

4,254

5,056

9,793

Cash flows from operating activities

8,401

11,785

5,350

9,819

7,652

10,241

Cash flows from investing activities( 5,074)(3,387)(5,855)(3,585)(2,855)(10,892)

Cash flows from financing activities(4,843)(4,205)(2,529)(5,030)(8,166)

3,318

Capital expenditures

5,939

5,442

5,021

5,424

2,869

2,557

Depreciation and amortization

3,589

3,474

3,260

3,138

3,191

3,223

Research and development expenses

1,178

1,505

2,293

2,464

2,680

2,227

At year-end:
Total assets¥ 209,697¥ 215,368 ¥ 222,211 ¥ 208,034 ¥ 195,650 ¥ 207,317

Current assets

85,72687,441

87,486

79,57976,31580,564Current liabilities

52,55560,377

79,322

59,79059,75063,870Total equity

75,544

78,21785,011

77,65866,45968,783

Net assets

77,96780,44787,086

79,584

68,26270,581

Interest-bearing liabilities

70,41372,59773,31173,50776,241

82,053Per share amounts:*

Yen

Basic earnings¥ 112.23¥ 116.23¥ 118.16¥ 105.29¥ 125.13¥ 242.34

Cash dividends

50.00

50.00

50.00

50.00

50.00

50.00

Net assets

1,926

1,978

2,104

1,922

1,644

1,702

84.2

84.3

85.0

Profitability:
Cost of sales margin (%)

%

84.1

84.8

84.9

Gross margin (%)

15.9

15.2

15.1

15.8

15.7

15.0

SG&A expense margin (%)

10.6

10.1

10.4

11.4

10.7

9.8

Operating margin (%)

5.3

5.1

4.7

4.4

4.9

5.2

Return on sales (%)

2.7

2.7

2.8

2.8

3.1

5.7
15.9

Efficiency and soundness:
Return on equity (ROE) (%) (Note 1)

5.8

5.7

5.9

5.9

7.5

Return on assets (ROA) (%) (Note 2)

2.1

2.1

2.2

2.1

2.5

4.8

Debt-to-equity (D/E) ratio (Times) (Note 3)

0.9

0.9

0.9

0.9

1.1

1.2

Equity ratio (%) (Note 4)

36.0

36.3

38.2

37.3

34.0

33.2

Total asset turnover (Times) (Note 5)

0.7

0.7

0.7

0.7

0.8

0.8

Dividend payout ratio (%) (Note 6)

44.6

43.0

42.3

47.5

40.0

20.6

Dividends on equity (DOE) ratio (%) (Note 7)

2.5

2.4

2.4

2.7

2.9

3.2

Investment indicators:

Price book value ratio (PBR) (Times) (Note 8)
Stock price at fiscal year-end (Yen)*
Notes: 1. Return on equity (ROE) = Profit attributable to owners of parent /		 Average total equity × 100
2. Return on assets (ROA) = Profit attributable to owners of parent /		 Average total assets × 100
3.	Debt-to-equity (D/E) ratio = Interest-bearing liabilities (fiscal year-end) /Total equity [Shareholders’ equity] (fiscal year-end)
4.	Equity ratio = Total equity [Shareholders’ equity] (fiscal year-end) /Total assets (fiscal year-end) × 100

32 FURUKAWA CO., LTD.

0.6

0.7

0.9

1.1

1.0

1.2

1,060

1,393

1,985

2,050

1,660

2,120

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

Financial Review

Revenue and Expenses

As a result, operating income decreased 2.5% from the previous fiscal year, to ¥8,693 million, and the operating margin
edged up 0.2 point, to 5.3%. In the Industrial Machinery, operating income jumped 53.6%, to ¥3,208 million, and in the UNIC
segment, operating income rose 43.1%, to ¥3,993 million. By
contrast, the Rock Drill Machinery segment reported a 91.6% fallin operating income, to ¥143 million, due mainly to a decrease inrevenue. The Electronics segment posted an operating loss of ¥35
million (compared with operating income of ¥408 million in theprevious fiscal year), reflecting lower sales of high-purity metallic
arsenic and crystal products due to deterioration of the semiconductor market. The Metals segment reported a 48.2% fall in operating income, to ¥302 million, due to deteriorating profitability of
our electrolytic copper smelting business stemming from worsening ore purchasing conditions and rising smelting costs. This was
despite higher income from sales of electrolytic gold due to risingoverseas market prices. In the Real Estate segment, operating
income fell 36.8%, to ¥736 million. This was due to a decline insales stemming from a decrease in floor space occupied by large
tenants in the Muromachi Furukawa Mitsui Building (commercial
name: COREDO Muromachi 2), as well as withdrawal of tenantsfrom the Furukawa Osaka Building.
Among other income, we posted ¥991 million in interest anddividend income, ¥264 million in gain on reversal of provision forcost of removal of office tenants, associated with the end ofnegotiations for removing tenants from the Furukawa Osaka
Building. Gain on sales of noncurrent assets amounted to ¥655
million, the main factors included a ¥583 million gain of sale of
the Furukawa Daimyo Building (Chuo-ku, Fukuoka City, Fukuoka
Prefecture). We also posted ¥20 million in gain on sales of investment securities—reflecting efforts to improve capital efficiency
through sales of idle assets and investment securities. By contrast,
we posted ¥1,030 million in loss on impairment of investment
securities due to falling prices of listed stocks. Impairment loss
was ¥241 million, which totaled ¥1,610 million in the previous
fiscal year (and included a ¥1,561 million impairment loss on the
Furukawa Osaka Building, which was deemed no longer viable asa competitive rental tenant building).
Total income taxes (including enterprise tax, inhabitants’ tax,
and business tax) amounted to ¥2,639 million, up 22.7%. The
effective tax rate increased 5.6 percentage points, to 36.3%, duelargely an increase in the valuation allowance resulting from aloss on valuation of investment securities. Profit attributable tonon-controlling interests increased 5.6%, to ¥210 million. As aresult, profit attributable to owners of parent decreased 4.8%
year on year, to ¥4,432 million.

In fiscal 2020, ended March 31, 2020, consolidated net sales
totaled ¥165,216 million, down 5.1% compared with theprevious fiscal year.
The Industrial Machinery segment posted a 29.3% year-onyear increase in sales, to ¥23,237 million. Factors included higher
sales of materials-related machinery for an intermediate storage
facility (Futaba-machi, Futaba-gun, Fukushima Prefecture), which
is a section plant project. We also generated higher sales fromlarge-scale projects, including cargo handling equipment for aninternational bulk terminal at the Port of Onahama, belt conveyors
for an intermediate storage facility (Okuma-machi, Futaba-gun,
Fukushima Prefecture), and enclosed hanging belt conveyors for
the Sakaigawa-Kanamori retention basin project (Machida City,
Tokyo), the latter resulting from a new order.
Sales in the Rock Drill Machinery segment were down 8.9%,
to ¥27,663 million. In Japan, the segment benefited from healthy
shipments of hydraulic breakers and hydraulic crawler drills on theback of continued steady demand for urban redevelopment andconstruction investments. We also shipped tunnel drill jumbos toconstruction projects related to the Linear Chuo Shinkansen andprojected Hokkaido Shinkansen lines. However, revenue fromthese projects declined year on year, leading to a ¥755 million
decrease in domestic sales. Overseas, there was a decline inshipments of hydraulic crawler drills, especially to North America,
compared with the previous fiscal year when shipments ofequipment complying with Tier 3 exhaust gas emissions werestrong. As a result, overseas sales in this segment fell ¥1,954 million.
The UNIC Machinery segment reported an 8.7% rise in sales,to ¥31,791 million. We enjoyed a ¥2,709 million year-on-yearincrease in domestic sales thanks to higher shipments of mainstay
UNIC cranes, reflecting a rush in demand and increased orders
ahead of a partial revision of mobile crane structural standards
enacted in March 2019. Meanwhile, overseas sales declined, due
mainly to economic slowdown in Southeast Asian countries, leading to ¥155 million decrease in overseas sales.
Sales in the Metals segment decreased 16.1% year on year,to ¥67,150 million. The Company’s sales of electrolytic copper
declined due to a 1,282-ton decrease in volume sales, to 83,864
tons, as well as falling overseas market prices. Meanwhile, sales ofelectrolytic gold declined due to a decrease in production volume.
Cost of sales decreased 5.9% year on year, to ¥138,941
million, and the cost of sales margin edged down 0.7 percentage
point, to 84.1%. Selling, general and administrative (SG&A)
expenses were up 0.3%, to ¥17,582 million.

Net Sales (Billions of yen)

161.8 149.8 167.7 174.1 165.2

Operating Income (Billions of yen)
Operating Margin (%)

8.0

4.9

'16/3 '17/3 '18/3 '19/3 '20/3

6.5

4.4

7.8

4.7

8.9

5.1

8.7

5.1

4.3

4.8

4.7

4.4

5.3

'16/3 '17/3 '18/3 '19/3 '20/3
Operating Income
Operating Margin

Profit Attributable to
Owners of Parent (Billions of yen)
Return on Sales (%)

3.1

2.8

2.8

2.7

2.7

'16/3 '17/3 '18/3 '19/3 '20/3
Profit Attributable to Owners of Parent
Return on Sales

Annual Report 202033

Return on equity (ROE) rose 0.1 percentage point, to 5.8%, andnet income per share declined 3.4%, to ¥112.23.

Medium-Term Business Plan 2019: Targets andProgress by Business Segment
In fiscal 2020, we reported consolidated net sales of ¥165,216
million, representing an achievement rate of 99% compared with
our target for fiscal 2020 (final year) under Medium-Term Business
Plan 2019. By segment, the achievement rate of the Machinery
business, positioned as a core business, was 98%, while the rate
for the Materials business was 100% and the Real Estate category
was 95%.
Operating income in fiscal 2020 totaled ¥8,693 million, for anachievement rate of 102% against our ¥8,500 million target for
the year. Following our ¥8,915 million result in fiscal 2019, thismeans we exceeded our target for the second consecutive term.
The achievement rate for the Rock Drill Machinery segment was
9%, due to a significant year-on-year decline in income stemmingfrom a fall in overseas sales. The achievement rate for the Industrial
Machinery segment was 257%, reflecting operating income
significantly in excess of our target for fiscal 2020, the final yearof the plan. In addition, the UNIC Machinery segment posted an
achievement rate of 117%, having generated stable domestic
earnings. As a result, the achievement rate for the overall Machinery
business was 117%. Due to deterioration in smelting profits, theachievement rate for the Metals segment was 43%. In the Electronics segment, we posted an operating loss due to a fall in sales
stemming from deteriorating conditions in the semiconductor
market. The Chemicals segment recorded an achievement rate of
128%, having generated stable earnings over the three years of
Medium-Term Business Plan 2019. As a result, the achievement
rate for the overall Materials business was 55%. The rate for theReal Estate segment was 74%. This was due to a year-on-year
decline in earnings stemming from a fall in rental income.
Under Medium-Term Business Plan 2019, we positioned theMachinery business as a core business, and the three years of theplan as a period of “Building foundations for renewed growth.”
For fiscal 2020, we had an operating income target for the

Machinery business of ¥6,250 million, or 72% of total operating
income. Our actual result in fiscal 2020 was ¥7,344 million, or
83% of total operating income, which was 1.2 times ourpercentage target.
We are also stepping up efforts to increase ROE. Among thecomponents of ROE, we are placing top priority on improving
profitability and efficiency. In addition to accurately monitoring
cost of capital cost since fiscal 2019, we have been reviewing thebusiness portfolio, and we started practicing business portfolio
management that takes cost of capital into account whenallocating management resources, including capital investments.
Compared with fiscal 2017 (the year before the start ofMedium-Term Business Plan 2019), as the base year, we reported
a decline in profitability in fiscal 2020. This was mainly due to afall in the net profit margin stemming from a ¥1,030 million loss
on impairment of investment securities, reported as an extraordinary loss, resulting from falling prices of listed stocks. We also
improved efficiency and reduced leverage, resulting in ROE of
5.8%. In the previous fiscal year, ROE was kept to 5.7%. Thiswas mainly because of a ¥1,561 million impairment loss on the
Furukawa Osaka Building, which negatively affected the returnon sales and caused a decline in profitability. Accordingly, we did
not achieve our ROE target of 6–7% set for Phase 1 of Vision for2025 (fiscal 2018–2020).

