Annual Report 2017
Year ended March 31, 2017

Breakthroughsfor the Future

Profile

Management Philosophy

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 torubber and plastic processing technologies in such areas as power transmission belts
and systems, belts used in precision equipment, and multimedia parts made fromurethane and resins.

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 bycreating and providing products and services of added value and high quality.
With pride as members of the Bando Group, we will contribute to society
as a whole.

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

Our Corporate Goals
Everyone in the Bando Group will strive to make it into a company that:

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

1. Values its customers and is trusted by them.
2. Allows for the material and spiritual growth of all its employees.
3. Contributes, and is of use, to society.

Contents

Group Vision 21

ProfileInnovative Vision of the Bando Group for the 21st Century

Value for Society 

2History of Innovation 

8

The Bando Group will employ energetic individuals with professionalism to lead the

Our Strength

10company in the expansion of our core business in global markets, and passionately

Products 

12pursue new business opportunities with a strong sense to protect the world

Global Network 

14environment.

Highlights16
Fiscal 2016 Topics

18

Guidelines for the Bando Group

Message from the President 

19

1. Employ energetic personnel with professionalism, and reform business activities.

Special Feature26

2. Minimize control and maximize actions.

Review of Operations 28

3. Delegate authority, and make optimum decisions in a prompt manner.

Sustainability Management/CSR 

34

Sustainability Management/Corporate Governance 

36

4. Maximize profits from existing products.

Financial Section

44

Corporate Data/Investor Information 

53

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 toconsolidated financial statements, please refer to the Company’s Annual Report on the website:
http://www.bandogrp.com/eng/ir/library/annual.html

5. Invest in new entrepreneurial ventures.
6. Strengthen the personnel and evaluation systems to encourage personnel to feela sense of worth in relation to their work.
7. Strengthen initiatives to reduce environmental impact as we move towards therealization of a low-carbon society.

Annual Report 2017

1

Value for Society

Promoting More Environmentally -friendly andComfortable Vehicles

VALUE

Automobiles and two-wheeled vehicles continue to proliferate and advance around the world.
As the world No. 1 maker of power transmission belts for automobiles and two-wheeled vehicles*,Bando has continued to develop auxiliary drive belts that excel
in energy conservation and silent operation.

Highly efficient powertransmissions that
improve energy-saving
performance* OEM field for both automobiles and two-wheeled vehicles (scooters)

Bando AVANCE™
Bando AVANCETM, a dry belt for CVT madefrom composite materials, offers improved
power transmission efficiency and increasedtransmission system energy savings. As
a result, it has been adopted in a large
number of compact cars and large scooters.

RIB ACETM(for automobile engines)

Double Cog Belts(for large scooters, etc.)
BSC – BANDO SMOOTH COUPLERTM(for automobile engines)
2

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20173

Value for Society

Contributing to Efficient Securing of Food Resources
As the world population grows, efficiently securing food resources has become an urgent social issue.
Mechanization of farming to raise productivity is an important challenge, increasing needs for larger
agricultural machinery with greater horsepower.
Using its knowledge of the agricultural field accumulated over many years, Bando develops andmanufactures agricultural machinery belts well suited for high-load power transmissions and greater
horsepower. In this way, we play a role in ensuring efficient acquisition of food resources.

VALUE

Exceptional durability inharsh environments
Red™ SII V Belts for agricultural
machinery
The Red™ SII V Belts for agricultural
machinery help improve combine harvesting efficiency with a service life that isabout 4.5 times longer than standard belts
in reverse bending applications and underhigh ambient temperatures of up to 70°C.

H-P Series Agricultural Raw Edge Cog Belts

Agricultural W Series Wrapped Belts

Agricultural V-belts with Profiles(for high load power transmission)

4

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20175

Value for Society

Constantly Expanding the Value Provision Domain
Bando is advancing the development of new businesses in non-belt fields in its mid-term business plan
while focusing on innovation targeting advanced needs in its original belt businesses.
Using an original production method to eliminate seams, BANDO PS BELTSTM* offer advanced precisionin power transmission to the delight of our customers in the precision equipment field including
automatic ticket gates, ATMs, and robotics.
* Precision seamless belt

VALUE

Space-saving, energysaving precision powertransmission
BANDO PS BELTSTM
Seamless, thin, flexible and lightweight,
BANDO PS BELTSTM realize precision powertransmission with smooth and vibration-freerotation. They contribute to more compact
and energy-efficient precision equipment.

BANDO PS BELTSTM

6

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20177

History of Innovation
Bando Chemical Industries’ history is one of innovation in which we have delivered solutions
addressing issues faced by our customers and society by developing products that are the firstof their kind in Japan or even the entire world.

Developed BANROPE, the first V
belts in Japan

Developed MONOPLY BELT, the firstsingle-ply conveyor belts in Japan*‌The photo is of the current Ultra
Abrasion Resistant Conveyor Belt.

1906

1932

1964

1921
Developed the first rubber conveyor
belts in Japan

1959
Developed SYNCHROBELT,
the first toothed belts in Japan*‌The photo is of SUNBELT, the rubber belts
developed in 1913

Milestones in
the Automobile
Industry*
Milestonesin the TwoWheeled
Vehicle Industry*

1907: Birth of the firstgasoline-powered
automobile produced
entirely in Japan
1902: Major U.K.
manufacturer began
production of 2.2
horsepower engine
motorcycle

Milestones in
the Agricultural
Machinery
Industry*

Developed BANDO AVANCETM, theworld’s first dry belt for continuously
variable transmissions (CVT)Hyper Flat Drive (HFD) SystemTM
won the Director-General’sPrize, the Agency for Natural
Resources and Energy

1988
1972

Developed SUNLINETM-A,
the first light-duty conveyor
belts in Japan

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

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

2014
1995

2016
2015

2020

Developed C-STRECHTM, a completely
new elastic strain sensor

Breakthroughs for the Future

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

1908: Birthof the Ford
Model T

1914: First
passenger car
in Japan

1947: Major Japanesemanufacturer started
production of lighttrucks and small cars

1909: Major U.S. manufacturer
began mass production and salesof 7.2 horsepower V-twin engine
motorcycle
1931: Bando
ChemicalIndustries
launched sales ofhusking roller

1955: Major Japanesemanufacturer launched salesof compact four-wheeled
passenger vehicles

1997: Major Japanesemanufacturer
launched sales ofmass-produced hybrid
automobile

1949: Major Japanese manufacturer
began producing motorcycles (two-stroke,
98cc engine)

1947: Major Japanesemanufacturer developed,
manufactured and beganselling farm tillers

1960: Major Japanesemanufacturer developed
and commercialized
Japan’s first riding tractor
for cultivating fields

2004: Annual
global productionof automobiles
surpassed 60 million
2003: Annual global
production of twowheeled vehicles
surpassed 30 million
units

1967: Major Japanese manufacturer began
production of rice transplanter and combine
harvester. Together with the tractor, this created afully-mechanized rice cultivation system.

2013: Annual
global productionof automobiles
surpassed 80 million
2011: Annual global
production of twowheeled vehicles
surpassed 60 million
units

1995: Major Japanesemanufacturer launched sales ofhigh-speed tilling tractor series* ‌Global automobile production data provided by IHS Markit. Global two-wheeled vehicle production data prepared based on a survey by FOURIN, Inc.
Statements about major manufacturers were prepared using information obtained from the companies’ websites.

8

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20179

Our Strength
We would like to discuss the current strengths of Bando as we continue to innovate,
expand business scale and enhance profitability in growth markets.

Achieving the Top Market Share through the World’s Highest Level of Technology and Know-how
We have built up a good reputation basedon our meticulous service to satisfy individual
customer needs, world-leading levels oftechnology and know-how, and stable supply
capabilities. As of the end of fiscal 2016, wecommand the top global share for OEM supply
of belts for four-wheeled and two-wheeledvehicles*.

1

No.

Global Share

OEM supply of belts for four-wheeled
and two-wheeled vehicles*Two-wheeled vehicles refer to scooters.

Expertise in Environmentally-friendly Products

Further expansion“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.

Ten products in oureco moving portfolio“Breakthroughs for the Future”

HFD System
Ceptor-VI S8M type
W-1500 Agricultural V-Belts

Energy-Saving Red,
Energy-Saving POWER ACE

Based on our management
philosophy and the strengths that weHigh-load V-ribbed Belts
G-CARRY

Our customers, and society as a whole, have welcomed
the added value provided by our “eco moving” brandof environmentally-friendly products. We had ten “ecomoving” products in our portfolio in fiscal 2016, mostly
belt products, and plan to expand our line-up further.

— To our Stakeholders —have cultivated throughout our history

ECO CARRYTENSION MASTER

of innovation, Bando will continue

BANDO GLANMESSE(incombustible)

to address social issues and create

Polyolefin thin films

unwavering value.

Top Share in OEM Supply of Power Transmission Belts for Injection Molds and Machine Tools in Japan
Our power transmission belts for injection molds andmachines have been highly evaluated for their highpower transmission capability and durability, and we
hold the top share in Japan for these products.

Mitsutaka Yoshii

1

President and Representative Director,
Bando Chemical Industries, Ltd.

No.

share in Japan
Synchronous belts
for high-load
power transmission
applications

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 fiscal 2016, our equity ratio was at
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

–2,000–4,000–6,000

2013

2014

2015

2016

2017

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

10

BANDO CHEMICAL INDUSTRIES, LTD.

11

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.

Automotive Parts Business

Main Products

Net sales bybusiness segment
RedTM SII V Belts for
agricultural machineryWe excel in OEM business in the four- and two-wheeled vehicle sectors, where we hold a large
global market share.
We develop environmentally-friendly power transmission systems and provide comprehensive
product lines suitable for various fields.

2017Core Technologies Rubber and resins compound design, dispersion and processing
technologies, power transmission system technologies

46.5%

Power Transmission BeltsHFD SystemTM

STS/HP-STS/CeptorTM-VI

BANCOLLAN™
Long Synchronous Belts

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

for four- and two-wheeled vehicles

Main Products

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

G-CARRYTM

TM

RIB ACE

V-Ribbed Belts

VS Belts

Automatic Tensioners

TENSION MASTERTM

Pipe Conveyor Belts

Mr. COOKTM F2224 Non-Stick
Belts

Advanced Elastomer Products Business

Lightweight Jointless P-Series
Belts

Net sales bybusiness segment

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 BusinessNet sales bybusiness segment

Industrial Power Transmission Belts

2017

17.2%

Strengths and Characteristics

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

Core Technologies Elastomer and resins compounding design, dispersion and processing• 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

2017

36.3%

Main Products

for industrial and agricultural machinery
Strengths and Characteristics• Development of energy-efficient belts and belts suited to high power machinery• Global production and sales network, with 21 bases in 15 countries

12

BANDO CHEMICAL INDUSTRIES, LTD.

BANCOLLANTMBLADE G-ModuleTM

Development Rollers

BANDO GLANMESSETM

Medical films

Annual Report 201713

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.

Bando Chemical Industries’
Global Network

Asia

Bando Jungkong Ltd. Bando Korea Co., Ltd.

Bando Siix Ltd.

Sanwu Bando Inc.

Philippine Belt
Manufacturing Corp.

