for Water,
for the EnvironmentEnter

Annual Report 2014
For the year ended March 31, 2014

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

At the Center of
Our Hearts …

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

21st Century
VISION02

of water treatment chemicals, water treatment facilities, andmaintenance services. Since its establishment in 1949, Kurita has

Becoming an advanced
water and environmental
management company
1. We will implement our Corporate Philosophy
and contribute to society by striving to add newvalue and functions to water and by meeting
global challenges such as the conservation of
the natural environment and effective use ofresources.

What We Do

2. We will further progress our “water
management” achieved throughour state-of-the-art products,
technologies and services, thereby
achieving “advanced management”
to ensure that water of appropriatequality and quantity is available
whenever and wherever it is needed.

accumulated a high level of technological expertise and know-how.
We have the Kurita 21st Century Vision at the center of our hearts. It
guides us as we strive to build a sustainable Group and society.

Corporate
Philosophy

Corporate Philosophy

Study the properties of water,
master them, and we will create anenvironment in which nature andman are in harmony

04

Our Strengths

Corporate
VisionContents

Investor
Information

Corporate Vision

Kurita Water Industries Ltd. is a leader in the industrial water field.
Kurita’s globally unique business portfolio is a balanced combination

Corporate Data

3. We will further advance our service
business in the water field to help
customers meet their challenges, suchas more safety, higher productivity
and lower environmental impact,
thereby retaining the continued
trust of our customers
and realizing our own
growth.

Management
Guidelines

02 What We Do
04 Our Strengths
06 Business Review
07 Management Indicators
08 To All Our Stakeholders
12 Solutions to Social Issues
16 Overseas Operations
17 Research and Development
18 Corporate Social Responsibility
19 Corporate Governance
23 Directors and Members of the Audit & Supervisory Board

08

To All Our
Stakeholders

Code of EthicalConduct

24 Relationship with Employees
26 Relationship with Customers
27 Relationship with Suppliers
28 Environmental Improvement Activities
30 Relationship with Local Communities
31 Financial Section
70 KURITA History
72 Corporate Data
73 Investor Information

12

Solutions toSocial Issues

18

Corporate Social
Responsibility
Kurita Water Industries Ltd. Annual Report 201401

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

What We Do
What and How: Water Treatment for Industries

Objectives and Business Domains

The Kurita Group provides water treatment chemicals, water treatment facilities, and maintenance andoperation services for a broad spectrum of different industrial uses from the way in to the way out offactories.

Our products and services boost the customers’ productivity,
reduce the environmental impact of their activities and help to
produce innovative energy solutions.

Kurita’s
Kurita’s
Water
Water
Treatment
Treatment
Chemicals
Chemicals

Manufacturing
Manufacturing
process
process
Process
Process
treatment
treatmentchemicals
chemicals• Process• Processtreatment
treatment

Water
Water
treatment
treatment

Water
Water
treatment
treatment

Power
Power
generation
generation AirAir
conditioning
conditioning
Refrigeration
systems
systems
systems
systems
systems
systems Refrigeration

Cooling
Coolingwater
water
treatment
treatmentchemicals
chemicals• Cooling• Cooling
water
water
treatment
treatment

Water
Water
treatment
treatment
facilities
facilities• Ultrapure• Ultrapure
water
water
production
production

BoilerBoilerwater
water
treatment
treatmentchemicals
chemicals• Boiler,• Boiler,vaporizer
vaporizer
andandcondenser
condenser
treatment
treatment Boiler
BoilerImagesImages
ofof
Water
Water
Treatment
TreatmentFacility
Facility

Wastewater
Wastewater
reclamation
reclamation
systems
systems

Wastewater
Wastewater
treatment
treatment
Wastewater
Wastewater
treatment
treatmentchemicals
chemicals

Water Treatment
Chemicals• Boiler water treatment
chemicals• Cooling water
treatment chemicals• Wastewater treatment
chemicals• Process treatment
chemicals• Packaged contracts• Chemical injection anddosing equipment, etc.

Wastewater
Wastewater
treatment
treatment
facilities
facilities

Water Treatment
for Industries

Water Treatment
Facilities• Ultrapure waterproduction systems• Water treatment
systems for generalindustrial use• Wastewater treatment
systems• Wastewater reclamation
systems

Maintenance and Operation Services• Maintenance services• Ultrapure water supply
business• Tool cleaning services

Food

Pharmaceuticals

Electronics• Soil remediation services• Chemical cleaning
services

Oil refining/ petrochemicals

Pulp &
paper

Steel

ElectricPower

BoilerBoilerthatthat
waswasused
used
forfor Boiler
Boilerthatthathashasbeen
been
subjected
subjected
a few
a few
years
years
to chemical
to chemicaltreatment
treatment
Contamination
Contamination
is attachedis attached
to tothetheinsideinsideUltrapure
Ultrapure
water
water

ReverseReverse- Ultrafiltration
Ultrafiltration
IonIonosmosis
osmosismembranemembrane exchange
exchange
ForForcleaning
cleaning
membranemembrane
resin
resin
semiconductor
semiconductor
waferswafersandandLCDLCD
panelspanels02 Kurita Water Industries Ltd. Annual Report 2014

Wastewater
Wastewater
reclamation
reclamation
treatment
treatment

Cooling
Cooling
tower
tower

Diagrams
Diagrams
ofof
Water
Water
Treatment
Treatment
Using
Using
Chemicals
Chemicals

Ultrapure
Ultrapure
water
water
production
production

Tap
Tap
water
water

Water Treatment
Solutions

Im
pr

Water
Water
treatment
treatment
facilities
facilities• Pre-treatment• Pre-treatment• Soft• Softwater
water
production
production• Pure• Purewater
water
production
production

Utilities
Utilities

ovative Energ
Inn
y
So
l

Manufacturing
Manufacturingline
line

roductivity
gP
n
i
ov

Industrial
Industrial
water
water

nvironmental
Im
ng E
i
c
pa
u
d
c
e

t

R

Kurita’s
Kurita’s
Water
Water
Treatment
Treatment
Facilities
Facilities

s
ion
ut

From
From
the
the
Way
Way
InIn
toto
the
the
Way
Way
Out
Out
ofof
Factories
Factories

Water
Water
Pipes
Pipes
of of
Boilers
Boilers
Steam
Steam

Used
Used
for forheatingheating

NoNo
deposits
depositsin thein thepipe
pipe

Realization of a Sustainable Society

Scale
Scale
andand
slime
slime

Loss
Loss
of fuelof fuelsuchsuch
as heavy
as heavy
oil oilandandgasgasReduction
Reductionof fuelof fuelloss;
loss;
HighlyHighlyefficient
efficient
operation
operation

Industrial
Industrial Waterway
Waterway
and
and
waste
waste sewage
sewagedischarge
discharge
Kurita Water Industries Ltd. Annual Report 201403

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

Our Strengths
The Kurita Group satisfies customers’ needs in the fields of water and environmental management by
providing total solutions. The Group also strives to satisfy all its stakeholders by further increasing its
corporate value.

UniqueBusiness Mix

Solutions Cycle Running
through Kurita’s Resources

Business capabilities that other companies don’t have

Service Business
Orientation

Kurita’s Comprehensive Strengths
UniqueBusiness Mix

Core
Accumulated Sales
Technologies Know-how Network

Water Treatment Facilities(Hardware)

16%
Water Treatment
Chemicals

Maintenance

Shareholder
Value Creation

Emergency
responses

Input

Dividends per Share
Water Treatment
Chemicals

33%

Daily
diagnostic
checks

Yen

28
18

32

34

36

38

40

42

44

22

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Develop newtechnologies

Water Treatment
Facilities

Customers

OutputImproving
Productivity

Reducing
Environmental
Impact

For the year ended
March 31, 2014

Identify
issues
ProposesolutionsInnovative
EnergySolutionContribution to a Sustainable Society

Based on our strong financial basis, we will aggressively invest
required management resources to strengthen our business

51%

base overseas, including capital investments in advanced
water analysis and product application testing locally, andWater Treatment
Facilities(Services)increase local personnel overseas and reinforce humanresources development programs.

Service businesses accountfor

84% of total revenues.

The Kurita Group is the only water treatment company inOn the basis of our accumulated resources managing

the world to develop its business based on a good balanceindustrial water, the Kurita Group will devote all its strengths

Service businesses account for over 80% of total revenues. Theof three distinct functions: water treatment chemicals, water

to helping resolve the various issues and challenges of our

proportion of sales coming from the after-market is far greater

treatment facilities, and maintenance services.

customers.

than any other major industrial water systems supplier.

04 Kurita Water Industries Ltd. Annual Report 2014

Years ended March 31

We will also endeavor to strengthen ties with local partners,
establish alliances and execute mergers and acquisitions(M&As).
At the same time, we aim to enhance shareholder returns
including dividend and share buyback.
Based on our stable dividend payment policy, we haveincreased the annual dividend for the 10th consecutive year.

Kurita Water Industries Ltd. Annual Report 201405

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
Stakeholders

Solutions to Social
Issue

Business Review Segment Highlights

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate DataManagement Indicators
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31

Water Treatment Chemicals

Water Treatment Facilities

In the fiscal year ended March 31, 2014, in Japan capacity

In the fiscal year ended March 31, 2014, in Japan weak capitalutilization at customer factories improved from the latter half

investment and low factory capacity utilization by customersof the fiscal year. However, the decline seen in the first half

led to declines in orders and sales. Overseas, some customers

Financial

2005

2006

2007

2008

2009

2010

2011

2012

2013

Millions ofyen

Thousands of
U.S. dollars1

2014

2014

Orders¥171,334 ¥183,910 ¥192,529 ¥208,689 ¥195,065 ¥175,162 ¥181,951 ¥197,256 ¥186,741¥173,463$1,684,107

160,896

173,683

197,146

204,875

199,706

178,520

181,234

193,792

180,143

178,137

1,729,489

had a significant impact, leading to slight decreases in orders

revised capital investment plans or canceled projects. As a

Net salesand sales on a full-year basis. Overseas, business grew steadily

result, orders and sales decreased. Operating income fell

Cost of sales

112,077

122,630

137,819

138,549

135,874

117,221

118,573

127,905

121,047

122,870

1,192,913

centering on the Asia region. As a result, orders and sales

substantially owing to such factors as construction losses due

increased. However, expenses rose, driven by overseas businessto the emergence of unprofitable projects and an increase in

Selling, general andadministrative expenses

32,86733,74135,05035,85735,89634,941

35,52836,503

38,10640,380392,043

expansion, leading to a decrease in operating income.

additional costs.

Operating income

15,951

17,311

24,27630,46827,93526,35827,131

29,382

20,98914,886

144,532

9.9

10.0

12.3

14.9

14.0

14.8

15.0

15.2

11.7

8.4

9,383

10,51914,207

18,297

16,29917,28817,13816,548

11,476

9,352

In the fiscal year ending March 31, 2015, in Japan customer

In the fiscal year ending March 31, 2015, in Japan

Operating income margin (%)
Net income

factory utilization rates are on a rising trend, and mainstay

although customer capacity utilization is on a recovery trend,

products are expected to recover. The Group is aiming to

the rebound in capital investment is expected to remain

Return on sales (%)

grow market share by leveraging its newly developed sensing

sluggish. In this environment, the Company is working to

Total assets

technology. Overseas, the Group is working to strengthen

bolster its standardized product offerings and develop new

its technical support structure and expand sales. Segment

markets. Overseas, the Group will strive to win new projects byTotal assets turnover(Times) 2

orders, sales and operating income are all expected to increase,targeting the recycled water market. Segment orders, sales andyear-on-year.

operating income are all expected to increase, year-on-year.

Years ended March 31

OrdersOrders(Millions of yen)

(Millions of yen)

53,37056,714 56,748 56,040 59,413

121,791 125,237

140,507 130,700

114,049

Equity3

Equity ratio (%)

5.8

6.1

7.2

8.9

8.2

9.7

9.5

8.5

6.4

5.3

192,428

212,774

235,137

231,498

245,406

251,620

253,298

271,141

263,580

274,925

0.86

0.86

0.88

0.88

0.84

0.72

0.72

0.74

0.67

0.66

136,366

145,366

156,772

169,402177,291

192,588

198,042

208,891

207,871

217,691

70.9

68.3

66.7

73.2

72.2

76.5

78.2

77.0

78.9

79.2

4

5.0

5.2

6.3

7.8

6.8

7.0

6.8

6.3

4.3

3.5

7.1

7.5

9.4

11.2

9.4

9.3

8.8

8.1

5.5

4.4

Capital expenditures

6,706

16,537

19,56324,09756,322

8,083

5,965

8,105

6,688

5,709

55,435

Depreciation and amortization

4,361

4,906

6,512

9,425

11,716

15,523

16,066

16,035

15,054

14,774143,441

R&D expenses

4,228

4,213

4,421

4,551

4,363

3,990

4,225

4,232

4,362

4,534

44,025Equity per share
2012

2013

2014

2010

Sales

Sales

(Millions of yen)

(Millions of yen)

58,84453,743 56,735 56,443 56,091

2010

2011

2012

2013

(Millions of yen)

10,0998,177

124,777 124,499

2014

Operating Income

2011

2010

2011

2012

137,348

2012

2013

2014

124,052 119,292

2013

2011

8

¥

71.8
1,058.9¥

81.8¥ 110.4¥ 142.2¥ 126.7¥ 134.4¥ 134.0¥ 130.7 ¥

92.4

1,129.7

1,218.4

1,316.7

1,378.0

1,497.0

1,563.6

1,649.2

1,744.4¥

U.S. dollars 1

78.5$ 0.76

1,826.8

17.74
0.43

Dividends per share

18.0

22.0

28.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

Dividend payout ratio (%)

25.1

26.9

25.4

22.5

26.8

26.8

28.4

30.6

45.4

56.1

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥103 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2014.
2. Total assets turnover = Net sales ÷ Total assets (Average)
3. “Equity” represents “Net assets less minority interests” (hereinafter, the same).
4. Equity ratio = Equity ÷ Total assets × 100
5. Return on assets = Net income ÷ Total assets (Average) × 100
6. Return on equity = Net income ÷ Equity (Average) × 100
7. Calculation of net income per share is based on average number of shares outstanding (excluding treasury stock).
8. Calculation of equity per share is based on the number of shares at year-end (excluding treasury stock).

2014

Operating Income(Millions of yen)

9,268

8,334

7,954

18,181 17,032

20,127

Non-Financial
12,641
6,934

2010

2,113,513

Return on equity (ROE) (%) 6

Return on assets (ROA) (%)

Net income per share 72011

2,669,183

5

Yen

2010

90,7992012

2013

06 Kurita Water Industries Ltd. Annual Report 2014

2014

2010

See P. 32

2011

2012

2013

2014

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Total CO2 emissions (t-co2)

21,05821,93722,39822,50522,541

23,56323,941

158,121

162,748

181,149

Total waste output (t)9,649

13,69925,95426,895

27,133

26,186

24,73947,181

41,56147,859Number of employees

3,382

3,668

3,992

4,249

4,404

4,445

4,490

4,555

4,640

4,635

*From the fiscal year ended March 31, 2012, we included the sites engaged in the ultrapure water supply business in the data tabulation target.

Management’s Discussion and Analysis
Kurita Water Industries Ltd. Annual Report 201407

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

To All Our Stakeholders

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information(TA-14), which we launched in April 2012, we worked to create business momentum
unmatched by our competitors by organically combining our strengths—the threefunctions of water treatment chemicals, water treatment facilities, and maintenanceservices. Through this process we aim to evolve into a corporate group that is strongly
competitive on the global stage, and realize a quantum leap in growth. However, theoperating results recorded over the first two years of the plan have seen a continuing
decrease in revenues and profit amid an adverse business environment, and we wereunable to achieve the growth anticipated under the plan. The Company’s operating
income margin declined to 8.4%, a level similar to that of over ten years ago. This
somewhat undermined one of our strengths to date—sound profitability. Meanwhile,
free cash flow remained at a high level, which meant return on equity (ROE)—a measureof capital efficiency—declined for the sixth consecutive fiscal year, to 4.4%. As of theend of the second year of the three-year TA-14 plan, we recognize that major challenges

July 2014

Q
Toshiyuki Nakai
President and Representative Director

remain in terms of profitability, growth and capital efficiency.

What are your key focus areas in the fiscal year ending
March 31, 2015, and what are your operating results
forecasts for the year?
In the Japanese economy, although our main customers in the manufacturing sector
are seeing a recovery trend in factory capacity utilization, capital investment in new

Q

The fiscal year ended March 31, 2014, was the second
year of the three-year medium-term management
plan, Take Action 2014 (TA-14). What is yourassessment of the operating results for the year, andwhat issues remain outstanding?
The Kurita Group faced a harsh market environment in the fiscal year under review. In
Japan, our main customers in the manufacturing sector ran factories at low capacity
utilization rates and investment in plant and equipment was weak. The impact of these
conditions led to declines in both orders and sales. Overseas, there was an increase insales driven by expansion in demand for water treatment in East Asia and Southeast Asia
as well as a correction in the strength of the yen exchange rate. However, some orders
were withdrawn as certain customers cancelled capital investment projects or revised
investment plans. As a result, orders totaled“

As of the end of the second year of the threeyear TA-14 plan, we recognize that major
challenges remain in terms of profitability,
growth and capital efficiency.

”¥173,463 million, a 7.1% decrease compared withthe previous fiscal year, and net sales amounted
to ¥178,137 million, down 1.1%. In terms of
profitability, the gross profit margin deteriorated
owing to intensified price competition inwater treatment facilities and the emergenceof unprofitable projects. Selling, general andadministrative (SG&A) expenses increased, driven by expenses related to expansion of
the overseas business. Such factors led to a large decline in profits. Operating income
decreased 29.1% compared with the previous fiscal year, to ¥14,886 million, andnet income fell 18.5%, to ¥9,352 million. Net income per share amounted to ¥78.48,
compared with ¥92.43 in the previous fiscal year.
In the Group’s three-year medium-term management plan, Take Action 201408 Kurita Water Industries Ltd. Annual Report 2014

production facilities and expansion of existing facilities is expected to remain low,
as manufacturers focus on improving production efficiency and maintaining aging
facilities. In contrast, in the overseas business
investment in new production facilities andexpansion of existing facilities is expected toincrease, particularly in East Asia and Southeast
Asia. Water treatment demand is forecast“

We will pursue profitable growth whileaiming to enhance capital efficiency.

”

to continue rising, driven by needs related to productivity improvement, reduced
environmental burden, and stricter wastewater regulations.
In this operating environment, as TA-14 draws to a conclusion in the fiscal year ending
March 31, 2015, we are focusing our efforts on achieving a recovery in profitability,
expansion of our global business, and improving capital efficiency.
Among these, the most pressing issue we face is achieving a recovery in profitability.
The foremost measure on our agenda is the elimination of unprofitable projects inthe water treatment facilities business, which were present in the fiscal year ended
March 31, 2014. To eliminate the occurrence of unprofitable projects, we are working
to strengthen collaboration between our sales function and production function.
We are increasing the involvement of design and production functions from an earlystage as we work to win orders, and are striving to lower the cost ratio and preventthe occurrence of additional costs through optimization of design and construction
management. Furthermore, by increasing the standardization of designs we are
striving to provide price-competitive products and services. Simultaneously, we are
expanding global procurement as we work to build an optimal worldwide production
system. To achieve sustainable, superior earnings, the entire Kurita Group is focusing
on maximizing its comprehensive strengths by generating synergies between water
treatment chemicals, water treatment facilities, and maintenance services. By making
high-value-added proposals to solve issues faced by our customers, we are working tomaintain and enhance order prices.

Kurita Water Industries Ltd. Annual Report 201409

Contents

What We Do

21st Century
VISIONOur Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

The second key focus area is expansion of our global business. The Group is

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

to continue providing solutions that make the most effective use of precious and limited

identifying growth regions and markets, and shifting management resources to thosewater resources. I believe that this mission fulfills a valuable role in society.

areas. Based on the specific characteristics of each region and market, we are committed

In particular, in newly emerging economies, as populations grow and economies

to providing profitable products and services using highly efficient sales and production

develop, there is an increasing awareness of global-scale risks related to environmental

methods. By doing so, we aim to expand our profitable overseas business.

contamination stemming from water shortages, factory wastewater and other

Looking at individual regions, in East Asia demand is emerging for maintenancephenomena. Within global economic activity, water management is becoming

Corporate
Philosophy

services related to water treatment facilities delivered in recent years, and maintenancesales are increasing. We plan to strengthen collaboration with Group companies to

Corporate
VisionKurita sees itself as a technology-driven company, and for over 60 years we have built

achieve further expansion overseas in the highly profitable maintenance business.

up advanced technology and frontline know-how related to water used by enterprises

increasingly complex and difficult, and its importance is growing.

