May 14, 2019

Consolidated Financial Results
for the Fiscal Year Ended March 31, 2019
(Japanese Accounting Standards)
Name of the Listed Company:
Listing:
Stock code:
URL:
Representative:
Contact Person:

Nitta Gelatin Inc.

First Section of Tokyo Stock Exchange4977
http://www.nitta-gelatin.co.jp
Koichi Ogata, Representative Director and President
Norifumi Nagaoka, Director and Executive Officer;
General Manager of General Management Division
Tel: +81-72-949-5381
Scheduled date of General Shareholders’ Meeting: June 26, 2019
Scheduled date to file Securities Report:
June 27, 2019
Scheduled date to commence dividend payments: June 26, 2019
Supplementary explanatory materials prepared:
Yes
Explanatory meeting:Yes (For analysts and institutional investors)(Millions of yen with fractional amounts discarded, unless otherwise noted.)

1. Consolidated financial results for the fiscal year ended March 31, 2019(from April 1, 2018 to March 31, 2019)(1) Consolidated operating results(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ended
March 31, 2019
March 31, 2018

Millions of yen

36,464
37,777

Operating income
%

(3.5)
3.3

Millions of yen

898
1,094

Net income
attributable to ownersof the parent

Ordinary income%

Millions of yen

828
978

(17.9)(32.4)%

Millions of yen%(15.4)(46.6)

989
(599)

-

Note: Comprehensive income
For the year ended March 31, 2019: ¥495 million (-%)
For the year ended March 31, 2018: ¥(304 million) (-%)
Net income
per share

Fiscal year ended
March 31, 2019
March 31, 2018

Yen

Diluted net income Return on equity
per share
(ROE)
Yen

%

Ordinary income/ Total assets%

Operatingmargin
%

6.3
2.2
2.5
53.85
(3.9)
2.5
2.9
(32.61)
Reference : Equity in earnings of affiliates
For the year ended March 31, 2019: ¥(132 million)
For the year ended March 31, 2018: ¥180 million
Notes: 1. Diluted net income per share is not disclosed due to the absence of latent shares with dilution effect.
2. The consolidated financial results for the fiscal year ended March 31, 2018 have been retrospectively revised. For
details, please refer to “(5) Notes to Consolidated Financial Statements in “3. Consolidated Financial Statements
and Key Notes” on page 19 of the Attachment to this report.

(2) Consolidated financial position
Total assets

As ofMarch 31, 2019
March 31, 2018

Net assets

Equity ratio

Millions of yen

Millions of yen

37,71537,81517,70817,459Net assets per share
%

Yen

42.0
40.7

862.29836.90

Reference: Equity
As of March 31, 2019:¥15,843 million
As of March 31, 2018:¥15,376 million
Note: The consolidated financial position as of March 31, 2018 has been retrospectively revised. For details, please refer to“(5) Notes to Consolidated Financial Statements in “3. Consolidated Financial Statements and Key Notes” on page 19 of
the Attachment to this report.

(3) Consolidated cash flows
Net cash provided byoperating activities

Fiscal year ended
March 31, 2019
March 31, 2018

Net cash used ininvesting activities

Millions of yen

Millions of yen

Net cash provided by(used in) financing
activities

Cash andcash equivalents
at end of year

Millions of yen

Millions of yen(1,009)
2,051
2,232
(708)
(1,160)1,538
1,423(1,377)
Note: The consolidated cash flows for the fiscal year ended March 31, 2018 has been retrospectively revised. For details,
please refer to “(5) Notes to Consolidated Financial Statements in “3. Consolidated Financial Statements and Key Notes”
on page 19 of the Attachment to this report.

2. Cash dividendsFirstquarter

Secondquarter

Third
quarter

Fiscalyear-end

AnnualTotal amountof dividends(annual)

Yen

Yen

Yen

Yen

Yen

Millions of yen

-

6.00

-

6.00

12.00

Cash dividends per share

Fiscal year ended
March 31, 2018220

Payout ratio(consolidated)

Dividends on
net assets(consolidated)

%

%

-

1.4

Fiscal year ended
6.00
10.00
16.00
29.7
1.9
293
March 31, 2019
Fiscal year ending
March 31,
6.00
6.00
12.00
27.6
2020(Forecasts)
Note: Breakdown of fiscal year-end dividend for the fiscal year ended March 31, 2019: ¥6.00 in ordinary dividend and ¥4.00 incommemorative dividend per share3. Consolidated financial forecasts for the fiscal year ending March 31, 2019(from April 1, 2018 to March 31, 2019)
OperatingincomeNet sales

Six months ending
September 30, 2019
Fiscal year ending
March 31, 2019

(Percentages indicate year-on-year changes.)
Net income
Net income
attributable toOrdinary income
owners of theper share
parentMillionsof yen%Millionsof yen%Millionsof yen%Millionsof yen%18,800

4.4

600

39.9

500

(15.9)

300(76.1)

16.33

38,200

4.8

1,400

55.9

1,300

56.9

800

(19.1)

43.54

Yen

Notes:(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in achange in the scope of consolidation): YesNew:
One company
Excluded: One company; Company name: Reva Proteins Ltd.
(2) Changes in accounting policies, changes in accounting estimates, and restatement of revisions
a. Changes in accounting policies due to revisions to accounting standards and other guidelines: No
b. Changes in accounting policies due to reasons other than a. above: No
c. Changes in accounting estimates: No
d. Restatement of revisions: No(3) Number of common shares issued
a. Total number of issued shares at the end of the period (including treasury stock)
As of March 31, 201918,373,974 shares
As of March 31, 2018
18,373,974 sharesb. Number of shares of treasury stock at the end of the period
As of March 31, 2019163 shares
As of March 31, 2018
162 sharesc. Average number of shares
For the year ended March 31, 2019
For the year ended March 31, 2018

