Consolidated Earnings Report for theThird Quarter of the Fiscal Year Ending
December 31, 2016 (Unaudited)

November 8, 2016
Kuraray Co., Ltd.

November 8, 2016
Kuraray Co., Ltd.

Consolidated Earnings Report for the Third Quarter of the Fiscal Year Ending December 31, 2016

Name of listed company:

Kuraray Co., Ltd.

Stock code:

3405

Stock exchange listing:Tokyo, first section

URL:

http://www.kuraray.com/

Representative:
Title:

Representative Director and President

Name:

Masaaki Ito

Contact:
Title:

Manager, Corporate Management Planning Office,Corporate Communications Department

Name:

Akiko Ide

Tel:

+81-3-6701-1070(Millions of yen rounded down unless otherwise stated)

Preparation of supplementary documentation for the quarterly earnings report: No

Holding of quarterly earnings results briefing: No

1. Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending
December 31, 2016 (January 1, 2016 to September 30, 2016)(1) Consolidated Operating Results (Cumulative)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year.)(Millions of yen)
Net Sales

Operating Income(Change)

Net Income Attributable to
Owners of the Parent

Ordinary Income(Change)(Change)(Change)

Fiscal 2016 3Q

360,787(7.9%)

52,562

6.6%

51,682

6.2%

34,352

7.8%

Fiscal 2015 3Q

391,905―

49,308―

48,686―31,858―

Note: Comprehensive income:For the fiscal 2016 third quarter:(¥2,937 million)―

For the fiscal 2015 third quarter:¥26,870 million―

Net Income per Share

Fully Diluted Net Income per(Yen)

Share (Yen)

Fiscal 2016 3Q

97.78

97.60

Fiscal 2015 3Q

90.77

90.52

(2) Consolidated Financial Position(Millions of yen)
Total Assets

Net Assets

Shareholders’ Equity Ratio (%)

As of September 30, 2016

660,131

485,471

72.3%

As of December 31, 2015

701,770

503,589

70.7%(Reference)
Shareholders’ equity:

As of September 30, 2016:¥477,522 million

As of December 31, 2015:¥496,062 million

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

Mar. 31

Jun. 30

Sep. 30

Dec. 31AnnualFiscal 2015

―

18.00

―

22.00

40.00

Fiscal 2016

―

20.00

―
20.00

40.00

Fiscal 2016
(Forecast)

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

3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending
December 31, 2016 (January 1, 2016 to December 31, 2016)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year)(Millions of yen)
Net Sales

Full Fiscal Year

500,000(4.2%)

Operating Income

70,0005.9%

Ordinary Income

68,0005.4%

Net Income Attributable

Net Income per Shareto Owners of the Parent(Yen)

40,00011.9%

113.84

Note: Revisions to forecasts of consolidated financial results during this period: No

4. Other(1) Changes in Important Subsidiaries during the Period (Changes in Special Subsidiaries Involving
Changes in the Scope of Consolidation)
No(2) Adoption of Special Accounting Practices in the Preparation of Quarterly Consolidated Financial
Statements
No(3) Changes in Accounting Policies, Accounting Estimates and Restatement in Connection with the
Preparation of Quarterly Consolidated Financial Statements
1. Changes following revision of accounting standards: Yes
2. Changes besides 1. above: No
3. Changes of accounting estimates: No
4. Restatement: No
Note: For details, refer to page 4 of the Attached Materials under the heading, “Items Regarding Summary

Data (and Notes): Changes in Accounting Policies, Accounting Estimates and Restatement.”(4) Number of Shares Issued and Outstanding (Common Shares)
1.

2.

3.

Number of shares issued and outstanding (including treasury stock) as of the period-end:
As of September 30, 2016

354,863,603 shares

As of December 31, 2015

354,863,603 shares

Number of treasury stock as of the period-end:
As of September 30, 2016

3,486,599 shares

As of December 31, 2015

3,658,647 shares

Average number of shares for the period (cumulative):
As of September 30, 2016

351,325,829 shares

As of September 30, 2015

350,961,019 shares

Indication of quarterly review procedure implementation status
This quarterly earnings report is exempt from the quarterly review procedure based upon the Financial
Instruments and Exchange Act. Furthermore, this report was undergoing the review procedure process at thetime of this release.

Cautionary Statement with Respect to Forecasts of Consolidated Business Results(Cautionary note regarding forward-looking statements)
The results forecasts presented in this document are based upon currently available information andassumptions deemed rational. A variety of factors could cause actual results to differ materially from forecasts.
Please refer to “Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts” onpage 3 of the Attachment for the assumptions used.

