Annual Report
Year Ended March 31, 2022

HARIMA CHEMICALS GROUP, INC.

Table of Contents
1. Business Overview

1

2. Consolidated Business Performance Trends

3

3. Consolidated Financial Statements

4

4. Independent Auditorʼs Report39

5. Corporate Overview

44

6. Principal Subsidiaries

45

7. Directors and Corporate Auditors

46

Business Overview
Overall, the world economy showed a gradual recovery during the current fiscal year, although it wasaffected by the COVID 19 that continued from the previous year. This was supported by the progress of
COVID-19 vaccination and aggressive economic measures mainly in developed countries. In the second halfof 2021, global supply chain disruptions and soaring raw material prices affected economic activity overall.
On the other hand, in Japan, vaccination has been progressed and the number of infected people showeddeclining trend. But because of the re-spreading infection with mutant virus and soaring raw material prices,
recovery of Japanese economic activity has been stalled.
Under these circumstances, demand recovered from the previous year despite the COVID-19 crisis, ourgroup worked hard to expand sales. About the oversea business, in Europe and America, sales of adhesive
resins increased. At the same time, our subsidiaries of the Paper Chemicals Segment in China remained
stable. As a result, the whole sales increased than the previous year. Earnings also increased despite thesoaring prices of raw materials because of the increased sales. About the domestic business, sales volume ofalmost each product increased because of the recovered demand. As a result, both revenues and earnings
increased than the previous year.
As a result of these conditions, the group’s consolidated net sales for the current fiscal year increased by
13,242 million Yen (up 21.1%) year-on-year to 76,093 million Yen. Operating income increased by 1,674
million Yen (up 106.2%) to 3,250 million. Ordinary income increased by 2,340 million Yen (up 214.0%) to
3,433 million Yen. Net income attributable to Harima Chemicals Group, INC. in this fiscal year was 1,746
million Yen, increased by 654 million Yen (up 60.0%).
Status of Business Segments(Resin & Tall Oil Products)
In this segment, sales of almost all items exceeded the previous year. As a result, the sales increased by
2,782 million Yen (up 18.8%) to 17,566 million Yen and the operating income increased by 581 million Yen
to 90 million Yen though we impacted by high raw material prices in the second half of the current fiscal
year.
・Sales of paint resins increased because the delay in painting work due to the effects of the COVID 19
has been gradually resolved.
・Sales of printing ink resins was the same level with the previous year. Though the demand of printing
ink resins recovered at the first of 2021, because of the re-spreading infection with the COVID 19 after
August 2021, demand for inks used in commercial printing and newspapers declined again.
・Sales of synthetic rubber emulsifiers increased in the current fiscal year. There was an impact of thedecrease in the number of automobiles in Japan due to the shortage of semiconductors. However, demandfor commercial tires used in general exchange has increased which also contributed to the increase ofsales.
(Paper Chemicals)
In this segment, on the background of the increasing demand for corrugated cardboards, the sales increased
by 2,692 million Yen (up 14.6%) to 21,174 million Yen but the operating income decreased by 337 million
Yen (down 17.0%) to 1,650 million Yen due to the impact of high raw material prices.
・In Japan, demand for corrugated cardboards due to market expansion of processed foods and online
shopping increased. In addition, production of print information paper has recovered. As a result, salesin Japan increased due to increased production of paper and paperboard.
・In China, the production of paper and paperboard also has recovered. Because Chinese government
tightened import restrictions on used paper, low strength recycled paper in China needed to be reused.
As a result, demand for paper strengthening agents increased, sales in China increased steadily. But theoperating income decreased due to the impact of high raw material prices.
・In America, as demand for base paper of corrugated cardboard increased, production of paper andpaperboard increased. As a result, sales in America increased but operating income decreased also
because of high raw material prices.

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(Electronics Materials)
In this segment, sales of almost all items exceeded the previous year. Thanks to the strong demand forsemiconductors, the sales increased by 1,298 million Yen (up 25.9%) to 6,304 million Yen and the operating
income increased by 385 million Yen to 658 million Yen (up 141.8%) with the increase in sales.
・Sales of solder pastes increased because in the global automotive industry, demand for electronic
components increased due to automated driving and electrification.
・Aluminium brazing materials for automobile heat exchangers, which sales volume decreased due to theimpact of the COVID 19 in the previous year. But in this current fiscal year, with the increase in global
automobile production, demand for automobile heat exchangers has recovered and sales of aluminium
brazing materials also increased.
・Sales of functional resin for semiconductors, increased this current fiscal year. There has been strong
demand for semiconductors because of the expanding demand of personal computers and 5G
communication infrastructure with the spread of home teleworking.
(Lawter)In this segment, in Europe and America, where the vaccination has progressed, economic activity has
recovered. As a result, the sales increased by 6,450 million Yen (up 28.0%) to 29,518 million Yen. The
operating income also increased by 1,335 million Yen to 1,721 million Yen (up 345.8%) not only due to theincrease in sales but also because that we did rationalized production and progressed to pass on the rise in
raw material prices to the unit sales price.
・Sales of adhesive resin increased steadily. Though sales volume declined due to confused disruptions inSouth America and Oceania, thanks to market expansion of online shopping, demand for adhesive resin,which is used in the address label stickers, increased over the world. On the other hand, sales of resinsused in road marking paint also increased steadily.
・Printing ink resin, demand for which was sluggish on the background of digitization of information. But
in this current fiscal year, demand has recovered in some regions, such as North and South America. Of
course, we progressed to pass on the rise in raw material prices to the unit sales price. As a result, salesof printing ink resin increased.

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Consolidated Business Performance Trends(Millions of Yen unless otherwise stated)
77th Fiscal Year

78th Fiscal Year

79th Fiscal Year

80th Fiscal Year

(Fiscal year ended
March 2019)(Fiscal year ended
March 2020)(Fiscal year ended
March 2021)(Fiscal year ended
March 2022)

Net sales

78,58971,79962,851

76,093

Ordinary income

4,818

3,589

1,093

3,433

4,131

2,218

1,091

1,746

159.02

87.67

43.44

69.42

Total assets

72,871

71,39569,39078,905

Net assets

37,81137,74637,442

40,104

Category

Net income attributable
to Harima Chemicals
Group, INC.
Net income per share(Yen)(Notes) 1. Net income per share is calculated based on the weighted average number of issued shares during
the fiscal year after deducting treasury stocks.
2. We applied ASBJ Statement No.29, “Accounting Standard for Revenue Recognition” issued on
March 31,2020 form the 80th Fiscal year. The information of the 80th Fiscal year is calculated
based on the application of the new statement above.

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HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Balance Sheet
March 31, 2022

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 17)
Notes and accounts receivable (Note 17):
Trade notes
Trade accounts
Associated companies
Other
Allowance for doubtful receivables
Inventories (Note 5)
Other current assets
Total current assets
PROPERTY, PLANT AND EQUIPMENT (Note 6):
Land (Note 7)
Buildings and structures (Note 7)
Machinery and equipment
Lease assets (Note 16)
Construction in progress
Other assets
Total
Accumulated depreciation
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 17)
Investments in associated companies
Deferred tax assets (Notes 3 and 13)
Other assets
Allowance for doubtful accounts
Total investments and other assets¥

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)
2022

5,339

$

LIABILITIES AND EQUITY

2,237
17,707204
832(106 )
15,3782,647

2,413
14,874
176
803
(75 )
12,047
1,907

18,278144,677
1,667
6,798(866 )
125,648
21,626CURRENT LIABILITIES:
Short-term bank loans (Notes 8 and 17)
Current portion of long-term debt (Notes 8, 16, and 17)
Notes and accounts payable (Note 17):
Trade notes
Trade accounts
Associated companies
Construction and other
Income taxes payable (Note 13)
Other current liabilities

44,23835,567

361,451

Total current liabilities

8,292
18,60029,716
637
1,352
5,193
63,790(40,388 )

8,306
18,60728,886
769
693
5,084
62,345(39,894 )

67,751
151,973
242,798
5,205
11,04742,429521,203(329,995 )

23,402

22,451

191,208

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 8, 16, and 18)

3,187
5,676
969
1,446
(13 )

3,351
5,357
1,243
1,423
(2 )

26,04046,376
7,917
11,815(106 )

11,265

11,372

92,042EQUITY (Note 11):
Common stock, authorized 59,500,000 shares; issued,
26,080,396 shares in 2022 and 2021
Capital surplus
Retained earnings
Treasury stock – at cost: 914,657 shares in 2022 and 946,459
shares in 2021
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests

¥

3,422

43,623¥ 7,725359¥ 8,626506$ 63,118
2,933

979
9,411
195
1,628
376
2,477

776
7,139
166
1,463
309
1,917

7,999
76,894
1,593
13,302
3,072
20,23923,15020,902

189,150

LONG-TERM LIABILITIES:Long-term debt (Notes 8, 16, and 17)
Long-term deposits received (Note 17)
Liability for retirement benefits (Note 9)
Asset retirement obligations (Note 10)
Deferred tax liabilities (Note 13)
Other long-term liabilities

13,420
529
247
39
859
557

8,546
556
397
49
810
688

109,649
4,322
2,018
319
7,019
4,551

Total long-term liabilities

15,651

11,046

127,878

10,013
9,760
19,12810,013
9,765
18,337

81,812
79,745
156,287(965 )(998 )(7,885 )191
57(1,287 )(156 )
36,741
3,363

356(2,720 )(187 )
34,566
2,876

1,561
466
(10,516 )(1,275 )300,195
27,47840,10437,442

327,673¥ 78,905¥ 69,390$ 644,701

Total equity
TOTAL¥ 78,905¥ 69,390

TOTAL$ 644,701

See notes to consolidated financial statements.

