IR Briefing for 2Q
Fiscal Year ending March 2018

January 2018
Inabata & Co., Ltd.
1

Contents
P.3-

Summary of the Company

P.9-

Gist of the incident at our German Subsidiary

P.13- “NC2020” – Year 1 Progress
P.31- Corporate Governance
P.36- Returning Profits to Shareholders
P.39- Summary of Financial Results – 2Q FY3/2018

P.46- Reference* In this document, Net income = Net income attributable to owners of parent

2

Summary of the Company
About Inabata:
1. Founded in 1890
Founded in Kyoto in 1890 as Inabata Senryoten – animporter of dyestuffs
The business was later expanded, with the focus on
chemicals

Inabata Dye Shop
(Nishijin, Kyoto)

Asia

EuropeThe Americas
China

2. A globally expanding, multi-faceted
trading company

Japan

India

SE Asia

Around 60 locations deployed across 18 countries
Business functions include market development; manufacturing &processing; logistics; finance etc.
Planning and proposals based on expertise and know-how of products
and markets
3Summary of the Company
3. 5 Business Segments
Operating in 5 segments:Information & Electronics; Chemicals;Life Industry; Plastics; and Housing & Eco Materials
Housing &Life Eco Materials
Industry 4%

7%
Chemicals

8%

FY 3/17
Sales Results
586.6 billion
JPY

Plastics
43%

Information& Electronics

38%

4

Inabata’s Business Spheres
Operating in 5 business segments at about 60 locations, throughout Japan and
18 countries overseas

Inabata GroupJapan

23 bases of operation in 2
countries - China &South Korea

26 bases of operation in 9
countries, including Singapore
and Thailand

5 Areas of Business:

Southeast
Asia

Information & Electronics

ChemicalsLife Industry
Plastics

Northeast
Asia

Housing & Eco Materials

5 bases of operation in 4
countries, including UK& France

EuropeThe
Americas(NB) No. of overseas countries and operation bases valid as of 1 July 2017
(NB) No. of operation bases includes bona fide Inabata & Co., Ltd. affiliates

9 bases of operationin 3 countries,
including USA &Mexico5Inabata’s Wide Range of Capabilities
Highly specialized people
empowered with cutting edge information

6

Inabata’s Strengths [Manufacturing and Processing]Our strategy involves expanding our trading business by swiftly grasping with information regarding
development of new products and market trends by drawing on our worldwide processing bases and trading
company offices.
Plastics compounds: Formed by adding flame
retardants and other additives to raw plastic

Compounding
facility

Plastics
manufacturer
Proposal

Information

Collaboration

Component
manufacturer
Information

Product
manufacturer
ProposalInquiries on plastics andcoating materials

Information onmaterials

Tradingcompany office

Expanding trading businessby leveraging ourmanufacturing capabilities
Trading company capabilities

7Annual Production Capacity of Plastics Compound (Worldwide)

China

Plastics Compound
Business Office(2 sites)
52,200 MT/Y

(Japan)・Shares information
・Coordination of facilities and raw
materials
・Reduces costs by purchasing in bulk

Vietnam
36,000 MT/Y

Philippines

Thailand
38,400 MT/Y

10,800 MT/Y
Building and dismantling of plants in line with customers’ relocation strategy
Providing consistent quality of service, anywhere.

Malaysia
21,600 MT/Y
Indonesia
37,200 MT/Y
211,200 MT/Y: 8 sites in 7 countries (as of Sep. 30, 2017)

Mexico15,000 MT/Y8 Gist of the incident at our German subsidiary** Refers to Inabata Europe GmbH (IKEG), Inabata’s trading company in Europe.

9Gist of the incident at our German subsidiary (background)

Unauthorized sales of solar cell module inventories by an intended buyer (Company X) werediscovered at Inabata’s German subsidiary.



Accounts settlement for 1Q FY3/2018 was postponed in order to conduct verification of theincident and to confirm financial results data. The announcement was delayed from August 14
to September 13, 2017.

Internal Investigation Committee encompassing third parties was established. The committee,
after thoroughly reviewing the facts and analyzing the cause of the incident, compiled aninvestigation report comprising recommendations for preventing recurrence of such an incident.

In response to the investigation report, Committee for the Promotion of Preventing Recurrences
was set up to compose recurrence prevention measures.

The recurrence prevention measures were resolved at a meeting of the board of directors andwas disclosed on September 28, 2017.
Dissemination and thorough inculcation of the recurrence prevention measuresthroughout the Group10

Gist of the incident at our German subsidiary (results of analysis &recurrence prevention measures) Background causes of this incident•

Business expansion was expedited amid slower growth of the European region in comparison with
our other regions.

•Being a relatively young company set up in December 2013 as a European trading base, theGerman subsidiary’s employee education and organizational framework were not fully established
to meet the Group standards.

