Business Report 2020
Year ended March 31, 2020

The Pursuit of ExcellenceBuilding on Core Strengths
Kureha Corporation is a manufacturer of highly originative specialty chemicals andplastics that leverages proprietary technologies to develop products in the fields ofadvanced materials, agrochemicals, pharmaceuticals, and packaging materials. Since its
establishment in 1944, Kureha has utilized its strengths in technology and innovation toprovide a wide range of solutions suited to the market needs of each era.
Today, this corporate DNA drives Kureha to always pursue originality and excellencein harmony with the environment, and consistently create products that bring value tocustomers and society.

Corporate Philosophy
To be a company supporting an ever-changing society.
To be a company that changes society for the better.
We formulated our Corporate Identity to reflect our vision for Kureha.

We treasurepeople andthe naturalenvironment.

We constantly
evolve throughinnovation.

We contributeto society by
developing
beneficial
products.

Contents
01 • Profile

20 • CSR

02 • At a Glance

22 • Corporate Governance37 • Consolidated Statements of
		 Changes in Equity

03 • Consolidated Financial Highlights

27 • Management Team39 • Consolidated Statements of Cash Flows

04 • President’s Message

28 • Consolidated Financial Summary

08 • Kureha Medium-Term Management Plan

29 • Management Discussion and Analysis

40 •	Notes to the Consolidated Financial
Statements

10 • Business Updates
12 • Year’s Highlight34 • Consolidated Statements of		 Financial Position

14 • Review of Operations

36 • Consolidated Statements of Profit or Loss

18 • Research & Development

36 • Consolidated Statements of		 Comprehensive Income

86 • Major Subsidiaries and Affiliates
87 • Investor Information

R&D Innovation:

The Source of Our CompetitivenessWe pride ourselves on our expertise in polymer engineering and processing as well as organic
synthesis and carbon materials development. These technologies provide the base for thedevelopment of our original innovative materials and products. We are constantly adding andfusing new ideas to these accumulated technologies, and in the spirit of “if it doesn’t exist, let’s create
it,” each day we pursue technology solutions that only Kureha can provide to meet unmet needs.

Th e Pu rsuit of Excellence

Originality and Quality to
Answer Global Needs:

Maximizing Earnings &Diversifying Risks:

Kureha’s overseas sales had reached 29% of total revenue inFY2019. Along with exports from Japan, we have production,
processing and sales locations in the United States, Germany,
the Netherlands, France, the U.K., China, Vietnam and Australia,
enabling an effective response to needs in overseas markets.
With continued growth expected in newly emerging
countries and many other regions, we are taking active andstrategic steps to expand sales of highly competitive products
in line with the needs of overseas markets, whether foradvanced materials, chemicals, or plastic products.

Our innovative products and services are broadly based
but highly specialized, supporting a wide range ofindustries, including electrical and electronic-appliances,automotive, agriculture, medicine and energy. We
maximize earnings and diversify risk through broadbased business development in promising growth fields
such as the environment, energy, health and lifestyle. We
continuously optimize our portfolio to align with shifting
market needs while securing our earnings path.

The Growth Potential in Global Markets

The Path to Sustainable Growth

Kureha Corporation Business Report 202001

At a Glance
FY2019 Revenue by Segment

Advanced Materials¥41,842 million

29.4%

Specialty Chemicals¥24,331 million
FY2019
Revenue¥142,398 million

17.1%

Specialty Plastics¥43,473 million

30.5%

Construction and Other Operations¥14,457 million ¥18,293 million

10.2%(Construction)

02

Kureha Corporation Business Report 2020

12.8%

(Other Operations)Consolidated Financial Highlights
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 (FY2019) and 2019 (FY2018)

Business Areas
Thousands of
U.S. dollars

Millions of yen

Advanced Plastics
Carbon Fibers & Products
Battery Materials

For the year:
Revenue
Operating profit
Profit attributable to ownersof parent
Capital expenditure
Depreciation and amortization
Research and development
expensesYear-end:
Total assets
Total equity attributable toowners of parent
Interest-bearing debt

FY2019FY2018FY2019¥142,398
18,041¥148,265
17,172$1,308,445
165,773

13,71913,933126,060

14,928
12,11013,174
10,310137,170
111,278

5,995

5,270

55,090¥246,890¥247,352$2,268,591

164,990

160,551

1,516,039

37,317

342,894

39,018Yen

Agrochemicals
Pharmaceuticals
Industrial Chemicals

Household Products

Amounts per share:
Basic profit per share
Owners' equity per share¥ 692.61
8,453.07

U.S. dollars$¥ 679.55
7,922.58

6.36
77.67

Percent

Ratios:Profit attributable to ownersof parent to revenue
Return on equity
Return on assets
Owner’s equity ratio

9.6%

9.4%

8.4
7.3
66.8

9.0
7.1
64.9

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥108.83 to US$1,
the rate of exchange prevailing on the Tokyo Foreign Exchange Market on March 31, 2020.
2. Return on equity = Profit attributable to owners of parent/Shareholders’ equity × 100
3. Return on assets = Profit before tax/Total assets × 100
4. Owner’s equity ratio = Owner’s equity/Total liabilities and equity

Packaging Materials
Synthetic Fiber Products

Revenue

Operating Profit(Millions of yen)

(Millions of yen)

Profit Attributable to
Owners of Parent(Millions of yen) (Left scale)

Basic Profit per Share(Yen) (Right scale)Engineering &160,000

20,000120,000

15,000Transport/Warehousing
0

12,000

800

9,000

600

6,000

400

3,000

200

5,000

40,000

(FY)

1,000

10,00080,000Construction
Environment Management

15,000

2018

2019

0

(FY)

2018

2019

0

(FY)

2018

2019

0

Kureha Corporation Business Report 202003

President’s Message

Yutaka Kobayashi
President & Chief Executive Officer

04

Kureha Corporation Business Report 2020

Dear Shareholders,
In FY2019, the first year of the mid-term plan
Kureha’s Challenge 2020, we commemorated the75th anniversary of our founding.
Regrettably, the business environment we faced
this year was very different from the one in FY2018.
Although the Japanese economy continued to
grow moderately in the first half of the year due to
steady domestic demand driven by expanding
personal consumption, a consumption tax rise
resulted in negative growth in the second half.
Meanwhile, global economic momentum slowed
due to factors including a deceleration of theChinese economy and trade friction between the
United States and China. This situation wascompounded by the outbreak of COVID-19 in early
2020, which triggered a global economic crisis ofextraordinary suddenness and severity.
While Kureha’s Construction and Other segments
recorded sales increases, revenue declined in

Advanced Materials, Specialty Chemicals andSpecialty Plastics, leading Group revenue to fall by
4% year on year to 142.398 million yen. However,operating profit rose by 5.1% to 18,041 million yen
while income before income taxes increased by 2.9%
to 17,944 million yen. This was due to the recordingof other income from the sale of land from Kureha’shead office annex, which offset structural reform costs
related to the polyglycolic acid (PGA) business and its
line of processed resin products. Profit attributable
to the owners of Kureha declined by 1.5% to 13,719
million yen due to an increase in income tax.
As originally planned, the dividend for FY2019 was
170 yen per share (an interim dividend of 85 yen and a
year-end dividend of 85 yen). In addition, we acquired
approximately 5 billion yen of treasury stock using
cash received from the sale of land and businesses.

Progress of the Mid-Term Management Plan, Kureha’s
Challenge 2020
In the year under review, which was the first year of the
mid-term management plan Kureha’s Challenge 2020
(FY2019 - 2020), Kureha expanded on the achievementsof the previous mid-term management plan, Kureha’s
Challenge 2018. Based on the two fundamental
concepts of product differentiation and new businesscreation, we continued our work to transform Kureha’sbusiness portfolio into one centered on Advanced
Materials and to solidify our foundation for a leap
forward as a high-value-added company.
In the field of polyvinylidene fluoride (PVDF), a
resin used as a binder material for lithium-ion
secondary batteries, we increased sales to major
Chinese and South Korean capital lithium-ion battery(LiB) manufacturers, leveraging the production
capacity expansion of 2000 tons/year that became
operational at the Iwaki Factory in January 2019.
In the PGA business, sales of PGA-based frac plugs
for shale oil and gas extraction increased. However,increasingly strict customer demands, intensified pricecompetition, and changes in the market environment
such as a drop in crude oil prices, have necessitated achange in business strategy. While PGA frac plugs will
maintain their positioning as core products, we will
expand our portfolio in this business by developing
unique products that leverage the expertise we havegained from frac plug development thus far. While theGroup recorded large structural reform expenses in theyear under review as a result of this change, we areconfident that the new strategy will further strengthen
our competitiveness.
Meanwhile, efforts to create new businesses are
steadily progressing. The New Business Creation Project
launched in FY2016 is now in its fourth year. Our aim is
to expand our business portfolio with differentiatedtechnologies that contribute to the resolution of social
issues and help people live healthy lives.
To that end, we have invested in two start-up
companies: Cambridge Touch Technologies Limited(UK), a developer of next-generation 3D multi-touch

Kureha Corporation Business Report 202005

President’s Message

sensor technology, and Boost Biomes Inc. (USA), which
possesses microbial interaction analysis technology.
In addition, Kureha has strengthened its
environmental business. The Sustainable Development
Goals set forth by the United Nations requirecompanies to contribute to the resolution of social
issues, and the Group is seeking to add value bycontributing to society through effective industrial
waste treatment and decontamination of environmental

pollutants. Consequently, in April 2019, Kureha Ecology
Management Co., Ltd., a group company that belongs
to a related business, made Himeyuri Total Work Co., Ltd.
a wholly owned subsidiary. This company provides
integrated handling of industrial waste, from collection
and transportation through to intermediate treatment
and final disposal. In FY2019, Himeyuri Total Work
recorded sales of 1.46 billion yen and operating profitof 480 million yen.

Initiatives and Outlook for FY2020
In the final year of the mid-term management plan
Kureha’s Challenge 2020, our goals are to expand andensure profit generation in the PGA business; further
expand the PVDF business; optimize the businessmodels of existing business; search for and nurture
new businesses in Japan and overseas; and strengthen
our management foundation. Kureha will steadily
work toward these objectives.
1. Expanding the Advanced Materials Segment
In the PGA business, in order to cover the entire North
American shale oil and gas market, our productdevelopment is now focused on enhancing the
low-temperature decomposition performance of ourfrac plugs. We are also adding non-PGA degradable
frac plugs to our product portfolio to meet
diversifying customer needs. By reducing costs acrossthe value chain, from the production of PGA resin
through to the manufacturing and sales of frac plugs,
we will raise the profitability of this business.
In the PVDF business, we have begun massproducing PVDF for use as high-performance bindermaterial in in-vehicle LiBs at the Changshu factory in
China, with the aim of expanding supply capacity inline with market growth. Our goal is to increase
profits by expanding sales to major Chinese andSouth Korean capital lithium-ion battery (LiB)
manufacturers.
Among engineering plastics, polyphenylene
sulfide (PPS) is also an investment target for the future.
Demand for PPS, a resin capable of lowering theweight of automobiles by acting as a substitute for06

Kureha Corporation Business Report 2020

metal, is expected to grow steadily. Construction work
to increase Kureha’s production capacity by 5,000 tons
by early 2021 is now underway at the Iwaki Factory.
2. R&DIn addition to accelerating R&D to create new
businesses, we will develop applications in existing
businesses that differ from those that have existed inmarkets until now, and utilize unique functional andsynthetic resins manufactured by Kureha to strengthen
and expand downstream processed productbusinesses. Moreover, with digitalization progressing
globally in all fields of business, we are establishingmodels for smart production and R&D while utilizing
digital technology to boost operational efficiency.
3. Using Human Resources and Strengthening
Governance
Investing in human resources is essential for thesurvival and growth of future businesses. In addition
to developing and strengthening human resources
for management and global business development,
as well as technical and development personnel, we
aim to appoint female managers as part of a groupwide diversity program. We are also preparing to
introduce a new personnel system that will
strengthen performance-based remuneration.
Strengthening corporate governance is central
to strengthening the management foundation. In
FY2019, Kureha appointed its first female outside
corporate auditor. In addition, we have changed
the employment form for executive officers froman employment-type to a delegation-type system,
and increased performance-based compensation(via stock options) to create a system that fosters ahigh degree of commitment from executive
officers to enhance corporate value.
4. Impact of COVID-19
The COVID-19 pandemic has had a significant impact
on Japan, the global community, and the world
economy. Due to the extreme uncertainty of thecurrent situation, it is difficult to foresee the extent towhich, and for how long, business performance will
be affected by the suspension of customer operations,
supply chain disruptions, and changes in society
caused by the virus. For this reason, Kureha has not
yet made forecasts for FY2020 (as of August 2020).
That being said, throughout our 75-year history,
we have faced many difficulties, including
circumstances that can be described as crises. In suchtimes, Kureha’s employees have always overcome thechallenges before them by combining their strengths

and making optimal use of their skills to generate
numerous technological innovations.
Kureha seeks to generate sustainable value andprofit growth by developing differentiated highvalue products that contribute to society. Our
employees are the driving force that enables us torealize this goal. I would like to take this moment tothank all of our employees for their hard work, andfor being the force that moves us forward. The roadahead is challenging, but we will overcome
COVID-19 in the same way we have overcome past
challenges: Together, as one company, driven by
your spirit, passion and ingenuity. I am convincedthat Kureha can look forward to a prosperous future.
I would also like to thank you, dear shareholders, foryour investment and confidence in us. We lookforward to your continued support as we movetoward our goals.

Yutaka Kobayashi
President & Chief Executive Officer
June 2020

Kureha Corporation Business Report 202007

Kureha Medium-Term Management Plan

Review of FY2019
FY2019 was 1st year of our new Medium-term Management Plan “Kureha’s Challenge 2020.” Kureha’s business environment in
FY2019 was more challenging than that of the previous year. External factors shaping market conditions include slowdowns in thesemiconductor and industrial chemicals markets, a reduction in electric vehicle (EV) subsidies in China, plunging crude oil prices,and the unprecedented global economic shock caused by COVID-19. Although performance continued to be strong in theConstruction and Other segments, as well as in the home and fiber products businesses in the Specialty Plastics segment, these
extraordinary circumstances led to a reduction in Group revenue.
However, as shown by the operating profit increase to 18.0 billion yen and core operating profit of 16.0 billion yen, Kureha’s
profit base remains strong. The challenging conditions have also demonstrated the importance of our continuous efforts to reduce
costs, raise operating efficiency, and reinforce our capacity for innovation.
Revenue/
Overseas Proportion

Operating Profit/
Operating Margin(Billions of yen)
180

150

(%)

148.3

142.4

30

28

20

30

10

FY2019Result

20

16

16

12

12

8

8

8

4

4

4

0

0

18.0

12

12.7

11.6

13.9

13.7

FY2018Result

FY2019Result30

60

FY2018Result(Billions of yen)

20

16

40

90

(%)

17.2

50

120

0

(Billions of yen)
20

60

Profit Attributable to
Owners of Parent

00

FY2018Result

FY2019ResultCapital Investment and R&D Expenditures

FY2018 Result(Billions of yen)

Capital investment
Depreciation
R&D expenditures

FY2019 Result
13.2
10.3
5.3

14.9
12.1
6.0

ROA and ROE

FY2018 Result
ROA
ROE
Dividend Payout and Dividend Payout Ratio
250
200

Annual per-share dividend (yen)Dividend payout ratio (%)

150

110

125

165

170

30%

50

10%

FY2017FY2018FY2019FY2018FY2019¥3 billion¥5 billion

40%

20%

FY2016

7.3%
8.4%
Share Repurchase

50%

100

0

FY2019 Result
7.1%
9.0%

0%

FY 2020 financial guidance is not announced as we are unable to assess the impact of new coronavirus on our global business
operations. It will be announced promptly when we determine a reasonable forecast. Regarding current circumstances, achieving
quantitative targets of Kureha’s Challenge 2020 is difficult. However, qualitative management goals are unchanged. We willcontinue to strive achieving these goals.

08

Kureha Corporation Business Report 2020

Management Goals and Priority Measures(Asterisks indicate a new priority measure)

Action01

Action02

Expand the PGA Business and Generate Earnings• Increase and stabilize sales of Kureha’s original frac plugs, and establish a business foundation

Strengthen the PVDF Business for Further Expansion• Advance the development of high-performance LiB binders with competitive advantages• Secure raw materials and raise production capacity to support business expansion

Optimize the Business Models for Existing Businesses
Action03• Revise business strategies and alliances to better respond to changes in the business environment*• Develop new applications for downstream business; expand existing business in different markets
and application fields*

Explore and Develop New Businesses in Japan and Overseas
Action04• Seek out new application business themes in Japan and overseas*• Assess the themes already identified, prioritize the necessary resources, and utilize outside resourcesto accelerate commercialization• Cultivate the personnel needed for downstream business development; invest the resources neededto accelerate technological innovations*

Strengthen Management Foundations
Action05• Build a value chain management structure led by business divisions• Enhance efficiency of administrative tasks and group management• Reinforce performance-based personnel and pay systems; promote talented middle-age/young
employees and recruit senior workers; cultivate and strengthen human resources• Enhance productivity by utilizing digital technologies; build smart operation models for production
and R&D*• Strengthen corporate social responsibility (CSR) management to encompass Sustainable
Development Goals (SDGs); ensure strong governance particularly for safety, quality, andenvironment (SQE) management*

Kureha Corporation Business Report 202009Business Updates

Having previously centered on the Specialty Chemicals segment, Kureha is now shifting to a businessstructure centered on the Advanced Materials segment. FY2019 updates for the advanced plastics productsthat make up the Advanced Materials segment are shown below.

Polyglycolic Acid (PGA)PGA is a biodegradable resin with exceptional mechanicalconcerns that shale oil/gas production will decline instrength and gas barrier properties. Kureha is the only

2020 due to the sharp fall in crude oil prices and the effects

company in the world producing this resin on an industrialof Covid-19.

scale. We have high expectations for this innovative specialty

To further strengthen the competitiveness of our PGA

polymer as a frac plug material that will revolutionize theplugs, it is necessary to conduct a thorough review of

shale oil and gas extraction process.

business assets that have accumulated over the past years.
For this purpose, we have recorded structural reform

In FY2019, we steadily increased sales of Kurehadeveloped PGA plugs through our US subsidiary, having

expenses of 10.6 billion yen in other expenses for FY2019,made a strong commitment to securing the profitability ofincluding an impairment loss on fixed assets. In the future,

the PGA business. However, alongside ever-stringent

while positioning PGA plugs as our core offering, we will also

customer demands for quality and performance, Kureha

develop and sell non-PGA degradable plugs to meetfaces downward pressure on prices in the US market forcustomer needs in a one-stop manner. We will continue tofrac plugs used in shale oil/gas extraction due to the entry

strengthen this business by always supplying products ofof cheap competitive products. Moreover, there areexcellent performance and quality.

PGA frac plug

Image of shale oil and gas extraction process

10

Kureha Corporation Business Report 2020

Polyvinylidene Fluoride (PVDF)
PVDF, when used as a binder for the connecting electrodes inlithium-ion batteries (LiBs), requires advanced electricalcharacteristics. As one of just a handful of companies that
produces PVDF for this purpose, Kureha holds around a 40%
share of the worldwide market for automotive PVDF binders,with acclaimed product performance. Going forward, we will

PVDF

Used as a binder material for in-vehicle LIBs

continue to expand production. Alongside new capacity at
our facility in China, which has begun to produce new gradesof binder material for in-vehicle LiBs, we will work to remove
bottlenecks at the Iwaki Factory in Japan by early 2021. Kureha
is also considering options for adding an additional plant(delayed due to the pandemic) and will determine its locationand production capacity by end-FY2020.

Kureha holds around a 40% share of the worldwide market
for automotive PVDF binders.

Polyphenylene Sulfide (PPS)PPS is gaining widespread use as a replacement for
metal in various components owing to its excellent heat
resistance, strength, and workability. Kureha produces
these plastics to support the automotive industry bothin Japan and overseas, and is actively working to develop
this business globally. To meet further demand growth,
we are expanding production capacity with anadditional 5,000 tons per year at our Iwaki Factory inJapan. Construction started in 2019 as scheduled andwill be completed in the fall of 2020. Commercial

Construction is on-schedule

operation will begin in February 2021 once a trial run has
been completed.

Kureha Corporation Business Report 202011

Year’s Highlight

Business Portfolio Restructuring
Kureha is currently reorganizing its business portfolio to raise thean existing capital relationship with our group company Kureha

competitiveness and profitability of existing businesses. As part ofEcology Management. The acquisition is in line with the Kureha

these efforts, we made two decisions in 2019.

Group’s policy of strengthening its environmental business andFirst, Kureha acquired Himeyuri Total Work Co., Ltd. in April
2019 through Kureha Ecology Management Co., Ltd. Himeyuri

has created a vertical value chain enabling greater earnings
stability in this business.

Total Work owns a final disposal site for industrial waste and has

Vertical Value Chain of Industrial Disposal
Kureha Ecology Management Co., Ltd.

Collection

Preprocessing

Incineration

Himeyuri Total
Work Co., Ltd.

Final Disposal

As this example demonstrates, Kureha’s policy is to makeKyodo Printing Co., Ltd. in November. A blow bottle is a multi-

acquisitions after first developing a good relationship with thelayer plastic container for food created through a co-extrusion

target firm over a longer period in which the parties get to know

hollow molding method. The container is made from EVOH resin

each other. The decision was taken to demonstrate our intention

with excellent gas barrier properties, with olefin resin used for theto actively develop our growth businesses.

inner and outer layers. The excellent gas barrier properties make itSecond, we transferred Kureha’s blow bottle business todifficult for moisture, oxygen and carbon dioxide to pass throughthe container, preventing spoilage due to microorganisms andoxygen, while also preserving aromas well. Due to thesecharacteristics, blow bottles are used as containers for liquids suchas mayonnaise, ketchup, sauce, dressing and oil.
While this product has continually contributed to Kureha’s
profits since 1965, the decision shows our determination totransform our business portfolio into one centered on Advanced
Materials. Kureha gains 1.2 billion yen on this business transfer. We
will make effective use of these funds by investing in growthfields to support the next leap of the Kureha Group.

Kureha’s blow bottle business was transferred to transform ourbusiness portfolio into one centered on Advanced Materials.

12

Kureha Corporation Business Report 2020

Investing in Growing Ventures for Future Growth
Boost Biomes Inc. and Cambridge Touch Technologies
Exploring and developing new businesses in Japan and overseas

made a seed investment in Boost Biomes Inc. (BBI) while Kureha

is a key part of the Management Goals and Priority Measures set

Corporation led a round of Series B financing in Cambridge Touch

forth in Kureha’s mid-term management plan Kureha’s Challenge

Technologies (CTT).

2020. Against that background, in FY2019, Kureha America Inc.

Investment Round

Seed
Round

Series A

Series B

Firstly, Boost Biomes is an early-stage startup that develops
microbial products. The company has a microbiome discovery

Series C

Exit(IPO, M&A, etc.)

Meanwhile, the Series B investment into CCT is expected to
produce synergies with Kureha’s development of piezo film products.

platform, a proprietary technology exclusively licensed by the

CTT is a fast-growing developer of next-generation touch

Lawrence Berkeley National Laboratory. Their unique platform

sensors spun off from the University of Cambridge in the Unitedtechnology enables the company to identify interactions among

Kingdom. The firm’s UltraTouch Sensor is based on proprietary

members of a microbiome and quickly screen combinations oftouch signal processing algorithms combined with Kureha’s

different microbes that yield desired effects suitable for use in

specialized piezoelectric film, KF Piezo. Due to its simple

various fields such as bio-fungicides and food preservatives.

architecture, the technology enables lower costs and improved

Boost Biomes is developing new products to address criticalneeds in agriculture, increase crop yields and reduce post-harvest

performance compared to existing technologies.
In 2016, Kureha began to support CTT’s development ofwaste. Underlying the products is a proprietary microbiome

UltraTouch sensors by leveraging the material technologies andtechnology platform that enables Boost a unique understandingknow-how accumulated by Kureha over the years.

of interactions within microbiomes, leading to superior products

Through this investment, Kureha will seek to expand itsthat are effective, safe, organic and natural. The value groundbusiness scope by strengthening the downstream presence of KF

underpinning the company’s activities are an excellent match

Piezo. In this way, Kureha will continue to seek new alliances thatwith Kureha’s own commitment to contributing to society inenable us to obtain seeds of new business creation, even withfields such as food packaging and agricultural chemicals.

businesses that are at an early stage of development.

Kureha Corporation Business Report 202013

Review of Operations

Advanced Materials
Major Product Areas:

Advanced plastics (PPS, PVDF, PGA), carbon materials
Advanced Materials revenue fell 9% year-on-year to 41.8 billion yen.
Operating profit decreased by 19% to 3.7 billion yen.

PGA: Profitability Attained, Kureha Moving to Counter
Adverse Market Conditions

50,0005,000

40,0004,000

30,0003,000

In the PGA business, Kureha Energy Solutions (KES) successfully expanded sales volumes of PGA
frac plugs for mid- and high-temperature wells. Sales of PGA stock shapes also grew in thesecond half of the year once destocking was completed in Q1. This positive momentum took the
PGA business into the black by a slight margin. Kureha’s innovative degradable frac plugs havenow been adopted by 32 field operators in the United States, almost doubling year on year, and51 field trials have been conducted.
However, challenges remain. Slow sales of frac plugs for low-temperature wells means ourdevelopment of this product will require further effort. In addition, Kureha’s expansion of the PGA
business faces adverse external factors such as falling crude oil prices, increasingly stringent
customer demands, and intensifying price competition. To enhance our competitiveness, Kureha
will expand operations beyond our core PGA-based offering into the development and sales of
non-PGA frac plugs. We will also seek to improve production efficiency throughout the value chain.
Here, a key goal will be to significantly reduce business assets and the fixed cost burden left overfrom Kureha’s initial, PET bottle-focused business development of global scope and create a much
more agile organization capable of sustained growth. To implement this change in strategy, Kureha
recorded business restructuring expenses of approximately 10.6 billion yen in Q4 FY 2019.

