Breakthroughsfor the Future
Annual Report 2019Year ended March 31, 2019

Contents
ProfileProfile/Philosophy
Message from the President

2

Our History: Innovation for the Future

10

Highlights

12

Global Network

14

Fiscal 2018 Topics

16

Our 1st Lap and Next Step in BF-2

17

Progress & Strategy

28

ESG Section

35

Financial Section

46

Corporate Data/Investor Information

55

In the 110-plus years since its founding in Japan in 1906, Bando Chemical Industries, Ltd. has been
pursuing industrial development by making various contributions to rubber and plastic processing
technologies in such areas as power transmission belts and systems, belts used in precision equipment,
and multimedia parts made from urethane and resins.
We are highly regarded by customers throughout the world owing to our efforts to develop newtechnologies and products that meet today’s needs while manufacturing and stably supplying peopleand environmentally-friendly products of unsurpassed performance and quality.
Possessing an unwavering spirit spanning back to our foundation, we will create a brighter future throughthe ceaseless innovation of our business.

Management Philosophy
With a spirit of harmony and in good faith, and to ensure the company’s growth, the Bando Group will
work to earn the trust of our customers and society by creating and providing products and services ofadded value and high quality. With pride as members of the Bando Group, we will contribute to society
as a whole.

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

Group Vision 21
Innovative Vision of the Bando Group for the 21st Century
The Bando Group will employ energetic individuals with professionalism to lead the company in the
expansion of our core business in global markets, and passionately pursue new business opportunities
with a strong sense to protect the world environment.

Guidelines for the Bando Group

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 Japanesefinancial statements on which they are based have been audited by independent auditors. For more detailed information including
notes to consolidated financial statements, please refer to the Company’s Annual Report on the website:
https://www.bandogrp.com/eng/ir/library/annual.html

1. Employ energetic personnel with professionalism, and reform business activities.
2. Minimize control and maximize actions.
3. Delegate authority, and make optimum decisions in a prompt manner.
4. Maximize profits from existing products.
5. Invest in new entrepreneurial ventures.
6. Strengthen the personnel and evaluation systems to encourage personnel to feel asense of worth in relation to their work.
7. Strengthen initiatives to reduce environmental impact as we move towards therealization of a low-carbon society.

Annual Report 20191

Message from the President

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

“We will address rapid changes tothe environment andspeed up the transformation of
our business portfolio
based on an unwavering
management philosophy.”
The Bando Group is in the midst of transforming its business portfolio
in anticipation of innovation in the automotive industry
that is said to happen only once in a century. We are facilitating
sustainable growth and improvement to corporate value by
accelerating initiatives in the second stage of the mid-to-long termbusiness plan “Breakthroughs for the future,” based on an unwavering
management philosophy to create products and services of added
value and high quality in line with society’s needs.

The Company voluntarily applies the International Financing Reporting Standards (IFRS) for the consolidated financial statements in the
Annual Securities Report for the fiscal year ended March 31, 2019 instead of conventional Japanese GAAP. The financial figures for the
fiscal year ended March 31, 2019 and the fiscal year ended March 31, 2018, as well as the target figures for the fiscal year ending March
31, 2023 are based on the IFRS, while other figures are based on the Japanese GAAP in principle, unless otherwise stated.

2

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20193

Message from the President

Performance in Fiscal 2018

“Breakthroughs for the future” Mid-to-Long Term Business Plan:
Overall Image

Although profit increased due to growth insales in Japan, core operating income* decreased
due to the impact of special factors, etc.

million despite an increase in sales of high-performancerollers and blades and films used in construction materials
and industrial materials. This was due to the impactof a decline in sales of medical-related products andPushing for growth in both new businesses
and current businesses in the second stage ofthe 10-year mid-to-long term business plan

concluded in fiscal 2017, we evolved and deepened
current businesses to improve profitability, and enhanced
R&D and market development efforts to help establish

In the fiscal year ended March 31, 2019, the first year of

decorative display products. Furthermore, in Otherthe second stage of the mid-to-long term business plan

Business, which comprises key new businesses and the

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

overseas sales and reducing cost to sales ratio for current“Breakthroughs for the future,” the Bando Group focusedrobot-related device business, revenue increased 42.0%

mid-to-long term business plan “Breakthroughs for thebusinesses, we launched mass production and sales for

its efforts on four guidelines: new business creation,

year on year to ¥3,881 million with the launch of mass

future.” Under this plan, we aim to provide value-added

products in optoelectronics and power electronics, as wellcore business expansion, enhancement and evolution in

production and sales for the precision polishing material

products that contribute to environmental preservation,

as welfare/nursing care fields in new businesses.

manufacturing, and work style innovation for individuals

TOPXTM for applications as a new business.

energy conservation and higher functionality, further

and the organization. It undertook various measures forpriority sectors, business types and regions.

Although the changes in earnings for each segment

new businesses. As a result, in addition to expanding

Using these results as a base, we strive in the second

refining our core technologies and reliable product quality

stage (BF-2) that started in fiscal 2018 to move towarddiffer, consolidated revenue increased 3.9% year on year

in the fields of rubber, elastomers, and resins—where weachieving consolidated revenue of ¥120 billion, coreto ¥94,319 million due to growth in overall sales in Japan.

have built up extensive expertise since the Company’s

operating income of ¥12 billion, and ROE at 12.0% bydecreased 0.1% year on year to ¥41,650 million due toOn the other hand, core operating income decreased

founding—to become a standout global supplier of belts

fiscal 2022, focusing our efforts on four guidelines under

the impact of flat sales in Japan and a decline in sales in

2.8% year on year to ¥6,503 million due to rising costs inand high-performance products in the global market.

the basic strategy of sustained growth in both new andEurope, the U.S., and China, and despite an increase in

raw materials and issues that needed to be addressedsales of variable speed belts for scooters and accessory

at a customer in the Industrial Products Business. Profit

drive power transmission belts and system products in

attributable to owners of parent for the fiscal year rose

Asia. In the Industrial Products Business, revenue rose

7.0% year on year to ¥5,457 million due to an increase in

9.1% year on year to ¥34,815 million through sales offoreign exchange gain.

As a result, in the Automotive Parts Business, revenue

power transmission belts for agricultural machinery inshare, bringing the total annual dividend up ¥2 to ¥32

conveyor belts in Japan, and industrial power transmission

per share.

Business, revenue grew only 0.5% year on year to ¥15,237

Become a standout global supplierNewbusiness
expansion* Figures calculated by subtracting cost of sales and selling, general andadministrative expenses from revenue

Fiscal 2018

Fiscal 2017
Results

Results

YoY¥90,798 million¥94,319 million+3,520Core operating income¥6,688 million¥6,503 million−186

Profit attributable to owners of parent¥5,100 million¥5,457 million+356

Revenues/profits

Consolidated earnings

Revenuecurrent businesses.

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

We increased the year-end dividend by ¥1 to ¥16 per

China and Asia, industrial power transmission belts andbelts in the U.S. In the Advanced Elastomer Products

In the first five years as the first stage (BF-1) which

2013

• B
 usiness domain
Global development of belt and highperformance product businesses• Key concepts
Provide value-added productsthat contribute to environmental
preservation, energy conservationand higher functionality

Current business:
Expand global business/increase added value
2018

BF-1 (five years)

BF-2 (five years)• Leverage core technologies andreliable product quality in rubber,elastomers and resins
2023

Fiscal 2022 numerical targets

Fiscal 2022
Numerical targets (IFRS)

4BANDO CHEMICAL INDUSTRIES, LTD.

RevenueCore operating income

ROE¥120 billion¥12 billion

12.0%

New businesses/
new product ratio

30% or higher(of which, new businesses
at 10% or higher)

Annual Report 20195

Message from the President

Future business portfolio

Basic strategy for BF-2 and four guidelines
Basic strategy: Sustained growth in both newand current businesses

Fiscal 2022 plan

Other

Fiscal 2017 results

Advanced
Elastomer
Products
Businessbillion¥120

Guideline
Automotive
Parts
BusinessbillionRevenue¥90.7

Revenue

Current businesses + ¥17.3 billion
New businesses+ ¥12.0 billion

As a result, in the electronic products business as

Industrial Products
Business

1

Guideline2

New businesscreationCore businessexpansion

We are prioritizing
deployment of management
resources to activities for new
business creation to prepare
for the transformation of ourbusiness portfolio.

We will capture the top
market position by pursuing
key markets by offering newhigh value-added products
and improving conveniencefor customers.

Guideline

3

Enhancement
and evolution in
manufacturing
We will ensure global growthfor core businesses, and evolve
manufacturing technology andsystems to improve profitability.

the first pillar for new businesses, the Bando Group¥10.45 billion, excluding expenses related to the actual

achieved significant growth in sales for new applicationsacquisition).

for polishing

The primary reason for the Company’s acquisition

glass on electronic devices in fiscal 2018, and is currentlyof Aimedic MMT is acceleration of the Bando Group’s

focusing its efforts on obtaining new customers andmedical equipment business that uses C-STRETCHTM.

development to further expand applications for the

C-STRETCHTM progressed with application development

product (see the featured article on page 22). As forthrough open innovation with Kobe University based onother products such as Free CrystalTM, BANDO MDEC™,

elastic and conductive elastomer materials developed by

TM

FlowMetal , and HEATEX , we will pursue our

the Bando Group in fiscal 2013. As a biometric sensor, we

strategies identifying new target markets as some of thehave great expectations for the product’s application in a

products will take time to expand adoption by customers

broad range of medical fields, such as orthopedic surgery,or to enjoy full-scale growth in applicable markets.

rehabilitation, respiratory medicine, and otolaryngologyof the precision polishing materials TOPXTM

Guideline

4

Work style innovation of individuals and the organization
We are promoting self-directed and creative work styles, while upgrading work environments
and systems, training personnel and changing the mindset of employees.

the orthopedic surgery field. (Price of share acquisition:

TM(ears, nose and throat). The development phase for

Progress in the 2nd Stage (BF-2) and Initiatives Going Forward

Accelerating growth in the medical andhealthcare equipment business

C-STRETCHTM has nearly concluded and the product is a
step away from mass production. However, to move forward with commercialization and launch of sales, the Bando

Progress for Guideline 1: New Business
Creation and Initiatives Going Forward

development in various fields where we have taken on chal-

In the medical and healthcare equipment business, whichGroup requires specialized personnel who are versed inlenges since BF-1, we designated the electronic products

is the second pillar of new businesses and has the elastic

operations such as clinical and therapeutic trials and phar-business and medical and healthcare equipment businessstrain sensor C-STRETCH

as its primary product, themaceutical application, the quality management systems

For the creation of new business, for which we areas the two pillars to facilitate growth for new business.

Bando Group proceeded with development of applica-

necessary for mass production, and safety management

focusing on deployment of management resources as

The Bando Group expects full-scale growth to occur only

tions for C-STRETCH

the foremost priority in BF-2, we established the New

after fiscal 2021; however, we will proceed with strategies

year ended March 31, 2019.

Business Promotion Center in April 2018 to build a systemfor each product in both fields, such as development andTMin medical equipment for the fiscal

systems. It would not have been the best course of action
for the Bando Group to build such systems itself, and

The Bando Group also acquired all shares in Aimedic

there was a need to be able to swiftly address the dramaticto accelerate creation and development of new businesses.

expansion of sales for the main products listed in the chart

MMT Co., Ltd. (hereinafter, “Aimedic MMT”) in May

Furthermore, in consideration of the results and topics forbelow and business alliances with third parties and M&As.

2019, a company that possesses high brand recognition

already possesses the infrastructure, a robust network withand sales capabilities in the manufacture, sales, andkey opinion leaders (KOL) in orthopedic surgery, and aafter-services of specially controlled medical devices insales network with university hospitals, advanced medical

Main products in the two pillars of new businessTwo pillars

Electronics products
business

Medical and healthcare equipment
business

6

TM

Main Products

Value

Example of use

Precision polishingmaterials
TOPXTM

Excellent polishing performance/long life span

Hard disks/brittle materials suchas silicon wafers, etc./difficult-to-­machine materials such as SiCs
and sapphire substrates, etc.

Optically clear
adhesive sheets
Free CrystalTM

Better visibility/superior
workability

Display devices, etc.

Dust removal system
BANDO MDECTM

Contributes to cleaning/high maintainability/long
lifespanPrinted circuit boards,
ceramic sheets, flexible
boards, etc.

Metal nanoparticle ink
FlowMetalTM

Can be used in boards withlow heat resistance/applicableto various printing methods

Metal nanoparticle
bonding material
FlowMetalTM

Low-temperature bonding/pressure-free bonding/low void/
high reliability/high thermal conductivity/low electrical resistanceHigh thermal
conductive sheets
HEATEXTMHigh thermal conductivity/
lower thermal resistance ofelectronic devices

Electronic devices, etc.

Elastic strain sensor
C-STRETCHTM

Highly accurate detection/high flexibility/easy to apply

Biometric sensors,
systems, etc.

BANDO CHEMICAL INDUSTRIES, LTD.

Transparent conductive
film for touch panels/
direct wiring for cases/
circuits for flexible devices
Bonding of power
semiconductors and opticalsemiconductors that operate at high temperatureschanges in trends for medical technologies. Aimedic MMT

Concept for collaborative development with Aimedic MMT in the medical and healthcare equipment business• Know-how regarding
pharmaceutical applications andproduct quality management• Kanda Manufacturing Plant(ISO13485)• Network of doctors/
medical institutions• Know-how and humanresources to conduct clinicaland therapeutic trials

Searching for demandMarket surveys
Planning proposals for products
Product development Decisions
on product specifications

Implementation of clinical trials/
creation of trial documents
Formulation of plans for
implementing therapeutic trials
Creation of brochures anddocuments for trial equipment• Sales system for
medical equipment• Sales capability
Sales to medical institutions
Adherence to advertising
regulations, etc.
Follow-up

Pharmaceutical applications
and approvals
Medical equipment quality
management structuring
Approvals for medical
equipment manufacturing andsales, etc.