•

Part of efforts to upgrade the managerial framework of Group companies worldwide was
outpaced by the rapid expansion of overseas business.
Recurrence Prevention Measures
1. Measures in purchasing and inventory management

1-1 Reinforce onsite stocktaking and book inventory practices

1-2 Set criteria for approval to a large quantity purchasing
2. Measures in the operational management

2-1 Disseminate and thoroughly inculcate the Administrative Operations Rules
among overseas subsidiaries
2-2 Ensure thorough education and training on purchasing and inventory
management, credit management and operational management

3. Measures to ensure smoother communication between sales department and administration department
4. Measures to reinforce capability of managing
group companies

4-1 Build new information systems
4-2 Strengthen checking function of the Company’s administration department

11

Gist of the incident at our German subsidiary (effects on consolidated
accounting) Effects on consolidated accounting for the six months ending September 30, 2017•

Increase in costs of sales brought about by an unidentified discrepancy in inventories
of solar cell modules:
12 million JPY•

Recording of an allowance for doubtful accounts with respect to claims against abusiness counterparty in relation to solar cells (= Company X), and other related
claims:Approx. 3.1 billion JPY• Recording of related loss on valuation of investment securities under
extraordinary losses:
0.25 billion JPY
Downward revision of full-year forecasts
Sales

Op. income

Current profit

Net income attributableto owners of parent

Initial forecasts

630.0

12.5

13.0

10.0

1Q forecasts

620.0

11.5

12.0

10.0

2Q forecasts

620.0

9.0

9.5

10.0*

(billion JPY)*

In 3Q, Inabata plans to record approximately 4.1 billion JPY under extraordinary income for gain on sales of investment securities, as disclosed on
December 14 and 30, 2017. Combined with the 2.791 billion JPY recorded up through 2Q, the aggregated sum is expected to be approximately 6.9
billion JPY.

12 Year 1 Progress of Medium-Term Management
Plan “NC2020”13

Positioning of the New Medium-Term Management Plan
NC2020 Our long-term vision has been drawn up as part of our new Medium-Term Management Plan

MissionPeople come first, based on the spirit of “love (ai)” and “respect (kei)”, andtogether we strive towards contributing to the development of society.

VisionTo continually evolve, serving clients and society, through global operations
and meeting their changing needs.

IK Values
Ethics, aspiration, organization, role, symbiosis
Long-term Vision
IK Vision 2030 (envisioning ourselves 10 to 15 years in the future)
Medium-term Management Plan

NC2020 (targets for FY 3/2021)
14

Long-term Vision

IK Vision 2030

What Inabata envisions to be in years around 2025 to 2030

Function：
Further enhancing multi-faceted capabilities such as manufacturing,logistics and finance, in addition to trading.
Scale of operation：
Achieving more than 1 trillion JPY in consolidated sales in early stage.

Sales and operating income generated outside of Japan：
70% or more
Portfolio ：At least one-third of sales and operating income from business segments
other than Information & Electronics and Plastics segments.
15

Medium-Term Management Plan NC2020
Quantitative Targets
Four-year medium-term management plan with FY 3/2021 as its final fiscal year
Quantitative Targets

FY3/2021

Sales

730 billion JPY

Op. Income

15.5 billion JPY

Current Profit

16.0 billion JPY

Net Income

12.0 billion JPY

Net D/E Ratio

0.4X or less

Assumed Exchange Rate(※) Net D/E Ratio = (Int. Bearing Debt – Cash & Deposits) / Equity Capital(※)

USD1= JPY110
16

Medium-Term
Management
Plan NC2020– Key Initiatives
中期経営計画ＮＣ２０２０
重点施策
１

Further broadening and deepening of businessoutside Japan

２

Focus on markets with growth potential and sectorsthat have yet to be developed

・ Continual development of the automotive, life science & medical, and environment & energy sectors
・ Launching new initiatives in the agricultural sector, which includes food business・

３

Further enhancement of information infrastructure essential for
global management

・ Setting priority on what is best as a group
・ Further enhancement of global business management and standardization

４

Stepping up investments to expand trading business・ Making minority investments primarily to expand trading business・ Considering majority investments but with limited risk and scale

５

Continual review of assets and enhancement offinancial standing

６

Establishing global human resources management
17

NC2020 Business Strategy: ① Business environment
Segments
Information&
Electronics•••

Chemicals••Life Industry•••

The liquid crystal-related business poised to increase slightly in the medium-term; panel
display production continues shifting to China
The photocopier and printer business is a mature industry, but there is room for growth withrespect to industrial applications
With solar power generation, expectations are low in Japan but growth persists overseas
The existing Chemicals market in Japan has changed little, and the market for products
handled by Inabata is also limited
Foreign chemical manufacturers are moving toward having trading companies handle theirmarketing in the Japanese market
In pharmaceuticals, markets for new drugs and regenerative medicine have been growing at amoderate pace
In home products, the Japanese market is saturated while markets in emerging economies are
expandingIn food products, industrialized nations are becoming more health and safety conscious, while
food consumption is increasing in emerging economies

