Consolidated Earnings Report for theSecond Quarter of the Fiscal Year Ending
March 31, 2014 (Unaudited)

October 29, 2013
Kuraray Co., Ltd.

October 29, 2013
Kuraray Co., Ltd.
Consolidated Earnings Report for the second Quarter of the Fiscal YearEnding March 31, 2014
Name of listed company:
Stock code:
Stock exchange listing:Kuraray Co., Ltd.
3405
Tokyo, first section

URL:

http://www.kuraray.co.jp/en

Representative:
Title:
Name:

Representative Director and President
Fumio Ito

Contact:
Title:

Manager, Corporate Management Planning Division,
Corporate Communications Department

Name:

Tomoyuki ShimamotoTel:+81-3-6701-1071(Millions of yen rounded down unless otherwise stated)

Preparation of supplementary documentation for the quarterly earnings report: Yes
Holding of quarterly earnings results briefing: Yes (For securities analysts and institutional
investors)

1. Consolidated Financial Results for the Second Quarter of the Fiscal
Year Ending March 31, 2014 (April 1, 2013 to September 30, 2013)(1) Consolidated Operating Results (Cumulative)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year.)(Millions of yen)
Net Sales

Operating Income(Change)Ordinary Income(Change)

Net Income(Change)(Change)

Fiscal 2013 2Q

199,269

10.2%

24,657

3.2%

24,89513.8%

15,765

23.7%

Fiscal 2012 2Q

180,888(2.6%)

23,899(18.6%)

21,884(24.5%)

12,745(26.0%)

Note: Comprehensive income: For the fiscal 2013 second quarter:¥37,064 million

199.0%

For the fiscal 2012 second quarter:

Net Income
per Share (Yen)¥12,398 million(40.7 %)

Fully Diluted
Net Income
per Share (Yen)

Fiscal 2013 2Q

45.04

44.91

Fiscal 2012 2Q

36.57

36.53

(2) Consolidated Financial Position
Total Assets(Millions of yen)
Shareholders’ Equity Ratio (%)

Net Assets

As of September 30, 2013

617,046

433,002

69.1

As of March 31, 2013

587,254401,307

67.2(Reference)
Shareholders’ equity:

As of September 30, 2013:¥426,624 million

As of March 31, 2013:¥394,754 million

2. Dividends(Yen)
Cash Dividends per Share
Record Date

Jun. 30

Sept. 30

Dec. 31Mar. 31AnnualFiscal 2012

―

18.00

―

18.00

36.00

Fiscal 2013

―

18.00
18.00

36.00

Fiscal 2013 (Forecast)

Note: Revisions to cash dividend forecast during this period: No

3. Forecasts of Consolidated Financial Results for the Fiscal YearEnding March 31, 2014 (April 1, 2013 to March 31, 2014)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year)(Millions of yen)
Net Sales
Full Fiscal Year

420,000

13.7%

Operating Income

Ordinary Income

55,00053,500

11.8%

10.1%

Net Income
32,00011.1%

Net Income
per Share
91.35

Yen

Note: Revisions to forecasts of consolidated financial results during this period: Yes

4. Other(1)

Changes in Important Subsidiaries during the Period (Changes inSpecial Subsidiaries Involving Changes in the Scope ofConsolidation)
No

(2)
(3)

(4)

Adoption of Special Accounting Practices in the Preparation of
Quarterly Consolidated Financial Statements
No
Changes in Accounting Principles, Procedures and Presentation
Methods in Connection with the Preparation of Quarterly
Consolidated Financial Statements
1. Changes following revision of accounting standards: Yes
2. Changes besides 1. above: No
3. Changes of accounting estimates: No
4. Restatement: No(Note: Please see “Changes in Accounting Policies and, Accounting
Estimates and Restatement” on page 5 about the details.)
Number of Shares Issued and Outstanding (Common Shares)
1. Number of shares issued and outstanding (including treasury stock)
as of the period-end:
As of September 30, 2013 382,863,603 shares
As of March 31, 2013
382,863,603 shares
2. Number of treasury stock as of the period-end:
As of September 30, 2013
32,573,911 shares
As of March 31, 2013
34,029,727 shares
3. Average number of shares for the period (Cumulative):
As of September 30, 2013 350,029,057 shares
As of September 30, 2012 348,490,740 shares

Indication of quarterly review procedure implementation status
This quarterly earnings report is exempt from the quarterly review procedure
based upon the Financial Instruments and Exchange Act. Furthermore, it wasundergoing the review procedure process at the time of this release.
Cautionary Statement with Respect to Forecasts of Consolidated Business Results(Cautionary note regarding forward-looking statements)
The results forecasts presented in this document are based upon currently
available information and assumptions deemed rational. A variety of factors
could cause actual results to differ materially from forecasts. Please refer to“Basis for (the Revision in) Forecasts, Including Consolidated Operating
Results Forecasts” on page 4 of the Attachment for the assumptions used.
Access to Documents and Other Materials Relating to the Quarterly Results Briefing to Be

Held on October 29, 2013
Related documents and materials, including the video of the briefing, will be
posted on the Company’s website immediately after the briefing is closed.

