Financial Section
2020 ANNUAL REPORT
Year Ended March 31, 2020

CONTENTS
Eleven-Year Summary ··········································
Financial Review ················································
Consolidated Statement of Financial Position ···············
Consolidated Statement of Income····························
Consolidated Statement of Comprehensive Income ········
Consolidated Statement of Changes in Equity ··············
Consolidated Statement of Cash Flows ······················
Notes to the Consolidated Financial Statements ············
Independent Auditor’s Report ·································

1
5
14
15
16
17
19
21
75

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated
Subsidiaries
As of and for the Years Ended March 31

Millions of yen(except as otherwise noted)

IFRS

2020

Results for the period:
Revenues································
Cost of sales ···························
Selling, general andadministrative expenses ···········
Other income ··························
Other expenses ·······················
Operating income····················
Income (loss) before income
taxes and non-controllinginterests··································Net income (loss) attributable
to shareholders of the parent
company ································Cash flows for the period:
Cash flows from operating
activities·································Cash flows from investing
activities·································
Free cash flows ·······················
Growth initiative costs:
Capital expenditures ················
Depreciation and amortization ·Research and development ······At the period-end:
Total assets ·····························
Interest-bearing debt ···············Net assets ·······························
Number of outstanding shares(thousands) ·····························
Number of shareholders ··········
Number of employees ·············Per share of common stock(yen):Net income (loss):
Basic ···································Cash dividends ·····················Net assets ·······························
Key financial indicators:
Operating income margin (%) ··Return on Sales (ROS) (%) ······
Return on Assets (ROA) (%)····
Return on Equity (ROE) (%)····
Shareholders’ equity ratio (%) ··Debt/equity ratio (%)···············
Notes:

2019

2018

2017

2016

2015

2014

¥ 1,004,373(793,517)¥ 807,794(637,081)¥ 881,402 ¥ 1,023,421(755,947)(851,029)¥ 988,303(803,607)¥ 910,486 ¥ 1,017,584(731,153)(819,433)(111,072)(120,965)(119,566)(113,350)(122,090)(126,446)(106,851)

8,599(62,108)(39,126)

10,667(19,652)
42,442

5,401(24,205)
46,326

14,070(11,786)
68,26736,416(12,523)
99,95421,303(21,306)
84,407

5,844(16,278)
53,428(40,614)43,03946,98566,01696,23386,391

55,820(37,648)

31,37042,21050,59369,05670,56948,133105,958

66,582

39,13389,391

115,742

108,983

99,171(56,418)(96,247)(75,080)(35,864)(32,147)(113,750)(9,832)49,540(29,665)(35,947)

53,527

83,595(4,767)

89,33953,01955,18015,91895,38950,901
18,604

91,786
46,13817,74963,84343,03917,971

59,602
42,927
19,12151,47439,917
20,90331,98733,762
16,814¥ 977,766
187,586
522,853¥ 1,099,252
202,098595,211¥ 1,058,832
160,844570,192¥ 1,040,390
194,457
548,746¥ 1,033,311
220,376
504,675¥ 1,083,450
255,350
476,176¥ 848,772
177,195
382,840

427,566

427,569

427,572

427,576

427,579

427,601

427,657

27,32329,80528,05330,304

29,14830,39025,30228,75428,582
29,15726,28730,27829,30826,850¥ (88.05)
26.00
1,216.92¥ 73.3734.00
1,375.16¥ 98.72
26.00
1,316.08¥ 118.32
26.00
1,254.89¥ 161.50
26.00
1,159.70¥ 165.02
23.00
1,090.64¥ 116.79
17.00
870.36

(4.4)
(4.3)
(3.9)
(6.8)
53.2
36.1

4.1
3.1
4.0
5.5
53.5
34.4

4.7
4.3
4.5
7.7
53.1
28.6

7.5
5.6
6.4
9.8
51.6
36.2

9.8
6.8
9.1
14.4
48.0
44.4

8.4
7.0
8.9
16.8
43.0
54.8

6.6
6.0
8.0
15.6
43.9
47.6

1. The amounts are accounted for and presented in accordance with the International Financial Reporting Standards.
2. The translation of Japanese yen amounts into U.S. dollars and euros for the fiscal year ended March 31, 2020, is included in this annual report solely for the convenience ofreaders outside Japan. The translation has been made at the rates of ¥108.83 = $1 and ¥119.55 = €1, the approximate exchange rates as of March 31, 2020.
3. Diluted net income per share is not provided for the periods presented as there were no outstanding common stock with a dilutive effect during the periods presented and also
there were no outstanding potential common shockduring the periods ended March 31, 2017, 2018, 2019, and 2020.
4. Net income (loss) represents net income (loss) attributable to shareholders of the parent company. Net income (loss) per share is calculated by dividing net income (loss) by theaverage number of outstanding shares for the period. Net assets per share are calculated by dividing net assets less non-controlling interests by the number of outstanding shares
as of the period-end.
5. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).
6. Results for the fiscal year ended March 31, 2014 (FY2014) are presented in accordance with both J-GAAP and IFRS.

1

Eleven-Year Summary
Hitachi Metals, Ltd. and Consolidated Subsidiaries
As of and for the Years Ended March 31

Thousands of U.S. dollars(except per share amounts)

Thousands of euros(except per share amounts)

IFRS

2020

Results for the period:
Revenues ························································
Cost of sales ····················································
Selling, general andadministrative expenses····································
Other income···················································
Other expenses ················································
Operating income ············································
Income (loss) before income
taxes and non-controllinginterests ··························································Net income (loss) attributable toshareholders of the parent
company ·························································Cash flows for the period:
Cash flows from operating
activities ·························································Cash flows from investing
activities ·························································
Free cash flows ················································
Growth initiative costs:
Capital expenditures ········································
Depreciation and amortization ··························
Research and development ·······························At the period-end:
Total assets ······················································
Interest-bearing debt ········································Net assets ························································
Number of outstanding shares(thousands)······················································
Number of shareholders ···································
Number of employees ······································Per share of common stock (U.S. dollars andeuros):Net income (loss):
Basic ···························································Cash dividends ············································Net assets ························································
Key financial indicators:
Operating income margin (%) ···························
Return on Sales (ROS) (%)·······························
Return on Assets (ROA) (%) ····························
Return on Equity (ROE) (%) ····························
Shareholders’ equity ratio (%)···························
Debt/equity ratio (%) ·······································

2020$ 8,098,888(6,946,127)€ 7,372,664(6,323,271)(1,020,601)
79,013(570,688)(359,515)(929,084)
71,928(519,515)(327,277)(373,188)(339,724)(345,934)(314,914)

973,610886,307(518,405)
455,205(471,920)
414,387

487,173
507,029
146,265

443,488461,564
133,149$ 8,984,343
1,723,661
4,804,309€ 8,178,720
1,569,101
4,373,509

—
—
—

—
—
—

$ (0.81)
0.24
11.18

€ (0.74)
0.22
10.18

—
—
—
—
—
—

—
—
—
—
—
—

2

Millions of yen(except as otherwise noted)

Japanese GAAP

Results for the period:
Net sales ····················································
Cost of sales ···············································
Selling, general and administrative expenses·
Operating income ·······································
Income (loss) before income taxes andminority interests ········································Net income (loss) attributable toshareholders of the parent company ·············Cash flows for the period:
Cash flows from operating activities ············Cash flows from investing activities ·············
Free cash flows···········································
Growth initiative costs:
Capital expenditures ···································
Depreciation and amortization ·····················
Research and development ··························At the period-end:
Total assets·················································
Interest-bearing debt ···································Net assets ···················································
Number of outstanding shares (thousands) ····
Number of shareholders ······························
Number of employees ·································Per share of common stock (yen):
Net income (loss):
Basic ·····················································Cash dividends ······································Net assets ···················································
Key financial indicators:
Operating income margin (%) ······················
Return on Sales (ROS) (%)··························
Return on Assets (ROA) (%) ·······················
Return on Equity (ROE) (%) ·······················
Shareholders’ equity ratio (%) ·····················
Debt/equity ratio (%) ··································
Notes:

2014

2013

2012

2011

2010

¥ 807,952(638,872)(109,544)
59,536¥ 535,779(440,684)(74,016)
21,079¥ 556,914(438,930)(73,117)44,867¥ 520,186(406,282)(70,761)
43,143¥ 431,683(352,382)(65,952)
13,34950,796

17,23036,41436,061

5,727

39,417

12,955

17,88622,204

1,937

100,557(30,906)
69,651

62,975(28,718)
34,257

3,008(21,769)(18,761)

42,688(24,607)
18,08157,012(21,495)
35,51731,987
33,63916,814

26,68824,21911,07624,30027,544
12,153

20,36928,38912,224

16,48530,494
10,626¥ 840,742
175,958
373,198
427,631
29,30826,850¥ 541,286
145,935
259,865
365,419
16,93017,308¥ 579,862
169,232
240,395
352,429
12,417
18,056¥ 529,869
149,822228,010352,442
12,711
18,008¥ 517,984
170,664
212,783
352,472
13,88517,806¥ 95.6517.00
848.73¥ 36.20
14.00
684.96¥ 50.75
12.00
625.04¥ 5.5012.00
591.51¥ 5.5012.00
548.76

7.4
4.9
7.4
12.9
43.2
48.5

3.9
2.4
3.1
5.5
46.2
58.3

8.1
3.2
6.6
8.3
38.0
76.8

8.3
4.3
6.9
11.0
39.3
71.9

3.1
0.4
1.1
1.0
37.3
88.2

1. The amounts are accounted for and presented in accordance with generally accepted accounting principles in Japan.
2. Diluted net income per share is not provided for the periods presented as there were no dilutive common stock with a dilutive effect.
3. Net income (loss) per share is calculated by dividing net income (loss) by the average number of outstanding shares for the period. Net assets per share are calculated by dividing
net assets less minority interests by the number of outstanding shares as of the period-end.
4. Return on equity (ROE) is computed as the net income (loss) divided by the sum of the average total shareholders’ equity and the average total accumulated comprehensive
income (the average of beginning and ending of the year).

3

4

Financial Review
Adoption of International Financial Reporting Standards (IFRS)In the fiscal year ended March 31, 2015, Hitachi Metals, Ltd. (the “Company”) and its consolidated subsidiaries (collectively, the “Group”)
voluntarily adopted IFRS for the purposes of better understanding group management, stronger governance, and more efficient business operations.

Market Environment
The global economy during the year ended March 31, 2020, continued to grow modestly during the nine months ended December 31, 2019.
However, the global outbreak of the novel coronavirus disease (COVID-19, “COVID-19”), which was first detected in China, and the measuresagainst it, increasingly taken by countries and regions around the world such as lockdowns, started to have a visible impact on the real global
economy in the three month ended March 31, 2020. In China, the effects of the COVID-19 outbreak significantly reduced industrial production andindividual consumption, and consequently weakened economic growth, which had already been slowing down due to the trade conflict with theUnited States and slack domestic demand. Weak economies in Europe and Asian emerging countries also slowed down significantly due to therestrictions on economic activities as a result of the spread of COVID-19. In the United States, although the employment situation and individual
consumption had continued to improve during the nine months ended December 31, 2019, there was a sharp fall in business confidence towards
March 31, 2020, due to the outbreak. Amid such circumstances, the Japanese economy faced a rapidly expanding economic stagnation due to theimpact of COVID-19, on top of the already decreased industrial production and export volume.
Among the industries in which the Group operates, sales of new vehicles dropped mainly in China and global sales also decreased as a result ofa fall in Japan and the United States. Both domestic and international demand for industrial machinery was weak. Housing starts increased in the
United States, but declined in Japan. The electronics field showed signs of improvement in smartphone shipments at the end of 2019, but shipments
dropped significantly in the three months ended March 31, 2020.

Business Overview
Under the business circumstances described above, the Group's operating results for the fiscal year ended March 31, 2020, were as follows.
The COVID-19 outbreak had a limited impact on the results for the fiscal year ended March 31, 2020, despite a decline in demand in theautomotive products business in China and North America, and reduced operation of related manufacturing bases.
Revenues decreased by 13.9% year on year to ¥881,402 million mainly due to a decrease in demand primarily for the Group’s mainstays. Othersignificant reasons for the revenue decline are a fall in raw material prices (the sliding-scale raw material price system) and structural reform
measures in the Functional Components and Equipment segment.
Adjusted operating income(*) for the year ended March 31, 2020, decreased by ¥37,044 million year on year to ¥14,383 million. This was
attributable to a major production adjustment implemented in order to address a decrease in demand and to optimize inventories as part of measures
to improve operational efficiency, in addition to a slowdown in the electronics- and semiconductor-related markets, a decline in demand for various
manufacturing equipment and industrial machinery, and a decrease in sales of new vehicles, despite measures including a reduction in fixed costs.
Operating income for the year ended March 31, 2020, decreased by ¥81,568 million year on year, resulting in an operating loss of ¥39,126 million.
This was attributable to the recording of impairment losses of ¥42,581 million in other expenses for the magnetic materials and applications businessas a whole in the three month ended September 30, 2019. This was mainly due to the changes in the operating environment of the rare earth magnet
business and the subsequent review of the future profitability of the magnetic materials and applications business. Income before income taxes
decreased by ¥83,653 million year on year to a loss before income taxes of ¥40,614 million. Net income attributable to shareholders of the parent
company decreased by ¥69,018 million from the same period of the previous year to a net loss attributable to shareholders of the parent companyof ¥37,648 million.
The Group introduced business management based on Return on Invested Capital (ROIC) with the aim of improving cash flow and capitalefficiency. As one of the measures to address these key management challenges in the fiscal year 2021 Medium-term Management Plan, the Grouphas reduced the level of equity investment mainly by shortening the Cash Conversion Cycle (CCC) to reduce the risk of fluctuations in raw material
prices. The Group has also cut capital expenditure through carefully selected investment in core business areas. As a result, free cash flow for the
fiscal year ended March 31, 2020, improved by ¥79,205 million from the same period last year.
(*) In order to give a true view of the condition of the whole Group’s business without the effects of business restructuring, the Group shows “adjusted operating
income,” which is the operating income (loss) recorded in the consolidated statement of income, excluding non-operating income and expenses, and extraordinary
income and losses. Adjusted operating income is a unified profit indicator for the Hitachi Group, including Hitachi, Ltd.

5

Business Results by Segment
Business Segment Information
The results by business segment are as follows. Note that revenues for each segment include intersegment revenues. There were no significant
changes to the businesses of the Group during the fiscal year ended March 31, 2020.
The Company transferred soft magnetic components and materials from the Specialty Steel Products segment to the Magnetic Materials andApplications segment, and changed the segment name from the Magnetic Materials and Applications segment to the Magnetic Materials andApplications / Power Electronics Materials segment as of April 1, 2019. Due to this change, the results of soft magnetic components and materials
for the fiscal year ended March 31, 2019 (April 1, 2018 to March 31, 2019), have been recorded under the Magnetic Materials and Applications /Power Electronics Materials segment.

Specialty Steel Products
Revenues across the entire Specialty Steel Products segment for the fiscal year ended March 31, 2020, were ¥250,643 million, a decrease of 9.5%
compared with those of the fiscal year ended March 31, 2019.
Breaking down the revenues by business, sales of molds and tool steel, among the business of tool steel & roll, decreased year on year, due to adecrease in demand in international markets especially in China and inventory adjustments including in a supply chain in Japan. Sales of rolls
increased year on year as a result of a rise in demand in Japan. Sales of injection molding machine parts decreased year on year due to a sharp
decline in demand in the three months ended December 31, 2019.
Among the business of industrial, aircraft & energy materials, sales of industrial materials decreased year on year, on the back of a decline indemand for products related to automobiles. Sales of aircraft- and energy-related materials increased year on year due to an increase in demand forboth materials.
Overall sales of alloys for electronic products decreased year on year, due to a decline in demand for semiconductor package components,
although sales of organic EL panel-related components grew and sales of clad metals for smartphones and batteries increased.
Adjusted operating income decreased by ¥16,936 million to ¥5,474 million compared with the year ended March 31, 2019, primarily due to a
decline in demand for the Company’s mainstays including molds and tool steel and industrial materials, a fall in raw material prices, and a reductionof work in process reflecting the decreased market demand. Operating income of the segment decreased by ¥14,217 million year on year to ¥7,585
million.

6

Functional Components and Equipment
Revenues across the entire Functional Components and Equipment segment for the fiscal year ended March 31, 2020, were ¥299,703 million, adecrease of 18.5% compared with those of the fiscal year ended March 31, 2019.
Breaking down the revenues by business, sales of casting components for automobiles in North America decreased year on year. This was
attributable to the fact that demand for light trucks and passenger vehicles continued to decrease and that demand for casting components forcommercial vehicles, and construction and agricultural machinery, which remained relatively robust during the six months ended September 30,
2019, has declined since the three months ended December 31, 2019. The decrease was also attributable to the COVID-19 outbreak at the end of
the fiscal year. Meanwhile in Asia, sales decreased year on year driven by a fall in demand for casting components for automobiles. Sales of heatresistant exhaust casting components decreased year on year, mainly reflecting a decrease in sales of new vehicles and careful selection of orders
in order to improve earnings. The Company has decided to withdraw the aluminum wheels business, and therefore, in March 2019, the Company
sold a consolidated subsidiary manufacturing aluminum wheels in the United States, and the termination of production in Japan is also progressing
as planned towards the end of September 2020. As a result, overall sales of casting components for automobiles decreased year on year.
Among piping components, sales of pipe fittings to both domestic and international markets in the year ended March 31, 2020, remained
unchanged year on year. Sales of semiconductor manufacturing equipment decreased year on year due to the delay of some capital investment
projects. As a result, overall sales of piping components decreased year on year.
Adjusted operating income decreased by ¥11,399 million year on year, resulting in an adjusted operating loss of ¥910 million. This was primarily
due to the suspension of the Company’s major customers’ operations at fiscal year end amid the COVID-19 outbreak, in addition to a decline indemand in the automotive casting components business in North America, which is the segment’s core business, and ongoing sluggish sales ofsemiconductor manufacturing equipment. Operating loss was ¥9,222 million, a decrease of ¥6,759 million from the same period last year due tomainly recorded impairment losses .

Magnetic Materials and Applications / Power Electronics Materials
Revenues in the Magnetic Materials and Applications segment for the fiscal year ended March 31, 2020, were ¥116,760 million, a decrease of
14.8% compared with those of the fiscal year ended March 31, 2019.
Breaking down the revenues by business, sales of rare earth magnets among magnetic materials and applications decreased year on year. Thiswas due to a slowdown in the electronics- and semiconductor-related markets and a significant decline in demand for various manufacturing
equipment and industrial machinery in the industrial equipment-related business. The decline in demand for automotive electronic components also
contributed to the decrease in sales. Sales of ferrite magnets decreased year on year due to a decrease in demand for automotive electronic
components. As a result, overall sales of magnetic materials and applications decreased year on year.
Among power electronics materials, sales of soft magnetic materials and their applied products decreased year on year due to a decline in demand
for amorphous metals for transformers and some components for consumer equipment, despite an increase in demand for the use of electronic
vehicles. Meanwhile, sales of ceramic components increased year on year due to an increase in demand mainly for the use of automotive electronic
components and medical and security-related devices. As a result, sales of power electronics materials as a whole remained at the same level as thesame period last year.
Adjusted operating income decreased by ¥2,628 million year on year to ¥1,405 million, due to a decrease in demand for magnetic materials andapplications. Operating income for the year ended March 31, 2020, decreased by ¥52,226 million year on year, resulting in an operating loss of¥42,750 million. This was attributable to the recording of impairment losses of ¥42,581 million in other expenses for the magnetic materials andapplications business as a whole in the three months ended September 30, 2019. This was mainly due to the changes in the operating environmentof the rare earth magnet business and the subsequent review of the future profitability of the magnetic materials and applications business.

7

Wires, Cables, and Related Products
Revenues in the Wires, Cables, and Related Products segment for the fiscal year ended March 31, 2020, were ¥213,329 million, a decrease of
11.2% compared with those of the fiscal year ended March 31, 2019.
Breaking down the revenues by business, sales of medical use products increased year on year due to an increase in demand for both tubes andcables. Sales of wires and cables for rolling stock decreased year on year as large-scale projects entered the offseason. Sales of magnet wires
decreased year on year due to a decrease in their demand for both automotive and industrial applications. Sales of electronic wires also decreased
year on year due to a decline in their demand mainly for FA / robots. As a result, overall sales of wires, cables, and related products decreased year
on year.
Sales of automotive components decreased year on year, reflecting a decline in demand for automotive electronic components and brake hoses
due to a decrease in global new vehicle sales.
Adjusted operating income decreased by ¥5,879 million to ¥6,669 million, as compared with the year ended March 31, 2019, led in part by adecline in demand. Operating income of the segment decreased by ¥6,341 million year on year to ¥5,257 million for the same period.

8

Financial Conditions and Liquidity
Financial Position
The analysis of changes in the Group’s consolidated statement of financial position as of March 31, 2020, is as follows:
Total assets were ¥977,766 million, a decrease of ¥121,486 million compared with March 31, 2019. Current assets were ¥406,119 million, adecrease of ¥74,212 million compared with March 31, 2019. This was mainly due to decreases of ¥37,574 million and ¥34,880 million in tradereceivables and inventories, respectively. Non-current assets were ¥571,647 million, a decrease of ¥47,274 million compared with March 31, 2019.
Property, plant and equipment decreased by ¥21,065 million, which was mainly attributable to an increase of ¥15,061 million in right-of-use assets
arising from the application of IFRS 16 Leases and a decrease due to impairment losses of ¥22,479 million for the magnetic materials andapplications business. In addition, goodwill and intangible assets decreased by ¥25,384 million, which resulted primarily from impairment lossesof ¥20,102 million for the magnetic materials and applications business.
Total liabilities were ¥454,913 million, a decrease of ¥49,128 million compared with March 31, 2019. A decrease of ¥18,716 million in the current
portion of long-term debt and long-term debt was mainly attributable to the year-on-year reduction of ¥33,671 million in these debts, partially offset
by an increase of ¥14,955 million in lease liabilities due to the adoption of IFRS 16 Leases. In additon, trade payables decreased by ¥28,611 million.
Total equity was ¥522,853 million, a decrease of ¥72,358 million compared with March 31, 2019. This was mainly attributable to decreases inretained earnings of ¥51,066 million and accumulated other comprehensive income of ¥16,956 million.