Quality Management System

Bando Manufacturing(Vietnam) Co., Ltd.

Sixteen of our domestic divisions and overseas business locations have received ISO
9001 certification, while 10 of our domestic and overseas business locations haveobtained ISO/TS 16949 certification.

Environmental Initiatives
Bando Manufacturing Pengeluaran Getah Bando Kee Fatt Industries(Thailand) Ltd.*(Malaysia) Sdn. Bhd.
Sdn. Bhd.

Bando (Singapore)
Pte. Ltd.

P.T. Bando Indonesia

BL Autotec(Shanghai), Ltd.

Bando Manufacturing(Dongguan) Co., Ltd.

All of our domestic production bases have introduced solar power generation systems.

Bando (India) Pvt. Ltd.

China

Bando Belt (Tianjin)
Co., Ltd.

Bando (Shanghai)Management Co., Ltd.*

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

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

Japan*

Europe, America & other

Head Office
Bando Belt
Manufacturing(Turkey), Inc.

Bando Iberica, S.A.

Bando Europe GmbH Bando USA, Inc.

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

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

Business Locations

Sales by region

Overseas sales
Overseas sales ratio

Overseas sales ratio:

Overseas sales(¥ million)
50,000(as of March 2017)48.20%

Japan: 51.80%

14

BANDO CHEMICAL INDUSTRIES, LTD.

(%)
50

40

Asia: 25.12%

30,00030

China: 11.61%

20,00020

10,00010

02008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Nankai Plant

Kakogawa Plant

Overseas sales ratio

40,000Europe, America &other: 11.46%

Ashikaga Plant
Tokyo Branch Office

Kobe Head Office/
R&D Center

Wakayama Plant/
Power Transmission Technical Research Center

Sales and Fabrication Service Affiliates

Manufacturing Affiliates

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

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

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

0

Annual Report 201715

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

1.50

Exchange rate transition
USD
(%)
160

THB

EUR

1.40
80,000

6,000

6

0.4

18,0000.3

12,000

0.2

6,000

0.1

1.30

140

1.20

60,0004,000

24,000

1.10
1.00

4

40,000

120

0.90
0.80

2,000

20,000

2

100

0.70
0.60

0

0

2012 2013 2014 2015 2016 201702012 2013 2014 2015 2016 20172012 2013 2014 2015 2016 2017

Capital investment

Free cash flow

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

6,000

4,500

4,000

3,000

Net assets

02012 2013 2014 2015 2016 2017

Energy consumption

0.0

0.50

’12/12’13/12’14/12’15/12’16/12 ’17/302012 2013 2014 2015 2016 2017

(t)
8,000

Shareholders’ equity*
Equity ratio
Shareholders’ equity(¥ million)
60,000

Annual dividend per share
Payout ratio

Equity ratio
(%)
62.5

Annual dividend per share
(yen)
30

(%)
60

ROA
(%)
14

25

50

12

55,00060.0

50,000

57.5

20

40

45,000

55.0

15

30

40,00052.5

12035,00030,0002012 2013 2014 2015 2016 2017

50.0

5

47.5

0

60
2,000

2012 2013 2014 2015 2016 201720
10

2012 2013 2014 2015 2016 2017

025,0002012 2013 2014 2015 2016 20172012 2013 2014 2015 2016 201702012 2013 2014 2015 2016 2017

Ratio of foreign employees

ROE

(t)
250

(%)
1.20

(%)
60

200

1.00

50

0.80

40

0.60

30

0.40

20

0.20

10

10

150

8

target

100

4

50

2
0

0

30

Occupational accident
frequency rate

VOC emission volume

6

10

Emission volume

90

ROA
ROE

Payout ratio’16/12 ’17/5

4,000

20,0000’15/12

(t)
150

6,000

30,0002012 2013 2014 2015 2016 2017’14/12

PRTR substance emission
and transfer volumes
Transfer volume(KL/GJ)
35,000’13/12

Waste generation

40,0000’12/12* Exchange rate base is 2011/12.

Total assets

80,0001,500’11/12* Raw materials cost (indicators) base is 2012/12.

60,0002,000

802012 2013 2014 2015 2016 201702012 2013 2014 2015 2016 201702012 2013 2014 2015 2016 201702012 2013 2014 2015 2016 2017

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

16

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201717

Fiscal 2016 Topics

Message from the President

Product Development and Others

Management

Developed BANDO FR-BIOSTM, a conveyor belt for

Selected as a “2017 Health &Productivity Stock Selection”

biomass power generation plants

March“We are working to strengthen ourcurrent businesses and also create new
businesses as we transition to the nextstage of growth.”

February
Palm kernel shell used inbiomass power generation plant

January

Commenced sales of POWER ACETM
Aramid Combo, combined narrow V-belt

2017
DecemberNovember

Decided on a relocation andexpansion in conjunction with theconstruction of a new Vietnam Plant

October

POWER ACETM Aramid Combo

September
Rendering of new Vietnam Plant

Held Bando Techno Fair 2016

AugustDeveloped FR7000 Series,
flame and heat resistant conveyor belts

Developed Free CrystalTM, optically clear adhesive sheets

President and Representative Director,
Bando Chemical Industries, Ltd.

July

June

Flame and heat
resistant conveyor belts

Mitsutaka Yoshii

Transitioned to a Company with an
Audit & Supervisory Committee

May

April

March
2016
Free CrystalTM

18

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201719

Message from the President

Performance in Fiscal 2016

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

Profit second highest ever despite lower net sales*Figures adjusted for the reverse stock split the Company conducted on
October 1, 2016, consolidating two shares of common stock into one
share.

Consolidated earnings
Fiscal 2015 results

Fiscal 2016
Results

YoY¥93,272 million¥88,387 million−4,885

Operating income¥5,961 million¥5,896 million−65

Profit attributable toshareholders of the parent¥4,386 million¥4,951 million+565

Net sales”Breakthroughs for the Future” Mid-to-Long Term Business Plan: Overall Image and Progress
Aiming to be a standout global supplierIn fiscal 2013, the Bando Group embarked on
its 10-year mid-to-long term business plan
“Breakthroughs for the future.” Under this plan, we
aim to provide value-added products that contribute to environmental preservation, energy conservation and higher functionality, further refining ourcore technologies and reliable product quality in

20

BANDO CHEMICAL INDUSTRIES, LTD.

the fields of rubber, elastomers, and resins—where
we have built up extensive expertise since theCompany’s founding—to become a standout supplier of belts and high-performance products in the
global market. Our priority measures are based on
improving the profitability of current businesses in
the first five years (BF-1), and expanding sales fromnew businesses in the second half (BF-2).

“Breakthroughs for the future”New business expansion
mid-to-long term business plan

Sales/profits

The Bando Group focused on strengthening sales
systems and promoting customer development
as part of initiatives targeting specific sectors andregions during fiscal 2016, the fourth year of thefirst stage of our mid-to-long term business plan,“Breakthroughs for the future.” In the Automotive
Parts Business, net sales fell 5.9% year on year to¥40,321 million, reflecting the impact of a stronger
yen (segment sales in Asia rose in local currency
terms) and lower sales in the U.S. due to more
profit-conscious efforts to secure new orders. In
the Industrial Products Business, despite higher
sales in China and other Asian markets, net sales
declined 5.0% to ¥31,446 million due to lower salesof conveyor belts in Japan, also reflecting a more
profit-conscious marketing approach. Net sales
in the Advanced Elastomer Products Business fell

4.5% to ¥14,914 million, reflecting the impact of thecontraction in the OA equipment market amid an
ongoing shift to paperless operations.
Consolidated net sales fell 5.2% year on yearto ¥88,387 million. Although we were able to lower
our cost to sales ratio by reducing costs, operating
income fell 1.1% to ¥5,896 million due to theoffsetting impact of fluctuations in foreign currency
exchange rates. Profit attributable to shareholdersof the parent increased 12.9% to ¥4,951 million,
reflecting lower foreign exchange losses, anincrease in share of profit of entities accounted forusing the equity method and a reduction in income
taxes. Our profit performance was the best since
fiscal 2008. We declared a year-end dividend of ¥14
per share, taking annual dividends to ¥26 per share(both figures were ¥2 higher* than in fiscal 2015).

Expand global business/increase added value
To achieve the vision for 2022
BF-1 (five years)
2013

BF-2 (five years)
2017

2018

2022

Aiming to be a standout global supplier•Global development of belt and high-performance product businesses•Provide value-added products that contribute to environmental preservation, energy conservation and higher functionality• Leverage core technologies and reliable product quality in rubber, elastomers and resins

for the final year of BF-1 due to various factors, including
slower growth of emerging economies; delayed progress in developing and launching new products and in
implementing cost-reduction measures; and an increasein SG&A expenses due to our upfront investments toreform production and improve management quality.
In fiscal 2017, leveraging the progress we havemade during the first four years of BF-1 on the core
themes of the evolution and deepening of current
businesses and the creation of new businesses, we will
use these successes as the foundation for better performance in BF-2 (fiscal 2018 to fiscal 2022), while also
seeking to address any outstanding issues. Specifically,
while accelerating efforts to entrench the evolution anddeepening of current businesses and promote cost
structural reforms, we will seek to foster developmentof new businesses as future pillars of the Bando Group
based on application of core technology.

Progress of BF-1 in the first stage
Representing the first step as part of our goal to
become a standout global supplier, our targets for the
first stage of the plan (fiscal 2013 to fiscal 2017) for the
final year ending March 2018 are net sales of ¥100 billion
and operating income of ¥10 billion (operating margin:10%). Specifically, while promoting the evolution anddeepening of current businesses, we are enhancing our
R&D and market development efforts to help establish
new businesses. These initiatives are based on the five
BF-1 guidelines of evolution of global market strategy;
product evolution; evolution in manufacturing; newbusiness creation; and evolution in management quality.
In the first four years of the plan, our overseas
sales have increased by 20%, or ¥7.1 billion, as we havesteadily expanded the Group’s global operations.
However, it will be hard to achieve the numerical targets
BF-1 Numerical targets and progress(¥ billion)

Fiscal 2012 results

Fiscal 2017
forecasts

vs. fiscal 2012

BF-1 targets(fiscal 2017)

Deviation fromforecasts

Net sales

85.7

91.0

+5.3

100.0

−9.0

Operating income

4.0

6.0

+2.0

10.0

−4.0

Operating margin

4.8%

6.6%

+1.8%

10.0%

−3.4%

Annual Report 201721

Message from the President

Key Initiatives for Final Year of BF-1
Strengthen the Automotive Parts Business
The upward trend in sales from products forfour-wheeled vehicles stalled in fiscal 2016, despite
substantially higher sales of accessory drive powertransmission belts for four-wheeled vehicles inIndia and ASEAN. This reflected an increase in the
production of belt-free vehicles such as hybrids inJapan, along with lower production at some major
customers in China and South Korea. In fiscal 2017,
we will reinforce our earnings base by launchingproducts for new applications and establishinginnovative manufacturing methods.
In terms of introducing products with new
applications, demand is growing for drivetrain
components such as synchronous transmission
belts for use in hybrids and electric vehicles. We
aim to focus all our development resources on suchproducts to expand sales from new applications.
With automotive accessory drive power transmission
belts, based on the outlook for continued growth inglobal sales of gasoline-powered vehicles, our focus
is on establishing innovative manufacturing methods and on realizing an optimized global production
structure to boost earnings further.