In Southeast Asia, in the water treatment chemicals business, we have stationed

Management
Guidelines

in their business operations—in other words, theengineers in Singapore, and are working to develop products that meet regional needs

water used by industry. Based on this technology

while enhancing the technical skills of local staff. In addition, our Thai subsidiary has

and know-how, we provide water of the required

Code of EthicalConduct

established a representative office in Vietnam. In the water treatment facilities business,quality and volume, when and where it is needed.

to expand the maintenance business we have taken various measures to reinforce

We also develop water management capabilities

our organization. This includes the integration of the Malaysia sales office into Group

from a global perspective, including solutions

company Kurita Water (Malaysia) Sdn. Bhd. Furthermore, we have begun to ship tofor the recycling and reuse of water, as we seek

Japan and Southeast Asia standardized water treatment facilities manufactured by

to become an even more advanced water andKurita Water Industries (Suzhou) Ltd. These facilities boast high cost competitiveness.

environmental management company.

Management Guidelines
1. World’s Top-Class Water andEnvironment Business2. Creation of New Business
3. Business That Makes Technology
4. Full Use of the Group’sComprehensive Strength
5. Enhanced Development of Human
Resources
6. Accomplishment of Social
Responsibility

The starting point of the Kurita Group’sbusiness activities is to provide customers withconstruction management as well as strengthened purchasing capabilities. In Europe

proposals that will help them solve issues related

and the Americas—where our presence is low compared with Asia—centering mainly

to productivity improvement, environmental impact reduction and energy savings.

on the water treatment chemicals business, we are looking for potential M&A targets

We do this by offering comprehensive proposals that combine the three functions

that have original products and an independent sales network.

of water treatment chemicals, water treatment facilities, and maintenance services.

”

Hence, we contribute to a sustainable society. These values are shared among the entire

fiscal year ended March 31, 2013, to the fiscal year ending March 31, 2015, we forecast

Kurita Group, and are the motivation for each individual employee in their day-to-day

that the Company will generate cash flows from operating activities amounting toactivities. It is fair to say that Kurita is a unique corporate group even at the global level.

to investment in growth businesses, while at the same time we will work to enhance
returns to shareholders. In addition to new investments and additional investments inthe ultrapure water supply business and investment in research equipment and testing
apparatus overseas, we are looking for potential M&A targets in North America andEurope. We are striving to effectively utilize the cash generated by the Kurita Group’s
unique business model, and increase our enterprise value.
Through execution of the measures outlined above, we will pursue profitable growth
while aiming to enhance capital efficiency. In the fiscal year ending March 31, 2015,
we forecast net sales of ¥185,000 million (up 3.9% year-on-year), operating income of¥17,000 million (up 14.2% year-on-year), and net income of ¥11,000 million (up 17.6%
year-on-year).

Please outline the essence of the Kurita Group’s raisond'être as a corporate citizen.
Since Kurita’s founding in 1949, we have contributed to the development of society
and industry and conservation of the environment as a leading company in the waterand environmental sphere. Our corporate philosophy is: “Study the properties ofwater, master them, and we will create an environment in which nature and man are
in harmony.” By deeply and broadly investigating the properties of water, we strive to
discover new functions and generate new value for water. The Kurita Group’s mission is

10 Kurita Water Industries Ltd. Annual Report 2014

The starting point of the Kurita
Group’s business activities is toprovide customers with proposals
that will help them solve issues
related to productivity improvement,
environmental impact reduction andenergy savings.

facilities, with efforts centering on such aspects as greater localization of design and

The third key focus area is improving capital efficiency. Over the three years from theQ“

In Taiwan, we are particularly focusing on cost reductions for water treatment

more than ¥80,000 million. With regard to the uses for this cash, we will give priority

Investor
Information

Q

Please outline your policy on shareholder returns
and your specific measures for further increasing
shareholder value.
Our basic policy is to pay stable dividends on an ongoing basis. We have worked
to increase dividends while taking into consideration earnings performance andinvestment required by our businesses. For the fiscal year ended March 31, 2014, we
paid a year-end dividend of ¥22 per share. Combined with the interim dividend of ¥22
per share, the annual dividend totaled ¥44 per share. This represented an increase of ¥2
per share in comparison with the previous fiscal year. For the fiscal year ending March
31, 2015, we forecast an interim dividend of ¥23 per share and a year-end dividend of¥23 per share, for an annual dividend of ¥46 per share. This forecast represents the 11th
consecutive annual dividend increase.
In November 2012, we acquired 7.49 million shares (5.64% of total outstanding
shares) of our own stock through a tender offer. In August 2013 we canceled 13.63
million shares of treasury stock (10.27% of issued shares). In the
future, with the aim of further increasing the Company’s shareholder
value, we will strive to increase dividends and maintain a flexible andagile approach to share buybacks while taking into consideration
investment opportunities and share price.

Kurita Water Industries Ltd. Annual Report 201411

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Re

in

gP

ro d

uc t iv i t yCase 1

Innovative En
erg
y

ov

The World Economic Forum cites water-related risks among the most critical global risks. This illustrates how
such problems as water shortages and environmental contamination by factory wastewater are attracting
considerable attention as global-scale risks. Against a backdrop of increases in agricultural and industrial
production—driven by population increase and economic development—demand for fresh water is rising.
During the 20th century, the world’s population quadrupled. However, water consumption rose nine-fold.
Along with satisfying the demand for greater water volume, maintaining water quality is also a major
challenge. Managing water quality is becoming ever more complex and difficult.
Frequently, the activities of business enterprises are cited as the main cause of such problems as water
shortages and deterioration in water quality. For companies, water management is an essential part ofbusiness operations.
The Kurita Group specializes in water management related to the operations of business enterprises.
Through water management, the Kurita Group aims to help customers tackle the crucial tasks of improving
productivity, reducing environmental impact, and producing innovative energy solutions. The Kurita
Group strives to create new functions and value for water and contribute to the betterment of society
by developing a wide range of proposals that will lead to the effective use of water resources and theprevention of environmental contamination.

ct

Solutions to Social Issues

vironmenta
l Im
g En
cin
pa
du

Im
pr

What We Do

s
ion
lut
So

Contents

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

S.sensing®: A Water Treatment Management
Service that Achieves Optimal Treatment in
Real-time

Facilities that Use Water Treatment Chemicals

Measurement

PC

Smartphone

ServerCustomer

Monitoring
optimally controls chemical
dosing in real-timeControl

Analysis

Proposals

Business Operations that Apply Kurita’s Corporate Philosophy

Case 2
P.14

Sharing water treatment status data with customers to implement
high-value-added proposals that drive productivity improvements

ironmenta
g Env
l Im
cin
pa
u
ed

In its water treatment chemicals business, Kurita has launched a new water treatment
management service called S.sensing®, which utilizes sensing technology.

ct

R

KURITA ST

P.13

Case 3

Combining Anaerobic
Water Treatment with
Biogas Power Generation

s
ion
ut

S.sensing®

Water
Treatment
Solutionsovative En
e
r
g
Inn
yS
ol

Case 1

roductivity
gP
n
i
v
ro

This service is designed for facilities that use water treatment chemicals, including

P.15

cooling-water equipment and wastewater treatment facilities. The service applies a system that
integrates Kurita’s proprietary technologies in several fields—including measurement, analysis,control and monitoring—to provide optimal chemical dosing in real-time based on changes
in water quality. In addition to a service that monitors data regarding water quality, chemicaldose amounts and other parameters, the system also analyzes the water treatment effectivenessof chemicals. By providing automated control, the system realizes enhanced water treatment
effectiveness.

Imp

Data measurements and control results are automatically relayed via the telecommunication
network, making it possible to monitor trends remotely. Customers can view over the Internet
time-series data as well as analytical reports and graphs generated automatically.
Kurita also shares data with customers in real-time regarding

Cooling-water treatment control screen using S.sensing®

the water treatment status and effectiveness and trends showing

Water Treatment for Industries

changes over time. Potential problems are detected at an
early stage, and Kurita uses this data as the basis for proposals
to customers to improve productivity. Kurita has positioned
S.sensing® as a tool for sharing water treatment effectivenessRealization of a Sustainable Society

with customers, increasing the speed of problem solving, andenhancing the quality of solutions. In the future, Kurita intends
to expand the application of S.sensing® in domestic and overseas
markets, as it works to meet a broad range of customer needs.

12 Kurita Water Industries Ltd. Annual Report 2014

For PCs

For smartphones

Kurita Water Industries Ltd. Annual Report 2014

13

Im
pr

ov

Formation of a Corrosion Protection Film Using a New Water Treatment Chemical

Research andDevelopment

Re

Overseas
Operations

Corporate Social
Responsibility

vironmenta
l Im
g En
cin
pa
du

ro d

uc t iv i t yCase 3gP

Contributing to Reduced Environmental
Impact and Effective Use of Water Resources
through High Development Capabilities

Solutions to Social
Issue

in

Re

uc t iv i t y
ro d

gP

s
ion
lut
So

in

To All Our
Stakeholders

ovManagement
Indicators

Innovative En
erg
yInnovative En
erg
yCase 2Business Review

ct

ct

vironmenta
l Im
g En
cin
pa
du

Our Strengths

Im
pr

What We Do

s
ion
lut
So

Contents

Financial Section

KURITA History

Corporate Data

Investor
Information

Combining Anaerobic Water Treatment with
Biogas Power Generation to Contribute to
the Increased Use of Renewable Energy

Example of Biogas-based Electricity Generation using Anaerobic Treatment Technology

Corrosion inhibition
components(phosphorus, zinc, etc.)

BiogasPower generation facilities

Electricity(sold to the grid)Innovative
energy solutions

Low-molecular polymer(acrylic acid, etc.)

Effective use of waste
combustion heat

Wastewater

Corrosion protection film

• The low-molecular polymer keeps corrosion
inhibition components in the water in an active state• A corrosion protection film rapidly forms innecessary places

Treated water

Metal
Anaerobic treatment
systems, such as Biosaver® TK
For more diluted wastewater

Aerobic treatment
systems

KURITA ST: A new series of water treatment chemicals that boasts
superior anticorrosion properties based on recycled water utilizing a
newly developed polymer

System for power generation using biogas made from factory
wastewater promotes application of feed-in tariff (FIT) scheme
In wastewater treatment at food manufacturing plants and other factories, Kurita is promoting

As global needs expand in the area of effective use of water resources, in the industrial field it is

proposals for anaerobic treatment systems that effectively use biogas as fuel for electricity

becoming increasingly common to see a variety of levels of water quality used. This can include

generation.

wastewater and recovered water as well as reverse osmosis (RO) treated water produced by aAnaerobic treatment is a type of wastewater treatment technology, which utilizes the special

seawater desalination plant used as supplementary feed water for cooling systems. However,characteristics of microorganisms that are active in environments where oxygen is not present.

since such types of water tend to be highly corrosive, there are growing needs for water treatment

Compared with aerobic treatment, anaerobic treatment boasts such advantages as low powerchemicals that boast superior anticorrosion properties—no matter the water quality. Anticorrosion

consumption, reduced amounts of waste, compact reactor, and the generation of biogas.

effectiveness is necessary to ensure stable cooling system operation.
To meet such needs, Kurita has commercialized KURITA ST, which is a cooling-water treatment

Methane in biogas is attracting significant attention as a new source of renewable energy,
which can contribute to the reduction of CO2 emissions. In July 2012, the Japanese Ministry ofchemical with low environmental impact. KURITA ST utilizes a newly developed polymer that

Economy, Trade and Industry (METI) launched a feed-in tariff (FIT) scheme for renewable energy,

realizes superior anticorrosion properties even for RO treated water and wastewater / recovered

and there are expectations that the scheme will see widespread adoption in the future.

water.

Kurita provides technical support for customers aiming to acquire certification under theThrough the action of the newly developed low-molecular polymer, corrosion inhibition

FIT scheme, and utilizes anaerobic treatment technology to meet a broad array of customer

components are maintained in an active state in the water, and a fine corrosion protection film

needs in the area of wastewater treatment. This includes Biosaver® TK, which is suitable foris rapidly formed on metal surfaces. Compared with Kurita’s conventional treatment chemicals,

the treatment of low-concentration organic wastewater. Kurita makes proposals regarding

KURITA ST achieves double the level of anticorrosion effectiveness, and the product can be used

the improvement of existing wastewater treatment systems and methods for the adoption ofeven in water that is highly corrosive. For this reason, there is a reduction in the usage amounts

biogas cogeneration systems. Kurita also provides comprehensive maintenance services forof chemicals with corrosion inhibition components, such as phosphorus and zinc. This lowers

systems following installation and launch, and is committed to helping create innovative energy

environmental impact and cuts operational costs.

solutions and to promoting the widespread adoption of renewable energy.

In the future, there is expected to be a worldwide increase in cooling systems that use RO
treated water and wastewater / recovered water. Kurita will continue striving to develop andexpand sales of water treatment chemicals that can help to reduce environmental impact andcontribute to the effective use of water resources.

14 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201415

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas Operations

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Research and Development

The Kurita Group has a long history of doing business in thelocally. In water treatment facilities, Kurita builds an integrated

Characteristics of the Kurita Group’s R&D

ion exchange, advanced analysis and sensing, slime control,international arena. As early as the 1950s, Kurita began technology

manufacturing and service structure, from receipt of orders and

To realize the corporate vision of “becoming an advanced waterand cleaning and surface treatment of semiconductor devices.

importation from the United States and Europe. In 1975, Kurita

design through to procurement, engineering and maintenance.

and environmental management company,” one of Kurita’s core

The Kurita Group takes a proactive approach to collaborative

established its first wholly owned overseas subsidiary in Brazil.

In newly emerging markets, even where economic growth

management policies is to be a technology-driven company.

research with external research institutions and companies

is slowing, we believe that demand for water treatment will

Kurita develops and cultivates technologies related to its main

as a means of discovering new materials, mechanisms andat a large-scale steel-manufacturing project in China developed

continue to expand. Although the Group’s presence in thebusinesses, including boiler and cooling-water treatment,

methods from core technologies that will lead to products andby Japanese companies. This marked Kurita’s full-fledged entry

Americas and Europe is small compared to the Asia region, theultrapure water production, wastewater treatment, and watertechnologies with technological advantages.

into the Chinese market. In the late-1980s, Kurita established anmarkets in which we operate are large. The Kurita Group has set

reclamation. The Kurita Group also develops new products andinternational network of manufacturing and marketing operations

a medium-term goal of raising its overseas sales ratio to aroundtechnologies to broadly meet the needs of industry and society

for water treatment chemicals. From the 1990s, Kurita continued

30%. To achieve this target, Kurita is allocating managementfrom the perspectives of environmental impact reduction,

to expand its overseas operations, particularly driven by ultrapure

resources to such areas as increasing the number of sales

productivity improvement, and energy generation.

water production systems for the electronics industry. At present,

engineers and other local staff and bolstering training programs,

A specific characteristic of the Kurita Group’s R&D is a

Kurita has 12 subsidiaries and one affiliated company overseas.

particularly in the Asia region. Kurita also plans to strengthen its

philosophy focusing on “three core realities”—the factory floor,

on-site analysis and maintenance capabilities.

actual articles and substances, and real situations. Besides

In 1980, Kurita received an order for a water treatment system

A feature of the Kurita Group’s overseas operations is thestrong commitment to localization to ensure that it responds

To strengthen links between different overseas operations andconducting laboratory-based testing and research, Kurita

closely to the specific characteristics of each regional market andmultiple businesses, Kurita is building an optimal procurement,

verifies performance of products at customer factories during

meets the needs of customers precisely. Hence, Kurita develops

production and sales system, including complementary productthe process of developing new products and services.

overseas operations with strong ties to each local market andsupply routes. In Europe and North America, Kurita is also

community.

examining potential opportunities for the use of M&As andIn water treatment chemicals, the local procurement rate atforging alliance partnerships.

Expansion of Overseas Operations[China / South Korea]
Expansion of maintenance[Europe]
M&A
DalianTianjinSuzhouStandardized water
treatment facilities
Chemicals for automobiles
Chemicals comprising foodadditives

Guangzhou

United States

Shanghai

Cost reductions
Overseas Sales by Region[Southeast Asia]
Development as one area

Brazil26.4

Coordinated provision ofstrategic products
Synergistic use of local staff
and staff from Japan

19.0

Halal certified products

13.4

Indonesia

Water treatment chemicals operations
Water treatment facilities operations

16 Kurita Water Industries Ltd. Annual Report 2014

the Kurita Group has been commissioned by the Japan

Bolstering R&D has been made a key task under TA-14. In theand production of a demonstration water recycling system

Aerospace Exploration Agency (JAXA) to begin the design

plan’s final fiscal year, ending March 31, 2015, the Kurita Groupfor space stations.

is focused on the following tasks.

• Kurita’s ballast water management system has received(1) Develop new products and technologies that willbasic approval from the International Maritime Organization

contribute to the expansion of core-product market share(IMO). Ballast water is used in ships to ensure stability. Kurita’s

and the creation of new markets

system treats ballast water to eliminate aquatic organisms

Kurita develops highly competitive new products basedthat can have an impact on marine ecosystems.

on an accurate understanding of customer needs and the• In the foodstuffs field, Kurita is working to develop

characteristics of key markets in Japan and overseas. Kurita

technologies that support crop safety and security, including

also works rigorously to enhance the performance and reduce

approaches focusing on microorganisms.

development of technologies that anticipate the needs ofThailandSingapore

Initiatives under the TA-14 Medium-termManagement Plan

the cost of its core products. Furthermore, Kurita carries out

Taiwan [Taiwan]

Vietnam

Malaysia
Reverse osmosis (RO)membrane treatment
chemicals[United States]
M&A

South Korea(3) Pursue commercialization of new businesses• In pursuit of the development of new business domains,

each overseas site is high, and a large proportion of staff are hired

EuropeScreens for managing water treatment status with S.sensing®

2010

2.6
1.4
1.6

29.3
3.1
1.3
2.8

19.2

2011

30.5
3.0
1.4
2.3

22.5

23.9

(Billions of yen)

33.6
3.0
1.2
2.3

3.3
1.3
1.8

North America

problems. Such technology fields include technologies related
to next-generation semiconductors, treatment of radioactive
substances, and biomass energy production.

27.2(2) Cultivate core technologies
2012

2013

2014

Years ended March 31

Asia

growth industries and needs stemming from environmental

EuropeOther regions

The Kurita Group has an array of core technologies essential towater treatment, including membrane separation, polymers,

International Space Station (ISS) (©JAXA / NASA)

Kurita Water Industries Ltd. Annual Report 201417

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Corporate Social Responsibility

Corporate Governance

Kurita's CSR Policy

The Kurita Group aims to contribute broadly to society and meet the expectations of its
stakeholders through corporate activities in the fields of water and environment.
To realize these aims, the Group has adopted a basic corporate governance policy with two
main components. The first is establishing management systems that improve managementtransparency, efficiency and sustainably to increase corporate value over the long term. The
second is rigorous oversight of management and operational execution.

Kurita has set the “Accomplishment of Social Responsibility” as one of its six Management Guidelines. We
will comply with laws and regulations in accordance with social ethics, in all our business activities. We
will continue to build transparent and fair relationships with shareholders, customers, employees, local
communities and suppliers.

Accomplishment of Social Responsibility
Management that respects shareholders

Building new relationships with employees

Emphasis on safety and quality

Healthy relationship with suppliers

Activities as a good corporate citizen

Corporate Governance

Relationship with Employees

Relationship with Customers

Relationship with Suppliers

Environmental Improvement Activities

P.19

P.24

P.26

P.27

P.28

Corporate Governance Structure

checks on the status of progress toward objectives andDirectors and the Board of Directors

the implementation of policies and measures. The Ex-

The Board of Directors determines the Kurita Group’s

ecutive Committee comprises the president, directors

basic management policies and strategies, and makesof the rank of managing director or above, the generaldecisions on important matters related to operational

manager of corporate planning, and other directors

execution. The Board of Directors also has the role ofand executive officers nominated by the president. The

oversight body for operational execution. At present

committee meets, in principle, twice monthly, and on

the Board of Directors comprises ten directors, includ-an ad hoc basis as necessary.

ing one external director. The appointment period
for directors is one year. This system is intended to

Executive Officer System

make the Company more responsive to changes in the

To strengthen its capabilities for operational execution,market environment, foster a greater sense of mana-

the Company has adopted an executive officer system.

gerial urgency among directors, and facilitate flexible

Executive officers carry out their responsibilities forand timely revisions of the management structure as

operational execution under the delegation of theneeded. To complement the decision-making of theBoard of Directors. At present, there are nine executive

Board of Directors, the Company also has a decision

officers.

approval protocol based on its internal decision
Audit & Supervisory Systemapproval and review rules.