Cash Flows
Cash and cash equivalents as of March 31, 2020, were ¥42,353 million, an increase of ¥1,255 million from March 31, 2019, as a result of cash
provided by operating activities exceeding net cash used in investing and financing activities. The analysis of cash flows for each category as ofMarch 31, 2020, is as follows:<Cash Flows from Operating Activities>
Net cash provided by operating activities was ¥105,958 million. This was mainly attributable to the net effect of net loss of ¥39,538 million,
depreciation and amortization of ¥55,180 million, impairment losses of ¥49,391 million, and a decrease of ¥38,879 million in working capital suchas inventories.
<Cash Flows from Investing Activities>
Net cash used in investing activities was ¥56,418 million, which was mainly attributable to payment of ¥59,520 million for the purchase ofproperty, plant and equipment.
<Cash Flows from Financing Activities>
Net cash used in financing activities was ¥45,735 million. This was mainly attributable to the repayment of long-term debts of ¥37,488 million
and dividends paid to shareholders of ¥12,849 million.

9Research and Development (R&D) Activities
The Group continues to invest in cutting-edge material R&D areas toachieve sustainable growth and contribute to the society. Further, theGroup strives to shorten the R&D period by leveraging digitaltechnologies, such as AI and materials informatics.
For the fiscal year ended March 31, 2020, the Group invested¥15,918 million in R&D.
Breaking down R&D expenses by segment, the Group allocated¥4,525 million for the Specialty Steel Products segment, ¥3,317 million
for the Functional Components and Equipment segment, ¥3,201 million
for the Magnetic Materials and Applications /Power Electronics Materials
segment, and ¥4,875 million for the Wires, Cables, and Related Products
segment.

R&D by Business Segment
Millions of yen
2020
2019
¥ 4,525¥ 5,501
3,317
3,589
3,201
4,193
4,875
5,321
¥ 15,918¥ 18,604¥ 881,402¥ 1,023,421
1.8%
1.8%

Years ended March 31
Specialty Steel Products
Functional Components and Equipment
Magnetic Materials and Applications / Power Electronics Materials
Wires, Cables, and Related Products
Total
Consolidated revenues
R&D to revenues (%)

10Capital Expenditures, Depreciation, and Amortization
The Group invested strategically to innovate its core business processes
for enhancement of production capacity and gaining a competitive edge
through streamlining production efficiency.
For the fiscal year ended March 31, 2020, capital expenditures were¥53,019 million, , and amounts invested by business segment are as
follows:
In the Specialty Steel Products segment, ¥19,140 million was invested
to build production systems for alloys for electronic material products andindustrial equipment sectors in Japan. In the Functional Components andEquipment segment, ¥14,813 million was invested to streamline andupdate production facilities for both overseas and in Japan. In the Magnetic
Materials and Applications /Power Electronics Materials segment,¥7,613 million was invested to build production lines for powerelectronics products in Japan. In the Wires, Cables, and Related Products
segment, ¥9,874 million was invested to increase production capacity forelectric wires and cables, and electronic components in Japan andoverseas.
The Group is investing proactively in next-generation metal products,
and the above capital investments include investments that incorporate anelement of R&D. At the same time, the Company is taking steps tostrengthen its production technologies through the use of IoT.
The above expenditures were covered by own funds and funds raised
through the issuance of corporate bonds.
For the fiscal year ended March 31, 2020, there were no significant
disposals or sales of facilities.
For the fiscal year ending March 31, 2021, management plans toallocate ¥33,830 million to capital expenditures (including new andadditional expenditures). The Specialty Steel Products segment willcontinue to enhance production capacities and streamline production
efficiency, primarily in Japan. The Functional Components and Equipment
segment will enhance production capacity and production efficiency both in Japan and overseas.The Magnetic Materials and Applications / PowerElectronics Materials segment will enhance production capacities in the field power electronics materials both in Japan and overseas. The Wires,
Cables, and Related Products segment will enhance production capacity with respect to electric wires and cables, and electronic components, andproduction efficiency in Japan and overseas.
Capital Expenditures by Business Segment
Millions of yen
2020
2019
¥ 19,140¥ 34,552
14,813
19,551
7,613
25,475
9,874
12,879
156
508
1,423
2,424
¥ 53,019¥ 95,389¥ 105,958¥ 66,582
0.5
1.43

Years ended March 31
Specialty Steel Products
Functional Components and Equipment
Magnetic Materials and Applications / Power Electronics Materials
Wires, Cables, and Related Products
OthersAdjustments
Total
Operating cash flows
CAPEX to operating cash flow ratio (times)
Depreciation and Amortization by Business Segment

Millions of yen
Years ended March 31
2020
2019
Specialty Steel Products¥ 16,715¥ 14,091
Functional Components and Equipment
17,166
16,501
Magnetic Materials and Applications / Power Electronics Materials
9,281
10,821
Wires, Cables, and Related Products
8,300
7,157
Others453
325
Adjustments
3,265
2,006
Total
¥ 55,180¥ 50,901
As of April 1, 2019, the Company transferred soft magnetic components and materials from the Specialty Steel Products segment to the Magnetic
Materials and Applications segment, and changed the segment name from the Magnetic Materials and Applications segment to the Magnetic
Materials and Applications / Power Electronics Materials segment. Accordingly, the results of soft magnetic components and materials for the fiscal
year ended March 31, 2019 (April 1, 2018 to March 31, 2019), have been recorded under the Magnetic Materials and Applications / PowerElectronics Materials segment.

11Outlook
For Performance Outlook for the fiscal year ending March 31, 2021, and Management Strategies for the Future, refer to the Integrated Report.

Business Risk
For Business Risks for the fiscal year ending March 31, 2021, refer to the Integrated Report.

12

Table of Contents

Consolidated Financial Statements and Notes ...................................................................................................................................... 14
Consolidated Financial Statements ......................................................................................................................................................... 14
1)
Consolidated Statement of Financial Position ................................................................................................................ 14
2)
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ..................................... 15
3)
Consolidated Statement of Changes in Equity ................................................................................................................ 17
4)
Consolidated Statement of Cash Flows ........................................................................................................................... 19
Notes to the Consolidated Financial Statements .................................................................................................................................. 21
Nature of the Reporting Company .............................................................................................................. 21
Basis of Presentation ................................................................................................................................... 21
Summary of Significant Accounting Policies ............................................................................................... 21
Segment Information .................................................................................................................................. 27
Business Combinations ............................................................................................................................... 33
Trade Receivables ....................................................................................................................................... 34
Inventories.................................................................................................................................................. 35
Investments Accounted for Using the Equity Method.................................................................................. 35
Property, Plant and Equipment .................................................................................................................. 36
Goodwill and Intangible Assets ................................................................................................................... 38
Leases ......................................................................................................................................................... 40
Deferred Taxes and Income Taxes .............................................................................................................. 41
Trade Payables ........................................................................................................................................... 43
Provisions ................................................................................................................................................... 43
Employee Benefits ...................................................................................................................................... 44
Equity ......................................................................................................................................................... 47
Accumulated Other Comprehensive Income and Other Comprehensive Income ......................................... 48
Dividends.................................................................................................................................................... 52
Revenues .................................................................................................................................................... 53
Other Income and Other Expenses ............................................................................................................. 54
Other Financial Income and Expenses ........................................................................................................ 54
Earnings per Share ..................................................................................................................................... 54
Supplementary Explanation on the Consolidated Statement of Cash Flows ................................................. 55
Financial Instruments and Other Related Information ............................................................................... 56
Major Subsidiaries and Associates .............................................................................................................. 71
Transactions with Related Parties ............................................................................................................... 73
Commitments and Contingencies (Other Than Liabilities Recognized as Provisions) .................................. 74
Additional Information ............................................................................................................................... 74
Subsequent Events ...................................................................................................................................... 74

13

Consolidated Financial Statements and Notes
Consolidated Financial Statements
1)

Consolidated Statement of Financial Position
As ofMarch 31, 2020

As ofMarch 31, 2019

Thousands of
U.S. dollars
As ofMarch 31, 2020

¥ 42,353
157,732
179,925
26,109406,119¥ 41,098
195,306
214,805
29,122
480,331$ 389,167
1,449,343
1,653,267
239,906
3,731,682

28,35428,563

260,535

13,234
381,095
118,174
17,816
12,974
571,647¥ 977,766

19,978402,160
143,558
9,652
15,010618,921¥ 1,099,252

121,6023,501,746
1,085,859
163,705
119,213
5,252,660$ 8,984,343¥ 53,048
51,253
26,642
126,640
35,042
640
3,934
297,199¥ 48,844
34,26837,730155,251
38,018534
2,739
317,384$ 487,439
470,946244,804
1,163,650
321,9885,881
36,1482,730,855

3,24
24
15
12
14

83,285
97867,5602,420
3,471
157,714454,913

118,986923
58,124
4,964
3,660
186,657
504,041765,276
8,986
620,785
22,23731,894
1,449,178
4,180,033

16
16
16,18
17
16

26,284
115,405
374,820
4,969(1,165)26,284
115,045425,886
21,925(1,161)

241,5141,060,415
3,444,087
45,658(10,705)

520,313587,979

4,780,970

2,540
522,853¥ 977,766

7,232
595,211¥ 1,099,252

23,3394,804,309$ 8,984,343

Millions of yen
Note
AssetsCurrent assets
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity
methodInvestments in securities and other financial
assetsProperty, plant and equipment
Goodwill and intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Short-term debt
Current portion of long-term debt
Other financial liabilities
Trade payables
Accrued expenses
Contract liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term debt
Other financial liabilities
Retirement and severance benefits
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EquityEquity attributable to shareholders of the parent
company
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income
Treasury stock, at cost
Total equity attributable to shareholders of theparent company
Non-controlling interests
Total equity
Total liabilities and equity

6
7
24

8
24
3,9,11
10
12

24
3,24
24
13, 2414

See accompanying notes to the consolidated financial statements.

14

2)

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

4, 19

For the year ended
March 31, 2020
¥ 881,402(755,947)
125,455

For the year ended
March 31, 2019
¥ 1,023,421(851,029)
172,392

Thousands of
U.S. dollars
For the year ended
March 31, 2020
$ 8,098,888(6,946,127)
1,152,761

20
20(111,072)
8,599(62,108)(39,126)(120,965)
10,667(19,652)
42,442(1,020,601)
79,013(570,688)(359,515)

456
122(2,646)(1,087)514
846(2,818)
(8)

4,190
1,121
(24,313)(9,988)

1,667(40,614)
1,076(39,538)

2,063
43,039(11,796)
31,243

15,317(373,188)
9,887(363,301)(37,648)(1,890)¥ (39,538)

31,370(127)¥ 31,243(345,934)(17,367)$ (363,301)

For the year ended
March 31, 2020

For the year ended
March 31, 2019

U.S. dollars
For the year ended
March 31, 2020

¥ (88.05)‒¥ 73.37‒$ (0.81)‒Millions of yen
Note
Revenues
Cost of sales
Gross profit
Selling, general, and administrative expenses
Other income
Other expenses
Operating (loss) income
Interest income
Other financial income
Interest charges
Other financial expenses
Share of profits of investments accounted forusing the equity method(Loss) income before income taxes
Income (benefits) taxes
Net (loss) income

21
21
8
12

Net (loss) income attributable to:Shareholders of the parent company
Non-controlling interests
Net (loss) income

Yen

Earnings per share attributable to shareholdersof the parent company
Basic
Diluted22

See accompanying notes to the consolidated financial statements.

15

Consolidated Statement of Comprehensive Income

For the year ended
March 31, 2020
¥ (39,538)

For the year ended
March 31, 2019
¥ 31,243

Thousands of
U.S. dollars
For the year ended
March 31, 2020
$ (363,301)(573)(7,069)

(363)
1,013

(5,265)(64,955)219(1,127)2,012(7,423)(477)(68,207)(9,723)
(109)

5,800
(49)

(89,341)(1,002)

(11)

(95)

(101)

(9,843)(17,266)¥ (56,804)

5,656
5,179
¥ 36,422(90,444)(158,651)$ (521,952)¥ (54,588)(2,216)¥ (56,804)¥ 36,562(140)¥ 36,422$ (501,590)(20,362)$ (521,952)

Millions of yen
Note
Net (loss) income
Other comprehensive (loss) income
Items not to be reclassified into net income
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items not to be reclassified into net
incomeItems that can be reclassified into net income
Foreign currency translation adjustments
Net change in fair value of cash flow hedges
Share of other comprehensive income ofinvestments accounted for using the equity
methodTotal items that can be reclassified into net
incomeTotal other comprehensive (loss) income
Comprehensive (loss) income

8

8

17

Comprehensive (loss) income attributable to:Shareholders of the parent company
Non-controlling interests
Comprehensive (loss) income
See accompanying notes to the consolidated financial statements.

16

3)

Consolidated Statement of Changes in Equity
Millions of yen
NoteCommonstock

Balance at April 1, 2018
Changes in equity
Net income
Other comprehensive income
Dividends to shareholders of the18
parent company
Dividends to non-controllinginterests
Acquisition of treasury stock
16
Sales of treasury stock
16
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2019
Cumulative effect of accounting
3
changeRestated balance
Changes in equity
Net loss
Other comprehensive income
Dividends to shareholders of the18
parent company
Dividends to non-controllinginterests
Acquisition of treasury stock
16
Sales of treasury stock
16
Transactions with non-controllinginterests
Transfer to retained earnings
Total changes in equity
Balance at March 31, 2020

¥ 26,284

Capitalsurplus

Total equity
attributable toNonshareholders controllingof the parent
interests
company¥ (1,158)¥ 562,720¥ 7,472

AccumuTreasury
Retained lated otherstock, atearnings comprehencost
sive income¥ 113,518 ¥ 407,180¥ 16,896

Total
equity¥ 570,192

‒
‒

‒
‒

31,370
‒

‒
5,192

‒
‒

31,370
5,192

(127)
(13)

31,243
5,179‒‒(12,827)‒‒(12,827)‒(12,827)

‒
‒
‒

‒
‒
0

‒
‒
‒

‒
‒
‒

‒
(3)
0

‒
(3)
0

(146)
‒
‒

(146)
(3)
0

1,527
‒
‒
163
1,527
18,706¥ 115,045 ¥ 425,886

‒
(163)
5,029
¥ 21,925‒‒(3)¥ (1,161)

1,527‒
25,259¥ 587,979

46
‒
(240)
¥ 7,232

1,573‒
25,019¥ 595,211‒‒‒¥ 26,284
‒

‒

(607)

‒

‒

(607)

‒

(607)

26,284

115,045425,279

21,925(1,161)

587,372

7,232

594,604‒‒‒‒(37,648)‒‒(16,940)‒‒(37,648)(16,940)(1,890)(326)(39,538)(17,266)‒‒(12,827)‒‒(12,827)‒(12,827)

‒
‒
‒

‒
‒
0

‒
‒
‒

‒
‒
‒

‒
(4)
0

‒
(4)
0

(22)
‒
‒

(22)
(4)
0

360
‒
‒
16
(50,459)360¥ 115,405 ¥ 374,820‒(16)(16,956)¥ 4,969‒‒(4)¥ (1,165)360‒(67,059)¥ 520,313‒‒‒¥ 26,284

See accompanying notes to the consolidated financial statements.

17(2,454)(2,094)‒‒(4,692)(71,751)¥ 2,540 ¥ 522,853

Thousands of U.S. dollars
Note Common
stockBalance at March 31, 2019
$ 241,514
Cumulative effect of‒accounting change
Restated balance
241,514
Changes in equity
Net loss‒
Other comprehensive
income‒Dividends to shareholders
18of the parent company‒
Dividends to noncontrolling interests‒
Acquisition of treasury
16
stock
‒
Sales of treasury stock
16‒
Transactions with noncontrolling interests‒
Transfer to retained
earnings‒
Total changes in equity‒
Balance at March 31, 2020
$ 241,514

Capitalsurplus$ 1,057,107

Total equity
Accumulated
attributable to
NonRetained
other
TreasuryTotalshareholders controlling
earnings
comprehensive stock, at costequityof the parent
interests
incomecompany$ 3,913,314$ 201,461 $ (10,668) $ 5,402,729$ 66,452 $ 5,469,181‒(5,578)‒‒(5,578)‒(5,578)1,057,107

3,907,737

201,461(10,668)

5,397,152

66,452

5,463,604‒(345,934)‒‒(345,934)(17,367)(363,301)‒‒(155,656)‒(155,656)(2,995)(158,651)‒(117,863)‒‒(117,863)‒(117,863)

‒

‒

‒

‒

‒

(202)

(202)

‒
0

‒
‒

‒
‒

(37)
0

(37)
0

‒
‒

(37)
0

3,308

‒

‒

‒

3,308

(22,549)(19,241)‒
3,308$ 1,060,415

147(463,650)$ 3,444,087(147)(155,803)$ 45,658‒(37)$ (10,705)‒(616,181)$ 4,780,970

See accompanying notes to the consolidated financial statements.

18‒‒(43,113)(659,294)$ 23,339 $ 4,804,309

4)Consolidated Statement of Cash Flows

For the year ended
March 31, 2020

For the year ended
March 31, 2019

Thousands of
U.S. dollars
For the year ended
March 31, 2020

¥ (39,538)¥ 31,243$ (363,301)

55,18049,39150,901
7,394

507,029453,836(1,667)3,155(2,063)
1,466(15,317)(2,155)

3,721(19,802)

5,460

3,306

50,17043(5,653)395(1,076)33,673
31,4605,683(26,254)(2,359)472(3,598)107,870
2,361(2,678)(1,998)403
105,958

11,796
18,294(20,378)
1,482(16,177)(2,800)302(5,749)77,0852,303(2,712)(66)(10,028)
66,582(9,887)309,409
289,075
52,219(241,239)(21,676)
4,337(33,061)
991,179
21,694(24,607)(18,359)
3,703
973,610(59,520)(1,328)(98,414)(1,476)(546,908)(12,203)

5,321

650

48,893(115)

260(1,057)171(947)(56,418)

955
1,778(96,247)

1,571(8,702)(518,405)

Millions of yen
Note
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Impairment losses
Share of profits of investments accounted forusing the equity method
Financial expenses(Gains) losses on sale of property, plant andequipment
Structural reform expenses
Net loss (gain) on business reorganization andothersIncome taxes (benefits)
Decrease in trade receivables(Decrease) increase in inventories
Decrease in accounts receivable - other
Decrease in trade payables
Decrease in accrued expenses
Increase in retirement and severance benefits
Other
SubtotalInterest and dividends received
Interest paid
Payments for structural reforms
Income taxes refund (paid)
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from sales of property, plant andequipment(Purchase of) proceeds from investments insecurities and other financial assets (including
investments in subsidiaries and investments
accounted for using the equity method)
Proceeds from sales of investments in securities
and other financial assets (including investments
in subsidiaries and investments accounted forusing the equity method)Other
Net cash used in investing activities(Continued)

19

28,990Millions of yen
Note
Cash flows from financing activities:
Net increase in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Purchase of shares of consolidated
subsidiaries from non-controllinginterests
Dividends paid to shareholders
Dividends paid to non-controllinginterests
Acquisition of common stock fortreasury
Proceeds from sales of treasury stock
Net cash used in (provided by)financing activities
Effect of exchange rate changes on cash
and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at the
beginning of the year
Cash and cash equivalents at the end of
the year

For the year ended
March 31, 2020

For the year ended
March 31, 2019

Thousands of
U.S. dollars
For the year ended
March 31, 2020

23
23
23

5,271
1,424
(37,488)

18,522
45,633(34,979)

48,43313,085(344,464)

18(2,089)(12,827)(1,362)(12,827)(19,195)(117,863)

(22)

(146)

(202)

(4)
0

(3)
0

(37)
0

(45,735)

14,838(420,243)(2,550)

1,013(23,431)

1,255(13,814)

11,532

41,09854,912

377,635¥ 42,353¥ 41,098$ 389,167

See accompanying notes to the consolidated financial statements.

20Notes to the Consolidated Financial Statements
Nature of the Reporting Company
Hitachi Metals, Ltd. (the “Company”) is a Japan-based company whose shares are listed on the First Section of the Tokyo Stock Exchange.
Its principal office is located at 2-70 Konan 1-chome, Minato-ku, Tokyo. The Company’s consolidated financial statements comprise thefinancial statements of the Company and its subsidiaries, as well as its share of the profit or loss of associates and joint ventures. The
Company and its subsidiaries (the “Group”) primarily manufacture and sell Specialty Steel Products, Functional Components andEquipment, Magnetic Materials and Applications / Power Electronics Materials, and Wires, Cables, and related products.