18,373,812 shares
18,373,812 shares

(Reference) Summary of non-consolidated operating results
1. Non-consolidated financial results for the fiscal year ended March 31, 2019(from April 1, 2018 to March 31, 2019)(1) Non-consolidated operating results(Percentages indicate year-on-year changes.)
Net sales

Operating income

Ordinary income

Net income

Fiscal year ended
March 31, 2019

Millions of yen

22,311(3.9)

316(63.4)

997

(4.0)

1,005

-

March 31, 201823,2101.3

863(29.8)

1,039(36.9)(1,256)-%

Net income
per share

Millions of yen%

Millions of yen%

Millions of yen%

Diluted net income
per share

Fiscal year ended
March 31, 2019

54.72

-

March 31, 2018(68.37)

-

Yen

Yen

Note: Diluted net income per share is not disclosed due to the absence of latent shares with dilution effect.

(2) Non-consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

As ofMarch 31, 2019

Millions of yen

26,74913,68251.1

744.65

March 31, 2018

26,307

12,92949.1

703.69Millions of yen

Yen%

Reference: Equity
As of March 31, 2019: ¥13,682 million
As of March 31, 2018: ¥12,929 million* This financial report is not subject to audits by Certified Public Accountants or the independent auditor.
* Proper use of earnings forecasts, and other special matters
The forward-looking statements, including earnings forecasts, contained in these materials are based on
information currently available to the Company and on certain assumptions deemed to be reasonable. Thesestatements do not guarantee that the Company will achieve its earnings forecasts. In addition, actual businessand other results may differ substantially due to various factors. For details on the conditions assumed and thecautionary notes and items in the financial forecasts, please refer to “(4) Outlook” under “1. Overview ofBusiness Results” on page 5 of the Attachment to this report.

Attachment Contents
1. Overview of Business Results ······················································································· 2(1) Operating Results for the fiscal year ended March 31, 2019 ················································· 2(2) Financial Position ································································································· 4(3) Cash Flows ········································································································· 4(4) Outlook ············································································································· 5(5) Basic Policies Concerning Management ········································································ 6
2. Basic Approach to Selection of Accounting Standard ·························································· 9
3. Consolidated Financial Statements and Key Notes ·····························································10(1) Consolidated Balance Sheets ····················································································10(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ·········12Consolidated Statements of Income ············································································12Consolidated Statements of Comprehensive Income ·························································13(3) Consolidated Statements of Changes in Net Assets ··························································14(4) Consolidated Statements of Cash Flows ·······································································16(5) Notes to Consolidated Financial Statements ··································································18(Note Concerning Going Concern Assumption) ······························································18(Changes in Presentation Basis) ················································································18(Business Combinations) ························································································19(Segment Information) ···························································································22(Per Share Information) ··························································································25(Subsequent Events) ·····························································································25
4. Others ··················································································································26

11. Overview of Business Results(1) Operating Results for the fiscal year ended March 31, 2019
In the fiscal year ended March 31, 2019, the global economy showed increasing signs of deceleration
as the European and Chinese economies clearly entered a recession, although the U.S. maintained
gradual economic growth. The Japanese economy experienced increasing uncertainty over the futureas the downturns in overseas economies caused exports to falter, despite robust capital expendituresand corporate performance.
In this environment, management policies of the Group as shown in the three-year Medium-Term
Management Plan launched in April 2018 are as follows.
1. Our three core areas will be food solutions, health support, and biomedical.
2. We will globally optimize our production system in Japan, Asia, and North America in responseto an era of completely free trade.
3. We will promote selection and concentration and create high-value-added products and services
to recreate the Company as a higher-profit enterprise.
Guided by these management policies, the Group actively worked to cultivate new markets and todevelop new applications and products in its three core areas. The Group strove to enhance
productivity and reduce costs at each of its manufacturing sites. It also conducted a company split of
its Adhesive Business (excluding manufacturing), transferring it to Bostik-Nitta Co., Ltd. for the
purposes of focusing even more on core areas. In other developments, the Company took steps toreorganize its businesses, with Nitta Gelatin India Ltd. of India conducting an absorption-type merger
with Reva Proteins Ltd. and the Company deciding to transfer shares of Nitta Hong Kong Ltd. in the
Chinese collagen casing business.
As a result, in the fiscal year ended March 31, 2019, net sales decreased 3.5% year on year to¥36,464 million, and operating income decreased 17.9% year on year to ¥898 million, mainly due toa rise in the price of fish used as raw materials and a decrease in casing sales in North America.
Ordinary income decreased 15.4% to ¥828 million, mainly due to equity in losses of affiliates. Under
extraordinary gains, the Company recorded transfer gain on business divestiture of ¥1,301 million
associated with the company split and transfer of the adhesive business (excluding manufacturing),
while extraordinary losses included impairment loss of ¥1,098 million recognized for Nitta Gelatin
India Ltd. Consequently, the Company posted net income attributable to owners of the parent of ¥989
million (net loss attributable to owners of the parent of ¥599 million in the previous fiscal year).
The Company changed the reporting segment to a single business segment of “Collagen business”
effective from the fiscal year ended March 31, 2019.
Products are categorized into the following sales categories.

