Business Report 2018Year ended March 31, 2018

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

22 • Corporate Governance02 • At a Glance

26 • Management Team35 • Consolidated Statements of
		 Changes in Equity

03 • Consolidated Financial Highlights

27 • Consolidated Financial Summary

37 • Consolidated Statements of Cash Flows

04 • President’s Message

28 • Management Discussion and Analysis
32 • Consolidated Statements of		 Financial Position

38 • Notes to Consolidated Financial
		Statements

34 • Consolidated Statements of Profit or Loss

81 • Investor Information

08 • Business Plan Update
12 • The Year’s Highlights
14 • Review of Operations
18 • Research & Development
20 • CSR

34 • Consolidated Statements of		 Comprehensive Income

80 • Major Subsidiaries and Affiliates

R&D Innovation:
The Source of Our CompetitivenessWe pride ourselves on our expertise in polymer engineering and processing as well asorganic synthesis and carbon materials development. These technologies provide thebase for the development of our original innovative materials and products. We areconstantly adding and fusing new ideas to these accumulated technologies, and in the spiritof “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 r s u i t o f E xce l l e n ce

Originality and Quality to
Answer Global Needs:

Maximizing Earnings &Diversifying Risks:

The Growth Potential in Global Markets

The Path to Sustainable Growth

Kureha’s overseas sales had reached 27% of total revenue
in FY2017. Along with exports from Japan, we haveproduction, processing and sales locations in the UnitedStates, Germany, the Netherlands, France, the U.K., China,
Vietnam and Australia, enabling an effective response toneeds in overseas markets. With continued growth
expected in newly emerging countries and many otherregions, we are taking active and strategic steps to expand
sales of highly competitive products in line with the needsof overseas markets, whether for advanced 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 broad-based
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.

Kureha Corporation Business Report 201801

At a Glance
FY2017 Revenue by Segment

Advanced Materials¥41,640 million

28.3%

Specialty Chemicals¥26,176 million
FY2017
Revenue¥147,329 million

17.8%

Specialty Plastics¥45,397 million

30.8%

Construction and Other Operations¥17,354 million ¥16,760 million

11.8%(Construction)

02

Kureha Corporation Business Report 2018

11.4%

(Other Operations)Consolidated Financial Highlights
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2018 (FY2017) and 2017 (FY2016)

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

FY2017FY2016FY2017¥147,329
12,973¥132,294
9,255$1,386,760
122,116

9,697

7,001

91,278

9,768
9,898

10,304
10,191

91,944
93,167

4,962

4,734

46,706¥242,281¥234,907$2,280,510

150,193

124,297

1,413,722

48,089452,652

71,007
Yen

Agrochemicals
Pharmaceuticals
Industrial Chemicals

Household Products

Amounts per share:
Basic profit per share
Owners' equity per share¥ 507.48
7,271.67

U.S. dollars$¥ 407.38
7,232.89

4.78
68.45

Percent

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

6.6%

5.3%

7.1
5.3
62.0

5.8
3.8
52.9

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥106.24 to US$1,
the rate of exchange prevailing on the Tokyo Foreign Exchange Market on March 30, 2018.
2. For amounts per share, see Note 29 of the Notes to Consolidated Financial Statements.
3. Return on equity = Profit attributable to owners of parent/Shareholders’ equity × 100
4. Return on assets = Profit before tax/Total assets × 100
5. 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)
160,000

14,000140,000

12,000120,000

12,000600

10,000

500

8,000

400

6,000

300

4,000

200

2,000

100

10,000100,000
8,000

Engineering & Construction

80,0006,000

Environment Management

60,000Transport/Warehousing

40,000

4,000
2,000

20,000
0

(FY)

2016

2017

0

(FY)

2016

2017

0

(FY)

2016

2017

0

Kureha Corporation Business Report 201803

President’s Message

Yutaka Kobayashi
President & Chief Executive Officer

04

Kureha Corporation Business Report 2018

Dear Shareholders,
In FY2017 (ended March 31, 2018), Kureha paved

We also posted a record high 9.7 billion in profit

the way for future growth. One of the strategies inattributable to the owners of Kureha,

the current mid-term management plan is todemonstrating the untiring efforts of theenhance the competitiveness and earnings capacity

employees of the Kureha Group and ourof existing businesses, and we made significant

commitment to sustained growth. Further, we

progress in this regard, achieving an 11.4% year-on-

expanded returns to shareholders, increasing ouryear increase in revenue to 147.3 billion yen, and aannual dividend by 15 yen to 125 yen per share, the40.2% gain in operating profit to 13.0 billion yen.

highest in Kureha’s history.

Performance Highlights for FY2017• Advanced Materials: Kureha’s polyvinylidene fluoride

at the same time making strategic price adjustments. This(PVDF) business, which provides our market-leading

year, we achieved a record level of operating profit.

lithium-ion battery (LiB) binder material, continued to seehigh demand for use in electric vehicles, particularly in• Specialty Chemicals: In pharmaceuticals, amid a business

China and Korea. Earnings grew on the back of products

environment marked by fierce competition from generics,

meeting advanced market requirements.

in January 2018 Kureha launched a fast-dissolving tablet

Polyphenylene sulfide (PPS), which is seen in thefor Kremezin, a therapeutic agent for chronic kidneyautomotive industry as an excellent solution to reduce

disease. This new tablet is aimed at making thevehicle weight and incorporate more electronics

medication gentler for the patient and improving drug

benefitted from higher demand worldwide. Earnings

adherence, and we are working with our marketing

expanded as Kureha increased its sales volume bypartner to expand sales.

operating production plants in Japan at full capacity,

The agrochemicals business was boosted by a higher

along with steady growth at our U.S. joint venture firm.

sales volume of Ipconazole fungicide, along with favorable

Carbon products were boosted by firm demand in thesemiconductor industry, and the positive outcome ofexchange rates.

several years of business restructuring, leading to the first• As part of our Reform Project measures, Kureha

operating profit in six years.

implemented bold and sweeping measures to lower costs• Specialty Plastics: Kureha has continually improved NEW
Krewrap plastic wrap on an annual basis since 2004

in all aspects of the Group’s business operations, achieving
cumulative cost reductions through FY2017 of 7.6 billion
yen compared to FY2012 levels.

through careful consideration of consumers’ needs, while

Kureha Corporation Business Report 201805

President’s Message

Putting the PGA Business on a Growth Track
The polyglycolic acid (PGA) business is a key component forthe success of the FY2016-2018 management plan, andtherefore applicable to a broad range of wells.
Product development to meet such customer needs

positioned as a core business that will drive Kureha’s future

meant full-fledged business establishment was delayed

growth. Currently, Kureha is the only company in the world

compared to the initial plan, and the PGA business recorded

producing this resin on an industrial scale. Its exceptionalan operating loss in FY2017. However, we also madematerial strength and controllable degradability, which

thorough preparations for future business growth. During

enable enhanced efficiency and lower costs, have made it a

FY2018 we will focus on market expansion in North

game-changing solution for hydraulic fracturing to extract

America, and narrow the operating loss. We will accelerate

shale gas and oil. We see a broad range of market

business growth by steadily capturing market needs, andopportunities in the oil and gas sector, and have expanded

expect to achieve profitability in FY2019. Going forward,

our product lineup through the development of new frac

PGA for oil and gas exploration is expected to make a muchplug types that are degradable in lower temperatures andstronger contribution to the Kureha Group’s performance.

Investment for the Future
Alongside the expansion of the PGA business, Kureha
is concentrating resources in the growth field ofof how vitally important it is to maintain our current market

advanced materials.

presence while creating new businesses that will support

In the fall of 2018, we will increase PVDF production

06

As a company built on technology, we are keenly aware

future growth. In April 2016, Kureha launched the New

capacity at the Iwaki Factory by 2,000 tonnes to 6,000

Business Creation Project, an initiative to use ourtonnes per year. Further, in anticipation of greater

technological skills and specialization in the fields of thedemand in the LiB market, we are considering doubling

environment, energy and quality of life, and create new

production capacity at our Chinese factory (currently

technologies and products that will lead to downstream

producing 5,000 tonnes per year), and will finalize plans inbusiness development through collaboration with third-

the first half of 2019.

party companies, universities, and other organizations. We

PPS is another growth business. To meet surging

currently have 11 projects underway, several of which havedemand, we have already taken the decision to increase

moved into the stage of advanced technology development.

annual production at the Iwaki Factory from 10,700 tonnes

Innovation in materials science is not something thatto 15,700 tonnes, with the new facility scheduled tocan be accomplished in a short time frame. It may takebecome operational in the spring of 2021. For thistime, but I believe that the synergies and new value offeredexpansion, we will utilize a highly efficient manufacturing

by the wonderful technologies that arise from these efforts

process that will enable Kureha to maintain its leading

to reveal the unknown will bring benefits to the Kureha

position in the PPS market.

Group of the future, as well as society as a whole.

Kureha Corporation Business Report 2018

Changing Kureha’s History in FY2018
FY2018 is the final year of Kureha’s Challenge 2018, Kureha’s

steadfast determination to provide value to customers,

current mid-term management plan. We are forecasting

shareholders, and society.

year-on-year increases in revenue to 150.0 billion yen (upKureha will also continue to take action for reform and1.8%), operating profit to 14.0 billion yen (up 7.9%), and profit

innovation, and pursue productivity gains by reducing

attributable to the owners of Kureha to 10.5 billion yen (upcosts, improving operational efficiency, enhancing8.3%). While the revenue forecast is 10.0 billion yen lower

employee motivation and further reinforcing ourcompared to the initial targets in the mid-term management

management foundation. All of our employees, myself

plan, operating profit is on track to reach 14.0 billion yen.

included, are working resolutely with a sense of urgency

We will continue to enhance quality and cost

toward our management goals and quantitative targets,competitiveness, proceed determinedly with our strategy todriven by our watchwords Passion, Speed, andput the PGA business on track, and make a concerted effort

Commitment. The Kureha Group, through innovation in

as a company to achieve our FY2018 operating profit target.

materials science, will seek solutions to the rapidly changing

In addition, we will cut loose the burdensome legacies thatissues facing the world today, and continually generate newhave consistently failed to meet their financial targets invalue for customers, shareholders, and society.

management plans, and begin a new “history of reliable
growth” for Kureha. This will enable Kureha to secure

We thank you for your investment and your confidence
in us, and look forward to your continued support.

sustained growth into the future, and demonstrate our

Yutaka Kobayashi
President & Chief Executive Officer
June 2018

Kureha Corporation Business Report 201807

Business Plan Update

Progress in Kureha’s Challenge 2018 Mid-term

During FY2017, Kureha steadily strengthened

the PGA business on the strength of ourthe competitiveness and earnings capacity of its

extended product lineup. In other existing

existing businesses, in line with one of the key

businesses, we will further strengthen cost

strategies in the management plan. In thecompetitiveness and continue to pursue quality

Advanced Materials segment, demand for

differentiation. At the same time, we will

polyvinylidene fluoride (PVDF) as a bindercommence operation of expanded production

material in lithium-ion batteries (LiB) is risingfacilities for PVDF, as well as expand production

particularly sharply, mainly in the Chinese

capacity for polyphenylene sulfide (PPS) with amarket. Kureha is steadily improving products toscheduled start in 2021. In initiatives to create

meet customer needs, and is gradually building

the new businesses that will support Kureha ina more solid business foundation. In carbon

the future, we will further pursue collaboration

products, the fundamental businesswith companies, universities, and otherrestructuring implemented over the last few

organizations. Further, Kureha will continue toyears has restored profitability. In the Specialty

reduce costs through the Reform Project,

Plastics segment, Kureha further enhanced

enhancing productivity and strengthening theearnings capacity in the household-use sectorbusiness base. We will do our utmost to achieveby establishing appropriate pricing, and increasing

the targets of the FY2016-2018 Medium-term

the proportion of high-margin products.

Management Plan, and thereby “lay the

In the PGA business, which is positioned as
future growth driver in the mid-term
management plan, Kureha was unable toachieve the sales and earnings targets. Although
we made progress establishing a sales structurein the mainstay U.S. market, developing theadditional products and customer recognition
needed for market expansion has required moretime than anticipated.
PGA and other strategic growth businesses
are key to our success in FY2018 as we aim toachieve the target of 14.0 billion yen in operating
profit. We will pursue full-fledged expansion of

08

Kureha Corporation Business Report 2018

foundations for Kureha’s future expansion” andcontinue toward our next stage of growth.

Management Plan (FY2016-2018)

Quantitative Goals
FY2016
Results
Revenue

FY2017
Results¥132.3 billion

FY2018FY2018Initial Targets Revised Targets¥147.3 billion ¥160.0 billion ¥150.0 billion

Operating profit

9.3 billion

13.0 billion

14.0 billion

14.0 billion

Profit attributableto owners ofparent

7.0 billion

9.7 billion

9.0 billion

10.5 billion

0.6

0.3

0.5

0.3

5.8%

7.1%

6.0%

6.8%

DE ratioROE

FY2018 Presumptions:
Initial Targets• Currency exchange rates: ¥120/US$1, ¥130/€1, ¥18/CNY1• Crude oil price: US$40/bbl
Revised Targets • Currency exchange rates: ¥105/US$1, ¥130/€1, ¥16.5/CNY1• Crude oil price: US$60/bbl

Strategic Direction:
As a company built on technology, Kureha will develop
differentiated products in the field of specialty
chemicals and become a high value-added enterprisethat continually contributes to global society.