Plastics••

Customers and suppliers are becoming increasingly more international
Companies are opting to channel business to trading companies that are able to operate
globally

Housing&•••

The number of housing starts is expected to keep decreasing
The market for renovations is expanding
Major homebuilders and housing equipment manufacturers are increasingly entering overseas
markets

Eco Materials

18

NC2020 Business Strategy: ② Portfolio strategy
Segments
Information&
Electronics••

We will work to maintain steady profits in the liquid display business which will remain amainstay business while the medium-term plan is in effectWe will work to expand new businesses in anticipation of slowing growth in our current
mainstay businesses over the long term

Chemicals•••

Achieve deeper penetration in the automotive parts industry
Expand the coating business with a focus on the automotive industry
Enhance initiatives with foreign chemical manufacturers

Life Industry••

Develop promising opportunities in the business of new drugs and raw materials, and focus
efforts on leading-edge medical fields
In home products and food products, work to increase sales driven by expanding markets,
including those overseas
In food products, continue expansion into business involving production and processing

Plastics••

Expand sales of plastics leveraging the plastic compounds business
Focus on automotive sector and particularly the North American market

Housing&••

Expand sales to overseas markets
Focus on non-housing fields of business•

Eco Materials

19

“NC2020” – Year 1 Progress[Quantitative Targets](billion JPY)

2Q FY3/18
Results(A)

NC2020 FY3/18 Target(B)% Achieved (A)/(B)

304.9

630.0

48.4%

620.0

Op. income

2.9

12.5

23.5%

9.0

Current profit

3.3

13.0

25.9%

9.5

Net income

2.7

10.0

27.3%

10.0

Net worth ratio

39.8%

Exchange rates

USD 1 = JPY 111.04

Sales

－
USD 1 = JPY 110.00

FY3/18Forecast－
USD 1 = JPY 110.00

20

NC2020 Progress (per business segment): (1) Information & Electronics（billion JPY）

NC2020300［Sales］

261.0

229.0

221.0

2Q FY3/18
Results
(A)

229.0

45.6％

219.0

Op. income

–1.33

3.70

－

0.40

✓ Recording of a loss allowance in relation to solar cells led to theoperating loss. Business strategy for solar power generation waspartially revised.
✓ The liquid crystal-related business was solid on the profit front
supported by strong sales of polarizing film materials in Japan, despite
loss of market share in China and Taiwan amid fierce competition on
pricing of large polarizing films.
✓ Focus will remain on production of prototypes and evaluation oflithium-ion batteries, as well as the sale of materials for Chinese andSouth Korean battery manufacturers.

104.3

0
3/21

(Result)(Target)(Goal)

6.0
3.99

4.0

［Operating Income］

3.70

4.40

2.0

0.0

-2.0

3/17

3/18

3/21

(Result)(Target)(Goal)-1.33

FY3/18
Forecast

104.3

100

3/18

% Achieved(A)/(B)

Sales

200

3/17

NC2020FY3/18 Target(B)

Profit drivers

Growth drivers

•

•

•

Parts and materials for liquid
crystal displays
Parts and materials forphotocopiers and printers•

Business related to lithium-ion batteries（Business related to solar power
generation）
Development of business involving “storing,
releasing and saving energy,” in addition to“creating energy”

21NC2020 Progress (per business segment): (2) Chemicals（billion JPY）
80

48.0

2Q FY3/18
Results(A)

NC2020［Sales］

61.0

52.0

NC2020FY3/18 Target(B)% Achieved(A)/(B)

FY3/18
Forecast

Sales

25.8

52.0

49.7％

52.0

Op. income

0.37

1.20

31.4％

1.10

40

25.8
0
3/17

3/18

3/21

(Result)(Target)(Goal)

2.0［Operating Income］ 1.60

1.00

✓ Although sales have been on track, operating income was limited
partially as a result of having recorded an allowance for doubtful
accounts.
✓ Sales to overseas markets of materials and intermediates for the paints
and inks sector increased.
✓ Sales of materials for heat-releasing parts grew steadily, while heatreleasing parts themselves gradually increased for auto use. Focus on
this area will continue.