Industrial Machinery: Compared with our targets for fiscal
2020 under Medium-Term Business Plan 2019, the achievement rates for segment sales and operating income were116% and 257%, respectively. ROA improved 12.9 points,from 0.5% in fiscal 2017 to 13.4% in fiscal 2020. We madeparticularly good progress in improving profitability (operating
margin). On April 1, 2018 we undertook a reorganization
aimed at transitioning from a simple equipment manufacturer
to a strategic partner for our customers. This entailed integrating the sales and design departments—previously separated
from each other and coordinated by the head office—into eachbusiness section. Consequently, our engineering capabilities
grew stronger. For example, our proprietary belt conveyor● ROE Breakdown Analysis
ROE

Profitability
Return on sales

Efficiency
Total asset turnover

Leverage
Financial leverage

FY2017 (results)

：5.9%

2.84%

0.74 times

2.80 times

FY2018 (results)

：5.9%

2.85%

0.78 times

2.65 times

FY2019 (results)

：5.7%

2.67%

0.79 times

2.68 times

FY2020 (result)：5.8%

Comparison with FY2017

2.68%

0.78 times

2.76 times

Profitability: Down

Efficiency: Improved

Leverage: Down

● ROA Transition by Segment
FY2017

Consolidated

ROA
Total Asset(Operating Turnover
Income)(Times)3.2%

0.7

Operating Operating
IncomeMargin(Millions of yen)

4.4%

6,546

FY2020ROA(Operating
Income)Total Asset
Turnover(Times)Consolidated

4.1%

0.8

5.3%

8,693

13.4%

1.1

12.2%

3,208

0.4%

0.8

0.5%

143

13.0%

1.0

12.5%

3,993

Industrial
Machinery

0.5%

0.9

0.6%

104

Industrial
Machinery

Rock Drill
Machinery
UNIC
Machinery

2.9%

0.9

3.3%

897

11.2%

1.1

9.9%

2,579

Rock Drill
Machinery
UNIC
Machinery

Operating Operating
IncomeMargin(Millions of yen)

Metals

6.2%

2.4

2.6%

1,738

Metals

1.1%

2.5

0.5%

302

Electronics

0.2%

0.8

0.3%

18

Electronics(0.5%)

0.8(0.6%)(35)

Chemicals

0.7%

0.3

2.1%

115

Chemicals

3.1%

0.4

7.6%

510

Real Estate

4.0%

0.1

39.4%

1,266

Real Estate

2.7%

0.1

30.7%

736

34 FURUKAWA CO., LTD.

2018 and 5.6% in fiscal 2019. However, it fell to 0.5% in fiscal
2020. This was due mainly to increased costs associated withmaking our hydraulic crawler drills compliant with exhaustemission regulations in developed countries, as well as risingdepreciation costs related to the Takasaki Yoshii Plant since
fiscal 2018. Although segment sales in fiscal 2020 were 103%
compared with fiscal 2017, segment operating income fell to16%. Going forward, we will work to improve efficiency (total
asset turnover) in light of our increasing investments in fixed assets and inventories. In consideration of this segment’s businessperformance and other factors, we decided to postpone andreassess our capital investments in the Takasaki Yoshii Plant
from Phase 2 of Vision for 2025.

technologies were adopted in multiple large-scale construction
projects, enabling us to expand our contractor business. In
materials-related machinery, we attracted orders for crushers,
screens, granulators, and certain types of plant equipment fora section plant project as a result of our technical proposals.
Accordingly, segment sales and operating income in fiscal 2020
were 165% and 3,071%, respectively, compared with fiscal
2017.
Rock Drill Machinery: Compared with our targets for fiscal
2020 under Medium-Term Business Plan 2019, the achievement rates for segment sales and operating income were 83%
and 9%, respectively. ROA fell 2.5 points, from 2.9% in fiscal
2017 to 0.4% in fiscal 2020. In fiscal 2018 and 2019, the firsttwo years of Phase 1 of Vision for 2025 (fiscal 2018–2020), thissegment benefited from healthy domestic shipments ofhydraulic breakers and hydraulic crawler drills on the back ofcontinued steady demand for tunnel drill jumbos and urban
redevelopment and construction investments. Overseas, weenjoyed steady shipments of hydraulic crawler drills, especiallyto North America and Europe. As a result profitability (operating
margin) improved from 3.3% in fiscal 2017 to 5.9% in fiscal

UNIC Machinery: Compared with our targets for fiscal 2020
under Medium-Term Business Plan 2019, the achievement
rates for segment sales and operating income were 104% and117%, respectively. ROA improved by 1.8 points, from 11.2%
in fiscal 2017 to 13.0% in fiscal 2020. Due to increases in total
assets at the Sakura Plant associated with a capital investment
program that started in fiscal 2017, as well as rising steel prices
and increasing production costs related to capital investments● Consolidated Net Sales and Operating Income by Segment and Progress Rate

(Millions of yen, rounded down)

Consolidated
Net Sales

FY2017(results)

FY2018(results)

FY2019(results)

FY2020(results)

Machinery

FY2020Progress rate vswith(Medium-term Medium-term plan Comparison
FY2017plan estimation)
estimation

66,80473,45377,581

82,692

84,10098%

124%

Industrial Machinery

14,042

15,872

17,971

23,23720,000116%

165%

Rock Drill Machinery

26,97930,20030,372

27,66333,500

83%

103%

UNIC Machinery

25,78327,381

29,23731,79130,600104%

123%

Materials

78,96889,98792,722

79,36779,600100%

101%

Metals

67,854

77,33480,06867,15067,200100%

99%Electronics

5,816

6,308

6,527

5,506

6,400

86%

95%

Chemicals

5,298

6,345

6,127

6,711

6,000

112%

127%

Real Estate

3,074

3,339

2,999

2,386

2,500

95%

78%

Others
Total

983

917

814

771

1,400

55%

78%

149,830

167,696

174,117

165,216

167,600

99%

110%(Millions of yen, rounded down)

FY2020Progress rate vswith(Medium-term Medium-term plan Comparison
FY2017plan estimation)
estimation

Consolidated
Operating Income (Loss)

FY2017(results)

FY2018(results)

FY2019(results)

FY2020(results)

Machinery

3,580

5,084

6,568

7,344

6,250

Composition ratio*

（53%）

（63%）

（72%）

（83%）

（72%）

Industrial Machinery

104

1,005

2,089

3,208

Rock Drill Machinery

897

1,783

1,690

143

2,579

2,295

2,789

1,871

1,649

1,396

Composition ratio*

（28%）

（20%）

Metals

1,738

867

UNIC Machinery
Materials

117%

205%

—

—

1,250

257%

3,071%

1,600

9%

16%

3,993

3,400

117%

155%

777

1,400

55%

42%

（15%）

（9%）

（16%）

—

—

582

302

700

43%

17%

Electronics

18

330

408

（35）

300

—

—

Chemicals

115

451

407

510

400

128%

445%

Real Estate
Composition ratio*
OthersSubtotal

1,266

1,340

1,164

736

1,000

74%

58%

（19%）

（17%）

（13%）

（8%）

（12%）

—

—

(127)

(196)

(147)

(95)

(40)

—

—

6,590

7,876

8,980

8,761

8,610

—

—

Adjustment amount

(44)

(55)

(65)

(68)

(110)

—

—

Total

6,546

7,821

8,915

8,693

8,500

102%

133%

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

Annual Report 202035

made during manufacturing, both our efficiency (total asset
turnover) and profitability (operating margin) indicators deteriorated in fiscal 2018 and 2019 compared with fiscal 2017.
Accordingly, ROA slipped to 8.9% in fiscal 2018 and 9.7%
in fiscal 2019. Compared with fiscal 2017, segment sales andoperating income in fiscal 2020 were 123% and 155%,
respectively, while profitability (operating margin) improved
2.6 points, from 9.9% to 12.5%. This was due to multiple
factors. In Japan, seeking to further enhance competitivenessby increasing the functionality and added value of UNIC cranes,
we undertook a full model change of our “G-FORCE” series,
releasing new models featuring improved levels of operability
and safety. Overseas, we reorganized our sales network andstrengthened sales capabilities while expanding and reinforcing
our production bases for machines destined for export. We alsobegan to reap the benefits of capital investments in the Sakura
Plant, which are now contributing to improved production
efficiency and profitability.
Metals: Compared with our targets for fiscal 2020 underMedium-Term Business Plan 2019, the achievement rates forsegment sales and operating income were 100% and 43%,
respectively. ROA declined by 5.1 points, from 6.2% in fiscal
2017 to 1.1% in fiscal 2020. Profit in this segment fluctuatessignificantly, because raw copper ore and bullion products
are affected by international market trends—including supply/
demand balance, speculative transactions, and geopolitical andeconomic conditions—while smelting profitability is impacted
by copper concentrate purchasing conditions. We are working
to reduce the effects of these fluctuations by entering forward
exchange contracts, hedging through futures contracts, andthe like. To improve earnings, we are also establishing an
optimal production and sales system with an emphasis on
profitability. Due to deteriorating copper concentrate purchasing
conditions and increasing smelting costs, however, it is difficult togenerate profits in the smelting business. Accordingly, profitability (operating margin) in the Metals segment declined from
2.6% in fiscal 2017 to 0.5% in fiscal 2020 (1.1% in fiscal 2018
and 0.7% in fiscal 2019). Going forward, our challenge is toverify the profitability and future potential of the consigned
smelting business.
Electronics: Compared with our targets for fiscal 2020 underMedium-Term Business Plan 2019, the achievement rate forsegment sales was 86%, while we reported a segment loss
in fiscal 2020. ROA declined by 0.7 point, from 0.2% in fiscal
2017 to –0.5% in fiscal 2020. In fiscal 2018 and 2019, the firsttwo years of Phase 1 of Vision for 2025 (fiscal 2018–2020),
this segment benefited from healthy demand for compound
semiconductors—the main application for high-purity metallic
arsenic, which is positioned as a mature product—as well as
steady demand for crystal products used in individual semiconductor devices. Accordingly, profitability (operating margin)improved steadily, from 5.2% in fiscal 2018 to 6.2% in fiscal
2019. ROA also increased, from 4.5% in fiscal 2018 to 6.2%

in fiscal 2019. Due to subsequent deterioration of the semiconductor market, however, sales and profits of mature products
declined, and this segment posted an operating loss in fiscal
2020. Going forward, we will work relentlessly to transition
from mature products to strategic products, such as aluminum
nitrides, diffractive optical elements (DOEs), and hybrid coils.
Chemicals: Compared with our targets for fiscal 2020 underMedium-Term Business Plan 2019, the achievement rates forsegment sales and operating income were 112% and 128%,
respectively. ROA improved by 2.4 points, from 0.7% in fiscal 2017 to 3.1% in fiscal 2020. Compared with fiscal 2017,segment sales and operating income in fiscal 2020 were 127%
and 445%, respectively. As a result, profitability (operating
margin) improved 5.5 points, from 2.1% in fiscal 2017 to 7.6%
in fiscal 2020. In Phase 1 of Vision for 2025 (fiscal 2018–2020),
both existing products (such as sulfuric acid, cuprous oxide,
and cupric oxide used for copper plating) and high-value-added
products (such as low-iron sulfuric acid) contributed to increased
earnings in the Chemicals segment.
Real Estate: Compared with our targets for fiscal 2020 underMedium-Term Business Plan 2019, the achievement rates forsegment sales and operating income were 95% and 74%,
respectively. ROA declined by 1.3 points, from 4.0% in fiscal
2017 to 2.7% in fiscal 2020. In Phase 1 of Vision for 2025
(fiscal 2018–2020), we engaged in negotiations to remove
tenants from the Furukawa Osaka Building (starting in fiscal
2018) and closed that building in December 2019. During thattime, however, rental income decreased as tenants moved out.
Meanwhile, Muromachi Furukawa Mitsui Building (commercial name: COREDO Muromachi 2), which is our main facility,
continued operating smoothly, but rental income declined due
to a decrease in floor space occupied by large tenants from thefourth quarter of fiscal 2019. As a result, profitability (operating
margin) declined from 39.4% in fiscal 2017 to 30.7% in fiscal
2020 (39.9% in fiscal 2018 and 38.5% in fiscal 2019). Seeking
to effectively utilize our business resources, we will work toenhance efficiency (total asset turnover) by selling idle assets
and assets that are no longer expected to contribute toearnings. The latter includes the Furukawa Daimyo Building(Chuo-ku, Fukuoka City, Fukuoka Prefecture), which wassold in April 2019. We will also strive to secure stable income
through the steady operation of the Muromachi Furukawa
Mitsui Building. Another challenge is to finalize our future planfor the Furukawa Osaka Building and improve its profitability.