2

Sales Category

Products

Food solutions

Gelatin for food use, food materials, collagen casings, and others

Health support

Gelatin for capsules, collagen peptide for health foods and beauty
applications, gelatin and collagen for advanced medical care, and others

Specialties

Adhesives, gelatin for industrial use, and others

Sales were as follows:
Food solutions
In Japan, sales for use in microwaveable delicatessen items increased as demand for ready-mademeals continued to increase, driven by an increase in households where both spouses work and a
growing trend of eating alone. Sales for processed meat products used in ready-made meals andrestaurants increased, along with sales for food-service frozen products, offsetting a decline in salesof gelatin for confectionery and food preparation. Sales for high sugar content confectionery
applications such as gummy candy and for desserts were level year on year. Overseas, net sales ofcollagen casing in snack sausages were lower than the previous fiscal year.
As a result, overall sales in the food solutions category decreased 1.9% year on year to ¥15,290
million.
Health support
In Japan, net sales increased due to robust demand for capsules for health foods, partly aided by rising
health awareness and an expanding market for foods with nutrient function claims. Net sales ofcollagen peptide for beauty applications increased due to penetration of revised pricing and sales
expansion.
Overseas, net sales increased due to robust sales of capsules in the U.S. market following market
recovery and market expansion for collagen peptide in North America and China in health and beauty
applications. Net sales of capsules in the Asian market declined, affected in part by the outbreak offloods in southern India in August 2018.
As a result, overall sales in the health support category increased 1.7% year on year to ¥14,521
million.
Specialties
In adhesives, overall sales decreased 15.9% year on year to ¥6,653 million, influenced by declining
sales in adhesives for hygiene products due to a change in demand by customers.

3(2) Financial Position(Assets)
Total assets amounted to ¥37,715 million at March 31, 2019, ¥99 million lower than at March 31,
2018. This was mainly attributable to decreases in noncurrent assets.
(Liabilities)
Total liabilities stood at ¥20,007 million at March 31, 2019, ¥348 million lower than at March 31,
2018. This was mainly attributable to decreases in long-term loans payable (including the current
portion).
(Net assets)
Net assets amounted to ¥17,708 million at March 31, 2019, ¥249 million higher than at March 31,
2018. This was mainly attributable to an increase in retained earnings.
As a result, the equity ratio stood at 42.0% at March 31, 2019 compared with 40.7% at March 31,
2018.

(3) Cash Flows
Cash and cash equivalents (“cash”) as of March 31, 2019 was ¥2,051 million, up ¥513 million fromMarch 31, 2018.
Cash flows for each activity and reasons are as follows.
(Net cash provided by operating activities)
Operating activities provided net cash of ¥2,232 million. The main components were income before
provision of income taxes of ¥1,031 million, depreciation and amortization of ¥1,568 million,
increase in inventories of ¥753 million, transfer gain on business divestiture of ¥655 million,
impairment loss of ¥634 million, and increase in notes and accounts payable-trade of ¥567 million.
(Net cash used in investing activities)
Investing activities used net cash of ¥708 million. This was mainly attributable to ¥475 million inproceeds from the sale of property, plant and equipment, ¥1,967 million in purchase of property, plantand equipment, and ¥887 million in proceeds from business divestiture.
(Net cash used in financing activities)
Financing activities used net cash of ¥1,009 million. The main uses of cash were repayment oflong-term loans payable of ¥2,664 million and repayments of lease obligations of ¥212 million,
which were partially offset by proceeds from long-term loans payable of ¥1,800 million.

4

(Reference)
Trends in cash flow indicators are as shown below:
Fiscal year ended

Fiscal year ended

Fiscal year ended

Fiscal year ended

Fiscal year ended

March 31, 2015

March 31, 2016

March 31, 2017

March 31, 2018

March 31, 2019

Equity ratio (%)

45.0

39.8

38.9

40.7

42.0

Market value equity ratio (%)

44.1

35.9

34.3

39.3

33.4

4.5

4.4

5.9

7.2

4.3

13.6

7.6

8.1

6.0

9.2

Interest-bearing debt to cash
flow ratio (Years)
Interest coverage ratio(Times)Equity ratio: equity / total assets
Market value equity ratio: market capitalization / total assets
Interest-bearing debt to cash flow ratio: interest-bearing debt / cash flow
Interest coverage ratio: cash flow / paid interest
Notes: 1. All indicators are calculated using consolidated financial figures.
2. Market capitalization is calculated based on the number of issued shares, excluding treasury stock,
as of the end of the fiscal year.
3. The figure used for cash flow is “net cash provided by operating activities” on the consolidated
statements of cash flows.
4. Interest-bearing debt includes all liabilities recorded on the consolidated balance sheets on whichinterest was paid. Furthermore, regarding the paid interest, we use “interest expenses paid”
recorded on the consolidated statements of cash flows.

(4) Outlook(Outlook for Business Performance in the Fiscal Year Ending March 31, 2020)
The fiscal year ending March 31, 2020 marks the first of the Company’s next 100 years. To provide
products and services that meet our customers’ expectations and requests for continued improvement,
the Company will continue to pursue the enormous potential of collagen as a unique natural material.
Moreover, the Company will develop products that take full advantage of its researchaccomplishments in the fields of collagen and collagen peptide. By doing so, the Company will help
to fulfill the desire of its customers “To stay healthy and feeling young,” as laid out in its vision.
In Japan, demand for collagen and collagen peptide for use in general food products and healthfood products is forecast to remain firm, but there are concerns such as persistently high prices forfish used as raw material and rising costs of energy and logistics. In North America, demand for use
in capsules is expected to trend strongly, and the Company will respond to expanding collagen
peptide demand for beauty applications by taking steps to provide more stable supplies at lower cost.
In growing Asia, the Company will strive to bolster sales and marketing activities and to expand its
business.
With regard to capital investment, in Japan the Company will look to increase product quality andinvest in energy-efficient equipment, as well as equipment for research and development. Overseas,
the Company will execute investments aimed at equipment and facilities that enhance productivity as
well as measures to address environmental conservation.

