TOYO KANETSU K.K.
Annual Report 2018
For the year ended March 31, 2018

CONTENTS

To Our Shareholders

1

A History of Toyo Kanetsu

2

Lines of Business3

Consolidated Financial Highlights

4

Analysis of Operating Environment and Results

5

Business Risks

6

Board of Directors, Audit & Supervisory Committee Members
and Executive Officers

7

Corporate Governance System

7

Medium-Term Business Plan

8

Overseas Delivery Record

12

Financial Section

14

Consolidated Balance Sheet

14

Consolidated Statement of Income and Comprehensive Income

16

Consolidated Statement of Changes in Equity

17

Consolidated Statement of Cash Flows

19

Notes to Consolidated Financial Statements

21

Independent Auditor’s Report

51

Corporate Data

53

Directory53

To Our Shareholders

The Toyo Kanetsu K.K. (TKK) Group was established in 1941 under the company creed: “Be creative, begood for the society.” Based on the technology we have built up since that time, we operate mainly in the
Plant & Machinery Business and the Material Handling Systems Business. By supplying customers in various
industrial fields with optimal products, systems, and services, we have earned their approval and trust while
contributing to society and the environment.

Fiscal 2018 (the year ended March 31, 2019) was the final year of the Group’s medium-term business plan(fiscal 2016–2018) that was drawn up in fiscal 2016. Not satisfied with only achieving the consolidated
targets set out in this plan, we aim to go beyond it and implement the vision we have formed for 2020:
contributing to enhancing the infrastructure of the societies of the future, centered on advanced energy andlogistics technology. With passion and resolve, we will use the year to come to get a foothold for a further
leap ahead.

Going forward, we will maintain our spirit of “Challenge & Change,” continuing to take up new challenges toachieve the continued development of the Group and to improve corporate value. In closing, I would like tothank you in advance for your understanding and continued support of our efforts.

June 2018

Toru Yanagawa
President
and Representative Director

1

A History of Toyo Kanetsu
Our company was established in 1941 as Toyo Kanetsu Kogyo K.K. Having begun
with manufacture and sales of industrial furnaces, we then launched a plant andmachinery business.
Subsequently, during the postwar reconstruction period, in 1950 we became the firstcompany in Japan to manufacture and sell the fully welded tanks that were taking theplace of riveted tanks. Furthermore, during the high-speed economic growth era webegan expanding abroad early on, and manufactured a large number of tanks in the
Middle East and Asia.
For LNG, which was attracting attention as a form of clean energy, we manufactured
a super-low-temperature storage tank in 1969. As a result, we developed into a
manufacturer capable of making everything from ambient temperature tanks tosuper-low-temperature storage tanks.
Moreover, we were one of the first to tackle the use of machines for automatic
welding of tanks. At our production plant in Batam, Indonesia, we have managed tomake the manufacture of high-quality tanks with strong cost control a reality.
Currently, we have manufactured 5,700 tanks in Japan and overseas, and in terms of number of tanks manufactured, weare No. 1 in the industry overseas. We have the second largest market share in Japan for LNG tanks.
Our materials handling business products, manufacture and sales of which began in 1955, made freight shipping easier,users and operators and were well received, leading to rapid growth for this segment. The baggage handling system that
we provided to Fukuoka Airport in 1971 has been supplied to more than 65 locations in Japan and to 17 airports
overseas, giving us a market share in Japan of more than 90%. In 1981 we developed and launched the first digital
picking system in Japan, and have continued to support the co-op industry ever since. Currently we have a market shareof 70%, and have maintained our No. 1 position.
Our stance is to thoroughly learn the customer’s requirements, understand it, and sell not products but functions. While
gaining a grasp of everything from the customer’s business vision to the operational expertise at each of their distribution
locations, we work with them to find ways to respond in a rapidly changing business environment, and in doing so haveintroduced many innovations.
We will use the spirit of taking up new challenges that we have carefully nurtured since the founding of the Company tocontinue to evolve.
The core welding technology used in our Plant & Machinery segment is shifting from automatic welding to remote welding.
Being able to perform high-quality construction work 24 hours a day from an office’s location separate from the site is
the future that we are striving to achieve.
In addition, in anticipation of the birth of a full-scale hydrogen society, we have introduced a schedule for developing
large hydrogen storage tanks.
In the Material Handling Systems segment, we are working to provide predictive maintenance services that use IoTtechnology and AI, contribute to labor-saving by using robots on distribution sites, and use augmented reality (AR) to
achieve highly efficient and error-free picking.
The mission of the Company is unchanged. However much society changes going forward, the Company will continue
to support infrastructure, and in doing so contribute to society.

2

Toyo Kanetsu K.K. Annual Report 2018

Lines of BusinessToyo Kanetsu K.K. (President: Toru Yanagawa) was established as Toyo Kanetsu Kogyo K.K. in May 1941 and soon
began producing and selling industrial furnaces. Currently, the Material Handling Systems and the Plant & Machinery
segments are the two pillars of our operations.

Material Handling
Systems Business

Plant & Machinery
Business

Other Business

Net Sales

Net Sales

Net Sales

Operating Profit¥914 million

Operating Profit

Operating Profit¥25,939 million ¥1,931 million¥10,030million ¥-178 million¥6,470 million

Development, design, andinstallation of distribution systems,
especially those for sorting,picking, and conveyance, as well
as all types of maintenance workon these systems.

Design, production, andinstallation of storage tanks for
LNG, LPG, crude oil, and othergases and liquids, as well as all
types of tank maintenance.

Construction on contract of social
service facilities, rental housing,and others; manufacture and saleof industrial equipment such asbalancers and winches; and realestate rental and property
management.
*Before the elimination of inter-segment transactions.

Net Sales

Operating Profit

Cash Dividends per Share*(Millions of yen)

(Millions of yen)

(Yen)

5,000

60,00050,00052,457
48,395

4,000

15

4,341

12.0

12

2.0 *

46,57240,00041,932100

3,588

41,758
3,000

3,024

10.0

9

3,080

30,000
2,265

2,000

6

20,000

5.0

5.0
4.0

3

1,000

10,0000

0FY2013

FY2014FY2015FY2016FY20170

FY2013

FY2014FY2015FY2016FY2017FY2013

FY2014FY2015FY2016FY2017*Commemorative dividend

Profit Attributable to Owners of Parent

Total Net Assets / Total Assets
Total Net Assets(Millions of yen)
4,000

Total Assets(Millions of yen)

70,000
3,746

3,000
2,879

60,0002,362

56,29853,22851,36840,000

2,000
1,906

55,92854,51550,0003,019

30,00033,78936,58034,37635,481

36,66620,0001,000

10,0000

0FY2013

FY2014FY2015FY2016FY2017FY2013

FY2014FY2015FY2016FY2017*A consolidation of shares (converting 10 common shares to one share) was carried out effective October 1, 2017.
Dividends per share in fiscal 2017 shown here reflect the consolidation of shares (when the consolidation of shares is not taken into account, ¥10).

Toyo Kanetsu K.K. Annual Report 20183

Toyo Kanetsu K.K. and Consolidated Subsidiaries

Consolidated Financial Highlights
For the years ended March 31

Millions of yen

2018

2017

2016

2015

2014

For the Years Ended March 31:¥41,758¥41,932¥46,572¥52,457¥48,395

Plant & Machinery Business

10,03013,852

22,78829,425

26,903

Material Handling Systems Business

25,93921,711

17,206

15,68915,158

Other

6,470

6,368

6,577

7,341

6,333

Operating profit

2,265

3,080

3,024

3,588

4,341

Profit Attributable to Owners of Parent

2,362

3,746

1,906

3,019

2,879

Comprehensive Income

3,347

3,923

1,302

4,390

3,223

930

1,150

514

460

594

Current Assets¥30,570¥28,479¥29,995¥33,463¥33,841

Property, Plant and Equipment

15,71016,084

13,661

13,577

12,912

Investments and Other Assets

9,649

8,245

7,340

8,504

7,368

Net Sales

Cash Dividends

At March 31:

368

418

370

382

393

Total Assets

56,29853,22851,36855,92854,515Current Liabilities

12,698

13,104

12,866

15,57016,724

Total Non-Current Liabilities

6,933

4,642

4,125

3,777

4,000

Shareholders’ Equity

34,20733,97832,13633,525

32,105

Accumulated Other Comprehensive Income

2,458

1,503

2,239

2,814

1,471

0

–

–

240

212

Total Liabilities and Net Assets

56,29853,22851,36855,92854,515

Order Backlog

27,09524,48524,12632,25649,065Intangible Assets

Non-Controlling Interests

Yen

Per Share:

2018

2017

Profit Attributable to Owners of Parent¥251.26¥373.78¥17.45¥26.08¥24.18Cash Dividends

100.00

12.0

5.0

4.0

5.0

3,941.68

3,702.00

333.91315.91

282.182018

2017

Shareholders’ Equity

2016

2015

2016

2014

2015

2014

Number of Shareholders

8,819

11,36012,83915,22916,738

Number of Employees

909

899

884

753

742

The Company conducted a share consolidation of 10 shares of common shares to 1 share on October 1, 2017. The per share information
figures reflect the effect of the consolidation.

4

Toyo Kanetsu K.K. Annual Report 2018

Analysis of Operating Environment and Results
During fiscal 2017 (the year ended March 31, 2018),

As a result, consolidated net sales in this business

improvements in corporate profitability and the resilience

segment increased 19.5% year on year to ¥25,939

shown by private consumption, against the backgroundmillion, while operating profit fell 2.5% to ¥1,931 millionof a positive employment environment, resulted in a

(before adjustment), and orders received grew 4.3% togentle recovery for the Japanese economy. In addition,¥29,717 million.

the economic expansion overseas continued, helped by arecovery in business conditions in the main countries ofPlant & Machinery Business

Europe and in the United States, solid growth in China,

Due to a limited number of projects for installing new or

and a pickup in developing economies.

additional large tanks, we carried out major reviews of
the structure of this segment, such as strengthening

In these circumstances, the Material Handling Systems

systems for receiving orders for small and medium-sizedBusiness, demand for material handling systems

projects overseas, and for domestic maintenanceremained high against the background of the expansion

projects. In addition we considered the production ofof online shopping and labor shortages. Demand forsmall tanks, and implemented thoroughgoing cuts insystems for airports was also strong, based partly on

costs. However, the stagnant environment for capital

expectations of further increases in the number ofinvestment had a significant impact, and the situation

overseas visitors ahead of the 2020 Tokyo Olympics andremained difficult.

Paralympics.
As a result, consolidated net sales in this businessIn the order environment for the Plant & Machinery

decreased 27.6% year on year to ¥10,030 million and an

segment remained challenging. Nevertheless, there wereoperating loss of ¥178 million was posted (comparedsome signs of a restart to development for major plants,

with an operating profit of ¥633 million in the previous

spurred by higher oil prices and rising demand for energy

fiscal year), while orders received grew 1.8% to ¥8,331

resulting from the recovery in business conditions.

million.

In net sales for the current fiscal year, there was an

Other Businesses

increase in the Material Handling Systems segment.

In businesses other than those above, we concentrated

However, due in part to a decline in the number ofon improving results in a way suited to theprojects in the Plant & Machinery segment, thecharacteristics of each business. Consolidated net sales

Company’s consolidated net sales were ¥41,758 million

declined 9.1% year on year to ¥5,788 million, operating(down 0.4% year on year), while operating profit was

profit declined 4.6% to ¥914 million (before adjustment),¥2,265 million (down 26.5%), ordinary profit was ¥2,646

and orders received rose 81.3% to ¥1,317 million.

million (down 23.1%). Profit attributable to owners ofparent came to ¥2,362 million (down 36.9%). Orders
received rose 5.3% to ¥39,366 million.

Segment results are as follows.
Material Handling Systems BusinessFor online shopping, which is on an expansionary track,
the business posted sales for projects using goods-toperson (GTP) order picking together with our mainstay“Multishuttle” product, enabling picking operations to be
performed by workers without having to collect theitems. In terms of preparations for further growth, we
implemented a reallocation of employees, which,
together with an increase in expenses related to
productivity reforms that integrate design, manufacturing
and purchasing, resulted in a small decline in profits.