Financial Position
At March 31, 2020, total assets amounted to ¥209,697 million,
down 2.6% from a year earlier. Current assets declined 2.0%,
to ¥85,726 million, due mainly to a ¥1,682 million decrease in
cash and cash equivalents. Property, plant and equipment, net
increased 1.8%, to ¥89,838 million and stemmed mainly from
capital investments totaling ¥5,939 million. Depreciation andamortization amounted to ¥3,589 million. Investments and other

Basic Earnings per Share (Yen)

Net Assets (Billions of yen)
Return on Equity (ROE) (%)

Total Assets (Billions of yen)
Equity Ratio (%)

125.13 105.29 118.16 116.23 112.23

68.3 79.6 87.1 80.4 78.0

195.7 208.0 222.2 215.4 209.7

34.0 37.3 38.2 36.3 36.0
7.5

'16/3 '17/3 '18/3 '19/3 '20/3

5.9

5.9

5.7

'16/3 '17/3 '18/3 '19/3 '20/3
Net Assets
Return on Equity (ROE)

36 FURUKAWA CO., LTD.

5.8
'16/3 '17/3 '18/3 '19/3 '20/3
Total Assets
Equity Ratio

million to the Rock Drill Machinery segment, ¥937 million to the
UNIC Machinery segment, ¥229 million to the Metals segment,¥222 million to the Electronics segment, and ¥779 million to theChemicals segment, aimed primarily at improvements in production
efficiency. In addition, ¥19 million was allocated to the Real Estatesegment, mainly for maintenance of buildings, and ¥566 million
went to the Others segment, mainly for investments in facilities toprevent accidents at suspended mines. Funds for these expendituresare sourced from internal funds and borrowings. Depreciation andamortization increased 3.3%, to ¥3,589 million.

assets were down 13.9%, to ¥34,133 million, with investment
securities decreasing 19.3%, to ¥24,029 million, due to a decline
in the market value resulting from falling prices of publicly listed
stocks.
Total liabilities decreased 2.4%, to ¥131,730 million. Current
liabilities declined 13.0%, to ¥52,555 million. The main factors
were a ¥5,623 million fall in short-term debt (including current
portion of long-term debt), as well as decreases in payables—
trade (notes and accounts payable and electronically recordeddebt) and accounts payable—other, the sum of which declined¥2,304 million. Long-term liabilities increased 6.2%, to ¥79,175
million, mainly due to a ¥3,439 million increase in long-term debt.
Net assets at fiscal year-end totaled ¥77,967 million, down
3.1% from a year earlier. The decrease stemmed mainly from a¥3,976 million decline in unrealized holding gain on securities, netof income taxes, due to a decline in the market value resulting fromfalling prices of publicly listed stocks. This was despite a ¥2,615
million increase in retained earnings. The increase in retained
earnings mainly reflected ¥4,432 million in profit attributableto owners of parent, which outweighed ¥1,978 million in cash
dividends paid. Consequently, total equity amounted to ¥75,544
million, and the equity ratio edged down 0.3 percentage point, to36.0%. The debt-to-equity (D/E) ratio remained unchanged, at 0.9
times.

Cash Flows
In the fiscal year under review, net cash provided by operating
activities amounted to ¥8,401 million, down 28.7% from theprevious fiscal year. The main factor was an increase in income
taxes paid, which contrasted with a decrease in payables—tradeand inflows from changes in assets and liabilities associated with
operating activities.
Net cash used in investing activities totaled ¥5,074 million, up¥1,687 million from the previous fiscal year. The main factor was¥6,120 million in purchases of property, plant and equipment (up¥1,361 million year on year) associated with a capital investment
program to strengthen our manufacturing capabilities underMedium-Term Business Plan 2019. These included investments toincrease the production capacity of the Takasaki Yoshii Plant andinvestments aimed at reinforcing the “mother factory” functionsof our Sakura Plant, which has a three-pronged production system(Japan, China, and Thailand). We also recorded ¥1,058 million
in proceeds from sales of property, plant and equipment (down¥187 million), including the Furukawa Daimyo Building (Chuo-ku,
Fukuoka City, Fukuoka Prefecture).
Net cash used in financing activities was ¥4,843 million, up¥638 million from the previous fiscal year. The main factors were¥2,174 million (up ¥1,495 million from the previous year) in
repayment of short- and long-term debt, net of proceeds fromsame, aimed at reducing interest-bearing debt. We also recorded¥421 million in purchase of treasury shares (down ¥788 million).

R&D and Capital Expenditures
The Furukawa Company Group actively engages in R&D on
high-value-added products and new materials that meetwide-ranging market needs. In the fiscal year under review, total
research and development expenses amounted to ¥1,178 million,
down 21.7% from the previous fiscal year. Of this total, ¥13
million was allocated to the Industrial Machinery segment, ¥75
million to the Rock Drill Machinery segment, ¥89 million to the
UNIC Machinery segment, ¥24 million to the Metals segment,¥109 million to the Electronics segment, and ¥151 million to theChemicals segment. We also spent ¥717 million on corporate
research aimed at developing basic technologies for each segment
and creating new businesses. This was allocated to all of thebusiness segments.
In fiscal 2020, capital expenditures (including purchase of intangible fixed assets) amounted to ¥5,939 million. Of this total, ¥405
million was allocated to the Industrial Machinery segment, ¥2,782

Consolidated Operating Cash Flow Allocation
and Capital Strategy
The Furukawa Company Group has completed its Medium-TermBusiness Plan 2019, covering the three-year period from April● Financial Strategy for Fiscal 2026
FY2020 Year-End Level

FY2026 Level (Estimation)

0.9 times

0.6–0.7 times range

5.7 times

4 times level

BBB（JCR）

BBB+ or higher (Japanese rating agency)

Debt-to-equity (D/E) ratio*1
Interest-bearing debt to EBITDA ratio*2

Issuer credit rating*1 Debt-to-equity (D/E) ratio = Interest-bearing liabilities (fiscal year-end) / Total equity [Shareholders’ equity] (fiscal year-end)*2 Interest-bearing debt to EBITDA ratio = Interest-bearing debt (fiscal year-end) / Operating income + Depreciation and amortization

Capital Expenditures (Billions of yen)
Depreciation andAmortization (Billions of yen)

5.4
2.9 3.2

3.1

5.0
3.3

5.4
3.5

5.9

Cash Flows (Billions of yen)

7.7

11.8

9.8

8.4

Cash Dividends per Share (Yen)

50

50

50

50

50

5.4

3.6

'16/3 '17/3 '18/3 '19/3 '20/3
Capital Expenditures
Depreciation and Amortization(2.5)(2.9) (3.6)(4.8)(5.0) (5.9) (3.4)(8.2)(4.2) (5.1)'16/3 '17/3 '18/3 '19/3 '20/3'16/3 '17/3 '18/3 '19/3 '20/3

Cash Flows from Operating Activities
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Annual Report 202037

● Consolidated Operating Cash Flows and Progress Ratio
FY2018–FY2020 Cumulative(Medium-Term Plan Estimation )FY2018–FY2020 Cumulative(Results)

Progress Rate
(vs Medium-Term Plan Estimation)¥25,000 million¥25,537 million

102%

Interest-bearing debt
reduction*1¥3,000 million¥3,094 million

103%

Capital expenditures*2¥16,000 million¥16,403 million

103%

Cash dividends*3¥6,000 million¥6,017 million

100%

Share buybacks—¥1,631 million—

Operating Cash Flows

Allocation*1 Refers to borrowings (short and long term) only, and does not include lease obligations.
*2 Refers to purchase price. Purchases of tangible and intangible fixed assets in fiscal 2020 amounted to ¥6,170 million, and cumulative purchases in fiscal 2018–2020
totaled ¥16,394 million.
*3 Refers to total dividend payments. The dividend payout ratio was 42.3% in fiscal 2018, 43.0% in fiscal 2019, and 44.6% in fiscal 2020 (compared with the target of
30% or higher under Medium-Term Business Plan 2019).

2017 to March 2020. With respect to allocation of consolidated
operating cash flows, our policy under the plan was to “actively
promote investments that contribute to increased corporate
value” while aiming to establish a robust financial foundation.
At the same time, we endeavored to make optimal allocations ofcash flows in consideration of shareholder returns.
At its meeting held on May 8, 2020, the Board of Directors
announced its Medium-Term Business Policy 2022. Under thispolicy, we aspire to achieve a financial soundness vision that will
enable us to obtain a credit rating of BBB+ (or higher), which is
one notch above the current rating issued by a Japanese rating
agency, by fiscal 2026 (ending March 2026), the final year of
Vision for 2025. To this end, we will continue striving to improve
our financial soundness and pursue an optimal capital structure.
Over the three-year period of Medium-Term Business Plan
2019, we generated ¥25,537 million in cumulative operating cash
flows, representing a 102% achievement rate compared with our¥25,000 million projection under the plan.
Over the same period, we also reduced interest-bearing debt
by ¥3,094 million, from ¥73,507 million on March 31, 2017 to¥70,413 million on March 31, 2020. The reduction represented a
103% achievement rate compared with our ¥3,000 million projection. Going forward, we will continue placing top priority on
improving efficiency and profitability without excessive reliance on
financial leverage, while endeavoring to improve financial soundness in order to achieve financial targets set for fiscal 2026 underMedium-Term Business Policy 2022.
As for allocation of capital expenditures, our cumulative
three-year projection was around ¥16,000 million, mostly forinvestment in the Machinery business, which is positioned as acore business. The cumulative amount for the past three years(fiscal 2018 to fiscal 2020) was ¥16,403 million, for an achievement rate of 103%. Going forward, we will continue making
capital investments aimed at strengthening our manufacturing
capabilities, especially in the Machinery business, in our quest to
proactively promote investments that help increase our corporate
value.
Furukawa places great importance on improving returns ofprofits to all shareholders. Our basic policy is to appropriate profits
after comprehensive consideration of various factors, including
retained earnings required to finance capital expenditures andresearch and development expenses necessary to bolster earnings,
as well as future business development and other factors. We
strive to return profits to shareholders in a stable and ongoingmanner. In principle, we aim to pay annual dividends of ¥50.00
per share or higher for a consolidated payout ratio of 30% or
higher, based on consolidated earnings (excluding extraordinary
income / loss situations). Under Medium-Term Business Plan 2019,
our projection for cumulative dividend payments over the threeyear period was ¥6,000 million. In each of the three years (fiscal
2018, 2019, and 2020), we paid annual dividends of ¥50.00

38 FURUKAWA CO., LTD.

per share, for a consolidated payout ratio in excess of 40.0%.
Cumulative payments totaled ¥6,017 million, for an achievement
rate of 100%.
The Company made purchases of treasury stock in November
2018 and February 2020. Over the three-year period from fiscal
2018 to fiscal 2020, we purchased a total of 1,186,300 shares,
for a total purchase price of ¥1,631 million. We will continue
contemplating the purchase and cancellation of treasury stock asappropriate, taking into consideration stock price trends, capitalefficiency, cash flow, and other factors.