Relationship with Local Communities

P.30

Kurita employs an audit & supervisory system. As
Executive Committeeof June 27, 2014, the Audit & Supervisory Board

The Executive Committee deliberates on importantcomprised three members, including two externalmanagement-related matters to support the deci-

members. The Audit and Supervisory Board decides on

sion-making of the Board of Directors, and conducts

audit policies for the fiscal year, the allocation of duties

Matters relating to Directors and the Board of Directors (June 27, 2014)

Corporate Governance Structure

Number of directors specified underthe Articles of Incorporation

No maximum number
specified

General Meetingof Shareholders

Matters relating to Directors and the Board of Directors (June 27, 2014)

Term of appointment of directors underthe Articles of Incorporation
Chair of the Board of Directors

18 Kurita Water Industries Ltd. Annual Report 2014

1 yearPresident

Number of directors

10

Number of external directors (within
the total above)1

Number of independent officers
specified within external directors

1

Number of Board of Directors’ meetings
held (fiscal year ended March 31, 2014)

11

Board of Directors

Audit & Supervisory
Board
Members of Audit &Supervisory Board
Executive Committee

PresidentInternal Auditing
Department

Operating Divisions

Kurita Water Industries Ltd. Annual Report 201419

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

to each of its members, specific items to be performed,of risk management and measures for improvement.

be no potential for conflict of interest arising withagreements is limed to the amount specified underschedules, and other items for executing audits. BasedAccounting Audit

ordinary shareholders.

Article 425, Paragraph 1 of the Companies Act.

on this framework, each member of the Audit & Super-

The Company has appointed Grant Thornton Taiyo ASG

Mr. Seiji Nakamura, Kurita’s part-time external

visory Board then conducts audits.

LLC as its accounting auditor. Grant Thornton Taiyo ASG

director, has served as executive vice president andRemuneration Paid to Directors and Members of the

The members of the Audit & Supervisory Board at-

LLC provides opinions related to the Group’s financial

representative director of Mitsui O.S.K. Lines, Ltd.,

Audit & Supervisory Board

tend Board of Directors’ meetings, Executive Committee

statements and other matters from the standpoint ofpresident and representative director of MOL Ferry

Kurita’s system for compensating directors andmeetings, and other important company meetings andan independent accounting auditor.

Co., Ltd., and as a member of the Policy Board of themembers of the Audit & Supervisory Board isBank of Japan. None of these have any special interests

intended to create incentives to continuously work tomonitor the directors’ execution of duties and the Boardof Directors’ fulfillment of its oversight responsibilities.

Cooperation between the Internal Auditing Depart-in Kurita. Mr. Chiaki Kuzuu, Kurita’s full-time external

increase the Company’s enterprise value and business

Other responsibilities of the members of the Audit &

ment, Audit & Supervisory Board, and Accounting

member of the Audit & Supervisory Board, is a former

results. To this end, the remuneration packages

Supervisory Board include conducting asset status

Auditor

employee of ITOCHU Corporation. ITOCHU has nocomprise two components: a basic annual salary andsurveys of the entire Group, including subsidiaries,

From the perspective of enhancing its corporate

special interests in Kurita. Mr. Tamio Uda, a part-timea performance-linked component that reflects theand auditing the development and operation status ofgovernance, the Company strives to ensure ample

external member of the Audit & Supervisory Board, isCompany’s business results. Specifically, for directors

internal control systems implemented by the directors.

cooperation between the Internal Auditing Department,

an attorney and has no special interests in Kurita.

the basic annual salary is set separately for each

Audit & Supervisory Board, and accounting auditor. The
Internal Audit

members of the Audit & Supervisory Board verify the

The Company has an Internal Auditing Department,

independence of the accounting auditor and the status

which is independent from operational executionof execution of the accounting auditor’s duties. The

functions and reports directly to the president. The

Audit & Supervisory Board also holds meetings with theInternal Auditing Department—comprising a generalaccounting auditor regularly and as necessary regarding

manager and eight other staff—conducts internal

the accounting audits and exchanges opinions during

audits of the Company and its subsidiaries, identifies

these meetings. The members of the Audit & Supervisory

issues and problems in operational execution, andBoard discuss with the Internal Auditing Department theprovides recommendations to the president on im-

audit plan prepared by the department, and exchange

provement measures. From the fiscal year commencing

opinions with the department regarding audit results,

on April 1, 2008, in accordance with the Japanese

evaluation of internal control relating to financial report-

Financial Instruments and Exchange Act the Company

ing, and evaluation of risk management.

established the Internal Control Reporting System in
relation to financial reporting, and carries out monitor-

External Director and External Members of the Audit

ing as well as provides recommendations and support& Supervisory Board

for improvements. This system also monitors the status

The Company appoints an external member of the

Number of members of the Audit & Supervisory Board
specified under the Articles of Incorporation

No maximum
number specified

Number of membersof the Audit & Supervisory Board

3

Number of external membersof the Audit & Supervisory Board

2

Number of independent officers specified within external
members of the Audit & Supervisory Board

2

Number of Audit & Supervisory Board meetings held (fiscal
year ended March 31, 2014)

20 Kurita Water Industries Ltd. Annual Report 201410

Meeting Attendance by the External Director and External Members of
the Audit & Supervisory Board (fiscal year ended March 31, 2014)
Number of meetings ofthe Board of Directors
attendedNumber of meetingsof the Audit &Supervisory Board
attended

Total number of
meetings held

11

10

Seiji Nakamura*1

9 (all meetings since
appointment onJune 27)–

Chiaki Kuzuu*2

1110

Tamio Uda*2

1110

office, while for members of the Audit & Supervisory
Board the basic annual salary reflects the full-timeor part-time status of the officer. The performancelinked amount is variable and dependent onachievement of performance targets for the fiscal
year. To incentivize improved business performanceover the medium-to-long term, a certain proportionof the basic annual salary is paid to the Directors’ andAudit & Supervisory Board Members’ Shareholding
Scheme and allocated for purchasing the Company’s
shares. Based on this policy, the remuneration foreach director is decided by the Board of Directors andthe remuneration for each member of the Audit &Supervisory Board is decided through deliberation by
all of the members of the Audit & Supervisory Board
within the total limit set by the General Meeting of*1. External director*2. External members of the Audit & Supervisory Board

Shareholders.

from outside the Company on the management

bers of the Audit & Supervisory Board in the Articles

The total amounts of remuneration by officer classification and type as well as the number
of officers to whom remuneration was paid for the fiscal year under review

oversight conducted by the Board of Directors. The

of Incorporation. This was done to facilitate the use ofCompany has appointed one external director andoutside human resources with an emphasis on greater

two external members of the Audit & Supervisoryindependence, with the aim of respecting shareholder

Board. Regarding the independence of these external

profits and increasing management transparency.

officers, appointments are made of members who

Pursuant to the provisions of Article 427, Paragraph 1

have not worked at the Kurita Group and are notof the Companies Act, Kurita entered into agreements

affiliated with the Company’s major shareholders,with Mr. Seiji Nakamura (part-time external director)

suppliers or customers. This policy is maintained inand Mr. Tamio Uda (part-time external member of theaccordance with the independent decision-making

Audit & Supervisory Board) to limit liability, as provided

standards established by the Tokyo Stock Exchange,

for under Article 423, Paragraph 1 of the Companies

and appointment criteria specify that there shouldAct. The maximum liability provided for under these

Board of Directors to provide an objective perspective
Matters Relating to Members of Audit & Supervisory Boardand the Audit & Supervisory Board (June 27, 2014)

In 2013, Kurita made provision for a limited liability
agreement with external directors and external mem-Classification

Total remuneration paid by type
Total
(Millions of yen)remuneration
paid(Millions ofRetirement
Basic
Stock
Bonus
yen)
packageremuneration
options

Number ofrecipients(Persons)

Directors(Excluding external
directors)

406

402

–

–

3

12

Members of the Audit& Supervisory Board(Excluding external
members of the
Audit &
Supervisory Board )

32

32

–

–

–

1

External members of
the Audit & Supervisory
Board

54

54

–

–

–

3

Kurita Water Industries Ltd. Annual Report 201421

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate Data

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Directors and Members of the Audit & Supervisory Board
As of June 27, 2014

Internal Control Systemoutside organization to discuss compliance-related

In May 2006, the Kurita Group formulated the Funda-

matters.

Directors

mental Policy Regarding the Establishment of Internal
Control Systems in accordance with the requirements

Risk Managementof Japan’s Companies Act, and has subsequently been

The Managing Director and General Manager of the

improving its structures in line with this basic policy.

Corporate Planning Division is designated as the officer

The Fundamental Policy Regarding the Establishment

to promote risk management for the Kurita Group. In

of Internal Control Systems has been revised by athis role, the officer regularly conducts risk analysis

Board of Directors’ resolution. To ensure that financial

and evaluation, and takes steps to minimize risks

reporting by the Group is carried out appropriately,

where possible. Monitoring of the execution status andthe Company has established the Internal Control

improvement status of risk management is conducted

Reporting System in accordance with the Japaneseby the Internal Auditing Department.

Financial Instruments and Exchange Act. This system

Among serious risks, those related to complianceis monitored by the Internal Auditing Department

are the responsibility of the Compliance Committee

and the department provides recommendations andhead, and their management is strengthened by the

support for improvements.

Compliance Committee. Those related to labor, health,and safety are the responsibility of the Headquarters

Compliance

Health and Safety Committee head, and their manage-

The Kurita Group regards compliance activities asment is strengthened by the Headquarters Health andentailing more than simple law abidance. Rather,

Safety Committee.

compliance activities are conceived as ethical practices
aimed at realizing five values: fairness, transparency,

Toshiyuki Nakai*

Kaoru Kajii*

2011 President
Representative Director (topresent)
2009 President, Kurita Engineering
Co., Ltd.
2005 Director
1979 Joined Kurita Water
Industries Ltd.

2014 Executive Managing Director
General Manager of Facilities Division andExecutive Officer overseeing China andGeneral Manager of Global Business Group,
Facilities Division (to present)2013 General Manager of Facilities Division andGeneral Manager of Ultra Pure Water Supply
Group, Facilities Division2011 General Manager of Research andDevelopment Division2009 Managing Director
2005 Director
1974 Joined Kurita Water Industries Ltd.

Kouichi Iioka

Kiyoshi Itou2013 Managing Director
General Manager ofChemicals Division (topresent)
2011 President and Representative
Director, Kuritec Service Co.
Ltd.
2007 Director
2005 Executive Officer
1975 Joined Kurita Water
Industries Ltd.

2013 Managing Director
General Manager of Corporate
Planning Division (to present)
2009 Director
General Manager of Administrative
Division
2007 Executive Officer
1979 Joined Kurita Water Industries Ltd.

* Representative Director

For more information on risks, please refer topage 40.

integrity, safety, and coexistence. These values are set

Directors

forth in the Code of Ethical Conduct, established inInformation Disclosure and Investor Relations (IR)Takahito Namura

Youichi Kurokawa

Toshitaka Kodama

Yoshio Yamada

Michiya Kadota

2000. Kurita then prescribed its Basic Principles andActivities

Compliance Guidelines to Practice Ethical Conduct to

The Managing Director and General Manager of theensure rigorous compliance with laws, regulations andCorporate Planning Division has overall responsibilitysocial ethics in Kurita’s daily business activities.

in managing the corporate information and IR of the2014 General Manager
of Research andDevelopment Division(to present)
2011 Director (to present)
1977 Joined Kurita Water
Industries Ltd.

2013 General Manager ofFacilities Production
Division (to present)
2011 Director (to present)
1984 Joined Kurita Water
Industries Ltd.

2014 Director
General Manager
of Domestic Sales
Group I and General
Manager of Ultra Pure
Water Supply Group,
Facilities Division (topresent)
2011 Executive Officer
1977 Joined Kurita Water
Industries Ltd.

2014 Director (to present)2013 General Manager
of Sales Group II,
Chemicals Division
and General Manager
of Osaka Office (topresent)
2011 Executive Officer
1982 Joined Kurita Water
Industries Ltd.

2014 Director
		 General Manager
of Administrative
Division and General
Manager of		 Finance andAccounting
Department,
Administrative
Division (to present)2013 Executive Officer
1983 Joined Kurita Water
Industries Ltd.

Kurita has established a Compliance Committee,

Kurita Group. Kurita holds an earnings presentation

chaired by a representative director, and a Group

twice a year, at which time the president explains theCompliance Committee—chaired by the same repre-

results and holds a Q&A session. In addition, the presi-

sentative director—comprising representatives fromdent also conducts overseas meetings twice annually.

Group companies in Japan. Through these committees,

Kurita has also set up a dedicated IR website on

the Kurita Group determines policies and priority

which the Company discloses earnings presentation

measures related to compliance activities. Thesematerials and a variety of other financial materials.

policies and measures are rigorously implemented
among all employees through subcommittees at eachheadquarters division, business division, and Group
company division.
In addition, the Company has established “Whistleblower Protection Rules,” and set up proceduresfor whistleblowers to discuss and report complianceissues through an internal desk as well as an outsideorganization. Kurita’s suppliers may also use the

22 Kurita Water Industries Ltd. Annual Report 2014

Director

Members of the Audit & Supervisory Board

Seiji Nakamura

Chiaki Kuzuu

Shiro Hayashi

Tamio Uda

2013 External Director(part-time) (to present)
2007 Member of the Policy
Board of the Bank ofJapan (to 2012)2003 President andRepresentative
Director of MOL Ferry
Co., Ltd.
2000 Executive Vice
President andRepresentative
Director of Mitsui
O.S.K. Lines, Ltd.
1965 Joined Mitsui O.S.K.
Lines, Ltd.

2004 External Memberof the Audit &Supervisory Board (topresent)
2002 Chief Financial Officer,
Machinery Company,
ITOCHU Corporation
1971 Joined ITOCHU
Corporation2012 Member of the Audit& Supervisory Board(to present)
2009 General Manager of
Personnel and Labor
Relations Department,
Administrative
Division
1977 Joined Kurita Water
Industries Ltd.

2009 External Memberof the Audit &Supervisory Board(part-time) (topresent)
1977 Established Harada
Uda Law Office(currently Uda Law
Office)1974 Admitted to the JapanBar Association

Kurita Water Industries Ltd. Annual Report 201423

Contents

What We Do

Our Strengths

Management
Indicators

Business Reviewb

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Relationship with EmployeesWith the aim of promoting employees’ enthusiasm for work, in its Management Guidelines
the Kurita Group strives to provide a diverse range of employment styles for employees tochoose from and allows employees to select a working style that enables them to achieve theirindividual dreams and suits their lifestyle and stage in life.

from 2006, Kurita Water Industries has established a sys-

system for a cumulative total of up to 12 months per

tem to secure employment opportunities for people whofamily member depending on the condition of the family

have retired having reached the mandatory retirement

member requiring care.

to a maximum or five years from the time of mandatory

Volunteer Leave System

Developing Human Resources

globally, as well as more than 200 distance learning andretirement (60 years old) in accordance with the 2013

At Kurita Water Industries, all employees are eligible to

The Ideal Situation

classroom-based courses for the acquisition of a wide

amendment to the Act on Stabilization of Employment

take leave for volunteer activities. Employees can take paid

The Kurita Group has a firmly entrenched system that

range of knowledge and skills.

of Elderly Persons.

leave for up to two days each fiscal year for such activities.

age. These employment opportunities are offered for up

Between 2006 and April 1, 2014, a total of 276 retire-encourages employees to challenge themselves and toenhance their own skills. We strive to enable employees

Promoting Personnel Diversity

ment age personnel secured employment opportunities.

Work Health and Safety

to grow so that they can create and develop Kurita’s

At the Kurita Group, we aim to hire a diverse range

As of April 1, 2014, there are 106 retirement age employ-

In accordance with the Industrial Safety and Healthown products, technologies and services as they findof personnel for the right positions in order to meetees who have secured employment opportunities at theAct, Kurita Group companies in Japan have establishedglobal needs.

Company.

health and safety rules in order to prevent employees

solutions to the issues facing customers and society.
Self-reporting System
Kurita Water Industries has established a system where
employees can report their preferred working style andcareer formation to the Company. Once a year, employees
discuss the suitability of their current duties, their preferred• Average age
40.0• Average service years
16.4 years (Male 16.5 years; Female 15.9 years)• Ratio of female employees among career track employees 4.3%
• Ratio of local nationals among directors in overseas group companies
As of April 1, 2014, seven of 32 directors are local nationals (22%)
Number of Employees by Region(as of March 31, 2014; Consolidated)

path for the future, their family situation and more with

China 288

their superiors so that the Company can understand thethinking of each individual, which is utilized in training.

Thailand 135

Japan

3,634

Creating Opportunities for Personal Development

Overseas

1,001

system that provides employees with opportunities

Korea 122
Indonesia 111

For operational areas where the Company has needs,
Kurita Water Industries has a paid study sabbatical

Singapore 136

Total 4,635

Brazil 85
Europe 49
Taiwan 37
U.S. 38

from being harmed by occupational disasters, as well
Second Career Support System

as to maintain and improve the health of employees

Kurita Water Industries has a second career support

and to promote comfortable workplace environments.

system that offers preferential treatment to support

We have organized a health and safety management

employees who wish to try to work in a different fieldsystem comprising Health and Safety committees andfrom their present one. The employees must satisfy

Health and Safety Managers. Under this system, thecertain conditions to qualify for this system.

domestic Group works alongside partnering companies
to provide health and safety education to employees andRealizing a Pleasant Workplace

to conduct health and safety drills. We also develop work

Child-raising Leave and Shortened Working Hours forstandards and provide instruction on them, maintainChild Raisingand inspect employees’ safety gear and other facilities

In accordance with the Act on Advancement of Measures

to prevent accidents. The Group also examines ways

to Support Raising Next-Generation Children, Kurita

to deal with disasters, discovers their causes and drafts

Water Industries has established an environment thatcountermeasures.

makes it easier for employees to balance work withto study at educational institutions and research

We also provide health and safety rules in all overseas
Kurita Group companies in accord with local law.

institutions in Japan and overseas, as well as a schol-

Employment of Personnel with Disabilities

raising children. In principle, each employee can takearship program for employees which aims to develop

In Japan, the Kurita Group provides a wide range ofchild-raising leave until the day that their child reaches

personnel who can contribute to the advancement of

employment opportunities for people with disabilities.

one year and six months of age, but this period can be

Relationship with Labor Union

In April 2013, With Kurita Ltd. was established withextended if stipulated conditions are met. As of April

In addition to securing the Company’s sound growth andsociety through our business activities. We have also
prepared “Global Training” that includes language study

the goal of securing employment opportunities for2014, over the past three years a total of 23 employees

continuation, Kurita Water Industries and the labor unionwith the aim of developing personnel who can operate

people with disabilities. As of May 31 of the same year,(including one male employee) have used the childcare

maintain a sound and fair relationship. Labor and man-With Kurita has been approved as a special subsidiaryleave system, while 427 employees have taken advan-

agement each do their utmost to improve the economic

company under the Act on Employment Promotion etc.

tage of another system that allows employees raisingand social standing of union members and to maintainof Persons with Disabilities.

children to have shortened working hours.

and improve working conditions.

ment rate is 2.07%, which surpasses the statutory

Nursing Care Leave and Shortened Working Hours for

Respect for Human Rights

employment rate (2.0%).

Nursing Care

Kurita works to raise awareness of human rights issues

At Kurita Water Industries, employees with a family mem-throughout the Group in Japan. This effort includes

Employee Breakdown
Kurita Water Industries (as of April 1, 2014)
Full-time employees(Management positions
therein)

29 and under

281

(0)

30–39

371

(58)

40–49

555

(316)

50 and over

269

(213)

Total

1,476

(587)

Female188(5)

Securing Employment Opportunities for

ber who needs nursing care and who wishes to continue

developing guidelines aimed at preventing various

Non-Japanese

9(2)Senior Personnel

to work after taking nursing care leave, may take nursing

types of discrimination and harassment, setting up

In conjunction with the enforcement of the amendedcare leave up to a total of one year (365 days) in principle.

consultation counters, and regularly holding human

Act on Stabilization of Employment of Elderly Persons

Also, employees may use the shortened working hours

rights training programs.

Age

Notes: (1) Management position figures include employees who are ranked as
professional level or higher (including specialist abilities).
(2) Figures of female and non-Japanese employees are included in total
numbers of employees.

24 Kurita Water Industries Ltd. Annual Report 2014

As of June 1, 2014, the disabled person employ-

Kurita Water Industries Ltd. Annual Report 201425

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Relationship with Customers

Relationship with Suppliers

The Management Guidelines of the Kurita Group clarify that it strives to provide technology
and services with excellence that customers expect.

The Kurita Group shows in its Management Guidelines that it is striving to maintain fair andtransparent business transactions based on free competition. In our dealings with our suppliers,
we are aiming to strengthen relationships of mutual trust with an emphasis on the autonomy,
profits, and the assets of both companies.

Approach to Quality Assurance

Quality Assurance Systems

The Kurita Group has indicated in its Quality Policy that

With regards to product quality control, we havethe unshakeable trust of its customers must be gained

established a Quality Assurance department in theby providing products, technology and services that

Chemicals Division and Facilities Production Division.

