Consolidated Financial Results
for the Year Ended March 31, 2020 [Japanese GAAP]May 15, 2020
Stock Exchange Listing: Tokyo
URL: http://www.hokuetsucorp.com

Company:
Hokuetsu Corporation
Stock Code:
3865
Representative: Sekio Kishimoto, President & CEO
Contact:
Tomonari Maruyama, General Manager, Accounting Department
Scheduled date of ordinary general meeting of shareholders: June 26, 2020
Scheduled date of commencement of dividend payment:
June 29, 2020
Scheduled date of filing annual securities report:
June 26, 2020
Supplementary documents for financial results:
Yes
Results briefing
None

TEL: +81-3-3245-4500(Figures rounded down to the nearest million yen)
1. Consolidated financial results for the year ended March 31, 2020 (April 1, 2019 through March 31, 2020)(1) Consolidated results of operations(% change from the previous corresponding period)
Profit attributable to
Net sales
Operating profit
Ordinary profit
owners of parent
Million yen%
Million yen%
Million yen%
Million yen%
Year ended March 31, 2020
264,618(4.1)
11,208
10.6
15,652
20.3
8,072 (11.8)
Year ended March 31, 2019
275,807
2.5
10,130 (11.2)
13,015(6.4)
9,155 (11.3)(Note) Comprehensive income:The year ended March 31, 2020:
677 million yen (-78.9%)
The year ended March 31, 2019: 3,210 million yen (-75.3%)
Basic earnings
Diluted earnings
Ratio of ordinary Ratio of operating
Return on equity
per shareper share
profit to total assets profit to net sales
Yen
Yen
%
%
%
Year ended March 31, 2020
43.45
40.95
4.3
4.4
4.2
Year ended March 31, 2019
48.44
47.73
4.8
3.5
3.7
(Reference) Investment income by equity method:
The year ended March 31, 2020:
4,580 million yen
The year ended March 31, 2019:
1,259 million yen(2) Consolidated financial position
Total assets
Net assets
Equity ratio
Net assets per share
Million yen
Million yen%
Yen
As of March 31, 2020
344,731
180,86152.3
1,073.08
As of March 31, 2019
368,082
192,86152.2
1,016.16(Reference) Equity:
As of March 31, 2020:
180,183 million yen
As of March 31, 2019:
192,104 million yen(3) Consolidated Cash flows
Cash flows from
Cash flows from
Cash flows from
Cash and cash
operating activities
investing activities
financing activities
equivalents at year-end
Million yen
Million yen
Million yen
Million yen
Year ended March 31, 2020
43,974(20,199)(17,261)
21,383
Year ended March 31, 2019
21,626(19,274)(934)
15,202
2. Dividends
Annual dividend per share
End of 1Q End of 2Q End of 3Q Year-end

Year ended
March 31, 2019Year ended
March 31, 2020
Year ending
March 31, 2021 (forecast)

Total

Ratio of
Dividend
dividend to
payout ratio
net assets(Consolidated)(Consolidated)
Million yen
%
%
Total
dividends(Total)

Yen

Yen

Yen

Yen

Yen

–

6.00

–

6.00

12.00

2,274

24.8

1.2

–

6.00

–

6.00

12.00

2,148

27.6

1.1

–

7.00

–

7.00

14.00

31.3

3. Forecast of Consolidated Financial Results for the Year Ending March 31, 2021 (April 1, 2020 through March 31, 2021)(% change from the previous corresponding period)
Basic
Profit attributable to
Net sales
Operating profit
Ordinary profit
earnings perowners of parent
shareMillion yen% Million yen% Million yen% Million yen%
Yen
2Q (Accumulated)
120,000 (12.2)
2,000 (72.6)
3,500 (63.4)
1,500 (77.1)
8.93
Full year
250,000(5.5)
9,000 (19.7)
13,000 (16.9)
7,500
(7.1)
44.67

-1-

* Notes(1) Changes in significant subsidiaries during the year (changes in specified subsidiaries accompanying changes in the scope of
consolidation): None
(2) Changes in accounting policies, accounting estimates and restatement of prior period financial statements(i) Changes in accounting policies due to amendment of accounting standards: Yes(ii) Changes in accounting policies other than (i): None(iii) Changes in accounting estimates: None(iv) Restatement of prior period financial statements: None
(3) Shares outstanding (common stock)(i) Number of shares outstanding at the year-end (treasury stock included):
As of March 31, 2020