-4-

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)2022

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2022

Millions of Yen
2022
2021
NET SALES (Note 14)

Thousands of
U.S. Dollars(Note 1)2022

¥ 76,093¥ 62,851$ 621,726

58,11647,888474,843

17,977

14,963

146,883

14,726

13,386

120,320

Operating income

3,251

1,577

26,563OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Rental income
Commission paid
Foreign exchange gain (loss)
Gain on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 6)
Loss on disposal of property, plant and equipment
Gain on sale of investment securities
Equity in earnings (losses) of associated companies
Other – net

125(273 )
35(122 )
56
0(439 )
(53 )
0
292
123

105
(261 )
34(8 )(348 )
12(342 )(53 )
1,553(110 )
158

1,021(2,231 )286(997 )
458
0(3,587 )(433 )
0
2,386
1,005

(256 )

740(2,092 )

2,995

2,317

24,471

634
248

607
210

5,180
2,026

882

817

7,206

NET INCOME

2,113

1,500

17,265NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS(367 )(409 )(2,999 )¥ 1,746¥ 1,091$ 14,266

COST OF SALES
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 12 and 15)

Other income (expenses) – net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 13):
Current
Deferred
Total income taxes

NET INCOME ATTRIBUTABLE TO OWNERS OF THE
PARENTYen
PER SHARE OF COMMON STOCK (Notes 2.t and 20):
Net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
-5-¥69.42
38.00

U.S. Dollars¥43.44
38.00

$0.57
0.31

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2022

Millions of Yen
2022
2021

Thousands of
U.S. Dollars(Note 1)2022

NET INCOME¥ 2,113¥ 1,500$ 17,265

OTHER COMPREHENSIVE INCOME (LOSS) (Note 19):
Unrealized loss on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive gain in associated companies
Total other comprehensive income (loss)(164 )
57
1,768
31
0
1,692

(516 )(255 )
65
0(706 )(1,340 )466
14,446253
013,825COMPREHENSIVE INCOME¥ 3,805¥ 794$ 31,090

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥3,103
702

¥358
436

$25,353
5,737

See notes to consolidated financial statements.

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HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2022
Thousands

BALANCE, APRIL 1, 2020
Net income attributable to owners of the parent
Cash dividends, ¥38.00 per share
Purchase of treasury stock
Disposal of treasury stock
OthersNet change in the year
BALANCE, MARCH 31, 2021
Net income attributable to owners of the parent
Cash dividends, ¥38.00 per share
Purchase of treasury stock
Disposal of treasury stock
OthersNet change in the year
BALANCE, MARCH 31, 2022

BALANCE, MARCH 31, 2021

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock

25,106¥ 10,013¥ 9,768¥ 18,201¥ (1,028 )¥ 872¥ (2,440 )Total

Noncontrolling
Interests

Total Equity¥ (250 )¥ 35,136¥ 2,610¥ 37,746

266

1,091
(955 )(0 )27
0(467 )

2,876

37,442

1,091(955 )(0 )28(516 )(280 )

63

1,091(955 )(0 )27
0(733 )

356(2,720 )(187 )

34,566

(0 )
30

(3 )
0

25,134

10,013

9,765

18,337(998 )

1,746(955 )(0 )31

25,165¥ 10,013¥ 9,760

1,746(955 )
(0 )
28

(0 )
33

(5 )

¥ 19,128¥ (965 )CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 81,812$ 79,786$ 149,824$ (8,154 )Net income attributable to owners of the parent
Cash dividends, $0.31 per share
Purchase of treasury stock
Disposal of treasury stock
OthersNet change in the year
BALANCE, MARCH 31, 2022

Millions of Yen
Accumulated Other Comprehensive Income
Unrealized
Gain onDeferred Gain
ForeignDefinedAvailable-forCurrency
on Derivatives
Retirement
Sale
Translation
under Hedge
BenefitSecurities
Adjustments
Accounting
Plans(165 )

¥ 57

1,433

31

1,356

487

1,843

¥ 191

¥ 57

¥ (1,287 )¥ (156 )¥ 36,741¥ 3,363¥ 40,104

Total

Noncontrolling
Interests

Total Equity$ 282,425$ 23,499$ 305,924

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Unrealized
Gain onDeferred Gain
ForeignDefinedAvailable-forCurrency
on Derivatives
Retirement
Sale
Translation
under Hedge
BenefitSecurities
Adjustments
AccountingPlans$ 2,909$ (22,224 )$ (1,528 )

14,266(7,803 )$ 81,812$ 79,745

14,266(7,803 )
(0)
228

(0)
269

(41 )

$ 156,287$ (7,885 )See notes to consolidated financial statements.

-7-

1,746
(955 )(0 )28

14,266(7,803 )(0)228(1,348 )$ 466

11,708253

11,0793,979

15,058$ 1,561$ 466$ (10,516 )$ (1,275 )$ 300,195$ 27,478$ 327,673

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2022

Millions of Yen
2022
2021
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes – paid
Depreciation and amortization
Loss on impairment of long-lived assets
Foreign exchange (gain) loss
Gain on sales of property, plant and equipment
Loss (gain) on sales of investment securities
Changes in assets and liabilities:
Increase in trade notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in trade notes and accounts
payableOther – net
Total adjustments
Net cash provided by operating activities

Thousands of
U.S. Dollars(Note 1)2022

¥ 2,995¥ 2,317$ 24,471(587 )
2,175
439
(56 )
(21 )
1

(783 )
2,353
342
372
(12 )
(1,567 )(4,796 )17,771
3,587(458 )(172 )
8(1,745 )(2,572 )(100 )
554(14,258 )(21,015 )

2,006
198
(162 )
2,833(596 )
128
691
3,008

16,3901,619(1,324 )23,147(2,589 )26(267 )(4 )
5(610 )(3,439 )(2,226 )260(69 )(1,788 )2,649(684 )(1,858 )(21,154 )212(2,182 )(33 )41(4,983 )(28,099 )FINANCING ACTIVITIES:
Decrease in short-term bank loans – net(1,144 )Proceeds from long-term debt
5,000
Repayments of long-term debt
(536 )
Dividends paid
(956 )
Other – net(257 )Net cash provided by (used in) financing activities 2,107(3,980 )5,005(1,453 )(955 )(182 )(1,565 )(9,347 )40,853(4,379 )(7,811 )(2,100 )17,216

416

(75 )

3,399

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

1,917(490 )

15,663

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,422

3,912

27,960¥ 5,339¥ 3,422$ 43,623

INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Other – net
Net cash used in investing activities

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

-8-

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2022
1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act and its related
accounting regulations, and in conformity with accounting principles generally accepted in Japan("Japanese GAAP"), which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the 2021 consolidated financial statements to conform to the classifications usedin 2022.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich HARIMA CHEMICALS GROUP, INC. (the "Company") is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been made at the rate of ¥122.39 to $1, theapproximate rate of exchange at March 31, 2022. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any
other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation – The consolidated financial statements include the accounts of the Company
and all its subsidiaries (together, the "Group").
Under the control and influence concepts, those companies in which the Company, directly or
indirectly, is able to exercise control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise significant influence are accounted
for by the equity method.
The excess of the cost of acquisition over the fair value of the net assets of an acquired
subsidiary at the date of acquisition is amortized over a period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation.
All material unrealized profit included in assets resulting from transactions within the Group isalso eliminated.

-9-

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements – Under Accounting Standards Board of Japan ("ASBJ") Practical Issues
Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements," the accounting policies andprocedures applied to a parent company and its subsidiaries for similar transactions and events
under similar circumstances should be unified for the preparation of the consolidated financial
statements. However, financial statements prepared by foreign subsidiaries in accordance witheither International Financial Reporting Standards or generally accepted accounting principles
in the United States of America (Financial Accounting Standards Board Accounting Standards
Codification) tentatively may be used for the consolidation process, except for the following
items that should be adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity
through other comprehensive income; (c) expensing capitalized development costs of R&D;(d) cancellation of the fair value model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost model of accounting; and (e) recording again or loss through profit or loss on the sale of an investment in an equity instrument for thedifference between the acquisition cost and selling price, and recording impairment loss throughprofit or loss for other-than-temporary declines in the fair value of an investment in an equity
instrument, where a foreign subsidiary elects to present in other comprehensive income
subsequent changes in the fair value of an investment in an equity instrument.

c.