Index of the Attachment
1. Qualitative Information and Financial Statements.....................................................................

2(1) Qualitative Information and Overview of Consolidated Business Results.........................

2(2) Basis for (the Revision in) Forecasts, Including Consolidated Operating Results Forecasts
2. Items regarding Summary Information (and Notes)................................................................

4

Changes in Accounting Policies, Accounting Estimates and Restatement.............................

5

3. Quarterly Consolidated Financial Statements...............................................................................

6(1) Quarterly Consolidated Balance Sheets.......................................................................................

65(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements ofComprehensive Income...................................................................................................................

8

Quarterly Consolidated Statements of Income............................................................................

8

Quarterly Consolidated Statements of Comprehensive Income...............................................

10(3) Quarterly Consolidated Statements of Cash Flows....................................................................

11(4)Notes regarding Quarterly Consolidated Financial Statements.................................................

13

Notes regarding Going Concern Assumptions.............................................................................

13

Material Changes in Shareholders’ Equity.....................................................................................

13

Segment and Other Information.....................................................................................................

14

1. Qualitative Information and Financial Statements(1) Qualitative Information and Overview of Consolidated BusinessResults
In the first half of fiscal 2013 (April 1, 2013 to September 30, 2013), although
there was a correction in the overvaluation of the yen and the U.S. economy
was strong, the European and Chinese economies remained stagnant while
economic growth in emerging countries slowed. Reflecting this, overall
demand in the Company’s operating environment remained weak. On thedomestic front, there is a sense of expectation with regard to “Abenomics,”
but significant effects on the market conditions surrounding the Company
have yet to materialize.
Confronting these circumstances, the Kuraray Group, to achievesustained growth, is accelerating the global expansion of its core businesswhile proactively developing new businesses to secure its future growth in theaqua, environment, energy, optical and electronics fields.
Consequentially, cumulative consolidated operating results for the firsthalf of the current fiscal year are as follows: net sales rose ¥18,380 million, or
10.2%, compared with the corresponding period of the previous fiscal year to¥199,269 million; operating income grew ¥757 million, or 3.2%, to ¥24,657
million; ordinary income increased ¥3,010 million, or 13.8%, to ¥24,895
million; and net income rose ¥3,020 million, or 23.7%, to ¥15,765 million.
In line with the structural reorganization carried out on April 1, 2013,
the Company has changed its reporting segments, starting from the firstquarter of the current fiscal year. Comparisons and analyses for the first halfof the current fiscal year are based on the segment divisions following thechange.
Results by Business Segment
Vinyl Acetate
Sales in this segment grew 19.9% year on year to ¥90,051 million, andoperating income rose 0.5% year on year to ¥24,527 million.
(1) Water-soluble PVA films favorably expanded on the back of active
demand. Sales of optical-use poval film grew only slightly as demand for
LCD TVs stagnated. While sales of poval resins expanded in the UnitedStates and Europe, they continue to be impacted by intensifying
2

competition in Asia. Sales of PVB films were strongly affected by the
economic stagnation in Europe.
The Company decided to expand its water-soluble PVA film facilities in
the United States to meet the active expansion of demand for detergent
applications and is moving ahead with construction.
(2) Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin) favorably
expanded, particularly in the United States and Asia.
Isoprene
Sales in this segment grew 13.2% year on year to ¥25,388 million, andoperating income rose 99.0% year on year to ¥2,068 million.
(1) In isoprene chemicals, although demand was sluggish for liquid rubber,demand for fine chemicals and SEPTON thermoplastic elastomer
rebounded.
(2) Sales of GENESTAR heat-resistant polyamide resin progressed amid
favorable demand for LED reflector applications and connector
applications as well as automotive applications.
Functional Materials
Sales in this segment rose 5.8% year on year to ¥23,126 million, and operating
income fell 43.1% from the previous fiscal year to ¥471 million.
(1) The performance of methacrylic resin was affected by weak market
conditions and increased costs for raw materials and fuel.
(2) In the medical business, sales of dental materials remained stable.
(3) CLARINO man-made leather saw overall demand remain sluggish as salesof products created using new processes were not as brisk as expected.
Fibers and Textiles
The performance of KURALON was steady for automotive brake hose
applications and use as an asbestos substitute in fiber reinforced cement(FRC). As a result, sales in this segment fell 5.4% year on year to ¥21,275
million, and operating income grew 37.2% year on year to ¥1,328 million.
Trading
Although some businesses stagnated amid the weak economy, sales in suchfiber-related businesses as polyester were stable. As a result, sales in this3