Business Risks(1) Foreign Exchange Fluctuations
The Furukawa Company Group engages in production, procurement,
and sales activities in Japan and overseas, and therefore is at risk offoreign 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 and other methods to mitigate this risk, its operating results
and financial position may be adversely affected by significant
movements in exchange rates.
(2) Fluctuations in Nonferrous Metals Markets
International prices of electrolytic copper, a mainstay product of
the Group, and other nonferrous metals are decided by the London
Metals Exchange (LME) in U.S. dollars to reflect international market
conditions. Such prices fluctuate according to the international
supply–demand balance, speculative transactions, international
political and economic circumstances, and the like. Accordingly, theGroup utilizes forward delivery transactions and other hedging
techniques to minimize the impact of fluctuating LME prices.
However, significant movements in such prices may affect theGroup’s operating results and financial position.
The Group also invests in overseas copper mines to procure copper
concentrate. Any fluctuations in LME prices may impact the businessperformance of those mines, which may affect the Group’s operating
results and financial position.
(3) Interest Rates
The Group’s fiscal year-end balance of interest-bearing liabilities(debt) was ¥70,413 million, equivalent to 33.6% of total assets. Any
increase in debt-related costs arising from changes in interest rates
may adversely affect the Group’s operating results and financial
position. Although funding costs may increase if market interest rates
rise, the Group has prepared for sudden changes in interest rates
by utilizing an optimal combination of borrowing arrangements,
including fixed-rate instruments.
(4) Investment Securities and Land
Historically, the Furukawa Company Group has maintained holdings

of investment securities, which are subject to market valuations, aswell as land. As of March 31, 2020, the carrying value of investment
securities as stated in the balance sheets was ¥22,278 million, whileland stood at ¥53,497 million. Accordingly, the Group’s operating
results and financial position are at risk of impairment losses, losses
from devaluation, and losses on sales if securities and land prices
decline significantly.
Regarding securities, every year the Board of Directors comprehensively considers the benefits and risks associated with individual
holdings, both qualitatively and quantitatively, in order to verify
the suitability of maintaining such holdings. Securities judged to beunsuitable as a result of such verification are sold.
As for other fixed assets held by the Group, a significant deterioration of business conditions could result in a decline in profitability,
while falling market prices could lead to impairment losses. Any ofthese factors may adversely affect the Group’s operating results andfinancial position.
(5) Fluctuations in Demand
The Furukawa Company Group’s products are sold both in Japan andoverseas. Therefore, any major fluctuations in demand in its major
markets—such as Japan, North America, Europe, and Asia—may
adversely affect the Group’s operating results and financial position.
Due to the nature of its products, moreover, sales from domestic
public works projects account for a high proportion of net sales.
Therefore, any major fluctuations in public investments may adversely
affect the Group’s operating results and financial position.
(6) Country Risk
The Furukawa Company Group conducts its production, procurement, and sales activities on a global basis in order to expand its
sales network, strengthen cost-competitiveness, and reduce currency
risk. Any number of local events could hamper the Group’s smoothbusiness operations. These include local political unrest, sharp economic slowdown, deterioration of public security, trade sanctions,cultural and legal differences, special labor–management relations,and terrorism. Such events could affect the Group’s operating results
and financial position.
(7) Natural Disasters, Infectious Diseases, and Other Force Majeure
The occurrence of natural disasters (such as earthquakes, tsunamis,
floods, and typhoons) and accidents (such as large-scale fires) could
cause substantial damage to the Group’s production facilities andprocurement sources and a breakdown of its distribution network.
Also, the worldwide spread of infectious diseases, such as COVID-19,
could render inoperable the Group’s business operations and owned
facilities, as well as the operations of its suppliers. Either of these
events may prevent the Group from supplying products in a reliable manner, which could affect its operating results and financial
position.
Regarding the worldwide spread of COVID-19, which materializedin early 2020, the Group has taken rigorous measures to prevent
infections among employees, including introduction of stringent
hygiene management and teleworking systems. If the pandemic
continues for a prolonged period, however, our operations may besuspended due to employee infections, while any slowdown in the
supply chain and suspension or contraction of customers’ businessactivities could lead to a decline in revenue, which could affect theGroup’s operating results and financial position.
For more information about major risks identified as having thepotential to affect cash flows, segment performances, and otherfactors in light of the COVID-19 pandemic, please refer to the Annual
Securities Report and quarterly reports.
The Group is taking various measures to prevent COVID-19
infections. These include introduction of teleworking systems andshortened working hours, as well as separating desks with partitions
to prevent droplet infections. Each department has also adopted arotation system to avoid concentration of employees. At our factories,
we have increased the number of shuttle buses connecting eachfactory with its nearest railway station and introduced rotation
systems at employee cafeterias. We have also installed partitions atother business facilities, and at shiftwork sites we reduced the numberof shifts from three to two.

(8) Product Quality
The Group manufactures products in accordance with globally recognized quality control standards and strives constantly to establish,
maintain, and improve its quality assurance system. However, there
is no guarantee that all products will be defect-free in the future.
To mitigate such risk, we take out product liability insurance, recall
insurance, and the like. However, in the event that a product defectleads to major liability claims or recalls that exceed our expectations,public trust in the Group and its products may be lost, which could
affect its operating results and financial position.
(9) New Product Development
The Group actively engages in new product development with theaim of bringing to market products incorporating new technologies
and functions that meet customer needs. In some of our businesses,
however, there are products that are in mature stages of their life
cycles. Such products may be subject to reduced profit margins
because they are difficult to differentiate from the competition. If theGroup is unable to develop or market new products that will become
future pillars of such businesses, its operating results and financial
position could be affected as a result.
(10) Human Resources
To achieve future growth, the Group hires talented people—both
new graduates and mid-career professionals—and provides training
to enhance their competitive strengths. If the Group is unable toattract sufficient human resources required for its business,
however, its operating results and financial position could be affected
as a result.
(11) Environmental Protection
The Furukawa Company Group places the highest importance on
environmental protection, environmental safety, and prevention ofpollution at its various business sites, both in Japan and overseas,
respecting all laws and regulations. Furthermore, in Japan the Grouptakes all necessary measures to ensure proper environmental
management of suspended and closed mines, including preventionof water pollution from such mines, as well as managing the safetyof tailing dams. Due to changes in relevant regulations, however,legislation may be tightened and unexpected situations may arise ateach business site, which could increase the cost of responding andthus affect the Group’s operating results and financial position.
(12) Official Regulations
The Furukawa Company Group engages in business in Japan andoverseas and thus is subject to legal regulations of various nations,
including rules related to licensing, taxation, the environment, labor,
antitrust, and export controls. The Group takes care to faithfullycomply with such official regulations. Due to changes in laws andregulations, however, existing legislation may be tightened or new
legislation enacted, which could increase the cost of responding andimpact business continuity, and thus affect the Group’s operating
results and financial position.
(13) Retirement Benefit Obligation
The employees of the Furukawa Company Group are covered bya defined benefit corporate pension plan and a non-contributory
funded employee pension plan. Liability for retirement benefits areprovided at an amount calculated based on the retirement benefit
obligation and the fair value of pension plan assets at the balance
sheet date as of March 31, 2020. In calculating retirement benefit
obligation, the Group adopts assumptions in connection with thediscount rate and expected rate of return on plan assets, as wellas other assumptions. However, the Group’s operating results andfinancial position are at risk in the event that the actual discountrate and expected rate of return on plan assets differ materiallyfrom the assumptions, as well as in the event of a change in theassumptions on which retirement benefit obligation are made.

Annual Report 202039

Consolidated Balance Sheets
Furukawa Co., Ltd. and consolidated subsidiaries
As of March 31, 2020 and 2019

Thousands of
U.S. dollars (Note 4)

Millions of yen

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

2020

¥

Property, Plant and Equipment, at Cost (Notes 6 and 19):
Land and timberlands
Buildings and structures
Machinery and equipment
Lease assets (Note 10)
Construction in progress

12,64730,653
16,951
10,514
10,9444,180(163)
85,726

2020

2019

¥

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

116,207281,661
155,754
96,610100,561
38,408(1,499)787,702

Accumulated depreciation
		 Property, plant and equipment, net

55,34452,93346,0691,180
1,317
156,844(67,005)
89,83855,75958,01344,612
1,391
1,135
160,911(72,622)
88,289508,540
486,386
423,311
10,842
12,101
1,441,180(615,688)
825,492

Investments and Other Assets:
Investment securities (Note 5)
Investments in affiliates
Long-term loans receivables
Deferred tax assets (Note 14)
Assets for retirement benefits (Note 13)
Other assets
Allowance for doubtful accounts
		 Total investments and other assets
		Total assets

24,029
3,308
3,791
1,458
345
1,778
(575)
34,133
209,697

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

220,792
30,394
34,834
13,397
3,171
16,336(5,286)313,639
1,926,833

40 FURUKAWA CO., LTD.

¥

¥

$

Thousands of
U.S. dollars (Note 4)

Millions of yen

LIABILITIES AND NET ASSETS
Current Liabilities:
Short-term debt (Note 6)
Current portion of long-term debt (Note 6)
Lease obligations (Note 6)
Payables—trade
Electronically recorded obligations
Accounts payable—other
Income taxes payable
Provision for environmental measures
Provision for deposition field restoration
Provision for cost of removal of office tenants
Other current liabilities
		 Total current liabilities

2020

¥

Long-Term Liabilities:
Long-term debt (Note 6)
Lease obligations (Note 6)
Provision for environmental measures
Liability for retirement benefits (Note 13)
Deferred tax liabilities (Note 14)
Deferred tax liabilities on surplus on the revaluation of land
(Note 14)
Asset retirement obligations
Other long-term liabilities
		 Total long-term liabilities
Net Assets (Note 7):
Shareholders’ equity:
Common stock without par value:
		Authorized—80,000,000 shares
		Issued—40,445,568 shares
Retained earnings
Treasury stock, at cost:		2020—1,229,045 shares		2019—904,102 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

¥

8,570
3,011
222
9,532
10,331
12,651
729
—
—
—
7,508
52,555

2020

2019

¥

9,738
7,467
258
12,691
12,233
9,895
761
4
219
432
6,680
60,377$78,751
27,6702,037
87,586
94,928116,247
6,700———
68,993482,91258,831
443
120
9,511
6,357

55,392
405
68
8,801
6,018

540,578
4,067
1,103
87,39458,415

1,408

1,477

12,936229
2,276
79,175224
2,159
74,5442,106
20,914
727,512

28,20844,50828,20841,892

259,195
408,965(1,697)—71,018(1,277)—
68,824(15,597)—
652,563

5,364
(322)
2,620
(340)
(2,797)
4,525
2,423
77,967
209,697

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

49,287(2,959)24,076(3,122)(25,701)
41,581
22,264
716,408
1,926,833¥$

The accompanying notes are an integral part of these statements.

Annual Report 202041

Consolidated Statements of Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars (Note 4)

Millions of yen

2020

Net Sales¥

Cost of Sales (Note 16)

2020

2019

165,216¥

174,117$

1,518,109(138,941)(147,675)(1,276,676)

		Gross profit

26,27526,442

241,433

Selling, General and Administrative Expenses (Note 9)(17,582)(17,526)(161,556)

8,693

8,915

79,877

		Operating income
Other Income (Expenses):
Interest and dividend income

991

952

9,105

Equity in earnings (losses) of affiliates

(51)

(150)

(467)

(512)

(577)

(4,706)

Other income (expenses), net (Note 17)(1,840)(2,137)(16,908)

		 Profit before income taxes

7,281

7,003

66,901

Current(1,425)(1,665)(13,098)

Deferred(1,214)(485)(11,155)

		 Total income taxes(2,639)(2,150)(24,252)

Profit

4,641

4,853

42,648

Profit Attributable to Non-Controlling Interests

(210)

(199)

Interest expense

Income Taxes (Note 14):

Profit Attributable to Owners of Parent

¥

4,432

¥

4,654

(1,927)$

Yen

40,721
U.S. dollars (Note 4)

Profit Attributable to Owners of Parent per Share

¥

112

¥

116

$

1.03

Net Assets per Share

¥

1,926

¥

1,978

$

17.70

The accompanying notes are integral part of these statements.

42 FURUKAWA CO., LTD.

Consolidated Statements of Comprehensive Income
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars (Note 4)

Millions of yen

2020

Profit

¥

2020

2019

4,641

¥

4,853

$

42,648Other Comprehensive Income (Loss):
Unrealized holding gain (loss) on securities, net of income taxes
Deferred gain (loss) on hedges(3,983)(5,180)(36,599)

(334)

(63)

(3,073)

Translation adjustments

(43)

(318)

(399)

Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates
accounted for using equity method
		 Total other comprehensive income (loss) (Note 8)(407)(2,477)(3,740)

66

(204)

605

(4,702)(8,242)(43,206)(61)(3,389)(558)

Owners of parent(275)(3,566)(2,529)Non-controlling interests

215

178

1,971

Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to:

The accompanying notes are an integral part of these statements.