20,0002,000

PVDF: External Factors Dampen Demand Growth in Q4

10,000

1,000

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)

0

(FY)

2018

2019

0

Demand for PVDF, a binder material for lithium-ion batteries (LiBs) that is vitally important for EV
production, showed rapid growth for most of the fiscal year, leading Kureha to strengthen its
customer base in South Korea and China. However, the reduction of EV subsidies implemented
by the Chinese government in June dampened demand for such vehicles over the latter half of2019 in China and consequently lowered demand for PVDF. Demand was further affected by
COVID-19 , which led customers in China and South Korea to halt operations and forced us totemporarily stop production at our factory in Changshu, China in February. The pandemic also
extended the lead times for raw material delivery to our main factory in Iwaki, Japan, which up
until that point had operated at full capacity. As a result, revenue in the PVDF business remainedlargely flat year on year while operating profit decreased.
However, Kureha is taking steps to meet the fierce demand for this material once markets
stabilize. The Iwaki Factory is enhancing its capacity for specialty polymer production in response
to growing demand for advanced binder, and the Changshu Factory will begin volume
production of specialty polymer for use in LiBs in Q1 FY2020. By end-FY2020, Kureha will also
determine the location and production capacity of an additional PVDF plant.

PPS: Slowing Automotive Industry Momentum Affects Earnings

Key products• Polyphenylene sulfide (PPS)• Polyvinylidene fluoride (PVDF)• Polyglycolic acid (PGA)• Carbon fibers• Bead-shaped activated carbon

14

Kureha Corporation Business Report 2020

Revenue and operating profit declined in Kureha’s polyphenylene sulfide (PPS) business due toexchange rate fluctuations and shifts in customer applications that we are now incorporating
into our marketing strategy. However, Kureha anticipates continued strong demand forautomotive applications and is on track to complete a capacity expansion of 5,000 tons / year at
the Iwaki Factory in 2020. The combination of light weight and heat stability makes PPS an
excellent replacement for metals and the material is finding wide-ranging application as theautomotive industry shifts toward CASE (Connected, Autonomous, Shared & Electric) models.

Carbon Products: Slowing Global Semiconductor Demand
Affects Revenue and Profits

Kureha’s carbon products business was affected by lower sales volumes of heat-insulating
materials used in the manufacturing of ingots for semiconductors, leading to reduced revenue
and operating profit. This was mainly due to the general slowdown in the global semiconductor
market seen in 2019.

Specialty Chemicals
Major Product Areas:

Industrial chemicals, agrochemicals, pharmaceuticals
Specialty Chemicals revenue fell by 11% to 24.3 billion yen while operating
profit decreased by 36% to 2.1 billion yen.

Agrochemicals: Adverse Weather Conditions AffectFungicide Sales Volumes
In the agrochemicals business, adverse weather conditions in Europe and flood
damage in North America in connection with the severe 2019 hurricane season
affected sales volumes of the wheat and rapeseed fungicide Metconazole. The resulting
reduction in revenue and operating profit more than offset continued sales growth of

Revenue (Left scale)Operating Profit (Right scale)rice seed treatment Ipconazole.

(Millions of yen)
50,0005,000

40,0004,000

30,0003,000

20,0002,000

10,0001,000

Pharmaceuticals: Sales Stable Year on Year, Offsetting
Mandatory Drug Price Revisions
The new tablet version of Kremezin, a therapeutic agent for chronic kidney disease,maintained the healthy sales volumes seen in the previous year, offsetting
government-mandated drug price revisions. Improved productivity and reduced

0

(FY)

2018

2019

0

research costs led to a rise in operating profit.

Industrial Chemicals: Revenue and Operating Profit
Down on Lower Sales Volumes
Revenue and operating profit decreased due lower sales volumes of both organic andinorganic chemicals, although measures taken over the year to improve the operating
margin, including price adjustments and cost reductions, helped to cushion the fall.

Key products• Therapeutic agent for chronic
renal failure• Agricultural and horticulture
fungicide• Caustic soda

Agricultural and horticulture
fungicide (Metconazole)• Hydrochloric acid• Sodium hypochlorite• Monochlorobenzene• para-Dichlorobenzene

KREMEZIN® Tablets 500 mg• ortho-Dichlorobenzene

Kureha Corporation Business Report 202015

Review of Operations

Specialty Plastics
Major Product Areas:

Household packaging products, food packaging materials,
auto-packaging machinery
Specialty Plastics revenue was down by 4% to 43.5 billion yen, while
operating profit decreased by 6% to 6.3 billion yen.

Home / Fiber Products: Continued Healthy Growth for
New Krewrap and Kichinto-San
Home products continued to see healthy growth due to expanding sales of Kureha’s
flagship NEW Krewrap plastic wrap and increased profitability for the Kichinto-san
product series. The business saw particularly notable growth during the spring of 2020,

Revenue (Left scale)Operating Profit (Right scale)with sales rising by over 110% in February and March. During this time, pandemic-(Millions of yen)related restrictions such as school closures, together with the spread of remote work

50,00010,00040,0008,000

30,0006,000

20,0004,000

Food Packaging Materials: Lower Sales Volumes for HeatShrink Multilayer Film

10,0002,000

Slower sales of heat-shrink multilayer film in overseas markets resulted in lower

and people refraining from going out, led to increased meal consumption at homeand higher demand for NEW Krewrap. In fiber products, sales volumes of Kureha’s
popular fishing line Seaguar also continued to grow.

revenue and operating profit for this business. The main factors were intensifying
0

(FY)

2018

2019

0

competition in Russia and Eastern Europe and lower meat production in Australia due
to drought. The transfer of Kureha’s blow bottle business to Kyodo Printing inNovember 2019 also affected earnings in this business.

Home-use wrap film, NEW Krewrap

Key products• Household wrap film
• Plastic containers• PVDF fishing lines• Polyvinylidene chloride (PVDC) film
• Multilayer shrinkable film
• Machinery for auto-seal foodpackaging

Seaguar fluorocarbon fishing lines
Krehalon food packaging film

16

Kureha Corporation Business Report 2020

Construction and Other Operations
Major Product Areas:

Construction, environmental engineering, transport/
warehousing, and trading-related businesses
Construction: Higher Sales Volumes in Both Private andPublic Sectors
Revenue and operating profit rose on the back of an increase in small and mediumsized private sector projects and higher sales volumes for public sector projects, thelatter driven by reconstruction in the aftermath of Typhoon Hagibis. Continued cost
reductions also contributed to the sound performance. As a result, revenue for Kureha’sConstruction segment rose by 16% to 14.5 billion yen, while operating profit climbed

Revenue (Left scale)Operating Profit (Right scale)by 72% to 1.1 billion yen.
Construction

35,000

Other
Operations
7,000

30,0006,000

Kureha’s industrial waste treatment business continued to grow due to a significant

25,0005,000

increase in the number of such projects. Kureha was also entrusted with the

20,0004,000

management and disposal of waste generated by Typhoon Hagibis. The acquisition

15,0003,000

and new consolidation of industrial waste treatment business Himeyuri Total Work Co.

10,000

2,000

5,000

1,000

(Millions of yen)

0

(FY)

2018

2019

0

Other Operations: Solid Growth for the Waste Treatment
Businessalso contributed to the results. Meanwhile, the logistics business saw revenue andprofit growth on a par with the previous year. In the hospital business, operating profit
remained largely flat despite a slight revenue growth. As a result, revenue in Other
Operations increased by 4% to 18.3 billion yen while operating profit rose by 30% to
2.7 billion yen.

Facility to detoxify low-concentration
PCB wastes[Kureha Ecology Management Co.]

Key products and services• Civil engineering andconstruction• Plant engineering andmaintenance• Industrial waste treatment andenvironmental engineering• Environmental andphysiochemical testing andanalysis• Transport and warehousing• Medical hospital operation

Construction of water gate of Nakata Riverin Fukushima[Kurehanishiki Construction Co.]
Kureha Corporation Business Report 202017

Research & Development

Since its founding in 1944, Kureha has worked with creativity andpassion to generate proprietary technologies that enrich people’s
lives and contribute to the advancement of industry. With corestrengths in organic synthesis, polymer technology, carbon
control, evaluation techniques, and process engineering, Kureha
continues to reinforce its market position through productResearch Center & Process Innovation
Research Laboratories

differentiation and innovation.
Our R&D efforts are twofold—creating new businesses andstrengthening strategic growth businesses. To create new
businesses, we are focusing our proprietary technologies onlatent market needs, exploring business themes in the areas ofenvironment, energy and quality of life (medicine and food). For
existing businesses, we focus on enhancing competitiveness in

Polymer Processing ResearchLaboratories

both quality and cost, as well as strengthening secondary process
technologies to further expand in the downstream businesses.
For both existing and new businesses, Kureha will pursue open
innovation and active collaboration with outside organizations.
In everything that we do, Kureha will bring unique value creation
to bear on the challenges faced by society and communities
around the world.

Strategy for Intellectual Property
Kureha uses three intellectual property strategies to maintain its technological advantages and advance its business operations.
1. Assert intellectual property rights to R&D results to establish barriers to entry.
2. Utilize intellectual property rights to advance businesses.
3. Respect the intellectual property rights of others, and conduct appropriate intellectual property clearance.
The Kureha Group held 1,485 intellectual property rights as of March 2020, of which 1,015 are patent registrations. With
the globalization of Kureha’s business, we are also acquiring intellectual property rights in countries and territories outside
Japan. Currently, 65.6% of the intellectual property rights held by the Kureha Group are outside Japan.

IP Held by Kureha Group

Global Distribution of IP
35
55

Pending
applications
470

Total
1,485

patents

Registeredpatents

239

212

Total
1,485

patents

1,015

Kureha Corporation Business Report 2020

Japan
Asia
EuropeNorth America
WIPO
Others
WIPO: World Intellectual
Property Organization

Advanced Materials
Specialty Plastics
Specialty Chemicals
Others

280
116

Total
1,485

patents
304

433

18

511

IP in Business Segments

785

FY2019 R&D Spending
Kureha’s R&D spending amounted to ¥5,995 million in the fiscal year ended March 31,
2020 (FY2019). An overview of spending is as follows.

1) Advanced Materials segment
For KF Polymer (PVDF) and Fortron KPS (PPS), we are working on innovative methods for reducing
costs by developing technology and improving manufacturing processes in order to raise
productivity and ensure stable production. Particularly for KF Polymer, development effort has
centered on binder materials for the large lithium-ion batteries used in hybrid and electricvehicles. We are accelerating the development of advanced binder grades and improved
solutions for customers, which will enable us to expand our market share.
For PGA and KUREHA Microspheres (thermally expandable microcapsules), we areadvancing forward with initiatives to differentiate performance and functions to meet market
needs and developing new grades. Particularly for the PGA business, in addition to existingsales of frac plugs produced from Kureha’s PGA for drilling operations in the field of shale oiland gas extraction, we also decided to push forward with the development and sales of
non-PGA frac plugs by leveraging the knowledge and resources we have acquired thus far. We
will continue to accelerate the development of new grades and related technology to bring
PGA frac plugs to the forefront of the market.
FY2019 R&D spending in this segment amounted to ¥2,681 million.

2) Specialty Chemicals segment
In the agrochemicals business, we are working to enhance sales volumes and expand markets for
Metconazole agricultural and horticultural fungicide and Ipconazole seed treatment fungicide. We
are also optimizing our manufacturing systems to reduce costs for these fungicide products. Our
agrochemical exploration has discovered promising new agents that are likely to finish the basic
research stages, and we are working toward their development.
In pharmaceuticals, we have developed and launched new easy-to-dissolve tablets of Kremezin,a therapeutic agent for chronic renal failure, as part of our supporting research to enhance theearnings of Kremezin. We are also advancing basic evaluation research with the aim of creating
original medical materials that can be differentiated from existing treatments and products.
FY2019 R&D spending in this segment amounted to ¥1,644 million.

3) Specialty Plastics segment
For Krehalon food packaging film (PVDC film), we are committed to persistently listening to theneeds of our customers and pursuing technology development to ensure stable supply,
improve quality and comply with the sanitation laws enacted in each country. For Krehalon ML(multilayer heat-shrinkable film), we are collaborating with our related departments in Japan andoverseas to differentiate performance and functions and develop new grades to expand
markets and seek further growth in the future. In addition, to further expand global sales, we are
actively providing technical support to customers in Japan and overseas.
FY2019 R&D spending in this segment amounted to ¥1,669 million.
R&D Expenditure/Ratio of R&D
Expenditure to Revenue(%)
7(Millions of yen)
7,000

5,995

6,000
5,000
4,000

4,962
3.4

3,000

5,270

6
5

4.2
3.6

4
3

2,000

2

1,000

1

0

(FY)

2017

2018

2019

0

Kureha Corporation Business Report 2020

19

CSR

Our CSR
Kureha is continually working to strengthen its competitiveness toenhance its enterprise value over the longer term. Our corporate
philosophy and vision for the future is expressed in our ESG(Environmental, Social, and Governance) measures, which arealigned with the UN’s Sustainable Development Goals. As a
responsible corporate citizen, we seek to achieve harmony with thenatural environment and contribute to the realization of asustainable society, while reducing risk, providing motivation toemployees and ensuring quality products and services. We firmly
believe that generating environmental and social value alongsideeconomic value leads to sound, sustainable growth as a company.

The Framework of Kureha CSR
Corporate Philosophy

Local communities
Customerss
Suppliers
S Shareholders/Investors
Employees
NPO/NGO
Educational institutions
Government/Industry groups

DialogueSociety

Responsible
Care

EconomyDevelopment of Human Resources
and Technology
Stakeholders

Code of Conduct,
Governance, Compliance

Kureha Submits Declaration of Voluntary Action
to the White Logistics Movement
On September 20, Kureha submitted a declaration of voluntaryaction to the headquarters of the White Logistics Movement todemonstrate its support for the campaign. The White Logistics
Movement is a government initiative to tackle the ever-worsening
shortage of truck drivers in Japan, ensure a stable operation of thelogistics necessary for people’s daily lives and industrial activities,
and contribute to economic growth. It is spearheaded by the
Ministry of Land, Infrastructure, Transport and Tourism, the Ministryof Economy, Trade and Industry, and the Ministry of Agriculture,
Forestry and Fisheries. In April 2019, the three ministries called onlisted companies and about 6,300 major companies from acrossJapan’s prefectures to participate.
Kureha’s efforts encompass the following five points: (1) Making
proposals for and cooperating in improving logistics (2) Improving
facilities on the shipper’s side (3) Use of expressways (4) Modal shift tovessels and railroads (5) Separate contracts for freights and charges.
These steps will shorten waiting times and cargo handling times,
reduce the burden on drivers, and clarify issues of compensation
when these occur, thus helping to boost the attractiveness of thevitally important truck driver profession.

Support for Victims of Typhoon Hagibis
In October 2019, Typhoon Hagibis struck eastern Japan and caused
a great deal of damage in Iwaki City, Fukushima Prefecture. While
Kureha’s Iwaki Factory suffered almost no damage, daily life in someareas was severely disrupted. Kureha therefore requested water20

Kureha Corporation Business Report 2020

Business operations

Global environment
Energy/Resources
Food
Daily living
Medical care/Health
Sustainability

Social issues connected tobusiness operations

supplies from Sapporo Breweries Ltd., a company with whom weare continually exchanging information, and donated 20,160 530 ml
plastic bottles (840 cases) to Iwaki City. The water was delivered tothe multipurpose open space (Iwaki Green Base) inside the city’s
21st Century Forest Park. We will continue to strengthen our
co-existence with the local community so that we can come toeach other’s assistance in difficult times.

Educational Support for the Next Generation
To support the education of the next generation, Kureha has been
accepting school visits as part of children’s social studies since 1999.
We arrange various activities to make chemistry feel closer to thechildren’s daily lives.
On May 17, fifth graders from Nakoso Daiichi Elementary School in
Iwaki City visited the Iwaki Factory as part of their social studies. Afterwatching a DVD introducing the operations, the children received atour of the facilities, visiting the packaging factory and thepharmaceutical production factory. At the Skills Training Center, they
underwent a learning program teaching them how to handle electric
shocks and how to wash theirhands well. At lunchtime,
there was a picnic at Kureha
General Ground under a blue
sky that made the food lookdelicious. After the meal, thechildren’s lively voices echoed
as they played soccer andbadminton on the grass.

Plan

Environmental
Security anddisaster
response

ActionCommunity
relations

RC
PolicyEnergyconservation

Logistics
safetyLabor
safetyand healthDo

Kureha, an inaugural member of the Japan Responsible
Care Council founded in 1995, continues to pursue
Responsible Care initiatives to improve health, safety andenvironmental performance throughout its operations. We
regard our commitment to Responsible Care as an integral
part of our corporate responsibility.

Product safety
Quality assurance

Check

Responsible Care Implementation

Safety and Disaster Prevention

Kureha is continually enhancing its responsible care initiatives under
the direction of the Corporate Social Responsibility Committee andthe Kureha Group Responsible Care Committee. We take proactive
actions to protect the environment, improve labor safety and healthand ensure product safety and quality, while being responsive andsensitive to community concerns. Our actions are in line with ISO14001,
the international standards for environmental management, ISO9001
for product quality management as well as OHSAS18001 for labor
safety and hygiene management, and are constantly improving
through the Plan-Do-Check-Act cycle.

Safety and disaster prevention are among the most important
responsibilities of a chemical manufacturing company. Kureha
manages its facilities and operations in strict compliance withthe relevant laws and regulations as well as voluntary safety
standards set to best protect its employees and community.
Comprehensive safety and emergency drills and training havebeen also conduced regularly at our manufacturing sites in orderto enhance our preparedness for emergency situations, including
a large-scale earthquake.

Contributing to the Community
Reducing the Burden on the Environment
Since its establishment, Kureha has developed technologies andproducts with a view to reducing the burden on the environment.
In our manufacturing facilities, we strive to minimize environmental
impact by implementing strict measures to prevent air and waterpollution, reduce chemical material and industrial wastes, andmake effective use of energy.

In addition to Kureha General Hospital serving as a community
medical facility in the southern part of Iwaki City, Kureha contributes
to the local community in a variety of different ways. These include
opening company sports facilities for public use, volunteering forclean up activities, teaching science classes at elementary schools
and holding community meetings to initiate dialogue with local
neighborhood associations.

Waste Generated

GHG (CO2) Emissions(Thousands of tonnes) (Left scale)(Thousands of tonnes) (Left scale)

Recycled Rate

Specific Energy Consumption Index(%) (Right scale)(Right scale)

35

100

450

125

28

80

430

100

21

60

410

75

14

40

390

50

7

20

370

25

0

(FY) 2015

2016

2017

2018

2019

0

350

(FY) 2015

2016

2017

2018

2019

Disaster prevention and safety drill at the
Iwaki Factory

0

Kureha Corporation Business Report 202021

Corporate Governance

Kureha’s Corporate Philosophy, Corporate Mission, and Employee Code of Conduct together constitute ourcompany’s identity. All executives and employees share these ideals, and constantly strive to achieve ambitious
goals. Corporate governance is a critical element in maintaining and acting in accordance with this identity, andwe have outlined our basic policies and stance in Kureha’s Corporate Governance Guidelines. Kureha follows theseguidelines to ensure compliance and enhance internal control functions, provide for fair and transparent
management, and ensure a high standard of corporate governance.

Corporate Philosophy• We treasure people and the natural environment.
• We constantly evolve through innovation.
• We contribute to society by developing beneficial products.
Corporate Mission
Kureha will continually strive in the pursuit of excellence.
Employee Code of Conduct
We always act as global corporate citizens, recognizing our corporate social responsibilities.
In relation to our clients: We will act with sincerity and with customer satisfaction as our priority.
In relation to our work: We will consistently pursue progress and innovation.
We will consistently respond to change and act with a global perspective.
In relation to our colleagues: We will maintain mutual respect and exhibit teamwork.

Decision-Making, Execution and Management Framework
1. Supervisory and executive responsibilities are clearly
distinguished to strengthen corporate governance andaccelerate managerial decision-making and execution.
The Board of Directors, which is limited in size to a maximumof 10 directors, of whom at least 2 should be outside directors,
consists of 3 directors and 2 outside directors as of June 2017.
The Board, presided over by the President & Representative
Director, meets once a month in principle, to make decisions onimportant management issues and supervise execution.
The Executive Committee, chaired by the President & CEO
and comprised of executive officers meets twice a month inprinciple. The committee considers basic authoritative policies
and mid- and long-term management strategy that cover all
aspects of general management. The committee members
pass resolutions on issues as authorized in official company
regulations and take steps to ensure speedy implementation.
To clarify responsibilities for fiscal year results, a one-year
term is given to all directors and executive officers.
2. The consolidated Executive Committee, set up to unify the
Kureha Group’s internal policies and long-term management
vision, is chaired by the President & CEO. It serves as a forum toexchange views on basic management policies and business

22

Kureha Corporation Business Report 2020

strategies with representatives from each group company, withthe aim of strengthening consolidated management.
Meanwhile, the operations of group companies are supervised
and managed in accordance with the Group Company
Management Rules, in which the obligations of groupcompanies are clearly specified, while giving autonomy, interms of certain business and management issues required forreporting and consultation prior to making decisions within
their companies.
3. A total of three Audit & Supervisory Board Members (including
two independent outside Audit & Supervisory Board Members)
forms the Audit & Supervisory Board. This body works within aframework that allows them to monitor the deliberation processesof board resolutions and reports, as well as have a representative
Audit & Supervisory Board Member attend and monitor meetingsof the Executive Committee and the Consolidated Executive
Committee. In addition, Audit & Supervisory Board Members areable to access documentation including all documents requiring
senior approval, results of internal audits, and documentation on
the status of customer inquiries.
Audit & Supervisory Board Members interact withaccounting and internal control functions, for example toDiagram of Internal Control Systems (As of June 26, 2020)
General Meeting of Shareholders
Appoints
Nomination Advisory
Committee
Remuneration Advisory
Committee(Non-mandatory)

Consultation

Appoints

Supervisory Function
Board of Directors(Maximum of 10 directors, including 2
or more external directors)

Audit

Appoints

Audit & Supervisory Board(Maximum of 4 members,
including 2 or more
external members)

LiaiseLiaiseLiaiseCompliance Committee
Trade Control (Export/Import) Committee
Labeling and Trade Promotions Committee
Antitrust Committee
Personal Information Protection Committee

Executive Function

LiaisePresident &Chief Executive Officer

Executive
Committee

Independent
AuditorInternal Control and
Auditing Department

CSR Committee
Energy Management Committee

Audit

All divisions ofKureha Corporation

Information Management
Committee
Information Disclosure Committee
Information Security Committee

Audit
Audit

Kureha Group companies

Risk Management Committee

Internal Control ofFinancial Reporting Committee

exchange opinions on audit planning and progress. They also
regularly exchange opinions with the President & Representative
Director and outside directors on management matters including
corporate governance, business conditions and issues that theCompany should address.
In addition, the Internal Control and Auditing Department
acts independently of other departments and under direct
management and supervision of the President & CEO. Based on
an annual internal audit plan approved by the Board of
Directors, this department assesses the suitability andeffectiveness of internal management control systems including
compliance and risk management. It then proposes necessary or
desired changes and improvements, so as to enhance bothmanagement efficiency and public trust in Kureha.
4. A Nomination Advisory Committee and a Remuneration
Advisory Committee have been established as voluntary advisory

bodies for the Board of Directors. Each committee comprises atleast three directors, with outside directors in majority.
The Nomination Advisory Committee deliberates onmatters concerning the appointment and dismissal of the
President and Chief Executive Officer, Representative Directors,
and Directors, as well as candidates to succeed the President
and Chief Executive Officer and relevant succession plans, andreports its opinions and recommendations to the Board of
Directors. The Remuneration Advisory Committee deliberates
on matters related to the system and policies regarding
remuneration for Directors, and reports its opinions andrecommendations to the Board of Directors.
The establishment of these committees enhancestransparency to the Board of Director’s decision-making regardingthese matters, and increases accountability to stakeholders.

Kureha Corporation Business Report 202023

Corporate GovernanceInternal Control System
To further strengthen its internal control system, Kureha hasestablished a set of basic policies, committees and internal rules toensure that it observes laws and regulations and conducts its
business operations in an appropriate and fair manner.
Under this system, Kureha publishes Internal Control Reports
under the responsibility of the President & CEO.

In addition, Kureha has also established a set of Basic Rules forInternal Control of Financial Reports to ensure the reliability of thefinancial reports and to guarantee implementation ofmanagement’s assessment and certified public accountant’s
auditing of the effectiveness of internal control of financial reports,
as stipulated in the Financial Instruments and Exchange Law.

Independent Directors and Audit & Supervisory Board Members
Presently, Kureha’s Board of Directors and Audit & Supervisory
Board each include two independent members selected fromoutside the Company. They fulfill their respective roles andduties in providing independent and fair supervision over theCompany’s management and business execution, while serving
the interest of its stakeholders. Their independence standards
also meet the requirements prescribed by the Tokyo Stock
Exchange as well as the ‘Criteria for Determining the Independenceof Outside Executives’ established by the Company.

Outside Directors
1. Osamu Tosaka
Dr. Osamu Tosaka possesses advanced views and a wealth ofexperience in corporate management from a technologicaland research viewpoint due to his history of responsibility ininternational business and managing research and production
divisions at a global food manufacturing company.
Dr. Tosaka was appointed Kureha Outside Director in
June 2016.
2. Kazunari Higuchi
Mr. Kazunari Higuchi possesses advanced views and wealthof experiences in the management of financial institutions
and business companies.
Mr. Kazunari Higuchi currently served as Audit & Supervisory
Board Member of Taiyo Nippon Sanso Corporation until June

2020. Currently, he also serves as Outside Director of The
Michinoku Bank, Ltd., there are no significant transactions
between the bank and the Company or Group Companies.
Mr. Higuchi was appointed Kureha Outside Director in
June 2020.

