Kurita Water Industries Ltd. ANNUAL REPORT 2013

10-1, Nakano 4-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 81 (3) 6743-5000

URL: http://www.kurita.co.jp/english/

Providing Comprehensive
Solutions Throughout
the World

Annual Report 2013
For the year ended March 31, 2013This report was printed on FSC-approved paper using vegetable oil ink.
Printed in Japan

Corporate Philosophy

Investor Information

Study the properties of water, master them,and we will create an environment
in which nature and man are in harmony
The Kurita Group will contribute to society by deeply and broadly studying theproperties of water to discover new functions, creating value, and make the most

Stock Exchange Listing
Common Stock

Number of Shareholders
Independent Auditor
Transfer Agent

effective use of this precious and limited resource.

First Section of the Tokyo Stock Exchange
Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares) (As of March 31, 2013)37,824 (As of March 31, 2013)
Grant Thornton Taiyo ASG LLC
Akasaka Oji Bldg. 5F, 8-1-22, Akasaka, Minato-ku, Tokyo 107-0052, Japan
Sumitomo Mitsui Trust Bank, Ltd.
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Corporate Vision
Main Shareholders

Becoming an advanced water and environmental
management company
The starting point for the Kurita Group’s wide ranging business activities is toprovide our customers and society with solutions for their issues through water
treatment systems. As customers face the urgent tasks of improving productivity
and reducing their environmental impact, Kurita’s mission is to provide solutions
through comprehensive proposals concerning both water and the environment.
Based on the advanced technological capabilities in industrial water that wehave developed since our founding, we will provide water of the required quality

Distribution of Shares
Shareholdings
Percentage of total(Number of shares) shares issued (%)

Kurita Water Industries Ltd.
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)Northern Trust Co. (AVFC) Sub A/C American Clients
National Mutual Insurance Federation ofAgricultural Cooperatives
RBC IST LONDON-LENDING ACCOUNTThe Chase Manhattan Bank, N.A. London Secs
Lending ­Omnibus Account
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Pictet and Cie (Europe) S.A.

13,635,467
6,644,283
5,374,400
4,201,600

10.26
5.00
4.04
3.16

3,380,300

2.54

2,885,830

2.17

2,743,248

2.06

2,586,926
2,360,200
2,273,800

1.94
1.77
1.71
(As of March 31, 2013)and volume, when and where it is needed, and provide solutions for its recycling

Treasury Stock
Individuals
Financial
Institutions
Foreign
Owned

Securities
Firms

Shareholdings(Number of shares)

n
n
n
n
n
n

38,181,722

28.8%

935,340

0.7%

10,895,827

8.2%

50,537,910

38.1%

18,613,990

14.0%

13,635,467
Total132,800,256

and reuse. Moreover, we will develop these water management capabilities from a

10.3%
100.0%(As of March 31, 2013)

more global perspective, seeking to become an even more advanced water andenvironmental management company.

Other Domestic
Firms
Percentage of total
shares issued (%)

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Stock price (Yen)

Trading volume (Hundreds of shares)

4,000

800,000

3,000

600,000

2,000

400,000

1,000

200,000

Kurita FACT BOOK 2013
Kurita Fact Book 2013 provides a wide range oflong-term, historical data, including financial
indicators and quantitative management data.

http://ir.kurita.co.jp/en/reports/factbook/Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains forward-looking statements regarding forecasts, plans,
strategies and business performance in the future. These forward-looking statements
represent judgments made by the Company based on information currently
available to it and involve a variety of risks and uncertainties.
Actual results may be materially different from these forward-looking statements.
Such risks and uncertainties include (but are not limited to) changes in the economic
environment, business conditions, market, demand and currency exchange rates.

0

Jan. ’11

Jan. ’12

Jan. ’13

0n Stock price n Trading volume
Kurita Water Industries Ltd. Annual Report 201367

Contents
Profile and History

What We Do

page

02

Products and services that boost our customers’ productivity
and reduce the environmental impact of their activities

Management Indicators

page

04

page

12

page

14

page

16

page

17

page

18

page

22

page

28

page

29

page

66

page

67

Business Review
Segment Highlights
Water Treatment Chemicals............ 14

To All Our Stakeholders

Water Treatment Facilities................ 15

Overseas Operations

Research and Development

Corporate Governance

Focusing on Growth that Fosters Profitability,

Corporate Social Responsibility

thereby Improving Corporate Value

Directors and Members of
the Audit & Supervisory Board
Financial Section

page

06

Corporate Data

Interview with the President

page

07

Investor Information

Kurita Water Industries Ltd. Annual Report 201301

Profile and history
Kurita Water Industries Ltd. is a leader in the industrial water field. Kurita’s globally unique business portfolio is a balanced combination of water treatment chemicals, water treatment facilities, and maintenance services. Moreover, since its establishment in 1949,
Kurita has also accumulated a high level of technological expertise and know-how. Today, Kurita leverages these assets to provide
customers across a wide range of industries with high-value-added products and services.

Group History■ 1951 Boiler Water Supply Laboratory established.
■ 1959 K.K. Suzuki Shokai established as a chemical cleaning
company (now Kurita Engineering Co., Ltd.).

■ 1961 Kansai Kurita Seibi K.K. established as a maintenancecompany for water treatment facilities (predecessor of Kurita
Technical Service Co., Ltd.).
■ 1961 Listed stock on the Second Section of the Tokyo Stock
Exchange and the Osaka Securities Exchange.
■ 1962 Listed stock on the First Section of the Tokyo Stock Exchange
and the Osaka Securities Exchange.
■ 1975 Kurita Operation and Maintenance Services, Ltd. established as awater treatment facilities operation and maintenance company(now Kuritaz Co., Ltd.).
■ 1975 Kurita do Brasil Ltda. established to manufacture and sellwater treatment chemicals in Brazil.
■ 1978 Kurita (Singapore) Pte. Ltd. established as Kurita’s water
treatment chemicals and water treatment facilities businessbase in Southeast Asia.

1941–60

1961– 1980

Achievements and Development■ 1949 First steps taken in the water treatment chemicals business
Utilizing navy boiler technology, the company’s founder (whohad previously served in the navy) began a water treatment
chemicals business (boiler water treatment chemicals).
■ 1951 Entry into the water treatment facilities business
Capitalizing on sales of deionizers forthe pretreatment of boiler watersupplies, the Company moves into thewater treatment facilities business.
■ 1953 Start-up of chemical cleaning services
New expansion into chemical cleaning services, where boilerinteriors are cleaned using chemical technology.
■ 1958 Expansion of maintenance services
An organization specializing in maintenance services isestablished with a view to expanding after-sales services andmaintenance operations for water treatment facilities.

02

Kurita Water Industries Ltd.

Annual Report 2013

■ 1965 Expansion into process treatment chemicals
Develops chemicals that
increase productivity in thepulp and paper,
petrochemical and steel
industries, where large
volumes of water are used, as
the Company broadens thescope of its business from water treatment chemicals to
production process treatment chemicals.
■ 1973 Entry into the electronics industry
As water of a higher degree of purity is demanded withincreasing miniaturization in semiconductor
manufacturing processes, ultrapure water production
technology is developed.

As customers and society at large face the urgent tasks of improving productivity and reducing their environmental impact, Kurita isproviding comprehensive water treatment solutions in line with its corporate philosophy, “Study the properties of water, master them,and we will create an environment in which nature and man are in harmony.” Looking ahead, Kurita will continue seeking to become
an advanced water and environmental management company from a global perspective. To this end, Kurita remains focused on
working towards realizing a sustainable society.

■ 1986 P.T. Kurita Indonesia established to carry out the production
and sale of water treatment chemicals in Indonesia.

■ 2001 Land Solution Inc. established as a consulting company
dealing in soil remediation.

■ 1987 Kurita (Taiwan) Co., Ltd. established to conduct water
treatment chemical manufacturing and sale in Taiwan.

■ 2001 Kuritec (Shanghai) Co., Ltd. established as Kurita’s base in
China for import, sale and maintenance services of water
treatment facilities.

■ 1989 Goshu Chemical Co., Ltd. established to conduct water
treatment chemical manufacturing and sale in Thailand (nowKurita-GK Chemical Co., Ltd.).

■ 2003 Analysis division split off to establish Kurita Analysis Service
Co., Ltd.

■ 1989 Kurita Europe GmbH established in Germany as Kurita’s basein Europe for water treatment chemical production and sale.

■ 2003 Integration of tool cleaning business units from Group
companies and establishment of Kuritec Service Co. Ltd.

■ 1995 Kurita Water Industries (Dalian) Co., Ltd. established as Kurita’sbase in China for water treatment chemical production
and sales.

■ 2004 Kurita Water Industries(Suzhou) Ltd. established asa water treatment facilities
production and sales basein China.

■ 1996 Kurita America, Inc. established in the United States to
conduct water treatment facilities sales and maintenance.
■ 1997 Kurita Water Industries Ltd. merges with maintenancecompany Kurita Technical Service Co., Ltd.
■ 1998 Acquires an equity stake in Hansu Technical Service Ltd.,
which is involved in the production, sale and maintenance ofwater treatment facilities in Korea.

■ 2005 Kurita Global Technology Center established through the
integration of research and development facilities.
■ 2009 Kurita Chemical Manufacturing Ltd. established as a new
subsidiary to manufacture water treatment chemicals.

1981–2000

2001–■ 1986 Deployment of tool cleaning services
Sales channels established for the electronics business andchemical cleaning technology developed to date are used for
the Company’s entry into cleaning services for tools and jigs
used in semiconductor manufacturing devices.

■ 2001 Start of consulting services for hedging soil pollution risks
Start of business involving the hedging of pollution risks andschemes to facilitate the smooth liquidation of land that has
been restored to a safe condition based on soil remediation
successes to date.

■ 1991 Launch of soil remediation services
Soil pollution was increasingly becoming a major social
problem, and as a result, theCompany commenced soil
remediation service operations basedon water treatment technology
developed to date.

■ 2002 Launch of ultrapure water supply business
Launch of outsourcing business in which Kurita owns,
operates and manages facilities for customers and supplies
them with ultrapure water. A business model is developedthat represents a fusion of technology, products and services
developed to date acrossthe chemicals, facilities
and maintenance arms of
the business.

Kurita Water Industries Ltd. Annual Report 201303

Management Indicators
Kurita Water Industries Ltd. and Consolidated Subsidiaries
Years ended March 31
2004

2005

2006

2007

2008

2009

2010

2011

Millions ofYen

Thousands of
U.S. dollars 1

2013

2013

2012

Orders ���������������������������������������������������� ¥149,735 ¥171,334 ¥183,910 ¥192,529 ¥208,689 ¥195,065 ¥175,162 ¥181,951 ¥197,256 ¥186,741$1,986,606

Net sales ����������������������������������������������

146,819

160,896

173,683

197,146

204,875

199,706

178,520

181,234

193,792

180,143

1,916,420

Cost of sales������������������������������������������

101,433

112,077

122,630

137,819

138,549

135,874

117,221

118,573

127,905

121,047

1,287,737

Selling, general andadministrative expenses ������������

31,89532,86733,74135,05035,85735,89634,941

35,52836,503

38,106405,392

Operating income ��������������������������

13,49015,951

17,311

24,27630,46827,93526,35827,131

29,382

20,989223,291

Operating income margin (%) ������

9.2

9.9

10.0

12.3

14.9

14.0

14.8

15.0

15.2

11.7

Net income ����������������������������������������

8,444

9,383

10,51914,207

18,297

16,29917,28817,13816,548

11,476Return on sales (%) ������������������������

5.8

5.8

6.1

7.2

8.9

8.2

9.7

9.5

8.5

6.4

Total assets ������������������������������������������

183,620

192,428

212,774

235,137

231,498

245,406

251,620

253,298

271,141

263,580

Total assets turnover(Times) 2����������������������������������������������

0.82

0.86

0.86

0.88

0.88

0.84

0.72

0.72

0.74

0.67

Equity 3 ��������������������������������������������������

128,676

136,366

145,366

156,772

169,402177,291

192,588

198,042

208,891

207,871

Equity ratio (%) 4��������������������������������

70.1

70.9

68.3

66.7

73.2

72.2

76.5

78.2

77.0

78.9

Return on assets (%) ��������������������

4.7

5.0

5.2

6.3

7.8

6.8

7.0

6.8

6.3

4.3

Return on equity (%) 6��������������������

6.8

7.1

7.5

9.4

11.2

9.4

9.3

8.8

8.1

5.5

Capital expenditures��������������������������

9,718

6,706

16,537

19,56324,09756,322

8,083

5,965

8,105

6,688

71,148Depreciation and amortization ����

3,872

4,361

4,906

6,512

9,425

11,716

15,523

16,066

16,035

15,054160,150

R&D Expenses��������������������������������������

4,289

4,228

4,213

4,421

4,551

4,363

3,990

4,225

4,232

4,362

46,404

5

Yen

2,804,046

2,211,402

U.S. dollars 1

Net income per share 7������������������

64.6

71.8

81.8

110.4

142.2

126.7

134.4

134.0

130.7

   92.4

0.98

Equity per share 8������������������������������

999.7

1,058.9

1,129.7

1,218.4

1,316.7

1,378.0

1,497.0

1,563.6

1,649.2

1,744.4

18.56

Dividends per share ������������������������

16.0

18.0

22.0

28.0

32.0

34.0

36.0

38.0

40.0

42.0

0.45

Dividend payout ratio (%) ����������

24.8

25.1

26.9

25.4

22.5

26.8

26.8

28.4

30.6

45.4

Number of employees (persons)

3,383

3,382

3,668

3,992

4,249

4,404

4,445

4,490

4,555

4,640

Notes: 1. The U.S. dollar amounts are given solely for convenience at the rate of ¥94 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2013.
2.	Total assets turnover = Net sales ÷ Total assets (Average)
3.	“Equity” represents “Net assets less minority interests” (hereinafter, the same).
4.	Equity ratio = Equity ÷ Total assets × 100
5.	Return on assets = Net income ÷ Total assets (Average) × 100
6.	Return on equity = Net income ÷ Equity (Average) × 100
7. Calculation of net income per share is based on average number of shares outstanding (excluding treasury stock).
8. Calculation of equity per share is based on the number of shares at year-end (excluding treasury stock).

04

122,086

Kurita Water Industries Ltd.

Annual Report 2013

Orders and Net Sales

Operating Income and Operating Income Margin(Millions of Yen)

(Millions of Yen)(%)

30,00015

20,00010

10,0005200,000
150,000
100,000
50,000

0

0
2006

2007

Orders

2008

2009

2010

2011

2012

2013

0
2006

2007

2008

Operating Income

Net Sales

Net Income and Return on Sales

2009

2010

2011

2012

2013

Operating Income Margin

Total Assets and Total Assets Turnover(Millions of Yen)(%)

(Millions of Yen)

20,00010.0

300,000

1.2

15,0007.5

200,000

0.8

10,000

5.0

5,000

2.5

100,000

0.4

0

0
2006

2007

Net Income

2008

2009

2010

2011

2012

0

2013

2008

2009

2010

2011

2012

2013

2011

2012

2013

Total Assets Turnover

Return on Assets and Return on Equity(Millions of Yen)

(%)

80

12

150,00060

9100,000

40

650,000

20

3

0

0

0
Equity2007

Total Assets

Return on Sales

200,000

2007

0
2006

Equity and Equity Ratio

2006(Times)

2008

2009

2010

2011

2012

(%)

2013

2006

2007

2008

Return on Assets

Equity Ratio

2009

2010

Return on Equity

Capital Expenditures and Depreciation and Amortization

Dividends per Share and Dividend Payout Ratio(Millions of Yen)

(Yen)

60,00040,00020,000

0

(%)

50

50

40

40

30

30

20

20

10

10

0
2006

2007

2008

Capital Expenditures

2009

2010

2011

2012

Depreciation and Amortization

2013

0
2006

2007

2008

Dividends per Share

2009

2010

2011

2012

2013

Dividend Payout Ratio

Kurita Water Industries Ltd. Annual Report 201305

To all our stakeholders

Focusing on Growth that Fosters Profitability,
thereby Improving Corporate Value
The fiscal year ended March 31, 2013, was the first year of the three-year
medium-term management plan Take Action 2014 (TA-14), which waslaunched in April 2012. During the year, the Kurita Group made progresson the key strategies of expanding overseas business, offering leadingedge products and services, and creating new products and businesses,
all resting upon the basic strategy of demonstrating the Kurita Group’s
comprehensive strengths to win the trust of customers both in Japanand overseas.
Impacted by the adverse business environment, our operating
results unfortunately did not meet our projections. On the other hand,
we had a number of achievements in certain areas, including enhancing
our overseas business base, building a new domestic business model,
and cultivating core technologies with an eye to future development of
new products. As a result, we were able to lay the foundation for future
growth during the year.
In terms of returns to shareholders, this year marked the ninth consecutive year of increased dividends, while in November 2012 we executed a share buyback program in which we acquired 7.49 million of ourown shares through a tender offer. Going forward, our focus will be on
increasing capital efficiency and distributing profits to our shareholders.
The fiscal year ending March 31, 2014, is the second year of TA-14.
We will return to the roots of our business, which is to leverage our technological strengths to solve the issues faced by our customers and society through water treatment, and work to help customers and society
tackle the urgent tasks of improving productivity and reducing environmental impact. Also, in light of last year’s operating results, we will implement strategies focused on growth that fosters profitability, thereby
improving corporate value.
I ask for the ongoing support and understanding of all stakeholders,
including our shareholders and other investors, for the Group’s management direction.
August 2013

Toshiyuki Nakai
President and Representative Director

06

Kurita Water Industries Ltd.

Annual Report 2013

Interview with the President
How do you view the consolidated operating results for the fiscal
year ended March 31, 2013? What were some of the issues?
Our consolidated operating results for the fiscal year ended March 31, 2013, fell short of ourforecasts due to the impact of the challenging market environment. This was a disappointing
outcome. Orders totaled ¥186,741 million, which was 5.3% less than the previous fiscal year.
Net sales totaled ¥180,143 million, which represented a 7.0% decline from the previous year.
On the income side, operating income fell 28.6% from the prior year to ¥20,989 million, while
net income was ¥11,476 million, representing a 30.7% year-on-year decline. Net income pershare fell to ¥92.43 per share, as compared to ¥130.65 per share in the previous fiscal year.
In Japan, capacity utilization at customers’
plants remained low, and as a result there was a
decline in sales in both water treatment chemicals and maintenance services. Sales of water

Profits declined more than revenues due to the drop insales of highly profitable core products and services.

treatment facilities also declined, primarily as aresult of their sensitivity to capital investment coupled with a sharp pull back in investment in
the electronics industry field. Meanwhile, in our overseas operations we saw an increase inrevenues in both water treatment chemicals and water treatment facilities, but this was
unable to make up for the revenue decline in Japan.
Profits declined more than revenues due to the drop in sales of highly profitable coreproducts and services, in addition to the increase in costs associated with expanding theoverseas business and relocation of our head office.
The Kurita Group is currently in a transition phase, as we continue to evolve into a truly
global corporate group. We have bolstered our business base as part of our efforts to develop
the strength we need as a Group to compete internationally. Going forward we must link thiswith tangible achievements and achieve growth accompanied by profitability. We will closely
examine growing businesses and regions, and expand our high-profit products and services.

Kurita Water Industries Ltd. Annual Report 201307

Please talk about the market environment as well as the businessenvironment surrounding Kurita.

In terms of the market environment in Japan, capacity utilization at plants has fallen, andcompanies continue to curb capital investment, consolidate production sites, and relocate
overseas. These trends were partly because restoration-related demand following the 2011
Great East Japan Earthquake has run its course, and they were also caused by a decline inpersonal consumption, the weakness of the European economy, as well as the leveling out of
economic growth in emerging countries. There are hopes for a domestic economic upturn,and in fact there have been signs of an improvement in the export environment based on thecorrection of the historically strong yen, but I think that it will take time for this to translate
into better earnings for the Kurita Group.
Looking overseas, however, we haveseen strong demand relating to water treat-

Looking overseas, we have seen strong demandment, especially in emerging countries. Japa-

relating to water treatment, especially innese companies transferring their operations

emerging countries.

overseas have spurred fresh investment inwater treatment facilities, and stimulated

new demand for water treatment chemicals. When you add the growth of local companies
on top of this, I feel that there are significant business opportunities for us in many countries.
This includes China, where water shortages and environmental problems have emerged,
South Korea and Taiwan, where capital investment in the electronics sector continues, andSoutheast Asia, where continued economic growth is expected.

08

Kurita Water Industries Ltd.