Annual Report 202043

Consolidated Statements of Changes in Net Assets
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2020 and 2019

For the year ended March 31, 2020

Millions of yen
Number ofshares ofcommonstock(thousands)

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

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208For the year ended March 31, 2020

Retainedearnings

Treasury stock,at cost41,892(1,977)
4,432
—
161
—
44,508¥¥¥¥(1,277)
—
—
(421)
—
—
(1,697)

Total
shareholders’equity¥¥68,824(1,977)
4,432
(421)
161
—
71,018Millions of yen
Accumulated other comprehensive income
Surplus on the
Unrealized
revaluation ofholding gain onland, net of
securities, net of Deferred gain
income taxes (loss) on hedges income taxes

Balance at beginning of year
¥ 9,340 ¥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
(3,976)
Balance at end of year
¥ 5,364 ¥Translation
adjustments

12 ¥ 2,781 ¥
—
—
—
—
—
—
—
—
(334)
(161)
(322) ¥ 2,620 ¥Total­accumulated
Retirement
other
benefits liability
comprehensive Non-controlling
adjustments
incomeinterests(Note 13)(350) ¥ (2,390) ¥ 9,393 ¥ 2,230 ¥ 80,447————(1,977)
—
—
—
—
4,432
—
—
—
—
(421)
—
—
—
—
161
10
(407) (4,867)
193(4,675)(340) ¥ (2,797) ¥ 4,525 ¥ 2,423 ¥ 77,967

For the year ended March 31, 2019

Millions of yen
Number ofshares ofcommonstock(thousands)

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

44 FURUKAWA CO., LTD.

Total
net assets

40,446—————40,446

Shareholders’ equity
Commonstock¥¥

28,208—————28,208¥¥Retainedearnings

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

¥

¥

(68)
—
—
(1,209)——(1,277)

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

For the year ended March 31, 2019

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

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

46 ¥ 3,465 ¥
—
—
—
—
—
—
—
—
(33)
(685)
12 ¥ 2,781 ¥Total­accumulated
Retirement
other
benefits liability
comprehensive
adjustments
income(Note 13)

Non-controllinginterests

Total
net assets

182 ¥87 ¥ 18,298 ¥ 2,075 ¥ 87,086————(2,020)
—
—
—
—
4,654
—
—
—
—
(1,209)
—
—
—
—
685
(533)
(2,477)(8,905)156(8,750)(350) ¥ (2,390) ¥ 9,393 ¥ 2,230 ¥ 80,447

For the year ended March 31, 2020

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

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

Commonstock

Retainedearnings

Treasury stock,at costTotal
shareholders’equity$ 259,195—————$ 259,195$ 384,935(18,167)
40,721—
1,476—$ 408,965$ (11,730)——(3,867)——$ (15,597)$ 632,400(18,167)
40,721(3,867)1,476—$ 652,563

The accompanying notes are integral part of these statements.

For the year ended March 31, 2020

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

Translation
adjustments

Total­accumulated
Retirement
other
benefits liability
comprehensive
adjustments
income(Note 13)

Non-controllinginterests

Total
net assets

Balance at beginning of year
$ 85,819 $113 $ 25,552 $ (3,218) $(21,960) $ 86,306 $ 20,495 $739,201
Cash dividends paid
—
—
—
—
—
—
— (18,167)
Profit attributable to owners of parent
—
—
—
—
—
—
—
40,721
Purchase of treasury stock
—
—
—
—
—
—
—
(3,867)
Reversal of surplus on the revaluation of land
—
—
—
—
—
—
—
1,476
Net change during the year
(36,532) (3,073) (1,476)
96(3,740) (44,725)
1,769 (42,956)
Balance at end of year
$ 49,287 $ (2,959) $ 24,076 $ (3,122) $(25,701) $ 41,581 $ 22,264 $716,408
The accompanying notes are integral part of these statements.

Annual Report 202045

Consolidated Statements of Cash Flows
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars (Note 4)

Millions of yen

2020

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

¥

7,281
228
3,589
51
241
(511)
1,030
(18)
(219)
(432)
(991)
512
(17)
208
(5,085)
3,271
639
9,778
1,036
(512)
(2,160)
259
8,401

2020

2019

¥

7,003
25
3,474
150
1,610
(146)
—
(215)
(454)
(147)
(952)
577
470
2,225
1,719
(4,980)2,234
12,593953(575)(1,662)476
11,785$66,901
2,096
32,978467
2,213(4,698)9,462(166)(2,010)(3,965)(9,105)
4,706
(154)
1,908
(46,722)30,056
5,876
89,845
9,521(4,707)(19,850)
2,383
77,192

Investing Activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Increase in short-term loans receivables
Collection of long-term loans receivables
Other
		 Net cash used in investing activities(6,120)
1,058
(527)
350
—
111
54
(5,074)(4,760)
1,246
(506)
444
(364)
691
(138)
(3,387)(56,239)
9,724(4,845)
3,219
—
1,018
499
(46,623)

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

6,460
(7,471)
17,387(18,551)(421)(1,978)(248)(22)(4,843)(54)(1,571)
14,21812,64725,713(26,912)
7,555(7,035)(1,209)(2,020)(275)(22)(4,205)(177)
4,017
10,20014,21859,359(68,647)
159,767(170,455)(3,867)(18,174)(2,283)(202)(44,503)(499)(14,433)
130,640
116,207

The accompanying notes are integral part of these statements.

46 FURUKAWA CO., LTD.

¥

¥

$

Notes to the Consolidated Financial Statements
Furukawa Co., Ltd. and consolidated subsidiaries
For the years ended March 31, 2020 and 2019

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

2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The Company had 32 subsidiaries and 11 affiliates as of March
31, 2020. The consolidated financial statements included
the accounts of the Company and 32 subsidiaries as of March
31, 2020.
For the purpose of preparing the consolidated financial
statements, all significant intercompany transactions, accountbalances and unrealized profits among the Furukawa Group
have been eliminated.
Certain foreign subsidiaries have been included on the basisof a fiscal year ended on December 31, but prior to the parent
company’s fiscal year ended on March 31. Relevant adjustments
have been made for significant transactions with such
subsidiaries during the intervening period from January 1 toMarch 31.
Investments in subsidiaries and affiliates which are notaccounted for by the equity method are carried at cost becauseof their immaterial impact on the consolidated financial
statements.
(2) Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investmentswith a maturity of three months or less when purchased.
(3) Short-Term Investments and Investment Securities
Securities other than equity securities issued by subsidiaries andaffiliates are classified into three categories: trading, held-tomaturity or other securities. The Furukawa Group does not holdany trading or held-to-maturity securities as of March 31, 2020
and 2019. 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.
(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

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.

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

Annual Report 202047

(10) Retirement Benefits
The retirement benefit obligation for employees is attributed toeach period by the straight-line method over the estimated yearsof service of the eligible employees.
Actuarial gain or loss is amortized in the year following theyear in which the gain or loss is recognized primarily by thestraight-line method over periods (mainly 15 years) which areshorter than the average remaining years of service of theemployees.
Prior service cost is being amortized as incurred by thestraight-line method over periods (mainly 15 years) which areshorter than the average remaining years of service of theemployees.
Unrecognized actuarial gains and losses and unrecognizedprior service costs are recorded in “Retirement benefits liability
adjustments” in net assets after adjusting income tax effect.
(11) Surplus on the Revaluation of Land
Pursuant to the Law Concerning the Revaluation of Land, land
used for the Company’s business operations was revalued on
March 31, 2002. The income tax effect of the difference
between the book value and the revalued amount has beenpresented under liabilities as “Deferred tax liabilities on surplus
on the revaluation of land” and the remaining balance has beenpresented under net assets as “Surplus on the revaluation ofland, net of income taxes” in the accompanying consolidatedbalance sheets. Revaluation of land was determined based on
the official notice prices published by the Commissioner of the
National Tax Authorities in accordance with Paragraph 4, Article
2 of the “Enforcement Ordinance Concerning Land Revaluation,”with relevant adjustments. The carrying value of the land after
revaluation exceeded its fair value by ¥1,440 million ($13,234
thousand) and ¥1,643 million as of March 31, 2020 and 2019,respectively.
(12) Income Taxes
Current income taxes comprising corporation tax, enterprise tax
and inhabitants’ taxes are provided for based on amounts
currently payable for each year. Deferred income taxes arisingfrom temporary differences between financial reporting and tax
bases of the assets and liabilities, which were measured using
the enacted tax rates and laws that will be in effect when thetemporary differences are expected to reverse, are reflected in
the consolidated financial statements.
The Company and its domestic wholly owned subsidiaries
file a consolidated corporation tax return.
(13) Amounts per ShareProfit attributable to owners of parent per share is computed
based on the profit available for distribution to shareholders ofcommon stock and the weighted-average number of shares ofcommon stock outstanding during the year.
Net assets per share are computed based on the net assets
excluding non-controlling interests and the number of common
stock outstanding at the year-end.

48 FURUKAWA CO., LTD.

(14) Foreign Currency Translation
Foreign currency-denominated monetary assets and liabilities
are translated into Japanese yen using the rates of exchange in
effect at the balance sheet date. Differences arising from thetranslation are included in the consolidated statement ofincome.
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in
effect at the balance sheet date, except for the components of
net assets excluding non-controlling interests, which aretranslated at their historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange
in effect during the year. Differences arising from the translation
are presented as “Translation adjustments” and “Non-controllinginterests” in the consolidated financial statements.
(15) Hedging Activities
The Furukawa Group uses derivative financial instruments forthe purpose of hedging the risks of adverse fluctuations inforeign exchange rates on the trade receivables, trade payables
and forecast transactions denominated in foreign currencies,
commodity prices and interest rates. All derivative financial
instruments except those below are stated at fair value andrelated gain or loss on the changes in the fair values of derivative
financial instruments is deferred as a component of net assets inthe balance sheet until the recognition of gain or loss on hedged
items when those derivative financial instruments qualify forhedge accounting.
Trade receivables, trade payables and forecast transactions
denominated in foreign currencies are translated at thecontracted rates if the relating forward contracts qualify forhedge accounting.
The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not carried at fair value,
but any differences paid or received on the interest rate swaps
are recognized as adjustments to interest expense or income
over the life of each swap, thereby adjusting the effective
interest rate on the hedged items.
(16) Shareholders’ Equity
The Company Law of Japan provides that an amount equal to
10% of the amount to be distributed as distributions of capitalsurplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the common stock
account. Such distributions can be made at any time byresolution of the shareholders or by the Board of Directors if
certain conditions are met, but neither the capital reserve nor
the legal reserve is available for distributions.

(17) Adoption of Tax Effect Accounting for the Transition
from the Consolidated Taxation System to the GroupTax Sharing System
With respect to items for which a review of the Non-Consolidated
Taxation System was made in line with the transition to theGroup tax sharing system established under the Act for Partial
Revision of the Income Tax Act, etc. (Act No. 8 of 2020) and thetransition to the Group tax sharing system, the Company andsome of its domestic consolidated subsidiaries have not applied
the provisions of Paragraph 44 of the Implementation Guidanceon Tax Effect Accounting (Accounting Standards Board of Japan(ASBJ) Guidance No. 28 issued February 16, 2018) in accordancewith the treatment set out in Paragraph 3 of the Practical
Solution on the Treatment of Tax Effect Accounting for theTransition from the Consolidated Taxation System to the GroupTax Sharing System (Practical Issues Task Force (PITF) No. 39
issued March 31, 2020) and the amounts of deferred tax assets
and deferred tax liabilities are based on the provisions of tax
laws before the revision.

3. Additional Information
Impact of COVID-19
The Group assumes that the impact of the COVID-19 pandemic
and the period of its influence will return to a recovery trend in
about one year, and it will converge within the next fiscal year.
Accordingly, the Group is making its best estimate regarding
impairment accounting of fixed assets and recoverability ofdeferred tax assets in consideration of available informationsuch as customer trends.

