Sustained Growththrough Value Creation

2020
INTEGRATED REPORTThe Kanematsu Group aims to create value
the entrepreneurial spirit of its founding.
Last year marked the 130th anniversary of the Kanematsu Group’s founding in 1889. Guided by its Corporate Principle,a codification of the entrepreneurial spirit of its founder, Kanematsu has constantly stayed ahead of the curve,
contributing to social and economic development by repeatedly creating new businesses.
In April 2018, we launched future 135, our medium-term vision for the coming six years. Under future 135, weCorporate Principle“Let us sow and nurture the seeds of global prosperity”

Our Beliefs: Kanematsu’s Guiding Principles“Sow a seed now,” and take action to benefit people aroundthe globe, bade our founder, Fusajiro Kanematsu, setting astandard of public duty that we at Kanematsu continue touphold through a commitment to ethical business principles
and corporate responsibility.
The beliefs and philosophies that inspired Fusajiro
Kanematsu in the late nineteenth century Meiji period, a time
when Japan was striving to build a national economy, wereencapsulated in the document Our Beliefs: Kanematsu’s
Guiding Principles in 1967, on the occasion of our merger withThe Gosho Company.

1. Reflecting the pioneering spirit of our predecessors, we believe thatfairness and justice should guide our business dealings and the wiseuse of creative imagination and ingenuity will bring prosperity.
2. Our purpose as a Company is not only to build a sound andflourishing business, but to fulfill our responsibilities as a corporate
citizen, contributing to society and the security and well-being of all.
3. As members of a corporation, we act not as individuals but asrepresentatives of that organization and as such we are bound byCompany rules and attendant loyalties and must work together witha spirit of cooperation while cultivating mutual understanding andrespect for fellow members.

Contents

Kanematsu’s Progress and Strengths

Special Feature

Review of Operations

2 The Kanematsu Group’s Value Creation Process

18 Progress in the First Two Years

22 Business Segments

4 Kanematsu’s History
6 Message from the President
16 Message from the CFOof the future 135 Medium-Term Vision

24 Electronics & Devices
26 Foods, Meat & Grain
26 Foods
28 Meat Products

30 Grain, Oilseeds & Feedstuff
32 Steel, Materials & Plant
34 Motor Vehicles & AerospaceKanematsu’s Progress and Strengths

for the development of society in line withhave launched initiatives aimed at sustained growth in core businesses as well as expansion of scale and securing
additional value through business investment. Leveraging our stable earnings structure and ﬁnancial structure, we are
steadily advancing toward the next stage of growth, with the aspiration of being a unique general trading company.

Kanematsu’s Code of Conduct
We became involved in corporate activities to serve our various stakeholders by providing socially valuable
goods and services in accordance with the aim of our founder to realize a sustainable society.

3. Information management& disclosure

Information is properly managed to protect personal information, customer information, and intellectual
property and is disclosed in a timely and proper manner to establish mutual trust between Kanematsu andthe community and maintain a high level of transparency.

4. Respect for human rights

We respect human rights and do not discriminate. Employee career development and capability
development are actively supported. Diversity, personality, and character are respected so as to create adynamic corporate culture.

Special Feature

1. Origin of corporate
activities
2. Fair transactions

Our corporate activities are conducted in compliance with laws and ordinances in Japan and abroad,international rules and practices, and internal rules as well as with social common sense.

5. Consideration of the global We exercise sufficient consideration in our corporate activities to maintain a sound global environment forsustainable growth.
environment
We are aware of the importance of our social responsibility as good corporate citizens, and proactively
6. Social contribution

Sustainability

Financial Section and Company Information

36 Sustainability

52 Financial and ESG Highlights

46 Corporate Governance

54 Management’s Discussion and Analysis

50 Messages from the Outside Directors

56 Business Risks

51 Corporate Officers

58 Consolidated Financial Statements

Review of Operations

undertake social contribution activities. Employee activities to contribute to community development and tocomfortable and safe living are supported.

65 Notes to Consolidated Financial Statements
Sustainability

121 Independent Auditor’s Report
124 Major Group Companies
125 Global Network / Organization Chart
126 Japanese and Overseas Offices
128 Corporate ProﬁleFinancial Section and Company Information

Editorial Policy
The content of the Kanematsu Group annual reports isbased on an integrated reporting approach with reference
to the International Integrated Reporting Council’sInternational Integrated Reporting Framework, the G4
Sustainability Reporting Guidelines, a set of international
standards created by the Global Reporting Initiative, andISO 26000. We hope that the report will help readersdeepen their understanding of the Kanematsu Group.

Forward-Looking Statements
This annual report contains statements regarding theKanematsu Group's plans, strategies, and expectations for
future performance. Such statements are inherently subject to risk and uncertainty. Actual results could diverge
materially from the Group's projections due to changes inthe economic and market environment surrounding theGroup's business areas, such as exchange rate ﬂuctuation.
KANEMATSU Integrated Report 2020

1

The Kanematsu Group’s Value Creation Process

The Kanematsu Group is utilizing its capital insociety and increase its enterprise value as it
Corporate Principle—Our Entrepreneurial Spirit and Our Beliefs:

Five Key Issues

The Kanematsu Group’s CapitalA
External
Environment

Responding to changes in market
characteristics and location andchanges in customer needs

Organizational
Capital• Six divisions, organized by business
ﬁeld, each with speciﬁc expertise• Organizational functions that support
business activities from specialized
perspectives• Locations around the world• Highly specialized Group companies

Human andIntellectual
Capital• Wide range of business ﬁelds• Expertise and technical capabilities
regarding industries and products• Accumulated know-how• Global professionals/Diverse
professionals• Business creation and proposal abilities

Financial
Capital• Sound ﬁnancial position (Net D/E ratioof less than 1.0)
• Stable earnings base
• Average annual cash ﬂows ofapproximately ¥20 billion

Shifting international conditions

B
Climate change

Mutual development with local
communities

Technologicalinnovation

Changing food supply and demandbalanceC
Consideration of the global
environment

Changing lifestyles
Emergence andspread of infectious diseases
Legal amendments, regulatory
loosening andtightening

D
Enhancing governanceSocial and
Relationship
Capital• High quality and quantity of business
partners• Contribution to local communities• Trust built over a period of 130 years

E
Promoting respect for human rights,
human resource development, anddiversity
NaturalCapital• Biodiversity (animals, plants, fungi, etc.)• Sunlight, air, forests, and soil
• Geothermal, wind, and other forms ofrenewable energy

Corporate G
C
Governance

2

KANEMATSU Integrated Report 2020

Kanematsu’s Guiding Principles

See p. 1

Kanematsu’s Progress and Strengths

its corporate activities to provide new value toworks to address ﬁve key issues.
Value We Provide
to Society(Outcomes)

What We Do—Four Segments with Unique Strengths—

Semiconductor Equipment, Electronic Components and Materials,
Industrial Electronics, Semiconductors & Devices,
ICT Solutions, Mobile, and CCTV Systems

Realizing richer,comfortable living

Special Feature

Electronics & Devices

Foods, Meat & Grain
Foods (Agricultural products, marine products, beverages, etc.),
Cooked and Processed Foods, Meat Products, Grain, Food Soybeans,
Oilseeds, Feedstuff, and Processed Agricultural Products

Health and safety incommunities
Review of Operations

Steel, Materials & Plant
Steel, Oilﬁeld Tubing, Chemicals, Energy, Plant & Ships,
and Machine Tools & Industrial Machinery

Motor Vehicles & Aerospace
Motor Vehicles and Parts and Aerospace—Priority Initiatives Under the future 135 Medium-Term Vision—

Addressing
environmental
issues, including
mitigating global
warming

Sustainability• Sustainable growth in fundamental businesses, expansion of the revenue basethrough business investments, and securing added value• Response to technical innovation• Establishment of management infrastructure for achieving sustainable growth

Building sustainablevalue chains

Weighing risks and opportunities

Contributing to local communities and the environment

Financial Section and Company Information

Bolstering the management baseRealizing asociety in whichpeople can exercise
their individuality
and abilities

KANEMATSU Integrated Report 20203

Kanematsu’s History

Innovating and evolving with the times, continually
Founding
Guided by Kanematsu’s founder, a pioneer intrade between Japan and Australia, Kanematsu
weathered financial panics and built a solid
foundation. Eventually, the Company expanded
to the United States and other countries.

GrowthKanematsu grows larger, diversifying functions as a trading company and expanding geographically.

1967

1989

Merged with the Gosho Company to form
Kanematsu-Gosho, Ltd.

100th anniversary of the Company’s founding

1973

Company name changed toKanematsu Corporation

Listed on the ﬁrst section of theTokyo Stock Exchange

1990Electronics & Devices

Fusajiro Kanematsu (1845–1913)
Born in Osaka, Fusajiro Kanematsu was forced to work hard
as a child, including as an apprentice merchant in Osaka andKyoto and later in the service of the local samurai.
As an adult, he found success in the banking, marinetransport, and newspaper industries, helping to develop
Japanese industry. At 44, seeing an opportunity in trade with
Australia, he left behind his social standing as a businessleader in Osaka and turned his energies to trade between
Japan and Australia, building the foundations of Kanematsu.
The ﬁrst in Japan to directly import Australian wool,
Fusajiro Kanematsu earned a reputation as a pioneer forthe major role he played in the development of Japan–
Australian trade.

1889
Fusajiro Kanematsu Shoten of Australian
Trading founded by Fusajiro Kanematsu in Kobe

1968

1978

Kanematsu Denshi Service Ltd. established(now Kanematsu Electronics Ltd.)

Kanematsu Kinzoku Hanbai Co., Ltd. established (now Kanematsu Advanced Materials
Corp.)

1972
Kanematsu Semiconductor Corporation
established (now Kanematsu Futuretech
Solutions Corporation)

1974
Kanematsu Computer Systems Ltd. established(now Kanematsu Communications Ltd.)

1982
Nippon Office Systems Ltd. establishedPaciﬁc Western Systems Japan established(now Kanematsu PWS Ltd.)

Foods, Meat & Grain

1954

1977

Kanematsu Hiryo Co., Ltd established (nowKanematsu Agritec Co., Ltd.)

Kaneshoku Corporation established (now
KANEMATSU SHINTOA FOODS CORPORATION)

1890
Branch opened in Sydney
Direct importing of Australian wool began

1918
Company name changed to Kanematsu Shoten
Company

Steel, Materials & Plant

1959

1974

Kanematsu Yuso Co., Ltd. established

Kanematsu Kaseihin Co., Ltd established(now Kanematsu Chemicals Corp.)

1967

1935

Acquired a controlling interest in Fine
Kuroda Services Corp., renaming it
Kanematsu Gosho Machine Tool Sales Corp.
(now Kanematsu KGK Corp.)

1960

Branches opened in New York and Seattle

1970

1943

Kanematsu Kenzai Corporation established(now Kanematsu Trading Corp.)

Began trading with Steel Service Oilﬁeld
Tubular, Inc.

Kanematsu Wool Research Institute established(now KANEYO Co., Ltd.)

1936

Company name changed to Kanematsu
Corporation

1951
Overseas affiliate established in New York, theﬁrst overseas office established by a Japanesetrading company after World War II

1889 –1950s

Kanematsu Sekiyu Gasu Corp. established(now Kanematsu Petroleum Corp.)

1985

Motor Vehicles & Aerospace

1985
Kanematsu Aerospace Corp. established

1960s–1980s

Solving Social Problems
Kanematsu expanded its international
trading beyond Australia, opening overseas branches and building a foundation
for the development of trade with Japan.

4

KANEMATSU Integrated Report 2020

In step with Japan’s rapid economic growth, Kanematsu proactively developed
third-county trading as well as importing and exporting between companies in Japanand overseas. At the same time, the Group promoted infrastructure development indeveloping countries.

Reforms
Following the expansion and collapse of Japan’s economic bubble
and the Asian Financial Crisis,
Kanematsu carried out decisivebusiness selection and concentration aimed at reinforcing its management framework. The
Company also worked to improveand strengthen its financial base.

Kanematsu’s Progress and Strengths

creating and providing value unique to Kanematsu.
Aiming for the Future
Kanematsu has enhanced its management base through business selection and concentration.
Implementing M&A in highly specialized fields and business expansion, we are shifting to an
aggressive management stance.

2014

2019

Acquired a majority stake in Kanematsu-NNK Corp.
(now Kanematsu Sustech Corporation)

130th anniversary of theCompany’s founding

2016
1991

1993
Kanematsu Computer Systems Ltd.
(now Kanematsu Communications Ltd.)
began mobile phone sales

1995
Kanematsu Sekiyu Hanbai Corp. established (now Kanematsu Petroleum Corp.)

1999
Carried out large-scale businessselection and concentration

Ordinary Income

Special Feature

Kanematsu Electronics Ltd. listed on
the ﬁrst section of the Tokyo Stock
Exchange

Carried out an absorption-type merger with Diamondtelecom, Inc.,
aimed at expanding the mobile business(Millions of yen)
30,00025,00020,00015,00010,000
5,000
0

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

* Figures for ﬁscal 2017 onward are IFRS-basis proﬁt before tax.

Review of Operations

2005– future 135 –Kanematsu Electronics Ltd. became asubsidiary
Acquired a majority stake in Shintoa
Corp. (100% stake acquired in 2010)2012
Acquired North American oilﬁeld
tubing company Benoit Machine LLC

2013
Resumed dividend payments

April 2018–March 2024
• By aiming for sustainable growth in the business segments comprising our stablerevenue base while pursuing the expansion of scale and the acquisition of added
value through appropriate and effective investment in business areas where wehave strength, we will target a consolidated proﬁt for ﬁscal 2024 of ¥25 billion.
• Based on a stable earnings structure and ﬁnancial structure, the dividend payout
ratio (total return ratio) is set at 25%–30%, and the Company will promote management with an emphasis on capital efficiency.

“VISION-130”

April 2014 – March 2019

—Jump to next stage leading to the future—

Largely Completed a Year Early in
Fiscal 2018
• Consolidated net income:¥16.3 billion• ROE:
15.1%• Shareholders’ equity: ¥116.0 billion• Net D/E ratio:
0.5 times

Sustainability• Approaching the 130th anniversary of the founding of Kanematsu, we returned
to our beginnings as a trading company and to our Corporate Principle. Our
management objectives were to “Maintain a healthy ﬁnancial position” and to“Expand our earnings base” through coexistence and mutual development withour business partners based on the long history of our trading business.
• We aimed to increase our enterprise value by furthering our business in areas ofexpertise and investing in new challenges to create value while bolstering ourmanagement base.

April 2013–March 2016

Financial Section and Company Information• Took a positive stance to enable rapid progress and to establish a solid growth track in preparation for the 125th anniversary.
• Continued to develop professional organizations and personnel as a business creation group, aiming for coexistence andmutual development with our business partners.
• Endeavored to consistently increase corporate value to meet the expectations of domestic and foreign stakeholders.

Resumed paying an interim dividend in ﬁscal 2014
Note: The above periods are those designated at the time the respective plan/visions were announced.

1990s–2000s

2010 –

Responding to the rapid uptake ofIT throughout society, Kanematsu
advanced business development inline with the needs of the information age, entering the mobile business and reinforcing informationand communication technology(ICT) functions.

Kanematsu focused on developing products and services that take into account sustainability in such areas as food resources and the environment. The Group worked to create
new, high-value-added business models, with an eye to responding to such technologicalinnovation as AI and IoT.

KANEMATSU Integrated Report 20205

Message from the President

The Kanematsu Group is implementing its future 135 medium-term vision launched in ﬁscal 2019. Under
this vision, we are aiming for sustainable growth in fundamental businesses while securing scale expansion
and added value through effective and appropriate business investment in areas where we have strengths
and insight. As a growth-oriented company of 131 years, we will continue to create new business
opportunities with the aspiration of being a unique general trading company, thereby ensuring that
Kanematsu will thrive for another century.
President

Kaoru Tanigawa

6

KANEMATSU Integrated Report 2020

Kanematsu’s Progress and Strengths

1
Kanematsu’s Social Mission
and the Sustainability Management Section within the Corporate Planning Department to further
integrate management with sustainability
awareness.
In addition, we created internal rules requiring approval requests for new business projects toclearly state how they relate to the SDGs andwhat their purpose is. This is a mechanism to shift
the SDGs from being simply abstract ideas thatshould be kept in mind to actionable concepts
that permeate every aspect of the real workplace.
Trading companies do a lot of business withemerging and developing nations, and I thinkthat they must implement initiatives to help thecountries that supply them solve the environmental, labor, and other problems they face. Trading
companies also play an important role in controlling entire supply chains and coordinating
operations across countries, regions, cultures, andlevels of economic development. Accordingly, I
think that to build sustainable supply chains,given our positions at key nodes of business, wemust broadly share information with suppliers,
proactively express our approach to the SDGs andwork together toward them. We are engaged in awide range of such projects. These include theREDD+ forest conservation initiatives in Indonesia
and shifting toward renewable energy businesses,
such as reinforcing biomass fuel trading, which
contributes to combatting climate change, andwell as businesses that promote digitization,
which is very important to achieving the SDGs.
When I took office as president, I vowed tomyself to work toward making Kanematsu a company that its employees and their families would
be proud of, that increases its enterprise value
while contributing to society, and that contributes
to the global economy. The Kanematsu Group willcontinue to take a broad view of internationalsociety and ambitiously work to solve social problems through its businesses in line with the entrepreneurial spirit that ﬂows through the core of its
business activities.

Review of Operations
Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 2020

Special Feature

Since its founding, Kanematsu has carried on theentrepreneurial spirit of developing new markets
and businesses of its founder, Fusajiro Kanematsu,
as well as his mission of providing socially valuable
goods and services (which relates directly totoday’s Sustainable Development Goals). Since
the start of 2020, the novel coronavirus (COVID19) pandemic has plunged society into uncharted
territory. Nevertheless, the Kanematsu Group’s
fundamental mission remains unchanged.
Because of the pandemic, the movement of people and things has been restricted and economic
activity has stalled. As a trading company,
Kanematsu is able to leverage its worldwide network to quickly and precisely gather information
on local conditions around the world. By sharing
such information with our customers and partners, we will nurture business opportunities andstimulate economic activity, thus helping to support society through these challenging times. As
in ordinary times, but also precisely because weare in such difficult circumstances, we will do ourutmost to fulﬁll our role in supporting the foundations of society.
With a focus on cooperation and mutual
development with our customers and partners,
we aim to leverage the insight and know-how
developed over our long history, providing
value-added products and services to advance theongoing development of the environment, society and the economy, and the Kanematsu Group.
Based on the Sustainable Development Goals(SDGs) and other international trends, stakeholder expectations, Kanematsu’s Corporate Principle,
and considerations of the degree of importanceto our businesses, we have designated ﬁve key
issues for the Kanematsu Group to address
through its corporate activities. Furthermore, as
ESG investing attracts increasing attention, contributing to the achievement of the SDGs throughbusiness is becoming important to corporate survival. Accordingly, in April 2020, we establishedthe new Sustainability Management Committee7

2
Fiscal 2020 Performance
Kanematsu’s business model is rooted in the fundamental business of trading. We do not invest insuch volatile markets as natural resources or realestate. Rather, we operate businesses that form asolid earnings base in the Electronics & Devices,
Foods, Meat & Grain, and other segments. The
Kanematsu Group is seen as leader in numerous
areas of strength and expertise and is focusing
on finding new business opportunities, mainly
in areas of advanced technologies, such as AI
and IoT.
In ﬁscal 2020, the year ended March 31,
2020, just as overall global economic growth was
slowing, the spread of COVID-19 caused limitations on economic activity around the world,
greatly impacting results in the fourth quarter.
Within the Kanematsu Group, revenue
increased year on year in the meat products business, which beneﬁtted from growth in domestic
sales due to the entry into force of the TPP and
EPA trade agreements. Revenue also increased in
the aerospace business, which saw growth in salesof fuselages and components. In contrast,

revenue decreased in such areas as the mobile
business, where the number of units sold declined
due to the introduction of plans separating
mobile phone and data costs and store foot traffic
decreased due to the spread of COVID-19.
Revenue also fell in the energy business, reﬂecting
a decline in unit prices due to falling crude oil prices. In terms of proﬁt, the ICT solutions business,where IT investment demand was ﬁrm, primarily
in virtualization and security, saw a year-on-year
proﬁt increase. However, proﬁt declined in thefeedstuff business, where pet-related transactions
and transactions involving aquafeed had difficulty, and in the machine tools and industrial
machinery business, which was affected by
restrained investment among manufacturers.
As a result, revenue edged down year on
year, and proﬁt attributable to owners of the parent fell 13%. Although the novel coronavirus
impacted results in the fourth quarter, the effectof U.S.-China trade frictions was within assumptions, and performance in most businesses, especially the ICT solutions business and other

Change of Operating Proﬁt in Main Segments(¥ billion)

35.0Electronics & Devices

Foods, Meat & Grain

Steel, Materials & Plant

Motor Vehicles & Aerospace

Other

30.0
25.0
20.0
15.0

18.5

0

4.0
2.5
2.8

2.1

2.2
FY2017KANEMATSU Integrated Report 2020

2.4
4.4

3.8

2.5

2.5

2.4

FY2018FY2019FY2020

3.9

VISION-130

8

18.6

14.3

10.0
5.0

19.0

17.6

future 135

3.6
1.8
2.2
FY2021(Forecast)Kanematsu’s Progress and Strengths

domestic businesses, was ﬁrm. We were thus able
to maintain a minimum level of proﬁtability.
Reﬂecting the recording of retained earnings, equity attributable to owners of the Parent(shareholders’ equity) rose. As a result, the equity
ratio increased to 23.7%, and the net D/E ratio
remained at 0.4.

3
future 135 Medium-Term Vision
Special Feature

The Kanematsu Group has established the future
135 medium-term vision for the period leading up
to the 135th anniversary of its founding. Under
this vision, while maintaining and strengthening
the sound ﬁnancial base we have established, weare focusing on developing our areas of strength
more deeply and building businesses using innovative new technologies. By doing so, we are
aggressively advancing business expansion andcreation. In addition to continuing efforts to
expand in scale through effective business investment and to acquire added value, in order to turntechnological innovation in such areas as AI and
IoT into business opportunities, we are advancing
initiatives in new businesses. We have set thequantitative targets for the ﬁnal year of the vision,

Review of Operations

ﬁscal 2024, of ¥25 billion in consolidated proﬁt,
ROE of 13%–15%, and a total return ratio of
25%–30%.
To achieve consolidated proﬁt of ¥25 billion,
we aim to grow operating proﬁt by approximately¥20 billion from the start of future 135 to approximately ¥45 billion. Of this ¥20 billion, half—¥10billion—will come from growth in core businesses,
while the other ¥10 billion will come from new
business investment. Fiscal 2020, the second yearof the vision, was marked by major unanticipatedchanges in the business environment due to the
spread of the novel coronavirus. Nevertheless, wehave not changed the targets of future 135 andaim to ensure that Kanematsu continues to growin the future.

4

revenue. The feedstuff business, which plays animportant part in food supply in Japan, is a good
example. In this business, while the accumulationof unglamorous, daily effort is of course essential,
going forward, as technologies evolve and needschange, some businesses will fade away, whileother, new businesses emerge. In such an environment, I think that imagination and ingenuity will
be particularly crucial to expansion in existing
businesses. Technological innovation may bringmore opportunities for investment in efficiencies
and other areas. To make sure we do not drop theball, we will advance collaboration between

KANEMATSU Integrated Report 2020

Financial Section and Company Information

I. The ﬁrst priority initiative under future 135 is“Sustainable growth in fundamental businesses,
expansion of the revenue base through business
investments, and securing added value.” As mentioned, one of the targets of future 135 is to reachconsolidated proﬁt of ¥25 billion, and to achieve
this target, we are working to grow operating
proﬁt to around ¥45 billion by ﬁscal 2024 throughgrowth in core businesses and new business
investment.
We will continue working toward sustained,
steady growth in our existing businesses, which
are the foundation of the Kanematsu Group’s

Sustainability

Priority Initiatives under future 135

9Medium-Term Vision

Quantitative
Targets(Final year: the ﬁscal year
ending March 2024)

April 2018 – March 2024

¥25 billion
13% – 15%25% – 30%

Consolidated net income(Proﬁt for the year attributable to owners of the parents)

ROE
Total return ratio

Essentials

By aiming for sustainable growth in the business segments comprising our stable revenue base whilepursuing the expansion of scale and the acquisition of added value through appropriate and effective
investment in business areas where we have strength, we will target a consolidated proﬁt for ﬁscal 2024of ¥25 billion.
Based on a stable earnings structure and ﬁnancial structure, the dividend payout ratio (total return ratio)
is set at 25%–30%, and the Company will promote management with an emphasis on capital efficiency.
The new medium-term vision is for the six years from ﬁscal 2019 to ﬁscal 2024.
(Three years after the initiation of the medium-term vision, the vision’s direction will be reconﬁrmed
based on such factors as the progress of business investment.)

Image ofgrowthAdded
value
Functions

Stable earnings
base

Investment ininnovation(seeds)Expansionof scale

Customers • Markets • SharePriority
Initiatives

Sustainable growth in fundamental businesses, expansion of the revenue base throughbusiness investments, and securing added value• Achieve sustainable growth by maintaining a stable revenue structure• Carry out growth investments while achieving a balance between capital and risk assets based on a soundﬁnancial structure• Promote business investments in areas of strength through two strategies focused on “revenue base expansion”
and “value added”

Response to technical innovation• Promote and expand new businesses with advanced technology (IoT, AI, etc.) (“investment in innovation”)

Establishment of management infrastructure for achieving sustainable growth• Build a framework for global strategy• Cultivate management-level human resources• Improve employee satisfaction (ES)10

KANEMATSU Integrated Report 2020

businesses by harnessing technological innovation. Over the past 30 years, reﬂecting the shift ofinnovation from analog to digital technologies,
the Electronics & Devices Division’s businesses
have expanded dramatically, growing into one of
Kanematsu’s main divisions. Similarly, by building
new businesses in step with innovation acrosssociety, we aim to develop new pillars of growth.
We expect the market for data businesses we are
currently working on to develop enormously
going forward. Furthermore, in the ICT solutions
business and related areas, we are considering
alliances, business tie-ups and M&A as we systematically advance investment.

Special Feature

III. Third is “Establishment of management infrastructure for achieving sustainable growth.”
During the period of future 135, we are revamping a number of our internal systems. In particular,
we recognize that people are the foundation of
all we do, and, accordingly, there are many things
we must work on.
First, we urgently need to cultivate management personnel. To this end, we have been creating new training programs and enhancing othereducational measures aimed at raising the qualityof our employees. During the period of themedium-term vision, we will establish systems to
impart the knowledge of ﬁrst-class management
personnel to all career-track employees, spanningfrom individual projects to corporate management. In July 2019, we launched Kanematsu
University, a training system for younger employees in their ﬁrst ten years with Kanematsu.
Through the system, employees are given opportunities to build character, study international cultural and language skills, and acquire the ﬁnancial
knowledge necessary for business as well as operational and investment knowledge necessary forcorporate management. Employees, including
those at Group companies, have been ambitiously
engaging with the program, and we have great
expectations for it. Going forward, we will work toquickly enhance educational and study abroadsystems for mid-level employees who have beenwith the Company more than ten years andemployees in division manager and higher

Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 2020

Review of Operations

II. Second, “Response to technical innovation,” asexempliﬁed by such technologies as IoT and AI,
will be indispensable as we build the KanematsuGroup’s future. Across all business ﬁelds, theapplication and integration of IoT and other new
technologies are advancing, creating needs forstructural innovation. In this environment, theElectronics & Devices Division is focusing on offering high-value-added business models using newtechnologies. The acceleration of technologicalinnovation is creating new business opportunities
for trading companies. This is truly the realm ofideas, and we are remaining alert, proactively
gathering information from all sides to ensure we
do no not let opportunities slip by. Going forward,
trading companies will need to create added
value that transcends individual business areas.
We will promote the coordination of businesses
that possess cutting-edge technologies with otherbusinesses and our partners, further reinforcing
business creation through broad-reaching collaboration across business areas. From ﬁscal 2019,
we have created the position of Chief Officer ofTechnologies and Business Collaboration, and weare working to accelerate the creation of new

Kanematsu’s Progress and Strengths

businesses as well as appropriate investment andM&A in areas where we have deep insight as we
expand our revenue base.
Looking at expansion of scale through business investment, over the past two years we havemade new investments totaling approximately¥18 billion while maintaining a healthy balance ofequity to risk assets backed by a stable ﬁnancial
position. The impact of the COVID-19 pandemic
has changed the investment environment, but wehave many projects in the pipeline. In addition,
there are most certainly business opportunities tobe found not only in technological innovation,
but in other ways the world is changing, such as
evolution in logistics and lifestyles. While we aimfor ongoing growth, we will carefully scrutinize
every investment, taking care to ensure that none
become a burden down the line. To this end, we
will rigorously apply our standards to investment
decisions while proactively selecting our ﬁelds ofspecialization and honing our precision.

11

have adopted a system to fully update our data
storage infrastructure, the core of digitization. We
have also taken major strides toward digitizing all
applications, forms and other internal documents.
Because of the COVID-19 pandemic, our employees have been telecommuting and we have been
hiring via online platforms. This has led to thesurfacing of a number of issues to address going
forward. To improve the productivity and efficacyof remote working in the coming era, we aim to
implement measures—including enhancing individual IT literacy—to evolve our systems to be
employee friendly and thereby enhance employee motivation, ultimately bolstering revenue.
In addition, we will implement systems toquantitatively assess our management situation
and related risks. As we work toward global business expansion, we are aiming to increase thenumber of specialized operating companies in key
overseas markets. To this end, we are working toenhance our internal systems.

positions. By doing so, we will raise the knowledge level of the Group as a whole and develop
management-level human resources. The mostimportant factors in making accurate investment
decisions are the amount of ﬁrst-hand information obtained and the discernment to interpret it.
Fostering such discernment entails equipping
human resources with management knowledge.
Therefore, human resource development is an
essential task. To this end, we plan to proactively
implement a number of new systems.
At the same time, we are working on measures to raise employee satisfaction and work
style reforms. While individuals have differing values, it is important that we create frameworks inwhich each employee can ﬁnd meaning in theirwork and enjoy the use of their imagination andingenuity and operate such frameworks while
enhancing communication. Accordingly, given thechanges wrought by digitization in this fourthindustrial revolution, we are examining work
styles that are not deﬁned by time or place, and5Growth Strategy and Progress by Business under future 135
Kanematsu’s aim when investing is not simply tosecure dividend income or equity method income;rather, the acquisition of real businesses in which
we can be involved in supply chains and thereby
secure proﬁt is the core of our business investment approach. Expansion of scale, acquisition ofadded value, and investment in innovation (seeds)
are the axes of growth strategy under future 135.
The ﬁrst, expansion of scale, is aimed at
growing our customer base, markets, and market
share. In addition to investing in the Electronics &Devices segment, which encompasses numerous
business areas in which we are highly competitive,
we are working to boost the machinery andchemicals businesses in the Steel, Materials &Plant segment.
In ﬁscal 2020, we made an equity-method
investment in a German photo printer company;

12

KANEMATSU Integrated Report 2020

established a feedstuff material factory in Dalian,
China; increased our investment in a processedfood product factory in Indonesia; purchased usedaircraft in our aircraft parts business in Ireland;
and acquired an aluminum construction material
manufacturer in Japan. In terms of acquisition ofadded value, we have been working to add newfunctions to existing businesses, mainly in theareas of feedstuff, foods, and steel, and acquired asemiconductor image sensor back-end processing
business as well as a plant engineering company.
Looking at investment in innovation aimed atsowing the seeds of the future, we need to take a
new approach to business investment. We areworking to realize cross-division collaboration
focused on advanced technologies, such as AI and
IoT, to create new businesses. In particular, in theElectronics & Devices segment, technologicalKanematsu’s Progress and Strengths
Special Feature

three-division structure, along with the existing
Grain, Oilseed & Feedstuff Division. By thus
enhancing the specialization of each division, we
aim to accelerate business management. Our
Meat Products Division boasts a high share of theimported meat market among trading companies.
Going forward, we hope to expand its businessfrom within Japan to other parts Asia.
In the Steel, Materials & Plant segment, we
continue to aim for expansion of scale centeredon business investment and M&A in the areas ofsteel, chemicals, and machinery. At the same time,
we have focused business investment in suchoverseas areas as the environment and energy
ﬁeld, where we have long had strength. By bringing together the integrated strength of theKanematsu Group, we are examining opportunities for multifaceted business development thattranscends the boundaries of individual ﬁelds.
In the Motor Vehicles & Aerospace segment,
our strength is in our proposal- and problem solving-based business model that leverages abundant information resources. We are advancing
business expansion in next-generation automobile markets as well as the space business. In
December 2019, we made Kaneyo Co., Ltd. a fully
owned subsidiary as part of efforts to quickly
develop businesses in carbon ﬁber and otherhigh-spec materials.

Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 2020

Review of Operations

innovation is creating an abundance of business
opportunities, and we will examine investmentswith both great care and speed. In ﬁscal 2020, we
formed an equity alliance with a data exchange
consulting company.
Furthermore, in the Electronics & Devices
segment, the ICT solutions business of Kanematsu
Electronics Ltd. is specializing in the IT infrastructure development business, expanding transactions in the areas that underly such operations as
virtualization, networks, security, and cloud services. Adoption of these, as a part of work stylereforms, has been ﬁrm.
The Foods, Meat & Grain segment maintains
strong competitive advantages and forms part of
the Group’s stable earnings base. Handling foodingredients, processed foods, cooked foods, andother products in Japan and other parts of Asia,
we are working to create businesses by expanding value added through the development of newtechnologies and products. Focusing on our raw
ingredient procurement capabilities and new
product development, we have reinforced relationships with business partners and aggressively
invested capital to build value chains aimed atensuring stable supply. In addition, in April 2020,
we split off the Meat Products Division from the
Foods Division, which focuses mainly on value-adding businesses, establishing a13

6Management Challenges
From the start of the medium-term vision, we
knew improving the pace of business growthwould be a challenge and, indeed, ﬁscal 2020 saw
no signiﬁcant change, due in part to external factors. However, investment progressed considerably more than in the vision’s ﬁrst year. Goingforward, we aim to continue carefully and steadily
selecting and investing in promising targets tospeed up growth. Business creation and expansion are possible once a business opportunity has
been identiﬁed, researched, and assessed todetermine its future potential. We are taking
steps to further accelerate this process leading up
to business development.
Quick management decision making requires
human resources with the know-how to maintaina comprehensive view of all operations, evenwhen dealing with individual processes. In addition, no matter what else changes, highly specialized information in international markets, themanagement capabilities to control supply chains,and new added value through business creation
are always sought by the customers of a trading
company. To carry out these roles as a company,as I mentioned earlier, requires the developmentof a next generation of management-level personnel. During the six years of the medium-term
vision, we will raise the level of management
expertise and speed up business creation.
By taking a long-term approach to humanresource development spanning 20 or even 30
years, I hope, as a member of the Group’s leadership, to foster a sense of unity and trust within the
Company. Furthermore, by the end of future 135,
I feel that we must not only achieve our numericaltargets, but also foster a new awareness within
the Company. People are the foundation of sustained corporate growth. The power to sustain acompany comes from its people, which is why
nurturing their character and spirit is crucial.

7
Corporate Governance
In June 2019, Kanematsu made major changes to
its corporate governance and management
framework. Speciﬁcally, we reduced the numberof directors to six in order to improve ﬂexibility
and efficiency and took steps to better separate
management oversight from business execution,such as making a third of the Board outside directors. Doing so has facilitated more active discussion and debate, and I feel it has been effective.
At the same time, we appointed a female outside

14

KANEMATSU Integrated Report 2020

director, a step toward improved diversity. Thishas helped us examine issues from more diverse
viewpoints, which I think has helped eliminate
complacency among the Board of Directors.
Furthermore, we evaluated and analyzed theeffectiveness of the Board of Directors with input
from an external institution, enabling efforts tofurther enhance the Board’s functions and invigorate discussion.

Kanematsu’s Progress and Strengths

8
Fiscal 2021 Outlook and Message to Stakeholders

Special Feature
Review of Operations
Sustainability
Financial Section and Company Information

Fiscal 2021 marks the third year and half-way
point of the six-year vision 135 medium-term
vision. This is an extremely important year for thegrowth and future of the Kanematsu Group. We
will look for new opportunities for appropriate
investment in growth and considerably enliven
our lineup of investment projects. Although thecurrent ﬁscal year’s outlook for the global economy remains unclear, and even though the novel
coronavirus pandemic has caused temporary
stops and slow-downs in supply chains, we havenot seen the outright breakdown of supply chainsfeared by the market. As such, I think these difficulties may still be resolved quickly. Furthermore,because Kanematsu operates businesses across adiverse range of ﬁelds, our risk is, effectively, distributed. In light of these factors, in ﬁscal 2021,
we are planning for revenues of ¥700.0 billion,
down 3.0% year on year, operating proﬁt of ¥27.0
billion, down 4.8%, and proﬁt for the year attributable to owners of the Parent of ¥14.5 billion, up
0.7%. It is still difficult to predict the extent of the
impact that the COVID-19 pandemic will have,but, as a matter of responsivity to our shareholders and other stakeholders, we have provided thisforecast based on current assumptions.

The Kanematsu Group considers providing
returns to shareholders to be one of its mostimportant tasks. We will continue to pay stabledividends backed by a sound ﬁnancial position
that is resilient in the face of ﬂuctuating market
conditions. Under future 135, we are targeting a
total return ratio of 25%–30%. Regardless of temporary performance ﬂuctuations caused by the
COVID-19 pandemic, we are prioritizing the payment of steady dividends, and are planning a ¥60
per share annual dividend for ﬁscal 2021 (for adividend payout ratio of 34.6%). To ensure that
our responsibilities to shareholders are consistently fulﬁlled, we will continue to balance careful
decision making with aggressive investment as
we move on to a steady growth trajectory.
The Kanematsu Group, now more than 130
years old, continues to grow. In all aspects of ourcorporate activities, from the management baseto business creation, we will continue to constantly change and grow. We will then return the
results of these efforts to our stakeholders in theform of social value. Going forward, we will
endeavor to earn stakeholder trust and ensurethat they will be eager to deepen their relationships with Kanematsu by enhancing our enterprise value with a focus on growth. I hope you are
expecting big things from us.

KANEMATSU Integrated Report 202015

Message from the CFO

three years since March 31, 2017. Our low balance of risk
assets creates a buffer that mitigates changes in thesenumbers and thus serves as a considerable source of resilience in light of the impact of the novel coronavirus.
The ﬁnancial impact of the novel coronavirus near theend of ﬁscal 2020 led to some companies recording an
impairment loss on ﬁxed assets as resource prices plummeted or valuation losses as a result of wild ﬂuctuations in stock
prices. Kanematsu, however, saw almost no such effects and,at present, no major impairment loss on ﬁxed assets is
expected. We have few assets or contracts that are exposed
to changes in ﬁnancial, real estate or commodities markets,
which is another reason that our risk asset ratio is low.
By leveraging this solid ﬁnancial base and making effective, judicious business investments in ﬁelds where we havestrengths and insight, we will continue to work toward theachievement of future 135.

Tetsuro Tsutano

Stable Earnings Structure

Director, Senior Executive Officer, CFO

Resilience in the Face of the Novel Coronavirus
Kanematsu has now entered the third year of its six-year
medium-term vision, future 135. Since the end of ﬁscal 2020,
its second year, the spread of the novel coronavirus haschanged the world dramatically. To begin, I would like toexplain what I see as Kanematsu’s resilience to the impact of
the novel coronavirus.

Solid Financial BaseFirst, Kanematsu’s ﬁnancial position remains solid. As shownin Figure 1, the net D/E ratio and risk asset ratio (the ratio of
maximum possible losses to shareholder’s equity) are both
holding steady at 0.4 and 0.3, respectively. In addition, theequity ratio has improved from 20.9% to 23.7% over the

Figure 1. Financial BaseIn ﬁscal 2020, proﬁt for the year attributable to owners of
the Parent (consolidated proﬁt) decreased for the ﬁrst timein three years, declining 13.3% year on year to ¥14.4 billion.
However, we did not see any major impairment or slumps inany speciﬁc business due to the novel coronavirus, and I
think that the year-on-year decrease in proﬁt was kept to aminimum.
In ﬁscal 2021, we assume that stay-at-home orders andstate of emergency declarations in Japan and abroad willcontinue to exert a major impact on business activities
through June. Accordingly, we forecast consolidated proﬁtof ¥14.5 billion, up slightly from ﬁscal 2020. Leveraging ourstable revenue structure, which contains no resource-related
businesses and centers on digital transformation (DX) businesses, an area expected to grow in importance in the
post-corona world, we are aiming for consolidated proﬁt on
par with ﬁscal 2020.

Figure 2. Consolidated Proﬁt/Dividend Payout Ratio(Times)(%)(Billions of yen)

(Yen)

0.7

35

20

200

0.6

0.6

30

0.5

0.5

0.44

23.7

25

15

30.3%

22.8

22.3

0.4

20

20.9

0.40

0.3

0.4
0.33

0

0

Risk asset ratio (left)

1005FY2020Equity ratio (right)

50

KANEMATSU Integrated Report 2020

60

60

60

FY2019FY2020

FY2021(Forecast)

48
0

0

FY2018
Consolidated profit (left)
Dividend payout ratio

16

150

24.8%

5

Net D/E ratio (left)

14.5

0.30

0.1

FY2019

14.4

15
10

FY2018

34.6%

10

0.4

0.2

FY2017

34.8%
16.6

16.3

Annual dividend (right)

Capital Cost-Conscious Management
Adopting ROIC Management

As shown in Figure 3, our weighted average cost of capital(WACC) has been between 3% and 3.5%. Although ROIC
edged down in ﬁscal 2020, excess return—the difference
between ROIC (5.3%) and WACC—still exceeded 2%. In ﬁscal
2018, however, this ﬁgure was over 3%, so there is still considerable room for improvement. Going forward, by proactively
implementing capital cost-conscious management at Group
companies and divisions, we will maximize excess return.

Our Stock Price
Since the full force of the novel coronavirus pandemic hit inMarch 2020, our stock price has moved more than the Nikkei
average or TOPIX, reﬂecting investors’ appreciation of the resilience of our revenue structure in a harsh business environmentand our steady approach to shareholder returns (Figure 4).
However, the price-earnings ratio has been persistently low,around 7.4, and the price-to-book ratio fell below 1, to about
0.8. Leveraging the aforementioned unique characteristics ofKanematsu, we will work to ensure Kanematsu’s true enterprise value is clear to the market so as to maintain a commensurate stock price.
Although business conditions are challenging, we will strive
to maintain active communication with shareholders andinvestors and take their views into account as we work toenhance shareholder value.
Fiscal 2020 is the ﬁnal year of the ﬁrst half of the medium-term vision, and is turning out to be a year in which theworld is changing enormously due to the novel coronavirus. As
it unfolds, we will look ahead to the trends of the post-corona
world and work out our policy for the last three years of themedium-term vision to boldly advance toward further growth.

Figure 4. Comparison of Kanematsu’s Stock Price, theNikkei Average, and TOPIX

(%)

20

Sustainability

Figure 3. ROE/ROIC/WACC

Comparison with WACC

Review of Operations

Under the medium-term vision, Kanematsu is targeting ROE(consolidated proﬁt as a percentage of shareholders’ equity)of 13% to 15%. Assuming gross consolidated ﬁnancial leverage (shareholders’ equity to gross interest-bearing debt) of
close to 1:1, to maintain ROE of about 14%, our operatingtarget for ROIC (return on invested capital, calculated as
consolidated proﬁt ÷ (shareholder’s equity + gross interest-bearing debt) × 100) would be 7%.
In ﬁscal 2020, Kanematsu recorded ¥14.4 billion inconsolidated proﬁt, for ROIC of 5.3% and ROE of 11.2%,
below the target range. By adopting ROIC as an internalmanagement indicator, we aim to enhance capital efficiency
and rigorously enforce capital cost-conscious management

throughout the consolidated Group to quickly bring ROE
within the target range.

Special Feature

We kept the annual dividend for ﬁscal 2020 steady at ¥60
per share. This meant that the dividend payout ratio exceeded the target range of 25%–30% set under future 135. In
light of the effect on business results of the unprecedented
and unforeseeable situation brought about by the global
pandemic, however, we decided to maintain ongoing,steady dividends to our shareholders regardless.
Although we expect the novel coronavirus pandemic tocontinue to affect certain operations in ﬁscal 2021, theproportion of risk assets on our balance sheet is low and our
impairment risk is limited, while we have ample earnings
available for dividends, backed by a stable revenue structure.
As such, we plan to again pay an annual dividend of ¥60 per
share in ﬁscal 2021.
In ﬁscal 2021, the third year and midway point of our
six-year medium-term vision, we will reexamine our shareholder return policy, considering such factors as cumulative
business investment.

Kanematsu’s Progress and Strengths

Dividend Policy

1.3

Kanematsu
1.2

Nikkei Average

15.1

15

TOPIX

13.8
1.1

11.2

Financial Section and Company Information

10

1.0

8.3
6.7

6.4
5.3

5

3.5

0.9

0.8

0

0.7

FY2017ROE

ROIC

FY2018WACC

FY2019FY2020

3/2

3/9

3/16 3/23 3/30

4/6

4/13 4/20 4/27 5/7 5/11 5/18 5/25

6/1 6/8 6/15
(Month /Day)

Note Increase or decrease, with the value at March 2, 2020 set at 1

KANEMATSU Integrated Report 202017

Special Feature

Progress in the First Two Years of the future 135 Medium-Term Vision
Under its six-year medium-term vision, future 135, the Kanematsu Group is aiming for sustainable growth infundamental businesses while securing scale expansion and added value through effective and appropriate
business investment in areas where it has strengths and insight. At the same time, we are advancing innovation
investment aimed at promoting and expanding new businesses centered on advanced technology, such as IoT and
AI. This section highlights our progress over the ﬁrst two years of the vision and some of our main projects.

Growth Strategy by Business under the future 135 Medium-Term Vision

Acquisition ofadded value

Investment ininnovation(seeds)Expansion of scale

Mobile Business
ICT Solution Business

Strategic scale expansion
Reinforcement of store revenue

Sustained growth using ourstrengths

Electronics

Foods, Meat & Grain

Reorganization and reinforcement of the printer business
Reorganization and reinforcement of semiconductor businessStableearnings base

Scale expansion of meat products business
Expansion in food markets inAsia

New businesses withadvanced technologies
such as AI/loT as a core

Steel, Plant, Energy, andChemicals

Motor Vehicles & Aerospace
Horizontal development in themachinery and chemicals businesses

Expansion into the space-related area
Accumulation of assets in the aerospace business

Composition of Revenue Growth
Through growth in core businesses and new business investment we aim to raise operating proﬁt to approximately ¥45 billion.