Annual Report 2013

Please tell us about the progress made during the fiscal year ended
March 31, 2013, on the medium-term management plan Take Action
2014 (TA-14), which went into effect in April 2012.
In terms of progress on key initiatives of the TA-14 plan, our overseas business has continued
to expand, especially in the electronics industry in Asia. During the fiscal year, we added
approximately 80 overseas employees, most of whom were local staff, established a sales
office in Malaysia, and built up a maintenance business platform in Singapore, as part of ourefforts to strengthen our local service business base. In China, we launched a structure tooversee and manage three group companies that handle water treatment chemicals, water
treatment facilities, and maintenance services, and this initiative is gradually yielding positive
results. In the wastewater recycling business in China (a project to re-treat treated wastewaterfrom industrial zones and sewage water and reuse it as water for industrial use) the Kurita
Group is the only player in the market capable of supplying the optimal combination ofwastewater reclamation equipment and the reverse osmosis (RO) membrane treatment
chemicals used in this equipment.
In the domestic business, we began new initiatives to expand our market share and secure
profitability. One example is to extend our scope beyond just providing water treatment
facilities for customers’ production plants, and to propose maintenance of various utilities
used in these facilities, along with equipment diagnosis and operational monitoring, thereby
offering both stable operation and a reduction of total operating costs. In these proposals, we
provide customers with clear explanations to help them visualize the improvement measuresand how they will benefit from them, and we work with each customer to solve their issues
while having them understand the benefits. We will continue to use this approach to expand
our maintenance services, including the revamping of water treatment facilities.
In light of the changes in the market environment and our operating results in the firstyear of the TA-14 plan, in April 2013 we madeI am certain that we can maintain our high profitability

downward revisions to our performance targets

by pushing through with one of our key strategies offor the fiscal year ending March 2015, the final

providing superior products and services to help cus-year of TA-14. However, we will continue tomaintain steady profitability, which is our

tomers tackle issues.

strength. I am certain that we can maintain ourhigh profitability by pushing through with one of our key strategies of providing superior
products and services to help customers tackle issues. Our other key strategy of expanding
the overseas business also remains unchanged. Specifically, we have kept our targets for
operating income margin (approximately 15%) and overseas sales ratio (approximately 27%)
for the fiscal year ending March 31, 2015.

Kurita Water Industries Ltd. Annual Report 201309

What are the focal points of TA-14 going into its
second year in April 2013?

First, regarding our overseas business, we are focusing on expanding our business in Southeast Asia. This is in addition to South Korea, China, and Taiwan, where we have already been
concentrating on expansion. In countries such as Indonesia, Malaysia, Singapore, and Thailand,
we will target general industries, including food, beverage, chemical, and automobile industries. In Southeast Asia, we have group companies in these key countries, but rather thanhaving them each function individually, we will view Southeast Asia as an entity, and build aplatform to optimally supply customers by having these group companies share their specialty products, services, and technicians with one another.
In China and South Korea, we are now starting to see maintenance demand emerge forfacilities projects that we won over the past few years. Going forward, we will aim to capture service demand by working steadily to localize advanced analysis and application
testing capabilities.
The Kurita Group is the world’s only water treatment

Our group companies will work together incompany that offers water treatment chemicals, water
treatment facilities, and maintenance services in aregions throughout the world to provide

balanced manner. Our group companies will work

comprehensive services.

together in regions throughout the world to provide
comprehensive services. Meanwhile, in order to accelerate the growth of our overseas business, we willcontinue to search for M&A and alliance opportunities targeting the U.S. and European markets, where the Kurita Group’s presence and market share are relatively low.

10

Kurita Water Industries Ltd.

Annual Report 2013

Next, in order to further solidify our domestic business base, we will work to expand ourhighly profitable core products and services as well as make sure that our sales are carried out
based on the concept of helping customers resolve problems. Examples of this include comprehensive maintenance agreements that leverage our proprietary monitoring technologies,
and water quality management systems that utilize sensing technologies and communications infrastructure.
Furthermore, to promote new business creation we will enhance our core technologies
including membranes, polymers, and advanced analytics. We will swiftly develop new products
and technologies matched to the needs of the domestic and overseas markets, while improving
our cutting-edge technologies in areas including water for food, energy and space technology.

Please talk about your policy for shareholder returns, aswell as specific strategies aimed at further raising shareholder value.
In order to foster sustainable growth, the Kurita Group will use capital to bolster its businessbase through capital investment, R&D, and M&As and alliances. At the same time, it is important to increase our capital efficiency and to distribute more profits to our shareholders.
Our basic policy is to pay stable dividends on an ongoing basis. We have strived to increase
the dividend, while taking into consideration earnings performance and investment in ourbusinesses. For the fiscal year ended March 31,

We will strive to increase dividends as well as boost
capital efficiency in a flexible and agile manner.

2013, we paid a year-end dividend of ¥21 pershare, which combined with the interim dividend of ¥21 per share, resulted in an annual
dividend of ¥42 per share. This represented anincrease of ¥2 per share versus the previous fiscal year, for a ninth consecutive fiscal year with adividend increase.
Also, in November 2012, we acquired 7.49 million shares (5.64% of total outstanding
shares) of our own stock through a tender offer.
In August 2013 we cancelled 13.63 million shares of treasury stock (10.27% of issued shares).
Going forward, we will strive to increase dividends as well as boost capital efficiency in a
flexible and agile manner, with the aim to further increase our shareholder value.

Kurita Water Industries Ltd. Annual Report 201311

What We Do
When our customers need solutions involving water, they turn to us for products and services that
boost their productivity and reduce the environmental impact of their activities. You’ll find Kurita
helping in many areas to realize a sustainable society.
Pure water production
systems
Industrial water

Cooling water treatment
chemicals

OfficeWastewater
reclamation
systems

Water treatment

Cooling tower

Boiler water
treatmentchemicals

Manufacturing line

Ultrapurewater production
systems

Wastewater
treatment

BoilerElectrolyzed sulfuric acid generators

Wastewater
treatment
systemsn12

Waterway andsewage discharge

Water treatmentnIndustrial
waste

Cooling towernW astewater treatment

Ultrapure water production systems

Cooling water treatment chemicals

Wastewater treatment systems

These systems remove ions, microscopic particles,
and bacteria from water to produce ultrapure
water that is as close as possible to theoreticallypure H2O.

Cooling water treatment chemicals help keepcooling systems in factories and office buildings
running smoothly to ensure efficient operation.

These systems treat many kinds of industrial
wastewater to ensure that they do not affect theenvironment.

Pure water production systemsnBoiler

These systems produce water for a variety ofindustrial uses including medical-grade water for
injectable drugs and eye medications, drinking
water for alcoholic beverages and soft drinks, andboiler water for the electric power and steel
industries.

Boiler water treatment chemicals

Wastewater reclamation systems

nThese systems reclaim wastewater discharged
from manufacturing processes and treat it forreuse in plants as pure water or cooling water.

Electrolyzed sulfuric acid generators

Kurita Water Industries Ltd.

Annual Report 2013

Kurita’s boiler water treatment chemicals prevent
boiler problems for customers in a wide range ofindustries, helping to promote safe operations
and energy efficiency.

Manufacturing line

These systems allow semiconductor manufacturers
to significantly reduce consumption of processing
liquids while ensuring higher efficiency for resist
removal.

Wastewater treatment chemicals
Kurita’s wastewater treatment chemicals help toreduce environmental impact by performing
functions such as removal of suspended solids
and deodorization.

Maintenance services
Kurita provides preventive maintenance ­services
to ensure continued high performance ofwater treatment systems supplied to clients.
Kurita also proposes modifications to help
clients boost productivity and reduce theirenvironmental impact.

Who Uses Our Products and Services?
Customers in general industries

Pulp & Paper

Steel

Food &
Beverages

Customers in theelectronics industry

LCDs

Oil Refining & Pharmaceuticals
Petrochemicals

What is Our Strength?

Water
Treatment
Chemicals

The Kurita Group is the only water treatment company in theworld to develop its business based on a good balance of three
distinct functions: water treatment chemicals, water treatment
facilities, and maintenance services.

Semiconductors

Office building
customers

Electronic
Components

Business functions
that othercompanies
do not have

Regional Heating /Cooling Centers

Water
Treatment
Facilities

Maintenance
Services

Water Treatment Chemicals

Water Treatment Facilities

Boiler water treatment chemicals

For the Electronics Industry

	Cooling water treatment chemicalsnUltrapure water production systems

	Wastewater treatment chemicalsnWastewater reclamation systems

Process treatment chemicalsnWastewater treatment systems

	Incinerator chemicalsnElectrolyzed sulfuric acid generators

Equipment and systems for water treatment chemicalsnTool cleaning services

	Packaged water treatment management contracts• Cooling water / Boiler water supply contracts• Comprehensive wastewater treatment contractsnMaintenance servicesnUltrapure water supply business

n
n
n
n
n
n
n

For General IndustriesnPure water production systemsnWastewater reclamation systemsnWastewater treatment systemsnSoil remediation servicesnChemical cleaning servicesnMaintenance services

Kurita Water Industries Ltd. Annual Report 2013

13

BUSINESS REVIEW Segment Highlights

Water Treatment Chemicals
Performance in the Fiscal Year Ended
March 31, 2013

Outlook for the Fiscal Year Ending
March 31, 2014

In the fiscal year ended March 31, 2013, in Japan, although certain

For the fiscal year ending March 31, 2014, the Kurita Group forecasts

products saw increased orders and sales, demand for mainstay cool-a gradual recovery in capacity utilization at customers’ plants ining water treatment chemicals and wastewater treatment chemicals

Japan from the summer, centered on the export industry. Overseas,

was down, mainly due to the elimination and consolidation of cus-

the Group anticipates continued firm demand for water treatment intomers’ plants, along with lower capacity utilization. As a result,emerging nations lead by Asia. We are targeting a year on year

domestic sales declined by1.9% year on year.

increase in overseas sales.

Overseas sales, meanwhile, climbed 4.3% year on year. BothAs a result, the Group projects an increase in sales in the Water

orders and sales declined in Europe, where the economy remained

Treatment Chemicals segment.

stagnant, but sales grew strongly in Asia, especially China and Thailand.

The Company also projects a year on year increase in segment

As a result, overall sales for the Water Treatment Chemicals

operating income, based on the increase in sales and an improved

segment edged down by 0.6% year on year.

sales composition, despite the continued increase in personnel andSegment operating income declined 10.1% year on year due toother expenses in line with an increase in employees for businessdeterioration in the composition of sales with the proportion of

expansion overseas. The operating margin is also expected to improve.

mainstay products decreasing, as well as higher selling, general andadministrative (SG&A) expenses in line with an increase in employees for business expansion overseas and relocation of the head
office. Rising prices for raw materials had a limited impact on costs.

Orders

Sales

Operating Income(Millions of yen)

(Millions of yen)

(Millions of yen)

58,47053,370

2009

14

2010

56,7142011

Kurita Water Industries Ltd.

56,748 56,040

2012

2013

Annual Report 2013

58,331
53,743

2009

2010

56,735

2011

56,443

2012

56,091

2013

10,099
8,417

8,177

2009

2010

9,268
8,334

2011

2012

2013

Water Treatment Facilities
Performance in the Fiscal Year Ended
March 31, 2013

Outlook for the Fiscal Year Ending
March 31, 2014

During the fiscal year ended March 31, 2013, in the electronics

For the full fiscal year ending March 31, 2014, in Japan the Kurita

industry both orders and sales declined for water treatment facilities

Group forecasts continued weak capital investment by customers,

and maintenance services in Japan. The decline reflected consolida-

however, an early recovery in demand for maintenance services istion of manufacturing plants among major customers and lower

anticipated from the start of autumn.

capacity utilization rates. Moreover, the ultrapure water supply busi-

In the electronics industry, in Japan the Kurita Group expects toness also contracted with contract changes at a number of sites.

see year-on-year declines in the ultrapure water supply business,

Overseas, while some customers postponed or scaled back capital

due to the lingering impact of contract changes implemented lastinvestments, sales of water treatment facilities for the semiconductor

fiscal year at a number of sites, and in the facilities businesses andand LCD panel industries in Asia increased. Net sales in the electron-

maintenance services which still need time to recover. Overseas,

ics industry declined 7.9% year on year due to the decrease in Japan.

however, we are targeting an increase in the facilities businesses andIn general industries, although orders and sales of water treat-

maintenance services despite varying capital investment by custom-

ment facilities for the steel and the food industries increased, orders

ers for each product and region.

and sales fell for water treatment facilities for the electric power

In general industries, in Japan we expect to see a progressive

industry due to a fall in earthquake recovery-related demand, andfall in earthquake recovery-related demand for electric power, butmaintenance services declined because of lower capacity utilization

we are targeting an increase in water treatment facilities for general

at customers’ plants. Sales in general industries decreased 12.1% year

industries other than electric power together with maintenanceon year.

services. Consequently, we expect net sales in general industries to

As a result, overall sales for the Water Treatment Facilities seg-

be approximately the same year on year.

ment decreased by 9.7% year on year.

As a result, the Group projects an increase in sales in the Water

Segment operating income decreased by 37.2% year on year

Treatment Facilities segment.

due to the decrease in net sales, the deterioration of the sales com-

As regards operating income for the segment, we forecast an

position with a decrease in service business sales, and an increase inincrease year on year mainly due to the benefits of increased sales,

SG&A expenses.

despite the increase in SG&A expenses and the change in composition of sales. The operating margin is also expected to improve.

Orders

Sales

Operating Income(Millions of yen)

(Millions of yen)

(Millions of yen)

136,595

140,507
121,791 125,237

130,700

141,374

137,348
124,777 124,499

124,052

19,517

20,12718,181

17,032
12,641

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

2009

2010

2011

2012

2013

Kurita Water Industries Ltd. Annual Report 201315

overseas OPERATIONS
Kurita Water Industries is conducting global business through consolidated group companies andone affiliated company.

4
7
9 10
11 13
5

6
3

12

2
8
1

Overseas Sales by Region(Billions of yen)

Main Overseas Consolidated Group Companies
and One Affiliated Company

Water Treatment Chemicals■

EquityOwnership (%)

R$6.986
S$4

100.0
100.0

1
2

Kurita do Brasil LTDA.
Kurita (Singapore) Pte. Ltd.

1975
1978

3

Kurita Water (Malaysia) Sdn. Bhd.

1994

RM$0.6

83.3

4
5
6
7
8
9

Kurita Europe GmbH

1989
1987
1989
1995
1986
1974

EUR2.301
NT$20
BAHT92¥550
US$2
W2,500

95.0
100.0
85.0
90.1
92.5
33.2

Year of
Establishment

Paid-in Capital(Millions)

EquityOwnership (%)

Kurita (Taiwan) Co., Ltd.
Kurita-GK Chemical Co., Ltd.
Kurita Water Industries (Dalian) Co., Ltd.
P.T. Kurita Indonesia
Hansu Ltd.

Manufacture, sale, operation and maintenance of water treatment systems and facilities
2
10
11
12
13

16

Paid-in Capital(Millions)

26.0

26.4

3.0

2.9

3.1

1.4
2.3

1.6
1.4

Kurita (Singapore) Pte. Ltd.
Hansu Technical Service Ltd.
Kurita Water Industries (Suzhou) Ltd.
Kurita America, Inc.
Kuritec (Shanghai) Co., Ltd.

Kurita Water Industries Ltd.

Annual Report 2013

1978
1988
2004
1996
2001

S$4
W400
¥530
US$3
¥30

100.0
59.4
100.0
100.0
100.0

1.3
2.8

19.0

30.5
3.0
1.2
2.3

2.6

Manufacture & sale of water treatment chemicals

Water Treatment Facilities■

Year of
Establishment

29.3

1.4
1.6

23.9
22.5

20.1

19.2
13.4

2009
Asia

■

■

2010
2011
North America■

2012
Europe2013
Others■Overseas Sales
by Segment

12.0 bn(Billions of yen)

30.5 bn
18.5 bn

Water
Treatment
Chemicals■ Water
Treatment
Facilities■

Research and development
Kurita’s Approach to R&D

of knowledge we have cultivated over many years to accurately

As well as evolving and developing its core technologies for boiler
and cooling water treatment, ultrapure water production, wastewater treatment, and water reclamation, the Kurita Group is also
actively developing new products and technologies to broadly meetthe needs of industry and society to improve productivity, reduce
environmental impact, and create energy.
The Kurita Group’s R&D is guided by a three-point focus on the“actual place,” “actual part,” and “actual situation.” Besides conducting
our research at the lab, we attach importance to verify performanceof our developed products at customers’ sites in the process of creating
new products and services.
The Kurita Group employs a total of approximately 140 R&D
personnel, equivalent to3.0% of its total workforce.
In the year ended March
31, 2013, total R&D
expenses were ¥4,362
million, equivalent to 2.4%of net sales.

anticipate overseas customers’ needs, and quickly develop new
products and technologies that match the needs of each region.
(2) Strengthen and cultivate core technologies
The Kurita Group has various core technologies necessary for water
treatment including membrane separation, polymers, ion exchange,advanced analysis and sensing, slime control, and electronic device
cleaning and surface treatment. In order to differentiate ourselvesfrom our competitors in the future, we will work to further bolster
our core technologies, which represent our strengths, and use theseto develop innovative, creative products that are technologicallysuperior to others in the field.
(3) Create new business areas
The Kurita Group believes that its mission is to find solutions forproviding water, food, and energy, which are problems shared by all
people. For example, concerning the issue of food, we have developed technologies using soil & water conditioning and microorganisms, to ensure food safety and security or to increase crop yields . In
the energy field, we are working proactively to create new businessareas, such as converting waste into energy. Meanwhile, we have

Initiatives under the Medium-term Management Plan, Take Action 2014 (TA-14)

launched a joint research project with the Japan Aerospace Exploration Agency (JAXA) to develop a future-type water recycling system
for space stations.

Under TA-14, we positioned strengthening of R&D functions as a key
initiative. In particular, we are focused on the following points.
(1) Develop new products and technologies to contribute tooverseas business expansion
An important key to overseas business expansion is to organicallycombine the three functions of water treatment chemicals, water

R&D Expenses(Millions of Yen)treatment facilities, and maintenance services to provide optimal
water treatment in each region. Overall, the world has a limited

4,363

4,225

3,990

supply of water available for industrial use, and there are regional
differences in both water

2.2

2.3

2.2

4,362

4,232

2.2

2.4

quality as well as legal andregulatory systems. Whiledifferent regions havedifferent cultures andapproaches, we will leverage the wealth

2009

2010

R&D Expenses

2011

2012

2013

Ratio of R&D Expenses to Net Sales (%)

Kurita Water Industries Ltd. Annual Report 201317

Corporate Governance
Basic Policy

conducted properly, Kurita established its Internal

The Kurita Group aims to contribute broadly toControl Reporting System in accordance with thesociety and meet the expectations of its stakehold-Japanese Financial Instruments and Exchange Act,ers, including shareholders and investors, custom-and confirms the effectiveness of and implements

ers, regional communities, business partners andcontinuous improvements to this system.

employees. The Group does this through corporate
activities in the fields of water and environment in

Corporate Governance Structure

accordance with the Kurita corporate philosophy,

As of June 27, 2013, Kurita’s Board of Directors com-

“Study the properties of water, master them, andprised nine directors, including one external direc-

we will create an environment in which nature andtor. The Board of Directors’ meetings are held at

man are in harmony.” To realize these aims, theleast once per month in principle. At the meetings,

Group has adopted a basic corporate governancethe directors set management policy and makepolicy with two main components. The first isother important management decisions, and moni-

establishing management systems that improve

tor and oversee directors’ execution of their duties.

management transparency, efficiency, speed, and

The Board of Directors’ meetings are chaired bysustainably increase corporate value over the longthe president and in principle held monthly on aterm. The second is rigorous oversight of manage-

regularly scheduled basis and whenever necessary

ment and operational execution.

on an ad hoc basis. An external director isappointed to supervise management in the Board

Internal Control System

of Directors’ meetings, and to provide an objective

In May 2006, the Kurita Group formulated the Fun-perspective from outside the Company. The mem-

damental Policy Regarding the Establishment ofbers of the Audit & Supervisory Board also attend

Internal Control Systems in accordance with thethe Board of Directors’ meetings to oversee andrequirements of Japan’s Companies Act, and hasmonitor the directors’ execution of duties.

subsequently been improving its structures for risk

In 2013 following a partial revision of the

management and internal controls in line with thisCompany’s Articles of Incorporation, the appoint-

basic policy. The Fundamental Policy Regarding thement period for directors was shortened from two

Establishment of Internal Control Systems has beenyears to one year. This change is intended torevised by a Board of Directors’ resolution. To ensure

increase the Company’s responsiveness to changes

that the Kurita Group’s financial reporting isin the market environment, foster a greater sense oftension among directors with regard to management, and facilitate flexible and timely revisions ofCorporate Governance Structure

the management structure as needed.
The Board of Directors has also established an

General Meetingof Shareholders

Board of Directors

authorization protocol based on authorization
and review regulations to complement its

Audit & Supervisory
Board

decision-making.