Kureha Corporation Business Report 201809

Business Plan Update

Measures in Progress
Enhance Competitiveness & Enhance Earnings Capacity

01

Segment

Products

Progress in FY2016-2017

Challenges in FY2018

to enhance annual production • Study for additional production• Resolved
by 5,000 tons (operational in 2021)
enhancement
enhancement project underway
for production enhancement inAdvanced• 2,000t• Study
PVDF(operational in Fall 2018)
China, Promote quality differentiation
Materials
to generating profit throughto generate profit, Promote
Carbon• Retuned• Continue
streamlining and strategic reforms
quality differentiation
Products
Specialty
Pharma/ • Launched fast-dissolving Kremezin tablets, • Expand sales of new Kremezin tablets,
Achieved steady growth for agrochemicals
Develop new drugs and agrochemicals
Agro
Chemicals
penetration strategy with higher • Expand global markets, ImproveHome• Advanced
prices and increased sale of 50m wrap
profitability for Kichinto-san products
Products
Reformed EU sales/production framework,
Expand ML film sales by focusing on
Specialty
Packaging • Launched new business expansion strategy • functional differentiation
Plastics
full operation at new extrusion
Synthetic • Expanded PVDF processed product• Startbusinessfacility
Fiber
Expanded business for post-quake• Promote cost reduction programs
Construction Construction • restoration demand
Expanded industrial waste treatmentcompetitiveness for industrial
Other• Improve
Environment • businesswaste treatment
Operations

PPS

Expanding the PGA Business02

Segment

Products

Advanced
Materials

PGA

Kureha Corporation Business Report 2018

Challenges in FY2018

marketing framework
Launched low-temp dissolving
frac plugs
Developed super low-temp
frac plugs

product lineup
Launch business in China
marketKureha Energy
US business• Established• Accelerate
Solutions in US, Realigned sales/
expansion with enhanced

•
•

10

Progress in FY2016-2017•

Exploring New Business Themes

03

Progress in FY2016-2017

potential themes• Exploredresponding to market needs incollaboration with external parties

Challenges in FY2018

on selected 11 themes with• Workproper gate controls andaccelerate their commercialization

Promote CSR Management

04

Progress in FY2016-2017

appropriate CSR• Executedmanagement in line with Kureha•

corporate governance guidelines
Improved CSR promotion system

Challenges in FY2018

the effectiveness of• Maintain
governancesafety and quality• Enhance
assurance systems

Strengthen the Management Foundation

05

Progress in FY2016-2017

Challenges in FY2018

a process experiment lab and pilot
new production process• Established• Promoteplant to improve production technology
developments¥7.6bn in cost over 5 years (FY2013effective and cumulative cost
• Reduced• Achieve2017) through group-wide reforms
reductions of ¥8.8bn
productivity improvement projects for • Improve productivity and enhance departmental• Launchedmanufacturing and administrative departmentsfunctions under individual projects
up on the Shine-Up Project tomeasures devised through the• Followed• Executepromote human resource development andfollow-up
improve our working environment

Kureha Corporation Business Report 2018

11

The Year’s Highlights

Launch of New KREMEZIN®
Formulation

Expansion of PVDF and PPS
Facilities at the Iwaki Factory

Mitsubishi Tanabe Pharma Corporation (MTPC) launched

Demand for Kureha’s advanced plastics is rising, mainly in the

KREMEZIN® Tablets 500 mg, a drug for chronic renal failure

automotive industry. Kureha is making effective investments todeveloped by Kureha, on January 16, 2018. This new formulation

strengthen its supply structure and further enhance its market

improves the experience of the drug administration for patients,

leadership in this growing business area.

and is expected to increase adherence.*
KREMEZIN® is an orally administered spherical adsorbent with

Polyvinylidene fluoride (PVDF) is used as a binder in lithiumion secondary batteries (LiBs), the power source for electric, hybrid,

high-purity porous carbon for the treatment of chronic renal

and plug-in vehicles. Kureha’s PVDF was the first material ever tofailure. By absorbing uremic toxins in the gastrointestinal tract ofbe used as a binder for LiB cathodes and, as the industry pioneer,chronic renal failure patients, and excreting these toxins with the

we have maintained a high global market share. In addition, withfeces instead of letting them be absorbed into the body,

vehicles continuing to be made lighter and incorporating more

KREMEZIN® improves symptoms of uremia at the predialysis stage,electronics, polyphenylene sulfide (PPS) is being more widely usedand delays the introduction of dialysis treatment.

as a replacement for metal in various components owing to its

The previous formulation of KREMEZIN® consisted of finegranules and capsules, but feedback from patients and doctors

excellent heat resistance, strength, and workability.
Kureha produces these plastics to support the automotive

showed that with capsules the volume that needed to beindustry both in Japan and overseas, and is actively working toadministered in a single dose was large, and that the fine granules

develop this business globally. To meet further demand growth,would diffuse in the mouth, giving an unpleasant feel to the patient.

we are expanding production capacity at our Iwaki Factory inKureha applied its proprietary drug formulation technologies andJapan, as follows.

ideas to resolve these issues, and succeeded in commercializing a

PVDF

tablet that is easier to swallow. The new tablet formulation provides

Increase

2,000 tonnes/year

Increase

5,000 tonnes/year

the same quantity, while disintegrating quickly with a small amount

Investment

4.7 billion yen

Investment

10.0 billion yen

Operation start

Fall 2018

Operation startFeb. 2021

of water, and without dispersing inside the mouth.

PPSKREMEZIN® Tablets 500mg is manufactured by Kureha, while
MTPC handles sales and provides information to medical institutions.
*Adherence: The extent to which a patient follows medication and medical advice
as prescribed.

PVDF plant at
Iwaki Factory

KREMEZIN® Tablets 500mg

12Kureha Corporation Business Report 2018

PPS plant at Iwaki Factory

Start of Measures to Digitize Business Activities
The digital revolution, called the “Fourth Industrial Revolution,” isIn addition, to prevent unforeseen equipment failures atadvancing rapidly around the world. In the chemicals industry too,production sites and ensure stable production, we will collect andadvanced technologies such as AI and IoT are expected to play ananalyze digital data from instrumentation devices. Such data will

important role in enhancing companies’ market competitiveness andenable us to predict system deterioration and failure, and improve

capacity to innovative.

the timing of equipment maintenance.

Kureha launched the Digital Transformation Project in 2017 as a

Kureha is also considering introducing robotic processmeans of enhancing its enterprise value by actively incorporating

automation (RPA) throughout the company. RPA is expected todigital technologies in its business activities. This project has alreadyenhance productivity, including by automating routine computer

identified and launched studies into several specific themes aimed at

tasks, shortening work hours, shifting resources to high value-added

digitizing operations and structures in such areas as R&D, production,

work, and improving operational quality.

sales, and administration.

Kureha will continue to regularly examine and introduce effective

Examples of ideas under consideration include AI-supported

digitization measures to strengthen R&D capacity, improve

designs for agrochemicals, and systemization of instrumentation

productivity, ensure safety, and enhance corporate value.

maintenance and management. For agrochemical development,
we plan to create a database of previous compound prototypes andtheir evaluation results, and have the system screen for molecular
structures that might suit a particular purpose. Further, automating
the general compound evaluation by using an AI that has learned
the effect measurement standards for diseases will speed up R&D.

Kureha Corporation Business Report 201813

Review of Operations

Advanced Materials
Major Product Areas:

Advanced plastics (PPS, PVDF, PGA), carbon materials
Advanced Materials revenue rose 25% year-on-year to 41.6 billion yen
while operating profit jumped from 0.1 billion yen to 1.7 billion yen.

Advanced plastics: Continued growth for PVDF and PPS
for automotive applications
Kureha continued to see strong performance for PVDF, a LiB binder material for which
Kureha holds a global market share of 40%. This growth was driven by the expanding
global market for electric and plug-in hybrid electric vehicles, particularly in China. In
the PPS business, Kureha also saw demand growth for automotive applications. Withsales volume increases for PVDF and PPS more than offsetting the slower performancein the PGA business, advanced plastics revenue rose by 24% to 24.4 billion yen.

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)
50,0005,000

40,0004,000

30,0003,000

20,0002,000

10,000

1,000

0

(FY)

2016

2017

2018
(Planned)0

Carbon products: Better-than-expected return to profitability
Kureha’s carbon products business continued its recovery on the back of positive
demand, price adjustments and effective structural reforms. The business recorded a
19% increase in revenue to 4.9 billion yen.
FY2018 Outlook
Kureha expects the PGA business, with its expanded frac plug lineup for oil and gas
exploration, to make a stronger contribution to segment performance. Kureha also
expects to see increased sales volumes in the PVDF business as a further 2,000 tons/
year of production capacity will come online in the fall of 2018. The carbon products
business will continue to benefit from the successful restructuring, although revenue
and operating profit are expected to decline slightly.
Segment revenue is expected to increase by 9% to 45.5 billion yen, while operating
profit will climb to 3.9 billion yen.

PGA frac plug used for shale oiland gas extraction

Key products• Polyphenylene sulfide (PPS)PVDF used as a binder for
lithium-ion batteries• Polyvinylidene fluoride (PVDF)• Polyglycolic acid (PGA)• Carbon fibers• Bead-shaped activated carbon

14

Kureha Corporation Business Report 2018

Carbon fiber insulation products

Specialty Chemicals
Major Product Areas:

Industrial chemicals, agrochemicals, pharmaceuticals
Specialty Chemicals revenue grew slightly to 26.2 billion yen from 25.9
billion yen while operating profit rose by 35% to 3.4 billion yen.

Pharmaceuticals/agrochemicals: Growth in fungicidesales volumes
Kureha saw continued growth in sales volumes and operating profit driven by the
Ipconazole fungicide and favorable currency effects. This momentum offset declines inrevenue and operating profit in the pharmaceutical business that were mainly caused
by lower sales volumes for Kremezin, a therapeutic agent for chronic kidney disease,
due to competition from generics.

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)
50,0005,000

40,0004,000

30,0003,000

20,0002,000

10,000

1,000

0

(FY)

2016

2017

2018
(Planned)0

Industrial chemicals: Revenue and operating profit riseon volume growth
Kureha saw healthy volume growth for both organic and non-organic chemicals,
resulting in higher revenue and operating profit for this business. The growth was
driven by a combination of higher demand and price adjustments.
FY2018 Outlook
Revenue and operating profit for the agrochemicals business are expected to decrease
due to a decline in sales volumes. In the pharmaceuticals business, sales volumes andrevenue will increase for our newly launched Kremezin tablets but operating profit will beaffected by national drug price revisions.
In industrial chemicals, revenue and operating profit will remain at the FY2017 level on
the back of measures to improve margins, including price adjustments and cost reductions.
Segment revenue is forecast to rise by 5% to 27.5 billion yen, but operating profit
will decline to an estimated 2.7 billion yen.

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

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

KREMEZIN® Tablets 500 mg• ortho-Dichlorobenzene

Kureha Corporation Business Report 201815

Review of Operations

Specialty Plastics
Major Product Areas:

Household packaging products, food packaging materials,
auto-packaging machinery
Specialty Plastics segment revenue rose by 6% from 42.8 billion yen to 45.4
billion yen while operating profit increased by 39% to 6.9 billion yen.

Home products: Strong sales volumes for NEW Krewrap
and Seaguar
The home products business recorded growth in both revenue and operating profit
due to strong sales volumes for NEW Krewrap plastic wrap and Seaguar fishing lines,
the former benefitting from strategic price adjustments and increased sales of highmargin products (50m wrap).

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)
50,00010,00040,0008,000

30,0006,000

20,0004,000

10,000

2,000

0

(FY)

2016

2017

2018
(Planned)0

Food packaging materials: Global sales growth for heatshrink multilayer film
This business benefited from a successful restructuring of Kureha’s food packaging
sales and production network within the EU, and the launch of a new businessexpansion strategy. Revenue and operating profit increased, driven particularly byrising global sales of heat-shrink multilayer film.
FY2018 Outlook
Kureha expects to see continued sales growth for NEW Krewrap, Seaguar and theKichinto-san product series. However, higher costs for raw materials and promotion in
the home products business are likely to affect operating profit for the segment as awhole, although continued healthy global sales of advanced heat-shrink multilayer film
products will soften the decline.
Segment revenue is forecast to rise slightly to 46.0 billion yen, but operating profit
will decline by 15% to 5.9 billion yen.

Home-use wrap film, NEW Krewrap

Key products• Household wrap film
• Plastic containers• PVDF fishing lines

Seaguar fluorocarbon fishing lines• Polyvinylidene chloride (PVDC) film
• Multilayer shrinkable film
• Multilayer bottles• Machinery for auto-seal foodpackaging

16

Kureha Corporation Business Report 2018

Krehalon food packaging film

Construction and Other Operations
Major Product Areas:

Construction, environmental engineering, transport/
warehousing, and trading-related businesses
Construction: Post-quake reconstruction demand
drives growth
The year saw expanded post-quake reconstruction demand, leading to sales volume
increases for both public and private sector construction projects. This growth morethan offset a slowdown in the engineering business. As a result, revenue for theConstruction segment rose by 25% to 17.4 billion yen, while operating profit increased
to 1.0 billion yen.

Revenue (Left scale)Operating Profit (Right scale)

Construction

35,000

Other
Operations
7,000

30,0006,000

25,0005,000

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

(Millions of yen)

0

(FY)

2016

2017

2018
(Planned)0

Other Operations: Continued volume growth in thewaste treatment business
Kureha’s environmental engineering business saw continued volume growth in thewaste treatment business. In the logistics business, effective cost reduction measurescompensated for lower revenue, leading to an increase in operating profit. In the hospitalbusiness, operating profit declined due to flat revenue. As a result, revenue in Other
Operations increased to 16.8 billion yen while operating income rose to 1.8 billion yen.
FY2018 Outlook
Kureha expects revenue and operating profit in the Construction segment to beaffected by lower demand for post-quake reconstruction as well as higher labor and raw
material costs. Revenue is forecast to fall to 14.5 billion yen and operating profit will
decline to 0.6 billion yen.
In Other Operations, Kureha expects to see continued demand in the environmental
engineering business, but intensifying market competition will affect revenue andoperating income. Revenue is expected to fall to 16.5 billion yen while operating profit
will decline to 1.4 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 201817

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 core strengths inorganic synthesis, polymer technology, carbon control, evaluation
techniques, and process engineering, Kureha continues to reinforce its
market position through product differentiation and innovation.

Research Center & Process Innovation
Research Laboratories

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

Polymer Processing ResearchLaboratories

strengthening secondary process technologies to further expand in thedownstream businesses. For both existing and new businesses, Kureha
will pursue open innovation and active collaboration with outsideorganizations. 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 1,686 intellectual property rights as of May 2018, of which 1,157 are patent registrations. With theglobalization of Kureha’s business, we are also acquiring intellectual property rights in countries and territories outside Japan.
Currently, 62.7% of the intellectual property rights held by the Kureha Group are outside Japan.

IP Held by Kureha Group

Global Distribution of IP
Pending
applications

529

Total
1,686

Registeredpatents

patents

37
55
262

234

Total
1,686

patents

1,157
469

18

Kureha Corporation Business Report 2018629

IP in Business Segments
Japan
Asia
EuropeNorth America
WIPO
Others
WIPO: World Intellectual
Property Organization

227
150

Total
1,686

patents
444

865

Advanced Materials
Specialty Chemicals
Specialty Plastics
OthersFY2017 R&D Expenditure
Kureha spent a total of ¥4,962 million on a consolidated basis for R&D during the
fiscal year ending March 31, 2018 (FY2017). R&D activities and expenditure for eachbusiness segment are as follows.

Advanced Materials
For Fortron KPS (PPS), which is widely used in automobiles and electronic devices,
Kureha has determined to enhance production at its Iwaki Factory, and is developing
improved manufacturing processes and exploring ways to expand applications.
For KF Polymer (PVDF), Kureha’s R&D and Manufacturing & Technology teams areworking together to raise productivity and ensure stable production for an additional
facility, which will be operational during FY2018.
For Kuredux (PGA), we are actively developing applications while working to
improve resin manufacturing technologies. Particularly in the area of shale oil and gas
exploration, where PGA’s easy-to-degrade attribute has proved useful, we have focusedon developing new product grades reflecting customer needs informed by the sales
team and Kureha Energy Solutions LLC.
Among battery materials, our development effort has centered on binder materials
for the large lithium-ion batteries used in hybrid and electric vehicles. We areaccelerating the development of advanced binder grades and improved solutions forcustomers, which will enable us to expand our market share.
FY2017 R&D spending in this segment amounted to ¥1,940 million.