Basis of Presentation
As the Company meets the qualification for a “Specified Company applying Designated IFRSs” pursuant to Article 1-2 of the Ordinanceon Terminology, Forms and Preparation Method of Consolidated Financial Statements (Ordinance of Ministry of Finance of Japan
Regulation No. 28, 1976), the consolidated financial statements of the Company have been prepared in accordance with International
Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, as permitted by the provision of
Article 93 of the above Ordinance.
The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments measured
at fair value, financial instruments measured at fair value through profit or loss (FVTPL), financial instruments measured at fair value
through other comprehensive income (FVTOCI), and assets and liabilities associated with defined benefit plans. The consolidated
financial statements are presented in millions of Japanese yen. Amounts are rounded to the nearest million yen for presentation.
The accompanying consolidated financial statements were approved by Mitsuaki Nishiyama, Chairperson, President and Chief Executive
Officer, on June 23, 2020.
Management of the Company is required to make a number of judgments, estimates, and assumptions related to the application of
accounting policies and reporting of revenues and expenses, and assets and liabilities to prepare the consolidated financial statements inaccordance with IFRS. Actual results may differ from those estimates.
Estimates and assumptions are continually reviewed. The effects of a change in accounting estimates, if any, are recognized in thereporting period in which the change was made and in future periods.
The translation of Japanese yen amounts into U.S. dollars as of and for the year ended March 31, 2020, is included in this annual reportsolely for the convenience of readers outside Japan. The translation has been made at the rate of ¥110.99 = $1, the approximate exchange
rate as of March 31, 2020.
The following notes include information regarding judgments in applying accounting policies that could materially affect the Company’s
consolidated financial statements:• Note 3. (1) “Basis of Consolidation”• Note 3. (4) “Financial Instruments” and Note 24. “Financial Instruments and Other Related Information”
The following notes include information regarding uncertainties arising from assumptions and estimates that may materially affect theCompany’s consolidated financial statements in the following fiscal year:• Note 3. (10) “Impairment of Non-Financial Assets”• Note 3. (12) “Post-Employment Benefits” and Note 15. “Employee Benefits”• Note 3. (13) “Provisions,” Note 3. (14) “Contingencies,” Note 14. “Provisions,” and Note 27. “Commitments and Contingencies (Other
Than Liabilities Recognized as Provisions)”• Note 3. (16) “Income Taxes” and Note 12. “Deferred Taxes and Income Taxes”

Summary of Significant Accounting Policies(1)

Basis of Consolidation(a) Subsidiaries
Subsidiaries are entities controlled mainly by the Group through direct or indirect ownership of a majority of voting rights.
The Company consolidates all subsidiaries from the date on which the Group acquired control until the date on which the Group loses
control.
The financial statements of the Company’s subsidiaries have been adjusted if accounting policies applied by such subsidiaries differ
from those of the Group, if necessary.
Changes in ownership interest in subsidiaries without a loss of control are accounted for as equity transactions. On the other hand,changes in ownership interest in subsidiaries with a loss of control are accounted for by derecognizing assets and liabilities, noncontrolling interests, and accumulated other comprehensive income attributable to the subsidiary.
Financial statements of subsidiaries whose fiscal closing dates differ from the consolidated account closing date are included in the
consolidated financial statements based on a provisional account closing as of the consolidated account closing date.
21

(b) Associates and joint ventures (accounted for using the equity method)
Associates are entities over which the Group has the ability to exercise significant influence over operational and financial policies
mainly by holding 20% to 50% ownership directly or indirectly, but does not control such entities.
Joint ventures are entities jointly controlled by more than one party, including the Group, and decisions about operational and financial
policies require unanimous consent of all parties where the Group has a right to the net assets of the arrangement.
Investments in associates and joint ventures (“equity-method investees”) are accounted for using the equity method.
Consolidated financial statements include changes in net income and other comprehensive income of the equity method investees fromthe date on which the Group obtains significant influence or joint control over the investees to the date on which it loses significant
influence or joint control.
The financial statements of the Group’s equity-method investees have been adjusted, if necessary, when the accounting policies of such
equity-method investees differ from those of the Group.
(2)

Cash Equivalents
The Group considers highly liquid investments with insignificant risk of changes in value and original maturities of three months or lesswhen purchased to be cash equivalents.

(3)

Foreign Currency Translation
The consolidated financial statements are presented in Japanese yen, which is also the Company’s functional currency.
(a) Foreign currency transactions
Foreign currency transactions are translated into each functional currency of the Group using exchange rates prevailing at the dates of
the transactions or rates that approximate such rates. Monetary assets and liabilities denominated in foreign currencies are translatedusing the exchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from currency translation andsettlement are recognized in profit or loss.
(b) Translation of the financial statements of foreign operations
Assets and liabilities of the Company’s foreign operations are translated into Japanese yen using the exchange rate at the end of thereporting period. Income and expense items are translated at the average exchange rate prevailing during the year.
Foreign exchange gains and losses resulting from the translation of financial statements of foreign operations are included in othercomprehensive income.

(4)

Financial Instruments(a) Non-derivative financial assets
The Group initially recognizes trade and other receivables on the actual transaction dates. Other financial assets are initially recognizedon the dates on which the Group becomes party to the agreement.
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire or all the risks andrewards of ownership of the financial assets are substantially transferred. For transactions under which all the risks and rewards ofownership of the financial assets are not substantially retained nor transferred, the Group derecognizes financial assets when it does notretain control of the financial asset.
Classification and measurement methods of non-derivative financial assets are summarized as follows:
Financial assets measured at amortized cost
Financial assets are classified as measured at amortized cost when they meet the following requirements:• The financial asset is held in accordance with the Group’s business model, whose objective is to hold the asset in order to collectcontractual cash flows.
• The contractual terms of financial assets give rise on specified dates to cash flows that are solely payments of principal and intereston the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The carrying
amount of financial assets measured at amortized cost is subsequently determined using the effective interest method. Interest income
from financial assets measured at amortized cost is included in interest income in the consolidated statement of income.
FVTOCI financial assets
The Group holds certain equity instruments to expand its revenue base by primarily maintaining and strengthening business relations
with investees and classifies these equity instruments as FVTOCI financial assets. At initial recognition, FVTOCI financial assets aremeasured at fair value and subsequently measured at fair value at the date of fiscal year-end. Changes in fair value are recognized inother comprehensive income, and the cumulative amount of the changes in fair value is recognized in accumulated othercomprehensive income. Dividends from equity instruments designated as FVTOCI financial assets are recognized in profit or loss
unless they are obviously a return of investment.
22

FVTPL financial assets
The Group classifies all equity instruments not classified as FVTOCI financial assets and all debt instruments not classified as financial
assets measured at amortized cost as FVTPL financial assets. FVTPL financial assets are subsequently measured at fair value, andany changes in fair value are recognized in profit or loss.
Impairment of financial assets
The Group assesses an allowance for expected credit losses on trade and other receivables at least on a quarterly basis, regardless ofwhether the credit risk on those receivables has increased significantly since initial recognition.
The Group measures an allowance for doubtful accounts for a financial asset at an amount equal to the lifetime expected credit losses
if the credit risk on that financial asset has increased significantly since initial recognition. If the credit risk on a financial asset has
not increased significantly since initial recognition, the Group measures an allowance for doubtful accounts for that financial asset at
an amount equal to 12-month expected credit losses. The Group, however, measures an allowance for doubtful accounts for tradereceivables at an amount equal to the lifetime expected credit losses without exceptions.
The Group determines whether the credit risk on financial assets has increased significantly based on changes in the risk of default
occurring. The Group defines a default event by the debtor as a situation in which a significant issue arises on the debtor’s paymentof contractual cash flows, causing the Group to have no reasonable expectation of recovering the financial asset in its entirety or a
portion thereof. In assessing the changes in the risk of default occurring, the Group mainly considers external credit ratings and pastdue information.
Expected credit losses are measured at the present value of differences between all contractual cash flows that are due to the Groupand all future cash flows that the Group is expected to receive from the financial assets, which is weighted by the probability of acredit loss event occurring. When one or more events, such as the existence of overdue payments; extended payment terms; a negativeevaluation by third-party credit rating agencies; excessive debts; and findings indicating a deteriorating financial position or operating
results, have occurred, the Group individually assesses the financial assets as credit-impaired and estimates expected credit losses
based on primarily historical default events and amounts recoverable in future periods. If the financial assets are not credit-impaired,
the Group estimates the expected credit losses using allowance rates on a collective basis based primarily on historical default events,
adjusted by considering present and future economic conditions as necessary.
The Group recognizes an allowance for doubtful accounts for expected credit losses on trade and other receivables, and does notdirectly reduce the carrying amounts of those receivables. Any changes in credit losses are recognized as impairment losses in profit
or loss, which are included in selling, general, and administrative expenses in the consolidated statement of income. After all meansof collection have been exhausted and the recoverability of the financial asset is considered remote, the Group determines that it has
no reasonable expectations of recovering the financial asset in its entirety or a portion thereof and directly writes off such asset.
(b) Non-derivative financial liabilities
The Group initially recognizes debt instruments issued on the date of issuance. All other financial liabilities are initially recognized on
the transaction dates on which the Group becomes party to the agreement.
The Group derecognizes financial liabilities when extinguished, that is, when the obligation in the contract is redeemed, or the liability
is discharged, cancelled, or expires.
Non-derivative financial liabilities that the Group holds include bonds, debts, trade payables, and other financial liabilities. They are
initially recognized at fair value (less direct transaction costs). Bonds and debts are subsequently measured at amortized cost using theeffective interest method, and interest income is recognized in interest charges in the consolidated statement of income.
(c) Derivatives and hedge accounting
The Group uses derivative instruments, including forward exchange contracts, interest rate swaps, and copper futures trading, in orderto hedge currency risks, interest rate risks, and raw material (copper) price fluctuation risks. These derivatives are all recorded at fairvalue regardless of the purposes or intentions of holding the derivatives.
The Group applies hedge accounting as follows:• Fair value hedge: a hedge against changes in the fair value of a recognized asset or liability, or an unrecognized firm commitment. Thechanges in the fair value of the recognized assets or liabilities, or unrecognized firm commitments, and the related derivatives arerecognized in profit or loss if the hedge is considered effective.
• Cash flow hedge: a hedge against variability in cash flows attributable to a forecasted transaction or related to a recognized asset or
liability. The changes in the fair value of derivative instruments designated as cash flow hedges are recognized in other comprehensive
income (loss) if the hedge is considered effective. This treatment is continued until the unrecognized firm commitment of thedesignated hedged item or changes in hedged expected future cash flows are recognized in profit or loss, at which point changes infair value of the derivative instruments are also recognized in profit or loss. If a hedged forecast transaction subsequently results in
the recognition of a non-financial asset or non-financial liability, changes in fair value of derivatives recognized as othercomprehensive income (loss) are directly included in the cost or other carrying amount of the asset or liability when the non-financial
asset or non-financial liability is recognized.
The Group documents risk management objectives and strategies for undertaking various hedge transactions as stipulated in
23

IFRS 9 .Financial Instruments. In addition, the Group assesses whether the derivative used in hedging activities is effective in offsettingchanges in fair value or cash flows of the hedged item at the hedge’s inception and periodically on an ongoing basis. Hedge accounting
is discontinued for ineffective hedges.
(d) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position only when theGroup currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis or to realize the asset
and settle the liability simultaneously.
(5)

Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined by the specific identification method or average cost
method for merchandise and finished products, and work in process, and generally by the moving average cost method or average cost
method for raw materials and supplies. Net realizable value is the estimated selling price in the ordinary course of business, less the estimatedcosts of completion and the estimated costs necessary to sell.

(6)

Property, Plant and Equipment
The Group applies the cost model to property, plant and equipment and states such assets at cost, less accumulated depreciation andaccumulated impairment losses. The cost of an item of property, plant and equipment includes the direct cost of acquisition, and the cost ofits dismantlement, removal, and restoration. Property, plant and equipment are principally depreciated using the straight-line method overthe following estimated useful lives:
Buildings and structures:
2 to 60 years
Machinery and vehicles:
2 to 20 years
Tools, furniture and fixtures:
2 to 30 years
Right-of-use assets
2 to 50 years
The estimated useful lives and the method of depreciation are reviewed at each fiscal year-end. Changes in estimated useful lives ordepreciation method are accounted for as a change in an accounting estimate and applied prospectively.

(7)

Goodwill and Other Intangible Assets(a) Goodwill
Goodwill is stated at cost, less any accumulated impairment losses.
(b) Intangible assets (excluding goodwill)
The Group applies the cost model to intangible assets and states such assets at cost, less accumulated amortization and impairment
losses.
Intangible assets with finite useful lives are amortized principally using the straight-line method over the following estimated useful
lives:
Software:2 to 10 years
Other intangible assets:
2 to 20 years(8)

Leases(a) Lessee
The Company and certain subsidiaries use leased facilities, including buildings, machinery, and vehicles as lessees. The Group
recognizes a right-of-use asset, a right to use the underlying asset, and expenses related to leases, and gains an liability, an obligation to
make lease payments, and also recognizes lease expenses as depreciation charges for right-of-use assets and interest expenses on leaseliabilities.
Lease payments for short-term leases with a lease term of 12 months or less are recognized in profit or loss on a straight-line basis overthe lease term.
Right-of-use asset
The Group applies the cost method to measure the right-of-use asset, which is included in property, plant and equipment or intangible
assets at cost at the commencement date of the lease less any accumulated depreciation and any accumulated impairment losses. The
cost of right-of-use asset includes the amount of the initial measurement of the lease liability and the initial direct cost incurred by thelessee. The right-of-use asset is depreciated from the commencement date of the lease to the earlier of the end of the useful life of theunderlying asset or the end of the lease term on a straight-line basis. Changes in the useful life or the lease term are accounted for on aprospective basis as a change in accounting estimate.
Lease liability
The lease liability is measured at the present value of lease payments that are not paid at the commencement date of the lease, discounted
using the interest rate implicit in the lease or the lessee’s incremental borrowing rate, and is included in the current portion of long-term
debt or long-term debt. Interest expense on the lease liability in each period during the lease term is recognized in profit or loss over thelease term at a constant periodic rate of interest on the remaining balance of the lease liability, and is included in interest charges in the
consolidated statement of income.
24

(b) Lessor
The Company and certain subsidiaries lease facilities, including buildings, machinery, and equipment as lessors. When substantially all
the risks and rewards incidental to the ownership of items of property, plant and equipment are transferred to the lessee, such lease isclassified as a finance lease with the derecognition of the underlying assets and the present value of the total amount of lease payments
is used to recognize and measure the net investment in the lease.
If substantially all the risks and rewards incidental to the ownership remain with the lessor, it is classified as an operating lease, underwhich the underlying asset is continuously recognized and lease income is recognized over the lease term on a straight-line basis.
(9)

Equity(a) Common stock and capital surplus
The amounts of equity instruments issued by the Company are recognized in common stock and capital surplus at their issued prices,and the costs incurred directly related to the issuance are deducted from capital surplus.
(b) Treasury stock
When the Company acquires treasury stock, the acquisition costs are recognized as deductions from equity. When treasury stock is sold,the differences between the carrying amounts and the considerations are recognized in capital surplus.

(10) Impairment of Non-Financial Assets
The Group performs impairment testing for non-financial assets whenever events or circumstances have occurred that indicate that thecarrying amount of the assets may not be recoverable. The Group tests goodwill and intangible assets with indefinite lives for impairment
annually, generally during the fourth quarter, irrespective of whether there is any indication of impairment. The Group performs impairment
testing by estimating the recoverable amount per cash-generating unit (CGU) to which the asset belongs. When performing an impairment
test, assets are grouped into the smallest identifiable group whose cash flows are independent.
In determining the recoverable amount, the Group uses available quoted market prices or the income approach (a present value technique)based on the estimated future cash flows expected to result from the use of the assets and their eventual disposition. If the carrying amountof the assets allocated to a CGU exceeds the recoverable amount, an impairment loss on the assets of that CGU is recognized.
When there is a significant change in the facts and circumstances used to calculate the recoverable amount of an asset other than goodwill,
and there is an indication that an impairment loss previously recognized on the asset may no longer exist or be decreased, the recoverable
amount of the asset or the CGU is estimated. If the recoverable amount of the asset or the CGU exceeds its carrying amount, then the
impairment loss is reversed to the extent of the carrying amount that would have been determined, net of depreciation or amortization, had
no impairment loss been recognized for the asset in prior years.
(11) Assets Held for Sale
The Group classifies an asset or a disposal group of assets whose carrying amount will be recovered through a sales transaction, rather than
through continuing use, as an asset or assets held for sale, if its sale is highly probable and it is available for immediate sale in its present
condition. Assets held for sale are not depreciated or amortized, and are measured at the lower of carrying amount or fair value, less costs tosell.
(12) Post-Employment Benefits
The Company and its subsidiaries have contributory defined benefit pension plans as well as funded and unfunded lump-sum payment plans
to provide retirement and severance benefits to employees. The present value of defined benefit obligations and retirement benefit costs aremeasured based on the projected unit credit method.
The effects of remeasurements of the net defined benefit asset or liability are recognized in other comprehensive income when incurred. Past
service cost is immediately recognized in profit or loss.
The net amount of a defined benefit asset or liability is calculated as the present value of the defined benefit obligation, less the fair value ofthe plan assets, and is recognized as an asset or liability in the consolidated statement of financial position.
Additionally, the Company and certain subsidiaries have defined contribution pension plans, recognizing the contributions to the plans as
expenses during the fiscal year when employees have rendered service.
(13) Provisions
The Group recognizes provisions when it has a present obligation (legal or constructive) as a result of a past event, when it is probable thatan outflow of resources embodying economic benefits will be required to settle the obligation, and the amount of obligation can be reliably
estimated.
When the time to settle an obligation is expected to be long and the time value of money is material, the amount of a provision is measured
at the present value of the expenditures expected to be required to settle the obligation. The discount rate used in calculating the present
value is a pre-tax rate that reflects the time value of money and the risks specific to the liability.
The nature and the amount of the provisions that the Group recorded are described in Note 14. “Provisions.”25

(14) Contingencies
In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, the Group discloses contingent liabilities in Note 27.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” for outflows of resources embodying economic
benefits whose realization is uncertain at the end of the reporting period, if it cannot be determined as a present obligation as of the end of
the reporting period or if it does not meet the recognition criteria of provisions prescribed in (13) “Provisions,” unless the possibility of any
outflow in settlement is remote.
The Group has financial guarantee contracts that require the Group to make specified payments to reimburse the creditor for a loss when the
debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are initially measured
at fair value adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, theGroup accounts for liabilities related to the financial guarantee contracts at the higher of the best estimate of expenditures required for settling
the present obligation at the reporting date or the amount initially recognized, less cumulative amortization.
(15) Revenue Recognition
The Group recognizes revenue by applying the following five steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Group engages in a wide-range of transactions, and some are tailored based on customers’ requests where it offers two or more products
or services to customers under the transactions. When the Group enters into two or more contracts with a customer to provide products orservices, related contracts are combined taking into account the relationships between considerations in the contracts or the timing of thecontracts entered into with the customers. The transaction price is allocated to performance obligations on a relative standalone selling pricebasis, and revenue is recognized accordingly.
The relative standalone selling price is estimated by taking many factors into account, including market conditions, market prices ofcompetitive products, costs of products, and information about the customer.
The transaction price is determined at the amount of consideration to which the Group expects to be entitled in exchange for transferringpromised goods or services to a customer. Variable consideration, such as discounts and rebates, are included in the transaction price only tothe extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when theuncertainty associated with the variable consideration is subsequently resolved. The promised consideration does not contain a significant
financing component.
(16) Income Taxes
Deferred tax assets and liabilities arising from temporary differences, unused tax losses, and unused tax credits are recognized based on theasset and liability method. A deferred tax liability is not recognized on the temporary difference arising from goodwill, and the temporary
difference arising from the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time oftransaction, affects neither accounting nor taxable profit or loss. It is also not recognized on outside-basis difference arising from investments
in subsidiaries and associates when the Group is able to control the timing of the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be applied to taxable income in the fiscal year when those temporary differences are expected to be recovered. The effects of achange in tax rates on deferred tax assets and liabilities are recognized in profit or loss and other comprehensive income in the fiscal yearthat includes the date of enactment of the change in the tax rate. Deferred tax assets are recognized to the extent that it is probable that futuretaxable income will be available against which any unused tax losses, unused tax credits, and future deductible temporary difference can beutilized.
(17) Consumption Tax
Consumption tax collected and remitted to taxing authorities is excluded from revenues, cost of sales, and expenses in the consolidated
statements of income.
(18) Earnings per Share
Basic earnings per share (“EPS”) attributable to shareholders of the parent company is calculated based on the weighted-average of common
stock outstanding during the period.
(19) Business Combinations
Business combinations are accounted for using the acquisition method. Acquisition cost is determined as the total consideration transferred,measured at the acquisition date fair value and the non-controlling interests in the acquiree. For each business combination, the Groupchooses to measure any non-controlling interest in the acquiree at fair value or based on its proportionate interest in the acquiree’s identifiable
net assets at fair value. Acquisition-related costs are recognized as incurred in profit or loss.
Business combinations under common control, in other words, business combinations in which all the combining entities or businesses areultimately controlled by the same party or parties both before and after the business combinations and when the control is not temporary, areaccounted for based on carrying amounts.
26

(20) Changes in Accounting Policies
From the beginning of the fiscal year ended March 31, 2020, the Group has adopted IFRS 16 Leases. IFRS 16 sets out the principles for therecognition, measurement, presentation, and disclosure of leases. This standard introduces a single accounting model, under which lessees
recognize all leases in the statement of consolidated financial position.
As a transition measure upon the adoption of IFRS 16, the Group recognized the cumulative effect of initially applying this standard as an
adjustment to the beginning balance of retained earnings for the fiscal year ended March 31, 2020.
The leases held by the Group are mainly real estate leases. The effect of the adoption of IFRS 16 on the consolidated statement of financial
position as of the beginning of the fiscal year ended March 31, 2020, is as follows: an increase of ¥16,693 million (U.S. $153,386 thousand)in assets mainly due to recognizing right-of-use assets; an increase of ¥17,300 million (U.S. $158,964 thousand) in liabilities mainly due torecognizing lease liabilities; and a decrease of ¥607 million (U.S. $5,578 thousand) in equity due to the adjustment to the beginning balanceof retained earnings. Minor effect is recognized in the consolidated statement of income. Additionally, under IFRS 16, depreciation
adjustments of right-of-use assets are included in cash flows from operating activities instead of the payment of operating lease expense, andthe payment of lease liabilities is included in cash flows from financing activities in the consolidated statement of cash flows for the fiscal
year ended March 31, 2020. This resulted in an increase in cash flows from operating activities and a decrease in cash flows from financing
activities compared with those under the previous accounting standard.
The Group elects to use a practical expedient that permits an entity not to reassess whether existing contracts contain a lease at the date ofinitial application as defined under IAS 17 Leases and IFRIC 4 Determining whether an Arrangement contains a Lease in prior periods atthe commencement date of applying IFRS 16. In addition, when IFRS 16 is applied to a lease that is classified as an operating lease under
IAS 17, the following practical expedients are mainly elected:
・Leases for which the lease term ends within 12 months from the date of initial application are accounted for in the same way as for shortterm leases.
・If a contract contains an option to extend or terminate the lease, a lessee uses hindsight in determining the lease term.
The lessee’s weighted average incremental borrowing rate applied to lease liabilities recognized in the consolidated statement of financial
position at the beginning of the fiscal year ended March 31, 2020, is 1.53%.
The difference between minimum lease payments under non-cancelable operating leases to which IAS 17 is applied as of March 31, 2019,and lease liabilities recognized under IFRS 16 is ¥16,359 million (U.S. $150,317 thousand.) This is primarily due to the difference in periodsof extension options and termination options included in the lease term under respective accounting standards.
(21) Standards Issued but not yet Effective
None of the standards and interpretations that were issued, amended, or revised before the approval date of the accompanying consolidated
financial statements for the fiscal year ended March 31, 2020, have significant impact on the consolidated financial statements of the Group.

