JSP Annual Review 2018Year ended March 31, 2018

Financial
Highlights

Automotive

JSP technologies offer a wide range of performance benefits to automobile manufacturers, from enhancing collisionsafety performance to reducing vehicle weight and improving
fuel efficiency. JSP supplies leading automakers with automotive components that take full advantage of the uniquecapabilities of high-performance plastics, highlighted by ourrevolutionary lightweight and shock-absorbent ARPRO ® (Expanded Poly Propylene) material.

Global supplierof foamed plastic

JSP  is a leader of the foamed plastic industry and has
been pioneering foamed plastic materials and products
since its founding in 1962.

Construction

JSP insulation materials contribute to creating comfortable
home living environments by providing exceptional insulation
performance for heat and cold retention and water shedding.
Our core expanded polystyrene product MIRAFOAM™ iswidely used in homes, apartment and office buildings, andother large structures and by commercial operators with refrigerated warehouses.

We develop products that take full advantage of thepotential of plastic and for virtually every field of industry, where they contribute to developing industry and enriching people’s lives around the world.

Civil engineering¥109,048
9,612
10,033
10,013
7,301¥114,904
9,278
9,101
8,752
5,914

¥116,923
5,667
6,044
6,000
4,039

¥112,128
5,909
6,509
6,536
4,404

$1,075,723
85,71186,76189,31064,512  

Total assets
Total net assets
Shareholders’ equity

125,728
84,10579,524

113,151
76,77872,532

115,136
72,497
67,890116,71770,35265,307

108,420
62,37557,853

1,183,437
791,657
748,537

Per Share Information

Yen

Net income2
Cash dividends
Total net assets¥  244.94¥  198.40¥  135.50¥  147.73$ 2.1650.00
2,667.72

50.00
2,433.10

40.00
2,277.32

30.00
2,190.61

30.00
1,940.48

0.47
25.11

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1.
2. Net income per share is computed based on the weighted-average number of shares of common stock outstanding during each year.

Corporate Data

Supplycapability

Globalnetwork

Environmentally
responsible(Millions of yen)

Sales

+6.3%

Operatingincome

–2.1%

60.8%

Sales increased from expanded sales volume andproduct pricing revisions
but overall operating declined owing to higher raw
material costs, particularly
in Japan.

34.1%
Percentage
of total sales

Sales grew from growth insales in fields with favorable business conditions,increased sales of highvalue-added products, andproduct pricing revisions.
However, operating income
declined from rises in raw
material costs and shipping
expenses.

37,929 39,024
3,045 2,640

Sales

+2.9%

2018

22

Material
and design
proposal
capability

Extrusion Business

69,483
7,376 7,219

Development
capability+11.1%

Total assets grew mainly fromincreased cash and deposits in current assets and buildings and structures, net in noncurrent assets.

2017

Global Network

2018

21

2017

Financial Review(Billions of yen)

2018

18

125

Total assets

2017

Consolidated Statements of Cash Flows

65,3542018

17

Our Strength

2017

Consolidated Statements of Changes in Net Assets

2018

Consolidated Statements of Income– 6.1%

Extraordinary income increased
from the previous year due mainly
to the sale of property adjacent to
the Kashima Plant, but higher nonoperating expenses due to foreignexchange loss resulted in the overall
decline.

Business Segment Results(Millions of yen)

2017

15

Net income

attributable to owners of the parent(Billions of yen)

2016

–5.3%

Operating income increased overseas but decreased overall due tothe impact on income in Japan froma rise shipping expenses and sharply higher raw material costs.

Bead Business

16

2015

(Billions of yen)

2016

Operating income

2015

+4.8%

Net sales rose year on year supported by the creation of new demand
and management focus on developing and marketing high value-added
products. We also boosted sales volume in all regions by focusing investment in growth fields and regions.

116 115 113

4.4 4.0
2014(Billions of yen)

6.8

5.9

2018

Net sales

7.3

2018

5.9 5.61082014

9.2 9.6 9.1

112 116 114 109 114

2017

JSP food packaging materials play an integral role in foodsafety. Our STYRENE PAPER™ expanded polystyrene
sheet is used as insulation in hot and cold containers topreserve the freshness of fish, meat, and vegetables duringtransport. We are constantly developing products offeringboth high performance and convenience to meet the evolving lifestyle needs and food preferences.

U.S. dollars1¥  229.91

2016

Consolidated Balance Sheets¥114,284
9,105
9,217
9,488
6,853

2014

Corporate GovernanceNet sales
Operating income
Ordinary income
Income before income taxes
Net income attributable to owners of the parent

2018

9
13

2018

2017

Long-Term Vision and Medium-Term Business Plan

2014

2016

Interview with the President

7

2015

2015

3

2016

2014

JSP develops and provides packaging solutions for safe
transport of items ranging from household electronics toprecision equipment and fragile items. Our MIRAMAT® series of low-density expanded polyethylene products provides
exceptional cost and performance advantages from its combination of extreme versatility, high durability, and reusability.
These attributes have made MIRAMAT® a leading packaging
material in the distribution field, particularly for use as longlasting and reliable cushioning for items requiring extended
shipping and storage periods.

Food packaging

Financial Highlights

2017

PackagingContents
2

2018

2015

JSP is creating new value for customers worldwide through foamed plastics utilizing our leading capabilities developing products that “breakthe mold” of existing concepts, proposing products and materials that meet current and future
market needs, and supplying customers from aworldwide network of production bases.

As of or for the year ended March 31

2017

JSP products help ensure the safety of social infrastructure
as key components in road construction, soft-ground stabilization, landslide prevention, and other civil engineering
applications. Our STYRODIA® BLOCK products combining
expandable polystyrene and lightweight mortar wall surfacing materials enable fast and easy wall construction. The
blocks, which are lightweight, easy to work with, and highly
resistant to corrosion, make the most of the unique characteristics of foamed plastic to provide new value in the civilengineering field.