In belts for two-wheeled vehicles, our originalhigh-value-added products such as Double Cog
Belts™ are proving popular with customers. We
now supply these products in India and Vietnam tolocal producers as well as Japanese manufacturers.
With new production facilities coming on stream,
we expect to augment both our production capacity
and competitiveness in these two markets in fiscal
2017 as we seek to reinforce our share-leading
global position.

Net sales of belts for
two-wheeled vehicles (India)

Net sales of belts for
two-wheeled vehicles (Vietnam)

200

200

250

150

47 %

+

61 %

150

+

112 %

200

150
100

100
100

50

0

22

50

2013

2014

2015 2016 2017
(Year ended March, 31)*Net sales in 2013 as 100(After eliminating effects of foreign
currency fluctuations)BANDO CHEMICAL INDUSTRIES, LTD.

0

50

2013

2014

In our Industrial Products Business, a key focus
remains on generating higher earnings from belts
for agricultural machinery. With this sector enjoying
solid growth in China and Asia, we aim to boost
earnings by expanding our sales channels andintroducing new belts for use in large agricultural
machinery.
In conveyor belts, we have improved margins
by focusing on high-value-added lines such as fire/
heat-resistant belts to avoid price competition.
Going forward, we will seek to strengthen our
profitability further using the new production line
at the Kakogawa Plant (operational since 2016) andmore precisely targeted marketing efforts.
We are also trying to grow the portfolio of thisbusiness based on sales expansion of highvalue-added products, such as the Bando Wiper
Edge™ EX seal blade, a world-first polyurethane
product for use with machine tools.
 et sales of industrial power transmission belts
N(China)
200

+

62 %

150

100

50

0

2013

2014

2015

2016
2017
(Years ended March, 31)*Net sales in 2013 as 100(After eliminating effects of foreign currency fluctuations)Double Cog BeltsTM

Net sales of automotive parts(India/ASEAN)+

Strengthen the Industrial Products Business2015 2016 2017
(Year ended March, 31)*Net sales in 2013 as 100(After eliminating effects of foreign
currency fluctuations)

0

2014

2015

2016
2017
(Year ended March, 31)*Net sales in 2014 as 100(After eliminating effects of foreign
currency fluctuations)

Belts for agricultural machinery

Strengthen the Advanced Elastomer Products BusinessIn the Advanced Elastomer Products Business, wehave been shifting focus toward the field of optoelectronics materials due to the ongoing contractionof the market for office automation (OA) equipment,
which has been our key target. For example, theBANDO MDEC™ cleaning system for eliminating
and collecting micro-dust by contact charging
control on the roller surfaces is one of the products

Bando Wiper EdgeTM EX

that we expect to drive future growth.
Our polyurethane synchronous belts such as
the BANCOLLAN™ STS Belts are extremely flexible
and abrasion-resistant, and allow good power transmission/conveyance while keeping equipment cleanof rubber dust. We see market demand for theseproducts growing in a range of areas such as precision instruments and robotics. We have developed
new manufacturing methods for these belts at the
Ashikaga Plant to lower mass-production costs, andAnnual Report 201723

Message from the President

we remain focused on developing new products.
With our high-performance films, we are not
only selling them as standalone items, but also
marketing them as decorative high-value-added
materials for use in construction or automotive
applications.

Polyurethane belts

BANDO MDECTM

the thermal resistance of power semiconductors,
digital household appliances and other electronic
devices. We also expect the applications and salesof these products to grow as the electronics shift
in the auto market accelerates. Elsewhere, in April
2017 we began sales of LASHINGBITE™, a tension
meter for lashing belt for cargo that we developed

jointly with major logistics firm Sankyu Inc. This
product improves the reliability of transportation byhelping prevent the collapse of loaded cargoes. We
have also started selling C-STRETCH™, an elasticstrain sensor, for applications related to equipmentused in the welfare sector. This is another productwhere we expect applications to broaden over time.

Progress of new businesses creation
Target areas

Cost structural reform
Cost structural reform is a critical backbone of ourefforts to strengthen each of the Group’s businesses.
We have been working to reduce costs during BF-1
with the aim of achieving profitability targets of a
10% operating margin, cost to sales ratio of 70% or
less, and SG&A expense ratio of 20% or less.
Over the past two years we have improved thecost to sales ratio significantly, lowering it by about 4
percentage points with a mixture of cost reductions
and sales mix improvements, backed by a decreasein raw material prices. We achieved the BF-1 targetof 70% or less in fiscal 2016. Since further reductions
in raw material prices are likely to be difficult going
forward, we aim to make further improvements
based on the aforementioned innovative manufacturing methods and an optimized global production
structure.

New business creation
In new business creation, we are honing our coretechnologies for compounding, dispersing andcombining elastomers and resins, and combining
these with new technologies to develop new products and markets so that we can build up anotherbusiness to act as a next-generation pillar for theCompany.
In BF-1, environmental protection, energy

24

BANDO CHEMICAL INDUSTRIES, LTD.

Our SG&A expense ratio is still rising due to
IT investments aimed at improving management
quality and boosting efficiency. Our aim is to lower
the ratio to 20% or less once investments peak andwe start to reap related cost benefits. As long as thecost to sales ratio stays at 70% or less, this will resultin an operating margin of at least 10%.
Trend of cost to sales ratio(%) 75

Cost reduction,
Sales mix
improvement,
etc.

74

Fluctuationinraw material
prices

71
70
69
2013

2014

2015

2016

2017

Research

Product development/
Customer assessment

Massproduction

Optically clear adhesive
sheetsFree Crystal™

Final customer assessment (launch
expected in first half of fiscal 2017)

Metal nanoparticle ink
FlowMetal™

Customer assessment, mass production
scale-up complete (launch expected
in second half of fiscal 2017)

Thermal conductive sheets

Mass production and sales begun forindustrial equipment applications
Development of new applications underway

Metal nanoparticle
bonding material
FlowMetal™

Under assessment by multiple customers
to use in bonding with power devices andLEDs

Tension meter forlashing belt for cargo
LASHINGBITE™

Sales launched

Robotics

Industrial robotic devices
ZEUS/GIGA (Supporting
communications standards)

Assessment for DeviceNET/
Profibus/Ethernet, etc., complete,
launch in fiscal 2017

Welfare/nursing care

Elastic strain sensor
C-STRETCH™

Sales launched for welfare sector
Development of new applications underway

Optoelectronics

Automotive/
transportation

73
72

Product development

Powerelectronics(Year ended March, 31)conservation and high performance have been
the key objectives for product R&D. Over the last
four years, we have focused on the sectors of
optoelectronics, automotive/transportation, powerelectronics, robotics, and welfare/nursing care. We
now have a range of new products that are either onsale or approaching mass production.
For example, we have begun mass productionof thermal conductive sheets for industrial equipment applications. These products can help lower

Corporate governance andCSR activities to support value creation
As can be seen with these new businesses, and as
embodied in the Group’s management philosophy,
our strength is fundamentally committed to reacting
flexibly to change and addressing social issues
through constant innovation. We will continue tofocus on improving corporate governance and CSR
activities to support our unswerving commitment tovalue creation.

In 2016, to strengthen corporate governance,
we adopted a new governance structure based on a
Company with an Audit & Supervisory Committee.
In our CSR activities, our aim is to build trust andto foster harmonious coexistence with all our
stakeholders, including customers, employees,
suppliers and other business partners, shareholders
and investors, and local communities.
In closing, I ask all our stakeholders for theircontinued support and understanding.

Annual Report 201725

Incremental Innovation

Radical Innovation

Special Feature
Labor

Our Innovation in 3 Domestic Plants

Improve
Productivity
Resources

Kakogawa Plant

Creating New Value

CapitalAshikaga Plant

High-productivity, integrated line delivering highInnovative production lines via development ofprecision urethane belts and related manufacturing methods

quality and precision using new production technol-

High-productivity, small-scale molding line delivering highogy after installation of state-of-the-art equipment

quality based on rubber compounding and new production

Renewed conveyor belt production line

Addressing
social issues

Elastic strain sensor C-STRETCHTM

Strain sensor using highly elastic, super-soft rubber• Measures changes in small loads without interfering with movement• ‌Potential applications in medical/nursing care field (such as rehabilitation-related products) and in sportswear (for data analysis)

technologies and automation

Nankai Plant

Innovative production lines based on development of transmission belts and related
manufacturing methods
High-productivity, energy-saving line delivering highSocial Issue: Develop sensor adapted to clinical setting

quality with low losses based on rubber compounding
and new production technologies and automation

Our Solution: ‌Use rubber/urethane compounding, film processing and dispersion technologies(for conductive materials)“Cost Competitiveness Innovation”
We renewed production lines at our three plants inJapan, concentrating investment in the BF-1 period.
These moves improved three aspects of productivity,
namely labor (from automation), resources (from loss
reduction) and capital (from restricted capex), thereby
increasing the Group’s overall competitiveness.

Hisashi Samejima

The product of Bando’s excellent technical expertise,
C-STRETCHTM is a high-value-added innovation with greatsocial contribution potential. We are now developing
it for applications in the fields of medical, welfare andnursing care.

Katsuhiko Hata
Senior Executive Officer,
General Manager, R&D Center

Senior Executive Officer

26

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201727

Review of Operations

Automotive Parts Business
Established innovative manufacturing methods anddeveloped new product applications
Atsushi Someda

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 and the Middle East

• Relatively strong customer base with customers diversified to a certain degree• ‌Lower prices and less usage of rubber belt products fromthe proliferation of hybrid cars, downsizing turbocharged
vehicles, and small vehicles

Performance for the Fiscal Year Ended March 31, 2017
The segment achieved net sales of ¥40,321 million, down 5.9% from the previous fiscal year. Results by region are as follows.

Europe, America & otherNet sales decreased 12.6% year on year, owing to weaker sales ofaccessory drive power transmission belts, which reflected order-taking
with an emphasis on profitability in the U.S., despite higher sales ofrepair parts and high levels of automobile output.

China
Net sales declined 15.8% from the previous fiscal year, owing to lower
output at key customers and a decline in sales due to appreciation of
the yen, even though sales increased in the repair market thanks toaggressive marketing activities.

Asia
Net sales edged down 4.1% from the previous fiscal year due to yen
appreciation, despite higher sales of variable speed belts for scootersin the ASEAN region, as well as higher sales on a local currency basis
from brisk production at automakers in Thailand.

(¥ billion)
50

42.7

40

40.2

Net sales declined 2.5% year on year due to weaker sales on lower
production volumes at major customers amid sluggish sales of small
vehicles and an increase in belt-free vehicles, despite steady sales
in the repair market thanks to aggressive marketing activities andthe introduction of new products, amid a decrease in the number of
automobile inspections.
Segment profit fell 11.6% year on year to ¥2,937 million,
owing mainly to an increase in imported raw material prices due toforeign currency translation effects in China and Asia, as well as yen
appreciation.

