Annual Report 2015
For the year ended March 31, 2015

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
New Products & Topics.............................. 6
Consolidated Financial Statements ............ 8

Financial Highlights

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2015, 2014, 2013, 2012 and 2011

Millions of Yen and Thousands of U.S. Dollars

2011

2012

2013

Net sales ........................... ¥ 141,506 ¥ 151,209 ¥ 158,153
Operating income .............
4,349
4,542
4,703
Ordinary income ...............
4,373
4,600
5,669
Net income .......................
1,375
874
1,318
Net assets .........................
36,83936,94939,870Total assets .......................
115,969
125,469
131,618

2015

2014

2015

¥ 180,392 ¥ 168,833 $ 1,405,185
3,452
28,7303,577
4,648
38,684
5,025
2,736
22,771
2,546
44,984374,398
41,419135,596
1,128,555
135,860

Yen and U.S. Dollars

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

¥ 10.88¥ 6.97¥ 10.51¥ 20.29¥ 22.34$ 0.19Note: The translations into U.S. dollars are based on $1= ¥120.15, the approximate exchange rate on March 31, 2015
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

002011 2012 2013 2014 2015

02011 2012 2013 2014 2015

02011 2012 2013 2014 20152011 2012 2013 2014 2015

Daiken Corporation

Annual Report 2015

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 2014 (April 1, 2014 to March 31, 2015).

Business Progress and Results

2

In regard to the consolidated business results forthe year in review, we achieved net sales totaling¥168,833 million (a decrease of 6.4% comparedwith the previous year), operating income of¥3,452 million (a decrease of 3.5% comparedwith the previous year), ordinary income of¥4,648 million (a decrease of 7.5% comparedwith the previous year) and a net income of¥2,736 million (an increase of 7.5% comparedwith the previous year).
The outlook for the Japanese economy thisfiscal year is positive, with the economy making a
gradual recovery and share prices on the rise.
Despite this, there was a rush for orders prior to
the increase in consumption tax, followed by a dip
in demand once the increased rate was applied,which rather highlighted the weakness of thecurrent recovery. Looking to the future, theeconomic outlook remains unclear.
With regard to the housing market, the rental
housing market is holding up comparatively well
due to various measures taken by parties set toinherit property assets to alleviate the impact ofinheritance taxes. Despite this, there has been an
ongoing reaction that translated into a reduction in
new housing starts, which at 880,000 units in fiscal
2014 was 10.8% down on the previous fiscal year.
The situation remains challenging for the industry.

Daiken Corporation

Annual Report 2015

Under these business conditions, the Daiken
Group has been working hard to adapt ourbusiness constitution so that we do not rely solely
on construction work for new housing starts. Our
mid-term management plan is to target fourdeveloping markets, namely the remodelingmarket, markets overseas and the industrial
materials market, as well as the engineering
market. Combined with this approach, we havealso established a new organization with the aimof developing the company’s business in markets
such as domestic public works and commercial
construstion projects (i.e. non-housing
construction), as well as strengthening ourposition with regard to tabling proposals.
Looking at the four developing markets, theJune 2014 opening of the TDY Fukuoka
Collaboration Showroom – our collaboration with
TOTO Ltd. and YKK AP Inc. – we have createdanother channel in the remodeling market for
direct proposals to and feedback from the end
user. Furthermore, we are moving forward withthe development of our eco-friendly materials,
such as MDF, as well as looking for new uses forthese products and seeking new customers. With
regard to these products, we have been striving to
expand our sales in the industrial materials market
as well as our markets overseas.
In addition to the measures outlined above, wehave been striving to expand our sales in thecomparitively healthy rental housing market, but theincrease in consumption tax negatively impacted the
new housing market as well as the previously solid
remodeling market, where the dip in demand was
greater than anticipated. Our business has becomemuch more challenging as a result. In terms ofprofit, due to rising prices for raw materials, we
tried to rationalize various costs as well as passing
costs off to the sales side, but we were unable toabsorb all of these costs in this manner.