Members of Audit &Supervisory Board

In terms of operational execution, Kurita has an
Executive Committee to ensure that operations are

Executive Committee

Internal Auditing
Department

Operating Divisions

President

executed smoothly in accordance with management policies decided at the Board of Directors’
meetings. The committee comprises five directors,
including representative directors. The committee

18

Kurita Water Industries Ltd.

Annual Report 2013

meets twice monthly as a general rule.
Kurita has employed an executive officer

measures for improvement to the president. From
the fiscal year beginning April 1, 2008, the depart-system since June 2005 with the aim of strengthen-ment has been responsible for monitoring theing operational execution capabilities. Kurita cur-status of internal controls and recommending andrently has nine executive officers.

supporting improvements in response to the introduction of the internal controls reporting system

Audit & Supervisory System

for financial reporting mandated by the Japanese

Kurita employs an audit & supervisory system. As of

Financial Instruments and Exchange Act. The

June 27, 2013, the Audit & Supervisory Board com-

department also monitors the Group’s implementa-

prised three members, including two externaltion and improvement of risk management.

members. The Audit and Supervisory Board decides

The members of the Audit & Supervisory Boardon audit policies for the fiscal year, the allocation of

discuss the Internal Auditing Department’s audit

duties to each of its members, specific items to beplan and exchange opinions regarding the results

performed, schedules, and other items for execut-of audits, the assessment of internal control overing audits. Based on this framework, each member

financial reporting, and the assessment of riskof the Audit & Supervisory Board then conducts

management.

audits.
The members of the Audit & Supervisory Board

Kurita has appointed Grant Thornton Taiyo ASG
LLC as its accounting auditor, in accordance withattend Board of Directors’ meetings, Executive

the law, to implement and enhance the Company’s

Committee meetings, and other important com-accounting audits.

pany meetings and monitor the directors’ execuof its oversight responsibilities. Other responsibili-

External Director and External Members of
the Audit & Supervisory Board

ties of the members of the Audit & Supervisory

Kurita appoints an external director to supervise

Board include conducting asset status surveys ofmanagement in the Board of Directors’ meetings,

the entire Group, including subsidiaries, and audit-

and to provide an objective perspective from out-

ing the development and operation status of inter-side the Company. Kurita has one external director

nal control systems implemented by the directors.

and two external members of the Audit & Supervi-

They also confirm the accounting auditors’ inde-sory Board. Regarding the independence of thependence and fulfillment of duties, and meet withexternal director and members of the Audit &the accounting auditor regularly and as otherwise

Supervisory Board, Kurita judges that there is nonecessary to discuss the accounting audit andpossibility of a conflict of interest with shareholders

exchange opinions.

given their financial record and background.

tion of duties and the Board of Directors’ fulfillment

The Internal Auditing Department, which

The external director voices opinions from anreports directly to the president, is tasked withindependent position at Board of Directors’ meet-strengthening internal audits. As of June 27, 2013,

ings. This ensures a multilateral perspective andthe head of the department and eight subordinate

greater objectivity in directors’ decisions on busi-

staff members conduct internal audits of theness execution. The external members of the Audit­Company and other Group companies to ascertain& Supervisory Board make use of their specialized

any issues or problems arising in the execution of

wisdom to conduct audits from an independent

duties. The department then recommends

position. This increases the objectivity of manage-

Kurita Water Industries Ltd. Annual Report 201319

ment supervision.
Mr. Seiji Nakamura, Kurita’s part-time externaland part-time external members of the Audit &Supervisory Board. Kurita concluded a limited liabil-

director, has served as executive vice president andity agreement with Mr. Seiji Nakamura, the part-

representative director of Mitsui O.S.K. Lines, Ltd.,

time external director, and Mr. Tamio Uda, thepresident and representative director of MOL Ferry

part-time external member of the Audit & Supervi-Co., Ltd., and as a member of the Policy Board ofsory Board, to limit their liability for damages to a

Bank of Japan. None of these have any special

certain degree pursuant to the provisions of Article

interests in Kurita. Mr. Chiaki Kuzuu, Kurita’s full-time

427, Paragraph 1 of the Companies Act, with theexternal member of the Audit & Supervisory Board,

total maximum liability under the said agreement

is a former employee of ITOCHU Corporation.

to be the amount provided for in Article 423, Para-

ITOCHU has no special interests in Kurita. Mr. Tamiograph 1 of the same act.

Uda, a part-time external member of the Audit &Kurita has registered the external director andSupervisory Board, is an attorney and has no spe-

the two external members of the Audit & Supervi-

cial interests in Kurita.

sory Board as independent officers in accordance

Mr. Seiji Nakamura, the part-time external direc-

with the Tokyo Stock Exchange’s listing regulations.

tor, attended Board of Directors’ meetings andas required on the proposals and deliberations at

Remuneration Paid to Directors andMembers of the Audit & Supervisory Board

the meetings. In addition to conducting regular

Kurita’s system for compensating directors andaudits, Mr. Chiaki Kuzuu, the full-time external

members of the Audit & Supervisory Board ismember of the Audit & Supervisory Board,

intended to create incentives to continuously workattended Board of Directors’ meetings, Audit &to increase the Company’s enterprise value andSupervisory Board meetings and other importantbusiness results. To this end, the remuneration

meetings to offer a specialist financial and account-packages comprise two components: a basic

ing perspective on matters, as well as appropriately

annual salary and a performance-linked compo-

exchanging opinions with the accounting auditors

nent that reflects the Company’s business results.

and the Internal Auditing Department as describedSpecifically, for directors the basic annual salary is

above. Mr. Tamio Uda, the part-time external

set separately for each office, while for members ofmember of the Audit & Supervisory Board,

the Audit & Supervisory Board the basic annual

attended Board of Directors’ meetings and Audit &salary reflects the full-time or part-time status of theSupervisory Board meetings to offer opinions

officer. The performance-linked amount is variableappropriately as required, mainly from a specialist

and dependent on achievement of performancelegal expert’s perspective.

targets for the fiscal year. To incentivize improved

voiced highly independent opinions appropriately

20

Kurita Water Industries Ltd.

In 2013, Kurita enabled the conclusion of abusiness performance over the medium-to-longlimited liability agreement with external directors

term, a certain proportion of the basic annual salaryand external members of the Audit & Supervisory

is paid to the Directors’ and Audit & Supervisory

Board. This was done to facilitate the use of outside

Board Members’ Shareholding Scheme and allo-

human resources with an emphasis on greater

cated for purchasing the Company’s shares. Based

independence, with the aim of respecting share-on this policy, the remuneration for each director isholder profits and increasing management trans-

decided by the Board of Directors and the remu-

parency. However, in practice the agreement shallneration for each member of the Audit & Supervi-

apply only to part-time external directors

sory Board is decided through deliberation by all of

Annual Report 2013

the members of the Audit & Supervisory Boardin place at each headquarters, business division,

within the total limit set by the General Meeting ofand Group company division.

Shareholders.

Further, Kurita has instituted whistleblower
protection regulations and set up whistleblowing

Compliancedesks, while at the same time providing an internal

The Kurita Group regards compliance activities asconsultation desk and a consultation desk throughentailing more than simple law abidance. Rather,an external organization.

compliance activities are conceived as ethical practices aimed at realizing five values: fairness, trans-

Risk Management

parency, integrity, safety, and coexistence. These

The Managing Director and General Manager of thevalues are set forth in the Code of Ethical Conduct,

Corporate Planning Division is designated as theestablished in 2000. Kurita then prescribed its Basic

officer to promote risk management for the Kurita

Principles and Compliance Guidelines to PracticeGroup. In this role, the officer regularly conducts

Ethical Conduct to ensure rigorous compliancerisk analysis and evaluation, and takes steps towith laws, regulations and social ethics in Kurita’s

minimize risks where possible. As described above,

daily business activities.

monitoring of the execution status and improve-

Kurita has established a Compliance Committee, chaired by the executive senior managing
director (representative director), and a Groupment status of risk management is conducted by
the Internal Auditing Department.
Among serious risks, those related to compliance

Compliance Committee, also chaired by the same

are the responsibility of the Compliance Committee

executive senior managing director, comprisinghead, and their management is strengthened by the

representatives from Group companies in Japan.

Compliance Committee. Those related to labor, health,

The Kurita Group determines policies and priority

and safety are the responsibility of the Headquarters

measures related to compliance activities in these

Health and Safety Committee head, and their man-committees, which it implements thoroughly for all

agement is strengthened by the Headquarters Healthexecutives and employees through subcommittees

and Safety Committee.
For more information on risks, please refer toRemuneration Paid to Directors and Members of the Audit & Supervisory Boardfor the Fiscal Year Ended March 31, 2013
Classification

Total
remuneration paid

Total remuneration paid by type (Millions of yen)

Basic
(Millions of yen) remuneration

Directors(Excluding external
directors)

Members of the Audit& Supervisory Board(Excluding external
members of the Audit &Supervisory Board )External members of
the Audit & Supervisory Board

Stock
options

Bonus

Retirement
package

Number ofrecipients(Persons)

431

431

–

–

–

11

32

32

–

–

–

2

45

45

–

–

–

2

Total
consolidated
remuneration Classification
paid

100

Kurita builds fair and transparent relationships withstakeholders through all its business activities.
The General Manager of the Corporate Planning
Division has overall responsibility in managing thecorporate information and IR of the Kurita Group.
year, at which time the president explains the results

Directorand holds a Q&A session. In addition, the president

Total consolidated remuneration paid by type
Division(Millions of yen)Toshiyuki
Nakai

Information Disclosure and Investor
Relations (IR) Activities

Kurita holds an earnings presentation twice a

Total Remuneration Paid by Type to Directors for the Fiscal Year Ended
March 31, 2013
Name

page 38.

Company(Millions of yen)Basicremuneration

Stock
options

Bonus

Retirement
package

100

–

–

–

also conducts overseas meetings twice annually.
Kurita has also set up a dedicated IR website on
which the Company discloses earnings presentationmaterials and a variety of other financial materials.

Only directors whose total remuneration exceeded ¥100 million for the fiscal year ended March 31, 2013.

Kurita Water Industries Ltd. Annual Report 201321

Corporate social responsibility
Relationship with Employees
Basic Policy

products, technologies, and services as they find solutions

The Kurita Group provides a diverse range of employ-to the issues facing customers and society. For operational

ment styles for employees to choose from. By allowing

areas where the Company has needs, we have a study

employees to select a working style that enables them tosabbatical system that provides employees with opportuni-

achieve their individual dreams and to suit their lifestyleties to study at educational institutions and research institu-

and stage in life, we aim to promote employees’ enthusi-

tions in Japan or overseas, as well as a scholarship programasm for their work.

for students which aims to develop personnel who can

Kurita Water Industries works to develop and utilize
its employees based on a personnel system comprising aqualification system, a position system, a wage system,
and a personnel performance review system.

business activities.
We hold a Management Development Seminar eachyear for employees of our overseas group companies. The
objectives of this training include cultivating employees’

Promoting Diversity
To meet global needs, we seek a diverse range of personnel around the world, and aim to hire the right people forthe right positions.

knowledge of Kurita, including its history, features,strengths, and business strategies, as well as developing
their global management skills, and enhancing communication among Group companies.

Employee Breakdown(As of April 2013; Kurita Water Industries)

In 1999, Kurita Water Industries established the Technol-(Management positions
therein)

29 and under
30–39
40–49
50 and over
Total

Full-time
employees
294
405
516
257
1,472

FemaleNon-Japanese

186
7

(5)
(2)

Age

contribute to the advancement of society through our

(0)
(77)
(299)
(204)
(580)

Note: Figures of female and non-Japanese employees are included in
total numbers of employees

ogy Transmission Committee for the purpose of raisingeach employee’s level of expertise and for passing on­Kurita’s technologies and know-how. In 2005, we opened
Kurita Technology College, which aims to develop engineers who will lead the Company in the future. With these
programs, veteran employees’ skills and know-how arereliably passed down to mid-career and young employees
via one-on-one instruction.

– Average age
39.7

Employment of Personnel with Disabilities– Average service years
16.6 years (Male 16.5 years; Female 17.3 years)

employment opportunities for people with disabilities. In– Ratio of female employees among career track employees
3.6%(five of whom have disabilities). With Kurita employees are

Numbers of Employees by Region(As of March 2013; Consolidated)Japan 3,674
Overseas 966(China 274, Thailand 131, Singapore 130, South Korea 120,
Indonesia 103, Brazil 85, Europe 51, Taiwan 38, U.S. 34)

Total 4,640
Ratio of Local Nationals Among Directors in Overseas
Group Companies(As of April 1, 2013)11 of 31 directors are local nationals (35.5%)

In Japan, the Kurita Group provides a wide range ofApril 2013, we founded With Kurita Ltd., with 11 employees
engaged in cleaning Kurita Global Technology Center andother duties. As of May 31, 2013, With Kurita has been
approved as a special subsidiary company under the Act on
Employment Promotion etc. of Persons with Disabilities,
and we expect to exceed the statutory levels with respect
to both the number of persons with disabilities employed
as well as the ratio of persons with disabilities employed(2.0%), which was raised from April 2013.

Employment of Senior Personnel
In conjunction with the enforcement of the amended Act

22

Kurita Water Industries Ltd.

Developing and Utilizing Human Resourceson Stabilization of Employment of Elderly Persons fromThe Kurita Group has a firmly entrenched system that

2006, Kurita Water Industries has established a system toencourages employees to challenge themselves andsecure employment opportunities for people who haveenhance their own skills. We strive to enable employees

retired having reached the mandatory retirement age. Theseto grow so that they can create and develop Kurita’s own

employment opportunities are offered for up to a maximum

Annual Report 2013

of five years from the time of mandatory retirement (60promote comfortable workplace environments. We haveyears old) in accordance with the 2013 amendment to theorganized a health and safety management system

Act on Stabilization of Employment of Elderly Persons.

comprising Health and Safety Committees and Health

Between 2006 and April 1, 2013, a total of 250 seniorand Safety Managers. Under this system, the domestic

employees have been rehired. As of April 1, 2013, there

Group works alongside partnering companies to provide

were 115 senior employees working at the Company.

health and safety education to employees and to con-

Second Career Support System
Kurita Water Industries has a second career support
system that offers preferential treatment to support
employees who wish to try to work in a different fieldfrom their present one. The employees must satisfy certain conditions to qualify for this system.

duct health and safety drills. We also develop work standards and provide instruction on them, maintain andinspect employees’ safety gear and other facilities toprevent accidents. The Group also examines ways to deal
with disasters, discovers their causes, and drafts
countermeasures.
Kurita Water Industries’ Health and Safety Committee

Child-Raising Leave and Shortened Working Hours

is chaired by an executive senior managing director andfor Child Raising

general manager of the Administrative Division, with the

In accordance with the Act on Advancement of Measuresgeneral manager of the Personnel and Labor Relations

to Support Raising Next-Generation Children, Kurita

Department serving as the deputy chairman. The com-

Water Industries has established an environment thatmittee chair appoints the remainder of the committee

makes it easier for employees to balance work with rais-

members, selecting employees with experience in healthing children.

and safety.

In principle, employees can take child-raising leave
until the day that their child reaches one year and six
months of age, but this period can be extended if stipulated conditions are met.
As of April 2013, over the past three years a total of 26
employees (including one male employee) have used thechildcare leave system, while 353 employees have taken
advantage of another system that allows employees raising children to have shortened ­working hours.

Nursing Care Leave and Shortened Working Hours
for Nursing CareAt Kurita Water Industries, employees with a family
member who needs nursing care and who wishes tocontinue to work after taking nursing care leave, may takenursing care leave up to a total of one year (365 days) in

Appropriate Labor Conditions and Industrial
Relations
In addition to securing the Company’s sound growth andcontinuation, Kurita Water Industries and the labor union
maintain a sound and fair relationship. Labor and management each do their utmost to improve the economic
and social standing of union members and to maintainand improve working conditions.

Human Rights
Kurita works to raise awareness of human rights issues
throughout the Group. This effort includes guidelines
aimed at preventing various types of discrimination andharassment, as well as regularly holding human rights
training programs.

principle. Also, employees may use the shortened working hours system for a cumulative total of up to 12
months per family member depending on the conditionof the family member requiring care.

Health and Safety
In accordance with the Industrial Safety and Health Act,
Kurita Group companies in Japan have established healthand safety rules in order to prevent employees frombeing harmed by occupational disasters, as well as tomaintain and improve the health of employees, and to
Kurita Water Industries Ltd. Annual Report 2013

23

Relationship with Customers
The Kurita Group strives to provide products, technologies and services that excel in terms of
quality, including safety, as well as cost performance that customers expect.
Quality Assurance Policy

our Corporate Philosophy and the principles of the Basic

The Kurita Group’s Quality Policy is to speedily provide

Environment Act.

our customers with products, technologies and services
that can meet their quality expectations, thereby winningtheir unshakable trust. In accordance with this Quality
Policy, we will continue to enhance our problem-solving
capabilities, with a focus on “quality via products” and“quality via people” from the customers’ perspective. To
this end, we will extend the capabilities of our humanresources, developing a team that understands what ishappening on the frontlines, knows our customers, andprovides value to them. At the same time, we will strive todevelop and improve our products, technologies andservices to help customers boost productivity, reduce
environmental impact, and create energy.

Customer Satisfaction Survey
The Kurita Group conducts a customer satisfaction survey
regularly once every four years in order to verify the
results of the work that we have done to solve our customers’ problems, based on their specific needs. The aimof this survey is to identify issues that can help us cement
the trust of our customers, and to use these findings to
improve our Company and to achieve our medium-term
management plan. We recently conducted the sixth
customer satisfaction survey during October to November 2012, and we received responses from more than 700
customers, including overseas customers.
In the survey, we received high marks from custom-

Developing Human Resources and Improving
Operational Quality and the Environment

ers both in terms of overall satisfaction with the Kurita

The Kurita Group is working to develop human resources

on proposals to solve problems. On the other hand, areas

and enhance our corporation through operational quality

highlighted for improvement included the quality of our

improvements and operational reforms. We are also

proposals as well as verifying results. We will analyze

working to improve the environment in accordance withthese issues, and work to further improve our customers’Group’s business activities as a whole and with our stancelevels of satisfaction.

Relationship with Suppliers
The Kurita Group strives to maintain fair and transparent transactions based on free competition.
In our dealings with business partners, we emphasize relationships built on trust, with an emphasis on placed on the mutual autonomy, profits and property of both companies.
Basic Policies for Purchasing

In making purchases, we buy products with general-use

Our basic policies for purchasing are to have open pur-

specifications to the extent possible, and we select the sup-chases and to coexist and prosper with our businessplier based on competitive estimates from the suppliers in thepartners. We choose suppliers based on a comprehensive

supplier ledger. After deciding on the supplier and the pur-set of criteria, including product quality, price competitive-

chase price, we quickly issue an order form to the supplier. We

ness, certainty of on-time delivery, management stability,

keep track of the delivery deadline and make payments

and green purchasing (RoHS directive) compliance.

appropriately in compliance with our payment guidelines.

Purchasing Guidelines

market research as needed, and keeps track of the state of

Kurita Water Industries has put in place purchasing guidelines. The purpose of these guidelines is to establish

24

Furthermore, the department in charge performs
the industry along with the economic environment, as we
strive to choose blue-chip suppliers and gather

purchasing standards, reduce product costs, and save

information on new products. Also, the responsible General

expenses by purchasing inexpensive, high-quality goods

Manager keeps track of the supplier’s fulfillment of obliga-

from the best suppliers on an as-needed basis, thereby

tions to prevent losses or damages due to problems such

improving management efficiency.

as late delivery or poor product quality.

Kurita Water Industries Ltd.

Annual Report 2013

Relationships with Regional Communities
The Kurita Group is actively working to use the insight and expertise built up in its businesses togive back to society as a good corporate citizen.
Kurita Water and Environment Foundation

Tree-planting Activities(Public Interest Incorporated Foundation)

In 1999, Kurita

Kurita Water Industries makes a monetary contribution toplanted approxi-

the Kurita Water and Environment Foundation, as a social

mately 300 broad-contribution activity expense.

leaf trees, including

The Kurita Water and Environment Foundation is acherry, Japanesepublic interest incorporated foundation established withzelkova, maple, andbasic funds by Kurita Water

flowering dogwood,

Monetary Contribution to the Kurita
Water and Environment Foundation

Industries in 1997. Kurita groupin a mountaincompanies make contributions

forest in Hinode-cho, Tokyo, as part of its 50th anniversary(Millions of yen)

to the Foundation every year

commemorations. The forest is named the Kurita A­ soudairato provide operating funds. By

Shikisai Forest, and volunteer programs to tend to theproviding subsidies for surveys,

trees are held every year.