Outside Audit & Supervisory Board Members
1. Masaru Kiriyama
Mr. Masaru Kiriyama has extensive knowledge and expertisein risk management and compliance as well as financing andaccounting through his previous work at Meiji Yasuda Life
Insurance Company.
Mr. Kiriyama was appointed Kureha Outside Audit &Supervisory Board Member in June 2019.
2. Yukako Oshimi
Ms. Oshimi is a lawyer and partner at SHIBATA, SUZUKI &NAKADA, a Tokyo-based independent law firm. She isspecialized in corporate laws and compliance, serving
currently as Outside Member of Risk Management andCompliance Committee at ORIX Asset Management
Corporation and Outside Auditor at FUJI SOFT
INCORPORATED.
Ms. Oshimi was appointed Kureha Outside Audit &Supervisory Board Member in June 2019.

Executive Remuneration
Executive remuneration reflects corporate performance. It isdetermined with consideration to enhancing medium- tolong-term enterprise value, and in accordance with thecompensation structure and levels appropriate to the roles andresponsibilities required of each executive.
Total remuneration paid to directors and Audit & Supervisory
Board Members in fiscal 2019 (ended March 31, 2020) was as follows.

24

Kureha Corporation Business Report 2020

Board directors(for total of 5 directors)¥247.9 mil(of which ¥30.6 mil was paid to 2 outside directors)

Audit & Supervisory
Board Members(for total of 3 members)¥48.0 mil(of which ¥26.4 mil was paid to 2 outside Audit &Supervisory Board Members)

Note: The remuneration for board directors includes stock acquisition rights at a total value
equivalent to 19.1 million yen, issued as reward-type stock options to 3 directors, notincluding outside directors.

Compliance Program Framework
Kureha has in place a compliance program framework, based on
the Kureha Group Ethical Charter and its Compliance Rules.
Kureha’s compliance objective is to ensure that all executives
and employees act in a manner that is consistent with legal
compliance and that also meets the standards of our society. This
framework is constantly being improved and reinforced so as tocultivate a compliance-focused corporate culture.
The Compliance Committee, led by the President & Chief
Executive Officer (CEO), keeps employees informed of complianceissues through training programs and other activities based on
the Compliance Handbook and the Compliance Standards. In
addition, direct access to internal and external (legal) advisers forinquiries and reporting on compliance issues is maintained so thatlegal violations, confirmed or suspected, can be detected anddeterred at an early stage.

Disclosure and Transparency
Impartial and continuous information disclosure ensuresmanagement transparency and builds trust with stakeholders. Kureha
provides timely and appropriate disclosure in accordance with allapplicable laws and regulations, as well as the Timely Disclosure Rules
prescribed by the Tokyo Stock Exchange. Kureha also proactively
releases information deemed to be valuable to shareholders.
Kureha’s General Meeting of Shareholders is held annually in
June. To ensure that shareholders have sufficient time to review
the proposals, the proxy statement for the shareholders’ meetingis posted on the Company’s website at the end of May, and mailedin early June. Shareholders are able to exercise their voting rights
by post or via the Internet.
During the shareholders’ meeting, Kureha uses video to clearly
explain its business content and results, and makes every effort torespond directly and fully to shareholders’ questions.
Kureha also holds regular briefings for institutional investors
and analysts regarding its medium-term business strategies andresults, and regularly provides individual hearings for investors inJapan and overseas.

Risk Management System
In response to various types of risk accompanying businessactivities, Kureha has established a risk management structure
consisting of a Risk Management Committee, a CSR Committee
and an Information Management Committee. Each committee istasked with recognizing related risks, and proposes concretemeasures to the President & Representative Director aimed at
reducing and avoiding risk and manages implementation.
In addition, to respond to unforeseen circumstances, aBusiness Continuity Plan is in place for the establishment of an
emergency response task force, with the objective of prioritizing
the safety of personnel, minimizing economic damage, andensuring the continuation of corporate activities.
In terms of information management, Kureha works rigorously
to ensure appropriate security and disclosure based on its
regulations for information control, security and disclosure, withindividual committees set up to oversee each of these areas.
To address environmental and safety risks, management
procedures for the environment, quality, and labor safety havebeen established that comply with ISO 14001, ISO 9001, and
OHSAS 18001 standards. In addition, Kureha is also continuingwith ongoing efforts to improve environmental conservation,
quality assurance, and occupational health and safety.

Compliance with the Corporate Governance Code
The Corporate Governance Code is a compilation of various
regulations aimed at ensuring substantive corporate governanceat listed companies. It was formulated in March 2015 in responseto revisions made to the Japanese government’s growth strategy,
the Japan Revitalization Strategy, in 2014.

Kureha considers thorough corporate governance to be of vital
importance for strengthening the management base to achieve
medium- to long-term corporate growth. In November 2015, theCompany formulated its own Corporate Governance Guideline.

Kureha Corporation Business Report 202025

Corporate Governance

Kureha’s Steps to Strengthen Corporate Governance in the Last Two Fiscal Years
Kureha pursues not only financial stability but also stability in the
non-financial aspects of our operations. Against this background,
we are strengthening our measures in ESG areas. We have also
made strengthening Kureha’s management foundation a part of
the action plan set forth in the mid-term management plan
Kureha’s Challenge 2020.

FY2018Discontinuation of Countermeasures against Large-Scale
Purchase of Kureha Shares, Etc. (Takeover Defense Measures)
Kureha has resolved to discontinue and abolish the Current
Countermeasures on the expiration date.
As a means of preventing inappropriate persons fromcontrolling the Company’s financial and business policies, theCompany continued the Countermeasures until March 2019.
However, Kureha has continued to consider as to the content
of the Countermeasures in light of the business environment
surrounding the Company, including the opinions of ourshareholders, recent trends involving takeover defense measuresand the stockholder composition. As a result, we have determined
not to renew the Countermeasures and to abolish such measures.
Following the termination, we will continue to properly
respond to any large-scale share acquisition attempted by a third
party in accordance within the scope of the Financial Instruments
and Exchange Law of Japan, the Japanese Companies Act, andother relevant laws and regulations. We will seek necessary andsufficient information from any such large-scale purchaser toenable our shareholders to accurately evaluate the conditions of a
proposed acquisition. Also, we will disclose the opinions of theBoard of Directors promptly and ensure that all shareholders are
given sufficient time and information to deliberate with respect tosuch acquisition attempt.
Establishment of Nomination and Compensation Committees
By establishing a nomination committee and a compensationcommittee, Kureha enhances transparency to the Board of
Director’s decision-making regarding these matters and increases
accountability to stakeholders.

26

Kureha Corporation Business Report 2020

Termination of Corporate Adviser System
Kureha aimed to further enhance corporate governance, makeexecutive remunerations more closely linked with the businessperformance, and motivate Board Directors to contribute to theCompany’s performance and value creation while in office. To thisend, Kureha terminated its current system of appointing former
Board Directors to Executive Corporate Advisers or SeniorCorporate Advisers.

FY2019Introduction of a Delegation-Type Executive Officer System
and Expanding Stock Options to Include Executive Officers
Kureha has reviewed its employment system and compensation
system for executive officers. Shifting the employment form forexecutive officers from the conventional employment-typesystem to a delegation-type system will clarify scopes of authority
and roles. This in turn will enable better focus on decision-making
and oversight, while further revitalizing the Board of Directors. At
the same time, we have expanded the scope of stock options toinclude executive officers. By doing so, we aim to increase themotivation of executive officers to work toward enhanced
corporate value.
Note: Decision made in FY2019, started from FY2020.

Management Team

Board of Directors

Yutaka Kobayashi

Michihiro Sato

Yoshio Noda

President &Chief Executive Officer

Senior Vice PresidentManaging Director, PGA Department
General Manager of Manufacturing &Technology Division
Managing Director of R&D Division

Senior Vice President
General Manager ofFinance & Accounting Division
General Manager of
Administration Division

Osamu Tosaka

Kazunari Higuchi

Outside Director

Outside Director

Audit & Supervisory Board

Masaru Kiriyama

Toru Yoshida

Yukako Oshimi

Naomitsu Nishihata

Koji Suyama

Hiroyuki Tanaka

Senior Vice President
Deputy Managing Director,
PGA Department

Senior Vice President, General Manager
of Home Products & Packaging
Materials Division

Vice President, General Manager ofIwaki Factory

Katsuhiro Natake

Satoshi Yonezawa

Masahiro Namikawa

Vice President, General Manager ofAdvanced Products Division

Vice President, General Manager ofChemicals Division

Vice President, General Manager ofCorporate Planning & Strategy Division

Executive Officers

Hiroyuki Sato
Vice President, General Manager,
Research & Development Division

Kureha Corporation Business Report 202027

Consolidated Financial Summary
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 (FY2019) and 2019 (FY2018)

Millions of yen

For the year:
Revenue:
Domestic
Overseas
Revenue by segment:
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations
Operating profit
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations
Elimination or corporate
Profit attributable to owners of parent
Capital expenditure
Depreciation and amortization
Research and development expenses
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Year-end:
Total assets
Total equity attributable to owners of parent
Interest-bearing debt

FY2019FY2018¥ 142,398
102,718
39,678¥ 148,265
103,862
44,402

41,842
24,331
43,473
14,457
18,29318,041
3,711
2,127
6,306
1,147
2,713
2,033
13,71914,928
12,110
5,995
2,681
1,644
1,669
—
—
15,150
5,483(19,353)

45,74927,30945,14812,415
17,643
17,172
4,607
3,301
6,738
668
2,087
(230)
13,933
13,174
10,310
5,270
2,037
1,903
1,329
—
—
23,377(8,363)(15,478)¥ 246,890
164,990
37,317¥ 247,352
160,551
39,018
Yen

Amounts per share:
Basic profit per share
Owners’ equity per share
Cash dividends per share¥ 692.61
8,453.07
170.00¥ 679.55
7,922.58
165.00Percent

Ratios:Operating profit to revenue
Profit attributable to owners of parent to revenue
Return on equity
Return on assets
Owner’s equity ratio
Notes: 1. Return on equity = Profit attributable to owners of parent/Shareholders’ equity × 100
2. Return on assets = Profit before tax/Total assets × 100
3. Owner’s equity ratio = Owner’s equity/Total liabilities and equity

28

Kureha Corporation Business Report 2020

12.7%
9.6
8.4
7.3
66.8

11.6%
9.4
9.0
7.1
64.9

Management Discussion and Analysis
Business environment
During the fiscal year ended March 31, 2020 (FY2019), theworld economy was on a moderate recovery trend until the third
quarter. Meanwhile, the Japanese economy recorded negative
growth in the third quarter due to the impact of the consumption tax hike in October. From the fourth quarter onward,
economic activities both in Japan and overseas decelerated
sharply due to the spread of COVID-19. In these conditions,however, the effect on the financial results of the Kureha Group(“the Group”) for FY2019 was insignificant, supported partly byincreased demand in Japan in the Specialty Plastics segmentdespite a slowdown in sales in the Asian region in the Advanced
Materials segment.

Analysis of business results
Revenue of the Group in the subject fiscal year decreased by¥5,867 million from the previous fiscal year to ¥142,398
million. Gross profit decreased by ¥1,450 million to ¥42,132
million, and gross profit margin improved from 29.4% to29.6%. Selling, general and administrative expenses increased by¥54 million to ¥28,105 million. Share of profit of entities
accounted for using equity method increased by ¥29 million to¥1,998 million, and other income (net of other expenses)
amounted to an income of ¥2,016 million, an improvement of¥2,344 million from the loss recorded in the previous fiscal year.
As a result, operating profit increased by ¥868 million to¥18,041 million, and the ratio of operating profit to revenue
increased from 11.6% to 12.7%.
Finance loss amounted to ¥96 million, a decline of ¥358
million from the previous fiscal year. As a result, profit before
tax increased by ¥509 million to ¥17,944 million.

Revenue
Revenue
Revenue

Income tax expense was ¥4,117 million, and profit for theyear decreased by ¥171 million to ¥13,827 million. The Group
posted profit attributable to non-controlling interests of ¥108
million, and profit attributable to owners of parent decreased by¥214 million to ¥13,719 million.

Cash flow analysis
The balance of cash and cash equivalents at the end of the subject
fiscal year (March 31, 2020) amounted to ¥7,268 million, an
increase of ¥1,278 million from the end of the previous fiscal year
(March 31, 2019). Even if the effect of COVID-19 continues, theGroup is unlikely to face a funding shortfall for the time being,with such measures as securing an issuance limit on commercial
papers and using commitment line agreements and overdraft
agreements with financial institutions, in addition to securing
cash and cash equivalents. An outline of individual cash flows andthe main factors affecting each is as follows:
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥15,150
million, a decrease of ¥8,227 million from the previous fiscal
year. This was mainly due to an increase in expenditure fordecreased trade and other payables, and an increase in income
taxes paid.
Cash flows from investing activities
Net cash provided by investing activities amounted to ¥5,483
million, compared to net cash used of ¥8,363 million in theprevious fiscal year. This was mainly because there was anincrease in proceeds from sales of property, plant and equipment, and intangible assets, and an increase in proceeds fromsales of investment securities.

ProfitAttributable
ProfitAttributable
ProfitAttributableto Ownersof Parent
toto
Ownersofof
ParentOwnersParentOperating
ProfitOperating
ProfitOperating
Profit(Millionsof yen)(Millions
of of
yen)
(Millionsyen)(Left scale)(Millionsof yen)of yen)(Leftscale)(Millions(Leftscale)(Millionsof yen)Ratioof Operating
Profit
Ratio
ofof
Operating
Profit
Ratio
Operating
Profit(Right(Rightscale)(%)scale)scale)(%)(%)(Rightto Revenue
toto
Revenue
Revenue(Left scale)(Millionsof yen)of yen)(Leftscale)(Millions(Leftscale)(Millionsof yen)Ratio
of Profit
to Revenue
Ratio
ofof
Profittoto
Revenue
Ratio
ProfitRevenue(Right(Rightscale)(%)scale)scale)(%)(%)(Right150,000150,000
150,000

21,00021,000
21,00018

18 18

15,00015,000
15,00012

12 12150,000150,000
150,000

17,50017,500
17,50015

15 15

12,50012,500
12,50010

10 10120,000120,000
120,000

14,00014,000
14,00012

12 12

10,00010,000
10,00088 890,00090,000
90,00010,50010,500
10,50099 97,500 7,500
7,500

6

6 6

60,00060,000
60,0007,000 7,000
7,000

6

6 6

5,000 5,000
5,000

4

4 4

30,00030,000
30,0003,500 3,500
3,500

3

3 3

2,500 2,500
2,500

2

2 2

0

0 0

0

0 0

0

0 0

2019 2019(FY) (FY)(FY)2018 2018
2018
2019

0

0 0

(FY) (FY)(FY)2018 20182019 2019
2018
2019

0

0 0

(FY) (FY)(FY)2018 20182019 2019
2018
2019

Domestic
Overseas
Domestic
Overseas
Domestic
Overseas

Cash
Flows
from
Cash
Flows
from
Cash
Flows
from
Operating
Activities
Operating
Activities
Operating
Activities
Cash
Flows
from
Cash
Flows
from
Cash
Flows
from

Total
Assets
Total
Assets
Total
Assets(Millionsof yen)of yen)
(Millions(Millionsof yen)Total
EquityTotal
EquityTotal
EquityKurehaCorporation Business Report 2020 29(Left scale)(Millionsof yen)of yen)(Leftscale)(Millions(Leftscale)(Millionsof yen)Owner’sEquityRatio
Owner’sEquityRatio
Owner’sEquityRatio

Cash flows from financing activities
Net cash used in financing activities amounted to ¥19,353
million, an increase of ¥3,874 million from the previous fiscal
year. This was mainly due to an increase in acquisition oftreasury stock, and other factors.

expenditure centered on the Advanced Materials Division, andintends for capital required to be procured from cash-at-hand,
corporate bonds, and borrowings.

Balance sheet analysis

As of March 31, 2020, the Kureha Group’s total assets
amounted to ¥246,890 million, a decrease of ¥461 million fromThe Kureha Group procures required capital throughthe end of the previous fiscal year (March 31, 2019). Current
borrowing from financial institutions, and the issuance ofassets totaled ¥79,011 million, an increase of ¥233 million from
corporate bonds and commercial papers. In addition, a cash
the end of the previous fiscal year, mainly due to increases inmanagement system has been introduced, in order to ensure
cash and cash equivalents and other current assets, despite athat the Group is effectively utilizing funds and reducing
decrease in trade receivables. Non-current assets amounted tofinance costs. The Group also ensures the liquidity of funds by¥167,879 million, a decrease of ¥695 million from the end of
securing an issuance limit on commercial papers and using
the previous fiscal year. This was because, although property,
commitment line agreements and overdraft agreements withplant and equipment increased ¥2,229 million from the end of
financial institutions, in addition to securing cash and cash
the previous fiscal year to ¥119,782 million, there was a decline
ProfitAttributable
ProfitAttributable
Revenue
Operating
ProfitRevenue
Operating
ProfitProfitAttributable
Revenue
Operating
Profitequivalents.
Given
these
measures, even if the effectofscale)inof assets
investment
securities.
The rise(Left(Millionsof yen)(Leftscale)(Millionsof yen) associated with sales(Leftscale)(Millionsyen)(Millionsof yen)(Millionsyen)(Millions
of of
yen)
toof
Ownersof Parent
toOwnersParentto
Ownersofof
Parent(Left scale)(Millionsof yen)(Leftscale)(Millionsof yen)(Leftscale)(Millionsyen)
COVID-19 continues, the Group is unlikely to facea Ratiofundingin property,
plant and equipment
wasa result
ofofanincrease
Ratio
of Operating
Profit
Ratio
Operating
Profitofof
Operating
Profit(Right(Rightscale)(%)to(Rightscale)
scale)(%)(%) expenditures
Ratio
of Profit
to Revenue
Ratio
ProfitRevenueto Revenue
Revenue
ofof
Profittoto
Revenue
toto
Revenueshortfall for the time being.
owing
capitalatRatiofacilities
includingthe
Iwaki(Right(Rightscale)(%)scale)(Rightscale)(%)(%)The Group’s basic policy is to maximize cash flows from
Factory as well as new consolidation and the application of IFRS
150,000150,000
18
12
15,00015,000
150,000
18
12
15,00021,00021,000
operatingactivities by securing earnings in line
with21,000
its
16 “Leases,”18 offsetting a decreasecaused by business asset 12
businessplan and by enhancing asset efficiency,
andto allocate
reorganization
associateda structural reform in the
150,000150,000
15
12,500with
10 polygly17,500
150,000
12,50017,50015 1512,50010 1017,500cash with priority given to capital expenditure for new
colic acid (PGA) business.
120,000120,000
12 liabilities
14,000120,000
14,00010,0008 8
12 12
14,00010,000businesses
and expansion of existing businesses,
investments
Total
at 10,000
the endof the subject fiscal year8 amounted
and loans, research and development, and dividend payments
to ¥80,266 million, a decrease of ¥4,917 million from the end
90,00090,000
97,500 7,500
610,50010,500
90,0007,500
10,5009 9
6 6
to investors. In line with this policy, the Group procuresof the previous fiscal year. This was mainly because of a decline
requiredcapital with priority given to securing7,000
long-termin tradeand a5,000
declinein interest-bearing debt
60,00060,000
4 by4 4
6 payables,
60,000
5,000
7,000
5,000
7,000
6 6
funding, and in consideration of the balance between long¥1,701 million from the end of the previous fiscal year to
30,00030,000
3,500 3,500
330,000
3,500
2,500
3 3
2,500
2 2
and
short-termborrowings.
¥37,317
milliondue to2,500
repaymentsof bonds payable,2 despitean
In0 regardtoimportantplannedoutflows
ofcapitalandtheincreasedue
tonew
consolidation,theapplication
of
IFRS
16
0
0
0
0
0 0
0 0
0 0
0 0
0 0
(FY) of(FY) (FY)(FY) (FY)(FY)2018 2018
2018funds,
20192019 2019(FY)2018 201820182019 intends to conduct
2018
2019
2019“Leases,”20182019 and other factors.
(FY)(FY)20182019
sourcesthose
the 2019
Group
capitalFinancial policy

Domestic
Overseas
Domestic
Overseas
Domestic
Overseas

Cash
Flows
from
Cash
Flows
from
Cash
Flows
from
Operating
Activities
Operating
Activities
Operating
Activities
Cash
Flows
from
Cash
Flows
from
Cash
Flows
from
Investing
Activities
Investing
Activities
Investing
Activities

Total
Assets
Total
Assets
Total
Assets

Total
EquityTotal
EquityTotal
Equity(Left scale)(Millionsof yen)of yen)(Leftscale)(Millionsof yen)(Leftscale)(Millions(Millionsof yen)of yen)
(Millionsof yen)(Millions

Owner’sEquityRatio
Owner’sEquityRatio
Owner’sEquityRatio(Right(Rightscale)(%)scale)(Rightscale)(%)(%)(Millionsof yen)of yen)
(Millionsof yen)(Millions
25,00025,000
25,000300,000300,000
300,000

20,00020,000
20,00015,00015,000
15,00010,00010,000
10,000240,000240,000
240,0000

0 02019 2019(FY) (FY)(FY)2018 2018
2018
2019

30

Returnon Assets
ReturnAssetsReturnonon
AssetsKureha Corporation
Business
ReportReturnon
EquityReturnon
EquityReturnon2020Equity(%) (%)(%)

90 90

150,000150,000
150,00075

75 75

120,000120,000
120,000

60

60 60

90,00090,000
90,0004545 4560,00060,000
60,00030

30 30

30,00030,000
30,000

15

15 15

0

0 0

120,000120,000
120,000

60,00060,000
60,000-10,000-10,000-10,000-15,000-15,000-15,00090

180,000180,000
180,000

5,000 5,000
5,000-5,000 -5,000-5,000180,000180,000
180,0000

0 02019 20192019
2018(FY) (FY)(FY)2018 2018

Interest-Bearing
Debt
Interest-Bearing
Debt
Interest-Bearing
Debt(Millionsof yen)of yen)
(Millionsof yen)(Millions

00 0(FY) (FY)(FY)2018 20182019 2019
2018
2019

CapitalExpenditure
CapitalExpenditure
CapitalExpenditure
Depreciation
andandDepreciation
andDepreciation
Amortization
Amortization
Amortization

Revenue
Revenue
Revenue

ProfitAttributable
ProfitProfitAttributable
Attributable
toOwners
OwnersofParent
Parentto Owners
toof ParentofOperating
ProfitOperatingOperating
ProfitProfit(Millionsyen)(Millions(Millionsof yen)ofofyen)(Leftscale)scale)(Millionsyen)(Left (Leftscale)(Millions(Millionsof yen)ofofyen)(Leftscale)scale)(Millionsyen)(Left (Leftscale)(Millions(Millionsof yen)ofofyen)
Ratio
ofOperating
Operating
ProfitRatio
Ratio
of Operatingof
ProfitProfit(Rightscale)(%)(Right(Rightscale)
scale)
(%)
(%)
Ratio
ofProfit
ProfittoRevenue
RevenuetoRevenue
Revenue
Ratio
Ratio
of Profit
ofto(Kureha
Revenuetoto Revenue
toTotal equity at the end of the subject fiscal year amounted
tomainly in industrial waste processing
facilities
Ecology(Rightscale)(%)(Right(Rightscale)scale)(%) (%)¥166,623 million, an increase of ¥4,456 million from the end ofManagement Co., Ltd.).
150,000
15,00021,000150,000
150,000
18 1818
12 121215,00015,000
21,00021,000
the previous fiscal year. This was primarily due to the posting ofIn addition, as a joint initiative, the Advanced Materials,
profitattributableto owners of parent of ¥13,719
million,Specialty
andSpecialty
Plastics segments invested
150,000
12,50017,500 despite
150,000
150,000
15 Chemicals,
1515
12,50012,50010 1010
17,50017,500the payment of dividends in an amount of ¥3,608 million and¥2,504 million in such areas as research and development
120,000
14,00010,000and common factory facilities
120,000
120,000
8
88
1212
14,000million.
14,00010,00010,000
purchaseof treasury shares in an amount of ¥5,003
facilities12(Kureha
Corporation)
As a90,000
result of the above, the ratio of owners’ equity
to gross(Kureha Corporation).
7,500
10,50090,00090,000
999
7,500 7,500
666
10,50010,500
assets increased by 1.9 percentage points from the previous fiscal
Capital required for these investments was procured from60,0005,000and borrowings.
7,000
year60,000
to60,000
66.8%.
ROE (Profit attributable to owners
parent/cash-at-hand,bonds,
5,000
444
7,000of
7,000
6
6 6 corporate5,000
Equity capital) declined by 0.6 percentage points to 8.4%. ROA
An amount of increase as a result of business combinations
30,000
3,500
2
2,500
30,00030,000
3,500 3,500
333
2,500 2,500(Profitbefore tax/Total assets) increased by 0.2 percentage
is not includedin the amountof capital expenditure. 2 2points 0to 7.3%.
00
0
00
0
00
0
00
0
00
(FY)
(FY) 20182018(FY) 20182018
2018 201920192018 20192019
2019
2018 2019Business
2019(FY) (FY)(FY) (FY)(FY) (FY)2019
and other risks
There
was2018
no 2018
impactof2019COVID-19 on securingliquidity
Domestic
Overseas
Domestic
Domestic
Overseas
Overseasand protecting
receivables
ofthe Kureha Group for the subject
The Kureha Group’s business operations are diverse, comprisingfiscal year.
the Advanced Materials segment focused on processed PGA
resin products, PVDF resin, and PPS resin; the Specialty
Overview of capital expenditure
onTotalpharmaceuticals,
Cash
Flows
from
Total
AssetsChemicals segment focusedTotal
Total
Equity agrochemicals
Cash
Cash
Flows
Flows
from
from
Total
Total
AssetsAssetsEquityEquity(Leftscale)scale)(Millions
ofyen)
yen)(LeftSpecialty(Leftscale)(Millions(Millionsof yen)ofsegment(Millionsyen) and industrial chemicals; the(Millions(Millionsofyearyen)
ofofyen)Operating
Activities
OperatingOperating
Activities
Total capital
expenditureofActivities
theKureha Group during the
fiscalPlastics
Owner’sEquityRatio
Owner’s
Owner’sEquityEquity
Ratio
Ratio
Cash
Flows
from
Cash
Cash
Flows
Flows
from
from
ended March 31, 2020 amounted to ¥14,928 million.
focused on household products
andscale)foodpackaging;the(Rightscale)(%)(Right(Rightscale)(%) (%)
Investing
Activities
Investing
Investing
Activities
Activities
Capital expenditurebybusinesssegment
Construction
segment
focusedonconstruction
andengi(Millions
yen)(Millions(Millionsof yen)ofofyen)
The25,000
Advanced Materials segment invested 300,000¥7,270
million,neering; and the Other
Operations
segment including
300,000
25,000300,000
25,000180,000
180,000
180,000
90 9090
mainly in manufacturing-related facilities for PPS resin (Kureha
environmental businesses and logistics. Also geographically,
20,00020,00020,000
150,000
150,000
150,000
75 7575
Corporation), and an extrusion processing plantforplastic stock
the Group conducts businessglobally.
240,000
240,000
240,000
15,00015,00015,000
shapesandfilms (Kureha Extron Co., Ltd.).
Among the major risks that are deemed likely to have a
120,000
120,000
120,000
60 6060
10,00010,000
The10,000
Specialty Chemicals segment invested180,000¥743
million,considerable impact on the operating results and other aspects of
180,000
180,000
primarily
in manufacturing-related facilities for industrial
the Kureha Group, the90,000
risk90,000
associated with COVID-19
the
5,000
5,000 5,000
90,00045
45 is45
chemicals(KurehaCorporation).
one
that
is
most
likelytoactualize
withgreater
impacton
120,000
120,000
120,000
000
60,00060,00060,000
30 3030
The Specialty Plastics segment invested ¥1,883 million,
operating results, etc. Until
the global spread of this diseaseis-5,000-5,000-5,000
60,000resin
60,000
primarily in manufacturing-related facilities for60,000
PVDC
brought under control,30,000
eachbusiness
of
the
Group
may
be
30,00030,00015 1515-10,000-10,000-10,000(KurehaCorporation).
affected as follows. Additionally, it is difficult to reasonably-15,000
0 in0 0facilities.
-15,000
00
00
The-15,000
Construction segment invested ¥87 million
calculate the impact on the0 operating
results and other0 aspects
at20192018 20192019
2019
2018 20192019(FY) 20182018(FY) 20182018(FY) 20182018(FY) (FY)(FY) (FY)(FY) (FY)2018 20192019
2019
The Other Operations segment invested ¥2,437 million,
this moment.

