Breakthroughs for the Future
Annual Report 2018Year ended March 31, 2018

Profile

Group Vision 21

In the 110-plus years since its founding in Japan in 1906, Bando Chemical Industries, Ltd. has been
pursuing industrial development by making various contributions to rubber and plastic processing
technologies in such areas as power transmission belts and systems, belts used in precisionequipment, and multimedia parts made from urethane and resins.

Innovative Vision of the Bando Group forthe 21st Century

We are highly regarded by customers throughout the world owing to our efforts to develop newtechnologies and products that meet today’s needs while manufacturing and stably supplying
people- and environmentally-friendly products of unsurpassed performance and quality.

The Bando Group will employ energetic

Possessing an unwavering spirit spanning back to our foundation, we will create a brighter future
through the ceaseless innovation of our business.

company in the expansion of our core business

Mitsutaka Yoshii
President and Representative Director,
Bando Chemical Industries, Ltd.

individuals with professionalism to lead thein global markets, and passionately pursue new
business opportunities with a strong sense to

Management Philosophy

protect the world environment.

With a spirit of harmony and in good faith, and to ensure the company’s growth, the Bando
Group will work to earn the trust of our customers and society by creating and providing
products and services of added value and high quality.

Guidelines for the Bando Group
1. Employ energetic personnel with

With pride as members of the Bando Group, we will contribute to society as a whole.

professionalism, and reform businessactivities.

Our Corporate Goals

2. Minimize control and maximize actions.
3. Delegate authority, and make optimum

Everyone in the Bando Group will strive to make it into a company that:
1. Values its customers and is trusted by them.

decisions in a prompt manner.

2. Allows for the material and spiritual growth of all its employees.

4. Maximize profits from existing products.
5. Invest in new entrepreneurial ventures.
6. Strengthen the personnel and evaluation

3. Contributes, and is of use, to society.

Contents
ProfileStart Second Stage of“Breakthroughs for the Future”

2

Our History: Innovation for the Future10

Snapshot

12

Products

14

Global Network

16

Highlights

18

Fiscal 2017 Topics

20

Message from the President

21

Review of Operations

30

ESG Section

36

Financial Section

46

Corporate Data, Investor Information

55

Cautionary Statements
This annual report includes forward-looking statements related to the Company’s future performance forecasts. These statements arerationally determined by management based on information available at the time and therefore are subject to risk and uncertainty.
Actual performance may differ from targets due to such factors as changes in the operating environment.
The Company’s financial statements in English have not been audited by independent auditors. However, the original
Japanese financial statements on which they are based have been audited by independent auditors. For more detailed information
including notes to consolidated financial statements, please refer to the Company’s Annual Report on the website:
https://www.bandogrp.com/eng/ir/library/annual.html

systems to encourage personnel to feel asense of worth in relation to their work.

7. Strengthen initiatives to reduce

environmental impact as we move towards
the realization of a low-carbon society.

We have started the second stage of the“Breakthroughs for the future”
mid-to-long term business plan (BF-2).
Annual Report 20181

Start Second Stage of2018–2022 “Breakthroughsfor the Future”

Targeted Markets/
Priority Sectors/
Main Products

Aiming to be a standout global supplier

Guideline 1

New Business Creation

Display sector
Power electronics sector
Medical/welfare/nursing care market

The BF-2 top-priority strategy is new business creation.

Our Targets

We will form a group of solid new businesses while further expanding the portfolio centering on
the products already being mass produced in sectors such as optoelectronics, power electronics andwelfare/nursing care.

+12billion yen*Net sales growth target (fiscal 2022 vs fiscal 2017)

Free Crystal™

(Optically clear adhesive sheets)

Free Crystal™
(Self healing sheets)

Application: Easy writability sheet, etc.

FlowMetal™

TOPX™

(Silver nanoparticle bonding material)(Diamond-abrasive fixed-pad for efficient lapping)
Features: High removal rates and low
surface roughness in lapping process

FlowMetal™

(Low-temperature sinterable conductive inks)

C-STRETCH™

(Elastic strain sensor)

HEATEX™

(Thermal conductive sheets)
2

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20183

Start Second Stage of2018–2022 “Breakthroughsfor the Future”

Our Targets

Aiming to be a standout global supplier

Guideline 2

Core Business Expansion+52%*Net sales growth rate target (fiscal 2022 vs fiscal 2017)

er
P

rod
uct
s

Bus
ine
ss

We aim to secure the top share in target markets by focusing on the development of specifications
for highly functional, energy-saving, and reduced environmental impact products in the Automotive
Parts Business, Industrial Products Business and Advanced Elastomer Products Business, as well as
by making proposals that enhance customer convenience.

Capture the top market share byfocusing on priority business types
and regions

A

ed
c
n
dva

om
t
s
Ela

+36%
+6%
*Net sales growth rate target (fiscal 2022 vs fiscal 2017)

BANDO MDEC™
Feature: Enables removal of particles effectively by controllingthe surface charging polarity of the cleaning rollers

uc
d
o
Pr
l
a
i
r
st
Indu

Decorative display film
Application: Decorative film for
two-wheeled vehicles, etc.

ss
e
n
usi
B
ts

*Net sales growth rate target (fiscal 2022 vs fiscal 2017)

Bando Wiper Edge™ EX
Feature: The world’s first special urethane
seal blade for machine tools

H-P Series Agricultural
Raw Edge Cog Belts
RIB ACE™

(For automobile engines)

ar
P
e
tiv
o
m
Auto

e ss
n
i
us
st B

Double Cog Belts(For large scooters, etc.)
4

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 2018

5

Start Second Stage of2018–2022 “Breakthroughsfor the Future”
Aiming to be a standout global supplier

Guideline 3

Enhancement and
Evolution in Manufacturing

Our Targets
Establish a cost to sales ratio of70%

Kakogawa Plant

We started innovative manufacturing method development under BF-1 at our three plants in Japanand are continuing under BF-2. We will pursue further innovative manufacturing methods for our
main products of power transmission belts in particular, as well as build automated lines and rollthem out to overseas production bases to stabilize a low cost to sales ratio.
Development of innovative manufacturing methods

or lessNankai Plant

Ashikaga Plant

Promotion of IoT and AI
 anufacturing cost reduction activities aimed atMglobal total optimization

l out
Horizontally rol

6

BANDO CHEMICAL INDUSTRIES, LTD.

ring
u
t
c
a
f
u
e man
v
i
t
a
v
o
n
in

as
b
n
ctio
u
d
pro
s
a
r se
e
v
o
ds to
o
h
t
e
m

Annual Report 2018es

7

Start Second Stage of2018–2022 “Breakthroughsfor the Future”
Aiming to be a standout global supplier

Work Style Revolution

Strengthening of
Global Management

Acquisition andTraining of Human
Resources

Review working
environments andestablish enhanced
productivity and healthmanagement

Establish the information
system necessary for
global management(unify core systems)

Continuously develop
human resource leaders
who can be successful
globally and establisha spiral to nurture andproduce such types

Reform the corporate
culture to create
innovation

Promote improved work
efficiency and labor saving

Guideline 4

Work Style Innovation ofIndividuals andthe Organization“Human capital” is the source of various types of value creation, and work style innovationof individuals and the organization will be the core elements of BF-2. We aim to bolster our
foundation for sustainable growth and reduce our SG&A expense ratio by reforming work styles,
strengthening global management, and securing and developing human resources.

Our Targets
Achieve an SG&A expense ratio of

20%

or less bystrengthening the managementbase for sustainable growth

8

BANDO CHEMICAL INDUSTRIES, LTD.

Enable every individual to maximize their abilities
Shorten production line working hours through IT
Create various feelings of well-being throughflexible work styles
Work healthily and enthusiastically
Use tablets for recording
inspections

A meeting about work efficiency
improvement

Instruction regarding the BPS(Bando Production System)

Annual Report 20189

Sustainable growthin bothnew businesses andcurrent businesses

Our History: Innovation for the Future
Bando Chemical Industries aims for sustainable growth in both new and current businesses
by leveraging its ability to innovate, which has brought world-first and Japan-first products tomarket that help solve issues faced by its customers and society.

Developed the BANCOLLANTM Synchronous
Belt UG Type, the world’s first polyurethane
teethed belt with glass cord

Accumulated
ability toinnovate

Developed the first rubber conveyor
belts in Japan
Developed BANDO AVANCETM,
the world’s first dry belt
for continuously variabletransmissions (CVT)2016
Developed SUNLINETM-A, the firstlight-duty conveyor belts in Japan*‌The photo is of SUNBELT, the rubber belts
developed in 1913

2015
2014

1995

Developed MONOPLY BELT, the firstsingle-ply conveyor belts in Japan
Developed the first cotton belts(the Bando Cotton Belt) in Japan*‌The photo is of the current
light-duty conveyor belt.

Developed Bando Wiper EdgeTM EX,
the world’s first special urethane seal
blade for machine tools

1988*‌The photo is of the current Ultra
Abrasion Resistant Conveyor Belt.

1972
1964

Developed C-STRECHTM, a completely
new elastic strain sensor

1959
Hyper Flat Drive (HFD) SystemTM
won the Director-General’sPrize, the Agency for Natural
Resources and Energy

1932
1921
1906

10

BANDO CHEMICAL INDUSTRIES, LTD.

Developed BANROPE,
the first V belts in Japan

Developed SYNCHROBELT,
the first toothed belts in Japan
Annual Report 201811

Snapshot
Below, we explain Bando Chemical Industries’ current initiatives, unique characteristics andstrengths as it transitions to a new growth stage driven by new businesses.

Expertise in Environmentally-friendly Products”eco moving” concept
We will accelerate the “move” to “eco”
throughout the Group, thoroughly
develop products that reduce
environmental burden, and spread the
new “movement” to our customers
and society.

Accelerating Development of New Businesses
The Company is accelerating efforts to expand
new businesses that hold the key to the second
stage of its “Breakthroughs for the future” plan.
Based on the key concepts of the environment,
energy conservation and high performance, Bandois concentrating resources on research and development at its New Businesses Promotion Center,Research Laboratories for Core Technologies, andManufacturing Planning Center in the priority fieldsof power electronics, optoelectronics, printing
electronics, and welfare and nursing care in the
key markets of medical and healthcare equipment/
electronic products/automotive.
Since launching the mid-to-long term businessplan “Breakthroughs for the future,” the Company
has allocated more than ¥1 billion every year for
R&D in new businesses. As a result, the number ofpatent registrations related to new businesses has
increased at a faster pace over the most recent two

years, mainly in the optoelectronics and power electronics fields. By focusing on R&D and marketingin these new businesses, Bando aims to open the
doors to a new stage of growth.
Number of patent registrations in new businesses(Cases)30

2.9 times

12

BANDO CHEMICAL INDUSTRIES, LTD.

Ten products in our “ecomoving” portfolio

HFD System
Aiming for at least 50% ratio* of
Ceptor-VI S8M type“Environmentally-Friendly Products” Energy-Saving Red, Energy-Saving
POWER ACE
and “Products with Fewer Hazardous High-load
V-ribbed Belts
G-CARRY
Substances”
ECO CARRY* Percentage of newly marketed
products as of the fiscal year
ending March 31, 2023

TENSION MASTERBANDO GLANMESSE (incombustible)
Polyolefin thin films
W-1500 Agricultural V-Belts

20

Achieving the Top Market Share through the World’s Highest Level ofTechnology and Know-how

10

In the Automotive Parts Business, one of our corebusinesses, we have built up a good reputation
based on our meticulous service to satisfy individual
customer needs, world-leading levels of technology
and know-how, and stable supply capabilities. As ofthe end of the fiscal year ended March 31, 2018, wecommand the top global share for OEM supply ofbelts for four-wheeled and two-wheeled vehicles*.

0

2016

2017

2018

(Years ended March 31)

Top Share in OEM Supply of Power Transmission Belts for Injection Molds andMachine Tools in Japan
During BF-2, the aim is to sustain growth in bothnew businesses and current businesses. By leveraging accumulated strengths, we will focus on further
polishing our core businesses.
In the Industrial Products Business, demand
looks likely to expand briskly in key markets. Backed
by our top share of the domestic market in OEM
supply of power transmission belts for injection
molds and machine tools, we aim to solidify ourposition further while developing high-value-added
products in a bid to differentiate from rivals.

Our customers, and society as a whole, havewelcomed the added value provided by our “ecomoving” brand of environmentally-friendly products.
We had ten “eco moving” products in our portfolio
in fiscal 2017, mostly belt products, and plan toexpand our line-up further.
We have grouped this brand, and productsthat satisfy at least 50% of the baseline values for
key environmental claims that define this brand,
into the “Environmentally-Friendly products”

category, and are working to expand it along with
“Products with Fewer Hazardous Substances.”
By the fiscal year ending March 31, 2023, the final
year of BF-2, we aim to have increased the ratio of“Environmentally-Friendly Products” and “Productswith Fewer Hazardous Substances” to at least 50%*of newly marketed products.

1

No.

Share in Japan

Parts Business, we are targeting growth in new
business domains.

1

No.

Global Share

OEM supply of belts forfour-wheeled andtwo-wheeled vehicles*Two-wheeled vehicles refer to scooters.

Leveraging our technological, marketing andproduction capabilities garnered in the Automotive

Strong Financial Position
We are working to build an even stronger financial
position, even as we continue the capital investments needed for growth.
At the end of the fiscal year ended March 31,
2018, our equity ratio was at an all-time high.

Capital investment/Net interest-bearing debt*
D/E ratio

Capital investment(¥ million)
6,000

Net interest-bearing debt*

D/E ratio(times)
0.6

4,000

0.4

2,000

0.2

0

0.0

–2,000–4,000Synchronous belts
for high-load
power transmission
applications–6,000–8,000

2014

2015

2016

2017

2018

* Net interest-bearing debt =short-term borrowings + long-term borrowings + corporate bonds – cash and deposits

Annual Report 201813

Products
The Bando Group’s products boast world-class performance and quality based ontechnologies developed over many years.
Bando’s specialty products display our superior design and development capabilities.

