Annual Report 2014
For the year ended March 31, 2014

DAIKEN CORPORATION

Company Profile

Since the founding of the company in September 1945, the corefocus of our business has been the development and provisionof materials for residential housing and construction. Daiken’s
corporate activities cover a broad and diverse range, including
the manufacturing and sales of materials for residential housing
and construction as well as materials for industrial use. These
activities have led Daiken to grow into one of the world’s
foremost comprehensive manufacturers of building materials.
Through its highly-motivated research and development, Daiken
is continuously working with the latest materials, concepts andtechnologies. With a core of technological and material-supply
capabilities for building materials, the very basis for the housing
field in which Daiken specializes, Daiken shall continue toprovide its customers with new generations of technologies andproducts.

Contents
Financial Highlights.................................... 1
A Message from the President................... 2
Review of Operations................................. 4
Topics........................................................ 6
Consolidated Financial Statements ............ 8

Financial Highlights

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2014, 2013, 2012, 2011 and 2010

Millions of Yen and Thousands of U.S. Dollars

2010

2011

2012

Net sales ........................... ¥ 140,936 ¥ 141,506 ¥ 151,209
Operating income .............
3,010
4,349
4,542
Ordinary income ...............
2,819
4,373
4,600
Net income .......................
511
1,375
874
Net assets .........................
36,66336,83936,949Total assets .......................
123,862
115,969
125,469

2014

2013

2014

¥ 158,153 ¥ 180,392 $ 1,753,421
3,577
34,768
4,703
5,025
48,843
5,669
2,546
24,747
1,318
41,419402,595
39,870135,860
1,320,567
131,618

Yen and U.S. Dollars

Net income per share ........

¥ 4.01¥ 10.88¥ 6.97¥ 20.29¥ 10.51$ 0.20Note: The translations into U.S. dollars are based on $1= ¥102.88, the approximate exchange rate on March 31, 2014
Note: Net income per share is computed based upon the weighted average number of shares of common stock outstanding
during each fiscal year.

1

Net sales

Net income

Total assets

Net income per share(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

(Yen)

200,000

3,000

180,000

24

180,000

2,500

150,000

20

160,000

2,000

120,000

16

140,000

1,500

90,00012

120,000

1,000

60,0008

100,000

500

30,0004

002010 2011 2012 2013 201402010 2011 2012 2013 201402010 2011 2012 2013 20142010 2011 2012 2013 2014

Daiken Corporation

Annual Report 2014

A Message from the President

We herein present our shareholders and persons
concerned a report on the consolidated businessresults for the Daiken Corporation Group in fiscal
year 2013 (April 1, 2013 to March 31, 2014).

Business Progress and Results

2

In regard to the consolidated business results forthe year in review, we achieved net sales totaling¥180,392 million (an increase of 14.1%
compared with the previous year), operating
income of ¥3,577 million (a decrease of 24.0%
compared with the previous year), ordinary
income of ¥5,025 million (a decrease of 11.4%
compared with the previous year) and a net
income of ¥2,546 million (an increase of 93.1%
compared with the previous year).
The outlook for the Japanese economy thisfiscal year is positive, due to several different typesof policies implemented by the government andthe Bank of Japan, and the expectation of whatthese policies might bring has resulted in rising
share prices, as well as improving corporate
profits and consumer spending. The general
sentiment is that the economy is making a
gradual recovery.
With regard to the housing market, the numberof new housing starts during the period underreview significantly outstripped the number
recorded for the previous fiscal year, due to thenumber of people seriously considering buying a
new home, who foresee the coming increases ininterest rates and consumption tax, as well as the
improving economic situation.
Under these business conditions, the Daiken
Group has been working hard to ensure steadysupply of our products to meet positive domestic
demand that has outstripped expectations. As aresult our sales have also shown steady growth.
Furthermore, we are moving forward with ourapproach to secure a share of markets that wehave targeted for growth as part of our mid-term
management plan, namely the remodeling

Daiken Corporation

Annual Report 2014

market, markets overseas and the industrial
materials market, as well as the engineering
market.
In terms of profit, we have made efforts tosecure our gross profit by making progress to
reduce costs in order to counter the effect ofrising prices for both imported products and raw
materials. On the other hand, with regard to
selling, general and administrative expenses, we
saw an increase in these costs during the period
under review due in part to repair work that we
had to undertake on some secondary decorative
board products that were found to be defective.

