Annual Financial Report
SUMITOMO CORPORATION AND SUBSIDIARIESFor the year ended March 31, 2023
Together with Independent
Auditors' ReportContents
Management’s Discussion and Analysis .................................................................................................................................... 1
Consolidated Statement of Financial Position ........................................................................................................................... 43
Consolidated Statement of Comprehensive Income .................................................................................................................. 45
Consolidated Statement of Changes in Equity .......................................................................................................................... 47
Consolidated Statement of Cash Flows ..................................................................................................................................... 50
Notes to the Consolidated Financial Statements........................................................................................................................ 52
Independent Auditor’s ReportMANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1.

Management Policies, Business Environment and Management Challenges

Medium-Term Management Plan
The progress of “SHIFT 2023” (from fiscal 2021 to fiscal 2023)
Under the medium-term management plan “SHIFT 2023”, we are working on “Business Portfolio SHIFT”, which aims to build a highly
profitable and resilient business portfolio, as well as “Framework SHIFT” and “Management Base SHIFT” which ensures theeffectiveness of such shift. The progress and the status of each shift is as below.

(1)

Business Portfolio SHIFT

We grouped all our businesses into Strategic Business Units (SBU)s, regardless of the existing organizations and categorized them into
four categories based on the two axes of “market potential” and “demonstration of strengths”, and promoted the shift of reallocation ofmanagement resources (funds and human resources) to business domains in which we can demonstrate our strengths.
<Four categories>- “Divestment” which aims for the strategic withdrawal of planned projects without missing opportunities and recovers management
resources- “Value Creation” which aims for improvement of profitability through value additions and efficiency enhancements- “Steady Business Growth” which aims at to grow earning pillar through expansion of business scales- “Seeding” which aims to grow new earning pillars through cultivation of next-generation businesses(a) The progress of each category in fiscal 20221

(b) Business reform through DX (Digital Transformation) and Enhancement of the Sustainability Management
As a measure to support the “Business portfolio SHIFT” and enhancing functions and profit margins of the existing businesses, andpromoting the creation of new businesses, we conducted “Business reform through DX” and “Enhancement of sustainability
management”.

Business reform through DX- Improve functionality and profitability through DX implementation in existing businesses: Progress in demand/supply forecasting in
the domestic supermarket business, advanced data analysis in the healthcare businesses- New business creation from next-generation growth fields x DX: Progress in decarbonization, mobile payment services, DX support
services

Enhancement of Sustainability Management
Internal promotion and progresses have accelerated with respect to the six “Key Social Issues” to be pursued by our company in theinterest of realizing a sustainable society (identified in 2020), such as the initiatives of each SBU and the start of the company wide
operation system. The examples of the main initiatives in fiscal 2022 are as below

2Please refer "Our Approach and Initiatives to Sustainability" for details.
(2)

Framework SHIFTIn order to ensure the effectiveness of the “Business Portfolio SHIFT”, we have also promoted the “Framework SHIFT”. Specifically,
we have conducted the following initiatives.
- Monitoring of the progress status of the strategies set by each SBU, conducting plan-do-check-act (PDCA) cycle to discuss the need forreviewing strategies- Adoption of stricter investment discipline through the establishment of guidelines for selecting investments and, to increase theprobability of successful business investment and maximize value- Establishment and reinforcement of the structure regarding the growth strategy themes such as next-generation energy business, social
infrastructure, retail and consumer, healthcare, and agriculture- Revising the framework to a one which reallocates investment capital across business units in order to drive a more dynamic “Business
Portfolio SHIFT”(3)

Management Base SHIFT

We made steady progress in reinforcing and expanding our management foundation to achieve medium to long-term growth andadvancement.
Enhancement of Governance- Fiscal 2022: Reformed the director remuneration system with the objective of strengthening motivation to improve corporate value andachieve management goals in the medium to long-term(reviewed remuneration standards/remuneration composition ratio and reflected the stock price growth rate in the calculation of the total
amount of payment of the performance-linked bonuses)- Fiscal 2023: added non-financial indicators (“climate change,” “promotion of women's active engagement” and “employee
engagement”) to the evaluation indicators the for the stock-based remuneration system
Enhancement of Human Resources Management
Promoted further “Diversity, Equity & Inclusion” by implementing measures such as promotions that are not restricted by age, promotionsof female employees, active promotions of mid-career employees including promotions to the post of executive officers, and3

diversification/annualization of recruitment methods
Maintenance and Improvement of Financial Soundness
The debt-equity ratio (DER) was maintained at 0.7 at the end of the previous fiscal year, and risk-weighted assets stayed within our corerisk buffer *1.
*1 Our core risk buffer represents the sum of “common stock,” “additional paid-in capital,” “retained earnings” and “exchange
differences on translating foreign operations,” minus “treasury stock, at cost.” Our basic management policy is to keep risk-weighted
assets, which are our maximum possible losses, within our core risk buffer.
Initiatives for the completion of Medium-Term Management Plan “SHIFT 2023”
Taking into account the progresses over the last two years as explained above, as fiscal 2023 being the final year of “SHIFT 2023”, wewill focus on conducting the following priority actions.

We will complete “SHIFT 2023” in order to further improve our growth potential and the stability of our earnings, and create a structurethat will generate profit above the cost of shareholder’s capital regardless of the external environment, and enhance shareholder returns.
In addition, we will endeavor to retain and upward trust from the market through constructive dialog.
(4)

Quantitative Targets
1.

Business environment
Overview
Amidst financial instability originating in the U.S. and continuing uncertainty in the Russian Ukrainian situation, the prospect isthe slowdown of global economic growth. Monetary tightening as well as high prices caused by rising prices for raw materials due
to soaring resource and energy prices has become a burden on corporate and household economic activity. Among developed
countries, the U.S. economy will maintain positive growth, although at a slower pace, supported by consumer spending, while a
gradual recovery is expected to continue in the Japanese economy. In contrast, the slump in the Euro-zone economy is expected tocontinue as a result of effects from a delayed recovery in external demand and unstable energy supplies. Among emerging countries,
economic activity in China is expected to continue recovering as a result of the abolishment of zero-COVID policies, the recoveryof the real estate market, and other factors. Many other emerging and developing countries are expected to continue recovering at
a gradual pace. Risks include turmoil in the financial industry, intensification of the conflict in Ukraine, a potential rebounding of
COVID-19, prolonged high prices and effects from the accompanying financial tightening, intensification of debt problems inemerging economies, and heightened geopolitical risks in Northeast Asia, the Middle East, North Africa, and other regions.

4

Metal Products Business Unit
This Business Unit handles a broad range of metal products such as steel sheets and tubular products.
In the steel products sector, while demand in the automotive, consumer electronics, and construction fields is currently flat or
weakening, steel market entered correction phase after price hike due to rising production costs and other factors. Furthermore, in
China, the domestic market is declining due to the imbalance of supply and demand, and the export volume outside of China is
expanding, that we are paying close attention to further global supply and demand balance.
In the tubular products sector, in the United States, developers are adjusting orders as a reaction to the extremely tight supply anddemand environment of the previous year and tubular prices are turning downwards at this point. However, demand for steel pipes
especially for gas exploration is expected to remain firm that tubular prices are expected to gradually recover after a period ofadjustment, and demand for non-U.S. markets is expected to remain strong too.
In addition, from the perspective of energy security in countries around the world, the movement toward energy transitions for
decarbonization is expected to accelerate.
Given this environment, the Business Unit will complete it’s restructuring to a business model that can ensure sustainable growthfrom a medium- to long-term perspective. And at the same time, it will provide new value through DX, and focus on improving
sustainability management, by supplying metal products and services that contribute to the carbon neutralization of society such as
renewable energy and CCS.
Transportation & Construction Systems Business Unit
This Business Unit is engaged in various transactions and business investment, focused on the leasing and financing business, theglobal reach of our value chains in the automotive, construction equipment and ship businesses and advanced expertise in theaerospace-related businesses.
In the environment currently surrounding the Business Unit, we observe the recovery and expansion in global mobility demand,
while we are closely monitoring the trends as increasing geopolitical risks in some regions, the impact of semiconductor shortages
on supply chains, and concerns about economic slowdown due to rising raw material costs, labor costs, and interest rates. In addition,
the need to contribute to the realization of a decarbonized society and a circular economy is increasing in each segment.
Considering this environment, our Business Unit will complete structural reforms, including withdrawal from low-profit businesses,
and focus on improving the profitability and expanding the foundation of our core business. Specifically, we will work on improving
asset efficiency and increasing high-quality assets in growth areas in the lease and finance businesses, expanding the businessfoundation and capturing demand in growth markets in the construction equipment businesses. Moreover, we will seize new social
needs as opportunities to create and nurture new projects that will become our future pillars such as the development of nextgeneration fuel ships, aircraft part-out business, and a business that combines electric vehicles and energy management in theautomotive space.
Infrastructure Business Unit
This Business Unit is engaged in social infrastructure businesses (water supply/sewerage systems, railway projects, etc.), electric
power infrastructure businesses (EPC business, IPP business, etc.), and logistics infrastructure businesses (overseas industrial parks,
insurance, etc.).
In the environment currently surrounding the Business Unit, although several EPC projects have completed and the IPP businessgenerally also remains robust, domestic retail electricity business has been impacted by increasing cost of power due to soaring
price of fuel.
Given this environment, the Business Unit will further strengthen market risk management including contract renewals with theclients and it will accelerate new initiatives to take advantage of business opportunities brought by the arrival of a low-carbon
society due to heightened global environmental awareness and the strong demand of infrastructure, especially in the emerging
countries.

5Specifically, in order to provide high-quality infrastructure that meets the needs of the whole community, the Business Unit will
actively engage in social infrastructure projects, including water supply/sewerage projects, smart city development, andrailway/airport/seaport businesses. In addition, to achieve carbon neutrality by 2050, the Business Unit will focus on renewableenergy generation business and promote low-carbonization of its power generation portfolio. Furthermore, the Business Unit will
promote the commercialization of new electric power and energy services such as renewable energy power generation and domestic
electricity retail business that contribute to environmental value through co-creation with the Energy Innovation Initiative.
Media & Digital Business Unit
This Business Unit is engaged in media businesses (cable television, TV shopping, 5G-related business, etc.), digital businesses(ICT platforms, digital solutions, digital media etc.) and smart communications platform businesses (mobile phone sales, overseas
telecommunications business, etc.).
In the environment surrounding this Business Unit, in the media business, along with lifestyles and consumer behavior change, it
is expected that there will be needs for diversification of TV viewing styles and sales process in a non-face-to-face and non-contact
manner. In the 5G-related business, installation of base stations by mobile carriers is progressing due to growing demand for highspeed, large-capacity communications. In the digital business, there is a rising demand for digital solution such as expansion ofopportunities to resolve social issues with digital technologies and to transform customer’s businesses. In the mobile phone sales
business, market changes are accelerating, including raising the mobile phone price and the introduction of online-only contract
forms by all telecommunications carriers in Japan.
In addition, in the overseas telecommunications business, while there are geopolitical risks in Myanmar and Ethiopia, to which we
newly entered, customer demands are expected to grow as the region develops.
Given the environment, in the media business, we will provide new TV viewing-styles and expand lifestyle-related services suchas telemedicine service, as well as we will work on early expansion of base station sharing service in the 5G-related business. In
the digital business, we will accelerate new DX-related businesses and the co-creation with start-up companies throughcollaboration with SCSK. In the mobile phone sales business, we will work on creating new businesses that respond to changes in
the mobile phone distribution market. We will also take a cautious approach in overseas telecommunications business while keeping
a close eye on the situation in Myanmar and Ethiopia.
Living Related & Real Estate Business Unit
This Business Unit is engaged in business in the retail, food, healthcare, construction materials, and real estate sectors.
In the retail sector, the supermarket business was currently sluggish due to the impact of a slowdown in the demand for at-homedining and rising electricity and other costs. In the food sector, the business was also affected by rising transportation, material, andother costs due to the effect of the Russia-Ukrainian situation. Although high costs remain a concern, these businesses continue tobe of high importance as it support people's daily lives.
In the healthcare sector, business opportunities are expected to expand in the areas of dispensing medical costs, at-home nursing
care, and online medical services as the aging population of Japan is increasing.
In the construction materials and real estate sector, overseas business remained sluggish due to higher financing costs associatedwith rising U.S. interest rates, while domestic business remained strong. Going forward, the impact of policy interest rate trends
and rising construction costs needs to be closely monitored.
Given the environment, this Business Unit will continue to implement the measures necessary for business continuity and future
growth, while carefully monitoring the market. In the retail and healthcare sector, we will promote DX initiatives aimed at solving
issues in the field and upgrading functions, such as the use of data unique to the retail business and the introduction of fully
automated medicine dispensing in drugstores. In the food sector, we will strive to secure earnings by capturing firm demand frommass retailers and diversification of production areas. In the real estate sector, we will continue to strengthen our stable earnings
base by promoting portfolio management that handles various asset types.

6Mineral Resources, Energy, Chemical & Electronics Business Unit
This Business Unit is engaged in developing, producing, and selling metal resources and energy interests in the mineral resourcesand energy field, and developing, manufacturing and selling basic chemical products, agricultural inputs, pharmaceuticals, animal
health products, cosmetics and electronics materials/products in the chemical and electronics field.
In fiscal year 2022, the upstream and trading business in the mineral resources and energy field showed strong performance,
capturing surges in mineral resources and energy prices. In the chemical and electronics field, business overall performed well,
capturing growing demand such as agricultural inputs and electronics materials/products. In fiscal year 2023, the market has been
showing softening trend not only in mineral resources and energy prices, but also in grains and basic chemicals, which shall be
paid close attention to.
Based on the above business environment, in the mineral resources and energy field, the Business Unit will continue stable
operations of upstream mineral resources business and thoroughly manage market risks, and work on restructuring the portfolio ofmineral resources and energy interests, and develop next-generation energy businesses, in order to achieve the Sumitomo
Corporation Group carbon neutral in 2050. In the chemical and electronics field, the Business Unit will focus on strengthening
existing business foundation such as agribusiness, and developing new businesses in the green chemical field to promote a circular
economy.
2.

Quantitative Plan and shareholder return policy
The details of our quantitative plan and shareholder return policy onward are as below.
Quantitative Plan
- Earnings forecasts
In light of the current situation, we have set our earnings forecasts as follows

Although uncertainty of the outlook of the word economy is increasing, at present, we foresee that the present business environment
will continue, and thus we forecast the profit for fiscal 2023 as ¥480.0 billion. Compared to the previous year, we are expectingthat mineral resources businesses will decrease due to the softening of resource and energy prices and the non-mineral resourcesbusinesses will remain flat. As we engage in strategic discussions while always maintaining concrete quantitative views for not
only the period covered by “SHIFT 2023” but also the next three years towards the implementation of the “Business Portfolio
SHIFT”, through the optimal allocation of management resources, the profit plans for up to fiscal 2025 are presented below.

7

- Cashflow plan
We will keep the policy of achieving positive free cash flow after dividends under “SHIFT 2023” and will continue to implement
thorough investments and asset recycling to conduct “Business Portfolio SHIFT” with high profitability and strong resiliency ofour portfolio.

8

(5)

Shareholder Return Policy

Sumitomo Corporation aims to increase dividends by achieving medium and long-term earnings growth while adhering to its
fundamental policy of paying shareholders a stable dividend over the long term.

9

2.

Our Approach and Initiatives to Sustainability

Approach and initiatives to sustainability of the Sumitomo Corporation Group are as follows.
GovernanceImportant initiatives relating to sustainability including the planning of measures, implementation throughout the organization andimprovement of monitoring system are referred to the Management Council and the Board of Directors. The important initiatives are
subject to the decisions of the Management Council and the supervision of the Board of Directors.

Organization for Promoting Sustainability
Sumitomo Corporation has established the Corporate Sustainability Department, which is responsible for the planning of measures topromote sustainability and ensuring their implementation throughout the organization. Meanwhile, the department coordinates withgeneral managers, who are responsible for promoting sustainability within each business unit, and with the sustainability promoting staff
of each business unit’s Planning & Coordination Department. The department also works with the sustainability promoting staff ofrelevant corporate departments and overseas regional organizations to ensure that sustainability promotion measures are fully
implemented groupwide and also that the different business units/initiative and regional organizations pursue measures tailored to thespecifics of their business or region.
The Corporate Sustainability Committee acts as an advisory body to the Management Council and discusses important policies, measures,and initiatives relating to the promotion of sustainability. Important initiatives relating to sustainability promotion are referred by thecommittee to the Management Council and the Board of Directors for further discussion. Some important initiatives are subject to thedecisions of the Management Council and the supervision of the Board of Directors. In addition, we have established the Sustainability
Advisory Board, which is organized by external experts, to provide advice and recommendations on overall sustainability management.

10

Also, important HR management policies, strategies, and measures are discussed at meetings of the Management Council and the HR
Management System Committee, which is an advisory body to the Management Council. The Board of Directors defines directions andengages in supervision and monitoring accordingly.

Strategy
The Enhancement of Sumitomo Corporation Group’s Sustainability Management
In addition to clear commitment to the role we play in achieving a sustainable society, it is necessary that we focus on the optimal statusof companies and their business that will be needed in a sustainable society, such as carbon neutrality, circular economy and zero violationof human rights. We need to recognize the paths to achieve them and the challenges to be overcome, and consider the strategies andallocation of management resources that we should implement from a long-term perspective.
We believe that capturing and pursuing the ideal state of society will bring more business opportunities. The Sumitomo Corporation
Group's sustainability management is about perfectly aligning the vision of a sustainable society with the Group's value creation andsustainable growth.

11

Positioning in the Medium-Term Management Plan SHIFT 2023
Within the Medium-Term Management Plan “SHIFT 2023” that we formulated in May 2021, we have identified three “SHIFTs”:
Business Portfolio SHIFT, Framework SHIFT, and Management Base SHIFT. In particular, we consider “enhancement of sustainability
management” along with DX important elements to be incorporated in promoting Business Portfolio SHIFT to one that is both highly
profitable and resilient to changes in the business environment while firmly grasping the two major social trends of digitization and thedemand for sustainability.

12

Identification of Sumitomo Corporation Group’s Key Social Issues
As Sumitomo Corporation works to enhance its sustainability management, it has identified “Mitigation of climate change”, “Circular
economy”, “Respect for human rights”, “Development of local society and economy”, “Improvement of living standard” and “Quality
education” as the six key social issues it needs to address, and has set long-term goals and medium-term goals for each issue. For moredetails, please refer to the ［Metrics and Targets］ as below.

Risk Management
Framework for Social and Environmental Risk Management
The Sumitomo Corporation Group has established a companywide framework to perform regular and appropriate monitoring of thesocial and environmental impact of the Group’s entire business activities when opening new businesses.
We have prepared a self-assessment sheet on relevant social and environmental risks to be used at the time of investment application to
identify anticipated risks and opportunities in terms of the nature and regional characteristics of each business. Decision-making is thencarried out considering impacts on society and the environment. This includes having the Corporate Sustainability Department participate
in discussions as a specialist organization that addresses social issues depending on the risk. Depending on nature of business and risks,
we also engage outside experts to check that the business is soundly managed and does not have serious impacts on stakeholders by using
environmental assessment by an environmental consultant and assessment of human rights and labor issues by a law firm, considering
the specifics and risks of each business.
As follow-up to the investment, the responsible business department and related corporate departments work together through dialogue
with group companies to carry out regular monitoring from the viewpoint of the environment, human rights, labor management, thesupply chain, and other aspects. If an issue arises, remedial action is taken in line with the specifics of the case. Internal audits that take
into account special characteristics of the business are used to confirm that management operations are legally compliant and meet13

international standards on social and environmental issues. When a case relating to the impact of the Sumitomo Corporation Group’sbusiness activities is referred to by a local community, a non-governmental organization (NGO), or another stakeholder, we ascertain thefacts and engage in dialogue and discussion toward improvement.
If, as a result of this process of review and monitoring of investments, an important social or environmental risk is identified, the individual
response is reported or referred for further discussion to the Management Council and the Board of Directors through the relevant internal
committees.

Metrics and Targets
Setting Long-term and Medium-term Goals to Address Key Social Issues
We, Sumitomo Corporation Group have identified six key social issues to be addressed. We have established medium- and long-termgoals for each of the issues and aim to resolve them. The progress of the medium-term goals set for each issue are monitored by the
Corporate Sustainability Committee.

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(*1) As of 2020：coal 50%, gas 30%, renewables 20%(*2) Indirect CO2 emissions generated by others with the use of fossil fuel(*3) Contribute to CO2 reduction by setting targets for individual businesses(*4) As of 2020：1.5GW (1GW=1 billion W)(*5) A process that employees, local residents or other stakeholders can use to lodge complaints regarding human rights violations andother issues related to enterprise’s business activities including its supply chain, for resolving such issues(*6) Social contribution activity program with employee participation at Sumitomo Corporation Group［Disclosure by Theme］■Disclosure on Climate Change Initiatives
The issue of climate change is an important issue that must be overcome to realize a sustainable society. Global efforts towards the faster
realization of a carbon neutral society are accelerating. We value the global consensus of the Paris Agreement, and in order to play a more
active role in achieving the carbon neutralization goals of society set forth in the agreement, we reviewed our “Policies on Climate Change
Issues” in May 2021. We have set medium-term goals that show a clearer action plan for “Climate Change Mitigation” and its long-termgoals, one of our six key social issues. (For medium-term goals, please refer to above) Subsequently, in February 2022, we reviewed our"Policies on Climate Change Issues", and we now state that we will not be involved in any new coal-fired power generation businessneither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction).

15

Sumitomo Corporation Group has disclosed the Climate Change Initiatives based on the TCFD (Task Force on Climate-related Financial
Disclosures). For details of disclosure for the fiscal year 2021, please refer to the ESG Communication Book 2022 (pages 24-43).

ESG Communication Book 2022（Published in September 2022）:
ESG Disclosure Book
(https://www.sumitomocorp.com/jp/-/media/Files/hq/sustainability/report/esg/esg-all.pdf?la=en)

Furthermore, the TCFD-based disclosure for fiscal year 2022 is scheduled to be included in the ESG Communication Book 2023, whichis planned to be published in September 2023.

Governance
The system of governance for the Climate Change Initiatives is incorporated into the governance for Sumitomo Corporation Group’s
sustainability initiatives. The important initiatives relating to the Climate Change are subject to the decisions of the Management Council
and the supervision of the Board of Directors.

Strategy
Steady Advancement of the Business Portfolio SHIFT
To overcome the issues of climate change, it is necessary to realize a carbon neutral cycle by shifting to decarbonization technology andrenewable energy across the industry and utilizing CO2 emitted. We will respond to the risks caused by changes in various technologies
and business models due to decarbonization as we globally develop businesses in a wide range of industries. At the same time, we will
steadily advance the Business Portfolio SHIFT by meeting new social needs that arise in response to these changes and cultivating diverse
business opportunities.

16Transition Risks and Opportunities Related to Climate Change
We are analyzing the impact on businesses including power generation/energy and resource-related businesses, automobiles, aircraft,shipping business, steel, chemicals, cement, aluminum smelting, and real estate, which are presumed to be fields that face a relatively
high risk of change in the business environment. These include changes in technology related to climate change mitigation and theintroduction of regulations. It is assumed that there are risks that affect business activities in these fields. By recognizing the magnitudeof the risks through regular scenario analysis and considering appropriate countermeasures, we are working to keep the negative impact
on business performance to a minimum. We are also strengthening initiatives that contribute to the development of business opportunities,
such as the construction of carbon-free and recyclable energy systems. For details and results of the scenario analysis, please refer to ESG
Communication Book 2022 (pages 28-39).

Risk Management
Our Group's activities cover businesses across a broad range of fields and regions and involve various social issues. We always attach
great importance to these social issues, and in order to appropriately control the social and environmental impact of the entire Group'sbusiness activities, establish policies and publicize and thoroughly enforce them within the Group.
We evaluate social and environmental risk and confirm response measures as part of our deliberation processes when considering andimplementing new business from a broad perspective. In particular, with regard to climate change, we confirm the following with regard
to risks (and opportunities) related to business continuity being impeded by the inability to appropriately respond to changes in thebusiness environment resulting from social and environmental problems such as climate change.

- The impact of climate change such as the frequent occurrence of natural disasters and abnormal weather- The impact of the introduction of regulations- The impact of technology changes, etc.
- The potential for the expansion of business or the improvement of business performance through advances in climate change mitigation
and adaptation to climate changeWith regard to our existing business, as well, we regularly monitor the overall management status of these risks to each business, including
social and environmental risks. In addition to managing risk related to individual businesses, we assess the status of companywide socialand environmental risks and develop systems that enable these assessments to be used to make strategic management decisions.
With regard to the handling of the risks of climate change, each business organization assesses the introduction of regulations and market
changes for related business sectors and conducts business activities, and as a part of companywide portfolio management, the Corporate
Sustainability Department summarizes the status of major risks to the Group, taking into consideration global efforts relating to climatechange and regulatory trends. The results are periodically reported to the Management Council and the Board of Directors. If there are
any unacceptable risks from the perspective of the portfolio as a whole, measures including reduction of exposure are investigated withorganizations responsible for risk management.

Metrics and Targets
The results of Greenhouse Gas (GHG) Emissions for fiscal year 2022 are as below. For the results of GHG Emissions up to fiscal year
2021, please refer to ESG Communication Book2022 (page 112)17

＜GHG Emissions (Scope1/2)＞ (Boundary(*1))
FY2022 (Unit: thousand t-CO2e)
Scope1<Energy-related CO2>

1,268

Scope1＜GHG Emissions except energy-related CO2＞260

Scope2

553

Total amount

2,081

Furthermore, the amounts shown above are preliminary. The fixed amounts are planned to be included in the ESG Communication Book
2023, scheduled to be published in September 2023.

(*1) The boundary is non-consolidated, consolidated subsidiaries and Joint operations. For Joint operations, the amount equivalent to theinvestment ratio as of the end of March of the reporting period is included in the environmental data. Group companies emitting morethan 3,000 t-CO2e for each gas per year are subject to the aggregation of Scope1＜GHG Emissions except energy-related CO2＞, under
the Greenhouse Gas Emissions Accounting, Reporting, and Disclosure System in Japan.

The results of CO2 emissions by activity, calculated as the target of the Sumitomo Corporation Group's carbon neutrality are as below.
For the results of CO2 emissions by activity up to fiscal year 2021, please refer to ESG Communication Book2022 (page 112).
＜Sumitomo Corporation Group’s CO2 Emissions targeted for Carbon Neutrality＞(Boundary(*2))
FY2019 (The base year)

FY2022Rate of(Unit: thousand t-CO2e)(Unit: thousand t-CO2e)

reduction

Business other than power generation

1,005

757

(24.7%)

Power generation business (*3)

43,126

42,613(1.2%)

Fossil energy concession

15,8089,203(41.8%)

Total amount

59,93952,572(12.3%)

Furthermore, the amounts shown above are preliminary. The fixed amounts are planned to be included in the ESG Communication Book
2023, scheduled to be published in September 2023.

(*2) Sumitomo Corporation Group established the “Policies on Climate Change Issues” in 2019 and we aim to achieve carbon neutrality
by 2050. The scopes of business targeted for carbon neutralization are as follows.
＜Scope1・2＞
Direct CO2 emissions from Sumitomo Corporation and its subsidiaries, as well as indirect CO2 emissions from the generation ofenergy used by each company (however, for power generation businesses, emissions from those affiliated companies under theequity method are also included)＜Scope3＞
Indirect CO2 emissions associated with the use of energy resources produced by fossil energy concession of Sumitomo Corporation

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Group, its subsidiaries, and affiliated companies under the equity method.
Carbon neutrality means net-zero CO2 emissions that combine CO2 emissions from our business and our contributions to CO2emission reduction.

(*3) The estimates for projects under construction are included in the amount of power generation business.
■Disclosure on Human Capital
Strategy
Policies on Human Resources Development and Maintenance of Working Environment (Including the Ensurance of Diversity)
The Sumitomo Corporation Group, through our "Global HR Management Policy" established in September 2020, presents a vision for
global human resources management. With this as the foundation of all HR initiatives, we will implement HR management to foster anenvironment that creates new value.
The visions for SC people and the SC organization to be achieved by this policy are as follows.
Vision for SC People (Top-Tier Professionalism)
A group of individuals “creating new value on a global scale, sharing SC Group’s vision and mission, and maintaining
high aspirations and a continuous intrinsic motivation with Enterprising Spirit”.
Vision for SC Organization (Great Place to Work)
An organization recognized for nurturing talent that continuously take on new challenges throughout the world bybuilding a Great Place to Work on a global scale, where individuals continuously and passionately create new value.

The Sumitomo Corporation Group has a diverse workforce made up of people who have different lifestyles and values in addition todifferences in gender and nationality. The Global HR Management Policy therefore defines “Diversity, Equity & Inclusion” as “the coreenabler for value creation, innovation and competitiveness”, and we strive to eliminate all barriers to diversity, equity and inclusion andleverage our mix of diverse wisdom to pursue the realization of our shared vision.

We are promoting respective measures in accordance with the following four principles, set in the Medium-Term Management Plan
“SHIFT 2023”.
- Human resources management reform to realize the Global HR Management Policy- Promotion of Diversity, Equity & Inclusion- Promotion of the right talent to the right assignments on a global basis- Health and productivity management and work style reform
Initiatives based on these principles are deployed based on the new HR system introduced by the Company (non-consolidated) in FY2021.
Such initiatives include the creation of an environment in which employees can demonstrate their capabilities to the fullest, from various
aspects such as recruitment, retention, development and assignment of talent, the introduction of a job grading system for managers, andthe maximization of organizational performance by optimally allocating the best talent with an emphasis on expertise and skills, including
expanded mid-career recruitment and the active promotion of locally hired employees to executive positions at overseas locations. The
Global HR Management Policy declares that the Sumitomo Corporation Group “values the fundamental significance of talentdevelopment” and “encourages individuals to grow proactively by continuously learning with a heightened sense of awareness.” Since19

we regard talent as important management capital for the Group, we offer opportunities for all individuals, regardless of their age or job
position, to continuously and proactively learn and acquire knowledge and skills required in their respective global fields. Morespecifically, we offer career development training programs at the Company (non-consolidated) to help employees raise their level ofprofessionalism and demonstrate it in work performance, and training programs to strengthen “people management skills” to ensure thatsupervisors can communicate closely with and motivate each subordinate and lead a group of diverse individuals for the growth of boththe organization and individuals. In addition, to provide employees with opportunities to acquire knowledge and skills required forbusiness management, we operate long-term or selective training programs on an ongoing basis. We are striving to strengthen our
initiatives for talent development, to support individuals to enhance their performance in their respective fields and contribute to thegrowth of the Sumitomo Corporation Group’s value.
We also promote HR management without any bias based on nationality, age, gender, sexual orientation, gender identity or any otherindividual attributes and without being restricted by any conventional values. Our Diversity, Equity & Inclusion measures at our head
office in Japan as well as at our Japan and overseas regional offices are developed and implemented according to their respective local
circumstances. As part of continuous awareness-building to establish Diversity, Equity & Inclusion in the organizations, from FY2021,
we set up a specific period to intensively hold Diversity, Equity & Inclusion related programs such as messaging from top management,
various training programs and roundtable discussion workshops with employees (called Diversity Weeks). The Company (nonconsolidated) regards encouraging active involvement of women in business as an important pillar of Diversity, Equity & Inclusion. We
are simultaneously promoting intangible initiatives such as reducing long working hours, encouraging employees to take paid leave, andraising employee awareness, in addition to tangible initiatives, such as establishing various systems that exceed legal requirements, fromthe perspective of supporting a balance between life events and career development. Since these continued efforts were highly acclaimed,
the Company (non-consolidated) was awarded Platinum “Kurumin” certification by the Minister of Health, Labour and Welfare andcertified by the Minister of Health, Labour and Welfare as an “Eruboshi” company of the second-highest class.
<Specific Examples of Efforts>- Introduction of a support program for employees with overseas assignments to accompany only their children- Creation of a handbook for employees to support the balance between work and childcare or family care
- Introduction of childcare consultation services- Collaboration with childcare facilities- Implementation of training related to unconscious bias and various other seminars
In addition, the Company adopted the “Declaration of Iki-iki Waku-waku Health and Productivity Management” based on the conceptthat a healthy mind and body are essential for each employee to perform at his or her highest level and are the foundation for the continuous
creation of new value.
Furthermore, the Company has introduced a teleworking system and a super-flextime system to encourage employees to have high-value
added, output-oriented work styles in pursuit of work styles that allows diverse individuals to maximize their abilities and maximize theoutput of the organization. Owing to company-wide efforts to entrench these systems and to raise employee awareness, the Company(non-consolidated) was selected as one of the “Top Hundred Telework Pioneers” by the Ministry of Internal Affairs and Communicationsin 2019, and was given the Shining Telework Awards presented by the Minister for Health, Labor and Welfare in 2020.
In FY2022, we replaced our employee awareness survey (conducted once every three years) with an engagement survey (conducted oncea year) to investigate the connection between individuals and the organization as well as employee willingness to make voluntary
contributions. We also established a cross-organizational working group of employees to identify and begin addressing areas requiring

20

improvement.

Throughout all of the foregoing measures, we will leverage the power of our diverse talent as a source of competitive strength and willcontinuously create new values and seek further growth and corporate value enhancement for the entire Sumitomo Corporation Group.

Metrics and Targets
Indicator Goal
Indicator
1.

Employee engagement index and employee

Goal
Improvement year-on-yearenablement index
2.

Female manager ratio, Female Department<Goals to be achieved by FY2030>

General Manager ratio, and Female Director andFemale Manager ratio: 20% or more (8.4% as of April 2023)

Audit & Supervisory Board Member ratio

Female Department General Manager ratio: 10% or more
(1.4% as of April 2023)
Female Director and Audit & Supervisory Board Member ratio(*): 30% or more (18.8% as of April 2023)(*) These numerical targets are based on the Company’s support for “Challenge toward 30% by 2030” announced by KEIDANREN(Japan Business Federation) in March 2021.
1. Employee engagement index and employee enablement index
We believe that by implementing measures based on the Policies on Human Resources Development and Maintenance of Working
Environment (Including the Ensurance of Diversity) above, we will realize the “Vision for SC People (Top Tier Professionalism)" and“Vision for SC Organization (Great Place to Work)" stated in the Global HR Management Policy. In this process, we believe that the
Employee engagement index and employee enablement index, which are assessed by the engagement survey (once a year), will improve,and have set the goals for the Company (non-consolidated) as shown in the table above. The engagement survey was conducted only for
the Company (non-consolidated) in FY2022 but will be conducted on a global basis from FY2023, including Sumitomo Corporation's
Japan and overseas regional offices.
2. Female manager ratio, Female Department General Manager ratio, and Female Director and Audit & Supervisory Board
Member ratio
To foster female professionals active in various fields globally on an ongoing basis, the Company (non-consolidated) has set the above
goals to be achieved by FY2030 in light of the present circumstances.

21

3.

Risk factors

The following is a list of risks related to our business that may have a significant impact on the decisions of investors.
Unless otherwise stated, the future information is based on the Company's judgments, plans and forecasts based on certain assumptions
as of the end of the current consolidated fiscal year, and may not be realized due to various factors. There is also a possibility that the
Medium-Term Management Plan, which is formulated based on some forecasts, may be revised or may not be achieved.
(1)

Basic Risk Management Policies and Systems of the Company’s businessWe define “risk” as “the possibility of losses due to the occurrence of anticipated or unanticipated situations,” and also as “the possibilityof not achieving the expected return on business activities.” We have set the following three items as the goals of our risk management
activities.
1.

Stabilize performance2.

Strengthen financial base3.

Maintain corporate reputation

We categorize our business activities into investments and commercial transactions, identify both common and category-specific risk
factors and analyze and evaluate probability and impact of the risk factors.

(2)

Risks pertaining to business investment
1.

Overall
The Company has 636 consolidated subsidiaries and 250 equity-accounted investees as of the end of this consolidated fiscal
year. The Company faces the potential risk of being unable to reap the expected gains from investments made in consolidated

22

subsidiaries and equity-accounted investees or to recover the invested funds due to technological innovations and otherenvironmental changes or due to poor business performance by partners, and of being forced to assume additional financial
burdens when withdrawing from these investments. To manage these risks, the Company has introduced a number of programs
that can be broadly divided into monitoring when making new investments and monitoring after investments have been made.
(a) When making new investments
The Company identifies “investment topics” from the initial stages of investments and verifies them on a prioritized basis
through due diligence. In addition, the Company makes both qualitative and quantitative assessments by, evaluating
investment opportunities through strict investment discipline, as well as calculating the “fair price” of investment targets
through the application of discount rates corresponding to these business risks. Decisions on investment matters at each stageof consideration and execution are made at meetings of business unit investment committees, or the Company’s Investment
Committee in keeping with the scale and importance of these matters. These committees convene early on to conduct indepth discussions on the strategic positioning of investments, the background/reasons for investment selections, and theconditions determining the success or failure of investments.
(b) After making investments
With regard to post-investment execution support, issues are clarified before the decision to invest is made, and a system has
been established to work on resolving smoothly any issues that emerge after the investment has been made. For especially
important projects, in addition to the “100-day plan *1 execution support system,” which provides integrated support
functions, a “Focused Follow Up System” has been established that consists of plans to improve performance, and following
up of project execution, provided by the Company Investment Committee. In addition, we introduced a “full potential plan”
investment monitoring system that is intended to improve the quality of the investment portfolio in fiscal 2018. Investment
targets are evaluated mainly using quantitative indicators, such as ROIC/WACC that measures whether a return on invested
capital (ROIC) exceeds the weighted cost of capital (WACC), and categorized into “Satisfactory,” “Not Satisfactory,” and“Not Good.” As for “Focused Follow Up,” as defined by the “Focused Follow Up System,” “Not Satisfactory” and “Not
Good,” we monitor the ongoing performance, the progress of turnarounds, and the status of efforts to exit on a quarterly basis.
On the other hand, if it is judged that the turnaround is not sufficiently certain to be realized, the turnaround roadmap will be
reviewed, and if it is still judged that a turnaround will be too difficult to achieve, the investment will be designated as "Exit.”
We are working to reposition (“shift”) our business portfolio as stated in our Medium-Term Management Plan "SHIFT 2023”
through these value-creation measures based on a clear time frame. In addition, with the aim of "Enhancement of group
governance" as stated in the Medium-Term Management Plan, we are working to improve the quality of operations at groupcompanies by making management more visible via the setting of appropriate KAIs and KPIs, forming optimal management
teams, and designing compensation for management that promotes the enhancement of business value.
Furthermore, to enhance commitment of our people in charge to value-up of the investment portfolio, a new incentive plan
linked to performance of each of new invested companies was implemented.
*1 Activities, performed mainly in the first 100 days immediately after the investment has been executed, to construct anddevelop management infrastructure aimed at drawing up a medium-term plan that seeks to maximize business value,
including management of the investment, and which management and financial indicators should be used as targets.

