Business Results for theThird Quarter of the Fiscal Year Ending
December 31, 2019 (Unaudited)

November 12, 2019
Kuraray Co., Ltd.

November 12, 2019
Kuraray Co., Ltd.

Consolidated Earnings Report for the Third Quarter of the Fiscal Year Ending December 31, 2019
Name of listed company:
Stock code:
Stock exchange listing:
URL:

Kuraray Co., Ltd.
3405
Tokyo, first section
https://www.kuraray.com/

Representative:
Title:
Name:

Representative Director and President
Masaaki Ito

Contact:
Title:

Senior Manager, Corporate Communications Department, Corporate Management
Planning Office
Fumio Uegaki+81-3-6701-1070

Name:
Tel:

Preparation of supplementary documentation for the quarterly earnings report: Yes
Holding of quarterly earnings results briefing: Yes (for securities analysts and institutional investors)(Millions of yen rounded down unless otherwise stated)

1. Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending December
31, 2019 (January 1, 2019 to September 30, 2019)(1) Consolidated Operating Results(Percentage changes displayed for net sales, operating income, ordinary income and net income attributable to owners of theparent are comparisons with the corresponding period of the previous fiscal year.)(Millions of yen)
Net Sales
(%)
(4.7)
18.5

428,914449,929

Fiscal 2019 3Q
Fiscal 2018 3Q

Note: Comprehensive income:

42,33454,375(%)(22.1)(6.8)

For the fiscal 2019 third quarter:
For the fiscal 2018 third quarter:

Net Income per
Share (Yen)
Fiscal 2019 3Q
Fiscal 2018 3Q

Operating Income

55.86
95.18

Ordinary Income
37,941
52,030Net Income Attributableto Owners of the Parent(%)(27.1)(8.9)

19,35733,283(%)(41.8)(11.2)¥4,308 million (−86.1%)¥30,924 million (−21.4%)

Fully Diluted Net
Income per Share
(Yen)
55.78
95.00

Note: In fiscal 2018, Kuraray determined the temporary accounting treatment related to a business combination, which thefigures for the third quarter of fiscal 2018 reflect.

(2) Consolidated Financial Position(Millions of yen)
As of September 30, 2019
As of December 31, 2018

Total Assets
978,274
947,095

Net Assets
549,958
567,033

Equity Ratio (%)
55.0
58.6

[Reference] Equity attributable to owners of the parent: As of September 30, 2019: ¥537,644 million
As of December 31, 2018: ¥555,438 million
Note: Kuraray has adopted ASBJ Statement No. 28 Partial Amendments to Accounting Standard for Tax Effect Accounting(issued February 16, 2018) from January 1, 2019. These accounting standards have been retroactively applied to thenumbers used for the consolidated financial position as of December 31, 2018.

2. Dividends(Yen)
Record Date
Fiscal 2018
Fiscal 2019
Fiscal 2019
(Forecast)Mar. 31――

Cash Dividends per ShareJun. 30
Sep. 30
Dec. 31
22.00
20.00
―
20.00
―

Annual
42.00

22.00

42.00

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

3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending December 31, 2019
(January 1, 2019 to December 31, 2019)(Percentage changes displayed for net sales, operating income, ordinary income and net income attributable to owners of theparent are comparisons with the corresponding period of the previous fiscal year.)(Millions of yen)
Net Sales
Full Fiscal Year

578,000(%)(4.1)

Operating
Income57,000(%)(13.4)

Ordinary
Income52,000(%)(15.0)Net Income Attributable Net Income per
to Owners of the Parent
Share (Yen)
28,500(%)
82.92(15.1)

Note: Revisions to forecasts of consolidated financial results during this period: Yes[Reference](1) Changes in Important Subsidiaries during the Period (Changes in Special Subsidiaries
Involving Changes in the Scope of Consolidation)
Added: No companies

Excluded: No companies(2) Adoption of Special Accounting Practices in the Preparation of Quarterly Consolidated
Financial Statements
No(3) Changes in Accounting Principles, Procedures and Presentation Methods inConnection with the Preparation of Quarterly Consolidated Financial Statements
1. Changes following revision of accounting standards: Yes
2. Changes besides 1. above: No
3. Changes in accounting estimates: No
4. Restatement: No

Note: For further details, please refer to “Changes in Accounting Principles” under “Notes
regarding Quarterly Consolidated Financial Statements” on page 10 of the
Attachment.
(4) Number of Shares Issued and Outstanding (Common Shares)
1.