Toyo Kanetsu K.K. Annual Report 20185

Business Risks
The following risks may affect the business results, stock

entering into forward exchange contracts or option

price and financial position of the TKK Group.

contracts, and by implementing structural solutions suchas using overseas manufacturing bases and internationallyEffect of the Global Economy and Energy Market Trends

procuring raw materials. However, an unexpected change

The Plant & Machinery Business, the TKK Group’s

in exchange rates may adversely affect the TKK Group’s

mainstay business, is subject not only to global

business results and financial position.

economic trends but also to economic and social
conditions in oil- and gas-producing and consuming

Project Execution

countries, energy and environmental policies in each

The business results of the TKK Group may be affected

country, and the prices of crude oil and LNG. Owing toby situations where, for customer reasons, projects arethese factors, some customers have halted, postponed,

suspended or postponed or the project content isor reviewed their investment plans in ways that could

otherwise altered.

adversely affect Plant & Machinery Business orders andthe TKK Group’s earnings and financial standing.

Further, as our projects take the form of inclusive
contracts, deterioration in project profitability may impact

Potential Risks Associated with Internationalon business results in the event of a sudden change inActivities and Overseas Advancethe economic situation leading to unforeseen rises in

The TKK Group conducts some operations in overseas

equipment and material prices, transportation costs,

markets, primarily those of the Plant & Machinery

construction costs or other expenses, or in the event of

Business. Further, its subsidiary manufactures tanka natural disaster, outbreak of disease, serious accident

materials in Indonesia. These overseas operations carryor other eventualities.

inherent risks as stated below, and the TKK Group’sbusiness results and financial position may be adversely

Intense Competition for Winning Orders

affected by such risks.

All of the major businesses of the TKK Group are being
operated under the make-to-order type system, and the(1) Unexpected changes in laws and regulations(2) Political and economic instability(3) Difficulties in securing human resources(4) Tax system revisions that could be unfavorable to

TKK Group is facing severe competition to win orders.

the TKK Group(5) Social confusion arising from acts of terror, war
or any other factors

Although the TKK Group strives to reduce all kinds ofDepending on the circumstances, we recognize thepossibility that a competitor may disregard profitability
and enter into price competition with the TKK Group.
costs and reinforce its price competitiveness, suchunreasonable downward pressure on the TKK Group’s
earnings may adversely affect the TKK Group’s business

Exchange Rate Fluctuations

results and financial position.

The TKK Group’s business activities include
manufacturing products, selling materials andDisasters

implementing construction operations overseas. Foreign-

The TKK Group takes necessary measures such as acurrency-denominated accounting items such as sales,

daily check, drill and establishment of a contact system

expenses and assets are translated into Japanese yen

to continue it’s business activities to prepare for fire,

for the purpose of preparing consolidated financial

earthquakes or other large-scale natural disasters. In

statements. The exchange rates used in currency

addition, major personal and property damages areconversion may affect the yen-denominated value. As

adequately covered by insurance against such disasters.

most of our payments and receipts are denominated in

However, the TKK Group’s business results and financial

U.S. dollars or euros, a stronger yen will adversely affectposition may be adversely affected if projections are

the TKK Group’s business, while a weaker yen will

exceeded by the scale of the direct or indirect materialfavorably affect the TKK Group’s business.

damage or human injury, or by the burden of restoration
costs or other expenses.

The TKK Group makes an effort to minimize the adverse
effects of such exchange rate fluctuations by flexibly

6

Toyo Kanetsu K.K. Annual Report 2018

Board of Directors, Audit & Supervisory Committee Members
and Executive Officers
Directors

Executive officers

President and Representative Director

Toru Yanagawa

Senior Executive Officer

Akira Kakihara

Director and Deputy President

Isao Shimomae

Executive Officers

Directors and Senior Executive Officers

Masayuki Takeda
Keisuke Kodama

Directors and Audit& Supervisory Committee Members

Kazuto Abe
Toshiaki Hiwatari
Tsuneo Nagai
Shigeharu Nakamura

Shiro Ito
Hiroshi Ohgi
Hiromi Tanaka
Takeshi Yonehara
Masahiko Mitsumoto
Susumu Fujisaki
Hirotoshi Kunitomo
Takashi Ohwada
Kazuto Watanabe

Corporate Governance System
At TKK’s 107th ordinary general meeting of shareholders, held on June 26, 2015, a resolution was passed making TKK a
company with an audit and supervisory committee. On the same day, TKK made the transition from a company with aboard of auditors to one with an audit and supervisory committee.
By giving voting rights in the Board of Directors to directors who are committee members (including multiple outside
directors), we aimed to strengthen the role of the Board of Directors and auditing and supervisory roles whileconstructing a more effective corporate governance system.

Corporate Governance System
General Meeting of Shareholders
Selection, dismissal

Selection, dismissal

Selection, dismissal, non-reappointment

Board of Directors
Non-committee member
directors

Committee member directors

Audit and Supervisory
Committee

LinkageAccounting
auditor

Auditing,supervision
Consultation

ReportSupervision
Nomination
and Compensation
Committee

Audit

Report Monitoring, instruction

Business Execution Division
President and CEO

Audit
Report Monitoring, instruction

Management
CouncilBusiness execution
for each Division(businesses, Group
companies, etc.)

Linkage

Control support

Internal Control
Division

Audit and control
assessment

Internal Audit
Division

Toyo Kanetsu K.K. Annual Report 20187

Medium-Term Business Plan
The TKK Group has devised a medium-term business plan covering the fiscal years 2016–2018. Under the slogan“Challenge & Change,” the Group will not be bound by conventional business domains and processes as it embarks on
the following four management policies.

Expansion of businessdomains

Launch of new
businesses that build on
the strengths of existing
businesses

Switch to a more
profitable andcompetitive structure

Construction of acorporate governancesystem that enables
appropriate risk-taking

Business Strategy[Plant & Machinery Business][Material Handling Systems Business](1) Gaining projects in Southeast Asia and the Middle East
(2) Alliance strategy with facilities developers(3) Entry into the small tank market(1) Expansion of sales where our systems have an advantage(2) A stronger advance into the refrigeration and freezing field(3) Expansion of business domains through alliances(4) Improvement of business productivity(5) Shortening and standardization of project operations(6) Expansion of the maintenance business(4) Reinforcement of the value chain from sales through maintenance(5) Reinforcement of the maintenance business(6) Development of future strategic products[Development of New Products and Services,
Launch of New Businesses that Build on Existing Strengths]
In the Plant & Machinery Business, we are developing large liquefied hydrogen tanks to fill the needs of a lowcarbon society. Hydrogen energy emits no CO2 and is expected to play a major role in reducing mankind’s
environmental impact, and we anticipate the need for storage facilities.
In the Material Handling Systems Business, we are rising to the challenges presented by changing retail formats,progress in the Internet of Things (IoT), and the decline of Japan’s working-age population. Our response is toconstruct next-generation systems that employ the IoT and robots.
Given our affinity with the energy industry and the numerous sales channels we have built up over the years, we areconsidering entry into the electric power business.

Important Companywide Policies(1) Put governance guidelines into practice and make Board of Directors’ meetings more functional(2) Release information in a timely manner and raise TKK’s image and name recognition(3) Hold earnings explanation meetings and step up dialog with shareholders(4) Reinforce Environmental, Social, Governance (ESG) initiatives(5) Consider the Group’s optimum organization based on medium- to long-term management issues and the business environment(6) Optimize fund procurement aimed at both capital efficiency and management stability(7) Foster a corporate atmosphere of “Challenge & Change”(8) Train and strengthen the next generation of management(9) Encourage women’s activity and contributions in the workplace

Basic Plans for Capital Policy and Return to Shareholders
We see the return of profits to shareholders as one of our most important management issues. The optimal balance between financial soundness andshareholders’ return is the point we aimed for in devising our shareholders’ return policy. On November 11, 2016, we released the basic plan for our capital
policy, which comprehensively takes into consideration aggressive investment to improve corporate value, profit distribution, and capital efficiency, based on
our earnings projections and financial standing. From the viewpoint of enhancing TKK’s return to shareholders, the policy we have put in place is as follows.

1. Consolidated dividend payout ratio
Before revision: Set at 20%-30% (but with a minimum of ¥5 per share)
After revision: Set at 30% or more (but with an annual minimum of ¥10 per share)

2. Consolidated total return ratio
Before revision: Set at 50%-75%. In addition to 1, share buybacks will be carried out flexibly, when necessary.
(However, the Company may not be held to this rule when it faces demand for a large amount of funds.)
After revision: Set at 100%. In addition to 1, share buybacks will be carried out flexibly, when necessary.
(However, the Company may not be held to this rule when it faces demand for a large amount of funds.)
This shareholders’ return policy will be applied for the three years of the TKK Group’s medium-term plan (fiscal years ending March 2017 – March 2019),
and it will be reviewed when the three years are over. Based on these basic plans for capital policy and return to shareholders, we will raise capitalefficiency, aiming for an ROE of 8% or higher in fiscal 2020.

8

Toyo Kanetsu K.K. Annual Report 2018

Examples of Business Strategy Initiatives[Material Handling Systems Business]
Predictive maintenance service offers stable operation 24 hours a day
As part of the medium-term business plan (running from fiscal 2016–2018), we tackled the developmentof the next-generation of strategic products. The Company has built cooperative industry-academia
relationships with some of the leading organizations in Japan, such as the National Institute of Advanced
Industrial Science and Technology, Tokyo University of Science, and Yokogawa Solution Service
Corporation, to develop services that utilize Internet of Things (IoT) technology.
One of the IoT services developed by the Company is the predictive maintenance service. This uses IoTtechnology and artificial intelligence (AI) to perform remote monitoring of the customer's materials
handling systems 24 hours a day, during the course of which it uses the minute variations in vibrations,noise, electric current and temperature that are the precursors to faults to predict the occurrence oftrouble, and to carry out maintenance at the
optimal time. It is a service that helps realize
stable materials handling systems operations.
Since April 2018, we have been carrying out
real-world validation at customer distribution
centers, and plan to offer the service from
October onward.
By implementing IoT service development
initiatives, we can offer materials handlingsystems with higher added value than that ofprevious offerings, enabling the shift to a higher
profitability structure and reinforced
competitiveness.

Through composite and integrated analysis using big data prevents trouble
before it occurs and assists in the stable operation of the distribution center.
In addition, sophisticated AI is used to analyze the maintenance andconsumables situation from multiple angles. Efforts are in progress tointroduce customer relationship management cards that establish the
optimal maintenance plan for every user.

[Plant & Machinery Business]
Tanks for small to medium-sized LNG satellite facilities
Leveraging our track record, technology and know-how as a leader in large liquefied natural gas (LNG)
tank construction, we have strengthened our product lineup for small LNG tanks with a capacity of not
more than 10,000 m³, designed for small and medium-sized LNG satellite facilities.
The Company operates a processing site for tank materials in Batam, Indonesia (the Batam Plant), andcarries out everything from the processing of tank materials to assemblyof small LNG tanks at this location. The tanks are modularized fortransport by sea to various LNG satellite facilities. This enables asignificant reduction in the amount of construction work required on siteat the project location, and shortens the lead time to delivery. The
modularization at the factory and the transportation methods require thedistillation of the design and construction technology that a specialist
manufacturer accumulates, and by performing manufacturing andassembling at our own plant, we can provide safer, higher-quality tanks.
Due to growing energy demand driven by economic development, as wellas the rising awareness of environmental problems, demand is rising for
LNG for islands and remote locations, where the laying of pipeline isdifficult. By providing small LNG tanks, we can support the increasingly
diversified energy infrastructure of these locations.

Toyo Kanetsu K.K. Annual Report 2018

9

[New Businesses]
R&D company becomes a subsidiary
The Company has acquired all of the shares of Kankyo Research Co., Ltd., located in Hachioji, Tokyo, a company
that conducts asbestos surveys, “sick building” surveys, and measurements of sound and vibration, in addition toowning survey and analysis technology that makes use of IoT.
From the perspective of the Company, which is actively involved in initiatives to address environmental
problems, the operations of this company have a high degree of social significance, as they prevent harm andprotect people’s health and safety. In addition, the new subsidiary will take part in R&D for the new businessdomains the Group is targeting, demonstrating synergies between the Group’s existing businesses and the start-up companies invested in by the
corporate venture capital fund that was established in 2017, making open innovation a reality.