23

2.

Risks pertaining to mineral resource and gas development/production
The Company is involved in numerous countries in developing mineral resources, gas and other resources, and it thereby assumes
risks such as those described below. Should these risks surface, the Company’s business performance and financial standing could
be adversely affected.
(a) Increases in development costs above those anticipated in the plan, or construction delays(b) Changes in reserves identified after the star of a project despite suitable geological surveys having been conductedby hired experts prior to the project(c) Production volumes failing below, or production costs rising above, planned figures due to technical issues
encountered during operations, etc.
(d) Plans not being realized for reasons attributable to the project host country’s government, including delays inacquiring/renewing licenses and other authorizations, changes to tax regimes, confiscation of business assets andinfringements of rights
The Company has established a Project Management Department for Mining & E&P staffed by personnel highly knowledgeable
about resource development who strive to bolster project management in these businesses. Efforts are also being made to control
the aforementioned risks through portfolio management, e.g., setting out investment ceilings for individual projects and keeping
the percentage of projects that have not yet started production below a stipulated level within resource/energy portfolios.

(3)

Risks by type1.

Credit risks
The Company extends credit to its business partners via trade receivables, advance payments, loans, guarantees and other means,
and thus bears credit risks. The Company mainly uses derivative trading for hedging purposes, and such trading also entails
counterparty credit risks.
The Company strives to manage such risks by checking the creditworthiness of its customers based on its own internal rating system,
acquiring collateral and guarantees, and diversifying customers. In preparation against the aforementioned credit risks, allowances24

for credit losses are set based on the creditworthiness of its customers, the value of collateral and certain other assumptions,estimates and evaluations. However, the Company’s business performance and financial standing could be adversely affected if
these customers or counterparties were to fall into insolvency, default, etc.
2.

Risks pertaining to changes in commodity market conditions
The Company group trades various commodities such as metals and energy, and thus bears the risk of fluctuations in the prices of
those commodities.
The Company strives to reduce risks by establishing a management system that sets quotas for each commodity, by engaging in
hedging and by setting position and loss limits for mainstay commodities, and it ensures a separation of duties by creating middle
back offices.
In addition, the Company group directly or indirectly holds interests in mineral, crude oil and gas resources, and thus bears the riskof commodity price fluctuations. The Company has established a hedging policy and, if judged necessary, controls the risk of adownturn in business performance by hedging with derivatives or other means.

3.

Country risks
The Company engages in commercial transactions and business activities in more than 60 countries, including Japan, and businessdelays and suspensions resulting from changes in the business environment stemming from political, economic and social
conditions in the countries concerned may have an adverse impact on the Company’s business performance and financial standing.
The Company takes steps to avoid these risks, such as acquiring insurance coverage for each endeavor, setting target upper limits
for exposure in line with in-house country ratings, and carefully maintaining an appropriate diversification of its business portfolio
by applying exposure management to each country.
The Company has put the utmost importance on the safety and security of its stakeholders, including Sumitomo Corporation
Group’s officers and employees, their families, and business partners operating in the region related to Russia and Ukraine.
In addition, the Company’s management council, headed by the President and CEO, is making decisions following discussions
with its business partners and stakeholders, pursuant to the Company’s crisis response policy.

4.

Risks pertaining to changes in interest/ exchange rates
The Company procures business funds by borrowing from financial institutions or issuing corporate bonds and commercial paper.
It may also extend credit to its business partners in the form of trade receivables, advance payments, loans, guarantees and othermeans. The revenues and expenses resulting from these transactions as well as the fair values of assets and liabilities may be affectedby interest rate fluctuations.
The revenues and expenses arising from foreign currency-denominated investments and transactions carried out by the Company,
the yen equivalents of foreign-currency denominated receivables and payables as well as the yen equivalents listed in the financial
statements of overseas consolidated companies prepared in foreign currencies may be affected by fluctuations in exchange rates.
The Company uses derivatives to avoid the risks of interest rate and foreign exchange rate fluctuations, but there is no guaranteethat these risks can be fully avoided.

5.

Risks pertaining to changes in stock markets
Investments in stocks issued by Japanese companies account for a large percentage of the marketable securities held by the any,
and future declines in Japanese stock markets could cause fluctuations in the fair value of these securities that could adversely affectits business performance and financial standing. The Company's corporate pension fund also manages some of its pension assets
with marketable securities, so there is the risk that a decline in stock prices could reduce pension assets.

6.

Risks pertaining to price drops for real estate and other fixed assets
The Company is engaged in developing, leasing, maintaining and managing office buildings, commercial facilities, and residential

25real estate both inside and outside Japan, so the Company’s business performance and financial standing could be adversely affected
if real estate market conditions were to worsen.
If land prices and rental prices decline, it may become necessary to recognize impairment losses for the carrying amount of landand buildings for rent as well as land for development and other real estate owned by the Company.
In addition to real estate, other fixed assets owned by the Company are also exposed to the risk of impairment, which could adversely
affect the Company’s business performance and financial standing.
7.

Risks pertaining to information security
The Company recognizes the importance of information security, and it strives to manage information assets by establishingrelevant regulations, educating executives and employees, and adopting technical measures to ensure information security. The
Company is also working to strengthen information security in response to the diversification of information system usage
environments, such as telework environments. Moreover, since most of the Company’s business activities depend on information
system functions, the Company is also working to ensure security in operating its information systems. Nevertheless, as cyberattacks become more sophisticated year by year, the Company’s business activities could be adversely affected to a significant
degree by information leaks, loss or damage or temporary suspensions of its business activities due to unexpected cyberattacks orunauthorized access from outside, virus or malware infections, information system malfunctions, etc.
To respond appropriately to these risks, efforts have been made as advocated as "enhancement of governance" in the Medium-Term
Management Plan called “SHIFT 2023”, primarily by the IT Strategy Committee chaired by the Chief Information Officer, tosuitably manage information assets in line with the "Information Security Policy" established in October 2017. In addition, theCompany is introducing system measures to counter external cyberattacks and unauthorized access and working in cooperation
with outside expert organizations to obtain the latest information and respond appropriately and promptly.

8.

Legal/compliance risks
The Company is subject to a wide range of laws and regulations as it engages in a broad range of business activities both in Japanand overseas. These laws and regulations span a wide spectrum—business and investment authorizations, import/export activities(including national security regulations), competition legislation, corruption/graft prevention, foreign exchange control, financial
instrument transactions, personal information/data protection, human rights protection, environmental protection, consumer
protection, tariffs and other taxes, etc.— and the Company could in future become subject to additional or new laws and regulations
enacted by individual countries. The Company may face increasing burdens for legal compliance in emerging countries due to thelack of laws, unforeseen changes in laws, and changes in regulatory practices by judicial and administrative agencies.
The Company has a Chief Compliance Officer serving as the top corporate official responsible for compliance. The Chief
Compliance Officer receives advice from the Compliance Committee on planning, drafting and implementing compliance measures,and formulates/ executes appropriate compliance measures. The Sumitomo Corporation Group Compliance Policy, based on the
Company’s existing Compliance Guiding Principles, was prepared to stipulate the basic compliance approaches applicable to theentire Sumitomo Corporation Group, and efforts are being made to forestall compliance issues by inculcating awareness of the need
to “give first priority to compliance” into the Group as a whole through seminars and other continuing educational activities as well
as by thoroughly encouraging Group personnel to “report compliance issues immediately,” meaning that, should compliance issues
arise, employees must report these without delay to their superiors or to the relevant in-house organizations and then implement thebest measures.
However, if officers or employees of the Company or the Group fail to comply with current or future laws and regulations, theCompany/Group may be subject to fines or other penalties, restrictions in our businesses (operations) or damage to our credit, andthis could have a seriously adverse impact on the Company’s/Group’s business development, business performance, financial
standing and credit.

9.

Risks relating to litigations, etc.
The Company is involved in litigation and other disputes in Japan and overseas, and litigation or claims not developing to that level26

may arise suddenly in the course of doing business.
Due to the inherent uncertainty of lawsuits and other disputes, it is not possible to predict the ultimate outcome of the lawsuits andother disputes in which we are involved at this time. There is no assurance that we will prevail in any lawsuits and other disputesor that the Company’s/Group’s business performance, financial standing or credit will not be materially adversely affected by suchactions in the future.
10.

Social/environmental risks

The Group is engaged in business across multiple domains in different countries and regions around the world, and its businessactivities have various impacts on the global environment and local communities as well as on customers, executives, employees
and other stakeholders. Accordingly, if the Group’s business activities were to have a negative impact on people's human rights or
the global environment, the Group could see its financial standing undermined, its credit damaged or other consequences incurred
due to the additional costs that might arise in the course of eliminating or mitigating the impacts, paying compensation for damages,
etc. and business suspensions.
The Group has established an “Environmental Policy,” a “Human Rights Policy” and “CSR Action Guidelines for Supply Chain
Management” that take social and environmental considerations into account with the aim of achieving sustainable growthalongside society as a whole and thereby clarified its approaches to social and environmental issues. We have also established andare practicing on separate policies for major natural resources that require sustainable procurement. To adequately control the socialand environmental impacts of its business activities, the Company examines the social and environmental implications and impactsof each business as well as the management of these before making new investments, and a Group-wide framework for social andenvironmental risk management inclusive of regular monitoring has been put in place for use after investments have been made.
To address the important global issues of climate change, policies have been set out to help resolve climate change issues that must
be addressed for the sake of sustainable social development and to realize a carbon-neutral society through the Group’s businessactivities. For instance, efforts are being undertaken to continually shift the management resources of the Group’s power generation
business to create a more eco-friendly power generation portfolio that places greater focus on renewable energies. In addition,
regarding respect for human rights, we have begun a human rights due diligence covering all of our businesses and supply chainswith the goal of ensuring that human rights are respected in all of our group's businesses and supply chains. Through this initiative,
we will identify human rights risks and then work to minimize and prevent the potential risks.
11.

Risks pertaining to natural disasters, etc.

Natural disasters such as earthquakes, tsunamis, torrential rains, or flooding as well as infectious diseases such as new strains ofinfluenza in countries or regions in which the Company operates could adversely affect its businesses. In preparation forearthquakes and other disasters, the Company has put together disaster countermeasure manuals and Business Continuity Plan
(BCP), developed an employee safety confirmation system, stockpiled disaster supplies, conducted disaster drills, madebuildings/systems earthquake resistant, backed up data and taken other needed measures, but there is no guarantee that damage
from a disaster can be fully avoided through such measures.
12.

Operational risks

The Company is engaged in business across a wide range of domains through its business units, regional organizations in Japanand overseas, and Group companies around the world, making it necessary to establish suitable internal controls for eachorganization. Nevertheless, establishing proper internal controls will not guarantee that administrative errors, misconduct on thepart of executives and employees or other operational risks can be completely prevented. The Company may see its financial
standing deteriorating, its credit be undermined or its operations otherwise adversely affected by such administrative errors or
misconduct. To minimize these risks as far as possible, the Company has advocated “enhancing governance” in the Medium-Term
Management Plan “SHIFT 2023” and is working to develop appropriate internal controls and step up Group governance.
13.

Risks pertaining to fund liquidity

The Company procures business funds by borrowing from financial institutions or issuing corporate bonds and commercial paper.

27

Should turmoil strike financial markets or financial institutions reduce lending or should the Company’s credit rating besignificantly downgraded by rating agencies, the Company could see its fund procurement restricted, e.g., being unable to procure
needed funds at the time needed with the desired conditions or facing higher procurement costs, and this could adversely affect theCompany’s business performance and financial standing. For this reason, the Company is working to secure sufficient liquidity by
utilizing cash and deposits, commitment lines, etc., and to diversify its procurement sources and methods, aiming thereby to“enhance financial soundness” as advocated in the Medium-Term Management Plan “SHIFT 2023.”
14.

Risks pertaining to deferred tax assets

The Company and its consolidated subsidiaries assess the recoverability of deferred tax assets by utilizing all currently available
information about the future, including the feasibility and timing of tax-free amortization of taxable assets as well as the futuretaxable income of the Company and its consolidated subsidiaries. The Company and its consolidated subsidiaries have booked
those deferred tax assets they deem to be recoverable, but the recoverable amounts could fluctuate due to future tax system revisions,such as changes in taxable income estimates and changes in statutory tax rates. If future taxable income forecast falls below thecurrent tax planning forecast because worsened business conditions prevent achievement of business plan targets, the recoverable
amounts of deferred tax assets will decrease, as will the value of the deferred tax assets, and this could adversely affect the businessperformance and financial standing of the Company and its consolidated subsidiaries.
15.

Risks related to human capital

The regions, fields, and business models in which the Group operates are dramatically diversifying, and the environment is changing
unforeseeably at a substantial pace. There is always the possibility that business expansion will require talent with a high level ofexpertise and experience in a particular field. In order to secure top-tier internal and external professionals, we strive to create amore attractive work environment through measures such as hiring year-round, promoting health management and work stylereforms, and fostering a culture and awareness of Diversity, Equity & Inclusion that accepts and leverages diverse values and ideas.
However, our business may be adversely affected if there is a rapid increase in demand for a particular expertise due to rapidchanges in business models, or if the labor market for such expertise is not fully mature and our efforts to recruit and train talent do
not go as planned.
(4)Concentration risks

There is a risk that the Group's business dealings and investment activities will concentrate its exposure in specific countries, sectors orbusiness partners. The Group’s business performance and financial standing could be adversely affected if it is unable to obtain the
expected returns or if it suffers losses due to a worsening business environment, etc.
The Company has in place a country risk management system to prevent excessive concentration of risk exposure in specificcountries/regions. To avoid excessive concentration in specific business domains and build a well-balanced business portfolio, theStrategy Conference as well as the Investment Committee, a deliberative body for large-scale and important projects, engage in suitablediscussions on the amount of risk assets to be allocated to specific business units and business lines. The Group regularly monitors thestatus of business partners with whom the Group has a large number of contracts or high loan balances in the following specific ways:• Operations in countries in which the Company has a significant exposure are carefully managed using the country risk management
system mentioned above.

• Exposure ceilings are set for upstream resource and energy projects, and project values are regularly monitored.
• Transactions with business partners with whom the Group has a large number of contracts or high loan balances, the financial
standing of these business partners and other relevant information is regularly monitored and managed.

28

4.

Analysis of Financial Condition and Results of Operations(1)

Corporate Environment

In the fiscal year under review (fiscal 2022), although the global economy was seeing modest recovery underpinned by support frommonetary, fiscal and other policies following the COVID-19 pandemic, it turned out to be sluggish owing from a rapid rise in the cost of
goods and tighter monetary policy to constrain inflation. Prices soared for a wide range of goods, mainly energy and food products, on
the back of a squeeze on supply and demand overall due to a production capacity shortage and supply chain congestion as well as theglobal divide that has become more pronounced triggered by the Russia - Ukrainian situation. Moreover, coupled with upward pressure
on wages due to tighter supply and demand for labor, primarily in the service industry, the world is grappling with the highest inflation
rates seen in around 40 years. However, many countries and regions are tightening their monetary policy to control prices, and therefore
the uptick has gradually become moderate. Meanwhile, some financial institutions experienced financial instability as a result of risinginterest rates, causing turmoil in the United States, where medium-sized banks went bankrupt, and in Europe, where major banks wereabsorbed and merged by governmental initiatives. In international commodity markets, due to negative impact from the Russia Ukrainian situation, price levels rose substantially mainly for major exports from Russia, including crude oil and petroleum products,
natural gas, coal and wheat. Also, the degree of price fluctuations in markets was larger than ever, forcing the suspension of future trading
due to skyrocketing nickel prices in the short term. Reflecting these soaring commodity prices, governments have taken measures,
including releasing stockpiles into the market, securing distribution safety and setting a ceiling on energy prices. On top of this, there has
been an ease up on the supply and demand for energy, mainly liquefied natural gas, owing to the warm winter in Europe. Accordingly,
commodity prices, primarily for energy and agricultural goods, are returning to levels seen prior to the Russian-Ukrainian situation.
However, the environment surrounding the commodities market yet remains unstable, given the various divides around the world whichhave deepened over the past year Meanwhile, the economy in Japan continued to go up and down. Reflecting the rise in commodity
prices globally and the ongoing depreciation in the value of the yen to levels that have not been seen for the first time in about 25 years,
domestic prices have substantially risen. This weighed heavily on economic activities which had been trending toward recovery as thedaily lifestyle of Japanese citizens were transitioning to a phase of “co-existing with COVID-19.” Also, although the current accountbalance remained in the black, the balance of goods and services posted an unprecedented deficit due to a sharp rise in import prices
reflecting soaring prices for resources, mainly petroleum and coal, and a rapid increase in the import of services from overseas, including
online advertising(2)

Operating Results

Revenues for the fiscal year ended March 31, 2023, amounted to ¥6,817.9 billion, representing an increase of ¥1,322.9 billion comparedto¥ 5,495.0 billion in the previous fiscal year.
Gross profit totaled ¥1,234.8 billion increased by ¥225.1 billion compared to ¥1,009.6 billion in the previous fiscal year. This was due
mainly to strong performance in the tubular products business in North America and the mineral resources & energy trade business.
Selling, general and administrative expenses totaled ¥811.7 billion increased by ¥97.8 billion compared to ¥713.9 billion in the previous
fiscal year.
Gain (loss) on property, plant and equipment was profit of ¥13.3 billion, an increase of ¥25.9 billion compared to loss of ¥12.6 billion in
the previous fiscal year. This was mainly due to an increase in profit in the real estate business as a result of the delivery of large-scale
properties.
Share of profit (loss) of investments accounted for using the equity method totaled profit of ¥252.2 billion increased by ¥75.4 billion
compared to profit of ¥176.8 billion in the previous fiscal year. This was due to the absence of a loss in the aircraft leasing business related
to the Russian-Ukrainian situation in the previous fiscal year, in addition to increase in earnings accompanied by higher mineral resource
prices. As a result, profit for the year attributable to owners of the parent totaled ¥565.2 billion, representing an increase of ¥101.5 billion
compared to profit of ¥463.7 billion in the previous fiscal year.
(3)

Operating Segment

We conduct business through six industry-based business operating segments (business units).
Our six business segments consist of Metal Products; Transportation & Construction Systems; Infrastructure; Media & Digital, Living

29

Related & Real Estate; Mineral Resources, Energy, Chemical & Electronics.
On April 1, 2022, precision agriculture business was transferred from Transportation & Construction Systems Business Unit to Mineral
Resources, Energy, Chemical & Electronics Business Unit and digital health business was transferred from Media & Digital Business
Unit to Living Related & Real Estate Business Unit. Accordingly, the segment information of the previous year has been reclassified.
The following tables set forth our operating results by operating segments for the years ended March 31, 2023 and 2022.
Breakdown of Gross profit by operating segment
Billions of Yen

Millions of
U.S. Dollars
2023

2023

2022

Increase/
Decrease

Increase/
Decrease(%)¥ 220.4¥ 140.3¥ 80.2

57.2$ 1,657

Transportation & Construction Systems

261.0

189.4

71.7

37.9

1,963

Infrastructure

59.8

71.5

(11.7)(16.3)

450

Media & Digital

121.3

111.0

10.3

9.3

912

Living Related & Real Estate

242.8

222.7

20.1

9.0

1,825

Mineral Resources, Energy, Chemical & Electronics

329.7

271.2

58.5

21.6

2,479

1,235.0

1,006.0

229.0

22.8

9,286

(0.2)

3.6

(3.9)

－

(2)

¥ 1,234.8¥ 1,009.6¥ 225.1

22.3$ 9,284

Metal Products

Segment Total
Corporate and Eliminations
Consolidated

Breakdown of Profit (loss) for the year attributable to owners of the parent by operating segment
Billions of Yen

Millions of
U.S. Dollars
2023

2023

2022

Increase/
Decrease

Increase/
Decrease(%)¥ 110.4¥ 55.2¥ 55.2

100.0

$ 830

Transportation & Construction Systems

92.0

34.9

57.0

163.2

691

Infrastructure

20.8

33.3

(12.5)(37.4)

156

Media & Digital

13.0

39.3

(26.3)(66.9)

98

Living Related & Real Estate

59.0

44.2

14.8

33.5

444

Mineral Resources, Energy, Chemical & Electronics

266.9

247.3

19.6

7.9

2,007

Segment Total

562.0

454.2

107.8

23.7

4,226

3.2

9.5

(6.3)

(66.8)

23¥ 565.2¥ 463.7¥ 101.5

21.9$ 4,249

Metal Products

Corporate and Eliminations
Consolidated

Fiscal Year Ended March 31, 2023 Compared to Fiscal Year Ended March 31, 2022
Metal Products
Gross profit totaled ¥220.4 billion, an increase of ¥80.2 billion, or 57.2%, from ¥140.3 billion in the year ended March 31, 2022. Profit(loss) for the year attributable to owners of the parent totaled profit of ¥110.4 billion, an increase of ¥55.2 billion, or 100.0%, from lossof ¥55.2 billion in the year ended March 31, 2022. This is due mainly to favorable performance in market conditions for the tubular
products business in North America and stable performance in overseas steel service center business.
Transportation & Construction Systems
Gross profit totaled ¥261.0 billion, an increase of ¥71.7 billion, or 37.9%, from ¥189.4 billion in the year ended March 31, 2022. Profit

30

(loss) for the year attributable to owners of the parent totaled profit of ¥92.0 billion, an increase of ¥57.0 billion, or 163.2%, from profitof ¥34.9 billion in the year ended March 31, 2022. This is due to stable performance in the automobile distribution business, despite an
impairment loss in the automobile manufacturing business, in addition to stable performance in the construction equipment related
business, particularly in North America, and the leasing business, and the absence of a loss related to the Russian-Ukrainian situation in
the aircraft leasing business in the previous fiscal year.
Infrastructure
Gross profit totaled ¥59.8 billion, a decrease of ¥11.7 billion, or 16.3%, from ¥71.5 billion in the year ended March 31, 2022. Profit (loss)
for the year attributable to owners of the parent totaled profit of ¥20.8 billion, a decrease of ¥12.5 billion, or 37.4%, from profit of ¥33.3
billion in the year ended March 31, 2022. This is due mainly to the impact of soaring electricity procurement prices in the domestic
electricity retail business, while the overseas IPP/IWPP business had shown stable performance.
Media & Digital
Gross profit totaled ¥121.3 billion, an increase of ¥10.3 billion, or 9.3%, from ¥111.0 billion in the year ended March 31, 2022. Profit(loss) for the year attributable to owners of the parent totaled profit of ¥13.0 billion, a decrease of ¥26.3 billion, or 66.9%, from profit of¥39.3 billion in the year ended March 31, 2022. This is due mainly to an impairment loss on equity method investment in thetelecommunications business in Myanmar and increased start-up costs in the telecommunications business in Ethiopia, while majordomestic group companies had shown stable performance.
Living Related & Real Estate
Gross profit totaled ¥242.8 billion, an increase of ¥20.1 billion, or 9.0%, from ¥222.7 billion in the year ended March 31, 2022. Profit(loss) for the year attributable to owners of the parent totaled profit of ¥59.0 billion, an increase of ¥14.8 billion, or 33.5%, from gain of¥44.2 billion in the year ended March 31, 2022. This is due mainly to delivery of large-scale properties in the real estate business, while
the domestic supermarket business posted a decrease in profit.
Mineral Resources, Energy, Chemical & Electronics
Gross profit totaled ¥329.7 billion, an increase of ¥58.5 billion, or 21.6%, from ¥271.2 billion in the year ended March 31, 2022. Profit(loss) for the year attributable to owners of the parent totaled profit of ¥266.9 billion, an increase of ¥19.6 billion, or 7.9%, from gain of¥247.3 billion in the year ended March 31, 2022. This is due mainly to higher mineral resource and energy prices, strong performance inmineral resources and energy trading, and stable performance in the chemical products and electronics business.
(4)

Purchases, Sales Contracts and Trading Transactions① Purchases
As purchases are generally linked to trading transactions, this item is omitted.
② Sales Contracts
As sales contracts are generally linked to trading transactions, this item is omitted.
③ Trading Transactions
Revenues for the fiscal year ended March 31, 2023 significantly increased from the previous fiscal year, owing mainly to higher sales
prices and volumes in tubular products business in North America and rising mineral resources prices, etc.
Please refer to “(2) Operating Results” and “Note 4. Segment Information to our consolidated financial statements.”(5)

Certain Line Items in Our Consolidated Statement of Comprehensive Income

The following is a description of certain line items in our Consolidated statement of comprehensive income:31

Revenues.
We categorize our revenues into sales of tangible products and sales of services and others. We generate revenues from sales of tangible
products:-in connection with our wholesale, retail, manufacturing and processing operations;-in connection with our real estate operations; and-under long-term construction contracts.

We generate revenues from the sale of services and others in connection with:-services related to customized software development; and-loans, finance leases and operating leases of commercial real estate, vessels, etc.

Gross Profit.
Gross profit primarily consists of:-gross profit on transactions for which we act as a principal; and-fees and commissions received on transactions for which we act as an agent.

To the extent revenues are recorded on a gross basis, any expenses or commissions or other payments to third parties that are directly
attributable to the sales are recorded as cost of sales. Gross profit reflects the net amount of gross revenues after cost of sales. As a part ofsales of services and others, we recognize revenues from fees and commissions on a net basis. As a result, sales of services and others
contribute a larger portion of our gross profit than they do of our revenues. For the year ended March 31, 2023, sales of services andothers accounted for 8.5% of our total revenues, and the gross profit from sales of services and others accounted for 22.3% of our grossprofit.
Impairment Reversal (Loss) on Long-Lived Assets.
At the end of each reporting period, the carrying amounts of non-financial assets, excluding inventories, deferred tax assets, and biologicalassets are assessed whether there is any indication of impairment. If any such indication exists, the recoverable amount of the nonfinancial asset is estimated. Regarding goodwill, intangible assets with indefinite useful lives and intangible assets not yet available foruse, the recoverable amount is estimated at the same time every year. If the carrying amount of an asset or a cash-generating unit (“CGU”)
exceeds the recoverable amount of it, an impairment loss is recognized in profit (loss). Impairment losses on long-lived assets include
reversals of impairment losses when applicable.
Gain (Loss) on Sale of Long-Lived Assets, Net.
As a result of strategic and active replacement of our asset portfolio, we may, at times, recognize gains and losses on sales of some of ourreal estate assets.
Dividends.
Dividends reflect dividends declared by companies in which we hold interests other than our consolidated subsidiaries or equityaccounted investees.
Gain (Loss) on Securities and Other Investments, Net.
We maintain a significant level of investments in order to supplement our trading activities. Among those investments, financial assets
measured at fair value through profit and loss (“FVTPL”) are initially measured at fair value. Subsequently, they are measured at fairvalue, and gains and losses arising from changes in fair value are recognized in profit (loss). Financial assets measured at amortized cost
are initially measured at fair value (including directly attributable transaction costs). Subsequently, the carrying amount of the financial
assets measured at amortized cost is calculated using the effective interest method, less impairment losses when necessary. We recognize

32gains and losses on sales of our financial assets measured at amortized cost and investments in our consolidated subsidiaries or equityaccounted investees when we elect to sell investment holdings.
Share of Profit (Loss) of Investments Accounted for Using the Equity Method.
In connection with our investment strategy and the development of business opportunities, we may, from time to time, acquire or makeinvestments in newly established or existing companies, enter into joint ventures with other entities or form strategic business allianceswith industry participants, in each case in a variety of business segments. In general, we account for the profits or losses of any suchinvestee under the equity method when the level of the investment is between 20% and 50% of the total voting equity of the investee.
Financial Assets Measured at Fair Value Through Other Comprehensive Income.
Financial assets measured at fair value through other comprehensive income (“FVTOCI”) are initially measured at their fair value(including directly attributable transaction costs). Subsequently, they are measured at fair value, and changes in fair value are recognizedin other comprehensive income.
Remeasurements of Defined Benefit Pension Plans.
The Companies recognize remeasurements of the net defined benefit liability (asset) in other comprehensive income.
Exchange Differences on Translating Foreign Operations.
Assets and liabilities of foreign operations (including goodwill and fair value adjustments arising on the acquisition of foreign operations)
are translated into Japanese yen using the spot exchange rate at the reporting date. Income and expenses are translated into Japanese yenat the average spot exchange rates for the period.
Exchange differences arising from translation of financial statements of foreign operations are recognized in other comprehensive income.
These differences are presented as “Exchange differences on translating foreign operations” in other components of equity after the dateof transition to IFRSs.
Cash-Flow Hedges.
When derivatives are designated as hedging instruments to hedge the exposure to variability in cash flows that are attributable to particularrisks associated with recognized assets or liabilities or highly probable forecast transactions which could affect profit (loss), the effective
portion of changes in the fair value of derivatives is recognized in other comprehensive income.
(6)

Critical Accounting Policies and estimates

The preparation of our consolidated financial statements in accordance with IFRSs requires management to make judgments, estimatesand assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, weevaluate our estimates, which are based on historical experience and various other assumptions that are believed to be reasonable under
the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities
and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from thoseestimates under different assumptions. For a summary of our significant accounting policies, including the critical accounting policies
discussed below, please refer to “Note 3. Significant Accounting Policies to our consolidated financial statements.”
The followings are the critical accounting policies that are important to our financial condition and results of operations and requiresignificant management judgments and estimates:
Impairment of Financial Assets
For financial assets measured at amortized cost, lease receivables, contract assets, and debt instruments measured at fair value throughother comprehensive income, we recognize loss allowance based on the expected credit losses for the financial asset. Credit risk change

33

and calculation of expected credit losses are mainly based on original credit rating model, the Sumisho Credit Rating (“SCR”). “SCR”
includes the debtor’s past bad debts experience, current financial condition and reasonably available forecast information.
Financial Assets Measured at Fair Value
We carry financial assets measured at fair value such as marketable securities, and other investments. We have decided to classify equity
instruments into FVTOCI or FVTPL. Financial assets classified as FVTOCI are held for objective, such as expansion of the medium andlong-term revenue through maintenance and reinforcement of relationships with investees. Their changes in fair values are not includedin the assessment of business performance. Financial assets classified as FVTPL are held to make profits from the changes in fair values
and are included in the assessment of business performance. Fair values of these assets are based on market prices or determined by thediscounted future cash flow method, profitability and net assets of the investees, and other valuation approaches.
Recoverability of Non-current Assets
We maintain significant non-current assets in the operation of our global business. We review non-current assets, such as Investments
accounted for using the equity method and intangibles assets, for impairment whenever events or changes in circumstances suggest thatthe carrying amount of such assets may not be recoverable. Determining whether impairment has occurred typically requires various
estimates and assumptions, including determining whether cash flows are directly related to the potentially impaired asset, the useful life
over which cash flows will occur, their amount, and the asset’s residual value, if any. We also review goodwill and other intangible assets
with indefinite useful lives for impairment at least annually, or more often if events or circumstances, such as adverse changes in thebusiness climate, indicate that there may be impairment. In turn, we estimate the recoverable amount at the impairment tests. The
recoverable amount of an asset or a cash-generating unit is the higher of its value in use and its fair value less costs of disposal. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the time valueof money and the risks specific to the asset. We derive cash flow estimates from our historical experience and our internal business plans,and discount them by applying an appropriate discount rate. Changes in strategy or in market conditions could significantly affect theseestimates. The significant accounting estimates related to Recoverability of Non-current Assets are as follows. For the details of
accounting estimates related to Recoverability of Non-current Assets, please refer to “Note 11. Investments Accounted for Using theEquity Method and Note 13. Intangible Assets to our consolidated financial statements.”
1.

Nickel mining and refining business in Madagascar
We recognize Share of profit (loss) of investments accounted for using the equity method, if there is indication of impairment
related to fixed assets of Ambatovy Minerals S.A. and Dynatec Madagascar S.A. (hereinafter Project Companies) and its
recoverable amount is less than its carrying amount as a result of the impairment test. We define the recoverable amounts of fixed
assets in Project Companies as the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. We use key
assumptions, including the state of production at the Project Companies, future natural resources prices (mainly mid-long term
price outlook of nickel and cobalt), the recoverable reserves, on which the business plan of the Project Companies was based, as
well as the discount rates for the judgments regarding indications of impairment of fixed assets and the estimating of its recoverable
amounts.

2.

Fresh produce business in Europe and the Americas
For the impairment test of goodwill and intangible assets with indefinite useful lives, they are allocated across multiple CGUs andtheir recoverable amounts are calculated based on the value in use. The value in use is estimated by using the present value of future
cash flows, with support of an independent appraiser. Future cash flows are calculated based on the business plan that was used as
the basis of consideration paid, amended to reflect the recent business environment. The key assumptions with significant impact
on the calculation of the value in use are sales volume, the margin of trading, the discount rate, etc. for Banana & Pineapple business.

3.

Parking Business in Nordic countries
For the impairment test of goodwill and intangible assets with indefinite useful lives, they are tested for impairment using the entire

34

parking business as a single cash generating unit group, and the recoverable amounts are calculated based on the value in use. The
value in use is estimated by using the present value of future cash flows, with support of an independent appraiser. Future cash
flows are calculated based on the business plan that was used as the basis of consideration paid, amended to reflect the recent
business environment. The key assumptions with significant impact on the calculation of the value in use are future short termparking revenue, the discount rate, etc.
Tax Asset Valuation
We reduce deferred tax assets when, in management’s judgment, it is more likely than not that the deferred tax assets, or a portion thereof,
will not be realized. In assessing the realizability of deferred tax assets, we must determine whether we will be able to generate adequate
future taxable income in the tax jurisdictions that give rise to the deferred tax assets during the periods in which the underlying temporary
differences become deductible or before net operating loss carry forwards expire. We consider all available evidence, both positive andnegative, in making this assessment. Determination of the deferred tax assets is based on estimates and judgment. A change in the abilityof our operations to generate future taxable income in the tax jurisdictions that give rise to the deferred tax assets could change ourassessment as to the realizability of these assets.
Calculation of Provision
Provisions are recognized when the Companies have present legal or constructive obligations as a result of past events, it is probable that
outflows of resources embodying economic benefits will be required to settle the obligations, and reliable estimates can be made of theamount of the obligations. Provisions are discounted to their present value using a pre-tax rate that reflects the time value of money andthe risks specific to the liability.
Measurement of Defined Benefit Obligations
Defined benefit plans are post-employment benefit plans other than defined contribution plans. The Companies’ net defined benefit
obligations are calculated separately for each plan by estimating the future amount of benefit that employees have earned in exchange for
their service for the previous and current years. The benefits are discounted to determine the present value, and fair value of plan assets
is deducted.
The discount rates are equivalent to the market yields of AA credit-rated corporate bonds at the end of each reporting period that havematurity terms approximating those of the Companies’ obligations. These calculations are performed annually by qualified actuaries
using the projected unit credit method.
(7)

Total Assets, Liabilities, and Equity

Fiscal Year Ended March 31, 2023 Compared to Fiscal Year Ended March 31, 2022
Total assets stood at ¥10,106.3 billion, representing an increase of ¥524.1 billion compared to ¥9,582.2 at the previous fiscal year-end,
due mainly to the impact of yen’s depreciation, the increase of working capital and investments accounted for using the equity method.
Equity attributable to owners of the parent totaled ¥3,779.5 billion, representing an increase of ¥581.7 billion compared to ¥3,197.8 atthe previous fiscal year-end, due mainly to the impact of yen’s depreciation and the profit attributable to owners of the parent posted in
the fiscal year ended March 31, 2023, while dividend payment and share repurchase were executed.
Interest-bearing liabilities (net) (*1) totaled ¥2,484.4 billion increased by ¥210.7 billion compared to ¥2,273.7 billion at the previous
fiscal year-end. In consequence, the net debt-equity ratio (Interest-bearing liabilities (net)/ Equity attributable to owners of the parent)
was 0.7.
(*1) Interest-bearing liabilities = Sum of bonds and borrowings (current and non-current) (excluding lease liabilities)(8)

Cash FlowsNet cash provided by operating activities totaled ¥232.8 billion as basic profit cash flow (*2) totaled an inflow of ¥509.3 billion because
our core businesses performed well in generating cash, while working capital increased.