Unification of Accounting Policies Applied to Foreign Associated Companies for the
Equity Method – ASBJ Statement No. 16, "Accounting Standard for Equity Method of
Accounting for Investments," requires adjustments to be made to conform the associate's
accounting policies for similar transactions and events under similar circumstances to those of
the parent company when the associate's financial statements are used in applying the equity
method, unless it is impracticable to determine such adjustments. In addition, financial
statements prepared by foreign associated companies in accordance with either International
Financial Reporting Standards or generally accepted accounting principles in the United Statesof America tentatively may be used in applying the equity method if the following items areadjusted so that net income is accounted for in accordance with Japanese GAAP, unless they
are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or lossof pensions that has been recorded in equity through other comprehensive income;(c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model ofaccounting for property, plant and equipment and investment properties and incorporation of thecost model of accounting; and (e) recording a gain or loss through profit or loss on the sale ofan investment in an equity instrument for the difference between the acquisition cost and selling
price, and recording impairment loss through profit or loss for other-than-temporary declines in
the fair value of an investment in an equity instrument, where a foreign associate elects topresent in other comprehensive income subsequent changes in the fair value of an investment
in an equity instrument.

- 10 -

d.

Business Combinations – Business combinations are accounted for using the purchasemethod. Acquisition-related costs, such as advisory fees or professional fees, are accounted foras expenses in the periods in which the costs are incurred. If the initial accounting for abusiness combination is incomplete by the end of the reporting period in which the businesscombination occurs, an acquirer shall report in its financial statements provisional amounts forthe items for which the accounting is incomplete. During the measurement period, which shallnot exceed one year from the acquisition, the acquirer shall retrospectively adjust theprovisional amounts recognized at the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date and that would have affected themeasurement of the amounts recognized as of that date. Such adjustments shall be recognized
as if the accounting for the business combination had been completed at the acquisition date.
The acquirer recognizes any bargain purchase gain in profit or loss immediately on theacquisition date after reassessing and confirming that all of the assets acquired and all of theliabilities assumed have been identified after a review of the procedures used in the purchaseprice allocation. A parent's ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrollinginterest is adjusted to reflect the change in the parent's ownership interest in its subsidiary while
the parent retains its controlling interest in its subsidiary. Any difference between the fair valueof the consideration received or paid and the amount by which the noncontrolling interest is
adjusted is accounted for as capital surplus as long as the parent retains control over its
subsidiary.

e.

Cash Equivalents – Cash equivalents are short-term investments that are readily convertible
into cash and exposed to insignificant risk of changes in value. Cash equivalents include time
deposits and certificates of deposit, all of which mature or become due within three months ofthe date of acquisition.

f.

Inventories – Inventories are principally stated at the lower of cost, determined by the movingaverage cost method, or net selling value.
The inventories of certain consolidated foreign subsidiaries are stated at the lower of cost,
determined by the first-in, first-out method, or net selling value.

g.

Investment Securities – Investment securities are classified and accounted for as follows:
Marketable available-for-sale securities are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate component of equity.
Nonmarketable available-for-sale equity securities are stated at cost determined by the movingaverage method. For other-than-temporary declines in fair value, investment securities are
reduced to net realizable value by a charge to income.
Effective April 1, 2021, the Company applied ASBJ Statement No. 30, "Accounting Standard for
Fair Value Measurement," etc. The Company applied the New Accounting Standards
prospectively. As a result, there is no impact on the consolidated financial statements for 2022.

h.

Property, Plant and Equipment – Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally computed by the declining-balance method, while the straight-line
method is applied to buildings acquired after April 1, 1998, and building improvements andstructures acquired on or after April 1, 2016. Certain domestic subsidiaries and foreignsubsidiaries apply the straight-line method, using rates based on the estimated useful lives of
the assets. The range of useful lives is from 5 to 50 years for buildings and from 4 to 17 years
for machinery and equipment.

i.

Long-Lived Assets – The Group reviews its long-lived assets for impairment whenever eventsor changes in circumstance indicate the carrying amount of an asset or asset group may not berecoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual
disposition of the asset, or the net selling value at disposition.
- 11 -

j.

Software – Amortization of capitalized software costs is computed using the straight-line
method over five years, the estimated useful life of the assets.

k.

Retirement and Pension Plans – The Company and certain domestic subsidiaries havefunded defined benefit pension plans, defined contribution pension plans, and severance lumpsum payment plans covering substantially all of their employees. Certain foreign subsidiaries
have adopted funded defined benefit plans and defined contribution pension plans.
The Company accounts for the liability for retirement benefits based on the projected benefit
obligations and plan assets at the balance sheet date. The projected benefit obligations are
attributed to periods on a benefit formula basis. Actuarial gains and losses and past service
costs that are yet to be recognized in profit or loss are recognized within equity (accumulated
other comprehensive income), after adjusting for tax effects and are recognized in profit or loss
over 14 years, no longer than the expected average remaining service period of the employees.
Prior service costs are recognized in the period in which they are incurred.
Retirement allowances for directors are recorded as a liability at the amount that would be
required if all directors retired at each balance sheet date.

l.

Asset Retirement Obligations – An asset retirement obligation is recorded for a legal
obligation imposed either by law or contract that results from the acquisition, construction,
development, and the normal operation of a tangible fixed asset and is associated with theretirement of such tangible fixed asset. The asset retirement obligation is recognized as the sumof the discounted cash flows required for the future asset retirement and is recorded in the
period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement
obligation is incurred, the liability should be recognized when a reasonable estimate of the asset
retirement obligation can be made. Upon initial recognition of a liability for an asset retirement
obligation, an asset retirement cost is capitalized by increasing the carrying amount of therelated fixed asset by the amount of the liability. The asset retirement cost is subsequently
allocated to expense through depreciation over the remaining useful life of the asset. Over time,
the liability is accreted to its present value each period. Any subsequent revisions to the timingor the amount of the original estimate of undiscounted cash flows are reflected as an
adjustment to the carrying amount of the liability and the capitalized amount of the related asset
retirement cost.

m. Revenue Recognition – The Company and its domestic subsidiaries implement the AccountingStandards for Revenue Recognition (ASBJ Statement No. 29 revised on March 31, 2020), etc.
Foreign subsidiaries implement "Revenue from Contract(s) with Customers" (IFRS 15 and ASC606), recognizing revenue at the amount expected to be received in exchange for goods orservices when control of the promised goods or services is transferred to customers.
(1) The nature of performance obligations for each of the Group's major industry – The Group's
main business segments including - Resin & Tall Oil Products, Paper Chemicals,Electronics Materials and Lawter, have the obligation to perform the contract and deliver
the goods according to the sales contract with the customer.
(2) The timing when performance obligations are satisfied – Since the sale of products andcommodities is a performance obligation satisfied when the customer gains control over the
products and commodities, revenue is recognized when the performance obligationconsidered to be completed. However, for domestic shipment from factories, the Company
applies paragraph 98 of the Guidance on Accounting Standards for Revenue Recognition(ASBJ Guidance No. 30 revised on March 26, 2021) to recognize revenue at the time of
shipment.
Effective April 1, 2021, the Company and its domestic subsidiaries adopted ASBJ Statement
No. 29, "Accounting Standard for Revenue Recognition," etc. and recognizes revenue at theamount expected to be received in exchange for promised goods or services when control of
the goods or services is transferred to customers. As a result, under the New AccountingStandards, in buy-sell transactions, the Company does not recognize termination of paid
supplies if the Company has the obligation to buy them back, while under the previous
accounting standards, the Company recognize termination of them.
- 12 -

The Company retrospectively applied ASBJ Statement No. 29 and there was no cumulative
effect to the retained earnings at April 1, 2021. Also, the effects of this accounting change for2022 were insignificant.
n.

Research and Development Costs – Research and development costs are charged to income
as incurred.

o.

Leases – Finance lease transactions are capitalized by recognizing leased assets and leased
obligations in the balance sheet.
All other leases are accounted for as operating leases.

p.

Bonuses to Directors – Bonuses to directors are accrued at the end of the year to which suchbonuses are attributable.

q.

Income Taxes – The provision for income taxes is computed based on the pretax income
included in the consolidated statement of operations. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis of assets and liabilities.
Deferred taxes are measured by applying currently enacted income tax rates to the temporary
differences. The Group files a tax return under the consolidated corporate-tax system, whichallows companies to base tax payments on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.

r.

Foreign Currency Transactions – All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated into Japanese yen at the exchange
rates at the balance sheet date. The foreign exchange gains and losses from translation arerecognized in the consolidated statement of operations to the extent that they are not hedged byforward exchange contracts.

s.

Foreign Currency Financial Statements – The balance sheet accounts of the consolidated
foreign subsidiaries are translated into Japanese yen at the current exchange rate as of thebalance sheet date except for equity, which is translated at the historical rate. Differences
arising from such translation are shown as "Foreign currency translation adjustments" underaccumulated other comprehensive income in a separate component of equity. Revenue andexpense accounts of consolidated foreign subsidiaries are translated into yen at the averageexchange rate.

t.

Derivative and Hedging Activities – The Group uses derivative financial instruments tomanage its exposures to fluctuations in interest rates. Interest rate swaps are utilized by theGroup to reduce interest rate risks. The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives
are recognized as either assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the consolidated statement of operations; and (2) for
derivatives used for hedging purposes, if such derivatives qualify for hedge accounting becauseof high correlation and effectiveness between the hedging instruments and the hedged items,
gains or losses on derivatives are deferred until maturity of the hedged transactions.
Foreign currency forward contracts employed to hedge foreign exchange exposures for export
sales are measured at fair value and the unrealized gains/losses are recognized in income.
Forward contracts applied for forecasted (or committed) transactions are also measured at fairvalue but the unrealized gains/losses are deferred until the underlying transactions arecompleted.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value, but the differential paid or received under the swap
agreements is recognized and included in interest expense.