Number of shares issued and outstanding (including treasury stock) as of the period-end:
As of September 30, 2019354,863,603 shares
As of December 31, 2018354,863,603 shares

2.

Number of treasury shares as of the period-end:
As of September 30, 201911,145,105 shares
As of December 31, 2018
6,179,578 shares

3.

Average number of shares for the period (cumulative):
As of September 30, 2019346,518,211 shares
As of September 30, 2018349,671,638 shares

Note: It is not required that this type of earnings report be audited.

Cautionary Statement with Respect to Forecasts of Consolidated Business Results(Cautionary note regarding forward-looking statements)
The results forecasts presented in this document are based upon currently available information andassumptions deemed rational. A variety of factors could cause actual results to differ materially fromforecasts. Please refer to “Basis for the Revision in Forecasts, Including Consolidated Operating Results
Forecasts” on page 4 of the Attachment for the assumptions used.

Index of the Attachment
1. Qualitative Information regarding Business Results ..............................................................................

2(1) Overview of Consolidated Business Results ........................................................................................

2(2) Overview of Financial Position ..............................................................................................................

4(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts.........

4

2. Quarterly Consolidated Financial Statements and Notes......................................................................

5(1) Quarterly Consolidated Balance Sheets.................................................................................................

5(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements ofComprehensive Income ...........................................................................................................................

7(3) Notes regarding Quarterly Consolidated Financial Statements ........................................................

10

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

10

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

10

Changes in Accounting Principles..........................................................................................................

10

Additional Information ............................................................................................................................

10

Business Combinations, etc.....................................................................................................................

10

Segment Information, etc. .......................................................................................................................