Segment Information
Business Segments
The Group’s operating segments are components for which independent financial information is available and which are regularly reviewed by
the Board of Directors to assist the Board in making decisions about resources to be allocated to the segments and to assess performance.
The Group has adopted a two-Business Division-based organization structure, which is composed by Advanced Metals Division and Advanced
Components and Materials Division. Both of the business divisions prepare a comprehensive strategy and engage in business activities related totheir products and services in both the domestic and overseas markets.
There are four business segments under these Divisions: the Specialty Steel Products segment and the Functional Components and Equipment
segment comprise the Advanced Metals Division; and the Magnetic Materials and Applications / Power Electronics Materials segment, and Wire,
Cables, and Related Products segment comprise the Advanced Components and Materials Division. The four segments represent the Group’sreportable segments.

27

The primary products and services included in each segment are as follows:
Reportable segments

Specialty Steel Products

Functional Components andEquipment

Major products and services<Tool Steel & Roll>·Molds and tool steel, rolls for steel mills, injection molding machine parts, structural ceramic products,
and steel-frame joints for construction<Industrial, Aerospace & Energy Materials>·Automobile-related materials, razor and blade materials, precision cast components, and aircraft- andenergy-related materials<Electronic Materials>·Display-related materials, semiconductor and other package materials, and battery-related materials<Automotive Casting>·HNM high-grade ductile cast iron products, cast iron products for transportation equipment,
HERCUNITE heat-resistant exhaust casting components, and aluminum components<Piping Components>·Piping and infrastructure components (TM gourd brand pipe fittings, valves, stainless steel and plastic
piping components, water cooling equipment, precision mass flow control devices, and sealed expansion
tanks)

Magnetic Materials andApplications / PowerElectronics Materials<Magnetic Materials>·NEOMAX® rare-earth magnets, ferrite magnets, and other magnets and applied products<Power Electronics Materials>·Soft magnetic materials (Metglas® amorphous metals; FINEMET® nanocrystalline magnetic material; andsoft ferrite) and applied products, and ceramic components

Wires, Cables, and Related
Products<Electric Wire & Cable>·Industrial cables, electronic wires, electric equipment materials, cable assemblies, and industrial rubber
products<Automotive Components>·Automotive electronic components and brake hoses

The same accounting policies as the ones described in Note 3. “Summary of Significant Accounting Policies” are applied to the reportablesegments.
Income by reportable segment is based on operating income. Intersegment revenues are based on prevailing market price.

28

The following tables show business segment information for the years ended March 31, 2020 and 2019:
For the year ended March 31, 2020
Millions of yen
Reportable segment
Magnetic
Materials and Wires,
Specialty
Functional
Applications Cables, andSteelComponents/ Power
RelatedProducts and Equipment
Electronics
Products
Materials

Subtotal¥ 250,489¥ 299,703¥ 116,749¥ 212,936

Intersegment
transactions

154

‒

11

Total revenues

250,643

299,703

7,585

Financial income

Adjustments

Consolidated
statement ofincome¥ 881,402¥‒¥ 881,402

1,846

2,404

(2,404)‒880,435

3,371

883,806(2,404)

881,4025,257(39,130)510(38,620)(506)(39,126)

‒

‒

‒

‒

‒

‒

578

‒

‒

‒

‒

‒

‒

‒

(3,733)

‒

‒

‒

‒

‒

‒

‒

‒

1,667

‒

‒

‒

‒

‒

‒

‒

‒

(40,614)368,543

308,941

147,373

244,089

1,068,946

8,814

1,077,760(99,994)

977,766

Depreciation andamortization

16,715

17,166

9,281

8,300

51,462453

51,915

3,265

55,180Capital expenditure

19,14014,813

7,613

9,874

51,440156

51,596

1,423

53,019Impairment losses

1,403

4,231

42,581

674

48,889‒48,889290

49,179OthersTotal¥ 879,877¥ 1,525393

558

116,760

213,329(9,222)(42,750)‒‒

Financial expenses‒

Share of profits ofinvestments
accounted for using
the equity method

Revenues
External customers

Segment profit (loss)

Income (loss)
before income taxes
Segment assets
Other items:

Notes: 1. Segment profit (loss) is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly allocation
variances of general and administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate assets
and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.
The Company transferred soft magnetic components and materials from the Specialty Steel Products segment to the Magnetic Materials andApplications segment, and changed the segment name from the Magnetic Materials and Applications segment to the Magnetic Materials andApplications / Power Electronics Materials segment as of April 1, 2019. Due to this change, the results of soft magnetic components and materials
for the twelve months ended March 31, 2019 (April 1, 2018 to March 31, 2019), are recorded under the Magnetic Materials and Applications /Power Electronics Materials segment.

29For the year ended March 31, 2019
Millions of yen
Reportable segment
Magnetic
Materials
Wires,
Specialty
FunctionalandCables, andSteelComponents Applications
RelatedProducts and Equipment / Power
Products
Electronics
Materials

Subtotal¥ 276,708¥ 367,563¥ 137,009¥ 239,602¥ 1,020,882

Intersegment
transactions

196

‒

‒

521

717

1,890

Total revenues

276,904

367,563

137,009240,123

1,021,599

Segment profit

21,802(2,463)

9,476

11,598Financial income

‒

‒

‒

Financial expenses‒‒

Share of profits ofinvestments
accounted for using
the equity method‒

Income before
income taxes
Segment assets

Adjustments

Consolidated
statement ofincome¥‒¥ 1,023,421

2,607(2,607)‒4,429

1,026,028(2,607)

1,023,421

40,413945

41,3581,084

42,442

‒

‒

‒

‒

‒

1,360

‒

‒

‒

‒

‒

‒

(2,826)

‒

‒

‒

‒

‒

‒

‒

2,063

‒

‒

‒

‒

‒

‒

‒

‒

43,039392,167

339,251

187,131

258,570

1,177,119

1,396

1,178,515(79,263)

1,099,252

Depreciation andamortization

14,091

16,501

10,821

7,157

48,570325

48,8952,006

50,901

Capital expenditure

34,552

19,551

25,475

12,87992,457508

92,9652,424

95,389Impairment losses

‒

7,378

‒

16

7,394

‒

7,394

‒

7,394

OthersTotal

Revenues
External customers¥ 2,539 ¥ 1,023,421(loss)

Other items:

Notes: 1. Segment profit (loss) is based on operating income.
2. Intersegment transactions are recorded at the same prices used in transactions with third parties. Adjustments represent mainly allocation
variances of general and administrative expenses for corporate assets, which are not allocated to each reportable segment.
3. Adjustments represent mainly cash and cash equivalents, investments in securities, and other financial assets allocated to corporate assets
and eliminations of intersegment transactions.
4. Capital expenditure represents increases in property, plant and equipment, intangible assets, and investment property.

30

For the year ended March 31, 2020
Thousands of U.S. dollars
Reportable segment
Magnetic
Functional Materials andWires,
Specialty Steel Components Applications / Cables, andProducts
andPower
RelatedEquipment Electronics
Products
Materials

OthersSubtotal

Adjust-ments

Total

Consolidated
statement ofincomeRevenues
External customers
Intersegment
transactions$ 2,301,654 $ 2,753,864$ 1,072,765 $ 1,956,593 $ 8,084,875 $ 14,013 $ 8,098,888$ ‒ $ 8,098,888

1,415

‒

101

3,611

5,127

16,96222,089(22,089)‒

Total revenues

2,303,069

2,753,864

1,072,866

1,960,204

8,090,003

30,9758,120,978(22,089)

8,098,888

Segment profit (loss)

69,696(84,738)(392,814)

48,305(359,552)

4,686(354,865)(4,649)(359,515)

Financial income

‒

‒

‒

‒

‒

‒

‒

‒

5,311

Financial expenses
Share of profits ofinvestments
accounted forusing the equity
methodIncome (loss)
before income
taxes
Segment assets

‒

‒

‒

‒

‒

‒

‒

‒

(34,301)

‒

‒

‒

‒

‒

‒

‒

‒

15,317

‒

‒

‒

‒

‒

‒

‒

‒

(373,188)

9,903,152 (918,809)

8,984,343

3,386,410

2,838,749

1,354,158

2,242,847

9,822,163

80,989Other items:
Depreciation andamortization
Capital expenditure

153,588

157,732

85,28076,266472,866

4,162

477,028

30,001

507,029

175,871

136,11169,95390,729472,664

1,433

474,097

13,075487,173

Impairment losses

12,89238,877391,2626,193

449,224‒449,224

2,665

451,88831

Other Related Information
For the year ended March 31, 2020
1. Product and service information
Information is similar to that presented under Segment Information above and is therefore omitted.
2. Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

Europe¥ 405,410¥ 245,349¥ 166,136¥ 44,542

Other areas¥ 19,965

Total¥ 881,402

Thousands of U.S. dollars
Japan

North America

Asia

EuropeOther areas

Total$ 3,725,168$ 2,254,424$ 1,526,564$ 409,281$ 183,451$ 8,098,888
Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥225,143 million (U.S. $2,068,759 thousand) and¥63,380 million (U.S. $582,376 thousand), respectively.
(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 320,935¥ 170,084¥ 47,557¥ 243¥ 3,071¥ 541,890

Other areas

Total

Thousands of U.S. dollars
Japan

North America

Asia

Europe$ 2,948,957$ 1,562,841$ 436,984$ 2,233$ 28,218$ 4,979,234
Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥170,084 million(U.S. $1,562,841 thousand).
3. Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2020.
For the year ended March 31, 2019
1. Product and service information
Information is similar to that presented under Segment Information above and is therefore omitted.
2.

Geographic information(1) Revenues
Millions of yen
Japan

North America

Asia

Europe¥ 448,984¥ 310,880¥ 200,703¥ 50,406

Other areas¥ 12,448

Total¥ 1,023,421

Note: Revenues are classified by country or region based on the customer’s location.
Revenues from external customers attributed to any individual country or region other than Japan, the United States, and China
were not material.
Revenues from external customers in the United States and China were ¥277,942 million and ¥76,206 million, respectively.

32

(2) Non-current assets (excluding financial instruments)
Millions of yen
Japan

North America

Asia

EuropeOther areas

Total¥ 357,898¥ 176,293¥ 50,825¥ 220¥ 1,989¥ 587,225

Note: Non-current assets (excluding financial instruments) attributed to any individual country or region other than Japan and the UnitedStates were not material.
Non-current assets (excluding financial instruments) attributable to the United States were ¥176,293 million.
3.

Significant customer information
There was no concentration of revenues from a specific customer for the year ended March 31, 2019.

Business Combinations
The major business combination for the year ended March 31, 2019, is as follows:
Making Santoku Corporation a subsidiary through acquisition of shares
1. Purpose of acquisition of sharesWith NEOMAX® neodymium magnets, the strongest magnet of its kind available in the world, as its mainstay product, Hitachi Metals’
Magnetic Materials Company has been supplying a wide range of high-performance magnets as key materials for downsizing, weight-saving,
optimization, energy-saving, and improvement of environmental performance in various fields including automobiles, IT, home appliances,industrial machinery, medicine, the environment, and energy.
At the same time, Santoku Corporation possesses a high level of expertise that includes microstructure control technology for alloys, asevidenced by the fact that Santoku Corporation was the first in the world to succeed in the molten salt electrolysis of rare earths as well as themass production of rare earth rapid quenching alloys. Santoku Corporation also carries out integrated production from raw materials to highpurity compounds and assorted alloys. As for the manufacturing of neodymium magnet alloys that make up the raw materials of neodymium
magnets, specifically, Santoku Corporation has a patent related to strip casting process manufacturing technologies and has been recognized as
the world’s leading comprehensive rare earth manufacturer.
As significant growth is expected in the global market for xEVsNote, the Company has been endeavoring to reinforce the competitiveness ofhigh-performance magnets by boosting the global production system and optimizing material flows that cover from raw materials to endproducts. While the Company has been investing aggressively in the manufacturing of neodymium magnet alloys and the development of new
recycling technologies, it has decided to acquire Santoku Corporation as a subsidiary in order to further accelerate the progress of the activities
above.
Note: xEVs is the general term for electric vehicles (EVs), hybrid electric vehicles (HEVs), and plug-in hybrid electric vehicles (PHEVs).
The Company acquired shares of Santoku Corporation, equivalent to 75.64% of the voting rights, as of April 2, 2018, and Santoku Corporation
became a consolidated subsidiary of the Company. As of May 25, 2018, the Company made Santoku Corporation a wholly owned subsidiarythrough the squeeze out.
Through the acquisition of Santoku Corporation, the Company will aim to develop a stable production system and achieve sustainable growthin the global market by establishing an integrated production system that covers from the manufacturing of alloys and magnets for the
neodymium magnets business to recycling.
2. Name of the acquired company and its business(1) Name: Santoku Corporation(2) Business: Manufacturing and sales of rare earth compounds, rare earth metals, magnet materials, and battery materials
3. Date of acquisition of shares
April 2, 2018
4. Ratio of voting rights acquired
75.64%

33

5. Consideration for the acquisition of shares and fair values of assets acquired and liabilities assumed
The following table summarizes consideration for the acquisition of Santoku Corporation and recognized amounts of assets acquired andliabilities assumed as of the date of acquisition.
Millions of yen
Cash and cash equivalents
Trade receivables
Inventories
Other current assets
Non-current assets (except for intangible
assets)Intangible assets
Other non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Consideration paid (cash)
Fair value of pre-existing interests in theacquiree
Total consideration for the acquisition ofsharesNon-controlling interests
Gain on bargain purchase¥ 2,883
12,025
4,119
715
7,849
215
1,201
¥ 29,007
13,533
4,115¥ 17,648
2,552
162¥ 2,714
2,935
5,710

Non-controlling interests are measured at an amount equivalent to non-controlling shareholders’ ownership interests in the acquiredcompany’s identifiable net assets at fair value.
The gain of ¥5,710 million on bargain purchase of the shares of Santoku Corporation arose in this acquisition because fair value of the net
assets acquired exceeded the consideration for the acquisition of shares. The gain on bargain purchase is recorded as other income in the
consolidated statement of income.
The allocation of consideration transferred in the acquisition was accounted for at provisional amounts as of June 30, 2018. During the sixmonth period ended September 30, 2018, the amounts were finalized and there were no changes to the provisional amounts recognized.
6. Acquisition-related costs
The Company recorded ¥31 million of acquisition-related costs of the business combination as other expenses in the consolidated statement ofincome.
7. Gain on a step acquisition
As a result of remeasurement of equity interests in Santoku Corporation held by the Company before the acquisition date at acquisition-datefair value, they were determined as ¥162 million, and thus, the Company recognized a gain on a step acquisition of ¥47 million as other incomein the consolidated statement of income.
8. Revenue and net income of the acquired company
Disclosure regarding revenue and net income of the acquired company for the period between the acquisition date and March 31, 2019, isomitted because the amounts do not have material effects on the consolidated financial statements.

Trade Receivables
Trade receivables as of March 31, 2020 and 2019, are summarized as follows:
Millions of yen
March 31, 2020

March 31, 2019

Thousands of
U.S. dollars
March 31, 2020

Accounts receivable¥ 138,345¥ 168,398$ 1,271,203
Notes receivable and electronically recordedmonetary claims
19,572
27,219179,840
Allowance for doubtful accounts(1,700)
(185)
(311)
Total
¥ 157,732¥ 195,306$ 1,449,343
For credit risk control and fair value of trade receivables, see Note 24. “Financial Instruments and Other Related Information.”34

Inventories
Inventories as of March 31, 2020 and 2019, are summarized as follows:
Thousands of
U.S. dollars
March 31, 2020
March 31, 2019
March 31, 2020
Merchandise and finished products¥ 64,189¥ 73,524$ 589,810
Work in process
68,02486,330625,048
Raw materials and supplies
47,712
54,951
438,409
Total¥ 179,925¥ 214,805$ 1,653,267
The amount of inventories written down for the years ended March 31, 2020 and 2019, was ¥3,980 million (U.S. $36,571 thousand) and¥4,300 million, respectively.
Millions of yen

Investments Accounted for Using the Equity Method
The summarized financial information, in aggregate, for individually immaterial associates and joint ventures accounted for using the equity
method as of and for the years ended March 31, 2020 and 2019, is as follows:
These amounts represent the Group’s share of the associates and joint ventures per ownership percentage.
(1) Investments in associates
Millions of yen
Carrying amount of investments

March 31, 2020
¥ 28,119March 31, 2019
¥ 28,519

2019¥ 1,932(1,222)¥ 710

Thousands of
U.S. dollars
2020$ 13,562
1,911$ 15,474

March 31, 2019
¥ 44

Thousands of
U.S. dollars
March 31, 2020
$ 2,159

Millions of yen
Net income
Other comprehensive income
Total comprehensive income

Thousands of
U.S. dollars
March 31, 2020
$ 258,375

2020¥ 1,476208¥ 1,684(2) Investments in joint ventures
Millions of yen
Carrying amount of investments

March 31, 2020
¥ 235

Millions of yen
Net income
Total comprehensive income

2020
¥ 191
¥ 191

35

2019
¥ 131
¥ 131

Thousands of
U.S. dollars
2020$ 1,755$ 1,755

Property, Plant and Equipment
The following tables show the reconciliation of the carrying amount, acquisition costs, accumulated depreciation, and accumulated impairment
losses of property, plant and equipment as of and for the years ended March 31, 2020 and 2019:
Millions of yen
Tools,
Machineryfurniture
Right-ofand vehicles
anduse assets
fixtures

Buildings
andstructures

Land

Construction inprogress

Total

Carrying amountAt April 1, 2018

¥ 55,616¥77,834¥ 155,947¥ 17,213¥ 184¥ 48,524¥ 355,318

Additions

753

664

2,604

1,170

4

88,71893,913

Disposals
Depreciation

(190)
‒

(225)
(7,657)(2,927)(30,030)(971)(8,032)

(2)
(423)

(162)
‒

(4,477)(46,142)

Impairment losses
Effects of exchange rate changes
Transfer from construction inprogress
Change in the scope of consolidation

(44)
25

(802)
844

(7,367)
1,812

(411)
181

‒
(28)

(1,045)
197(9,669)3,031

97

29,61853,974

8,284‒(91,973)

‒

4,584
(41)

1,747
772

1,314
(206)

142
(45)

28
1,895

31
(35)

7,846
2,340

¥ 60,800¥ 102,795¥ 175,121¥17,531¥ 1,658¥ 44,255¥ 402,160

Other
At March 31, 2019
Cumulative effect of accountingchangeRestated balance

‒

‒

‒

‒

17,908‒17,90860,800102,795

175,121

17,531

19,56644,255420,068

Additions

7

173

1,637

1,125

2,486

46,263

51,691

Disposals
Depreciation

(270)
‒

(232)
(7,774)(1,583)(31,686)(454)(7,703)(1,301)(3,405)(233)‒(4,073)(50,568)

Impairment losses
Effects of exchange rate changes
Transfer from construction inprogress
Other

(555)
(293)

(6,784)(1,198)(20,017)(2,472)(1,506)
(275)

(363)
(545)

(1,963)(535)(31,188)(5,318)21

10,27549,7776,851

54(66,978)

‒

81

57

(529)

9

227

638

483

¥ 59,791¥ 97,312¥ 170,248¥ 15,578¥ 16,719¥ 21,447¥ 381,095

At March 31, 2020

Thousands of U.S. dollars
Tools,
Machineryfurniture
Right-ofand vehicles
anduse assets
fixtures

Land

Buildings
andstructures$ 558,669$ 944,547$ 1,609,124$ 161,086‒
558,669‒
944,547‒
1,609,124

Additions
Disposals

64(2,481)

1,590(2,132)

Depreciation
Impairment losses‒(5,100)Effects of exchange rate changes
Transfer from construction inprogress
Other

Constructionin progress

Total$ 15,235$ 406,643$ 3,695,305‒
161,086

164,550
179,785‒406,643

164,550
3,859,855

15,042(14,546)

10,337(4,172)

22,843(11,954)425,094(2,141)

474,970(37,425)(71,433)(62,336)(291,151)(183,929)(70,780)(13,838)(31,287)(3,335)‒(18,037)(464,651)(286,575)(2,692)(11,008)(22,714)(2,527)(5,008)(4,916)(48,865)