Europe, America & other
China
Asia

30

Japan

20
10
0

2016

2017

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

Segment Profit of Automotive Parts
Business(¥ billion)
4

3.3

3

2.9

• ‌Further growth in business opportunities in Asian
countries such as India and Vietnam where demand isbrisk for motorcycles• ‌More demand for rubber belts apart from those for
auxiliary drives due to the increased use of electronics inautomobiles

Sales of Automotive Parts Businessby Region

Key Initiatives for the Fiscal Year Ending March 31, 2018
In products for four-wheeled vehicles, we aim to expand
sales in aftermarket parts (China and Latin America) andacquire OEM business with Chinese automakers andEuropean automakers. Moreover, we plan to enhance thevalue added to mainstay products and develop products
for fields other than auxiliary drive applications, while
establishing innovative manufacturing methods for mainstay products and creating an optimal global production
system through advances in automation.

In products for two-wheeled vehicles, we aim to
expand business with Japanese and non-Japanese OEMsin Asia. In Vietnam, we plan to strengthen production
capacity and cost competitiveness by constructing newplants and ramping up production.
Moreover, we aim to boost sales in the repair market
by approaching sales agencies based on a market strategy
map.

2

Environmental Initiatives

1

Japan

• ‌Spread of automobiles without traditional engines, suchas electric vehicles, over the longer term• ‌Growth in high-value-added business opportunities, suchas improvements in silence and transmission efficiency

0

2016

2017

At the Nankai Plant, which manufactures accessory drive
power transmission belts for four-wheeled vehicles, we
replaced mercury lamps with LED lighting (65 lights) forenergy savings of 60,000 kWh annually and a CO2 reduction of 29.8t-CO2 per year*.
* Fiscal 2016 results

Inside Nankai Plant(Measurement of illuminance/temperature/power)

28

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201729

Review of Operations

Industrial Products Business
Focus on expanding sales in China and Asia,
improving profitability of conveyor belts
Satoshi Matsuo
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 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

Performance for the Fiscal Year Ended March 31, 2017• ‌Development of markets in the U.S., China andSoutheast Asia

For the fiscal year ended March 31, 2017, net sales declined 5.0% year on year, to ¥31,446 million. Results by region are
as follows.

Europe, America & other
Despite higher sales on a successful effort to expand sales in Turkey,
net sales fell 10.9% compared with the previous fiscal year, owing
primarily to weak demand related to capital investment in the U.S.,
a decline in sales of industrial power transmission belts due to thestrong yen, and weaker sales in South America.

Sales of Industrial Products Businessby Region(¥ billion)
35

33.0

30

31.3

Europe, America & other
China

25

Asia

20

Japan

15
10

China
Net sales rose 15.1% year on year from stronger sales of power transmission belts for agricultural and industrial machinery from efforts toboost sales, as well as higher sales of light-duty conveyor belts.

Asia
Net sales rose only 0.6% year on year on account of yen appreciation,
despite higher sales of power transmission belts for industrial andagricultural machinery on stronger sales in Thailand, Vietnam andIndia, as well as stronger demand for light-duty conveyor belts in
Thailand and Vietnam.

Japan
Net sales decreased 6.7% from the previous fiscal year, reflecting
weaker sales of conveyor belts due to order-taking with an emphasis
on profitability, and lower sales of industrial power transmission belts
due to weaker demand related to capital investment.
Segment profit was ¥1,992 million, a year on year increase of
3.5%, owing to higher profits on order-taking in conveyor belts that
focused on profitability, stronger sales of power transmission belts
for agricultural machinery and industrial power transmission belts, aswell as light-duty conveyor belts in China, and higher sales of powertransmission belts for agricultural machinery and light-duty conveyor
belts in Thailand and Vietnam.

30

BANDO CHEMICAL INDUSTRIES, LTD.

5
0

2016

2017

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

Segment Profit of Industrial Products
Business(¥ billion)
2

1.9

1.9

1

0

2016

2017

• ‌Expansion in applications overseas, other thanautomobiles

Key Initiatives for the Fiscal Year Ending March 31, 2018
In industrial power transmission belts, we aim to increase
sales of power transmission belts overseas by expanding
sales channels in China and Asia. We will focus on boostingsales of high value-added products, such as Wiper
EdgeTMEX and belts for large agricultural machinery. We
plan to build an optimized global production structure byadvancing capital investment in stages at overseas bases.
In conveyor belts, we aim to improve profitability of

conveyor belts through production line innovations, while
differentiating characteristic products from those of rivals
and developing services. We will also advance marketing
tailored to each market for light-duty conveyor belts, andstrengthen our ability to propose solutions with products
and services through consolidation of domestic sales
companies.

Environmental Initiatives
We promote modal shift*1 by using railway containers totransport raw materials and parts between the Kakogawa
Plant, which manufactures conveyor belts, and the
Ashikaga Plant, resulting in the reduction of 80.3 tons of
CO 2 annually compared with previously used forms oftransportation*2.
*1 ‌Emissions of greenhouse gasses from railway transportation are about
one-eighth the amount from truck transportation.
*2 Fiscal 2016 results

Railway containers with Bando’s corporate logo

Annual Report 201731

Review of Operations

Advanced Elastomer Products Business
Developing new markets withhigh-value-added products
Takayuki Nagase
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 such as PS(Precision Seamless) Belts; new business creation• ‌Catering to customer needs by adding functionality based on leveraging characteristics of polyolefin,
polyvinyl chloride, polyester and polyurethane plastics
Performance for the Fiscal Year Ended March 31, 2017

Key Initiatives for the Fiscal Year Ending March 31, 2018

For the fiscal year ended March 31, 2017, net sales declined 4.5% year on year, to ¥14,914 million. Results by region are
as follows.

Precision Parts
Sales of cleaning blades, resin components and other products
fell due to the impact of lower production by our main customers,
office equipment manufacturers in Japan and overseas. Overall,sales fell 7.2% year on year.

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

High-Performance Films

15.5

14.7

2016

2017

Precision Parts

10

High-Performance Films
Sales of films used in construction materials and industrial materials
increased, reflecting solid demand for domestic non-housing
applications. While sales of films for medical applications also rose,sales to major customers of films for decorative displays declined.
Total sub-segment sales fell 0.1% year on year.
Segment profit fell 61.3% to ¥294 million, reflecting lower
sales of precision parts and negative changes in the sales mix forhigh-performance films.

• ‌Using more highly processed, high value-added functional films to enter building materials and automotive
markets

In functional films, we will seek to expand sales of more
highly processed, high valued-added product lines
rather than focusing on the stand-alone films business.
Specifically, in the market for building materials, we will
differentiate our products from competitors’ as ones thatcombine functionality and design with the convenienceof small batch customization. In the automotive sector,
we will continue to market our films for use in motorcycle
accessories and in materials for vehicle interiors.

In precision parts, we are working to reduce ourreliance on the OA equipment market by developing nonOA applications for precision belts. We are also focused on
growing sales of strategic products for the optoelectronics
market, including abrasive films, Free CrystalTM, and theBANDO MDECTM cleaning system. Other initiatives include
reducing costs with the use of a new mass-production
method for urethane belts.

50Note: Sales represents the figure before
deduction of inter-segment
transactions

Segment Profit of Advanced Elastomer
Products Business(¥ billion)
1.0

Environmental Initiatives
The BANDO eco moving solar power facility installed at
the Ashikaga Plant, which makes advanced elastomers,
generates 2,328 MWh* of power annually. This is sold to

0.7

the Tokyo Electric Power Company Group under Japan’s
feed-in tariff system for renewable energy.
* Fiscal 2016 results

0.5

0.2
0

2016

2017

Solar panels at the BANDO eco moving solar power facility

32

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201733

Sustainability Management/CSR
Basic Stance on Corporate Social Responsibility (CSR)

Environmental Accounting

The Bando Group’s stance on CSR lies in business activities rooted in the positive contributions it makes to people’s lives
and the development of society, which are embodied in the Group’s management philosophy. In an effort to harmoniously
coexist with stakeholders—customers, shareholders and investors, employees, business partners (including suppliers
and retailers), and local communities—it is vital that we provide products and services that meet the needs of society
while undertaking business activities that help preserve the global environment. The chief objective of the Group’s CSR
activities is to gain the trust of society, which is consistent with its corporate culture and in keeping with its obligations tostakeholders.

The Company uses environmental accounting tools to determine and manage overall environmental costs, effectiveness,and volumes.

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.

CSR Promotion
Committee

President

Head office/business facilities
Group affiliates

Chair: Executive incharge of CSR

CSR Promotion
Committee
secretariat

CSR promotion themes
Major
achievements
CSR promotion themes
Major
achievements

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• Unit volume of energy consumption
increased by 3.0% (year on year)• Suppressed VOC emissions by 66%(compared to fiscal 2000)• Raised Eupatorium japonicum (thoroughwort), an endangered species, inKakogawa Plant• 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 “2017 Health & Productivity
Stock Selection”• Held mental health classes and walking
activities• Health and safety education and installationof disaster simulation equipment

General Administration Department• Supported volunteer activities• Participated in activities organized by local
resident associations, and cleanup, public
safety and disaster prevention initiatives• Conducted tours of Company facilities

ExpensesCapitalinvestment

Expenses

13,70859,5352,220

55,46649,51357,240Installed leakage prevention plate andwastewater treatment systems

3,344

3,623

6,688

1,761

17,6493,889

Upgrades to air conditioning

847

166,1142,476

147,780

3,770

151,340

Upstream/downstream cost

0

0

0

121

0

293

Administration cost

023,350025,174996

30,822

Environmental measurement, etc.

R&D cost

029,493022,6440

21,190

R&D for environmental products

Social activity cost

0

5,634

675

5,880

681

4,566

Greenification

Environmental remediation cost

0

1,177

0

669

0

640

17,899288,927

12,059259,495

72,609269,980

Pollution control

Total

Fiscal 2014

Fiscal 2015

Fiscal 2016

20,07722,64016,501

Upstream/downstream

0

0

0

Other

0

0

0

Total

20,07722,64016,501Business area

Waste disposal
Re-use of packaging materials

Promotion of Safety and Health Management Activities
In activities to manage safety and health, the Company aims to improve key performance indicators such as the rate of
frequency of injuries resulting in lost time, and engages in risk assessment, takes steps to ensure facility safety and provides
safety sensitivity improvement training.
With regard to safety sensitivity improvement training, classes on safety sensitivity are implemented to increaseawareness of work-inherent dangers, and nurture an ability to take appropriate action through simulated experiences ofthe danger of being caught or stuck in production equipment for which there is a high risk of danger with the Company’sequipment. Employees eligible for training were expanded to the entire Group in the fiscal year ended March 31, 2015, andsafety sensitivity improvement training is now conducted at all domestic plants, the R&D Center and domestic affiliates.
Moreover, the Company has introduced training programs that use disaster simulation equipment at overseas production bases. The equipment has been installed at eight key bases. In the fiscal year ended March 31, 2017, disaster simulationequipment was installed at Kee Fatt Industries Sdn. Bhd., an equity-method affiliate in Malaysia, and the employees there
were trained in using the equipment.