ReturnonAssets
AssetsReturnReturnon on
AssetsReturnonEquity
EquityReturnReturnon on
EquityInterest-Bearing
Debt
Interest-Bearing
Interest-Bearing
Debt
Debt

CapitalExpenditure
CapitalCapitalExpenditure
Expenditure
Depreciation
andDepreciation
Depreciation
andandAmortization
Amortization
Amortization(Millionsyen)(Millions(Millionsof yen)ofofyen)(%)(%) (%)(Millionsyen)(Millions(Millionsof yen)ofofyen)121212

90,00090,00090,000

15,00015,00015,000

10

1010

75,00075,00075,000

12,50012,50012,500

888

60,00060,00060,000

10,00010,00010,000

666

45,00045,00045,000

7,500
7,500 7,500

444

30,00030,00030,000

5,000
5,000 5,000

2

22

15,00015,00015,000

2,500
2,500 2,500

0002018 20192019
2019(FY) 20182018(FY) (FY)

0002018 20192019
2019(FY) 20182018(FY) (FY)000(FY) 20182018
2018 20192019
2019(FY) (FY)

Kureha Corporation Business Report 202031

Forward-looking statements in this text are based on evaluations made as of the date of submission of this report.
Advanced Materials segment
Polyglycolic acid (PGA) business: Operating rates of U.S. shale
oil and gas extraction operators—key customers for the business—have dropped sharply due to lower crude oil prices caused
by declining demand, which is affecting the sales of PGA resin
products. It is expected that sales of PGA resin products willremain sluggish until the crude oil prices recover.
Polyvinylidene fluoride (PVDF) business: Sales of products
for binders in lithium-ion batteries may temporarily slow as theoperating rates of the automotive industry decline.
Advanced materials other than the above are targeted for
applications mainly in the areas of automobiles, electrical andelectronics, and therefore they may be also affected by stagnant
production activities of customers in these areas, which may
cause sales to decline.
Specialty Chemicals segment
Agrochemicals business: As the business is dependent on
outsourced production, it may face the operational risk ofoutsourcing contractors.
Industrial chemicals: As operating fields of its sales destinations
are broad, there may be a decline in demand and the softening ofmarket conditions due to stagnant economic activities in Japan andoverseas.
Specialty Plastics segment
Household products business: Demand is increasing with morehouseholds eating meals at home due to self-restraint in going out,
but currently production and logistics operations are not being
disturbed.
Commercial-use packaging materials business: Due torestrictions on outings in Europe, production activities ofcustomers including the meat-packing industry are stagnant,which has affected, and may continue to affect the sales ofcommercial-use packaging materials.
Construction and Other Operations segments
Construction business: Stagnant economic activities in Japan
may cause a decrease in orders for construction projects.
Environmental business: The industrial waste processing
business may face lower volume of waste due to stagnant
economic activities in Japan.
Hospital business: The business may see reduced opportunities to cope with COVID-19 and decreased number of patientscoming to hospitals.
As to our overall business activities, we have set up a
Company-wide COVID-19 Countermeasures Headquartersthat monitors the effect on the working environment and healthconditions of the Group’s employees in Japan and overseas, in aneffort of securing safety, preventing the spread of infection,
mitigating impacts on our business operations, and ensuring

32

Kureha Corporation Business Report 2020

business continuity. Specific measures that have commenced
include the development and operation of a system required forteleworking, and an epidemic prevention system on entering
manufacturing sites.
Major risks other than COVID-19 are as follows:(1) Changes in external business environment
The Group’s business is exposed to external factors such as changes
in markets or customers, and intensification of competition withrival companies. Accordingly, changes such as a decrease in demand
for the Group’s principal products, customers shifting production
overseas, and an increase in production capacity by competingfirms, could have a negative effect on the Group’s operating results
and other aspects.
(2) Changes in fuel and raw material prices
Petrochemical raw materials such as naphtha and coal used by
the Group, as well as fuel, are susceptible to changes in market
conditions. As a result, changes such as an increase in the priceof these raw materials, or the inability to shift the additional cost
to product prices in a timely and appropriate manner, could
have a negative effect on the Group’s operating results and otheraspects.
(3) Product liability and goods quality
The Group’s core business is chemical manufacturing. The
Group is acutely aware of the risks connected with its products
and the manufacturing process, and is careful to continually
exercise Responsible Care (autonomous management for environmental conservation, disaster safety and other measures). In
addition, the Group utilizes product liability insurance.
However, should a significant, unforeseen quality issue arise,
there could be a negative effect on the Group’s operating results
and other aspects.
(4) Changes in operating environment peculiar to pharmaceutical businessOne of the Group’s main businesses is the manufacture and saleof pharmaceuticals. Accordingly, revisions to drug prices underJapan’s medical insurance system, as well as the rise of the usageof generic drugs, could have a negative effect on the Group’s
operating results and other aspects.
(5) Country risks
The Group conducts business globally. Accordingly, changes
such as deterioration in the political or economic situation ineach country and region, the enactment or abolishment of laws
and regulations, international tax practice risks such as transfer
price taxation, and deterioration in public safety, as well as
unforeseen circumstances such as terrorism, armed conflict or
natural disaster, could have a negative effect on the Group’s
operating results and other aspects.

(6) Currency fluctuations
The items in the Group’s financial statements not denominated inyen are susceptible to fluctuations in exchange rates when converted
into yen. The Group concludes exchange contracts and takes othersteps to minimize the effects of fluctuations in exchange rates.
However, fluctuations in exchange rates beyond those predicted
could have a negative effect on the Group’s operating results andother aspects.
(7) Fluctuations in investment securities prices
The Group holds investment securities (approximately 10% of
total assets on a consolidated basis) for the purpose of long-termholdings as of the end of the subject fiscal year. The Group is
striving to reduce these holdings based on a periodic review of
the necessity of such holdings, however, price fluctuations in thestock market, or significant changes in the financial position of
the issuing companies, could have a negative effect on theGroup’s operating results and other aspects.

(10) Emergence of new technologies
The Group is committed to research and development in all its
business fields, aiming to “develop differentiated products in thespecialty chemicals field, and become a high value-added
company that continually contributes to society.” Particularly in
the Advanced Materials segment, the Group considers it essential to develop and bring to market new products in a timely
manner, given the remarkable pace of technological innovation.
However, in cases where it is not possible to continuously
develop and supply new products to meet customer needs, or incases where other companies come up with revolutionary newtechnologies, there is a risk of obsolescence of some Kureha
products and technologies due to rapid technological advance, or of
product prices falling more steeply than anticipated due to intensified price competition triggered by new entrants in Japan andoverseas. In such case, they could have a negative effect on theGroup’s operating results and other aspects.

(8) Occurrence of natural disasters or accidents
Manufacturing of the Group’s principal products is concentrated
in the Iwaki Factory (Iwaki, Fukushima Prefecture), and as such
the Group makes continual efforts focused on this facility toensure safety of its people and facilities, including the formulationof business continuity plan (BCP), implementation of disasterprevention drills, and renewal of production facilities. However,damage to production facilities as a result of natural disasters suchas major earthquakes or typhoons, or due to fires and otheraccidents, could have a negative effect on the Group’s operating
results and other aspects.
(9) Occurrence of litigation
The Group has established the “Kureha Group Ethical Charter,”“Compliance Rules” and “Compliance Standards,” and strives toensure that the Group strictly complies with all laws, regulations
and societal norms through training and seminars. However, there
is a risk of the occurrence of lawsuits, administrative measures orother action in relation to the Group’s domestic or overseas
businesses. A major lawsuit or other action filed against Kureha
could have a negative effect on the Group’s operating results andother aspects.

Kureha Corporation Business Report 202033

Consolidated Statements of Financial Position
Kureha Corporation and Consolidated Subsidiaries
As of March 31, 2020 (FY2019) and 2019 (FY2018)

Millions of yen

FY2018FY2019ASSETS
Current assets:
Cash and cash equivalents (Notes 8, 23)
Trade and other receivables (Notes 9, 23, 24)
Other financial assets (Note 23)
Inventories (Note 10)
Other current assets (Note 24)
Total current assets

34

¥

7,268
28,327
2
38,2405,173
79,011¥

5,989
30,72128
38,3283,709
78,777

Non-current assets:
Property, plant and equipment, net (Notes 3, 11, 13, 16)
Intangible assets, net (Notes 12, 13)
Investments accounted for using equity method (Note 14)
Other financial assets (Notes 16, 23)
Deferred tax assets (Note 15)
Other non-current assets (Note 19)
Total non-current assets

119,782842
13,12024,574
2,599
6,958
167,879

117,553
1,094
13,15228,5891,249
6,935
168,574

Total assets¥246,890¥247,352

Kureha Corporation Business Report 2020

Millions of yen

FY2018FY2019LIABILITIES AND EQUITYCurrent liabilities:
Trade and other payables (Notes 16, 17, 23)
Bonds and loans payable (Notes 16, 23)
Other financial liabilities (Notes 3, 16, 23)
Accrued income taxes
Provisions (Note 18)
Other current liabilities (Note 24)
Total current liabilities
Non-current liabilities:
Bonds and loans payable (Notes 16, 23)
Other financial liabilities (Notes 3, 16, 23)
Deferred tax liabilities (Note 15)
Provisions (Note 18)
Net defined benefit liability (Note 19)
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity:Shareholders’ equity:
Capital stock, no par value (Note 21)
Capital surplus (Note 21)
Less: Treasury stock, at cost (Note 21)
Retained earnings (Note 21)
Other components of equity (Note 21)
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity¥ 19,424
15,549
1,582
4,750
6,339
6,473
54,121¥ 24,011
23,038
523
2,897
6,176
7,348
63,995

18,648
2,580
1,221
1,465
295
1,932
26,14480,266

15,514
1,009
2,546
671
329
1,116
21,18885,184

18,16915,044(8,693)
135,918
4,551
164,990
1,633
166,623¥246,890

18,16915,044(3,689)122,363
8,664
160,551
1,616
162,167¥247,352

Kureha Corporation Business Report 202035

Consolidated Statements of Profit or Loss
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2020 (FY2019) and 2019 (FY2018)

Millions of yen

FY2018FY2019
Revenue (Notes 6, 24)
Cost of sales (Notes 10, 11, 12, 19)
Gross profit
Selling, general and administrative expenses (Notes 11, 12, 19, 20)
Share of profit of entities accounted for using equity method (Notes 6, 14)
Other income (Notes 7, 25)
Other expenses (Notes 4, 6, 10, 11, 12, 13, 26)
Operating profit (Note 6)
Finance income (Note 27)
Finance costs (Note 27)
Profit before tax
Income tax expense (Note 15)
Profit for the year

¥142,398
100,265
42,132
28,105
1,998
13,447
11,431
18,041545
642
17,944
4,117
13,827¥148,265
104,683
43,582
28,051
1,969
615
944
17,172651
389
17,435
3,435
13,999Profit attributable to:
Owners of parent
Non-controlling interests
Total

13,719108¥ 13,827

13,93365¥ 13,999

Profit per share (in Yen):
Basic (Note 28)
Diluted (Note 28)¥ 692.61
692.03¥ 679.55
679.07

Consolidated Statements of Comprehensive Income
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2020 (FY2019) and 2019 (FY2018)

Millions of yen

FY2018FY2019Profit for the year
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss:
Financial assets measured at fair value through other comprehensive
income (Notes 23, 29)
Remeasurements of defined benefit plans (Note 29)
Total
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations (Note 29)
Total
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
Comprehensive income (loss)

36

Kureha Corporation Business Report 2020

¥13,827¥13,999

796
(328)
467

1,504
304
1,809

(1,174)(1,174)(707)¥13,119

692
692
2,501
¥16,500¥13,04672¥13,119¥16,465
34¥16,500

Consolidated Statements of Changes in Equity
Kureha Corporation and its Consolidated Subsidiaries

FY2018 (From April 1, 2018 To March 31, 2019)
Millions of yen
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2018
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 2019

Capital, nopar value

Capitalsurplus¥18,169¥15,267

—

—

Stock
acquisitionrightsExchange differences ontranslating foreign operations¥ (685) ¥108,715
13,933¥52¥(4,370)—(3,004)

—

684
684

Treasurystock, at cost

Retainedearnings

13,93311(2,891)(222)—¥18,169(222)¥15,0442,605(3,004)(286)¥(3,689) ¥122,363

11
¥63

—
¥(3,686)

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2018
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 2019¥13,043

¥ —

1,545
1,545

302
302

(2,302)(2,302)¥12,286

(302)
(302)
¥ —

Non-controllinginterests

Total

Total

¥ 8,725
—
2,532
2,532
—
11
—
—

¥150,193
13,933
2,532
16,465(3,004)11(2,891)(222)(2,605)(2,594)¥ 8,664—(6,107)¥160,551¥1,84765(30)
34

Total equity

(105)
(160)

¥152,041
13,9992,501
16,500(3,004)11(2,996)
(383)

(265)
¥1,616—(6,373)¥162,167

Kureha Corporation Business Report 2020

37

FY2019 (From April 1, 2019 To March 31, 2020)
Millions of yen
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2019
Cumulative effect of accounting change (Note 3)
Restated balance-April 1, 2019
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 2020

Capital, nopar value

Capitalsurplus¥18,169¥15,044

18,16915,044——StockacquisitionrightsExchange differences ontranslating foreign operations¥(3,689) ¥122,363(13)(3,689) 122,349
13,719¥63¥(3,686)

63(3,686)—(5,003)—(1,172)(1,172)

Treasurystock, at cost

Retainedearnings

13,71917(3,608)0—¥18,1693,457(5,003)(150)¥(8,693) ¥135,918—¥15,04417¥80—¥(4,858)

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2019
Cumulative effect of accounting change (Note 3)
Restated balance-April 1, 2019
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 2020

38

Kureha Corporation Business Report 2020

¥12,286¥ —12,286

—

824
824

(325)
(325)

(3,782)(3,782)¥ 9,329

325
325
¥ —

Total

Total

¥ 8,664
—
8,664
—
(672)
(672)
—
17
—
—

¥160,551(13)
160,537
13,719(672)
13,046(5,003)17(3,608)0(3,457)(3,439)¥ 4,551—(8,594)¥164,990

Non-controllinginterests¥1,616

Total equity

(54)
(0)

¥162,167(13)
162,153
13,827(707)
13,119(5,003)17(3,663)0(55)¥1,633—(8,649)¥166,623

1,616
108
(35)
72

Consolidated Statements of Cash Flows
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2020 (FY2019) and 2019 (FY2018)

Millions of yen

FY2018FY2019Cash flows from operating activities:
Profit before tax
Depreciation and amortization
Impairment loss (Note 13)
Gain on bargain purchase (Notes 7, 25)
Gain on sale of businesses (Notes 7, 25)
Finance income
Finance costs
Share of (profit) loss of entities accounted for using equity method(Profit) loss on disposal and sale of property, plant and equipment, andintangible assets (Note 25)(Increase) decrease in trade and other receivables(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in provision
Increase (decrease) in net defined benefit asset and liability
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Cash flows from operating activities
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment, and intangible
assetsProceeds from down-payment related to sales of property, plant andequipment
Payments for purchases of property, plant and equipment, and intangible
assetsProceeds from sales of investment securities
Purchase of investment securities
Proceeds from purchase of shares of subsidiaries that result in change inscope of consolidation (Note 7)
Proceeds from sale of businesses (Note 7)
Proceeds from government grants
Other, net
Cash flows from investing activities
Cash flows from financing activities:
Dividends paid (Note 22)
Dividends paid to non-controlling interests
Net increase (decrease) in commercial paper and short-term loans payable(Note 30)
Proceeds from non-current loans payable (Note 30)
Repayments of non-current loans payable (Note 30)
Proceeds from issue of bonds (Note 30)
Repayments of bonds (Note 30)
Payments from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation
Acquisition of treasury stock (Note 21)
Other, net
Cash flows from 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 beginning of year
Cash and cash equivalents at end of year (Note 8)¥ 17,944
12,1105,218(1,460)(1,200)(544)
312(1,998)¥ 17,435
10,310
—
—
—
(647)
359
(1,969)(9,585)2,427(419)(3,410)
(55)
(457)
(197)
18,684
1,757(274)(5,016)15,150758
961(2,407)
2,625
241
(547)
(1,257)25,862
1,656(375)(3,766)23,377

10,826

59

—

1,175

(13,649)
6,146
(624)

(13,438)
4,102
(25)

1,409
1,677
79
(381)
5,483

—
—
247
(485)
(8,363)(3,608)(54)(2,891)
(105)

1,293
6,000
(9,250)—(7,000)(3,730)—(5,051)
4,971(5,000)—(5,003)(1,729)(19,353)
(1)
1,278
5,989
¥ 7,268(383)(3,004)(283)(15,478)
(22)
(486)
6,475
¥ 5,989
Kureha Corporation Business Report 202039

Notes to the Consolidated Financial Statements
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2020 (FY2019) and 2019 (FY2018)

1. Reporting entity

Kureha Corporation (the “Company”) is a company registered in Japan and listed on the Tokyo Stock Exchange. The locationsof the Company’s registered headquarters and main offices are available on the Company’s website at https://www.kureha.co.jp/
en/. The consolidated financial statements of the Company for FY2019 (from April 1, 2019 to March 31, 2020) comprise theCompany and its subsidiaries (collectively the “Group”), and the Group’s interests in its affiliates. The Group operates its
businesses primarily in the manufacturing and sale of advanced materials, specialty chemicals, and specialty plastics, and engages
in business activities including construction and repair of facilities, logistics and environmental protection, and other services.

2. Basis of preparation of the consolidated financial statements(1) Matters concerning compliance with IFRSThe Group’s consolidated financial statements have been prepared in accordance with the International Financial ReportingStandards (“IFRS”).
The Group has adopted the provision of Article 93 of Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements because the Group satisfies the requirements for a “Designated IFRS Specified Company” as
set forth in Article 1-2 of said Ordinance.
(2) Basis of measurement
The Group’s consolidated financial statements have been prepared on a historical cost basis except for some of the financial
assets, financial liabilities, employee benefits and other items, which have been measured at fair value, as stated in “3. Significant
accounting policies.”(3) Functional currency and presentation currency
The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency. In principle,
all financial information presented in Japanese yen has been rounded down to the nearest million.
(4) Approval of the consolidated financial statements
The consolidated financial statements have been approved at the Board of Directors meeting held on June 24, 2020.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all the periods presented in the consolidated financial
statements, unless otherwise specified.
(1) Basis of consolidation
1) Subsidiaries
A subsidiary is an entity which is controlled by the Group. The Group controls an entity when it is exposed, or has rights, tovariable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of a subsidiary are included in the scope of consolidation from the date the Group obtains controlof the subsidiary until the date it loses such control of the subsidiary.
When the accounting policies adopted by a subsidiary differ from those adopted by the Group, the financial statements of a
subsidiary are adjusted as necessary.
When the closing date of the financial statements of a subsidiary differs from that of the Group’s consolidated financial
statements, the Group uses the financial statements based on a provisional settlement of accounts.
Intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, areeliminated in preparing the consolidated financial statements.
Comprehensive income of the subsidiaries is allocated to owners of the parent and non-controlling interests, even when the
non-controlling interests will result in a negative balance.
2) Affiliates
An affiliate is an entity over which the Group has significant influence in the financial and operating policy decisions, but that is
not controlled or jointly controlled by the Group. If the Group holds between 20 percent and 50 percent of the voting rights ofanother entity, it is presumed that the Group has significant influence over the other entity. An investment in an affiliate isaccounted for using the equity method.
When the closing date of the affiliate’s financial statements differs from that of the Group’s consolidated financial statements,
the Group uses the financial statements based on a provisional settlement of accounts.
3) Joint ventures
A joint venture is an entity with a contractual agreement whereby two or more parties including the Group undertake aneconomic activity that is subject to joint control, which is the contractually agreed sharing of control over an economic activity,and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of theparties sharing control.
The joint ventures held by the Group are accounted for using the equity method.
40

Kureha Corporation Business Report 2020

(2) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred by the Company as an
acquirer is measured as the aggregate of the acquisition-date fair value of the assets given, liabilities assumed and equity
instruments issued by the Company in exchange for control of the acquiree. If (a) the aggregate of the consideration transferredby the Company, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held
equity interest in the acquiree in a business combination achieved in stages (step acquisitions) exceeds (b) the fair value ofidentifiable assets and liabilities, the excess is recognized as goodwill in the consolidated statements of financial position. If, in
the contrary, the amount of (a) above falls below the amount of (b), the difference is recognized immediately as profit or loss inthe consolidated statements of profit or loss.
Acquisition-related costs, which are the costs the Group incurs to effect a business combination, are expensed as incurred.
As additional acquisitions of non-controlling interests in the Group’s subsidiaries are accounted for as equity transactions, nogoodwill is recognized as a result of such transactions.
(3) Foreign currency translation
1) Foreign currency transactions
The items included in the financial statements of each entity of the Group are measured in its functional currency. Foreign
currency transactions are converted into the functional currency of each entity using the spot exchange rate at the transaction
date. Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency using theexchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from the currency conversion andsettlement are recognized in profit or loss, except where gains and losses arising from financial assets measured at fair value
through other comprehensive income and cash flow hedges are recognized in other comprehensive income.
2) Financial statements of foreign operations
Assets and liabilities of foreign operations (including goodwill and fair value adjustments arising from the acquisition of foreign
operations) are translated into Japanese yen using the exchange rate at the end of the reporting period, and revenue and expense
items are translated into Japanese yen using the average exchange rates during the period. Exchange differences arising from thetranslation of financial statements of the foreign operations are recognized in other comprehensive income. In the event of a lossof control or significant influence (or joint control) due to the disposal of foreign operations, the relevant cumulative amount oftranslation differences associated with the foreign operations is reclassified into profit or loss as part of gain or loss on disposal.
(4) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand; demand deposits; and short-term, highly liquid investments with amaturity of three months or less from the date of acquisition that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
(5) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes costs of purchase, costs of
conversion and all the other costs incurred in bringing the inventories to their present location and condition, and the cost isdetermined using the periodic average method if items of inventories are interchangeable or the specific identification method ifthey are not interchangeable. Net realizable value is the estimated selling price in the ordinary course of business less theestimated costs of completion and the estimated costs necessary to make the sale. Any difference arising from the measurement
is recognized in profit or loss.
(6) Property, plant and equipment
The Group uses the cost model to measure items of property, plant and equipment. They are stated at cost less any accumulated
depreciation and any accumulated impairment losses.
The cost of an item of property, plant and equipment includes directly attributable costs of acquisition, costs of dismantling,
removing or restoring the item, and borrowing costs eligible for capitalization.
Except for non-depreciable assets such as land, an item of property, plant and equipment is depreciated using the straightline method over the estimated useful life. The estimated useful lives of the major classes of assets are presented as follows:
Buildings and structures:
Machinery and equipment:
Vehicles, tools, furniture and fixtures:

10 to 50 years
7 to 20 years
4 to 10 years

The estimated useful life, depreciation method and residual value of an asset are reviewed at the end of each reporting
period. Any changes are accounted for prospectively as a change in accounting estimate.