We have cultivated our business activities in linewith our deep respect for the natural environment and design each of our products from theearliest R&D stages to have minimal impact on
the environment.

Thousands of
U.S. dollars1

Millions of yen

Operatingincome–13.3%

Forward-Looking Statements — This annual review includes forward-looking statements related to JSP Corporation’s plans, strategies, and business results.

01

These statements represent judgments of JSP based on information available at the time of writing. As such, these statements are
subject to risks and uncertainties. Please understand that actual performance may differ from these forward-looking statements.

02

Interview with
the President
when we formulated the medium-term plan to thefinal fiscal year. At the same time, we surpassed
our target for operating income on steady salesof products featuring JSP technologies.
While our progress toward attaining numerical targets is important, my focus is mainly on
verifying and responding to the progress we aremaking advancing our strategies. As external
factors that affect our business change, we mustask ourselves how can we make our strategies
more effective and what were we not preparedfor. Understanding these points is essential towould do this by thoroughly applying the PDCA
cycle every three years to verify our earning
capability and reconfirm we are moving in the
direction we should be and progressing toward
fulfilling a long-term future vision.
Vision 2027 sets the course for the company. In 10 years we want to be a “Global Supplier for Global Society.” Our management policy
under our new business plan to realize thisvision is “Deliver with WOW!” Our Corporate Philosophy is to “creatively and actively contributeto society,” which we fulfill by selling products

making us stronger as a company. The divergence between our results and the targets inthe medium-term plan arose from two areas—
overall sales volume for our products and thecreation of new businesses. Applying the PDCA
cycle to identify the specific reasons for our underperformance in these two areas is critical tomaintaining sustained business growth.

meeting the needs of society and help resolve
social issues. “Deliver with WOW!” is how wewant to provide value to our clients. We want tobe a company that shares our dynamism withall of our stakeholders and continually provides
products that exceed expectations and earn fullclient satisfaction.
Fundamental and absolutely essential tothis is the level of motivation and satisfaction of
our employees. The enthusiasm our employees
put into their work each day without a doubt
transmits to our customers. To deepen our senseof being “One JSP,” a fully united group working
to fulfill our vision, my mission as president is totalk with each and every one of our employees
while the new medium-term plan is under way.

Aiming to
become “A Global Company
		 for Global Society”
Yukio Sakai

President, Representative Director

Yukio Sakai

President,
Representative Director

Q
A

03

Please review the company’s performance
under the Deepen & Grow 2017 MediumTerm Business Plan.

The main objective of the Deepen & Grow 2017
plan was to expand our earnings by promoting ourdifferentiation strategy and our growth strategy.
Promoting the differentiation strategy
involved creating new business lines and channeling resources to develop new spec classifications for our products and developing productswith new applications. Although we did not fully

achieve our plan’s target for new product sales,
we made significant progress on which to buildfor our next objectives. Promoting the growthstrategy centered on increasing production
capacity for products in fields where demand is
growing, notably for the expanded polypropylene material ARPRO/P-Block and the expanded
polystyrene product Mirafoam used for homeheat insulation.
Our sales result was short of our target. A
big reason for this was the marked change in theexternal environment, particularly in raw materials prices and foreign exchange rates, fromQ
A

The Company presented its first long-term
vision for the next 10 years. What ideas
went into forming the vision, and why was
the vision set before creating the next
medium-term business plan?

When I became President of JSP, I decided I
wanted us to be a corporate group that is steadily increasing its corporate value and is always
growing toward a clearly defined target. We

04

Interview with the President

Q
A

05

ness plans. We are stepping up the target for oursafety initiatives from aiming for “zero accidents”
to eliminating all “safety risk.” At the management level, this means strengthening our activities in all of the areas of corporate governance,compliance, quality, occupational health andsafety, and environmental preservation.

What are the key elements of the new
medium-term business plan Deeper &Higher 2020, and what are the strategies toachieve the plan’s targets?

The new medium-term business plan welaunched in April 2018 is the first of three medium-term plans to enable us to fulfill our Vision
2027. The plans set numerical targets based ona clear image of the company we want to be in
10 years in terms of how we will be contributing
to society and what value society will see in us
as a company. To fulfill our objective, we continue advancing our differentiation and growthstrategies while adding a third element of fortifying the management base.
Fortifying the management base first means
correctly identifying the specific reasons for our
performance results. Our new medium-termplan dictates refining the SWOT analysis that
we apply in each of our businesses and ensuring all employees are fully aware of the analysis
results. We are also introducing project portfolio
management (PPM) analysis to enable us to better consolidate our management resources into
our growth businesses. The plan also identifies“Four Growth Engines” that will drive concretebusiness growth. We believe we can create newvalue by developing our considerable businesspotential in automotive components, building
and home insulation materials, flat panel display
protective materials, and new business domains.
Our differentiation strategy will be to deepen our communication with our clients to stay
on top of their current and emerging needs. It iseasy to view our products as being differentiatedby the quality of their performance or high levelof precision, but the value added products ourcustomers are looking for goes beyond technicalspecifications. We want to be a company clientschose as a partner because we offer products
and services providing value they truly need,including practical value like how easy a productcan be used in their production processes.
As a manufacturer, consistently realizing
zero accidents and zero injuries in our production processes is fundamental to all of our busi-

Vision 2027

Our Vision

A Global Company for Global Society“We continue advancing ourdifferentiation and growthstrategies while adding athird strategy of fortifying
the management base.”

Clientsandbusiness
partners
Employees

End users

Management Policy

Q
A

What message would you like tocommunicate to stakeholders?