Main Products

Automotive Parts BusinessWe excel in OEM business in the four- and two-wheeled vehicle sectors, where we hold a large
global market share.

Net sales by business segment

We develop environmentally-friendly power transmission systems and provide comprehensive
product lines suitable for various fields.

2018

46.7%

Core Technologies Rubber and resins compound design, dispersion and processing
technologies, power transmission system technologies

RedTM SII V Belts for
agricultural machinery

HFD SystemTM

STS/HP-STS/CeptorTM-VI

BANCOLLAN™
Long Synchronous Belts

Conveyor Belts
Strengths and Characteristics•A full line-up of rubber conveyor belts and light-duty resin conveyor belts•P recisely meeting customers’ needs with heat and oil-resistant specifications, as well as fray prevention, non-slip,
anti-static and many other models

Power Transmission Beltsfor four- and two-wheeled vehicles

Main Products

Strengths and Characteristics• I ntegrated development of auxiliary drive belts and power transmission systems for four-wheeled vehicles (Tier 1
manufacturer of power transmission belt systems for automotive manufacturers)•D evelopment of high-efficiency continuously variable transmission (CVT) belts for two-wheeled vehicles
Main Products
G-CARRYTM

Pipe Conveyor Belts

Mr. COOKTM F2224 Non-Stick
Belts

Lightweight Jointless P-Series
Belts

Advanced Elastomer Products Business
RIB ACETM V-Ribbed Belts

VS Belts

Automatic Tensioners

Net sales by business segment

TENSION MASTERTM

We maximize materials characteristics through the use of our precision processing, materialand structural design technologies, and add optimal functionality to develop pioneering
products with high precision and high quality, in consideration of the environment.

Industrial Products BusinessCore Technologies Elastomer and resins compounding design, dispersion and processing

Net sales by business segment
We excel in OEM business in the industrial machinery, agricultural machinery and conveyance
sectors. Similar to the Automotive Parts Business, we are developing environmentally-friendly
power transmission systems for use in a variety of fields.
Core Technologies Rubber and resins compound design, dispersion and processing
technologies, power transmission system technologies

2018

17.0%

Strengths and Characteristics• Development and provision of high performance, clean precision parts• Development and provision of functional films for various applications, such as in the printing and medical fields

2018

36.3%

Main Products

Industrial Power Transmission Beltsfor industrial and agricultural machinery
Strengths and Characteristics•D evelopment of energy-efficient belts and belts suited to high power machinery•G lobal production and sales network, with 21 bases in 15 countries

14

BANDO CHEMICAL INDUSTRIES, LTD.

BANCOLLANTMBLADE G-ModuleTM

Development Rollers

BANDO GLANMESSETM

Medical films

Annual Report 201815

Global Network

Bando Chemical Industries’
Global Network

Aiming to become a standout supplier worldwide, we are expanding our global
network based in Japan, China, Asia, the United States, and Europe.

Asia

Quality Management System
Sixteen of our domestic divisions and overseas business locations have received ISO
Bando Korea Co., Ltd.

Bando Jungkong Ltd. Bando Siix Ltd.

Bando Manufacturing Bando Asia & Pacific Co.,
(Vietnam) Co., Ltd.
Ltd.

9001 certification, while 10 of our domestic and overseas business locations have

Bando Manufacturing(Thailand) Ltd.*obtained IATF 16949 certification.

Environmental Initiatives
Eighteen of our domestic divisions and overseas business locations have received ISO
14001 certification and all of our domestic production bases have introduced solar
Bando (Singapore)
Pte. Ltd.

Bando (India) Pvt. Ltd. Sanwu Bando Inc.

Kee Fatt Industries
Sdn. Bhd.

Bando Belt (Tianjin)
Co., Ltd.

Bando Manufacturing(Dongguan) Co., Ltd.

P.T. Bando Indonesia

Philippine Belt
Manufacturing Corp.

power generation systems.

China

Bando (Shanghai)Management Co., Ltd.*

Bando (Shanghai)Industry Equipment
Element Co., Ltd.

* The China Technical Center and Asia Technical Center were opened in 2012 and 2013, respectively, bothof which are developing products with optimal specifications for markets.

Japan*

Europe, America & other

Head Office
Bando USA, Inc.

Bando Belting de
Mexico, S.A. de C.V.

Bando Belt
Manufacturing(Turkey), Inc.

* Japanese business locations are leading
the development of environment-friendly
products and the expansion of highvalue-added businesses.

Bando Europe GmbH Bando Iberica, S.A.

Business Locations

Sales by region

Overseas sales
Overseas sales ratio

Overseas sales ratio:

Overseas sales(¥ million)
50,000(as of March 2018)49.64%

Japan: 50.36%

16

BANDO CHEMICAL INDUSTRIES, LTD.

(%)
50

40

Asia: 28.35%

30,00030

China: 9.90%

20,00020

10,00010

02009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Nankai Plant

Kakogawa Plant

Overseas sales ratio

40,000Europe, America &other: 11.39%

Ashikaga Plant
Tokyo Branch Office

Kobe Head Office/Research Laboratories
for Core Technologies

Wakayama Plant/Research Laboratories forPower Transmission Technologies

Sales and Fabrication Service Affiliates

Manufacturing Affiliates

Bando Industrial Components &Services, Ltd.
Bando Elastomer Co., Ltd.
East Japan Belt Products, Inc.
Vann Corporation
Hokuriku Bando, Inc.
Koyo Sangyo Co., Ltd.

BL Autotec, Ltd.
Fukui Belt Industries, Ltd.
Bando-Scholtz Corporation
Other Service Affiliates

Bando Trading Co., Ltd.
Bando Kosan Co., Ltd.

0

Annual Report 201817

Highlights
Fiscal year endings are March 31 in the years shown below

Net sales

Operating income(¥ million)
100,000(¥ million)
8,000

Operating margin

Interest-bearing debt
D/E ratio
Interest-bearing debt(¥ million)
30,000(%)
8

Raw material costs (indicators)

D/E ratio

Naphtha(times)0.5

CottonNatural rubber

Aluminum

1.40

Exchange rate transition
USD
(%)
160

THB

EUR

1.30
80,000

6,000

6

0.4

18,0000.3

12,000

0.2

6,000

0.1

1.20

140

1.10

60,0004,000

24,000

1.00
0.90

4

40,000

120

0.80
0.70

2,000

20,000

2

100

0.60
0.50

0

0

2013 2014 2015 2016 2017 201802013 2014 2015 2016 2017 20182013 2014 2015 2016 2017 2018

Capital investment

Free cash flow

Net assets
Total assets(¥ million)
8,000(¥ million)
6,000(¥ million)
100,000

6,000

4,500

Net assets

4,000

Total assets02013 2014 2015 2016 2017 2018

0.0

CO2 emissions
Scope 1

1,500

0

0

2013 2014 2015 2016 2017 2018

’13/12’14/12’15/12’16/12’17/12 ’18/6

80’12/12’13/12’14/12’15/12’16/12* Raw materials cost (indicators) base is 2013/12.

* Exchange rate base is 2012/12.

Energy consumption

Waste generation’17/12 ’18/6

Scope 2(t)
70,000(KL/GJ)
30,000(t)
6,000

60,00080,00050,00060,00040,00040,00030,000

4,000

3,000

2,000

0.40

25,0002,000

20,00020,00002013 2014 2015 2016 2017 2018

10,0002013 2014 2015 2016 2017 201802013 2014 2015 2016 2017 2018

20,0002013 2014 2015 2016 2017 201802013 2014 2015 2016 2017 2018*C O2 conversion factors are based on theemission factors of the electric power supplier,published by the Ministry of the Environment.

Shareholders’ equity*
Equity ratio
Shareholders’ equity(¥ million)
65,000

Annual dividend per share
Payout ratio

Equity ratio
(%)
65.0

60,00062.5

55,00060.0

50,00057.5

45,00055.0

40,00052.5

35,00030,0002013 2014 2015 2016 2017 2018

Annual dividend per share
(yen)
30

ROA
ROE

Payout ratio
(%)
60

ROA
(%)
14

25

50

12

20

40

15

30

5

47.5

0

ROE

20
10

2013 2014 2015 2016 2017 2018

0

Transfer volume

(%)
1.20

(%)
60

80

1.00

50

0.80

40

0.60

30

0.40

20

0.20

10

40

4
20

2
0

2013 2014 2015 2016 2017 2018

Ratio of foreign employees

Emission volume60

8

Occupational accident
frequency rate

(t)
100

10

6

10

50.0

PRTR substance emission
and transfer volumes02013 2014 2015 2016 2017 2018

0.00

2013 2014 2015 2016 2017 201802013 2014 2015 2016 2017 2018

* ’Shareholders’ equity’ = net assets – minority interests

18

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201819

Fiscal 2017 Topics

Message from the President

Product Development and Others
Developed BANDO DEC-20TM dust particle measuring

Management
March

device to help with environmental monitoring

Selected as a “2018 Health &Productivity Stock Selection,” forthe second consecutive year

We are forging the next stage of growthwith initiatives in the second stage of“Breakthroughs for the future.”February

JanuaryBANDO DEC-20TM

2018

Mitsutaka Yoshii

DecemberCommenced sales of YELLOW BOY™
rice hulling rolls made from special thermos-setting
urethane used in rice huskers

NovemberPresident and Representative Director,
Bando Chemical Industries, Ltd.

Start business of Bando Asia &Pacific Co., Ltd., as a new company
in Thailand

October

Performance in Fiscal 2017
YELLOW BOY™

Commenced sales of LASHINGBITE™,
a tension meter for lashing belt for cargo

SeptemberAugustBando Asia & Pacific Co., Ltd.

July

Commenced sales of BANDO FR-BIOS™,
a conveyor belt for biomass power generation plant

June

May

April

Palm kernel shell usedin biomass power
generation plantMarchbelts for industrial machinery in Japan increased. In the

The Bando Group completed the first stage of its mid-to-

high-performance rollers and blades were partially offset

long term business plan “Breakthroughs for the future” inby weaker sales of films for industrial use and medical

fiscal 2017, having implemented measures in priority fields

applications, and net sales expanded only 1.7% year on

and key regions with a focus on evolving and deepening

year to ¥15,161 million.

current businesses, creating new businesses, and reformEnacted the Employee HealthManagement Declaration

LASHINGBITE™

Net sales increased in all segments, albeit slightly.
Profit declined due to impairment losses

Advanced Elastomer Products Business, higher sales ofwrapping films for automobiles and motorcycles andWith net sales up, albeit weakly, in every segment,

ing the cost structure. As a result, in the Automotive Parts

consolidated net sales increased 3.3% year on year to

Business, net sales increased 3.4% year on year to ¥41,701¥91,263 million, and operating income expanded 7.5%

million as growth was restrained by weaker sales in China

from the previous fiscal year to ¥6,336 million, reflecting

and Japan, despite increased sales of variable speed belts

a boost to gross profit from foreign currency translation

for scooters and accessory drive power transmission belts

effects and a lower SG&A expense ratio. However, profit

in Asia, as well as of accessory drive power transmission

attributable to shareholders of the parent decreased 3.1%

belts and repair parts in Europe and the U.S. In theto ¥4,796 million, owing to impairment losses on some

Industrial Products Business, net sales rose only 2.9%

products that resulted from a reshuffling of the productfrom the previous fiscal year to ¥32,369 million due toportfolio. We increased the year-end dividend by ¥1 to

weaker sales in China, although sales of power trans-¥15 per share, bringing the total annual dividend up ¥4 to

mission belts for industrial and agricultural machinery in¥30 per share*.

Asia, power transmission belts for industrial machinery in* Figures adjusted for the reverse stock split the Company conducted on
October 1, 2016, consolidating two shares of common stock into one
share.

Europe and the U.S., and pulleys and power transmission

2017

20

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201821

Message from the President
Consolidated earnings

Net sales
Operating income
Profit attributable to shareholders of the parent(28%) over the past five years, but net sales fell short of our

Fiscal 2017

Fiscal 2016

Nonetheless, we made progress reducing the costinitial numerical target owing to weaker-than-anticipatedto sales ratio as planned, thanks to spending a substantial

sales at major customers overseas due to unforeseenamount to update our production lines at two domestic

circumstances, as well as longer-than-expected time

plants (the Kakogawa Plant and Ashikaga Plant), sales mix

Results

YoY¥88,387 million¥91,263 million+2,876¥5,896 million¥6,336 million+440

to develop and launch new products. Even though we

improvement, and lower material costs. In the creation−155

reduced the cost to sales ratio as intended, operatingof new businesses, we developed new products in theincome also did not reach our initial target, owing to sales

optoelectronics, power electronics and welfare/nursing

falling short, higher SG&A expenses centered on higher IT

care fields, and began to mass produce and sell them. With

investment in Japan and overseas, and R&D expenses inthese major accomplishments, we are more confident in

new businesses.

our ability to achieve sustained growth from BF-2 onward.

¥4,951 million¥4,796 million“Breakthroughs for the Future” Mid-to-Long Term Business Plan: Overall Image and Summary of the First Stage

BF-1 numerical targets and progress

10-year mid-to-long term business plan launched infiscal 2013

in the fields of rubber, elastomers, and resins—where we

In fiscal 2013, the Bando Group embarked on its 10-year

and high-performance products in the global market. In

mid-to-long term business plan “Breakthroughs for the

regard to profit growth, our priority measures are based

future.” Under this plan, we aim to provide value-addedon improving the profitability of current businesses in

products that contribute to environmental preservation,

the first five years (BF-1), and expanding sales from new

ROAenergy conservation and higher functionality, further

businesses to perform the role of a driving force in therefining our core technologies and reliable product quality

second half (BF-2).

