Flash Report
Consolidated Basis
Results for the First Half of Fiscal 2019
(April 1, 2019―September 30, 2019)＜under IFRS＞
November 1, 2019
Nippon Steel Corporation
Tokyo, Nagoya, Sapporo, Fukuoka stock exchanges
5401
https://www.nipponsteel.com/en/index.html
Eiji Hashimoto, Representative Director and President
Fumiaki Ohnishi, General Manager, Public Relations Center+81-3-6867-2130
November 12, 2019
December 2, 2019
Yes
Yes (for investment analysts)

Company name:
Stock listing:Code number:
URL:
Representative:
Contact:
Telephone:
Scheduled date to submit Securities Report:
Scheduled date to pay dividends:
Preparation of supplemental explanatory materials:
Holding of quarterly financial results meeting:（All amounts have been truncated to the nearest millions of Japanese yen.）

1. Consolidated Operating Results and Financial Position through the First Half of Fiscal 2019
(April 1, 2019―September 30, 2019)(1) Consolidated Operating Results (Accumulated)（Percentage figures are changes from the same period of the previous fiscal year.）
Revenue

Business profit (*)%

First half of Fiscal 2019

Millions ofyen
3,047,183

3.6

Millions ofyen
73,100First half of Fiscal 2018

2,941,586―

157,990(53.7)

Millions ofyen
73,100―136,950%

Profit attributable toowners of the parent

Total comprehensive
incomeMillions ofyenMillions ofyen%Operating profit%

Profit before
income taxes(46.6)

Millions ofyen
64,471―

128,619%

Profit(49.9)

Millions ofyen
49,440(57.3)―

115,662―%

Basic earnings
per share

Diluted earnings
per share

Yen

Yen

First half of Fiscal 2019

38,750(66.8)

12,246(85.5)

42.09―

First half of Fiscal 2018

116,795―

84,515―132.33―%(*)Business Profit on Consolidated Statements of Profit or Loss indicates the results of sustainable business activities, and is an importantmeasure to compare and evaluate the Company’s consolidated performance continuously. It is defined as being deducted Cost of sales,
Selling general and administrative expenses and Other operating expenses from Revenue, and added Share of profit in investments
accounted for using the equity method and Other operating income. Other operating income and expenses is composed mainly of Dividend
income, Foreign exchange gains or losses, Loss on disposal of fixed assets.

(2) Consolidated Financial Position
Total assets

Total equity

Total equity attributable toowners of the parent

Ratio of total equity
attributable to owners of theparent to total assets

Millions of yen

Millions of yen

Millions of yen%

First half of Fiscal 20198,026,392

3,575,279

3,197,355

39.8

Fiscal 2018

8,049,528

3,607,367

3,230,788

40.1

2. Dividends
Dividends per share
End of first quarterEnd of second quarterEnd of third quarterEnd of fiscal year

Fiscal year

Yen

Yen

Yen

Yen

Yen

Fiscal 2018

―

40.00

―

40.00

80.00

Fiscal 2019

―

10.00
―

―

―

Fiscal 2019 (Forecasts)

Notes: 1. Whether the dividends forecasts under review have been revised: No
2. The Company plans to determine the forecast for the year-end dividend distribution amount, with due consideration of forecasts forthe full fiscal year performance, and to announce it at the time of its third-quarter result announcement.

