PROVIDING PLASTICS

as SOLUTIONSAnnual Report

2 019
For the year ended March 31, 2019

Providing Plastics
as Solutions
Management Philosophy

We, Sekisui Plastics Group,
practice “Zen-in Keiei”
based on respect and mutual trust.
We are always innovating in
our aim of “new happiness.”

Goal

Plastics Solution Company
Trusted by Customers around the WorldTo mark its 50th anniversary, in 2009, Sekisui Plastics Co., Ltd.
formulated the Sekisui Plastics Group’s 100th Year Vision to serve as aroadmap for further growth and development in the next half century.
On the basis of the founding spirit of Sekisui Plastics and our new
management philosophy, we aspire to be “a plastics solution company
trusted by customers around the world” by achieving global businessdevelopment in our segments of Industry, Human Life and Environment/
Energy while practicing the group-wide CSR and “Zen-in Keiei.”

1

Sekisui Plastics Co., Ltd.

Zen-in Keiei

For the growth of both company and its people
4 keywords for the practice of Zen-in Keiei

Innovation

Speed

Teamwork

Respect for
Diversity

Zen-in Keiei
Make the mostof personality
and strengthof individuals(power ofindividuals)

Recognizes
Group’s
direction asa memberShare the aimof the entire
Group and havethe same goals

Respect diversity
and join forces
as a team(power of teams)

Contents

Leads toachieving
the Group’s
goals

People andcompany growtogetherSet up andachieve goals
as a member

3 Consolidated Financial Highlights

21 Corporate Governance

5 A Message from the President

23 Compliance / Risk Management

9 Sekisui Plastics Group’s 100th Year Vision

24 Corporate Social Responsibility (CSR)

11 Creation, Growth, Change, and to a Next “Stage”

27 Financial Section

13 Mid-Term Management Plan

49 Corporate Data

15 About Sekisui Plastics

49 Investor Information

17 Industry
19 Human Life

Sekisui Plastics Co., Ltd.

2

Consolidated Financial Highlights
Fiscal Year

2008

2009

2010

2011

2012

¥ 96,102¥ 100,744¥ 101,418¥ 101,350¥ 101,784

Operating income

4,119

5,118

4,876

2,271

1,152

Recurring income
Net income attributable toowners of the parent
Capital expenditures

3,881

4,475

4,628

2,107

1,237

2,111

2,393

2,306

744

926

5,500

3,735

4,561

5,059

6,849

Depreciation and amortization

4,060

3,886

3,814

3,848

3,940

Research and development costs

2,150

2,044

2,237

2,261

1,993

¥ 92,553¥ 97,008¥ 99,263¥ 101,889¥ 105,562

Total net assets

45,28546,848

48,165

48,91150,929Interest-bearing debt

17,151

17,126

17,175

17,06818,492For the year:
Net sales

At year-end:
Total assets

Amounts per share*3:
Net income¥ 43.48

Net assets
Cash dividends

¥

50.58

¥

49.08

¥

15.84

¥

19.72

934.76977.281,005.62

1,021.26

1,063.68

20.00

20.00

20.00

12.00

8.00

Operating income ratio (%)

4.3

5.1

4.8

2.2

1.1

ROE (%)

4.7

5.3

5.0

1.6

1.9

ROA (%)

4.2

4.7

4.7

2.1

1.2

Equity ratio (%)

48.0

47.4

47.6

47.1

47.4

Employees

1,568

1,637

1,719

1,757

1,813

Key ratios:*1 U.S. dollar amounts represent translations of Japanese yen, for readers’ convenience only, at the rate of ¥111.00 = U.S.$1.00, the prevailing exchange rate at
March 31, 2019.
*2 In order to synchronize accounting periods of overseas Group companies with the accounting period in Japan beginning in FY2014, the FY2014 results foroverseas Group companies are based on a 15-month accounting period.
*3 Sekisui Plastics Co., Ltd. consolidated its common share at the ratio of two shares to one, effective on October 1, 2016. On assumption that the shareconsolidation was implemented on the beginning of FY2007, the dividend per share shows as above.

Net Sales(Billions of yen)

¥112.6

Operating Income/Operating Income Ratio

Net income attributableto owners of the parent/ROE(Billions of yen/%)(Billions of yen/%)¥3.1

billionbillion¥4.8
billion

4.8%

4.2%

14

15

16

17

18 (FY)

14

15

16

Operating Income
Operating Income Ratio

3

Sekisui Plastics Co., Ltd.

1718 (FY)

14

15

16

17

18 (FY)Net income attributable to owners of the parent
ROE

2013

2014＊2

2015

2016

2017

2018

2018

Millions of yen

Thousands of
U.S. dollars*1¥ 109,923¥ 113,660¥ 101,559¥ 102,398¥ 112,101¥ 112,593$ 1,014,351

2,124

3,930

5,118

5,401

5,284

4,784

43,099

2,206

4,180

4,862

5,049

5,154

4,776

43,027

1,264

2,530

3,147

3,404

3,448

3,129

28,189

3,434

5,908

4,424

5,836

7,762

7,368

66,378

3,856

3,999

3,937

3,591

4,087

4,517

40,694

1,936

1,877

1,856

1,916

2,104

2,145

19,324¥ 110,687¥ 116,201¥ 114,892¥ 119,670¥ 131,774¥ 152,845$ 1,376,982

54,03658,27558,80061,363

66,145

66,771

601,541

18,566

19,467

18,274

18,42419,09635,229317,378

Yen

¥

26.96

¥

54.14

¥

67.34

¥

73.03

¥

75.33

¥

U.S. dollars*1

69.09

$

0.62

1,136.52

1,231.36

1,243.30

1,322.14

1,444.28

1,439.43

12.97

14.00

18.00

24.00

24.00

27.00

30.00

0.27

1.9

3.5

5.0

5.3

4.7

4.2

2.5

4.6

5.4

5.7

5.5

4.8

2.0

3.7

4.2

4.3

4.1

3.4

48.0

49.5

50.6

50.7

49.6

42.7

1,833

1,859

1,895

2,011

2,101

3,881

Total Assets/ROA(Billions of yen/%)¥152.8billionCapital Expenditure &Depreciation and Amortization

Research andDevelopment Costs(Billions of yen)(Billions of yen)

¥7.4
billion¥2.1
billion¥4.5
billion

3.4%

14

15

Total Assets
ROA

16

17

18 (FY)

14

15

16

17

18 (FY)

14

15

16

17

18 (FY)

Capital Expenditures
Depreciation and Amortization

Sekisui Plastics Co., Ltd.

4

A Message from the President

We carry out social responsibility
to stakeholders including
the global environmentand contribute to
the sustainable developmentof the global society.

5

Sekisui Plastics Co., Ltd.

Aspirations for the 100th Anniversary of
Our Founding
In 2009, the Sekisui Plastics Group established its “Sekisui
Plastics Group’s 100th Year Vision,” which looks aheadto the 100th anniversary of its founding and acts as a
guide for further development over the next half century.
Everyone in the Group shared their aspirational visions,and from among them we adopted “Sekisui Plastics
Group, Expanding Our Dreams for People and the Earth”
as our CSR Declaration.
Based on this vision and other considerations, theGroup believes that it is even more important to fulfill its
corporate responsibilities and to contribute to the sustainable development of the global society by solving social issues through business activities. Since the new Midterm Management Plan starts in the current fiscal year,
we have clarified our stance of bringing about a balance
between pursuing the convenience of plastics and reducing their impact on the global environment while aiming
to contribute to a sustainable society with the slogan,“Aiming to become a Leading Environmental Company.”

Mid-term Management Plan
“Make Innovations Stage-II”
In line with the goals of the “Sekisui Plastics Group’s
100th Year Vision,” we had been promoting the threeyear mid-term management plan “Make Innovations
60” from FY2016 to the last fiscal year. It was establishedbased on the concepts of promoting “Business Portfolio
Transformation” and “Earnings Structure Reform,” under this Plan we had been promoting five high-priority
policies, namely “Business portfolio transformation,”“Speed-up of the business model transformation,”“Strengthening of development capabilities by transforming development promotion system,” “Reinforcingof the competitiveness to build a high-profitable structure,” and “Personnel portfolio transformation/humanresources development.”
Based on the measures, we had been focusing in particular on expanding business globally and expanding
sales of strategic merchandise. At the beginning of thePlan, expansion progressed steadily and achieved certain
results, but the market penetration in the target fields did
not progress as expected. Since profits were affected byfluctuations in raw material prices during the period, theystalled from the second half of 2017, and in the end did
not reach those envisaged under the Plan.
From FY2019, we have launched the mid-term management plan “Make Innovations Stage-II.” Under
the new Plan, we will continue with the previous policies, and bring about evolution in “Business Portfolio
Transformation” and the “Execution of Strategies toStrengthen Earnings Structure” while implementing new
initiatives toward management that newly places a greater emphasis on the environment.
Specifically, in addition to developing business utilizing
the M&A projects under the previous Plan and expanding
sales of development projects at an early stage, we will
work to further promote business portfolio transformationand strengthen the Group’s management foundation.
With regard to our environmental efforts, in aiming tocontribute to a sustainable society we have taken as ourthemes the evolution of existing products, the practicalapplication of new materials, and business activities that
do not place a burden on society. By reducing the weightof existing products, saving resources by developing andproviding thermal insulation products, improving energy
efficiency, as new materials finding practical applications
for biodegradability and biomass plastics, the further
promotion of recycling we will continue to contribute to asustainable society.

FY2018 Results
The business environment that encompassed Sekisui
Plastics in FY2018 was generally one in which the global economy remained on a recovery trend, primarilyin Europe and the United States, but the trade friction
between the United States and China led to fears of aslowdown, which increased uncertainty over the economic outlook. The Japanese economy saw a continued
moderate recovery trend, driven by a pickup in personal
consumption and other factors, but was also affected bya series of natural disasters, including torrential rain, typhoons, and earthquakes. In Japan’s foam plastics industry the Company relates to, raw material prices continued
their rise from the beginning of FY2018, and raw fuel prices and logistics costs also rose, resulting in a challenging
operating environment.
In this environment, in FY2018 we squared up to the

Sekisui Plastics Co., Ltd.

6

final fiscal year of the Sekisui Plastics Group’s mid-term
management plan “Make Innovations 60,” which had
run for three years from FY2016, and steadily implemented measures to proceed with “Business Portfolio
Transformation” and “Earnings Structure Reform.” In
addition, with the aim of expanding our business in the
Automobile field in Europe, we acquired eight companies, including automotive components supplier Proseat
GmbH & Co. KG, which operates manufacturing locations
in six European countries. Following the acquisition of
the Proseat Group, we acquired a strong customer basefor European automakers. As a result, we are strengthening and expanding our business in the Automobile fieldin Europe, which is currently being developed mainly by
Japanese manufacturers. At the same time, the thinking
is that we will accelerate the development and supply of
new lightweight automotive components that fuse ourtechnologies with the advanced technologies, centeredon urethane foam, of the Proseat Group.
In FY2018, the growth of the Industry segment continued, centered on automotive-related, but capital expenditures needed to strengthen development capabilities,
and higher expenses, resulted in difficult conditions. In
the Human Life segment, a review of less profitable products led to lower sales, and price revisions to reflect therise in raw material and fuel prices took time to implement. At consolidated subsidiary in Mexico, the impact
of political issues led to a delayed start-up, and because
we assume that it will take time to recover from the uncertainty of these economic conditions, we recorded an
impairment loss for a part of fixed assets.
As a result, in FY2018 the Sekisui Plastics Group7

Sekisui Plastics Co., Ltd.

achieved net sales of ¥112.593 billion, edging up 0.4%
compared with the previous period; operating income of¥4.784 billion, a 9.4% decrease compared with the previous period; recurring income of ¥4.776 billion, a yearon-year decrease of 7.3%; and net income attributable toowners of the parent of ¥3.129 billion, down 9.3% compared with the previous period.

Future Outlook and FY2019 Performance Forecast
In terms of the outlook for FY2019 and beyond, it is anticipated that the Japanese economy will continue its
gradual recovery on the back of further improvements
in income and employment environments. However, theoutlook for the future is expected to remain uncertain
due to factors such as the increase in the consumption
tax for October 2019, developments in trade issues, including the trade friction between the United States andChina, and the impact of Brexit on the EU economy.
Despite being faced with this situation, to further
strengthen the transformation implemented in the previous mid-term management plan, the Group will drive
forward steadily its newly formulated three-year mid-term
management plan, “Make Innovations Stage-II.”For FY2019, the Sekisui Plastics Group is expecting¥145 billion in net sales, ¥4.9 billion in operating income,¥4.8 billion in recurring income, and ¥3.2 billion in net income attributable to owners of the parent.

Shareholder Returns
The Sekisui Plastics Group positions the returning of
profits to shareholders as an important management
issue. Our basic policy remains to distribute profits in accordance with consolidated financial results as well as inconsideration of stability of dividends while strengthening
our management structure and securing internal reservesto prepare for future business development. Based on thispolicy, we will continue to target a consolidated payout
ratio of 30% to 40%. In terms of retained earnings, we aregiving priority to strategic investments that will lead tofurther growth and investments aimed at strengthening of
the management structure.
Based on these concepts, in FY2018 we executed anannual dividend of ¥30 per share. In FY2019, we are alsoplanning an annual dividend of ¥30 per share.

ESG Initiatives Centered on Environmental
Contributions
Having adopted “Sekisui Plastics Group, Expanding Our
Dreams for People and the Earth” as its CSR Declaration
under the “Sekisui Plastics Group’s 100th Year Vision,”
the Group is committed to fulfilling its social responsibilities to all stakeholders, including the global environment,
and contributing to the sustainable development of society on a global basis.
With regard to the “problem of ocean plastic waste”,
which has become an international issue in recent years,
we will continue to work toward solutions while collaborating with industry associations, such as the Japan
Plastics Industry Federation. Our mainstay product, foam
plastic, is a resource-saving product that can reduce
the amount of raw materials used. The recycling of EPS(expandable polystyrene) foam, which has been carriedout over the past 48 years, has now reached the stage at
which approximately 90% is being recycled as a result of
unified industry efforts. We will also redouble our efforts
to, for example, put biodegradable plastics into practicaluse and work to contribute toward a sustainable society.
Furthermore, in April 2019 we established the Environment
and Quality Control Center as an organization for addressing environmental and quality issues throughout the Group.
Through activities centered on this organization, we will clarify initiatives for the sustainable development goals (SDGs)
and lead to further enhancement of corporate value.

