Annual Report

2018

For the year ended March 31, 2018PROVIDING PLASTICS

as SOLUTIONSProviding Plastics

as Solutions
Management Philosophy
We, Sekisui Plastics Group,
practice “Zen-in Keiei”
based on mutual respect and trust.
We are always innovating in
our pursuit 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 most of
personality and strengthof individuals

UnderstandGroup’s direction
as a member(power of individuals)

Share thoughts andhave the same aim
Respect diversity
and join forces
as a team

People andcompany growtogether

It leads to achieving
the Group’s goals
Set and achievea goal as a member(power of teams)

Contents
3 About Sekisui Plastics

21 Corporate Governance

5 Consolidated Financial Highlights

23 Compliance / Risk Management

7 A Message from the President

24 Corporate Social Responsibility (CSR)

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

27 Financial Section

13 Sekisui Plastics Group’s 100th Year Vision

47 Corporate Data

15 Mid-Term Management Plan

47 Investor Information

17 Industry
19 Human Life

Sekisui Plastics Co., Ltd.

2

About Sekisui Plastics
Built around its world-class foaming technologies and using plastics as core materials the Sekisui Plastics
Group provides solutions and products that contribute to the realization of a low-carbon society and bringcomfort and convenience to the lives of individuals as well as to industry.

Industry
The Sekisui Plastics Group has won recognition for the value it provides by proposing business solutions that help
improve operations, workflow, and efficiency at its corporate customers.

Home
Appliance/IT

Automobiles/
transportation

Medical/healthcare/cosmetic

TECHPOLYMER
Fine polymer particles
optical applications

EPSREM
Foamed polystyrenematerial for cushion
packing

PIOCELAN
Automobile
component

PIOCELAN
Packaging material fortransporting automobile parts

ST-gelHydrogel for facialmasks

ST-gelHydrogel for medicaluseLightlon
Polystyrene sheet forprotective cushion
packing

Neo-Microlen
Polypropylene sheet
for protective cushion
packing

Resin Molding
Truck roof fairing

ST-LAYER
CFRP/foam corecomposite

TECHPOLYMER
Fine polymer particles for cosmetics
applications

Security Pack
UN-standard-compliant
transport container for
infectious material

TECH
TECHTELAS
T
ECHTE
T LA
AS
LED lighting equipment

TECHPOLYMER
Fine particle polymer
for use in coatings

SMC Parts
Medical equipmentcoverHuman Life
Thanks to their lightweight, thermal insulation, and shock absorption properties, products in the Human Life field
are used in items that have served to change the lifestyles of end users and consumers.

Food

Agricultural/fishery

Housing/
civil engineering

ESLEN BlockSuper Soilen System
Block for EPS construc- Lightweight greening
tion method
methodEslen sheet
Food trays made of
foamed polystyrene

Eslen sheet (laminate)
Used in instant foodcontainers

Fish box
Foamed polystyrene
fish box

CELEPET
Microwave/oven safe
food container

Eslen Wood Folded
Box
Folded box made of
foamed polystyrene
sheet

Fruit Tray
Fishery products
Cushioning material for mounting board
Foamed polystyrene
protection
cut sheet

AQUAROADTECHEATER
Underground stormwa- PTC ceramic heaters
ter tank

TECHTELAS
Low-UV LED lighting
equipment (low insectattracting type)

ES Dan Mat LV
Insulation material madeof low VOC beads method polystyrene foam

Eslen container
Returnable container
with superior heat retention properties

Farm product box
Foamed polystyrene
farm product box

Consolidated Financial Highlights
Fiscal Year

2007

2008

2009

2010

2011

¥ 98,561¥ 96,102¥ 100,744¥ 101,418¥ 101,350

Operating income

2,028

4,119

5,118

4,876

2,271

Recurring income
Net income attributable toowners of the parent
Capital expenditures

1,463

3,881

4,475

4,628

2,107

712

2,111

2,393

2,306

744

4,281

5,500

3,735

4,561

5,059

Depreciation and amortization

4,050

4,060

3,886

3,814

3,848

Research and development costs

2,034

2,150

2,044

2,237

2,261

¥ 91,342¥ 92,553¥ 97,008¥ 99,263¥ 101,889

Total net assets

45,55145,28546,848

48,165

48,911

Interest-bearing debt

12,196

17,151

17,126

17,175

17,06814.50¥ 43.48

Net assets

911.64

Cash dividends

For the year:
Net sales

At year-end:
Total assets

Amounts per share*3:
Net income

¥

¥

50.58

¥

49.08

¥

15.84

934.76977.281,005.62

1,021.26

16.00

20.00

20.00

20.00

12.00

Operating income ratio (%)

2.1

4.3

5.1

4.8

2.2

ROE (%)

1.5

4.7

5.3

5.0

1.6

ROA (%)

1.6

4.2

4.7

4.7

2.1

Equity ratio (%)

48.9

48.0

47.4

47.6

47.1

Employees

1,540

1,568

1,637

1,719

1,757

Key ratios:*1 U.S. dollar amounts represent translations of Japanese yen, for readers’ convenience only, at the rate of ¥106.26 = U.S.$1.00, the prevailing exchange rate
at March 31, 2018.
*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

Operating Income/Operating Income Ratio(Billions of yen)

¥112.1(Billions of yen/%)¥5.3

billion

Net income attributableto owners of the parent/
ROE¥3.4(Billions of yen/%)billionbillion

5.5%
4.7%

13

14

15

16

17 (FY)

13

14

15

Operating Income
Operating Income Ratio

5

Sekisui Plastics Co., Ltd.

16

17 (FY)

13

14

15

16

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

2012

2013

2014*2

2015

2016

2017

2017

Millions of yen

Thousands of
U.S. dollars*1¥ 101,784¥ 109,923¥ 113,660¥ 101,559¥ 102,398¥112,101$ 1,054,969

1,152

2,124

3,930

5,118

5,401

5,284

49,727

1,237

2,206

4,180

4,862

5,049

5,154

48,504

926

1,264

2,530

3,147

3,404

3,448

32,449

6,849

3,434

5,908

4,424

5,836

7,762

73,047

3,940

3,856

3,999

3,937

3,591

4,087

38,462

1,993

1,936

1,877

1,856

1,916

2,104

19,800¥ 105,562¥ 110,687¥ 116,201¥ 114,892¥ 119,670¥131,774$ 1,240,109

50,92954,03658,27558,80061,363

66,145

622,483

18,492

18,566

19,467

18,274

18,42419,096

179,710

Yen

¥

19.72

¥

26.96

¥

54.14

¥

67.34

¥

U.S. dollars*1

73.03¥75.33$0.71

1,063.68

1,136.52

1,231.36

1,243.30

1,322.14

1,444.28

13.59

8.00

14.00

18.00

24.00

24.00

27.00

0.25

1.1

1.9

3.5

5.0

5.3

4.7

1.9

2.5

4.6

5.4

5.7

5.5

1.2

2.0

3.7

4.2

4.3

4.1

47.4

48.0

49.5

50.6

50.7

49.6

1,813

1,833

1,859

1,895

2,011

2,101

Total Assets/ROA

Capital Expenditure &Depreciation and Amortization(Billions of yen/%)(Billions of yen)

¥7.8

Research andDevelopment Costs(Billions of yen)billion¥131.8¥2.1

billionbillion¥4.1
billion

4.1%

13

14

Total Assets
ROA

15

16

17 (FY)

13

14

15

16

17 (FY)

13

14

15

16

17 (FY)

Capital Expenditures
Depreciation and Amortization

Sekisui Plastics Co., Ltd.

6

A Message fromthe President

Aspirations for the 100th Anniversaryof Our Founding
To mark the 50th anniversary of Sekisui Plastics’ foundingin October 2009, we, Sekisui Plastics Group, formulated the Sekisui Plastics Group’s 100th Year Vision for thesustained growth and development of Sekisui Plastics
Group over the next half century. In 2015, we revised partof this Vision based on a review of the changes in thebusiness environment that had occurred since 2009.
In this Vision, our aspiration for the 100th anniversary of our founding, as based on the founding spirit ofSekisui Plastics and our new management philosophy,
is to transform the company into “a plastics solution
company trusted by customers around the world,” which
we aim to achieve by expanding business globally inthe segments of Industry, Human Life and Environment/
Energy, and by putting our “CSR” and “Zen-in Keiei”
concepts into practice group-wide.

Mid-term Management Plan
“Make Innovations 60”
In line with the goals of the “Sekisui Plastics Group’s
7

Sekisui Plastics Co., Ltd.

100th Year Vision,” since FY2016 we have been advancing the three-year mid-term management plan “MakeInnovations 60.”
This Plan was established based on the concepts of promoting “Business Portfolio Transformation” and “Earnings
Structure Reform.” Under this Plan, we have been promoting five high-priority policies, namely “Businessportfolio transformation,” “Speed-up of the businessmodel transformation,” “Strengthening of development
capabilities by transforming development promotion
system,” “Reinforcing of the competitiveness to build
a high-profitable structure,” and “Personnel portfoliotransformation/human resources development.”

FY2017 Results
The business environment that encompassed Sekisui
Plastics in FY2017 generally saw a robust global economy,
with particular strength in the US and Europe. However, italso saw the notable impact of higher crude oil prices andthus greater costs for petrochemicals and other raw materials. Although the Japanese economy saw a gentle recovery, including improved corporate earnings and a better
employment situation, Japan continues to face laborWe will achieve our corporate goals
from the 100th Year Vision and realize growth
by transforming our business portfolio andpromoting global expansion.