Issues and Policies for the Future
Looking to the future, we have to pay attention
to fluctuations in the financial markets, thedownward swing of the global economy and therising cost of raw materials due to sudden
fluctuations in exchange rates, etc.
With regard to the housing market, we expect
a steady recovery driven by positive change in the
consumer mindset, assisted by government
policies designed to support remodelling andhouse purchases, as well as to anticipate any
future rise in material and construction costs.
Under these business conditions, the Daiken
Group will engage in further cost rationalization,
as well as promoting the use of domestically
produced timber to counter the rising cost of raw
materials, many of which are imported. Somecosts will also be passed off to the sales side as
we strive to secure our profits.
Furthermore, based on GP (Grow/Glow Plan)
25, the long-term vision that the Daiken Groupestablished this fiscal year, the company willengineer a significant shift away fromconventional attitudes and ways of doing
business as it seeks to become a company that is
no longer swayed by fluctuations in the newbuild housing market.
The Daiken Group is looking to reinvent itself –shifting away from its current image as amanufacturer of building materials for housing.
The company wants to become known for morethan the manufacture and supply of building
materials. Daiken is committed to expand into theprovision of raw materials for the manufacture ofbuilding materials, as well as actually engaging inconstruction work using said materials.
The company is also going to move away fromsolely concentrating on housing and will strive toexpand its business in fields such as public andcommercial construction as well as industrial
materials. Finally, the Daiken Group will also aim to
expand beyond the borders of Japan, looking tobecome a comprehensive corporation for building
materials in markets overseas, as well as thedomestic market.
We sincerely hope that we may continue to lookforward to the support and encouragement of allof our shareholders and persons concerned.

3

Masanori Okuda
Representative Director, President
Chief Executive Officer

Daiken Corporation

Annual Report 2015

Review of Operations

Housing Business4

In regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥85,753 million (a decrease of
8.3% compared with theprevious year) and an ordinary
income of ¥2,858 million (adecrease of 46.2% comparedwith the previous year).
With regard to the housingbusiness, the reduction in thenumber of new housing starts
has had a significant effect on
this sector. Having said that, wehave worked to expand oursales turnover in areas such as
the rental housing market,
which has been relatively solid,
along with our aggresive efforts
in recent years in areas such as
housing and facilities for elderly
people.
With regard to the rental
housing market, this market
has seen a rising demand for
products that help prevent
sound and noise pollution tolower floors and neighboring
properties, and sales haveincreased as a result. Looking at
the door market, our new seriesof door products has led toincreased market share. With
regard to the public andcommercial property
construction market, we are
putting our efforts intodeveloping the market as wellas our product line-up. Our
fire-resistant wall materials –made from cedar sourced from
Toyama Prefecture – have been
adopted in the construction of
the new Toyama Station for the
Hokuriku Shinkansen Bullet
Train. Also a governmentbacked initiative to promote theuse of domestic timber has led
to our domestically-sourced

Our wall material installed at a shinkansenbullet train station.

timber flooring featuring our
proprietary WPC processing
technology being chosen foruse in public facilities locatedwithin Minato Ward, Tokyo.
This marks our contribution tothis initiative to promote theuse of domestic timber – and at
the same time we were able topromote our results in this field.
On the other hand, in terms ofour profits, the rising cost of
raw materials has led us torationalize various items as wellas passing costs off to the sales
side. However, these measures
have not completely
ameliorated the effect of thesecosts on our profits.

Our flooring material installed in a hotel guest
room.
A sliding door with sufficient
width to allow for easy
access by wheelchair andcare workers.

Daiken Corporation

Annual Report 2015

Demand continues to grow for
MDF as a flooring material, and
it is increasingly being adopted
as a replacement for plywood

Eco-BusinessIn regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥55,699 million (a decrease of
7.5% compared with theprevious year) and an ordinary
income of ¥1,505 million(compared with an ordinary lossof ¥544 million for the previousyear).
With respect to our
eco-business, looking at MDF,
despite the fact that demand for
MDF has dropped off due to thedecrease in new housing starts,
sales of MDF as a flooringmaterial have grown, whichmeans sales of MDF as a whole
have come in at the same level
as the previous year.
With regard to public andcommercial facilities, we havedeveloped a proprietary

earthquake-resistantceiling method that
we call Daiken Hybrid
Ceiling, which is bothlabor-saving and only requires ashort period of construction. We
have recently started including
Daiken Hybrid Ceiling in our
proposals to customers.
With regard to tatami mat
surfaces, we continue to expand
our market share due to ouradded capabilities on both thesales and manufacturing side.
We also launched a new
product called ZIPANG Kokochi
Waza, an interior tatami productthat requires no professional
tatami processing technology, inline with our plans to stimulate
the tatami market as part of theliving environment.
Furthermore, during theprevious conslidated fiscal year

‘ZIPANG Kokochi Waza’ is ourtatami mat product for interior
spacesWood chips (left) and rock wool (right) utilized as
raw materials in our eco business.

we had to pay out on repairs
due to a defective product,
which impacted negatively on
our earnings for that term, socompared to the previous year
our profits have improved.