New product ratio

have built up extensive expertise since the Company’s(¥ billion)

founding—to become a standout global supplier of belts

Fiscal 2012 results

Fiscal 2017
results

vs. fiscal 2012

BF-1 targets(fiscal 2017)

Deviation fromtargets

Net sales

85.7

91.2

+5.4

100.0

−8.7

Operating income

4.0

6.3

+2.2

10.0

−3.6

3.1%

4.9%

+1.8 points

6.0%−1.1 points

—

12.8%

+12.8 points

30.0%−17.2 points

Overall image of the mid-to-long term business plan

“Breakthroughs for the future” mid-to-long term business plan
Become a standout global supplierNewbusiness
expansion
Sales/profits
2013

BF-1 (five years)

BF-2 (five years)

2023

Summary of the first stage (BF-1)

income of ¥10 billion, ROA of 6% and new products

Representing the first step as part of our goal to become

strengths on promoting the evolution and deepening ofa standout global supplier, our targets for the first stage ofcurrent businesses, while enhancing our R&D and market

the plan (fiscal 2013 to fiscal 2017) for the final year ended

development efforts to help establish new businesses.

March 2018 were net sales of ¥100 billion, operating22• Key concepts
Provide value-added products that contributeto environmental preservation, energy
conservation and higher functionality• Leverage core technologies and reliable
product quality in rubber, elastomers andresinsCurrent business: Expand global business/increase added value
2018• Business domain
Global development of belt and highperformance product businesses

BANDO CHEMICAL INDUSTRIES, LTD.

comprising 30% of total sales. Specifically, we focused ourAs a result, overseas net sales expanded ¥9.8 billion

Operating Environment
Balanced global economic growth continues, but
specific markets starting to change structurally

Parts Business, the Industrial Products Business, andIn the world economy, a trade war has festered between

equipment markets, where we have enjoyed competitive

the U.S. and China recently, but extreme bloc economies

advantages, are approaching a turning point with belt-lesslook unlikely to spread. Over the mid-to-long term,engines from the rise of electric vehicles and hybrid cars,

we expect continued balanced growth in the world

as well as with paperless offices. We believe these trends

economy to be driven by China and Asia, and forecast

will have an even larger impact around the time that BF-2

robust demand in markets related to the Automotive

comes to a conclusion.

Bando is approaching an inflection point in the longterm growth cycle

industries we have focused on to date, and are preparing

Actually, this is not the first time that we have experienced

is to concentrate on creating new products and fostering

a turning point in our main longstanding markets. Looking

new businesses. At the same time, we aim to expand

back at the growth cycles the Company has experienced

earnings by continuing to strengthen our main businesses

since its founding in 1906 (see the chart on the next page),during BF-2, as we originally conceived for the overall pic-

Bando has been able to continue growing by transforming

ture for “Breakthroughs for the future.” By tending to ourits business portfolio in tune with changes in leading

corporate culture as the underpinning of these initiatives

industries during each cycle. Under the mid-to-long termin both new businesses and current businesses, we willbusiness plan “Breakthroughs for the future,” we aretake one step closer to being a standout global supplier,aware of this turning point approaching in the leading

the concept of our mid-to-long term business plan.

the Advanced Elastomer Products Business during thefive years of BF-2. However, the automobile and officeto establish a new business foundation for the next 30
years. Accordingly, our most important priority for BF-2

Annual Report 201823

Message from the President
Become a standout global supplierGrowth cycles since the Company’s founding

Sustained growth in both new and current businesses

Establish new business foundation

Breakthrough:“Breakthroughs for the future” mid-to-long termbusiness plan(fiscal 2013 to fiscal 2022)

Growth centered on automotive parts andelectronic/information equipment

Basic strategy for BF-2

increase customer convenience by turning products into

Bando is concentrating on work style innovation fortargeted markets. Moreover, in continuation from BF-1,

individuals and organizations within the context of human

we aim to hone technologies and advance systems further

capital, its most important business resource, as a part ofthrough capital investment and work style innovation toinitiatives to achieve its quantitative targets and realize its

expand these core businesses worldwide and strengthen

future business portfolio. Going beyond simple reductions

earnings potential via the art of manufacturing.

services, with the ultimate aim of securing top shares ofin overtime work expense, we are promoting self-directed
and creative work styles while upgrading work environ-Growth centered on heavy chemical industry and agricultural machinery

BF-2: Four guidelines
Aiming to be a standout global supplierments and systems, training personnel and changing themindset of employees.
In addition, we are prioritizing the allocation of busi-

Growth in textile/manufacturing industry

ness resources for activities that lead to the creation of new
businesses, the foremost priority of BF-2, to transform our

Guideline1

New businesscreation

Guideline

2

Guideline

Core businessexpansionbusiness portfolio. In expanding core businesses consisting of the Automotive Parts Business, Industrial Products

Outline of BF-2

Business, and Advanced Elastomer Products Business, we
intend to provide new high-value-added products andQuantitative targets for BF-2

operating income to ¥12 billion (operating margin 10%),

With the aim of realizing sustained growth in both

12%. Compared with BF-1, we plan to increase capital

new and current businesses, we target a new business

investment, including in new businesses, by about 30% tosales ratio of at least 10% by fiscal 2022, the final year

¥30 billion, while expanding R&D investment by roughlyof BF-2. Compared with fiscal 2017, we aim to increase

20% to ¥25 billion.

and improve ROE by roughly 4 percentage points toconsolidated net sales by about ¥30 billion to ¥120 billion,

BF-2 numerical targets and investments
Sustainable growth in both new businesses and current businesses
New business sales ratio of at least 10% (sales of at least ¥12 billion)
Fiscal 2017 results

Fiscal 2022 targets

Net sales¥91.2 billion¥120 billion

Operating income¥6.3 billion¥12 billion

7.9%

12%

ROE

BF-1 results

BF-2 plan(fiscal 2013 to fiscal 2017)(fiscal 2018 to fiscal 2022)

Capital investment¥23.6 billion¥30 billion

Depreciation¥21.2 billion¥25 billion

R&D investment¥20.1 billion¥25 billion

Our future business portfolio
The chart on the right depicts the outlines of a businessexpected based on the assumption that sales will decline
in Japan, but we aim to raise the growth rate in the
Industrial Products Business and the Advanced Elastomer
Products Business. In addition, we target a new productratio of at least 20% overall among our current businesses.

areas on the chart below). During BF-2, we will take theseIn new businesses, we honed our core technologies forwhere critical needs are growing alongside expansion

compounding, dispersing and combining elastomers andin automotive applications, the power electronics field,

resins during BF-1. As a result of focusing on development

which demands innovation in thermal managementthat combines these core technologies with new technol-

technologies, and the welfare/nursing care fields, whichogies, we have commenced mass production and saleshow promising potential for market growth.

product lines and form a cluster of new businesses while
expanding our portfolio into the optoelectronics field,of a number of promising new products (refer to the red

Targeted markets/priority sectors/main products for New Businesses

Medical examination and training equipment,
rehabilitation and training support equipment,
and health management devices

Other
Advanced
Elastomer
Products
Business

Net sales¥91.2 billion

Current businesses + ¥16.8 billion
New businesses+ ¥12 billion

Net sales¥120 billion

Industrial Products
Business

Automotive
Parts
Business

4 Work style innovation for individuals and the organization

Focusing on optoelectronics, power electronics,
and welfare/nursing care fields

Walking aids

Fiscal 2017 results

Guideline

New Business Creation

Fiscal 2022 planbusinesses and consolidated net sales of ¥120 billion.
In the Automotive Parts Business, strong growth is not

Guideline 1

C-STRETCHTM
elastic
strain sensor

Future business portfolio

portfolio for BF-2 that has at least 10% of sales from new

Foaming vessel withsupercriticalinjection molding

Welfare/nursing care
Medical andhealthcare
equipment
business
New

Power electronics
Electronic devices
FlowMetalTM
silver nanoparticle
bonding material Free CrystalTM
self healing
HEATEXTM
sheetsthermalOptoelectronics
conductive sheets MDEC™
dust removal
systemFree CrystalTM
TOPX™
OCA sheets
Automotive
precision polishingmaterials

Electronics
products
business

Information
terminals¥12 billion in fiscal 2022
Markets

24

3

Enhancement
and evolution in
manufacturing

BANDO CHEMICAL INDUSTRIES, LTD.

Displays

FlowMetal™ Printed
silverelectronics
nanoparticle ink
Products

Priority Sector

Annual Report 201825

Message from the President
Five promising products for driving growth in New Businesses
Field

Product

Value

Example of use

Optically clear adhesive
sheetsFree Crystal™

Better visibility/superior
workability

Precision polishingmaterials
TOPX™

Excellent polishing performance/long life span

Optical fiber, color filters/
FPD/substrates

High thermal conductive
sheetsHEATEX™

High thermal conductivity/
lower thermal resistance ofelectronic devices

Electronic devices, etc.

Metal nanoparticle
bonding material
FlowMetal™

Low-temperature bonding/pressure-free bonding/low void/highreliability/high thermal conductivity/
low electrical resistance

Bonding of power
semiconductors and opticalsemiconductors that operate at high temperatures

Highly accurate detection/high flexibility/easy to apply

Biometric sensors, systems,etc.

Display devices, etc.

Optoelectronics

Powerelectronics

Welfare/nursing carefieldsElastic strain sensor
C-STRETCH™

decrease as electric vehicles and hybrid cars catch ontinued growth in the segment by taking on the overseas

in the automotive market, and we anticipate a minor

repair market and by increasing sales of products for new

increase in sales overseas. However, the segment will

applications.

continue to be a core business that reflects on our brand

Japan

China

Asia

Europe, America Fiscal 2022
& other Net Sales (planned)

India Plant

Four-wheeled vehicles

sales growth in new businesses will begin to pick up fromseek to penetrate the market with the product lines wethe latter part of BF-2.

time required to implement these measures, we forecast• Acquire local OEM customers, increase sales in the repair
market∙A
 dapt the specifications of cost-competitive products to(1) Local Chinese automakers (2) European automakers∙E nhance brand awareness and develop repair/sales network in(1) China (2) India•S ales of products responding to electronics shift for applications other than accessory drive power transmission∙ Increase sales of timing belts for electronic power steering(EPS) systems (rack-assist types), etc.

Timeline for growth in New Businesses
BF-2 former partvalue and the value we provide to society. We aim for con-Fiscal 2017
Net Sales

As a first step toward new business expansion, we will

while moving onto establishing better production andIn the Automotive Parts Business, we expect sales to+6%innovation and M&As. Due to the considerable amount ofoverseas customers and finishing quality engineering

remain our largest source of earnings for now, and it will

Net sales growth rate target for the Automotive Parts Business

Steps and timeline for expansion in new businesses

developed during BF-1 by cross-developing them for

Automotive Parts Business

Vietnam Plant

Two-wheeled vehicles• Increase our share of OEM for key customers∙ Maintain and increase our share of OEMs for major priority
customers with a full line-up of products∙ Develop products in the low-price regions•E xpand sales in the repair market∙ Enhance brand awareness and develop repair/sales network in(1) India (2) Vietnam

BF-2 latter partmanufacturing technologies. By advancing the commercialization of better products with new concepts, we aim

Industrial Products Businessto expand sales further and shift toward mass production.
Moreover, we will continue to search for new productthemes in focused fields, and engage proactively in openfrom the competition in key markets to expand sales ofthe business as much as new businesses during BF-2.

In the Industrial Products Business, we aim to differentiate
2018

2019

2020

2021

2022

2023

2025

Net sales growth rate target for the Industrial Products Business
Guideline 2+36%Core Business Expansion

Aiming for top positions in key markets

customers through activities that help improve customer

We aim to further expand our core businesses consistingments for targeted customers.

of the Automotive Parts Business, Industrial Products
Business and Advanced Elastomer Products Business, butsome fields have maturing markets. We intend to take theconvenience, such as technology and service developFiscal 2017
Net Sales

Basic strategy for expanding Core Businesses
Capture the top market share by focusing on priority business types and regions

top position in key markets by finely segmenting themalong the lines of marketplaces, regions and customers,

Improve Customer Valueand then building advantageous relationships withleading companies in each key market. Specifically, we
have strengthened technical mapping activities for thedevelopment of specifications for reducing environmental
burden, conserving energy and improving performancein line with market needs. We are increasing value for

26

BANDO CHEMICAL INDUSTRIES, LTD.

Technical Mapping Activities
Develop specifications for reducing environmental
impact, conserving energy and improving
performance in line with market needs

Activities to Improve Customer
Convenience
Propose ideas for improving customer convenienceand expand our own value chain

Market Mapping Activities
Beat rivals by partnering with leading companies in key markets

Japan

China

Asia

Europe, America Fiscal 2022
& other Net Sales (planned)

Power transmission belts for industrial machinery,etc.
• Focus on the key markets with market mapping∙ Increase sales to leading companies in the key markets
including(1) Agricultural machinery (2) Machine tools (3) Robots∙E xpand sales channels overseas•E xpand sales of high-value-added products∙A ccelerate sales of Bando Wiper Edge™ EX∙M arket transmission belts for large agricultural machinery andurethane rice hulling rolls

Bando Wiper EdgeTM EX

H-P Series Agricultural Raw Edge Cog BeltsYELLOW BOYTM

Conveyor belts• Improve profitability of conveyor belts∙ Differentiate from rivals with hallmark products∙ Develop low-price products∙ Turn products into services•E nhance marketing in each segment of light-duty conveyorbelts∙ Key markets: (1) Food processing (2) Transportation/logistics∙ Increase processing bases and introduce automated manufacturing lines

Annual Report 201827

Message from the President

Advanced Elastomer Products Businesswith the introduction of high-value-added products into

In the Advanced Elastomer Products Business, we expect

Advanced Elastomer Products Business has the greatest

growth markets. Of the core businesses, we believe therelated markets to evolve into new growth fields. We

potential for sales growth.

are accelerating the transition in our business portfolio

Net sales growth rate target for the Advanced Elastomer Products Business+52%

Guideline 4

Work Style Innovation of Individuals and the Organization

Achieve an SG&A expense ratio of 20% or lessby strengthening the management basefor sustainable growthbusiness management on a global scale, and integrating

Regarding the human capital that will drive forward all thesaving measures.