1.20

1.0

0.37

Profit drivers

Growth drivers•••

Raw materials for automotive parts
Coatings (paints and inks)

•

0.0
3/17

3/18

3/21

(Result)(Target)(Goal)

Heat-releasing parts (Polymatech
Japan Co., Ltd.)New products such as plastic
compounds reinforced with glass wool22

NC2020 Progress (per business segment): (3) Life Industry
NC2020（billion JPY）
80

［Sales］

40.4

2Q FY3/18
Results
(A)

65.0

47.0

NC2020FY3/18 Target(B)% Achieved(A)/(B)

FY3/18
Forecast

Sales

20.7

47.0

44.1％

47.0

Op. income

1.03

2.00

51.6％

2.00

40

20.7
0
3/17

3/18

3/21

(Result)(Target)(Goal)

4.0［Operating Income］✓ Operating income exceeded target due to firm results with business
related to pharmaceuticals and home products.
✓ Profit of pharmaceutical and cosmetics subsidiary in France improved
due to restructuring efforts.
✓ In Hokkaido, cultivation and sales of agricultural products * waslaunched. Contribution to the profit is expected in the next fiscal year
and on.

2.80* Blueberries, pumpkins, garlic, etc.
2.0

1.82

2.00

1.03

Profit drivers

Growth drivers

•

•

•

0.0
3/17

3/18

3/21

(Result)(Target)(Goal)

Materials for pharmaceuticals (newdrugs)
Materials for home products••

Regenerative medicine and otherleading-edge medical fields
Agricultural products, particularly
blueberries
Develop new business models(agriculture and food processing)23

NC2020 Progress (per business segment): (4) Plastics
NC2020（billion JPY）
400

［Sales］

251.8

2Q FY3/18
Results
(A)

308.0

273.0

NC2020FY3/18 Target(B)% Achieved(A)/(B)

FY3/18
Forecast

Sales

141.4

273.0

51.8％

273.0

Op. income

2.68

5.10

52.6％

5.20

200

141.4
0
3/17

3/18

3/21

(Result)(Target)(Goal)

8.0［Operating Income］

5.39

5.90

5.10

4.0

2.68

✓ Sales of resins primarily for our focus area of automotive-related
applications were favorable both in Japan and abroad. Consequently,
both sales and operating income exceeded targets.
✓ Growth in sales and profit in the film and sheet-related business fell
short of target, partially due to adverse effects of unusual weather
patterns.
✓ Automotive-related sales to global users have increased steadily, andsales to Japanese automakers based in Thailand and Indonesia are also
on track to recovery.
Profit drivers

Growth drivers

•

•
•

•

0.0
3/17

3/18

3/21

(Result)(Target)(Goal)

Plastics for the automobile, officeequipment, and home electrics sectors
Film-related products, including
manufacturing and processing

Sales to global users
Further expansion in overseas business(regionally and in different fields)

24

NC2020 Progress (per business segment): (5) Housing & Eco Materials
2Q FY3/18
Results(A)

NC2020（billion JPY）
50

［Sales］

25.0

34.7

28.7

NC2020FY3/18 Target(B)% Achieved(A)/(B)

FY3/18
Forecast

Sales

12.4

28.7

43.5％

28.7

Op. income

0.11

0.30

39.3％

0.20

25

✓ Sales and operating income both fell short of target, amid stagnant
growth in overseas-related and housing-related business.

12.4
0
3/17

3/18

3/21

(Result)(Target)(Goal)✓ Sales of particle boards made from scrap wood grew.

0.8［Operating Income］

0.4

0.26

0.60

0.30

0.11
0.0
3/17

3/18

3/21

(Result)(Target)(Goal)

Profit drivers

Growth drivers•••

Materials for major homebuilders andhousing equipment manufacturers

Overseas markets (flooring, etc.)
Non-housing fields of business(urethane materials, wood chips, etc.)25

NC2020 Investment
Stepping up investments to expand trading business（billion JPY）

Growth investment
Fixed investment
Total

2Q FY3/18
Results

2.59 billion JPY
0.66 billion JPY
3.25 billion JPY

 Major growth investments in 2Q FY3/2018• Chemicals segment:
Investment outlay of 1.67 billion JPY(Automotive and heat-releasing parts business)• Information & Electronics segment: Investment outlay of 0.48 billion JPY(2 investments in the environment & energy-related business)• Plastics segment:
Capital investment of 0.10 billion JPY(Resin compound related)26

NC2020: Sales Transition by Business Segment
Information & Electronics(billion JPY)

ChemicalsLife Industry

Plastics

1200.0

Housing & Eco Mat.

OtherIK Vision 2030

（IK Vision 2030）
1000.0New Challenge 2016

1,000.0

NC 2020

800.0

600.0

400.0

200.0

572.1

577.0

586.6

24.2 0.5 24.8 0.1 25.0 0.1
250.4

251.1

251.8

620.0
28.7 0.3
273.0

660.0
29.7 0.3
285.0

700.0
32.7 0.3

730.034.7 0.3

299.0

308.0

59.0
59.0

65.0
61.0

34.6
52.8

41.0
48.1

40.4
48.0

47.0
52.0

54.0
56.0

209.3

211.6

221.0

219.0

235.0

250.0

261.0

FY 3/15FY 3/16

FY 3/17

FY 3/18

FY 3/19

FY 3/20

FY 3/21(Result)(Result)(Result)(Forecast)(Target)(Target) (Mid-Term Target)

0.0

Future(10 to 15 years ahead)(NB) Sales forecast for FY3/18 revised from 630.0 billion JPY to 620.0 billion JPY (announced on September 13, 2017)(NB) From FY 3/17, crane business previously classified under “Other” is classified under “Information & Electronics.” Segment information for FY 3/16 has been prepared on the27basis of the new classification.