3. Consolidated Financial Forecasts for Fiscal 2019 (April 1, 2019―March 31, 2020)
Revenue

Fiscal 2019

（Percentage figures are changes from the same period of the previous fiscal year.）
Profit attributable to
Basic earnings per shareowners of the parent
Millions of yen%
Millions of yen%
Yen
Business profit

Millions of yen%

6,100,000(1.3)

100,000(70.3)

40,000(84.1)

43.00

Notes: 1. Whether the consolidated financial forecasts for fiscal 2019 under review have been revised: Yes
2. For further details, please refer to page 4, “1. Qualitative Information for the First Half of Fiscal 2019 (2) Explanation of Information on
Future Estimates, Including Consolidated Earnings Forecasts.”* Notes(1) Changes in significant subsidiaries during the period: None
(2) Changes in accounting policies and changes in accounting estimates(a) Changes in accounting policies required by IFRS: Yes(b) Changes other than those in (a) above: None(c) Changes in accounting estimates: None
Note: For further details, please refer to page 11, “2. Quarterly Condensed Consolidated Financial Statements and Major Notes(4) Notes to the Quarterly Condensed Consolidated Financial Statements (Changes in Accounting Policies Required by
IFRS).”(3) Number of shares outstanding (common shares)(a) Number of shares outstanding at the end of the period (including treasury stock)
First half of Fiscal 2019
950,321,402 sharesFiscal 2018
950,321,402 shares(b) Number of treasury stock at the end of the period
First half of Fiscal 201929,622,938 sharesFiscal 2018
29,797,955 shares(c) Weighted average number of shares outstanding
First half of Fiscal 2019
920,469,296 sharesFirst half of Fiscal 2018882,605,722 shares* This quarterly flash report is not subject to quarterly review procedures.
* Explanation of the appropriate use of performance forecasts and other related items(Explanation of the appropriate use of performance forecasts)
The forward-looking statements included in this flash report are based on the assumptions, forecasts, and plans of the Company as of thedate on which this document is made public. The Company’s actual results may differ substantially from such statements due to various
risks and uncertainties.

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

Index of Attached Documents
1. Qualitative Information for the First Half of Fiscal 2019 ............................................................................................2(1) Explanation of Operating Results ...........................................................................................................................2(2) Explanation of Information on Future Estimates, Including Consolidated Earnings Forecasts ..............................4
2. Quarterly Condensed Consolidated Financial Statements and Major Notes................................................................6(1) Quarterly Condensed Consolidated Statements of Financial Position ....................................................................6(2) Quarterly Condensed Consolidated Statements of Profit or Loss andQuarterly Condensed Consolidated Statements of Comprehensive Income or Loss ..............................................8(3) Quarterly Condensed Consolidated Statements of Changes in Equity ....................................................................9(4) Notes to the Quarterly Condensed Consolidated Financial Statements ................................................................11(Going Concern Assumption) ............................................................................................................................11(Changes in Accounting Policies Required by IFRS) ........................................................................................11

1

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

1. Qualitative Information for the First Half of Fiscal 2019(1) Explanation of Operating Results
Global and Domestic Economic Conditions in the First Half of Fiscal 2019
The global economy was characterized by ongoing improvement in private consumption in the United States while thetrade friction between the United States and China led to slower private consumption and overall economic growth inChina, where the government continued to invest in infrastructure to buoy the economy. Japanese economic conditions
continued to recover moderately with improving employment and income conditions, but economic sentiment was
subdued amid ongoing weakness mainly in exports.

Operating Results by Business Segment in the First Half of Fiscal 2019
The Nippon Steel Corporation Group’s business segments strived to respond to the changing business environment andto improve revenue and profit. An overview of operating results by business segment is shown below.
(Billions of yen)
Revenue
1H FY2019

1H FY2018

Business Profit
1H FY2019

1H FY2018

Steelmaking and Steel Fabrication
2,594.1
132.1
2,704.1
49.2
Engineering and Construction
161.3
3.1
157.9
5.1
Chemicals and Materials*
125.9
12.7
114.1
11.3
System Solutions
126.6
12.0
150.2
14.9
Total
3,008.0
160.1
3,126.5
80.7
Adjustments(66.4)(2.1)(79.3)(7.6)
Condensed consolidated total
2,941.5
157.9
3,047.1
73.1* The Chemicals segment and New Materials segment were merged to form the Chemicals and Materials
segment after Nippon Steel Chemical & Material Co., Ltd. was established in October 2018 following themerger of Nippon Steel & Sumikin Chemical Co., Ltd. and Nippon Steel & Sumikin Materials Co., Ltd. The
figures for the Chemicals and Materials segment in fiscal 2018 are the total sum of the Chemicals segment andthe New Materials segment.