We are updating our information systems to enable
core systems. We are strengthening global management
by increasing business efficiency and promoting labor

initiatives in guidelines 1–3, we are encouraging changes

In addition, we are focusing on acquiring andin work styles to improve labor productivity in production

training personnel with the aim of developing leadersand sales divisions, and in back office departments. We

who can be successful globally, and to establish a spiral toaim to improve productivity and raise awareness of healthcontinuously nurture and produce such types.

management while reassessing work environments for all
Fiscal 2017
Net Sales

Precision parts

High-performance films

Fiscal 2022
Net Sales (planned)

BANDO MDEC™

Precision parts• Develop new markets with current products∙ Develop business for precision belts outside the OA equipment market(1) Security cameras (2) Banking terminals• Expand sales of strategic products in new markets∙ Grow sales in the optoelectronics market
BANDO MDEC™: Increase sales of cleaning system
Free Crystal™: Capture market share in the easywritability-sheet market

Free Crystal™

Through these initiatives, Bando aims to reduce theemployees. Our hope is that this will foster a corporate

SG&A expense ratio from just under 24% in fiscal 2017 to

culture that generates innovation.

below 20% by fiscal 2022.

High-performance films• Expand sales of high-value-added products
Expand sales of highly processed products rather than focusing
on the stand-alone films business (Building materials market)∙ Differentiate our products from competitors’ as ones that combine functionality and design with the convenience of small
batch customization to promote the downstream business(vehicles market)∙ Continue to market our films for use in motorcycle accessories
and in materials for vehicle interiors

Path to Achieving Operating Income Target
We aim to reach ¥12 billion in operating income
by completing all four guidelines.

intend to attain an operating margin of at least 10% by

To achieve our operating income target of ¥12 billion

us within reach of our target of operating income of ¥12

in fiscal 2022, we must reach our target for net sales ofbillion.

completing guideline 3 (cost to sales ratio below 70%) andguideline 4 (SG&A expense ratio below 20%). This will put¥120 billion by completing guidelines 1 and 2. We then

Guideline 3

Growth in operating income during BF-2

Enhancement and Evolution in Manufacturing

Toward establishing a consolidated cost to
sales ratio of 70% or lessmanufacturing methods with the objective of lowering

We focused on reducing our consolidated cost to

by deploying IoT in our plants, and take advantage of AI

sales ratio during BF-1, and we successfully developed(robots).

innovative production methods at our plants in Japan thatthe cost of sales significantly further. Additionally, we will¥

the innovative manufacturing methods we developed atof March 31, 2018, from around 74% previously. Although

domestic plants. We will reinforce activities to lower the

crude oil prices and personnel expenses are likely tocost of sales with the aim of achieving global optimization

increase in the future, we intend to keep the cost to sales

through optimizing production based on the principle of pro-ratio below 70% by taking appropriate measures.

ducing near demand, integrating product and material types,
reducing material costs, and optimizing global logistics.

Operating margin

10.0

(%)
10

Improve
profitability

Trend of consolidated cost to sales ratio
74 (%)

6.9

4.8

5

0

Fiscal 2012 result

Fiscal 2017 result

Net sales
120.0

Kakogawa Plant

Expand net sales

70

100.0

28

Mid-term business plan (BF-2)

BANDO CHEMICAL INDUSTRIES, LTD.

Ashikaga Plant

85.7

91.2

80.0
60.0

Mid-term business plan (BF-1)

Fiscal 2022 target

120.0(¥ billion)

66(Fiscal 2022 target)

At overseas production bases, we intend to introduce

allowed us to lower the cost to sales ratio to below 70% as

To begin, we will continue to develop innovative

12 billion

Profit target(operating income)also build automated production lines, reduce man hours

Fiscal 2012 result

Fiscal 2017 result

Fiscal 2022 target

Cost to sales ratio:
70% or less
SG&A expense ratio:
20% or lessNew businesses+ ¥12 billion
Current businesses+ ¥16.8 billion

Nankai Plant

Annual Report 201829

Automotive Parts Business
Review of Operations

Strategically address the overseas repair market andexpand sales of products for new applications
Hisashi Yagi

Executive Officer, General Manager,
Automotive Parts Division

Segment Strengths

Segment Risks and Opportunities• Excellent processing technologies and compounding technologies for raw rubber materials

Risks

Opportunities• Solid relationships with customers, including joint development with automakers• ‌Long-term contraction in the domestic market• ‌Growth in overseas repair parts market, such as in China,
Southeast Asia, etc.

• Relatively strong customer base with customers diversified to a certain degree• ‌Lower prices and less usage of rubber belt products due
to proliferation of hybrid cars, small vehicles and thedownsizing of turbocharged vehicles• ‌Global product supply network made up of production and sales bases in more thana dozen countries worldwide• ‌Spread of automobiles without traditional engines, suchas electric vehicles

Performance for the Fiscal Year Ended March 31, 2018

Net sales grew 2.7% year on year, primarily due to sales of belts in
the U.S. to South America as well as repair parts in Turkey.

China
Net sales declined 21.0% from the previous fiscal year, mainly owing
to weaker sales resulting from lower output at key customers.

Asia
Net sales increased 12.9% year on year, driven by growth in sales ofaccessory drive power transmission belts and systems in Thailand,in addition to a rise in sales of variable speed belts for scooters in
Thailand, Vietnam and India.

Sales of Automotive Parts Businessby Region(¥ billion)
50
40

41.6

Europe, America & other
China
Asia

30

Japan

20
10
0

2017

2018

Note: Sales represents the figure after
deduction of inter-segment
transactions

Priority Measures for the Second Stage of “Breakthroughs for the Future”

For four-wheeled vehicles

For two-wheeled vehicles• ‌Acquire OEM business with local overseas customers,
expand sales in the repair market• Acquire OEM business with key customers• ‌Launch products meeting the needs of electrification
other than, aside from accessory drive applications(¥ billion)

3

Net sales decreased 1.3% from the previous fiscal year due to a
decline in sales of accessory drive power transmission systems
from customers shifting to local procurement overseas, despite anincrease in sales of accessory drive power transmission belts alongwith growth in domestic automobile output.

2

BANDO CHEMICAL INDUSTRIES, LTD.

Enhancement and evolution in manufacturing

4

2.9

3.3

Bando Manufacturing (Thailand) Ltd. awarded the
National Occupational Safety and Health Award 2017

10

ESG Initiatives: Social

2017

2018

Bando Manufacturing (Thailand) Ltd., which makes
accessory drive power transmission belts for fourwheeled vehicles and variable speed belts for scooters, isAward ceremony30• ‌Expand sales in the repair market• ‌Develop innovative production methods, promote
IoT and AI, reduce production costs aiming for global
optimization

Segment Profit of Automotive Parts
Business

Japan

Segment profit grew 11.1% year on year to ¥3,264 million, reflecting
expanded sales in Asia, Europe, and the Americas, which outweighed
lower sales to major customers in China.

40.2• ‌Further growth in business opportunities in Asian countries such as India and Vietnam where demand is brisk
for motorcycles• ‌Additional new demand for rubber belts due to theincreased use of electronics in automobiles, such as that
related to electronic power steering, electronic parking
brakes, and power sliding doors

The segment achieved net sales of ¥41,701 million, up 3.4% from the previous fiscal year. Results by region are as follows.

Europe, America & other• ‌Steady growth in high-value-added business opportunities,
such as improvements in silence and transmission efficiency

concentrating on creating a safe workplace for employees
including establishment of a Safety Training Center toraise employee awareness of safety. In October 2017, suchinitiatives earned the National Occupational Safety and
Health Award 2017 from Thailand’s Ministry of Labour.

Safety patrol

Safety Training Center

Annual Report 201831

Industrial Products Business
Review of Operations

Focus on setting ourselves apart fromthe competition in key markets
Satoshi Matsuo
Senior Executive Officer, General Manager,
Industrial Products Division

Segment Strengths

Segment Risks and Opportunities• Competitive products based on core technologies, relatively strong earnings foundation

Risks

Opportunities• Top share of domestic market in friction transmission belts as industrial materials• ‌Impact from contraction in domestic market• ‌Further productivity improvements and streamlining
based on core technologies• Strong in the repair market thanks to robust sales agency network• ‌Impact of changes in rubber prices on raw materials
costs• ‌Stiffer price competition due to large number of rivals• ‌Expansion in applications overseas, other thanautomobiles• ‌Development of markets in the U.S., China andSoutheast Asia

Performance for the Fiscal Year Ended March 31, 2018
For the fiscal year ended March 31, 2018, net sales grew 2.9% year on year to ¥32,369 million. Results by region are as
follows.

Europe, America & otherNet sales increased 8.0% year on year as sales of industrial powertransmission belts in the U.S. increased domestically and to SouthAmerica, and sales promotions contributed to growth in Turkey.

China
Net sales decreased 23.9% year on year, owing mainly to a decline insales of power transmission belts for agricultural machinery.

Asia
Net sales rose 23.7% year on year from stronger sales of power transmission belts for industrial and agricultural machinery from efforts toboost sales in Thailand, Vietnam and India.

Japan
Net sales grew 3.0% year on year as stronger sales of industrial powertransmission belts and pulleys from increased capital investment
outweighed weaker sales of conveyor belts.
Segment profit decreased 4.2% year on year to ¥1,907 million,
reflecting sluggish sales of power transmission belts for agricultural
machinery in China, which outweighed sales growth in Japan, Asia,
Europe, and the Americas.

Sales of Industrial Products Businessby Region(¥ billion)
35
30

31.3

32.2

Europe, America & other
China

25

Asia

20

Japan

15

Belts for industrial machinery and other products

Conveyor belts• ‌Make strategic moves in key markets based on market
mapping• ‌Bolster conveyor belt profitability• ‌Expand sales channels overseas

5

2017

2018

Note: Sales represents the figure after
deduction of inter-segment
transactions

Enhancement and evolution in manufacturing• ‌Develop innovative production methods, promote
IoT and AI, reduce production costs aiming for global
optimization

Segment Profit of Industrial Products
Business(¥ billion)
2

1.9

1.9

ESG Initiatives: Environment

10• ‌Strengthen market specific marketing for light-duty
conveyor belts• ‌Expand sales of high-value-added products

100Priority Measures for the Second Stage of “Breakthroughs for the Future”

2017

2018

Strengthen steps to prevent water quality incidents at
the Kakogawa Plant
In Japan, damage from heavy rainfall due to unseasonal
weather has been on the rise in recent years. At the
Kakogawa Plant, which makes conveyor belts, we areshoring up measures to prevent leaks from oil water
separators due to heavy rainfall, reinforcing sewage tanks,and setting up floodwalls, among other things. Also, froma business continuity plan (BCP) standpoint, we are conducting emergency response training for oil leak incidents.

Oil leak emergency response
training

32

BANDO CHEMICAL INDUSTRIES, LTD.

Installing cover for agricultural
water inlet

Annual Report 201833

Advanced Elastomer Products Business
Review of Operations

Accelerating business portfolio transformationand launching high-value-added products
in growth markets
Tadahiko Noguchi
Executive Officer, General Manager,
Advanced Elastomer Products Division

Segment Strengths

Segment Risks and Opportunities• Development‌of high-performance products utilizing accumulated expertise in elastomer materials
technology and molding technology• ‌Catering to customer needs by leveraging characteristics of materials such as polyurethane andengineering plastics

Risks

Opportunities• ‌Falling demand for precision parts due to declining
usage of paper media in Japan and shift to in-housemanufacture by some customers• ‌Growth in sales of high-value-added products, newbusiness creation• ‌Catering to customer needs by adding functionality based on leveraging characteristics of polyolefin,
polyvinyl chloride, polyester and polyurethane plastics• ‌Using more highly processed, high-value-added functional films to enter building materials and automotive
markets

Priority Measures for the Second Stage of “Breakthroughs for the Future”
Performance for the Fiscal Year Ended March 31, 2018
For the fiscal year ended March 31, 2018, net sales grew 1.7% year on year to ¥15,161 million. Results by product are as
follows.

Precision Parts
Total sales rose 1.9% year on year, owing to growth in sales ofhigh-performance rollers and blades from increased output at key
customers—office equipment manufacturers.

High-Performance Films
Total sales increased 3.3% year on year, reflecting a rise in sales ofwrapping films for four-wheeled and two-wheeled vehicles where
new applications are being developed, which outweighed a decline
in sales of industrial and medical films.
Segment profit grew 46.0% year on year to ¥429 million, driven bysales growth and the change in sales mix.

Sales of Advanced Elastomer Products
Business(¥ billion)
20
15

Precision Parts

High-Performance Films• ‌Deploy current products in markets where they are not
now in use (expand applications for precision belts andother products in non-office automation markets)• ‌Shift toward high added value by expanding finishedproduct business (building materials and vehicles market)• ‌Grow sales of strategic products in new markets (expand
sales in the optoelectronics market)

High-Performance Films

14.7

15.1

2017

2018

Enhancement and evolution in manufacturing• ‌Develop innovative production methods, promote
IoT and AI, reduce production costs aiming for global
optimization

Precision Parts

1050

Note: Sales represents the figure after
deduction of inter-segment
transactions

Segment Profit of Advanced Elastomer
Products Business(¥ billion)
0.5

0.42

0.4
0.3

0.29

0.2
0.1
0

2017

2018

ESG Initiatives: Environment

Switch to high-efficiency equipment andLED at Ashikaga Plant
At the Ashikaga Plant, which makes advanced elastomer
products, we employed the Ministry of the Environment’s
ASSET program* to switch to a high-efficiency power
generator that uses city gas instead of heavy oil, and air
conditioning equipment that utilizes waste hot water fromgenerator, and LED lighting. The new power generator

provides most of the electricity used by the plant (half inthe summer and two-thirds in the spring, fall and winter).
Further, the recent equipment replacements and shift to
LED are expected to reduce CO2 emissions by 1,686 tons,
which is equivalent to over 20% of the Ashikaga Plant’s
annual CO2 emissions.
* Advanced technologies promotion Subsidy Scheme with Emission reduction Targets

Installation of the high-efficiency power generator

34

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201835

ESG Section/Material Issues

ESG Section/CSR Management

Determining Material Issues

CSR Management

The Bando Group recognizes that society expects it to uphold its social responsibilities through CSR activities, andthat such activities must lead to the realization of its management philosophy. Accordingly, in the fiscal year ended
March 31, 2018, we determined material issues with a view to revising our CSR objectives and themes from a global
standard perspective. Under our new CSR objectives based on our material issues and management philosophy, we
will promote CSR activities to ensure that we can continue to respond to changes in society and demands from ourstakeholders.