188,053,114 shares

As of March 31, 2019

209,263,814 shares

20,140,702 shares

As of March 31, 201920,213,382 shares

185,800,021 shares

For the year ended March 31, 2019

189,007,882 shares(ii) Number of treasury stock at the year-end:
As of March 31, 2020(iii) Average number of shares during the year:
For the year ended March 31, 2020

(Reference) Overview of non-consolidated financial results
1. Non-consolidated financial results for the year ended March 31, 2020 (April 1, 2019 through March 31, 2020)(1) Non-consolidated results of operations(% change from the previous corresponding period)
Net sales
Operating profit
Ordinary profit
Net profit
Million yen%
Million yen%
Million yen%
Million yen%
Year ended March 31, 2020
174,709
(1.7)
2,994
–
9,824
236.1
2,732
–
Year ended March 31, 2019
177,811
0.9(2,091)
–
2,923
64.3
(5,810)–
Basic earnings
per share

Diluted earnings
per share
Yen
Yen
Year ended March 31, 2020
14.67
14.66
Year ended March 31, 2019(30.66)–(Note) Diluted earnings per share for the fiscal year ended March 31, 2019 are not stated because basic earnings per share are negative
although there are dilutive shares.
(2) Non-consolidated financial position
Total assets
Net assets
Equity ratio
Net assets per share
Million yen
Million yen%
Yen
As of March 31, 2020
260,526
115,00844.1
682.16
As of March 31, 2019279,110
129,84146.5
684.37(Reference) Equity:
As of March 31, 2020:
114,926 million yen
As of March 31, 2019:
129,737 million yen* The summary of financial results is exempt from audits conducted by certified public accountants or an audit corporation.
* Explanation regarding appropriate use of business forecasts and other special instructions(Caution regarding forward-looking statements)
The forward-looking statements such as forecasts of financial results contained in this material are based on information available to theCompany at the time of the publication of this document and certain assumptions that the Company considers to be reasonable, and may
differ materially from the actual results due to various factors. For assumptions of business forecasts and a note about the use of business
forecasts, please refer to page 5 “1. Summary of Operating Results (4) Future outlook.”* This document is an excerpt translation of the original in Japanese and is for reference purposes only. In case of any discrepancy
between this document and the original in Japanese, the latter shall take precedence.

-2-

1. Summary of operating results(1) Summary of operating results during the year
(Operating results during the year)
During the current year , net sales decreased due to weak demand in Japan and declining sales prices overseas, despite the revision of paper
prices implemented in January 2019. On the profit side, both operating and ordinary profits rose, mainly reflecting the revision of paper
prices and the effect of a range of cost reduction initiatives. However, profit attributable to owners of parent decreased chiefly due to an
impairment loss on non-current assets posted by Jiangmen Xinghui Paper Mill Co., Ltd. The Group’s consolidated financial results for thecurrent year

were as follows:

Net sales

264,618 million yen(down 4.1% year on year)

Operating profit

11,208 million yen(up 10.6% year on year)

Ordinary profit

15,652 million yen(up 20.3% year on year)

Profit attributable to owners of parent

8,072 million yen(down 11.8% year on year)

The performance of major segments is as follows:(i) Pulp and paper business(Million yen)Previous year
Net sales
Operating profit

Current year

Difference

248,253

237,895(10,358)

7,956

9,321

1,365

In the pulp and paper business, net sales decreased due to weak demand in Japan and declining sales prices overseas, despite the revisionof paper prices implemented in January 2019. Profits rose, mainly reflecting the revision of paper prices and a range of successful cost
reduction initiatives.
By product type, sales of paper surpassed the level in the previous year in Japan, reflecting revised prices effective from January 2019,
although demand was on the decline due to the digitization of advertising media and mail-order catalogs. In exports, however, sales fell
short of the year ago level due to the impact of the U.S.-China trade friction, among other factors.
With regard to white paperboard, sales of special white paperboard and coated duplex board (with gray-back) remained strong for use in
the pharmaceutical business; however, they fell short of the previous year’s level for use in businesses related to cosmetics and souvenirs
due to a significant decrease in inbound demand. Sales of special white paperboard declined from the level in the previous year, reflecting
sluggish sales for use in POP in stores, different types of cards, and covers for publications.
Regarding specialty paper, in the area of functional paper, sales of base paper for chip carrier tapes used to carry electronic parts and thoseof filters for air purifiers were lower than in the previous year, the former attributable to the U.S.–China trade friction and the latter due toa decrease in orders for export. With respect to the overall situation of fancy paper, downgrading to general paper continued to occur, as
well as a decline in demand. In addition, sales of high-grade printing paper, which had remained firm, started to show signs of a slowdown.
Regarding communication paper, sales fell below the previous year’s level because of the continuation of a decrease in use for adhesive
postcards for notices and vouchers, as well as a shift to electronic media.
Sales of pulp decreased from the previous fiscal year, reflecting a decline in pulp prices due to the impact of the U.S.-China trade friction.
(ii) Packaging/Paper processing business(Million yen)Previous year
Net sales
Operating profit

