Financial Results
for the three months ended March 31, 2018 — Consolidated(Based on IFRS)
May 10, 2018

Company name

Sapporo Holdings Limited

Security code
Listed on
URL

2501
Tokyo Stock Exchange (First Section); Sapporo Securities Exchange
http://www.sapporoholdings.jp/english/

Representative
Contact

Masaki Oga, President and Representative Director
Toshihiko Umezato, Director of the Corporate Communications Department

Telephone
Scheduled dates:+81-3-5423-7407

Filing of quarterly financial report

May 14, 2018

Commencement of dividend payments-

Supplementary information to the quarterly earnings results

Available

Quarterly earnings results briefing heldYes(mainly targeted at institutional
investors and analysts)

1. Consolidated Financial Results for three months ended March 31, 2018
(January 1 – March 31, 2018)(Amounts in million yen rounded to the nearest million yen)

(1) Operating Results(Percentage figures represent year-over-year changes)
Revenue

Operating profit

Profit before tax

million yen%

million yen

Three months ended
March 31, 2018

111,342(2.8)(5,505)_(6,053)_(4,449)_Three months ended
March 31, 2017

114,564_(3,655)_(4,243)_(3,389)_Profit attribute tomillion yen

Total comprehensive

owners of parent
million yen

%

%

%

Profitmillion yen

Basic earnings

Diluted earnings

per shareper shareyen

incomemillion yen%

Yen

Three months ended
March 31, 2018

(4,286)_(12,877)_(55.03)(55.01)Three months ended
March 31, 2017

(3,372)_(4,807)_(43.29)_1%

(2) Financial Position
Total assets

Total equity

Equity attributableto owners ofparentEquity ratio
attributable toowners of parent

million yen

million yen

million yen%

Three months ended
March 31, 2018

630,264

159,709

156,458

24.8

December 31, 2017664,731

175,710172,055

25.9

2. Dividends
Dividend per share
Record date or

End Q1End Q2End Q3Year-end

Full year

yen

yen

yen

yen

yen

periodYear ended
December 31, 2017—

Year ended
December 31, 2018—Year ending
December 31, 2018
(forecast)

0.00

—

40.00

40.00

0.00

—

40.00

40.00

Note: Changes were made to dividends forecasts in the three months ended March 31, 2018: None

3. Forecast of Consolidated Earnings for the Year Ending December 31, 2018
(January 1 – December 31, 2018)(Percentage figures represent year-over-year changes)
Revenuemillion yen

Operating profit%

million yen%

Profit before tax

million yen%

Profit attribute to

Basic earnings

owners of parent

per share

million yen%

555,800
3.6
18,70046.0
17,70053.4
11,10054.4
Year ending
December 31,
2018
Note: Changes were made to earnings forecasts in the three months ended March 31, 2018: None

Earnings forecasts for the six months ending June 30, 2018 are omitted because the company
manages performance targets on a yearly basis.

2

Yen

142.504. Other(1) Changes to scope of consolidation: None
(2) Changes in accounting policy, changes in accounting estimates, and retrospective restatement
1) Changes in accounting policies required by IFRS: None
2) Changes other than 1) above: None
3) Changes in accounting estimates: None
(3) Number of shares issued and outstanding (common stock)1) Number of shares issued at end of period (treasury stock included):
March 31, 2018: 78,794,298 shares
December 31, 2017: 78,794,298 shares
2) Number of shares held in treasury at end of period:
March 31, 2018: 902,656 shares
December 31, 2017: 901,792 shares
3) Average number of outstanding share during the period:
Three months ended March 31, 2018: 77,891,842 shares
Three months ended March 31, 2017: 77,894,901 shares*Quarterly review status
The quarterly financial results are not subject to quarterly reviews pursuant to the Financial
Instruments and Exchange Act.
Appropriate Use of Earnings Forecasts and Other Important Information
This document contains projections and other forward-looking statements based on information
available to the Company as of the date of this document. Actual results may differ from thoseexpressed or implied by forward-looking statements due to various factors.

3

1. Analysis of Operating Results and Financial Condition
The Sapporo Group has applied International Financial Reporting Standards (IFRS) to its consolidated
accounts from the first quarter of 2018. For the purpose of comparisons, financial data for the first quarter andentire fiscal 2017 have been adjusted and are also presented on the IFRS basis.