In comparison to responding independently:
More product plans and development projects
Smooth implementation of clinical and therapeutic trials
Strengthen sales capabilities to medical institutions

Annual Report 20197

Message from the President[3] Advanced Elastomer Products Businessfacilities, etc., that stretches across major cities in Japan.
By utilizing Aimedic MMT’s strengths, the Bando GroupThe Advanced Elastomer Products Business saw achose a path that would accelerate business related to
C-STRETCH

TM

high-value-added products, with an increase in sales
for security cameras and cash recycler machines, etc.,
added value.
BANDO VS BELTSTM for scooters, a product for which Bando isexpanding sales with consistent production on the groundWe will continue to strive for 52% growth in revenue

business segment in fiscal 2018.

[2] Industrial Products Business[1] Automotive Parts BusinessIn the Industrial Products Business, as an example of offer-high-value-added products to growth markets.

ing new high-value-added products, our self-developed
In the Automotive Parts Business, we undertook initiatives

Hyper Flat Drive (HFD) SystemTM received the Grand Prize

to strengthen products following on from accessory drive

for Excellence in Energy Efficiency for a next-generation

power transmission belts for four-wheeled vehicles, and toenergy-conserving power transmission system in Januarybuild assets in new fields as part of the transformation to a

2019, for the second time since 2014 (The prize was jointly

new business portfolio.

awarded to three companies: the Bando Group, Mitsuya
Bando Group was highly evaluated for expanding its(primarily scooters) continues to grow. Aside from increas-

new lineup and contributing to energy conservation foring sales by consistent production in the area, we area broad range of industrial machinery with a system that

progressing with operations such as an evaluation process

can improve electricity consumption by an average of 7%*2

by customers for further expansion and other activities

and prolong lifespan by around 3 times*2 using flat belts(see the featured article on pages 24–25).

that perform to the utmost extent in terms of transmission

trification of four-wheel vehicles proceeds, the Company’s

efficiency and durability.
We will continue to aim at a 36% increase in revenue

synchronous belts for electronic power steering (EPS) haveduring the BF-2 period through “differentiation in key

experienced growing demand and were well-received bymarkets” by working on our priority measures to expand

a Tier 1 manufacturer, and sales have been launched (seesales of high-value-added belts for industrial machinery

the FAQ on page 26).

and improve profitability of conveyor belts.

Going forward, we will strive to increase revenue by
6% during the BF-2 period by focusing on strategicallyaddressing the overseas repair market and expanding sales

Progress for Guideline 4: Work Style
Innovation for Individuals and theOrganization and Initiatives Going Forward

for Guidelines 1 to 3, we are aiming to achieve an SG&A
ratio of 20% or less through improvements to productivity
for each employee, and focusing on improvement and support for work processes, proposals and guidance to improve
work efficiency by using IT, and reforming awareness toward
improvements to productivity and work-life balance under
the guidance of the Work Style Innovation Department
BANDO PS BELTSTM, high-value-added urethanebelts for which we have expanded sales

that was newly established in April 2018. In addition, theBando Group proceeded to “slim down” work operations

Progress for Guideline 3: Enhancement and
Evolution in Manufacturing and Initiatives
Going Forward
For Guideline 3: Enhancement and Evolution in
Manufacturing, we focused our efforts on the three key
initiatives to establish a consolidated cost to sales ratioof 70% or less, namely develop innovative manufacturing
automated production lines, and optimize production
based on the principle of producing near demand.

of products for new applications as priority measures.

Mid-term business plan (BF-2)

the Organization which serves as the base for all initiatives

methods for main power transmission belt products, build*1 Currently Mitsuya F&B Corporation*2 Compared to the Company’s V-Belts

Mid-term business plan (BF-1)

For Guideline 4: Work Style Innovation for Individuals andFan Mfg. Co., Ltd.*1 and KUKEN KOGYO Co., Ltd.). The

in Vietnam, where demand for two-wheeled vehicles

66

during the BF-2 period by focusing on accelerating thetransformation of our business portfolio and introducing

convenience. These initiatives made progress in each

Furthermore, as the use of electronics and the elec-

70

and a development of high-performance films with high

For Guideline 2: Core Business Expansion, we aim to

For example, we opened a new plant in May 2018

Fiscal 2018of precision parts such as blades and urethane belts

Progress for Guideline 2: Core Business
Expansion and Initiatives Going Forward

high-value-added products and enhancing customer

74 (%)

progress in its business portfolio transformation toward(see the featured article on page 23).

capture the top share in key markets by offering new

Aiming to establish a consolidated cost to sales
ratio of 70% or lessHowever, the consolidated cost to sales ratio went slightly
over 70% for fiscal 2018 due to the impact of temporary

by abolishing, integrating, and changing unnecessary or
repetitive tasks. As a result, we were able to achieve both
growth in revenue and a reduction in total hours worked infiscal 2018. Although the Bando Group is moving towards
increasing systems investment and investment related to
new businesses, we were able to reduce the SG&A expense
ratio to 22%. We are also focusing on further reduction
to the SG&A expense ratio using IT and robotic process
automation (RPA) going forward.

Achieving an SG&A expense ratio of 20% or lower
through improving productivity for each employee
24 (%)
Fiscal 2018

factors such as addressing issues at a customer. We willcontinue to focus on those three key initiatives while
taking up new methods such as introducing AI in visual

20

inspection of products and expanding automation ofSecond time to receive the Grand Prize
for Excellence in Energy Efficiency

HFD SystemTM lineup (small, medium,large)

production lines.
16

Mid-term business plan (BF-1)

Mid-term business plan (BF-2)

Opening ceremony for the new plant in Vietnam (May 2018)8

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20199

To become a standout
global supplier

Our History: Innovation for the Future
Toward achieving sustainable growth using our technological capabilities
to generate innovation
As a company founded on Japan’s first cotton power transmission belts, Bando Group has
achieved sustainable growth by creating many “Japan-first” or “world-first” products with
its technology, while adapting its business portfolio in line with the transitions of growthindustries to achieve sustainable growth.
Going forward, we will leverage these strengths and aim to be a standout global supplier.

Establish new foundations
for business

2015

2014

“ Technological capabilities
to generate innovation”
Growth centeredon the automotive industry,electronics industry, andinformation machinery field

1988
1972
Growth centeredon the heavy chemical
1964
industry andagricultural fields

1959
Growth centeredon the textile industry
and industrial fields

1921
1906

2016

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

Developed C-STRECHTM,
a completely new elastic strain sensor

1995

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

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

Developed BANDO AVANCETM, the world’s first dry belt forcontinuously variable transmissions (CVT)

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

Developed MONOPLY BELT, the first single-ply conveyor belts in Japan

1932
Developed SYNCHROBELT,
the first toothed belts in Japan
Developed BANROPE, the first V belts in Japan“Sustainable growth inboth new businesses
and current businesses”

Developed the first rubber conveyor belts in Japan

Developed the first cotton belts (the Bando Cotton Belt) in Japan

10

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201911

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

Net Sales/Revenue

Operating income/Core operating income

CO2 emissions

Operating margin/
Core operating margin

Scope 1(¥ million)
100,000(¥ million)
8,000

(%)
8

6,000

6

Waste generation

Scope 2(t)
60,000(KL/GJ)
30,000(t)
6,000

50,00080,00040,00060,000
4,000

4,000

30,0004

40,00025,00020,0002,000

20,0000Energy consumption

2,000

2
10,00002014 2015 2016 2017 2018 2019
J-GAAP

02014 2015 2016 2017 2018 2019
J-GAAP

IFRS

02014 2015 2016 2017 2018 2019
J-GAAP

IFRS

2014 2015 2016 2017 2018 2019

20,0002014 2015 2016 2017 2018 201902014 2015 2016 2017 2018 2019IFRS
* Based on the 2005 emission factors of the electric power supplier, published by the Ministry of
the Environment

Capital investment

Free cash flow(¥ million)
8,000(¥ million)
6,000

6,000

4,500

4,000

Interest-bearing debt(¥ million)
30,000PRTR substance emission
and transfer volumes
Transfer volume

D/E ratio(times)0.5

24,0000.4

18,0000.3

12,000

0.2

1,500

6,000

0.1

0

2014 2015 2016 2017 2018 2019
J-GAAPIFRSJ-GAAP

Shareholders’ equity/Equity attributable to owners of parent
Equity ratio/Equity attributable to owners of parent ratio
Shareholders’ equity/Equity attributable to owners of parent
Equity ratio/Equity attributable to owners of parent ratio(¥ million)(%)
70,00070.002014 2015 2016 2017 2018 2019IFRS

J-GAAP

Annual dividend per share*
Payout ratio
Annual dividend per share
(yen)
35

Payout ratio
(%)
35.0

ROA
(%)
14

67.5

30

30.0

12

60,000

65.0

25

25.0

10

55,000

62.5

20

20.0

8

50,000

60.0

15

15.0

6

45,000

57.5

10

10.0

4

40,000

55.0

5

5.0

2

35,000

52.5

0

0.0

0

2014 2015 2016 2017 2018 2019
J-GAAP

0

(%)
1.20

(%)
70

1.00

60

90

50

0.80

40
0.60

30

0.40

20

30

0.20
0

Ratio of foreign employees

2014 2015 2016 2017 2018 2019

0.00

10

2014 2015 2016 2017 2018 201902014 2015 2016 2017 2018 2019

IFRS

ROA
ROE

65,0002014 2015 2016 2017 2018 2019
J-GAAP
IFRS

2014 2015 2016 2017 2018 2019

Occupational accident
frequency rate

Emission volume

(t)
120

60

3,000

2,000

0

Interest-bearing debt
D/E ratio

IFRS

ROE

2014 2015 2016 2017 2018 2019
J-GAAPIFRS* Figures adjusted for the reverse stock split theCompany conducted on October 1, 2016, consolidating two shares of common stock into one share.

12

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201913

Bando Chemical Industries’
Global Network

Global Network
Toward achieving optimization worldwide
As a company securing approximately half of its consolidated revenue overseas,
we are undertaking initiatives to constantly evolve our global network by making
organic connections at bases built in Japan, China, Asia, the United States, andEurope, and proceeding with optimization in production based on the principle ofproducing near demand as well as global logistics.

Europe, America & other
Revenue

China(¥ million)

Revenue(¥ million)

16

8,983

5

6

Bando (Shanghai)Management Co., Ltd.*

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

7

6

8

9
Bando Siix Ltd.

8

10

Asia
Revenue

10

Bando Korea Co., Ltd.

Bando Jungkong Ltd.

Bando Manufacturing(Vietnam) Co., Ltd.

11

12

13

Bando Asia & PacificCo., Ltd.

Bando Manufacturing(Thailand) Ltd.*

Bando (Singapore) Pte.
Ltd.

14

18

19

Sanwu Bando Inc.

Kee Fatt Industries Sdn.
Bhd.

Bando Belt Manufacturing(Turkey), Inc.

16

17

Bando Europe GmbH

Bando Iberica, S.A.

Revenue

P.T. Bando Indonesia

Philippine Belt
Manufacturing Corp.

26,22245,574BANDO CHEMICAL INDUSTRIES, LTD.

Head Office*1 Japanese business locations are leading thedevelopment of environment-friendly products andthe expansion of high-value-added businesses.

Business Locations
Kobe Head Office/
Manufacturing Planning
Center/ResearchLaboratories for CoreTechnologies
Kakogawa Plant

2019

Ashikaga Plant
Tokyo Branch OfficeNankai Plant
Wakayama Plant/Research Laboratories forPower Transmission Technologies

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

Composition of Revenue by Region(as of March 2019)

2018

2019

Japan: 51.86%

Manufacturing Affiliates
BL Autotec, Ltd.
Aimedic MMT Co., Ltd.*2
Fukui Belt Industries, Ltd.
Bando-Scholtz Corporation
Other Service Affiliates
Bando Trading Co., Ltd.
Bando Kosan Co., Ltd.
*2 Consolidated through M&A on May 8, 2019

Asia: 27.80%

Initiatives to steadily improve corporate value through business expansion

China: 9.25%

Quality Management System

Environmental Initiatives

ISO 9001: 16 domestic divisions and overseas business locations
IATF 16949: 10 domestic and overseas business locations
ISO 13485: 1 domestic subsidiary

ISO 14001: 18 domestic divisions and overseas business locations
Solar power generation systems: All domestic production bases

Europe, America &other: 11.09%
14

1

22

48,91048.14%

21

2019

Japan*1

21

Overseas revenue ratio:
20

2018

2

20

25,857

10,45922(¥ million)

2018

Bando (India) Pvt. Ltd.

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

10,3843

19
13(¥ million)

4

Bando USA, Inc.

18

9

12 11

3

4

5 7

* The China Technical Center and Asia TechnicalCenter were opened in 2012 and 2013, respectively,
both of which are developing products with optimal
specifications for markets.
14

15

2019

15

Bando Manufacturing(Dongguan) Co., Ltd.

2

8,728

2018
17

1

Annual Report 201915

Fiscal 2018 Topics

Our 1st Lap and Next Step in BF-2

Product Development and Others

The fiscal year ended March 31, 2019 was the first year for BF-2, and we focused our efforts on
various key measures for growth in both new and current businesses. This feature will primarily
introduce progress for Guideline 1: New Business Creation and Guideline 3: Enhancement and
Evolution in Manufacturing, as well as initiatives for the guidelines going forward.

Commenced sales of Mr. Ultra
MirrorTM, a light-duty fluorine
resin conveyor belt used withsmall pulley designs

Awarded the Grand Prize for
Excellence in Energy Efficiency(second time since 2013) for the
HFD SystemTM, which achieves
next-generation energy-savingtransmission

Commenced sales of Mr.
SpikeTM, a high-grip, light-duty
conveyor belt for food

New Businesses Creation
Enhancement and
Evolution in Manufacturing
Mr. SpikeTM

Mr. Ultra MirrorTM
HFD SystemTM

TOPXTM lapping pad for glass polishing
We launched mass production and sales for
precision polishing materials for glass casingson smartphones and other items, and we areproceeding with initiatives for expansion.