Projected Growth in Operating Profit

Maintaining a minimum level of growthamid the impact of the coronavirus(Billions of yen)

Increase operating profit approximately¥10 billion through new business investment
30.3
26.2

23.5

28.4

FY2016FY2017FY2018(YoY increasein ﬁscal 2020)

Corebusinesses

22.6
18.8

FY2015

Approx.
45.0

FY2019FY2020

FY2021

FY2022First three years

VISION-130

New
business
investment

FY2023

FY2024

Last three years

future 135

Note: Data for ﬁscal 2016 onward is operating proﬁt according to IFRS (data for ﬁscal 2015 is operating income plus exchange rate ﬂuctuations according to JGAAP).

18

KANEMATSU Integrated Report 2020

Kanematsu’s Progress and Strengths

Acquisition ofadded value

Acquisition of Semiconductor Image Sensor Back-End Processing BusinessGoing Forward

Kanematsu Futuretech Solutions Corporation, one of the corecompanies of the Kanematsu Group, acquired a CMOS image
sensor back-end processing business. This acquisition was
aimed at adding value in the businessof image sensors, a key sensing technology that is undergoing rapid,
sustained growth, reﬂecting theadvance of automation in a wide
range of ﬁelds.

In addition to completed sensor units, we aim to expand therange of manufacturing orders we accept to include modules
and completed cameras that use sensors. Utilizing suchmeans as production at partner companies, we are meeting
growing image sensor demand while contributing to further
Group-wide development and expansion.

Special Feature

Market Environment

Image sensor

This Year’s Progress

Review of Operations

Until now, Kanematsu Futuretech Solutions received orders
for contracted manufacturing from customers in China,
Europe, the United States, and elsewhere and then subcontracted them out for fulﬁllment. By bringing this businessin-house, we have expanded our range of functions.
This acquisition enables in-house production, facilitatingtimely, ﬂexible production. We can, for example, act directly
on investment decisions to expand production capacity,
improving responsiveness.

Clean room

Capital Alliance with a Plant Engineering Company
Market Environment

corporations and trading companies, allowing it to expand its
businesses and maintain a stable customer base.

This Year’s Progress

Sustainability

Since it entered the capital alliance, Aioi Sekkei has seenorders for chemical plants remain robust, and its performancehas been strong. However, due to the impact of the novel
coronavirus, some aspects of the collaboration with
Kanematsu KGK have been delayed. In the meantime, we are
examining opportunities to quickly realize synergies andadvancing preparations.

Going Forward

Financial Section and Company Information

In January 2020, machinery trading company Kanematsu KGKCorp. formed a capital alliance with Aioi Sekkei Co., Ltd., acompany that provides one-stop plant facility engineering
covering facility design and manufacturing through the installation of facilities like pressure vessels and piping for a wide
range of clients, including the chemical, food, and medical
products industries.
This project is part of Kanematsu KGK’s strategy ofenhancing its engineering functions and reinforcing its
services. Aioi Sekkei boasts a large roster of qualiﬁed engineers. Its rapid customer responsiveness and strong technological capabilities have earned it the trust of many major

Kanematsu KGK’s PS (Product Solution) Division handles
industrial machinery and facilities, including machinery andplants in the areas of food products, lumber processing, ﬁbers,
plastics, and electronic component manufacturing lines. In
many cases, customers request the provision of plant facilities
that are used with such machinery, like tanks, pressure vessels,
piping, ducts, hydraulics, and electrical systems. Aioi Sekkei’splant facility engineering, production, and installation capabilities make it possible to fulﬁll these requests, increasing thevalue added by Kanematsu KGK and broadening the range oforders it can accept while helping expand the trading platform and trading rights of Aioi Sekkei,
KANEMATSU Integrated Report 202019

Expansion of Scale

Scale Expansion of the Meat Products Business
Market Environment

This Year’s Progress

In the Japanese market, despite the impact of the novel coronavirus, demand for imported beef and pork is graduallyrising, while demand for domestically produced chicken andprocessed chicken products is ﬁrm. In overseas markets,particularly in China and Southeast Asia, which are mainstay
markets for the Kanematsu Group, demand for meat products, a form of animal protein, is rising, reﬂecting steady
population growth. Movement in demand for meat products
in China has an especially signiﬁcant impact on market prices.

In the Japanese market, taking advantage of reduced tariffs
under the Trade Agreement on Goods (TAG) with the UnitedStates, we expanded business related to the import and saleof American beef. In addition, leveraging the beneﬁts ofbeing an early entrant into the Uruguayan beef business, inﬁscal 2019, the ﬁrst ﬁscal year after the lifting of Japan’s
import ban, we successfully secured an overwhelming shareof the domestic market. We also diversiﬁed our sources ofpork and chicken and steadily increased trading volumes.
Looking at overseas markets, we launched a beef sales business targeting the Indonesian market via third-country
trading.

Going Forward
To establish a stable supply of safe, secure, high-value-added
products, we will continue to build value chains and reinforce
their functions. In upstream areas, we will diversify oursources and reinforce relationships with suppliers throughbusiness tie-ups and investment. In mid- and downstream
areas, we will work with Group companies and our partnercompanies to reinforce such functions as processing, logistics,
and sales, aiming to build value chains that can meetcustomer needs better than ever before.

Aircraft Parts Business in Ireland: Purchasing Used Aircraft

20

Market Environment

This Year’s Progress

From January 2020 onward, global demand for commercial
air travel fell sharply due to the impact of the novel coronavirus. Nevertheless, we expect the aircraft parts market to see
strong growth over the medium to long term.
We will continue proactively working to capture demand,
focusing mainly on single-aisle, narrow body aircraft, such as
the Boeing 737 series and Airbus A320 series, which are themost ﬂown and for which we have the largest order backlog.

Continued purchasing of used aircraft has allowed us toexpand our component inventory. In addition, our subsidiaryin Ireland, KG Aircraft Rotables, established a new component
shipping hub in Kuala Lumpur, Malaysia, building a framework for full-scale expansion into Asian markets.

KANEMATSU Integrated Report 2020

Going Forward
We will continue to expand the part-out business, in which
we purchase used aircraft and disassemble them to sell thecomponents. We are considering bringing the maintenanceand repair of aircraft parts in-house and collaborating withcompanies that boast outstanding, cutting-edge technologies
as we aim to increase value added and secure even greater
trust from our customers as a supplier.
In addition, through the aircraft rotable parts and part-out
businesses, we will contribute to the reuse of resources andenvironmental protection as well as the enhancement ofaircraft safety.

Kanematsu’s Progress and Strengths

Investment in
Innovation(Seeds)Data Transaction BusinessGoing Forward

In light of the vast volumes of data constantly being generated, “data free ﬂow with trust” was a topic extolled at theJanuary 2019 World Economic Forum Annual Meeting(Davos) and a key theme at the G20 Osaka summit in June ofthat year. The beneﬁts to society and individuals of data areincalculable, and its utilization offers wide-ranging possibilities. Kanematsu is advancing initiatives in businesses related
to data exchange and utilization, areas that are only expected
to grow in importance.

Leveraging our broad customer base as a trading company
while coordinating with the ICT solutions business and mobile
business, we will advance the data exchange and utilization
business on a Groupwide basis.
Through this business, Kanematsu will contribute to thedigital transformation (DX) of society.

This Year’s Progress

Data exchange market

Dataacquirers

RetailersInsurancecompanies

Smart
citiesElectricity,gas, andwater
utilities

Banks

Automakers

Review of Operations

In September 2019, we formed a strategic partnership withFrance-based Dawex Systems, SAS, which operates a global
data marketplace. Then, in December 2019, we entered acapital alliance with Japan Data Exchange Inc., which operates a data exchange business in Japan.
Through these alliances, we have built a platform fordeveloping and operating a data exchange market in Japanand a framework for providing data exchange consulting
services, helping enable the secure, broad-ranging exchangeof data between companies.

Data
providersSpecial Feature

Market Environment

Comment from the Chief Officer of Technologies and Business Collaboration

KANEMATSU Integrated Report 2020

Financial Section and Company Information

The latter half of the 1970s saw the beginning of a period
often referred to as the “winter years of the trading
companies.” While battling the headwinds, we had to ﬁnd
creative ways to develop new businesses. However, withthe rise of the tech giants and accelerating pace of technological advancement, particularly over the past decade,the winds have shifted. Today, anyone can easily communicate globally through their smartphone, and individuals
have the tools to take on the world. Trading companies

Sustainability

Yoshiya Miyabe
Director, Senior Managing
Executive Officer

are said to be collectives of individually operated businesses, and today, a single individual’s idea can create amajor business. In addition, it is now easier than ever to
invoke the concept of open innovation and enter into
collaboration with other companies. Barriers between
industries are also lower, expanding new business opportunities for trading companies like Kanematsu, which
operate in a diverse array of sectors.
Given these conditions, we created a Technologies andBusiness Collaboration team and are working to create
new businesses leveraging the Kanematsu Group’s
networks and the strengths of companies around theworld that boast cutting-edge technologies and new
business models. Today, the world’s top companies interms of market cap were started by individuals and are allstrongly associated with their founder’s names. I believe
that, as a trading company, we have the resources andtalent necessary to do what they have done. The
Kanematsu Group will continue to push forward withinitiatives to foster innovation in order to build new businesses that will change the world.

21

Business Segments
Main BusinessElectronics &Devices• Semiconductor Equipment• Electronic Components andMaterials• Industrial Electronics• Semiconductors & Devices• ICT Solutions• Mobile• CCTV Systems

Revenue(¥ billion)

300.0
263.3

265.5

FY2018FY2019FY2020

244.9

251.4

FY2019FY2020

254.5

200.0

100.0

0

• Foods

Foods(¥ billion)

300.0

231.3

Foods,
Meat
Meat & Products
Grain
Grain,
Oilseeds&
Feedstuff• Meat and Marine Products

200.0

100.0

•Grain, Food Soybeans, Oilseeds•Feedstuff•Processed Agricultural Products•Pet Products and Groceries• Steel• Materials• Plant & Ships

0

FY2018(¥ billion)

200.0

150.0

Steel,
Materials &
Plant

153.1
139.4

129.9

100.0

50.0

0

FY2018• Motor Vehicles and Parts• Aerospace

FY2019FY2020(¥ billion)

80.0
74.6
62.1

60.0

Motor
Vehicles &Aerospace

54.5

40.0

20.0

0

FY201822

KANEMATSU Integrated Report 2020

FY2019FY2020(FY 2020)

Operating Income

Revenue

Net Income*/ROIC(¥ billion)

(%)

20.0

10.0

25

17.6

18.5

19.0

9.5

9.3

8.0

15.0

15
11.2

4.0
5.0

FY2018FY2019

10.7

10

2.0

5

0

0

0

FY2020

Other

10.3%

1.6%

Steel,
Materials &Plant¥721.8 billion

Electronics &Devices

35.3%

20

6.0
10.0

Motor Vehicles &Aerospace

Kanematsu’s Progress and Strengths(¥ billion)

FY2019Foods, Meat &
Grain

34.8%

FY2020Net Income (left)

18.0%

ROIC (right)

Operating Income(¥ billion)

(%)

5.0

3.0

15

4.0

2.0

10

3.0
2.4

2.1

1.3
4.9

1.0
1.0

5
2.5

0

0

FY20198.4%

2.8%

Steel,
Materials &Plant¥28.4 billion

Electronics &Devices

66.9%

0

FY2020FY201913.5%
Foods, Meat &
Grain

8.4%

Review of Operations

FY2018

Other

2.5

4.0

2.0

Motor Vehicles &Aerospace

Special Feature(¥ billion)

FY2020Net Income (left)

ROIC (right)

Net Income*(¥ billion)

5.0(¥ billion)

(%)

3.0

15

4.4

4.0

3.9

Motor Vehicles &Aerospace

11.6%

Other
-¥0.1 billion

Electronics &Devices

64.8%

2.6
2.3

3.8

2.0

10

3.0
2.0

4.8

1.0

5

4.1

Steel,
Materials &Plant¥14.4 billion

15.7%

0

0

FY2018FY20190

FY2020FY2019FY2020Net Income (left)

Sustainability

1.0

Foods, Meat &
Grain

8.7%

ROIC (right)

Total Assets(¥ billion)

(%)

3.0

2.5

10

2.0

8

2.5

2.5

2.4

2.0
1.5

1.9
6.0

Motor Vehicles &Aerospace

9.8%

Other

8.3%

Electronics &Devices

36.6%

Financial Section and Company Information(¥ billion)

1.7

6
5.0

1.0

4

5

2

1.0

0

0

FY2018FY2019FY20200FY2019Net Income (left)

FY2020

Steel,
Materials &
Plant

22.3%

¥551.7 billion
Foods,
Meat &
Grain

23.0%

ROIC (right)* Proﬁt for the year attributable to owners of the Parent
KANEMATSU Integrated Report 202023

Electronics & Devices
This segment handles a value chain spanning ICT solutions, mobile,and electronics-related materials parts, devices and equipment,
providing unique added value across a wide range of ﬁelds. Using
our solid technological prowess and wealth of know-how inelectronics, we are advancing new initiatives in the IoT and AI
ﬁelds and offering new value to contribute to society.

Masahiro Harada
Senior Executive Officer,
Chief Officer, Electronics & Devices Division

Segment Vision

Constantly provide solutions to international society by leveraging advanced technologies in all ﬁelds
Segment Strengths
Stable proﬁt generated by the solid foundations built up in the ICT solutions and mobile businesses
Expansive supply chains and a robust customer base in the semiconductor component and equipment
businesses and the electronic devices and materials businesses
Specialized business areas—we develop speciﬁc business areas in depth, for example enhancing businessproposal capabilities by acquiring development functions centered on commercial printers in the industrial
electronics businessBusiness Environment

Opportunities• Growth of the remote work market due to the
spread and adoption of the SDGs and work stylereforms• The creation and expansion of related technology
and service markets driven by the adoption of AI,
IoT, robotics, and 5G• Accelerating digital transformation (DX) initiatives at companies in Japan

Risks

24

Growth Strategies• Provide solutions and services in such areas as virtual desktop infrastructure(VDI) and connectivity to reinforce the earnings base of the ICT solutions andconnectivity• Provide new value to expand opportunities for proﬁt by offering related
solutions in the ICT solutions and mobile businesses as well as related products in the semiconductor component and equipment businesses and theelectronic devices and materials businesses• Promote M&A and innovation investment in solutions providers, including
startups, and expand proﬁt through synergies with existing businesses

Countermeasures• Increasing sophistication and complexity of information security, shortage of specialized professionals, and tightening regulations• Acquire and expand solutions platforms based on capital alliances and partnerships with companies in and outside Japan that have specialized technologies• Industry reorganization, the impact of core technologies, and technological innovation• Expand scale by acquiring companies and businesses and acquire anddevelop new products and solutions through innovation investment• Supply chain interruptions due to changing international conditions or geopolitical risks• Optimize and diversify supply chains by expanding the functions of overseas
locations

KANEMATSU Integrated Report 2020

Key Businesses and Locations• Printer business• Semiconductor equipment• Semiconductor components
and electronic materials• Semiconductor equipment• Semiconductor components
and electronic materials

Germany

China• ICT solutions

Korea

Japan

TaiwanIndia
Thailand• ICT solutions• Semiconductor components
and electronic materials• Printer businessSingapore• Printer business

Silicon Valley

New Jersey
Texas• ICT solutions• Mobile• Semiconductor equipment• Semiconductor components
and electronic materials• CCTV system• Semiconductor components andelectronic materials• Semiconductor equipment• Semiconductor components
and electronic materials

Special Feature• Semiconductor equipment• Semiconductor components
and electronic materials

Kanematsu’s Progress and Strengths• ICT solutions• Mobile• Semiconductor equipment• Semiconductor components andelectronic materials

Progress toward the Medium-Term Vision

Business Highlightbusiness, a Group company acquired a CMOS image
sensor back-end processing business. This allows us tomeet demand related to high-resolution imaging, suchas that in the growth areas of image analysis and diagnostic imaging. In new initiatives, we are forming partnerships with companies that offer related technologies
and services with an eye to establishing a data exchange
market and promoting the creation of an advanced data
community for the data-driven society of the future.

Review of Operations

In the ICT solutions business, the adoption of VDI anddemand for private cloud systems has driven businessperformance. In the mobile business, despite the negative impacts of legal changes and the consumption tax
hike in Japan, sales were steady, contributing to revenue.
In addition, we are entering new business areas, such as
the sale and repair of used mobile devices, to better
meet society’s needs.
In the printer business, we implemented aggressive
measures to reinforce and expand our earnings base,such as investing in sales channel expansion in Europe
and the United States. In the semiconductor component

Hearable Devices
Sustainability

KCS is leveraging its ability to sell this service inpackages that include earpieces and smartphones
to reinforce sales.
In addition, going forward, we will bolster propositions to enrich communications between people
and devices, such as solutions linking AI conversation and voice data analysis with corporate workﬂow systems.

Financial Section and Company Information

Kanematsu Communications Ltd. (KCS), which sells
smartphones and other communications equipment, has expanded the range of its business byinvesting in BONX Inc., a company that develops
voice communication services using Voice over
Internet Protocol (VoIP).
BONX offers BONX for BUSINESS, a service
combining its cutting-edge earpiece with an app.
This fully duplex, cloud-based group talk solution
allows up to 30 people to talk at a distance. In addition to applications in remote working, it can serve
as a safe, efficient means of communication at
medical institutions. In May 2020, to support
medical institutions strained by the impact of thenovel coronavirus, BONX and KCS lent out earpieces
and smartphones along with data SIM cards, free ofcharge, for use as a means of communication in viraltesting and other facilities.

KANEMATSU Integrated Report 202025

Foods, Meat & Grain
Foods
Committed to safe, secure food, this division applies amanufacturer’s perspective to maintain an integrated supply
system spanning raw material procurement through ﬁnishedproduct processing.
With a broad lineup that includes agricultural products,
marine products, coffee, alcoholic and non-alcoholic beverages,
and cooked foods, the Foods Division meets diverse market needs.

Koichi Nishimura
Executive Officer,
Chief Officer, Foods Division

Division Vision

Support people in Japan and across Asia by providing a stable supply of safe, reliable food ingredients
Division Strengths
Procurement network leveraging locations worldwide for securing high-quality, differentiated raw ingredients
Specialized staff capable of quickly developing products and proposals in response to customer needs
Import, manufacturing, and logistics networks covering growing Asian markets

Business Environment

Opportunities• Demographic graying of consumers and rising
health awareness• Develop production sites for fresh agricultural products that are safe andreliable• Personnel shortages and rising staffing costs inthe food products industry• Develop and commercialize delicious and easy to prepare processed foodproducts targeted to speciﬁc markets around the world• Growing food demand and shift from focus on
quantity toward quality in Asia

• Expand mechanisms for providing safe, reliable food at Japanese standards
and grow businesses in local production for local consumption

Risks• Damage to agricultural products under cultivation or operational disruptions of processing andmanufacturing facilities or logistics attributable
to global warming or extreme weather events• Health hazards for consumers due to the contamination of food products• Global population growth and food resource
depletion

26

Growth Strategies

KANEMATSU Integrated Report 2020

Countermeasures• Hedge risks by working with production sites distributed around the world;
secure water resources and promote cultivation• Reinforce food safety management systems based on ISO 22000 and FSSC
2200
• Trade in agricultural and marine products that are certiﬁed as sustainable bythird parties and promote the use of renewable products

Key Businesses and Locations

Kanematsu’s Progress and Strengths• Frozen dim sum manufacturing•Cooked meat product manufacturing
Dalian Tiantianli Food Co., Ltd.

• Japanese food import and sales
Fujita & Co.

Germany• Fruit processing
Shangdong Lufeng Foods Co., Ltd.
• Seaweed processing
Nantong Taiyang Foodstuff Co., Ltd.

China

• Confectionary and breads• Restaurant food ingredient wholesaling
Iwase-Esta Kanematsu Co., Ltd.

ThailandIndonesia• Frozen processed food
P.T. Kanemory Food Service• Japanese restaurant chain franchise operation
PT. Abadi Tunggal Lestari
PT. Agrapana Niaga Gemilang

Special Feature• Aloe processing
Siam Aloe Vera (2005) Co., Ltd.

Progress toward the Medium-Term Vision

Business Highlightand fruit juice businesses, due in part to efforts todevelop new products leveraging the factories ofcompanies in which we have invested, we boast the top
market share in Japan.
In the alcoholic and non-alcoholic beverage business,
we are building frameworks to expand sales of beverage
ingredients from around the world in Japan and Asia.
In Asian markets, we are working to expand our value
chains to Indonesia and neighboring Muslim countries,
mainly through Kanemory Food Service.
By reinforcing relationships with our partners andaggressively investing, we aim to become a leader in theregion and by doing so achieve the medium-term vision.

Review of Operations

To strengthen its ability to procure high-quality raw
materials overseas, the Foods Division works with
suppliers around the world via exclusive contracts,
investment, and facility loan agreements. To ensure thelevel of quality that consumers in Japan expect, we reinforce production systems and put in place Japanese
specialists to oversee quality control systems. Throughsuch efforts, we are working to ensure the stable supplyof safe, reliable food.
In the cooked foods business, we have expanded ourroster of product development personnel, introduced
convenient and tasty ingredients and expanded our
lineup of products for end users. In the fruit processing

which more than 95% of Brazil’s agricultural
producers subscribe.
Going forward, as a pioneer in sustainable coffee,
Daterra will continue to contribute to local communities and the natural environment as it supplies safe,delicious coffee to consumers.

Financial Section and Company Information

Daterra Coffee is said to be the producer of thehighest quality coffee beans in Brazil. Daterra was theﬁrst coffee producer in Brazil to acquire certiﬁcationfrom Rainforest Alliance, an organization that aims toprotect rainforests and improve working environments, and is a pioneer in sustainable coffee,
focusing on both quality and the environment.
Kanematsu has worked with Daterra for 16 years.
When we began trading with Daterra, terms like
“CSR” and “development goals” were not as widely
known in Japan as they are today. From the start,
however, we were drawn to their ethos of sustainability, and the partnership has proved enduring. In
2015, Daterra won the prestigious ﬁrst prize in acontest ranking plantations in terms of environmental friendliness and sustainability. The contest
was organized by the magazine Globo Rural, toSustainability

Initiatives at Daterra Coffee, a Pioneer in Sustainable Coffee

KANEMATSU Integrated Report 202027

Foods, Meat & Grain
Meat Products
Leveraging our accumulated know-how as an industry leader inthe meat products business, we build meat product value chains,from securing raw ingredient sources to processing and sales, toprovide a stable supply of safe, reliable, high-value-added productsthat meet customer needs.

Toru Hashimoto
Executive Officer,
Chief Officer, Meat Products Division

Division VisionHelp enhance the enjoyment of food in Japan and across Asia by providing a stable supply of safe,
reliable meat products
Division Strengths
A product lineup spanning the full range of meat products and a leading market share in each product category
Meat product value chains extending from raw ingredient procurement (production site development) to processing and distribution to meet customer needs
Attentive service with highly specialized staff and differentiated products and services
Business Environment

Opportunities• Expansion of imports due to reduced import tariffs under the TPP11, the EPA with the European
Union, and the TAG with the United States• Rapidly growing demand for meat products in
Asian markets• Growing consumer awareness of safety and reliability issues

Risks• Supply risk due to trade prohibitions related todiseases, such as foot-and-mouth disease, BSE,
hog cholera, and avian inﬂuenza• Raw ingredient price ﬂuctuation risk
• Impact on Japan-bound supply availability due torapid growth in demand for meat products in
Asian markets

28

KANEMATSU Integrated Report 2020

Growth Strategies• Pursue expansion of scale via business investment and M&A to strengthen
the functions of the Kanematsu meat products group and thereby reinforce
sales• Extend the meat products business model used in Japan to Asian markets in
response to local growth in meat product sales• Step up production site initiatives undertaken with current suppliers andcultivate new production sites to develop safe, secure, high-value-added
products with a stable supply stream

Countermeasures• Diversify production sites to better distribute suppliers• Diversify customers and expand processing businesses to mitigate priceﬂuctuation risk
• Use expanding sales in Asian markets and the accompanying reinforcementof procurement capabilities to secure Japan-bound supply

Key Businesses and Locations

Kanematsu’s Progress and Strengths• Meat importing and sales• Meat processing• Beef importing and sales• Beef, pork, and chicken
purchasing

CanadaEurope
China

Japan

Hong Kong•Meat importing and sales•Meat processing•Cooled and refrigerated storage
and distribution•Japanese beef and pork sales
and exporting•Beef and pork purchasing

United States•Beef, pork, chicken, andturkey purchasing

Thailand•Pork and chicken
purchasing•Beef importing and sales

Brazil• Pork purchasing• Chicken and processedchicken product purchasing

Chile
Special Feature

Uruguay•Beef purchasing

Progress toward the Medium-Term Vision

Business Highlightfunctions in the Japanese market. Responding to therapid growth in Asian markets, in 2018 we established
Dalian Matsutomo Foods Co., Ltd., as a joint venturewith a local partner in China for the primary processing
and sale of meat products. Going forward, we will work
to capture beef demand in the Chinese market, which is
expected to see ongoing growth. We will horizontally
expand similar initiatives in growing Asian markets to
expand the earnings base.

Review of Operations

To establish a stable supply of safe, reliable, high-valueadded products that meet customer needs, we havecontinued to build value chains and reinforce related
functions. In upstream areas, we are reinforcing relationships with suppliers through business tie-ups and investment while diversifying our sources to secure a stablesupply. In mid- and downstream areas, we have worked
with Group companies and our partner companies toreinforce such functions as sales business promotion,
storage (refrigeration), and processing. In the processing
business, in 2019 we established a joint venture plant in
Higashi Ogishima, Kawasaki, to reinforce GroupIn Search of New Sources: Business in Uruguayan Beef
Sustainability

and antibiotics, it has a favorable reputation as anatural product in the E.U. and U.S. markets and is
beginning to attract attention in Japan, as well.
Going forward, as we have with Uruguayan beef, wewill boldly advance the development of sources
around the world to provide a stable supply of safe,
reliable, high-quality meat products.

Financial Section and Company Information

Handling beef, pork, chicken, lamb, and horse meat,
the Meat Products Division works to secure diverse
sources of these products across Europe, theAmericas, Oceania, Southeast Asia, and elsewhere inan effort to minimize supply risks and ensure stableprocurement. In February 2019, the ban on imports
of Uruguayan beef to Japan, which had been in placesince 2000, was lifted. Kanematsu took action aheadof the competition, handling the ﬁrst shipments after
the change, and has been proactively developing
production sites. For years, we had preparing for thelifting of the ban by using our overseas network togather information and strengthening relationships
with Uruguayan meat packing companies. As a result,in 2019, we boasted the top market share in
Uruguayan beef imports to Japan by an overwhelming margin. Because Uruguayan beef is subject
to strict regulations on the use of growth hormones

KANEMATSU Integrated Report 202029

Foods, Meat & Grain
Grain, Oilseeds & Feedstuff
The Grain, Oilseeds & Feedstuff Division stably procures the basic food products
and production materials that form the foundation for diverse food production
from around the world, providing stable supplies to food product manufacturers
in Japan and Asia.
The global population is projected to continue growing, while the middleincome population and demand for protein are expected to grow even fasterthan the population. At the same time, supply risks, such as those from extreme
weather and trade protectionism, are growing. In these circumstances, weconstantly strive to enhance our ability to stably supply high quality products.
Masayuki Hamasaki
Senior Executive Officer,
Chief Officer, Grain, Oilseeds & Feedstuff Division

Division Vision

Support the food industries of Japan and the rest of Asia through the stable supply of safe, reliablehigh-quality products
Division Strengths
Full line of feedstuff materials, including rice, barley, soybeans, and corn, with leading domestic market shares innumerous categories, such as food soybeans, rice, and feedstuff materials
Ability to meet diverse logistics needs, from dry bulk shipping to container transport
Production of raw materials, such as soybeans, forage, and mixed feedstuff, in Japan, North America, and Asia toprovide high-quality products

Business Environment

Opportunities• Growing global demand• Focus on Japanese, Chinese, and ASEAN markets as our key domains• Increasing regularity of extreme weather events• Secure stable supply by diversifying production sites and suppliers• Growing demand for quality• Enhance quality control through upstream production and processing businesses

Risks

30

Growth Strategies

Countermeasures• Price ﬂuctuations• Enter into hedges via futures markets, such as the Chicago Mercantile
Exchange• Extreme weather events• Secure stable supply by diversifying production sites and suppliers• Quality control• Enhance quality control through upstream production and sourcing businesses

KANEMATSU Integrated Report 2020

Key Businesses and Locations

Kanematsu’s Progress and Strengths•Raw material supply, local production
Mixed feedstuff manufacturer
Dalian Runsong Biological Feed Co., Ltd.

North America
China•Dairy farming in Vietnam•Raw material supply to theaquaculture industry
Dalat Milk Joint Stock Company
Other partners

ASEAN region•Soybean and forage production
and processing
KG Agri Products, Inc.
Sage Hill Northwest, Inc.
KAI Enterprises, Inc.

Australia
Special Feature•Grain and forage production and processing
Bodiam Pty Ltd.
Kangaroo Island Pure Grain Pty Ltd.

Progress toward the Medium-Term Vision

Sustainability

Business Highlightﬁscal 2021. Notably, because major meat producers are movingfrom southern China to the country’s northeast and setting up
new facilities due to environmental problems and other factors,
above-average demand growth is expected to continue.
In North America, our plant in California that processes
forage for export to China had seen a drop in utilization due to
U.S.-China trade frictions. However, following the resolution oftariff conﬂicts between the two nations, it returned to full
capacity. New exports to the Middle East are also gradually
increasing. As such, this business promises growth going
forward.
In the domestic feedstuff materials business, we have a
supply framework for an unmatched full product lineup andare working to further strengthen and deepen functions insuch areas as agricultural IoT.

Review of Operations

In the rice business, we have a leading share of Japan’s
imported rice market and are seeing gradual growth in rice
trading overseas, such as exports to Singapore and China.
Going forward, we will also focus on exports from Vietnam, ouroverseas base for the rice business, to other countries in Asia.
In the food soybean and oilseed business, we boast aleading market share in Japan and are reinforcing our foundations in North America via a supply network comprising awholly owned sorting plant and partner plants. In ﬁscal 2021,
we are increasing the utilization rates of our existing assets andinfrastructure and preparing to make new investments.
In the overseas feedstuff materials business, we utilized local
capital to establish a joint-venture soybean processing plant in
Dalian, China. The ﬁrst phase of construction was completed at
the end of 2019, and processing and sales utilizing the plant,
which has a capacity of 100,000 tons per year, will begin in

Initiatives in Sustainable Marine Resource Use and Agricultural IoT
Trust CoC V2.0, an international ﬁsh meal and ﬁsh oil
responsible supply certiﬁcation that meets the standardsof global aquaculture mixed feedstuff manufacturers.
In the agricultural IoT ﬁeld, our IT divisions and Group
companies are working together to support more efficient
operations and work style reforms at pig and dairy farms.
Although livestock production and dairy farming are key
industries in Japan, because of their severe working conditions, they face difficulties securing adequate labor. As
such, implementing improvements to save labor andimprove efficiency is a matter of urgent importance.
Leveraging Kanematsu’s strength in IoT technologies, weare implementing such technologies at major pig
farming companies’ latest facilities, with the aim of realizing smart farms.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

Kanematsu boasts leading shares of the ﬁsh meal and ﬁshoil trading markets of Japan and Asia and conducts business with an awareness of the importance of marine
resource sustainability.
Kanematsu is a member of IFFO, the marine ingredients organization. To protect marine resources, we areworking to increase the proportion of ﬁsh meal and ﬁsh oil
we handle that meets responsible supply standards.
Currently, more than half of such products we handle
are certiﬁed under the MarinTrust Standard promoted
by IFFO.
In addition, we encourage ﬁsh meal and ﬁsh oil
suppliers in Japan and around the world who do not yet
meet the MarinTrust Standard to acquire certiﬁcation. As aseller, Kanematsu is in the process of applying for Marine

31

Steel, Materials & Plant
This segment covers a full range of iron and steel products, energy
solutions, chemicals, industrial plant and infrastructure facilities, andships. Across a wide variety of operations, highly specialized staff
uphold Kanematsu’s commitment to supplying and developing
high-value-added products.

Eiji KanManaging Executive Officer,
Chief Officer, Steel, Materials & Plant Division

Segment Vision

Change society by providing high-value-added products through businesses that support infrastructure
Segment Strengths
Diverse products and relationships with a broad client base due to the integration of businesses in different sectors
Business creation capabilities of staff with wide-ranging expertise in areas from trading to business investment
Global value chains operating in cooperation with inﬂuential partners in and outside Japan

Business Environment

Opportunities• Changes in the global energy market structure,including declining demand for fossil fuels• Intensifying trade frictions between key countries, such as the United States, China, andnations in Europe and Asia
• Growing global awareness of the SDGs and otherenvironmental issues

Risks• Further changes to market structures and therealization of geopolitical risks due to trade problem intensiﬁcation• Temporary personnel shortages due to accelerating business investment• Changes to the business environment due totightening environmental regulations or otherfactors arising from the international shift toward
lower carbon emissions

32

KANEMATSU Integrated Report 2020

Growth Strategies• Accelerate initiatives in renewable energy businesses• Expand business in high-performance products and products made to proprietary standards to reduce risk related to trade problems• Create new business schemes by reinforcing relationships with business
partners

Countermeasures• Mitigate the risk of trading right advantages being weakened by cultivating
new markets, products, and trading partners• Provide education and opportunities for employees to gain experience,
mainly through personnel exchanges with affiliated companies in and outside Japan• Create new businesses that contribute to environmental preservation,
including CO2 reduction

Key Businesses and Locations

Kanematsu’s Progress and Strengths• Pharmaceuticals• Functional foods• Specialty steel• General chemicals• Specialty steel

North America

Europe• Treated-surface steel materials• Specialty steel

China
Middle East

South Korea

India• Plant facilities• Iron and steel productsSoutheast Asia

• Bunker oil• Biomass fuel• General chemicals• Specialty steel• Plant/infrastructure• Shipbuilding• Oilﬁeld tubing• Specialty steel• Functional foods• High-performance steel materials• Functional food materials

Special Feature

Progress toward the Medium-Term Vision

Business Highlight

States, which has become the world’s top oil producer.
In the energy business, in response to rising renewableenergy demand and growing concern about the environment, we are expanding initiatives in the solar power
generation and biomass fuel businesses.
In the plant and ships business, we are working toachieve greater differentiation from our competitors,
mainly through package project proposals covering everything from raw materials and products to related materials.
While this segment currently faces numerous headwinds, such as shifting crude oil prices and trade problems,
we are steadily taking steps to build a stable business foundation for the future.

Review of Operations

In the chemicals business, we deepened initiatives in thehigh-value-added pharmaceuticals and life science ﬁelds.
In the iron and steel business, we invested in a South
Korean company with strong development capabilities
related to a range of unique products in the construction
materials ﬁeld, which offers high growth potential. In
Japan, we welcomed a Kyushu-based aluminum construction material manufacturer into the Group, reinforcing ourcomprehensive construction material-related product andservice sales capabilities.
In the oilﬁeld tubing business, we established a technicalcenter for threaded connection research and developmentwith an eye to meeting long-term needs in the United

Forest Conservation Initiative in Guinea
Sustainability

project also contributes to the achievement of thegoals of the Paris Agreement, reducing forest
destruction by working to eliminate slash and burnagriculture and discouraging household ﬁrewood
collection. The chocolate market is dominated by
European and American companies, but we arebuilding an SDG-oriented business that will demonstrate Japan’s unique strengths to the world.

Financial Section and Company Information

This segment has long engaged in carbon credit
trading as part of its energy business, increasing its
forest conservation know-how through REDD+.*
Speciﬁcally, we have been implementing a forest
conservation project with the Gobel Group inIndonesia since 2011. In 2019, we horizontally
expanded these efforts to Guinea, in West Africa,
beginning a project to farm cacao while conserving
forests. Kanematsu and a specialized cacao trading
company were jointly commissioned by JICA tocommercialize the project and are providing guidance to growers with regard to agroforestry, in whichcrops are cultivated without clear-cutting forests, andfermentation techniques to improve product quality.
Aiming to establish and industrialize the market for
Guinea cacao, this project seeks to help poor farmers
by paying them a portion of sales revenues. The* REDD+ (reducing emissions from deforestation and forest degradation) is an initiative aimed at reducing forest loss and degradation and promoting
sustainable forest management in developing countries.

KANEMATSU Integrated Report 202033

Motor Vehicles & Aerospace
The motor vehicles and parts business handles motorcycle andautomobile parts as well as complete built up vehicles, while theaerospace business handles aircraft and parts as well as space-related
products. These businesses operate on a global scale, leveraging theGroup’s superb expertise and extensive information resources.

Yoshiya Miyabe
Director, Senior Managing Executive Officer,
Chief Officer, Motor Vehicles & Aerospace Division

Segment Vision

Contribute to society by creating next-generation mobility businesses centered on the environment,
safety, and comfort
Segment Strengths
A strong roster of sales assets, including industry-leading customers and business partners around theworld, built up over the decades
Supply chain management that leverages our overseas locations and logistics network
Ability to gather information, set up businesses, and execute investments in areas related to advanced
technologies and startups
Business Environment
Opportunities• Long-term growth in demand for cars and motorcycles inemerging countries and the emergence of new demand
related to the evolution of CASE and MaaS technologies• Growing demand for air travel in step with globalizationand growth in the space business due to public and private development and forward-looking investment indeveloped countries• Rapid diversiﬁcation of mobility as part of a once-in-acentury period of technological innovation and digitization

Risks• Fluctuations in demand due to changes in international
conditions, such as environmental regulations, economic
sanctions, or trade frictions• Drastic changes in commodity structures, value chains,or business models due to the development of CASE,
MaaS, or other such technologies• Intensifying competition with new players entering thepart-out and MRO markets as air travel demand grows

34

KANEMATSU Integrated Report 2020

Growth Strategies• Leverage the Group’s global network to further hone existing projects,
increase value added, and execute new investments• Further develop the commercial aircraft aftermarket business andexpand scale, mainly in the part-out and maintenance, repair and overhaul (MRO) businesses• Advance partnerships with startups, mainly through our investmentbase in Silicon Valley, to create new businesses

Countermeasures• Innovate existing value chains, create new added value and evolve toimplement next-generation business models• Increase trading of components for EVs and other environmentallyfriendly vehicles, develop data and software businesses in addition to
our existing businesses• Establish locations in Asia, where markets are growing, and the UnitedStates, the biggest market, and form tie-ups and joint businesses withlocal companies

Key Businesses and Locations• Motorcycle OEM components• Aerospace equipment andcomponent agency sales

PolandEuropeChina• Motorcycle and automobile OEMcomponents and warehouse
operation• Export of helicopter and aircraftcomponents to Japan• Replacement, maintenance, leasing,and sale of aircraft rotablecomponents

Kanematsu’s Progress and Strengths• Motorcycle and automobile
OEM components• Establishment and operation of
joint-venture plants withbusiness partners• Sales and maintenance ofautomobiles• Sales of engines, generators,
lawnmowers, and othergeneral-purpose machinery• Motorcycle, automobile, ATV, and golf cart OEM
components, motorcycle aftermarket components• Export of aircraft fuselages and components to Japan• Investment in VC funds, seeking out advanced
technologies, and growth support for startups

North America

Japan
South
Korea

India, Thailand,
Indonesia• Aircraft and helicopter fuselages,
components sales agency, and spacerelated sales agency (private/public)• Rocket downrange operations• Kanematsu Aerospace Corp.
(aircraft equipment import agency sales)• Kaneyo Co., Ltd.
(Fiber material import, export, anddomestic sales)

Central & SouthAmericaSpecial Feature• Motorcycle and automobile OEMcomponent trading and golf cart
OEM

• Motorcycle OEM components andwarehouse operation• Establishment and operation of jointventure plants with business partners

Progress toward the Medium-Term Vision

Sustainability

Business Highlightstrengthen the personnel and business frameworks ofthe European commercial aircraft parts business andestablished a sales office in Malaysia as part of efforts toenter Asian markets, which are expected to grow going
forward. In the space business, in addition to thesatellite-related component business, an area ofstrength, we have been receiving stable orders in therocket downrange operations business and contributing
to national projects.
Furthermore, aiming to ﬁnd cutting-edge technologies
and new business models, we established Kanematsu
Ventures Inc. in Silicon Valley and invested in a Silicon
Valley venture capital fund managed by AllegisCyber
Capital, thereby kicking off efforts to build innovative new
businesses. Based on information gathered via the worldwide network of contacts we have built, our business
investment and creation initiatives, including investment
in startups, continue to evolve.

Review of Operations

In our motorcycle and automobile businesses, as part ofefforts to work with key business partners to build new
businesses, a strategy carried over from the previous
medium-term vision, we established a joint venture
motorcycle electronics manufacturing company in Tamil
Nadu, India, with one of our suppliers in Japan and apartner in India. To enhance our global framework andreinforce logistics, we focused mainly on Asia, establishinga sales office in Sriracha, Thailand, and a branch office inBengaluru, India, as well as launching operations at warehouses in the cities of Pune, Bawal, and Chennai, India.
Also, in new initiatives, we entered the data business. We
are working in cooperation with a major equipment
manufacturer in Japan on both the hardware and software aspects of systems to efficiently collect vehicle
driving data, and are currently carrying out demonstration
testing of such systems in Indonesia.
In the aircraft business, we advanced measures to

New Initiatives in the Space Businessthe private-sector-led space business, enhancing tradingof satellite components. Going forward, we aim to utilize
data from positioning and small satellite constellations
with AI and big data technologies across our operations
to further expand our business foundations.
In addition, we are proactively engaging in initiatives
related to national security, gathering data about Space
Situational Awareness, andimplementing space debris
countermeasures as we
advance businesses related
to space development andutilization.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

Kanematsu has long worked to expand Japan’s spaceindustry as a sales agency for European and American
space-related manufacturers.
We provide overseas launch support for the H-IIA/B,
the primary launch vehicles currently used by the Japan
Aerospace Exploration Agency (JAXA). Furthermore, toenhance international competitiveness, we are working
with the government to set up overseas downrange
operation stations for the H3 launch vehicle, a next-generation ﬂagship rocket currently in development, in aneffort to realize its maiden ﬂight in ﬁscal 2020.
In addition to the conventional government-led
space business, Kanematsu has been quick to get into

35

Sustainability

Our Approach to Sustainability
The Kanematsu Group has codiﬁed the entrepreneurial spirit of Kanematsu’s founder, Fusajiro Kanematsu, in its
Corporate Principle. We engage in business in Japan and around the globe based on our mission of contributing tointernational society and economic development.
The challenges facing international society today, such as climate change and other increasingly serious socialand environmental problems, are growing more diverse and complex. We believe that carrying out corporate
activities proactively, with an awareness of these challenges and a sense of mission, serves to both help address
such challenges and promote the growth of the Kanematsu Group.
With an eye toward cooperation and mutual development with our customers and business partners, we willcontinue to leverage the insight and know-how built up over Kanematsu’s long history to provide goods andservices with added value. Through these corporate activities, we aim to achieve the sustained development of the
global environment, society, economy, and of the Kanematsu Group.

Addressing the Five Key Issues
Business activities

Social contribution activities, etc.

A
Business in high-value-added
health foods for healthierlivingResponding to changes in market
characteristics and location andchanges in customer needs

Initiatives to introduce ICT tolivestock farming
Security business to guard
against cyber attacks
Cloud-based FarmManagement Systems for
Chicken Farming

p. 40

B
Mutual developmentwith local communities

Ensure health and safety through our
corporate and social contribution activities
to achieve mutual growth anddevelopment with local communities.

Sustainable coffee
plantation-related initiatives
Offering services closely
tailored to local needs atmobile phone shops
Kanematsu Foundation for
p. 39
the Research of Foreign Trade
Volunteering in areas
affected by the Great East
Japan Earthquake
Supporting Amputee Soccer

p. 39

p. 39

e-Net Caravan activities

36

Enhancing the corporate
governance systemp. 46

Enhancing internal control
and risk management
systems

p. 48

KANEMATSU Integrated Report 2020

D
Enhancing governance

Increase management transparency,
enhance appropriate oversight functions
and systems, and promote sound corporate
management to achieve sustained growth.

Kanematsu’s Progress and Strengths

Determining Materiality
The Kanematsu Group aims to take on social challenges based on a broad
view of international society in order to create new markets and value. In
this way we seek to contribute to the global environment, sustainablesocial development, and the growth of the Kanematsu Group.
At the start of the future 135 medium-term vision in ﬁscal 2019, wesought to determine which issues the Kanematsu Group should focus on
in its corporate activities, taking into account international targets andstandards—such as the Sustainable Development Goals (SDGs)—as well
as stakeholder expectations, Kanematsu’s Corporate Principle, andimportance to management. Through these efforts, we established ﬁve
key issues (issues of high materiality).

• Responding to changes in market
characteristics and location and changes incustomer needs• Mutual development with local communities• Consideration of the global environment• Enhancing governance• Promoting respect for human rights, humanresource development, and diversity

Special Feature

Meet the needs of people in many countries
and regions by achieving the stableprocurement and supply of goods andservices to realize richer, comfortable living.

Demonstration project toincrease effective EV range
Aircraft rotable parts business/
part-out business
Forest conservation initiatives
in Indonesia (REDD+)
Review of Operations

Solar panel and converter supply
business
Renewable energy power plant
construction businessBusiness supplying highefficiency industrial machinery
employing low-carbon
technologies

C
Work to address environmental issues,
including mitigating global warming andconserving biodiversity, through our
corporate and social contribution activities.

Business selling biomass fuels tocombat global warming
Lumber preservation treatment
technology helping reduce global
warming

Sustainability

Consideration of
the global
environment

Business supplying heat reﬂective
paint to combat global warming

Environmentally friendly ground
improvement using wooden piles
Business in implementing
switches to LP gas fuelE

Securing Traceability in
Marine Products
Acquisition of Carbon Credits
with Saudi Arabia via the
Joint Crediting Mechanism

p. 40
Financial Section and Company Information

Promoting respect for human rights,
human resource development, and diversity

Development of mealwormbased feedstuff materials

p. 40

Developing and utilizing
global professionals in the
IT industry

Respect human rights, build sustainable value chains, and contribute toemployment in emerging counties in our global corporate activities. Maintainenvironments in which diverse human resources can exercise their individuality
and abilities while promoting the development of every employee.