35

Net cash used in investing activities totaled ¥91.5 billion. We have invested in domestic and overseas real estate and also executed atender offer for Sumitomo Precision Products Co., Ltd. On the other hand, we have recovered funds through asset replacement, such as
the sale of domestic real estates, the sale of silver, zinc and lead business in Bolivia, and the sale of oil and gas business in the British
territories of U.K. North Sea. As a result, free cash flows, representing sum of net cash provided by operating activities and net cash used
in investing activities, totaled an inflow of ¥141.3 billion.
Net cash used in financing activities totaled ¥250.5 billion due mainly to dividend payment, share repurchase, and repayments of leaseliabilities, while execution of borrowings. In consequence of the foregoing and consideration of the impact such as foreign exchange
fluctuation, cash and cash equivalents stood at ¥656.9 billion as of March 31, 2023, representing a decrease of ¥77.0 billion compared to¥733.8 billion at the previous fiscal year-end.
(*2) Basic profit cash flow = (Gross profit + Selling, general and administrative expenses (excluding provision for doubtful receivables)+ Interest expense, net of interest income + Dividends) × (1-Tax rate) + Dividend from investments accounted for using the equity method(9)

Capital Resources and Liquidity

Our basic policy for fund raising activities is to maintain and enhance financial soundness, and we are committed to secure stable,
medium-to long-term low-interest rate funds and liquidity for our operations. We have implemented a group financing policy for our fundmanagement on a consolidated basis in which funds are raised principally by the Company, finance subsidiaries and overseas regional
entities and efficiently utilized through our cash management system within Group.
As of March 31, 2023, we had ¥3,152.1 billion of bonds and borrowings. Our short-term debt, excluding current maturities of long-term
debt, was ¥341.4 billion, an increase of ¥77.7 billion from March 31, 2022. Our short-term debt consisted of ¥248.9 billion of loans,principally from banks, and ¥92.5 billion of commercial paper.
As of March 31, 2023, we had bonds and long-term debt of ¥2,810.7 billion, an increase of ¥53.0 billion from March 31, 2022, including
current maturities of ¥344.0 billion. As of March 31, 2023, the balance of our borrowings from banks and insurance companies was¥2,317.6 billion, an increase of ¥49.0 billion from March 31, 2022, and the balance of notes and bonds was ¥493.1 billion, an increase of¥4.1 billion from March 31, 2022.
Most of our loans from banks contain covenant provisions customary in Japan. We do not believe those provisions materially limit ouroperating or financial flexibility. However, several of the loan agreements require maintenance of certain financial ratios and minimum
levels of tangible net worth. Under some agreements, principally with government-owned financial institutions, we may be required tomake early repayments of an outstanding amount if the lender concludes that we are able to repay the outstanding amount throughimproved earnings or from the proceeds of an equity or debt offering, and makes such a prepayment request. Certain agreements providethat the banks may require the borrower to obtain bank approval prior to the payment of dividends and other appropriations of earnings.
We have not been asked to make any such prepayments and currently do not anticipate any prepayment requests.
Please refer to "3 Risk factors (3) Risks by type13. Risks pertaining to fund liquidity".
We have maintained a stable funds procurement by extending fundraising periods to diversify the maturity dates. Our basic policy is tomaintain the appropriate balance between funds mainly obtained through indirect financing including bank loans based on our soundrelationship with broad range of financial institutions and funds obtained through direct financing such as commercial paper and corporate
bonds. With an aim to diversify the sources of funds, we procure foreign currency funds not only through bank loans, bonds issued inforeign currencies, currency swaps, but also through commercial paper issued by finance subsidiaries and overseas regional entities, andEuro medium-term note (“MTN”). In addition, we developed the Sumitomo Corporation Green Finance Framework in March 2022, andbased on this framework, the Company issued 20 billion in Green Bonds in May 2022.
As of March 31, 2023, our long-term and short-term credit ratings are Baa1/P-2 (stable outlook) from Moody’s Investors Service,
BBB+/A-2 (stable outlook) from Standard & Poor’s and A+/a-1 (stable outlook) from Rating and Investment Information, Inc. (As of
the filing date, our long-term and short-term credit ratings are A-(stable outlook)/A-2 from Standard & Poor’s.)
In order to facilitate our direct access to capital markets for funding, we have established several funding programs, including:-¥300.0 billion Japanese and Overseas shelf registration for primary debt offerings;

36

-¥500.0 billion commercial paper program in Japan;-$1,500 million commercial paper program, established by our U.S. subsidiary, Sumitomo Corporation of Americas;-

U.S.$3,000 million Euro Medium Term Note program jointly established by us, Sumitomo Corporation Capital Europe,
Sumitomo Corporation of Americas and Sumitomo Corporation Capital Asia; and-U.S.$1,500 million Euro-denominated commercial paper program established by Sumitomo Corporation Capital Europe.

In addition, we continuously determine various worst case scenarios, including the current financial market turmoil, to maintain adequatelevels of liquidity in any market condition. As of March 31, 2023, we maintain cash and deposits and committed lines of credit with major
Japanese and overseas financial institutions in the aggregate amount of $1,210 million, as well as the following long-term committed lineof credit in the amount up to ¥285.0 billion, which should secure sufficient liquidity to provide funds required for the operation of theCompany and its subsidiaries and repayments of borrowings and bonds that will become due within one year. By the filing date, we havenot drawn on any of these lines of credit. These lines of credit do not contain any material covenants, ratings triggers or other restrictions
that could potentially impair our ability to draw down the funds. We also have several uncommitted lines of credit.
These lines of credit consist of:-$1,060 million multi-borrower and multi-currency line of credit provided by a syndicate of major European and U.S. banks,
under which we can obtain loans for Sumitomo Corporation or any of our subsidiaries in the United Kingdom, the UnitedStates and Singapore;-$100 million U.S. dollar-denominated line of credit provided to Sumitomo Corporation of Americas by a major U.S. bank;-$50 million multi-currency line of credit provided to Sumitomo Corporation Capital Europe by a major European bank;-¥150.0 billion line of credit provided by a syndicate of major Japanese banks, including ¥79 billion multi-currency facility;and-¥135.0 billion line of credit provided by a syndicate of Japanese regional banks.

37

Capital resources and liquidity
Millions of U.S.
Dollars

Billions of Yen

As of March 31, 2023 and 2022

2023

Short-term

2022

2023

¥ 341.4¥ 263.7$ 2,567

Loans, principally from banks

248.9

199.7

1,871

Commercial paper

92.5

64.0

696

2,810.7

2,757.7

21,133

227.9

235.3

1,713

2,089.7

2,033.4

15,712

493.1

489.0

3,708

3,152.1

3,021.4

23,700

667.7

747.7

5,020

Interest-bearing liabilities (net)2,484.4

2,273.7

18,680Total assets

10,106.3

9,582.2

75,987

Equity attributable to owners of the parent

3,779.5

3,197.8

28,418Equity attributable to owners of the parent ratio (%)

37.4

33.4

Debt-Equity Ratio (gross) (times)

0.8

0.9

Debt-Equity Ratio (net) (times)

0.7

0.7

Long-term, including current maturities of long-term debt
Secured long-term debt
Loans
Unsecured long-term debt
Loans
Bonds and notes
Interest-bearing liabilities (gross)
Cash and cash equivalents & time deposits38As of March 31, 2023, our contractual cash obligations for the periods indicated are as follows:
Payments due by period
Billions of Yen
Bonds and borrowings
Less than 1 years

Lease liabilities¥ 685.4¥ 76.1

1-2 years

409.6

64.2

2-3 years

275.5

53.7

3-4 years

355.8

40.9

4-5 years

313.4

34.4

More than 5 years

1,112.5

228.5¥ 3,152.1¥ 497.8

Total

Millions of U.S. Dollars
Bonds and borrowings
Less than 1 years

Lease liabilities$ 5,153$ 572

1-2 years

3,080

483

2-3 years

2,071

404

3-4 years

2,675

307

4-5 years

2,356

259

More than 5 years

8,365

1,718

$ 23,700$ 3,743

Total

As of March 31, 2023, we had financing commitments in connection with loans and investments in equity capital and contracts for theuse of equipment of which the aggregate amount is￥875.7 billion.
As of March 31, 2023, we have no material commitments for capital expenditures.
In addition to our commitments above, in connection with our businesses, we incur various contingent liabilities, such as guarantees ofour customers’ obligations. Furthermore, we are subject to contingent liabilities arising from litigation. Details of these contingent
liabilities are discussed in “(10) Contingencies” and “(11) Litigation and Others” described below. Although we currently do not believethat our cash needs under such contingent liabilities will be significant, if, contrary to expectations, defaults under guarantees aresubstantial, or there is a significant adverse outcome in our litigation, such contingent liabilities may cause significant new cash needs.
We require continuous financing for our cash needs for working capital, capital investments in new and existing business ventures anddebt service. Our growth strategy contemplates the making of investments, in the form of acquisitions, equity investments and loans. We
invested ¥114.6 billion in acquisitions of property, plant and equipment and investment property and ¥131.7 billion in acquisitions ofother investments in the year ended March 31, 2023. We are currently contemplating acquisitions of companies complementary to ourexisting businesses and related business areas in all business segments.
These investments, however, are either at a preliminary evaluation stage or are subject to a number of conditions; accordingly, there arepossibilities that these investments could not be completed. Additionally, although we believe our existing cash, current credit
arrangements, and cash flows from operations will be sufficient to meet our cash needs for the foreseeable future, it is not guaranteed. If
our future cash flows from operations are less than we expect, we may need to incur additional debt, pursue other sources of liquidity, or
modify our investment plans.

39

(10) Contingencies
In connection with our businesses, from time to time, we incur various contingent liabilities, such as guarantees of our customers’
obligations. We conduct business with counterparties around the world, and we make an effort to control the related trade receivables andguarantees in order to minimize concentrations of credit risk. We do not anticipate material losses on the commitments and guarantees
discussed below in excess of established allowances.
As of March 31, 2023, we are contingently liable for guarantees (continuing through 2048) in the aggregate amount of ¥157.2 billion,
including ¥75.9 billion relating to our equity-accounted investees and ¥81.3 billion to third parties. The guarantees are primarily toenhance the credit standings of our equity-accounted investees, suppliers and customers.
(11) Litigation and Others
The Companies are involved in certain legal actions and claims incidental to its business. In the opinion of management, none of theseactions or claims will have a material adverse effect on the financial position or results of operations of the Companies.
(12) New Standards and Interpretations Not Yet Applied
The new standards, interpretations, and amendments that have been issued as of the date of the approval for the consolidated financial
statements, which the Companies have not yet applied as of March 31, 2023, are as follows. The impact caused by the application of
those is being determined and cannot be estimated at this time.

IFRSs

Title

Reporting periods
on or after which
the applications are
required

Reporting periods ofthe application by
the Companies (Thereporting period
ended)

Summaries of new IFRSs and amendments

Clarification of deferred tax related to assets
and liabilities arising from a single transaction
and requirements of disclosure of Pillar Two
income taxes
Clarification of requirements forclassification of liabilities as current or noncurrent liabilities and requirements ofdisclosure of information on non-current
liabilities with covenants

IAS 12

Income Taxes

January 1, 2023

March 31, 2024

IAS 1

Presentation of
Financial Statements

January 1, 2024

March 31, 2025

IAS 7

Cash FlowsIFRS 7

Financial Instruments:
Disclosures

January 1, 2024

March 31, 2025

Requirements of disclosure of information
on supplier finance arrangements

IFRS 16

LeasesJanuary 1, 2024

March 31, 2025

Consolidated
Financial Statements
Investments in
Associates and Joint
Ventures

Clarification of subsequent measurement
requirements for sale and leaseback
transactions

To be determined

To be determined

Amendments of accounting for the sale orcontribution of assets between an investor andits associate or joint venture

IFRS 10
IAS 2840

(13) Quantitative and Qualitative Disclosure about Market Risk
In the normal course of business, we are exposed to risks arising from fluctuations in interest and currency exchange rates, commodity
prices and equity prices. In order to manage these risks, we use financial and commodity derivative instruments including: foreignexchange forwards, currency swaps and options; interest rate swaps, futures and options; and commodity futures, forwards, swaps, andoptions. To a lesser degree, we also use derivative commodity instruments for trading purposes within prescribed position limits and loss
limits imposed under the risk management structure described below.
Interest Rate Risk
Our business activities expose us to market risks arising from changes in interest rates, which we monitor and for which we take measures
to minimize through the departments which Chief Financial Officer of the Corporate Group manages. In particular, interest rate
fluctuations will impact our borrowing costs because a portion of our outstanding debt instruments is floating rate instruments and because
we have short-term borrowings that we refinance from time to time. However, the impact on our borrowing costs will be partially offset
by increased returns on certain of our assets, which will also be impacted by interest rate fluctuations. To manage this risk, we enter into
interest rate swap agreements, future contracts and option contracts that serve to modify and match the interest rate characteristics of ourassets and liabilities.
Foreign Currency Exchange Rate Risk
The nature of our global operations expose us to market risks caused by fluctuations in foreign currency exchange rates related to imports,
exports and financing in currencies other than the local currency. In order to mitigate foreign currency exchange rate risks, except for
certain risks including the risk associated with foreign investments considered to be permanent, we use derivative instruments including
foreign exchange forward contracts, currency swap agreements and currency option contracts with third parties in addition to borrowing
and deposit transactions denominated in foreign currencies.
Commodity Price Risk
We trade in commodities such as physical precious and base metals, energy products (crude oil and refined oil products) and agricultural
products (wheat, coffee, sugar and others), and engage in investments in metal mining, and oil and gas development. As a result of these
activities, we are exposed to commodity price risks. We intend to reduce commodity price risks by hedging sales, matching the volume
and timing of selling and purchasing commodities, or using derivatives. We use derivatives for trading purposes within well-defined
position limits and loss limits.
Equity Price Risk
We are exposed to equity price risk inherent in stock we hold in financial institutions and our customers and suppliers for strategic
purposes and in the other investments held by us. We do not engage in continuous hedging measures against the market exposures on
those securities. As of March 31, 2023, we had fair value exposure on our marketable equity securities in the aggregate amount of ¥225.6
billion.
Risk Management Structure
Any business department wishing to enter into a derivative transaction or any other type of transaction exposing us to market risk mustobtain approval from the President or General Manager, depending on the magnitude of the transaction, before entering into thetransaction. The President or General Manager, as the case may be, reviews requests with the assistance of staff members who haveexpertise in derivative contracts. The request must identify the counterparty, the applicable market and credit risks and state the objectivesof the transaction, the trading limit, and the loss limit amount.
The departments which Chief Financial Officer manages provide the following with respect to the execution and monitoring oftransactions:-back office support services for financial and derivative commodity transactions, such as opening accounts, confirming theexecution of contracts, processing settlement and delivery of funds, and maintaining accounting records for the transactions;41-

confirmation of balances of each transaction position; and-monitoring of the status of positions and analyzing and calculating the risks of related transactions on a company-wide basis,
and issuing periodic reports to our senior management.

Our subsidiaries are required to comply with the risk management structure described above when they execute commodity market
transactions.

42Consolidated Statement of Financial Position
Sumitomo Corporation and Subsidiaries
As of March 31, 2023 and 2022
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

¥ 656,859¥ 733,824$ 4,939

Time deposits

10,783

13,84781

Marketable securities (Notes 6, 9 and 27)

1,741

2,308

13

1,678,995

1,621,862

12,624Contract assets (Note 27 and 28)

426,369

300,539

3,206

Other financial assets (Note 27)

123,827

250,892

931

Inventories (Notes 9 and 10)

1,390,559

1,058,003

10,455

Advance payments to suppliers

135,177

116,795

1,016

6,574

33,81550

Other current assets (Note 16)442,073

513,598

3,324

Total current assets

4,872,957

4,645,483

36,6392,642,504

2,356,984

19,868Other investments (Notes 6, 9 and 27)

388,767

416,6672,923

Trade and other receivables (Notes 7, 9, 11 and 27)

207,201

215,941

1,558

Other financial assets (Note 27)

190,736

204,415

1,434

ASSETS
Current assets:
Cash and cash equivalents (Note 9)

Trade and other receivables (Notes 7 and 9, 11 and 27)

Assets classified as held for sale (Note 9)

Non-current assets:
Investments accounted for using the equity method(Notes 9 and 11)

Property, plant and equipment (Notes 8, 9 and 12)

1,046,316

1,023,733

7,867

Intangible assets (Notes 8, 9 and 13)

284,790

254,966

2,141

Investment property (Notes 8, 9 and 14)

346,355

339,3362,604

Biological assets (Note 15)

36,891

40,241

277

Deferred tax assets (Note 16)

30,79026,660232

Other non-current assets

58,94557,740444

5,233,295

4,936,683

39,348¥ 10,106,252¥ 9,582,166$ 75,987

Total non-current assets
Total assets (Note 4)43Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Bonds and borrowings (Notes 17, 18 and 27)¥ 685,356¥ 608,031$ 5,153

Trade and other payables (Notes 11, 19 and 27)

1,648,976

1,612,480

12,398

Lease liabilities (Notes 8, 11 and 18)

76,05873,820572

Other financial liabilities (Note 27)

119,170

292,185896

Income tax payables

48,06063,373361

Accrued expenses

137,190

119,979

1,032

Contract liabilities (Note 28)

119,603

155,651

899

Provisions (Note 20)

12,152

6,429

91

Liabilities associated with assets classified as held for sale

5,487

16,917

41

113,103

127,925851

2,965,155

3,076,790

22,294

Bonds and borrowings (Notes 17, 18 and 27)

2,466,733

2,413,343

18,547

Trade and other payables (Notes 11, 19 and 27)

57,57550,651

433

Lease liabilities (Notes 8, 11 and 18)

421,759

410,027

3,171

Other financial liabilities (Note 27)

57,243

95,764430

Accrued pension and retirement benefits (Note 21)

21,841

20,742

164

Provisions (Note 20)

39,99655,969301

Deferred tax liabilities (Note 16)

98,491

77,595741

Total non-current liabilities

3,163,638

3,124,091

23,787

Total liabilities

6,128,793

6,200,881

46,081

Common stock (Note 22)

220,047

219,894

1,654

Additional paid-in capital (Note 23)

254,114

255,996

1,911

Treasury stock(39,563)(1,871)(297)

Other components of equity (Note 24)

637,538

454,136

4,794

2,707,382

2,269,661

20,356

3,779,518

3,197,816

28,418

197,941

183,469

1,488

3,977,459

3,381,285

29,906¥ 10,106,252¥ 9,582,166$ 75,987

LIABILITIES AND EQUITYCurrent liabilities:

Other current liabilities
Total current liabilities
Non-current liabilities:

Equity:Retained earnings (Note 23)
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Total liabilities and equity
See the accompanying notes to the consolidated financial statements.

44

Consolidated Statement of Comprehensive Income
Sumitomo Corporation and Subsidiaries
For the years ended March 31, 2023 and 2022
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Sales of tangible products¥ 6,238,706¥ 4,997,278$ 46,908

Sales of services and others579,166

497,737

4,355

6,817,872

5,495,015

51,263

Cost of tangible products sold

(5,278,970)(4,219,322)(39,692)

Cost of services and others(304,150)(266,090)(2,287)(5,583,120)(4,485,412)(41,979)

1,234,752

1,009,603

9,284(811,737)(713,941)(6,103)(6,861)(17,887)(52)

Revenues:

Total revenues (Notes 4, 8, 14, 27, 28 and 31)
Cost:

Total cost (Notes 12, 13, 14, 21, 27 and 31)
Gross profit (Note 4)
Other income (expenses):
Selling, general and administrative expenses(Notes 12, 13 and 30)
Impairment reversal (loss) on long-lived assets(Notes 12, 13 and 14)
Gain (loss) on sale of long-lived assets, net

20,152

5,244

152

Other, net (Note 31)(3,241)55,881(24)(801,687)(670,703)(6,027)

Interest income

48,34028,989363

Interest expense(59,791)(30,194)(450)

Dividends

20,06827,255151

Gain (loss) on securities and other investments, net(Note 27)

29,05048,238218

Finance income (costs), net (Note 31)

37,66774,288282

Share of profit (loss) of investments accounted forusing the equity method (Notes 4 and 11)

252,186

176,831

1,896

Profit (loss) before tax

722,918590,019

5,435

Income tax expense (Note 32)(123,830)(105,452)(931)

Profit (loss) for the year

599,088484,567

4,504¥ 565,178¥ 463,694$ 4,249

33,91020,873255

Total other income (expenses)
Finance income (costs):

Profit (loss) for the year attributable to:
Owners of the parent (Note 4)
Non-controlling interests

45

Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Other comprehensive income:Items that will not be reclassified to profit or loss
Financial assets measured at fair value throughother comprehensive income

4,735

14,18836

Remeasurements of defined benefit pension plans

8,885

10,577

67

Share of other comprehensive income of investments
accounted for using the equity method
Total items that will not be reclassified to profit orloss
Items that may be reclassified subsequently to profit or
loss

769

(1,646)

6

14,38923,119109

Exchange differences on translating foreign operations

123,559

246,071929

Cash-flow hedges

26,175

19,354

197

Hedging cost

(1,596)(2,209)(12)

48,83520,363367

196,973283,579

1,481

211,362306,698

1,590

810,450

791,265

6,094¥ 774,262¥ 765,330$ 5,822

36,18825,935

272

Share of other comprehensive income of investments
accounted for using the equity method
Total items that may be reclassified subsequently to
profit or loss
Other comprehensive income, net of tax (Note 24)
Comprehensive income for the year
Comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interests
Earnings per share (Note 33):

Yen

U.S. Dollars

Basic¥ 452.51¥ 370.79$ 3.40

Diluted452.15370.533.40

See the accompanying notes to the consolidated financial statements.

46

Consolidated Statement of Changes in Equity
Sumitomo Corporation and Subsidiaries
For the years ended March 31, 2023 and 2022
For the year ended March 31, 2023

Millions of Yen
Equity attributable to owners of the parent

Balance, beginning of year

Commonstock(Note 22)

Additional
paid-in
capital(Note 23)

¥ 219,894¥ 255,996

Total

Noncontrollinginterests

Total equity¥ 2,269,661¥ 3,197,816¥ 183,469¥ 3,381,285

565,178

565,178

33,910599,088

209,084

2,278

211,362774,262

36,188810,450

Treasury
stock

Other
componentsof equity(Note 24)

Retainedearnings(Note 23)

¥ (1,871)¥ 454,136

Profit for the year
Other comprehensive income forthe year (Note 24)

209,084

Comprehensive income forthe year

209,084

565,178

Transaction with owners:
Share-based paymenttransactions (Note 26)

153

Acquisition and disposal of
non-controlling interests, net

559

712

(2,578)(2,578)Acquisition and disposal oftreasury stock, net (Note 26)(37,692)

Cash dividends to owners of
the parent (Note 25)(153,139)

1,839(37,692)(153,139)(153,139)(23,555)

Others137

Transfer to retained earnings¥ 220,047¥ 254,114¥ (39,563)(23,555)

137

137
―

(25,682)

25,682―¥ 637,538¥ 2,707,382¥ 3,779,518

47

(739)

(37,692)

Cash dividends to noncontrolling interests

Balance, end of year712

¥ 197,941¥ 3,977,459

For the year ended March 31, 2022

Millions of Yen
Equity attributable to owners of the parent

Balance, beginning of year

Commonstock(Note 22)

Additional
paid-in
capital(Note 23)

¥ 219,781¥ 251,781

Total

Noncontrollinginterests

Total equity¥ 1,871,411¥ 2,527,951¥ 167,599¥ 2,695,550

463,694

463,694

20,873

484,567

301,636

5,062

306,698

765,330

25,935791,265

Treasury
stock

Other
componentsof equity(Note 24)

Retainedearnings(Note 23)

¥ (2,063)¥ 187,041

Profit for the year
Other comprehensive income forthe year (Note 24)

301,636

Comprehensive income forthe year

301,636

463,694

Transaction with owners:
Share-based paymenttransactions (Note 26)

113

Acquisition and disposal of
non-controlling interests, net

113

226

3,967

3,967

Acquisition and disposal oftreasury stock, net (Note 26)

192

Cash dividends to owners of
the parent (Note 25)(99,985)643

192(99,985)(99,985)(10,708)

Others135

Transfer to retained earnings¥ 219,894¥ 255,996¥ (1,871)(10,708)

135

135
―

(34,541)

34,541―¥ 454,136¥ 2,269,661¥ 3,197,816

48

4,610

192

Cash dividends to noncontrolling interests

Balance, end of year226

¥ 183,469¥ 3,381,285

For the year ended March 31, 2023

Millions of U.S. Dollars
Equity attributable to owners of the parent

Balance, beginning of year

Commonstock(Note 22)

Additional
paid-in
capital(Note 23)

$ 1,653$ 1,925

Treasurystock$ (14)

Other
componentsof equity(Note 24)

Retainedearnings(Note 23)

$ 3,414$ 17,065
4,249

Profit for the year
Other comprehensive income forthe year (Note 24)

1,573

Comprehensive income forthe year

1,573

4,249

Non-controllinginterests

Total equity$ 24,043$ 1,379$ 25,422

4,249

255

4,504

1,573

17

1,590

5,822

272

6,094

Total

Transaction with owners:
Share-based paymenttransactions (Note 26)

1

Acquisition and disposal of
non-controlling interests, net

4

5

(19)

(19)

Acquisition and disposal oftreasury stock, net (Note 26)(283)

Cash dividends to owners of
the parent (Note 25)(1,151)14(283)(1,151)(1,151)(177)

Others1

Transfer to retained earnings$ 1,654$ 1,911$ (297)

1
－

193

－

$ 4,794$ 20,356$ 28,418

49

(177)

1
(193)

See the accompanying notes to the consolidated financial statements.

(5)

(283)

Cash dividends to noncontrolling interests

Balance, end of year5

$ 1,488$ 29,906

Consolidated Statement of Cash Flows
Sumitomo Corporation and Subsidiaries
For the years ended March 31, 2023 and 2022
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Operating activities (Note 34):
Profit (loss) for the year

¥ 599,088¥ 484,567$ 4,504

183,749

170,363

1,382

6,861

17,88752

Finance income, net(37,667)(74,288)(282)

Share of (profit) loss of investments accounted forusing the equity method(252,186)(176,831)(1,896)(Gain) loss on sale of long-lived assets, net(20,152)(5,244)(152)

Income tax expense

123,830

105,452931

Changes in Inventories(264,356)(148,056)(1,988)Changes in trade and other receivables(9,911)(200,792)(76)

Changes in prepaid expenses(10,599)(28,476)(80)

Changes in trade and other payables(39,662)251,924(298)

Other, net(118,258)(249,621)(889)

Interest received

20,72813,601

156

Dividends received

205,786

142,7671,547Interest paid

(46,483)(22,650)(349)

Income tax paid

(107,967)(86,537)(812)

232,801

194,066

1,750

Adjustments to reconcile Profit for the year to net cash
provided by operating activities:
Depreciation and amortization
Impairment reversal (loss) on long-lived assets

Net cash provided by operating activities

50

Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Investing activities (Note 34):
Proceeds from sale of property, plant and equipment

15,1405,300

114

Purchase of property, plant and equipment(70,295)(69,716)(529)

Proceeds from sale of investment property

32,11922,327242

Purchase of investment property(44,333)(7,576)(333)

31,53063,737237(13,565)(1,792)(102)

85,241

102,280

641

Acquisition of other investments(131,653)(93,946)(990)

Collection of loan receivables

20,27350,492

152

Increase in loan receivables(15,982)(22,067)(120)(91,525)

49,039(688)

Net increase (decrease) in short-term debt (Note 18)

72,24755,708543

Proceeds from issuance of long-term debt (Note 18)

381,151

354,709

2,866

Repayments of long-term debts (Note 18)(415,156)(369,915)(3,122)

Repayments of lease liabilities (Notes 8 and 18)(71,509)(68,365)(538)

Cash dividends paid (Note 25)(153,139)(99,985)(1,151)

Capital contribution from non-controlling interests

663

758

5

Payment for acquisition of subsidiary’s interests from
non-controlling interests(3,247)(2,178)(24)

Payment of dividends to non-controlling interests(23,555)(10,708)(177)

Acquisition and disposal of treasury stock, net(37,914)

52

(285)

Net cash used in financing activities(250,459)(139,924)(1,883)

Net increase (decrease) in cash and cash equivalents(109,183)

103,181(821)

Cash and cash equivalents at the beginning of year

733,824

599,013

5,517

Effect of exchange rate changes on cash and cash equivalents

26,95940,668203

Net increase (decrease) in cash and cash equivalents resulting
from transfer to assets classified as held for sale

5,259

(9,038)40¥ 656,859¥ 733,824$ 4,939

Proceeds from sale of subsidiaries, net of cash and cash
equivalents disposed ofAcquisition of subsidiaries, net of cash and cash equivalents
Acquired
Proceeds from sale of other investments

Net cash provided by (used in) investing activities
Financing activities (Note 34):

Cash and cash equivalents at the end of year
See the accompanying notes to the consolidated financial statements.

51

Notes to the Consolidated Financial Statements
Sumitomo Corporation and Subsidiaries
For the years ended March 31, 2023 and 2022
1.
Reporting Entity
Sumitomo Corporation (the “Company”) is a company incorporated in Japan. The consolidated financial statements of the Company as at and for theyear ended March 31, 2023 comprise the financial statements of the Company and its subsidiaries (together, the “Companies”), and the interests inassociates and joint arrangements. The Companies are engaged in a wide range of business activities on global basis. The Companies’ business foundationconsists of trust cultivated over the years, a global network in Japan and overseas, global relations with business partners in all sectors around the world,
intellectual capital, and advanced functions in business development, logistic solutions, financial services, IT solutions, risk management and intelligencegathering and analysis. Through the integration of these elements, the Companies provide a diverse array of value to our customers.
2.

Basis of Preparation(1) Statement of Compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”).
(2) Basis of Measurement
The consolidated financial statements have been prepared under the historical cost basis except for the following significant items:-

Derivatives are measured at fair value;-

Financial instruments at fair value through profit or loss are measured at fair value;-

Financial instruments at fair value through other comprehensive income are measured at fair value;-

Defined benefit liabilities (assets) are the present value of the defined benefit obligation less the fair value of plan assets;-

Inventories acquired with the purpose of generating profits from short-term fluctuations in price are measured at fair value less costs to sell;-

Biological assets are measured at fair value less costs to sell; and-Non-current assets or disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

(3) Functional Currency and Presentation Currency
The consolidated financial statements are presented in Japanese yen, which is also the Company’s functional currency. All financial information presented
in Japanese yen has been rounded to the nearest million. The translation of Japanese yen amounts into United States dollars for the year ended March 31,
2023 is included solely for the convenience of readers and has been made at the rate of ¥133 = U.S. $1, the approximate exchange rate prevailing at theFederal Reserve Bank of New York on March 31, 2023. Such translation should not be construed as a representation that the Japanese yen amounts havebeen or could in the future be converted into United States dollars at that or any rate.
(4) Use of Estimates and Judgments
The preparation of consolidated financial statements in accordance with IFRSs requires management to make judgments, estimates and assumptions that affectthe application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results could differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates
are revised and in future periods in which the revision affects.
Judgments made by management in the application of accounting policies that have a significant effect on the amounts recognized in the consolidated financial
statements are as follows:-

Note 3 (9) - Accounting for Arrangement containing a Lease-

Note 11 - Scope of associated companies and joint ventures

The following notes include information in respect of uncertainties of assumptions and estimates which have a risk to cause material adjustment in the next fiscal
year:-

Note 27 - Impairment of Financial Assets

52-Note 27 - Financial Assets Measured at Fair Value-

Notes 11, 12, 13 and 14 - Recoverability of Non-current Assets-

Notes 16 - Tax Asset Valuation-

Notes 20 and 37 - Calculation of Provision-

Note 21 - Measurement of Defined Benefit Obligations(5) Changes in Accounting Policies
The Companies have applied the Standards and Interpretations required to be adopted from the year ended March 31, 2023. These applications had no material
effect on the consolidated financial statements. The amendment to International Accounting Standard No.12 Income Taxes clarifies that deferred tax assets andliabilities related to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organization
for Economic Co-operation and Development shall not be recognized. Based on this amendment, the Companies do not recognize such deferred tax assets andliabilities.
3.
(1)

Significant Accounting Policies
Significant accounting policies applied in the preparation of the accompanying consolidated financial statements are summarized below:
Basis of Consolidation
1.
Business combinations
The Companies have applied International Financial Reporting Standard No. 3 Business Combinations (“IFRS 3”) and International Financial ReportingStandard No. 10 Consolidated Financial Statements to all business combinations.
The Companies have applied the acquisition method to business combinations disclosed in Note 5.
The Companies control an investee when the Companies are exposed, or have rights, to variable returns from their involvement with the investee and havethe ability to affect those returns through their power over the investee. The acquisition date is the date when the control is transferred to the acquirer. Judgments
may be required in deciding the acquisition date and as to whether the control is transferred from one party to another.
Goodwill is measured at the fair value of the considerations transferred, including the recognized amount of any non-controlling interests in the acquiree atthe date of acquisition, less the net recognized amount of the identifiable assets acquired and the liabilities assumed at the acquisition date (ordinarily measured
at fair value).
The considerations transferred include the fair value of the assets transferred from the Companies to the former owners of the acquiree, assumed liabilities,
and equity interest issued by the Companies. The considerations transferred also include the fair value of contingent consideration.
The contingent liabilities of the acquiree are recognized in the business combinations if, and only if, they are present obligations that arose from past eventsand their fair value can be measured with sufficient reliability.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation
are initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net
assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or,when applicable, on the basis specified in another IFRS.
Acquisition-related costs incurred by the Companies in connection with business combinations such as finder’s and legal fees, due diligence, and otherprofessional or consulting fees are recognized as expenses when incurred.
Additional acquisitions of non-controlling interests are accounted for as equity transactions, and no goodwill is recognized.
If the initial accounting for business combinations is incomplete by the end of the reporting period in which the business combinations occur, the Companies
report provisional amounts for the items for which the acquisition accounting is incomplete. Those provisional amounts are retrospectively adjusted during
the measurement period to reflect new information obtained about facts and circumstances that existed at the acquisition date and, if known, would haveaffected the amounts recognized at that date. Additional assets or liabilities are recognized if new information, if known, would have resulted in the additionalrecognition of assets or liabilities. The measurement period does not exceed one year.
2.
Subsidiaries
Subsidiaries are entities which are controlled by the Companies. The financial statements of subsidiaries are included in the consolidated financial statements

53

from the date when control is obtained until the date when it is lost. The accounting policies of subsidiaries have been adjusted in order to ensure consistency
with the accounting policies adopted by the Company, when necessary.
The consolidated financial statements include the financial statements of certain subsidiaries, of which the end of the reporting period is different from that of
the Company because it is impracticable to unify the end of the reporting period of the subsidiaries with that of the Company. Due to the requirement of local
laws and regulations, it is impracticable to unify the closing dates with that of the Company. It is also impracticable to prepare additional financial statements
as of the same date as the financial statements of the Company due to the characteristics of the local business and the IT environment for the accounting
system. The difference between the end of the reporting period of subsidiaries and that of the Company does not exceed three months.
When the financial statements of subsidiaries used in the preparation of the consolidated financial statements are prepared as of the dates different from theend of the reporting period of the Company, adjustments are made for the effects of significant.
transactions or events that occur between the end of the reporting period of the subsidiaries and that of the Company. On the disposal of interests in subsidiaries,
if the Companies retain control over the subsidiaries, they are accounted for as equity transactions. Any difference between the adjustment to the noncontrolling interests and the fair value of the consideration received is recognized directly in equity as “Equity attributable to owners of the parent.”
3.
Business combinations of entities under common control
Business combinations of entities under common control are business combinations in which all the combining entities or businesses are ultimately controlled
by the same party or parties both before and after the business combination, and that control is not transitory. The Companies have consistently accounted forall such transactions based on carrying amounts.
4.
Associates and joint arrangements
Associates are entities over which the Companies have significant influence but do not have control to govern the financial and operating policies. Significant
influence is presumed to exist when the Companies hold between 20% and 50% of the voting power of another entity.
Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.
The Companies account for the assets, liabilities, revenues and expenses relating to their interest in a joint operation in accordance with the IFRS applicableto the particular assets, liabilities, revenues and expenses.
Investments in associates and joint ventures (“equity-accounted investees”) are accounted for using the equity method, and recognized at cost on acquisition.
The investments include goodwill identified on acquisition (net of accumulated impairment losses).
The Companies’ share of the income and expenses of the equity-accounted investees and changes in the Companies’ share in equity are included in the
consolidated financial statements from the date when significant influence or joint control is obtained until the date when it is lost. The accounting policies of
equity-accounted investees have been adjusted when necessary to ensure consistency with those applied by the Company. The consolidated financial
statements include some equity-accounted investees, of which the end of the reporting period is different from that of the Company because it is impracticableto unify the end of the reporting date of those equity-accounted investees with that of the Company in connection with other shareholders and for other reasons.
The end of the reporting period of those equity-accounted investees is mainly the end of December. Adjustments are made for the effects of significant
transactions or events that occur due to differences in the end of the reporting period.
5.
Transactions eliminated in consolidation
All inter-company transactions, balances, and any unrealized gains and losses arising from inter-company transactions, are eliminated in preparing theconsolidated financial statements. Unrealized gains on transactions with equity-accounted investees are eliminated to the extent of the Companies’ interest in
the investees. Unrealized losses are eliminated in the same way as unrealized gains unless there is evidence of impairment.
(2)

Foreign Currencies
1.
Foreign currency transactions
Foreign currency transactions are translated into functional currencies of individual companies using the spot exchange rate at the date of the transactions. At
the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated into functional currencies using the spot
exchange rate at the reporting date. Exchange differences on monetary items are the differences between the amortized costs denominated in functional
currencies at the beginning of the reporting period adjusted by effective interest and interest payments during the year, and the amortized costs denominated54

in foreign currencies translated using the spot exchange rate at the reporting date. Non-monetary assets and liabilities measured at fair value that are
denominated in foreign currencies are retranslated using the spot exchange rates at the date when the fair value was determined. Exchange differences arisingfrom retranslation are recognized in profit or loss. However, exchange differences arising from FVTOCI financial assets, hedges of a net investment in foreign
operations (see 3. below) and cash-flow hedges are recognized in other comprehensive income. Non-monetary items measured at historical cost in foreign
currencies are translated using the spot exchange rate at the date of the transaction.
2.
Foreign operations
Assets and liabilities of foreign operations (including goodwill and fair value adjustments arising on the acquisition of foreign operations) are translated into
Japanese yen using the spot exchange rate at the reporting date. Income and expenses are translated into Japanese yen at the average exchange rate for theperiod.
Exchange differences arising from translation of financial statements of foreign operations are recognized in other comprehensive income.
These differences are presented as “Exchange differences on translating foreign operations” in Other components of equity after the date of transition to IFRSs.
On disposal of the entire interest in foreign operations and on the partial disposal of the interest involving loss of control, significant influence or joint control,
the cumulative amount of the exchange differences is reclassified to profit or loss as a part of gains or losses on disposal.
3.
Hedges of a net investment in foreign operations
The Companies apply hedge accounting to a part of the exchange differences arising between the functional currencies of foreign operations and theCompany’s functional currency (Japanese Yen), regardless of whether investments in foreign operations are held directly by the Company or indirectly throughits subsidiaries.
Exchange differences arising from the retranslation of financial instruments designated as hedging instruments for a net investment in foreign operations arerecognized in other comprehensive income to the extent that the hedge is effective, and are presented as “Exchange differences on translating foreign
operations” in Other components of equity. The ineffective portion of the gains or losses on the hedging instruments is recognized in profit or loss. On disposalof hedged portion of net investments, the cumulative amount of exchange differences is reclassified to profit or loss as a part of gains or losses on disposal.
(3)

Financial Instruments1.
Non-derivative financial assets
The Companies recognize trade and other receivables on the date they are originated.
All other financial assets are recognized on the contract date when the Companies become a party to the contractual provisions of the instrument.
The following is a summary of the classification and measurement model of the non-derivative financial assets;

Financial assets measured at amortized cost
Financial assets that meet the following conditions are subsequently measured at amortized cost:-

The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows; and-The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.