(1) Operating Results
In the first quarter of 2018 (January 1 – March 31, 2018), the Japanese economy remained in a moderate
recovery trend, underscored by firm consumer spending. The future outlook, however, is clouded byworsening conditions in some countries and regions and rising concerns about trade wars.
In this economic environment, the Sapporo Group recorded a year-on-year decline in first-quarter
consolidated sales, as favorable sales performances by the Japanese Alcoholic Beverages business’ Sapporo
Draft Beer Black Label and RTD offerings and the International Business’ Canadian subsidiary SLEEMAN
BREWERIES were offset by year-on-year declines in shipments of the Japanese Alcoholic Beverages
business’ happoshu and new-genre beers and weak sales in Japan and overseas of soft drinks handled by
the International Business and the Food & Soft Drinks business.
With all segments except for the Real Estate business reporting year-on-year sales declines, the Group
posted a larger first-quarter operating loss than it did a year earlier.
In short, in the first quarter of 2018 consolidated revenues totaled ¥111.3 billion (down ¥3.2 billion, or 3%
year on year), the operating loss came to ¥5.5 billion (compared with a ¥3.7 billion loss in the first quarter ofthe previous fiscal year), and the net loss attributable to owners of the parent came to ¥4.3 billion (comparedwith a net loss of ¥3.4 billion a year earlier).
Results by segment are outlined below. From the consolidated financial statements for the first quarter of
2018, the export business of Sapporo International Inc., which was included in the International Business, hasbeen transferred to Sapporo Breweries Ltd., which is included in the Japanese Alcoholic Beverages business.
To enable year-over-year comparisons in this document, figures for the previous fiscal year have beenadjusted to reflect the new segmentation.

Seasonal Factors
The Group’s operating results exhibit substantial seasonal variation because demand for the products andservices offered by the Japanese Alcoholic Beverages, International Business, Food & Soft Drinks, andRestaurant businesses tends to be concentrated in the summer months. Revenues and profits consequently
tend to be lower in the first quarter than in the other three quarters.

Results by segment are outlined below.

4Japanese Alcoholic Beverages
We estimate that total domestic demand for beer and beer-type beverages in the first quarter of 2018 fell 1%
from the level seen in the first quarter of 2017.
Under such market conditions, the Japanese Alcoholic Beverage business continued its efforts to realize
management’s vision of “Seek to be No.1 by accumulating one-of-a-kind products” and achieve further
growth by constantly providing customers with a unique value proposal and by investing aggressively in linewith the business policy of “Continuation of strengthening beer business."Among beer products, Sapporo Draft Beer Black Label continued to enjoy strong sales, especially thecanned version. The Yebisu brand also performed solidly, contributing to a 1% year-on-year increase indomestic shipments of our beer products. However, shipments of products in the happoshu and new genre
categories declined in a highly competitive market environment. As a result, overall shipments of our beer
and beer-type beverages were 2% lower than in the first quarter of 2017.
In the RTD*1 category, revenue increased over the previous year’s level on strong sales of such core RTD
collaboration products as Otoko Ume Sour and Kireto Lemon Sour as well as Ai no Skal White Sour, which
has seen its sales expand steadily since market introduction in 2017.
In the wine category, we continued to strengthen marketing of domestic and imported fine wines*2,
including the imported wine Penfolds, Taittinger champagne, and our domestic Grande Polaire wines.
However, weak sales of our everyday wines*2 led to a year-on-year decline in revenue for the wine category
as a whole.
Our spirits business achieved year-on-year growth in revenue, led by strong sales of products from major
overseas brands, such as Bacardi and Dewars.
Our Japanese liquor business also achieved growth in revenue, driven by continued strong sales of Imo
Shochu Kokuimo, Japan’s No. 1 selling*3 blended imo shochu.
Overall, first-quarter revenues in the Japanese Alcoholic Beverages business came to ¥50.8 billion, down
¥0.0 billion, or 0% year on year. The segment posted an operating loss of ¥3.1 billion, compared with a lossof ¥2.3 billion a year earlier.
*1) RTD, or ready-to-drink, beverages are already-mixed, low-alcohol content cocktail-like beverages that can be consumed as
is immediately after opening.
*2) Fine wines are wines priced in the mid- to high-price range of ¥1,500 or more per bottle, while everyday wines are those witha low price of less than ¥1,500 per bottle.
*3) Based on Intage SRI market research on combined blended imo shochu sales in the supermarket, convenience store, anddirect sales channels from March 2016 to October 2017.

5

International BusinessWe estimate that total demand in the North American beer market in the first quarter of 2018 was below
previous-year levels in both the United States and Canada. In Asian countries, demand is being affected byslower economic growth and there was an increasing movement to assess new taxes on a wider range ofconsumer goods.
In this environment, our International Business continued its efforts to strengthen brand recognition primarily
in the premium beer markets in North America and Southeast Asia.
Our Canadian subsidiary SLEEMAN BREWERIES continued to invest in the marketing of its core premium
brands, which enabled it to increase its overall beer sales volume (excluding Sapporo brand beer) year on
year. In the U.S. beer market, Sapporo USA’s shipments of Sapporo brand beers declined year on year despite
the subsidiary’s continued efforts to expand its customer base among the general population as well as toAsian Americans. Since the acquisition of Anchor Brewing Company in September 2017, Sapporo USA has
been working to strengthen sales synergies with the new group company, especially on the U.S. west coast.
In the U.S. soft drinks market, Total revenue of County Pure Foods and Silver Springs Citrus fall amid anincreasingly difficult management environment. Targeting earnings improvement for both companies, we are
now promoting the management integration of these two U.S. subsidiaries.
In Southeast Asia, our Vietnam business managed to increase its beer shipments over the previous year's
level despite the country’s liquor tax being raised in January. We are continuing to make structural reforms at
the Vietnam business.
Thanks to the efforts outlined above, the International Business increased its shipments of Sapporo brandproducts in overseas markets during the first quarter of 2018 by 2%.
As a result, the International Business posted revenues of ¥17.8 billion, down ¥0.6 billion, or 3%. The
segment posted an operating loss of ¥0.4 billion, compared with a loss of ¥0.0 billion a year earlier.

