Osaka Head Office: 1-1-17, Shinmachi, Nishi-ku,
Osaka City, Osaka 550-8668, Japan
Tel: (81) 6-6535-2114

Tokyo Head Office: 	5-1, Nihonbashi-Kobunacho, Chuo-ku,
Tokyo 103-8355, Japan
Tel: (81) 3-3665-3021

Nagoya Branch Office : 	3-14-18, Marunouchi, Naka-ku,
Nagoya City, Aichi 460-8560, Japan
Tel: (81) 52-963-5615

https://www.nagase.co.jp/english/

Printed in Japan

Integrated Report 2 0 1 8Year ended March 31, 2018

Bringing it
all together

About thisReportThe NAGASE Group Slogan is “Bringing it all together.” This slogan inspires us to realize a sustainable world
where people live with peace of mind, each of us embodies our value proposition, Identify, Develop and Expand
through daily activities.
This integrated report is our opportunity to communicate to our stakeholders, providing financial andnon-financial information related to the NAGASE Group as a business organization, our issues, and our mid- andlong-term strategies in a single, integrated publication.
We intend to continue to evolve this report as an effective tool to communicate our activities for improving
the NAGASE Group corporate value over the medium and long term.
In creating this report, we referred to version 1.0 of the International Integrated Reporting Framework issued
in December 2013 by the International Integrated Reporting Council.

Contents
Integrated Report 2018

About the NAGASE Group

Unique Products

44 Global Network
46 Regional Overview
50 Main Manufacturing and Processing Functions
54 Major R&D Functions

2 NAGASE by the Numbers
4 Management Philosophy and the NAGASE Vision
6 NAGASE Group Businesses
8 The NAGASE Group: Changes and Challenges
10 How We Create Corporate Value
12 Valuable Products and Services
14 13-Year Financial Highlights
16 Annual Topics

57 Human Rights, Employment Practices
60 Environment
62 Fair Business Practices
64 For Consumer Safety and Security
65 Community Involvement and Development

Leading Us to the Future

Financial and Corporate Information

18 Message from the President
24 Our Board
26 Corporate Governance

66 Financial Foundation Supporting Business Growth
68 Management’s Discussion and Analysis of

Performance by Segment

32 At a Glance
34 Functional Materials
36 Advanced Materials & Processing
38 Electronics
40 Automotive & Energy
42 Life & Healthcare

Critical Initiatives for Sustainable Growth

Operations and Finances

76 Consolidated Financial Statements
102 Consolidated Subsidiaries, Affiliates and Offices
106 Corporate Information
107 Investor Information
Forward-Looking Statements
Non-historic information contained in this integrated report related to
NAGASE Group revenue and profit plans, strategies, assumptions, etc., areforward-looking statements that entail elements of risk and uncertainty. Actual
earnings may differ significantly from forecasts due to changes in theseelements. Accordingly, the reader is cautioned to refrain from placing undue
reliance on such future forecasts contained in this document. Elements that
could impact earnings results are not necessarily limited to those explicitly
noted in this document.

NAGASE & CO., LTD.

Integrated Report 2018

1

NAGASE by the Numbers

NAGASE trends andother useful information.

CHECK !

200 Years in Business

2032

Establishing the NAGASE brandheading toward 200 years in business.
P.4–5

2

NAGASE & CO., LTD.

Integrated Report 2018

Consolidated Operating Income¥ 30 billion
or moreWe launched our ACE-2020 mid-term
management plan in 2016.
By the fiscal year
ending March 2021,
we will normalize ¥30 billion
or more in consolidated
operating income.

About the NAGASE Group

Consolidated Net Sales

billion

14 Countries
48 Companies
Practical answers tocustomer needs
through research
and manufacturingfunctions.

Performance by Segment

Consolidated net sales of¥783.9 billion
for the fiscal year
ended March 2018.
Strong financial
underpinning;issuer rating of A.

(as of March 31, 2018)

P. 50–56

Overseas Sales to Net Sales

Consolidated Employees

Network spanning 26 countries
and regions and 101 companies;
overseas sales accountfor 49.6% of consolidated
net sales.

A diverse employee baseengaged in NAGASE
business worldwide.

(as of March 31, 2018)

6,312

Unique Products

49.6%

Leading Us to the Future¥ 783.9

Manufacturing Companies

Critical Initiatives for Sustainable Growth(FYE March 2018)

P. 44–49

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 20183

Management Philosophy and the NAGASE Vision

A sense of values shared within the
NAGASE GroupNAGASEManagement
Philosophy

NAGASE Vision“­The NAGASE Way”
Action Principles

The NAGASE Group works toward sustainable growth and improving corporate value.
We have defined the NAGASE Management Philosophy, NAGASE Vision,and The NAGASE Way (employee behavioral guidelines) as a set of common values
for the Group in our project of developing a global brand.
Our slogan of “Bringing it all together” represents our commitment
to encompassing all aspects of our business as one,
including our business domains, operating regions
and countries, people, products, technologies, and services.
This slogan inspires us to realize a sustainable world
where people live with peace of mind, each of us embodies our value proposition,
Identify, Develop and Expand, through our daily activities.

4

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupNAGASE Management Philosophy
We recognize our responsibility to society and offer beneficial products andLeading Us to the Futureservices while maintaining the highest standards of integrity. Through our
growth, we will contribute to society and enrich the lives of our employees.

NAGASE Vision
To realize a sustainable world where people live with peace of mind, each of
Performance by Segment

us embodies our value proposition, Identify, Develop and Expand throughdaily activities.

Strengths/
Characteristics

1. Identify : We discover untapped business opportunities
2. Develop: We convert opportunities into customer value
3. Expand : ‌We deliver solutions to multiple fields and regions

We will contribute to a sustainable
world where people live with peace of mind

Critical Initiatives for Sustainable Growth

Visionfor the Future

We “Identify, Develop and Expand” new businesses

Unique Products

Value
Proposition

Maintaining the highest standards of integrity for almost 200 years
Working with partners to enable new businesses
Driving new technologies with knowledge and experience
Staying a step ahead of the market to actively off­er solutions“ ­T he NAGASE Way”

Financial and Corporate Information

Always be customer-oriented.
Always be a creative challenger.
Always use the power of the NAGASE Group.
Always think globally and act locally.
Always think systematically and act speedily.

NAGASE & CO., LTD.

Integrated Report 2018

5

NAGASE Group Businesses

Advanced Materials& Processing

Functional
Materials

Consolidated
Net Sales¥ 783.9billionLife &
Healthcare

10.9%

Automotive& Energy

16.5%

Performance Chemicals Business
Functional
Materials

22.5%

Net Sales
Composition
Fiscal 2017 Results

Electronics

Advanced
Materials &Processing

16.5%

33.5%

<Overview><Overview>

The Performance Chemicals Business leverages
Group manufacturing and R&D functions toprovide a broad range of goods and services to
the global market, from g­ eneral-purpose
petrochemical products to high-value-added
products. The department consists of a raw
materials business for the paints and inks
industry and a raw materials business for theurethane industry, each of which is recognized
as an established leader in its respective
market.

This business traces its roots back to the dyeing
business at the very founding of our company.
The department consists of four main productgroups: digital printing supply, colors & additives, functional film materials, and polymer
products. We established a new Group Development Team to work with other departments
and affiliated companies in order to cover a
wider range of industries. This team promotes
cross-organizational development activities,
working to uncover new businesses opportunities, mainly in the trading sphere, in Japan andoverseas.

<Main Products and Services>

Resins, raw materials for resins, pigments,
solvents, and additives for paints and inks,
urethane materials, flame retardants, releaseagents<Customer Industries>

Paints and inks, urethane

Consolidated
Operating Income

Speciality Chemicals Business¥ 24.1billionLife &
Healthcare

15.4%

Automotive& Energy

8.8%

Functional
Materials

18.9%

Operating
IncomeComposition
Fiscal 2017 Results

Electronics

Advanced
Materials &Processing

24.4%

32.5%

Colors & Advanced Processing
Business<Overview>

The Speciality Chemicals Business has a longand successful history, serving more than 2,000
customers in the plastic materials and additives, industrial oil materials, plating chemicals,
water processing agents, photoresist materials,
fluorochemicals, silicone, 3D, and other industries. Today, the department handles more than
10,000 different products. We are working to
expand into new fields as we keep our eyes on
the underlying technologies of our business
partners.
<Main Products and Services>

Petrochemical products, plastic materials andadditives, chemicals for paper manufacturing,raw materials for industrial oil solutions, surfactants and surfactant raw materials, fluorochemicals, silicone materials, plating chemicals,
electronics chemicals and polymer filters<Customer Industries>

Petrochemicals, plastics, electronic materials,
semiconductors, industrial oil, surfactants,
organic synthetics, etc.

<Main Products and Services>

Pigments/additives, auto body repair paint,
digital print processing materials, dyestuffs,
fiber processing agents, copolyester resins,functional sheets and films, organic transparent
conductive materials<Customer Industries>

Paper manufacturing/thermal paper, cosmetics
and toiletries, office equipment and electronicequipment, sheets and films, printing and printmaterials, fiber processing, auto body paint

Polymer Global Account Business<Overview>

The Polymer Global Account Business provides
plastics, packaging materials, equipment andfacilities to the domestic and international
office automation (OA), electric and electronics,
and consumer electronics industries. The
greatest strength of this department is the
sheer number of local staff who maintainnetworks in Asia-Pacific, as well as their wealthof experience and knowledge. The department
continues to create new plastics businesses
through cooperative efforts, reflecting NAGASEGroup growth strategies.
<Main Products and Services>

Functional resins, general-purpose resins,
auxiliaries, packaging materials, plastic-related
equipment, devices and moldings<Customer Industries>

Office automation, electrical and electronics,
consumer electronics, home appliances,
housing and construction materials, packaging materials

6

NAGASE & CO., LTD.

Integrated Report 2018

Electronic Chemicals Business

Automotive Solutions BusinessLife & Healthcare

Life & Healthcare Products
Business<Overview><Overview>

The Electronic Chemicals Business provides
unique products and services for the electronics industry, including formulated epoxy resins,
photolithography materials, chemical management equipment, semiconductor equipment,
and other proprietary products and services.
The department answers the needs of theJapanese and overseas markets, focusing on
high-value-added products produced byGroup manufacturing companies. The department strives for high profitability, integrating
trading and Group manufacturing functions.

The Automotive Solutions Business operates in
the global automotive industry, which is experiencing increasingly rapid growth. Here, we makethe most of our superior global network to
expand sales of raw materials and products inglobal markets, particularly China, ASEAN, andNorth America. At the same time, we are working
to improve Group manufacturing functions tooffer greater levels of safety, security, comfort,
and environmental friendliness demanded bysociety now and in the future. In doing so, weplan to contribute to the new automobile
society and grow our business at the same time.

The Life & Healthcare Products Business sets its
sights on contributing to food, beauty, andhealth as a member of the Life & Healthcare
Segment. This business is developing highvalue-added products that help people live
better and healthier lives, leveraging thegroup’s comprehensive strengths in trading,
R&D, and manufacturing and processing in the
global food materials, pharmaceutical/medical
materials, fragrance and cosmetics materials,
household products materials, and agriculture,
fisheries, and livestock fields.

<Main Products and Services>

Functional food ingredients (functional­saccharides, enzymes, health food materials,
and food additives), fragrances/cosmetics andhousehold product materials (whitening
agents, moisturizing agents, UV absorbers,
activators, antibacterial agents, and chelates),
pharmaceuticals (active pharmaceutical­ingredients [APIs], clinical trial APIs, intermediates, raw materials, formulations, additives),
in-vitro diagnostics, medical materials andequipment, materials for agriculture, fisheries,
and livestock (agricultural chemicals andmaterials, feed and feed additives)<Customer Industries>

Electronic components, semiconductors, heavy
electric machinery, displays, automotive,
aircraft, environment and energy<Overview>

The Electronic Materials Business sells materials
and components to smartphone and wearables
brand owners, as well as to the display device
and silicon wafer industries. Manufacturingfunctions include business in liquid crystal glassprocessing, flame-resistant insulation/thermal
conductive sheets, and polyimide films.
<Main Products and Services><Customer Industries>

Smartphones, displays, silicon wafers, TVs, LED
lighting, electronic components

Automotive and automotive parts industries

Energy Business<Overview>

The Energy Business deals in lithium ion battery(LiB) systems, photovoltaic (PV) modules, andenergy management systems (EMS), whichconnect these products. This business devises
marketing strategies that anticipate futureneeds, using and sharing information covering
all aspects of the business from upstream todownstream in each infrastructure market. The
business also develops and sells LED opticalwireless communications equipment for thesafe, stable control of infrastructure equipment.
<Main Products and Services><Customer Industries>

Foods, pharmaceuticals and medical, diagnostic drugs, fragrances and cosmetics, householdproducts, agricultural, fisheries and livestock

Beauty Care Products Business
On April 1, 2017, the Beauty Care Products
Department transferred to Nagase Beauty Care
Co., Ltd. to generate greater efficiency.
For more, see the Nagase Beauty Carewebsite.

https://nbc.jp/

Raw materials for lithium ion battery (LiB),
photovoltaic (PV) modules, LiB systems, PV
materials, applied products in energy management systems, independently powered systems, LED optical communications equipment,
wireless communications modules

Financial and Corporate Information

Flexible display materials, OLED materials,
silicon wafer processing materials, liquid
crystal glass processing, touch panel components, optical films, electronic paper materials,
materials for smartphone and tablet cases,
flame-resistant insulation/thermal conductive
sheets, lenses, LED chips, precision abrasives<Customer Industries>

Critical Initiatives for Sustainable Growth

Electronic Materials BusinessCommodity plastics and engineering plastics
for automotive interior, exterior, and functional
components; automotive interior, exterior, andfunctional components; high-function materials (decorative and weight-saving); devices;
molds and dies; high-function materials andcomponents for car electronics<Main Products and Services>

Unique Products

Formulated epoxy resins and related products,
photolithography materials for the productionof semiconductors and liquid crystal displays,siloxane materials, chemical management
equipment for liquid crystal display production
processes, semiconductor manufacturing
equipment and wafer bumping services

Performance by Segment<Overview><Main Products and Services>Leading Us to the Future

Automotive& Energy

About the NAGASE GroupElectronics<Customer Industries>

Batteries, photovoltaics, automotive and­automotive parts, construction, logistics, lighting,commercial facilities, public facilities, etc.

NAGASE & CO., LTD.

Integrated Report 2018

7

The NAGASE Group: Changes and Challenges

Changes and Challenges

NAGASE & CO., LTD. is a chemicals trading firm, founded in Kyoto, Japan in 1832.
The NAGASE Group began as a specialized sales agent securing exclusive contracts
to sell industry-leading products from around the world in Japan.
Over the years, we have leveraged our technology and information
gathering expertise—as well as our global network—to transform our business
into a hybrid model offering superior manufacturing, processing,and R&D functions as well as trading company services.
Looking forward to our 200th anniversary in the year 2032,
we are creating a platform for sustainable growth.

Initiatives
with Leading Overseas Manufacturers
In the 1900s,
we signed sales
representative agreementswith Eastman Kodak andGeneral Electric1832 Nagase founded in Kyoto as a dyestuffs trading concern
Sales of dyestuffs, starches and funori seaweed

1898 Head office moved to Osaka
1900 Established business ties with Basel Chemical Co. of
Switzerland (now Ciba Specialty Chemicals Ltd.)

1901 Opened office in Lyon
1911 Established Tokyo branch office
年創業
1913 Opened offices in London and New York
1917 Established Nagase Shoten Company (from sole proprietor

1832

to corporation)

1923 Established business ties with Eastman Kodak Co. of theUnited States

1930 Concluded an exclusive distributorship agreement with
Union Carbide and Carbon Corp. of the United States

1938 Established Teikoku Chemical Industries Co., Ltd.
1964 Listed Company shares on the Osaka Securities Exchange
1968 Concluded an exclusive distributorship agreement with
General Electric Co. of the United States

Accelerating
growth in
Asia andother markets
overseas

Overseas Network
We established branches andlocal entities in Japan and overseas,building the foundationsof our business

1900 年代
Right: Nagase-CIBA Ltd. in 1971
Left: Newly completed Tokyo branch
office building (October 1969)

1970 Established Nagase-CIBA Ltd.

(now Nagase ChemteX Corporation) jointly with Ciba-Geigy Ltd.
Listed Company shares on the Tokyo Stock Exchange

1971 Established Nagase (Hong Kong) Ltd. andNagase America Corporation

Established Engineering Plastics, Ltd. jointlywith General Electric Co.

1972 Established Nagase Medicals Co., Ltd.
1975 Established Nagase Singapore (Pte) Ltd.
1977 Established Nagase Biochemicals, Ltd.
1980 Established Nagase Chemicals, Ltd.
Established Nagase (Europa) GmbH

1981 Established Nagase (Malaysia) Sdn. Bhd.
1985 Established Seoul branch office
1988 Established Nagase (Taiwan) Co., Ltd.
1989 Established Nagase (Thailand) Co., Ltd.

Established Nagase Science and Technology Foundation

Osaka head office at incorporation in December 1917

8

NAGASE & CO., LTD.

Integrated Report 2018

Tokyo branch office became a head office;adoption of Osaka/Tokyo two head office system

Expanding
製造拠点・
manufacturing
base
and R&D
研究施設展開centers

About the NAGASE Group

Toward
創業
Our
200th
周年へ
200
Anniversary

Leading Us to the Future

Beyond the Traditional Trading
Firm Framework
Invest­ment

Stronger Manufacturing, Processing,and R&D Functions
A chemicals trading company
building a strong reputation in manufacturing,processing, and research and development

TradingCompany

R&D

Logistics

R&D

Business
Designer
GlobalNetwork

Trading
Manufac­turing

Performance by Segment

Manufacturing
andProcessing

Beyond the trading
firm business
offering new value
as a “Business Designer”

2015 Created NAGASE Long-Term
Management Policy

2016 Start of Mid-Term

Management Plan ACE-2020

1990 Established Sofix Corporation, a U.S.-based color former production
joint venture

Set up the Nagase R&D Center in Kobe
Established joint venture Nagase Wahlee Plastics Corporation(Taiwan)Established Shanghai Nagase Trading Co., Ltd.

Established New Value Creation Office
Converted Inkron Oy into a subsidiary
Launch of Nagase Business Expert Co., Ltd.
Acquired stock of DAITAI KAKO CO., LTD.
Acquired stock of Fitz Chem LLC (USA)

Unique Products

1997 Established Nagase Philippines Corporation

2017

Established Nagase Engineering Service Korea Co., Ltd.

1998 Established PT. Nagase Impor-Ekspor Indonesia

Established Shanghai Hua Chang Trading Co., Ltd.

2000 Changed the name of Nagase-CIBA, Ltd. toNagase ChemteX Corporation

2032 200th Anniversary

2001 Nagase ChemteX, Nagase Chemicals, Teikoku Chemical Industries,

and Nagase Biochemicals merged to Nagase ChemteX Corporation
Critical Initiatives for Sustainable Growth

Closed the Seoul branch office and established
Nagase Korea Corporation

2002 Established Guangzhou Nagase Trading Ltd.

Established Nagase ChemteX (Wuxi) Corporation

2004 Established NWP International Trading (Shenzhen) Co., Ltd.
2005 Established Totaku Industries Suzhou Co., Ltd.
Established Nagase Electronics Technology Co., Ltd.

Established Nagase Philippines International Services Corporation

2006 Acquired stock of semiconductor manufacturing equipment maker
Pac Tech-Packaging Technologies GmbH
Established Nagase India Private Ltd.

Financial and Corporate Information2007 Established Nagase Application Workshop
2008 Established Sakai Sales Office
Established Nagase Vietnam Co., Ltd.

2009 Established Dubai branch office2012 Acquired stock of Engineered Materials Systems, Inc., U.S.-based
maker of formulated epoxy resins

Acquired stock of Hayashibara Co., Ltd. (Okayama, Japan)
Established local entity in Brazil

2014 Completion of NAGASE Global HR Development Center

Top Left: Nagase Application Workshop
Top Right: Hayashibara Co., Ltd. (functional saccharides manufacturing plant)
Bottom: Nagase R&D Center

NAGASE & CO., LTD.

Integrated Report 20189

How We Create Corporate ValueA Unique Business Model that Extends
Beyond the Traditional Trading Firm Framework
The NAGASE Group offers sustainable value to society as a “Business Designer”
that conceives and builds businesses through six synergistic functions:
Trading, R&D, Investment, Logistics, Global Network, and Manufacturing.

Design Businesses

NAGASE

Identify

DevelopFind needs
and seeds

Foundation■ Information

Collection■ Consultative

Approach■ Development/

Manufacturing

Ongoingbusiness growth

Invest­ment

Opportunities and Risks■ Strong Financial

Strategy and Capital Allocation

NAGASEGroup
Strengths

ExpandGrow seeds
into businesses

R&D

Logistics[  Six Functions  ]

Business
Designer
GlobalNetwork

Trading
Manufac­turing■ Quality■ Global Expansion

Etc.

Co

TradingCompany
Functionsr por

UniqueNAGASE
Functions
Manufacturing
and Processing
R&D

10

NAGASE & CO., LTD.

Integrated Report 2018a t e Go ver nan

ce

NAGASEGroup• Nagase ChemteX (p.50)• Hayashibara (p.52), 46 Other Companies• Nagase R&D Center (p.55)• Nagase Application Workshop (p.56)

About the NAGASE Group

Share of NAGASE Consolidated Operating Income
Represented by Manufacturing Businesses

34.2%

(%)
40
30

Leading Us to the Future20

Maintain high profit ratios
by offering high-value-added materials

100

2013/3

2014/3

2015/3

2016/32017/3

2018/3

Per Share Dividends

¥

(¥)
40

40*

30
20

* Includes special dividend of ¥5 for fiscal 2017.

0

2013/3

B to B&
B to CC

Performance by Segment

Dividends paid
from business profits10

2014/3

2015/3

2016/32017/3

2018/3

We improve corporate value through ourbusiness and return profits to shareholders.

Unique Products

ユーザー
Users
Consumers
消費者

Critical Initiatives for Sustainable Growth

We contribute to creating a sustainable world
where people live with peace of mind.
Supporting industry
through materials andfinished products

Financial and Corporate Information

Supporting
beauty and health

NAGASE & CO., LTD.

Integrated Report 201811

Valuable Products and Services

A Sustainable World Where
People Live with Peace of Mind

Delivering Valuable Products andServices on the Global Stage
Functional
Materials

12

NAGASE & CO., LTD.

Integrated Report 2018

Advanced Materials& Processing

Coating Raw Materials

Color Formers

Coating raw materials sold by NAGASE are used in
automobile bodies and other applications.

Manufacture and sale of dyes used in thermal
paper applications, including cash register
receipts, tickets, and labels.

Urethane Materials

Copolyester Resin (Tritan™)

High-density, flexible urethane materials sold by
NAGASE are used in car seat cushions.

A copolyester resin resistant to temperatures greaterthan 100ºC. Free of phenol A, a suspected hormone
disruptor, it is expected to find use as a substitute forglass (tableware, etc.) and medical applications.

Denafilter™

Engineering Plastics

Manufacture and sale of Denafilter™, a filtration
system used in the manufacturing process ofhigh-​quality films for packaging and opticalapplications.

Sales of functional resins used in office equipment,
electric and electronic products, etc.

About the NAGASE GroupElectronics

Leading Us to the Future

NAGASE delivers value that contributes to creating a sustainable world where people live with peace of mind.
This value is represented in everything from raw materials for plastic materials and additives, functional polymers,
and plastic products to functional food ingredients and pharmaceutical raw materials and intermediates.
We will continue to grow as we work together closely with our customers in producing products and services of value.

Life &
Healthcare

Automotive &EnergyPerformance by Segment

Car Electronics

Pharmaceuticals/Medical

Sales of encapsulants for semiconductors,
photolithography materials, manufacturing
equipment, wafer bumping services.

Solutions for new materials, components, andtechnologies for next-generation environmental
applications.

Manufacture and sale of pharmaceutical raw
materials and anti-cancer drugs.

Epoxy Resins

Materials for Next-Generation Vehicles

Fragrances/Cosmetics

Manufacture and sale of high-performance resins
for use in electronic components, wind power
generation, solar cells, aircraft, optical components, etc.

Technological support and sales of components
and new materials required by car multimedia,
sensors, and self-driving systems.

Manufacture and sale of fragrances andcosmetics materials, products, and health foods.

Liquid Crystal, Flexible Display, Organic EL Materials

Home Energy Management System

Foods

Sale of high-heat-resistant polyimide film, OLED
materials, chemicals, and equipment for
smartphones, wearables, and TV industries.

In-house development and sale of eneEase™
home energy management system (HEMS).

Manufacture and sale of functional saccharides,
enzymes, and other food and health foodmaterials.

Unique Products

Semiconductor-Related Products

Financial and Corporate Information

Integrated Report 2018

Critical Initiatives for Sustainable Growth

NAGASE & CO., LTD.

13

13-Year Financial Highlights

NAGASE & CO., LTD. and Consolidated Subsidiaries (Years Ended March 31)(Millions of yen)

2006/3

Segments

Performance (Accounting Fiscal Year)Net Sales
Functional Materials (formerly Chemicals)
Advanced Materials & Processing (formerly Plastics)
Electronics
Automotive & EnergyLife & Healthcare (formerly Healthcare/
Other)
Other

RegionDomestic

Overseas
Gross Profit
Operating Income
Profit Attributable to Owners of the Parent
Financial Condition
Total Assets
Equity CapitalInterest-Bearing Debt

2007/3

2008/3

2009/3

2010/3

2011/3

WIT21

WIT2008“CHANGE”11

Investment
Amount:¥23.7 billion

Investment Amount: ¥27.7 billion

Investment Amount: ¥107.4 billion¥ 648,023
222,282229,278
132,086—¥ 701,321
247,094
244,681
150,796—¥ 764,755
267,836
274,660
163,833—¥ 715,238
248,461
253,029
153,255—¥ 603,949
237,124
192,569
117,591—¥ 660,213
253,290
222,100
133,640—

56,404
7,972

53,556
5,191

56,4891,934

58,905
1,585

55,542
1,121

50,247934

388,470

410,789432,813394,874

360,382

389,379

259,553
67,64017,596
12,892

290,532
73,63921,66913,567331,942
80,50623,063
10,005

320,364
71,527
12,522
5,808

243,567
65,415
13,128
7,537

270,833
73,00818,732
12,823¥ 396,773
196,620
24,834¥ 422,859
205,083
20,491¥ 419,869
200,554
33,342¥ 340,968
184,599
31,340¥ 368,088
195,344
21,886¥ 375,336
201,516
27,125(Yen)

Per Share Data:
Net Income (Basic)
Net Assets
Cash Dividends
Payout Ratio (%)
Shareholders’ Equity Dividend Rate (%)¥  100.32
1,535.70
15
14.9
1.06

¥  105.84
1,597.27
18
17.0
1.15

¥   77.86
1,559.97
17
21.8
1.08

¥   45.17
1,435.88
16
35.4
1.07

¥   58.64
1,519.61
16
27.3
1.08

¥   99.76
1,568.04
22
22.1
1.42
(%)

Ratios:Overseas Sales to Net Sales
Manufacturing Ratio (Operating Income)Operating Margin (Operating Income/Net Sales)
Return on Equity (ROE)Net Worth Ratio
Debt Equity Ratio (Times)

40.1
20.5
2.7
7.1
49.6
0.13

41.4
22.3
3.1
6.8
48.5
0.10

43.4
24.4
3.0
4.9
47.8
0.17

44.8
15.5
1.8
3.0
54.1
0.17

40.3
35.4
2.2
4.0
53.1
0.11

41.0
29.0
2.8
6.5
53.7
0.13

(Note 1) At the beginning of fiscal 2009, the Company moved its information and functional materials businesses handling materials related to insulating materials and fluoroplastic-related materials from theElectronics segment to the Chemicals segment. Businesses handling surface detection machines for functional films and sheets have been moved under the Plastics segment.
(Note 2) At the beginning of fiscal 2012, the NAGASE Group reorganized its four business segments into five business segments (Functional Materials, Advanced Materials & Processing, Electronics, Automotive &Energy, and Life & Healthcare) to more fully reflect the respective positions of each business in the value chain. For comparative purposes, fiscal 2011 figures have been calculated using the new businesssegments. The Colors & Imaging Department formerly under the Chemicals segment has been moved under the Advanced Materials & Processing segment. The Automotive & Energy segment wasorganized out of the Automotive Solutions Department (belonging to the Plastics segment) and the Energy Business Office, which was launched as an integrated entity from the Environment & Energy
Office (under Other) and the Energy Device Office.

Net Sales
Trading Business

Operating Income
Manufacturing Business（百万円）(Millions of Yen)

Trading Business

Manufacturing Business（百万円）(Millions of Yen)

800,000

25,00020,000600,000

15,000400,000
10,000200,000

5,000

0

0
06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3

14

NAGASE & CO., LTD.

Integrated Report 201806/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3

About the NAGASE Group(Millions of yen)

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

ACE-2020
Investment
Amount:¥13.7 billion

Investment Amount: ¥41.1 billion

Investment Amount: ¥32.6 billion¥ 723,212
169,973
239,224
137,026
99,441¥ 759,713
168,238
254,165
149,947
109,851¥ 742,194
157,149
255,505
127,926
115,351¥ 722,384
153,546
242,609
127,722112,956¥ 783,933
176,068
262,831
129,324
129,708

49,1701,018

76,116841

76,810737

76,609900

85,571
689

84,904644

85,371
629

366,369

361,971372,939374,208

363,038

369,365

395,428

265,484
71,62813,427
8,570

304,301
82,583
15,57814,182350,272
88,936
15,78911,663

385,505
91,991
18,153
11,318379,155
91,66318,024
12,316353,019
91,503
15,03010,331

388,504
102,675
24,11817,175¥ 450,842
204,706
88,710¥ 486,747
228,505
98,425¥ 498,141
246,723
92,828¥ 546,525
281,398
98,493¥ 512,081
273,963
87,560¥ 530,775
290,21782,046¥ 571,445
303,636
86,173

Performance by Segment¥ 666,272
167,017214,214125,01483,068

Leading Us to the Future¥ 631,854
177,126
217,929
110,495
76,113(Yen)¥   66.69
1,592.87
24
36.0
1.52

¥  111.31
1,803.31
26
23.4
1.52

¥   91.86
1,942.20
28
30.5
1.50

¥   89.10
2,215.18
30
33.7
1.44

¥   96.96
2,156.67
32
33.0
1.46

¥   81.65
2,301.10
33
40.4
1.48

¥  136.34
2,424.97
40
29.3
1.69
Unique Products

(%)

45.7
37.3
2.3
6.5
46.9
0.43

48.4
23.5
2.2
4.9
49.5
0.38

50.7
27.8
2.4
4.3
51.5
0.35

51.1
24.3
2.4
4.4
53.5
0.32

48.9
39.5
2.1
3.7
54.7
0.28

49.6
34.2
3.1
5.8
53.1
0.28

Critical Initiatives for Sustainable Growth

42.0
31.3
2.1
4.2
45.4
0.43

(Note 3) At the beginning of fiscal 2013, the Automotive & Energy segment was organized by combining the former Automotive Solutions Department (under the Plastics segment) and the former Energy
Business Office, which was an integrated entity combining the Environment & Energy Office (under the Other segment) and the Energy Device Office.

Total Assets/ROA
Total Assets (left scale)

Net Assets/ROE
ROA (right scale)（百万円）(Millions of Yen)

600,000

Net Assets (left scale)
（%）

6.0

ROE (right scale)（百万円）(Millions of Yen)（%）

300,000

12.0

250,000

10.0

200,000

8.0

150,000

6.0

14.0

350,000

5.0

400,000

4.0

300,000

3.0

200,000

2.0

100,000

4.0

100,000

1.0

50,000

2.0

0

0

0
06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3

Financial and Corporate Information

500,0000
06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3

NAGASE & CO., LTD.

Integrated Report 201815

Annual Topics

Highlights

in FY

2017

NAGASE & CO., LTD.

NAGASE & CO., LTD.

The foundational technology behind NAGASE’s
proprietary N-STePP™ biotechnology won the
Topics Award at the 2017 meeting of the Japan
Society for Bioscience, Biotechnology, andAgrochemistry

eneEase™ energy storage system,
jointly developed with Murata
Manufacturing Co., Ltd., used inpublic housing for disastervictims in Onagawa Town,
Miyagi Prefecture

Nagase ChemteX CorporationMay

INKRON LIMITED became asubsidiary; NAGASE expands­business in display, touch sensor,
and wearables markets

Inkron Oy (Finland)

September

April 2017
July

AugustNAGASE & CO., LTD.

Launch of shared service center
Nagase Business Expert Co., Ltd. toperform indirect operations undercontract for the group

NAGASE & CO., LTD.

Establishment of heat-resistant polyimide film production and sales joint
venture with Toyobo Co., Ltd.
announced; bolsters flexible display
business

NAGASE & CO., LTD.

DAITAI KAKO CO., LTD. shareacquisition brings NAGASE into
downstream coatings market

XENOMAX® high-heat-resistantpolyimide film

Nagase America Corporation

Acquisition of U.S. chemicals firm
Fitz Chem LLC
Nagase (Europa) GmbHNew branch office in Lyon, France tosell raw materials to cosmetics
companies and collaborate withtesting organizations and universities

16

NAGASE & CO., LTD.

Integrated Report 2018

Lyon Branch (France)About the NAGASE Group
Leading Us to the Future

NAGASE & CO., LTD.
Performance by Segment

Pat!naLock™-∑ reactive paint developed;
effective against acidic corrosive environments
NAGASE & CO., LTD.
Guangzhou Nagase Trading Ltd.

NovemberAnnouncement of joint venture with
China’s Shenzhen Kedali Industry Co.,
Ltd. and ATECS Corporation in­Guangdong; expands components business for alternative-energy automobiles

Signed agreement to establish
Huizhou Sanli Three Synergy Precision
Co., Ltd. in China

Unique Products

March 2018
February

March¥500 million investment in
OLED venture Kyulux, Inc.;
supporting world-first
technology and participatingin OLED display market

Critical Initiatives for Sustainable Growth

NAGASE & CO., LTD.

NAGASE & CO., LTD.

Light-emitting material developed by
Kyulux, Inc.

Additional investment in MINDAKYORAKU LTD., joint venture
established with major Indian autocomponents maker UNO MINDAGroup; expanding supply capacity in
the Indian market

NAGASE & CO., LTD.

Financial and Corporate Information

Repurchased own shares via off-auction repurchasetrading (ToSTNeT-3)

MINDA KYORAKU LTD. (India)

NAGASE & CO., LTD.

Integrated Report 201817

Message from the President

We raise the bar
to perform beyond expectations.

Representative Director and President

Kenji Asakura
July 201818

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupWe look ahead of the times,
contributing to society by creating new value.

Leading Us to the Future

Looking Back on Fiscal 2017
Higher sales achieved across all segments

Performance by Segment

The NAGASE Group achieved record-high consolidated net sales and operating income for fiscal
2017, the second year under our ACE-2020 mid-term management plan. Every business segment
outperformed the prior year in terms of net sales, including our Functional Materials, Advanced­Materials & Processing, Electronics, Automotive & Energy, and Life & Healthcare segments. The lasttime we recorded all-time highs in operating income was fiscal 2007. I am extremely proud that wehave set a new high after 10 years.
Part of our success was due to outside factors, including a strong general market for chemicals andthe impact of favorable foreign exchange and oil prices. I also want to recognize our employees, whotook responsibility for their work, completed their tasks and helped us achieve strong earnings. We are
beginning to see the results of NAGASE Group employees worldwide embracing A­ CE-2020­targets, using the PDCA cycle to achieve our goals.