Investment in biomass power generation business
The Company has invested in biomass power generation operations in Okinawa Prefecture, the developmentof which is being promoted by erex Co., Ltd. (Chuo-ku, Tokyo).
The increased adoption of renewable energy not only reduces greenhouse gas emissions but also leads todiversification in energy supplies and so on, an issue that grows more important and attracts more attention
from society with each passing year.
The Company has a close affinity to the energy industry, and by participating in the biomass power generation
business, and supporting energy infrastructure, we contribute to the realization of a low-carbon society.

Establishment of corporate venture capital fundWith the aim of launching the new businesses that will drive the Group’s future growth, the Company has established the Toyo Kanetsu Corporate
Venture Investment Partnership corporate venture capital fund. The fund began operations on October 1, 2017 with a total of ¥500 million in funds.
In addition to investing in promising start-up companies both in Japan and overseas that have innovative technology or ideas primarily in thebusiness-to-business (B2B) domain, irrespective of their distance from the Group’s existing businesses, we will cooperate with them to makeopen innovation a reality.

[Corporate Strategy]
Acquisition of Toyo Kanetsu Solutions K.K.
At a meeting of the Board of Directors of the Company held on May 11, 2018, it was resolved that, effective April 1, 2019, wholly owned
subsidiary Toyo Kanetsu Solutions K.K., that operates the Materials Handling Systems segment, will be absorbed into the parent Toyo Kanetsu,
which operates the Plant & Machinery segment.
The purpose of this merger is to share the intellectual property, appropriately allocate human resources, and make full use of common assets of
the Plant & Machinery Business and the Materials Handling Systems segments, which are the mainstays of the Group.
Going forward, these two segments will join hands and work to further raise the corporate value of the Group as a whole.

Consolidated Net Sales and Operating Profit Targets by Segment
Material Handling Systems Business

Plant & Machinery Business(unit: billions of yen)

Others, net adjusted amountMedium-term business plan target (left column)

60

Net Sales
50

40

30

Net Sales

Net Sales

41.9
6.3

41.7
5.7

13.8

20

10

Earnings forecasts (right column)
6

Net Sales

21.7

Operating
Profit

3.08
0.46
0.63
1.98

10.0

48.2

5

7.5

7.4
14.6
Operating
Profit

2.26
0.51
25.9

52.5

1.93

Secure sales through repair /small and medium-sized projects

3.1
0.5

20.8

3.02
0.42

1.0
Commit management resourcesand expand orders won

30.4

2.46

20.0

1.6

Total return ratio
Overseas sales ratio

10

1

0

FY2016

Dividend payout ratio

3

0.14
2

0

ROE

4

Operating Operating
ProfitProfit10.7%
32.1%
105.4%
12.6%

Toyo Kanetsu K.K. Annual Report 2018

FY2017

6.5%
39.8%
102.9%
5.2%-0.17

FY2018
Medium-termbusiness plan target

Earnings forecasts

7.2%
30% or higher
100% or higher
15.0%

6.0%
42.5% or higher
100% or higher
7.6%

Basic Capital Policy and Policy on Shareholder Returns
The Company has positioned returns to shareholders as one of the most important issues facing management, and had previously established a policy
for shareholder returns based on the optimal balance between financial soundness and returning profits to shareholders. However, on November 11,
2016, in consideration of the outlook for the Company's financial position and business performance for the immediate future, the Company announced
the drawing up of a new basic capital policy that takes an integrated approach to active investment to boost corporate value, distributions of profit, andcapital efficiency. Accordingly, from the perspective of further enriching returns to shareholders, we have also amended the shareholder returns policy
as follows.

(1) Consolidated dividend payout ratio

At least 30%.
(However, the lower limit shall be ¥10 per share annually, although from fiscal 2018 this shall be ¥100
per share per annum, due to a consolidation of shares performed on October 1, 2017.)(2) Consolidated total return ratio

This has been set to at least 100%, and in addition to the measures described in (1), we will take anagile approach to purchasing treasury stock. (However, in the case of a significant demand for funds,
this shall not apply.)

The effective period for this shareholder returns policy shall be the three fiscal periods of the Group’s medium-term business plan (running from fiscal
2016–2018), and shall be reviewed at the end of said period, but based on the basic capital policy and shareholder returns policy, we will strive toimprove capital efficiency and achieve a return on equity (ROE) of 8% by fiscal 2020.

Dividends / Treasury Stock Purchases
Dividend per share (yen)Total dividends (millions of yen)

Total treasury stock purchased (millions of yen)

(yen)
15

Dividend payout ratio (%)

Total return ratio (%)(millions of yen)

(%)

5,000

140

131.9
120
4,000

105.4

102.9
100

10
3,000
80

2,799

12
5

5

4

2,000

1,499

55.4

100
*

48.4
1,999
1,000

5

999
20.7

0

28.6

999

39.8

1,150

15.3

594

460

514

FY2014FY2015FY2016FY2017FY2013

FY2014FY2015

40

32.1
20

930

0

FY201360

0FY2016FY2017*A consolidation of shares (converting 10 common shares to one share) was carried out effective October 1, 2017.
Dividends per share in fiscal 2017 shown here reflect the consolidation of shares (when the consolidation of shares is not taken into account, ¥10).

Share PriceFY2013

FY2014FY2015FY2016FY2017

High (yen)

404

278

272

358

422 (4,775)

Low (yen)

227

226

186

185

258 (2,985)

Close at end of period (yen)

263

228

246

295

(3,065)*A consolidation of shares (converting 10 common shares to one share) was carried out effective October 1, 2017.
With regard to the share price during fiscal 2017, we have presented here the share price before and after the consolidation of shares, with the figuresin parentheses showing the high and low after the consolidation of shares, in addition to the price of the end of the period.

Toyo Kanetsu K.K. Annual Report 201811

Overseas Delivery Record
Making Things Happen Worldwide
Our Plant & Machinery Business has delivered a range of storage tanks to 40
countries around the world, including many suppliers of oil and liquefied natural gas.
We advantageously use our Indonesian production andprocessing base to maintain a strong profile
overseas, especially in Southeast Asia and the
Middle East, where we have built up an
extensive delivery record andwon favorable assessmentsin every country.
Our Material Handling

New Posi-Sorter installation
project for Seongnam Post Office(South Korea)

Netherlands

Systems Business hasdelivered airport baggage
handling systems in 17

RussiaSpain
GreeceTurkeycountries.

Turkmenistan

South Korea

Iraq
Algeria
Libya

China

KuwaitIran Pakistan
Qatar
U.A.E.

Egypt

Saudi Arabia

Hong Kong

Oman

Laos
India

Thailand

SaipanPhilippines

Yemen

Nigeria

TaiwanVietnam

Guam

Malaysia Brunei
Kenya

Sri Lanka

Indonesia

Singapore
Tanzania
AngolaAustralia
South Africa
Baggage handling system delivery
project for Kuala Lumpur
International Airport (Malaysia)

TKK Group Companies
Domestic
SAPPORO

Toyo Kanetsu Solutions K.K.
Toyo Kanetsu Builtec K.K.
Toyo Service System K.K.
Toyo Koken K.K.
Kankyo Reserch Co., Ltd.

SENDAI

Overseas
PT Toyo Kanetsu Indonesia
Toyo Kanetsu (Malaysia) Sdn. Bhd.

YOKOHAMA

Toyo Kanetsu Singapore Pte. Ltd.

OKAYAMAFUKUOKA

NAGOYAOSAKAWAKAYAMASAITAMA
TOKYO
CHIBA

Toyo Kanetsu(Malaysia) Sdn. Bhd.
Toyo Kanetsu
Singapore Pte. Ltd.
PT Toyo Kanetsu
Indonesia

12

Toyo Kanetsu K.K. Annual Report 2018

Material handling system delivery
and installation project for food
distribution center (South Korea)

AlaskaLegend for map entries
LNG tank-related
Other tank-related

BahamasDistribution system-related

Aruba

120,000㎥ PC LNG tank for
Brunei LNG project (Brunei)

Curacao

Trinidad and Tobago

170,000㎥ PC LNG tank for
Donggi-Senoro LNG project(Indonesia)

Brazil
140,000㎥ PC LNG tanks for
Queensland Curtis LNG project(Australia)

Chile

Other Businesses

Plant & Machinery Business

TOYO KANETSU K.K.

Material Handling Systems BusinessToyo Kanetsu Solutions K.K.

Toyo Kanetsu Builtec K.K.
PT Toyo Kanetsu Indonesia
Toyo Service System K.K.
Toyo Kanetsu (Malaysia) Sdn. Bhd.
Toyo Koken K.K.
Kankyo Reserch Co., Ltd.

Toyo Kanetsu
Singapore Pte. Ltd.

Domestic
Subsidiaries

Overseas
Subsidiaries

Toyo Kanetsu K.K. Annual Report 201813

Consolidated financial statements, etc.
(1) Consolidated financial statements(i) Consolidated balance sheet(Millions of yen)Previous fiscal period(As of March 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Lease investment assets
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

14

Toyo Kanetsu K.K. Annual Report 2018

*1

*3
*3
*3
*3, *4*2

Current fiscal period(As of March 31, 2018)

6,811
12,824
1,526
100
54
4,140
1,649
582
872
(83)
28,479

*1

3,578
1,132
288
10,9651190
16,084
418

*3

7,325
41
358
788
(267)
8,245
24,74853,228*5*3*3*3, *4*2

12,421
9,387
1,781
500
40
3,819
1,640
506
494
(21)
30,570

3,457
1,152
282
10,707110
015,710
368
8,730
33
398
778
(292)
9,649
25,72756,298(Millions of yen)Previous fiscal period(As of March 31, 2017)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Current portion of long-term loans payable
Accrued expenses
Income taxes payable
Advances received
Provision for bonuses
Provision for loss on order received
Provision for warranties for completed
construction
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

*3
*3

*3

*4

*4

2,347
2,397
60
4,324
647
1,173
258
674

Current fiscal period(As of March 31, 2018)

*5
*3
*3

2,033
4,604
15
3,380
316
417
242
183

512

580

709
13,104924
12,698

1,095
1,692
1,121
364
332
37
4,642
17,747

*3

*4

3,080
2,071
1,107
325
321
27
6,933
19,632

18,5801,273
16,447(2,323)33,97818,5801,273
15,750(1,397)
34,207

1,992

2,995

(14)
163
(652)
14
1,503
–
35,48153,228

*4

–
133
(676)
5
2,458
0
36,66656,298

Toyo Kanetsu K.K. Annual Report 2018

15

(ii)

Consolidated statement of income and comprehensive income(Millions of yen)Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Gain on investments in silent partnership
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Impairment loss
Head office relocation expenses
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable toProfit attributable to owners of parent
Loss attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

16

Toyo Kanetsu K.K. Annual Report 2018

*1

*2, *3*5

Current fiscal year
(From April 1, 2017
to March 31, 2018)

41,932
33,660
8,272
5,191
3,080

*1

*2, *341,75834,172
7,585
5,319
2,265

20
248
–
60
136
466

11
283
5
–
134
434

20
69
15
105
3,441

33
–
19
53
2,646

2,315
2
1
2,319

98
320
–
418

179
401
–
226
2
809
4,951
818
386
1,205
3,746

–
19
72
–
2
94
2,971
582
26
609
2,362

*4

3,746
–

2,362
(0)

203
(14)
(13)
2
177
3,923

1,003
14
(23)
(9)
985
3,347

*5

3,923

3,347

–

(0)

(iii) Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
periodCapital surplus

Retained earnings

1,273

15,17018,580

Dividends of surplus
Profit attributable toowners of parent
Reversal of revaluation
reserve for land
Purchase of treasury
sharesRetirement of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodTreasury shares

Total shareholders’equity(2,887)32,136

(514)

(514)

3,746

3,746

914

914
(2,304)(2,304)(2,868)