Food & Soft Drinks
We estimate that overall demand for soft drinks in Japan increased 2% year on year in the first quarter of 2018.
In this market environment, the Food & Soft Drinks business continued to strengthen its brand lineups anddeliver customers with value unique to the Sapporo Group.
During the first quarter, the domestic soft drinks business launched Kumamoto Oishii Genmai-cha, a newtea made exclusively from tea leaves from Kumamoto Prefecture, and continued its efforts to expand the tea
market by creating new demand. We simultaneously launched a special version of our Gyokuro-iri Ocha witha Kumamoto Castle Restoration Support Label that informs consumers that a portion of the product’s sales
will be donated to the effort to restore Kumamoto Castle, which was badly damaged by the series ofearthquakes that struck the prefecture in 2016. We also introduced the JELEETS series of dessert drinks withauthentic flavor made using a special two-layer jelly recipe (patent pending). These drinks are being marketed
as refreshingly sweet drinks that will rejuvenate workers and contribute to more efficient completion of work

6

tasks if consumed during the busy working day. Meanwhile, sales of our coffee products declined amid adownturn in Japan’s canned coffee market. As a result, overall sales at our domestic soft drinks business fell
below the level achieved in the first quarter of 2017.
The domestic food business introduced Jikkuri Kotokoto Gohobi Dining Reisei series targeted at the coldsoup market, which has been expanding in recent years. Our shipments of lemon-based food products
achieved 15% year-on-year sales growth in the first quarter, led by strong sales of our core Pokka Lemon 100
brand products. In the soy beans and chilled products category, we introduced a new brand SOYBIO Soymilk
Yogurt as part of our ongoing effort to expand the customer base of our soymilk yogurts. During the period
under review, we also began the production and sale of Almond Breeze, the world’s leading brand of almondmilk.
At the domestic restaurants business, Pokka Create, the POKKA SAPPORO subsidiary that operates the
Café de Crié coffee shop chain, sustained its efforts to boost sales by introducing new menus with seasonal
and trendy dishes, but existing store sales fell below the previous year’s level nonetheless.
Our overseas soft drinks business maintained its top share* in Singapore’s tea drinks market, including its
dominant 70% share of the green tea market. However, exports to other countries in the region fell slightly as
new tax systems introduced in some countries depressed consumer spending. In Indonesia, PT. POKKA DIMA
INTERNATIONAL continued its aggressive marketing activities.
Overall, the Food & Soft Drinks segment’s revenues came to ¥27.8 billion, down ¥2.5 billion or 8% year on
year. The segment posted an operating loss of ¥1.0 billion, compared with a loss of ¥0.3 billion a year earlier.
* Based on data from Nielsen Singapore MarketTrack December 2017 (Copyright 2017, The Nielsen
Company)

Restaurants
Japan’s restaurant industry continued to see year-on-year growth in revenue in the first quarter of 2018, while
grappling with a severe operating environment characterized by labor shortages and the resulting increase inlabor costs as well as the upward trend in food material procurement prices.
In this environment, the Restaurants business continued to pursue the fulfillment of its philosophy of“Enhancing the Joy of Living” through constant efforts to deliver safe and sound food and service to customers
while also striving to create restaurants that “deliver 100% satisfaction to customers.”
The sole new store opening in Japan during the first quarter was the March opening in Fukuoka's Hakata
district of the first Yebisu Bar outlet in Kyushu. The new outlet has won rave reviews from local customers andis doing quite well. We plan to continue expanding our presence throughout Japan by opening new outlets inregional cities as well as the Tokyo metropolitan area. We also continue to renovate existing outlets and change
formats as needed. In April, we re-opened the completely renovated Ginza Lion outlet in Tokyo’s Aoyama
district and opened a new format Japanese restaurant Sobaemon in Tokyo’s Osaki district. During the firstquarter, we also closed one restaurant, keeping the total number of restaurants operating in Japan as of end-

7

March at 195.
Meanwhile, in Singapore we continue to promote the spread of Japan’s beer hall culture. However, weclosed one unprofitable store during the first quarter, reducing the total number of outlets in Singapore to 12
stores.
Overall, the Restaurants business’ revenues in the first quarter of 2018 totaled ¥6.1 billion, down ¥0.2 billion
or 4% year on year. The segment posted an operating loss of ¥0.5 billion.