Issues and Policies for the Future
Looking to the future, fluctuations in the financial
markets and the downward swing of the global
economy as a whole means that we have to pay
attention to sudden fluctuations in exchange rates
and the rising cost of raw materials due to thehigh price of crude oil. Furthermore, the first halfof fiscal year 2014 saw a rise in the rate of
consumption tax, which we expect to cause a dip
in demand to follow the last-minute demand prior
to the increased rate taking effect. In this regard
the direction of the domestic economy is a cause
for concern.
With regard to market for new housing, eventhough demand for new homes is rising in theface of anticipated rises in interest rates, materialand construction costs as well as a further rise in
consumption tax, in addition to a series ofgovernment policies, it is expected that thissituation will inevitably lead to a reduction in thenumber of new housing starts going forward. On
the other hand, looking at the remodeling market,
we do not expect any major shrinkage in this
sector due to government policies that incentivize
remodeling as well as the increase in the volume
of housing stock that is reaching an age where
remodeling work becomes appropriate.
Based on our mid-term management plan, theMasanori Okuda
Representative Director, President
Chief Executive Officer

3

Daiken Group will further commit management
resources to actively match expanding andgrowing markets, as we strive to reinforce ourmanagement systems going forward. In theremodeling market, we plan to expand our sales
through developing our business by catching theeye of the consumer through our showrooms, aswell as reinforcing our order-receiving systems
that we use for our construction materials andworks. Overseas, we are moving forward withincreasing our sales in the ASEAN region. In thefield of industrial materials, we will further
strengthen our supply of our eco-friendly
materials, centering on MDF, to ensure stability,
as well as looking for new uses for theseproducts, in addition to developing newmaterials.

Looking at our engineering business, we arelooking to expand the scope of our business
operations from our core work in ceilings andinteriors as a way of growing this business going
forward.
Moreover, as part of reinforcing our systems,
we will carry out further reforms of our logistics
and distribution system as well as a full review ofour procurement costs, all with the aim of
maximizing profits.
We sincerely hope that we may continue tolook forward to the support and encouragementof all of our shareholders and persons concerned.
August 2014

Daiken Corporation

Annual Report 2014

Review of Operations

Housing BusinessIn regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥93,552 million (an increase of
12.5% compared with theprevious year) and an ordinary
income of ¥5,314 million (anincrease of 82.3% comparedwith the previous year).
With regard to the interiormaterials business field, where
our focus is on flooringmaterials, we have seen an
increase in the adoption of our
products in the condominium,
rental and detached housemarkets, as well as an increasein sales centering on ourhighly-functional flooringmaterials for the remodelingmarket.
With regard to our homefurnishings and equipment
business, which focuses mainly
on interior doors, storage andhome fixtures and fittings, wehave registered increased sales
due to the healthy number of
new housing starts as well as
the remodeling market.
Our new ‘hapia Series’ of
products that aim to provide
high-quality living spaces
together with ‘Shiko’ – ourhighest-grade flooring product,

part of our ‘Japanese Wood
Series’, which uses
domestically-sourced timber toprovide decorative surface
materials, both went on saleduring the period under review,
as we move to reinforce theproducts we can offer to ourmore discerning customers.
Furthermore, we have added
to the product line-up of our‘Omoiyari Series’ of building
materials for housing targeted
at elderly customers, which has
also contributed to our sales
growth in these markets.

4

Our highest-grade
flooring product‘Shiko’, part of our‘Japanese Wood
Series’, reproduces
the texture of solidwood

Our ‘MiSEL’ storage can be fitted in a number of configurations, resulting inan elegant and fresh feel to any living space
Our standard-type ‘hapia basis’ products offer enriched
functionality for doors, storage spaces, flooring and partitions

Daiken Corporation

Annual Report 2014

Eco-BusinessIn regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥60,184 million (an increase of
27.0% compared with theprevious year) and an ordinary
loss of ¥544 million (comparedwith an ordinary income of¥2,596 million for the previousyear).
With respect to our
eco-business, which is focusedon materials, sales have grownsteadily over the period underreview. Looking at MDF, themarket for MDF as a flooringmaterial has grown on the backof increased demand as well as
increased adoption of thisproduct as a replacement for
plywood.

With regard to
Dailite and insulation
board, the strengthof the new housing
starts has driven a rise indemand, and we have pushedforward in securing newcustomers and new uses forthese materials; as a result sales
have grown accordingly.
With regard to tatami mat
surfaces, we are enjoying
positive sales due to the soundreputation and uniquecharacteristics of the raw
material, namely machine-madewashi Japanese paper, such as
peace of mind, safety anddurability. We have added toour capabilities on both thesales and manufacturing side,which has helped us register

Demand continues to grow for
MDF as a flooring material, and
it is increasingly being adopted
as a replacement for plywood‘ZIPANG Kokochi Waza’ is ourtatami mat product for interior
spacessteady sales growth in this
sector. On the other hand, withregard to our secondary
decorative board, we had to pay
out on repairs due to a defectwith this product, which
impacted negatively on ourearnings.