Steelmaking and Steel Fabrication
The Steelmaking and Steel Fabrication segment experienced a decline in domestic demand for indirect exports, causedby slower consumption in Asia. Overseas steel demand lacked strength, particularly for flat steel products, as productionof consumer goods declined due to concern about deteriorating economic conditions in China. Steel prices in Japanremained generally firm, while prices in overseas markets fell in the second half of the previous fiscal year and havesince been stagnant.

In these conditions, profit declined year-on-year in the first half of fiscal 2019. While the recovery from the impacts oftorrential rains, typhoons, and earthquakes in the previous fiscal year and improving costs and long-term contractual
prices were factors that boosted profit, business profit was adversely affected by higher raw material prices, falling
prices for steel products in overseas markets, disasters (a power outage at the Kimitsu Works due to lightning strikes in
Chiba, a fire at the Nippon Steel Nisshin Kure Works No. 1 steelmaking plant, and the impact of Typhoon 15 (Faxai) on
the Kimitsu Works again and other facilities), an inventory valuation difference, and other factors.

2

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019The Steelmaking and Steel Fabrication segment recorded revenue of ¥2,704.1 billion (¥2,594.1 billion in the same
period of the previous fiscal year) and business profit of ¥49.2 billion (¥132.1 billion).

Engineering and Construction
Nippon Steel Engineering Co., Ltd. builds and operates plants in the steelworks, environmental, and energy fields andprovides services utilizing comprehensive engineering technology worldwide for various types of structures, including
large steel structure buildings, ultra-high-rise buildings, and pipeline facilities. In the first half of fiscal 2019, thecompany achieved steady progress in projects in various fields through strict project execution management andrecorded robust sales as a number of projects in Japan were completed. In addition, the first-half results were contributedby improvement in earnings of its affiliated companies and other factors.

The Engineering and Construction segment recorded revenue of ¥157.9 billion (¥161.3 billion in the same period of theprevious fiscal year) and business profit of ¥5.1 billion (¥3.1 billion).

Chemicals and Materials
Nippon Steel Chemical & Material Co., Ltd. continued to attract strong demand for needle coke used in graphite
electrodes while sales of carbon fiber composite materials to the civil engineering and construction fields remained
favorable. At the same time, the harsh business environment persisted with prices remaining low for benzene andstyrene monomer and slower sales growth for materials used in smartphones and large TVs, which was partly affectedby the US-China trade friction. However, signs of a recovery appeared for bonding wire and some other products related
to semiconductors.

The Chemicals and Materials segment recorded revenue of ¥114.1 billion (¥125.9 billion in the same period of theprevious fiscal year) and business profit of ¥11.3 billion (¥12.7 billion).

System Solutions
Nippon Steel Solutions Co., Ltd. (NS Solutions) provides advanced solution services in the planning, configuration,
operation, and maintenance of IT systems for clients in a wide range of business fields to keep pace with the changing
business environments. The segment continued to aggressively expand sales of solutions incorporating IoT, ascustomers investing in IT in pursuit of digital transformation (DX) generated ongoing brisk business in the first half.

The System Solutions segment recorded revenue of ¥150.2 billion (¥126.6 billion in the same period of the previous
fiscal year) and business profit of ¥14.9 billion (¥12.0 billion).

Revenue and Profit for the First Half of Fiscal 2019
In the first half of fiscal 2019, Nippon Steel recorded revenue of ¥3,047.1 billion (¥2,941.5 billion in the same period of
the previous fiscal year), business profit of ¥73.1 billion (¥157.9 billion), and profit attributable to owners of the parentof ¥38.7 billion (¥116.7 billion).