There is high uncertainty regarding the timing of the COVID19 convergence and its impact on our business environment. If
the situation is significantly different from the assumption, it
may affect the Group’s operating results and financial position
from the next fiscal year, such as impairment loss of fixed assets.

4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollar amounts is
included solely for convenience, as a matter of arithmetic
computation only, at ¥108.83=US$1.00, the exchange rate
prevailing on March 31, 2020. This translation should not be

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

5. Investment Securities
The aggregate acquisition cost, carrying value and unrealized gain or loss pertaining to the marketable other securities as of March 31,
2020 and 2019 were as follows:
Millions of yen

Thousands of U.S. dollars

2020
Carrying value

Securities whose carrying value
exceeds their acquisition cost:
Listed stocks
Government bonds
Corporate bonds¥

Securities whose carrying value does notexceed their acquisition cost:
Listed stocks
Government bonds
Corporate bonds
Total

¥

Acquisition cost

2020
Unrealized gain
(loss)

Carrying value

Acquisition cost

Unrealized gain
(loss)

14,717 ¥——
14,717

7,152 ¥
—
—
7,152

7,565
—
—
7,565

$ 135,233 $——
135,233

65,717 $——
65,71769,516——
69,516

7,561
—
—
7,561
22,278 ¥

8,792
—
—
8,792
15,944 ¥(1,231)——(1,231)
6,335

69,47480,782(11,308)
—
—
—
—
—
—
69,47480,782(11,308)$ 204,707 $ 146,499 $ 58,207

Annual Report 2020

49

Millions of yen

2019
Carrying value

Securities whose carrying value
exceeds their acquisition cost:
Listed stocks
Government bonds
Corporate bonds¥

Securities whose carrying value does notexceed their acquisition cost:
Listed stocks
Government bonds
Corporate bonds
Total

¥

Acquisition cost

Unrealized gain
(loss)

24,442 ¥——24,442

12,030 ¥——12,03012,412——
12,412

3,601
—
—
3,601
28,042 ¥

4,196
—
—
4,196
16,225 ¥

(595)
—
—
(595)
11,817

Gain on sales of securities classified as other securities with aggregate gains for the years ended March 31, 2020 and 2019 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2020

¥

Sales proceeds
Aggregate gains
Aggregate losses
The Company and its consolidated subsidiaries recognized¥1,030 million ($9,462 thousand) of loss on impairment ofinvestment securities for the year ended March 31, 2020.
The Company and its consolidated subsidiaries recognize
loss on devaluation of investment securities in cases where thefair value at the balance sheet date of a security declines by

2020

2019

345
20
(2)

¥

444
215
(0)

$

3,170
186
(20)

more than 50% from its carrying value. The Company and its
consolidated subsidiaries also recognize loss on devaluation of
investment securities by considering the recoverability of fairvalue and so forth when the fair value at the balance sheet
date declines by more than 30% and less than 50% from its
carrying value.

6. 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 0.7% and 0.6%
as of March 31, 2020 and 2019, respectively.
Long-term debt as of March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Loans, principally from banks, insurance companies and government agencies,
most of which are secured, due 2020 to 2038¥

Current portion of long-term debt¥

61,842
61,842(3,011)
58,831

2019¥¥

62,85962,859(7,467)55,3922020$ 568,248
568,248(27,670)$ 540,578

The average interest rates applicable to the above debt amounting to ¥61,842 million ($568,248 thousand) and ¥62,859 million
were 0.6% and 0.6% as of March 31, 2020 and 2019, respectively.

50 FURUKAWA CO., LTD.

The aggregate annual maturities of long-term debt subsequent to March 31, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Years ending March 31,

¥

2021
2022
2023
2024
2025
2026 and thereafter

¥

3,011
2,088
5,158
8,971
5,988
36,627
61,842$

27,67019,18447,39682,43055,020336,548$ 568,248

Lease obligations as of March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Lease obligations due 2020 to 2026¥

Current portion of lease obligations
¥

664
664
(222)
443

2020

2019

¥

¥

663
663
(258)
405

$

$

6,104
6,104
(2,037)
4,067

The aggregate annual maturities of lease obligations subsequent to March 31, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Years ending March 31,

2021
2022
2023
2024
2025
2026 and thereafter¥¥
The Company and certain consolidated subsidiaries haveentered into overdraft and loan commitment agreements
amounting to ¥38,102 million ($350,108 thousand) with 23
banks and ¥37,014 million with 24 banks as of March 31,
2020 and 2019, respectively. The borrowings outstanding and

222
189
132
62
27
32
664

$

$

2,037
1,737
1,213
574
247
296
6,104

the unused balances under these credit facilities amounted
to ¥7,663 million ($70,409 thousand) and ¥30,440 million($279,700 thousand), respectively, as of March 31, 2020, andamounted to ¥8,764 million and ¥28,250 million, respectively,
as of March 31, 2019.

Annual Report 2020

51

Assets pledged as collateral and liabilities with collateral pledged as of March 31, 2020 and 2019 were as follows:(a) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

2020

¥

Property, plant and equipment, net

2020

2019

1,321

¥

1,414

$

12,142(b) Liabilities with collateral pledged
Thousands of
U.S. dollars

Millions of yen

2020

¥

Long-term debt (including current portion)

2020

2019

1,556

¥

1,707

$

14,295

7. Net Assets
Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2019

Shares issued:
Common stock		 Total
Treasury stock:
Common stock (Note)		 Total

Increase

Decrease

As of March 31,
2020

40,44640,446—­———40,44640,446

904
904

325
325

—
—

1,229
1,229

Note:	The increase of 325 thousand shares of equity in treasury stock was due to the purchase of shares based on the resolution of
the Board of Directors on February 26, 2020.
		 The increase of 0 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.
Types and number of shares issued and in treasury
Thousands of shares
As of March 31,
2018

Shares issued:
Common stock		 Total
Treasury stock:
Common stock (Note)		 Total

Increase

Decrease

As of March 31,
201940,44640,446—­———40,44640,446

42
42

862
862

—
—

904
904

Note:	The increase of 862 thousand shares of equity in treasury stock was due to the purchase of shares based on the resolution of
the Board of Directors on November 26, 2018.
		 The increase of 0 thousand shares of equity in treasury stock was due to the purchase of shares of less than a standard unit.

52 FURUKAWA CO., LTD.

8. Other Comprehensive Income
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March
31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Unrealized holding gain (loss) on securities, net of income taxes:
Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Amounts before tax effectTax effectUnrealized holding gain (loss) on securities, net of income taxes¥(5,931)
1,021(4,910)927(3,983)

2019

¥

2020

(6,528)(215)(6,742)
1,562(5,180)$ (54,497)
9,378(45,119)
8,520(36,599)

Deferred gain (loss) on hedges:
Amounts arising during the year
Adjustments on the acquisition cost of assets
Amounts before tax effectTax effect
Deferred gain (loss) on hedges

(805)
364
(441)
106
(334)

(473)
358
(115)
52
(63)

(7,394)3,344(4,049)977(3,073)

Translation adjustments:
Amounts arising during the year

(43)

(318)

(399)

Retirement benefits liability adjustments:
Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Amounts before tax effectTax effect
Retirement benefits liability adjustments

(594)
(1)
(595)
188
(407)

(3,941)(27)(3,968)1,492(2,477)(5,455)(11)(5,466)
1,725(3,740)

83
(17)

(200)
(4)

765
(160)

66

(204)

605

(8,242)$ (43,206)

Share of other comprehensive income (loss) of affiliates accounted
for using equity method:Amounts arising during the year
Reclassification adjustments for gains and losses included in profit
Share of other comprehensive income (loss) of affiliates accounted for using
equity method
Total other comprehensive income (loss)¥(4,702)¥

9. 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, 2020 and 2019 amounted to ¥1,178 million ($10,821 thousand) and ¥1,505 million, respectively.

10. 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
Please refer to “(9) Property, Plant and Equipment and Depreciation” in “2. Summary of Significant Accounting Policies.”

Annual Report 202053

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

54 FURUKAWA CO., LTD.

2. Estimated fair value of financial instruments
	Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2020 and 2019 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

2020

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

2020

Carrying value

Estimated fair value¥ 12,647
30,653
22,27865,579¥ 12,647
30,653
22,27865,579

¥

¥

¥

¥

9,532
10,331
12,651
8,570
61,842102,927
¥
418

9,532
10,331
12,651
8,570
62,586103,671¥
418

Difference¥

Carrying value

Estimated fair value

—
—
—
—

$ 116,213
281,661
204,707602,581$ 116,213
281,661
204,707602,581

$

—
—
—
—

—
—
—
—
744
744
—

$

$

$

—
—
—
—
6,832
6,832
—

87,586
94,928116,247
78,751
568,248945,760$
3,839

87,586
94,928116,247
78,751
575,080
952,592$
3,839

Difference$

Millions of yen

2019
Carrying value

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

Estimated fair value

14,32930,66828,042
73,040¥12,691
12,233
9,895
9,738
62,859107,416¥23¥¥

Difference

14,32930,66828,042
73,040¥————12,691
12,233
9,895
9,738
62,978
107,535
¥
23

¥

—
—
—
—
119
119
—

¥

(*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, and (2) Receivables—trade		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(3) Investment securities		The fair value of stocks is based on market prices. For information on securities classified by holding purpose, please refer to“5. Investment Securities” to the consolidated financial statements.

Annual Report 202055

Liabilities(1) Payables—trade, (2) Electronically recorded obligations, (3) Accounts payable—other and (4) Short-term debt
		 Since these items are settled in a short period of time, their carrying value approximates fair value.
(5) Long-term debt
		The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivative transactions
Please refer to “12. 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, 2020 and 2019
Thousands of
U.S. dollars

Millions of yen

2020

¥

Unlisted stocks

2020

2019

5,058

¥

5,024

$

46,480Because 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, 2020 and 2019 are as follows:
For the year ended March 31, 2020
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

12,62130,653
43,274Due after one year
through five years

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2019
Due in one
year or lessMillions of yen

Cash deposits
Receivables—trade
Total

¥
¥

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

Due after five years
through ten years

¥

¥

¥

—
—
—

¥

—
—
—

Due after
ten years

¥

—
—
—

¥

For the year ended March 31, 2020
Thousands of U.S. dollars

Due in one
year or less

Cash deposits
Receivables—trade
Total$ 115,969
281,661$ 397,630

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 “6. Short-Term Debt, Long-Term Debt and Lease Obligations.”

56 FURUKAWA CO., LTD.

———

12. Derivative Transactions
The notional amounts and estimated fair value of the derivative instruments outstanding as of March 31, 2020 and 2019 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, 2020
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

¥

256
93
3,275

—
—
—

¥

4
1
9

Accounts receivables
Accounts receivables

¥

153
328

—
—

(*)
(*)

Accounts payables

¥

4,083

—

(*)

Millions of yen
Method of hedge accounting

Principal method

Allocation method

Type of transaction

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

Major object of hedge

Accounts receivables
Accounts receivables
Accounts payables

As of March 31, 2019
Contract amounts¥

Maturing after one year

895
12
8,082

—
—
—

Fair value

¥

0
0
(21)

Accounts receivables
Accounts receivables

¥

—
142

—
—

(*)
(*)

Accounts payables

¥

2,828

—

(*)

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, 2020
Contract amounts

Maturing after one year

Fair value

Accounts receivables
Accounts receivables
Accounts payables

$

2,357
854
30,090

—
—
—

$

40
9
82

Accounts receivables
Accounts receivables

$

1,404
3,009

—
—

(*)
(*)

Accounts payables$

37,520—(*)

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

Annual Report 202057

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, 2020
Contract amounts¥

12,533Maturing after one year¥

Fair value

11,917(*)

Millions of yen
Method of hedge accounting

Special accounting
procedure forinterest rate swap

Type of transaction

Receive/floating and pay/fixed

Major object of hedge

Long-term debt

As of March 31, 2019
Contract amounts¥

15,131Maturing after one year¥

Fair value

12,533(*)

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, 2020
Contract amounts$

115,161

Maturing after one year$

Fair value

109,501(*)(*) The fair values by means of the special accounting procedure for interest rate swap are included in the fair values of the hedged
long-term debt because the derivative transactions are treated as a part of hedged long-term debt.
3. Commodity-related transactions
Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2020
Contract amounts

Maturing after one year

Fair value

Raw material

¥

—

¥

—

¥

—

Raw material

¥

6,944

¥

28

¥

(432)

Millions of yen
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2019
Contract amounts

Maturing after one year

Fair value

Raw material

¥

—

¥

—

¥

—

Raw material

¥

1,720

¥

16

¥

43

Thousands of U.S. dollars
Method of hedge accounting

Principal method

Type of transaction

Forward product contracts
Sell:		Copper
Buy:
		Copper

Major object of hedge

As of March 31, 2020
Contract amounts

Maturing after one year

Raw material

$

—

$

—

$

—

Raw material$

63,810$261$(3,970)Note: The fair values of forward product contracts are based on prices provided by trading companies.