P
2018
March

22

Development of innovative production methods
and strengthening production near demand
We are progressing and strengthening initiatives to keep thecost to sales ratio below 70%, both domestically and overseas.

P

24

2019
April

May

June

July

AugustSeptember

OctoberNovember

DecemberJanuary

February

MarchManagement
Introduced a work-from-home system

Held the private exhibition Bando Techno
Fair 2018

Nankai Plant achieved arecord of 5,600,000 hours ofaccident-free operation

Selected as a 2019 Health &Productivity Stock Selection for
the third year in a row/Recognizedin the 2019 Certified Health &Productivity Management
Outstanding Organizations
Recognition Program (White 500)

Bando Techno Fair 201816

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201917

Fiscal 2022 plan

Transforming Our Business Portfolio

Other
Business

In the fiscal year ended March 31, 2019, we proceeded with the shift to highvalue-added products in the Advanced Elastomer Products Business, in addition to
expanding sales for new businesses. The Group will continue to push forward withtransforming our business portfolio by focusing on Guideline 1 in BF-2: New Business
Creation and Guideline 2: Core Business Expansion.

Sustainable growthin bothnew businesses andcurrent businesses

Fiscal 2017 results

Advanced
Elastomer
Products
Business

Automotive Parts
BusinessCore

Business

Revenue
Japan
China

Industrial Products
BusinessCore

Business

Revenue
Japan
China

Asia
Europe, America & other¥90.7
billion(¥ billion)

billionCurrent businesses + ¥17.3 billion

New

Business

Business

Advanced
Elastomer Products
Business

Other
Business

New

Business

Revenue

Asia
Europe, America & other

31.9

34.8

36.4%

Proceeding with the shift tohigh-value-added products

15.1

15.9%

(¥ billion)

Expansion of sales
in new businesses

15.2
2.7

Fiscal 2017 Fiscal 2018

Fiscal 2017 Fiscal 2018

Fiscal 2017 Fiscal 2018
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 powertransmission systems for use in a variety of fields.

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

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

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

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

Industrial Power Transmission Belts for industrial and agricultural
machineryStrengths and Characteristics•Development of energy-efficient belts and belts suited to highpower machinery•Global production and sales network, with 21 bases in 15 countries
Main Products•RedTM SII V Belts for agricultural machinery•HFD SystemTM•STS/HP-STS/CeptorTM-VI/CeptorTM-X•BANCOLLANTM Long Synchronous Belts
Conveyor Belts
Strengths and Characteristics•A full line-up of rubber conveyor belts and light-duty resin conveyor belts•Precisely meeting customers’ needs with heat and oil-resistantspecifications, as well as fray prevention, non-slip, anti-static andmany other models
Main Products•Hyper Flat Drive (HFD) SystemTM •Mr.COOKTM F2224 Non-Stick Belts•Pipe Conveyor Belts•Lightweight Jointless P-Series Belts

4.1%

3.8

Fiscal 2017 Fiscal 2018

We 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.

Main Products•RIB ACETM V-Ribbed Belts•VS Belts•Automatic Tensioners•TENSION MASTERTM

Industrial Products
Business+ ¥12.0 billion(¥ billion)

41.6

43.6%

Core

Japan
China

(¥ billion)

41.6

Automotive
Parts
Business

Business Portfolio
Revenue

Asia
Europe, America & other¥120

Revenue

New businesses

For the Future

RevenueStrengths and Characteristics•Development and provision of high performance, clean precision parts•Development and provision of functional films for various applications, such as in the printing and medical fields
Main Products•BANCOLLANTM BLADE G-ModuleTM•Development Rollers•BANDO GLANMESSETM•Medical films•BANDO MDECTM (new businesses)

We are prioritizing the allocation of business resources for new
business creation with a focus on the medical and healthcare
equipment business and electronic products business to prepare forthe transformation of our business portfolio.
*Including the robot-related device business from BL Autotec, Ltd.

Core Technologies•Technologies for compounding, dispersing and combining elastomers
and resins (new business)
Strengths and Characteristics•On-point technology that merges and fully integrates core technologies and new technologies (new business)•Top domestic share for robotic wrist peripheral equipment products(robot-related device business)
Main Products•Elastic strain sensor C-STRETCHTM•Precision polishing materials TOPXTM•Optically clear adhesive sheets Free CrystalTM•High thermal conductive sheets HEATEXTM•Metal nanoparticle bonding material FlowMetalTM

BANCOLLANTMBLADE G-ModuleTM

RIB ACETM V-Ribbed Belts
TOPXTMBANDO GLANMESSETM
Double Cog Belts

18

BANDO CHEMICAL INDUSTRIES, LTD.

Hyper Flat Drive (HFD)
SystemTM

Pipe Conveyor Belts

C-STRETCHTM

Annual Report 201919

Growth Plan in New Business
For Guideline 1: New Business Creation in BF-2, the electronic products business and medical
and healthcare equipment business have been designated as the two main pillars, and we
proceeded with initiatives towards mass production and commercialization in these fields.
Furthermore, we are accelerating initiatives in the medical and healthcare equipment business inparticular with the acquisition of Aimedic MMT Co., Ltd. that was implemented in May 2019.

Toward full-scale expansion
in the two pillars
The New Business Promotion Center opened
in April 2018 as an organization dedicated to

Toward Full-scale Expansion for Fiscal 2021 and Beyond
During BF-1 (fiscal 2013–2017), the Company observed
results and issues regarding various fields where it had
undertaken development of new products, such as
electronics, transportation, automobiles, energy, robots,
healthcare, welfare, and medical care, and decided tofocus management resources on the electronic products
business and medical and healthcare equipment businessfor BF-2, starting in the fiscal year ended March 31, 2019.
In the fiscal year ended March 31, 2019, the Company
was able to proceed with applications development forelastic strain sensor C-STRETCHTM by collaborating withaccelerating creation of new business as the mostimportant guideline for BF-2.

influential doctors (key opinion leaders) in the fields ofrespiration, swallowing, etc., in addition to launching mass
production and sales for TOPXTM lapping pad for glass
substrate polishing. Furthermore, we received more evaluations from customers for HEATEXTM thermal conductive
sheets as an interface to convey the shift of heat fromheat generating components to a cooling material. Goingforward, we will further strengthen initiatives for the twopillars of new business to fully expand earnings for the
fiscal year ending March 31, 2022 and beyond.

Number of patent registrations in new businesses

Target businesses and key products(Cases)
30

Electronic products business:
Precision polishing materials TOPXTM
Optically clear adhesive sheets Free CrystalTM
Dust removal system BANDO MDECTM
Metal nanoparticle ink FlowMetalTM
Metal nanoparticle bonding material FlowMetalTM
High thermal conductive sheets HEATEXTM

Members of the New Business Promotion Center that will pioneer creation of new business+122022 Target (Revenue growth):

billion yen

focus on swiftly rotating the PDCA cycle, such assame-day implementation of report results fromvisits to customers.
Furthermore, the TOPXTM, FlowMetalTM,
HEATEXTM, and C-STRETCHTM are assigned tothose in charge of strategies to build momentum
toward product growth respectively, with four
teams introducing mechanisms to compete andeach team sharing progress on development
topics on a weekly basis.

mid-to-long term perspective, and proceed with
Power electronics

initiatives that develop and commercialize new

10

products for future markets and those that survey,

High thermal conductive
sheets HEATEXTM

2014

2015

2016

2017

2018

Electronic Products
Business

2019(years ended March 31)

Optoelectronics

analyze, and measure technological trends, inaddition to application of core technologies innew business fields.
Going forward, the Group will continue totake on the challenge of creating new business inPower electronics

In fiscal 2018, the precision polishing materials
TOPXTM posted significant results

future markets, while advancing toward achieving

Metal nanoparticle bonding
material FlowMetalTM

the quantitative targets of BF-2.

Metal nanoparticle ink
FlowMetalTM

P

Optoelectronics

Precision polishingmaterials TOPXTM

technological trends in both businesses, it will

for new pillars to follow the original two from a

22

Optoelectronics

In consideration of the rapid pace of change for

The center will also play a role in searching0

Optoelectronics

business, the electronic products business andmedical and healthcare equipment business.

20

Medical and healthcare equipment business:
Elastic strain sensor C-STRETCHTM

P

The center will guide initiatives toward
full-scale expansion of the two pillars for new

Dust removal system
BANDO MDECTM

23

May 2019
Acquired all shares of
Aimedic MMT Co., Ltd.

Optically clear adhesive
sheets Free CrystalTM

Katsuhiko Hata
Director, General Manager,
New Business Promotion Center

Swallowing function evaluation

Medical and Healthcare
Equipment Business
Elastic strain sensor
C-STRETCHTM
Respiratory rate measurement

20

BANDO CHEMICAL INDUSTRIES, LTD.

Medical and Healthcare
Equipment BusinessAnnual Report 201921

Progress in New BusinessElectronic Products Business

Medical and Healthcare Equipment BusinessWe are proceeding with initiatives to further expand sales for the precision polishing materials
TOPXTM, which is being mass produced and sold for use in polishing glass substrates forelectronic devices and is highly praised by customers for its polishing performance.

In the medical and healthcare equipment business field where the Company isimplementing M&A strategies, we are moving toward full-fledged growth forelastic strain sensor C-STRETCHTM.

Precision polishing materials
TOPX
TM

Elastic strain sensor
C-STRETCH
TM

CORE TECHNOLOGIES

Know-how regarding
pharmaceutical applications andproduct quality management
Pharmaceutical applications, medical
equipment quality management
structuring, approvals for medical
equipment manufacturing and sales, etc.

Dispersion
technology
Network of doctors
and medical
institutions

Compounding
technology

Know-how and humanresources to conduct clinicaland therapeutic trials

Searching for demand, market
surveys, project proposals
for products, development,
deciding on specifications

Coatingtechnology

Clinical trials, trial
equipment, creating
brochures, etc.

Strengths of
Aimedic MMT
TIMELINE•2003 Start of development•2005 Launch of sales for first generationof TOPXTM•2015 Improved silica film
•2018 Used in polishing glass substrates forelectronic devices

Sales system for
medical equipment

Sales capability

Sales to medical institutions,
adherence to advertising
regulations, etc.

Follow-up•Achieves flattening at the nanolevel•Realizes a high polishing rate with minimal
surface roughness•Long lifespanSUPERIORITY

CHARACTERISTICS ominates as a competitive product due to itsDpolishing performance for glass substrates

Fast contraction after expanding, can return to its
original shape

Delving further into
potential markets
With a further increase in the number of electricvehicles and advancement of information communications equipment, there is a growing need forpolishing materials used to process various types ofsubstrates with high speed and precision. TOPXTM
has an extremely high growth potential as it can beused not only for glass substrates but also for brittle
materials such as silicon wafers and difficult-tomachine materials such as SiC, and therefore we are
currently working on development of new products,
enhancement of our production system, and sales
promotion activities for new customers.

LASER

Competitor (Substrate Ra=0.7µm)
Competitor (Substrate Ra<1nm)
TOPX Pad (Substrate Ra=0.7µm)
TOPX Pad (Substrate Ra<1nm)20
15

Not Enough SRR(competitor)

10

Enough SRR(our pad)

5
0

0

0.05

0.1
0.15
0.2
Roughness Ra (µm)

0.25

0.3

C-STRETCH

Target markets and applications, etc.
•Substrates for hard disks•Brittle materials such as silicon wafers, etc.
•Difficult-to-machine materials such as SiCs andsapphire substrates, etc.

520

100

420

50

320

0

1

2

3

4
5
Time (sec)

6

7

8

220

22

BANDO CHEMICAL INDUSTRIES, LTD.

•2010 Start of development•2013 Developed elastic and conductive
elastomer materials•2014 Concluded an “agreement for comprehensive industry-academia cooperation”
with Kobe University•2015 Launched sales for an R&D kit that cantest capabilities

VALUE•Pliability that can be applied to various
locations, such as curved surfaces•Quick responsiveness•High-precision detection capability

Accelerating the medical
equipment business

Examples of use in medical andnursing care fields

Aimedic MMT, which became a member of the•Respiratory rate measurement•Swallow count measurement•Motor function measurement•Improving the control accuracy of prosthetic feet,artificial limbs, etc.

that will significantly contribute to expansion ofBando Group in May 2019, possesses strengths
the Group’s medical and healthcare equipment
business. By utilizing Aimedic MMT’s strength tothe fullest extent, the Group will accelerate commercialization of C-STRETCHTM medical equipment,along with undertaking a search for new demand

Hard disk

Respiratory ratemeasurement

Swallow countmeasurement

Motor function
measurement

Improving the control accuracyof prosthetic feet, etc.

Kazuhiro Yamauchi
Marketing Department, New Business Promotion Center,in charge of TOPXTM strategy

TIMELINE

Processing
technology

620

150

0

Compounding
technology

720

200

Strain (%)

Stock removal rate (µm/min)

25

Dispersion
technology

Capacitance (pF)

VALUE

CORE TECHNOLOGIES

that directly ties into the development of new
products in the field of orthopedic surgery.

Masashi Ohta
Silicon wafer

Engineering Department, New Business Promotion Center,in charge of C-STRETCHTM strategy

Annual Report 201923

Updated production line for urethane belts at the Ashikaga Plant

Progress in Manufacturing
For Guideline 3: Enhancement and Evolution in Manufacturing, we proceeded with initiatives
in Japan and overseas toward the goal of keeping the consolidated cost to sales ratio below
70%. Despite worsening of the cost to sales ratio due to the impact of issues addressed ata customer in the fiscal year ended March 31, 2019, the Group continued to increase costcompetitiveness by continuing to place its focus on building an optimized global production
structure with innovative production methods and automated production lines.