Shareholders
andinvestors

Localcommunities
I believe the ESG movement is investors’ wayof showing that contributing to society raises
corporate value. And I believe that is exactly thekind of group JSP aspires to be by continuallycultivating a corporate culture focused on valuing
the individual and providing a workplace inspiring the enthusiasm of employees; and the kind ofcompany JSP aspires to be by seeking to satisfy
all of our stakeholders.
Underlying this belief is my conviction that
our ability to contribute to the ongoing development of society is fundamental to realizing
ongoing growth for our Group. We look forward
to your continued support as we forge ahead tofulfill our vision of the company in 10 years.

Key Elements
Fortify and expand
existing businesses

Expand thebusiness domain

Fortify the
management base

Corporate Philosophy
Creatively and Actively
Contribute to Soceity06

Long-Term Vision andMedium-Term Business Plan
Our long-term vision is a longterm roadmap for the company
and a vision created to share with
our stakeholders.

Vision 2027
Key Elements

JSP is implementing measures to stimulate new demandby setting up operations closer to its customers and by
expanding into new business domains with the objectiveof generating new value creation to maintain our legacy ofoffering unique products with value and continue to growour business.
We are also broadening our geographical reachand aggressively advancing growth strategies, including
through M&A, with the aim of establishing business inglobal markets to become a “true global company.”
Also, as a manufacturing operation that uses natural
resources, we are deeply aware that preserving the earth’s
environment is an issue that affects all of us and will contribute to creating a sustainable society.

Fortify and expand existing businesses

Vision 2027
Key Elements

Expand the business domain• Improve our product portfolio• Establish an effective production andsales structure• Shift into our strength area of
production equipment• Expand business through localized
sales strategies• Expand the domain to be closer tousers• Target the global market• Expand domain via M&A• Enter new business areas

Fortify the management base
• Foster a corporate culture based onhealth and safety and environmental
preservation• Strengthen the human resource
development system• Implement workstyle reform• Strengthen our global businessstructure (One JSP)
• Advance our global intellectual
asset strategy• Strengthen our brand power

Position ARPRO®/P-BLOCK as growth drivers

2015–20172018–2020

Medium-termbusiness plan

Medium-termbusiness plan

VisionVisionDeepen & Grow 2017

Vision 2027
Automotive
Components

Deepen and Grow

Deeper & Higher

Basic strategies

Basic strategies

Promote the differentiation
strategy

Promote the growthstrategy

Promote the growthstrategy

Promote thedifferentiation strategy

A Global Company
for Global Society

Building and Home
Insulation Materials• Use insulation features to boost sales
by 40%• Cultivate new demand in theconstruction and civil engineering
sectors• Improve the workability and laborsaving features of pre-cut products• Broaden business into materials andfields peripheral to insulation• Expand business with an eye tooverseas markets• Strengthen the production, sale, andshipping structures• Increase the efficiency of the pre-cut
materials business

Position MIRAMAT ACE™ as the growth driver• Leverage the demand growth forsurface protection materials to raisesales by 65%

Fiscal 2020

Fiscal 2027

¥ 114.2 billion¥ 138 billion¥ 180 billion

Operating income¥ 9.1 billion¥ 11 billion¥ 18 billion

Operating income ratio

6.5 %
8%

8%
8%

10 %
10 %

ROA

• Strengthen our brand power• Develop other materials for global
markets

Turn our industry-leading insulation materials into an earnings growth driver

Our vision for JSP

Fiscal 2017 (Results)

Net sales• Increase applications, such as for
HVAC, permeable ground surface
materials• Increase geographic reach atopportune times

Deeper & Higher 2020

Fortify the management
base

Quantitative Targets• Raise per-vehicle product usage by
40%, sales by 50%• Increase product applications, suchto include front seat-cores• Expand sales of our ample line ofantistatic products• Broaden into fields beyond FPDs

• Establish a solid business continuity
plan system• Strengthen the marketing structure in
East Asia• Expand the domain to be closer tousers• Develop and offer new products andspec classifications• M&A• Improve the promotion structure

FPD Protection
Materials

New BusinessDomains

07

08

Corporate
Governance
As of June 28, 2018

Corporate Governance Structure
1. Status of Business Execution

Basic Policy on Corporate Governance
JSP places top priority on realizing sustained businessgrowth and enhancing corporate value following ourcorporate philosophy to “creatively and actively contributeto society” and with the objective of fulfilling our promise
to be an internationally competitive company that emphasizes safety and environmental awareness. We aim
for the management of our Company to earn the trust ofand fulfill the expectations of all stakeholders. We believethat effectively functioning corporate governance andconstant effort to maintain and improve management
efficiency, transparency, and soundness are essential tofulfilling this objective.

Basic Policyof Company Auditors framework in which the Board of
Directors makes decisions on important issues for theCompany and seeks to provide an environment enabling management to make sound decisions to carryout the decisions of the Board of Directors.
2. The Company respects the rights and viewpoints of all
stakeholders and seeks to maintain appropriate andcooperative relations.
3. The Company provides appropriate information disclosure and seeks to ensure transparency for all stakeholders.
4. As a Company with a Board of Company Auditors, theCompany appoints independent outside directors andauditors to monitor the Company’s management activities and ensure sound management practices.
5. The Company engages in constructive dialogue withshareholders.