Enhancing Corporate Value through“Zen-in Keiei” and Human Resource Initiatives
The Sekisui Plastics Group drives forward CSR activities
based on its contributions to society through the promotion of business activities. To that end, we believe thecapabilities of the Group’s personnel are important.
The Sekisui Plastics Group has defined the image ofthe employees sought by the Group and summarized thisimage in the “Zen-in Keiei” card so that each individual
employee can fully utilize their specific capabilities, andto share Sekisui Plastics’ culture of “Zen-in Keiei” alongwith our management philosophy and code of conduct
with all Group employees.
To continue to improve corporate value through “Zen-in

Keiei,” we are strengthening efforts geared toward human resources. As part of human resource development
and work style reforms, we will formulate a three-year
action plan to support the advancement of women andsupport for raising next generation children while systematically encouraging the promotion of women andsupport for raising children. As part of those plans, thenumber of female department heads has increased in thecurrent fiscal year, and even when recruiting new graduate female employees, the recruitment record has exceeded the ratio target of 20% or more, so we believe wehave been making a steady progress. We would like towork to promote further the active participation of women and respect diversity.
Despite this steady progress, we are still halfway toachieving our corporate goals. As such, we will continue
promoting these activities as a single, unified Group.
We once again thank our shareholders and investors forthe continued support and encouragement.

October 2019

President and Chief Executive Officer

Sekisui Plastics Co., Ltd.

8

Sekisui Plastics Group’s 100th Year Vision

As Sekisui Plastics Group’s corporate goal for the 100th
anniversary of foundation (in FY2059), on the basis of thefounding spirit of Sekisui Plastics and our new management
philosophy, we aspire to be “a plastics solution company
trusted by customers around the world” by achieving
global business development in our segments of Industry,
Human Life and Environment/Energy while practicing thegroup-wide CSR and “Zen-in Keiei.”

Zen-in K
i

ecl a

eie

C SR Dr at

ionManagement Philosophy
Founding Spirit

Corporate Goal for Our 100th Year Anniversary (in FY2059)
Sekisui Plastics Group aims to gain trust of customers by expanding businesses globally basedon plastics and providing solutions.

Situation Goal

Scale Goal

Plastics Solution Company

Consolidated Sales

Trusted by Customers around the World¥500.0 billion or more

Corporate Domain

Sekisui Plastics Group Solutions
Materials

Technologies

Systems

Plastics based

Technology thatcreates added value

By systemizing, know-how
and providing information

Contributions to Industry:

Contributing to the growth and development of the industry
by proposing business solutions to client companies
Contributions to Lifestyle Transformation: Contributing to the transformation of people’s lifestyles
Contributions to the Global Environment: Simultaneously aiming to improve the global environment

9

Sekisui Plastics Co., Ltd.

Business Vision—Develop Globally as a “Plastics Solution Company” in Three Business Segments
Sekisui Plastics Group targets net sales of over ¥250 billion and ¥200 billion in the Industry and Human Life segments
respectively, and also will grow the Environment/Energy segment to the ¥50 billion scale in net sales in FY2059, theGroup’s 100th anniversary of founding.

¥50.0 billion
or more ■Environment/Energy
Consolidated sales

50th Year
Anniversary¥100.7billion

FY2009Consolidated sales

100th Year
Anniversary
FY2059¥500.0¥200.0■Human Life

¥250.0■Industrybillion or morebillion or morebillion or more

¥71.5 billion¥29.2 billion
FY2059FY2009CSR Vision—Sekisui Plastics Group, Expanding Our Dreams for People and the EarthWe, Sekisui Plastics Group, carry out social responsibility to stakeholders including the global environment by practicing ourmanagement philosophy and contribute to the sustainable development of the global society.

Responsibility to Stakeholders
Stakeholder

Responsibility of Sekisui Plastics Group

Customers

The Company not only supplies safe/reliable products but also bring comfort and convenienceto the lives of people by always creating new functions/value and proposing materials/services as
solutions for customers.

Group Members

The Company places emphasis on mutual respect and trust, and pursues the happiness of people
working for the company.
Consequently, we will improve fairness to skill development and rating, and make efforts to create ahealthy/safe work environment, and a good balance between work and family.

Local Communities

The Company believes being a safe workplace is the most important to communities.
In addition, as a member of local communities, we aim to be a company trusted and loved by thewhole community.

Shareholders

The Company meets expectations from shareholders with returns by improving its corporate value.
Furthermore, we focus on the active disclosure of our management information and dialogue withshareholders.

Business Partners

The Company builds trust in relationships with business partners through fair, honest businesspractices with sincerity as our motto.
Also, we aim at co-existence and co-prosperity as a better partner for the partners.

Global Environment

The Company actively endeavors to improve environment to protect our precious earth.
In particular, we contribute to the low-carbon society and develop the recycling-based society with foam
plastics in the community and lowering carbon levels centering on foam plastics which are eco materials.

Culture Vision—Zen-in Keiei
All members, including managements and employees in general, of Sekisui Plastics Group always recognize the
4 keywords, “Innovation,” “Speed,” “Teamwork” and “Respect for Diversity” as starting point of achievement bymaking the most of strength and improving the weakness.

Sekisui Plastics Co., Ltd.

10

Creation, Growth, Change, and to a Next “Stage”

Earnings trends to date in Sekisui Plastics can be broadly divided into three periods.
Earnings grew in line with the rapid popularity of EPS foam in the “Establishment Period.”
Earnings fluctuated with the ebb & flow of Japanese economy in the “Growth to Maturity Period.” In the“Global Development Period,”
we achieved record-high earnings based on new businesses and globalization.
With the launch of our new mid-term management plan “Make Innovations Stage-II” in 2019,
we are now focusing our energies on efforts aimed at solidifying our position as a leading environmental company.

Growth to Maturity Period
Years 21 to 40

Establishment Period
Sekisui Plastics’ First 20 years
Sekisui Sponge Industries Co., Ltd. (the current Sekisui
Plastics Co., Ltd.) was established in 1959. The following
year, we began manufacturing and selling the first
EPS (expandable polystyrene) beads using technology
developed in Japan.
Our business underwent rapid growth, driven by ESLEN
Beads and ESLEN Sheets, and our shares were listed
after five years in business. We overcame the obstacles
presented by the 1973 oil crisis and the movement to ban
EPS foam, and in 1978 we listed our shares on the First
Section of the Tokyo Stock Exchange.
1959 Sekisui Sponge Industries Co., Ltd. established, commenced
EPS beads and PVC foam businesses
1961 Kanto Plant (the current Sekisui Plastics Kanto Co., Ltd.) built in
Ibaraki Prefecture1964 Shares listed on the Second Section of the Osaka Securities
Exchange
1966 Tenri Plant (the current Sekisui Plastics Tenri Co., Ltd.) built in
Nara Prefecture
1969 Company name changed to Sekisui Plastics Co., Ltd.
Shiga Plant (the current Sekisui Plastics Shiga Co., Ltd.) built in
Shiga Prefecture
1970 Kasahara Kasei Co., Ltd. (the current Sekisui Plastics Toubu Co.,
Ltd.) established in Ibaraki Prefecture1973 Shares listed on the Second Section of the Tokyo Stock
Exchange
1976 Hokkaido Eslen Co., Ltd. (the current Sekisui Plastics Hokkaido
Co., Ltd.) established in Hokkaido
1978 Oita Plant (the current Sekisui Plastics Kyushu Co., Ltd. Oita
Plant) built in Oita Prefecture
Assigned to the First Section of the Tokyo Stock Exchange andthe Osaka Securities Exchange

11

Sekisui Plastics Co., Ltd.

The Company continued to develop in line with Japan’s
economic growth, but with the collapse of the bubble economy,
our earnings grew progressively weaker, with consolidated
operating losses recorded for four consecutive years from 1995.
Against this backdrop, we switched direction from a policy ofmultifaceted expansion of our existing businesses to one thatemphasizes “selection and concentration.” Various measures
including withdrawals from businesses and early retirement
programs were implemented.
1989 Okayama Plant (the current Sekisui Plastics Tenri Co., Ltd.
Okayama Mfg. Department) built in Okayama Prefecture
1994 Ibaraki Shimodate Plant (the current Sekisui Plastics Kanto Co., Ltd.,
Shimodate Mfg. Group) built in Ibaraki Prefecture
Acquired Giken Kasei Co., Ltd. (the current Sekisui Giken Co., Ltd.)
1995 With land expropriated by Nara City, Nara Plant closed
1996 Sekisui Plastics S.E.A. Pte. Ltd. established in Singapore

To a Next “Stage”
From our 60th Year (2019)

Global Development Period
Years 41 to 59
As new businesses including PIOCELAN and TECHPOLYMER
began to contribute to earnings, we moved from rebuilding
businesses to a return to growth. To build on this growth, webegan full-scale global business development, and despite
a surge in the price of crude oil and a global recession,
we achieved our long-held goal of consolidated net salesof ¥100 billion, with ¥5 billion of consolidated operating
income in FY2009.
2004 Sekisui Plastics Yamaguchi Co., Ltd. established in
Yamaguchi Prefecture
Sekisui Plastics (Shanghai) International Trading Co., Ltd.
and Tianjin Sekisui Plastics Co., Ltd. established in China

In 2019, the Company’s 60th year of operations, we not only
advanced the “execution of strategies to strengthen earnings
structure” and “business portfolio transformation” goals
commenced during our previous mid-term management
plan, but also launched as our new mid-term management
plan “Make Innovations Stage-II”, which features a basic
policy aimed at solidifying our position as a leading
environmental company.

2006 Sekisui Plastics U.S.A., Inc. established in the United States2007 Sekisui Plastics Europe B.V. established in the Netherlands
Suzhou Sekisui Plastics Co., Ltd. established in China
Sekiwoo Plastics Korea Co., Ltd. (the current Sekisui Plastics Korea Co., Ltd.) established in Korea
2008 Taiwan Sekisui Centex Co., Ltd. (the current Sekisui Plastics Taiwan Co., Ltd.) established in Taiwan
2009 Sekisui Plastics Saitama Co., Ltd. established in Saitama Prefecture
Marking 50th anniversary, formulated the Sekisui Plastic Group’s 100th Year Vision2010 Consolidated local manufacturing and sales companies in Kyushu and established Sekisui
Plastics Kyushu Co., Ltd. in Fukuoka Prefecture2012 Consolidated local Group sales offices in Chubu Region and established Sekisui Plastics Chubu Co., Ltd. in Aichi
Prefecture
Sekisui Plastics (Thailand) Co., Ltd. established in Thailand
PT. Sekisui Plastics Indonesia established in Indonesia
2013 Sekisui Plastics Tohoku Co., Ltd. established in Miyagi Prefecture2014 Consolidated Kanto Group offices and established Sekisui Plastics Toubu Co., Ltd.
Consolidated Group companies in Taiwan and established Sekisui Plastics Taiwan Co., Ltd.
Sekisui Plastics (Shanghai) Precision Forming Co., Ltd. established in China
2015 Sekisui Plastics Mexico S.A. de C.V. established in Mexico
2016 Made Yamakyu a consolidated subsidiary2019 Made Proseat GmbH & Co. KG, a manufacturer of automotive
components with multiple manufacturing bases in Europe,a consolidated subsidiary

Tianjin Sekisui Plastics Co., Ltd.

Sekisui Plastics Korea Co., Ltd.

Sekisui Plastics Europe B.V.

Sekisui Plastics Co., Ltd.
(19 Domestic Subsidiaries)

Sekisui Plastics U.S.A., Inc.

Proseat Europe GmbH
Suzhou Sekisui Plastics Co., Ltd.
Sekisui Plastics (Shanghai) International Trading Co., Ltd.
Sekisui Plastics (Shanghai) Precision Forming Co., Ltd.

Sekisui Plastics Mexico S.A. de C.V.
Sekisui Plastics Taiwan Co., Ltd.

Sekisui Plastics (Hong Kong) Trading Co., Ltd.

Sekisui Plastics (Thailand) Co., Ltd.
Sekisui Plastics S.E.A. Pte. Ltd.
PT. Sekisui Plastics Indonesia

Sekisui Plastics Co., Ltd.

12

Mid-Term Management Plan

Promote business portfolio transformation and execution of strategies to strengthen earnings structure
while solidifying position as leading environmental company“Make Innovations Stage-II” Positioning and Quantitative Targets
O u r p re v i o u s m i d - t e r m m a n a g e m e n t p l a n “ M a k e
Innovations 60” covered FY2016 to FY2018 and focusedon transforming our business portfolio and reforming ourearnings structure in line with the goal of transforming
our business model and advancing to the next stage of
growth as Sekisui Plastics moved into its 60 th year ofoperations.
From FY2019, we believe it vital to strengthen thetransformations we have undertaken in the three years
covered by the previous mid-term management plan,and in addition to further advancing the “executionof strategies to strengthen earnings structure” and“business portfolio transformation” goals, we havecreated and are promoting our new three-year mid-term
management plan “Make Innovations Stage-II,” whichcontains a basic policy aimed at cementing the Group’s
position as a leading company in environmental issues.

Make Innovations Stage-II Quantitative Targets

Net Sales

FY2018results

FY2019plan

FY2021plan

Averageannualgrowthover three
years

112.6

145.0

155.0

11%
42%

(Overseas sales)(Overseas sales ratio)

20.4

53.5

58.0

（18%）

（37%）

（37%）

Operating income(Operating income ratio)

4.8

4.9

7.8

（4.2%） （3.4%） （5.0%）

18%

Recurring income

4.8

4.8

7.6

17%

Net income
attributable toowners of the parent

3.1

3.2

5.0

17%

4.8%

4.8%

6.8%

ROE

Key “Make Innovations Stage-II” concepts• Promote to get contribution from M&A Activities in MI60
• Work to bring about actual results early with MI60 development projects• Promote further Business Portfolio Transformation• Strengthen group management foundation and implement efforts that further emphasize the environment

13

Sekisui Plastics Co., Ltd.

Priority Policies
Sekisui Plastics Group is promoting three priority policies to achieve medium-term management plan basic policies of“cementing our position as a leading company in environmental issues,” as well as advancing the “business portfoliotransformation,” and the “execution of strategies to strengthen our earnings structure.”

1. Evolution ofbusiness portfolio
Accelerate growth with threebusiness domains and two
key products
Automobile structural material field
High functional food container field
Medical/Health Care field
PIOCELANTECHPOLYMER

Mid-Term Plan

2. Strengthening groupmanagement foundation
Improvement oforganizational capabilities
Improvement of productivity

Culture Vision:
Both the people and company growbased on management by all members’
participation (Zen-in Keiei)

Improvement of capabilitiesof human resources

3. Contribution tosustainable society
Evolution of existing products
Development of new materials
Business activities that do notplace a burden on society

Evolution of
Existing Products
Promoting environmental
contributions throughdevelopment and provision of
products that reduce weight andimprove thermal insulation

Practical Applicationof New Materials
Practical application of low
environmental impact materials
made of biodegradable or biobased plastics

Business activities that do
not place a burden on society
Reducing environmental impact
through production process, andby recycling activities

Become leading environmental company
Sekisui Plastics Co., Ltd.