Kureha Corporation Business Report 202041

(7) Intangible assets
1) Goodwill
The measurement of goodwill upon initial recognition is described in “3. Significant accounting policies, (2) Businesscombinations.” Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is not amortized, but instead tested for impairment annually or whenever there are indications that goodwill may
be impaired. An impairment loss for goodwill is recognized in the consolidated statements of profit or loss and is not
subsequently reversed.
2) Other intangible assets
The Group uses the cost model to measure a separately acquired intangible asset other than goodwill. With respect to aninternally generated intangible asset, expenditure on such an asset is recognized as expenses in the period in which they are
incurred except for development expenditures that qualify for capitalization.
Intangible assets with definite useful lives are stated at cost less any accumulated depreciation and any accumulated
impairment losses, depreciated using the straight-line method over the estimated useful life, and tested for impairment whenever
there are indications that the assets may be impaired. The estimated useful lives of the major classes of assets are presented asfollows:
Trademarks:
Software:10 years
5 years

The estimated useful life, amortization method and residual value of an asset are reviewed at the end of each reporting
period. Any changes are accounted for prospectively as a change in accounting estimate.
Intangible assets with indefinite useful lives and those not yet available for use are not amortized, but instead tested for
impairment individually or at a cash-generating unit level annually or whenever there are indications that they may be impaired.
(8) Lease
The Group has adopted IFRS 16 “Leases” since FY2019.
A lease liability under a lease transaction is measured at the discounted present value of the total lease payments that are notpaid at inception of the lease, and is included in other financial liabilities. A right-of-use asset is initially measured based on theinitial measurement amount of the lease liability adjusted for initial direct costs and prepaid lease payments, etc. and added costs
such as obligations of restoration to original conditions required by the terms of the lease. A right-of-use asset is depreciated on asystematic basis over the lease term, and is included in property, plant and equipment or intangible assets.
Lease payments are apportioned between finance costs and the repayment portion of the outstanding lease liability so as toproduce a constant periodic rate of interest on the remaining balance of the lease liability. Finance costs are presented separatelyfrom depreciation of right-of-use assets in the consolidated statements of profit or loss.
Whether or not a contract is, or contains, a lease is determined based on the substance of the contract even if it does not takethe legal form of a lease.
Additionally, right-of-use assets and lease liabilities are not recognized for a short-term lease that ends within 12 months or alease for which the underlying asset is of low value. Lease payments related to such leases are recognized in profit or loss oneither a straight-line basis over the lease term or another systematic basis.
(Change in accounting policies)
The Group has adopted the standard described below since FY2019.
Standard

Title

Details of new or amended standard

IFRS 16

LeasesAmendments to accounting treatment for lease agreements

In adopting IFRS 16, the Group has employed the method of recognizing the cumulative effect of changes in accounting
policies on the date of initial application, which is utilized as a transitional measure. The weighted average for lessee’s
incremental borrowing rate applied to lease liabilities recognized in the consolidated statement of financial position as of thedate of initial application is 0.7%. Lease liabilities recognized in the consolidated statement of financial position as of the date ofinitial application under the transitional measure is 2,912 million yen.
In accordance with adoption of this standard, primarily, property, plant and equipment increased by 2,594 million yen,other financial liabilities under current liabilities increased by 1,111 million yen, and other financial liabilities under non-current
liabilities increased by 1,491 million yen in the consolidated statements of financial position for FY2019, in comparison withthe case where the previous accounting standard was adopted. This adoption has only minor effect on the consolidated
statements of profit or loss.

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(9) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is any indication that its non-financial assets other thaninventories and deferred tax assets may be impaired. If any such indication exists, it estimates the recoverable amount of theasset. Goodwill and an intangible asset with indefinite useful life or an intangible asset not yet available for use are tested for
impairment annually regardless of whether there is an indication of impairment.
The recoverable amount of an asset or a cash-generating unit is the higher of its value in use and fair value less costs ofdisposal. In determining the value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects
the time value of money and the risks specific to the asset.
Assets that are not individually tested for impairment are integrated with the smallest cash-generating unit that generates
cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets. The
Group’s corporate assets do not generate independent cash inflows. If there is an indication that the corporate assets may be
impaired, the recoverable amount is determined for the cash-generating unit to which the corporate assets belong.
Goodwill acquired in a business combination is allocated to each of the cash-generating units that is expected to benefit fromthe synergies of the combination to ensure that goodwill is tested for impairment reflecting the smallest unit to which the
goodwill relates.
Impairment losses are recognized as profit or loss when the carrying amount of an asset or a cash-generating unit exceeds its
estimated recoverable amount.
The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized inprior periods for an asset other than goodwill may have decreased or may no longer exist. An impairment loss is reversed if there
is a change in the estimates used to determine the asset’s recoverable amount.
(10) Financial Instruments
1) Non-derivative financial assets(i) Initial recognition and measurement
The Group initially recognizes sale and purchase of securities on the account day and initially recognizes other financial assets
when the Group becomes party to the contractual provisions of the financial assets.
At initial recognition, the financial assets are classified as financial assets measured at fair value through profit or loss,
financial assets measured at fair value through other comprehensive income, or financial assets measured at amortized cost.
Financial assets are classified as financial assets measured at amortized cost if both of the following conditions are met.
Otherwise financial assets are classified as financial assets measured at fair value.
•The financial assets are held within a business model whose objective is to hold assets in order to collect contractual cash
flows; and•The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Of financial assets measured at fair value, certain equity instruments such as stocks that are held with the purpose of
facilitating business relations with investees are initially designated as financial assets measured at fair value through othercomprehensive income. Other financial assets are designated as financial assets measured at fair value through profit or loss.
All financial assets are measured at fair value plus transaction costs directly attributable to acquisition of the financial assets
unless the financial assets are classified as financial assets measured at fair value through profit or loss.
(ii) Subsequent measurement
Measurement of financial assets after initial recognition is performed as follows according to the classification:(a) Financial assets measured at amortized cost
These financial assets are measured at amortized cost using the effective interest method.
(b) Financial assets measured at fair value through other comprehensive income
These financial assets are measured at fair value after initial recognition, and subsequent changes in fair value areincluded in other comprehensive income. If the Group disposes of an investment, or if the fair value of the investment
declines significantly, for example, the cumulative gains or losses recognized in other comprehensive income arereclassified from other components of equity to retained earnings.
Dividends from the financial assets measured at fair value through other comprehensive income are recognized as
finance income in profit or loss.
(c) Financial assets measured at fair value through profit or loss
Financial assets designated to be measured at fair value through profit or loss, or financial assets other than (a) and (b)above are measured at fair value, and subsequent changes in their fair value are recognized in profit or loss.

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(iii) Derecognition of financial assets
The Group derecognizes financial assets when the rights to receive benefits expire or when the Group transfers financial assets or
substantially all the risks and rewards of ownership of the financial assets.
(iv) Impairment of financial assets
With respect to financial assets measured at amortized cost, the Group recognizes allowance for doubtful accounts based on the
expected credit loss model for such financial assets. At each reporting date, the Group assesses whether the credit risks on thefinancial assets have increased significantly since initial recognition. If the credit risk on a financial asset has increased
significantly since the initial recognition, the allowance for doubtful accounts is measured at an amount equal to the lifetime
expected credit losses. If the risk on a financial asset has not increased significantly since the initial recognition, the allowance for
doubtful accounts for the financial asset is measured at an amount equal to the 12-month expected credit losses. However, theallowance for doubtful accounts on trade and other receivables is always measured at an amount equal to the lifetime expectedcredit losses.
The Group estimates expected credit losses of a financial asset in a way that reflects:• an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;• the time value of money; and• reasonable and supportable information that is available without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic conditions.
The amounts of these measurements are recognized in profit or loss.
2) Non-derivative financial liabilities(i) Initial recognition and measurement
The Group initially recognizes a financial liability when the Group becomes party to the contractual provisions of the financial
liability.
At the initial recognition, the Group classifies financial liabilities as financial liabilities measured at fair value through profit
or loss or financial liabilities measured at amortized cost.
All financial liabilities are measured in the full amount after deducting transaction costs directly attributable to the financial
liabilities from the fair value unless the financial liabilities are classified as financial liabilities measured at fair value throughprofit or loss.
(ii) Subsequent measurement
Financial liabilities measured at fair value through profit or loss are measured at fair value, and subsequent changes in the fairvalue are recognized in profit or loss.
After initial recognition, financial liabilities measured at amortized cost are measured at amortized cost using the effective
interest method. Amortization using the effective interest method and gains and losses upon derecognition are recognized in
profit or loss in its consolidated statements of profit or loss for the period.
(iii) Derecognition of financial liabilities
The Group derecognizes financial liabilities when they are discharged, cancelled or expired.
3) Derivatives and hedge accounting
The Group uses derivatives such as forward exchange contracts and interest rate swaps to hedge foreign currency risk andinterest rate risk.
Derivatives are initially measured at fair value at the date when the derivative contract is entered into and are subsequently
measured at fair value. Changes in the fair value of derivatives are immediately recognized in profit or loss except for those that
qualify for hedge accounting.
The Group formally designates and documents the hedging relationship and the risk management objective and strategy forundertaking the hedge. The documentation includes the hedging instrument, the hedged item, the nature of the risk being
hedged and the methods of assessing whether the hedging relationship meets the hedge effectiveness requirements. In addition,
the Group assesses whether the hedging relationship meets the hedge effectiveness requirements, both at the inception and on an
ongoing basis.
Hedging relationship that meet the criteria for hedge accounting are accounted as follows.
Changes in fair value of a derivative designated as fair value hedges are recognized in profit or loss. The carrying amount ofhedged items is measured at fair value and the changes in the fair value of hedged items attributable to the hedged risk arerecognized as profit or loss with adjustments to the carrying amount of the hedged items.

44

Kureha Corporation Business Report 2020

With regard to cash flow hedge, the effective portions of the gain or loss on the hedging instrument are recognized in othercomprehensive income as the line item titled “Cash flow hedges.” Subsequently, such amounts associated with forward exchange
contracts are reclassified as reclassification adjustment from equity to profit or loss in the same period in which the hedged item
affects profit or loss. With regard to interest rate swaps, the changes in gains and losses on the hedging instrument are recognizedas other comprehensive income.
Hedge accounting is discontinued prospectively when, and only when, the hedging relationship ceases to meet the qualifying
criteria. This includes instances when the hedging instrument expires or is sold, terminated or exercised.
(11) Employee benefits
1) Post-retirement benefits
The Group has defined benefit plan and defined contribution plan as post-employment benefit plan.
The net defined benefit liability (asset) associated with the defined benefit plans is calculated by deducting the fair value ofthe plan assets from the present value of defined benefit obligations. The present value of defined benefit obligations and related
current service costs and prior service costs are measured annually by independent actuaries based on the projected unit credit
method. The discount rate is calculated by reference to market yields at the end of the fiscal year on highly rated corporate
bonds denominated in the same currency as those used for future benefit payment, corresponding to the discount period
determined based on the period until annual future payment dates.
Remeasurements of all of the net benefit liability (asset) arising from the defined benefit plans are recognized at once in othercomprehensive income in the period in which they are incurred and immediately reclassified from other components of equity
to retained earnings.
Current service costs are recognized as profit or loss for the period in which they are incurred.
Prior service costs are immediately recognized as profit or loss for the period in which they are incurred.
Contributions to defined contribution plans are recognized as an expense when they are paid.
2) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis, and are recognized at once when the related
services are rendered. When there is a legal or constructive obligation to make payments of bonuses and paid leave expenses, andthe obligation can be estimated reliably, the estimated amount to be paid under the relevant plans is accounted for as a liability.
(12) Share-based payments
The Group has a stock option plan accounted for as an equity-settled share-based payment plan. Stock options are estimatedusing its fair value at the grant date and recognized as expenses over the vesting periods with corresponding increases to equity
and taking into account the estimated number of options to be vested. The fair value of options granted is measured using theBlack-Scholes model based on the terms and conditions of the options.
(13) Provisions
The Group recognizes a provision when the Group has a present obligation (legal or constructive) as a result of a past event; it isprobable that the Group will be required to settle the obligation through an outflow of resources embodying economic benefits,
and a reliable estimate can be made of the amount of the obligation.
The amount of provision is measured at the present value of the expenditures expected to be required to settle the obligation.
In calculating the present value, the pre-tax discount rate that reflects the current market assessment of the time value of money
and the risks that are specific to the obligation is applied. Unwinding of the discount associated with the passage of time isrecognized as finance costs.
(14) Levies
For levies that are an outflow of resources embodying economic benefits required by a government to the Group in accordancewith laws and regulations, the estimated payment is recognized as a liability when the obligation event that triggers the paymentof levies prescribed by laws and regulations occurs.
(15) Revenue
The Group recognizes revenue based on the five-step approach described below.
Step 1: Identify the contract(s) with a customer
Step 2: Identify performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to each performance obligation in the contract
Step 5: Recognize revenue when the performance obligation is satisfied
With regard to the timing when the performance obligation is satisfied, the Group recognizes revenue after determining
whether control over goods or services is transferred to a customer over a certain period of time or at a single point in time.

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45

The Group operates its businesses primarily in the manufacturing and sale of advanced materials, specialty chemicals, andspecialty plastics and with regard to sales of these products, the Group determines that a customer obtains control over a productand the performance obligation is satisfied when the product is delivered to the customer. Accordingly, the Group principally
recognizes revenue at the time of delivery of its product to the customer.
With regard to provision of services, the Group determines that the performance obligation is satisfied while control over a
service is transferred to a customer over a certain period of time and therefore, recognizes revenue principally in accordance withthe progress of the service.
Revenue is measured at the amount of consideration promised in a contract with a customer less discounts, rebates, returns,
taxes collected for a third party, etc. In addition, in the event that another party is involved in providing goods or services to acustomer, the Group, if it is deemed as a principal, recognizes revenue on the gross amount basis (amount of consideration towhich it expects to be entitled) and, if it is deemed as an agent, recognizes revenue on the net amount basis (amount of fee orcommission to which it expects to be entitled).
(16) Government grants
Government grants are recognized at fair value when there is reasonable assurance that the Group will comply with theconditions attaching to them and the grants will be received.
Government grants related to expense items are recognized as revenue on a systematic basis over the period in which theGroup recognizes the related expenses for which the grants are intended to compensate. Government grants related to assets are
directly deducted in arriving at the carrying value of the assets. Government grants are recognized in profit or loss over the useful
lives of the depreciable assets as a reduction in depreciation.
(17) Finance income and finance costs
Finance income consists mainly of interest income and dividend income. Interest income is recognized when accrued by using
the effective interest method. Dividend income is recognized when the Group’s right to receive the dividends is established.
Finance costs consist mainly of interest expenses. Interest expenses are recognized when incurred by using the effective
interest method.
(18) Income taxes
Income tax expenses consist of current tax expense and deferred tax expense. Income taxes are recognized in profit or loss, except
when they arise from business combinations, and from items that are recognized directly in equity or in other comprehensive
income.
Current tax expense is measured by the expected taxes payable to or receivable from tax authorities. The tax rates and tax
laws that are used to calculate the tax amount are those enacted or substantively enacted by the end of the fiscal year injurisdictions in which the Group operates business and earns taxable income.
Deferred tax expense is calculated based on temporary differences between the carrying amounts of assets and liabilities forfinancial accounting purposes and the tax bases of such assets and liabilities. Deferred tax assets are recognized for deductible
temporary differences, the carryforwards of unused tax credits and the carryforwards of unused tax losses to the extent that it isprobable that future taxable income will be available against which such deferred tax assets can be recovered. Deferred tax
liabilities are recognized, in principle, for taxable temporary differences.
Deferred tax assets and liabilities are not recognized for the following temporary differences:• Temporary differences arising from initial recognition of goodwill,• Temporary differences arising from initial recognition of assets and liabilities from transactions that are not businesscombinations and affect neither accounting profit nor taxable income (tax loss),• Deductible temporary differences on investments in subsidiaries and affiliates, when it is probable that such temporary
differences will not reverse in the foreseeable future, or when it is unlikely that taxable income will be earned against which
the temporary difference can be utilized,• Taxable temporary differences on investments in subsidiaries and affiliates, when the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable
futureDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are
realized or the liabilities are settled, based on the tax rates and tax laws enacted or substantively enacted by the end of the fiscal
year.
Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to set off current tax assets against
current tax liabilities and income taxes are levied by the same taxation authority on the same taxable entity.

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Kureha Corporation Business Report 2020

(19) Treasury stock
Treasury stock is recognized at cost and deducted from equity. No gains or losses are recognized on the repurchase, sale orretirement of shares of the Company’s treasury stock. Any difference between the carrying amount and consideration received on
the sale of shares of the treasury stock is recognized directly as capital surplus.
(20) Profit per share
Basic profit per share are calculated by dividing profit attributable to owners of parent by the weighted average number ofordinary shares outstanding during the period, adjusted for treasury stocks held. Diluted profit per share is calculated byadjusting for the effects of all dilutive potential ordinary shares.

4. Significant accounting estimates and associated judgments

In preparing the Group’s consolidated financial statements in compliance with IFRSs, the management is required to makejudgments, estimates and assumptions that affect the adoption of accounting policies and the reportable amount of assets,
liabilities and revenue and expenses. Actual results may differ from such estimates.
The estimates and their underlying assumptions are reviewed on an ongoing basis. The effect of a change in accounting
estimates is recognized in the accounting period in which such estimates are changed and also in the future accounting periods.
Estimates and assumptions that may have material impact on the preparation of the Group’s consolidated financial statements
are as follows:• Useful lives of property, plant and equipment (Item (6) of 3. Significant accounting policies and 11. Property, plant andequipment)
Except for non-depreciable assets such as land, an item of property, plant and equipment is depreciated using the straightline method over the estimated useful life. These assumptions in estimates are determined based on the best possible
estimates and judgments by the management, but may be affected by the result of uncertain changes in economic
conditions in the future. If it becomes necessary to review the assumptions, there could be a significant effect on the
consolidated financial statements.
• Impairment of property, plant and equipment; goodwill and intangible assets (Item (9) of 3. Significant accounting policies
and 13. Impairment of non-financial assets)
The Group assesses at the end of each reporting period whether there is any indication that its non-financial assets otherthan inventories and deferred tax assets may be impaired. In determining recoverable amounts in impairment testing,assumptions are made as to estimated future cash flows, discount rates, and other items. These assumptions are determinedbased on the best possible estimates and judgments by the management, but may be affected by the result of uncertainchanges in economic conditions in the future. If it becomes necessary to review the assumptions, there could be asignificant effect on the consolidated financial statements.
• Valuation of inventories (Item (5) of 3. Significant accounting policies and 10. Inventories)
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price inthe ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale,but the Group may incur a loss if the market environment deteriorates further than expected and net realizable value
declines significantly.
• Recoverability of deferred tax assets (Item (18) of 3. Significant accounting policies and 15. Income taxes)
Deferred tax assets are recognized for deductible temporary differences, the carryforwards of unused tax credits and thecarryforwards of unused tax losses to the extent that it is probable that future taxable income will be available against whichsuch deferred tax assets can be recovered. Deferred tax liabilities are recognized, in principle, for taxable temporary
differences. In judging the probability of recording taxable income, the timing for recording taxable income and amountthereof are estimated based on a business plan. Such estimates are made based on the best possible estimates by the
management, but may differ from actual results due to the result of uncertain changes in economic conditions in the
future.
• Valuation of defined benefit obligations (Item (11) of 3. Significant accounting policies and 19. Employee benefits)
The net defined benefit liability (asset) associated with the defined benefit plans is calculated by deducting the fair value ofthe plan assets from the present value of defined benefit obligations. The present value of defined benefit obligations andrelated current service costs and prior service costs are measured annually by independent actuaries based on the projected
unit credit method. The discount rate is calculated by reference to market yields at the end of the fiscal year on highly rated
corporate bonds denominated in the same currency as those used for future benefit payment, corresponding to thediscount period determined based on the period until annual future payment dates. These assumptions are determined
after comprehensively taking into consideration all information that is available. These assumptions in actuarial
calculations may be affected by factors such as an uncertain economic environment and changes in social situations in the
future, and thus involve risks of causing a material revision in the measurement amount of defined benefit obligations in
the future.

Kureha Corporation Business Report 202047

• Recognition of provisions (Item (13) of 3. Significant accounting policies and 18. Provisions)
The Group recognizes a provision when the Group has a present obligation (legal or constructive) as a result of a past
event; it is probable that the Group will be required to settle the obligation through an outflow of resources embodying
economic benefits, and a reliable estimate can be made of the amount of the obligation. Assumptions used in themeasurement of these provisions may be affected by uncertain changes in economic conditions in the future, and thus
involve risks of causing a material revision in the measurement amount of provisions in the future.
• Assumption on valuation of financial instruments (Item (10) of 3. Significant accounting policies and 23. Financial
instruments)
At the Group, measurement of financial assets after initial recognition is performed as follows according to theclassification:(a) Financial assets measured at amortized cost
These financial assets are measured at amortized cost using the effective interest method.
(b) Financial assets measured at fair value through other comprehensive income
These financial assets are measured at fair value after initial recognition, and subsequent changes in fair value areincluded in other comprehensive income. If the Group disposes of an investment, or if the fair value of theinvestment declines significantly, for example, the cumulative gains or losses recognized in other comprehensive
income are reclassified from other components of equity to retained earnings.
Dividends from the financial assets measured at fair value through other comprehensive income are recognized
as finance income in profit or loss.
(c) Financial assets measured at fair value through profit or loss
Financial assets designated to be measured at fair value through profit or loss, or financial assets other than (a) and(b) above are measured at fair value, and subsequent changes in their fair value are recognized in profit or loss.
These conditions are determined after taking into consideration all the information that is available. These
conditions may be affected by factors such as an uncertain economic environment and changes in social situationsin the future, and could have a significant effect on the consolidated financial statements.
Judgments made by the management in the course of applying the accounting policies are as follows:• Determination of scope of consolidation (Item (1) of 3. Significant accounting policies) and• Classification of financial instruments (Item (10) of 3. Significant accounting policies and 22. Financial instruments).
(Change in accounting estimates)(Change in valuation method for inventories)
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in theordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
In changing the business strategy for the polyglycolic acid (PGA) business, the Group has reviewed the future businessenvironment and projected earnings. In order to more appropriately reflect declines in profitability of inventories held for thesaid business in our financial position and operating results, in FY2019 we decided to adopt the method whereby net realizablevalue is estimated by factoring in data based on revenue for the current fiscal year and projected revenue for the next fiscal year.
The effect of this change is recorded in “Other expenses” in the consolidated statements of profit or loss. As a result,operating profit and profit before tax for FY2019 decreased by 5,388 million yen each compared to the previous method.
(Additional information)(Effect of COVID-19 on accounting estimates)
The Group is continuing stable business operations while securing a safe working environment for its employees, etc., andworking to prevent infection and mitigate the risk of infection. In FY2019, although the Advanced Materials segment
experienced a temporary shutdown of its factory in China as well as weakness in sales, the overall effect on operating results was
immaterial supported partly by increased demand in Japan in the Specialty Plastics segment. In the procurement of raw
materials, etc. and logistics operations, there was no significant effect despite some delays. Declines in market prices of raw
materials, etc. led to lower production costs across the company, but a steep drop in crude oil prices affected operating rates of
U.S. shale oil and gas extraction operators—customers for the processed PGA resin products business—and caused orders todecrease for the said business. In financial terms, there are no uncollectible receivables and the liquidity of funds has been
secured.
In light of these circumstances, it is extremely difficult to project the effect of COVID-19 on the Group’s future operating
results given the lack of precedents that can be referenced in forming accounting estimates or a unified view on the future
infection spread and the timing when the disease is contained. Meanwhile, for FY2019, based on an assumption that sales fell in
the processed PGA resin products business as the U.S. shale oil and gas market had slowed due to short-term declines in crude
oil prices, the Group made accounting estimates regarding inventory valuations, impairment of non-financial assets, andjudgment regarding the recoverability of deferred tax assets, and these were reflected in the accounting treatment.

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This accounting treatment under these accounting estimates are based on assumptions that the Company regards asreasonable and may differ from the results actually realized depending on the status of COVID-19. See the section entitled“Business and other risks” for further details on the risks to each business segment of the Group associated with the spread of
COVID-19.

5. Standards and interpretations issued but not yet adopted

There are no new standards or interpretations having significant effects among those that were established or amended by thedate of approval of the consolidated financial statements but not adopted early by the Group.

6. Segment information(1) Overview of reportable segments
The Group’s reportable segments are components for which separate financial information is available and whose operating
results are regularly reviewed by the Board of Directors to decide on the allocation of operating resources and assess theirperformance.
The Group has separate divisions by product, and each division formulates a comprehensive strategy for business activities indomestic and overseas markets.
Accordingly, the Group consists of segments by product and service on the basis of the business divisions, and has the fivereportable segments of “Advanced Materials,” “Specialty Chemicals,” “Specialty Plastics,” “Construction,” and “Other
Operations.”
Major products and services for each segment are as follows:
Segment
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations

Products and services
polyphenylene sulfide (PPS), polyvinylidene fluoride (PVDF), processed polyglycolic acid
(PGA) products, carbon fiber, bead-shaped activated carbon
agricultural and horticultural fungicides, therapeutic agent for chronic renal failure, caustic
soda, hydrochloric acid, sodium hypochlorite, monochlorobenzene, para-dichlorobenzene,
ortho-dichlorobenzene
household plastic wrap, garbage bags for kitchen sink, plastic food containers, cooking
paper, PVDF fishing lines, polyvinylidene chloride (PVDC) film, multilayer heat-shrinkablefilm, multilayer bottle, auto-pack machinery (for food packaging)
civil engineering and construction contracting business, construction and management
serviceindustrial waste management and environmental processing facilities, physiochemical andbiochemical testing, analysis and measurement services, transport and warehousing, medical
services(2) Information on reportable segments
The accounting policies for the reportable segments are the same as those of the Group stated in “3. Significant accounting
policies.” Intersegment revenue is principally based on the market price.