1. The Company has adopted the Company with a Board

As stipulated in the Articles of Incorporation, the Company maintains a Board of Directors and Board of Auditors
comprising up to 16 directors and up to four auditors.
As of June 28, 2018, the Company maintains astructure of 11 directors and four auditors. The Board of
Directors meets, in principle, on a monthly basis to deliberate and make decisions on items as stipulated by law
and internal company regulations and on items importantto the management of the Company and to supervise theexecution of business activities. The Management Meetings serve as a supplementary function to the Boardof Directors. The meetings, attended by representative
directors, managing executives, and personnel in higher
positions, are held to conduct preliminary discussions onimportant management issues. The Company additionally uses an executive director structure as a system forexecuting business operations and seeks to enhance theefficiency of business execution by delegating executive
power and accountability.
Evaluation of the Effectiveness of the Board of Directors

Corporate Governance Structure Diagram

Outline of the Corporate Governance Structure

Organizational structure

General Meeting of Shareholders
Appointment/Dismissal

Appointment/Dismissal

Appointment/Dismissal

Board of Directors
12 Directors(2 Outside Directors)

Audit

Selection and RemovalSupervision

Board of Auditors
4 Auditors(2 Outside Auditors)

Cooperation

Accounting
Auditor
Audit

Audit
Cooperation

Directives andSupervision

ReportDirectors Meeting

Audit

Business
Divisions

ReportInternal Audit Dept.
Internal Audit
Group

ReportRisk
Compliance
Committee

Guidance andSupervision• Term of office stipulated in the Articles of Incorporation: 1 year
• Number of Directors: 11• Number of Outside Directors: 2

Auditors• Number of Auditors stipulated in the Articles of Incorporation: 4• Number of Auditors: 4

Number of Independent Executive Officers: 4
Report• Outside Directors: 2• Outside Auditors: 2

Cooperation

09• Number of Directors stipulated in the Articles of Incorporation: 16• Number of Outside Auditors: 2

Administrative
DivisionsGroup Companies

Directors• Chair of the Board of Directors: President

Representative Director

Management
Committee

Company with auditors

Report* We have set up an external reporting desk fordomestic group companies.

The Company issues questionnaires to directors on anannual basis and uses the questionnaires as a basis forassessing the effectiveness of the Board of Directors.
The Board of Directors analyzes and evaluates the results of the questionnaires and incorporates the views of
the independent outside directors and outside auditors.
To evaluate the Board of Directors’ effectiveness infiscal 2017, questionnaires were distributed to all of the directors and auditors covering the following items, and theresults were discussed at a Board of Directors meeting.
1. Matters concerning the effectiveness of the Board of
Directors overall
2. Matters concerning the composition of the Board of
Directors
3. Matters concerning the administrative performance of
the Board of Directors
4. Matters concerning deliberations by the Board of
Directors
5. Matters concerning support for directors andauditors
6. Risk management
7. Performance monitoring

8. Evaluations and compensation for management
9. Dialogues with shareholders and others
For this evaluation of the effectiveness of the Board of Directors, we requested an external organization to collect,compile, and analyze the questionnaires in order to obtain
unrestrained opinions and to ensure objective analysis.
Based on the results of the questionnaire and discussion at the Board of Directors meeting, the Board wasdeemed largely effective. One issue that emerged was
the need for further improvement in matters concerning
the effectiveness of the Board of Directors overall.
We will continue to improve the effectiveness of theBoard of Directors through continuous efforts on the issues that emerged.

2. Status of Audits(1) Audits by auditors
The Board of Auditors comprises four auditors, including two outside auditors. The four auditors carry out
audits of the Company’s business operations informedby the input from the highly independent outside auditors. All of the auditors are highly knowledgeable about
financial and accounting operations and have abundant
experience in various aspects of the accounting process,including as auditors in the chemicals industry.
The auditors and outside auditors attend meetingsof the Board of Directors and important company meetings and hold monthly auditor meetings in which they
conduct discussions with managers in charge of specificoperations to supplement and guide their detailed audits of the legality and appropriateness of the business
operations and the financial standing of the companies
in the JSP Group. The auditors also regularly and when
deemed necessary solicit the advice of accounting auditors regarding specific accounting issues.
(2) Internal audits
The Internal Audit Group of the Internal Audit Dept.
comprises four auditors conducting regular audits of theCompany and group companies and seeks to enhancethe effectiveness of internal controls. In addition to thefunctions of the Internal Audit Group, the company assigns a Process Owner to each business division tostrengthen the monitoring of each business process.
The Internal Audit Group also conducts internal
audits in line with the internal audit plan for each year

10

Corporate Governanceand reports the results to each auditor with the aim offacilitating dialogue and further strengthening mutual collaboration.

Internal Control(3) Auditing of accounts
In accordance with the Financial Instruments and Exchange Act and the Companies Act, the Company has
contracted with Deloitte Touche Tohmatsu LLC to perform accounting audits. The Company does not have aninterest in the auditing corporation or the executive members of the auditing organization.

The Group has established the JSP Guidelines for Corporate Behavior and JSP Code of Conduct to which theCompany and its subsidiaries adhere in compliance withlaws, regulations, and social ethics as a premise for corporate activities.
Our Risk Compliance Committee oversees compliance across the JSP Group, and is responsible for theeducation and training of executives and employees of
the JSP Group on compliance.
We have also set up a compliance consultation deskso that JSP Group executives and employees can reportany questionable acts that may not be in compliance withlaws and regulations. The Risk Compliance Committee
reports to the Board of Auditors on the details of any reported situation, which is then investigated. Measures arethen taken to prevent a recurrence. It is prohibited to treat
a whistleblower badly due to their reporting of noncompliance, and executives and employees of the Group arebeing thoroughly educated to that effect.
Regarding the status of compliance, the auditors of
the Company and the Internal Audit Dept. cooperate to
conduct audits.

Director and Auditor Remuneration
Remuneration for Directors (excluding non-executive
directors) is configured as base compensation andreserve-type remuneration to be paid upon retirement,a portion of which (as stock based compensation) is
deposited in the Company’s executive shareholder association. Remuneration for non-executive directors andauditors is configured as base compensation and fixedcompensation. The aggregate amount of remuneration is
set within the limit determined by a resolution passed at
the General Meeting of Shareholders.
The Company President, as authorized by the Boardof Directors, sets the amount of remuneration for each director based on the recommendations of the Remuneration Advisory Board and in consideration of the businessenvironment, operating conditions, Company earnings,
the Company’s financial status, and the contribution to beprovided by each individual. Remuneration for auditors
is set based on negotiations and in consideration of thecontribution to be provided by each individual.