- 13 -

u.

Per Share Information – Basic net income per share is computed by dividing net income
attributable to common shareholders by the weighted-average number of common shares
outstanding for the period.
Cash dividends per share presented in the accompanying consolidated statement of operations
are dividends applicable to the respective fiscal years, including dividends to be paid after theend of the year.

v.

3.

Accounting Changes and Error Corrections – Under ASBJ Statement No. 24, "AccountingStandard for Accounting Changes and Error Corrections," and ASBJ Guidance No. 24,"Guidance on Accounting Standard for Accounting Changes and Error Corrections," accounting
treatments are required as follows: (1) Changes in Accounting Policies—When a new
accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional
provisions, in which case the entity shall comply with the specific transitional provisions.
(2) Changes in Presentation—When the presentation of financial statements is changed, priorperiod financial statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates—A change in an accounting estimate is accounted for in
the period of the change if the change affects that period only, and is accounted forprospectively if the change affects both the period of the change and future periods.
(4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is
discovered, those statements are restated.

SIGNIFICANT ACCOUNTING ESTIMATE
Valuation of deferred tax assets(1) Carrying amounts
Millions of Yen
2022
2021
Deferred tax assets¥969¥1,243Thousands of
U.S. Dollars
2022$7,917(2) Information on the significant accounting estimate
Net deferred tax assets were ¥969 million ($7,917 thousand) as of March 31, 2022, of which¥729 million ($5,956 thousand) was recorded relating to tax loss carryforwards at LAWTER
Europe BV. Under the accounting principles generally accepted in the United States of America,
which LAWTER Europe BV applies, a valuation allowance is generally provided to offset
deferred tax assets if, based upon the available evidence, it is more likely than not that some or
all of the deferred tax assets will not be realized. Future estimated taxable income is used todetermine the recoverability of the deferred tax assets. But due to the deterioration of thebusiness environment and the impact of COVID-19, it could be necessary to revise theassumptions used in the estimation. In this case, related valuation allowances may be recorded
to offset the deferred tax assets in the next consolidated fiscal year.
4.

INVESTMENT SECURITIESInvestment securities as of March 31, 2022 and 2021, consisted of the following:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Non-current:
Equity securities¥ 3,187¥ 3,351$ 26,040

Total¥ 3,187¥ 3,351$ 26,040- 14 -

The costs and aggregate fair values of investment securities as of March 31, 2022 and 2021, wereas follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2022

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities¥2,800¥596¥ (231 )¥3,165¥2,802¥600¥(73 )¥3,329Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2021
Securities classified as:
Marketable available-for-sale:
Equity securities

March 31, 2022
Securities classified as:
Marketable available-for-sale:
Equity securities

Cost$22,878$4,870$ (1,888 )$25,860

Carrying amounts of nonmarketable available-for-sale securities as of March 31, 2022 and 2021,
were as follows:
Millions of Yen
2022
2021
Nonmarketable available-for-sale:
Equity securities

¥22

¥22

Thousands of
U.S. Dollars
2022
$180

The information for available-for-sale securities which were sold during the years ended March 31,
2022 and 2021, were as follows:
Millions of Yen
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2022
Available-for-sale:
Equity securities

¥5

¥1

Total

¥5

¥1

March 31, 2021
Available-for-sale:
Equity securities¥ 2,657¥ 1,576¥1

Total¥ 2,657¥ 1,576¥1

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2022
Available-for-sale:
Equity securities

$ 41

$8

Total

$ 41

$8

- 15 -

5.

INVENTORIESInventories as of March 31, 2022 and 2021, consisted of the following:
Millions of Yen
2021
2022

6.

Thousands of
U.S. Dollars
2022

Finished products
Work in process
Raw materials and supplies¥ 6,705365
8,308¥ 5,084378
6,585$ 54,784
2,982
67,882

Total¥ 15,378¥ 12,047$ 125,648

LONG-LIVED ASSETSThe Group recorded impairment losses of ¥439 million ($3,587 thousand) and ¥342 million for theyears ended March 31, 2022 and 2021, respectively. The Group recognized a decline in value of agolf course, hotel facilities, and paper chemicals facilities of the Hokkaido Plant for the year ended
March 31, 2021. Also, the Group recognized a decline in value of a golf course and hotel facilities forthe year ended March 31, 2022. The impairment loss was recognized since the recoverable value ofthe assets was lower than the carrying amounts of the assets. The recoverable value of the assets
was measured at the fair value considering a third-party appraisal report for the facility.

7.

INVESTMENT PROPERTYThe Group owns certain rental properties, such as office buildings and land. The net of rental
income and operating expenses for those rental properties for the years ended March 31, 2022 and
2021, were ¥33 million ($269 thousand) and ¥91 million, respectively.
In addition, the carrying amounts, changes in such balances, and market prices of such properties
were as follows:

April 1,2021
¥1,888

April 1,2020
¥2,009April 1,2021
$15,426

Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2022¥34¥1,922Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2021¥(120)¥1,889Thousands of U.S. Dollars
Carrying Amount
Increase/
March 31,
Decrease
2022$279$15,705

Fair Value
March 31,2022
¥2,840Fair Value
March 31,2021
¥2,796
Fair Value
March 31,2022
$23,205

Notes:1)

Carrying amount recognized in the consolidated balance sheets is net of accumulated
depreciation and accumulated impairment losses, if any.

- 16 -

8.

2)

Increase during the fiscal year ended March 31, 2022, primarily represents the capital
expenditure for current investment properties of ¥521 million ($4,257 thousand), and thedecrease primarily represents depreciation of ¥65 million ($531 thousand) and impairment
loss of ¥439 million ($3,587 thousand). Increase during the fiscal year ended March 31,
2021, primarily represents the capital expenditure for current investment properties of ¥155
million, and the decrease primarily represents depreciation of ¥45 million and impairment
loss of ¥230 million.

3)

Fair value of properties is measured by the Group in accordance with the Real-EstateAppraisal Standard.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2022 and 2021, consisted of an outstanding balance of lineof credit, notes to banks and bank overdrafts. The average interest rates applicable to the short-termbank loans as of March 31, 2022 and 2021, were 0.9% and 0.7%, respectively. As of March 31,
2022 and 2021, the total committed line of credit was ¥6,000 million ($49,024 thousand) and ¥6,000
million, and unused balance was ¥6,000 million ($49,024 thousand) and ¥5,000 million, respectively.
Long-term debt as of March 31, 2022 and 2021, consisted of the following:Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
Unsecured loans from banks and other financial
institutions, due serially to 2032 with interest
rates ranging from 0.5% to 2.3% (2022) andfrom 0.5% to 3.7% (2021)
Obligations under finance leases
Total
Less current portion¥ 12,974
805
13,779(359 )¥ 8,162890
9,052(506 )$ 106,005
6,577
112,582(2,933 )Long-term debt, less current portion¥ 13,420¥ 8,546$ 109,649

Annual maturities of long-term debt as of March 31, 2022, for the next five years and thereafter wereas follows:
Millions of
Yen

Year Ending March 31
2023
2024
2025
2026
2027
2028 and thereafter

¥

359
6,695
1,226
1
0
5,498

Total

¥ 13,779

Thousands of
U.S. Dollars$

2,933
54,702
10,0178
044,922$ 112,582

Certain bank loans and the commitment lines of credit are subject to financial covenants, which use
total equity and continuous operating income without extraordinary items for the most recent year as
credit risk indicators, and require the Group to maintain the financial measures above a certain level.
Based on the financial results for the years ended March 31, 2022 and 2021, the covenants were
not breached since the Group met the requirements.

- 17 -

9.

RETIREMENT AND PENSION PLANS
The Company and certain domestic subsidiaries have a defined contribution plan and a defined
benefit plan, including a defined corporate pension plan and retirement lump sum plan. Certain
foreign subsidiaries have defined contribution plans and defined benefit plans. Certain domestic
subsidiaries apply the simplified method to calculate liabilities for retirement benefits and retirement
benefit costs.
In addition, the Company and certain domestic subsidiaries participate in multi-employer pension
plans. Since the pension assets attributable to the Company and certain domestic subsidiaries
cannot be reliably determined based on their contributions, the plan is accounted for as a defined
contribution plan.
Also, a certain domestic subsidiary has a severance payment plan for directors. The retirement
benefits for directors are paid subject to the approval of the shareholders in accordance with theCompanies Act of Japan (the "Companies Act"). The liability for retirement benefits for directors asof March 31, 2022 and 2021 was ¥5 million ($41 thousand) and ¥4 million, respectively, andincluded in liability for retirement benefits in the consolidated balance sheet.
<1> Defined Benefit Plan
(1) The changes in defined benefit obligation for the years ended March 31, 2022 and 2021,
were as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Balance at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Foreign currency translation differences
Others¥ 3,080
180
21
(31 )
(247 )
21
7¥ 3,019180
2250(224 )
26
7$ 25,165
1,471
172(253 )(2,018 )172
56

Balance at end of year

¥ 3,031¥ 3,080$ 24,765(2) The changes in plan assets for the years ended March 31, 2022 and 2021, were as follows:
Millions of Yen
2021
2022