2,868

–

–

–

1,277

563

1,841

18,5801,273

16,447(2,323)33,978

Accumulated other comprehensive income
Valuation
RemeasureDeferred gains
Foreign currency
difference on
Revaluation
ments ofor losses ontranslation
available-for-salereserve for landdefined benefit
hedgesadjustment
securities
plans
Balance at beginning ofcurrent period
Changes of items during
period

1,788

–

1,077

(639)

12

Total
accumulated
othercomprehensive
income2,239

Dividends of surplus
Profit attributable toowners of parent
Reversal of revaluation
reserve for land
Purchase of treasury
sharesRetirement of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodTotal net assets

34,376

(514)
3,746
914
(2,304)
–
203

(14)

(914)

(13)

2

(736)

(736)

203

(14)

(914)

(13)

2

(736)

1,104

1,992

(14)

163

(652)

14

1,503

35,481

Toyo Kanetsu K.K. Annual Report 201817

Current fiscal year (From April 1, 2017 to March 31, 2018)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning ofcurrent period
Changes of items during
period18,580Capital surplus

Retained earnings

1,273

16,447

Dividends of surplus
Profit attributable toowners of parent
Reversal of revaluation
reserve for land
Purchase of treasury
sharesRetirement of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
periodTotal shareholders’equityTreasury shares(2,323)33,978(1,150)(1,150)

2,362

2,362

30

30
(1,013)(1,013)(1,939)

1,939

–

–

–

(697)

926

229

18,5801,273

15,750(1,397)

34,207

Accumulated other comprehensive income
Valuation
Deferred gains Revaluationdifference onor losses onreserve foravailable-forhedges
landsale securities
Balance at beginning ofcurrent period
Changes of items during
period

1,992

(14)

163

Foreigncurrencytranslation
adjustment
(652)

Total
Remeasureaccumulated
ments ofother
defined benefit
comprehensive
plansincome14

1,503

Noncontrolling Total net assetsinterests–

Dividends of surplus
Profit attributable toowners of parent
Reversal of revaluation
reserve for land
Purchase of treasury
sharesRetirement of treasury
sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
periodBalance at end of current
period18

Toyo Kanetsu K.K. Annual Report 201835,481(1,150)2,362
30(1,013)
–
1,003

14

(30)

(23)

(9)

955

0

956

1,003

14

(30)

(23)

(9)

955

0

1,185

2,995

–

133

(676)

5

2,458

0

36,666

(iv) Consolidated statement of cash flows(Millions of yen)Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in net defined benefit liability
Decrease (increase) in net defined benefit asset
Increase (decrease) in provision for loss on order
received
Increase (decrease) in provision for warranties forcompleted construction
Interest and dividend income
Interest expenses
Head office relocation expenses
Foreign exchange losses (gains)
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in notes and accounts receivable- tradeDecrease (increase) in lease investment assets
Decrease (increase) in inventories
Decrease (increase) in advance payments
Increase (decrease) in notes and accounts payable trade
Increase (decrease) in advances received
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Payments for head office relocation expenses
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from sales and redemption of securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment
securities
Other, net
Net cash provided by (used in) investing activities

Current fiscal year
(From April 1, 2017
to March 31, 2018)

4,951
691
–
62

2,971
737
72
–

72

(37)

(86)
2

(28)
(58)

165

(489)

330

68

(269)
20
226
34
(2)
(2,136)
401

(294)
33
–
18
(320)
(98)
19

(3,380)3,375

0(1,833)
(286)

(257)
342
252

99

(1,272)

(303)
(119)
(1,357)
272
(20)
(233)
(791)
(2,131)

(773)
74
4,336
294
(32)
–
(872)
3,726

(202)
232
500
(5,160)
3,647
(887)

–
–
100
(436)
295
(634)

6

500

148
(1,714)91(85)

Toyo Kanetsu K.K. Annual Report 201819

(Millions of yen)Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury shares
Proceeds from share issuance to non-controllingshareholders
Cash dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

20

Toyo Kanetsu K.K. Annual Report 2018

*1

Current fiscal year
(From April 1, 2017
to March 31, 2018)

56
–
(60)
(2,304)

2,250
2,000
(60)
(1,013)

–

1

(512)
(2,820)(1,145)
2,032

(130)

(64)

(6,796)
13,606
6,810

5,609
6,810
12,420*1NotesBasis of presenting the consolidated financial statements
The accompanying consolidated financial statements of the Company and its domestic consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. The accounts of overseas-consolidated subsidiaries are based on theirfinancial statements prepared in conformity with generally accepted accounting principles and practices
prevailing in the respective countries in which the subsidiaries are incorporated.
Significant accounting policies for preparation of the consolidated financial statements
1. Disclosure of scope of consolidation
Number of consolidated subsidiaries: 8 companies
Names of major consolidated subsidiaries are omitted since those names are described in “TKK Group
Companies.”
2. Disclosure about application of the equity method
Not applicable
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
Of the Company’s consolidated subsidiaries, PT Toyo Kanetsu Indonesia, Toyo Kanetsu Singapore Pte. Ltd, Toyo
Kanetsu (Malaysia) Sdn. Bhd and Toyo Kanetsu Corporate Venture Investment Partnership have a closing date ofDecember 31. In preparation of the consolidated financial statements, their financial statements as of December
31 are used. However, for major transactions that occurred between that date and the consolidated balance sheet
date, the necessary adjustments are made in the consolidated financial statements.
4. Disclosure of accounting policies(1) Accounting policy for measuring significant assets(i) Securitiesa) Held-to-maturity bonds: Stated at amortized cost (straight-line method)b) Available-for-sale securities
Available-for-sale securities with available fair market values are stated at fair value based on the market
price or the like on the consolidated balance sheet date (valuation differences are directly charged or
credited to net assets, and cost of securities sold is determined by the moving-average method).
Available-for-sale securities without available fair market value are valued at cost determined by themoving-average method.
(ii)

Derivatives
Derivatives are valued at fair value.

(iii) Inventoriesa) Finished goods: Primarily, at cost using the first-in first-out method(The value on the balance sheet is written down to reflect a decline in profitability.)b) Work in process: Primarily, at cost using the specific identification method(The value on the balance sheet is written down to reflect a decline in profitability.)c) Raw materials: Primarily, at cost using the weighted-average method(The value on the balance sheet is written down to reflect a decline in profitability.)

Toyo Kanetsu K.K. Annual Report 201821

(2) Accounting policy for depreciation of significant assets(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries use the declining balance method, and overseas
consolidated subsidiaries use the straight-line method in accordance with provisions of accounting standards
in their respective countries.
However, the Company and its domestic consolidated subsidiaries use the straight-line method to depreciatebuildings (excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached
to buildings and structures acquired on or after April 1, 2016.
The estimated useful lives of major items are as follows:
Buildings and structures
2 to 57 years
Machinery and equipment
2 to 17 years(ii) Intangible assets
Intangible assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated useful life as internallydetermined (5 years).
(3) Accounting policy for significant provisions(i) Allowance for doubtful accounts
To cover losses from bad debts for notes and accounts receivable - trade, loans receivable and others, anallowance for doubtful accounts is provided based on historical experience of bad debts for general
receivables. For specific receivables such as highly doubtful receivables, the collectibility is individuallyconsidered and the estimated amount of uncollectible accounts is provided as the allowance.
(ii) Provision for bonuses
To pay bonuses to employees, out of the estimated amount to be paid in the following fiscal year, an amountattributable to the current fiscal year is recorded.
(iii) Provision for loss on order received
To make provision for losses on orders received, as for existing construction, for which an amount of loss canbe reasonably estimated at the end of the current fiscal year, an expected amount of loss in future is recorded
as the provision.
(iv) Provision for warranties for completed construction
To cover costs of warranty against defects and after-sales service for completed construction, an amount isrecorded based on the historical loss rate as well as consideration of an amount for individual construction thatis expected to incur in future at the end of the current fiscal year.
(4) Method of accounting for retirement benefits(i) Method of attributing estimated retirement benefits to periods
For the purpose of attributing estimated retirement benefits over the period up to the end of the current fiscal
year in the calculation of retirement benefit obligations, the benefit formula method is applied.
(ii) Method of amortizing actuarial gain or loss and past service cost
Past service costs are recorded as an expense in the year they are incurred.
With regard to actuarial gain or loss, the amount is amortized by the straight-line method over a certain term
within the average remaining service period of the eligible employees (5 years) for each applicable fiscal year,
and expensed from the year following the year in which the gain or loss is recognized.
(5) Accounting policies for significant revenues and expenses(i) Recognition of revenues and costs of completed construction contracts
The percentage-of-completion method is applied to construction showing certainty of performance on the
progress made up until the end of the current fiscal year (the cost-to-cost method is applied to estimate theextent of progress toward completion), and the completed-contract method is applied to other construction.
(ii) Standards for recognition of revenues and expenses related to finance lease transactions
Sales and costs are recognized at the time of receiving lease payments.
(6) Accounting policy for hedging(i) Method of hedge accounting
In principle, the deferral accounting is applied. The allocation method is applied to forward foreign exchange
contracts that meet requirements thereof, and the exceptional treatment is applied to interest rate swaps thatmeet requirements thereof.

22

Toyo Kanetsu K.K. Annual Report 2018

(ii) Hedging instruments and hedged items
Hedging instruments: ......... Forward foreign exchange contracts, Interest rate swaps
Hedged items: ..................... Forecast transactions denominated in foreign currencies and borrowings(iii) Hedging policy
In accordance with the “Rules on Handling of Derivative Transactions” established by the Company, theCompany and its consolidated subsidiaries (collectively, the “Group”) do not enter into any derivativetransaction for speculative purposes but use derivative transactions only to hedge exchange rate fluctuation
risk and interest rate fluctuation risk.
(iv) Method of assessing the hedging effectiveness
The Group confirms effectiveness by comparing and examining cash flows of hedging instruments and hedged
items in advance. However, the Group omits assessment of effectiveness on interest rate swaps to which the
exceptional treatment is applied.
(7) Accounting policy for goodwill
Goodwill is amortized evenly over the period of 5 years.
(8) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents include cash in hand, readily available deposits and short-term investments withmaturities of three months or less from the purchase date whose value is not subject to significant fluctuation
risk.
(9) Other significant information for preparation of the consolidated financial statements
Accounting policy for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of taxes.

Notes - Changes in accounting policies
Not applicable
Notes - New accounting standards to be applied“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued by the Accounting Standards
Board of Japan on March 30, 2018)• “Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, issued by the
Accounting Standards Board of Japan on March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB)
jointly developed comprehensive revenue recognition standards and issued “Revenue from Contracts with
Customers” in May 2014 (IASB’s IFRS 15 and FASB’s Topic 606). Considering that IFRS 15 shall apply tofiscal years beginning on or after January 1, 2018, and Topic 606 shall apply to fiscal years beginning after
December 15, 2017, the ASBJ developed a comprehensive accounting standard on revenue recognition and thus
issued the accounting standard together with the implementation guidance.
•

The ASBJ established the accounting standard on revenue recognition by following the basic policies indeveloping it. The basic policies were: firstly, incorporating the core principle of IFRS 15 as the starting pointfrom the perspective of facilitating comparability among financial statements, which is one of the benefits ofensuring consistency with IFRS 15; secondly, adding alternative treatments, but to the extent not impairing
comparability, where consideration should be given to the practice having been used in Japan.
(2) Scheduled date of application
These ASBJ statement and guidance will be applied at the start of the fiscal year beginning on April 1, 2021.
(3) Effects of application of the accounting standard, etc.
The impact of the application of the Accounting Standard for Revenue Recognition on the consolidated financial
statements is currently under evaluation.
Notes - Changes in presentation
Consolidated statement of income and consolidated statement of comprehensive income“Gain on sales of investment securities” included in “other” under extraordinary income for the previous fiscal year

Toyo Kanetsu K.K. Annual Report 201823

has been set down separately from the current fiscal year since significance of the amount has increased. In order toreflect this change in the method of presentation, the amount in the consolidated financial statements for theprevious fiscal year has been reclassified.
As a result, ¥3 million included in “other” under extraordinary income in the consolidated statement of income andconsolidated statement of comprehensive income for the previous fiscal year, has been reclassified to “gain on salesof investment securities” of ¥2 million and “other” of ¥1 million.
Consolidated statement of cash flows“Amortization of long-term prepaid expenses (¥4 million for the current fiscal year)” and “decrease (increase) in
accounts receivable - other (¥139 million for the current fiscal year)” under “cash flows from operating activities,”
which were set down separately for the previous fiscal year, have been included in “other” from the current fiscal
year since significance of the amount has decreased. In order to reflect this change in the method of presentation,
the amount in the consolidated financial statements for the previous fiscal year has been reclassified.
As a result, ¥3 million included in “amortization of long-term prepaid expenses” and ¥(123) million included in“decrease (increase) in accounts receivable - other” under “cash flows from operating activities” in the consolidated
statement of cash flows for the previous fiscal year have been reclassified to “other.”
Notes - Consolidated balance sheet*1.