Basic Policies for Purchasing

required to cease the infringement, and are urged tomeet customers’ quality expectations. We place particu-

These Quality Assurance departments work on quality

In connection to purchasing within the Kurita Group in

acquire a license. In order to promote respect for intel-

lar importance on service quality, analyzing changes incontrol from production to actual use of the product.

Japan, we have a basic policy of open purchases andlectual property rights, we are implementing courses

the operating status of utility facilities of our customers,

In Japan, there are quality assurance systems based

coexistence and prosperity. We choose suppliers basedsuch as hierarchical intellectual property training andsharing issues with customers and striving to improveon the ISO9001 international standard for quality

on a comprehensive set of criteria, including producte-learning within the Group. Until March 2014, this was

the quality of our solutions. In order to achieve this,management systems in each of Kurita’s Electric Powerquality, price competitiveness, certainty of on-timejust a domestic activity, but the initiative is also being

we are endeavoring to train human resources that

Plant department, Kurita Chemical Manufacturing Ltd.,delivery, management stability and green purchasing

expanded to overseas Group companies in the period

offer value to our customers by increasing “quality via

Kurita Engineering Co. Ltd., Kuritaz Co., Ltd., and Kuritec(RoHS directive, WEEE directive, REACH regulations, andup to March 31, 2015.

Service Co. Ltd.

substances toxic to the environment) compliance.

people,” as well as “quality via products”.
For example, in the water treatment chemicals

Furthermore, domestic Group companies havebusiness, we are conducting training for management

constructed a system for sharing information between

Green Purchasing

staff at overseas Group companies in Japan and train-

related parties via the Company intranet to enable

In Kurita Water Industries’ water treatment chemicals

ings extends to sales persons of domestic distribution

rapid response from receiving information on com-business, while there is not a uniform set of require-agents. In addition, the Yamaguchi Plant, the water

plaints to taking measures for correction.

ments for all suppliers in connection to environmental
considerations, we do check for the presence oftreatment system manufacturing base of Kurita Water

Number of Patent Applications and Patents Held
2,000

1,921
1,860

1,827

Domestic
Patentapplications

600
506

500

448

400

476

Industries, installed water treatment systems for training

Reliable Technical Transmission

harmful chemical substances, and confirm thatin 2013, with the goal of improving onsite capabilities.

In 1999, Kurita Water Industries established theenvironmental considerations and legal compliance are

Actual systems are used for knowledge and technologi-

Technology Transmission Committee for the purposein place in the manufacturing stage before purchasing

200

cal training related toof raising each employee’s level of expertise and for

raw materials and other materials.

100

maintenance and op-

passing on Kurita’s technology and know-how. In

eration management.

2005, we opened Kurita Technology College, whichbusiness, we enact green purchasing guidelines, andTo further enhanceaims to develop engineers. The Company is striving to

we specify the requirements to our suppliers in terms

Corruption Prevention and Dealing with Antisocial

these efforts, theensure that veteran employees’ skills and know-how

of environmental management initiatives and environ-

ForcesT&C Technical Center

are reliably passed down to mid-career and young

mental considerations regarding the procurement of

The fundamental policy of the internal controls system

employees via one-on-one instruction.

resources at the design and manufacturing stages, andof the Kurita Group in Japan states that all officers andthe non-use of ozone-depleting substances (ODS) in

employees take a resolute stance against and reject all

was opened at the
Yamaguchi Plant inOverseas manager training for increasing“quality via people”

In Kurita Water Industries’ water treatment facilities

300

322
232
217
212
50

0

2012

234
173
170

181
148
80

2013

114

Patentregistration

Years ended March 31

Customer Satisfaction Survey

the manufacturing stage. Kurita requires that suppliersconnections to antisocial elements and organizations.

The Kurita Group conducts a customer satisfaction

follow these guidelines in accord with our customers’

In terms of specific policies, we have taken steps by, fortechnological training

survey regularly once every four years in order to verify

requests.

example, adding a clause to our contracts about thefor maintenance andthe results of the work that we have done to solve ourplant production

customers’ problems. The survey conducted during

Respect for Intellectual Property Rights

at all domestic andOctober and November 2012 was expanded interna-

Kurita Group respects the intellectual property rights

Conduct and Compliance Guidelines, we also promotetionally, rather than just being implemented withinof others, and conducts its business activities while

fair business activities, and prohibit while also working

Japan as before. Areas highlighted for improvement

avoiding infringing on the intellectual property rights

to prevent the provision and acquisition, etc., of unjustin this survey included the quality of our proposals asof other parties. We acquire licenses when using

profits. Kurita surveys its suppliers with questionnaires

well as verifying results. We will analyze these issues,

intellectual property owned by other parties, andregarding these to confirm the current state of affairs.

and work to further improve our customers’ levels of

we request that other parties respect the intellectual

satisfaction.

property rights of the Kurita Group. Businesses thatcompanies.

Overseas
Patentapplications

Patents held

conducts unified

Technological improvement
training at the Yamaguchi Plant

Patents held

2014

April 2014. This center

overseas Group

Patentregistration

elimination of crime syndicates.
On the basis of the Kurita Group Code of Ethicalinfringe on the Group’s intellectual property rights are

26 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201427

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Environmental Improvement Activities
The Kurita Group’s basic policy for its environmental improvement activities is to operate in
keeping with its corporate philosophy and endeavor to resolve water and environmental issues
so that it can contribute broadly to society. This is based on recognition of the deep connection
between the significance of the Company and our corporate values, and our ability to meetglobal challenges such as the conservation of the natural environment and the effective use ofresources as we strive to add new value and functions to water.

Activity Guidelines and the Three Aspects

Initiatives for Meeting Customers’ Needs

Internal Change Initiatives

This initiative is for the second activity guideline. The

This initiative is for the third activity guideline. We are

Kurita Group proposes solutions to meet its customers’

working to reduce our environmental impact, chiefly byneeds for reducing their environmental impact, which,lowering carbon dioxide emissions, reducing waste andif applied, result in environmental improvements. The

increasing recycling in Group operations.

Environmental Report* gathers the results in this areafrom Japan and from overseas.

The carbon dioxide emissions results in the Kurita
Group for the fiscal year ended March 31, 2014, were

The main results for the fiscal year ended Marchin excess of those of the previous year as, in addition

31, 2014, include examples of waste reduction andto the increased amount of energy used due to the

Our environmental improvement activities, whichcharacterized by three guidelines and three aspects.

energy conservation

additional supply of water in the ultrapure water supply

reflect the connection between water and the

The activity guidelines are as follows.

by means of opera-

business, the carbon dioxide emissions factor of thetional improvements

power company also increased.

environment and Kurita Group business activities, are

In terms of the absolute amount of waste emittedusing water treatment
1. We will contribute to the realization of a sustainable society
by developing new products and technologies conducive toenvironmental improvement.

The three aspects of our environmental
improvement activities

2. We will work with customers to improve the environment by providing
products, technologies, and services that boost productivity, reduce
environmental impact and offer innovative energy solutions.
3. In conducting daily business activities, we will reduce environmental
impact through operational improvement and innovation.

chemicals based onby the Kurita Group for the fiscal year ended Marchan analysis of the31, 2014, the results were in excess of those of fiscal

operational situation
TechnologicalInnovation
CustomerNeedsof customer utilities.

Refrigerator that achieves operational
improvement by means of a data analysis

2013 and we did not achieve our targets due to theadditional supply of water in the ultrapure water supply
business, and the effect of the increased impact ofwastewater.

Internal
ChangeSpecific details are reported in the Environmental
Report.
* The Environmental Report for the fiscal year ended March 31, 2014, covers Kurita

Water Industries and domestic Group companies regarding data aggregation, andthe sales amount covered by the report accounts for 81% of consolidated sales. We
are striving to expand coverage to include overseas Group companies in the future.

Results of Environmental Activities in the Fiscal Year Ended March 31, 2014
Technological Innovation Initiatives

environment,” and we establish a theme for the devel-

This initiative is for the first of the activity guidelines.

opment of new products and technologies. Key results

The Kurita Group grasps the needs and challenges offor the year under review were as follows.

society and our customers in terms of “water and the
New Products and Technologies for Environmental Improvements

Environmental Improvements
CO2 emissions reduction

New Products and Technologies• Chemical agents that reduce fuel consumption by keeping heat transfer surfaces clean in low-pressure boilers• Chemical agents that reduce paper defects by preventing pitch adhesions to paper in the papermaking
process

Waste reduction andwastewater treatment• Suspended soilds coagulation monitor used for flocculation agents dosage control that reduces sludge volume
in wastewater treatment process• Space-saving coagulation-sedimentation system characterized by the forming of pelletized sludge in
wastewater• Fenton (oxidation decomposition) wastewater treatment system that generates less sludge• Anaerobic wastewater treatment process for low-concentration organic wastewater using a biofilm grown on
carrier media which anaerobically degrades pollutants

Reducing use ofenvironmentally harmful
substances

Technological Innovation Initiatives

Carrier-type Anaerobic Wastewater Treatment

unsuitable for conventional anaerobic treatment.

System Wins Prize in the Ministry of Economy,

Since going on sale in 2012, it has become highly

Trade and Industry Awards

regarded for its results in contributing to energy

In June 2014, the “carrier-type anaerobic wastewater

conservation and waste reduction in a wide range

treatment system (Biosaver® TK)” won a prize in theof industries, such as foods, beverages, liquid crystal

Ministry of Economy Trade and Industry Awards at

displays and chemicals.

the 40th Excellent Environmental Equipment Awards
hosted by the Japan Society of Industrial Machinery
Manufacturers.
Biosaver® TK is a wastewater treatment systemthat uses plastic carriers with anaerobic microor-• Aerobic wastewater treatment process that reduces sludge volume by utilizing an ecosystem whereby protozoa
feed on sludge

ganisms. The plastic carrier developed by Kurita• Double-bed single-tower (two beds of ion-exchange resins in a single tank) deionizer that needs a relatively
small amount of chemical agents (acid / alkali) for regeneration of resinsconcentration wastewater and wastewater consisting

Remediation technologies for soil • Permeable reactive barrier technology to purify groundwater polluted by heavy metals (fluorine, arsenic,
and groundwater pollution
hexavalent chromium)

28 Kurita Water Industries Ltd. Annual Report 2014

Topicsenables anaerobic treatment to be applied to low

Plastic carriers with anaerobic
microorganismsof only specific organic compounds, which has been

Kurita Water Industries Ltd. Annual Report 201429

Contents

What We Do

Our Strengths

Business ReviewbManagement
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Corporate Governance b Directors and Members of the Audit & Supervisory Board b Relationship with Employees b Relationship with Customers b Relationship with Suppliers b Environmental Improvement Activities b Relationship with Local Communities

Relationship with Local Communities
The Management Guidelines of the Kurita Group state that the Group strives to actively use theinsight and expertise built up through its business to give back to society as a good corporate citizen.
Regional Activities

Kurita Water and Environment Foundation (Public

At the Kurita Global Technology Center, volunteers

Interest Incorporated Foundation)

conduct cleanup activities in the local area every year.

The Kurita Water and Environment Foundation is a

The center also responds to requests from students

public interest incorporated foundation establishedand other local residents who wish to take a tour of thewith basic funds by Kurita Water Industries in 1997.

R&D facilities and laboratories. By introducing people

Kurita Group companies make contributions to theto water treatment technologies, we are striving toFoundation every year to provide operating funds.

increase scientific interest and concern.

By providing subsidies for surveys and research into

Every year, Kurita Water Industries holds sports

water and the environment, as well as other support,

events in which the rugby team plays a central role atthe Foundation aims to contribute to the development

the Company-owned grounds in Atsugi, Kanagawa

of a rich global environment that promotes harmony

Prefecture. These events deepen the bonds of com-

between people and nature. The Foundation provides

munication between

subsidies for surveys and research regarding water andKurita employees andthe environment conducted by universities and otherlocal people. In March

research institutes in Japan and overseas, and subsidies

2014, more than 250

for holding international symposiums and for research-people participated in

ers and experts to attend international conferences

the “Sports Games inregarding science related to water and the environment. In the fiscal year ended March 31, 2014, it began

Atsugi & Kurita” event.
Sports event at the Atsugi grounds

a research subsidy

Disaster Recovery Support

project in Thailand.

Kurita Water Industries lends seawater desalination

The Foundation has

units to local governments in response to their requests

subsidized a total ofto help with emergency water shortage relief.

745 research studies

As a recent example of this, at the time of the Great

since its foundation

East Japan Earthquake, Kurita helped supply water

through to the end of

from June 19 to July 19, 2011, to a hotel being used

March 2014.

Financial Section
32 Management’s Discussion and Analysis
42 Consolidated Balance Sheets
44 Consolidated Statements of Income and Consolidated
Statements of Comprehensive Income
45 Consolidated Statements of Changes in Net Assets
46 Consolidated Statements of Cash Flows
47 Notes to Consolidated Financial Statements
69 Report of Independent Certified Public Accountants

Beginning subsidy provision in Thailand

as an evacuation shelter in Minamisanriku, Miyagi
Prefecture, which was one of the disaster areas. Kurita
installed a seawater desalination unit there to provide
water for evacuation
shelter toilets andwashing. In the fiscal
year ended March
31, 2014, no disasterrecovery support was
required.
Emergency seawater desalination unit

30 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201431

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

MANAGEMENT’S DISCUSSION AND ANALYSIS
Business Overview

sensing technology. In water treatment facilities, the Group strove to leverage

Sales by Segment

During the fiscal year ended March 31, 2014, the global economy gradually

its comprehensive capabilities both in Japan and overseas, and undertook

Years ended March 31(Millions of yen)recovered, driven by a robust United States economy. The European econ-

measure to reinforce the structure of its maintenance business.

omy—which had stagnated owing to debt crises—bottomed out, while

However, both domestically and internationally conditions for winningemerging economies, including China, generally showed healthy growthorders were harsh, and the level of orders fell below that achieved in thedespite the presence of some instability. The Japanese economy staged aprevious fiscal year. Total consolidated orders for the Kurita Group in the fiscal

steady recovery throughout the fiscal year. Underpinned by the Bank of Japan’s

year ended March 31, 2014, were ¥173,463 million, down 7.1% compared withquantitative and qualitative monetary easing as well as the government’s

the previous fiscal year.

emergency economic stimulus package, the yen’s weakening trend continued
and stock prices made further advances. Corporate performance showed ab) Net Sales

sound recovery, both in the manufacturing and non-manufacturing sectors.

Consolidated net sales for the fiscal year ended March 31, 2014 decreased

Production activity in the domestic manufacturing sector remained at below¥2,006 million, or 1.1%, to ¥178,137 million. In the Water Treatment Chemicals

the previous year’s level through the second half of the fiscal year. Capitalsegment, sales rose by ¥2,753 million. However, in the Water Treatment

investment also lacked vigor, and remained at a weak level.

Facilities segment, sales decreased by ¥4,760 million.

Against this backdrop, the Kurita Group worked to maximize the combined
strengths of its water treatment chemicals, water treatment facilities andc) Cost of Sales and Gross Profit

maintenance services businesses with the aim of developing into a highly

Cost of sales increased ¥1,823 million, or 1.5%, to ¥122,870 million compared

competitive global Group, as it strove to expand its domestic market share andwith ¥121,047 million in the previous fiscal year. As a percentage of sales, costgrow its overseas operations. The Group pursued the expansion of businessof sales increased 1.8 percentage points to 69.0% compared with 67.2% in thesites focusing on Asia while adding to and developing its work force. The

previous fiscal year. This was mainly attributable to a deterioration in the cost

Group focused management resources on growth regions and industries.

of sales ratio in the Water Treatment Facilities segment, with the principal cause

However, the operating environment faced by the Group remained harsh.

Water Treatment Chemicals
Water Treatment Facilities

193,792

178,520

181,234

124,777

124,499

137,348 124,052 119,292

53,74356,73556,44356,091

58,844

2010

2011

2012

2013

2014

180,143 178,137

Gross Profit
Years ended March 31(Millions of yen)

61,29962,66065,88659,09655,267being the emergence of unprofitable projects, which led to construction losses
and increases in additional costs.

In Japan, the Group suffered from the impact of low capacity utilization rates
and weak capital investment by its main customers in the manufacturingsector, leading to decreases in sales and operating income. Overseas, despited) Selling, General and Administrative (SG&A) Expenses

an increase in sales driven by growth in demand for water treatment in East

SG&A expenses were ¥40,380 million compared with ¥38,106 million in the

Asia and Southeast Asia as well as a correction in the value of the yen, theprevious fiscal year. This was an increase of ¥2,274 million, or 6.0%. The main

Group posted a large loss due to such factors as intensified price competition

factors driving this increase were increases of ¥885 million in salaries andin the electronics industry, a deterioration in the gross profit margin owing

allowances and ¥172 million in research and development (R&D) expenditures.

to the emergence of unprofitable projects, and an increase in selling, generaland administrative (SG&A) expenses. There were also some cancellations andchanges in customer capital investment plans, leading to the withdrawal oforders that had been previously booked.

Orders by Segmente) Operating Income

Years ended March 31(Millions of yen)

181,951

186,741declined to 8.4% from 11.7% in the previous fiscal year.
173,463

water treatment chemicals and water treatment facilities. In water treatment

121,791 125,237 140,507 130,700

Asia—as well as Japan, the Group worked to expand sales of high-margin

chemicals for petroleum refining and petrochemicals. However, there were53,37056,71456,74856,04059,413

2010

2011

2012

2013

2014

to strengthen its services programs, including through the launch of its

32 Kurita Water Industries Ltd. Annual Report 2014

SG&A Expenses
Years ended March 31(Millions of yen)

34,941

35,52836,503

2010

2011

2012

38,10640,380Orders and Sales
In Japan, orders and sales increased for cooling water chemicals and process

S-sensing® service, which realizes optimal water treatment based on the use of2014

Water Treatment Chemicals
114,049

chemicals, in growth regions overseas—particularly China and Southeast
products and reduce overall costs. The Group also carried out initiatives

2013f ) Results by Business Segmenta) Orders
In the fiscal year ended March 31, 2014, the Group focused on growth in both2012

pared with ¥20,989 million in the previous fiscal year. The operating margin

Water Treatment Facilities

175,162

2011

Operating income was ¥14,886 million, down ¥6,103 million, or 29.1%, com-

Water Treatment Chemicals

197,256

Operating Results

2010

decreases for boiler chemicals, and process chemicals for pulp and paper.
2013

2014

Kurita Water Industries Ltd. Annual Report 201433

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Despite a gradual recovery in the capacity utilization rates at customer factories

Operating Income by Segmentg) Overseas Sales

Overseas Sales by Region

in the second half of the fiscal year, orders and sales overall slightly decreased.

Years ended March 31(Millions of yen)

Sales by Region

Fiscal year ended March 31, 2014

Overseas, centering on China and Southeast Asia, cooling-water chemicals,
wastewater treatment chemicals and reverse osmosis (RO) treatment chemicals increased, leading to rises in both orders and sales.

Overseas sales rose 10.2%, to ¥33,590 million. The overseas sales ratio within

Water Treatment Chemicals
Water Treatment Facilities

26,35827,131

29,382

Regional Breakdown
20,989were ¥59,413 million, up 6.0% compared with the previous fiscal year, and sales
18,181

17,032

20,127
12,641

Operating Income

expansion of overseas operations and an accompanying rise in personnel.
Water Treatment Facilities
Orders and Sales
In Japan, despite the ultrapure water supply business in the electronics indus-

8,177

10,099

9,268

2010

2011

2012

ment and low capacity utilization at customer factories. In general industries,
the cycle of post-earthquake reconstruction demand came to an end, leading
to falls in sales of water treatment facilities for electric utilities. However, soil
remediation saw increases in orders and sales. Overseas, among projects inEast Asia for the electronics sector, there were changes and cancellations in

7,954

2013

2014

Overseas Sales

North America: Down 24.8% to ¥1,765 million; 5.3% of total overseas sales¥

Other income and expenses—net was income of ¥488 million, comparedwith expenses of ¥1,212 million in the previous fiscal year. This turnaround
was mainly attributable to the absence of two large expenses booked in the
million, and impairment losses of ¥1,108 million related to the relocation of theYears ended March 31(%)

head office.

17.8
15.2
14.8
14.6

15.0
13.7

16.4
15.2
14.7

Water Treatment Chemicals

14.9
11.7
10.2

Water Treatment Facilities

13.5

78.48

8.4

fiscal year.
j) Net Income

2014

decrease compared with ¥11,476 million in the previous fiscal year.
Net income per share decreased to ¥78.48 from ¥92.43 in the previous

mainly due to construction losses and an increase in additional costs owing

92.43

The pretax profit margin decreased to 8.6% from 11.0% in the previous

5.8

2013

fiscal year, and the net margin fell to 5.2% from 6.4% in the previous fiscal year.
Return on equity (ROE) decreased to 4.4% from 5.5% in the previous fiscal

2010

2011

2012

2013

2014

Return on Equity
Years ended March 31
(%)

9.3

year.

to the emergence of unprofitable projects, which led to a deterioration in thecost of sales ratio.