ACE-2020 Progress
Unique Products

Signs of progress, but further to go

Summary of the Long-Term Management Policy

Stage 1(Business Scale)

Challenges
for Growth• Restructure global governance• Increase flexibility in HR management• Enhance safety and assurance• Consolidate communications
infrastructure

Stage 3

Image of Growth Path

Establish multinational
management system
Enhance overseas
operating structure

Expand overseas
operations

Financial and Corporate Information

Reinforcethe Management
Platformfor Growth• Increase growth investment• Accelerate organic growth• Expand overseas operations

Stage 2

ACE-2020

Critical Initiatives for Sustainable Growth

In 2015, we drafted our long-term management policy to reach a level of tripled profits prior to our200th anniversary in 2032. The first stage of this plan we called the Reform Stage. Our five-year
ACE-2020 mid-term management plan, formed in 2016, was built on the twin pillars of Reform ofProfit Structure and Reform of Corporate Culture.
Fiscal 2018 is the mid-point of this five-year plan, and we realize we have further to go to achievethese reforms. There are signs of progress. However, our goal still lies ahead, and measures to bridge thegap will play an important role. We consider fiscal 2018 to be a rolling start on our mid-term management plan. We are strengthening the potential to reach our goals, and we will maintain our speed andcomplete focus on our targets.

Goal to 2032

Normalization of the profit more thantripled (compared to FYE March 2015).

2015

2032

NAGASE & CO., LTD.

(Year)

Integrated Report 201819

Message from the President

KGI (Key Goal Indicator)
KGI

FY2016

Consolidated
Net Sales

FY2017FY2018 (planned)

FY2020722.3 Billion Yen 783.9 Billion Yen 828.0 Billion Yen

Consolidated
Operating Income

15.0 Billion Yen

24.1 Billion Yen

3.7%

5.8%

ROE

1.0 Trillion Yen or more

25.5 Billion Yen 30.0 Billion Yen or more

6.0% or more

6.0%

KPI (Key Performance Indicator) Factor index to achieve KGIReform/Strategy

Measures

Increase Focused Business(Portfolio Optimization)
Profit Structure
Reform
Accelerate Globalization
Indicator(Expand and Strengthen
Profit Structure)

KPI (Index)

Operating Income
in Focus Area*

FY2016FY2017FY2018(planned)

FY202011.9 B Yen

13.1 B Yen

13.3 B Yen

16.9 B Yen

46%

52%

59%

35% ≦

350.2 B Yen

389.0 B Yen

405.1 B Yen

600.0 B Yen

90%

103%

110%

170%

9.0 B Yen

11.4 B Yen

11.5 B Yen

14.4 B Yen

76%

76%

77%

73%

10.6%

10.0%

9.9%

9.4%

8.2 B Yen ** 23.5 B Yen ** 42.3 B Yen** 100.0 B Yen

Growing Investment
Distribution Ratio
in Focus Area
Overseas Group Sales*
Sales Growth Ratein the Americas

Operating Income
Increase Manufacturingfrom Manufacturing*
Profitability (Expand andStrengthen Profit Structure) Break-Even Point Sales Ratio*
Corporate
Pursue Efficiency
Culture Reform (Strengthen Management
Platform)
Indicator

Consolidated Selling,
General and Administrative
Ratio

Financial
Strategy
Indicator

Investment

Growth Investment

Financial Structure

Rating (R&I)

[A]

[A]

[A] or more

[A] or more

* The figures in this document are all management accounting data simple, which are different from the figures disclosed on the consolidated financial statements.
** Total over five years

ACE-2020 Basic Policy ① Reform Profit Structure
Portfolio Optimization– Categorize businesses into four areas(Growth, Focus, Base, Improvement)
to drive growth and maximize resource efficiencies■ Investing in Life & Healthcare, Electronics

We have categorized our Life & Healthcare and Electronics businesses as two focus areas. The­Americas, where we expect market growth, represent a priority for resource allocation intended to
grow profitability. During fiscal 2017, we made several aggressive moves, including investment­activities, laying a foundation for the future.
Cases

Major Developments in Focus Areas
Life & Healthcare
Established new branch in Lyon, France to expand cosmetics business in Europe
Invested in PeptiStar, Inc., owner of next-generation drug design technologies
Electronics
Established Xenomax - Japan Co., Ltd., a joint venture with Toyobo Co., Ltd. for the
manufacture and sales of high-heat-resistant polyimide film
Invested in Kyulux, Inc., owner of next-generation OLED technologies
Converted Inkron Oy (leading brand of next-generation materials for displays,
semiconductors) into a subsidiary
Consolidated Taiwan liquid crystal glass thin processing business to China

20

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE Group

Expand and Strengthen
Revenue Base

– Accelerate global expansion to grow sales overseas– I mprove manufacturing company profitability,
develop new businesses■ Business investment to generate synergies

Improving Manufacturing Company Profitability
Constructed TOTAKU INDUSTRIES, INC. Kanto/Oyama Plant
Acquisition of DAITAI KAKO CO., LTD., entry into downstream coatings markets
Developed Pat!naLock™-Σ

Performance by Segment

Cases

Leading Us to the Future

I always tell employees that Identify is the most important part of the NAGASE vision to Identify,
Develop, and Expand. And, this awareness has taken deeper hold, as our investment during fiscal 2017
took us into more comprehensive businesses, generating dynamic synergies beyond our expectations.
As one means to improve the profit-generating capacity in our manufacturing business, we acquired
DAITAI KAKO CO., LTD., a manufacturer and seller of special paints and other products. We also
made progress in the construction of the Kanto/Oyama Plant (Oyama City, Tochigi P­ refecture) of
TOTAKU INDUSTRIES, INC., a company that deals in pipes and other plastic products. Our
unique Pat!naLock™ reactive paint found new applications as Pat!naLock™-Σ, expected to perform
well in the thermal power plant and other infrastructure markets. This new version of Pat!naLock™
was developed in partnership with Kansai Electric Power, Kyoto Materials, and M­ itsubishi Hitachi
Power Systems.

■ Our G6000 global initiatives and issues

Critical Initiatives for Sustainable Growth

Cases

Unique Products

During fiscal 2017, we acquired U.S. chemical distributer Fitz Chem LLC (via Nagase America­Corporation), making Fitz Chem a wholly owned subsidiary of Nagase America. The Fitz Chem
geographical reach ranges from the U.S. Midwest to the South. The company sells raw materials for its
mainstay paints and inks customers. The company also sells raw materials for personal care and homecare products, adhesives, and industrial raw materials for resin compounds. With Fitz Chem now amember, we expect the NAGASE Group global business to reach a new stage in evolution.
During fiscal 2017, the businesses of our partner companies and investees made steady progress,
contributing to group growth. However, we have noted as Future Matters that these businesses have yet
to make significant contributions to net sales as provided under G6000. ­Business models and circumstances in each country and region differ from those in Japan. Accordingly, the NAGASE Group is
working to appoint local CEOs and to delegate authority to these individuals. As we accelerate our
global expansion, we expect to see locally hired talent rise to top management positions in their respective countries.
Global Initiatives
U.S.: Acquired chemicals distributor Fitz Chem LLC
China: Wuxi Chenghong Electronic Chemicals Co., Ltd. set up new entity in Mianyang,
Sichuan Province
China: Established Huizhou Sanli Three Synergy Precision Co., Ltd.
Taiwan: Consolidated liquid crystal glass thin processing business to China
India: M ade additional investment in MINDA KYORAKU, joint venture with major automaker

MindsetStrengthen
Management Platform

Financial and Corporate Information

ACE-2020 Basic Policy ② Reform Corporate Culture– Foster accountability, responsibility, and risk awareness–S hare top messages,
engage in consistent monitoring and PDCA
– Pursue efficiencies, human resource development

NAGASE & CO., LTD.

Integrated Report 201821

Message from the President

If we are satisfied in doing business as usual, we will never reach our desired destination. This is a message
that I believe is resonating with every group employee. With greater individual awareness, we see stronger coordination across our divisions. We have also seen a positive change in the language and attitude
within the group. In my annual new year address, I share a key phrase I want employees to keep in mind.
In 2017, that phrase was Speed Up. For 2018, the phrase is Raise the Bar. Raise the Bar encourages us tobe confident in going after more ambitious goals, always moving forward. I will continue to create
opportunities to meet employees at their place of work, talking with them directly in my own words.
We will also hold study groups, use internal portal websites, create video messages, publish posters,
and use other means to close the gap in mindset between management and the front lines of ourbusinesses. We began holding Top Management Tours in January 2016, sending our chairman, vicechairman, and president to NAGASE locations around the world. To date, we have held more than
180 Top Management Tour events. We will continue interactions that lead to individual growth and asense of accomplishment in our employees around the world.

ACE-2020 Basic Policy

Investment

NAGASE Transforms from
“Shosha/Trading” to “Business Designer.”

Logistics

GlobalNetwork

Expand and Strengthen
Revenue Base• Categorization of businessand execution of strategy thatmatches with the area• Replacement of asset andreallocation of resources• Acceleration in investment thatcreates core business of group• Accelerate globalization“G6000”• Improve manufacturing
profitability

Trading
Manufacturing

Leverage Group functions to achieve
the quantitative and qualitative targets.

Portfolio Optimization

R&D

Business
Designer

NAGASE strings all the groups together
to create and provide new value to the world through 6 key functions.

Reform Profit Structure[6 Functions]

Reform Corporate Culture
Mindset• Breed independence andresponsibility• Share the management’s
message• Thorough monitoring and
PDCA

Strengthen
Management Platform• Pursue efficiency• HR development

Into the Future
Not just a trading company, but a Business Designer
A business model consisting solely of trading company functions cannot fully respond to this era ofradical change. At the NAGASE Group, we use the term Business Designer to describe the type ofcompany we want to become. While our main activities have been based in trading and chemicals,
we will extend beyond those categories, integrating six functions on a higher level: Trading, R&D,
Investment, Logistics, Global Network, Manufacturing. We will engage actively in designing businesses, ­without placing limits on ourselves. We must create new businesses and systems at the speedof ­technological innovation, continuing sustainable growth.
In April 2017, we established the New Value Creation Office. This office is engaged in projects
that include the use of AI to conduct materials searches. We expect to see concrete results from theseprojects in fiscal 2018. This is just one way in which we will establish our identity as a company thatprovides society with new value through AI and other new technologies.

22

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupFor Sustainable Growth
Accelerating cross-organization ESG disclosures

Leading Us to the Future

Fiscal 2018 will be a new phase of ESG at the NAGASE Group. We have practiced CSR-related
disclosure for some time. However, we recognize the need to collect internal information andrevise our disclosure practices from the standpoint of ESG investment, which is a rapidly growing
part of the social awareness.
Accordingly, our Corporate Planning Division will take the lead in setting up a cross-­organization team that will share information with division general managers and affiliates. The
primary consideration of the NAGASE Group is in running our business. In the context of ESG,
we must begin our approach with our businesses as they stand today. We are preparing our group
to comply with ESG, SDGs, and other social demands, as we design businesses that are useful tosociety in terms of sustainability. This includes environmental business initiatives, particularly as
related to our energy business.
ESG and SDGs are matters we must take seriously to continue to exist as a member of s­ ociety.
Our universal and unchanging management philosophy to maintain good and fair-business­practices is a standard by which we make decisions related to ESG, ­compliance, and more.

Performance by Segment

To Our Shareholders and Investors
Meeting expectations

Unique Products

Our number one goal is the execution of ACE-2020. When we first set our goals, people insideand outside our company wondered whether we were stretching too far. Looking at our fiscal 2017
performance, I think these goals can be achieved. I am confident in our growth vector, and I believe
we will continue to be a corporate group that rises to meet expectations. We will not stand still. We
will set and achieve ambitious goals, weaving the threads of our long-held businesses into the future.
As we continue to reform and reach for our vision, we thank you for your understanding and supportof the NAGASE Group.

Critical Initiatives for Sustainable Growth“Beyond our trading company roots,
we will continue
to be a Business Designer,
creating new value for society.”

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201823

Our Board(as of June 22, 2018)

Sustainable corporate value
through management anddisclosure accountability

100%
Ratio of Outside
社外役員のDirectors’
取締役会
Attendance
at FYE
March 2018
出席率
Board Meetings

Directors

9

7

5
1

6

4
3

10

8
2

1. Representative
Director andChairmanHiroshi Nagase

2. Director andVice Chairman

Reiji Nagase

3. Representative Director,
President and CEO

5. Director and Managing
Executive Officer

7. Director andExecutive Officer

Kenji Asakura

Osamu Morishita

Takanori Yamauchi

4. Representative Director
and Senior Managing
Executive Officer

6. Director and Managing
Executive Officer

8. Director andExecutive Officer

Ichiro Wakabayashi

Masaya Ikemoto

Mitsuro Naba

Corporate Administration

24

NAGASE & CO., LTD.

Integrated Report 2018

Manufacturing
Osaka Region
Energy Business OfficeSpecial Projects

Sales & Marketing

GM, BPR & Administration Division
GM, Legal Division
Information Technology Division
Human Resources & General Affairs Division

Group Companies
GM, Corporate Planning Division
New Value Creation OfficeRatio of社外取締役のOutside割合
Directors

50%

About the NAGASE Group20%

Five years
orgreater
5年以上

Less than

five
years
年未満
5

50%

Audit & Supervisory Board Members

取締役

Length of Director
経験年数別Service by Years

Audit & Supervisory Board Member

Kenichi Matsuki

Masanori Furukawa

Outside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member (part-time)

Nobuyuki Shirafuji

Gan Matsui

1980 Prosecutor, Tokyo District Public
Prosecutors Office
1990 Prosecutor, Tokyo District Public
Prosecutors Office (Special
Investigative Squad)2005 Director, Special Trial Department,
Tokyo District Public Prosecutors
Office2010 Assistant Public Prosecutor, Osaka
High Public Prosecutors Office2012 Chief, Criminal Investigations,
Supreme Public Prosecutors Office2014 Chief Prosecutor, Yokohama District
Public Prosecutors Office2015 Superintending Prosecutor,
Fukuoka High Public Prosecutors
Office2016 Japan Federation of Bar
Associations (Member, Tokyo Bar
Association) Yaesu Sogo Law Office2018 Audit & Supervisory Board Member,
NAGASE & CO., LTD.

Unique Products

1984 Joined the Sumitomo Bank, Ltd.
(currently Sumitomo Mitsui Banking
Corporation)
2003 General Manager of the London
Group of Global Corporate
Investment Dept. of Sumitomo
Mitsui Banking Corporation and
Sumitomo Mitsui Banking
Corporation Europe Limited
2006 General Manager of Credit Dept.,
Europe, Middle East and Africa
Division (London) of Sumitomo
Mitsui Banking Corporation and
Sumitomo Mitsui Banking
Corporation Europe Limited
2013 General Manager of Credit Review
Dept. of Sumitomo Mitsui Banking
Corporation
2016 Retired from Sumitomo Mitsui
Banking Corporation
Audit & Supervisory Board Member,
NAGASE & CO., LTD.

Performance by Segment

Audit & Supervisory Board Member

Leading Us to the Future

構成

Executive Officers
Kusuo Ota

Executive Officer
GM, Colors & Advanced Processing
Department
Nagase Application Workshop

Managing Executive Officer
Nagase ChemteX Corporation

Naoki Yasuba
9. Outside Director

10. Outside Director

Managing Executive Officer
Hayashibara Co., Ltd.
Nagase R&D Center

Hidenori Nishi

Nobumasa Kemori

Mitsuru Kanno

1980 Joined Sumitomo Metal Mining
Co., Ltd.
2006 Managing Executive Officer andDirector, Sumitomo Metal
Mining Co., Ltd.
2007 Representative Director andPresident, Sumitomo Metal
Mining Co., Ltd.
2013 Representative Director andChairman, Sumitomo Metal
Mining Co., Ltd.
2016 Director and Chairman,
Sumitomo Metal Mining Co., Ltd.
Director, NAGASE & CO., LTD.
2017 Executive Adviser, Sumitomo
Metal Mining Co., Ltd.

Hiroyuki Ueshima

Executive Officer
GM, Automotive Solutions Department
Nagoya Branch

Koichi Sagawa

Executive Officer
CEO, Nagase (Europa) GmbH

Executive Officer
GM, Polymer Global Account Department

Masatoshi Kamada

Executive Officer
CEO, Greater China
COO, Nagase Business Management &Planning (Shanghai) Co., Ltd.

Yasuhiro Mihara

Executive Officer
GM, Speciality Chemicals Department

Takahiro Okumura

Akira Takami

Financial and Corporate Information1975 Joined KAGOME CO., LTD.
2000 Director, KAGOME CO., LTD.
2003 Director and Executive
Officer, KAGOME CO., LTD.
2005 Director and Managing
Executive Officer, KAGOME
CO., LTD.
2008 Director and Senior
Managing Executive Officer,
KAGOME CO., LTD.
2009 Representative Director andPresident, KAGOME CO., LTD.
2014 Representative Director andChairman, KAGOME CO., LTD.
Director, NAGASE & CO., LTD.
2016 Chairman of the Board,
KAGOME CO., LTD.
2018 Retired from KAGOME CO., LTD.

Critical Initiatives for Sustainable Growth

Akihiko Isono

Executive Officer
GM, Finance Division
GM, Accounting Division

Takayuki Masuda
Executive Officer
CEO, ASEAN and India

Executive Officer
GM, Electronic Chemicals Department

NAGASE & CO., LTD.

Integrated Report 201825

Corporate GovernanceDirector Term of Service

独立役員の人数
Numberof Independent
Directors

One Year

44名（社外役員全員）

Institutional Format

取締役の人数
Total Number of Directors

Corporation with Boardof Directors andAudit & Supervisory
Board Members(Audit & Supervisory
Board)

名910(same for outside directors)(all outside directors)

Number of Outside Directors

Executive Officer
System Adopted

Total Number of Audit &Supervisory Board Members

Number of Outside Audit &Supervisory Board Members

2

Yes

4

2

Number of Board of
Directors Meetings

Compensation Committee

Number of Audit & Supervisory
Board Meetings

Independent Auditor

Yes

16

Ernst & Young
ShinNihon LLC

16(Attendance by Outside Directors)
Mr. Hidenori Nishi, 100%
Mr. Nobumasa Kemori, 100%
(Attendance by Outside Audit &Supervisory Board Members)
Mr. Nobuyuki Shirafuji, 100%

Compliance with the Corporate Governance Code (as of July 1, 2018)
We have complied with all aspects of the Corporate­Governance Code since fiscal 2016.
To improve corporate value over the medium and longterm, we believe that it is important to continually assess andverify our status, beyond simply creating the systems andstructures. We are committed to continuing the improvementof our corporate governance.

26

NAGASE & CO., LTD.

Integrated Report 2018

With the fiscal 2018 revision of the Corporate Governance
Code, we are taking another look at each provision to achieveeven more effective and appropriate corporate governance.
Please refer to our corporate governance report for more information.

About the NAGASE Group

Basic Approach
To put these principles and vision into practice, we established a framework for sustainable growth in any businessclimate. This framework of our long-term management
policy includes Challenges for Growth and Reinforce theManagement Platform for Growth. We are improving ourcorporate value over the medium and long term guided bythis framework.
We believe that rapid decision-making, execution, andtransparency are essential for us to accomplish these initiatives as we engage in strengthening our corporate governance.

Leading Us to the Future

The NAGASE Management Philosophy states that “Werecognize our responsibility to society and offer beneficial
products and services while maintaining the highest standardsof integrity. Through our growth, we will contribute to society and enrich the lives of our employees.”
Building upon this philosophy, the NAGASE Vision
makes a promise to our stakeholders. Our vision states, “Torealize a sustainable world where people live with peace ofmind, each of us embodies our value proposition, Identify,
Develop and Expand through daily activities.”

Performance by Segment

Initiatives to Strengthen Corporate Governance(Year)~2000
President

2001

2002

2003

2004

2005

2007

2008

2010

2012

Hiroshi Nagase

2015

2016

2017

2018

Kenji Asakura

Chairman of the
Chairman
Board of Directors

President

20
Reduced board
directors to 11 directors 10

8

10

9

Chairman

10

9

10

Adopted executive officer system (for faster decisions and stronger business execution)

Advisory Board

2
Individuals 1 IndividualOutsideDirectors

1
Individual 2 Individuals

Unique Products

Separation ofManagement
and Business
Execution

2009

Compliance Committee

Critical Initiatives for Sustainable Growth

Outside Audit &Supervisory
1994~ 1 Individual, 1998~ 2 Individuals
Board Members
Risk Management & Compliance Committee

Established Basic Compliance Policy

Compliance

Established NAGASE Group Compliance Behavior Standards

RevisedEstablished Compliance Call Center Rules

Director
Compensation

Financial and Corporate Information

Internal Controls
Promotion
Committee

Internal Control Committee

Compensation Committee

Management
Philosophy

NAGASE & CO., LTD.

Integrated Report 201827

Corporate Governance

Governance System

Under a corporate system that adopts an Audit & Supervisory Board,
NAGASE introduced the executive officer system in June 2001. The Company’s current management framework consists of 10 directors (including 2
outside directors), 17 executive officers (6 of whom concurrently serve as
directors), and 4 Audit & Supervisory Board Members (including 2 outside
Audit & Supervisory Board Members). NAGASE has also established thefollowing committees to reinforce its corporate governance function.

NAGASE’s Corporate
Governance System
Shareholders’ Meeting
1 Board of Directors

2

Independent
Auditor

The Board of Directors is clearly
positioned as the body in charge ofmaking decisions on management
policies and strategies, and it
supervises the execution of operations. Holding a regular monthly
meeting, the Board of Directors
reviews and formulates measures
regarding important decisions andtracks business performance.

Audit & Supervisory
Board Members

LiaisonAudit

連携

Audit & Supervisory Board
4(including 2 outside Audit & ­Supervisory Board Members)Audit

2 Audit & Supervisory Board/
Audit & Supervisory Board
Members

In accordance with audit policy andstandards for responsible work set at
Audit & Supervisory Board meetings,
Audit & Supervisory Board Members
attend important meetings, such as
Board of Directors meetings, andconduct audits of the execution ofduties of directors based on reports
solicited from subsidiaries on an
as-needed basis.

LiaisonLiaison3 Executive Officers
Executive officers attend General
Managers’ Meetings, where eachdepartment provides a status report,
which is discussed by meeting
attendees before an action plan isformulated.

28

NAGASE & CO., LTD.

Integrated Report 2018

Audit Office

AuditAbout the NAGASE Group
Leading Us to the Future

Under the executive officer system, the NAGASE corporate governance system collaborates various internal committees to appoint outside directors and members to the Audit &Supervisory Board as well as to reinforce its corporate governance system. Having secured
supervision and auditing functions that operate from diversified perspectives, including fromoutside the Company, NAGASE believes the current corporate governance system is morerational than ever. We will increase our efforts to further reinforce our corporate governancesystem to secure the trust of our stakeholders.

4 Compensation Committee

Board of Directors
10(including 2 outside directors)

Compensation Committee
3(including 2 outside directors)

5

Supervision

Risk Management &Compliance Committee

Compliance Call Center

President• Internal• External

As a consultative body for the Board of
Directors, the Risk Management &Compliance Committee establishes andstrengthens risk management andcompliance systems that cover not only
legal compliance but also corporate
ethics. The committee also maintains
ISO environmental management
standards and promotes energy conservation initiatives.

7

Security Trade Control
Committee

Critical Initiatives for Sustainable GrowthInternal Control
Committee

The Internal Control Committee
documents the Company-wide internal
control conditions and financial statement preparation process to further
enhance its financial reporting credibility, while maintaining and strengthening a structure to carry out evaluationand improvements.

7 Security Trade Control
Committee

Financial and Corporate Information

General Managers’
Meeting

Compliance Committee

6 Internal Control Committee
63

5 Risk Management &Unique ProductsSupervision

4

Performance by Segment

1

With the majority of its members madeup of outside directors, the Compensation Committee ensures the objectivity
and transparency of the Company’s
directors and executive officers in thedecision-making process regarding
compensation by screening the appropriateness of every compensation level
and the compensation system to reportand make recommendations to theBoard of Directors.

The Security Trade Control Committee
thoroughly complies with export related
laws and regulations in relation toforeign currency exchange and foreign
trade for its trading of cargos andtechnologies covered by such laws andregulations.

NAGASE & CO., LTD.

Integrated Report 201829

Corporate GovernanceDirector Compensation
Director compensation (excluding outside directors and Audit &Supervisory Board Members) consists of a basic salary commensurate with the position and performance incentives (bonuses). The
Company calculates compensation based on director compensation
rules, contingent upon approval by the board of directors. Performance incentives (bonuses) reflect individual performance based on
the Goal Management System after a basic payment amount isdecided, based on Company earnings for the period in question.
The Compensation Committee, a majority of whom are outside
directors, assesses the validity of compensation standards and systems, reporting to and advising the board of directors. This ensures
improved objectivity and transparency in the director compensation
decision-making process.
Total Director Compensation by Title/Total Compensation
by Type/Number of Eligible Directors(Millions of yen)
Total
Compensation

Title

Total Compensation
by Type
Basic
Compensation

Bonus

Number of
Eligible
Directors

Directors(excluding Outside Directors)

391

227

164

8

Audit & Supervisory
Board Members(excluding Outside
Audit & Supervisory
Board Members)

44

44

0

3

Outside Officers

50

49

0

4

Important Matters regarding Employee Bonuses
for Employees Also Serving as Directors(Millions of yen)

Total
Compensation

Number of Eligible Directors

Comments

39

4

Paid in an amount equivalent
to employee bonus.

Audit System[Status of Audit by Internal Auditors]

The Audit Office is in charge of internal audits, including audits toassess the appropriateness and efficiency of the Company’s businessactivities, including those of subsidiaries, based on internal auditing
rules. The Audit Office is staffed by nine employees, including certified internal auditors (CIA), qualified internal auditors (QIA), andother individuals who possess specialized knowledge in internal audits.

[Status of Audit by Audit & Supervisory Board Members]

Four Audit & Supervisory Board Members (including two outside
Audit & Supervisory Board Members) who have a considerable
amount of knowledge about finance and accounting conduct Audit& Supervisory Board Members’ audits. The Audit & Supervisory
Board meets regularly every month to receive reports from Audit &Supervisory Board Members regarding the status and results ofaudits. The Audit & Supervisory Board also received reports fromthe board of directors and independent auditor regarding the performance of their duties. Each Audit & ­Supervisory Board Member

30

NAGASE & CO., LTD.

Integrated Report 2018

works to communicate with the board of directors, Audit Office,and other employees in keeping with the Audit & Supervisory Board
Members’ audit s­ tandards set by the Audit & Supervisory Board andwith auditing policies and plans. Audit & Supervisory Board Members audit the performance of duties by the board of directors,
attending meetings of the board of directors and other important
meetings and seeking reports, if needed, from subsidiaries.

[Status of Audit by Independent Auditor]

Independent audits are performed in a fair and impartial manner by
a total of 36 audit staff, including the following specified limited
liability partners, as well as other certified public accountants.
Certified Public Accountants

Auditing Firm

Mikio Konishi

Specified limited
liability partners

Hideo Yamamoto

Managing partners

Yasuhiro Takada

Ernst & Young ShinNihon
LLC[Coordination among Internal Auditors, Audit &­Supervisory Board and Independent Auditor]

The Audit Office and Audit & Supervisory Board Members
exchange information as appropriate regarding internal audits andaudits of domestic and overseas affiliates. The office and auditors
hold meetings periodically to report and exchange opinions on audit
results, as well as to enhance the quality and efficiency of audits.
Audit & Supervisory Board Members and the independent
auditor collaborate in a wide range of functions. They trade opinions
on their perceptions of risk, and routinely meet regarding individual
incidents. When necessary, Audit & Supervisory Board Members
observe site visits and audit reviews performed by the independent
auditor. Audit & Supervisory Board Members meet each quarterwith the independent auditor to hear reports about the results ofaudits and reviews. At these meetings, they also learn the independent auditor’s auditing plans and audit status.

Independence Standards and Policies for
Outside Directors and Audit & Supervisory
Board Members
NAGASE & CO., LTD. selects candidates for outside director inaccordance with the standards of independence stipulated by the
Financial Instruments Exchange, and who have the ability to identify
issues from a perspective representing the interests of stakeholders
and society at large. The Company selects candidates for outside
Audit & Supervisory Board Member who have a wealth of knowledge and experience in a variety of fields, and who have the ability to
conduct audits from a standpoint of neutrality and objectivity.
The Company has designated a total of four outside directors
and Audit & Supervisory Board Members as independent:
Mr. Hidenori Nishi and Mr. Nobumasa Kemori as outside­directors, and Mr. Nobuyuki Shirafuji and Mr. Gan Matsui as­outside Audit & Supervisory Board Members.

NameReason for Appointment

Attendance at FYE March2018 Board Meetings

Hidenori
Nishi

Hidenori Nishi has been involved in the management of KAGOME CO., LTD.
for many years and possesses advanced knowledge and extensive
experience regarding corporate management. He will use this knowledge
and experience to make proposals concerning the Company’s overallmanagement from a perspective of familiarity with industry and is
expected to enhance the Company’s corporate governance.

16/16

Chairman, Japan Canners Association

Nobumasa
Kemori

Nobumasa Kemori has been involved in the management of Sumitomo
Metal Mining Co., Ltd. for many years and possesses advanced knowledge
and extensive experience regarding corporate management. He will use
this knowledge and experience to make proposals concerning theCompany’s overall management from a perspective of familiarity withindustry and is expected to enhance the Company’s corporate governance.

16/16

Executive Adviser, Sumitomo Metal Mining
Co., Ltd.
Outside Director, JFE Holdings, Inc.

Nobuyuki
Shirafuji

Nobuyuki Shirafuji possesses a wide range of knowledge based on his
many years of overseas experience in financial institutions. He also has
many years of experience in audits and audit departments, possessing
considerable knowledge regarding finance and accounting. Accordingly,
we believe he will properly perform his duties as an outside Audit &Supervisory Board Member.

16/16

N/A

OutsideDirectors

Gan
MatsuiGan Matsui has a wealth of experience in legal circles and considerable
knowledge of compliance and governance. Accordingly, we believe hewill properly perform his duties as an outside Audit & Supervisory Board
Member.

Concurrent Titles/Responsibilities

Leading Us to the Future

OutsideAudit &
Supervisory
Board
Members

About the NAGASE Group

Category—

Performance by Segment

Attorney, Yaesu Sogo Law OfficeOutside Audit & Supervisory Board Member,
Orient Corporation
Outside Audit & Supervisory Board Member,
Totetsu Kogyo Co., Ltd.
Outside Director, Audit and Supervisory
Committee, GLOBERIDE, Inc.

(Note) The number of Board of Directors meetings noted above does not include resolutions made in writing.

Policies Related to Company Information
Disclosure

No. of
EventsConferences/briefings
for institutional
investors and analysts

2

Financial results disclosure,forecasts, special topics(year-end, interim)

Individual investor
conferences/meetings

10

Conducted at branches of
securities companies

Overseas roadshows

1

President and CFO traveled
overseas to meet directly, havediscussions with institutional
investors

Overseas conferences

1

Participation in conferences
sponsored by securities
companies

Comments

Fiscal 2018 Initiatives
As in fiscal 2017, we will continue to conduct emergency
response training to improve initial response quality andspeed. We will conduct disaster prevention BCP training for
the NAGASE Global HR Development Center (backup
office location) to improve our disaster preparedness andresponse.

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information

Activity

During the fiscal year ended March 2018, we held disasterpreparedness drills (fire drills) in July (Tokyo and Osaka
Head Offices) and August (Nagoya branch office). In
February (Tokyo Head Office) and March (Osaka head
office, Nagoya branch office), we practiced initial responses
to a major disaster scenario for our Fire Prevention Head
Office, Facilities Confirmation Team, Information Systems
Team, and Logistics confirmation Team.
In the event of a large-scale disaster making the continued use of our Tokyo Head Office unfeasible, we have theoption of using the NAGASE Global HR Development
Center (opened May 2014 in Sendagaya, Tokyo) as a
backup office. During December 2017, we implemented
disaster prevention BCP response training.

Critical Initiatives for Sustainable Growth

Major Investor Relations Activities during Fiscal 2017

Fiscal 2017 Results
Unique Products

Pursuant to the NAGASE Group Compliance Behavior Standards,
we engage in ongoing communications with society and our stake­holders through timely disclosure of truly important information
over appropriate channels. We are mindful that all corporate activities remain within the bounds of socially accepted norms.
This basic philosophy guides us as we conduct timely, appropriate, and fair disclosure of information through investor relations
activities, public relations programs, and websites for our shareholders and investors to improve management transparency andaccountability.
See “Timely Disclosure System” on our corporate website for more.

Business Continuity Planning31

At a Glance

Advanced Materials& Processing

Electronics

 erformance Chemicals
P
Department
P. 34

 olors & Advanced
C
Processing Department P. 36

 lectronic Chemicals
E
Department

P. 38

 peciality Chemicals
S
Department olymer Global
P
Account Department P. 37

 lectronic Materials
E
Department

P. 39

Net Sales

Net Sales(¥ hundred million)(¥ hundred million)

Functional
Materials

P. 35

Net Sales(¥ hundred million)

2,000

1,500

1,571

1,535

1,760

3,000

2,555

1,500

2,426

2,628

2,000

1,000

1,000

500

1,279

1,277

1,293

16/3

17/3

18/3

1,000

500

0

0

16/3

17/3

18/3

Operating Income

0

16/3

17/3

Operating Income(¥ hundred million)

Operating Income(¥ hundred million)60(¥ hundred million)

80

100

51
45

36

75

49

50

30

40

50

15

20

25

0

16/3

17/3

89

67
60

41

0

18/3

62

63

16/3

17/3

0

16/3

17/3

18/3

Operating Margin

Operating Margin

Operating Margin

(%)

(%)

4 .0

4 .0

(%)

3 .0

2.3

2. 7

2. 9

8 .0

3 .0

2 .0

2 .0

1 .0

1 .0

0

1.9

2. 1

2. 5

NAGASE & CO., LTD.

17/3

18/3

Integrated Report 2018

6 .0

18/3

6.9
4.9

5.0

16/3

17/3

4 .0

2 .0

0

16/3

32

18/3

0

16/3

17/3

18/3

18/3

Life & Healthcare

About the NAGASE Group

Automotive& Energy

Net Sales by Segment(¥ hundred million)
10,0007,500

7,421 7,223 7,839
Leading Us to the Future

5,000

2,500

 ife & Healthcare
L
Products Department P. 42

 nergy Business Office
E

P. 41

 eauty Care Products
B
Business

Net Sales

Net Sales(¥ hundred million)

1,153

1,129

800

855

300

849

853
200

1,000

17/3

18/3

(¥ hundred million)(¥ hundred million)

1,297

16/3

Functional Materials
Advanced Materials & Processing
Electronics
Automotive & EnergyLife & Healthcare
OthersOperating Income by Segment

1,000

1,500

P. 43

0

Performance by Segment

 utomotive Solutions
A
Department
P. 40

241
180

150

16/3

17/3

600
100

400

500

200

Unique Products

0
0

0

16/3

17/3

18/3

16/3

17/3

18/3
–100

Operating Income

Operating Income(¥ hundred million)(¥ hundred million)
50

30

24

13

38

30

15

42
33

Operating Margin

20

10

(%)

10
0

Functional Materials
Advanced Materials & Processing
Electronics
Automotive & EnergyLife & Healthcare
Others

4.0

3.1

0

16/3

17/3

18/3

16/3

17/3

18/3

3.0

2.4
Operating Margin

Operating Margin

(%)

(%)

3 .0

6 .0

1.1

4.5
4 .0

4. 9

1.0

3. 9
0

1. 4

16/3

1 .0

2.1

2.0

Financial and Corporate Information

1. 9

2 .0

Critical Initiatives for Sustainable Growth

20

40

18/3

17/3

18/3

2 .0

0

0

16/3

17/3

18/3

16/3

17/3

18/3

NAGASE & CO., LTD.

Integrated Report 201833

Performance by Segment
Functional Materials
Major Manufacturers

Performance Chemicals Department• Toyo Quality One Ningbo Co., Ltd.
• Guangzhou Kurabo Chemicals Co., Ltd.
• Toyo Quality One (Guangzhou) Co., Ltd.
• PT. Toyo Quality One Indonesia• TQ-1 de MEXICO S.A. de C.V.
• Light Chemical (Changzhou) Co., Ltd.
• Cytech Products Inc.
• DAITAI KAKO CO., LTD.