Financial assets measured at amortized cost are initially measured at fair value (plus directly attributable transaction costs). Trade and other receivables that do
not contain a significant financing component are measured at their transaction price. Subsequently, the carrying amount of the financial assets measured atamortized cost is calculated using the effective interest method, less impairment loss when necessary.
Debt instruments measured at FVTOCI
Financial assets that meet the following conditions are subsequently measured at FVTOCI:-The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and55

-The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.

Debt instruments measured at FVTOCI are initially measured at fair value plus directly attributable transaction costs.
They are subsequently measured at fair value, and changes in fair value are included in Other components of equity as “Financial assets measured at FVTOCI.”
When debt instruments measured at FVTOCI are derecognized, the accumulated amount of Other components of equity is reclassified to profit or loss.
Financial assets measured at FVTPL
Financial assets other than equity instruments that do not meet the above conditions in relation to amortized cost and FVTOCI measurement are measured at
FVTPL. Those financial assets include financial assets held for trading.
Equity investments are measured at fair value with gains or losses on re-measurement recognized in profit or loss unless the Companies make an irrevocable
election to measure equity investments at FVTOCI on initial recognition.
Financial assets measured at FVTPL are initially measured at fair value and transaction costs are recognized in profit or loss when they occur.
Equity instruments measured at FVTOCI
On initial recognition, the Companies may make an irrevocable election to measure investments in equity instruments at FVTOCI. The election is made only
for the equity investment other than held for trading.
Equity instruments measured at FVTOCI are initially measured at their fair value (including directly attributable transaction costs). Subsequently, they aremeasured at fair value, and gains and losses arising from changes in fair value are recognized in other comprehensive income and presented as “Financial
assets measured at fair value through other comprehensive income” in Other components of equity.
The amount of Other components of equity is transferred directly to Retained earnings, not to profit or loss, when the equity investment measured at FVTOCI
is derecognized or the decline in its fair value compared to its acquisition cost is significant and other-than-temporary.
However, dividends on equity instruments measured at FVTOCI are recognized in profit or loss as finance income.
Derecognition of financial assets
The Companies derecognize a financial asset when the contractual rights to the cash flows from the asset expire, or when the Companies transfer the contractual
rights to receive cash flows from financial assets in transactions in which substantially all the risks and rewards of ownership of the asset are transferred toanother entity. Any interests in transferred financial assets that qualify for derecognition that is created or retained by the Companies are recognized as aseparate asset or liability.
2.
Cash and cash equivalents
Cash and cash equivalents are cash and highly liquid investments that are readily convertible to known amounts of cash, including short-term time deposits
with original maturities of three months or less.
3.
Non-derivative financial liabilities
Debt securities issued are initially recognized on the issue date. All other financial liabilities are recognized when the Companies become a party to thecontractual provisions of the instruments.
The Companies derecognize financial liabilities when they are extinguished, i.e., when the obligation specified in the contract is discharged, cancelled or
expired.
The Companies classify borrowings, corporate bonds, trade payables and other payables as non-derivative financial liabilities, and initially measure them atfair value (minus directly attributable transaction costs).
Non-derivative financial liabilities held for trading are measured at fair value after initial recognition and the change in fair value is recognized in profit or loss.
Non-derivative financial liabilities held for other than trading are measured at amortized cost using the effective interest method after initial recognition.
Even if the modification or exchanges of financial liabilities do not result in derecognition due to the terms not being substantially different, the gains or losses
arising from such modifications are recognized in profit or loss at the date of the modification or exchange.

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4.
EquityCommon stock
Proceeds from issuance of equity instruments by the Company are included in “Common stock” and “Additional paid-in capital.” The direct issue costs (netof tax) are deducted from “Additional paid-in capital.”
Treasury stock
When the Companies reacquire treasury stocks, the consideration paid, net of direct transaction costs and tax, is recognized as a deduction from equity. When
the Companies sell treasury stocks, the consideration received is recognized as an increase in equity.
5.
Derivatives including hedge accounting
The Companies utilize derivatives to manage interest rate risk, foreign currency risk and the risk of the price fluctuation of commodity inventories and trading
commitments. The primary derivatives used by the Companies include foreign exchange forward contracts, currency swaps, interest rate swaps andcommodity future contracts.
At the initial designation of the hedging relationship, the Companies document the relationship between the hedging instrument and the hedged item, alongwith their risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged item, the nature of the risk being hedged,
how the hedging instrument’s effectiveness in offsetting the hedged risk will be assessed, and the analysis of ineffective portion.
In order to ascertain whether the change in the fair value or cash flow of the hedging instrument is highly effective in offsetting with the change in the fairvalue or cash flow of the hedged item, at the beginning and throughout the period for which hedge is designated, the Companies confirm the existence of an
economic relationship between the hedged item and the hedging instrument through qualitative assessment and quantitative assessment.
To qualify as a cash flow hedge of a forecast transaction, the transaction must be highly probable.
Derivatives are initially recognized at fair value with transaction costs recognized in profit or loss when they occur. Subsequently, derivatives are measured atfair value, and gains and losses arising from changes in fair value are accounted for as follows:
Fair value hedges
The changes in the fair value of the hedging instrument are recognized in profit or loss. The carrying amounts of the hedged items are measured at fair value
and the gains or losses on the hedged items attributable to the hedged risks are recognized in profit or loss.
Cash flow hedges
When derivatives are designated as hedging instruments to hedge the exposure to variability in cash flows that are attributable to a particular risk associatedwith recognized assets or liabilities or highly probable forecast transactions which could affect profit or loss, the effective portion of changes in the fair valueof derivatives is recognized in other comprehensive income as "Cash-flow hedges" and included in other components of equity. Foreign currency basis spreadon cross currency interest rate swaps is excluded from hedging instruments, and changes in the fair value are recognized in other comprehensive income as"Hedging cost" and included in other components of equity. The balances accumulated in other components of equity are reclassified to profit or loss over theperiods when the cash flows of hedged items affect profit or loss. The ineffective portion of changes in the fair value of derivatives is recognized immediately
in profit or loss. Hedge accounting is discontinued prospectively when the hedge no longer qualifies for hedge accounting, or when the hedging instrument
expires or is sold, terminated or exercised, or when the designation is revoked.
When hedge accounting is discontinued, the balances of cash flow hedges remain in equity until the forecast transaction affects profit or loss. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.
6.
Derivatives held for trading and others
The Companies hold derivatives for hedging purposes which do not qualify for hedge accounting. The Companies also hold derivatives for trading purposes
as opposed to hedging purposes. Any changes in fair value of these derivatives are recognized immediately in profit or loss.

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7.
Presentation for financial instruments
Financial assets and liabilities are offset and the net amounts are presented in the Consolidated statement of financial position when, and only when, theCompanies currently have a legally enforceable right to set off the recognized amounts and intend either to settle on a net basis, or to realize the asset and settle
the liability simultaneously.
(4) Inventories
Inventories mainly consist of commodities, materials/work in progress, and real estate held for development and resale. Inventories are measured at the lower ofcost and net realizable value. Net realizable value represents the estimated selling price in the ordinary course of business less any estimated costs of completionand the estimated costs necessary to make the sale.
Inventories acquired with the purpose of generating profits from short-term fluctuations in price are measured at fair value less costs to sell, and changes in fairvalue are recognized in profit or loss.
The cost of inventories other than acquired with the purpose of generating profits from short-term fluctuations in price is determined based on either specificidentification basis when inventories are not ordinarily interchangeable, or mainly moving average basis when inventories are ordinarily interchangeable.
(5) Non-current assets held for sale and discontinued operations
If the carrying amount of non-current assets or disposal groups will be recovered principally through a sale transaction rather than through continuing use, theCompanies classify such non-current assets or disposal groups as held for sale, and reclassify them into current assets. For this to be the case, the assets or disposalgroup must be available for immediate sale subject only to terms that are usual and customary for sales of such assets or disposal group and its sale must be highly
probable. Management must be committed to a plan to sell the assets or disposal group, and the sale should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
Non-current assets or disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less cost to sell.
(6)

Property, Plant and Equipment

1.
Recognition and measurement
Property, plant and equipment are measured at cost less any accumulated depreciation and accumulated impairment losses. The cost of items of property, plantand equipment comprises costs directly attributable to the acquisition, costs of dismantling and removing the items and restoring the site on which they arelocated, and capitalized borrowing costs.
When the useful life of each part of an item of property, plant and equipment varies, it is accounted for as a separate item of property, plant and equipment.
2.
Depreciation
Depreciation is calculated based on the depreciable amount which is the cost of an asset, or other amount substituted for cost, less its residual value.
Depreciation of property, plant and equipment is mainly computed under the straight-line method based on the estimated useful life of each item. The straightline method is used because it is considered to most closely approximate the pattern in which the asset’s future economic benefits are expected to be consumed
by the Companies.
Depreciation of mining rights is computed under the units-of-production method over the estimated proven and probable reserve tons, and recognized as an
expense. Land and land improvements are not depreciated.
The estimated useful lives for the years ended March 31, 2023 and 2022 are as follows:-

Buildings and leasehold improvements 3-50 years-

Machinery and equipment 2-20 years

The depreciation methods, useful lives and residual values are reviewed at the end of each reporting period, and changed when necessary.
(7)

Intangible Assets

1.
Goodwill
Initial recognition

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Goodwill arising on the acquisition of a subsidiary is recognized as an intangible asset. Measurement of goodwill on initial recognition is described in (1) 1.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. The carrying amount of investments in equity-accounted investees includes the carrying
amount of goodwill. The impairment loss of those investments is not allocated to any asset (including goodwill) which constitutes part of the carrying amountof investments in equity-accounted investees.
2.
Capitalized software costs
The Companies incur certain costs to purchase or develop software for sale or internal-use.
Expenditures arising from research activities to obtain new scientific or technical knowledge are recognized as expenses as incurred. Expenditures arisingfrom development activities are capitalized as internally generated intangible assets, if, and only if, they are reliably measurable, products or processes aretechnically and commercially feasible, it is highly probable to generate future economic benefits, and the Companies have an intention and adequate resources
to complete those assets and use or sell them. Capitalized software costs are measured at cost less any accumulated amortization and accumulated impairment
losses.
3.
Intangible assets acquired in business combinations
Intangible assets that are acquired in business combinations, such as sales licenses, trademarks and customer relationships, are recognized separately fromgoodwill, and are initially recognized at fair value at acquisition date.
Subsequently the intangible assets are measured at cost less any accumulated amortization and accumulated impairment losses.
4.
Other intangible assets
Other intangible assets with finite useful lives are measured at cost less any accumulated amortization and accumulated impairment losses.
Certain trademarks are not amortized because they are determined to have indefinite useful lives and are expected to exist fundamentally as long as the business
continues.
5.
Amortization
Amortization is calculated based on the cost of an asset less its residual value. Amortization of intangible assets other than goodwill is computed under thestraight-line method over their estimated useful lives from the date the assets are available for use. The straight-line method is used because it is considered tothe most closely approximate the pattern in which the intangible assets’ future economic benefits are expected to be consumed by the Companies. Estimateduseful lives for the years ended
March 31, 2023 and 2022 are mainly as follows:-

Software 3-10 years-

Sales licenses, trademarks and customer relationships 3-30 years-

Others 3-20 years

The amortization methods, useful lives and residual values are reviewed at the end of each reporting period, and changed when necessary.
(8) Investment Property
Investment property is a property held to earn rental income or for capital appreciation or for both. Property held for sale in the ordinary course of business, oruse in the production or supply of goods or service or for other administrative purpose is not included in investment property. Investment property is measured atcost less any accumulated depreciation (see (6) 2.) and accumulated impairment losses.
(9) Leases
At inception of a contract, the Companies assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right tocontrol the use of an identified asset for a period of time in exchange for consideration. If a contract is, or contains, a lease, the Companies recognize right-of-use
assets and lease liabilities on the Consolidated statements of financial position at the commencement date. The Companies recognize the lease payments

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associated with short-term leases as an expense on a straight-line basis over the lease term.
Right-of-use assets are measured by using the cost model and are measured at cost less any accumulated depreciation and accumulated impairment losses.
The cost of right-of-use assets includes the amount of the initial measurement of lease liabilities adjusted for initial direct costs and any lease payments made ator before the commencement date.
Right-of-use assets are depreciated using the straight-line method over its lease terms.
Lease liabilities are initially measured at the present value of unpaid lease payments at the commencement date of the contract.
Lease payments are allocated to finance costs and the repayment portion of the balance of lease liabilities, to ensure that the interest rate remains constant for thebalance of lease liabilities. Finance costs are presented separately from the depreciation of the right-of-use assets in the Consolidated statement of comprehensive
income.
(10) Impairment1.
Non-derivative financial assets
For financial assets measured at amortized cost, lease receivables, contract assets, and debt instruments measured at fair value through other comprehensive
income, the Companies recognize loss allowance based on the expected credit losses for the financial asset.
At each end of the fiscal year, if the credit risk on financial assets has not increased significantly since initial recognition, the impairment loss is measured at
an amount equal to 12-months of expected credit losses. On the other hand, if the credit risk on financial assets has increased significantly since initialrecognition, the impairment loss is measured at an amount equal to the lifetime expected credit losses.
However, the impairment loss for trade and other receivables, etc. which does not contain a significant financing component is always at an amount equal to
the lifetime expected credit loss.
Credit risk change and calculation of expected credit losses are mainly based on original credit rating model, the Sumisho Credit Rating (“SCR”). “SCR”
includes the debtor’s past bad debts experience, current financial condition and reasonably available forecast information.
The existence of evidence of credit impairment is judged based on events such as debtor’s serious financial difficulties and breach of contract including overdue.
For financial assets that have evidence of credit impairment at the reporting date, expected credit losses are measured individually after comprehensive
evaluation of the individual situation of the debtor including collateral and guarantees.
If is reasonably determined that all or part of a financial asset cannot be collected, the Companies directly write off the financial assets.
2.
Non-financial assets
At the end of each reporting period, the carrying amounts of non-financial assets, excluding Inventories, Biological assets and Deferred tax assets are assessed
to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the non-financial asset is estimated.
Regarding goodwill and Intangible assets with indefinite useful lives, and Intangible assets not yet available for use, the recoverable amount is estimated at thesame time every year. The recoverable amount of an asset or a cash-generating unit (“CGU”) is the higher of its value in use and its fair value less costs ofdisposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the time valueof money and the risks specific to the asset. A CGU is the smallest group of assets which generates cash inflows from continuing use that are largely
independent of the cash inflows from other assets or groups of assets. A CGU of goodwill is determined based on the unit by which the goodwill is monitored
for internal management purposes, and does not exceed an operating segment before aggregation.
Because the corporate assets do not generate independent cash inflows, if there is an indication that corporate assets may be impaired, the recoverable amountis determined for the CGU to which the corporate assets belong.
If the carrying amount of an asset or a CGU exceeds the recoverable amount, an impairment loss is recognized in profit or loss. The impairment loss recognized
related to a CGU is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis
based on the carrying amount of each asset in the unit. An impairment loss recognized for goodwill is not reversed in subsequent periods. Assets other than
goodwill are reviewed at the end of each reporting period to determine whether there is any indication that an impairment loss recognized in prior years may
no longer exist or may have decreased. An impairment loss recognized in prior years for an asset is reversed to profit or loss if an event occurs that changes
the estimates used to determine the asset’s recoverable amount. A reversal of impairment loss does not exceed the carrying amount, net of depreciation andamortization, that would have been determined if no impairment loss had been recognized for the asset for prior years.
Goodwill that forms part of the carrying amount of investments in equity-accounted investees is not separately recognized, and it is not tested for impairment

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separately. The entire carrying amount of the investments is tested for impairment as a single asset, whenever there is any objective evidence that theinvestments are impaired.
(11) Employee Benefits
1.

Defined benefit plans

Defined benefit plans are post-employment benefit plans other than defined contribution plans (see 2. below). The Companies’ net defined benefit obligations
are calculated separately for each plan by estimating the future amount of benefit that employees have earned in exchange for their service for the previous
years. The benefits are discounted to determine the present value, and fair value of plan assets is deducted.
The discount rates are equivalent to the market yields of AA credit-rated corporate bonds at the end of each reporting period that have maturity terms
approximating those of the Companies’ obligations. These calculations are performed annually by qualified actuaries using the projected unit credit method.
When plan amendments are made, the change in defined benefit obligations related to past service by employees is recognized in profit or loss immediately.
The Companies recognize remeasurements of the net defined benefit liability (asset) in other comprehensive income and immediately reclassify them from
Other components of equity to Retained earnings.
2.
Defined contribution plans
The employees of certain subsidiaries are provided with defined contribution plans. Defined contribution plans are postemployment benefit plans in which
the Companies pay fixed contributions into separate entities and will have no legal or constructive obligation to make further contributions. The Obligations
for contributions to defined contribution plans are recognized as an expense during the period when the service is rendered. Certain subsidiaries participate inmulti-employer plans in addition to lump-sum benefit plans or pension benefit plans and recognize the contribution during a period as an expense in profit orloss and contribution payable as a liability.
Other than the above, the Company and certain subsidiaries have elective defined contribution pension plans for employees who elect to contribute a portionof their bonuses received for their services rendered during the year.
3.
Short-term employee benefits
Short-term employee benefits are measured on an undiscounted basis and are expensed during the period when the service is rendered.
Bonus accrual is recognized as a liability, when the Companies have present legal or constructive obligations to pay as a result of past employee service, andwhen reliable estimates of the obligation can be made.
4.
Share-based payments
The Company adopts the “restricted performance share unit-based remuneration,” under which the number of shares granted varies according to the degree
to which previously determined performance conditions are achieved after establishing a transfer restriction period. The fair values of the share-based payments
are estimated at the grant date, and they are recognized as employee expenses over the period from the grant date to the end of the date of their service as acorresponding increase in equity. The fair value is measured by utilizing Monte-Carlo Simulation method based on the fair value of the Company’s ordinary
shares, etc.
(12) Provisions
Provisions are recognized when the Companies have present legal or constructive obligations as a result of past events, it is probable that outflows of resources
embodying economic benefits will be required to settle the obligations, and reliable estimates can be made of the amount of the obligations. Provisions are
discounted to their present value using a pre-tax rate that reflects the time value of money and the risks specific to the liability. The unwinding of the discount isrecognized as finance costs.
Asset retirement obligations
The Companies account for asset retirement obligations mainly related to the dismantlement of coal mining and drilling facilities and obligation to restore leased
offices to their original condition in accordance with the Companies’ published environmental policies and the requirements of laws, regulations, and contracts
applicable to the Companies.

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(13) Revenue
The Companies recognize revenue for goods sold and services provided in the ordinary course of business, except for lease and financial instrument transaction,
based on the following five-step approach.
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the entity satisfies a performance obligation
The policies on revenue recognition and principal versus agent considerations are as follows:
1.
Revenue from sales of tangible products
The Companies recognize revenue from sales of tangible products in connection with the Companies’ wholesale, retail, manufacturing and processing
operations and real estate operations when the Companies satisfy a performance obligation by providing a promised good or service to a customer. Depending
upon the terms of the contract, this may occur at the time of delivery or shipment or upon the attainment of customer acceptance. The conditions of acceptanceare governed by the terms of the contract or customer arrangement and those not meeting the predetermined specifications are not recognized as revenue until
the attainment of customer acceptance. The Companies’ policy is not to accept product returns unless the products are defective.
The Companies transfer control of a good or service over time and, therefore, satisfy a performance obligation and recognize revenue and costs over time, if
certain conditions are met, from sales of tangible products under long-term construction contracts, etc., principally in connection with the construction of
power plants in which the Companies provide engineering, procurement and construction service, and software development business in which the Companies
customize the software to customer specifications. Progress towards complete satisfaction of a performance obligation is measured by reference to the stageof completion measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs. If
circumstances arise that may change the original estimates of revenue, costs, or extent of progress toward completion, then, revisions to the estimates are made.
2.
Revenue from sales of services and others
The Companies also generate revenue from sales of services and others in connection with services related to software, loans, finance leases and operatingleases of commercial real estate and vessels.
Revenue from maintenance related to software is recognized over the contractual period or as the services are rendered.
Revenue from loans in connection with vessels, etc. is recognized using the effective interest method over the terms of the loans.
Revenue from finance leases is calculated using the interest rate implicit in the lease.
Revenue from operating leases is recognized in profit or loss on a straight-line basis over the lease term.
3.
Principal versus agent considerations
In the ordinary course of business, the Companies may act as an intermediary or an agent in executing transactions with third parties. In these arrangements,
the Companies determine whether to recognize revenue based on the “gross” amount billed to the ultimate customer for tangible products or services provided
or on the “net” amount received from the customer after considering commissions and other payments to third parties. However, the amounts of “Gross profit”
and “Profit (loss) for the period attributable to owners of the parent” are not affected by whether revenue is recognized on a gross or net basis.
The Companies determine whether the nature of its promise is a performance obligation to provide the specified goods or services itself (i.e. the entity is aprincipal) or to arrange for those goods or services to be provided by the other party (i.e. the entity is an agent). To the extent that the Companies are acting asa principal in a transaction, the Companies recognize revenue on a gross basis when or as the entity satisfies a performance obligation. To the extent that theCompanies are acting as an agent in a transaction, the Companies recognize revenue on a net basis in the amount of any fee or commission to which it expects
to be entitled in exchange for arranging for the specified goods or services to be provided by the other party when or as the entity satisfies a performanceobligation.

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Factors that indicate that the Companies act as a principal, and thus recognize revenue on a gross basis include:-

the Companies are primarily responsible for fulfilling the promise to provide the specified good or service;-

the Companies have inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer;and- the Companies have discretion in establishing the price for the specified good or service.
(14) Finance Income and Costs
Finance income mainly comprises interest income, dividend income, gains on sale of securities, changes in fair value of financial assets measured at FVTPL,
gains on hedging instruments recognized in profit or loss. Interest income is recognized when incurred using the effective interest method. Dividend income isrecognized on the date when the right to receive payment is established. Interest income from a financial asset (excluding financial assets measured at FVTPL)
is accrued using the effective interest method. Finance costs mainly comprise interest expense, losses on sale of securities, changes in fair value of financial assets
measured at FVTPL, impairment loss on financial assets, losses on hedging instruments recognized in profit or loss. Borrowing costs that are not directly
attributable to the acquisition, construction or production of qualifying assets are recognized in profit or loss using the effective interest method.
(15) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of certain qualifying assets, which take a considerable period of time to get
ready for their intended use or sale, are added to the costs of those assets, until the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in profit or loss when incurred.
(16) Income Taxes
Income taxes comprise current taxes and deferred taxes. These are recognized in profit or loss, except for the taxes which arise from business combinations or
are recognized either in other comprehensive income or directly in equity.
Current taxes are the expected taxes payables or receivables on the taxable profit, using the tax rates enacted or substantially enacted by the end of the reporting
period, adjusted by taxes payables or receivables in prior years.
Deferred tax assets and liabilities are recognized on temporary differences between the carrying amounts of assets and liabilities for accounting purposes andtheir tax basis. Deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition of an asset or liability in atransaction which is not related to a business combination and, at the time of transaction, affects neither accounting profit nor taxable profit. Deferred tax liabilities
are not recognized if the taxable temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates and joint arrangements. However,if the Companies are able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in theforeseeable future, Deferred tax liabilities are not recognized. Deferred tax assets arising from deductible temporary differences associated with investments in
subsidiaries, associates and joint arrangements are recognized only to the extent that it is probable that there will be sufficient taxable profit against which thebenefit of temporary differences can be utilized and the temporary differences will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the temporary differences will reverse, based on tax
laws that have been enacted or substantively enacted by the end of reporting period. In accordance with the stipulation in International Accounting Standard
No.12 Income Taxes that deferred tax assets and liabilities related to income taxes arising from tax law enacted or substantively enacted to implement the Pillar
Two model rules published by the Organization for Economic Co-operation and Development shall not be recognized, the Companies do not recognize suchdeferred tax assets and liabilities. Deferred tax assets and Deferred tax liabilities are offset when: there is a legally enforceable right to offset current tax assets
against current tax liabilities; and income taxes are levied by the same taxation authority on either the same taxable entity or different taxable entities which intend
either to settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously.
Deferred tax assets are recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits
will be available against which they can be utilized. Deferred tax assets are reviewed at the end of each reporting period and reduced to the extent that it is nolonger probable that the related tax benefits will be realized.
(17) Earnings per Share

63

The Companies disclose basic and diluted earnings per share related to ordinary share. Basic earnings per share is calculated by dividing Profit (loss) for the year
attributable to owners of the parent less the portion attributable to transfer-restricted stocks by the weighted average number of ordinary share outstanding during
the reporting period, adjusted for the number of treasury stock acquired and transfer-restricted stocks. For the purpose of calculating diluted earnings per share,
Profit (loss) for the year attributable to owners of the parent and the weighted average number of ordinary share outstanding, adjusted for the number of treasury
stock, are adjusted for the effects of all dilutive potential ordinary share. Potential ordinary share of the Company is related to the stock option plan, transferrestricted stock compensation, performance-linked stock compensation and restricted performance share unit-base compensation plan.
(18) Operating Segments
Operating segments are components of business activities from which the Companies may earn revenues and incur expenses, including revenues and expenses
relating to transactions with other operating segments. Discrete financial information for operating results of all operating segments is available and is regularly
reviewed by management in order to determine the allocation of resources to the segment and assess its performance.
(19) New Standards and Interpretations Not Yet Applied
The new standards, interpretations, and amendments that have been issued as of the date of the approval for the consolidated financial statements, which theCompanies have not yet applied as of March 31, 2023, are as follows. The impact caused by the application of those is being determined and cannot be estimatedat this time.

IFRSs

Reporting periodsof the applicationby the Companies(The reporting
period ended)

Summaries of new IFRSs
and amendments
Clarification of deferred tax related to assets
and liabilities arising from a single transaction
and requirements of disclosure of Pillar Two
income taxes
Clarification of requirements forclassification of liabilities as current or noncurrent liabilities and requirements ofdisclosure of information on non-current
liabilities with covenants

IAS 12

Income Taxes

January 1, 2023

March 31, 2024

IAS 1

Presentation of
Financial Statements

January 1, 2024

March 31, 2025

IAS 7

Cash Flows
January 1, 2024

March 31, 2025

Requirements of disclosure of information
on supplier finance arrangements

January 1, 2024

March 31, 2025

Clarification of subsequent measurement
requirements for sale and leaseback
transactions

To be determined

To be determined

Amendments of accounting for the sale orcontribution of assets between an investor andits associate or joint venture

IFRS 7

Financial Instruments:
Disclosures

IFRS16

LeasesIFRS 10

Consolidated Financial
Statements

IAS 284.

Title

Reporting periods
on or after which
the applications
are required

Investments in
Associates and Joint
Ventures

Segment Information(1) Operating Segments
The Companies conduct business through six industry-based business operating segments (business units).
The Companies’ industry-based business segments are:64

Metal Products

Media & Digital

Transportation & Construction Systems

Living Related & Real Estate

Infrastructure

Mineral Resources, Energy, Chemical & Electronics“Trading” used in the following descriptions of the Companies’ business units represents sales transactions where the business units act as a principal or an agent.
See Note 3. (13) for the Companies’ accounting policy on revenue recognition.
Metal Products—The Metal Products Business Unit encompasses various metal products, including steel products such as steel sheets and tubular products. This
segment also has an extensive value chain that satisfies the diverse needs of customers in a broad range of fields. In the steel sheet-related field, this segmentprovides just-in-time delivery services for steel sheet products mainly to automotive and home appliance manufacturers via worldwide steel service center
network, which provides functions including procurement, inventory management, and processing. In the tubular products field, this segment has functions as a
total service provider by developing oil field services in addition to unique supply chain management (SCM) system for oil and gas companies. This segment
consists of the Steel Sheet Products Division and the Tubular Products Division.
Transportation & Construction Systems―The Transportation & Construction Systems Business Unit engages in global transactions involving ships, aircrafts,
motor vehicles, construction equipment and related components and parts. This segment covers a wide range of businesses, ranging from selling and servicing,leasing and financing to manufacturing. This segment consists of the Lease, Ship & Aerospace Business Division, the Mobility Business Division 1, the Mobility
Business Division 2, and the Construction & Mining Systems Division.
Infrastructure―The Infrastructure Business Unit engages in a wide range of large-scale infrastructure development projects both in and outside Japan including
renewable energy such as power generation and power plant Engineering, Procurement and Construction (EPC). This segment also engages in electricity retailin Japan, industrial infrastructure businesses such as industrial facilities and equipment, water businesses, transportation systems and infrastructure businesses,
airports, smart city project, environmental solutions, and storage battery businesses. This segment also engages in providing logistics services such as delivery,
customs clearance and transportation services, arrangements for insurance, and development and operation of overseas industrial parks. This segment consists of
the Social Infrastructure Business Division, the Global Power Infrastructure Business Division, and the Logistics Infrastructure Business Division.
Media & Digital―The Media & Digital Business Unit engages in cable television, 5G related technologies, multi-channel programming distribution, movies,
digital media-related businesses, video content-related businesses, TV shopping businesses, and media businesses such as e-commerce. This segment also
engages in ICT platform, digital solution, and the Global Corporate Venture Capital. This segment also engages in smart platform businesses such as cell phone
related business and smart communications infrastructure and value-added services. This segment consists of the Media Division, the Digital Business Division,and the Smart Communications Platform Business Division.
Living Related & Real Estate―The Living Related & Real Estate Business Unit engages in retail businesses such as food supermarket, healthcare-related
businesses such as drugstore chains, fresh & processed food (including vegetables, fruits and meats) business and trading of materials & supplies such as cement
and building materials. This segment also engages in real estate businesses, including buildings, retail facilities, residences, logistics facilities, and real estate
funds. This segment consists of the Lifestyle Business Division, and the Construction Materials & Real Estate Division.
Mineral Resources, Energy, Chemical & Electronics―The Mineral Resources, Energy, Chemical & Electronics Business Unit engages in the development andtrading of mineral and energy resources including coal, iron ore, manganese, uranium, non-ferrous metals, precious metals, petroleum, natural gas and liquefied
natural gas (LNG) and commodity derivative transactions. This segment also trades non-ferrous metal products, petroleum products, liquefied petroleum gas(LPG), storage batteries, carbon products, plastics, organic and inorganic chemicals, silicon wafers, LEDs, pharmaceuticals, agricultural chemicals, household
insecticide, fertilizers, and veterinary drugs and is also involved and invests in those businesses. This segment also operates electronics manufacturing services(EMS) mainly in Asia. This segment consists of two Mineral Resources Divisions, the Energy Division, the Basic Chemicals & Electronics Division and theLife Science Division.

65

The reportable segments are organized based on the nature of products and services provided. Each operating segment operates with a degree of autonomy inpursuing its strategic goals, managing operations and ensuring accountability. Segment financial information is evaluated regularly by management in order toassess performance and determine the allocation of resources.
Information by operating segment for the years ended March 31, 2023 and 2022 is summarized as follows:
2023
Millions of Yen
Segment
Metal Products

Revenues

Gross profit

Share of profit ofProfit for the year
investments(attributable toaccounted for using
owners of the parent)
the equity method

Total assets¥ 1,760,388¥ 220,449¥ 11,704¥ 110,372¥ 1,161,058

Transportation & Construction
Systems

1,053,184

261,033

63,313

91,9682,004,969

Infrastructure

613,633

59,813

11,964

20,822

1,379,568

Media & Digital

451,306

121,277

14,315

12,9801,062,708

Living Related & Real Estate

1,059,099

242,7548,624

58,997

1,704,435

Mineral Resources, Energy,
Chemical & Electronics

1,854,780

329,661

140,983

266,8822,490,098¥ 6,792,390¥ 1,234,987¥ 250,903¥ 562,021¥ 9,802,836

25,482

(235)

1,283

3,157

303,416¥ 6,817,872¥ 1,234,752¥ 252,186¥ 565,178¥ 10,106,252

Total
Corporate and Eliminations
Consolidated
2022

Millions of Yen
Segment
Metal Products

Revenues

Gross profit

Share of profit ofProfit for the year
investments(attributable toaccounted for using
owners of the parent)
the equity method

Total assets¥ 1,056,058¥ 140,275¥ 8,179¥ 55,197¥ 981,264

Transportation & Construction
Systems

894,092

189,350

5,782

34,945

1,751,663

Infrastructure

524,605

71,491

10,04233,2831,228,743

Media & Digital

418,525

111,004

36,05939,257

1,007,972

Living Related & Real Estate

979,185

222,651

7,903

44,007

1,527,726

Mineral Resources, Energy,
Chemical & Electronics

1,526,138

271,196

107,534

247,318

2,747,353¥ 5,398,951¥ 1,005,968¥ 175,499¥ 454,192¥ 9,244,721

96,424

3,635

1,332

9,502

337,445¥ 5,495,015¥ 1,009,603¥ 176,831¥ 463,694¥ 9,582,166

Total
Corporate and Eliminations
Consolidated

66

2023
Millions of U.S. Dollars
Segment
Metal Products

Revenues

Share of profit ofProfit for the year
investments(attributable toaccounted for using
owners of the parent)
the equity method

Gross profit

Total assets$ 13,236$ 1,657

$88

$ 830

$ 8,730

7,919

1,963

476

691

15,075

Infrastructure

4,614

450

90

156

10,373

Media & Digital

3,393

912

107

98

7,990

Living Related & Real Estate

7,963

1,825

65

444

12,815Mineral Resources, Energy,
Chemical & Electronics

13,946

2,479

1,060

2,007

18,723$ 51,071$9,286$ 1,886$ 4,226$ 73,706

192

(2)

10

23

2,281

$ 51,263$ 9,284$ 1,896$ 4,249$ 75,987

Transportation & Construction
Systems

Total
Corporate and Eliminations
Consolidated
Notes:
1.

On April 1, 2022, precision agriculture business was transferred from Transportation & Construction Systems Business Unit to Mineral Resources,
Energy, Chemical & Electronics Business Unit and digital health business was transferred from Media & Digital Business Unit to Living Related &Real Estate Business Unit. Accordingly, the segment information of the previous year has been reclassified.

2.

Corporate assets consist primarily of cash and cash equivalents and marketable securities maintained by corporate headquarters that are not related to specificoperating segments.

3.

Profit for the year attributable to owners of the parent in Corporate and Eliminations includes certain profits and losses that cannot be allocated to operating
segments and intersegment eliminations. Certain profits and losses in Corporate and Eliminations are reallocated once the Company determines their
attributable operating segments.

4.

Transactions between segments are based on normal market prices.

5.

Revenues from contracts with customers are disaggregated into each segment as a result of categorization by economic factors.

6.

In the year ended March 31, 2023, impairment reversal relating to the tubular products business company in North America, B&L PIPECO SERVICES,
INC., is recognized in the Metal Products Business Unit. The impact on the Profit for the year attributable to owners of the parent is a gain of ¥11,379 million($86 million).

7.