14

About Sekisui Plastics
Sekisui Plastics Group aspires to be “a leading environmental company” that proposes group merchandise(products and systems), including eco-friendly products, as solutions in order to bring comfort andconvenience to the lives of people.

Human Life

Light weight, and featuring excellent thermal insulation and shock resistance,these products are used in items that have transformed the lifestyles of consumers and end users.

Food

ESLEN Sheet

Foamed polystyrene
food tray

Agricultural /Fishery

Housing / Civil
engineering

1
15

Sekisui
Sek
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la
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Fish Box

Foamed polystyrene
fish box

ESLEN Block

Block for EPS construction method

ESLEN Sheet“Laminated”

CELEPETESLEN wood folded box

Instant food containers

Microwave/oven safe
food container

Farm product box

Fruit Tray

Fishery products
mounting board

Foamed polystyrene
farm product box

Super Soilen System
Lightweight greening
methodCushioning material for
protection

AQUAROAD

Underground stormwater tank

Folded box made of
foamed polystyrene sheet

Foamed polystyrene
cut sheet

TECHEATER

PTC ceramic heaters

Industry

Value has been recognized based on proposed business solutions, including
solutions improving customer businesses, operations and efficiency.

Home
Appliances / IT TECHPOLYMER
Fine polymer particles

EPSREM

LIGHTLONTECHTELAS

for optical applications

Foamed polystyrene material for cushion packing

Automotive /Transportation

PIOCELAN

PIOCELAN

Resin Molding

TECHPOLYMER

ST-gelTECHPOLYMERSMC Parts

ELASTIL

Medical /Healthcare

Automotive component

Self-adhesive gelpads for Medical /Healthcare use

Packaging material fortransporting automobile parts

Fine polymer particles for cosmetics
applications

Polystyrene sheet for protective cushion packing

Truck roof fairing

Medical equipmentcover

LED lighting equipment

Fine polymer
particles for use incoatings

Elastic / high bounce
foam

Seeki
Sekisuik susui
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16
16

IndustryNet Sales

Market Environment & FY2018 Results(Millions of yen)

47,728

14

15

16

17

18

(FY)

Recurring Income(Millions of yen)

2,546

14

17

15

16

Sekisui Plastics Co., Ltd.

17

18

(FY)

FY2018 net sales in the Industry segment were ¥47.7 billion,
an increase of 3.8 (YoY).
In the Home Appliance/IT fields, demand for PIOCELAN(polystyrene/polyolefin hybrid resin foam), which is utilized
in LCD panel transportation material applications, and otherproducts was robust primarily in Northeast Asia. In contrast,
sales of TECHPOLYMER (organic polymer particles) thatare utilized for light diffusion applications, such as liquid
crystal panels, were weak due to the impact of inventory
adjustments. In the Automotive field, the number of
automotive component applications using PIOCELAN andother Company products increased on a global basis. In
the Medical/Health Care-related fields, sales of ST-gel (afunctional high-polymer gel) used in electrode pads for lowfrequency therapeutic devices were steady but remainedsluggish from the second half of the fiscal year under review.
Our strategic merchandise ELASTIL (thermoplastic
elastomeric bead foam) has been adopted for the midsolesof running shoes released globally as spring/summer 2019models. Sports shoes require resilience for comfortablerunning and cushioning for better comfort, and ELASTIL
enables the achievement of both these performancerequirements. Sekisui Plastics will work to raise performanceby improving materials, not only for shoe applications, while
continuing to respond to increasingly diverse needs.

Initiatives of the New Mid-Term Plan &FY2019 Outlook
Under our “Make Innovations 60” mid-term management
plan, in which the fiscal year under review was the final year,
the plan had been to increase the sales ratio in the Industry
segment to 50% of that of the Company as a whole, but
as the actual result was 42% this has not been achieved. The
cause of this was expansion of global sales and sales expansionof strategic merchandise that were later than planned.
In the newly launched mid-term management plan, “MakeInnovations Stage-II,” we will continue to promote “Business
Portfolio Transformation,” including the expansion of global
sales and sales of priority products. Under this plan, we areaiming to accelerate growth centered on three businessdomains (the automobile structural materials, functional
food container and medical/health care fields, of which theautomobile structural materials and medical/health carefields are in the Industry segment) and two priority products(PIOCELAN, TECHPOLYMER).
It is in relation to this that the M&A of the Proseat Group,
an automotive parts manufacturer with bases deployed inEurope, is being conducted in 2019. In FY2021, the final
year of the mid-term management plan, we are targeting
net sales of ¥93.0 billion, and in FY2019 we have our sights
set on sales of ¥84.0 billion, including the sales of theProseat Group.

TOPIC

M&A of Proseat GroupThe Company has completed the M&A of theProseat Group, an automotive parts manufacturer
with manufacturing bases in six European countries.
The Proseat Group is an independent automotive
parts manufacturer that supplies automotive parts,
such as seat-use cushion material, headrests andarmrests, to European automakers. Having brought
the Proseat Group under the Sekisui Plastics Groupumbrella, we plan to accelerate sales expansion toEuropean automakers and promote Proseat Group
products to Japanese automakers alongside ourmainline polystyrene/polyolefin composite resin foam
products, which include PIOCELAN. We believe that
this acquisition will serve as an opportunity for us toincrease the sales ratio in the Industry segment andespecially in the automotive field.

Proseat Group rear seat foam

Sekisui Plastics Co., Ltd.

18

Human LifeNet Sales

Market Environment & FY2018 Results(Millions of yen)

64,865

14

15

16

17

18

(FY)

Recurring Income(Millions of yen)

3,453

14

19

15

16

Sekisui Plastics Co., Ltd.

17

18

(FY)

FY2018 net sales in the Human Life segment were ¥64.9
billion, a decrease of 1.9% (YoY).
In food containers, demand for heat-resistant containers
associated with the heating of food in microwave ovens
continued to be strong, but agriculture/fishery-related
demand was affected by a succession of natural disasters
in recent years. In addition, a decrease in sales of related
purchased products brought about by a review of low-profit
products caused a decrease in sales compared with theprevious fiscal year.
The sales volume of our mainstay products increased fromthe previous year for ESLEN Sheet (Foamed Polystyrene
Sheet), but decreased from the previous year for ESLEN
Beads (Expandable Polystyrene [EPS] Beads). In addition,
price revisions designed to counter increases in raw fuelprices mainly in the first half of the fiscal year were delayed
and became a cause of a profit deterioration.
In the construction materials and civil engineering-related
fields, we acquired projects for sports facilities and theirassociated construction and road construction. To meetongoing demand for infrastructure development, primarily
in the Tokyo metropolitan area, we will continue to gain
projects centered on EPS Slope public works (involving alightweight embankment method) and AQUAROAD (a resinfor underground rain- and stormwater runoff tanks).

Initiatives of the New Mid-Term Plan &FY2019 Outlook
In the Human Life segment under the “Make Innovations
60” mid-term management plan, the final year of which
was FY2018, we had been working to improve profits bypromoting reviews of low-profit products and passing
increases in raw fuel prices onto products.
In the food field, under the newly launched mid-term
management plan, “Make Innovations Stage-II,” we will
work to expand business in new fields and sales channels
in addition to expanding existing fields with a focus onfunctional food containers. In the agriculture/fishery-related
field we will work to expand sales, including import andexport business, by maintaining freshness technology andlogistics efficiency proposals tailored to domestic specialty
products. With regard to global expansion, we will target thedevelopment of fruit trays and functional food containers.
Furthermore, as efforts to improve profitability we willcontinue to improve productivity and logistics through energy
saving and rationalization while continuing to review lowprofit businesses. The sales target for FY2021, the final yearof the plan, will be ¥62.0 billion, a decrease from the FY2018
results, but we will secure profit growth through the initiatives
to improve profitability. For FY2019, sales are planned to be¥61.0 billion.

TOPIC

AQUAROADTM Adopted at
Ichikawa Roadside Station

Responses in the fields of, for example, road flooding
countermeasures and rainwater treatment following
torrential rain and other events have become an urgent
necessity. With regard to underground stormwater
storage tanks made of AQUAROAD, which is a flood
mitigation product, we received an order from theMetropolitan National Highway Office of the Ministryof Land, Infrastructure, Transport and Tourism’s Kanto
Regional Development Bureau for their adoption
as a flood countermeasure under the parking lot
at the Ichikawa Roadside Station rest area in Chiba
Prefecture. Our AQUAROAD product temporarily stores
overflowing rainwater when precipitation that exceeds
sewage treatment capacity occurs and afterwards
allows the now stagnant rainwater runoff to seep into
the ground. AQUAROAD has received acclaim forhaving features that include high strength that permits
the passage of large vehicles, high porosity that enables
the storage of more than 92% of water per volume,
workability that facilitates rapid manual construction,and storability so that sections can be stacked duringtransportation and storage.

Work to lay AQUAROAD

Sekisui Plastics Co., Ltd.

20

Corporate GovernanceSekisui Plastics carries out social responsibility to stakeholders and aspires to be “a plastics solution
company trusted by customers around the world.”

Corporate Governance Systems
With Japan’s Corporate Governance Code having taken effect from June 2015 for companies listed on the Tokyo Stock
Exchange, Sekisui Plastics Group has formulated its own“Corporate Governance Guidelines” outlining the Group’s
policies and activities regarding corporate governance. These
Guidelines form the starting point for the effective functioningof corporate governance, to maintain management transparency
and soundness, and establish a management structure that isable to address changes in the operating environment.
The guidelines are available in Japanese only on our website:
https://www.sekisuiplastics.com/company/outline/governance/

Audit & Supervisory Board and Internal Audits
Sekisui Plastics introduces a corporate auditor system offive auditors (including three outside auditors) and conducts
supervision and audits on business execution through theBoard of Directors and the Board of Corporate Auditors.
The Company strengthens the audit function by building asystem of the timely and relevant disclosure of important information to corporate auditors and the Board of Corporate
Auditors, and secures the validity, transparency and equityof management decisions. Furthermore, based on our Basic

Policy Regarding the Internal Control System, we have established an internal control structure including an Audit
Department which is charged with the responsibility ofoverseeing the implementation status of internal audits andinternal control systems. Sekisui Plastics strives to strengthenfunctions of management oversight and supervision througha variety of measures such as cooperation between the
Audit Department and corporate auditors.

Corporate Governance Framework

Shareholders’ meeting
Appoint/dismiss

Appoint/dismiss
Board of Directors 9 Directors

Operational audit(6 internal and 3 outside)*
Assign and supervise
President
Deliberate on substantive matters

Audit & Supervisory Board 5 Audit & Supervisory Board Member(2 internal and 3 outside)*
Financial audit
Independent
人
Auditors
Financial audit

Executive Committee (discuss on important matters)
Appoint/
dismiss(6 concurrently Directors)
Internal Audit Department• Responsible Care Internal Audit Committee

Othercommittees

HQs/Departments/Subsidiaries*Three Outside Directors and Two Outside Corporate Auditors are appointed as independent officers.

21

Sekisui Plastics Co., Ltd.

Cooperation

14 Executive Officers

CSR Control Committee• Compliance Committee, etc.

Internal audit

Appoint/
dismiss

Internal
auditDirector Remuneration
Remuneration in FY2018 totaled ¥152 million for nine directors (including ¥25 million for three outside directors), and¥60 million for five auditors (including ¥13 million for threeoutside auditors). The total remuneration amount for directors does not include employee salaries for directors who areconcurrently serving as company employees. The numbersof directors/auditors and remuneration above include one
director and one auditor that dismissed within FY2018.
Provisions for director bonuses in FY2018 of ¥20 million [including ¥14 million for eight directors (with ¥3 million allotted
for three outside directors) and ¥6 million for five auditors(with ¥2 million for three outside auditors)] are included.

Outside Directors
With the goal of achieving long-term stable growth and development, Sekisui Plastics appointed three independent
outside directors at the annual shareholders meeting, held on
22 June, 2018, to have their specialized knowledge and extensive experience to bolster management of the Company.
The Board of Directors also established our own “standard for judging the independence of outside directors”

based on the requirement for outside directors under theCompanies Act and the standards governing independence set by the Tokyo Stock Exchange. Following sufficient discussion, the Board of Directors selects candidates
with ample knowledge and experience that can be candid
and proactive in advising constructively while showing
strength in supervisory roles.

Support System for Outside Directors and Outside Auditors
As an information communication system to outside directors and Outside Auditors, the Corporate Planning
Department distributes and explains, in advance, documents for discussion matters at the Board of Directors.
At the same time the internal directors provide sufficient

explanations on particularly important matters.
The full-time auditor provides timely and accurate an explanation to outside auditors. As required, outside auditors
conduct regular audits of business sites alongside the fulltime auditors.

The “Zen-in Keiei” card
Sekisui Plastics Group has created the“Zen-in Keiei” card that contains informationon the origin of the Group name “Sekisui,”management philosophy and code of conduct of Sekisui Plastics, and action guidelines
for the “Zen-in Keiei,” all in a booklet-sizedcard. The Group started to hand the card to
all Group members in April 2017.

Sekisui Plastics Co., Ltd.

22

Compliance / Risk Management
Sekisui Plastics Group has been improving compliance by promoting and establishing the corporate ethics,
and preventing any acts contrary to legal compliance. Also, for the business risks, we take measures suchas improving a control system and promoting awareness-raising activities.

ComplianceSekisui Plastics has established the Compliance Committee
and built a structure to maintain the compliance withlaws/regulations. The Committee is held twice a year on aregular basis to deliberate on compliance matters in theGroup. And, each Group appoints a responsible person forcompliance to cooperate. Moreover, certain-sized Group
companies, as well as Sekisui Plastics, have a Compliance
Committee. In an effort to fulfill the corporate social

responsibility, we set up hotlines for direct communication
to the secretariat of the Compliance Committee and legal
advisor and strive to build an equitable and vibrant organization. In addition, the Company has executed an advisory
agreement with a legal firm in order to refer for decision
making with respect to corporate management and daily
operations, so we have a system to receive guidance andadvice as required.

CSR Control Committee
ReportRelevant Departments

InstructCompliance Committee

ReportInternal Hotline○ General Manager of Legal Department○ Secretariat of the Compliance Committee

ReportReportInvestigation request
Response

OptionResponse

External Hotline○ Legal Advisor

ReportResponse

Whistleblower

Risk Management
Sekisui Plastics Group has formulated rules regarding thequality, safety, environment and information security risks,and respective committees implement risk managements
and take independent measures.
We also established a “Risk Management Manual” andendeavor to prevent risk occurrences by ensuring that
directors and employees understand. In emergency situations, the Emergency Measure HQ, whose head is the president, supervises the risk management according to theemergency response measure procedures.