Japan
At the Ashikaga Plant, which produces polyurethane belts
for various types of precision machines, etc., we are currently
undertaking initiatives to transform the facility into a “smart
plant” that uses AI and IoT, in addition to making the assemblyline more compact and automating a portion of the process toimprove productivity.

Productivity

UP
New plant in Vietnam

BANCOLLANTM (polyurethane) belts

Vietnam
In terms of building an optimized global production structure near
demand, we started operation of a new plant in Vietnam that
produces variable speed belts for scooters in the region in May 2018.
Efficiency improvements to integrate production from preprocess topostprocess have started to show results in cost reduction.

Production volume
Optimization of
localized andintegrated production

UP

Achieving expansion of core businesses
while reducing costs
Aside from growing demand for scooters in the domestic market in Vietnam,
there has also been an increase in customers transferring to “post-China”
production, and production volume at the new plant has expanded consistently since operations began in May 2018. Going forward, we will proceedwith expansion of core businesses and cost reduction through steady
initiatives that meet the needs of customers in the domestic market.

Atsushi Someda
24

Director, General Manager,
Manufacturing Planning Center

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 2019

25

FAQ

Here, we provide answers to some of the questions most frequently asked byour shareholders and investors.

At Bando, we believe that continuing to engage in a dialogue with our shareholders and investors
will lead to sustained improvement in corporate value. Here, we provide answers to some of yourQ

most frequent questions, with the goal of fostering better understanding of that dialogue going
forward by sharing more information about our growth strategies and management policies.

Tell us about your business and product development in
the market for EV and other next-generation automobiles.

With OCA Without OCA

What is the impact of raw material price fluctuations andexchange rate fluctuations on your business performance?

Q

Raw material costs (indicators)
Naphtha

CottonNatural rubber

1.80
1.60
1.40
1.20
1.00
0.80
0.60

Synchronous belts for EPS systems
0.40‘14/12
Free CrystalTM ultra-thick OCA for next-generation displays

EV and hybrid cars do not require
the accessory drive powertransmission belts used in gasoline
vehicles. Therefore under our strategy for core business expansion, Guideline 2 in
BF-2, we are working to pioneer new demandfor belts used in assisted and autonomous
driving systems.
Synchronous belts for EPS (electronic power
steering) systems are one such example, developed by Bando for rack-assist systems thatmake it easy to adjust assist power. They are
well-regarded for their silent performance anddurability, and are used in luxury sedans andSUVs. Going forward, we will work to expand

A

26

BANDO CHEMICAL INDUSTRIES, LTD.

sales of these products, while unearthing new
demand created through increased use ofvehicle electronics and electrification, including
motor drive components with belt-driven
speed reduction mechanisms.
Another new business we are working on isthe development of the Free CrystalTM opticalclear adhesive sheets. Taking advantage of its
outstanding properties as an OCA* for curved
surfaces and for variant or curved displays,
we are working to expand certification anddevelop the market in the area of in-car displays, where further evolution is expected fornext-generation vehicles.

‘15/12‘16/12‘17/12‘18/12* Raw materials cost (indicators) base is 2014/12.

Exchange rate transition
USD

THB

The products we manufacture,including power transmission belts,
conveyor belts, high-performancefilms and precision parts, use avariety of raw materials. These include naturaland synthetic rubber and elastomers, as wellas the aluminum wire and glass fiber used inbelt cores.
Of these, we spend a large amount to purchase synthetic rubber and elastomers. Given
that the price of naphtha has a major impact on
price fluctuations for these materials, our raw
material costs are easily affected by changes in
the price of naphtha.
With regard to foreign exchange rates,
we are significantly affected by fluctuations in
RMB 推移the U.S.
dollar, the Thai baht and the Chinese
推移
yuan.THBWhen
the yen weakens against the U.S.
dollar,for 推移example, we can expect this to haveUSD
a positive effect on our earnings.

A

Aluminum

RMB

(%)
140

120

100

80

60

’13/12’14/12’15/12’16/12’17/12’18/12* Exchange rate base is 2013/12.

* Optical Clear Adhesive

Annual Report 201927

Progress & Strategy

Automotive Parts

Business

Accelerating Target Customer Development

Hisashi Yagi

Executive Officer, General Manager,
Automotive Parts Division

Segment Strengths

Segment Risks and Opportunities• High share of the two-wheeled vehicle market in addition to the four-wheeled vehicle market

Risks

Opportunities• Ability to develop new rubber belts for electronic power steering-related applications due toincreased use of electronics and the electrification of automobiles• ‌Contraction in target markets due to the impact of trade
friction between the U.S. and China• ‌Growth in overseas repair parts market, such as in China,
Southeast Asia, etc.

• Long-term‌
contraction in the domestic market• ‌Steady growth in high-value-added business opportunities,
such as improvements in silence and transmission efficiency• Excellent processing technologies and compounding technologies for raw rubber materials
relationships with customers, including joint development with automakers• Solid‌• Customers are diversified to a certain degree between domestic and overseas markets, creating a
relatively solid customer base‌
• Lower
prices and less usage of rubber belt products
from the proliferation of hybrid cars, small vehicles, anddownsizing turbocharged vehicles• Spread‌of automobiles without traditional engines, suchas electric vehicles

product supply network made up of production and sales bases in more than a dozen• Global‌
countries worldwide

The segment achieved revenue of ¥41,650 million, down 0.1% from the previous fiscal year.
Results by region were as follows.

Revenue fell 1.8% year on year, due in part to lower sales caused
by a drop in production in the U.S. of vehicles equipped with our
products.

China
Revenue declined 1.0% from the previous fiscal year, mainly owing toweaker sales resulting from lower output at key customers.

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

41.6

41.6

Europe, America & other
China
Asia
Japan

30

10
0

2018

2019

Segment Profit of Automotive Parts
Business(¥ billion)
4

3.4

3.1

3

Japan
Automobile output was flat at the previous year’s levels, and revenue
grew just 0.1% year on year as a result.

2
1
0

Segment profit fell 6.4% year on year to ¥3,182 million, reflecting adrop in profit due to lower sales.

For four-wheeled vehicles

For two-wheeled vehicles

Acquire OEM business with local overseas customers

Acquire OEM business with key customers• Adapt‌the specifications of high-value-added andcost-competitive products• Maintain‌and increase our share of OEMs for major
priority customers with a full line-up of products

Expand sales in the repair market• Develop‌
products in the low-price regions• Enhance‌brand awareness and develop repair/sales
network in (1) China and (2) India

Expand sales in the repair market

Sales of products responding to electronics shift for applications other than accessory drive power transmission• Increase‌
sales of timing belts for electronic power
steering (EPS) systems (rack-assist types), etc.

20

Asia
Revenue increased 0.6% year on year, driven by growth in sales ofaccessory drive power transmission belts and systems in Thailand,in addition to a rise in sales of variable speed belts for scooters in
Thailand, Vietnam and India.

• ‌Additional new demand for rubber belts due to theincreased use of electronics and electrification in
automobiles, including those related to electronic power
steering and electronic brakes

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

Performance in Fiscal 2018

Europe, America & other• ‌Further growth in business opportunities in Asian countries such
as India and Vietnam where demand is brisk for motorcycles

2018

2019

‌
• Enhance
brand awareness and develop repair/sales
network in (1) India and (2) Vietnam

Enhancement and evolution in manufacturing‌
Developinnovative production methods, promote IoT andAI, reduce production costs aiming for global optimization

ESG Initiatives: Social

Nankai Plant achieved a record of 5,600,000
hours of accident-free operation

accidents with the target of achieving a record of 8,400,000
hours of accident-free operation as the standard for our
next objective, the Type 3 Accident-free Record Certificate.

The Nankai Plant, which is responsible for domestic
production in the Automotive Parts Business, achieved arecord of 5,600,000 hours of accident-free operations withno deaths and no more than one lost day in September
2018. It was awarded a Type 2 Accident-free Record
Certificate (rubber manufacturing) by Japan’s Ministry of
Health, Labour and Welfare in January 2019. Through ourrisk assessment activities, we will continue to nip risks andaccidents in the bud, working to prevent occupational

Accident-free Record Certificate

Nankai Plant

28

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201929

Progress & Strategy

Industrial Products

Business

Focus on expanding sales in key markets and regions

Satoshi Matsuo
Senior Executive Officer, General Manager,
Industrial Products Division

Segment Strengths

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

Risks

Opportunities• Competitively priced in products for agricultural and injection molds amid numerous competitors• ‌Impact from contraction in domestic market• ‌Further productivity improvements and streamlining
based on core technologies• Supplying a wide range of industries enables effective risk diversification• ‌Impact of changes in rubber prices on raw materials costs• An‌ unstable business environment in products for
agricultural machinery in China

• Top
‌
share of domestic market in friction transmission belts as industrial materials• Strong in the repair market thanks to robust sales agency network

For the fiscal year ended March 31, 2019, revenue grew 9.1% year on year, to ¥34,815 million.
Results by region were as follows.

Revenue rose 4.7% year on year, due in part to an increase in
private sector demand for capital investment in the U.S. andincreased sales for industrial power transmission belts.

Revenue of Industrial Products Businessby Region(¥ billion)
35

31.9

34.8

Revenue rose 7.4% year on year, owing mainly to an increase insales of power transmission belts for agricultural machinery.

Asia

15

While machinery orders were at a standstill, revenue increased
10.6% year on year due not only to increased sales of industrial
power transmission belts, but also to expanded sales of conveyor
belts from a steel manufacturer’s large order.
Segment profit rose 1.6% to ¥1,960 million due in part to theimpact of increased costs due to a product deficiency
being addressed at a customer.

30

BANDO CHEMICAL INDUSTRIES, LTD.

Belts for industrial machinery andother products

Conveyor belts

Focus on the key markets with market mapping• Differentiate‌from rivals with hallmark productswith leading companies in key markets• Partnering‌(1) Agricultural machinery, (2) Machine tools, (3) Robots, etc.

low-price products• Develop‌• Expand‌
sales channels overseas
sales of Bando Wiper Edge™ EX• Accelerate‌• ‌Key markets: (1) Food processing and (2) Transportation/logistics• ‌Market transmission belts for large agricultural machineryand urethane rice hulling rolls• ‌Increase processing bases and introduce automatedmanufacturing lines

Enhancement and evolution in manufacturing
2018

1.9

1.9

1.5
1
0.5

2018

Develop innovative production methods, promote IoT andAI, reduce production costs aiming for global optimization

2019

Segment Profit of Industrial Products
Business0• Turn‌
products into services
Enhance marketing in each segment of light-duty
conveyor belts

5(¥ billion)
2

Improve profitability of conveyor belts

Expand sales of high-value-added products

10

Asia

Japan

Japan

20

0

Revenue rose 4.2% year on year, owing mainly to an increase insales of power transmission belts for agricultural machinery.

Europe, America & other
China

30
25

China

• Developmentof markets in the U.S., China and‌
Southeast Asia

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

Performance in Fiscal 2018

Europe, America & other• ‌Expansion in applications overseas, other than automobiles

2019

ESG Initiatives: Environment

Relieving traffic congestion with longdistance conveyor belts and contributing to
the reduction of CO2 emissions
In the construction of the Tokyo Outer Ring Road, anational project currently underway, our long-distance pipe
conveyor belts are transporting excavated sediment over a
distance of about six kilometers. The total amount of sediment scheduled to be transported is equivalent to about
twice the volume of the Tokyo Dome, or about 500,000
10-ton dump truck loads. Carrying this sediment via a pipe
conveyor belt installed along the expressway shoulder not
only avoids the congestion caused by dump truck traffic
and accidents due to spilled loads, but is expected tocontribute significantly to reducing CO2 emissions.

Pipe conveyor belt installed alongexpressway shoulder

Gathering around the conveyor belt

Conveyor belt front view

Annual Report 201931

Progress & Strategy

Advanced Elastomer
Products BusinessAccelerating portfolio transformation to high-value-added products
and strengthening profitability

Tadahiko Noguchi
Executive Officer, General Manager,
Advanced Elastomer Products Division

Segment Strengths

Segment Risks and Opportunities• Applications expanding for high-performance film products in residential building materials
and for decorative use

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
high-performance blades, PS (Precision Seamless) Belts,
and new business creation• Offers added value not only in the value chain mid-stream, but downstream as well
• Development of high-performance products utilizing accumulated expertise in elastomer
materials technology and molding technology
to customer needs by leveraging characteristics of materials such as polyurethane and• Catering‌engineering plastics• Catering to customer needs by adding functionality based on leveraging characteristics ofpolyolefin, polyvinyl chloride, polyester and polyurethane plastics

For the fiscal year ended March 31, 2019, revenue grew 0.5% year on year to ¥15,237 million.
Results by product were as follows.

Although office equipment manufacturer output remained flat,
revenue rose 1.7% year on year due in part to increased sales ofhigh-performance rollers and blades to key customers.

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

Precision Parts

High-Performance Films

Develop new markets with current products

Shift toward high added value by expanding finishedproduct business (building materials and vehicles market)• Develop‌business for precision belts outside the OA
equipment market: ‌(1) Security cameras and (2) Banking terminals

Performance in Fiscal 2018

Precision Parts• ‌Introduction of more highly processed, high-value-addedfunctional films in the building materials and vehicle
markets, primarily in the downstream sector

Expand sales of strategic products in new markets

Revenue of Advanced Elastomer Products
Business(¥ billion)
15

15.1

15.2

• Grow sales in the optoelectronics market
BANDO MDEC™: Increase sales of cleaning system
Free Crystal™: Capture market share in the easywritability-sheet market

Segment profit grew 44.7% year on year to ¥799 million, in part
thanks to progress in the shift to high-value-added products.

Precision Parts

10

Enhancement and evolution in manufacturing

5

Develop innovative production methods, promote IoT andAI, reduce production costs aiming for global optimization

0

2018

2019

Segment Profit of Advanced Elastomer
Products Business(¥ billion)
0.8
0.6

0.79
0.55

0.4
0.2
0

32

BANDO CHEMICAL INDUSTRIES, LTD.