President and Chief Executive Officer

shortages and rising logistics costs. Looking at the foam
plastics industry as related to Sekisui Plastics, the price ofraw materials and fuel turned upwards during the second
half of the fiscal year, leading to a severe environment that
also lacked growth in end-user demand.
Under this environment, the mid-term management plan
“Make Innovations 60” entered its second year in FY2017,
during which time we steadily implemented measures inorder to proceed with “Business Portfolio Transformation”
and “Earnings Structure Reform.” Specifically, althoughautomotive- and home appliance/IT-related industrial
fields grew globally, the impact of higher raw material andfuel prices along with greater logistics costs, as well as
capital expenditures and other outlays for the purpose ofstrengthening our development capability, placed pressure on earnings.
As a result, Sekisui Plastics Group achieved net sales of¥112.101 billion, a 9.5% increase over the previous period; operating income of ¥5.284 billion, a 2.2% decrease
compared with the previous period; and net income attributable to owners of the parent of ¥3.448 billion, a 1.3% increase over the previous period. We recorded the highest
recurring income and net income attributable to owners of
the company in our history.

Global Expansion
Against the background of Japan’s contracting population and aging society, Sekisui Plastics Group recognizes global expansion as a core issue for growth over the
medium- to long-term.
Under the mid-term management plan “Make Innovations 60,”
we have been driving forward global business expansion with a focus on automobiles, home appliances/IT, and other industrial fields, and pouring our energy
into the effective use of the production/processing facilities that have been expanded to date. As a result,in FY2017 we saw positive trends in LCD panels andother home appliance/IT fields in Northeast Asia (China,
Taiwan, Korea), and saw positive demand from Thailand,
Indonesia, and other countries in Southeast Asia witha particular focus on applications related to packaging
materials for transporting automobile parts.
As a whole, we feel that FY2017 was a year of robust
global expansion.

Sekisui Plastics Co., Ltd.

8

Future Outlook and FY2018
Performance Forecast
In terms of the outlook for FY2018 and beyond, thebusiness environment encompassing Sekisui Plastics
Group is expected to remain uncertain due to concerns
about economic trends in emerging countries such as
China, the impact of movements in the US administration, and the rising cost of logistics and expenditures asa result of labor shortages in Japan.

Despite being faced with this situation, Sekisui Plastics
Group will move forward with the various measures
to fulfill objectives of the mid-term management plan
“Make Innovations 60,” which has entered its final year
this period, without compromising our goal of achieving
the Plan’s quantitative targets.
Specifically, in terms of ST-LAYER (CFRP/foam corecomposites), ELASTIL (thermoplastic elastomeric beadfoam), and our other strategic merchandise, we will fully
address the detailed needs of our customers, and accelerate market launches and sales expansion. In termsof global business activities, we will advance businessexpansion measures that link to earnings contributionsat an early stage by thoroughly implementing quantitative management. At the same time, we will also build amanagement system that suits the characteristics of thecountries and regions into which we have expanded.
We will also revise product prices appropriately inresponse to raw material price fluctuations, while at thesame time striving tirelessly to reduce costs throughout
the Group by reviewing low-performing businesses,
improving productivity, and reducing logistics costs in
9Sekisui Plastics Co., Ltd.

moving towards building a highly profitable structure.
By driving these measures forward, we are aiming for
FY2018 Sekisui Plastics Group results of ¥120 billion in
net sales, a 7.0% increase over the previous period; ¥6.8
billion in operating income, a 28.7% increase over theprevious period; and ¥4.4 billion in net income attributable to owners of the parent, a 27.6% increase over theprevious period.

Shareholder Returns
Sekisui Plastics Group’s basic policy concerning returns
to our shareholders is to distribute profits in accordance with consolidated financial results as well as inconsideration of stability. Based on this policy, we willcontinue to target a consolidated payout ratio of 30%
to 40%. Also as part of our efforts to reward our shareholders, we are also considering plans to continue withacquisition and retirement of treasury stock. In termsof retained earnings, we are giving priority to strategic
investments that lead to further growth and investments
aimed at strengthening the management structure.
Based on these concepts, in FY2017 we executed
an annual dividend of ¥27 per share. Moreover, we acquired 568,000 treasury shares in February 2018.
Given the outlook for continued growth in FY2018, weplan to increase the dividend by ¥3 for an annual dividend of ¥30 per share.

CSR Initiatives
Sekisui Plastics Group stated “Sekisui Plastics Group,
Expanding Our Dreams for People and the Earth” inthe “Sekisui Plastics Group’s 100th Year Vision” as our
CSR Declaration, whereby we are taking initiatives tomeet our social responsibility to all of our stakeholders,
including the global environment, and to contributeto the sustainable development of the global society.
In particular, we have defined the responsibilities that
we hold to each stakeholder, including our customers,
Group members and shareholders, and are giving priority to those initiatives that contribute to society throughthe promotion of our business activities, thereby fulfilling these social responsibilities.
As part of our environmental contribution activities,
the entire Group throughout the world has poured its

energies into planting tress on the International Day
for Biological Diversity and other such “Green Wave
Activities,” which have been broadly called for by
Japan’s Ministry of the Environment and other organizations. These activities have been ongoing since 2012,
and in March 2018 we were designated as a “Green
Wave Official Partner” by the Japan Committee forJapan Committee for United Nations Decade on
Biodiversity (UNDB-J) in recognition of our activities
thus far. Likewise, environmental contribution activities have also taken root as Group-wide initiatives,
including a photo contest held as part of the “Green
Curtain Activities” advocated by Japan’s Ministry of theEnvironment.
We also participated in “The Call for a Solution to
the Problem of Ocean Plastic Waste” advocated by theJapan Plastics Industry Federation as a way to cooperate in solving the international problem of plastic waste
in the ocean.
Meanwhile, in terms of community-based social contribution activities, we have worked to promote Satoyama
Conservation Activities, in which Group Members participate through the “Sekisui Plastics Fund” in two locations in East and West Japan.
In addition to these existing activities, in FY2017
we expressed our endorsement of the “Creation of a
New Lake Biwa Museum” announced by the Lake Biwa
Museum in Shiga Prefecture, where Sekisui Plastics
and two Group companies—Sekisui Plastics Shiga andSekisui Plastics Ohmi—are located, by registering as arenewal supporting company.

Enhancing Corporate Value Through“Zen-in Keiei”
Sekisui Plastics Group believes that the capabilities of
the Group’s personnel are essential to powerfully driving forward with our CSR activities, which are centeredon contributing to society through the promotion ofbusiness activities.
Therefore, Sekisui Plastics Group has defined theimage of the employees sought by the Group and summarized this image in the “Zen-in Keiei” card so thateach individual employee can fully utilize their specificcapabilities, and to share Sekisui Plastics’ culture of“Zen-in Keiei” along with our management philosophy

and code of conduct with all Group employees.
Meanwhile, for our global employees we prepared
the “Global Management Handbook,” which defines
how to act on-site in consideration of the different cultures and customs of different regions and countries.
We believe creating organizations, developing ways ofworking, and executing management through the useof this handbook will help nurture cultural diversity.
In addition, as a way of creating a worry-free work
environment, we offer child-raising support that takes
work-life-balance into account and engage in initiatives
that consider the physical and mental healthcare of ouremployees. In terms of diversity, we are undertaking initiatives that support the participation of women, employ
those with disabilities and expand global employment.
These initiatives are all based on our founding spiritof “pursuing the happiness of people working for thecompany.” In this way, we believe the reason that weare making steady progress in our initiatives aimed atachieving the corporate goals in the 100th Year Vision
is the spread of the Sekisui Plastics Group culture of“Zen-in Keiei” among all of our employees.
Despite this steady progress, we are still only partway to achieving our corporate goals. As such, we willcontinue to engage in promoting these activities as asingle, unified Group.
We once again thank our shareholders and investors
for the continued support and encouragement.

August 2018
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 “Establishment Period.”
Earnings fluctuated with the ebb & flow of Japanese economy in “Growth to Maturity Period.”
And, in “Rebuilding to Rebirth Period,” we achieved record-high earnings based on new businesses
and globalization.
The mid-term management plan ”Make Innovations 60” was commenced in 2016, and we aremoving on a new “stage.”

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”
Since 2016

Rebuilding to Rebirth Period
Years 41 to 55
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.

60

Make
Innovations—Transforming the business model for our 60th anniversary—

We launched the new mid-term management plan for our
60th anniversary of foundation. Operating income as well as
net income attributable to owners of the parent hit record
highs in FY2017.
2016 YAMAKYU Co., Ltd. became our consolidated subsidiary2004 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
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
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.

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

Sekisui Plastics Group’s 100th Year Vision

As Sekisui Plastics Group’s corporate goal for the
100th anniversary of foundation (in FY2059), on thebasis of the founding spirit of Sekisui Plastics andour 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 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 based on plastics andproviding solutions.

Situation Goal

Scale Goal

Plastics Solution Company
Trusted by Customers around the World

Consolidated Sales¥500 billion or more

Corporate Domain

Sekisui Plastics Group Solutions
Materials

Technologies

Systems

Plastics based

Technology
echnology tha
thatcreates added value

By systemizing,
mizing know
know-how andproviding 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

13

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, the Group’s
100th anniversary of foundation.

¥50.0 billion
or more ■Environment/Energy
Consolidated sales

50th Year
Anniversary¥100.7billion

FY2009Consolidated sales

100th Year
Anniversary
FY2059¥500.0billion or more

¥200.0■Human Life

¥250.0■Industrybillion 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 by making the most of
strength and improving the weakness.

Sekisui Plastics Co., Ltd.