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

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

2(2) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts.........

3

2. Items Regarding Summary Data (and Notes).......................................................................................

4

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

4

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

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

6(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements ofComprehensive Income..........................................................................................................................

8

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

8

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

9(3) Notes regarding Quarterly Consolidated Financial Statements........................................................

10

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

10

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

10

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

10

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

11

1

1.

Qualitative Information and Financial Statements(1) Qualitative Information and Overview of Consolidated Business Results
In the third quarter of fiscal 2016 (January 1, 2016–September 30, 2016), the Japanese economy remained
stalled as personal consumption stagnated and the yen began appreciating since the beginning of the period.
In the global economy, economic conditions in the United States were favorable with consumer spending andexports leading the way, and the economy in Europe continued to gradually improve. Although the United
Kingdom’s decision to leave the European Union cast a shadow on Europe’s outlook, there has currently
been no major impact. Meanwhile, the deceleration in China’s economy was halted by the government’s
successful measures to stimulate consumption. The economies in most emerging nations continued to slow.

Under these circumstances, the Kuraray Group has been successively implementing the business strategies
outlined in GS-STEP, its medium-term management plan that started in fiscal 2015, to realize “a high-profit
specialty chemical company with a global presence.”

Consequently, cumulative consolidated operating results for the third quarter of fiscal 2016 are as follows: net
sales fell ¥31,117 million, or 7.9%, compared with the corresponding period of the previous fiscal year to¥360,787 million; operating income grew ¥3,254 million, or 6.6%, to ¥52,562 million; ordinary income
increased ¥2,996 million, or 6.2%, to ¥51,682 million; and net income attributable to owners of the parentrose ¥2,494 million, or 7.8%, to ¥34,352 million.

Results by Business Segment
Vinyl Acetate
Sales in this segment fell 8.3% year on year to ¥190,599 million, and segment income grew 8.8% year on yearto ¥45,012 million.
(1) Sales of PVA resins were not able to absorb the depreciation and other costs of the new U.S. plant as
there was some trouble at the start of operations. Sales of optical-use poval film showed signs ofrecovery as adjustments in the production of LCD panels reached an appropriate levels. Sales ofwater-soluble PVA film remained firm. Sales of PVB film stayed brisk.
(2) Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin) continued to be healthy for bothautomotive gas tank and food packaging applications.

Isoprene
Sales in this segment declined 7.7% year on year to ¥38,419 million, and segment income grew 0.7% year on
year to ¥5,520 million.
(1) In isoprene chemicals, sales of fine chemicals, SEPTON thermoplastic elastomer and liquid rubber
remained firm.

2(2) Sales of GENESTAR heat-resistant polyamide resin continued to expand for automotive applications
and rebounded for connector applications, but sales for LED reflector applications were still struggling.

Functional Materials
Sales in this segment decreased 8.6% year on year to ¥38,595 million, and segment income fell 17.6% year on
year to ¥3,471 million.
(1) For methacrylic resins, signs of recovery emerged in demand for certain resin applications andmonomers that had been affected by poor market conditions.
(2) In the medical business, sales of dental materials remained brisk due to an expanded range of new
product offerings and greater synergies through business integration on the sales front.
(3) For CLARINO man-made leather, the impact of the stronger yen on sales became clear.

Fibers and Textiles
In addition to increased sales of KURALON for high value-added applications, sales of consumer goods andmaterials, especially KURAFLEX, remained favorable. As a result, sales in this segment increased 3.4% year
on year to ¥35,474 million while segment income grew 56.1% year on year to ¥4,677 million.

Trading
Results from chemical-related businesses remained firm, while sales in fiber-related businesses bore theeffects of weak domestic demand. As a result, segment sales decreased 1.7% year on year to ¥87,257 million,
and segment income fell 4.4% to ¥2,634 million.

OthersIn other businesses, development costs rose due to the addition of the energy materials business in the first
consolidated quarter. As a result, segment sales fell 10.0% year on year to ¥46,569 million, and segment
income declined 21.7% to ¥1,356 million.

(2) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts
Kuraray has not revised full-year consolidated operating results forecast released on August 4, 2016.

3

2.