Thousands of
U.S. Dollars
2022

Balance at beginning of year
Expected return on plan assets
Actuarial (losses) gains
Contributions from the employer
Benefits paid
Foreign currency translation differences
Others¥ 2,790
79
(25 )
251
(247 )
177¥ 2,16846
113
660(224 )
22
5$ 22,796
645(204 )
2,051(2,018 )139
57

Balance at end of year

¥ 2,872¥ 2,790$ 23,466- 18 -

(3) The changes in defined benefit obligation under the simplified method for the years ended
March 31, 2022 and 2021, were as follows:
Millions of Yen
2021
2022

Thousands of
U.S. Dollars
2022

Balance at beginning of year
Periodic benefit costs
Benefits paid
Foreign currency translation differences

¥ 103
(15 )
(9 )
4

¥ 146
(9 )
(31 )
(3 )

$ 842
(123 )(74 )33

Balance at end of year

¥ 83

¥ 103

$ 678

(4) Reconciliation between the liability recorded in the consolidated balance sheet and thebalances of defined benefit obligation and plan assets as of March 31, 2022 and 2021, was
as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 3,031(2,872 )159
83¥ 3,080(2,790 )290
103$ 24,765(23,466 )
1,299
678

Net liability arising from defined benefit
obligation

¥

¥

$

242

393

Millions of Yen
2022
2021

1,977

Thousands of
U.S. Dollars
2022

Liability for retirement benefits

¥ 242

¥ 393

$ 1,977

Net liability arising from defined benefit
obligation

¥ 242

¥ 393

$ 1,977(5) The components of net periodic benefit costs for the years ended March 31, 2022 and
2021, were as follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Recognized prior service cost
Periodic benefit cost in simplified method
Others

¥ 180
21
(79 )
20
4
(14 )
2

¥ 180
22
(46 )
37
4
(8 )

$ 1,471172(645 )
163
33(114 )
16

Net periodic benefit costs

¥ 134

¥ 189

$ 1,096- 19 -

(6) Amounts recognized in other comprehensive income (before income tax effect) in respectof defined retirement benefit plans for the years ended March 31, 2022 and 2021, were as
follows:
Millions of Yen
2021
2022

Thousands of
U.S. Dollars
2022

Prior service cost
Actuarial gains (losses)
Others

¥ 4
28
(4 )

¥

4
(101 )
(4 )

$ 33
229
(34 )

Total

¥ 28

¥ (101 )$ 228(7) Amounts recognized in accumulated other comprehensive income (before income tax
effect) in respect of defined retirement benefit plans as of March 31, 2022 and 2021, wereas follows:
Millions of Yen
2022
2021

Thousands of
U.S. Dollars
2022

Unrecognized prior service cost
Unrecognized actuarial losses

¥ 39
183

¥ 42
208

$ 319
1,495

Total

¥ 222

¥ 250

$ 1,814(8) Plan assets as of March 31, 2022 and 2021a.

Components of plan assets
Plan assets consisted of the following:

b.

2022

2021

Debt securities in Japan
Equity securities in Japan
Debt securities in other countries
Equity securities in other countries
Cash and time deposits
Insurance asset (general account)
Others

9.0 %
11.7
3.1
11.7
0.6
63.3
0.6

9.0 %
11.3
4.0
11.5
0.5
63.4
0.3

Total

100.0 %

100.0 %

Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term
rates of return which are expected currently and in the future from the various
components of the plan assets.

(9) Assumptions used for the years ended March 31, 2022 and 2021, were set forth as follows:

Discount rate
Expected rate of return on plan assets- 20 -

2022

2021

Mainly 0.7%
Mainly 3.0%

Mainly 0.7%
Mainly 2.0%

<2> Defined Contribution Plan
The amount of contributions required for the defined contribution plan of the Group for the years
ended March 31, 2022 and 2021, was ¥272 million ($2,228 thousand) and ¥210 million,
respectively.
<3> Multi-Employer Pension Plan
The contributions to the multi-employer plan, which are accounted for using the same method
as a defined contribution plan, were ¥89 million ($727 thousand) and ¥86 million for the years
ended March 31, 2022 and 2021, respectively.
(1) The funded status of the multi-employer plan as of March 31, 2021 and 2020, was asfollows:
Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

Plan assets
Actuarial liabilities of pension plan

¥ 39,662
66,209¥ 35,561
67,611$ 324,062
540,967

Net balance¥ (26,547 )¥ (32,050 )$ (216,905 )(2) The contribution ratio of the Group in the multi-employer plan for the years ended March
31, 2021 and 2020, were 2.1% and 2.1%, respectively.
(3) Supplementary explanation
The above information is obtained from the latest available information.
The net balance in (1) above is mainly caused by past service cost of ¥31,794 million($259,776 thousand) for 2021 and ¥32,708 million for 2020, and a deficiency brought
forward of ¥5,246 million ($42,863 thousand) for 2021 and ¥658 million for 2020. Past
service cost under the plan is amortized on a straight-line basis over 23 years, and thespecial contributions of ¥38 million ($310 thousand) for 2021 and ¥38 million for 2020,
which are utilized for such amortization, were expensed in the consolidated statement ofincome of the Group.
The ratios in (2) above do not represent the actual actuarial liability ratio of the Group.
10.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2022 and 2021, were as
follows:
Millions of Yen
2022
2021
Balance at beginning of year
Balance at end of year

¥ 49
39

- 21 -¥ 49
49

Thousands of
U.S. Dollars
2022
$ 400
319

11.

EQUITYJapanese companies are subject to the Companies Act. The significant provisions in the Companies
Act that affect financial and accounting matters are summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally, forcompanies that meet certain criteria including (1) having a Board of Directors, (2) having
independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service ofthe directors being prescribed as one year rather than the normal two-year term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any
time during the fiscal year if the company has prescribed so in its articles of incorporation. With
respect to the third condition above, the Board of Directors of companies with (a) board
committees (namely, appointment committee, compensation committee, and audit committee)or (b) an audit and supervisory committee (as implemented under the Companies Act effective
May 1, 2015) may also declare dividends at any time because such companies, by nature, meetthe criteria under the Companies Act. The Company is organized as a company with an audit
and supervisory committee, effective June 25, 2015. The Company meets all the above criteria
and, accordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at
any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) toshareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act
provides certain limitations on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount available for distribution to the shareholders, but
the amount of net assets after dividends must be maintained at no less than ¥3 million.

b.

Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated asa legal reserve (a component of retained earnings) or as additional paid-in capital (a componentof capital surplus) depending on the equity account charged upon the payment of such
dividends until the aggregate amount of legal reserve and additional paid-in capital equals 25%of the common stock. Under the Companies Act, the total amount of additional paid-in capitaland legal reserve may be reversed without limitation. The Companies Act also provides that
common stock, legal reserve, additional paid-in capital, other capital surplus, and retained
earnings can be transferred among the accounts within equity under certain conditions upon
resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose ofsuch treasury stock by resolution of the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders, which isdetermined by a specific formula. Under the Companies Act, stock acquisition rights are now
presented as a separate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.

- 22 -

12.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2022 and 2021,
principally consisted of the following:
Millions of Yen
2021
2022
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development

13.

¥ 3,820
306
3,839
307
258
2,537

¥ 3,426
212
3,223
317
254
2,599

Thousands of
U.S. Dollars
2022$ 31,212
2,500
31,3672,508
2,108
20,729INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes
which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for
the years ended March 31, 2022 and 2021. Foreign subsidiaries are subject to the income taxes of
the countries in which they operate.
The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2022 and 2021, were as follows:
Millions of Yen
2022
2021
Deferred tax assets:
Tax loss carryforwards
Impairment loss on long-lived assets
Loss on revaluation of investment securities
Retirement benefits to directors
Unrealized gain on property, plant andequipment
OthersTotal of tax loss carryforwards and temporary
differences
Less valuation allowance for tax loss
carryforwards
Less valuation allowance for temporary
differences
Total valuation allowance
Deferred tax assets
Deferred tax liabilities:
Reserve for deferred gains on sales of property,
plant and equipment
Unrealized gain on available-for-sale securities
Undistributed earnings of foreign subsidiaries
Depreciation of foreign subsidiaries
Intangible fixed assets of foreign subsidiaries
OthersDeferred tax liabilities
Net deferred tax assets- 23 -

Thousands of
U.S. Dollars
2022¥ 1,4641,584
64
1¥ 1,653
1,481
66
1$ 11,962
12,942
523
8

97
964

97
902

793
7,876

4,174

4,200

34,104(705 )(612 )(5,760 )(1,738 )(2,443 )¥ 1,731(1,634 )(2,246 )¥ 1,954(14,201 )(19,961 )$ 14,143¥(46 )(163 )(461 )(715 )(21 )(215 )¥ (1,621 )

¥

(47 )
(162 )(327 )(683 )(50 )(252 )¥ (1,521 )

$

¥

¥

$

110

433

(376 )(1,332 )(3,767 )(5,842 )(172 )(1,756 )$ (13,245 )898

The expiration of tax loss carryforwards, the related valuation allowances, and the resulting net
deferred tax assets as of March 31, 2022 and 2021, were as follows:

March 31, 2022
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

1 Year or
Less

¥

After
1 Yearthrough
2 Years¥After
2 Years
through
3 Years¥

Millions of Yen
After
After
4 Years
3 Years
throughthrough
5 Years
4 Years

After
5 Years

Total

¥ 26

¥ 15

¥ 1,423¥ 1,464

(13 )

(15 )

(677 )(705 )

746

759

¥ 19

¥ 1,529¥ 1,653

(88 )

(14 )

(510 )(612 )

17

5

1,019

1,041

Thousands of U.S. Dollars
After
After
After
4 Years
3 Years
2 Years
throughthroughthrough
5 Years
4 Years
3 Years

After
5 Years

Total

$

13

March 31, 2021
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

March 31, 2022
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards¥ 105

1 Year or
Less

$

¥

¥

After
1 Yearthrough
2 Years

$

¥

$ 212

$ 123

$ 11,627$ 11,962(106 )(123 )(5,531 )(5,760 )

6,096

6,202

106

Net deferred tax assets relating to tax loss carryforwards were ¥759 million ($6,202 thousand) and¥1,041 million for the years ended March 31, 2022 and 2021, respectively. They were mainly
recorded at LAWTER Europe BV as a result of future taxable income consideration.