Promoting work-life balancep. 44

Human resource
development initiatives

p. 41

Activities to support theindependence of persons
with disabilities
KANEMATSU Integrated Report 202037

Message from the Sustainability Management Committee Chair

Yoichiro Muramatsu
Executive Officer

When he founded Kanematsu, Fusajiro Kanematsu declared, “Let us sow and nurture the seedsof global prosperity.” This urging to “Sow a seed now” and take action for the greater good
reﬂected the common social mission shared by the people of Japan in the late nineteenth century, when Japan was striving to build a national economy. In the context of today, 130 years later,
it is clear that this founding spirit has much in common with the principles underlying the
Sustainable Development Goals (SDGs), which have gained prominence in recent years. Indeed, acommitment to helping realize a more prosperous society and better future has been an essential component of Kanematsu’s core heritage since its founding.
The novel coronavirus pandemic has thrown into sharp relief the risks of a globalized society, including how quickly infectious disease can spread. In the post-corona world, or rather, the“new normal,” where we live with the novel coronavirus, the issues of realizing a sustainable society and corporate business continuity are expected to draw increased focus. The KanematsuGroup’s medium-term vision, future 135, includes the goal of growth by pursuing scale expansion and the acquisition of added value through effective and judicious business investment, andwe are advancing business activities accordingly. Going forward, as society rapidly transforms, wewill pursue corporate activities with an increased awareness of the SDGs. In addition, we recognize addressing climate change as important to the realization of a sustainable society and are
exploring ways of responding to the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD).
To further advance sustainability management, in April 2020 we relaunched the CSR
Committee as the Sustainability Management Committee. As interest in the SDGs and ESG issues
increases, we will fulﬁll the role and responsibilities expected by our stakeholders, working tosolve social issues and create value through our business activities as we aim for the sustainablegrowth of both the Company and society.

38

KANEMATSU Integrated Report 2020

Kanematsu’s Progress and Strengths

Environmental Initiatives
Kanematsu is engaged in environmental businesses in Japan and overseas that help protect and improve the global environment. The global Group also continuously works to improve its ISO 14001-based environmental management system.
By effectively operating this system, the Group is reducing electricity and paper consumption, promoting comprehensive
waste sorting and reduction, and helping to reduce CO2 emissions. Through these efforts, the Group strives to contribute to
the creation of a low-carbon, recycling-oriented society.
For more details, please refer to Kanematsu’s Environmental Report.

https://www.kanematsu.co.jp/en/sustainability/environment/

Social Contribution
Ground. In the spring of 2020, the team became affiliated with
the AC Milan Academy Chiba and was renamed AC Milan BBee
Chiba with the aim of developing even further.

Raising Awareness through Experience—The Kanematsu
Invitational Kids’ Soccer Tournament
The eighth Kanematsu Invitational Kids’ Soccer Tournament
was held in January 2020 at KUVERA football park in
Kamagaya, Chiba, where Kanematsu supplied the artiﬁcial turf.
After the matches concluded, we held an amputee soccer
experience event to spread awareness among the participating
children. This event served as an opportunity to not only allow
the children to see ﬁrst-hand
how fun and interesting
amputee soccer is, but also to
spark an interest in parasports
and communicate the value ofhuman life and resilience.

Review of Operations

The Kanematsu Foundation for the Research of Foreign Tradewas established in 1940 with the purpose of contributing toeconomic development through support and funding for
research into trade and international economics. The Foundation
is jointly operated by the Research Institute for Economics andBusiness Administration of Kobe University and Kanematsu.
In 1993, the Kanematsu Prize—a Kanematsu postgraduate
research scholarship—was jointly established by the ResearchInstitute for Economics and Business Administration of Kobe
University, the Kanematsu Foundation for the Research of
Foreign Trade, and Kanematsu Corporation. Every year, graduate
students are invited to submit their dissertations to apply for the
prize. The Kanematsu Prize thus provides graduate students inthe ﬁelds of economics, management, and accounting acrossJapan with opportunities to win a research fellowship and topresent their research.
Beginning with the 2018 prize, the economics division andmanagement division are
judged separately. Throughsuch efforts, Kanematsu willcontinue to support researchin the ﬁelds of economics,
management, and accounting
through the Kanematsu Prize.

Special Feature

The Kanematsu Foundation for the Research of Foreign Trade

Reconstruction Support Volunteer Activities
To encourage employees to volunteer, Kanematsu Company
has created a support system to cover transportation andlodging costs not only for Company-organized volunteer
efforts, but also employee’s self-directed efforts.
Sustainability

Volunteering in Areas Affected by the Great East Japan Earthquake

Supporting Amputee Football
Under a partnership agreement with the Japan Amputee
Football Association (JAFA), Kanematsu supports the parasportof amputee football as part of initiatives to address its key
issues of mutual development with local communities andpromoting respect for human rights, human resource development, and diversity.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

Operational Support (Office Space and Kanematsu Tsuga Ground)
Since October 2018, Kanematsu has provided a meeting roomat its Tokyo Head Office for JAFA to use as an office. Since
forming a partnership agreement with JAFA in April 2019, we
have sent employee volunteers to JAFA tournaments andactively engaged in efforts to spread awareness of amputee
football, broadly communicating
the appeal and excitement of
the sport.
The Chiba Prefecture
amputee football team AFC
BumbleBee Chiba holds monthly
practices at Kanematsu Tsuga

Since 2011, Kanematsu has carried out ongoing volunteer
efforts to support recovery in Rikuzentakata, Iwate, an area
affected by the Great East Japan Earthquake. To date, a total of
337 Kanematsu Group employees have taken part in 20 volunteer trips. As the areas affected move into the later stages ofrecovery, there has been less need for volunteer labor.
Accordingly, since 2018, employee volunteers have been helping
operate the Road to Recovery Rikuzentakata Marathon. This
marathon, of which Kanematsu is a corporate sponsor, brings
runners and volunteers from around the country together withlocal citizens in a shared hope for recovery.
In addition, in ﬁscal 2019, Rikuzentakata was designatedan SDGs Future City by the national government, and the city
is actively working toward
the achievement of the
SDGs. Going forward, we
will continue to support
new community building
and recovery in
Rikuzentakata through avariety of efforts.

39

Addressing the Five Key Issues

A

Cloud-based Farm Management Systems for Chicken Farming

The Kanematsu Group’s Electronics & Devices Division andGrain, Oilseeds & Feedstuff Division are jointly advancing
next-generation smart-agriculture initiatives. Speciﬁcally,
Kanematsu Futuretech Solutions Corporation is developing
cloud-based farm management systems for egg and chicken
farming.
Daily reports on poultry house conditions or breeding,which have conventionally been managed using handwritten
ledgers, can be input to the new system via tablet using a
dedicated app during poultry house inspections, improving
efficiency. In addition, data collected on-site is available in realtime, enabling better understanding of farm operations andanalysis of farm management.

C

Securing Traceability in Marine Products

In April 2020, Kanematsu obtained MSC/ASC Chain of Custody(CoC) certiﬁcation.
MSC1 and ASC2 certiﬁcations serve as proof that marine
products were produced by sustainable ﬁshing or aquaculture
methods managed with proper consideration given to marine
resources and the environment. MSC certiﬁcation applies towild-caught seafood, while ASC certiﬁcation applies to aquaculture. Vendors wishing to claim marine products as originating from ﬁshery operators or aquaculture producers with
MSC or ASC certiﬁcation must obtain CoC certiﬁcation. CoC
certiﬁcation provides credible assurance of product traceability
up the chain of custody to the source to ensure that non-certiﬁed products are not mixed into or substituted for MSC/ASC
certiﬁed marine products during distribution or processing.
Leveraging its CoC certiﬁcation, Kanematsu will strive toensure the protection of marine resources and the marine environment in its role as an operator in supply chains that reliablyCbring sustainable marine products to consumers. By doing so,
we will contribute to the achievement of SDG 14, “Conserveand sustainably use the oceans, seas and marine resources forsustainable development” while further developing sustainablemarine product industries.
1. MSC: Marine Stewardship Council
2. ASC: Aquaculture Stewardship Council

Acquisition of Carbon Credits with Saudi Arabia via the Joint Crediting Mechanism

Japan has built and is implementing a joint crediting mechanism (JCM) to promote the use of energy-saving and renewable energy technologies in developing countries asmechanism for promoting the absorption and reduction ofemissions of greenhouse gases.
Using this system, Kanematsu and Jubail Chemical
Industries Company (JANA) of Saudi Arabia installed high-efficiency electrolysis tanks at a chlorine production plant. JANA
produces chlorine and caustic soda, the manufacture of which
consumes great quantities of electricity. Replacing the older
facilities with the latest model high-efficiency electrolysis
tanks helped reduce resistance and the amount of electricity
consumed.
The Kanematsu Group is also using the JCM in four projects in Southeast Asia. We will continue to look for new

40

The evolution of smart agriculture, powered by ICT, is
expected to not only help
attract personnel to theindustry, but improve efficiency and productivity.
Through this initiative, theentire Kanematsu Group willcontribute to the sustainable
development of the livestockindustry while adapting tomarket changes.

KANEMATSU Integrated Report 2020

opportunities to leverage the JCM and thereby contribute to
the achievement of the SDGs.

Kanematsu’s Progress and Strengths

Human Resource Development Initiatives
Human resources are a vital asset for Kanematsu, and retaining and training human resources is important for theCompany’s growth. Kanematsu maintains systems to promote work-life balance, including child care support and familycare support systems, seeking to create workplaces that are comfortable and rewarding for employees. Furthermore, we
focus considerable effort on human resource development, an indispensable part of Kanematsu’s growth.

Message from the Chief Officer of Human Resources & General Affairs

Senior Executive
Officer,
Chief Officer,
Human Resources &General Affairs

Sustainability

Human resources are the Kanematsu Group’s most valuable assets. Our Corporate Principle, established basedon the entrepreneurial spirit of our founder, Fusajiro
Kanematsu, includes the passage, “Our purpose as a
Company is not only to build a sound and ﬂourishingbusiness, but to fulﬁll our responsibilities as a corporate
citizen, contributing to society and the security and wellbeing of all.” Since the Group’s founding 130 years ago,
Kanematsu has strived to develop its people and create
employee-friendly workplaces, growing and developing
alongside a talented workforce.
One of the priority initiatives of the future 135 medium-term vision is the establishment of management

Review of Operations

Further Reinforcing Human
Resource Development andPromoting Diversity and Inclusion

Special Feature

Kazuo Tanaka

infrastructure for achieving sustainable growth, underwhich we aim to build a framework for global strategy,
cultivate management-level human resources, andimprove employee satisfaction.
To cultivate management-level human resources, inJuly 2019, we launched Kanematsu University, a reinforced, more systematic version of our existing training
systems. To achieve the ongoing growth of theKanematsu Group, we are developing human resources
with broad, long-term perspectives that encompass theentire Company. By doing so, we will realize qualitative
improvement, nurturing the next generation of
Kanematsu leaders.
Furthermore, in October 2019, we created a
Diversity and Inclusion (D&I) Team within the Personnel
and General Affairs Department. In its ﬁrst year, theteam held diversity lectures and career training fornon-career-track employees under the main theme ofincreasing motivation as part of efforts to promotewomen’s professional success. Going forward, the D&I
Team will work to create environments that recognize
and accept diverse ways of thinking and beliefs to makeit easier for all employees to work and use their abilities.
By combining such efforts with work style reforms, we
aim to enhance employee engagement and help
achieve the SDGs.
Going forward, as the world adapts to the presenceof the novel coronavirus, work styles, values, and business models are expected to undergo tremendous
changes. No matter how times change, Kanematsu will
work to further develop business professionals withstrong basic qualities of character, such as fairness andintegrity, as well as rich individuality, so that every
employee can act with pride to build strong relationships with business partners, thereby supporting thedevelopment of the Kanematsu Group.

Financial Section and Company Information

Kanematsu University
Kanematsu University, a reinforced, more systematic versionof our existing training systems, was launched in July 2019 todevelop management professionals who will create new businesses.
All employees of Kanematsu and Group companies who
have been with the Group for less than ten years are required
to participate in the system, which grants credits and certiﬁcations. The curriculum comprises the three categories ofgeneral education, interpersonal knowledge and skills, andprofessional knowledge and skills. The system provides a richrange of courses administered via e-learning or grouptraining, depending on the content. Content ranges from thefundamental, such as business manners and foreign
languages, to specialized knowledge and skills, such as business investment, legal matters, and anger management.
Using Kanematsu University, we are developing the next
generation of management-level human resources.

KANEMATSU Integrated Report 202041

Kanematsu University Student’s Perspective

Norihiko Higashi
Corporate Planning
Department, Corporate
Planning Section

Through e-learning, I was able to learn a wide
range of business fundamentals in such areas asﬁnance, accounting, and marketing through astructured online medium, freely engaging withthe content that most interested me when I had
gaps of free time during the workday. In addition,in management strategy formulation training, I
learned the basic approach to strategy formulation through two days through lectures fromoutside instructors, instructional texts, and casestudies of other companies. This helped me realize

some of the areas where my normal way of seeing
things falls short, and, in the group work portion, I
had the opportunity to see the strategies mygroupmates use in their work. I thus learned a lot
from this training.
Using the knowledge and know-how I havegained through Kanematsu University, I hope tohelp Kanematsu continue to grow its core businesses while taking part in advancing and executing business investment and M&A projects, areasof focus for Kanematsu going forward.

Executive Management Training
Kanematsu created a new executive management training system in ﬁscal 2017 to foster the skills to operate businesses and organizations from an executive management perspective. Speciﬁcally, the targets of this training are to (1) foster strategy formulationand human resource management abilities and (2) acquire the basic knowledge necessary to an executive manager. In the ﬁrst
year, we implemented this training for general manager-level employees. Since ﬁscal 2018, we have been gradually expanding
this training to the division manager level and below, planning to eventually include employees who are in approximately their
10th year with the Company.

Training in Business Plan Formulation
Kanematsu aims to improve corporate value by further developing areas of strength, making new investments for businesscreation, and taking on other new challenges. To this end, we have created training courses covering business plan formulation to
impart the skills necessary for drafting road maps to the creation and successful launch of new businesses.

Business Plan Formulation Trainee’s Perspective

Naoko Goto
Motor Vehicles and Parts
Department No. 2, Section 1

The ﬁrst half of the business plan formulation training consisted of working on problems we hadreceived in advance using instructional texts,
followed by a systematic study of the basic skills
necessary for business plan formation throughlectures and lessons from instructors.
In the second half, we split into groups to identify a new business opportunity within a given areaand develop a business plan. The training as awhole was an extremely valuable opportunity to
step away from ordinary work to really focus onlearning skills like deeply thinking things through,logically structuring ideas, and communicatingthem in a convincing way. In addition, the opportunity to foster deeper mutual understanding andgain new perspectives through discussions with theother participants from other departments andaffiliates made it a very eye-opening experience.
Going forward, I will leverage what I learned inthis training while continuing to build my experience and knowledge in my ordinary work, aiming
to use these assets in future business creation.

Overseas Dispatch Training System
Kanematsu operates an overseas training system for employees in their ﬁrst ﬁve years with the Company. Participants aredispatched to overseas subsidiaries, representative offices, and business corporations to experience local life- and work styles foraround six months. This system exposes employees to diverse values and provides the experiences, insights, and knowledge thatmembers of a globally operating trading company need.

Overseas Dispatch Training System Trainee’s Perspective

Yosuke Watanabe
Plant & Ships Department,
Industrial Machinery &Plant Section

42

KANEMATSU Integrated Report 2020

During my dispatch training in Myanmar, I worked
in practical operations and project management,
mainly for Official Development Assistance projects under contract with the Japanese government. Speciﬁcally, I was working on yen loans forthe installation of agricultural facilities by government institutions. Many aspects of Myanmar’s
import systems and taxation law are vague, so
there were times when advancing a single step ina procedure took a great deal of time and effort.
As a matter of cultural difference, the approach to
timetables was often different from what I wasused to, and I learned the importance of keeping

the participants involved and invested while keeping the overall schedule in mind.
Through my four months of living and working in Myanmar, I discovered things that I personally need to work on that I had never noticed inJapan and gained a greater sense of motivation towork overseas in the future. The Plant & Ships
Department does not currently have any employees stationed at the Yangon Representative Office,but I hope to continue to maintain close communication with the local staff, not just advancing
existing projects, but also discovering and building
new projects.

Kanematsu’s Progress and Strengths

Diversity
Promoting Greater Professional Success for Women
Action Plan for Helping Women Excel Outline Plan duration: (April 1, 2019 to March 31, 2024)
Issues theCompany Faces

Although Kanematsu hires a certain number of women every year, the percentages of women among all new
graduate hires, employees in core operations, and employees in management positions are low.

Targets

1. Increase the number of women working in core operations in assistant section manager-level or higher
positions to 35 (from 27 in ﬁscal 2018)
2. Increase the percentage of women among new graduate hires to 42% (from 34% in ﬁscal 2018).

Initiatives

Increasing the percentage of women among new graduate hires and creating systems to promote female employee
retention

1. Extended eligibility for shortened working hours for childcare to the end of the child’s third year of elementary
school2. Individual staggered work hours until the child ﬁnishes
elementary school
3. Flexi-time system
4. System for hourly use of paid annual vacation

FY2016FY2017FY2018FY2019Female career-track
employees* at ﬁscal year-end

54

56

54

52

54

Responsibility band at ﬁscal
year-end

22

22

22

27

28

38.1%

31.0%

34.4%

34.0%

39.0%

Review of Operations

FY2015

Women among new
graduate hires

Special Feature

Action Plan to Help Women Excel
In addition to a system to allow non-career-track employees
to take division manager or assistant manager positions and asystem for rehiring employees who left the Company toaccompany a spouse who was transferred to another location, we are implementing the following initiatives to help
improve work-life balance.

* Work location is determined according to the Company’s needs and not restricted to any speciﬁc area. These employees eventually move into core operations.

Perspective of a Female Employee Working Overseas

Kanematsu Vietnam Co., Ltd.
Sales & Procurement Leader

during my time at Kanematsu Vietnam.
Although the course was not long, I not only
learned working knowledge and skills, but also
built relationships with other KanematsuGroup staff.
I believe in collaboration in business as ateam, because with Kanematsu’s system ofcompanies, offices, and subsidiaries around theworld, collaboration is the key to identifying
demand and requirements and securing supply
sources globally. By doing this, every office,company, and department will be able to create
new businesses and grow strongly together.

Financial Section and Company Information

KANEMATSU Integrated Report 2020

Sustainability

Vo Thi Thanh Hai

I am in charge of the coffee and fruit productsof the Food Department at Kanematsu
Vietnam, a supplier of many kinds of agricultural products. Our mission is to introduce
Vietnamese ingredients and products to theworld as well as bring high-tech products fromdeveloped countries, especially Japan, toVietnam. We would love to be one of thebridges in Southeast Asia that connect to theKanematsu Group worldwide.
Being chosen for Kanematsu Tokyo Head
Office Training and the Dialogue Program was
one of the greatest opportunities I have had

43Work-Life BalanceKanematsu is proactively committed to ensuring a good work-life balance and discourages long working hours in order to foster ahealthy workforce. We have been improving the working environment so that employees can treasure the time they spend with
their families as well as the time spent on hobbies and participating in social activities.

Child Care Support
In addition to maternity and childcare leave systems, we have anumber of systems in place to allow parents to continue
working while pregnant or raising children. These include
reduced duties and time off for doctor’s visits during pregnancy,
time off to care for sick children, and shortened work hours andﬂexi-time after returning from leave. From ﬁscal 2019, theperiod after returning from leave during which employees are
eligible for reduced work hours has been extended from up to
the child’s third birthday to the end of the child’s third year ofelementary school. In addition, employees may work reduced
hours with no reduction in pay until the child’s third birthday.

Many mothers take childcare leave, and when they return
to work, as a rule, they are placed in the divisions in which
they worked before. These measures are taken to create apleasant working environment

Number of Employees Taking Childcare Leave
FY2015FY2016FY2017FY2018FY2019

17*

14

18

20**

20

* Includes two male employees** Includes two male employees

Family Care Support
In addition to the conventional family care leave system, Kanematsu has recently enabled special paid holidays for family care.
We have also appointed a child-raising and care consultation officer for one-to-one consultation on these matters.

Systems for Using Paid Vacation
Bronze Week
Since ﬁscal 2016, Kanematsu has maintained a “Bronze Week”
system for systematically encouraging the use of annual paidvacation days. This is intended to make it easier for employees
to take off the time they are entitled to and create workplaces
that are more comfortable and rewarding.
From ﬁscal 2020, we have upgraded the system, renaming
it the Bronze Week Plus System and doing away with thesystem of having sections designate candidate days off fromwhich employees chose. We also increased the minimum
number of days employees are required to use through thesystem to ﬁve to ensure compliance with the Revised Labor
Standards Act’s requirement of taking at least ﬁve days of paidvacation per year. Since the system’s introduction, the rate ofannual vacation days used has risen steadily, reaching 73.8%
in ﬁscal 2019. We will continue working to create even more
employee-friendly workplaces and further increase the paid
annual vacation usage rate.

Bronze Week System Outline•Makes it easier to take off a bridge day between two
ordinary days off, the day before or after a three-day
weekend, or take two days before or after a normal
weekend, effectively extending the number ofconsecutive days off for the individual to four or more.
• This system is aimed at helping employees have special
experiences that are difficult to realize with one or twodays off so that they will feel refreshed and have newideas that they can then put to use in their work.

My Weekend System
In ﬁscal 2019, we established the “My Weekend” system toencourage employees to take their paid annual vacation to, forexample, pursue their hobbies or enjoy special family occasions. This system is aimed at helping employees feel comfortable taking days off for important events and giving greater• At the start of each ﬁscal year, employees schedule atleast ﬁve days of paid vacation for that year.
• Applies to all employees, in principle, excluding those on
dispatch within Japan, stationed overseas, or on leave.
• The system, which encourages the use of paid annual
vacation, especially multiple consecutive days off, isnamed “Bronze Week Plus” in reference to the yearlyclusters of public holidays in Japan popularly known as“Golden Week” and “Silver Week.”

priority to their personal lives. In particular, managerial
employees, who often ﬁnd it particularly difficult to take timeoff, are asked to use at least ﬁve days per year. This system thus
provides support to help employees prioritize both their workand private lives.

My Weekend System Outline• By encouraging employees to take off not only ordinary
weekends, but days of personal signiﬁcance, such as
their wedding anniversaries or the birthdays of family
members, as “my weekends,” this system is aimed at
helping employees take time for their personal interestsand important family occasions.

44

KANEMATSU Integrated Report 2020

• Managerial employees are asked to take at least ﬁve
days off per year through the My Weekend system alone(no usage requirement has been set for non-managerial
employees).

Hourly Use of Paid Annual Vacation

Annual Vacation Usage Rate
Kanematsu’s Progress and Strengths

In ﬁscal 2019, we introduced an hour-based system for using
paid annual vacation. This provides even more ﬂexibility thanthe previous system, which required employees to take anentire half day in the morning or afternoon, to better accommodate employee’s private lives.

(%)
80

73.7

73.8

FY2018FY2019

70

65.6
60

66.7

59.7

50

FY2015FY2016FY2017

Outline of Hourly Use of Paid Annual Vacation• Up to 40 hours per year of paid annual vacation (theequivalent of ﬁve 8-hour days) can be used in hourly
units; in principle, managerial employees andnon-full-time employees are not eligible to use this system.
• By expanding the range of options for using paid annual
vacation, Kanematsu is creating work environments thatare more accommodating of individual circumstancesand promoting more ﬂexible work styles.

Special Feature• Paid annual vacation, which previously could only be
used in one-day or half-day units, can now be used inhourly units.

Individual Flexi-Time System
In ﬁscal 2019, we implemented a ﬂexi-time system thatapplies at the individual rather than sectional level, as waspreviously the case. Now, in principle, individuals can freely

adjust the times they come to and leave work in accordancewith the varying demands of their own schedules.

• Employees must be at work during core time (10:00–
15:30), but outside of this time, they are, in principle,
free to decide what time to come to and leave work.
• To use this system, in principle, employees must submit
notice of their planned arrival and departure times by

Review of Operations

Overview of the Individual Flexi-Time System
the end of the previous week. However, after such plans
are submitted, they may be revised as needed toaccommodate urgent errands, illness, or other individual
circumstances.

General Employer Action Plan
ments that enable employees to autonomously engage in their work and continue tofully participate professionally regardless of
the ups and down of life events, we areadvancing initiatives to fully harness
employee potential.

Sustainability

In December 2010, Kanematsu was awarded the “Kurumin”
certiﬁcation of support for the nurturing of the next generationby the Ministry of Health, Labour and Welfare’s Tokyo Labour
Bureau. In January 2017, we received the “Kurumin” certiﬁcation a second time.
In April 2020, we formulated our ﬁfth General Employer
Action Plan. With the principal aim of creating work environ-

Bring Your Child to Work Day

Financial Section and Company Information

Kanematsu has held an annual Bring Your Child to Work Day
since ﬁscal 2017. By helping to deepen colleagues’ understanding of and build support for their workmates balancing
work and childcare while enhancing communication andunderstanding among families regarding work and theCompany, this event is intended to increase employee motivation and foster a sense of belonging within the Company.
We also hope that it will provide an opportunity for all
employees to think about their own work-life balance. On the
day of the event, the participating children saw displays of the
products handled by each division, took a tour of theCompany, practiced exchanging business cards with thecompany president and executives, and made paper fans withmessages of encouragement for their working parents.
KANEMATSU Integrated Report 202045

Corporate Governance

Our Basic Stance on Corporate Governance
Kanematsu’s founder himself put down the words “Let us sow and nurture the seeds of global prosperity.” The
Kanematsu Group recognizes the pioneering spirit fostered by our predecessors along with the wise use of our creative imagination and ingenuity, fulﬁlling our corporate social responsibilities through sound, ﬂourishing businesses, and adherence to Company rules as key parts of its Corporate Principle. We operate in accordance with thisprinciple and our Code of Conduct, striving to carry out corporate activities to serve our various stakeholders andhelp realize a sustainable society by providing socially valuable goods and services.
To this end, Kanematsu endeavors to strengthen corporate governance to increase the transparency of management and create a more equitable, efficient, and sound company. We work to improve corporate governancewith the aim of increasing our enterprise value and winning the support of all our stakeholders, including shareholders, customers, business partners, and employees.

System of Corporate Governance
Board of Directors
sion making and to further reinforce the supervision of business execution. In principle, the Board of Directors meets oncea month, with additional meetings held as necessary.
Directors are appointed to the Board for one-year terms toallow the Board to respond appropriately to changes in thebusiness environment.

The Board of Directors is made up of six directors, with thechairman of the Board of Directors as its presiding officer. The
Board decides on matters required of it as set out in law andKanematsu’s Articles of Incorporation as well as business policies and other important matters and oversees business execution by directors. Two of the six directors are outside
directors to ensure that the Board conducts appropriate deci-

Advisory Bodies
and dismissal of directors and the necessary policy, rules, andprocedures for reaching related resolutions• Compensation Committee: Comprises the president as committee chair and the two outside directors. The committee
provides recommendations to the Board of Directors basedon deliberations regarding such matters as policy regarding
the setting of compensation levels and types for individual
directors and executive officers as well as the necessary policy,
rules, and procedures for reaching related resolutions.

To reinforce the objectivity, independence, and accountabilityof the Board of Directors, Kanematsu has voluntarily established a Nominating Committee and Compensation
Committee as advisory bodies under the Board of Directors.
• Nominating Committee: Comprises the chairman as committee chair and the two outside directors. The committee
provides recommendations to the Board of Directors basedon deliberations regarding such matters as proposals for the
General Meeting of Shareholders related to the appointment

Corporate Governance Structure
General Meeting of Shareholders
Appointment/Dismissal
Consultation

Board of Directors

Advice/Suggestions

Six Directors(including two
outside directors)

Appointment/
Dismissal

Appointment/Dismissal
Audit

Audit & Supervisory Board
Four Audit & Supervisory
Board Members(including two outside members)

Collaboration

Nominating Committee
Compensation Committee

Appointment/Dismissal/
Supervision

President

Audit

Collaboration

Management Committee
Project Deliberation Committee
Internal Control and Compliance Committee

Internal Auditing
Department
Internal
controls

Sustainability Management Committee

Accounting audit

Accounting Auditor

Collaboration

Marketing Area/Support Area, Domestic and Overseas Offices, Subsidiaries(As of June 24, 2020)

46

KANEMATSU Integrated Report 2020

Kanematsu has adopted an executive officer system to improve
the ﬂexibility of business execution, speed up management decision making, and further clarify roles and responsibilities throughthe separation of supervisory and executive functions. Withauthority delegated by the Board of Directors, the executive officers carry out business operations in their respective areas of
responsibility based on the decisions of the Board of Directors.
To facilitate rapid decision making and ﬂexible manage-

Kanematsu’s Progress and Strengths

Management Committee
ment, Kanematsu has set up a Management Committee composed of the chairman of the Board of Directors and executive
officers, including the president. In principle, the Committee
meets at least twice a month. The Committee establishes basic
policies for Companywide general business execution in accordance with basic policies determined by the Board of Directors
and provides instruction and guidance on the execution ofbusiness.

Project Deliberation Committee
The Project Deliberation Committee considers and discusses
important projects before they are referred to theManagement Committee or other bodies. Comprising thechief officers of credit control, ﬁnance and accounting, andcorporate planning, the Committee meets at least twice amonth, in principle.

Kanematsu uses the audit & supervisory board system. The
Audit & Supervisory Board and its members act independently to audit directors’ performance of their duties. Speciﬁcally,
the four Audit & Supervisory Board members, including two
outside members, receive reports from directors and employees on the performance of their duties as required, andSpecial Feature

Audit & Supervisory Board
attend meetings of the Board of Directors and Management
Committee.
Furthermore, the full-time Audit & Supervisory Board
Members attend the Project Deliberation Committee, Internal
Control and Compliance Committee, and other important
meetings or committees.

Reasons for Selection of Outside Directors and Outside Audit & Supervisory Board Members
NameFiscal 2020 Attendance

Kazuhiro Tanaka

So that he can utilize his extensive expertise and deep insight regarding
corporate management as a university professor specializing in businessadministration in Kanematsu’s management and provide management
oversight.

Tsukasa Miyachi

So that he can audit Kanematsu based on his expert knowledge and experience
as a certiﬁed public accountant.

18 of 19 Board of Directors meetings
14 of 15 Audit & Supervisory Board meetings

So that he can audit Kanematsu based on his expert knowledge and experience

14 of 15 Board of Directors meetings1
10 of 10 Audit & Supervisory Board meetings1

Yusaku Kurahashi as a lawyer.

Review of Operations

Yuko Tahara
OutsideDirectors

Outside Audit &Supervisory
Board Members

Reasons for Selection

So that she can provide advice to management and appropriate oversight ofbusiness execution based on her wealth of experience in corporate management
14 of 15 Board of Directors meetings1
and deep insight gained through experience in human resources andorganizational consulting.
—2

1. As Ms. Tahara and Mr. Kurahashi were appointed at the June 21, 2019 General Meeting of Shareholders, the numbers of meetings of the Board of Directors andAudit & Supervisory Board that they were eligible to attend differ from those for the other outside director and Audit & Supervisory Board member.
2. As Mr. Tanaka was appointed at the June 24, 2020 General Meeting of Shareholders, he did not attend meetings in ﬁscal 2020.

Director and Audit & Supervisory Board Member Compensation
Sustainability

Breakdown of Director and Audit & Supervisory Board Member Compensation
Basic Compensation

Stock Incentives

BonusesNumber of Individuals
Receiving Compensation

Directors (excluding outside directors)

238

176

25

36

5

Audit & Supervisory Board Members(excluding outside members)

28

28

—

—

2

Outside Directors and Audit &Supervisory Board Members

69

69

—

—

8

Total Compensation by Type (millions of yen)

Financial Section and Company Information

Total Compensation(millions of yen)

1. The above table includes one director, one Audit & Supervisory Board member, and three individuals who served as outside directors or Audit &Supervisory Board members who retired as of the conclusion of the June 21, 2019 General Meeting of Shareholders.
2. The above ﬁgure for stock incentives is the amount (¥25 million) recorded as costs for performance-linked stock incentives in ﬁscal 2020.

Performance-Linked Compensation Plan
To clarify directors’ management responsibilities and enhancetheir incentives to improve corporate performance, Kanematsu
has adopted a performance-linked compensation plan. Furthermore, the May 9, 2018 Board of Directors meeting and June 22,2018 General Meeting of Shareholders passed resolutions to
introduce a performance-linked stock incentive plan employing
a trust for Kanematsu’s directors (excluding outside directors).

The Company also implemented a similar performance-linked
stock incentive plan for its executive officers. This plan is aimed atmore closely linking director compensation with corporate performance and stock price and better motivating directors to improve
corporate performance and enterprise value over the medium
term by having directors share with other shareholders thepotential beneﬁts and risks of share price changes.
KANEMATSU Integrated Report 202047

Internal Auditing
The Internal Auditing Department conducts internal audits of Kanematsu Corporation and its subsidiaries to ensure that properaccounting records are kept and to evaluate and oversee improvement and control activities to help make business execution
more effective and efficient.

Internal Control System and Risk Management System
Maintaining the Internal Control System
To comprehensively assess risks facing the Kanematsu Group,
to comply with laws and regulations relating to operational
effectiveness and efficiency and business activities, to protect its
assets, and to ensure the reliability of its ﬁnancial reporting, theKanematsu Group has built an internal control system. To maintain and advance the use of this system, we have alsoestablished the Internal Control and Compliance Committee.
We develop, operate, assess, and improve internal controls
related to ﬁnancial reporting to ensure the correctness of theGroup’s reporting in line with the internal control reporting systems deﬁned in the Financial Instruments and Exchange Law.

Compliance
In light of the importance of corporate legal compliance, wehave set up internal control systems for the Company and theGroup as well as an Internal Control and Compliance Committee
to implement said systems, seeking to strengthen our internal
compliance system. In addition to preparing a ComplianceHandbook that covers all Group companies, we work toenhance awareness of and training on sensible behavioral ethics.
The Group also maintains a hotline system that allows employees to directly report to or consult with the Internal Control andCompliance Committee or an outside lawyer.

Diagram of the Kanematsu Group Compliance System
Reports, Consultation

Instructions, Feedback
Board of Directors

Management Committee

AuditorInternal Control and Compliance Committee
Internal Control and Compliance Committee Members
Promotion Office: Legal & Compliance Department(For units that do not have a controlling division at Kanematsu Corporation)

Marketing Area/Support Area

Group Companies

Departmental Compliance Officers

Compliance Officer(Chief officers of business divisions and administrative departments)(President or Head of Location)

Officers & Employees of Kanematsu Corporation

Officers & Employees of Group companies*Sub-subsidiaries report through their immediate parent companies(As of June 24, 2020)

Elimination of Antisocial Forces
One of Kanematsu’s compliance commitments is to take aﬁrm stand against and eschew all relationships with antisocial
forces. To promote the elimination of antisocial forces,
Kanematsu belongs to the Tokyo Metropolitan Police
Department’s Special Violence Prevention Countermeasures
Association, cooperating closely on a regular basis by sharing

48

KANEMATSU Integrated Report 2020

information. The Human Resources & General Affairs
Department is designated to coordinate Companywide
response and information gathering to address any unreasonable demands from antisocial forces, and the Company maintains a framework for responding in coordination withoutside organizations, including the police and attorneys.

With regard to information management, we have established standards for the custody, retention, and disposal of
accounting records, balance sheets, agreements and contracts concerning the basic rights and obligations ofKanematsu, certiﬁcates related to properties, and other similar documents.
As information is a valuable corporate asset, we have also
formulated, and work to reinforce, rules on information security management with the aim of protecting and managing
personal data and other information in line with compliance

Kanematsu’s Progress and Strengths

Information Management System
requirements.
With regard to security in the use of information systems,
the Group has established information security management
rules aimed at preventing leaks and losses of important information and established standardized rules covering the use ofPCs, networks, and e-mail to protect corporate and personal
information. Furthermore, the Group continually reviews its
systems framework aimed at enhancing security and operates
and maintains said framework to ensure that security is maintained at necessary and appropriate levels.

Risk Management
decisions about business risks. The Project Deliberation
Committee considers important investments and loans,including their execution, continuance, and withdrawal,
based on the comprehensive examination of relevant risks.
To address the risk of crises related to the occurrence ofmajor events, such as natural disasters, we have put in place asystem, including speciﬁc rules and manuals, to ensure theappropriate management of the Group at such extraordinary
times.

Special FeatureWith respect to business risks that may affect our operations,based on designated levels of authority, departments responsible for functions related to each type of risk establish internal regulations along with detailed enforcement regulations
and prepare operational guidelines while using training andother means to ensure thorough awareness of risk management. The Company also sets up cross-departmental committees as necessary to control risks.
We have established an approval request system basedon designated levels of authority for making judgements andQuantifying and Monitoring Risk
Risk Assets(Billions of yen)(Times)

0.7

140

0.6

116
92

100

0.48

100

0.5

0.44
0.40

0.4

0.33
60
40

131

125

120

80

Review of Operations

44

44

46

41

0.30

0.3

40

0.2
0.1

20

Sustainability

The Kanematsu Group has laid out basic guidelines for controlling and managing risk in its Risk Management Guidelines.
Based on said guidelines, we classify and deﬁne risks, thenrespond to each appropriately, aiming to minimize losses tothe Kanematsu Group and achieve sound business growthand development.
The Group monitors quantiﬁable risks (market risk, credit
risk, investment risk, country risk, etc.) by regularly measuring
such risks and reporting the results to management.
Speciﬁcally, to measure maximum possible losses (risk assets)
we apply a proprietary weighting scheme corresponding to
the potential loss risk to all assets included in theConsolidated Statement of Financial Position as well as
off-balance sheet items.
Recently, to achieve more sophisticated capital management, we set an upper limit on the risk asset ratio, aiming toensure a sound balance of risk assets and risk buffer (shareholder’s equity) and maintain a sound ﬁnancial position while
increasing enterprise value through business creation and revenue expansion.

00

FY2016
Risk assets (left)

FY2017FY2018

Shareholders’ equity (left)

FY2019FY2020Risk-asset ratio (right)

Groupwide Activities
Financial Section and Company Information

Group company presidents meet twice a year and at other times as necessary to share information on Groupwide business activities. These meetings are aimed at ensuring mutual understanding and awareness with regard to corporate governance issues.

Disclosure
Kanematsu regards promptly, fairly and accurately disclosing important corporate information about management to shareholders and all other stakeholders, institutional investors, analysts, and the media and ensuring transparency as a responsibility of management. In addition to registering information with ﬁnancial instruments exchanges, we disclose information through our
website and engage actively in IR activities, including regular brieﬁngs for institutional investors and analysts and meetings.

KANEMATSU Integrated Report 2020

49

Messages from the Outside Directors

Leveraging Intangible Assets to Further Increase Value

Yuko Tahara
Outside Director

A year has passed since I took office as an outside director. In that time, Kanematsu
has launched numerous new initiatives to improve its enterprise value and businessresults. To develop global professionals and cultivate management-level humanresources, one of the priority initiatives of the future 135 medium-term vision,
Kanematsu University kicked off classes in July 2019. In addition, the Company held
diversity lectures, with many members of top management taking part. And, personnel from across the Company launched the J-Project, aimed at fostering professional
fulﬁllment, employee pride, and sustainable growth in the run up to the move of theCompany’s head office to the JP Tower in Tokyo in 2022. The current head office has
already introduced activity based working (ABW—a work style that allows employees
to freely choose when and where they work) on a trial basis as part of efforts tochange mindsets throughout the Company.
At Board of Directors and other meetings and in discussions with employees, I havekeenly felt that the know-how and expertise Kanematsu has accumulated throughthe various businesses it undertakes around the world are one-of-a-kind intangible
and intellectual assets that can be leveraged to create new businesses, enhance
employee education and realize other beneﬁts. Worldwide, the focus is increasingly
on not only tangible assets, but the intangible assets that constitute the wellspring of
new business creation. In my opinion, Kanematsu’s intellectual and human capital willbe the keys enabling it to overcome the threat of the novel coronavirus. I will strive toimplement corporate governance, including monitoring, with a proper balance of
aggressive execution and careful oversight, keeping in mind the latest developments
in Japan’s Corporate Governance Code, such as those related to digital transformation(DX), while working to further increase Kanematsu’s enterprise value.

Going Back to Kanematsu’s Roots to Contribute through Business

Kazuhiro Tanaka
Outside Director

50

KANEMATSU Integrated Report 2020

Companies must contribute to the interests of their diverse stakeholders
through their main business from a long-term perspective. Speciﬁcally, theymust endeavor to provide employment and enhance employee beneﬁts whilesteadily providing products and services that society needs, securing proﬁt, andmaintaining a robust ﬁnancial base. The importance of these fundamentals has
been brought into sharp relief by the impact of the novel coronavirus that theworld now faces. I am sure that, over the more than 130 years sinceKanematsu’s founder, Fusajiro Kanematsu, declared“ Let us sow and nurturethe seeds of global prosperity,” Kanematsu has learned and practiced suchfundamentals in many forms and fashions. This is evident in Kanematsu’s
Guiding Principles, as well. At times like this, when the outlook is unclear, it is
crucial to return to the basics while looking forward to progress and theachievement of the future 135 medium-term vision.
The central goal of corporate governance is to realize and encourage sound,vigorous corporate management, which ultimately depends on the ability of
top management itself to rouse and elevate its sense of responsibility andmission. I believe that aiding and guiding management in this is a key role of an
outside director. To that end, I intend to ﬁrst prioritize building relationships oftrust while maintaining productive tension with top management and asking
penetrating questions from an outside perspective, with diverse stakeholders in
mind. At the same time, I hope to consider and discuss how Kanematsu can
implement corporate governance that is effective and best suited to its businesses, corporate culture, and business environment.

Corporate Officers(As of June 24, 2020)

Kanematsu’s Progress and Strengths

Directors and Audit & Supervisory Board Members

President

1974 Joined Kanematsu- Gosho Ltd.
2010 President & CEO
2017 Chairman (incumbent)

1981 Joined Kanematsu- Gosho Ltd.
2015 Director, Senior Managing Executive Officer
2017 President (incumbent)

Yoshiya Miyabe

Tetsuro Tsutano

Yuko Tahara

Kazuhiro Tanaka

Director

Director

Director

Director

1983 Joined Kanematsu-Gosho Ltd.
2018 Director, Senior Managing Executive
Officer (incumbent)

1992 Joined Kanematsu Corporation2017 Director, Executive Officer
2018 Director, Senior Executive Officer(incumbent)

1998 President and CEO, Basic Inc. (incumbent)
2012 Representative Director, Framework
Promotion Association (incumbent)
2018 Outside Director & Member of the Audit
and Supervisory Committee, Sanyo Homes
Corporation (incumbent)
2019 Director, Kanematsu Corporation (incumbent)
2020 Visiting Professor, Advanced Academic
Institution, The Graduate School ofInformation & Communication (incumbent)

2010 Professor, Graduate School of Commerce andManagement, Hitotsubashi University
2018 Professor, Graduate School of Business
Administration, Hitotsubashi University(incumbent)
2019 Dean, Graduate School of Business Administration
and Faculty of Commerce and Management,
Hitotsubashi University (incumbent)
2020 Director, Kanematsu Corporation (incumbent)

Testuro Murao

Motohisa Hirai

Tsukasa Miyachi

Yusaku Kurahashi

Audit & Supervisory Board Member (full-time)

Audit & Supervisory Board Member (full-time)

Audit & Supervisory Board Member

Audit & Supervisory Board Member

1976 Joined Kanematsu- Gosho Ltd.
2015 President, Shintoa Corporation
2019 Audit & Supervisory Board Member,
Kanematsu Corporation (incumbent)

1976 Joined Kanematsu- Gosho Ltd.
2014 Senior Managing Director, KanematsuNNK Corporation (now Kanematsu
Sustech Corporation)2020 Audit & Supervisory Board Member,
Kanematsu Corporation (incumbent)

1970 Joined Chuo Audit Corporation2007 Opens Miyachi public accounting ﬁrm(incumbent)
2015 Audit & Supervisory Board Member,
Kanematsu Corporation (incumbent)

2007 Registered as attorney at law and joined
Nakamura, Tsunoda & Matsumoto2015 Partner of Nakamura, Tsunoda & Matsumoto(incumbent)
2019 Audit & Supervisory Board Member, Kanematsu
Corporation (incumbent)
2020 Outside Director (Audit & Supervisory Committee
Member), UNITED ARROWS LTD. (incumbent)

Review of Operations

Kaoru Tanigawa

ChairmanSpecial Feature

Masayuki Shimojima

Sustainability

1 Ms. Yuko Tahara and Mr. Kazuhiro Tanaka are outside directors.
2 Mr. Tsukasa Miyachi and Mr. Yusaku Kurahashi are outside Audit & Supervisory Board members.
3 Ms. Yuko Tahara, Mr. Kazuhiro Tanaka, Mr. Tsukasa Miyachi, and Mr. Yusaku Kurahashi are independent officers, as deﬁned by the Tokyo Stock Exchange.