Director and Auditor Remuneration Totals for Fiscal Year 2017

Storage and Management of Information Pertaining
to the Execution of Duties by Directors
Based on document management regulations, the Company records and preserves information on the executionof duties by directors on documents or electromagnetic
media. Directors and auditors can view these at all times,
according to document management regulations. In
addition, matters regarding which information must be
disclosed as stipulated by law or the regulations of stock
exchanges, etc., are promptly disclosed based on our
information disclosure regulations.

NumberTotal Remuneration

Director

12341

  Of which Outside Director

2

16

Risk Management System

Auditor4

37

  Of which Outside Auditor

2

19

Total

16

378

The Risk Compliance Committee was established to
manage the risks of the JSP Group across the organization. In addition to identifying and analyzing risks, thecommittee has also established rules related to risk management and strengthened the risk management system.

Position(Millions of yen)

Remuneration amounts and other payments to individual executives are omitted
because no individual was paid a total amount exceeding 100 million yen.

11

Compliance

Regarding unforeseen circumstances such as afire or other calamity, the department in charge of crisis
management is to follow the rules and instructions established for emergency response.

System for the Execution of Duties by Directors
The Company’s Board of Directors, in principle, holds
monthly meetings and makes decisions on basic management policies, matters stipulated by law, and otherimportant matters related to management. The Company
also has a Management Committee composed of representative directors and executive officers that meets todeliberate on important management matters in advanceof Board of Directors meetings. We have adopted a system of executive officers and separate business headquarters, and delegate the authority for execution andresponsibility for performance to improve the efficiencyof business execution. Important individual managementtasks related to business execution are, in principle, decided at the Directors Meeting held twice a month.
The Company formulates management plans on aconsolidated basis, carries out group business management, and provides guidance for group companies toachieve targets. The group companies are organized under separate business headquarters, and are under the
direct supervision of the particular business headquarters
to which the business execution belongs.

System to Ensure the Appropriateness of
Operations in the Corporate GroupThe Company requires group companies to get preliminary approval for important management issues or reportthem to the Company. Our Internal Audit Dept. regularly
conducts business audits of Group companies to ensure
the appropriateness of operations.
In addition, to ensure autonomy in the managementof the Company, we have entered into a basic agreement with our parent company on capital and businessalliances, and transactions with the parent company are
conducted with terms and conditions equivalent to thosebetween independent parties. In such ways we strive toensure the appropriateness operations.

Systems for Effective Auditing■ System relating to the assistance of auditors
Auditors are allowed to request the allocation of employees to assist them in carrying out audits as necessary.
Employees who receive instructions from an auditor thatare necessary for carrying out an audit shall not takeorders from directors or others regarding the instructions.
In addition, the Board of Auditors must be consulted withregard to matters related to the transfer, evaluation, ordisciplining of assisting employees.
■ System for reporting to auditors
Directors and employees shall report to the Board ofAuditors matters that seriously affect the JSP Group, in
addition to legal matters and the implementation status ofinternal audits within the JSP Group.
Auditors attend the Board of Directors’ meetingsand other important meetings of the Company and groupcompanies and work to gather information on importantmatters concerning management in the Group.
■ Other systems
The Board of Auditors regularly provides private interview
opportunities for business managers and others, andholds regular meetings with representative directors andauditing firms to exchange ideas.
A certain budget is allocated every year for expenses arising from the execution of duties by auditors.

Approach and System for Excluding
Anti-social Forces
Under the JSP Code of Conduct, the Company stipulates
that the JSP Group will be resolutely committed to having no association whatsoever with anti-social activities
or forces in order to exclude them from the Company’s
activities.
The General Affairs Department works closely withoutside expert agencies such as attorneys and police,
collects and manages information, and has developed asystem to inform relevant departments as necessary.

12

JSP Corporation and Consolidated Subsidiaries—As of March 31

Consolidated
Balance Sheets

Thousands of
U.S. dollars*Millions of yen

ASSETS

2018

2017

2018

Current assets
Cash and deposits
Notes and accounts receivable–trade
Electronically recorded monetary claims–operating
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Accounts receivable–other
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets¥  16,963
30,712
3,776
121
6,906
1,115
5,255
513
752
1,905
(114)
67,909¥  13,436
29,785
2,765
139
6,310
779
4,398
603
825
1,374
(209)
60,208$  159,675
289,082
35,545
1,144
65,011
10,50349,4694,834
7,084
17,936(1,074)
639,211

39,510(22,687)(14)
16,80872,939(56,398)(94)
16,446
14,557
28
(16)
12
3,307
9,405
(7,912)
1,493
52,625926

37,446(21,880)(15)
15,55074,303(58,870)(142)
15,28914,451
29
(15)
14
2,406
10,122(8,826)
1,295
49,008977

371,895(213,549)(134)
158,210686,554(530,857)(887)
154,808
137,024
271
(151)
119
31,132
88,532(74,478)
14,053495,349
8,717

1,680
128
1,221
442
1,202
(410)
4,266
57,818¥125,728

1,650
47
341
1,471
(554)
2,957
52,943¥113,151

15,821
1,213
11,497
4,168
11,318(3,860)40,159544,226$1,183,437

Noncurrent assets
Property, plant and equipment
Buildings and structures  
Accumulated depreciation
Accumulated impairment loss
Buildings and structures, net
Machinery, equipment and vehicles  
Accumulated depreciation
Accumulated impairment loss
Machinery, equipment and vehicles, net
Land  
Lease assets
Accumulated depreciation
Lease assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities  
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets  
Total assets