• Differentiate‌our products from competitors’ as ones thatcombine functionality and design with the convenienceof small batch customization to promote the downstream
business (vehicles market)• Continue‌to market our films for use in motorcycle
accessories and in materials for vehicle interiors

High-Performance Films

High-Performance Films
While sales of film for construction and industrial materials
increased, revenue fell 0.6% year on year, reflecting a decline insales of medical-related and decorative display products.

• Expand‌
sales of highly processed products rather thanfocusing on the stand-alone films business (Building
materials market)

2018

2019

ESG Initiatives: Environment & Social

Reducing energy use throughnew manufacturing methods, while also
improving labor productivity
The Ashikaga Plant, which manufactures advanced
elastomer products, is working to establish a new
method for manufacturing urethane belts as part of ourdevelopment of innovative manufacturing methods. In
the fiscal year ended March 2019, they re-evaluated thecompounding design of urethane materials and worked
to shorten processing steps. As a result, energy use was
reduced by about 80% and material loss fell by about 20%

compared to conventional manufacturing methods, whilelabor productivity improved by about a factor of two. We
are prepared to expand these types of efforts to all Group
plants going forward.

BANCOLLANTM (polyurethane) belts

Annual Report 201933

Progress & Strategy

ESG Section/New CSR Promotion Themes

Work style innovation ofindividuals and the organization
Achieving a positive spiral by aiming forself-directed work style innovation

Material Issues & New CSR Promotion Themes

Nobuhiro Hamada

The Bando Group recognizes that society expects it tofrom a global standard perspective. From the fiscal year

uphold its social responsibilities through CSR activities,

ended March 31, 2019, under our new CSR promotion

and that such activities must lead to the realization of its

themes on our material issues and management

management philosophy. Accordingly, in the fiscal year

philosophy, we strive to promote CSR activities to ensure

ended March 31, 2018 we determined material issues

that we can continue to respond to changes in society

with a view to revising our CSR objectives and themes

and demands from our stakeholders.

General Manager,
Work Style Innovation Department

New CSR Promotion Themes (Established in fiscal 2017, implemented from fiscal 2018)
The Department’s Mission• Lead with BF-2’s Guideline 4: Work Style Innovation of Individuals and the Organization, which
provides core support for Guidelines 1 through 3.
• Improve productivity, propose and support the operation of and educate employees about amechanism for achieving work-life balance• Propose and educate employees about measures for eliminating wasteful work, thereby
streamlining operations Group-wide and promoting and supporting labor savings

Compliance/Human rights
The Bando Group fully complies with the law andtakes sincere actions to gain the trust of society

Provide safe and secure products and services thatmeet the needs of society• Anti-corruption• Anti-competitive behavior•C ompliance(environmental/socioeconomic)• Customer health and safety• Product/process innovations

Achievements in the Fiscal Year Ended March 2019
We focused on building work processes and guiding and supporting
improvements, and on proposing, educating and guiding employees
in steps to improve operational efficiency with the use of IT. As aresult, progress was made in reducing or eliminating work dependent on individual skills, and we saw improvement in indicatorsfor both hours worked and work-life balance including annual paid
leave taken.

Fiscal 2017: 26.0 hours → Fiscal 2018: 24.8 hours (down 4.6% year on year)[Annual Paid Leave Taken (Average per Person)]Fiscal 2017: 11.4 days → Fiscal 2018: 12.0 days (up 5.3% year on year)[Net Sales (Non-consolidated, J-GAAP)]
Fiscal 2017: ¥48,153 million → Fiscal 2018: ¥50,423 million (up 4.7% year
on year)• Supplier assessment(environmental/social)• Human rights

The environment
Average Monthly Overtime Hours and
Net Sales (Non-consolidated)(Hours)
30

26.0

20

48,153

24.8

Average Monthly
Overtime Hours

50,423

Net Sales(Non-consolidated, J-GAAP)(¥ million)

10[Average Monthly Overtime Hours]

Products and services

0

Labor/Safety

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

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

Value communication with society
2018

2019

Stakeholder communication

Annual Paid Leave Taken(Average per person)(Days)
15

Initiatives for the SDGs
11.4

12.0

10

The Bando Group is conscious of the importanceof the globally shared Sustainable Development
Goals (SDGs). Going forward, we plan to solidify

5

policies and activity details for achieving the
0

2018

2019

SDGs in order, while also moving forward withinitiatives that achieve the targets (KPIs) of the
new CSR promotion themes.

Inspections utilizing IT(tablet devices)Work Style Innovation
informational posters

Future Efforts
Streamlining work through use of IT, RPA, etc.

34

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201935

CSR Promotion Themes and Major Achievements in Fiscal 2018

ESG Section/Environmental Initiatives

Major Achievements in Fiscal 2018

Reduction of CO2 Emissions through Use of the Joint Crediting Mechanism

This section will introduce the results of our primary CSR activities in fiscal 2018 as the first year for implementation of the

In aiming to reduce CO2 emissions by 20% compared

new CSR promotion themes.

to fiscal 1990 levels by fiscal 2020, the Company isundertaking initiatives such as shifting to different fuels,

CSR promotion themes

Compliance/
Human rights

Products andservices

The Environment

Labor/Safety

36

Major achievements in Fiscal 2018

adopting highly optimized equipment, switching to LED[Compliance]• Environmental: Environmental patrols (twice for the Company, once for affiliates)/survey on thestatus of compliance (once for overseas affiliates)• Social/Economic: Ensuring corporate ethics/enhancing information security measures/compliance with various laws and regulations and dissemination of revised information[Supplier assessments]• Environmental: Conducted CSR surveys• Social: Shared the Company’s procurement policies/confirmed social initiatives through CSR surveys[Anti-corruption/Anti-competitive behavior]• Held Code of Conduct workshops/implemented discussions regarding the Code of Conduct at
all departments/implemented lectures pertaining to the corrupt practices prevention laws (twice)for employees dispatched to overseas affiliates• Anti-competitive behavior cases: None
[Child labor/forced or compulsory labor]• Implemented supplier assessments/various types of measures related to hiring activities/education on human rights• Child labor or forced labor cases: Nonelighting, and installing high-efficiency boilers at business[Product/process innovations]• Marketed two new “eco moving” products• Developed new manufacturing method for urethane belts at the Ashikaga Plant (nearly doubled
productivity, reduced material loss by 20%, reduced energy use by 80%)
[Customer health and safety]• Reduced highly toxic chemicals/Proceeded with substitutions for regulated pollutants[Materials]• Unit volume of waste generation: Increased by 10.3% compared to all-time low in 3 years• Sustained zero emissions[Energy]• Unit volume of energy consumption: Increased by 0.1%
[Emission]• Reduction of CO2 emissions: 84% completion toward fiscal 2020 target (Based on the 2005
emission factors of the electric power supplier, published by the Ministry of the Environment)• Suppressed VOC emissions by 74% (compared to 2000)[Training and education]• Implemented level-based and function-based education/Implemented an educational program
outside the Company[Employment]• Status of annual paid leave taken/Average monthly overtime hours: Both improved compared tofiscal 2017
[Diversity and equal opportunity]• Ratio of female new graduates employed: 26%• Ratio of persons with disabilities employed: 1.98%[Occupational health and safety]• Lost days rate: 0.86%• Recognized in the “2019 Health & Productivity Stock Selection” and the “Certified Health &Productivity Management Outstanding Organizations Recognition Program (large enterprise
category) White 500”

BANDO CHEMICAL INDUSTRIES, LTD.

locations, in addition to focusing on modal shifts, jointdeliveries, and milk run logistics.
In accordance with developments in globalizationof our businesses, we are also focusing on reducing CO2
emissions at our overseas bases. Aside from refurbishingheat source boilers for equipment such as vulcanizers inthe belt molding process, press machines, and calenderrolls, we also introduced high-efficiency boilers that use
natural gas for fuel at Bando Manufacturing (Thailand)Ltd. in fiscal 2017. With the refurbishment and installationof new boilers, we estimate a CO2 reduction of 2,623
t-CO2 per year, and registered our reduced CO2 levels as
an item toward achieving Japan’s reduction targets in the
Joint Crediting Mechanism*.
* Joint Crediting Mechanism: Advanced countries provide technology and investment
to developing countries to reduce CO2 emissions, and resulting reductions counttoward the targets of advanced countries in the bilateral mechanism

Bando Manufacturing (Thailand) Ltd. has begun refurbishing manufacturing
equipment and high optimization to reduce CO2 emissions

Setting Targets Higher than Industry Standards to Further Evolution
CO2 emissions for the Company in fiscal 2018 amounted

2013 or 44,856 t. Going forward, the Bando Group will

to 50,920 t-CO2, nearly achieving the fiscal 2020 target

undertake initiatives inside and outside Japan to reduceof reducing emissions to below 47,842 t-CO2. In

CO2 emissions, and put forth effort to preserve the global

consideration of this, we set a new target to reduce CO2

environment.

emissions by 18% compared to fiscal 2013 by fiscal 2030.
In setting the above target, we considered target

CO2 emissions (Results and target)-18 %proposals from the Japan Rubber Manufacturers
Association. As of fiscal 2018, we have already nearly
achieved the association’s target of a 21% reduction
compared to fiscal 2005. On the other hand, adjustments

54,703 t

between industries have yet to be implemented in
50,920 t

terms of the Japanese government’s target of a 26%
reduction compared to fiscal 2013, feasibility of which has
been recognized as difficult in the Company’s business

44,856 tfields. Therefore, as the Company continues its current
business activities, it has set a goal close to that of
the government, an 18% reduction compared to fiscal

Fiscal 2013
(Result)

Fiscal 2018
(Result)

Fiscal 2030
(Target)Annual Report 201937

ESG Section/Social Initiatives

ESG Section/Corporate Governance

Toward Further Value Creation Overseas

Basic Stance on Corporate GovernanceConsidering the fact that about 60% of consolidated

English language training by foreign teachers

employees at Bando are non-Japanese, we are focusing

in education and guidance for new recruits, andour efforts on cultivating global personnel for thestrengthening language capabilities to serve as a

purpose of maximizing overall group synergy, while all

fundamental skill for global personnel. We also set

domestic and overseas employees further polish theirup voluntary courses, such as e-learning tailored to

specialties, creativity, and individuality.

each employee’s English language level, in an effort toAs part of this effort, we have been implementing

strengthen their English language capabilities.

In order to improve sustainable growth and mid-to-longterm corporate value, the Company, as a memberof society, must adhere to the law and social norms.
In addition, we seek to create harmony starting withstakeholders including the customers who use the Bando
Group’s products (end users), employees, business

partners, shareholders, local communities. We believe
it is especially important to gain people’s trust andbuild better relationships. In line with such thinking,
the Company focuses on ensuring sound, transparent
and efficient management by enhancing its corporate
governance system.

Board of Directors
Bando aims to further enhance auditing and oversightfunctions by adopting a Company with an Audit &Supervisory Committee structure.
The Company’s Board of Directors consists of eight
members, with four of those eight members serving as
members of the Audit & Supervisory Committee. The Board
makes decisions concerning basic management policies,
important management issues, and legally stipulated matters,

as well as monitoring the work performance of directors
and corporate executive officers. The Board’s three external
directors are charged with the independent oversight ofbusiness operations. The Board meets at least once a month.
In addition, the Company maintains a corporate executive
officer system to improve operational efficiency and speed,
and has established the Management Advisory Council toassist the president with management decisions.

Audit & Supervisory Committee
The Audit & Supervisory Committee members comprisefour directors, of whom three are external directors.

English language training for new recruits (Japan)

Bando Global Sales Seminar

Nominating Committee and Compensation Committee

The Bando Global Sales Seminar for employees in charge

As an example of its evolution, the seminar held inof sales at overseas bases provides market information

fiscal 2017 launched a new initiative to include new recruits

and sales cases for each base, and helps to cultivate

from Japan as participants. We have also started overseas

personnel who can develop global markets and products.

practical training, business manner training using English,

In fiscal 2018, six non-Japanese employees from five bases

and dispatching participants to a business school in Asia.

in five countries participated in the seminar, and learned

The Company positions strengthening personnel

about marketing methods, product development, and themeasures at the core of its growth strategy, as seen with

content of new businesses. They also gained knowledge

making “Work Style Innovation of Individuals and theabout the status of the overall Bando Group and best

Organization” a basic strategy in BF-2. Going forward,

practices. The seminar, which contributes to the creation of

we will focus on strengthening global management anda network connecting participants, was well received anddeveloping personnel, while integrating growth strategies

we plan to continue holding this event while evolving theand the CSR promotion themes, and material issues.

Despite having no legal obligation under the Companies
Act, the Company has established the Nominating
Committee and Compensation Committee to serve as
consultative bodies of the Board of Directors in an effort
to further strengthen corporate governance. Specifically,
resolutions for appointment and determination of
remuneration of directors by the Board of Directors, which
is chaired by the president, take place after deliberationby the Nominating Committee and Compensation
Committee, whose members include external directors
and directors serving as Audit & Supervisory Committee
members. As of June 27, 2019, the committees are chaired

38

BANDO CHEMICAL INDUSTRIES, LTD.

by Mitsutaka Yoshii (president and representative director)
and other members include Kyosuke Nakamura (director
who is an Audit & Supervisory Committee member) and
Takahiro Matsusaka, Takashi Shigematsu and Haruo
Shimizu (external directors who are Audit & Supervisory
Committee members).The Audit & Supervisory Committee
must approve the appointment of directors who will serveon it. The Audit & Supervisory Committee also deliberates
on the remuneration of said directors.
In the fiscal year ended March 31, 2019, the total
amount of director and Audit & Supervisory Committee
member remuneration is shown below.

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

Stock Remuneration
Total Remuneration

Total Amount

Number of
Persons

Total Amount5(0)¥72 million(¥0 million)

5(0)¥18 million(¥0 million)¥91 million(¥0 million)

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

4(3)¥45 million(¥30 million)0(0)¥0 million(¥0 million)¥45 million(¥30 million)

Total(of which, external directors)

9(3)¥118 million(¥30 million)

5(0)¥18 million(¥0 million)¥136 million(¥30 million)

content going forward.