Executive Officers
President
Senior Managing
Executive Officers

Kaoru Tanigawa
Yoshiya Miyabe

KANEMATSU Integrated Report 2020

Financial Section and Company Information

Chief Officer, Motor Vehicles & Aerospace Division,
General Manager, Osaka Branch; General Manager, Nagoya Branch; Chief Officer, Technologies and Business Collaboration
Toshihide Motoshita Chief Officer, Credit Control, Legal and ComplianceManaging Executive Officer Eiji Kan
Chief Officer, Steel, Materials & Plant Division
Senior Executive Officers Masayuki Hamasaki Chief Officer, Grain, Oilseeds & Feedstuff Division
Chief Officer, Electronics & Devices Division
Masahiro Harada
Chief Officer, Human Resources & General Affairs, Traffic & Insurance
Kazuo Tanaka
Chief Officer, Finance, Accounting, Business Accounting
Tetsuro Tsutano
Executive Officers
Deputy Chief Officer, Motor Vehicles & Aerospace Division
Koichi Koizumi
President, Kanematsu USA Inc.
Ryoichi Kidokoro
Deputy Chief Officer, Steel, Materials & Plant Division
Osamu Iwata
Hiroshi Yamashina President, Kanematsu GmbH; President, Kanematsu Europe PLC
Yoichiro Muramatsu Chief Officer, Corporate Planning, IT Planning
Jun Nakajima
Deputy Chief Officer, Grain, Oilseeds & Feedstuff; General Manager, Grain & Feedstuff Dept
Chief Officer, Meat Products Division; General Manager, Meat Products Dept. No. 1; General Manager, Meat Products Dept. No. 2
Toru Hashimoto
Chief Officer, Foods Division
Koichi Nishimura

51

Financial and ESG Highlights
JGAAP(As of March 31)

2010

2011

2012

2013

2014

¥861,277—
74,104
12,186¥936,891—
76,90518,029¥1,006,365—
80,90021,426¥1,019,232—
80,021
18,262¥1,114,539—
86,402
19,776

Income (loss) before income taxes andminority interests/Profit before tax

8,407

13,03013,52916,781

19,075

Net income (loss)/Profit for the year
attributable to owners of the Parent3

3,528

9,175

6,110

9,564

11,799Cash flows from operating activities

26,441(19,149)
7,292

7,827
17,32225,14915,822
1,291
17,113

1,355
1,466
2,821

22,384(1,111)
21,273

Net assets/Total equity

398,62945,804

388,676
49,576

399,753
55,992

399,186
75,912

428,459
96,204

Shareholders’ equity/Total equity
attributable to owners of the Parent

28,916

33,10139,00854,51971,657

Net interest-bearing debt

109,350

104,61290,01286,43968,038Net income/Basic earnings per share
attributable to owners of the Parent3¥ 8.44¥21.93¥14.60¥ 22.80¥ 28.09

Net assets/Equity attributable to ownersof the parent

69.15

79.07

93.16

129.82170.54

—

—

—

—

3.00

13.10
7.3
3.8

29.59
8.5
3.2

16.95
9.8
2.3

20.45
13.7
1.6

18.70
16.7
0.9

For the year:
Net sales3
Revenue
Gross profit
Operating income/Operating profit

Cash flows from investing activities
Free cash flow
At year-end:
Total assets

Per share (yen):

Cash dividends
Financial indicators:
Return on equity (ROE) (%)
Equity ratio (%)
Net D/E ratio (times)

ESG* (Non-Financial) Data: *ESG: Short for environmental, social, and corporate governance.

4,871
850 (264)

4,770
832 (250)

4,770
795 (238)

5,522
782 (242)

5,747
800 (246)

31

30

30

31

31

External disposal of general waste (t)7

731.927,504,63787.80

644.76
6,801,30571.50

443.83
7,062,310
46.57

471.42
6,874,521
48.95

456.44
6,648,353
37.60

Total electricity consumption (kWh)7

Employees—consolidated
Employees—non-consolidated (women)
Percentage of women among
employees—non-consolidated (%)
6, 7

CO2 emissions (t-CO2)

Total paper use (sheets)7

1,772,201

1,561,164

871,965

828,514805,015

Directors (outside directors)810 (0)

10 (0)

10 (0)

10 (0)6 (1)Audit & Supervisory Board members8(outside Audit & Supervisory Board members)

4 (3)

4 (3)

4 (3)

4 (3)

4 (2)

14.3
9.8
9.3

15.1
6.5
7.2

15.5
10.3
10.1

16.0
0
8.3

15.7
2.6
8.0

Average length of service (years)
Three-year job separation rate (%)9
Average overtime worked (hours/month)

Notes For the above items with two titles, the first applies to figures under JGAAP and the second to figures under IFRS.
1. Figures are rounded down to the nearest million yen. Percentages have been rounded off.
2. The U.S. dollar amounts represent the arithmetical results of translating yen to dollars at the rate of ¥108.83 to U.S.$1.00, the exchange rate prevailing on March 31,
2020.
3. Net sales shown here for fiscal 2015 and after are based on accounting principles generally accepted in Japan, calculated as the sum of transactions in which theGroup acted as a party to the contract and transactions in which the Group acted as agent.
4. Kanematsu executed a share consolidation on October 1, 2017, at a ratio of five common shares to one. The calculation of the above figures assumes that said shareconsolidation was implemented on April 1, 2014.
5. Kanematsu executed a share consolidation on October 1, 2017, at a ratio of five common shares to one. The calculation of the above figure assumes that said shareconsolidation was implemented on April 1, 2017.

52

KANEMATSU Integrated Report 2020

IFRS
Millions of yen1

Thousands of
U.S. dollars2

2020

2020

—
¥704,211
87,88023,547—¥668,374
86,23818,772—¥675,579
100,139
22,633—¥714,790
106,371
26,160—¥723,849
110,01430,349—¥721,802
110,904
28,352—$6,632,382
1,019,064
260,525

22,373

18,122

17,87526,04329,177

26,944

247,580

10,546

8,959

8,049

16,317

16,605

14,399132,312

6,758(6,649)109

33,024(4,214)
28,81011,852(14,691)(2,839)

434
1,103
1,537

24,698(6,575)
18,12324,259(10,215)
14,044

222,916(93,871)129,045466,314
119,015

443,592
120,706

479,717
129,863

519,889
147,050

549,459
158,698

551,671
166,174

5,069,110
1,526,915

90,244

91,599100,357

116,012125,246

130,829

1,202,144

72,155

48,81355,42959,04549,96951,807476,037¥ 125.494¥ 106.464¥

95.644¥ 193.794¥ 198.22¥ 172.43$ 1.581,072.204

1,088.454

1,192.214

1,377.664

1,499.86

1,566.60

14.39

4.00

5.00

6.00

48.005

60.00

60.00

0.55

12.99
19.4
0.8

9.85
20.6
0.5

8.39
20.9
0.6

15.08
22.3
0.5

13.77
22.8
0.4

11.25
23.7
0.4

6,002
813 (253)

5,832
816 (259)

6,727
835 (273)

6,666
842 (282)

6,915
765 (263)

7,182
775 (266)

31

32

33

33

34

34

377.54
6,645,797
33.40
682,7177 (2)392.586,087,765
31.90
735,1747 (2)398.686,256,363
32.70
768,1668 (3)400.745,920,960
29.50
772,1378 (3)358.31
5,510,121
35.00
690,3786 (2)304.05
4,919,786
27.20
659,534
6 (2)

4 (3)

4 (3)

4 (3)

4 (3)

4 (3)

4 (2)

15.5
3.5
8.8

13.8
4.8
8.1

15.4
5.2
11.6

15.5
9.4
12.1

15.0
—
12.5

14.0
—
17.5

Financial Section and Company Information

2019

Sustainability

2018

Review of Operations

2017

Special Feature

2016

Kanematsu’s Progress and Strengths

2015

6. The coefficients used to calculate the above figures are the most recent values published by the Japan Foreign Trade Council (originally publishedby the Electric Power Council for a Low Carbon Society via the Japan Business Federation).
7. The figures above are the totals for Kanematsu’s domestic locations on a non-consolidated basis and are subject to change due to changes in
office space due to the consolidation of branches or sales offices, etc.
8. The number following the General Meeting of Shareholders, after the year-end.
9. The percentage of employees hired in the year in question who had left the Group as of three years later (for example, of the 42 employees hiredin April 2015, 2 had left the Group as of April 2018, so the rate for the year ended March 31, 2016 is calculated as (2/42)×100).

KANEMATSU Integrated Report 202053

Management’s Discussion and Analysis

Business Results
For the fiscal year ended March 31, 2020, revenue declined ¥2,047
million (0.3%) from the previous fiscal year to ¥721,802 million.
Gross profit increased ¥890 million (0.8%) from the previous fiscal
year to ¥110,904 million. Operating profit decreased ¥1,997 million (6.6%) from the previous fiscal year to ¥28,352 million, reflecting an increase in selling, general and administrative expenses.
Profit before tax decreased ¥2,233 million (7.7%) from the previous fiscal year to ¥26,944 million, reflecting a slight increase infinance costs. Profit for the year attributable to owners of the
Parent decreased ¥2,206 million (13.3%) from the previous fiscal
year to ¥14,399 million. As a result, return on equity (ROE) calculated on the basis of total equity attributable to owners of the
Parent (shareholders’ equity) came to 11.2%.

Segment Information
Results for each business segment are described below.

Electronics & Devices
Performance in the ICT solutions business was strong, reflecting IT
investment demand for servers and storage, mainly in the manufacturing and logistics industries as well as in the virtualization andsecurity fields. Performance in the mobile business was solid, due
to improved efficiency in store operations and increased businesswith corporate customers. Results in the semiconductor and LCD
manufacturing equipment business were impacted by measures
to address the spread of the novel coronavirus in China.
As a result, revenue in the Electronics & Devices segment fell
¥11,014 million year on year to ¥254,516 million, but operating
profit increased ¥430 million to ¥18,963 million.

Foods, Meat & Grain
The feedstuff business faced challenging conditions, reflecting
weak performance in businesses related to pets and animal feedstuff for marine product farming, despite continued strong performance in food soybeans and rice. In the food business, processed

agricultural product trading was firm, s­ upported by procurementof ingredients and product development well matched to consumer needs. The meat products business enjoyed firm performance, despite fluctuations in market prices due to instability inthe global supply balance.
As a result, in the Foods, Meat & Grain segment, revenue
increased ¥6,544 million year on year to ¥251,403 million, but
operating profit fell ¥1,570 million to ¥2,381 million.

Steel, Materials & Plant
The energy business recovered from difficult conditions caused bya steep drop in crude oil prices in the previous fiscal year andrecorded solid trading results, mainly in Japan. The chemicals business also saw firm performance, mainly in pharmaceuticals. In contrast, the oilfield tubing business continued to slow, reflecting low
crude oil prices. In the machine tools and industrial machinery
business, overseas trading, especially in China and the UnitedStates, was sluggish. The plant and infrastructure business saw adecrease in revenue due to a halt in shipments to the Middle East.
As a result, revenue in the Steel, Materials & Plant segment
decreased ¥9,578 million year on year to ¥129,858 million.
Operating profit decreased ¥618 million to ¥3,819 million.

Motor Vehicles & Aerospace
In the aerospace business, performance in the mainstay aircraft
parts business was firm. The motor vehicles and parts business was
also firm overall, but recorded a decrease in revenue due to a haltof shipments to the Middle East.
As a result, revenue in the Motor Vehicles & Aerospace segment increased ¥12,542 million year on year to ¥74,605 million.
Operating profit fell ¥166 million to ¥2,383 million.

Other
In other, revenue decreased ¥542 million year on year to ¥11,418
million. Operating profit declined ¥31 million to ¥819 million.

Revenue

Operating Profit

Profit for the Year Attributable to Ownersof the Parent / Basic Earnings per Share(Millions of yen)

(Millions of yen)

(Millions of yen)

800,000

35,00020,000668,374

675,579

714,790

723,849200

193.79721,802172.4330,34930,000600,000(Yen)

198.22

16,31728,352
26,16025,00016,60515,00014,399150

22,63320,000400,000

18,772

10,0008,959

15,00010,000200,000

106.46*95.64*

100

8,049

5,000

50

5,000

0

0

0

FY2016 FY2017 FY2018 FY2019

FY2020FY2016 FY2017 FY2018 FY2019

FY20200FY2016 FY2017 FY2018 FY2019

FY2020

Profit for the Year Attributable to Owners of the Parent
Basic Earnings per Share

54

KANEMATSU Integrated Report 2020*	Kanematsu executed a share consolidation on
October 1, 2017, at a ratio of five shares to one.
The calculation of the above figures assumes thatsaid share consolidation was implemented on
April 1, 2015.

Analysis of Financial Status

Cash Flows

Fundraising
The Kanematsu Group carries out fundraising in line with a basic
policy of stably procuring funds at low cost as needed to realize(Millions of yen)(Times)60,0001.5

59,045

Total Equity Attributable to Owners of
the Parent / Ratio of Equity Attributable to
Owners of the Parent(Millions of yen)

(Yen)

(Millions of yen)

200,000

1,500

140,000(%)
35

55,42949,96948,81351,807
158,698
150,000

147,050

1.0

40,000120,706

1566.60

0.5

1,000

20.6

1,088.45 *

0.5
0.4

0.4

FY2016 FY2017 FY2018 FY2019
Net Interest-Bearing Debt

22.3

22.8

23.7

20

60,00015

40,00010

20,0005

0.5
50,0000

0

20.9

Financial Section and Company Information

20,00025

91,59980,0000.6

30

100,357

100,000

1,377.66
1,192.21*

100,000

130,829

116,0121,500

1,499.86

129,863

125,246

120,000

166,174

Sustainability

Total Equity / Equity Attributable to
Owners of the Parent per ShareNet Interest-Bearing Debt*1 /Net D/E Ratio*2

Review of Operations

In the year under review, net cash provided by operating activities
totaled ¥24,259 million. Net cash used in investing activities
amounted to ¥10,215 million. Net cash used in financing activities
amounted to ¥11,590 million. As a result, after the effect of
exchange rate changes on cash and cash equivalents, cash andcash equivalents at the end of the fiscal year under review stood at¥91,105 million, up ¥2,164 million from the end of the previous
fiscal year.

Special Feature

Total assets at the end of the fiscal year under review increased¥2,212 million from the end of the previous fiscal year to¥551,671 million.
Current assets decreased ¥17,687 million from the end of theprevious fiscal year to ¥426,756 million, reflecting a decrease intrade and other receivables. Non-current assets increased ¥19,899
million year on year to ¥124,915 million, due to an increase inproperty, plant and equipment as a result of the application of
IFRS 16 “Leases” (IFRS 16) and increases in goodwill, intangible
assets, and the balance of equity-method investments due to newinvestments, despite a decrease in other investments as a result of
decreases in stock prices.
Total liabilities decreased ¥5,263 million year on year to¥385,497 million, mainly due to a decrease in trade and other payables, despite an increase in lease liabilities due to the applicationof IFRS 16.
Total equity attributable to owners of the Parent increased¥5,583 million to ¥130,829 million, reflecting the recording ofretained earnings, despite a decrease in other components ofequity due to the strong yen and low stock prices.
As a result, the equity ratio at the end of the fiscal year underreview was 23.7%. The net D/E ratio stood at 0.4 times.

Kanematsu’s Progress and Strengths

Assets, Liabilities and Net Assets

sustainable growth in line with its six-year medium-term vision,
future 135.
The Group raises funds primarily through indirect financing
based on good relations with its main banks, regional banks, lifeand non-life insurers, and other financial institutions. Kanematsu
also raises funds from capital markets by issuing straight corporate bonds as a means of long-term capital procurement. At theend of the fiscal period under review, debt procurement throughdirect financing accounted for 10% of consolidated interest-bearing debt.
To facilitate capital procurement, Kanematsu receives ratingsfrom Japan Credit Rating Agency, Ltd. (JCR) and Rating andInvestment Information, Inc. (R&I). The Group’s long-term ratings
as of the end of the fiscal year under review are BBB+ (positive)
from JCR and BBB (positive) from R&I.
To secure liquidity on hand, the Group maintains an ample balance of cash and cash equivalents and has established commitment lines with major financial institutions.
To efficiently procure capital on a consolidated basis, the Group
has adopted a cash management system under which fundraising
for major domestic subsidiaries and affiliates is concentrated at the
Parent Company and proceeds are then allocated in response tocapital requirements. At the end of the fiscal period under review,
the Company’s interest-bearing debt accounted for 66% of theconsolidated Group’s interest-bearing debt, a reflection of theconcentration of fund procurement at the Parent Company.
As a result of the above fundraising activities, at the end of the
fiscal period under review, gross interest-bearing debt stood at¥143,394 million, an increase of ¥3,890 million from the end of
the previous fiscal year. Net interest-bearing debt stood at ¥51,807
million, up ¥1,838 million from the end of the previous fiscal year.
As a result, the net D/E ratio stood at 0.4, and Kanematsu’s financial position remained sound.
Corporate bonds and long-term borrowings (including the current portion of corporate bonds and long-term borrowings)
accounted for 63% of the balance of interest-bearing debt at theend of the fiscal year under review (or 89% on a non-consolidated
basis). As such, Kanematsu’s fundraising was stable.

FY2020Net D/E Ratio*1	Net interest-bearing debt = Interest-bearing
debt –Cash and cash equivalents*2	Net D/E ratio = Net interest-bearing debt / Total
equity attributable to owners of the Parent

500

0

0

FY2016 FY2017 FY2018 FY2019

FY2020Total Equity
Equity Attributable to Owners of the Parent per Share*	Kanematsu executed a share consolidation on
October 1, 2017, at a ratio of five shares to one. The
calculation of the above figures assumes that said
share consolidation was implemented on April 1, 2015.

00

FY2016 FY2017 FY2018 FY2019

FY2020Total Equity Attributable to Owners of the Parent
Ratio of Equity Attributable to Owners of the Parent

KANEMATSU Integrated Report 2020

55

Business Risks
Below are details of the risks that could affect the business performance and financial position of the Group.
The ­forward-looking statements below are based on information available as of June 24, 2020.
The Group takes all risk that it faces on a daily basis in the course of its business very seriously. Risk control isundertaken through management mechanisms and methods tailored to the nature of each category of risk.

Risk of Macro Economic Change
The Group is engaged in wide-ranging global businesses, including the trading of goods, business investment, and the provision ofservices in and outside Japan. As such, economic deceleration in
Japan, the United States, China, Europe, emerging nations in Asia,
or in the global economy as a whole could cause demand to stagnate, leading to decreases in sales and significant drops in market
prices. Such developments could negatively affect the Group’s
operating results and financial position.

Market Risk
Many of the risks related to fluctuations in currency exchange
rates, interest rates, and the product prices attendant to theGroup’s business transactions are hedged against in the terms oftransactions agreed upon with its business partners. In addition,individual internal units and Group companies set position limits
and loss limits based on risk level and revenue for foreign currency
exchange, interest rates on fund procurement, inventories, andtheir derivative products so that if these limits are exceeded, theGroup can promptly reduce its position. Furthermore, the Grouputilizes derivatives as hedging instruments to reduce the risk offluctuation in the prices of such positions. The status of these positions is regularly reported to the Management Committee. Whena position limit is exceeded, it is promptly analyzed before theposition in question is reduced.

Foreign Currency Risk

Incidental to its export and import trading, the Group is engaged
in foreign currency transactions in a number of currencies andunder a variety of terms. The Group participates in derivatives
transactions such as forward contracts to reduce the risk of currency fluctuations.
The Group also includes local subsidiaries and business corporations overseas. Account balances at these companies are converted into yen at the exchange rates prevailing at the time ofaccount closing for the purposes of preparing consolidated financial statements. Total equity attributable to owners of the Parent
may thus change as a result of translation adjustments related tooverseas operations due to exchange rate fluctuations. This could
affect the Group’s operating results and financial standing.

Interest Rate Risk

The Group raises the majority of funds needed for operating andfinancing activities in the form of borrowings from financial institutions at variable interest rates, with the exception of certain
loans. Such borrowings and fund management are exposed tointerest rate risk, as interest paid by the Group may increase due toa rise in interest rates.
In its asset-liability management, the Group regards the portionof its short-term investments, long-term assets, and other noninterest-sensitive assets that are procured at variable interest rates
as constituting its position subject to interest rate risk. The Group
uses interest rate swaps to avoid interest rate risk related to borrowings, thereby reducing the interest rate risk pertaining to a portion of this position. However, the impact of interest rate
fluctuations cannot be avoided completely and may affect theGroup’s operating performance and financial standing.

Risk Related to Supply and Demand and Prices of Goods

In its mainstay commodity trading business in Japan and overseas,
the Group deals with grains, meat products, petroleum products
and other products that are readily influenced by market conditions.
Although the Group uses commodity futures trading to reduce therisk of price fluctuations of ­certain goods, when its positions vis-à-vis
such commodities increase, such factors as rapid movements incommodities prices or declines in demand may lead to unexpected
losses and impact the Group’s operating performance.

Price Fluctuation Risk of Marketable Securities, etc.

The Group may hold shares in trade partners as means of strengthening its relationship with them. There is a risk of price fluctuation

56

KANEMATSU Integrated Report 2020

inherent in these shares, which could have an effect on the financial position of the Group due to changes in financial assets measured at fair value through other comprehensive income.

Credit Risk
The Group extends credit in a number of forms, including accounts
receivable, advance payments, loans, and guarantees, as part ofdiverse business transactions with its trading partners in Japan andabroad. For this reason, deterioration in the financial standing of
its trading partners or other such circumstances may result in late
repayment or default. In the course of forming and carrying out
commodity supply agreements, subcontract agreements, or otheragreements, the Group could also be forced to honor obligations
and thereby incur a monetary loss if a trade partner were todefault on its obligation or contract. Although the Group has set
aside an allowance for such losses in its accounting using certain
estimates, an additional loss could arise if the loss exceeds thescope of the allowance. This could negatively impact the Group’s
operating performance.
For the purposes of extending credit to trading partners inJapan and abroad, the Group regularly rates its trading partners
based on their financial data and other information. It sets credit
limits based on these ratings and the type of credit in question andinsures credit where necessary. The Group ensures that total credit
extended stays within these credit limits. Such credit includes
transactional credit arising from normal business transactions aswell as that related to financing, guarantees, and other activities.
The Group periodically monitors credit collection and delinquency
status and takes steps to protect its interests as needed. However,these control efforts are not a guarantee that credit risk will beentirely avoided. Furthermore, if a business partner’s credit worsens, the Group will reduce its dealings with said partner or takesteps to protect its receivables. Moreover, the Group establishes
resolution policies for use if such a partner were to go bankrupt. In
these ways, the Group strives to collect receivables. However, if
receivables or other forms of credit become unrecoverable, theGroup’s operating performance may be negatively affected.

Country Risk
The Group engages in transactions, loans, and investments inother countries. The collection of receivables may be delayed orrendered impossible as a result of political or economic developments in these countries. To minimize losses that could arise
should a country risk be realized, the Group regularly sets limits
based on ratings given to each country and region according to
the scale of their respective country risk and avoids overexposure
to any particular country or region. The Group takes such steps as
enrolling in trade insurance programs as warranted by ratings andproject details in an attempt to minimize recovery risks. However,continuing relevant businesses and transactions may be difficult if
such risks actualize in certain countries and regions, potentiallyaffecting the business results of the Group.

Business Investment Risk
Under the future 135 medium-term vision, the Group aims for sustainable growth in business fields where it has stable earnings
structures while securing scale expansion and added value
through effective and appropriate business investment in areas ofstrength.
The Group establishes investment criteria for these business
investments, with a focus mainly on investing in areas of strength.
Based on their objectives, content, business profitability estimatedon a cash flow basis, and evaluations and analyses of risk factors,
these investments are deliberated by the corporate areas. Major
projects over a certain size are deliberated by the Project
Deliberation Committee. Investments are made after establishingcriteria for business withdrawal, following which the Project
Deliberation Committee regularly reevaluates and reviews theirbusiness potential and investment value to minimize any loss.
However, the value of business investments may fluctuate

Risk of Impairment on Long-Term Assets
The Group’s property, plant and equipment, goodwill, and intangible assets are exposed to impairment risk. As necessary, if the valueof such an asset decreases, the Group records said decline as impairment, which may affect its operating performance. In particular,
under the future 135 medium-term vision, the Group seeks growththrough business investment and, accordingly, its goodwill andidentifiable intangible assets may increase as a result of corporate
mergers going forward.

Fundraising Risk

Legal Risk Related to Changes in Laws

Legal Risk Related to Lawsuits and Disputes

Compliance and Improper Conduct Risk

Risk of Climate Change and Social and Environmental Problems
The Kanematsu Group is engaged in business activities across awide range of fields in and outside Japan, and its ability to continue
such activities may be limited by the impact of climate change orworsening social, environmental, or other such problems.
Furthermore, environmental pollution, labor problems, or othersuch issues arising from the Group’s businesses may lead to the suspension of business, costs for removing pollution or the payment ofdamages, or a decline in the Group’s social standing.
The Group has designated and promotes awareness of key
issues to address in its corporate activities (responding to changes inmarket characteristics, mutual development with local communities,
consideration of the global environment, enhancing governance,and promoting respect for human rights, human resource development, and diversity). The Group has also established a Sustainability
Management Committee as a part of a system for proactively solving issues. Nevertheless, unforeseen circumstances or developments
may affect the operating results and financial position of the Group.
KANEMATSU Integrated Report 2020

Financial Section and Company Information

The Group operates businesses to buy, sell, and provide a broadarray of products and services in Japan and overseas and carefully
monitors laws and regulations, including those related to security
export control and other aspects of exporting and importing, thatare established and enforced for these products and services both
domestically and abroad.
To ensure comprehensive monitoring of relevant laws andcompliance, the Company has established the Internal Control andCompliance Committee, which implements regular reviews ofcompliance maintenance and responds to sudden issues.
However, it is difficult to ensure the completely consistent execution of related procedures across the Group’s wide range of trading operations, which often involve multiple parties. Although theGroup has in place a number of measures to prevent violations,
there is a risk that these may fail to prevent a legal violation orDisaster Risk
In the event of an earthquake, major storm, flood, or other natural disaster or extreme weather event, outbreak of influenza,novel coronavirus, or other infectious disease, a major accident,
an act of terrorism, a riot, or other unforeseen circumstance, theGroup’s employees and assets, such as systems, facilities andequipment, including offices, warehouses, and manufacturing
plants in Japan and overseas, may be impacted, impairing business or production activities. The Group also owns cargo being
stored or transported in and outside Japan for business transactions. Such assets may be damaged or deteriorate as a result of
natural disasters, accidents, or other developments, and thebusinesses of the Group may be suspended due to such developments as earthquakes, fires, floods, and riots. The Group takes
steps to mitigate such risk, including the adoption of employee
safety confirmation systems, formulation of disaster manuals
and business continuity plans (BCPs), measures to protect buildings, facilities, and systems from earthquake damage (including
data backup), disaster readiness training, preparation of stocksof necessary supplies, and coordination and information sharing
with business locations and affiliates in and outside Japan.
Nevertheless, depending on the extent of the damage, such incidents may affect the operating results and financial position of
the Group.
In response to the global novel coronavirus pandemic, theGroup is implementing a variety of measures to minimize infection
among the Group and its stakeholders as well as business continuity risk. These include staggered commuting and telecommuting,restrictions on domestic and international business travel andtransfers, spreading awareness of infection prevention measures,and monitoring developments in various regions through its
domestic and international network. In particular, the Group’s policy is to have all employees work remotely, in principle, when a relevant government body issues stay-at-home orders or declares astate of emergency. The Group will continue working to preventthe spread of infection based on the policies, action plans, andrequests of government authorities.

Sustainability

The Group’s business operations and associated assets and liabilities may become subject in various ways to legal proceedings,
including lawsuits, or other disputes in the course of businessactivities undertaken in Japan and overseas. Such lawsuits andother disputes are generally unpredictable, and resolving them isoften very time-consuming. Furthermore, any prediction of theirresults involves uncertainty. If such lawsuits or disputes arise andlead to unexpected outcomes, the Group’s operating results andfinancial position may be affected.

The Group builds and operates information systems for sharing
information and streamlining its operations. The Group has adopted
information security control rules and takes thoroughgoing steps torealize effective crisis control response to ensure the safety of its
information system operations. However, information systems cannot be made entirely invulnerable to the unauthorized disclosure ofsensitive business information or personal information as a result of
unauthorized access, computer viruses or other threats, nor to inoperability due to such factors as natural disasters, destruction of information system facilities attributable to accidents and other causes,
and communication line problems. Such issues may reduce the efficiency of operations that depend on information systems and,depending on the scale of damage, seriously affect the businessresults and financial position of the Group.

Review of Operations

The business activities undertaken by the Group are subject to awide range of legal regulations in Japan and other countries. The
Group takes the utmost care to abide by these regulations andmay become unable to continue certain transactions because offactors such as unexpected changes in laws, changes in export andimport regulations, including punitive tariffs introduced unilaterally following changes in the international political environment,
and changes in regulations, such as requirements for permits andlicenses related to the sale and handling of products. In addition,
lawsuits or orders issued by the relevant authorities in relation tosuch developments may result in unexpected expenses for theGroup. This risk also includes the risk of changes in tax rates or tax
arrangements imposed by the relevant authorities or between
countries under international taxation arrangements. Changes inlegal systems could thus influence the operating results and financial position of the Group.

Information Security Risk

Special Feature

The Group procures business capital via borrowings from financial
institutions in and outside Japan, corporate bonds, and othermeans. The Group strives to maintain good business relationships
with financial institutions and effective asset-liability management
as well as to minimize liquidity risk by fundraising as warranted by
its asset holdings. However, disorder in financial markets, a major
downgrading of the Company’s credit ratings from a ratings institution, or other such developments could constrain the Group’s
fundraising ability or increase fundraising costs.

instance of improper conduct. If such violation or conduct is material, the operating results and financial position of the Group could
be affected.

Kanematsu’s Progress and Strengths

according to the financial condition of the investment targets andthe success or failure of the business.
Local laws and relationships with partners may prevent theGroup from executing its policy for operating or withdrawing froma business, leading to the loss of part or all of the investment, or toa need to provide additional funding. This may negatively affect
the Group’s operating performance.

57

Consolidated Financial Statements
Consolidated Statement of Financial Position
For the fiscal year ended March 31, 2020 and 2019
JPY

2020

USD (Note 2)

2019

2020

(Assets)
I. Current assets
1. Cash and cash equivalents (Note 27)

91,10588,941

837,132

2. Trade and other receivables (Note 8)

204,920

227,300

1,882,938

3. Inventories (Note 9)

100,766

96,232925,910

5,383

3,546

49,471

4. Other financial assets (Note 30)
5. Other current assets (Note 14)

24,58028,420225,860

426,756

444,443

3,921,311

1. Property, plant and equipment (Notes 2 & 10)

40,75622,090374,498

2. Goodwill (Note 11)10,304

8,810

94,684

3. Intangible assets (Note 11)23,382

23,051

214,850

4. Investments accounted for using the equity method (Note 12)

7,506

6,867

68,972

5. Trade and other receivables (Note 8)

1,428

1,449

13,126

6. Other investments (Note 13)

28,27932,416259,847

7. Other financial assets (Note 30)

7,370

4,216

67,721

8. Deferred tax assets (Note 29)

2,761

2,609

25,371

9. Other non-current assets (Note 14)

3,126

3,504

28,732

Total non-current assets

124,915

105,016

1,147,800

Total assets

551,671

549,459

5,069,110

Total current assets

II. Non-current assets(Notes) Presentation of fiscal year and amounts (Japanese Yen and U.S. dollars)
1. “2020” refers to the Company’s consolidated fiscal year ended March 31, 2020 and the other fiscal year is referred to in the corresponding manner.
2. “JPY” means millions of Japanese Yen and “USD” means thousands of U.S. dollars.

58

KANEMATSU Integrated Report 2020

JPY

USD (Note 2)

2019

2020

Kanematsu’s Progress and Strengths

2020(Liabilities)
I. Current liabilities
1. Trade and other payables (Note 15)

172,922

196,054

1,588,920

2. Bonds and borrowings (Note 16)

68,16474,316626,341

3. Lease liabilities (Notes 2 & 31)

6,303

370

57,9194. Other financial liabilities (Note 30)

4,614

5,722

42,398

5. Income taxes payable

3,393

3,469

31,186

30

189

284

7. Other current liabilities (Note 18)

29,07332,321

267,150

Total current liabilities

284,503

312,4432,614,197

1. Bonds and borrowings (Note 16)75,22965,188691,257

2. Lease liabilities (Notes 2 & 31)

11,251

670

103,390

3. Other financial liabilities (Note 30)

2,063

1,966

18,959

4. Retirement benefit liabilities (Note 28)

6,779

6,555

62,292

5. Provisions (Note 17)

1,914

1,368

17,596

6. Deferred tax liabilities (Note 29)

2,385

1,362

21,918

7. Other non-current liabilities (Note 18)

1,369

1,205

12,586

100,994

78,317927,998

385,497

390,760

3,542,196

1. Share capital (Note 19)

27,781

27,781

255,271

2. Capital surplus (Note 19)

26,957

26,882

247,702

3. Retained earnings (Note 19)

69,54060,748

638,981

4. Treasury stock (Note 19)(1,309)(1,318)(12,037)

930

1,865

8,547

6,816

9,580

62,639

113

(293)

1,041

6. Provisions (Note 17)

II. Non-current liabilities

Total liabilities

Special Feature

Total non-current liabilities(Equity)

Review of Operations

5. Other components of equity (Note 26)
1) Exchange differences on translation of foreign operations2) Financial assets measured at fair value through othercomprehensive income3) Cash flow hedges
Total other components of equity
Total equity attributable to owners of the Parent
6. Non-controlling interests

7,860

11,15372,227130,829

125,246

1,202,144

35,34433,451

324,771

Total equity

166,174

158,698

1,526,915

Total liabilities and equity

551,671

549,459

5,069,110
Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 202059

Consolidated Statement of Income and Consolidated Statement ofComprehensive Income: (a) Consolidated Statement of Income
JPY

For the fiscal year ended March 31, 2020 and 2019

USD (Note 2)

2020

2019

2020

I. Revenue (Notes 6 & 7)

721,802723,849

6,632,382

II. Cost of sales(610,897)(613,834)(5,613,318)

Gross profit

110,904

110,0141,019,064

III. Selling, general and administrative expenses (Note 20)(82,716)(80,393)(760,056)

1. Gain (loss) on sale or disposal of property, plant and equipment andintangible assets, net (Note 21)

(118)

(238)

(1,093)

2. Impairment loss on property, plant and equipment and intangible
assets (Note 22)

(551)

(111)

(5,068)

IV. Other income (expenses)

3. Other income

1,958

2,669

18,0004. Other expenses(1,123)(1,592)(10,322)

Total other income (expenses)

165

727

1,517

28,35230,349260,525

1. Interest income (Note 24)

271

371

2,495

2. Dividend income (Note 24)

1,143

1,189

10,511

Total finance income

1,415

1,561

13,006(2,761)(2,662)(25,372)

(452)

(434)

(4,161)(3,214)(3,096)(29,532)

389

363

3,581

Profit before tax

26,94429,177

247,580

Income tax expense (Note 29)(8,710)(8,728)(80,036)

Profit for the year

18,233

20,449167,544

Owners of the Parent

14,39916,605

132,312

Non-controlling interests

3,834

3,844

35,231

Total

18,233

20,449167,544

Operating profit (Note 7)
V. Finance income

VI. Finance costs
1. Interest expenses (Note 24)
2. Other finance costs (Notes 24 & 30)
Total finance costs
VII. Share of profit (loss) of investments accounted for using
the equity method (Note 12)

Profit for the year attributable to:

Yen

U.S. dollars

Earnings per share attributable to owners of the Parent:60

Basic earnings per share (Note 25)

172.43198.22

1.58

Diluted earnings per share (Note 25)

172.28198.15

1.58

KANEMATSU Integrated Report 2020

Consolidated Statement of Income and Consolidated Statement ofComprehensive Income: (b) Consolidated Statement of Comprehensive Income
JPY

For the fiscal year ended March 31, 2020 and 2019

USD (Note 2)

2019

2020

18,233

20,449167,544(2,939)(3,031)(27,009)

2. Remeasurement of defined benefit pension plans (Note 26)

(24)

199

(226)

3. Share of other comprehensive income of investments accounted
for using the equity method (Note 26)

(8)

(23)

(80)

(2,972)(2,855)(27,315)(1,105)948(10,161)

2. Cash flow hedges (Notes 26 & 30)

403

584

3,709

3. Share of other comprehensive income of investments accounted
for using the equity method (Note 26)

(27)

(19)

(251)

I. Profit for the year

Kanematsu’s Progress and Strengths

2020

II. Other comprehensive income
Items that will not be reclassified to profit or loss:
1. Financial assets measured at fair value throughother comprehensive income (Note 26)

Total items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
1. Exchange differences on translation of foreign operations (Note 26)

(729)

1,514

(6,703)(3,702)(1,341)(34,019)

Total comprehensive income for the year

14,531

19,108

133,525

Owners of the Parent

10,927

15,003

100,406

Non-controlling interests

3,604

4,104

33,119

Total

14,531

19,108

133,525

Special Feature

Total items that may be reclassified to profit or loss
Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable to:

Review of Operations
Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 202061

Consolidated Statement of Changes in Equity
For the fiscal years ended March 31, 2020 and 2019
(JPY)
Equity attributable to owners of the Parent
Other components of equity

As of April 1, 2018
 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends (Note 19)
Dividends to non-controlling interests
Acquisition of treasury stock
Disposition of treasury stock
Equity transactions with non-controlling interests
Share-based payment transaction (Note 36)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2019
 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends (Note 19)
Dividends to non-controlling interests
Acquisition of treasury stock
Disposition of treasury stock Equity transactions with non-controlling interests
Share-based payment transaction (Note 36)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2020

SharecapitalCapitalsurplusRetainedearnings

27,781

26,81027,781

26,81048,559(61)
48,49816,605

—

—

—

8
(0)
64
72

16,605(4,655)

Treasury
stock

Financial assets
Exchangemeasured at
differences onfair valuetranslation ofthrough otherforeign operations comprehensive income

Cash flow
hedges

(193)

1,275

12,684

(905)

(193)

1,275

12,684

(905)

—

589
589

(2,940)(2,940)

612
612

—

—

(1,128)4(4,655)(1,124)

—

300

(163)

27,781

26,88260,748(1,318)

1,865

9,580

(293)

27,781

26,88260,74814,399(1,318)

1,865

9,580

(293)

—

—

14,399(5,428)

—

(935)
(935)

(2,926)(2,926)

406
406

—

(0)
31
42
74

—

—

(5)
14

(5,428)

8

—

(179)
27,781

26,95769,540162(1,309)

930

6,816

113
(JPY)

Equity attributable to owners of the Parent
Other components of equity

As of April 1, 2018
 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends (Note 19)
Dividends to non-controlling interests
Acquisition of treasury stock
Disposition of treasury stock
Equity transactions with non-controlling interests
Share-based payment transaction (Note 36)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2019
 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Dividends (Note 19)
Dividends to non-controlling interests
Acquisition of treasury stock
Disposition of treasury stock Equity transactions with non-controlling interests
Share-based payment transaction (Note 36)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2020

62

KANEMATSU Integrated Report 2020

Remeasurement of defined
benefit pension plans

Total other componentsof equity—

13,055—
13,055—(1,601)(1,601)
—
—
—
—
—
—
—

—
137
137

—

Total equity attributable toowners of
the Parent
Non-controlling interests

116,012(61)
115,951
16,605(1,601)
15,003(4,655)—(1,128)12(0)64(5,708)

(137)

(300)

—

—

—

11,153—
11,153—(3,472)(3,472)
—
—
—
—
—
—
—

125,246—
125,246
14,399(3,472)
10,927(5,428)
—
(5)
14
31
42
(5,344)

17

179

—

—

7,860

130,829

—
(17)
(17)

31,03731,037
3,844
260
4,104
(1,689)(0)(1,690)Total
equity147,050(61)
146,989
20,449(1,341)
19,108(4,655)(1,689)(1,128)12(1)
64(7,398)—33,45133,451
3,834
(229)
3,604
(1,891)179(1,711)

158,698—
158,698
18,233(3,702)
14,531(5,428)(1,891)
(5)
14
211
42
(7,056)—35,344

166,174

(USD)

Kanematsu’s Progress and Strengths

Equity attributable to owners of the Parent
Other components of equity

As of March 31, 2019

Financial assets
Exchangemeasured at
differences onfair valuetranslation ofthrough otherforeign operations comprehensive income

SharecapitalCapitalsurplusRetainedearnings

Treasurystock

Cash flow
hedges255,271

247,018

558,194(12,118)

17,14388,036(2,694)

255,271

247,018

558,194(12,118)

17,14388,036(2,694)(8,596)(26,889)

3,735—(8,596)(26,889)

3,735

—

—

—

 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year

132,312

Other comprehensive income
Total comprehensive income for the year——

132,312Dividends (Note 19)(49,877)

Dividends to non-controlling interests
Acquisition of treasury stock(50)

Disposition of treasury stock(0) Equity transactions with non-controlling interests

289
395
—

684

(49,877)

Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2020

81

(1,648)255,271247,702638,981Special Feature

Share-based payment transaction (Note 36)
Total transactions with owners

131

1,491
(12,037)

8,547

62,639

1,041

(USD)
Equity attributable to owners of the Parent
Other components of equity

As of March 31, 2019

Total equity attributable toowners of
the Parent
Non-controlling interests

Total other componentsof equity—

102,484

1,150,849———

102,484

(157)
(157)

Total
equity307,377

1,458,226

1,150,849

307,377

1,458,226—

132,31235,231

167,544(31,906)(31,906)(2,112)(34,019)(31,906)

100,406

33,119133,525

Dividends (Note 19)—(49,877)

Dividends to non-controlling interests——(17,376)(17,376)

Acquisition of treasury stock

—

(50)

(50)

Disposition of treasury stock

—

131

131

 Equity transactions with non-controlling interests—

289

Share-based payment transaction (Note 36)

—

395

—

—

(49,111)

157

1,648

—

—

72,2271,202,144 Cumulative effects of changes in accounting policies
Restated balance at the beginning of the financial year
Profit for the year
Other comprehensive income
Total comprehensive income for the year

Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)(49,877)

1,651

1,940

(15,725)(64,836)395—
324,771

1,526,915

Sustainability

As of March 31, 2020—

Review of Operations

Remeasurement of defined
benefit pension plans

Financial Section and Company Information

KANEMATSU Integrated Report 202063

Consolidated Statement of Cash Flows
For the fiscal years ended March 31, 2020 and 2019
JPY

I. Cash flows from operating activities
Profit for the year
Depreciation and amortization
Impairment loss on property, plant and equipment and intangible assets
Finance income and costs
Share of (profit) loss of investments accounted for using
the equity method(Gain) loss on sale or disposal of property, plant and equipment andintangible assets, net
Income tax expense(Increase) decrease in trade and other receivables(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in retirement benefits liabilities
Other (Note 6)
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
II. Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for intangible assets
Purchases of other investments
Proceeds from sale of other investments
Purchases of other financial assets
Proceeds from sale of other financial assets
Proceeds from (payments for) acquisition of subsidiaries (Notes 5 & 27)
Proceeds from transfer of business (Note 27)
Increase in loans receivable
Proceeds from collection of loans receivable
Payments for leasehold deposits (Note 2)
Other
Net cash provided by (used in) investing activities
III. Cash flows from financing activities
Increase (decrease) in short-term (maturing before 3 months)
borrowings, net (Note 27)
Proceeds from short-term (maturing after 3 months) borrowings (Note 27)
Repayments of short-term (maturing after 3 months) borrowings(Note 27)
Proceeds from long-term borrowings (Note 27)
Repayments of long-term borrowings (Note 27)
Redemption of Bonds (Note 27)
Dividends paid
Proceeds from stock issuance to non-controlling interests
Payments for purchase of treasury stock
Dividends paid to non-controlling interests
Repayments of lease liabilities (Notes 2 & 27)
Other (Note 27)
Net cash provided by (used in) financing activities
IV. Increase (decrease) in cash and cash equivalents, net
V. Cash and cash equivalents at the beginning of the year
VI. Effect of exchange rate changes on cash and cash equivalents
VII. Cash and cash equivalents at the end of the year (Note 27)

64

KANEMATSU Integrated Report 2020

USD (Note 2)

2020

2019

2020

18,233
9,176
551
1,798

20,449
3,274
111
1,535

167,544
84,323
5,068
16,526

(389)

(363)

(3,581)

118

238

1,093

8,710
23,422(1,391)(23,184)393(5,184)32,254200
1,188(2,731)(6,651)
24,2598,728(6,295)(1,132)(2,067)(285)
7,632
31,826375
1,579(2,639)(6,442)
24,69880,036215,217(12,784)(213,034)
3,613(47,642)
296,379
1,839
10,921(25,101)(61,122)
222,916(6,725)
1,159(1,044)(1,452)
436
—
—
(835)
(380)
(240)
292
(1,640)213(10,215)(3,128)443(419)(3,109)
1,490
(0)
15
(1,729)
—
(62)
296
(130)
(239)
(6,575)(61,802)
10,658(9,598)(13,346)
4,013——(7,673)(3,492)(2,206)
2,688(15,077)
1,963(93,871)

3,972

5,708

36,4982,009—

18,465(3,355)—(30,831)24,756(26,064)—(5,414)90(5)(1,791)(5,798)
11(11,590)
2,453
88,941(290)
91,105

13,871(14,035)(5,000)(4,643)—(1,130)(1,709)(214)(6)(7,158)
10,96477,731
245
88,941

227,474(239,497)—(49,754)831(46)(16,463)(53,283)
105(106,501)
22,545817,255(2,667)
837,132

Notes to Consolidated Financial Statements
For the fiscal years ended March 31, 2020 and 2019

1. Reporting Entity
Kanematsu’s Progress and Strengths

Kanematsu Corporation (the “Company”) is a company locatedin Japan. The addresses of the Company’s registered headquarters and main offices are available on its corporate website(https://www.kanematsu.co.jp/en/). The consolidated financial
statements of the Company as of and for the year ended March
31, 2020 comprise the Company and its subsidiaries (collectively,
the “Consolidated Group”), and the Consolidated Group’s interests in associates and joint ventures. The Consolidated Group
operates its businesses as an integrated trading company byproviding a broad array of products and services through theorganic integration of domestic and international business networks; expertise acquired in various fields; and the functions ofa trading company, including commodities trading, information
gathering, market exploration, business development and organization, risk management, and distribution. Detailed information on the business operations for each reportable segment areprovided in Note 7 Segment Information.

2. Basis of Preparing Consolidated Financial Statements(1) Statement of compliance with IFRS

application of accounting policies that have a significant effect on
the amounts recognized in the consolidated financial statements:

Significant accounting policies applied to the consolidated
financial statements of the Consolidated Group are the same as
the accounting policies applied to the consolidated financial
statements for the previous fiscal year, except for the following.

(3) Functional currency and presentation currency

Financial Section and Company Information(5) Changes in accounting policies

The preparation of the consolidated financial statements inaccordance with IFRSs requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results could differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. The effect of a change in an accounting estimate
is recognized in the period of the change and future periods. The
following notes include information on critical judgments in the

The consolidated financial statements have been prepared ona historical cost basis except for:• financial assets and liabilities measured at fair value throughprofit or loss, which are measured at fair value;• financial assets measured at fair value through other comprehensive income, which are measured at fair value;• defined benefit assets or liabilities, which are measured at thepresent value of the defined benefit obligations less the fairvalue of plan assets; and• Impairment of non-financial assets, which are measured atvalue in use or fair value.

Sustainability(4) Use of estimates and judgments(2) Basis of measurement

Review of Operations

The consolidated financial statements are presented in Japaneseyen, which is the Company’s functional currency. All financial
information presented in Japanese yen has been rounded down
to the nearest million.
The U.S. dollar amounts appearing in the consolidated financial statements and the notes thereto represent the arithmeticalresults of translating yen to dollars at the rate of ¥108.83 to
U.S.$1.00, the approximate exchange rate prevailing on March
31, 2020. The translation of such dollar amounts is solely forconvenience of the readers outside Japan and should not be
construed as a representation that the Japanese yen amounts
have been, or could be readily converted, realized or settled indollars at the above, or any other rate.