NC2020: Operating Income Transition by Business Segment(billion JPY)

Information & Electronics

ChemicalsLife Industry

Plastics

25.00

Housing & Eco Mat.

OtherIK Vision 2030

230
～240
（IK
Vision2030）
New Challenge 2016

20.00

NC 2020

15.5
15.00

12.6
10.7
10.00

0.28 0.15

11.3

1.03
1.07

4.48

0.42 0.14
4.43
1.52
1.01

1.82

3.83

3.99

9.0

0.20

5.30

0.60 0.20

0.50 0.20
5.60

5.90

0.20 0.10
5.20

1.00
2.00

FY 3/15(Result)

FY 3/16(Result)

FY 3/17(Result)

1.10
0.40
FY 3/18(Forecast)

1.9%

2.0%

2.2%

1.5%

0.00

Operatingincome ratio

0.40

0.26 0.14
5.39

3.73
5.00

14.5

13.5

2.50

2.80

1.30

1.50

1.60

4.00

4.20

4.40

2.30

FY 3/19(Target)FY 3/20
FY 3/21(Target) (Mid-Term Target)

2.0%

2.1%

Future(10 to 15 years ahead)

2.1%(NB) Operating income forecast for FY3/18 revised from 12.5 billion JPY to 9.0 billion JPY (announced on November 14, 2017)(NB) From FY 3/17, crane business previously classified under “Other” is classified under “Information & Electronics.” Segment information for FY 3/16 has been prepared on thebasis of the new classification.
28
・Operating income ratio FY3/17 was corrected on July 2, 2018 as follows. before correction:1.9% , after correction 2.2%

Sales and Operating Income (Since FY2002)(Sales: billion JPY)

(Op. Income: billion JPY)

1200.0

Sales

35.0

Op. Income（IK Vision 2030）
1000.0 30.0

1000.025.0(Target)

800.0

700.0

730.0

20.0

660.0

600.0

561.1 572.1
500.0
466.0

7.6

7.6

200.0

11.3

13.5

12.6

14.5

10.0

10.7

7.9

7.6

15.0

15.5
10.9

400.0
288.9

586.6

479.9

469.0

442.7

577.0

620.0

9.0

7.7

5.0
3.5

2.6

0.0

0.0
3/03

3/04

3/05

3/06

3/07

3/08

3/09

3/10

3/11

3/12

3/13

3/14

3/15

3/16

3/17

3/18

3/19

3/20

NC2020(NB) Revision of full-year forecasts for FY3/18 (announced on November 14, 2017)

3/21

Future(10 to 15 years ahead)29

Overseas Sales and Operating Income (Since FY2002)
Sales(Sales: billion JPY)

Op. Income(Op. Income: billion JPY)

800.0

20.0
（IK Vision 2030）

600.0

400.0

10.0
312.9
284.3 294.0 305.4
211.6

200.0

150.5
72.4

0.0

1.2
3/03

JPY:USD
Exchange
rates

84.1

185.0

186.5

2.3

4.2

3.3 3.6 3.5
1.6

3/05

3/06

3/07

6.1

159.3 152.2

110.2

1.6
3/04

170.9

186.7

4.9 5.1

5.8

3.7 3.9

2.0

3/08

3/09

3/10

3/11

3/12

3/13

3/14

3/15

3/16

3/17

114.1

91.0

92.1

81.49

77.74

79.81

100.17109.76 120.15 108.34

3/18

3/19

3/20

NC2020
119.9

107.1

104.2

118.0

119.1

3/21

0.0

Future(10 to 15 years ahead)30

Corporate Governance (1)・3 outside directors (of 9 directors)
We aim to enhance supervisory functions and increase corporate value by taking
advantage of the outside directors’ extensive experience and wide-ranging insight
into company business.

Outside Directors
・Yoshimasa Takao
Former Executive Deputy Chairman ; Current Advisor– Sumitomo ChemicalCo., Ltd.

・Katsumi Nakamura*
Former Executive Vice President – Renault (France),
Former Chairman of the Board– Calsonic Kansei Corp. ;Current Director (Outside) – Kito Corp.

・Toshiyuki Kanisawa*
Former Representative Director, Executive Vice President ;Current Counselor, - Tokyo Gas Co., Ltd.
(*) Mr. Katsumi Nakamura and Mr. Toshiyuki Kanisawa are registered as independent, outside officers with the TSE.