Thousands of
U.S. dollars*Millions of yen

LIABILITIES AND NET ASSETS

2018

2017

2018

Current liabilities
Notes and accounts payable–trade
Electronically recorded obligations–operating
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable–other
Income taxes payable
Accrued consumption taxes
Provision for bonuses  Provision for business structure improvement
Electronically recorded obligations–facilities
Accounts payable–facilities
Other
Total current liabilities¥   11,483
2,005
6,366
3,945
13
2,978
895
96
1,487
131
1,277
2,463
33,145¥   9,298
1,470
5,989
3,861
14
2,688
899
421
1,581
132
38
841
2,429
29,667$  108,093
18,881
59,924
37,132
122
28,038
8,433
905
14,005
1,236
12,02623,187
311,988

Noncurrent liabilities
Long-term loans payable
Lease obligations
Asset retirement obligations
Deferred tax liabilities
Provision for business structure improvement
Provision for directors’ retirement benefits
Net defined benefit liability
Other
Total noncurrent liabilities
Total liabilities

5,712
16
160
997
20
11
576
980
8,477
41,622

4,756
22
151
697
16
10
134
915
6,705
36,37353,772
154
1,506
9,390
192
111
5,428
9,233
79,791
391,780

10,12813,40556,551(1,385)78,70010,12813,40551,336(1,382)73,48895,337
126,181532,295(13,037)
740,776

244
(483)
1,062
824
4,581
84,105¥125,728

239(1,694)
499
(955)
4,245
76,778¥113,151

2,305(4,547)
10,003
7,761
43,120791,657$1,183,437

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Foreign currency translation adjustment  
Remeasurements of defined benefit plans
Total valuation and translation adjustments  
Non-controlling interest
Total net assets
Total liabilities and net assets* U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1.

13

14

JSP Corporation and Consolidated Subsidiaries—Years ended March 31

JSP Corporation and Consolidated Subsidiaries—Year ended March 31, 2018

Consolidated
Statements of Income

Consolidated Statements of
Changes in Net Assets
Thousands of
U.S. dollars*Millions of yen

Net sales

2018

2017

2018

¥114,284¥109,048$1,075,723

80,65775,182759,200

33,62733,865316,523

Selling expenses

7,779

7,682

73,226

General and administrative expenses  

16,741

16,570157,585

Total selling, general and administrative expenses  

24,521

24,252230,812

9,105

9,612

85,711

Cost of sales
Gross profit  
Selling, general and administrative expenses

Operating income

Millions of yen
Shareholders’ equity

Balance, beginning of period
Cumulative effects of changes in accounting policies
Restated balance, beginning of period
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance, end of period

Non-operating income
Interest income

183

170

1,730

Dividends income

25

26

241

Rent income

74

78

705

Foreign exchange gains  

-

41

-

Equity in earnings of affiliates  

6

6

64

286

318

2,697

577

642

5,440

Interest expenses  

119

111

1,126

Foreign exchange loss

200

-

1,885

Other

146

109

1,376

466

221

4,389

9,217

10,03386,761Gain on sales of noncurrent assets

403

32

3,797

Gain on sales of investment securities

-

20

-

403

53

3,797

Loss on retirement of noncurrent assets  

119

69

1,248

Loss on sales of noncurrent assets

13

4

122

132

73

1,125

9,488

10,01389,310

Income taxes–current  

2,497

2,592

23,505

Income taxes–deferred

0

(66)

3

2,497

2,525

23,509

6,990

7,487

65,801

Net income attributable to non-controlling interests

136

185

1,288

Net income attributable to owners of the parent¥  6,853¥   7,301$   64,512

Other
Total non-operating income
Non-operating expenses

Total non-operating expenses  
Ordinary income  
Extraordinary income

Total extraordinary income
Extraordinary loss

Total extraordinary losses
Income before income taxes

Total income taxes
Net income* U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1.

15

Treasury stock

Capital stock

Capital surplus

Retained earnings¥10,128¥13,405¥51,336(¥1,382)

10,12813,40551,336(1,382)(1,639)6,853¥10,128
Valuation difference
on available-for-salesecurities

Balance, beginning of period
Cumulative effects of changes in accounting policies
Restated balance, beginning of period   
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance, end of period

(2)

5,214
¥56,551¥13,405

Total shareholders’equity(2)(¥1,385)

Valuation and translation adjustments
Foreign currency Remeasurementsof defined benefit
translationplans
adjustment

Total valuationand translation
adjustments

Minority
interests

5,211¥78,700

Net assets(¥1,694)¥499(¥955)¥4,245239(1,694)

499

(955)

4,245

¥76,778
76,778335
335¥4,581(1,639)
6,853
(2)
2,115
7,327
¥84,105

563
563¥1,062

1,211
1,211(¥483)

5
5
¥244

1,780
1,780
¥824

Total shareholders’equityCapital stock

Capital surplus

Retained earnings

Treasury stock$95,337$126,181$483,214($13,013)

95,337

126,181483,214(13,013)$691,719
691,719(23)(15,432)
64,512(23)(23)($13,037)

49,056$740,776(15,432)
64,512$95,337
Valuation difference
on available-for-salesecurities

Balance, beginning of period
Cumulative effects of changes in accounting policies
Restated balance, beginning of period
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance, end of period(1,639)
6,853
(2)
-

¥239

Thousands of U.S. dollars*
Shareholders’ equity

Balance, beginning of period
Cumulative effects of changes in accounting policies
Restated balance, beginning of period
Changes of items during the period:
Dividends from surplus
Net income attributable to owners of the parent
Purchase of treasury stock
Change of scope of consolidation
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance, end of period¥73,488
73,488$126,181

49,080$532,295

Valuation and translation adjustments
Foreign currency Remeasurementsof defined benefit
translationplans
adjustment

Total valuationand translation
adjustments

Minority
interests

Net assets$2,252($15,952)$4,701($8,997)$39,9652,252(15,952)

4,701(8,997)39,965$722,687
722,687

3,154
3,154
$43,120(15,432)
64,512(23)
19,91368,969$791,65752
52$2,305

11,404
11,404($4,547)

5,301
5,301
$10,003

16,75816,758$7,761* U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1.