Current year

Difference

19,192

18,227

(964)

841

418

(423)

In the packaging/paper processing business, a decrease in net sales and profits was posted, reflecting a decline in orders for fluid containers
and a fall in the use for cosmetics due to a decrease in inbound demand.
-3-

(iii) Other businesses(Million yen)Previous year
Net sales
Operating profit

Current year

Difference

8,361

8,494

133

709

890

181

As for other businesses such as the wood business, the used paper wholesale business, the construction business, the transportation and thewarehousing business, net sales increased due to a rise in external orders received by the wood business, although the overall orders
environment was difficult. In terms of profitability, an increase in profits was recorded, mainly reflecting the effect of a range of cost
reduction initiatives.
(2) Summary of financial conditions during the fiscal year
(Million yen)
End of previous year

End of current year

ChangeTotal assets

368,082

344,731(23,351)

Net assets

192,861

180,861(11,999)

Equity ratio
Basic earnings per share
Interest-bearing debt at year-end

52.2%

52.3%

0.1%

1,016.16 yen

1,073.08 yen

56.92 yen

109,725

106,832(2,893)

Total assets decreased 23,351 million yen from the end of the previous year, to 344,731 million yen. Main factors included increases incash and deposits of 6,180 million yen and merchandise and finished goods of 3,187 million yen, which were more than offset by decreases
in notes and accounts receivable - trade of 17,630 million yen, raw materials and supplies of 3,957 million yen, investment securities of
2,920 million yen, and property, plant and equipment of 7,489 million yen due to depreciation.
Total liabilities decreased 11,351 million yen from the end of the previous year, to 163,869 million yen. This was chiefly due to decreases
in interest-bearing debt of 2,893 million yen, note and accounts payable - trade of 2,048 million yen, income taxes payable of 1,444 million
yen, and retirement benefit liability of 4,747 million yen.
Net assets fell 11,999 million yen from the end of the previous year, to 180,861 million yen. This mainly reflected decreases in retained
earnings of 4,719 million yen primarily due to the retirement of treasury shares and valuation difference on available-for-sale securities of
6,716 million yen.
(3) Summary of cash flow during the fiscal year
(Million yen)Previous year

Current year

ChangeCash flows from operating activities

21,62643,974

22,347

Cash flows from investing activities(19,274)(20,199)(924)

Cash flows from financing activities(934)(17,261)(16,327)

Effect of exchange rate change on cash and cash equivalents

(496)

(332)

163

Net increase (decrease) in cash and cash equivalents

920

6,180

5,260

Cash and cash equivalents at beginning of the year

14,281

15,202920

Cash and cash equivalents at end of the year

15,202

21,383

6,180

Cash and cash equivalents as of the end of current year increased 6,180 million yen year on year, to 21,383 million yen.

-4-

(Cash flow from operating activities)
Net cash provided by operating activities was 43,974 million yen (up 103.3% year on year.)
Major inflows were income before taxes of 12,711 million yen, depreciation of 18,450 million yen, impairment loss of 6,382 million yen,and decrease in trade receivables of 17,550 million yen. Major outflows were gain on contribution of securities to retirement benefit trustof 4,874 million yen, share of profit of entities accounted for using equity method of 4,580 million yen and income taxes paid of 4,860
million yen.
(Cash flow from investing activities)
Net cash used in investing activities amounted to 20,199 million yen (up 4.8% year on year).
A major factor was the purchase of investment securities of 4,569 million yen, and purchase of property, plant and equipment of 14,857
million yen.
(Cash flow from financing activities)
Net cash used in financing activities was 17,261 million yen (Outflow of 934 million yen in the previous year).
Major outflows were a decrease in commercial paper of 3,500 million yen, repayments of long-term borrowings of 15,551 million yen,purchase of treasury shares of 10,097 million yen and dividends paid of 2,274 million yen. The inflow was attributable to proceeds fromlong-term borrowings of 16,000 million yen.
(4) Future outlook(i) Forecast on financial results for the next fiscal year
The Japanese economy is deteriorating sharply due to the impact of COVID-19. This extremely difficult situation is expected to continue
for some time. In addition, there are concerns regarding the risk of the infectious disease putting additional downward pressure on theeconomic situation in both Japan and overseas.
Under these circumstances, given a range of factors such as rapid changes in the trend of domestic demand and global market prices, there
is growing uncertainty in the business environment surrounding the pulp and paper industry. The Group will continue to work on full-scalecost reductions to strengthen its financial conditions. In addition, it will aim to achieve stable profitability as soon as possible with respect
to the corrugated board base paper business whose commercial production commenced in April this year.
The following business forecast was prepared by considering these circumstances comprehensively.
The following forecast was based on information currently available to the Company at the time of the release of these materials. Actual
result may differ from the above forecast due to various factors.