58 FURUKAWA CO., LTD.

Fair value13. Retirement Benefit Plans
For the year ended March 31, 2020
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, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Retirement benefit obligation at April 1, 2019
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Prior service cost
Exchange translation adjustment
Other
Retirement benefit obligation at March 31, 2020¥¥

20,136886
97(183)(1,475)—(17)—
19,444$ 185,018
8,139
893(1,679)(13,551)—(160)—$ 178,660

The changes in plan assets during the year ended March 31, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Plan assets at April 1, 2019
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2020¥¥

11,545218(1,125)
351
(690)
(21)
—
10,278$ 106,085
2,001(10,335)
3,222(6,340)(196)—$ 94,437

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2020 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2020

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

18,770(10,278)
8,492
674
9,166

$ 172,469(94,437)
78,032
6,191
84,223Liability for retirement benefits
Assets for retirement benefits
Net liability for retirement benefits in the balance sheet

9,511
(345)
9,166

87,394(3,171)
84,223Funded retirement benefit obligation
Plan assets at fair value

¥

¥

$

Annual Report 2020

59

The components of retirement benefit expense for the year ended March 31, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

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

¥

¥

886
97
(218)
24
315
1,104

$

$

8,139
893
(2,001)224
2,892
10,146

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, 2020 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2020

Prior service cost
Actuarial loss
Total

¥
¥

24
(618)
(594)

$

224
(5,678)(5,455)$

Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2020

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥
¥

132
3,995
4,127

$
$

1,213
36,70937,922

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2020 are as follows:
2020

Bonds
StocksCash on hand and in banks
Other
Total

20%
51%
2%
27%
100%

Note: 41% of total plan assets are in a Retirement Benefit Trust for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.2%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.6%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the year ended March 31,
2020 is ¥19 million ($173 thousand).

60 FURUKAWA CO., LTD.

The changes in the retirement benefit obligation during the year ended March 31, 2019 are as follows:
Millions of yen

2019

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

20,166912
122
127(1,231)76(37)—
20,136The changes in plan assets during the year ended March 31, 2019 are as follows:
Millions of yen

2019Plan assets at April 1, 2018
Expected return on plan assets
Actual loss
Contributions by the Company
Retirement benefits paid
Exchange translation adjustment
OthersPlan assets at March 31, 2019¥¥15,491234(3,752)
355
(745)
(38)
—
11,545

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

2019

Funded retirement benefit obligation
Plan assets at fair value¥

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

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

Liability for retirement benefits
Assets for retirement benefits
Net liability for retirement benefits in the balance sheet

8,801
(210)
8,590

¥

The components of retirement benefit expense for the year ended March 31, 2019 are as follows:
Millions of yen

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

¥

¥

912
122
(234)
24
(51)
773

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

Annual Report 202061

Prior service cost and actuarial loss included in other comprehensive income (before tax effect) as of March 31, 2019 are as
follows:
Millions of yen

2019

Prior service cost
Actuarial loss
Total

¥

(52)
(3,917)(3,968)¥Unrecognized prior service cost and unrecognized actuarial loss included in accumulated other comprehensive income (before tax
effect) as of March 31, 2019 are as follows:
Millions of yen

2019

Unrecognized prior service cost
Unrecognized actuarial loss
Total

¥

156
3,377
3,533

¥

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

Bonds
StocksCash on hand and in banks
Other
Total

18%
58%
1%
23%
100%

Note: 47% of total plan assets are in a Retirement Benefit Trust for corporate pension plans and non-contributory funded employee
pension plans.
Matters related to the actual assumption
Major actuarial assumptions at the end of the period:
Discount rates
mainly 0.2%
Expected rates of return on plan assets mainly 2.0%
Expected rates of salary increase
3.6%–5.3%
Defined contribution plan
The amount which a consolidated subsidiary has contributed or is obligated to contribute to the plan for the year ended March 31,
2019 is ¥18 million.

14. Income Taxes
The reconciliation between the effective tax rate reflected in the consolidated statement of income and the statutory tax rate for theyear ended March 31, 2020 was summarized as follows:
2020

Statutory tax rate
Non-deductible expenses for tax purposes
Non-taxable dividends and other income
Tax deduction such as R&D expenses
Inhabitants’ per capital tax
Equity in earnings and losses of affiliates
Undistributed profits of subsidiaries
Changes in valuation allowance
Different tax rates applied to subsidiaries
Adjustment of profit and loss on transfer
Other
Effective tax rate

62 FURUKAWA CO., LTD.

30.6%
0.4
(1.0)
(2.0)
1.0
0.2
0.4
3.2
(0.2)
2.0
1.7
36.3%

The above information for 2019 has not been presented because the difference between the effective tax rate and the statutory
tax rate was less than 5% of the statutory tax rate.
Deferred tax assets and liabilities as of March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

2020

2019

Deferred tax assets:
Liability for retirement benefits¥
7,534
Investment securities
2,284
Net operating loss carryforwards
3,800
Land
1,725
Provision for deposition field restoration—
Provision for cost of removal of office tenants
—
Other
1,378
Total gross deferred tax assets
16,721
Valuation allowance for net operating loss carryforwards(3,668)Valuation allowance for total amount of deductible temporary difference and others(4,437)
Total valuation allowance(8,105)
Total deferred tax assets
8,616
Deferred tax liabilities:
Statutory reserves provided for tax purposes(1,253)Gain from establishment of trust for retirement benefit plans(3,020)Land(7,188)
Unrealized holding gain on securities(1,544)
Other(510)
Total deferred tax liabilities(13,515)
Net deferred tax liabilities¥ (4,899)
Deferred tax liabilities on surplus on the revaluation of land
¥ (1,408)

¥

7,365
1,526
4,190
1,869
67
173
1,659
16,849(3,592)(3,903)(7,495)
9,353(1,342(3,020)(7,003)(2,471)(352)(14,188)¥ (4,835)¥ (1,477)$

69,22820,98634,916
15,848——12,665
153,643(33,708)(40,769)(74,477)
79,166(11,511)(27,748)(66,052)(14,187)(4,687)(124,184)$ (45,019)$ (12,936)

15. Contingent Liabilities
Contingent liabilities as of March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Notes receivables discounted and endorsed
Loans guaranteed
Repurchase obligation of the securitization of receivables

¥

151
2,847
1,469

2020

2019

¥

179
3,736
861

$

1,383
26,164
13,495

16. Write-Down of Inventories
The amount of write-down of inventories, included in cost of sales for the year ended March 31, 2020 totaled ¥157 million ($1,439
thousand). For the year ended March 31, 2019, the Company reversed write-down in the amount of ¥(110) million and credited it tocost of sales.

Annual Report 202063

17. Other Income (Expenses)—Other, Net
Other income (expenses)—other, net for the years ended March 31, 2020 and 2019 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2020

Reversal of provision for cost of removal of office tenants
Gain on sales of noncurrent assets
Gain on sales of investment securities
Payments for idle mines
Foreign exchange losses
Financial cost
Impairment loss
Loss on impairment of investment securities
Other, net

¥

¥

264
655
20
(715)
(554)
(104)
(241)
(1,030)(136)(1,840)

2020

2019

¥

¥

—
224
215
(673)
(55)
(280)
(1,610)—43(2,137)

$

2,429
6,017
186
(6,573)(5,086)(957)(2,213)(9,462)(1,248)$ (16,908)

18. Segment Information
The reportable segments are constituent units of the Furukawa Group for which separate financial information is available. The Boardof Directors periodically examines these segments for the purpose of deciding the allocations of management resources and evaluating
operating performance.
The Company mainly manufactures and sells machinery, smelts on consignment and sells copper, and manufactures and sells
electronic materials and chemicals.
Under the holdings company structure, each main Group company plans domestic and overseas comprehensive strategies about
their products, and the Company manages and supervises them.
The Furukawa Group therefore categorizes segments classified by products based on main Group companies. The seven reportablesegments are as follows: Industrial Machinery, Rock Drill Machinery, UNIC Machinery, Metals, Electronics, Chemicals and Real Estate.
Main products and services belonging to each segment are as follows:(a) Industrial Machinery
		 Manufacture, sell, conduct installation work and manage operation for pumps, steel structures, steel bridges, industrial
machinery (crushers, grinding mills, screens, briquetting machines, material handling systems, environmental machinery,recycling machines and so on) and heat-resistant and wear-resistant castings(b) Rock Drill Machinery
		 Manufacture and sell rock drills such as hydraulic breakers, hydraulic crushers, boring drills (air pressure crawler drills, hydrauliccrawler drills, down-the-hole drills and so on), tunnel and mining drill jumbos (tunnel drill jumbos, concrete sprayers used inmine cavities, drill jumbos used in mines and so on) and environmental machinery(c) UNIC Machinery
		 Manufacture and sell UNIC cranes, mini crawler cranes, ocean cranes and UNIC carriers(d) Metals
		 After buying ore, manufacture and sell electrolytic copper, gold, silver and sulfuric acid which is smelted on consignment by
joint smelting company, dig and distribute limestone(e) Electronics
		 Manufacture and sell high-purity metallic arsenic, crystals, cores and coils, aluminum nitride ceramics and optical components(f) Chemicals
		 Manufacture and sell cuprous oxide, ferric polysulfate aqueous solution, aluminum sulfate, sulfuric acid, cuprous dioxide andcopper 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 statement of income.
Intersegment sales and transfers are recorded based on the actual market prices.

64 FURUKAWA CO., LTD.

From the year ended March 31, 2020, in order to appropriately understand the invested capital of each reportable segment, wehave changed the method of totaling assets for each reportable segment. The information on assets by reportable segment for theyear ended March 31, 2019 is based on the asset aggregation method after the change.
Segment information of the Furukawa Group for the years ended March 31, 2020 and 2019 was as follows:Year ended March 31, 2020

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

31,791 ¥160
31,951
3,993 ¥

67,150 ¥251
67,401
302 ¥

5,506
1
5,507
(35)

25,379 ¥336—
278

36,371 ¥
796
—
3,672

31,095 ¥
976
113
740

27,663 ¥
177
2,847
96

7,037
270
215
265

Millions of yen¥¥¥

Real Estate

OthersAdjustments

Consolidated

6,711 ¥
51
6,762
510 ¥

2,386 ¥
15
2,401
736 ¥

771 ¥
1,639
2,410
(95) ¥— ¥ 165,216(5,273)—(5,273)
165,216(68) ¥
8,693

16,677 ¥206—
728

26,717 ¥446—
122,595 ¥
95
100
(56)

36,163 ¥ 209,697
53
3,356
—
3,275
430
6,166

Year ended March 31, 2019

Millions of yen
Industrial
Machinery¥¥¥

Rock Drill
Machinery

UNIC
Machinery

MetalsElectronics

17,971 ¥3,204
21,1752,089 ¥

30,372 ¥
130,373
1,690 ¥

29,237 ¥139
29,3762,789 ¥

80,068 ¥230
80,298
582 ¥

6,527
1
6,528
408

22,675 ¥320—
262

36,276 ¥
630
—
1,370

30,288 ¥
870
95
2,284

27,357 ¥
227
2,929
55

7,079
276
214
112

Year ended March 31, 2019

Millions of yen
Chemicals

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

Electronics

27,663 ¥30
27,693143 ¥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

Metals23,237 ¥3,127
26,364
3,208 ¥

Year ended March 31, 2020

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¥¥¥

Real Estate

OthersAdjustments

Consolidated

6,127 ¥
53
6,180
407 ¥

2,999 ¥
20
3,020
1,164 ¥

814 ¥
1,647
2,461
(147) ¥

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

16,164 ¥210—
84

27,752 ¥564—
24

3,044 ¥
106
21
16

44,732 ¥ 215,368
52
3,255
—
3,260
620
4,827

Annual Report 202065

Year ended March 31, 2020

Thousands of U.S. dollars
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

UNIC
Machinery

MetalsElectronics$ 213,518 $ 254,187 $ 292,119 $ 617,017 $
28,735
276
1,466
2,305
242,254
254,464
293,585
619,322$ 29,478 $
1,310 $ 36,690 $
2,772 $