Specialty Chemicals
In the agrochemicals business, we are working to expand markets in Japan andoverseas for Metconazole agricultural and horticultural fungicide and Ipconazole seedtreatment fungicide. We are also improving productivity for Metconazole fungicide.
In pharmaceuticals, we have developed and launched new easy-to-dissolve tabletsof Kremezin, a therapeutic agent for chronic renal failure, as part of our supporting
research to enhance the earnings of Kremezin.
FY2017 R&D spending in this segment amounted to ¥1,792 million.

Specialty Plastics
For food packaging film, Kureha is pursuing technology development to ensure stablesupply and improve quality. In addition, to further expand global sales, we are actively
providing technical support to customers in Japan and overseas.
FY2017 R&D spending in this segment amounted to ¥1,229 million.
R&D Expenditure/Ratio of R&D
expenditure to Revenue(%)
6(Millions of yen)
6,000
5,000

4,885

4,734

4,962

4,000
3,000

5
4

3.5

3.6

3.4

3

2,000

2

1,000

1

0

(FY)

2015

2016

2017

0

Kureha Corporation Business Report 2018

19

CSR

Corporate Social Responsibility
Kureha is continually working to strengthen its competitiveness andenhance its enterprise value over the longer term. These efforts arefounded in what we call CSR-based management, in which we seek
to ensure harmony with the environment, motivate employees,
support the development of local communities, reduce risks, andenhance benefits for all stakeholders. Kureha maintains a

Responsible Care program centered on the types of activities
expected of a chemical company, including environmental conservation, disaster risk reduction, worker safety, product safety, andquality assurance. We firmly believe that generating environmental
and social value alongside economic 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

20

Code of Conduct,
Governance, ComplianceBusiness operations

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

Social issues connected tobusiness operations

Teaching Children the Joys of Chemistry

Community Support during Disasters

On March 11, 2018, Dr. Hideki Shirakawa, co-recipient of the 2000
Nobel Prize in Chemistry, held a special experimental workshop forelementary and junior high school students in Tokushima
Prefecture. This workshop was sponsored by the Japan Science
Museum Association, with support from Kureha. Dr. Shirakawa
conducts such workshops throughout Japan to convey to children
the many fascinating aspects of chemistry.
In the workshop, children observed as Dr. Shirakawa coated
Kureha’s piezo film with an electroconductive polymer to make atransparent film, and used this to create a speaker to play music. Dr.
Shirakawa discovered and developed conductive polymers, forwhich he was awarded the Nobel Prize.

Kureha’s production centers have concluded agreements with local
governments to provide material support in times of disaster. The
Plastics Processing Factory signed an agreement with Omitama City
(Ibaraki Prefecture) in October 2017, as did the Iwaki Factory with
Iwaki City (Fukushima Prefecture) in March 2018. The agreements
aim to ensure prompt and smooth provision of supplies at therequest of these local governments following an earthquake orother large-scale natural disaster. Kureha plans to supply NEW
Krewrap and other household products upon request. NEW Krewrap
in particular is valuable in times of disaster because it can be placed
over dishes during meals to save water for washing, and allows foodto be transported in a hygienic manner.

Dr. Shirakawa held a special experimental workshop for children.

Kureha signed an agreement with local governments
to provide material support in times of disaster.

Kureha Corporation Business Report 2018

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 with therelevant laws and regulations as well as voluntary safety standards
set to best protect its employees and community. Comprehensive
safety and emergency drills and training have been also conduced
regularly at our manufacturing sites in order to enhance our
preparedness for emergency situations, including a large-scale
earthquake.

Contributing to the Community
Reducing the Burden on the Environment

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.

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 water pollution, reduce chemical material and industrial
wastes, and make effective use of energy.

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) 2013

2014

2015

2016

2017

*The above data were obtained from Kureha
Corporation and its facilities in Japan.

0350(FY) 2013

2014

2015

2016

2017

Disaster prevention and safety drill at the
Iwaki Factory (November 2017)

0*The above data were obtained from Kureha
Corporation and its facilities in Japan.

Kureha Corporation Business Report 201821

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 2018

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 corporate auditors (including two independent
outside auditors) forms the Audit & Supervisory Board. Thisbody works within a framework that allows them to monitor
the deliberation processes of board resolutions and reports, aswell as have a representative corporate auditor attend andmonitor meetings of the Executive Committee and theConsolidated Executive Committee. In addition, auditors areable to access documentation including all documents
requiring senior approval, results of internal audits, anddocumentation on the status of customer inquiries.
Corporate auditors interact with accounting and internal
control functions, for example to exchange opinions on audit
planning and progress. They also regularly exchange opinions

Diagram of Internal Control Systems (As of June 26, 2018)
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

LiaiseAppoints

Audit & Supervisory Board(Maximum of 4 members,
including 2 or more
external members)
LiaiseLiaiseCompliance Committee
Trade Control (Export/Import) Committee
Labeling and Trade Promotions Committee
Antitrust Committee
Personal Information Protection Committee

Executive Function

Independent
AuditorPresident &Chief Executive Officer

Executive
Committee

Internal Control and
Auditing Department

CSR Committee
Energy Management Committee

Information Management
Committee
Information Disclosure Committee
Information Security Committee

Audit

All divisions ofKureha Corporation

Audit
Audit

Kureha Group companies

Risk Management Committee

Internal Control ofFinancial Reporting Committeewith the President & Representative Director and outside
directors on management matters including corporate
governance, business conditions and issues that the Company
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 201823

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 Auditors
Kureha has appointed two outside directors and two outside
auditors. Outside directors utilize their extensive experienceand insight as former managers to provide independent andfair supervision of the Company’s management decisions.
Outside auditors provide auditing from an independent
perspective based on their extensive experience and expertise
regarding corporate law, corporate finance, and accounting.
The outside directors and outside auditors currently serving
Kureha fulfill the requirements for independent executives asprescribed by the Tokyo Stock Exchange, as well as the “Criteria
for Determining the Independence of Outside Executives”
established by the Company. The Company has determinedthat there is no conflict of interest with general shareholders.

Outside Directors
1. Osamu Tosaka
Dr. Tosaka worked at Ajinomoto Co., Inc. for over 40 years,
accumulating extensive experience in business operations
through overseas postings and by serving in the company’s
research and production divisions. He has particular experiencein company management from the perspective of technology
and research, having served as Representative Board Director
and Corporate Executive Deputy President for Ajinomoto from2007 to 2011. He was appointed as outside director for Kureha
in June 2016.

firm for 33 years, where he was chiefly engaged incommercial banking, special financing and corporate
advisory businesses. As a banker and later as a Managing
Executive Officer of a hydraulic equipment manufacturer, he
has accumulated experiences in business operation andmanagement mainly in Europe. He was appointed as outside
director for Kureha in June 2017.

Outside Auditors
1. Haruki Yamaguchi
Mr. Yamaguchi has served as president of domestic andoverseas affiliates of Yasuda Life Insurance Company(currently Meiji Yasuda Life Insurance Company), and brings
extensive insight and experience regarding global
management. He has been an outside auditor for Kureha
since June 2012.
2. Masaru Kitamura
Mr. Kitamura has served as a lawyer with Japan’s Ministry ofForeign Affairs, and in 1992 established the Kitamura Law
Office (currently Kitamura & Makiyama). He has been an
outside auditor for Kureha since June 2011, andconcurrently holds the positions as Corporate Auditor ofJapan Pacific Century Group, Corporate Auditor of PacificCentury Hotel, and Outside Corporate Auditor of Kowabo
Company, Ltd.

2. Tadao Ogoshi
Mr. Ogoshi previously worked at the Fuji Bank, Ltd (currently
Mizuho Bank, Ltd.) and its affiliated trust bank and securities

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 auditors in fiscal
2017 (ended March 31, 2018) was as follows.

24

Kureha Corporation Business Report 2018

Board directors(for total of 8 directors)¥222.7 mil(of which ¥33.2 mil was paid to 4 outside directors)

Auditors(for total of 4 auditors)¥52.5 mil(of which ¥30.0 mil was paid to 2 outside auditors)

Note: The remuneration for board directors includes stock acquisition rights at a total value
equivalent to 11.2 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 ofvital importance for strengthening the management base toachieve medium- to long-term corporate growth. In November
2015, the Company formulated its own Corporate Governance
Guidelines to comply with the government code.

Kureha Corporation Business Report 201825

Management Team

Board of Directors

Yutaka Kobayashi

Yoshio Noda

Michihiro Sato

President &Chief Executive Officer

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

Senior Vice President
General Manager of Manufacturing &Technology Division
General Manager of R&D Division

Osamu Tosaka

Tadao Ogoshi

Outside Director

Outside Director

Audit & Supervisory Board

Toru Yoshida

Haruki Yamaguchi

Masaru Kitamura

Naoki Fukuzawa

Hiroyuki Tanaka

Masahiro Namikawa

Executive Vice President, General
Manager of Krehalon Division

Vice President, General Manager ofIwaki Factory

Naomitsu Nishihata

Satoshi Yonezawa

Vice President, General Manager of
Pharmaceuticals & Agrochemicals
Division

Senior Vice President, General
Manager of Corporate Planning &Strategy Division, General Manager ofSpecialty Products Division

Vice President, General Manager of
Performance Materials Division

Executive Officers

26

Kureha Corporation Business Report 2018

Koji Suyama
Vice President, General Manager ofHome Products Division

Consolidated Financial Summary
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2018 (FY2017) and 2017 (FY2016)

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
Interest-bearing debt

FY2017FY2016¥ 147,329
107,145
40,183¥ 132,294
97,63034,664

41,64026,17645,397
17,354
16,76012,973
1,669
3,421
6,907
1,037
1,812
(1,876)
9,697
9,768
9,898
4,962
1,940
1,792
1,229
—
—
20,178(9,698)(10,415)33,36925,866
42,791
13,934
16,332
9,255
79
2,538
4,986
1,026
1,726
(1,101)
7,001
10,304
10,191
4,734
1,860
1,814
1,059
—
—
12,350(1,071)(11,727)¥ 242,281
150,193
48,089¥ 234,907
124,297
71,007
Yen

Amounts per share:
Basic profit per share
Owners’ equity per share
Cash dividends per share¥ 507.48
7,271.67
125.00¥ 407.38
7,232.89
60.50

Percent

Ratios:Operating profit to revenue
Profit attributable to owners of parent to revenue
Return on equity
Return on assets
Owner’s equity ratio

8.8%
6.6
7.1
5.3
62.0

7.0%
5.3
5.8
3.8
52.9

Notes: 1. For amounts per share, see Note 29 of the Notes to Consolidated Financial Statements.
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

Kureha Corporation Business Report 201827

Management Discussion and Analysis
Business environment
During the fiscal year ended March 31, 2018 (FY2017), theJapanese economy continued a moderate recovery trend due toimprovements in corporate earnings and the employment
environment. Meanwhile, the world economy was also relatively
robust in the United States, Europe, and Asia, despite geopolitical risks.

Analysis of business results
Revenue of the Kureha Group (“the Group”) in the subject fiscal
year increased by ¥15,034 million from the previous fiscal yearto ¥147,329 million. Gross profit increased by ¥4,525 million
to ¥40,028 million, and gross profit margin improved from
26.8% to 27.2%. Selling, general and administrative expenses
increased by ¥560 million to ¥27,193 million. Share of profit ofentities accounted for using equity method increased by ¥611
million to ¥2,230 million, and other expenses (net of otherincome) amounted to a loss of ¥2,092 million, an increase of¥857 million in the loss from the previous fiscal year. As a result,operating profit increased by ¥3,717 million to ¥12,973
million, and the ratio of operating profit to revenue improved
from 7.0% to 8.8%.
Finance costs (net of finance income) amounted to a loss of¥290 million, an increase of ¥15 million in the loss from theprevious fiscal year. As a result, profit before tax increased by¥3,701 million to ¥12,683 million.
Income tax expense was ¥2,869 million, and profit for the year
increased by ¥2,707 million to ¥9,813 million. The Group

Revenue
Revenue
Revenue

125,000
125,000125,000

Cash flow analysis
The balance of cash and cash equivalents at the end of thesubject fiscal year (March 31, 2018) amounted to ¥6,475
million, an increase of ¥253 million from the end of theprevious fiscal year (March 31, 2017). An outline of individual
cash flows and the main factors affecting each is as follows:
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥20,178
million, an increase of ¥7,827 million from the previous fiscal
year. This was mainly due to an increase in profit before tax andother factors.
Cash flows from investing activities
Net cash used in financing activities amounted to ¥9,698
million, an increase of ¥8,627 million from the previous fiscal
year. This was mainly because there were no proceeds fromsubsidy for Fukushima Business Investment Subsidy for
Revitalization of Industries, which occurred in the previous
fiscal year, and other factors.
Cash flows from financing activities
Net cash used in financing activities amounted to ¥10,415
million, a decrease of ¥1,311 million from the previous fiscal
year. This was mainly due to a decline in repayments of noncurrent loans payable and other factors.

(Leftscale)(Millionsof yen)(Leftscale)(Millions(Left scale)(Millionsof yen)of yen)

Operating
ProfitOperating
ProfitOperating
Profitto toto(Rightscale)(%)(%)(Right(Rightscale)(%)scale)
Revenue
Revenue
Revenue
15,00015,00015,000

15

15 15

12,00012,00012,000

12

12 12

9,000
9,000 9,000

9

9 9100,000
100,000100,000
75,00075,00075,000
6,000
6,000 6,000

6

0

0 0

2016
2017
2017 2017(FY) (FY)(FY)2016 2016

3,000
3,000 3,000

3

3 3

0 0

0

0 0

0

2016
2017
(FY) (FY)(FY)2016 20162017 2017(Leftscale)(Millionsof yen)(Leftscale)(Millions(Left scale)(Millionsof yen)of yen)

ProfitRevenue
Profittoto
Revenue
Profitto Revenue(Rightscale)(%)(%)(Right(Rightscale)(%)scale)
12,00012,00012,000

12

12 12

10,00010,00010,000

10

10 10

8,000
8,000 8,000

8

8 8

6,000
6,000 6,000

6

6 6

4,000
4,000 4,000

4

4 4

2,000
2,000 2,000

2

2 2

0 0

0

0 0

6 6

50,00050,00050,000
25,00025,00025,000

ProfitAttributable
ProfitAttributable
ProfitAttributable
OwnersParenttoto
Ownersofof
Parentto Ownersof Parent

Operating
ProfitOperating
ProfitOperating
Profit(Millionsyen)(Millions
of of
yen)
(Millionsof yen)150,000
150,000150,000

posted profit attributable to non-controlling interests of ¥116
million, and profit attributable to owners of parent increased by¥2,696 million to ¥9,697 million.