44

Kurita Water Industries Ltd.

46
42

47

43

The Kurita Asoudaira Shikisai Forest

research, and international

2009

2010

2011

2012

2013

exchange programs regarding

Volunteer Leave Systemwater and the environment, asAt Kurita Water Industries, all employees are eligible to takewell as other support, theleave for volunteer activities. Employees can take paid

Foundation contributes to theleave for up to two days each fiscal year for such activities.

development of a society that
promotes harmony between

Disaster Recovery Support

people and nature. At the same time, it contributes to the

Kurita lends seawater desalination units to local govern-

creation of a rich global environment. Specifically, thements to help with emergency water shortage relief.

Foundation provides subsidies for surveys and research

In order to provide relief for the victims of the Great

regarding water and the environment conducted by

East Japan Earthquake and help disaster-stricken regions

universities and other research institutes in Japan andrecover, Kurita made a donation of ¥100 million and also

overseas, and subsidies for holding international sympo-

provided ¥27 million in support in the form of approxi-

siums and for researchers and experts to attend interna-

mately 30,000 liters of drinking water.

tional conferences regarding science related to water andFrom June 19 to July 19, 2011, the Kurita Groupthe environment. By the year ended March 31, 2013 wehelped supply water to a hotel being used as an evacua-

had provided ¥414 million in assistance to a total of 898

tion shelter in Minamisanriku, Miyagi Prefecture, one ofprojects.

the areas hit hard by the Great East Japan Earthquake.
Kurita installed a seawater desalination unit there to

Regional Activities

provide approximately 30 m3/day of water for evacuation

At the Kurita Global Technology Center, volunteers con-shelter toilets and washing.

duct cleanup activities in the local area every year. The
Center also accepts visits from local elementary andmiddle school students and other groups from time
to time.

The seawater desalination unit in Minamisanriku,
Miyagi Prefecture

Kurita Water Industries Ltd. Annual Report 201325

Environmental Improvement Activities
The Kurita Group’s basic policy for its environmental activities is to operate in keeping with its
corporate philosophy and endeavor to resolve water and environmental issues so it can contribute broadly to society.
A distinctive aspect of the Kurita Group’s environmental improvement activities is that activities are carried out from the three perspectives ofsocietal needs, customer needs, and internal change. From the perspective of societal needs, we aim to contribute to realizing a sustainable
society through the development of new products and technologies that contribute to environmental improvement. From the perspective ofcustomer needs, we strive to help customers improve their environmental performance by working to provide products, technologies andservices that improve productivity, reduce environmental impact, and create energy. In the area of internal change, we work to reduce theenvironmental impact from our own business operations through operational improvement and innovation.

The Three Aspects of Kurita’s Environmental Improvement Activities
Kurita’s Own
Environmental
Improvement Activities

Customers’ Environmental
Improvement Activities
Societal Needs

Customer Needs

Internal Change

Realizing a sustainable society
through the development of
new products and technologies
that contribute to environmental
improvement

Products, technologies andservices that will enable
customers to improve theenvironment

Reducing environmental impact
through operational
improvement and innovation

Results of Environmental Activities in the Year Ended March 31, 2013
Responding to Social Needs

new products and technologies developed and the

The Group develops new products and technologies that

resulting environmental benefits to customers. Key results

fundamentally resolve environmental and water-related

for the year under review were as follows.

issues for society. The Group monitors the numbers of

New Environmental Improvement Products and Newly Developed Technologies
Environmental
Improvements

26

Kurita Water Industries Ltd.

New Products and Technologies

CO2 emissions reductionl Low-pressure boiler steam condenser treatment chemicals for food-processing plantsl Cooling water treatment chemicals for the Chinese market, which are applicable to low
quality waterl Boiler water treatment chemicals for bioethanol and sugar plantsl Wastewater reclamation and recycling system for beverage container sterilization processl Reclamation and recycling system for blow water released from cooling towersl Software system to support water and energy saving at water treatment facilities

Waste reduction
・Wastewater treatmentl Anaerobic wastewater treatment processes for wastewater containing suspended solidsl Pellet-forming high-speed coagulation and sedimentation device

Reduction ofenvironmentally harmful
substancesl Cooling water treatment chemicals with reduced environmental impact for blast furnacesof steel refineriesl Cleaning technology with reduced environmental impact for LED substrates

Annual Report 2013

Initiatives for Meeting Customers’ Needs
Kurita helps customers to improve the environment by proposing and implementing solutions that match customers’
needs for reducing the environmental impacts of their plants and other business sites.
Key achievements for the year under review were as follows.

1: Reducing Waste Volume Using Anaerobic
Water Treatment

2: Hybrid Treatment and Water Quality Analysis
Save Energy in Combination

A customer that manufactures

A customer that supplies heatand sells a wide range of chem-

to TOKYO SKYTREE TOWNTM

icals, such as electronic materi-and the surrounding area

als and pharmaceuticalthrough a district heating andproducts, needed to boost thecooling system (DHC) wanted

capacity of its wastewater

to install a state-of-the-art turbo freezer and other energy-

treatment equipment in ordersaving equipment to achieve stable operations as well as

to ensure stable treatment. The

achieve higher than COP1.35, the highest level of energy use

customer was anticipating that an increase in production

efficiency in Japan for a DHC system.

would strain its wastewater treatment process in the

To achieve and maintain this level, it is important tomanufacturing of chemicals used as raw materials forkeep the air conditioner’s auxiliary cooling water systemadhesives, coatings and other materials.

that performs the heat exchange clean at all times, toKurita proposed an improvement measure to boost
treatment capacity by placing an anaerobic wastewater
treatment facility before the existing wastewater treat-

prevent any increase in the LTD value, which is an indicator of the heat exchange efficiency.
In addition to offering cooling water treatment chemi-

ment facility. Anaerobic wastewater treatment offers

cals that match the water quality and operating conditions,advantageous energy savings and waste emission reduc-we proposed a water treatment program that combines

tions in treatment of high-concentration organic waste-consulting services such as real-time LTD value monitoringwater, and produces only small amounts of excess sludge.

technologies, freezer inspections, and data analysis.

Because it uses anaerobic microorganisms attached to

By implementing this proposal, the customer suc-carriers in high concentration, it overcomes previous

ceeded in preventing the LTD value from increasing, evendifficulties in applying anaerobic treatment to wastewater

approximately one year after the start of the trial run, andfrom chemical or factory processes. By applying thisthe cooling water system achieved COP1.36.

proposal, the customer was able to significantly reduce
emissions of BOD (biochemical oxygen demand).

Note: COP: Coefficient of performance. Calculated as air conditioner
capacity (kW)/power consumption (kW)LTD: Leaving Temperature Difference. Coolant condensing temperature—cooling water outlet temperature

Internal Change Initiatives
To drive internal change, we started by categorizing all Group businessfacilities into production sites and administrative offices. We set goals insites, in connection with changes in customers’ production conditions.
With respect to waste disposal, although there was specific waste generated

keeping with the nature of each operation. Objectives are to reduce environ-in conjunction with both the disposal of equipment used in the restoration

mental impact, notably by lowering carbon dioxide emissions and waste from

effort following the Great East Japan Earthquake as well as the large-scaleGroup operations.

office relocation, we saw a significant reduction in waste at ultrapure water

To lower carbon dioxide emissions, we worked to reduce energy consumption through efforts such as adopting “Cool Biz”—a nationwide initiative to saveenergy by relaxing office dress standards while reducing air conditioning—andby installing high-efficiency lighting and air conditioning units. However, there
was a year-on-year increase in Kurita Group’s overall carbon dioxide emissions
as a result of the increase in energy use at some of our ultrapure water supply

supply facilities thanks to improvements in our operation management
method for wastewater treatment facilities.
Moreover, we started initiatives to reduce waste at worksites, and proceededwith the preparation for a full scale launch in 2013.
We will disclose more specific and detailed data in the Kurita Group Environmental Report.

Kurita Water Industries Ltd. Annual Report 201327

directors and MEMBERS OF THE audit & supervisory board
As of June 27, 2013

Directors

Toshiyuki Nakai*

Tetsuo Saeki*

2011	President
Representative Director (to present)
2009	President, Kurita Engineering Co., Ltd.
2005	Director
1979	Joined Kurita Water Industries Ltd.

2013

2007
2005
1974

Executive Senior Managing Director
Representative Director
General Manager of Administrative Division (to present)
Managing Director
Director
Joined Kurita Water Industries Ltd.

Kaoru Kajii

Kouichi Iioka

Kiyoshi Itou

2013

2013

2013

2011
2009
2005
1974

General Manager of Facilities Division andGeneral Manager of Ultra Pure Water
Supply Group, Facilities Division (to present)
General Manager of Research andDevelopment Division
Managing Director (to present)
Director
Joined Kurita Water Industries Ltd.

2011
2007
2005
1975

Managing Director
General Manager of Chemicals Division(to present)
President and Representative Director,
Kuritec Service Co. Ltd.
Director
Executive Officer
Joined Kurita Water Industries Ltd.

2009

2007
1979

Managing Director
General Manager of Corporate Planning
Division (to present)
Director
General Manager of Administrative
Division
Executive Officer
Joined Kurita Water Industries Ltd.

Motoyuki Yoda

Takahito Namura

Youichi Kurokawa

Seiji Nakamura

2012	General Manager of Domestic Sales
Group I, Facilities Division (to present)
2009 Director (to present)
1978 Joined Kurita Water Industries Ltd.

2012	General Manager of Sales Group I,
Chemicals Division (to present)
2011	Director (to present)
1977	Joined Kurita Water Industries Ltd.

2013	General Manager of Facilities
Production Division (to present)
2011	Director (to present)
1984	Joined Kurita Water Industries Ltd.

2013 	External Director (part-time)(to present)
2007 	Member of the Policy Board of the
Bank of Japan (to 2012)2003 	President and Representative
Director of MOL Ferry Co., Ltd.
2000 	Executive Vice President andRepresentative Director of Mitsui
O.S.K. Lines, Ltd.
1965 Joined Mitsui O.S.K. Lines, Ltd.

Members of the Audit & Supervisory Board
Chiaki Kuzuu

Shiro Hayashi

Tamio Uda

2004	External Member of the Audit &Supervisory Board (to present)
2002	Chief Financial Officer, Machinery
Company, ITOCHU Corporation
1971 Joined ITOCHU Corporation2012	Member of the Audit & Supervisory
Board (to present)
2009	General Manager of Personnel andLabor Relations Department,
Administrative Division1977 Joined Kurita Water Industries Ltd.

2009	External Member of the Audit &Supervisory Board (part-time)(to present)
1977	Established Harada Uda Law Office(currently Uda Law Office)1974	Admitted to the Japan Bar Association* Representative Director

28

Kurita Water Industries Ltd.

Annual Report 2013

FINANCIAL SECTIONManagement’s Discussion and Analysis.................................. 30
Consolidated Balance Sheets....................................................... 40
Consolidated Statements of Income and Consolidated
Statements of Comprehensive Income.................................... 42
Consolidated Statements of Changes in Net Assets............ 43
Consolidated Statements of Cash Flows................................. 44
Notes to Consolidated Financial Statements......................... 45
Report of Independent Certified Public Accountants........ 65

Kurita Water Industries Ltd. Annual Report 2013

29

MANAGEMENT’S DISCUSSION AND ANALYSIS

Business Overview
During the fiscal year ended March 31, 2013, the Japanese economy continued
to face a challenging environment, despite continued demand generated by
the recovery from the Great East Japan Earthquake. The Japanese economy was
negatively impacted by slower growth in exports and production due to thedecelerating world economy, along with capital spending adjustments, sluggish consumer spending, concerns about electricity supply, and the yen’s continued appreciation. The global economy generally saw a slowdown
increasingly take hold around the world. In Asia, China and India experienced
slower economic growth, despite sustained economic expansion in ASEAN
countries. The global economy was also weighed down by prolonged economic stagnation in Europe due to the debt crisis. Meanwhile, the U.S. showedsigns of a moderate economic recovery, highlighted by an increase in housing
starts supported by quantitative easing policies, along with a lower unemployment rate.
The markets in which the Kurita Group operates remained challenging
throughout the fiscal year. In Japan, both capital spending and capacity utilization at plants stayed low, as the elimination and consolidation of production
bases and the trend of transferring operations overseas continued in the manufacturing industry, the main source of customers for the Group. Overseas, theoperating environment also remained harsh, as demand declined with theslower economic growth in China and the prolonged stagnation of the European economy, in addition to the emergence of movements to postpone andscale down large capital investments in the electronics industry in East Asia.
In this business environment, the fiscal year ended March 31, 2013 was thefirst year of Take Action 2014 (TA-14), our three-year medium-term management plan based on the theme of “Execution and Evolution.” The basic objectives of the plan are to demonstrate the Group’s comprehensive strengths tosecure the trust of customers in Japan and other countries. Under the plan, theGroup is endeavoring to expand overseas business while also raising its domestic market share. Particularly overseas, the Company concentrated management resources on growing areas and industry sectors with a targeted

Orders by Segment
Years ended March 31(Millions of yen)approach focused mainly on Asia, by setting up operating bases and strengthening its human resources. However, the Group was unable to increase earn-

195,065

175,162 181,951

197,256

186,741

ings sufficiently and suffered falls in overall orders, sales, and profits from theprevious fiscal year.
136,595 121,791 125,237 140,507 130,700

Operating Resultsa) Orders
In both the Water Treatment Chemicals and Water Treatment Facilities segments, the Group focused on expanding performance in the fiscal year ended
March 31, 2013.
30

Kurita Water Industries Ltd.

Annual Report 2013

58,4702009

53,3702010

56,7142011

n Water Treatment Facilities
n Water Treatment Chemicals

56,748
2012

56,0402013

In the Water Treatment Chemicals segment, Kurita worked to expand sales ofcore products, including cooling water treatment chemicals and chemicals forreverse osmosis membranes in Japan and overseas, and to strengthen sales capabilities in priority regions such as China and Southeast Asia. At the same time, theGroup strove to reduce overall expenses, including expenses at Group companies.

Sales by Segment
Years ended March 31(Millions of yen)

199,706

178,520 181,234

193,792

180,143

In the Water Treatment Facilities segment, Kurita worked to bolster its overseas business foundation with a view to expanding business globally. Measures
included strengthening ties with Group companies around the world andopening the Malaysia Branch to enhance sales activities in Southeast Asia.
Despite these efforts, orders decreased in both the Water Treatment Chemicals and Water Treatment Facilities segments. Total consolidated orders for the141,374 124,777 124,499 137,348 124,052
58,331
2009

53,743
2010

56,735
2011

56,443
2012

56,091
2013

Kurita Group in the fiscal year ended March 31, 2013 were down 5.3% versus
the previous fiscal year to ¥186,741 million.
b) Net Sales
Consolidated net sales for the fiscal year ended March 31, 2013 decreased¥13,649 million, or 7.0%, to ¥180,143 million. In the Water Treatment Chemicals

n Water Treatment Facilities
n Water Treatment Chemicals

Gross Profit
Years ended March 31(Millions of yen)segment, sales were favorable in Asia, particularly in China and Thailand, butwere negatively affected by elimination and consolidation of production bases

65,886

63,831

61,29962,660

2009

2010

2011

2012

2013

and lower capacity utilization at customers’ plants in Japan. In the Water Treat-

59,096

ment Facilities segment, while sales of water treatment facilities for the semiconductors and LCD panel industries in Asia increased, sales declined overall, mainly
due to elimination and consolidation of production bases and lower capacity
utilization at customers’ plants, and a fall in earthquake recovery-related demand.
c) Cost of Sales
Cost of sales was down 5.4% to ¥121,047 million from ¥127,905 million in thefiscal year ended March 31, 2012. As a percentage of sales, cost of sales
increased to 67.2% in the year ended March 31, 2013, from 66.0% in the previous fiscal year. This increase in the cost-of-sales ratio was due in part to the fallin the cost-of-sales ratio in the Water Treatment Facilities segment, caused
mainly by lower sales to the electronics industry.
d) Selling, General and Administrative (SG&A) Expenses

SG&A Expenses
Years ended March 31(Millions of yen)

35,89634,941

35,52836,503

38,106

2009

2010

2011

2012

2013

SG&A expenses were ¥38,106 million, up 4.4%, or ¥1,603 million, from ¥36,503
million in the fiscal year ended March 31, 2012. The increase in SG&A expenses
was mainly attributable to a ¥501 million year-on-year increase in salaries andallowances, due to an increase in the number of employees. Another factor wasa ¥130 million year-on-year increase in research and development expenses. At
the same time, other increased by ¥849 million year on year, mainly due tohigher rental expenses.

Kurita Water Industries Ltd. Annual Report 201331e) Operating Income

Operating Income by Segment

Operating income decreased to ¥20,989 million in the year ended March 31,
2013, down 28.6% from ¥29,382 million in the fiscal year ended March 31, 2012.

Years ended March 31(Millions of yen)

The operating margin declined to 11.7% from 15.2% in the previous fiscal year.
27,935f ) Segment Information

26,35827,131

29,382

20,989Water Treatment Chemicals
Orders and Sales
In Japan, although chemicals for reverse osmosis membranes and certain otherproducts saw increased orders and sales, both orders and sales declined for mainstay cooling water treatment chemicals and wastewater treatment chemicals,

19,51718,181

8,417
2009

8,177
2010

17,032

20,127

12,641

10,099
2011

9,268
2012

8,334
2013

mainly due to the elimination and consolidation of customers’ plants and falling
capacity utilization. Overseas, both orders and sales increased overall, supported

n Water Treatment Facilities
n Water Treatment Chemicals

by steady growth in Asia, especially in China and Thailand, despite lower orders
and sales in Europe. However, this did not make up for the overall decrease inorders and sales for the Water Treatment Chemicals segment as a whole.
As a result, total Group orders for the Water Treatment Chemicals segment

Operating Margin by Segment
Years ended March 31(%)

were ¥56,040 million (down 1.2% versus the previous fiscal year), while sales
were ¥56,091 million (down 0.6%).
15.2

Operating Income
Segment operating income declined 10.1% year on year to ¥8,334 million. This was

14.4
14.0
13.8

mainly due to lower sales and changes in the sales mix, as well as higher SG&A

14.8
14.6

17.8

16.4

15.0

15.2

13.7

14.7

14.9

11.7

expenses, such as personnel costs in line with an increase in employees overseas.
Water Treatment Facilities
Orders and Sales
In the electronics industry, both orders and sales declined in the ultrapure watersupply business, water treatment facilities, and maintenance services in Japan,
reflecting the elimination and consolidation of plants and lower capacity utilization rates among major customers. Overseas, while some customers postponedor scaled back capital investments, sales of water treatment facilities for semiconductor and LCD panel factories in Asia increased. In general industries, althoughorders for and sales of water treatment facilities for the steel and the food industries increased, water treatment facilities for the electric power industry and maintenance services posted declining orders and sales due to a fall in earthquake
recovery-related demand and lower capacity utilization at customers’ plants.
As a result, total Group orders for the Water Treatment Facilities segment were¥130,700 million (down 7.0% versus the previous fiscal year), and sales declined to¥124,052 million (down 9.7%).

32

Kurita Water Industries Ltd.

Annual Report 2013

2009

2010

2011

n Water Treatment Chemicals
n Totaln Water Treatment Facilities

2012

10.2

2013

Operating Income
Operating income decreased significantly by 37.2% year on year to ¥12,641

Overseas Sales by Region
Fiscal year ended March 31, 2013

million. This was mainly due to lower sales and changes in the sales mix, as wellas higher SG&A expenses, such as personnel costs in line with an increase in

9.9%

3.9%

employees overseas.

78.4%

7.7%
Overseas Salesg) Overseas Sales¥30,472
millionOverseas sales rose 4.1% to ¥30,472 million in the year ended March 31, 2013.
The overseas sales ratio with respect to consolidated net sales increased to
16.9% from 15.1% in the previous fiscal year.
Sales by Regionn Asia¥23,898 millionn North America

¥2,349 million• Asia: Up 6.0% to ¥23,898 million; 78.4% of total overseas salesn Europe

¥1,196 million• North America: Up 1.7% to ¥2,349 million; 7.7% of total overseas sales

n Other regions

¥3,028 million• Europe: Down 12.9% to ¥1,196 million; 3.9% of total overseas sales• Other regions: Down 0.5% to ¥3,028 million; 9.9% of total overseas salesh) Other Income and Expenses

Net Income per ShareYears ended March 31(Yen)

The net result of other income and expenses was net other expense of ¥1,212
million, compared to net other income of ¥294 million in the previous fiscal year.