segment were down 2.3% year on year to ¥53,009 million, and operating
income increased 6.2% to ¥1,719 million.
OthersSales of activated carbon and its use in water purification and energy-related
applications grew steadily. Other items were affected overall by the weakeconomy. As a result, sales in this segment decreased 3.6% year on year to¥30,513 million, and operating income declined 36.0% year on year to ¥1,391
million.
(2) Basis for (the Revision in) Forecasts, Including Consolidated
Operating Results Forecasts
Kuraray has revised its cumulative consolidated forecast of the fiscal year
ending March 31, 2014 (April 1, 2013–September 30, 2014), as shown in thefollowing table in light of the stagnant economies of Europe and China,
stalled economic recovery in Japan, and slowing economic growth in emerging
countries.
Revised cumulative consolidated forecast of the fiscal year ending March 31,
2014 (April 1, 2013–March 30, 2014)(Millions of yen, unless otherwise stated)

Net Sales

Operating
IncomeOrdinary
IncomeNet
IncomeNet Income
per Share (yen)Previous forecast (A)(Announced on
August 1, 2013)

430,000

60,00058,50035,000100.33

Revised forecast (B)420,000

55,00053,50032,00091.35

Change (B – A)

(10,000)(5,000)(5,000)(3,000)

(2.3)

(8.3)

(8.5)

(8.5)

369,431

49,197

48,59028,798Change (%)(Reference) Fiscal 2013
results

Assumptions for the third quarter and later are as follows: ¥100=US$1
 ¥130=1 euro
 Domestic naphtha price ¥65,000 per kiloliter

4

82.62

<Reference> Consolidated result forecast for the fiscal year ending March 31,
2014 (Breakdown of segment sales and income)(Billions of yen)

Net Sales Operating Income
Vinyl Acetate

187

50

Isoprene

53

6Functional Materials

50

2

Fibers and Texitiles

47

3

Trading110

3.5

Others67

3

Elimination on
Consolidation andCorporate(94)(12.5)

Total

420

55

2. Items Regarding Summary Information (and Notes)
Changes in Accounting Policies, Accounting Estimates and Restatement(Changes in Accounting Policies Accompanying Revisions or Other Changes
in Accounting and Other Standards)
From the first quarter of the current fiscal year, for some foreign subsidiaries,
Kuraray is applying “IAS 19 Employee Benefits,” announced on June 16, 2011by the International Accounting Standards Board. Accordingly, the Company
will conduct adjustments to recognition and disclosure methods for past
service costs, net interest costs, actuarial adjustments and other items.
The changes to the corresponding accounting policies will be applied
retroactively. The consolidated financial statements for the previous fiscal year
and the first half of the previous fiscal year have already been retroactively
adjusted. The effect of this retroactive adjustment on the previous fiscal year
and the first half of the previous fiscal year is minor.

53. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Millions of yen)March 31, 2013

September 30, 2013ASSETS
Current Assets
Cash and cash deposits
Notes and accounts receivable–trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent Assets
Tangible fixed assets
Buildings and structures, net
Machinery, equipment and vehicles, net
LandConstruction in progress
Other, net
Total tangible fixed assets
Intangible fixed assets
Goodwill
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Prepaid pension costs
OthersAllowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

46,151

36,981

83,84386,40831,69654,49857,823
10,33258,902
12,337

15,13815,685

5,732

6,080

7,237

6,855

(742)

(607)

257,212277,143

41,93882,29843,04585,386

20,425

21,20132,32642,908

4,285

4,387

181,274

196,928

24,65926,126

26,664

29,411

51,32455,53783,54374,204

679
2,744

375
2,842

5,437

5,297

5,114

4,766

(76)

(48)

97,442330,041
587,2546

87,437339,903
617,046(Millions of yen)March 31, 2013

September 30, 2013

LIABILITIESCurrent Liabilities
Notes and accounts payable–trade
Short-term loans payable
Income taxes payable
Provision for bonuses
Other provision
Other