Use of a certain part of the Company’s current deposits is restricted by a bank in return for its issuing a bankguarantee, which was provided by the Company to the Ministry of Economy and Planning of the United ArabEmirates in connection with corporate registration in the country.
The restricted deposits are as follows:
Previous fiscal year
(As of March 31, 2017)
Current deposit*2.

Current fiscal year
(As of March 31, 2018)¥1 million(50,000 AED)

¥1 million(50,000 AED)

Accumulated depreciation of property, plant and equipment are as follows:
Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)¥11,203 million*3.

¥11,620 million

Assets pledged and liabilities secured

Assets pledged and liabilities secured as collateral are as follows:
Assets pledged
Previous fiscal year
(As of March 31, 2017)
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

Current fiscal year
(As of March 31, 2018)¥405 million
0
0
5,458

[¥405 million][0][0][5,458]¥373 million
0
0
5,458

[¥373 million][0][0][5,458]5,864[5,864]

5,832[5,832]

Liabilities secured
Previous fiscal year
(As of March 31, 2017)
Short-term loans payable
Long-term loans payable
Total

Current fiscal year
(As of March 31, 2018)¥426 million
980[¥426 million][980]¥997 million
1,130[¥997 million][1,130]1,406[1,406]2,127[2,127]In the above table, figures in brackets present mortgages on factory foundation and the relevant debts. The amountsof land are after revaluation.
*4.

24

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on March 31, 1998), theCompany revalues its land for business use and, as for the valuation difference, records an amount equivalent

Toyo Kanetsu K.K. Annual Report 2018

to tax relating to the valuation difference as “deferred tax liabilities for land revaluation” in the liabilities
section and an amount after deducting said amount as “revaluation reserve for land” in the net assets section.
Method of revaluation – The Company revalues the land by the calculation method where a value based on theassessed value of fixed asset tax set forth in Article 2, Item 3 and road rating set forth in Article 2, Item 4 of the“Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 promulgated on March 31,
1998) is reasonably adjusted.
Date of revaluation – March 31, 2002
Previous fiscal year
(As of March 31, 2017)
Difference between the year-end value ofrevaluated land and the book value after therevaluation

Current fiscal year
(As of March 31, 2018)¥(3,233) million¥(2,642) million*5. Notes matured at the end of the fiscal year
With respect to the accounting treatment of notes matured at the end of the fiscal year, although the last day of thecurrent fiscal year fell on a bank holiday, the notes were treated as though they were settled on the maturity date.
The amounts for notes matured at the end of the fiscal year are as follows:
Previous fiscal year
(As of March 31, 2017)
Notes receivable - trade
Notes payable - trade

Current fiscal year
(As of March 31, 2018)¥– million–¥143 million
103

Notes - Consolidated statement of income and consolidated statement of comprehensive income*1.

Provision for loss on order received included in cost of sales
Previous fiscal year
(From April 1, 2016
to March 31, 2017)¥116 million*2.

Salaries and allowances
Bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts¥1,489 million
380
109
105
72

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥1,629 million
386
115
102
(37)

Total of research and development expenses included in general and administrative expenses andmanufacturing costs for the current period
Previous fiscal year
(From April 1, 2016
to March 31, 2017)¥567 million*4.

¥(458) million

Major components of selling, general and administrative expenses are as follows:
Previous fiscal year
(From April 1, 2016
to March 31, 2017)*3.

Current fiscal year
(From April 1, 2017
to March 31, 2018)

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥653 million

Impairment loss

Previous fiscal year (From April 1, 2016 to March 31, 2017)
Not applicable

Toyo Kanetsu K.K. Annual Report 201825

Current fiscal year (From April 1, 2017 to March 31, 2018)
Location

Use

Type

Yokohama City, Kanagawa

Assets for lease

Land, buildings and other assets

Ebina City, Kanagawa

Same as above

Same as above

In principle, the Group’s assets for business use are grouped on the basis of the business, and the Group’s idle assets
are grouped by each asset.
For the current fiscal year, the book value of assets scheduled to be sold, such as land, buildings and other assets
owned by the Group, was reduced to a recoverable amount calculated using net realizable value based on anassessed value reasonably measured by a third party. Said reduced amount has been recorded under extraordinary
losses as impairment loss (¥72 million). A breakdown of this impairment loss is ¥72 million in land and ¥0 million
in buildings and other assets.
The recoverable amount of this asset group was measured based on the net realizable value and valued based on theplanned sale amount.
*5.

Reclassification adjustments and tax effects relating to other comprehensive income
Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Valuation difference on available-for-sale securities:
Amount recorded during the period
Reclassified amount

26

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥295 million(2)¥1,446 million–

Pre-adjustment of tax effectTax effect amount

292
(89)

1,446
(443)

Valuation difference on available-for-salesecurities

203

1,003

Deferred gains or losses on hedges:
Amount recorded during the period
Reclassified amount

(21)
–

–
21

Pre-adjustment of tax effectTax effect amount

(21)
6

21
(6)

Deferred gains or losses on hedges

(14)

14

Foreign currency translation adjustment:
Amount recorded during the period
Reclassified amount

(13)
–

(23)
–

Pre-adjustment of tax effectTax effect amount

(13)
–

(23)
–

Foreign currency translation adjustment

(13)

(23)

Remeasurements of defined benefit plans, net of tax:
Amount recorded during the period
Reclassified amount

35
(33)

52
(64)

Pre-adjustment of tax effectTax effect amount

1
0

(11)
2

Remeasurements of defined benefit plans,
net of tax

2(9)Total other comprehensive income

177

985

Toyo Kanetsu K.K. Annual Report 2018

Notes - Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2016 to March 31, 2017)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period(Thousands of shares)
Number of shares Number of shares atdecreased in period
end of period

Issued shares
Common shares (Notes 1 and 2)

115,030–

12,000103,030

Total

115,030–

12,000103,030

12,081

7,106

12,0007,187

Treasury shares
Common shares (Notes 1, 3 and 4)

Total
12,081
7,106
12,0007,187
The number of issued common shares decreased by 12,000 thousand shares and the number of common shares intreasury decreased by 12,000 thousand shares due to retirement of treasury shares based on a resolution by the
Board of Directors.
The number of common shares in treasury increased by 7,106 thousand shares due to purchase of treasury sharesbased on a resolution by the Board of Directors of 7,091 thousand shares and purchase of shares less than one unitof 15 thousand shares.

(Notes) 1.

2.

2.

Matters concerning dividends(1) Cash dividends paid
Resolution

Class of shares

Total cash
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 29,
2016

Common shares¥514 million¥5

March 31, 2016

June 30, 2016

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June29, 2017

Commonshares¥1,150 million

Retainedearnings¥12

March 31, 2017

June 30, 2017

Current fiscal year (From April 1, 2017 to March 31, 2018)1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares (Note 1)

103,030–

93,327

9,703

Total

103,030–

93,327

9,703

Common shares (Notes 1 and 2)

7,187

1,727

8,514

401

Treasury shares(Notes) 1.
2.
3.

4.

Total
7,187
1,727
8,514
401
The Company conducted a share consolidation at a ratio of 10 shares of common shares to 1 share on October 1,
2017.
Total number of issued shares decreased by 93,327 thousand shares due to decline after the share consolidation of
87,327 thousand shares and retirement of 6,000 thousand shares of treasury shares based on a resolution by the
Board of Directors.
Total number of issued shares increased by 1,727 thousand shares due to purchase of treasury shares based on a
resolution by the Board of Directors of 1,716 thousand shares (1,597 thousand shares before the shareconsolidation and 119 thousand shares after the share consolidation), purchase of fractional number of shares inline with the share consolidation of 0 thousand shares and purchase of shares less than one unit of 11 thousand
shares (9 thousand shares before the share consolidation and 1 thousand shares after the share consolidation).
The number of common shares in treasury decreased by 8,514 thousand shares due to decline after the share

Toyo Kanetsu K.K. Annual Report 201827

consolidation of 2,514 thousand shares and retirement of 6,000 thousand shares of treasury shares based on a
resolution by the Board of Directors.

2.

Matters concerning dividends(1) Cash dividends paid
Resolution

Class of shares

Total cash
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 29,
2017

Common shares¥1,150 million¥12

March 31, 2017

June 30, 2017(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next
fiscal year

Resolution

Class ofsharesTotal cash
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June
28, 2018

Commonshares¥930 million

Retainedearnings¥100

March 31, 2018

June 29, 2018

Notes - Consolidated statement of cash flows*1.

Reconciliation of ending balance of cash and cash equivalents with account balances per balance sheet
Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Current fiscal year
(From April 1, 2017
to March 31, 2018)

Cash and deposits
Restricted deposits¥6,811 million(1)¥12,421 million(1)

Cash and cash equivalents

6,810

12,420Notes - Leases(Borrower)
Operating lease transactions
Future lease payments under non-cancelable operating leases

Within 1 year
Over 1 year
Total

Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)¥8 million¥13 million

16

20

25

33

Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)¥1,596 million¥1,826 million(Lender)
Finance lease transactions(1) The components of lease investment assets
Current assets

Lease payments receivable

81–

Amount equivalent to interest income

(151)

(44)

Lease investment assets

1,526

1,781

Estimated residual value

28

Toyo Kanetsu K.K. Annual Report 2018

(2)Amounts expected to be collected on lease payments receivable of lease investment assets after consolidatedbalance sheet dateCurrent assets(Millions of yen)Previous fiscal year (As of March 31, 2017)

Lease investment
assetsWithin 1 year

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

622

476

321

123

52

–
(Millions of yen)

Current fiscal year (As of March 31, 2018)
Within 1 year
Lease investment
assets669

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

515

317

248

75

–

Toyo Kanetsu K.K. Annual Report 201829

Notes - Financial instruments
1.
Status of financial instruments(1) Policy on treatment of financial instruments
The Group raises funds necessary to run its business smoothly by borrowing from banks. In the case where theGroup has temporary surplus funds, it invests them only in safe financial instruments.
The Group uses derivative transactions to hedge various risks described in (2) in accordance with the “Rules on
Handling of Derivative Transactions” established by the Company and has a policy not to enter into any
speculative transaction.
(2) Content and risks of financial instruments and risk management system therefor
The Group’s notes and accounts receivable - trade are subject to credit risk of its customers, and its certain
receivables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigatesthe credit risk of its customers by periodically confirming whether there is any overdue receivable using an aging
schedule and other documents and the exchange rate fluctuation risk such as by borrowing in foreign currencies
as needed.
The Company’s securities are subject to credit risk of its investees, but the Company invests surplus funds in safe
financial instruments with high ratings through prescribed internal procedures.
The Group’s investment securities are subject to credit risk of its investees and market price fluctuation risk.
They are equity securities of listed companies with which the Group has business relationships, most of which
are categorized as available-for-sale securities, and the Group periodically ascertains the fair value thereof.
Certain bond securities include hybrid financial instruments that were accounted for with embedded derivatives.
The Group’s notes and accounts payable - trade and accrued expenses are subject to liquidity risk, and its certain
payables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigates theliquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents andthe exchange rate fluctuation risk by forward exchange contracts and other means as needed.
Of borrowings, short-term loans payable are primarily for daily business transactions, and long-term loans
payable are primarily for temporary advances on large-scale projects. Variable-rate borrowings are subject tointerest rate fluctuation risk, and the Group uses interest rate swaps as hedging instruments for respective
contracts for most of the long-term loans payable in order to hedge the fluctuation risk of the interest rates to be
paid and fix interest expenses. The Group limits interest rate swaps to those to which the exceptional treatment
can be applied and omits assessment of hedge effectiveness thereon. The Group mitigates the liquidity risk by
periodically preparing a schedule of cash receipts and disbursements and other documents.
The Group executes and manages derivative transactions in accordance with the Company’s Rules on Handlingof Derivative Transactions and, when using derivatives, enters into transactions with financial institutions withhigh ratings to mitigate credit risk. Please see “Accounting policy for hedging” of “Disclosure of accounting
policies” in “Significant accounting policies for preparation of the consolidated financial statements” described
previously for the hedging instruments, hedging policy, method of assessing the hedging effectiveness and otherinformation on hedge accounting.
(3) Supplementary explanation concerning fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably measured values
where market prices are unavailable. As several variable factors are incorporated in calculating the relevant fairvalue, the resulting amount may vary depending on the different preconditions employed. In addition, thecontract amounts of derivative transactions, mentioned in “Notes - Derivatives” in Notes, should not be
considered indicative of the sizes of the market risks involved in the derivative transactions.