5Forecast for Consolidated Financial Results for the Next Fiscal Year
Consolidated financial
forecasts for the fiscal year
ending March 31, 2020

Year on year change(Millions of yen)(%)

Net sales

38,200

4.8

Operating income

1,400

55.9

Ordinary income

1,300

56.9

800

(19.1)Net income attributable toowners of the parent(5) Basic Policies Concerning Management
1) Basic Management Policies
At its heart, our management policy is to contribute to the creation of a prosperous society for all
humankind. The Group’s approach to achieve this is to make full use of collagen materials that havebeen utilized over the years and to add high market value to them for return to society as products forthe food, health and beauty and medical markets. Our policy also calls for management from a global
perspective, as a Company working towards the conservation of the Earth’s environment.
Corporate Philosophy
Based on a spirit of empathy and sincerity, we, the members of the Nitta Gelatin Family, arededicated to the development of our business and contributions to the global community. We
will lead prosperous and fulfilling lives through our competence and utmost efforts.
Vision“To stay healthy and feeling young”
Nitta Gelatin group fulfills this desire of people worldwide through our relentless pursuit of
meeting collagen’s enormous potential.
1. We will provide products and services that meet our customers’ expectations of continued
improvement.
2. We will broaden the range of collagen applications through our ongoing efforts in R&D andproduction innovation.
3. We will pioneer and create new markets by fostering a corporate culture that encourages
facing and overcoming challenges.
Aiming to realize this vision and further strengthen and expand its business foundations, the Groupwill implement the following three management policies:6a. Our three core areas will be food solutions, health support, and biomedical.

Food solutions

Health support

Biomedical

To realize “more delicious and easy” food solutions, we will provide solutions
that solve customers’ issues through applications development utilizing gelatin
and gelling agents, etc., and through our unique product development andformulation technologies.
We will respond to people’s needs to maintain their youth and beauty byresearch into the functional characteristics of collagen peptides and productdevelopment capabilities over many years to fulfill the desire for health ofpeople around the world.
In the cutting-edge medical field, where ambitious initiatives are being
undertaken to develop innovative medical technology, we will contribute to the
manufacture of regenerative medicine and biomaterial through the expansion ofsafe collagen and gelatin in the medical field for use in vivo.

b. We will globally optimize our production system in Japan, Asia, and North America in responseto an era of completely free trade.
We will need to address intensified competition from overseas manufacturers entering theJapanese market when tariffs are withdrawn through trade agreements such as the Trans-PacificPartnership (TPP) and Economic Partnership Agreements (EPAs). To do so, we will push ahead
with production innovation at each of the Group’s manufacturing facilities in order to enhance our
global competitiveness.
c. We will promote selection and concentration and create high-value added products and services
to recreate the company as a higher-profit enterprise.
In the fiscal year ended March 31, 2019, the Company conducted a company split of its adhesive
business (excluding manufacturing) and transferred it to Bostik-Nitta Co., Ltd. Nitta Gelatin India
Ltd. conducted an absorption-type merger with Reva Proteins Ltd. and in the Chinese collagenbusiness, the Company decided to transfer the shares of Nitta Hong Kong Ltd. Furthermore, in
April 2019, the Company conducted an absorption-type merger with Nitta Gelatin Foods Inc.
Looking ahead, the Company will recreate itself as a higher-profit enterprise by optimizing our
product portfolio, along with steadily pushing ahead with our business strategies in the corebusinesses laid out in our vision.

2) Target Management Indicators
From the viewpoint of improving both business growth and profitability, management indicators
important to the Nitta Gelatin Group are consolidated net sales, and consolidated operating income.
The Group aims to maximize earnings based on sustained business growth by providing products andservices that satisfy customers’ needs, and by continually reducing cost and improving productivity toremain competitive as a manufacturer.

3) Medium- to Long-term Management Strategies and Issues Facing the Company
The number of foreign tourists visiting Japan in 2018 surpassed 30 million, and the Tokyo Olympics
7

planned for 2020 are expected to drive further expansion in demand in the hotel, restaurant, andrestaurant chain industries. Meanwhile, as more women enter the workforce, ordinary households areusing convenience store and supermarket delicatessen items for meals on increasing occasions.
Moreover, the Japanese language has a larger number of words to express food texture than othercountries, and Japanese people are thought to have a more acute sense of texture, leading them toconstantly seek new textures, such as light and airy or sticky and chewy textures.
Japan is in a unique position as it rapidly becomes a super-aged society. A rising healthconsciousness has seen an increase in joggers and walkers among the population, seeking to maintaintheir physical strength. These background trends are driving an expanding sports nutrition market(foods generally developed for sports people, such as sports drinks, sports food, and sports
supplements), which aims to aid post-sport fatigue recovery or injury prevention. Furthermore, tocope with the sudden increase in the senior population, there is a focus on initiatives to improveconditions at the “frail” stage (the intermediate stage where people make a transition from good
health to requiring nursing care as they age).
In Asia, income levels are rising in each country, and major supermarkets are now stocking a large
number of dairy products and desserts. Moreover, new needs are emerging with an increase inJapanese-affiliated convenience stores and so forth.
In the medical market, research institutions around the world are promoting cutting-edge therapies
and innovative treatments such as next-generation pharmaceuticals. Collagen and gelatin can be used
not only for cell cultures, but also for its biocompatibility and bioabsorbent properties. These uniqueinherent properties are increasingly being used to create artificial bone and skin, and for drug delivery
and other purposes.
Food solutions
In the restaurant industry, including hotels and restaurants, while the market is expanding, driven inpart by an increase in foreign visitors to Japan, chronic labor shortages are driving needs around foodpreparation that requires little work. To meet these needs, in addition to its existing sales ofingredients, the Company will provide highly processed products for commercial use to resolve
customers’ issues such as labor shortages.
For the ready-made meal market, which is seeing high demand for microwaveable delicatessen
items and frozen foods, the Company will develop specialized products to realize “more deliciousand easy” food solutions. Meanwhile, in Asia, the Company will utilize application technologies
acquired in Japan to meet local needs, thereby expanding its business and building a new businessmodel.