126.69134.38134.02130.65This decline was mainly attributable to a loss on valuation of investment

92.43

securities of ¥2,343 million and impairment losses of ¥1,108 million related to
the relocation of the head office, which was partially offset by a gain on sales ofproperties of ¥1,051 million.
i) Income before Income Taxes and Minority Interests
Income before income taxes and minority interests decreased 33.4% to ¥19,776

2009

2010

2011

2012

2013

million from ¥29,676 million in the previous fiscal year.
The pretax profit margin decreased to 11.0% from 15.3% in the previous
fiscal year.
Return on Equityj) Net Income
After deducting income taxes and minority interests in income, Kurita recorded

Years ended March 31(%)

net income of ¥11,476 million for the fiscal year ended March 31, 2013, a 30.7%
decrease from ¥16,548 million in the previous fiscal year.
Net income per share decreased to ¥92.43 from ¥130.65 in the previous
fiscal year, and the net margin fell to 6.4% from 8.5% in the previous fiscal year.

9.4

9.3

8.8

8.1

Return on equity decreased to 5.5% from 8.1% in the previous fiscal year.

5.5

2009

2010

2011

2012

2013

Note: Return on equity = Net income ÷ Equity (Average) × 100
Equity is defined as net assets less minority interests

Kurita Water Industries Ltd. Annual Report 201333k) Returns to Shareholders
Kurita’s basic policy is to pay stable dividends on an ongoing basis. Kurita strives
to increase its dividends, taking into consideration earnings performance andDividends per ShareYears ended March 31(Yen)investment in its businesses.
In light of future business prospects, and to reward shareholders for theirsupport, Kurita paid an annual dividend of ¥42 per share (of which ¥21 per

34.00

36.00

42.00

40.00

38.00

share was an interim dividend), an increase of ¥2 per share versus the previous
fiscal year’s ¥40 per share (of which ¥20 per share was an interim dividend).
Capital Expenditures
The Kurita Group is committed to making necessary investments in technologi-

2009

2010

2011

2013

2012

cal innovation, production capacity expansion, and competitiveness enhancement in response to intensification of sales competition. In the year ended
March 31, 2013, capital expenditures totaled ¥6,688 million, a decrease of¥1,417 million year on year. (Leased assets and leased obligations were included
for transactions for finance leases which do not transfer ownership.)
The Water Treatment Chemicals segment invested a total of ¥1,458 million,
mainly for renovation of water treatment chemicals production facilities. This
represented a decrease of ¥5 million from the previous fiscal year.

Capital Expenditures andDepreciation and Amortization
Years ended March 31(Millions of yen)

56,322

The Water Treatment Facilities segment invested a total of ¥5,230 million,
primarily to install and expand facilities for the ultrapure water supply business.
This was a ¥1,411 million decrease from the previous fiscal year.
Depreciation and amortization decreased by 6.1% year on year to¥15,054 million.

11,716
8,083

Research and Development
Kurita conducts R&D mainly through its Research and Development Division.
In the year ended March 31, 2013, total R&D expenses increased 3.1% year
on year to ¥4,362 million, equivalent to 2.4% of net sales.
The Kurita Group employs approximately 140 R&D personnel, equivalent to3.0% of its total workforce (4,640 personnel on a consolidated basis).
The Water Treatment Chemicals segment’s R&D activities predominantly
involved developing chemicals that help customers improve energy efficiency,
reduce their environmental impact, and boost productivity. Other developments include technologies for systems that monitor water treatment effectiveness. Through these efforts, the segment achieved the following:• Kurita developed a safety boiler water treatment chemical comprised solely ofcompounds found in food and food additives for plants in the food industry.
• For plants manufacturing bioethanol and sugar from sugar cane, which arefound in large numbers in South America and Southeast Asia, Kurita developed

34

Kurita Water Industries Ltd.

Annual Report 2013

2009

2010

16,035

16,066

15,523
5,965

2011

n Capital Expendituresn Depreciation and Amortization

8,105
2012

15,0546,688
2013

a boiler water treatment chemical to prevent the thermal efficiency decreasedby scale formation on the heating surface.
• For plants in the papermaking process that use wastepaper, manufacturing
paper products such as paperboard and newsprint, Kurita developed a pulp

R&D Expenses
Years ended March 31(Millions of yen)

4,363

and paper processing chemical to prevent problems caused by adhesive con-

3,990

4,225

4,232

4,362

2011

2012

2013

tamination originated from wastepaper, such as quality deterioration andpaper breaks.
• Kurita developed a highly cost competitive cooling water treatment chemical
for plants in industrial complexes, containing new polymer compounds. The
Company also developed a portable water quality monitor for cooling water
systems, enabling the Company’s sales engineers to quickly evaluate various

2009

2010

water quality control items and to provide customers with valuable information that they want and need on-site.
The segment’s R&D expenses for the fiscal year ended March 31, 2013
totaled ¥1,367 million, a 2.4% increase versus the previous fiscal year.
In the Water Treatment Facilities segment, Kurita endeavored to further
improve ultrapure water quality to contribute to productivity in the electronics
industry, and to develop wastewater treatment and soil remediation technologies in anticipation of future environmental regulations. Kurita also endeavored
to develop technologies conducive to a recycling oriented society, such aswastewater reclamation for reuse and sludge volume reduction. Through these
efforts, the segment achieved the following:• Kurita developed an ultrapure water production system and trace analysis
technologies to ensure the water quality required in the manufacturing process of the most advanced semiconductors in the world.
• Kurita developed a new sedimentation system—a key component of thewastewater treatment process. The new system takes a completely new
approach to coagulation and sedimentation to reduce costs and save spacecompared with conventional systems.
• Kurita developed a new technology to remove metal residues on surfaces ofadvanced silicon wafers for system LSIs.
The segment’s R&D expenses for the fiscal year ended March 31, 2013
totaled ¥2,994 million, a 3.3% increase versus the previous fiscal year.

Kurita Water Industries Ltd. Annual Report 201335

Financial Position

Total Assets and Return on Assetsa) Assets
As of March 31, 2013, Kurita had total assets of ¥263,580 million, a decrease of¥7,561 million from ¥271,141 million as of March 31, 2012.
Current Assets

As of March 31(Millions of yen) (%)

245,406 251,620 253,298
7.0

6.8

271,141 263,580

6.8

6.3

Current assets as of March 31, 2013 totaled ¥146,874 million, an increase of

4.3¥1,889 million from ¥144,985 million as of March 31, 2012.
This increase was mainly due to an increase of ¥14,137 million in cash andtime deposits, partially offset by decreases of ¥4,969 million in notes andaccounts receivable, trade and ¥6,500 million in marketable securities.
The decrease in notes and accounts receivable, trade reflected decreased
sales during the second half of the fiscal year ended March 31, 2013. The

2009

2010

2011

2012

2013

n Total Assets
n Return on Assets
Note: Return on assets = Net income ÷ Total assets (Average) × 100

increase in cash and time deposits and decrease in marketable securities were
due to decreased investment in negotiable certificates of deposits, which aretreated as marketable securities.

Property, Plant and Equipment, Net
As of March 31(Millions of yen)

Property, Plant and Equipment, Intangible Assets, and Investments and

126,063

Long-term Receivables

116,500

106,608

As of March 31, 2013, property, plant and equipment, net totaled ¥86,820 million,

98,36886,820a decrease of ¥11,548 million from ¥98,368 million as of March 31, 2012. Thisoccurred mainly because depreciation on past years’ investments in ultrapure
water supply business facilities exceeded capital expenditure in the year underreview, the sale of some ultrapure water supply business facilities owned by theCompany, and impairment losses related to the relocation of the head office.
Investments and long-term receivables were ¥28,265 million as of March 31,
2013, an increase of ¥2,162 million from ¥26,103 million a year earlier. The
increase was the result of an increase in unrealized gains on investment securities due to the recovery of share prices after the posting of a valuation loss of¥2,343 million on investment securities in the second quarter.
b) Liabilities
As of March 31, 2013, liabilities totaled ¥54,462 million, a decrease of ¥6,677
million from ¥61,139 million as of March 31, 2012.
Current Liabilities
Current liabilities as of March 31, 2013 were ¥35,415 million, a decrease of¥6,943 million from ¥42,358 million as of March 31, 2012. This was due todecreases of ¥3,349 million in notes and accounts payable, trade, and ¥4,536
million in income taxes payable. The decrease in notes and accounts payable,
trade was due to slower production activities associated with lower sales in the36

Kurita Water Industries Ltd.

Annual Report 2013

2009

2010

2011

2012

2013

second half of the fiscal year. The decline in income taxes payable was due to afall in income before income taxes and minority interests.

EquityAs of March 31(Millions of yen)

Long-term Liabilities
Long-term liabilities as of March 31, 2013 were ¥19,046 million, a small increase

177,291

192,588 198,042

208,891 207,871

of ¥265 million from ¥18,781 million as of March 31, 2012.
c) Net Assets
As of March 31, 2013, net assets totaled ¥209,118 million, an ¥884 million
decrease from ¥210,002 million as of March 31, 2012. The change mainlyreflects a ¥12,217 million increase in treasury stock through a tender offer, a¥6,266 million increase in retained earnings resulting from the posting of¥11,476 million in net income, which exceeded dividend payments in the previ-

2009

2010

2011

2013

2012

Note: Equity is defined as net assets less minority

interests.

ous fiscal year and interim dividend payments in the fiscal year under review of¥5,192 million, and a ¥3,827 million increase in unrealized gains on available-forsale securities owning to an increase in unrealized gains on investment securities.
As a result, total assets were ¥263,580 million as of March 31, 2013, a ¥7,561

Cash Flows from Operating Activities
Years ended March 31(Millions of yen)million decrease from the previous fiscal year-end. As of March 31, 2013, Kurita

43,644had an equity ratio of 78.9%, up 1.9 percentage points from 77.0% a year earlier.
Equity per share at March 31, 2013 was ¥1,744.41, an increase of ¥95.17 from33,658¥1,649.24 a year earlier.

29,79628,282

27,276

2011

2012

2013

Cash Flows
Cash Flows from Operating Activities
Operating activities provided net cash of ¥27,276 million in the fiscal year ended
March 31, 2013, a decrease of ¥1,006 million versus the previous fiscal year. The

2009

2010

main sources of cash were income before income taxes and minority interests of¥19,776 million, ¥15,054 million in depreciation and amortization, and a ¥6,095
million decrease in trade receivables. These were partly offset by ¥4,005 million
from a decrease in trade payables and income taxes paid of ¥13,152 million.
Cash Flows from Investing Activities
Net cash provided by investing activities was ¥4,268 million, a change of¥17,775 million from net cash used in the previous fiscal year. This primarilyreflects an inflow from a decrease in time deposits, net of ¥7,895 million, andproceeds from sale of property, plant and equipment of ¥3,356 million. These
were partly offset by a net outflow of ¥1,393 million after subtracting paymentsfor purchase of marketable securities and investment securities from proceedsfrom sale and redemption of marketable securities and investment securities,
and an outflow of ¥5,048 million for payments for purchase of property, plantand equipment, mainly for equipment for the ultrapure water supply business.

Kurita Water Industries Ltd. Annual Report 201337

Cash Flows from Financing Activities
Financing activities used net cash of ¥18,561 million, an increase of ¥12,954
million versus the previous fiscal year. The main uses of cash were ¥12,216­million for purchase of treasury stock, net and ¥5,241 million for cash
dividends paid.
Cash and Cash Equivalents at End of YearAt March 31, 2013, Kurita had cash and cash equivalents totaling ¥33,313­million, an increase of ¥13,487 million versus March 31, 2012.
Business Risks
The following are summaries of major foreseeable risks present in the businessenvironments in which the Kurita Group operates. Forward-looking statements
herein are based on judgments made by management as of March 31, 2013.
1. Economic and Market Conditions
The Group’s Water Treatment Chemicals and Water Treatment Facilities businesses are affected by economic conditions in Japan and countries and regions
outside Japan where the Group operates. Demand in the Water Treatment
Chemicals business fluctuates in response to factory capacity utilization rates inindustries such as steel, petroleum refining and petrochemicals, and pulp andpaper—the main areas of demand for the business. Such demand fluctuations
may affect the Group’s financial results. Demand in the Water Treatment Facilities business fluctuates in response to trends in capital expenditure in electronics—the main area of demand for the business—and other industries. Such
demand fluctuations may affect the Group’s financial results.
More intense competition with rivals in the Group’s business domains could
lead to declines in prices of products and services, which could lower theGroup’s profitability.
2. Materials and Parts Procurement
The Group procures raw materials and parts from outside the Group for the
manufacture of products and fabrication of facilities. The prices of raw materials
and parts fluctuate based on changes in market conditions, and this may affect
the Group’s financial results.

38

Kurita Water Industries Ltd.

Annual Report 2013

3. Overseas Business Development
The Group is striving to expand its business outside Japan. In contrast to theJapanese market, doing business in overseas markets involves a number ofinherent risks, including the risk of changes to local laws and regulations, the riskof political and economic instability, and the risk of foreign exchange rate fluctuations. If such risks materialized, the Group’s financial results could be affected.
4. New Product Development
The Group continuously endeavors to develop new technology and appealing
new products.
The success of new technology and product development efforts cannot be
guaranteed. The Group may not be able to offer new technologies and productsthat meet the needs of its customers or launch new products in a timely fashion.
The Group may also fail to keep pace with rapid technological innovation andchanging customer needs. If the Group were to fail to develop outstanding new
products, this could hamper its future growth and profitability or otherwise affect its
financial results.
5. Intellectual Property
The Group recognizes the importance of intellectual property and continuallyseeks to register its own intellectual property while avoiding infringing theintellectual property rights held by third parties, both in Japan and overseas.
Given the wide scope of the Group’s business, however, there is potential for
the Group’s intellectual property rights to be infringed and potential for theGroup to infringe the rights held by third parties. Such occurrences may affect
the Group’s financial results.
6. Dependence on Information Systems
The Group’s use of information systems is increasing, as is the importance of
information systems to the Group’s business. If a computer virus or some otherfactor were to obstruct the functions of the Group’s information systems, theGroup’s business activities, financial results, and financial condition could be
negatively affected.
7. Large-scale Natural Disasters
If an earthquake, typhoon, or other kind of natural disaster were to directly or
indirectly upset the Group’s business execution, the Group’s business activities,
financial results, and financial condition could be negatively affected.

Kurita Water Industries Ltd. Annual Report 2013

39

CONSOLIDATED BALANCE SHEETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
As of March 31, 2013 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen

AssetsCurrent assets:

2013

2012

2013

Cash and time deposits (Notes 3, 5 and 7)�����������������������������������������������������������������������������������

¥ 43,039¥ 28,902$   457,864

Notes and accounts receivable, trade (Notes 4 and 5)�������������������������������������������������������������

61,387

66,356653,063

Allowance for doubtful accounts�����������������������������������������������������������������������������������������������������

(104)

(58)

(1,108)Marketable securities (Notes 5 and 6)���������������������������������������������������������������������������������������������

34,00040,500361,702

Inventories (Note 8)�������������������������������������������������������������������������������������������������������������������������������

4,875

5,522

51,865

Deferred tax assets (Note 10)�������������������������������������������������������������������������������������������������������������

1,956

2,294

20,817

Other current assets�������������������������������������������������������������������������������������������������������������������������������

1,719

1,466

18,290Total current assets���������������������������������������������������������������������������������������������������������������������������

146,874

144,985

1,562,495

Investment securities (Notes 5 and 6)���������������������������������������������������������������������������������������������

17,367

14,992

184,765

Investments in unconsolidated subsidiaries and affiliates (Note 5) �����������������������������������

1,384

1,169

14,730

Deferred tax assets (Note 10)�������������������������������������������������������������������������������������������������������������

7,738

8,035

82,328Other investments���������������������������������������������������������������������������������������������������������������������������������

2,015

2,246

21,439Investments and long-term receivables:

Allowance for doubtful accounts�����������������������������������������������������������������������������������������������������

(241)

(339)

(2,565)

Total investments and long-term receivables������������������������������������������������������������������������

28,265

26,103

300,698

13,984

13,962

148,771

Property, plant and equipment, at cost (Notes 15 and 16):
Land (Note 13)�����������������������������������������������������������������������������������������������������������������������������������������
Buildings and structures�����������������������������������������������������������������������������������������������������������������������

59,98265,368638,115

Machinery and equipment�����������������������������������������������������������������������������������������������������������������

87,994

92,180936,111

Construction in progress���������������������������������������������������������������������������������������������������������������������

4,074

2,362

43,349Other facilities �����������������������������������������������������������������������������������������������������������������������������������������

11,368

11,237

120,945

Leased assets �������������������������������������������������������������������������������������������������������������������������������������������

8,183

7,808

87,058

Total���������������������������������������������������������������������������������������������������������������������������������������������������������

185,589

192,919

1,974,351

Accumulated depreciation�����������������������������������������������������������������������������������������������������������������

(98,768)(94,551)(1,050,726)

Property, plant and equipment, net�������������������������������������������������������������������������������������������

86,82098,368923,625

1,619

1,683

17,227¥263,580¥271,141$ 2,804,046

Intangible assets
Total assets�������������������������������������������������������������������������������������������������������������������������������������������
The accompanying notes are an integral part of these statements.

40

Kurita Water Industries Ltd.

Annual Report 2013

Thousands of
U.S. dollars(Note 1)Millions of yen

Liabilities and Net Assets

2013

2012

2013

Short-term borrowings and current portion of long-term borrowings lease­obligations (Note 9)�������������������������������������������������������������������������������������������������������������������������������

¥  1,127¥  1,463$   11,997

Notes and accounts payable, trade (Notes 4 and 5)�����������������������������������������������������������������

17,973

21,322

191,206

Accounts payable, other ���������������������������������������������������������������������������������������������������������������������

6,857

6,237

72,953

Income taxes payable���������������������������������������������������������������������������������������������������������������������������

2,509

7,045

26,692

Advances received���������������������������������������������������������������������������������������������������������������������������������

1,409

945

14,999Accrued employees’ bonuses�������������������������������������������������������������������������������������������������������������

2,362

2,427

25,137

Provision for product warranties�������������������������������������������������������������������������������������������������������

774

1,007

8,241

Current liabilities:

Other current liabilities�������������������������������������������������������������������������������������������������������������������������

2,400

1,908

25,534

Total current liabilities ���������������������������������������������������������������������������������������������������������������������

35,41542,358376,762

Lease obligations (Note 9)�������������������������������������������������������������������������������������������������������������������

6,020

6,191

64,051

Accrued employees’ retirement benefits (Note 11) �����������������������������������������������������������������

10,835

10,335

115,275

Accrued retirement benefits for directors and corporate auditors�������������������������������������

165

168

1,756

Deferred tax liabilities on revaluation of land (Note 13)�����������������������������������������������������������

1,303

1,303

13,866Long-term liabilities:

Other long-term liabilities (Note 9)�������������������������������������������������������������������������������������������������

721

782

7,672

Total long-term liabilities ���������������������������������������������������������������������������������������������������������������

19,046

18,781

202,623

Total liabilities�������������������������������������������������������������������������������������������������������������������������������������

54,462

61,139579,385

2012—132,800,256 shares�����������������������������������������������������������������������������������������������

13,45013,450143,093

Capital surplus �����������������������������������������������������������������������������������������������������������������������������������������

11,426

11,426

121,561Retained earnings ���������������������������������������������������������������������������������������������������������������������������������

202,807

196,541

2,157,531

2012— 6,140,839 shares�����������������������������������������������������������������������������������������������������������������

(21,859)(9,642)(232,543)

Total shareholders’ equity���������������������������������������������������������������������������������������������������������������

205,826

211,776

2,189,643

Unrealized gains on available-for-sale securities �����������������������������������������������������������������������

4,079

252

43,395

Unrealized losses on revaluation of land (Note 13)�������������������������������������������������������������������

(564)

(564)

(6,007)

Foreign currency translation adjustments �����������������������������������������������������������������������������������

(1,469)(2,572)(15,629)

Total accumulated other comprehensive income ���������������������������������������������������������������

2,045(2,884)21,759Net assets:
Shareholders’ equity (Note 12):
Common stock, 2013 and 2012
Authorized: 531,000,000 shares
Issued: 2013—132,800,256 shares

Treasury stock, at cost
2013—13,635,467 shares

Accumulated other comprehensive income:Minority interests���������������������������������������������������������������������������������������������������������������������������������������

1,246

1,110

13,258

Total net assets�����������������������������������������������������������������������������������������������������������������������������������

209,118

210,0022,224,661

Liabilities and net assets�����������������������������������������������������������������������������������������������������������������

¥263,580¥271,141$2,804,046

Kurita Water Industries Ltd. Annual Report 201341

CONSOLIDATED STATEMENTS OF INCOME ANDCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2013 and 2012