14

Mid-Term Management Plan

60

Make
Innovations—Transforming the business model for our 60th anniversary—

Sekisui Plastics Group formulated the Sekisui Plastics Group’s 100th Year Vision
for further growth and development toward the 100th anniversary of foundation in
FY2059. With seven years having passed since its formulation, the vision has been
partially revised to reflect changes in the operating environment during that time,
but with the continued goal of becoming “a plastics solution company trusted bycustomers around the world.”
This year was the final fiscal year of the Company’s three year mid-term management
plan, “Make Innovations 60,” launched in FY2016. As a year in which every effort wasmade to fully address those issues that the Group has worked in unison to overcome,particular emphasis was placed on promoting business portfolio transformation andearnings structure reform as well as achieving targets.

Concept
Toward the 60th anniversary in FY2019, we, all the Group members, will innovate thought, action and structure, andtransform the business model.

Business Model Transformation
To innovate thought, action and structureby all the Group members

60th Anniversary(FY2019)

Pursue steady sales growth and strengthen the profitable structure• For steady expanding sales and strengthening profitability, evolve our solution-proposals more by concentrating management resources in sales activities and development.
• Implement cultivating new markets and reforming sales methods, and restructure the business portfolio by expanding
business domains and getting more customers.
• Take a global approach to effectively utilize production sites in each country and flexibly allocate human resources, andshare information worldwide to increase business opportunities.
• In addition to transforming the development promotion system, proactively invest in development to further accelerate
the commercialization of new products and businesses. Take advantage of M&A and business tie-ups and strengthen andexpand business domains.
• Promote cost reductions by reforming manufacturing and logistics and introducing energy-saving activities and further
strengthen the earnings structure.
• Further strengthen development of the Group company personnel who implements these measurements.

15

Sekisui Plastics Co., Ltd.

Quantitative Targets
Sekisui Plastics Group promotes the mid-term management plan with the business model transformation toward the 60th
anniversary in FY2019, and aims to achieve the target of ROE 6.6% in FY2018.

(Billions of yen)

FY2015
results

FY2016
results

FY2017
results

FY2018plan

Net Sales

101.6

102.4

112.1

120.0

(15.3)(17.1)

19.4

21.2(15.0%)(16.7%)

17.3%

17.7%

5.1

5.4

5.3

6.8

(5.0%)(5.3%)

4.7%

5.7%

Recurring income

4.9

5.0

5.2

6.6

Net income attributable toowners of the parent

3.1

3.4

3.4

4.4

5.4%

5.7%

5.5%

6.6%

(Overseas sales)(Overseas sales ratio)
Operating income(Operating income ratio)

ROE

ROE
(%)

6.6%
5.4%

15

5.7%

5.5%

16

17

18 (FY)plan

Five High-Priority Policies
Sekisui Plastics established five high-priority policies for the promotion of the 100th Year Vision and the mid-term
management plan which is based on the vision.

Business portfolio transformation• Increase the sales ratio in the Industry segment• Accelerate the global sales expansion• Enhance collective capabilities of the Group with M&A
synergy effects

Speed-up of the business modeltransformation• Build a brand strategy of the Group and centralize
information transmissions• Enhance group-wide development of fabrication business• Redevelop solution-proposing sales activities and strengthen
multi-stage sales activities

Strengthening of development
capabilities by transforming
development promotion system• Transfer theme of New Business Application Development
Center
• Utilize domestic and foreign exhibitions• Strengthen information gathering for strategic merchandise
development

Enhancement of competitivenessto build a high-proﬁtability structure• Adequately respond to raw material price trends• Wide-region logistic• Development of energy saving/productivity

Personnel portfolio transformation/
human resource development• Increase the number of sales/development personnel,
improve their skills and streamline back-office sections• Human resource development by Sekisui Plastics-Juku• Share ideal types of Group personnel and nurture nextgeneration leaders in Japan and overseas
Sekisui Plastics Co., Ltd.

16

IndustryNet Sales(Millions of yen)

¥45,972

Market Environment & FY2017 Results

million

13

14

15

16

Recurring Income(Millions of yen)

13

17

17

(FY)

¥2,805
million14

15

Sekisui Plastics Co., Ltd.

16

17

(FY)

FY2017 net sales in the Industry segment were ¥46.0 billion, an
increase of 14.5% (YoY).
In the Home Appliance/IT fields, demand for PIOCELAN(polystyrene/polyolefin hybrid resin foam), which is utilized in LCD
panel transportation material applications, was robust in Taiwan and
China. Customer demand for TECHPOLYMER recovered, and salesof these organic polymer particles that are utilized for light diffusion,for example in LCD panels, improved from the previous fiscal year.
In the Automotive field, automotive component applications
using PIOCELAN and other Company products increased
significantly, which is partly attributable to increased use of thesematerials in large vehicles, such as buses and trucks, in addition
to passenger cars. In the Medical/Health Care-related fields, theCompany expanded its overseas sales, for example of the ST-gel(a functional high-polymer gel) used in electrode pads for lowfrequency therapeutic devices. Our strategic merchandise STLAYER (CFRP/foam core composites) have been adopted for thecomponents of the latest type of drone that a leading drone service
company has launched onto the market. Going forward, we will aim
for the adoption of these products in a variety of fields, such as in
the structural components of industrial robots and in automotive
components, where light weight and high strength are demanded.
In addition to completing a product lineup and expanding
sales in Japan of TECHEATER, a heater and snow-melting
system with a positive temperature coefficient (PTC) thermistor
heating element that features higher outputs and temperatures
than conventional products, we obtained Underwriters
Laboratories (UL) standards certification in the United States
and are preparing to expand sales globally.

Initiatives of the Mid-Term Plan & FY2018 Outlook
In the Industry segment in FY2018, which marks the final yearof “Make Innovations 60”, we are aiming to make progresswith “business portfolio transformation” and “earnings
structure reform” and to achieve the planned numericalvalues. Specifically, with regard to our strategic merchandise,such as ST-LAYER and ELASTIL, we will thoroughly respondto finely tuned customer needs and work to speed up
product launches and sales expansion.
Regarding the global regions, in addition to promoting
the revamping of business expansion initiatives designed toensure contributions to earnings at an early stage throughthorough numerical value management, we will build
management structures that are tailored to a country or
region. For example, in China and Taiwan we will accelerate
developments in the fields of Home Appliances/IT. Also,
in Asia, Europe and the United States we plan to promote
development in the Automobile field, and in Europe and theAmericas in the Medical/Health Care fields.
In addition to these initiatives, with regard to productsthat include PIOCELAN, TECHPOLYMER and ST-gel, we will
also continue efforts geared toward improving our share atexisting customers.
In tandem with these initiatives, we are targeting net salesof ¥51.4 billion in FY2018.

TOPIC

TECHEATER Obtains U.S. UL Standards Certification
TECHE
A cable heater that can be used for snow-melting, antifreezing, thermal control and other applications, TECHEATER
has obtained UL certification, the product safety standard forelectrical products in the United States. Since semiconductive
ceramics are used as heating elements, TECHEATER output
can be self-controlled according to changes in the ambient
temperature.
As thermostats for temperature control are unnecessary,and there is no risk of abnormal overheating or burnouts,
TECHEATER garners immense praise for its safety.
Previously, TECHEATER had been widely used in Japan,
including for residential, agricultural and industrial purposes,
but having obtained this certification, we commenced sales in
the United States. We will be promoting sales expansion on a
global basis, including in Europe and Asia, in the years ahead.

TECHEATER (tape type)

Sekisui Plastics Co., Ltd.

18

Human LifeNet Sales

Market Environment & FY2017 Results(Millions of yen)

¥66,128
million

13

14

15

16

17

(FY)

Recurring Income(Millions of yen)

¥3,518million

13

19

14

15

Sekisui Plastics Co., Ltd.

16

17

(FY)

FY2017 net sales in the Human Life segment were ¥66.1 billion,
an increase of 6.3% (YoY).
Affected by inclement weather and other factors, agriculture/
fishery-related demand remained sluggish, but due to increased
customer needs for the heat-resistant containers associatedwith the heating of food in microwave ovens, container-related
demand was strong. Construction materials/civil engineeringrelated demand was also healthy, driven by private sector
projects and increased activity in infrastructure maintenance.
With regard to the sales volume of mainstay products, ESLEN
Beads (Expandable Polystyrene Beads) decreased slightly,
and ESLEN Sheet (Foamed Polystyrene Sheet) exceeded theprevious fiscal year. Sales rose for both of these products
compared with the previous fiscal year due to price revisions.
For newly developed products, we launched Flying Fish
Box, a container that enables fresh seafood to be transported
as general cargo, in collaboration with a leading logistics
company. With excellent heat resistance and thermal insulation
properties, in addition to their light weight, CELEPET (PET
resin foam) containers for in-flight meals were adopted by amajor airline, which appreciated these features.
As a disaster countermeasure product, an expressway
operator has adopted the EPS Slope that eliminate the steps
that can occur on road surfaces following an earthquake, and weare continuing to make progress with sales expansion to national
and local public entities. In the years to come, we will work to
expand sales of products that can meet customers’ needs.

Initiatives of the Mid-Term Plan & FY2018 Outlook
In FY2018, which will be the final year of “Make Innovations 60”,
we will focus on “earnings structure reform” in the Human
Life segment.
As this is the year for finishing the plan, we will promoteeach measure while paying particular attention to achieving
the planned numerical values.
As one means to achieve this, we will undertake appropriate
product price revisions in response to raw material pricefluctuations. To build a high-profit structure, we will also
review low-profit businesses while continuing to work on cost
reductions, including productivity improvements and logistics
cost reductions, across the entire group.
In addition to this, we will take steps to improve our shareat existing customers for beads and sheets by enhancing
proposal sales that lead to solutions to customer issues. In the
Human Life segment, we will promote the sales expansionof strategic products, such as functional food containers
and freshness preservation materials. Of these, we will aim
for the adoption of freshness preservation materials by
Japanese agricultural produce export businesses, which havebecome increasingly active in recent years, by leveraging ourfreshness preservation technologies, centered on our thermal
management technology, and by developing materials
that are suitable for logistics involving long timespans anddistances as well as multiple items and temperatures.
In tandem with these initiatives, we are targeting net salesof ¥68.6 billion in FY2018, which will mark an increase for asecond consecutive year.