A Bando Global Sales Seminar

Furthermore, one of the directors serves on a full-timebasis.

Notes:
1. As of March 31, 2019, the Company has four directors not serving as members of
the Audit & Supervisory Committee (no external directors), and four directors who
serve as members of the Audit & Supervisory Committee (including three external
directors).
2. The numbers above include one director not serving as a member of the Audit &Supervisory Committee who resigned at the conclusion of the Ordinary General
Meeting of Shareholders held on June 21, 2018.
3. The total monetary remuneration of directors not serving as members of the Audit& Supervisory Committee was limited to a maximum of ¥190 million per year, andthe total monetary remuneration of directors who serve as members of the Audit &Supervisory Committee was limited to a maximum of ¥84 million per year.
4. The total amount of monetary remuneration of the abovementioned directors notserving as members of the Audit & Supervisory Committee includes a profit-linked
component for the fiscal year ended March 31, 2019 (monetary remuneration linked
to business performance), calculated based on the Company’s criteria for profitlinked bonus. Projected payments are included in reserves.
5. The total amount of stock remuneration is the amount of costs recorded for 18,704
stock award points (equivalent to 18,704 shares of company stock) awarded to
executive directors in accordance with performance during the fiscal year ended
March 31, 2019. The maximum amount of stock remuneration that can be paid toexecutive directors during a single fiscal year is ¥50 million and 54,000 shares.
6. In addition to the above-listed information, salaries and bonuses for employees who
concurrently serve as directors are as follows.
Four employee salaries: ¥56 million
Three employee bonuses: ¥20 million

Annual Report 201939

ESG Section/Corporate Governance
Performance-linked Remuneration for Directors

Co., Ltd., and Outside Director at Ashimori Industry

enable Mr. Shimizu to conduct auditing and oversight

The Company introduced performance-linked

improve mid-to-long term performance results, such as

Co., Ltd. As the Company does not have any special

activities from an independent perspective. In addition,

remuneration (monetary or stock remuneration) correlated

stock-based remuneration received upon resignation

relationships with either Murata Manufacturing Co.,

Mr. Shimizu concurrently holds the position of Outside

to profit attributable to owners of parent for the purpose(stock award points are granted each year based on

Ltd. or Ashimori Industry Co., Ltd., there is no conflict

Director at Suminoe Textile Co., Ltd., and Outsideof heightening awareness of contributions to improving

business performance, and a number of shares equivalentof interest with ordinary shareholders as defined by the

Director at Ashimori Industry Co., Ltd. As the Company

business performance and corporate value. Furthermore,to the accumulated points are issued at the time ofTokyo Stock Exchange, and Mr. Shigematsu has a highdoes not have any special relationship with Suminoe

we are introducing functions to serve as incentives toresignation).

degree of independence.

Textile Co., Ltd. or Ashimori Industry Co., Ltd., there is no

Method to Determine the Amount of Performance-linked Remuneration
Conditions for profit-linked bonus payment∙ Total amount of profit-linked bonuses

Profit-linked bonus for directors who do not serve as Audit= Profit attributable to owners of parent before& Supervisory Board members (non-executive directors

performance-linked stock remuneration or payment ofare not eligible for this benefit) will only be paid if the

profit-linked bonus x 0.004 x (1.05)n-4

following conditions related to business performance are* n = Number of directors

conflict of interest with ordinary shareholders as definedHaruo Shimizu

by the Tokyo Stock Exchange, and Mr. Shimizu has a highMany years of experience gained working as a manager

degree of independence.

in manufacturing firms and a related wealth of knowledge

Analysis and Evaluation of the Effectiveness of the Board of Directors
For analysis and evaluation of the effectiveness of theand with a composition maintaining balance and diversity

Board of Directors, the Board of Directors carried out aof knowledge, experience, and skill, the Board of Directors∙ The dividend per share is more than ¥12 per year

Standards for stock remuneration payment

self-evaluation survey in regards to their operation andarrived at the conclusion that there are no overall issues with

∙ Profit attributable to owners of parent for the fiscal year

The amount of stock remuneration payment will be cal-management style and the chair of the Board of Directors

effectiveness. However, they expressed the opinion thatis more than ¥3,000 million and the Company posts

culated using the same standards as profit-linked bonus

carried out his own analysis and evaluation of directors’

it would be desirable to enrich their strategic discussions

non-consolidated net income

listed above. Stock award points will be calculated eachself-evaluation. Those results were reported to the Board ofrelated to achieving the targets of the mid-to-long term

year, divided by the average acquisition price (average

Directors and discussed.

business plan, create more concise materials for thefulfilled at the end of the fiscal year.

Calculation method for the total amount of
profit-linked bonuses

unit price of Company stocks acquired by a trusteefrom stock markets, etc., based on a fiduciary contract),

R&D and new product development in fiscal 2018. ThroughThe total amount of profit-linked bonuses to be paid

rounding down any number below one. Upon resignation,

lively discussions incorporating a variety of perspectives

to directors is calculated using the following formula.

the Company shall issue a number of shares equivalent to

However, in accordance with this calculation method,

the cumulative total of stock award points granted during

the fixed upper limit for the total amount of profit-linked

the tenure of an applicable director.

The Board of Directors added a member well-versed in

General Meeting of Shareholders
ElectionIndependence Standards and Qualification for Independent Directors
In nominating candidates for independent director, theit is judged that the Company’s decision-making is not sub-Nominating Committee ensures that such persons satisfy

ject to any undue influence by SMBC since (a) the Company

the independence criteria set by stock exchanges andconducts business with a number of financial institutions,are also capable of fulfilling their role and responsibilities(b) business with SMBC is conducted on the same terms as

from an independent standpoint. The rationales for thewith other banks, and (c) loans from SMBC are equivalent toappointment of those independent directors serving as ofonly about 2% of the Company’s total assets. Hence, sinceJune 25, 2019 are summarized below.

there is no conflict of interest with ordinary shareholders as

Board of Directors
Supervision

Audit & Supervisory Committee

AttendanceAppointment

Audit/
Supervision

Assistant
Cooperation

President
Consultation
Management Advisory Council

gained working in managerial positions in financial

Takashi Shigematsu

institutions afford Mr. Matsusaka the capacity to conduct

Many years of experience gained working as an engineer

auditing and oversight activities from general and specialist

or manager in manufacturing firms and a related wealthviewpoints. He is not influenced by the views of Sumitomoof knowledge enable Mr. Shigematsu to conduct auditing

Mitsui Banking Corporation (SMBC), a major business part-and oversight activities from an independent perspective.

ner of the Company, due to the 15 years that he has spent

In addition, Mr. Shigematsu concurrently holds theworking at other companies since leaving SMBC. Moreover,positions of Outside Director at Murata Manufacturing

BANDO CHEMICAL INDUSTRIES, LTD.

Audit/Supervision

Compensation Committee

high degree of independence.

Many years of experience and related business knowledge

Consultation

Election

Nominating Committee

defined by the Tokyo Stock Exchange, Mr. Matsusaka has a

40

an earlier stage in order to improve their effectiveness.

Management organization and corporate governancebonuses is ¥50 million.

Takahiro Matsusaka

summary of issues, and share a broader range of topics at

CSR Promotion Committee
Legal Compliance Committee
Education

MonitorInternal Audit Department/
Administrative division
Business
execution

Audit

Accounting
audit

Accounting Auditors

Administration

The Company and subsidiaries

Annual Report 201941

ESG Section/Corporate Governance

ESG Section/Interview with an External Director

Internal Audits

As the Company works towardsustainable growth and a mid-to-longterm improvement in corporate value,
how should its corporate governanceevolve? We asked Takashi Shigematsu,
an independent director, about this issue.

The Company has established the Internal Audit
Department, an independent organization that is staffedby four people reporting directly to the president. The
Internal Audit Department implements systematic internal
audits which include the internal control system (coveringinternal 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, the results of which are reported to thepresident, directors not serving as members of the Audit& Supervisory Committee and the Audit & Supervisory
Committee.

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 to use
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 andprovides briefings to domestic and foreign institutional
investors, and disclosure of information such as the details
and progress of business plans, Group performance, andreturns to shareholders. In these meetings, the president
and the senior management of the Company seek toengage 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 suchmeetings 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, andalso ensures that adequate time is allocated to the Q&A
session.
The content of dialogue with shareholders andinvestors is reported as necessary to the Board of Directors,
and executive officer meetings. The Company has also
instituted policies on disclosure and insider trading as partof efforts to prevent any occurrence of insider trading.
* Details of the Company’s disclosure policy

https://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 across fields
such as financing, development, procurement, production andsales are essential if the Company is to prevail as a manufacturerof 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 withsuch firms would contribute to the enhancement of the Bando
Group’s corporate value over the mid-to-long term.
The Board of Directors conducts a review of crossshareholdings each year, investigating and verifying items suchas whether benefits or risks are commensurate with capitalcosts, in addition to compatibility with the Company’s retention
policies. Cross-shareholdings will be reduced if they are determined to have little significance to the Company.
As a result of verifying the status of related profits for all
individual stocks, such as dividends compared against capital
cost for balance sheet amounts or related trading profit, theCompany confirmed that related profit exceeded capital costfor most of the items applicable for verification. Overall, theCompany confirmed that there was qualitative significance forall individual stocks. Consequently, due to dilution of significance for retained cross-shareholdings, the Company confirmed
it will consider disposal by sale for some indexes going forward.

42

BANDO CHEMICAL INDUSTRIES, LTD.

Decisions relating to the exercise of any voting rights
pertaining to cross-shareholdings are taken based on a generalconsideration of whether the proposed voting resolution is(a) consistent with the aforementioned policy, and (b) likely tocontribute to the enhancement of the corporate value of theequity issuer over the mid-to-long term. As a shareholder of the
supplier, it is our policy to veto any resolutions carrying significant
concerns for damage to the corporate value of the Bando Group.

Takashi Shigematsu
External Director(Audit & Supervisory Committee Member)

Q

What do you think the Company
needs to do to further enhance its
corporate governance?

There are two sides to corporate governanceas a mechanism for improving corporate
value. The first is “continuous improvement”
through day-to-day internal controls andaudits. The second is a company’s “response to futurerisks” based on economic conditions, competitive trends
and other changes in the external environment. My
understanding is that for the Company in the present, thelatter aspect is of particular importance, and the greatest
issue in governance is how quickly we can transform ourbusiness portfolio in response to the once-in-a-century
changes taking place in the automotive industry. In otherwords, it is essential that the Company move early to build
a mechanism for growing the new businesses that havesprouted around it into core businesses. I also believe it isimportant that the Company maximize its synergies acrossthe entire Bando Group as it works to balance expanding
the medical and healthcare equipment business, where it
carried out an M&A, with current businesses.

A[Principle 2.6] Roles of Corporate Pension Funds as
Asset Owners
The Company uses its corporate pension reserves through theBando Chemical Industries Corporate Pension Fund (hereafter“the Pension Fund”). In addition to formulating basic policies
regarding management of the Pension Fund, we establisheda steering committee to operate, manage, etc. reserve funds.
Individuals who possess expert knowledge on finance areappointed as members of the steering committee. We also
contract multiple managing bodies for the reserve to ensure
there are no conflicts of interest between corporate pension beneficiaries and the Company. Furthermore, additions or changes
to the managing bodies or the managed products are approvedby the Pension Fund council and representative council after
deliberation by the steering committee. All managing bodies
have announced their acceptance of the Stewardship Code.

Q

What do you see as the Company’s
strengths and issues, and whatwork needs to be done towardsustainable growth?

Bando’s strength is that its core technologies
are built on chemistry (materials and theirapplications), offering strong potential
for achieving innovation through thedevelopment of completely new materials. The issues theCompany faces are, I think, mid-to-long term investmentAin human resources and capital required to turn those newmaterials into profitable businesses, and the creation ofa flexible organization and corporate cultures to support
new businesses with varying business models and climates.
This is something that the Company’s management
fully recognizes, and that is explicit in its strategy ofemphasizing new businesses. In the process of achieving
this, I believe the Company’s governance can evolve as
well. The fiscal year ending March 2020—the second
year of BF-2—is an important year in terms of building amechanism for supporting new businesses. Care needs
to be taken, however, to avoid fixating on short-term
quantitative targets, and to focus more than anything elseon creating a system that embodies the Company’s original
goal of “Breakthroughs for the future.” Specific steps thatmight be effective include establishing a common identity
and set of goals for the entire organization, including the
medical fields, developing accessible communications that
resonate with employees, and establishing opportunities
for mutual dialogue and learning.

Q

In closing, what approach will
you take to your involvement with
Bando Chemical Industries, andwhat are your aspirations?

I would like to bring a stronger awarenessof the “shareholder perspective” to working
with day-to-day internal controls and audits.
That said, rather than focusing solely on
profit growth, I will also emphasize a point of view thatasks how the Company might best contribute to society’s
sustainable growth. In terms of new business initiatives
and collaboration with other industries, I hope to makeuse of the insights I have gained through my experiencein the automotive and ICT industries.

A

Annual Report 201943

Management (As of June 25, 2019)

Supplementary information regarding voluntary
application of IFRSBoard of Directors

The Company voluntarily applies the International Financing Reporting Standards (IFRS) for the
consolidated financial statements in the Annual Securities Report for the fiscal year ended March 31,
2019 instead of conventional Japanese GAAP. In accordance with this application, the Company will
provide the following supplementary information concerning the accompanying Financial Section.