Information Security
Sekisui Plastics Group has formulated a Basic Policy for
Information Security to ensure the security of information
assets, and appropriately manages and operate the assets.
In order to enhance the Group’s information security, we
set up an “IT Promotion Committee.” In accordance with

23

Sekisui Plastics Co., Ltd.

the Basic Policy, the committee enhances information security systems, formulates rules, and prepares operational
manuals, and also strives to improve knowledge for handling information assets by seminars and e-learning programs for all Group members.

Corporate Social Responsibility (CSR)
Sekisui Plastics Group engages in CSR activities with the aim of becoming a corporate group trusted bystakeholders around the world based on the Sekisui Plastics Group’s 100th Year Vision. To achieve this, we
promote a variety of initiatives for all stakeholders including global environment.

CSR Promotion
To mark the 50th anniversary of founding, we formulated
the CSR Vision as well as Sekisui Plastics Group’s 100thYear Vision. According to the CSR Vision, we set up the
CSR Control Committee, whose chair is the president, andactively promote the CSR.

CSR Promotion
Structure

Environmental Committee

CSR Control
Committee

Social Contribution Committee(Chair: President)

Safety Committee

Secretariat

Quality Committee(Corporate Planning
Department)

Responsible Care Internal Audit Committee
Compliance Committee(Committee Chairs: Responsible Directors)

Responsibility to Customers
We operate a customer-focused quality assurance system, applied from the development stage to ensure that all products andservices meet the expectations of our customers.

Basic Stance on Quality Assurance

Chemical Substance Management

The Company’s philosophy is that product quality shouldreflect customer values, not those of the Company, and assuch we carry out upstream management (ensuring productquality at the development stage) in an integrated manner
throughout the entire Group. We conducted an in-house
campaign to improve quality awareness in fiscal 2018.

The Sekisui Plastics Group has established a green procurement
standard for raw materials and with the goal of providing
information on chemical substances in its products,
manages all chemical substances under ChemSHERPA(short for chemical information sharing and exchange underreporting partnership in supply chain), a domestic informationtransfer scheme. In addition, all of our products are labeledaccording to GHS classifications and their safety data sheets(SDS) are available.

Approach to Product Safety
We are committed to developing products that take
into consideration the environment, safety and healththroughout the entire product life cycle, from the researchand development stage to product disposal after use.

Improve Product Quality at Development Stage

Market needs,
Customer needs

Sales
Activities

Development
Topic
Evaluate/Decide

Design
Review
Environmental Impact
Laws and Regulations

Initialproduction
control

New productMarketevaluation

Preliminary Safety

Sekisui Plastics Co., Ltd.

24

Responsibility to Global Environment
To achieve a sustainable society, Sekisui Plastics Group promotes activities that reduce emissions of environmentally hazardous
substances generated through business activities, and that preserve biodiversity.

To achieve a sustainable society
Maintaining a particular focus on its foam technologies, theGroup has been contributing to the improvement of the global
environment through the effective utilization and recycling oflimited resources, such as oil, since its founding. Promoting thedevelopment of products that are environmentally friendly evenduring their manufacture and use, we are working to “contributeto a sustainable society”—the evolution of existing products,
finding practical applications for new materials, businessactivities that do not place a burden on society—which is oneof the High-Priority Policies of our Mid-Term Management
Plan and will open the way to our remaining a leading
company in environmental issues.
In April 2019, we established our Environment and Quality
Control Center to rapidly respond to environmental issues
throughout the Group.

Evolution of existing products
With regard to existing foam products that are resourceand energy-saving materials during manufacture and use,
we are working to improve their functionality—such as byfurther reducing the weight by higher foam expansion rates
and reducing foam thickness, and making improvementsin thermal resistance (heat/cold insulation)—and thereby
contribute to the realization of a sustainable society.

Development of new materials
We are promoting the commercialization of products inwhich we utilize biodegradable and biomass plastics aswell as other materials with low environmental impact. In
developing products that improve the environment, such as
the “TECHPOLYMER” EF series, we contribute to society.

Business activities that do not place a burden on society
We are promoting business activities that do not impact
the environment through the promotion of energy saving in
production activities, the reduction of CO2 emissions and zero
emission activities. In particular, we have been taking the industry
lead in the recycling of polystyrene foam for 48 years (since 1971)
and recently implemented the collection, recovery and recyclingof the foamed polystyrene floats used in aquaculture to deal
with the problem of ocean plastic waste in the Shikoku area.

Responsibility to Group Members
Sekisui Plastics Group respects fundamental human rights and takes into consideration that no one is discriminated on any andall factors such as birth, nationality, ethnicity, creed, religion, gender, age, disability.

Initiatives to Respects for Human Right
Sekisui Plastics Group thoroughly informs the thought above,
which descried in the compliance manual, to all groupmember.
To prevent sexual harassment and power harassment that
could occur in the workplace, we appropriately educate

Columnemployees through several training programs.
In addition, we have set up the SKG (Sekisui Kaseihin[Plastics] Group) Clean Network, an internal whistleblowing
system whereby a staff member can directly report humanrights abuses to an internal hotline or an outside legal advisor
hotline and also address human rights issues.

Support for Parents

In raising our children it’s been helpful to use the childcare leave system that makes it
possible to take time off up until a child reaches age two, and the company’s system fortaking leave in half-day increments for up to five days per year to care for a child. Thanks
to childcare leave I’ve been able to share lots of time with my kids who are growing up
so fast, and it’s been possible to have a greater sense of their growth. Together with thechildcare leave I took when my third child was born, I was able to be there for the birthof all three of my children, which has been an enormous joy.
More than just offering an ample lineup of systems, though, this is a company where
people understand what it takes to raise a small child, like when one of them has a fever
or some other problem, my coworkers or supervisor will say “Why don’t you go homeearly and take care of your kid.” I really feel that owing to these systems I’ve been able
to more easily balance work with childcare.

25

Sekisui Plastics Co., Ltd.

Foam Materials Development Group (Tenri),
Development Division, R&D Center

Yuichi Gondo

Responsibility to Local Communities
In accordance with our CSR Declaration set forth in the Sekisui
Plastics Group’s 100th Year Vision, we foster a culture of social
contribution and actively promote social contribution activities.
With greater importance given to CSR-oriented management, the Social Contribution Committee has formulated
the “Social Contribution Action Policy” and promoted
activities in an organized manner throughout the Group.

The Action Policy defines two themes in its promotion ofsocial contribution: corporate social contribution activities
and support for activities by Group employees.
Following the policy, we have set two activities of “social
contribution activity promotion as a company” and “social
contribution activity support to the Group members” to promote our activities.

Disaster Assistance Agreements Signed with Local Authorities
In January 2019, three group companies, Sekisui Plastics
Kanto, Sekisui Plastics Tenri and Sekisui Plastics Shiga enteredinto agreements with regard to providing material support intimes of disaster to Koga City in Ibaraki Prefecture, Tenri
City in Nara Prefecture, and Koka City in Shiga Prefecture,
respectively. In the event of a large-scale disaster, thecompanies will supply local authorities with insulationand cushion materials, as well as simple food containers
and other items made using the materials of the Sekisui
Plastics Group, thus contributing to local communities.

Grant Activities through the Sekisui Plastics FundWith the aim of providing assistance to support biodiversity
preservation activities, we established the Sekisui Plastics
Fund with a contribution to the “Mirai Fund Ohmi” in 2012,
and to expand upon this, we created a new fund with a contribution to the “Mirai Fund Ibaraki.” We continue to assist
activities conducted by local NPOs, in which Group employees are active and participate as volunteers, and together
with that, endeavor at Satoyama Conservation Activities.

ColumnHands-on Experience at Creating a Water
Conservation Forest to Protect Saba River

Hofu Plant,
Sekisui Plastics Yamaguchi Co., Ltd.

Takuya Fujiwara

Every year we participate in hands-on activities to create a water conservation forest that conserves the Saba River in an initiative
sponsored by the Yamaguchi Prefecture’s Office of Agriculture, Forestry and Fisheries. In November of FY2018 approximately 70
employees from companies that utilize Saba River water participated in these activities, and joining in was a group of 12 led byPresident Ejiri from the Hofu Plant.
These activities at forest maintenance, such as clearing out brush and pruning trees, helped not only the participants, but all employees, to gain a deeper understanding of the role the forest plays as a crucial source of industrial water to a company’s production activities,
specifically functions including water source recharging and the prevention of
global warming.
Prior to thinning brush and pruning, the forest was thick with an atmosphereof the heavy darkness found deep in the mountains. The completion of thatwork, however, let the sunshine in and the trees and ground that had been
covered in darkness were bathed in sunlight. It felt as though this would
foster the growth of trees and new vegetation.
Participation in this activity further elevated an awareness of the environment,
and to even in just a small measure contribute to solving the ongoing societal
issue of water-borne plastic garbage, we are renewing the resolve that we mustalso make efforts to collect plastic garbage from within forests and from rivers.
Sekisui Plastics Co., Ltd.

26

Consolidated Balance Sheet
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019
Thousands of U.S. dollars(Note 2)Millions of yen

2018

2019

2019

¥

¥ 11,271

AssetsCurrent assets:
Cash and cash equivalents (Note 4)
Short-term investments (Note 4)

5,117

$

101,549

5

6

54

Notes and accounts receivable (Notes 3 and 4)

33,36936,457

328,471

Inventories (Note 6)

10,432

13,872

124,984

Other current assets

826

3,279

29,543

Less allowance for doubtful accounts
Total current assets

(71)

(60)

(540)

49,68064,826584,070

20,955

21,176

190,791

Property, plant and equipment (Note 20):
Land (Notes 8, 12 and 15)
Buildings and structures (Notes 8 and 15)

43,80646,921

422,749

Machinery and equipment

80,633

100,115

902,018

Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

4,386

2,186

19,695

149,781

170,400

1,535,273(95,931)(110,135)(992,296)

53,84960,265542,976

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates (Note 4)
Investments in securities (Notes 4 and 5)
Deferred income taxes (Note 9)
Assets for retirement benefits (Note 10)
Software
Other assets
Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 20)

27

Sekisui Plastics Co., Ltd.

595

594

5,351

19,24917,059153,698

757

804

7,243

5,194

5,163

46,517

641

753

6,784

1,233

3,433

30,930

(54)

(55)

(495)

27,61827,753250,049¥ 131,148¥ 152,845$ 1,377,106

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

2018

2019

2019

¥ 27,027¥ 28,288

Short-term loans (Notes 4, 7 and 8)

4,946

13,562

122,191

Current portion of long-term loans (Notes 4, 7, 8 and 17)

7,178

4,127

37,183

Accrued expenses

3,012

4,419

39,814

Accrued income and enterprise taxes (Note 9)

1,050

990

8,919

Provision for bonuses to employees

1,023

1,056

9,514

Liabilities and net assets
Current liabilities:
Notes and accounts payable (Notes 3 and 4)

Provision for bonuses to directors and audit andsupervisory board members$

254,869

29

29

261

3,202

3,788

34,12947,47056,264506,928

Long-term loans less current portion (Notes 4, 7, 8 and 17)

6,972

17,540

158,032

Liabilities for retirement benefits (Note 10)

3,011

3,212

28,939Deferred income taxes (Note 9)

7,043

6,478

58,365

Provision for product warranty

244

190

1,711

Other current liabilities (Note 3)
Total current liabilities

Long-term liabilities:

Other long-term liabilities

259

2,387

21,506

Total long-term liabilities

17,53129,809268,573

16,533

16,533

148,959

Capital surplus

16,544

16,532

148,950

Retained earnings (Note 21)

20,69922,560203,261

Net assets:
Shareholders’ equity (Note 11):
Common stock:
Authorized: 124,751,000 shares and 124,751,000 shares
at March 31, 2018 and 2019, respectively
Issued:46,988,109 shares and 46,988,109 shares
at March 31, 2018 and 2019, respectively

Less treasury stock, at cost:
1,696,143 shares at March 31, 2018
1,696,864 shares at March 31, 2019

(1,425)(1,425)(12,838)

Total shareholders’ equity

52,352

54,200488,332

Net unrealized holding gain on securities (Notes 5 and 13)

10,168

8,799

79,277

Surplus arising from land revaluation (Note 12)

1,479

1,479

13,325

235

190

1,711

Retirement benefits liability adjustments (Notes 10 and 13)

1,179

524

4,721

Total accumulated other comprehensive income

13,061

10,992

99,035731

1,578

14,217

Accumulated other comprehensive income:Translation adjustments (Note 13)

Non-controlling interests
Total net assets
Total liabilities and net assets

66,145

66,771

601,594¥ 131,148¥ 152,845$ 1,377,106

See notes to consolidated financial statements.

Sekisui Plastics Co., Ltd.

28

Consolidated Statement of Income
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2018 and 2019
Thousands of U.S. dollars(Note 2)Millions of yen

2018

2019

2019

¥ 112,101¥ 112,593$ 1,014,442

85,47985,498770,321

26,622

27,095244,121

21,33722,311

201,018

5,284

4,784

43,102

Interest income (Note 20)

16

4

36

Dividend income

287

305

2,747

Net sales (Note 20)
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 14)
Operating income
Other income (expenses):

Equity in earnings of affiliates (Note 20)
Interest expense (Note 20)

—

0

0

(166)

(164)

(1,477)

Equity in losses of an affiliate (Note 20)

(6)

—

—

Foreign exchange loss, net

(88)

(20)

(180)

Loss on sales or disposal of equipment

(99)

(54)

(486)

Commission paid

(50)

(52)

(468)

Gain on sales of investments in securities (Note 5)

136

603

5,432

Loss on impairment of investments in securities

(52)

(8)

(72)

Loss on disaster

—

(31)

(279)

Loss on impairment of property, plant and equipment (Note 15)

—

(356)

(3,207)

Other, net

(21)

(25)

(225)

5,238

4,983

44,895

1,461

1,605

14,460

Profit before income taxes
Income taxes (Note 9):
Current
DeferredProfit

324

243

2,189

1,786

1,848

16,650

3,451

3,134

28,236

Profit attributable to:Non-controlling interests
Owners of parent
See notes to consolidated financial statements.

29

Sekisui Plastics Co., Ltd.

2
¥

3,448

5
¥

3,129

45
$

28,191

Consolidated Statement of Comprehensive Income
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2018 and 2019
Thousands of U.S. dollars(Note 2)Millions of yen

2018Profit20192019¥ 3,451¥ 3,134$ 28,236

2,672(1,368)(12,325)

Other comprehensive income (Note 13):
Net unrealized holding gain (loss) on securities
Translation adjustments

47

(45)

(405)

Retirement benefits liability adjustments

333

(654)

(5,892)

Total other comprehensive income
Comprehensive income

3,053(2,068)(18,623)¥ 6,505¥ 1,066$ 9,604¥ 6,502¥ 1,060$ 9,5502

545Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

Sekisui Plastics Co., Ltd.