- 24 -

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflectedin the accompanying consolidated statement of operations for the years ended March 31, 2022 and
2021, were as follows:

14.

2022

2021

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Inhabitant tax on per capita basis
Difference of income tax rates applicable to income in certain
foreign countries
Increase in valuation allowance
Tax credit
Undistributed earnings of foreign subsidiaries
Other – net

30.6 %
2.8
1.1

30.6 %
0.5
1.4(10.7 )
4.2
(1.1 )
4.5(2.0 )

0.3
1.7(2.9 )
0.4
3.3

Actual effective tax rate

29.4 %

35.3 %REVENUE(1) Disaggregation of Revenue
Revenues from contracts with customers on a disaggregated basis for the year ended March 31,
2022, were as follows:
Millions of Yen
2022
Reportable Segment
Resin &
Tall Oil
Paper
Electronics
Products Chemicals Materials

LawterOther

Domestic
Foreign
Revenues fromcontracts withcustomers
Other revenue¥ 16,272
1,294¥ 9,243
11,931¥ 4,684
1,620¥ 29,519¥ 1,388(19 )¥ (27 )
33

¥ 31,560
44,37817,566

21,174

6,304

29,519

1,369
155

6

75,938155

Total¥ 17,566¥ 21,174¥ 6,304¥ 29,519¥ 1,524¥ 6¥ 76,093

Reconcilia
tions
Consolidated

Thousands of U.S. Dollars
2022
Reportable Segment
Resin &
Tall Oil
Paper
Electronics
Products Chemicals Materials

Other$ 11,341(155 )$ (221 )270$ 257,864
362,596

11,1861,266

49620,460
1,266

49$ 621,726

Domestic$ 132,952 $ 75,521
Foreign
10,573
97,483
Revenues fromcontracts withcustomers
143,525
173,004
Other revenue$ 38,271
13,236$ 241,189

51,507241,189

Total$ 51,507$ 143,525 $ 173,004- 25 -

Reconcilia
tions
Consolidated

Lawter$ 241,189 $ 12,452$

(2) Basic Information to Understand Revenues from Contracts with Customers
Contract, performance obligation, timing of satisfaction of performance obligation – The
information is included in Note 2.
Transaction price calculation information – Regarding production sales, the Company
calculates the transaction price according to the amount of consideration agreed in the contract
with the customer after deducting the estimated value such as discount, and revenue isrecognized only to the extent that it is highly probability that no significant reversal will occur.
Revenue-related consideration recognized by the company is usually received within one year
after performance obligations have been completed, excluding significant financial factors.
15.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,537 million ($20,728 thousand) and¥2,599 million for the years ended March 31, 2022 and 2021, respectively.

16.

LEASESThe Group leases certain buildings and structures, machinery and equipment, and other assets.
Total lease expenses for the years ended March 31, 2022 and 2021, were ¥313 million ($2,557
thousand) and ¥337 million, respectively.
The future minimum lease payments commitment under noncancelable operating leases as ofMarch 31, 2022, are as follows:

17.

Millions ofYen

Thousands of
U.S. Dollars

Due within one year
Due after one year

¥ 155
720

$ 1,266
5,883

Total

¥ 875

$ 7,149

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments, mainly bank loans based on its capital financing plan.
Short-term bank loans are used to fund the Group's ongoing operations. Derivatives are notused for speculative purposes, but to manage exposure to financial risks as described in (2)below.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk.
Payment terms of payables, such as trade notes and trade accounts, are primarily less than one
year. Payment in foreign currencies is exposed to the market risk of fluctuation in foreign
currency exchange rates. Investment securities are exposed to the risk of market pricefluctuations. Short-term bank loans and long-term debt are related to ongoing operations andworking capital. Although a part of such bank loans are exposed to market risks from changes
in variable interest rates, those risks are mitigated by using interest rate swaps. Long-term
deposits received are mainly related to deposits for membership at a golf course and are
exposed to liquidity risk.

- 26 -

(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service
debt according to the contractual terms. The Group manages its credit risk from receivables
based on internal guidelines, which include monitoring of payment terms and balances of major
customers by each business administration department to identify the default risk of customers
at an early stage.
The counterparties to the Group's derivative contracts are limited to major international financial
institutions to reduce credit risk.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as ofMarch 31, 2022.
Market risk management (foreign exchange risk and interest rate risk)
Interest rate swaps are used to manage exposure to market risks from changes in interest rates
of loans payable.
Investment securities are managed by monitoring market values and the financial position ofissuers on a regular basis.
Derivative transactions entered into by the Group have been made in accordance with internal
policies that regulate the authorization and credit limit amount.
Liquidity risk management
Liquidity risk is the risk that the Group cannot meet its contractual obligations in full on theirmaturity dates. The Group manages its liquidity risk by holding adequate volume of liquid assets
at the level of one month's sales volume, along with adequate financial planning by the
corporate treasury department.
(4) Concentration of Credit Risk
As of March 31, 2022, 6.8% of total receivables is from certain major customer group.

- 27 -

(5) Fair Value of Financial Instruments
Fair values of financial instruments are as follows: Investments in equity instruments that do nothave a quoted market price in an active market are not included in the following table. The fairvalues of cash and cash equivalents, notes and accounts receivable, notes and accounts
payable and short-term bank loans are not disclosed because their maturities are short and thecarrying values approximate fair value. Also, please see Note 18 for details of the fair values ofderivatives.
Fair value of financial instruments
Millions of Yen
March 31, 2022

Carrying
AmountFair Value

Unrealized
Gain (Loss)

Investment securities¥ 3,165¥ 3,165¥

Total¥ 3,165¥ 3,165¥

Long-term bank debt
Lease debt
Long-term deposits received¥ 12,974805
529¥ 12,973805
521¥ (1 )
(0)
(8 )

Total

¥ 14,308¥ 14,299¥ (9 )

Derivative

¥

82

¥

82

¥

Total

¥

82

¥

82

¥

March 31, 2021

Carrying
AmountFair Value

Investment securities¥ 3,329¥ 3,329¥

Total¥ 3,329¥ 3,329¥

Long-term bank debt
Lease debt
Long-term deposits received¥ 8,162890
556¥ 8,168
891
525

¥ 6
1
(31 )

Total

¥ 9,608¥ 9,584¥ (24 )March 31, 2022

Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain (Loss)

Investment securities$ 25,860$ 25,860$

Total$ 25,860$ 25,860$

Long-term bank debt
Lease debt
Long-term deposits received$ 106,005
6,577
4,322

$ 105,997
6,577
4,257

$ (8 )
(0 )
(65 )

Total

$ 116,905$ 116,831$ (74 )

Derivative

$

670

$

670

$

Total

$

670

$

670

$

Millions of Yen- 28 -

Unrealized
Gain (Loss)Carrying amount of investments in equity instruments that do not have a quoted market price inan active market
Thousands of
U.S. Dollars
2022

Millions of Yen
2021
2022
Investments in equity instruments that do
not have a quoted market price in an
active market

¥22

¥22

$180

Maturity analysis for financial assets with contractual maturities
Millions of Yen
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

March 31, 2022

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable¥ 5,339
20,980¥¥¥¥ 26,319

¥

¥

¥

Total

Millions of Yen
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

Due after
Ten Years

March 31, 2021

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable¥ 3,422
18,266¥¥¥¥ 21,688

¥

¥

¥

Total

Thousands of U.S. Dollars
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

Due after
Ten Years

March 31, 2022

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable$ 43,623
171,420$$$$ 215,043

$

$

$

Total

Due after
Ten Years

Financial Instruments Categorized by Fair Value Hierarchy
The fair value of financial instruments is categorized into the following three levels, depending on theobservability and significance of the inputs used in making fair value measurements:
Level 1:

Fair values measured by using quoted prices (unadjusted) in active markets for
identical assets or liabilities.

Level 2:

Fair values measured by using inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly or indirectly.

Level 3:

Fair values measured by using unobservable inputs for the assets or liabilities.