8

Health support
Collagen peptides are drawing attention for their efficacy in anti-aging products. The Company will
collaborate with external research institutions with a focus on research and development of foods
with nutrient function claims that contribute to healthy longevity, such as rejuvenation of bloodvessels and blood sugar reducing effects that can improve diabetes, aiming to realize the desire ofpeople “To stay healthy and feeling young.” Other areas of focus will be the development of new
products for the rapidly growing sports nutrition market, and the development of new markets.
In North America, the capsule market for pharmaceutical and health food products is performingstrongly, and the collagen peptide market for beauty applications and health foods is expanding
sharply. In China, the functionality of collagen peptides has been recognized anew in growing
demand for use in health foods. The Company will expand its business globally to meet thesedemands.
Biomedical
The Company’s gelatin and collagen are highly safe products that do not cause an exothermal
reaction when entering the body directly. This property has led to their used in the field of
regenerative medicine from cell cultivation to treatment. Overseas, gelatin and collagen are earning a
reputation for use in biopharmaceuticals, and going forward the Company will strive to achieve evengreater recognition of medical collagen and to increase its sales with a view to contributing to the
future of medical care.
Since the Nitta Gelatin Group’s main raw materials are by-products of the livestock and marine
products industries, they are susceptible to price surges caused by supply and demand effects. The
Group will continue to develop new suppliers for reliable and safe raw materials to strengthen its
global supply system. Moreover, by improving productivity at its plants, the Group will reduce costs
and strengthen its environmental measures, thereby increasing its competitive advantages.
The Company’s core material, collagen, holds unlimited potential. Through joint research with
universities and external research institutes, the Company will uncover new properties of collagen toassist people’s health and daily lives, developing new applications and creating new markets.

2. Basic Approach to Selection of Accounting Standard
The Nitta Gelatin Group plans to prepare its consolidated financial statements based on Japanese
accounting standards in the near future. This is in consideration of the need to ensure that theconsolidated financial statements can be readily compared between different periods and different
companies.
Looking ahead, considering its management policies and various conditions in Japan and abroad,
Nitta Gelatin plans to examine the adoption of International Financial Reporting Standards (IFRS). In
doing so, the Company will take into account trends such as the adoption of IFRS by its peer
companies.

93. Consolidated Financial Statements and Key Notes(1) Consolidated Balance Sheets(Millions of yen)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Land
Lease assets
Accumulated depreciation
Lease assets, net
Construction in process
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

10

Fiscal 2018

Fiscal 2019

(As of March 31, 2018)(As of March 31, 2019)

1,626
8,966
5,152
1,240
2,943
338
(11)
20,255

2,092
8,589
5,884
1,350
2,911
558
(9)
21,37810,045(6,423)
3,621
16,796(11,986)
4,809
2,537
1,179
(684)
495
572
1,455
(1,240)215
12,251

10,660(6,871)
3,788
17,514(12,865)
4,648
2,166
948
(453)
494
184
1,383
(1,115)268
11,551

384
395
780

353
231
585

3,451
128
133
672
204
(63)
4,527
17,55937,815

3,260
138
152
572
270
(193)
4,200
16,33737,715

(Millions of yen)

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable-other
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Net defined benefit liability
Other
Total noncurrent liabilities
Total liabilities
Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income(loss)
Valuation difference on other available-for-salesecurities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive loss
Non-controlling interests
Total net assets
Total liabilities and net assets

11

Fiscal 2018

Fiscal 2019

(As of March 31, 2018)(As of March 31, 2019)

4,159
2,504
2,497
196
1,729
16
249
623
11,977

4,794
2,657
2,386
196
1,614
237
205
468
12,559

4,684
345
558
2,709
80
8,378
20,355

4,000
343
371
2,731
－
7,447
20,007

3,144
2,966
9,386
(0)
15,497

3,144
2,966
10,155(0)
16,266

1,331

1,274

(43)
149
(1,558)(120)
2,082
17,45937,815(8)
174(1,863)(423)
1,865
17,70837,715

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income(Millions of yen)

Net sales
Cost of sales
Gross profit on sales
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Rent income
Outsourcing service income
Insurance claim income
Foreign exchange gains
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Equity in losses of affiliates
Commissions paid
Other
Total non-operating expenses
Ordinary income
Extraordinary gains
Gain on sales of noncurrent assets
Subsidy income
Transfer gain on business divestiture
Gain on change in equity
Total extraordinary gains
Extraordinary losses
Provision of allowance for doubtful accounts
Disposal costs for noncurrent assets
Loss on retirement of noncurrent assets
Loss on tax purpose reduction entry of noncurrent
assetsLoss on disaster
Impairment loss
Total extraordinary losses
Income before provision of income taxes
Income taxes
Income taxes-deferred
Total income taxes
Net income (loss)
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to owners of the parent