30

Consolidated Statement of Changes in Net Assets
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2018 and 2019
Millions of yen
Common stock

Balance at April 1, 2017
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Other changes
Balance at April 1, 2018
Cash dividends
Profit attributable to owners of parent for the year
Decrease due to acquisition of additional shares of
consolidated subsidiary
Acquisition of treasury stock
Other changes
Balance at March 31, 2019

Capital surplus

Retained earnings

Treasury stock,at cost¥ 16,533————
16,533——¥

16,544————
16,544——¥ 18,351(1,100)3,448——
20,699(1,268)
3,129

¥

(802)
—
—
(622)
—
(1,425)—————¥ 16,533(12)——¥ 16,532———¥ 22,560—(0)—¥ (1,425)

Millions of yen

Balance at April 1, 2017
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Other changes
Balance at April 1, 2018
Cash dividends
Profit attributable to owners of parent for the year
Decrease due to acquisition of additional shares of
consolidated subsidiary
Other changes
Balance at March 31, 2019

Net
unrealized
holding gain
on securities

Surplusarisingfrom land
revaluation

Translation
adjustments

Retirement
benefits
liability
adjustments¥ 7,495———
2,672
10,168——¥ 1,479
—
—
—
—
1,479
—
—

¥ 187
—
—
—
47
235
—
—

¥ 845
—
—
—
333
1,179
—
—

—
—
(1,368)—¥ 8,799 ¥ 1,479

—
(45)
¥ 190

—
—
(12)
(654)
846
(1,222)¥ 524 ¥ 1,578 ¥ 66,771

Noncontrollinginterests¥

Total net
assets729 ¥ 61,363—(1,100)
—
3,448
—
(622)
2
3,056
731
66,145—(1,268)—3,129

Thousands of U.S. dollars (Note 2)

Balance at April 1, 2018
Cash dividends
Profit attributable to owners of parent for the year
Decrease due to acquisition of additional shares of
consolidated subsidiary
Acquisition of treasury stock
Other changes
Balance at March 31, 2019

Treasury stock,at costCommon stock

Capital surplus

Retained earnings$ 148,959——$ 149,058——$ 186,494(11,424)
28,191$ (12,838)
—
—

—
—
—
$ 148,959

(108)
—
—
$ 148,950———$ 203,261—(0)—$ (12,838)

Thousands of U.S. dollars (Note 2)

Balance at April 1, 2018
Cash dividends
Profit attributable to owners of parent for the year
Decrease due to acquisition of additional shares of
consolidated subsidiary
Other changes
Balance at March 31, 2019
See notes to consolidated financial statements.

31

Sekisui Plastics Co., Ltd.

Net
unrealized
holding gain
on securities

Surplusarisingfrom land
revaluation$ 91,611——$ 13,325————(12,325)—$ 79,277 $ 13,325

Translation
adjustments

Retirement
benefits
liability
adjustments

Noncontrollinginterests$ 2,117——$ 10,622——$ 6,586 $ 595,954—(11,424)—
28,191

Total net
assets

—
—
—
(108)
(405)
(5,892)
7,622(11,010)$ 1,711 $ 4,721 $ 14,217 $ 601,594

Consolidated Statement of Cash Flows
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2018 and 2019
Thousands of U.S. dollars(Note 2)Millions of yen

Cash flows from operating activities
Profit before income taxes
Adjustments for:
Depreciation and amortization
Amortization of goodwill
Loss on impairment of property, plant and equipment
Decrease in allowance for doubtful accounts
Interest and dividend income
Interest expense
Equity in (earnings) losses of an affiliate
Increase in provision for bonuses to employees
Decrease in provision for product warranty
Changes in assets and liabilities for retirement benefits, net
Gain on sales of investments in securities
Loss on impairment of investments in securities
Loss on sales or disposal of equipment, net(Increase) decrease in notes and accounts receivable
Increase in inventories
Increase (decrease) in notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Proceeds from casualty insurance claims
Income taxes
Net cash provided by operating activities
Cash flows from investing activities
Increase in short-term investments
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in short-term and long-term loans receivableCollection of short-term and long-term loans receivable
Purchases of investments in consolidated subsidiaries and affiliates
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net (decrease) increase in short-term loans
Proceeds from long-term loans
Repayment of long-term loans
Purchases of treasury stock
Dividends paid
Dividends paid to non-controlling shareholders
Purchase of shares of subsidiary not resulting in change
in scope of consolidation
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease (increase) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

2018

2019

2019

¥ 5,238¥ 4,983$ 44,895

4,087
21
—
(19)
(303)
166
6
34
(144)
(958)
(136)
52
75
(4,205)
(827)
2,804
801
6,694
303
(162)
10
(1,074)
5,771

4,517
21
356
(12)
(310)
164
(0)
32
(54)
(830)
(603)
8
51
2,419
(597)
(2,685)
1,136
8,596
310
(184)
155
(1,721)
7,156

40,697
189
3,207
(108)
(2,793)
1,477
(0)
288
(486)
(7,478)(5,432)
72
459
21,794(5,378)(24,191)
10,23577,4482,793(1,657)
1,396(15,505)
64,474—(6,127)
74
(4)
439
(3)
51
—
(17)
(5,587)(1)(8,077)
37
(4)
893
(4)
22
(3,565)(8)(10,706)(9)(72,772)
333
(36)
8,045
(36)
198
(32,120)(72)(96,459)

(245)
5,200
(4,267)(621)(1,100)(0)

4,714
13,675(7,181)(0)(1,266)(2)

42,472
123,209(64,699)(0)(11,406)
(18)

—
(318)
(1,354)(58)(185)(9,695)(522)(1,668)(87,350)21(1,148)
6,266¥ 5,117

8
6,154
5,117
¥ 11,271

72
55,446
46,103$ 101,549

See notes to consolidated financial statements.

Sekisui Plastics Co., Ltd.

32

Notes to Consolidated Financial Statements
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
March 31, 2019

1. Significant Accounting Policies(a) Basis of Preparation
The consolidated financial statements of Sekisui Plastics Co., Ltd. (the“Company”) and its consolidated subsidiaries are prepared on the basisof accounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements ofInternational Financial Reportable Standards (“IFRS”), and have been compiled from the consolidated financial statements prepared by the Company
as required by the Financial Instruments and Exchange Act of Japan.
In preparing the consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a format
which is more familiar to readers outside Japan.
Certain reclassifications of previously reported amounts have been
made to conform the consolidated financial statements for the year ended March 31, 2018 to the 2019 presentation. Such reclassification had noeffect on consolidated profit.
As permitted by the Financial Instruments and Exchange Act of Japan,
amounts of less than one million yen have been omitted. Consequently,
the totals shown in the consolidated financial statements do not necessarily agree with the sum of the individual yen and U.S. dollar amounts.
(b) Principles of Consolidation and Accounting for Investments in
Unconsolidated Subsidiaries Affiliates
The consolidated financial statements include the accounts of theCompany and its 41 significant consolidated subsidiaries (collectively, the “Group”) for the years ended March 31, 2018 and 2019. The
Company has applied the equity method to its investment in one significant affiliate for the purpose of the consolidated financial statements forthe years ended March 31, 2018 and 2019.
The principles of consolidation are to include significant subsidiaries
over which substantial control is exerted either through majority ownership of voting stock and/or by other means. In addition, significant
affiliates, over which the Group exercises substantial control in various
ways, are accounted for by the equity method.
Other subsidiaries and affiliates are not significant in terms of their total assets, profit or loss, and retained earnings. Accordingly, these othersubsidiaries and affiliates have not been consolidated nor are they accounted for by the equity method. Investments in such subsidiaries andaffiliates are stated at cost unless there has been a permanent decline in
the value of such investments. In such case, the Company is required towrite down the investments.
All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
Goodwill arising from the difference between the purchase cost andthe underlying equity in net assets at the respective dates of acquisition isamortized by straight-line method over the estimated period of its effect.
Five overseas consolidated subsidiaries whose fiscal year end is
December 31 have been consolidated using provisional financial statements at March 31, 2019.
For nine overseas consolidated subsidiaries whose fiscal year ends
on December 31, necessary adjustments have been made for any significant intercompany transactions which took place during the period
between the year end of the overseas consolidated subsidiaries and theyear end of the Company.
(c) Foreign Currency Translation
The financial statements of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date except that the components of net assets excluding non-controllinginterests are translated at their historical exchange rates. Differences resulting from translating the financial statements of the overseas consolidated subsidiaries are not included in the determination of profit but arereported as translation adjustments and non-controlling interests in net
assets in the consolidated balance sheet.
Revenue and expense items arising from transactions denominatedin foreign currencies are generally translated into yen at the rates of exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance

33

Sekisui Plastics Co., Ltd.

sheet date and gain or loss on each translation is credited or charged
to income.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits with banks
withdrawable on demand and short-term investments with a maturity of
three months or less when purchased which can easily be converted to
cash and are subject to little risk of change in value.
(e) Allowance for Doubtful Accounts
The Group provides an allowance for doubtful accounts at an amountcalculated based on their historical experience of bad debts on ordinary
receivables plus an additional estimate of probable specific bad debts
from customers experiencing financial difficulties.
(f) Inventories
Inventories are stated at lower of cost or net selling value, cost being
determined by the moving average method.
(g) Securities
Securities are classified into three categories: trading securities, held-to-maturity debt securities and other securities. Trading securities, consisting ofdebt and marketable equity securities are stated at fair value. Gain or loss,
both realized and unrealized, is credited or charged to income. Held-tomaturity debt securities are stated at amortized cost. Marketable securities
classified as other securities are carried at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, reported as a separate component of accumulated other comprehensive
income. Non-marketable securities classified as other securities are carriedat cost determined by the moving average method.
(h) Property, Plant and Equipment (except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of buildings and structures is calculated by the straightline method over the estimated useful lives of the respective assets. Depreciation of other property, plant and equipment is principally
computed by the straight-line method, except for certain subsidiaries
which compute depreciation by the declining-balance method over theestimated useful lives of the respective assets.
The estimated useful lives of major property, plant and equipment
are summarized as follows:
Buildings
Machinery

principally 31 to 38 years
principally 8 years

Significant renewals and additions are capitalized at cost. Maintenanceand repairs are charged to income as incurred.
(i) Leased Assets (included in other assets)
Leased assets under finance lease contracts that do not transfer ownership to the lessee are depreciated to a residual value of zero by thestraight-line method using the term of the contract as the useful life.
(j) Income Taxes
Income taxes are calculated on taxable income and charged to incomeon an accrual basis. Certain temporary differences exist between taxable
income and income reported for financial statement purposes which enter into the determination of taxable income in a different period. The
Group has recognized the tax effect of such temporary differences in the
consolidated financial statements.
The Company and certain domestic consolidated subsidiaries haveapplied the consolidated taxation system, which allows companies tofile tax returns based on the combined profits or losses of the parent
company and wholly owned domestic subsidiaries.
(k) Provision for Bonuses to Employees
Provision for bonuses to employees is provided at the estimated amountof bonuses to be paid to the employees in the following year which has
been allocated to the current fiscal year.

(l) Provision for Bonuses to Directors and Audit and Supervisory
Board Members
Provision for bonuses to directors and audit and supervisory board
members is calculated based on the estimated amount of bonuses tobe paid to directors and audit and supervisory board members in thefollowing year which has been allocated to the current fiscal year.
(m) Provision for Product Defect Compensation
Provision for product warranty is provided based on an estimatedamount which is expected to be incurred subsequent to the balance
sheet date.
(n) Retirement Benefit Plansi) Method of attributing expected benefits to each period
The retirement benefit obligation for employees is attributed to eachperiod by the benefit formula method over the estimated years ofservice of the eligible employees.
ii) Amortization method of actuarial gain or loss
Actuarial gain or loss is amortized from the year following the year inwhich the gain or loss is recognized by the straight-line method overa period of 5 years, which is within the estimated average remaining
years of service of the eligible employees.
(o) Software (except for leased assets)
Expenditures relating to computer software developed for internal use
are charged to income when incurred, except if these are deemed tocontribute to the generation of future income or cost savings. Such expenditures are capitalized as assets and amortized by the straight-line
method over their respective estimated useful lives, generally a periodof 5 years.
(p) Research and Development Costs
Research and development costs are charged to income when incurred.
(q) Hedge Accounting
The Company has entered into interest-rate swaps to hedge the risk ofinterest rate and foreign currency exchange rate fluctuations on longterm debt denominated in foreign currencies.
i) Hedge accounting method
Interest-rate swaps that meet special matching criteria are notremeasured at market value, but the differential paid or received
under the swap agreements is recognized and included in interest
expense or income, and the long-term debt hedged by the swap by
the swap agreements is translated at the swap contract rate (“special treatment”).
ii) Hedging instruments and hedged items
Hedging instruments: Interest-rate swaps
Hedged items:
Long-term loans denominated in foreign
currenciesiii) Hedging policy
Derivative transactions are used to hedge the risk of interest-rate fluctuation in accordance with the Company’s risk management policy.
iv) Assessing hedge effectivenessWith regard to interest-rate currency swaps accounted for by the special treatment evaluation of hedge effectiveness is omitted.
(r) Distribution of Retained Earnings
Under the Corporation Law of Japan, the distribution of retained earnings with respect to a given financial period is made by resolution of theshareholders at a general meeting held subsequent to the close of thefinancial period. The accounts for that period do not, therefore, reflect
such distributions (see Note 21).
(s) Change in Accounting Policy(Change in translation method of revenue and expenses of overseas
consolidated subsidiaries)

Revenue and expenses of the overseas consolidated subsidiaries had
been translated into yen at the rates of exchange in effect at the balance
sheet dates of the overseas consolidated subsidiaries. Effective the year
ended March 31, 2019, the Company changed the translation method ofrevenue and expenses of overseas consolidated subsidiaries using the
average exchange rates for the fiscal years.
The importance of revenue and expenses of the overseas consolidated subsidiaries has increased. In addition, the proportion of revenue andexpenses of the overseas consolidated subsidiaries is also expected toincrease. Therefore, this change was made in order to reflect the operating results of the overseas consolidated subsidiaries more accurately inthe consolidated statement of income in consideration of recent changes in foreign currency exchange rates.
As the effect of this change was immaterial, no adjustment has been
made retrospectively.
(t) Accounting Standards Issued but Not Yet Effective
On March 30, 2018, the Accounting Standards Board of Japan (the“ASBJ”) issued “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29) and “Implementation Guidance on AccountingStandard for Revenue Recognition” (ASBJ Guidance No. 30).
i) Overview
The International Accounting Standards Board (the “IASB”) and the
Financial Accounting Standards Board (the “FASB”) in the UnitedStates co-developed comprehensive accounting standards for revenue recognition and issued “Revenue from Contracts with Customers”(issued as IFRS 15 by the IASB and Topic 606 by the FASB) in May
2014. The ASBJ developed comprehensive accounting standards onrevenue recognition and issued them in conjunction with the implementation guidance based on the fact that IFRS 15 was applied fromfiscal years starting on or after January 1, 2018 and Topic 606 was applied from fiscal years starting after December 15, 2017.
As the basic policy in developing accounting standards for revenue recognition, the ASBJ defined the accounting standard startingwith incorporating the basic principle of IFRS 15 from a standpointof comparability between financial statements, which is one benefit
of ensuring consistency with IFRS 15. Furthermore, the ASBJ added alternative accounting treatment without impairing comparability when there are matters to be considered related to accounting
practices, etc. common in Japan.
ii) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending
March 31, 2022.
iii) Impact of the adoption of accounting standard and implementation
guidance
The Company is currently evaluating the effect of the adoption ofthis accounting standard and implementation guidance on its consolidated financial statements.
(u) Change in Presentation(Partial Amendments to Accounting Standard for Tax Effect Accounting)
Effective April 1, 2018, “Partial Amendments to Accounting Standard forTax Effect Accounting” (ASBJ Statement No.28 issued on February 16,2018) has been adopted.
Under ASBJ Statement No.28, deferred income taxes, which were previously classified as current assets and current liabilities, are classified as
investments and other assets and long-term liabilities, respectively.
As a result, ¥124 million of ¥750 million of deferred income taxes,
which was previously presented under current assets, is included in deferred income taxes under investments and other assets. In addition,¥625 million of that was offset with deferred income taxes under longterm liabilities.
As a result of offsetting deferred tax assets and deferred tax liabilitiesof the same taxable entity, total assets decreased by ¥625 million compared with the previously reported amount.
Furthermore, the note to income taxes was changed in accordance with notes 8 and 9 set forth in Articles 3 to 5 of ASBJ Statement

Sekisui Plastics Co., Ltd.