TOPIC

CELEP Food Containers Adopted by
CELEPET
Japan Airlines for In-Flight Meal Use
Developed by Sekisui Plastics, CELEPET PET resin foam foodcontainers have been adopted as steam oven-compatible
food containers for in-flight meal use on Japan Airlines. Heat
resistant up to about 220 degrees C, CELEPET containers also
possess thermal insulation, cold resistance and heat retention
properties superior to those of existing C-PET containers.
As this container can also be used for cooking with heat on
board aircraft, it enables hot food to be provided for a longtime as the food does not readily cool down even after it has
been taken out of the oven. It is also difficult for the outsideof the container to become hot, which leads to improved
handling by cabin crew members.
Going forward, we will aim to expand earnings by developing
high-value-added products that meet customer needs.

Sample Japan Airlines in-flight meal

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.”
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 functioning of corporate
governance, to maintain management transparency and soundness, and establish a management
structure that is able to address changes in the operating environment.

Characteristics of Governance Structure
Sekisui Plastics conducts business execution and supervision/
audits by the governance organization composed of theorganizations below.
The Board of Directors consists of nine directors (including
three outside directors) who aim to engage in rational andefficient management decision making. Matters of importanceare determined by the Board of Directors as well as by the
Board of Managing Directors. The management responsibilityof directors is clearly defined, and the term of office of directors
has been set at one year for the purpose of developing amanagement system capable of rapidly responding to changes
in the business environment. Furthermore, committees havebeen established for each important management matters topromote swift, rational decision making while complementing
the divisional system. This structure ensures mutual supervision
with respect to compliance, ethics, and other governancerelated matters.
The Company’s outside directors play an important rolein the oversight and advisory functions in all aspects of theCompany’s management, drawing on a wealth of experienceand broad insight as corporate managers. As an information
communication system to outside directors, 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.

Board of Corporate Auditors 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 the Boardof Directors and the Board of Corporate Auditors. The Company
strengthens the audit function by building a system of the timely
and relevant disclosure of important information to corporate
auditors and the Board of Corporate Auditors, and secures thevalidity, transparency and equity of management decisions.

Furthermore, based on our Basic Policy Regarding theInternal Control System, we have established an internal control
structure including an Audit Department which is charged withthe responsibility of overseeing the implementation status ofinternal audits and internal control systems. Sekisui Plastics
strives to strengthen functions of management oversight andsupervision through a 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

Board of Corporate Auditors 5 Auditors(2 internal and 3 outside)*
Financial audit

President
Deliberate on substantive matters
Appoint/
dismiss

Board of Managing Directors (discuss on important matters)

Independent Auditors
Financial audit

Appoint/
dismiss
Cooperation

13 Executive Officers(6 concurrently Directors)

CSR Control Committee• Compliance Committee, etc.

Audit Department• Responsible Care Internal Audit Committee
Internal audit

Othercommittees

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

21

Sekisui Plastics Co., Ltd.

Internal
auditDirector Remuneration
Remuneration in FY2017 totaled ¥141 million for ten
directors (including ¥19 million for two outside directors),and ¥60 million for six auditors (including ¥13 million forthree outside auditors). The total remuneration amount for
directors does not include employee salaries for directors
who are concurrently serving as company employees. The
numbers of directors/auditors and remuneration above

include one director and one auditor that dismissed within
FY2017. Provisions for director bonuses in FY2017 of ¥19
million [including ¥13 million for eight directors (with ¥2
million allotted for two 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 anddevelopment, Sekisui Plastics appointed two independent
outside directors at the annual shareholders meeting, held
on 23 June, 2015, to have their specialized knowledge andextensive 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 andproactive in advising constructively while showing strengthin supervisory roles.

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

As an information communication system to outside auditors,
the full-time auditor provides an explanation to outside
auditors on matters to be discussed at the Board of Managing
Directors. As required, outside auditors conduct regular
audits of business sites alongside the full-time auditors.

The “Zen-in Keiei” card
Sekisui Plastics Group has created the “Zenin Keiei” card that contains information on
the origin of the Group name “Sekisui,”management philosophy and code of conduct
of Sekisui Plastics, and action guidelines forthe “Zen-in Keiei,” all in a booklet-sized card.
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 takemeasures such as improving a control system and promoting awareness-raising activities.

ComplianceSekisui Plastics has established the Compliance Committee
and built a structure to maintain the compliance with laws/
regulations. The Committee is held twice a year on a regularbasis to deliberate on compliance matters in the Group. And,each Group appoints a responsible person for complianceto cooperate. Moreover, certain-sized Group companies, aswell as Sekisui Plastics, have a Compliance Committee. Inan 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 tobuild an equitable and vibrant organization. In addition, theCompany has executed an advisory agreement with a legal
firm in order to refer for decision making with respect tocorporate management and daily operations, so we have asystem to receive guidance and advice 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, andrespective committees implement risk managements. For
other risks, general managers of each department basicallytake 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 the emergency
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 “Information Security Committee.” The committee

23

Sekisui Plastics Co., Ltd.

formulates rules according to the basic policy and theiroperational manual, 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 by stakeholders 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 foundation, 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
Social Contribution Committee(Chair: Responsible Director)

Safety Committee(Chair: Responsible Director)

CSR Control Committee(Chair: President)

Quality Committee(Chair: Responsible Director)

Responsible Care Internal Audit Committee(Chair: Responsible Director)

Secretariat(CSR Promotion & Public
Relations Department)

Compliance Committee(Chair: Responsible Director)

Responsibility to Customers
We operate a customer-focused quality assurance system, applied from the development stage to ensure that all products
and services 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 2017.

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

Design Review
Market needs,
Customer needs

Sales
Activities

Development
Topic
Evaluate/Decide

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 environmentallyhazardous substances generated through business activities, and that preserve biodiversity.

Initiative to Reduce CO2 Emissions in Production

Initiative to Reduce CO2 Emissions in Distribution

Sekisui Plastics Group set up the Energy-Saving Promotion
Committee and promotes the energy saving throughinnovations on production process.
In fiscal 2017, changes in our production structure
involving a shift from raw materials to final products resulted
in domestic CO 2 emissions (basic unit) increasing 1.9%
from the previous year. Likewise, CO2 emissions (basic unit)
increased 12.5% overseas in line with the launch of fullfledged operations at various mold processing plants.
We are continuing to work to reduce CO2 emissions infiscal 2018, by improving processes, eliminating steam/airleakage, and reducing heat loss.

The Sekisui Plastics Group is working to reduce CO 2
emissions by improving efficiency in distribution andorganizing projects to reform the distribution system fromfiscal 2017. As part of our efforts, we are decentralizing
production sites and constructing warehouses in businesscenters to improve our distribution network. However, withthe effects of these efforts yet to manifest, CO2 emissions in
distribution increased in fiscal 2017.

Initiative to Reduce CO2 Emissions in Offices
We have started energy-saving activities such as turning
off unnecessary lights, and installation of energy-saving
equipment such as LED lighting and individual air
conditioners. In FY2017, we reduced energy consumption ona basic unit per area by 7.0% from the previous fiscal year.

Responsibility to Group Members
Sekisui Plastics Group respects fundamental human rights and takes into consideration that no one is discriminated on any
and all 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 harassmentthat could occur in the workplace, we appropriately educate
employees through several training programs.

ColumnSupport for Parents
S

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.

Sekisui Plastics Co., Ltd. The 2nd Business Headquarters Planning Department Sae Hosoe
Sekisui Urethane Kako Co., Ltd. Administration Department Tamotsu Suzuki

With two children born in consecutive years, we have made use of the company’s
childcare leave system for two years in a row. Thanks to the flex time system, we
have been able after giving birth to align the time we arrive at work and leave
work to match that of the nursery school, allowing us to maintain a full-time work
schedule without any undue difficulty. Our children are still very young and there
are times that they cannot go to the nursery school due to a fever or some otherreason, and in those cases we have been able to use the company’s system fortaking leave to care for a child. This is separate from the usual paid leave and has
proven very helpful.
The system makes it much easier to raise a child and contributes to an
environment where we as parents can put our full energy into both raising theirchild and performing their duties at work. It appears there are also a number ofmale employees taking full advantage of the system to attend school events or
to care for their children.
While our co-workers and superiors have been quite understanding of ourchildcare needs, we are promoting the sharing of work responsibilities so that wecan better respond to the sudden need to take time off.

25

Sekisui Plastics Co., Ltd.

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 andsupport 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” topromote our activities.

Mirai Fund Ibaraki “Sekisui Plastics Fund”
To expand activities of the “Sekisui Plastics Fund”
nationwide, a new fund in the Kanto region was establishedin May 2016 with a contribution to the “Mirai Fund Ibaraki”
operated by the Ibaraki NPO Center Commons.
In FY2017, we supported, with aid and the participation of
our Group members, the activities of
the NPO “association of the Protecting
Rural Nature in Koga,” which engages
in restoring and protecting abandoned
wooded areas.

