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

August 4, 2016
Kuraray Co., Ltd.

August 4, 2016
Kuraray Co., Ltd.
Consolidated Earnings Report for the Second 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: Yes
Holding of quarterly earnings results briefing: Yes (for securities analysts and institutional investors)

1. Consolidated Financial Results for the Second Quarter of the Fiscal YearEnding December 31, 2016 (January 1, 2016 to June 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 2Q

244,099(7.1%)

34,641

9.6%

33,681

4.7%

22,376

6.9%

Fiscal 2015 2Q

262,877―

31,605―32,160―20,931―

Note: Comprehensive income:For the fiscal 2016 second quarter:(¥13,084 million)―

For the fiscal 2015 second quarter:¥23,402 million―

Net Income per Share

Fully Diluted Net Income per(Yen)

Share (Yen)

Fiscal 2016 2Q

63.70

63.57

Fiscal 2015 2Q

59.65

59.48

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

Net Assets

Shareholders’ Equity Ratio (%)

As of June 30, 2016

660,200

482,341

71.9%

As of December 31, 2015

701,770

503,589

70.7%(Reference)
Shareholders’ equity:

As of June 30, 2016:¥474,627 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: Yes

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 5 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 June 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 June 30, 2016

3,498,791 shares

As of December 31, 2015

3,658,647 shares

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

351,303,259 shares

As of June 30, 2015

350,883,360 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 4 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.........

4

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

5

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

5

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

7(1) Quarterly Consolidated Balance Sheets................................................................................................

7(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements ofComprehensive Income..........................................................................................................................

9

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

9

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

10(3) Quarterly Consolidated Statements of Cash Flows............................................................................

11(4) Notes regarding Quarterly Consolidated Financial Statements........................................................

13

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

13

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

13

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

13

1

1.

Qualitative Information and Financial Statements(1) Qualitative Information and Overview of Consolidated Business Results
In the second quarter of fiscal 2016 (January 1, 2016–June 30, 2016), recovery in the Japanese economy
slowed as personal consumption stagnated and corporate profits deteriorated due to appreciating yen since
the beginning of the period. In the global economy, although conditions in the United States were favorable
despite worries regarding employment conditions, the economy in Europe continued to gradually improve
even though there were temporary disruptions in foreign exchange and stock markets due to the United
Kingdom’s decision to leave the European Union at the end of the period. However, this did not impact
business performance for the second cumulative consolidated quarter. Meanwhile, the economies in China
and 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 second quarter of fiscal 2016 are as follows:
net sales fell ¥18,777 million, or 7.1%, compared with the corresponding period of the previous fiscal year to¥244,099 million; operating income grew ¥3,036 million, or 9.6%, to ¥34,641 million; ordinary income
increased ¥1,521 million, or 4.7%, to ¥33,681 million; and net income attributable to owners of the parentrose ¥1,445 million, or 6.9%, to ¥22,376 million.
Results by Business Segment
Vinyl Acetate
Sales in this segment fell 7.1% year on year to ¥128,624 million, and segment income grew 10.8% year on
year to ¥29,394 million.
(1) Sales of PVA resins were not able to offset the depreciation of the new U.S. plant, which began
operation in the second quarter (April 1, 2016–June 30, 2016). Sales of optical-use poval film decreased
due to adjustments in the production of LCD panels. Sales of water-soluble PVA film remained firm.
Sales of PVB film remained brisk mainly due to a recovery in demand in China.
(2) Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin) were healthy for both automotive gas
tank and food packaging applications.
Isoprene
Sales in this segment declined 8.8% year on year to ¥25,953 million, and segment income grew 18.2% year on
year to ¥3,990 million.
(1) In isoprene chemicals, sales of fine chemicals, SEPTON thermoplastic elastomer and liquid rubber

2remained brisk as signs of recovery appeared in Chinese demand for certain applications and the productlineups shifted toward high-added value products.
(2) Sales of GENESTAR heat-resistant polyamide resin continued to expand for automotive applications
and signs of recovery emerged for connector applications, but sales for LED reflector applications werestill affected by stagnant Chinese demand.
Functional Materials
Sales in this segment decreased 8.1% year on year to ¥26,055 million, and segment income tumbled 21.4%
year on year to ¥2,001 million.
(1) For methacrylic resins, the Company was forced to lower prices of certain resin applications andmonomers due to worsened market conditions.
(2) In the medical business, sales of dental materials remained favorable 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, sales of products made with both the conventional and the new
production process remained firm.
Fibers and Textiles
In addition to brisk sales of KURALON, consumer goods and materials remained firm. As a result, sales inthis segment increased 0.5% year on year to ¥23,864 million while segment income grew 41.2% year on yearto ¥2,994 million.
Trading
Chemical-related businesses were impacted by the slowdown in Chinese demand, while sales of certain
applications in fiber-related businesses bore the effects of weak domestic demand. As a result, segment sales
decreased 1.8% year on year to ¥59,097 million, and segment income fell 4.6% to ¥1,895 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 8.1% year on year to ¥30,860 million, and segment
income declined 26.7% to ¥938 million.