193

94,413457,383

62,951

496(615,437)

‒

744

524

(4,861)

83

2,086

5,862

4,438

Carrying amountAt April 1, 2019
Cumulative effect of accountingchangeRestated balance

At March 31, 2020
$ 549,398$ 894,165 $ 1,564,348$ 143,141$ 153,625$ 197,069 $ 3,501,746
Notes: 1. Property, plant and equipment under construction are presented as construction in progress.
2. Right-of-use assets as of March 31, 2019, represent finance lease assets, which were included in “Other property, plant and equipment.”36

Depreciation charges recognized for the years ended March 31, 2020 and 2019, are included in “Cost of sales” as well as “Selling, general andadministrative expenses” of the consolidated statements of income. Impairment losses are included in “Other expenses” of the consolidated
statements of income.
Millions of yen
Tools,
Right-offurniture anduse assets
fixtures

Land

Buildings
andstructures

Machineryand vehicles

At April 1, 2018

¥ 55,865¥ 260,589¥ 665,225¥ 98,764¥ 941¥ 50,687¥ 1,132,071

At March 31, 2019

61,010292,749694,793

97,447

4,875

44,486

1,195,360

At March 31, 2020

60,556299,145

725,794

99,22934,462

23,507

1,242,693

Accumulated depreciation andaccumulated impairment
lossesAt April 1, 2018

Constructionin progress

Total

Acquisition cost

¥ 249

¥ 182,755¥ 509,278¥ 81,551¥ 757¥ 2,163¥ 776,753

At March 31, 2019210

189,954519,672

79,9163,217

231

793,200

At March 31, 2020

765

201,833

555,546

83,651

17,743

2,060

861,598

Land

Buildings
andstructures

Thousands of U.S. dollars
Tools,
Machinery
Right-offurniture andand vehicles
use assets
fixtures$ 556,427$ 2,748,737$ 6,669,062

Constructionin progress

Total

Acquisition cost
At March 31, 2020

$ 911,780$ 316,659$ 215,997$ 11,418,662

Accumulated depreciation andaccumulated impairment
lossesAt March 31, 2020

$ 7,029 $ 1,854,571$ 5,104,714$ 768,639$ 163,034$ 18,929$ 7,916,916
Note. Right-of-use assets as of March 31, 2019, represent finance lease assets and are included in “Other property, plant and equipment.”
Items of property, plant and equipment are grouped by the smallest CGU that generates largely independent cash inflows.
The Group recognized impairment losses of ¥31,188 million (U.S. 285,932 thousand) and ¥9,669 million on property, plant and equipment for
the years ended March 31, 2020 and 2019, respectively.
Impairment losses recognized for the year ended March 31, 2020, mainly represent ¥42,581 million (U.S. $391,262 thousand) of impairment
losses related to a decline in profitability in the magnetic materials and applications business due to changes in the operating environment of therare earth magnet business under the Magnetic Materials and Applications / Power Electronics Materials segment. The impairment loss consistsof ¥22,479 million (U.S. $206,552 thousand) recognized on property, plant and equipment (mainly machinery) and ¥20,102 million(U.S. $184,710 thousand) on goodwill and intangible assets. The carrying amounts of such assets were reduced to their recoverable amounts. The
recoverable amount of an asset is determined based on the value in use, which is determined as ¥106,313 million (U.S. $976,872 thousand) as of
September 30, 2019, when the impairment loss was recognized. The value in use is calculated by discounting future cash flows to the present
value using a pretax weighted average capital cost of 9.6%.
Impairment losses were recognized for the year ended March 31, 2019, to reduce the carrying amounts of business-use assets (mainly machinery),due mainly to a decline in profitability in the heat-resistant casting components of the Functional Components and Equipment segment, to theirrecoverable amounts for the amount of ¥6,975 million. The recoverable amount of an asset is determined based on its fair value less costs ofdisposal, and the assets above were evaluated as ¥7,394 million as of December 31, 2019, when the impairment loss was recognized. The fairvalue of an asset is determined mainly under the market approach. The fair value is measured based on real estate appraisals. The fair value
hierarchy for such inputs is classified as Level 3.

37

Goodwill and Intangible Assets
The following tables show the reconciliation of the carrying amounts, acquisition costs, and the accumulated amortization and accumulated
impairment losses of goodwill and intangible assets as of and for the years ended March 31, 2020 and 2019:

Goodwill

Software forinternal use

Millions of yen
Software for
sale

Other
intangible assets¥ 2,974¥ 283¥ 29,999

Total

Carrying amountAt April 1, 2018

¥ 108,640

Purchases
Amortization

‒

145

41

1,290

1,476

‒

(1,351)(173)(3,045)(4,569)Impairment losses

‒
‒

(4)
(7)

‒
‒

(7)
(6)

(11)
(13)

Effects of exchange rate changes
Transfer from software in progress

3,509
‒

(9)
1,123

12
‒

1,212
(1,123)

4,724‒

Change in the scope of consolidation
Other

‒

209

‒

‒

209

Disposals

At March 31, 2019

‒

(17)

2

(139)

(154)

¥ 112,149¥ 3,063¥ 165¥ 28,181¥ 143,558‒‒

89(1,371)

6
(40)

1,233
(3,013)

1,328(4,424)(20,033)
‒

(134)
(34)

‒
‒

7
(22)

(20,160)(56)(1,582)
‒

(15)
938

(5)
‒

(508)
(938)

(2,110)
‒

‒

10

30

2

38

¥ 90,534¥ 2,546¥ 156¥ 24,938¥ 118,174

Purchases
Amortization
Impairment losses
Disposals
Effects of exchange rate changes
Transfer from software in progress
Other
At March 31, 2020

¥ 141,896

Thousands of U.S. dollars
Software forSoftware for
Otherinternal use
sale
intangible assets

Goodwill

Total

Carrying amountAt April 1, 2019

$ 1,030,497$ 28,145$ 1,516$ 258,945$ 1,319,103

Purchases
Amortization

‒
‒

818
(12,598)55(368)

11,330(27,685)

12,203(40,651)

Impairment losses
Disposals(184,076)‒(1,231)
(312)

‒
‒

64
(202)

(185,243)(515)

Effects of exchange rate changes
Transfer from software in progress(14,536)
‒

(138)
8,619

(46)
‒

(4,668)(8,619)(19,388)
‒

‒

92

276

18

349

$ 831,885$ 23,394$ 1,433$ 229,146$ 1,085,859

Other
At March 31, 2020

38

Amortization recognized for the years ended March 31, 2020 and 2019, was included in “Cost of sales” as well as “Selling, general andadministrative expenses” of the consolidated statements of income. Impairment losses are included in “Other expenses” in the consolidated
statements of income.

Goodwill

Software forinternal use

Millions of yen
Software for
sale

Other intangible
assets¥ 15,136¥ 1,489¥ 42,282¥ 168,042

Total

Acquisition cost
At April 1, 2018

¥ 109,135

At March 31, 2019112,644

16,116

1,591

43,807

174,158

At March 31, 2020
Accumulated amortization andaccumulated impairment losses
At April 1, 2018
At March 31, 2019

111,062

16,026

1,590

43,299171,977¥ 495
495¥ 12,162
13,053¥ 1,206
1,426¥ 12,283
15,626¥ 26,146
30,600At March 31, 2020

20,52813,4801,434

18,36153,803Thousands of U.S. dollars
Software for
Other intangible
saleassetsGoodwill

Software forinternal use$ 1,020,509$ 147,257$ 14,610$ 397,859$ 1,580,235$ 188,624$ 123,863$ 13,177$ 168,713$ 494,377

Total

Acquisition cost
At March 31, 2020
Accumulated amortization andaccumulated impairment losses
At March 31, 2020

For the years ended March 31, 2020 and 2019, there were no material intangible assets with indefinite useful lives.
The Group expenditures on R&D recognized as expenses for the years ended March 31, 2020 and 2019, are ¥15,918 million(U.S. $146,265 thousand) and ¥18,604 million, respectively. R&D expenses are included in “Cost of sales” and “Selling, general andadministrative expenses” in the consolidated statements of income.
The Group performs impairment testing for goodwill acquired through business combinations by comparing the carrying amount and therecoverable amount per CGU or group of CGUs.
Significant goodwill recognized in the consolidated statement of financial position is primarily goodwill related to the Functional Components
and Equipment segment arising from the acquisition of Waupaca Foundry, Inc. in 2014 (¥67,125 million ( U.S. $616,788 thousand) and¥67,125 million as of March 31, 2020 and 2019, respectively) and that related to the magnetic materials and applications business in connection
with the acquisition of additional shares in NEOMAX Co., Ltd. through a tender offer in 2006 (¥15,761 million (U.S. $144,822 thousand) and¥35,781 million as of March 31, 2020 and 2019, respectively).
The Group measures the recoverable amount for each CGU or group of CGUs by the value in use. In assessing the value in use, estimated future
cash flows based on management-approved business plans are discounted to their present values using the discount rate based on the weightedaverage cost of capital. The business plan to be used is based on external information and reflects historical trends, generally with a maximum
period of five years. Since the Group is engaged in a wide range of business activities from development, production, and sale of diverse products
to providing various services, appropriate external information for each business activity is used for evaluating the value in use. In addition, theestimated future cash flows subsequent to the business plan are calculated using the estimated growth rate not exceeding the long-term average
growth rate of the market to which the CGU belongs.
The discount rate used for impairment testing of the significant goodwill is estimated based on prior years’ weighted-average cost of capital(approximately 9.0% to 11.0%). For future cash flows, a permanent growth rate (maximum 2.0%) is applied. Such rate is determined not to exceed
the growth rate of countries and regions making estimates, including budgets, and engaged in business activities. Furthermore, even when primary
assumptions used for the impairment test change within a reasonable and foreseeable range, Group management considers any significant
impairment losses unlikely to occur.
Impairment losses recognized for goodwill and intangible assets for the year ended March 31, 2020, mainly represent ¥20,102 million(U.S. $184,710 thousand) of impairment losses related to a decline in profitability in the magnetic materials and applications business due tochanges in the operating environment of the rare earth magnet business under the Magnetic Materials and Applications / Power Electronics
Materials segment. See further discussion about the impairment loss at Note 9. “Property, Plant and Equipment.”

39

Leases(1) Lessee
The Company and certain subsidiaries use leased facilities and equipment, including buildings, machinery, and vehicles. The Group has adopted
IFRS 16 Leases from the beginning of the fiscal year ended March 31, 2020.

The following table shows the carrying amount of right-of-use assets by class of underlying assets as of March 31, 2020.

March 31, 2020

March 31, 2020

Buildings andstructures¥ 6,342Millions of yen
Class of underlying assets
Machinery andTools, furniture
vehiclesand fixtures¥ 1,405¥ 26

Buildings andstructures$ 58,274

Thousands of U.S. dollars
Class of underlying assets
Machinery andTools, furniture
vehiclesand fixtures$ 12,910
$ 239

Land
¥ 8,946Land$ 82,202

Total¥ 16,719

Total$ 153,625

Expenses related to leases, and gains and losses with cash outflows for the fiscal year ended March 31, 2020 are as below.

Millions of yen
2020
Depreciation charges for right-of-use assets:
Buildings and structures
Machinery and vehicles
Tools, furniture and fixtures
Land
Total
Interest expenses on lease liabilities
Expenses on short-term leases
Income from subleasing right-of-use assets
Total expenses related to leases
Total cash outflows for leases¥ 1,971495
18921¥ 3,405
266
118
(24)
3,765
¥ 3,280

Thousands of U.S.
dollars
2020$ 18,111

4,548
165
8,463
$ 31,287
2,444
1,084
(221)
34,595$ 30,139

Maturity analysis of lease liabilities as of March 31, 2020, is disclosed in Note 24. “Financial Instruments and Other Related Information.”
Additions to right-of-use assets for the year ended March 31, 2020, are disclosed in Note 9. “Property, Plant and Equipment.”

Many of the Group’s real estate leases contain options to extend the lease in the contractual terms in response to the risk of price fluctuations. The
Group determines whether it is reasonably certain to exercise an option to extend the lease by comprehensively taking into account various factors,
such as specifications of the leased property and business strategies.

(2) Lessor
Disclosure is omitted due to its immateriality.

40

Deferred Taxes and Income Taxes
The following table shows major components of income taxes:
Thousands of
U.S. dollars
2020

Millions of yen

2020
2019
Income taxes
Current tax expense¥ 6,822¥ 7,157$ 62,685
Deferred tax expense
Accruals and reversals of temporary differences(14,482)
3,276(133,070)
Changes in realizability of deferred tax assets
6,584
1,363
60,498Total¥ (1,076)¥ 11,796$ (9,887)
The Company is subject to a national corporate tax, inhabitant tax, and deductible business tax, and those taxes resulted in combined statutory
income tax rates of 30.5% and 30.4% for the fiscal years ended March 31, 2020 and 2019, respectively.
The Company has elected to file a consolidated income tax return.
The reconciliation between the combined statutory income tax rate and the effective income tax rate as a percentage of income before income
taxes is as follows:
Combined statutory income tax rate
Share of profits of investments accounted for using the equity method
Expenses not deductible for tax purposes
Gain on bargain purchase
Impairment on goodwill
Special tax credit for corporate taxes
Change in realizability of deferred tax assets
Difference between the statutory income tax rate of Japan and tax rates used inoversea subsidiaries
Other, net
Effective income tax rate

2020
30.5%
1.3
(0.3)
‒
(15.0)
2.5(16.2)
1.3

2019
30.4%
(1.5)
0.3
(4.2)
‒
(0.1)
3.2
(2.1)

(1.5)
2.6%

1.4
27.4%

Changes in significant portion of the deferred tax assets and liabilities are as follows:

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reduction entry
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Changes in thescope ofconsolidation

March 31, 2020

¥ 2,400‒‒‒46¥ 2,446

¥‒
‒
‒
‒
111
¥ 111

¥ 19,098
3,090
9,481
281
17,053¥ 49,003

60
79
(168)
614

‒
253
‒
‒

‒
‒
‒
‒

(4,229)(1,856)(7,396)(5,533)987¥ 1,572¥ 7,898‒¥ 253¥ 2,699

‒
¥‒
¥ 111

(14,593)¥ (33,607)¥ 15,396

April 1, 2019

Recognized in
profit or loss

¥ 17,973
2,361
7,200
393
12,193¥ 40,120¥ (1,275)
729
2,281
(112)
4,703
¥ 6,326(4,289)(2,188)(7,228)(6,147)(15,580)¥ (35,432)¥ 4,688

41

Millions of yen
Recognized inothercomprehensive
incomeDeferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reduction entry
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Deferred tax assets
Retirement and severance benefits
Accrued expenses
Depreciation and amortization
Net operating loss carry-forwards
Other
Total deferred tax assets
Deferred tax liabilities
Tax purpose reduction entry
Investments in securities
Depreciation and amortization
Intangible assets acquired in businesscombinations
Other
Total deferred tax liabilities
Net deferred tax assets

Changes in thescope ofconsolidation

March 31, 2019

¥ 625
‒
‒
‒
23
¥ 648

¥ ‒
94
‒
304
(2,431)¥ (2,033)¥ 17,973
2,361
7,200
393
12,193¥ 40,120

76
(127)
(885)
206

‒
144
‒
‒

‒
‒
593
‒

(4,289)(2,188)(7,228)(6,147)(1,103)¥ (1,833)¥ (4,639)

‒
¥ 144
¥ 792

‒
¥ 593
¥ (1,440)(15,580)¥ (35,432)¥4,688

April 1, 2018

Recognized in
profit or loss

¥ 18,113
2,455
5,499
2
18,242¥ 44,311¥ (765)
(188)
1,701
87
(3,641)¥ (2,806)(4,365)(2,205)(6,936)(6,353)(14,477)¥ (34,336)¥ 9,975

April 1, 2019

Millions of yen
Recognized inothercomprehensive
incomeThousands of U.S. dollars
Recognized in
Changes in the
Recognized inotherscope ofprofit or loss
comprehensive
consolidation
incomeMarch 31, 2020

$ 165,147
21,694
66,1583,611
112,037$ 368,648$ (11,716)
6,699
20,959(1,029)43,214$ 58,127$ 22,053‒‒‒
423$ 22,475

‒
‒
‒
‒
1,020
$ 1,020$ 175,485
28,393
87,1182,582
156,694$ 450,271(39,410)(20,105)(66,416)551
726(1,544)

‒
2,325
‒

‒
‒
‒

(38,859)(17,054)(67,959)(56,483)

5,642

‒

‒

(50,841)(143,159)$ (325,572)$ 43,076

9,069$ 14,445$ 72,572‒$ 2,325$ 24,800‒$‒$ 1,020(308,803)$ (308,803)$ 141,468

Deferred tax liabilities have not been recognized for excess amounts over the tax bases of investments in subsidiaries and associates that areconsidered to be reinvested indefinitely, because such differences will not reverse in the foreseeable future.
Total temporary differences related to undistributed earnings of subsidiaries for which deferred tax liabilities have not been recognized as ofMarch 31, 2020 and 2019, were ¥157,765 million (U.S. 1,449,646 thousand) and ¥162,509 million, respectively.
In assessing the realizability of deferred tax assets, the Group considers whether it is probable that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in specific tax
jurisdictions during periods in which these deductible temporary differences become deductible or unused tax credits can be used. Althoughrealization is not assured, the Group considers the scheduled reversals of deferred tax liabilities and projected future taxable income in making
the assessment. Based on these factors, the Group believes that it is probable that it will realize the recognized deferred tax assets as of March 31,
2020.

42

Deductible temporary differences, net operating loss carry-forwards, and unused tax credits carry-forwards for which no deferred tax asset isrecognized are as follows:
Millions of yen
Deductible temporary differences
Net operating loss carry-forwards
Unused tax credits carry-forwards
Total

March 31, 2020
¥ 56,342
243
839¥ 57,424

March 31, 2019
¥ 33,699
653
1,036¥ 35,388

Thousands of
U.S. dollars
March 31, 2020
$ 517,707
2,233
7,709
$ 527,649

Carry-forwards related to net operating losses and unused tax credits on which no deferred tax asset is recognized will expire as follows:
Millions of yen
March 31, 2020
Net operating loss carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total net operating loss carry-forwards
Unused tax credits carry-forwards
Within 5 years
After 5 years but not more than 10 years
Total unused tax credits carry-forwards

March 31, 2019

Thousands of
U.S. dollars
March 31, 2020

¥ 243
‒
¥ 243

¥ 450
203
¥ 653

$ 2,233‒$ 2,233

¥ 839
‒
¥ 839

¥ 1,036‒¥ 1,036$ 7,709‒$ 7,709

March 31, 2020

March 31, 2019

Thousands of
U.S. dollars
March 31, 2020

¥ 111,130¥ 135,553

Trade Payables
Trade payables as of March 31, 2020 and 2019, are summarized as follows:
Millions of yen

Accounts payable
Notes payable and electronically recorded obligations
Total

15,51019,698$ 1,021,134
142,516¥ 126,640¥ 155,251$ 1,163,650

Provisions
Details and the reconciliation of provisions included in other current liabilities and other non-current liabilities as of and for the year ended
March 31, 2020, are as follows:

Balance at April 1, 2019

Millions of yen
Asset retirement
Provision for
obligations
environmental measures
¥ 792
¥ 694

Additions

181

587

Utilized
Reversals

(10)
(23)

(133)
(201)

Effects of exchange rate changes
Balance at March 31, 2020
Current
Non-current

43

(17)

‒

¥ 923

¥ 947

‒

‒

¥ 923

¥ 947

Balance at April 1, 2019

Thousands of U.S. dollars
Asset retirement
Provision for
obligations
environmental measures$ 7,277$ 6,377

AdditionsUtilized

1,663
(92)

5,394
(1,222)

Reversals
Effects of exchange rate changes

(211)
(156)

(1,847)‒$ 8,481$ 8,702‒‒$ 8,481$ 8,702

Balance at March 31, 2020
Current
Non-current

Asset retirement obligations:
The Group recognizes asset retirement obligations principally based on estimated future expenditures using historical trends when the Group
has a legal obligation associated with the retirement of property, plant and equipment used in normal operation, such as obligations to restore
the site in relation to lease agreements for plant facilities and premises.
Provision for environmental measures:
A provision for environmental measures is provided for disposal costs anticipated to be incurred with respect to the Law Concerning Special
Measures against PCB Waste.