The Bando Group’s CSR promotion system is led by the Company’s CSR Promotion Committee. Chaired by Bando’s
executive in charge of CSR, the CSR Promotion Committee decides on CSR policy for the entire Group, and monitors committees established for each CSR promotion theme as well as the CSR functions of individual departments.
The Committee is also responsible for prioritizing issues, tracking the progress of CSR activities, promoting public
information disclosure, and interacting with stakeholders.

Determination Process
STEP 1

Identify issues for discussion
We identified 36 items, mainly those provided in the GRI Standards, while making reference to international guidelines including the GRI Standards and EICC (currently RBA) Code of Conduct, as well as competition benchmarks.

Establish a priority order
We assigned scores to the 36 items by evaluating them based on their impact from the Company’s perspective. We
also conducted an evaluation from the stakeholders’ perspectives based on surveys of ESG survey institutions and ourbusiness partners. We mapped the items on two axes to determine 17 material issues for the Bando Group.

Evaluate the validity of the items

Review of CSR Promotion Themes and Initiatives Going Forward
The 17 determined material issues were referenced against the management philosophy to set new CSR promotion themes.
Looking ahead, we will set qualitative and quantitative targets (including KPIs) for each theme and we intend to review themin each business year using a PDCA cycle.

The 17 determined material issues

New CSR promotion themes

Importance to StakeholdersHigh(levels of importance within each quadrant are not ordered)• Occupational health andsafety• Materials• Emission• Effluents and waste• Supplier assessment(social and environmental)• Customer health and safety• Product/process innovations• Compliance(social and environmental)• Anti-corruption• Anti-competitive behavior• Safety and disasterreadiness

Products and services

The Group fully complies with the law andtakes sincere actions to gain the trust ofsociety

Provide safe and secure products andservices that meet the needs of society• Anti-corruption• Supplier assessment• Anti-competitive behavior• Human rights• Compliance• Customer health and safety• Product/process innovations

The environment

Labor/Safety

Work for environmental preservation by developing eco-friendly products and by being attentive tothe environment in manufacturing practices

Allow employee growth through their work,and provide safe, dynamic workplaces• Materials• Emission• Energy• Effluents and waste• Water• Safety and disaster readiness• Occupational health and safety• Training and education• Employment• Diversity and equal opportunity

Value communication with society

Importance to the Bando Group36

Categorize
with reference
to themanagement
philosophy

Compliance/Human rights

BANDO CHEMICAL INDUSTRIES, LTD.

High

Stakeholder communication(Further information on the new CSR promotion themes can be found on P. 36)
CSR promotion themes

After confirmation by the CSR Promotion Committee, the material issues and the determined items were approvedby the Board of Directors.

• Human rights(child labor, forced orcompulsory labor)

CSR Promotion
Committee
secretariat

CSR Promotion Themes and Major Achievements in Fiscal 2017

Major
achievements

Management approval• Energy• Water• Employment• Training and education• Diversity andequal opportunity

Chair: Executive incharge of CSR

The Group engaged in various activities in line with six CSR promotion themes.

We had the CSR experts evaluate the validity of the 17 items that we had determined based on the documentssummarizing the Company’s activities to date, its determination process and background of material issues.

STEP 4

Group affiliates

CSR promotion themes

STEP 3

Head office/business facilities

Major
achievements

STEP 2

CSR Promotion
Committee

President

The Bando Group’s material issues were determined by the following process.

Compliance/Business Ethics

The Environment

Quality

The Group fully complies with the law
and takes sincere actions to gain thetrust of society

Work for environmental preservation
by developing eco-friendly products
and by being attentive to the environment in manufacturing practices

Provide safe and reliable products
and services

Head Office Environment Committee;
Manufacturing Planning Center, Safety andEnvironmental Promotion Department

Manufacturing Planning Center,
Quality Control Department

Legal Compliance Committee• Held Code of Conduct workshops foraffiliates• Provided information security training via
e-learning system and training on targetede-mail attacks• Reduced unit volume of waste generation
by 3.9%• Reduced unit volume of energy consumption by 5.2%
• Suppressed VOC emissions by 69%(compared to 2000)• Held Bando QC Circle Convention• Convened a product quality case study
exhibition• Implementation of an assessment of
product conformity to standards• Updated the information management
system for chemicals used as raw materials

Human Rights/Labor/Safety

Social Contribution

Information Disclosure

Allow employee growth throughtheir work, and provide safe, dynamic
workplaces

Recognize the importance of communication with society, individual
contributions to the community, andCompany-wide contributions to society for environmental preservation

Timely and proper information
disclosure to stakeholders

Head Office Health and Safety Committee;
Human Resources Department;
Manufacturing Planning Center, Safety
and Environmental Promotion Department• Selected as a “2018 Health & Productivity
Stock Selection”• Held mental health classes and walking
activities• Health and safety education and installationof disaster simulation equipment

General Administration Department

Finance and Accounting
Department; General
Administration Department• Supported volunteer activities• Convened procurement policy briefings• Participated in activities organized by local
resident associations, and cleanup, public
safety and disaster prevention initiatives• Published periodic CSR reports andbusiness reports, and provided informationon the Group’s websites• Conducted tours of Company facilities• Held investor relations briefings(Work-related injuries resulted in lost time during
the fiscal year under review: 1 in Japan, 0 indomestic affiliates, 19 in overseas affiliates)

Annual Report 201837

ESG Section/Environmental Initiatives

ESG Section/Social Initiatives

Formation of a Resource-Recycling Society — Reducing Waste Emissions

Work Style Innovation — Enabling Every Individual to Maximize Their Abilities

The Company’s industrial waste largely consists of rubber and plastics. Rubber is difficult to reuse, so the Company
focuses primarily on initiatives to reduce initial waste generation at manufacturing sites. Specifically, we have
improved our production facilities and reviewed our manufacturing methods, and taken steps to promote the3Rs (reduce, reuse, and recycle). In the fiscal year ended March 31, 2018, the Company actively promoted efforts
to improve facilities and develop new manufacturing methods, achieving a 3.9% year-on-year reduction in raw
material-related waste per volume of raw material input. Moreover, we also strengthened our initiatives on “material
recycling,” which involves use of waste as raw materials for products, and by rigorously separating waste we continued to achieve zero emissions. Looking ahead, we will continue to make effective use of raw materials with a view to
reducing the volume of waste generated.

In Japan, work style needs are diversifying, including a decline in the productive population due to a falling birthrate
and aging population, and balancing childcare and nursing care with work. Against this backdrop, it is importantto address issues such as increasing productivity through investment
and innovation, increasing employment opportunities, and creating
environments where people can fulfill their ambitions and demonstrate
their capabilities. Under BF-2, guideline 4, the Bando Group is focusing
on “work style innovation of individuals and the organization.” In April
2018, we established the Work Style Innovation Department to drive
reforms in our work processes, increase productivity, and reform ourcorporate culture. The department will work to change work styles toenable generation of high added value within a limited time, and to
reduce overtime hours per employee by 10% each year over the next
five years. In this way, it aims to realize a corporate culture in which
Discussion on work style innovation
every employee enjoys and feels motivated by their work.

Waste crushed into chips for reuse

Artificial wood for landscaping made from recycled rubber waste

Contributing to the Creation of an Abundant Global Environment through Business Activities —“Environmental Claims”
The Bando Group conducts environmentally-friendly business activities through product development, technology,
and manufacturing. Products that meet one or more of the baseline standards in the Company’s proprietary
Environmental Claims form the core of the Company’s ten “eco moving” brand products. Amongst these, productsthat meet at least 50% of the baseline values in the Environmental Claims are grouped together as “EnvironmentallyFriendly Products,” which the Company is working to expand. (Further information about the ten “eco moving”
products can be found on P. 13 Snapshot.)

Environmental Claims — (The Company’s proprietary standard)

1. S‌ aving energy
The product’s energy loss during use is cut by 15% or
more, in comparison with the corresponding reference
product.

2. S‌ aving resources
The raw materials used for the product are reducedby 10% or more by mass, in comparison with thecorresponding reference product.

3. Reduction in quantity of waste
Product-related waste during use is reduced by 10% ormore by mass, in comparison with the correspondingreference product.

4. Using recycled materials

5. Using eco materials
The product uses 80% or more eco materials by weight (recycledmaterials as well as non-petrochemical natural resources andmaterials).

6. Reduction of CO2 emissions
The product reduces CO2 emissions by 10% or more during
its lifecycle, in comparison with the corresponding reference
product. Or, the product reduces CO2 emissions by 15% ormore during any stage of its lifecycle (material procurement,
production, transportation, use, or disposal).

7. C‌ arbon offset

Improve Production Line Operational Efficiency
with IT

Development of Human Resource Leaders Who
Can Be Successful Globally

In production line inventory operations, rather than writing on paper
or inputting numbers manually, we introduced a system that reads
QR codes and automatically inputs numbers and this has reduced thenumber of man-hours and labor hours to less than half. Furthermore,by automating the process of sending electronic slips by email orgathering information on defects and creating a defect causal analysis
Pareto chart, we have reduced the time needed by production line
chiefs to complete these operations from three hours a day to just 30
minutes. Through these and other initiatives, we have been using IT
to increase productivity.

As one of our priority measures under BF-2, guideline 4, we arefocusing on development of human resource leaders who can be
successful globally.
At the “Bando Management School,” we are working todevelop the future management of the Company, while “Overseas
Practical Training” is used to educate personnel by dispatching themoverseas for practical operations. In our induction education programsfor new recruits, we have incorporated an English language-training
component taught by foreign teachers, and we provide ongoinge-learning courses after the training. In this way, we are working tostrengthen the English language capabilities of each of our younger
employees as a basic part of developing global personnel.
At our “Manufacturing School,” which is designed to develop
leaders on the manufacturing front lines, we nurture the ability to solve
issues at production sites and focus on strengthening the knowledge
and expertise required for leaders on manufacturing sites throughself-directed improvement activities. In the fiscal year ended March 31,
2017, we started participating in other companies’ improvement activities
as well, helping to change our awareness. We have also had personnel
from overseas production sites participate in some of the training.

Flexible Work Styles Realize Various Kinds ofMotivation for Working
In April 2017, we established a “Work Location Change Request
System” for people to request a change of work location due toreasons such as a spouse’s transfer or the need to nurse a family
member. We also created a system for people who have temporarily
resigned for such reasons to apply for reemployment by registering
beforehand. In April 2018, we introduced a work-from-home systemfor employees involved in childcare or nursing care. We will continue
to enable more flexible ways of working and support various methods
and motivations for working.

English language
training for new
recruits

Initiatives for Employees to Work Healthily and
EnthusiasticallyIn April 2017, we appointed a new executive in charge of health and
we are strengthening our initiatives on employee health. We have set
specific targets on metabolic syndrome and mental health, and the“Healthy and Enthusiastic Workplace Creation Team” jointly organizedby labor and management will lead our efforts to realize employees’
own visions for their health and create comfortable workplaces.
Partly due to the impact of this initiative, we have been included for asecond consecutive year as a “Health & Productivity Stock Selection
by the Ministry of Economy, Trade and Industry and the Tokyo Stock”
Exchange.

Manufacturing School

The product is certified by the carbon offset certification system(third-party institution), and the appropriate carbon offset
activities have been implemented.

The product uses 20% or more recycled materials by
weight.

38

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201839

ESG Section/Corporate Governance
Basic Stance on Corporate GovernanceIn order to improve corporate value, the actions of
the Company are based on an adherence to the law
and social norms as a member of society. In addition,
the Company recognizes the importance of building
positive relationships with customers (end users),
current and potential investors, business partners,
local communities, and labor unions. In line with suchthinking, the Company focuses on ensuring sound,transparent and efficient management by enhancing its
corporate governance system.

Board of Directors
Bando aims to further enhance auditing and oversightfunctions by adopting a Company with an Audit &Supervisory Committee structure.
The Company’s Board of Directors consists ofeight members, with four of those eight members serving as members of the Audit & Supervisory Committee.
The Board makes decisions concerning basic management policies, important management issues, andlegally stipulated matters, as well as monitoring thework performance of directors and corporate executive
officers. The Board’s three external directors arecharged with the independent oversight of business
operations. The Board meets at least once a month. In
addition, the Company maintains a corporate executive
officer system to improve operational efficiency andspeed, and has established the Management Advisory
Council to assist the president with management
decisions.

Independence Standards and Qualification
for Independent Directors
In nominating candidates for independent director, theNominating Committee ensures that such persons satisfy the independence criteria set by stock exchanges
and are also capable of fulfilling their role andresponsibilities from an independent standpoint. The
rationales for the appointment of those independent
directors serving as of June 21, 2018 are summarized
below.

conduct auditing and oversight activities from generaland specialist viewpoints. He is not influenced by theviews of Sumitomo Mitsui Banking Corporation (SMBC),
a major business partner of the Company, due to the
14 years that he has spent working at other companies
since leaving SMBC. Moreover, it is judged that theCompany’s decision-making is not subject to any undue
influence by SMBC since (a) the Company conducts
business with a number of financial institutions, (b)business with SMBC is conducted on the same terms aswith other banks, and (c) loans from SMBC are equivalent to only about 3% of the Company’s total assets.
Hence, since there is no conflict of interest with ordinary
shareholders as defined by the Tokyo Stock Exchange,
Mr. Matsusaka has a high degree of independence.