0

2016
2017
(FY) (FY)(FY)2016 20162017 2017

Domestic
Overseas
Domestic
Overseas
Domestic
Overseas

28

Cash
Flows
from
Cash
Flows
from
Cash
Flows
from
Kureha Corporation
Business
Report2018

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

Total
Assets
Total
Assets
Total
Assets(Millionsof yen)(Millions(Millionsof yen)of yen)

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

Ratio
EquityRatio
ofof
EquityRatio
of Equityproperty, plant and equipment decreased by ¥1,674 million to¥114,236 million owing to the completion of large-scale capital
The Kureha Group procures required capital through borrowing
expenditures and other factors, non-current assets amounted tofrom financial institutions, and the issuance of corporate bonds¥165,318 million, an increase of ¥5,683 million from the end ofand commercial paper. In addition, a cash management system
the previous fiscal year. This was mainly due to an increase inhas been introduced, in order to ensure that the Group isgain on valuation of investment securities included in othereffectively utilizing funds and reducing finance costs. In addifinancial assets.
tion to cash and cash equivalents, the Group also ensures the
Total liabilities at the end of the subject fiscal year amounted
liquidity of funds by entering into commitment line agreements
to ¥90,240 million, a decrease of ¥18,694 million from the end
with financial institutions.
of the previous fiscal year. This was mainly because of a decline
The Group’s basic policy is to maximize cash flows fromin interest-bearing debt, by ¥22,918 million from the end of theoperating activities by securing earnings in line with its businessprevious fiscal year to ¥48,089 million, owing to the completion
plan and by enhancing asset efficiency, and to allocate cash withof the share conversion of convertible bonds and other factors.
priority given to capital expenditure for new businesses andTotal equity at the end of the subject fiscal year amounted to
expansion of existing businesses, investments and loans, research¥152,041 million, an increase of ¥26,068 million from the end
and development, and dividend payments to investors. In lineofthe previous fiscal year. Thiswasmainlydue to the posting ofProfitAttributable
Revenue
Operating
ProfitProfitAttributable
Revenue
ProfitProfitAttributable
Revenue
Operating
Profitwith thispolicy,the Group procures required capitalOperating
with
(Left
scale)(Millionsof yen)(Left scale)(Millionsof yen)(Leftscale)(Millionsof yen)(Millionsyen)(Millionsof yen)(Millions
of of
yen)
profitattributable to owners
parentofof¥9,697
millionand anto
OwnersParenttoofOwners
Parentto
Ownersofof
Parentpriority given to securing long-term funding, and inOperating
consider(Leftscale)(Millionsof yen)(Left scale)(Millionsof yen)of yen)scale)(MillionsOperating
ProfitProfitto totoOperating
Profitincreasein other componentof(Leftequityprimarily
associatedwithation of the balance between long- and short-term borrowings.
(Right(Right(Rightscale)(%)scale)scale)(%)(%)
ProfittoRevenue
Revenue
ProfittoRevenue
Revenue
ProfittoRevenue
Revenueincreases in capital stock, etc.
owingtothe(%)completionof the(Right(%)(Right(Rightscale)(%)scale)scale)In regard to important planned outflows of capital and theshare
conversionofconvertible
bonds
and
gain
on
valuationof
150,000
12,00015,000150,000150,000
12
12,00012,000
15
15,00015,000
12 12
15 15
sourcesofthose funds, the Group intends to conduct
capitalinvestment securities, despite the payment of dividends in an
expenditure
centered on the Advanced Materials Division, and125,000
10,000125,000125,000
10,00010,00010
10 10amount¥2,033
million.
12,00012
12,00012,000
12 of 12intends for capital required to be procured fromcash-at-hand,
As a result of the above, the equity-to-asset ratio (equity
100,000
8,000
100,000100,000
88,000 8,000
8 8corporatebonds, and borrowings.
ratio) improved
9,000
9,000 9,000
9
9 9 by 9.1 percentage points from the previous
75,0006,000
75,00075,000
6,000 6,000
6fiscal year to 62.0%. Returnonequity (ROE) improvedby
6 61.3
Balance sheet analysis
6,000
66,000 6,000
66points
percentage
to 7.1%. Return on assets (ROA) improved
50,0004,000
50,00050,000
4,000 4,000
44 4As of March 31, 2018, the Kureha Group’s total assets
by 1.5 percentage points to 5.3%.
3,000
3,000 3,0003
3 3amountedto ¥242,281 million, an increase of ¥7,374
million25,0002,000
25,00025,000
2,000 2,0002
2 2from the end of the previous fiscal year (March 31, 2017).
0
0
0
0
0
0 0
0 0
0 0
0 0
0 0
Current
assetstotaled¥76,963
million, an increase¥1,690(FY)2016
2016
2017
2016
2017
2016
2017
(FY) (FY)(FY) of(FY) (FY)(FY)2016 20162017 20172017 20172017 2017(FY)(FY)2016 20162016
million from
theend oftheOverseas
previous
Domestic
Overseas fiscal year. Although
Domestic
Overseas
Domestic

Financial policy

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(Leftscale)(Millionsof yen)(Left scale)(Millionsof yen)of yen)(Leftscale)(Millions(Millionsof yen)(Millionsof yen)of yen)
(Millions

Ratio
EquityRatio
of Equity
Ratio
ofof
EquityAttributable
Attributable
to totoAttributable
OwnersParentOwnersof Parent
Ownersofof
Parent(Millionsof yen)(Millionsof yen)of yen)
(Millions
30,00030,00030,000

300,000
300,000300,000

25,00025,00025,000
15,00015,00015,000
10,00010,00010,000

240,000
240,000240,000

180,000
180,000180,000

5,000
5,000 5,000
0

0 0-5,000-5,000 -5,000

2016
2017
2017 2017(FY) (FY)(FY)2016 2016

ReturnAssetsReturnon Assets
Returnonon
AssetsReturnEquityReturnon Equity
Returnonon
Equity(%) (%)(%)

90

90 90

150,000
150,000150,000

75

75 75

120,000
120,000120,000

60

60 60

90,00090,00090,000

45

45 45

60,00060,00060,000

30

30 30

30,00030,00030,000

15

15 15

0 0

0

0 0

120,000
120,000120,000

60,00060,00060,000-10,000-10,000-10,000-15,000-15,000-15,000(Right(Right(Rightscale)(%)scale)scale)(%)(%)

180,000
180,000180,000

0

0 0

2016
2017
2017 2017(FY) (FY)(FY)2016 2016

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

0(FY) (FY)(FY)2016 2016
2016
2017
2017 2017

CapitalExpenditure
CapitalExpenditure
CapitalExpenditure
Kureha Corporation
Business Report 2018 29
Depreciation
andDepreciation
andandDepreciation
Amortization
Amortization
Amortization

Revenue
Revenue
Revenue(Leftscale)scale)(Millionsyen)(Left (Leftscale)(Millions(Millionsof yen)ofofyen)(Leftscale)scale)(Millionsyen)(Left (Leftscale)(Millions(Millionsof yen)ofofyen)Operating
ProfittoOperatingOperating
ProfitProfitto to(Rightscale)(%)(Right(Rightscale)
scale)(%)(%)
ProfittoRevenue
Revenue
Revenue and industrial chemicals; theProfit
Profitto Revenue
to
Revenue
Revenue
Specialty
Plastics
segment focused

Overview of capital expenditure(Rightscale)(%)(Right(Rightscale)scale)(%) (%)

150,000 expenditure of the Kureha Group 15,000
15,000150,000
150,000
15,000Total
capitalduringthe fiscal
year ended March 31, 2018 amounted to ¥9,768 million.
125,000
125,000
125,000

ProfitAttributable
ProfitProfitAttributable
Attributable
toOwners
OwnersofParent
Parentto Owners
toof ParentofOperating
ProfitOperatingOperating
ProfitProfit(Millionsyen)(Millions(Millionsof yen)ofofyen)12,00012,00012,000

on household products and food packaging; the Construction
12,00012 1212
12,00012,000
15 1515
segment focused on construction and engineering; and the
Other Operations
segment
including environmental businesses
10,00010,00010,000
10 101012 1212and logistics. By region, the Group conducts business in Japan
8,000
8
88
8,000 8,000
as well as
Europe,North America, and Asia.
999
The main factors that
6,000 affect the operating results,
6,000could
6,000
6
66
stock price,6
6 6financial position and other aspects of the Kureha
4,000
4
44
Group are as follows. 4,000 4,000
333
Forward-looking
statementsin this text are based2 on22
2,000
2,000 2,000
evaluations made as of the end of the subject fiscal year
0
00
0
00
(March0 31,002018).

Capitalexpenditure by business segment
100,000
100,000
100,000
9,000
9,000 9,000
The Advanced Materials segment invested ¥3,308
million,75,00075,00075,000
mainly in manufacturing facilities for PVDF resin (Kureha Corporation).
6,000
6,000 6,000
The50,000
Specialty Chemicals segment invested ¥661 million,
50,00050,000
primarily in production facilities for inorganic chemicals (Kureha
3,000
3,000 3,000
25,00025,00025,000
Corporation).
The
Specialty
Plastics segment invested ¥2,5850 million,
0
00
00
(FY)
(FY) 20162016(FY) 20162016
2016 20172017 molded product2016 20172017
2017
2016 20172017
2017
(FY)
(FY)
(FY)processing(FY)(FY) (FY)2016
2016
primarily in the renewalof 2017
plastic
Domestic
Overseas
Domestic
Domestic
Overseas
Overseasfactory buildings (Kureha Gohsen Co., Ltd.).
Changes in the business environment in Japan and
The Construction segment invested ¥90 million in facilities.
overseas; changes in the market price of products
The Other Operations segment invested ¥777 million, mainly
The Group’s business is exposed to external factors such as
in industrial waste processing facilities (Kureha Ecology Management
Cash
Flows
from
Total
Assets
Total
Equity
Cash
Cash
Flows
Flows
from
from
Total
Total
AssetsAssets
Total
Total
EquityEquityandintensification
Co., Ltd.).
(Leftscale)(Millionsyen)of compe(Left (Leftscale)
scale)(Millions(Millionsof yen)ofofyen)(Millionsyen) changes in markets or customers,(Millions(Millionsof yen)ofofyen)Operating
Activities
OperatingOperating
Activities
Activities
Ratio
ofchanges
Equitysuch as a
Ratio
of EquityofEquitytition with rival companies.Ratio
Accordingly,
In addition,as Flows
aFlowsjoint
initiative,
Cashfrom the Advanced Materials,
Cash
Cash
Flows
from
from
Attributable
to
Attributable
toInvesting
Activities
Investing
Activities
decrease in demand for the Attributable
Group’sprincipletoproducts,
SpecialtyInvesting
Chemicals,andActivities
Specialty
Plastics segments invested
OwnersofParent
ParentOwnersOwnersof Parentof(Millionsyen)(Millions(Millionsof yen)ofofyen)(Rightscale)(%)an increase in(Right(Rightscale)scale)(%)and(%)
customers shifting production
overseas,¥2,346
millionin such areas as research and development
facili300,000
30,000300,000
300,000
30,00030,000
180,000
180,000
180,000
90 9090
production
capacitybycompetingfirms,
could
have a negative
ties (Kureha Corporation) and common factory facilities (Kureha
25,00025,00025,000
effect on the Group’s operating
150,000 results and financial position.
150,000
150,000
75 7575
Corporation).
240,000
240,000
240,000
15,00015,00015,000

Capital required for these investments was procured from10,000 corporate bonds, and borrowings.
10,00010,000
cash-at-hand,
180,000
180,000
180,000

120,000

120,000
120,000
Changes in fuel andraw material prices

60

5,000
5,000 5,000

6060

90,00090,00045 4545
Raw materials such as 90,000
naphthaand coal used by the Group,aswell as fuel, are susceptible
tochangesinmarketconditions.
As
60,00060,00060,000
30 3030-5,000aresult,changessuchasanincrease
in
the
price
of
these
raw
-5,000-5,000
The Kureha Group’s business operations are diverse,60,000
comprising
60,00060,000
30,00030,00030,0001515
materials, or the inability
toshift the additional cost to15 productthe-10,000
Advanced-10,000 Materials segment focused on PGA resin and-10,000
prices in a timely and appropriatemanner, could have a negative
processed
products, PVDF resin, and PPS resin; the0 Specialty-15,000
00-15,000-15,000
000
000
2017 on the Group’s operating2016 2017effect
2016
(FY)
(FY) 20162016(FY)results
2017
2017
20162016(FY) (FY)(FY)(FY) (FY)20172017
20162017 position.
20162016
2017
and 2017
financial
Chemicals
segment
focusedon pharmaceuticals, (FY)
agrochemicals

Businessother risks
0
0
0and

120,000
120,000
120,000

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)
8

88

7

77

6

66

5

55

4

44

3

33

2

22

1

11

0

00

2016 20172017
2017(FY) 20162016(FY) (FY)30

Kureha Corporation Business Report 2018

90,00090,00090,000

12,00012,00012,000
10,00010,00010,000

60,00060,00060,000

8,000
8,000 8,000
6,000
6,000 6,000

30,00030,00030,000

4,000
4,000 4,000
2,000
2,000 2,000

0002016 20172017
2017(FY) 20162016(FY) (FY)000(FY) 20162016
2016 20172017
2017(FY) (FY)Product liability

Occurrence of natural disasters or accidents

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).
However, should a significant, unforeseen quality issue arise,
there could be a negative effect on the Group’s operating results
and financial position.

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 forenvironmental conservation and to ensure safety. However,damage to production facilities as a result of natural disasters
such as major earthquakes or typhoons, or due to fires and otheraccidents, could have a negative effect on the Group’s operating
results and financial position.

The Specialty Chemicals Division’s pharmaceuticalbusiness

Litigation

One 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.

Country risks for overseas businesses
The Group conducts business in Europe, North America andAsia. Accordingly, changes such as deterioration in the politicalor economic situation in these regions, 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 theGroup’s operating results and financial position.

Currency fluctuations
The items in the Group’s financial statements not denominatedin yen are susceptible to fluctuations in exchange rates whenconverted into yen. The Group concludes exchange contracts
and takes other steps 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 and financial position.

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. However, there is a risk that the Group’s
domestic or overseas businesses could be the target of lawsuits,administrative measures or other action. A major lawsuit orother action filed against Kureha could have a negative effect on
the Group’s operating results and financial position.

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 tointensified price competition triggered by new entrants in Japanand overseas. In such case, they could have a negative effect on
the Group’s operating results and financial position.

Investment securities
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. Significant
changes in market prices, or in the financial position of theissuing companies, could have a negative effect on the Group’s
operating results and financial position.