37,04828,78630,91836,779

7,687

7,370

6,590

6,660

21

23

29,182

22,415

111,449

102,035

Corporate bonds payable
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directors’ retirement benefits

10,00010,00028,17132,28014,872

16,738

6,665

7,575

178

128

Provision for environmental measures
Asset retirement obligations
Other

1,051

1,051

2,336

2,405

11,221

11,82974,49782,009185,947

184,044

88,95588,95587,147

87,147

Total current liabilities
Long-term liabilities

Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock

263,262272,293(40,169)(38,452)

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gain or losses on hedges

399,195

409,944

6,076

6,539

(17)

(20)

Foreign currency translation adjustments
Pension liability adjustments(9,877)

10,960

(622)

(798)

(4,440)16,680

1,221

1,017

5,330

5,359

401,307433,002587,254

617,046

Total accumulated other comprehensive
incomeSubscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets

7

(2) Quarterly Consolidated Statements of Income and Quarterly
Consolidated Statements of Comprehensive Income
Quarterly Consolidated Statements of Income(Millions of yen)
Fiscal 2012 2Q

Fiscal 2013 2Q(April 1, 2012 –(April 1, 2013 –Sept. 30, 2012)

Sept. 30, 2013)

Net sales

180,888

199,269

Cost of sales

122,560

136,210Gross profit

58,32863,058Selling expenses

9,255

9,904

General and administrative expenses

25,17228,496

Total selling, general and administrative expenses

34,42838,40023,89924,657

Interest income

190

337

Dividends income

1,021

1,197

0

0

Other, net

451

662

Total non-operating income

1,664

2,197

Selling, general and administrative expenses

Operating income
Non-operating income

Equity in earnings of affiliates

Non-operating expenses
Interest expenses
Other expenses

494

505

3,184

1,454

Total non-operating expenses

3,679

1,959

21,88424,895

Loss on disposal of tangible fixed assets

120

280

Impairment loss－

118

Acquisition-related cost

748－

Loss on valuation of investment securities

562－

Provision for environmental measures

111－

Total extraordinary expenses

1,544

399

Income before income taxes and minority interests in net
income of consolidated subsidiaries

20,34024,495

Income taxes－current

6,766

8,894

Income taxes－deferred

543

(342)

Ordinary income
Extraordinary loss8

(Millions of yen)

Total income taxes
Income before minority interests in net income of
consolidated subsidiaries
Minority interests
Net income

9

Fiscal 2012 2Q

Fiscal 2013 2Q(April 1, 2012 –(April 1, 2013 –Sept. 30, 2012)

Sept. 30, 2013)

7,309

8,552

13,03015,942285

177

12,745

15,765

Quarterly Consolidated Statements of Comprehensive Income(Millions of yen)

Income before minority interests in net income of
consolidated subsidiaries

Fiscal 2012 2Q

Fiscal 2013 2Q(April 1, 2012 –(April 1, 2013 –Sept. 30, 2012)

Sept. 30, 2013)13,03015,942

(174)

464

10

(3)

Foreign currency translation adjustments(394)

20,837Pension liability adjustments

(73)

(176)

Total other comprehensive income(632)

21,121

12,39837,064

12,11336,886284

177

Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gain or losses on hedges

Quarterly comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests10(3) Quarterly Consolidated Statements of Cash Flows(Millions of yen)Six-month period

Six-month period

ended Sept. 30, 2012

ended Sept. 30, 2013

(April 1, 2012 –(April 1, 2013 –Sept. 30, 2012)

Sept. 30, 2013)

Cash Flows from Operating Activities
Income before income taxes and minority interests in net

20,34024,495

Depreciation and amortization

13,82916,430

Impairment loss－

118

Provision for environmental measures

111－

Loss on disposal of tangible fixed assets

120

280

Acquisition-related cost

748－

Loss on valuation of investment securities

562－

Decrease in notes and accounts receivable―trade

1,489

670

Decrease (increase) in inventories(2,183)

243

Increase (decrease) in notes and accounts payable―trade(1,950)(10,492)

Other, net

249

(221)

Subtotal

33,31831,525

Income taxes paid

(9,192)(9,261)

685

1,027

24,811

23,291606

7,754

Net decrease(increase) in short-term investment securities

49,989(22,993)

Proceeds from sales and redemption of marketablesecurities
Purchase of tangible fixed assets and intangible assets

1,310

10,290(19,390)(24,900)