Kureha Corporation Business Report 2020

49

The Group’s segment information is as follows:
Millions of yen

FY2018 (From April 1, 2018 To March 31, 2019)

Revenue
Revenue fromexternal customers
Intersegment revenue
Total
Operating profit
Finance income
Finance costs
Profit before tax
Other items
Segment assets
Depreciation andamortization
Impairment loss
Share of profit ofentities accounted forusing equity method
Increases in property,
plant and equipment,
and intangible assets

Advanced
Materials

Specialty
Chemicals

Reportable segments
Specialty
Plastics
Construction¥45,749782
46,531
4,607¥27,309227
27,5373,301¥45,148
230
45,3796,738

89,575

21,187

3,381
—
1,690
¥ 7,067¥

Adjustment(Note)

Other
Operations

Total¥12,415
6,093
18,509668¥17,643
5,923
23,5662,087¥148,265
13,258
161,523
17,40339,911

7,734

18,913

177,32270,029247,352

1,155
—

2,310
—

102
—

1,279
—

8,228
—

2,081
—

10,310
—

—

238

—

40

1,969

—

1,969

510

¥ 1,54162¥ 1,675¥ 10,856¥ 2,317¥ 13,174¥

Consolidated¥— ¥148,265(13,258)—(13,258) 148,265(230)
17,172651(389)
17,435

Note: Adjustment to operating profit consists mainly of 97 million yen of profit resulting from elimination of intersegment transactions, 615
million yen of other income and 944 million yen of other expenses not allocated to any reportable segment.
Adjustment to segment assets includes corporate assets not allocated to reportable segments, which mainly consist of cash and deposits,
investment securities and shared facilities of the Company.
Millions of yen

FY2019 (From April 1, 2019 To March 31, 2020)

Revenue
Revenue fromexternal customers
Intersegment revenue
Total
Operating profit
Finance income
Finance costs
Profit before tax
Other items
Segment assets
Depreciation andamortization
Impairment loss
Share of profit ofentities accounted forusing equity method
Increases in property,
plant and equipment,
and intangible assets

Advanced
Materials

Specialty
Chemicals

Reportable segments
Specialty
Plastics
Construction

Other
Operations

Total¥41,842608
42,451
3,711¥24,331218
24,5492,127¥43,473200
43,673
6,306¥14,457
5,739
20,197
1,147¥18,293
6,330
24,623
2,713¥142,398
13,097
155,495
16,00786,512

21,33936,7098,556

25,915

179,032

67,857

246,890

3,683
—

1,176
—

2,214
—

216
—

2,287
—

9,577
—

2,532
5,218

12,110
5,218

1,791

—

207

—

—

1,998

—

1,998

743

¥ 1,88387¥ 2,437¥ 12,423¥ 2,504¥ 14,928¥ 7,270¥¥

Adjustment(Note)

Consolidated¥— ¥142,398(13,097)—(13,097) 142,398
2,033
18,041545(642)
17,944

Note: Adjustment to operating profit consists mainly of 17 million yen of profit resulting from elimination of intersegment transactions,13,447 million yen of other income (10,177 million yen of gain on sale of fixed assets, 1,460 million yen of gain on bargain purchase,
1,200 million yen of gain on sale of businesses, etc.) and 11,431 million yen of other expenses (10,607 million yen of businessrestructuring expenses, etc.) not allocated to any reportable segment.

50

Kureha Corporation Business Report 2020

Adjustment to segment assets includes corporate assets not allocated to reportable segments, which mainly consist of cash and deposits,
investment securities and shared facilities of the Company.
Adjustment to impairment losses includes impairment losses for fixed assets of 5,218 million yen associated with the Advanced
Materials segment.

(3) Information on products and services
This information is omitted because the same information is disclosed in “(1) Overview of reportable segments” and “(2)Information on reportable segments.”(4) Information by geographical area
Revenue from external customers
Millions of yen

FY2019Japan
Asia
EuropeOther(From April 1, 2019
To March 31, 2020)¥102,718
15,291
10,58913,798¥142,398

Total
Note: Revenues are classified based on the location of customers.

FY2018(From April 1, 2018
To March 31, 2019)¥103,862
18,061
13,53312,808¥148,265

Non-current assets (property, plant and equipment and intangible assets)
Millions of yen

FY2019(As of March 31, 2020)

Japan
U.S.
Other

Total
Note: Non-current assets are classified based on the location of the assets.

¥103,290
8,037
9,297
¥120,625

FY2018(As of March 31, 2019)¥ 94,319
13,936
10,390¥118,647(5) Information on major customers
This information is omitted because no customer accounted for 10% or more of revenue from external customers in the
consolidated statements of profit or loss.

7. Business combinations(Business combination due to acquisition)
FY2019 (From April 1, 2019 To March 31, 2020)(1) Overview of business combination
Kureha Ecology Management Co., Ltd. which is a consolidated subsidiary of the Company, has acquired shares of Himeyuri
total work Co., Ltd. as described below on April 1, 2019, based on a share transfer contract concluded on March 1, 2019.
1) Name and business of acquiree
Name: Himeyuri total work Co., Ltd.
Main business: final disposal of industrial waste (controlled landfill)2) Reason for acquisition
The Group, through its business activities, is making earnest efforts to solve social issues in fields such as the global
environment, energy and resources, food, life, and medical and health, and Kureha Ecology Management Co., Ltd. strives toconserve the global environment through the collection, transportation, and intermediate disposal of industrial wastes. By
making into a subsidiary Himeyuri total work Co., Ltd., which operates final disposal sites and has business transactions with
the Group since its founding, we can provide an integrated service from collection and transportation to intermediate and final
disposal of industrial wastes and the Group will have a structure which can further satisfy the needs of customers and local
communities.
3) Acquisition date
April 1, 2019
Kureha Corporation Business Report 2020

51

4) Ratio of voting rights acquired
Ratio of voting rights owned immediately before the acquisition date: 19%
Ratio of voting rights acquired additionally on the acquisition date: 81%
Ratio of voting rights after acquisition: 100%5) Fair values of consideration transferred, assets acquired and liabilities assumed, equity interest owned immediately before theacquisition date, and gain on bargain purchase
Item

Amount (Millions of yen)

Consideration transferred (cash)¥ 470
Fair values of assets acquired and liabilities assumed
Current assets¥ 2,164
Property, plant and equipment
5,493
Other non-current assets
797
Non-current assets
6,290
Current liabilities(451)
Long-term loans payable(4,583)
Other non-current liabilities(1,037)
Non-current liabilities(5,621)
Fair values of assets acquired and liabilities assumed (net)2,382
Equity interest owned immediately before the acquisition date *1
452
Gain on bargain purchase *2¥ 1,460*1 As a result of remeasuring the equity interest in the acquiree owned immediately before the acquisition date using the fairvalue as of the acquisition date, a gain on step acquisitions of 20 million yen was recorded in “Other income” in the
consolidated statements of profit or loss.
*2 Gain on bargain purchase arose as the net fair value of assets acquired and liabilities assumed exceeded the fair value ofconsideration transferred, and was recorded in “Other income” in the consolidated statements of profit or loss.
6) Acquisition-related expenses
This information is omitted because the impact of acquisition-related expenses is insignificant.
(2) Cash flows related to acquisition
Cash and cash equivalents paid for acquisition:
Cash and cash equivalents owned by acquiree at the time of acquisition:
Proceeds from acquisition of subsidiary:

475 million yen
1,884 million yen
1,409 million yen(3) Effect on operating results
Revenue and profit for the year generated from the acquiree after the acquisition date are omitted because their impact on the
consolidated statements of profit or loss is insignificant.
(Business transfer due to company split)
FY2019 (From April 1, 2019 To March 31, 2020)
The Company has entered into a contract by which the blow bottle business operated by the Company was succeeded by Kyodo
Printing Co., Ltd. (hereinafter, “Kyodo Printing”) on July 24, 2019 by way of a company split (simplified absorption-typecompany split) (hereinafter, the “Company Split”), and Kyodo Printing succeeded the business on November 1, 2019.
(1) Purpose of the Company Split
The Company believes that succession of the blow bottle business by Kyodo Printing will bring a synergistic effect to the living
and industrial materials business and product line of Kyodo Printing, allow for continuous provision of value-added products
and services to its customers, and contribute to the mutual development of the business of the Company and Kyodo Printing.
(2) Summary of the Company Split
1) Date of Company Split
November 1, 2019
2) Form of the Company Split
It is an absorption-type company split by which the Company becomes the split company and Kyodo Printing becomes the
succeeding company. The company split took place without the approval of a general meeting of shareholders of the Company
as it was a simplified absorption-type company split as stipulated in Article 784, Paragraph 2 of the Companies Act.
52

Kureha Corporation Business Report 2020

3) Allotment in the Company Split
As consideration for the Company Split, the Company received cash in an amount of 1,677 million yen from Kyodo Printing.
(3) Details of business that was split
1) Details of business that was split
Manufacturing and sale of blow bottles
2) Operating results of business that was split (from April 1, 2019 to October 31, 2019)
Revenue: 1,101 million yen
3) Item of assets and liabilities that were split and amounts thereof
Inventories:
186 million yen
Property, plant and equipment:
291 million yen
Total assets:
477 million yen(Note) No liability was succeeded.
4) Accounting treatment
Gain on sale of businesses of 1,200 million yen, which is the difference between the consideration for the Company Split andthe assets that were split, was recorded in “Other income” in the consolidated statements of profit or loss.

8. Cash and cash equivalents

Cash and cash equivalents comprise cash and deposits. The balances of “cash and cash equivalents” in the statements of financial
position as of the end of FY2018 and FY2019 equal the balances of “cash and cash equivalents” presented in the corresponding
consolidated statements of cash flows.

9. Trade and other receivables

The breakdown of trade and other receivables is as follows:
Millions of yen

FY2019(As of March 31, 2020)

Trade notes and accounts receivable
Other
Allowance for doubtful accounts
Total

FY2018(As of March 31, 2019)¥29,610
1,276(165)¥30,721¥27,300
1,199(171)¥28,327

10. Inventories

The breakdown of inventories is as follows:
Millions of yen

FY2019(As of March 31, 2020)

FY2018(As of March 31, 2019)

Merchandise and finished goods¥31,828¥32,070
Work in process
1,361
1,411
Raw materials and supplies
5,051
4,846
Total
¥38,240¥38,328
Note: The amounts of inventory write-down recognized as expense for FY2018 and FY2019 are 619 million yen and 5,315
million yen, respectively. Of the said amounts, that for FY2018 was included in “Cost of sales,” and that for FY2019 wasincluded in “Cost of sales” in an amount of negative 72 million yen and in “Other expenses” as business restructuring
expenses in an amount of 5,388 million yen in the consolidated statements of profit or loss.

Kureha Corporation Business Report 202053

11. Property, plant and equipment(1) Changes in carrying amount, cost, and accumulated depreciation and accumulated impairment losses
Carrying amountMillions of yen
Buildings
andstructures

Balance as of April 1, 2018
Acquisitions
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of March 31, 2019
Change in accounting policies
Balance as of April 1, 2019
Acquisitions
Acquisitions due to business combination
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of March 31, 2020

Machinery,equipment
and vehicles

Land

Construction Right-of-use
in progress
assets¥40,940 ¥44,902 ¥17,863 ¥ 7,517
4,184
8,049
18
(342)
(49)
(150)
(0)
—
(3,111)(5,739)
—
—
—
—
—
—
—
—
—
—
49
386
(6)
8
—
(0)
—
—
¥42,013 ¥47,449 ¥17,875 ¥ 7,183————¥42,013 ¥47,449 ¥17,875 ¥ 7,183
3,646
3,895
0
4,432
3,708
1,434
342
—
(219)
(459)
(1,738)—(3,428)(6,105)——(785)(4,111)
—
—
—
—
—
—
(239)
(605)
(8)
(13)
—
(0)
—
—
¥44,695 ¥41,497 ¥16,471 ¥11,602

—
—
—
—
—
—
—
—
—
3,325
¥ 3,325
1,768
—
(673)
(1,352)————¥ 3,067

Other

Total

¥ 3,012 ¥114,236
1,123
13,032(8)(207)(1,090)(9,940)
—
—
—
—
(5)
432
0
—
¥ 3,031 ¥117,553
(432)
2,892
¥ 2,598 ¥120,445
769
14,511
7
5,493(17)(3,108)(880) (11,767)(12)(4,908)
—
—
(16)
(882)
—
(0)
¥ 2,447 ¥119,782

Notes: 1. Depreciation is recorded in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated
statements of profit or loss.
2. Impairment loss is recorded in “Other expenses” in the consolidated statements of profit or loss. See the section
entitled “13. Impairment of non-financial assets” for further details on impairment.
3. The line item “Acquisitions” above includes transfers from construction in progress to items of property, plant andequipment.
4. See the section entitled “7. Business combinations (Business combination due to acquisition)” for further details on
acquisitions due to business combination.
Cost
Millions of yen
Buildings
andstructures

Balance as of April 1, 2018
Balance as of March 31, 2019
Balance as of March 31, 2020

Machinery,equipment
and vehicles¥106,222 ¥165,733¥109,930 ¥171,079¥117,182 ¥170,427

Land¥18,458¥18,470¥17,066

Construction Right-of-use
in progress
assets¥ 7,517¥ 7,183¥11,602——¥5,816Other¥16,291 ¥314,223¥16,354 ¥323,018¥15,012 ¥337,106

Accumulated depreciation and accumulated impairment losses
Millions of yen
Buildings
andstructures

Balance as of April 1, 2018
Balance as of March 31, 2019
Balance as of March 31, 2020
54

Kureha Corporation Business Report 2020

Machinery,equipment
and vehicles¥65,282 ¥120,830¥67,917 ¥123,629¥72,486 ¥128,929

Land

¥594
¥594
¥594

Right-of-use
assets——¥2,748

Other

Total

Total

¥13,278 ¥199,986¥13,323 ¥205,464¥12,564 ¥217,324

(2) Government grants that were directly deducted from the cost of fixed assets (by applying reduction entry to fixed
assets) are as follows:
Millions of yen

FY2019(As of March 31, 2020)

FY2018(As of March 31, 2019)

Amount subject to reduction entry¥7,309¥7,309Note: The amount represents direct deduction of subsidy from the carrying amounts of building, machinery and equipment,
etc. related to Fukushima Business Investment Subsidy for Revitalization of Industries.
(3) The breakdown of right-of-use assets is as follows:
Millions of yen

FY2019(As of March 31, 2020)

Buildings and structures
Machinery, equipment and vehicles
Land
Other
Total right-of-use assets¥1,744241
732
347¥3,067(4) Profit and loss related to right-of-use assets are as follows:
Millions of yen

FY2019Depreciation of right-of-use assets
Buildings and structures
Machinery, equipment and vehicles
Land
Other
Total
Interest expenses on lease liabilities
Expenses on short-term leases
Expenses on leases of low-value assets(From April 1, 2019
To March 31, 2020)

¥ 979
107
93
172
1,352
13
409
¥ 75

Cash outflows for leases are as follows:
Millions of yen

FY2019Total cash outflows for leases(From April 1, 2019
To March 31, 2020)¥1,848

Kureha Corporation Business Report 202055

12. Intangible assets(1) Changes in carrying amount, cost, and accumulated amortization and accumulated impairment losses
Carrying amountMillions of yen
Other

SoftwareBalance as of April 1, 2018
Acquisitions
Disposals
Amortization
Exchange rate differences
Other changes
Balance as of March 31, 2019
Acquisitions
Acquisitions due to business combination
Disposals
Amortization
Impairment loss
Exchange rate differences
Other changes
Balance as of March 31, 2020

¥ 729
126
(15)
(273)
(0)
—
¥ 567
407
—
(4)
(243)
—
(1)
—
¥ 726

Total

¥ 606
15
(0)
(96)
1
—
¥ 526
8
5
(3)
(99)
(310)
(11)
—
¥ 116

¥1,336
142
(15)
(369)
1
—
¥1,094
416
5
(7)
(342)
(310)
(12)
—
¥ 842

Notes: 1. Amortization of intangible assets is recorded in “Cost of sales” and “Selling, general and administrative expenses” inthe consolidated statements of profit or loss.
2. Impairment loss is recorded in “Other expenses” in the consolidated statements of profit or loss. See the section
entitled “13. Impairment of non-financial assets” for further details on impairment.
3. The line item “Acquisitions” above mainly represents the amounts of intangible assets purchased from external parties.
4. See the section entitled “7. Business combinations (Business combination due to acquisition)” for further details on
acquisitions due to business combination.
Cost
Millions of yen
Other

SoftwareBalance as of April 1, 2018
Balance as of March 31, 2019
Balance as of March 31, 2020

¥1,727¥1,640¥1,724

Total¥1,006¥1,011¥1,005¥2,734¥2,652¥2,729

Accumulated amortization and accumulated impairment losses
Millions of yen
Other

SoftwareBalance as of April 1, 2018
Balance as of March 31, 2019
Balance as of March 31, 2020

¥ 997
¥1,072
¥ 998

Total

¥400
¥485
¥889

¥1,397¥1,557¥1,887(2) Research and development expenses
The total amounts of expenditures for research and development recognized as expense for FY2018 and FY2019 are 5,270
million yen and 5,995 million yen, respectively.

13. Impairment of non-financial assets(1) Impairment loss
The Group recognizes impairment losses when either the carrying amount of an asset or a cash-generating unit exceeds its
estimated recoverable amount.
The Group recognized impairment losses for property, plant and equipment and intangible assets for FY2019 in an amountof 5,218 million yen.

56

Kureha Corporation Business Report 2020

(2) Main events and circumstances that led to recognition of impairment losses
FY2018 (From April 1, 2018 To March 31, 2019)
Not applicable.
FY2019 (From April 1, 2019 To March 31, 2020)
Millions of yen

Segment
Advanced Materials

Purpose of use
Location
Manufacturing facility Omitama, Ibaraki

West Virginia, U.S.

Type of assets
Buildings
Machinery and equipment
Tools, furniture and fixtures
Intangible assets
Total
Buildings
Machinery and equipment
Total

Amount
¥

22
359
12
310
705
762
3,751
4,513
5,218

Total

In principle, the Group has grouped the operating assets by segment and by company, and idle assets and assets for lease byindividual properties.
Recoverable value is the higher of value in use and fair value less costs of disposal. Value in use is the present value of future
cash flows calculated by using pre-tax weighted average cost of capital of a cash-generating unit. Fair value less costs of disposal isevaluated either by the estimated disposal amount or the amount reasonably calculated based on assessed values of fixed assets
for property tax.
For the manufacturing facility in the Advanced Materials segment, the Group conducted a thorough review and assessmentof its business, including projected earnings upon implementing a business restructuring in the PGA business. Consequently, forthe abovementioned manufacturing facility, the Group wrote down the carrying amount of fixed assets associated with the PGA
business to their recoverable values and recognized the reduction of 5,218 million yen as other expenses. The Group measures
recoverable value based on value in use, which is calculated after discounting future cash flows of 8.6%.
In recording impairment, etc., of business assets for the PGA business, estimates have been made assuming that there will bea decrease in demand in FY2020 due to the spread of COVID-19 and a drop in crude oil prices. In addition, actual results may
differ from these estimates.

14. Investments accounted for using the equity method(1) The aggregate carrying amounts of the Group’s interests in individually immaterial affiliates and joint ventures are as follows:
Millions of yen

FY2019(As of March 31, 2020)

Joint ventures
Affiliates

FY2018(As of March 31, 2019)¥10,475
2,677¥10,6212,499(2) The aggregate amounts of profit for the year, other comprehensive income and comprehensive income of individually
immaterial affiliates and joint venture that are adjusted to reflect the portion of ownership interests are as follows:
Joint ventures
FY2019Millions of yen(From April 1, 2019
to March 31, 2020)

Profit for the year
Comprehensive income¥1,791
1,791

FY2018(From April 1, 2018
to March 31, 2019)¥1,731
1,731

Kureha Corporation Business Report 202057

Affiliates
FY2019Millions of yen

Profit for the year
Comprehensive income

FY2018(From April 1, 2018
to March 31, 2019)(From April 1, 2019
to March 31, 2020)

¥238
238

¥207
207

15. Income taxes(1) Breakdown of deferred tax assets and deferred tax liabilities
The breakdown of deferred tax assets and deferred tax liabilities by major cause and the details of changes are as follows:
FY2018 (From April 1, 2018 To March 31, 2019)

As of April 1, 2018

Deferred tax assets
Loss on valuation of inventories
Impairment loss
Provisions
Unrealized gain on fixed assets
Tax loss carryforwards
Amount in excess of allowed depreciation limit
Other
Subtotal
Deferred tax liabilities
Financial assets measured at fair value throughother comprehensive income
Accelerated depreciation and amortization offoreign operations
Deemed cost
Net defined benefit assets
Other
Subtotal
Net amountMillions of yen
Amount recognized in
Amount recognized inother comprehensive
profit or loss
incomeAs of March 31, 2019

¥ 1,334
1,177
1,885
1,732
3,169
574
2,246
12,120

¥ 230
(246)
91
(21)
(263)
69
235
95

¥ —
—
—
—
—
—
1
1

¥ 1,565
930
1,976
1,711
2,905
643
2,484
12,217(5,843)—337(5,505)(3,464)(2,200)(1,538)(539)(13,585)¥ (1,465)

10
—
(149)
(17)
(156)
¥ (61)

—
—
(110)
—
227
¥ 229

(3,453)(2,200)(1,797)(557)(13,514)¥ (1,296)

Note: A difference between the amount recognized in profit or loss and total deferred tax expenses is mainly due to exchange
rate fluctuations.

58

Kureha Corporation Business Report 2020

FY2019 (From April 1, 2019 To March 31, 2020)

As of April 1,
2019

Deferred tax assets
Loss on valuation of inventories
Impairment loss
Provisions
Unrealized gain on fixed assets
Tax loss carryforwards
Amount in excess of allowed depreciation limit
Other
Subtotal
Deferred tax liabilities
Financial assets measured at fair value throughother comprehensive income
Accelerated depreciation and amortization offoreign operations
Deemed cost
Net defined benefit assets
Other
Subtotal
Net amountMillions of yen
Amount recognizedin otherAmount recognized comprehensive
in profit or loss
income¥ 1,565
930
1,976
1,711
2,905
643
2,484
12,217¥ 1,572
1,110
(106)
183
(1,530)
92
(123)
1,200

(5,505)(3,453)(2,200)(1,797)(557)(13,514)¥ (1,296)¥

Business
combinations(Note 1)

As of March 31,
2020

—
—
—
—
—
—
(1)
(1)

¥ —
2
129
—
16
—
280
428

¥ 3,138
2,044
1,999
1,895
1,392
736
2,639
13,845

—

1,361

(49)

(4,192)

103
—
(142)
(160)
(199)
¥ 1,001

—
—
120
—
1,481
¥1,480

—
—
—
(186)
(235)
¥ 193

(3,350)(2,200)(1,819)(903)(12,466)¥ 1,378

Notes: 1. See the section entitled “7. Business combinations (Business combination due to acquisition)” for further details on
business combinations.
2. A difference between the amount recognized in profit or loss and total deferred tax expenses is mainly due to exchange
rate fluctuations.
(2) Deductible temporary differences, etc. for which deferred tax assets are not recognized
Deductible temporary differences and tax loss carryforwards for which deferred tax assets were not recognized are as follows:
Millions of yen

FY2019Deductible temporary differences
Tax loss carryforwards
Total

FY2018(As of March 31, 2020)(As of March 31, 2019)¥ 5,962
4,130¥10,092¥6,0902,005¥8,096

Note: The breakdown by expiry date of tax loss carryforwards for which deferred tax assets were not recognized is as follows:
Millions of yen

FY2019Due in one year or lessDue after one year through five years
Due after five years
Total

FY2018(As of March 31, 2020)(As of March 31, 2019)

¥ 175
975
2,978
¥4,130

¥ 451
1,553
—
¥2,005(3) Temporary differences arising from investments in subsidiaries for which deferred tax liabilities were not recognizedNot applicable.

Kureha Corporation Business Report 202059

(4) Income tax expense
The breakdown of income tax expense is as follows:
FY2019Millions of yen

Current tax expense
Deferred tax expense
Total

FY2018(From April 1, 2018
to March 31, 2019)(From April 1, 2019
to March 31, 2020)¥3,39341¥3,435¥ 5,138(1,021)¥ 4,117(5) Reconciliation of statutory effective tax rate and actual tax rate
The reconciliation of the statutory effective tax rate and actual tax rate is as follows.
The actual tax rate represents the ratio of income tax expense to profit before tax.
FY2018FY2019(From April 1, 2018
to March 31, 2019)(From April 1, 2019
to March 31, 2020)

Statutory effective tax rate
Permanently non-deductible items such as entertainment expenses
Permanently non-taxable items such as dividend income
Tax credit on research expense
Effect of unrecognized tax loss carryforwards or temporary differences
Gain on bargain purchaseDifference in tax rates at foreign operations
Other
Actual tax rate

30.46%
0.53%(0.22)%(6.91)%(3.60)%——(0.55)%
19.71%

30.46%
0.63%(0.21)%(9.87)%
2.27%(2.48)%
1.80%
0.34%
22.94%

Note: The Group is subject mainly to income tax, inhabitant tax and enterprise tax, based on which the statutory effective tax
rate above is calculated. The Group’s foreign operations are subject to income and other taxes at their respective locations.