NAGASE Market Strengths and the Business Environment

Paints and Inks
Industry

UrethaneIndustry

Strengths

Business Environment

Organization and staff specialized in the global paints and inks
industry
Domestic and overseas sales
channels
Unique solutions as a trading
company with R&D, manufacturing, and processing functions

Growing demand for paints andinks in overseas markets
Business growth with local(non-Japanese) customers
overseas

Strong customer pipeline
supported by consultative sales
Packaged sales of various
urethane materials
Overseas sales network

Growing demand for urethane inemerging countries
Accelerating customer (Japanesecompanies) entry in overseas
markets
Higher awareness of energy
conservation, the environment,
and bio-based chemistry

GM, Performance Chemicals Department

Tamotsu Isobe

Fiscal 2017 Strategies and Results

Fiscal 2017 marked the second year of our ACE-2020 midterm management plan. During the year, the Performance
Chemicals Department pursued three key measures: (1) Builda stronger domestic business foundation, (2) Strengthen overseas business, and (3) Cultivate new businesses.
To strengthen our overseas business, we acquired U.S.
chemical distributor Fitz Chem LLC, gaining a foothold to
growth our coating raw materials business.
As part of our efforts to cultivate new businesses, we
acquired DAITAI KAKO CO., LTD., a medium-sized paintmanufacturer. Here, we have secured a manufacturing base tobuild on our strengths in developing new materials.
Our urethane business continues to grow, as we sell raw
materials through global joint ventures and other channels.
We continue to develop synergies by working with partners,
beyond raw materials sales.
Our department recorded higher sales and profits,
owing to our two acquisitions, a recovery in Japanese raw
materials sales due to environment regulations in China,soaring prices for naphtha and other raw materials, andother contributing factors.

f­ unctional materials in the region. We also plan to develop
new products and grow sales of urethane mold releaseagents through Cytech Products Inc., our joint venture in
North America.
In new business development, we are working to penetrate
the market with our Pat!naLock™ reactive coating, registeredwith NETIS (New Technology Information System) in 2017.
We are also establishing a business for our carbon hybrid™
coating system.
We will cooperate faster with our domestic customers­(partners) to build a stronger presence in the coating andurethane industries.

TOPICS

New Pat!naLock™ Reactive Paint

Using rust prevention by the protective rust is a newconcept not found in current anti-rust paint. Based on
this concept, we developed a reactive paint thatbrings a new dimension in maintenance management.
We can inhibit the progression of common rust by creating a dense
protective rust layer(Patina) when applied
BeforeAfter
BeforeAfterto a steel surface to becoated.

Fiscal 2018 Strategies

During the third year of ACE-2020, we will continue topursue our three key measures, growing our ­business by­leveraging the NAGASE Group network and value chain.
Our focus for overseas growth will be North America,
as we align with Fitz Chem to build sales of Japanese

34

NAGASE & CO., LTD.

Integrated Report 2018

In 2018, this technology
received the Second Annual
Infrastructure MaintenanceAwardAbout the NAGASE Group

Major Manufacturers

Speciality Chemicals Department• Nagase ChemteX Corporation• Nagase Filter Co., Ltd.

NAGASE Market Strengths and the Business Environment
Business Environment

Strong trust relationship with customers
Material development capabilities alongwith advancement of EV, IoT, 5G, andother technologies
Unique technology-oriented sales andinnovation, utilizing information from thevalue chain
Experience in a variety of diverse chemical
products, tailored to customer needs,
from general purpose to specialty

AI technology research in the chemicalindustry
Restructuring in the petrochemicalindustry (including biochemicals)
Increasing need for high-function, highvalue-added productsTrends in chemical manufacturing
prompted by environmental regulationsin China
Stricter global environmental regulations(Paris Agreement, etc.)

Leading Us to the Future

Strengths

Performance by Segment

Executive Officer
General Executive, Functional Materials Segment
GM, Speciality Chemicals Department

Yasuhiro Mihara

As we worked to realize our vision to reform our profit structure during the second year of our ACE-2020 mid-term
management plan, we saw a definite change in employee value
perception and attitude. As a result, we achieved targets anddelivered higher profits in our core businesses, including compounding technologies, organic synthesis technologies, andpolymer technologies.
Operations have stabilized at the new Nagase Filter Co.,
Ltd. Fukui Plant. In addition to filter manufacturing technology, we have developed unique cleaning technology that willoffer new value to customers.

To completely reform our profit structure during the thirdyear of ACE-2020, we will continue to invest in businesses and work on alliances with business partners, striving to deliver early successes for new businesses.
We also plan to bolster development activities in ourNagase ChemteX market development team, newly formed
in 2017. We will use our global marketing resources to findmore sales in existing markets.

TOPICS

Critical Initiatives for Sustainable GrowthFiscal 2018 Strategies

Unique Products

Fiscal 2017 Strategies and Results

Growing Businesses that Comply with Stricter Global Environmental Regulations
Building a Circular Economy and Contributing to the Global Environment~Supporting Customer ESG Investment~

MORIKAWA INDUSTRIES CORPORATION REARTH™

Financial and Corporate Information

In Singapore, where the government has
instituted a carbon tax, NAGASE has
adopted REARTH™ (product by MORIKAWA
INDUSTRIES CORPORATION) for affectedcompanies. REARTH contributes to reduced
CO2 emissions and lower costs.
We have also adopted the wastewater
treatment system developed by Aience
Limited. This system solves several customer
issues, reducing related electricity andtreatment costs, while increasing totaltreatment capacity.

Aience Limited Aquablaster™

NAGASE & CO., LTD.

Integrated Report 201835

Performance by Segment
Advanced Materials& Processing

Colors & Advanced Processing Department

Major Manufacturers• Fukui Yamada Chemical Co., Ltd.
• Sofix LLC• Nagase ChemteX Corporation• Hayashibara Co., Ltd.
• Totaku Industries, Inc.
• Kotobuki Kasei Corporation• ON Textile Chemicals (Shanghai) Co., LTD.

NAGASE Market Strengths and the Business Environment
Strengths

Changing market needs forcustomers overseas and among
advanced economies (industry
digitalization/paperless, online
sales, etc.)

Colors &Additives
Industry

Relationships with top manufacturers, customers
Expertise in colors and dispersion processing
Ability to distribute a wide variety
of products, small-batch sales

Needs and expanding market fordecorative materials and distributed processing
Overseas expansion of Japanbased customers

Polymer
Products
Industry

Personnel with international
experience and expertise infilms, resins, molding, andmasterbatches industries
Relationships with suppliers thathave strong product lineups
Information resources at numerous top-class business partners

Diversification and polarizationof needs
Increasing awareness of safety
and environmentally conscious
products
Growth of medical, diagnostics,
and nursing care markets

Digital Printing
Supply Industry

Executive Officer
GM, Colors & Advanced Processing Department
Nagase Application Workshop

Business Environment

Manufacturing bases
Highly specialized global
network

Kusuo Ota

Fiscal 2017 Strategies and Results
Despite weakness in functional film materials, functional dyes,
and construction materials during fiscal 2017, we recorded
strong results in other businesses, including color pigments,
copolyester resins, and thermal-related products. As a result,
the Colors & Advanced Processing Department recorded
higher sales and profits for the year.
We accelerated cross-department projects between sales
and development teams. We reorganized sales teams in orderto strengthen focus on key fields for resin sales. We will continue to use the PDCA cycle in development projects, defining clear paths toward commercialization.

At the same time, we will strive to improve our abilities asa vendor to provide trading + α (basic and added value) functions that offer solutions to a variety of issues with which ourcustomers struggle.
Further, we intend to strengthen cooperative business activities for cross-organization projects involving our department
and NAGASE affiliates across a wide range of industries.
We believe that personal, cross-department networks
promote communications and perspectives based on different
business experiences. We will leverage these networks tobring the power of our integrated business to bear and tostrengthen our capacity to design businesses. These advancements will be an important link in training future businessleaders in our department.

Fiscal 2018 Strategies
The Colors & Advanced Processing Department exists midstream in the value chain as a part of the Advanced Materials& Processing segment. From our position, we are able tomatch upstream seeds and downstream needs for markets,
industries, and our clients.
During fiscal 2018, we plan to execute on the Identify andDevelop concepts of the NAGASE Vision, focusing on business matching activities to find new business opportunities.
We intend to conduct fundamental trading company activities to delve deeper into the core businesses within the digitalprinting supply, colors and additives, functional film materials,
and resin processing businesses in our department.
We will also seek potential opportunities to expand commercial rights for strategic products (pigments, additives, andresins) outside the borders of Japan.

36

NAGASE & CO., LTD.

Integrated Report 2018

TOPICS

Copolyester Resin Tritan™

We expect to grow sales of copolyester resins as theseproducts are embraced throughout the world as partof a trend to avoid environmental issues. We will
engage in a number ofmeasures to raise theprofile of our copolyester
resins among our customers and end users in
the Japanese market.

Copolyester Resin Tritan™

About the NAGASE Group

Major Manufacturers

Polymer Global Account Department• Setsunan Kasei Co., Ltd.
• Dainichi Color Vietnam Co., Ltd.

NAGASE Market Strengths and the Business Environment
Business Environment
Growing business opportunities
in inland China and newly
emerging countries in the
Asia-Pacific region
Increasing local spec businessBusiness reorganization amongsuppliers

Leading Us to the Future

Resin Sales
BusinessStrengths
Expanding sales network in
Asia-Pacific and other regions(personnel, offices, logistics
bases)
Abundant national staff withexperience and expertise
Spec-in functions for end users
Size and number of transactions
with Japanese and non-Japaneseaffiliated customers
Strong partnerships with leading
suppliers in Japan and aroundthe world

Performance by Segment

Executive Officer
GM, Polymer Global Account Department

Koichi Sagawa

Fiscal 2017 Strategies and Results

Proprietary Denapolymer™
CompoundWholly owned subsidiary Setsunan Kasei Co., Ltd.
launched its own Denapolymer™ brand of
products. Denapolymer™ is a result of thecompany’s strengths in resin processing
technologies. We will also work to create arecord of success for unique, differentiatedproducts, particularly our HS80 Series ofhigh sliding polyethylene.

Financial and Corporate Information

Fiscal 2018 marks the third year of our ACE-2020 midterm management plan. We see this year as a year to make a

Critical Initiatives for Sustainable GrowthFiscal 2018 Strategies

TOPICS

Unique Products

Strong performance in Japan, China, and Southeast Asia
resulted in higher sales and profits for fiscal 2017.
Sales of plastics grew significantly, despite a challenging
environment of tight supply. Some of this growth was due toour handling products being used as main materials in new
products offered by our strong-selling customers.
In China, we saw greater adoption of our products in focus
areas (office equipment, appliances, game devices, electric andelectronics). New applications of our materials in products
related to the rapidly evolving AI, IoT, and other technology
innovations also had a positive impact on performance.
In Southeast Asia, we recorded significant sales growth,
securing new business that was transferred from China, whiledriving more sales in our existing local spec business.
In Japan, we provided expanded logistics functions at oursales subsidiaries, resulting in higher sales of plastics. Sales ofhigh-performance films rose, while greater earnings among
affiliated manufacturing companies also contributed to earnings in a significant way.
As a whole, fiscal 2017 was a year in which we built a stronger foundation for our businesses as we head into the final yearof ACE-2020. This progress was due in part to new projects
with major suppliers, as well as new business with major
customers.

dramatic step forward.
We intend to continue establishing market superiority forour core resin sales business by leveraging the NAGASEGroup network.
In our compound business, we plan to deliver even greaterlevels of profits for existing businesses, while growing sales ofour own high-value-added Denapolymer™ product.
We will delve deeper to grow sales in our packaging materials business leveraging the strengths of our overseas manufacturing affiliates and ability to offer feature-rich,differentiated products focused on the end user.
As a department, we plan to look outside Asia for new
business, seeking new investment opportunities and reforming
our profit structure.

Molded products in the HS80
Series of high sliding polyethylene

NAGASE & CO., LTD.

Integrated Report 201837

Performance by Segment
Electronics
Major Manufacturers

Electronic Chemicals Department• Nagase ChemteX Corporation• Nagase ChemteX (Wuxi) Corporation• Engineered Materials Systems, Inc.
• Wuxi Chenghong Electronic Chemicals Co., LTD.

• Nagase Techno-Engineering Co., Ltd.
• Pac Tech-Packaging Technologies GmbH
• Nagase Engineering Service Korea Co., Ltd.
• Inkron Oy

NAGASE Market Strengths and the Business Environment

Executive Officer
GM, Electronic Chemicals Department

Takahiro Okumura

Strengths

Business Environment

Electronic
Components(Communication
Devices) Industry

Epoxy sheet encapsulant materials maintain alarge market share among communication
device applications; these materials are basedon unique Nagase ChemteX advanced
formulation technologies

Growth in the communication device
markets of China and emerging economies
Expanding next-generation high-speed
communications networks

Semiconductor
Industry

Total solutions provided through Nagase
ChemteX high-value-added materials and
Pac Tech Group subcontracting services andequipment

Increasing demand in new fields, including 5G, IoT, AI, automobiles, medical
equipment, etc.

Display Industry

Advanced technological capabilities inhigh-grade chemicals and chemical management equipment
Optical materials based on special siloxane

Growing market for liquid crystal displays/
OLEDs in China
Growth of 8K displays

Heavy Electric
Machinery Industry(Electricity/Railways)

Fifty years of strong market share in highperformance, highly reliable materials
markets in Japan

Rising global demand for infrastructure,
particularly among the emerging
economies

Energy &Environment
Industry

Group network capable of building upon ahistory of successes in automobiles, aircraft,
rail cars, and wind power generation to
overseas markets

Growing demand for lightweight composite materials

Fiscal 2017 Strategies and Results
Our epoxy business recorded higher sales for liquid formulated epoxy (de facto standard for semiconductor packaging),
materials for automotive/electronic components, and sealants
for displays.
Our photolithography business experienced growth atour chemical manufacturing company bases in China, whilesales in our chemical management equipment business in
China and Korea were strong.
Our Pac Tech business contributed significantly to earnings through electronics component production equipment
sales for new smartphone devices.

Fiscal 2018 Strategies
The goal of the Electronic Chemicals Department for the
final year of the NAGASE Group mid-term management
plan is to integrate and optimally allocate technologies
among our locations to supply high-value-added products
through proprietary NAGASE technologies, contributing
to the success of our local communities and customers.
We have determined target markets by industry for thecore Nagase ChemteX epoxy business, recording solid resultsin every geographical region. Towards further global expansion, we intend to construct new manufacturing bases in
Europe, following our projects in China and North America.
In our photolithography business, we intend to expand
Nagase ChemteX production bases for high-valued-added
products in the Chinese market, expanding our presence inthe market for displays and the market for semiconductors,

38

NAGASE & CO., LTD.

Integrated Report 2018

which is expected to grow over the long term.
We will strengthen the research and development
functions in the United States for our Pac Tech businessto create new technologies for semiconductor packaging.
As well, we plan to advance our business in the Chinese
market for wafer bumping services, and semiconductor
manufacturing equipment.
The Electronic Chemicals Department will engage ina worldwide rollout of total solutions based on proprietary
NAGASE Group technologies, stepping up the creationof businesses that provide special value to our customers.

TOPICS

Equity Investment in 3DGS
Strengthens Presence in 5G Market

3D Glass Solutions, Inc. is a specialty glass processing
design and manufacturing company with development and production based in Albuquerque, New Mexico, USA. We
plan to work with 3D Glass Solutions to create new business in nextgeneration semiconductors via the global expansion of the company’s 5G high-frequency products. At the same time, we intend tointegrate semiconductor-related technologies of the NAGASE Group
with 3D Glass Solutions products.

About the NAGASE Group

Major Manufacturers

Electronic Materials Department• Nagase Electronics Technology (Xiamen) Co., Ltd.
• SunDelta Corporation• Xenomax - Japan Co., Ltd.

NAGASE Market Strengths and the Business Environment

Smartphone
and Display
Businesses

Core customer communication
capabilities through global bases
Brand owner ~EMS~ Components~
Business relationships with material
manufacturers
Highly professional global workforce

While the market is growing, the focus ofgrowth has shifted away from the advanced
nations toward the developing nations
Ongoing specialization/integration in smartphones, smart watches, smart speakers, MR*1,
AR*2, VR*3, etc.
Greater penetration of IoT in industry; smartphones with built-in sensors for information
processing/AI becoming more important

Silicon Wafer
Industry

NAGASE global network
Strong positioning in Japaneseprocess materials

IoT creating growth in industry overall
Chinese semiconductor companies stepping
up investment; stronger presence in the
futureDisplay Industry

Ability to handle many products;
high barriers to entry
Highly professional global workforce

China, Korea, and Taiwan have become global
centers for LCD panels
Full-scale development and investment inflexible displays, including OLED andmicro LED

Fiscal 2017 Strategies and Results

Xenomax - Japan Co., Ltd.:
Joint Venture with Toyobo Co., Ltd.
to Manufacture and Sell High-­
Heat-Resistant Polyimide Film

XENOMAX® polyimide film offers among the best heat tolerance anddimensional stability performance in the world. Used as a replacement for glass, this film is thinner,
lighter, unbreakable, and bendable
when used in sensor substrates
and flexible display panels such as
OLED, electronic paper, or micro
LEDs. Our goal is to reach fulloperations as quickly as possible totake advantage of these properties.
* XENOMAX® is a registered trademark
to Toyobo Co., Ltd.

TOPICSXENOMAX®

Investment in Kyulux, Inc.
OLED Venture

Kyulux, Inc. is a startup supported by Kyushu
University. The university is the world’s
first successful developer of thermally
activated delayed fluorescence (TADF),
an OLED material. TADF, without the useof rare metals like iridium, could result inan OLED that achieves blue light, excellent color purity, low cost, and better
energy efficiency. NAGASE brings its
global network to partners as it aims to
TADF (thermally activatedpromote TADF all over the world.
delayed fluorescence)

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information

We have three defined goals under the ACE-2020 midterm management plan: shift to growth businesses, createbusiness through investment, and exercise true global
management.
We are bolstering our marketing of OLED and flexible
display materials to shift to growth businesses. We are also
working to grow sales of silicon wafer production-relatedmaterials in China, as well as to develop new products.
To create business through investment, we continue tolook at opportunities to create new business in the fields
of functional materials, unique processing technologies,
and IoT.

*3 Virtual Reality

Critical Initiatives for Sustainable GrowthFiscal 2018 Strategies

TOPICS*2 Augmented Reality

Unique Products

During fiscal 2017, we consolidated our liquid crystal glassprocessing business in China, generating big gains in­profitability. We recorded lower revenues and higher profits
for the year. While silicon wafer processing materials showedrobust growth, sales of materials for displays and smartphones were lower.
Our business investments included a joint venture to
manufacture and sell high-heat-resistant polyimide film. We
also invested in a venture developing and selling materials toboost the luminous efficiency of OLED.

*1 Mixed Reality

Performance by Segment

Takeshi Takada

Business Environment
Leading Us to the Future

GM, Electronic Materials Department

Strengths

39Performance by Segment
Automotive & Energy
Major Manufacturers• Tokai Spring Mfg. (Foshan) Co., Ltd.
• Sanko Gosei Technology (Thailand) Ltd. • MINDA KYORAKU LTD.
• Automotive Mold Technology Co., Ltd. • Huizhou Sanli Three Synergy Precision
Co., Ltd.
• KN Platech America Corporation

Automotive Solutions Department

NAGASE Market Strengths and the Business Environment
Strengths

Business Environment

Complete supply chain, frommaterials to products

Growing business opportunities
with non-Japanese OEMenterprises, including the U.S.
Big Three and Chinese OEM

Total solutions matching
NAGASE resources in theelectric and electronics industries with the needs of theautomobile industry

Expanding business opportunities related to HMI*1, ADAS*2,
xEV

Strong global network, including expatriate assignees andlocal staff. Long-standing
relationships with Japanese andnon-Japanese suppliers; strong
customer base

Growing business opportunities
in engineering plastics, taking
advantage of emissions regulations, replacing metal withplastic, and offering higherlevel design

Automotive
Interior Industry

Components
Industry

Executive Officer
GM, Automotive Solutions Department,
Nagoya Branch

Global Resin
Industry

Hiroyuki Ueshima

Fiscal 2017 Strategies and Results

Fiscal 2017 was the second year under our ACE-2020­mid-term management plan. Market conditions were very
challenging, as NAGASE felt the negative impact of trouble ata commodity plastics plant in Japan, non-qualified inspection
problems, and other issues. Despite these issues, we enjoyedstrong demand for engineering plastics and E­ V-related components, which drove increases in domestic revenue and profits.
Outside Japan, the slowing of the interior trim business caused
revenue to decline in Korea and North America. In China,
strong production of automobiles boosted our business withJapanese automobile manufacturers. In Southeast Asia, theautomobile market recovered in Thailand. Overall, thedepartment recorded higher revenue and profits.

Fiscal 2018 Strategies
In fiscal 2018, we will step up development in new areas ofcar electronics in Japan, China, Europe and the U.S. We will
also work to grow our Human-Machine Interface (sensors,
car multimedia) and xEV (inverters, batteries) businesses.
Our overseas regional strategy calls for active developmentin the Indian market and for non-Japanese customers in China.
These are two regions where we expect significant growth.
Outside Japan, we plan to bolster efforts among nonJapanese customers, especially in Europe, the U.S., and China.
We are also working to expand sales of interior components,
car multimedia products, and high-function materials. Finally,
we are considering foreign joint ventures with partners who
manufacture components.

40

NAGASE & CO., LTD.

Integrated Report 2018

*1 HMI: Human-Machine Interface*2 ADAS: Advanced Driver-Assistance Systems

TOPICS

Joint Venture in China(Huizhou Sanli Three
Synergy Precision Co., Ltd.)In China, the market for new energy vehicles,
including electric vehicles(EV), plug-in hybrid electricvehicles (PHEV), and fuel cellvehicles (FCV), is expected to
grow rapidly. We plan tobegin operations of a new
joint venture designed to
produce and sell electric drive
components for these typesof vehicles during fiscal 2018. Concept (red frame)

TOPICS

Proposing Super
Engineering Plastics toReplace Metal Components

NAGASE meets the needs of next-generation
vehicles through collaborations with specific partners.
Engineering plastics
designed with particularly
outstanding performance are
known as super engineering
plastics. We are approachingcustomers with solutions
that replace metal components with these plastics.

About the NAGASE Group

Energy Business Office

Major Manufacturer• CAPTEX Co., Ltd.

NAGASE Market Strengths and the Business Environment

PV Industry

GM, Energy Business Office

Kiyoshi Sato

Commercial
Facilities
Logistics Industry

Fiscal 2017 Strategies and Results

Promotional policies forrenewable energy; electric
power deregulation; newemerging markets overseas
Governmental ZEH (zeroenergy house) policies

NAGASE Group sales channels

CO2 reduction regulations;
ZEV (zero emissions vehicle)
regulations in the U.S.
Increase in EVs

Historically strong connections
with the logistics industry fromour background in lighting
equipment sales

Adoption of the My Number(social security number) system
Personal Information­Protection Act

government has called for 50% of new residential construction
to be zero-energy houses (ZEH) in 2020. By 2030, that
number would rise to 80%. The Ministry of Land, Infrastructure, Transport and Tourism, Ministry of the Environment, andMinistry of Economy, Trade and Industry have announced ajoint policy to promote ZEHs. NAGASE is focusing on building our sales and after-sales network, developing our businessby creating and proposing new energy businesses.

Initiatives toward Sustainable Development
Goals (SDGs)

Critical Initiatives for Sustainable Growth

TOPICS

Unique Products

Our battery materials business has been winning new customers for cathode and anode materials, anode copper foil,
and more. We have expanded the range of products wehandle. As a result, sales rose 156% higher than the previous
fiscal year.
In our smart systems business, we focused on sales ofhome energy management devices. Our late start and delay
in building sales channels, however, resulted in sales lower
than initially anticipated. On the other hand, we have
expanded sales channels significantly. Our products havebeen picked up by a prominent PV equipment manufacturer
and will also be handled by other brands. Further, products
now connect to other energy management devices, which
provides another sales channel.
Field operation tests combining our optical wireless communications technology with surveillance cameras took placeat several shopping malls during the year. Truly, this was ayear of dramatic progress toward practical applications.
We expect to make more great strides forward in fiscal 2018with investments in long-distance technology and largecapacity models.

Ability to handle both batteries/
PV and systems/materials
Fabless business responding
quickly to market changes
without the need for a factory

Performance by Segment

Automotive/
Components
Materials Industry

Business Environment
Promotional policies forrenewable energy; electric
power deregulation; newemerging markets overseas;
future government subsidies

Leading Us to the Future

Battery Industry

Strengths
Ability to handle both batteries/
PV and systems/materials
The NAGASE network
Engineering support functions

NAGASE has started initiatives to meet Sustainable Development
Goals (SDGs), a United Nations program becoming more prominentinternationally. We are developing businesses with a particular goalof clean energy and livable cities.

Financial and Corporate Information

Fiscal 2018 Strategies
The Energy Business Office is helping build smart society
infrastructure via innovations in home, industrial, transportation, IT, and communications infrastructure.
In fiscal 2018, we will channel our effort into sales of theeneEase™ home energy management device. The Japanese* In this integrated report, we use special logo marks to identify targets provided in
TOPICS for each business and overseas base of operations.

NAGASE & CO., LTD.

Integrated Report 201841

Performance by Segment
Life & Healthcare
Major Manufacturers

Life & Healthcare Products Department• Hayashibara Co., Ltd.
• Nagase ChemteX Corporation• Nagase Medicals Co., Ltd.

NAGASE Market Strengths and the Business Environment

Fragrances/
Cosmetics

Pharmaceuticals/
MedicalStrengths

Business Environment

Wide range of activities (fromfragrances and cosmetics tohousehold items)

Major Japanese cosmetics
firms expanding overseas

Manufacture of highly active
injections of formulation
developments function

Government policies encouraging generic pharmaceuticals

Global network of NAGASE
Group

Trust in the “Made in Japan”
label

Organization to comply with
global & domestic regulations

Policies promoting Japanesefood ingredients and industryof medical materials

Foods

GM, Life & Healthcare Products Department

Yoshihiro Shimizu

Regulation

Fiscal 2017 Strategies and Results
The Life & Healthcare Products Department continued tofocus on foods and beverages, fragrances, cosmetics andtoiletries, and pharmaceuticals and medical materials. As aresult, we made solid progress in fiscal 2017 toward achieving our ACE-2020 targets.
In the food materials area, we took steps to differentiate
our products successfully from competitors in Northeast Asia,
helping us achieve our goals. In fragrances and cosmetics,
Japanese manufacturers (our major customers) have benefitted
from international e-commerce. In turn, we experienced
strong sales of raw materials to these customers, reaching
department goals. In pharmaceuticals and medical materials,
certain segments of the medical care field have been a challenge. However, we secured business in the growing genericpharmaceuticals market, which helped us significantly outperform our goals in total. We also strengthened the functions of
our Global Regulatory & Pharmaceutical Affairs Office.

Fiscal 2018 Strategies
We continue to establish a reputation for NAGASE as aleading biocompany following 3 core strategies, 1) Global,
2) Innovation, and 3) Sustainability, to achieve the targets set
in mid-term management plan ACE-2020.
In the food materials field, in order to further streamline,
we integrated our domestic and overseas saccharine business
operation into Hayashibara Co., Ltd. We also intend to­utilize resources in our enzyme business overseas and seek
M&A opportunities.

42

NAGASE & CO., LTD.

Integrated Report 2018

We will also look to increase the ratio of sales fromf­ ragrances and cosmetics outside Japan. To this end, we haveestablished a new office in Lyon, France. We are also working with new NAGASE Group company Fitz Chem LLC
in America.
In pharmaceuticals, we will continue to focus on thegrowing market for generics in Japan. Meanwhile, we willrebuild and establish a footing for our medical care businesswithin the NAGASE Group.

TOPICS

Investment in PeptiStar, Inc.

NAGASE has invested in PeptiStar, Inc., and we areworking in cooperation with Shikoku Nucleic Acids
Chemistry Co., LTD. These initiatives are expanding our
focus rapidly from conventional low molecular weightdrugs to the ­biopharmaceuticals of the future.

About the NAGASE Group

Nagase Beauty Care Co., Ltd.
NAGASE Market Strengths and the Business Environment
Business Environment

A 50-year history in direct sales;
a 500-person organization of
NAGASE dedicated fans/managers (sales agents);
support for women-owned
businesses (women’sorganizations)

Declining birthrate andaging population, spread ofe-commerce, health-­
consciousness and growing
health industry, rising desire
for safe and reliable options

Leading Us to the Future

Direct Sales
Industry

Strengths

Performance by Segment

Representative Director and President
Nagase Beauty Care Co., Ltd.

Masahiro Yoshino

Fiscal 2017 Strategies and Results

Unique Products
Critical Initiatives for Sustainable Growth

During fiscal 2017, our direct sales business transferred allfunctions of NAGASE & CO., LTD. to Nagase Beauty
Care Co., Ltd. (NBC). NBC now covers the full range offunctions from manufacturing to sales. In fiscal 2017, we
implemented our Three Arrows strategy. The first arrow
involves a change of direction, turning us back to our focus
on sales. The second arrow is training the next generationof managers. Finally, the third arrow is to run business under
the direct control of the head office. On the product side, we
reformulated the Belmash drink (health food). We also
launched a new makeup line, WIZ D, as well as skin careproduct QACT for younger customers. AUTOLIFTER,
our main beauty serum, received a full update during theyear. As the average age of our members rises, however,demand continues to fall. As a result, we recorded anotheryear of falling revenues.

beauty and health for many more years, especially forseniors. This in turn will sharpen our appeal to younger
customers and coming generations.

“WIZ D” Base makeup

Fiscal 2018 Strategies
TOPICS

Excellence Award Received at
Presentation of Fermented
Ginseng-CD Research

Financial and Corporate Information

We will continue to execute our Three Arrows strategy
introduced in fiscal 2017. To address the arrow of prioritizing sales in fiscal 2018, we plan to improve the skills of oursales agents. These plans include updating our sales system,
revising the Nagase Brush-Up training system, and instilling the NAGASE sales formula. We will also introduce a
new exercise, nutrition, and rest initiative that will go
beyond selling products, offering various services andevents. This effort will help customers achieve total beauty,
as we offer Activity, Beauty, Youth, and Health that extends

Together with Fukuoka University, we have been
researching Alzheimer-type dementia. The research,which looked at the effectiveness of Fermented Ginseng-CD, a foodmaterial independently developed by NBC, won an excellence award
at the 34th conference of the Medical and Pharmaceutical Society for
WAKAN-YAKU.

NAGASE & CO., LTD.

Integrated Report 201843

Global Network

Built on a foundation of chemistry, the NAGASE Group is engaged in global business across a wide
spectrum of industries, including dyes/pigments, coating materials/inks, surfactants, office automation,
electrical equipment, electronics, automobiles, LCDs, semiconductors, pharmaceutical/medical
applications, cosmetics, and functional food ingredients.
Since our founding, we have grown to become an influential global technology and information
network with 101 companies in 26 countries and regions and 6,312 employees worldwide as of the fiscal
year ended March 2018. Today, overseas revenues represent 49.6% of our total business.

EuropeNet sales: ¥14.1 billion
Group companies: 4
Number of employees: 240

Japan
Greater China
Net sales: ¥207.4 billion
Group companies: 30

Net sales: ¥395.4 billion
Group companies: 35
Number of employees: 2,948

Number of employees: 1,275

Other
Net sales: ¥19.9 billion
Group companies: 2
Number of employees: 33

ASEAN
Net sales: ¥110.3 billion
Sales and servicing companies
Manufacturing and processing companies

Group companies: 20
Number of employees: 719

Drive Global Business
44

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupNet Sales by Region (Japan/Overseas)
and Overseas Sales to Net Sales■Japan ■Overseas (left axis)
Overseas Sales to Net Sales (right axis)■Greater China ■ASEAN ■Americas ■Europe ■Other
(%)

60

48.9

49.6

199
141
365

7,500

45

1,103
30

5,000

3,885

3,530

2,074

2,500

15

3,693

0

3,954

0

18/3

Launched in 2016, our ACE-2020
mid-term management plan defines
two pillars for growing and expanding revenues:

Performance by Segment

17/3

Aimingfor ¥600 Billion
in Total Overseas
Group Sales

Leading Us to the Future(¥ hundred million)

10,000

1 Accelerate Globalization2 	Improve Manufacturing

Profitability

Unique Products

1

Accelerate Globalization

Americas
Net sales: ¥36.5 billion
Group companies: 10
Number of employees: 236

Critical Initiatives for Sustainable Growth

Aim for ¥600 billion* in total overseas Groupsales through 2020. Search and execute growthinvestment (M&A) that matches with themarket strategy of the designated area andaccelerate the business development to expand
business (especially focused in North America).
* Figures represent total sales (simple sum) for overseas local entities
rather than sales by region.

2

ForwardCreating a scenario and human resources
development which focuses on overseas
market expansion (overseas marketing andproduction).

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information* As of March 2018
* Employees in the consolidated corporate group

Improve Manufacturing Profitability

45

Regional Overview

Greater China
The NAGASE Group operates sales subsidiaries, manufacturing subsidiaries, and services subsidiaries across more than 40 locations in Greater China (China, Hong Kong,
and Taiwan). Our basic stance is to contribute to group profit growth by capturing moreinternal demand and by creating locally based businesses. At the same time, we will workin partnership with leading companies and leverage the comprehensive strengths of the
NAGASE Group to build global businesses between our locations.
Major Market Trends

The Chinese automobile industry is enjoying stable growth. Technology trends in the electronics
industry, which includes displays and other products, continued to advance, as our business in
office equipment and home appliances experienced ongoing growth in inland China. The semiconductor industry is another one in which growth is expected. As well, internal demand in China
grows yearly for products in the life and healthcare industry, including the environment, foodproducts, and medical care sectors.

Fiscal 2017 Results
Executive Officer
Greater China CEO
Nagase Business Management &Planning (Shanghai) Co., Ltd. COO

Masatoshi Kamada

Net
Sales
売上高
(¥ hundred million)（億円）

Fiscal 2017 sales of materials for displays and smartphones grew, while business in plastics
and other products for automobiles and semiconductor-related materials performed well. The
polyimide film and glass lamination processing businesses began operations in Taiwan, which
contributed to profitability.
Nagase ChemteX Corporation’s formulated epoxy resins business was impacted by thehigh cost of raw materials during the second half of the fiscal year. Wuxi Chenghong Electronic Chemicals Co., Ltd. reported strong sales of chemical solutions for the liquid crystals
business, while the company launched a new production base in Mianyang, Sichuan Province
in September 2017.
Our PV business in the environmental field grew significantly. In the food products field,
the Hayashibara products business (TREHA™, etc.) increased hiring of new employees inconnection with improvements in technological services.

2,500

2,000

1,937

2,074

1,500

1,000

500

0

17/3

18/3

Fiscal 2018 Strategies
In the resin sales business, we continue to expand our business area by leveraging our group
network, boosting initiatives with our major suppliers. In the automotive field, we will workwith interior and decorative components and increasingly handle power systems and batteries
for new energy vehicles as well as display components.
In the electronics field, we are taking advantage of local production, focusing our energy
on application development and sales expansion. Another priority is next-generation displays
like OLED*1 and electronic paper. In semiconductors, we plan to expand NAGASE Group
products and materials developed by our partners, while we speed up growth in our functional materials business.
In our food business, we see a growing awareness of the safety and sense of security offeredby TREHA™. We will work to grow the high-end market by offering more technologicalservices. Our environmental business is one where we expect growth. Here, we will focus onsales of PV materials, as well as solutions related to equipment for measuring, condensing,recovering, and incinerating VOCs*2. We will also propose more solutions for aqueous printing
ink and systems and effluent treatment equipment.
*1 OLEDs: Organic Light-Emitting Diodes *2 VOCs: Volatile Organic Compounds

TOPICS

Business Developmentin Growing Chinese Markets

Wuxi Chenghong Electronic Chemicals Co., Ltd. deals in chemical solutions
for liquid crystal and semiconductor markets. During fiscal 2017, the company established Mianyang Chenghong Electronics Co., Ltd. in Mianyang, Sichuan Province. We expect
significant growth in the liquid crystal and semiconductor markets, and we are adding to the numberof production bases in west-central and southern China. We will leverage the new company as a joint
venture with a local Chinese enterprise to further develop our chemical solutions business.