3

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019(2) Explanation of Information on Future Estimates, Including Consolidated Earnings Forecasts
Consolidated Earnings Forecasts
Nippon Steel expects the global economy to continue slowing amid the prolonged trade friction between the UnitedStates and China. The Company also anticipates conditions in the Japanese economy to continue reflecting strong
concern about future uncertainty stemming from the potential impact of global economic conditions.

Domestic steel demand and market conditions are experiencing heightened downside risk in all fields along with anuncertain outlook. Global steel demand and prices also continue to require monitoring because of the further downsiderisk that could stem from the prolonged US-China trade friction and other factors.

Nippon Steel is projecting full-year consolidated business profit to be limited to ¥100 billion in fiscal 2019. The
Company expects profit to benefit from the recovery from the impacts of torrential rains, typhoons, and earthquakes in
the previous fiscal year, and is committed to promoting measures to enhance the overall stability of its facilities andoperations, and ensure steady improvements in cost and long-term contractual prices. At the same time, the Company
anticipates profit will be influenced by factors including significantly narrower margins, particularly in export markets,
which is based on the assumption that current high prices for raw materials and low prices for steel products will persist,and a deteriorating product mix caused by declining demand for indirect exports. The Company also expects greaterthan-expected fluctuation from the impacts of disasters in the present fiscal year as well as impacts from a smaller gain
on inventory valuation and other factors.

The Company is responding to these conditions by advancing initiatives to shift its management focus to reconstructionof its manufacturing capabilities, to profitability-oriented production pursuing optimal scale in production and shipment,
and to revising long-term contractual prices to bolster its underlying revenue. Efforts are also made to implement
strategies to generate medium- and long-term growth. Specifically, the Company intends to maximize the integration
synergies from the merger with Nippon Steel Nisshin Co., Ltd. and from the reorganization of the specialty steelbusiness (Sanyo Special Steel Co., Ltd. and Ovako AB). At the same time, the Company will promote investment inbusiness fields and regions where it anticipates growing demand and where it will be able to fully leverage its technicaladvantages. These include investment in expanding the production capacity and enhancing the quality of electrical steel
sheet, renovating the Scrap Melting Process at the Hirohata Works, and acquiring Essar Steel India Ltd. Moreover, theCompany continues to emphasize financial discipline in its cash management through asset compression, more efficient
capital expenditures, and large-scale financing by issuing subordinated bonds. Far-reaching measures to fortify thebusiness foundation for the future have also begun to be considered. In addition to building an optimal production
structure by taking measures such as to strengthen the UO steel pipe business and the tinplate business, the integration
and reorganization of the structure of steelworks has been decided as a part of organizational and operational review for
ensuring reconstruction of manufacturing capabilities with enhanced autonomy and efficiency of manufacturing
workplaces. Plans will be announced one by one as they put into concrete shape.

4Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

Basic Profit Distribution Policy and the Interim Dividend Distribution
Nippon Steel’s basic profit distribution policy is to pay dividends from distributable funds at the end of the first half
(interim) and second half (year-end) of the fiscal year, in consideration of the consolidated operating results and suchfactors as capital requirements for investment and other activities aimed at raising corporate value and performanceprospects while also considering the financial structure of the Company on both consolidated and non-consolidated bases.
The Company has adopted a consolidated payout ratio target of around 30% as the benchmark for the “payment ofdividends from distributable funds in consideration of the consolidated operating results.” The level of the first-half
dividend is determined based on consideration of interim performance figures and forecasts for the full fiscal year
performance.

Regarding the dividend from retained earnings for the end of the second quarter (interim), in accordance with the policy
described above, the Company has decided to pay a dividend of ¥10 per share (representing a consolidated dividend
payout ratio of 23.8%), as announced on August 1, 2019 at the time of the announcement of results for the first quarter.