12

Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)37,777
29,815
7,961
6,867
1,094

36,46429,079
7,384
6,486
898

15
45
30
9
180
33
316

10
39
47
32
34
119
34
317

235
154
9
31
431
978

236
－
132
9
9
387
828

-

81
147
655
416
1,301

63
4
35
862
965
12
304
185
490
(477)
121
(599)

127
3
171
147
13
634
1,098
1,031
431
(217)
214
817
(171)
989

Consolidated Statements of Comprehensive Income(Millions of yen)

Net income (loss)
Other comprehensive income
Valuation difference on other available-for-salesecurities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Pension liability adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Total comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

13

Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)

(477)

817

224

(57)

(126)
(290)
336

47
46
(306)

28

(52)

173
(304)

(321)
495

(405)
100

687
(191)

(3) Consolidated Statements of Changes in Net Assets
Fiscal 2018 (From April 1, 2017 to March 31, 2018)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at the beginning of fiscal year
Cumulative impact of merger withconsolidated subsidiary
Balance at start of year after
retrospective application of
accounting treatment
Changes during the fiscal year

Capital surplus

3,144

2,966

Retained earnings

Treasury stock

10,042

Total shareholders’equity(0)

16,153

120
3,144

2,966

120

10,162(0)

16,273

Dividends from surplus

(220)

(220)

Net income (loss) attributable toowners of the parent

(599)

(599)

43

43

Increase by merger
Net changes of items other thanshareholders’ equity-

Total changes during fiscal year

-

-

(776)

-

(776)

Balance at the end of fiscal year

3,144

2,966

9,386

(0)

15,497

Noncontrollinginterests

Total
net assets

2,009

17,736

159

280

2,168

18,016

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities

Balance at the beginning of fiscal year
Cumulative impact of merger withconsolidated subsidiary
Balance at start of year after
retrospective application of
accounting treatment
Changes during the fiscal year

1,107

1,107

Deferred gains(losses) onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefined benefit
plans

Total accumulated othercomprehensive
income331(1,907)

(426)

43

43

331

(1,907)(426)

Dividends from surplus

-

(220)

Net income (loss) attributable toowners of the parent

-

(599)

Increase by merger-

43

Net changes of items other thanshareholders’ equity

224

(86)

(182)

349

305

(86)

218

Total changes during fiscal year

224

(86)

(182)

349

305

(86)

(557)

Balance at the end of fiscal year

1,331

(43)

149

(1,558)

(120)

2,032

17,45914

Fiscal 2019 (From April 1, 2018 to March 31, 2019)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at the beginning of fiscal year

Capital surplus

3,144

2,966

Retained earnings

Treasury stock

9,386

Total shareholders’equity(0)15,497

Changes during the fiscal year
Dividends from surplus

(220)

(220)

Net income attributable to ownersof the parent

989

989

Purchase of treasury stock

(0)

(0)

Net changes of items other thanshareholders’ equity-

Total changes during fiscal year

-

-

768

(0)

768

Balance at the end of fiscal year

3,144

2,966

10,155(0)

16,266

Noncontrollinginterests

Total
net assets

2,082

17,459

Accumulated other comprehensive income
Valuationdifference on
available-forsale securities

Balance at the beginning of fiscal year

1,331

Deferred gains(losses) onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefined benefit
plans

Total accumulated othercomprehensive
income149(1,558)

(120)

(43)

Changes during the fiscal year
Dividends from surplus

-

(220)

Net income attributable to ownersof the parent-

989

Purchase of treasury stock
Net changes of items other thanshareholders’ equity

(0)
(57)

35

25

(305)

(302)

(216)

(519)

Total changes during fiscal year

(57)

35

25

(305)

(302)

(216)

249

Balance at the end of fiscal year

1,274

(8)

174

(1,863)

(423)

1,865

17,70815

(4) Consolidated Statements of Cash Flows(Millions of yen)

Cash flows from operating activities
Income before provision of income taxes
Depreciation and amortization
Amortization of goodwill
Increase in allowance for doubtful accounts
Decrease in provision for bonuses
Increase in net defined benefit liability
Interest and dividends income
Interest expenses
Foreign exchange losses
Equity in earnings of affiliates
Loss on sales of property, plant and equipment
Loss on retirement of noncurrent assets
Impairment loss
Gain on change in equity
Transfer gain on business divestiture
Loss on tax purpose reduction entry of noncurrent
assets
Subsidy income
Loss on disaster
Increase in notes and accounts receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from the sale of property, plant andequipment
Purchase of property, plant and equipment
Purchase of intangible assets
Subsidies received
Proceeds from the sale of investment securities
Purchase of investment securities
Proceeds from business divestiture
Payment of expenses related to business divesture
Other, net
Net cash used in investing activities

16

Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)

12
1,675
47
53
(5)
49
(61)
235
7
(180)
4
35
862
-

1,031
1,568
47
128
(47)
20
(49)
236
(99)
132
(78)
171
634
(416)
(655)

-

147

(181)
(294)

(147)
13
412
(753)

(6)

567

(67)
164
2,350
179
(235)
(871)
1,423

(158)
(221)
2,484
238
(237)
(252)
2,232

(92)
111

(21)
65

1

475

(1,347)
(35)
(7)
(8)
(1,377)(1,967)
(19)
147
0
(7)
887
(180)
(89)
(708)

(Millions of yen)

Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable

(236)

118

Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from sale-and-leaseback transactions
Repayments of lease obligations
Cash dividends paid
Purchase of treasury stock
Cash dividends paid to non-controlling interests