46

NAGASE & CO., LTD.

Integrated Report 2018

Concept (red frame)About the NAGASE GroupASEAN and the Middle East

Leading Us to the Future

Export industries grew sharply in the region, buoyed by a strong world economy. Domestic
demand for automobiles in Thailand and Indonesia showed only slight growth; however,as standards of living rise, industries related to food and personal care prospered in eachcountry. Singapore, Malaysia, and Thailand—leading nations of ASEAN—are introducing new measures to advance industry, develop human resources, and attract industry as
they aim to be among the world’s most industrialized nations. In the more populated
countries of Indonesia, the Philippines, and Vietnam, on the other hand, industry is­diversifying. ­China’s Silk Road Economic Belt strategy, also known as the One Belt andOne Road Initiative, and open economy means India is growing more important in termsof both markets and supply.
Major Market Trends

Takayuki Masuda

Performance by Segment

Executive Officer
ASEAN and India CEO

In China, rising labor costs and environmental problems have led to regulations on production.
Changes in trade barriers in the U.S. and other countries are forcing leading chemical, electricalequipment, solar panel, and other industries in Japan and the rest of the world to shift and expand
production in ASEAN nations. Regions with a high population of young people have shown an
increase in domestic demand-oriented industries in terms of quantity and quality of food, lifestyle
goods, apparel, and medical care. In India, Japanese automobile manufacturers have made major
investments, while others are beginning to enter the country. In the Middle East, clouds have arisenover hopes of an open economy in Iran. However, the country is moving to develop new industries
for the post-oil era.

Fiscal 2017 Results
Fiscal 2017 was a strong year for NAGASE, with sales and profits both rising sharply overthe previous year. Vietnam made a particularly notable contribution to sales. Businesses
transferring in from China and other countries had a positive effect here, as did growing
trade with local Vietnamese firms. The strong chemicals market in the region also supported
sales growth, while the comparatively strong local currency gave a boost to profits.

Net
Sales
売上高
(¥ hundred million)
（億円）
1,500

1,019

1,103

900

600

300

Unique Products

1,200

Fiscal 2018 Strategies
This year will be a particularly important one for achieving the targets set in our ACE-2020
mid-term management plan. During the year, we will expand our core businesses throughclose communication with our business partners to offer services that satisfy them. We will
also create joint projects with prominent local enterprises in every field in every country, as wework toward creating sustainable businesses. At the same time, we will not skimp on investingin local staff to develop our human resources in the region.

Critical Initiatives for Sustainable Growth

0

17/3

18/3

TOPICS

Comprehensive Cooperative
Arranges with Hanoi City for
Medical Care and Other Businesses

Financial and Corporate Information

The mayor of Hanoi, Vietnam visited our Tokyo head office inJune 2017, observing a demonstration of our colorectal
cancer examination equipment. Over the past few years, anumber of projects in health and environment have been
underway in Hanoi. In response to rising demand, Nagase
Vietnam has launched a variety of products and systems
related to life and healthcare and chemicals, while building
deeper cooperative relationships.

The mayor of Hanoi and other guests visited our Tokyo head office

NAGASE & CO., LTD.

Integrated Report 201847

Regional Overview

EuropeAmericas
Growth rates for the EU beat expectations last year
as the transition from economic recovery to expansion continues. It is estimated to have grown by
2.4% in 2017, the fastest pace in a decade. Domestic
demand is set to remain the main growth engine in2018 whereas investments continuing to recover,although a trade warfare between Europe, the U.S.
and China may become apparent.
Major Market Trends

Executive Officer
Nagase (Europa) GmbH CEO

Mitsuru Kanno

New ecological requirements for clean labels as wellas the evolution of computing and digitization will
have a significant impact on everyday objects. Europe
is becoming green and environmentally friendly withbiotechnology as a driving force. Consumers arerequesting clean labels and energy saving products toprotect the environment. As these new trends require
new developments, European companies havestarted looking for biostartups to save time andmoney in R&D. Additionally, EVs have become
popular, and new competitors will enter the traditional automotive industry.

Fiscal 2017 Results

Net
Sales
売上高
(¥ hundred million)
（億円）
160

141
120

119

Results for fiscal 2017 are close to the highest
record in our history. Except for our color former
business which suffered from requirements imposedby EU legislation regarding environmental protection, all business units exceeded our targets significantly. The steadily growing pharma business andnew business in the field of car electronics contributed the greatest share of profit.
Fiscal 2018 Strategies
Regionally driven investments as a second businessorientation will be one of our future measures tosupport our traditional import business of chemicals
from Japan. We will make top investment priorities
to bio-based technologies. In parallel, we intend to
set up new business channels for advanced products,
imported via our NAGASE network.

80

40

0

17/3

18/3

Nagase America Corporation CEO and COO
Nagase do Brasil Comercio de Produtos
Quimicos Ltda. CEO
Nagase Enterprise Mexico S.A. de C.V. CEO

Ryuichi Uchida

Net
Sales
売上高
(¥ hundred million)
（億円）
400

300

365
295

200

100

0

17/3

18/3

TOPICSTOPICS

New Branch Office in Lyon (France) to Focus
on Cosmetic Applications

Acquisition of U.S.
Chemicals Distributor

Lyon is one of the global hot
spots in terms of the cosmetic
industry. Here, where all the major players havetheir laboratories and R&D centers, we havestarted introducing our cosmetic ingredientsfrom Japan. For better acceptance and approvals,
we are preparing evaluations based on an artificial 3D skin model.
3D Skin Model: Bioprinted Skin from Labskin Creations

48

NAGASE & CO., LTD.

Integrated Report 2018

Fitz Chem Sales Territory

About the NAGASE Group

Korea

Major Market Trends

Major Market Trends

Nagase Korea Corporation CEO
and COO

Fiscal 2017 Results

Hideharu Yamazaki

Net
Sales
売上高
(¥ hundred million)
（億円）
200

150

199

156

Sales of NAGASE Group products
related to semiconductors, electronic
components, and displays increased.
Particularly as Korean firms expand into
Asia, Europe, and the Americas,
NAGASE has collaborated actively
with overseas subsidiaries, giving us alaunch pad for the next leap forward.

Unique Products

Fiscal 2018 Strategies
100

50

0

17/3

TOPICS

18/3

Our goal is to contribute to the profits of
the NAGASE Group by creating andgrowing Korean-led businesses. In addition
to our business in electronics, sales of Life
& Healthcare segment products (particularly Hayashibara products) are expanding.
At the same time, we are building a foundation from which to sell our Korean-maderesins. Focusing on these products, we plan
to strengthen ties with local NAGASE
entities in every region, seeing a future inwhich Korean-led businesses grow. In
particular, we have focused on Vietnam for
greater development. We will be moving
forward with promising projects there.

Critical Initiatives for Sustainable Growth

Growing Korean-Led Businesses

In Korea, our aim is to transition from spec-in activities toglobal expansion, handling more NAGASE Group products
and other products related to businesses in which Korean companies
have a special affinity (OLED-relatedmaterials, semiconductor processing
materials, battery materials, cosmetics raw materials, etc.).

NAGASE & CO., LTD.

Financial and Corporate Information

The NAGASE Group acquired sharesof Fitz Chem LLC, a chemical distributor with a 30-year history. This acquisition was spurred by our belief that
the U.S. speciality chemicals field willgrow in the future. Additionally, the purchase brought
NAGASE a customer base of more than 1,000 firms
and a North American sales and distribution network.
We will use this platform going forward to expand
our business in this market.

* OLEDs: Organic Light-Emitting Diodes

Fiscal 2017 Results

Fiscal 2018 Strategies
Our business portfolio strategy will consist of replacing assets and concentrating resources on focus businesses. We will develop business that better meets theneeds of our customers by expanding in emerging
markets in Central and South America, handling awider range of NAGASE Group products, and promoting a project to transition some products to local
production. We also intend to increase locallydirected business by solidifying the business infrastructure and building synergies with the firms inwhich we have invested. Finally, we will boost investment support and shared services functions in theregion to strengthen our management infrastructure.

Mass production of ultra-high-speed memory
has begun in the semiconductor industry,and 3D memory technology has led to thefoundation of a new stage for growth. The
expanding adoption of OLEDs* in smartphones has grown the market for displays.
Korea holds a near-monopolistic share of the
global market for small- and medium-format
OLEDs, and the country is making strides inthe development of flexible screens.

Performance by Segment

While volume remains high, fewer automobiles weremade in the U.S. than the year before. Our policy going
forward will be to focus on eco-friendly businesses andproducing all types of components and raw materials
locally. We will also turn our attention toward foodmaterials in response to lifestyle changes, as consumers
become increasingly health-conscious. Here, we will stepup our marketing activities not only in North America,
but also in Central and South America.

Our mainstay automotive solutions business continued to perform well. At the same time, we havegrown our businesses in new fields such as 3D printing. In the emerging markets, our Mexican businessis growing steadily. Our business is also expanding inSouth America, in Brazil, especially, but also inneighboring countries like Argentina. We haveinvested to expand our North American speciality
chemicals business, where we project growth going
forward. These investments have contributed greatly
to our business growth in the Americas.

Leading Us to the Future

Korea represents an important market
internationally. An export-based economy,
the country’s top corporations are achieving remarkable growth through investment and globally oriented, speed-based
management. Korea is positioned withsuperior access to the EU, the U.S., China,
and ASEAN through free trade agreements, and the country has had a historyof success in entering emerging markets.

While the U.S. experiences continued stable
growth, Mexico garners more attention as a manufacturing center, while South America holds muchpotential for future business. Here in the Americas,
the NAGASE Group operates four sales companies(seven locations) and six Group manufacturing
companies. During 2017, we acquired shares of achemicals distributor, expanding group sales functions within the region.

Integrated Report 201849

Main Manufacturing and Processing Functions
Nagase ChemteX Corporation
Nagase ChemteX Corporation is a chemical manufacturer supplying uniqueproducts in the fields of electronics, environment, energy, and biotechnology.
We have developed high-performance and high-added-value products thatmeet the needs of our customers, making good use of original core technologies
accumulated over time. We expand our businesses furthermore as the central
manufacturer of the NAGASE Group, leading the way in occupational safety
and regulatory management.
Major Market Trends

The electronics sector has seen a softening in the smartphone market and ongoing contraction in
the large format LCD panel market. The market for semiconductors in the electronic devices sector
has been growing, pushing strong sales of related products as well. We expect to see greater
demand for enzyme production in our food business in response to the rapid growth of Foods with
Function Claims market.

Nagase ChemteX Corporation
Representative Director and President

Akihiko Isono
Net Sales/Operating Income■ Net Sales (Left scale) ■ Operating Income (Right scale)(¥ hundred million)(¥ hundred million)

300

60

237

256

259

200

The NAGASE Group
Continues to Expand
Across the World
Nagase R&D
CenterNAGASE &CO., LTD.

R&D

DesignTesting

Production
Equipment
Manufacturing

Quality
Control
Analysis

Functional Resins
Business
Performance Chemicals
Business

Photolithography
Materials BusinessJapan/Overseas
Proactive Allianceswith Industry,
Academia andGovernment

Bio Chemicals Business

40

29
100

Nagase ChemteX
Corporation

29

18

20

0

0

16/3

17/3

18/3

Fiscal 2017 Results
Net sales for fiscal 2017 amounted to ¥25.96 billion (1% year-onyear increase), while operating income came in at ¥2.96 billion (0.3%
year-on-year increase). Sales of sheet encapsulation for hollow packages for high-frequency devices and conductive coating materials in

the electronics market were weak, but sales of photolithographymaterials performed well. As a result, both sales and operating
income increased modestly compared to the prior year.

Production Systems
We are working to streamline production by improving the accuracy of our productionplans and production efficiency. In November 2017, we launched a safety training program based on years of service, the goal of which is to continue to improve awareness ofsafety issues. We will be rolling this training out to other group manufacturers. We haveachieved significant plant wastewater treatment cost reductions through full-scale operation of the sludge volume reduction equipment we installed in March 2017.

Safety training(walking on unstable surfaces)

50

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupNew Business Development

Low-temperature sintered wiring ink
printing test

Leading Us to the Future

We reorganized our Research and Development Dept., which is now called
the New Business Development Dept. This office is making strong moves tocommercialize products in our focused business fields. We have also establisheda new planning section improved planning functions, including coordinationand cooperation with universities and companies both in Japan and overseas.
During fiscal 2017, we started new business about materials for additive manufacturing, including supplying resins for 3D printers. We also began supplying
samples of low-temperature sintered-type ink for wiring applications. In thebiomaterials field, we worked on development for new polymer materials thatform bioinspired surfaces, supplying samples of these products to customers.

High-definition modeling with
3D printer resin

Fiscal 2017 Operations

Photo­lithography
Materials Business

Our Performance Chemicals Business is engaged in product development and manufacturing activities for high-function materials based onorganic synthesis, polymerization, and compounding technologies. Fiscal
2017 sales of epichlorohydrin derivatives and organic chemical products
were strong, driving higher profits. Our conductive materials businessgrew, thanks mainly to stronger relationships with innovation partners
driving steady progress in new development projects for peripheral display applications and light control film applications.

No. 2 Plant in China

Critical Initiatives for Sustainable Growth

Bio Chemicals
Business

The Photolithography Materials Business is engaged in development and manufacturing activities based on the technology developed in the chemical business, thefront-end processing for liquid crystals and semiconductors. Fiscal 2017 sales rose,
mainly due to growth in removers, developers for displays and removers for semiconductors. We also recorded strong performance in photoresist sales. Meanwhile, ourproduct lineup in mid-end processes for semiconductors expanded during the year.
We set up a second manufacturing base in China and established a supply system tomeet new demand.

Unique Products

Performance­Chemicals BusinessWe are expanding our reach in the fields of the environment, energy savings, and semiconductors through advanced
epoxy formulation technology. Sales of electronic car components, coating materials for chip components and new
liquid sealants for semiconductor packages have increased. We are also focusing on developing new functional materials and new applications for these products, working on joint development with various external organizations.

Performance by Segment

Functional Resins
Business

Light-controlling film

In foods, Nagase ChemteX focuses on confectionery, bakery, egg, and lecithin applications. Here, we are expanding our new product lineup. We have also moved beyond
Japan, growing the scale of our business overseas with an emphasis on our proprietary enzymes.
Our core lactase product has been a significant contributor to sales growththrough our entry into Kosher and Halal markets and production yield
improvements.

Food enzyme applications

Financial and Corporate Information

Fiscal 2018 Strategies
In the first two years of the ACE-2020 mid-term business plan,
Nagase ChemteX completely reorganized our business divisionsystem. We have created a stronger organization by improving ourinternal value change and reducing costs consistently. The fiscal year
ending March 2019 will be the third year of this plan. During theyear, we will expand our existing business and create new businessby changing from a materials-supply business to a solutions-supply
business and exploring the acquisition of technologies and production bases.

NAGASE & CO., LTD.

Integrated Report 201851

Main Manufacturing and Processing Functions

Hayashibara Co., Ltd.
The Hayashibara Saccharides Business leverages saccharide products produced using biotechnology in the foods, cosmetics, pharmaceuticals, andother markets. Our Fine & Wellness Business draws on organic synthesis
technologies to provide products in photography, displays, and other commercial fields, as well as in the life science domains, including pharmaceuticals and in-vitro diagnostics.
Major Market Trends

Our B to B customers give our products high marks not only for their physical properties, but also for
their functionality. Our product line extends widely from the food and cosmetics markets to the
medical and industrial fields. In our food business, we have been proactive in creating a systematic
review process necessary for compliance with the rules for Food for Specified Uses and the rules for
Foods with Function Claims. This is just one of the ways in which we are building a support structure
for customer product development.

Hayashibara Co., Ltd.
Representative Director and President

Naoki Yasuba
Net Sales/Operating Income■ Net Sales (Left scale) ■ Operating Income (Right scale)(¥ hundred million)(¥ hundred million)

300

90

241

238

243

200

60

46

45

50

100

30

0

Line of dyes saccharide products

0

16/3

17/3

18/3

Functional dyes (fluorescent dyes)

Fiscal 2017 Results
Net sales for fiscal 2017 amounted to ¥24.39 billion, which was a 2%
increase compared to the prior year. This increase was mainly due togrowth in functional materials and a recovery in inbound demand.

On the other hand, operating income rose 9% to ¥5.03 billion,
mainly due to controlled manufacturing costs arising from lower
main raw materials and energy costs.

Production Systems
We began operations of two new plants to replace the former Okayama
Plant I. We also completed work to expand the production capacity of
the Okayama Functional Saccharide Plant, T Building, which produces
TREHA™. We will establish a reliable global supply system for highquality products, promoting food safety and quality assurance in linewith global standards.
In addition to making advances in manufacturing process improvements and energy efficiencies through our own engineering methods,
we have also adopted quality control systems based on FSSC 22000(food safety), ISO 9001(quality assurance), and Good Manufacturing
Practice (GMP). To answer customer requests from overseas, we aremaking progress toward Kosher and Halal certification.

52

NAGASE & CO., LTD.

Integrated Report 2018

Okayama Functional Saccharide Plant,
T Building (TREHA™ production)
FSSC 22000 (International Food
Safety System Certification)
Certificate

About the NAGASE Group

Research and Development Organization
Osaka Industrial Research
Association: Industrial
Technology Award

Leading Us to the Future

Microorganism screening technologies derived from years of expertisehave put us on course to developing purpose-driven research into new
enzymes and the development of new saccharides using enzymes. We
collect evidence about market needs through our own survey system,working closely with our customers to bring new products and applications to the market quickly. Meanwhile, we are active in registering ourintellectual assets, building a structure that allows our customers to use our
products with confidence. We are also making advancements in researchand development in coordination with Nagase ChemteX and the Nagase
R&D Center.

Research Division: Laboratory

Fiscal 2017 Operations

LUMIN™-A digital signage(Okayama city hall)

Soluble Dietary Fiber Fibryxa™
pullulan and pullulan capsules

Critical Initiatives for Sustainable Growth

While the Fine & Wellness Business saw lower salesof photography and printing plates and other dyesfor commercial use during the year, sales of in-vitro
diagnostics and other life science products werestrong. In response to anticipated growth in polarizing plates and other products, Hayashibara isdeveloping pigments for the display market.
­Meanwhile, sales of Class III pharmaceutical
LUMIN™-A recovered, outperforming the prioryear. This was the result of creating a stronger working relationship with our sales agents.

Pastry Seminar

Unique Products

Fine & Wellness
Business

The Japanese food industry is our core market in our Saccharides Business.
Here, demand has been very strong for our mainstay TREHA™,­SUNMALT™, and HALLODEX™ products. Meanwhile, the market hasrecognized the antioxidant effects of high-performance Ascofresh™, as wellas the neutral lipid reduction and improved blood circulation effects ofHayashibara Hesperidin S. We are gratified to see more cases of adoption ofthese products in their respective markets. We are seeing a steady increase in
the number of customers using the new soluble dietary fiber Fibryxa™
(isomaltodextrin). Fibryxa™ was the first new product introduced by
Hayashibara since reorganizing the company.
The market for overseas food businesses is attracting theentry of several Chinese manufacturers. Despite the increased
competition, we saw an increase in new orders for our products.
The cosmetic ingredients market has seen somewhat of anincrease in domestic sales thanks to a recovery in inbounddemand. Demand overseas, however, remained sluggish.
In the medical and pharmaceutical market, pullulan sales
have been strong, owing in part to rising demand for capsule applications.

Performance by Segment

Saccharides
Business

LUMIN™-A Website

Fiscal 2018 Strategies
Financial and Corporate Information

Under the ACE-2020 mid-term management plan, we are executing a basic strategy of pursuing clear growth markets and regions
globally. We intend to integrate our domestic and overseas salesorganizations in the food products market, develop new applications,and expand our product lineup for customers overseas customers,
where the market is growing. We have also made advancements indeveloping applications and validating functions for our functional
products in preparation for market introduction.

On the production side, we are strengthening Okayama as a technical development and production center. At the same time, we are
studying the potential for overseas production from the standpoint ofmaterials procurement and competitive advantage.
On the research and development front, we have made progress indeveloping our existing ingredients and other materials based on
exploration for proprietary ingredients. Here, our goal is to contribute to the creation of a healthier and happier society.
NAGASE & CO., LTD.

Integrated Report 2018

53

Major R&D Functions
NVC (New Value Creation) Office
The NVC Office was established in April 2017 to promote NAGASE Group innovation
and build core businesses of the future that will create new value. The office assesses trends
in the IT industry, including IoT and AI, planning and developing mechanisms for businesses not currently part of the NAGASE Group. These mechanisms will be deployed to
the various business divisions for implementation.
In January 2017, we started participating as a founding member in the IBM Research­Frontiers Institute (RFI), an IT fundamental research consortium established by IBM to
promote R&D initiatives involving companies in different industries.
Organizational Goals■ Using technology obtained from the RFI consortium with IBM, we will build new businesses thatlook ahead five to ten years in the future.

■ We will take stock of trends in hardware technologies that support AI and IoT to ensure that wealways stay one step ahead of paradigm shifts.

Manager, NVC (New Value Creation) Office
Organizational Structure

Yasumitsu Orii

■ We will build a flexible organization that benefits from synergistic effects between the businessdivisions, group companies, and partner companies.

Major Projects
Project 1

Project 2

Fusion of Biology and Electronics
Energy consumption is coming into sharper focus as an issue related
to the use of information technology driven by big data and AI.
When considering low-power consumption, we must focus on how
to apply mechanisms of the human brain to electronics. Through the
RFI consortium, the NVC Office is working on the development of
bio-inspired technology that integrates biology and electronics.
These activities include contributions to the development of­low-power devices that mimic the human brain and products thatfeature biomimicry applications.

Market Development for “Axonerve™,” a Semiconductor­Intellectual Property Core (IP Core)
Large-scale, real-time data processing is increasingly important at
data centers that support technological innovations such as AI, IoT,
and 5G networks. High-speed hardware processing has been a major
trend over the past few years.
The NVC Office is collaborating with FPGA vendors and development platform vendors to open a market for a FPGA-based hardware accelerator that uses Axonerve™ IP Core.
Axonerve™ is a semiconductor intellectual property core(­supported by Japanese academic research organizations and ourown work) specializing in search/query function.

Future Direction
The NAGASE Group has built a network in cooperation with avariety of materials manufacturers. Although Japanese materials
manufacturers are in a strong position worldwide, they lag behind indevelopment and research using IT (AI). The NVC Office will lead

TOPICSthe industry, creating our own IP. We are advancing new technologies through the construction of AI-based materials informatics
systems and the integration of biology and electronics.

Pursuing the Potential of Materials Informatics

Materials informatics (MI) is a technology attracting major attention in the field of materials. MI
New
Materials
holds the potential to reduce materials development time and cost significantly, potentially leadingNew
to the discovery of innovative new materials. The key to exploring new materials lies in how to
Substances
gather data from research institutions and companies that have accumulated large amounts ofdata over the years, and how to turn the information gleaned from this data into knowledge.
The NVC Office is participating in the Accelerated Materials Discovery project of the RFI consortium as one means of engaging with this issue. This project has been advancing two approaches
based on AI. The cognitive approach reads an amount of information from literature, turning theminto knowledge. The cognitive approach captures data obtained and converts it into usable knowledge. The analytical approach theoretically estimates
structure and physical property values from a predictive model. The NVC Office is working closely with IBM’s three laboratories to master their cutting-edge
technologies, building a system NAGASE will be able to use in the near future.

AI

54

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE Group

Nagase R&D Center
The Nagase R&D Center functions to advance bio-related businesses from the earliest
stages of research development. Our mission is to use proprietary fermentation technologies for innovation in the production of safe, secure, eco-friendly chemicals and materials.
In doing so, the center will continue to create seeds of new businesses. The underlying­concept of our research is unavailable made available in a sustainable way.

Leading Us to the Future

Main Functions■ Development of Proprietary Bio-Related Technologies: Integrate advanced technologies andknowledge across a wide range of academic fields (N-STePP®: Nagase Streptomyces Technology for
Precious Products)■ New Business Planning and Development: Use biotechnologies for the efficient production ofvaluable materials with low environmental impact (biochemicals, functional materials fields)■ Assessment and adoption of bio-related technologies
Technologies

GM, Nagase R&D Center

Xiaoli Liu■ Fundamental Technologies: Genetic engineering, metabolic engineering, fermentation engineer-ing, bioprocess engineering, bioinformatics

Performance by Segment■ Core Technologies: Materials production technologies using actinomycetes, strain improvement

technologies utilizing metabolic engineering

Achievements in Fiscal 2017
■ Established a fermentation production method for the amino acid ergothioneine, a stable, safe, andpowerful antioxidant (patented)

Nagase R&D Center■ Developed a production method for metal-encapsulated, cage-shaped proteins (patent pending)■ Presented a paper on the development of an OTR simulator for culture tanks at the 83rd Annual

Meeting of the Chemical Engineering Society■ Presented a paper jointly with Hiroshima University at an academic conference on the production

Unique Products

Patent certificate
for ergothioneine­fermentation productionof substances using Aurantiochytrium at the 69th Annual Meeting of the Biotechnology Society ofJapan and the Japan Association of Agricultural Chemistry Conference 2018
■ Cleared milestone (proof of concept) in the fermentation production of biocolors■ Succeeded in the fermentation production of functional cosmetics materials

Fiscal 2018 Strategies

Technologicalcapabilities• Fundamental actinomycete technologies• Multidisciplinary expertise• Know-how

Expertjudgment•D iscover seeds of newtechnologies/businesses• Technology assessment

Critical Initiatives for Sustainable Growth

The Nagase R&D Center is dedicated to creating a sustainable world where people live with peace of mind.
To this end, we develop microbial fermentation technologies, based on multidisciplinary fields in synthetic
biology. At the same time, we continue to propose newideas to commercialize these technologies, planting seeds
that we hope will one day become new businesses.
In fiscal 2018, we will collaborate with partners insideand outside our corporate group to rapidly commercialize
the functional ingredients and materials currently indevelopment.

• Needs assessment• Value analysis

Survey and analysis
capabilities

Intellectual Property Administration and Usage
Financial and Corporate Information

The intellectual property team within the Nagase R&D
Center collaborates with the intellectual property­support team at corporate headquarters to secure theoutcomes of research and technological development
activities in the center as intellectual property. At thesame time, the team proposes patent strategies for use in
future businesses, conducting research and development
as business strategy.

Cumulative(through fiscal 2017)

Fiscal 2017
In Japan

Overseas*2

In Japan

Overseas*2

Patentapplications*1

6

2

891

442

Patents*1

4

0

210

208

*1 Number made under the names of Nagase & Co., Ltd. and Nagase Beauty Care Co., Ltd.
Licenses and other intellectual property rights are not included.
*2 Figures include applications for international patents.

NAGASE & CO., LTD.

Integrated Report 201855

Major R&D Functions

Nagase Application Workshop
The Nagase Application Workshop (NAW ) is the testing and evaluation armof the NAGASE Group for plastics and coatings. NAW tests and accumulates information about new technologies, serving as an antenna monitoring
new trends in technology. We advance proprietary foundational technology
development, working with group manufacturing companies to help create
new businesses.
Main Functions
1. Plastics
Plastic material analysis using twin-screw extruders, injection molding
machines, and various analytic equipment; compound formulation,
prototypes of formed products, and materials analysis[Equipment] Twin-screw extruders (15mm, 18mm, 26mm); injection
molding machines (80t and 110t); T-die extruder press, forming machine,
analysis equipment, measurement equipment, etc.

GM, Nagase Application Workshop

2. Coating materials
Coating material analysis using various processing equipment, evaluation and analysis equipment, development of formulation of paint andink formulation, prototyping and property evaluation[Equipment] Dry coating booth dispersing machine (paint conditioner,
horizontal type, vertical type bead mill), UV irradiation machine drying
oven, various environmental testing machines

Tetsuya Asakawa
Materials
manufacturers
Processing
companies● Evaluation of raw

materials andprocessing technology● Marketing, including
application
development

NAGASE
This mechanism is madeuniquely possible
by NAGASE

NAW
1. Plastics
2. Coating materials
Multipurpose
laboratory

Customers

Automobiles/
Appliances, Office Equipment,
Mobile Phones/
Amusement/Housing/
Apparel, Sporting Goods/
Cosmetics, Food Products, Beverages

3. Multipurpose laboratory
The NAW serves as an incubator for new business development
within the NAGASE Group, receiving expert staff from divisions andaffiliated companies on a temporary basis. This increases the speed ofbusiness development through the effective use of technical support
available through NAW facilities and staff.

● Support for local

production overseas● Develop unique

NAGASE brand products

Development History
Throughout fiscal 2017, we received inquiries and requests from customers, materials manufacturers, and processing companies based on our reputation for conducting
applied technology development that meets true market needs. We received representatives from more than 200 companies, in addition to more than 300 requests fortesting and development. Intellectual property activities included 13 patent applications* and eight acquisitions of rights (six in Japan, two overseas). In addition, we
actively pursued collaboration with companies inside and outside the NAGASEGroup, universities, and other external research institutes.
* Number of projects during fiscal 2017. Projects listed under the Nagase Application Workshop name do not include
licenses or other intellectual properties.

Plastics

Coatings

• Develop plastic materials for molding
with automotive industry parts
makers (Tier 1, Tier 2). Weight savings,
high-grade treatment, improvementin scratch resistance, etc.

We proposed new formulations
to answer global needs, including
Pat!naLock™, a reactive paint thatsuppresses rust using rust; acarbon hybrid coating systemthat dramatically reduces paint
VOC*, and new coating raw
materials• Development of high sliding
polyethylene featuring superior
processing characteristics• Development of transparent, highly
rigid plastics for use in cosmetics,
medical products, and foodapplications* VOC: Volatile organic compounds

Fiscal 2018 Policies
The NAW works with customers and suppliers as development partners in the plastics and coatings fields. Through these activities, we add
new levels of support for technical sales, contributing to the real andperceived value of the NAGASE name.
During fiscal 2018, we plan to speed up our cooperative businessdevelopment with other divisions and affiliated companies in Japanand overseas. In particular, we are targeting the commercialization of a
TOPICS

carbon hybrid™ coating system and a high sliding polyethylene,
among other projects.
Our goal is to uncover new elemental technologies and functional
materials earlier than any other company in the world, contributing to
growth in our markets. We will develop useful formulations and create
proprietary NAGASE Group technologies that we can suggest as
effective solutions to our customers.

Introduction of Liquid-Repellent Nanocoating Device Made by P2i Ltd

NAW installed the P2i Ltd liquid-repellent nanocoating device in the NAW facility, where NAW will be able to conduct
demonstrations and create samples in Japan. This technology is mainly used for smartphones; however, NAGASE
intends to expand applications to headphones and other electronics, medical equipment, and other new fields.
In recent years, smartphones have developed with slimmer form factors, narrower frames, and 3D shapes. Treatingthese devices with mechanical protection against liquids has become much more difficult. The pulsed plasma vapor deposition technology patented by
P2i applies a liquid-repellent coating to both the interior and exterior of three-dimensional objects, providing protection for the entire device. At the sametime, treated devices are protected from corrosion due to water, salt, oils, humidity, etc., that may seep into the device’s PCBA and other components.

56

NAGASE & CO., LTD.

Integrated Report 2018

Critical Initiatives for Sustainable Growth
About the NAGASE Group

Human Rights, Employment Practices

The NAGASE Group has a Code of Conduct which defines
our respect for human rights and our refusal to discriminate
against individuals or groups in any manner. As a corporategroup doing business around the globe, the NAGASE Group
respects the history, culture, and customs of every region, andwe do not engage in harassment or discrimination based on
race, creed, gender, religion, nationality, language, physicalcharacteristics, wealth, or place of birth. This Code of

Leading Us to the Future

Respect for Human Rights
Conduct is available in Japanese, English, Chinese, andGerman, distributed as a booklet and available through our
corporate intranet for the reference of all Group employees.
We require every NAGASE Group employee to comply withthis Code of Conduct. In the event of an incident of discrimination, the Group will take immediate steps to investigate the situation, acting to help the affected individual(s)and to prevent any recurrence.

Performance by Segment

Diversity
Diversity Initiatives

The NAGASE Group believes that diversity is an importantpart of overall corporate strategy. Respect for the ideas andviews of a diverse range of
employees encourages more
dynamic internal discussions and leads to new ideasthat become the source ofcompetitive advantage inthe market. This in turnleads to the growth of boththe NAGASE Group andeach individual employee.

Our diversity initiatives began in earnest in fiscal 2008 withthe launch of the Diversity Promotion Committee. During
fiscal 2017, we took the opportunity to think about the futureof diversity in the NAGASE Group under the banner ofdeveloping a roadmap based on our vision of the future. We
began creating a roadmap to carry us through the medium
term. We continue to promote diversity within our organization through strong management directives, group training,and other initiatives.

Unique Products

Basic Stance on Diversity

Critical Initiatives for Sustainable Growth

Themes for Diversity Promotion
1. Internal education

2.	Diversity in organizations andindividuals

3. Develop good places to work➀	Periodic messages from top management andbroadcasts of related information➁ Instill the NAGASE Management Philosophy,
NAGASE Vision, and NAGASE Way deeply into
NAGASE Group employees➂ Improve global communications➃ Support employees’ career development➄	Continue employing non-Japanese people
and women as main career track staff andimprove our corporate culture➅	Instill awareness and activate initiatives forcontinuity and productivity improvements➆	Support employees who are dealing withhome care or other challenges

Frank Exchanges ofOpinions

Sharing New, ValueAdded Ideas

New Proposals to
Customers

Financial and Corporate Information

Discussions among
Employees who Have
Various Backgrounds

Company Growthand Contribution toSociety

NAGASE & CO., LTD.

Integrated Report 201857

Critical Initiatives for Sustainable Growth

Work-Life Balance
Basic Stance on Work-Life Balance

Work-Life Balance Initiatives

We believe that work-life balance is a critical part of respecting diversity. Establishing a workplace environment in which
it is easy for employees from wide variety of backgrounds towork enables achieving a working style that has a balance
between professional and private lives, providing benefits toboth the company and the individual. We are reforming
mindsets and establishing systems to accomplish this goal.

The monthly meeting of the employee-management HealthCommittee includes discussions related to flexible work
schedules, encouraging paid time off, and reducing overtime.
The committee uses results of workplace surveys as a basis for
employee-management talks regarding creating a moreenjoyable workplace environment.

Human Resource Development
The NAGASE Group HR Development PolicyGroup Company Employees(Consolidated companies)

The NAGASE Group Approach to HR Development(Person)

8,000

NAGASE Group HR development programs consist of anorganized combination of on-the-job and off-the-job training. On-the-job training lets employees experience real-world
work in a variety of roles to gain new knowledge and skills.
Off-the-job training also involves training and gaining skills
through both formal lectures and self-directed learning.
The NAGASE Group promotes on-the-job training, whileat the same time ensuring employees are able to learn knowledge and skills for their continued growth. These programs
include rank-specific training for young staff, training for
managers, and position-specific training to ensure staff havethe necessary knowledge and skills to perform their work.

6,000

6,259

6,267

6,241

6,312

14/3

15/3

16/3

17/3

18/3

4,000

2,000

0

Using the NAGASE Global HR Development Center
We opened the NAGASE Global HR Development Center in May
2014 (Sendagaya, Tokyo). The Center serves as a base for humanresource training in support of sustainable growth for the group.
During fiscal 2017, we used the facility for meetings (joint division
council meetings, global meetings, mid-term plan council meetings) and training (HR training, group company training, interntraining, etc.). A total of 4,496 people used the center, including
1,172 room nights and 156 training meetings.

Organization-Wide HR Development toPromote Group Function

We hold group joint training by job title and sponsor ongoingtraining for local staff, engaging in global unified humanresource development programs that bring the comprehensivefunctions of the NAGASE Group to bear.

Number of Participants in Main Training Programs

Major Policies

Training Program

Strengthening Management Capabilities and Operating
Skills and Fostering Globally Proficient Personnel

We have emphasized the following three points among ourvarious development policies. We will continue to revise Group
education and training programs according to changes in theexternal business environment and NAGASE Group strategy.