Real Estate
Japan’s real estate industry is expecting a sharp increase in supply of new office space becoming available in
the Greater Tokyo office leasing market in 2018. Nonetheless, vacancy rates remain low as strong corporate
earnings support demand for office space, and accordingly, rents continue to rise slightly.
In this environment, our real estate leasing business is maintaining high occupancy rates at its properties inTokyo Metropolitan area, including Yebisu Garden Place Tower, the business’ core source of earnings. In
addition, the high occupancy rates provide a solid platform for more assertive efforts to increase rents ofexisting tenants.
Meanwhile we continue to enhance the asset value of our Yebisu Garden Place commercial complex, alandmark of stylish and sophisticated Ebisu area, through constant efforts to provide tenants and visitors withenjoyable experiences in comfortable and pleasant surroundings that raise convenience levels and strengthen
the property’s brand appeal.
At our GINZA PLACE commercial complex, we continue to enhance the facility’s information dissemination
capability in line with its original concept as a “base for information dissemination and exchange.” In addition
to enhancing the property’s brand value, this effort is increasing the property’s drawing power and making the
Ginza district an even more dynamic and bustling urban center.
The real estate development business is proceeding with the renovation of the Sapporo Factory commercial
complex as part of Sapporo City’s urban redevelopment program focused on the nearby area on the east sideof the Sosei River. We will continue our efforts to make the new complex an attractive urban space.
As result of the efforts outlined above, Real Estate business revenues in the first quarter of 2018 totaled ¥6.0
billion, up ¥0.2 billion or 3%. Operating profit was ¥1.1 billion, up ¥0.1 billion or 13%.

(2) Consolidated Financial Condition
Consolidated assets as of March 31, 2018, totaled ¥630.3 billion, ¥34.5 billion less than at the end of theprevious fiscal year (December 31, 2017). The decline is mainly attributable to a decrease in trade receivables,
which more than offset an increase in other current assets.
Consolidated total liabilities totaled ¥470.6 billion, ¥18.5 billion less than on December 31, 2017, primarily
owing to the decrease in other current liabilities, which helped to offset an increase in other financial liabilities(current).

8

Consolidated total equity totaled ¥159.7 billion, down ¥16.0 billion from the end of the previous fiscal year,
primarily owing to the payment of year-end dividends despite the posting of a net loss attributable to owners ofparent.

(3) Consolidated Earnings Forecast
The consolidated earnings forecast for the full fiscal year ending December 31, 2018, is unchanged from theforecast announced by Sapporo Holdings on February 15, 2018.

9

2. Consolidated Financial Statements(1) Consolidated Statement of Financial Position(millions of yen)Transition date
January 1, 2017
AmountDecember 31, 2017

March 31, 2018

AmountAmountAssetsI Current assets
1 Cash and cash equivalents
2 Trade and other receivables
3 Inventories
4 Other financial assets
5 Other current assets
subtotal
6 Assets held for sale
Total current assets

10,476
96,574
37,6199,967
7,386
162,022359
162,381

12,537
98,32537,873
9,107
6,914
164,755
164,755

9,329
73,56839,491
8,389
10,127140,905
140,905

II Non-current assets
1 Property, plant and equipment
2 Investment property
3 Goodwill
4 Intangible assets
5 Investments accounted for using equity method
6 Other financial assets
7 Other non-current assets
8 Deferred tax assets
Total non-current assets
Total assets

151,602223,595
21,483
10,305372
79,2788,921
2,176
497,733
660,114151,334
219,658
24,942
13,339391
78,6779,309
2,326
499,976
664,731

149,053
218,951
24,406
12,764395
72,544
8,623
2,624
489,359
630,264

Transition date
January 1, 2017
AmountDecember 31, 2017

March 31, 2018

AmountAmountLiabilities and equity
Liabilities
I Current liabilities
1 Trade and other payables
2 Bonds and borrowings
3 Lease liabilities
4 Income tax payable
5 Other financial liabilities
6 Other current liabilities
Total current liabilities

38,46075,5806,609
1,570
33,10866,424
221,750

36,48880,716
6,533
5,207
33,277
66,590228,80934,39991,1086,547
586
38,152
54,925
225,717

II Non-current liabilities
1 Bonds and borrowings
2 Lease liabilities
3 Other financial liabilities
4 Net defined benefit liabilities
5 Other non-current liabilities
6 Deferred tax liabilities
Total non-current liabilities
Total liabilities

165,235
24,623
48,125
8,996
2,689
26,455276,122497,872

153,184
24,29545,9566,283
2,621
27,872
260,212
489,021

139,981
24,36445,9007,819
2,693
24,081
244,838
470,555

Equity1 Share capital
2 Capital surplus
3 Treasury shares
4 Retained earnings
5 Other components of equity
Total equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity

53,88740,706(1,796)36,31528,515
157,628
4,613
162,241
660,11453,88740,825(1,807)44,491
34,659172,055
3,655
175,710
664,73153,88740,825(1,809)36,012
27,545
156,458
3,250
159,709630,26410

(2) Consolidated Statement of Profit or Loss and Comprehensive Income
Consolidated Income statements(millions of yen)Three months ended
Three months ended
March 31, 2017
March 31, 2018
AmountAmount114,564
111,342
82,16680,49632,39730,846

Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income
Other operating expense
Operating profit (loss)

35,630231
654(3,655)35,882307
777(5,505)

Financial income
Financial expense
Share of profit (loss) of investments accounted for using equity method
Profit (loss) before tax

189
781
4
(4,243)201752
3(6,053)

Income tax expense
Profit (loss)
Profit attributable to
Owners of parent
Non-controlling interests
Total