30

Toyo Kanetsu K.K. Annual Report 2018

2.
Fair values of financial instruments
Carrying amounts on the consolidated balance sheet, fair values and differences therebetween of the financial
instruments as of March 31, 2017 and 2018, are as shown below. However, financial instruments whose fair values
are deemed to be extremely difficult to determine are not included therein (Note 2).
Previous fiscal year (As of March 31, 2017)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

6,811
12,824
(30)

6,811

–

12,794

12,794

–

100
6,402

100
6,404

–
1

Total assets

26,108

26,1101

Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

2,347
2,397
4,324

2,347
2,397
4,324

–
–
–

1,155

1,169

14

Total liabilities

10,224

10,238

14

–
(21)

–
(21)

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives
(21)
(21)
–
(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.

Current fiscal year (As of March 31, 2018)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

12,4219,387(10)12,421

–

9,376

9,376

–

500
7,887

500
7,887

–
–

Total assets

30,18530,185–

Notes and accounts payable - trade
Short-term loans payable
Accrued expenses
Long-term loans payable(including within 1 year)

2,033
4,604
3,380

2,033
4,604
3,380

–
–
–

3,095

3,160

65

Total liabilities

13,113

13,178

65

–
–

–
–

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1)
Those not qualifying for hedge accounting(2)
Those qualifying for hedge accounting

Total derivatives–––(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.
(Notes) 1.

Calculation method of fair values of financial instruments and matters concerning securities and derivatives
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,

Toyo Kanetsu K.K. Annual Report 201831

the fair values are based on the book values.
(3) Securities
Because this account has a short-term maturity, its fair value approximates its book value. Therefore, the fairvalue is based on the book value.
(4) Investment securities
Fair value of this account is based on the price on exchanges, the price provided by counterparty financial
institutions or other prices. Please refer to “Notes - Securities” for the notes.
Liabilities(1) Notes and accounts payable - trade, (2) Short-term loans payable and (3) Accrued expenses
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(4) Long-term loans payable (including within 1 year)
Fair value of this account is determined by discounting the total amount of principal and interest at the interest
rate available for a similar borrowing. Fair values of long-term loans payable with variable rates, to which the
exceptional treatment for the interest rate swap is applied, are determined by discounting the total amount ofprincipal and interest accounted for with the relevant interest rate swaps at the reasonably estimated interest
rates applied to similar borrowings.
Derivatives
Please refer to “Notes - Derivatives” in Notes.
2.
3.

“Assets (4) Investment securities” do not include unlisted equity securities (carrying amount on the consolidatedbalance sheet of ¥843 million) because there is no market price and their future cash flows cannot be estimated andaccordingly it is extremely difficult to ascertain their fair values.
Projected redemption amounts for monetary claims and securities with maturities after the consolidated balance
sheet datePrevious fiscal year (As of March 31, 2017)(Millions of yen)
Within 1 year

Over 1 year
to 5 years

Over 5 years
to 10 years

Over 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

6,796
12,794
100

–
–
–

–
–
–

–
–
–

–
–

500
96

–
–

–
–

Total

19,690596––

Within 1 year

Over 1 year
to 5 years

Over 5 years
to 10 years

Over 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

12,408
9,376
500

–
–
–

–
–
–

–
–
–

–
–

–
–

–
–

–
–

Total

22,284–––Current fiscal year (As of March 31, 2018)(Millions of yen)

32

Toyo Kanetsu K.K. Annual Report 2018

4.

Scheduled repayment amounts of long-term loans payable and other interest-bearing liabilities
Previous fiscal year (As of March 31, 2017)
Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

15

480

600

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

480

600

–

Long-term loans payable(Millions of yen)Over 4 years
to 5 years–

Current fiscal year (As of March 31, 2018)

Long-term loans payable(Millions of yen)Over 4 years
to 5 years–

Notes - Securities
1.

Held-to-maturity bonds
Previous fiscal year (As of March 31, 2017)(Millions of yen)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet

Carrying amount on
the consolidatedbalance sheet

Fair value

Difference(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

100

100

0

(3) Other

500

501

1

Subtotal

600

601

1

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

–

–

–

(3) Other–––

Subtotal
Total

–

–

–

600

601

1

Current fiscal year (As of March 31, 2018)(Millions of yen)
Type

Securities for which the fair value
exceeds the carrying amount on the
consolidated balance sheet

Securities for which the fair value
does not exceed the carrying amounton the consolidated balance sheet(1) Government
bonds and municipal
bonds, etc.
(2) Corporate bonds–

Fair value

Difference

–

–

–

–

–

500

500

0

Subtotal

500

500

0

(1) Government
bonds and municipal
bonds, etc.

–

–

–

(2) Corporate bonds

–

–

–

(3) Other–––(3) Other

Subtotal
Total

Carrying amount on
the consolidatedbalance sheet

–

–

–

500

500

0

Toyo Kanetsu K.K. Annual Report 2018

33

2.

Available-for-sale securities (securities classified as other securities under Japanese GAAP)
Previous fiscal year (As of March 31, 2017)(Millions of yen)Type(1) Stocks

Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

5,164

2,400

2,764

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

5,164

2,400

2,764

640

717

(76)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

96

100

(3)

(3) Other

–

–

–

737

817

(79)

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Subtotal(1) Stocks(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost

Subtotal(Note)

34

Total
5,902
3,217
2,685
“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥922 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

Toyo Kanetsu K.K. Annual Report 2018

Current fiscal year (As of March 31, 2018)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Type(1) Stocks

Acquisition cost

Difference

6,723

2,327

4,395

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost(3) Other

–

–

–

6,723

2,327

4,395

1,163

1,424

(260)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

Subtotal(1) Stocks(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(3) Other
Subtotal(Note)

3.

–

–

–

1,163

1,424

(260)

Total
7,887
3,752
4,134
“Available-for sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥842 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

Available-for-sale securities that were sold
Previous fiscal year (From April 1, 2016 to March 31, 2017)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount6

Total gain on sales
2(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

6

2

–

Current fiscal year (From April 1, 2017 to March 31, 2018)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount400

Total gain on sales
320(Millions of yen)
Total loss on sales
(0)

–

–

–

–
–
–

–
–
–

–
–
–

400

320

(0)

Toyo Kanetsu K.K. Annual Report 201835

Notes - Derivatives
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(1) Currencies
Previous fiscal year (As of March 31, 2017)(Millions of yen)Type of derivativetransaction, etc.

Classification

Principal hedged
items

Contract
amountPortion ofcontract
amount over
1 yearFair value
calculation
methodFair value

Forward exchange
contract
Allocation method
for forward
exchange contract

Fair value iscalculated
based on theprice provided
by counterparty
financial
institutions orother prices.

Buy contract
Euro

Accounts payable- trade

Total

839

–

818

839

–

818

Current fiscal year (As of March 31, 2018)
Not applicable(2) Interest rates
Previous fiscal year (As of March 31, 2017)(Millions of yen)Classification

Type of derivativetransaction, etc.

Interest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed(Note)

Principal hedged
itemsLong-term loans
payableContract
amount1,055

Portion ofcontract
amount over
1 year
1,055

Fair value
calculation
methodFair value(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Current fiscal year (As of March 31, 2018)(Millions of yen)Classification

Type of derivativetransaction, etc.

Interest rate swap
Exceptionaltransactions
treatment of interest
Receive variable,
rate swaps
pay fixed(Note)

36

Principal hedged
itemsLong-term loans
payableContract
amount2,495

Portion ofcontract
amount over
1 year
2,480

Fair value(Note)

Fair value
calculation
method(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that ofcorresponding long-term loans payable, as those interest rate swaps are treated as an adjustment to long-term loans
payable as hedged items.

Toyo Kanetsu K.K. Annual Report 2018

Notes - Retirement benefits
1. Summary of retirement benefit plans adopted
The Company and certain consolidated subsidiaries have defined benefit corporate pension plans as defined benefit
plans, and certain consolidated subsidiaries have a small and medium sized enterprise retirement allowancecooperative plan and lump-sum retirement plans.
In addition, the Company and certain consolidated subsidiaries have defined contribution corporate pension plans.
The Company and certain consolidated subsidiaries participate in Nihon Sangyo Kikai Kougyo Kigyonenkin Kikin(pension fund of Japan industrial machinery manufacturers). For this fund, since the amount of pension plan assets
corresponding to contributions by the respective companies cannot be reasonably calculated, the fund is accounted
for similar to defined contribution plans.
The Nihon Sangyo Kikai Kougyo Kigyonenkin Kikin has received permission from the Minister of Health, Labourand Welfare on May 1, 2017 for past portions of the entrusted employees’ pension portion to be returned to the state,
and it has changed its pension scheme from an employees’ pension fund plan to a corporate pension fund plan.
2. Defined benefit plans(1) Reconciliation between beginning balance and ending balance of retirement benefit obligations
Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Beginning balance of retirement benefit
obligations
Service cost
Interest expenses
Unrecognized net actuarial gain or loss
Retirement benefits paid
Other
Ending balance of retirement benefit
obligations(2)

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥3,342 million¥3,438 million

178
15
37
(136)
1

182
15
52
(190)
(4)

3,438

3,493

Reconciliation between beginning balance and ending balance of pension plan assets

Beginning balance of pension plan assets
Expected return on plan assets
Unrecognized net actuarial gain or loss
Amount of employer contribution
Retirement benefits paid
Other
Ending balance of pension plan assets

Previous fiscal year
(From April 1, 2016
to March 31, 2017)¥3,271 million
41
78
174
(134)
0
3,432

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥3,432 million
45
105
181
(190)
(7)
3,567

Toyo Kanetsu K.K. Annual Report 2018

37

(3)

Retirement benefit obligations and pension plan assets at the end of the fiscal year and reconciliation of net
defined benefit liability and net defined benefit asset on consolidated balance sheet
Previous fiscal year
(From April 1, 2016
to March 31, 2017)Retirement benefit obligations under
funded system
Pension plan assets
Retirement benefit obligations under
unfunded system
Net amount of assets and liabilities
stated in the consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net amount of assets and liabilities
stated in the consolidated balance sheet(4)

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥3,436 million¥3,491 million(3,432)(3,567)

3

(75)

2

2

5

(73)

364
(358)

325
(398)

5

(73)

Retirement benefit expenses and components thereofService cost
Interest expenses
Expected return on plan assets
Amortization of net actuarial gain or
loss
Retirement benefit expenses pertaining
to defined benefit plans

Previous fiscal year
(From April 1, 2016
to March 31, 2017)¥178 million
15(41)

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥182 million
15
(45)

(42)

(60)

110

91

(5)

Remeasurements of defined benefit plans, net of tax on consolidated statement of income and comprehensive
income
The components of remeasurements of defined benefit plans, net of tax (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Past service cost
Actuarial gains and losses
Total

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥– million
1¥– million
(11)

1

(11)