Employee Benefits(1)

Post-Employment Benefits
The Company, its subsidiaries located in Japan, and certain overseas subsidiaries have contributory defined benefit pension plans and funded
and unfunded lump-sum payment plans to provide retirement and severance benefits to employees. An employee retirement benefit trust isestablished for the pension plans and the lump-sum payment plans.
The Company and some of its subsidiaries have contract-type pension plans based on the pension rules. They also have established a postemployment benefits committee as an advisory body for significant matters related to the pension plans. The committee holds meetings toreport various matters, such as asset management performance, plan status, and accounting treatments, and to discuss agendas, such as plan
revisions and investment policy changes, as necessary.
Under the unfunded lump-sum payment plans, employees are entitled to receive lump-sum payments based on their earnings and the lengthof service at retirement.
In addition, the Company and its certain subsidiaries have defined contribution pension plans.
Reconciliations of the beginning and ending balances of the benefit obligation and the fair value of the plan assets of the defined benefit
pension plans are as follows:
Millions of yen
2020¥ 187,621
6,710
1,882
5,054
‒
(13,667)(878)¥ 186,722

Defined benefit obligations at the beginning of the year
Service costs
Interest costs
Actuarial gains and losses
Past service cost
Benefits paid
Effects of exchange rate changes and others
Defined benefit obligation at the end of the year

44

2019
¥ 189,597
6,771
1,987
133
32
(11,114)215¥ 187,621

Thousands of
U.S. dollars
2020$ 1,723,982
61,656
17,293
46,439‒(125,581)(8,068)$ 1,715,722

Thousands of
U.S. dollars
2020
2020
2019
¥131,564¥ 133,967$ 1,208,895
Fair value of plan assets at the beginning of the year
957
1,155
8,794
Interest income(4,389)521(40,329)
Return on plan assets (excluding interest income)Contributions to defined benefit pension plans (Note)
3,272
3,980
30,065
Benefits paid
(10,576)(8,419)(97,179)
Effects of exchange rate changes and others
(346)
360
(3,179)Fair value of plan assets at the end of the year
¥120,482¥ 131,564$ 1,107,066
Note: As of March 31, 2020, the estimated contributions to the defined benefit pension plans for the year ending March 31, 2021, were
¥3,602 million (U.S. $33,097 thousand).
Millions of yen

The amounts recognized in relation to defined benefit plans in the consolidated statement of financial position are as follows:

March 31, 2020
¥ (180,201)
120,482(59,719)(6,521)March 31, 2019
¥ (181,374)
131,564(49,810)(6,247)

Thousands of
U.S. dollars
March 31, 2020
$ (1,655,803)
1,107,066(548,737)(59,919)¥ (66,240)¥ (56,057)$ (608,656)

2019
¥ 330
(134)
(63)

Thousands of
U.S. dollars
2020$ 30,221
15,768450

Millions of yen
Present value of defined benefit obligations (funded)
Fair value of plan assets
Funded status
Present value of defined benefit obligations (unfunded)
Net asset (liability) recognized in the consolidated
statement of financial position
Components of actuarial gains and losses are as follows:
Millions of yen
2020¥ 3,289
1,716
49

Arising from changes in financial assumptions
Arising from changes in demographic assumptions
Other

The Company and all of its subsidiaries use their year-end as a measurement date. The primary assumptions used for actuarial valuation are
as follows:
March 31, 2020
1.1%

Discount rate

March 31, 2019
1.1%

If, as of March 31, 2020, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥8,759 million(U.S. $80,483 thousand), and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥9,195 million(U.S. $84,490 thousand). If, as of March 31, 2019, the discount rate rose by 0.5%, the defined benefit obligations would decrease by¥14,065 million, and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥3,867 million.
Although sensitivity analysis is based on the assumption that all other variables are constant, in reality, changes in other assumptions may
affect the sensitivity analysis.
The weighted-average duration (weighted-average maturity) of defined benefit obligations is as follows:
March 31, 2020
10.7 years

Duration

March 31, 201910.4 years

The objective of the investment policy of the plan is to ensure stable returns from investments over the long term, which allows the pension
funds to meet their future benefit payments, and to maintain the pension funds in a sound condition.
In order to achieve the above objective, the plan establishes a target rate of return, taking into consideration the participants’ demographics,
funded status, the Company’s and certain subsidiaries’ capacities to absorb risks, and the current economic environment. To meet the target
rate of return, the plan also employs strategic target asset allocation based on the expected rate of return by asset class, the standard deviationof the rate of return, and the correlation coefficient among assets.
When markets fluctuate in excess of certain levels, the asset allocation of the plan assets is rebalanced to the strategic target asset allocation.
The Company and certain subsidiaries periodically review actual returns on the plan assets, economic trends, and their capacities to absorb
risks and realign the strategic target asset allocation, if necessary.

45

The following tables show the fair value of the plan assets as of March 31, 2020 and 2019:

StocksGovernment and municipal debt securities
Corporate and other debt securities
Hedge funds
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

StocksGovernment and municipal debt securities
Corporate and other debt securities
Hedge funds
Securitized products
Cash and cash equivalents
Life insurance company general accounts
Commingled funds
Other
Total

With a quoted market
price in an active market¥ 6,696
1,033‒‒‒
10,001‒‒85¥ 17,815

Millions of yen
March 31, 2020
Without a quoted market
price in an active market
¥ 247
185
970
1,131
1,881
‒
19,54877,979726¥ 102,667

With a quoted market
price in an active market¥ 9,672
931‒‒‒
11,683‒‒81¥ 22,367

Millions of yen
March 31, 2019
Without a quoted market
price in an active market
¥ 257
190
1,029
899
2,162
‒
19,15584,590915¥ 109,197

Total¥ 6,943
1,218
970
1,131
1,881
10,001
19,54877,979811¥ 120,482

Total¥ 9,929
1,121
1,029
899
2,162
11,683
19,15584,590996¥ 131,564

Thousands of U.S. dollars
March 31, 2020
With a quoted market
Without a quoted market
Total
price in an active market
price in an active market
Stocks$ 61,527$ 2,270$ 63,797
Government and municipal debt securities
9,492
1,700
11,192
Corporate and other debt securities
‒
8,913
8,913
Hedge funds‒
10,392
10,392
Securitized products‒
17,284
17,284
Cash and cash equivalents
91,896‒91,896
Life insurance company general accounts‒
179,620
179,620
Commingled funds‒
716,521716,521
Other
781
6,671
7,452
$ 163,696$ 943,370$ 1,107,066
Total
Commingled funds represent pooled institutional investments. Approximately 30% and 33% of commingled funds were invested in listed
stocks as of March 31, 2020 and 2019, respectively. Approximately 47% and 45% were invested in government and municipal debt securities
as of March 31, 2020 and 2019, respectively. Approximately 18% and 17% were invested in corporate and other debt securities as ofMarch 31, 2020 and 2019, respectively. Approximately 5% was invested in other assets as of March 31, 2020 and 2019.
Expenses recognized in relation to the Company’s and certain subsidiaries’ contributions to the defined contribution plans amounted to¥3,155 million (U.S. $28,990 thousand) and ¥3,025 million for the years ended March 31, 2020 and 2019, respectively.
(2)

Employee Benefit Expense
The aggregated amounts of employee benefit expenses recognized in the consolidated statement of income for the years ended
March 31, 2020 and 2019, were ¥137,507 million (U.S. $1,263,503 thousand) and ¥144,014 million, respectively.

46

Equity(1)

Common Stock
March 31, 2020
Authorized issuance (Number of shares)

Balance as of April 1, 2018
Changes during the year
Balance as of March 31, 2019
Changes during the year
Balance as of March 31, 2020

500,000,000

March 31, 2019
500,000,000

Issued shares(Number of shares)
428,904,352‒
428,904,352‒
428,904,352

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. Changes in treasury stock
for the years ended March 31, 2020 and 2019, are as follows:

Balance as of April 1, 2018
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2019
Acquisition of treasury stock
Sales of treasury stock
Balance as of March 31, 2020

Treasury shares(Number of shares)
1,332,135
2,712
(406)
1,334,441
3,254
(112)
1,337,583

Treasury stock held by the Company’s associates was 71,885 shares as of March 31, 2020 and 2019.
(2)

Surplus(a) Capital surplus
The Companies Act of Japan mandates that at least half of paid-in capital be appropriated as common stock and the rest be appropriatedas legal reserves as part of capital surplus.
(b) Retained earnings
The Companies Act of Japan provides that an amount equal to 10% of appropriated retained earnings to be paid as dividends be reserved
as legal reserve or retained earnings reserve to the extent that the total legal reserve and retained earnings reserve equals 25% of thenominal value of common stock. Retained earnings reserve may be made available for dividend payments upon a shareholders’ meeting
resolution.

47

Accumulated Other Comprehensive Income and Other Comprehensive Income
Accumulated other comprehensive income, net of related tax effects, as presented in the consolidated statement of changes in equity is as follows:
Millions of yen

Thousands of
U.S. dollars
2020

2020

2019

Balance at the beginning of the year
Net other comprehensive income¥ 7,129¥ 1,4115,718$ 65,506(9,409)Balance at the end of the year

¥ (2,280)¥ 7,129$ (20,950)¥ 8,627(7,068)¥7,615

Net other comprehensive income

1,012$ 79,270(64,945)

Balance at the end of the year

¥ 1,559¥ 8,627$ 14,325¥ 6,184¥ 7,836$ 56,823

(16)
(354)

(163)
(1,489)(147)(3,253)¥ 5,814¥ 6,184$ 53,423¥ (15)(109)¥34

Net other comprehensive income(49)$ (138)(1,002)

Balance at the end of the year

¥ (124)¥ (15)$ (1,139)¥ 21,925¥ 16,896
(163)
5,192
¥ 21,925$ 201,461

Foreign currency translation adjustments on foreign operations:Remeasurements of defined benefit pension plans:
Balance at the beginning of the year

Net change in fair value of financial assets measured at FVTOCI:
Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year
Net change in fair value of cash flow hedges:
Balance at the beginning of the year

(86,456)

Total accumulated other comprehensive income:Balance at the beginning of the year
Transfer to retained earnings
Net other comprehensive income
Balance at the end of the year

(16)
(16,940)¥ 4,969

48(147)(155,656)$ 45,658

The following is a summary of reclassification adjustments, by line item, made to other comprehensive income, including non-controlling interests
and related tax effects arising during the years ended March 31, 2020 and 2019:
Millions of yen
2020
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

49

¥ (9,749)(9,469)¥‒2,400¥ (9,749)(7,069)

(817)

244

(573)

(178)

54

(124)

297

(89)

208

¥ (19,916)¥ 2,609¥ (17,307)

¥26
23
¥49

¥‒
(8)
¥ (8)

¥ 26
15
¥ 41

¥ (9,723)(9,469)¥‒2,400¥ (9,723)(7,069)

(817)

244

(573)

(155)

46

(109)

297

(89)

208

¥ (19,867)¥ 2,601¥ (17,266)¥ (325)(1)‒‒¥ (326)¥ (9,398)(7,068)
(573)
(109)
208
¥ (16,940)

Millions of yen
2019
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

50

¥ 6,151
388

¥‒
625

¥ 6,151
1,013

(517)

154

(363)

(23)

8

(15)

(1,548)326(1,222)¥ 4,451¥ 1,113¥ 5,564¥ (351)(49)¥ (400)

¥ ‒
15
¥ 15

¥ (351)(34)¥ (385)¥ 5,800
388

¥ ‒
625

¥ 5,800
1,013

(517)

154

(363)

(72)

23

(49)

(1,548)326(1,222)¥ 4,051¥ 1,128¥ 5,179¥ (13)‒‒‒¥ (13)¥ 5,813
1,013
(363)
(49)
(1,222)¥ 5,192

Thousands of U.S. dollars
2020
Before-tax amount Tax benefit (expense) Net-of-tax amount
Other comprehensive income arising during the year:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Reclassification adjustments between items in other comprehensive
income and net income:
Foreign currency translation adjustments on foreign operations
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total
Other comprehensive income, net of reclassification adjustments
attributable to non-controlling interests:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Total
Other comprehensive income, net of reclassification adjustments
attributable to shareholders of the parent company:
Foreign currency translation adjustments on foreign operations
Remeasurements of defined benefit plans
Net gains or losses from financial assets measured at fair value
through other comprehensive income
Net change in fair value of cash flow hedges
Share of other comprehensive income of investments accounted forusing the equity method
Total

51

$ (89,580)(87,007)‒
22,053$ (89,580)(64,955)(7,507)

2,242(5,265)(1,636)496(1,139)

2,729

(818)

1,911

$ (183,001)$ 23,973$ (159,028)

$ 239
211
$ 450

‒
(74)
$ (74)

$ 239
138
$ 377

$ (89,341)(87,007)‒
22,053$ (89,341)(64,955)(7,507)

2,242(5,265)(1,424)423(1,002)

2,729

(818)

1,911

$ (182,551)$ 23,900$ (158,651)$ (2,986)$ (9)‒‒$ (2,995)$ (86,355)(64,945)(5,265)(1,002)
1,911$ (155,656)

Dividends
Dividends paid for the years ended March 31, 2020 and 2019, are as follows:
Resolution adopted
Board of Directors’
meeting on
May 29, 2018
Board of Directors’
meeting on
October 25, 2018
Board of Directors’
meeting on
May 27, 2019
Board of Directors’
meeting on
October 29, 2019

Resolution adopted
Board of Directors’
meeting on
May 27, 2019
Board of Directors’
meeting on
October 29, 2019

Type ofsharesMillions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateCommonstock¥ 5,558

Retained earnings¥ 13.0March 31, 2018

May 31, 2018

Commonstock¥ 7,269

Retained earnings¥ 17.0

September 30,
2018

November 28,
2018

Commonstock¥ 7,269

Retained earnings¥ 17.0March 31, 2019

May 29, 2019

Commonstock¥5,558Retained earnings¥ 13.0

September 30,
2019

November 29,
2019Type ofsharesThousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective dateCommonstock$ 66,792

Retained earnings$ 0.16

March 31, 2019

May, 29, 2019

Commonstock$ 51,070

Retained earnings$ 0.12September 30,
2019

November 29,
2019

U.S. dollars
Amount per
share

Dividends whose record date is during the year ended March 31, 2020, but whose effective date is in the following fiscal year are as follows:
Resolution adopted

Type ofsharesBoard of Directors’
meeting on
May 27, 2020

Millions of yen

Yen

Aggregate
amountAppropriation fromAmount per
share

Record date

Effective dateCommonstock¥ 5,558

Retained earnings¥ 13.0March 31, 2020

June 30, 2020

Resolution adopted

Type ofsharesThousands of
U.S. dollars
Aggregate
amountAppropriation from

Record date

Effective date

Board of Directors’
meeting on
May 27, 2020

Commonstock$ 51,070

Retained earnings

March 31, 2020

June 30, 2020

U.S. dollars

52

Amount pershare$ 0.12

Revenues(1)

Disaggregation of revenue
The Group has four reportable segments as described in Note 4. “Segment Information,” which include the Specialty Steel Products segment,
the Functional Components and Equipment segment, the Magnetic Materials and Applications / Power Electronics Materials segment, and
the Wires, Cables, and Related Products segment. Revenues are disaggregated according to businesses based on the types of products andservices. Relationship of the disaggregated revenues and revenues of each reportable segment is as follows:
As of April 1, 2019, the Company transferred the soft magnetic materials business from the Specialty Steel Products segment to the Magnetic
Materials and Applications segment. Further, the transferred soft magnetic materials business was combined with the ceramic business, which
was part of the magnetic materials and applications business of the Magnetic Materials and Applications segment, and the combined
businesses were classified as the power electronics materials business within the Magnetic Materials and Applications segment. Also, theCompany changed the segment name from the Magnetic Materials and Applications segment to the Magnetic Materials and Applications /Power Electronics Materials segment.
Due to this change, revenues of ceramic products arising from both the soft magnetic materials business and the magnetic materials andapplications business for the fiscal year ended March 31, 2019 (April 1, 2018 to March 31, 2019), are recorded under the power electronics
materials business.
Thousands ofMillions of yen

U.S. dollars

2020

2019

2020

¥ 226,071¥ 253,262$ 2,077,286

24,572

23,642

225,783

253,83145,872319,757
47,8062,332,362
421,501

79,641

99,240731,793

37,11937,769341,073

213,329

240,123

1,960,204

Specialty Steel Products
Specialty Steel BusinessRoll Business
Functional Components and Equipment
Automotive Components Business
Piping Components Business
Magnetic Materials and Applications /Power Electronics Materials
Magnetic Materials and Applications
Business
Power Electronics Materials Business
Wires, Cables, and Related ProductsElectric Wires and Cables Business
Others and adjustments
Total

967

1,822

8,885

¥ 881,402¥ 1,023,421$ 8,098,888(2) Information regarding satisfaction of performance obligations
The Group recognizes revenue at a point in time in which control of a product is transferred to a customer because performance obligationsof all businesses described in (1) Disaggregation of revenues are satisfied mainly when the Group sells a product to a customer and thecustomer accepts the product. The payment terms are determined as generally accepted terms for regular transactions. There are no significant
transactions with special payment terms, such as extended payment terms.
(3) Information regarding contract balances
The beginning and ending balances of trade receivables and contract liabilities that arise from contracts with customers of the Group are as
follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2020
Trade receivables

April 1, 2019

¥157,732

March 31, 2020

¥ 195,306$ 1,449,343

Contract liabilities
640
534
5,881
Note that the amount of revenue recognized for the fiscal year ended March 31, 2020, included in the beginning balance of contract liabilities
as of April 1, 2019, is immaterial.

Millions of yen
March 31, 2019

April 1, 2018

Trade receivables¥ 195,306¥ 207,628

Contract liabilities

534

869

53

(4) Transaction price allocated to the remaining performance obligations
The Group adopts a practical expedient and omits disclosure regarding the remaining performance obligations because there are notransactions with expected contract durations of over one year. No material consideration from contracts with customers is excluded fromthe transaction price.
(5) Capitalized incremental costs incurred to obtain or fulfill a contract with a customer
The Group has no capitalized incremental costs incurred to obtain or fulfill a contract with a customer.

Other Income and Expenses
Other income and expenses for the years ended March 31, 2020 and 2019, are summarized as follows:
Millions of yen
Thousands of U.S. dollars
2020
2019
2020
Other income:Gain on reorganization (*)¥‒¥ 5,851$‒
Gain on sale of properties
4,900
278
45,024
Rental income from properties held
1,179
1,371
10,833
Other
2,520
3,167
23,155
Total¥ 8,599¥ 10,667$ 79,013
Other expenses:
Structural reform expenses¥ 5,460¥ 3,306$ 50,170
Loss on disposal of property, plant and equipment
2,745
3,999
25,223
Impairment loss on property, plant and equipment
49,1797,394
451,888
Other
4,724
4,953
43,407
Total¥ 62,108¥ 19,652$ 570,688* Gain on reorganization for the year ended March 31, 2019, includes ¥94 million as a result of the Group losing control of certain subsidiaries.
There was no gain or loss resulting from the remeasurement at fair value of the investment retained in the former subsidiary for the year ended
March 31, 2019.

Other Financial Income and Expenses
Other financial income and expenses for the years ended March 31, 2020 and 2019, are summarized as follows:
Millions of yen
2020
Other financial income:
Dividend income (**)
¥ 122
Exchange gain
‒
Total
¥ 122
Other financial expenses:
Exchange loss
901
Other
186
Total
¥ 1,087** Dividend income is from financial assets measured at FVTOCI.

Thousands of U.S. dollars
2019

2020

¥ 128
718
¥ 846

$ 1,121‒$ 1,121

‒
8
¥8

8,279
1,709
$ 9,988

Earnings per Share
The calculation of basic earnings or loss per share (EPS) attributable to shareholders of the parent company is summarized as follows:
Thousands of shares
Weighted-average number of common stock on which basic
EPS is calculated

2020

2019

427,568

427,570

Millions of yen
2020¥ (37,648)

Net (loss) income attributable to shareholders of the parent
company2019¥ 31,370

Yen

Thousands of
U.S. dollars
2020$ (345,934)

U.S. dollars

2020
2019
2020
$
(0.81)
Basic EPS attributable to shareholders of the parent company¥ (88.05)¥ 73.37
Note that diluted EPS attributable to shareholders of the parent company is not presented because no potentially dilutive shares of common
stock were issued or outstanding for the years ended March 31, 2020 and 2019.
54

Supplementary Explanation on the Consolidated Statement of Cash Flows
Changes in liabilities arising from financing activities during the fiscal year ended March 31, 2020 and 2019, are as follows:
Millions of yen
Short-term debt

Corporate bonds
payable¥48,844¥ 40,606¥ 110,830¥ 1,818¥ 202,098

Adjustment due to the adoption of
IFRS 16‒‒‒¥ 17,389¥ 17,389

Balance as of April 1, 2019 (adjusted)

48,84440,606

110,830

19,207

219,487

5,271

(720)

(32,182)(3,162)(30,793)

Balance as of April 1, 2019

Increase (decrease) involving cashflows

Long-term debt

Leaseliabilities

Total

Increase (decrease) not involving
cash flows:
Effects of exchange rate changes(1,067)

‒

(477)

48

(1,496)

New leases

‒

‒

‒

2,295

2,295

Others

‒

26

(318)

(1,615)(1,907)¥ 53,048¥ 39,912¥ 77,853¥ 16,773¥ 187,586

Short-term debt

Corporate bonds
payable¥ 27,203¥ 9,997¥ 123,446¥ 198¥ 160,844

18,52229,588(18,506)(428)

29,176

868

11

1,969

24

2,872

2,251

1,010

3,921

2,024

9,206

¥ 48,844¥ 40,606¥ 110,830¥ 1,818¥ 202,098

Balance as of March 31, 2020

Millions of yen

Balance as of April 1, 2018
Increase (decrease) involving cashflows

Long-term debt

Leaseliabilities

Total

Increase (decrease) not involving
cash flows:
Effects of exchange rate changes
Change in the scope of
consolidation and others
Balance as of March 31, 2019

Short-term debt
Balance as of April 1, 2019

Thousands of U.S. dollars
Corporate bonds
Long-term debt
payableLeaseliabilities

Total$ 448,810$ 373,114$ 1,018,377$ 16,705$ 1,857,006

Adjustment due to the adoption of
IFRS 16‒‒‒

159,781

159,781

Balance as of April 1, 2019 (adjusted)

448,810373,1141,018,377

176,486

2,016,788

48,433(6,616)(295,709)(29,054)(282,946)(9,804)‒(4,383)441(13,746)

‒
‒

‒
‒

‒
‒

21,08821,08821,08821,088$ 487,439$ 366,737$ 715,363$ 154,121$ 1,723,661

Increase (decrease) involving cash
flows
Increase (decrease) not involving
cash flows:
Effects of exchange rate changes
New leases
OthersBalance as of March 31, 202055

Financial Instruments and Other Related Information(1)