Engineering BusinessIn regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥17,714 million (a decrease of
1.9% compared with theprevious year) and an ordinary
income of ¥302 million (anincrease of 58.4% comparedwith the previous year)
With regard to thecondominium, building andshop market, we are enjoying aperiod of stable sales even withthe completion of large-scaleconstruction projects in theTokyo metropolitan area as wellas the Kinki district.
Moreover, rising costs
due to a shortage of
construction workers
has led us to move fromlooking to expand oursales to emphasizing
profitability by
selectively choosing
orders for the company,
and we are working to improve
our management systems ateach work site as well as
striving to secure skilled
manpower, thus working toincrease our profits in this
sector.

Our Line Typesystem ceilingproduct

Our Grid Type system ceiling product

Daiken Corporation

Annual Report 2014

5

Topics

Establishing a construction and sales company
in Indonesia through a joint venture witha local business
Daiken has targeted South-East
Asia as one of the most promising
growth markets in the world, due
to its increasing population andongoing economic development,
and the company plans to work
towards expanding its supply andsales of housing materials in thearea. In January 2014, in responseto the rapid growth in housingdevelopments for the affluent andmiddle-class sections of Indonesian6society, the company moved toestablish PT. SUSETA DAIKENINDONESIA (hereinafter called SDI)
as a supplier and constructor ofinterior building materials.
SDI was formed as a joint
venture with Pt. Sumber Setia
Abadi, a local company thatimports and sells building
materials. SDI will provide local
companies, major construction
companies and developers

originating from Japan withproposals for interior building
materials, including fittings, as wellas supplying products andconstruction works. Furthermore,by delivering high-quality
construction management thatutilizes Daiken’s superior technology
and know-how, SDI will distinguishitself from local competitors andexpand its sales of interior building
materials in the Indonesian market.

Daiken secures the No. 1 spot in two categories in the“Adoptable Building Materials andEquipment Manufacturer Rankings 2013”
The “Adoptable Building Materials
and Equipment Manufacturer
Rankings 2013” were published in
the general architectural magazine
Nikkei Architecture (in theNovember 25, 2013 issue) and thehome builder information magazine
Nikkei Home Builder (in the
December 2013 issue). The ranking
is calculated following a survey ofbuilding and architecture

professionals. Building materials andfixtures are separated into a numberof different categories, and theaforementioned building andarchitecture professionals are
solicited for their opinions withregard to individual manufacturers
and products that they themselves
would use.
Daiken is proud to acknowledge
that the company was chosen as the• Nikkei Architecture - Ranking
Responses were collected from 1701
professionals holding the grade-one
architect qualification across 52 categories
of building materials and fixtures.

Composite flooring• Nikkei Home Builder - Ranking
This magazine featured 34 categories thatcovered its dedicated readership, namely
home building. 1603 home building
professionals submitted their answers to
the survey.
Exterior wall base material Dailite(durable surface material)

Daiken Corporation

Annual Report 2014

No. 1 ranked manufacturer in two
categories across both magazines,
namely in the Composite Flooring
category and in the Inorganic
Durable Surface Materials category.

Cooperating with and contributing to promoting the Useof Trees Movement; Receiving a Certificate of Gratitude
from the Minister of Agriculture, Forestry and Fisheries
The Use of Trees Movement is anational campaign promoted by
the Forestry Agency in order toreduce the amount of CO2
emissions in line with the Kyoto
Protocol. The movement aims toincrease the amount of CO2
captured by trees through active
use of domestically-sourced
timber, which in turn will
invigorate mountain village
communities, as well as
encouraging the proper
maintenance and care of forests.
Daiken has developed products
such as the ‘Japanese Wood
Series’, a concept whichshowcases the brand and added
value of domestically-sourced
wood, as well as the ‘ForesHard
Series’, which is a range offlooring materials made fromdomestically-sourced plywood.
Both of these product lines actively
promote the use of domestic
timber. Daiken is also actively
involved in PR and advertising to
spread the message regarding thecharm and necessity of using
domestically-sourced timber.
In recognition of these efforts,
on October 1, 2013 Daiken waspresented with a Certificate of
Gratitude in the Category for

Promoting the Use ofDomestically-Sourced Timber from
the Minister of Agriculture,
Forestry and Fisheries at the Use of
Trees
Movement2013 Awards
Ceremony.