CONSOLIDATED STATEMENTS OF INCOME

Thousands of
U.S. dollars(Note 1)Millions of yen
2013

2012

2013

Net sales (Note 18)�����������������������������������������������������������������������������������������������������������������������������������������������
Cost of sales �����������������������������������������������������������������������������������������������������������������������������������������������������������
Gross profit���������������������������������������������������������������������������������������������������������������������������������������������������������

¥180,143
121,047
59,096¥193,792
127,905
65,886$1,916,420
1,287,737
628,683

Selling, general and administrative expenses (Note 14)��������������������������������������������������������������������
Operating income (Note 18)�����������������������������������������������������������������������������������������������������������������������

38,106
20,98936,50329,382405,392
223,291

Other income (expenses):
Interest and dividend income���������������������������������������������������������������������������������������������������������������������
Interest expense�����������������������������������������������������������������������������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates���������������������������������������������������
Loss on disposal of properties���������������������������������������������������������������������������������������������������������������������
Gain on sales of properties (Note 15)�������������������������������������������������������������������������������������������������������
Gain on sale of investment securities (Note 6)�������������������������������������������������������������������������������������
Gain on discontinuation of approved retirement annuity system (closed-type) �������������������
Impairment losses (Note 16) �����������������������������������������������������������������������������������������������������������������������
Provision for building demolition expenses (Note 15)�����������������������������������������������������������������������
Loss on valuation of investment securities (Note 6)���������������������������������������������������������������������������
Loss on disaster and support expense of disaster restoration �������������������������������������������������������
Other, net�������������������������������������������������������������������������������������������������������������������������������������������������������������
Other income (expense), net�����������������������������������������������������������������������������������������������������������������������
Income before income taxes and minority interests���������������������������������������������������������������������������

501
(78)
348
(49)
1,051
403
137
(1,108)(410)(2,343)—335(1,212)
19,776

495
(88)
328
(27)
139
—
—
(173)
—
(608)
(49)
278
294
29,676

5,338
(836)
3,702
(526)
11,1804,297
1,462(11,794)(4,361)(24,925)—
3,565(12,897)
210,393

Income taxes (Note 10):
Current�����������������������������������������������������������������������������������������������������������������������������������������������������������������
Deferred���������������������������������������������������������������������������������������������������������������������������������������������������������������
Total income taxes �����������������������������������������������������������������������������������������������������������������������������������������
Income before minority interests�����������������������������������������������������������������������������������������������������������������

8,660
(452)
8,208
11,56812,750292
13,042
16,634

92,133(4,808)87,325123,068

Minority interests in income���������������������������������������������������������������������������������������������������������������������������
Net income�������������������������������������������������������������������������������������������������������������������������������������������������������������

92¥ 11,47686¥ 16,548

982$  122,086

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Thousands of
U.S. dollars(Note 1)Millions of yen

Income before minority interests�����������������������������������������������������������������������������������������������������������������
Other comprehensive income (Note 17):
Unrealized gains (losses) on available-for-sale securities �����������������������������������������������������������������
Unrealized losses on revaluation of land�������������������������������������������������������������������������������������������������
Foreign currency translation adjustments���������������������������������������������������������������������������������������������
Share of other comprehensive income of associates accounted
for using equity method�����������������������������������������������������������������������������������������������������������������������������
Total other comprehensive income ���������������������������������������������������������������������������������������������������������
Comprehensive income�����������������������������������������������������������������������������������������������������������������������������������
Comprehensive income attributable toComprehensive income attributable to owners of parent���������������������������������������������������������������
Comprehensive income attributable to minority interests�������������������������������������������������������������

2013

2012

2013

¥11,568¥16,634$123,068

3,824
—
1,069

(370)
184
(564)

40,685—
11,376133
5,027¥16,595(35)(785)¥15,848

1,421
53,483$176,551¥16,406
189¥15,796
52$174,532
2,018
U.S. dollars(Note 1)Yen

Per share of common stock (Note 20):
Net income �������������������������������������������������������������������������������������������������������������������������������������������������������Cash dividends applicable to the year ���������������������������������������������������������������������������������������������������
The accompanying notes are an integral part of these statements.

42

Kurita Water Industries Ltd.

Annual Report 2013

2013

2012

2013

¥92.4342.00¥130.65
40.00

$0.98
0.45

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2013 and 2012

Millions of yen
Shareholders’ equity (Note 11)

Balance as of March 31, 2011 �����������������

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Unrealized
Unrealized
Foreign Total accumuTotal
gains onlosses on
currency
lated other
Treasury shareholders’ available-for- revaluation of translation comprehensive
stock
equity sale securities land (Note 13) adjustments
income¥13,450¥11,426¥184,954¥ (9,640)¥200,191¥  623¥(764)¥(2,006)

Minority
interests

Total net
assets¥(2,148) ¥1,308¥199,351

Changes during the year
Cash dividends paid�������������������������������

(4,939)(4,939)(4,939)Other�����������������������������������������������������������

(5)

(5)

(5)

Net income for the year�����������������������

16,54816,54816,548

(2)

(2)

(15)

(15)

Acquisition of treasury stock �������������

(2)

Reversal of unrealized gains (losses)
on revaluation of land������������������������

(15)

Net changes of net assets otherthan shareholders’ equity�����������������

(370)

Total changes during the year���������������

(736)

(198)

(934)

(736)

(198)

10,650¥(2,884) ¥1,110¥210,002

11,585

(370)

199

(565)

¥(9,642) ¥211,776¥  252¥(564)¥(2,572)

Cash dividends paid�������������������������������

(5,193)(5,193)(5,193)

Other�����������������������������������������������������������

(16)

(16)

(16)

Net income for the year�����������������������

11,476¥13,450¥11,426

(2)

(565)

¥196,541

Balance as of March 31, 2012 �����������������

11,587

199

Changes during the year

(12,216)

Acquisition of treasury stock �������������
Reversal of unrealized gains (losses)
on revaluation of land������������������������

(0)11,476

11,476(12,216)(12,216)(0)(0)

Net changes of net assets otherthan shareholders’ equity�����������������

3,826
6,266

Total changes during the year���������������
Balance as of March 31, 2013 �����������������

¥13,450 ¥11,426¥202,807(12,216)

0

1,103

4,930

135

5,065

(5,950)

3,826

0

1,103

4,930

135

(884)

¥(21,859) ¥205,826¥4,079¥(564)¥(1,469)¥2,045 ¥1,246¥209,118

Thousands of U.S. dollars (Note 1)
Shareholders’ equity (Note 11)

Commonstock

Balance as of March 31, 2012 �����������������

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Unrealized
Unrealized
Foreign Total accumuTotal
gains onlosses on
currency
lated other
Treasury shareholders’ available-for- revaluation of translation comprehensive
stock
equity sale securities land (Note 12) adjustments
income$143,093 $121,561 $2,090,870$(102,581) $2,252,943(55,244)(55,244)$ 2,685$(6,008)$(27,366)

Minority
interests

Total net
assets$(30,688) $11,813 $2,234,068

Changes during the year
Cash dividends paid�������������������������������

(55,244)

Other�����������������������������������������������������������

(178)

(178)

(178)

Net income for the year�����������������������

122,086

122,086

122,086(129,961)(129,961)

(1)

(1)

(129,961)

Acquisition of treasury stock �������������
Reversal of unrealized gains (losses)
on revaluation of land������������������������

(1)

Net changes of net assets otherthan shareholders’ equity�����������������

40,7101

11,73652,4481,445

53,893(63,300)

40,7101

11,73652,4481,445(9,406)

Balance as of March 31, 2013 ����������������� $143,093 $121,561 $2,157,531 $(232,543) $2,189,643$43,395

Total changes during the year���������������

66,661(129,961)$(6,007) $(15,629)$21,759 $13,258 $2,224,661

The accompanying notes are an integral part of these statements.
Kurita Water Industries Ltd. Annual Report 2013

43

CONSOLIDATED STATEMENTS OF CASH FLOWS
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2013 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen
2013

2012

2013

¥ 19,776
15,054
464
(379)
(348)
(501)
78
(1,000)
1,108
(403)
2,343

¥ 29,676
16,035
415
85
(328)
(495)
88
(108)
173
1
608

$ 210,393
160,150
4,938(4,032)(3,702)(5,338)836(10,646)
11,794(4,297)24,925Interest and dividends received�������������������������������������������������������������������������������������������������������
Interest paid���������������������������������������������������������������������������������������������������������������������������������������������
Income taxes paid ���������������������������������������������������������������������������������������������������������������������������������
Others, net�������������������������������������������������������������������������������������������������������������������������������������������������
Net cash provided by operating activities�������������������������������������������������������������������������������

6,095
808
(4,005)
(76)
173
221
39,409730(73)(13,152)361
27,276(13,652)
(135)
5,448
285
954
(147)
38,907693(89)(11,346)
117
28,282

64,847
8,601(42,613)
(818)
1,847
2,360
419,246
7,775(776)(139,915)
3,845
290,174

II. Cash flows from investing activities
Decrease in time deposits, net����������������������������������������������������������������������������������������������������������
Payments for purchase of property, plant and equipment ���������������������������������������������������
Proceeds from sale of property, plant and equipment �����������������������������������������������������������
Payments for purchase of marketable securities and investment securities �����������������������������������
Proceeds from sale and redemption of marketable securities and investment securities�
Others, net�������������������������������������������������������������������������������������������������������������������������������������������������
Net cash used in investing activities������������������������������������������������������������������������������������������

7,895(5,048)
3,356(76,510)
75,117
(541)
4,268

6,608
(7,460)262(69,010)57,001(907)(13,507)

83,998(53,707)35,705(813,946)
799,120(5,761)45,409III. Cash flows from financing activities
Decrease in short-term borrowings, net���������������������������������������������������������������������������������������
Proceeds from long-term loans payable���������������������������������������������������������������������������������������
Repayment of long-term loans payable ���������������������������������������������������������������������������������������Cash dividends paid�������������������������������������������������������������������������������������������������������������������������������Cash dividends paid to minority shareholders of consolidated subsidiaries�������������������
Payments for lease obligations���������������������������������������������������������������������������������������������������������
Payments for purchase of treasury stock, net �����������������������������������������������������������������������������
Net cash used in financing activities�����������������������������������������������������������������������������������������

(494)
58
(89)
(5,192)(49)(579)(12,216)(18,561)

(166)
46
—
(4,936)
(41)
(507)
(2)
(5,607)(5,256)627(954)(55,235)(521)(6,160)(129,961)(197,463)

IV. Effect of exchange rate changes on cash and cash equivalents�����������������������������������
V. Net increase in cash and cash equivalents�����������������������������������������������������������������������������
VI. Cash and cash equivalents at beginning of year�����������������������������������������������������������������
VII. Cash and cash equivalents at end of year (Note 3) �������������������������������������������������������������

503
13,487
19,825¥ 33,313

(176)
8,991
10,834¥ 19,825

5,359
143,479
210,914$ 354,393

I.		 Cash flows from operating activities
Income before income taxes and minority interests ���������������������������������������������������������������
Depreciation and amortization���������������������������������������������������������������������������������������������������������
Increase in accrued employees’ retirement benefits�����������������������������������������������������������������
Increase (decrease) in other allowances ���������������������������������������������������������������������������������������
Equity in earnings of unconsolidated subsidiaries and affiliates�����������������������������������������
Interest and dividend income�����������������������������������������������������������������������������������������������������������
Interest expense�������������������������������������������������������������������������������������������������������������������������������������
Gain on sales and disposal of properties���������������������������������������������������������������������������������������
Impairment loss���������������������������������������������������������������������������������������������������������������������������������������
Loss (gain) on sales of investment securities�������������������������������������������������������������������������������
Loss on valuation of investment securities�����������������������������������������������������������������������������������
Changes in assets and liabilities:
Decrease (increase) in trade receivables�����������������������������������������������������������������������������������
Decrease (Increase) in inventories�����������������������������������������������������������������������������������������������
Increase (decrease) in trade payables���������������������������������������������������������������������������������������
Decrease (increase) in other assets���������������������������������������������������������������������������������������������
Increase in other liabilities�������������������������������������������������������������������������������������������������������������
Others, net�������������������������������������������������������������������������������������������������������������������������������������������������

The accompanying notes are an integral part of these statements.

44

Kurita Water Industries Ltd.

Annual Report 2013

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kurita Water Industries Ltd. And Consolidated Subsidiaries

1. Basis of presentation of consolidated financial statements
Kurita Water Industries Ltd. (the “Company”) and its domestic subsidiaries maintain their books of accountand prepare their financial statements in accordance with accounting principles and practices generally
accepted in Japan, while its foreign subsidiaries maintain their books of account and prepare their financial statements in conformity with those of the countries of their domicile. Certain accounting principles
and practices generally accepted in Japan are different from International Financial Reporting Standards
and standards in other countries in certain respects as to application and disclosure requirements.
Accordingly, the accompanying consolidated financial statements are intended for use by those who are
informed about Japanese accounting principles and practices.
The Company’s consolidated financial statements, prepared in accordance with accounting principles
and practices generally accepted in Japan, were filed with the Japanese Ministry of Finance and theTokyo Stock Exchange as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications of accounts and modifications have been made in the accompanying consolidated financial statements to facilitate understanding by readers outside Japan. In addition, certain
reclassifications have been made in the 2012 financial statements to conform to the classification usedin 2013.
All figures in the consolidated financial statements and notes are stated in millions of Japanese yen
by discarding fractional amounts of less than ¥1 million. As a result, the totals shown in the consolidated
financial statements and notes in yen do not necessarily agree with the sum of the individual amounts.
The translation of yen amounts as of or for the year ended March 31, 2013 into U.S. dollars is included
solely for the convenience of readers and has been made, as a matter of arithmetical computation only,at the rate of ¥94 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2013.
The translation should not be construed as a representation that yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at the above or any other rate.

2. Significant accounting policies
(1) Consolidation
Scope of consolidation
The consolidated financial statements included the accounts of the Company and its significant subsidiaries (together, the “Group”). For the years ended March 31, 2013 and 2012, 37 subsidiaries were consolidated, respectively.
Under the control concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated.
All significant inter-company transactions and balances have been eliminated in consolidation.
Names of principal consolidated subsidiaries:
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Kuritec Service Co. Ltd.
Kurita Chemical Manufacturing Ltd.
Fiscal years of consolidated subsidiaries
The fiscal years of Kurita (Singapore) Pte. Ltd. and 12 (12 in 2012) other consolidated subsidiaries end on
December 31. For these consolidated subsidiaries, the financial statements as of December 31 were used forconsolidation purposes. However, material transactions that have occurred during the three-month period
from January 1 to March 31 of the following year have been adjusted as necessary for consolidation.

Kurita Water Industries Ltd. Annual Report 201345

Amortization of goodwill
Goodwill is amortized using the straight-line method over three years, except for minor amounts that are
charged to income in the period of acquisition.
(2) Equity method
Scope of equity method application
Under the influence concept, significant investments in unconsolidated subsidiaries and affiliates overwhich the Company has the ability to exercise significant influence with regard to the operating andfinancial policies of the investees are accounted for by the equity method. For the years ended March 31,
2013 and 2012, 3 companies were accounted for by the equity method.
Name of principal company applying the equity method:
Kurita Sogo Service Co., Ltd.
Investments in the remaining unconsolidated subsidiaries and affiliates were stated at cost. If theequity method of accounting had been applied to the investments in these companies, the effect on theaccompanying consolidated financial statements would not be material.
Fiscal years of companies accounted for by the equity method
Adjustments were made to the financial statements of the companies accounted for by the equity
method whose fiscal year-ends were not identical to the Company.
(3) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand,readily available bank deposits, and short-term investments with an original maturity of three months orless and subject to a minor risk of fluctuations in value.
(4) Available-for-sale securities
Available-for-sale securities that have available fair values are stated at fair value at the balance sheet
date, with resulting unrealized holding gains and losses reported as a separate component of net assets.
Available-for-sale securities with no available fair values are stated at cost computed by the movingaverage method. The cost of sold securities is computed by the moving-average method.
(5) Inventories
Inventories held for sale in the ordinary course of business are stated at the lower of cost determined by
the moving-average method, except for work in process determined by the specific-identification
method, or net selling value.
(6) Derivative transactions
Derivative transactions utilized by the Group are composed of only forward currency contracts enteredinto when necessary to hedge the market risk, as the Company maintains the policy not to engage in
speculative transactions. The Company believes that the risk of counterparty default is negligible because
its forward currency contracts are entered into only with banks with high credit ratings. In addition, transactions in forward currency contracts are executed and managed by the finance and accounting department on a contract-by-contract basis after they have been approved by prescribed internal procedures.
Derivatives are classified and accounted for as follows: a) all derivatives are recognized as either assets

46

Kurita Water Industries Ltd.

Annual Report 2013

or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in
the consolidated statements of income and b) for derivatives used for hedging purpose, if derivatives
qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
If forward currency contracts qualify for hedge accounting and the required condition under the
related Japanese accounting standards, the hedged assets and liabilities dominated in foreign currencies
are translated at the contracted rates, and no gains and losses on derivative transactions are recognized.
Hedging instruments and Hedged items are as follows:
Hedging instruments
Hedged items
Forward currency contracts
Time deposits dominated in foreign currencies
The Group evaluates hedge effectiveness by comparing the cumulative changes in the changes in far
value of hedged items and the corresponding changes in the hedging derivative instruments.
If forward contracts qualify for the hedge accounting, these derivatives are not evaluated hedge
effectiveness.
(7) Depreciation of property, plant and equipment
Property, plant and equipment is depreciated by the declining-balance method for the Company and its
domestic consolidated subsidiaries, except for buildings (other than building equipment) acquired on
and after April 1, 1998, and ultrapure water supply equipment located at clients’ sites, for which thestraight-line method is applied. The straight-line method is applied by foreign consolidated subsidiaries.
The estimated useful lives of these assets are as follows:
Buildings and structures: 2–65 years
Machinery and equipment: 4–10 years
Accounting change which could not be distinguished from changes in accounting estimate
In accordance with revisions to the Corporate Tax Act, effective April 1, 2012, the Group adopted amortization methods revised based on the Corporation Tax Act for depreciation of property, plant and equipment (excluding building) acquired on or after April 1, 2012. The effects of this change are immaterial.
(8) Impairment of long-lived assets
The Company reviews its long-lived assets for impairment in accordance with the accounting standards
for impairment of fixed assets whenever events or changes in circumstances indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if
the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured as the amount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling price at disposition.
(9) Accrued employees’ bonuses
The Company and its domestic consolidated subsidiaries accrue the amount of employees’ bonuses
based on the anticipated bonus payments to employees.
(10) Accrued employees’ retirement benefits
Accrued employees’ retirement benefits are recorded based on the estimated amount of projected

Kurita Water Industries Ltd. Annual Report 201347

benefit obligation at the balance sheet date by the Company, certain of its domestic consolidated subsidiaries and certain foreign consolidated subsidiaries, and based on the estimated amounts of projected
benefit obligation and pension plan assets, at the balance sheet date by other domestic consolidated
subsidiaries. Actuarial differences are subject to amortization over a period of 1–2 years from the year
when they are incurred.
(11) Leases
Finance leases which do not transfer ownership are capitalized to recognize leased assets and lease obligations in the consolidated balance sheets. Leased assets are depreciated using the straight-line method
over the respective lease periods without residual value.
(12) Consumption taxes
Consumption taxes are accounted for separately from transaction prices and are not reflected in the
consolidated statements of income.
(13) Construction contracts
The percentage-of-completion method has been applied to the contracts if the outcome of the construction activity is deemed certain for the percentage of performance of the contractor’s obligation at
the end of the balance sheet date, otherwise the completed-contract method is applied. The percentage
of completion is determined using the cost incurred to the estimated total cost.
(14) Foreign currency translation
Monetary receivables and payables denominated in foreign currency are translated using the spot
exchange rate prevailing at the balance sheet date, and the differences are charged to income as foreignexchange gains or losses.
Foreign subsidiaries’ assets and liabilities are translated using the spot exchange rate at their balance
sheet dates, and their income and expenses are translated using the average exchange rate during theyear. The translation differences are recorded in “Foreign currency translation adjustments” and “Minority
interests” in net assets.
(15) Appropriation of retained earnings
The accompanying consolidated statements of changes in net assets reflect the appropriations ofretained earnings of the Company in the fiscal year in which the appropriations are approved at thegeneral shareholders’ meeting.
(16) Earnings per share
Earnings per share are computed using the weighted-average number of common shares outstanding.
(17) New accounting pronouncements
Accounting standard for retirement benefits
On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits”
and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the
Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in1998 with effective date of April 1, 2000 and the other related practical guidance, being followed by partial
amendments from time to time through 2009.
These accounting standards were revised mainly on a processing method of unrecognized actuarial
loss and unrecognized prior service cost, a calculation method of retirement benefit obligations and48

Kurita Water Industries Ltd.