Kureha Corporation Business Report 201831

Consolidated Statements of Financial Position
Kureha Corporation and Consolidated Subsidiaries
As of March 31, 2018 (FY2017) and 2017 (FY2016)

Millions of yen

FY2016FY2017ASSETS
Current assets:
Cash and cash equivalents (Notes 7, 23)
Trade and other receivables (Notes 8, 23)
Other financial assets (Note 23)
Inventories (Note 9)
Assets held for sale (Notes 10, 23)
Other current assets
Total current assets

32

6,475
32,66389
36,018—
1,715
76,963¥ 6,222
29,387332
36,497772
2,060
75,272

Non-current assets:
Property, plant and equipment, net (Notes 11, 13, 16)
Intangible assets, net (Note 12)
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

114,236
1,336
12,09130,4581,191
6,003
165,318

115,911
1,395
10,71425,342
1,350
4,920
159,634

Total assets¥242,281¥234,907

Kureha Corporation Business Report 2018¥

Millions of yen

FY2016FY2017
LIABILITIES AND EQUITYCurrent liabilities:
Trade and other payables (Notes 16, 17, 23)
Bonds and loans payable (Notes 16, 23)
Other financial liabilities (Notes 16, 23)
Accrued income taxes
Provisions (Note 18)
Other current liabilities
Total current liabilities
Non-current liabilities:
Bonds and loans payable (Notes 16, 23)
Other financial liabilities (Notes 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¥ 21,530
25,759
533
2,234
5,947
6,591
62,595¥ 20,369
46,689
836
873
5,742
6,161
80,672

21,657
1,201
2,657
663
380
1,084
27,64490,24023,561
1,291
1,492
386
382
1,147
28,261
108,934

18,16915,267(685)
108,715
8,725
150,193
1,847
152,041¥242,281

12,4609,430(4,456)
101,731
5,132
124,297
1,674
125,972¥234,907

Kureha Corporation Business Report 201833

Consolidated Statements of Profit or Loss
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2018 (FY2017) and 2017 (FY2016)

Millions of yen

FY2016FY2017
Revenue (Notes 6, 25)
Cost of sales (Notes 9, 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 (Note 26)
Other expenses (Notes 11, 13, 27)
Operating profit (Note 6)
Finance income (Note 28)
Finance costs (Note 28)
Profit before tax
Income tax expense (Note 15)
Profit for the year

¥147,329
107,300
40,02827,193
2,230
510
2,602
12,973603
893
12,6832,869
9,813¥132,294
96,79135,503
26,632
1,619
1,398
2,633
9,255
577
852
8,981
1,874
7,106

Profit attributable to:
Owners of parent
Non-controlling interests
Total

¥

9,697
116
9,813

7,001
105
¥ 7,106

Profit per share (in Yen):
Basic (Note 29)
Diluted (Note 29)¥ 507.48
469.18¥ 407.38
338.77

Consolidated Statements of Comprehensive Income
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2018 (FY2017) and 2017 (FY2016)

Millions of yen

FY2016FY2017

34

Profit 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, 30)
Remeasurements of defined benefit plans (Note 30)
Total
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations (Note 30)
Cash flow hedges (Note 30)
Share of other comprehensive income of entities accounted for using
equity method (Note 30)
Total
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
Comprehensive income (loss)

Kureha Corporation Business Report 2018

¥ 9,813¥7,106

3,936
189
4,126

1,780
190
1,970

(778)
—

(698)
2

—
(778)
3,348
¥13,161

(199)
(896)
1,074
¥8,181¥13,020
141¥13,161¥7,993
187¥8,181

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

FY2016 (From April 1, 2016 To March 31, 2017)
Millions of yen
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 2017

Capital, nopar value

CapitalsurplusTreasurystock, at cost

¥12,460¥9,430——Retainedearnings

StockacquisitionrightsExchangedifferences ontranslating
foreign
operations¥304¥(2,682)

¥ (2)

—

(900)
(900)

2
2

—
¥(3,582)—¥—¥(4,450) ¥ 95,723
7,001
—
(5)
0

0

7,001

Cash flow
hedges14(1,890)—¥12,460

888
8
(5)
(993)
¥(4,456) ¥101,731

0¥9,43014¥319

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 2017

¥7,393

¥ —

1,711
1,711

179
179

(708)

(179)

(708)
¥8,395(179)¥ —Non-controllinginterests

Total

Total

¥ 5,013
—
992
992
—
—
14
—
—

¥118,177
7,001
992
7,993
(5)
0
14
(1,890)
—

(888)
—
(873)
¥5,132—8(1,872)¥124,297¥1,263105
82
187

Total equity

(35)
260

¥ 119,440
7,106
1,074
8,181
(5)
0
14
(1,926)260

224¥1,674—8(1,648)¥125,972

Kureha Corporation Business Report 201835

FY2017 (From April 1, 2017 To March 31, 2018)
Millions of yen
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2017
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Conversion of convertible bonds (Note 21)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 2018

Capital, nopar value

CapitalsurplusTreasurystock, at cost

¥12,460¥ 9,430

—

—

Stock
acquisitionrightsExchange differences ontranslating foreign operations¥319¥(3,582)

—

(767)
(767)

¥(4,456) ¥101,731
9,697
—
(6)
0
29

(0)
5,709

Retainedearnings

5,826
10

3,748

9,697
0
(4)
(2,033)
(116)

(12)
(254)
(20)

(557)
5,709
¥18,169

5,837¥15,267

3,771(2,712)¥ (685) ¥108,715

(266)
¥ 52

(20)
¥(4,370)

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2017
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction(Note 20)
Dividends (Note 22)
Conversion of convertible bonds (Note 21)
Equity transactions with non-controlling interests
Reclassification from other components of equity toretained earnings
Total transactions with owners
BALANCE-MARCH 31, 201836

Kureha Corporation Business Report 2018

¥ 8,395
3,922
3,922

725
725
¥13,043

¥

—
167
167

(167)
(167)
¥ —

Non-controllinginterests

Total

Total

¥5,132
—
3,323
3,323
—
—
(12)
—
(254)

¥124,297
9,697
3,323
13,020(6)
012(2,033)
14,913¥1,674
116
24
141

(20)

(10)

73

62

557
270
¥8,725—
12,875¥150,193

31¥1,847—
12,906¥152,041(41)

Total equity¥125,972
9,813
3,348
13,161(6)
0
12(2,075)
14,913

Consolidated Statements of Cash Flows
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2018 (FY2017) and 2017 (FY2016)

Millions of yen

FY2016FY2017
Cash flows from operating activities:
Profit before tax
Depreciation and amortization
Business restructuring costs (Note 13)
Loss on business withdrawal (Note 13)
Impairment loss (Note 13)
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(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
assetsPayments for purchases of property, plant and equipment, and intangible
assetsProceeds from sales of investment securities
Purchase of investment securities
Proceeds from sales of assets held for sale
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 31)
Proceeds from non-current loans payable (Note 31)
Repayments of non-current loans payable (Note 31)
Proceeds from issue of bonds (Note 31)
Repayments of bonds (Note 31)
Proceeds from contributions of non-controlling interests
Payments from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation
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 7)¥ 12,683
9,898
—
—
746
(593)
468
(2,230)¥ 8,981
10,191
1,194
378
—
(550)
557
(1,619)1,298(3,415)
634
783
473
(847)
838
20,737
1,759(414)(1,903)
20,178486
1,597(3,630)340(188)(1,172)(2,235)
14,3281,395(481)(2,890)12,35065

32(9,857)
247
(180)
793
230
(996)
(9,698)(9,379)
1,320
(38)
—
7,780
(786)
(1,071)(2,033)(41)(1,890)(35)(4,325)
1,130(6,780)
6,963(5,000)
66

(117)
4,090
(13,715)
—
—
260

(3)
(390)
(10,415)
189
253
6,222
¥ 6,475—(317)(11,727)
(24)
(472)
6,695
¥ 6,222

Kureha Corporation Business Report 201837

Notes to the Consolidated Financial Statements
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2018 (FY2017) and 2017 (FY2016)

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 http://www.kureha.co.jp/
en/. The consolidated financial statements of the Company for FY2017 (from April 1, 2017 to March 31, 2018) comprise theCompany and its 29 subsidiaries (collectively the “Group”), and the Group’s interests in its 3 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 26, 2018.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all the periods presented in the consolidated financial
statements.
In addition, the Group has early adopted IFRS 9 Financial Instruments (issued in November 2009, as amended in July2014).
(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,38

Kureha Corporation Business Report 2018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.
(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 designated investments in equity
instruments 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) Assets held for saleNon-current assets or disposal groups that recover their carrying amount principally through a sale transaction rather than
through continued use are classified as held for sale if the asset is available for immediate sale in its present condition, themanagement is committed to a plan to sell the asset, and the asset is expected to be sold within a year.
Non-current assets or disposal groups classified as held for sale are measured at the lower of their carrying amount and fairvalue less costs to sell.
(7) 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.

Kureha Corporation Business Report 201839

Except for non-depreciable assets such as land, an item of property, plant and equipment is depreciated using the straight-line
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.
(8) 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 statement of income 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.
(9) Lease
The Group determines whether the agreement contains a lease based on the substance of the arrangement at the commencement
date of the lease transaction.
If a lease transfers to the Group substantially all risks and rewards incidental to ownership of an asset, such a lease is classified
as a finance lease, or otherwise it is classified as an operating lease.
A leased asset under a finance lease transaction is initially recognized at the lower of the fair value of the leased asset
determined at inception of the lease and the present value of the minimum lease payments, and subsequently depreciated basedon the applicable accounting policies using the straight-line method over shorter of the estimated useful life and the lease term.
Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge isallocated to each period over the lease term so as to produce a constant periodic rate of interest on the remaining balance of theliability.
Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. Contingent
rents are charged as expenses in the periods in which they are incurred.
(10) 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
40

Kureha Corporation Business Report 2018

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.
(11) Financial Instruments
1) Non-derivative financial assets(i) Initial recognition and measurement
The Group initially recognizes a financial asset on the account day in its consolidated statements of financial position when theGroup becomes party to the contractual provisions of the financial asset.
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 at initial recognition, and subsequent changes in their fair value are recognized in profit
or loss.
(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.
Kureha Corporation Business Report 2018

41

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 in its consolidated statements of financial position when the Group becomesparty 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) Issuance of compound financial instruments
The Group issues bonds with stock acquisition rights. At initial recognition, proceeds from issuance are split between thecomponent of consideration received for bonds and the component of consideration received for stock acquisition rights, andthe bond component is classified and presented as liability while the stock acquisition right component as equity. On initialrecognition, stock acquisition rights are measured as difference between the proceeds and initially measured fair value of theliability component. All of the transaction costs associated with issuing bonds with stock acquisition rights are allocated pro rata
to each component on the basis of initial ratio of carrying amount of a liability component and an equity component. Afterinitial recognition, a liability component of compound financial instrument is measured at amortized cost using the effective
interest method. An equity component of compound financial instrument is not remeasured after initial recognition.
4) 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.
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.
42

Kureha Corporation Business Report 2018

(12) 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.
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.
(13) 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 in profit or loss 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 ismeasured using the Black-Scholes model based on the terms and conditions of the options.
(14) 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, and a reliable estimate can be made of the amount of theobligation.
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.
(15) 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.
(16) Revenue
1) Sale of goods
Revenue from the sale of goods is recognized when the Group has transferred the significant risks and rewards of ownership of
the goods to the buyer; the Group retains neither continuing managerial involvement nor effective control over the goods sold;
it is probable that future economic benefits related to the transaction will flow to the Group; and these benefits andcorresponding costs can be measured reliably. Revenue is usually recognized at the time of delivery of goods to customers.
Revenue is measured at the fair value of the consideration received or receivable less any discounts, rebates and consumption
taxes.
Taxes collected on behalf of the third parties and transaction amounts where the Group acted as agent are deducted fromrevenue, and inflow of economic benefits excluding those amounts is recognized as revenue.
2) Royalty
Royalty revenue is recognized on an accrual basis in accordance with the substance of the contractual arrangement.
3) Rendering of services
Revenue from the rendering of services is recognized in accordance with such transaction’s degree of progress as of the end of thereporting period in which the service is rendered.
4) Construction contracts
Revenues from construction contracts are calculated based on the stage of completion of the contract (multiplying the mostKureha Corporation Business Report 201843

recent total selling price by the proportion of the most recent contract costs incurred to the most recent estimated total contract
costs) if the outcome of the construction contract can be estimated reliably. Otherwise, contract revenues are recognized only tothe extent of the contract costs incurred very likely to be recovered and contract costs are expensed when incurred.
(17) 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.
(18) 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.
(19) 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.
(20) 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.
(21) 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.

44

Kureha Corporation Business Report 2018

(Change in accounting policies)
The Group has adopted the standards described below since FY2017. This adoption does not have material effect on the
consolidated financial statements.
Standard

IAS7

Title

Details of new or amended standard

Statement of Cash Flows

Amendments to disclosure of changes in liabilities arising from financing activities

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:• Impairment of property, plant and equipment; goodwill and intangible assets (Item (10) of 3. Significant accounting
policies and Note 13. Impairment of non-financial assets),• Valuation of inventories (Item (5) of 3. Significant accounting policies and Note 9. Inventories),• Recoverability of deferred tax assets (Item (19) of 3. Significant accounting policies and Note 15. Income taxes),• Valuation of defined benefit obligations (Item (12) of 3. Significant accounting policies and Note 19. Employee benefits),• Recognition of provisions (Item (14) of 3. Significant accounting policies and Note 18. Provisions) and• Assumption on valuation of financial instruments (Item (11) of 3. Significant accounting policies and Note 23. Financial
instruments).
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 (11) of 3. Significant accounting policies and Note 23. Financial instruments).

5. Standards and interpretations issued but not yet adopted

Of the new standards or interpretations that were established or amended by the date of approval of the consolidated financial
statements, the following are the titles and other related information of the major new IFRSs. The Group has not yet adopted
these standards in FY2017.
Standard

Title

Effective dateFiscal year in which
the Group will apply
the standard

Summary of new or amended standard

IFRS 15

Revenue fromContracts with
Customers

Fiscal year
January 1, 2018 ending March
31, 2019

An entity shall recognize revenue to depict the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which theentity expects to be entitled in exchange for those
goods or services.

IFRS 16

LeasesFiscal year
January 1, 2019 ending March
31, 2020

A lessee is required to recognize assets and liabilities
for most leases.

With regard to application of IFRS 15 “Revenue from Contracts with Customers”, we plan to adopt the method of recognitionof cumulative effect on the date of start of application, which is accepted as transitional measure. The effect of application ofthese standards on the consolidated financial statements of the fiscal year ending March 31, 2019 is negligible.
The effect of application of IFRS 16 “Leases” is under evaluation.