31

Corporate Governance (2)The following initiatives were implemented to enhance governance

1. Established the Nominating and Remuneration
Committee (voluntary)
Ensures objectivity, fairness and transparency with respect to appointing senior
management, nominating director and audit & supervisory board member
candidates, and making decisions on director remuneration• Current membership: 1 internal director (chairperson) and 2 independent
outside directors• Held four times during FY 3/2017

32

Corporate Governance (3)2. Evaluating the board of directors (self-evaluation)
Objective - To increase corporate value by enhancing effectiveness andtransparency of the board of directors• Evaluations of the board of directors (self-evaluation) are carried out since
FY2015• Third-party evaluation scheduled for FY2017✓ In November 2016, performed an evaluation involving all directors
and audit & supervisory board members using a survey format✓ In April 2017, disclosed analysis/evaluation results in writing

33

Corporate Governance (4)2. Evaluating the board of directors (self-evaluation)◆ Tasks and measures taken(1) Improve discussion of medium and long-term issues by the board of directors
We will develop a framework that enables the board of directors to focus on more important
proposals, so that its members can engage in more extensive discussions on medium- to longterm business issues and other such matters.

(2) Promote succession planning and diversity
Given that such matters are important issues for Inabata, the board of directors and theNominating and Remuneration Committee will engage in more extensive discussions on suchmatters.

(3) Adequate collaborative framework and communication amongst outside directors andaudit & supervisory board members
In March 2017, we established a forum where the outside directors and audit & supervisoryboard members can exchange views. We will continue monitoring the situation to ensurethat a sufficient collaborative framework is established.
34

Corporate Governance (5)3. Strategically Held Shares[Basic Views]
Close business and cooperative relations with various companies are valuable assets to theCompany, and the Company believes the establishment, maintenance and development of these
relations improve the Company’s corporate value in the medium and long term and lead to the benefitof shareholders and investors. Also, as the Company believes the strategic holding of shares of suchcompanies is one effective way to establish, maintain and develop good cooperative relations, theCompany owns strategically held shares.

[Decisions on acquisition, continuous holding and disposal of such shares]
The Company bases its decisions regarding whether to maintain ownership of strategically held
shares on whether such holdings contribute to the establishment of cooperative relations, enhance theCompany’s corporate value in the medium and long term, and lead to the benefit of shareholders andinvestors.
The necessity of such holdings is validated on a yearly basis, and the rationale for such holdings is
explained to the board of directors.
Sales of other securities
FY3/15
FY3/16
FY3/17¥730 million¥1,421 million¥5,150 million
35

Returning Profits to Shareholders (1)Policy for returning profits to shareholders

Total Return Ratio of 30-35% (target)
Total Return Ratio (%) = (amount of dividends + amount of treasury shares acquired) / consolidated net income x 100【 Treasury stock 】●Retirement of treasury shares ●Acquisition of Treasury shares(August 2014)（Details for FY 3/2018）- No. of Shares Retired: 1,660,000

No. of Shares Acquired: 400,000
Value of Shares Acquired: 679,580,600 JPY(equivalent to 2.55% of the total no. ofshares issued and outstanding prior to
retirement)

Acquisition Period:15th Nov.-13th Dec. 201736

EPS Trends
(JPY)

200
162.61
156.25151.91160
137.01 137.20
111.34120

97.45

104.29

80
40

27.08
(355)

(439)

FY 3/12(Result)

FY 3/13(Result)

(604)

(707)

(891)

FY 3/15(Result)

FY 3/16(Result)

FY 3/17(Result)

0
FY 3/10(Result)

FY 3/11(Result)

FY 3/14(Result)

FY 3/18(Forecast)(NB) The figures in brackets at the bottom of the bar chart show the amount of treasury shares acquired during the period(JPY million).

37

Returning Profits to Shareholders (2)Trends in Annual DPS & Shareholder Return Indicators(JPY)

Dividend

50

Dividend Payout Ratio

Total Return Ratio

60.0%

40

40

30

36.9%
30

33
31.1%

31.1%

23

40.0%
30-35％
Target

30.0%

21
20
23.4%
10

21.5%

10

22.1%

50.0%

36
34.8%

26

40

21.9%

24.1%

23.7%

25.6%

24.6%

20.0%
10.0%

(355)

(439)

(604)

(707)

(891)

0

0.0%
FY 3/10(Result)

FY 3/11(Result)

FY 3/12(Result)

FY 3/13(Result)

FY 3/14(Result)

FY 3/15(Result)

FY 3/16(Result)

FY 3/17(Result)(NB) The figures in brackets at the bottom of the bar chart show the amount of treasury stock acquired during the period (JPY million).
(NB) Figures for FY 3/11 include a special dividend of 2 JPY to commemorate the company’s 120 th anniversary.