Mirai Fund Ohmi “Sekisui Plastics Fund”
The Sekisui Plastics Fund was established in July 2012
with a contribution to the “Mirai Fund Ohmi” operated by
the NPO Ohmi Culture Promotion Foundation. The fundprovides ongoing financial support and assistance via ourGroup member participation for the activities of the “Koga
Environment and Satoyama Vitalization Council,” an NPO
which works to preserve biodiversity in Lake Biwa and thesurrounding environment. From FY2016, we started thisactivity in the new employee orientation.

ColumnSekisui Plastics Fund provides support for the preservation of woodlands
President of NPO “Koga Environment and Satoyama Vitalization Council” Tadao Fujii

The “Koga Environment and Satoyama Preservation Council” conducts restoration
activities aimed at revitalizing the woodlands in Minakuchi-cho, Koka City, Shiga
Prefecture, which is located near Lake Biwa. More specifically, our activities include thethinning of the woodlands, the trimming of deadwood and shrubs, weeding and theclearing of dead leaves, the installation and maintenance of stairs and pathways, andthe creation of a boardwalk through the wetlands. We have been conducting these
activities for about 14 years and the goals of initial restoration plan have almost beenreached. We are now moving into the maintenance and utilization stages.
In terms of support from Sekisui Plastics, we are of course grateful for the financial
support, and we are especially delighted that these conservation activities are includedin the training program for new employees. Our membership is well populated witholder citizens and they are especially happy to work with the younger recruits.
Even when the activities associated with the funding come to a close, we are hoping
for continued participation in Satoyama preservation activities as well as ongoingcooperation in making the woodlands of Koka a relaxing place for its citizens.

Sekisui Plastics Co., Ltd.

26

Consolidated Balance Sheet
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
March 31, 2017 and 2018
Thousands of U.S. dollars(Note 2)Millions of yen

2017

2018

2018

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

¥

6,266

¥

5,117

$

48,1645

547

Notes and accounts receivable (Notes 3 and 4)

29,02833,369314,090

Inventories (Note 6)

9,589

10,432

98,192

738

750

7,059

1,167

826

7,774

Deferred income taxes (Note 9)
Other current assets
Less allowance for doubtful accounts

(89)

(71)

(668)

46,70650,431

474,689

20,906

20,955

197,242

Buildings and structures (Note 8)

43,40043,806412,330

Machinery and equipment

78,44680,633758,970

Total current assets

Property, plant and equipment (Note 17):
Land (Notes 8 and 12)

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

1,112

4,386

41,283

143,864

149,781

1,409,836(93,351)(95,931)(902,964)

50,51353,849506,861

653

595

5,600

15,56919,249181,184

620

632

5,948

3,768

5,194

48,889

549

641

6,033

1,344

1,233

11,605

(55)

(54)

(508)

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 17)

27

Sekisui Plastics Co., Ltd.

22,45027,493

258,782¥ 119,670¥ 131,774$ 1,240,342

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

2017

2018

2018

¥ 23,693¥ 27,027

5,188

4,946

46,554Current portion of long-term loans (Notes 4, 7, 8 and 15)

4,263

7,178

67,564

Accrued expenses

2,728

3,012

28,350Accrued income and enterprise taxes (Note 9)

683

1,050

9,883

Provision for bonuses to employees

988

1,023

9,629

Provision for bonuses to directors and audit andsupervisory board members

35

29

272

Liabilities and net assets
Current liabilities:
Notes and accounts payable (Note 3)
Short-term loans (Notes 4, 7 and 8)

Other current liabilities (Note 3)$

254,395

2,086

3,202

30,13939,66747,470446,818

Long-term loans less current portion (Notes 4, 7, 8 and 15)

8,973

6,972

65,625

Liabilities for retirement benefits (Note 10)

2,878

3,011

28,341

Deferred income taxes (Note 9)

6,005

7,668

72,176

Provision for product warranty

389

244

2,296

Other long-term liabilities

392

259

2,437

Total long-term liabilities

18,63918,157

170,905

Total current liabilities

Long-term liabilities:

Net assets:
Shareholders’ equity (Note 11):
Common stock:
Authorized: 124,751,000 shares and 124,751,000 shares
at March 31, 2017 and 2018, respectively
Issued:46,988,109 shares and 46,988,109 shares
at March 31, 2017 and 2018, respectively

16,533

16,533

155,619

Capital surplus

16,544

16,544

155,722

Retained earnings (Note 18)

18,351

20,699194,832

Less treasury stock, at cost:
1,127,225 shares at March 31, 2017
1,696,143 shares at March 31, 2018

(802)

(1,425)(13,413)50,62752,352492,771

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

7,495

10,16895,707

Surplus arising from land revaluation (Notes 12 and 13)

1,479

1,479

13,921

Total shareholders’ equity
Accumulated other comprehensive income:Translation adjustments (Note 13)

187

235

2,211

Retirement benefits liability adjustments (Notes 10 and 13)

845

1,179

11,097

10,007

13,061

122,938

729

731

6,880

Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

61,363

66,145622,599¥ 119,670¥ 131,774$ 1,240,342

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, 2017 and 2018
Thousands of U.S. dollars(Note 2)Millions of yen

Net sales (Note 17)

2017

2018

2018

¥ 102,398¥ 112,101$ 1,055,167

77,09185,479804,583

25,307

26,622

250,583

19,905

21,337200,837

5,401

5,284

49,736

Cost of sales
Gross profit
Selling, general and administrative expenses (Note 14)
Operating income
Other income (expenses):
Interest income (Note 17)

8

16

150

Dividend income

271

287

2,701

Interest expense (Note 17)

(139)

(166)

(1,562)Equity in losses of an affiliate (Note 17)

(10)

(6)

(56)

Foreign exchange loss, net

(276)

(88)

(828)

Loss on sales or disposal of equipment

(64)

(99)

(931)

Compensation expenses

(128)

—

—

Gain on sales of investments in securities (Note 5)

117

136

1,280

Loss on impairment of investments in securities

—

(52)

(489)

Loss on disaster

(62)

—

—

Other, net

(137)

(71)

(668)

4,980

5,238

49,303

1,232

1,461

13,751

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

335

324

3,049

1,568

1,786

16,810

3,412

3,451

32,4837

2

18

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

29

Sekisui Plastics Co., Ltd.

¥

3,404

¥

3,448

$

32,454

Consolidated Statement of Comprehensive Income
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2017 and 2018
Thousands of U.S. dollars(Note 2)Millions of yen

2017Profit20182018¥ 3,412¥ 3,451$ 32,483

1,307

2,672

25,150

(91)

47

442

Other comprehensive income (Note 13):
Net unrealized holding gain on securities
Translation adjustments
Retirement benefits liability adjustments
Total other comprehensive income
Comprehensive income

(69)

333

3,134

1,147

3,053

28,736¥ 4,559¥ 6,505$ 61,229¥ 4,551¥ 6,502$ 61,2017

2

18Comprehensive 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, 2017 and 2018
Millions of yen
Common stock

Balance at April 1, 2016
Cash dividends
Profit attributable to owners of parent for the year
Decrease resulting from exclusion of subsidiaries from consolidation
Decrease resulting from inclusion of a subsidiary in consolidation
Acquisition of treasury stock
Retirement of treasury stock
Other changes
Balance at April 1, 2017
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Other changes
Balance at March 31, 2018

Capital surplus¥ 16,533
—
—
—
—
—
—
—
16,533————¥ 16,533¥ 17,261
—
—
—
—
—
(716)
—
16,544————¥ 16,544

Retained earnings

Treasury stock,at cost¥ 16,257(1,215)
3,404
(2)
(92)
—
—
—
18,351(1,100)3,448——¥ 20,699

¥

(798)
—
—
—
—
(720)
716
—
(802)
—
—
(622)
—
¥ (1,425)

Millions of yen
Netunrealized
holding gain
on securities

Surplusarisingfrom land
revaluation

Balance at April 1, 2016
¥ 6,187
Cash dividends—
Profit attributable to owners of parent for the year—
Decrease resulting from exclusion of subsidiaries from consolidation—
Decrease resulting from inclusion of a subsidiary in consolidation—
Acquisition of treasury stock—
Retirement of treasury stock—
Other changes
1,307
Balance at April 1, 2017
7,495
Cash dividends—
Profit attributable to owners of parent for the year—
Acquisition of treasury stock—
Other changes
2,672
Balance at March 31, 2018
¥ 10,168¥ 1,479
—
—
—
—
—
—
—
1,479
—
—
—
—
¥ 1,479

Translation
adjustments

Retirement
benefits
liability
adjustments

Noncontrollinginterests¥ 275 ¥
914
—
—
—
—
—
—
—
—
—
—
—
—
(87)
(69)
187
845
—
—
—
—
—
—
47
333
¥ 235 ¥ 1,179

Total net
assets¥ 691 ¥ 58,800—(1,215)
—
3,404
—
(2)
—
(92)
—
(720)
—
—
37
1,188
729
61,363—(1,100)
—
3,448
—
(622)
2
3,056
¥ 731 ¥ 66,145

Thousands of U.S. dollars (Note 2)

Balance at April 1, 2017
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Retirement of treasury stock
Other changes
Balance at March 31, 2018

Common stock

Capital surplus

Retained earnings$ 155,619—————$ 155,619$ 155,722—————$ 155,722$ 172,731(10,353)
32,454———$ 194,832

Treasury stock,at cost$ (7,548)——(5,854)——$ (13,413)

Thousands of U.S. dollars (Note 2)

Balance at April 1, 2017
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Other changes
Balance at March 31, 2018
See notes to consolidated financial statements.

31

Sekisui Plastics Co., Ltd.