130.65¥15,375 million compared with ¥19,776 million in the previous fiscal year.

net income of ¥9,352 million for the fiscal year ended March 31, 2014, an 18.5%
2012

134.02

Income before income taxes and minority interests decreased 22.3%, towere ¥114,049 million, down 12.7% compared with the previous fiscal year,
2011

Net Income per ShareYears ended March 31(Yen)

134.38

Total

2010

Asia .....................................................................¥27,162 million
North America................................................¥1,765 million
Europe.................................................................¥1,330 million
Other regions..................................................¥3,331 millioni) Income before Income Taxes and Minority Interests

After deducting income taxes and minority interests in income, Kurita recorded

Segment operating income decreased 45.1%, to ¥6,934 million. This was

80.9%

Other regions: Up 10.0% to ¥3,331 million; 9.9% of total overseas sales

As a result, total Group orders for the Water Treatment Facilities segment

Operating Income

33,590
millionEurope: Up 11.2% to ¥1,330 million; 4.0% of total overseas sales

previous fiscal year—a loss on valuation of investment securities of ¥2,343

customer capital investment plans, leading to decreases in orders and sales.

and sales were ¥119,292 million, down 3.8%.

5.3%

Asia: Up 13.7% to ¥27,162 million; 80.9% of total overseas salesh) Other Income and Expenses
8,334

Operating Margin by Segment

try largely proceeding according to plan, orders and sales decreased in water
treatment facilities and maintenance services owing to weak capital invest-

14,886

4.0%

6,934

Segment operating income declined 4.6%, to ¥7,954 million. Factors contributing to this decline included an increase in SG&A expenses driven by the

9.9%

consolidated net sales increased to 18.9% from 16.9% in the previous fiscal year.

As a result, total Group orders for the Water Treatment Chemicals segment
were ¥58,844 million, up 4.9%.

Investor
Information

Corporate Data

8.8
8.1

k) Policies on Shareholder Returns
Kurita’s basic policy is to pay stable dividends on an ongoing basis. Kurita
strives to increase its dividends, taking into consideration earnings perfor-

5.5

mance and investment in its businesses.

4.4

Taking into account the future business outlook, and as recognition ofshareholder support, for the fiscal year ended March 31, 2014, the Company
paid an annual dividend of ¥44 per share (of which ¥22 per share was aninterim dividend), an increase of ¥2 per share compared with the ¥42 pershare paid in the previous fiscal year (of which ¥21 per share was an interim

2010

2011

2012

2013

2014

Note: Return on equity = Net income ÷ Equity (Average) × 100
Equity is defined as net assets less minority interests

dividend).

34 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201435

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Capital Expenditure

Dividends per Shareof inorganic flocks and optimize the dosage flocculants. This sensor can be

R&D Expenses

The Kurita Group is committed to making investments necessary forYears ended March 31(Yen)utilized in annual chemical treatment service contracts for wastewater.

Years ended March 31(Millions of yen)technological innovation and production capacity expansion, and to enhance

The R&D expenses for the Water Treatment Chemical segment for thecompetitiveness in response to intensified sales competition. In the year ended
March 31, 2014, capital expenditures totaled ¥5,709 million, a decrease of ¥979
million compared with the previous fiscal year (including leased assets and

36.00

40.00

38.00

44.00

42.00

fiscal year ended March 31, 2014, totaled ¥1,556 million, with a 13.8% increase
compared to the previous fiscal year.
improve ultrapure water quality to contribute to a higher productivity in

The Water Treatment Chemicals segment undertook capital expenditure

the electronics industry, and also developed wastewater treatment and soil

totaling ¥1,792 million, mainly for upgrading water treatment chemicals

remediation technologies compatible with future environmental regulations.

production facilities. This represented an increase of ¥334 million compared

Kurita also has developed technologies for wastewater reclamation and sludge

with the previous fiscal year.

volume reduction, which are conducive to a sustainable society. The segment

The Water Treatment Facilities segment carried out capital expenditure
the ultrapure water supply business. This represented a ¥1.313 million decrease
compared with the previous fiscal year.
Depreciation and amortization decreased by 1.9%, to ¥14,774 million.

Kurita’s R&D activities are performed mainly by Research and Development
Division.
In the fiscal year ended March 31, 2014, Kurita’s R&D expenses totaled

2010

2011

2012

2014

2013

2011

2012

2013

4,534

ultrapure water. This technology can meet the requirements for the

2010

2014

of unit processes that make up an ultrapure water production system toimprove the quality of ultrapure water production at a reduced cost.

Capital Expenditures
Depreciation and Amortization

15,523• Kurita has developed a technology for the removal of fine particles fromminiaturization of circuits. In addition, Kurita has enhanced the performance

16,066

16,035• Kurita has improved and strengthened competitiveness of its coagulationand sedimentation process and biological treatment process, which are core
15,054

14,774technologies for wastewater treatment systems.
• Kurita has developed an adsorbent, which can remove radioactive strontium

the previous fiscal year.

from contaminated water generated due to the nuclear power plant accident
8,105

8,083
5,965

bers, equivalent to 3.7% of its total workforce (4,635 on a consolidated basis).

6,688

with a simple operation and at low cost.
5,709

The R&D activities of Water Treatment Chemical segment predominantly

The R&D expenses for the Water Treatment Facilities segment for the
fiscal year ended March 31, 2014, totaled ¥2,978 million, with a 0.5% decrease

consisted of developing chemicals for water treatment, environmental
improvement and process enhancement, which help customers improve their

4,362

semiconductor manufacturing processes, which are seeing advances in the

Capital Expenditures andDepreciation and Amortization¥4,534 million, equivalent to 2.5% of sales. It increased by 3.9% compared to
The Kurita Group as a whole employs approximately 170 R&D staff mem-

4,232

had the following R&D achievements:

Years ended March 31(Millions of yen)

Research and Development

3,990

4,225

For the Water Treatment Facilities segment, Kurita has strived to further

lease obligations for finance lease transactions that do not transfer ownership).

totaling ¥3,917 million, mainly for the installation and expansion of facilities for

Investor
Informationcompared to the previous fiscal year.
2010

2011

2012

2013

2014

energy efficiency, reduce environmental impacts and increase productivity.
Other activities include development of monitoring systems for the potency ofwater treatment chemicals. The segment had the following R&D achievements:• For small once-through boilers, of which the number of installation isincreasing rapidly in recent years, Kurita has developed a new chemical thatremoves scale, which would lower the boiler efficiency, off the inner surfaceof the boiler while the boiler is in operation and also prevents a new scale
formation. Kurita also has developed a device to optimize the chemical
dosage for multiple small once-through boiler units.
• For food manufacturing customers, who strongly focus on food safety, Kurita
has increased the lineup of water treatment chemicals that contain only foodadditive constituents. In addition to conventional boiler chemicals, Kurita
has newly developed cooling-water chemicals and pulp and paper process
chemicals that only contain food additive ingredients.
• Kurita has developed a sensor which is able to monitor the coagulation state

36 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201437

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Financial Position

Total Assets and Return on Assets

Long-term Liabilities

Equitya) Assets

Years ended March 31(Millions of yen) (%)

Long-term liabilities as of March 31, 2014, were ¥18,872 million, a slightYears ended March 31(Millions of yen)decrease of ¥174 million compared with ¥19,046 million as of March 31, 2013.

As of March 31, 2014, Kurita had total assets of ¥274,925 million, an increase of

Total Assets¥11,345 million compared with ¥263,580 million as of March 31, 2013.

Return on Assets

251,620

Current Assets

253,298

271,141

263,580

274,925c) Net Assets

6.3

6.8

Although notes and accounts receivable, trade, decreased by ¥4,776

3.5

million. The rise in total shareholders’ equity reflected net income of ¥9,352

increased by ¥13,999 million.

million exceeding dividend payments of ¥5,124 million (previous fiscal year

according to schedule by customers. The increase in marketable securities wasdue to an increase in negotiable certificates of deposits, which are treated as
marketable securities.
Property, Plant and Equipment, Intangible Assets, and Investments and

2011

2012

2013

2014

Note: Return on assets = Net income ÷ Total assets (Average) × 100

The increase in total accumulated other comprehensive income reflected anincrease in unrealized gains on available-for-sale securities of ¥3,783 million
increase of ¥1,853 million in foreign currency translation adjustments due toYears ended March 31(Millions of yen)

the weaker yen. The retirement of treasury stock in the second quarter of the116,500
106,608

year-end dividend and interim dividend for the fiscal year under review).

due to an increase in unrealized gains on investment securities, and an

Property, Plant and Equipment, Net

Long-term Receivables

fiscal year under review led to a decrease in treasury stock of ¥21,859 million
and a decrease in retained earnings of the same amount. This had no effect on

98,368

As of March 31, 2014, property, plant and equipment, net, totaled ¥77,855

77,855

March 31, 2013.

2014

Cash Flows from Operating Activities

43,64429,796

increase of ¥11,345 million compared with ¥263,580 million at the previous
fiscal year-end. As of March 31, 2014, Kurita had an equity ratio of 79.2%, up

31, 2014, an increase of ¥4,726 million compared with ¥28,265 million a year

0.3 percentage point from 78.9% a year earlier. Net assets per share at Marchearlier.

31, 2014, was ¥1,826.84, an increase of ¥82.43 compared with ¥1,744.41 a year

Intangible assets as of March 31, 2014, were ¥1,578 million, a decrease of

28,282

27,2762012

2013

29,666earlier.

¥41 million compared with ¥1,619 million a year earlier.

* Equity is defined as total net assets less minority interests.

2010

2011

2012

2013

2014

2010

depreciation of ultrapure water supply operational facilities exceeding capital

Cash Flows

expenditure in the year under review.

Cash Flows from Operating Activities

increase in unrealized gains on investment securities driven by rising stock prices.

2013

Years ended March 31(Millions of yen)

As a result, total assets were ¥274,925 million as of March 31, 2014, an

Investments and long-term receivables were ¥32,991 million as of March

The increase in investments and long-term receivables was due to an

2012

total net assets.

86,820

million, a decrease of ¥8,965 million compared with ¥86,820 million as of

The decrease in property, plant and equipment, net, was due to2011

and an increase in total accumulated other comprehensive income of ¥5,612

million, cash and deposits rose by ¥4,297 million, and marketable securities

and deposits reflected the payment of notes and accounts receivable, trade,2010

increase reflects an increase in total shareholders’ equity of ¥4,208 million,

4.3

2010

198,042

217,691¥10,035 million compared with ¥209,118 million as of March 31, 2013. This

¥15,626 million compared with ¥146,874 million as of March 31, 2013.

The decrease in notes and accounts receivable, trade, and increase in cash

192,588

208,891 207,871

As of March 31, 2014, net assets totaled ¥219,153 million, an increase of

7.0

Current assets as of March 31, 2014, totaled ¥162,500 million, an increase of

Investor
Information

2011

2014

Net cash provided by operating activities amounted to ¥29,666 million in
the fiscal year ended March 31, 2014, an increase of ¥2,390 million comparedwith the previous fiscal year. Major items within this total were income beforeb) Liabilities

income taxes and minority interests of ¥15,375 million, depreciation and

As of March 31, 2014, liabilities totaled ¥55,772 million, an increase of ¥1,308

amortization of ¥14,774 million, decrease in trade receivables of ¥4,997 million,

million compared with ¥54,462 million as of March 31, 2013.

and income taxes paid of ¥6,652 million.

Current Liabilities

Cash Flows from Investing Activities

Current liabilities as of March 31, 2014, were ¥36,899 million, an increase of

Net cash used in investing activities totaled ¥16,676 million, an increase of¥1,484 million compared with ¥35,415 million as of March 31, 2013. This was¥20,944 million compared with net cash provided by investing activities ofmainly due to an increase in provision for loss on construction of ¥1,308¥4,268 million in the previous fiscal year. Major items within this total weremillion, accompanying the emergence of unprofitable projects in the overseas

increase in time deposits, net, of ¥1,516 million, the net amount of payments

water treatment facilities business.

for purchase of marketable securities and investment securities less proceeds

38 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201439

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountantsfrom sale and redemption of marketable securities and investment securities ofrisk of political and economic instability, and the risk of foreign exchange rate

¥8,999 million, and payments for purchase of property, plant and equipment,

fluctuations. If such risks materialized, the Group’s financial results could be

mainly for equipment for the ultrapure water supply business, of ¥5,670 million.

affected.

Cash Flows from Financing Activities

4. New Product Development

Net cash used in financing activities amounted to ¥5,957 million, a decrease of

The Group continuously endeavors to develop new technology and appealing¥12,604 million compared with the previous fiscal year. The main item was cash

new products.

dividends paid of ¥5,193 million.

Corporate Data

The success of new technology and product development efforts cannot
be guaranteed. The Group may not be able to offer new technologies andCash and Cash Equivalents at End of Yearproducts that meet the needs of its customers or launch new products in a

At March 31, 2014, Kurita had cash and cash equivalents totaling ¥41,028

timely fashion. The Group may also fail to keep pace with rapid technologicalmillion, an increase of ¥7,715 million compared with March 31, 2013.

innovation and changing customer needs. If the Group were to fail to develop
outstanding new products, this could hamper its future growth and profitabili-

Business Risks

ty or otherwise affect its financial results.

The following are summaries of major foreseeable risks present in the businessenvironments in which the Kurita Group operates. Forward-looking statements

5. Intellectual Property

herein are based on judgments made by management as of March 31, 2014.

The Group recognizes the importance of intellectual property and continuallyseeks to register its own intellectual property while avoiding infringing the

1. Economic and Market Conditions

intellectual property rights held by third parties, both in Japan and overseas.

The Group’s Water Treatment Chemicals and Water Treatment Facilities

Given the wide scope of the Group’s business, however, there is potential forbusinesses are affected by economic conditions in Japan and countries andthe Group’s intellectual property rights to be infringed and potential for theregions outside Japan where the Group operates. Demand in the Water Treat-

Group to infringe the rights held by third parties. Such occurrences may affectment Chemicals business fluctuates in response to factory capacity utilization

the Group’s financial results.

rates in industries such as steel, petroleum refining and petrochemicals, andpulp and paper—the main areas of demand for the business. Such demand

6. Dependence on Information Systems

fluctuations may affect the Group’s financial results. Demand in the Water

The Group’s use of information systems is increasing, as is the importance ofTreatment Facilities business fluctuates in response to trends in capital expen-

information systems to the Group’s business. If a computer virus or some otherditure in electronics—the main area of demand for the business—and otherfactor were to obstruct the functions of the Group’s information systems, theindustries. Such demand fluctuations may affect the Group’s financial results.

Group’s business activities, financial results, and financial condition could beMore intense competition with rivals in the Group’s business domains

negatively affected.

could lead to declines in prices of products and services, which could lower
the Group’s profitability.

7. Large-scale Natural Disasters
If an earthquake, typhoon, or other kind of natural disaster were to directly or

2. Materials and Parts Procurement

indirectly upset the Group’s business execution, the Group’s business activities,

The Group procures raw materials and parts from outside the Group for thefinancial results, and financial condition could be negatively affected.

manufacture of products and fabrication of facilities. The prices of raw materials
and parts fluctuate based on changes in market conditions, and this may affect
the Group’s financial results.
3. Overseas Business Development
The Group is striving to expand its business outside Japan. In contrast to theJapanese market, doing business in overseas markets involves a number ofinherent risks, including the risk of changes to local laws and regulations, the40 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201441

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

CONSOLIDATED BALANCE SHEETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
As of March 31, 2014 and 2013

Thousands of U.S.
dollars

Millions of yen

Assets2014

2014

Current assets:
Cash and time deposits (Notes 3, 5 and 7)¥47,336¥43,039$459,577

Notes and accounts receivable, trade (Notes 4 and 5)

57,791

61,387561,081

(184)

(104)

(1,791)Marketable securities (Notes 5 and 6)

47,99934,000466,018

Inventories (Note 8)

5,811

4,875

56,424

Deferred tax assets (Note 10)

2,193

1,956

21,293

Other current assets

1,551

1,719

15,067

162,500

146,874

1,577,671

Allowance for doubtful accounts

		

Total current assets

Investments and long-term receivables:
Investment securities (Notes 5 and 6)

23,004

17,367223,341

Investments in unconsolidated subsidiaries and affiliates (Note 5)

1,713

1,384

16,635

Deferred tax assets (Note 10)

6,586

7,738

63,941Other investments

2,097

2,015

20,363

Allowance for doubtful accounts

(409)

(241)

(3,977)32,991

28,265

320,305

Land (Note 13)

13,953

13,984135,474

Buildings and structures

61,17759,982593,955

Machinery and equipment

93,982

87,994912,455

Construction in progress

1,742

4,074

16,914

Other facilities

11,867

11,368115,219

Leased assets

7,990

8,183

77,577

190,714

185,589

1,851,597(112,859)(98,768)(1,095,719)

77,85586,820755,877

Intangible assets

1,578

1,619

15,330		Total assets¥274,925¥263,580$2,669,183

		Total investments and long-term receivables

Property, plant and equipment, at cost (Notes 16 and 17):

		TotalAccumulated depreciation		Property, plant and equipment, net

Millions of yen(Note 1)

2013

Thousands of U.S.
dollars

Liabilities and Net Assets
Current liabilities:
Short-term borrowings and current portion of long-term borrowings leaseobligations (Note 9)
Notes and accounts payable, trade (Notes 4 and 5)
Accounts payable, other
Income taxes payable
Advances received
Accrued employees’ bonuses
Provision for product warranties
Provision for loss on construction contracts
Other current liabilities
		 Total current liabilities
Long-term liabilities:
Lease obligations (Note 9)
Accrued employees’ retirement benefits (Note 11)
Net defined benefit liability (Note 11)
Accrued retirement benefits for directors and corporate auditors
Deferred tax liabilities on revaluation of land (Note 13)
Other long-term liabilities (Note 9)
		 Total long-term liabilities
		Total liabilities
Net assets:
Shareholders’ equity (Note 12):
Common stock, 2014 and 2013
		 Authorized: 531,000,000 shares
		 Issued: 2014—119,164,594 shares			
2013—132,800,256 shares
Capital surplus
Retained earnings
Treasury stock, at cost		2014—1,125 shares		2013—13,635,467 shares
		 Total shareholders’ equity
Accumulated other comprehensive income:Unrealized gains on available-for-sale securities
Unrealized losses on revaluation of land (Note 13)
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Note 11)
		 Total accumulated other comprehensive income
Minority interests
		 Total net assets
		 Liabilities and net assets(Note 1)

2014

2013

2014

¥1,063¥1,127$10,323

18,887
5,541
2,535
1,995
2,246
801
1,311
2,516
36,89917,973
6,857
2,509
1,409
2,362
774
2
2,397
35,415

183,375
53,802
24,612
19,377
21,811
7,780
12,72824,434358,245

5,389—
11,36398
1,303
718
18,872
55,772

6,020
10,835
—
165
1,303
721
19,04654,46252,322—
110,322952
12,654
6,978
183,230
541,475

13,45011,426
185,159

13,45011,426
202,807

130,589
110,939
1,797,666(2)
210,034(21,859)
205,826(23)
2,039,172

7,862
(564)
384
(25)
7,657
1,461
219,153¥274,925

4,079
(564)
(1,469)
—
2,045
1,246
209,118¥263,580

76,336(5,482)
3,734(246)
74,341
14,193
2,127,707$2,669,183

The accompanying notes are an integral part of these statements.