In the year ended March 31, 2022, impairment loss in the aircraft leasing business, invested through Sumitomo Mitsui Finance and Leasing Company wasrecognized in the Transportation & Construction Systems Business Unit. The impact on the Profit (loss) for the year attributable to owners of the parent wasa loss of ¥40,186 million.

8.

In the year ended March 31, 2023, impairment loss in the telecommunication business in Myanmar is recognized in the Media & Digital Business

9.

Unit. The impact on the Profit for the year attributable to owners of the parent is a loss of ¥17,464 million ($131 million).
In the year ended March 31, 2022, impairment loss in the aircraft leasing business, invested through Sumitomo Mitsui Finance and Leasing Company,
Limited, was recognized in the Living Related & Real Estate Business Unit. The impact on the Profit for the year attributable to owners of the parent was aloss of ¥10,046 million.

10. In the year ended March 31, 2022, one-off profit from valuation of shareholder financing and the profit in the sale of copper and molybdenum mining
business in Chile, one-off profit from restructuring of project finance in the nickel mining and refining business in Madagascar were recognized in
the Mineral Resources, Energy, Chemical & Electronics Business Unit. The impacts to the Profit for the year attributable to owners of the parent
were a profit of ¥36,604 million related to the one-off profit of copper and molybdenum mining business in Chile, a profit of ¥14,409 million related
to the one-off profit from restructuring of project finance in the nickel mining and refining business in Madagascar, and loss of ¥15,125 million
related to the impairment losses in the pharmaceutical business in the United States.

67

(2)

Geographic Information

The Companies’ revenues by geographical area for the years ended March 31, 2023 and 2022 are as follows:
Millions of Yen

Millions of U.S. Dollars

2023
Japan

2022

2023

¥ 2,424,129¥ 2,125,304$ 18,228

East Asia

388,889

324,778

2,924

Asia Pacific732,783

695,488

5,510

Europe and CIS

752,536

725,513

5,658

Middle East and Africa

281,086

219,9112,113

1,634,584

936,719

12,290

Other Americas

603,865

467,302

4,540

Total

¥ 6,817,872¥ 5,495,015$ 51,263

Americas:U.S.

The carrying amounts of non-current assets, excluding Financial assets and Deferred tax assets, by geographical area as of March 31, 2023 and 2022 are as
follows:
Millions of Yen

Millions of U.S. Dollars

2023
Japan

2022
¥ 954,1522023¥ 905,143$ 7,174

East Asia

18,155

17,174

136

Asia Pacific

162,780

158,9111224

Europe and CIS

250,447

244,971

1,883

2,236

1,855

17

U.S.

314,349

262,815

2,364

Other Americas

71,178125,147

535

Total

1,773,297¥ 1,716,016$ 13,333

Middle East and Africa
Americas:Note: In the year ended March 31, 2023, the Company classified foreign countries into five broad regions in accordance with a wide-area reorganization.
Accordingly, the geographic information of the previous year has been reclassified.

68

5. Acquisition of Subsidiaries
For the year ended March 31, 2022
There were no significant business combinations for the year ended March 31, 2022.
For the year ended March 31, 2023
Business combinations during the year ended March 31, 2023 mainly consisted of acquiring Sumitomo Precision Products Co., Ltd. as a wholly-owned
subsidiary and acquiring an agricultural supplies distributor in Brazil. The aggregated acquisition-date fair value of the consideration transferred which
consisted of cash, the previously held equity interest, assets acquired and liabilities assumed, and non-controlling interests as of each acquisition-date areas follows.
The consideration transferred was paid in cash but included an unpaid portion.
As the purchase price allocations in certain business combinations were incomplete as of the issuance date of the consolidated financial statements, theCompany reports provisional amounts for the items for which the acquisition accounting is incomplete as of March 31, 2023.
Millions of U.S.
Millions of Yen
Dollars
Fair value of the consideration transferred¥ 29,063

$ 219

5,786

43

¥ 34,849$ 262

Total assets¥ 100,229$ 753

Total liabilities(70,520)(530)¥ 29,709$ 223

Non-controlling interests(1,127)(8)

Goodwill

8,600

65

Others(2,333)(18)¥ 34,849$ 262

Fair value of the previously held equity interest
Total

Net assets

Total

Non-controlling interests were measured at the ownership interests' proportionate share in the recognized amounts of the acquiree's identifiable net assets.

69

6. Marketable Securities and Other Investments
The amounts of “Marketable securities” and “Other investments” in the Consolidated statement of financial position are as follows:
Millions of U.S.
Dollars

Millions of Yen
2023

2022

2023

Marketable securities:
FVTPL

¥ 523

¥ 1,322$4

Amortized cost

1,218

986

9

1,741

¥ 2,308

$ 13

FVTPL

¥ 43,250¥ 39,853$ 325

FVTOCI339,559

371,431

2,553

5,958

5,383

45

¥ 388,767¥ 416,667$ 2,923

Total
Other investments:

Amortized cost
Total

The fair values of “Marketable securities” and “Other investments” measured at amortized cost as of March 31, 2023 and 2022 are ¥7,176 million ($54 million)and ¥6,369 million, respectively.
The Companies classify investments as financial assets measured at FVTOCI when those investments are held for the objective, such as expansion of the medium
and long-term revenue through maintenance and reinforcement of relationships with investees.
The fair value and dividends received from “Other investments” measured at FVTOCI held as of March 31, 2023 and 2022 are as follows:
Millions of Yen

Millions of U.S. Dollars

2023

2022

2023

Fair value

Dividends

Fair value

Dividends

Fair value

Dividends

Listed¥ 222,668¥ 7,494¥ 253,021¥ 6,318$ 1,674$ 56

Unlisted

116,891

11,493

118,410

19,471879

87¥ 339,559¥ 18,987¥ 371,431¥ 25,789$ 2,553

$ 143

Total

70

The fair values of “Other investments” measured at FVTOCI as of March 31, 2023 mainly consist of the following:

TOYOTA MOTOR CORPORATION

Millions of Yen

Millions of
U.S. Dollars

2023

2023

¥ 31,504$ 237

Nippon Steel Corporation.

25,331

190

Sumitomo Realty & Development Co., LTD.

15,408116

YAMATO KOGYO CO., LTD.

13,142

99

Sumitomo Metal Mining Co., Ltd.

12,62395

Sumitomo Forestry Co., Ltd.

11,48486

MS&AD Insurance Group Holdings, Inc.

9,239

69

Sumitomo Electric Industries, Ltd.

8,499

64

DAIKIN INDUSTRIES, LTD.

6,732

51

Nippon Coke & Engineering

4,921

37

Sumitomo Rubber Industries, Ltd.

4,884

37

SUMITOMO HEAVY INDUSTRIES, LTD.

4,835

36

NISSHIN SEIFUN GROUP INC.

4,795

36

YAMAZAKI BAKING CO., LTD.

4,794

36

The Sumitomo Warehouse Co., Ltd.

3,677

28

SOSiLA Logistics REIT, Inc.

3,185

24

Daikyo Nishikawa Corporation

2,305

17

Sumitomo Bakelite Co., Ltd.

2,024

15

UACJ Corporation

1,976

15

SEC CARBON, LTD.

1,759

13

SAWAI GROUP HOLDINGS Co., Ltd.

1,733

13

NICHIHA CORPORATION

1,493

11

TOTECH CORPORATION

1,380

10

Sumitomo Osaka Cement Co., Ltd.

1,380

10

UEX, LTD.

1,212

9

71

The fair values of “Other investments” measured at FVTOCI as of March 31, 2022 mainly consist of the following:
Millions of Yen
2022
TOYOTA MOTOR CORPORATION¥ 37,244

Nippon Steel Corporation.

22,034

Sumitomo Metal Mining Co., Ltd.

21,571

Sumitomo Realty & Development Co., LTD.

17,511DAIKIN INDUSTRIES, LTD.

12,756

MS&AD Insurance Group Holdings, Inc.

10,144

Sumitomo Forestry Co., Ltd.

9,503

YAMATO KOGYO CO., LTD.

9,143

Nippon Coke & Engineering

8,144

YAMAZAKI BAKING CO., LTD.

8,141

Sumitomo Electric Industries, Ltd.

7,322

Sumitomo Rubber Industries, Ltd.

5,400

NISSHIN SEIFUN GROUP INC.

5,275

SUMITOMO HEAVY INDUSTRIES, LTD.

4,205

SOSiLA Logistics REIT, Inc.

3,937

The Sumitomo Warehouse Co., Ltd.

3,888

KATO SANGYO CO., LTD.

2,951

NICHIHA CORPORATION

2,783

Atlantic Lithium Limited

2,558

SAWAI GROUP HOLDINGS Co., Ltd.

2,118

Sumitomo Bakelite Co., Ltd.

1,957

Daikyo Nishikawa Corporation

1,930

UACJ Corporation

1,753International Steels Limited

1,724

Sumitomo Osaka Cement Co., Ltd.

1,660

“Other investments” measured at FVTOCI which were disposed of during the years ended March 31, 2023 and 2022 are as follows:
Millions of Yen
2023

Millions of U.S. Dollars
2022

2023

Fair value
at the dateof saleCumulative
gains or(losses)

Dividends

Fair value
at the dateof saleCumulative
gains or(losses)

Dividends

Fair value
at the dateof saleCumulative
gains or(losses)

Dividends¥ 119,517¥ 24,994¥ 1,071¥ 120,976¥ 30,151¥ 1,462

$ 899

$ 188

$8

The Companies sold or exchanged the investments mainly as a result of reviewing business relationships or as a result of business combinations in the investees.
In connection with the disposal, the Companies reclassified cumulative gains (net of tax) of ¥18,805 million ($141 million) and ¥22,932 million from Other
components of equity to retained earnings for the years ended March 31, 2023 and 2022, respectively.
For financial assets measured at FVTOCI of which the decline in fair value compared to its acquisition cost is significant and not temporary, the Companies
reclassified cumulative losses (net of tax) of ¥2,044 million ($15 million) and gains (net of tax) of ¥931 million from Other components of equity toretained earnings for the years ended March 31, 2023 and 2022, respectively.

72

7.

Trade and Other Receivables

The components of Trade and other receivables as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Notes receivable¥ 53,174¥ 55,635$ 400

Accounts receivable

1,557,555

1,517,969

11,711Loans receivable

117,277

105,244

882

Finance lease receivable

116,473

126,526

876

Other receivables

98,211

88,486738

Less: Allowance for doubtful receivables(56,494)(56,057)(425)¥ 1,886,196¥ 1,837,803$ 14,182

Trade and other receivables

Financial assets measured at FVTPL of ¥75,233 million ($566 million) and ¥84,056 million are included in Accounts receivable as of March 31, 2023 and 2022,
respectively.
Certain notes receivables derived mainly from export transactions are transferred to banks on a discounted basis. The Companies are liable to the banks
for defaults by the note issuer. As such, the Companies continue to recognize the discounted notes receivables of ¥3,419 million ($26 million) and ¥3,086
million as of March 31, 2023 and 2022, respectively, and these discounted notes are presented in “Trade and other receivables” in the Consolidated
statement of financial position. Related cash receipts which are discounted are presented in “Bonds and borrowings”.
8.

Leases(1)

As lessor

The Companies, as a lessor, lease office buildings, vessels and certain other assets to third parties under operating leases. Costs of the leased properties asof March 31, 2023 and 2022 are ¥430,452 million ($3,236 million) and ¥450,966 million, respectively. Accumulated depreciation and accumulated
impairment losses as of March 31, 2023 and 2022 are ¥107,920 million ($811 million) and ¥113,300 million, respectively. These assets are included in“Property, plant and equipment,” “Intangible assets,” and “Investment property” in the Consolidated statement of financial position.
Future lease payments to be received under operating leases as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

￥28,945￥26,379$ 218

Due after 1 year through 2 years

20,48914,963154

Due after 2 years through 3 years

12,347

12,03993

Due after 3 years through 4 years

9,786

8,836

74

Due after 4 years through 5 years

7,358

7,909

55

Due after 5 years

20,36325,126153

Due in 1 year or less

The Companies lease automobiles, vessels, power stations, service equipment and other assets under arrangements which are classified as finance leases
under International Financial Reporting Standard No.16 Leases (“IFRS 16”). The significant leased item is a coal-fired thermal power plant owned by
the Companies in Indonesia and currently leased to the Indonesian state-owned electricity corporation.

73

Future receivables under finance leases as of March 31, 2023 and 2022 are as follows:
Minimum lease payments receivable
Millions of
U.S. Dollars

Millions of Yen
2023
Due in 1 year or less

2022

2023

¥ 75,548¥ 58,598$ 568

Due after 1 year through 2 years

28,85447,386217

Due after 2 years through 3 years

17,352

14,017131

Due after 3 years through 4 years

7,276

9,602

55

Due after 4 years through 5 years

3,515

6,396

26

Due after 5 years

9,712

17,38973

Unguaranteed residual value

4,151

4,744

31

Less: Future finance income(29,935)(31,606)(225)

Net investment in the lease¥ 116,473¥ 126,526$ 876

Net investment in the lease
Millions of
U.S. Dollars

Millions of Yen
2023
Due in 1 year or less

2022

2023

¥ 67,827¥ 54,103$ 510

Due after 1 year through 2 years

21,75040,959164

Due after 2 years through 3 years

12,571

10,41695

Due after 3 years through 4 years

5,606

6,612

42

Due after 4 years through 5 years

2,674

4,215

20

Due after 5 years

3,601

8,799

27

¥ 2,444¥ 1,422$ 18

Unguaranteed residual value

The amounts mainly recognized in the Consolidated statement of comprehensive income related to finance leases as a lessor for the year ended March
31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023
Financial income on lease receivables
Income on variable lease payments not included in themeasurement of lease receivables

74

2022

2023

¥ 16,828¥ 18,919$ 127

22,826

19,935172

(2)As lessee

The Companies, as a lessee, lease office buildings, vessels, machinery and equipment, stores and certain other assets.
1.

Right-of-use assets

The carrying amounts of right-of-use assets as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Land and land improvements¥ 21,044¥ 19,136$ 158

Buildings and leasehold improvements

314,610317,6812,365

Machinery and equipment

32,61939,657245

Depreciation expenses for right-of-use assets for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Land and land improvements¥ 2,677¥ 2,464$ 20

Buildings and leasehold improvements

49,576

46,240373

Machinery and equipment

7,641

6,848

57

Acquisitions of right-of-use assets for the years ended March 31, 2023 and 2022 are ¥83,377 million ($627 million) and ¥62,922 million, respectively.
Acquisitions of those through business combinations for the years ended March 31, 2023 and 2022 are ¥3,369 million ($25 million) and ¥3 million,
respectively.
2.

Maturity analysis of lease liabilities

The Companies’ remaining contractual maturities for lease liabilities as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

3.

2022

2023

Due in 1 year or less

¥ 76,058¥ 73,820$ 572

Due after 1 year through 5 years

193,249

190,374

1,453

Due after 5 years

228,510219,653

1,718

Profit or loss related to right-of-use assets
Millions of
U.S. Dollars

Millions of Yen
2023
Interest expense on lease liabilities

2022

2023

¥ 10,204¥ 9,734$ 77

Expense on variable lease payments not included in themeasurement of lease liabilities

19,605

14,383

147

Income from subleasing right-of-use assets

4,185

6,420

31

75

4.

Total cash outflows for leases
Millions of
U.S. Dollars

Millions of Yen
2023
Total cash outflows for leases

9.

2022

¥ 98,1062023¥ 96,287$ 738

Assets Pledged as Security

Assets pledged to secure borrowings, guarantee of contracts and others as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

Cash and deposits¥ 30,484¥ 29,159$ 229

Trade and other receivables

349,790

296,186

2,630

Inventories

12,941

5,721

97

－

10,822－

205,409

197,819

1,544

7,031

6,541

53

Intangible assets (Carrying amount)

－

23

－

Investment property (Carrying amount)

2,415

2,636

18

Others (Note)

52,737

214,441397¥ 660,807¥ 763,348$ 4,968

Assets classified as held for saleMarketable securities and investments
Property, plant and equipment (Carrying amount)

Total

2023

Note: These are mainly guarantee deposits related to derivative transactions and deposits for rental properties.

Trust receipts issued under customary import financing arrangements grant recipient banks a security interest in the imported merchandise and/or theaccounts receivable or sales proceeds resulting from the sales of such merchandise. The Companies repay the related notes and acceptances payable atthe maturity dates without applying the sales proceeds to specific notes or acceptances. The large volume of transactions makes it impracticable todetermine the aggregate amounts of assets covered by outstanding trust receipts.

10. Inventories
The components of Inventories as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen

Real estate held for development and resale

2023

2022

2023

¥ 272,842¥ 184,127$ 2,051

Commodities

890,728

663,639

6,697

Materials /work in progress

226,989

210,237

1,707¥ 1,390,559¥ 1,058,003$ 10,455

Inventories

Of the Inventories disclosed above, the carrying amounts of Inventories that are measured at fair value less costs to sell as of March 31, 2023 and 2022
are ¥109,930 million ($827 million) and ¥114,021 million, respectively.
The write-down of Inventories recognized as expense for the years ended March 31, 2023 and 2022 are ¥5,238 million ($39 million) and ¥9,041 million,
respectively.

7611. Investments Accounted for Using the Equity Method(1)

Carrying Amount of Investments Accounted for Using the Equity Method and Profit (Loss) Attributable to the Company

Summarized financial information for the Companies' interest in associates and joint ventures, based on the amounts reported in the Companies'
consolidated financial statements as of and for the years ended March 31, 2023 and 2022 is as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Carrying amount
Associates¥ 1,388,845¥ 1,294,729$ 10,442

Joint Ventures

1,253,659

1,062,255

9,426

Total

¥ 2,642,504¥ 2,356,984$ 19,868
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Profit for the year
¥ 104,526¥ 107,461$ 786

Joint Ventures

147,660

69,3701,110

Subtotal

252,186

176,831

1,896

Associates

28,637

4,974

215

Joint Ventures

20,967

13,743

158

Subtotal

49,604

18,717373¥ 301,790¥ 195,548$ 2,269

Associates

Other comprehensive income

Comprehensive income for the year

Profit and loss for the year ended March 31, 2022 was recognized as follows. The profit and loss is included in “Share of profit (loss) of investments
accounted for using the equity method” in the Consolidated statement of comprehensive income.
In the nickel mining and refining business in Madagascar, Project Companies agreed on the revision regarding repayment conditions of the loan agreementwith lenders and recognized a gain on financial liabilities, as a result of the reassessment of the fair value related to financial liabilities due to the revisionof repayment conditions. Since the increase in the carrying amount of the investment for Project Companies resulting from the recognition of the gain is
not expected to contribute to future cash inflows from Project Companies, the Company recognized a loss equivalent to the amount of the gain
corresponding to the equity interest as a decreasing the carrying amount of the investment for Project Companies in terms of the recoverability.
Consequently, the Company does not expect any impact to the consolidated financial statements due to the reassessment of financial liabilities in Project
Companies.
In addition, a gain related to the debt restructuring is recognized in this business. Consequently, a gain of ¥14,409 million was recognized as Share of
profit (loss) of investments accounted for using the equity method in the Consolidated statement of comprehensive income.
In the aircraft leasing business, invested through Sumitomo Mitsui Finance and Leasing Company, Limited, losses of ¥40,186 million in the Transportation& Construction Systems Business Unit and ¥10,046 million in the Living Related & Real Estate Business Unit were recognized for the investment heldby our group. Regarding the aircraft assets leased to Russian airlines, the lease agreement has been terminated in compliance with applicable sanctions.
However, in consideration of the current situation where the possibility of repossessing the aircraft assets is uncertain, the Company recognized the loss

77

relating to the aircraft leasing business. The impairment loss of ¥15,125 million was recognized for the investment held by our group relating to UpsherSmith Laboratories, LLC, a pharmaceutical business company in the United States as a result of reassessing the business plan based on changes in thebusiness environment which are mainly due to entering by competitors into the market related to goods handled.

The impairment loss for the year ended March 31, 2023 is recognized as follows. The impairment loss is included in “Share of

profit (loss) ofinvestments accounted for using the equity method” in the Consolidated statement of comprehensive income.
As a result of reassessing recoverable amount of the investments in Telecommunications business in Myanmar due to the increasing country risk in the
country, an impairment loss of ¥17,464 million ($131 million) is recognized in the Media & Digital Business Unit.

The major joint ventures accounted for using the equity method included in the summarized financial information above are Sumitomo Mitsui Financeand Leasing Company, Limited (50% owned), AMBATOVY MINERALS S.A. (54.17% owned), and DYNATEC MADAGASCAR S.A. (54.17%
owned). Regarding AMBATOVY MINERALS S.A. and DYNATEC MADAGASCAR S.A. owned more than 50% of the total voting rights, theCompany classifies them as joint ventures in light of the shareholder’s agreement.

Sumitomo Mitsui Finance and Leasing Company, Limited
Sumitomo Mitsui Finance and Leasing Company, Limited 's summarized financial information as of and for the years ended March 31, 2023 and 2022
is as follows:
Note that the following summarized financial information includes the amount of goodwill relating to Sumitomo Mitsui Finance and Leasing Company,
Limited.
Millions of
U.S. Dollars

Millions of Yen
2023
Current assets

2022

2023

¥ 4,094,148¥ 3,949,011$ 30,783

Non-current assets

5,279,527

3,927,031

39,696

Total assets¥ 9,373,675¥ 7,876,042$ 70,479

Current liabilities¥ 3,115,577¥ 3,133,372$ 23,425

Non-current liabilities

4,973,533

3,656,960

37,395

Total liabilities¥ 8,089,110¥ 6,790,332$ 60,820

Non-controlling interests¥ 257,114¥ 166,798$ 1,933

Equity1,027,451

918,912

7,725¥ 1,284,565¥ 1,085,710$ 9,658

Total equity

Millions of
U.S. Dollars

Millions of Yen
2023
Revenues

2022

2023

¥ 1,014,200¥ 839,972$ 7,626

Profit (loss) for the year

92,166(15,264)

693

Other comprehensive income

34,39149,857259¥ 126,557¥ 34,593$ 952

Comprehensive income for the year

Sumitomo Mitsui Finance and Leasing Company, Limited engages in a variety of financial services including leasing. The dividends which the Company

78

received from Sumitomo Mitsui Finance and Leasing Company, Limited for the years ended March 31, 2023 and 2022 are ¥6,246 million ($47 million)and ¥6,333 million, respectively.
The Madagascar Nickel business
The Madagascar Nickel business's summarized financial information that is combined balance of AMBATOVY MINERALS S.A. and DYNATEC
MADAGASCAR S.A. as of and for the years ended March 31, 2023 and 2022 is as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Current assets¥117,608¥ 91,704$ 884

Non-current assets

314,651

289,261

2,366

Total assets¥ 432,259¥ 380,965$ 3,250

Current liabilities¥ 60,925¥ 35,145$ 458

Non-current liabilities

205,193

180,209

1,543

Total liabilities¥ 266,118¥ 215,354$ 2,001

Total equity¥ 166,141¥ 165,611$ 1,249
Millions of
U.S. Dollars

Millions of Yen
2023
Revenues

2022

2023

¥ 168,991¥ 126,368$ 1,271

Profit (loss) for the year

(15,278)

78,389(115)

Other comprehensive income

32,10916,301242¥ 16,831¥ 94,690$ 127

Comprehensive income for the year

AMBATOVY MINERALS S.A. and DYNATEC MADAGASCAR S.A. operate a nickel mining and a nickel refining in Madagascar. Non-current assets
in the Ambatovy Enterprise's summarized financial information include mining rights and long-lived assets including refining equipment of these
operations, which are ¥309,366 million ($2,326 million) and ¥282,625 million as of March 31, 2023 and 2022, respectively.
If there is any indication of impairment for the PPE of the Project Companies and an impairment test shows that the recoverable amount is less than the
carrying amount of the PPE, the Company will recognize its share of loss as an equity method investment loss. When the Project Companies estimate therecoverable amount of the PPE, it will be either their value-in-use or their fair value after deducting disposal costs, whichever is higher. The key
assumptions—the Project Companies’ production conditions, future natural resources prices (primarily the medium- to long-term forecasted prices ofnickel, cobalt, etc.), expected recoverable reserves, and discount rates, —will be used in making judgments regarding an indication of impairment andestimates of the recoverable amount. These assumptions are subject to change due to market conditions, equipment problems at the project company andother factors, and could have a significant impact on the Companies’ business performance.

In the current fiscal year, no indication of impairment was found for the PPE of the Project Companies based on a comprehensive consideration of thechanges in the above assumptions.
The carrying amounts of the investments in the Project Companies accounted for using the equity method as of March 31, 2023 and 2022, are about¥60,562 million ($455 million). and ¥62,697 million respectively.

79

(2)

The Balances of Receivables from and Payables to Equity-accounted Investees

The balances of receivables from and payables to equity-accounted investees as of March 31, 2023 and 2022 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2023

2022

2023

Trade and other receivables¥ 123,589¥ 130,815$ 929

Trade and other payables

35,53740,908267

Lease liabilities

11,424

11,971

86(3)

Summary of Transactions with Equity-accounted Investees

The Companies engage in various agency transactions between equity-accounted investees and third parties. Net fees earned on these transactions are notmaterial.
Transactions with equity-accounted investees for the years ended March 31, 2023 and 2022 are summarized as follows:
Millions ofMillions of Yen
U.S. Dollars
2023Management and secondment fees, received

2022

2023

¥ 5,145¥ 4,531$ 39

Interest income

6,893

4,847

52

Interest expense

189

57

1

Transactions with equity-accounted investees stated above are made on an arm's length basis.

8012. Property, Plant and Equipment
Cost and accumulated depreciation and impairment losses of Property, plant and equipment as of March 31, 2023 and 2022 are as follows:[Cost]
Millions of Yen
Land and land
improvements

Buildings
andleaseholdimprovements

Machineryandequipment

Projects inprogress

Mining rights

Total¥ 120,793¥ 969,205¥ 930,716¥ 37,883¥ 56,512¥ 2,115,109

Acquisitions

1,660

66,65050,93831,789602

151,639

Reclassification

5,733(3,363)(4,021)(18,797)－(20,448)

Balance as of April 1, 2021

Acquisitions throughbusiness combinations
Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals

157

413

402

－

－

972

(2,491)(13,160)(80,569)(16,729)(39,871)(152,820)(4,972)(29,395)(14,763)(23)(2,112)(51,265)

Exchange differences ontranslating foreign operations

273

25,31170,185

2,753

5,107

103,629

1,485(5,966)(2,666)(3,015)

1,284(8,878)¥ 122,638¥ 1,009,695¥ 950,222¥ 33,861¥ 21,522¥ 2,137,938

Acquisitions

8,072

62,808

97,117

41,469－209,466

Reclassification

18,65818,661(10,626)(43,692)－(16,999)

4,005

8,672

2,732

146

－

15,555(498)(17,116)(147,980)(1,450)(3,149)(170,193)

OthersBalance as of March 31, 2022

Acquisitions throughbusiness combinations
Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals(9,876)(25,473)(23,497)(1,831)－(60,677)

Exchange differences ontranslating foreign operations

1,780

12,783

41,471468(484)

56,018Others(3,977)

1,000

3,872

(6,221)

662(4,664)¥ 140,802¥ 1,071,030¥ 913,311¥ 22,750¥ 18,551¥ 2,166,444

Balance as of March 31, 2023

81

Millions of U.S. Dollars
Buildings
Land and land
andimprovements
leaseholdimprovements
Balance as of March 31, 2022

Machineryandequipment

Projects inprogress

Mining rights

Total

$ 921

$ 7,592$ 7,145

$ 255

$ 162

$ 16,075

Acquisitions

62

471

730

312

－

1,575

Reclassification

140

141

(80)

(329)

－

(128)

30

65

21

1

－

117

(4)

(129)

(1,112)

(11)

(24)

(1,280)Acquisitions throughbusiness combinations
Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals

(74)

(192)

(177)

(13)

－

(456)

Exchange differences ontranslating foreign operations

14

96

311

4

(4)

421

Others

(30)

9

29

(48)

5

(35)

$ 1,059$ 8,053$ 6,867

$ 171

$ 139

$ 16,289

Balance as of March 31, 2023

82

[Accumulated depreciation and impairment losses]
Millions of Yen
Land and land
improvements

Buildings
andleaseholdimprovements

Machineryandequipment¥ (13,810)¥ (461,448)¥ (548,244)

650

7,626

50,27528,50487,055

2,987

29,032

10,823

1,959

44,801

(35)

2,805

14,117－

16,887

Depreciation expenses(2,464)(69,217)(65,928)(2,071)(139,680)

Impairment losses(2,354)(3,086)(7,376)(299)(13,115)(342)(10,975)(44,109)(3,771)(59,197)

(3)

5,040

8,468

－

13,505¥ (15,371)¥ (500,223)¥ (581,974)

Balance as of April 1, 2021
Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals
Reclassification

Exchange differences ontranslating foreign operations
OthersBalance as of March 31, 2022

Mining rights

Total¥ (40,959) ¥ (1,064,461)¥ (16,637) ¥ (1,114,205)

Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals

115

12,047

105,307

2,198

119,667

3,510

15,523

17,912－

36,945

Reclassification(1,109)243

21,623－20,757

Depreciation expenses(2,677)(74,211)(74,647)(535)(152,070)

Impairment losses(56)(6,860)(12,254)－(19,170)

Exchange differences ontranslating foreign operations(195)(5,872)(25,194)377(30,884)

Others977

7,201

10,654－

18,832¥ (14,806)¥ (552,152)¥ (538,573)

Balance as of March 31, 2023

¥ (14,597) ¥ (1,120,128)

Millions of U.S. Dollars

Balance as of March 31, 2022
Deconsolidation of subsidiaries
and reclassification to assets
classified as held for sale
Disposals

Land and land
improvements

Buildings
andleaseholdimprovements

Machineryandequipment

Mining rights$ (116)$ (3,761)$ (4,376)$ (125)$ (8,378)

1

90

792

17

900

Total

26

117

135

－

278

Reclassification

(8)

2

162

－

156

Depreciation expenses

(20)

(558)

(561)

(4)

(1,143)

Impairment losses

(0)

(52)

(92)

－

(144)

Exchange differences ontranslating foreign operations

(1)

(44)

(189)

2

(232)

Others

7

54

80

－

142

$ (111)$ (4,152)$ (4,049)$ (110)$ (8,422)

Balance as of March 31, 2023

Note: Depreciation expenses for property, plant and equipment are included in “Cost” and “Selling, general and administrative expenses” in theConsolidated statement of comprehensive income. The impairment losses for property, plant and equipment are included in “Impairment reversal (loss)83

on long-lived assets” in the Consolidated statement of comprehensive income. The impairment losses recognized on property, plant and equipment for
the years ended March 31, 2023 and 2022 are ¥19,170 million ($144 million) and ¥13,115 million, respectively. The impairment losses mainly recognizedin Transportation & Construction Systems Business Unit on property, plant and equipment for the years ended March 31, 2023 and 2022 are ¥15,517
million ($117 million) and ¥8,315 million, respectively.

[Carrying amount]2023 (Millions of Yen)

¥ 125,996

Buildings
andleaseholdimprovements¥ 518,878

2022 (Millions of Yen)

¥ 107,267¥ 509,472¥ 368,248¥ 33,861¥ 4,885¥ 1,023,733$ 948$ 3,901$ 2,818

$ 171

$ 29

$ 7,867

Land and land
improvements

2023 (Millions of U.S. Dollars)

Machineryandequipment

Projects inprogress

Mining rights¥ 374,738¥ 22,750¥ 3,954¥ 1,046,316

Total

13. Intangible Assets(1)

Goodwill

Cost and accumulated impairment losses of goodwill for the years ended March 31, 2023 and 2022 are as follows:[Cost]
Millions of
U.S. Dollars

Millions of Yen
2023
Balance, beginning of year

2022

2023

¥ 216,485¥ 223,808$ 1,628

Acquisitions through business combinations

8,600

1,092

64

Deconsolidation of subsidiaries(5,932)(11,958)(45)

Disposals

(400)

(6)

(3)

Exchange differences on translating
foreign operations

8,083

13,05561

794(9,506)

6¥ 227,630¥ 216,485$ 1,711

OthersBalance, end of year
[Accumulated impairment losses]

Millions of
U.S. Dollars

Millions of Yen
2023

2022

¥ (110,975)¥ (114,012)$ (834)

Impairment losses(354)(1,368)(3)

Deconsolidation of subsidiaries

5,880

11,958

44

400

－

3

(6,887)(7,313)

(52)

－

(240)

－

¥ (111,936)¥ (110,975)$ (842)

Balance, beginning of year

Disposals
Exchange differences on translating
foreign operations
OthersBalance, end of year2023

The impairment losses recognized on goodwill for the years ended March 31, 2023 and 2022 are ¥354 million ($3 million) and ¥1,368 million, respectively,
and are included in “Impairment reversal (loss) on long-lived assets” in the Consolidated statement of comprehensive income.

84

[Carrying amount]Carrying amount2023 (Millions of Yen)

¥ 115,694

2022 (Millions of Yen)

¥ 105,510

2023 (Millions of U.S. Dollars)$ 869

Goodwill arising from business combinations is allocated to each of the Companies’ CGU that is expected to benefit from the synergies of the businesscombination at the date of acquisition of the business.
The carrying amounts of goodwill by operating segment as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Metal Products¥ 4,604¥ 5,116$ 34

Transportation & Construction Systems

48,301

46,629

363

－

－

－

Media & Digital

13,861

13,861

104

Living Related & Real Estate

38,29532,603288

Mineral Resources, Energy, Chemical & Electronics

10,525

7,192

79

108

109

1

¥ 115,694¥ 105,510$ 869

Infrastructure

Corporate and Eliminations
Total

Note: “Corporate and Eliminations” above includes the carrying amount of the Energy Innovation Initiative (EII).
Significant portions of goodwill as of March 31, 2023 and 2022 are related to parking business in Nordic countries of ¥29,974 million ($225 million) and¥30,741 million, and fresh produce business in Europe and the Americas of ¥12,061 million ($91 million) and ¥11,316 million, respectively.