• Note 3. Significant Accounting Policies: (1) Basis of consolidation• Note 3. Significant Accounting Policies: (11) Revenue
The following notes include information on uncertainties ofassumptions and estimates that have a significant risk to causematerial revisions in the next fiscal year:• Note 11. Goodwill and Intangible Assets• Note 22. Impairment Loss
• Note 28. Employee Benefits• Note 29. Current and Deferred Income Tax• Note 30. Financial Instruments: (6) Fair value of financial­instruments
When measuring the fair value of an asset or a liability, theConsolidated Group uses observable market data as much as it
is available. Fair values are categorized into the following threehierarchy levels based on the inputs to the valuation techniques:• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Consolidated Group can accessat the measurement date• Level 2: inputs other than quoted prices included within Level
1 that are observable, either directly or indirectly• Level 3: unobservable inputs
The following notes include detailed information on assumptions made when measuring the fair value:• Note 22. Impairment Loss
• Note 30. Financial Instruments: (6) Fair value of financial­instruments
Further, in the current fiscal year, the impact of the COVID-19
outbreak is contained in quoted prices in active markets, inother directly or indirectly observable inputs, and unobservable
inputs that are referred to in measuring the fair value of financial assets or liabilities. In assessing the impairment of non-financial assets, the recoverable amount is estimated on taking
certain into account the impact of the COVID-19 outbreak on
future profit plans. No other impact from the COVID-19 outbreaks have material effects on the accounting estimates andthe assumptions on which it is based.

Special Feature

The consolidated financial statements have been prepared inaccordance with International Financial Reporting Standards(“IFRSs”) pursuant to the provision of Article 93 of the Ordinanceon Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements (Ordinance of the Ministry of
Finance No. 28 of 1976) as all the requirements of the “Specified
Company for Designated IFRSs” set forth in Article 1-2 of said
Ordinance have been fulfilled.
The consolidated financial statements were authorized by theboard of directors meeting on June 24, 2020.

(IFRS 16 Leases)
The Consolidated Group has adopted IFRS 16 “Leases” from thecurrent fiscal year. On adoption of IFRS 16, the Consolidated
Group has not restated comparatives for the 2019 reporting

KANEMATSU Integrated Report 202065

period, as permitted under the specific transition provision in
the standard.
Information on critical judgments in the application of theaccounting policies that have a significant effect on the amounts
recognized in the consolidated financial statements is provided
in Note 3. Significant Accounting Policies: (15) Leases.
For the lease contracts of the lessee that were classified as
operating leases and expensed upon their occurrence in thepast by applying IAS 17 “Leases”, the Consolidated Group recognizes lease liabilities and right-of-use assets associated with theapplication of IFRS 16.
Reconciliation of the amount of non-cancellable operatinglease commitments disclosed by applying IAS 17 at the end of
the previous fiscal year and lease liabilities recognized in the
consolidated statement of financial position on the date of­initial application is as follows.
(JPY)

(USD)

5,481

50,370

Short-term lease commitments forwhich lease liability is not recognized

(23)

(220)

Finance lease commitments at the endof the previous fiscal year

1,041

9,568

Non-cancellable operating lease contracts

11,396

104,713

Lease liabilities at the beginning of
the current fiscal year

17,895

164,432

Non-cancellable operating leasecommitments at the end of the previous
fiscal year

The Consolidated Group has decided that the impact of the discount is not material in the measurement of lease liabilities tobe newly recognized on the date of initial application, given thesize of the leases and the current financial environment. With
respect to right-of-use assets, the Consolidated Group recognizes ¥16,667 million ($153,150 thousand), included in property,
plant and equipment, at the beginning of the current fiscal year,
taking into consideration the amount of lease liabilities to be
newly recognized and the amount of prepaid or accrued lease
payments relating to the leases. There is no impact on retained
earnings at the beginning of the current fiscal year.
The Consolidated Group uses the following practical expedients when applying IFRS 16 to leases previously classified as
operating leases applying IAS 17.
- Rely on its assessment of whether leases are onerous applying
IAS 37 Provisions, Contingent Liabilities and Contingent Assets

immediately before the date of initial application and adjust
the right-of-use asset at the date of initial application by theamount of any provision for onerous leases recognized immediately before the date of initial application.
- Account for leases for which the lease term ends within 12
months of the date of initial application in the same method asshort-term leases.
- Exclude initial direct costs from the measurement of right-ofuse assets on the date of initial application.
- Use hindsight, such as when determining the lease term forcontracts that contain options to extend or terminate the lease.

(6) Changes in Presentation(Consolidated statement of financial position)“Lease liabilities” that were included in “Other financial liabilities” of “Current liabilities” and “Lease liabilities” that were
included in “Other financial liabilities” of “Non-current liabilities”
at the end of the previous fiscal year are presented separately atthe end of the current fiscal year, because their amount has
increased in significance. Associated with this, ¥6,093 million
presented in “Other financial liabilities” of “Current liabilities” inthe consolidated statement of financial position at the end of
the previous fiscal year is reclassified as “Lease liabilities” of ¥370
million and “Other financial liabilities” of ¥5,722 million. The¥2,636 million presented in “Other financial liabilities” of­“Non-current liabilities” is reclassified as “Lease liabilities” of¥670 ­million and “Other financial liabilities” of ¥1,966 million.
(Consolidated statements of cash flows)“Payments for leasehold deposits,” which was included in“Other” of “Cash flows from investing activities” in the previous
fiscal year, and “Repayments of lease liabilities,” which was
included in “Other” of “Cash flows from financing activities” inthe previous fiscal year, are presented separately at the end of
the current fiscal year, because their amount has increased insignificance. Associated with this, ¥(369) million presented in“Other” of “Cash flows from investing activities” in the consolidated statement of cash flows in the previous fiscal year isreclassified as “Payments for leasehold deposits” of ¥(130) million and “Other” of ¥(239) million, and ¥(220) million presented
in “Other” of “Cash flows from financing activities” in the consolidated statement of cash flows in the previous fiscal year isreclassified as “Repayments of lease liabilities” of ¥(214) millionand “Other” of ¥(6) million.

3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all the periods presented in these consolidated financial statements, and have been applied consistently by theConsolidated Group.

(1) Basis of consolidation
1) Subsidiaries
Subsidiaries are entities which are controlled by theConsolidated Group. The Consolidated Group controls an entity
when it is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. When theConsolidated Group holds more than half of the voting rights ofanother entity, such entity is included in the subsidiaries of theConsolidated Group as it is determined that control exists,
unless it can be clearly demonstrated that such ownership does

66

KANEMATSU Integrated Report 2020

not constitute control. In addition, even when the Consolidated
Group holds only half or less of the voting rights of another entity, such entity is included in the subsidiaries of the Consolidated
Group if it is determined through agreements with other investors that the Consolidated Group has control over such entity’s
financial and operating policies and thus has the ability to affectreturns from such entity.
The financial statements of subsidiaries are included in the
consolidated financial statements of the Consolidated Group
from the date the Consolidated Group obtains control of thesubsidiaries until the date it loses such control of the subsidiaries. When the accounting policies adopted by the subsidiaries
are different from those adopted by the Consolidated Groupand the difference is considered material, the financial statements of the subsidiaries are adjusted as necessary.

4) Transactions eliminated in consolidation
Intragroup balances and transactions, as well as any unrealized
gains and losses arising from intragroup transactions, are eliminated when preparing the consolidated financial statements.

(2) Foreign currency translation
1) Translation of foreign currency transactions
Foreign currency transactions are translated into functional currencies of individual companies using the exchange rates at thedates of such transactions. At the end of each reporting period,
monetary assets and liabilities denominated in foreign currencies
are translated into functional currencies using the exchange rate
at the end of each reporting period. Exchange differences onmonetary items are recognized in profit or loss in the period inwhich they arise. Non-monetary items that are measured on ahistorical cost basis in a foreign currency are translated into thefunctional currency using the exchange rate at the date of thetransaction. Non-monetary items that are measured at fair value
in a foreign currency are translated into the functional currency
using the exchange rates at the date when the fair value
was measured.
With respect to the exchange differences of a non-monetary
item, when a gain or loss on a non-monetary item is recognizedin other comprehensive income, the Consolidated Group recognizes any exchange component of that gain or loss in othercomprehensive income. Conversely, when a gain or loss ona non-monetary items is recognized in profit or loss, theConsolidated Group recognizes any exchange component ofthat gain or loss in profit or loss.

Review of Operations
Sustainability2) Translation of foreign operations
The assets and liabilities of foreign operations, including any goodwill and fair value adjustments arising on the acquisition of foreign
operations, are translated using the exchange rate at the end of thereporting period. In addition, income and expenses of foreign operations are translated using the average exchange rate for the reporting period unless exchange rates fluctuate significantly.
Exchange differences arising from the translation are recognized in other comprehensive income and the cumulative
amounts of the exchange differences are included in other­components of equity. When the Consolidated Group’s foreign
operations are disposed of, the cumulative amounts of theexchange differences related to foreign operations are reclassified
to profit or loss when the gain or loss on disposal is recognized.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

3) Business combinations
Business combinations are accounted for using the acquisition
method. The Consolidated Group recognizes goodwill as thesum of the fair value of the consideration transferred, theamounts of any non-controlling interests in the acquiree andthe fair value of the acquirer’s previously held equity interest in
the acquiree measured at the acquisition date; less the net ofthe acquisition-date amounts of the identifiable assets acquired
and the liabilities assumed (generally measured at fair value).
When such difference results in a negative balance, it is immediately recognized in profit or loss. Non-controlling interests are

Special Feature

2) Associates and joint ventures
Associates are those entities over which the Consolidated Group
has significant influence, where significant influence is definedas the power to participate in the financial and operating policy
decisions of the entities but is not control or joint control of
those entities. If the Consolidated Group holds between 20­percent and 50 percent of the voting rights of each those entities, it is presumed that the Consolidated Group has significant
influence over each of those entities.
Even if the Consolidated Group holds less than 20 percent of
the voting rights of another entity, such entity is included in theassociates of the Consolidated Group as long as it is determinedthat the Consolidated Group has significant influence over theentity through the dispatch of the board members, the shareholders’ agreement or the like.
Joint ventures are those entities with respect to which multiple parties, including the Consolidated Group, have joint control
over the economic activities by contract and unanimous consent
of all of such parties is required when deciding on the relevant
activities, whereby the Consolidated Group has rights to the net
assets of the arrangement.
Except for those that are classified as assets held for sale inaccordance with IFRS 5 Non-current Assets Held for Sale andDiscontinued Operations, investments in associates and joint
ventures (“equity method investee”) are measured at the carrying amount following the application of the equity method(including goodwill recognized at the time of acquisition) lessany accumulated impairment losses.
The consolidated financial statements include theConsolidated Group’s share of profit or loss and other comprehensive income of the associates and joint ventures from thedate the Consolidated Group obtains significant influence or
joint control until the date it loses such significant influence or
joint control. When the accounting policies adopted by theequity method investees are different from those adopted by
the Consolidated Group, the financial statements of the equity
method investees are adjusted as necessary.

measured either at fair value or at the non-controlling interests’
proportionate share in the recognized amounts of the acquiree’s
identifiable net assets. The measurement method to be appliedat the acquisition date is determined on a transaction-by-­transaction basis. Acquisition-related costs, which are costs that
the Consolidated Group incurs to effect a business combination(excluding costs to issue debt or equity securities), are accounted for as expenses in the periods in which the costs are incurred,
and thus not included in the cost of goodwill. In a business combination achieved in stages, the Consolidated Group remeasures
its previously held equity interest in the acquiree at its­acquisition-date fair value and recognizes any gains or losses
arising from such remeasurement in profit or loss. Changes
in the value of the Consolidated Group’s equity interest in theacquiree that had been recognized in other comprehensive income
prior to the acquisition date are recognized in profit or loss,or other comprehensive income, on the same basis as would
be required if the Consolidated Group had disposed of the­previously held equity interest.

Kanematsu’s Progress and Strengths

Changes in the Consolidated Group’s interest in a subsidiarythat do not result in a loss of control are accounted for as equity
transactions. The Company recognizes directly in equity any difference between the amounts by which the non-controllinginterests are adjusted and the fair value of the consideration
paid or received, and attribute it to the owners of the Company.
If the Consolidated Group loses control of a subsidiary, theConsolidated Group derecognizes the assets and liabilities of theformer subsidiary, and any non-controlling interests and othercomponents of equity related to the former subsidiary. Any
gains or losses arising from such loss of control are recognized in
profit or loss. If the Consolidated Group retains any interest in
the former subsidiary after the control is lost, such interest ismeasured at fair value at the date that control is lost.

67

(3) Cash and cash equivalents(7) Impairment of non-financial assets

Cash and cash equivalents are comprised of cash on hand;demand deposits; and short-term, highly liquid investments witha maturity of three months or less from the date of acquisition
that are readily convertible to known amount of cash and which
are subject to an insignificant risk of changes in value.

(6) Goodwill and intangible assets

The Consolidated Group assesses at the end of each reporting
period whether there is any indication that an asset may be
impaired. If any such indication exists, it estimates the recoverable amount of the asset or the cash-generating unit to which
the asset belongs. Goodwill and an intangible asset with anindefinite useful life are tested for impairment annually andwhenever there is an indication that such assets may be
impaired. If the carrying amount of an individual asset or the
cash-generating unit exceeds its recoverable amount, the carrying amount of the asset is reduced to its recoverable amountand that reduction is recognized as an impairment loss.
The Consolidated Group assesses at the end of each reporting
period whether there is any indication that an impairment loss
recognized in prior fiscal years for an asset other than goodwill
may no longer exist or may have decreased. If any such indication exists, the Consolidated Group will estimate the recoverable
amount of that asset. If the recoverable amount exceeds the carrying amount of that asset or the cash-generating unit to which
the asset belongs, the carrying amount is increased to its recoverable amount, which is, however, limited up to the carrying
amount that would have been determined (net of amortization
or depreciation) had no impairment loss been recognized forthe asset in prior fiscal years; and that increase is recognized as areversal of an impairment loss. An impairment loss recognized
for goodwill is not reversed in a subsequent period.
In addition, because goodwill that forms part of the carrying
amount of an investment in an equity method investee is notseparately recognized, it is not tested for impairment separately.
If it is indicated that the investment in an equity method investee may be impaired, the entire carrying amount of the investment is tested for impairment as a single asset, by comparing its
recoverable amount with its carrying amount.

1) Goodwill
Goodwill is carried at cost less any accumulated impairment losses.

(8) Financial instruments(4) Inventories
Inventories are measured at the lower of cost determined by themoving-average method and net realizable value.

(5) Property, plant and equipment
The Consolidated Group uses the cost model to measure an
item of property, plant and equipment after initial recognitionand carries it at its cost less any accumulated depreciation andany accumulated impairment losses. The cost of property, plantand equipment include the cost directly attributable to theacquisition of the asset.
Property, plant and equipment are depreciated using thestraight-line method over the estimated useful life of each component thereof. The ranges of principal estimated useful lives
are presented as follows:
Buildings and structures:
3 to 50 years
Machinery, vehicles, tools, furniture & fixtures: 2 to 20 years
Right-of-use assets are fully depreciated over the shorter ofthe lease term and their estimated useful lives if there is no­reasonable certainty that the Consolidated Group will obtainownership by the end of the lease term.
The depreciation method, useful life and residual value of anasset are reviewed at least at the end of each reporting period
and amended as necessary.

2) Intangible assets
The Consolidated Group uses the cost model to measure an
intangible asset after initial recognition and carries it at its costless any accumulated amortization and any accumulated impairment losses.
A separately acquired intangible asset is initially recognized
and measured at cost. The cost of an intangible asset acquired
in a business combination is its fair value at the acquisition date.
With respect to an internally generated intangible asset that
does not qualify for asset recognition, expenditures on such aninternally generated intangible asset are recognized as expenses
when they are incurred. Conversely, the cost of an internallygenerated intangible asset that qualifies for asset recognition is
the sum of expenditures incurred from the date when it firstmeets the recognition criteria.
An intangible asset with a finite useful life is amortized using
the straight-line method over its estimated useful life. The
Consolidated Group’s intangible assets with finite useful lives
are comprised mainly of software whose estimated useful life is
5 years.
The amortization method, useful life and residual value of an
intangible asset with a finite useful life are reviewed at the endof each reporting period and amended as necessary.
Certain intangible assets with indefinite useful lives such as
carrier shop operating rights are not amortized, but instead tested for impairment based on the cash-generating unit at least
once a year and whenever there is an indication that they may
be impaired.

68

KANEMATSU Integrated Report 2020

1) Financial assets
The Consolidated Group classifies financial assets at initial­recognition as financial assets measured at fair value throughprofit or loss, financial assets measured at fair value throughother comprehensive income or financial assets measured atamortized cost. The Consolidated Group initially recognizes
financial assets measured at amortized cost on the date thatthey arise and the other financial assets on the transaction date.
The Consolidated Group derecognizes a financial asset when,and only when (a) the contractual rights to cash flows from thefinancial asset expire, or (b) it transfers the contractual rights tocash flows and substantially all the risks and rewards of ownership of the financial asset.
(i) Financial assets measured at amortized cost
A financial asset that meets both of the following conditions isclassified as a financial asset measured at amortized cost:• The financial asset is held within a business model whose
objective is to hold financial assets in order to collect contractual cash flow and,• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures afinancial asset measured at amortized cost at its fair value plus
any transaction costs directly attributable to the acquisition of
the financial asset. The Consolidated Group subsequently measures it at amortized cost using the effective interest method.

(i) Financial liabilities measured at amortized cost
The Consolidated Group classified financial liabilities, other thanfinancial liabilities measured at fair value through profit or loss,
as financial liabilities measured at amortized cost. The Consolidated
Group initially recognizes and measures a financial liability measured at amortized cost at its fair value less any transaction costs
directly attributable to incurring of the liability, and subsequently
measures it at amortized cost using the effective interest method.
(ii) Financial liabilities measured at fair value through profit
or loss
The Consolidated Group initially recognizes and measures afinancial liability measured at fair value through profit or loss at
its fair value, and subsequently measures it at fair value and recognizes subsequent changes in fair value in profit or loss.

Sustainability4) Derivatives and hedge accounting
In order to hedge the foreign currency fluctuation risk, interest
rate fluctuation risk and commodity price fluctuation risk, theConsolidated Group enters into derivative transactions, such as
forward exchange transactions, interest rate swap transactions
and commodity futures and forwards transactions.
When initiating a hedge, the Consolidated Group designatesand documents the risk management purposes and strategies
regarding the hedge relationship and initiation of such hedge.
Such documentation includes the designation of the hedging
instrument, the hedged item or transaction, the nature of therisk being hedged and methods of assessing the hedging­instrument’s effectiveness in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to the

KANEMATSU Integrated Report 2020

Financial Section and Company Information

2) Impairment of financial assets
The Consolidated Group assesses impairment of financial assets
measured at amortized cost and financial assets measured atfair value through other compressive income based on the
expected credit loss approach.
If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, theConsolidated Group measures the loss allowance for that financial instrument at an amount equal to the 12-month expectedcredit losses, i.e., the expected credit losses that result from

3) Financial liabilities
The Consolidated Group classifies financial liabilities at initialrecognition as financial liabilities measured at fair value throughprofit or loss or financial liabilities measured at amortized cost.
The Consolidated Group initially recognizes financial liabilities
measured at amortized cost on the date that they arise and theother financial liabilities on the transaction date.
The Consolidated Group derecognizes financial liabilities
when they are extinguished, i.e., when obligations specified
under a contract is discharged, cancelled or expires.

Review of Operations(iii) Financial assets measured at fair value through profit or loss
A financial asset other than those classified as (i), (ii) and (iii)
above is classified as a financial asset measured at fair value
through profit or loss.
The Consolidated Group initially recognizes and measures afinancial asset measured at fair value through profit or loss at its
fair value and expenses the transaction costs as incurred that are
directly attributable to the acquisition of the financial asset. The
Consolidated Group subsequently measures it at fair value andrecognizes the subsequent changes in fair value in profit or loss.

Special Feature(b) Equity instruments
With regard to a financial asset that has classified as a financial
asset measured at fair value through profit or loss, IFRS 9 permits an entity to make an irrevocable election to present inother comprehensive income changes in fair value of an investment in an equity instrument that is not held for trading. The
Consolidated Group makes this election on an instrument-byinstrument basis.
The Consolidated Group initially recognizes and measures
an equity instrument measured at fair value through other comprehensive income at its fair value plus any transaction costs
directly attributable to the acquisition of the financial asset. The
Consolidated Group subsequently measures it at fair value andrecognizes the subsequent changes in fair value as other comprehensive income. When the equity instrument is derecognized, or its fair value substantially decreases, the Consolidated
Group reclassifies the cumulative amount of other comprehensive income to retained earnings and not to profit or loss.
Dividends are recognized in profit or loss unless the dividend
clearly represents a recovery of part of the cost of the investment.

default events on that financial instrument that are possible within the 12-months after the reporting date. Conversely, if, at thereporting date, the credit risk on that financial instrument has
increased significantly since initial recognition, the Consolidated
Group measures the loss allowance for that financial instrument
at an amount equal to the lifetime expected credit losses, i.e., theexpected credit losses that result from all possible default events
over the expected life of that financial instrument.
However, the Consolidated Group always measures the loss
allowance for trade receivables, contract assets and lease receivables at an amount equal to the lifetime expected credit losses
despite the above requirement.
If there is any objective evidence that financial assets are­credit-impaired, such as a borrower’s significant financial difficulty, a breach of contract of default or delinquency by the borrower, etc., the Consolidated Group measured interest income
to net carrying amount after deducting loss allowance following
the effective interest method.
Detailed information on the assessment of significant increases incredit risk and the measurement of expected credit losses is provided in Note 30. Financial Instruments: (3) Credit risk management.

Kanematsu’s Progress and Strengths(ii) Financial assets measured at fair value through othercomprehensive income(a) Debt instruments
Debt instruments that meet both of the following conditions isclassified as a financial asset measured at fair value throughother comprehensive income:• The financial asset is held within a business model whose
objective is achieved by both collecting contractual cash flow
and selling financial assets and,• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures afinancial asset measured at fair value through other comprehensive income at its fair value plus any transaction costs directly
attributable to the acquisition of the financial asset. The
Consolidated Group subsequently measures it at fair value andrecognizes the subsequent changes in fair value as other comprehensive income. When the financial asset is derecognized,
the cumulative gain or loss is reclassified to profit or loss.

69

hedged risk. In addition, such hedging is assessed on an ongoing basis whether it was actually effective throughout thereporting periods was designated.
The Consolidated Group initially recognizes and measuresderivatives at fair value and subsequently measures them at fairvalue and accounts for subsequent changes in fair value as follows:(i) Fair value hedge
The Consolidated Group recognizes the changes in fair value ofa derivative used as a hedging instrument in profit or loss, andthe changes in fair value of a hedged item attributable to thehedged risk in profit or loss by adjusting the carrying amount of
the hedged item.
(ii) Cash flow hedge
Of the changes in fair value of a derivative used as a hedging
instrument, the portion determined to be effective is recognizedin other comprehensive income and the cumulative amount isincluded in other components of equity. Conversely, the portion
determined to be ineffective is recognized in profit or loss. The
amounts accumulated in other components of equity are reclassified from other components of equity to profit or loss in thesame period that the transaction of the hedged item affects
profit or loss; provided, however, that if hedging of a forecast
transaction subsequently results in the recognition of a nonfinancial asset or liability, the amounts accumulated in othercomponents of equity are then accounted for as an adjustment
to the initial carrying amount of the non-financial asset or liability.
When the hedging instrument expires or is sold, terminatedor exercised; or when the hedge no longer meets the criteria forthe hedge accounting, the Consolidated Group discontinues thehedge accounting prospectively. The amounts accumulated inother components of equity remain in equity when hedge
accounting is discontinued and are recognized in profit or loss
when the forecast transaction is recognized in profit or loss.
However, if the forecast transaction is no longer expected tooccur, the amounts accumulated in other components of equity
are reclassified immediately from other components of equity to
profit or loss.
(iii) Derivatives not designated as hedging instruments
The Consolidated Group recognizes the changes in fair value ofderivatives not designated as hedging instruments in profit or loss.
5) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net
amount of such offset is presented in the consolidated statements of financial position only when the Consolidated Group
has a legally enforceable right to offset the recognized amounts
and intends either to settle them on a net basis or realize theassets and settle the liabilities simultaneously.

(9) Provisions
The Consolidated Group recognizes a provision when, only
when (a) the Consolidated Group has a present obligation (legal
or constructive) as a result of a past event; (b) it is probable thatan outflow of resources embodying economic benefits will be
required to settle the obligation; and (c) a reliable estimate canbe made of the amount of the obligation.
Where the effect of the time value of money is material, theConsolidated Group recognizes the provision by discounting it
using a current pre-tax discount rate that reflects the risks specificto the liability.

70

KANEMATSU Integrated Report 2020(10) Equity
When the Consolidated Group repurchases the shares of treasury stock, it is measured at cost and is presented as a deduction
from equity. Transaction costs directly attributable to the repurchase of the shares of treasury stock are deducted from capitalsurplus. When the Consolidated Group sells the shares of treasury stock, the consideration received is recognized as anincrease in equity.

(11) Revenue
1) Recognition of revenue
The Consolidated Group recognizes revenue from contracts withcustomers based on the following five-step approach.
Step 1: Identifying the contracts with customers
Step 2: Identifying the performance obligations in the contracts
Step 3: Determining the transaction price
Step 4: Allocating the transaction price to the performanceobligations in the contracts
Step 5: Recognizing revenue when (or as) an entity satisfies
the performance obligations
The Consolidated Group’s principal business is mainly to sellgoods in its four segments of Electronics & Devices, Foods &Grain, Steel, Materials & Plant, and Motor Vehicles & Aerospace.
It recognizes revenue from the sale of these goods at the time
when promised assets are delivered that is, because customers
obtain control of the goods and the performance obligations
are satisfied at the time of delivery. In the provision of services,
the Consolidated Group recognizes revenue in accordance withthe performance obligations that will be satisfied over time
according to the progress of individual contracts.
The Consolidated Group also measures revenue at an amountobtained by deducting discounts, rebates and returned goods
from the promised consideration in the contract with the customer. If there is more than one identifiable performance obligation in a single contract, the contract is divided into eachperformance obligations, and revenue is recognized for eachperformance obligation. In addition, if an economic reality is notpresented unless multiple contracts are considered as one, theConsolidated Group recognizes revenue by combining the multiple contracts.
If the Consolidated Group receives the consideration from thecustomer before satisfying the performance obligations, theConsolidated Group recognizes it as a contract liability.
2) Presentation of revenue
If the Consolidated Group conducts a transaction as a principal,
the Consolidated Group presents revenue at the total amount ofconsideration received from the customer. If the Consolidated
Group conducts a transaction as an agent for a third party, theConsolidated Group presents revenue at the net amount of
the commission.
When the Consolidated Group determines whether it conducts
a transaction as a principal or as an agent for a third party, theConsolidated Group takes the following indicators into account.
• Whether the other party is primarily responsible for fulfilling
the premise.
• Whether the Consolidated Group has inventory risk both during shipping and upon return around the time when the customer places an order for the goods.
• Whether the benefits that the Consolidated Group can obtainfrom the goods or services of the other party are limited
because of the fact that the Consolidated Group does not havediscretion in establishing the price for the goods or services ofthe other party.

(13) Employee benefits
1) Post-retirement benefits(i) Defined benefit plans
Defined benefit plans are retirement benefit plans other thandefined contribution plans. Defined benefit obligations are­calculated separately for each plan by estimating the future
amounts of benefits that employees will have earned in returnfor their services provided in the current and prior periods, anddiscounting such amounts in order to determine the present
value. The fair value of any plan assets is deducted from thepresent value of the defined benefit obligations. The discountrate is determined by reference to the market yields on highly
rated corporate bonds at the fiscal year-end that have maturity
terms that are approximately the same as those of the Consolidated
Group’s defined benefit obligations and use the same currencies
as those used for future benefits payments.
When the retirement benefit plans are amended, the change
in defined benefit obligations related to past service by employees
is immediately recognized in profit or loss.
The Consolidated Group recognizes the changes in the net
defined benefit liability (asset) due to remeasurements in othercomprehensive income and immediately reclassifies them toretained earnings.
(ii) Defined contribution plans
Defined contribution plans are retirement benefit plans underwhich an employer pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further contributions. The obligations already paid or to be paid ascontributions under the defined contribution plans are recognized as expenses in the period in which the employees render
the related services.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

3) Short-term employee benefits
The Consolidated Group recognizes short-term employee benefits as a liability and an expense by estimating the amounts thatwill be paid to the employees in return for their services without
discounting those amounts. The Consolidated Group recognizes
bonuses to be paid pursuant to the bonus system as a liability
when it has present legal or constructive obligations to pay as aresult of past employee service, and when the amounts of theobligations can be estimated reliably.

Sustainability

2) Other long-term employee benefits
The Consolidated Group recognizes obligations for long-term
employee benefits other than post-employment benefits as aliability by estimating the amounts as of the reporting date thatwill be paid to the employees in return for their services without
discounting that amounts unless it is material.

Review of Operations

Income tax expenses comprises current tax expense anddeferred tax expense. The Consolidated Group recognizes themin profit or loss, except when they arise from items that are recognized in other comprehensive income or directly equity, andfrom business combinations.
Current tax expense is measured by the expected taxes receivable from or taxes payable to tax authorities, and the tax rates
or tax laws that are used to calculate the tax amount are thosethat have been enacted or substantially enacted by the end of
the fiscal year.
The Consolidated Group recognizes deferred tax assets anddeferred tax liabilities for temporary differences between the
carrying amount of an asset and liability in the statements offinancial position and its tax base, the unused tax losses carriedforward and unused tax credits carried forward. The amounts ofdeferred tax assets and deferred tax liabilities are calculated byapplying the expected tax rate or tax law applicable as of theperiod in which assets are realized or liabilities are settled inaccordance with a statutory tax rate or a substantially enacted
statutory tax rate and the tax law as of the fiscal year-end. The
Consolidated Group does not recognize deferred tax assets anddeferred tax liabilities in the following cases:• when taxable temporary differences arise from the initial­recognition of goodwill;• when they arise from the initial recognition of an asset or a liability in a transaction which is not a business combination; andon the transaction date, affects neither accounting profit nor
taxable profit (tax loss); or,• with respect to taxable temporary differences associated withinvestments in subsidiaries and associates, when the Consolidated
Group is able to control the timing of the reversal of the­temporary differences; and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset only
when the Consolidated Group has a legally enforceable right to
set off the current tax assets against current tax liabilities, and,such deferred tax assets and liabilities relate to income taxes­levied on the same taxation entity. However, even in the case ofdifferent taxable entities, the Consolidated Group can set off if
the tax taxable entities intend either to settle current tax liabilities and assets on a net bases, or to realize the assets and settle
the liabilities simultaneously. Deferred tax assets are recognizedfor deductible temporary differences, the unused tax losses­carried forward and unused tax credits carried forward to theextent that it is probable that they can be used against futuretaxable profit. The carrying amounts of deferred tax assets arereassessed at each fiscal year-end, and such carrying amount will
be reduced to the extent it is no longer probable that related tax
benefits from such assets will be realized. Unrecognized deferred
tax assets are also reassessed at the end of each reporting period and are recognized to the extent that it is probable that futuretaxable profit will be available to recover the deferred tax assets.
The Company and its wholly owned domestic subsidiaries
apply the consolidated tax payment system, by which theCompany and its wholly owned domestic subsidiaries areallowed to file a tax return and pay the corporation tax asa ­consolidated tax filing group.

Special Feature(14) Income taxes

Finance income comprises interest income, dividend income,gain on sale of financial instruments and gain arising fromchanges in fair value of financial instruments. Interest income isrecognized at the time of receipt by using the effective interest
method. Dividend income is recognized on the date when theConsolidated Group’s right to receive payment is established.
Finance costs comprise interest expenses, loss on sale of financial instruments and loss arising from changes in the fair value offinancial instruments.

Kanematsu’s Progress and Strengths(12) Finance income and finance costs

71

(15) Leases
At inception of a contract, the Consolidated Group assesses
whether the contract is, or contains, a lease. A contract is, or
contains, a lease if it conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. For a contract that is, or contains, a lease, the Consolidated
Group recognizes the lease liability and the right-of-use asset.
Lease liability is measured at the present value of discounted
unpaid lease payments, using the interest rate implicit in thelease or the Consolidated Group’s incremental borrowing rate,
at the commencement date of the lease contract. After the commencement date, the lease liability is measured by increasing or
reducing the carrying amount to reflect interest rate and lease
payments made. In addition, if there is a revision to the leaseterm or a change in the assessment of an option, lease liability isremeasured to be reflected in the carrying amount. The leaseterm is determined by taking into consideration an option toterminate the lease and an option to extend the lease term during the non-cancellable period of the lease.
A right-of-use asset is measured at the acquisition cost that
adjusts the initial measurement amount of lease liability on thecommencement date of the lease contract mainly for initial
direct costs and expenses for restoration to the condition
required by the terms and conditions of the lease, and it isdepreciated by the straight-line method over the shorter of theestimated useful life and the lease term.
For short-term leases with a lease term of 12 months or less, theConsolidated Group does not recognize lease liability and a right-of-

use asset by applying recognition exemption, and recognizes themas expenses on a straight-line basis over the lease term.
When the Consolidated Group is the lessor, it classifies each ofits leases as either an operating lease or a finance lease, andaccounts as follows:
1) Finance lease
A finance lease is a lease that transfers substantially all the risks
and rewards incidental to ownership of an underlying asset. At
the commencement date of the lease, the Consolidated Group
recognizes assets held under a financial lease in its consolidated
statement of financial position and presents them as a receivable at an amount equal to net investment in the lease.
2) Operating lease
An operating lease is a lease other than a finance lease. The
Consolidated Group presents the assets subject to the operatinglease in its consolidated statement of financial position and recognizes lease payments from operating leases as income oneither a straight-line basis or another systematic basis.

(16) Share-based payments
The Consolidated Group introduces a performance-linked stockcompensation plan as an incentive plan for its Directors andExecutive Officers. The equity-settled share-based payment planmeasures at the fair value on the date of grant, recognizing it as
an expense from the date of grant through the vesting period
and recognizing the same amount as an increase in capital surplus.

4. Standards and Interpretations issued but not yet adopted
There were no newly issued or amended standards and interpretations, which were publicly announced prior to the date of
the authorization for issuance of the consolidated financial

statements and have material effects on the financial statements of the Consolidated Group.

5. Business Combinations
No major business combinations took place in the fiscal year
under review (April 1, 2019 to March 31, 2020).
The major business combination that took place in the previous
fiscal year (from April 1, 2018 to March 31, 2019) was as follows.

(1) Contents of the business combination

72

Name of the acquiredcompany

G-Printec, Inc.

Contents of business

Development, manufactureand sale of card printers andrelated devices

Date of the businesscombination

December 3, 2018

Legal form of the businesscombination

Acquisition of shares withcash as consideration

Company name after the
combination

G-Printec, Inc.

Percentage of the voting
rights acquired

Percentage share of voting
rights owned immediately
before the acquisition date
40.0%
Percentage share of voting
rights additionally acquired on
the acquisition date 60.0%
Percentage share of voting
rights after acquisition
100.0%KANEMATSU Integrated Report 2020

(2) Purpose of the business combination
The card printer business, one of the key businesses in theElectronics & Devices segment, has been focusing on the distribution of card printers for many years. We position G-Printec,
Inc. as an important strategic function to further enhance theadded value of the card printer business, and we have decided
that the acquisition of the printer design and development
functions of G-Printec, Inc. will contribute to the enhancementof the corporate value of the Consolidated Group, because it
will enable us to mutually generate synergistic effects by meeting even more diversified customer needs.

(3) Acquisition costs and the detail
JPY

Fair value on the acquisition date of shares of theacquired company held immediately before theacquisition date

1,440

Fair value of shares of the acquired company
additionally acquired on the acquisition date

2,160

Acquisition cost

3,600

(4) Acquisiton-related costs and its line item

(6) Impacts on cash flows through business combination

Gain from remeasurement relating to business combinations of¥610 million is recorded in “Other income” in the consolidated
statements of income as a result of re-measuring the fair valueon the acquisition date of equity interest in the acquired company held immediately before the acquisition date.

439

Trade receivables

845

Inventories

301

439

Payments for acquisition of subsidiaries(1,720)91

Property, plant and equipment

124

JPY

Revenue
Profit1,628
287

Pro-forma information (unaudited information) concerning consolidated operating results in the previous fiscal year in the casethat the business combination is assumed to be conducted at the
beginning of the period is revenue of ¥726,220 million and profit
attributable to owners of the Parent of ¥16,760 million.

2,856

Special Feature

Other current assets

25

Current liabilities(1,740)Non-current liabilities(1,831)

Goodwill (Note)

2,485

Total

Kanematsu’s Progress and Strengths

3,600

Cash and cash equivalents

Other non-current assets

Cash and cash equivalents on the acquisition date

Operating results at the acquired company from the date ofacquisition to March 31, 2019 are as follows:

JPY

Intangible assets(2,160)(7) Impacts on the operating results of the ConsolidatedGroup(5) Assets and liabilities on the day of the businesscombination
Fair value of the consideration paid

JPY

Payments of acquisition costs (cash consideration)

3,600(Note) The details of goodwill are mainly excess earning power and synergy effects
with the existing businesses. The amount of goodwill recognized does notinclude the amount that is expected to be deductible for tax purposes.

Review of Operations

6. Revenue(1) Disaggregation of revenue
As disclosed in Note 7 Segment information, the Consolidated Group has four reportable segments: Electronics & Devices, Foods &Grain, Steel, Materials & Plant and Motor Vehicles & Aerospace. In addition, the Consolidated Group disaggregates revenue inElectronics & Devices recognized from contracts with customers into three categories: ICT solutions, Mobile and Others. Similarly, revenue in Steel, Materials & Plant is disaggregated into Energy and Others. The reconciliations of the disaggregated revenue with thegroup’s sales components are as follows.
The accounting methods for the revenue are consistent with those stated in Note 3. Significant Accounting Policies.
JPY

2020

USD

2019

2020

Electronics & Devices
70,17665,561

644,828

118,059

135,094

1,084,811

Others

66,07664,530607,150

Foods & Grain

251,403244,859

2,310,060

Sustainability

ICT solution
MobileSteel, Materials & Plant
Energy62,57773,199575,004

Others67,273

66,234

618,152

Motor Vehicles & Aerospace
Total reportable segment
Total revenue arising from contracts with customers
Revenue arising from other sources
Total

61,938684,921711,417

6,524,926

11,418

11,960104,920

721,526

723,378

6,629,846

275

470

2,536

721,802723,849

6,632,382

Financial Section and Company Information

Others74,539710,107(Note) Revenue arising from other sources includes revenue recognized in accordance with IFRS 16 “Lease”.

KANEMATSU Integrated Report 202073

(2) Contract balances
Information on contract assets and liabilities arising from contracts with customers are as follows:
JPY

Contract assets
Contract liabilities

USD

2019

2020

2020

12

7

116

9,289

11,27385,362Contract assets primarily relate to the consolidated group’s rights to receive consideration for performance obligations that have been
completed, but not yet billed for, as of the reporting date and they are reclassified as receivables when the Consolidated Group’s rights
to payment becomes unconditional.
Contract liabilities are mainly consideration for performance obligation satisfied over time in maintenance and warranty with service
and they are reclassified as revenue according to maintenance period or satisfaction of performance obligation. In addition, theConsolidated Group recognizes as a contract liability that already received a part of consideration upon delivery of goods. Of the revenue recognized in the current fiscal year, ¥8,014 million ($73,646 thousand) was included in the balance of contract liabilities as of April
1, 2019. There are no significant amounts of revenue recognized during the year ended March 31, 2020 from performance obligations
satisfied in the prior fiscal year. The increase of contract liabilities is included in a reduction of other from operating activities in theConsolidated Statement of Cash Flows.

(3) Transaction price allocated to the remaining performance obligations
Transaction price allocated to the remaining performance obligations are as follows. It’s not included expected transactions term within
one years.
JPY

2020

USD

2019

2020

Within one year

9,939

10,517

91,331

Over one years

7,812

11,38771,786

17,752

21,905

163,117

Total(Note) The transaction for remaining performance transaction by over one year is mainly sales of goods as of year ended March 31, 2020 and March 31, 2019, and theperformance obligation is satisfied within seven years.

(4) Assets recognized from the costs of obtaining or fulfilling contracts with customers
There are no assets recognized from the costs of obtaining or fulfilling contracts with customers as of the year ended March 31, 2020
and March 31, 2019. In addition, if the amortization period of the assets that the group otherwise would have recognized is one year or
less, the group applies the practical expedient of recognizing the incremental costs of obtaining the contract as an expense when incurred.

7. Segment Information(1) Overview of Reportable Segments
The reportable segments of the Consolidated Group are components of the Consolidated Group for which discrete financial information is available and are reviewed by the Board of Directors of theCompany normally and regularly assesses its business performanceand examines the allocation of management resources.
The Consolidated Group offers a broad array of merchandiseand services, using expertise in each business field and trading
function from Japan and its international network. Trading functions include commercial trade, information gathering, market
development, business development and arrangement, risk
management and logistics.
The Consolidated Group therefore consists of merchandiseand service segments based on its business units: “Electronics &Devices”, “Foods & Grain”, “Steel, Materials & Plant”, and “Motor
Vehicles & Aerospace”.
The principal merchandise and services handled by each segment are presented as follows:(Electronics & Devices)
The Electronics & Devices segment provides a wide range of
products including electronic parts and components, semiconductor and LCD manufacturing equipment, materials and indirect materials related to electronics, coupled with development
and proposal services. This segment also deals with mobile­communications terminals, mobile internet systems, and­information and telecommunication equipment and security
equipment and services.

74

KANEMATSU Integrated Report 2020

(Foods & Grain)
The Foods & Grain segment integrates the handling of a broadarray of food and foodstuffs, with operations ranging fromsourcing raw materials reliably to providing food and foodstuffs,
including high value-added products. Merchandise in this segment includes cooked foods, processed fruits, processed agricultural products, beverage ingredients, animal and fisheryproducts, wheat, rice, soybeans, feedstuff and pet foods.
(Steel, Materials & Plant)
The Steel, Materials & Plant segment operates the domestic andinternational trade of general steel products including steel
plates, bars and wire rods, pipes, and stainless products, carries
out overseas projects such as plant and infrastructure development, and sells machine tools and industrial machinery.
Additionally, this segment operates the domestic and international trade of crude oil, petroleum products, LPG, functional
chemicals and food products, pharmaceuticals and pharmaceutical intermediates, and other products. It also operates businesses related to environmental and emissions rights.
(Motor Vehicles & Aerospace)
The Motor Vehicles & Aerospace segment primarily operates
international trade of aircrafts, helicopters, satellite- and­aerospace-related products, automobiles, motorcycles,­industrial vehicles and related parts, etc., and also provides­products with added value based on demand or use.

(2) Information on reportable segments

Fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020)

Kanematsu’s Progress and Strengths

The accounting methods for the reportable operating segments are consistent with those stated in Note 3. Significant Accounting
Policies. Inter-segment revenue and transfers are based on the transaction prices to external customers.
(JPY)

Reportable segment
Electronics &Devices

Foods & Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

254,516

251,403

129,858

74,605710,383

414

2

94

8

518

11,418—721,802

215

(734)

Total revenue

254,930

251,406

129,952

74,613—710,902

11,634(734)

721,802

Segment profit (loss)

18,963

2,381

3,819

2,383

27,547819(14)28,352

5,021

1,392

1,809

697

8,920

275

(18)

9,176

(35)

62

180

38

246

143

—

389

201,979

127,143

122,767

54,030505,921

11,21534,534

551,671

Investments accounted
for using the equity
method

399

1,616

2,676

362

5,055

2,453

(2)

7,506

Capital expenditures

2,006

580

1,249

3,701

7,537

304

653

8,495

Revenue
External
Inter-segment

Other profit or loss:
Depreciation andamortization

Segment assets

Special Feature

Share of profit (loss) ofinvestments accounted
for using the equity
methodOther assets:

Fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020)

(USD)
Review of Operations

Reportable segment
Electronics &Devices

Foods & Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

2,338,658

2,310,060

1,193,219

685,525

6,527,462

104,920—

6,632,382(6,751)—

Revenue
External
Inter-segment

3,804

20

869

76

4,769

1,983

Total revenue

2,342,462

2,310,080

1,194,088

685,600

6,532,231

106,902

Segment profit (loss)

174,252

21,87935,097

21,897

253,124

7,531

(131)

260,525

46,136

12,795

16,628

6,408

81,967

2,529

(173)

84,323

(322)

578

1,655

353

2,264

1,317

—

3,581

1,855,914

1,168,278

1,128,069

496,469

4,648,731

103,054

317,326

5,069,110

Investments accounted
for using the equity
method3,675

14,855

24,591

3,334

46,45522,544(27)

68,972

Capital expenditures(Note 3)

18,437

5,334

11,48334,00869,262

2,799

6,002

78,063(6,751) 6,632,382

Other profit or loss:
Depreciation andamortization

Segment assets

Sustainability

Share of profit (loss) ofinvestments accounted
for using the equity
methodOther assets:

Financial Section and Company Information(Notes) 1.	The “Others” column is an operating segment that is not included in the reportable segments and includes the logistics and insurance service business andthe geographic improvement business.
2. Adjustments are presented as follows:(1)	Adjustment for segment profit (loss) of ¥(14) million ($(131) thousand) includes inter-segment elimination of ¥(14) million ($(131) thousand).
(2)	Adjustment for segment assets of ¥34,534 million ($317,326 thousand) includes inter-segment elimination of ¥(13,618) million ($(125,136) thousand) andcorporate assets of ¥48,153 million ($442,463 thousand) that are not allocated to any reportable segment. The corporate assets consist mainly of cash andbank deposits associated with financing activities and assets such as investment securities.
(3)	Adjustment for depreciation and amortization of ¥(18) million ($(173) thousand) includes inter-segment elimination of ¥(18) million ($(173) thousand).
(4)	Adjustment for investments accounted for using the equity method of ¥(2) million ($(27) thousand) includes inter-segment elimination of ¥(2) million($(27) thousand).
(5)	Adjustment for capital expenditures of ¥653 million ($6,002 thousand) includes inter-segment elimination of ¥(53) million ($(492) thousand) and corporate
assets of ¥706 million ($6,495 thousand) that are not allocated to any reportable segment. The corporate assets consist mainly of lease equipment related
to the information system of the subsidiary.
3. Capital expenditures do not include the amounts of right-of-use assets.