Items Regarding Summary Data (and Notes)
Changes in Accounting Policies, Accounting Estimates and Restatement(Changes in Accounting Policies)
1. Adoption of Accounting Standard for Business Combinations

The Accounting Standards Board of Japan (ASBJ) issued ASBJ Statement No. 21 “Revised
Accounting Standard for Business Combinations,” ASBJ Statement No. 22 “Revised
Accounting Standard for Consolidated Financial Statements,” and ASBJ Statement No. 7“Revised Accounting Standard for Business Divestitures.” These revised accounting
standards are applied from the first quarter of the fiscal year ending December 31, 2016.
Accordingly, differences resulting from changes in ownership interest in a subsidiary whencontrol over the subsidiary is retained are recorded under capital surplus, and costs related
to acquisition of increased ownership interest are recognized in the period in which theyarise. Also, transitional accounting is applied to business combinations performed on orafter the beginning of the first quarter of the fiscal year ending December 31, 2016, withrevision of purchase price allocation applied to the quarterly consolidated financial
statements during the quarter in which the date of the business combination occurs. The
presentation method of net income was amended, and “minority interests” were changed
to “noncontrolling interests.” For comparison purposes, information for the third quarterof the fiscal year ended December 31, 2015, and for the fiscal year ended December 31,
2015, is shown in accordance with the new standards in the accompanying consolidated
financial statements.
Transitional accounting in accordance with Article 58, Paragraph 2, Item 4, of ASBJ
Statement No. 21, Article 44, Paragraph 5, Item 4, of ASBJ Statement No. 22, and Article
57, Paragraph 4, Item 4, of ASBJ Statement No. 7 is applied from the beginning of thefirst quarter of the fiscal year ending December 31, 2016.
These changes have no effect on the consolidated financial statements for the third quarterof the fiscal year ending December 31, 2016.
2. Change in depreciation method due to tax reforms

The ASBJ issued PITF No. 32 “Practical Solution on a change in depreciation method due
to Tax Reform 2016” on June 17, 2016. This revised accounting standard is applied fromthe second quarter of the fiscal year ending December 31, 2016. The Company has
switched the method of depreciation for buildings purchased on or after April 1, 2016,
from the declining-balance method to the straight-line method.
4This change has minimal effect on the operating income, ordinary income and net income
before taxes for the third quarter of the fiscal year ending December 31, 2016.

5

3. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Millions of yen)
December 31, 2015

September 30, 2016

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
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent Assets

36,996
102,079
18,80577,582
11,29323,3107,598
19,430(611)
296,486

39,33999,121
33,04571,472
11,412
22,532
7,210
10,202(447)
293,889

53,959127,962
18,50856,6094,978262,019

53,629148,287
19,17926,1884,752
252,036

28,56432,244
23,167
83,976

23,83325,65820,40869,90046,057
239
791
6,361
5,887
(50)
59,287405,284
701,770

29,756
258
1,013
6,618
6,703
(45)
44,304366,241
660,131

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 relation 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

6

(Millions of yen)
December 31, 2015

September 30, 2016

LIABILITIESCurrent Liabilities
Notes and accounts payable–trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for bonuses
Other provision
Other
Total current liabilities
Long-term 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-sale securities
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

7

38,331
7,187
10,468
14,6925,259
31
19,48095,45030,247
7,783
10,070
5,972
7,852
6
15,747
77,681

10,00042,257
24,102
185
353
11,247
3,615
10,966
102,729
198,180

10,00042,174
20,539193351
10,006
3,326
10,38596,978
174,659

88,95587,147
278,899(4,319)450,682

88,95587,160298,230(4,117)470,228

10,808(4)
39,377(4,801)45,380831
6,695
503,589
701,770

7,899
(20)
3,546
(4,132)
7,293
750
7,197
485,471
660,131(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated
Statements of Comprehensive Income
Quarterly Consolidated Statements of Income(Millions of yen)

Net sales
Cost of sales
Gross profit

Fiscal 2015 3Q

Fiscal 2016 3Q(January 1, 2015 –(January 1, 2016 –September 30, 2015)

September 30, 2016)

391,905
267,280
124,624

360,787
234,581
126,206

20,16855,14775,31649,30819,99253,65073,64352,562

179
2,392
2
837
3,411

169
2,491
12
1,362
4,035

545
3,487
4,033
48,686

587
4,328
4,915
51,682

278
278

－
－

267
195
463
48,501
16,987(884)
16,10232,398540
31,858－－－51,682
16,345289
16,63535,047694
34,352

Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Equity in earnings of affiliates
Other, net
Total non-operating income
Non-operating expenses
Interest expenses
Other expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of tangible fixed assets
Total extraordinary income
Extraordinary loss
Loss on disposal of tangible fixed assets
Loss on valuation of investment securities
Total extraordinary loss
Income before income taxes and minority interests
Income taxes–current
Income taxes–deferred
Total income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of the parent

8

Quarterly Consolidated Statements of Comprehensive Income(Millions of yen)

Net income

Fiscal 2015 3Q

Fiscal 2016 3Q(January 1, 2015 –(January 1, 2016 –September 30, 2015)

September 30, 2016)

32,39835,047

1,015(71)(6,847)374(5,528)26,870(2,909)(15)(35,729)669(37,984)(2,937)26,329541(3,631)
693

Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gain or losses on hedges
Foreign currency translation adjustments
Pension liability adjustments
Total other comprehensive income
Quarterly comprehensive income
Comprehensive income attributable to:
Owners of the parent
Noncontrolling interests9(3) Notes Regarding Quarterly Consolidated Financial Statements
Notes Regarding Going Concern Assumptions
None

Additional Information
Third Quarter Cumulative Consolidated Period(January 1, 2016–September 30, 2016)
Kuraray’s Belgian subsidiary, which had received preferential taxation under the Belgian tax code in theprevious fiscal year, was ordered by the Belgian government to pay taxes for the amount that had beenpreviously exempted when, in January 2016, the European Commission determined that Belgium’s tax
system constituted illegal state aid. In response, the Belgian government has already filed a lawsuit toinvalidate the European Commission’s decision, and the Belgian subsidiary also filed a lawsuit to invalidate
the decision in July 2016.

In fiscal 2015, Kuraray’s Belgian subsidiary estimated its taxes at ¥2,994 million and recorded this amount in
its statements, taking into consideration its final tax burden risk rate.

Material Changes in Shareholders’ Equity
None

10

Segment and Other Information
Segment Information

I. Third Quarter of Fiscal 2015 (January 1, 2015 to September 30, 2015)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
Vinyl

Isoprene

Acetate1

Others

Total

Consolidation

Functional Fibers and Trading Total
Materials

Elimination on Consolidated

Textilesand Corporate

2Statements
3of IncomeNet Sales
Outside customers

184,356

24,11928,85826,139 87,165 350,639

41,266 391,905－

391,905

Inter-segment sales

23,474

17,525

13,3658,159

1,631 64,155

10,502 74,657(74,657)－

Total

207,831

41,64442,22334,299 88,796 414,794

51,768 466,562(74,657)

391,905

Segment Income

41,375

5,480

4,214

2,996

1,731 58,555(9,247)49,308and transfers

2,756 56,823

Notes:
1. The “Other Business” category incorporates operations not included in business segments reported,
including activated carbon, environmental business and engineering.
2. Elimination on Consolidation and Corporate is as follows: Included within negative segment income of¥9,247 million is the elimination of intersegment transactions of ¥1,298 million and corporate expensesof ¥10,545 million. Corporate expenses mainly comprise headquarters’ general and administrative
expenses and the submitting company’s basic research expenses not usually attributed to segments.
3. Segment income is adjusted to agree with operating income in the consolidated statements of income.

II. Third Quarter of Fiscal 2016 (January 1, 2016 to September 30, 2016)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
Vinyl

Isoprene

Acetate1

OthersTotal

Elimination on Consolidated

Functional Fibers and Trading Total

Consolidation

Statements

Materials

and Corporate

2of IncomeTextiles3

Net Sales
168,860

20,83225,144

27,128 85,068 327,034

33,753 360,787－

360,787

21,73917,586

13,451

8,345

2,189 63,312

12,815 76,128(76,128)－

Total

190,599

38,41938,59535,474 87,257 390,347

46,569 436,916(76,128)

360,787

Segment Income

45,012

5,520

3,471

4,677

1,356 62,673(10,110)52,562

Outside customers
Inter-segment sales
and transfers

2,634 61,316

11

Notes:1. The “Other Business” category incorporates operations not included in business segments reported,
including activated carbon, environmental business and engineering.
2. Elimination on Consolidation and Corporate is as follows: Included within negative segment income of¥10,110 million is the elimination of intersegment transactions of ¥1,195 million and corporate expensesof ¥11,305 million. Corporate expenses mainly comprise headquarters’ general and administrative
expenses and the submitting company’s basic research expenses not usually attributed to segments.
3. Segment income is adjusted to agree with operating income in the consolidated statements of income.

12