Audit & Supervisory Committee
The Audit & Supervisory Committee members
comprise four directors, of whom three are external
directors. Furthermore, one of the directors serves on afull-time basis.

Nominating Committee and Compensation
Committee
Despite having no legal obligation under theCompanies Act, the Company has established theNominating Committee and Compensation Committee
to serve as consultative bodies of the Board of
Directors in an effort to further strengthen corporate

governance. Specifically, the appointment of directors
and the setting of their compensation are carried out
by resolution of the Board of Directors after deliberation by the Nominating Committee and Compensation
Committee, whose members include external
directors and directors serving as Audit & Supervisory
Committee members. The Audit & Supervisory
Committee must approve the appointment of
directors who will serve on it. The Audit & Supervisory
Committee also deliberates on the remuneration ofsaid directors. In the fiscal year ended March 31, 2018,
the total amount of director and Audit & Supervisory
Committee member compensation is shown below.

Takashi Shigematsu
Many years of experience gained working as an engineer or manager in manufacturing firms and a related
wealth of knowledge enable Mr. Shigematsu to conduct
auditing and oversight activities from an independent
perspective. In addition, Mr. Shigematsu concurrently
holds the position of Outside Director at Murata
Manufacturing Co., Ltd. As the Company does not haveany special relationship with Murata Manufacturing Co.,
Ltd., there is no conflict of interest with ordinary shareholders as defined by the Tokyo Stock Exchange, andMr. Shigematsu has a high degree of independence.

Haruo Shimizu
Many years of experience gained working as a manager in manufacturing firms and a related wealth ofknowledge enable Mr. Shimizu to conduct auditing andoversight activities from an independent perspective.
In addition, Mr. Shimizu concurrently holds the positionof Outside Director at Suminoe Textile Co., Ltd. As theCompany does not have any special relationship with
Suminoe Textile Co., Ltd., there is no conflict of interest
with ordinary shareholders as defined by the Tokyo
Stock Exchange, and Mr. Shimizu has a high degree of
independence.

Monetary Remuneration

Stock Remuneration
Total Compensation

Number of
Persons

Total Amount

Number of
Persons

Total Amount

Directors not serving as members of
the Audit & Supervisory Committee(of which, external directors)

5(0)¥70 million(¥0 million)

4(0)¥18 million(¥0 million)¥88 million(¥0 million)

Directors who serve as members of
the Audit & Supervisory Committee(of which, external directors)

3(3)¥37 million(¥37 million)0(0)¥0 million(¥0 million)¥37 million(¥37 million)

Total(of which, external directors)

8(3)¥107 million(¥37 million)

4(0)¥18 million(¥0 million)¥125 million(¥37 million)

Notes:
1. As‌ of March 31, 2018, the Company has four directors not serving as membersof the Audit & Supervisory Committee (no external directors), and three directors who serve as members of the Audit & Supervisory Committee (including
three external directors).
2. The‌
numbers above include one director not serving as a member of the Audit& Supervisory Committee who resigned at the conclusion of the Ordinary
General Meeting of Shareholders held on June 22, 2017.
3. The‌
total monetary remuneration of directors not serving as members of the
Audit & Supervisory Committee was limited to a maximum of ¥190 million peryear, and the total monetary remuneration of directors who serve as membersof the Audit & Supervisory Committee was limited to a maximum of ¥84
million per year.
4. The‌
total amount of monetary remuneration of the abovementioned directors
not serving as members of the Audit & Supervisory Committee includes a

profit-linked component for the fiscal year ended March 31, 2018 (monetary
remuneration linked to business performance), calculated based on the
Company’s criteria for profit-linked bonus. Projected payments are included inreserves.
5. ‌The total amount of stock remuneration is the amount of costs recorded for
18,419 stock award points (equivalent to 18,419 shares of company stock)
awarded to executive directors in accordance with performance during the
fiscal year ended March 31, 2018. The maximum amount of stock remunerationthat can be paid to executive directors during a single fiscal year is ¥50 million
and 54,000 shares.
6. ‌In addition to the above-listed information, salaries and bonuses for employees who concurrently serve as directors are as follows.
	Three employee salaries: ¥49 million
Three employee bonuses: ¥20 million

Takahiro Matsusaka
Many years of experience and related business knowledge gained working in managerial positions in financial institutions afford Mr. Matsusaka the capacity to

40

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201841

ESG Section/Corporate GovernanceManagement organization and corporate governance
General Meeting of Shareholders
Election

Board of Directors
Supervision

Election
Audit/Supervision

Audit & Supervisory Committee

Consultation

Nominating Committee

AttendanceAppointment

Assistant

Audit/
Supervision

Compensation Committee

Cooperation

President
Consultation
Management Advisory Council
Internal Audit Department/
Administrative division
CSR Promotion Committee

Legal Compliance Committee
Education

Business
execution

Audit

Administration

Accounting
audit

42

BANDO CHEMICAL INDUSTRIES, LTD.

The Group has formulated and distributes to all
Group executives and employees the Bando Group
Code of Conduct, which stipulates proper actions insuch areas as “compliance with laws and corporate
ethics,” “product and service safety,” “honest andfair business activities,” and “fair and equitableprocurement transactions.” In addition, the Group
works to raise awareness of compliance by designating
October as the Bando Group Corporate Ethics Month,conducting training sessions on the Bando Group
Code of Conduct at Company business facilities ordomestic and overseas affiliates every other year,
and providing opportunities to discuss these topics
internally. Moreover, the Group has established asystem to further promote compliance by adopting aninternal reporting system that includes external lawyers
as well as a service for providing information on theformulation, revision and abolition of relevant laws.

The Group proactively engages in public relations andinvestor relations activities with the intention of quickly
disclosing information to stakeholders on the basisof transparency, fairness and consistency. The Group
discloses information in strict accordance with laws
and regulations under the Financial Instruments andExchange Act and set by the Tokyo Stock Exchange.
In addition, the Group makes a concerted effort todisclose information in a timely fashion that furthers theunderstanding of its activities. At Bando, the General
Administration Department is responsible for public
relations, including the timely disclosure of information.
* ‌Details of the Company’s disclosure policy are provided at thefollowing.
https://www.bandogrp.com/eng/ir/management/disclosure.html

Internal Audits

The Company and subsidiaries

To meet the requirements stipulated in the Financial
Instruments and Exchange Act pertaining to financial
reporting performed by internal control reporting
systems, the Company maintains internal control inaccordance with the basic frameworks for internal
control outlined in Financial Services Agency criteria,
and undertakes evaluations and reporting as definedby said criteria. The Bando Group will work to further
improve the effectiveness of internal control based on
the four objectives of internal control: (1) reliability offinancial reporting, (2) operational effectiveness andefficiency, (3) legal compliance regarding businessactivities, and (4) asset protection.

Basic Policy on Information Disclosure

Accounting Auditors

MonitorInternal Control

Compliance Promotion

Basic Stance on the Elimination ofAntisocial Forces
The Group takes stringent measures to eliminate
antisocial forces by investigating prospective business
partners prior to commencing new transactions basedon relevant Group policies and the Bando Group Codeof Conduct, which stresses the overriding importanceof adhering to the law and corporate ethics. In
addition, the Group maintains an internal reporting
system to thoroughly raise awareness of the necessityof avoiding any actions that are illegal or contrary tocorporate ethics. In the event that a business partneris revealed to be an antisocial organization, the Groupwill immediately dissolve its relationship with thisorganization.

The Company has established the Internal Audit
Department, an independent organization thatis staffed by four people reporting directly to thepresident. The Internal Audit Department implements
systematic internal audits which include the internal
control system (covering internal control system
for financial reporting) of all departments as well as
domestic and overseas affiliates. Accompanied by the
Audit & Supervisory Committee members in principle,
the Internal Audit Department conducts on-site audits
at Company’s business facilities and affiliates, theresults of which are reported to the president, directors
not serving as members of the Audit & Supervisory
Committee and the Audit & Supervisory Committee.

Annual Report 201843

Message from an External Director

Management (As of June 21, 2018)

Priming Diversity in Terms of Ideas and Viewpoints,
and Following Progress on BF-2

Board of Directors

It is two years since Bando Chemical Industries, Ltd.

as possible. Moreover, through candid exchanges

transitioned to a Company with an Audit & Supervisoryof opinions with the accounting auditor, I can strive

Committee. The Committee was established withto ascertain the current state of affairs through mythree external directors, but in June 2018, we added

five senses. Based on this, within my allocation of

an internal director as the Committee member. We

roles and cooperation with other external directors,

President and Representative Director:

Member of the Board:

Member of the Board:

Member of the Board:consider this structure more effective for auditing and

I respond simply as a person with no experience of

Mitsutaka Yoshii

Shinji Kashiwada

Atsushi Someda

Katsuhiko Hata

supervision.

the knowledge that is assumed of people inside theApr. 1981 Joined the Company
Apr. 1999 General Manager, Automotive Parts Marketing
Department, Power Transmission Belt Division
May 2003 President, Bando Europe GmbH
Apr. 2007 General Manager, Procurement Department, theCompany
Apr. 2009 General Manager, Corporate Planning
Department
Apr. 2011 General Manager, Industrial Products Division
President and Director (Representative Director),
Bando-Scholtz Corporation
Jun. 2011 Director, the Company
Apr. 2013 President and Director (Representative Director)(Present)

Apr. 1985 Joined the Company
Nov. 2002 General Manager, Automotive Parts Marketing
Department, Tokyo Branch Office, Marketing
Division
Apr. 2007 General Manager, Osaka Branch Office,Marketing Division
Apr. 2009 General Manager, Power Transmission Belt
Division
Jun. 2011 Director (Present)
Apr. 2013 General Manager, Mid-Term Plan Promotion
Department and Tokyo Branch Office
Apr. 2018 Senior Managing Executive Officer (Present)

Apr. 1987 Joined the Company
Apr. 2008 General Manager, Research Laboratories forPower Transmission Technologies
Apr. 2013 General Manager, Automotive Parts DivisionJun. 2017 Director (Present)
Apr. 2018 Senior Executive Officer (Present)
General Manager, Manufacturing Planning
Center (Present)

Apr. 1985 Joined the Company
Apr. 2009 General Manager, Research and Development
CenterApr. 2013 General Manager, Elastomer Products Business
Administrative Headquarters
Apr. 2017 Senior Executive Officer (Present)
Apr. 2018 General Manager, New Businesses Promotion
Center (Present)
Jun. 2018 Director (Present)

directors draw on their diverse experience to provide

Member of the Board (Audit & Supervisory
Committee Member):Member of the Board (Audit & Supervisory
Committee Member):Member of the Board (Audit & Supervisory
Committee Member):multifaceted advice on these issues enabling all

Kyosuke Nakamura

Member of the Board (Audit & Supervisory
Committee Member):

Takahiro Matsusaka (External)

Takashi Shigematsu (External)

Haruo Shimizu (External)

members to share a common direction on the matters.

Apr. 1981 Joined the Company
Dec. 2003 General Manager, Personnel and General Affairs
Department
Apr. 2011 General Manager, Corporate Information
Systems Department
Apr. 2013 General Manager, Corporate Planning
Department
Apr. 2014 Senior Executive Officer
Jun. 2014 Director
Jun. 2018 Director(Audit & Supervisory Committee
Member) (Present)

Apr. 1974 Joined Taiyo-Kobe Bank Ltd.
Oct. 2000 Sannomiya Corporate Marketing Manager,
Sakura Bank, Limited
Jun. 2002 Executive Officer and Himeji Corporate Marketing
Manager, Sumitomo Mitsui Banking Corporation(retired in June 2004)
Jun. 2004 Senior Executive Officer, Ginsen Co., Ltd.
Jun. 2012 Representative Director, Kobe Tochi Tatemono
Co., Ltd.
Jun. 2014 External Audit & Supervisory Board Member(full-time) of the Company
Jun. 2016 External Director of the Company (Audit &Supervisory Committee Member) (Present)

Apr. 1975 Joined Toyota Motor Co., Ltd.
(Current Toyota Motor Corporation)
Jun. 2004 Managing Officer (retired in June 2009)
Jun. 2005 Outside Director, FUJITSU TEN LIMITED (Current
DENSO TEN Limited)
Jun. 2010 President and Director, FUJITSU TEN LIMITED(Representative Director)
Jun. 2014 Chairman and Director, FUJITSU TEN LIMITED(Representative Director)
Jun. 2015 External Director of the Company
Outside Director, Murata Manufacturing Co., Ltd.
(Present)
Jun. 2016 External Director of the Company (Audit &Supervisory Committee Member) (Present)

Feb. 1970 Joined Daikin Mfg. Co., Ltd. (Current EXEDY
Corporation)
Jun. 1994 Director
Jun. 1996 General Director, Sales DivisionJun. 2006 President and Chief Executive Officer
Apr. 2015 Chairman
Jun. 2016 Advisor
External Director of the Company (Audit &Supervisory Committee Member) (Present)
Aug. 2016 Outside Director, Suminoe Textile Co., Ltd.
(Present)

In this role, external directors (the Committee

Company, being up-front about what I do not know

members) adopt different perspectives to therather than pretending to know it. In so doing, I believe

operational side of the business, ones that I think act

I can function as a primer for diversity in terms of ideas

as checks on the application of traditional modes

and viewpoints.

of thinking. I often refer to it as one of challenging
established preconceptions.