KANEMATSU Integrated Report 202075

Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)

(JPY)

Reportable segment
Electronics &Devices

Foods & Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

265,530

244,859

139,436

62,063

711,888

282

1

66

24

374

11,960—723,849

103

(478)

Total revenue

265,812244,860

139,50262,087—712,262

12,064(478)

723,849

Segment profit (loss)

18,533

3,951

4,437

2,549

29,472850

26

30,349

1,345

579

864

390

3,179

116

(21)

3,274

(78)

53

28

32

35

327

—

363

197,389

124,172

133,762

48,296503,621

9,520

36,318549,459

—

1,407

2,521

350

4,279

2,591

(3)

6,867

1,377

335

1,101

701

3,516

251

415

4,183

Revenue
External
Inter-segment

Other profit or loss:
Depreciation andamortization
Share of profit (loss) ofinvestments accounted
for using the equity
methodSegment assets
Other assets:
Investments accounted
for using the equity
methodCapital expenditures(Notes) 1.	The “Others” column is an operating segment that is not included in the reportable segments and includes the logistics and insurance service business andthe geographic improvement business.
2. Adjustments are presented as follows:(1)	Adjustment for segment profit (loss) of ¥26 million includes inter-segment elimination of ¥26 million.
(2)	Adjustment for segment assets of ¥36,318 million includes inter-segment elimination of ¥(10,141) million and corporate assets of ¥46,459 million that are
not allocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits associated with financing activities and assets suchas investment securities.
(3)	Adjustment for depreciation and amortization of ¥(21) million includes inter-segment elimination of ¥(21) million.
(4)	Adjustment for investments accounted for using the equity method of ¥(3) million includes inter-segment elimination of ¥(3) million.
(5)	Adjustment for capital expenditures of ¥415 million includes corporate assets of ¥415 million that are not allocated to any reportable segment. The
corporate assets consist mainly of lease equipment related to the information system of the subsidiary.

Adjustments from segment profit (operating profit) to profit before tax presented in the consolidated statements of income are presented as follows:
JPY

2019

2020

Segment profit

28,35230,349260,525

Finance income and finance costs(1,798)(1,535)(16,526)

389

363

3,581

26,94429,177

247,580

Share of profit (loss) of investments accounted forusing the equity method
Profit before tax(3) Information on products and services
The information on products and services is disclosed in Note 6. Revenue.

76

USD

2020

KANEMATSU Integrated Report 2020

(4) Geographic information
JPY

USD

2020

2019

2020

5,452,049

Japan

593,346597,774

Asia

53,32351,157

489,970

North America

53,37153,708490,415

Europe15,421

16,492

141,706

Others

6,338

4,716

58,242

721,802723,849

6,632,382

2020

2019

2020

Japan

65,07547,292597,959

Asia

1,621

1,172

14,897

Total

Kanematsu’s Progress and Strengths

1) External revenue

Revenue is classified by country or region based on the locations of customers.
2) Non-current assets (excluding financial assets and deferred tax assets)
JPY

USD

7,270

6,750

66,808

3,569

2,216

32,797

Others
Total

32

24

303

77,57057,457712,764

Special Feature

North America
Europe(5) Information on major customers
There is no customer whose transaction amount is equal to or more than 10% of the Consolidated Group’s revenue during the fiscal
years ended March 31, 2020 and March 31, 2019.
Review of Operations

8. Trade and Other Receivables
The breakdown of trade and other receivables is presented as follows:
JPY

Notes and accounts receivable

USD

2020

2019

2020

1,823,343

198,434

222,551

Loans receivable

3,150

3,195

28,948

Other

6,807

4,830

62,550Less: loss allowance
Total
Current assets
Non-current assets
Total(2,043)(1,827)(18,776)

206,348

228,749

1,896,064

204,920

227,300

1,882,938

1,428

1,449

13,126206,348

228,749

1,896,064
Sustainability

Information on changes in loss allowance is provided in Note 30. Financial Instruments: (3) Credit risk management.

9. Inventories
The breakdown of inventories is presented as follows:
JPY

USD

2020

2019

2020

891,644

97,037

93,299

2,343

2,335

21,534Work in progress

1,385

597

12,732

100,766

96,232925,910

Total

Financial Section and Company Information

Merchandise and finished goods
Raw materials and supplies

The amounts of inventory write downs that were recognized as expense during the fiscal year ended March 31, 2020 and March 31,
2019 are ¥592,233 million ($5,441,826 thousand) and ¥597,766 million, respectively.
The amounts of inventory write downs that were recognized as expense during the fiscal years ended March 31, 2020 and March 31,
2019 are ¥1,140 million ($10,480 thousand) and ¥276 million, respectively.

KANEMATSU Integrated Report 202077

10. Property, Plant and Equipment(1) Changes in property, plant and equipment
Changes in costs, accumulated depreciation and accumulated impairment losses of property, plant and equipment are presented as follows:[Costs]

As of April 1, 2018

(JPY)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

Land

Construction inprogress

15,40026,825

8,303

301

Right-of-use
assetsTotal—

50,831

Acquisitions

514

2,179

—

522

—

3,216

Acquisitions through business combinations

25

101

—

2

—

129

Transfers from construction in progress

108

214

—

(293)

—

28

Disposals(546)(2,021)—(1)—(2,569)Exchange differences

(33)

149

(1)

12

—

126

Other

99

(174)

—

0

—

(75)

15,56727,274

8,301

544

—

51,688(367)(2,037)——

19,072

16,667

As of April 1, 201915,19925,236

8,301

544

19,072

68,355Acquisitions

1,043

4,699

94

986

6,003

12,827

679

42

305

5

54

1,087

As of March 31, 2019
Increases (decreases) due to adopting new
accounting standards

Acquisitions through businesscombinations
Transfers from construction in progress

351

281

84

(717)

—

—

Disposals(675)(2,043)(16)—(1,355)(4,091)

(17)

(160)

(7)

(10)

(71)

(267)

Other

Exchange differences(1,629)(1,057)

(236)

(8)

527

(2,404)As of March 31, 2020

14,95026,9998,524

801

24,23175,507[Accumulated depreciation and accumulated impairment losses](JPY)As of April 1, 2018

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixturesLand(8,413)(19,293)(1,224)

Construction inprogress—

Right-of-use
assetsTotal—(28,930)(2,552)

Depreciation(759)(1,793)———

Impairment losses

(58)

(20)

—

—

—

(78)

Disposals

390

1,573

—

—

—

1,963

Exchange differences

6

(31)

—

—

—

(25)

Other

4

22

—

—

—

26

(8,830)(19,543)(1,224)——(29,597)

121

1,343

—

—

(1,464)—As of March 31, 2019
Increases (decreases) due to adopting
new accounting standards(8,708)(18,200)(1,224)—(1,464)(29,597)

Depreciation

As of April 1, 2019(757)

(1,572)——(5,934)(8,265)

Impairment losses

(71)

(74)

(405)

—

—

(551)

Disposals

636

935

—

—

904

2,476

9

89

(0)

—

2

101

Other

Exchange differences

1,072

40

—

—

(27)

1,085

As of March 31, 2020

(7,819)(18,782)(1,629)—(6,519)(34,750)[Carrying amount](JPY)
Buildings andstructures

78

Machinery,
vehicles, tools,
furniture andfixtures

Land

Construction inprogress

Right-of-use
assetsTotal

As of March 31, 2019

6,737

7,731

7,077

544

—

22,090

As of March 31, 2020

7,131

8,217

6,895

801

17,71140,756KANEMATSU Integrated Report 2020

[Costs]

As of April 1, 2019

Buildings andstructures

Land

Construction inprogress

143,048

250,615

76,2835,000—

474,946(3,381)(18,722)——

175,252

153,150

Right-of-use
assetsTotal

139,667

231,893

76,2835,000

175,252

628,096

Acquisitions

9,584

43,179871

9,069

55,165

117,868

Acquisitions through businesscombinations

6,245

392

2,810

49

499

9,995

Transfers from construction in progress

3,227

2,589

772

(6,589)——

Disposals(6,209)(18,777)(153)—(12,457)(37,596)

Exchange differences(165)(1,472)

(73)

(95)

(655)

(2,459)Other(14,973)(9,717)(2,178)

(75)

4,848

(22,094)

As of March 31, 2020

137,378

248,089

78,332

7,360

222,651

693,810(USD)

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixturesLand(81,137)(179,576)(11,249)——(271,962)

1,117

12,341——(13,458)—

As of April 1, 2019

(80,020)(167,236)(11,249)—(13,458)(271,962)

Depreciation(6,961)(14,452)——(54,533)(75,946)

Impairment losses

(658)

(684)

(3,725)——(5,067)

Disposals

5,846

8,592

—

—

8,315

22,753

89

822

(1)

—

26

937

9,853

373

—

—

(252)

9,974

(71,850)(172,584)(14,975)—(59,902)(319,312)

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

Land

Construction inprogress

Right-of-use
assetsTotal

65,52775,50463,3587,360

162,748

374,498

As of March 31, 2019

Other
As of March 31, 2020

Construction inprogress

Right-of-use
assets

Total[Carrying amount]

As of March 31, 2020

Review of Operations

Exchange differences

Special Feature[Accumulated depreciation and accumulated impairment losses]

Increases (decreases) due to adopting
new accounting standards

Kanematsu’s Progress and Strengths

As of March 31, 2019
Increases (decreases) due to adopting
new accounting standards(USD)
Machinery,
vehicles, tools,
furniture andfixtures(USD)

Sustainability

The amounts of expenditures relating to property, plant and equipment under construction are presented in the table above as“Construction in progress”.
Depreciation for property, plant and equipment are included in “Cost of sales” and “Selling, general and administrative expenses” inthe consolidated statement of income.
The Consolidated Group has adopted IFRS 16 Leases from the current fiscal year. The Consolidated Group has recognized right-of-use
assets for the lease contracts of the lessee that were classified as operating leases and expensed upon their occurrence in the past by
IAS 17 Leases and has reclassified underlying assets into right-of-use assets for finance leases which is recognized in the consolidated
statements of financial position in the past. The information on changes in accounting policies is provided in Note 2. Basis of Preparing
Consolidated Financial Statements.

JPY

USD

2020

2020

Right-of-use assets for which buildings and structures are the underlying asset

15,915

146,240

Right-of-use assets for which machinery, vehicles, tools, furniture and fixtures are the underlying asset

1,248

11,471

548

5,038

17,711

162,748

Other
Total

KANEMATSU Integrated Report 2020

Financial Section and Company Information(2) Right-of-use assets
The breakdown of underlying assets is presented as follows:7911. Goodwill and Intangible Assets(1) Goodwill
1) Costs, accumulated impairment losses and carrying amount
Changes in costs, accumulated impairment losses and carrying amount of goodwill are presented as follows:[Costs]
JPY

USD

2020

2019

2020

Balance at the beginning of the year

10,1607,578

93,361

Acquisitions through business combinations

1,537

2,485

14,128

(43)

96

(402)

11,654

10,160107,087

2020

2019

2020

(1,349)(1,006)(12,403)

—

(343)

—

(1,349)(1,349)(12,403)

2020

2019

2020

10,304

8,810

94,684

Exchange differences
Balance at the end of the year
[Accumulated impairment losses]

JPY

Balance at the beginning of the year
Impairment losses
Balance at the end of the year

USD

[Carrying amount]
JPY

Carrying amountUSD2) Impairment test
The Consolidated Group’s cash-generating units to which goodwill has been allocated are tested for impairment annually, and whenever there is an indication that the Consolidated Groups may be impaired. The carrying amount of significant goodwill allocated to theConsolidated Group’s cash-generating units are as follows:
JPY

USD

2020

2019

2020

Electronics business of the domestic subsidiaries

4,628

4,248

42,532

Mobile business of the domestic subsidiaries

2,098

2,098

19,284

2,203

2,247

20,250Electronics & Devices segment

Steel, Materials & Plant segment
Oilfield tubing business of the foreign subsidiaries
The recoverable amounts of the Consolidated Group’s cash-­generating units to which significant goodwill has been allocated were calculated based on its value in use founded on thefive-year forecast that was approved by management.
The five-year forecast of cash flows is based on future plansreflecting past performance. In addition, the main assumption
used to determine such forecast was the growth rates of gross

80

KANEMATSU Integrated Report 2020

profits through such terms, such growth rates being consistent
with the forecasts of the nominal GDP growth rates or the like ofthe countries in which such Consolidated Group’s cash-generating
units are situated. The ultimate growth rates are determined byconsidering the average long-term growth rates of the markets
or countries to which the Consolidated Group’s cash-generating
units belong.

2020

2019

Electronics business of the domestic
subsidiaries

7.1%

6.2%

Mobile business of the domestic
subsidiaries

8.3%

8.9%

—%

7.0%

12.7%

11.8%

Kanematsu’s Progress and Strengths

The pre-tax discount rates which were used in calculating the value in use of the Consolidated Group’s cash-generating units towhich significant goodwill has been allocated are as follows:

Electronics & Devices segment

Foods & Grain segment
Pet-related businesses of the domestic
subsidiaries
Steel, Materials & Plant segment
Oilfield tubing business of the foreignsubsidiaries

Special Feature

The goodwill that has been allocated to the Consolidated Group’s cash-generating units are highly unlikely to be impaired significantly
even if major assumptions used for the impairment test would have changed within a reasonable and predictable scope.

(2) Intangible assets
1) Changes in intangible assets
Changes in costs, accumulated amortization and accumulated impairment losses of intangible assets are presented as follows:[Costs]

As of April 1, 2018

(JPY)
Software

Carrier shop operatingrightsRight-of-use assets

Other

Total

17,140—

4,295

30,004

418

—

—

17

435

Acquisitions throughbusiness combinations

52

—

—

2,804

2,856

Disposals

(204)

—

—

(21)

(226)

Exchange differences

14

—

—

144

158

Other

54

—

—

(104)

(49)

8,904

17,140—7,134

33,179

(32)

—

32

—

—

As of April 1, 2019

8,871

17,14032

7,134

33,179Acquisitions

1,039

—

25

7

1,071

23

—

—

4

27

Disposals

(228)

—

(19)

(9)

(257)

Exchange differences

(11)

—

0

(67)

(78)

As of March 31, 2019
Increases (decreases) due
to the application of new
accounting standard

Acquisitions throughbusiness combinations

210

—

(3)

8

215

9,905

17,14033

7,078

34,158Sustainability

Other
As of March 31, 2020

Review of Operations

8,568

Acquisitions

Financial Section and Company Information

KANEMATSU Integrated Report 202081

[Accumulated amortization and accumulated impairment losses]
Software

As of April 1, 2018

Carrier shop operatingrights(JPY)
Right-of-use assets

Other

Total

(7,528)(234)—(1,863)(9,626)

(396)

—

—

(368)

(765)

Impairment losses

(32)

—

—

—

(32)

Disposals

200

—

—

4

205

Exchange differences

(12)

—

—

(52)

(64)

Other

25

—

—

131

156

(7,744)(234)—(2,148)(10,128)

28

—

(28)

—

—

(7,716)

(234)

(28)

(2,148)(10,128)

(437)

—

(1)

(472)

(911)

—

—

—

(0)

(0)

222

—

19

5

248

Amortization

As of March 31, 2019
Increases (decreases) due
to the application of new
accounting standard
As of April 1, 2019
Amortization
Impairment losses
Disposals
Exchange differences
Other
As of March 31, 2020

9

—

(0)

30

39

(17)

—

1

(8)

(24)

(7,939)

(234)

(8)

(2,593)(10,776)[Carrying amount]

(JPY)
Software

Carrier shop operatingrights

As of March 31, 2019

1,159

As of March 31, 2020

1,966

Software

Carrier shop operatingrightsRight-of-use assets

Other

Total

81,817

157,501—

65,560304,878

(296)

—

296

—

—

As of April 1, 2019

81,521

157,501

296

65,560304,878

Acquisitions

9,549

—

231

69

9,849

212

—

—

45

257
(2,367)Right-of-use assets

Other

Total

16,906—

4,986

23,051

16,90624

4,484

23,382[Costs]

As of March 31, 2019
Increases (decreases) due
to the application of new
accounting standard

Acquisitions throughbusiness combinations
Disposals(USD)(2,098)

—

(183)

(85)

Exchange differences

(106)

—

0

(618)

(724)

Other

1,938

—

(33)

74

1,979

As of March 31, 2020

91,016

157,501311

65,045313,873[Accumulated amortization and accumulated impairment losses]
Software

As of March 31, 2019

(USD)
Right-of-use assets

Other

Total

(71,165)(2,155)—(19,744)(93,065)

260

—

(260)

—

—

As of April 1, 2019(70,906)(2,155)(260)(19,744)(93,065)

Amortization(4,019)—(17)(4,341)(8,377)

—

—

—

(1)

(1)

2,047

—

183

51

2,281

87

—

(0)

276

363

Increases (decreases) due
to the application of new
accounting standard

Impairment losses
Disposals
Exchange differences
Other
As of March 31, 202082

Carrier shop operatingrightsKANEMATSU Integrated Report 2020

(161)

—

12

(77)

(226)

(72,951)(2,155)(82)(23,835)(99,023)

[Carrying amount](USD)
Carrier shop operatingrightsRight-of-use assets

Other

Total

18,066

155,346229

41,210214,850

Kanematsu’s Progress and Strengths

As of March 31, 2020

Software

There are no material internally-generated intangible assets as of March 31, 2020 and March 31, 2019.
Amortization expenses are included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated statement of income.
The Consolidated Group has adopted IFRS 16 Leases (hereinafter “IFRS 16”) from the current fiscal year. The Consolidated Group hasrecognized right-of-use assets for the lease contracts of the lessee that were classified as operating leases and expensed upon theiroccurrence in the past by IAS 17 Leases and has reclassified underlying assets into right-of-use assets for finance leases which is recognized in the consolidated statements of financial position in the past. The information on changes in accounting policies is provided in
Note 2. Basis of Preparing Consolidated Financial Statements.

Special Feature2) Carrier shop operating rights
The carrier shop operating rights were recognized as intangible assets upon acquisition of the mobile business by the consolidated subsidiaryof the Company. Fundamentally the rights are expected to exist as long as the business continues, they are determined to be classified as
intangible assets with indefinite useful lives.
The recoverable amounts of the Consolidated Group’s cash-generating units including the carrier shop operating rights were calculated based on its five-year forecast’s value in use that was approved by management. The five-year forecast of cash flows is based on
the future plans anticipated based on past performance. In addition, the main assumption used to determine such forecast was thegrowth rates of gross profits through such terms, such growth rates is consistent with the forecasts of the nominal GDP growth rates orsimilar the countries in which such Consolidated Group’s cash-generating units are situated.
The ultimate growth rates are determined by considering the average long-term growth rates of the markets or countries to which
the Consolidated Group’s cash-generating units belong.
The discount rates before tax used to determine the value in use of the Consolidated Group’s cash-generating units are presented as follows:
2020

2019

7.7%

8.3%

Mobile business of the domestic subsidiaries

Review of Operations

Electronics & Devices segment
The carrier shop operating rights are highly unlikely to be impaired significantly even if major assumptions used for the impairment test
would have changed within a reasonable and predictable scope.
3) Right-of-use assets
The breakdown of underlying assets is presented as follows:

Right-of-use assets for which software is the underlying assets
Total

JPY

USD

2020

2020

24

229

24

229

Sustainability

12. Interests in Associates and Joint Ventures
There are no associates or joint ventures that are material to the Consolidated Group.
The aggregate amounts of interests in individually immaterial associates and joint ventures that are accounted for using the equity
method are presented as follows:[Aggregate carrying amount]
JPY

USD

2019

2020

7,316

6,749

67,227

189

118

1,745

2020

2019

2020

Associates

410

304

3,775

Joint ventures

(21)

59

(194)

Associates
Joint ventures

Financial Section and Company Information

2020[Profit or loss from continuing business]
JPY

USD

KANEMATSU Integrated Report 202083

[Other comprehensive income]
JPY

USD

2019

2020

2020

Associates

(35)

(42)

(330)

Joint ventures

—

—

—

2020

2019

2020

Associates

374

261

3,445

Joint ventures

(21)

59

(194)

[Total comprehensive income]
JPY

USD

13. Other Investments
The breakdown of other investments is presented as follows:
JPY

USD

2020

2019

2020

Financial assets measured at fair value through profit or loss

3,647

3,962

33,512Financial assets measured at fair value through other comprehensive income

24,63228,453

226,335

Total

28,27932,416259,847

2020

2019

2020

Advance payments

15,56919,666

143,065

Prepaid expenses

4,763

4,809

43,769

12

7

116

7,361

7,441

67,641

14. Other Current Assets and Other Non-current Assets
The breakdown of other current assets and other non-current assets is presented as follows:
JPY

Contract assets
Other
Total

USD

27,70731,925

254,591

Current assets

24,58028,420225,860

Non-current assets

3,126

3,504

28,732

27,70731,925

254,591

2020

2019

2020

1,051,911

Total

15. Trade and Other Payables
The breakdown of trade and other payables is presented as follows:
JPY

Notes and accounts payable

114,479

142,951

Import bills payable

46,17942,443424,331

Accounts payable - commission

12,262

10,660112,678

172,922

196,054

1,588,920

172,922

196,054

1,588,920———

172,922

196,054

1,588,920

Total
Current liabilities
Non-current liabilities
Total

84

USD

KANEMATSU Integrated Report 2020

16. Bonds and Borrowings
Kanematsu’s Progress and Strengths

The breakdown of bonds and borrowings is presented as follows:
2019

2020
JPY

USD

JPY

Averageinterest rate
(Note)

Maturity dateCurrent portion of bonds

4,993

45,881———

Short-term borrowings

52,792

485,093

48,463

1.17%—

Current portion of long-term borrowings

10,37895,36625,852

0.94%—

Bonds (excluding the current portion)

10,056

92,407

14,930

—

—

0.68%

August2021 toMay 2033

Long-term borrowings (excluding the current portion)
Total
Current liabilities
Non-current liabilities
Total

65,172598,850

50,258143,394

1,317,598

139,504

68,164626,341

74,31675,229691,257

65,188143,394

1,317,598

139,504
Special Feature(Note) The “average interest rate” is presented as the weighted average interest rate against the borrowings outstanding at the end of the fiscal year. The interest rate
for bonds is presented in the “Details of bonds” below.

[Details of bonds]
IssuerBond Name

Issue dateKanematsu
Corporation

Unsecured Straight
Bonds No 2(5-year bonds)

2019

2020

Collateral

Maturity date

4,985

0.64% per
annum

None

March 10,2021

45,762

4,972

0.42% per
annum

None

December
14, 2022

4,976

45,726

4,971

0.57% per
annum

None

December13, 2024

100

919

—

USD

JPY

March
10, 2016

4,993

45,881

Kanematsu
Corporation

Unsecured Straight
DecemberBonds No 3
14, 2017(5-year bonds)

4,980

Kanematsu
Corporation

Unsecured Straight
DecemberBonds No 4
14, 2017(7-year bonds)
Other

Review of Operations

Coupon rate

JPY

(Note) The maturity schedule of bonds after the end of the current fiscal year is presented as follows:

Within one year

Corporate bonds

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

Over five years

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

4,993

45,881

100

919

4,980

45,762

—

—

4,976

45,726——

17. Provisions
Changes in provisions are presented as follows:
Sustainability(JPY)
Asset retirement obligations

Balance as of April 1, 2019

Other

Total

1,338

218

Provisions made

592

13

1,557
606

Provisions used

(133)

(24)

(157)

—

(86)

(86)

29

—

29

Foreign exchange translation differences

—

(3)

(3)

1,828

117

1,945

Balance as of March 31, 2020

Financial Section and Company Information

Provisions reversed
Unwinding of discount(USD)
Asset retirement obligations

Other

Total

Balance as of April 1, 201912,303

2,011

Provisions made

5,446

124

5,570

Provisions used

(1,224)(226)(1,450)

—

(798)

(798)

273

—

273

—

(29)

(29)

16,7991,081

17,880

Provisions reversed
Unwinding of discountForeign exchange translation differences
Balance as of March 31, 2020

14,314KANEMATSU Integrated Report 2020

85

The current and non-current portions of provisions are presented as follows:
JPY

Current liabilities
Non-current liabilities
Total

USD

2019

2020

2020

30

189

284

1,914

1,368

17,596

1,945

1,557

17,880Asset retirement obligations are obligations for restoring offices and shops in accordance with provisions of the property leasing contracts. While these expenditures will be made after at least one year has passed, the amounts may be affected by the future businessplan and other factors.

18. Other Current Liabilities and Other Non-current Liabilities
The breakdown of other current liabilities and other non-current liabilities is presented as follows:
JPY

2020

USD

2019

2020

Advances received

5,867

7,940

53,910Contract liabilities

9,309

11,27385,540Accrued expenses

3,680

3,464

33,819Unearned revenue

57

74

525

11,52910,774

105,941

Other

30,44333,527279,735

Current liabilities

Total

29,07332,321

267,150

Non-current liabilities

1,369

1,205

12,58630,44333,527279,735

Total

19. Equity(1) Capital management
The Consolidated Group has a basic policy of increasing shareholders’ equity (See Note 1) up to a certain level and strengthening its financial base to enhance its enterprise value throughbuilding new businesses and increasing revenues while maintaining a sound financial position.
The Company sets the maximum ratio of risk assets (See Note2) and examines the appropriateness of scale of shareholders’equity in terms of it being a risk buffer to potential loss that
could result from a deterioration in the companies’ respective
businesses, so that it could manage shareholders’ equity
minutely.
The key indices which the Consolidated Group uses for management of shareholders’ equity are as follows, and these indi-

ces are periodically reported to and monitored by management.
• Ratio of risk assets• Net DER(See Note 3)(Note 1) Shareholders’ equity is defined as equity attributable to owners of the
Parent.
(Note 2) Ratio of risk assets is defined as a ratio of the amount of maximum
potential loss to shareholders’ equity. The amount of maximum
potential loss is the amount of all assets and off balance sheettransactions on the consolidated financial statements multiplied by
the original risk weight set by our consolidated group according to thepotential risk of loss.
(Note 3) Net DER is defined as a ratio of net interest-bearing debt toshareholders’ equity, while net interest-bearing debt is the total
amount of interest-bearing debt excluding lease liabilities (bonds andborrowings) less cash and deposits.

The figures of net DER as of March 31, 2020 and March 31, 2019 are presented as follows:(Unit: times)
Net DER

2020

2019

0.4

0.4

The Consolidated Group is not subjected to any externally imposed capital requirements (except for general requirements, such as
those in the Companies Act).

86

KANEMATSU Integrated Report 2020

(2) Number of shares authorized to be issued, issued shares and shares of treasury stock

Shares authorized to be issued(No-par common stock)2019

200,000,000

200,000,000

84,500,202—
84,500,202

84,500,202—
84,500,202

1,062,027

1,068,136

Issued shares(No-par common stock)
Balance at the beginning of the year
Changes during the period
Balance at the end of the year
Shares of treasury stock(No-par common stock)

Kanematsu’s Progress and Strengths(Unit: share)
2020(Note) Shares of treasury stock in the previous fiscal year included 100,000 shares of the Company held by the associate and 711,500 shares of the Company held by
the stock issuance trust for officers. Shares of treasury stock in the current fiscal year includes 100,000 shares of the Company held by the associate and 702,500
shares of the Company held by the stock issuance trust for officers.

(3) Surplus
Special Feature

1) Capital surplus
Capital surplus mainly consists of legal capital surplus.
2) Retained earnings
Retained earnings consist of legal retained earnings and other retained earnings.
The Companies Act of Japan provides that an amount equal to 10% of distribution of surplus for each fiscal year must be appropriated as legal capital surplus or legal retained earnings until the total aggregate amount of legal capital surplus and legal retained earnings equals 25% of share capital.
Under the Companies Act, the amounts available for distribution are calculated based on the amounts of capital surplus and retained
earnings, exclusive of legal capital surplus and legal retained earnings, all of which are recorded in accordance with the accounting
principles generally accepted in Japan.

(4) Dividends

Resolution

Type of stock

Source ofdividends

Dividends
per share

Total amounts of dividends
JPY

USD

Yen

U.S.$

Record date

Effective date

May 20, 2019
Board of Directors
meeting

Commonstock

Retainedearnings

2,948

27,093

35.00

0.322

Mar. 31, 2019

Jun. 3, 2019

Oct. 31, 2019
Board of Directors
meeting

Commonstock

Retainedearnings

2,527

23,222

30.00

0.276

Sep. 30, 2019

Dec. 2, 2019

Resolution

Type of stock

Source ofdividends

Record date

Effective date

Total amounts of dividends

Dividends
per share

JPY

Yen

Commonstock

Retainedearnings

2,569

30.50

Mar. 31, 2018

Jun. 4, 2018

Oct. 31, 2018
Board of Directors
meeting

Commonstock

Retainedearnings

2,106

25.00

Sep. 30, 2018

Dec. 3, 2018

Sustainability

May 21, 2018
Board of Directors
meeting

Review of Operations

1) Amounts of dividends paid

(Note)	The total amount of dividends resolved by the board of directors meeting on May 20, 2019, October 31, 2019 and October 31, 2018 includes ¥24 million ($229
thousand), ¥21 million ($194 thousand) and ¥17 million of the dividends to the shares of the Company held by the stock issuance trust for officers.

2) Dividends with record date in the current fiscal year, and effective date in the following fiscal year

May 26, 2020
Board of Directors
meetingType of stock

Commonstock

Source ofdividends

Retainedearnings

Dividends
per share

Total amounts of dividends
JPY

USD

Yen

U.S.$

2,527

23,222

30.00

0.276

Record date

Effective dateMar. 31, 2020

Jun. 10, 2020

Financial Section and Company Information

Resolution*T he total amount of dividends resolved by the board of directors meeting on May 26, 2020 includes ¥21 million ($194 thousand) of the dividends to the shares of theCompany held by the stock issuance trust for officers.

KANEMATSU Integrated Report 202087

20. Selling, General and Administrative Expenses
The breakdown of selling, general and administrative expenses is presented as follows:
JPY

USD

2019

2020

2020

Depreciation and amortization (Note)

7,743

2,174

71,153

Personnel expenses

46,082

44,944423,438

Outsourcing service charges

7,606

7,670

69,889Rent expenses (Note)

2,679

6,512

24,617

Other

18,60519,091

170,958

82,71680,393760,056

Total(Note) For the lease contract of the lessee that were classified as operating leases in the past, the Consolidated Group recognizes right-of-use assets and depreciation
expenses on a straight-line basis associated with the application of IFRS 16. Leases expenses for short terms lease assets remain to be recorded as rent expenses.
Please refer to the following notes for further details:• Note 2. Basis of Preparing Consolidated Financial Statements: (5) Changes in accounting policies• Note 3. Significant Accounting Policies: (15) Leases

21. Gain or Loss on Sale or Disposal of Property, Plant and Equipment and Intangible Assets
The breakdown of gain or loss on sale or disposal of property, plant and equipment and intangible assets is presented as follows:
JPY

Gain on sale of property, plant and equipment
Total gain on sale of property, plant and equipment and intangible assets
Loss on sale of property, plant and equipment
Total loss on sale of property, plant and equipment and intangible assets
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets

USD

2020

2019

2020

42

32

391

42

32

391

(4)

(8)

(46)

(4)

(8)

(46)

(150)

(241)

(1,386)

(5)

(21)

(52)

Total loss on disposal of property, plant and equipment and intangible assets

(156)

(262)

(1,438)Gain (loss) on sale or disposal of property, plant and equipment andintangible assets, net

(118)

(238)

(1,093)

22. Impairment Loss
(1) Breakdown of impairment loss by each class of assets
The breakdown of impairment losses by class of assets is presented as follows. Impairment losses for property, plant and equipment
and intangible assets are included in “Impairment loss on property, plant and equipment and intangible assets”, and impairment losses
for goodwill are included in “Other expenses” in the consolidated statement of income.
JPY

Property, plant and equipment

USD

2019

2020

2020

(551)

(78)

(5,067)

Goodwill

—

(343)

—

Intangible assets

(0)

(32)

(1)

(551)

(454)

(5,068)

2019

2020

Total

(2) Breakdown by reportable segment
The breakdown of impairment losses by reportable segment is presented as follows:
JPY

2020

Electronics & Devices

—

(77)

—

(106)

(377)

(977)

Steel, Materials & Plant

(62)

—

(574)

Other/Adjustment and elimination

(382)

—

(3,517)

(551)

(454)

(5,068)

Foods & Grain

Total

88

USD

KANEMATSU Integrated Report 2020

Regarding the pet-related business of the domestic subsidiary, an impairment loss of ¥164 million ($1,510 thousand) was
recognized as a result of reducing the carrying amount of property, plant and equipment which a subsidiary transferred, to therecoverable amount of ¥17 million ($156 thousand) before thetransfer. The recoverable amount is based on fair value less costsof disposal and the fair value is estimated mainly based on transfer value. The asset belongs to the Foods & Grain segment.
While fair values are categorized into three levels depending
on inputs to valuation techniques used, all the fair values above
are categorized within Level 3 of the fair value hierarchy with its
details described in Note 2. Basis of Preparing Consolidated
Financial Statements, (4) Use of estimates and judgments.

Kanematsu’s Progress and Strengths

For the fiscal year ended March 31, 2019, the pet-related business of the domestic subsidiary recognized an impairment lossof ¥319 million as a result of reducing the carrying amount of
goodwill to the recoverable amount of ¥950 million because
future cash flows was anticipated to be lower than its originallyvalue. The recoverable amount is based on the value in use andit is estimated by discounting future cash flows at a pre-tax rateof 7.01%. The asset belongs to the Foods & Grain segment.
For the fiscal year ended March 31, 2020, an impairment lossof ¥382 million ($3,517 thousand) was recognized as a result of
reducing the carrying amount of land and buildings and structures owned in Japan, which the Company intends to sell, to therecoverable amount of ¥1,429 million ($13,134 thousand). The
recoverable amount is based on fair value less costs of disposal
and the fair value is estimated mainly based on sale value. The
asset belongs to the Others segment.

Special Feature

23. Exchange Differences
Exchange differences recognized in profit or loss for the fiscal
years ended March 31, 2020 and March 31, 2019 were ¥943
million ($8,672 thousand) and ¥646 million, respectively and areincluded in “Other income” in the consolidated statement ofincome. In addition, each amount includes gains or losses arisingfrom currency-related derivative transactions that were enteredinto for the purpose of hedging the foreign currency risk. Gains
and losses arising from translating assets and liabilities denominated in a currency other than the functional currency or fromsettling such items are included in profit or loss as they arise.

24. Finance Income and Finance Costs
The breakdown of finance income and finance costs is presented as follows:
JPY

USD

2019

Review of Operations

2020

2020

Interest income
Financial assets measured at amortized cost

271

371

2,495

Total interest income

271

371

2,495

Financial assets measured at fair value through profit or loss

220

227

2,028

Financial assets measured at fair value through other comprehensive income

923

962

8,482

Total dividend income

1,143

1,189

10,511

Total finance income

1,415

1,561

13,006(2,563)(2,446)(23,551)

Dividend income

Interest expenses
Financial liabilities measured at amortized cost
Derivatives(215)(1,821)(2,662)(25,372)

Other finance costs

(452)

(434)

(4,161)

Total other finance costs

(452)

(434)

(4,161)

Total finance costs(3,214)(3,096)(29,532)

Sustainability(198)(2,761)

Total interest expenses
Other finance costs (Note)(Note) The amounts of other finance income and other finance costs are those related to financial assets measured at fair value through profit or loss and the details
are presented in Note 30. Financial Instruments: (6) -3) - (ii) Recurring fair value measurements categorized within Level 3 of the fair value hierarchy.

Financial Section and Company Information

KANEMATSU Integrated Report 202089

25. Earnings Per Share Attributable to Owners of the Parent(1) Earnings per share
Yen

U.S. dollar

2020

2019

2020

Basic earnings per share

172.43198.22

1.58

Diluted earnings per share

172.28198.15

1.58

The amount of diluted earnings per share is calculated by deeming the shares authorized to be issued subject to conditions which are
expected to be provided under the performance-linked stock compensation plan as potential shares.

(2) Bases for calculation of basic earnings per share
JPY

USD

2020

2019

2020

14,39916,605

132,312———

Profit used to calculate basic earnings per share

14,39916,605

132,312

Profit used to calculate diluted earnings per share

14,39916,605

132,312

Profit attributable to owners of the Parent
Amount not attributable to common shareholders of the Parent

Thousand shares

Weighted average number of common shares
Increase due to performance-linked stock compensation plan
Weighted average number of common shares adjusted for dilution

2020

2019

83,50983,77371

31

83,58083,804(Note) In the calculation of earnings per share, the shares of the Company owned by the stock issuance trust for officers below are included in the treasury stock which
is deducted in the calculation of average number of shares during the fiscal year.
The previous fiscal year 437,846 shares
The current fiscal year 705,961 shares

26. Other Components of Equity and Other Comprehensive Income
Changes in other components of equity are presented as follows:
JPY

USD

2020

2019

2020

Balance at the beginning of the year

1,865

1,275

17,143

Changes during the period

(935)

589

(8,596)

Balance at the end of the year

930

1,865

8,547

Balance at the beginning of the year

9,580

12,68488,036

Changes during the period(2,926)(2,940)(26,889)

162

(163)

1,491

6,816

9,580

62,639Balance at the beginning of the year

(293)

(905)

(2,694)

Changes during the period

406

612

3,735

Balance at the end of the year

113

(293)

1,041

Balance at the beginning of the year

—

—

—

Changes during the period

(17)

137

(157)

Reclassification to retained earnings

17

(137)

157

Balance at the end of the year

—

—

—

Balance at the beginning of the year

11,153

13,055

102,484

Changes during the period(3,472)(1,601)(31,906)

179

(300)

1,648

7,860

11,15372,227

Exchange differences on translation of foreign operations

Financial assets measured at fair value through other comprehensive income

Reclassification to retained earnings
Balance at the end of the year
Cash flow hedges

Remeasurements of defined benefit pension plans

Other components of equity

Reclassification to retained earnings
Balance at the end of the year

90

KANEMATSU Integrated Report 2020

The breakdown for the amounts of reclassification adjustments and deferred tax in other comprehensive income is presented as follows:
USD

2019

2020

Amount arising during the year

(4,163)(4,440)(38,258)

Amount before deferred tax(4,163)(4,440)(38,258)

Deferred tax

1,224

1,408

11,249Financial assets measured at fair value through other comprehensive
income(2,939)(3,031)(27,009)

Amount arising during the year

(55)

263

(511)

Amount before deferred tax

(55)

263

(511)

Deferred tax

30

(64)

284

Remeasurements of defined benefit pension plans

(24)

199

(226)

Amount arising during the year

(1,077)948(9,896)

Reclassification adjustments

(28)

—

(265)

(1,105)948(10,161)

Amount arising during the year

358

104

3,296

Reclassification adjustments

224

737

2,062

Amount before deferred tax

583

842

5,358

Deferred tax

(179)

(258)

(1,649)Cash flow hedges

403

584

3,709

(39)

(70)

(359)

3

27

29

(35)

(42)

(330)

(3,702)(1,341)(34,019)

Kanematsu’s Progress and Strengths

JPY

2020

Financial assets measured at fair value through other comprehensive income

Remeasurements of defined benefit pension plans

Exchange differences on translation of foreign operations
Special Feature

Exchange differences on translation of foreign operations
Cash flow hedges

Share of other comprehensive income of investments accounted for using theequity method
Reclassification adjustments
Share of other comprehensive income of investments accounted for using
the equity method
Total other comprehensive income

Review of Operations

Amount arising during the year

27. Cash Flow Information(1) Cash and cash equivalents
The breakdown of cash and cash equivalents and its reconciliation to the amounts presented in the consolidated statement of financial
position are as follows:
JPY

USD

2019

2020

91,10588,941

837,132———

Cash and cash equivalentsin the consolidated statement of financial position

91,10588,941

837,132

Cash and cash equivalentsin the consolidated statement of cash flows

91,10588,941

837,132

Cash and bank deposits except for time deposits with original term of morethan three months
Short-term investments with original maturity of three months or lessSustainability

2020

Financial Section and Company Information

KANEMATSU Integrated Report 202091

(2) Net payment for acquisition of subsidiaries and transfer of business
The breakdown of the main assets and liabilities of newly acquired subsidiaries at the time control thereof was acquired, and the reconciliation between consideration paid and net payment for the acquisition are presented as follows:
JPY

USD

2020

2019

2020

Current assets (including cash and cash equivalents)

9,201

1,700

84,549Non-current assets

1,750

3,012

16,083Current liabilities(7,940)(1,749)(72,963)

Non-current liabilities(1,190)(1,831)(10,935)

Goodwill

1,536

2,480

14,121

Non-controlling interests

(134)

—

(1,233)(3,223)(3,612)(29,621)

Breakdown of assets at the acquisition date

Breakdown of liabilities at the acquisition date

Fair value of consideration paid
Fair value of holding shares of the acquired companies

377

1,440

3,464

Cash and cash equivalents of the acquiree

1,631

443

14,992

Net proceeds from (payment for) acquisition of subsidiaries(835)(1,729)(7,673)

Net proceeds from transfer of business

(380)

—

(3,492)(3) Changes in liabilities for financing activities
Changes in liabilities for financing activities are as follows:
Fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020)(JPY)
Non-cash movements
March 31,
2019

Adjustment
for IFRS 16

April 1, 2019

Cash flows

Lease

Exchangedifferences

Increase anddecreasefromacquisition ofsubsidiaries

OthersMarch 31,2020

Borrowings

124,574—

124,574

1,317

—

(336)

2,788

—

128,344

Bonds

14,930—14,930

—

—

—

100

19

15,049Lease liabilities

1,041

16,853

17,895(5,798)

6,113

(140)

61

(575)

17,555140,546

16,853

157,399(4,480)

6,113

(476)

2,949

(555)

160,949

Total

(USD)
Non-cash movements

Borrowings
Bonds
Lease liabilities
Total

Lease

Exchangedifferences

Increase anddecreasefromacquisition ofsubsidiaries

12,109—(3,090)———164,432(53,283)

56,173

1,446,291(41,174)

56,173

March 31,
2019

Adjustment
for IFRS 16

April 1, 2019

Cash flows

1,144,671—

1,144,671

137,188—

137,188

9,568

154,863

1,291,427

154,863

OthersMarch 31,2020

25,620—1,179,310

919

181

138,288(1,290)565(5,288)161,309(4,380)27,104(5,108)1,478,907

Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)(JPY)
Non-cash movements

April 1, 2018

Cash flows

Exchangedifferences

Increase anddecrease fromacquisition ofsubsidiaries

OthersMarch 31, 2019

Borrowings

117,428

5,545

101

1,500

—

124,574

Bonds

19,898(5,000)——32

14,930

Lease liabilities

1,170

(214)

0

—

85

1,041

Total

138,497

331

101

1,500

117

140,546(4) Significant non-cash transactions
The adoption of IFRS 16 increased right-of-use assets and lease liabilities for the fiscal year ended March 31, 2020. Please refer to Note
10. Property, Plant and Equipment for more information.
There were no significant non-cash transactions for the fiscal year ended March 31, 2019.

92

KANEMATSU Integrated Report 2020

28. Employee Benefits1) Outline of retirement benefit plans adopted by theConsolidated GroupThe Company has a defined benefit pension plan and lump-sum
retirement benefit plan covering substantially all employees
other than directors and executive officers. The benefit amounts
for the defined benefit pension plan are determined based on
the period of employees’ enrollment in the plan, contribution
granted to employees and other factors. The Company has a
responsibility to manage pension assets faithfully and has an
obligation to make contributions for the employees enrolled in
the plan in compliance with applicable laws and regulations.
The pension plan that the Company maintains is a contracttype defined benefit pension plan.

Kanematsu’s Progress and Strengths(1) Post-employment benefits

Matters such as asset management performance, status of
the plan and accounting treatment are reported to theManagement Committee by the Finance Department and the
Personnel & General Affairs Department, which are in charge of
operation of the pension plan. These departments hold a meeting on a timely manner to discuss the matters such as a revision
to the plan and a change in the asset investment policy.
Most of the subsidiaries have unfunded retirement benefit
plans and/or funded pension plans. Employees, other thandirectors, are entitled to, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of employment, a lump-sum retirement benefit based oncompensation at the time of retirement, years of service andother factors. Certain subsidiaries have adopted the defined
contribution retirement benefit plan.

Special Feature2) Defined benefit plan(i) Net defined benefit liability (asset)
Reconciliation of the beginning and ending balances of net defined benefit liability (asset) and the components for the years ended
March 31, 2020 and March 31, 2019 are presented as follows:(JPY)
Present valueof the defined
benefit obligation

Fair value of plan
assets

As of March 31, 2018

19,659(13,442)—

6,217

Current service cost

1,425

—

—

1,425

Net interest

Net defined benefit
liability (asset)

62

(60)

—

2

(248)

(14)

—

(263)

Foreign currency translation difference

3

(7)

—

(4)

Employer contributions to the plan—

(1,013)—(1,013)(422)(1,469)1,047—

Effect of business combinations and disposals

Benefits paid

492

—

—

492

Other

111

9

—

120

As of March 31, 2019

20,036(13,481)—

6,555

Current service cost

1,489

—

—

1,489

46

(24)

—

21

Remeasurements

Net interest

(110)

166

—

55

Foreign currency translation difference

(21)

3

—

(17)

Employer contributions to the plan

—

(973)

—

(973)

Benefits paid

1,311

—

(354)

117

(151)

—

(33)

Other

27

9

—

37

19,917(13,138)—

6,779

As of March 31, 2020

Sustainability(1,666)

Effect of business combinations and disposals

Review of Operations

Remeasurements

Effect of the asset
ceiling

Financial Section and Company Information

KANEMATSU Integrated Report 2020

93

(USD)
Present valueof the defined
benefit obligation

Fair value of plan
assets

As of March 31, 2019

184,105

123,872—

60,233Current service cost

13,683——

13,683

431

(229)

—

202

(1,019)

1,529

—

511

(199)

36

—

(162)

Net interest
Remeasurements
Foreign currency translation difference
Employer contributions to the plan
Benefits paid
Effect of business combinations and disposals
Other
As of March 31, 2020

Effect of the asset
ceiling

Net defined benefit
liability (asset)—(8,945)—(8,945)(15,315)

12,055—(3,260)1,084(1,393)

—

(309)

249

91

—

340

183,019(120,726)—

62,292Remeasurements of the defined benefit obligation for the fiscal years ended March 31, 2020 and March 31, 2019 are the differences
arising primarily from changes in financial assumptions.
(ii) Reconciliation of ending balances of defined benefit obligation/plan assets and net defined benefit liability/asset presented
on the consolidated statements of financial position
JPY

USD

2019

2020

2020

Defined benefit obligations of funded plan

15,345

15,726141,003

Plan assets(13,138)(13,481)(120,726)

Net defined benefit liability of funded plan

2,206

2,245

20,276

Defined benefit obligations of unfunded plan

4,572

4,309

42,016Net liability or asset presented on the consolidated statements of financial
position (Before the effect of the asset ceiling)

6,779

6,555

62,292The measurement date used to determine the main benefit obligations is March 31 of each year.
The Company’s funding policy is based on a number of factors
including the tax deductibility of contributions, funded status,
actuarial calculations and other considerations. Contributions
are intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the
future. In addition, the Company may contribute cash to an
employee retirement benefit trust for any funding deficits inbenefit obligations at the fiscal year end.
The Company’s investment policy is designed to increase thevalue of plan assets within acceptable risk levels to ensure payments of pension benefits to eligible participants, including
future participants. Taking into account the return and risk onplan assets thereon, the Consolidated Group formulates a stra-tegic asset mix which aims at an optimal portfolio on a longterm basis and supervise asset management by selecting
investment management companies and monitoring asset allocations. The strategic asset mix is subject to review in responseto changes in expected market conditions or funded status. The
strategic asset mix is not based on limitations but guidelines,
and therefore, the actual allocation may temporarily exceed orfall below the guidelines. The Company’s target allocation is10% equity securities, 44% debt securities, 36% life insurancecompany general accounts and 10% others.
The Company holds a meeting regularly with the asset management institutions and discusses important issues regarding
pension assets investment.