(855)
(3,389)(1,604)(4,449)(3,372)(16)(3,389)(4,286)(162)(4,449)Basic earnings per share (JPY)
Diluted earnings per share(JPY)(43.29)-(55.03)(55.01)

Consolidated Statement of Comprehensive Income
Three months ended
Three months ended
March 31, 2017
March 31, 2018
AmountAmount(3,389)(4,449)Profit (loss)
Other comprehensive income
Items that will not be reclassified to profit or loss
Financial assets measured at fair value through other comprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to profit or loss
Items that might be reclassified to profit or loss
Exchange differences on translation of foreign operations
Effective portion of gains and losses on fair value of cash flow hedges
Total of items that might be reclassified to profit or loss
Other comprehensive income, net of taxes
Comprehensive income

(394)
6
(388)

(4,263)(1,083)(5,346)(1,116)86(1,030)(1,418)(4,807)(3,171)88(3,083)(8,429)(12,877)

Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income(4,614)(192)(4,807)(12,472)(405)(12,877)11

(3) Consolidated Statements of Changes in Equity(millions of yen)
Equity attributable to owners of parent
Other components of equity

Balance as of January 1, 2017

Share capital

Capital surplus

53,88740,706

Profit (loss)
Other comprehensive income, net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Transfer from other components of equity to retained earnings
Total transactions with owners
Balance as of March 31, 2017

Treasury shares

Retained earnings

Exchange differences ontranslation of foreign
operations

28,515

157,628

4,613

162,241(3,372)(1,242)(4,614)(2)
0(2,888)(2,890)

(16)
(176)
(192)
-

(3,389)(1,418)(4,807)(2)
0(2,888)(2,890)150,124

4,421

154,545

28,832-(3,372)

(928)
(928)

74
74

(393)
(393)

6
6

(2)

(2,888)6(2,882)

-

-

-

(6)
(6)

(1,242)(1,242)(6)(6)(1,798)30,061

(928)

(243)

-

27,268Financial assets
Effective portion of
Exchange differences on
measured at fair value
gains and losses on
Remeasurements oftranslation of foreign
through otherfair value of cash
defined benefit plans
operations
comprehensive
flow hedges
incomeTotal othercomponents of equity-

34,659172,055

3,655

175,710(8,185)(8,185)
1,071
1,071

(4,286)(8,185)(12,472)(3)(3,122)0(3,124)

(162)
(243)
(405)
(0)
(0)

(4,449)(8,429)(12,877)(3)(3,122)(3,125)27,545

156,458

3,250

159,709

0

(2)
0

0
40,706(3,372)53,887

Total equity(317)

36,315-

Non-controllinginterests

Total othercomponents of equity-(1,796)-

Total equity
attributable to ownersof parent

Financial assets
Effective portion of
measured at fair value
gains and losses on
Remeasurements ofthrough otherfair value of cash
defined benefit planscomprehensive
flow hedges
income28,439Equity attributable to owners of parent
Other components of equity

Balance as of January 1, 2018

Share capital

Capital surplus

53,88740,825

Profit (loss)
Other comprehensive income, net of taxes
Total comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Transfer from other components of equity to retained earnings
Total transactions with owners
Balance as of March 31, 2018

Treasury shares(1,807)Retained earnings

44,491

1,137

(191)

33,712(4,286)--53,88740,825(4,286)(2,916)(2,916)(3)(3,122)(1,071)(4,193)

-

-

(12)
(12)

(1,809)36,012(1,778)(115)

29,437

(3)

12

76
76

(4,263)(4,263)(1,083)(1,083)

1,083
1,083
-

Total equity
attributable to ownersof parent

Non-controllinginterests

Total equity

3.Notes on the Going-concern Assumption
Not applicable
4.Segment Information
1. Overview of reportable segments
The Company’s reportable segments are components of the Sapporo Group about which separate financial information is available. Thesesegments are subject to periodic examinations to enable the Company's board of directors to decide how to allocate resources and assess
performance.
The Group's businesses are segmented mainly based on the products, services, and sales markets of Group companies and their affiliatedcompanies. The Company's five reportable segments are Japanese Alcoholic Beverages, International, Food & Soft Drinks, Restaurants, andReal Estate.
The Japanese Alcoholic Beverages segment produces and sells alcoholic beverages in Japan, while the international segment produces andsells alcoholic beverages and soft drinks overseas.
The Food & Soft Drinks segment produces and sells foods and soft drinks.
The Restaurants segment operates restaurants of various styles.
The Real Estate segment's activities include leasing and development of real estate.