34

No.28. However, information as of March 31, 2018 was omitted in accordance with the transitional treatment set forth in Article 7 of ASBJ

Statement No.28. (see Note 9)

2. U.S. Dollar Amounts
The U.S. dollar amounts in the consolidated financial statements havebeen translated from yen solely for convenience and, as a matter ofarithmetic computation only, at ¥110.99 = U.S. $1.00, the exchange rate
prevailing on March 31, 2019. This translation should not be construed

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

3. Notes and Accounts Receivable, Notes and Accounts Payable and Other Current Liabilities
The balance sheet date for the year ended March 31, 2019 fell on a bankholiday. Consequently, notes receivable of ¥1,062 million ($9,568 thousand) and notes and accounts payable and other current liabilities of¥721 million ($6,496 thousand) with due date of March 31, 2019 were
included in the respective balances in the consolidated balance sheet atMarch 31, 2019 and were settled on the next business day.

4. Financial Instruments(a) Status of Financial Instruments
The Group manages fund surpluses only through short-term financial
assets. In addition, the Group currently raises capital through bank borrowings. Derivative transactions are not used for speculation, but onlyused to hedge various risks as addressed below.
In accordance with the internal business management rules of theCompany for managing credit risk arising from notes and accounts receivable, each business section and the sales supervisory department
monitor credit worthiness of their customers periodically, and monitor
due dates and outstanding balances. Subsidiaries of the Company also
manage credit risk in accordance with the Company’s business management rules.
Investments in securities are exposed to market risk. Those securities are composed of mainly the shares of common stock of othercompanies with which the Group has business relationships. The accounting department, on a quarterly basis, reviews the fair value ofsuch financial instruments.
Trade payables, such as notes and accounts payable, have payment
due dates within one year.
Short-term loans are raised mainly in connection with operating

activities, and long-term loans are taken out principally for the purpose of
making capital investments. Loans with variable interest rates is exposed
to interest-rate fluctuation risk. Interest-rate swaps are used to hedge therisk of interest rate and foreign currency exchange rate fluctuations on theGroup’s long-term loans denominated in foreign currencies.
Derivative transactions are not used for speculation, but only used to
manage various market risks and to reduce those risks.
Further information regarding the method of hedge accounting canbe found in Note 1(q).
Trade payables, short-term loans and long-term loans are exposed
to liquidity risk. The Company makes efforts to facilitate financing andensure diverse sources of financing. Each component of the Group also
prepares monthly cash flow plans to manage liquidity risk.
(b) Fair Value of Financial Instruments
Carrying value, fair value and the difference between them for financial
instruments on the consolidated balance sheets as of March 31, 2018and 2019 are shown in the following table. The following table does notinclude financial instruments for which it is extremely difficult to determine the fair value.
Millions of yen

2018
Carrying
value

Fair value

Cash and cash equivalents
Short-term investments
Notes and accounts receivable
Investments in securities
Total assets¥ 5,1175
33,36919,130¥ 57,622¥ 5,1175
33,36919,130¥ 57,622

Notes and accounts payable
Short-term loans
Long-term loans*
Total liabilities¥ 27,027
4,946
14,150¥ 46,124¥ 27,027
4,946
14,184¥ 46,157

2019
Difference

Carrying
value

Fair value

Difference

¥—
—
—
—
¥—

¥ 11,271
6
36,457
17,007¥ 64,742¥ 11,271
6
36,457
17,007¥ 64,742

¥ —
—
—
—
¥ —

¥—
—
33
¥ 33

¥ 28,288
13,562
21,668¥ 63,519¥ 28,288
13,562
21,756¥ 63,608

¥ —
—
88
¥ 88

Thousands of U.S. dollars

2019
Carrying
value

Fair value

Difference

Cash and cash equivalents
Short-term investments
Notes and accounts receivable
Investments in securities
Total assets$ 101,549
54328,471
153,230$ 583,313$ 101,549
54328,471
153,230$ 583,313$

Notes and accounts payable
Short-term loans
Long-term loans*
Total liabilities$ 254,869
122,191
195,224$ 572,294$ 254,869
122,191
196,017$ 573,096$* Includes current portion of long-term loans of ¥7,178 million and ¥4,127 million ($37,183 thousand) at March 31, 2018 and 2019, respectively.

35

Sekisui Plastics Co., Ltd.

$

—
—
—
—
—

—
—
792
$ 792

Methods to determine the estimated fair value of financial instruments and other matters related to securities are as follows:
Assets:Cash and cash equivalents, short-term investments and notes andaccounts receivable:
Since cash and cash equivalents, short-term investments and notes
and accounts receivable are settled in a short period of time, theircarrying value approximate the fair value.
Investments in securities:
The fair values of other investments in securities are based on quoted
market prices. For information on securities classified by purpose ofholding, please refer to Note 5.

Long-term loans:
The fair value of long-term loans are based on the present value ofthe total of principal and interest discounted by the interest rate tobe applied if similar new borrowings were entered into. The fair value of long-term loans with variable interest rates hedged with interest-rate swaps which qualify for hedge accounting and meet special
matching criteria is calculated by discounting the sum of principal
and interest, including the difference paid or received under theswap agreements, with the rate which would be applied if similar
new borrowings were entered into.

Liabilities:
Notes and accounts payable and short-term loans:
Since notes and accounts payable and short-term loans are settled in ashort period of time, their carrying value approximate the fair value.

Unlisted equity securities in the amount of ¥714 million and ¥645 million ($5,811 thousand) at March 31, 2018 and 2019, respectively, are notincluded in investments in securities in the preceding table since it is extremely difficult to determine their fair value at March 31, 2018 and 2019.

The redemption schedule at March 31, 2019 for deposits and notes and accounts receivable is summarized as follows:
Millions of yen

Thousands of U.S. dollars

2019

2019

Within 1 year

Within 1 year

¥ 11,252
36,457¥ 47,709$ 101,378
328,471$ 429,849

Deposits
Notes and accounts receivable
Total
The redemption schedule for long-term loans are disclosed in Note 7.

5. Investments in Securities
Marketable securities classified as other securities at March 31, 2018 and 2019 were as follows:
Millions of yen

2018

Securities whose carrying value exceeds their acquisition cost:
Equity securities
Securities whose acquisition cost exceeds their carrying value:
Equity securities
Total

2019

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)¥ 4,562¥ 19,130¥ 14,568¥ 4,566¥ 17,007¥ 12,4400¥ 4,5620¥ 19,130(0)¥ 14,5680¥ 4,566

0¥ 17,007(0)¥ 12,440

Thousands of U.S. dollars

2019

Securities whose carrying value exceeds their acquisition cost:
Equity securities
Securities whose acquisition cost exceeds their carrying value:
Equity securities
Total
Unlisted equity securities other than securities of affiliates in theamount of ¥118 million and ¥51 million ($459 thousand) at March 31,2018 and 2019 are not included in equity securities in the above table

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)$ 41,138$ 153,230$ 112,082

0$ 41,1380$ 153,230(0)$ 112,082

since it is extremely difficult to determine their fair value at March 31,2018 and 2019.

The proceeds from sales of, and gross realized gain on investments in securities for the years ended March 31, 2018 and 2019 are summarized as follows:
Millions of yen

2018
Proceeds from sales
Gross realized gain

¥ 300
136

Thousands of U.S. dollars

2019

2019

¥ 895
603

$ 8,063
5,432

Sekisui Plastics Co., Ltd.

36

6. Inventories
Inventories at March 31, 2018 and 2019 were composed of the following:
Millions of yen

Merchandise, finished goods and semi-finished goods
Work in process goods
Raw materials and supplies
Total

Thousands of U.S. dollars

2018

2019

2019

¥ 7,166
194
3,071¥ 10,432¥ 7,937
1,840
4,094¥ 13,872$ 71,510
16,57836,886$ 124,984

7. Short-Term Loans and Long-Term Loans
Short-term loans at March 31, 2018 and 2019 represented loans in theform of deeds and overdrafts at interest rates ranging from 0.11% to3.4% and from 0.18% to 8.2% per annum, respectively.

Long-term loans at March 31, 2018 and 2019 were composed of the following:
Millions of yen

Unsecured loans from banks and insurance companies,
payable in Japanese yen, at rates ranging from 0.11% to 3.40%
Unsecured loans from banks, payable in U.S. dollars,
at rates ranging from 1.52% to 3.40%
Unsecured loans from banks, payable in Euro, at a rate of 2.25%
Unsecured loans from banks, payable in Taiwan dollars, at a rate of 1.40%
Unsecured loans from banks, payable in Baht, at a rate of 2.575%
Total
Less current portion

Thousands of U.S. dollars

2018

2019

2019

¥ 12,602¥ 18,316$ 165,023

329
—
219
—
14,150(7,178)¥ 6,972

1,272
1,015
86
977
21,668(4,127)¥ 17,540

11,460
9,144
774
8,802
195,224(37,183)$ 158,032

The aggregate annual maturities of long-term loans subsequent to March 31, 2019 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Years ending March 31,

2019

2019

2020
2021
2022
2023
2024 and thereafter
Total¥ 4,127
4,127
4,317
6,871
2,224
¥ 21,668$ 37,183
37,18338,89561,906
20,037$ 195,224

8. Pledged Assets and Secured Liabilities
Assets pledged as collateral for liabilities as of March 31, 2018 and 2019 are summarized as follows:
Millions of yen

2018
Land
Buildings

Liabilities secured by these assets as collateral consist of ¥36 millionand ¥31 million ($279 thousand) of short-term loans and ¥68 million

¥ 166
56
¥ 222

Thousands of U.S. dollars

2019
¥ 166
54
¥ 220

2019
$ 1,495486$ 1,982and ¥37 million ($333 thousand) of long-term loans at March 31, 2018and 2019, respectively.

9. Income Taxes
Income taxes applicable to the Company and its domestic subsidiaries
consist of corporation, enterprise and inhabitants’ taxes. The statutory

37

Sekisui Plastics Co., Ltd.

tax rates in Japan for the years ended March 31, 2018 and 2019 were, in
the aggregate, approximately 30.8% and 30.6%, respectively.

A reconciliation of the statutory and effective tax rate for the years ended March 31, 2018 and 2019 as a percentage of profit before taxes was presented as follows:

2018
Statutory tax rates
Non-deductible expenses
Impairment loss on property, plant and equipment
Acquisition related cost
Per capita portion of inhabitants’ taxes
Tax credit of research and development costs
Loss on impairment of investments in securities
Other
Effective tax rates

2019

30.8%
2.0
—
—
0.6
(0.5)
0.3
0.9
34.1%

30.6%
2.3
2.2
1.9
0.6
(0.6)
0.1
0.0
37.1%

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities for financial
reportable purposes and the corresponding amounts for income tax purposes. The significant components of the Group’s deferred tax assets andliabilities at March 31, 2018 and 2019 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

2018

2019

2019

¥

¥

$

Deferred tax assets:
Liabilities for retirement benefits
Tax loss carryforwards
Provision for bonuses to employees
Unrealized profit on intercompany transactions
Impairment loss on property, plant and equipment
Loss on devaluation of inventories
Acquisition related cost of acquired companies
Other
Gross deferred tax assets
Valuation allowance for tax loss carryforwards
Valuation allowance for temporary differences
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Differences on land revaluation
Surplus arising from land revaluation
Net unrealized holding gain on securities
Gain on marketable securities contributed to employees’ retirement benefit trust
Assets for retirement benefits
Other
Total deferred tax liabilities
Net deferred tax liabilities

434
625
320
499
17
65
—
414
2,376
—
—
(559)
1,816

(980)
(1,596)(4,400)
(144)
(515)
(465)
(8,102)¥ (6,286)

190
2,069
334
507
119
75
93
459
3,852
(1,864)(377)(2,242)
1,609

(962)
(1,596)(3,874)
(146)
(230)
(474)
(7,284)¥ (5,674)

1,711
18,641
3,009
4,567
1,072
675
837
4,135
34,705(16,794)(3,396)(20,200)
14,496(8,667)(14,379)(34,904)(1,315)(2,072)(4,270)(65,627)$ (51,121)Note 1: Tax loss carryforwards and related deferred tax assets as of March 31, 2019 will expire as follows:
Millions of yen

2019Year ending March 31,

Tax loss carryforwards (*1)

Valuation allowance fortax loss carryforwards

2020
2021
2022
2023
2024
2025 and thereafter
Total

¥

¥

29
29
43
124
71
1,769
¥ 2,069

Deferred tax assets for
tax loss carryforwards

(24)
(11)
(37)
(118)
(71)
(1,600)¥ (1,864)

¥

4
18
6
6
—
169
¥ 205

Thousands of U.S. dollars

2019Year ending March 31,

2020
2021
2022
2023
2024
2025 and thereafter
Total

Tax loss carryforwards (*1)

$

261
261
387
1,117
640
15,938$ 18,641

Valuation allowance fortax loss carryforwards

$

(216)
(99)
(333)
(1,063)(640)(14,416)$ (16,794)

Deferred tax assets for
tax loss carryforwards

$

36
162
54
54
—
1,523
$ 1,847(*1) The tax loss carryforwards in the above table are measured using the statutory tax rates.