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 five
Kureha Corporation Business Report 201845

reportable 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), polyglycolic acid (PGA) andits processed product, carbon fiber, bead-shaped activated carbon, anode materials forlithium ion batteries
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
serviceenvironmental engineering, industrial waste management, transport and warehousing,physiochemical and biochemical testing, analysis and measurement services, 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.
The Group’s segment information is as follows:
Millions of yen

FY2016 (From April 1, 2016 To March 31, 2017)

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¥33,369627
33,997
79¥25,866
278
26,144
2,538¥42,791
184
42,976
4,986

81,33023,8503,385

Adjustment(Note)

Other
Operations

Total¥13,934
5,401
19,336
1,026¥16,332
5,638
21,9701,726¥132,294
12,130144,425
10,35737,894

7,439

19,631

170,145

64,761

234,907

1,064

2,342

102

1,228

8,122

2,068

10,191

—

—

—

—

—

—

1,572

1,572

1,357

—

261

—

—

1,619

—

1,619

¥ 3,904¥ 1,333¥ 1,633171¥ 1,082

8,125¥ 2,179¥ 10,304¥¥

Consolidated¥— ¥132,294(12,130)—(12,130) 132,294(1,101)
9,255
577
(852)
8,981

Note: Adjustment to operating profit consists mainly of 133 million yen of profit resulting from elimination of intersegment transactions,
1,398 million yen of other income and 2,633 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.
Adjustment to impairment losses includes impairment losses for fixed assets of 1,194 million yen associated with the Advanced
Materials segment and 378 million yen for fixed assets of the Specialty Chemicals segment.

46

Kureha Corporation Business Report 2018

Millions of yen

FY2017 (From April 1, 2017 To March 31, 2018)

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¥41,640
707
42,348
1,669¥26,176
327
26,504
3,421¥45,397334
45,731
6,907¥17,354
4,580
21,935
1,037¥16,760
5,745
22,505
1,812¥147,329
11,695
159,025
14,850¥— ¥147,329(11,695)—(11,695) 147,329(1,876)
12,973603(893)
12,68382,94322,60140,066

8,198

18,519172,32969,951

242,281

3,278
—

932
—

2,311
—

100
—

1,203
—

7,826
—

2,071
746

9,898
746

1,963

—

267

—

—

2,230

—

2,230

661

¥ 2,585

7,421¥ 2,346¥ 3,308

¥

¥

90

¥

777

¥

Adjustment(Note)

Consolidated

¥

9,768

Note: Adjustment to operating profit consists mainly of 216 million yen of profit resulting from elimination of intersegment transactions, 510
million yen of other income and 2,602 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.
Adjustment to impairment losses includes impairment losses for fixed assets of 194 million yen associated with the Advanced Materials
segment and 552 million yen for fixed assets of the Specialty Plastics 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

FY2017Japan
Asia
EuropeOther(From April 1, 2017
To March 31, 2018)¥107,145
14,014
13,717
12,451¥147,329

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

FY2016(From April 1, 2016
To March 31, 2017)¥ 97,630
13,986
10,301
10,377¥132,294

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

FY2017(As of March 31,2018)

Japan
U.S.
Other

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

¥ 89,749
14,432
11,390¥115,573

FY2016(As of March 31,2017)¥ 89,205
16,241
11,860¥117,306

Kureha Corporation Business Report 201847

(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. 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 FY2016 and FY2017 equal the balances of “cash and cash equivalents” presented in the corresponding
consolidated statements of cash flows.

8. Trade and other receivables

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

FY2017(As of March 31,2018)

Trade notes and accounts receivable
Other
Allowance for doubtful accounts
Total

FY2016(As of March 31,2017)¥28,374
1,186(173)¥29,387¥31,907915(159)¥32,663

9. Inventories

The breakdown of inventories is as follows:
Millions of yen

FY2017(As of March 31,2018)

FY2016(As of March 31,2017)

Merchandise and finished goods¥30,278¥30,474
Work in process
1,022
1,001
Raw materials and supplies
4,717
5,021
Total
¥36,018¥36,497
Note: The amounts of inventory write-down recognized as expense for FY2016 and FY2017 are 766 million yen and 1,827
million yen, respectively. These amounts are included in “Cost of sales” in the consolidated statements of profit or loss.

10. Assets held for sale

The breakdown of assets held for sale is as follows:
Millions of yen

FY2017(As of March 31,2018)

FY2016(As of March 31,2017)

Assets held for sale
Other financial assets
¥—
¥772
Total
¥—
¥772
Note: As the Company made a decision to sell its investment in an entity located in China, the assets associated with theinvestment were reclassified to assets held for sale in FY2016. The fair value of those assets are based on a selling priceprovided by the sales agreement and is classified as Level 3 of the fair value hierarchy. The sale of said assets has been
completed in FY 2017.

48

Kureha Corporation Business Report 2018

11. Property, plant and equipment(1) Changes in carrying amount, cost, and accumulated depreciation and accumulated impairment losses
Carrying amountMillions of yen
Machinery,
Buildings and equipment andstructures
vehiclesBalance as of April 1, 2016
Acquisitions
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of March 31, 2017
Acquisitions
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of March 31, 2018

¥43,589
3,429(19)(2,919)(805)(2,940)(206)(58)¥40,0704,009(32)(2,856)
(202)
(0)
(47)
0
¥40,940¥52,156
6,122(55)(5,629)(489)(3,746)(603)
49¥47,802
3,875(172)(5,524)
(540)
(96)
(442)
0
¥44,902Land¥18,099
50
(0)
—
(269)
—
(10)
(5)
¥17,864
31
(45)
—
—
—
12
—
¥17,863

Construction inprogress¥6,996
(243)
—
—
—
—
(1)
0
¥6,752
774
—
—
—
—
(9)
—
¥7,517

Other¥4,144792(11)(1,226)
(8)
(223)
(36)
(8)
¥3,421750(16)(1,133)
(4)
(15)
10
(0)
¥3,012

Total¥124,987
10,151(87)(9,775)(1,572)(6,910)(858)(22)¥115,911
9,441
(267)
(9,514)
(746)
(112)
(475)
0
¥114,236

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.
Cost
Millions of yen
Machinery,
Buildings and equipment andstructures
vehiclesBalance as of April 1, 2016
Balance as of March 31, 2017
Balance as of March 31, 2018

¥103,061¥102,705¥106,222¥166,250¥165,649¥165,733

Land¥18,425¥18,459¥18,458

Construction inprogress

Other

Total

¥6,996¥6,752¥7,517¥16,648¥16,411¥16,291¥311,382¥309,979¥314,223

Other

Total

¥12,503¥12,989¥13,278¥186,395¥194,067¥199,986

Accumulated depreciation and accumulated impairment losses
Millions of yen
Machinery,
Buildings and equipment andstructures
vehiclesBalance as of April 1, 2016
Balance as of March 31, 2017
Balance as of March 31, 2018

¥59,471¥62,635¥65,282¥114,093¥117,847¥120,830

Land

¥325
¥594
¥594

Kureha Corporation Business Report 201849

(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

FY2017(As of March 31,2018)

FY2016(As of March 31,2017)

Amount subject to reduction entry¥7,322¥7,215
Note: 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.

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, 2016
Acquisitions
Disposals
Amortization
Exchange rate differences
Other changes
Balance as of March 31, 2017
Acquisitions
Disposals
Amortization
Exchange rate differences
Other changes
Balance as of March 31, 2018

¥851
152
(2)
(308)
(1)
(0)
¥692
325
(1)
(286)
0
(0)
¥729

Total

¥814
1
(1)
(107)
(8)
4
¥703
1
(0)
(96)
(1)
—
¥606

¥1,666
153
(3)
(415)
(9)
4
¥1,395
326
(1)
(383)
(1)
(0)
¥1,336

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. The line item “Acquisitions” above mainly represents the amounts of intangible assets purchased from external parties.
Cost
Millions of yen
Other

SoftwareBalance as of April 1, 2016
Balance as of March 31, 2017
Balance as of March 31, 2018

¥1,812¥1,883¥1,727

Total¥1,099¥1,037¥1,006¥2,911¥2,920¥2,734

Accumulated amortization and accumulated impairment losses
Millions of yen
Other

SoftwareBalance as of April 1, 2016
Balance as of March 31, 2017
Balance as of March 31, 2018

¥ 960
¥1,191
¥ 997

Total

¥284
¥333
¥400

¥1,244¥1,525¥1,397(2) Research and development expenses
The total amounts of expenditures for research and development recognized as expense for FY2016 and FY2017 are 4,734
million yen and 4,962 million yen, respectively.

50

Kureha Corporation Business Report 2018

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 for FY2016 and FY2017 in an amount of 1,572
million yen and 746 million yen, respectively.
(2) Main events and circumstances that led to recognition of impairment losses
FY2016 (From April 1, 2016 To March 31, 2017)
Millions of yen

Segment
Advanced Materials

Purpose of use

Location
Kasumigaura, Ibaraki

Manufacturing facility
Shanghai, PRC

Specialty Chemicals

Manufacturing facility Iwaki, Fukushima
Total

Type of assets
Buildings
Structures
Land
Machinery and equipment
Buildings
OthersAmount
¥ 336
137
269
451
303
74
1,572

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 (between 3% and 13%) of a cash-generating unit. If
future cash flows are not expected to be derived from a cash-generating unit, the value in use is taken as zero. Fair value less costsof disposal is evaluated either by the estimated disposal amount or the amount reasonably calculated based on assessed values of
fixed assets for property tax, and it is taken as zero when sale cannot be expected.
1) Advanced Materials segment
For manufacturing facility in Kasumigaura City, Ibaraki Prefecture, after reviewing the future operating environment andprojected earnings following the change in the expected use of the facilities associated with restructuring of resin processing
systems in the advanced plastics business, the Group wrote down the carrying amount of fixed assets associated with theadvanced plastics business to their recoverable value and recognized the reduction of 743 million yen under other expenses. In
addition, the Group applies value in use for recoverable value, which is calculated as 567 million yen.
For manufacturing facility in Shanghai City, PRC, under the carbon products business in the Advanced Materials segment
which was affected by the weak demand and increasingly fierce competition, the Group conducted a thorough review andassessment of business, including its future operating environment and projected earnings. Consequently, for the above
mentioned manufacturing facility, the Group wrote down the carrying amount of fixed assets associated with carbon products
business to their recoverable value and recognized the reduction of 451 million yen as other expenses. In addition, the Groupapplies value in use for recoverable value, which is calculated as 996 million yen.
2) Specialty Chemicals segment
For manufacturing facility in Iwaki City, Fukushima Prefecture, after reviewing the future operating environment and projected
earnings following the change in the expected use of the facilities associated with discontinuance of some production in thepharmaceuticals business, the Group wrote down the carrying amount of fixed assets associated with the pharmaceuticals
business to their recoverable value and recognized the reduction of 378 million yen under other expenses. In addition, theGroup applies value in use for recoverable value, which is calculated as zero.

Kureha Corporation Business Report 201851

FY2017 (From April 1, 2017 To March 31, 2018)
Millions of yen

Segment
Advanced Materials
Specialty Plastics

Purpose of use
Location
Manufacturing facility Shanghai, PRC
Idle assets
Iwaki, Fukushima

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

Amount
¥194
122
80
346
4
552
746

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. If future cash flows are notexpected to be derived from a cash-generating unit, the value in use is taken as zero. Fair value less costs of disposal is evaluatedeither by the estimated disposal amount or the amount reasonably calculated based on assessed values of fixed assets for property
tax, and it is taken as zero when sale cannot be expected.
1) Advanced Materials segment
For manufacturing facility, under the carbon products business in the Advanced Materials segment which was affected by the
weak demand and increasingly fierce competition in China, the Group conducted a thorough review and assessment of business,
including its projected earnings. Consequently, for the above mentioned manufacturing facility, the Group wrote down the
carrying amount of fixed assets associated with the carbon products business to their recoverable value and recognized the
reduction of 194 million yen as other expenses. In addition, the Group applies value in use for recoverable value, which is
calculated as 768 million yen after discounting future cash flows of 13%.
2) Specialty Plastics segment
For idle assets, due to change in market conditions, they are no longer expected to be used in the future. Consequently, theGroup wrote down the carrying amount of above mentioned fixed assets to their recoverable value and recognized the reductionof 552 million yen as other expenses. In addition, the Group applies value in use for recoverable value, which is calculated aszero.

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

FY2017(As of March 31,2018)

Joint ventures
Affiliates

FY2016(As of March 31,2017)¥8,1242,590¥9,1302,960(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
FY2017

Millions of yen(From April 1, 2017
to March 31, 2018)

Profit for the year
Other comprehensive income
Comprehensive income

52

Kureha Corporation Business Report 2018

¥1,963—
1,963

FY2016(From April 1, 2016
to March 31, 2017)¥1,357(10)
1,347

Affiliates
FY2017

Millions of yen

Profit for the year
Other comprehensive income
Comprehensive income

FY2016(From April 1, 2016
to March 31, 2017)(From April 1, 2017
to March 31, 2018)

¥ 261
(189)
72

¥267
—
267

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:
FY2016 (From April 1, 2016 To March 31, 2017)

As of April 1, 2016

Deferred tax assets
Tax loss carryforwards
Provisions
Unrealized gain on fixed assets
Loss on valuation of inventories
Impairment loss
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
income¥ 6,273
1,863
1,711
506
1,037
562
2,254
14,210¥(492)
(70)
26
297
115
45
504
427

(3,258)(6,368)(2,200)(885)(676)(13,389)¥821¥

As of March 31, 2017

—
—
—
—
—
—
(20)
(20)

¥ 5,781
1,793
1,737
804
1,153
607
2,739
14,617—(928)(4,187)

(233)
—
(300)
156
(377)
¥ 50

—
—
(65)
—
(994)
¥ (1,014)(6,601)(2,200)(1,252)(519)(14,760)¥ (142)

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

Kureha Corporation Business Report 2018

53

FY2017 (From April 1, 2017 To March 31, 2018)

As of April 1, 2017

Deferred tax assets
Tax loss carryforwards
Provisions
Unrealized gain on fixed assets
Loss on valuation of inventories
Impairment loss
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
income¥ 5,781
1,793
1,737
804
1,153
607
2,739
14,617¥(2,612)
91
(5)
529
24
(32)
(469)
(2,474)(4,187)(6,601)(2,200)(1,252)(519)(14,760)¥ (142)¥As of March 31, 2018

—
—
—
—
—
—
(22)
(22)

¥ 3,169
1,885
1,732
1,334
1,177
574
2,246
12,120—(1,656)(5,843)

3,137
—
(228)
(20)
2,889
¥ 415

—
—
(58)
—
(1,714)¥(1,737)(3,464)(2,200)(1,538)(539)(13,585)¥ (1,465)

Note: A difference between the amount recognized in profit or loss and total deferred tax expenses is 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

FY2017

Deductible temporary differences
Tax loss carryforwards
Total

FY2016(As of March 31, 2018)(As of March 31, 2017)¥ 7,156
3,731¥10,887¥6,875
3,008¥9,884

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

FY2017Due in one year or lessDue after one year through five years
Total

FY2016(As of March 31, 2018)(As of March 31, 2017)

¥ 448
3,282
¥3,731¥ 706
2,301¥3,008(3) Temporary differences arising from investments in subsidiaries for which deferred tax liabilities were not recognizedNot applicable.