85

(2)

Other Intangible Assets

Cost and accumulated amortization, and impairment losses of other intangible assets as of March 31, 2023 and 2022 are as follows:[Cost]
Millions of Yen
Sales licenses,
trademarks andcustomer
relationships

SoftwareBalance as of April 1, 2021
Acquisitions through businesscombinations
Separate acquisitions
Deconsolidation of subsidiaries
Disposals

OthersTotal¥ 154,150¥ 229,610¥ 44,176¥ 427,936

176

488

6

670

11,05594920

12,069(563)－(1,687)(2,250)(12,119)(5,035)(3,102)(20,256)

Exchange differences on translating
foreign operations

2,896

16,398983

20,277

Others

2,034

5,157

717

7,908

Balance as of March 31, 2022

¥ 157,629¥ 246,712¥ 42,013¥ 446,354

Acquisitions through businesscombinations

2,731

－

1,285

4,016

Separate acquisitions

13,438217

1,854

15,509(165)(3,513)－(3,678)

Disposals(5,374)

(682)

(215)

(6,271)

Exchange differences on translating
foreign operations

1,150

11,967655

13,772Others6,109(7,160)

630

(421)

¥ 175,518¥ 247,541¥ 46,222¥ 469,281

Deconsolidation of subsidiaries

Balance as of March 31, 2023

Millions of U.S. Dollars
Sales licenses,
trademarks andcustomer
relationships

Software

Others

Total

Balance as of March 31, 2022

$ 1,185$ 1,855$ 316$ 3,356

Acquisitions through businesscombinations

20

－

10

30

Separate acquisitions

101

2

14

117

Deconsolidation of subsidiaries

(1)

(27)

－

(28)

Disposals

(40)

(5)

(2)

(47)

Exchange differences on translating
foreign operations

9

90

5

104

Others

46

(54)

5

(3)

$ 1,320$ 1,861$ 348$ 3,529

Balance as of March 31, 2023

86

[Accumulated amortization and impairment losses]
Millions of Yen
Sales licenses,
trademarks andcustomer
relationships

SoftwareBalance as of April 1, 2021

OthersTotal¥ (126,271)¥ (145,591)¥ (9,909)¥ (281,771)

Disposals

10,610

5,031

2,169

17,810

Amortization expenses(6,864)(8,751)(1,866)(17,481)

Impairment losses

(503)

(241)

(465)

(1,209)Deconsolidation of subsidiaries

496

－

1,061

1,557

Exchange differences on translating
foreign operations(2,322)(9,655)(467)(12,444)

Others(2,769)

(10)

(581)

(3,360)¥ (127,623)¥ (159,217)¥ (10,058)¥ (296,898)

Disposals

5,302

681

179

6,162

Amortization expenses(7,913)(7,516)(2,434)(17,863)

Impairment losses

(773)

－

(255)

(1,028)

Impairment reversals－

12,179－12,179Deconsolidation of subsidiaries

170

3,513

－

3,683

Exchange differences on translating
foreign operations(272)(8,570)(267)(9,109)(3,642)

7,175

(844)

2,689

¥ (134,751)¥ (151,755)¥ (13,679)¥ (300,185)

Balance as of March 31, 2022

OthersBalance as of March 31, 2023

Millions of U.S. Dollars
Sales licenses,
trademarks andcustomer
relationships

SoftwareBalance as of March 31, 2022

OthersTotal$ (960)$ (1,197)$ (76)$ (2,233)

Disposals

40

5

1

46

Amortization expenses

(59)

(57)

(18)

(134)

Impairment losses

(6)

－

(2)

(8)

Impairment reversals

－

92

－

92

Deconsolidation of subsidiaries

1

27

－

28

Exchange differences on translating
foreign operations

(2)

(64)

(2)

(68)

Others

(27)

53

(6)

20

$ (1,013)$ (1,141)$ (103)$ (2,257)

Balance as of March 31, 2023

87

[Carrying amount]
SoftwareSales licenses,
trademarks
and customer
relationships

OthersTotal

2023 (Millions of Yen)

¥ 40,767¥95,786¥ 32,543¥ 169,096

2022 (Millions of Yen)

¥ 30,006¥ 87,495¥ 31,955¥ 149,456

$ 307

$ 720

$ 245

$ 1,2722023 (Millions of U.S. Dollars)

Significant portions of sales licenses, trademarks and customer relationships as of March 31, 2023 and 2022 are related to fresh produce business in
Europe and the Americas of ¥23,950 million ($180 million) and ¥23,821 million, and parking business in Nordic countries of ¥16,031 million ($121
million) and ¥18,251 million, respectively. The average remaining amortization period of intangible assets with finite useful lives is 18 years for fresh
produce business in Europe and the Americas, and 9 years for parking business in Nordic countries.
The impairment losses recognized on other intangible assets for the years ended March 31, 2023 and 2022 are ¥1,028 million ($8 million) and ¥1,209
million, respectively. The impairment reversals recognized on other intangible assets for the years ended March 31, 2023 are ¥12,179 million ($92 million),and are included in “Impairment reversal (loss) on long-lived assets” in the Consolidated statement of comprehensive income. The impairment reversals
on other intangible assets for the year ended March 31, 2023 mainly consist of the impairment reversal of ¥11,379 million ($86 million) recognized forthe tubular products business company B&L PIPECO SERVICES, INC., which is recognized in the Metal Products Business Unit, due to revision of thelong-term business plan in line with market recovery.
Intangible assets with finite useful lives are amortized over their useful lives. Amortization expenses on intangible assets are recognized in “Cost” and“Selling, general and administrative expenses” in the Consolidated statement of comprehensive income.
Intangible assets with indefinite useful lives as of March 31, 2023 and 2022 are ¥20,323 million ($153million) and ¥20,397 million, respectively, andconsist mainly of trademarks. Those trademarks were acquired through business combinations which are expected to exist as long as business continues,
therefore the management considers the useful lives for these as indefinite. Intangible assets with indefinite useful lives are not material individually.
(3)

Impairment test of goodwill and other intangible assets

Goodwill and intangible assets with indefinite useful lives are tested for impairment annually and whenever there is an indication that the unit may be
impaired. Significant goodwill and other intangible assets are tested for impairment based on assumptions as follows:
Fresh produce business in Europe and the Americas
Goodwill and intangible assets with indefinite useful lives are tested for impairment in the Banana and Pineapple business. The recoverable amounts arecalculated based on the value in use. The value in use is estimated with support of an independent appraiser by using the present value of 4-year future
cash flows, which are calculated based on the business plan amended to reflect the recent business environment. The key assumptions with significant
impact on the calculation of the value in use are the sales volume, the margin of trading, the discount rate, etc. for Banana & Pineapple business. The
growth rates and the discount rates used at the impairment test of goodwill and other intangible assets for the years ended March 31, 2023 and 2022 aresummarized as follows:
2023(%)
CGU Group
Banana & Pineapple business

Growth rate

2022
(%)
Discount rate

1.9

6.6

Growth rate

Discount rate
1.8

5.2

The growth rates used are determined by considering the long-term average growth rate of the market or the country which the CGU group belongs to.
The discount rates used are calculated based on the weighted average cost of capital of the CGU group.

88In the Banana & Pineapple business, the value in use used at the impairment test of goodwill as of March 31, 2023 exceeded the carrying amount by¥11,023 million ($83 million). If the profitability in the European market declines due to the deterioration of the situation in Russia and Ukraine, thestrengthening of economic sanctions against Russia, or the re-spread of COVID-19 etc., or if the discount rate rises by approximately 1.0%, there is apossibility that the recoverable amounts go below the carrying amount.
Parking Business in Nordic countries
Goodwill and intangible assets with indefinite useful lives are tested for impairment using the entire parking business in the three Nordic countries of
Sweden, Norway and Finland as a single cash generating unit group, and the recoverable amounts are calculated based on the value in use. The value in
use is estimated with support of an independent appraiser by using the present value of future cash flows, which are calculated based on the business planamended to reflect the recent business environment. The business plan is calculated based on the average lease period of parking facilities, which is 6 to
9 years. The key assumptions with significant impact on the calculation of the value in use are future short-term parking revenue, the discount rate, etc.
The growth rates and the discount rates used at the impairment test of goodwill and other intangible assets for the years ended March 31, 2023 and 2022
are summarized as follows:

CGU Group
Parking Business in Nordic countries(Sweden, Norway and Finland)

2023
(%)
Growth rate

2022
(%)
Discount rate

1.8~2.0

8.0~8.5

Growth rate
1.9~2.0

Discount rate
5.5~7.0

The growth rates used are determined by considering the long-term average growth rate of each country.
The discount rates are used calculated based on the weighted average cost of capital in each country.

In the Parking Business in Nordic countries, despite a significant increase in the discount rate against the backdrop of rising inflation due to increased
international geopolitical risks such as the deterioration of the situation in Russia and Ukraine, short-term parking revenues have shown stable performancedue to recovery from the spread of COVID-19, and this trend is expected to continue in FY2023 and beyond. As a result, the value in use used at the
impairment test of goodwill as of March 31, 2023 exceeded the carrying amount by ¥5,274 million ($40 million). If the profitability declines due to there-spread of COVID-19 or other factors, or if the discount rate rises by approximately 1.0%, there is a possibility that the recoverable amount goes below
the carrying amount.

OthersFor other impairment tests of goodwill, recoverable amounts are calculated based on value in use. The value in use is the present value calculated bydiscounting the estimated cash flows based on the business plans approved by management and a growth rate. The business plans are not longer than five
years in principle, and reflect the management assessments of future industry trends and historical data based on the external and internal information.
The growth rates used are determined by considering the long-term average growth rates of the market or the country which the CGU belongs to. The
growth rates used do not exceed the long-term average growth rates of the market or country (domestic: approximately 1% or less, overseas: approximately
4% or less). The discount rates used are calculated based on the weighted average capital cost or capital cost of each CGU (domestic: approximately 5%
to 11%, overseas: approximately 7% to 23%).

89

14. Investment Property
Cost and accumulated depreciation and impairment losses of Investment property as of March 31, 2023 and 2022 are as follows:[Cost]
Millions of
U.S. Dollars

Millions of Yen
2023

2022

¥ 448,385¥ 440,173$ 3,371

Acquisitions

50,144

15,137377

Disposals(21,910)(15,708)

(165)

5,716

6,183

43

(13,000)

2,461

(98)

244

139

2

¥ 469,579¥ 448,385$ 3,530

Balance, beginning of year

Exchange differences on translating foreign operations
Reclassification
OthersBalance, end of year2023

[Accumulated depreciation and impairment losses]
Millions of
U.S. Dollars

Millions of Yen
2023
Balance, beginning of year

2022

2023

¥ (109,049)¥ (99,722)$ (820)Depreciation expenses(13,816)(13,202)(104)

Impairment losses(4,854)(2,195)

(36)

－

69

－

Disposals

3,007

8,502

23

Exchange differences on translating foreign operations(1,191)(1,300)(9)

Reclassification

2,689(1,187)

20

(10)

(14)

(0)

¥ (123,224)¥ (109,049)$ (926)

Impairment reversals

OthersBalance, end of year

The impairment losses recognized for the year ended March 31, 2023 and 2022 are ¥4,854 million ($36 million) and ¥2,195 million, and are included in“Impairment reversal (loss) on long-lived assets” in the Consolidated statement of comprehensive income.
[Carrying amount and fair value]
Carrying amount

Fair value

2023 (Millions of Yen)

¥ 346,355¥ 406,163

2022 (Millions of Yen)

¥ 339,336¥ 392,033$ 2,604$ 3,0542023 (Millions of U.S. Dollars)

The fair value as of the end of each reporting period is based on a valuation conducted by independent appraisers having current experience in the locations
and categories of the Investment property being valued and the appropriate and recognized professional qualifications, such as a registered appraiser. The
valuation, which conforms to the standards of the country where the Investment property is located, is based on market evidence of transaction prices for
similar properties.
The fair value measurement for all of the investment properties has been categorized as a Level 3 fair value – unobservable inputs, in accordance with
International Financial Reporting Standard No.13 Fair Value Measurement (“IFRS 13”).
Rental income from Investment property for the years ended March 31, 2023 and 2022 are ¥38,090 million ($286 million) and ¥38,026 million,
respectively, and are reported in “Revenues” in the Consolidated statement of comprehensive income. Expenses directly attributable to generating rental

90

income (including repairs and maintenance) for the years ended March 31, 2023 and 2022 are ¥28,131 million ($212 million) and ¥28,583 million,
respectively, and are included mainly in “Cost.”
15. Biological Assets
Biological assets as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

Balance, beginning of year

¥ 40,241¥ 26,183$ 302

Increases due to purchases

374

9,951

3

Decreases due to harvest(1,193)(1,096)(9)

The gain or loss arising from changes in fair value less costs to sell

(1,766)

1,666

(13)

(765)

3,537

(6)

¥ 36,891¥ 40,241$ 277

Exchange differences on translating foreign operations
Balance, end of year

2023

The Company owns forest assets (mainly pines) in New Zealand. The assets are measured at fair value less estimated selling cost. The fair value
measurement for all of the Biological assets has been categorized as a Level 3 fair value – unobservable inputs, in accordance with IFRS 13 Fair Value
Measurement.
16. Deferred Taxes
The tax effects of temporary differences that give rise to significant components of Deferred tax assets and liabilities as of March 31, 2023 and 2022 are
as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Deferred tax assets:
Net operating loss carryforwards¥ 11,105¥ 25,579$ 83

Securities and other investments

4,193

4,643

32

Inventories and long-lived assets

66,33369,929499

Allowance for doubtful receivables

5,470

5,435

41

－

－

－

71,98363,862541¥ 159,084¥ 169,448$ 1,196

Investments accounted
for using the equity method¥ (64,809)¥ (50,833)$ (487)

Securities and other investments(41,962)(51,173)(316)

Long-lived assets(86,899)(87,648)(653)

Retirement benefit plans
OthersDeferred tax assets total
Deferred tax liabilities:

Retirement benefit plans(3,569)(1,286)(27)

Others(29,546)(29,443)(222)¥ (226,785)¥ (220,383)$ (1,705)

Deferred tax liabilities total

91

Deferred tax assets and liabilities reported in the Consolidated statement of financial position as of March 31, 2023 and 2022 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2023

2022

2023

Deferred tax assets¥ 30,790¥ 26,660$ 232

Deferred tax liabilities(98,491)(77,595)(741)

Changes in Deferred tax assets and liabilities for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Net Deferred tax assets (liabilities):
Balance, beginning of year

¥ (50,935)¥ (55,279)$ (383)Financial assets measured at FVTOCI(2,250)(6,220)(17)

Remeasurements of defined benefit pension plans(4,502)(1,426)(34)

Exchange differences on translating foreign operations(5,347)

4,741

(40)

Cash-flow hedges(7,422)(4,580)(56)

Amount recognized in other comprehensive income:Hedging cost

530

737

4

Share of other comprehensive income of investments
accounted for using the equity method(1,157)(87)(9)

Amount recognized in profit or loss

(7,481)

10,453(56)

Effects of acquisitions and divestitures

10,863726

82¥ (67,701)¥ (50,935)$ (509)Balance, end of year

The Companies consider the probability that a portion of, or all of the future deductible temporary differences or operating loss carryforwards can beutilized against future taxable profits on recognition of Deferred tax assets. In assessing the recoverability of Deferred tax assets, the Companies consider
the scheduled reversal of Deferred tax liabilities, projected future taxable income and tax planning strategies. Based on the level of historical taxable
profits and projected future taxable income during the periods in which Deferred tax assets can be recognized, the Companies determined that it isprobable that the tax benefits can be utilized. The amount of the Deferred tax assets considered realizable could be reduced in the near term if estimatesof future taxable income during the carryforward period are reduced. As a result of the assessment of the recoverability of Deferred tax assets, the netchange in Deferred tax assets for the years ended March 31, 2023 and 2022 are a decrease of ¥14,296 million ($107 million) and an increase of ¥1,017
million, respectively.
Deferred tax assets were not recognized for certain tax losses and deductible temporary differences which relate principally to the certain subsidiaries.
The Companies performed an analysis of each of these subsidiaries to assess their ability to realize such Deferred tax assets and reduce the amount of
those assets to the extent that the Companies believe it is not probable that tax benefits will be utilized. No Deferred tax assets are recognized at certain
domestic subsidiaries attributable to tax loss carryforwards and deductible temporary differences when it is not probable that future taxable profit will beavailable. The amounts of unused tax loss carryforwards and deductible temporary differences for which no Deferred tax asset is recognized amounted
to ¥502,522 million ($3,778million) and ¥218,298 million ($1,641million) as of March 31, 2023 and ¥430,127 million and ¥195,450 million as of March
31, 2022, respectively. The deductible temporary differences do not expire under current tax legislation.

92

The tax losses for which Deferred tax assets are not recognized as of March 31, 2023 and 2022 expire as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

1st year¥ 138,828¥ 7,187$ 1,044

2nd year

4,996

136,91037

3rd year

35,650

4,923

268

4th year

47,641

30,380358

5th year and thereafter

275,407250,727

2,071¥ 502,522¥ 430,127$ 3,778

Total

As of March 31, 2023 and 2022 in principle, the Companies recognize a Deferred tax liability on taxable temporary differences associated withinvestments in subsidiaries because the Companies were in a position to control the timing of the reversal of the temporary differences and it was assumed
that such differences would reverse in the foreseeable future. On the other hand, the Companies did not recognize a Deferred tax liability if it is probablethat the temporary differences will not reverse in the foreseeable future.
The amount of taxable temporary differences associated with investments in subsidiaries on which a Deferred tax liability is not recognized in theaccompanying consolidated financial statements as of March 31, 2023 and 2022 totaled to ¥1,073,055 million ($8,068million) and ¥1,243,059 million,
respectively.
In accordance with the stipulation in International Accounting Standard No.12 Income Taxes that deferred tax assets and liabilities related to income taxes
arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organization for Economic Co-operation
and Development shall not be recognized, the Companies do not recognize such deferred tax assets and liabilities.
Other current assets as of March 31, 2023 and 2022 include tax receivables of ¥25,174 million ($189million) and ¥23,470 million, respectively.

9317. Bonds and Borrowings
Details of the Bonds and borrowings (non-current), and interest rates as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen

Secured:Loans from banks and insurance companies,
maturing serially through 2039,
average interest rate 5.32%
Unsecured:
Loans from banks and insurance companies,
maturing serially through 2036,
average interest rate 1.87%
Bonds payable in Japanese yen due,

2023

2022

2023

¥ 227,869¥ 235,259$ 1,7132,089,743

2,033,370

15,7122022, fixed rates 0.14% to 1.12%－

60,147－2023, fixed rates 0.14% to 0.86%

40,09740,269302

2024, fixed rates 0.77% to 0.83%

35,12835,258264

2026, fixed rate 0.14%

4,982

4,976

37

2027, fixed rate 0.33%

19,956

19,945150

2028, fixed rates 0.33% to 0.64%

39,962

29,909301

2029, fixed rates 1.24% to 1.29%

26,215

26,682

197

2030, fixed rates 0.39% to 2.26%

51,34526,376386

2031, fixed rates 0.29% to 2.19%

21,025

21,347158

2032, fixed rate 0.57%

19,579－147

2033, fixed rate 0.66%

9,793

10,04374

2038, fixed rate 0.89%

9,617

10,10572－

61,424

－

－

6,770

－

2024, fixed rate 0.33% to 2.60%

67,84262,909510

2026, fixed and floating rates 0.70% to 5.51%

79,60072,870599

Bonds payable in U.S. dollars due,2022, fixed rate 2.50%
Medium-term notes,
2022, fixed and floating rates 0.44% to 2.67%

67,976－

511

Subtotal

2,810,729

2,757,659

21,133

Less: Current maturities(343,996)(344,316)(2,586)¥ 2,466,733¥ 2,413,343$ 18,547

2028, fixed rate 5.55%

Bonds and borrowings (non-current)

94Details of the Bonds and borrowings (current) as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen

Short-term loans, principally from banks

2023

2022

¥ 248,881¥ 199,715$ 1,871

92,47964,000696¥ 341,360¥ 263,715$ 2,567

Commercial paper
Total

2023

The differences between the balances stated above and the balances presented as “Bonds and borrowings” under Current liabilities of the Consolidated
statement of financial position are the amounts of Bonds and borrowings with current maturities.
The weighted average interest rates for short-term loans for the years ended March 31, 2023 and 2022 are 2.96% and 1.77%, respectively.
The weighted average interest rates for commercial paper for the years ended March 31, 2023 and 2022 are 0.82% and (0.01) %, respectively.
The Companies have lines of credit agreements available for immediate borrowing with a syndicate of foreign banks as well as U.S. and European banks
in the amount of $1,210 million in total and with two syndicates of domestic banks in the amount of ¥285,000 million ($2,143 million) in total.
Most short-term and long-term loans from banks contain certain covenants.
The banks may, under certain conditions, require the Companies to provide collateral (or additional collateral) or guarantors. The banks may treat any
collateral as collateral for all indebtedness to the banks. Several of the loan agreements require maintenance of certain financial ratios and minimum levelsof tangible net worth. Default provisions of certain agreements grant certain rights of possession to the banks. The borrower may be required to makeearly repayments of outstanding amounts under some agreements, principally with government-owned financial institutions, if the lender concludes thatthe borrower is able to repay the outstanding amount through improved earnings or from the proceeds of an equity or debt offering, and the lender makes
such a prepayment request. Certain agreements provide that the banks may require the borrower to obtain bank approval prior to presenting proposals forthe payment of dividends and other appropriations of earnings at the general meeting of shareholders. The Companies have not been asked to make any
prepayments for the years ended March 31, 2023 and 2022 and currently do not anticipate any prepayment requests.
The Companies have been in compliance with all of the bonds and borrowing obligations covenants for the years ended March 31, 2023 and 2022.
18. Liabilities Arising from Financing Activities
Changes in liabilities arising from financing activities for the years ended March 31, 2023 and 2022 are as follows:
Millions of Yen
Short-termloans,
principallyfrom banks

Commercial
paperLong-termloans,
principallyfrom banks

Bonds

Lease liabilities

Total

Balance as of April 1, 2021

¥ 138,088¥ 50,319¥ 2,272,153¥ 451,652¥ 501,398¥ 3,413,610

Increase in lease liabilities

－

－

－

－

65,41365,41345,531

12,742(39,260)

24,054(68,365)(25,298)(22)－(4,539)(4,856)－(9,417)

－

－

－

－

1,684

1,684

(948)

－

(30,485)－(251)(31,684)

16,966939

66,934

19,632

6,932

111,403(843)－(7,318)－－(8,161)

943－

11,144(1,452)(22,964)(12,329)¥ 199,715¥ 64,000¥ 2,268,629¥ 489,030¥ 483,847¥ 3,505,221

Cash flows
Increase (decrease) of changes
in fair value
Increase through businesscombinations
Deconsolidation of subsidiaries
Exchange rate changes
Reclassification to liabilities
associated with assets classified asheld for sale
OthersBalance as of March 31, 2022

95

Balance as of April 1, 2022

¥ 199,715¥ 64,000¥ 2,268,629¥ 489,030¥ 483,847¥ 3,505,221

Increase in lease liabilities

－

－

－

－

104,519

104,519

25,321

29,053(34,721)716(71,509)(51,140)(42)－(3,626)(1,169)－(4,837)

13,655－

11,837－

9,325

34,817

Deconsolidation of subsidiaries

(842)

－

(7,318)－(10,558)(18,718)

Exchange rate changes

5,015

(574)

63,727

5,439

4,325

77,932Others

6,059－

19,084(899)(22,132)

2,112¥ 248,881¥ 92,479¥ 2,317,612¥ 493,117¥ 497,817¥ 3,649,906

Lease liabilities

Total

Cash flows
Increase (decrease) of changes
in fair value
Increase through businesscombinations

Balance as of March 31, 2023
For the year ended March 31, 2023

Millions of U.S. Dollars
Short-termloans,
principallyfrom banks

Commercial
paperLong-termloans,
principallyfrom banks$ 1,502$ 481$ 17,057$ 3,677$ 3,638$ 26,355

Increase in lease liabilities

－

－

－

－

786

786

Cash flows

190

219

(260)

4

(538)

(385)

(0)

－

(27)

(9)

－

(36)

103

－

89

－

70

262

Deconsolidation of subsidiaries

(7)

－

(55)

－

(79)

(141)

Exchange rate changes

37

(4)

479

41

33

586

Others

46

－

143

(6)

(167)

16

$ 1,871$ 696$ 17,426$ 3,707$ 3,743$ 27,443

Balance as of March 31, 2022

Increase (decrease) of changes
in fair value
Increase through businesscombinations

Balance as of March 31, 2023

Bonds

For the year ended March 31, 2023, in the Consolidated statement of cash flows, other than the items listed above, Net increase in short-term debt includes
deposits from associates.

9619. Trade and Other Payables
The components of Trade and other payables as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Notes payable¥ 49,165¥ 34,312$ 370

Accounts payable

1,500,679

1,490,479

11,283

Other payables

156,707138,340

1,178¥ 1,706,551¥ 1,663,131$ 12,831

Trade and other payables

The amount of Accounts payable above includes financial liabilities measured at FVTPL of ¥220,209 million ($1,656 million) and ¥289,731 million asof March 31, 2023 and 2022, respectively.
Trade and other payables in the Consolidated statement of financial position as of March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen

Current liabilities

2023

2022

¥ 1,648,976¥ 1,612,480$ 12,398

57,57550,651433¥ 1,706,551¥ 1,663,131$ 12,831

Non-current liabilities
Total

2023

20. Provisions
The changes in Provisions for the year ended March 31, 2023 are as follows:
Millions of Yen
Asset retirement
obligations

Employee benefits

Other provisions¥ 50,450¥ 1,774¥ 10,174¥ 62,398

Provisions made

4,120

210

9,904

14,234

Provisions used

(658)

－

(2,304)(2,962)

Balance, beginning of year

Total

305

－

－

305

Others(22,947)

27

1,093

(21,827)

Balance, end of year

¥ 31,270¥ 2,011¥ 18,867¥ 52,148

Accretion expense

Millions of U.S. Dollars
Asset retirement
obligations

Employee benefits

Other provisions

$ 379

$ 13

$ 77

$ 469

Provisions made

31

2

74

107

Provisions used

(5)

－

(17)

(22)

Accretion expense

2

－

－

2

Others

(172)

0

8

(164)

Balance, end of year

$ 235

$ 15

$ 142

$ 392

Balance, beginning of year

Total

Asset retirement obligations are principally related to the dismantlement costs of coal exploration installations and obligation to restore leased offices totheir original condition.

97

The provision for employee benefits mainly represents long service leave entitlements accrued.
Other Provisions include provision for product warranties and other items.
Others include mainly the effect of deconsolidation.
21. Employee Benefits(1)

Post-employment benefit

The Company has defined benefit pension plan (DBP) and lump-sum retirement benefit plans covering substantially all employees other than directors
and executive officers. The plans provide benefits based on years of service, severance payment, and other factors. The Company has a responsibility to
manage pension assets faithfully and has an obligation to make employee benefit contributions comply with laws and regulations. As per Defined-Benefit
Corporate Pension Law, the Company reviews and adjusts the pension contribution amount once every three years to ensure its accuracy and validity.
The pension plan is a contract type. The Company establishes the steering committee organized by related officers and employees as an advisory body to
discuss important issues concerning the pension plan. The Committee holds meetings in a timely manner for the purpose of reporting various reports on
asset management performance, the status of the system, accounting procedures, etc., as well as to review system revisions, investment policy changes,
etc.
Most of the subsidiaries have unfunded retirement benefit plans and/or funded pension plans. Employees, other than directors, are entitled to, under mostcircumstances, upon mandatory retirement at normal retirement age or earlier termination of employment, a lump-sum retirement benefit based oncompensation at the time of retirement, years of service and other factors. Certain subsidiaries have defined contribution retirement benefit plans.
Other than the above, the Company and certain subsidiaries have an elective defined contribution pension plans for employees who elect to contribute a
portion of their bonuses received for their services rendered during the year.
Changes in the present value of the defined benefit obligations and changes in the fair value of the plan assets for the years ended March 31, 2023 and2022 are as follows:[Changes in the defined benefit obligations]
Millions of
U.S. Dollars

Millions of Yen
2023

2022

¥ (377,236)¥ (386,122)$ (2,836)

Service cost

(12,248)(12,957)(92)

Interest on obligation(3,662)(3, 148)(28)

Past service cost

(56)

(6,767)(0)Remeasurement

33,99910,272

256

Exchange differences on translating foreign operations(3,282)(2,733)(25)

Benefits paid

15,43914,435

116

－

－

－

(6,504)

9,784

(49)

¥ (353,550)¥ (377,236)$ (2,658)

Balance, beginning of year

Curtailments or Settlements
Acquisitions, disposals and reclassification to liabilities associatedwith assets held for sale (net)
Balance, end of year

98

2023

[Changes in the plan assets]
Millions of
U.S. Dollars

Millions of Yen
2023

2022

¥ 381,505¥ 375,894$ 2,869

3,667

3,446

28

(20,612)

1,731

(155)

Exchange differences on translating foreign operations

1,109

2,300

8

Contributions by the employer

9,720

11,54573

Benefits paid

(14,074)(12, 611)(106)

Settlements

－

－

－

6,685

(800)

50

¥ 368,000¥ 381,505$ 2,767

Balance, beginning of year
Interest on plan assets
Remeasurement

Acquisitions, disposals and reclassification to liabilities associatedwith assets held for sale (net)
Balance, end of year2023

The measurement dates used to determine the benefit obligations are mainly March 31 of each year.
The Companies’ funding policy is based on a number of factors including the tax deductibility of contributions, funded status, actuarial calculations andother considerations. Contributions are intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in
the future. In addition, the Company may contribute cash to an employee retirement benefit trust for any funding deficits in benefit obligations at the
fiscal year end.
The Companies’ investment policy is designed to increase the value of plan assets within acceptable risk levels to ensure payments of pension benefits toeligible participants, including future participants. Taking into account the return and risk on plan assets thereon, the Companies formulate a strategic
asset mix which aims at an optimal portfolio on a long-term basis and supervise asset management by selecting investment management companies andmonitoring asset allocations. The strategic asset mix is subject to review in response to changes in expected market conditions or funded status. The
strategic asset mix is not based on limitations but guidelines, and therefore, the actual allocation may temporarily exceed or fall below the guidelines. The
Companies’ target allocation is 22% equity securities, 49% debt securities, and 29% others.
The Companies hold a meeting regularly with the asset management institutions and discuss important issues regarding pension assets investment, andrequest the institutions to inform violations of investment policy and important business and operating conditions of the institutions.
The major categories of plan assets as of March 31, 2023 are as follows:
Categories of plan assets

Millions of Yen
Prices are quoted in a Prices are not quoted
marketin a market

Total¥ 32,463¥ －¥ 32,463

Domestic

31,937－31,937

Foreign

65,122－

65,122

Domestic

19,943－

19,943Foreign

Cash and cash equivalents
Equity securities:

Debt securities:
137,812－

137,812Hedge funds－

41,55541,555

Life insurance company general accounts－

19,13919,139

Private equity

－

901

901

Others－19,12819,128¥ 287,277¥ 80,723¥ 368,000

Total

99

The major categories of plan assets as of March 31, 2022 were as follows:
Categories of plan assets

Millions of Yen
Prices are quoted in a Prices are not quoted
marketin a market

Total¥ 5,346¥ －¥ 5,346

Domestic

32,913－32,913Foreign

75,644－75,644

Domestic

16,254－

16,254Foreign

170,975－

170,975

Hedge funds－

40,86440,864

Life insurance company general accounts－

18,161

18,161

Private equity

－

556

556

Others－

20,792

20,792¥ 301,132¥ 80,373¥ 381,505

Cash and cash equivalents
Equity securities:

Debt securities:

Total
The major categories of plan assets as of March 31, 2023 are as follows:
Categories of plan assets

Millions of U.S. Dollars
Prices are quoted in a Prices are not quoted
marketin a market

Total

$ 244

$ －

$ 244

Domestic

240

－

240

Foreign

490

－

490

Domestic

150

－

150

Foreign

1,036

－

1,036

Hedge funds

－

312

312

Life insurance company general accounts

－

144

144

Private equity

－

7

7

Others

－

144

144

$ 2,160$ 607$ 2,767

Cash and cash equivalents
Equity securities:

Debt securities:

Total

Principal assumptions used in the actuarial valuations for the years ended March 31, 2023 and 2022 are as follows:
2023
(%)

2022
(%)

Discount rate as of March 31

1.4

1.0

The expected rate of salary increase

2.5

2.5

The changes in the key assumptions may affect the valuations of defined benefit obligations as of March 31, 2023 and 2022. A 0.5% increase in discountrate would lead to a decrease of ¥20,225 million ($152 million) and ¥23,166 million, respectively. A 0.5% decrease in discount rate would lead to anincrease of ¥24,194 million ($182 million) and ¥27,570 million, respectively. This analysis shows the sensitivity to the key assumptions without taking
into account projected all cash flow information.

100

The employer’s contributions expected to be paid for the year ending March 31, 2023 are ¥10,016 million ($75 million).
The weighted-average duration of the defined benefit obligation for the year ended March 31, 2023 is 18 years.
The Companies’ pension and retirement benefits expense at the defined contribution plans for the years ended March 31, 2023 and 2022 are ¥6,822
million ($51 million) and ¥6,172 million, respectively.
In addition to lump-sum retirement benefit plans or retirement benefit pension plans, certain domestic subsidiaries participate in multi-employer defined
benefit plans, and recognize the payments made during the fiscal year as an expense and contribution payable as a liability. The amount of contributions
expected to be paid by the subsidiaries for the year ending March 31, 2023 are ¥872 million ($7 million).
(2)

Employee Benefits Expense

The employee benefits expense included in “Cost” for the years ended March 31, 2023 and 2022 are ¥183,117 million ($1,377 million) and ¥173,783
million, respectively.
22. Common Stock
The numbers of shares authorized and issued as of March 31, 2023 and 2022 are as follows:
2023(Number of shares)

2022(Number of shares)

Authorized:
Ordinary shares

2,000,000,000

2,000,000,000

1,251,404,367

1,251,253,867

167,500

150,500

1,251,571,867

1,251,404,367

Issued:Balance, beginning of year
Adjustment for the year
Balance, end of year

The number of shares of treasury stock as of March 31, 2023 and 2022 included in the number of shares issued shown above were 17,478,130 shares and1,399,754 shares, respectively.
The number of issued shares as of March 31, 2023 has increased by 167,500 due to the issuance of ordinary shares as performance-linked stockcompensation.
23. Reserves(1)

Additional Paid-in Capital

Under the Companies Act of Japan (“the Companies Act”), at least 50% of the proceeds of certain issues of ordinary shares shall be credited to Common
stock. The remainder of the proceeds shall be credited to Additional paid-in capital. The Companies Act permits, upon approval at the general meeting ofshareholders, the transfer of amounts from Additional paid-in capital to Common stock.
(2)

Retained Earnings

The Companies Act provides that a 10% dividend of Retained earnings shall be appropriated as Additional paid-in capital or as a legal reserve until theaggregate amount of the Additional paid-in capital and the legal reserve equals 25% of Common stock. The legal reserve may be used to eliminate or
reduce a deficit or be transferred to Retained earnings upon approval at the general meeting of shareholders.
Retained earnings available for dividends under the Companies Act is based on the amount recorded in the Company’s general accounting records
maintained in accordance with accounting principles generally accepted in Japan.

101

The Companies Act limits the amount of Retained earnings available for dividends. Retained earnings of ¥901,923 million ($6,781 million) and ¥641,570
million, shown by the Company’s accounting records for the years ended March 31, 2023 and 2022, respectively, were not restricted by the limitations
under the Companies Act.
24. Other Components of Equity and Other Comprehensive Income (Loss)
The changes in Other components of equity for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

¥ 156,806¥ 170,264$ 1,178

6,067

10,405

46(16,761)(23,863)(126)¥ 146,112¥ 156,806$ 1,098

Balance, beginning of year

¥ －

¥ －

$ －

Adjustment for the year

8,921

10,67867

Transfer to retained earnings(8,921)(10,678)(67)

Balance, end of year

¥ －

¥ －

$ －

Balance, beginning of year

¥ 307,738¥ 64,834$ 2,314

Adjustment for the year

120,230

242,904

904

Balance, end of year

¥ 427,968¥ 307,738$ 3,218

Balance, beginning of year

¥ (9,420)¥ (49,278)$ (71)

Adjustment for the year

75,46239,858568

Balance, end of year

¥ 66,042¥ (9,420)$ 497

Balance, beginning of year

¥ (988)¥ 1,221$ (7)Adjustment for the year

(1,596)(2,209)(12)

Balance, end of year

¥ (2,584)¥ (988)$ (19)

Balance, beginning of year

¥ 454,136¥ 187,041$ 3,414

Adjustment for the year

209,084

301,636

1,573

Transfer to retained earnings(25,682)(34,541)(193)¥ 637,538¥ 454,136$ 4,794

Financial assets measured at FVTOCIBalance, beginning of year
Adjustment for the year
Transfer to retained earnings
Balance, end of year
Remeasurements of defined benefit pension plans

Exchange differences on translating foreign operations

Cash-flow hedges

Hedging cost

Other components of equity

Balance, end of year102

The following table provides each component of Other comprehensive income included in Non-controlling interests for the years ended March 31, 2023
and 2022.
Millions of
U.S. Dollars

Millions of Yen
2023
Financial assets measured at FVTOCI

2022

2023

¥ (510)¥ 1,806

$ (4)

(89)

230

(1)

Exchange differences on translating foreign operations

3,329

3,167

25

Cash-flow hedges

(452)

(141)

(3)

¥ 2,278¥ 5,062$ 17

Remeasurements of defined benefit pension plans

Other comprehensive income

103

The following table provides an analysis of each component of Other comprehensive income and related tax effects (including those on Noncontrolling interests) for the years ended March 31, 2023 and 2022
2023
Millions of Yen
Pretax amountTax (expense) or
benefit

Net-of-tax amount¥ 6,985¥ (2,250)¥ 4,735

6,985(2,250)

4,735

Gains (losses) recorded in other comprehensive
income during the year

13,387(4,502)

8,885

Financial assets measured at FVTOCI:
Gains (losses) recorded in other comprehensive
income during the year
Adjustment for the year
Remeasurements of defined benefit pension plans:

Adjustment for the year

13,387(4,502)

8,885

Exchange differences on translating
foreign operations:Aggregated adjustment during the year
resulting from translation of foreign currency
financial statements
Reclassification to profit or loss for the year

162,867(5,343)

157,524(33,961)(4)(33,965)

Adjustment for the year

128,906(5,347)

123,559

Unrealized gains (losses) arising during the year

57,419(13,313)

44,106

Reclassification to profit or loss for the year

(23,822)

5,891(17,931)

Adjustment for the year

33,597(7,422)

26,175

(860)

214

(646)

Reclassification to profit or loss for the year

(1,266)

316

(950)

Adjustment for the year

(2,126)530(1,596)

Unrealized gains (losses) arising during the year

46,016(1,157)44,859Reclassification to profit or loss for the year

4,745

－

4,745

Adjustment for the year

50,761(1,157)49,604¥ 231,510¥ (20,148)¥ 211,362

Cash-flow hedges:

Hedging cost
Unrealized gains (losses) arising during the year

Share of other comprehensive income ofinvestments accounted for using the equity method:

Total other comprehensive income

104

2022
Millions of Yen
Pretax amountTax (expense) or
benefit

Net-of-tax amount¥ 20,408¥ (6,220)¥ 14,188

20,408(6,220)14,188

Gains (losses) recorded in other comprehensive
income during the year

12,003(1,426)

10,577

Adjustment for the year

12,003(1,426)

10,577

Exchange differences on translating
foreign operations:Aggregated adjustment during the year
resulting from translation of foreign currency
financial statements
Reclassification to profit or loss for the year

262,195

4,643

266,838(20,865)

98(20,767)

Adjustment for the year

241,330

4,741

246,071

Unrealized gains (losses) arising during the year

54,286(12,082)

42,204

Reclassification to profit or loss for the year

(30,352)

7,502(22,850)

Adjustment for the year

23,934(4,580)19,354

Unrealized gains (losses) arising during the year

(1,666)417(1,249)Reclassification to profit or loss for the year

(1,280)

320

(960)

Adjustment for the year

(2,946)737(2,209)Unrealized gains (losses) arising during the year

12,783(87)

12,696

Reclassification to profit or loss for the year

6,021

－

6,021

Adjustment for the year

18,804(87)

18,717¥ 313,534¥ (6,836)¥ 306,698

Financial assets measured at FVTOCI:
Gains (losses) recorded in other comprehensive
income during the year
Adjustment for the year
Remeasurements of defined benefit pension plans:

Cash-flow hedges:

Hedging cost

Share of other comprehensive income ofinvestments accounted for using the equity method:

Total other comprehensive income

105

2023
Millions of U.S. Dollars
Pretax amountTax (expense) or
benefit

Net-of-tax amount$ 53$ (17)

$ 36

53

(17)

36

Gains (losses) recorded in other comprehensive
income during the year

101

(34)

67

Adjustment for the year

101

(34)

67

1,224

(40)

1,184

(255)

(0)

(255)

969

(40)

929

Unrealized gains (losses) arising during the year

432

(100)

332

Reclassification to profit or loss for the year

(179)

44

(135)

Adjustment for the year

253

(56)

197

Unrealized gains (losses) arising during the year

(7)

2

(5)

Reclassification to profit or loss for the year

(9)

2

(7)

Adjustment for the year

(16)

4

(12)

Unrealized gains (losses) arising during the year

346

(9)

337

Reclassification to profit or loss for the year

36

－

36

Adjustment for the year

382

(9)

373

$ 1,742$ (152)$ 1,590

Financial assets measured at FVTOCI:
Gains (losses) recorded in other comprehensive
income during the year
Adjustment for the year
Remeasurements of defined benefit pension plans:

Exchange differences on translating
foreign operations:Aggregated adjustment during the year
resulting from translation of foreign currency
financial statements
Reclassification to profit or loss for the year
Adjustment for the year
Cash-flow hedges:

Hedging cost

Share of other comprehensive income ofinvestments accounted for using the equity method:

Total other comprehensive income

10625. Dividends(1)

Dividends paid during the years ended March 31, 2023 and 2022 are as follows:
Amount ofDividends per
dividends
share
Resolution
Class of shares Millions of Yen
Yen(Millions of(U.S. Dollars)
U.S. Dollars)

Record date

Effective dateOrdinary general meeting ofshareholders held on June 18, 2021

Ordinaryshares¥ 43,740($ 361)¥ 35($ 0.29)

March 31,2021

June 21,
2021

Board of Directors’ meeting held on
November 4, 2021

Ordinaryshares¥ 56,245($ 465)¥ 45($ 0.37)

September 30,
2021

December 1,
2021

Ordinary general meeting ofshareholders held on June 24, 2022

Ordinaryshares¥ 81,250($ 611)¥ 65($ 0.49)

March 31,2022

June 27,
2022

Board of Directors’ meeting held on
November 4, 2022

Ordinaryshares¥ 71,889($ 541)¥ 57.5($ 0.43)

September 30,
2022

December 1,
2022

(2)

Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year are as follows:
Amount ofDividends per
dividends
share
Source ofRecord date
Effective date
Resolution
Class of shares Millions of Yen
dividends
Yen(Millions of(U.S. Dollars)
U.S. Dollars)
Ordinary general
Ordinary¥ 70,960
Retained¥ 57.5
March 31,
June 26,
meeting of shareholders
shares($ 534)
earnings($ 0.43)
2023
2023
held on June 23, 2023

26. Share-based Payments
Information relating to the Company’s share-based payments is as follows:(1)

Stock option plan

The Company has stock option plans for directors, executive officers, and corporate officers under the Company’s qualification system. Under the plans,each stock option entitles the recipient to acquire 100 ordinary shares at an exercise price equal to the greater of (i) 105% of the average closing market
price of the Company’s ordinary share on the Tokyo Stock Exchange for the calendar month before the grant date (excluding days when there are notransactions), or (ii) the closing market price of the Company’s ordinary share on the Tokyo Stock Exchange on the grant date (or the closing market priceon the day immediately preceding that date, if there are no transactions on that date).
The options vest 100% at the grant date. The options granted are exercisable beginning April 1 of the fiscal year after the fiscal year in which they are
granted. They are exercisable for four years and three months from that date.
It was decided, starting from FY2018, not to issue new stock options (new share acquisition rights in the form of stock options).
There is no balance of stock options outstanding and exercisable as of March 31, 2023.