2. Revenue, profit (or loss)(millions of yen)Three months ended March 31, 2017 (January 1, 2017 – March 31, 2017)
Japanese
Alcoholic
Beverages
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

50,796743
51,539(2,289)International

Food &
Soft Drinks

18,44817
18,466(30)

30,36138
30,400(309)

Restaurants Real Estate

6,347
0
6,347
(538)

5,861
614
6,475
972

Three months ended March 31, 2017 (January 1, 2017 – March 31, 2017)
Other *1
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

2,750
4,405
7,155
(129)

Total

114,564
5,817
120,381(2,324)

Adjustment

Consolidated total

114,564(5,817)(5,817)(1,332)

114,564(3,655)(millions of yen)Three months ended March 31, 2018 (January 1, 2018 – March 31, 2018)
Japanese
Alcoholic
Beverages
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

50,784669
51,452(3,056)

International

Food &
Soft Drinks

17,837116
17,952(443)

27,81527
27,842(1,003)

Restaurants Real Estate

6,113
1
6,114
(543)

6,021
663
6,683
1,101

Three months ended March 31, 2018 (January 1, 2018 – March 31, 2018)
Other *1
Revenue
To outside customers
Inter-segment revenue
Total
Operating profit

2,773
4,428
7,201
(98)

Total

111,342
5,903
117,245(4,043)Adjustment

Consolidated total(5,903)(5,903)(1,463)111,342
111,342(5,505)(1) "Other" comprises businesses, such as logistics businesses, that are not included in reportable segments.
(2) Segment income and losses are adjusted based on operating income reported on the quarterly
consolidated statements of income for the corresponding period.
(3) The export business of Sapporo International Inc. has been transferred to Sapporo Breweries Ltd. effective January 1, 2018.
Accordingly, the business was previously included in the International business segment,
but has been included in the Japanese Alcoholic Beverages segment.
The consolidated financial statements for the first quarter of fiscal 2017 have been adjusted retroactively to reflect these changes.

13Subsequent Events(Issuance of convertible bonds with stock acquisition rights)
At a meeting of the Board of Directors held on April 11, 2018, the Company resolved toissue euro-yen convertible bonds with stock acquisition rights due 2021. The payment wascompleted on April 27, 2018. Details concerning the convertible bond issuance are as follows.
1. Name of the bond
Sapporo Holdings Limited Euro-Yen Convertible Bonds with Stock Acquisition Rights due
2021 (hereinafter, “Bonds with Stock Acquisition Rights;” “the Bonds” when referring to
the bonds only, and “the Stock Acquisition Rights” when referring to the stock acquisitionrights only).
2. Issuance amount (amount paid for the Bonds)
100.5% of the Bonds’ par value (each Bond has a par value of ¥10 million)
3. Issue price (subscription price)
103.0% of the Bonds’ par value
4. Total issuance amount¥20 billion plus total par value of the Bonds for Substitute Bonds with Stock Acquisition
Rights (i.e., bonds with stock acquisition rights issued with appropriate certification ascompensation in case of loss, theft or destruction of the Bonds with Stock Acquisition
Rights, hereinafter the same shall apply).
5. Coupon interest rate
The Bonds do not have a coupon interest rate
6. Closing date and issue date
April 27, 2018 (London time, hereinafter the same unless indicated otherwise below)
7. Redemption method and maturity date
The Bonds will be redeemed at 100% of their par value upon maturity on April 27, 2021
and in accordance with certain provisions set forth in the issuance documents.
8. Matters concerning the Stock Acquisition Rights(1) Type, content, and number of shares to be issued upon exercise of Stock Acquisition
Rights
The shares to be issued upon exercise of Stock Acquisition Rights shall be theCompany’s common stock (the number of shares constituting one unit = 100 shares),and the number of shares to be delivered by the Company upon exercise of the Stock

14

Acquisition Right shall be determined by dividing the total value of the Bonds’ par value
regarding the exercise request by the conversion price set forth in (3) below. However,fractions of less than one share resulting from the exercise of rights shall be rounded
down without any cash adjustment.
(2) Total number of Stock Acquisition Rights issued
2,000 plus a number determined by dividing the par value of the Bonds regarding
Substitute Bonds with Stock Acquisition Rights by ¥10 million(3) Nature and value of the asset to be contributed upon exercise of the Stock Acquisition
Rights(a) The exercise of each Stock Acquisition Right shall be valued at the par value of theBonds to which the Stock Acquisition Rights were attached.
(b) The conversion price will initially be ¥3,965.
(c) Conversion price adjustments
Subsequent to the issue of the Bonds with Stock Acquisition Rights, if the Company
issues shares of its common stock at a price less than its market price or disposesof shares held by the Company as treasury stock, the conversion price will be
adjusted according to the below formula, in which the “Number of shares alreadyissued” refers to the total number of outstanding shares of the Company’s common
stock (excluding treasury stock held the Company).

Conversion priceafter adjustment=

Conversion priceprior to adjustment

Number ofshares alreadyissuedx

Number of issued or
disposed sharesx

Price paid per
share

+

Number of shares alreadyissuedMarket capitalization+

Number of issued or
disposed shares

In addition, the conversion price shall be adjusted appropriately to reflect changes
caused by the splitting or consolidation of the Company’s common stock, theissuance of stock acquisition rights (including via the issuance of bonds with stockacquisition rights) that can request the delivery of the Company's common stock at
a price below its market price or any other justifiable reason.
(4) Stock Acquisition Rights can be exercised from May 11, 2018 to April 13, 2021 (local
time for the location where exercise request is received), in accordance with certain
provisions set forth in the issuance documents.
(5) Other conditions for exercising Stock Acquisition Rights: The Stock Acquisition Rights
cannot be partially exercised.
(6) Capital and capital reserves to be increased when common shares are issued upon15