Finance and Accounting
Department; General
Administration Department• Convened procurement policy briefings• Published periodic CSR reports andbusiness reports, and provided informationon the Group’s websites• Held investor relations briefings(Work-related injuries resulted in lost time during
the fiscal year under review: 1 in Japan, 1 indomestic affiliates, 16 in overseas affiliates)

Safety sensitivity improvement training (the U.S.)

34

Main projects in fiscal 2016

Capitalinvestment(¥ thousand)Compliance/Business Ethics

Raw material-related wastes ±0% (year on year)
Packaging-related wastes –5% (year on year)

Fiscal 2016

Expenses

Environmental conservation benefit

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

• Reduced unit volume of waste generation

Fiscal 2015

Capitalinvestment

Resource recycling

CSR Promotion Themes and Major Achievements in Fiscal 2016

• Held Code of Conduct workshops foraffiliates• Provided information security training via
e-learning system and training on targetede-mail attacks

Environmental conservation costs

Business Global environmental
area cost conservation

CSR Management

Legal Compliance Committee(¥ thousand)Fiscal 2014

BANDO CHEMICAL INDUSTRIES, LTD.

Safety sensitivity improvement training (Malaysia)

Safety sensitivity improvement training (Turkey)

Annual Report 201735

Sustainability Management/Corporate Governance
Basic Stance on Corporate Governance

Audit & Supervisory Committee

In 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.

The Audit & Supervisory Committee is composedof three members serving as external directors andone member serving on a full-time basis. Under theCompanies Act, external directors must commanda majority on the Audit & Supervisory Committee.
Ensuring this ratio is higher than the statutory minimum
enables auditing and business oversight activities to be
multi-faceted and undertaken by experts from a variety
of fields.

Nominating Committee andCompensation Committee

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 ofseven members, with three of those seven members
serving as members of the Audit & Supervisory
Committee. The Board makes decisions concerning
basic management policies, important management
issues, and legally stipulated matters, as well as
monitoring the work performance of directors andcorporate executive officers. The Board’s three external
directors are charged with the independent oversightof business operations. As a rule, the Board meetsonce per month. In addition, the Company maintains
a corporate executive officer system to improve operational efficiency and speed, and has established theManagement Advisory Council to assist the president
with management decisions.

(2) ‌After the transition to a Company with an Audit & Supervisory Committee(from the conclusion of the 93rd Ordinary General Meeting of Shareholders until March 31, 2017)
Monetary Remuneration
Number of
Persons
Directors not serving as members of
the Audit & Supervisory Committee(of which, external directors)

Total Amount4(0)¥77 million(¥0 million)

4(0)¥19 million(¥0 million)¥97 million(¥0 million)

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

3(3)¥27 million(¥27 million)0(0)¥0 million(¥0 million)¥27 million(¥27 million)

Total(of which, external directors)

7(3)¥104 million(¥27 million)

4(0)¥19 million(¥0 million)¥124 million(¥27 million)

1. ‌As of March 31, 2017, 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. ‌After the transition to a Company with an Audit & Supervisory Committee,
the total monetary remuneration of directors not serving as members of theCommittee was limited to a maximum of ¥190 million per year, and the totalmonetary remuneration of directors who serve as members of the Committee
was limited to a maximum of ¥84 million per year.
3. ‌The total monetary remuneration for directors not serving as members of
the Committee includes a profit-linked component for the fiscal year ended
March 31, 2017, which is calculated based on the Company’s criteria for
profit-linked bonus (non-executive directors and part-time directors are noteligible for this benefit). Projected payments are included in reserves.

fiscal year ended March 31, 2017. The maximum number of stock award
points that can be awarded to executive directors during a single fiscal year is
108,000 points.
The profit-linked bonus and stock remuneration is compensation based on
annual performance from April 1, 2016 through March 31, 2017. Compensation
for the period from April 1, 2016 until the end of the 93rd Ordinary General
Meeting of Shareholders includes compensation after the transition to a
Company with an Audit & Supervisory Committee.
5. ‌In addition to the above, the salaries and bonuses for employees who concurrently serve as directors were as follows for the fiscal year from April 1, 2016 to
March 31, 2017.
Two employee salaries: ¥36 million
Two employee bonuses: ¥12 million
6. ‌In addition to the above, based on a resolution approved by the 81st Ordinary
General Meeting of Shareholders, the Company paid the following retirement
bonus to a retired board member.
One auditor: ¥5 million

4. ‌The total amount of stock remuneration is the amount of costs recorded for
19,949 stock award points (equivalent to 19,949 shares of company stock)
awarded to executive directors in accordance with performance during theManagement organization and corporate governance
General Meeting of Shareholders
Election

Board of Directors
Supervision

Election
Audit/Supervision

Appointment

AttendanceCompensation Committee(1) ‌Before the transition to a Company with an Audit & Supervisory Committee(from April 1, 2016 until the conclusion of the 93rd Ordinary General Meeting of Shareholders)

Audit & Supervisory Committee

Consultation

Nominating Committee

Directors(of which, external directors)

Audit/
Supervision

Assistant
Cooperation

President

Number of Persons

Total Compensation

Compensation Limit

6(2)¥23 million(¥4 million)¥240 million or less annually

Consultation
Management Advisory Council

Internal Audit Department/
Administrative division

CSR Promotion Committee

36

Audit & Supervisory Board Members(of which, external audit & supervisory board members)

4(3)¥13 million(¥8 million)

Total(of which, external directors and external audit & supervisory board
members)

10(5)¥36 million(¥12 million)BANDO CHEMICAL INDUSTRIES, LTD.

Total Compensation

Total AmountNotes:

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.
Decisions regarding director appointments
and compensation are made by a resolution of theBoard of Directors following deliberations by the
Nominating and Compensation committees. The
Audit & Supervisory Committee must approve theappointment of directors who will serve on it. The
Audit & Supervisory Committee also deliberates on the
remuneration of said directors.
In the fiscal year ended March 31, 2017, the total
amount of director and audit & supervisory board
member compensation is shown below.

Stock Remuneration
Number of
Persons¥7 million or less monthly

Legal Compliance Committee
Education

Business
execution

Audit

Accounting
audit

Accounting Auditors

Administration

Monitor

The Company and subsidiaries

Annual Report 201737

Sustainability Management/Corporate GovernanceInternal Control
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 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.

Compliance Promotion
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 an

38

BANDO CHEMICAL INDUSTRIES, LTD.

internal reporting system that includes external lawyers
as well as a service for providing information on theformulation, revision and abolition of relevant laws.

Internal Audits
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 principal,
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.

Basic Policy on Information Disclosure
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.

http://www.bandogrp.com/eng/ir/management/
disclosure.html

Disclosures Based on Principles of Japan’s
Corporate Governance Code
The Company complies with the principles of the
Corporate Governance Code.
Principle 1.4 Cross-Shareholdings
Cooperative relationships with a range of firms acrossfields such as financing, development, procurement,

production and sales are essential if the Company
is to prevail as a manufacturer of rubber and plastic
components against fierce global competition. The
Company’s policy is to own shares in suppliers where
it is judged that, in line with business strategy, maintaining or strengthening stable, long-term commercial
relationships with such firms would contribute to theenhancement of the Group’s corporate value over the
mid-to-long term.
Decisions relating to the exercise of any voting
rights pertaining to cross-shareholdings are taken
based on a general consideration of whether the
proposed voting resolution is (a) consistent with theaforementioned policy, and (b) likely to contribute to
the enhancement of the corporate value of the equity
issuer over the medium and long term.
Principle 1.7 Related Party Transactions
Any related party transactions involving the Company’s
directors or major shareholders must be approved andreported in accordance with internal rules to prevent
any transactions that would be detrimental to theinterests of the Company or shareholders. The statusof any transactions between the Group and directors
or their close relatives (within two degrees of kinship) is
subject to periodic reporting.
Principle 3.1 Full Disclosure
1. Details of the Company’s Management Philosophy
and mid-to-long term business plans are provided
in this Annual Report (p. 1, p. 20, p. 21) and on the
Company’s website.
http://www.bandogrp.com/eng/corporate/index.html
http://www.bandogrp.com/eng/ir/index.html
2. Details of the Company’s basic stance on corporate
governance and related policies are provided in thisAnnual Report (p. 36).
3. Remuneration of executive directors consists of basic
salary, a profit-linked bonus and performance-linked
stock remuneration, while non-executive directors
are entitled only to a basic salary. Limits on director
remuneration are determined by resolution of
the General Meeting of Shareholders. Current
maximum annual remuneration is set at ¥190 million
for all directors not serving as members of the
Audit & Supervisory Committee, and at ¥84 million
for all directors serving as Audit & Supervisory
Committee members. Besides this direct monetary

remuneration, directors are collectively entitled toannual grants of performance-linked stock remuneration of up to ¥50 million that are held in trust (thisexcludes non-executive directors). Any remuneration
for directors is separate to salary and bonuses towhich they are entitled for any concurrent position as
an employee.
		 To ensure greater transparency in determining
remuneration for directors, the Company has
instituted the Compensation Committee, which iscomposed of the president, a director serving as an
Audit & Supervisory Committee member, and an
external director. The Board of Directors approves
proposals for director remuneration based on
the deliberation and advice of the Compensation
Committee. With regard to the remuneration of
directors serving as Audit & Supervisory Committee
members, any proposals are approved by the
Board of Directors following Audit & Supervisory
Committee consultation.
4. Any internal candidates for appointment to a director’s position must satisfy the nomination criteria
listed below.
(1) Adequate comprehension of, and the ability
to implement, the Company’s “Management
Philosophy,” “Our Corporate Goals,”“Management Policy,” and the “Group Code of
Conduct”(2) Strong determination to maximize value forshareholders and corporate value, coupled withthe ability to display strong leadership(3) Ability to make practical, mature business decisions in a management capacity(4) Strong business ethics and high integrity andvalue
Candidates for nomination as external director musthave the capacity to provide independent oversightof operational execution and counsel and advice tocontribute to sustained growth in corporate value,
based on an appreciation of corporate management
and business strategy.
		 Candidates for nomination as director serving
as an Audit & Supervisory Committee member musthave the capacity to conduct auditing and oversightactivities from general and specialist viewpoints,
based on an appreciation of aspects of businesssuch as management, finance, accounting and risk
management. The Articles of Incorporation set theAnnual Report 201739

Sustainability Management/Corporate Governancemaximum numbers of directors as 10 for directors
not serving and five for directors serving on the
Audit & Supervisory Committee.
To ensure greater transparency in appointment
of directors, the Company has instituted theNominating Committee, which is composed ofthe president, a director serving as an Audit &Supervisory Committee member, and an external
director. The Board of Directors approves any
candidates for appointment to director based on
the deliberation and advice of the Nominating
Committee. With regard to the appointment of any
directors serving as Audit & Supervisory Committee
members, nominations are confirmed by the Boardof Directors after their approval by the Audit &Supervisory Committee, based on the advice of theNominating Committee.
The reasons behind director candidate nominations are mentioned in the Notification of the 94th
Ordinary General Meeting of Shareholders.
http://www.bandogrp.com/eng/ir/stockholder/
pdf/170529-94rd.pdf
Supplementary Principle 4.1.1
Besides any statutory items or other matters as
stipulated in the Articles of Incorporation, the Boardof Directors deliberates and determines importantmatters related to business execution as stipulated in
the regulations pertaining to the Board of Directors,
including management policies and plans,personnel-related decisions, plans for financing
and capital investment, and the establishment or
dissolution of subsidiaries or affiliates. Responsibility
for deciding other items of business is delegated by
the Board to the president. In addition, in accordancewith Japanese laws and regulations and the Articles
of Incorporation, with the Company’s transition to a
Company with an Audit & Supervisory Committee,
some important business matters have been delegatedto the president. To help improve the speed andefficiency of business execution, the president candelegate authority to make decisions on these mattersto corporate executive officers as appropriate.
Principle 4.9 Independence Standards andQualification 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 and40

BANDO CHEMICAL INDUSTRIES, LTD.

responsibilities from an independent standpoint. The
rationales for the appointment of those independent
directors serving as of June 22, 2017 are summarized
below.