54

Kureha Corporation Business Report 2018

(4) Income tax expense
The breakdown of income tax expense is as follows:
FY2017

Millions of yen

Current tax expense
Deferred tax expense
Total

FY2016(From April 1, 2016
to March 31, 2017)(From April 1, 2017
to March 31, 2018)¥1,921(47)¥1,874¥3,278(409)¥2,869(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.
FY2016FY2017(From April 1, 2016
to March 31, 2017)(From April 1, 2017
to March 31, 2018)

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
Adjustment of ending balance of deferred tax assets due to changes in tax rates
Other
Actual tax rate

30.69%
1.14%(0.37)%(6.71)%(8.22)%
0.13%
4.21%
20.87%

30.69%
0.83%(0.68)%(6.03)%
0.47%(0.54)%(2.12)%
22.62%

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.
(6) Adjustment of the amounts of deferred tax assets and deferred tax liabilities due to change income tax rates
In accordance with the tax reform legislation approved on December 22, 2017 in the United States, the U.S. federal corporate
income tax rate applied to consolidated subsidiaries in the United States was lowered from 35 percent to 21 percent.
The impact of this change on the tax rate is immaterial.

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

FY2017(As of March 31, 2018)

Property, plant and equipment
Other financial assets
Total¥38,842322¥39,164

FY2016(As of March 31, 2017)¥42,183
947¥43,130

Kureha Corporation Business Report 201855

(2) Obligations with pledged assets
Millions of yen

FY2017(As of March 31, 2018)

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

FY2016(As of March 31, 2017)

¥ 785
582
295
1,663
927
¥ 736

¥ 865
480
278
1,624
1,007
¥ 617

17. Trade and other payables

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

FY2017(As of March 31, 2018)

Trade notes and accounts payable
Other
Total

FY2016(As of March 31, 2017)¥15,014
5,355¥20,369¥16,013
5,517¥21,530

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, 2016
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of March 31, 2017
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of March 31, 2018

Other

¥ 5,643
4,019(4,088)
—
(9)
5,564
4,216
(4,049)—8¥ 5,740

Total

¥ 682
297
(414)
(1)
—
563
698
(391)
—
—
¥ 870

¥ 6,325
4,316(4,503)
(1)
(9)
6,128
4,914
(4,440)—8¥ 6,610

Millions of yen

FY2017(As of March 31, 2018)

Current liabilities
Non-current liabilities
Total¥5,947663¥6,610FY2016(As of March 31, 2017)¥5,742386¥6,128

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.

56

Kureha Corporation Business Report 2018

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.
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

FY2017
Present 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

FY2016(As of March 31, 2018)(As of March 31, 2017)¥ 22,138(26,956)(4,818)¥ 21,999(25,696)(3,697)261

251(4,557)380¥ 4,937(3,446)382¥ 3,829

Note: Net defined benefit asset is recorded under “Other non-current assets” in the consolidated statement 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:
FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

Service cost
Net interest
Total defined benefit cost

FY2016(From April 1, 2016
To March 31, 2017)¥1,162(23)¥1,138¥1,182(4)¥1,178

Note: Defined benefit cost is recorded under “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statements of profit or loss.

Kureha Corporation Business Report 201857

3) Changes in the present value of defined benefit obligations
Changes in the present value of defined benefit obligations are as follows:
FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

Present value of defined benefit obligations (beginning of the year)
Service cost
Interest cost
Benefits paid
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)

FY2016(From April 1, 2016
To March 31, 2017)¥22,6131,182
118(1,552)
(86)
—
(200)
114
(25)
¥22,250¥22,250
1,162
136(1,555)
388
(66)
150
303
17
¥22,399

Note: The weighted average duration of defined benefit obligations for the FY2016 and FY2017 were 10.3 years and 9.9 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:
FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

Fair value of plan assets (beginning of the year)
Interest income
Return on plan assets
Contributions by the employer (Note)
Benefits paid
Exchange rate differences
Fair value of plan assets (end of the year)
Note: Expected contribution for the year ending March 31, 2019 is 1,657 million yen.

58

Kureha Corporation Business Report 2018¥25,696
160
658
1,947
(1,516)9¥26,956

FY2016(From April 1, 2016
To March 31, 2017)¥24,611
122
189
2,254
(1,461)(19)¥25,696

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

FY2017(As of March 31, 2018)
Quoted market pricein an active market
Not
Available
available¥13,541
¥ —
7,627
—
—
4,414
—
1,373
¥21,168¥ 5,787

FY2016(As of March 31, 2017)
Quoted market pricein an active market
Not
Available
available¥15,908
¥ —
4,932
—
—
4,344
—
511
¥20,840¥ 4,855

6) Major assumptions used for actuarial calculations
Major assumptions used for actuarial calculations are as follows:
FY2017(As of March 31, 2018)

Discount rate (weighted average)

FY2016(As of March 31, 2017)

0.6%

0.5%

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

FY2017(As of March 31, 2018)

0.5% increase in discount rate
0.5% decrease in discount rate¥(1,076)
1,076

FY2016(As of March 31, 2017)¥(1,114)1,114(3) Defined contribution plan
Amounts of contribution to the defined contribution plan recognized as expenses for FY2016 and FY2017 were 2,025 million
yen and 2,005 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 FY2016 and FY2017 were 29,200 million yen and 29,476
million yen, respectively. The amounts are recorded under “Cost of sales” and “Selling, general and administrative expenses” inthe consolidated statements of profit or loss.

Kureha Corporation Business Report 201859

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.
The Company’s stock option plan outstanding in FY2016 and FY2017 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
FY2016
Shares outstanding
as of the end of
FY2017
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
FY2016
Shares outstanding
as of the end of
FY2017

June 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

1,060

1,160

1,320

2,140

3,060

530

580

660

1,300

1,810

June 25, 2014

June 24, 2015

June 24, 2016

June 27, 2017

Total

3,390
July 16, 2014

3,410
July 22, 2015

4,050
July 20, 2016

2,120
July 19, 2017

43,030—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

—

1,870

3,410

4,050

—

18,070

1,140

2,570

3,050

2,120

13,760——Note: If a director retires during the vesting period, exercisable stock acquisition rights will decrease in accordance with thedirector’s service period.
(2) Number of outstanding stock options and weighted average exercise price
FY2017(From April 1, 2017
To March 31, 2018)
Number of options
Weighted average(shares)
exercise price (yen)FY2016(From April 1, 2016
To March 31, 2017)
Number of options
Weighted average(shares)
exercise price (yen)Outstanding at the beginning of the year
18,0701
14,0201
Granted
2,120
1
4,050
1
Exercised(6,430)1——
Outstanding at the end of the year
13,7601
18,070
1
Exercisable at the end of the year————
Notes: 1. For stock options exercised during the period, the weighted average share price as of the exercise date was 5,500 yen
for FY2017.
2. Weighted average fair value of stock options outstanding at the end of FY2016 and FY2017 were 3,780 yen and 4,021 yen,respectively. Weighted average contractual life remaining for FY2016 and FY2017 were 26.4 years and 26.2 years, respectively.
60

Kureha Corporation Business Report 2018

(3) Expenses in relation to stock options are as follows:
FY2017

Selling, general and administrative expenses

Millions of yen(From April 1, 2017
To March 31, 2018)

FY2016(From April 1, 2016
To March 31, 2017)

¥12

¥14

(4) Fair value of stock options granted were calculated as follows:
FY2017FY2016(As of March 31, 2018)(As of March 31, 2017)
Expected volatility (Note 1)
27.2%
29.0%
Expected remaining life (Note 2)
3.0 years
3.0 years
Expected dividend (Note 3)
110 yen/share
110 yen/share
Risk-free rate (Note 4)(0.09)%(0.33)%
Notes: 1. Expected volatility for FY2016 and FY2017 are calculated using the actual share price over a period of three years(from July 2013 to July 2016) and three years (from July 2014 to July 2017), respectively.
2. Expected retirement date used in the computation is estimated based on the average service period.
3. Expected dividend for FY2016 and FY2017 are calculated based on the actual annual dividend amounts for the year
ended March 2016 and March 2017, respectively.
4. Risk-free rates are calculated by linear interpolation between spot rates of separated principal component of Japanese
Government Bonds with a 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:
FY2017

Number of authorized shares
Common stock
Number of issued shares
Balance as of the beginning of the year
Increases during the year (Note 2)
Decreases during the year (Note 3)
Balance as of the end of the year

Shares

FY2016(From April 1, 2017
To March 31, 2018)(From April 1, 2016
To March 31, 2017)

60,000,000

60,000,000

18,168,390
2,637,017—
20,805,407

181,683,909—
163,515,519
18,168,390

Notes: 1. All of the shares issued by the Company are shares of common stock with no par value and no limits to any rights ofthe shareholders.
2. Increases during the current fiscal year were due to the exercise of stock acquisition rights of convertible bond-typebonds with stock acquisition rights.
3. Decreases during the current fiscal year were due to the share consolidation.
(2) Treasury stock
Changes in treasury stock are as follows:
FY2017

Shares(From April 1, 2017
To March 31, 2018)

Balance as of the beginning of the year
Increases during the year (Note 1)
Decreases during the year (Note 2)
Balance as of the end of the year

983,280
1,068
833,608
150,740

FY2016(From April 1, 2016
To March 31, 2017)

9,819,315
4,000
8,840,035
983,280

Kureha Corporation Business Report 201861

Notes: 1. Increases during the year were due to the purchase of shares less than one trading unit and the purchase of fractional
shares less than one share that resulted from the share consolidation. The Company conducted a ten-to-one shareconsolidation on October 1, 2016, and the major components of the 4,000 shares of the Company’s stock acquired
during FY2016 are as follows: 2,938 shares resulting from the purchase of shares less than one trading unit before theshare consolidation, 890 shares resulting from the purchase of shares less than one trading unit after the shareconsolidation, and 172 shares resulting from the purchase of fractional shares less than one share due to the shareconsolidation.
2. Decreases during FY2016 were due to the share consolidation and sale of shares less than one trading unit. Decreases
during FY2017 were due to the exercise of stock acquisition rights of convertible bond-type bonds with stockacquisition rights and the exercise of stock option, etc.
(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
FY2016 (From April 1, 2016 To March 31, 2017)

Resolution

Board of Directors’
meeting held on April 19,
2016
Board of Directors’
meeting held on October18, 2016

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock¥945

Common stock

945

Class of shares

Record date

Effective date

¥5.50

March 31,2016

June 2,2016

5.50

September 30,
2016

December 2,
2016

Note: The Company conducted a ten-to-one share consolidation on October 1, 2016. Dividend per share shown above
represents the amount before the share consolidation.

62

Kureha Corporation Business Report 2018

FY2017 (From April 1, 2017 To March 31, 2018)
Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock¥ 945

Common stock

1,088

Resolution

Class of shares

Board of Directors’
meeting held on April 18,
2017
Board of Directors’
meeting held on October24, 2017

Record date

Effective date

¥55.00March 31,2017

June 2,
2017

55.00

September 30,
2017

December 4,
2017(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year
FY2016 (From April 1, 2016 To March 31, 2017)

Resolution

Board of Directors’
meeting held on
April 18, 2017

Source of dividends

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock Retained earnings¥945¥55.00Source of dividends

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock Retained earnings¥1,445¥70.00Class of shares

Record date

Effective date

March 31,2017

June 2,
2017

Record date

Effective date

March 31,2018

June 4,2018

FY2017 (From April 1, 2017 To March 31, 2018)

Resolution

Board of Directors’
meeting held on
April 17, 2018

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

FY2017(As of March 31, 2018)

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

FY2016(As of March 31, 2017)¥ 48,089(6,475)41,613150,193
62.0%¥ 71,007(6,222)64,785
124,297
52.9%

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.

Kureha Corporation Business Report 201863

(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 obligations 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:
FY2016 (As of March 31, 2017)

Days in arrears

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

64

Kureha Corporation Business Report 2018

(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¥2,708100
11¥2,721

¥—
—
—
—
—
¥—

¥27,789
319
50
26
188
¥28,374

¥ 35
—
—
—
76
¥111

Total

¥30,533
321
50
26
275
¥31,208

FY2017 (As of March 31, 2018)

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¥2,1770———¥2,177

¥—
—
—
—
—
¥—

¥31,186
535
56
10
117
¥31,907

¥30
—
—
—
62
¥93

Total

¥33,393
535
56
10
180
¥34,177iii) 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:
FY2016 (From April 1, 2016 To March 31, 2017)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

¥—

¥—

¥ 211

¥104

¥ 316

—

—

172

3

175

—

—

—

(0)

(0)

—
—
¥—

—
—
¥—

(201)
(9)
¥ 173

(13)
0
¥ 94

(214)
(9)
¥ 267

Kureha Corporation Business Report 2018

65

FY2017 (From April 1, 2017 To March 31, 2018)

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

¥—

¥—

¥ 173

¥ 94

¥ 267

—

—

159

0

159

—

—

—

—

—

—
—
¥—

—
—
¥—

(183)
9
¥ 159

(16)
(0)
¥ 77

(200)
9
¥ 237

b. Liquidity risk
1) Management of liquidity risk related to fund procurement
The Group manages its liquidity risk by formulating 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:
FY2016 (As of March 31, 2017)

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

Carrying
amountContractual
cash flows

Due within
one year¥20,369
70,2502,127—¥92,748¥20,369
70,351
2,127—¥92,849¥20,369
46,758836—¥67,965(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

¥

—
9,831
287
—
¥10,119¥—
10,886
181—¥11,068

¥

—
1,952
102
—
¥2,054

¥ —
694
45
—
¥740

¥ —
227
673
—
¥901

FY2017 (As of March 31, 2018)

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

66

Kureha Corporation Business Report 2018

Carrying
amountContractual
cash flows

Due within
one year¥21,530
47,416
1,734
66¥70,748¥21,530
47,467
1,734
66¥70,798¥21,530
25,760533
66¥47,891(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

¥
—
11,157
196—¥11,353

¥ —
2,226
146
—
¥2,373

¥ —
1,055
123
—
¥1,179

¥ —
7,053
54
—
¥7,108

¥ —
212
680
—
¥892

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 the
FY2016 and FY2017, 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

FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

U.S. dollar
Chinese yuan

FY2016(From April 1, 2016
To March 31, 2017)

¥24
2

¥19
1

ii) Sensitivity analysis of interest rate risk
With regard to the financial instruments held by the Group as of the end of FY2016 and FY2017, 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 1% (sensitivity to interest rate). The analysis is based on the assumption that
all other variable factors are held constant.

Item
Effect on profit before tax

FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

FY2016(From April 1, 2016
To March 31, 2017)¥(149)¥(137)

iii) Sensitivity analysis of share price fluctuation risk
With regard to the listed shares held by the Group as of the end of FY2016 and FY2017, 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

FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)¥(2,773)

FY2016(From April 1, 2016
To March 31, 2017)¥(2,260)

Kureha Corporation Business Report 201867

(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

FY2017(As of March 31, 2018)
Carrying
Fair value
amountFinancial assets
Financial assets measured atamortized cost
Other financial assets
Financial assets measured at fairvalue through othercomprehensive income
Other financial assets
Assets held for saleFinancial assets measured at fairvalue through profit or loss
Derivative 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

FY2016(As of March 31, 2017)
Carrying
Fair value
amount¥ 1,276¥ 1,276¥ 1,552¥ 1,553

29,271—

29,271—

24,121
772

24,121772—
30,547—30,54736
26,48236
26,48347,416
1,734

47,5601,734

70,2502,12773,1142,127

66¥49,21766¥49,361—¥72,378—¥75,2412) 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 and assets held for sale
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, an appropriate 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 or the price presented by counterparty financial
institutions.
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 obligations 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.