111

1. Qualitative Information regarding Business Results(1) Overview of Consolidated Business Results
In the third quarter of fiscal 2019 (January 1, 2019–September 30, 2019), the ongoing trade
war between the United States and China and the geopolitical situation in the Middle Eastfostered a stronger sense of uncertainty. Due to these factors, growth in the world
economy has been more stagnant than before. Consequently, consolidated operating results
for the third quarter of fiscal 2019 are as follows: net sales decreased ¥21,015 million, or
4.7%, compared with the previous fiscal year to ¥428,914 million; operating income fell
¥12,040 million, or 22.1%, to ¥42,334 million; ordinary income decreased ¥14,088 million,
or 27.1%, to ¥37,941 million; and net income attributable to owners of the parent dropped¥13,925 million, or 41.8%, to ¥19,357 million. In the third quarter, Kuraray has recognizeda loss of ¥13,953 million including the settlement amount in connection with a fireincident that occurred in May 2018 at a group subsidiary in the United States. This amountis based on the most current reasonable estimation of damages to be paid to the plaintiffs
and other expenses for a court settlement, and is classified under extraordinary loss.
Kuraray also recognized insurance income totaling ¥10,046 million as part of extraordinary
income.
The Kuraray Group launched the medium-term management plan “PROUD 2020” fromfiscal 2018. In fiscal 2019, the second year of the plan, the Group aims to achieve its
long-term vision of becoming a “Specialty Chemical Company, growing sustainably byincorporating new foundational platforms into its own technologies.” We will steadily takespecific measures related to the key management strategies underlined in the plan. We will
also continue working to establish a new business portfolio from a medium- to long-term
perspective.
Furthermore, regarding the business combination with Calgon Carbon Corporation
conducted on March 9, 2018, which resulted from the acquisition of shares, Kuraray used atemporary accounting treatment for the third quarter of the previous fiscal year. However,
the treatment was determined at the end of the previous fiscal year. As a result, forcomparison and analysis with the corresponding period of the previous fiscal year, thefigures used have been revised to reflect the determination of the treatment.
In addition, Kuraray has adopted ASBJ Statement No. 28 Partial Amendments to
Accounting Standard for Tax Effect Accounting (issued February 16, 2018) from January 1,
2019. Regarding the Company’s financial position, these accounting standards have been
retroactively applied to the numbers used for comparison and analysis with the previous
fiscal year.
Results by Business Segment
Vinyl Acetate
Sales in this segment decreased 2.9% year on year to ¥201,437 million, and segment
income fell 17.0% year on year to ¥36,037 million.
(1) The sales volume of PVA resin declined due to decelerating economic conditions.
Shipments of optical-use poval film decreased by a LCD panel inventory adjustment.
In addition, the sales volume of PVB film for automotive use declined despite growing
2demand for highly functional films for construction use. However, sales ofwater-soluble PVA film expanded thanks to growing demand for products for use inunit dose detergent packets.
(2) Sales of EVAL™ ethylene vinyl alcohol copolymer (EVOH resin) for gas tankapplications was affected by the decline in the production number of vehicles. The
sales volume for food packaging applications was also stagnant.
Isoprene
Sales in this segment decreased 6.3% year on year to ¥39,992 million, and segment income
fell 33.8% year on year to ¥4,107 million.
(1) The sales volume of isoprene chemicals and SEPTON™ thermoplastic elastomer
declined due to economic deceleration.
(2) The sales of GENESTAR™ heat-resistant polyamide resin fell due to sluggish
demand for electric and electronic devices, despite growth in demand for connectors
for automotive devices.
Functional Materials
Sales in this segment decreased 4.6% year on year to ¥94,525 million, and segment income
decreased 17.1% year on year to ¥3,192 million.
(1) The methacrylate business was affected by worsening market conditions, which, inturn, caused sales of methacrylic resins to decrease.
(2) In the medical business, sales were steady, especially for esthetic and restorative
dentistry products.
(3) As for Calgon Carbon, demand grows for filtering applications in connection with the
supply of drinking water in North America despite sales in Europe were sluggish due
to stagnant demand. However, in the Carbon Materials business, sales of highvalue-added products increased.
Fibers and Textiles
Sales in this segment edged down 1.3% year on year to ¥47,584 million while segment
income fell 19.4% year on year to ¥4,361 million.
(1) Sales of CLARINO™ man-made leather sales for luxury product applications
remained stable. However, sales declined for use in shoes.
(2) In fibers and industrial materials, exports of KURALON™ for cement reinforcement
use remained weak. Also, sales of products used in reinforcing rubber were negatively
affected by a decline in vehicle production.
(3) In consumer goods and materials, sales of KURAFLEX™ for commodity use
decreased.
Trading
In fiber-related businesses, sales of sportswear-use products remained firm. However,exports of resins and chemicals to such countries as China fell. As a result, segment sales
decreased 5.1% year on year to ¥96,791 million, and segment income rose 0.3% to ¥3,001
million.
Other BusinessIn other businesses, due to weak sales of domestic affiliates, segment sales declined 10.4%
3