- 29 -

If multiple inputs are used that have a significant impact on the measurement of fair value, fair value
is categorized at the lowest level in the fair value measurement among the levels to which each ofthese inputs belongs.
(1) The financial assets and liabilities measured at the fair values in the consolidated balance sheet
March 31, 2022
Marketable and investment securities:
Investment securities
Derivative transactions:
Derivative

Level 1
¥ 3,165

Total assets¥ 3,165

March 31, 2022

Level 1Marketable and investment securities:
Investment securities
Derivative transactions:
Derivative
Total assets

Millions of Yen
Level 2
Level 3

¥ 3,165
¥ 82

82

¥ 82

¥ 3,247

Thousands of U.S. Dollars
Level 2
Level 3

$ 25,860$ 25,860

Total

Total
$ 25,860

$ 670

670

$ 670

$ 26,530(2) The financial assets and liabilities not measured at the fair values in the consolidated balance
sheet
March 31, 2022

Level 1Millions of Yen
Level 2
Level 3Total

Long-term bank debt
Lease debt
Long-term deposits received¥ 12,973
805
521¥ 12,973
805
521

Total liabilities¥ 14,299¥ 14,299

March 31, 2022

Level 1Thousands of U.S. Dollars
Level 2
Level 3Total

Long-term bank debt
Lease debt
Long-term deposits received$ 105,997
6,577
4,257

$ 105,997
6,577
4,257

Total liabilities$ 116,831$ 116,831

The following is a description of valuation methodologies and inputs used for measurement of
the fair value of assets and liabilities:
Investment Securities
The fair values of listed equity securities are measured at the quoted market prices. Since listed
equity securities are traded in active markets, the fair values of listed equity securities are
categorized as Level 1.
Derivatives
The fair values of foreign currency forward contracts are measured by using discounted present
value techniques considering observable inputs such as foreign currency exchange rate, andare categorized as Level 2.
- 30 -

Long-Term bank Debt and Lease Debt
The fair values of long-term debt and lease debt are measured by using discounted present
value techniques considering assumptions including expected future cash flows and discountrates taking into account maturity and credit risk, and are categorized as Level 2.
Long-Term Deposits Received
The fair values of long-term deposits received are measured by using discounted present value
techniques considering assumptions including expected future cash flows and discount rates
taking into account maturity and credit risk, and are categorized as Level 2.
18.

DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures oncertain liabilities.
All derivative transactions are entered into to hedge interest exposures incorporated within theGroup's business. Accordingly, market risk in these derivatives is generally offset by opposite
movements in the value of the hedged liabilities.
Because the counterparties to these derivatives are limited to major international financial
institutions, the Group does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal
policies which regulate the authorization and credit limit amount.
Derivative Transactions to Which Hedge Accounting Is Not Applied
March 31, 2022
Not applicable
March 31, 2021
Not applicable
Derivative Transactions to Which Hedge Accounting Is Applied

March 31, 2022
Foreign currency forward contracts:
Buying EUR

HedgedItem

Millions of Yen
Contract
AmountContract
Due after
AmountOne Year

Fair
Value

Forecasted
transaction

¥877

¥

¥82

Forecasted
transaction

¥

¥

¥

March 31, 2021
Foreign currency forward contracts:
Buying EUR- 31 -

HedgedItem

March 31, 2022
Foreign currency forward contracts:
Buying EUR
19.

Thousands of U.S. Dollars
Contract
AmountDue after
Fair
Contract
One YearValue
AmountForecasted
transaction$7,166$$670

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2022 and
2021, were as follows:
Thousands of
U.S. Dollars
2022

Millions of Yen
2022
2021
Unrealized loss on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain on derivatives under hedge
accounting:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal¥ (163 )1(162 )(2 )¥

848(1,567 )(719 )
203$ (1,332 )
8(1,324 )(16 )¥ (164 )¥ (516 )$ (1,340 )

¥

¥

$

82
(25 )
¥

Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive loss in associatedcompanies – Losses arising during the year
Total
Total other comprehensive income (loss)- 32 -

82

57

670
670
(204 )¥$¥ 1,768¥ (255 )$ 14,446

1,768(255 )

14,446¥ 1,768¥ (255 )$ 14,446

¥

2
26
28
3

¥

59
42
101
(36 )

$

16
212
228
25

¥

31

¥

65

$

253

¥

0

¥

0

$

0

¥

0

¥

0

$

0

¥ 1,692¥ (706 )466$ 13,825

20.

NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2022 and 2021,
were as follows:
Millionsof YenNet Income
Attributable to
Owners of the
ParentThousandsof Shares¥ 1,746

25,156¥ 69.42¥ 1,091

25,125¥ 43.44

WeightedAverage
SharesYen

Dollars

EPS

For the year ended March 31, 2022:
Basic EPS
Net income available to commonshareholders$ 0.57For the year ended March 31, 2021:
Basic EPS
Net income available to commonshareholders

Diluted net income per share is not disclosed because there are no outstanding potentially dilutive
securities.
21.

RELATED PARTY DISCLOSURES(1) The Transactions between the Company and Related Parties
Transactions between the Company and related parties for the years ended March 31, 2022
and 2021, were as follows:
Fiscal year ended March 31, 2022
Not applicable
Fiscal year ended March 31, 2021
Not applicable- 33 -

(2) Transactions between Subsidiaries and Related Parties
Transactions between subsidiaries and related parties for the years ended March 31, 2022 and 2021, were as follows:
Fiscal year ended March 31, 2022

Type of Related Parties

Name

Owned by certain directors of theCompany and their relatives

Harima Food, Inc.

Note:

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity
Ownership in the Company

Food
manufacturing-

Nature of Transactions

Thousands of
U.S. Dollars
AmountLease payments

¥ 5

$ 41

Other current assets, end of year
Minimum rental commitments

0
10

4
82

Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.
Lease payments are determined based on fair value (used to calculate property taxes).

Fiscal year ended March 31, 2021

Type of Related Parties

Name

Owned by certain directors of theCompany and their relatives

Harima Food, Inc.

Note:
22.

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity
Ownership in the Company

Food
manufacturing-

Nature of Transactions

AmountLease payments¥ 5

Other current assets, end of year
Minimum rental commitments

015

Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.
Lease payments are determined based on fair value (used to calculate property taxes).

SUBSEQUENT EVENT(1) Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2022, was approved at the Company's Board of Directors' meeting held on May 18, 2022:

Year-end cash dividends, ¥19 ($0.16) per share

Millionsof YenThousands of
U.S. Dollars¥478$3,906(2) Acquisition of Material Assets
Since the agreement with Henkel AG & Co. KGaA on acquisition of commercial rights, assets, etc. related to its solder materials business that concluded on December 16, 2021, the Group has proceeded with procedures related tothis acquisition. Following enhancement of the contractual preconditions of the purchase agreement, the acquisition procedures were completed on June 1, 2022 (June 2 Japan time).
Since Henkel AG & Co. KGaA's solder business has a large number of customers in the global industrial equipment and communication equipment industry, especially in the automotive industry in Europe, the acquisition will greatly
expand our customer base. In addition, by acquiring the high-performance solder product line owned by Henkel AG & Co. KGaA, the Company enhances competitiveness by expanding the product portfolio of solder business. In
addition, the Company plans to expand production scale and improves production efficiency by merging the solder business of the two companies, thus contributing profits.
Nature of assets – commercial rights, land, factory, etc. of solder business
Purchase price – The purchase price will not be disclosed under a confidentiality agreement with Henkel AG & Co. KGaA. For the calculation of transferee price, in addition to the estimation of future profitability, the Company also
obtains the business value table calculated by third-party institutions for reference and determination.

- 34 -

23.

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Disclosures about Segments of anEnterprise and Related Information," and ASBJ Guidance No. 20, "Guidance on AccountingStandard for Disclosures about Segments of an Enterprise and Related Information," an entity isrequired to report financial and descriptive information about its reportable segments. Reportablesegments are operating segments or aggregations of operating segments that meet specified
criteria. Operating segments are components of an entity about which separate financial information
is available and for which such information is evaluated regularly by the chief operating decisionmaker in deciding how to allocate resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as is used internally for evaluating
operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available
and regular evaluation by the Company's management is performed in order to decide how
resources are allocated among the Group.
"Resin & Tall Oil Products" manufactures and sells paint resin, resins for print inks, tall oil
products, and synthetic rubber emulsifiers. "Paper Chemicals" manufactures and sells paperstrengthening agents, sizing agents, and surface-coating agents. "Electronics Materials"
manufactures and sells electronics materials. "Lawter" manufactures and sells resins for print
inks and adhesives.
(2) Methods of Measurement for the Amounts of Sales, Profit, Assets, and Other Items for
Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note2, "Summary of Significant Accounting Policies."- 35 -

(3) Information about Sales, Profit, and Other Items Is As Follows:
Millions of Yen
2022
Reportable Segments

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense
Equity in earnings (losses) of associated companies
Notes:

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials¥ 17,566
252¥ 17,818¥91¥ 21,174
157¥ 21,331¥1,651¥ 6,304

647
(1 )

670
22

133
0

¥ 6,304¥658

Lawter

Total

Other

Total

¥ 29,518
646¥ 30,164¥1,722¥ 74,562
1,055¥ 75,617¥4,122¥ 1,525202¥ 1,727¥ (12 )

¥ 76,087
1,257¥ 77,344¥4,110573(178 )
278

2,023(157 )
278

152
(1 )

2,175
(158 )
278

Reconciliations¥

Consolidated

6(1,257 )¥ (1,251 )¥(859 )