2,000(2,586)
160
(250)
(220)
(27)

1,800
(2,664)
195
(212)
(220)
0
(25)

Net cash (used in) provided by financing activities(1,160)(1,009)Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the fiscal
year
Cash and cash equivalents at end of the fiscal year

102

(0)

(1,012)

513

2,550

1,538

1,538

2,051

17

(5) Notes to Consolidated Financial Statements(Note Concerning Going Concern Assumption)
None.
(Changes in Presentation Basis)(Consolidated Statements of Income)“Outsourcing service income” was included in “other” under “non-operating income” in theprevious fiscal year. However, in the fiscal year under review it has been presented as a separate item
because the total amount of outsourcing service income exceeded 10% of the total amount of
non-operating income. The consolidated financial statements for the previous fiscal year have been
restated to reflect this change in presentation.
As a result, ¥43 million recorded as “other” under “non-operating income” in the consolidated
statements of income for the previous fiscal year has been restated as “outsourcing service income” of¥9 million and “other” of ¥34 million.
(Changes associated with the adoption of “Partial Amendments to Accounting Standard for Tax EffectAccounting, etc.”)
The Company has adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting,etc.” (Accounting Standards Board of Japan (ASBJ) Statement No. 28, February 16, 2018) from the
beginning of the fiscal year ended March 31, 2019. Accordingly, the presentation method has changed
so that deferred tax assets have been presented under investments and other assets, deferred tax
liabilities have been presented under noncurrent liabilities, and the notes related to tax effectaccounting have also changed.
As a result, in the consolidated balance sheet for the previous fiscal year, “deferred tax assets”
under “current assets” has decreased by ¥196 million, and “deferred tax assets” under “investment
and other assets” has increased by ¥32 million.
Furthermore, deferred tax assets and deferred tax liabilities for the same tax-paying entities havebeen offset against each other, reducing total assets by ¥164 million compared to before the change.

18

(Business Combinations)
1. Transactions under common control, etc.
(Share exchange and absorption-type merger of consolidated affiliate by a consolidated subsidiary)
The Company’s consolidated subsidiary, Nitta Gelatin India Ltd. resolved at a Board of Directors
meeting held on November 8, 2018, to merge with its subsidiary Reva Proteins Ltd., and conducted
the merger effective from April 1, 2017. The merger reference date is set retrospectively as the
beginning of the fiscal year in which the merger application was filed, in accordance with the merger
system in India.
1. Outline of business combination
1) Names of the combining companies and business activities
a. Merging company
Name: Nitta Gelatin India Ltd.
Business activities: Production and sales of ossein from bovine bones, bovine gelatin andcollagen peptide
b. Merged company (dissolving company)
Name; Reva Proteins Ltd.
Business activities: Production of ossein from bovine bones2) Business combination date
April 1, 20173) Legal form of the business combination
Nitta Gelatin India Ltd. exchanged its newly issued classified stock for all of the Company’s
shares of Reva Proteins Ltd., after which it conducted an absorption type merger with Nitta
Gelatin India Ltd. as the surviving company and Reva Proteins Ltd. as the dissolving
company.
4) Company name after the business combination
Nitta Gelatin India Ltd.
5) Other matters related to the outline of the transaction
The business combination was conducted to increase the efficiency of management byenabling unified business management.
2. Outline of accounting treatment
The business combination was treated as a transaction under common control in accordancewith “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September
13, 2013) and “Guidance on Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No.10, September 13, 2013).

19

2. Business Divestitures(Company split)
Pursuant to a resolution passed at a meeting of the board of directors held on May 17, 2018,theCompany conducted a company split on August 1, 2018, with the Company (Adhesive Business(excluding manufacturing)) as the splitting company and Bostik-Nitta Co., Ltd. as the succeedingcompany.
1. Outline of Business Divestiture
1) Name of company that succeeded the divested business
Bostik-Nitta Co., Ltd.
2) Business description of divested business
Adhesive Business (excluding manufacturing)
3) Primary reason for business divestiture
In the Adhesive Business field, the business environment is changing at an accelerated pace.
In this environment, the Company is set to make intensive investments to pursue its strategy
for the core businesses and new businesses according to its new corporate vision. With thisin mind, the Company believes that it will be able to realize further growth in the coveredbusiness by having Bostik-Nitta Co., Ltd., an equity-method affiliate of the Company,
succeed the covered business.
4) Date of business divestiture
August 1, 20185) Outline of the transaction including legal format
An absorption-type split with only cash and equivalent assets provided as consideration
2. Outline of accounting treatment
1) Gain on transfer of business
655 million
2) Appropriate book values of assets and liabilities of business transferred and major
components
Noncurrent assets¥23 million
Total assets¥23 million
Current liabilities¥11 million
Noncurrent liabilities¥169 million
Total liabilities¥180 million
3) Accounting treatment
20

The Company recognizes the difference between the consideration for the transfer and an
amount equivalent to the shareholders’ equity corresponding to the transferred business andnet of advisory fees for the company split as a “Transfer gain on business divestiture”in the
consolidated statement of income for the six months ended September 30, 2018.
3. Reporting segment in which the divested business was included
Collagen business
4. Estimated net sales and operating income attributable to the divested business recorded on thequarterly consolidated statement of income for the quarterly period under review
Net sales
1,482 million
Operating income
45 million
Note: The above amounts represent the net sales and operating income of the entire Adhesive
Business, as it is impractical to determine the net sales and operating income of theAdhesive Business (excluding manufacturing).
5. Outline of continued involvement
The Company has entered into a business outsourcing agreement with Bostik-Nitta Co., Ltd.