Financial Risk
The Group is engaged in business activities worldwide, and therefore exposed to various risks, including interest rate risk, currency exchange
rate risk, and credit risk.
(a) Market risk
The Group’s major manufacturing bases are located in Japan and Asia, but its customers are geographically diversified. As a result, theGroup is exposed to market risks from fluctuations in foreign currency exchange rates.
(i) Interest rate risk
The Group is exposed to interest rate risks related principally to long-term liabilities. In order to minimize interest rate risks, theGroup enters into interest rate swap agreements to hedge future cash flow exposures to fluctuations in interest rates. Those interest
rate swaps are receive-floating, pay-fixed interest rate swaps. For interest rate swaps, the Group receives floating interest rate
payments on long-term liabilities, including borrowings, and pays fixed interest rate payments, thereby creating fixed interest rate
long-term liabilities.
Sensitivity analysis:
Sensitivity analysis for the interest rates shown below indicates the impact of assumed changes in interest rates on income before
income taxes in the Company’s consolidated statement of income. If interest rates increased by 1% on financial instruments (floatinginterest financial assets and liabilities measured at amortized cost, financial assets and liabilities measured at FVTPL, and derivatives),
and all other variables were constant, the impact on the income before income taxes for the years ended March 31, 2020 and 2019,
would have been as follows:
Millions of yen
2020¥ (420)

Impact on income before income taxes

2019
¥2

Thousands of
U.S. dollars
2020$ (3,859)(ii) Currency exchange risk
The Group holds assets and liabilities exposed to currency exchange risks. In order to hedge currency exchange risks, the Grouputilizes forward exchange contracts.
In order to stabilize future net cash flows from transactions denominated in foreign currencies for trade receivables and payables aswell as forecast transactions, each month the Group measures the net amount of future cash flows on the settlement date for eachcurrency and hedges fluctuation risk, mainly using forward exchange contracts for a portion of these transactions. As per the Group’s
policy, these contracts generally expire in one year.
Hedge relationships between forward exchange contracts and hedged items are highly effective in offsetting effects on hedged items(assets and liabilities denominated in foreign currencies) arising from changes in foreign currency exchange rates.
Sensitivity analysis:
Sensitivity analysis for the currency exchange rates shown below indicates the impact of increases or decreases in currency exchange
rates on income before income taxes in the Company’s consolidated statement of income. If the Japanese yen had depreciated by
1% against foreign-currency denominated financial instruments held by the Group, and all other variables were constant, the impact
on the income before income taxes for the years ended March 31, 2020 and 2019, would have been as follows:
Millions of yen

Currency

Impact on income before income taxes

U.S. dollar
Euro
Other

56

2020
¥ 123
33
11

2019
¥ 162
35
23

Thousands of
U.S. dollars
2020$ 1,130
303
101

(b) Credit risk
Credit risk refers to the risk that the Group will incur a financial loss because customers or counterparties fail to discharge theircontractual obligations related to a financial instrument or contract. The Group is exposed to credit risks because of its operating activities(primarily trade receivables) and financing activities, including deposits at financial institutions, currency transactions, and otherfinancial instruments. No significant concentration of credit risk is present, as the Group has a diverse group of trading parties situatedin many different regions.
The Group sets credit limits according to the credit risks of certain instruments or customers by periodically reviewing relevant factors,
such as financial conditions and ratings.
The Group’s maximum exposure to credit risk, without considering collateral held, is represented as the carrying amount of financial
assets (excluding contingent liabilities) net of impairment losses, if any, in the consolidated statement of financial positions. The
maximum exposure to credit risk from contingent liabilities is represented as the balance of contingent liabilities disclosed in Note 27.
“Commitments and Contingencies (Other Than Liabilities Recognized as Provisions).” Balances by contractual maturity of tradereceivables and other assets that are past due at the end of the reporting period but not impaired are omitted from disclosures becausesuch balances are not material.
Reconciliation of allowance for doubtful accounts for trade receivables and other receivables, and reconciliation of the gross carrying
amount for trade receivables and other receivables corresponding to the allowance for doubtful accounts are as follows:57

Trade receivables

April 1, 2019
Changes during the year (net)
Credit impairment (a)Write off (b)Others (c)March 31, 2020

Other receivables

April 1, 2019
Changes during the year (net)
Credit impairment (a)Write off (b)Others (c)March 31, 2020

Trade receivables

March 31, 2018
(before change in the accounting
policy)Cumulative effect of change in
the accounting policy
April 1, 2018
(after change in the accounting
policy)Changes during the year (net)
Credit impairment (a)Write off (b)Others (c)March 31, 2019

Other receivables

March 31, 2018
(before change in the accounting
policy)Cumulative effect of change in
the accounting policy
April 1, 2018
(after change in the accounting
policy)Changes during the year (net)
Credit impairment (a)Write off (b)Others (c)March 31, 2019

Millions of yen
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
basis
basis
basis
basis
¥ 84
¥ 229
¥ 313
¥ 195,308
¥ 323
(32)
(81)
(113)
(37,532)
(167)
‒
‒
‒
‒
‒
(4)
(11)
(15)
(4)
(11)
‒
‒
‒
‒
‒
¥ 48
¥ 137
¥ 185
¥ 157,772¥ 145
Millions of yen
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
basis
basis
basis
basis
¥ 11
¥1
¥ 12
¥ 17,891
¥1
(11)
726
715
(5,266)
726
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
¥‒
¥ 727
¥ 727
¥ 12,625¥ 727
Millions of yen
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
basis
basis
basis
basis

Total
¥ 195,631(37,699)‒(15)‒¥ 157,917

Total¥ 17,892(4,540)‒‒‒¥ 13,352

Total

¥ 98

¥ 105

¥ 203

¥ 207,738¥ 105¥ 207,843

‒

‒

‒

‒

‒

‒

98

105

203

207,738

105

207,843

30
‒
(44)
‒
¥ 84

129
‒
(5)
‒
¥ 229

159
‒
(49)
‒
¥ 313

(12,386)‒(44)‒¥ 195,308

223
‒
(5)
‒
¥ 323

(12,163)‒(49)‒¥ 195,631

Millions of yen
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
basis
basis
basis
basis

Total

¥ 12

¥8

¥ 20

¥ 24,108¥8¥ 24,116

‒

‒

‒

‒

‒

‒

12

8

20

24,108

8

24,116

3
‒
(4)
‒
¥ 11

‒
‒
(7)
‒
¥1

3
‒
(11)
‒
¥ 12

(5,921)‒(296)‒¥ 17,891

‒
‒
(7)
‒
¥1

(5,921)‒(303)‒¥ 17,892

58

Trade receivables

April 1, 2019
Changes during the year (net)
Credit impairment (a)Write off (b)Others (c)March 31, 2020

Other receivables

Thousands of U.S. dollars
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
Total
basis
basis
basis
basis
$ 772
$ 2,104$ 2,876$ 1,794,615$ 2,968$ 1,797,583
(294)
(744)
(1,038)(344,868)(1,535)(346,403)
‒
‒
‒
‒
‒
‒
(37)
(101)
(138)
(37)
(101)
(138)
‒
‒
‒
‒
‒
‒
$ 441
$ 1,259$ 1,700$ 1,449,711$ 1,332$ 1,451,043
Thousands of U.S. dollars
Allowance for doubtful accounts
Gross carrying amountCollective
IndividualCollective
Individual
assessment
assessment
Total
assessment
assessment
basis
basis
basis
basis
$ 101
$9
$ 110
$ 164,394
$9
(101)
6,671
6,570
(48,387)
6,671
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
‒
$‒
$ 6,680$ 6,680$ 116,007$ 6,680

Total

April 1, 2019
$ 164,403
Changes during the year (net)(41,716)
Credit impairment (a)‒Write off (b)‒Others (c)‒March 31, 2020
$ 122,687
Notes:(a) Allowance for doubtful accounts for credit-impaired financial assets is reclassified from a collective assessment basis to anindividual assessment basis in order to measure the allowance for doubtful accounts on an individual basis.
(b) When the Group determines that it no longer has reasonable expectations of recovering a financial asset in its entirety or a portion
thereof, the financial asset is directly written off and derecognized.
(c) Others include mainly change in the scope of consolidation and effects of exchange rate changes.
(c) Liquidity risk
The Group’s fundamental financial policy is to maintain an appropriate level of liquidity and secure adequate funds for current and futurebusiness operations. The Group works to optimize capital utilization for its business operations through the efficient management ofworking capital. Further, the Group endeavors to improve group-wide capital management by centralizing this management function to
the Company.
The Group also raises funds from both capital markets and financial institutions. The Group finances its capital expenditures primarily
by drawing down internally generated funds and also through the issuance of debts and equity securities when necessary.
The Group also maintains commitment line agreements with a number of financial institutions to secure efficient funding as necessary.
The total unused commitment lines as of March 31, 2020, are disclosed in Note 27. “Commitments and Contingencies (Other Than
Liabilities Recognized as Provisions).”

59

The following tables present balances by maturity of non-derivative financial liabilities held by the Group as of the reporting dates:
Note that the carrying amounts of trade payables and contractual cash flows match, and their due dates are all within one year. Hence,
they are not included in the following tables.
Millions of yen
March 31, 2020

¥ 53,048¥ 53,950¥ 53,950

After one but
not more than
five years¥‒

47,50747,70147,701

‒

‒

20

20

20

‒

‒

3,726

3,806

3,806

‒

‒

30,34639,892
13,047

31,24740,545
13,299385
76‒

30,762
15,3228,855

100
25,147
4,444

Carrying
amountShort-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease liabilities
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease liabilities

Contractual
cash flows

Withinone yearOver five years¥‒

Millions of yen
March 31, 2019
Carrying
amountShort-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease liabilities
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease liabilities

Contractual
cash flows¥ 48,844¥ 50,223¥ 50,223

33,12433,34633,346

720

722

722

424

424

77,70639,886¥1,39479,65440,641
1,394

After one but
not more than
five years¥ ‒$ 487,439

Over five years
¥ ‒

‒

‒

424

‒
‒

‒
‒

760
76
‒

78,643
15,351
1,079

251
25,214315

Thousands of U.S. dollars
March 31, 2020
After one but
ContractualWithinnot more thancash flows
one yearfive years$ 495,727$ 495,727$‒

Carrying
amountShort-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate bonds
payableLease liabilities
Long-term debt
Long-term borrowings
Corporate bonds payable
Lease liabilities

Withinone yearOver five years$‒

436,525

438,307438,307

‒

‒

184

184

184

‒

‒

34,237

34,972

34,972‒‒

278,839
366,553
119,884

287,118
372,554
122,200

3,538
698
‒

282,661
140,788
81,365919
231,067
40,83460

The weighted-average interest rates of short-term debt, the current portion of long-term debt, and long-term debt are 1.76%, 0.69%, and1.54%, respectively. The maturities range from 2020 to 2026. The details of corporate bonds by issue are as follows:

March 31,2020

March 31,2019

Thousands of
U.S. dollars
March 31,2020

¥ 14,953¥ 14,941$ 137,398

Unsecured

0.14

December 6,
2023¥ 14,950¥ 14,941$ 137,370

Unsecured

0.28

December 5,2025¥ 9,959¥ 9,954$ 91,510

Unsecured

0.385

December 6,
2028

¥ 50

¥ 70

$ 459

Unsecured

0.21

September 29,
2022¥ 39,912¥ 40,606$ 366,737‒‒‒

Millions of yen
Issuer

The Company

The Company

The Company

Santoku
Corporation

Total

Issue

Issue date

The 31st
December 6,
unsecured2018
corporate bond
The 32nd
December 6,
unsecured2018
corporate bond
The 33th
December 6,
unsecured2018
corporate bondSantoku
Corporation
Septemberthe 33th29, 2017
unsecured
corporate bond‒‒

Secured/UnsecuredInterest
rate (%)

Maturity

Contingent liabilities disclosed in Note 27. “Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)” arenot included in the above table.
The following tables show the maturities of derivatives. Net settlement derivatives are also disclosed in gross amounts.

Within one year
Forward exchange contracts
Interest rate swap contracts
Put options

In
Out
In
Out
In
Out

¥‒
‒
‒
101
6,061
‒

61

Millions of yen
March 31, 2020
After one but not
more than five
Over five years
years
¥‒
¥‒
‒
‒
‒
‒
77
‒
‒
‒
‒
‒

Total
¥‒
‒
‒
178
6,061
‒

Within one year
Forward exchange contracts
Interest rate swap contracts
Put options

In
Out
In
Out
In
Out

¥6
‒
‒
119
‒
‒

Within one year
Forward exchange contracts
Interest rate swap contracts
Put options

In
Out
In
Out
In
Out

$‒
‒
‒
928
55,692‒Millions of yen
March 31, 2019
After one but not
more than five
Over five years
years
¥‒
¥‒
‒
‒
346
‒
256
‒
6,061
‒
‒
‒
Thousands of U.S. dollars
March 31, 2020
After one but not
more than five
Over five years
years
$‒
$‒
‒
‒
‒
‒
708
‒
‒
‒
‒
‒

Total
¥6
‒
346
375
6,061
‒

Total
$‒
‒
‒
1,636
55,692‒(d) Capital management
The Group’s fundamental capital management policy is to maintain an appropriate level of assets, liabilities, and capital for current andfuture business operations and to optimize capital efficiency for its business operations.
The ratio of equity attributable to shareholders of the parent company is viewed as a significant indicator for the Group’s capitalmanagement. A specific ratio is targeted under the Group’s medium-term management plan and continuously monitored.
The Group is not subject to significant capital requirements except for general rules, such as the Companies Act of Japan.
Equity attributable to shareholders of the parent company as of March 31, 2020, was ¥520,313 million (U.S. $4,780,970 thousand),
which decreased by ¥67,666 million (U.S. $621,759 thousand) from the end of the year ended March 31, 2019. As a result, the ratio of
equity attributable to shareholders of the parent company as of March 31, 2020, was 53.2%, a decrease from 53.5% as of March 31,
2019.
(e) Risk of stock price fluctuations
The Group pursues profit in its business and enhances corporate value through reinforcing relationships, particularly with customers andsuppliers, or by delivering proposals to its investees. As part of maintaining the relationship with customers, suppliers, or other parties,
the Group occasionally invests in marketable securities and therefore is exposed to the risk of stock price fluctuations. To manage thisrisk, the Group regularly monitors the fair values of these instruments, financial conditions, and other factors of investees. Further,holdings of stocks are reviewed by the relevant department as appropriate, considering relationships with business partners.
(2)

Fair Value of Investments in Securities and Other Financial Assets and Liabilities(a) Methods and assumptions of fair value measurements
The following methods and assumptions are used to measure fair values of financial assets and liabilities:
Short-term loans receivable and short-term debt:
Carrying amount of these assets and liabilities approximates their estimated fair value because of their short-term maturity.
Long-term debt:
Fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using market interest
rates under similar contractual terms.
Investments in securities and derivatives:
Refer to fair value hierarchy at (e) Fair value hierarchy below.
Long-term loans receivable:
Fair value of long-term loans receivable is estimated based on the present value of future cash flows using interest rates applicable toobtain an additional loan under similar contractual terms.
Other debt securities:
Other debt securities represent leasehold deposits and security deposits, whose fair value is estimated based on the present value of62

future cash flows using current market interest rates.
(b) Fair value of investments in securities and other financial assets
Carrying amounts and estimated fair values of financial assets for the years ended March 31, 2020 and 2019, are as follows:
Millions of yen
March 31, 2020
Carrying
Estimatedamounts
fair values
Financial assets measured at FVTPL
Current
Securities
Derivatives
Forward exchange contracts
Put options
Non-current
Securities
Derivatives
Interest rate swaps
Put options
Financial assets measured at FVTOCI
Non-current
Securities
Financial assets measured at amortized cost
Current
Short-term loans receivable
Current portion of long-term
receivables
Current portion of long-term loans
receivable
Non-current
Other debt securities
Long-term loans receivable

March 31, 2019
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2020
Carrying
Estimatedamounts
fair values

¥ 634

¥ 634

¥ 1,703¥ 1,703$ 5,826$ 5,826

‒
6,061

‒
6,061

6
‒

6
‒

‒
55,692‒
55,692

1,883

1,883

1,734

1,734

17,302

17,302

‒
‒

‒
‒

90
6,061

90
6,061

‒
‒

‒
‒

9,131

9,131

9,974

9,974

83,901

83,901

13

13

17

17

119

119

2

2

‒

‒

18

18

1,368
637

1,368
637

1,448
654

1,448
654

12,5705,853

12,5705,853

Equity instruments are securities measured at FVTOCI.
(c) Fair value of financial assets measured at FVTOCIThe following is a list of major equity instruments designated as FVTOCI and their fair values as of the reporting dates:
Millions of yen
March 31, 2020
Equity instruments
Kowa Kogyosho Co., Ltd.
Kakimoto Co., Ltd.
Riken Corporation
Konwa Kaikan
OSG Corporation
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
WEARE Pacific Co., Ltd.
Mikuni Shoji Co., Ltd.
NTC Corporation

Fair value¥ 1,462
1,423
982
862
530
374
352
345
243
210

63

Millions of yen
March 31, 2019
Equity instruments
Riken Corporation
Kakimoto Co., Ltd.
Kowa Kogyosho Co., Ltd.
Konwa Kaikan
OSG Corporation
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
WEARE Pacific Co., Ltd.
Mikuni Shoji Co., Ltd.
NTC Corporation

Fair value¥ 1,793
1,422
1,371
831
781
431
338
251
237
183

Thousands of U.S. dollars
March 31, 2020
Equity instruments
Kowa Kogyosho Co., Ltd.
Kakimoto Co., Ltd.
Riken Corporation
Konwa Kaikan
OSG Corporation
Owari Precise Products Co., Ltd.
Kojima Co., Ltd.
WEARE Pacific Co., Ltd.
Mikuni Shoji Co., Ltd.
NTC Corporation

Fair value$ 13,434
13,075
9,023
7,921
4,870
3,437
3,234
3,170
2,233
1,930

64

(d) Fair value of financial liabilities
Carrying amounts and estimated fair values of financial liabilities as of the reporting dates are as follows:
The Group holds no financial liabilities designated at initial recognition as financial liabilities measured at FVTPL.
Millions of yen
March 31, 2020
Carrying
Estimatedamounts
fair values

March 31, 2019
Carrying
Estimatedamounts
fair values

Thousands of
U.S. dollars
March 31, 2020
Carrying
Estimated fairamountsvaluesFinancial liabilities measured at
FVTPL
Current
Derivatives
Interest rate swap contracts

¥ 101

¥ 101

¥ 119

¥ 119

$ 928

$ 928

77

77

‒

‒

708

708

53,04853,04848,844

48,844487,439

487,439

47,50747,621

33,12433,288436,525

437,572

20

20

720

720

184

184

3,726

3,726

424

424

34,237

34,237Long-term borrowings

30,34630,51377,70678,420278,839

280,373

Corporate bonds payable

39,89240,01839,88640,264

366,553367,711

Lease liabilities

13,047

13,047

1,394

1,394

119,884

119,884

Non-current
Derivatives
Interest rate swap contracts
Financial liabilities measured atamortized cost
Current
Short-term debt
Current portion of long-term debt
Current portion of long-termborrowings
Current portion of corporate
bonds payable
Lease liabilities
Non-current
Long-term debt

Since the fair value of lease liabilities is not material to the consolidated statements of financial position, it is measured as the present
value of the minimum lease payments discounted by the interest rates used at the initial recognition of lease liabilities. Accordingly, thefair value is based on the relevant carrying amount.