Takahiro Matsusaka
Many years of experience and related businessknowledge gained working in managerial positions infinancial institutions afford Mr. Matsusaka the capacity
to conduct auditing and oversight activities fromgeneral and specialist viewpoints. He is not influenced
by the views of Sumitomo Mitsui Banking Corporation(SMBC), a major business partner of the Company, due
to the 13 years that he has spent working at other companies since leaving SMBC. Moreover, it is judged that
the Company’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 sameterms as with other banks, and (c) loans from SMBC
are equivalent to only about 5% 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.

Takashi Shigematsu
Many years of experience gained working as anengineer 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 positions of Chairman &Representative Director at FUJITSU TEN LIMITED,
and Outside Director at Murata Manufacturing Co.,
Ltd. As the Company does not have any special
relationships with either FUJITSU TEN LIMITED or
Murata Manufacturing Co., Ltd., there is no conflict ofinterest with ordinary shareholders as defined by the
Tokyo Stock Exchange, and Mr. Shigematsu has a highdegree 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, the lack of any special relationship between
the Company and EXEDY Corporation or Suminoe
Textile Co., Ltd. means that there is no conflict ofinterest with ordinary shareholders as defined by the
Tokyo Stock Exchange, and that Mr. Shimizu has a highdegree of independence.
Supplementary Principle 4.11.1
The Company ensures that the composition of
the Board of Directors includes a diverse range oftalented people of impeccable character with suitable
experience and knowledge, taking into consideration
the business environment and the related issues faced
at the time. With regard to the size of the Board, toensure lively and frank exchanges of opinion, the limits
on the number of directors have been set at 10 for
directors not serving and five for directors serving on
the Audit & Supervisory Committee.
Supplementary Principle 4.11.2
Directors concurrently occupy the following positions
with other listed companies.

Takahiro Matsusaka
Corporate Auditor, BANDO INDUSTRIAL COMPONENTS &SERVICES, LTD.

Takashi Shigematsu
Chairman & Representative Director, FUJITSU TEN LIMITED
Outside Director, Murata Manufacturing Co., Ltd.

Haruo Shimizu
Corporate Adviser, EXEDY Corporation
Outside Director, Suminoe Textile Co., Ltd.

Supplementary Principle 4.11.3
The Company has analyzed and evaluated the effectiveness of the Board of Directors at its meetings heldin 2016. This involved directors completing a self-evaluation questionnaire on the operation of the Board of
Directors. The Board chairperson conducted an analysis
and evaluation and reported the results to the Board
for internal discussion. The exercise concluded thatthe Board’s lively discussion based on multi-faceted
viewpoints supported its effective operation.

are provided to visit offices and factories in Japan andabroad as deemed appropriate.
Principle 5.1 Policy for Constructive Dialogue
with Shareholders
Regarding all shareholders and investors as important
stakeholders, the Company believes it is important todeepen mutual understanding based on a constructive
dialogue about how to enhance corporate value and touse such dialogue as the basis for proper management
policy. In line with such thinking, the executive director
in charge of administrative functions oversees the
dialogue in coordination with the central departments
responsible for finance, general affairs and corporate
planning and provides briefings to domestic andforeign institutional investors, and disclosure of
information such as the details and progress ofbusiness plans, Group performance, and returns toshareholders. In these meetings, the president and thesenior management of the Company seek to engage
in dialogue with institutional investors about longterm creation of corporate value so that stakeholder
views can better be reflected in the management of
the business. The full online disclosure of any materials
presented at such meetings via the Company’s website
ensures fair disclosure to individual investors and shareholders. Since the General Meeting of Shareholders
also provides another valuable opportunity to engage
with shareholders, the Company seeks to avoid holding
it on the most popular dates, and also ensures that
adequate time is allocated to the Q&A session.
The content of dialogue with shareholders
and investors is reported as necessary to the Boardof Directors, and executive officer meetings. The
Company has also instituted policies on disclosure
and insider trading as part of efforts to prevent any
occurrence of insider trading.

Supplementary Principle 4.14.2
The Company provides directors with training as
required on or after appointment through training
seminars, the provision of literature regarding directorial roles and responsibilities, and by providing otheropportunities to acquire required knowledge at theCompany’s expense. External directors are provided
with materials and explanation to ensure a basic knowledge of the Company’s operations, and opportunities

Annual Report 201741

Message from an External Director

Management (As of June 22, 2017)

Contributing to Genuine Diversity of Thinking
for Bando

Board of Directors

upcoming Board meeting agenda. This helps us apply
experience to provide advice to senior management
and to discuss the direction of the Company’s future

Takahiro Matsusaka
External Director(Chair of the Audit &Supervisory Committee)

plans based on shared information.
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 advancementof women. Personally, however, I feel the most criticalaspect of it is the need to cultivate a broad diversity of

President andRepresentative Director:

Member of the Board:

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

Takahiro Matsusaka

Takashi Shigematsu

Haruo Shimizu

Mitsutaka Yoshii

Kyosuke Nakamura

Member of the Board:

Member of the Board:

Shinji Kashiwada

Atsushi Someda

ideas and viewpoints.
As a banker, I have participated in discussions at
the Japan Association of Corporate Executives on the
topic of regional revitalization. In developing towns,
it is often said the three most influential groups ofpeople in transforming a region are the young people,
the eccentrics, and the outsiders. In other words, toBando Chemical Industries, Ltd. transitioned to adevelop communities you need to have people who

Company with an Audit & Supervisory Committee

can come up with fresh ideas rather than sticking to

one year ago. The Committee is currently composed

how things have been done in the past. This applies toof three external directors. With the administrative

a company as well. At Bando, we need to change our

support that we receive from the Company, I believe

mindset by thinking in the same way as young people,

that we are performing an effective auditing andeccentrics, and outsiders.

supervising role.

42(External)(External)(External)

While I have 30 years’ experience in banking

In this role, the Committee adopts a different

and then spent 10 years as an executive of a company

perspective to the operational side of the business,with insurance agency and real estate companies, it is

one that I think acts as a check on the application ofdifficult for me to make any contribution as somebody

traditional modes of thinking. I often refer to it as one

with experience of making or selling products. What I

of challenging established preconceptions.

can do is cooperate and allocate governance roles with

Corporate Executive Officers

Aiming to realize a more lively discussion at Board

other Committee members who possess manufacturing

President:

Senior Executive Officers:

Executive Officers:of Directors meetings after the move to the governancebackgrounds. In those business areas where I have

Mitsutaka Yoshii

Kyosuke Nakamura

Katsuya Yamaguchi

model based on an Audit & Supervisory Committee,

experience, I can provide my external perspective.

Shinji Kashiwada

Takayuki Nagase

the Company has created opportunities for the

In areas outside my expertise, though, I can takeCommittee members to be briefed by the members

advantage of my inexperience and lack of knowledge

Masao Ohara

Kazuyuki Mambaof the execution side before Board meetings on any

in the sense that I can adopt the fresh perspective of

Keiji Iwai

Satoshi Matsuo

specific proposals, the background to them and how

someone less experienced so as not to be swayed

Masayuki Kitabayashi

Atsushi Someda

they came to be made. This practice has developed tounduly by traditional ways of corporate thinking, or else

Hisashi Samejima

Tsutomu Okada

the point where we now receive general presentations

to be a know-it-all. In this way, I believe that I can help

Katsuhiko Hata

on any plans under deliberation, regardless of theBando to encourage genuine diversity of thinking.

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201743

Management’s Discussion and Analysis

Operating Environment
During the fiscal year ended March 31, 2017, the U.S. economy
saw firm personal consumption backed by a recovery in bothinternal and external demand, while in Europe there was amodest economic recovery amid uncertainty about the future,
namely with respect to Brexit. Meanwhile, prolonged economic
slowdown continued in China, while in Asia the economy was
somewhat stagnant on the whole, despite the limited impact ofthe mood of self-restraint in Thailand following the death of theking, India’s abolition of large currency bills, and other factors. In
Japan, the modest economic recovery continued.
In the automotive sector, a key market for the Bando
Group, automobile production was firm in the U.S. andEurope, in continuation from the previous fiscal year. In
China, the number of automobiles produced increased year
on year as the effect of reduced taxes levied on small cars
continued. In Japan, automobile production was on parwith the previous fiscal year, due to the decline in sales oflight vehicles, but there was a decline in production of vehicle models using belts due to the increase in production of
hybrids and other beltless vehicle models. In the industrial
machinery field, demand was weak despite signs of a
pickup in domestic capital investment. In the construction
sector, a main market for high-performance films, there wasstrong demand in both housing and non-housing starts.

Business Overview
Fiscal 2016 was the fourth year of the first stage of theGroup’s “Breakthroughs for the future” mid-to-longterm business plan covering the period of fiscal 2013 to
fiscal 2022. We focused our efforts on increasing sales oftransmission belts for automobiles, two-wheeled vehicles,
agricultural equipment and industrial machinery, and of lightduty conveyor belts. We continued to develop the Group’s
customer base, notably across China and the ASEAN region.
In addition, we advanced the development of anumber of products with specifications optimal for the

Net sales*
Net sales*

market, including the FR7000 Series, Japan’s first selfextinguishing conveyor belt which is both heat and flame
resistant, the Power Ace™ Aramid Combo, Japan’s first tie
band, narrow profile V-belt which employs high-modulus
aramid core wires, and the BANDO FR-BIOS™, a conveyor
belt specifically for use in biomass power plants.
With respect to new product development, we
moved ahead on research based on a comprehensive
cooperation with Kobe University, and developed products
such as the optically clear adhesive sheet Free Crystal™. In
addition, during the Bando Techno Fair 2016 held as partof activities to commemorate our 110th anniversary, we
unveiled a variety of products we have under development.
In addition, we were proud to be selected as a 2017
Health & Productivity Stock Selection by the Ministry of
Economy, Trade and Industry (METI) and the Tokyo Stock
Exchange (TSE) in recognition of our strategic focus on
employee health from a management perspective.

Operating Results
Consolidated net sales in the fiscal year ended March
31, 2017, were ¥88,387 million, a decline of 5.2% year on
year. This decline was partly due to the impact of the yen’s
appreciation, along with other factors.
Operating income declined 1.1% year on year to¥5,896 million, as the decline in raw materials procurement
costs and cost-cutting efforts did not completely make up
for the impact of the exchange rate and the decline in sales.
Although the SG&A ratio rose 0.9 percentage points
to 23.6% reflecting labor costs increase, the cost-to-sales
ratio improved 1.2 percentage points to 69.7% due to successful efforts to reduce costs. As a result, the operating
margin improved by 0.3 percentage points to 6.7%.
Profit attributable to shareholders of the parentrose 12.9% year on year to ¥4,951 million. This reflected
the improvement in foreign exchange losses and share of
profit of entities accounted for using the equity method,
as well as the decline in tax expenses.