Operating profit

Ordinary profit

Profitattributable toowners of parent

Basic earnings
per share

Million yen

Million yen

Million yen

Million yen

Yen

The year ending
March 31, 2021 (forecast)

250,000

9,000

13,000

7,500

44.67

The year ended
March 31, 2020 (actual)

264,618

11,20815,652

8,072

43.45

(5.5)

(19.7)(16.9)(7.1)

Net sales% change from the previous
corresponding period(ii) Forecast on dividends for the next fiscal year

The Company continues to make investments for growth to boost its corporate value consistently and from a long-term perspective. With
this in mind, it established the basic guidelines for capital policy with an emphasis on the implementation of continuous and stable dividend
payments based on the capital policy of maintaining a balance between financial soundness, capital efficiency and shareholder returns.
The Company has made certain achievements in management initiatives implemented based on its long-term management vision. Taking
these achievements and other factors comprehensively into consideration, with respect to dividend forecasts for the next fiscal year, thecompany plans to increase its interim dividends to 7 yen per share, year-end dividends to 7 yen per share and annual dividends to 14 yen
per share.

-5-2. Our basic philosophy on the selection of accounting standards
Taking into account the period comparability of consolidated financial statements, the Group currently prepares consolidated financial
statements based on Japanese GAAP. With respect to the International Financial Reporting Standards (IFRSs) the Company will address
the issue appropriately with consideration to the various circumstances in Japan and overseas.

-6-

3. Consolidated Financial Statements and Key Notes(1) Consolidated Balance Sheet(Million yen)
(Assets)
Current assets
Cash and deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims - operating
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation

As of March 31, 2019

As of March 31, 2020

15,202
67,7086,228
26,012
2,247
26,6796,075(55)

21,38350,0786,427
29,2002,429
22,7225,445(6)150,098

137,679

83,736(50,949)

84,722(52,954)

Buildings and structures, net

32,78731,767

Machinery, equipment and vehicles
Accumulated depreciation

422,189(350,187)

423,773(361,058)

72,001

62,715

5,767(4,695)

6,188(4,948)

1,072

1,240

22,504758(487)

22,514500(395)

Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Right-of-use assets
Accumulated depreciation
Right-of-use assets, net
Construction in progress
Forestland
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment in securities
Long-term loans
Asset for retirement benefits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

-7-

271

104

–
–

2,619
(302)

–

2,317

3,151
3,090

4,251
2,480

134,880

127,390

2,907

2,984

73,287
220
2,668
2,067
4,379
(2,427)70,366
206
2,109
1,840
4,577
(2,425)80,19576,675217,983

207,051

368,082

344,731(Million yen)
As of March 31, 2019

As of March 31, 2020

21,4096,632
25,655
10,500
74
2,531
449
2,688
95
343
161
125
2,350
11,277

19,3606,317
19,338
7,000
288
1,086
892
2,757
94
330
214
177
2,642
11,03084,293

71,531

30,00043,331
164
1,045
766
246
372
12,0142,376
609

30,00048,460
1,744
435
803
197
375
7,266
2,441
612

90,92692,337

Total liabilities

175,220

163,869

Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares

42,02045,348105,599(9,933)42,02045,341
100,879(9,708)(Liabilities)
Current liabilities
Notes and accounts payable - trade
Electronically recorded obligations - operating
Short-term loans
Commercial papers
Lease obligations
Income taxes payable
Accrued consumption taxes
Provision for bonuses
Provision for directors’ bonuses
Provision for environmental measures
Provision for loss on disaster
Provision for reforestation
Notes payable - facilities
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term loans
Lease obligations
Deferred tax liabilities
Provision for environmental measures
Provision for business structure improvement
Provision for reforestation
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities

Total shareholders’ equity

183,034

178,533

Accumulated 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

8,876
(1)
(388)
583

2,159
21
337
(868)