Net
unrealized
holding gain
on securities

Surplusarisingfrom land
revaluation$ 70,547———
25,150$ 95,707$ 13,921————$ 13,921

Translation
adjustments

Retirement
benefits
liability
adjustments

Noncontrollinginterests$ 1,760———442$ 2,211$ 7,953———
3,134$ 11,097$ 6,861 $ 577,588—(10,353)—
32,454—(5,854)18
28,765$ 6,880 $ 622,599

Total net
assetsConsolidated Statement of Cash Flows
Sekisui Plastics Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2017 and 2018
Thousands of U.S. dollars(Note 2)Millions of yen

2017

2018

2018

¥ 4,980¥ 5,238$ 49,303

3,591
10
(38)
(280)
139
10
(79)
(718)
(160)
(117)
—
63
1,528
(168)
871
(682)
8,950
281
(122)
17
(1,705)
7,421

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

38,469197(178)(2,852)
1,562
56
320
(9,017)(1,355)(1,280)489
705(39,580)(7,784)
26,393
7,539
63,0082,852(1,524)
94(10,109)54,320Cash flows from investing activities
Increase in short-term investments
Decrease 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(2)
7(5,170)
113
(7)
242
(415)
32
(258)
(46)
(5,505)——(6,127)
74
(4)
439
(3)
51
—
(17)
(5,587)——(57,671)
696
(37)
4,132
(28)
480
—
(160)
(52,588)

Cash flows from financing activities
Net increase (decrease) 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
Other
Net cash used in financing activities

414
1,700
(2,790)(719)(1,215)(6)(335)(2,953)

(245)
5,200
(4,267)(621)(1,100)(0)(318)(1,354)(2,306)48,945(40,163)(5,845)(10,353)(0)(2,993)(12,744)5(1,030)7,137

21(1,148)
6,266

197(10,805)
58,979

161

—

—

(1)
¥ 6,266—¥ 5,117—$ 48,164

Cash flows from operating activities
Profit before income taxes
Adjustments for:
Depreciation and amortization
Amortization of goodwill
Decrease in allowance for doubtful accountInterest and dividend income
Interest expense
Equity in losses of an affiliate(Decrease) increase in provision for bonuses to employees
Changes in assets and liabilities for retirement benefits, net
Decrease in provision for product warranty
Gain on sales of investments in securities
Loss on impairment of investments in securities
Loss on sales or disposal of equipment, net
Decrease (increase) in notes and accounts receivable
Increase in inventories
Increase 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

Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Increase in cash and cash equivalents fromnewly consolidated subsidiaries
Decrease in cash and cash equivalents resulting fromexclusion of a subsidiary from consolidation
Cash and cash equivalents at the end of the year
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, 2018

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 thebasis of accounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure requirements of International Financial Reportable Standards (“IFRS”),
and have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments andExchange 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 aformat 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, 2017 to the 2018 presentation. Such reclassification
had no effect on consolidated profit and cash flow.
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 32 significant consolidated subsidiaries (collectively, the “Group”) for the years ended March 31, 2017 and 2018. The
Company has applied the equity method to its investment in one significant affiliate for the purpose of the consolidated financial statements
for the years ended March 31, 2017 and 2018.
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, theseother subsidiaries and affiliates have not been consolidated nor are
they accounted for by the equity method. Investments in such subsidiaries and affiliates are stated at cost unless there has been a permanent decline in the value of such investments. In such case, theCompany is required to write 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 acquisitionis amortized by straight-line method over a period of 5 years.
Five overseas consolidated subsidiaries, the fiscal year end of whichis December 31, have been consolidated using provisional financial
statements at March 31, 2018.
(c) Foreign Currency Translation
The financial statements of the overseas consolidated subsidiaries
are translated into yen at the rates of exchange in effect at the balance sheet date except that the components of net assets excluding
non-controlling interests are translated at their historical exchange rates.
Differences resulting from translating the financial statements of theoverseas consolidated subsidiaries are not included in the determinationof profit but are reported as translation adjustments and non-controllinginterests 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
sheet date and gain or loss on each translation is credited or charged
to income.

33

Sekisui Plastics Co., Ltd.

(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 of debt and marketable equity securities are stated
at fair value. Gain or loss, both realized and unrealized, is credited
or charged to income. Held-to-maturity debt securities are stated atamortized cost. Marketable securities classified as other securities arecarried at fair value with any changes in unrealized holding gain or loss,
net of the applicable income taxes, reported as a separate componentof accumulated other comprehensive income. Non-marketable securities classified as other securities are carried at cost determined by themoving 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.
Maintenance and 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 estimatedamount of 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 Warranty
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 toeach period by the benefit formula method over the estimated yearsof service 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 currency swaps to hedge
the risk of interest rate and foreign currency exchange rate fluctuations
on long-term debt denominated in foreign currencies.
i) Hedge accounting method
Interest-rate currency swaps that meet special matching criteria
are not remeasured at market value, but the differential paid or
received under the swap agreements is recognized and included ininterest expense or income, and the long-term debt hedged by theswap by the swap agreements is translated at the swap contract
rate (“special treatment”).
ii) Hedging instruments and hedged items
Hedging instruments: Interest-rate currency swaps
Hedged items:
Long-term loans denominated in foreign
currenciesiii) Hedging policy
Derivative transactions are used to hedge the risk of interest-rate
and foreign currency exchange rate fluctuations 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
the shareholders at a general meeting held subsequent to the closeof the financial period. The accounts for that period do not, therefore,
reflect such distributions (see Note 18).
(s) 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 will be applied
from fiscal years starting on or after January 1, 2018 and Topic 606 will
be 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.

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 ¥106.24 = U.S. $1.00, the exchange rate
prevailing on March 31, 2018. 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 Receivable, Notes and Accounts Payable and Other Current Liabilities
The balance sheet date for the year ended March 31, 2018 fell on abank holiday. Consequently, notes receivable of ¥925 million ($8,706
thousand) and notes and accounts payable and other current liabilitiesof ¥735 million ($6,918 thousand) with due date of March 31, 2018 were
included in the respective balances in the consolidated balance sheet
at March 31, 2018 and were settled on the next business day.

Sekisui Plastics Co., Ltd.

34

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 bankborrowings. Derivative transactions are not used for speculation, but
only used 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 purposeof making capital investments. Long-term loans with variable interest
rates is exposed to interest-rate fluctuation risk. Interest-rate currency
swaps are used to hedge the risk of interest rate and foreign currency
exchange rate fluctuations on the Group’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 Groupalso 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, 2017and 2018 are shown in the following table. The following table does
not include financial instruments for which it is extremely difficult to determine the fair value.

Millions of yen

2017

2018

Carrying
value

Carrying
value

Fair value

Difference

Cash and cash equivalents
Short-term investments
Notes and accounts receivable
Investments in securities
Total assets¥ 6,266
5
29,02815,400¥ 50,701¥ 6,266
5
29,02815,400¥ 50,701¥

Fair value

Difference

—
—
—
—
—

¥ 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¥ 23,693
5,188
13,237¥ 42,118¥ 23,693
5,188
13,048¥ 41,930

¥

—
—
(188)
¥ (188)¥ 27,027
4,946
14,150¥ 46,124¥ 27,027
4,946
14,184¥ 46,157

¥ —
—
33
¥ 33

¥

Thousands of U.S. dollars

2018
Carrying
value

Fair value

Difference

Cash and cash equivalents
Short-term investments
Notes and accounts receivable
Investments in securities
Total assets$ 48,16447
314,090
180,064$ 542,375$ 48,16447
314,090
180,064$ 542,375$

Notes and accounts payable
Short-term loans
Long-term loans*
Total liabilities$ 254,395
46,554133,189$ 434,149$ 254,395
46,554
133,509$ 434,459

$

$

—
—
—
—
—

—
—
310
$ 310

* Includes current portion of long-term loans of ¥4,263 million and 7,178 million ($67,564 thousand) at March 31, 2017 and 2018, respectively.

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
and accounts 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 purposeof holding, please refer to Note 5.

35

Sekisui Plastics Co., Ltd.

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.
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.

Unlisted equity securities in the amount of ¥822 million and ¥714 million ($6,720 thousand) at March 31, 2017 and 2018, respectively, are notincluded in investments in securities in the preceding table since it is extremely difficult to determine their fair value at March 31, 2017 and 2018.

The redemption schedule at March 31, 2018 for deposits and notes and accounts receivable is summarized as follows:
Millions of yen

Thousands of U.S. dollars

2018

2018

Within 1 year

Within 1 year

¥ 5,092
33,369¥ 38,461$ 47,929
314,090$ 362,019

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, 2017 and 2018 were as follows:
Millions of yen

2017

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

2018

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)¥ 4,673¥ 15,400¥ 10,727¥ 4,562¥ 19,130¥ 14,5680¥ 4,6730¥ 15,400(0)¥ 10,7270¥ 4,5620¥ 19,130(0)¥ 14,568

Thousands of U.S. dollars

2018

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 ¥169 million and ¥118 million ($1,110 thousand) at March 31,2017 and 2018 are not included in equity securities in the above table

Acquisition
cost

Carrying
value

Unrealized
holding gain
(loss)$ 42,940$ 180,064$ 137,1230$ 42,940

0$ 180,064(0)$ 137,123

since it is extremely difficult to determine their fair value at March 31,2017 and 2018.

The proceeds from sales of, and gross realized gain on investments in securities for the years ended March 31, 2017 and 2018 are summarized as follows:
Millions of yen

2017
Proceeds from sales
Gross realized gain

Thousands of U.S. dollars

2018

¥ 242
117

2018

¥ 300
136

$ 2,823
1,280

6. Inventories
Inventories at March 31, 2017 and 2018 were composed of the following:
Millions of yen

2017
Merchandise, finished goods and semi-finished goods
Work in process goods
Raw materials and supplies
Total¥ 6,601
206
2,782¥ 9,589

Thousands of U.S. dollars

2018

2018

¥ 7,166
194
3,071¥ 10,432$ 67,451
1,826
28,906$ 98,192

Sekisui Plastics Co., Ltd.