58

5,960

Fiscal 2015

Fiscal 2016

Fiscal 2017

Rank-Specific Training

796

699

547

Overseas Training

19

11

15

Selective Training

8

20

7

Business Leadership
Program for Overseas
National Staff

37

36

33

➊ Promote globalization• Assign employees to overseas entities• Send employees to overseas business school• Provide cross-cultural training• Offer English language training support➋ Train managers

Improving awareness in competitive environment (send employees to business school or MBA basic training, etc.)➌ Instill shared values• Provide shared value workshops in rank-specific training• Offer shared value workshops for managers• Conduct surveys regarding shared value

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE Group

Staff Development Program
Title/RoleManagement
Required Training Selective Training Voluntary Training

DivisionManager andHigherTitle/Role

SectionManager
Candidates

NAGASEManagement
ProgramManagement
Training

New Section
Manager Training

Business
School (Japan)

NAGASEManagement
ProgramGeneralManagement
ProgramSpecialist
Required Training Selective Training Voluntary Training

DivisionManager andEquivalent

SectionManager andEquivalent

CareerDevelopment
Training II

Selective Training

Business
School (Japan)

Specialist Training

Career Development
Required Training

Business
School (Japan)

National Staff

Voluntary Training

Performance by Segment

SectionManagers,
Manager
Candidates

CareerDevelopment
Training II

Title/Role

Leading Us to the Future

DivisionManager
Candidates,
SectionManagers

Business School(Japan, Overseas)

National Staff

Career ­Development Training I
Basic Management Program

MBA Basic
Education
Program

MBA Basic Education Program

Practical Training
Overseas BusinessOn-the-Job Training
Leadership Training

Section Staff

Follow-Up Training

Unique Products

Basic Practical Skills Seminar

Introductory Training

Job Candidates

Critical Initiatives for Sustainable Growth

Title/Role

Job Candidate Training

AssistantRequired Training

Selective Training

Voluntary Training

Promoted PA Training,
PA Committee
Promoted AA Training
Professional Networking(With Other Industries)

Basic Management Program

Business Improvement Program

Financial and Corporate Information

Section Staff
Excel Training

Business Skills Training

Introductory Training
Leadership Training

NAGASE & CO., LTD.

Integrated Report 2018

59

Critical Initiatives for Sustainable Growth

Environment
Environmental Management
NAGASE Group
Environmental ­Management Activities
The NAGASE Group began building an environmental
management structure in May 1999 by establishing an­Environmental Protection Committee, a role currently
assumed by the Risk Management & Compliance Committee.
The committee encouraged and supported certification for
ISO 14001, an international standard for environmental
management systems. Today, NAGASE & CO., LTD.
operates an environmental ISO organization that includes six
other group companies: Nagase Chemical, Nagase Plastics,
Nagase Abrasive Materials, Nishinihon Nagase, Nagase Elex,
and Nagase-OG Colors & Chemicals. Japan group companies Nagase ChemteX, Nagase Medicals, Totaku Industries,
Nagase Techno-Engineering, Nagase Techno Service, andFukui Yamada Chemical have received independent certification. We will continue activities to improve environmental
management systems among certified group companies.

Environmental Management Structure
Risk Management & Compliance Committee

Environmental ISO
Management Organization
Environmental ISO
Management Representative

NAGASE & CO., LTD.

Affiliates
Management

Environmental ISO
Management General Secretariat
Chief Environmental
Management Representative
Environmental Management
Representative
Internal Environmental
Audit Team

Environmental Management
Representative
Internal Environmental
Audit Team

Secretariat

Secretariat

Environmental Protection
Officers

Environmental Protection
Officers

Eco-Leaders

Eco-Leaders

Environmental M­ anagement Structure
We incorporate environmental management activities into
our daily business activities. Specific activities include (1)promoting environmental businesses, (2) pursuing energyefficient activities, and (3) improving operational efficiencies.
One example of our environmental businesses is using thetechnologies from our key environment and energy segment
to develop and grow other businesses. We are building asystem to quickly roll out products and services toward
creating recycling-oriented and low-carbon societies.
One example of energy-efficient activities is the Nagase
Energy Calculation Online System, or NECO System.

60

NAGASE & CO., LTD.

Integrated Report 2018

We began operating this system in August 2008. The NECO
System uses logistics voucher data to calculate domestic cargotransport volumes, helping reduce our environmental footprint through logistics efficiencies.
In addition to calculating annual cargo transport volume
and CO2 emissions, the system analyzes optimal transportroutes to reduce CO2, aiding our efforts to reduce energy usedin transportation.
We are also taking action in our headquarters building toconserve energy and resources.

About the NAGASE Group

Environmental Policy➋ Develop businesses that give full­consideration to environmental issues➌ Fulfill our responsibilities as agood corporate citizen

We will observe all environmental laws, municipal
bylaws, environmental regulations and other rules
as we conduct our business activities.

We will conduct our business activities in full awareness of the need to preserve the ecosystem andprotect the environment, and we will make every
possible effort to give full consideration to theenvironment within the limits of technological andeconomic feasibility.

As a good corporate citizen, we will work
together with public institutions, industries, and local communities to promote
environmental conservation measuresthat are suitable for the NAGASE Group.

➍ Environmental management systems
and continuous improvement➎ Disclose and make the relevant parties
fully aware of our Environmental Policy

The NAGASE Group has set environmental targets
to achieve our environmental policies. Further, wehave established and operate an environmental
management system, striving for continuous
improvement.

We will disclose our Environmental Policy to the
public and make all who work for the NAGASEGroup fully aware of its contents.

Performance by Segment

Reducing Our Ecological Footprint

Leading Us to the Future➊ Comply with all environmental laws,
regulations and other rules

Activities Undertaken by Nagase ChemteX

Environmental Performance Data

The NAGASE Group manufacturing subsidiary Nagase ChemteX
engages in environmental activities under the slogan, “We are agreen company and want to help make the world greener.” During
fiscal 2017, the company engaged in energy savings activities toimprove energy output by at least 1% through initiatives such as
equipment, manufacturing process, and operating rules.
The company was able to sell CO2 emissions saved throughconservation activities through the J-Credit Scheme. The J-Credit
Scheme is an initiative of the Ministry of the Environment to reducegreenhouse gas emissions.

Unique Products

In line with the Revised Act on the Rational Use of Energy,
NAGASE & CO., LTD. has been designated as a specified
corporation by the Bureau of Economy, Trade and Industry,as our energy usage exceeds fixed levels. Consequently, since2011, we have compiled data on the amount of energy
consumed at every facility, formulating medium- and longterm energy reduction plans and submitting regular reports to
the Bureau of Economy, Trade and Industry.
We adopted and operate a building energy management
system (BEMS) at our Tokyo head office building andNagoya branch office. We automated controls and energy
conservation operations during summer peak usage times tokeep environmental settings within target levels.

CO2 Output
Fiscal 2016

Fiscal 2017

2,494

3,196

3,094

Fiscal 2015

Fiscal 2016

Fiscal 2017

Paper Usage (1,000 sheets)

6,007

5,431

3,916

Paper Usage (t)

25.8

23.4

16.7

Fiscal 2015

Fiscal 2016

Fiscal 2017

1,787

1,840

2,044

Critical Initiatives for Sustainable GrowthFiscal 2015

Electricity Usage

Electricity Usage (kWh)Fiscal 2015

Fiscal 2016

Fiscal 2017

6,110,367

6,131,628

6,068,534

CO2 Output (t-CO2)

Paper Usage

Waste and Recycling
Fiscal 2015

Fiscal 2016

Fiscal 2017

217

189

194

Recycling (t)

183

154

156

84.1%

81.7%

80.6%

Recycling (Ratio)

Participating Companies: NAGASE & CO., LTD.
Period: April 2015 to March 2018

Financial and Corporate Information

Waste (t)CO2 Output from Logistics Activities

CO2 Output (t-CO2)

NAGASE & CO., LTD.

Integrated Report 2018

61

Critical Initiatives for Sustainable Growth

Fair Business Practices
Risk Management and Compliance
Identify, Understand, and Control Risk
The Company established the Risk Management &­Compliance Committee to monitor risk management andcompliance. The committee has defined functions andauthority, operating under a structure of clear roles andresponsibilities.
The Risk Management & Compliance Committee
formulates the NAGASE Basic Compliance Policy, using
regular workshops and other initiatives to ensure corporate
activities are strictly in line with the NAGASE Group Codeof Conduct. Should an illegal act or other issue be discoveredat NAGASE & CO. or a group company, such should bereported immediately to the Risk Management & Compliance
Committee, which shall report promptly to the Board of
Directors and the Audit & Supervisory Board/Audit &Supervisory Board Members. In addition, the Company has
introduced an internal reporting system whereby employees
and others can report or discuss issues directly.
In January 2015, we established Crisis Management
Guidelines. These rules are part of a structural and communications system that allows us to quickly and properly respondas a cohesive organization, gathering information, providing
reports, and issuing instructions in the event of a crisis that
affects business continuity.

Fair Business Practice Initiatives
Basic Approach

The risk of cartel enforcement, particularly surcharges, underthe Antimonopoly Act can have a major impact on a business. Accordingly, the NAGASE Group actively conducts
education activities, mainly for our manufacturing companies.
Moving forward, we will continue to educate our employees about laws related to fair business practices, particularly
those regulations deemed most necessary. We intend tostrengthen our approach to the prevention of bribery of
foreign public officials with respect to Japan’s Unfair­Competition Prevention Act. We also plan to continue
educating employees worldwide regarding bribery prevention
regulations, reflecting considerations of extraterritorial
application of the U.S. Foreign Corrupt Practices Act andthe UK Bribery Act.

62

NAGASE & CO., LTD.

Integrated Report 2018

Basic Compliance Policy
The NAGASE Group is a member of society and, as such, it isour duty to behave in a manner in keeping with this role by maintaining good and fair business practices and providing society withthe goods and services it needs. Through continued growth anddevelopment, NAGASE can improve the welfare of its employees,
while making a contribution to society. Based on this corporate
philosophy, NAGASE has adopted and will implement the following Basic Compliance Policy.
This policy defines the behavior standards that NAGASE and
its officers and employees will observe as it carries out its various
business activities. Officers and employees of NAGASE must
behave in accordance with these behavior standards and endeavor
to disseminate them to those within the corporate organization,
especially those with whom they work. If circumstances arise inwhich there is a risk that these behavior standards may be compromised, officers and employees must work to resolve problems
without delay, and to improve operations by identifying the causesof problems and taking steps to prevent recurrences.
➊ Compliance with laws, regulations and internal rules andregulations➋ Elimination of anti-social elements➌ Provision of goods and services that are useful to society➍ Respect for the qualities and individuality of employees➎ Disclosure of information to stakeholders➏ Preserving the global environment➐ Senior Management Responsibilities

Basic Compliance Policy
https://www.nagase.co.jp/english/csr/compliance/policy/

Education Activities (2017–)
Implemen­tationTargets

Content/AttendanceNovember–
December
2017

NAGASE Group
worldwide
Officers, employees

E-Learning compliance awarenesssurveys related to Compliance Behavior
Standards (revised October 2017), etc.

December
2017

Hayashibara Co., Ltd.
Officers, employees

Subcontract Act compliance seminars
Held once each in Tokyo and Okayama

February
2018

Hayashibara Co., Ltd.
Employees

Antimonopoly Act compliance seminars
Held once each in Sapporo and Fukuoka

February–
March
2018

NAGASE & CO., LTD.,
certain affiliatedcompanies
Section managers

Compliance seminars conducted by rank
Held once each in Tokyo and OsakaProduct Safety and Quality Control

Security Trade Controls

Strategic Approach to International Chemical
Management (SAICM)
The action plan adopted at the 2002 World Summit on
Sustainable Development—also known as the Johannesburg
Summit—is aimed at ensuring that, by the year 2020, chemicals are produced and used in ways that minimize significant
adverse impacts on the environment and human health.
In accordance with this policy, the entire world is adopting
more strict and standardized regulations concerning chemical
management.
These legal and regulatory developments affect thefinished products produced by manufacturers. Therefore, oneof the important functions of the NAGASE Group is toprovide relevant information to our customers. Accordingly,
we anticipate global regulatory trends related to chemical
management, working with our overseas subsidiaries to
educate, provide instructions, and adopt product management systems. In this way, we facilitate the global management of information related to chemical substances in the
products we handle.

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information

Efforts to Promote Personnel Development
Every year, the practical business of security trade controls
becomes ever more complex. To keep pace with developments,
the NAGASE Group encourages its employees—­primarily

Specific Compliance Framework
The NAGASE Group monitors related laws for the chemicalcomponents and regulated effects of new products we plan to
introduce to the market. Information related to these products is managed within the aforementioned Product Management System database, shared group-wide. We are membersof the Japan Chemical Industry Association, the Japan
Chemical Exporters and Importers Association, and otherindustry organizations. Through these relationships, we haveaccess to information regarding chemical regulations. We area member of the Joint Article Management Promotionconsortium ( JAMP), and we use MSDSplus, AIS, and otherspecialized tools related to products containing chemical
substances, as we endeavor to pass on accurate information to
relevant parties.

Critical Initiatives for Sustainable Growth

Specific Management Framework
All information about our export products, technologies, andoverseas customers is stored in our proprietary ProductManagement System. We confirm whether certain products
or technologies are subject to restriction under the rules of theForeign Exchange and Foreign Trade Control Law and the
U.S. Export Administration Regulations. Only those products
approved by the Item Compliance Management Section are
put into the system as products allowed for export.
Going one step beyond mere adherence to the law, we
define policies for the entire NAGASE Group associatedwith security trade controls that, as a rule, prohibit trade of
products that are military-related items or that have military
applications.

International society is becoming more concerned about
environment- and safety-related issues. At NAGASE, we
continue to improve product-related compliance and centralized information management, including management ofchemical products. All products we deal in are subject to the
management system administered by the Item ComplianceManagement Section within the Logistics Management
Division. This allows us to comply properly with any laws or
regulations that affect our products.

Unique Products

NAGASE has set up our own Security Trade Control Committee to determine security trade control rules and implement other export controls appropriately. The Security Trade
Control Committee works to understand the export control
situation, follow the latest revisions to the Foreign Exchange
and Foreign Trade Control Law, and ascertain a detailed
picture of export controls across the entire group, while
formulating related group policies. The Item ComplianceManagement Council is in charge of directing and educatingeach business division and group company in matters andstatute updates determined by the Security Trade Control
Committee. It is the responsibility of the Item ComplianceManagement Council to protect the Company and affiliates
against the risk of illegal acts with respect to export controls.

Regulatory Compliance in Products

Performance by Segment

Product Safety Principles
https://www.nagase.co.jp/english/csr/compliance/
product-safety-principles/

those involved in export operations—to become Security
Trade Control Associates by taking the exam offered by theCenter for Information on Security Trade Controls(CISTEC). As of March 2018, NAGASE had 856 qualified
STC Associates in 21 Group companies. We hold internal
security trade control training for all NAGASE employees, aswell as lectures for domestic subsidiaries and affiliates, andoverseas subsidiaries, providing global group human resource
development related to export management.

Leading Us to the Future

According to the NAGASE Group Product Safety Principles formulated in October 2008, we strive to ensure thesafety of NAGASE Group products through rules andeducation regarding group-wide quality management andproduct safety assurance.
As NAGASE changes business models from being sales
agents to manufacturing/processing and manufacturer investment, we will be called upon increasingly to assume responsibility for quality assurance. To assist in this area, the Quality
Management Section of the Legal Division provides management of vendors and manufacturing contractors, support
to group manufacturing companies, and internal education.

About the NAGASE GroupSpecific Measures Taken for
Individual Risks

63

Critical Initiatives for Sustainable Growth

For Consumer Safety and Security
The NAGASE Group deals in more than just chemical products. We also manufacture and sell enzymes andother food products and cosmetics under strict quality management and effective sales systems.
In this section, we introduce Nagase ChemteX Corporation and Nagase Beauty Care Co., Ltd.,
two group companies that focus on the security, safety, and trust of our customers.

Green Company Initiatives

Cosmetics Safety and Security

Nagase ChemteX provides core manufacturing functions for
the NAGASE Group. Nagase ChemteX is engaged in two
pillars of environmental management based on ISO 14001:
Green Company (aiming to be a company that does notnegatively impact the environment) and Green Technologies
and Products (reducing the overall impact of society on theenvironment by developing and manufacturing environmentally friendly products).
In recent years, the company has paid particular focus on
green procurement, or not using hazardous chemical substances subject to intensified regulations worldwide (substances restricted under the RoHS Directive, substance ofvery high concern regulated under REACH, etc.). The
company strives to provide products that customers can use
with safety and confidence throughout the product life cycle.
http://www.nagasechemtex.co.jp/en/environment/index.html

Food Safety and Security
Nagase ChemteX believes contributing to customer foodsafety and security is one of the most important callings they
have. The company’s Fukuchiyama Plant, which manufactures
food additives and health food materials, provides the highest
in safe and quality manufacturing as a member of the foodchain, from the acceptance of raw materials and manufacturing to quality assurance and product delivery. These practices
incorporate ISO 9001, Food Additive Good Manufacturing
Practices, and FSSC 22000 (voluntary adoption).

Nagase Chemtex
Fukuchiyama Plant

64

NAGASE & CO., LTD.

Integrated Report 2018

Basic Approach

Nagase Beauty Care sells direct to the consumer through anorganization of independent sales agents. Because theseproducts are cosmetics and health foods that come into directcontact with the human body, the company must practiceproduct quality management under the strictest quality
standards. Our highest priority is to provide our valued
customers with safe, secure products and services.

Specific Initiatives

Our research and development pursues herb sciences andtechnology, selecting materials from a variety of plants,
seeking out those that combine safety and functionality.
The plant materials coming out of our research are used as
the raw materials of end products, which are in turn subject
to strict quality management systems in connection with the
production process.
Nagase Beauty Care has established an after-sales support
office, which answers customer questions about their purchases. We use the direct feedback from this office to improve
the quality of our products and services.

About the NAGASE Group

Community Involvement and Development

Nagase Science and Technology
Foundation

NAGASE & CO., LTD. supports the SCRUM
JAPAN PROGRAM, a program operated by
the Japan Rugby Football Union to foster
human resources through the sport of rugby.
This program promotes rugby to elementary,junior high, and high school students, who
represent Japan’s future leaders. Through rugby,
these children learn the spirit of the sport:
Courage, trust, responsibility, determination,
cooperation, and loyalty.

Participation in the Living­Architecture Museum Festival
NAGASE & CO., LTD.’s Osaka head office isa registered cityscape resource of Osaka City.
Every year, NAGASE participates in the Living
Architecture Museum Festival in Osaka, helping promote the city as an attraction.

Performance by Segment

We believe in the importance of fundamental
research in the organic chemistry and biochemistry
fields, and that offering subsidies through researchand development and international exchange leads
to the advancement of science and technology. As
part of our contribution to socioeconomic progress,
we established the Nagase Science and Technology
Foundation in 1989. Current programs include
research grants to researchers and other subsidies.
To date, the Nagase Science and Technology
Foundation has helped finance 492 research
projects, provided support for 178 international
exchange programs (program terminated during
fiscal 2004), and contributed a total of ¥1.27
billion to further science.

SCRUM JAPAN PROGRAM

Leading Us to the Future

The NAGASE Group Management Philosophy reminds us that we are a member of society
and that we must strive to contribute to society.
We engage in a variety of social contribution activities under this banner.

Unique Products

https://www.rugby-japan.jp/
scrum_japan_program/

Hayashibara Museum of Art
https://www.nagase-f.or.jp/

NAGASE & CO., LTD. supports the TABLE
FOR TWO charity. A donation of ¥20 per meal
taken in the corporate cafeteria, which provides
school lunches to children in Africa. The company matches employee donations to TABLE
FOR TWO, which has reached a cumulative
total of ¥2,917,280 (as of April 2018).

Critical Initiatives for Sustainable Growth

TABLE FOR TWO Initiative

NAGASE Group company Hayashibara Co.,
Ltd. provides operational support for the
Hayashibara Museum of Art. The museum
houses a collection of Japanese and other East
Asian paintings, crafts, and other items collected by the late Ichiro Hayashibara. The
museum also exhibits furnishings inheritedfrom the estate of the feudal Ikeda clan of the
Okayama Domain. The goal of the museum is
to contribute to research of cultural assets andimprove the culture of the region and of Japan.

https://ikenchiku.jp/

Community Contribution
NAGASE & CO., LTD. employees volunteer
their time (cleaning, removing protective straw
mats from trees, etc., at Hamarikyu Gardens, etc.)
participating in the activities of Chuo Planet(Chuo-ku/Tokyo Social Contribution
Committee).

Financial and Corporate Information

Blood Donation Activities
http://www.hayashibaramuseumofart.jp/

Employees participate in blood drives in Tokyo
and Osaka twice yearly. In fiscal 2017, nearly
150 NAGASE employees donated blood.

Source: TABLE FOR TWO

http://jp.tablefor2.org/

NAGASE & CO., LTD.

Integrated Report 201865

Financial Foundation Supporting Business Growth

Through our ACE-2020 initiatives,
we are building a foundation forbusiness growth and globalization,
reaching toward sustainable growthand development.
Representative Director andSenior Managing Executive Officer

Mitsuro Naba

Basic Policy

Our ACE-2020 mid-term management plan guides us
through the five years to the fiscal year ending March 2021.
Our goals under this plan are to reach at least ¥1 trillion inconsolidated net sales, at least ¥30 billion in consolidated
operating income, and an ROE of at least 6% through two
distinct reforms: Reform of Profit Structure and Reform ofCorporate Culture. We use improved return on invested capital(ROIC) as a benchmark, focusing on measures that contributeto an improved net income ratio (before taxes) and ROIC. We
follow five key performance indicators to help us achieve ourgoals, achieve sustainable growth, and increase corporate value.
These indicators are Increase Focused Business, Accelerate­Globalization, Increase Manufacturing Profitability, Pursue
Efficiency, and Build a Strong Financial Structure.

Capital Procurement

Under ACE-2020, we expect to invest ¥100 billion over five
years to grow our businesses. For fiscal 2017, our investments
amounted to ¥18.6 billion. We will source our investment

66

NAGASE & CO., LTD.

Integrated Report 2018

capital and working capital mainly from operating cash flows
and interest-bearing debt. At the same time, efficient use ofworking capital and asset replacement will serve to preserve
our strong financial foundation, a particular strength of
NAGASE & CO., LTD. We have established an R&I(Rating and Investment Information, Inc.) rating of A or
higher as an indicator of our financial strength.

Return of Profits to Shareholders

Our basic policy is to continue paying a stable dividend to
our shareholders in line with our consolidated results as we
improve our earnings power and management structure. We
look to improve per-share dividends based on considerationsof the consolidated payout ratio and consolidated dividend toequity ratio.
Our initial forecast for fiscal 2017 dividends was ¥35 pershare. However, we raised that figure to ¥40 per share(including a special dividend of ¥5), based on our most recent
earnings and financial condition. For fiscal 2018, we forecasta ¥37 per share dividend.

About the NAGASE Group

Numerical Targets under ACE-2020

ROE = Post-tax Profit ÷ Equity

ROE
Normalization of 6% or higher

ROIC =

8.0%

Sales amount
Equity + Interest-bearing debt

Pre-tax profit
Sales amount

6.5%

6.5%
6.0%

6.0%

09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 19/3

21/3

Invested Capital
Turn Over Ratio

Pre-tax Profit Ratio

Leading Us to the Future

Pre-tax ROIC = Pre-tax profit ÷ (Equity + Interest-bearing debt)

5.8%
4.9%
4.3% 4.4%

All measures that efficiently
increase profit by reduced cost

All measures that efficiently
increases sales with limited asset

Sales of new andadded-value productIncrease growth investment

Logistics efficiency

M&A

Utilize shared service

Reduce slow-moving,long-term inventory

Withdraw
from unprofitable business

Utilizegroup cash management system

Rationalization

Idle assets liquidation

3.7%

0.0%

(Plan)

Performance by Segment(millions of yen)
30,0004.0% 4.2%
3.0%

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Free cash flow

Cash Flows

4.0%

Investment(billions of yen)
20

Unique Products

18.6

21,01320,00015

10,000

6,571

10

0
5

–10,000

14/3

15/3

16/3

17/3

Equity Capital/Interest-Bearing Debt/
Net Worth Ratio

0

18/3

14/3

Equity Capital (left scale)Interest-Bearing Debt
(left scale)（%）
Net Worth Ratio
60(right scale)(millions of yen)
400,000

Dividends

15/3

16/3

17/3

303,636

18/3

Dividends per Share (left scale)
Dividend Payout Ratio (right scale)

Includes special dividend of¥5 for fiscal 2017.

(Yen)
40

（%）

40

53.1
300,000

Critical Initiatives for Sustainable Growth(14,442)–20,000

40

37
29.3

45

30

200,000

30

20

20

100,000

86,173 15

10

10

0

0

30

24.9

14/3

15/3

16/3

17/3

18/3

Financial and Corporate Information

0

0
14/3

15/3

16/3

17/3

18/3

NAGASE & CO., LTD.

19/3

(Plan)

Integrated Report 201867

Six-Year Summary

NAGASE & CO., LTD. and Consolidated Subsidiaries (Fiscal years ended March 31, 2013–2018)

For the Fiscal Year:Net Sales
Domestic
Overseas
Gross Profit
Operating Income
Profit before Income Taxes andNon-Controlling Interests
Profit Attributable to Owners of the Parent
As of the Fiscal Year-End:Total Assets
Net Assets
Interest-Bearing Debt
Share Price (Yen)Market Value
Number of Shares Issued and Outstanding(Thousands of Shares)
Number of Shareholders
Number of Employees

2017

2018

Thousands of
U.S. dollars(Note 1)
2018¥742,194
363,038
379,155
91,66318,024¥722,384
369,365
353,019
91,503
15,030¥ 783,933
395,428
388,504
102,675
24,118$7,378,887
3,722,026
3,656,852
966,444
227,014

18,98911,31815,23912,316

16,10010,331

24,04917,175

226,365
161,662¥498,141
251,892
92,8281,275
176,470¥546,525
287,500
98,493
1,573
200,413¥512,081
279,149
87,5601,237
157,604¥530,775
295,198
82,080
1,551
197,610¥ 571,445
308,804
86,173
1,805
229,971$5,378,812
2,906,664
811,116
16,9902,164,637

138,408
6,984
5,960

127,408
6,781
6,259

127,408
7,338
6,267

127,408
10,394
6,241

127,408
11,357
6,312

—
—
—

Millions of yen
2015
2016

2013

2014

¥666,272
361,971304,301
82,583
15,578¥723,212
372,939
350,272
88,936
15,789¥759,713
374,208
385,505
91,991
18,153

19,45814,182

18,353
11,663¥486,747
237,806
98,425
1,147
158,754
138,408
6,921
5,897

U.S. dollars(Note 1)Yen

Per Share Data

Profit Attributable to Owners of the Parent
Net Assets
Cash Dividends¥  111.31
1,803.31
26.00¥   91.86
1,942.20
28.00¥   89.10
2,215.18
30.00¥   96.96
2,156.67
32.00¥   81.65
2,301.10
33.00¥  136.34
2,424.97
40.00$     1.28
22.83
0.38

2.3

2.2

2.4

2.4

2.1

3.1

—

2.9
2.1
1.4
3.0
6.5
46.9
0.43
184.4
15.46

2.5
1.6
1.5
2.4
4.9
49.5
0.38
187.2
15.80

2.5
1.5
1.5
2.2
4.3
51.5
0.35
187.0
17.86

2.1
1.7
1.4
2.3
4.4
53.5
0.32
200.1
18.69

2.2
1.4
1.4
2.0
3.7
54.7
0.28
192.9
16.31

3.1
2.2
1.4
3.1
5.8
53.1
0.28
184.5
20.02

—
—
—
—
—
—
—
—
—

Ratio

Operating Margin(Operating Income/Net Sales) (%)
Ratio of Profit before Income Taxes andNon-Controlling Interests to Net Sales (%)
Return on Sales (ROS) (%)
Total Assets Turnover (Times)
Return on Assets (ROA) (%)
Return on Equity (ROE) (%)
Shareholders’ Equity Ratio (%)
Debt to Equity Ratio (Times)
Current Ratio (%)
Interest Coverage Ratio (Times) (Note: 2)

Note: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥106.24=U.S. $1.00, the approximate rate of exchange prevailing on March 31, 2018.
Note: 2. Interest coverage ratio is calculated as (operating income + interest income + dividend income) / interest expense.

68

NAGASE & CO., LTD.

Integrated Report 2018

Management’s Discussion and Analysis of Operations and Finances■ Gross Profit and Profit Attributable to
Owners of the Parent
Gross profit rose in concert with sales gains, amounting to ¥102.67
billion (+12.2%) for the fiscal year. Operating income amounted to¥24.11 billion (+60.5%), mainly due to lower retirement benefit
expenses associated with amortization of actuarial losses. The Company
recorded ordinary income ¥25.98 billion (+58.8%) and profit attributable to owners of the parent ¥17.17 billion (+66.2%). All profit indicators marked record highs for the consolidated fiscal year in the historyof the Company.

Leading Us to the Future

The NAGASE Group, led by NAGASE & CO., LTD. (“the Company” or“NAGASE”), imports and exports a diverse array of products andengages in domestic transactions. In addition, the group manufacturesand sells products and provides services. These businesses are conducted by 101 affiliated companies consisting of 70 subsidiaries and
31 affiliates. The NAGASE scope of consolidation includes 61 companies, as well as 22 affiliates accounted for by the equity method.

About the NAGASE Group

Business Lines and Scope of Consolidation

Overview of Results
Gross Profit and Operating Income■ Net Sales(Billions of yen)800

723.21759.71

742.19722.38■ Operating Income

91.9

88.9

91.6

102.6

91.5

60

30

15.7

18.1

18.0

24.1

15.0

0
Fiscal years ended 2014
March 31

2015

2016

2017

2018

The Company recorded profit before income taxes of ¥24.0 billion(49.3% increase year on year) with a ratio of profit before income taxes to
net sales of 3.1%, which was a 0.9-point increase compared to the priorfiscal year. Profit attributable to owners of the parent amounted to ¥17.17
billion (66.2% increase). Return on sales increased by 0.8 points to 2.2%.
Earnings per share was ¥136.34, compared to ¥81.65 in the prior year.

783.93

Profit Attributable to Owners of the Parent/
Earnings per Share

600■ Profit Attributable to Owners of the Parent (Left scale)Earnings per Share (Right scale)

400

(Yen)
200

Critical Initiatives for Sustainable Growth(Billions of yen)
20

17.17
15

200

150

11.66

12.31

11.31

10
0
Fiscal years ended 2014
March 31

Unique Products

Net Sales90■ Gross Profit

Performance by Segment

The Japanese economy continued to recover throughout the fiscal
year, supported by factors including improved corporate earnings,
strong personal consumption driven by favorable employment andpayrolls, and stable capital investment. The global economy continued to experience a gradual recovery, despite risks related to
exchange rate fluctuations and market conditions impacted bynational financial and trade policies. The overall global economy was
supported by continued growth in the United States, China, andamong the emerging economies.
In this environment, the Company recorded domestic sales of¥395.42 billion (+7.1% year on year) for the consolidated fiscal year.
Overseas sales, impacted by the comparatively weak yen comparedto the prior year, rose to ¥388.5 billion (+10.1%). In total, the­Company recorded a record-high ¥783.93 billion in net sales, anincrease of 8.5%.

(Billions of yen)
120

2015

2016

2017

2018

96.96
91.86

136.34

10.33

89.10

100

81.65

5

50

0
Fiscal years ended 2014
March 31

0

2015

2016

2017

2018

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201869

Management’s Discussion and Analysis of Operations and Finances

Results by Business Segment
Functional Materials
Fiscal years ended March 31

Sales to Customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2017

2018

¥153,546
4,185
72,576
476
—
—
1,716

¥176,068
5,170
87,905
456
133
3,276
2,478

297

243

The Functional Materials segment recorded higher sales in both
domestic and overseas markets.
The Performance Chemicals Business recorded higher sales due toimproved sales of coating raw materials and urethane materials,
spurred by strong automotive production in Japan and overseas.
Another contributing factor was a jump in sales associated with theCompany’s acquisition of a distributor in the United States.
The S­ peciality Chemicals Business recorded higher sales overall.
Sales of fluorochemicals, electronics chemicals, and raw materials forindustrial oil solutions were higher for the semiconductor and otherelectronics industries in Japan. Overseas, sales were higher for electronics chemicals and other products.
As a result, the segment recorded sales of ¥176.06 billion for theyear, representing a ¥22.52 billion (+14.7%) increase compared to theprior consolidated fiscal year. Segment operating income grew ¥980
million (+23.6%), reaching ¥5.17 billion for the year.
Advanced Materials & Processing
Fiscal years ended March 31

Sales to Customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2017

2018

¥242,609
5,093
121,346
809
—
—
1,394

¥262,831
6,700
134,977
645
—
—
1,482

3,561

2,817

The Advanced Materials & Processing segment recorded lower sales inboth domestic and overseas markets.
The Colors & Advanced Processing Business recorded higher sales
as a whole, driven by growth in plastic resins for industrial and packaging applications, dyes/­additives, and digital print processing materials
in Japan. O­ verseas, strong sales of print-related business products
contributed to higher overall performance.

70

NAGASE & CO., LTD.

Integrated Report 2018

The Polymer Global Account Business mainly sells plastics to theoffice equipment, appliance, and video game device markets. Sales werehigher overall, driven by growth in Japan, Greater China, and ASEAN.
As a result, the segment recorded sales of ¥262.83 billion for theyear, representing a ¥20.22 billion (+8.3%) increase compared to theprior consolidated fiscal year. Segment operating income grew ¥1.6
billion (+31.5%), reaching ¥6.7 billion.
Electronics
Fiscal years ended March 31

Sales to Customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2017

2018

¥127,722
6,333
65,610
2,524
41
627
2,318

¥129,324
8,917
70,149
2,454
112
1,296
2,751

1,825

1,834

The Electronics segment recorded an increase in sales for the year,
driven by strong performance at our manufacturing subsidiaries inJapan and overseas.
The Electronic Chemicals Business recorded higher sales due togrowth in photolithography materials and equipment-related sales, aswell as strong performance of formulated epoxy resins for the electricand electronics industries.
The Electronic Materials Business recorded lower sales compared tothe prior fiscal year. This decrease was due to declines in processedmaterials sales associated with smartphone model changeovers.
As a result, the segment recorded sales of ¥129.32 billion for theyear, representing a ¥1.6 billion (+1.3%) increase compared to theprior consolidated fiscal year. Segment operating income grew ¥2.58
billion (+40.8%), reaching ¥8.91 billion for the year.
Automotive & Energy
Fiscal years ended March 31

Sales to Customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2017

2018

¥112,956
1,539
46,258
219
—
—
1,235

¥129,708
2,415
51,109
249
—
—
1,231

284

191

The Automotive Solutions Business recorded higher sales, driven byfactors including strong performance in our resins businesses in Japan,
Greater China, and ASEAN.

Life & Healthcare
Fiscal years ended March 31

2018¥84,904
3,332
98,2213,412
1,502
22,4072,476¥85,371
4,216
97,667
3,552
1,502
20,905
2,601

4,906

2,369

Cash and cash equivalents (Cash) increased ¥3.12 billion (+7.9%)
compared to the end of the prior consolidated fiscal year, amounting
to ¥42.85 billion. Cash provided by operating activities amounted to¥21.01 billion, while cash used in investing activities came to ¥14.44
billion, and cash used in financing activities amounted to ¥3.16 billion.
In addition, effects of exchange rate changes had a ¥170 million­negative impact on Cash balances.

■ Cash Flows from Operating Activities
Cash flows from operating activities for the consolidated fiscal year
amounted to ¥21.01 billion. While the Company experienced a ¥11.96
billion decrease in Cash due to increased working capital and paymentsof ¥4.86 billion in income taxes, we also recorded income before profit
before income taxes of ¥24.04 billion and cash reserved related todepreciation and amortization in the amount of ¥9.29 billion.