Total accumulated other comprehensive income

9,070

1,650

104
651

81
596

192,861

180,861

368,082

344,731

Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets-8-(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income(Million yen)
For the year ended
March 31, 2019

For the year ended
March 31, 2020

Net sales
Cost of sales

275,807
224,668

264,618
213,143

Gross profit

51,13851,474

Selling, general and administrative expenses

41,00840,266

Operating profit

10,130

11,208Non-operating income
Interest income
Dividends income
Share of profit of entities accounted for using equity method
Insurance claim income
Other
Total non-operating income

82
980
1,259
582
2,061
4,967

93
1,030
4,580
213
1,420
7,338

Non-operating expenses
Interest expenses
Foreign exchange losses
Environmental expenses
Other
Total non-operating expenses

773
–
648
660
2,082

654
1,177
–
1,062
2,894

Ordinary profit

13,015

15,652Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Gain on change in equity
Gain on transfer of business
Gain on contribution of securities to retirement benefit trust
Insurance claim income
Other
Total extraordinary income

227
632
256
87
–
114
1
1,319

56
897
48
–
4,874
719
23
6,620

Extraordinary losses
Loss on sales and retirement of non-current assets
Impairment loss
Loss on disaster
Loss on tax purpose reduction entry of non-current assets
Loss on sales of investment securities
Loss on valuation of investment securities
Loss on sales of equity investment of subsidiary

1,112
142
342
34
–
–
–

1,751
6,382
675
57
0
27
666

1,631

9,561

Profit before income taxes

12,703

12,711

Income taxes - current
Income taxes - deferred

3,837
(93)

2,210
2,398

Total income taxes

3,743

4,609

Profit

8,960

8,101

Total extraordinary losses

Profit (loss) attributable to non-controlling interests

(195)

28

Profit attributable to owners of parent

9,155

8,072

-9-

Consolidated Statements of Comprehensive Income(Million yen)

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests- 10 -For the year ended
March 31, 2019

For the year ended
March 31, 2020

8,960

8,101

(2,317)24(3,501)(39)(5,435)16
721(1,404)83(1,322)(5,750)(7,424)

3,210

677

3,455
(244)

652
24

(4) Consolidated Statement of Cash Flows(Million yen)
For the year ended
March 31, 2019

For the year ended
March 31, 2020

12,703
18,390
142
133
(114)
188
(1,063)773

12,711
18,450
6,382
125
(719)
186
(1,124)654(1,259)(4,580)

34
884

57
1,694

–

(4,874)110(7,114)
435
(563)
229
69

17,550801(161)(2,338)446
1,885

Subtotal

23,98047,148Interest and dividend income received
Interest paid
Income taxes paid
Proceeds from insurance income

1,479
(720)
(3,221)
108

1,528
(605)
(4,860)763

Net cash provided by (used in) operating activities

21,62643,974(4,192)
1,105(15,626)
(875)
642
(124)
71
(275)

(4,569)2,128(14,857)(1,002)
65
(119)
136
(1,979)(19,274)(20,199)

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Insurance claim income
Increase (decrease) in retirement benefit liability
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using equity
methodLoss on tax purpose reduction entry of non-current assets
Loss (gain) on sales and retirement of non-current assets
Loss (gain) on contribution of securities to retirement benefit
trust
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in consumption taxes refund receivable
Increase (decrease) in notes and accounts payables - trade
Increase (decrease) in accrued consumption taxes
Other

Cash flows from investing activities
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of property, plant and equipment
Payments for retirement of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments of loan receivables
Collection of loans receivable
Other
Net cash provided by (used in) investing activities- 11 -

(Million yen)
For the year ended
March 31, 2019

For the year ended
March 31, 2020

(3,813)(500)
12,200(6,446)
10,000(10,000)(2,273)
(77)
63
(1)
(85)

(1,463)(3,500)16,000(15,551)––(2,274)(80)–(10,097)(293)

Net cash provided by (used in) financing activities(934)(17,261)

Translation (loss) gain on cash and cash equivalents

(496)

(332)

Net increase (decrease) in cash and cash equivalents

920

6,180

Cash and cash equivalents at beginning of the year

14,281

15,202

Cash and cash equivalents at end of the year

15,202

21,383

Cash flows from financing activities
Net increase (decrease) in short-term loans
Net increase (decrease) in commercial papers
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Dividends paid
Dividends paid to non-controlling interests
Proceeds from share issuance to non-controlling shareholders
Purchase of treasury shares
Other- 12 -