107

The Company’s stock option activities for the years ended March 31, 2023 and 2022 are as follows:
2023
Numberofshares2022

Weighted
average
exercise price
Yen

Outstanding, beginning of year

Numberofshares

Weighted
average
exercise price

U.S. Dollars

Yen

42,000¥ 1,516$ 11

108,000¥ 1,443

Granted

－

－

－

－

－

Exercised

23,0001,516

1140,0001,398

Cancelled or expired

19,0001,516

1126,0001,350

Outstanding, end of year

－

－

0

42,000

1,516

Options exercisable, end of year

－

¥ －

$0

42,000¥ 1,516(2)

Stock-linked compensation plan

The Company has stock-linked compensation plans for directors and executive officers. Under the plans, each stock option granted after August 1, 2006
entitles the recipient to acquire 100 ordinary shares at an exercise price equal to ¥1 ($0.01) per share. Each stock option granted prior to July 31, 2006
entitles the recipient to acquire 1,000 ordinary shares at an exercise price equal to ¥1 per share.
The options vest 100% at the grant date. The options granted are exercisable beginning the day after leaving their positions as both directors and executive
officers of the Company. The options are exercisable for ten years from that date.
It was decided, starting from FY2018, not to issue new stock options (new share acquisition rights in the form of stock options for a stock compensationplan).
The Company’s stock-linked compensation plans for the years ended March 31, 2023 and 2022 are as follows:
2023

2022

Number of shares

Number of shares

Outstanding, beginning of year

621,000

728,200

Granted－－Exercised132,900

107,200

Cancelled or expired－－

Outstanding, end of year

488,100

621,000

Options exercisable, end of year

287,200

403,100(3)

Performance-linked stock compensation plan

From the year ended March 31, 2019, the Company has introduced the “performance-linked stock compensation (performance share units),” under which
the number of shares granted varies according to the degree to which previously determined performance conditions (share price conditions) are achieved.
This also aims, to promote initiatives geared to improve corporate value over the medium- to long-term and achieve greater value sharing withshareholders through the strengthening of correlation with shareholder value to a greater degree than before.
Under the plans, eligible directors, excluding outside directors, and executive officers, on the condition that they continuously serve the position as theCompany’s directors or executive officers for a certain period, will receive the Company’s ordinary shares after the three-year evaluation periods involumes computed pursuant to the stock price condition, or Company’s stock growth rate, over the evaluation periods to be adjusted between 0% and150%. The computation method was determined by the Board of Directors after expressing to the audit & supervisory board members that the method isappropriate.

108

The Company’s performance-linked stock issued for the years ended March 31, 2023 and 2022 are as follows.
2023
Date of issue2022

August 18,2022

August 12,2021

Number of shares issued

167,500

150,500

Issue price (JPY per share)(U.S. Dollars)
The Company's stock growth rate during
the evaluation period (%)¥ 1,831$ 13.8¥ 1,496$ 12.4

107.7

84.5

(4)

Restricted performance share unit-based compensation Plan

From the year ended March 31, 2022, the Company has introduced the “Restricted Performance Share Unit-Base Compensation Plan,” under which thenumber of shares granted with a transfer restriction period varies according to the degree to which predetermined performance conditions (share priceconditions) are achieved. The Company integrated the Transfer-restricted stock compensation plan and Performance-linked stock compensation plan intoa single plan in order to further promote the objectives of the current stock-based remuneration, which are to enhance the link with shareholder value,
promote efforts for medium/long-term improvement of corporate value, and further advance the sharing of value with shareholders.
Under the plans, eligible directors, excluding outside directors, and executive officers, on the condition that they continuously serve the positions as theCompany’s directors or executive officers for a certain period, will receive the Company’s ordinary shares after the three-year evaluation periods involumes computed pursuant to the stock price condition, or Company’s stock growth rate, over the evaluation periods to be adjusted between 0% and150%. The computation method was determined by the Board of Directors after the audit & supervisory board members expressed that the method isappropriate. Since the initial evaluation period under the new plan does not end until the last day of June 2024, no results are yet available for theCompany's stock growth rate under the new plan.
The weighted average fair value and the basis of computation for the Company’s restricted performance share unit-base stock granted for the years ended
March 31, 2023 and 2022 are as follows. The valuation utilized Monte-Carlo Simulation method.
2023
Average share price of the Company during the firstmonth of performance evaluation period (Yen)(U.S. Dollars)
Vesting period (years)2022¥ 1,873.8$ 14.1¥ 1,524.9$ 12.6

3.00

3.00

4.80

4.60

Expected dividend yield (%)
Risk-free rate (%)
Weighted average fair value per share (Yen)(U.S. Dollars)
(5)

0.00

0.00

¥ 1,770.7$ 13.3¥ 1,502.1$ 12.4

Share-based compensation expense

Compensation expenses incurred on the transfer-restricted stock compensation plans, performance-linked stock compensation plans and restrictedperformance share unit-based compensation plan for the year ended March 31, 2023 and 2022 are ¥1,627 million ($12 million) and ¥823 million,
respectively.
27. Financial Instruments and Related Disclosures(1)

Capital Management

The fundamental principles of the Companies’ capital management are to maintain an appropriate level of capital and debt and equity balance to manage
business risk for the purpose of maintaining management soundness and efficiency and to promote continuous growth.
The key metrics used for capital management are as follows:-balance between risk-adjusted assets *1 and equity; and-times of interest-bearing liabilities (net) *2 to equity (Debt-equity ratio (net))

109

*1

Risk-adjusted assets refer to the maximum loss exposure and are calculated by assigning assets including Trade and other receivables,
Inventories, Fixed Assets and Investments multiplied by risk weights which the Companies have determined individually based on the potential
risk of loss. The maximum loss exposure is measured statistically under the variability of the market values of the assets for each related
business and is calculated based on a number of subjective judgments, estimates and assumptions concerning the all-around economic
circumstances and tendencies of the industry.

*2

Interest-bearing liabilities (net) is total debt less the amount of cash and cash equivalents and time deposits.

Management monitors the strategies for profits and investments and the metrics at the time of planning and reviewing the medium-term management
plan.
As “Equity attributable to owners of the parent” is directly affected by the market conditions of foreign exchange rates and stock prices, the Companies
hedge against the exchange rate risks of major investments denominated in foreign currencies and review stock holdings in a timely manner, in order tominimize the influence of changes in foreign exchange rates and stock prices upon “Equity attributable to owners of the parent.”
The Companies are not subject to any externally imposed capital requirements (except for general requirements, such as those in the Companies Act).
(2)

Financial Risk Management Policy

The Companies operate internationally, exposing them to the risk of changes in foreign exchange rates, interest rates and commodity prices. Derivative
financial instruments are comprised principally of foreign exchange contracts, foreign currency swaps, interest rate swaps and commodity futurescontracts utilized by the Company and certain of its subsidiaries to reduce these risks. The Companies assess foreign currency exchange rate risk, interest
rate risk and commodity price risk by continuously monitoring changes in these exposures and by evaluating hedging opportunities. The Companies enter
into commodity derivatives transactions for trading purposes. The Companies are also exposed to credit risk from these derivative contracts, but it is notexpected that any counterparty will fail to meet its obligations, because most of the counterparties are internationally recognized financial institutions andthe contracts are diversified across a number of major financial institutions. The Companies’ basic policy for fund raising activities is to secure stable,
medium- to long-term funds and liquidity for our operations.
1.

Foreign currency exchange rate risk management
The Companies operate internationally and are exposed to foreign currency risks related to purchasing, selling, financing and investing incurrencies other than the local currencies in which the Companies operate. The Companies’ strategy to manage foreign currency risks is mainly
to preserve the economic value of cash flows in non-functional currencies by using foreign exchange forward contracts, foreign currency swaps,
after considering the net effect of offsetting foreign currency exposures on recognized assets, liabilities and unrecognized firm commitments.

Foreign currency sensitivity analysis
The following table represents the Companies’ sensitivity analysis for foreign currency risk exposures on U.S. Dollars.
The analysis shows the hypothetical impact on Profit (loss) before tax in the Consolidated statement of comprehensive income that would
result from a 1% appreciation of the Yen against U.S. Dollars for the risk exposures arising from foreign currency trade receivables andpayables, future contracts for sale and purchase transactions, derivatives and others at the end of the year.
The analysis is based on the assumption that other factors such as the outstanding balance and interest rates are constant.
Millions ofMillions of Yen
U.S. Dollars
2023
Profit (loss) before tax

2.

2022
¥ (158)Interest rate risk management

110

2023
¥ 608

$ (1)

The Companies are exposed to market risks arising from changes in interest rates in their business activities. In particular, interest rate
fluctuations affect borrowing costs because a portion of the Companies’ borrowings are floating rate borrowings and short-term borrowings arerefinanced from time to time.
However, the impact on borrowing costs is partially offset by returns on certain assets which are also impacted by interest rate fluctuations. The
Companies monitor the interest rate risk arising from the assets and liabilities and the Companies’ risk management structure is prepared toutilize derivatives contracts such as the interest rate swaps to manage the fluctuation in profits or losses due to drastic fluctuations in interest
rates.
In addition, a fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank
offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’).
London Interbank Offered Rate (LIBOR) publication has been ceased on December 31, 2021, excluding US dollar LIBOR. The Companies
have already finished amending contracts of financial assets and financial liabilities referencing LIBOR, except for USD LIBOR.
In addition, US dollar LIBOR is expected to be discontinued on June 30, 2023. The Companies already finished identifying contracts of financial
assets and financial liabilities referencing US dollar LIBOR and planned to complete the amendments of contracts by June 30, 2023. The
Companies have also been proceeding the transition to alternative interest rate benchmarks for new contracts sequentially.
If the amendments of contracts are not concluded, there are uncertainties with regard to alternative interest rate benchmarks after the
discontinuation of US dollar LIBOR. In case interest rate swaps are used to hedge the fluctuation of borrowing rates, and the transition ofborrowings and its hedging instruments to alternative interest rate benchmarks is at different times and terms, there are risks in borrowing costs
and hedge accounting. In order to avoid these situations, the Companies communicate closely with all counterparties.
The Companies utilize derivatives contracts such as interest rate swaps for risk management purposes which are designated in cash flow hedging
relationships and fair value hedging relationships. The Companies’ exposure to LIBOR designated to hedging relationships are mainly based on
currency and interest rate swaps, which hedges the interest rate fluctuations related to LIBOR with the borrowings denominated US dollars heldby the Companies.
Hedging relationships which maturity date are after discontinuation of LIBOR will be affected by uncertainty of IBOR reform.
The Companies have hedging transactions affected by IBOR reform, and therefore applied “Interest Rate Benchmark Reform – Phase1”(Amendments to IFRS 9, IAS 39 and IFRS 7) issued in September 2019, and “Interest Rate Benchmark Reform – Phase2” (Amendments to
IFRS9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) issued in August 2020.
Until the uncertainty caused by IBOR reform ends, the Companies will continue to apply the Phase1. Furthermore, the Companies consider thatthe uncertainty will be solved when interest rates are replaced by alternative interest rates or cash flows and spread adjustment of alternativeinterest rate are fixed.
The hedging transactions which apply the exception of IBOR reform are mainly referencing US dollar LIBOR. The notional amounts of hedging
instruments for the year ended March 31, 2022 and March 31, 2023 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Interest rate contracts¥ 311,674¥ 425,244$ 2,343

Foreign exchange contracts¥ 182,496¥ 186,590$ 1,372

The Companies hold non-derivative financial assets (loan receivables) and non-derivative liabilities (loan payables and bonds) which arereferencing mainly US dollar LIBOR as of March 31, 2023 and 2022. The book value of these non-derivative assets and non-derivative
liabilities which have not yet transitioned to alternative interest rates are as follows:111Millions of
U.S. Dollars

Millions of Yen
2023
Non-derivative financial assets
Non-derivative financial liabilities

2022

2023

¥ 14,795¥ 13,879$ 111¥ 667,180¥ 716,360$ 5,016

Interest rate sensitivity analysis
The following table represents the hypothetical impact on the Companies’ Profit before tax that is attributable to financial instruments which areexposed to the risk of fluctuations in interest rates in the case where the interest rate increases by 1%. The analysis is calculated by multiplying
the net amounts of floating rate interest bearing financial assets and liabilities as of March 31, 2023 and 2022 by 1%, without considering futurechanges in the balance, currency exchange fluctuations and dispersing effects for floating rate borrowings derived from the difference in timingof refinancing and resetting of the interest rate, and is based on the assumption that all other variable factors are held constant.
The sensitivity analysis is performed for instruments that are exposed to fluctuations in market interest rates including: floating interest rate
bearing debts and loans; fixed interest rate bearing debts and loans which are converted to floating rates with interest rate swap contracts and arein substance floating interest rate bearing debts and loans; cash and cash equivalents; time deposits; and receivables and payables which havenot been settled at the end of the period.
Millions of
U.S. Dollars

Millions of Yen
2023
Profit before tax

3.

¥ (8,312)

2022

2023

¥ (5,574)$ (62)

Credit risk management
The Companies are exposed to credit risk as a result of providing credit to our customers in the form of accounts receivable, advances, loans,guarantees and other instruments. The companies use its own internal rating system, Sumisho Credit Rating ("SCR"), to manage customers' credit
risk. It is a nine-level rating based on the creditworthiness of the customers, and we have established the authority to determine credit limits inaccordance with it. In addition, the Companies periodically review the customers’ credit limits and appropriately manage the credit exposure underthose limits. At the same time, the Companies continuously perform credit evaluations on the financial conditions of customers, and based on such
evaluations, obtain collateral to secure the receivables if necessary.
The Companies’ receivables are from a large number of customers, spreading across diverse industries and geographical areas, therefore theCompanies do not have significant concentrated credit risk exposure to any single counterparty or any group of counterparties. The credit risk on
deposits and derivatives is limited because the counterparties are internationally recognized financial institutions.
The total amounts of guarantees, and financing commitments, and the carrying amounts of financial assets net of impairment losses recorded in theConsolidated statement of financial position, represent the Companies’ maximum exposure to credit risk without taking account of any collateralobtained.

112

Loss allowance
Movements in loss allowance for Trade and other receivables, Contract assets, and Loans for the year ended March 31, 2023 and 2022 are as
follows:
2023

Balance,
beginning ofyear
Initial recognition
and recoveries
Write-offExchangedifferences ontranslating
foreign
operations
Other
Balance,end of year

(Millions of Yen)

Trade and other receivables andContract assets
Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

Sub total¥ 15,806¥ 31,538

294

Loans

12-month
expected
credit loss

Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

Sub total¥ 47,344

¥ 295

¥ 180

¥ 2,500¥ 2,975¥ 50,319

9,969

10,263

(147)

(27)

124

(50)

10,213(2,027)(4,044)(6,071)

(30)

(19)

(258)

(307)

(6,378)

605

550

1,155

14

－

58

72

1,227

57

(452)

(395)

－

－

－

－

(395)

¥ 14,735¥ 37,561¥ 52,296

¥ 132

¥ 134

¥ 2,424¥ 2,690¥ 54,986

2022(Millions of Yen)
Trade and other receivables andContract assets

Balance,
beginning ofyear
Initial recognition
and recoveries
Write-offExchangedifferences ontranslating
foreign
operations
Other
Balance,end of year

Total

Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

Sub total¥ 12,887¥ 25,936

2,969

Loans

12-month
expected
credit loss

Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

Sub total¥ 38,823

¥ 236

¥ 351

¥ 2,608¥ 3,195¥ 42,018

5,363

8,332

85

(110)

275

250

8,582

(1,013)(2,038)(3,051)

(38)

(57)

(424)

(519)

(3,570)

1,015

2,400

3,415

12

(4)

41

49

3,464

(52)

(123)

(175)

－

－

－

－

(175)

¥ 15,806¥ 31,538¥ 47,344

¥ 295

¥ 180

¥ 2,500¥ 2,975¥ 50,319

113

Total

2023

(Millions of U.S. Dollars)
Trade and other receivables andContract assets

Balance,
beginning ofyear
Initial recognition
and recoveries
Write-offExchangedifferences ontranslating
foreign
operations
Other
Balance,end of year

Loans

Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

12-month
expected
credit loss

Lifetime
expected
creditloss, notcreditimpaired

Lifetime
expected
creditloss,
creditimpaired

Sub total

Sub total

$ 119

$ 237

$ 356

$2

$1

$ 19

$ 22

$ 378

2

75

77

(1)

(0)

1

(0)

77

(15)

(31)

(46)

(0)

(0)

(2)

(2)

(48)

5

4

9

0

－

0

0

9

0

(3)

(3)

－

－

－

－

(3)

$ 111

$ 282

$ 393

$1

$1

$ 18

$ 20

$ 413

Total

.
Carrying amount of financial assets
Carrying amount of Trade and other receivables and Loans for the year ended March 31, 2023 and 2022 are as follows:
2023(Millions of Yen)
12-month expectedcredit loss

Lifetime expected credit loss,
not credit-impaired

Lifetime expected credit loss,
credit-impaired¥ －¥ 1,766,822¥ 58,591－

426,369－

107,332

7,742

2,203

Lifetime expected credit loss,
not credit-impaired(Millions of Yen)
Lifetime expected credit loss,
credit-impaired¥ －¥ 1,727,155¥ 61,461－

300,539－

92,545

9,408

3,291

Lifetime expected credit loss,
not credit-impaired(Millions of U.S. Dollars)
Lifetime expected credit loss,
credit-impaired$ －$ 13,284$ 441

Contract assets

－

3,206

－

Loans

807

58

17

Trade and other receivables
Contract assets
Loans
2022

12-month expectedcredit loss
Trade and other receivables
Contract assets
Loans
2023
12-month expectedcredit loss
Trade and other receivables

The Companies’ maximum credit exposure to credit risk is the carrying amount of the financial assets, and related collaterals held or other credit
enhancements are immaterial.

114

4.

Commodity price risk management
The Companies are exposed to price fluctuations arising from physical commodity trades such as precious and base metals, energy products andagricultural products, as well as investments in metal mining and oil and gas development. The Companies intend to mitigate such risks by matching
the volume and timing of purchase and sales or by hedging with derivatives. In addition, the Companies transact derivatives for trading purposes
which are managed within defined position and loss limits. The fair value changes from these trades are limited, and do not materially affect theCompanies’ consolidated annual profit and total assets.

5.

Liquidity risk management
The Companies’ basic policy for financing operation is to secure stable medium- to long-term funds and sufficient liquidity for the operations.
Management has been monitoring liquidity risk by setting various worst case scenarios including financial market turmoil. The Companies securenecessary liquidity from the cash flows from operations, borrowing from financial institutions with which the Companies have good relationships,
bonds issued in the capital markets, and issuance of commercial paper. The Companies deposit these funds with highly credible financial institutions
which are generally given high credit ratings by credit rating agencies.
The Companies have several unused long-term committed lines of credit with leading domestic and international financial institutions and several
uncommitted lines of credit to reduce the liquidity risk.
The Companies’ remaining contractual maturities for non-derivative financial liabilities as of March 31, 2023 and 2022 are as follows: “Leaseliabilities” are disclosed in Note 8.
Millions of Yen
Due in1 year or lessDue after
1 year through5 years

Due after
5 years

Total

2023
Bonds and borrowings¥ 685,356¥ 1,354,267¥ 1,112,466¥ 3,152,089

Trade and other payables

1,483,695

182,870

39,986

1,706,551

46,45658,172

52,579157,207

Bonds and borrowings¥ 608,031¥ 1,179,694¥ 1,233,649¥ 3,021,374

Trade and other payables

1,524,146

103,772

35,213

1,663,131

25,39755,22541,022

121,644

Financial guarantee contracts
2022

Financial guarantee contracts

Millions of U.S. Dollars
Due in1 year or lessDue after
1 year through5 years

Due after
5 years

Total

2023
Bonds and borrowings$ 5,153$ 10,183$ 8,364$ 23,700

Trade and other payables

11,1551,375

301

12,831

349

438

395

1,182

Financial guarantee contracts

115

The Companies’ liquidity analysis for derivatives as of March 31, 2023 and 2022 is summarized in the table below. The table is based on thecontractual future cash inflows and outflows of derivative instruments. The net contractual cash inflows and outflows of gross-settled derivative
instruments are presented as net cash flows on a transaction-by-transaction basis. When receipt and payment of cash are not fixed, the amountdisclosed was calculated based on the projected interest rates by reference to the yield curves at the end of the reporting period.
Millions of Yen
Due in1 year or lessDue after
1 year through5 years

cash receipt¥ 6,715¥ 21,808¥ 25,826¥ 54,349/ (payment)(3,274)(7,564)(1,715)(12,553)

Due after
5 years

Total

2023
Interest rate contracts
Foreign exchange contracts
Commodity contracts

cash receipt

12,34049,70434,50696,550/ (payment)(22,190)(9,376)(1,392)(32,958)

cash receipt

102,830

52,797－

155,627/ (payment)(94,160)(34,754)－(128,914)

cash receipt¥ 5,634¥ 15,780¥ 12,668¥ 34,082/ (payment)(1,781)(4,827)(776)(7,384)

cash receipt

18,19630,73328,305

77,234/ (payment)(27,383)(5,227)(1,312)(33,922)

cash receipt

266,668

102,624－

369,292/ (payment)(297,978)(79,744)－(377,722)

2022
Interest rate contracts
Foreign exchange contracts
Commodity contracts

Millions of U.S. Dollars
Due in1 year or lessDue after
1 year through5 years

cash receipt

$ 51

$ 164

$ 194

$ 409

/ (payment)

(25)

(57)

(13)

(95)

cash receipt

93

374

259

726

/ (payment)

(167)

(71)

(10)

(248)

cash receipt

773

397

－

1,170

/ (payment)

(708)

(261)

－

(969)

Due after
5 years

Total

2023
Interest rate contracts
Foreign exchange contracts
Commodity contracts(3)

Fair Value of Financial Instruments
1.

Fair value measurements
The fair values of financial assets and liabilities are determined as follows:
Quoted market prices, if available, are used as fair values of financial instruments. If quoted market prices are not available, fair values of suchfinancial instruments are measured by using appropriate measurement techniques such as discounted future cash flow method or others.
Cash and cash equivalents, time deposits and marketable securities
The carrying amounts of these instruments approximate their fair values due to their short-term maturities.
Other investments

116

The fair values of marketable securities are estimated using quoted market prices. Fair values of unlisted investments in ordinary share aredetermined by discounted future cash flow method, valuation models based on revenue, profitability and net assets of investees, market values ofcomparable companies, and other valuation approaches.
Trade and other receivables, trade and other payables
The fair values of current and non-current trade receivables and payables, except for loans with floating rates whose carrying amounts approximate
fair value, are estimated using discounted future cash flow analysis, using interest rates currently being offered for loans or accounts receivables
with similar terms to borrowers or customers of similar credit quality and remaining maturities.
Bonds and borrowings
The fair values of bonds and borrowings, except for debt with floating rates whose carrying amount approximates fair value, are estimated using
discounted future cash flow analysis using interest rates currently available for similar types of borrowings with similar terms and remaining
maturities.
Guarantee of third party debt
The fair values of financial guarantees are estimated based on the premiums received or receivable from guarantors in arm’s length transactions
with unrelated parties.
Interest rate swaps, currency swap agreements and currency option contracts
The fair values of interest rate swaps, currency swap agreements and currency option contracts are estimated by obtaining quotes from brokers andother appropriate valuation techniques based on information available to the Companies.
Foreign exchange forward contracts
The fair values of foreign exchange forward contracts are estimated based on quoted market prices for contracts with similar terms.
Interest rate future contracts and bond future contracts
The fair values of interest rate future contracts and bond future contracts are estimated by using quoted market prices.
Commodity forwards, futures and swap contracts
The fair values of commodity forwards, futures and swap contracts are mainly estimated using quoted market prices.

117

2.

Financial instruments measured at amortized cost
The fair values of financial instruments measured at amortized cost as of March 31, 2023 and 2022 are as follows: Financial instruments measured
at amortized cost that are included in “Marketable securities” and “Other investments” are disclosed in Note 6.
Millions of Yen
2023
Carrying amounts

Fair value

Financial assets measured at amortized cost:
Trade and other receivables¥ 1,810,963¥ 1,824,116

Bonds and borrowings

3,152,089

3,152,099

Trade and other payables

1,486,342

1,486,140

Financial liabilities measured at amortized cost:

Millions of Yen
2022
Carrying amounts

Fair value

Financial assets measured at amortized cost:
Trade and other receivables¥ 1,753,747¥ 1,766,632

Bonds and borrowings

3,021,374

3,031,851

Trade and other payables

1,373,400

1,373,696

Financial liabilities measured at amortized cost:

Millions of U.S. Dollars
2023
Carrying amounts

Fair value

Financial assets measured at amortized cost:
Trade and other receivables$ 13,616$ 13,715

Financial liabilities measured at amortized cost:

3.

Bonds and borrowings

23,70023,700Trade and other payables

11,176

11,174

Financial instruments measured at fair value
IFRS 13 Fair Value Measurement requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significanceof the inputs used in making the measurements.
The fair value hierarchy has the following levels:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities;
Level 2 inputs are inputs other than quoted prices that are observable for the assets or liabilities, either directly or indirectly;
andLevel 3 inputs are unobservable inputs for the assets or liabilities.
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant
to the fair value measurement in its entirety.

118

The fair values of financial assets and liabilities measured at fair value, grouped by fair value hierarchy as of March 31, 2023 and 2022 are as
follows:
Millions of Yen
2023
Level 1

Level 2

Level 3

Total

Assets:Securities and other investments
Financial assets measured at FVTPL¥ 3,137¥ －¥ 40,636¥ 43,773

Financial assets measured at FVTOCI

222,668－

116,891

339,559－

75,233－75,233－

134,423－

134,4233,217

164,265－

167,482

Total¥ 229,022¥ 373,921¥ 157,527¥ 760,470

Trade and other payables
measured at FVTPL¥ －¥ (220,209)¥ －¥ (220,209)－(23,082)－(23,082)(14,281)(136,418)－(150,699)¥ (14,281)¥ (379,709)¥ －¥ (393,990)

Trade and other receivables
measured at FVTPL
Other financial assets (derivatives)
Derivatives designated as hedges
Derivatives not designated as hedges
Liabilities:

Other financial liabilities (derivatives)
Derivatives designated as hedges
Derivatives not designated as hedges
Total

119

Millions of Yen
2022
Level 1

Level 2

Level 3

Total

Assets:Securities and other investments
Financial assets measured at FVTPL¥ 1,354¥ －¥ 39,821¥ 41,175

Financial assets measured at FVTOCI

253,021－

118,410

371,431－

84,056－

84,056－93,423－93,423

16,887370,041－

386,928

Total¥ 271,262¥ 547,520¥ 158,231¥ 977,013

Trade and other payables
measured at FVTPL¥ －¥ (289,731)¥ －¥ (289,731)－(28,278)－(28,278)(14,566)(376,158)－(390,724)¥ (14,566)¥ (694,167)¥ －¥ (708,733)

Trade and other receivables
measured at FVTPL
Other financial assets (derivatives)
Derivatives designated as hedges
Derivatives not designated as hedges
Liabilities:

Other financial liabilities (derivatives)
Derivatives designated as hedges
Derivatives not designated as hedges
Total

120

Millions of U.S. Dollars
2023
Level 1

Level 2

Level 3

Total

Assets:Securities and other investments
Financial assets measured at FVTPL

$ 24

$ －

$ 305

$ 329

Financial assets measured at FVTOCI

1,674

－

879

2,553

－

566

－

566

Derivatives designated as hedges

－

1,011

－

1,011

Derivatives not designated as hedges

24

1,235

－

1,259

Total

$ 1,722$ 2,812$ 1,184$ 5,718

Trade and other payables
measured at FVTPL$ －$ (1,655)$ －$ (1,655)

－

(174)

－

(174)

(107)

(1,026)－(1,133)$ (107)$ (2,855)$ －$ (2,962)

Trade and other receivables
measured at FVTPL
Other financial assets (derivatives)

Liabilities:

Other financial liabilities (derivatives)
Derivatives designated as hedges
Derivatives not designated as hedges
Total

121

Reconciliation between the beginning and ending balance of financial assets measured at fair value on a recurring basis using
Level 3 inputs for the year ended March 31, 2023 is as follows:
Millions of Yen
2023
Financial assets
measured
at FVTPL

Financial assets
measured
at FVTOCINet other financial
assets(liabilities)¥ 39,821¥ 118,410

¥ －

8,451

5,601

－

300

－

44

2,057

2,712

－

Disposals(6,295)(5,456)－

Settlements(3,698)(1,070)(44)－(3,306)－

Balance, end of year

¥ 40,636¥ 116,891¥ －Profit or (loss) for the year included inearnings relating to financial instruments stillheld
at the end of year, net¥ 3,421¥ －¥ －Balance, beginning of year
Purchases
Comprehensive income
Profit (loss) for the year (Note 1)
Other comprehensive income (Note 2)

Others (Note 3)

Millions of U.S. Dollars
2023
Financial assets
measured
at FVTPL

Financial assets
measured
at FVTOCINet other financial
assets(liabilities)

$ 299

$ 890

$ －

64

42

－

Profit (loss) for the year

2

－

0

Other comprehensive income

15

21

－

Disposals

(47)

(41)

－

Settlements

(28)

(8)

(0)

Others－(25)－

Balance, end of year

$ 305

$ 879

$ －

Profit or (loss) for the year included inearnings relating to financial instruments stillheld
at the end of year, net

$ 26

$ －

$ －

Balance, beginning of year
Purchases
Comprehensive income

Notes:
1. The above profits or losses for the year were included in “Sales of tangible products,” “Cost of tangible products sold” and “Gain (loss) on
securities and other investments, net” in the Consolidated statement of comprehensive income.
2. The impact of exchange rate fluctuations (included in Exchange differences on translating foreign operations) is included.
3. The impact of changes in the scope of consolidation of subsidiaries is included.
(4)

Derivatives and Hedge Accounting
Fair-value hedges

122Fair-value hedge is a type of hedge that mitigates the risk of changes in the fair values of assets and liabilities or firm commitments. The Companies use
commodity futures contracts and foreign exchange forward contracts to hedge the changes in fair values on firm commitments. The Companies use
interest rate swaps to hedge the changes in fair values on fixed rate borrowings used to fund assets earning interest at floating rates. Changes in the fairvalues of derivatives designated as fair-value hedges are recognized in profit or loss and are offset by corresponding changes in the fair values of thehedged item to the extent the hedge is effective. For the years ended March 31, 2023 and 2022, net gains or losses for hedged items were net gains of¥6,433 million ($48 million) and net gains of ¥9,544 million, respectively, and net gains or losses for hedging instruments were net losses of ¥6,433
million ($48 million) and net losses of ¥9,544 million, respectively.
Cash-flow hedges
Cash-flow hedge is a type of hedge that uses derivatives to offset the variability of expected future cash flows. The Companies use commodity futurecontracts and foreign exchange forward contracts to hedge the variability of cash flows related to forecasted transactions and interest rate swaps to hedge
the variability of cash flows related to floating-rate borrowings. The Companies recognize changes in the fair values of derivative instruments that aredesignated as cash-flow hedges in Other comprehensive income as “Cash-flow hedges” and include in Other components of equity to the extent the hedge
is effective. Foreign currency basis spread on cross currency interest rate swaps is excluded from hedging instruments, and changes in the fair value arerecognized in Other comprehensive income as "Hedging cost" and included in Other components of equity. The balances accumulated in Other
components of equity are reclassified into profit or loss in the period when the hedged items are recognized in profit or loss.
For the years ended March 31, 2023 and 2022, net derivative gains or losses (net of the related tax) that were expected to be reclassified into profit or loss
within the next fiscal year were net gains of ¥1,663 million ($13 million) and net gains of ¥7,008 million, respectively.
Hedges of net investments in foreign operations
The Companies use currency swaps, foreign currency bonds and foreign currency borrowings to hedge against the foreign currency risk of the net
investments in foreign operations. The Companies recognized changes in fair values of derivatives designated as hedging instruments and exchange
differences in foreign currency borrowings designated as hedging instruments in other comprehensive income in Other components of equity to the extent
the hedge is effective.
Derivatives not designated as hedges
The Companies use derivatives to hedge exposures when it makes economic sense to do so, including circumstances in which the hedging relationshipdoes not qualify for hedge accounting.
The Companies use foreign exchange forward contracts to economically hedge against the fluctuations of foreign exchange rates on foreign currency
assets, liabilities and unrecognized firm commitments. The Companies also enter into commodity forwards, futures and swap contracts to economicallyhedge their inventories and unrecognized firm commitments against market price fluctuations. Certain commodity derivatives are entered into for trading
purposes to the extent approved by management. These derivatives do not qualify for hedge accounting and any changes in their fair values are recognizedin profit or loss.

123

The fair values of derivative instruments as of March 31, 2023 and 2022 are as follows:
2023
Millions of Yen
Fair-value
hedgesCash-flow
hedgesHedges ofnet investment
in foreign
operations

Derivatives notdesignated ashedges

Total[Derivative assets]¥ 11,955¥ 36,580¥ －¥ 1,193¥ 49,728

Foreign exchange contracts

12

84,916280

11,34296,550Commodity contracts

28

652

－

154,947

155,627¥ 11,995¥ 122,148¥ 280¥ 167,482¥ 301,905

Interest rate contracts

Total
Other financial assets(current)
Other financial assets(non-current)

123,827
190,736

Total¥ 314,563[Derivative liabilities]
Interest rate contracts
Foreign exchange contracts
Commodity contracts
Total¥ (4,606)¥ (6,951)¥ －¥ (352)¥ (11,909)(1,813)(5,095)(4,539)(21,511)(32,958)

(5)

(73)

－

(128,836)(128,914)¥ (6,424)¥ (12,119)¥ (4,539)¥ (150,699)¥ (173,781)

Other financial liabilities(current)
Other financial liabilities(non-current)(119,170)(57,243)

Total¥ (176,413)

Other than the above, the Companies have foreign currency bonds of ¥46,062 million ($346 million) and foreign currency borrowings of ¥337,944 million($2,541 million) that are designated as hedging instruments to hedge the net investments in foreign operations.
The differences between the amounts of derivative assets and derivative liabilities stated above and those stated in the Consolidated statement of financial
position were resulted from a financial liability for the put option granted to the non-controlling shareholder and offsetting derivative assets and derivative
liabilities with deposits. The amounts of “Other financial assets and liabilities” in the Consolidated statement of financial position that are subject toenforceable master netting arrangements or similar arrangements are ¥64,519 million ($485 million).