42 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201443

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

CONSOLIDATED STATEMENTS OF INCOME ANDCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2014 and 2013

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2014 and 2013

CONSOLIDATED STATEMENTS OF INCOME
Thousands of U.S.
dollars

Millions of yen(Note 1)

2014
¥178,137
122,870
55,2672013¥180,143
121,047
59,0962014$1,729,489
1,192,913
536,576

Selling, general and administrative expenses (Note 15)
Operating income (Note 19)

40,38014,886

38,106
20,989392,043
144,532

Other income (expenses):
Interest and dividend income
Foreign exchange gains
Interest expense
Settlement
Equity in earnings of unconsolidated subsidiaries and affiliates
Loss on disposal of properties
Rent expenses on properties
Gain on sales of properties (Note 16)
Gain on sale of investment securities (Note 6)
Gain on discontinuation of approved retirement annuity system (closed-type)
Impairment losses (Note 17)
Provision for building demolition expenses (Note 16)
Contribution (Note 16)
Loss on valuation of investment securities (Note 6)
Other, net
Other income (expense), net
Income before income taxes and minority interests

501
174
(60)
(56)
302
(23)
(24)
—
—
—
—
(197)
(500)
—
372
488
15,375

501
120
(78)
—
348
(49)
(17)
1,051
403
137
(1,108)(410)—(2,343)232(1,212)
19,776

4,867
1,692
(589)
(548)
2,941
(232)
(233)
—
—
—
—
(1,912)(4,854)
—
3,614
4,744
149,277

Income taxes (Note 10):
Current
Deferred
Total income taxes
Income before minority interests

6,614
(737)
5,877
9,498

8,660
(452)
8,208
11,56864,222(7,160)57,062
92,215

Minority interests in income
Net income

145¥9,352

92¥11,476

1,416$90,799

Net sales (Note 19)
Cost of sales (Note 14)
Gross profit

Thousands ofU.S.
dollars

Millions of yen

Income before minority interests
Other comprehensive income (Note 18):
Unrealized gains on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to minority interests(Note 1)

2014
¥9,4982013¥11,5682014$92,215

3,782
1,792
204
5,780
¥15,278

3,824
1,069
133
5,027
¥16,595

36,724
17,403
1,989
56,118$148,333¥14,989288¥16,406
189$145,528
2,804
U.S.dollars

Yen

Per share of common stock (Note 21):
Net income
Cash dividends applicable to the year

Common Capitalstock
surplus

Balance as of March 31, 2012
¥13,450
Changes during the year
Cash dividends paid
Other
Net income for the year
Acquisition of treasury stock
Retirement of treasury stock Reversal of unrealized gains(losses) on revaluation of landNet changes of net assets otherthan shareholders’ equity
Total changes during the year—
Balance as of March 31, 2013
¥13,450
Changes during the year
Cash dividends paid
Other
Net income for the year
Acquisition of treasury stock
Retirement of treasury stock Reversal of unrealized gains(losses) on revaluation of landNet changes of net assets otherthan shareholders’ equity
Total changes during the year—
Balance as of March 31, 2014
¥13,450

Unrealized Unrealized
Foreign
Remeasure- Total accumuTotal
gains onlosses on
currency
ments oflated otherdefined comprehensive
Retained Treasury shareholders’ available-for- revaluation of translation
equitysale securities land (Note 13) adjustments benefit plansincomeearnings stock(5,193)(16)
11,476(5,193)(16)
11,476(12,216)—(5,193)(16)
11,476(12,216)
—

(0)

(0)

(0)

(Note 1)

2014

2013

¥78.4844.00¥92.43
42.00

2014
$0.76
0.43

¥(564)¥(2,572)¥—¥(2,884)

Total net
assets¥(9,642) ¥211,776(12,216)¥252

Minority
interests¥11,426 ¥196,541

3,826

0

1,103

—

4,930

3,826
¥4,0790¥(564)

1,103¥(1,469)

—
¥—

4,930
¥2,045¥1,110 ¥210,002

135

5,065

—
6,266
¥11,426 ¥202,807(12,216)(5,950)¥(21,859) ¥205,826(5,124)(17)
9,352(5,124)
(17)
9,352
(2)
—

(5,124)
(17)
9,352
(2)
—

—

—

(21,859)— (17,648)¥11,426 ¥185,159(2)
21,85921,8564,208¥(2) ¥210,034

Shareholders’ equity (Note 12)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions of yen
Accumulated other comprehensive income

Shareholders’ equity (Note 12)

Common Capitalstock
surplus

3,783

—

1,853

(25)

5,611

3,783
¥7,862—¥(564)

1,853
¥384

(25)
¥(25)

5,611
¥7,657135(884)¥1,246 ¥209,118

215

5,827

215
10,035¥1,461 ¥219,153

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income

Unrealized Unrealized
Foreign
Remeasure- Total accumuTotal
gains onlosses on
currency
ments oflated otherdefined comprehensive
Retained Treasury shareholders’ available-for- revaluation of translation
equitysale securities land (Note 13) adjustments benefit plansincomeearnings stock

Balance as of March 31, 2013 $130,589 $110,939 $1,969,009 $(212,223) $1,998,315
Changes during the year
Cash dividends paid
(49,748)(49,748)
Other
(165)
(165)
Net income for the year
90,79990,799Acquisition of treasury stock
(27)
(27)
Retirement of treasury stock(212,228) 212,228— Reversal of unrealized gains—(losses) on revaluation of landNet changes of net assets otherthan shareholders’ equity
Total changes during the year—
— (171,343) 212,200
40,857
Balance as of March 31, 2014 $130,589 $110,939 $1,797,666$(23) $2,039,172$39,603$(5,482) $(14,263)$—$19,858

Minority
interests

Total net
assets$12,100 $2,030,273(49,748)(165)
90,799(27)——

36,732—

17,997(246)

54,48336,732$76,336—$(5,482)

17,997$3,734(246) 54,483$(246) $74,341

2,093

56,576

2,093
97,434$14,193 $2,127,707

The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these statements.

44 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201445

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

CONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2014 and 2013

Kurita Water Industries Ltd. and Consolidated Subsidiaries

Millions of yen

I. Cash flows from operating activities
Income before income taxes and minority interests
Depreciation and amortization
Increase in accrued employees’ retirement benefits
Increase in net defined benefit liability
Increase (decrease) in other allowances
Equity in earnings of unconsolidated subsidiaries and affiliates
Interest and dividend income
Interest expense
Gain on sales and disposal of properties
Impairment loss
Gain on sales of investment securities
Loss on valuation of investment securities
Changes in assets and liabilities:
		Decrease in trade receivables
		Decrease (increase) in inventories
		Decrease in trade payables
		Decrease (increase) in other assets
		Increase (decrease) in other liabilities
Others, net
Interest and dividends received
Interest paid
Income taxes paid
Others, net
		Net cash provided by operating activities
II. Cash flows from investing activities
Decrease in time deposits, net
Payments for purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for purchase of marketable securities and investment securities
Proceeds from sale and redemption of marketable securities and investment securities
Others, net
		Net cash used in investing activities
III. Cash flows from financing activities
Decrease in short-term borrowings, net
Proceeds from long-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Cash dividends paid to minority shareholders of consolidated subsidiaries
Payments for lease obligations
Payments for purchase of treasury stock, net
		Net cash used in financing activities
IV. Effect of exchange rate changes on cash and cash equivalents
V. Net increase in cash and cash equivalents
VI. Cash and cash equivalents at beginning of year
VII.Cash and cash equivalents at end of year (Note 3)

Investor
Information

Thousands of U.S.
dollars(Note 1)

2014

2013

2014

¥15,375
14,774
—
454
1,559
(302)
(501)
60
14
—
(0)
—

¥19,776
15,054
464
—
(379)
(348)
(501)
78
(1,000)
1,108
(403)
2,343

$149,277
143,441—4,414
15,136(2,941)(4,867)
589
144
—
(8)
—

4,997
(673)
(26)
204
(222)
121
35,835751(62)(6,652)(204)
29,666

6,095
808(4,005)
(76)
173
221
39,409730(73)(13,152)361
27,27648,552(6,541)(253)
1,986(2,160)1,175
347,916
7,291(610)(64,590)(1,987)
288,019(1,516)(5,670)105(100,145)
91,004(454)(16,676)

7,895(5,048)
3,356(76,510)
75,117(541)
4,268(14,726)(55,052)
1,023(972,282)
883,537(4,409)(161,910)

(164)
—
—
(5,122)
(71)
(595)
(2)
(5,957)

(494)
58
(89)
(5,192)(49)(579)(12,216)(18,561)(1,594)——(49,733)(696)(5,785)(27)(57,837)

683
7,715
33,313¥41,028503
13,487
19,825¥33,313

6,637
74,910323,427$398,337

1. Basis of presentation of consolidated financial statements
Kurita Water Industries Ltd. (the “Company”) and its domestic subsidiaries maintain their books ofaccount and prepare their financial statements in accordance with accounting principles and practices
generally accepted in Japan, while its foreign subsidiaries maintain their books of account and prepare
their financial statements in conformity with those of the countries of their domicile. Certain accounting
principles and practices generally accepted in Japan are different from International Financial ReportingStandards and standards in other countries in certain respects as to application and disclosure
requirements. Accordingly, the accompanying consolidated financial statements are intended for use by
those who are informed about Japanese accounting principles and practices.
The Company’s consolidated financial statements, prepared in accordance with accounting
principles and practices generally accepted in Japan, were filed with the Japanese Ministry of Financeand the Tokyo Stock Exchange as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications of accounts and modifications have been made in the accompanying
consolidated financial statements to facilitate understanding by readers outside Japan. In addition,certain reclassifications have been made in the 2013 financial statements to conform to the classification
used in 2014.
All figures in the consolidated financial statements and notes are stated in millions of Japanese yen
by discarding fractional amounts of less than ¥1 million. As a result, the totals shown in the consolidated
financial statements and notes in yen do not necessarily agree with the sum of the individual amounts.
The translation of yen amounts as of or for the year ended March 31, 2014 into U.S. dollars is
included solely for the convenience of readers and has been made, as a matter of arithmeticalcomputation only, at the rate of ¥103 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market
on March 31, 2014. The translation should not be construed as a representation that yen amounts havebeen, could have been or could in the future be converted into U.S. dollars at the above or any otherrate.

2. Significant accounting policies(1) Consolidation
Scope of consolidation
The consolidated financial statements included the accounts of the Company and its significant
subsidiaries (together, the “Group”). For the years ended March 31, 2014 and 2013, 36 and 37 subsidiaries
were consolidated, respectively.
Under the control concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated.
All significant inter-company transactions and balances have been eliminated in consolidation.
Names of principal consolidated subsidiaries:
		 Kuritaz Co., Ltd.
		 Kurita Engineering Co., Ltd.
		 Kuritec Service Co. Ltd.
		 Kurita Chemical Manufacturing Ltd.
Fiscal years of consolidated subsidiaries
The fiscal years of Kurita (Singapore) Pte. Ltd. and 11 (12 in 2013) other consolidated subsidiaries end
on December 31. For these consolidated subsidiaries, the financial statements as of December 31 wereused for consolidation purposes. However, material transactions that have occurred during the threemonth period from January 1 to March 31 of the following year have been adjusted as necessary forconsolidation.

The accompanying notes are an integral part of these statements.

46 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201447

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbOverseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Amortization of goodwill
Goodwill is amortized using the straight-line method over three years, except for minor amounts thatare charged to income in the period of acquisition.
(2) Equity method
Scope of equity method application
Under the influence concept, significant investments in unconsolidated subsidiaries and affiliates overwhich the Company has the ability to exercise significant influence with regard to the operating andfinancial policies of the investees are accounted for by the equity method. For the years ended March 31,
2014 and 2013, 5 and 3 companies were accounted for by the equity method, respectively.
Name of principal company applying the equity method:
		 Kurita Sogo Service Co., Ltd.
Investments in the remaining unconsolidated subsidiaries and affiliates were stated at cost. If theequity method of accounting had been applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would not be material.
Fiscal years of companies accounted for by the equity method
Adjustments were made to the financial statements of the companies accounted for by the equity
method whose fiscal year-ends were not identical to the Company.
(3) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand,readily available bank deposits, and short-term investments with an original maturity of three months orless and subject to a minor risk of fluctuations in value.
(4) Available-for-sale securities
Available-for-sale securities that have available fair values are stated at fair value at the balance sheet
date, with resulting unrealized holding gains and losses reported as a separate component of net assets.
Available-for-sale securities with no available fair values are stated at cost computed by the movingaverage method. The cost of sold securities is computed by the moving-average method.
(5) Inventories
Inventories held for sale in the ordinary course of business are stated at the lower of cost determinedby the moving-average method, except for work in process determined by the specific-identification
method, or net selling value.
(6) Derivative transactions
Derivative transactions utilized by the Group are composed of only forward currency contracts enteredinto when necessary to hedge the market risk, as the Company maintains the policy not to engage
in speculative transactions. The Company believes that the risk of counterparty default is negligible
because its forward currency contracts are entered into only with banks with high credit ratings. In
addition, transactions in forward currency contracts are executed and managed by the finance andaccounting department on a contract-by-contract basis after they have been approved by prescribedinternal procedures.

48 Kurita Water Industries Ltd. Annual Report 2014

Solutions to Social
Issue(7) Depreciation of property, plant and equipment
Property, plant and equipment is depreciated by the declining-balance method for the Company andits domestic consolidated subsidiaries, except for buildings (other than building equipment) acquired
on and after April 1, 1998, and ultrapure water supply equipment located at clients’ sites, for which thestraight-line method is applied. The straight-line method is applied by foreign consolidated subsidiaries.
The estimated useful lives of these assets are as follows:		 Buildings and structures:		
2–65 years
		 Machinery and equipment:		
4–10 years(8) Impairment of long-lived assets
The Company reviews its long-lived assets for impairment in accordance with the accounting standards
for impairment of fixed assets whenever events or changes in circumstances indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.
(9) Accrued employees’ bonuses
The Company and its domestic consolidated subsidiaries accrue the amount of employees’ bonuses
based on the anticipated bonus payments to employees.
(10) Provision for loss on construction contracts
Provision for loss on construction contracts is provided in an amount sufficient to cover probable losses
on construction contracts on hand when substantial losses in the future are anticipated and can bereasonably estimated.
(11) Accounting method for employees’ retirement benefits
The straight-line method is used as a method of attributing expected benefits to be paid to the current
period in calculating retirement benefit obligations.
Actuarial differences are subject to amortization over a period of 1–2 years from the year when they
are incurred.
(Change in accounting policies)
Effective from the end of the year ended March 31, 2014, the Group adopted “Accounting Standard for
Retirement Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 26, May 17, 2012)
and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012),
except the article 35 of the standard and the article 67 of the guidance. Under the standard and theguidance, retirement benefit obligations are recorded as net defined benefit liability and unrecognizedactuarial differences are also recorded in net defined benefit liability
With regards to the application of the standard and the guidance, the effect of this change isrecognized in remeasurements of defined benefit plans in accumulated other comprehensive income inaccordance with the transitional treatment in article 37 of the standard.
As a result of this change, net defined benefit liability of ¥11,363 million (US$110,322 thousand) wasrecorded, deferred tax assets increased by ¥14 million (US$136,009 thousand) and accumulated othercomprehensive income decreased by ¥25 million (US$246 thousand) at March 31, 2014.

Kurita Water Industries Ltd. Annual Report 201449

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbOverseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants(12) Leases
Finance leases which do not transfer ownership are capitalized to recognize leased assets and leaseobligations in the consolidated balance sheets. Leased assets are depreciated using the straight-line
method over the respective lease periods without residual value.
(13) Consumption taxes
Consumption taxes are accounted for separately from transaction prices and are not reflected in the
consolidated statements of income.
(14) Construction contracts
The percentage-of-completion method has been applied to the contracts if the outcome of theconstruction activity is deemed certain for the percentage of performance of the contractor’s obligation
at the end of the balance sheet date, otherwise the completed-contract method is applied. The
percentage of completion is determined using the cost incurred to the estimated total cost.
(15) Foreign currency translation
Monetary receivables and payables denominated in foreign currency are translated using the spot
exchange rate prevailing at the balance sheet date, and the differences are charged to income as foreignexchange gains or losses.
Foreign subsidiaries’ assets and liabilities are translated using the spot exchange rate at their balance
sheet dates, and their income and expenses are translated using the average exchange rate during theyear. The translation differences are recorded in “Foreign currency translation adjustments” and “Minority
interests” in net assets.
(16) Appropriation of retained earnings
The accompanying consolidated statements of changes in net assets reflect the appropriations ofretained earnings of the Company in the fiscal year in which the appropriations are approved at thegeneral shareholders’ meeting.
(17) Earnings per share
Earnings per share are computed using the weighted-average number of common shares outstanding.
(18) New accounting pronouncements
Accounting standard for retirement benefits
On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits”
and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced
the Accounting Standard for Retirement Benefits that had been issued by the Business Accounting
Council in 1998 with effective date of April 1, 2000 and the other related practical guidance, being
followed by partial amendments from time to time through 2009.
These accounting standards were revised mainly on a processing method of unrecognized actuarial
loss and unrecognized prior service cost, a calculation method of retirement benefit obligations andservice cost and expansion of the disclosure based on a point of view that improved a financial reportand an international trend.
The Company expects to apply the revision on the calculation method of retirement benefit
obligations and service cost from the beginning of the annual period ending on March 31, 2015.
The effect of application of the revised accounting standard on operating income and income
before income taxes and minority interests for the year ending March 31, 2015 is expected to immaterial.

50 Kurita Water Industries Ltd. Annual Report 2014

Solutions to Social
Issue(19) Reclassifications
Certain reclassifications have been made in the 2013 consolidated financial statements to conformto the 2014 presentation. These reclassifications had no impact on previously reported results ofoperations.

3. Reconciliation between cash and cash equivalents
The reconciliation between the fiscal year-end cash and cash equivalents (See Note 2 (3)) in the
consolidated statements of cash flows and cash and time deposits in the consolidated balance sheet
items is as follows:
Thousandsof U.S. dollars

Millions of yen

Cash and time deposits
Time deposits with original maturity of more than
three months
Certificates of deposits included in marketable securities,
excluding deposits maturing over three months
Cash and cash equivalents(Note 1)

2014

2013

2014

¥47,336¥43,039$459,577(11,307)(9,726)(109,784)

5,000

—

48,543¥41,028¥33,313$398,337

4. Trade notes with maturity on the balance sheet date
The following amount of trade notes had March 31, 2014 and 2013 as their maturity date, which fell ona holiday of financial institutions. These trade notes were accounted for as if they had been cleared on
their maturity date.
Thousandsof U.S. dollars

Millions of yen
2014(Note 1)

2013

2014

Notes receivable

¥—

¥629

$—

Notes payable

—

195

—

5. Financial instruments and related disclosures(1) Policy for financial instruments
The Group invests its funds in low risk financial assets (deposits, etc.) in principle. The Group finances its
working fund and capital investment fund internally and does not need external funds, but may raisenecessary funds from external resources in case of special demand for significant capital investment,
if any. In such cases, financing from external resources would be possible without any problem thanks
to our sound financial position. With respect to derivatives, only forward foreign currency contracts areused if necessary to avoid foreign exchange risk, and not for speculative purposes.
(2) Nature of financial instruments and their related risks
Trade receivables such as notes and accounts are exposed to customer credit risk. Certain tradereceivables denominated in foreign currencies arising from overseas operations are exposed to themarket risk of fluctuation in foreign currency exchange rates.
Marketable securities and investment securities are exposed to the risk of market price fluctuations
and business risk of the investees.
Payment terms of trade payables such as notes and accounts are mostly less than one year. Leaseobligations under finance lease transactions are mainly related to ultrapure water supply business andits payment term is 15 years (16 in 2013) later at maximum.
Kurita Water Industries Ltd. Annual Report 201451

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Investor
Information

Corporate DataManagement’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants(3) Risk management system for financial instruments
Credit risk management (customers’ default risk):
The Company manages its credit risk involved in trade receivables based on the Credit Control Policy
and Manual. The Control Division of each business unit and the Legal Department collect credit
information on a regular basis and control the payment terms and outstanding balances by customer,
and the Company is making efforts to prevent them from damages and to improve the soundness ofthe transactions by monitoring the default risk of customers due to the deterioration of their financial
position at an early stage. The consolidated subsidiaries are also making efforts to reduce credit risk bycontrolling payment terms and outstanding balances of customers. Counterparties of forward foreign
currency contracts to be used to avoid foreign exchange risk when necessary are limited to high-creditrating financial institutions and accordingly, we believe there is very little credit risk.
Market risk management (foreign exchange risk and interest rate risk):
The Company and certain consolidated subsidiaries utilize forward foreign currency contracts to hedge
the market risk of fluctuations in foreign exchange rates involved in trade receivables and payables by
currency and by month. Forward foreign currency contracts are executed and controlled by the Finance
Department after the individual contract is approved in accordance with the predetermined rule.
Liquidity risk management (risk that the Company may not be able to settle on the payment duedate):The Finance Departments of the Company and its consolidated subsidiaries prepare and update thefund management plan every month based on reports from each business unit and hold a sufficientamount of liquidity in hand and manage the liquidity risk.
Carrying amounts, fair values and unrealized gain (loss) of financial instruments at March 31, 2014
and 2013 were as follows (financial instruments whose fair values cannot be reliably determined are notincluded in the following table):
Millions of yen

Millions of yen
At March 31, 2013

Carrying
amountFair value

Difference

Cash and time deposits¥43,039¥43,039¥—

Notes and accounts receivable, tradeMarketable securities and investment securities
Available-for-sale securities
Total assets

61,387

61,387—51,27751,277—¥155,705¥155,705¥—

Notes and accounts payable, trade¥17,973¥17,973¥—

Total liabilities¥17,973¥17,973¥—

Derivatives

¥

¥

¥—

—

—

Notes:
a. Computation method of fair values
Cash and time deposits and notes and accounts receivable, trade:
Fair values approximate carrying amounts because of their short maturities.
Marketable securities and investment securities:
	Fair values approximate carrying amounts because of their short maturities since marketable securities consist ofcertificates of deposits and commercial paper. Fair values of investment securities are determined based on thequoted market price of the stock exchange.
Notes and accounts payable, trade:
Fair values approximate carrying amounts because of short maturities.
Derivatives:	For the year ended March 31, 2013, these derivatives are accounted for together with time deposits designated asa hedged item. Therefore, the fair value of such derivatives is included in that of time deposits. (Note2 (6))
For the year ended March 31, 2014, derivatives are not disclosed because they are not material.
Detail and information are discussed in Note 7.
b. Financial instruments whose fair values cannot be reliably determined are as follows:
Thousandsof U.S. dollars
Millions of yen(Note 1)2014
Unlisted equity securities (Unlisted shares)(Shares of unconsolidated subsidiaries and affiliates)