FY 3/18(Forecast)38

Summary of Financial Results – 2Q FY3/2018

39

Consolidated Results Review – 2Q FY3/2018
Sales

：

304.9 billion JPY+5.6％ YoY

Increased due to effect of yen depreciation and strong performance in theplastics business

2.9 billion JPY

Op. Income：-48.2％ YoY

Decreased substantially due to having recorded an allowance for
doubtful accounts

Current Profit：

3.3 billion JPY -47.5％ YoY

Decreased due to lower operating income

Net Income：

2.7 billion JPY -41.6％ YoY

Decreased due to lower current profit etc., despite an increase in gain on
sales of investment securities
40

Consolidated Results Review – 2Q FY3/2018(billion JPY)YoY Change
Six month Six month
ended Sep. ended Sep.
30,2016 30,2017(A)Sales

Amount％288.8 304.9 +16.0 +5.6%

Full Year
Forecast announced on
May 11, 2017

Full Year
Forecast announced on
Nov. 14, 2017

Achievement(A)/(B)%

(B)

630.0

620.0

49.2%

Op. Income

5.6

2.9

-2.7 -48.2%

12.5

9.0

32.7%

Current Profit

6.4

3.3

-3.0 -47.5%

13.0

9.5

35.5%

Net Income

4.6

2.7

-1.9 -41.6%

10.0

10.0

27.3%

Exchange Rate:
USD/JPY105.20 111.04 +5.84

110.00 110.00
41

Sales Trends
Sales(billion JPY)

1-2Q

Full Year Forecast(as announced on
November 14, 2017)

Full Year

700.0
600.0

620.0
561.1

572.1

577.0

586.6
% Achieved

500.0

49.2％

400.0
300.0

277.3

277.7

292.7

288.8

304.9

FY 3/14

FY 3/15FY 3/16

FY 3/17

FY 3/18

FY 3/17

FY 3/18

200.0

100.0
0.0
(Reference)
Exchange
Rate:
USD/JPY

1-2Q
Full Year

FY 3/14

FY 3/15FY 3/1698.86
100.17103.01109.76121.87120.15105.20111.04108.34 (*Note)110.00* The full-year forecast for FY3/18 has been revised to 620.0 billion JPY (revised on September 13, 2017),
from 630.0 billion JPY (released on May 11, 2017).

(NB) Estimation at time of release.

42Trends in Operating Income
Op. Income(million JPY)

1-2Q

14,00012,00010,936

Full Year

10,774

12,616
11,371

Full Year Forecast(as announced on
November 14, 2017)

9,000

10,000
8,000
6,000

5,712

5,124

5,932

% Achieved

5,679

4,000

32.7％
2,939

2,000
0
FY 3/14

FY 3/15FY 3/16

FY 3/17* The full-year forecast for FY3/18 has been revised to 9,000 million JPY (revised on November 14, 2017), from12,500 million JPY (released on May 11, 2017).

FY 3/18

43

Trends in Current Profit
Current Profit(million JPY)

1-2Q

16,00014,00012,454

Full Year

13,217

13,672
12,257Full Year Forecast(as announced on
November 14, 2017)

9,500

12,00010,000
8,000

6,573

6,907

6,739

6,416

6,000

% Achieved

35.5％
3,369

4,000
2,000
0
FY 3/14

FY 3/15FY 3/16

FY 3/17* The full-year forecast for FY3/18 has been revised to 9.5 billion JPY (revised on November 14, 2017), from
13 billion JPY (released on May 11, 2017).

FY 3/18

44

Trends in Net Income(million JPY)

Net Income

12,000

1-2Q

10,0008,669

Full year forecast(as announced on
November 14, 2017)

Full Year

8,630

9,510

9,687

10,0008,000% Achieved

6,000

4,562

5,086

4,785

27.3％
4,677

4,000

2,730

2,000
0
FY 3/14

FY 3/15FY 3/16

FY 3/17* The full-year forecast for FY3/18 is 10 billion JPY (unchanged from forecast released on May 11, 2017).

FY 3/1845

Reference46Summary of the Company (Business Segment 1)
1. Plastics
Sales(FY 3/17)• Sales of high performance plastics:
For automobiles and motorcycles, home electric appliances, OA
equipment, and electronic components

43% • Sales of plastics, molded plastic products and related materials(251.8 billion
JPY)

For general merchandise, sundry, architectural component, andhealthcare industries• Sales of resins/products for packaging materials and films:
Materials for garbage bags, packaging for industrial use and food
• Manufacture and sales of sheet products for sporting goods
Grip tapes for tennis rackets and baseball bats

etc.