7

Daiken has drawn plaudits for its outstanding initiatives
and information disclosure related to its corporate
management approach towards sustainability
Daiken is the first company in thebuilding materials industry to receive
a positive evaluation from the SMBC
Sustainability Evaluation Fundregarding its sound approach toEnvironmental Social Governance(ESG) and its readiness to disclose
information.
Items that received especially
positive evaluation
1. The company’s environmental
conservation activities andBiomass Boiler (Takahagi Plant)

management plan are wellintegrated in order to promote
the effective use of wood orunused resources.
2. Biomass energy has been actively
introduced as a measure to
reduce the amount of greenhousegas emissions due to its businessactivities.
3. A committed approach to thecustomer that centers on ensuringsafety and product quality.
The SMBC Sustainability

Biomass Boiler (Okayama Plant)

Evaluation Fund is a set ofstandards that have been jointly
formulated by the Sumitomo
Mitsui Banking Corporation and
the Japan Research Institute. A
company’s approach to ESG,
specifically in terms of
information disclosure andsustainability, are evaluated andbased on the findings of thisevaluation, funding conditions arethen set.

‘Insulation Board’:
Tatami matting thatmakes use of wood
resources

Daiken Corporation

Annual Report 2014

Consolidated Financial Statements

Consolidated Balance Sheets

Daiken Corporation and Consolidated Subsidiaries
March 31, 2014 and 2013
Millions of Yen
2013
2014

ASSETS
Current assets ...............................................................................
Noncurrent assets:
Property, plant and equipment ................................................
Intangible assets ......................................................................
Investments and other assets ...................................................
Total noncurrent assets ............................................................
Deferred assets..............................................................................
Total assets.........................................................................................

8¥

71,88938,5492,192
18,85359,596132¥ 131,618

LIABILITIESCurrent liabilities ...........................................................................
Noncurrent liabilities .....................................................................
Total liabilities.....................................................................................

64,904
26,84391,747NET ASSETS
Shareholders’ equity......................................................................
Accumulated other comprehensive income ...................................
Minority interests ..........................................................................
Total net assets...................................................................................
Total liabilities and net assets .............................................................

33,894
2,107
3,868
39,870¥ 131,618

Daiken Corporation

Annual Report 2014

¥ 75,652 $Thousands of
U.S. Dollars
2014

735,342

38,451
373,746
2,345
22,793
19,342
188,005
60,139584,55499962¥ 135,890 $ 1,320,859

64,97829,492
94,471

631,590286,664
918,263

35,499345,052
1,655
16,086
4,264
41,446
41,419402,595¥ 135,890 $ 1,320,859

Consolidated Statements of Income

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Thousands of
U.S. Dollars

Millions of Yen
2013
2014

Net sales.............................................................................................
Cost of sales..................................................................................
Gross profit ........................................................................................
Selling, general and administrative expenses .................................
Operating income...............................................................................
Non-operating income ..................................................................
Non-operating expenses................................................................
Ordinary income.................................................................................
Extraordinary income ....................................................................
Extraordinary loss ..........................................................................
Income before income taxes and minority interests ............................
Total Income taxes ........................................................................
Income before minority interests ........................................................
Minority interests in income ..........................................................
Net income.........................................................................................

2014¥ 158,153¥ 180,392

119,12139,031
34,327
4,703
1,834
869
5,669
2,091
5,387
2,373
487
1,885
566
¥
1,318

137,693
42,69939,121
3,577
2,193
745
5,025
106
514
4,617
1,699
2,917
371
¥
2,546

$ 1,753,421
1,338,384
415,036
380,258
34,76821,316
7,241
48,843
1,030
4,996
44,877
16,51428,353
3,606$
24,747

9

Consolidated Statements of Cash Flows

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Thousands of
U.S. Dollars

Millions of Yen
2013
2014

Net cash provided by (used in) operating activities ...................................

¥

2,624

¥

2014

9,663

$ 93,924

Net cash provided by (used in) investing activities.....................................

(2,033)(5,168)(50,233)

Net cash provided by (used in) financing activities ....................................
Effect of exchange rate change on cash and cash equivalents ..................

224
75(1,054)60(10,244)

Net increase (decrease) in cash and cash equivalents ................................
Cash and cash equivalents at beginning of period....................................
Increase in cash and cash equivalents from newly consolidated
subsidiary...............................................................................................

891
9,630

3,500
10,59634,020102,99374––

Cash and cash equivalents at end of period .............................................

¥ 10,596¥ 14,096$ 137,013

Daiken Corporation

583

Annual Report 2014

DAIKEN CORPORATION
Registered Head Office:1-1, Inami, Nanto City, Toyama 932-0298, Japan
Phone: +81-763-82-5850
Operational Headquarters:
22F, Dojima Avanza
6-20, Dojima 1-chome Kita-ku, Osaka 530-8210, Japan
Phone: +81-6-6452-6000