2014

2013

¥91

¥90

$883

¥1,713¥1,384$16,635

At March 31, 2014

Carrying
amountFair value

Difference

Cash and time deposits¥47,336¥47,336¥—

Notes and accounts receivable, tradeMarketable securities and investment securities
Available-for-sale securities
Total assets

57,791

57,791—

70,91370,913—¥176,040¥176,040¥—

These securities are not included in above “Marketable securities and investment securities” since their fair values
cannot be reliably determined.
c. Maturities of monetary receivables and securities after the balance sheet date:Millions of yen
Due after one
Due after fiveDue in one year year throughyears throughDue after ten
At March 31, 2014or less
five years
ten years
years

Notes and accounts payable, trade¥18,887¥18,887¥—

Deposits¥47,303

¥—

¥—

¥—

¥—

Notes and accounts receivable, tradeMarketable securities and investment securities
Available-for-sale securities with maturities(Certificates of deposits)
Marketable securities and investment securities
Available-for-sale securities with maturities(Commercial paper)
Total

57,791———47,000

—

—

—

¥—

¥—

¥—

Total liabilities¥18,887

At March 31, 2014

Thousands of U.S. dollars (Note 1)
Carrying
amountFair value
Difference

Cash and time deposits$459,577$459,577$—

Notes and accounts receivable, tradeMarketable securities and investment securities
Available-for-sale securities
Total assets

561,081

561,081—

688,476

688,476—$1,709,135$1,709,135$—

Notes and accounts payable, trade$183,375$183,375$—

Total liabilities$183,375$183,375$—

52 Kurita Water Industries Ltd. Annual Report 2014

¥18,887

999¥153,094

Kurita Water Industries Ltd. Annual Report 201453

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholdersbb

At March 31, 2014

Due in one year
or less

Thousands of U.S. dollars (Note 1)
Due after one
Due after five
year throughyears throughfive years
ten years

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Millions of yen
Due after ten
years

Deposits$459,255

$—

$—

$—

Notes and accounts receivable, tradeMarketable securities and investment securities
Available-for-sale securities with maturities(Certificates of deposits)
Marketable securities and investment securities
Available-for-sale securities with maturities(Commercial paper)
Total

561,081———456,310———

Carrying
amountAcquisition cost

Stocks¥16,679¥11,198¥5,481

Bonds

—

—

—

At March 31, 2013

Other

—

—

—

16,679

11,198

5,481

Stocks

598

756

(157)

Bonds

—

—

—

Carrying amount not exceeding acquisition cost:

9,707
$—

$—

$—

6. Marketable securities and investment securities(1) Available-for-sale securities with fair value at March 31, 2014 and 2013 are summarized as follows:
Millions of yen
Carrying
amountAcquisition cost

Difference

Stocks¥22,841¥11,198¥10,842

Bonds

—

—

—

Other

—

—

—

22,841

11,198

10,842At March 31, 2014

Difference

Carrying amount exceeding acquisition cost:		Subtotal$1,486,355

Investor
Information

Corporate Data

Other

—

—

—

		Subtotal

598

756

(157)

¥17,277¥11,954¥5,323

Total

Notes:
The above table does not include negotiable deposits that have not been assigned a market value (value on
consolidated balance sheets: ¥34,000 million) and unlisted shares (value on consolidated balance sheets: ¥90 million).

Carrying amount exceeding acquisition cost:		Subtotal
Carrying amount not exceeding acquisition cost:
Stocks

71

96

(24)

Bonds

—

—

—

Other

—

—

—

		Subtotal

71

96

(24)

¥22,913¥12,095¥10,818

Total

At March 31, 2014

Thousands of U.S. dollars (Note 1)
Carrying
amountAcquisition cost
Difference

Carrying amount exceeding acquisition cost:
Stocks$221,763$116,493$105,269

Bonds

—

—

—

—

—

—

$221,763$116,493$105,269

Stocks

694

934

(240)

Bonds

—

—

—

Other
		Subtotal(2) Available-for-sale securities sold during the years ended March 31, 2014 and 2013 are summarized asfollows:
Thousandsof U.S. dollars

Millions of yen

2014(Note 1)

2014

2013
¥4

¥617

Total gains on sales

0

411

8

Total losses on sales

—

7

—

Sales amount$42(3) Loss on valuation of available-for-sale securities
The Company recognizes loss valuation for the full amount of securities when the fair value declines
below 50% of the acquisition cost, and for amounts deemed necessary after consideration ofrecoverability when the fair value declines by 30 to 50% of the acquisition cost. For the year ended
March 31, 2013, loss on valuation recognized on equity securities classified as available-for-sale securities
amounted to ¥2,343 million.

Carrying amount not exceeding acquisition cost:

Other

—

—

—

		Subtotal

694

934

(240)

$222,458$117,428$105,029

Total

Notes:
The above table does not include negotiable deposits that have not been assigned a market value (value on
consolidated balance sheets: ¥47,000 million) , commercial paper (value on consolidated balance sheets: ¥999
million) and unlisted shares (value on consolidated balance sheets: ¥91 million).

54 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201455

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

7. Derivatives
All Derivatives held by the Group as of March 31, 2014 and 2013 have been applied the hedge
accounting.
Derivatives for which hedge accounting applied at March 31, 2013 are as follows:(2) Long-term debt
Long-term debt at March 31, 2014 and 2013 is summarized as follows:

At March 31, 2013

Hedging instrument

Hedge item

Contract
amountForward currency contracts:
Time deposits
Selling Yuan Renminbi¥4,000

—

Note

Note:
These derivatives are accounted for together with time deposits designated as a hedged item. Therefore, the fairvalue of such derivatives is included in that of time deposits. (Note2 (6))
Derivatives for which hedge accounting applied at March 31, 2014 are not disclosed because they are not material.

8. Inventories
Inventories at March 31, 2014 and 2013 consist of the following:Thousandsof U.S. dollars(Note 1)Millions of yen

2014

2013

2014

Finished products¥1,788¥1,445$17,359

Raw materials

1,455

1,191

14,128Work in process

2,568

2,238

24,936¥5,811¥4,875$56,424

Total

Inventories and provision for loss on construction contracts related to construction contracts that arelikely to incur losses are presented as is and are not offset. The amount of inventories (work in process)corresponding to the provision for loss on construction contracts is immaterial.

9. Short-term borrowings and long-term debt
(1) Short-term borrowings and current portion of long-term debt
The short-term borrowings and current portion of long-term debt at March 31, 2014 and 2013 consist of
the following:¥0Less current portion of long-term borrowings

—

—

—

Long-term borrowings (Excluding current portion)

¥—

¥0

$—

¥5,954¥6,604$57,810

(565)

(583)

(5,488)¥5,389¥6,020$52,322

Lease obligations
Less current portion of lease obligations
Lease obligations (Excluding current portion)$—

The weighted-average annual interest rate of long-term borrowings for the year ended March 31, 2013
was 10.37%.
Annual maturities of long-term debt at March 31, 2014 are as follows:
Years Ending March 31

2015

Millions of yen¥565

Thousandsof U.S. dollars(Note 1)

$5,488

2016

528

5,130

2017

494

4,796

2018

425

4,131

2019 and thereafter

3,941

38,263

Total¥5,954$57,810(3) Other long-term liabilities
Other than the short-term borrowings and lease obligations described above, ¥684 million (US$6,648
thousand) and ¥664 million of interest-bearing long-term deposits received were included in otherlong-term liabilities as of March 31, 2014 and 2013, respectively. The weighted-average annual interest
rates for such deposits received for the years ended March 31, 2014 and 2013 were 0.36%.

(Note 1)

2013

2014

Short-term borrowings

¥498

¥543

$4,835Current portion of lease obligations

565

583

5,488

¥1,063¥1,127$10,323

Total

2014

2013

Thousandsof U.S. dollars

Millions of yen

2014(Note 1)¥—Long-term borrowings
Fair value

Thousandsof U.S. dollars

Millions of yen

2014
Currency related
Millions of yen
Contracts longer
than one year

Investor
Information

Corporate Data

The weighted-average annual interest rate of short-term borrowings for the years ended March 31, 2014
and 2013 were 4.56% and 4.62%, respectively.

56 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201457

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
Stakeholdersbb

Significant components of the deferred tax assets and liabilities as of March 31, 2014 and 2013 are as
follows:
Thousandsof U.S. dollars(Note 1)

2014

2013

2014

Excess depreciation of property, plant and equipment
Excess provision for accrued employees’
retirement benefits
Net defined benefit liability¥6,212¥5,676$60,311

—

3,815

—

3,913

—

37,999Loss on revaluation of investment securities

1,159

1,187

11,256

Excess provision for accrued bonuses to employees

785

873

7,629

Provision for loss on construction contracts

467

—

4,537

Impairment loss

322

351

3,128

Excess provision of allowance for product warranty

285

287

2,771

Accrued enterprise taxes not deductible

190

251

1,854

Unrealized gain on sale of property, plant and equipment

187

157

1,816

Other

1,097

1,060

10,656

		Subtotal

14,621

13,662

141,960

Deferred tax assets:

		Valuation allowance(1,591)(1,539)(15,448)

		

13,03012,122

126,512

Total deferred tax assets

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

Deferred tax liabilities:(2,944)(1,267)

Investor
Information

Corporate Data

beginning on or after April 1, 2014. Accordingly, the effective statutory tax rate is changed from 38.0% to35.6% for the year beginning on April 1, 2014.
As a result of this change, compared with when using the previous effective statutory tax rate,
deferred tax assets, net of deferred tax liabilities as of March 31, 2014 decreased by ¥172 million(US$1,674 thousand) and income taxes – deferred increased by ¥172 million (US$1,674 thousand) for theyear ended March 31, 2014.

11. Retirement benefits and pension plans
For the year ended March 31, 2014
Defined benefit plans
The Company and 24 domestic consolidated subsidiaries provide lump-sum retirement benefit plans (allunfunded) for defined benefit plans; 21 provide lump-sum retirement benefit plans partly; and 4 provide
lump-sum retirement plans entirely. 5 overseas consolidated subsidiaries provide lump-sum retirement
benefit plans (all unfunded) for defined benefit plans; 2 provide lump-sum retirement benefit plans
partly; and 3 provide lump-sum retirement plans entirely. Also, 23 domestic consolidated company
subsidiaries except the Company, 1 domestic consolidated subsidiary and 5 overseas consolidated
subsidiaries use the simplified method for computing benefit obligations.
(1) Movement in benefit obligations, except plans applied simplified method
Millions of yen

Balance at April 1, 2013

Unrealized losses on available-for-sale securities
Estimated income taxes pertaining to retained
earnings of overseas consolidated subsidiaries
Capital gains on properties deferred for tax purposes

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

10. Income taxes

Millions of yen

Solutions to Social
Issue

Thousandsof U.S. dollars(Note 1)

2014

2014

¥9,562$92,842(28,589)

Service cost

568

5,522

Interest cost

183

1,779

Actuarial differences incurred

34

334

(414)

(4,019)40391¥9,975$96,850

(670)

(520)

(6,505)

(636)

(638)

(6,182)

Total deferred tax liabilities(4,251)(2,426)(41,277)

Deferred tax assets, net¥8,779¥9,695$85,235

A reconciliation between the normal effective statutory tax rate and the effective income tax rate as apercentage of income before income taxes and minority interests for the year ended March 31, 2013
was as follows:

Benefits paid
Other
Balance at March 31, 2014

(2)Movement in net defined benefit liability for plans applied simplified method
Millions of yen

2013
Normal effective statutory tax rate

38.0%

Loss on revaluation of investment securities

3.8

Expenses not deductible for income tax purposes

0.5

Reversal of deferred tax liabilities on retained earnings of foreign consolidated subsidiaries(0.4)

Dividend income not taxable for income tax purposes(0.3)

R&D expense tax credit(1.4)

Difference in statutory tax rates of foreign subsidiaries(1.0)

Income taxes—correction

1.3

Other

1.0

Actual effective tax rate

41.5%

Balance at April 1, 2013

Thousandsof U.S. dollars(Note 1)

2014

2014

¥1,290$12,526

Net periodic benefit costs

201

1,959

Benefits paid

(104)

(1,014)¥1,387$13,472

Balance at March 31, 2014

On March 31, 2014, “Act on Partial Revision of the Income Tax Act” (Act No. 10 of 2014) was enacted
into law. As a result, the special reconstruction corporate tax will be no longer be imposed from years

58 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 201459

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbThousandsof U.S. dollars(Note 1)

2014

2014

Retirement benefit obligations¥11,363$110,322

Net liability on the consolidated balance sheet¥11,363$110,322

Net defined benefit liability¥11,363$110,322

Net liability on the consolidated balance sheet¥11,363$110,322(4) Net periodic benefit costs
Millions of yen

2014

Thousandsof U.S. dollars(Note 1)

2014

Service cost

¥568

$5,522

Interest cost

183

1,779

Amortization of actuarial differences

12

118

Net periodic benefit costs computed by simplified method

201

1,959

11

111

¥977

$9,491Other
Net periodic benefit costs

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants(3) Reconciliation between retirement benefit obligations and net defined benefit liability
Millions of yen

Solutions to Social
Issue

contribution pension insurance is used for fund management of ¥10,207 million (US$99,100 thousand)as of March 31, 2014, which was previously included in retirement benefit obligations and plan assets, is
excluded from retirement benefit obligations and plan assets in the above tables.
Defined contribution pension plans
The Company and 9 domestic consolidated subsidiaries provide defined contribution pension plans. 11
other domestic consolidated subsidiaries provide combination of defined contribution plans including
the Smaller Enterprise Retirement Allowance Mutual Aid Scheme. 5 overseas consolidated subsidiaries
provide defined contribution plans; 2 provide defined contribution plans partly and 3 provide defined
contribution plans entirely.
The amount to be contributed to the defined contribution plans by the Company and its
consolidated subsidiaries was ¥804 million (US$7,811 thousand).
For the year ended March 31, 2013
The Company and 9 domestic consolidated subsidiaries provide lump-sum retirement benefit plans anddefined contribution pension plans. Fifteen other domestic consolidated subsidiaries provide lump-sum
retirement benefit plans. Four overseas consolidated subsidiaries provide lump-sum retirement benefit
plans; 2 provide lump-sum retirement benefit plans and defined contribution pension plans; and 2
provide a defined contribution pension plan.
(1) Benefit obligations
Millions of yen

2013(5) Remeasurements of defined benefit plans, before income tax effectMillions of yen

2014

Thousandsof U.S. dollars(Note 1)

2014

Unrecognized actuarial differences¥(39)$(382)

Total

¥(39)

$(382)

Retirement benefit obligation¥(20,891)

Fair value of plan assets

10,038

Unfunded retirement benefit obligations(10,852)

Unrecognized actuarial gain

17

Unrecognized prior service cost—

Net accrued employees’ retirement benefits(10,835)

Prepaid pension cost(6) Assumptions for actuarial calculation
Discount rate

Accrued employees’ retirement benefits—¥(10,835)

1.7–1.8%(2) Net periodic benefit costs(7) Supplementary explanation
The Company and 9 domestic consolidated subsidiaries provide combination of defined contribution
pension plans and lump-sum retirement benefit plans.
Under the lump-sum retirement benefit plans, payments are made for the difference between total
amounts of retirement allowance set by the Company and the amount calculated as if certain principalprotected type defined contribution pension insurance was used for fund management. Through theyear ended March 31, 2013, the total amount of retirement allowance calculated by the Company was
assumed as retirement benefit obligations and the amount calculated as if certain principal-protected
type defined contribution pension insurance was used for fund management was assumed as plan
assets. The difference was recorded as unfunded retirement benefit obligations.
In accordance with the revision of the accounting standard for retirement benefits, effective fromthe year ended March 31, 2014, the amount calculated as if certain principal-protected type defined

60 Kurita Water Industries Ltd. Annual Report 2014

Millions of yen

2013
Service cost

¥777

Interest cost

159

Expected return on plan assets—

Amortization of actuarial differences

239

Additional retirement payments

14

Loss at transition to defined contribution pension plan

—

Other
Net periodic benefit cost711
¥1,901

Kurita Water Industries Ltd. Annual Report 2014

61

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholdersbb(3) Assumptions to determine above obligation and cost

Discount rate
Expected rate of return on plan assets
Amortization period of actuarial differences

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

2013
Equal amountover each period
1.7–1.8%
0.5%
1–2 years

12. Shareholders’ equity

Investor
Information

Corporate Data

When any revaluated land is sold, the related unrealized gain or loss on revaluation of land istransferred to retained earnings.
Revaluation method: The revaluation of land was computed in accordance with Article Two, Item
One of the Land Revaluation Law Enforcement Order.
Revaluation date: March 31, 2002

14. Cost of sales
Provision for loss on construction contracts included in cost of sales were ¥1,311 million (US$12,728
thousand) and ¥2 million for the years ended March 31, 2014 and 2013, respectively.

15. Selling, general and administrative expenses
Selling, general and administrative expenses for the years ended March 31, 2014 and 2013 consisted of
the following:

Japanese companies are subject to the Companies Act. A summary of the sections of the Companies
Act that affect financial statements and accounting matters is as follows:(1) Distribution of dividends to shareholders
Under the Companies Act, if companies meet certain criteria, dividends can be paid at any time during
the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors’
meeting if the articles of incorporation of the company so stipulate.
The Companies Act provides certain limitations on the amounts available for dividends and/or
the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, and it is calculated mainly based on capital surplus other than paid-in capital, retained
earnings, and treasury stock, but the amount of net assets after dividends must be maintained at no lessthan ¥3 million.
(2) Increases/decreases; transfer of common stock, reserve, and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus) depending on the equity account charged upon the payment of such dividends. However, suchappropriation may not be made if the aggregate amount of legal reserve and additional paid-in capital
exceeds 25% of the common stock. Under the Companies Act, this legal reserve and additional paid-in
capital may be reversed without limitation.
The Companies Act also provides that common stock, legal reserve, additional paid-in capital, othercapital surplus, and retained earnings can be transferred among the accounts under certain conditions
upon resolution of the shareholders.
(3) Treasury stock
The Companies Act provides that companies may purchase, hold or dispose of such treasury stock byresolution of the Board of Directors’ meetings. The amount of treasury stock purchased cannot exceed
the amount available for distribution to the shareholders which is determined by a specific formula.

13. Unrealized gains on revaluation of land
The Company implemented a revaluation of land for business use in accordance with the Land
Revaluation Law (enacted on March 31, 1998). The revaluation difference, net of taxes is stated as“Unrealized gains (losses) on revaluation of land” in the valuation and translation account in net assets.
The tax equivalent is stated as deferred tax assets or liabilities in long-term liabilities.

62 Kurita Water Industries Ltd. Annual Report 2014

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

In the above table, benefit cost incurred for the domestic consolidated subsidiaries, which use thesimplified method for computing benefit obligations, is included in “Service cost,” and “Other” represents
contribution to the defined contribution pension plan.

Periodic allocation of projected benefit obligation

Solutions to Social
Issue

Thousandsof U.S. dollars

Millions of yen(Note 1)

2014

2013

2014

¥15,780¥14,895$153,212

Provision for employees’ bonuses

1,223

1,368

11,883Retirement benefit expenses

1,018

1,079

9,891

Salaries and allowances

Travel expenses

2,808

2,675

27,268

Research and development expenses

4,534

4,362

44,025

Other

15,013

13,726

145,762

Total¥40,380¥38,106$392,043

16. Other income (expenses)
The details of gain on sales of properties for the year ended March 31, 2014 and 2013 are as follows:
Thousandsof U.S. dollars

Millions of yen

2014(Note 1)

2014

2013

Machinery and equipment

¥—

¥701

$—

Buildings and structures

—

346

—

Others—3—

Provision for building demolition expenses
Provision for building demolition expenses is recorded for demolishing the former head office buildingof the Company (Shinjuku-ku, Tokyo) in reasonably estimated amounts to be incurred in the future.
Contribution
The Company contributed ¥500 million (US$4,854 thousand) as the endowment for the Charitable
Organization Kurita Water and the Environmental Science Foundations and recorded as contribution inother income (expenses) for the year ended March 31, 2014.