The Company moved into the second stage of its
mid-to-long term business plan in the fiscal year ending

The Company has previously created

March 31, 2019. As we reflected on the results of theopportunities for the executive side to provide

first stage and set the direction for the second stage,

explanations on the background and course ofas an external director I raised issues from a diversity

proposals prior to Board meetings so that more active

perspective and gave my opinion. As we go forward, I

discussion can be conducted in the meetings. Now,

will continue to support the Company’s progress on thethis has been further developed so that explanations

second stage as an external director, looking to see if

are given not only for proposals of the Board meeting

the Company is managing to transition from the ideason that day, but also an outline of mid-to-long termof the past.

issues and matters under discussion. The external

Promoting greater diversity is one of the issues
that we must address as a company. In Japan, diversity
is often taken to mean promoting the advancement

Takahiro Matsusaka

of women and foreign nationals. Personally, however, I

External Director(Chair of the Audit &Supervisory Committee)

feel the most critical aspect of it is the need to cultivatea broad diversity of ideas and viewpoints.
While I have 30 years’ experience in banking andthen spent 10 years as an executive of insurance agency
and real estate companies, it is difficult for me to makePresident:

Senior Managing Executive Officer:

Senior Executive Officers:

Executive Officers:

any contribution as somebody with experience in

Mitsutaka Yoshii

Shinji Kashiwada

Atsushi Someda
Katsuhiko Hata
Takayuki Nagase
Kazuyuki Mamba
Satoshi Matsuo

Katsuya Yamaguchi
Tsutomu Okada
Yuji Honda
Hisashi Yagi
Tadahiko Noguchi

making or selling products. What I can do is participate
in various meetings within the Company and make site
visits to deepen my exchanges with as many people

44

Corporate Executive Officers

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201845

Management’s Discussion and Analysis
Operating Environment
During the fiscal year ended March 31, 2018, the U.S. economy
was robust and the European economy continued on a moderate recovery trend. In Asia, exports drove growth as the global
economy rebounded. In China, internal and external demand
was brisk. Japan’s economy also continued to recover.
In the automotive sector, a key market for the Bando
Group, automobile production volume was down in the U.S.
and Europe compared with the previous fiscal year. In China,
automobile output held steady. In Japan, production volume
was higher than the previous fiscal year, thanks in part to theintroduction of new models.

Business Overview
Fiscal 2017 was the final year of the first stage of the Group’s“Breakthroughs for the future” mid-to-long term businessplan covering the period from fiscal 2013 to fiscal 2022. We
focused our efforts on increasing sales of transmission belts
for automobiles, two-wheeled vehicles, agricultural equipment and general industrial machinery, and of light-duty
conveyor belts. We continued to develop the Group’s sales
channels, centered around Japan, China and the ASEAN
region.
The Company aggressively developed new products
for fields outside current businesses. For example, we
commenced sales of LASHINGBITE™, a tension meter for
cargo lashing belts that helps improve the reliability of cargotransportation by numerically managing the tension of thelashing belt with high precision. Moreover, we developed
BANDO DEC-20™, a dust particle measuring device thatfacilitates the visualization of falling dust, a problem faced inclean rooms.

To improve profitability, we worked to reduce costs andenhance global competitiveness by developing optimum
global purchasing, production, and distribution functions.
In recognition of our strategic focus on employee
health, the Ministry of Economy, Trade and Industry and
the Tokyo Stock Exchange selected Bando as a Health &Productivity Stock Selection for a second year in a row.

Operating Results
Consolidated net sales in the fiscal year ended March 31,2018 were ¥91,263 million, an increase of 3.3% year on
year.
Operating income rose 7.5% year on year to ¥6,336
million, owing to higher gross profit due in part to foreignexchange rate factors, despite a worsening in the cost to
sales ratio due to higher raw material prices.
The SG&A ratio improved by 0.4 percentage
points over the previous fiscal year to 23.2% due to theimpact of cost reduction efforts while the cost to sales
ratio increased by 0.1 percentage point to 69.8% due tothe aforementioned impact of increased raw materials
prices. As a result, the operating margin increased by 0.2
percentage points to 6.9%.
Profit attributable to shareholders of the parent fell
3.1% year on year to ¥4,796 million. This mainly reflected
increases in foreign exchange losses and impairment loss.

Operating Results by Business Segment
Automotive Parts Business
In Japan, automobile production volume was higher thanthe previous fiscal year, leading to an increase in sales of

RIB ACE™ and other accessory drive power transmission
belts. However, sales decreased for accessory drive
power transmission system products, such as Automatic
Tensioners, owing in part to customers switching to local
procurement at their overseas bases.
Overseas, sales declined in China due to lower output by key customers. However, sales in the Asia region
expanded thanks to an aggressive pursuit of customers for
its accessory drive power transmission belts and systemproducts, and variable speed belts for scooters.
As a result, segment net sales rose 3.4% year on
year to ¥41,701 million. Segment profit increased 11.1% to¥3,264 million.

industrial use and medical applications decreased, but
sales increased for wrapping films for automobiles andtwo-wheeled vehicles, a new application we have beendeveloping as a part of our business transformation
efforts.
In precision performance products, sales increased
for high-performance rollers and blades in accordancewith higher production at office equipment manufacturers,
which are key customers.
As a result, segment net sales increased 1.7% year
on year to ¥15,161 million. Segment profit rose 46.0% year
on year to ¥429 million, owing to the increase in sales, thechange in the sales mix, and other factors.

Industrial Products Business

Other BusinessIn industrial power transmission belts, sales of powertransmission belts for agricultural machinery and otherproducts were down in China. However, initiatives to boost
marketing in the ASEAN region, the U.S. and Europe
translated into higher sales of power transmission belts
for agricultural machinery and industrial machinery. In
Japan, private-sector capital investment-related demand
increased for robots and the like, resulting in higher salesof pulleys and power transmission belts for industrial
machinery.
In conveyor belts, sales decreased owing to a
decline in projects such as for coal-fired thermal power
generation plants in Japan.
As a result, segment net sales increased 2.9% year
on year to ¥32,369 million. However, segment profit
declined 4.2% to ¥1,907 million, owing mainly to weaker
demand for power transmission belts for agricultural
machinery in China.

Bando is engaged in other business, such as the manufacture and sales of robot-related devices. Sales in otherbusiness increased 8.9% year on year to ¥2,732 million,
but segment profit fell 25.9% to ¥317 million due in part toupfront investments for the development of new products.

Advanced Elastomer Products Business

Financial Position
Total assets as of March 31, 2018 amounted to ¥99,236
million, an increase of ¥2,541 million year on year. Current
assets increased by ¥1,536 million due to increases inelectronically recorded monetary claims — operating andinventories, while other assets increased by ¥1,005 million
due to factors including increases in property, plant andequipment and investments in securities.
Total liabilities decreased ¥2,113 million comparedwith the previous fiscal year-end to ¥35,842 million. Current
liabilities increased by ¥270 million due to an increase inelectronically recorded obligations — operating, while

In high-performance film products, sales of films for

Net sales*
Net sales*

Profit attributable to shareholders of the parent*

Operating income*Operating income*Net assets
Total assets*
Net assets(¥ million)
100,000(¥ million)
100,000

93,43484,81180,00095,39686,372

93,27285,772

91,26388,387
95,39693,434

6,000

6,000

80,00060,000(¥ million)
5,000(¥ million)
8,000(¥ million)

5,056
5,518

4,000

60,000

4,571
4,797

5,961

5,518
5,896

6,336
4,797

4,095

4,951

4,796

4,386

4,280
3,757

4,000

(¥ million)
100,000

89,623

94,70090,76596,69599,23680,0003,000

60,0002,000

40,0001,000

20,0004,000

40,000Total assets

56,77749,27755,20558,741

63,39440,0002,000
2,000

20,00020,000
0
0

2014
2011

2015
2012

2016
2013

* Fiscal year endings are March 31.

46

2017
2014

BANDO CHEMICAL INDUSTRIES, LTD.

2018
2015

0
0

2014
2011

2015
2012

2016
2013

2017
2014

2018
2015

0

2014

2015

2016

2017

2018

0

2014

2015

2016

2017

2018

* Fiscal year endings are March 31.

Annual Report 201847

Management’s Discussion and Analysis

long-term liabilities decreased by ¥2,383 million due tofactors including a decrease in long-term debt resulting
from a contractual repayment.
Net assets increased ¥4,653 million from the previous
fiscal year-end to ¥63,394 million. Retained earnings
increased ¥3,449 million due partly to the recording of profit
attributable to shareholders of the parent, and accumulated
other comprehensive income increased ¥1,258 million.
As a result, the equity ratio increased 3.1 percentage
points from 60.5% at the previous fiscal year-end to 63.6%.

Capital Investment and Fund Procurement
Capital investment undertaken in the fiscal year ended
March 31, 2018 totaled ¥5,131 million. Major capital investment items are shown below. The financing required was
obtained from the Company’s own funds and borrowings.
Business
Segment

Amount(¥ million)

Main Activities

Automotive
Parts Business¥2,869Installed new — and expanded or
upgraded existing — manufacturing
equipment

Industrial
Products
Business

988

Installed new — and expanded or
upgraded existing — manufacturing
equipment

Advanced
Elastomer
Products
Business

574

Installed new — and expanded or
upgraded existing — manufacturing
equipment

Other

700

Installed new system and researchequipment

Total¥5,131

Cash Flow
Net cash provided by operating activities totaled ¥8,995
million, compared with ¥6,800 million provided in theprevious fiscal year, with the recording of income before
income taxes of ¥6,413 million.
Net cash used in investing activities was ¥4,802
million, compared with ¥4,639 million used in the previous
fiscal year. This was due to the booking of ¥4,465 million
in expenses for the purchases of property, plant andequipment, ¥575 million in expenses for the purchases ofintangible assets, and other factors.
Net cash used in financing activities was ¥4,606
million, compared with ¥422 million provided in theprevious fiscal year, largely reflecting payments on longterm borrowings of ¥3,048 million and cash dividends paid
totaling ¥1,347 million.
As a result, cash and cash equivalents as of March
31, 2018 totaled ¥18,477 million, down ¥458 million
compared with the previous fiscal year-end.

48

BANDO CHEMICAL INDUSTRIES, LTD.

Earnings Forecasts for the YearEnding March 31, 2019
In the fiscal year ending March 31, 2019, there areconcerns that worldwide trade will shrink and economies
will weaken if there is an entrenchment of protectionist
government policies, such as U.S. tariffs on importsof steel and aluminum. However, the global economy
is projected to remain strong, supported by growing
demand in the U.S. In Japan, exports are on the rise, andcorporate capital investment is likely to hold steady amid
the redevelopment of urban areas. There are also signs ofa turnaround in consumer spending. We therefore expect
the Japanese economy to continue recovering on theback of brisk domestic and overseas demand.
Under these circumstances, the Group aims toachieve the management targets it has set for the second
five-year stage (BF-2), which spans from the fiscal year
ending March 31, 2019 to the fiscal year ending March
31, 2023, of its 10-year mid-to-long term business plan
“Breakthroughs for the future” that has been in motion
since the fiscal year ended March 31, 2014. For the
fiscal year ending March 31, 2019, we are forecasting
consolidated net sales of ¥94,000 million, up 3.0% year
on year, operating income of ¥6,500 million, up 2.6%, andprofit attributable to shareholders of the parent of ¥5,000
million, up 4.3%.

Basic Policy Regarding
the Distribution of Profits
Our basic policy is to enhance the return of profits andaim for making stable dividend payments targeting a
consolidated payout ratio of 30% over the near term, whileconsidering our earnings and financial position. Internal
reserves are invested over the long term in such areas as
R&D; new product, production technology and market
development; the strengthening of business structure;internationalization; and the expansion into new businessdomains, to further enhance corporate value.
We paid a year-end dividend of ¥15 for the fiscal
year ended March 31, 2018 following a comprehensive
consideration of the aforementioned policies, operating
results for the fiscal year, and other factors. We plan to paya ¥16 year-end dividend for the fiscal year ending March
31, 2019. Combined with the interim dividend, this will
result in a planned annual dividend of ¥32 per share.

Business Risks
The Group considers the following to be important risks related to the performance and financial
position of the Bando Group that could have a material effect on the decisions of investors. The
forward-looking statements listed in this document are based on judgments made by the Group asof March 31, 2018.

Increasing Overseas Transactions
The Group primarily uses foreign exchange contracts
to hedge the risks associated with the significant
number of foreign currency receivables it currently
carries, and will implement other appropriate measures
to hedge against such risks in the future. Nevertheless,the Group’s performance could be adversely affectedby fluctuations in foreign currency exchange rates.
In addition, the Group’s performance and financial position could be adversely affected by changes
in economic conditions in individual regions, despite
efforts to strengthen its overseas production and sales
systems.

Recalls
As a components manufacturer, the Company delivers
items to automotive, office automation equipment,
consumer product and other manufacturers.
In addition, its subsidiaries and affiliates mainly
manufacture, process and sell these parts. Considering
product quality to be of paramount importance formaintaining and developing current business operations, the Group focuses on implementing various
initiatives to ensure product quality to the maximum
extent possible. However, recalls and other actions
could arise in cases where defects in automobiles andother items are caused by products (components)
supplied by the Group.
In such cases, the Group will likely be required tocover all obligatory legal or contractual costs of recalls
and other actions, which could adversely affect theGroup’s performance.

Raw Material Market Fluctuations andProcurement
The Group negotiates with business partners regarding
delivery dates and prices by closely examining market
prices as well as supply-demand circumstances, butthere could be sharply rising raw material prices
accompanying higher crude oil prices. Accordingly,
the Group promotes research on alternative materials
to stabilize supply and demand; revises and increases
product prices in response to rising raw material
prices; and strengthens measures to reduce overall
costs. Nevertheless, the Group’s performance could
be adversely affected by a downturn in demand, or
prolonged increases in material and/or fuel prices thatexceed expectations.