(6) Remeasurements of defined benefit plans on consolidated balance sheet
The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Unrecognized past service cost
Unrecognized net actuarial gain or loss
Total

38

Toyo Kanetsu K.K. Annual Report 2018

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥– million(21)¥– million
(9)

(21)

(9)

(7) Pension plan assets(i) Major components of pension plan assets
Ratio of major components for total pension plan assets is as follows:
Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Current fiscal year
(From April 1, 2017
to March 31, 2018)

27%
33
31
9

29%
31
30
10

100

100

Bonds
SharesGeneral account
Other
Total

(ii) Method of establishing expected long-term rates of return on plan assets
In order to determine the expected long-term rates of return on plan assets, the current and forecast distributionof plan assets and the current and expected long-term rates of return from the diverse assets that comprise theplan assets are taken into consideration.
(8) Matters relating to the basis for actuarial calculations
Main basis for actuarial calculations
Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)

0.25%

0.25%

1.00%

1.00%

Discount rate
Expected long-term rates of return on pension plan
assets3. Defined contribution plans
The required contribution from the Company and its consolidated subsidiaries into the defined contribution pension
plans was ¥53 million in the previous fiscal year and ¥58 million in the current fiscal year.
4. Multi-employer plan
The required contribution amount to the employees’ pension fund plan under the multi-employer plan, which isaccounted for in the same manner as a defined contribution plan, was ¥98 million in the previous fiscal year and ¥94
million in the current fiscal year.
(1)

Funded status of multi-employer planPrevious fiscal year
(As of March 31, 2016)

Current fiscal year
(As of March 31, 2017)

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve¥77,014 million¥72,648 million

96,894

90,979Net amount(19,880)(18,331)(2) Group’s proportion of total contributions to planPrevious fiscal year 4.36%(From April 1, 2016 to March 31, 2017)
Current fiscal year 4.56%(From April 1, 2017 to March 31, 2018)(3) Supplementary explanation
Major factors for the net amount in (1) above are the balance of past service liabilities (¥22,440 million as of March
31, 2016 and ¥21,372 million as of March 31, 2017) and surplus amount (¥2,560 million as of March 31, 2016 and¥3,041 million as of March 31, 2017) for pension financing calculation.
The principal and interest of past service liabilities in this plan are amortized equally over 20 years, and the Group
recorded special contributions applied to such amortization (¥68 million as of March 31, 2016 and ¥67 million as ofMarch 31, 2017) as expenses in the consolidated financial statements.
The proportions in (2) above are not consistent with the proportions actually funded by the Group.

Toyo Kanetsu K.K. Annual Report 201839

Notes - Share options, etc.
Not applicable
Notes - Tax effect accounting
1. Significant components of deferred tax assets and liabilities

Deferred tax assets
Tax loss carry-forward
Accrued business tax
Net defined benefit liability
Provision for bonuses
Allowance for doubtful accounts
Provision for loss on order received
Loss on valuation of investment securities
Loss on valuation of investments in capital
Impairment loss
Depreciation
Asset retirement obligations
Other
Subtotal
Valuation reserve
Total deferred tax assets
Deferred tax liabilities
Revaluation reserve for land
Valuation difference on available-for-salesecurities
Reserve for advanced depreciation of non-current assets
Other

Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)¥459 million
58
111
79
107
207
275
39
181
47
101
258

¥166 million
35
99
74
96
54
274
39
159
58
98
250

1,928
(1,165)

1,407
(715)

762

692

1,121

1,107

692

1,135

888
251

881
208

Total deferred tax liabilities
2,952
3,332
(Note)The net deferred tax liabilities as of March 31, 2017 and March 31, 2018 are included in the items below of theconsolidated balance sheet.

Current assets㸫Deferred tax assets

Current fiscal year
(As of March 31, 2018)¥582 million¥506 million

41

33

Non-current liabilities㸫Deferred tax liabilities

1,692

2,071

㸫Deferred tax liabilities for land revaluation

1,121

1,107

Non-current assets㸫Deferred tax assets

40

Previous fiscal year
(As of March 31, 2017)

Toyo Kanetsu K.K. Annual Report 2018

2. Main components causing significant differences between the statutory effective tax rate and the actual effective
tax rate after application of tax effect accounting
Previous fiscal year
(As of March 31, 2017)

Current fiscal year
(As of March 31, 2018)

Statutory effective tax rate
Adjustments
Increase/decrease in valuation reserve
Expenses not deductible for income tax purposes, such asentertainment expenses
Income not included for income tax purposes, such as dividends
received
Per capita levy of inhabitant taxes
Effect of differences in tax rates applicable to subsidiaries fromtax rate applicable to the Company
Amortization of goodwill
Retained earnings of overseas subsidiaries
Tax credits
Other

30.86%

30.86%(8.33)(12.36)

0.97

1.19

(0.22)(0.44)

0.79

1.30

0.30

1.40

0.39
0.22
(0.42)(0.21)–(1.68)–
0.22

Actual effective tax rate

24.34

20.50

Notes - Asset retirement obligations
Of asset retirement obligations, items recorded on the consolidated balance sheeta) Outline of asset retirement obligations
The asset retirement obligations of the Group are obligations in certain facilities for rent under the Ordinanceon Prevention of Asbestos Hazards.
b) Calculation method for determining asset retirement obligation amountThe amount of asset retirement obligations was calculated assuming an estimated period of use of 31 years
from acquisition, and using a discount rate from 2.2%.
c) Increase (decrease) in total asset retirement obligations
Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Current fiscal year
(From April 1, 2017
to March 31, 2018)

Beginning balance
Decrease due to settlement of asset retirement obligations¥332 million–¥332 million(10)

Ending balance

332

321

Toyo Kanetsu K.K. Annual Report 201841

Notes - Real estate for lease, etc.
The Company and certain subsidiaries rent out a space such as in their business places as well as land mainly forrental housing and buildings in the Tokyo metropolitan area and other areas. Rental profit related to the real estate
for rent, etc. for the previous fiscal year was ¥353 million (rent income is recorded in net sales, and rent expenses
are recorded in cost of sales). Rental profit related to the real estate for rent, etc. for the current fiscal year was ¥418
million (rent income is recorded in net sales, and rent expenses are recorded in cost of sales).
Carrying amounts on the consolidated balance sheet, changes during period for the previous and current fiscal years
and fair values of the real estate for rent, etc. are as follows:(Millions of yen)
Current fiscal year
(From April 1, 2017
to March 31, 2018)

Previous fiscal year
(From April 1, 2016
to March 31, 2017)
Carrying amount on the consolidatedbalance sheet
Balance at
beginning of period

5,364

5,049

Increase (decrease)during period

(315)

375

Balance at end of
period

5,049

5,424

Fair value at end of period
3,398
3,587
(Notes) 1. Carrying amount on the consolidated balance sheet is calculated by subtracting accumulated depreciation andimpairment loss from acquisition cost.
2. The increase (decrease) during period for the previous fiscal year primarily consist of a decrease in rentable space(¥231 million) and decrease due to depreciation (¥83 million). The increase (decrease) during period for thecurrent fiscal year primarily consist of an increase in rentable space (¥486 million), impairment loss (¥72 million)
and decrease due to depreciation (¥38 million).
3. Fair value of property whose amount has significance at the end of the period is an amount based on a value
investigation report by an external real property appraiser, and that of other property whose amount has little
significance is an amount based on an index which is believed to reflect a market value appropriately.

Notes - Segment information, etc.
[Segment information]
1. Description of reportable segments
The reportable segments of the Company are components for which discrete financial information is available
and whose operating results are regularly reviewed by the Board of Directors of the Company to make decisions
about resource allocation and assess their performance.
The Group develops comprehensive business strategies and engages in business activities for respective products
and services of divisions by product and service in the Company and of Toyo Kanetsu Solutions K.K., asubsidiary of the Company.
Accordingly, the Company is comprised of segments by product and service, and its reportable segments consistof “Plant & Machinery Business” and “Material Handling Systems Business.”“Plant & Machinery Business” designs, builds, and executes construction works of, storage tanks for LNG, LPG,
crude oil and other gas and liquid and provides maintenance services and other operations for these tanks.
“Material Handling Systems Business” develops, designs, builds and executes construction works of, material
handling systems focusing on sorting, picking and conveying systems and provides maintenance services andother operations for these systems.
2. Method of measurements of sales, profit (loss), asset, liability, and other items for each reportable segment
The accounting procedures for the reporting operating segments are nearly the same as those stated in“Significant accounting policies for preparation of the consolidated financial statements.” Profits of thereportable segments are based on operating profit. Intersegment transactions are based on actual transaction
amounts.

42

Toyo Kanetsu K.K. Annual Report 2018

3. Disclosure of sales, profit (loss), asset, and other items for each reportable segment
Previous fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Material
Handling
Systems Business

Other(Note)

Total

Adjustment

Total

13,852

21,71135,563

6,368–

41,932

–

–

–

661

(661)

–
41,932

Total

13,852

21,71135,563

7,030

(661)

Segment profit

633

1,981

2,614

958

(492)

3,080

Segment assets

12,707

21,23033,9388,106

11,18353,228

237

306

544

135

12

691

1,728

2,934

4,663

100

387

5,152

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Current fiscal year (From April 1, 2017 to March 31, 2018)(Millions of yen)
Reportable segments
Plant &
MachineryBusiness
Sales
Sales to externalcustomers
Transactions withother segments

Material
Handling
Systems Business

Other(Note)

Total

Adjustment

Total

10,03025,93935,9695,788–

41,758

–

–

–

682

(682)

–

Total

10,03025,93935,969

6,470

(682)

41,758Segment profit (loss)

(178)

1,931

1,753

914

(401)

2,265

10,44517,70028,145

12,501

15,651

56,298

220

349

569

153

14

737

103

357

460

129

11

602

Segment assets
Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the building construction business, manufacturing and sales of industrial facilities and equipment, realestate rental operations, leasing operations and other operations.

Toyo Kanetsu K.K. Annual Report 201843

4. Differences between total amounts for reportable segments and amounts in the consolidated financial statements
and main details of these differences (matters relating to difference adjustments)
Profit(Millions of yen)
Current fiscal year

Previous fiscal year

Reportable segments total
Profit of “other”
Corporate expenses (Note)
Other adjustments

2,614
958
(495)
3

1,753
914
(404)
2

Operating profit in the consolidated
3,080
2,265
financial statements(Note) Corporate expenses mainly represent expenses related to administrative divisions such as the general affairs division,
which are not attributable to the reportable segments.
(Millions of yen)
Asset
Reportable segments total
Assets of “other”
Corporate assets (Note)
Other adjustments

Previous fiscal year

Current fiscal year
33,938
8,106
11,235(51)

28,145
12,501
15,721(70)

Total assets in the consolidated financial
53,22856,298statements(Note) Corporate assets mainly represent assets related to divisions managing cash and deposits, investment securities andother assets of the Company, which are not attributable to the reportable segments.

44

Toyo Kanetsu K.K. Annual Report 2018

[Information associated with reportable segments]
Previous fiscal year (From April 1, 2016 to March 31, 2017)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Material handlingsystemequipment, etc.

6,961

6,891

21,711

Sales to external customers

Other

Total

6,368

41,932

2. Information about geographical area
(1) Sales(Millions of yen)Japan
(Note)Southeast Asia

Total

Other

36,643
5,170
119
Sales are classified by country or region on the basis of construction sites.

41,932(2) Property, plant and equipment(Millions of yen)
Japan

Southeast Asia
15,093

Oceania

943

Total
48

16,084

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income.
Current fiscal year (From April 1, 2017 to March 31, 2018)
1. Information for each product and service(Millions of yen)
Storage tank, etc.

Maintenanceservices ofstorage tanks

Material handlingsystemequipment, etc.

2,248

7,781

25,939

Sales to external customers

Other

Total

5,788

41,758

2. Information about geographical area
(1) Sales(Millions of yen)Japan
(Note)Southeast Asia

Total

Other

39,5792,012
166
Sales are classified by country or region on the basis of construction sites.