The Company plans to determine the forecast for the year-end dividend distribution amount, with due consideration of
forecasts for the full fiscal year performance, and announce it at the time of the third-quarter results announcement.

5

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

2. Quarterly Condensed Consolidated Financial Statements and Major Notes(1) Quarterly Condensed Consolidated Statements of Financial Position

March 31, 2019ASSETS
Current assets :Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets(Millions of Yen)
September 30, 2019

163,176
968,333
1,567,116
16,915
143,669

360,450
783,762
1,601,315
20,262
156,501

2,859,211

2,922,291

3,246,669―
52,803
106,131
793,146
812,668
82,24788,357
8,292

3,194,918
76,41451,74399,141
791,537
693,136
85,328103,904
7,976

Total non-current assets

5,190,316

5,104,100

Total assets

8,049,528

8,026,392

Total current assets
Non-current assets :Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Investments accounted for using the equity method
Other financial assets
Defined benefit assets
Deferred tax assets
Other non-current assets

6

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

(Millions of Yen)
March 31, 2019

LIABILITIES

September 30, 2019

Current liabilities :Trade and other payables
Bonds, borrowings and lease liabilities
Other financial liabilities
Income taxes payable
Other current liabilities

1,611,403
515,355
1,017
38,71934,042

1,437,940
418,769
2,313
25,37843,138

Total current liabilities

2,200,538

1,927,540

Non-current liabilities :Bonds, borrowings and lease liabilities
Other financial liabilities
Defined benefit liabilities
Deferred tax liabilities
Other non-current liabilities

1,853,876
6,501
186,755
28,253
166,235

2,156,380
6,269
183,70928,291
148,921

Total non-current liabilities

2,241,622

2,523,572

Total liabilities

4,442,160

4,451,113

419,524
393,9172,300,175(58,831)
176,000

419,524
392,5872,331,429(58,481)112,294

3,230,788

3,197,355

376,579

377,923

Total equity

3,607,367

3,575,279

Total liabilities and equity

8,049,528

8,026,392

EQUITY
Common stock
Capital surplus
Retained earnings
Treasury stock
Other components of equity
Total equity attributable to owners of the parent
Non-controlling interests

7

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019(2) Quarterly Condensed Consolidated Statements of Profit or Loss andQuarterly Condensed Consolidated Statements of Comprehensive Income or Loss
Quarterly Condensed Consolidated Statements of Profit or Loss
First half of
Fiscal 2018
Revenue
Cost of sales
Gross profit(Millions of Yen)First half of
Fiscal 2019

2,941,586(2,560,434)
381,152

3,047,183(2,722,803)
324,380

Selling, general and administrative expenses
Share of profit in investments accounted for using the equity method
Other operating income
Other operating expenses
Business profit(276,638)
42,89939,450(28,874)
157,990(292,890)
28,53349,785(36,707)73,100Loss on disaster
Operating profit(21,039)
136,950―
73,100Finance income
Finance costs
Profit before income taxes

2,982(11,312)
128,619

3,087(11,716)
64,471

Income tax expense
Profit(12,957)
115,662(15,031)49,440

Profit attributable to :Owners of the parent
Non-controlling interests

116,795(1,132)38,75010,689Earnings per share
Basic earnings per share (Yen)132.3342.09

Quarterly Condensed Consolidated Statements of Comprehensive Income or Loss
First half of
Fiscal 2018
Profit115,662
Other comprehensive income
Items that cannot be reclassified to profit or loss
Changes in fair value of financial assets measured at fair value
6,269
through other comprehensive income
Remeasurements of defined benefit plans
11,699
Share of other comprehensive income of investments accounted
1,087
for using the equity method
Subtotal
19,057(Millions of Yen)First half of
Fiscal 201949,440Items that might be reclassified to profit or loss
Changes in fair value of cash flow hedges
Foreign exchange differences on translation of foreign operations
Share of other comprehensive income of investments accounted
for using the equity method
Subtotal
Total other comprehensive income, net of tax
Total comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests
8(14,927)
6,078
1,014
(7,834)