21

(Segment Information)
Fiscal year ended March 31, 2018 (From April 1, 2017 to March 31, 2018)
1. Overview of reporting segments
The Company’s reporting segments are the compositional units of the Company for which separate
financial information is available. They are periodically examined by the Board of Directors for the
purpose of deciding on allocation of management resources and evaluating business results.
The Company formulates a comprehensive worldwide strategy for the products and services it
handles and conducts business activities based on operations that are divided along product andservice lines.
As a result, the Company is composed of product and service segments based on business activity,with two reporting segments: “Collagen Material” and “Formula Solution.”
In Collagen Material Business, the Company manufactures gelatin, collagen peptide, collagencasings and other products.
In Formula Solution Business, the Company manufactures various food materials, adhesives andother products.
2. Calculation methods for net sales, income and loss, assets and other items by reporting
segment
The accounting methods used for the reported business segments are the same as the accounting
methods the Company applies for consolidated financial reporting purposes.
Segment income for reporting segments represents operating income.
Intersegment sales and transactions are based on prevailing market prices.

223. Information on net sales, income and loss, assets and other items by reporting segment
Fiscal year ended March 31, 2018 (From April 1, 2017 to March 31, 2018)(Millions of yen)

Reporting segment

Net sales
Sales to third parties
Inter-segment sales andtransfers
Total
Segment income
Segment assets
Other items
Depreciation andamortization
Impairment loss
Increase in property,
plant and equipment andintangible assets*1

Amounts in the
consolidated
financialstatements*2

Collagenmaterial
business

Formulasolutionbusiness

Total

27,8709,907

37,777－

37,777

1,999

6

2,005

(2,005)－29,8691,482
29,508

9,914
1,016
5,759

39,783
2,498
35,267(2,005)(1,404)2,547

37,777
1,094
37,815

1,551

75

1,627

48

1,675

862

－

862

－

862

1,146

38

1,185

83

1,269

Adjustments

Notes: 1. Adjustments are as follows:(1) Adjustment for segment income of (¥1,404) million comprises elimination of intersegment
transactions of ¥6 million and unallocated expenses of (¥1,410) million. Unallocatedexpenses are mainly general and administrative expenses.
(2) Adjustment for segment assets of ¥2,547 million comprises elimination of intersegment
transactions of (¥752) million and unallocated assets of ¥3,299 million. Major componentsof the unallocated assets are cash and deposits, property, plant and equipment, andinvestment securities.
2. Segment income is adjusted against the operating income recorded in the consolidated income
statement.
3. Segment liabilities have not been reported, as they are serviced periodically in consolidationby the Company’s highest decision making authority.
4. Revisions have been applied retrospectively to the previous fiscal year. For details, refer to“(Business Combinations)” under “(5) Notes to Consolidated Financial Statements” in “3.
Consolidated Financial Statements and Key Notes.”23

Fiscal year ended March 31, 2019 (From April 1, 2018 to March 31, 2019)
The Nitta Gelatin Group’s collagen business has become the standalone reporting segment, so
information is omitted.
(Matters Concerning Changes in Reporting Segments)
The Nitta Gelatin Group’s reporting segments until now have been categorized into two businesses:
collagen material business and formula solution business. To make intensive investments to pursue its
strategy for core businesses and new businesses according to its new corporate vision, the Company
conducted a reorganization centered on transforming the production and sales management system
and reviewed the allocation of Group management resources and the management system.
On August 1, 2018, the Company conducted a company split of the adhesive business (excluding
manufacturing), which was included in the Formula Solutions Business. As the Company shifted its
business activities to integrated management of the Collagen Business, the Company made theCollagen Business its standalone reporting segment from the fiscal year ended March 31, 2019.
As a result, disclosure of segment information for the fiscal year ended March 31, 2019 is omitted
since there is only a single segment.

24

(Per Share Information)
Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)

Net assets per share¥836.90¥862.29

Net income (loss) per share(32.61)(53.85)

Notes: 1. Diluted net income per share for fiscal 2018 is not disclosed due to the recording of a net loss per
share and the absence of latent shares with dilution effect.
2. Diluted net income per share for fiscal 2019 is not disclosed due to the absence of latent shareswith dilution effect.
3. Basis for calculating net income (loss) per share data is shown below.
Fiscal 2018

Fiscal 2019

(From April 1, 2017
to March 31, 2018)(From April 1, 2018
to March 31, 2019)

Net income (loss) per share
Net income (loss) attributable to owners of theparent (Millions of yen)
(Millions of yen)Amounts not attributable to common shareholders(Millions of yen)
Net income (loss) attributable to owners of theparent related to common stock (Millions of yen)
Average number of common shares during theperiod (shares)(Subsequent Events)
No items to report

25

(599)

989

-

-

(599)

989

18,373,812

18,373,812

4. Others(1) Change in Appointment of Board Members and Executive Officers
1) Change in appointment of representative Director
None.
2) Change in appointment of other Board Members
Candidate for newly appointed Director
Outside Director
Yoko Hori
Candidate for newly appointed Standing Audit & Supervisory Board Member
Standing Audit & Supervisory Board Member
Masaki Kataoka(currently Manager of Administration Dept., General Management Div.)
Outside Audit & Supervisory Board Member
Kuniki Sato
Audit & Supervisory Board Members scheduled to resignStanding Audit & Supervisory Board Member
Hiroshi Takase
Outside Audit & Supervisory Board Member
Shigeoki Tougou
3) Scheduled dates for appointment and retirement
June 26, 2019(2) OthersNone.

26