68

Kureha Corporation Business Report 2018

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
FY2016 (As of March 31, 2017)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value
through other comprehensive income
Other financial assets
Assets held for saleFinancial assets measured at fair value
through profit or loss
Derivative assets
Total

Level 2

Level 3

Total

¥22,605—¥——¥1,516772¥24,121772—¥22,60536¥36—¥2,28836¥24,930

Note: There were no transfers between different levels of the fair value hierarchy.
FY2017 (As of March 31, 2018)
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

¥27,730
27,730¥——¥1,540
1,540

—
—

66
¥66

¥

¥

—
—

¥29,271
29,271¥

66
66

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.

Kureha Corporation Business Report 201869iii) Changes in financial instruments categorized in Level 3
FY2017

Millions of yen(From April 1, 2017
To March 31, 2018)

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

FY2016(From April 1, 2016
To March 31, 2017)

Financial assets
Financial assets
measured at fairmeasured at fairvalue through other value through othercomprehensive
comprehensive
incomeincome¥2,288¥3,571285(1,167)
161
20
(775)
(135)
(421)
—
¥1,540¥2,288Notes: 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. The line item “Transfer” above is transfer to investments accounted for using the equity method.
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:
FY2016 (As of March 31, 2017)
Item

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

Millions of yen
Fair value¥7,521
2,554
2,153
1,206
1,110

FY2017 (As of March 31, 2018)

70

Item

Millions of yen
Fair value

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

¥10,578
2,865
2,727
1,493
1,190

Kureha Corporation Business Report 2018

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

FY2017

Millions of yen

FY2016(From April 1, 2017
To March 31, 2018)(From April 1, 2016
To March 31, 2017)

¥570
5
¥576

¥494
33
¥527

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

FY2017

Millions of yen

Fair value
Cumulative gains or losses

FY2016(From April 1, 2016
To March 31, 2017)(From April 1, 2017
To March 31, 2018)¥1,320973¥1,466(585)

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 FY2016 and FY2017 were 708
million yen and (725) 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.
FY2016 (As of March 31, 2017)
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

¥—
—

¥ 1,553
1,553

¥—
—

¥ 1,553
1,553

—
—
—
¥—

34,70636,4072,000¥73,114———¥—34,70636,4072,000¥73,114

FY2017 (As of March 31, 2018)
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

¥—
—

¥ 1,276
1,276

¥—
—

¥ 1,276
1,276

—
—
—
¥—

19,042
26,5182,000¥47,560———¥—

19,042
26,5182,000¥47,560

Kureha Corporation Business Report 201871

(6) Derivatives
Derivative transactions to which hedge accounting is not applied
FY2016 (As of March 31, 2017)
Type

Off-market
transactions

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

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

Unrealized
gains or losses

¥ 301
139
1,457

¥

—
24
54

¥ 2
0
4

¥ 2
0
4

132
49
1,884
2,958
¥6,923——935
7¥1,021

(1)
(0)
45
(14)
¥ 36

(1)
(0)
45
(14)
¥ 36

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.
FY2017 (As of March 31, 2018)
Type

Off-market
transactions

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

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

¥ 621
124
593

¥ —
24
—

¥ 6
(8)
7

¥ 6
(8)
7

74
971
1,381
65
¥3,831

—
450
—
—
¥475

(0)
(55)
(17)
0
¥(66)

(0)
(55)
(17)
0
¥(66)

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.

72

Kureha Corporation Business Report 2018

Unrealized
gains or losses

24. Construction contracts

The amounts due from and to clients for construction contracts at the end of FY2016 and FY2017 are as follows:
Millions of yen

FY2016FY2017(As of March 31, 2018) (As of March 31, 2017)

Amount due from clients based on contracts
Amount due to clients based on contracts
Cumulative costs incurred and gross profit earned (lessgross loss incurred)
Amount of progress billings
Amount due from and to clients¥ 2,036
—

¥

992
—

7,084
(5,047)¥ 2,036

4,089(3,097)¥ 992

The balances of advances received from clients before associated services were rendered as of the end of FY2016 and FY2017
were 103 million yen and 320 million yen, respectively. There were no balances withheld by clients at the end of FY2016 andFY2017. Revenue from construction contracts recognized for FY2016 and FY2017 were 15,165 million yen and 19,247 million
yen, respectively.

25. Revenue

The Group’s revenue is generated primarily from sale of goods. See “6. Segment information” for further details.

26. Other income

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

FY2017

Gain on government grants (Note)
Compensation income
Other
Total

(From April 1, 2017
To March 31, 2018)

¥250
60
198
¥510

FY2016(From April 1, 2016
To March 31, 2017)¥1,01422361¥1,398

Note: Gain on government grants for FY2016 mainly consists of 7,780 million yen of proceeds from subsidy for Fukushima
Business Investment Subsidy for Revitalization of Industries, net of 6,910 million yen as a direct deduction from the costof property, plant and equipment acquired using said subsidy. Gain on government grants for FY2017 mainly consists of
230 million yen of proceeds from subsidy for Subsidy for Operating Expenses for Businesses that Promote Regional
Reconstruction and Commercialization Development, etc., net of 112 million yen as a direct deduction from the cost of
property, plant and equipment acquired using said subsidy.

27. Other expenses

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

FY2017

Loss on retirement and sale of property, plant andequipment, and intangible assets
Impairment loss
Provision for environmental measures
Business restructuring costs (Note 1)
Loss on business withdrawal (Note 2)
Other
Total

FY2016(From April 1, 2017
To March 31, 2018)(From April 1, 2016
To March 31, 2017)¥1,311
746
375
—
—
170
¥2,602

¥ 501
—
51
1,194
713
173
¥2,633

Notes: 1. Business restructuring costs for FY2016 include an impairment loss on property, plant and equipment of 1,194
million yen.
2. Loss on business withdrawal for FY2016 includes an impairment loss on property, plant and equipment of 378 million
yen.
Kureha Corporation Business Report 201873

28. Finance income and finance costs

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

FY2017

Interest income
Dividend income
Other
Total

(From April 1, 2017
To March 31, 2018)

¥ 17
576
9
¥603

FY2016(From April 1, 2016
To March 31, 2017)

¥ 22
527
27
¥577

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

FY2017

Interest expenses
Foreign exchange losses
Other
Total

(From April 1, 2017
To March 31, 2018)

¥468
397
27
¥893

FY2016(From April 1, 2016
To March 31, 2017)

¥557
279
15
¥852

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

FY2017

Profit 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)FY2016(From April 1, 2017
To March 31, 2018)(From April 1, 2016
To March 31, 2017)¥9,697¥7,001

—
9,697

—
7,001

19,109,108

17,185,950

507.48407.38

Note: Since the Group conducted a ten-to-one share consolidation on October 1, 2016, basic profit per share was calculated on
the assumption that the share consolidation was conducted at the beginning of FY2016.

74

Kureha Corporation Business Report 2018

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

FY2017

Profit 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

FY2016(From April 1, 2017
To March 31, 2018)(From April 1, 2016
To March 31, 2017)¥9,697—
9,697¥7,001—
7,001

19,109,108
1,559,543

17,185,950
3,480,568

20,668,651

20,666,518

469.18338.77Weighted average number of common stock during theperiod (shares):
Dilutive effects
Weighted average number of common stock including
dilutive effects (shares)
Diluted profit per share (yen)Note: Since the Company conducted a ten-to-one share consolidation on October 1, 2016, basic profit per share was calculatedon the assumption that the share consolidation was conducted at the beginning of FY2016.

30. Other comprehensive income

Reclassification adjustment and tax effect for other comprehensive income are as follows:
FY2016 (From April 1, 2016 To March 31, 2017)

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
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Cash flow hedges
Share of other comprehensive income ofentities accounted for using equity
methodTotal
Total

Millions of yen
Amount before tax
effectAmount arisingduring the year

Reclassification
adjustment¥3,006
275
3,282

¥—
—
—

¥3,006275
3,282¥(1,226)(85)(1,311)¥1,780
190
1,970

(698)
1

—
1

(698)
2

—
(0)

(698)
2

(199)
(896)

—
1

(199)
(895)

—
(0)

(199)
(896)

¥2,385¥ 1¥2,386¥(1,312)¥1,074

Tax effectAmount after tax
effectKureha Corporation Business Report 201875

FY2017 (From April 1, 2017 To March 31, 2018)
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¥5,652
269
5,922

¥—
—
—

¥5,652269
5,922¥(1,716)(80)(1,796)¥3,936
189
4,126

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

(778)
(778)

—
—

(778)
(778)

—
—

(778)
(778)

¥5,144¥—¥5,144¥(1,796)¥3,348Non-cash transactions
Amortized cost Exchange rate Conversion tomeasurementchangesstock

As of March
31, 2018

Total

Tax effectAmount after tax
effect31. Cash flow information

The table below presents reconciliations regarding liabilities arising from financing activities.
FY2017 (From April 1, 2017 To March 31, 2018)
Millions of yen

As of April 1,
2017Cash flow¥19,974
18,377
16,965¥(4,325)(5,650)
1,963

¥—
—
19

¥55
36
—

¥—
—
—

¥15,704
12,762
18,94914,933¥70,250—¥(8,012)

29
¥49

—
¥91

(14,962)¥(14,962)—¥47,416

Short-term loans payable andcommercial paper
Long-term loans payable
Bonds
Bonds with stock acquisitionrightsTotal

32. 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

FY2017

Basic compensation
Bonus
Share-based compensation
Total

76

Kureha Corporation Business Report 2018

(From April 1, 2017
To March 31, 2018)

¥226
37
11
¥275

FY2016(From April 1, 2016
To March 31, 2017)

¥288
30
14
¥332

33. Major subsidiaries

Major subsidiaries of the Group are disclosed in page 80 of our Business Report.

34. 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

FY2017Aggregate amount of maximum
overdraft limit and loan commitment
Less: Drawn down balance
Balance of undrawn credit facilities

FY2016(As of March 31, 2018)(As of March 31, 2017)¥6,710—¥6,710¥7,27555¥7,22035. Subsequent events
Not applicable.

Kureha Corporation Business Report 2018775) Consolidated supplementary schedules[Details of bonds]

Issuer(Millions of yen)
Beginning balance Ending balance
FY2017FY2017
Issue date(as of Apr. 1,(as of Mar. 31,
2017)
2018)

Type

KurehaCorporation
KurehaCorporation
KurehaCorporation
KurehaCorporation

Interest rate(%)

Collateral

Maturity date

¥ 4,997

The 4th unsecured bonds

September 16,
2010
October 20,
2011

4,992

4,998
(4,998)The 5th unsecured bonds

March 6, 2015

6,976

6,984

The 6th unsecured bonds

September 1,
2017

—

6,967

0.95 perannum
0.82 perannum
0.30 perannum
0.14 perannum

KurehaCorporation

Zero coupon convertible
bonds due 2018(bonds with stockacquisition rights)

March 14, 2013
(London time)

14,933——

None

March 14,
2018

Total

—

—

¥31,898

18,949¥(4,998)———

The 3rd unsecured bonds

¥

—

15,
None September
2017
October 19,
2018
March
6,
None
2020
1,
None September
2022
None

Notes: 1. The amounts shown in parenthesis in “Ending balance” column represent the current portion of bonds payable.
2. The aggregate annual amounts to be redeemed within five years after the end of FY2017 are as follows:

Within one year

Over one year andwithin two years¥5,000(Millions of yen)Over two years andwithin three years¥7,000Over three years andwithin four years¥—

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

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

Beginning balance
FY2017(as of Apr. 1, 2017)

Ending balance FY2017(as of Mar. 31, 2018)

Average interest rate (%)

Maturity date————
April 2019 toMarch 2033
April 2019 toJuly 2027—¥17,974
6,784
278
2,000

¥13,704
5,055
252
2,000

1.38
0.64
0.61
(0.00)

11,592

7,706

0.64

478

420

0.61

¥39,108¥29,140—

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 obligations to be repaid within five years after theend of FY2017 are as follows:
Over one year andwithin two years

Long-term loans payable
Lease obligations

78

Kureha Corporation Business Report 2018

¥4,157
148(Millions of yen)Over two years andOver three years andwithin three years
within four years¥2,226120¥1,05598

Over four years andwithin five years¥53
29

[Details of asset retirement obligations]
The disclosure is omitted because the amounts of asset retirement obligations as of the beginning and end of FY2017 were lessthan 1% of the total liabilities and equity as of the same dates.
(2) Other information
Quarterly information for FY2017(Cumulative period)

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

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

FY2017¥32,443
2,328¥69,497
7,177¥110,248
12,562¥147,329
12,683

1,601

5,763

9,518

9,697

93.16

325.46511.90507.48First quarter¥93.16

Second quarter¥228.31(Yen)
Fourth quarter

Third quarter¥184.38¥8.65

Kureha Corporation Business Report 201879

Major Subsidiaries and Affiliates

Country

Company Name

Major BusinessJapan

Kureha Trading Co., Ltd.

Trading of chemical and plastic products

Resinous Kasei Co., Ltd.

Manufacture/sale of advanced materials

Kureha Extech Co., Ltd.

Manufacture/sale of plastic film and 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 Staff Service Co., Ltd.

Recruiting and staffing services

Kureha-kai Medical Corporation

Hospital operations (Kureha General Hospital)

Kureha America Inc.

Holding company and finance

Kureha America LLC

Sale of advanced products and packaging materials

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

80

Kureha Corporation Business Report 2018

Investor Information(As of March 31, 2018)

Major Stockholders

Corporate Data
Corporate Name
Headquarters

Kureha Corporation

Japan Trustee Services 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

4,374 (Consolidated)

Independent Auditor

Ernst & Young ShinNihon LLC

Japan Trustee Services Bank, Ltd. (9 trust accounts)
Tokio Marine & Nichido Fire Insurance Co., Ltd.
JP MORGAN CHASE BANK 385166 (UK)
J.P. MORGAN BANK LUXEMBOURG S.A. 380578
Mizuho Bank, Ltd.
J.P. MORGAN BANK LUXEMBOURG S.A. 385576
GOVERNMENT OF NORWAY

Stock Information
Number of Shares ofCommon Stock Issued

20,805,407 shares

Number of Shareholders 11,236
Number of Shares Heldby Foreign Shareholders 6,300,136 (30.3% of total)
Stock Exchange Listings Tokyo Stock Exchange
Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Kureha Corporation Business Report 201881

http://www.kureha.co.jp/

Printed in Japan