Purchase of investments in subsidiaries resulting in change(31,051)－

Other, net(1,784)(1,003)

Net Cash Used in Investing Activities(319)(30,852)

Other
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Net decrease in time deposits

11

(Millions of yen)Six-month period

Six-month period

ended Sept. 30, 2012

ended Sept. 30, 2013

(April 1, 2012 –(April 1, 2013 –Sept. 30, 2012)

Sept. 30, 2013)

Cash Flows from Financing Activities
Net decrease in short-term loans payable(4,642)(30)

230

10,054

Repayment of long-term loans payable(2,922)(55)

Cash dividends paid

(5,922)(6,279)Other, net

(103)

1,031

(13,359)

4,721

(652)

1,197

Net Increase(decrease) in Cash and Cash Equivalents

10,480(1,642)

Cash and Cash Equivalents, Beginning of the Period

34,811

29,885－26

45,291

28,269Proceeds from long-term loans

Net Cash Used in Financing Activities
Effect of Exchange Rate Changes on Cash and Cash
Equivalents

Increase in cash and cash equivalents from newly
consolidated subsidiary
Cash and Cash Equivalents, End of the Period12(4) Notes regarding Quarterly Consolidated Financial Statements
Notes regarding Going Concern Assumptions
None
Material Changes in Shareholders’ Equity
None

13

Segment and Other Information[Segment Information]
I. Second Quarter of Fiscal 2012 (April 1, 2012 to September 30, 2012)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment

Elimination
Consolidated

on
Vinyl
Functional
Isoprene
AcetateMaterials

FibersandTextilesTrading

Total

Others1

Total

Cosolidation Statementsof Income3

andCorporate2

Net Sales
Outside customers 60,544

14,31812,872 17,168 52,479

157,383

23,504

180,888－

180,888

Inter-segment
sales and transfers

8,114

8,992

1,765

38,7708,145

46,916(46,916)－

21,865 22,496 54,244

196,153

31,650227,804(46,916)

180,888

28,8662,175

31,041(7,142)

23,899Total

14,56975,113 22,433

Segment Income 24,410

1,039

828

5,328

968

1,619

Notes:
1. The “Other Business” category incorporates operations not included in businesssegments reported, including activated carbon, environmental business andengineering.
2. Elimination and Consolidation and Corporate is as follows: Included within segment
income of ¥7,142 million is the elimination of intersegment transactions of ¥205
million and corporate expenses of ¥6,936 million. Corporate expenses mainlycomprise headquarters’ general and administrative expenses and the submitting
company’s basic research expenses not usually attributed to segments.
3. Segment income is adjusted with operating income under consolidated statements ofincome.

14

II. Second Quarter of Fiscal 2013 (April 1, 2013 to September 30, 2013)

1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment

Elimination
Consolidated

on
Vinyl
Functional
Isoprene
AcetateMaterials

FibersandTrading
Textiles

Total

Others1

Total

Consolidation Statementsof Income3

andCorporate2

Net Sales
Outsidecustomers

77,610 15,046

Inter-segment
12,440sales and transfers

Total

10,34190,051 25,388

Segment Income 24,527

2,068

15,404 15,988 51,739 175,789

23,479 199,269

7,721

7,033

5,287

1,270

37,062

23,126 21,275 53,009 212,851
471

1,328

1,719

30,115－

199,269

44,095(44,095)－

30,513 243,364(44,095)

199,269

1,391(6,850)24,65731,507

Notes:
1. The “Other Business” category incorporates operations not included in businesssegments reported, including activated carbon, environmental business andengineering.
2. Elimination on Consolidation and Corporate is as follows: Included within segment
income of ¥6,850 million is the elimination of intersegment transactions of ¥38
million and corporate expenses of ¥6,812 million. Corporate expenses mainlycomprise headquarters’ general and administrative expenses and the submitting
company’s basic research expenses not usually attributed to segments.
3. Segment income is adjusted with operating income under consolidated statements ofincome.

2. Regarding Changes in Reporting Segments
From the first quarter of fiscal 2013, Kuraray carried out a structural
reorganization. As a result, the former reporting segments of “Resins,”“Chemicals,” “Fibers and Textiles” and “Trading” have now been changed to“Vinyl Acetate,” “Isoprene,” “Functional Materials,” “Fibers and Textiles” and“Trading.”
A retroactively adjusted version of the “Segment and Other
Information” presented in the earnings report for the second quarter of theprevious fiscal year has been published to reflect the change in reporting
segments.

15