41,758(2) Property, plant and equipment(Millions of yen)
Japan

Southeast Asia
14,755

Oceania

908

Total
46

15,7103. Information for each of main customers(Millions of yen)
Name of customer

Net sales

ASKUL Corporation

8,354

Related segment
Material Handling Systems BusinessToyo Kanetsu K.K. Annual Report 201845

[Disclosure of impairment loss on non-current assets for each reportable segment]
Previous fiscal year (From April 1, 2016 to March 31, 2017)
Not applicable
Current fiscal year (From April 1, 2017 to March 31, 2018)(Millions of yen)
Reportable segments
Plant & Machinery
Business
Impairment loss
(Note)

Material Handling
Systems Business

–

–

Other
(Note)

Adjustment

72

–

Total
72

The amount of “other” is an amount related to real estate rental operations.

[Amortization and unamortized balance of goodwill for each reportable segment]
Previous fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)
Reportable segments
Plant & Machinery
Business

Material Handling
Systems Business

Other(Note)

Adjustment

Amortization in thecurrent fiscal year

–

–

62

–

62

Ending balance

–

–

–

–

–

(Note)

The amount of “other” is an amount related to manufacturing and sales of industrial facilities and equipment.

Current fiscal year (From April 1, 2017 to March 31, 2018)
Not applicable[Information associated with related parties]
Subsidiaries and others
1.
Related party transactions
Not applicable
2.

46

Total

Notes concerning the parent company or important affiliated companies
Not applicable

Toyo Kanetsu K.K. Annual Report 2018

Notes - Per share information

Net assets per share
Basic earnings per share(Note)(Note)

1.
2.

(Note)

3.

Previous fiscal year
(From April 1, 2016
to March 31, 2017)

Current fiscal year
(From April 1, 2017
to March 31, 2018)¥3,702.00¥3,941.68¥373.78¥251.26

The amount of diluted earnings per share is not provided because there are no potential shares.
The Company conducted a share consolidation at a ratio of 10 shares of common shares to 1 share, effective on
October 1, 2017. Accordingly, the net assets per share and basic earnings per share are calculated based on theassumption that the share consolidation had been conducted at the beginning of the previous fiscal year.
The basis for calculation for basic earnings per share is as follows:
Previous fiscal year
Current fiscal year
(From April 1, 2016
(From April 1, 2017
to March 31, 2017)
to March 31, 2018)

Profit attributable to owners of parent
Profit not relating to common shareholders¥3,746 million¥2,362 million––

Profit attributable to owners of parent pertaining tocommon shares

3,746

2,362

Average number of outstanding common shares

10,023thousand shares

9,401
thousand shares

Toyo Kanetsu K.K. Annual Report 201847

Notes - Significant events after reporting period
1. Purchase and retirement of treasury shares
The Company’s Board of Directors made a resolution on May 11, 2018 for the Company to acquire its own sharespursuant to the provision of Article 156, Paragraph 1 of the Companies Act, as applied by replacing the relevantterms pursuant to the Act’s provision of Article 165, Paragraph 3, and to retire treasury shares pursuant to theprovision of Article 178 of the Companies Act, and conducted the purchase and retirement of treasury sharesaccording to the particulars stated below.
(1) Reason for purchase and retirement
To implement a flexible capital policy based on the shareholder return policy and to improve capital efficiency.
(2) Details of the matters relating to transaction(i) Type of the shares to be acquired:
Common shares(ii) Total number of shares to be repurchased: Up to 290 thousand shares(Ratio of the total number of shares to be repurchased to thetotal number of shares issued (excluding treasury shares):
3.1%)(iii) Total price of repurchase:
Up to ¥1,000 million(iv) Repurchase period:
May 18, 2018 to August 28, 2018(v) Repurchase method:
Purchase on the stock exchange via a trust bank(3) Details of the matters relating to retirement(i) Type of the shares to be retired:(ii) Total number of shares to be retired:(iii) Date of retirement:

Common shares
380 thousand shares(Ratio of the total number of shares to be retired to the total
number of shares issued (excluding treasury shares) before theretirement: 3.9%)
May 25, 2018

2. Absorption-type merger of wholly-owned subsidiaries and partial amendment to the Articles of Incorporation
associated with the amendments to the business objectives
The Company’s Board of Directors made a resolution on May 11, 2018 to merge Toyo Kanetsu Solutions K.K., awholly-owned subsidiary of the Company, with the Company by an absorption-type merger with an effective date ofApril 1, 2019 and entered into a merger agreement on the same date.
In addition, the Company’s Board of Directors made a resolution to make a proposal at the 110th Ordinary General
Meeting of Shareholders to be held on June 28, 2018, concerning partial amendments to its current Articles ofIncorporation, including amendments to the business objectives.
(1) Outline of transaction(i) Information such as the name and description of business to be transferred
Name of surviving company
Toyo Kanetsu K.K.
Line of business
Manufacturing and sales of various kind of storage tanks
Name of absorbed company
Toyo Kanetsu Solutions K.K.
Line of business, etc.
Manufacturing, sales and maintenance of material handlingsystem equipment
Total assets: ¥13,522 million; liabilities: ¥6,183 million; net
assets: ¥7,338 million(ii)

Date of the business combination:
April 1, 2019 (scheduled)(iii) Legal form of the business combination:
An absorption-type merger, in which Toyo Kanetsu K.K. is the surviving company and Toyo Kanetsu
Solutions K.K. is the absorbed company(iv) Name of the company after the business combination:
Toyo Kanetsu K.K.

48

Toyo Kanetsu K.K. Annual Report 2018

(v)Outline of transaction including purposes of transaction
The Company decided to carry out an absorption-type merger of Toyo Kanetsu Solutions K.K. in order tostrive for further increases of the entire group’s corporate value by sharing intellectual property from theGroup’s primary businesses, the Plant & Machinery Business and the Material Handling Systems Business,
appropriately allocating human resources, and effectively using shared assets.

(2) Overview of accounting treatment
The acquisition will be accounted for as a transaction under common control based on “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, September 13, 2013), and “Guidance on Accounting Standard
for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10,
September 13, 2013).

Toyo Kanetsu K.K. Annual Report 2018

49

(v)

Annexed consolidated detailed schedules

Annexed consolidated detailed schedule of corporate bonds
Not applicable
Annexed consolidated detailed schedule of borrowings
Classification

Beginning balanceEnding balance(Millions of yen)

(Millions of yen)

Short-term loans payable

Average interest
rate (%)

Repayment due¥2,397¥4,604

0.601–

Current portion of long-term loans
payable

60

15

1,350

–

Long-term loans payable (excluding
current portion)

1,095

3,080

0.892

Between 2020 and 2025

Total

3,552

7,699

–

(Notes) 1.
2.

–

In calculating the average interest rate, the weighted average interest rate on the ending balance of loans payable, isshown.
Repayment of long-term loans payable (excluding the current portion) scheduled within five years after the balance
sheet date is as follows:
Over 1 year
to 2 years

Classification
Long-term loans
payableOver 2 years
to 3 years¥480 million

Over 3 years
to 4 years

Over 4 years
to 5 years¥– million¥– million¥600 million

Annexed consolidated detailed schedule of asset retirement obligations
A schedule of asset retirement obligations has been omitted since matters to be stated in the schedule are stated as
notes prescribed in Article 15-23 of the Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements.

(2) Other information
Quarterly information for the current fiscal year
First quarter(Cumulative)(Cumulative period)
Net sales(From April 1, 2017
to June 30, 2017)

Third quarter(Cumulative)(From April 1, 2017
(From April 1, 2017
to September 30, 2017) to December 31, 2017)

Current fiscal year
(From April 1, 2017 toMarch 31, 2018)(Millions of yen)

9,162

22,10031,546

41,758

Profit before income taxes(Millions of yen)

940

2,002

2,837

2,971

Profit attributable to owners ofparent(Millions of yen)

711

1,482

2,127

2,362

74.82

156.57225.61251.26First quarter

Second quarter

Third quarter

Fourth quarter

74.82

81.87

68.91

25.20

Basic earnings per share(Yen)(Accounting period)
Basic earnings per share(Note)

50

Second quarter(Cumulative)(Yen)

The Company conducted a share consolidation at a ratio of 10 shares of common shares to 1 share, effective on
October 1, 2017. Accordingly, the basic earnings per share is calculated based on the assumption that the shareconsolidation had been conducted at the beginning of the previous fiscal year.

Toyo Kanetsu K.K. Annual Report 2018

(TRANSLATION)
INDEPENDENT AUDITOR’S REPORT
June 28, 2018
To the Board of Directors of
Toyo Kanetsu K.K.
GYOSEI & CO.
Designated Partner
Engagement Partner
Certified Public Accountant

Takayuki Nakagawa (seal)

Designated Partner
Engagement Partner
Certified Public Accountant

Tetsuo Noguchi(seal)

Designated Partner
Engagement Partner
Certified Public Accountant

Akira Mishima(seal)

Audit of Financial Statements
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited the accompanying consolidated financial statements of Toyo Kanetsu K.K. (the “Company”), which
comprise the consolidated balance sheet as of March 31, 2018, and the consolidated statements of income andcomprehensive income, the consolidated statement of changes in equity, the consolidated statement of cash flows
for the fiscal year from April 1, 2017 to March 31, 2018, and significant accounting policies for preparation of theconsolidated financial statements, other notes, and annexed consolidated detailed schedules, all expressed inJapanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of the consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit as
independent auditor. We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theToyo Kanetsu K.K. Annual Report 201851

consolidated financial position of the Company and its subsidiaries as of March 31, 2018, and the consolidated
results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in Japan.
Audit of Internal Control
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited management’s report on internal control over financial reporting of the Company as of March 31, 2018.
Management’s Responsibility for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting and for the
preparation and fair presentation of its report on internal control in accordance with assessment standards forinternal control over financial reporting generally accepted in Japan.
There is a possibility that misstatements may not be completely prevented or detected by internal control overfinancial reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal control
audit as independent auditor. We conducted our internal control audit in accordance with auditing standards forinternal control over financial reporting generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether management’s report on internal control is free frommaterial misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of theassessment of internal control over financial reporting in management’s report on internal control. The procedures
selected depend on the auditor’s judgment, including the significance of effects on reliability of financial reporting.
An internal control audit includes examining representations on the scope, procedures and results of the assessmentof internal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of the Company as of March 31, 2018 was effective, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
Conflicts of Interest
We have no interest in the Company which should be disclosed in compliance with the Certified Public Accountants
Act.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.

52

Toyo Kanetsu K.K. Annual Report 2018

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

29,700,000

Capital Stock Issued

9,703,074

Number of Shareholders

8,819

Security Traded

Tokyo Stock Exchange, First Section

Transfer Agent and Registrar

The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head Office11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-1952
URL: http://www.toyokanetsu.co.jp/global/

Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Tel: +81-72-645-2520 Fax: +81-72-645-2532

Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173

Material Handling Systems Business(Toyo Kanetsu Solutions K.K. Head Office)Tel: +81-3-5857-3126 Fax: +81-3-5857-3185

Chiba Plant
2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Solutions K.K.

PT Toyo Kanetsu Indonesia

11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3126 Fax: +81-3-5857-3185
URL: http://www.tksl.co.jp/en(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62-21-570-7805 / 7739 Fax: +62-21-570-3950
URL: http://www.pttki.com/

Toyo Kanetsu Builtec K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com

Toyo Service System K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3171
URL: http://www.toyoservice.co.jp

Toyo Koken K.K.

Toyo Kanetsu Singapore Pte. Ltd.
16 Ayer Rajah Crescent, #03-04 Tempco Technominium,
3rd Floor, Singapore 139965
Tel: +65-6776-2393 Fax: +65-6773-1703

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60-86-338-122 Fax: +60-86-338-123

11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: http://www.toyokoken.co.jp/en

Kankyo Reserch Co., Ltd.
6-22, Okadomachi, Hachioji-shi, Tokyo 192-0054, Japan
Tel: +81-42-627-2810 Fax: +81-42-627-2820
URL: http://www.kankyo-research.co.jp/

Toyo Kanetsu K.K. Annual Report 201853

11-1, Minamisuna 2-chome, Koto-ku,
Tokyo 136-8666, Japan
Tel: +81-3-5857-3100 Fax: +81-3-6700-1952
URL: https://www.toyokanetsu.co.jp/global/