124

2022
Millions of Yen
Fair-value
hedgesCash-flow
hedgesHedges ofnet investment
in foreign
operations

Derivatives notdesignated ashedges

Total[Derivative assets]¥ 13,578¥ 14,586¥ －¥ 5,661¥ 33,825

Foreign exchange contracts

6

62,083

109

15,036

77,234

Commodity contracts

30

3,031

－

366,231369,292¥ 13,614¥ 79,700¥ 109¥ 386,928¥ 480,351

Interest rate contracts

Total
Other financial assets(current)
Other financial assets(non-current)

250,892
204,415

Total¥ 455,307[Derivative liabilities]¥ (1,798)¥ (5,560)

¥ －

¥ －

¥ (7,358)

Foreign exchange contracts(18)(3,341)(8,498)(22,065)(33,922)

Commodity contracts(6)(9,057)－(368,659)(377,722)¥ (1,822)¥ (17,958)¥ (8,498)¥ (390,724)¥ (419,002)

Interest rate contracts

Total
Other financial liabilities(current)
Other financial liabilities(non-current)(292,185)(95,764)

Total¥ (387,949)

Other than the above, the Companies have foreign currency bonds of ¥78,841 million and foreign currency borrowings of ¥273,413 million that aredesignated as hedging instruments to hedge the net investments in foreign operations.
The differences between the amounts of derivative assets and derivative liabilities stated above and those stated in the Consolidated statement of financial
position were resulted from a financial liability for the put option granted to the non-controlling shareholder and offsetting derivative assets and derivative
liabilities with deposits. The amounts of “Other financial assets and liabilities” in the Consolidated statement of financial position that are subject toenforceable master netting arrangements or similar arrangements are ¥100,253 million.

125

2023
Millions of U.S. Dollars
Fair-value
hedgesCash-flow
hedgesHedges ofnet investment
in foreign
operations

Derivatives notdesignated ashedges

Total[Derivative assets]
Interest rate contracts

$ 90

$ 275

$0

$9

$ 374

Foreign exchange contracts

0

639

2

85

726

Commodity contracts

0

5

0

1,165

1,170

$ 90

$ 919

$2

$ 1,259$ 2,270

Total
Other financial assets(current)
Other financial assets(non-current)

931
1,434

Total

$ 2,365[Derivative liabilities]
Interest rate contracts
Foreign exchange contracts
Commodity contracts
Total$ (35)$ (52)$0$ (3)$ (90)

(14)

（38)

(34)

(162)

(248)

0

(1)

0

(968)

(969)

$ (49)$ (91)$ (34)$ (1,133)$ (1,307)

Other financial liabilities(current)
Other financial liabilities(non-current)

(896)
(430)

Total

$ (1,326)

28. Revenue(1)

Contract balances
1.

Contract assets“Contract assets” are the rights of the Companies to considerations in exchange for goods or services that the Companies have transferred to acustomer in the normal course of business, when those rights are conditioned on something other than the passage of time.
Contract assets are transferred to receivables arising from contracts with customers when the rights of the Companies to consideration become
unconditional. The changes in contract assets during the year ended March 31, 2023 are mainly due to the satisfaction of performance obligationsof long-term construction contracts in infrastructure business.

2.

Contract liabilities“Contract liabilities” represent the Companies’ obligations to transfer goods or services to a customer for which the Companies have received
considerations or the amount is due. There are no significant changes in the Contract liabilities balances during the year ended March 31, 2023.
Also, the amount of Contract liabilities that was included in the beginning balance as of April 1, 2022 and from which revenue has not beenrecognized during the year ended March 31, 2023 is not material.

(2)

Transaction price allocated to the remaining performance obligations

The Companies customarily enter into long-term sales contracts for certain transactions. For the performance obligation of these long-term sales contracts,
the amount of transaction price allocated to the remaining performance obligations as of March 31, 2023 and March 31, 2022 are ¥2,190,254 million($16,468 million) and ¥2,612,782 million. These remaining performance obligations include contracts such as long-term sales contracts in energy businessand long-term construction contracts in biomass fuel business, and are deemed to be recognized as revenue within 24 years at March 31, 2023. As a126

practical expedient stipulated in IFRS 15, the amount above does not include transaction price allocated to the performance obligation of a contract withan original expected duration of one year or less.
In addition, the Companies include the variable consideration of these long-term contracts in the transaction price only to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variableconsideration is subsequently resolved.
29. Exchange Difference Gains and Losses
Gains and losses resulting from translating assets and liabilities denominated in a currency other than the functional currency of the reporting entity orfrom settling such items are included in profit or loss as they arise. Net foreign exchange losses of ¥28,322 million ($213 million) and losses of ¥5,087
million are included in the Consolidated statement of comprehensive income for the years ended March 31, 2023 and 2022, respectively.
30. Selling, General and Administrative Expenses
The components of Selling, general and administrative expenses for the years ended March 31, 2023 and 2022 are as follows:
Millions ofMillions of Yen
U.S. Dollars
2023
Employee benefits expenses

2022

2023

¥ 454,606¥ 407,929$ 3,418

Equipment expenses

126,843

114,292

954

Travel and transportation expenses

22,225

10,161

167

Outsourcing expenses

66,361

59,073499

Advertising expenses

15,23011,876114

Amortization expenses

17,69917,288133

Impairment losses on receivables

4,278

5,693

32

Others104,495

87,629786

Selling, general and administrative expenses¥ 811,737¥ 713,941$ 6,103

Equipment expenses disclosed above mainly include rental expenses and depreciation of Property, plant and equipment.

12731. Finance Income and Costs
The components of Finance income and costs for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Interest income:Financial assets measured at amortized cost
Derivatives
Total¥ 48,339¥ 29,011

$ 363

1

(22)

0

¥ 48,340¥ 28,989$ 363¥ (58,353)¥ (31,368)$ (439)8,766

10,90866(10,204)(9,734)(77)¥ (59,791)¥ (30,194)$ (450)Interest expense:
Financial liabilities measured at amortized cost
Derivatives
Lease liabilities
Total
Dividends:
Financial assets measured at FVTPL

¥ 10

¥4

$0

Financial assets measured at FVTOCI

20,05827,251151¥ 20,068¥ 27,255$ 151

Financial assets measured at FVTPL¥ 7,960¥ 10,991$ 60

Others21,09037,247158¥ 29,050¥ 48,238

$ 218

Total
Gain (loss) on securities and other investments, net:

Total

Others of “Gain (loss) on securities and other investments, net” are mainly gains and losses on investments in subsidiaries and associates. Of that amount,losses or gains attributable to deconsolidation of subsidiaries for the years ended March 31, 2023 and 2022 are gains of ¥16,852 million ($127 million)
and gains of ¥22,377 million, respectively.
In addition to the above, gains or losses on revaluation of derivatives not designated as hedges for the years ended March 31, 2023 and 2022 are losses of¥33,074 million ($249 million) and losses of ¥73,148 million included in “Revenues” and “Cost,” and gains of ¥29 million ($0 million) and gains of ¥21
million included in “Other, net,” respectively.
Interest income from financial assets measured at amortized cost for the years ended March 31, 2023 and 2022 are included in “Revenues” in the amountof ¥18,207 million ($137 million) and ¥20,241 million, respectively, and interest expense from financial liabilities measured at amortized cost is included
in “Cost” in the amount of ¥1,959 million ($15 million) and ¥2,060 million in “Cost,” respectively.
The Company had provided shareholder financing to the mining project operating company in the Republic of Chile (hereinafter “Operating Company”)
through SC Sierra Gorda Finance B.V., a wholly owned subsidiary. The Company assesses the recoverability of the shareholder financing based on thelatest business plan of the Operating Company every fiscal year. As a result of reassessing the business plan of Operating Company based on the midlong term price outlook for copper, the Company recognized a gain of ¥32,779 million ($246 million) as “Other, net” in the Consolidated statement ofcomprehensive Income.
As of February 22, 2023, the Company transferred all of its equity interests in SC Sierra Gorda Finance B.V. to South32 Limited, which operates mainly
in Australia.

12832. Income Tax Expense
Income tax expense for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Current tax¥ 116,349¥ 115,905$ 875

Deferred tax

7,481(10,453)56¥ 123,830¥ 105,452

$ 931

Total

The Company is subject to national corporate tax, inhabitant tax and deductible business tax. The applicable tax rate calculated based on these taxes is31.0% for both years ended March 31, 2023 and 2022. Foreign subsidiaries are subject to income taxes of the countries in which they operate.
The reconciliation between the applicable income tax rate in Japan and the Companies’ average effective income tax rate in the Consolidated statementof comprehensive income for the years ended March 31, 2023 and 2022 are as follows:
2023
(%)

2022
(%)

The applicable income tax rate in Japan

31.0

31.0

Tax effect on equity-accounted investees

(9.5)

(8.1)

Tax effect on expenses not deductible for tax purposes

0.3

0.1

Difference in applicable tax rate of foreign subsidiaries

(4.3)

(0.4)

Tax effect of the assessment of the recoverability of Deferred tax assets

1.0

(6.6)

Others-net

(1.4)

1.9

The Companies’ average effective income tax rate

17.1

17.9

129

33. Earnings per Share
A calculation of the basic and diluted earnings per share for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Profit or loss used to calculate basic earnings per shareand diluted earnings per share:
Profit (loss) attributable to owners of the parent¥ 565,178

Adjustment to profit or loss
Profit or loss used to calculate basic earnings per share$ 4,249

(257)

(213)

(2)

564,921463,481

4,248

257

213

2

565,178

463,694

4,249

Adjustment to profit or loss
Profit or loss used to calculate diluted earnings per share¥ 463,694

Number of shares
2023

2022

Weighted-average shares:
Weighted-average shares-basic

1,248,421,952

1,249,983,857

1,819

6,253

Transfer-restricted stock compensation plan

384,983

490,100

Performance-linked stock compensation plan

405,136547,322

Restricted performance share unit-base compensation
plan

771,615

411,443

1,249,985,505

1,251,438,975

Dilutive effect of:
Stock options

Weighted-average shares-diluted

Yen
2023

U.S. Dollars
2022

2023

Earnings per share (attributable to owners of the parent):
Basic¥ 452.51¥ 370.79$ 3.40

Diluted452.15370.533.40

Note:
Due to the conversions of stock options, and the issuance of transfer-restricted stock and performance-linked stock having an effect of reducing the loss
per share attributable to owners of the parent company, potential shares have no diluting effect in the previous fiscal year.

13034. Cash Flow Information
Supplemental disclosure of cash flow information for the years ended March 31, 2023 and 2022 are as follows:
Millions of
U.S. Dollars

Millions of Yen
2023

2022

2023

Non-cash investing and financing activities:
Lease liabilities incurred¥ 104,519¥ 65,413

$ 786

－

－

－

Total consideration paid

(25,934)(2,185)(195)

Cash and cash equivalents included in assets acquired

12,369393

93¥ (13,565)¥ (1,792)$ (102)Acquisition of securities through exchange of loan
receivables for securities
Acquisition of subsidiaries:

Acquisition of subsidiaries, net of cash and cash
equivalents acquired

Refer to Note 5 for fair value of assets and liabilities as of the acquisition date.
The total consideration received in respect of sales of subsidiaries for the year ended March 31, 2023 is ¥53,677 million ($404 million).
Each major class of assets and liabilities at the point of sale is as follows:
Millions of Yen

Millions of
U.S. Dollars

Cash and cash equivalents¥ 22,147$ 167

Trade and other receivables

19,107144

Property, plant and equipment

62,382469

Intangible assets

3,827

29

Other assets

46,906353

Current liabilities(27,889)(210)

Non-current liabilities(49,952)(376)

The total consideration received in respect of sales of subsidiaries for the year ended March 31, 2022 was ¥72,059 million.
Each major class of assets and liabilities at the point of sale is as follows:
Millions of Yen
Cash and cash equivalents¥ 8,322

Trade and other receivables

69,806

Property, plant and equipment

44,092Intangible assets

4,122

Other assets

20,573Current liabilities(33,212)

Non-current liabilities(49,312)131

35. Related Party Transactions
Compensation for directors
The remuneration for directors for the years ended March 31, 2023 and 2022 is as follows:
Millions of
U.S. Dollars

Millions of Yen
2023
1. Monthly remuneration

2022

2023

¥ 532

¥ 476

$4

2. Performance-Linked bonuses

473

453

3

3. Transfer-restricted stock compensation (Note 1)

－

21

－

4. Performance linked stock compensation

91

65

1

5. Restricted performance share unit-base compensation plan

296

121

2

¥ 1,392¥ 1,135$ 10

Total (Note 2)
Note:

1. Transfer-restricted stock compensation were not paid for the year ended March 31, 2023.
2. The above amounts are rounded to the nearest million yen, therefore the breakdown of remuneration for directors does not necessarily correspond to
the total amount of remuneration.

13236. Subsidiaries
The Companies’ subsidiaries as of March 31, 2023 are as follows:
Place ofincorporationand operation

Proportion of
voting power
held bythe Companies(%)

Sumitomo Corporation Global Metals Co., Ltd.

Chiyoda-ku, Tokyo

100.00ERYNGIUM Ltd.

Glasgow, U.K.

100.00Servilamina Summit Mexicana S.A. de C.V.

Queretaro, Mexico

100.00

Sumiputeh Steel Centre Sdn. Bhd.

Selangor, Malaysia

90.00

Edgen Group

Baton Rouge, U.S.

100.00(100.00)

Sekal AS

Stavanger, Norway

90.00

B&L Pipeco Services

Houston, U.S.

P2 Energy Services

Spring, U.S.

Business segment
Metal Products

Name of subsidiary

100.00(100.00)
100.00(100.00)

Others (60 Companies)
Transportation& Construction Systems

KIRIU Corporation

Ashikaga, Tochigi

100.00Sumitomo Precision Products Co., Ltd.

Amagasaki, Hyogo

100.00SMS Construction and Mining Systems Inc.

Acheson, Canada

Tecnologia Para La Construccion Y Mineria S.L.

Madrid, Spain

Toyota Ukraine

Kiev, Ukraine

100.00Sumitec International, Ltd.

Moscow, Russia

100.00SC Construction Machinery (Shanghai) Corporation

Shanghai, China

P.T. Summit Auto Group

Jakarta, Indonesia

Summit Motors Vladivostok

Vladivostok, Russia

Summit Capital Leasing Co., Ltd.

Bangkok, Thailand

Moto-Pfohe EOOD

Sofia, Bulgaria

100.00Sunstate Equipment Co. LLC

Phoenix, U.S.

100.00(100.00)

Aimo Solution AB

Stockholm, Sweden

100.00SML Isuzu Ltd.

Chandigarh, India

43.96

Linder Industrial Machinery

Plant City, U. S.

100.00(100.00)

Aver Asia (S) Pte Ltd

Singapore

100.00Summit Energy Corporation

Chiyoda-ku, Tokyo

100.00Sumitomo Shoji Machinex Co., Ltd.

Chiyoda-ku, Tokyo

100.00Sumisho Global Logistics Co., Ltd.

Chiyoda-ku, Tokyo

100.00P.T. Central Java PowerJakarta, Indonesia

100.00(25.00)Summit Water Limited

London, U.K.

100.00100.00(10.00)100.00(60.00)100.00(10.00)100.00(0.01)
100.00(0.01)
99.64(50.64)

Others (90 Companies)
Infrastructure133

Business segment

Place ofincorporationand operation

Name of subsidiary

Proportion of
voting power
held bythe Companies(%)

Summit Renewable Energy Europe Limited

London, U.K.

100.00Perennial Power Holdings

New York, U.S.

100.00(100.00)

SRPT SAS

Paris, France

100.00SRPN SAS

Paris, France

100.00

Others (76 Companies)
Media & Digital

SCSK Corporation

Koto-ku, Tokyo

50.77

Presidio Ventures, Inc.

Santa Clara, U.S.

100.00(100.00)

Sumitomo Corporation Equity Asia Limited

Hong Kong, China

100.00Summit, Inc.

Suginami-ku, Tokyo

100.00

IG Kogyo Co., Ltd.

Higashine, Yamagata

65.68

S.C. Cement Co., Ltd.

Chiyoda-ku, Tokyo

100.00

Tomod's

Bunkyo-ku, Tokyo

100.00SC Foods Co., Ltd.

Chiyoda-ku, Tokyo

100.00Highline Produce Limited

Leamington, Canada

SC Healthcare Holdings

Kelana Jaya,
Malaysia

100.00(100.00)

Fyffes International

Geneva, Switzerland

100.00(10.00)Zhu Li (Jinan) Real Estate

Jinan, China

100.00Sumitomo Shoji Chemicals Co., Ltd.

Chiyoda-ku, Tokyo

100.00Sumitronics Corporation

Chiyoda-ku, Tokyo

100.00Summit Agri-Business Corporation

Chiyoda-ku, Tokyo

100.00

Enessance Holdings Co., Ltd.

Minato-ku, Tokyo

53.86

SUMISHO METALEX CORPORATION

Chiyoda-ku, Tokyo

100.00Summit Agro International Ltd.

Chiyoda-ku, Tokyo

100.00Sumi Agro Europe Limited

London, U.K.

100.00Interacid Trading S.A.

Lausanne,
Switzerland

100.00SC Minerals America, Inc.

Denver, U.S.

Sumitomo Corporation Global Commodities
LimitedLondon, U.K.

100.00SCAP C Pty Ltd

Sydney, Australia

100.00Summit Ambatovy Mineral Resources Investment
B.V.

Amsterdam,
Netherlands

100.00Sumisho Coal Australia Holdings Pty. Ltd.

Sydney, Australia

100.00

Pacific Summit Energy LLC.

Irvine, U.S.

100.00(100.00)

Others (38 Companies)
Living Related & Real Estate

100.00

Others (157 Companies)
Mineral Resources, Energy,
Chemical & Electronics

134(30.00)100.00(15.25)

Business segment

Place ofincorporationand operation

Name of subsidiary

Proportion of
voting power
held bythe Companies(%)

SC Quebrada Blanca SPA

Santiago, Chile

100.00SUMMIT RURAL (WA) PTY LIMITED

Kwinana, Australia

100.00(20.00)Agro Amazonia Produtos Agropecuarios S.A

Cuiabá, Brasil

SC Metal Pty Ltd

Melbourne, Australia

Nativa Agronegocios & Representacoes

Minas Gerais, Brazil

100.00100.00(10.00)100.00(100.00)

Others (89 Companies)
OthersYasato Kosan Co., Ltd.

Chiyoda-ku, Tokyo

Summit Forests New Zealand Limited

Auckland,
New Zealand

100.00Sumitomo Corporation of Americas

New York, U.S.

100.00Sumitomo Corporation Europe Holding Limited

London, U.K.

100.00(100.00)

Sumitomo Corporation (China) Holding Ltd.

Beijing, China

100.00Sumitomo Corporation Asia & Oceania Pte. Ltd.

Singapore

100.00(100.00)

Sumitomo Corporation Do Brasil S.A.

Sao Paulo, Brazil

100.00Sumitomo Corporation Taiwan Ltd.

Taipei, Taiwan

100.00(100.00)

Sumitomo Corporation (Central Eurasia) LLC

Moscow, Russia

100.00Sumitomo Corporation Korea Ltd.

Seoul, Korea

Sumitomo Corporation Middle East FZE

Dubai, U.A.E.

100.00100.00(100.00)

Sumitomo Corporation (Hong Kong) Limited

Hong Kong, China

100.00100.00

Others (50 Companies)
Notes:
1.The percentage in the parenthesis under “Proportion of voting power held by the Companies” indicates the indirect ownership out of the total ownershipnoted above.
2. Although the Company owns 50% or less of the voting rights in SML Isuzu, SML Isuzu is a subsidiary of the Company because the Company effectively
controls SML Isuzu.
3. "Others" include the companies belonging to the Energy Innovation Initiative.
37. Commitments and Contingent Liabilities(1) Commitments
The Companies customarily enter into long-term purchase commitments for certain items, principally ocean transport vessels and industry materials,
either at fixed prices or at variable prices adjustable to market. Such purchase commitments are in most instances matched with counter-party sales
contracts. Long-term purchase contracts with equity-accounted investees at fixed prices or at variable prices adjustable to market amounted to ¥627,801
million ($4,720million) as of March 31, 2023. Scheduled deliveries are at various dates through 2027. The Companies also have entered into financing
contract for loans and capital investment, and use of equipment contract, which amounts for ¥875,725 million ($6,584 million) as of March 31, 2023. Of
that amount, ¥127,659 million ($960 million) is accounted for contract with equity-accounted investees.
For lease commitments to which the Companies are the lessees, refer to Note 8.

135

(2) Guarantees
The Companies enter into various guarantee agreements. These agreements include credit enhancement for equity-accounted investees, suppliers andcustomers.
The following table provides the undiscounted maximum amount of potential future payments for each major group of guarantees as of March 31, 2023:
Millions of U.S.
Millions of Yen
Dollars
2023

2022

2023

¥ 75,862¥ 52,198$ 570

81,34569,446612¥ 157,207¥ 121,644$ 1,182

Guarantees for indebtedness of:Equity-accounted investees
Third parties
Total

1.

Guarantees for Indebtedness of Equity-accounted investees
The Companies provide guarantees on certain equity-accounted investees’ borrowings from banks, payables to suppliers and other indebtedness.
These guarantees mature through 2032. The Companies would be obliged to reimburse the banks for losses, if an equity-accounted investee defaults
on a guaranteed loan.

2.

Guarantees for Indebtedness of Third Parties
The Companies also provide guarantees for indebtedness of third parties. These guarantees are arranged mainly with suppliers and customers andmature through 2047. Some of the guarantees are secured by counter guarantees, whose balances are ¥10,631 million ($80 million) as of March
31, 2023.
The Companies are obligated to pay for indebtedness in case the guaranteed party defaults. Some of these guarantees are collateralized by assets ofa guaranteed party.
The Companies record the loss allowance for expected credit losses regarding to those commitments and guarantees. The management does not
anticipate any significant losses arising from such commitments and guarantees.

(3) Litigation and others
The Companies are involved in certain legal actions and claims incidental to its business. Management concludes that none of these actions or claims will
have a material impact on the Companies’ financial position or results of operations.
38. Subsequent Events
Repurchases and Cancellation of Treasury StockAt a meeting of its Board of Directors held on May 9, 2023, the Company has resolved to repurchase shares of its common stock pursuant to Article 156of the Companies Act of Japan, as applied pursuant to Paragraph 3, Article 165 of the Act, and to cancel a portion of its treasury stock in accordance with
Article 178 of the Act. Details of the repurchase and cancellation are as follows.
1. Purpose of the share repurchases
To improve capital efficiency and to enhance shareholder returns
2. Details of the share repurchases(1) Class of shares to be repurchased: Common stock(2) Total number of shares to be repurchased: Up to 12 million shares (Ratio to the number of outstanding shares (excluding treasury stock) about
1.0%)

136

(3) Aggregate repurchase amount: Up to 20 billion yen(4) Period for repurchases: From May 10, 2023 to June 9, 2023
(5) Method of repurchases: Purchase on the Tokyo Stock Exchange
3. Details of cancellation(1) Class of shares to be cancelled: Common stock(2) Total number of shares of treasury stock to be cancelled: All shares repurchased(3) Scheduled date of cancellation: July 24, 2023
(Reference)
Number of treasury stock shares (as of March 31, 2023) (*)
Number of outstanding shares (excluding treasury stock): 1,234,093,737 shares
Number of treasury stock shares: 17,478,130 shares(*) 5,036,700 shares were repurchased from April 1, 2023 to April 28, 2023. The share repurchases pursuant to the resolution of the meeting of Boardof Directors held on February 6, 2023 have been completed. In addition, 7,478,000 shares were repurchased from May 10, 2023 to June 9, 2023.
The share repurchases pursuant to the resolution of the meeting of Board of Directors held on May 9, 2023 have been completed.
39. Approval of Consolidated Financial Statements
The consolidated financial statements were approved by Masayuki Hyodo, Representative Director, President and Chief Executive Officer, and Reiji
Morooka, Chief Financial Officer, on June 23, 2023.

137

Independent Auditor’s Report
To the Board of Directors of Sumitomo Corporation:

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Corporation (“theCompany”) and its consolidated subsidiaries (collectively referred to as “the Group”), which comprise theconsolidated statement of financial position as at March 31, 2023, and the consolidated statements ofcomprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising
significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the consolidated financial position of the Group as at March 31, 2023, and its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRS).

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
Appropriateness of the Judgment Concerning the Identification of an Indication of Impairment for
the Property, Plant and Equipment Held by Joint Ventures Accounted for Using the Equity Methodthat Operate the Nickel Mining and Refining Business in Madagascar
The key audit matter
How the matter was addressed in our audit
In the consolidated statement of financial position of
Sumitomo Corporation and subsidiaries (“theCompany”) at the end of the current fiscal year,
investments accounted for using the equity methodof ¥2,642,504 million were recognized. As
described in Note 11, “Investments Accounted for
Using the Equity Method” to the consolidated
financial statements, included therein were the joint
ventures accounted for using the equity method of¥60,562 million in AMBATOVY MINERALS S.A.
and DYNATEC MADAGSCAR S.A. (the “Project
Companies”) that operate a nickel mining andrefining business in Madagascar, in which theCompany held a 54.17% equity interest.

To assess the appropriateness of the Company’s
judgment concerning the identification of an
indication of impairment for the PPE held by the
Project Companies, we requested the component
auditor of the Project Companies accounted forusing the equity method to perform an audit. We
then obtained reports on the results of certain audit
procedures performed by the component auditor (seebelow for detail), and evaluated whether sufficientand appropriate audit evidence was obtained.
(1) Internal control testing
Testing the design effectiveness of certain internal
controls relevant to the judgment concerning theThe primary assets held by the Project Companies
were property, plant and equipment (“PPE”) for thenickel mining and refining business. Whenever there
is any indication of impairment for those PPE, an
impairment test is required to be performed. The
Project Companies determined that there was no
indication of impairment for the PPE, as a result of acomprehensive consideration of the changes in theassumptions for production conditions, futurenatural resources prices, expected recoverable
reserves, and discount rates.

identification of an indication of impairment for
the PPE.
(2) Assessment of the appropriateness of thejudgment concerning the identification of an
indication of impairment⚫

Forecasted future natural resources prices anddiscount rates fluctuate in accordance with changes
in market conditions, and the projected production
volume of resources may decrease in the case of any
equipment breakdowns at the Project Companies. If
any revision of these plans was determined to benecessary in the light of available internal andexternal information, an indication of impairment
may have been identified. In that case, therecoverable amount may have been less than the
carrying amount of the PPE, which may haveresulted in the recognition of an impairment loss.
We, therefore, determined that our assessment of theappropriateness of the Company’s judgment
concerning the identification of an indication of
impairment for the PPE held by the Project
Companies operating the nickel mining and refining
business in Madagascar was one of the mostsignificant matters in our audit of the consolidated
financial statements for the current fiscal year, andaccordingly, a key audit matter.
⚫

Performing procedures to assess theappropriateness of forecasted future natural
resources prices, expected recoverable
reserves, and projection of production
volume, which were used for the judgment
concerning the identification of an indicationof impairment for the PPE held by the
Project Companies, which included:-

comparing the forecasted future natural
resources prices with the average of theestimated long-term prices published byexternal research organizations;-comparing the expected recoverable
reserves with the relevant assumptions
used by management in the prior year,
inquiring of management about them, andevaluating their consistency with external
assessment reports; and-performing a retrospective review onmanagement’s assumptions andjudgments used in the projection of
production volume in the prior years, andevaluating the consistency of the
projected production volume with theassumptions for the capital investment
plan, natural resources prices, andrecoverable reserves.

Assessing the reasonableness of the discountrates used by management for the judgment
concerning the identification of an indicationof impairment for the PPE, by comparing
them with a range of acceptable discountrates independently developed by thevaluation specialists within the network
firms of the component auditor.

Reasonableness of the Estimated Value-in-use of the Group of Cash-generating Units to which
Intangible Assets of the Banana & Pineapple Business within the Fresh Produce Business in Europe
and the Americas were Allocated
The key audit matter
How the matter was addressed in our audit
In the consolidated statement of financial position of
Sumitomo Corporation and subsidiaries at the end of
the current fiscal year, intangible assets of ¥284,790
million were recognized, which accounted for 2.8%of total assets in the consolidated financial
statements. As described in Note 13, “Intangible
Assets” to the consolidated financial statements,
these intangible assets included goodwill ¥12,061
million allocated to the banana & pineapple
business, a group of cash-generating units, arisingfrom the acquisition of a fresh produce business in
Europe and the Americas.

The primary procedures we performed to assess thereasonableness of the estimated value-in-use of thegroup of cash-generating units to which goodwill
and intangible assets of the banana & pineapple
business within the fresh produce business in Europe
and the Americas were allocated included thefollowing:

A group of cash-generating units to which goodwill
and intangible assets with indefinite useful lives
have been allocated is tested for impairment at least
annually or more frequently whenever it isdetermined that there is an indication of impairment.
In the impairment testing, when the recoverable
amount of a group of cash-generating units is lessthan the carrying amount, the carrying amount isreduced to the recoverable amount, and the resulting
decrease in the carrying amount is recognized as an
impairment loss. In calculating the recoverable
amount, the higher of either the value-in-use or fairvalue less costs of disposal is used.

(2) Assessment of the reasonableness of theestimated value-in-use

In the annual impairment testing for the current
fiscal year, the value-in-use was used as therecoverable amount of the group of cash-generating
units to which goodwill and intangible assets of thebanana & pineapple business were allocated. The
recoverable amount exceeded the carrying amount,and thus no impairment loss was recognized. As theexcess of the recoverable amount of the banana &pineapple business over its carrying amount was¥11,023 million, an impairment loss may have beenrequired to be recognized if there were any change
in the relevant assumptions.
The future cash flows used to measure the value-inuse of the group of cash-generating units to which
goodwill and intangible assets of the banana &pineapple business within the fresh produce business
in Europe and the Americas were allocated were
estimated based on the business plan developed bymanagement. The business plan included
management’s projection of future sales volumes
and margins, and accordingly, involved a highdegree of uncertainty. In addition, selecting
appropriate models and input data for determining
the discount rates, used to measure the value-in-use,(1) Internal control testing
We tested the design and operating effectivenessof certain internal controls relevant to measuring
the value-in-use used in the impairment testing.

To assess the appropriateness of assumptions usedby management in projecting future sales volumes
and margins and determining the discount rates,on which the estimated value-in-use was based, we
inquired of management and other responsible
personnel in the fresh produce business in Europe
and the Americas about the basis for thoseassumptions, and performed the following
procedures, among others:⚫

assessed the appropriateness ofmanagement’s assumptions used inprojecting sales volumes and margins in the
future, on which the sales plan of thebusiness was based, by comparing theassumptions for projected sales volumes andmargins with the actual sales volumes andmargins in the past, and evaluating theconsistency between these assumptions andexternal data published by external researchorganizations; and⚫

developed our own independent estimate of
future cash flows that incorporated a certain
level of uncertainty into the business plan,taking into consideration the results of ourassessment of the appropriateness of key
assumptions for sales volumes and margins
included in the business plan, as well as ouranalysis on the reasons for any discrepancies
between the past business plan and actual
results, and then evaluated the overall impact
on the impairment testing by comparing ourown independent estimate with those bymanagement.

requires a degree of expertise. Accordingly, theassumptions used by management in projecting
future sales volumes and margins and determining
the discount rates had a significant effect on theestimated value-in-use.
We, therefore, determined that our assessment of thereasonableness of the estimated value-in-use of thegroup of cash generating units to which goodwill
and intangible assets of the banana & pineapple
business within the fresh produce business in Europe
and the Americas were allocated was one of themost significant matters in our audit of theconsolidated financial statements for the current
fiscal year, and accordingly, a key audit matter.

Involved valuation specialists within our domestic
network firms who assisted in assessing theappropriateness of the method used to determine
the discount rates as key assumptions, and tracing
input data to external data sources, and thenevaluated the impact on the determination onwhether an impairment loss was to be recognized,
should input data be changed.

Reasonableness of the Estimated Value-in-use of the Group of Cash-generating Units to which
Intangible Assets of the Parking Business in Nordic Countries were Allocated
The key audit matter
How the matter was addressed in our audit
In the consolidated statement of financial position of
Sumitomo Corporation and subsidiaries at the end of
the current fiscal year, intangible assets of ¥284,790
million were recognized, which accounted for 2.8%of total assets in the consolidated financial
statements. As described in Note 13, “Intangible
Assets” to the consolidated financial statements,
these intangible assets included goodwill ¥29,974,
arising from the acquisition of the parking businessin Nordic countries.
A group of cash-generating units to which goodwill
and intangible assets with indefinite useful lives
have been allocated is tested for impairment at least
annually or more frequently whenever it isdetermined that there is an indication of impairment.
In the impairment testing, when the recoverable
amount of a group of cash-generating units is lessthan the carrying amount, the carrying amount isreduced to the recoverable amount, and the resulting
decrease in the carrying amount is recognized as an
impairment loss. In calculating the recoverable
amount, the higher of either the value-in-use or fairvalue less costs of disposal is used.
In the annual impairment testing for the current
fiscal year, the value-in-use was used as therecoverable amount of the group of cash-generating
units to which goodwill and intangible assets of theparking business in Nordic countries were allocated.
The recoverable amount exceeded the carrying
amount, and thus no impairment loss wasrecognized. As the excess of the recoverable amountover the carrying amount was ¥5,274 million, an
impairment loss may have been required to be

The primary procedures we performed to assess thereasonableness of the estimated value-in-use of thegroup of cash-generating units to which goodwill
and intangible assets of the parking business in
Nordic countries were allocated included thefollowing:(1) Internal control testing
We tested the design and operating effectivenessof certain internal controls relevant to measuring
the value-in-use used in the impairment testing.
(2) Assessment of the reasonableness of theestimated value-in-use
To assess the appropriateness of assumptions usedby management in projecting short term parking
revenue and determining the discount rates, on
which the estimated value-in-use was based, we
inquired of management about the basis for thoseassumptions, and performed the following
procedures, among others:⚫

assessed the appropriateness of short termparking revenue in the future, which was oneof management’s key assumptions includedin the business plan, by comparing theassumption with the trends in the historicalexperience and evaluating the consistency
between the assumption and available
external data on potential market growth; and⚫

developed our own independent estimate of
future cash flows that incorporated a certain
level of uncertainty into the business plan,taking into consideration the results of ourassessment of the appropriateness of shortrecognized if there were any change in the relevant
assumptions.
The future cash flows used to measure the value-inuse of the group of cash-generating units to which
goodwill and intangible assets of the parking
business in Nordic countries were allocated were
estimated based on the business plan developed bymanagement. The business plan included
management’s projection of short term parking
revenue, and accordingly, involved a high degree of
uncertainty. In addition, selecting appropriate
models and input data for determining the discountrates, used to measure the value-in-use, requires adegree of expertise. Accordingly, the assumptions
used by management in projecting short termparking revenue and determining the discount rates
had a significant effect on the estimated value-inuse.

term parking revenue in the future, which
was one of key assumptions included in thebusiness plan, and then evaluated the overall
impact on the determination on whether an
impairment loss was to be recognized bycomparing our own independent estimate
with those by management.
Involved valuation specialists within our domestic
network firms who assisted in assessing theappropriateness of the method used to determine
the discount rates as key assumptions, and tracing
input data to external data sources, and thenevaluated the impact on the determination onwhether an impairment loss was to be recognized,
should input data be changed.

We, therefore, determined that our assessment of thereasonableness of the estimated value-in-use of thegroup of cash generating units to which goodwill
and intangible assets of the parking business in
Nordic countries were allocated was one of the mostsignificant matters in our audit of the consolidated
financial statements for the current fiscal year, andaccordingly, a key audit matter.

Other Information
The other information comprises the information included in the Annual Financial Report issued by theCompany, but does not include the consolidated financial statements and our auditor’s reports thereon.
Management is responsible for the preparation and presentation of the other information. Corporate auditors
and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties
with regard to the design, implementation and maintenance of the reporting process for the otherinformation.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit, or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact.
We have nothing to report in this regard.

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statementsin accordance with IFRS, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due tofraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with IFRS and using the going concern basis of accounting unless management either intends toliquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as awhole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with auditing standards generally accepted in Japan will always detect amaterial misstatement when it exists. Misstatements can arise from fraud or error and are consideredmaterial if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting amaterial misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.

Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an opinion
on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting andbased on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Group to cease to continue as agoing concern.



Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with IFRS, the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements. We
are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we determine
those matters that were of most significance in the audit of the consolidated financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2023 are presented solely for convenience. Our audit also included the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 2(3) to the consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company and its
consolidated subsidiaries which are required to be disclosed pursuant to the provisions of the Certified
Public Accountants Act of Japan.

Michitaka Shishido
Designated Engagement Partner
Certified Public Accountant

Isao Kamizuka
Designated Engagement Partner
Certified Public Accountant

Kenji Kasajima
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
June 23, 2023