16

JSP Corporation and Consolidated Subsidiaries—Years ended March 31

Consolidated
Statements of Cash Flows

Financial
Review
Thousands of
U.S. dollars*Millions of yen

Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors’ retirement benefits
Loss (gain) on sales and retirement of noncurrent assets
Loss (gain) on sales of investment securities
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Equity in (earnings) losses of affiliates
Decrease (increase) in notes and accounts receivable–trade
Increase (decrease) in notes and accounts payable–trade
Decrease (increase) in inventories
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Business structure improvement expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of noncurrent assets
Proceeds from sales of noncurrent assets
Payments for retirement of noncurrent assets
Purchase of investment securities
Proceeds from sales of investment securities
Net decrease (increase) in time deposits
Other, net
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Purchase of treasury stock
Cash dividends paid
Dividends paid for non-controlling interests
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Decrease in cash and cash equivalents resulting from exclusion of  subsidiaries from consolidation
Cash and cash equivalents at end of period

2018

2017

2018

¥ 9,488
5,072
(222)
(106)
39
0
(270)
(209)
119
101
(6)
(1,555)2,459(1,681)(327)
596
13,498
202
(109)
(127)
(2,613)
10,849¥10,013
4,952
129
113
(410)
(152)
40
(20)
(197)
111
(156)
(6)
(719)
1,029
(219)
(112)
84
14,480
229
(138)
(131)
(3,751)
10,688$ 89,310
47,748(2,093)(998)
369
8(2,548)(1,971)
1,126
956
(64)
(14,643)
23,153(15,832)(3,080)5,617
127,059
1,901(1,033)(1,201)(24,604)
102,122

Results of Operations(8,153)
819
(9)
(6)
(200)
(112)
(7,661)(6,236)
105
(39)
(5)
170
(168)
(14)
(6,188)(76,741)
7,718
(85)
(57)
(1,889)(1,060)(72,117)354
5,325(4,295)(2)(1,639)
(233)
(16)
(506)
160
2,841
7,965

(178)
199
(4,915)(2)(1,341)(233)(26)(6,497)(354)(2,351)
10,295

3,336
50,129(40,427)(23)(15,432)(2,199)(154)(4,771)
1,511
26,74474,979-22-¥10,807¥  7,965$101,723

Net sales
Net sales increased 5,236 million yen year-on-year to 114,284
million yen. The main factors behind the increase were the tapping of new demand and a focus on developing and selling highadded-value products, as well as higher sales volumes in Japanand all overseas regions as a result of priority investment ingrowth fields and regions.

Ratio of operating income to sales (%)(Years ended March 31)
10

8.1

8

Operating income declined 507 million yen year-on-year to 9,105
million yen. Although operating income in overseas businessincreased because of strong sales in all regions, overall operating income declined, primarily because of higher transportation
prices in Japan and the rapid increase in raw fuel prices in the
fourth consolidated quarter, which exceeded the effects of increased product sales volumes and better sales in strong fields.

4.8

2
0

2016

2017

2018

10
8

Net income attributable to owners of the parent fell 448 million
yen year-on-year to 6,853 million yen. Extraordinary income
increased as a result of sale of property adjacent to the Kashima
Plant and other factors, but non-operating expenses increased
due largely to the occurrence of foreign exchange losses, andloss on the sale of fixed assets also increased.

4

Total assets increased by 12,576 million yen compared to the endof the previous consolidated fiscal year to 125,728 million yen.
Current assets were up 7,701 million yen to 67,909 million
yen. The main cause of the increase was a 3,527 million yen
increase in cash and deposits.
Noncurrent assets amounted to 57,818 million yen, up 4,875
million yen. The main factor behind the rise was a 1,257 million
yen increase in buildings and structures (net value).

2015

Ratio of net income to sales (%)

Net income attributable to owners of the parent

Assets2014(Years ended March 31)

6

Financial Position

8.0

5.3

6
4

Operating income

8.8

6.7
5.1

3.9

6.0

3.5

2
0

2014

2015

2016

2017

2018

196.5

202.9

204.9

2016

2017

2018

Liquidity ratio (%)(As of March 31)
300
250
200
150

182.9

191.6

2014

2015

100
50
0

* U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1.

17

18

Financial Review

Shareholders’ equity ratio (%)

Liabilities(As of March 31)
100
80
60

53.4

56.0

59.0

64.1

63.3

40
20
0

2014

2015

2016

2017

Net assets amounted to 84,105 million yen. The shareholders’equity ratio fell 0.8 points compared to the end of the previous
consolidated fiscal year to 63.3%.

13,8499,000

10,688 10,849
7,200

8,289

Cash Flows

6,000
3,000
0

2014

2015

2016

2017

2018

Net cash provided by (used in) investing activities(Millions of yen)

(Years ended March 31)
2,000
0-2,000-4,000-6,000-8,000-10,000-6,001-8,430-8,029

2014

2015

2016

-6,1882017-7,661
2018

Net cash provided by (used in) financing activities(Millions of yen)

(Years ended March 31)
2,000
0

190

1,156

-506

-2,000-4,000-6,000-8,00019-5,907
2014

2015

2016

-6,49720172018

Cash and cash equivalents at end of period(Millions of yen)
(As of March 31)
12,00010,0008,000

The balance of cash and cash equivalents was 10,807 million yen,
up 2,841 million yen over the end of the previous consolidated fiscal year. Cash flows from each activity category are shown below.