■ Cash Flows from Investing Activities
Cash used in investing activities during the consolidated fiscal year
amounted to ¥14.44 billion. This result was mainly due to cash outlays of¥7.21 billion for the purchase of property, plant and equipment andintangible fixed assets, as well as outlays of ¥5.99 billion for the acquisition of the stock of a subsidiary in connection with a change in thescope of consolidation.

■ Cash Flows from Financing Activities
Cash used in financing activities for the consolidated fiscal year
amounted to ¥3.16 billion. This result was mainly due to cash outlays of¥10.0 billion and ¥4.28 billion for redemption of bonds and dividend
payments, respectively. These outlays were in excess of a net ¥5.0 billion
increase in commercial paper and ¥8.3 billion in proceeds from longterm loans.

Unique Products

Cash Flow Summary
Fiscal years ended March 31(Millions of yen)

2014

2015

2016

2017

2018

Critical Initiatives for Sustainable Growth

OthersNo special matters to disclose.

(Summary of Consolidated Cash Flows)

Performance by Segment

The Life & Healthcare segment recorded net sales slightly higher
compared to the prior fiscal year. While sales were lower domestically,
the Company recorded higher sales overseas.
Sales of TREHA™ and other products to food ingredient makers in
our Life & Healthcare Products Business were level, while sales in
Europe and other regions overseas grew. Although the businessrecorded lower sales of AA2G™ to major customers in the skin careand toiletries field overseas, sales to major customers in Japan werehigher. In the medical and pharmaceutical field, sales of pharmaceutical raw materials and intermediates, medical materials, and pharmaceutical business products all underperformed the prior year. As aresult, the business recorded sales slightly higher compared to theprior year.
The Beauty Care Products Business, which includes sales of cosmetics and health foods, recorded lower sales, driven down due to weak
performance across all product categories.
As a result, the segment recorded sales of ¥85.37 billion for theyear, representing an increase of ¥460 million (+0.6%). Segment operating income grew ¥880 million (+26.5%), reaching ¥4.21 billion forthe year.

Financial Condition

Leading Us to the Future

Sales to Customers
Segment Income
Segment Assets
Depreciation and Amortization
Amortization of Goodwill
Goodwill
Investments in Equity Affiliates
Increase in Property, Plant, and Equipment
and Intangible Fixed Assets(Millions of yen)

2017

About the NAGASE GroupAs a result, the segment recorded sales of ¥129.7 billion for theyear, representing a ¥16.75 billion (+14.8%) increase compared tothe prior consolidated fiscal year. Segment operating income grew¥870 million (+56.9%), reaching ¥2.41 billion for the year.

Cash Flows fromOperating
Activities¥ 12,721 ¥15,474 ¥ 29,376 ¥  14,527 ¥  21,013
Cash Flows from
Investing Activities (14,171) (7,732) (12,600) (6,518) (14,442)
Cash Flows from
Financing
Activities(11,833) (3,205) (12,822) (10,592) (3,161)

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201871

Management’s Discussion and Analysis of Operations and Finances

Summary of the Consolidated Balance Sheet■ Net Assets■ Assets
As of the end of the consolidated fiscal year, current assets amounted
to ¥356.1 billion. This represents an increase of ¥34.89 billion comparedto the end of the prior consolidated fiscal year, an increase due mainly
to increases in accounts receivable and inventories. Non-current assets
amounted to ¥215.33 billion, up ¥5.77 billion. This increase was mainly
due to increases in fair values of shares retained and goodwill recordedby the Company during the period. As a result of these various factors,
total assets increased ¥40.67 billion to ¥571.44 billion as of the end of
the consolidated fiscal year.

Net assets amounted to ¥308.8 billion, up ¥13.6 billion. This increase
was mainly due to ¥17.17 billion in profit attributable to owners of theparent and an increase in net unrealized holding gain on securities.
As a result, the Company recorded a shareholders’ equity ratio of
53.1%, down 1.6 points compared to the end of the prior consolidated
fiscal year.

Shareholders’ Equity Ratio / ROE(%)
60

Shareholders’ Equity Ratio (Left scale)ROE (Right scale)49.5

546.52512.08530.77(%)
6571.44

2.4

4.9

4.3

4

4.4
3.7

2

0

3.1
2.2

2.3

Fiscal years ended 2014
March 310

Fiscal years ended 2014
March 31

2015

2016

2017

2018

■ Liabilities
Liabilities amounted to ¥262.64 billion, a ¥27.06 billion increase­compared to the end of the prior consolidated fiscal year. This increase
was mainly due to increases in accounts payable and short-term loans,which exceeded redemptions of bonds.

Working Capital / Prepaid Cost Recovery(Billions of yen)200

■ Working Capital (Left scale)
Prepaid Cost Recovery (Right scale)

171.48155.442.47

2.63

161.452.53

167.89181.64

2

1

0

NAGASE & CO., LTD.

0

2015

2016

Integrated Report 2018

2017

2016

2017

2018

Capital Investment
During the fiscal year, the NAGASE Group recorded ¥9.42 billion incapital investment (including purchases of intangible fixed assets).
This amount included ¥2.36 billion in capital investment at the Kanto/
Oyama Plant of Totaku Industries, Inc. (Advanced Materials & Processing segment).
The group used cash on hand and funds procured from externalsources for capital investments.
Reportable Segments

Functional Materials
Advanced Materials & Processing
Electronics
Automotive & EnergyLife & Healthcare
Others
Total(Millions of yen)¥  243
2,817
1,834
191
2,369
1,965
9,423

2.68

50

Fiscal years ended 2014
March 31(Months)
4

3

2.70

0

2015

2

2.0

0

72

30

4

200

100

6

15

400

150

53.1

(%)
8

5.8

■ Total Assets (Left scale)
ROA (Right scale)498.14

53.5

45

Total Assets / ROA(Billions of yen)
600

51.5

54.7

2018

Research Costs
The NAGASE Group develops new technologies and products originating from our marketing activities. We also engage in research anddevelopment activities for the purpose of generating and sharing
technological information. These activities bring the comprehensive
power of the group to bear in creating new businesses.
The New Value Creation Office was established in April 2017 (under
the corporate segment) to promote innovation within the group andcreate new value. The office serves as a core driver of future businessfor the NAGASE Group.
Through the Research Frontiers Institute consortium with IBM, the
New Value Creation Office works on bio-inspired technology that
integrates biology and electronics. These activities include contributions to the development of AI-based information retrieval systems

About the NAGASE Group

Hayashibara Co., Ltd. continues research and developmenta­ ctivities for the use of TREHA™ and other functional saccharides ineverything from foods, cosmetics, and pharmaceuticals/medicines toapplications in agricultural and industrial fields. The company is accelerating development activities for mainstay products Fibryxa™ and
Hayashibara Hesperidin S for applications in Foods with Function
Claims and other uses. Hayashibara is searching for new enzymeproducing bacteria related to saccharides, moving forward withresearch and development related to products created through unique
enzymes. As the company considers patents and intellectual property
strategy for new materials, it also continues to study manufacturingmethods for functional saccharides with the potential of becoming
mainstay products for the next generation. Activities include market
analysis, suggestions for effective uses, and applications development.
Meanwhile, the NAGASE Group is making use of Hayashibara’s extensive library of functional dyes, looking to develop products and new
applications in commercial fields, such as photo and printing plates, aswell as in life science fields, including pharmaceuticals and in-vitro
diagnostics. The NAGASE Group incurred a total of ¥9.42 billion in
research and development expenses for the consolidated fiscal year.

Leading Us to the Future
Performance by Segment* Abbreviation of Nagase Streptomyces Technology for Protein/Precious Products, a NAGASE
registered trademark in Japan.

Research and Development Expenses(Billions of yen)
8

6.00

6

5.17

4.90

5.06

5.16

2015

2016

2017

Unique Products

4

20
Fiscal years ended 2014
March 312018
Critical Initiatives for Sustainable Growth

Outlook for the Year Ending March 31, 2019
In Japan, personal spending is expected to remain strong throughout
the next fiscal year, buoyed by an improving picture in domestic
employment and payrolls. And also, the general global business environment is expected to continue to perform well, supported bystrength in the United States, China, and the emerging economies of
the world, while uncertainties remain in connection with exchange
rate fluctuations resulting from national financial policies and economic friction resulting from protectionism, as well as geopolitical risks
related to North Korea and the Middle East.
For the year ending March 2019, we forecast consolidated net salesof ¥828 billion (+5.6% year on year), operating income of ¥25.5 billion(+5.7%), ordinary income of ¥27.5 billion (+5.8%), and profit attributable to owners of the parent in the amount of ¥18.6 billion (+8.3%).

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information(accelerated material discovery), the development of low-powerdevices (brain-inspired devices), and the development of productsthat feature biomimicry applications.
The Nagase R&D Center conducts foundational technology
research and proposes research topics for the biotechnology-related
businesses operated by the NAGASE Group. At present, the Nagase
R&D Center is working to help create a global-scale bioeconomy
society through process innovation (Unavailable Made Available) tofacilitate high-efficiency production of plant- and animal-derived rare
and useful substances, which have been traditionally difficult tosynthesize. The center is leveraging our own core technologies(N-STePP®*: Technology for breeding and fermenting actinomycetes)and other foundational technologies to accomplish this goal.
­Examples include algae-derived ultraviolet absorbing substances(mycosporine-like amino acids), proteins in human and animal blood(ferritin), unusual antioxidative amino acids (ergothioneine) containedin mushrooms and wheat varieties, biodyes, and other functional
substances unique to actinomycetes. The center is developing theseuseful substances to be applied across a wide range of functional
foods, cosmetics, and industrial products. The center also applies forpatents and registrations of numerous foundational and peripheraltechnologies. In this way, the Nagase R&D Center fulfills its mission todevelop and utilize foundational biotechnologies, inventing productsthat will lead the NAGASE Group into the future.
The Nagase Application Workshop (NAW) is home to specialized
equipment and expert staff capable of conducting raw materials
analysis, application development, and final product formulation forplastics and coating materials. The NAW supports the NAGASE Group
trading company differentiation strategy by combining materials andprocessing technologies from business partners and group manufacturing companies. This combination of materials and processes
produce solutions that respond to market needs identified throughthe marketing functions of the NAGASE Group network. The NAW
accurately formulates new elemental technologies and functional
materials, developing these technologies and materials into solutions
for our customers. Here, the workshop coordinates closely withNAGASE divisions and group companies to explore the potential for
new businesses.
In addition to its existing businesses, Nagase ChemteX Corporation
has launched next-generation manufacturing projects, including the
supply of resins for 3D printers. The company also began supplying
samples of low-temperature sintered-type ink for wiring applications.
In the biomaterials field, Nagase ChemteX began development for
new polymer materials that form biomimetic surfaces, supplying
samples of these products to customers.
In our Electronics segment, INKRON LIMITED (converted to a subsidiary in this consolidated fiscal year) and two other subsidiaries havebeen using unique siloxane synthesis technologies to develop coating
materials offering a wide range of refractive index compatibility, ranging from a low of 1.25 to a high of more than 1.8.
Nagase ChemteX uses nanoparticle dispersion technologies, massproduction technologies, and complementary synergies with quality
control systems developed over many years to contribute to customer
innovations by supplying leading-edge materials for next-generation
optical devices on a global scale.

73

Management’s Discussion and Analysis of Operations and Finances

These forecasts have been developed based on a currency conversion rate of ¥105 to the US dollar.
(Announced on May 2, 2018)(Millions of yen)
Profit­attributable toowners of
Ordinary income the parent

Net sales

Operatingincome828,000

25,50027,50018,600783,933+5.6%

24,118+5.7%

25,982+5.8%

17,175+8.3%

Year ending
March 31, 2019
(Projected)
Year ended March
31, 2018 (Actual)
Change(1) Overall Operating Risk
The NAGASE Group is engaged in activities that rely on the use ofchemicals across a wide spectrum of products and services throughour Functional Materials, Advanced Materials & Processing, Electronics,
Automotive & Energy and Life & Healthcare business. These products
and services include dyes/pigments, coating materials/inks, surfactants,
OA, electrical equipment, home electronics, automobiles, LCDs,­semiconductors, and pharmaceutical/medical applications.
­Accordingly, significant changes in domestic and international­commercial chemicals industry could affect the NAGASE Group’s
earnings and financial condition.

Consolidated Payout Ratio /Consolidated Dividend to Equity Ratio

Profit Sharing Policy■ Dividend Policy
Our basic policy is to continue paying a stable dividend to our shareholders in line with our consolidated results as we improve our earnings power and management structure. We look to improve per-share
dividends based on considerations of consolidated payout ratio andconsolidated dividend to equity ratio. We also plan to use funds frominternal reserves effectively in our business growth and to build astronger management function.
The NAGASE Group declared a year-end dividend of ¥23 per sharebased on this policy, a ¥1 increase compared to the prior fiscal yearwith an additional ¥5 per share special dividend reflecting the group’s
consolidated performance and financial position for the fiscal year. As
a result, the scheduled full-year cash dividend will amount to ¥40 per
share, including the special ¥5 yen per share special dividend.
We forecast a full-year regular dividend of ¥37 per share for the
next fiscal year, ¥2 higher than the prior year. This dividend will­consist of an ¥18 per-share interim dividend and a ¥19 per-shareyear-end dividend.
May 2, 2018. Forecasts in connection with the Group’s future performance are subject to a variety of risks and uncertainties including
those outlined as follows. As a result, readers are advised that actual
results may differ from projections.

Operating and Other Risks
The NAGASE Group is engaged in trading, marketing, research anddevelopment, manufacturing and processing in six business segments
across the world: Functional Materials, Advanced Materials & Processing, Electronics, Automotive & Energy, Life & Healthcare, and Other.
The nature of these businesses entails various risks that may have amaterial effect on investment decisions. We provide a discussion of the
major risks below.
Any forward-looking statements are based on management decisions as of the end of fiscal year under review.

74

NAGASE & CO., LTD.

Integrated Report 2018(%)
50

Consolidated Payout Ratio (Left scale)
Consolidated Dividend to Equity Ratio (Right scale)

40.4

40

30

(%)
2.5

30.5
1.50

33.7

33.0

1.44

1.46

2.0

1.69
1.5

1.48

29.3

20

1.0

10

0.5

0
Fiscal years ended 2014
March 31

0

2015

2016

2017

2018

(2) Product Market Conditions
The NAGASE Group handles extensive petrochemicals manufactured
from naphtha in our Functional Materials, Advanced Materials &­Processing, and Automotive & Energy segments. Raw materials­markets and demand-supply balance are two factors that result in
unique market circumstances for each of our products. Fluctuations inthese factors could affect our revenues and profits in related productlines. Also, some products manufactured by the Group use raw materials derived from grains. Raw materials costs fluctuate widely due tochanges in grain market prices; we may not be able to pass on
increased raw materials costs through higher sales prices, which could
affect our profits in related product lines.
(3) Impact of Fluctuations in Foreign Currency Exchange Rates
The NAGASE Group conducts import/export as well as non-tradebusiness transactions denominated in foreign currencies. Fluctuations
in currency markets have a significant impact when prices are converted to yen. While the Group executes exchange contract hedges forthese transactions to minimize exchange rate risk to the greatest
extent possible, currency exchange rate fluctuations could have asignificant impact on Group earnings and financial conditions. The
NAGASE Group owns foreign-domiciled corporations whose financial
statements are prepared using local currencies. The conversion ofthese currencies to Japanese yen for consolidated reporting purposes
entails currency conversion risk due to fluctuating exchange rates.

(11) Risks Related to Product Laws
The NAGASE Group imports, exports, and sells domestically a wide
variety of chemicals and other products for a broad range of uses. To
maintain international peace and safety, the chemicals and other items
we export are subject to different laws, including the Foreign
Exchange and Foreign Trade Control Law and the Export Trade Control
Order. Imports and domestic sales are subject to the Chemical Substances Control Law and other related statutes, as well as similar regulations in foreign jurisdictions. To ensure compliance, the Group has
established internal Security Trade Control Regulations and Chemical/
Product Control Regulations. However, a violation of such laws andstatutes could result in restrictions on Group business activities, having
an impact on Group earnings and financial condition.

Critical Initiatives for Sustainable Growth(12) Risks of Natural Disasters
The NAGASE Group has put emergency response systems in place,including the creation of a business contingency plan, the adoption ofsafety confirmation systems, the creation of a disaster-responsemanual, earthquake-response measures, disaster-response training,and other measures to deal with natural disasters. However, as we
conduct business across a great number of countries and regions, weare exposed to the risk of major natural disasters, H1N1 influenza andother communicable diseases, and other emergencies that could
disrupt our supply chain. Such disruptions could prevent us fromselling our products or damage the manufacturing capabilities ofimportant Group facilities. Such interruptions would result in opportunity loss, and could have a significant impact on Group earnings andfinancial condition.

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information(8) Risk of Investments
The NAGASE Group engages in investment activities to establish newcompanies, to invest in equipment at manufacturing subsidiaries, andto acquire other business entities. These types of investment activities
involve certain risks, including the risk of failing to recover investments in cases where the Company is not able to record profits at
initially planned levels, the risk that additional funding may berequired, and the risk that the Group will not be able to withdraw
from investments according to the desired timing and method. The
NAGASE Group strives to reduce risk in this area. Decisions to invest in
new businesses are made after a careful study of the viability ofbusiness plans and profitability. At the same time, the Group regularly
monitors the performance of existing investments. However, even(10) Product Quality Risk
The NAGASE Group operates the Nagase R&D Center and manufacturing subsidiaries to offer high-value-added products to our customers.
We pay detailed attention to the quality of the technologies andproducts that bear the name of NAGASE and our affiliates. We also
bear manufacturers’ liability for imported products, products manufactured on a contract basis, etc. Accordingly, the Group treats theseproducts with the same attention to detail and quality as if they weremade in our own facilities. However, product defects could result incessation of sales and/or product recalls, exposing the NAGASE Groupto liability for damages, which could have an impact on Group earnings and financial conditions.

Unique Products(7) Counterparty Credit Risk
The NAGASE Group extends credit to domestic and overseas purchasers in connection with various transactions. As a matter of policy, the
NAGASE Group reduces credit risk by obtaining guarantees, collateral,and insurance, etc. according to the financial condition of the purchaser. Although the NAGASE Group strives to ensure stable, uninterrupted product procurement, financial weakness or bankruptcies
among suppliers or others could damage the Group’s ability to procure
goods. Such circumstances could have an impact on the Group’s
earnings and financial condition.

(9) Risk of Asset Impairment
The NAGASE Group owns non-current assets such as business assets in
manufacturing subsidiaries and goodwill. These assets entail the risk of
impairment loss if asset value declines. The NAGASE Group records
impairment losses when deemed necessary. However, even greater
impairment losses may be incurred as a result of deteriorating businessprofits or other factors in the future, which may have an impact onGroup business performance and financial condition.

Performance by Segment(6) Impact of Changes in Stock Prices
The NAGASE Group maintains a portfolio of marketable securities,
primarily equity shares of companies doing business with the Group.
These equity investments are subject to share price fluctuation risks.
As a matter of policy, the NAGASE Group reduces risk by continuously
reviewing and reorganizing its shareholdings. However, changes inshare prices could impact Group earnings and financial condition. A
decline in share prices could damage the value of pension plan assets
managed by the Group, increasing retirement benefit costs andthereby reducing Group profits.

these management initiatives cannot completely negate potential
investment risk, and such risk may have an impact on Group earnings
and financial condition.

Leading Us to the Future(5) Risks Involved in Operating Overseas
A significant and increasing percentage of NAGASE Group sales andproduction takes place overseas in locations such as Greater China,
ASEAN, the Americas, and Europe. While NAGASE Group management
keeps a close eye on local trends and conditions in order to respond
appropriately, unforeseen events stemming from local government
regulations, business customs, or other influences could have an impact
on Group business performance and financial condition.

About the NAGASE Group(4) Impact of Fluctuations in Interest Rates
The NAGASE Group obtains funds for operating and investing activities
through loans from financial institutions; some of these loans areinterest-bearing debt including variable interest terms. The Group
reduces interest rate fluctuation risk related to variable interest loans
by utilizing interest-rate swap contracts. Group earnings and financial
conditions may be affected by future interest rate trends. Interest rate
fluctuations cause variations in discount rates used for retirement
benefit obligations and plan asset investment income, impacting
NAGASE Group business performance and financial position.

75

Consolidated Balance SheetNAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2018 and 2017)

ASSETS
Current assets:
Cash and time deposits (Notes 14 and 21)
Notes and accounts receivable (Note 14)
Inventories (Note 4)
Deferred tax assets (Note 11)
Other current assets
Less allowance for doubtful accounts
Total current assets

Property, plant and equipment, at cost (Notes 5 and 6):
Land
Buildings and structures
Machinery, equipment and vehicles
Leased assets
Construction in progress
Less accumulated depreciation
Property, plant and equipment, net (Note 22)

Investments and other assets:
Investments in securities (Notes 7 and 14):
Unconsolidated subsidiaries and affiliates
Other
Long-term loans receivable
Goodwill (Note 22)
Technology-based assets
Asset for retirement benefits
Deferred tax assets (Note 11)
Other assets (Note 6)
Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 22)

76

NAGASE & CO., LTD.

Integrated Report 2018

Millions of yen
2018

2017

Thousands of
U.S. dollars (Note 1)
2018¥ 43,303
225,999
73,671
2,783
10,953(602)
356,109¥ 39,830
206,846
63,120
2,375
9,681
(638)
321,215$  407,596
2,127,250
693,439
26,195103,097(5,666)
3,351,930

21,15458,01682,437
530
784
162,922(95,697)
67,22521,93954,911
83,372532
1,874
162,630(95,011)67,619199,115546,084
775,951
4,989
7,380
1,533,528(900,762)
632,765

8,116
92,287
100,403
109
25,478
12,215
—
1,614
8,389
(101)
148,110¥571,445

7,788
86,75994,548482
23,034
13,791
1
1,524
8,846
(289)
141,940¥530,775

76,393
868,665
945,058
1,026
239,816
114,976—
15,19278,963(951)
1,394,108$5,378,812

Total long-term liabilities¥118,028
31,934
11,126
5,000
—
1,738
44
3,250
5,451
274
16,191
193,040¥102,076
28,162
3,582—
10,000
1,849
37
3,095
4,512
171
13,006
166,494$1,110,956
300,584
104,725
47,063—
16,359414
30,59151,3082,579
152,400
1,817,018

20,00018,112
16,365
14,518603
69,60020,00020,335
13,503
14,625617
69,082

188,253
170,482
154,038
136,653
5,676
655,120

Performance by Segment

Long-term liabilities:
Bonds (Notes 8 and 14)
Long-term loans and finance lease obligations (Notes 8 and 14)
Deferred tax liabilities (Note 11)
Liability for retirement benefits (Note 10)
Other long-term liabilities

2017

Thousands of
U.S. dollars (Note 1)
2018

Leading Us to the Future

Total current liabilities

2018

About the NAGASE Group

LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable (Note 14)
Short-term loans (Notes 8 and 14)
Current portion of long-term loans and finance lease obligations (Notes 8 and 14)
Commercial papers (Notes 8 and 14)
Current portion of bonds (Notes 8 and 14)
Accrued income taxes (Note 11)
Deferred tax liabilities (Note 11)
Accrued expenses
Accrued bonuses for employees
Accrued bonuses for directors and executive officers
Other current liabilities

Millions of yen

Contingent liabilities (Note 18)

9,699
11,590219,721

91,293105,026
2,188,761(3,114)250,278(1,337)
239,674(29,311)2,355,779

Accumulated other comprehensive income:Net unrealized holding gain on securities (Note 7)
Deferred (loss) gain on hedges (Note 14)
Translation adjustments
Retirement benefit liability adjustments (Note 10)
Total accumulated other comprehensive income

50,773
(15)
2,917
(317)
53,35847,683
4
3,129
(274)
50,542477,909(141)
27,457(2,984)502,240

5,168
308,804¥571,445

4,981
295,198¥530,775

48,6452,906,664$5,378,812

NAGASE & CO., LTD.

Integrated Report 2018

Non-controlling interests
Total net assets
Total liabilities and net assets

Critical Initiatives for Sustainable Growth

9,699
11,158232,534

Unique Products

Net assets:
Shareholders’ equity (Note 12):
Common stock:
Authorized—346,980,000 shares
127,408,285 shares in 2018 and 2017
Issued—Capital surplus
Retained earnings (Note 23)
Treasury stock, at cost (Note 13)—2,195,966 shares in 2018 and
1,287,366 shares in 2017
Total shareholders’ equity

See notes to consolidated financial statements.

Financial and Corporate Information

77

Consolidated Statement of Income

NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2018 and 2017)

Millions of yen
2018

2017

Thousands of
U.S. dollars (Note 1)
2018¥783,933
681,258
102,675¥722,384
630,881
91,503$7,378,887
6,412,444
966,444

Selling, general and administrative expenses (Note 16)
Operating income (Note 22)78,557
24,11876,472
15,030739,430
227,014

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Gain on sales of shares of a subsidiary
Gain on sales of investments in securities (Note 7)
Loss on sales of shares of a subsidiary and affiliates
Loss on devaluation of investments in securities
Gain on sales of property, plant and equipment
Loss on sales of property, plant and equipment
Loss on disposal of property, plant and equipment
Loss on impairment of fixed assets (Notes 6 and 22)
Loss on reduction of property, plant and equipment
Gain on bargain purchase
Subsidy income
Loss on discontinued operation
Loss on step acquisitions
Other, net
Profit before income taxes

1,791(1,294)
921
84
8
0
(12)
50
(419)
(168)
(847)
(212)
229
288
(462)
(294)
269
24,0491,812(1,032)
217
—
2,006
(290)
(106)
239
(60)
(227)
(1,398)
(290)
—
314
—
—
(112)
16,10016,858(12,180)
8,669
791
75
0
(113)
471
(3,944)(1,581)(7,973)(1,995)
2,155
2,711(4,349)(2,767)2,532
226,365

Income taxes (Note 11):
Current
DeferredProfit5,358
1,098
17,592

5,020
417
10,66250,433
10,335
165,587(417)¥ 17,175(330)¥ 10,331(3,925)$  161,662

Net sales (Note 22)
Cost of sales
Gross profit

Profit attributable to:Non-controlling interests
Owners of parent
See notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
NAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2018 and 2017)

Millions of yen

ProfitOther comprehensive income (Note 9):
Net unrealized holding gain on securities
Deferred (loss) gain on hedges
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

78

NAGASE & CO., LTD.

Integrated Report 2018

Thousands of
U.S. dollars (Note 1)
2018

2018

2017

¥17,592¥10,662$165,587

3,083
(19)
(14)
(43)

10,60214(1,223)
1,895

29,019
(179)
(132)
(405)

50
3,055
¥20,648(152)
11,135¥21,798471
28,756$194,352¥20,101547¥21,622
175$189,2045,149

Consolidated Statement of Changes in Net Assets
About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2018 and 2017)

Millions of yen

Commonstock¥ 9,699 ¥    11,615
—
—
—
—
—
—
—
0

Retainedearnings¥     213,572 ¥    (230) ¥   234,657 ¥  37,074
10,331—
10,331—(4,050)—(4,050)——(1,107)(1,107)——00—¥   (9)————¥  4,411————

Retirement
Total
benefitaccumulated
liabilityotheradjustments comprehensive income(Note 10)

Noncontrollinginterests

Total net assets¥(2,169) ¥    39,305
—
—
—
—
—
—
—
—

¥   5,185————¥  279,149
10,331(4,050)(1,107)
0

—

—

(25)

—

—

—

—

—

—

(25)

—

—

0

—

0

—

—

—

—

—

—

0

—
—
9,699
—
—
—
—

—
—
11,590
—
—
—
0

(132)
—
219,721
17,175(4,287)————(1,337)——(1,776)0(132)—
239,674
17,175(4,287)(1,776)0—
10,60947,683
—
—
—
—

—
14
4
—
—
—
—

—
(1,281)
3,129
—
—
—
—

—
1,895
(274)
—
—
—
—

—
11,23650,542
—
—
—
—

—
(204)
4,981
—
—
—
—

(132)
11,032
295,198
17,175(4,287)(1,776)
0

—

(431)

—

—

(431)

—

—

—

—

—

—

(431)

—

—

(6)

—

(6)

—

—

—

—

—

—

(6)

—

—

(67)

—

(67)

—

—

—

—

—

—

(67)

(1)
—
(1)
—
—
—
—
3,090
¥232,534 ¥(3,114) ¥250,278 ¥50,773

—
(19)
¥(15)

—
(212)
¥2,917

—
—
(42)
2,815
¥  (317) ¥53,358—
187¥5,168(1)
3,002¥308,804

Total
Net unrealized Deferred gain
Treasuryshareholders’ holding gain
(loss) on
Translation
stock, at costequityon securities
hedgesadjustments

Retirement
Total
benefitaccumulated
liabilityotheradjustments comprehensive income(Note 10)

Noncontrollinginterests

Total net assets————¥9,699 ¥11,158

Unique Products(25)

Performance by Segment—

Leading Us to the Future

Balance at April 1, 2016
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Changes resulting from merger with an
unconsolidated subsidiary
Decrease in retained earnings resulting fromchanges in scope of equity method
Other changes
Balance at April 1, 2017
Profit attributable to owners of parent
Cash dividends
Purchases of treasury stock
Disposition of treasury stock
Changes in parent’s ownership interest due totransactions with non-controlling interests
Changes resulting from merger with an
unconsolidated subsidiary
Decrease in retained earnings resulting fromchanges in scope of consolidation
Decrease in retained earnings resulting fromchanges in scope of equity method
Other changes
Balance at March 31, 2018

CapitalsurplusTotal
Net unrealized Deferred gain
Treasuryshareholders’ holding gain
(loss) on
Translation
stock, at costequityon securities
hedgesadjustments

Thousands of U.S. dollars (Note 1)

Commonstock

CapitalsurplusRetainedearnings$   38————$29,452
—
—
—
—

—

—

—

—

—

(4,057)

—

—

—

—

—

(56)

—

—

—

—

—

(631)

—
—
(179)
(1,995)$(141) $27,457$(2,579) $475,734
—
—
—
—
—
—
—
—

—
—
(395) 26,497$(2,984) $502,240$46,884 $2,778,596—
161,662—(40,352)—(16,717)—0

Critical Initiatives for Sustainable GrowthBalance at April 1, 2017
$91,293 $109,093 $2,068,157 $(12,585) $2,255,968 $448,823
Profit attributable to owners of parent——
161,662—
161,662—
Cash dividends——(40,352)—(40,352)—
Purchases of treasury stock——— (16,717) (16,717)—
Disposition of treasury stock
—
0
—
0
0
—
Changes in parent’s ownership interest due totransactions with non-controlling interests— (4,057)——(4,057)—
Changes resulting from merger with an
unconsolidated subsidiary
—
—
(56)
—
(56)
—
Decrease in retained earnings resulting fromchanges in scope of consolidation
—
—
(631)
—
(631)
—
Decrease in retained earnings resulting fromchanges in scope of equity method
—
—
(9)
—
(9)
—
Other changes
—
—
—
—
—
29,085
Balance at March 31, 2018
$91,293 $105,026 $2,188,761 $(29,311) $2,355,779 $477,909

—
(9)
1,760
28,257$48,645 $2,906,664

See notes to consolidated financial statements.

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201879

Consolidated Statement of Cash FlowsNAGASE & CO., LTD. and Consolidated Subsidiaries (Years ended March 31, 2018 and 2017)

2018

2017

Thousands of
U.S. dollars (Note 1)
2018¥   24,049¥  16,100$  226,365

9,295
1,748
847
(229)
294
(288)
212
462
(210)
(1,791)
1,294
(309)

9,381
1,543
1,398
—
—
(314)
290
—
3,297
(1,812)
1,032
345

87,491
16,453
7,973(2,155)2,767(2,711)
1,995
4,349(1,977)(16,858)
12,180(2,909)(92)(1,690)(866)(17,382)(9,610)15,024
1,623
24,9372,235(1,292)(4,865)21,013(11,885)(1,017)
5,198(792)
21,0752,235(1,045)(7,737)
14,527(163,611)(90,456)
141,416
15,277
234,723
21,037(12,161)(45,793)
197,788

Investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible fixed assets included in other assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of investments in capital
Purchases of shares of subsidiaries resulting in change in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Decrease in short-term loans receivable included in other current assets, net(Increase) decrease in time deposits, net
Subsidy income
Other, net
Net cash used in investing activities(6,679)1,360(539)(1,603)105(54)(5,994)
207
108
(242)
288
(1,400)(14,442)(10,667)976(867)(1,825)
4,658
(53)
—
293
434
274
314
(54)
(6,518)(62,867)
12,801(5,073)(15,088)988(508)(56,419)
1,948
1,017
(2,278)2,711(13,178)(135,938)

Financing activities:
Increase in short-term loans, net
Increase in commercial papers, net
Proceeds from long-term loans
Repayments of long-term loans
Redemption of bonds
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Payments for purchases of shares of subsidiaries not resulting in change in scope of consolidation
Other, net
Net cash used in financing activities

3,632
5,000
8,301
(3,117)(10,000)(1,776)(4,287)
(275)
(606)
(30)
(3,161)

3,232
—
950
(9,182)—(1,107)(4,050)
(254)
(151)
(29)
(10,592)

34,18747,06378,134(29,339)(94,127)(16,717)(40,352)(2,588)(5,704)(282)(29,753)

(175)
3,234
39,730(596)(3,180)42,900(1,647)30,441
373,965(111)—(1,045)4¥   42,857

10¥  39,730

38$  403,398

Millions of yen

Operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided by operating activities:
Depreciation and amortization other than amortization of goodwill
Amortization of goodwill
Loss on impairment of fixed assets
Gain on bargain purchase
Loss on step acquisitions
Subsidy income
Loss on reduction of property, plant and equipment
Loss on discontinued operation(Decrease) increase in liability for retirement benefits
Interest and dividend income
Interest expense
Exchange (gain) loss, net
Gain on sales of investments in securities, investments in capital, shares of subsidiaries andaffiliates, and investments in capital of subsidiaries and affiliates, net
Changes in operating assets and liabilities:
Notes and accounts receivable
Inventories
Notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Decrease in cash and cash equivalents resulting from exclusion of a subsidiaryfrom consolidation
Increase in cash and cash equivalents resulting from merger withunconsolidated subsidiaries
Cash and cash equivalents at end of the year (Note 21)
See notes to consolidated financial statements.

80

NAGASE & CO., LTD.

Integrated Report 2018

Notes to Consolidated Financial Statements
About the NAGASE GroupNAGASE & CO., LTD. and Consolidated Subsidiaries (March 31, 2018)

1. BASIS OF PREPARATIONThe U.S. dollar amounts in the accompanying consolidated
financial statements have been translated from yen amounts solely
for the convenience of the reader, as a matter of arithmetic computation only, at ¥106.24 = U.S.$1.00, the rate of exchange prevailingon March 31, 2018. This translation should not be construed as arepresentation that the yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at the above or
any other rate.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen for the years ended
March 31, 2018 and 2017 have been omitted. Consequently, thetotals shown in the accompanying consolidated financial statements for the years ended March 31, 2018 and 2017 (both in yen
and in U.S. dollars) do not necessarily agree with the sum of theindividual amounts.

Leading Us to the Future

The accompanying consolidated financial statements of NAGASE &CO., LTD. (the “Company”) and consolidated subsidiaries are preparedon the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, andhave been compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments andExchange Act of Japan.
In preparing the accompanying consolidated financial statements,
certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan.
Certain amounts in the prior year’s consolidated financial statements
have been reclassified to conform to the current year’s presentation.
Such reclassifications had no effect on consolidated profit or net assets.