year on year to ¥38,293 million, and segment income fell 22.9% to ¥582 million.
(2) Overview of Financial Position
Total assets increased ¥31,178 million from the end of the previous fiscal year to ¥978,274
million mainly because of a ¥42,228 million increase in tangible fixed assets that offset a¥13,775 million decrease in intangible fixed assets. Total liabilities increased ¥48,253
million to ¥428,315 million due to factors that included the issuance of commercial paper
totaling ¥24,000 million, a ¥13,444 million increase in accrued expenses, and a ¥17,224
million increase in other noncurrent liabilities, despite an ¥11,799 million decrease in
short-term loans payable. The main reason for the increases in tangible fixed assets andother noncurrent liabilities is the application of IFRS 16 for leases of some overseas
affiliates from the first quarter of the fiscal year ending December 31, 2019, which led toincreases in right-of-use assets and lease liabilities respectively.
Net assets fell ¥17,075 million to ¥549,958 million. Equity attributable to owners of theparent amounted to ¥537,644 million, for an equity ratio of 55.0%.
(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results
Forecasts
Taking the current global economic conditions, trends in foreign exchange rates and raw
material and fuel prices as well as the prevailing business environment into account, werevised the full-year operating results forecast, which was announced on August 8, 2019.
In the third quarter of fiscal 2019, Kuraray has recognized litigation-related loss including
the settlement amount and insurance income in connection with a fire incident that
occurred in May 2018 at a group subsidiary in the United States. The recorded loss includes
costs incurred by this subsidiary to reach a settlement with some of the plaintiffs.
Presently, Kuraray is not positioned to reasonably estimate the extent of losses that may be
additionally incurred by the subsidiary in the course of future litigation procedures and,
therefore, has not included such amounts in its consolidated financial statements.
The revised cumulative consolidated operating results forecast for the fiscal year ending
December 31, 2019 (January 1, 2019 to December 31, 2019) is as follows.

Net Sales
Original Forecast (A)(Announced August 8, 2019)
Revised Forecast (B)Amount Adjusted (B − A)
Percent Adjusted

Operating
Income(Yen)(Millions of yen)
Net Income
Ordinary Attributable to Net Income
IncomeOwners of the
Per Share
Parent600,000

67,00062,50038,000109.76

578,000(22,000)(3.7%)

57,000(10,000)(14.9)

52,000(10,500)(16.8)

28,500(9,500)(25.0)

82.92

For the second half of fiscal 2019, we assume average exchange rates of ¥110 to the U.S.
dollar and ¥120 to the euro, as well as a domestic naphtha price of ¥41,000 per kiloliter.

42. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheets(Millions of yen)
ASSETS
Current Assets
Cash and cash deposits
Notes and accounts receivable–trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent Assets
Tangible fixed assets
Buildings and structures, net
Machinery, equipment and vehicles, net
LandConstruction in progress
Other, net
Total tangible fixed assets
Intangible fixed assets
Goodwill
Customer-related assets
Other
Total intangible fixed assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit assets
Deferred tax assets
OthersAllowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

5

December 31, 2018

September 30, 201967,022
128,107
32,921
101,081
15,221
36,667
14,315(426)
394,91057,325
113,551
41,364
108,017
15,071
33,82928,464(389)
397,235

74,182204,215
22,70749,4686,837
357,41175,830197,857
21,84678,72325,382399,639

66,48536,263
41,400144,150

61,36933,23035,775130,375

29,509218
1,101
12,9936,840(40)
50,622552,184
947,095

28,665
189
1,302
14,1586,735(27)51,023581,038
978,274(Millions of yen)
December 31, 2018
LIABILITIESCurrent Liabilities
Notes and accounts payable–trade
Short-term loans payable
Commercial paper
Accrued expenses
Income taxes payable
Provision for bonuses
Other provision
Other
Total current liabilities
Noncurrent liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Provision for directors’ retirement benefits
Provision for environmental measures
Net defined benefit liabilities
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gain or losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Subscription rights to shares
Noncontrolling interests
Total net assets
Total liabilities and net assets