Operating Results by Business Segment
Automotive Parts Business
Sales of automotive accessory drive power transmission
belts and system products declined overall in Japan. Salesof aftermarket parts were on par with the level of theprevious fiscal year due to proactive sales activities andthe introduction of new products, but sales to automobile
manufacturers declined due to factors including theincrease in beltless vehicles as well as weak sales of small
vehicles. Consequently, overall sales in Japan declined
compared with the previous fiscal year.
Meanwhile, sales of variable speed belts for scootersincreased overseas due to our focus on proactively
cultivating customers in the ASEAN region. Also, sales ofautomotive accessory drive power transmission belts andsystem products increased in Thailand due to strong production of automobiles. Overall sales overseas increased
on a local currency basis, but declined due to the impactof the yen’s appreciation.
As a result, segment net sales declined 5.9% year
on year to ¥40,321 million. Segment profit declined 11.6%
year on year to ¥2,937 million due to the impact of the
yen’s appreciation and other factors, despite thoroughcost reduction efforts as well as initiatives to improve theprofitability of overseas production bases.

Industrial Products BusinessOverall sales of industrial power transmission belts
declined, as there was a decline in sales of power transmission belts for industrial machinery demand in Japanand the U.S. due to the impact of sluggish capital investment, despite an increase in sales of power transmission
belts for agricultural machinery and industrial machinery
due to improved sales in China and the ASEAN region.
Although proactive initiatives to cultivate customers
in Japan, China and the ASEAN region resulted in growthin sales of resin conveyor belts (Sunline™ Belts), overall

Profit attributable to shareholders of the parent*

Operating income*Operating income*sales of conveyor belts declined due to our focus onreceiving orders with an emphasis on profits.
As a result, segment net sales fell 5.0% year on yearto ¥31,446 million. However, segment profit increased
3.5% year on year to ¥1,992 million, due to thoroughcost reduction efforts, an emphasis on the profitability oforders received, and other factors.

Advanced Elastomer Products BusinessIn precision performance products, sales of cleaning
blades, resin components, and other products declined
due to the impact of lower production by our main
customers, office equipment manufacturers in Japan andoverseas.
Meanwhile, in high-performance films products,
sales of films for construction materials, industrial use andmedical applications increased as a result of proactive
marketing efforts against a backdrop of strong nonhousing-related demand in Japan.
As a result, segment net sales fell 4.5% year on yearto ¥14,914 million. Segment profit declined 61.3% year
on year to ¥294 million, owing to the drop in sales, thechange in the sales mix, and other factors.

Other Business
Bando is engaged in other business, such as the manufacture and sales of robot-related devices. Sales in otherbusiness declined 4.6% year on year to ¥2,510 million.
Segment profit increased 54.9% to ¥427 million.

Financial Position
Total assets as of March 31, 2017 amounted to ¥96,695
million, an increase of ¥5,930 million year on year. Current
assets increased by ¥5,280 million due to an increase in
cash and cash equivalents, while other assets increasedby ¥999 million due to factors including an increase ininvestments in securities.
Total liabilities increased by ¥2,393 million compared

Net assets
Total assets*
Net assets(¥ million)
100,000(¥ million)
100,000
80,00085,772
84,811

93,43486,372

95,39685,772

93,272
95,39693,434 88,387

5,518

6,000

80,0004,000
60,0005,961(¥ million)
6,000(¥ million)

5,056
4,095

4,797
4,571

4,000

5,896

(¥ million)
5,000

4,951
4,386

4,280

5,518
4,797

4,095

3,000

60,00040,00082,207

3,757

4,000

Total assets(¥ million)
100,000

89,623

94,70090,76596,69580,00056,77760,0002,510

43,2262,000

40,0001,000

20,00049,27755,20558,741

2,000

40,0002,000
20,00020,000
0
0

2013
2011

2014
2012

2015
2013

* Fiscal year endings are March 31.

44

2016
2014

BANDO CHEMICAL INDUSTRIES, LTD.

2017
2015

0
0

2013
2011

2014
2012

2015
2013

2016
2014

2017
2015

0

2013

2014

2015

2016

2017

0

2013

2014

2015

2016

2017

* Fiscal year endings are March 31.

Annual Report 201745

Management’s Discussion and Analysis

with the previous year-end to ¥37,954 million. Current liabilities decreased by ¥207 million, and long-term liabilities
increased by ¥2,601 million due to factors including an
issue of corporate bonds.
Net assets increased ¥3,536 million from the previous fiscal year-end to ¥58,741 million. Retained earnings
increased ¥3,832 million due partly to the recording of
profit attributable to shareholders of the parent, andtreasury stock increased ¥1,099 million.
As a result, the equity ratio increased 0.1 percentage
points from 60.4% at the previous fiscal year-end to 60.5%.

Capital Investment and Fund Procurement
Capital investment undertaken in the fiscal year ended
March 31, 2017 totaled ¥4,558 million. Major capital investment items are shown below. The financing required was
obtained from the Company’s own funds and borrowings.
From the standpoint of diversifying fund procurement, anissue of domestic unsecured bonds procured funds of ¥6.0
billion.
Business
Segment

Amount(¥ million)

Main Activities¥2,050Installed new – and expanded or
upgraded existing – manufacturing
equipment, developed new
manufacturing process, newconstruction of manufacturing plant

950

Installed new – and expanded or
upgraded existing – manufacturing
equipment

Advanced
Elastomer
Products
Business

671

Installed new – and expanded or
upgraded existing – manufacturing
equipment, developed new
manufacturing process

Other

885

Total

¥4,558Automotive
Parts BusinessIndustrial
Products
Business

Installed new system and researchequipment

Cash Flow
Net cash provided by operating activities totaled ¥6,800
million, compared with ¥9,038 million provided in theprevious fiscal year, with the recording of income before
income taxes of ¥6,553 million.
Net cash used in investing activities was ¥4,639
million, compared with ¥4,184 million used in the previous
fiscal year. This was due to the booking of ¥4,004 million
in expenses for the purchase of property, plant andequipment, ¥515 million in expenses for the purchase ofintangible assets, and other factors.
Net cash provided by financing activities was ¥422
million, compared with ¥3,049 million used in the previous
fiscal year. This was due to the booking of ¥5,957 million inproceeds from issuance of bonds, expenditure of ¥3,000
million for the redemption of bonds, and other factors.

46

BANDO CHEMICAL INDUSTRIES, LTD.

As a result, cash and cash equivalents as of March
31, 2017 totaled ¥18,936 million, up ¥2,499 million compared with the previous fiscal year-end.

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 as

Earnings Forecasts for
the Year Ending March 31, 2018
In the fiscal year ending March 31, 2018, despite concerns
about future economic prospects, including uncertainty
surrounding the political and economic situations
overseas, the global economy is expected to grow due toadjustments to excess production capacity in China, therecovery of the U.S. economy, and an economic pickup
in resource-rich countries. In Japan, despite ongoingsluggish personal consumption and lack of momentum incapital investment by companies, the economy is in the
midst of a modest recovery attributable to the increase inpublic investment tied to economic measures, the pickup
in overseas economies, and other factors.
Based on this situation, the Group will aim toachieve its management targets under the five guidelines
in the last fiscal year of the first stage of the “Breakthroughsfor the future” mid-to-long term business plan. For the
fiscal year ending March 31, 2018, we are forecasting
consolidated net sales of ¥91,000 million, up 3.0% year
on year, operating income of ¥6,000 million, up 1.8%, andprofit attributable to shareholders of the parent of ¥4,900
million, down 1.0%.

of March 31, 2017.

The Group primarily uses foreign exchange contracts to

Raw Material Market Fluctuations andProcurement

hedge the risks associated with the significant number

The Group negotiates with business partners regardingof foreign currency receivables it currently carries, anddelivery dates and prices by closely examining market

will implement other appropriate measures to hedge

prices as well as supply-demand circumstances, but

against such risks in the future.

there could be sharply rising raw material prices

Increasing Overseas Transactions

Nevertheless, the Group’s performance could be
adversely affected by fluctuations in foreign currency

the Group promotes research on alternative materials

exchange rates. In addition, the Group’s performance

to stabilize supply and demand; revises and increases

and financial position could be adversely affected byproduct prices in response to rising raw materialchanges in economic conditions in individual regions,prices; and strengthens measures to reduce overall

despite efforts to strengthen its overseas production

costs. Nevertheless, the Group’s performance could

and sales systems.

be adversely affected by a downturn in demand, or
prolonged increases in material and/or fuel prices thatexceed expectations.

Recalls
As a components manufacturer, the Company delivers

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.
On February 10, 2017, we announced that the yearend dividend for the fiscal year ended March 31, 2017,
would be ¥12, but this amount was increased to ¥14
following a comprehensive consideration of the aforementioned policies, operating results for the fiscal year,
and other factors. We plan to pay a ¥15 year-end dividend
for the fiscal year ending March 31, 2018. Combined with
the interim dividend, this will result in a planned annual
dividend of ¥30 per share.
On October 1, 2016, the Company conducted areverse stock split, consolidating two shares of common
stock into one share.

accompanying higher crude oil prices. Accordingly,

items to automotive, office automation equipment,

Earthquakes and Other Natural Disasters

consumer product and other manufacturers.

There are indications that a major earthquake could

In addition, its subsidiaries and affiliates mainly

occur in the Tokai, Tonankai or Nankai regions of

manufacture, process and sell these parts. Considering

Japan. In addition, the potential for typhoons andproduct quality to be of paramount importance forfloods exists. In the event of such a disaster, businessmaintaining and developing current business oper-

sites including the Nankai Plant could sustain damage

ations, the Group focuses on implementing various

to production or other facilities, potentially leading toinitiatives to ensure product quality to the maximum

a temporary cessation of operations. Accordingly, eachextent possible. However, recalls and other actionsof the Company’s four plants has formulated a businesscould arise in cases where defects in automobiles andcontinuity plan (BCP) based on the assumption that

other items are caused by products (components)

it could be damaged under such circumstances.

supplied by the Group.

The BCPs include creating mechanisms to minimize

In such cases, the Group will likely be required todisruptions to operations, notably the formulation ofcover all obligatory legal or contractual costs of recalls

repair plans and the supplementary supply of products

and other actions, which could adversely affect theby overseas plants. Nevertheless, the Group’s perfor-

Group’s performance.

mance could be significantly impacted by disasters,
depending on the size of the disaster.