The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date, except that the components of net assets excluding non-controlling interests, net unrealized holding gain on securities,
and deferred gain or loss on hedges are translated at their historicalexchange rates. Revenue and expense accounts are translated at the
average rates of exchange in effect during the year. Adjustments
resulting from translating financial statements whose accounts aredenominated in foreign currencies are not included in the determination of net income but are reported as “Translation adjustments” as acomponent of accumulated other comprehensive income or loss inthe accompanying consolidated balance sheets.
(c) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits,
and short-term investments which are readily convertible to cash andsubject to an insignificant risk of any change in their value, whichwere purchased with an original maturity of three months or less.
(d) Inventories
Inventories are stated at the lower of cost or net selling value, cost
being determined primarily by the moving-average method.
(e) Investments in Securities
Securities are classified into three categories: trading securities, heldto-maturity debt securities or other securities. Trading securities, consisting of debt and marketable equity securities, are stated at fairvalue. Gain and loss, both realized and unrealized, are credited or
charged to income. Held-to-maturity debt securities are stated at theiramortized cost. Marketable securities classified as other securities arecarried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, reported as a separate component of accumulated other comprehensive income or loss. Nonmarketable securities classified as other securities are carried at cost
determined by the moving-average method.
(f) Property, Plant and Equipment and Depreciation(except for Leased Assets)
Property, plant and equipment are stated at cost.
Depreciation of property, plant and equipment is calculated by thestraight-line method based on the estimated useful lives of therespective assets.

Financial and Corporate Information

Integrated Report 2018

Critical Initiatives for Sustainable Growth

NAGASE & CO., LTD.

Unique Products(a) Principles of Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and companies that it controls directly or
indirectly. Affiliates over which the Company exercises significant
influence in terms of their operating and financial policies have beenaccounted for by the equity method. All significant intercompany
balances and transactions have been eliminated in consolidation.
Certain subsidiaries were excluded from the scope of consolidation
because the effect of their sales, net profit or loss, total assets andretained earnings on the accompanying consolidated financial statements was immaterial. The unconsolidated subsidiaries and affiliates
not accounted for by the entity method were excluded from thescope of application of the equity method, because their profit or loss
and retained earnings attributable to the Company’s interest were notmaterial to the consolidated financial statements.
For consolidation purposes, the financial statements of the consolidated subsidiaries whose fiscal year end date differs from that of
the Company have been included in consolidation based on a provisional statement of accounts for a full fiscal year ending March 31.
Unrealized intercompany gains among the Company and theconsolidated subsidiaries have been entirely eliminated and the portion attributable to non-controlling interests has been charged to
non-controlling interests.
(b) Foreign Currency Translation
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance
sheet date, except that receivables and payables hedged by qualified
foreign currency forward exchange contracts are translated at thecorresponding contract rates. All other assets and liabilities denominated in foreign currencies are translated at their historical rates. Gainor loss on each translation is credited or charged to income.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at therates in effect at the respective transaction dates. Foreign exchange
gain or loss is credited or charged to income in the period in whichsuch gain or loss is recognized for financial reporting purposes.

Performance by Segment

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES81

Notes to Consolidated Financial Statements

The estimated useful lives of the principal assets are as follows:
Buildings(other than structures attached to the buildings) 15 to 50 years
Machinery and equipment
2 to 17 years(g) Intangible Assets (except for Leased Assets)
Technology-based assets recognized upon acquisition are amortizedon a straight-line basis over 13 to 17 years.
Costs incurred for computer software obtained for internal use arecapitalized and amortized on a straight-line basis over an estimateduseful life of 5 years.
(h) Goodwill
Goodwill is amortized over a period not exceeding 20 years on astraight-line basis. When immaterial, goodwill is charged to income
as incurred.
(i) Leased Assets
Leased assets under finance lease contracts which do not transfer
ownership to the lessee are depreciated to a residual value of zero by
the straight-line method over the respective lease terms.
(j) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide allowances for
doubtful accounts based on their historical experience of bad debts on
ordinary receivables plus an additional estimate of probable specificdoubtful accounts from customers experiencing financial difficulties.
(k) Income Taxes
Income taxes are calculated based on taxable income and charged
to income on an accrual basis. Deferred tax assets and liabilities arecomputed based on the temporary differences between the financial reporting and the tax bases of the assets and liabilities that will
result in taxable or deductible amounts in the future. Computationsof deferred tax assets and liabilities are based on the tax rates
which have been enacted as of the balance sheet date. The Company and certain domestic consolidated subsidiaries have adopted
the consolidated taxation system (the Company is the taxable
entity), which allows companies to make tax payments on the
combined profits of the parent company and its wholly owned
domestic subsidiaries.
(l) Accrued Bonuses for Employees
Accrued bonuses for employees are provided based on the estimatedamount of bonuses to be paid to employees in the following fiscal
year which is attributable to the current fiscal year.
(m) Accrued Bonuses for Directors and Executive Officers
Accrued bonuses for directors and executive officers are provided
based on the estimated amount of bonuses to be paid to directors
and executive officers in the following fiscal year which is attributable
to the current fiscal year.
(n) Liability for Retirement Benefits
Liability for retirement benefits is provided based on the amount of
the retirement benefit obligation less estimated pension plan assets at

the end of the fiscal year. The estimated benefit is attributed to eachperiod based on the plan’s benefit formula.
Prior service cost is charged to income in the fiscal year in whichsuch cost is recognized for financial reporting purposes. Actuarial
differences are principally credited or charged to income in the fiscal
year following the fiscal year in which such differences are recognized
for financial reporting purposes.
(o) Derivatives and Hedging Activities
Derivatives positions are carried at fair value with any changes in unrealized gain or loss charged or credited to income, except for those whichmeet the criteria for deferral hedge accounting under which unrealized
gain or loss is deferred as a component of net assets. Foreign currency
receivables and payables hedged by qualified foreign currency forward
exchange contracts are translated at the corresponding foreignexchange contract rates (“allocation method”). Interest-rate swaps whichmeet certain conditions are accounted for as if the interest rates applied
to the swaps had originally applied to the underlying loans.
Derivative financial instruments are utilized principally in order tomanage the risk arising from adverse fluctuation in foreign currency
exchange rates and interest-rate swaps are also utilized to mitigate therisk of fluctuation in interest rates on loans. Hedging instruments areforeign currency forward exchange contracts, foreign currency deposits, foreign currency loans and interest-rate swaps. Hedged items areforeign currency receivables and payables, forecast transactions andinterest rates on loans from financial institutions.
The Company and its consolidated subsidiaries (collectively, the“Group”) manage derivative transactions in accordance with internalmanagement rules. Under these rules, the Group conducts foreign
currency forward exchange contracts within a range of actual demandof accounts receivable, accounts payable and actual transactions inforeign currencies. Execution and management of interest-rate swaps
are based on internal management rules and hedged items of interest-rate swaps are identified by individual contracts.
The Company and certain consolidated subsidiaries assess theeffectiveness of the hedging activities based on a comparison of theaccumulated fluctuations of the hedged items and those of the hedging instruments in the period from the start of the hedging activities tothe assessment date. However, with regard to interest-rate swaps whichmeet certain conditions, the evaluation of effectiveness is omitted.
(p) Research and Development Costs
Research and development costs are charged to income when incurred.
(q) Distributions of Retained Earnings
Dividends and other distributions of retained earnings are approvedby the shareholders at a meeting held subsequent to the end of the
fiscal year to which such distributions are applicable. The accompanying consolidated financial statements do not, however, reflect theapplicable distributions of retained earnings as approved by the shareholders subsequent to the fiscal year end. (Refer to Note 23.)

3. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
Accounting Standard and Implementation Guidance for Revenue
Recognition(a) Overview
On March 30, 2018, the ASBJ issued “Accounting Standard for Revenue
Recognition” (ASBJ Statement No. 29) and “Implementation Guidance on
Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30).
The International Accounting Standards Board (hereinafter referred to as
the “IASB”) and the Financial Accounting Standards Board (hereinafter

82

NAGASE & CO., LTD.

Integrated Report 2018referred to as the “FASB”) in the United States co-developed comprehensive accounting standards for revenue recognition and issued “Revenue
from Contracts with Customers” (IFRS 15 by the IASB and Topic 606 by
the FASB) in May 2014. The ASBJ developed comprehensive accounting
standards on revenue recognition and issued them in conjunction with
the implementation guidance based on fact that IFRS 15 is applied fromfiscal years starting on or after January 1, 2018 and Topic 606 is applied
from fiscal years starting after December 15, 2017.

About the NAGASE Group(b) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending
March 31, 2022.
(c) Impact of the adoption of accounting standard andimplementation guidance
The Company is currently evaluating the effect of the adoption of theaccounting standard and the implementation guidance on its consolidated financial statements.

Leading Us to the Future

As the basic policy in developing accounting standards for revenue recognition, the ASBJ defined the accounting standard startingwith incorporating the basic principle of IFRS 15 from a standpoint ofcomparability between financial statements, which is one benefit ofensuring consistency with IFRS 15. Furthermore, the ASBJ added
alternative accounting treatment without impairing comparability
when there are matters to be considered related to accounting practices, etc. common in Japan.

4. INVENTORIESInventories at March 31, 2018 and 2017 are summarized as follows:

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

2017

¥67,681
1,883
4,106¥73,671¥58,162
1,309
3,648¥63,120$637,058
17,72438,648$693,439

Performance by Segment

2018

Thousands of
U.S. dollars
2018

Millions of yen

5. REDUCTIONS IN ACQUISITION COSTS DUE TO SUBSIDIESThe amounts of subsidies received from the national government and deducted from the acquisition costs of property, plant and equipment at
March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

2017

¥359
575
¥935

$ 4,970
5,845$10,825

Area

Millions of yen
2018

Thousands of
U.S. dollars
2018

Chugoku¥284$2,673

Taoyuan,Taiwan

221

2,080

Kinki

71

668

Kinki

168

1,581

Tokai

4

38

3
92
¥847

28
866
$7,973

Unique Products¥  528621¥1,150

Buildings and structures
Machinery, equipment and vehicles
Total

6. LOSS ON IMPAIRMENT OF FIXED ASSETS
Loss on impairment of fixed assets for the years ended March 31, 2018 and 2017 was as follows:
Major use

Classification

Kinki
Kinki, Chugoku

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information

Buildings and structures, machinery,equipment and vehicles, land, andintangible assets included in other assets
Business-use assets for processing of thin glass Buildings and structures, machinery,
panelsequipment and vehicles, intangible assets
included in other assets
Business-use assets for processing and selling of Buildings and structures, machinery,plastic materials
equipment and vehicles, intangible assets
included in other assets
Business-use assets for developing andBuildings and structures, machinery,
manufacturing of polymer film
equipment and vehicles
Business-use assets for manufacturing andBuildings and structures, machinery,
selling of rechargeable battery systems
equipment and vehicles, intangible assets
included in other assets
Business-use assets for developing and selling
Intangible assets included in other assets
digital textile printing systems
Idle assets
Land, building and structures
Total

Critical Initiatives for Sustainable GrowthBusiness-use assets for manufacturing andselling of functional dyes

83

Notes to Consolidated Financial Statements

Major use

Business-use assets for manufacturing andselling of color formers

Classification

Area

Buildings and structures, machinery,equipment and vehicles, construction inprogress, intangible assets included inother assets
Machinery, equipment and vehicles

Business-use assets for manufacturing andselling of color formers
Business-use assets for processing and selling of Buildings and structures, machinery,plastic materials
equipment and vehicles, intangible assets
included in other assets
Business-use assets for manufacturing andMachinery, equipment and vehicles,
selling of rechargeable battery systems
intangible assets included in other assets
Business-use assets for manufacturing andBuildings and structures
selling of polymer products
Business-use assets for semiconductors andBuildings and structures, machinery,display devices
equipment and vehicles
Idle assets
Land
Total
The Company and its consolidated subsidiaries group fixed assets forbusiness use principally based on its business management segment.
They also group fixed assets to be disposed of and idle assets at each
asset individually as smallest cash-generating units.
For the year ended March 31, 2018, due to decreasing profitability,
the carrying values of certain fixed assets for business use were reduced
to their recoverable amounts. As to idle assets, due to a declining fairvalue, the carrying fair values were reduced to their recoverable amounts.
The recoverable amounts were measured at net selling value orvalue in use. Net selling value was calculated based on the appraisal

Hokuriku
Tennessee,
U.S.A.

Millions of yen
2017¥1,233
15

Kinki

85

Tokai

38

Tokai

17

Kanto
Kinki

1
6
¥1,398

value published by the tax authorities or the real estate appraisers, or
estimated sales value.
For the year ended March 31, 2017, due to decreasing profitability
on business-use assets, the carrying values were reduced to theirrecoverable amounts. As to idle assets, due to a declining fair value,
the carrying values were reduced to their recoverable amounts.
The recoverable amounts were measured at net selling value orvalue in use. Net selling value was calculated based on the appraisal
value published by the tax authorities or the real estate appraisers.

7. INVESTMENTS IN SECURITIES(a) Marketable securities classified as other securities at March 31, 2018 and 2017 are summarized as follows:
Millions of yen
2018

Securities whose carrying value exceeds theiracquisition costs:
Equity securities
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Total

2017

Carrying value

Acquisition costs

Unrealized
gain (loss)¥88,219¥16,475¥71,743¥83,820¥16,299¥67,520792¥89,011870¥17,346(78)¥71,665269¥84,090344¥16,643(74)¥67,446

Thousands of U.S. dollars
2018

Securities whose carrying value exceeds theiracquisition costs:
Equity securities
Securities whose carrying value does notexceed their acquisition costs:
Equity securities
Total

84

NAGASE & CO., LTD.

Integrated Report 2018

Carrying value

Acquisition costs

Unrealized
gain (loss)$830,375$155,073$675,292

7,455$837,829

8,189$163,272(734)$674,558

Carrying value

Acquisition costs

Unrealized
gain (loss)

About the NAGASE Group“Acquisition costs” in the above table represent the carrying value after recognizing impairment losses. For the year ended March 31, 2018, theCompany and its consolidated subsidiaries did not recognize any impairment losses on valuation of marketable securities. For the year ended
March 31, 2017, the Company and its consolidated subsidiaries recognized such impairment losses in the amount of ¥98 million.
(b) Securities classified as other securities for which market value was not determinable and not included in the table (a) at March 31, 2018 and2017 are summarized as follows:
2018
Carrying valueMarket value not determinable:
Unlisted equity securities
Total¥3,275¥3,275¥2,669¥2,669$30,826$30,826

Leading Us to the Future

2017
Carrying value

Thousands of
U.S. dollars
2018
Carrying value

Millions of yen(c) Proceeds from sales of, and gross realized gain and loss on, other securities for the years ended March 31, 2018 and 2017 are summarized
as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

2017

¥14
8
—

$132
75
—

¥2,401
2,006
25

Performance by Segment

Proceeds from sales
Gain on sales
Loss on sales

8. SHORT-TERM LOANS, BONDS, LONG-TERM LOANS, COMMERCIAL PAPERS AND FINANCE LEASE OBLIGATIONS
Short-term loans at March 31, 2018 and 2017, principally represented loans and commercial papers in the form of deeds at weighted-averageannual interest rates of 2.62% and 1.47% per annum, respectively.
Long-term loans, bonds and finance lease obligations at March 31, 2018 and 2017 consisted of the following:¥   23,601
10,00010,00010,000316
53,918(13,582)¥   40,335$ 272,722—
94,127
94,127
2,485
463,470(104,725)$ 358,735

2018Unsecured loans from banks and insurance companies, payable in Yen, U.S. dollars,
RMB, and HK dollars due through 2023, at rates from 0.13% to 4.51%
Unsecured bonds in Yen, due 2017, at a rate of 0.442%
Unsecured bonds in Yen, due 2019, at a rate of 0.753%
Unsecured bonds in Yen, due 2022, at a rate of 0.539%
Lease obligations
Less current portion
Total¥   28,974—
10,00010,000264
49,239(11,126)¥   38,112

Unique Products

2017

Thousands of
U.S. dollars
2018

Millions of yen

The aggregate annual maturities of bonds, long-term loans and finance lease obligations subsequent to March 31, 2018 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2019
2020
2021
2022
2023
2024 and thereafter
Total¥11,126
10,753
1,009
11,72014,522
106¥49,239$104,725
101,214
9,497
110,316
136,691998$463,470

Critical Initiatives for Sustainable GrowthYears ending March 31,

In order to achieve more efficient and flexible financing, the Company has concluded line-of-credit agreements with certain financial institutions.
The status of these lines of credit at March 31, 2018 and 2017 is as follows:

Lines of credit
Credit utilized

2018

2017

¥10,000—¥10,000—

NAGASE & CO., LTD.

Financial and Corporate Information

Thousands of
U.S. dollars
2018

Millions of yen$94,127—

Integrated Report 201885

Notes to Consolidated Financial Statements

9. OTHER COMPREHENSIVE INCOME
Reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2018 and2017 were as follows:
2018

2017

Thousands of
U.S. dollars
2018¥   4,413(4)
4,409(1,325)
3,083¥16,799(1,884)
14,915(4,313)
10,602$   41,538(38)
41,500(12,472)
29,019

(54)
25
(28)
8
(19)

121
(100)
20
(6)
14

(508)
235
(264)
75
(179)

(14)
—
(14)
—
(14)

(1,108)(159)(1,267)44(1,223)

(132)
—
(132)
—
(132)

(376)
317
(59)
15
(43)

(369)
3,111
2,742
(847)
1,895

(3,539)
2,984
(555)
141
(405)

50
¥   3,055(152)¥11,135471$   28,756

Millions of yen

Net unrealized holding gain on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effectNet unrealized holding gain on securities
Deferred (loss) gain on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effect
Deferred (loss) gain on hedges
Translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effectTranslation adjustments
Retirement benefit liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in the statement of income
Amount before tax effectTax effect
Retirement benefit liability adjustments
Share of other comprehensive income (loss) of affiliates accounted for by the equity method:Amount arising during the year
Total other comprehensive income

10. RETIREMENT BENEFIT PLANS(a) Outline of retirement benefit plans for employees
The Company and its domestic consolidated subsidiaries have defined
benefit plans, i.e., defined benefit pension plans and lump-sum payment plans. Certain overseas consolidated subsidiaries also havedefined benefit plans. Also, the Company and certain consolidated

subsidiaries have defined contribution pension plans. In addition to
the retirement benefit plans described above, the Company and its
consolidated subsidiaries pay additional retirement benefits undercertain conditions.

(b) Defined benefit plans
The changes in the retirement benefit obligation for the years ended March 31, 2018 and 2017 are as follows:
2018

2017

Thousands of
U.S. dollars
2018¥33,512
1,518
245
218
(1,493)41(10)¥34,031¥32,993
1,445
253
120
(1,316)—
16¥33,512$315,437
14,2882,306
2,052(14,053)386(94)$320,322

Millions of yen

Balance at the beginning of the year
Service cost
Interest cost
Actuarial differences
Retirement benefits paid
Changes in scope of consolidation
Other
Balance at the end of the year

86

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE GroupThe changes in plan assets for the years ended March 31, 2018 and 2017 are as follows:

Balance at the beginning of the year
Expected return on plan assets
Actuarial differences
Contributions by the Company and its consolidated subsidiaries
Retirement benefits paid
Other
Balance at the end of the year2017

¥18,888
378
(157)
1,220
(815)
(2)
¥19,513¥18,932
395
(249)
584
(782)
7
¥18,888$177,786
3,558(1,478)
11,483(7,671)(19)$183,669

Leading Us to the Future

2018

Thousands of
U.S. dollars
2018

Millions of yen

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of March 31, 2018and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet¥   22,460(19,513)
2,947
11,57014,518¥   22,273(18,888)
3,384
11,23914,624$   211,408(183,669)
27,739108,904
136,653

Liability for retirement benefits
Asset for the retirement benefits
Net liability for retirement benefits in the balance sheet

14,518—¥   14,518

14,625(1)¥   14,624

136,653—$   136,653

2018

Funded retirement benefit obligation
Plan assets at fair value

Performance by Segment

2017

Thousands of
U.S. dollars
2018

Millions of yen

The components of retirement benefit expenses for the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

2017

¥1,518
245
(378)
317
¥1,702¥1,445
253
(395)
3,111
¥4,414$14,288
2,306(3,558)2,984$16,020

Unique Products

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial differences
Retirement benefit expenses

Actuarial differences included in other comprehensive income (loss) (before tax effect) for the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

Actuarial differences

2017

¥(59)

¥2,742$(555)
Critical Initiatives for Sustainable Growth

Unrecognized actuarial differences included in accumulated other comprehensive income (before tax effect) as of March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

Unrecognized actuarial differences

2017¥(448)¥(388)$(4,217)

The allocation of plan assets, by major category, as a percentage of total plan assets at fair value as of March 31, 2018 and 2017 is as follows:
2018

2017

64%
19
15
2
100%

73%
17
—
10
100%

Financial and Corporate Information

Bonds
Equity securities
Alternative investments*
Other
Total
* “Alternative investments” consist of insurance-linked securities and private REITs.

The expected long-term rate of return on plan assets is determined as a result of consideration of both the portfolio allocation at present and in
the future, and expected long-term rate of return from multiple plan assets at present and in the future.
The assumptions used in accounting for the above plans were as follows:
2018

Discount rate
Expected long-term rate of return on plan assets

2017

0.8%
2.0
NAGASE & CO., LTD.

0.8%
2.1

Integrated Report 201887

Notes to Consolidated Financial Statements(c) Defined contribution plans
Millions of yen
2018

Contributions to defined contribution plans by the Company andits consolidated subsidiaries

2017

¥283

¥287

Thousands of
U.S. dollars
2018$2,664

11. INCOME TAXES
Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation, inhabitants’ and enterprise taxes, which,in the aggregate, resulted in a statutory tax rate of approximately 30.9% for the years ended March 31, 2018 and 2017.
The effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2018 and 2017 differ
from the statutory tax rates for the following reasons:
2018

Statutory tax rates
Adjustments for:Expenses not deductible for income tax purposes
Dividends and other income deductible for income tax purposes
Net adjustment resulting from elimination of dividend income upon consolidation
Different tax rates applied at overseas subsidiaries
Tax credit
Amortization of goodwill
Valuation allowance
Other, net
Effective tax rates

2017

30.9%

30.9%

3.1
(9.2)
8.3
(3.8)
(1.6)
2.2
(5.0)
1.9
26.8%

3.0
(6.9)
8.8
(3.1)
(2.1)
3.0
1.4
(1.2)
33.8%

The significant components of the Company’s and its consolidated subsidiaries’ deferred tax assets and liabilities at March 31, 2018 and 2017 aresummarized as follows:
2017

Thousands of
U.S. dollars
2018¥     1,436
152
465
184
3,832
4,306
1,007
1,107
6,321
2,530
21,345(5,190)16,154¥   1,202
237
508
247
3,555
4,496
1,114
1,338
8,444
2,770
23,916(6,032)
17,884$   13,517
1,431
4,377
1,732
36,06940,531
9,479
10,42059,497
23,814200,913(48,852)
152,052(3,720)(1,240)
(302)
(643)
(290)
(21,347)(620)(28,165)¥(12,011)(4,204)(1,425)
(354)
(553)
(311)
(20,186)(490)(27,526)¥ (9,641)(35,015)(11,672)(2,843)(6,052)(2,730)(200,932)(5,836)(265,107)$(113,055)

Millions of yen
2018

88

Deferred tax assets:
Accrued bonuses for employees
Allowance for doubtful accounts
Unrealized gain on inventories
Accrued enterprise taxes
Tax loss carryforwards
Liability for retirement benefits
Investments in securities
Loss on impairment of fixed assets
Tax goodwill
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Technology-based assets
Deferred capital gain on property
Reserve for special depreciation
Undistributed earnings of subsidiaries and affiliates
Revaluation of land
Net unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

NAGASE & CO., LTD.

Integrated Report 2018

About the NAGASE Group12. SHAREHOLDERS’ EQUITY
31, 2018 amounted to ¥9,634 million ($90,681 thousand). In addition,
the Company’s legal reserve included in retained earnings at March
31, 2018 amounted to ¥2,424 million ($22,816 thousand).
Under the Law, upon the issuance and sale of new shares ofcommon stock, the entire amount of the proceeds is required to beaccounted for as common stock, although a company may, by resolution of the Board of Directors, account for an amount not exceeding 50% of the proceeds of the sale of new shares as additional
paid-in capital.

Leading Us to the Future

The Corporation Law of Japan (the “Law”) provides that an amountequal to 10% of the amount to be disbursed as distributions of capitalsurplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and thelegal reserve, respectively, until the sum of the capital reserve and thelegal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of theshareholders, or by the Board of Directors if certain conditions are met.
The Company’s capital reserve included in capital surplus at March

Movements in common stock during the years ended March 31, 2018 and 2017 are summarized as follows:
Number of shares
2018
April 1, 2017

Common stock

Increase

127,408,285

Decrease—

March 31, 2018—

127,408,285

2017

Common stock

Increase

127,408,285

Decrease—

March 31, 2017—

Performance by Segment

April 1, 2016

127,408,285

13. TREASURY STOCK
Movements in treasury stock during the years ended March 31, 2018 and 2017 are summarized as follows:

Treasury stock

April 1, 2017

Number of shares
2018
Increase
Decrease

1,287,366

908,602

April 1, 2016

Increase

March 31, 20182

2,195,966

2017
Decrease

910,147

81

March 31, 2017

1,287,366

The increase in treasury stock consists of 908,000 shares resulting
from the purchases of treasury stock by resolution of the Board of
Directors and 2,147 shares resulting from the purchases of shares ofless than one voting unit for the year ended March 31, 2017. The
decrease in treasury stock consists of 81 shares resulting from thedisposition of shares of less than one voting unit for the year ended
March 31, 2017.

Critical Initiatives for Sustainable Growth

The increase in treasury stock consists of 900,000 shares resulting fromthe purchases of treasury stock by resolution of the Board of Directors,
7,549 shares resulting from the purchases of shares from untraceable
shareholders, and 1,053 shares resulting from the purchases of sharesof less than one voting unit for the year ended March 31, 2018. The
decrease in treasury stock consists of 2 shares resulting from thedisposition of shares of less than one voting unit for the year ended
March 31, 2018.

377,300

Unique Products

Treasury stock

14. FINANCIAL INSTRUMENTS
each customer based on the Group’s internal credit rating policy andmonitors outstanding balances. The Group establishes system underwhich the credit status by each customer is reviewed at least once a
year and the sales limit amount updated as necessary.
In the cases of notes and accounts receivable or payable denominated in foreign currencies, foreign currency forward exchange contracts are used to hedge the risk of fluctuation. However, for foreign
currency transactions denominated in the same currency involving
either payables or receivables, foreign currency forward exchange
contracts are used solely for the netted position.
Investments in securities are subject to market price fluctuation
risk. However, these are mainly equity securities of other companies
with which the Group has business relationships. The Group regularly
monitors both their fair value and the financial condition of the issuer.
The Group also reviews as needed the condition of its holdings withconcern to the status of business and financial transactions.
NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information(a) Policy for financial instruments
The Group invests excess funds in highly secure and short-term financial assets, whose principal is guaranteed to be recoverable. With regard
to financing policy, short-term working funds are raised by bank borrowings or issuance of commercial papers and long-term funds areraised by bank borrowings and the issuance of bonds. The policy forderivative transactions is that those are utilized to mitigate the fluctuation risk related to foreign currency exchange rates arising from thereceivables and payables denominated in foreign currencies, and fluctuation risk related to interest rates with respect to loans payable, andderivative transactions are not carried out for speculative purposes.
(b) Types of financial instruments, related risk and risk management
for financial instruments
Receivables such as trade notes and accounts receivable are exposed
to customers’ credit risks. With regard to this risk, the Group manages
the settlement date by each customer, and establishes credit limits by89

Notes to Consolidated Financial Statements

Short-term loans are raised primarily in connection with businessactivities. Long-term loans and bonds are taken out principally for the
purpose of making capital spending, investments and financing. Loans
with variable interest rates are subject to the risk of fluctuating interest
rates. However, to reduce such risk, the Group utilizes derivatives(interest-rate swap transactions) as a hedging instrument.

Derivatives include foreign currency forward exchange contracts
to manage fluctuation risk in foreign currency exchange rates andinterest-rate swaps to manage fluctuation risk of interest rates related
to the interest payments for bank loans.
In addition, notes and accounts payable and bank loans are
exposed to liquidity risk. However, the Group manages such risk bymonitoring the balance of inflow and outflow of cash and establishingliquidity on hand in excess of half of the amount of monthly net sales.

(c) Fair value of financial instruments
The carrying value of financial instruments on the consolidated balance sheets, fair value and the differences as of March 31, 2018 and 2017, areshown in the following table. Financial instruments for which fair value is deemed extremely difficult to determine are not included.

Assets:Cash and time deposits
Notes and accounts receivable
Investments in securities:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Commercial papers
Bonds
Long-term loans
Total liabilities
Derivatives*:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

Assets:Cash and time deposits
Notes and accounts receivable
Investments in securities:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Current portion of bonds
Bonds
Long-term loans
Total liabilities
Derivatives*:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions

90

NAGASE & CO., LTD.

Integrated Report 2018

Carrying value

Millions of yen
2018
Fair value

Difference¥ 43,303
225,999¥ 43,303
225,999¥  ——

89,011¥358,314

89,011¥358,314—¥  —¥118,028
31,934
11,0675,000
20,00017,906¥203,937¥118,028
31,934
11,067
5,000
20,174
17,979¥204,184

¥  —
—
—
—
174
72
¥246

¥     29(3)¥     26¥     29(3)¥     26

¥  —
—
¥  —

Carrying value

Millions of yen
2017
Fair value

Difference¥ 39,830
206,846¥ 39,830
206,846¥  ——

84,090¥330,767

84,090¥330,767—¥  —¥102,076
28,162
3,522
10,00020,00020,078¥183,840¥102,076
28,162
3,522
10,007
20,256
20,329¥184,354

¥  —
—
—
7
256
250
¥513

¥     211¥     22¥     211¥     22

¥  —
—
¥  —

About the NAGASE Group

Thousands of U.S. dollars
2018
Fair value

Difference$  407,596
2,127,250$  407,596
2,127,250$   ——

837,829$3,372,684

837,829$3,372,684

—
$   —

$1,110,956
300,584
104,170
47,063
188,253
168,543$1,919,588$1,110,956
300,584
104,170
47,063
189,891
169,230$1,921,913

$   —
—
—
—
1,638
678
$2,316$     273
(28)$     245$     273
(28)$     245

$   —
—
$   —

Performance by Segment

Carrying value

Leading Us to the Future

Assets:Cash and time deposits
Notes and accounts receivable
Investments in securities:
Other securities
Total assets
Liabilities:
Notes and accounts payable
Short-term loans
Current portion of long-term loans
Commercial papers
Bonds
Long-term loans
Total liabilities
Derivatives*:
Not subject to hedge accounting
Subject to hedge accounting
Total derivative transactions* Receivables and payables arising from derivative transactions are presented as a net value with the amount in parentheses representing a net liability position.

Short-term loans, current portion of long-term loans and commercial
papersSince these items are settled in a short period of time, their carrying
value approximates the fair value.
Bonds and current portion of bonds
The fair value of bonds is based on the market price.
Long-term loans
The fair value of long-term loans with fixed interest rates is based on
the present value of the total of principal and interest discounted by
the interest rate to be applied assuming new loans under similar
conditions to existing loans are made. Floating interest rates for longterm loans are hedged by interest-rate swap agreements andaccounted for as loans with fixed interest rates. The fair value of thoselong-term loans is based on the present value of the total of principals, interests and net cash flows of swap agreements discounted by
the interest rates, estimated reasonably, applicable to new loans undersimilar conditions.
Derivative transactions
Please refer to Note 14.

Unique Products
Critical Initiatives for Sustainable Growth

The calculation methods of fair values of financial instruments andsecurities and derivative transactions are as follows:
Cash and time deposits
Their carrying value approximates the fair value.
Notes and accounts receivable
The fair value of notes and accounts receivable is based on theirpresent values discounted by the interest rate determined taking into
account the remaining period to maturity for each receivable classified
by settlement date.
Investments in securities
The fair value of investments in securities is based on quoted market
prices. Please refer to Note 7 regarding information on securities byholding purpose.
Notes and accounts payable
The fair value of notes and accounts payable is based on their present
values discounted by the interest rate determined taking into accountthe remaining period to maturity for each payable classified by settlement date.

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201891

Notes to Consolidated Financial Statements

The carrying value of financial instruments without determinable market value at March 31, 2018 and 2017 is presented as follows:
2018

2017

Thousands of
U.S. dollars
2018¥ 3,275
8,116¥11,391¥ 2,669
7,788¥10,458$ 30,826
76,393$107,220

Millions of yen

Unlisted equity securities
Investments in unconsolidated subsidiaries and affiliates
Total

The redemption schedule for time deposits and notes and accounts receivable with maturity dates at March 31, 2018 is summarized as follows:
Millions of yen
Over 1 year andWithin 1 year
less than 5 years¥ 43,257
225,999¥269,256

Time deposits
Notes and accounts receivable
Total

¥—
—
¥—

Thousands of U.S. dollars
Over 1 year andWithin 1 year
less than 5 years$  407,163
2,127,250$2,534,413

Time deposits
Notes and accounts receivable
Total

$—
—
$—

With respect to the redemption schedule of bonds, long-term loans and finance lease obligations, please refer to Note 8.

15. DERIVATIVES AND HEDGING ACTIVITIESThe currency-related derivatives positions outstanding for which hedge accounting has not been applied at March 31, 2018 and 2017 are as
follows:

Classification

Transaction

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
OthersTotal

92

NAGASE & CO., LTD.

Integrated Report 2018

Millions of yen
2018
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)Valuation
gain (loss)¥ 4,707
2,062
845
740
105

¥—
—
—
—
—

¥ 46
(3)
12
(6)
(0)

¥ 46
(3)
12
(6)
(0)

2,019
966
86
93
¥11,627

—
—
—
—
¥—

(18)
1
(0)
(0)
¥ 29

(18)
1
(0)
(0)
¥ 29

Transaction

Transaction

¥—
—
—
—
—

¥ 24
(10)
3
1
(1)

¥ 24
(10)
3
1
(1)

750
379
33
3
¥11,706

—
—
—
—
¥—

2
2
(0)
0
¥ 21

2
2
(0)
0
¥ 21

Thousands of U.S. dollars
2018
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)Valuation
gain (loss)$ 44,305
19,409
7,954
6,965
988

$—
—
—
—
—

$ 433
(28)
113
(56)
(0)

$ 433
(28)
113
(56)
(0)

19,004
9,093
809
875
$109,441

—
—
—
—
$—

(169)
9
(0)
(0)
$ 273

(169)
9
(0)
(0)
$ 273

Unique Products

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
OthersTotal¥ 7,475
1,772
763
440
88

Performance by Segment

Classification

Valuation
gain (loss)

Leading Us to the Future

Foreign currency forward exchange contracts:
Selling:
U.S. dollars
Yen
Euro
RMB
Over-the-counter transactions
Others
Buying:U.S. dollars
YenEuro
Others
Total

About the NAGASE GroupClassification

Millions of yen
2017
Contract value(notional principal
Contract value
amount over(notional principal
one year)
Fair value
amount)

The fair value of foreign currency forward exchange contracts is mainly computed using the prices provided by counterparty financial institutions.
Critical Initiatives for Sustainable Growth
Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201893

Notes to Consolidated Financial Statements

The currency-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2018 and 2017 are as follows:

Method for hedge accounting

Deferral hedge accounting

Allocation method forforeign currency forward
exchange contracts(Note 2(o))

Transaction

Foreign currency forward exchange
contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange
contracts:
Selling:

Major hedged item

Accounts
receivable

Accounts payable

Accounts
receivableEuro
Buying:Euro
THB
Others

Accounts payable

Total

Method for hedge accounting

Deferral hedge accounting

Allocation method forforeign currency forward
exchange contracts(Note 2(o))

Transaction

Foreign currency forward exchange
contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
THB
OthersForeign currency forward exchange
contracts:
Selling:Euro
Buying:Euro
OthersTotal

94

NAGASE & CO., LTD.