6

September

30, 2019

45,40846,540―12,201
8,474
6,681
266
25,212
144,785

37,072
34,74024,00025,646
3,571
8,861
240
35,574
169,707

50,000120,049
24,951237
5,716
18,065
5,070
11,185235,276
380,062

50,000127,781
22,929274
4,930
19,3984,884
28,409258,608
428,315

88,95587,207364,841(9,746)531,257

88,95587,199369,603(16,307)529,451

7,822
1
20,382(4,025)24,181587
11,007567,033
947,095

7,090
32
5,056
(3,986)
8,193
668
11,645549,958
978,274(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements ofComprehensive Income
Quarterly Consolidated Statements of Income(Millions of yen)
Fiscal 2018 3Q(January 1, 2018 –September30, 2018)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Equity in earnings of affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange loss
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Insurance income
Gain on sale of investment securities
Compensation income
Total extraordinary income
Extraordinary loss
Litigation-related loss
Impairment loss
Loss on disposal of tangible fixed assets
Disaster loss
Loss on liquidation of subsidiaries and associates
Costs related to the suspension of operations
Acquisition related expenses
Total extraordinary loss
Income before income taxes and noncontrolling interests
Income taxes—current
7449,929
302,242
147,687

Fiscal 2019 3Q(January 1, 2019 –September 30, 2019)428,914292,167
136,746

25,13968,172
93,312
54,37525,136
69,274
94,41142,334

297
1,167
247
1,142
2,854

231
448
253
702
1,636

965
1,653
2,580
5,199
52,030

1,076
1,697
3,256
6,029
37,941

―
―
336
336

10,691
1,568―
12,260

―
―
623
1,468
－
－
1,030
3,121
49,244
16,746

14,727
3,358
1,131
858
567
511
―
21,156
29,045
11,238

(1,614)
15,131

Income taxes—deferred
Total income taxes

Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of the parent

8(2,409)8,828(Millions of yen)

Fiscal 2018 3Q(January 1, 2018 –September 30, 2018)

Fiscal 2019 3Q(January 1, 2019 –September 30, 2019)34,112829
33,283

20,216859
19,357

Quarterly Consolidated Statements of Comprehensive Income(Millions of yen)

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total other comprehensive income
Quarterly comprehensive income
Comprehensive income attributable to:
Owners of the parent
Noncontrolling interests

9

Fiscal 2018 3Q(January 1, 2018 –September 30, 2018)34,112

Fiscal 2019 3Q(January 1, 2019 –September 30, 2019)20,216(884)
600(2,905)1(3,188)30,924(731)
30(15,246)39(15,908)
4,308

30,096
828

3,369
938

(3) Notes regarding Quarterly Consolidated Financial Statements
Notes regarding Going Concern Assumptions
None
Material Changes in Shareholders’ Equity
Kuraray’s Board of Directors resolved to purchase treasury stock at the meeting convened on February
13, 2019. In accordance with this resolution, Kuraray completed the acquisition of five million shares. As
a result, in the third quarter of the fiscal year ending December 31, 2019, treasury stock increased ¥6,560
million and amounted to ¥16,307 million as of September 30, 2019.
Changes in Accounting Principles● Changes in Accounting Principles Following the Revision of Accounting Standards
Kuraray has adopted IFRS 16 for leases of some overseas affiliates from the first quarter of the fiscal
year ending December 31, 2019. As a result, regarding operating leases (as the borrower) under IAS 17,
the Company recognizes right-of-use assets and lease liabilities on the start date of the application. With
this application, the Group adopted the method of recognizing cumulative effects on the application
start date, which is considered a transitional measure. Due to the adoption of this method, Kuraray has
not restated its comparative information.
As a result, in the quarterly consolidated balance sheet for the third quarter of fiscal 2019, other tangible
fixed assets increased ¥18,541 million, other current assets increased ¥1,292 million, and othernoncurrent liabilities increased ¥17,585 million.
Furthermore, the impact of this change on profit and loss in the third quarter of the fiscal year ending
December 31, 2019, is minor.
Additional Information
Kuraray applies ASBJ Statement No. 28 Partial Amendments to Accounting Standard for Tax EffectAccounting (issued February 16, 2018) from January 1, 2019. Deferred tax assets are stated underinvestments and other assets, and deferred tax liabilities are stated under noncurrent liabilities.
Business Combinations, etc.
● Important Revision of the Original Allocation of the Acquisition Price
Kuraray acquired all of the shares of Calgon Carbon Corporation on March 9, 2018. Although Kuraray
used a temporary accounting treatment for the third quarter of the previous fiscal year with January 1,
2018, as the recognized acquisition date, the treatment was determined at the end of the previous fiscal
year.
With the determination of this temporary accounting treatment, in the comparative information includedin the quarterly consolidated financial statements of the third quarter of the fiscal year ending December
31, 2019, the original allocation of the acquisition price now reflects an important revision, mainly¥14,244 million was allocated to equipment and transport under tangible fixed assets, and, as a result,
the temporarily calculated goodwill of ¥85,688 million decreased ¥35,177 million to ¥50,511 million.
As a result, in the quarterly consolidated statement of income for the third quarter of the previous fiscal
year, operating income, ordinary income, and net income before taxes each decreased ¥2,802 million.