Earthquakes and Other Natural Disasters
There are indications that a major earthquake could
occur in the Tokai, Tonankai or Nankai regions ofJapan. In addition, the potential for typhoons andfloods exists. In the event of such a disaster, businesssites including the Nankai Plant could sustain damage
to production or other facilities, potentially leading toa temporary cessation of operations. Accordingly, eachof the Company’s four plants has formulated a business
continuity plan (BCP) based on the assumption thatit could be damaged under such circumstances.
The BCPs include creating mechanisms to minimize
disruptions to operations, notably the formulation of
repair plans and the supplementary supply of productsby overseas plants. Nevertheless, the Group’s performance could be significantly impacted by disasters,
depending on the size of the disaster.

Annual Report 201849

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2017

Thousands of
U.S. dollars

Millions of yen

2018

Assets2017

2018

Time deposits

2018

2017

2018

¥ 1,145¥ 1,421$ 10,778

1,804

3,111

16,980		Trade

9,966

9,259

93,801

Liabilities and Net Assets
Current Liabilities:

Current Assets:
Cash and cash equivalents

Thousands of
U.S. dollars

Millions of yen¥ 18,477¥ 18,936$  173,900

471

587

4,433

Short-term borrowings
Current portion of long-term debt
Notes and accounts payable:

Notes and accounts receivable:
		Trade18,951

18,824

178,362

		Other

161

261

1,519

		

Electronically recorded obligations — operating

4,441

3,407

41,798

2,835

1,789

26,678		Construction and other

(38)

(39)

(355)

11,89010,904

111,899

Deferred tax assets

570

551

Other current assets

1,021
54,337

		Electronically recorded monetary claims — operating		

Allowance for doubtful accounts

Inventories

Total Current Assets

3,660

3,627

34,449

Income taxes payable

926

1,065

8,713

Allowance for stock-based compensation

16

—

146

5,360

Provision for loss on liquidation of subsidiaries and associates

—

10

—

988

9,610

Other current liabilities

3,086

2,873

29,03952,801

511,406

25,044

24,773

235,704

9,287

10,98287,403

40

29

376

Net defined benefit liability

1,123

2,007

10,572Other long-term liabilities

348

163

3,277

10,79813,181

101,628

10,952

10,952103,077

Total Current Liabilities
Long-term Liabilities:
Long-term debt
Allowance for stock-based compensation

Property, Plant and Equipment:
Land

6,417

6,436

60,394

Buildings and structures

28,30627,857

266,409

Machinery and equipment

58,41256,960549,758

Construction in progress

1,795

1,168

16,892Other

14,25013,701

134,121		

Authorized: 187,000,000 shares

109,180

106,122

1,027,574

		Issued 2017 and 2018 — 47,213,536 shares

Accumulated depreciation(79,771)(76,985)(750,783)

Capital surplus

2,995

2,995

28,190Property, Plant and Equipment, Net

29,40929,137

276,791

Retained earnings

49,37245,923

464,673(1,421)(1,356)(13,374)

61,89858,514

582,566

2,553

2,060

24,026—1—

Total Long-term Liabilities
Net Assets:
Common stock

Treasury stock, at cost		2017 — 1,367,394 shares		2018 — 1,415,326 shares

Total Shareholders’ Equity
Accumulated other comprehensive income
Other Assets:

Unrealized gains on available-for-sale securities

Intangible assets

1,564

1,549

14,719		

Deferred gains on hedges

Investments in securities

6,845

6,183

64,419		Foreign currency translation adjustments(1,545)(1,644)(14,546)

Investments in affiliates

5,598

5,305

52,692		

Remeasurements of defined benefit plans

257

(410)

2,426

Total Accumulated Other Comprehensive Income

1,265

7

11,906

231

220

2,182

Total Net Assets

63,39458,741

596,654

Total Liabilities and Net Assets¥99,236¥96,695$933,986

Deferred tax assets

178

404

1,671

Other, net

1,305

1,316

12,288

Total Other Assets

15,49014,757

145,789¥ 99,236¥ 96,695$  933,986

Total Assets

50

		

BANDO CHEMICAL INDUSTRIES, LTD.

Non-controlling interests

Annual Report 201851

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Net Assets

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Consolidated Statements of Income

2018

2017

2018

Net Sales
Cost of Sales
Gross profit¥91,263
63,731
27,532¥88,387
61,596
26,791$858,954
599,824
259,130

Selling, General and Administrative Expenses
Operating income

21,196
6,336

20,895
5,896

199,493
59,637

273
(208)
477
(340)
48
(112)
(185)
124
77
6,413

239
(232)
592
(41)
80
(63)
(18)
100
657
6,553

2,566
(1,958)4,486(3,197)448(1,059)(1,739)1,178
725
60,362Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange losses, net
Gain on sale of investments in securities
Loss on disposal of property, plant and equipment
Impairment loss
Other, net
Income before income taxes
Income Taxes:
Current
DeferredProfitProfit Attributable to Non-Controlling Interests
Profit Attributable to Shareholders of the Parent

1,675
(93)
1,582
4,831

1,737
(164)
1,573
4,980

15,763(873)
14,89045,47235¥ 4,79629¥ 4,951336$ 45,136

Yen¥104.6930.00

2017¥107.9026.00$   0.99
0.28

Thousands of
U.S. dollars

Millions of yen

52

2018

Consolidated Statements of Comprehensive Income

2018

2017

2018

ProfitOther Comprehensive Income:Unrealized gains (losses) on available-for-sale securities
Deferred gains on derivative instruments
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income¥ 4,831¥ 4,980$ 45,472

496
(1)
47
667
34
1,243
¥ 6,074

629
0
(365)
823
(112)
975
¥ 5,955

4,664
(5)
441
6,281
319
11,700$ 57,172¥ 6,053
21¥ 5,92926$ 56,975
197

Comprehensive Income Attributable to:Shareholders of the parent
Non-controlling interests

BANDO CHEMICAL INDUSTRIES, LTD.

Balance at April 1, 2016

Millions of yen

Number ofshares ofcommonstock
outstanding

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costUnrealized
gains (losses)
Foreign
on available- Deferredcurrency
for-sale gains (losses) transaction
securities on hedges adjustments

Remeasurementsof defined
benefitplans

Noncontrollinginterests

Total
net assets

47,214¥10,952¥2,970¥42,091¥  (257)¥1,431¥ 1¥(1,170)¥(1,232)¥ 419¥55,205

Profit attributable toshareholders of the parent

—

—

—

4,952

—

—

—

—

—

—

4,952

Cash dividends

—

—

—

(1,120)

—

—

—

—

—

—

(1,120)Purchases of treasury stock

—

—

—

—

(1,643)

—

—

—

—

—

(1,643)

Disposal of treasury stock

—

—

5

—

544

—

—

—

—

—

549

Change in ownership interestof the parent arising fromtransactions with
non-controlling shareholders

—

—

20

—

—

—

—

—

—

—

20

Net change in the year

—

—

—

—

—

629

0

(474)

822

(199)

778

47,214

10,952

2,995

45,923(1,356)2,060

1(1,644)

(410)

220

58,741

Profit attributable toshareholders of the parent

—

—

—

4,796

—

—

—

—

—

—

4,796

Cash dividends

—

—

—

(1,347)

—

—

—

—

—

—

(1,347)Purchases of treasury stock

—

—

—

—

(156)

—

—

—

—

—

(156)

Disposal of treasury stock

—

—

—

—

91

—

—

—

—

—

91

Net change in the year

—

—

—

—

—

493

(1)

99

667

11

1,269

Balance at March 31, 2018

47,214¥10,952¥2,995¥49,372 ¥(1,421)¥2,553¥—¥(1,545)¥  257¥ 231¥63,394

Unrealized
gains (losses)
Foreign
on available- Deferredcurrency
for-sale gains (losses) transaction
securities on hedges adjustments

Remeasurementsof defined
benefitplans

Noncontrollinginterests

Total
net assets$19,389$ 5$(15,472)$(3,855)$2,074$552,858

—

—

—

—

—

—

45,136

Balance at April 1, 2017

Thousands of U.S. dollars

U.S. dollars

2018
Per Share of Common Stock
Basic net income
Cash dividends

Thousandsof shares

Thousands of
U.S. dollars

Millions of yen

Balance at April 1, 2017

Treasurystock,
at costCommonstock

CapitalsurplusRetainedearnings$432,215 $(12,765)$103,077$28,190

Profit attributable toshareholders of the parent——

45,136

Cash dividends——(12,678)

—

—

—

—

—

—

(12,678)

Purchases of treasury stock

—

—

—

(1,470)

—

—

—

—

—

(1,470)

Disposal of treasury stock

—

—

—

861

—

—

—

—

—

861

Net change in the year

—

—

—

—

4,637

(5)

926

6,281

108

11,947

Balance at March 31, 2018

$103,077$28,190 $464,673 $(13,374) $24,026$—$(14,546)$2,426$2,182$596,654

Annual Report 201853

Consolidated Statements of Cash Flows

Corporate Data/Investor Information

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2018 and 2017

Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

¥ 6,413¥ 6,553$ 60,362(1,912)(1,523)(17,997)

12

85

117

4,384

4,101

41,258

Amortization of goodwill and negative goodwill

10

9

91

Impairment loss

1,739

Cash Flows from Operating Activities:
Income before income taxes
Adjustments for:
Income taxes paid
Income taxes refunded
Depreciation and amortization

Corporate Data
Company name:Bando Chemical Industries, Ltd.
April 14, 1906

Founded:Capital:¥10,952 mil. (As of March 31, 2018)

Consolidated sales:¥91,263 mil. (FYE March 2018)

Employees (Consolidated): 4,128 (As of March 31, 2018)

185

18

(Decrease) increase in allowance for doubtful accounts

(4)

19

(38)

Increase in provision for stock-based compensation

26

29

248

Decrease in provision for loss on liquidation ofsubsidiaries and associates

(11)

(17)

(99)

Increase in liability for retirement benefits

80

277

754

Foreign exchange losses (gains), net

67

(52)

628

Shares Authorized:

187,000,000

Equity in earnings of affiliates

(477)

(592)

(4,486)

Loss on sales and disposal of property, plant and equipment

109

58

1,030

Shares Outstanding:

47,213,536

Increase in notes and accounts receivable — trade(1,189)(2,519)(11,194)

Increase in inventories(1,033)(542)(9,721)

Increase in notes and accounts payable — trade

1,749

172

16,463

Changes in assets and liabilities:

Other, net
Net Cash Provided by Operating Activities

586

724

5,505

8,995

6,800

84,660Investor Information (As of March 31, 2018)

126

(50)

1,184

(4,465)(4,004)(42,021)

30

105

283

Purchases of intangible assets

(575)

(515)

(5,413)Purchases of investments in securities

(51)

(20)

(478)

Proceeds from sales of investments in securities

136

110

1,278

Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment

(3)

(265)

(29)

(4,802)(4,639)(45,196)

Decrease in short-term borrowings

(207)

(115)

(1,948)Proceeds from long-term borrowings

100

553

941

Payments on long-term borrowings

Other, net
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:(3,048)(529)(28,691)

Proceeds from issuance of bonds

—

5,957

—

Redemption of bonds—(3,000)—(155)(1,642)(1,462)

Purchases of treasury stock

95

367

895

(1,347)(1,119)(12,678)

Cash dividends paid to non-controlling interests

(9)

(26)

(89)

Other, net

(35)

(24)

(317)

(4,606)422(43,349)

Proceeds from sales of treasury stock
Cash dividends paid

Net Cash Provided by (Used in) Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents

(46)

(83)

(432)

Net Increase (Decrease) in Cash and Cash Equivalents

(459)

2,500

(4,317)

Cash and Cash Equivalents at Beginning of Year

18,936

16,436

178,217

Cash and Cash Equivalents at End of Year

¥18,477¥18,936$173,900

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
Japan Trustee Services Bank, Ltd.
(trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Master Trust Bank of Japan, Ltd.
(trust account)
Nippon Life Insurance Company
GOVERNMENT OF NORWAY(including 830,004 shares of treasury stock)

Number of Shareholders:

7,444

Securities Traded: Tokyo Stock Exchange, Inc.
Composition of Shareholders
Financial institutions/
Securities firms:
19,544,058
42.14%

Individuals and others:
13,282,872
28.64%Cash Flows from Investing Activities:
Decrease (increase) in time deposits

Principal Shareholders (As of March 31, 2018)

Capital Stock

Other corporations:
7,795,072
16.81%
Foreign corporations:
5,761,530
12.42%

65

158

Investment
ratio
(%)

3,742
2,315

8.06
4.99

2,002

4.31

2,000
1,800

4.31
3.88

1,582

3.41

1,575

3.39

1,352

2.91

1,174
963

2.53
2.07

Notes: 1. Investment ratios are calculated after deducting treasury stock(830,004 shares).
2. Investment ratios listed above are rounded down to two decimal places.

6,986

Number of shareholders

234

Number ofshares held
(thousands)

Stock Price
(Yen)

1,600
1,400
1,200
1,000
800
600
400
200
0

4

7

2013

10

1

4

7

2014

10

1

4

7

2015

10

1

4

7

2016

10

1

4

7

2017

10

1

2018

* Since the Company conducted a 2-to-1 stock consolidation on October 1, 2016, the results from April 2013 to August 2016 are presented
with adjusted values.

54

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201855

www.bandogrp.com/eng

Cover:

Corporate image, “ON THE RUN!”
Bando Chemical Industries, Ltd. is focusing on new business creation in the second stageof its “Breakthroughs for the future” mid-to-long term business plan.
The corporate image of “ON THE RUN!” was designed for the second stage, which
commenced in April 2018, depicting an athlete (the Company) made up of various productsof the current and new businesses of Bando, racing toward the next growth stage with theentire company working together as one.

6-6, Minatojima Minamimachi 4-chome, Chuo-ku, Kobe, 650-0047, Japan