Integrated Report 2018

Major hedged item

Millions of yen
2018
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)Fair value¥    1
360
657
26

¥—
—
—
—

¥(0)
5
(5)
0

30
160
37
7

—
—
22
—

(0)
(1)
(0)
(0)

2

—

(*)

63
30
0
¥1,379

—
—
—
¥22

(*)
(*)
(*)
¥(3)

Millions of yen
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)Fair value

Accounts
receivable

¥  4
434
76
23

¥—
—
—
—

¥0
1
0
(0)

Accounts payable

45
178
29
24
18

—
—
—
—
—

0
(1)
(0)
0
0

12

—

(*)

86
23
¥956

—
—
¥—

(*)
(*)
¥1

Accounts
receivable
Accounts payable

Accounts
receivable

Accounts payable

Accounts
receivableEuro
Buying:Euro
THB
Others

Accounts payable

Total

Fair value$     9
3,389
6,184
245

$ —
—
—
—

$ (0)
47
(47)
0

282
1,506
348
66

—
—
207
—

(0)
(9)
(0)
(0)

19

—

(*)

593
282
0
$12,980

—
—
—
$207

(*)
(*)
(*)
$(28)

Performance by Segment

Allocation method forforeign currency forward
exchange contracts(Note 2(o))

Major hedged item

Leading Us to the Future

Deferral hedge accounting

Transaction

Foreign currency forward exchange
contracts:
Selling:
U.S. dollars
Euro
RMB
Others
Buying:U.S. dollars
Euro
RMB
OthersForeign currency forward exchange
contracts:
Selling:

About the NAGASE Group

Method for hedge accounting

Thousands of U.S. dollars
2018
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)

The fair value of foreign currency forward exchange contracts is mainly computed using the prices provided by counterparty financial institutions.
(*): The fair value of foreign currency forward exchange contracts that qualify for the allocation method is included in the fair value of the underlying accounts receivable and payable.

The interest-related derivatives positions outstanding for which hedge accounting has been applied at March 31, 2018 and 2017 are as follows:

Transaction

Transaction

Method for hedge accounting

Transaction

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Long-term loans

Hedged item

Long-term loans

Hedged item

Long-term loans¥18,000¥8,000(**)

Millions of yen
2017
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)¥20,465¥18,000$75,301

Fair value(**)

Thousands of U.S. dollars
2018
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)$169,428

Fair value

Critical Initiatives for Sustainable Growth

Method for hedge accounting

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Hedged item

Unique Products

Method for hedge accounting

Swap rates applied toInterest-rate swap transactions
underlying long-term loans (pay—fixed, receive—variable)

Millions of yen
2018
Contract value
Contract value(notional principal(notional principal
amount over one year)
amount)Fair value(**)
Financial and Corporate Information(**): Since interest-rate swap agreements are accounted for as if the interest rates applied to the swaps had originally applied to the underlying long-term loans, their fair values
were included in the fair value of the long-term loans.

NAGASE & CO., LTD.

Integrated Report 201895

Notes to Consolidated Financial Statements

16. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2018 and 2017 totaled¥6,009 million ($56,561 thousand) and ¥5,167 million, respectively.

17. OPERATING LEASES
Future minimum lease payments subsequent to March 31, 2018 under noncancelable operating leases are as follows:
Years ending March 31,

Millions of yen

Thousands of
U.S. dollars

20192020 and thereafter
Total¥  536518¥1,054$5,045
4,876$9,921

18. CONTINGENT LIABILITIESAt March 31, 2018, the Company and its consolidated subsidiaries were
contingently liable as guarantors of loans of customers and other in theaggregate amount of ¥584 million ($5,497 thousand), and as guarantors of loans of employees in the amount of ¥1 million ($9 thousand).

In addition, at March 31, 2018, the Company and its consolidated
subsidiaries had contingent liabilities arising from notes discountedwith banks and notes endorsed in the amount of ¥234 million($2,203 thousand).

19. PLEDGED ASSETS
Pledged assets as of March 31, 2018 are as follows:Land

Millions of yen
2018

Thousands of
U.S. dollars
2018

¥760

$7,154

Millions of yen
2018

Thousands of
U.S. dollars
2018

¥28

$264

Secured liabilities as of March 31, 2018 are as follows:

Long-term loans

20. AMOUNTS PER SHARE
Amounts per share at March 31, 2018 and 2017 and for the years then ended are as follows:
Yen

Profit attributable to owners of parent:
Basic
DilutedNet assets
Cash dividends applicable to the year
Basic profit attributable to owners of parent per share has been computed based on the profit attributable to owners of parent available
for distribution to the shareholders of common stock and theweighted-average number of shares of common stock outstanding
during the year.
Diluted profit attributable to owners of parent per share for theyears ended March 31, 2018 and 2017 has not been presented because

96

NAGASE & CO., LTD.

Integrated Report 2018

2018

2017

¥  136.34—
2,424.97
40.00¥   81.65—
2,301.10
33.00

U.S. dollars
2018$ 1.28
—
22.83
0.38

no potentially dilutive shares of common stock were outstanding.
Net assets per share have been computed based on the numberof shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends proposedby the Board of Directors as applicable to the respective years
together with the interim cash dividends paid.

About the NAGASE GroupThe financial data used in the computation of basic profit attributable to owners of parent per share for the years ended March 31, 2018 and2017 are summarized as follows:
Thousands of
U.S. dollars
2018

Millions of yen
2018

2017

¥17,175
17,175125,977,181¥10,331
10,331
126,541,671$161,662
161,662
Leading Us to the Future

Profit attributable to owners of parent
Profit available for distribution to shareholders of common stock
Weighted-average number of shares

21. CASH AND TIME DEPOSITS
A reconciliation of cash and time deposits in the accompanying consolidated balance sheets at March 31, 2018 and 2017 and cash and cash equivalents in the accompanying consolidated statements of cash flows for the years then ended is as follows:

Cash and time deposits
Long-term deposit included in other assets of investments and other assets
Time deposits with maturities of more than three months
Cash and cash equivalents

2017¥43,303—(445)¥42,857¥39,8302(102)¥39,730$407,596—(4,189)$403,398

Performance by Segment

2018

Thousands of
U.S. dollars
2018

Millions of yen

22. SEGMENT INFORMATIONThe Electronics segment is engaged in the sales of pre-processing
materials and devices for LCD/semiconductors, materials for display
panels, materials and devices for semiconductor assembly, lowtemperature/vacuum equipment, high-function epoxy, resins, precision electronics abrasives, and more for the displays, touch panels,
semiconductors, hard disk drives, electronic components, and heavy
electrical industries.
The Automotive & Energy segment is engaged in the sales ofplastic products, thermoplastic resins, thermosetting resins, silicone
products, resins molding tools/dies, high-function car electronics
materials and components, battery materials, solar cell/secondary
battery materials and more for the automotives, automotive components, and energy industries.
The Life & Healthcare segment is engaged in the sales of pharmaceutical/agricultural chemicals and materials, research products, invitro diagnostics, enzymes, food additives, additives for cosmetics,
feeds, and surfactants for the pharmaceutical, food, and cosmetics
industries. Furthermore, the segment offers radiation measurement as
one of its main services. In addition, this segment sells cosmetics,
health foods, and beauty foods directly to consumers.
(b) Calculation methods of net sales, income or loss, assets, andother items by reportable segments
The accounting policies of reportable segments are generally identicalto those described in Note 2. Reportable segment income corresponds to operating income in the consolidated statements ofincome. Intersegment internal income and transfers are determinedbased on the values of transactions at actual market prices.

Unique Products
Critical Initiatives for Sustainable Growth(a) Overview of reportable segments
The reportable segments of the Company comprise those entities
for which obtaining separate financial reports is possible and thatare subject to regular review by the Board of Directors, which
decides upon the distribution of management resources andassesses their performance.
Reflecting the respective positions of each business in the value
chain, as well as identifying the most closely aligned industries, theCompany defined five segment categories: Functional Materials (locatedat the top of the value chain), Advanced Materials & Processing (locatedin the next stage of the value chain), Electronics, Automotive & Energy,
and Life & Healthcare (functioning within the corresponding industries).
The following describes the major products and services handled
by each reportable segment.
The Functional Materials segment is engaged in the sales of materials for paints/inks, urethane materials, auxiliaries, plastic materials,
plastic additives, industrial oil solutions, surfactants materials, fluorochemicals, encapsulant materials, silicone materials, and more for thepaints/inks, resins, urethane foams, organic synthesis, surfactants, andsemiconductors industries.
The Advanced Materials & Processing segment is engaged in thesales of dyestuffs, dyes, functional dyes, digital print processing products,
thermoplastic resins, thermosetting resins, automobile refinish paints,
conductive coatings, synthetic rubber, inorganic materials, plastics
products, resins molding tools/dies for the dye/additive, digital print
processing materials, fiber processing, raw resin materials, resin moldings, functional films and sheets, constructions, and other industries.

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201897

Notes to Consolidated Financial Statements(c) Information on net sales, income or loss, assets and other items for each reportable segment
Information by reportable segments for the years ended March 31, 2018 and 2017 is as follows:
Millions of yen
2018
Reportable Segments

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization
other than amortization of
goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, net and intangible
assetsFunctional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare

Total

Total

Corporate

Adjustments Consolidated¥176,068
2,543
178,6125,170
87,905¥262,831
2,234
265,065
6,700
134,977¥129,324
2,108
131,433
8,917
70,149¥129,708
2,817
132,526
2,415
51,109¥85,371508
85,8804,216
97,667¥783,303
10,213
793,517
27,420441,809¥  629
4,783
5,413
207
5,304

¥783,933
14,997
798,931
27,628447,113¥      ———
(3,954)
153,594¥     — ¥783,933(14,997)—(14,997) 783,933
445
24,118(29,262) 571,445

456
133
3,276

645
—
—

2,454
112
1,296

249
—
—

3,552
1,502
20,905

7,359
1,748
25,478

218
—
—

7,577
1,748
25,478

1,717
—
—

—
—
—

9,295
1,748
25,478

2,478

1,482

2,751

1,231

2,601

10,545—

10,545—(2)

10,542

243

2,817

1,834

191

2,369

7,458

68

7,527

1,896

—

9,423

OthersMillions of yen
2017
Reportable Segments

Sales to customers
Intersegment sales and transfers
Net sales
Segment income
Segment assets
Other items:
Depreciation and amortization
other than amortization of
goodwill
Amortization of goodwill
Unamortized balance of goodwill
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, net and intangible
assets98

NAGASE & CO., LTD.

Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare

Total

Corporate¥153,546
2,000
155,546
4,185
72,576¥242,609
2,414
245,024
5,093
121,346¥127,722
1,977
129,699
6,333
65,610¥112,956
2,619
115,576
1,539
46,258¥84,904472
85,376
3,332
98,221¥721,739
9,483
731,223
20,484
404,013¥  644
5,432
6,077
148
5,089

¥722,384
14,916
737,300
20,633409,102¥     ———
(6,153)
149,020¥    —(14,916)(14,916)550(27,347)¥722,384—
722,384
15,030530,775

476
—
—

809
—
—

2,524
41
627

219
—
—

3,412
1,502
22,407

7,442
1,543
23,034

216
—
—

7,658
1,543
23,034

1,722
—
—

—
—
—

9,381
1,543
23,034

1,716

1,394

2,318

1,235

2,476

9,140

—

9,140

—

(1)

9,139

297

3,561

1,825

284

4,906

10,875190

11,066

1,107—

12,173Integrated Report 2018

Total

OthersAdjustments ConsolidatedAbout the NAGASE Group

Thousands of U.S. dollars
2018
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& Energy

Total$803,567 $7,372,957
4,782
96,131
808,358 7,469,098
39,684
258,095
919,305 4,158,594

Others

Total

Corporate

Adjustments Consolidated$ 5,921 $7,378,887 $        — $     — $7,378,887
45,021
141,162— (141,162)—
50,951 7,520,058— (141,162) 7,378,887
1,948
260,053(37,218)
4,189
227,01449,925 4,208,518 1,445,727 (275,433) 5,378,812

69,26816,453239,816

2,052——

71,32016,453239,816

16,162—————87,491
16,453239,816

24,482

99,256—99,256—(19)

99,22822,29970,200640

70,84917,846—

88,695

Performance by Segment

33,434
14,138
196,771

Leading Us to the Future

Sales to customers$1,657,267 $2,473,936 $1,217,282 $1,220,896
Intersegment sales and transfers
23,93621,028
19,842
26,515Net sales
1,681,212 2,494,964 1,237,133 1,247,421
Segment income
48,66363,06583,93322,732
Segment assets
827,419 1,270,491
660,288
481,071
Other items:
Depreciation and amortization
other than amortization of
goodwill
4,292
6,071
23,0992,344
Amortization of goodwill
1,252
—
1,054
—
Unamortized balance of goodwill
30,836—
12,199—Investments in affiliates accounted
for by the equity method
23,325
13,95025,894
11,587
Increase in property, plant andequipment, net and intangible
assets2,287
26,515
17,263
1,798Life &
Healthcare(d) Geographical information
Net sales by country or region for the years ended March 31, 2018 and 2017 are summarized as follows:

Japan
Greater China
ASEAN
Americas
Europe
Other
Total

2017

¥395,428
207,437
110,380
36,564
14,17819,943¥783,933¥369,365
193,784
101,998
29,573
11,975
15,687¥722,384$3,722,026
1,952,532
1,038,968
344,164
133,453
187,716$7,378,887

Unique Products

2018

Thousands of
U.S. dollars
2018

Millions of yen

Critical Initiatives for Sustainable Growth

Notes: 1. Net sales are categorized by country or region based on the locations of customers.
2. Country or region is determined by geographical proximity.
3. Major countries in each region		 (1) Greater China China, Hong Kong, and Taiwan
		 (2) ASEAN
Thailand and Singapore
		 (3) Americas
U.S.A. and Mexico
		 (4) Europe
Germany		 (5) Other
Korea

Property, plant and equipment by country or region as of March 31, 2018 and 2017 are summarized as follows:
2018

2017

Thousands of
U.S. dollars
2018¥61,686
5,539¥67,225¥61,666
5,952¥67,619$580,629
52,137$632,765

Millions of yen

Japan
Other
Total

Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 201899

Notes to Consolidated Financial Statements(e) Information on loss on impairment of fixed assets per reportable segments
Loss on impairment of fixed assets for the years ended March 31, 2018 and 2017 is as follows:
Millions of yen
2018
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare

¥—

¥528

¥221

¥4

¥—

Loss on impairment of fixed assets

Total

¥754

OthersEliminations
or corporate

¥—

¥92

Total

¥847

Millions of yen
2017
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare¥—¥1,352

¥1

¥38

¥—

Loss on impairment of fixed assets

Total¥1,392OthersEliminations
or corporate

¥—

¥6

Total

¥1,398

Thousands of U.S. dollars
2018
Reportable Segments
Functional
Materials

Advanced
Materials &Processing

Electronics

Automotive& EnergyLife &
Healthcare$—$4,970$2,080$38$—

Loss on impairment of fixed assets

Total$7,097

OthersEliminations
or corporate

$—

$866

Total

$7,973For the year ended March 31, 2017, as to business-use assets for manufacturing of color formers in Advanced Materials & Processing segment, due
to decreasing profitability, the carrying values were reduced to their recoverable amounts and recorded loss on impairment of fixed assets of¥1,249 million.

23. SUBSEQUENT EVENTSThe following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2018, was approved at a meeting of the shareholders held on June 22, 2018:

Cash dividends (¥23.0 = U.S.$0.22 per share)

100

NAGASE & CO., LTD.

Integrated Report 2018

Millions of yen

Thousands of
U.S. dollars¥2,879$27,099

Independent Auditor’s Report

About the NAGASE Group

Leading Us to the Future

Performance by Segment

Unique Products

Critical Initiatives for Sustainable Growth

Financial and Corporate Information

101

Integrated Report 2018

NAGASE & CO., LTD.

Consolidated Subsidiaries, Affiliates and Offices● Consolidated subsidiary○ Company accounted for under the equity method

Category

Company name

As of April 1, 2018
Description of business

Location

Year ofestablishment

Japan

Manufacturing and Processing●

Nagase ChemteX Corporation

Research, manufacture, and sale of enzymes, fermented products,
pharmaceutical intermediates, disinfecting agents, functional polymers,
epichlorohydrine derivatives, electronics materials, etc.

Osaka Pref.

1970

●

Hayashibara Co., Ltd.

Development, manufacture, and sale of food raw materials, pharmaceutical raw
materials, cosmetics raw materials, health foods raw materials, functional dyes, etc.

Okayama Pref.

1932

●

Nagase Medicals Co., Ltd.

Manufacture and sale of pharmaceuticals, animal drugs, health foods, andcosmetics

Hyogo Pref.

1972

●

Setsunan Kasei Co., Ltd.

Coloring and sale of plastics

Osaka Pref.

1966

●

Totaku Industries, Inc.

Manufacture and sale of plastic products

Osaka Pref.

1952

●

Kotobuki Kasei Corporation

Molding, processing and sale of plastic products

Tochigi Pref.

1972

●

Nagase Techno-Engineering Co., Ltd.

Manufacture, sale and maintenance of low-temperature vacuum equipment,
systems for chemical supply management and recycling processes, inspection
systems, and the peripheral equipment for each of theseTokyo Pref.

1989

●

Fukui Yamada Chemical Co., Ltd.

Manufacture of color former

Fukui Pref.

1985

●

Nagase Filter Co., Ltd.

Planning, production, processing, quality testing and sale of metal filters

Osaka Pref.

2006

●

CAPTEX Co., Ltd.

Manufacture and development of battery power source controllers, battery
power sources and power source peripheral equipment

Aichi Pref.

2004

●

DAITAI KAKO CO., LTD.

Manufacture and sale of special pattern paint, polyester resin related products
and FRP waterproof/anticorrosion related products

Osaka Pref.

1949

○

Xenomax-Japan Co., Ltd.

Manufacture and sales of high heat-resistant polyimide film XENOMAX®

Fukui Pref.

2018

○

Sun Delta Corporation

Development of applications for synthetic plastic products and manufacture andsale of processed productsTokyo Pref.

2005

○

Honshu Rheem Co., Ltd.

Manufacture and sale of fiber drums, import and sale of food processing
machines and materials

Kanagawa Pref.

1968

○

Toyo Beauty Supply Corporation

Contract manufacture of cosmetics and health foods

Tokyo Pref.

1964

○

eX. Grade Co., Ltd.

Development, manufacture and sale of components for electronic equipment

Osaka Pref.

2003

○

SN Tech Corporation

Manufacture of developer, recycling businessOsaka Pref.

2008

Nissei Technology Corporation

Design, development, and manufacture of ultra-precision plastic lenses andoptical units; manufacture of precision mechanical components and units

Hyogo Pref.

1953

●

Nagase Chemical Co., Ltd.

Sale of dyestuffs, industrial chemicals, chemicals for manufacturing paper, plastics
and machineryTokyo Pref.

1995

●

Nagase Plastics Co., Ltd.

Sale of raw materials for plastics and plastic products

Osaka Pref.

1975

●

Nagase Beauty Care Co., Ltd.

Sale of cosmetics and health foods

Tokyo Pref.

1991

●

Nishinihon Nagase Co., Ltd.

Sale of dyestuffs, auxiliaries, industrial chemicals and plastics

Fukuoka Pref.

1969

●

Nagase Elex Co., Ltd.

Sale of raw materials for plastics and plastic productsTokyo Pref.

1979

●

Nagase Abrasive Materials Co., Ltd.

Sale of abrasives, inorganic materials and related equipment

Osaka Pref.

1955

●

Nagase Sanbio Co., Ltd.

Sales of medicine for agriculture and additives for fertilizers, feed and foodTokyo Pref.

1987

●

Nagase Tool Matex Co., Ltd.

Sale of auto models, test production materials, and carbon fiber composites

Tokyo Pref.

1965

●

Nagase Techno Service Co., Ltd.

Sales of kitting/logistics services, online catalog sales, recordable media, and RFID

Chiba Pref.

1991

○

Nagase-OG Colors & Chemicals Co., Ltd.

Purchasing and information services related to dyes, industrial chemicals, etc.

Osaka Pref.

1957

○

Sales

Servicing102●

Nagase Logistics Co., Ltd.

Warehousing and distribution

Hyogo Pref.

1982

●

Nagase Information Development, Ltd.

Software development and maintenanceTokyo Pref.

1987

●

Nagase Chemspec Co., Ltd.

Sale and technical servicing of chemicals

Tokyo Pref.

1976

○

Nagase Landauer, Ltd.

Radiation measuring services

Ibaraki Pref.

1974

●

Nagase Business Expert Co., Ltd.

Office administration services, import/export administration services

Tokyo Pref.

1996

Nagase Logistics Support Co., Ltd.

An exclusive stevedore for Nagase Logistics Co., Ltd.

Hyogo Pref.

1954

Choko Co., Ltd.

Insurance agency

Osaka Pref.

1971

NAGASE & CO., LTD.

Integrated Report 2018

Company name

Description of business

Location

Year ofestablishment

Greater China and Korea

Manufacturing and Processing

Plastic manufacture and sale of adhesives and high-tech chemical products forelectronics, technology services

China

2002

●

Totaku Industries Suzhou Co., Ltd.

Manufacture and sale of plastic products

China

2005

●

Nagase Electronics Technology (Xiamen) Co.,Ltd.

Chemical etching of liquid crystal glass panel units

China

2010

●

Nagase Engineering Service Korea
Co., Ltd.

Equipment maintenance service and engineering

Korea

1997

○

Guangzhou Kurabo Chemicals Co., Ltd.

Manufacture of molded urethane products for automobiles

China

2001

○

Toyo Quality One (Guangzhou) Co., Ltd.

Research and development, manufacturing, processing, sale, technology
consulting, and after-sale service for major automotive parts

China

2004

○

Toyo Quality One Ningbo Co., Ltd.

Manufacture and sale of polyurethane foam

China

1993

○

Tokai Spring Mfg. (Foshan) Co., Ltd.

Development, manufacture, and sale of precision press products, spring, andstandard molds

China

2005

○

Light Chemical (Changzhou) Co., Ltd.

Research, development, and after-sale service for high-function composites andintermediates; sales of internally developed products

China

2011

○

Wuxi Chenghong Electronic Chemicals Co., Ltd.

Research, development, manufacture, and sales of electronics chemicals
including semiconductors and flat panel displays (FPDs)

China

2013

ON Textile Chemicals (Shanghai) Co., LTD.

Manufacture, sales, and export/import of textile-related products,
dyeing processing agents

China

2003

Mianyang Chenghong Electronic Chemicals
Co., Ltd.

Research, development, manufacture, and sales of electronics chemicals for theelectronics industry

China

2017

●

Nagase (Hong Kong) Ltd.

Import/export, domestic sales, marketing

China

1971

●

Shanghai Hua Chang Trading Co., Ltd.

Sale of resins and related products

China

1998

Sales

China

Chengdu Branch Office/Chongqing Branch Office

China

Nanjing Branch

China

●

Shanghai Nagase Trading Co., Ltd.

Import/export, domestic sales, marketing

China

1997

●

Nagase Wahlee Plastics Corporation

Sale of resins and related products

Taiwan1990●

Taichung OfficeTaiwanGangshan OfficeTaiwanGuangzhou Nagase Trading Co., Ltd.

Import/export, domestic sales, marketing

China

Wuhan Branch Office/Chongqing Branch Office

2002

China
China

●

Import/export, domestic sales, marketing

Taiwan1988●

Tianjin Nagase International Trading Co., Ltd.

Import/export, domestic sales, marketing

China

2003

●

Dalian Branch Office/Qingdao Branch Office

China

Changchun Branch OfficeChina

NWP International Trading (Shenzhen) Co., Ltd.

Sale of plastic products in South China

China

Dongguan Branch Office

China

Guangzhou Branch Office

China

Xiamen Branch Office

China

Shenzhen Nagase Trading Ltd.

Import/export, domestic sales, marketing

China

2006

China

●

Datai (Shanghai) Chemical Trading Co., Ltd.

Sales of paints

China

2013

●

Nagase Korea Corporation

General import/export trading, retailing/wholesaling, import/export trade agency

Korea

2001

ON Colors & Chemicals (Shanghai) Co., Ltd.

Sales of textile-related products, dyeing processing agents, related equipment;
export/import and technology consulting, technological development ofdyeing processing

China

2002

QINGDAO REPLUS CO., LTD.

Planning and development, manufacturing control, quality control and sales offood packaging

China

2015

NAGASE & CO., LTD.

Integrated Report 2018

Financial and Corporate Information

Guanlan Branch

2004

Critical Initiatives for Sustainable Growth

Zhengzhou Branch Office
Nagase (Taiwan) Co., Ltd.

●

Unique Products

Suzhou Branch Office/Ningbo Branch Office

Performance by Segment

Nagase ChemteX (Wuxi) Corporation

Leading Us to the Future●

About the NAGASE Group

Category103

Consolidated Subsidiaries, Affiliates and Offices● Consolidated subsidiary○ Company accounted for under the equity method

Category

Company name

Description of business

Location

Year ofestablishment

Nagase Techno-Engineering(Shanghai) Co., Ltd.

Construction and maintenance of chemical supply and management equipment

China

2006

NW Consultant Service (Shenzhen) Ltd.

Print quality management consultant

China

2008

Nagase Business Management and Planning(Shanghai) Co., Ltd.

Management of NAGASE Group operations and promotion of business strategies
related to Greater China

China

2011

Servicing

Asean and the Middle East

Manufacturing and Processing●

Pac Tech Asia Sdn. Bhd.

Manufacture and sale of semiconductor manufacturing equipment,
semiconductor wafer bumping contract manufacturing

Malaysia

2006○

Sanko Gosei Technology (Thailand) Ltd.

Manufacture of automobile components

Thailand

1994

Bangkok Design Office

Thailand○

Automotive Mold Technology Co., Ltd.

Manufacture of automotive molds and dies

Thailand

2000○

Nafuko Co., Ltd.

Manufacture, import/export and sale of packaging materials and related
equipment

Thailand

1996○

Dainichi Color Vietnam Co., Ltd.

Manufacture and sale of color masterbatch blend for plastic

Vietnam

2006○

PT. Toyo Quality One Indonesia

Manufacture of flame lamination products

Indonesia

2008

MINDA KYORAKU LTD.

Manufacture of blow-formed automobile components

India

2011

Nagase (Thailand) Co., Ltd.

Import/export, domestic sales, marketing

Thailand

1989

Sales
●

Eastern Office

Thailand

Yangon Branch●

Nagase Singapore (Pte) Ltd.

MyanmarImport/export, domestic sales, marketing

Australia Branch

Australia

Bangladesh Liaison Office

Bangladesh

Middle East Representative Office●

Nagase (Malaysia) Sdn. Bhd.

TurkeyImport/export, domestic sales, marketing

Malaysia

Penang Office

Malaysia
Import/export, domestic sales, marketing

Surabaya BranchIndonesia

1981

1998

Indonesia●

Nagase Philippines Corporation

Import/export, domestic sales, marketing

Philippines

1997

●

Nagase Philippines International Services
Corporation

Domestic sales, import/export

Philippines

2005

●

Nagase Vietnam Co., Ltd.

Import/export, domestic sales, marketing

Vietnam

2008

Ho Chi Minh City Branch●

Nagase India Private Ltd.

Vietnam
Import/export, domestic sales, marketing

North India Branch (Gurgaon)

India

2006

India

South India Branch (Chennai)
Landauer Radiopharmaceuticals Pty. Ltd.

India
Sales of radiation-related pharmaceuticals

Australia

2015

PT. Indonesia Mold Technology

Design changes and maintenance for large-scale plastic automobile component
molds

Indonesia

2015

Nagase (Siam) Co., Ltd.

Contract services for Group companies

Thailand2000

Landauer Australasia Pty Ltd

Radiation measuring services

Australia

2006

Servicing104

Malaysia

Johor Bahru Office

PT. Nagase Impor-Ekspor Indonesia

1975

United Arab Emirates

Turkey (Izmir) Liaison Office●

Singapore

NAGASE & CO., LTD.

Integrated Report 2018

Company name

Description of business

Location

Year ofestablishment

Americas

Manufacturing and Processing●

Engineered Materials Systems, Inc.

Research and development, manufacture, and sales of materials for commercial
adhesives, conductive adhesives

America

1993●

Pac Tech USA Packaging Technologies Inc.

Semiconductor wafer bumping, manufacture and sale of semiconductor
manufacturing equipment

America2001

Sofix LLC

Manufacture and sale of color formers

America

1990

KN Platech America Corporation

Manufacture and sale of blow-formed plastic molding components and products

America2010○

TQ-1 de MEXICO S.A. de C.V.

Manufacture and sale of urethane for automotive seat pads and automotive
laminated frames and sale of automotive urethane foam

Mexico2012○

Cytech Products Inc.

Manufacture and sales of mold release agents for polyurethane resins, thermal
paper additives and emulsion dispersing element

America

1988

Nagase America Corporation

Import/export, domestic sales, marketing

America

1971

Sales
●

Michigan Branch

America

California Branch

AmericaFitz Chem LLC●

Nagase Enterprise Mexico S.A. de C.V.

Import/export sales, intermediate trade, market development,
information collection

Leon Branch OfficeAmerica1985

Mexico2010

MexicoImport/export sales, intermediate trade, market development,
information collection

Brazil2012

EuropeManufacturing and Processing
Pac Tech-Packaging Technologies GmbH

Semiconductor wafer bumping, manufacture and sale of semiconductor
manufacturing equipment

Germany

1995●

Inkron Oy

Development, manufacture of functional materials for semiconductors andelectronic devices

Finland2013

Nagase (Europa) GmbH

Import/export, domestic sales, marketing

Germany

1980

Sales
●

Hungary Representative Office

Hungary

London Branch

England

Lyon BranchFranceUnique Products●

Performance by Segment●

Sales of raw materials for paints, inks, adhesives, resin compounds,
personal care products

Nagase do Brasil Comércio de Produtos
Químicos Ltda.

Leading Us to the Future●○

About the NAGASE Group

Category

Critical Initiatives for Sustainable Growth
Financial and Corporate Information

NAGASE & CO., LTD.

Integrated Report 2018105

Corporate Information (As of March 31, 2018)

Overview
Company Name NAGASE & CO., LTD.
FoundedJune 18, 1832

Establishment

December 9, 1917

Capital¥9,699 million

Employees

861 (Consolidated: 6,312)

Main Business

Import/export and domestic sales of chemicals, plastics, electronics materials, cosmetics andhealth foods

Main Banks

Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd.*, Mizuho Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited

Main Offices

Osaka Head Office
Tokyo Head Office
Nagoya Branch Office
Nagase R&D Center
Nagase Application Workshop

1-1-17, Shinmachi, Nishi-ku, Osaka City, Osaka 550-8668, Tel: (81) 6-6535-2114
5-1, Nihonbashi-Kobunacho, Chuo-ku, Tokyo 103-8355, Tel: (81) 3-3665-3021
3-14-18, Marunouchi, Naka-ku, Nagoya City, Aichi 460-8560, Tel: (81) 52-963-5615
Kobe High Tech Park, 2-2-3, Murotani, Nishi-ku, Kobe City, Hyogo 651-2241, Tel: (81) 78-992-3162
2-4-45, Higashitsukaguchicho, Amagasaki City, Hyogo 661-0011, Tel: (81) 6-4961-6730* MUFG Bank, Ltd. as of April 1, 2018

Organization (as of April 1, 2018)
Audit & Supervisory Board/
Audit & Supervisory Board Members

Shareholders’ Meeting

Risk Management & Compliance Committee

Functional Materials Segment

Internal Control Committee

Performance Chemicals Dept.

Security Trade Control Committee

Speciality Chemicals Dept.
Advanced Materials & Processing Segment

Board of Directors

Colors & Advanced Processing Dept.

President

Polymer Global Account Dept.

Corporate Planning Div.

Electronics Segment

Human Resources & General Affairs Div.

Electronic Chemicals Dept.

Finance Div.

Electronic Materials Dept.

Accounting Div.
Legal Div.

Automotive & Energy Segment
Automotive Solutions Dept.

Information Technology Div.

Life & Healthcare Segment

BPR & Administration Div.

Life & Healthcare Products Dept.

Audit Office

Nagase R&D Center

New Value Creation Office

Nagase Application Workshop

Energy Business Office

Nagoya Branch
Nagase ChemteX Corporation
Hayashibara Co., Ltd.

106

NAGASE & CO., LTD.

Integrated Report 2018

Investor Information (As of March 31, 2018)
NAGASEグループが有する独自機能

統合報告書 201844 グローバルネットワーク
Principal Shareholders

Stock Exchange Tokyo (First Section)
Code

8012

Stock Status NAGASE
Authorized
Number of Shares 346,980,000 shares
グループについてIssued Number of Shares

127,408,285 shares

Composition6of Shareholders
NAGASEグループの事業領域
Treasury Stock (1) 8 伝統と変革
2,195 thousand shares (1.72%)

NAGASEグループのあゆみ

10 企業価値創造プロセス

Securities
Companies (28)1,004
thousandツ・プロダク
12 NAGASE が提供するプレミアム
Other Investors (217)
shares (0.79%)
17,544%13.
77
14 13 年間の主要財務データ
thousand shares
Financial Institutions (52)35.96%
45,817 thousand shares
16 アニュアルトピックス

17.32%

6,936

5.44

Sumitomo Mitsui Trust Bank, Limited

5,776

4.53

NORTHERN TRUST持続的成長に欠かせない取り組み
CO. (AVFC) RE
SILCHESTER INTERNATIONAL INVESTORS
5,772
INTERNATIONAL VALUE EQUITY TRUST

4.53

Japan Trustee Services Bank, Ltd.
(Trust Account)57 人権・労働慣行

4,932

3.87

Sumitomo Mitsui
環境Corporation
60Banking

4,377

3.44

3,589

2.82

Nippon Life Insurance Company

62 公正な事業慣行
3,549
64 お客様の安心・安全のために
NORTHERN TRUST CO. (AVFC)
ミュニテFUNDS
ィへの参画および発展65 コPENSION
3,264
RE U.S. TAX EXEMPTED
Reiko Nagase

2,500

Share Price

2,970

2.33

Nagase Shunzo Co.,
Ltd.
財務・会社情報

2,688

2.11

1,000
500
0

TOPIX

32
34
36
38
40
2008/442

事業展開を支える財務戦略

MD&A

比較連結財務諸表
主なグループ会社・事業所一覧

TOPIX

4,000

会社情報
株式情報

3,200
2,400

At a Glance

見通しに関する注意事項

機能素材セグメント

1,600

本統合報告書に記載されている長瀬産業およびNAGASEグループの収益計画・戦加工材料セグメント

略や確信などのうち、歴史的事実でないものは将来に関する見通しであり、リスクや

電子セグメント

不確実な要素を含んでいます。実際の業績等は、これらの要素の変動によ
当社の
800り、

見込みとは大きく異なる可能性があります。従って、読者の皆様におかれましては、

自動車・エネルギーセグメント
生活関連セグメント
2009/4
2010/4

これらの将来予測に関する記述について全面的に依拠することは控えるようお願い2012/42013/4

します。
なお、業績に影響を与える要素はこれらに限定されるものではありません。
2018/4
2014/4
2015/4
2016/42017/4

2011/4

2012/42013/4

2014/4

Critical Initiatives for Sustainable Growth

2011/4Monthly Trading Volume(Thousands of shares)

12,000

9,000

6,000

2008/4

2009/4

2010/4

2015/4

2016/4NAGASE & CO., LTD.

2017/42018/4Integrated Report 2018

Financial and Corporate Information

3,000

0

Unique Products

1,500

66
68
70
72
76
77

事業別概況

2,000

2.56

Japan Trustee Services Bank, Ltd.
(Trust Account 9)18 トップメッセージ
24 Our Board
Monthly Share
Rangeト・ofガバナンス
NAGASE
コーポレー
26 Price(¥)

2.79

Performance by Segment

Individuals and Others
30.44%(10,801)ップ
NAGASEグループを導くリーダーシ
ForeignInvestors (258)22,063 thousand shares
38,781 thousand shares(Trust Account)

Leading Us to the Future

Number of
NAGASE
Shareholders2 数字で見る
11,357
4 経営理念とNAGASEビジョン

46 地域別概況
Number of
Shares Held
Percentage of Total
主な製造・加工機能
50Name(Thousands) Shares Outstanding (%)
The Master Trust54
Bank主な研究・開発機能
of Japan, Ltd.

About the NAGASE Group

Contents

107