10

Segment Information, etc.
● Segment Information
I. Third Quarter of Fiscal 2018 (January 1, 2018 to September 30, 2018)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
Vinyl Isoprene Functional Fibers and Trading
AcetateMaterials Textiles

Net sales(1) Outside
174,205
customers(2) Intersegment
sales and
33,309transfers
Total
207,514Segment income
43,395(loss)

Total

Other
Business1

Total Adjustment2 Consolidated
Statements3of Income

22,66784,55335,55799,936 416,920

33,009 449,929

20,00914,496

12,675

2,025

9,747

42,677

99,04948,232 101,962 499,436

6,203

3,850

5,414

2,993

82,51561,856－449,929

92,263(92,263)－

42,757 542,193(92,263)449,929(8,236)54,375755

62,611

Notes:
1. The “Other Business” category incorporates operations not included in business segment
reporting, including the environmental business and engineering business.
2. Adjustment is as follows: Included within segment loss of ¥8,236 million is the elimination ofintersegment transactions of ¥1,077 million and corporate expenses of ¥9,313million. Corporate
expenses mainly comprise the submitting company’s basic research expenses.
3. Segment income is adjusted to agree with operating income in the consolidated statements ofincome.

11II. Third Quarter of Fiscal 2019 (January 1, 2019 to September 30, 2019)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
Vinyl Isoprene Functional Fibers and Trading
AcetateMaterials Textiles

Net sales(1) Outside
169,599
customers(2) Intersegment
sales and
31,837transfers
Total
201,437
Segment income
36,037(loss)

Total

Other
Business1

Total Adjustment2 Consolidated
Statements3of Income

21,99280,45336,382

94,751 403,179

25,735 428,914

18,00014,072

11,202

2,039

12,55839,992

94,52547,584

96,791 480,332

4,107

3,192

4,361

3,001

77,15250,700－428,91489,711(89,711)－

38,293 518,626(89,711)

428,914(8,947)42,334582

51,282

Notes:
1. The “Other Business” category incorporates operations not included in business segment
reporting, including the environmental business and engineering business.
2. Adjustment is as follows: Included within segment loss of ¥8,947 million is the elimination ofintersegment transactions of ¥1,622 million and corporate expenses of ¥10,570 million.
Corporate expenses mainly comprise the submitting company’s basic research expenses.
3. Segment income is adjusted to agree with operating income in the consolidated statements ofincome.
4. At the end of the previous fiscal year, Kuraray determined the temporary accounting treatment
for the business combination and reflected the change in the figures for the third quarter of theprevious fiscal year.
2. Information related to goodwill or impairment loss of fixed assets for each reportable segment
Important impairment losses related to fixed assets
In the vinyl acetate segment, Kuraray recorded an impairment loss. Furthermore, the amount recorded
for said impairment loss was ¥3,358 million in the third quarter of the fiscal year under review.

12