36

7. Short-Term Loans and Long-Term Loans
Short-term loans at March 31, 2017 and 2018 represented loans in theform of deeds and overdrafts at interest rates ranging from 0.20% to

6.44% and from 0.122% to 7.6363% per annum, respectively.

Long-term loans at March 31, 2017 and 2018 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 2.60%
Unsecured loans from banks, payable in U.S.
dollars, at rates ranging from 1.52% to 2.49%
Unsecured loans from banks, payable in Euro, at a rate of 1.33%
Unsecured loans from banks, payable in Taiwan dollars, at a rate of 4.25%
Total
Less current portion

Thousands of U.S. dollars

2017

2018

2018

¥ 12,342¥ 13,602$ 128,030

471
68
355
13,237(4,263)¥ 8,973

329—
219
14,150(7,178)¥ 6,972

3,096
—
2,061
133,189(67,564)$ 65,625

The aggregate annual maturities of long-term loans subsequent to March 31, 2018 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Years ending March 31,

2018

2018

2019
2020
2021
2022
2023 and thereafter
Total¥ 7,178
3,934
2,664
45
328
¥ 14,150$ 67,564
37,02925,075423
3,087$ 133,189

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

2017
Land
Buildings
Liabilities secured by these assets as collateral consist of ¥41 millionand ¥36 million ($338 thousand) of short-term loans and ¥105 million

¥ 166
58
¥ 225

Thousands of U.S. dollars

2018
¥ 166
56
¥ 222

2018
$ 1,562527$ 2,089and ¥68 million ($640 thousand) of long-term loans at March 31, 2017and 2018, respectively.

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

tax rate in Japan for the years ended March 31, 2017 and 2018 was, inthe aggregate, approximately 30.8%.

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

2018
Statutory tax rate
Non-deductible expenses
Per capita portion of inhabitants’ taxes
Tax credit of research and development costs
Loss on impairment of investments in securities
Other
Effective tax rate
A reconciliation of the statutory and effective tax rate for the year ended March 31, 2017 has been omitted because the difference between

37

Sekisui Plastics Co., Ltd.

30.8%
2.0
0.6
(0.5)
0.3
0.9
34.1%

the statutory tax rate and the Group’s effective tax rate for financial reportable purposes was less than 5% of the statutory tax rate.

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, 2017 and 2018 are summarized as follows:
Millions of yen

Deferred tax assets:
Liabilities for retirement benefits
Tax loss carryforwards
Provision for bonuses to employees
Unrealized profit on intercompany transactions
Loss on impairment of investments in securities
Loss on devaluation of inventories
Other
Gross deferred tax assets
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

Thousands of U.S. dollars

2017

2018

2018

¥

¥

$

647
748
313
499
45
66
421
2,741
(524)
2,216

(985)
(1,596)(3,231)
(126)
(369)
(554)
(6,863)¥ (4,646)

434
625
320
499
83
65
348
2,376
(559)
1,816

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

4,085
5,882
3,012
4,696
781
611
3,275
22,364(5,261)
17,093(9,224)(15,022)(41,415)(1,355)(4,847)(4,376)(76,261)$ (59,167)

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 funded plans)
and retirement lump-sum payment plans as defined benefit plans.
Further, the Company and its 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 calculationof liabilities for retirement benefits and retirement benefit expenses.

(b) Defined benefit plans for the years ended March 31, 2017 and 2018(i) Excluding amounts calculated by the simplified method, the changes in the retirement benefit obligation for the years ended March 31, 2017 and2018 were as follows:
Millions of yen

2017
Retirement benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial gain
Retirement benefit paid
Other
Retirement benefit obligation at the end of the year

¥ 10,223
261
32
(158)
(557)
39
¥ 9,839

Thousands of U.S. dollars

2018

2018

¥ 9,839
255
35
(8)
(592)
40
¥ 9,568$ 92,611
2,400
329
(75)
(5,572)376$ 90,060

Sekisui Plastics Co., Ltd.

38

(ii) Excluding amounts calculated by the simplified method, the changes in plan assets at fair value for the years ended March 31, 2017 and 2018
were as follows:
Millions of yen

Plan assets at fair value at the beginning of the year
Expected return on plan assets
Actuarial gainContributions by the employer
Retirement benefit paid
Plan assets at fair value at the end of the year

Thousands of U.S. dollars

2017

2018

2018

¥ 13,171
261
271
445
(557)
¥ 13,592¥ 13,592
272
1,042
432
(592)
¥ 14,747$ 127,936
2,560
9,807
4,066
(5,572)$ 138,808(iii) The changes in liabilities for retirement benefits under the simplified method for the years ended March 31, 2017 and 2018 were as follows:
Millions of yen

2017
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

2018¥ 2,661
361
(204)
(21)
67
¥ 2,8632018¥ 2,863
302
(140)
(7)
(22)
¥ 2,995$ 26,948
2,842(1,317)(65)(207)$ 28,190(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, 2017 and 2018 were as follows:
Millions of yen

Funded retirement benefit obligation
Plan assets at fair value

Thousands of U.S. dollars

2017

2018

2018

¥

¥

$

Unfunded retirement benefit obligation
Net amount of liabilities and assets recognized in the consolidated balance sheet

9,943(13,685)(3,741)
2,851
(890)

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

2,878(3,768)
¥
(890)

9,616
(14,793)(5,177)2,994(2,183)

3,011(5,194)¥ (2,183)

90,512(139,241)(48,729)
28,181(20,547)

28,341(48,889)$ (20,547)(v) The components of retirement benefit expense (credit) for the years ended March 31, 2017 and 2018 were as follows:
Millions of yen

2017Service 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

2018

¥ 261
32
(261)
(531)
361
¥ (137)

¥ 255
35
(272)
(570)
302
¥ (250)2018$ 2,400
329(2,560)(5,365)2,842$ (2,353)(vi) The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years ended
March 31, 2017 and 2018 were as follows:
Millions of yen

2017
Actuarial (gain) loss

Thousands of U.S. dollars

2018¥ (99)¥ 479

2018$ 4,508(vii) The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2017 and 2018 were as follows:
Millions of yen

2017
Unrecognized actuarial gain

39

Sekisui Plastics Co., Ltd.

¥ (1,214)

Thousands of U.S. dollars

2018

2018

¥ (1,694)$ (15,945)

(viii) The plan assets by major category consist of the follows:

2017
Bonds
Equities
General accounts at life insurance companies
Cash and deposits
Other
Total

2018
24%
44
14
4
14
100%

The total pension plan assets includes 25% and 30% of the retirement
benefits trust for the corporate pension fund plans as of March 31, 2017and 2018, respectively.
The expected long-term rates of return on plan assets is determined

22%
47
13
4
14
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, 2017 and 2018 are as follows:

2017
Discount rates
Expected long-term rates of return on plan assets
Rates of salary increase

2018

0.4%
2.0%
2.8%

0.3%
1.9%
2.8%

(c) Defined contribution pension plans for the years ended March 31, 2017 and 2018 are as follows:
Millions of yen

2017
Contributions to defined contribution pension plans

Thousands of U.S. dollars

2018
¥7

2018

¥ 10

$ 94

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 time byresolution 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 ($12,895 thousand) at March 31, 2017 and 2018, respectively.

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:

2017
Number of shares
April 1, 2016

Common stock
Treasury stock

95,976,218
2,499,948

The decrease in common stock consists of 47,988,109 shares due tothe consolidation of two shares into one share on October 1, 2016, and
1,000,000 shares due to retirement of treasury stock based on the resolution of the Board of Directors meeting.
The increase in treasury stock consists of 875,000 shares due topurchase of shares based on the resolution of the Board of Directors

Increase

Decrease—
878,590

March 31, 2017

48,988,109
2,251,313

46,988,109
1,127,225

meeting, 1,483 shares due to the purchase of fractional shares of lessthan one voting unit, and 2,107 shares attributable to the Company
acquired by its equity-method affiliates. The decrease in treasury stock
consists of 1,251,313 shares due to the consolidation of two shares
into one share and 1,000,000 shares due to retirement of treasury stock
based on the solution of the Board of Directors meeting.

2018
Number of shares
April 1, 2017

Common stock
Treasury stock

46,988,109
1,127,225

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

Increase—
568,918

Decrease

March 31, 2018——

46,988,109
1,696,143

voting unit, and 696 shares attributable to the Company acquired by its
equity-method affiliates.

Sekisui Plastics Co., Ltd.

40

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 accordancewith the “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 ($89,843
thousand) for the purpose of land revaluation exceeded the land’s
estimated market values by ¥3,546 million and ¥3,587 million ($33,763
thousand) at March 31, 2017 and 2018, respectively.

13. Other Comprehensive Income
Reclassification adjustments and tax effects on components of other comprehensive income for the years ended March 31, 2017 and 2018 were as follows:
Millions of yen

2017
Net unrealized holding gain on securities:
Gain arising during the year
Reclassification adjustments
Before tax effectTax effectNet unrealized holding gain on securities
Translation adjustments:(Loss) gain arising during the year
Before tax effectTax effectTranslation adjustments
Retirement benefits liability adjustments:
Gain arising during the year
Reclassification adjustments
Before tax effectTax effect
Retirement benefits liability adjustments
Total other comprehensive income¥ 1,950(79)

Thousands of U.S. dollars

2018

2018

¥ 3,974(133)$ 37,405(1,251)

1,871

3,841

36,153(563)(1,168)(10,993)

1,307

2,672

25,150

(91)

47

442

(91)

47

442

—

—

—

(91)

47

442

431

1,050

9,883

(531)
(99)

(570)
479

(5,365)
4,508(1,364)

30

(145)

(69)

333

3,134

¥ 1,147¥ 3,053$ 28,736

14. Research and Development Costs
Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2017 and 201841

Sekisui Plastics Co., Ltd.

amounted to ¥1,916 million and ¥2,014 million ($18,957 thousand),
respectively.