Sekisui Plastics Co., Ltd.

38

10. Retirement Benefit Plans(a) Outline of adopted retirement benefit plans for employees
The Company and its consolidated subsidiaries adopt plans similar
to cash balance pension plans, corporate pension plans (all fundedplans) and retirement lump-sum payment plans as defined benefit
plans. Further, the Company and its consolidated subsidiaries may pay
premium benefits to employees on retirement. The Company also has
established retirement benefit trusts. Certain consolidated subsidiaries

adopt defined contribution plans. Certain consolidated subsidiaries
calculate the liabilities for retirement benefits and retirement benefit
expense by using the simplified method which assumes the retirement
benefit obligation to be equal to the benefits payable if all eligible employees voluntarily terminated their employment at the fiscal year end
for the calculation of liabilities for retirement benefits and retirement
benefit expenses.

(b) Defined benefit plans for the years ended March 31, 2018 and 2019(i) Excluding amounts calculated by the simplified method, the changes in the retirement benefit obligation for the years ended March 31, 2018 and2019 were as follows:
Millions of yen

2018
Retirement benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial (gain) loss
Retirement benefit paid
Other
Increase due to business combination
Retirement benefit obligation at the end of the year

Thousands of U.S. dollars

2019¥ 9,839
255
35
(8)
(592)
40
—
¥ 9,568¥ 9,568
258
31
0
(580)
35
130
¥ 9,4442019$ 86,205
2,324
279
0
(5,225)315
1,171$ 85,088(ii) Excluding amounts calculated by the simplified method, the changes in plan assets at fair value for the years ended March 31, 2018 and 2019 wereas follows:
Millions of yen

Plan assets at fair value at the beginning of the year
Expected return on plan assets
Actuarial gain (loss)
Contributions by the employer
Retirement benefit paid
Plan assets at fair value at the end of the year

Thousands of U.S. dollars

2018

2019

2019

¥ 13,592
272
1,042
432
(592)
¥ 14,747¥ 14,747
274
(391)
409
(580)
¥ 14,459$ 132,867
2,468(3,522)
3,685(5,225)$ 130,272(iii) The changes in liabilities for retirement benefits under the simplified method for the years ended March 31, 2018 and 2019 were as follows:
Millions of yen

2018
Liabilities for retirement benefits at the beginning of the year
Retirement benefit expense
Retirement benefit paid
Contribution to defined contribution pension plans
Other
Liabilities for retirement benefit at the end of the year

Thousands of U.S. dollars

2019¥ 2,863
302
(140)
(7)
(22)
¥ 2,995¥ 2,995
326
(240)
(7)
(10)
¥ 3,0642019$ 26,984
2,937(2,162)(63)(90)$ 27,606(iv) Including the amounts presented calculated by the simplified method, the balance of retirement benefit obligation and plan assets at fair value,liabilities and assets recognized in the consolidated balance sheets for the years ended March 31, 2018 and 2019 were as follows:
Millions of yen

2018

2019

2019

Unfunded retirement benefit obligation
Net amount of liabilities and assets recognized in the consolidated balance sheet¥ 9,616(14,793)(5,177)2,994(2,183)¥ 9,501(14,514)(5,012)
3,061(1,951)$ 85,602(130,768)(45,157)
27,579(17,578)

Liabilities for retirement benefits
Assets for retirement benefits
Net amount of liabilities and assets recognized in the consolidated balance sheet

3,011(5,194)¥ (2,183)

3,212(5,163)¥ (1,951)

28,939(46,517)$ (17,578)

Funded retirement benefit obligation
Plan assets at fair value

39

Thousands of U.S. dollars

Sekisui Plastics Co., Ltd.

(v) The components of retirement benefit expense (credit) for the years ended March 31, 2018 and 2019 were as follows:
Millions of yen

2018
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain
Retirement benefit expenses calculated by the simplified method
Retirement benefit expense (credit)

Thousands of U.S. dollars

2019

¥ 255
35
(272)
(570)
302
¥ (250)

2019

¥ 258
31
(274)
(548)
326
¥ (207)$ 2,324
279(2,468)(4,937)2,937$ (1,865)(vi) The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years ended March
31, 2018 and 2019 were as follows:
Millions of yen

2018
Actuarial (gain) loss

Thousands of U.S. dollars

2019

¥ 479

2019

¥ (938)$ (8,451)(vii) The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of March
31, 2018 and 2019 were as following:
Millions of yen

2018
Unrecognized actuarial gain

Thousands of U.S. dollars

2019¥ (1,694)2019¥ (755)$ (6,802)(viii) The plan assets by major category consist of the following:

2018
Bonds
Equities
General accounts at life insurance companies
Cash and deposits
Other
Total
The total pension plan assets includes 30% of the retirement benefits trust
for the corporate pension fund plans as of March 31, 2018 and 2019.
The expected long-term rates of return on plan assets is determined

2019
22%
47
13
4
14
100%

23%
47
13
4
13
100%

as a result of consideration of both the portfolio allocation at present
and in the future, and the long-term rate expected rate of return frommultiple plan assets at present and in the future.

(ix) The assumptions used in accounting for the defined benefit plans for the years ended March 31, 2018 and 2019 are as follows:

2018
Discount rates
Expected long-term rates of return on plan assets
Rates of salary increase

2019

0.3%
1.9%
2.8%

0.3%
1.7%
2.8%

(c) Defined contribution pension plans for the years ended March 31, 2018 and 2019 are as follows:
Millions of yen

2018
Contributions to defined contribution pension plans¥ 10

Thousands of U.S. dollars

2019

2019

¥ 10

$ 90

11. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (other thanthe capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively,
until the sum of the capital reserve and the legal reserve equals 25% of
the capital stock account. Such distributions can be made at any timeby resolution of the shareholders, or by the Board of Directors if certain
conditions are met.
Retained earnings include the legal reserve provided in accordance withthe provisions of the Corporation Law of Japan. The legal reserve of theCompany included in retained earnings amounted to ¥1,370 million and¥1,370 million ($12,343 thousand) at March 31, 2018 and 2019, respectively.

Sekisui Plastics Co., Ltd.

40

Common stock and treasury stock
Movements in shares of common stock and treasury stock during the years ended March 31, 2017 and 2018 are summarized as follows:

2018
Number of shares
April 1, 2017

Common stock
Treasury stock

46,988,109
1,127,225

Increase

Decrease—
568,918

March 31, 2018——

46,988,109
1,696,143

The increase in treasury stock consists of 568,000 shares due to purchase of shares based on the resolution of the Board of Directors meeting, 222 shares
due to the purchase of fractional shares of less than one voting unit, and 696 shares attributable to the Company acquired by its equity-method affiliates.

2019
Number of shares
April 1, 2018

Common stock
Treasury stock

46,988,109
1,696,143

Increase

Decrease—
721

March 31, 2019——

46,988,109
1,696,864

The increase in treasury stock consists of 124 shares due to the purchase of fractional shares of less than one voting unit, and 597 shares attributable
to the Company acquired by its equity-method affiliates.

12. Land Revaluation
In accordance with the “Law Concerning Revaluation of Land” promulgated on March 31, 1998, land used for business was revalued at March
31, 2002, and the related unrealized gain was reported as “Surplus arising from land revaluation” after deducting the relevant tax effect. The
method followed for this revaluation was determined in accordance withthe “Land Revaluation Tax Law” as stipulated in the “Enforcement Act

Concerning Land Revaluation” and other regulations.
The carrying values of ¥9,545 million and ¥9,545 million ($85,998 thousand) for the purpose of land revaluation exceeded the land’s estimatedmarket values by ¥3,587 million and ¥3,554 million ($32,020 thousand) at
March 31, 2018 and 2019, respectively.

13. Other Comprehensive Income
Reclassification adjustments and tax effects on components of other comprehensive income for the years ended March 31, 2018 and 2019 were as follows:
Millions of yen

2018
Net unrealized holding gain (loss) on securities:
Gain (loss) arising during the year
Reclassification adjustments
Before tax effectTax effectNet unrealized holding gain (loss) on securities
Translation adjustments:
Gain (loss) arising during the year
Before tax effectTax effectTranslation adjustments
Retirement benefits liability adjustments:
Gain (loss) arising during the year
Reclassification adjustments
Before tax effectTax effect
Retirement benefits liability adjustments
Total other comprehensive income

Thousands of U.S. dollars

2019

2019

¥ 3,974(133)¥ (1,495)(399)$ (13,469)(3,594)(17,064)

3,841(1,894)(1,168)

525

4,730

2,672

(1,368)(12,325)

47
47

(45)
(45)

(405)
(405)

—

—

—

47

(45)

(405)

1,050

(1,487)(13,397)

(570)

548

4,937

479
(145)

(938)
283

(8,451)
2,549

333

(654)

(5,892)¥ 3,053¥ (2,068)$ (18,632)

14. Research and Development Costs
Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2018 and 2019 amounted to¥2,014 million and ¥2,145 million ($19,326 thousand), respectively.

41

Sekisui Plastics Co., Ltd.

15. Loss on Impairment of Property, Plant and Equipment
Loss on impairment of property, plant and equipment was not recorded for the year ended March 31, 2018.
The Group recorded loss on impairment for the following asset groups for the year ended March 31, 2019.
Location

MexicoChina

UseBusiness Use
Business Use

Classification

Buildings and machinery
Buildings and machinery

The Group categorizes assets for business use mainly based on the classification for management accounting units. Idle assets are grouped on
an individual basis.
For the year ended March 31, 2019, the Company recorded loss on
impairment in the amount of ¥356 million ($3,207 thousand) on buildings
and machinery within other expenses by writing down the net book value
to the recoverable amount of plant assets due to a continuous downturnin the results of business operations of two consolidated subsidiaries. The
loss on impairment consisted of ¥174 million ($1,568 thousand) for buildings, ¥155 million ($1,397 thousand) for machinery and ¥26 million ($234
thousand) for other. The recoverable amounts of this asset group were
measured at the estimated value in use, which was calculated based on
future cash flows using a discount rate of 10.1%. The net selling value isbased on the estimated sales price.

16. Cash and Cash Equivalents
As a result of a business combination, the Company acquired eight companies, which consist of Proseat Mladá Boleslav s.r.o, Proseat Sp.zo.o, Proseat
GmbH & Co. KG and its subsidiaries and affiliates (the Proseat Group). (see Note 19)
Assets acquired and liabilities assumed of the eight newly consolidated subsidiaries as of the acquisition date due to the acquisition of shares of Proseat
Group, related acquisition cost of shares and net expenditure for acquisition of shares for the year ended March 31, 2019 were mainly as follows:
Millions of yen

Thousands of U.S. dollars

2019
Current assets
Property, plant and equipment
Investments and other assets
Goodwill
Current liabilities
Long-term liabilities
Non-controlling interests
Acquisition cost
Exchange difference
Cash and cash equivalents
Net expenditure for acquisition of shares2019¥ 16,452$ 148,230

4,304

38,776

¥

12

111

2,100

18,921(15,098)(136,030)(3,000)(27,029)(592)(5,354)

3,876

34,922

43

387

(355)

(3,198)

3,565$

32,12017. Derivatives and Hedge Accounting
The estimated fair value of derivative instruments outstanding at March 31, 2018 and 2019 for which hedge accounting has been applied is summarized as follows:
Millions of yen

2018
Notional amount
Total

Interest-rate currency swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen

Maturing after one year

¥ 3,000

Fair value—(*)

Millions of yen

2019
Notional amount
Total

Interest-rate swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen¥ 977

Maturing after one year

¥ 855

Fair value(*)

Sekisui Plastics Co., Ltd.

42

Thousands of U.S. dollars

2019
Notional amount
Total

Interest-rate swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen

Maturing after one year

$ 8,802

Fair value$ 7,703(*)(*) Because interest-rate currency swaps and Interest-rate swaps accounted for by integral hedge accounting are accounted for applying swap rates to underlying long-term loans, theirfair value is included in that of the hedged long-term loans disclosed in Note 4.

18. Amounts per ShareYen

Profit attributable to owners of parent
Net assets
Cash dividends
Profit attributable to owners of parent per share has been computed
based on the profit attributable to owners of parent available for distribution to shareholders of common stock and the weighted-average
number of shares of common stock outstanding during the year. Diluted
profit attributable to owners of parent per share has not been presented
for the years ended March 31, 2018 and 2019 since neither the Company
nor any of the consolidated subsidiaries had any potentially dilutive

U.S. dollars

2018

2019

¥

¥

75.33

2019

69.09

$ 0.62

1,444.28

1,439.43

12.96

27.00

30.00

0.27

shares at March 31, 2018 and 2019.
The amounts per share of net assets have been computed based on
the number of shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends declared as
applicable to the respective years together with the interim cash dividends paid.

The financial data used in the computation of profit attributable to owners of parent per share based on the above method for the years ended March
31, 2018 and 2019 is summarized as follows:
Millions of yen

2018Profit attributable to owners of parent
Adjusted profit attributable to owners of parent available for distribution tocommon stockholders

Thousands of U.S. dollars

2019

2019

¥ 3,448¥ 3,129$ 28,191¥ 3,448¥ 3,129$ 28,191

Thousands of shares

2018
Weighted-average number of shares of common stock outstanding

2019

45,78245,291

The financial data used in the computation of net assets per share based on the above method at March 31, 2018 and 2019 is summarized as follows:
Millions of yen

Total net assets
Deductions from total net assets:
Non-controlling interests
Total net assets available to owners of parent

Thousands of U.S. dollars

2018

2019

2019

¥ 66,145¥ 66,771$ 601,594

731¥ 65,414

1,578¥ 65,193

14,217$ 587,377

Thousands of shares

2018
Number of shares of common stock used in the calculation of net assets per share

45,291

201945,291

19. Business Combinations
Business Combinations through acquisitions(a) Outline of the business combination(i) Names and business of the acquired companies(1) Names of the acquired companies
Proseat Mladá Boleslav s.r.o.
Proseat Sp.zo.o
Proseat GmbH & Co. KG

43Sekisui Plastics Co., Ltd.