2,767(32,742)(2,927)(20,166)(20,229)(6,266)(50,204)(29,359)(31,147)
84,515(37,193)
12,24685,153
(638)

4,429
7,817

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019(3) Quarterly Condensed Consolidated Statements of Changes in Equity
First Half of Fiscal 2018

(Millions of Yen)
Equity attributable to owners of the parent

Balance at beginning of the year

CommonCapitalRetainedstock

surplusearnings

419,524

386,867

Other components of equity
Changes in fairvalue of financial
Treasury
assets measured at Remeasurements offair value throughdefined benefit
stock
other
plans
comprehensive
income(132,162)
334,701―

2,141,658

Changes of the year
Comprehensive income
Profit116,795

Other comprehensive income
Total comprehensive income

―

―

―

116,795

3,146

12,196

3,146

12,196(9,764)(12,196)

Transactions with owners and others
Cash dividends(35,355)

Purchases of treasury stock(24)

Disposals of treasury stock0

Changes in ownership interests in subsidiaries

2

1,443

Transfer from other components of equity
to retained earnings

21,960Business combinations and others
Subtotal
Balance as of September 30, 2018

(3)
―

1,443

(13,394)(25)(9,764)(12,196)

419,524

388,3112,245,059(132,188)

328,083―

Equity attributable to owners of the parent
Other components of equity

Changes in fairvalue of cash
flow hedges

Foreignexchangedifferences ontranslation offoreign
operations(6,600)(6,998)321,101

Other comprehensive income

3,171(50,156)

Total comprehensive income

3,171(50,156)

Balance at beginning of the year

Total equity
attributable toowners of theparentTotal

Non-controllinginterests

Total equity

3,136,991

387,905

3,524,896―

116,795(1,132)

115,662(31,642)(31,642)494(31,147)(31,642)

85,153(638)

84,515

Cash dividends―(35,355)(5,552)(40,908)

Purchases of treasury stock

―

(24)

Disposals of treasury stock―

3

Changes in ownership interests in subsidiaries

―

1,443

Changes of the year
Comprehensive income
ProfitTransactions with owners and others

Transfer from other components of equity
to retained earnings
Business combinations and others
Subtotal
Balance as of September 30, 2018(21,960)

―

―

(3)

(24)
3
(4,020)(2,577)

(45)

(48)

―

―

―

(21,960)(33,937)(9,618)(43,555)(3,428)(57,155)

267,499

3,188,207

377,648

3,565,855

9

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019

First Half of Fiscal 2019

(Millions of Yen)
Equity attributable to owners of the parent

Balance at beginning of the year

CommonCapitalRetainedstock

surplusearnings

419,524

393,917

Other components of equity
Changes in fairvalue of financial
Treasury
assets measured at Remeasurements offair value throughdefined benefit
stock
other
plans
comprehensive
income(58,831)
248,020―2,300,175

Changes of the year
Comprehensive income
Profit

38,750

Other comprehensive income
Total comprehensive income

―

―

―

38,750(13,965)

6,406(13,965)

6,406(22,978)(6,406)

Transactions with owners and others
Cash dividends(36,880)

Purchases of treasury stock(24)

Disposals of treasury stock(104)

Changes in ownership interests in subsidiaries

623(1,226)

Transfer from other components of equity
to retained earnings

29,384

Business combinations and others
Subtotal
Balance as of September 30, 2019

(249)
―

(1,330)(7,496)349(22,978)(6,406)

419,524

392,5872,331,429(58,481)

211,076―

Equity attributable to owners of the parent
Other components of equity

Changes in fairvalue of cash
flow hedges

Foreignexchangedifferences ontranslation offoreign
operations(4,433)(67,585)