Annual Report 2013

service cost and expansion of the disclosure based on a point of view that improved a financial reportand an international trend.
The Company expects to apply the revised accounting standard from the end of the annual period
ending on March 31, 2014. However, on the calculation method of retirement benefit obligations andservice cost, it expects to apply from the beginning of the annual period ending on March 31, 2015.
The Company is in the process of measuring the effects of applying the revised accounting standard
at the making of the accompanying consolidated financial statements.
(18) Reclassifications
Certain reclassifications have been made in the 2012 consolidated financial statements to conform to the2013 presentation. These reclassifications had no impact on previously reported results of operations.

3. Reconciliation between cash and cash equivalents
The reconciliation between the fiscal year-end cash and cash equivalents (See Note 2 (3)) in the consolidated
statements of cash flows and cash and time deposits in the consolidated balance sheet items is as follows:
Millions of yen
2013

Cash and time deposits�����������������������������������������������������������������������������
Time deposits with original maturity ofmore than three months�����������������������������������������������������������������������
Certificates of deposits included in marketable securities,
excluding deposits maturing over three months�������������������������Cash and cash equivalents�����������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)

2012

2013

¥43,039¥28,902$457,864(9,726)(17,576)(103,471)—¥33,3138,500¥19,825—$354,393

4. Trade notes with maturity on the balance sheet date
The following amount of trade notes had March 31, 2013 and 2012 as their maturity date, which fell on aholiday of financial institutions. These trade notes were accounted for as if they had been cleared on theirmaturity date.

Notes receivable�������������������������������������������������������������������������������������������
Notes payable�����������������������������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)Millions of yen
2013

2012

2013

¥629
195

¥679
197

$6,6982,080

5. Financial instruments and related disclosures
(1) Policy for financial instruments
The Group invests its funds in low risk financial assets (deposits, etc.) in principle. The Group finances its
working fund and capital investment fund internally and does not need external funds, but may raisenecessary funds from external resources in case of special demand for significant capital investment, if
any. In such cases, financing from external resources would be possible without any problem thanks toour sound financial position. With respect to derivatives, only forward foreign currency contracts are used
if necessary to avoid foreign exchange risk, and not for speculative purposes.
(2) Nature of financial instruments and their related risks
Trade receivables such as notes and accounts are exposed to customer credit risk. Certain trade receivables denominated in foreign currencies arising from overseas operations are exposed to the market riskof fluctuation in foreign currency exchange rates.
Kurita Water Industries Ltd. Annual Report 201349

Marketable securities and investment securities are exposed to the risk of market price fluctuations
and business risk of the investees.
Payment terms of trade payables such as notes and accounts are mostly less than one year. Leaseobligations under finance lease transactions are mainly related to ultrapure water supply business and its
payment term is 16 years (17 in 2012) later at maximum.
(3) Risk management system for financial instruments
Credit risk management (customers’ default risk):
The Company manages its credit risk involved in trade receivables based on the Credit Control Policy andManual. The Control Division of each business unit and the Legal Department collect credit information
on a regular basis and control the payment terms and outstanding balances by customer, and the Company is making efforts to prevent them from damages and to improve the soundness of the transactions
by monitoring the default risk of customers due to the deterioration of their financial position at an earlystage. The consolidated subsidiaries are also making efforts to reduce credit risk by controlling payment
terms and outstanding balances of customers. Counterparties of forward foreign currency contracts to be
used to avoid foreign exchange risk when necessary are limited to high-credit-rating financial institutions
and accordingly, we believe there is very little credit risk.
Market risk management (foreign exchange risk and interest rate risk):
The Company and certain consolidated subsidiaries utilize forward foreign currency contracts to hedge
the market risk of fluctuations in foreign exchange rates involved in trade receivables and payables by
currency and by month. Forward foreign currency contracts are executed and controlled by the Finance
Department after the individual contract is approved in accordance with the predetermined rule.
Liquidity risk management (risk that the Company may not be able to settle on the payment due date):
The Finance Departments of the Company and its consolidated subsidiaries prepare and update the fundmanagement plan every month based on reports from each business unit and hold a sufficient amountof liquidity in hand and manage the liquidity risk.
Carrying amounts, fair values and unrealized gain (loss) of financial instruments at March 31, 2013 and2012 were as follows (financial instruments whose fair values cannot be reliably determined are notincluded in the following table):
Millions of yen
At March 31, 2013

Cash and time deposits����������������������������������������������������������������������������������������������
Notes and accounts receivable, trade ��������������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities��������������������������������������������������������������������������������
Total assets��������������������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade��������������������������������������������������������������������
Total liabilities��������������������������������������������������������������������������������������������������������������������
Derivatives��������������������������������������������������������������������������������������������������������������������������

50

Kurita Water Industries Ltd.

Annual Report 2013

Carrying
amountFair value

Difference¥ 43,039
61,387¥ 43,039
61,387¥——51,277¥155,705¥ 17,973¥ 17,973¥     —

51,277¥155,705¥ 17,973¥ 17,973¥     —

—
¥—
¥—
¥—
¥—

Thousands of U.S. dollars (Note 1)
At March 31, 2013

Cash and time deposits����������������������������������������������������������������������������������������������
Notes and accounts receivable, trade ��������������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities��������������������������������������������������������������������������������
Total assets��������������������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade��������������������������������������������������������������������
Total liabilities��������������������������������������������������������������������������������������������������������������������
Derivatives��������������������������������������������������������������������������������������������������������������������������

Carrying
amountFair value

Difference$  457,864
653,063$  457,864
653,063$——545,509$1,656,437$  191,206$  191,206$       —545,509$1,656,437$  191,206$  191,206$       —

—
$—
$—
$—
$—

Millions of yen
At March 31, 2012

Cash and time deposits����������������������������������������������������������������������������������������������
Notes and accounts receivable, trade ��������������������������������������������������������������
Marketable securities and investment securities
Available-for-sale securities��������������������������������������������������������������������������������
Total assets��������������������������������������������������������������������������������������������������������������������������
Notes and accounts payable, trade��������������������������������������������������������������������
Total liabilities��������������������������������������������������������������������������������������������������������������������
Derivatives��������������������������������������������������������������������������������������������������������������������������

Carrying
amountFair value

Difference¥ 28,902
66,356¥ 28,902
66,356¥——55,402¥150,661¥ 21,322¥ 21,322¥     —

55,402¥150,661¥ 21,322¥ 21,322¥     —

—
¥—
¥—
¥—
¥—

Notes:
a. Computation method of fair values
	‌Cash and time deposits and notes and accounts receivable, trade:
Fair values approximate carrying amounts because of their short maturities.
Marketable securities and investment securities:
Fair values approximate carrying amounts because of their short maturities since marketable securities consist of certificates of deposits. Fair values of investment securities are determined based on the quoted market price of the stock
exchange.
Notes and accounts payable, trade:
Fair values approximate carrying amounts because of short maturities.
Derivatives:
These derivatives are accounted for together with time deposits designated as a hedged item. Therefore, the fair value ofsuch derivatives is included in that of time deposits. (Note2 (6))
Detail and information are discussed in Note 7.
b. Financial instruments whose fair values cannot be reliably determined are as follows:

Millions of yen
2013

Unlisted equity securities (Unlisted shares)�������������������������������������������������������
(Shares of unconsolidated subsidiaries and affiliates)�����������������������������������

¥   90¥1,3842012

Thousands of
U.S. dollars(Note 1)2013¥   90¥1,169$   957$14,730

These securities are not included in above “Marketable securities and investment securities” since their fair values cannot
be reliably determined.
c. Maturities of monetary receivables and securities after the balance sheet date:

At March 31, 2013

Deposits��������������������������������������������������������������������������������������������
Notes and accounts receivable, trade����������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities(Certificates of deposits)����������������������������������������������������
Total����������������������������������������������������������������������������������������������������

Due in one
year or lessMillions of yen
Due after one
Due after five
year throughyears throughfive years
ten years

Due after
ten years¥ 43,009
61,387

¥—
—

¥—
—

¥—
—

34,000¥138,397

—
¥—

—
¥—

—
¥—

Kurita Water Industries Ltd. Annual Report 2013

51

Thousands of U.S. dollars (Note 1)
At March 31, 2013

Deposits��������������������������������������������������������������������������������������������
Notes and accounts receivable, trade����������������������������������
Marketable securities and investment securities
Available-for-sale securities with maturities(Certificates of deposits)����������������������������������������������������
Total����������������������������������������������������������������������������������������������������

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years$  457,549
653,063

$—
—

$—
—

$—
—

361,702$1,472,315

—
$—

—
$—

—
$—

6. Marketable securities and investment in securities
(1) Available-for-sale securities with fair value at March 31, 2013 and 2012 are summarized as follows:
Millions of yen
At March 31, 2013

Carrying
amountAcquisition
cost

Difference

Carrying amount exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������

¥16,679——
16,679¥11,198——
11,198¥5,481
—
—
5,481

598
—
—
598
¥17,277

756
—
—
756
¥11,954

(157)
—
—
(157)
¥5,323At March 31, 2013

Carrying
amountAcquisition
cost

Difference$177,442——
177,442$119,129——
119,129$58,313——58,313

6,364
—
—
6,364
$183,807

8,044
—
—
8,044
$127,173(1,679)——(1,679)$56,633

Thousands of U.S. dollars (Note 1)

Carrying amount exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks ����������������������������������������������������������������������������������������������������������������
Bonds ����������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������
Total��������������������������������������������������������������������������������������������������������������������

Notes:
The above table does not include negotiable deposits that have not been assigned a market value (value on consolidatedbalance sheets: ¥34,000 million) and unlisted shares (value on consolidated balance sheets: ¥90 million).

52

Kurita Water Industries Ltd.

Annual Report 2013

Millions of yen
At March 31, 2012

Carrying amount exceeding acquisition cost:
Stocks������������������������������������������������������������������������������������������������������������������������
Bonds ������������������������������������������������������������������������������������������������������������������������
Other��������������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������������
Carrying amount not exceeding acquisition cost:
Stocks������������������������������������������������������������������������������������������������������������������������
Bonds ������������������������������������������������������������������������������������������������������������������������
Other��������������������������������������������������������������������������������������������������������������������������
Subtotal��������������������������������������������������������������������������������������������������������������
Total����������������������������������������������������������������������������������������������������������������������������

Carrying
amountAcquisition
cost

Difference¥ 7,845——
7,845¥ 5,873——5,873¥  1,972
—
—
1,972

7,056
—
—
7,056
¥14,902

8,626
—
—
8,626
¥14,499(1,570)——(1,570)¥    402

Notes:
The above table does not include negotiable deposits that have not been assigned a market value (value on consolidatedbalance sheets: ¥40,500 million) and unlisted shares (value on consolidated balance sheets: ¥90 million).

(2) Available-for-sale securities sold during the years ended March 31, 2013 and 2012 are summarized as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Sales amount��������������������������������������������������������������������������������������������������������
Total gains on sales��������������������������������������������������������������������������������������������
Total losses on sales ������������������������������������������������������������������������������������������

2013

2012

2013

¥617
411
7

¥0
—
1

$6,5664,382
84(3) Loss on valuation of available-for-sale securities
The Company recognizes loss valuation for the full amount of securities when the fair value declines
below 50% of the acquisition cost, and for amounts deemed necessary after consideration of recoverability when the fair value declines by 30 to 50% of the acquisition cost. For the year ended March 31,
2013 and 2012, loss on valuation recognized on equity securities classified as available-for-sale securities
amounted to ¥2,343 million (US$24,925 thousand) and ¥608 million, respectively.

7. Derivatives
All Derivatives held by the Group as of March 31, 2013 and 2012 have been applied the hedge accounting.
Derivatives for which hedge accounting applied at March 31, 2013 are as follows:
Currency related

At March 31, 2013

At March 31, 2013

Contract
amountMillions of yen
Contracts
longer than
one year

Fair value

Forward currency contracts:
Selling Yuan Renminbi
Time deposits ������������

¥4,000—Note

Hedging instrument

Thousands of U.S. dollars (Note 1)
Contracts
Contract
longer thanamountone year
Fair value

Hedging instrument

Hedge item

Hedge item

Forward currency contracts:
Selling Yuan Renminbi
Time deposits ������������

$42,553

—

Note

Note:
These derivatives are accounted for together with time deposits designated as a hedged item. Therefore, the fair value ofsuch derivatives is included in that of time deposits. (Note2 (6))
Derivatives for which hedge accounting applied at March 31, 2012 are not disclosed because they are not material.

Kurita Water Industries Ltd. Annual Report 201353

8. InventoriesInventories at March 31, 2013 and 2012 consist of the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Finished products ���������������������������������������������������������������������������������������
Raw materials �����������������������������������������������������������������������������������������������
Work in process���������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2013

2012

2013

¥1,445
1,191
2,238¥4,875¥1,598
1,209
2,715¥5,522$15,376
12,67023,818$51,865

9. Short-term borrowings and long-term debt
(1) Short-term borrowings and current portion of long-term debt
The short-term borrowings and current portion of long-term debt at March 31, 2013 and 2012 consist of
the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Short-term borrowings�����������������������������������������������������������������������������
Current portion of lease obligations�����������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2013

2012

2013

¥  543583¥1,127¥  957506¥1,463$ 5,785
6,211$11,997

The weighted-average annual interest rate of short-term borrowings for the years ended March 31, 2013
and 2012 were 4.62% and 4.69%, respectively.

54

Kurita Water Industries Ltd.

Annual Report 2013

(2) Long-term debt
Long-term debt at March 31, 2013 and 2012 is summarized as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Long-term borrowings������������������������������������������������������������������������������
Less current portion of long-term borrowings���������������������������������
Long-term borrowings with maturing dates coming in 2015
and thereafter���������������������������������������������������������������������������������������������
Lease obligations�����������������������������������������������������������������������������������������
Less current portion of lease obligations�������������������������������������������
Lease obligations with maturing dates coming in 2015 andthereafter�����������������������������������������������������������������������������������������������������

2013

2012

2013

¥    0—¥   42—$     6—¥    0¥   42$     6

¥6,604(583)¥6,697(506)$70,263(6,211)¥6,020¥6,191$64,051

The weighted-average annual interest rate of long-term borrowings for the year ended March 31, 2013
and 2012 were 10.37% and 4.24%, respectively.
Annual maturities of long-term debt at March 31, 2013 are as follows:
Millions of yen

Years Ending March 31

2014�������������������������������������������������������������������������������������������������������������������������������������������������
2015�������������������������������������������������������������������������������������������������������������������������������������������������
2016�������������������������������������������������������������������������������������������������������������������������������������������������
2017�������������������������������������������������������������������������������������������������������������������������������������������������
2018 and thereafter�������������������������������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������������������������������������������

¥  583
544
508
481
4,487
¥6,605

Thousands of
U.S. dollars(Note 1)

$ 6,211
5,790
5,408
5,124
47,734$70,270(3) Other long-term liabilities
Other than the short-term borrowings and lease obligations described above, ¥664 million (US$7,066
thousand) and ¥727 million of interest-bearing long-term deposits received were included in other longterm liabilities as of March 31, 2013 and 2012, respectively. The weighted-average annual interest rates forsuch deposits received for the years ended March 31, 2013 and 2012 were 0.36%.

Kurita Water Industries Ltd. Annual Report 201355

10. Income taxes
Significant components of the deferred tax assets and liabilities as of March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Deferred tax assets:
Excess depreciation of property, plant and equipment ���������
Excess provision for accrued employees’ retirement
benefits���������������������������������������������������������������������������������������������������
Loss on revaluation of investment securities�������������������������������
Excess provision for accrued bonuses to employees���������������
Impairment loss��������������������������������������������������������������������������������������
Excess provision of allowance for product warranty ���������������
Accrued enterprise taxes not deductible�������������������������������������
Unrealized gain on sale of property, plant and equipment���Other�����������������������������������������������������������������������������������������������������������
Subtotal�������������������������������������������������������������������������������������������������
Valuation allowance�������������������������������������������������������������������������
Total deferred tax assets�����������������������������������������������������������������
Deferred tax liabilities:
Unrealized losses on available-for-sale securities�����������������������
Capital gains on properties deferred for tax purposes�������������
Estimated income taxes pertaining to retained earnings ofoverseas consolidated subsidiaries�����������������������������������������������
Other�����������������������������������������������������������������������������������������������������������
Total deferred tax liabilities�����������������������������������������������������������
Deferred tax assets, net�������������������������������������������������������������������

2013

2012

2013

¥ 5,676¥ 4,956$ 60,389

3,815
1,187
873
351
287
251
157
1,060
13,662(1,539)12,122

3,675
461
897
316
379
509
188
961
12,347(786)
11,561

40,591
12,637
9,296
3,738
3,053
2,677
1,678
11,281
145,344(16,382)
128,962(1,267)
(638)

(149)
(640)

(13,479)(6,794)(520)—(2,426)¥ 9,695(439)(1)(1,231)¥10,329(5,541)—(25,815)$103,146

A reconciliation between the normal effective statutory tax rate and the effective income tax rate as apercentage of income before income taxes and minority interests for the years ended March 31, 2013
and 2012 was as follows:
Normal effective statutory tax rate��������������������������������������������������������������������������������������������
Loss on revaluation of investment securities ������������������������������������������������������������������������
Expenses not deductible for income tax purposes ������������������������������������������������������������
Reversal of deferred tax liabilities on retained earnings of foreign consolidated
subsidiaries ��������������������������������������������������������������������������������������������������������������������������������������
Dividend income not taxable for income tax purposes����������������������������������������������������
R&D expense tax credit������������������������������������������������������������������������������������������������������������������
Difference in statutory tax rates of foreign subsidiaries ����������������������������������������������������
Adjustment to deferred tax assets and liabilities from changes in the statutory
tax rate������������������������������������������������������������������������������������������������������������������������������������������������
Income taxes—correction������������������������������������������������������������������������������������������������������������
Other������������������������������������������������������������������������������������������������������������������������������������������������������
Actual effective tax rate������������������������������������������������������������������������������������������������������������������

56

Kurita Water Industries Ltd.

Annual Report 2013

2013

2012

38.0%
3.8
0.5

40.6%
—
0.4

(0.4)
(0.3)
(1.4)
(1.0)

(0.1)
(0.2)
(0.8)
(0.9)

—
1.3
1.0
41.5%

4.4
—
0.5
43.9%

11. Retirement benefits and pension plans
The Company and 9 domestic consolidated subsidiaries provide lump-sum retirement benefit plans anddefined contribution pension plans. Fifteen other domestic consolidated subsidiaries provide lump-sum
retirement benefit plans. Four overseas consolidated subsidiaries provide lump-sum retirement benefit
plans; 2 provide lump-sum retirement benefit plans and defined contribution pension plans; and 2 provide a defined contribution pension plan.
(1) Benefit obligations
Thousands of
U.S. dollars(Note 1)Millions of yen

Retirement benefit obligation����������������������������������������������������������������
Fair value of plan assets�����������������������������������������������������������������������������
Unfunded retirement benefit obligations�����������������������������������������
Unrecognized actuarial gain�������������������������������������������������������������������
Unrecognized prior service cost �����������������������������������������������������������
Net accrued employees’ retirement benefits �����������������������������������
Prepaid pension cost���������������������������������������������������������������������������������
Accrued employees’ retirement benefits�������������������������������������������

2013

2012

2013

¥(20,891)
10,038(10,852)
17—(10,835)—¥(10,835)¥(20,305)
9,879(10,426)
91—(10,335)—¥(10,335)$(222,244)
106,787(115,457)
181—(115,275)—$(115,275)(2) Net periodic benefit costs
Thousands of
U.S. dollars(Note 1)Millions of yen

Service cost ���������������������������������������������������������������������������������������������������
Interest cost���������������������������������������������������������������������������������������������������
Expected return on plan assets �������������������������������������������������������������
Amortization of actuarial differences���������������������������������������������������
Additional retirement payments�����������������������������������������������������������
Loss at transition to defined contribution pension plan �������������
Other�����������������������������������������������������������������������������������������������������������������
Net periodic benefit cost���������������������������������������������������������������������

2013

2012

2013

¥  777
159
—
239
14
—
711
¥1,901¥  854
152
—
124
27
0
685
¥1,844$ 8,272
1,692
—
2,548
151
—
7,563
$20,229

In the above table, benefit cost incurred for the domestic consolidated subsidiaries, which use the simplified method for computing benefit obligations, is included in “Service cost,” and “Other” represents contribution to the defined contribution pension plan.
(3) Assumptions to determine above obligation and cost
Periodic allocation of projected benefit obligation������
Discount rate��������������������������������������������������������������������������������
Expected rate of return on plan assets ������������������������������
Amortization period of actuarial differences��������������������

2013

2012

Equal amountover each period
1.7–1.8%
0.5%
1–2 years

Equal amountover each period
1.7–1.8%
0.5–0.7%
1–2 years

Kurita Water Industries Ltd. Annual Report 201357

12. Shareholders’ equity
Japanese companies are subject to the Companies Act. A summary of the sections of the Companies Act
that affect financial statements and accounting matters is as follows:(1) Distribution of dividends to shareholders
Under the Companies Act, if companies meet certain criteria, dividends can be paid at any time during
the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors’ meeting if
the articles of incorporation of the company so stipulate.
The Companies Act provides certain limitations on the amounts available for dividends and/or thepurchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, and it is calculated mainly based on capital surplus other than paid-in capital, retained
earnings, and treasury stock, but the amount of net assets after dividends must be maintained at noless than ¥3 million.
(2) Increases/decreases; transfer of common stock, reserve, and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends. However, suchappropriation may not be made if the aggregate amount of legal reserve and additional paid-in capital
exceeds 25% of the common stock. Under the Companies Act, this legal reserve and additional paid-in
capital may be reversed without limitation.
The Companies Act also provides that common stock, legal reserve, additional paid-in capital, othercapital surplus, and retained earnings can be transferred among the accounts under certain conditions
upon resolution of the shareholders.
(3) Treasury stock
The Companies Act provides that companies may purchase, hold or dispose of such treasury stock byresolution of the Board of Directors’ meetings. The amount of treasury stock purchased cannot exceed
the amount available for distribution to the shareholders which is determined by a specific formula.