65

(e) Fair value hierarchy
Financial instruments measured at fair value on a recurring basis after initial recognition are classified into three levels of a fair value
hierarchy based on observability and materiality of inputs used for fair value measurement. The three levels of the hierarchy are as
follows:
Level 1:
Fair value measured using quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2:
Fair value measured using direct or indirect observable inputs other than the quoted prices included in Level 1.
Level 3:
Fair value measured using unobservable inputs.
When several inputs are used for a fair value measurement, the measurement is categorized in its entirety in the same level of the fairvalue hierarchy as the lowest level input that is significant to the entire measurement. Transfers between levels are deemed to haveoccurred at the beginning of each quarter period.
Securities:
Securities that can be measured at fair value through quoted market prices are included in Level 1. Those securities include listed
stocks, government bonds or other debt securities, and exchange traded funds.
In the absence of an active market for securities, the following are used as inputs for fair value measurement: quoted prices for similar
securities; quoted prices for transactions that are not distressed for identical or similar securities; or other relevant information,
including observable interest rates and yield curves, credit spreads, and default rates. These inputs are included in Level 2. Includedin Level 2 are short-term investments and listed stocks traded over-the-counter.
Shares of non-listed companies and other instruments, whose significant inputs for fair value measurement are unobservable, areincluded in Level 3. The Group uses price information provided by financial institutions to evaluate these investments. The Group
corroborates the information using an income approach based on its own valuation model or a market approach, such as comparison
with prices of similar securities.
Derivatives:
Derivatives measured in a model using the following are included in Level 2: quoted prices under transactions that are not distressed,
quoted prices in markets that are not active, and observable interest rates and yield curves or forward and spot prices for currencies
and commodities. Level 2 derivatives mainly include interest rate swaps, forward foreign exchange contracts, and commodity futurescontracts.
Financial assets and liabilities measured at amortized cost:
Financial assets and liabilities measured at amortized cost are included primarily in Level 2 and Level 3.
The following tables present financial instruments that are measured at fair value on a recurring basis and the fair value hierarchyclassification as of March 31, 2020 and 2019:
Millions of yen
March 31, 2020
Level 2
Level 3

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Total

¥ 634
‒

¥‒
‒

¥‒
6,061

¥ 634
6,061

‒
2,090

1,203
‒

680
7,041

1,883
9,131

‒
‒

101
77

‒
‒

101
77

66

Millions of yen
March 31, 2019
Level 2
Level 3

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
Derivatives
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)¥ 1,703
‒

¥ ‒
6

¥‒
‒

¥ 1,703
6

‒
‒
3,265

1,042
90
‒

692
6,061
6,709

1,734
6,151
9,974

‒
‒

119
‒

‒
‒

119
‒

Thousands of U.S. dollars
March 31, 2020
Level 2
Level 3

Total

Level 1
AssetsFVTPL (Current)
Securities
Derivatives
FVTPL (Non-current)
Securities
FVTOCI (Non-current)
Liabilities
FVTPL (Current)
FVTPL (Non-current)

Total$ 5,826‒$‒‒$‒
55,692$ 5,826
55,692‒
19,204

11,054‒

6,248
64,697

17,302
83,901

‒
‒

928
708

‒
‒

928
708

Financial liabilities (current and non-current) measured at FVTPL represent derivatives.
The following tables present the changes in Level 3 instruments whose fair values were measured on a recurring basis for the years
ended March 31, 2020 and 2019:
Millions of yen

At April 1, 2018
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2019
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisition
Other
At March 31, 2020

FVTPL

FVTOCI

Total¥ 6,850
‒
‒
(118)
13
8
¥ 6,753
‒
‒
(94)
82
‒
¥ 6,741¥ 7,065
‒
139
(399)
11
(107)
¥ 6,709
‒
374
(107)
81
(16)
¥ 7,041¥ 13,915
‒
139
(517)
24
(99)
¥ 13,462
‒
374
(201)
163
(16)
¥ 13,782

67Thousands of U.S. dollars

At March 31, 2019
Gains (losses) in profit or loss
Gains (losses) in other comprehensive income
Sales or redemption
Purchases or acquisitions
Other
At March 31, 2020

FVTPL

FVTOCI

Total$ 62,051
‒
‒
(864)
753
‒
$ 61,941$ 61,647
‒
3,437
(983)
744
(147)
$ 64,697$ 123,698‒
3,437(1,847)1,498(147)$ 126,638

There were no changes in unrealized gains (losses) recognized in profit or loss relating to assets held as of March 31, 2020 and 2019.
The comprehensive income is included in net change in fair value of financial assets measured at fair value through other comprehensive
income in the consolidated statement of comprehensive income.
(3)

Derivative Instruments and Hedging Activities
Cash flow hedge:
Foreign currency exposure:
Changes in the fair value of forward exchange contracts designated as cash flow hedges for forecasted foreign currency transactions
are reported in other comprehensive income. These amounts are reclassified into profit or loss in the same period as foreign exchange
gains or losses on hedged assets or liabilities are recognized in profit or loss.
Interest rate exposure:
Changes in fair values of interest rate swaps designated as hedging instruments for fluctuation in cash flows associated with longterm debt obligations are reported in other comprehensive income. The amount in accumulated other comprehensive income issubsequently reclassified to other financial income and expenses over the period in which interest expenses are recognized in profit
or loss.
As of March 31, 2020, the expected period for cash flows arising from hedged items and affecting profit or loss is to be from April 2018
to June 2021.
The fair values of derivatives designated as hedging instruments as of March 31, 2020 and 2019, are as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2020
March 31, 2019
March 31, 2020
Asset
Liability
Asset
Liability
Asset
Liability
Cash flow hedges
Forward exchange contracts

¥‒

¥‒

¥6

¥‒

$‒

$‒

Interest rate swap contracts

‒

178

346

375

‒

1,636

¥‒

¥ 178

¥ 352

¥ 375

$‒

$ 1,636

Total

The fair values of derivative assets and liabilities to which hedge accounting is not applied were ¥6,061 million (U.S. $55,692 thousand)and ¥‒ million (U.S. $‒ thousand), respectively, as of March 31, 2020, and ¥6,061 million and ¥‒ million, respectively, as ofMarch 31, 2019.
The contract or notional amounts of derivatives as of March 31, 2020 and 2019, are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
March 31, 2020
March 31, 2019
March 31, 2020
Forward exchange contracts:
To sell foreign currencies
¥‒
¥ ‒
$‒
To buy foreign currencies
19
234
175
Interest rate swap contracts
476,201
51,82583,248
Copper futures contracts
‒
‒
‒

68

As the Company applies hedge accounting, it assesses hedge effectiveness through a qualitative assessment of whether the critical termsof the hedged item and the hedging instrument match or are closely aligned, and whether changes in the fair value or the cash flows of
the hedged item offset changes in the fair value or the cash flows of the hedging instrument, in order to verify that there is an economic
relationship between the hedged item and the hedging instrument. The Company also sets an appropriate hedge ratio, based on theeconomic relationship of the hedging instrument and the hedged item, and a risk management strategy.
Notional amounts and carrying amounts of hedging instruments are as follows. Note that carrying amounts of hedging instruments areincluded in Investments in securities and other financial assets and Other financial liabilities, or Other non-current liabilities in the
consolidated statements of financial position.
Millions of yen
Hedging Instruments

March 31, 2020
Notional amount

Carrying amountOver one year

Asset

Liability

Cash flow hedges
Currency exchange risk
Interest rate risk
Total

¥ 19

¥‒

¥‒

¥‒

51,825

16,325‒178¥ 51,844¥ 16,325

¥‒

¥ 178

Millions of yen
Hedging Instruments

March 31, 2019
Notional amount

Carrying amountOver one year

Asset

Liability

Cash flow hedges
Currency exchange risk

¥ 234

¥‒

¥6

¥‒

Interest rate risk

83,24863,248346

375¥ 83,482¥ 63,248

¥ 352

¥ 375

Total

Thousands of U.S. dollars
Hedging Instruments

March 31, 2020
Notional amount

Carrying amountOver one year

Asset

Liability

Cash flow hedges
Currency exchange risk
Interest rate risk
Total

$ 175

$‒

$‒

$‒

476,201

150,005‒

1,636$ 476,376$ 150,005$‒$ 1,63669

Reconciliation of fair value of the hedging instruments applying cash flow hedges, which are recognized in other comprehensive income
is as follows:
Millions of yen
2020

Balance atthe beginningof the year

Change in fairvalue of hedging
instrument
recognized inothercomprehensive
incomeAmounts directly
included carrying
amounts of hedged
assets andliabilities

Reclassification
to profit or loss(a)Balance at theend of theyear

Price risk

¥‒

¥‒

¥‒

¥‒

¥‒

Currency
exchange risk

6

(6)

‒

‒

‒

Interest rate risk

(29)

(149)

‒

‒

(178)

¥ (23)¥ (155)¥‒¥‒¥ (178)

Total

Millions of yen
2019

Balance atthebeginningof the year

Change in fairvalue of hedging
instrument
recognized inothercomprehensive
incomeAmounts
directly
includedcarrying
amounts ofhedged assets
and liabilities

Reclassification
to profit or loss(a)Balance at the end of theyear

Price risk

¥6

¥ (6)

¥‒

¥‒

¥‒

Currency
exchange
risk

(79)

85

‒

‒

6

Interest rate
risk

100

(129)

‒

‒

(29)

Total

¥ 27

¥ (50)¥‒¥‒¥ (23)

Thousands of U.S. dollars
2020

Balance at the
beginning of
the year

Change in fairvalue of hedging
instrument
recognized inothercomprehensive
incomeAmounts directly
included carrying
amounts ofhedged assets andliabilities

Reclassification to
profit or loss(a)Balance at theend of theyear

Price risk

$‒

$‒

$‒

$‒

$‒

Currency
exchange risk

55

(55)

‒

‒

‒

Interest rate risk

(266)

(1,369)‒‒(1,636)$ (211)$ (1,424)$‒$‒$ (1,636)

Total

Notes:(a) Reclassified amounts to profit or loss are included in “Cost of sales” for price risk, in “Revenues” and “Financial expenses” forcurrency exchange risk, and in “Cost of sales” and “Interest charges” for interest rate risk in the consolidated statements of income.

70

Major Subsidiaries and Associates
The Company’s consolidated financial statements include the following subsidiaries:

Principal business

As of March 31, 2020
Votingrights %Name

Location

Hitachi Metals Tool Steel, Ltd.

Minato-ku, Tokyo

Specialty Steel Products

100.0

Hitachi Metals Neomaterial, Ltd.

Suita, Osaka

Specialty Steel Products

100.0

Hitachi Metals Wakamatsu, Ltd.

Wakamatsu-ku,
Kita-kyushu, Fukuoka

Specialty Steel Products

100.0

Hitachi Metals Precision, Ltd.

Minato-ku, Tokyo

Specialty Steel Products

100.0

HMY, Ltd.

Yasugi, Shimane

Specialty Steel Products

100.0

NEOMAX KINKI Co., Ltd.

Yabu, Hyogo

NEOMAX ENGINEERING Co., Ltd.

Takasaki, Gunma

Hitachi Ferrite Electronics, Ltd.

Tottori, Tottori

NEOMAX KYUSHU Co., Ltd.

Takeo, Saga

Santoku Corporation

Higashinada-ku,
Kobe, Hyogo

Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics

Hitachi Metals FineTech, Ltd.

Kuwana, Mie

Functional Components and Equipment

100.0

Alcast, Ltd.

Kumagaya, Saitama

Functional Components and Equipment

100.0

Kyushu Technometal Co., Ltd.

Miyako, Fukuoka

Functional Components and Equipment

100.0

Hitachi Metals Trading, Ltd.

Minato-ku, Tokyo

Sales of products

100.0

Tonichi Kyosan Cable, Ltd.

Ishioka, Ibaraki

Wires, Cables, and Related Products

100.0

Ibaraki Technos, Ltd.

Hitachi, Ibaraki

Wires, Cables, and Related Products

100.0

Hitachi Metals Solutions, Ltd.

Minato-ku, Tokyo

Real estate business and others

100.0

Metglas, Inc.

South Carolina, U.S.A.

Magnetic Materials and Applications / PowerElectronics

100.0

Hitachi Metals Korea Co., Ltd.

Gyeonggi-do, South
Korea

Manufacturing and sales of products

100.0

Baosteel Hitachi Rolls (Nantong) Co., Ltd.

Jiangsu, China

Specialty Steel Products

70.0

San Technology, Inc.

Cavite, Philippines

Pacific Metals Co., Ltd.

North Gyeongsang,South Korea

PT. HITACHI METALS INDONESIA

Banten, Indonesia

100.0
100.0
100.0
100.0
100.0

Hitachi Metals San Huan Magnetic Materials (Nantong)
Jiangsu, China
Co., Ltd.

Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics
Magnetic Materials and Applications / PowerElectronics

Waupaca Foundry, Inc.

Wisconsin, U.S.A.

Functional Components and Equipment

100.0

Namyang Metals Co., Ltd.

Daegu, South Korea

Functional Components and Equipment

100.0

Ward Manufacturing, LLC

Pennsylvania, U.S.A.

Functional Components and Equipment

100.0

HNV Castings Private Limited

Delhi, India

Functional Components and Equipment

100.0

Hitachi Metals America, Ltd.

New York, U.S.A.

Sales of products

100.0

71

100.0
100.0
100.0
51.0

Name

Location

Hitachi Metals Hong Kong Ltd.

Hong Kong, China

Sales of products

100.0

Hitachi Metals Europe GmbH

Dusseldorf, Germany

Sales of products

100.0

Hitachi Metals Singapore Pte. Ltd.

Singapore

Sales of products

100.0

Hitachi Metals Taiwan, Ltd.

New Taipei, Taiwan

Manufacturing and sales of products

100.0

Hitachi Metals (Thailand) Ltd.

Ayutthaya, Thailand

Manufacturing and sales of products

100.0

Hitachi Metals (Suzhou) Technology, Ltd.

Jiangsu, China

Manufacturing and sales of products

100.0

Hitachi Metals (China), Ltd.

Shanghai, China

Sales of products

100.0

Hitachi Cable America Inc.

New York, U.S.A.

Wires, Cables, and Related Products

100.0

Hitachi Cable (Suzhou) Co., Ltd.

Jiangsu, China

Wires, Cables, and Related Products

100.0

Hitachi Cable (Johor) Sdn. Bhd.

Johor, Malaysia

Wires, Cables, and Related Products

100.0

Hitachi Cable Vietnam Co., Ltd.

Hai Duong, Vietnam

Manufacturing and sales of products

100.0

Thai Hitachi Enamel Wire Co., Ltd.

Bangpakong
Wires, Cables, and Related Products
Chachoengsao, Thailand

90.3

HC Queretaro, S.A. de C.V.

Queretaro, Mexico

100.0

Others‒20 companies

Principal business

As of March 31, 2020
Votingrights %Manufacturing and sales of products
‒

72

‒

Transactions with Related Parties(1) Transactions with Related Parties
Transactions with the related parties are as follows:
For the year ended March 31, 2020:
Attribution

Parentcompany

Name

Hitachi, Ltd.

Nature oftransaction
Borrowings from
Hitachi Group cash
pooling system(*1) (*3)

Millions of yen
Balance atTransaction amountyear-end
Repayment¥ 6,541(*4)¥ 1,183

Thousands of U.S. dollars
Transaction
Balance atamountyear-end
Repayment$ 60,103(*4)$ 10,870

Company with
Borrowings from a
Repayment
Repayment
the same
Hitachi America
cash pooling system¥ 271¥ 28,031$ 2,490$ 257,567
parentCapital, Ltd.
(*2) (*3)(*4)(*4)
company
Notes:*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management of funds.
Balance at the end of the fiscal year indicates borrowing balance as of the year-end.
*2 The Company participates in the Hitachi Group’s cash pooling system, where Hitachi America Capital Ltd. is a key participant, an
initiative intended to provide integrated management of funds. Balance at the end of the fiscal year indicates borrowings balance as of
the year-end.
*3 Interest rates on funding are reasonably determined based on market interest rates.
*4 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
For the year ended March 31, 2019:
Attribution

Parentcompany

Name

Hitachi, Ltd.

Nature oftransaction
Deposits with andBorrowings from
Hitachi Group cash
pooling system(*1) (*3)

Millions of yen
Balance atTransaction amountyear-end
Withdrawal¥ 8,059
Borrowings¥ 7,724¥ 7,724(*4)

Company
Borrowings from a
Borrowings
with theHitachi America
cash pooling system¥ 9,179¥ 28,302
same parent
Capital, Ltd.
(*2) (*3)(*4)
company
Notes:*1 The Company participates in the Hitachi Group’s cash pooling system, an initiative intended to provide integrated management of funds.
Balance at the end of the fiscal year indicates borrowing balance as of the year-end.
*2 The Company participates in the Hitachi Group’s cash pooling system, where Hitachi America Capital Ltd. is a key participant, an
initiative intended to provide integrated management of funds. Balance at the end of the fiscal year indicates borrowings balance as of
the year-end.
*3 Interest rates on funding are reasonably determined based on market interest rates.
*4 As deposits and withdrawals are made on a daily basis, transaction amounts represent differences between the beginning and endingbalances for the year.
(2) Compensation for Key Management Personnel
Compensation for key management personnel of the Group is as follows:

Short-term employee benefits

Millions of yen
For the year ended
For the year ended
March 31, 2020
March 31, 2019
¥ 550
¥ 639

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Thousands of U.S. dollars
For the year ended
March 31, 2020
$ 5,054

Commitments and Contingencies (Other Than Liabilities Recognized as Provisions)(1)

Loan Commitments
The Group has lines of credit arrangements with financial institutions in order to secure financing sources for business operations. The total
unused lines of credit as of March 31, 2020, were ¥40,000 million (U.S. $367,546 thousand) and also ¥40,000 million as of March 31, 2019.
The Group also has overdraft facilities with financial institutions. The unused facilities under these agreements as of March 31, 2020 and 2019,were ¥77,928 million (U.S. $716,053 thousand) and ¥86,308 million, respectively.

(2)

Commitments for Acquisition of Assets
Outstanding commitments for the purchase of property, plant and equipment as of March 31, 2020 and 2019, were ¥11,255 million(U.S. $103,418 thousand) and ¥20,845 million, respectively.

(3)

Guarantee Obligations
The Group was contingently liable for loan guarantees and other guarantees to its associates and third parties in the amounts of ¥2,723 million(U.S. $25,021 thousand) and ¥3,188 million as of March 31, 2020 and 2019, respectively.

(4)

OthersThe Company discovered misrepresentation of test results in inspection reports submitted to customers for certain specialty steel products
and magnetic material products (ferrite magnets and rare earth magnets) manufactured by the Company and its subsidiaries. The Company
has already reported the incident to individual customers and continues to hold discussions with them for countermeasures. At the same time,
the Company has set up a special investigation committee to investigate related facts and root causes. The outcome of the investigation by
the special investigation committee may affect the Group’s financial position and business performance going forward. Nonetheless as thefinancial impact, if any, is difficult to be reasonably estimated at this time, it is not reflected in the consolidated financial statements of theGroup for the fiscal year ended March 31, 2020.

Additional Information
Certain accounting treatments require the Group to make estimates for future cash flows and future taxable profits, including impairment
testing on non-financial assets and assessment of possible realization of deferred tax assets. The Group expects throughout its estimates forthe fiscal year ended March 31, 2020, that the current stalling of economic activities in Japan and overseas on account of COVID-19 outbreak
will recover in the medium- to long-term, although circumstances may vary by segment and geographic region considering its broad range ofbusiness activities conducted globally.
The Company believes that those assumptions are the best estimates that could be made by the Company as of March 31, 2020. However, if
those negative effects due to COVID-19 continue or worsen beyond expectation, they may affect the Group’s significant accounting estimatesand judgments, including the assessment of non-financial assets and possible realization of deferred tax assets.

Subsequent Events
There are no applicable items.

74Independent Auditor’s Report
The Board of Directors
Hitachi Metals, Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Hitachi Metals, Ltd.
and its consolidated subsidiaries(the Group), which comprise the consolidated statement offinancial position as at March 31, 2020, and the consolidated statements of income,comprehensive income, changes in equity, and cash flows for the year then ended, and notes tothe consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in allmaterial respects, the consolidated financial position of the Group as at March 31, 2020, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independentof the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
As described in Note 27. “Commitments and Contingencies (Other Than Liabilities Recognized
as Provisions) (4) Others” to the consolidated financial statements, the outcome of theinvestigations by the special investigation committee may affect the Group’s financial position
and business performance going forward. However, as the financial impact, if any, cannot bereasonably estimated at this time, it is not reflected in the consolidated financial statements of
the Group.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of mostsignificance in our audit of the consolidated financial statements of the current period. These
matters were addressed in the context of the audit of the consolidated financial statements as awhole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion
on these matters.

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1.

Impairment of non-financial assets
Description and reasons fordetermination of the matter

Auditor’s response

As described in Note 10 to theconsolidated financial statements, theCompany’s significant goodwill which isrelated to the Functional Components andEquipment Segment arising from theacquisition of Waupaca Foundry, Inc. was¥67,125 million as of March 31, 2020.
Also, as described in Note 20 and 9, an
impairment loss of ¥49,179 million wasrecognized in the current fiscal year due
mainly to a decline in a profitability in the
Magnetic Materials and Applications
business,, primarily attributed to thechanges in the operating environment of therare earth magnet business.

For the CGU to which the goodwill arisingfrom the acquisition of Waupaca Foundry,Inc. related to the Functional Components
and Equipment segment belongs and forother CGUs with indicators of impairment
identified, we performed audit proceduresthat included, among others, the following:⚫

⚫

Impairment is tested for cash-generatingunits (CGUs) to which goodwill belongs
and for CGUs when indicators of
impairment exist, and the recoverable
amount is calculated based on the greater ofthe fair value less costs of disposal or value
in use. Value in use is the present value ofthe expected future cash flows, which isbased on the business plan authorized by
Management and other information. For the ⚫
period beyond the term of the businessplan, the expected future cash flows are
estimated using the expected growth rate
calculated based on the average long-term ⚫
growth rate in the relevant market. The
significant assumptions used in estimating
the value in use are the expected future cash
flow based on the business plan, terminal ⚫
growth rate, and discount rate. The businessplan is affected by the numbers of orders
expected to be received and the expectedsales amount and a market growth rate.

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We involved our valuation specialistsof our network firm in assessing thevaluation methods, the terminal growth
rates, and discount rates in calculating
the value in use as well as the valuationof the real estate which is the basis of
the fair value less costs of disposal.
We inquired of Management about the
numbers of the orders expected to bereceived and the expected sales amountand the market growth rate used inestimating the business plan, comparedthose to market forecasts and otheravailable external information, andinspected the consistency between
those and the estimated orders to bereceived from its customers.
We compared the estimated future cash
flows with the business plan authorized
by Management to evaluate theconsistency.
We compared the prior year’s businessplan with the actual results to evaluate
the accuracy of Management’s
estimation process.
We performed sensitivity analysis of
the effects to the value in use thatwould result from the change insignificant assumptions, such as theterminal growth rate to assess thesignificant assumptions used by
Management.

Auditing impairment of non-financial ⚫
assets is complex as it involves uncertainty
related to the significant assumptions andManagement’s judgment and expertise inestimating recoverable amount, andrequires professional judgment. Therefore,
we identified the audit of impairment of
non-financial assets as a key audit matter.

We inquired of Management about theassumption that the recession inbusiness activities caused by COVID19 would recover in the mid to longterm period and evaluated the impacts
on the value in use.

Responsibilities of Management and the Audit Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with IFRSs, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup's ability to continue as a going concern and disclosing, as required by IFRSs, mattersrelated to going concern.
The Audit Committee is responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, andto issue an auditor’s report that includes our opinion. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by management.

77

・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going
concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentationin accordance with IFRSs.
・ Obtain sufficient appropriate audit evidence regarding the financial information of theentities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance ofthe group audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.
We also provide the Audit Committee with a statement that we have complied with the ethicalrequirements regarding independence that are relevant to our audit of the financial statements
in Japan, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Audit Committee, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group whichis required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

78

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2020 are presented solely for convenience. Our audit also included
the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2 to the consolidated financial
statements.

Ernst & Young ShinNihon LLC
Tokyo, Japan
June 23, 2020/s/ Takashi Ouchida
Takashi Ouchida
Designated Engagement Partner
Certified Public Accountant/s/ Teruyasu Omote
Teruyasu Omote
Designated Engagement Partner
Certified Public Accountant

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