176,000―

38,75010,68949,440

Other comprehensive income(2,076)(24,685)(34,321)(34,321)(2,872)(37,193)

Total comprehensive income(2,076)(24,685)(34,321)

4,429

7,817

12,246

Cash dividends―(36,880)(5,715)(42,596)

Purchases of treasury stock

―

(24)

Disposals of treasury stock―

519

Changes in ownership interests in subsidiaries―(1,226)

Balance at beginning of the year

Total equity
attributable toowners of theparentTotal

3,230,788

Non-controllinginterests

376,579

Total equity

3,607,367

Changes of the year
Comprehensive income
ProfitTransactions with owners and others

Transfer from other components of equity
to retained earnings
Business combinations and others
Subtotal
Balance as of September 30, 2019(29,384)

―

―

(249)

(24)
519
(211)

(1,438)

(545)

(794)

―

―

―

(29,384)(37,861)(6,473)(44,334)(6,510)(92,270)

112,294

3,197,355

377,923

3,575,279

10

Nippon Steel Corporation (5401)
The First Half of Fiscal 2019（4）Notes to the Quarterly Condensed Consolidated Financial Statements（Going Concern Assumption）
None（Changes in Accounting Policies Required by IFRS）
From the beginning of the first quarter of Fiscal 2019 (April 1, 2019－June 30, 2019), the Group has adopted IFRS 16“Leases” (Issued in January 2016)(“IFRS 16”). In adopting IFRS 16, the Group has applied an approach of recognizing the
cumulative effect of applying the standard as an adjustment to the beginning balance at the date of initial application, which
is approved as a transitional measure.
In adopting IFRS 16, the Group has elected to apply the practical expedient detailed in paragraph C3 of IFRS 16 in
determining whether a contract is, or contains, a lease by maintaining its previous assessment under IAS 17 “Leases” (“IAS17”) and IFRIC 4 “Determining whether an Arrangement Contains a Lease”. On and after the date of initial application, theGroup has determined whether a contract is, or contains, a lease in accordance with IFRS 16.
For leases previously classified as finance leases under IAS 17 and in which the Group is a lessee, the carrying amounts of
the right-of-use assets and lease obligations as of the date of initial application have been respectively measured at thecarrying amounts of the leased assets and lease liabilities under IAS 17 immediately before the date of initial application.
For leases previously classified as operating leases under IAS 17 and in which the Group is a lessee, the Group hasrecognized the right-of-use assets and lease liabilities as of the date of initial application. The lease liabilities are measured
at the present value of the minimum lease payments as of the date of initial application discounted by the lessee’s
incremental borrowing rate. The weighted average of the incremental borrowing rate is 0.5%. The right-of-use assets aremeasured at the carrying amounts computed under the assumption of applying the standard at the commencement date of
the contract. The discount rate applied is the lessee’s incremental borrowing rate as of the date of initial application.
The breakdown of difference between the amount of non-cancellable operating lease contracts under IAS 17 as of the endof the Fiscal 2018 and the amount of lease liabilities recognized in the Quarterly Condensed Consolidated Statements ofFinancial Position as of the date of initial application is as follows.
(Millions of Yen)

Non-cancellable operating lease contracts as of March 31, 2019
Finance lease liabilities as of March 31, 2019Non-cancellable lease contracts effective on or after the date of initial application
Lease liabilities as of the date of initial application (April 1, 2019)45,80046,754(12,226)
80,328The right-of-use assets recognized at the date of initial application in the Quarterly Condensed Statements of Financial
Position is ¥79,770 million.
In adopting IFRS 16, the Group has applied the following practical expedients.
-As an alternative of performing an impairment review, the Group relies on a previous assessment of whether leases areonerous in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” immediately before thedate of initial application.
- Exclusion of initial direct costs from the measurement of the right-of-use assets as of the date of initial application.
- Use of hindsight in determining the lease term if the contract contains options to extend or terminate the lease.

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