exercise of stock acquisition rights
The increase in capital realized through the issuance of common shares upon theexercise of the Stock Acquisition Rights shall be the amount obtained by multiplying
by 0.5 the upper limit on the increase in capital etc. set forth in the Article 17 of theRules of Corporate Accounting. The increase in the capital reserve shall be the amountobtained by subtracting the increase in capital from the upper limit on the increase incapital, etc.
(7) The issuance of stock acquisition rights by a successor company etc. resulting fromorganizational restructurings etc. is subject to certain provisions set forth in theissuance documents
9. The bonds are issued without collateral or guarantees.
10. Use of proceeds from bond issuance
The Company plans to use funds raised by the issuance of the Bonds with Stock
Acquisition Rights are as follows:(1) About ¥12 billion will be used within May 2018 for the repayment commercial paper
taken on as part of the acquisition of Anchor Brewing Company.
(2) About ¥8 billion will be used within May 2018 for the repayment of other outstanding
commercial paper as the Company seeks to strengthen its financial base.

16

(First time adoption)
Sapporo Group (the Group) started to disclose the consolidated financial statements based on theInternational Financial Reporting Standards (IFRS) from the first quarter of the fiscal year ending
December 31, 2018. The last consolidated financial statements prepared based on JGAAP is those for the
fiscal year ended December 31, 2017, and the date of transition to IFRS is January 1, 2017.
In principle, IFRS requires that first-time adopters apply IFRS retrospectively. However, IFRS 1 sets out
exceptions under which first-time adopters are optionally exempted or prohibited from the retrospective
application of some of the standards required by IFRS.
The exemptions applied by the Group are as follows:・ Business combination
As IFRS provides exemptions from IFRS 3 "Business Combinations," the Group elected not to apply thestandards retrospectively to business combinations that occurred before the date of transition to IFRS.
Consequently, the amounts of goodwill arising from business combinations that occurred before the dateof transition to IFRS were recognized based on their book value under JGAAP at the transition date. For
reference, at the transition date, an impairment test was implemented for such goodwill with or without
evidence that indicates impairment loss.
・ Deemed cost
With respect to property, plant and equipment items and intangible assets items, IFRS 1 permits the firsttime adopter to use their fair value at the date of transition to IFRS as deemed cost at the date oftransition to IFRS. The Group applied the exemption to certain property, plant and equipment items andused their fair value at the date of transition to IFRS as deemed cost at the date of transition to IFRS.
・ Exchange differences on translation of foreign operations
As is permitted by IFRS 1, the Group elected to deem the cumulative exchange differences on translationof foreign operations to be zero at the date of transition to IFRS.
・ Designation of financial instruments recognized before the transition dateWith respect to the classification described in IFRS 9, IFRS 1 permits an entity to assess financial assets
on the basis of the facts and circumstances that exist at the date of transition to IFRS, instead of thoseexisted at the initial recognition. In addition, based on the facts and circumstances that exist at the date oftransition to IFRS, an entity may designate change in fair value of equity instruments as financial assets
measured at fair value through other comprehensive income. For the classification described in IFRS 9,
the Company assessed financial assets on the basis of the facts and circumstances that exist at the dateof transition to IFRS, and designated certain equity instruments as financial assets measured at fair value
through other comprehensive income.
・ Lease for lessee
With respect to recognition of lease liabilities and right-of-use assets, IFRS 1 permits a first-time adopterthat is a lessee to measure all of its lease liabilities and right-of-use assets at the date of transition to
IFRS. The Group measured lease liabilities at the date of transition to IFRS at the present value of theremaining lease payments discounted using the lessee’s incremental borrowing rate at the date oftransition to IFRS. The Group also measured right-of-use assets at the date of transition to IFRS at an
amount equal to the lease liabilities.
For leases whose period ends within 12 months from the transition date and leases for which theunderlying asset is of low value, the lease payments are expensed over the lease period with the straightline method or another systematic basis.
The reconciliation which IFRS requires a first-time adaptor to disclose are presented below. For reference,"Presentation reclassification" in the following reconciliation tables include items that do not affect retained
earnings and comprehensive income. "Recognition and measurement differences" include items that
affect retained earnings or comprehensive income.

17

Reconciliations of equity as of the IFRS transition date (January 1, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

AssetsAssetsCurrent assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies

Current assets
10,589

ሺ114)－

10,47696,851

ሺ82)

ሺ194)

96,57424,657

ሺ24,657)－－

13,315

ሺ13,315)－－－

38,343

ሺ724)

Trade and otherreceivables

37,619①

Inventories⑥

Other financial assets

－

7,452

2,516

9,967

15,213(7,696)

(131)

7,386

Deferred tax assets

3,640

ሺ3,640)－－Allowance for doubtfulreceivables

ሺ82)

82

－

－

164,184(3,627)－359

164,184

ሺ3,269)Cash and cash equivalents
①

Other

Total current assets

Other current assets

1,466 162,022－

Subtotal

359

Assets held for sale

1,466 162,381

Total current assets

Fixed assets
Property, plant andequipment

Accounts under IFRS

Non-current assets
345,496

ሺ223,544)