(iii) Plan assets
The composition of the plan assets as of March 31, 2020.
Plan assets with a quoted market price inan active market

JPY

USD

Equity securities

1,195

10,987——

Debt securities

230

2,119

4,342

39,899JPY

USD

55,920Life insurance company general accounts

—

—

6,085

Other

61

568

1,222

11,234

1,488

13,674

11,650107,052

Total

94

Plan assets without a quoted market pricein an active market

KANEMATSU Integrated Report 2020

The composition of the plan assets as of March 31, 2019.
Plan assets without a quoted market pricein an active market

JPY

JPY

Equity securities

1,383

—

Debt securities

201

4,839

—

6,047

Life insurance company general accounts
Other
Total

58

949

1,643

11,837

Kanematsu’s Progress and Strengths

Plan assets with a quoted market pricein an active market

Equity securities and debt securities above are managed as jointly-managed trusts by trust banks. Plan assets with a quoted market pricein an active market are estimated by using the quoted price. Assets other than equity securities and debt securities are categorized into
the assets without a quoted market price in an active market, which are estimated by using the fair value the trust banks calculated.
(iv) Significant actuarial assumptions
Discount rate

2020

2019

0.5%

0.4%
Special Feature

The assumptions used for the actuarial calculation include the expected rate of salary increase, the mortality rate and the retirement
rate other than the above.
(v) Sensitivity analysis of defined benefit obligations
JPY

USD

2020

2019

2020

Increase in the defined benefit obligation with a 50-basis-point decrease in
the discount rate

829

617

7,624

Decrease in the defined benefit obligation with a 50-basis-point increase in
the discount rate

(914)

(926)

(8,399)(vi) Information on maturity profile of the defined benefit
obligation
The weighted average duration of the defined benefit obligation for the years ended March 31, 2020 and March 31, 2019were 10.1 year and 10.6 year, respectively.

Review of Operations

This analysis is based on the premise that the actuarial assumptions other than the discount rate do not fluctuate and that only the discount rate fluctuates. This method of analysis is based on assumptions, and it is possible that the actual calculation could be influenced
by fluctuations in other variables. Even if the discount rate falls below 0%, the calculation is performed assuming the lower limit of the
discount rate is 0%.
3) Defined contribution plan
Expenses recognized for the defined contribution plan for theyears ended March 31, 2020 and March 31, 2019 were ¥3,593
million ($33,023 thousand) and ¥3,368 million, respectively.

(2) Employee benefit expenses
Employee benefit expenses recognized for the years ended
March 31, 2020 and March 31, 2019 were ¥5,188 million($47,676 thousand) and ¥4,868 million, respectively. Employee
benefit expenses are included in “Cost of sales” and “Selling,
general and administration expenses” in the consolidated statement of income.

Sustainability(vii) Expected contribution to the plan for the year ending
March 31, 2020
The amount of contribution to be made by the Consolidated
Group to plan for the year ending March 31, 2020 is estimatedto be ¥982 million ($9,027 thousand).

Financial Section and Company Information

KANEMATSU Integrated Report 202095

29. Current and Deferred Income Tax(1) Deferred taxes
1) Breakdown of deferred tax assets and deferred tax liabilities
The breakdown of main deferred tax assets and deferred tax liabilities by component is as follows:
JPY

USD

2020

2019

2020

Deferred tax assets
Retirement benefits liabilities

1,871

1,864

17,200Loss allowance

618

540

5,679

Inventories

547

482

5,034

Impairment loss

898

802

8,256

Other investments

627

484

5,767

Golf club memberships

110

111

1,014

Tax losses carried forward

1,060

2,279

9,742

—

20

—

774

1,775

7,114

Cash flow hedges
Goodwill
Other

4,865

4,732

44,710Total deferred tax assets

11,374

13,093

104,516

Offset against deferred tax liabilities(8,613)(10,484)(79,145)

Total deferred tax assets, net

2,761

2,609

25,371

Deferred tax liabilities
Retained earnings in subsidiaries
Financial assets measured at fair value through other comprehensive income

(501)

(450)

(4,610)(3,044)(4,273)(27,977)

Cash flow hedges

(51)

—

(470)

Intangible assets(6,163)(6,216)(56,633)

Other(1,237)(905)(11,372)

Total deferred tax liabilities(10,998)(11,846)(101,062)

Offset against deferred tax assets

8,613

10,484

79,145

Total deferred tax liabilities, net(2,385)(1,362)(21,918)

375

1,247

3,454

2019

2020

Net deferred tax assets2) Details of changes in deferred tax assets and deferred tax liabilities
Details of changes in deferred tax assets and deferred tax liabilities are presented as follows:
JPY

2020

Beginning balance of net deferred tax assets

1,247

3,054

11,461

Deferred tax expense(1,967)(2,782)(18,080)

Income tax on other comprehensive income

1,075

1,086

9,884

Acquisition through business combinations

20

(88)

186

Other
Ending balance of net deferred tax assets

96

USD

KANEMATSU Integrated Report 2020

0

(22)

3

375

1,247

3,454

JPY

Deductible temporary differences

Kanematsu’s Progress and Strengths3) Deductible temporary differences and unused tax losses carried forward for which deferred tax assets were not recognized
The breakdown of deductible temporary differences and unused tax losses carried forward (by expiry date), for which deferred tax
assets were not recognized in the consolidated statement of financial position are presented as follows:
USD

2020

2019

2020

8,425

8,172

77,420Tax losses carried forward
Within one year to expiry

13,022

580

119,661

Between one and five years to expiry

14,16723,304130,185

Between five and ten years to expiry

8,844

10,587

81,270

35

62

326

36,07034,535

331,442Over ten years to expiry
Total tax losses carried forward

Special Feature4) Temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized
The total amounts of temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized as of March 31, 2020 and March 31, 2019 are ¥32,336 million ($297,126 thousand) and ¥28,397 million, respectively. Because
the Consolidated Group is able to control the timing of the reversal of such temporary differences, and it is probable that such temporary differences will not be reversed within the foreseeable future, it did not recognize deferred tax liabilities with respect to such temporary differences.

(2) Income taxes
1) Breakdown of income taxes
The breakdown of income taxes is presented as follows:
JPY

USD

2020

2019

2020

(6,742)(5,945)(61,956)

Origination and reversal of temporary differences(1,781)(2,771)(16,371)

Reassessment of recoverability of deferred tax assets

(186)

(11)

(1,709)(1,967)(2,782)(18,080)(8,710)(8,728)(80,036)

Current tax expense (Note 1)

Total deferred tax expense
Total income taxes

Review of Operations

Deferred tax expense (Note 2)(Notes) 1. The amounts of the benefits arising from previously unrecognized tax losses or temporary differences of a prior period that were used to reduce current tax
expenses for the years ended March 31, 2020 and March 31, 2019 were ¥134 million ($1,231 thousand) and ¥12 million, respectively, and these benefits
were included in the current tax expenses.
2.	Major causes for deferred tax expense by type are tax losses carried forward of ¥(1,219) million ($(11,205) thousand) and goodwill of ¥(1,036) million($(9,521) thousand) for the fiscal year ended March 31, 2020, and loss allowance of ¥(2,230) million and goodwill of ¥(790) million for the fiscal year ended
March 31, 2019.

2) Reconciliation of statutory effective income tax rate in Japan
Reconciliations between the statutory effective tax rate in Japan and the average effective tax rate of the Consolidated Group were as follows:
2019

30.6%

Permanent differences—additions
such as entertainment expenses

0.6%

1.2%

Effect of reassessment of recoverability ofdeferred tax assets

0.7%

0.0%

Effect of tax rate differences(0.2%)(0.1)%

Share of profit (loss) of investments
accounted for using the equity method(0.5%)(0.2)%

1.1%(1.7)%

32.3%

29.9%

Sustainability

2020

30.6%

Statutory effective tax rate
(Adjustments)

Financial Section and Company Information

Other
Average effective tax rate

The statutory effective tax rate for the fiscal year ended March 31, 2020 and March 31, 2019 are calculated to be 30.6% and 30.6%
based on the Corporation Tax, Inhabitant Tax and Business Tax in Japan.

KANEMATSU Integrated Report 202097

30. Financial Instruments(1) Classification of financial instruments
The breakdown of financial instruments for each classification is presented as follows:
JPY

USD

2020

2019

2020

91,10588,941

837,132

Trade and other receivables

206,348

228,749

1,896,064

Other financial assets

10,637

7,188

97,745

Total financial assets measured at amortized cost

216,986

235,938

1,993,809

Other investments

3,647

3,962

33,512Other financial assets

2,116

575

19,447

Total financial assets measured at fair value through profit or loss

5,763

4,538

52,959Other investments

24,63228,453

226,335

Total financial assets measured at fair value through other comprehensive
income24,63228,453

226,335

Total financial assets

338,486

357,871

3,110,234

Trade and other payables

172,922

196,054

1,588,920

Bonds and borrowings

143,394

139,504

1,317,598

Lease Liabilities (Note)

17,555

1,041

161,309

Other financial liabilities (Note)

5,965

6,183

54,812339,836

342,784

3,122,639

Other financial liabilities

712

1,504

6,546

Total financial liabilities measured at fair value through profit or loss

712

1,504

6,546

340,549

344,289

3,129,185

Financial assets
Cash and cash equivalents
Financial assets measured at amortized cost

Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through other comprehensive income

Financial liabilities
Financial liabilities measured at amortized cost

Total financial liabilities measured at amortized cost
Financial liabilities measured at fair value through profit or loss

Total financial liabilities(Note) The details of changing accounting policies and changing presentation methods are presented in Note 2. Basis of Preparing Consolidated Financial Statements.

(2) Basic policies for risk management of financial
instruments
The Consolidated Group is an integrated trading company
engaged in a wide range of business activities on a global basis.
Its headquarters includes business sections that handle merchandising, trading, product manufacturing, services, projectplanning and management, investments and financing activities, both domestically and internationally. Such businesses are
inherently exposed to various risks. The Consolidated Groupdefines and classifies risks per risk item and manages each ofthem in accordance with its nature.

98

KANEMATSU Integrated Report 2020

(3) Credit risk management
1) Credit risks of financial assets owned by the Company(risk exposure and the occurrence of the relevant risk)
The Consolidated Group extends credit to a large number ofcustomers in Japan and abroad in diverse business transactions,
resulting in a number of financial assets such as trade receivables, loans and other financial assets. These financial assets
provide credit accommodation to the various customers; therefore, the Consolidated Group is mainly exposed to the credit
risks related to those customers.
Each department manages credit exposure to each customer
by assigning credit ratings on a customer-by-customer basis andsetting credit exposure limits within the framework of theConsolidated Group’s credit risk control.

(i) Measurement of expected credit losses on tradereceivables
As trade receivables do not contain a significant financing component, the Consolidated Group measures loss allowance at an
amount equal to the lifetime expected credit losses until thetrade receivables are recovered. With regard to past due receivables, the Consolidated Group estimates the lifetime credit losses on the financial instruments individually and measures theamount of loss allowance based upon historical credit loss experience and future recoverable amount. Moreover, as performing
trade receivables comprise a number of customers, theConsolidated Group measures expected credit loss collectively
by grouping those receivables and considering historical credit
loss experience. When those receivables are affected by a material economic change, the provision rate calculated based upon
the historical credit loss experience is adjusted to reflect current
and future economic prospect.
Even when a late payment or request for grace period has
occurred, the Consolidated Group does not regard them as past
due receivables if such late payment or request for grace period
would be attributable to temporary cash shortage as the risk ofdefault would be low, and the debtors are evaluated to have astrong ability to fulfill the obligation of contractual cash flow in
the near future.

Kanematsu’s Progress and Strengths
Special Feature(ii) Measurement of expected credit losses on otherreceivables
When credit risk related to loans has not increased significantly
since the initial recognition at the end of the reporting period,
the Consolidated Group calculates the amount of loss allowanceof the financial instruments by estimating the 12-months
expected credit losses collectively based upon historical credit
loss experience. When those receivables are affected by a material economic change, the provision rate calculated based upon
the historical credit loss experience is adjusted to reflect current
and future economic prospect.
However, when there has been a significant increase in credit
risk since initial recognition as of the end of the fiscal year, theConsolidated Group estimates the lifetime credit losses on thefinancial instruments individually and measures the amount ofloss allowance based upon historical credit loss experience andfuture recoverable amount.

Review of Operations(iii) M easurement of the expected credit losses on the otherinvestments (debt securities)
When credit risk related to debt securities has not increased significantly since initial recognition at the end of the reporting
period, the Consolidated Group calculates the amount of loss
allowance of the financial instruments by estimating the
12-months expected credit losses. However, when there has
been a significant increase in credit risk since initial recognition
as of the end of the fiscal year, the Consolidated Group estimates the lifetime credit losses on the financial instruments andmeasures the amount of loss allowance of the financial instruments. When estimating such expected credit losses, theConsolidated Group uses the default rate published by major
rating agencies.

Financial Section and Company Information

KANEMATSU Integrated Report 2020

Sustainability2) Responses to the risk owned by the Company (purpose,
policy and procedure of the risk management andmethod used to measure such risks)
The Consolidated Group manages its credit risk to the customers
by defining risk management methods and management systems for specific risks in accordance with the regulations on risk
management. Based on such regulations, the Consolidated
Group mitigates credit risk through periodical monitoring of thecustomer’s credit status and undertaking the maturity control
and account balance control, while detecting promptly any
doubtful accounts caused by deterioration in the financial conditions of customers and other factors. Expected credit losses arerecognized and measured through transactions and financial
information related to customers available in the course of suchcredit risk management, while taking macroeconomic conditions such as the number of bankruptcies into consideration.
With regard to loans, the Consolidated Group determines
there has been a significant increase in credit risk of the financial
assets since initial recognition in cases where the cash collectionof the financial assets was delayed (as well as the case of request
for a grace period) after the trade date. However, even whena late payment or request for grace period occurs, theConsolidated Group does not determine that there has beena significant increase in credit risk if such late payment orrequest for grace period would be attributable to temporary
cash shortage, the risk of default would be low and objective
data such as external credit ratings would reveal their ability tofulfill the obligation of contractual cash flow in the near future.
However, the Consolidated Group determines that the creditof the financial assets are impaired, when late payment or request
for grace period do not arise from temporary cash shortage but
significant financial difficulty of the debtor and the recoverabilityof the modified financial assets is significantly doubtful.
The Consolidated Group determines there has been a significant
increase in the credit risk of debt instruments since initial recognition when an “investment grade” at the initial recognition deteriorates to the level below investment grade. For such purpose, rating
information provided by major rating agencies is used.
When guaranteeing the debts of its customers, theConsolidated Group establishes the guarantee limit amounts
based upon the financial position and business condition of thecustomers. The guarantee limit amounts are periodicallyreviewed and maintained at appropriate levels.
When entering into derivative transactions, the Consolidated
Group selects only major financial institutions with high credit
ratings assigned by independent rating agencies so as to minimize
the credit risks. In addition, the Consolidated Group periodicallyreviews credit limits in accordance with the internal regulations.
The Consolidated Group considers trade receivables, loans receivable, and debt instruments as default when all or part of thosefinancial instruments are not recovered or the recoverability of
those financial instruments is determined to be extremely difficult.
Moreover, the Consolidated Group directly writes off the grosscarrying amounts of the credit-impaired financial assets when allor part of the financial assets are evaluated to be uncollectible
and determined that it is appropriate to be written off as a resultof credit check.

993) Quantitative and qualitative information on the amounts arising from expected credit losses(i) Trade and other receivables(JPY)
Loss allowance

Lifetime expected credit losses
Collective assessment

Credit-impaired financial assets

As of April 1, 2018

3

1,981

1. Reclassification to credit-impaired financial
assets—75

2. Incurrence or collection

0

(62)

3. Direct write-off

—

(185)

4. Changes due to foreign exchange—

2

5. Increase (decrease) resulting from changes in
the provision rate based on historical credit loss
experience10—

As of March 31, 2019

15

1,811

1. Reclassification to credit-impaired financial
assets—264

2. Incurrence or collection

(2)

17

3. Direct write-off

—

(68)

4. Changes due to foreign exchange—(1)

5. Increase (decrease) resulting from changes in
the provision rate based on historical credit loss
experience6—

As of March 31, 2020

19

2,024
(JPY)

Gross carrying amount

As of April 1, 2018
1. Financial assets reclassified to credit-impaired
financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2019
1. Financial assets reclassified to credit-impaired
financial assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2020

Lifetime expected credit losses
Collective assessment

Credit-impaired financial assets

221,912

2,239

(75)

75

6,681

(74)

—

(185)

—

2

228,519

2,057

(534)

534

(22,120)

5

—

(68)

—

(1)

205,864

2,527
(USD)

Loss allowance

Collective assessment

Credit-impaired financial assets

139

16,649

1. Reclassification to credit-impaired financial
assets—2,431

2. Incurrence or collection

(20)

158

3. Direct write-off

—

(627)

4. Changes due to foreign exchange

—

(12)

5. Increase (decrease) resulting from changes in
the provision rate based on historical credit loss
experience58—

As of March 31, 2020

178

18,598

As of March 31, 2019100

Lifetime expected credit losses

KANEMATSU Integrated Report 2020

(USD)
Collective assessment

Credit-impaired financial assets

2,099,781

18,908(4,907)

4,907

As of March 31, 2019
1. Financial assets reclassified to credit-impaired
financial assets
2. Incurrence or collection(203,256)

46

—

(627)

3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 2020

—

(12)

1,891,618

23,222

Kanematsu’s Progress and Strengths

Gross carrying amount

Lifetime expected credit losses(ii) Other investments (debt instrument securities)(JPY)
Expected credit losses
Loss allowance

12 months

Lifetime
Individual assessment

Credit-impaired financial assets

—

—

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial
assets———(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection

(5)

—

—

3. Direct write-off

—

—

—

4. Increase (decrease) due to changes in default
rate

—

—

—

As of March 31, 2019

—

—

—

1 Changes in financial instruments recognized at
the beginning of the period

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial
assets———(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection

—

—

—

3. Direct write-off

—

—

—

4. Increase (decrease) due to changes in default
rate

—

—

—

As of March 31, 2020

—

—

—

Review of Operations

5

1 Changes in financial instruments recognized at
the beginning of the period

Special Feature

As of April 1, 2018

Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 2020

101

(JPY)
Expected credit losses
Gross carrying amount

As of April 1, 2018

12 months

Lifetime
Individual assessment

Credit-impaired financial assets

1,000

—

—

1. Changes in financial instruments recognized at
the beginning of the period

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial assets

—

—

—

(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection(1,000)——3. Direct write-off

—

—

—

4. Other changes

—

—

—

As of March 31, 2019

—

—

—

1. Changes in financial instruments recognized at
the beginning of the period

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial
assets———(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection

—

—

—

3. Direct write-off

—

—

—

4. Other changes

—

—

—

As of March 31, 2020

—

—

—
(USD)

Expected credit losses
Loss allowance

12 months

Lifetime
Individual assessment

Credit-impaired financial assets

As of March 31, 2019

—

—

—

1. Changes in financial instruments recognized at
the beginning of the period

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial assets

—

—

—

(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection

—

—

—

3. Direct write-off

—

—

—

4. Increase (decrease) due to changes in default
rate

—

—

—

As of March 31, 2020

—

—

—
(USD)

Expected credit losses
Gross carrying amount

12 months

Lifetime
Individual assessment

Credit-impaired financial assets

As of March 31, 2019

—

—

—

1. Changes in financial instruments recognized at
the beginning of the period

—

—

—

(a) Reclassified to lifetime expected credit losses

—

—

—

(b) Reclassified to credit-impaired financial assets

—

—

—

(c) Individual financial assets reclassified fromcredit-impaired financial assets

—

—

—

2. Incurrence or collection

—

—

—

3. Direct write-off

—

—

—

4. Other changes

—

—

—

As of March 31, 2020

—

—

—

(iii) T here is no contractual, uncollected balance for financial assets written off during the fiscal year ended March 31, 2020, forwhich collecting efforts are still being made.

102

KANEMATSU Integrated Report 2020

Balance of receivables (gross)
JPY

USD

Provision rate based on
historical credit loss
experience

Kanematsu’s Progress and Strengths4) Credit risk exposure
Trade and other receivables
As of March 31, 2020
Lifetime expected credit losses
JPY

USD

Performing receivables

205,864

1,891,618

0.01%

19

178

Past due receivables

2,527

23,22280.09%

2,024

18,598

Total

208,392

1,914,840

—

2,043

18,776

Past due receivables include loans receivable of ¥1,712 million ($15,738 thousand), for which a loss allowance of ¥1,479 million($13,591 thousand) has been already recognized.
As of March 31, 2019
Balance of receivables (gross)

Lifetime expected credit losses

JPY

Provision rate based on historical credit
loss experience

Performing receivables

228,519

0.01%

15

Past due receivables

2,057

88.05%

1,811

230,576—

1,827

Past due receivables include loans receivable of ¥1,724 million, for which a loss allowance of ¥1,479 million has been already recognized.
5) Maximum exposure to credit risks
The Consolidated Group’s maximum exposure to credit risks is as follows:
The Consolidated Group’s maximum credit risk exposure (gross) represents the amount of the maximum exposure with respect tocredit risks without taking into account any collateral held or other credit enhancement. The Consolidated Group’s maximum credit risk
exposure (net) represents the amount of the maximum exposure with respect to credit risks reflecting the mitigation effect of the collateral held or other credit enhancement.

Special Feature

Total

JPY

As of March 31, 2020
Maximum
credit risk exposure(gross)Lossallowance

JPY

USD

91,105

837,132——

Trade and otherreceivables

208,392 1,914,840(2,043)(18,776)

Other financial
assets

10,637

97,745——

310,134 2,849,717(2,043)(18,776)

Cash and cash
equivalents

JPY

USD

JPY

USD

91,105

Total collateral pledged
and credit enhancements
JPY

USD

837,132——

206,348 1,896,064(296)(2,726)

97,745——

308,091 2,830,941(296)(2,726)

Maximum
credit risk
exposure (net)
JPY

USD

91,105

837,132

Financial assets
measured atamortized cost

Total

10,637

Review of Operations

Grosscarrying amount

206,052 1,893,338
10,637

97,745

307,794 2,828,215
Sustainability

The amount of loss allowance for credit-impaired financial assets is reduced by ¥296 million ($2,726 thousand) through collateralpledged and credit enhancements.

Financial Section and Company Information

KANEMATSU Integrated Report 2020103

As of March 31, 2019
Gross
carrying amountLossallowance

Maximum
credit risk exposure(gross)Total collateralpledged and credit
enhancements

Maximum
credit risk
exposure (net)

JPY

JPY

JPY

JPY

JPY

Cash and cash equivalents

88,941—

88,941—

88,941

230,576(1,827)228,749(173)

228,576

7,188

—

7,188

—

7,188

326,707(1,827)

324,880(173)

324,706

Financial assets measured atamortized cost
Trade and other receivables
Other financial assets
Total

The amount of loss allowance for credit-impaired financial assets is reduced by ¥173 million through collateral pledged and credit
enhancements.

(4) Liquidity risk management
The Consolidated Group raises funds through borrowings from financial institutions or issuance of bonds. Accordingly, in the event of
a disruption to the financial system or financial/capital markets, or a major downgrade of the Consolidated Group’s credit rating by arating agency, the Consolidated Group’s fundraising becomes constrained and consequently there is a possibility that the Consolidated
Group will not be able to carry out the payment on the date of payment.
The Consolidated Group has sufficient levels of cash and cash equivalents and maintains a long-term (unused) commitment line
agreement with a major financial institution in the amount of ¥10.0 billion ($91,886 thousand) to ensure liquidity and stability of funds.
The Consolidated Group makes efforts to maintain good relationships with each financial institution.
1) Non-derivative financial liabilities
The breakdown of non-derivative financial liabilities by due date is presented as follows:
As of March 31, 2020
Within one year

Trade and other payables

JPY

USD

Between one andfive years
JPY

Over
five years

USD

JPY

Total
USD

JPY

USD

172,922

1,588,920

—

—

—

—

172,922

1,588,920

Bonds

5,079

46,678

10,241

94,106——15,321

140,784

Borrowings

63,779586,045

61,303563,300

4,886

44,901

129,969

1,194,246

Lease liabilities

6,373

58,563

8,507

78,172

2,683

24,66017,564

161,395

Deposits received

3,042

27,955

—

—

0

3

3,042

27,957

850

7,814

18

174

1,843

16,943

2,713

24,931

Guarantee deposits received
Other
Total

209

1,923

—

—

—

—

209

1,923

252,256

2,317,897

80,071

735,753

9,414

86,507

341,743

3,140,156

As of March 31, 2019

Trade and other payables
Bonds
Borrowings

Within one year

Between one andfive years

Overfive years

Total

JPY

JPY

JPY

JPY

196,054——

196,054

81

10,201

5,020

15,30275,23848,886

2,466

126,591

Lease liabilities

410

674

69

1,154

Deposits received

3,506

—

0

3,506

938

17

1,608

2,564

Guarantee deposits received
Other
Total

112

—

—

112

276,343

59,7799,164

345,287

The Consolidated Group has guarantee obligations of ¥1,025 million ($9,427 thousand) and ¥1,165 million as of March 31, 2020 andMarch 31, 2019 respectively.

104

KANEMATSU Integrated Report 2020

As of March 31, 2020
Within one year

Between one andfive years

Overfive years

JPY

USD

JPY

33,803

310,612

605

5,560

—

34,207314,325

612

5,628

404

3,712

7

68

Interest rate-related derivatives

107

991

95

Commodity-related derivatives

86

794

598

5,497

USD

JPY

Total
USD

JPY

USD

—

34,409316,172——

34,820319,953

—

—

411

3,781

873

—

—

202

1,864

1

13

—

—

87

807

103

955

—

—

702

6,452

Currency-related derivatives
Cash inflows
Cash outflows
Subtotal

Total

Kanematsu’s Progress and Strengths2) Derivative liabilities
The breakdown of derivative liabilities by due date is presented as follows:

As of March 31, 2019
Between one andfive years

Overfive years

Total

JPY

JPY

JPY

JPY

Currency-related derivatives
Cash inflows

35,35758—

35,416

Cash outflows

35,84960—

35,910

492

1

—

494

Interest rate-related derivatives

194

207

—

402

Commodity-related derivatives

579

—

—

579

1,266

209

—

1,475

Subtotal

Total(ii) Sensitivity analysis of foreign currency risk
In regards to financial instruments held by the Consolidated
Group as of the end of the reporting period, the following chartshows the amounts affecting profit before tax and other comprehensive income (before tax effect adjustments), as reported
in the consolidated financial statements, that would result from
1% appreciation of Japanese Yen against U.S. dollars.
The analysis is performed based on the assumption that all
the other variables are held constant.
In addition, such analysis does not include the affectedamounts based on translations (into Japanese yen) of financial
instruments denominated in functional currency, income andexpenses denominated in foreign currency and assets and liabilities of foreign operations.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

1) Foreign currency risk(i) Nature of foreign currency risk and its management policy
The Consolidated Group is engaged in foreign currency transactions in various currencies and terms incidental to its export andimport trading. The Consolidated Group participates in derivatives transactions such as forward contracts to reduce the risk ofcurrency fluctuation.
The Consolidated Group also has local subsidiaries and business corporations overseas. Account balances at these companies
are converted into yen at the exchange rates prevailing at the endof the reporting period, for the purposes of preparing consolidated

financial statements. As a result, equity attributable to owners of
the Parent may change through exchange difference of foreign
operations associated with exchange rate fluctuations.
In principle, the Consolidated Group enters into forward
exchange contracts to hedge against the exchange rate currency
fluctuation risk of foreign currency-denominated receivables andpayables that are controlled by currency and by contract month.
The Consolidated Group also enters into forward exchange­contracts to hedge against foreign currency-denominatedreceivables and payables that are highly probable to arise fromexport/import-related forecast transactions.

Sustainability

In many cases, the foreign currency risk, interest rate risk and riskof price fluctuations associated with goods traded incidental tobusiness transactions are hedged in with the transaction termswith trade partners, etc. In addition, the Consolidated Group has
established a system under which a limit (position limit) and aloss limit are set for foreign exchange, interest rates (funds),
products and their derivatives, taking into account the scale of
the risk and the income of each internal unit and company, sothat it can quickly reduce its position when the predetermined
limit is exceeded. Also, the price fluctuation risk of these positions are mitigated by using derivatives as a hedge. The positions
are reported to management meeting regularly. When the predetermined limit is exceeded, the Consolidated Group mitigatesthese positions after the analysis of the reason without delay.

Review of Operations(5) Market risk management

Special FeatureWithin one year

105

JPY

USD

2020

2019

2020

(31)

10

(290)

(273)

(181)

(2,514)

Profit before tax
U.S. dollar
Other comprehensive income
U.S. dollar
2) Interest rate risk(i) Nature of interest rate risk and its management policy
The Consolidated Group raises most funds needed for operating
and financing activities in the form of borrowings from financial
institutions at variable interest rates, with the exception of certain loans. Since these borrowings and fund management are
exposed to an interest rate risk, interest expenses for theConsolidated Group may increase with a rise in interest rates.
The Company and certain consolidated subsidiaries enter into
interest rate swap contracts to avoid the interest rate fluctuation
risk stemming from the borrowings.

(ii) Sensitivity analysis of interest rate risk
In regards to financial instruments held by the Consolidated
Group at the end of the reporting period, the following tableshows the amounts affecting profit before tax assuming that theinterest rate increases by 1%.
Under the analysis, the amounts affecting profit before tax are
calculated by multiplying the net balance of floating rate financial instruments as of March 31, 2020 and 2019 by 1%, without
considering future changes in the net balance, currency
exchange fluctuations and dispersing effects for floating rateborrowings derived from the difference in timing of refinancing
and resetting of the interest rate, and based on the assumptionthat all the other variables are held constant.

JPY

Profit before tax3) Commodity price risk(i) Nature of commodity price risk and its management policy
In its mainstay commodity trading business in Japan and overseas, the Consolidated Group deals with grains, meat products
and petroleum products which are influenced by market conditions. When the positions in these commodities increase, theConsolidated Group will be exposed to the commodity pricefluctuation risk stemming from rapid movements in commodities prices or a decline in demand.
The Consolidated Group strives to reduce our exposure to
price volatility by hedge-selling commodities, matching thequantity and timing of buying and selling, and utilizing­commodity-related derivatives for hedging purposes.

USD

2020

2019

2020

(969)

(883)

(8,908)(ii) Sensitivity analysis of commodity price risk
In regards to commodity-related derivatives held by theConsolidated Group at the end of the reporting period, the­following table shows the amounts affecting profit before tax
and other comprehensive income (before the tax effect) assumingthat the commodity price decreases by 1%.
The analysis is performed based on the assumption that all
the other variables are held constant.

JPY

2019

2020

(75)

(74)

(698)

Foods

(49)

(59)

(451)

Fuels

(26)

(14)

(247)

(0)

(1)

(4)

Foods

(0)

(1)

(4)

Fuels

—

—

—

Profit before tax

Other comprehensive income4) Share price risk(i) Nature of share price risk and its management policy
The Consolidated Group holds marketable securities, which areexposed to the market price fluctuation risk.
The Consolidated Group attempts to reduce share price risk by
periodically reviewing its shares held by the Consolidated Groupand selling those shares that it holds without strong rationale.

106

USD

2020

KANEMATSU Integrated Report 2020(ii) Sensitivity analysis of share price risk
In regards to listed shares held by the Consolidated Group at theend of the reporting period, the following table shows theamounts affecting other comprehensive income (before the tax
effect) assuming that the share price decreases by 1%.
The analysis is performed based on the assumption that all
the other variables are held constant.

JPY

2019

2020

(143)

(164)

(1,322)

Kanematsu’s Progress and Strengths

Other comprehensive income

USD

2020

(6) Fair value of financial instruments
1) Fair value measurement
Fair values of financial instruments are presented as follows:
Fair values are categorized into three levels of the fair value hierarchy depending on inputs to valuation techniques; details aredescribed in Note 2. Basis of Preparing Consolidated Financial Statements: (4) Use of estimates and judgments.
2) Financial instruments measured at amortized cost
2020
Type

2019

Carrying amount

Fair value

Carrying amount

Fair value

JPY

USD

JPY

USD

JPY

Trade and other receivables

1,428

13,126

1,428

13,126

1,449

1,449

Guarantee deposits

6,783

62,331

6,783

62,331

3,592

3,592

Other financial assets

586

5,390

586

5,390

623

623

Total

8,798

80,846

8,798

80,846

5,665

5,665

Bonds and borrowings

75,229691,257

75,273

691,661

65,18865,393Long-term lease obligations

11,251

103,390

11,251

103,390

670

670

Long-term deposits received

0

3

0

3

0

0

1,862

17,118

1,862

17,118

1,625

1,625

88,344

811,768

88,388812,172

67,48567,690Financial assets

Long-term guarantee deposits
received
Total

The fair values stated above are calculated as follows:(ii) Guarantee deposits
The fair value of guarantee deposits is the present value of
future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.

(vi) Long-term deposits received
The fair value of the long-term deposits received is the present
value of future cash flows discounted by an interest rate thatreflects time to maturity and credit risk.

(iii) Other financial assets
The fair value of other financial assets is the present value of
future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.

(vii) Long-term guarantee deposits received
The fair value of long-term guarantee deposits received is thepresent value of future cash flows discounted by an interest ratethat reflects time to maturity and credit risk.

(iv) Bonds and borrowings
The fair value of bonds is determined based on their market price.
The fair value of borrowings is the present value of the sum of
principal and interest payments discounted using an assumed
interest rate on equivalent incremental borrowings.

Financial assets and liabilities measured at amortized cost are
categorized within Level 2 of the fair value hierarchy.
Financial Section and Company Information(v) Long-term lease liabilities
The fair value of long-term lease liabilities is the present value of
future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.

Sustainability(i) Trade and other receivables
The fair value of trade and other receivables is the present valueof future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.

Review of Operations

The carrying amounts of trade and other receivables, other financial assets, trade and other payables, bonds and borrowings and otherfinancial liabilities, all of which are categorized into current assets or current liabilities of financial instruments measured at amortized
cost, approximate their fair values; therefore, those amounts are not included in the table above.

Special Feature

Financial liabilities

KANEMATSU Integrated Report 2020

107

3) Financial instruments measured at fair value(i) Analysis of fair value by hierarchy level
The following tables provide the breakdown by hierarchy level of financial assets and liabilities that are measured at fair value on
a recurring basis. No financial assets and liabilities are measured at fair value on a non-recurring basis. There were no material transfers
between different levels for the fiscal years ended March 31, 2020 and March 31, 2019.
As of March 31, 2020
Level 1JPY

Level 2
USD

Level 3

JPY

USD

Total

JPY

USD

JPY

USD

AssetsOther investments
Financial assets measured at fairvalue through profit or loss
Stock

—

—

—

—

3,647

33,512

3,647

33,512

14,385132,187——

10,246

94,14824,632

226,335

—

—

1,146

10,536

—

—

1,146

10,536

Financial assets measured at fairvalue through othercomprehensive income
Stock
Other financial assets
Derivative transactions:
Foreign exchangeInterest rate

—

—

—

—

—

—

—

—

Commodity

966

8,884

2

27

—

—

969

8,911

Foreign exchange

—

—

(411)

(3,781)

—

—

(411)

(3,781)

Interest rate

—

—

(213)

(1,958)

—

—

(213)

(1,958)

Commodity

(55)

(512)

(32)

(294)

—

—

(87)

(807)

15,296

140,558

492

4,530

13,893

127,659

29,683272,748

Liabilities
Other financial liabilities
Derivative transactions:

Total
As of March 31, 2019

Level 1

Level 2

Level 3

Total

JPY

JPY

JPY

JPY

AssetsOther investments
Financial assets measured at fairvalue through profit or loss
Stock

—

—

3,962

3,962

16,590—11,86228,453Foreign exchange

—

530

—

530

Interest rate

—

—

—

—

Commodity

44

—

—

44

Foreign exchange

—

(494)

—

(494)

Interest rate

—

(431)

—

(431)

Financial assets measured at fairvalue through othercomprehensive income
Stock
Other financial assets
Derivative transactions:

Liabilities
Other financial liabilities
Derivative transactions:

Commodity
Total

108

KANEMATSU Integrated Report 2020

(579)

—

—

(579)

16,055(394)

15,82531,486

(b) Derivative financial assets and liabilities
Currency-related derivatives
The fair value of forward exchange transactions is calculated
based on the forward exchange rate at the end of the fiscal year.

(a) Other investments

Interest rate-related derivatives
The fair value of interest-rate swaps is the present value of
future cash flows discounted by an interest rate that reflects
time to settlement, as well as market conditions.
Commodity-related derivatives
The fair value of commodity futures transactions is calculatedusing final prices on commodities exchanges as of the fiscal
year-end. The fair value of commodity swap transactions is calculated based on the index prices publicly announced at the endof the fiscal year.
Commodity futures transactions are categorized within Level
1 of fair value hierarchy. All other derivative financial assets andliabilities are categorized within Level 2 of the fair value hierarchy.

Special Feature

The fair value of listed shares is the quoted price in an active
market, and is categorized within fair value hierarchy Level 1.
The fair value of unlisted shares is calculated using valuation
methods including discounted future cash flows, market pricesof comparable companies, net asset value, and other valuation
methods, and is categorized within fair value hierarchy Level 3.
Measuring the fair value of unlisted shares involves the use ofunobservable inputs such as discount rate and valuation multiples, as well as any necessary adjustments including discounts
for a lack of liquidity.
The Company determines the policies and procedures formeasuring the fair value of unlisted shares and convertible
bonds, and reviews the approach to measuring fair value on arecurring basis including the valuation model, by obtaining theinformation on business operations and business plans associated with each equity issuer and confirming the data from comparable public companies.

Kanematsu’s Progress and Strengths

The methods of determining the fair value of the above instruments are described as follows:(ii) Recurring fair value measurements categorized within Level 3 of the fair value hierarchy
The changes in financial assets and liabilities that are measured at fair value on a recurring basis and are categorized within Level 3 ofthe fair value hierarchy are presented as follows. There were no material transfers between different levels for the years ended March
31, 2020 and March 31, 2019.
2019

2020
FVPL
JPY

Balance atthe beginning of the year

3,962

Total

FVOCI
USD

JPY

Other investments

USD

JPY

USD

36,414 11,862 109,001 15,825 145,416

Total

FVPL

FVOCI

JPY

JPY

JPY

4,168

14,13318,302

Total gains or losses
Profit or loss (Note 1)
Other comprehensive income (Note 2)
Purchase(452) (4,161)——(452) (4,161)

(434)

—

(434)

(1,692) (15,551) (1,692) (15,551)—(2,161)(2,161)

—

—

179

1,650

351

3,233

531

4,883

110

156

267

Sale

—

—

(202)

(1,864)(202) (1,864)

—

(264)

(264)

Foreign currency translation difference

(42)

(392)

(0)

(1)

(42)

(393)

118

0

118

Other

—

—

(72)

(671)

(72)

(671)

—

(1)

(1)

94,148 13,893 127,659

3,962

11,862

15,825

Balance at the end of the year

3,647

33,512 10,246

Sustainability

FVPL: Financial assets measured at fair value through profit or loss.
FVOCI: Financial assets measured at fair value through other comprehensive income.
(Notes) 1. The gains or losses are included in “Other finance income” or “Other finance costs” in the consolidated statement of income. Of those gains or losses
recognized in profit or loss, the amounts arising from financial instruments that were held at the period end are ¥(452) million ($(4,161) thousand) for the
fiscal year ended March 31, 2020 and ¥(434) million for the fiscal year ended March 31, 2019.
2. The gains or losses are included in “Financial assets measured at fair value through other comprehensive income” in the consolidated statement ofcomprehensive income.

Review of Operations

Other investments

Financial Section and Company Information

KANEMATSU Integrated Report 2020

109

(iii) Quantitative Information about the financial instruments categorized within fair value hierarchy Level 3
The following tables present quantitative information on the material assets categorized within Level 3 of the fair value hierarchy,
which were measured at fair value on a recurring basis.
As of March 31, 2020
Category

Fair value

Valuation techniqueSignificant unobservable inputs

Weighted
average of input
valuesJPY

USD

Financial assets measured atfair value through profit
or loss

1,887

17,344

Discounted cash flow
methodDiscount rate

2.6%

Financial assets measured atfair value through profit
or loss

1,759

16,168

Net asset value method——

Financial assets measured atfair value through othercomprehensive income

9,241

84,917

Market multiple method

P/B ratio
Illiquidity discount

0.9 times
30.0%

Financial assets measured atfair value through othercomprehensive income

1,004

9,231

Net asset value method——

As of March 31, 2019
Fair value

Category

JPY

Valuation techniqueSignificant unobservable inputs

Weighted
average of input
valuesDiscount rate

3.1%

Financial assets measured at fair value
through profit or loss

2,351

Discounted cash flow method

Financial assets measured at fair value
through profit or loss

1,610

Net asset value method——

Financial assets measured at fair value
through other comprehensive income

10,863Market multiple method

P/B ratio
Illiquidity discount

1.1 times
30.0%

Financial assets measured at fair value
through other comprehensive income

998

Net asset value method——

The significant unobservable inputs used in measuring the fair value of unlisted shares are the discount rate, illiquidity discount and P/Bratio (price-to-book ratio). A substantial increase (or decrease) in the discount rate or illiquidity discount causes the fair value to substantially fall (or rise), while a substantial increase (or decrease) in the P/B ratio causes the fair value to substantially rise (or fall).

(7) Financial assets measured at fair value through other comprehensive income
With respect to investments in equity instruments held for the purpose of maintaining and strengthening relationships with business partners,
the Consolidated Group has designated such investments as financial assets to be measured at fair value through other c­ omprehensive income
in view of the holding purpose.
1) Fair value of major items of investment
The following tables present the fair value of major items of investment in equity instruments designated as financial assets measured
at fair value through other comprehensive income.
As of March 31, 2020
Name of issuer

USD

Tokio Marine Holdings, Inc.

2,962

27,223MARUDAI FOOD CO., LTD.

2,347

21,572Nisshin Seifun Group Inc.

1,639

15,068

Daio Paper Corporation

1,116

10,261

SOTSU CORPORATION

984

9,046

The Norinchukin Bank

980

9,013

BOT Lease Co., Ltd.

946

8,696

SHIN KURUSHIMA DOCKYARD CO., LTD.

788

7,250

Alpha Group Inc.

652

5,994

F.C.C. CO., LTD.
Other

110

AmountJPY

KANEMATSU Integrated Report 2020

488

4,486

11,723

107,726

As of March 31, 2019
Kanematsu’s Progress and Strengths

AmountName of issuer

JPY

Tokio Marine Holdings, Inc.

3,209

Nisshin Seifun Group Inc.

2,311

MARUDAI FOOD CO., LTD.

2,258

SOTSU CORPORATION

1,299

BOT Lease Co., Ltd.

1,148

SHIN KURUSHIMA DOCKYARD CO., LTD.

1,049

Daio Paper Corporation

1,042

nms Holdings Corporation

974

The Norinchukin Bank

937

F.C.C. Co., Ltd.

723

Other

13,498

JPY

USD

2020

2019

2020

Investments derecognized during the year

13

0

127

Investments held at the end of the year

909

962

8,355

923

962

8,482

Total

JPY

USD

2020

2019

2020

Fair value on the date of sale

436

267

4,013

Cumulative gains (losses) on sale

203

257

1,866

Review of Operations

3) Financial assets measured at fair value through other comprehensive income that were derecognized during the fiscal year
The Consolidated Group periodically reviews its held shares and sells those shares that it holds without a strong rationale with gains orlosses on sale recognized in other comprehensive income. The following table presents the fair value on the date of sale and cumulative
gains or losses on sale.

Special Feature2) Dividend income

4) Reclassification to retained earnings
The Consolidated Group reclassifies to retained earnings cumulative gains or losses arising from changes in the fair value of financial
assets measured at fair value through other comprehensive income in either of the following cases: when an investment is disposed of,or when there is a significant decline in the fair value. Such cumulative gains or losses in other comprehensive income that were reclassified to retained earnings for the years ended March 31, 2020 and March 31, 2019 were ¥(162) million ($(1,491) thousand) and ¥163
million, respectively.

KANEMATSU Integrated Report 2020

Financial Section and Company Information(Cash Flow Hedge)
A cash flow hedge is a hedge of the exposure to variability in future cash flows arising from a forecast transaction or recognized assets
or liabilities. While a hedge is designated as cash flow hedge as long as the hedge is effective, the changes in the fair value of qualifying
hedging instrument should be recorded as other comprehensive income in the Consolidated Statement of Comprehensive Income. The
Consolidated Group continues such accounting treatment until variability in future cash flows arising from unrecognized forecast transactions or recognized assets or liabilities designated as hedged items are recorded in profit or loss. Moreover, portions determined to beineffective for hedging accounting are recognized in profit or loss.
The Consolidated Group designates the following instruments as cash flow hedges: forward exchange contracts to fix cash flows
from foreign currency denominated receivables and payables, foreign currency denominated firm commitments and foreign currency
denominated forecast transactions, interest rate swaps to fix variable interest rate on floating rate financial liabilities, and commodity
futures to fix cash flows from forecast transactions of commodity trade.
When applying hedge accounting, the Consolidated Group confirms that there are economic relationships between the hedged
items and hedging instruments through qualitative assessments, which show whether the critical terms of the hedging instruments
and the hedged items match exactly or are closely aligned, and quantitative assessments, which show fluctuations of the value ofhedged items and hedging instruments by the same risk offset each other, in order to confirm there are economic relationships thatvariability in fair value or cash flows of the hedged items that are attributable to the hedged risk shall be offset by the changes in fairvalue or cash flows of the hedging instruments. The Consolidated Group also establishes appropriate hedge ratios considering an economic relationship between hedging instruments and hedged items as well as risk management strategy.
The amounts recognized in profit or loss for the ineffective portion of the hedge are not material both for the fiscal years ended
March 31, 2020 and March 31, 2019. In addition, the amounts reclassified from valuation differences on cash flow hedges to profit orloss are immaterial because the forecast transactions are no longer expected to occur.