16. Assets pledged as collateral and secured obligations

Assets pledged as collateral and obligations with pledged assets are as follows:(1) Assets pledged as collateralMillions of yen

FY2019(As of March 31, 2020)

Property, plant and equipment
Other financial assets
Total

FY2018(As of March 31, 2019)¥34,600
340¥34,940¥31,722265¥31,987(2) Obligations with pledged assets
Millions of yen

FY2019(As of March 31, 2020)

Trade and other payables
Loans payable
Other financial liabilities
Total
Current liabilities
Non-current liabilities

60

Kureha Corporation Business Report 2020

¥ 768
289
241
1,299
800
¥ 499

FY2018(As of March 31, 2019)

¥ 563
359
260
1,182
632
¥ 549

17. Trade and other payables

The breakdown of trade and other payables is as follows:
Millions of yen

FY2019(As of March 31, 2020)

Trade notes and accounts payable
Other
Total

FY2018(As of March 31, 2019)¥18,602
5,408¥24,011¥14,796
4,628¥19,424

18. Provisions

The breakdown of provisions and the details of changes are as follows:
Millions of yen
Provision for
employee benefits(Note)

Balance as of April 1, 2018
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of March 31, 2019
Increases during the period
Increases due to business combinations
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of March 31, 2020

Other

¥ 5,740
4,397(4,154)
—
(3)
5,979
4,373
11
(4,299)—(8)¥ 6,057

Total

¥ 870
253
(255)
—
—
868
620
1,009
(723)
(26)
—
¥1,748¥ 6,610
4,651(4,409)
—
(3)
6,848
4,993
1,021
(5,022)(26)(8)¥ 7,805

Millions of yen

FY2019(As of March 31, 2020)

Current liabilities
Non-current liabilities
Total¥6,3391,465¥7,805FY2018(As of March 31, 2019)¥6,176671¥6,848

Note: Provision for employee benefits represent an estimated amount of expenditures for costs associated mainly with unused
paid leaves and bonuses. The expected timing of any resulting outflows of economic benefits is mostly within one year
from the end of each fiscal year.

19. Employee benefits

The Company and certain consolidated subsidiaries have adopted the funded and unfunded defined benefit plans and defined
contribution plans to provide for retirement benefits to the employees.
(1) Defined benefit plan
The defined benefit plans adopted by the Group mainly consists of defined benefit corporate pension plans and lump-sum
retirement benefit plans.
The Group’s defined benefit corporate pension plan is a contract-type corporate pension plan managed under a cash balanceplan. Under the plan, each participant is given a hypothetical individual account to record their funded amount which will be
the source of pension payment. Interest credit based on the market interest rate trends and contribution credit based primarily
on a level of compensation are the two main items accumulated in the hypothetical individual account. Certain consolidated
subsidiaries make lump-sum or pension payments based on the amount of salary and the lengths of service.

Kureha Corporation Business Report 202061

Under the contract-type corporate pension plan, plan assets management is entrusted to asset management institutions inaccordance with the defined benefit corporate pension regulations agreed between labor and management. In addition, theGroup abides by the rules provided under the Defined-Benefit Corporate Pension Law that requires recalculation of the amountof contribution at least every five years to maintain the plan’s funded status into the future.
Under the lump-sum retirement benefit plan, lump-sum payment is made based on the amount of salary and the lengths ofservice.
(2) Amounts related to defined benefit plans reported in the consolidated financial statements
1) Amounts recognized in the consolidated statements of financial position
The amounts recognized in the consolidated statements of financial position are as follows:
Millions of yen

FY2019Present value of defined benefit obligations under funded plans (with plan assets)
Fair value of plan assets
Funded status
Present value of defined benefit obligations under unfunded plans (without plan
assets)Net amount of liability and asset recognized in the consolidated statements offinancial position
Net defined benefit liability
Net defined benefit asset

FY2018(As of March 31, 2020)(As of March 31, 2019)¥ 21,007(26,780)(5,772)¥ 21,586(27,345)(5,759)235

249(5,537)295¥ 5,832(5,509)329¥ 5,839

Note: Net defined benefit asset is recorded under “Other non-current assets” in the consolidated statements of financial
position.
2) Amounts recognized in the consolidated statements of profit or loss
The amounts of defined benefit cost recognized in the consolidated statements of profit or loss are as follows:
FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

Service cost
Net interest
Prior service costs
Total defined benefit cost

FY2018(From April 1, 2018
To March 31, 2019)¥1,150(24)
14¥1,140Note: Defined benefit cost is recorded under “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statements of profit or loss.

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Kureha Corporation Business Report 2020

¥1,164(25)—¥1,1393) Changes in the present value of defined benefit obligations
Changes in the present value of defined benefit obligations are as follows:
FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

Present value of defined benefit obligations (beginning of the year)
Service cost
Interest cost
Benefits paid
Prior service costs
New consolidation
Remeasurements(i) Actuarial differences arising from changes in demographical assumptions(ii) Actuarial differences arising from changes in financial assumptions(iii) Other adjustments to actual results
Exchange rate differences
Present value of defined benefit obligations (end of the year) (Note)

FY2018(From April 1, 2018
To March 31, 2019)¥22,399
1,164
117(1,681)
—
—
(156)
—
228
(384)
(7)
¥21,835¥21,835
1,150
92(1,651)
14
44
(241)
—
(287)
45
(3)
¥21,243

Note: The weighted average duration of defined benefit obligations for the FY2018 and FY2019 were 9.8 years and 9.8 years,
respectively.
4) Fair value of plan assets
The Group’s investment policy is designed to ensure the total return in a long term to fund for the stable payments of pension
benefits and lump-sum payments into the future.
Accordingly, taking into account the maturity and financial position of the Group by giving consideration to expected rate of
return from fundamental investment assets, standard deviation of the rate of return, and the correlation coefficient of these rates,
the Group formulates a strategic asset mix ratio from a mid-to-long term standpoint, which is considered as an optimal portfolio
on a long-term basis. The Group reviews the investment policy as necessary and provides comprehensive management over its
assets and liabilities.
The Group manages risks appropriately through diversified asset management by investing in multiple asset classes andfunds that have different risk and return characteristics, thereby balancing the risk exposure.
Changes in fair value of plan assets are as follows:
FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

Fair value of plan assets (beginning of the year)
Interest income
Return on plan assets
Contributions by the employer (Note)
Benefits paid
New consolidation
Exchange rate differences
Fair value of plan assets (end of the year)¥27,345
117
(671)
1,550
(1,592)33(2)¥26,780

FY2018(From April 1, 2018
To March 31, 2019)¥26,956
143
235
1,631
(1,615)—(5)¥27,345

Note: Expected contribution for the year ending March 31, 2021 is 1,540 million yen.

Kureha Corporation Business Report 202063

5) The breakdown of the fair value of plan assets
The breakdown of the fair value of plan assets are as follows:
Millions of yen

Bonds
StocksGeneral accounts of life insurance companies
Other
Total

FY2019(As of March 31, 2020)
Quoted market pricein an active market
Not
Available
available¥12,515
¥ —
7,257
—
—
6,768
—
238
¥19,773¥7,007FY2018(As of March 31, 2019)
Quoted market pricein an active market
Not
Available
available¥ 9,680
¥ —
8,205
—
—
6,794
—
2,664
¥17,886¥9,4596) Major assumptions used for actuarial calculations
Major assumptions used for actuarial calculations are as follows:
FY2019(As of March 31, 2020)

Discount rate (weighted average)

FY2018(As of March 31, 2019)

0.4%

0.6%

7) Sensitivity analysis
Effects on defined benefit obligations due to changes in actuarial assumptions are as follows:
Sensitivity analysis is performed by applying the same method used to calculate defined benefit obligations recognized in the
consolidated statements of financial position, based on the change in assumption that can be reasonably estimated at the end of
the reporting period. Under the analysis, all other variables are assumed to remain constant.
Millions of yen

FY2019(As of March 31, 2020)

0.1% increase in discount rate
0.1% decrease in discount rate¥(205)
205

FY2018(As of March 31, 2019)¥(207)
207(3) Defined contribution plan
Amounts of contribution to the defined contribution plan recognized as expenses for FY2018 and FY2019 were 2,056 million
yen and 2,150 million yen, respectively. The amounts are recorded under “Cost of sales” and “Selling, general and administrative
expenses” in the consolidated statements of profit or loss.
(4) Employee benefit expenses
Total employee benefit expenses excluding the above items for FY2018 and FY2019 were 29,981 million yen and 30,205
million yen, respectively. The amounts are recorded under “Cost of sales” and “Selling, general and administrative expenses” inthe consolidated statements of profit or loss.

20. Share-based payments(1) Details of share-based payment plan
The Company has a stock option plan that grants rights to its directors (excluding outside directors) to purchase the Company’s
shares. The plan is accounted for as an equity-settled share-based payment plan.

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Kureha Corporation Business Report 2020

The Company’s stock option plan outstanding in FY2018 and FY2019 are as follows:
Date of resolution

Number of shares
granted (shares)
Grant date
Fair value at grant
date (yen)Vesting condition(Note)
Expiry date
Shares outstanding
as of the end of
FY2018
Shares outstanding
as of the end of
FY2019Date of resolution

Number of shares
granted (shares)
Grant date
Fair value at grant
date (Yen)
Vesting condition(Note)
Expiry date
Shares outstanding
as of the end of
FY2018
Shares outstanding
as of the end of
FY2019Date of resolution

Number of shares
granted (shares)
Grant date
Fair value at grant
date (Yen)
Vesting condition(Note)
Expiry date
Shares outstanding
as of the end of
FY2018
Shares outstanding
as of the end of
FY2019June 25, 2009

June 25, 2010

June 24, 2011

June 26, 2012

June 25, 2013

5,550
July 22, 2009

5,530
July 21, 2010

5,660
July 20, 2011

7,650
July 18, 2012

5,670
July 17, 2013

4,870
Continued service
from June 25,2009 to June 24,
2010
July 21, 2039

4,060
Continued service
from June 25,2010 to June 24,
2011
July 20, 2040

3,600
Continued service
from June 24,2011 to June 23,
2012
July 19, 2041

2,780
Continued service
from June 26,
2012 to June 25,
2013
July 17, 2042

2,890
Continued service
from June 25,2013 to June 24,
2014
July 16, 2043

530

580

660

1,300

1,810

530

580

660

1,300

1,810

June 25, 2014

June 24, 2015

June 24, 2016

June 27, 2017

June 26, 2018

3,390
July 16, 2014

3,410
July 22, 2015

4,050
July 20, 2016

2,120
July 19, 2017

1,500
July 18, 2018

5,060
Continued service
from June 25,2014 to June 24,
2015
July 15, 2044

4,260
Continued service
from June 24,2015 to June 23,
2016
July 21, 2045

3,680
Continued service
from June 24,2016 to June 23,
2017
July 19, 2046

5,299
Continued service
from June 27,2017 to June 26,
2018
July 18, 2047

7,393
Continued service
from June 26,2018 to June 25,
2019July 17, 2048

1,140

2,570

3,050

2,120

1,500

1,140

2,570

3,050

2,120

1,500

June 25, 2019

Total

2,740
July 24, 201947,270—

6,976
Continued service
from June 25,
2019 to June 24,
2020
July 23, 2049

—
—
—

—

15,2602,740

18,000Note: If a director retires during the vesting period, exercisable stock acquisition rights will decrease in accordance with thedirector’s service period.

Kureha Corporation Business Report 202065

(2) Number of outstanding stock options and weighted average exercise price
FY2019(From April 1, 2019
To March 31, 2020)
Number of options
Weighted average(shares)
exercise price (yen)FY2018(From April 1, 2018
To March 31, 2019)
Number of options
Weighted average(shares)
exercise price (yen)Outstanding at the beginning of the year
15,2601
13,7601
Granted
2,740
1
1,500
1
Exercised————
Outstanding at the end of the year
18,0001
15,260
1
Exercisable at the end of the year————
Note: Weighted average fair value of stock options outstanding at the end of FY2018 and FY2019 were 4,352 yen and 4,751
yen, respectively. Weighted average contractual life remaining for FY2018 and FY2019 were 25.6 years and 25.2 years,
respectively.
(3) Expenses in relation to stock options are as follows:
FY2019Selling, general and administrative expenses

Millions of yen(From April 1, 2019
To March 31, 2020)

FY2018(From April 1, 2018
To March 31, 2019)

¥17

¥11

(4) Fair value of stock options granted was calculated as follows:
FY2019FY2018(As of March 31, 2020)(As of March 31, 2019)
Expected volatility (Note 1)
34.3%
24.8%
Expected remaining life (Note 2)
1.0 years
2.0 years
Expected dividend (Note 3)
165 yen/share
125 yen/share
Risk-free rate (Note 4)(0.19)%(0.12)%
Notes: 1. Expected volatility for FY2018 and FY2019 are calculated using the actual share price over a period of two years (fromJuly 2016 to July 2018) and two years (from July 2017 to July 2019), respectively.
2. Expected retirement date used in the computation is estimated based on the average service period.
3. Expected dividend for FY2018 and FY2019 are calculated based on the actual annual dividend amounts for the years
ended March 2018 and March 2019, respectively.
4. Risk-free rates are calculated by linear interpolation between spot rates of separated principal component of JGBs witha maturity corresponding to the expected remaining life.

21. Paid-in capital and other equity items(1) Numbers of authorized shares and issued (and fully paid) shares
Changes in the numbers of authorized shares and issued shares are as follows:
FY2019Number of authorized shares
Common stock
Number of issued shares
Balance as of the beginning of the year
Increases during the year
Decreases during the year
Balance as of the end of the year

Shares

FY2018(From April 1, 2019
To March 31, 2020)(From April 1, 2018
To March 31, 2019)60,000,000

60,000,000

20,805,407——
20,805,407

20,805,407——
20,805,407

Note: All of the shares issued by the Company are shares of common stock with no par value and no limits to any rights of theshareholders.

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Kureha Corporation Business Report 2020

(2) Treasury stock
Changes in treasury stock are as follows:
Shares

FY2019(From April 1, 2019
To March 31, 2020)

Balance as of the beginning of the year
Increases during the year (Note)
Decreases during the year
Balance as of the end of the year

540,325
746,666—
1,286,991

FY2018(From April 1, 2018
To March 31, 2019)

150,740
389,585—
540,325

Note:Increases during FY2018 were due to 685 shares resulting from purchase of shares less than one trading unit and 388,900
shares resulting from acquisition based on a resolution of the Board of Directors’ meeting held on November 7, 2018 andincreases during FY2019 were due to 666 shares resulting from purchase of shares less than one trading unit and 746,000
shares resulting from acquisition based on a resolution of the Board of Directors’ meeting held on May 14, 2019.
(3) Capital surplus and retained earnings(a) Capital surplus
Under the Companies Act, 50% or more of the total amount paid in or contributed upon share issue must be recorded as sharecapital while the remaining amount must be recorded as legal capital surplus, which is a component of capital surplus. The
amount of legal capital surplus may be transferred to share capital by a resolution of a general meeting of shareholders.
(b) Retained earnings
Under the Companies Act, 10% of the amount of surplus that decreased due to distribution of surplus must be accumulated aslegal capital surplus or legal retained earnings until the aggregate amount of legal capital surplus and legal retained earnings
equals 25% of the capital stock. The amount reserved in legal retained earnings may be appropriated to compensate
accumulated deficit. It may also be reversed by a resolution of a shareholders’ meeting.
(4) Other components of equity(a) Stock acquisition rights
This amount represents the increase in equity arising from the reception or acquisition of goods or services pertaining to equitysettled share-based payment plan.
(b) Exchange differences on translating foreign operations
This amount represents exchange differences arising from translating the financial statements of foreign operations to Japaneseyen, which is the presentation currency of the Group.
(c) Financial assets measured at fair value through other comprehensive income
The amount represents the difference between the cost and the year-end fair value of equity instruments measured at fair value
through other comprehensive income.

22. Dividends(1) Amounts of dividends paid
FY2018 (From April 1, 2018 To March 31, 2019)

Resolution

Board of Directors’
meeting held on April 17,
2018
Board of Directors’
meeting held on October23, 2018

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock¥1,445

Common stock

1,445

Class of shares

Record date

Effective date

¥70.00March 31,2018

June 4,
2018

70.00

September 30,
2018

December 4,
2018

Kureha Corporation Business Report 2020

67

FY2019 (From April 1, 2019 To March 31, 2020)
Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock¥1,925

Common stock

1,682

Resolution

Class of shares

Board of Directors’
meeting held on April 23,
2019
Board of Directors’
meeting held on October24, 2019

Record date

Effective date

¥95.00March 31,2019

June 4,
2019

85.00

September 30,
2019

December 3,
2019(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year
FY2018 (From April 1, 2018 To March 31, 2019)

Resolution

Board of Directors’
meeting held on
April 23, 2019

Source of dividends

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock Retained earnings¥1,925¥95.00Source of dividends

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock Retained earnings¥1,659¥85.00Class of shares

Record date

Effective date

March 31,2019

June 4,
2019

Record date

Effective date

March 31,2020

June 2,2020

FY2019 (From April 1, 2019 To March 31, 2020)

Resolution

Board of Directors’
meeting held on
April 21, 2020

Class of shares

23. Financial instruments(1) Capital management
In order to maintain proper capital adequacy ratio and to maximize shareholder’s value, the Group determines an appropriate
amount of dividends, acquires its own shares, grants stock acquisition rights and raises funds through debt capital and equity
capital.
The followings are the key indicators employed by the Group in managing the Group’s capital.
The Group is not subject to any significant externally imposed capital requirements (except for general requirements such as
those required by the Companies Act and other laws and regulations).
Millions of yen

FY2019(As of March 31, 2020)

Interest-bearing debt
Less: Cash and cash equivalents
Net interest-bearing debt
Equity capital
Equity-to-asset ratio (Equity ratio)

FY2018(As of March 31, 2019)¥ 37,317(7,268)30,049164,990
66.8%¥ 39,018(5,989)33,029160,55164.9%

Note: Equity capital presented above represents total equity attributable to owners of the parent.
Equity-to-asset ratio (Equity ratio) = Equity capital / Total liabilities and equity(2) Basic policies on financial instruments
The Group uses financial instruments, mainly bank loans and bonds for the purpose of raising its necessary fund based on its
capital expenditure plan. Cash surpluses, if any, are invested only in short-term deposits, etc. Working capital for short-term
ongoing operations is procured from short-term bank loans. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described below.

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Kureha Corporation Business Report 2020

(3) Description of financial instruments and associated risk
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign currencies
are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign
currencies, is hedged principally by using forward foreign currency contracts. Other financial assets such as investments
securities are equity instruments of customers and suppliers of the Group, and are exposed to the risk of market pricefluctuations. The Group also provides long-term loans to the employees.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies, partly accompanied by the import of materials, are exposed to the market risk of fluctuation in foreign currency
exchange rates, the position, net of payables in foreign currencies, is hedged principally by using forward foreign currency
contracts.
Loans payable, bonds payable and lease liabilities related to finance lease are mainly used to procure necessary funds forcapital expenditure, most of which carry fixed interest rates.
Derivatives mainly include forward foreign currency contracts which are used to manage exposure to risks from fluctuations
in foreign currency exchange rates of trade receivables and payables denominated in foreign currencies.
(4) Risk management structure related to financial instruments and quantitative information on risk
a. Credit risk
1) Management of risk pertaining to counterparty default
Credit risk is the risk of economic loss arising from counterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include
setting up an individual credit limit and monitoring of payment terms and balances of major customers by each businessadministration department to identify the default risk of customers at an early stage. A credit limit is changed, if necessary,
based on a periodic monitoring of customers’ financial positions. The Group mitigates the risk of receivable collection due
to deteriorating financial position by utilizing such facilities as credit insurance or factoring.
In using derivatives, the Group chooses highly creditworthy financial institutions to avoid counterparty risk.
The same method of risk control is applicable to consolidated subsidiaries.
2) Quantitative information on credit riski) Maximum exposure to credit risk
Maximum exposure to the credit risk is the sum of the carrying amounts of financial assets, net of impairment losses
presented in the consolidated statements of financial position, and the balance of guarantee obligations.
ii) Credit risk exposure of the Group pertaining to trade and other receivables
The credit risk exposure of the Group pertaining to trade and other receivables are as follows:
FY2018 (As of March 31, 2019)

Days in arrears

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

(Millions of yen)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets¥2,4620———¥2,462

¥—
—
—
—
—
¥—

¥28,970
354
95
20
169
¥29,610

¥ 30
—
—
—
77
¥107

Total

¥31,463
354
95
20
246
¥32,180

Kureha Corporation Business Report 2020

69

FY2019 (As of March 31, 2020)

Days in arrears

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

(Millions of yen)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets¥2,652
1———¥2,653

¥—
—
—
—
—
¥—

¥26,351
676
108
15
148
¥27,300

¥30
—
—
—
64
¥94

Total

¥29,033
677
108
15
213
¥30,048iii) Analysis of changes in allowance for doubtful accounts
The Group reviews the recoverability of trade receivables depending on the credit conditions of counterparties andrecords allowance for doubtful accounts accordingly. Changes in allowance for doubtful accounts are as follows:
FY2018 (From April 1, 2018 To March 31, 2019)12-month expectedcredit loss

Beginning balance
Increases during the year
(allowances made)Decreases during the year
(allowances used)
Decreases during the year
(allowances reversed)
Exchange differences
Ending balance

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Kureha Corporation Business Report 2020

(Millions of yen)
Lifetime expected credit loss
Financial asset for which
the allowance for
doubtful accounts is
Financial assets foralways measured at an
which credit risk
amount equal to aincreased significantly lifetime expected credit
after initial recognition
loss

Credit-impaired
financial assets

Total

¥—

¥—

¥ 159

¥ 77

¥ 237

—

—

171

17

188

—

—

(5)

—

(5)

—
—
¥—

—
—
¥—

(153)
(5)
¥ 165

(13)
0
¥ 81

(167)
(5)
¥ 247

FY2019 (From April 1, 2019 To March 31, 2020)12-month expectedcredit loss

Beginning balance
Increases during the year
(allowances made)Decreases during the year
(allowances used)
Decreases during the year
(allowances reversed)
Exchange differences
Ending balance(Millions of yen)
Lifetime expected credit loss
Financial asset for which
the allowance for
doubtful accounts is
Financial assets foralways measured at an
which credit risk
amount equal to aincreased significantly lifetime expected credit
after initial recognition
loss

Credit-impaired
financial assets

Total

¥—

¥—

¥ 165

¥ 81

¥ 247

—

—

172

16

189

—

—

—

—

—

—
—
¥—

—
—
¥—

(161)
(5)
¥ 171

(11)
—
¥ 86

(173)
(5)
¥ 258

b. Liquidity risk
1) Management of liquidity risk related to fund procurement
Trade payables and loans payables are exposed to liquidity risk. In the Group, each entity manages its liquidity risk byformulating a monthly cash flow plan and the Company manages it by using commercial paper and commitment line.
2) Quantitative information on liquidity risk
The breakdown of financial liabilities including derivative financial instruments by due date is as follows:
FY2018 (As of March 31, 2019)

Trade and other payables
Bonds and loans payable
Other financial liabilities
Derivative liabilities
Total

Carrying
amountContractual
cash flows

Due within
one year¥24,01138,5521,519
13¥64,096¥24,011
38,6111,519
13¥64,155¥24,01123,046510
13¥47,580(Millions of yen)
Due after one Due after two Due after three Due after four
year through years through years through years through Due after five
two years
three years
four years
five years
years

¥

—
2,243
149
—
¥2,392

¥

—
1,055
111
—
¥1,167

¥

—
7,053
59
—
¥7,113

¥

—
5,052
42
—
¥5,094

¥ —
160
646
—
¥807

FY2019 (As of March 31, 2020)

Trade and other payables
Bonds and loans payable
Lease liabilities
Other financial liabilities
Derivative liabilities
Total

Carrying
amountContractual
cash flows

Due within
one year¥19,424
34,198
3,118
1,043
2
¥57,787¥19,424
34,236
3,118
1,043
2
¥57,825¥19,424
15,5491,310
270
2¥36,557(Millions of yen)
Due after one Due after two Due after three Due after four
year through years through years through years through Due after five
two years
three years
four years
five years
years

¥

—
1,496
746
39
—
¥2,283

¥

—
7,694
309
36
—
¥8,040

¥

—
5,592
183
36
—
¥5,813

¥ —
564
139
36
—
¥740

¥

—
3,338
428
623
—
¥4,390Kureha Corporation Business Report 202071

c. Market risk
1) Market risk management
The Company and certain consolidated subsidiaries manage market risk resulting from fluctuations in foreign currency
exchange rates of foreign currency trade receivables and payables, which are to be identified through management permonth and per currency. Such foreign exchange risk is hedged principally by forward foreign currency contracts.
Investment securities are managed by monitoring market values and financial position of issuers on a regular basis.
Basic principles of derivative transactions are based on the internal guidelines which prescribe the authority and the limit
for each transaction. The same principles are applicable to the consolidated subsidiaries.
2) Quantitative information on market riski) Sensitivity analysis of foreign currency risk
With regard to the foreign-currency-denominated loans payable and receivable held by the Group as of the end of
FY2018 and FY2019, the following sensitivity analysis shows an impact on profit before tax in the consolidated
statements of profit or loss of the Group, when the yen depreciates by 1% against the U.S. dollar and Chinese yuan(sensitivity to foreign currency). The analysis is based on the assumption that all other variable factors are held constant.
Item

FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

U.S. dollar
Chinese yuan

FY2018(From April 1, 2018
To March 31, 2019)

¥19
1

¥17
0

ii) Sensitivity analysis of interest rate risk
With regard to the financial instruments held by the Group as of the end of FY2018 and FY2019, the following
sensitivity analysis shows an impact on profit before income taxes in the consolidated statements of profit or loss of theGroup, when the interest rate increases by 0.1% (sensitivity to interest rate). The analysis is based on the assumptionthat all other variable factors are held constant.

Item
Effect on profit before tax

FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

FY2018(From April 1, 2018
To March 31, 2019)

¥(10)

¥(10)

iii) Sensitivity analysis of share price fluctuation risk
With regard to the listed shares held by the Group as of the end of FY2018 and FY2019, the following sensitivity
analysis shows an impact on other comprehensive income (before taking into account tax benefit) in the consolidated
statements of comprehensive income of the Group, when the share price declines by 10% (sensitivity to share price).
The analysis is based on the assumption that all other variable factors are held constant.