3(2) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts
Kuraray has revised its full-year net sales forecast for the fiscal year ending December 31, 2016 as shown
below in the table to reflect the effects of the continued appreciation of the yen.
The revised cumulative consolidated operating results forecast for the full fiscal year ending December 31,
2016 (January 1, 2016 to December 31, 2016) is as follows.
(Millions of yen)
Net Sales Operating Income Net Income

Net Income

Net Income Per Share

Attributable to
Owners of the
ParentOriginal Forecast (A)540,000

70,00068,00040,000¥113.89

Revised Forecast (B)500,000

70,00068,00040,000¥113.84

Amount Adjusted (B − A)

(40,000)

―

―

―

(7.4)

―

―

―

(Announced February 9, 2016)

Percent Adjusted

For the third quarter of fiscal 2016 onward, we assume average exchange rates of ¥105 to the U.S. dollar and¥115 to the euro, as well as a domestic naphtha price of ¥33,000 per kiloliter.

[Reference] Forecast Results by Segment for the Fiscal Year Ending December 31, 2016
(Billions of yen, rounded to the nearest hundred million)
Net Sales
Fiscal 2016 2Q

Results

Operating Income
Fiscal 2016 2Q
Results

Fiscal 2016

Fiscal 2016

Vinyl Acetate

128.6

260.0

29.4

61.0

Isoprene

26.0

52.0

4.0

7.5

Functional Materials

26.1

54.0

2.0

4.5

Fibers and Textiles

23.9

48.0

3.0

5.0

Trading

59.1

121.0

1.9

4.0

Others

30.9

66.0

0.9

2.0

Elimination & Corporate(50.4)(101.0)(6.6)(14.0)

Total

244.1

500.0

34.6

70.0

Note: The above forecasts are based on the best information currently available. Actual operating results mayvary significantly due to various factors.

4

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 second
quarter of 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.
In the consolidated cash flow statements, cash flows from the purchase or sale ofinvestments in subsidiaries not resulting in a change in scope of consolidation are listed
under cash flows from financing activities while cash flows resulting from expenses
incurred in the purchase of investments in subsidiaries resulting in a change in scope of
consolidation and from expenses incurred in the purchase or sale of investments in
subsidiaries not resulting in a change in scope of consolidation are listed under cash flows
from operating activities.
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 second
quarter of the fiscal year ending December 31, 2016.
5

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.
This change has minimal effect on the operating income, ordinary income and net income
before taxes for the second quarter of the fiscal year ending December 31, 2016.

6

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

June 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

37,126
99,04823,00071,404
11,38022,926
6,753
15,234(449)
286,425

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

52,957
145,603
18,28628,253
4,763
249,863

28,56432,244
23,167
83,976

24,51926,56821,12072,20846,057
239
791
6,361
5,887
(50)
59,287405,284
701,770

37,803
305
939
7,011
5,687
(44)
51,702
373,774
660,200

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

7

(Millions of yen)
December 31, 2015

June 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

8

38,331
7,187
10,468
14,6925,259
31
19,48095,45031,4558,014
9,349
10,541
4,488
8
16,24380,101

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

10,00042,20921,017
192
351
10,266
3,252
10,46797,757
177,859

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

88,95587,158293,281(4,131)
465,264

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

7,191
40
6,459
(4,328)
9,363
755
6,957
482,341
660,200

(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 2Q

Fiscal 2016 2Q(January 1, 2015 –(January 1, 2016 –June 30, 2015)

June 30, 2016)

262,877
181,544
81,333244,099
159,919
84,18013,491
36,23749,72831,605

13,342
36,19649,53834,641

129
2,347
560
3,037

111
1,983
1,027
3,122

357
2,125
2,482
32,160

358
3,723
4,082
33,681

278
278

－
－

195
154
349
32,088
10,848(36)
10,811
21,277345
20,931－－－33,681
10,035814
10,84922,832455
22,376

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
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 valuation of investment securities
Loss on disposal of tangible fixed assets
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