Engineering BusinessIn regard to the consolidated
business results in this field forthe fiscal year in review, weachieved net sales totaling¥16,486 million (a decrease of
6.9% compared with theprevious year) and an ordinary
income of ¥285 million (adecrease of 5.7% comparedwith the previous year).
With regard to ourengineering business, looking
at interior work centered on thecondominium, public andcommercial facility market, wemanaged to increase our orders
in important areas such as theTokyo metropolitan area, but
regarding construction work

focused on the remodellingmarket, our results in this
sector suffered due todecreased demandfollowing the increase in
consumption tax.
On the other hand,regarding profits, theshortage of skilled
manpower has led to higher
labor costs, so we havebeen 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 Type system ceiling product

Our Grid Type systemceiling product

Daiken Corporation

Annual Report 2015

5

New Products & Topics

New productInterior Tatami ZIPANG Kokochi Waza – Tatami Surface
using Machined Japanese Washi Paper

6

In June 2014, the company begansales of ZIPANG Kokochi Waza –its tatami surface mat using
machined Washi paper for a‘modern Japanese-style room’ –offering two different types of
product: spreading tatami
matting, or laying tatami mats forfree placement in a room. Bothtypes offer color coordination withmodern flooring designs, with six
color patterns offered in the initial
product line-up.
Machined Washi paper has
outstanding characteristics – it isapprox. 3 times the strength ofigusa rush reed, the colors do notfade easily and it is not a
hospitable environment for ticks
and mould. The standard thicknessof tatami mats is 55mm, but
ZIPANG Kokochi Waza (spreadingtype) is 12mm thick, which is thesame as conventional flooring,which makes it a simple productto transform a western room intoa Japanese-style room.
On the other hand, the laying
tatami mats for free placement ina room allow
for thecreation of aJapanese space
simply byplacing thesemats down.
This is an easy
and fun way totransform partof a livingroom into aplace to relax

and drink green tea, or a safe andcomfortable place for the kids toplay.

ZIPANG Kokochi Waza - an installation image.

Six color pattern variations.

New productFit Shelf – Shelf storage that fits for your living spaceand lifestyle – launched across JapanIn February 2015, Daiken begansales of Fit Shelf, a shelf-basedstorage system that aims to deliverlarge volumes of storage using
shelves that fit perfectly into any
available room space.
Fit Shelf features a simple
structure that consists of the
shelves themselves and the verticalboards that hold the shelves inplace. Both the width of the
shelves and the height of thevertical boards can be adjusted tomeet the needs of the space inquestion. One simply chooses theappropriate combination and sizeof shelves for the space, which arethen assembled to form a perfect
fit. The advantages of Fit Shelf isthe freedom to install theseshelves in the way you want tomatch your lifestyle. Also, due totheir simple design, Fit Shelf does
not take up large amounts ofspace, nor does it take a long timeto install – which makes it perfectfor remodelling work.

Fit Shelf

Daiken Corporation

Annual Report 2015

Topics

The 50th Anniversary of the launch ofRock Wool Decorative Sound-Absorption Board
In September 2014, Daiken marked
the 50th anniversary of the launchof the rock wool decorative
sound-absorption board (known inJapan as Dai-Lotone and in overseas
markets as Exceltone) that was firstmanufactured and sold by thecompany 50 years previously. At
that time, Japan was undergoing aperiod of rapid economic growth,and the demand for fire-resistantbuildings was increasing. To meetthis demand, Daiken bagan the
manufacture and sale of the firstwet-type rock wool decorative
sound-absorption board in Japan.
Since then, the company has
developed new manufacturing andprocessing techniques, as well as
new functions for this popular
product, which has been adapted tomeet a variety of needs over the
past 50 years. Over the years, rockwool decorative sound-absorption