Item
Effect on other comprehensive income

72

Kureha Corporation Business Report 2020

FY2019Millions of yen(From April 1, 2019
To March 31, 2020)¥(2,087)

FY2018(From April 1, 2018
To March 31, 2019)¥(2,581)(5) Fair value of financial instruments
1) Carrying amounts and fair values of financial assets and financial liabilities
Carrying amounts and fair values of financial assets and financial liabilities by class held by the Group are as follow:
Millions of yen

FY2019(As of March 31, 2020)
Carrying
Fair value
amountFinancial assets
Financial assets measured atamortized cost
Other financial assets
Financial assets measured at fairvalue through othercomprehensive income
Other financial assets
Total
Financial liabilities
Financial liabilities measured atamortized cost
Bonds and loans payable
Other financial liabilities
Financial liabilities measured atfair value through profit or loss
Derivative liabilities
Total

FY2018(As of March 31, 2019)
Carrying
Fair value
amount¥ 1,462¥ 1,462¥ 1,239¥ 1,239

23,114
24,57623,114
24,57627,37828,61827,37828,61834,1984,161

34,3484,161

38,552
1,519

38,685
1,519

2¥38,3622¥38,512

13¥40,08513¥40,2182) Method of fair value measurement
Fair values of key financial assets and financial liabilities are determined as follows.
i) Cash and cash equivalents, trade and other receivables and trade and other payables
Classified as financial assets measured at amortized cost. The carrying amounts of these accounts approximate fair value
because of their short maturities. Therefore, information on fair values is omitted.
ii) Other financial assets
The fair values of marketable shares are presented based on the price on the stock exchange. The fair values of unlisted
shares are determined using reasonable valuation techniques.
The fair values of long-term loans receivable are measured at the present value of the future cash flows discounted by arate of return, a reasonable rate such as government bond rate added to a credit spread, with respect to each credit risk
segment of credit control.
The carrying amount of others approximates fair value because of its short maturities.
iii) Bonds and borrowings
The fair values of bonds are measured based on the market price.
The fair values of borrowings are measured by discounting the principal and interest by an assumed new borrowing
rate.
iv) Other financial liabilities
The fair values of lease liabilities are measured by discounting them at the prevailing interest rate to be applied forsimilar lease transactions.
The carrying amount of others approximates fair value because of its short maturities.
v) Derivative transactions
The fair values of forward exchange contracts are measured based on forward exchange rates.

Kureha Corporation Business Report 2020733) Classification of the fair values of financial instruments measured at fair value by hierarchy level
The fair value measurements are categorized into the following three levels in a fair value hierarchy.
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Group can access at themeasurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level 3: Unobservable inputs for the asset or liability.
In the case of several inputs used to measure the fair value, the fair value measurement is categorized in its entirety in thesame level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Transfers
between the levels of fair value hierarchy are recognized assuming that such transfers occurred at the end of each reporting
period.
i) Financial assets and liabilities recognized at fair value
FY2018 (As of March 31, 2019)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Total
Financial liabilities
Financial liabilities measured at fair value
through profit or loss
Derivative liabilities
Total

Level 2

Level 3

Total

¥25,817
25,817¥——¥1,561
1,561

—
—

13
¥13

¥

¥

—
—

¥27,378
27,378¥13
13

Note: There were no transfers between different levels of the fair value hierarchy.
FY2019 (As of March 31, 2020)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Total
Financial liabilities
Financial liabilities measured at fair value
through profit or loss
Derivative liabilities
Total

Level 2

Level 3

Total

¥20,872
20,872¥——¥2,241
2,241¥23,114
23,114

—
—

2
¥ 2

—
—

2
2

¥

¥

¥

Note: There were no transfers between different levels of the fair value hierarchy.
ii) Information on fair value measurement categorized in Level 2 and Level 3
Financial assets and financial liabilities categorized in Level 2 arise from derivative transactions. The fair value of theseassets and liabilities are measured based on the observable inputs such as the forward exchange rate or the interest rate.
Financial assets categorized in Level 3 are mainly unlisted equity instruments. The fair values of unlisted equity
instruments are measured by applying valuation techniques such as market multiple method and net asset value
method, in addition to using unobservable inputs including valuation multiples.
The fair values of financial assets categorized in Level 3 on a recurring or non-recurring basis are measured inaccordance with the provisions of the Group’s accounting policies. In measuring the fair value, the Group uses valuation
techniques and inputs that reflect the nature, characteristics and risks of the relevant financial instruments mostappropriately. The results of the measurement are reviewed by senior managers.
If each unobservable input used to measure financial instruments categorized in Level 3 is changed to a reasonable
alternative assumption, no material changes in the amount of fair values would be assumed.
74

Kureha Corporation Business Report 2020

iii) Changes in financial instruments categorized in Level 3
FY2019Millions of yen(From April 1, 2019
To March 31, 2020)

Beginning balance
Gains or losses for the period (Note 1)
Purchase, etc. (Note 2)
Sale
Ending balance

FY2018(From April 1, 2018
To March 31, 2019)

Financial assets
Financial assets
measured at fairmeasured at fairvalue through other value through othercomprehensive
comprehensive
incomeincome¥1,561¥1,540
(0)
16
695
5
(14)
(0)
¥2,241¥1,561

Notes: 1. The line item “Gains or losses for the period” above is presented in “Financial assets measured at fair value throughother comprehensive income” in the consolidated statements of comprehensive income.
2. “Purchase, etc.” includes an increase due to new consolidation.
iv) Information on financial assets measured at fair value through other comprehensive income
The Group classifies long-term investments held mainly for the purpose of maintaining amicable relationships with its
business partners as financial assets measured at fair value through other comprehensive income.
(a) Major items and fair values
The fair values of financial assets measured at fair value through other comprehensive income by item are as follows:
FY2018 (As of March 31, 2019)
Item

Millions of yen
Fair value

Daiichi Sankyo Company, Limited
NOF Corporation
Tosoh Corporation
Taiyo Nippon Sanso Corporation
Kuraray Co., Ltd.

¥10,200
3,434
2,249
1,562
928

FY2019 (As of March 31, 2020)
Item

Daiichi Sankyo Company, Limited
NOF Corporation
Tosoh Corporation
Taiyo Nippon Sanso Corporation
Kuraray Co., Ltd.

Millions of yen
Fair value¥7,434
3,124
1,608
1,484
721

Kureha Corporation Business Report 202075

(b) Dividend income
The breakdown of dividend income on financial assets measured at fair value through other comprehensive income
is as follows:
Item

FY2019Millions of yen

FY2018(From April 1, 2019
To March 31, 2020)(From April 1, 2018
To March 31, 2019)

¥489
42
¥531

¥546
74
¥621

Investments held at the end of the year
Investments derecognized during the year
Total(c) Derecognized financial assets measured at fair value through other comprehensive income
The fair values on the date of derecognition and cumulative gains and losses (before taxes) of the financial assets
measured at fair value through other comprehensive income that were derecognized during the year are as follows:
Item

FY2019Millions of yen

Fair value
Cumulative gains or losses

FY2018(From April 1, 2018
To March 31, 2019)(From April 1, 2019
To March 31, 2020)¥4,102
3,320¥ 6,150(5,440)Notes: 1. For the purpose mainly of reviewing the relationship with the customers, the Group disposes the financial assets
measured at fair value through other comprehensive income and derecognizes such financial assets.
2. The Group reclassifies to retained earnings cumulative gains or losses arising from changes in the fair values offinancial assets measured at fair values through other comprehensive income in either of the following cases: when an
asset is derecognized; or when there is a significant decline in the fair value, etc. The amount of cumulative gains orlosses (after taxes) in other comprehensive income reclassified to retained earnings for FY2018 and FY2019 were 2,302
million yen and 3,782 million yen, respectively.
v) Breakdown of fair values of financial instruments measured at amortized cost by hierarchy level
The breakdown of financial assets and liabilities measured at amortized cost by fair value hierarchy is as follows. The
financial assets whose carrying amounts approximate their fair values are not included in the table below.
FY2018 (As of March 31, 2019)
Millions of yen
Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Commercial papers
Total

Level 2

Level 3

Total

¥—
—

¥ 1,239
1,239

¥—
—

¥ 1,239
1,239

—
—
—
¥—

19,02818,656
1,000¥38,685———¥—

19,02818,656
1,000¥38,685

FY2019 (As of March 31, 2020)
Millions of yen
Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Commercial papers
Total
76

Kureha Corporation Business Report 2020

Level 2

Level 3

Total

¥—
—

¥ 1,462
1,462

¥—
—

¥ 1,462
1,462

—
—
—
¥—

11,974
20,3732,000¥34,348———¥—

11,974
20,3732,000¥34,348

(6) Derivatives
Derivative transactions to which hedge accounting is not applied
FY2018 (As of March 31, 2019)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
Chinese yuan
U.S. dollar(Buying)
Chinese yuan
Japanese yen
U.S. dollar
British pound
Total

Contract amountMillions of yen
Contract amount
Fair value
due after one year

Unrealized
gains or losses

¥ 328
160
878

¥—
—
—

¥ 4
(0)
(3)

¥ 4
(0)
(3)

149
438
1,976
130
¥4,061

—
—
—
—
¥—

(1)
(32)
22
(1)
¥(13)

(1)
(32)
22
(1)
¥(13)

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.
FY2019 (As of March 31, 2020)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
Chinese yuan
U.S. dollar(Buying)Euro
Chinese yuan
U.S. dollar
Total

Contract amountMillions of yen
Contract amount
Fair value
due after one year

Unrealized
gains or losses

¥ 438
107
1,702

¥—
—
—

¥(3)
2
(5)

¥(3)
2
(5)

219
166
1,959
¥4,594

—
—
—
¥—

3
(1)
1
¥(2)

3
(1)
1
¥(2)

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.

24. Revenue(1) Disaggregation of revenue
The Group has separate divisions by product, and each division formulates a comprehensive strategy for business activities indomestic and overseas markets.
Accordingly, the Group consists of segments by product and service on the basis of the business divisions, and has the fivereportable segments of “Advanced Materials,” “Specialty Chemicals,” “Specialty Plastics,” “Construction,” and “Other
Operations.” Main products and services of each reportable segment are described in “6. Segment information.”With regard to sales of advanced materials, specialty chemicals, and specialty plastics, the Group determines that a customer
obtains control over a product and the performance obligation is satisfied when the product is delivered to the customer.
Accordingly, the Group principally recognizes revenue at the time of delivery of its product to the customer. In addition, revenue
generated from sales of products is measured at the amount of consideration promised in a contract with a customer lessdiscounts, rebates, etc. The consideration is paid generally within three months after the performance obligation is satisfied. It
does not include significant financial components.

Kureha Corporation Business Report 202077

With regard to provision of construction and other services, the Group determines that the performance obligation issatisfied while control over a service is transferred to a customer over a certain period of time and therefore, recognizes revenue
principally in accordance with the progress of the service. In addition, progress of construction is measured by the proportion of
the contract costs incurred to the estimated total contract costs. The consideration is paid generally within three months after
the performance obligation is satisfied. It does not include significant financial components.
Relationships between revenue by reportable segment and revenue disaggregated by type are as follows.
FY2018 (From April 1, 2018 To March 31, 2019)
Millions of yen
Advanced Materials Specialty Chemicals Specialty Plastics

Sale of products
Construction
Provision of other services
Total¥45,747—2¥45,749¥26,590—718¥27,309¥45,148——¥45,148

Construction

Other Operations¥—
12,415—¥12,415¥—
2,353
15,289¥17,643

Total¥117,486
14,76916,009¥148,265

FY2019 (From April 1, 2019 To March 31, 2020)
Millions of yen
Advanced Materials Specialty Chemicals Specialty Plastics

Sale of products
Construction
Provision of other services
Total¥41,840—2¥41,842¥23,971—359¥24,331¥43,473——¥43,473

Construction

Other Operations¥—
14,457—¥14,457¥—
1,144
17,148¥18,293

Total¥109,285
15,602
17,510¥142,398(2) Contract balance
The Group records contract assets relating to consideration on construction work in progress, records contract liabilities relating
to advances received from customers, and records refund liabilities by estimating rebates for which payment is expected in the
future.
FY2018 (From April 1, 2018 To March 31, 2019)
Millions of yen

Beginning of
FY2018Trade receivables
Contract assets
Contract liabilities
Refund liabilities(As of April 1, 2018)¥31,907
2,036
732
¥ 918

FY2018(As of March 31, 2019)¥29,610
1,789
1,876
¥ 896

FY2019 (From April 1, 2019 To March 31, 2020)
Millions of yen

Beginning of
FY2019Trade receivables
Contract assets
Contract liabilities
Refund liabilities(As of April 1, 2019)¥29,610
1,789
1,876
¥ 896

FY2019(As of March 31, 2020)¥27,300
3,113
665
¥ 982

Note: With respect to revenue recognized during the FY2018 and FY2019, the amounts included in contract liabilities were 732
million yen and 1,876 million yen at the beginning of the year, respectively. In the consolidated statements of financial
position, contract assets are included in “Other current assets,” and contract liabilities and refund liabilities are included in“Other current liabilities.”

78

Kureha Corporation Business Report 2020

25. Other income

The breakdown of “Other income” is as follows:
Millions of yen

FY2019Gain on sale of fixed assets (Note)
Gain on bargain purchase
Gain on sale of businesses
Gain on government grants
Other
Total

(From April 1, 2019
To March 31, 2020)¥10,177
1,460
1,200
317
292
¥13,447

FY2018(From April 1, 2018
To March 31, 2019)

¥ 19
—
—
343
252
¥615

Note: Gain on sale of fixed assets mainly consists of 9,272 million yen of gain on sale of land associated with the headquarters
annex building.

26. Other expenses

The breakdown of “Other expenses” is as follows:
Millions of yen

FY2019Business restructuring expenses (Note)
Loss on retirement and sale of property, plant andequipment, and intangible assets
Other
Total

(From April 1, 2019
To March 31, 2020)¥10,607

FY2018(From April 1, 2018
To March 31, 2019)

¥ —

766
177
¥944

591
232
¥11,431

Note: Business restructuring expenses consist of impairment losses of property, plant and equipment and intangible assets of
5,218 million yen, and effect of change in valuation method of inventories of 5,388 million yen.

27. Finance income and finance costs

The breakdown of finance income is as follows:
Millions of yen

FY2019Interest income
Dividend income
Other
Total

(From April 1, 2019
To March 31, 2020)

¥ 12
531
1
¥545

FY2018(From April 1, 2018
To March 31, 2019)

¥ 26
621
4
¥651

The breakdown of finance costs is as follows:
Millions of yen

FY2019Interest expenses
Foreign exchange losses
Other
Total

(From April 1, 2019
To March 31, 2020)

¥312
320
9
¥642

FY2018(From April 1, 2018
To March 31, 2019)

¥359
20
9
¥389

Kureha Corporation Business Report 202079

28. Profit per share(1) Basis for determining basic profit per share
Millions of yen,unless otherwise stated

FY2019Profit attributable to ordinary equity holders of parent:
Profit attributable to owners of parent
Profit not attributable to ordinary equity holders ofparentProfit used for determining basic profit per share
Weighted average number of common stock during theperiod (shares)
Basic profit per share (yen)FY2018(From April 1, 2019
To March 31, 2020)(From April 1, 2018
To March 31, 2019)¥13,719¥13,933—
13,719—13,93319,807,880

20,504,133

692.61

679.55(2) Basis for determining diluted profit per share
Millions of yen,unless otherwise stated

FY2019Profit attributable to ordinary equity holders including
dilutive effects:
Profit used for determining basic profit per share
Adjustments on profit
Profit used for determining diluted profit per share
Weighted average number of common stock during theperiod (shares):
Dilutive effects (shares)
Weighted average number of common stock including
dilutive effects (shares)
Diluted profit per share (yen)80

Kureha Corporation Business Report 2020

FY2018(From April 1, 2019
To March 31, 2020)(From April 1, 2018
To March 31, 2019)¥13,719—
13,719¥13,933—
13,93319,807,880
16,737

20,504,133
14,593

19,824,617

20,518,726

692.03679.07

29. Other comprehensive income

Reclassification adjustment and tax effect for other comprehensive income are as follows:
FY2018 (From April 1, 2018 To March 31, 2019)
Millions of yen
Amount before tax
effectAmount arisingduring the year

Reclassification
adjustment

Items that will not be reclassified to profit or
loss:
Financial assets measured at fair value
through other comprehensive income
Remeasurements of defined benefit plans
Total¥2,185
413
2,598

¥—
—
—

¥2,185413
2,598¥(680)(109)(789)¥1,504304
1,809

Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Total

692
692

—
—

692
692

—
—

692
692

¥3,291¥—¥3,291¥(789)¥2,501

Amount arisingduring the year

Reclassification
adjustment

Millions of yen
Amount before tax
effectItems that will not be reclassified to profit or
loss:
Financial assets measured at fair value
through other comprehensive income
Remeasurements of defined benefit plans
Total¥ 1,227
(445)
782

¥—
—
—

¥ 1,227(445)
782¥(431)
116(315)

Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Total(1,174)(1,174)——(1,174)(1,174)——(1,174)(1,174)¥ (392)¥—¥ (392)¥(315)¥ (707)Total

Tax effectAmount after tax
effect

FY2019 (From April 1, 2019 To March 31, 2020)

Total

Tax effectAmount after tax
effect

¥

796
(328)
467

Kureha Corporation Business Report 202081

30. Cash flow information

The table below presents reconciliations regarding liabilities arising from financing activities.
FY2018 (From April 1, 2018 To March 31, 2019)
Millions of yen

Non-cash transactions
Business
Amortized cost Exchange rate
combinations measurementchanges

As of April 1,
2018

Cash flow¥15,704
12,762
18,949¥47,416¥(3,730)(5,051)(28)¥(8,810)

Short-term loans payable andcommercial paper
Long-term loans payable
Bonds
Total

¥—
—
—
¥—

¥—
—
20
¥20

As of March
31, 2019

¥(57)
(16)
—
¥(73)

¥11,917
7,694
18,940¥38,552

Non-cash transactions
Business
Amortized cost Exchange rate
combinations measurementchanges

As of March
31, 2020

FY2019 (From April 1, 2019 To March 31, 2020)
Millions of yen

As of April 1,
2019

Cash flow¥11,917
7,694
18,940¥38,552¥ 1,293(3,250)(7,000)¥(8,957)

Short-term loans payable andcommercial paper
Long-term loans payable
Bonds
Total

¥

—
4,863
—
¥4,863

¥—
—
20
¥20

¥(259)(22)—¥(281)¥12,951
9,285
11,961¥34,198

Note: See the section entitled “7. Business combinations (Business combination due to acquisition)” for further details on
business combinations.

31. Related party transactions(1) Related party transactions
There were no related party transactions to be reported (excluding those eliminated in the consolidated financial statements).
(2) Executive compensation
The compensation for the Group’s management executives was as follows:
Millions of yen

FY2019Basic compensation
Bonus
Share-based compensation
Total

32. Major subsidiaries(From April 1, 2019
To March 31, 2020)

¥205
71
19
¥295

Major subsidiaries of the Group are disclosed in page XX of our Business Report.

82

Kureha Corporation Business Report 2020

FY2018(From April 1, 2018
To March 31, 2019)

¥210
62
11
¥283

33. Loan commitments

The Company and certain consolidated subsidiaries have entered into overdraft agreements and loan commitment agreementswith multiple financial institutions in order to efficiently procure working capital. The balances of undrawn credit facilities
pursuant to these agreements are as follows:
Millions of yen

FY2019Aggregate amount of maximum
overdraft limit and loan commitment
Less: Drawn down balance
Balance of undrawn credit facilities

FY2018(As of March 31, 2020)(As of March 31, 2019)¥5,675
1,200¥4,475¥6,069—¥6,069Kureha Corporation Business Report 202083

5) Consolidated supplementary schedules[Details of bonds]

Issuer(Millions of yen)
Beginning balance Ending balance
FY2019FY2019Issue date(as of Apr. 1,(as of Mar. 31,
2019)
2020)

Type

KurehaCorporation
KurehaCorporation
KurehaCorporation

The 5th unsecured bonds

March 6, 2015

¥ 6,991(6,991)The 6th unsecured bonds

6,974

6,982

The 7th unsecured bonds

September 1,
2017
October 18,
2018

4,974

Total

—

—

18,940¥ (6,991)

Interest rate(%)

Collateral

None

4,979

0.30 perannum
0.14 perannum
0.14 perannum¥11,961

—

—

¥

—

Maturity date

March 6,2020
September
1,
None
2022
18,
None October
2023—

Note: The aggregate annual amounts to be redeemed within five years after the end of FY2019 are as follows:

Within one year

Over one year andwithin two years¥—(Millions of yen)Over two years andwithin three years¥—

Over three years andwithin four years¥7,000Over four years andwithin five years¥5,000¥—[Details of loans payable](Millions of yen)Classifications

Short-term loans payable
Current portion of long-term loans payable
Current portion of lease liabilities
Commercial papers (current portion)
Long-term loans payable (excluding thecurrent portion)
Lease liabilities (excluding the current
portion)
Total

Beginning balance
FY2019(as of Apr. 1, 2019)

Ending balance FY2019(as of Mar. 31, 2020)

Average interest rate (%)

Maturity date————
April 2021 toApril 2034
April 2021 toMarch 2033—

¥10,917
4,129
195
1,000

¥10,951
2,598
1,310
2,000

1.42
0.72
0.67
(0.00)

3,565

6,686

0.72

269

1,807

0.67

¥20,077¥25,355—

Notes: 1. “Average interest rate” is presented as the weighted average interest rate against the loans outstanding at the end of the year.
2. The aggregate annual amounts of long-term loans payable and lease liabilities to be repaid within five years after theend of FY2019 are as follows:
Over one year andwithin two years

Long-term loans payable
Lease liabilities¥1,496746(Millions of yen)Over two years andOver three years andwithin three years
within four years

¥694
309

¥592
183

Over four years andwithin five years

¥564
139

[Details of asset retirement obligations]
The disclosure is omitted because the amounts of asset retirement obligations as of the beginning and end of FY2019 were lessthan 1% of the total liabilities and equity as of the same dates.

84

Kureha Corporation Business Report 2020

(2) Other information
Quarterly information for FY2019(Cumulative period)

Revenue
Profit before tax
Profit attributable to owners ofparentBasic profit per share (yen)(Each quarter)

Basic profit (loss) per shareFirst quarter(Millions of yen, unless otherwise stated)
Second quarter
Third quarter

FY2019¥32,025
4,569¥69,578
10,141¥ 105,436
25,868¥142,398
17,944

3,808

8,357

20,72013,719188.86417.23

1,041.10

692.61First quarter¥188.86

Second quarter¥236.86(Yen)
Fourth quarter

Third quarter¥629.23¥(358.65)

Note: In regard to the business combination with Himeyuri total work Co., Ltd. conducted on April 1, 2019, provisional
accounting was made in the first quarter. Following the settlement of its accounting in the second quarter, relevant figures
for the first quarter were revised to reflect the content of the settlement of the provisional accounting.

Kureha Corporation Business Report 2020

85

Major Subsidiaries and Affiliates

Country

Company Name

Major BusinessJapan

Kureha Trading Co., Ltd.

Trading of chemical and plastic products

Kureha Extron Co., Ltd.

Manufacture/sale of plastic products

Kureha Gohsen Co., Ltd.

Manufacture/sale of plastic fiber and products

Kurehanishiki Construction Co., Ltd.

Construction

Kureha Engineering Co., Ltd.

Plant engineering and maintenance

Kureha Ecology Management Co., Ltd.

Waste treatment and management

Kureha Special Laboratory Co., Ltd.

Environmental/physiochemical evaluation and analysis

Kureha Unyu Co., Ltd.

Transportation and storage services

Kureha Service Co., Ltd.

Real estate, travel and welfare services for Kureha Group

Kureha-kai Medical Corporation

Hospital operations (Kureha General Hospital)

Kureha America Inc.

Holding company and finance/sales of advanced products andfishing lines

Kureha PGA LLC

Manufacture/sale of PGA resins

Kureha Energy Solutions LLC

Sale of PGA downhole tools

Fortron Industries LLC*

Manufacture/sale of PPS resins and compounds

Germany

Kureha GmbH

Sale of advanced products

Netherlands

Kureha Europe B.V.

Holding company and financeKrehalon B.V.

Manufacture/sale of food packaging products

Australia

Krehalon Australia Pty. Ltd.

Sale of food packaging products

China

Kureha (China) Investment Co., Ltd.

Holding company and finance

Kureha (Shanghai) Carbon Fiber Materials Co., Ltd.

Manufacture/sale of carbon fiber products

Kureha (Changshu) Fluoropolymers Co., Ltd.

Manufacture/sale of PVDF resins and compounds

Nantong SKT New Material Co., Ltd.*

Manufacture/sale of PVDC resins and compounds

Kureha Vietnam Co., Ltd.

Manufacture/sale of food packaging films

USA

Vietnam*Affiliates accounted for by equity method

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Kureha Corporation Business Report 2020

Investor Information(As of March 31, 2020)

Major Stockholders

Corporate Data
Corporate Name
Headquarters

Kureha Corporation

Japan Trustee Service Bank, Ltd. (Trust account)

3-3-2, Nihonbashi-Hamacho,

Meiji Yasuda Life Insurance Company

Chuo-ku, Tokyo 103-8552, JapanThe Master Trust Bank of Japan Ltd. (Trust account)Tel: 81-3-3249-4666
Fax: 81-3-3249-4744
Establishment

June 21, 1944

Paid-in Capital¥18,169 million

Number of Employees

4,271 (Consolidated)

Independent Auditor

Ernst & Young ShinNihon LLC

Japan Trustee Service Bank, Ltd. (Trust account 9)
Tokio Marine & Nichido Fire Insurance Co., Ltd.
J.P. MORGAN BANK LUXEMBOURG S.A. 380578
Mizuho Bank, Ltd.
J.P. MORGAN CHASE BANK 385151
Japan Trustee Services Bank, Ltd. (Trust account 5)
STATE STREET BANK AND TRUST COMPANY 505001

Stock Information
Number of Shares ofCommon Stock Issued

20,805,407 shares

Number of Shareholders 11,754
Number of Shares Heldby Foreign Shareholders 5,857,238 (28.2% of total)
Stock Exchange Listings Tokyo Stock Exchange
Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Kureha Corporation Business Report 202087https://www.kureha.co.jp/

Printed in Japan