15. Derivatives and Hedge Accounting
The estimated fair value of derivative instruments outstanding at March 31, 2017 and 2018 for which hedge accounting has been applied is summarized as follows:
Millions of yen

2017
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
Forward foreign currency exchange contracts hedging
long-term accounts receivable accounted for by allocation method:
Selling / Hong Kong dollar

Maturing after one year

Fair value¥ 3,000¥ 3,000

(*1)

139

—

(*2)

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

—

(*1)

Thousands of U.S. dollars

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

$ 28,237

Fair value

—

(*1)

(*1) Because interest-rate currency swaps accounted for by integral hedge accounting are accounted for applying swap rates to underlying long-term loans, their fair value is included in that of the hedged long-term loans disclosed in Note 4.
(*2) When a forward foreign currency exchange contract meets the criteria for the allocation method, the net amount to be paid or received under the contract is added to or deducted from the amount of the hedged items. The fair value of the forward foreign currency exchange contract accounted for by the allocation method is included in that of thehedged account receivables.

16. 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 theweighted-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, 2017 and 2018 since neither the Company nor any of the consolidated subsidiaries had any potentially dilutive shares at March
31, 2017 and 2018.
The amounts per share of net assets have been computed

U.S. dollars

2017

2018

¥

¥

73.03

2018

75.33

$ 0.701,322.14

1,444.28

13.59

18.00

27.00

0.25

based on the number of shares of common stock outstanding at
the year end.
Two shares of common stock were consolidated into one shareon October 1, 2016. Net assets per share and profit attributableto owners of parent per share have been computed as if the consolidation of shares was executed on April 1, 2016.
Cash dividends per share represent the cash dividends declared as applicable to the respective years together with theinterim cash dividends paid.

Sekisui Plastics Co., Ltd.

42

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, 2017 and 2018 is summarized as follows:
Millions of yen

2017Profit attributable to owners of parent
Adjusted profit attributable to owners of parent
available for distribution to common stockholders

Thousands of U.S. dollars

2018

2018

¥ 3,404¥ 3,448$ 32,454¥ 3,404¥ 3,448$ 32,454

Thousands of shares

2017
Weighted-average number of shares of common stock outstanding

2018

46,61645,782

The financial data used in the computation of net assets per share based on the above method at March 31, 2017 and 2018 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

2017

2018

2018

¥ 61,363¥ 66,145$ 622,599

729¥ 60,634

731¥ 65,414

6,880$ 615,719

Thousands of shares

2017
Number of shares of common stock used in the calculation of net assets per share2018

45,86045,291

Number of shares of common stock as of March 31, 2017 used above was calculated based on the number after consolidation of shares.

17. Segment Information(a) Outline of segment information
The Group’s business mainly involves the manufacturing and sales ofplastic products. The Company has established departments basedon 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
those described 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
the same 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, 2017 and 2018 is as follows:
Millions of yen

2017
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

43

Sekisui Plastics Co., Ltd.

Industry

Total

Adjustments andeliminations(*1)

Consolidated¥ 62,233
2,467¥ 64,701¥ 3,802¥ 68,339¥ 40,165
1,874¥ 42,039¥ 1,969¥ 39,468¥ 102,398
4,342¥ 106,741¥ 5,771¥ 107,808¥—(4,342)¥ (4,342)¥ (722)¥ 11,862¥ 102,398—¥ 102,398¥ 5,049¥ 119,670¥ 1,579
—
0
845
(10)
354
2,394

¥ 1,606
10
5
348
—
—
2,861

¥

¥

¥

3,186
10
5
1,193
(10)
354
5,255

405
—
3
(1,054)
—
—
581

3,591
10
8
139
(10)
354
5,836

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

Adjustments andeliminations(*1)

Total

¥

Consolidated¥ 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)¥¥ 74,758¥ 42,581¥ 117,339¥ 14,434¥ 131,774¥ 1,796—¥ 1,794
21

¥

¥

¥

3,590
21

—

¥ 112,101

497
—

5,154

4,087
21

0

15

15

0

16

830

357

1,188

(1,021)

166

(6)

—

(6)

—

(6)

347

—

347

—

347

2,728

4,250

6,978

783

7,762

Adjustments andeliminations(*1)

Consolidated

Thousands of U.S. dollars

2018
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 losses of an affiliate
Investments in affiliates accounted for by the equity method
Increase in property, plant and equipment and intangible assets

Human Life

Industry

Total$ 622,439$ 432,718$ 1,055,167

34,807

14,57049,388(49,388)—$ 657,257$ 447,298$ 1,104,555$ (49,388)$ 1,055,167$ 33,113$ 26,402$

59,516$ (11,003)$$ 703,670$ 400,800$ 1,104,471$ 135,862$ 1,240,342$ 16,905$ 16,886

$

$

$

—

197

197

—

197

0

141

141

0

150

7,812

3,360

11,182(9,610)

1,562

(56)
3,266

—
—

(56)
3,266

—
—

(56)
3,266

25,67740,00365,681

7,370

73,060$33,791—$ 1,055,167

4,678

48,512

38,469(*1) Adjustments and eliminations in the preceding tables were as follows:(i) Segment income in the amounts of ¥722 million and ¥1,169 million ($11,003 thousand) for the years ended March 31, 2017 and 2018 consisted of elimination of inter-segment
transactions in the amounts of ¥(8) million and ¥0 million ($0 thousand), unallocable expenses in the amounts of ¥729 million and ¥1,169 million ($11,003 thousand), respectively and unrealized gain on property, plant and equipment in the amount of ¥1 million for the years ended March 31, 2017.
(ii) Segment assets in the amounts of ¥11,862 million and ¥14,434 million ($135,862 thousand) for the years ended March 31, 2017 and 2018, 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 ¥405 million and ¥497 million ($4,678 thousand) for the years ended March 31, 2017 and 2018, respectively, include amortization of 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 ¥581 million and ¥783 million ($7,370 thousand) for the years ended March 31, 2017 and2018, 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, 2017 and 2018 were summarized as follows:
Millions of yen

Thousands of U.S. dollars

2017

2018

Japan

¥ 85,344¥ 92,678

2018

Asia

14,211

16,041$

872,345
150,988

Other

2,842

3,381

31,824

Total¥ 102,398¥ 112,101$ 1,055,167

Sekisui Plastics Co., Ltd.

44

Property, plant and equipment by countries or areas grouped according to geographical classification at March 31, 2017 and 2018 were summarized as follows:
Millions of yen

Thousands of U.S. dollars

2017

2018

2018

Japan

¥ 42,862¥ 45,701$ 430,167

Asia

3,973

4,711

44,342

Other

3,677

3,437

32,351

Total¥ 50,513¥ 53,849$ 506,861(e) Information by major customer
The information by major customer for the years ended March 31, 2017 and 2018 was summarized as follows:
Millions of yen
Customer

Related segment

FP Corporation

Human Life

Thousands of U.S. dollars

2017

2018

2018

¥ 13,670¥ 14,216$ 133,810(f) Amortization of goodwill and unamortized balance of goodwill for the years ended and as of March 31, 2017 and 2018.
Millions of yen

2017
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

Adjustments andeliminations

Consolidated

¥—

¥ 10

¥—

¥ 10

—

94

—

94

Adjustments andeliminations

Consolidated

Millions of yen

2018
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

¥—

¥ 21

¥—

¥ 21

—

73

—

73

Adjustments andeliminations

Consolidated

Thousands of U.S. dollars

2018
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry

$—

$ 197

$—

$ 197

—

687

—

687

18. 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, 2018 was approved at a shareholders’ meeting held on June 22, 2018.

Cash dividends (¥15 (U.S. $0.14) per share)

45

Sekisui Plastics Co., Ltd.

Millions of yen

Thousands of U.S. dollars

2018

2018

¥ 679

$ 6,391Independent Auditor’s Report

Sekisui Plastics Co., Ltd.

46

Corporate Data (As of March 31, 2018)
Company nameSekisui Plastics Co., Ltd.

Founded

October 1, 1959

Paid-in capital¥16,533 million

Number of employees 2,101 (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

http://www.sekisuiplastics.com

Investor Information (As of March 31, 2018)
Stock Information

Shareholdings by Type of Shareholder

Common stock—authorized 124,751,000 shares

Foreigncorporations

Japanese
securities firms

15.0%

0.5%

Japanese individual
investors and others

Other Japanese
corporations

20.2%

39.0%

Common stock—issued

46,988,109 shares

Unit of trading

100 shares

Number of shareholders

5,012

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

25.3%
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

Employees’ Shareholding

1,727

3.81

Sekisui Jushi Corporation

1,419

3.13

Daido Life Insurance Company

1,418

3.12

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

1,400

3.08

FP Corporation

1,348

2.97

MUFG Bank, Ltd.

1,327

2.92

Asahi Kasei Chemicals Corporation

1,250

2.75

Denka Company Limited

1,250

2.75

Name

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.

47

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
http://www.sekisuiplastics.com

Investor Relations
http://www.sekisuiplastics.com/ir/index/

CSR Report
http://www.sekisuiplastics.com/ir/csr/index.html
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.
http://www.sekisuiplastics.com

1810SD249.9-500
1008SD249.1-1000