17. Impairment losses
For the purpose of impairment testing, assets of the Group are generally grouped based on business,
however, idle assets and investment properties are grouped by individual property.
For the year ended March 31, 2014, the Group recognized no impairment losses.
Kurita Water Industries Ltd. Annual Report 201463

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

For the year ended March 31, 2013, the Group recognized impairment losses of ¥1,108 million on
the following assets.
Land, buildings and structures, etc. of the former head office of the Company (Shinjuku Ward, Tokyo)
became idle assets as a result of the relocation of the head office. Of these assets, the Group recognized
an impairment loss on buildings and structures, etc. as because of aging and other factors the carrying
value of these assets may not be recoverable.
The Group recognized an impairment loss on land in Ichinomiya City, Aichi, for which there is nointended use in the future and whose market values significantly declined.
The details of impairment losses recognized for the year ended March 31, 2013 are as follows:

The Group’s operations are therefore classified into two reportable segments, the Water Treatment
Chemicals segment and the Water Treatment Facilities segment, based on the products and services
handled by each of the divisions.
The Water Treatment Chemicals segment manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities segment manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning,
tool cleaning, soil and groundwater remediation services, and provides maintenance services thatencompass operation, maintenance, and management of water treatment facilities.

Year ended March 31, 2013(2) Methods for calculating sales, income and loss, assets and liabilities, and other amounts byreportable segment
Accounting methods applied in the reportable segments are consistent with the methods appliedin preparation of the accompanied consolidated financial statements. Segment income represents
operating income. Inter-segment sales and transfers between the Group reflect values based on market
price. Intersegment sales and transfers between the Company’s divisions are based primarily on bookvalues.

Millions of yen

Idle assets:
Shinjuku-ku, Tokyo

Buildings and structures

Ichinomiya City, Aichi

Land¥1,09413

The carrying value of these assets is written down to their fair value less costs to sell, of which buildings
and structures, etc. is estimated memorandum value of ¥1 because the carrying value of these assets
may not be recoverable, and of which land is based on Japanese Real Estate Appraisal Standards.

(3) Sales, income and loss, assets and liabilities, and other amounts by reportable segment
Millions of yen

18. Comprehensive income
The components of other comprehensive income for the years ended March 31, 2014 and 2013 are as
follows:
Thousandsof U.S. dollars

Millions of yen

2014
Unrealized gains on available-for-sale securities
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectSubtotal
Foreign currency translation adjustments
Gains arising during the year
Share of other comprehensive income of associates
accounted for using equity method
Gains arising during the year
Total

(Note 1)

2013

2014

¥5,488(0)
5,487(1,705)
3,782¥2,982
2,085
5,067(1,243)
3,824$53,289(8)
53,281(16,556)
36,724

1,792

1,069

17,403

204

133

1,989

¥5,780¥5,027$56,118

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total¥58,844¥119,292¥178,137¥—¥178,137

278

252

530

(530)

—

¥59,122¥119,545¥178,668¥(530)¥178,137¥7,954¥6,934¥14,888¥(2)¥14,886

Segment assets

37,310133,620

170,931103,994

274,925

Segment liabilities

15,82440,08755,911(139)

55,772

1,386

13,387

14,774—

14,774

1,792

3,917

5,709

—

5,709

Year ended March 31, 2014

Adjustments Consolidated

Sales1) Sales to outside customers
2) Intersegment sales
Total
Segment income

Other items
Depreciation and amortization
Increase in property, plant andequipment andintangible assets

19. Segment information(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial
information is available. These segments are subject to periodic examinations to enable the Company’sboard of directors to decide how to allocate resources and assess performance.
The Company’s business divisions are based on product and service categories. Each of the divisions
conducts business based on comprehensive strategies formulated for the products and services thatthey handle in Japan and overseas. The Company’s consolidated subsidiaries conduct business under
the supervision of the relevant business divisions.

64 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 2014

65

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbYear ended March 31, 2014

Water
Treatment
Chemicals

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Thousands of U.S.dollars (Note1)
Water
Treatment
Facilities
Total
Adjustments Consolidated

Related Information(Information by geographic region)(1) Net Sales

Sales
1) Sales to outside customers
2) Intersegment sales
Total$571,309 $1,158,179 $1,729,489
2,700

2,452

5,152

$574,009 $1,160,631 $1,734,641$— $1,729,489(5,152)—

Year ended March 31, 2014

Sales

Japan

Asia

¥144,546¥27,162$(5,152) $1,729,489

Segment income$77,227$67,324$144,552$(20)$144,532

Segment assets

362,237

1,297,288

1,659,525

1,009,658

2,669,183

Segment liabilities

153,631389,202542,833(1,357)541,475

13,461

129,980

143,441—

143,441

17,40438,03055,435—55,435

Year ended March 31, 2014

Sales

Japan

Asia

$1,403,368 $263,714

Other items
Depreciation and amortization
Increase in property, plant andequipment andintangible assets

Millions of yen
Water
Treatment
Facilities

Total¥56,091¥124,052¥180,143¥—¥180,143

287

188

476

(476)

—

¥56,378¥124,241¥180,619¥(476)¥180,143

Segment income¥8,334¥12,641¥20,975¥13¥20,989

Segment assets

34,647

143,772

178,419

85,161

263,580

Segment liabilities

16,58937,98354,573(111)

54,462

Depreciation and amortization

1,369

13,684

15,054—

15,054

Impairment losses
Increase in property, plant andequipment andintangible assets
Amortization of goodwill

—

—

—

1,108

1,108

Adjustments Consolidated

Sales1) Sales to outside customers
2) Intersegment sales
Total

Other items

Goodwill

1,458

5,230

6,688

—

6,688

13

—

13

—

13

—

—

—

—

—

Note:
“Adjustments” represents the following:
1. Sales: Elimination of intersegment transactions.
2. Segment income: Amount resulting from eliminations of intersegment transactions.
3.	Segment assets: Mainly corporate assets of ¥104,135 million (US$1,011,028 thousand) and ¥85,272 million as ofMarch 31, 2014 and 2013, respectively, unallocated to reportable segment assets (cash deposits, securities in trust,and long-term investments).
4. Segment liabilities: Amount resulting from eliminations of intersegment claims and liabilities.
5.	Impairment loss on idle assets was recognized for the year ended March 31, 2013. This had no effect on thereportable segments.

66 Kurita Water Industries Ltd. Annual Report 2014

Year ended March 31, 2013

Sales

Japan

Asia

¥149,670¥23,898

Millions of yen
North
America
Europe

Other

Total

¥1,765¥3,331¥178,137

Other

Total

$32,346$1,729,489¥1,330Thousands of U.S. dollars (Note 1)
North
America
Europe$17,143$12,917

Millions of yen
North
America
Europe

Other

Total

¥2,349¥3,028¥180,143¥1,196

Note:
Sales are allocated to regions based on the location of the customer to which the products or services are deliveredor provided.

Water
Treatment
ChemicalsYear ended March 31, 2013

Investor
Information

Corporate Data

(2) Property, Plant and Equipment
The Company has omitted disclosure here because property, plant and equipment holdings inJapan account for more than 90% of the amount of property, plant and equipment reported on the
consolidated balance sheet.
(Information by major customer)
Year ended March 31, 2014

Millions of yen

Thousandsof U.S. dollars(Note 1)

Reportable segment$260,681

Water Treatment
Facilities

Sales to:Sharp Corporation
Year ended March 31, 2013

¥26,850
Millions of yen

Reportable segment¥25,684

Water Treatment
Facilities

Sales to:Sharp Corporation

20. Subsequent events
Appropriation of retained earnings
The following appropriation of retained earnings for the year ended March 31, 2014 was approved at theordinary general meeting of shareholders of the Company held on June 27, 2014.
Millions of yen

Cash dividends (year-end dividends)¥2,621Thousandsof U.S. dollars(Note 1)

$25,452

Kurita Water Industries Ltd. Annual Report 201467

Contents

What We Do

Our Strengths

Management
Indicators

Business Review

To All Our
StakeholdersbbSolutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Management’s Discussion and Analysis b Consolidated Balance Sheets b Consolidated Statements of Income and Consolidated Statements of Comprehensive Income b Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows b Notes to Consolidated Financial Statements b Report of Independent Certified Public Accountants

Report of Independent Certified Public Accountants

21. Per share information
U.S. dollars

Yen

Net assets per share(Note 1)

2014

2013

2014

¥1,826.84¥1,744.41$17.74

78.48

92.43

$0.76

Net income per share (EPS)As discussed in Note 2. (11), the Group applied the accounting standard for retirement benefits andothers and have followed the transitional treatment in the article 37 of the standard.
As a result, net assets per share decreased by ¥0.21 (US$0.00) as of March 31, 2014.
The basis of calculation for Net assets per share is as follows:
Thousandsof U.S. dollars

Millions of yen

Net assets
Amounts excluded from net assets(Minority interests on the above)
Net assets attributable to common stock
Number of common stock at the year-end used forthe calculation of net assets per share(Note 1)

2014

2013

2014

¥219,153¥209,118$2,127,707

1,461

1,246

14,193(1,461)(1,246)(14,193)

217,691

207,871

2,113,514

119,163,469

119,164,789

The basis of calculation for EPS is as follows:
Thousandsof U.S. dollars

Millions of yen(Note 1)

2014

2013

2014

Net income¥9,352¥11,476$90,799

Net income attributable to common stock

9,352

11,476

90,799119,164,231

124,160,885

Average number of shares outstanding(The Company has no dilutive shares.)

68 Kurita Water Industries Ltd. Annual Report 2014

Kurita Water Industries Ltd. Annual Report 2014

69

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Overseas
Operations

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

KURITA History
Net Sales and Historical Highlights of Business
Ultrapure watersupply business(Billions of yen)

250

2002
Soil remediation
services

200

Water treatment chemicalbusiness (boiler water
treatment chemicals)

Maintenance services

150

Process treatment
chemicals

Water treatment facilities
business

1965

1951

100

Establishment of an
overseas company forwater treatment
chemical business(Brazil)

1958

1949

Tool cleaning
business

1991

1986

1975

Entry into theelectronics industry

1973

50

0

1949

Establishment

1961

Listed stock on the Second Section of the Tokyo Stock Exchange
and the Osaka Securities Exchange

19742012 October

Head officerelocation to Nakano

Completion of Tokyo
head office building

Economic and industrial history
1947–1955
Postwar years of recovery
Major growing industries

1955–1973
High-speed growth period
Heavy and chemical industry(Petroleum and steel industry)

1973–1991
Stable-growth period
Industries of manufacturing and assembly
Semiconductor industry

1991–2014
Extensive stage of information society
Multimedia industry(Personal computers and digital appliances)

History & Achievements
1949–1950s

1949 Founded upon water treatment chemical business (boiler

1951
1951
1953
1958
1959

water treatment chemicals).
The founder of the Company, who had previously served in thenavy, starts selling boiler water treatment chemicals based onnavy boiler technology.
Entry into the water treatment facilities business
Capitalizing on sales of deionizers for the pretreatment of boiler
water supplies, the Company moves into the water treatment
facilities business.
Boiler Water Supply Laboratory established.
Start-up of chemical cleaning services
New expansion into the chemical cleaning business in whichboiler interiors are cleaned using chemical technology.
Expansion of maintenance services
An organization specializing in maintenance services isestablished with a view to expanding after-sales services andmaintenance operations for water treatment facilities.
KK Suzuki Shokai established as a chemical cleaning company(now Kurita Engineering Co., Ltd.).

1965 Expansion into process treatment chemicals

Development of chemicals that increase productivity in thepulp and paper, petrochemical and steel industries, where large
volumes of water are used, as the Company broadens the scopeof its business from water treatment chemicals to production
process treatment chemicals.

1970s1973 Entry into the electronics industry

1974
1975
1975
1978

1960s

Ultrapure water production technology is developed to meetthe demand for water of a higher degree of purity that comeswith increasing miniaturization in semiconductor manufacturing
processes.
Completion of Tokyo head office building.
Kurita do Brasil LTDA. established to manufacture and sell water
treatment chemicals in Brazil.
Kurita Operation and Maintenance Services, Ltd. established as awater treatment facilities operation and maintenance company(now Kuritaz Co., Ltd.).
Kurita (Singapore) Pte. Ltd. established as Kurita’s water treatment
chemicals and water treatment facilities business base inSoutheast Asia.

1961 Listed stock on the Second Section of the Tokyo Stock1980s

1961 Kansai Kurita Seibi KK. established as a maintenance company for1986 Deployment of tool cleaning business

Exchange and the Osaka Securities Exchange.

1962

water treatment facilities (predecessor of Kurita Technical Service
Co., Ltd.).
Listed stock on the First Section of the Tokyo Stock Exchange
and the Osaka Securities Exchange.

70 Kurita Water Industries Ltd. Annual Report 2014

1986 P.T. Kurita Indonesia established to carry out the production and
1987
1989
1989

2001
2001
2002

1990s

1991 Launch of soil remediation services

1995
1996
1997
1998

Sales channels established for the electronics business andchemical cleaning technology developed to date are used for
the Company’s entry into the cleaning business for tools and jigs
used in semiconductor manufacturing devices.

sale of water treatment chemicals in Indonesia.
Kurita (Taiwan) Co., Ltd. established to conduct water treatment
chemical manufacturing and sales in Taiwan.
Goshu Chemical Co., Ltd. established to conduct water treatment
chemical manufacturing and sales in Thailand (now Kurita-GK
Chemical Co., Ltd.).
Kurita Europe GmbH established in Germany as Kurita’s base inEurope for water treatment chemical production and sales.

Soil pollution is increasingly becoming a major social problem,
and, as a result, the Company commences soil remediation
business operations based on water treatment technology
developed to date.
Kurita Water Industries (Dalian) Co., Ltd. established as Kurita’sbase in China for water treatment chemical production and sales.
Kurita America, Inc. established in the United States to conduct
water treatment facilities sales and maintenance services.
Kurita Water Industries Ltd. merges with maintenance company
Kurita Technical Service Co., Ltd.
Acquires an equity stake in Hansu Technical Service Ltd., whichis involved in the production, sale and maintenance of water
treatment facilities in Korea.

2000s

2003
2003
2004
2005
2009
2012

Start of business involving the hedging of pollution risks andschemes to facilitate the smooth liquidation of land that has
been restored to a safe condition based on soil remediation
successes to date.
Land Solution Inc. established as a consulting company dealing
in soil remediation.
Kuritec (Shanghai) Co., Ltd. established as Kurita’s base in China
for water treatment facilities sales and maintenance services.
Launch of ultrapure water supply business
Launch of outsourcing business in which Kurita owns, operates
and manages facilities for customers, supplying them withultrapure water.
A business model is developed that represents a fusion oftechnology, products and services developed to date across thechemicals, facilities and maintenance arms of the business.
Integration of tool cleaning business units from Group
companies and establishment of Kuritec Service Co. Ltd.
Analysis division split off to establish Kurita Analysis Service Co.
Ltd.
Kurita Water Industries (Suzhou) Ltd. established as a water
treatment facilities production and sales base in China.
Kurita Global Technology Center established through the
integration of research and development facilities.
Kurita Chemical Manufacturing Ltd. established as a new
subsidiary to manufacture water treatment chemicals.
Head office relocation to Nakano.

2001 Start of consulting services for hedging soil pollution risks
Kurita Water Industries Ltd. Annual Report 201471

Contents

What We Do

Our Strengths

Business Review

Management
Indicators

To All Our
Stakeholders

Solutions to Social
Issue

Corporate Data
Osaka Office:2-22, Kitahama 2-chome, Chuo-ku,
Osaka-shi, Osaka 541-0041, Japan
Tel.: 81 (6) 6228-4800
Other Offices:
Tohoku, Nagoya,
Hiroshima and Kyushu

Kurita Water Industries Ltd.
10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Paid-in Capital¥13,450,751,434
Date of Establishment July 13, 1949
Number of Employees 4,635 (on a consolidated basis);
1,529 (parent company)(As of March 31, 2014)

Overseas Office

Head Office:10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Tel.: 81 (3) 6743-5000
Kurita Global Technology Center:
1-1, Kawada, Nogi-machi,
Shimotsuga-gun, Tochigi
329-0105, Japan
Tel.: 81 (280) 54-1511

Taiwan Branch:
5F-3, No. 295, Section 2,
Kuang-Fu Road,(Empire Commercial Bldg.)
Shinchu, Taiwan, R.O.C.
Tel.: 886 (3) 575-1157

Major Consolidated Subsidiaries and One Affiliated Company
Company namePaid-in capital
Equity(Millions)ownership (%) Main business

OVERSEAS
b North America & South America

Kurita America, Inc.

US$3.0100.0

Kurita do Brasil LTDA.

R$6.986

100.0

Manufacture & sale of water treatment chemicals and water
treatment facilities
Manufacture & sale of water treatment chemicals

b Europe

Kurita Europe GmbH

Research andDevelopment

Corporate Social
Responsibility

Financial Section

KURITA History

Corporate Data

Investor
Information

Investor Information

Company Name
Address

Domestic Offices

Overseas
Operations

EUR2.301

95.0

Manufacture & sale of water treatment chemicals

b AsiaStock Exchange Listing
Common StockFirst Section of the Tokyo Stock Exchange
Authorized: 531,000,000 shares
Issued: 119,164,594 shares(Stock trading unit: 100 shares) (As of March 31, 2014)
Number of Shareholders 33,131 (As of March 31, 2014)
Independent Auditor
Grant Thornton Taiyo ASG LLC
Akasaka Oji Bldg. 5F, 8-1-22, Akasaka, Minato-ku, Tokyo 107-0052, Japan
Transfer Agent
Sumitomo Mitsui Trust Bank, Ltd.
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Major Shareholders

Distribution of Shares
Shareholdings(Number of Shares)

Percentage
of totalshares issued(%)

Nippon Life Insurance Company

6,312,083

5.29

Japan Trustee Services Bank, Ltd. (Trust Account)

5,318,200

4.46

Goldman Sachs and Company Regular Account4,428,623

3.71

National Mutual Insurance Federation ofAgricultural Cooperatives

2,863,800

2.40

NORTHERN TRUST CO. (AVFC) RE SILCHESTERINTERNATIONAL INVESTORS INTERNATIONALVALUE EQUITY TRUST

2,772,600

2.32

The Master Trust Bank of Japan, Ltd.
(Trust Account)

2,589,900

2.17Northern Trust Company AVFC
Re U.S. Tax-Exempted Pension Funds

2,573,785

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,500,626

Individuals

Treasury
Stock

Financial Institutions

Securities
Firms
Foreigners

Other
Domestic Firms
Shareholdings(Number of shares)

Percentage of total sharesissued (%)

b

35,118,480

29.5

2.15

b

775,108

0.7

2.09

b

10,329,547

8.7

b56,654,561

47.5

b

16,285,773

13.7

b

1,125

0.0

Total

119,164,594

NORTHERN TRUST CO. (AVFC)
RE 15PCT TREATY ACCOUNT

2,178,208

1.82

RBC IST 15 PCT LENDING ACCOUNT

2,109,757

1.77

Kurita Water Industries (Dalian) Co., Ltd.

¥550

90.1

Manufacture & sale of water treatment chemicals

Kuritec (Shanghai) Co., Ltd.

¥30

100.0

Sale & maintenance of water treatment facilities

Kurita Water Industries (Suzhou) Ltd.

¥530

100.0

Manufacture & sale of water treatment facilities

Kurita (Taiwan) Co., Ltd.

NT$20

100.0

Manufacture & sale of water treatment chemicals

Hansu Co., Ltd.

W2,50033.2

Manufacture & sale of water treatment chemicals

Stock price (Yen)

Hansu Technical Service Ltd.

W400

59.4

Manufacture & sale of water treatment facilities

2,500

500,000

Kurita-GK Chemical Co., Ltd.

BAHT9285.0

Kurita (Singapore) Pte. Ltd.

S$4.0

100.0

2,000

400,000

Kurita Water (Malaysia) Sdn. Bhd.

RM$0.6

100.0

P.T. Kurita Indonesia

US$2.092.5

Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals and water
treatment facilities
Sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals and water
treatment facilities

1,500

300,000

¥160

100.0

Manufacture & sale of water purifiers

1,000

200,000

500

100,000(As of March 31, 2014)

100.0(As of March 31, 2014)

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Trading volume (Hundreds of shares)

DOMESTIC
Kurita Creation Co., Ltd.
Kuritec Service Co. Ltd.

¥50

100.0

Tool cleaning

Kuritaz Co., Ltd.

¥220

100.0

Operation & maintenance of water treatment facilities

Kurita Engineering Co., Ltd.

¥160

100.0

Chemical cleaning

Land Solution Inc.

¥450

66.0

Soil remediation

Kurita Chemical Manufacturing Ltd.

¥50

100.0

Manufacture of water treatment chemicals

0(As of March 31, 2014)

72 Kurita Water Industries Ltd. Annual Report 2014

Jan. ’12
Stock priceJan. ’13

Jan. ’14

0

Trading volume
Kurita Water Industries Ltd. Annual Report 201473

Kurita Water Industries Ltd. ANNUAL REPORT 2014

10-1, Nakano 4-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 81 (3) 6743-5000

URL: http://www.kurita.co.jp/english/

for Water,
for the Environment

This report was printed on FSC-approved paper using vegetable oil ink.
Printed in Japan

Annual Report 2014
For the year ended March 31, 2014