9

Quarterly Consolidated Statements of Comprehensive Income(Millions of yen)

Net income

Fiscal 2015 2Q

Fiscal 2016 2Q(January 1, 2015 –(January 1, 2016 –June 30, 2015)

June 30, 2016)

21,277

22,832

3,466(57)(1,449)165
2,125
23,402(3,617)44(32,815)473(35,916)(13,084)

23,056346(13,538)
454

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 interests10(3) Quarterly Consolidated Statements of Cash Flows(Millions of yen)

Cash Flows from Operating Activities
Income before income taxes and minority interests in net
income of consolidated subsidiaries
Depreciation and amortization
Loss (gain) on foreign exchange
Loss (gain) on valuation of investment securities
Loss on abandonment of non-current assets
Loss (gain) on disposal of fixed assets
Decrease (increase) in notes and accounts receivable–
trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable–trade
Other, net
Subtotal
Income taxes paid
Other
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities
Net decrease in time deposits
Purchase of tangible fixed assets and intangible assets
Purchase of investment securities
Proceeds from sales and redemption of marketablesecurities
Purchase of investments in subsidiaries resulting incharge in scope of consolidation
Proceeds from sale of business
Purchase of investment securities
Other, net
Net Cash Used in Investing Activities
Cash Flows from Financing Activities
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial papers
Repayment of long-term loans payable
Cash dividends paid
Other, net
Net Cash Used in Financing Activities
Effect of Exchange Rate Changes on Cash and Cash
Equivalents
Net Increase (decrease) in Cash and Cash Equivalents

11

Fiscal 2015 2Q

Fiscal 2016 2Q(January 1, 2015 –(January 1, 2016 –June 30, 2015)

June 30, 2016)

32,08833,681

21,636
285
195
154
(278)
(748)

20,0422,654－－－(2,308)(213)(8,324)(1,182)
43,613980
2,137
46,731(1,992)(5,627)
2,649
49,100(10,991)
1,740
39,848(193)(21,232)(1,985)
4,234－(24,402)(907)
3(5,564)

－

1,134
(120)
(1,762)(25,489)－－(81)(25,387)(4,950)(10,000)(69)(3,155)232(17,943)
(285)

937
－
(66)
(7,726)(297)(7,153)(3,207)

3,013

4,100

(Millions of yen)

Cash and Cash Equivalents, Beginning of the Period
Increase in cash and cash equivalents from newly
consolidated subsidiary
Cash and Cash Equivalents, End of the Period

12

Fiscal 2015 2Q

Fiscal 2016 2Q(January 1, 2015 –(January 1, 2016 –June 30, 2015)

June 30, 2016)

35,38854,750－231

38,401

59,082

(4) Notes Regarding Quarterly Consolidated Financial Statements
Notes Regarding Going Concern Assumptions
None
Material Changes in Shareholders’ Equity
None
Segment and Other Information
Segment Information
I. Second Quarter of Fiscal 2015 (January 1, 2015 to June 30, 2015)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
Vinyl

Isoprene

AcetateOthersFunctional Fibers and Trading
Materials

1

Total

Total

TextilesElimination on

Consolidated

Consolidation

Statements

2of Incomeand Corporate

3

Net Sales
Outside customers

123,083

16,44819,463

18,21359,094 236,304

26,573 262,877－

262,877

Inter-segment sales

15,325

12,023

8,875

5,537

1,112

7,000

49,874(49,874)－

Total

138,408

28,47228,33923,75160,207 279,178

33,573 312,752(49,874)

262,877

Segment Income

26,535

3,375

2,547

2,121

1,987

1,279

(6,243)31,60542,874and transfers

36,56837,848Notes:
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¥6,243 million is the elimination of intersegment transactions of ¥554 million and corporate expenses of¥6,797 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.

13

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

Isoprene

AcetateOthersFunctional Fibers and Trading
Materials

1

Total

Total

TextilesElimination on

Consolidated

Consolidation

Statements

2of Incomeand Corporate

3

Net Sales
Outside customers

113,988

14,001

17,30918,30957,667 221,276

22,823 244,099－

244,099

14,636

11,951

8,746

5,555

1,430

8,037

50,357(50,357)－

Total

128,624

25,95326,05523,86459,097 263,597

30,860 294,457(50,357)

244,099

Segment Income

29,394

3,990

2,001

2,994

1,895

(6,573)34,641

Inter-segment sales
42,320and transfers

40,276938

41,215

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¥6,573 million is the elimination of intersegment transactions of ¥707 million and corporate expenses of¥7,280 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.

14