50,593
550,598(325)$ 233,197 $ 334,202 $ 285,720 $ 254,187 $
3,085
7,311
8,966
1,630
—
—
1,036
26,162
2,552
33,7426,802
883

64,663
2,480
1,975
2,436

Year ended March 31, 2020

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$$

Real Estate

61,662 $467
62,1304,689 $

Others21,926 $139
22,065
6,763 $

$ 153,243 $ 245,490 $
1,896
4,102
—
—
6,689
110

Adjustments

7,086 $
15,061
22,147(870) $

Consolidated— $ 1,518,109(48,456)—(48,456) 1,518,109(628) $ 79,877

23,842 $ 332,289 $ 1,926,833
876
490
30,835917—
30,089(512)
3,954
56,658(Related information)
Years ended March 31, 2020 and 2019
1. Information regarding products and services
Year ended March 31, 2020

Millions of yen
Copper¥Sales for outside customers

54,231

UNIC cranes¥

Year ended March 31, 2019

Sales for outside customers¥

60,852UNIC cranes¥

Year ended March 31, 2020$

Sales for outside customers

498,313

2. Geographic segment information(1) Net sales
Year ended March 31, 2020
Millions of yen
Japan

Asia

¥

Others

21,763¥

14,113

Total¥

165,216¥

174,117

Year ended March 31, 2019
Millions of yen
Japan

¥

137,305

Asia¥

Others20,883¥

15,930Total

Year ended March 31, 2020
Thousands of U.S. dollars
Japan$ 1,188,453

66 FURUKAWA CO., LTD.

89,538

Total¥

165,216

18,792¥

174,117

Others

¥94,472

Total

Thousands of U.S. dollars
Copper129,339

Others¥Millions of yen
Copper¥21,446

Asia$

199,977

Others$129,679

Total$ 1,518,109

UNIC cranes$

197,063

Others$822,733

Total$ 1,518,109

(2) Property, plant and equipment
The geographic segment information for the years ended March 31, 2020 and 2019 has not been presented, because the total assets
in Japan exceed 90% of consolidated totals.
3. Information regarding main customers
Year ended March 31, 2020
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥ 24,409

MetalsYear ended March 31, 2019
Millions of yen
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

¥ 28,310

MetalsYear ended March 31, 2020
Thousands of U.S. dollars
Name of customer

Sales volume

Related segment

Furukawa Electric Co., Ltd.

$224,290

Metals

4. Impairment loss on property, plant and equipment
Millions of yen
Year ended March 31, 2020

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

Year ended March 31, 2019

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

Year ended March 31, 2020

Industrial
Machinery

Rock Drill
Machinery

UNIC
Machinery

Impairment loss onproperty, plant andequipment———

MetalsElectronics—

Chemicals—

Real Estate

— ¥

0 ¥

Others240

Adjustments

Consolidated

— ¥

241

Millions of yen
MetalsElectronics——

Chemicals

Real Estate— ¥ 1,561 ¥Others49

Adjustments

Consolidated— ¥ 1,610

Thousands of U.S. dollars
MetalsElectronics——

Chemicals

Real Estate— $Others4 $ 2,209

Adjustments

Consolidated— $ 2,213

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

Annual Report 202067

19. 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, 2020, rental income was ¥1,088 million ($9,994 thousand), gain on sales of rental properties was ¥576 million ($5,297
thousand), impairment loss on rental properties was ¥241 million ($2,213 thousand) and other gain was ¥6 million ($51 thousand).
For the year ended March 31, 2019, rental income was ¥1,555 million, gain on sales of rental properties was ¥206 million,
impairment loss on rental properties was ¥1,600 million and other loss was ¥2 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,
2020 and 2019 are as follows:Year ended March 31, 2020
Carrying value
As of March 31, 2019

Fair value

Net change

As of March 31, 2020

As of March 31, 2020

Millions of yen¥

31,632

¥

(927)

¥

30,705¥34,941

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

Fair value

Net change

As of March 31, 2019

As of March 31, 2019

Millions of yen¥

34,699¥(3,067)¥

31,632¥

34,186

Year ended March 31, 2020
Carrying value
As of March 31, 2019

Net change

Fair value
As of March 31, 2020

As of March 31, 2020

Thousands of U.S. dollars$

290,656$(8,520)$282,136$

321,058

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, 2020 mainly consists of increases due to use change in the amount of¥34 million ($311 thousand) and acquisition of land and buildings in the amount of ¥19 million ($171 thousand) and decreases
mainly due to amortization in the amount of ¥376 million ($3,452 thousand), impairment loss on rental properties in the amountof ¥241 million ($2,213 thousand) and sales of land in the amount of ¥362 million ($3,324 thousand). Net change in carrying value
for the year ended March 31, 2019 mainly consists of acquisition of land and buildings in the amount of ¥17 million and decreases
mainly due to amortization in the amount of ¥479 million, impairment loss on rental properties in the amount of ¥1,600 million andsales of land in the amount of ¥1,003 million.
3. The fair value is mainly estimated in accordance with appraisal standards for valuing real estate.

20. Subsequent Event(1) Appropriations of Retained Earnings
The following appropriations of retained earnings of the Company, which have not been reflected in the accompanying consolidated
financial statements, were approved at a shareholders’ meeting held on June 26, 2020:
Thousands of
U.S. dollars

Millions of yen

Year-end cash dividends (¥50.00=$0.46 per share)
Transfer to legal reserve

¥
¥

1,961
196
2,157

$
$

18,017
1,802
19,819(2) Retirement Benefit Plans
The Company revised its retirement benefit plans on April 1, 2020, shifting from the final salary proportional system to the points
system, extending the mandatory retirement age from 60 to 65 years old, and extending the age of old age benefit payment under
the defined benefit corporate pension system from 60 to 65 years old.
As a result of this revision, prior service cost (reduction of retirement benefit obligations) of ¥3,873 million ($35,589 thousand) is
incurred in the year ending March 31, 2021, and is amortized using the straight-line method over a certain number of years (mainly
15 years) within the average remaining years of service of the employees.

68 FURUKAWA CO., LTD.

Annual Report 2020

69

70 FURUKAWA CO., LTD.

Annual Report 2020

71

72 FURUKAWA CO., LTD.

Corporate Data and Stock Data

Corporate Data (As of March 31, 2020)

Directors and Auditors (As of June 26, 2020)

Company Name:

Furukawa Co., Ltd.

President and Representative Director

Naohisa Miyakawa

Head Office:Managing Director

Kiyohito MitsumuraTel:

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

Director

Masahiro Ogino

Date of Foundation:

August 1875

Director

Minoru Nakatogawa

Date of Establishment:

April 1918

Director

Tatsuki Nazuka

Stock Exchange Listing:

Tokyo
5715

Director

Securities Code Number:

Hiroyuki Sakai

Employees:

2,755 (Consolidated)

Outside Independent Director

Tatsuya Tejima

Outside Independent Director

Yoichi Mukae

Outside Independent Director

Kazumi Nishino

Stock Data (As of March 31, 2020)

Audit & Supervisory Board Member

Minoru Iwata

Number of Shares Authorized:

80,000,000 shares

Audit & Supervisory Board Member

Kazuo Inoue

Number of Shares Outstanding:

40,445,568 shares

Number of Shareholders:

20,533

Outside Audit &Supervisory Board Member

Tetsuro Ueno

Stock Transfer Agent:

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

Outside Audit &Supervisory Board Member

Masayuki Yamashita

Executive Officers (As of June 26, 2020)

Number of
Shares(Thousands)

Percentage ofTotal Shares(%)

Managing Executive Officer

Masahiro Ogino

Asahi Mutual Life Insurance Co.

2,373

6.05

Managing Executive Officer

Hiroyuki Abe

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

2,146

5.47

Japan Trustee Services Bank, Ltd. (trust account)

1,554

3.96

Managing Executive Officer

Minoru Nakatogawa

Seiwa Sogo Tatemono Co., Ltd.

1,503

3.83

Managing Executive Officer

Katsuhira Kawashita

The Yokohama Rubber Company, Limited

1,341

3.41

Senior Executive Officer

Tatsuki Nazuka

Furukawa Electric Co., Ltd.

877

2.23

Senior Executive Officer

Hiroyuki Sakai

Fuji Electric Co., Ltd.

862

2.19

Senior Executive Officer

Osamu Miyazaki

Sompo Japan Insurance Inc.

839

2.13

Senior Executive Officer

Atsushi Takano

Japan Trustee Services Bank, Ltd. (trust account 5)

713

1.81

687

1.75

Senior Executive Officer

Chuo Real Estate Co., Ltd.

Takeshi Miyajima

Executive Officer

Kenichi Kurita

Executive Officer

Atsushi Otani

Executive Officer

Tatsuyuki Muramatsu

Executive Officer

Masanori Saito

Executive Officer

Hitoshi Iida

Executive Officer

Tsutomu Kaneko

Executive Officer

Masayuki Kunou

Principal Shareholders

Notes: 1. The above excludes the Company’s holdings of treasury stock, totaling 1,229,045 shares.
2. The Company’s holdings of treasury stock, totaling 1,229,045 shares, are excluded		from shareholding ratio calculations.
3. On April 1, 2020, Sompo Japan Nipponkoa Insurance Inc. changed its name to		Sompo Japan Insurance Inc.

Composition of Shareholders
Financial Instruments Firms(Securities Companies)

1.06%

Foreign Institutions

15.89%

Treasury Stock3.03%

Individuals and Others

25.26%

Other Japanese Companies

24.42%

Financial Institutions

30.34%

Annual Report 202073Corporate History

1875

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

1877

Began the operation of the
Ashio Copper Mine in Tochigi.

1900

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

1914

Manufactured the first rock drillin Japan.

1918

1944

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

1951

1962

1987
1989

1990

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

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

1950

The Ashio Copper Mine iswhere the Furukawa Company
Group began.

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

Built the Takasaki Works of theRock Drill Division in Gunma.

Began manufacturing oftitanium dioxide and cuprous
oxide at Osaka Cementation
and Refining.
Completed the Furukawa /Outokumpu flash smelting plant
at Ashio Smelting and Refining.

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

Completed research anddevelopment of high-purity(99.999%) metallic arsenic andcommenced with sales of it.
Bought UNIC Corporation(manufacturer of truck-mounted
cranes).

Established a sales company ofrock drill products in Holland.

2003

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

2005

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

2006

Established a rock drills sales company in China.

2007

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

2008

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

This is an affiliate company forthe construction and mining
machinery business establishedin Utrecht, Holland, which
distributes rock drill products.

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

Built the laboratory of the Nitride
Semiconductors Department inOyama.

2009

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.

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

Established a sales company ofrock drill products in Panama.
Arsenic is one of the byproducts generated during
the smelting stage of copper
concentrates.

2012

2013

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

Bought an American breaker sales
and manufacturing company.

1998“UNIC” has become asynonym for truck-mounted
cranes in Japan.

With the sale of all of its shares inFurukawa Commerce Co., Ltd., theGroup has withdrawn from thefuels business.
The Group exited the paints businesswith the sale of all of its shares in
Tohpe Corporation.

Completed Muromachi Furukawa
Mitsui Building in Nihonbashi, Tokyo.

2014

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

Established a coil processing
company in the Philippines.
Established the Tsukuba Development
Center, which integrates a technology
research operation.

1997

Established a manufacturer of
UNIC products / components
in Thailand.
This is an affiliate company for
the UNIC business establishedin Rayong, Thailand, which
manufactures truck-mounted
cranes and other products.

74 FURUKAWA CO., LTD.

2015

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

2018

Established sales company forrock drills and other products
in Malaysia.

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

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

https://www.furukawakk.co.jp