Annual Report 201747

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen

2017

Assets2016

2017

Time deposits

2017

2016

2017

¥ 1,421¥ 1,555$ 12,668

3,111

3,513

27,732

		Trade

9,259

9,908

82,531

Liabilities and Net Assets
Current Liabilities:

Current Assets:
Cash and cash equivalents

Thousands of
U.S. dollars

Millions of yen¥ 18,936¥ 16,436$ 168,781

587

545

5,232

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

Notes and accounts receivable:
		Trade18,824

16,731

167,788

		Other

261

265

2,329

		

Electronically recorded obligations — operating

3,407

2,767

30,364

1,789

1,617

15,943

		Construction and other

3,627

3,587

32,332

(39)

(38)

(344)

1,065

439

9,491

10,904

10,50997,191

Provision for loss on liquidation of subsidiaries and associates

10

31

89

Deferred tax assets

551

458

4,909

Other current liabilities

2,873

3,180

25,607

Other current assets

988

997

8,813

24,77324,980220,81452,801

47,520470,642
Long-term debt

10,982

7,548

97,884

Net defined benefit liability

2,007

2,918

17,889Other long-term liabilities

192

114

1,716

13,181

10,580117,489

10,952

10,952

97,620		Electronically recorded monetary claims — operating		

Allowance for doubtful accounts

Inventories

Total Current Assets

Income taxes payable

Total Current Liabilities
Long-term Liabilities:

Total Long-term Liabilities

Property, Plant and Equipment:
Land

6,436

6,507

57,366

Buildings and structures

27,857

27,605248,302

Machinery and equipment

56,96055,942507,710

Construction in progress

1,168

1,508

10,415		Authorized: 187,000,000 shares

Other

13,701

13,281

122,129		Issued 2016 and 2017 — 47,213,536 shares

106,122

104,843945,922

Capital surplus

2,995

2,970

26,698

Accumulated depreciation(76,985)(75,356)(686,206)

Retained earnings

45,92342,091

409,332

Property, Plant and Equipment, Net

29,13729,487259,716

Treasury stock, at cost

Net Assets:
Common stock		

2016 — 327,080 shares		2017 — 1,367,394 shares

Total Shareholders’ Equity(1,356)(257)(12,091)

58,51455,756

521,559

2,060

1,431

18,362

1

1

5

Accumulated other comprehensive income
Other Assets:

Unrealized gains on available-for-sale securities

Intangible assets

1,549

1,189

13,807

		

Deferred gains on hedges

Investments in securities

6,183

5,287

55,110		Foreign currency translation adjustments(1,644)(1,170)(14,652)

Investments in affiliates

5,305

5,041

47,286		Remeasurements of defined benefit plans(410)(1,232)(3,651)

404

966

3,601

Total Accumulated Other Comprehensive Income

7

(970)

64

1,316

1,275

11,728

220

419

1,964

Deferred tax assets
Other, net
Total Other Assets
Total Assets

48

		

BANDO CHEMICAL INDUSTRIES, LTD.

14,757

13,758

131,532¥ 96,695¥ 90,765$ 861,890

Non-controlling interests
Total Net Assets

58,741

55,205523,587

Total Liabilities and Net Assets¥96,695¥90,765$861,890

Annual Report 201749

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, 2017 and 2016

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Consolidated Statements of Income

2017

2016

2017

Net Sales
Cost of Sales
Gross profit¥88,387
61,596
26,791¥93,272
66,097
27,175$787,835
549,034
238,801

Selling, General and Administrative Expenses
Operating income

20,895
5,896

21,214
5,961

186,247
52,554

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

260
(288)
509
(148)
24
(306)
(92)
(92)
258
125
6,086

2,131
(2,070)
5,274
(366)
714
(563)
(159)
—
898
5,859
58,413

Other 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
Provision for loss on liquidation of subsidiaries and associates
Other, net
Income before income taxes
Income Taxes:
Current
Prior years
DeferredProfitProfit Attributable to Non-Controlling Interests
Profit Attributable to Shareholders of the Parent

1,728
9
(164)
1,573
4,980

1,598
0
30
1,628
4,458

15,41077(1,465)
14,02244,39129¥ 4,95172¥ 4,386256$ 44,135

Yen
Per Share of Common Stock
Basic net income
Cash dividends

50

2017

2016

2017

¥107.90
26.00¥ 93.9124.00$   0.96
0.23

Thousands of
U.S. dollars

Consolidated Statements of Comprehensive Income

2017

2016

2017

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¥ 4,980¥ 4,458$ 44,391

629
0
(365)
823
(112)
975
¥ 5,955(636)
1(3,063)(729)(293)(4,720)¥  (262)5,608
2(3,253)
7,333
(998)
8,692
$ 53,083¥ 5,929
26¥  (312)50$ 52,847
236

BANDO CHEMICAL INDUSTRIES, LTD.

Balance at April 1, 2015

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¥2,968¥38,740¥  (114)¥2,061¥ (0)¥ 2,171¥  (504)¥503¥56,777

Profit attributable toshareholders of the parent

—

—

—

4,386

—

—

—

—

—

—

4,386

Cash dividends

—

—

—

(1,035)

—

—

—

—

—

—

(1,035)Purchases of treasury stock

—

—

—

—

(143)

—

—

—

—

—

(143)

Disposal of treasury stock

—

—

0

—

0

—

—

—

—

—

0

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

—

—

2

—

—

—

—

—

—

—

2

Net change in the year

—

—

—

—

—

(630)

1

(3,341)

(728)

(84)

(4,782)

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

—

—

629

0

(474)

822

(199)

778

¥45,923 ¥(1,356)¥2,060¥ 1¥(1,644) ¥  (410)¥220¥58,741

Remeasurementsof defined
benefitplans

Noncontrollinginterests

Total
net assets$(10,426) $(10,984)$ 3,733$492,066

Balance at April 1, 2016

Net change in the year

—

—

—

Balance at March 31, 201747,214¥10,952¥2,995

Thousands of U.S. dollars

U.S. dollars

Millions of yen

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

Thousandsof shares

Thousands of
U.S. dollars

Millions of yen

Balance at April 1, 2016

Treasurystock,
at costCommonstock

CapitalsurplusRetainedearnings$375,174 $ (2,288)$97,620$26,475

Profit attributable toshareholders of the parent——

44,135

Cash dividends——

Purchases of treasury stock—

Disposal of treasury stock—

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

Net change in the year—

Balance at March 31, 2017$97,620

Unrealized
Foreign
gains (losses)
currency
on available- Deferredfor-sale gains (losses) transaction
securities on hedges adjustments$12,759

$ 3

—

—

—

—

—

—

44,135(9,977)

—

—

—

—

—

—

(9,977)——(14,648)

—

—

—

—

—

(14,648)

45

—

4,845

—

—

—

—

—

4,890

178

—

—

—

—

—

—

—

178

—

—

—

5,603

2

(4,226)

7,333(1,769)6,943$26,698 $409,332 $(12,091) $18,362$5$(14,652) $ (3,651)$ 1,964$523,587

Annual Report 201751

Consolidated Statements of Cash Flows

Corporate Data/Investor Information

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of Yen

Corporate Data

2017

2016

2017

¥ 6,553¥ 6,086$ 58,413(1,523)(1,849)(13,578)

85

234

754

4,101

4,321

36,555

Amortization of goodwill and negative goodwill

9

10

81

Impairment loss

18

92

159

Increase in allowance for doubtful accounts

19

30

169

Increase in provision for share-based compensation

29

—

260

Decrease (increase) in provision for loss on liquidation ofsubsidiaries and associates

(17)

32

(155)

Increase (decrease) in liability for retirement benefits

277

(144)

2,472

Foreign exchange losses (gains), net

(52)

56

(463)

Shares Authorized:

187,000,000

Equity in earnings of affiliates

(592)

(509)

(5,274)

58

257

520

Shares Outstanding:

47,213,536(2,519)(8)(22,455)(Increase) decrease in inventories

(542)

634

(4,829)

Increase (decrease) in notes and accounts payable — trade

172

(810)

1,529

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

Loss on sales and disposal of property, plant and equipment
Changes in assets and liabilities:
Increase in notes and accounts receivable — trade

Other, net
Net Cash Provided by Operating Activities

724

606

6,449

6,800

9,038

60,607Company name:

April 14, 1906

Founded:Capital:¥10,952 mil. (As of March 31, 2017)

Consolidated sales:

Purchases of property, plant and equipment

(50)

(94)

(448)

(4,004)(3,883)(35,690)

Proceeds from sales of property, plant and equipment

105

109

933

Purchases of intangible assets

(515)

(408)

(4,590)Purchases of investments in securities

(20)

(19)

(175)

Proceeds from sales of investments in securities

110

35

984

(265)

76

(2,363)(4,639)(4,184)(41,349)

Decrease in short-term borrowings(115)(1,050)(1,025)

Proceeds from long-term borrowings

553

1,384

4,929

Payments on long-term borrowings(529)(2,049)(4,717)

Proceeds from issuance of bonds

5,957

—

53,101

Redemption of bonds(3,000)—(26,740)

Purchases of treasury stock(1,642)(141)(14,640)

367

1

3,274

Other, net
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

Proceeds from sales of treasury stock(1,119)(1,035)(9,977)

Cash dividends paid to non-controlling interests

(26)

(106)

(229)

Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation

—

(26)

—

Other, net

(24)

(26)

(213)
3,763

Cash dividends paid

Net Cash Provided by (Used in) Financing Activities

422(3,049)Effect of Exchange Rate Changes on Cash and Cash Equivalents(83)(1,066)(737)

Net Increase in Cash and Cash Equivalents

2,500

739

22,284

Cash and Cash Equivalents at Beginning of Year

16,436

15,697

146,497

Cash and Cash Equivalents at End of Year

¥18,936¥16,436$168,781¥88,387 mil. (FYE March 2017)

Employees (Consolidated): 4,043 (As of March 31, 2017)

Investor Information (As of March 31, 2017)
Principal Shareholders (As of March 31, 2017)

Capital Stock

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Japan Trustee Services Bank, Ltd.
(trust account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd.
(trust account)
CBNY-GOVERNMENT OF NORWAY(including 693,973 shares of treasury stock)

Number of Shareholders:

7,761

Securities Traded: Tokyo Stock Exchange, Inc.
Composition of Shareholders
Financial institutions/
Securities firms:
19,446,390
41.80%

Individuals and others:
14,290,939
30.72%Cash Flows from Investing Activities:
Increase in time deposits

Bando Chemical Industries, Ltd.

Other corporations:
5,793,043
12.45%

66

Foreign corporations:
6,989,191
15.02%

Investment
ratio
(%)

3,803
2,315

8.17
4.97

2,002

4.30

2,000
1,800
1,575

4.29
3.87
3.38

1,530

3.28

1,174

2.52

1,122

2.41

920

1.97

Notes: 1. Investment ratios are calculated after deducting treasury stock(693,973 shares).
2. Investment ratios listed above are rounded down to two decimal places.

7,308

239

Number of shareholders

147

Number ofshares held
(thousands)* On October 1, 2016, the Company changed its share unit from 1,000 to
100 shares and conducted a 2-to-1 stock consolidation.

Stock Price
(Yen)

1,200

1,000

800

600

400

200

0

4

7

2012

10

1

4

7

2013

10

1

4

7

2014

10

1

4

7

2015

10

1

4

7

2016

10

1

2017

* Since the Company conducted a 2-to-1 stock consolidation on October 1, 2016, the results from April 2012 to August 2016 are presented
with adjusted values.

52

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201753

www.bandogrp.com

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