47

Summary of the Company (Business Segment 2)
2. Information & Electronics
Sales(FY 3/17)

38%(221.0 billion
JPY)• Sales of raw materials for polarizing films to polarizing film manufacturers,
and sales of polarizing film to panel manufacturers; also, alignment layermaterials, electronic parts for LCD backlight units, etc.
• Sales of inkjet printer dye and toner ingredients to printer and copier
manufacturers• Materials for solar cells and lithium-ion batteries, LEDs, semiconductormaterials, etc.

48

Summary of the Company (Business Segment 3)
3. Chemicals
Sales (FY 3/17)

8%(48.0 billion
JPY)• Sales of raw materials and additives to the resin, rubber,
textile and other industries• Sales of raw materials and additives for use in paints, inks,
adhesives, paper, etc.

4. Life Industry
7%(40.4 billion
JPY)• Raw materials for pharmaceutical intermediates, insect
repellents and insecticides, air fresheners and deodorants,
and cosmetics• Agricultural products (blueberries, fruit juices, frozen
vegetables) and marine products (ingredients for sushi)

5. Housing & Eco Materials
4%(25.0 billion
JPY)• Lumber and laminated timber• Chemicals, resin materials, stairs, flooring, prefabricatedbath units, kitchens, toilets• Recycled products (particle board made from scrap wood,and wood chips for use in wood biomass power generators)
49

Overseas Sales (including exports from Japan)
The Americas
15.9 billion
4.4%

Europe12.6 billion
3.5%
(JPY)

Northeast Asia
201.4 billion
55.7%

FY 3/17
Overseas Sales
361.5 billion

Southeast Asia
131.5 billion
36.4%(61.6% of consolidated net sales)

Southeast Asia
Northeast Asia
The Americas
Europe50

Trends in Equity Capital/Net Interest-Bearing Debt/Net Debt Equity Ratio

Equity Capital

Net Int. Bearing Debt

Net D/E Ratio (Right-hand Axis)(billion JPY)

(X)

160.0
140.0
120.0
100.0

127.6

126.0

115.0
97.8

0.50

0.60

0.46

0.43
0.37

80.0
60.0

0.80

146.2

0.30
48.8

53.3

55.2

47.0

0.40

43.7

40.0

0.20

20.0
0.0

0.00
End 3/13

End 3/14

End 3/15

End 3/16

End 3/17(NB)
Equity Capital = Net Assets – Stock Acquisition Rights – Non-controlling interests;
Net D/E Ratio = (Int. Bearing Debt – Cash & Deposits) / Equity Capital
51

Trends in Cash Flow(billion JPY)
Operating CF
Real Operating CF*
Investment CF

20
10

0

FY 3/06

FY 3/07

FY 3/08

FY 3/09

FY 3/10FY 3/11

FY 3/12FY 3/13

FY 3/14

FY 3/15FY 3/16

FY 3/17-10-20(million JPY)
Operating CF
Change in WC
Real Operating CF*
Investment CF

FY 3/06-16,071-25,619
9,548
10,966

FY 3/07-1,150-3,873
2,723-3,132

FY 3/08-4,257-14,366
10,109-1,359FY 3/09
11,562
19,700-8,138947

FY 3/10
5,976
-968
6,944
-5,529FY 3/118,495-3,74812,243-1,436

FY 3/12-15,534-20,357
4,823-1,629FY 3/13
19,4003,414
15,986277

FY 3/14-764-15,244
14,480-5,467* Cash flows associated with operating activities – Cash flows associated with change in working capital
Working capital = Trade receivables + Inventory – Trade payables

FY 3/15
8,354-11,179
19,533-3,044FY 3/16
11,866
5,821
6,045
-161

52

FY 3/17
1,840-9,367
11,2074,504



Trends in Share Price

Inabata’s Share Price for the past 10 years
JPY/share53

Trends in Share Price

Inabata’s share price performance vs. TOPIX for the past 10 years(12/2008=100)

Continuing strong yen

The Great East Japan Earthquake (March)

INABATA

Bankruptcy of Lehman Brothers Holdings Inc. (Sep.)

LDP wins majority in the election. Start of the Abe Cabinet (Dec.)

54

 IR queries should be directed to:Inabata & Co., Ltd. Financial Management Office, IR Dept.
TEL:81-50-3684-4007 (Contact:Ms. Ryoko Mitsui)
FAX:81-3-3639-6410
E-mail inabata-ir@inabata.com

 A Cautionary Note Regarding Future Estimates
The data and future predictions contained in this document are based on information available andjudgments applicable at the time of the document’s release. Consequently the data and future forecasts
contained herein may include elements that are subject to change, and the reader should be aware that thisdocument and its contents are no guarantee of future performance.
 Re:Numerical Format
Units of ‘billion’, ‘hundred million’ and ‘million’ JPY in this document use figures that have been rounded
down. Consequently there may be some discrepancy between individual values and total values, or values
showing changes between sets of data.
55