[1] Differences between voluntary application of IFRS and Japanese GAAP

President and Representative Director:

Member of the Board:

Member of the Board:

Member of the Board:

Mitsutaka Yoshii

Shinji Kashiwada

Atsushi Someda

Katsuhiko Hata

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

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

Apr. 1987 Joined the Company
Apr. 2008 General Manager, ResearchLaboratories for Power Transmission
Technologies
Apr. 2013 General Manager, Automotive Parts
Division
Jun. 2017 Director (Present)
Apr. 2018 Senior Executive Officer (Present)
General Manager, Manufacturing
Planning Center (Present)

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

Japanese GAAPIFRSNet sales

Revenue

Gross profit

Gross profit

SG&A expenses

SG&A expenses

2

Other income/expenses3

Share of profit (loss) ofinvestments accounted
for using equity method• Extraordinary income (loss), etc. are calculated ascomponents of operating income.

Operating income* 1 The items of finance income/costs (interests and dividends, etc.) areadded or subtracted after the calculation of operating income.

Operating income

1

Financial revenue/
expenses

2

Other non-operating
income (loss)

3

Share of profit (loss) ofentities accounted
for using equity method

1

Operating income = Gross profit - SG&A expenses ± 2 ± 3

Finance income/costs

Ordinary income

2
Member of the Board(Audit & Supervisory Committee Member):Member of the Board(Audit & Supervisory Committee Member):Member of the Board(Audit & Supervisory Committee Member):Member of the Board(Audit & Supervisory Committee Member):

Kyosuke Nakamura

Takahiro Matsusaka (External)

Takashi Shigematsu (External)

Haruo Shimizu (External)

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

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

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

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

Corporate Executive Officers

44

President:

Senior Managing Executive Officer:

Senior Executive Officers:

Executive Officers:

Mitsutaka Yoshii

Shinji Kashiwada

Atsushi Someda
Katsuhiko Hata
Takayuki Nagase
Kazuyuki Mamba
Satoshi Matsuo

Katsuya Yamaguchi
Tsutomu Okada
Yuji Honda
Hisashi Yagi
Tadahiko Noguchi
Tomio Ueno

BANDO CHEMICAL INDUSTRIES, LTD.

Extraordinary
income (loss)
Profit attributable toshareholders of the parent

Profit attributable toowners of parent[2] Differences for main items in the overview of operating results, etc.
Fiscal year ended March 31, 2018
Please refer to Note 39 “First-Time Adoption of IFRS” of
Notes to Consolidated Financial Statements in Appendix.
Fiscal year ended March 31, 2019
Accounting process for revisions to the retirement
benefit pension plans
As of April 1, 2019, the Company and certain of its
consolidated subsidiaries have moved from defined
contribution pension plans to risk sharing pension plans.
Japanese GAAP applies the Accounting Standards Boardof Japan’s “Practical Solution on Accounting for Risk
Sharing Pension Plan,” and the Company recorded losses
associated with the transition as extraordinary losses forthe fiscal year ended March 31, 2019. With IFRS, however,
the Company plans to record such losses as other expenses
for the first quarter of the fiscal year ending March 31, 2020.
Therefore, when comparing IFRS with Japanese GAAP,
income before income taxes increased by ¥807 million.
Capitalization of research and development costs
With Japanese GAAP, all research and development costs
were charged to income as incurred. With IFRS, however,research and development costs that fulfill capitalization
conditions are recognized as intangible assets. Therefore,
when comparing IFRS with Japanese GAAP, selling,
general and administrative expenses in the consolidated
statement of profit or loss decreased by ¥120 million.

Annual Report 201945

Management’s Discussion and Analysis

The Bando Group voluntarily applies the International Financing Reporting Standards (IFRS) for the
consolidated financial statements in the Annual Securities Report for the fiscal year ended March
31, 2019 instead of conventional Japanese GAAP. When it undertakes comparative analysis in thisAnnual Report, IFRS have also been applied to figures for the previous fiscal year.

Operating Environment
During the fiscal year ended March 31, 2019, the U.S. economy continued on a path of recovery guided autonomously
by the private sector, while Japan also continued a moderate recovery trend supported by stable domestic demand.
However, the economy in Europe decelerated due toincreased uncertainty regarding politics in the region.
China’s economy also grew sluggish due to the impact oftrade friction with the U.S., and deceleration in the Asian
region focused on exports tied to China’s lackluster growth.
The automotive sector, a key market for the Bando
Group, was supported by robust domestic demand in
the U.S., as well as Asian countries such as Thailand, andautomobile production volume exceeded that of the previous fiscal year. In Japan, automobile production volume
held steady in comparison to the previous year, however,volume fell short of the previous year in Europe andChina, where deceleration of the market has escalated.

Business Overview
As fiscal 2018 was the first year of the second stage of theGroup’s “Breakthroughs for the future” mid-to-long termbusiness plan covering the period from fiscal 2013 to fiscal
2022, we carried out activities based on four guidelinesof New Business Creation, Core Business Expansion,
Enhancement and Evolution in Manufacturing, and Work
Style Innovation of Individuals and the Organization, with

Net sales*/Revenue*(¥ million)
100,000

95,396

93,272the aim of becoming a standout global supplier.
For new products, we launched sales for Mr. Ultra
Mirror™, a light-duty fluorine resin conveyor belt with highanti-stick properties that can be used with small pulley,
and Mr. Spike™, a high-grip, light-duty conveyor belt forfood with a durable spike shape. Furthermore, our independently developed Hyper Flat Drive (HFD) System™ was
evaluated for its exceptional energy-saving efficiency andawarded the Energy Conservation Center, Japan (ECCJ)’s
Grand Prize for Excellence in Energy Efficiency and the
Chairman’s Prize, the Energy Conservation Center, Japan in
the Product Category and Business Model Category.
As an enterprise undertaking strategic initiatives thatconsider operations from the perspective of employees’
health management, the Company was also selected by the
Ministry of Economy, Trade, and Industry and Tokyo Stock
Exchange for the Health & Productivity Stock Selection for thethird year in a row and recognized in the 2019 Certified Health& Productivity Management Outstanding Organizations
Recognition Program (in the large enterprise category).

Operating Results
Revenue in the fiscal year ended March 31, 2019 was¥94,319 million, an increase of 3.9% year on year, owing to
growth in the Industrial Products Business. Core operating
income, which excludes cost of sales and selling, generaland administrative expenses from revenue, decreased
2.8% year on year to ¥6,503 million owing to an increase in

Operating income*/Core operating income*

88,387

90,79894,319Operating Results by Business Segment
Automotive Parts Business
In Japan, automobile production volume remained steadycompared to the previous fiscal year, with flat sales for accessory drive power transmission belts such as RIB ACE™ andaccessory drive power transmission system products such as
Automatic Tensioners and BANDO SMOOTH COUPLER™.
Overseas, sales of accessory drive power transmission system products and variable speed belts for
scooters increased in the Asian region due to focused
efforts to proactively cultivate customers. However, sales
declined in the U.S. and China.
As a result, segment revenue declined 0.1% year on
year to ¥41,650 million.
Segment profit decreased 6.4% to ¥3,182 million.

Industrial Products BusinessIn industrial power transmission belts, sales of powertransmission belts for industrial machinery increased
despite a standstill in domestic machinery orders. Sales
strengthened in the U.S., China, and the Asian region,
with increases in sales of power transmission belts for
agricultural machinery and industrial machinery.
In conveyor belts, sales of conveyor belts for steel
increased in Japan.
As a result, segment revenue increased 9.1% year on
year to ¥34,815 million.

Profit attributable to shareholders of the parent*/
Profit attributable to owners of parent*(¥ million)
6,000(¥ million)
8,000

6,688

80,000cost of sales despite curtailment on an increase in selling,
general and administrative expenses. Operating income
decreased 4.8% year on year to ¥6,815 million due to anincrease in other expenses.
Profit attributable to owners of parent increased
7.0% year on year to ¥5,457 million, reflecting an increasein foreign exchange gain.

5,961

6,000

6,503

5,896

5,000
4,000

4,797

4,951

5,100

2017

2018

5,457

4,386
3,757

60,0003,000

4,000
40,000

Segment profit increased 1.6% year on year to¥1,960 million, owing mainly to the increase in costs toaddress issues at a customer.

Advanced Elastomer Products BusinessIn high-performance films, sales of films for construction materials and industrial materials increased due to strengthened
sales in the building materials industry. However, sales of film
for medical applications and decorative displays decreased.
In precision performance products, sales forhigh-performance rollers and blades for key customers
increased despite flat output at OA equipment makers.
As a result, segment revenue increased 0.5% year on
year to ¥15,237 million.
Segment profit rose 44.7% year on year to ¥799
million, owing to a shift to high-value-added products.

Other BusinessIn other business, sales increased 42.0% year on year to¥3,881 million, with a 52.3% increase in segment profit to ¥531
million due to contributions from the manufacture and salesof robot-related devices and electronic materials business.

Financial Position
Total assets as of March 31, 2019 amounted to ¥102,557
million, a decrease of ¥689 million year on year.
Current assets increased by ¥67 million, while
non-current assets declined by ¥756 million owing to the
reduction in other financial assets.
Total liabilities decreased by ¥3,613 million compared with the previous year-end to ¥34,424 million.
Current liabilities decreased by ¥1,790 million due
to the decrease in trade and other payables. Non-current
liabilities declined ¥1,823 million due to decreases inbonds and borrowings.
Equity increased ¥2,923 million from the previous
fiscal year-end to ¥68,133 million.
Retained earnings increased ¥3,705 million due partly
to the recording of profit attributable to owners of parent,
while other components of equity decreased ¥926 million.
As a result, the equity attributable to owners ofparent ratio increased 3.3 percentage points from 62.9%
at the previous fiscal year-end to 66.2%.

2,000

2,000
1,000

20,000

0

0

2015

2016
J-GAAP2017* Fiscal year endings are March 31.

46

BANDO CHEMICAL INDUSTRIES, LTD.

2018

IFRS

2019

0

2015

2016
J-GAAP

2017

2018

IFRS

2019

2015

2016
J-GAAP

IFRS

2019* Fiscal year endings are March 31.
Annual Report 201947

Management’s Discussion and Analysis

Capital Investment and Fund Procurement
Capital investment undertaken in the fiscal year ended
March 31, 2019 totaled ¥4,706 million. Major capital investment items are shown below. The financing required was
obtained from the Company’s own funds and borrowings.
Business
Segment
Automotive
Parts BusinessIndustrial
Products
Business
Advanced
Elastomer
Products
Business
Other andCorporate
Total

Amount(¥ million)¥2,3691,002

Main Activities
Installed new — and expanded or
upgraded existing — manufacturing
equipment
Installed new — and expanded or
upgraded existing — manufacturing
equipment

710

Installed new — and expanded or
upgraded existing — manufacturing
equipment

625

Installed new system and researchequipment¥4,706

Cash Flow
Net cash provided by operating activities totaled ¥6,603
million, compared with ¥9,184 million provided in theprevious fiscal year, with the recording of profit before
income taxes of ¥7,167 million.
Net cash used in investing activities was ¥4,575
million, compared with ¥5,008 million used in the previous
fiscal year. This was due to the booking of ¥3,986 million inpurchase of property, plant and equipment, ¥568 million
in purchase of intangible assets, and other factors.
Net cash used in financing activities was ¥3,134
million, compared with ¥4,588 million used in the previous
fiscal year, largely reflecting repayments of long-termborrowings of ¥1,773 million and dividends paid to ownersof parent totaling ¥1,422 million.
As a result, cash and cash equivalents as of March
31, 2019 totaled ¥17,530 million, down ¥946 million
compared with the previous fiscal year-end.

Earnings Forecasts for the YearEnding March 31, 2020
The forecast for businesses overseas continues to remain
uncertain due to Brexit concerns, trade friction between
the U.S. and China, and concerns regarding the deceleration of economies in China and the Asian region. Despite
expectations that various economic policies in Japan willsustain the economic recovery, the business forecast isovershadowed by prospective risks, including stagnant
exports resulting from the deceleration in the world48

BANDO CHEMICAL INDUSTRIES, LTD.

economy and declining consumer confidence caused by
the consumption tax rate hike.
Under these circumstances, the Group pushes
forward with priority measures in the second stage (BF-2:
five years from the fiscal year ended March 31, 2019 to thefiscal year ending March 31, 2023) of its 10-year mid-tolong term business plan “Breakthroughs for the future”
that has been in motion since the fiscal year ended March
31, 2014, and aims to achieve the management targets.
At the time of the announcement of financial results
for the fiscal year ended March 31, 2019 on May 13, 2019,
the earnings and dividend forecasts for the fiscal year
ending March 31, 2020 was not yet fixed as the Company
just acquired Aimedic MMT Co., Ltd. on May 8, 2019. The
forecasts became available, and the Company disclosed
the following forecasts on August 9, 2019, taking into
account the recent changes in economic conditions.
The earnings forecasts for the year ending March 31,
2020 are as follows: revenue of ¥93,000 million, down 1.4%
year on year; core operating income of ¥6,000 million,
down 7.7% year on year; operating income of ¥6,000
million, down 12.0% year on year; and profit attributableto owners of parent of ¥4,500 million, down 17.5% year on
year. The Company plans to pay an annual dividend pershare of ¥32, including an interim dividend of ¥16.

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 products, production technology and market
development; the strengthening of business structure;internationalization; and the expansion into new businessdomains, to further enhance corporate value.
We paid an interim dividend of ¥16 and a year-end
dividend of ¥16 for the fiscal year ended March 31,
2019 following a comprehensive consideration of theaforementioned policies, operating results for the fiscal
year, and other factors. (As for dividends for the fiscal year
ending March 31, 2020, please refer to the paragraphs
above.)

Business Risks

The Group considers the following to be important risks related to the performance and financial
position of the Bando Group that could have a material effect on the decisions of investors. The
forward-looking statements listed in this document are based on judgments made by the Group asof March 31, 2019.

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

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

Raw Material Market Fluctuations andProcurement
The Group negotiates with business partners regarding
delivery dates and prices by closely examining market

prices as well as supply-demand circumstances, butthere could be rising raw material prices accompanying higher crude oil prices. Accordingly, theGroup promotes research on alternative materials tostabilize supply and demand; revises and increases
product prices in response to rising raw material
prices; and strengthens measures to reduce overall
costs. Nevertheless, the Group’s performance could
be adversely affected by a downturn in demand, or
prolonged increases in material and/or fuel prices thatexceed expectations.