¥ 76,093¥ 76,093¥3,251

(75 )
14

2,175
(233 )
292"Other" comprises business segments not attributable to a reportable segment and is mainly comprised of real estate management.
Reconciliations of segment profit include reconciliation gain of inventories of ¥16 million ($131 thousand) and company-wide expenses of ¥882 million ($7,206 thousand), which are not attributable to any reportablesegment. Assets are not allocated to reportable segments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Millions of Yen
2021
Reportable Segments

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense
Equity in earnings (losses) of associated companies
Notes:

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials¥ 14,784
228¥ 15,012¥(491 )

¥ 18,4814¥ 18,485¥1,988¥ 5,005

781
(3 )

738
10

158
(0 )

¥ 5,005¥272

Lawter

Total

Other

Total

Reconciliations

Consolidated¥ 23,069
401¥ 23,470¥ 386¥ 61,339
633¥ 61,972¥2,155¥ 1,525156¥ 1,681¥ 27¥ 62,864
789¥ 63,653¥2,182¥ (13 )
(789 )¥ (802 )¥(605 )

¥ 62,851

534(169 )(158 )

2,211(162 )(158 )

142
(6 )

2,353
(168 )(158 )(69 )48¥ 62,851¥1,5772,353(237 )(110 )"Other" comprises business segments not attributable to a reportable segment and is mainly comprised of real estate management.
Reconciliations of segment profit include reconciliation gain of inventories of ¥113 million and company-wide expenses of ¥732 million, which are not attributable to any reportable segment. Assets are not allocated toreportable segments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Thousands of U.S. Dollars
2022
Reportable Segments

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense
Equity in earnings (losses) of associated companies

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials$ 143,525
2,059$ 145,584$ 744$ 173,004
1,283$ 174,287$13,490$ 51,507

5,286
(8 )

5,474
180

1,087
0

$ 51,507$5,376LawterTotal$ 241,180
5,278$ 246,458$ 14,070$ 609,216
8,620$ 617,836$33,680

4,682(1,454 )2,271

16,529(1,282 )2,271- 36 -

Other

Total

$ 12,460 $ 621,676
1,651
10,271$ 14,111 $ 631,947$ (98 )
$33,582
1,242(8 )

17,771(1,290 )2,271

Reconciliations$

50(10,271 )$ (10,221 )$(7,019 )(613 )
115

Consolidated$ 621,726$ 621,726$26,563
17,771(1,903 )2,386

[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March
31, 2022 and 2021, were as follows:(1) Net sales
Millions of Yen
2022

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥32,282¥10,881¥10,947¥2,388¥13,523¥2,463¥76,093

Asia¥3,609Millions of Yen
2021

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥27,728¥8,440¥9,718¥1,598¥10,348¥2,165¥62,851

Asia¥2,854

Thousands of U.S. Dollars
2022

Japan
$263,763

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

$88,904$89,444$19,511$110,491$20,125$621,726$29,488

Asia

Notes:
1)

Sales are classified by country or region based on the location of customers.

(2) Net property, plant and equipment
Millions of Yen
2022

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥12,231¥4,058¥2,307¥20¥2,366¥2,329¥23,402¥91

Asia

Millions of Yen
2021

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥12,525¥3,863¥2,041¥19¥2,305¥1,596¥22,451¥102- 37 -

Asia

Thousands of U.S. Dollars
2022

1.

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

$99,935$33,156$18,850$163$19,332$19,028$191,208

$744

Asia

Information by principal customers
Information is not provided because there are no customers who account for more than 10% of total consolidated net sales.

[Loss on impairment of long-lived assets by reportable segment]
Loss on impairment of long-lived assets by reportable segment for the years ended March 31, 2022 and 2021, was as follows:
Millions of Yen
2022
Resin & Tall
Oil Products
Loss on impairment¥

Reportable Segments
Paper
Electronics
Chemicals
Materials¥¥

Lawter

Total

Other

¥

¥

¥439

Eliminations/
Corporate¥

Consolidated¥439

Millions of Yen
2021
Resin & Tall
Oil Products
Loss on impairment¥

Reportable Segments
Paper
Electronics
Chemicals
Materials¥112¥

Lawter

Total

Other

¥

¥112

¥230

Eliminations/
Corporate¥

Consolidated¥342

Thousands of U.S. Dollars
2022
Resin & Tall
Oil Products
Loss on impairment$

Reportable Segments
Paper
Electronics
Chemicals
Materials$$******- 38 -

Lawter

Total

Other

$

$

$3,587

Eliminations/
Corporate$

Consolidated$3,587

- 39 -

- 40 -

- 41 -

- 42 -

- 43 -

Corporate Overview (as of March 31, 2022)
FoundedNovember 18, 1947

Capital Stock

10,012.95 million yen

Head Office

3-8-4 Nihonbashi, Chuo-ku, Tokyo

Osaka Head Office

4-4-7 Imabashi, Chuo-ku, Osaka

Tokyo Head Office

3-8-4 Nihonbashi, Chuo-ku, Tokyo

Laboratories

Central Research Laboratory, Tsukuba Research Laboratory

PlantsKakogawa Plant, Tokyo Plant, Fuji Plant, Ibaraki Plant, Sendai Plant, andShikoku Plant

Sales Offices

Tokyo Sales Office, Osaka Sales Office, Fuji Sales Office, Sendai Sales Office,and Shikoku Sales Office

Number of Employees

113 (Consolidated: 1,523)

Number of Group Companies 34
Business Activities

Manufacture and sale of Resin & Tall Oil Products, Paper Chemicals,Electronics Materials, etc.

Websitewww.harima.co.jp- 44 -

Principal Subsidiaries
Company name

Capital stock

Percentage ofequityparticipation (%)
100

Harima Chemicals, Inc.

5,000,000 thousandyen

Harima Trading, Inc.

398,000 thousand yen

100

Seven Rivers, Inc.

14,000 thousand yen

100

Harima M.I.D., Inc.

300,000 thousand yen

75

Nippon Filler Metals, Ltd.

45,000 thousand yen

100

HARIMA USA, Inc.

3,350 thousand U.S.
dollars

100

Harima do Brasil Industria Quimica
Ltda.

42,588 thousand Brasil
real

99.88

Harimatec Hangzhou Co., Ltd.

8,690 thousand
Chinese yuan

100

Harimatec Malaysia Sdn. Bhd.

1,356 thousand
Malaysian ringgit

100

Hangzhou Hanghua Harima
Chemicals Co., Ltd.

52,296 thousand
Chinese yuan

56.07

Harimatec Czech, s.r.o.

7,000 thousand Czech
koruna100

Lawter B.V.

76,300 thousand euro

97.68

Harima Chemicals (Shanghai) Co.,Ltd

12,652 thousand
Chinese yuan100

- 45 -

Main business
Manufacture andsale of Resin & Tall
Oil Products, Paper
Chemicals,Electronics
Materials, etc.
Real estate
management, etc.
Manufacture andsale of industrial
detergents, etc.
Manufacture andsale of tall oil
products
Manufacture andsale of electronicmaterials
Raw material
procurement,
Business support in
the U.S.
Holding company
of U.S. group
Manufacture andsale of rosin and its
derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of electronicmaterials
Manufacture andsale of papermaking
chemicals
Manufacture andsale of electronicmaterials
Control of Lawter
Group’s operations
Business support
for subsidiaries in
China

Directors and Corporate Auditors (as of March 31, 2022)
President
Senior Executive
Managing Director
Executive
Managing Director
Executive Director
Executive Director
Managing Director
Audit＆Supervisory
Committee Member
Audit＆Supervisory
Committee Member *Audit＆Supervisory
Committee Member *Yoshihiro Hasegawa
Teruo Kaneshiro
Ichiro Taninaka
Tsutomu Nishioka
Shunichiro Taoka
Eiketsu Ro
Hideo Yamada
Tatsuya Michigami
Tsuneo Takahashi* denotes Outside Corporate Auditors.
Status of Shares (as of March 31, 2022)(1) Total number of shares authorised to be issued
59,500,000(2) Total number of shares outstanding
26,080,396(including 914,657 shares of treasury stocks)(3) Number of shareholders
4,431(4) Major shareholders
Status of shareholding
Number of shares held
Ratio of number of shares held(Thousands of shares)
against total number of shares
outstanding (%)
Hasegawakosan Co., Ltd.
2,913
11.57
Matsukawa Corporation

2,913

11.57

Japan Master-Trust Trust bank

1,886

7.49

Harima Chemicals Mutual
Prosperity Association
Shorai, Ltd.

1,354

5.38

1,284

5.10

Sumitomo Mitsui Banking
Corporation

1,094

4.34

Hyogo Prefectural Credit Federationof Agricultural Cooperatives

1,028

4.08

Shorai Foundation for Scienceand Technology
The Minato Bank, Ltd

965

3.83

632

2.51

Bank of Mitsubishi UFJ, Ltd.

476

1.89

(Notes)

1. In “Number of shares held,” figures less than one thousand are rounded down.
2. Ratio of number of shares held against total number of shares outstanding is determined basedon the total number of shares outstanding minus the number of treasury stocks (914,657shares),which amounts to 25,165,739 shares. The numbers shown are rounded down to two decimal places.

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