58

Kurita Water Industries Ltd.

Annual Report 2013

13. Unrealized gains on revaluation of land
The Company implemented a revaluation of land for business use in accordance with the Land Revaluation Law (enacted on March 31, 1998). The revaluation difference, net of taxes is stated as “Unrealized
gains (losses) on revaluation of land” in the valuation and translation account in net assets. The tax equivalent is stated as deferred tax assets or liabilities in long-term liabilities.
When any revaluated land is sold, the related unrealized gain or loss on revaluation of land is transferred to retained earnings.
Revaluation method: The revaluation of land was computed in accordance with Article Two, Item Oneof the Land Revaluation Law Enforcement Order.
Revaluation date: March 31, 2002

14. Selling, general and administrative expenses
Selling, general and administrative expenses for the years ended March 31, 2013 and 2012 consisted of
the following:Thousands of
U.S. dollars(Note 1)Millions of yen

Salaries and allowances�����������������������������������������������������������������������������
Provision for employees’ bonuses���������������������������������������������������������
Retirement benefit expenses �����������������������������������������������������������������
Travel expenses���������������������������������������������������������������������������������������������
Research and development expenses�������������������������������������������������
Other�����������������������������������������������������������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2013

2012

2013

¥14,895
1,368
1,079
2,675
4,362
13,726¥38,106¥14,394
1,378
987
2,633
4,232
12,877¥36,503$158,458
14,554
11,47928,466
46,406
146,026$405,392

Kurita Water Industries Ltd. Annual Report 201359

15. Other income (expenses)
The details of gain on sales of properties for the year ended March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Machinery and equipment ���������������������������������������������������������������������
Buildings and structures���������������������������������������������������������������������������
Land �����������������������������������������������������������������������������������������������������������������
Others���������������������������������������������������������������������������������������������������������������

2013

2012

2013

¥701
346
—
3

¥ 15
—
123
0

$7,465
3,682—
32

Provision for building demolition expenses
Provision for building demolition expenses relates to the former head office building of the Company(Shinjuku-ku, Tokyo) and is estimated based on the plan of demolishing the former head office building.

16. Impairment losses
For the purpose of impairment testing, assets of the Group are generally grouped based on business,
however, idle assets and investment properties are grouped by individual property.
For the year ended March 31, 2013, the Group recognized impairment losses of ¥1,108 million (US$11,794 thousand) on the following assets.
Land, buildings and structures, etc. of the former head office of the Company (Shinjuku Ward, Tokyo)
became idle assets as a result of the relocation of the head office. Of these assets, the Group recognized
an impairment loss on buildings and structures, etc. as because of aging and other factors the carrying
value of these assets may not be recoverable.
The Group recognized an impairment loss on land in Ichinomiya City, Aichi, for which there is nointended use in the future and whose market values significantly declined.
The details of impairment losses recognized for the year ended March 31, 2013 are as follows:Year ended March 31, 2013

Idle assets:
Shinjuku-ku, Tokyo
Ichinomiya City, Aichi

Millions of yen

Buildings and structures������������������������������������������������������
Land ��������������������������������������������������������������������������������������������

¥1,094
13

Thousands of
U.S. dollars(Note 1)

$11,648
146

The carrying value of these assets is written down to their fair value less costs to sell, of which buildings
and structures, etc. is estimated memorandum value of ¥1 because the carrying value of these assets
may not be recoverable, and of which land is based on Japanese Real Estate Appraisal Standards.
For the year ended March 31, 2012, the Group recognized impairment losses of ¥173 million on realestate for which there is no intended use in the future and whose market values significantly declined.
The details of impairment losses recognized for the year ended March 31 are as follows:Year ended March 31, 2012

Idle assets:
Kitakami City, Iwate
Takatsuki City, Osaka
Awara City, Fukui

Millions of yen

Land ��������������������������������������������������������������������������������������������
Land ��������������������������������������������������������������������������������������������
Land ��������������������������������������������������������������������������������������������

¥103
60
8

The carrying value of these assets is written down to their fair value less costs to sell, which is based onJapanese Real Estate Appraisal Standards.

60

Kurita Water Industries Ltd.

Annual Report 2013

17. Comprehensive income
The components of other comprehensive income for the year ended March 31, 2013 and 2012 are
as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Unrealized gains on available-for-sale securities
Gains arising during the year�������������������������������������������������������������
Reclassification adjustments to profit or loss�������������������������������
Amount before income tax effect���������������������������������������������������
Income tax effect�����������������������������������������������������������������������������������
Subtotal�����������������������������������������������������������������������������������������������������
Unrealized losses on revaluation of land
Income tax effect�����������������������������������������������������������������������������������
Foreign currency translation adjustments
Gains arising during the year�������������������������������������������������������������
Share of other comprehensive income of associates
accounted for using equity method
Gains arising during the year�������������������������������������������������������������
Total�������������������������������������������������������������������������������������������������������������

2013

2012

2013

¥ 2,982
2,085
5,067(1,243)
3,824¥(1,004)
610
(394)
23
(370)

$ 31,725
22,18853,913(13,228)
40,685

—

184

—

1,069

(564)

11,376133¥ 5,027(35)¥  (785)

1,421$ 53,483

18. Segment information
(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial information is available. These segments are subject to periodic examinations to enable the Company’s boardof directors to decide how to allocate resources and assess performance.
The Company’s business divisions are based on product and service categories. Each of the divisions
conducts business based on comprehensive strategies formulated for the products and services thatthey handle in Japan and overseas. The Company’s consolidated subsidiaries conduct business under thesupervision of the relevant business divisions.
The Group’s operations are therefore classified into two reportable segments, the Water Treatment
Chemicals segment and the Water Treatment Facilities segment, based on the products and services
handled by each of the divisions.
The Water Treatment Chemicals segment manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities segment manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, toolcleaning, soil and groundwater remediation services, and provides maintenance services that encompass
operation, maintenance, and management of water treatment facilities.
(2) M ethods for calculating sales, income and loss, assets and liabilities, and other amounts
by reportable segment
Accounting methods applied in the reportable segments are consistent with the methods applied in
preparation of the accompanied consolidated financial statements. Segment income represents operating
income. Inter-segment sales and transfers between the Group reflect values based on market price. Intersegment sales and transfers between the Company’s divisions are based primarily on book values.

Kurita Water Industries Ltd. Annual Report 201361

(3) Sales, income and loss, assets and liabilities, and other amounts by reportable segment
Millions of yen
Reportable segments

Year ended March 31, 2013

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization���Impairment losses���������������������������
Increase in property, plant andequipment and intangible
assets �������������������������������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated¥56,091287¥56,378¥ 8,334
34,647
16,589¥124,052
188¥124,241¥ 12,641
143,772
37,983¥180,143
476¥180,619¥ 20,975
178,41954,573¥      —
(476)¥  (476)¥    13
85,161(111)¥180,143—¥180,143¥ 20,989
263,580
54,462

1,369—

13,684—

15,054——
1,108

15,054
1,108

1,458
13
—

5,230
—
—

6,688
13
—

—
—
—

6,688
13
—

Thousands of U.S. dollars (Note 1)
Reportable segment

Year ended March 31, 2013

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization���Impairment losses���������������������������
Increase in property, plant andequipment and intangible
assets �������������������������������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

62

Kurita Water Industries Ltd.

Annual Report 2013

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated$596,713
3,061$599,774$ 88,661
368,585
176,487$1,319,707
2,006$1,321,714$  134,484
1,529,489
404,082$1,916,420
5,068$1,921,488$  223,145
1,898,074
580,570$     —
(5,068)$  (5,068)$    145
905,971(1,185)$1,916,420—$1,916,420$  223,291
2,804,046
579,385

14,567—

145,583—

160,150——
11,794160,150
11,794

15,514
144—

55,640——71,155
144
—

—
—
—

71,155
144—

Millions of yen
Reportable segments

Year ended March 31, 2012

Sales
1) Sales to outside customers�����������
2) Intersegment sales���������������������������
Total�������������������������������������������������������
Segment income�����������������������������������
Segment assets���������������������������������������
Segment liabilities���������������������������������
Other items
Depreciation and amortization���Impairment losses���������������������������
Increase in property, plant andequipment and intangible
assets �������������������������������������������������
Amortization of goodwill��������������
Goodwill�����������������������������������������������

Water
Treatment
Chemicals

Water
Treatment
Facilities

Total

Adjustments

Consolidated¥56,443372¥56,816¥ 9,268
36,58017,999¥137,348
246¥137,595¥ 20,127
161,750
43,252¥193,792
619¥194,411¥ 29,396
198,330
61,252¥    —(619)¥    (619)¥    (13)72,811(113)¥193,792—¥193,792¥ 29,382
271,141
61,1391,485—

14,550—16,035——173

16,035
173

1,463
31
13

6,641
—
—

8,105
31
13

—
—
—

8,105
31
13

Note:
“Adjustments” represents the following:
1. Sales: Elimination of intersegment transactions.
2. Segment income: Amount resulting from eliminations of intersegment transactions.
3. Segment assets: Mainly corporate assets of ¥85,272 million (US$907,157 thousand) and ¥72,932 million as of March 31, 2013 and2012, respectively, unallocated to reportable segment assets (cash deposits, securities in trust, and long-term investments).
4. Segment liabilities: Amount resulting from eliminations of intersegment claims and liabilities.
5. Impairment loss on idle assets was recognized for the year ended March 31, 2012. This had no effect on the reportable segments.

Related Information(Information by geographic region)(1) Net Sales
Millions of yen
Year ended March 31, 2013

Sales ���������������������������������������������������������

Japan

Asia

North
America

Europe

Other

Total

¥149,670¥23,898¥2,349¥1,196¥3,028¥180,143

Thousands of U.S. dollars (Note 1)
Year ended March 31, 2013

Sales ���������������������������������������������������������

Japan

Asia

North
America

Europe

Other

Total

$1,592,244$254,240$24,991$12,729$32,215$1,916,420

Millions of yen
Year ended March 31, 2012

Sales ���������������������������������������������������������

Japan

Asia

North
America

Europe

Other

Total

¥164,523¥22,541¥2,310¥1,373¥3,044¥193,792

Note:
Sales are allocated to regions based on the location of the customer to which the products or services are delivered or provided.

Kurita Water Industries Ltd. Annual Report 201363

(2) Property, Plant and Equipment
The Company has omitted disclosure here because property, plant and equipment holdings in Japanaccount for more than 90% of the amount of property, plant and equipment reported on the consolidated balance sheet.
(Information by major customer)
Year ended March 31, 2013

Sales to:Sharp Corporation�����������������������������������������

Year ended March 31, 2012
Sales to:Sharp Corporation�����������������������������������������

Millions of yen

Thousands of
U.S. dollars (Note 1)

Reportable segment¥25,684$273,238

Water Treatment Facilities

Millions of yen

Thousands of
U.S. dollars (Note 1)

Reportable segment¥28,792$306,298

Water Treatment Facilities

19. Subsequent events
Appropriation of retained earnings
The following appropriation of retained earnings for the year ended March 31, 2013 was approved at theordinary general meeting of shareholders of the Company held on June 27, 2013.
Millions of yen¥2,502

Cash dividends (year-end dividends)���������������������������������������������������������������������������������

Thousands of
U.S. dollars(Note 1)

$26,621

20. Per share information
U.S. dollars(Note 1)Yen

Net assets per share �����������������������������������������������������������������������������������
Net income per share (EPS)���������������������������������������������������������������������

2013

2012

2013

¥1,744.41
92.43¥1,649.24
130.65$18.56
0.98

The basis of calculation for EPS is as follows:
Thousands of
U.S. dollars(Note 1)Millions of yen

Net income�����������������������������������������������������������������������������������������������������
Net income attributable to common stock���������������������������������������
Average number of shares outstanding���������������������������������������������

(The Company has no dilutive shares.)64

Kurita Water Industries Ltd.

Annual Report 2013

2013

2012

2013

¥     11,476
11,476
124,160,885¥     16,548
16,548
126,659,779$122,086
122,086

Report of Independent Certified Public Accountants

Kurita Water Industries Ltd. Annual Report 201365

Corporate Data
As of March 31, 2013

Company Name
Address

Kurita Global Technology Center:
1-1, Kawada, Nogi-machi,
Shimotsuga-gun, Tochigi
329-0105, Japan
Tel.: 81 (280) 54-1511
Osaka Office:2-22, Kitahama 2-chome, Chuo-ku,
Osaka-shi, Osaka 541-0041, Japan
Tel.: 81 (6) 6228-4800
Other Offices:
Tohoku, Nagoya,
Hiroshima and Kyushu

Kurita Water Industries Ltd.
10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Paid-in Capital¥13,450,751,434
Date of Establishment July 13, 1949
Number of Employees 4,640 (on a consolidated basis);
1,543 (parent company)

Domestic Offices

Head Office:10-1, Nakano 4-chome,
Nakano-ku, Tokyo 164-0001, Japan
Tel.: 81 (3) 6743-5000

Overseas Offices

Taiwan Branch:
5F-3, No. 295, Section 2,
Kuang-Fu Road,(Empire Commercial Bldg.)
Shinchu, Taiwan, R.O.C.
Tel.: 886 (3) 575-1157
Malaysia Branch:
1-5-28, E-gate Lebuh Tunku Kudin 2,
11700 Gelugor, Pulau Pinang, Malaysia
Tel.: 60 (4) 656-0026

Major Consolidated Subsidiaries and Affiliated Companies
Paid-in Capital(Millions)Company Name

EquityOwnership (%) Main Business

OVERSEAS

66n North America & South America
Kurita America, Inc.

US$3.0100.0

Kurita do Brasil LTDA.

R$6.986

100.0

Manufacture & sale of water treatment chemicals andwater treatment facilities
Manufacture & sale of water treatment chemicals

n Europe
Kurita Europe GmbH

EUR2.301

95.0

Manufacture & sale of water treatment chemicals

n AsiaKurita Water Industries (Dalian) Co., Ltd.
Kuritec (Shanghai) Co., Ltd.
Kurita Water Industries (Suzhou) Ltd.
Kurita (Taiwan) Co., Ltd.
Hansu Ltd.
Hansu Technical Service Ltd.
Kurita-GK Chemical Co., Ltd.
Kurita (Singapore) Pte. Ltd.

¥550
¥30
¥530
NT$20
W2,500W400
BAHT92
S$4.0

90.1
100.0
100.0
100.0
33.2
59.4
85.0
100.0

Kurita Water (Malaysia) Sdn. Bhd.
P.T. Kurita Indonesia

RM$0.6
US$2.0

83.3
92.5

Manufacture & sale of water treatment chemicals
Sale & maintenance of water treatment facilities
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals and water
treatment facilities
Sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals and water
treatment facilities

DOMESTIC
Kurita Creation Co., Ltd.
Kuritec Service Co. Ltd.
Kuritaz Co., Ltd.
Kurita Engineering Co., Ltd.
Land Solution Inc.
Kurita Chemical Manufacturing Ltd.

¥160
¥50
¥220
¥160
¥450
¥50

100.0
100.0
100.0
100.0
66.0
100.0

Kurita Water Industries Ltd.

Annual Report 2013

Manufacture & sale of water purifiers
Tool cleaning
Operation & maintenance of water treatment facilities
Chemical cleaning
Soil remediation
Manufacture of water treatment chemicals

Corporate Philosophy

Investor Information

Study the properties of water, master them,and we will create an environment
in which nature and man are in harmony
The Kurita Group will contribute to society by deeply and broadly studying theproperties of water to discover new functions, creating value, and make the most

Stock Exchange Listing
Common Stock

Number of Shareholders
Independent Auditor
Transfer Agent

effective use of this precious and limited resource.

First Section of the Tokyo Stock Exchange
Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares) (As of March 31, 2013)37,824 (As of March 31, 2013)
Grant Thornton Taiyo ASG LLC
Akasaka Oji Bldg. 5F, 8-1-22, Akasaka, Minato-ku, Tokyo 107-0052, Japan
Sumitomo Mitsui Trust Bank, Ltd.
1-4-1, Marunouchi, Chiyoda-ku, Tokyo 100-8233, Japan

Corporate Vision
Main Shareholders

Becoming an advanced water and environmental
management company
The starting point for the Kurita Group’s wide ranging business activities is toprovide our customers and society with solutions for their issues through water
treatment systems. As customers face the urgent tasks of improving productivity
and reducing their environmental impact, Kurita’s mission is to provide solutions
through comprehensive proposals concerning both water and the environment.
Based on the advanced technological capabilities in industrial water that wehave developed since our founding, we will provide water of the required quality

Distribution of Shares
Shareholdings
Percentage of total(Number of shares) shares issued (%)

Kurita Water Industries Ltd.
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd. (Trust Account)Northern Trust Co. (AVFC) Sub A/C American Clients
National Mutual Insurance Federation ofAgricultural Cooperatives
RBC IST LONDON-LENDING ACCOUNTThe Chase Manhattan Bank, N.A. London Secs
Lending ­Omnibus Account
Tokio Marine & Nichido Fire Insurance Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Pictet and Cie (Europe) S.A.

13,635,467
6,644,283
5,374,400
4,201,600

10.26
5.00
4.04
3.16

3,380,300

2.54

2,885,830

2.17

2,743,248

2.06

2,586,926
2,360,200
2,273,800

1.94
1.77
1.71
(As of March 31, 2013)and volume, when and where it is needed, and provide solutions for its recycling

Treasury Stock
Individuals
Financial
Institutions
Foreign
Owned

Securities
Firms

Shareholdings(Number of shares)

n
n
n
n
n
n

38,181,722

28.8%

935,340

0.7%

10,895,827

8.2%

50,537,910

38.1%

18,613,990

14.0%

13,635,467
Total132,800,256

and reuse. Moreover, we will develop these water management capabilities from a

10.3%
100.0%(As of March 31, 2013)

more global perspective, seeking to become an even more advanced water andenvironmental management company.

Other Domestic
Firms
Percentage of total
shares issued (%)

Stock Price Range and Trading Volume (Tokyo Stock Exchange)
Stock price (Yen)

Trading volume (Hundreds of shares)

4,000

800,000

3,000

600,000

2,000

400,000

1,000

200,000

Kurita FACT BOOK 2013
Kurita Fact Book 2013 provides a wide range oflong-term, historical data, including financial
indicators and quantitative management data.

http://ir.kurita.co.jp/en/reports/factbook/Cautionary Statement with Respect to Forward-Looking Statements
This annual report contains forward-looking statements regarding forecasts, plans,
strategies and business performance in the future. These forward-looking statements
represent judgments made by the Company based on information currently
available to it and involve a variety of risks and uncertainties.
Actual results may be materially different from these forward-looking statements.
Such risks and uncertainties include (but are not limited to) changes in the economic
environment, business conditions, market, demand and currency exchange rates.

0

Jan. ’11

Jan. ’12

Jan. ’13

0n Stock price n Trading volume
Kurita Water Industries Ltd. Annual Report 2013

67

Kurita Water Industries Ltd. ANNUAL REPORT 2013

10-1, Nakano 4-chome, Nakano-ku, Tokyo 164-0001, Japan
Tel: 81 (3) 6743-5000

URL: http://www.kurita.co.jp/english/

Providing Comprehensive
Solutions Throughout
the World

Annual Report 2013
For the year ended March 31, 2013This report was printed on FSC-approved paper using vegetable oil ink.
Printed in Japan