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

Changes in Value of Owned Assets
The Group owns various property, plant and equipment and intangible assets. The Group’s performance
could be significantly impacted in the event that such
assets must be impaired due to a decline in profitability, including a decline in market value or the inability
to generate expected cash flow, rendering investment
recovery impossible.

Annual Report 201949

Consolidated Statement of Financial Position
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2019 and 2018

Thousands of
U.S. dollars

Millions of yen

Assets

As of March 31,
2019

As of March 31,
2018

Transition date
As of April 1,
2017

As of March 31,
2019

Thousands of
U.S. dollars

Millions of yen

Liabilities and Equity

As of March 31,
2019

As of March 31,
2018

Transition date
As of April 1,
2017

As of March 31,
2019¥ 16,650¥ 18,068¥ 16,293$151,367

Current Liabilities:

Current Assets:
Cash and cash equivalents¥ 17,530¥ 18,477¥ 18,936$159,364

Trade and other payables

Trade and other receivables

21,707

21,493

20,836

197,339

Bonds and borrowings

2,768

2,921

4,499

25,167

Inventories

12,94912,207

10,950117,723

Income taxes payable

552

783

869

5,020

Income taxes receivable

12

7

20

110

Other financial liabilities

38

32

46

347

Other financial assets

471

481

604

4,286

Provisions

315

—

—

2,864

Other current assets

895

833

812

8,130

Other current liabilities

3,909

4,218

4,015

35,52753,56453,49852,158486,952

24,232

26,022

25,722

220,292

32,59732,762

32,488296,339

Bonds and borrowings

7,636

9,227

10,914

69,417

73

74

75

662

Net defined benefit liability

1,624

1,408

2,169

14,762Intangible assets

1,761

1,814

1,666

16,012Other financial liabilities

146

139

155

1,325

Investments accounted for using equity method

6,357

5,815

5,534

57,793

Deferred tax liabilities

470

926

505

4,273

Other financial assets

6,998

8,201

7,535

63,615

Other non-current liabilities

316

316

278

2,881

Deferred tax assets

458

349

413

4,161

Total Non-current Liabilities

10,192

12,016

14,021

92,658Other non-current assets

749

734

672

6,806

Total Liabilities

34,42438,03839,743

312,950

48,99349,74948,383445,388¥102,557¥103,247¥100,541$932,340

10,952

10,952

10,952

99,563

Capital surplus

3,093

3,061

3,023

28,115Retained earnings

53,14849,44245,380483,162(1,347)(1,433)(1,368)(12,242)

2,026

2,952

2,588

18,41867,87264,97460,575617,016

261

235

223

2,374

68,13365,20960,798619,390¥102,557¥103,247¥100,541$932,340

Total Current Assets

Non-current Liabilities:

Non-current Assets:
Property, plant and equipment
Goodwill

Total Non-current Assets
Total Assets

Total Current Liabilities

Equity:Common stock		

Authorized: 187,000,000 shares		Issued as of April 1, 2017, andMarch 31, 2018 and 2019 — 47,213,536 shares

Treasury stock, at cost		

April 1, 2017 — 1,386,131 shares		March 31, 2018 — 1,434,623 shares		March 31, 2019 — 1,355,774 shares

Other components of equity
Total Equity Attributable to Owners of Parent
Non-controlling interests
Total Equity
Total Liabilities and Equity

50

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201951

Consolidated Statement of Profit or Loss andConsolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018
Millions of yen

Consolidated Statement of Profit or Loss
Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income
Other expenses
Share of profit of investments accounted for using equity method
Operating income
Finance income
Finance costs
Profit before income taxes
Income tax expense
Profit for the year
Profit attributable to:
Owners of parent
Non-controlling interests
Profit for the year

Thousands of
U.S. dollars

Thousandsof shares
Number ofshares ofcommonstock
outstanding

Commonstock

Capitalsurplus

2019

2018

2019

¥94,319(66,756)
27,563(21,060)
328
(921)
905
6,815
487
(136)
7,166
(1,676)
5,490¥90,798(63,272)
27,526(20,837)
245
(528)
750
7,156
275
(532)
6,899
(1,763)5,136$857,443(606,870)
250,573(191,454)
2,980(8,371)
8,229
61,9574,430(1,235)65,152(15,238)
49,9145,457
33¥ 5,490

5,100
36¥ 5,136

49,610304$49,914

Balance at April 1, 2017

U.S. dollars
2018

2019
Earnings per Share Attributable to Owners of Parent
Basic earnings per share¥119.09¥111.392019$1.08
Thousands of
U.S. dollars

Millions of yen

Consolidated Statement of Comprehensive Income

2019

2018

2019

Profit for the year
Other Comprehensive Income:Items That will not be reclassified to profit or loss
Net change in fair value of financial assets measured at FVTOCI
Remeasurements of defined benefit plans
Share of OCI of investments accounted for using equity method
Total items that may be reclassified to profit or loss
Items That may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Net change in fair value of cash flow hedges
Share of OCI of investments accounted for using equity method
Total items that may be reclassified subsequently to profit or loss
Total other comprehensive income
Comprehensive Income¥ 5,490¥5,136$ 49,914

Comprehensive Income Attributable to:
Owners of parent
Non-controlling interests
Comprehensive Income

(829)
(373)
32
(1,170)

535
334
(70)
799

(7,534)(3,391)287(10,638)

(96)
—
20
(76)
(1,246)¥ 4,244

0
(1)
(158)
(159)
640
¥5,776

(878)
—
185
(693)
(11,331)$ 38,583¥ 4,201
43
4,244¥5,75521
5,776$ 38,188
395
38,583Total
equity¥10,952¥3,023¥45,380¥(1,368)¥ 2,588¥60,575¥223¥60,798

—

—

—

5,100

—

—

5,100

36

5,136

Other comprehensive income

—

—

—

—

—

655

655

(15)

640

—

—

—

5,100

—

655

5,755

21

5,776

Dividends———(1,329)——(1,329)(9)(1,338)Purchase of treasury stock

—

—

—

—

(157)

—

(157)

—

(157)

Disposal of treasury stock

—

—

11

—

84

—

95

—

95

Share-based payments

—

—

27

—

8

—

35

—

35

Transfer from other components of equity toretained earnings

—

—

—

291

—

(291)

—

—

—

Total Comprehensive Income

Changes in treasury stock associated withchanges in interests in associates accounted forusing equity method

Total Transactions with Owners

—

—

38

(1,038)

(65)

(291)

(1,356)(9)(1,365)47,214

10,952

3,061

49,442(1,433)

2,952

64,974235

65,209Profit for the year

—

—

—

5,457

—

—

5,457

33

5,490

Other comprehensive income

—

—

—

—

—

(1,256)(1,256)

10(1,246)

Total Comprehensive Income

—

—

—

5,457

—

(1,256)

4,201

43

4,244

Dividends———(1,421)——(1,421)(17)(1,438)Purchase of treasury stock

—

—

—

—

(3)

—

(3)

—

(3)

Disposal of treasury stock

—

—

14

—

85

—

99

—

99

Changes in treasury stock associated withchanges in interests in associates accounted forusing equity method

—

—

—

—

(8)

—

(8)

—

(8)

Share-based payments

—

—

18

—

12

—

30

—

30

Transfer from other components of equity toretained earnings

—

—

—

(330)

—

330

—

—

—

(1,751)86

330(1,303)(17)(1,320)¥53,148 ¥(1,347)¥ 2,026¥67,872¥261¥68,133

Total Transactions with Owners
Balance at March 31, 2019

—

—

32

47,214¥10,952¥3,093Thousands of U.S. dollars
Equity attributable to owners of parent

Balance at March 31, 2018

Treasurystock,
at costTotal equity
Other
attributable
Noncomponents to owners of controllingof equity
parentinterests

Commonstock

CapitalsurplusRetainedearnings$449,478 $(13,029) $ 26,838

Total
equity$99,563$27,823$590,673$2,137

Profit for the year——

49,610——49,610304

49,914

Other comprehensive income

—

—

—

—

(11,422)(11,422)91(11,331)

Total Comprehensive Income$592,810——

49,610—(11,422)

38,188395

38,583

Dividends——(12,924)——(12,924)(158)(13,082)

Purchase of treasury stock

—

—

—

(23)

—

(23)

—

(23)

Disposal of treasury stock

—

128

—

772

—

900

—

900

Changes in treasury stock associated withchanges in interests in associates accounted forusing equity method

—

—

—

(73)

—

(73)

—

(73)

Share-based payments

—

164

—

111

—

275

—

275

Transfer from other components of equity toretained earnings——(3,002)

—

3,002

—

—

—

292

(15,926)

787

3,002

(11,845)(158)(12,003)$28,115 $483,162 $(12,242) $ 18,418 $617,016$2,374$619,390

Balance at March 31, 2019

BANDO CHEMICAL INDUSTRIES, LTD.

Total equity
Other
attributable
Noncomponents to owners of controllingof equity
parentinterests

47,214

Total Transactions with Owners

52

Retainedearnings

Treasurystock,
at costProfit for the year

Balance at March 31, 2018
Yen

Millions of yen
Equity attributable to owners of parent—$99,563

Annual Report 201953

Consolidated Statement of Cash Flows

Corporate Data/Investor Information

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2019 and 2018

Millions of yen

Thousands of
U.S. dollars

Corporate Data
Company name:

2019

2018

2019

¥ 7,167¥ 6,900$ 65,152

4,490

4,353

40,815

Impairment losses

166

267

1,512

Consolidated revenue:

Interest and dividend income

(302)

(237)

(2,741)

Employees (Consolidated): 4,083 (As of March 31, 2019)

Interest expenses

118

147

1,068

Share of profit of investments accounted for using equity method

(905)

(751)

(8,229)Loss on sale and retirement of fixed assets

281

158

2,557

Increase in inventories(852)(1,304)(7,745)

Increase in trade and other receivables(288)(1,015)(2,620)(Decrease) increase in trade and other payables(1,545)

1,749(14,042)

Shares Authorized:

187,000,000

Increase (decrease) in net defined benefit liability

224

(759)

2,040

Shares Outstanding:

47,213,536

Increase in provisions

315

—

2,864

(including 831,023 shares of treasury stock)

Other, net

(870)

1,004

(7,913)

7,999

10,512

72,718

Number of Shareholders:Cash Flows from Operating Activities:
Profit before income taxes
Depreciation and amortization

SubtotalInterest and dividends received

701

672

6,374

Interest paid

(116)

(153)

(1,055)(1,987)(1,860)(18,063)

6

13

50

6,603

9,184

60,024

Income taxes paid
Income taxes refund
Net Cash Flows from Operating Activities
Cash Flows from Investing Activities:
Payments into time deposits

(441)

(453)

(4,010)

Proceeds from withdrawal of time deposits

432

578

3,931

Purchase of property, plant and equipment(3,986)(4,478)(36,240)

29

30

266

Purchase of intangible assets

(568)

(781)

(5,168)Purchase of equity instruments

(22)

(21)

(196)

Proceeds from sale of equity instruments

32

136

288

Purchase of investments accounted for using equity method

—

(30)

—

Other, net

(51)

11

(466)

(4,575)(5,008)(41,595)

Net decrease in short-term borrowings

—

(207)

—

Proceeds from long-term borrowings

—

100

—

Repayments of long-term borrowings(1,773)(3,048)(16,115)

(1)

(155)

(11)

Proceeds from sale of property, plant and equipment

Net Cash Flows from Investing Activities
Cash Flows from Financing Activities:

Purchase of treasury stock
Proceeds from sale of treasury stock

99

95

898

Dividends paid to owners of parent(1,422)(1,329)(12,924)

(17)

(10)

(158)

Dividends paid to non-controlling interests
Other, net
Net Cash Flows from Financing Activities

(20)

(34)

(177)

(3,134)(4,588)(28,487)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

160

(46)

1,451

Net Decrease in Cash and Cash Equivalents

(947)

(459)

(8,607)

Cash and Cash Equivalents at Beginning of Year

18,477

18,936167,972

Cash and Cash Equivalents at End of Year

¥17,530¥18,477$159,364

Bando Chemical Industries, Ltd.

Founded:April 14, 1906

Capital:¥10,952 mil. (As of March 31, 2019)¥94,319 mil. (FYE March 2019)

Investor Information (As of March 31, 2019)• Capital Stock• Composition of Shareholders
Other corporations
5,816,531 shares (230)

12.54%

Foreign corporations
7,778,054 shares (158)Financial institutions/
Securities firms
19,773,173 shares (66)7,164

• Securities Traded: Tokyo Stock Exchange, Inc.

16.77%

42.63%

Individuals and others
13,014,755 shares (6,709)(Number of shareholders)

28.06%• Principal Shareholders (As of March 31, 2019)
Number of shares held (thousands)

Investment ratio (%)

3,810
2,313
2,002
2,000
1,800
1,759
1,685
1,575
1,174
983

8.21
4.99
4.32
4.31
3.88
3.79
3.63
3.40
2.53
2.12

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking Corporation
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
The Master Trust Bank of Japan, Ltd. (trust account)
Japan Trustee Services Bank, Ltd. (trust account)
MUFG Bank, Ltd.
Nippon Life Insurance Company
GOVERNMENT OF NORWAY
Notes: 1. Investment ratios are calculated after deducting treasury stock (831,023 shares).
2. Investment ratios listed above are rounded down to two decimal places.

• Stock Price
(Yen)

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

4

7

2014

10

1

4

7

2015

10

1

4

7

2016

10

1

4

7

2017

10

1

4

7

2018

10

1

2019

* Since the Company conducted a 2-to-1 stock consolidation on October 1, 2016, the results from April 2014 to August 2016 are presented
with adjusted values.

54

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201955

www.bandogrp.com/eng

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