Sustainability(8) Hedge Accounting

111

Following are the carrying amounts of the hedging instruments as of March 31, 2020 and March 31, 2019. The fair value of financial
assets related to hedging instruments is included in “Other financial assets” while the fair value of financial liabilities related to hedging
instruments is included in “Other financial liabilities” in the consolidated statements of financial position.
As of March 31, 2020
Carrying amount

Notional amount

Derivative assets
JPY

Derivative liabilities

JPY

USD

USD

JPY

USD

35,907

329,943

558

5,128

191

1,756

13,200121,290

—

—

213

1,958

202

1,859

10

100

4

44

Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts
As of March 31, 2019
Carrying amount

Notional amount

Derivative assets

Derivative liabilities

JPY

JPY

JPY

31,429220

164

21,100

—

431

281

2

27

Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

The longest terms of hedging cash flow fluctuation risks by “Forward exchange contracts”, “Interest rate swap contracts” and“Commodity price risk” are about 4 years 6 months, 2 years 6 months and 1 year 8 months, respectively.
The following tables present the carrying amount of cash flow hedge reserve as of March 31, 2020 and March 31, 2019.
As of March 31, 2020
Cash flow hedge reservefor continuing hedges(before tax)

Cash flow hedge reservefor discontinuing hedge accounting(before tax)

JPY

USD

JPY

USD

366

3,372

—

—

(213)

(1,958)

—

—

6

57

(1)

(11)

Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts
As of March 31, 2019
Cash flow hedge reservefor continuing hedges(before tax)

Cash flow hedge reservefor discontinuing hedge accounting(before tax)

JPY

JPY

Foreign currency risk
Forward exchange contracts

56

—

(431)

—

(24)

(24)

Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

112

KANEMATSU Integrated Report 2020

Fiscal year ended March 31, 2020 (from April 1, 2019 to March 31, 2020)
Change in value of hedging
instruments recognized in othercomprehensive income

Reclassification from cash flow hedge
reserve to profit or loss

Line item for which profit or loss wasaffected by reclassification

JPY

USD

JPY

USD

333

3,066

(22)

(210)

Other income

20

185

198

1,821

Interest expenses

4

45

49

451

Cost of sales

Foreign currency risk
Forward exchange contracts
Interest rate risk
Interest rate swap contracts

Kanematsu’s Progress and Strengths

The following tables present the carrying amounts of transactions that affected the consolidated statements of comprehensive income
as a result of applying hedge accounting for the fiscal years ended March 31, 2020 and March 31, 2019.

Commodity price risk
Commodity futures contracts

Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)
Reclassification from cash flow hedge
reserve to profit or loss

JPY

JPY

220

488

Other expenses

(66)

215

Interest expenses

(49)

33

Cost of sales

Line item for which profit or loss wasaffected by reclassification

Foreign currency risk
Forward exchange contracts

Special Feature

Change in value of hedging
instruments recognized in othercomprehensive income

Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts(9) Transfer of financial assets
Review of Operations

The Consolidated Group liquidates certain trade receivables by discounting notes or the like. However, with respect to some liquidated
receivables, the Consolidated Group may be obligated to make payments as recourse for non-payment by the debtor. The Consolidated
Group continues to recognize such liquidated receivables as they do not meet the criteria for derecognition of financial assets.
The Consolidated Group recognized such liquidated assets as “Trade and other receivables” in the amount of ¥2,592 million ($23,825
thousand) and ¥5,028 million as of March 31, 2020 and March 31, 2019, respectively. In addition, liabilities relating to the deposit
amounts which arose upon the transfer of such assets were accounted for as “Bonds and borrowings” in the amount of ¥2,592 million($23,825 thousand) and ¥5,028 million as of March 31, 2020 and March 31, 2019, respectively. Such liabilities are settled when payments
for such liquidated assets are made, and the Consolidated Group may not use such liquidated assets until such settlement occurs.

(10) Offsetting financial assets and financial liabilities
The following tables present the financial assets and financial liabilities recognized for the same counterparties including financial
instruments that were not offset even though they were covered by an enforceable master netting arrangement or similar agreement
because they did not meet some or all of the offsetting criteria as of March 31, 2020 and March 31, 2019.
JPY

Foreign exchange

2019

2020

2,116

575

19,447
10,536

530

—

—

—

Commodity

969

44

8,911

(413)

(265)

(3,796)

1,703

309

15,651

Amounts that were not offset even though they were covered by an
enforceable master netting arrangement or similar agreement because they
did not meet some or all of the offsetting criteria
Net amounts

KANEMATSU Integrated Report 2020

Financial Section and Company Information

1,146

Interest rate

Sustainability

Amounts of financial assets presented in the consolidated statement offinancial position

USD

2020

113

JPY

USD

2020

2019

2020

712

1,504

6,546

Foreign exchange

411

494

3,781

Interest rate

213

431

1,958

Commodity

87

579

807

(413)

(265)

(3,796)

—

(534)

—

299

704

2,750

Amounts of financial liabilities presented in the consolidated statements offinancial position

Amounts that were not offset even though they were covered by an
enforceable master netting arrangement or similar agreement because they
did not meet some or all of the offsetting criteria
Financial collateral pledged
Net amounts

Certain financial assets and financial liabilities have not been offset because they do not meet some or all of the criteria for offsetting
financial assets and financial liabilities. The rights to offset such financial assets and financial liabilities become enforceable only underparticular circumstances, such as when the other party fails to discharge an obligation due to its bankruptcy or other such reasons.

31. Leases(1) Lessee
The Consolidated Group leases office building, computer-related equipment for the enterprise system (tools, furniture and fixtures) andother assets.
The profit (loss) amounts the Consolidated Group recognized as lessee for the fiscal year ended March 31, 2020 are as follows:
JPY

USD

2020

2020

(5,631)(51,741)(303)(2,791)

Depreciation of right-of-use assets
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
OthersTotal
Interest expense on lease liabilities
Short-term lease expenses
Sublease income

(2)

(17)

(5,936)(54,550)

(46)

(430)

(1,984)(18,232)

50

461

The cash outflow related to lease payments for the fiscal year ended March 31, 2020 are as follows:

Cash outflow for leases

JPY

USD

2020

2020

7,828

71,946The information on the balance and increase or decrease of the right-of-use assets are provided in Note 10. Property, Plant andEquipment and Note 11. Goodwill and Intangible Assets.
And the information on the breakdown of lease liabilities by due date is presented in Note 30. Financial Instruments: (4) Liquidity risk
management(2) Lessor
The Consolidated Group leases out machinery, plumping equipment of LPG, aircraft parts and other assets.
The profit (loss) amounts the Consolidated Group recognized as lessor for the fiscal year ended March 31, 2020 are as follows:

114

JPY

USD

2020

2020

Profit (Loss) from finance leases

16

148

Lease income from operating leases

91

844

KANEMATSU Integrated Report 2020

Lease receivables

Lease payments to be received

JPY

USD

JPY

USD

2020

2020

2020

2020

Within one year

21

195

85

778

Between one and two years

24

217

60

552

Between two and three years

12

113

60

552

Between three and four years

5

48

61

560

Between four and five years

5

45

51

465

Over five years

13

118

8

71

81

739

324

2,980

Total

Kanematsu’s Progress and Strengths

The breakdown of lease receivables of finance lease and lease payments to be received of operating lease by due date as of March 31,
2020 are presented as follows:

32. Pledged Assets
Details of pledged assets and associated secured obligations are as follows:
JPY

USD

2019

2020

2020

Special Feature(1) Pledged assets and associated secured obligations

Pledged assets:
Other financial assets (non-current)
Property, plant and equipment
Total

20

20

184

1,464

632

13,461

1,484

652

13,645

1,466

1,162

13,477

Associated secured obligations:Short-term borrowings (current)
Total

921

645

8,472

2,388

1,808

21,948Trust receipts issued under customary import financing arrangements give banks a security interest in the goods imported or sales proceeds resulting from the sales of the goods. However, due to the large volume of transactions, it is impracticable to determine theaggregate amounts of assets covered by outstanding trust receipts and those transactions were not included in the above amounts.

(2) Assets pledged in lieu of guarantee money

Review of Operations

Long-term borrowings (non-current)

The breakdown of assets pledged in lieu of guarantee money or the like is as follows:
JPY

USD

2020

2019

2020

Other financial assets (current)

50

51

459

Other financial assets (non-current)

60

60

551

3,143

3,605

28,885

3,253

3,717

29,896

Assets pledged in lieu of guarantee money or guarantee funds

Total

Sustainability

Other investments

33. Contingent Liabilities

JPY

2020

USD

2019

2020

1,098

Debt guarantees for equity method investees

119

138

Debt guarantees for third parties

906

1,027

8,329

1,025

1,165

9,427

Total

(Notes) 1. The above amounts include those for quasi-guarantee acts.
2. Debt guarantees for third parties include the debt guarantees covered by the insurance agreements that is limited to ¥897 million ($8,244 thousand) for the
fiscal year ended March 31, 2020 and ¥1,011 million for the fiscal year ended March 31, 2019, respectively.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

The Consolidated Group is contingently liable for guarantees on bank borrowings and trade payables owed by entities that do notbelong to the Consolidated Group.
The Group may become responsible for the amounts that are unpayable by the borrower and for losses attached to the unpayableamounts.

115

34. Significant Subsidiaries(1) Significant subsidiaries of the Company are as follows:
Trade nameLocation

Details of major operations

Percentage of voting rights (%)

2020

2019

58.34
(0.40)

58.32(0.40)[Electronics & Devices]
Kanematsu Electronics Ltd.

Chuo-ku, Tokyo, Japan

System integration of ICT andcommunications equipment

Nippon Office Systems Ltd.

Koto-ku, Tokyo, Japan

Development of software for andsales and maintenance of computersand computer peripherals, etc.

100.00(100.00)

100.00(100.00)

Kanematsu Communications
Ltd.

Shibuya-ku, Tokyo, Japan

Sales of mobile communications
devices; Mobile internet systems andservices

100.00100.00Kanematsu Granks, Corp.

Shinjuku-ku, Tokyo, Japan

Mobile contents delivery and mobilerelated solution business100.00(100.00)

100.00(100.00)

Kanematsu BD
Communications Ltd.

Kurume-shi, Fukuoka, Japan

Sales of mobile communication
device100.00(100.00)

100.00(100.00)

Kanematsu Sustech Corp.

Chuo-ku, Tokyo, Japan

Manufacture and sales of homeconstruction materials; Groundinspection services and improvement
work; Sales of security systems

52.97

52.97

Kanematsu Advanced
Materials Corp.

Chuo-ku, Tokyo, Japan

Import, export, storage, sales, andprocessing of materials andcomponents for vehicle equipment,
industrial electronics, andcommunication devices

100.00100.00G-Printec, Inc.

Saiwai-ku, Kawasaki-shi,
Kanagawa, Japan

Development, manufacturing andsales of card printer and related
device100.00100.00Kanematsu Futuretech
Solutions Corporation

Chuo-ku, Tokyo, Japan

Import, export, development, design,
manufacturing, sales and EMS of
semiconductor, electronic
components and modular products

100.00100.00

Kanekoh Electronics(Shanghai) Co., Ltd.

Shanghai, China

Development, manufacture, and salesof control modules for lithium ion
batteries

70.00

70.00

Kanematsu Industrial andDalian, China
Trading (Dalian F.T.Z.) Co., Ltd.

Manufacture of materials forelectronic precision parts and import,
export and sales of electronic
components

100.00(100.00)

100.00(100.00)

Kanematsu Advanced
Materials USA, Inc.

Texas, USA

Import, export, storage, sales andprocessing of materials andcomponents for vehicle equipment,
industrial electronics, andcommunication devices

100.00(100.00)

100.00(100.00)

Kanematsu Shintoa
Foods Corp.

Minato-ku, Tokyo, Japan

Food wholesaling and cold storage

100.00100.00Kanematsu Agritec Co., Ltd.

Matsudo-shi, Chiba, Japan

Manufacture and sales of feed andfertilizer

100.00100.00Kanematsu Soytech Corp.

Chuo-ku, Osaka, Japan

Sales of soybeans, millet, and grain

100.00100.00KG Agri Products, Inc.

Ohio, U.S.A.

Seed development, contract farming,sorting and sales of edible soybean

100.00100.00Kai Enterprises, Inc.

Washington, U.S.A.

Sales of hay and roughage

100.00(15.00)100.00(15.00)P.T. Kanemory Food Service

Serang, Indonesia

Manufacture of processed foods forcentral kitchen and home-meal
replacement

59.90(10.00)59.90(10.00)[Foods & Grain]

116

KANEMATSU Integrated Report 2020

Location

Details of major operations

Percentage of voting rights (%)

2020

2019

[Steel, Materials & Plants]
Chuo-ku, Tokyo, Japan

Sales of steel and construction
materials

100.00100.00

Kyowa Steel Co., Ltd.

Kasai-shi, Hyogo, Japan

Cutting and processing of steel sheet;
Sales of construction materials

100.00(100.00)

100.00(100.00)

Kanematsu Chemicals Corp.

Chuo-ku, Tokyo, Japan

Sales of petrochemicals andautomobile-related chemicals

100.00100.00Kanematsu Wellness Corp.

Chuo-ku, Tokyo, Japan

Sales of health foods and provision of
medical information

100.00(100.00)

100.00(100.00)

Kanematsu Petroleum Corp.

Chiyoda-ku, Tokyo, Japan

Sales of petroleum products and LPG

100.00100.00Kanematsu Yuso Co., Ltd.

Chiyoda-ku, Tokyo, Japan

Delivery and storage of petroleum
products and LPG

100.00100.00Kanematsu KGK Corp.

Chuo-ku, Tokyo, Japan

Sales of machine tools and industrial
machinery

97.89

97.89

Benoit Holding Company

Illinois, U.S.A.

Holding company

85.18(85.18)85.18(85.18)

Benoit Premium Threading,
LLC

Louisiana, U.S.A.

Oil well casing fabrication;
Manufacture and sales of oil wellrelated parts

54.00(54.00)54.00(54.00)

Steel Service
Oilfield Tubular, Inc.

Oklahoma, U.S.A.

Sales of steel materials for oil
excavation

51.00(51.00)51.00(51.00)KGK International Corp.

Illinois, U.S.A.

Sales of machine tools

100.00(100.00)

100.00(100.00)

Kanematsu Aerospace Corp.

Minato-ku, Tokyo, Japan

Sales of aircraft, defense, andaerospace-related products

100.00100.00

KANEYO Co., Ltd.

Chuo-ku, Osaka, Japan

Sales of textile materials for bedding,industrial materials and synthetic
fiber materials

100.0030.92

Aries Motor Ltd.

Warsaw, Poland

Sales of automobiles

93.59

93.59

Aries Power Equipment Ltd.

Warsaw, Poland

Sales of engines, generators, andother general-purpose machinery

60.00

60.00

KG Aircraft Rotables Co., Ltd.

Dublin, Ireland

Replacement and maintenance of
aircraft rotable components; Leasing

96.67

96.67

Shintoa Corp.

Chiyoda-ku, Tokyo, Japan

Beverage-vending machine
operations; Imports, exports, andsales of aircraft engines and feedstuffs

100.00100.00Kanematsu Logistics &Insurance Ltd.

Chuo-ku, Tokyo, Japan

Insurance agency; Consigned freight
forwarding business100.00100.00Special Feature

Kanematsu Trading Corp.

Kanematsu’s Progress and Strengths

Trade name

[Motor Vehicles & Aerospace]

Review of Operations[Others]

Sustainability
Financial Section and Company Information

KANEMATSU Integrated Report 2020

117

Trade nameLocation

Percentage of voting rights (%)

Details of major operations

2020

2019

[Overseas local subsidiaries]
Kanematsu USA Inc.

Illinois, U.S.A.

Export, import and sales ofmerchandise

100.00100.00Kanematsu (Hong Kong) Ltd.

Hong Kong, China

Export, import and sales ofmerchandise

100.00100.00Kanematsu (China) Co., Ltd.

Shanghai, China

Export, import and sales ofmerchandise

100.00100.00(100.00)

Kanematsu (Thailand) Ltd.

Bangkok, Thailand

Export, import and sales ofmerchandise

100.00100.00(100.00)

Watana Inter-Trade Co., Ltd.
(Notes) 1

Bangkok, Thailand

Export, import and sales ofmerchandise

49.00(24.00)49.00(49.00)Kanematsu (Singapore)
Pte. Ltd.

Singapore, Singapore

Export, import and sales ofmerchandise

100.00100.00(100.00)

Kanematsu Taiwan Corp.

Taipei, Taiwan

Export, import and sales ofmerchandise

100.00100.00(100.00)

Kanematsu Europe Plc

London, U.K.

Export, import and sales ofmerchandise

100.00(100.00)

100.00(100.00)

Kanematsu GmbH

Dusseldorf, Germany

Export, import and sales ofmerchandise

100.00100.00Kanematsu Australia Ltd.

Sydney, Australia

Export, import and sales ofmerchandise

100.00100.00Kanematsu New Zealand Ltd.

Auckland, New Zealand

Export, import and sales ofmerchandise

100.00100.00(Notes) 1. It is treated as a subsidiary because the Consolidated Group has a substantial control of the finance and management policy over the company through thedispatch of the majority of board members.
2. The figures in the parentheses in “Percentage of voting rights” indicate the indirect ownership ratio included in the total.

(2) Non-controlling interests
The subsidiary with non-controlling interests that is significant for the Consolidated Group is Kanematsu Electronics Ltd. Its condensed
financial information is presented as follows. The amounts presented below are before the elimination of intra-company transactions.
[Condensed statement of financial position]
JPY

USD

2020

2019

2020

Current assets

65,73563,387604,021

Current liabilities

17,522

17,179161,007

Current assets (net)

48,213

46,208443,014

Non-current assets

7,706

5,243

70,809Non-current liabilities

3,037

2,028

27,915

Non-current assets (net)

4,668

3,214

42,894Equity52,88149,423

485,908

Cumulative amounts of non-controlling interests

22,113

20,672

203,189

2020

2019

2020

Revenue

71,956

67,394

661,187

Profit for the year

7,333

6,770

67,388Other comprehensive income

(45)

(462)

(421)

Total comprehensive income

7,287

6,308

66,967

Profit for the year attributable to non-controlling interests

3,059

2,826

28,112

Dividends paid to non-controlling interests

1,610

1,431

14,800[Condensed statements of income and comprehensive income]
JPY

118

KANEMATSU Integrated Report 2020

USD

[Condensed statement of cash flows]
USD

2019

Cash flows from operating activities

7,008

7,719

64,398Cash flows from investing activities(1,472)(542)(13,532)

Cash flows from financing activities(4,331)(3,442)(39,802)

Increase (decrease) in cash and cash equivalents, net

1,204

3,734

11,0632020(3) Transaction with non-controlling interests
There was no transaction with significant non-controlling interests for the fiscal year ended March 31, 2020 and March 31, 2019.

Kanematsu’s Progress and Strengths

JPY

2020

35. Related Parties(1) Related party transactions
For the fiscal year ended March 31, 2020
Transaction amount

Outstanding amount

JPY

USD

JPY

USD

Associate(including subsidiaries of Kantatsu Co., Ltd.
the associate)

Purchase of merchandise

12,756117,216

1,786

16,414

Associate

Sales of merchandise

2,829

26,001

395

3,634

Name

Ogura Industrial Corp.

Associate

HOKUSHIN CO., LTD.

Sales of merchandise

Associate

Sage Hill Northwest, Inc.

Purchase of merchandise

Associate(including subsidiaries of AJU STEEL Co., Ltd.
the associate)

Sales of merchandise

79

734

1,004

9,226

2,592

23,821

212

1,954

346

3,187

1,046

9,616

For the fiscal year ended March 31, 2019
Detail of related party
relationshipTransaction amount

Outstanding amount

JPY

JPY

Associate(including subsidiaries of Kantatsu Co., Ltd.
the associate)

Purchase of merchandise

9,904

2,758

Associate

Ogura Industrial Corp.

Sales of merchandise

3,225

631

Associate

HOKUSHIN CO., LTD.

Sales of merchandise

84

1,576

Associate

Sage Hill Northwest, Inc.

Purchase of merchandise

1,456

128

Type

Name

(2) Remuneration to management executives

Sustainability(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailing market prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.
3. As the Consolidated Group conducts a transaction as a party involved, transaction amount of HOKUSHIN CO., LTD. is presented in the net amount of the commission.

Review of Operations(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailing market prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.
3. As the Consolidated Group conducts a transaction as a party involved, transaction amount of HOKUSHIN CO., LTD. and AJU STEEL Co., Ltd. are presented in
the net amount of the commission.

Special Feature

Detail of related party
relationshipType

The remuneration to the Company’s directors and auditors consists of base salary, directors’ bonus and share-based payments.
The amount of remuneration to the Company’s directors and audit & supervisory board members are as follows:
JPY

USD

2019

2020

Base salary and directors’ bonus

311

342

2,862

Share-based payments

25

29

235

337

372

3,097

Total

KANEMATSU Integrated Report 2020

Financial Section and Company Information

2020

119

36. Share-based Payments(1) Performance-Linked Stock Compensation Plan
The Company implemented a Performance-Linked Stock Compensation Plan for Directors and Executive Officers. The aim of adoptionof the Plan is to further clarify the linkage between compensation of Directors and Executive Officers and the corporate performanceand stock value of the Company, and to encourage them to contribute to mid- to long-term improvement in the corporate performance and expansion of corporate value because they will share the benefits and risks of stock price fluctuations with the shareholders.
The vesting condition is that after granted date they will work continuously until achieving certain performance goals and vesting. The
stocks will be granted to Directors and Executive Officers in the final year of the medium-term vision (from April 1, 2018 to March 31,2024), or the fiscal year that achieved the medium-term vision.

(2) Granted stocks and granted prices of shares
The fair value of the granted stocks was estimated using the Black-Scholes model considering expected dividend based on past dividend results. The number of shares granted during the fiscal years ended March 31, 2020 and March 31, 2019 and the weighted average share price are as follows.
2019

2020
Number ofshares

Weighted average share price

Number ofshares

Weighted
average share
price
Yen

Share

Yen

U.S. dollar

Share

As of the beginning of the year

40,704

1,583

14.55

—

—

Granted43,369

1,487

13.66

40,704

1,583

Exercised(9,000)

1,583

14.55

—

—

Forfeited(4,853)

1,583

14.55

—

—

As of the end of the year

70,220

1,524

14.00

40,704

1,583

—

—

—

—

—

Exercisable balance as of the end of the year(3) Stock compensation expenses
Performance-Linked Stock compensation Plan is equity-settled share-based payment transaction. The stock compensation expenses forthe fiscal years ended March 31, 2020 and March 31, 2019 are ¥57 million ($526 thousand) and ¥64 million, respectively.

37. Subsequent Events
Not applicable.

120

KANEMATSU Integrated Report 2020

Kanematsu’s Progress and Strengths

Special Feature

Review of Operations

Sustainability

Financial Section and Company Information

121

KANEMATSU Integrated Report 2020

122

KANEMATSU Integrated Report 2020

Kanematsu’s Progress and Strengths

Special Feature

Review of Operations

Sustainability

Financial Section and Company Information

123

KANEMATSU Integrated Report 2020

Major Group Companies (As of April 1, 2020)* Companies with shares listed on a stock exchangeElectronics & Devices

Japan
Kanematsu Electronics Ltd.*
Nippon Office Systems Ltd.
Kanematsu Sustech Corporation*
Kanematsu Communications Ltd.
Kanematsu Granks, Corp.
Kanematsu Futuretech Solutions Corporation
Kanematsu Advanced Materials Corp.
Kanematsu PWS LTD.
G-Printec, Inc.
China
Kanekoh Electronics (Shanghai) Co., Ltd.

Foods, Meat & GrainJapan
Kanematsu Shintoa Foods Corp.
Kanematsu Agritec Co., Ltd.
Kanematsu Soytech Corp.
GPC Holdings Co., Ltd.
Ks’ Meat Solution Co., Ltd.
China
Dalian Tiantianli Food Co., Ltd.
Shangdong Lufeng Foods Co., Ltd.
Iwase-Esta Kanematsu Co., Ltd.
Dalian Matsutomo Foods Co., Ltd.
Dalian Runsong Biological Feed Co., Ltd.
ThailandSiam Aloe Vera (2005) Co., Ltd.
Indonesia
P.T. Kanemory Food Service
U.S.A.
KAI Enterprises, Inc.
Sage Hill Northwest, Inc.
KG Agri Products, Inc.

Steel, Materials & Plant

Japan
Kanematsu Trading Corp.
Kyowa Steel Co., Ltd.
Eiwa Metal Co., Ltd.
Kenkosya Co., Ltd.
Kanematsu Petroleum Corp.
Kanematsu Yuso Co., Ltd.
Kanematsu Chemicals Corp.
Kanematsu Wellness Corp.
Kanematsu KGK Corp.
KGK Engineering Corp.
Watachukikai Corp.
China
Kanematsu KGK Trade & Sales (Shanghai) Co., Ltd.
ThailandKGK Engineering (Thai) Co., Ltd.
U.S.A.
Steel Service Oilfield Tubular, Inc.
Benoit Premium Threading, LLC
KGK International Corp.

System integration of ICT and communications equipment
Development, sales and maintenance of software for computers and computer peripherals, etc.
Manufacture and sales of home-construction materials; Ground inspection services and improvement work;
Installation and sales of security cameras
Sales of mobile communications devices; Mobile internet systems and services
Website planning, building, and operation; Content planning, production, and sales
Import, export, processing, development, design, manufacture, sales of semiconductors,
electronic components, and module products; EMS business.
Import, export, storage, sales, and processing of materials and components for vehicle equipment, industrial electronics, and communication devices
Design, development, and sales of semiconductor production equipment, testing equipment and related components; Technical services
Design, development, manufacture, sales and maintenance services (OEM) for card printers and related equipment
Design, development, manufacture, and sales of control modules for lithium ion batteries
Food wholesaling and cold storage
Manufacture and sales of feed and fertilizer
Sales of soybeans, pulses & peas, and grain; Development and marketing of tofu and other ingredients for processed foods
Sales of pet food and other products
Primary processing of meat in Japan
Manufacture of dim sum and delicatessens
Production of processed vegetables and fruits
Wholesale of confectionery and baking ingredients
Primary processing of beef in China
Manufacture and sales of feedstuff (puffed soybeans, soybean meal)
Processing and sales of aloe vera
Manufacture of processed foods; Management of central kitchen
Sales of hay and roughage
Production of hay
Seed development; Contract farming; Sorting, processing, and sales of food soybeans
Sales of steel and construction materials
Cutting and processing of steel sheet; Sales of construction materials
Processing and sales of stainless steel, titanium, and high-alloy steels
Construction, design, manufacturing, installation, and sales of steel joinery
Sales of petroleum products and LPG
Delivery and storage of petroleum products
Sales of petrochemicals, automobile-related chemicals, health food ingredients, and pharmaceuticals
Sales of health foods and provision of medical information
Sales of machine tools and industrial machinery
Repair and sales of machine tools; Sales of paper-manufacturing machinery
Wholesale of cutting tools and peripheral and auxiliary tools
Sales of machine tools and industrial machinery
Sales of machine tools and industrial machinery
Sales of steel materials for oil excavation
Oil well casing fabrication; Manufacture and sales of oil well-related parts
Sales of machine tools

Motor Vehicles & Aerospace Japan
Kanematsu Aerospace Corp.
Kaneyo Co., Ltd.
Ireland
KG Aircraft Rotables Co., Ltd.
PolandAries Motor Ltd.
Aries Power Equipment Ltd.
U.S.A.
Kanematsu Ventures Inc.

Other

124

Japan
Hokushin Co., Ltd.*
Shintoa Corp.
Kanematsu Logistics & Insurance Ltd.
Japan Logistics Co., Ltd.
Indonesia
PT. Dunia Express Transindo

KANEMATSU Integrated Report 2020

Sales of aircraft, defense, and aerospace-related products
Sales of bedding, fiber raw materials for industrial materials, and synthetic fiber raw materials
Replacement and maintenance of aircraft rotable components; Leasing; Sales
Sales and maintenance of automobiles
Sales of engines, generators, lawnmowers, and other general-purpose machinery
Investment in VC funds; Seeking out advanced technologies; Growth support for startups
Manufacture and sales of medium-density fiberboard
Beverage-vending machine operations; Imports, exports, and sales of aircraft engines
Insurance agency and forwarding business; Consigned freight forwarding business
Warehouse and self-storage operation
Total logistics services

Global Network (As of March 31, 2020)

6
1

2

3
4

34
5

33
11
25

8

10

23

7

15
21

24

30
28 29

32
31

9
12
13 14
16

18
17

Kanematsu’s Progress and Strengths

Kanematsu supplies products and services through its large network of business bases in Japan and overseas. In addition to the Company,
the Kanematsu Group comprises 122 companies (92 consolidated subsidiaries and 30 equity-method affiliates) operating global
businesses around the world.

35

20

NORTH AMERICA

19

28 Chicago

22

EUROPE
2 Dusseldorf
3 Munich

30 Detroit

ASIA & THE MIDDLE EAST

26
27

4 Milan

8 Seoul17 Ho Chi Minh City

5 Budapest

9 Shanghai

18 Bangkok

6 Moscow

10 Chongqing

19 Singapore

7 Las Palmas

11 Dalian

20 Manila

26 Sydney

12 Shenzhen

21 Yangon

27 Auckland

32 Silicon Valley
34 Vancouver

OCEANIA35 Silao
36 Sao Paulo

15 Hanoi

24 Bengaluru

16 Haiphong

25 Tehran

DOMESTIC OFFICES
4

1 Tokyo Head Office
2 Osaka

Midosuji Office

Representative offices

3 NagoyaBranches
2

3

1

5

4 Hokkaido
5 KyushuReview of Operations

Overseas subsidiaries
and their branches

23 Gurugram

CENTRAL &SOUTH AMERICA

33 Portland

13 Hong Kong 22 Jakarta
14 Taipei

36

31 Houston

Special Feature

29 Somerset

1 LondonOrganization Chart (As of April 1, 2020)
Shareholder’s Meeting
Audit & Supervisory Board
Board of Directors

Marketing Area
Electronics & Devices Division

Support Area
Foods Division

Steel, Materials & Plant Division

Motor Vehicles & Aerospace Division

Foods Dept. No. 1

Iron & Steel Foreign Trade Dept.

Aerospace Dept.

Semiconductor Equipment Dept.

Foods Dept. No. 2

Specialty Steel Foreign Trade Dept.

Motor Vehicles & Parts Dept. No. 1

Human Resources & General Affairs
Dept.

Components & Material Dept.

Foods & Grain Planning Office

Functional Chemicals Dept.

Motor Vehicles & Parts Dept. No. 2

Finance Dept.

Electronics Planning Office

Food Safety Management Office

Energy Dept.

Motor Vehicles &Aerospace Planning Office

Accounting Dept.

Meat Products Division

Plant & Ships Dept.

Business Accounting Dept.

Meat Products Dept. No. 1

Steel, Materials & Plant Planning Office

Legal & Compliance Dept.

Meat Products Dept. No. 2

Food Safety Management Office

Credit Control Dept.

Foods & Grain Planning Office
Food Safety Management OfficeGrain, Oilseeds & Feedstuff Division
Grain Dept.

Traffic & Insurance Dept.
IT Planning Dept.
Internal Auditing Dept.
Corporate Planning Dept.

Food & Grain Material Dept.
Grain & Feedstuff Dept.
Domestic Sections
Foods & Grain Planning Office
Food Safety Management Office
KANEMATSU Integrated Report 2020

Financial Section and Company Information

Industrial Electronics Dept.

Sustainability

Management Committee

125

Japanese and Overseas Offices (As of June 30, 2020)

Japan

Overseas

Tokyo Head Office

ASIA & THE MIDDLE EAST

2-1, Shibaura 1-chome, Minato-ku,
Tokyo 105-8005, Japan
TEL: 81-3-5440-8111
FAX: 81-3-5440-6500

Osaka
Awaji-machi Dai Building, 1-9, Awaji-machi
3-chome, Chuo-ku, Osaka 541-8560, Japan
TEL: 81-6-6205-3111
FAX: 81-6-6205-3322

Midosuji Office
Midosuji Daiwa Building, 6-8, Kyutaro-machi
3-chome, Chuo-ku, Osaka 541-0056, Japan
TEL: 81-6-6251-7700
FAX: 81-6-6251-7770

Nagoya9-3, Sakae 2-chome, Naka-ku,
Nagoya 460-0008, Japan
TEL: 81-52-202-5111
FAX: 81-52-202-4605

Hokkaido
Sapporo-Kokusai Building, 4-1, Kitashijou-nishi,
Chuo-ku, Sapporo 060-0004, Japan
TEL: 81-11-261-5631
FAX: 81-11-261-5630

KyushuTenjin Twin Building, 6-8, Tenjin 1-chome,
Chuo-ku, Fukuoka 810-0001, Japan
TEL: 81-92-715-7820
FAX: 81-92-715-7830

Kobe Head Office
119 Ito-machi, Chuo-ku, Kobe,
Hyogo 650-0032, Japan

KOREA
Kanematsu Korea Corporation
Seoul

Koreana Bldg. 602, 135 Sejong-Daero,Jung-Gu, Seoul, 04519, Korea
TEL: 82-2-737-5795
FAX: 82-2-737-5799
CHINA
Kanematsu (China) Co., Ltd.
Shanghai Head Office
Shanghai Branch

18th Floor Raffles City (Office Tower) 268 Xi Zang
Middle Road, Shanghai 200001, China
TEL: 86-21-6340-3456
FAX: 86-21-6340-4290
Chongqing Liaison Office

Room 2106, International Trade Center, No.38
Qingnian Road, Yuzhong District, Chongqing
400010, China
TEL : 86-023-6323-5676
FAX : 86-023-6323-5650

Kanematsu Vietnam Company Ltd.
Hochiminh City

Suite 608, 6/F, Saigon Tower, 29 Le Duan St,
District 1, Hochiminh City, S.R. Vietnam
TEL: 84-28-3910-5536, 5537
FAX: 84-28-3910-5539
THAILAND
Kanematsu (Thailand) Ltd.
Watana Inter-Trade Co., Ltd.
Bangkok

25th Floor Thaniya Plaza Building, 52 Silom Road,
Suriyawongse Bangrak, Bangkok 10500, Thailand
TEL: 66-2-632-8060
FAX: 66-2-632-8083, 8084
SINGAPORE

Dalian Branch

Room 602, Furama Hotel, 60 Renmin Road,
Dalian 116001, China
TEL: 86-411-8263-9105, 7481
FAX: 86-411-8280-5534

100 Tras Street, #12-01 100 AM, Singapore 079027
TEL: 65-6320-6000
FAX: 65-6320-6041
PHILIPPINES

Shenzhen Branch

Kanematsu Corporation
Manila Branch

Room 8, 10/F, Office Tower,
Di Wang Commercial Centre,
5002 Shen Nan Dong Road, Luohu District,
Shenzhen 518001, China
TEL: 86-755-8235-4850
FAX: 86-755-8223-8980
Kanematsu (Hong Kong) Ltd.
Hong Kong

Rooms 1116-1117, 11/F, The Metropolis Tower,
10 Metropolis Drive, Hunghom, Kowloon,
Hong Kong
TEL: 852-2821-6200
FAX: 852-2527-0465
TAIWAN

10F., No.451, Changchun Rd., Songshan Dist.,
Taipei City 10547, Taiwan R.O.C
TEL: 886-2-2717-1222
FAX: 886-2-2717-7927
VIETNAMThe Representative of Kanematsu
Corporation
Hanoi

Room No. 1209, 12th Floor, Daeha
Business Centre, 360 Kim Ma St., Ba Dinh Dist.,
Hanoi, S.R. Vietnam
TEL: 84-24-3771-5642, 5647
FAX: 84-24-3771-5641, 5648

KANEMATSU Integrated Report 2020

Room 2, 1st Floor, F1 Building 315-HK03,
Waterfront City, Vinh Niem, Le Chan,Hai Phong, S.R. Vietnam
TEL: 84-225-368-6371, 6372
FAX: 84-225-368-6373

Kanematsu (Singapore) Pte. Ltd.
Singapore

Kanematsu Taiwan Corporation
Taipei126

Haiphong

17th Floor Tower 2, The Enterprise Center 6766,
Ayala Avenue, cor. Paseo de Roxas, Makati City,
Philippines
TEL: 63-2-8-845-2017
FAX: 63-2-8-887-0030
MYANMARThe Representative of Kanematsu
Corporation
YangonUnion Business Centre (UBC) Suite 03-08, Nat
Mauk Road, Bo Cho Quarter, Bahan Township,
Yangon, Myanmar
TEL: 95-1-860-4370
FAX: 95-1-860-4380
INDONESIA
P.T. Kanematsu Trading Indonesia
Jakarta

ATRIA@SUDIRMAN 15th Floor,
Jalan Jend. Sudirman Kav. 33A Jakarta
10220, Indonesia
TEL: 62-21-572-1220, 1225, 1228, 1230, 1238
FAX: 62-21-572-1188, 1237
INDIA
Kanematsu India Private Ltd.
Gurugram

Tower-4, Block-A, Unit No.03-04, Ground Floor,
DLF Corporate Park, Gurugram,
Haryana-122002, India
TEL: 91-124-400-1461, 1462, 1362
FAX: 91-124-400-1371

SPAIN

2nd Floor, 216, Raheja chambers,
Museum Road, Bangalore,
Bengaluru (Bangalore) Urban,
Karnataka, 560001, India
TEL: 91-124-400-1461, 1462, 1362
FAX: 91-124-400-1371

The Representative of Kanematsu
Corporation
Las Palmas

IRAN
Kanematsu Iran Ltd.
TehranEUROPEUNITED KINGDOM
Kanematsu Europe PLC.
London Head Office

160 Euston Road, London NW1 2DX,
United Kingdom
TEL: 44-20-7529-8124
FAX: 44-20-7387-4582
GERMANY

Calle Eduardo Benot 51, Edificio Atlansea,
4-izqda, 35008 Las Palmas de Gran Canaria,
Spain
TEL: 34-928-275634, 275680
FAX: 34-928-275632

Portland Branch4380 SW Macadam Avenue, Suite 170, Portland,
Oregon 97239, U.S.A.
TEL: 1-503-224-7755
FAX: 1-503-228-5067

AUSTRALIA
Kanematsu Australia Ltd.
SydneySuite 1 Level 15, 15 Castlereagh Street, Sydney
NSW 2000, Australia
TEL: 61-2-9283-3347
FAX: 61-2-9283-3095

CANADANEW ZEALAND

205-8988 Fraserton Court Burnaby, B.C.
V5J 5H8, Canada
TEL: 1-604-689-0550
FAX: 1-604-689-0655

Kanematsu New Zealand Ltd.
AucklandLavender House, 27 Lilburn Street, Warkworth 0910,
New Zealand
TEL: 64-9-302-5660
FAX: 64-9-309-3877

Munich BranchKarl-Theodo-Str.55, D-80803 Muenchen, Germany
TEL: 49-89-307-481-712
FAX: 49-89-307-481-729

543 West Algonquin Road, Arlington Heights,
Illinois 60005, U.S.A.
TEL: 1-847-981-5600
FAX: 1-847-981-6760

ITALY

Somerset Branch

The Representative of Kanematsu GmbH
Milano100 Randolph Road, Somerset,
New Jersey 08873, U.S.A.
TEL: 1-732-271-7300
FAX: 1-732-271-7357

H-1116 Budapest, Fehervari ut126-128, VI/619,
Hungary
TEL: 36-20-410-2641
RUSSIAN FEDERATION

Tverskaya 16/2, Building 1, Business Centre,
125009, Moscow, Russian Federation
TEL: 7-495-935-8940, 8942, 8943, 8945
FAX: 7-495-935-8948

MEXICO

Suite C, Multitenant III, Av. Mineral de
Valenciana No. 202, Col. Parque Santa Fe, C.P.
36275, Guanajuato, Puerto Interior Silao, Gto.,
Mexico
TEL: 52-472-748-9187, 9327, 9329
FAX: 52-472-748-9221

Kanematsu USA Inc.
Chicago Head Office

BRAZIL
Kanematsu America do Sul Importacao e
Exportacao Ltda.
São Paulo

Avenida Paulista, 1337 - CJ.71 - Jardim Paulista,
São Paulo - SP, CEP 01311-200 Brazil
TEL: 55-11-3266-3967

Detroit Office41700 Gardenbrook Rd. Novi, Garden Office B,
Suite 140 Novi, Michigan 48375, U.S.A.
TEL: 1-248-347-3216
FAX: 1-248-347-3219
Segment Information:
Number of employees and number of Group companies (As of March 31, 2020)
Number of Employees(consolidated basis)

Number of Affiliated Companies

Electronics & Devices

4,203

22 (Japan:15, Overseas:7)

Foods, Meat & Grain

750

29 (Japan:14, Overseas:15)

Steel, Materials & Plant

1,221

28 (Japan:14, Overseas:14)

Motor Vehicles & Aerospace343

11 (Japan:3, Overseas:8)

Others235

15 (Japan:13, Overseas:2)

Companywide (common)

430

Overseas subsidiaries
Total

17
7,182

122

Notes:
1. Number of employees on a non-consolidated basis is 775.
2. Of affiliated companies, 92 are consolidated subsidiaries and 30 are equity-method affiliates.

KANEMATSU Integrated Report 2020

Financial Section and Company Information

The Representative of Kanematsu
Corporation
Moscow

CENTRAL & SOUTH AMERICA

Sustainability

The Representative of Kanematsu GmbH
Budapest

The Representative of Kanematsu
Corporation
VancouverKanematsu Mexico S. de R.L. de C.V.
Silao

NORTH AMERICA
U.S.A.

HUNGARY

2154 Paragon Drive, San Jose California 95131,
U.S.A.
TEL: 1-408-501-1400

OCEANIA

Oststrasse 34, D-40211 Duesseldorf, Germany
TEL: 49-211-3689-0
FAX: 49-211-3689-111

Via Filippo Turati u.26 20121 Milano, Italy
TEL: 39-02-6749-3538
FAX: 39-02-3668-0998

Silicon Valley Branch

Review of Operations

Kanematsu GmbH
Duesseldorf Head Office1800 Augusta Drive, Suite 390, Houston,
Texas 77057, U.S.A.
TEL: 1-713-975-7200
FAX: 1-713-975-7966

Special Feature

Unit #5, 3rd Floor, Monaco Building, No. 27,
Ordibehesht, Mahmudiyeh St., Parkway, Tehran,1986645416 IRAN
TEL: 98-21-2265-9069
FAX: 98-21-2265-3606

Houston Branch

Kanematsu’s Progress and Strengths

Bengaluru Branch127

Corporate Profile

Corporate Profile
Company Name
EstablishedFoundation
President
Head OfficePaid-in Capital*
Fiscal Year
General Meeting of
Shareholders
Number of Offices*

KANEMATSU CORPORATION
August 15, 1889
March 18, 1918
Kaoru Tanigawa
2-1, Shibaura 1-chome, Minato-ku,
Tokyo 105-8005, Japan¥27,781 million
April 1 to March 31
June

Domestic: T okyo Head Office, Kobe Head Officeand branches 5
Overseas: 36
Number of Employees* 775 (Consolidated: 7,182)* As of March 31, 2020

Investor Information(As of March 31, 2020)

Stock Exchange Listings
Stock CodeTransfer Agentfor Common Stock
Shares Authorized
Shares Outstanding
Minimum Trading Unit*
Number of Shareholders

Composition of Shareholders

Tokyo
8020
Sumitomo Mitsui Trust Bank, Limited
200,000,000
84,500,202 (including 259,527 treasury shares)
100
19,139Financial institutions

39.78%

Foreign institutions
and individuals

34.79%

Individuals and others(including treasury shares)18.76%
Other corporations

5.76%

Securities firms

0.91%

Principal Shareholders

Number of shares held (thousands)

Percentage of voting rights (%)

Japan Trustee Services Bank, Ltd. (trust account)

10,237

12.15

The Master Trust Bank of Japan, Ltd. (trust account)

5,761

6.83

MSIP CLIENT SECURITIES

2,553

3.03

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,322

2.75

SSBTC CLIENT OMNIBUS ACCOUNT

2,194

2.60

GOVERNMENT OF NORWAY

2,119

2.51

Japan Trustee Services Bank, Ltd. (trust account 9)

1,710

2.03

JP Morgan Chase Bank 385151

1,535

1.82

Japan Trustee Services Bank, Ltd. (trust account 5)

1,505

1.78

The Bank of New York Mellon Corporation 140044

1,422

1.68

Note: Calculated after deduction of treasury shares (259,527 shares)

Stock Price/Trading Volume
Trading Volume

Stock price(¥)(Thousands of shares)

1,800

100,000

1,200

80,000600

60,000040,00020,0000
15/4 68

10

12 16/2 4

6

8

10

12 17/2 4

6

8

10

12 18/2 4

6

8

10

12 19/2 4

6

8

10

12 20/2

Note: Kanematsu executed a share consolidation on October 1, 2017, at a ratio of five shares to one. Figures for all in the above graph for September 2017 and earlier
are calculated based on the assumption that said consolidation had already occurred.

128

KANEMATSU Integrated Report 2020

Kanematsu stock has been selected for inclusion in the JPX-Nikkei
Index 400 and the JPX-Nikkei Mid and Small Cap Index for,respectively, the last seven and four consecutive years.

Our Website
Detailed additional information about
the Kanematsu Group is available on our
website in English, Japanese and Chinese.
Content includes information about theCompany and its businesses, press releases,
investor relations materials, and details on
its sustainability activities, and other topics.

English: https://www.kanematsu.co.jp/en/

KANEMATSU Integrated Report 2020129

For more information on this Integrated Report, or to obtain
additional copies, please contact:
Public & Investor Relations Section, Finance Department,
Kanematsu Corporation
2-1, Shibaura 1-chome, Minato-ku, Tokyo 105-8005, Japan
Tel: 81-3-5440-8000
Fax: 81-3-5440-6503

Printed in Japan