Net cash provided by (used in) operating activities
Net cash provided by operating activities totaled 10,849 million
yen (up 160 million yen year-on-year). Inflows included 9,488
million yen in income before income taxes, 5,072 million yen in
depreciation and amortization, and a 2,459 million yen increasein notes and accounts payable-trade. Outflows included 2,613
million yen in income taxes paid, a 1,681 million yen increase ininventories, and a 1,555 million yen increase in notes and accounts receivable-trade.

Net cash provided by (used in) investing activities
Net cash used in investing activities totaled 7,661 million yen (up1,473 million yen year-on-year). Outflows included 8,153 million
yen in purchases of noncurrent assets.

Net cash provided by (used in) financing activities
Net cash used in financing activities totaled 506 million yen (down
5,990 million yen year-on-year). While inflow from long-termloans payable was 5,325 million yen, outflows included 4,295
million yen for repayment of long-term loans payable and 1,639
million yen in cash dividends paid.

8,893

10,807

10,295
7,965

6,972

6,000
4,000
2,000
0

Net assets(Years ended March 31)

12,000Planned capital expenditures total approximately 12,000 million
yen. This includes approximately 6,700 million yen in investment
to increase production and reinforce competitiveness and about
5,300 million yen in maintenance.
The forecast for depreciation and amortization is approximately 5,400 million yen, an increase of about 330 million yen
over the previous fiscal year.

2018

Net cash provided by (used in) operating
activities (Millions of yen)
15,000Total liabilities increased by 5,249 million yen compared to theend of the previous consolidated fiscal year to 41,622 million yen.
Current liabilities rose 3,477 million yen to 33,145 million
yen. The main cause of the increase was a 2,185 million yen
increase in notes and accounts payable-trade.
Noncurrent liabilities amounted to 8,477 million yen, up 1,771
million yen. The increase was primarily the result of a 956 million
yen increase in long-term loans payable.

Capital Expenditures

Profit Allocation and Dividends
Basic policy
The Company positions shareholder returns as a priority policy.
With regard to the distribution of profit, our policy is to emphasize stable dividends, making comprehensive determinations
that take into consideration consolidated financial results foreach fiscal year, the need to enhance internal reserves for futurebusiness development, and other factors.

2014

2015

2016

2017

2018

Capital expenditures (Millions of yen)

(Years ended March 31)
10,000

8,735

8,000
6,000

6,006

6,215

2014

2015

7,575

6,341

4,000
2,000
0

Internal reserves

2016

2017

2018

Internal reserves are used to reinforce the Company’s financial
standing and are allocated to research and development of new
products and technologies and capital expenditures for new
business development.

Dividends
The Company’s Articles of Incorporation provide that the Boardof Directors may declare dividends from retained earnings(pursuant to Article 459, Paragraph 1 of the Companies Act).
The Company’s basic policy is to pay dividends twice a year, aninterim dividend and a year-end dividend, in accordance withresolutions of the Board of Directors.
This fiscal year, the Company plans to pay a dividend of 50
yen per share in consideration of financial results, the management environment, maintenance of stable dividends, and otherfactors. An interim dividend was previously paid, and accordingly, a year-end dividend of 25 yen will be paid. In the next fiscal
year, the Company plans to pay an interim 25 yen per share
dividend and a 25 yen per share year-end dividend, for a total of
50 yen per share.

Annual dividend and payout ratio (yen; %)(Years ended March 31)
(Yen)

(%)

60
50
40

20.3

22.1

10
0

20.4
50

30
20

20.2

21.7
50

40
30

30

2014

2015

30.0
25.0
20.0
15.0
10.0
5.0

2016

2017

2018

0

20

Global
Network

Corporate
Data

As of March 31, 2018

As of March 31, 2018

EuropeAsia

The Americas

FranceSouth Korea

U.S.A.

Czech Republic

TaiwanMexicoSingapore

BrazilFoundedJanuary 1962

Paid-In Capital¥10,128.610 million

Number of Shareholders

18,374

Stock Exchange Listing

Tokyo (First Section: 7942)

Fiscal Year-End

March 31

Investor Relations Contact

Public and Investor Relations Department
Tel: +81-3-6212-6302

URL

www.jsp.com

Major Shareholders
Shareholders

Shares held

Voting right ratio(thousands)

(%)

53.74

China

Japan Trustee Services Bank, Ltd.

2,591

8.69

J.P. MORGAN BANK LUXEMBOURG S.A. 380578

1,300

4.36

JSP Client Stock Ownership Plan

1,057

3.54

4

21

Yukio Sakai

16,020

2

7

President, Representative Director

Mitsubishi Gas Chemical Company, Inc.

Japan

8

Shin Nisseki Bldg., 4-2, 3-chome Marunouchi, Chiyoda-ku,
Tokyo 100-0005, Japan

Thailand1

6

Head Office

5

3

The Master Trust Bank of Japan, Ltd.

653

2.19

1

Hokkaido

JP MORGAN CHASE BANK 385166

439

1.47

2

KanumaJSP Employee Stock Ownership Plan

295

0.98

3

KashimaNippon Life Insurance Company

242

0.81

4

Tokyo Head Office

CHASE MANHATTAN BANK GTS CLIENTS ACCOUNT ESCROW

198

0.66

5

Yokkaichi

BNP PARIBAS SECURITIES SERVICES PARIS/JASDEC/CDC AVOIRS FRR

190

0.63

6

Kansai7

Kitakyushu

8

KyushuNotes: 1. The above list of major shareholders does not include treasury stock held by the company (1,603,502 shares).
2. The shareholding ratio does not include treasury stock.

22

In so many ways, and in so many places,
JSP protects the things andthe people that are
most important
to you.

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