Other than the three main companies listed above, there are
five other companies, which are located in such countries as theUnited Kingdom and Spain.
(2) Business description: manufacture of automotive parts

(ii) Objective of the acquisition
Proseat Group, which has manufacturing hubs in six European
countries (Germany, France, the United Kingdom, Spain, the Czech
Republic, and Poland), is a leading company independent of automotive manufacturers, which provides automotive parts (seat-use cushion material, trim parts such as headrests and armrests, and foamed
molding) to European automobile companies.
The acquisition will enable the Company to accelerate the salesof its automotive parts such as Piocelan in European countries and topromote all of the automotive parts of the Proseat Group to Japanese
automobile companies through its sales channels.
The acquisition will also enable the Company to integrate thedifferent technologies between the Company and Proseat and toestablish a strong partnership with each global automobile company. Consequently, the Group will strengthen its capacities for making
proposals, for development, and for providing products to precisely
match the needs of customers not only for existing automotive parts,

but also light-weight structural parts for new energy vehicles with the
integration and strong partnerships.
(iii) Date of the business combination
Acquisition date: February 19, 2019
Deemed acquisition date: December 31, 2018(iv) Legal form of business combination
Acquisition of shares by cash(v) Names of acquired companies after acquisition
No change(vi) Major reason for determining the acquiring company
The Company is the acquiring company due to the acquisition ofstocks by cash.

(b) Period of the operating results of the acquired companies included in the accompanying consolidated financial statements
As the acquisition date is deemed to be December 31, 2018, solely the balance sheets the acquired companies of were included in consolidation.
(c) Acquisition cost of the acquired companies and details of the type of consideration
Millions of yen

Consideration for acquisition
Acquisition cost

Cash

Millions of U.S. dollars¥ 3,876$ 34¥ 3,876$ 34(d) Major acquisition-related costs and nature
Advisory fees, commissions and other: ¥526 million ($5 million)(e) Amount of goodwill recognized, reason for recognition of goodwill, method of amortization and amortization period(i) Amount of goodwill¥ 2,100 million ($19 million)(ii) Reason for recognition
Goodwill is recognized from future excess earning power to be generated from future business operations.
(iii) Amortization of goodwill
Goodwill is amortized by the straight-line method over the estimated period of its effect.
(f) Amount of assets acquired and liabilities assumed as of the date of business combination
Millions of yen

Millions of U.S. dollars

Current assets
Property, plant and equipment
Investments and other assets
Total assets¥ 16,452

$ 148

4,304

38

12
¥ 20,768

1$ 187

Current liabilities
Long-term liabilities
Total liabilities¥ 15,098

$ 136

3,300

30

¥ 18,399$ 166(g) Estimated impact on the consolidated statement of income for the year ended March 31, 2019 assuming the business combination wascompleted at the beginning of the year ended March 31, 2019 and the calculation method.
Millions of yen

Net sales(Calculation method for estimated impact)
Estimated impact was the difference between the amount of net sales assuming that the business combination was completed at the beginning

Millions of U.S. dollars¥ 38,451$ 346

of the fiscal year ended March 31, 2019 and the amount of net sales on
the consolidated statement of income.
This information is unaudited.

Sekisui Plastics Co., Ltd.

44

20. Segment Information(a) Outline of segment information
The Group’s business mainly involves the manufacturing and sales ofplastic products. The Company has established departments based on
product markets or product function for global development in the two
fields of “Human Life” and “Industry.” Each department has works closely with subsidiaries to plan overall strategies and operate its business.
Accordingly, the Group’s reportable segments are “Human Life” and“Industry.”
These reportable segments of the Group are components for which
discrete financial information is available and whose operating results
are regularly reviewed by the Board of Directors to make decisions
about resource allocation and to assess performance.
The main products for Human Life Segment are boxes/trays for agricultural/fishery products, food containers, housing and civil engineering

materials, etc., while the main products for Industry Segment are automobile components, digital consumer electronics components, packaging materials, and other related products.
(b) Calculation methods used for sales, income, assets and otheritems of each reportable segment
The accounting policies of the segments are substantially the same as thosedescribed in significant accounting policies in Note 1.
Segment income represents ordinary income, which consists of operating income and non-operating income/expenses. Non-operating income/expenses mainly include interest income, dividend income, interest expense, equity in losses of an affiliate. Intersegment sales are recorded at thesame price used in transactions with third parties.

(c) Information on sales, income, assets and other items of each reportable segment
Information by reportable segment for the years ended March 31, 2018 and 2019 is as follows:
Millions of yen

2018
Reportable segments
Human Life

Sales, income and assets by reportable segments:
Sales to third parties
Inter-segment sales and transfers
Total
Segment income (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Equity in losses of an affiliate
Investments in affiliates accounted for by the equity method
Increase in property, plant and equipment and intangible assets

Industry

Total

Adjustments andeliminations (*1)

Consolidated¥ 112,101¥ 66,128¥ 45,972¥ 112,101

¥—

3,698

1,548

5,247

(5,247)—¥ 69,827¥ 47,521¥ 117,348¥ (5,247)¥ 112,101¥ 3,518¥ 2,805¥

6,323¥ (1,169)¥¥ 74,015¥ 42,332¥ 116,348¥ 14,800¥ 131,148¥ 1,796¥ 1,794

¥

¥

¥

—

21

21

—

0

15

15

0

16

830

357

1,188

(1,021)

166

(6)

—

(6)

—

(6)

347
2,728

—
4,250

347
6,978

—
783

347
7,762

Adjustments andeliminations (*1)

Consolidated

3,590

497

5,154

4,087
21

Millions of yen

2019
Reportable segments
Human Life

Sales, income and assets by reportable segments:
Sales to third parties
Inter-segment sales and transfers
Total
Segment income (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Equity in earnings of an affiliate
Investments in affiliates accounted for by the equity method
Increase in property, plant and equipment and intangible assets

45

Sekisui Plastics Co., Ltd.

Industry

Total¥ 64,865¥ 47,728¥ 112,593

3,816

2,651

6,468

¥

(6,468)—¥ 112,593—¥ 68,681¥ 50,380¥ 119,062¥ (6,468)¥ 112,593¥ 3,453¥ 2,546¥

5,999¥ (1,223)¥¥ 72,609¥ 71,375¥ 143,985¥ 8,859¥ 152,845¥ 1,939¥ 2,115

¥

¥

¥

—

21

21

—

0

3

3

0

4

859
0

424
—

1,284
0

(1,119)
—

164
0

348
2,202

—
4,235

348
6,437

—
931

348
7,368

4,055

462

4,776

4,517
21

Thousands of U.S. dollars

2019
Reportable segments

Sales, income and assets by reportable segments:
Sales to third parties
Inter-segment sales and transfers
Total
Segment income (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Equity in earnings of an affiliate
Investments in affiliates accounted for by the equity method
Increase in property, plant and equipment and intangible assets

Adjustments andeliminations (*1)

Total

Consolidated

Human Life

Industry$ 584,422$ 430,020$ 1,014,442

34,381

23,88558,275(58,275)—$ 618,803$ 453,914$ 1,072,727$ (58,275)$ 1,014,442$ 31,110$ 22,939$

54,049$ (11,019)$$ 654,194$ 643,075$ 1,297,279$ 79,818$ 1,377,106$ 17,470$ 19,055

$

$

$

—

189

189

—

0

27

27

0

36

7,739

3,820

11,568(10,081)

1,477

0
3,135

—
—

0
3,135

—
—

0
3,135

19,83938,15657,996

8,388

66,384$36,534—$ 1,014,442

4,162

43,03040,697189(*1) Adjustments and eliminations in the preceding tables were as follows:(i) Segment income in the amounts of ¥1,169 million and ¥1,223 million ($11,019 thousand) for the years ended March 31, 2018 and 2019 consisted of elimination of inter-segment
transactions in the amounts of ¥(0) million and ¥(0) million ($(0) thousand), and unallocable expenses in the amounts of ¥1,169 million and ¥1,223 million ($11,019 thousand).
(ii) Segment assets in the amounts of ¥14,800 million and ¥8,859 million ($79,818 thousand) for the years ended March 31, 2018 and 2019, respectively, mainly consisted of investments in securities and assets related to administrative departments and the Central R&D Laboratory owned by the Company.
(iii) Depreciation and amortization in the amounts of ¥497 million and ¥462 million ($4,162 thousand) for the years ended March 31, 2018 and 2019, respectively, include amortizationof long-term prepaid expenses. In addition, these amounts mainly consisted of depreciation of assets related to administrative departments and the Central R&D Laboratory
owned by the Company.
(iv) Interest expenses were the difference between allocated internal interest expenses and actual interest expenses. The Company allocates internal interest to each reportablesegment according to the amount of assets of each reportable segment.
(v) Increase in property, plant and equipment and intangible assets in the amounts of ¥783 million and ¥931 million ($8,388 thousand) for the years ended March 31, 2018 and 2019,respectively, mainly consisted of assets related to the Central R&D Laboratory owned by the Company.
(*2) Segment income was adjusted for the ordinary income as described in “(b) Calculation methods used for sales, income, assets and other items of each reportable segment.”(d) Geographical information
Sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31, 2018 and 2019 were summarized as follows:
Millions of yen

Thousands of U.S. dollars

2018

2019

Japan

¥ 92,678¥ 92,230

2019

Asia

16,041

16,158$830,975
145,580

Other

3,381

4,204

37,877

Total¥ 112,101¥ 112,593$ 1,014,442

Property, plant and equipment by countries or areas grouped according to geographical classification at March 31, 2018 and 2019 were summarized
as follows:
Millions of yen

Thousands of U.S. dollars

2018

2019

2019

Japan

¥ 45,701¥ 48,182$ 434,111

Asia

4,711

4,911

44,247

Other

3,437

7,170

64,600Total¥ 53,849¥ 60,265$ 542,976(e) Information by major customer
The information by major customer for the years ended March 31, 2018 and 2019 was summarized as follows:
Millions of yen
Customer

Related segment

FP Corporation

Human Life

Thousands of U.S. dollars

2018

2019

2019

¥ 14,216¥ 14,964$ 134,822

Sekisui Plastics Co., Ltd.

46

(f) Loss on impairment of property, plant and equipment for the years ended March 31, 2018 and 2019.
Millions of yen

2019
Human life

Loss on impairment of property, plant and equipment¥—

Industry

Adjustments andeliminations

Consolidated

¥—

¥ 356

Adjustments andeliminations

Consolidated$—$ 3,207¥ 356
Thousands of U.S. dollars

2019
Human life

Loss on impairment of property, plant and equipment$—

Industry$ 3,207

Loss on impairment of property, plant and equipment was not recorded for the year ended March 31, 2018.
(g) Amortization of goodwill and unamortized balance of goodwill for the years ended and as of March 31, 2018 and 2019.
Millions of yen

2018
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

Adjustments andeliminations

Consolidated

¥—

¥ 21

¥—

¥ 21

—

73

—

73

Adjustments andeliminations

Consolidated

Millions of yen

2019
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

¥—

¥ 21

¥—

¥ 21

—

73

—

73

Adjustments andeliminations

Consolidated

Thousands of U.S. dollars

2019
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

$—

$ 189

$—

$ 189

—

657

—

657

21. Subsequent Event
Cash dividends
The following distribution of retained earnings of the Company, which has not been reflected in the consolidated financial statements for the year
ended March 31, 2019 was approved at a shareholders’ meeting held on June 21, 2019.

Cash dividends (¥17 (U.S. $0.15) per share)

47

Sekisui Plastics Co., Ltd.

Millions of yen

Thousands of U.S. dollars

2019

2019

¥ 770

$ 6,937

Independent Auditor’s Report

Sekisui Plastics Co., Ltd.

48

Corporate Data (As of March 31, 2019)
Company nameSekisui Plastics Co., Ltd.

Founded

October 1, 1959

Paid-in capital¥16,533 million

Number of employees 3,881 (consolidated)
Osaka Head office

2-4-4, Nishitenma, Kita-ku,
Osaka 530-8565, Japan
Tel. +81-6-6365-3014

Tokyo Headquarters

2-7-1, Nishishinjuku, Shinjuku-ku,
Tokyo 163-0727, Japan
Tel. +81-3-3347-9615

URL

https://www.sekisuiplastics.com/

Investor Information (As of March 31, 2019)
Stock Information

Shareholdings by Type of Shareholder

Common stock—authorized 124,751,000 shares

Foreigncorporations

Japanese
securities firms

13.8%

0.4%

Japanese individual
investors and others

Other Japanese
corporations

20.2%

39.1%

Common stock—issued

46,988,109 shares

Unit of trading

100 shares

Number of shareholders

4,917

Securities code

4228

Listings

First Section,
Tokyo Stock Exchange

Transfer agent

Mitsubishi UFJ Trust andBanking Corporation
4-5, Marunouchi 1-chome,
Chiyoda-ku, TokyoJapanese financial
institutions

26.5%
Note: Calculated after deducting treasury stock holdings of 1,668 thousand shares

Major Shareholders
Numbers of shares held
(thousands)

Percentage of shares held(%)

Sekisui Chemical Co., Ltd.

9,855

21.74

The Dai-ichi Life Insurance Company, Limited

3,031

6.68

Name

Sekisui Plastics Employee Ownership

1,679

3.70

Japan Trustee Services Bank, Ltd. (Trust account)

1,458

3.21

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG /JASDEC / FIM / LUXEMBOURG FUNDS / UCITS ASSETS

1,440

3.17

Sekisui Jushi Corporation

1,419

3.13

Daido Life Insurance Company

1,418

3.12

FP Corporation

1,348

2.97

MUFG Bank Ltd.

1,327

2.92

Asahi Kasei Corporation

1,250

2.75

Denka Company Limited

1,250

2.75

Notes: 1. The Company holds 1,668 thousand treasury stock shares, but is omitted from the above list of major shareholders.
2. The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its name to MUFG Bank, Ltd., as of April 1, 2018.

49

Sekisui Plastics Co., Ltd.

Sekisui Plastics Communications
You can find the latest information of corporation, shareholder and investor relations as well as details of our
products and green activities on the Website of Sekisui Plastics. For all stakeholders’ deeper understanding of theGroup’s initiatives, we publish CSR Reports since FY2010 in addition to the conventional Environmental Reports.

Sekisui Plastics Corporate Website

https://www.sekisuiplastics.com/

Investor Relations

https://www.sekisuiplastics.com/ir/

CSR Reporthttps://www.sekisuiplastics.com/csr/csr-report/

Results forecasts, plans, business strategies, awareness and assessments of facts, and other forward-looking statements concerning the Company or
the Group are assumptions that the Company’s management believes to be reasonable based on currently available information. Actual outcomes may
differ materially from those expressed in these forward-looking statements due to various factors. The Company undertakes no obligation to publish
revised forward-looking statements to reflect new events, conditions, or circumstances.

Sekisui Plastics Co., Ltd.

50

Sekisui Plastics Co., Ltd.

https://www.sekisuiplastics.com/

1910SD249.10-500
1008SD249.1-1000