board has been a versatile ceilingmaterial in office buildings,
whenever a fire-resistant material
has been required, as well as
contributing to the creation of asafe and comfortable living andworking environment.
This rock wool decorative
sound-absorption board is defined
as a mineral fiberboard,
manufactured from a raw material
called slagwool, made from slag
which is produced as a by-productof steelmaking, and then processed
into a fiber. As it is a mineral, it isdifficult to burn, as well as being
lightweight,
making it

ideal for the manufacture of light,
fire-resistant boards. Over the years
this product has been used as aceiling material in office buildings,
schools and educational facilities, aswell as conventional housing. Dueto its excellent sound absorption
qualities, sound properties in aroom are adjusted and in particular,when it comes to general housing,rock wool decorative soundabsorption board is ideal as a ceilingmaterial for housing , due to its
ability to absorb and emit moisturein the air, which makes for apleasant, drier living envionment.

7

From left to right: Dai-Lotone/Exceltone, the slag wool raw material, Dai-Lotone/Exceltone in an
office environment and lastly as a ceiling material in residential housing

TopicsAn outstanding evaluation for our plans and contingencies
regarding business continuity management
In March 2015, Daiken
implemented a round of capitalprocurement using the SMBC
Business Continuity Evaluation
Private Bond System, and as a result
the company’s BCM (BusinessContinuity Management) –related
activity planning, training andimprovement activities received an
outstanding evaluation for theircontent and balanced approach.
Areas that were evaluatedpositively① In each business division, activity

plans related to BCM are settled
and approved, and the current
situation is in line withexpectations. Corrective
measures as applied to said plans
have been executed.
② Situations etc. related to BCM are
acknowledged and evaluated aspart of the safety diagnoses thatare regularly undertaken for eachdivision. processes acknowledge
and include BCM.
The SMBC Business Continuity
Evaluation Private Bond System uses

a proprietary evaluation system
based on that developed jointly byInterRisk Research Institute &Consulting, Inc. and Sumitomo
Mitsui Banking Corporation. Basedon these evaluation standards, theprivate bond system will evaluate
the status of construction,
operations, etc. of a company’s
Business Continuity Plan and its
Business Continuity Management
System (BCMS). Said company
would then be able to raise funds infavorable conditions following
positive results of this evaluation.

Daiken Corporation

Annual Report 2015

Consolidated Financial Statements

Consolidated Balance Sheets

Daiken Corporation and Consolidated Subsidiaries
March 31, 2015 and 2014
Millions of Yen
2014
2015

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

8¥75,65238,451
2,345
19,34260,13999¥ 135,890

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

64,97829,492
94,471

NET ASSETS
Shareholders’ equity......................................................................
Accumulated other comprehensive income ...................................
Minority interests ..........................................................................
Total net assets...................................................................................
Total liabilities and net assets .............................................................

35,4991,655
4,264
41,419¥ 135,890¥ 70,931 $Annual Report 2015

2015

590,353

38,565
320,973
2,378
19,791
23,648
196,820
64,592537,59472
599¥ 135,596 $ 1,128,555

67,28623,32590,611560,016
194,132
754,148

36,177301,098
4,396
36,5874,410
36,70444,984374,398¥ 135,596 $ 1,128,555

Note: The translations into U.S. dollars are based on $1= ¥120.15, the approximate exchange rate on March 31, 2015

Daiken Corporation

Thousands of
U.S. Dollars

Consolidated Statements of Income

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Thousands of
U.S. Dollars

Millions of Yen
2014
2015

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.........................................................................................

¥ 180,392

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

2015

¥ 168,833$ 1,405,185
131,657
1,095,771
37,175309,404
33,722
280,665
3,452
28,7301,911
15,905
716
5,959
4,648
38,684
1,016
8,456
4,291
35,713
1,373
11,427(1,645)(13,691)
3,018
25,118281
2,338¥
2,736 $
22,7719

Consolidated Statements of Cash Flows

Daiken Corporation and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Thousands of
U.S. Dollars

Millions of Yen
2014
2015

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

¥

9,663

¥

2015

9,299

$ 77,394

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

(5,168)(4,072)(33,890)

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

(1,054)60(2,635)74(21,930)

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...............................................................................................

3,500
10,596

2,665
14,09622,180117,320–

12

99

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

¥ 14,096¥ 16,774$ 139,608

Daiken Corporation

615

Annual Report 2015

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