29,651 151,602③④

Property, plant andequipment⑤

Goodwill

Intangible assets
Goodwill

27,439－

ሺ5,956)21,483

Other

10,511

ሺ409)

202

10,305－

223,595－ 223,595

59,296

ሺ59,296)

－

－

－

372

－

372

－

68,783

10,49579,278Long-term loans
receivable

4,790

ሺ4,790)

－

－

Other

14,760

ሺ6,265)

426

8,921

Deferred tax assets

1,071

ሺ3,308)

4,414

2,176

Allowance for doubtfulreceivables

ሺ1,195)

1,195

－

－

462,168

ሺ3,666)39,231 497,733

626,352(6,935)40,697

Intangible assets
Investment property

Investments and otherassetsInvestment securities

Total fixed assets
Total assets

18660,114

Investments accounted forusing equity method⑥

Other financial assets②

Deferred tax assets

Other non-current assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities
Current liabilities
Notes and accounts
payable - trade

Liabilities
Current liabilities
38,503－

ሺ43)

38,460

Short-term bank loans

30,337

ሺ30,337)－－

Commercial Paper

33,000ሺ33,000)－－

Current portion of bonds

10,083

ሺ10,083)－－－

73,421

2,159

75,580⑥

Bonds and borrowings

Lease obligations

3,024

－

3,584

6,609

④

Lease liabilities

Income taxes payable

1,681

－

ሺ111)

1,570

－

32,988120

33,108

Accrued bonuses

2,980

ሺ2,980)－－Liquor taxes payable

34,228

ሺ34,228)－－

Deposits received

8,215

ሺ8,215)

－

－

Other

50,072

12,3384,014

66,424

Total current liabilities

212,123

ሺ96)

Trade and other payables

Income tax payables⑥

Other financial liabilities⑦

Other current liabilities

9,724 221,750

Total current liabilities
Non-current liabilities

Long-term liabilities
Bonds
Long-term bank loans

Net defined benefit
liability
Lease obligations
Dealers’ deposits forguarantees

50,129

ሺ50,129)－－

114,594

ሺ114,594)－－－

164,723512 165,235⑥

Bonds and borrowings－

47,609517

48,125⑥

Other non-current financial
liabilities

8,996

－

－

8,996

6,969

－

17,654

24,62333,242

ሺ33,242)－－

Net defined benefit liability④

Lease liabilities

Other
Deferred tax liabilities

15,115

ሺ14,367)

1,941

2,689

18,804

ሺ6,839)14,49026,455

Total long-term liabilities

247,848

ሺ6,839)35,113 276,122

Total non-current liabilities

Total liabilities

459,971

ሺ6,935)44,837 497,872

Total liabilities

Common stock

53,887－－53,887

Capital surplus

46,089－

ሺ5,383)40,706

Treasury stock, at cost

ሺ1,796)－－

ሺ1,796)

Retained earnings

41,932－

ሺ5,617)36,315⑨

Retained earnings

Accumulated othercomprehensive income

20,574－

7,941

28,515⑧

Other components of equity

Other non-current liabilities②

Net assets

Deferred tax liabilities

EquityShare capital⑤

Capital surplus
Treasury shares

157,628

Total equity attributable toowners of parent

4,613

Non-controlling interests

5,694

－

ሺ1,081)

Total net assets

166,381－

ሺ4,140) 162,241

Total equity

Total liabilities and net
assets626,352

ሺ6,935)40,697 660,114

Total liabilities and equity

Non-controlling interests

19

Reconciliations of equity as of the end of the first three months of FY2017 (March 31, 2017)(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

AssetsAssetsCurrent assets
Cash and cash equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies

Other
Allowance for doubtfulreceivables

Total current assets

Current assets
Cash and cash
equivalents
Trade and otherreceivables

9,429

(119)

－

9,310

68,489

(62)

(159)

68,26827,573(27,573)－－

13,156(13,156)－－－

40,985(837)

40,149①

Inventories

－

6,846

329

7,175

⑥

Other financial assets

19,575(11,110)

(138)

8,326

(62)

62

－

－

138,159(4,126)(805)

133,228

－

359

－

359

Assets held for sale138,159(3,767)(805)

133,587

Total current assets①

Other current assets

Subtotal

Fixed assets
Property, plant andequipment

Accounts under IFRS

Non-current assets
Property, plant andequipment

342,419(222,558)

28,964

148,825③④

Goodwill

26,286－(4,983)

21,303⑤

Other

10,292(395)

174

10,071Intangible assets－

222,595－

222,595

Investment property

59,093(59,093)

－

－

－

376

－

376

－

64,202

10,30874,510

460

(460)

－

－

15,305(7,327)

404

8,382

Intangible assets
Goodwill

Investments and otherassetsInvestment securities

Long-term loans
receivable
Other

Investments
accounted for using
equity method⑥

Other financial assets

Other non-current
assets－(2,771)

5,207

2,436

Allowance for doubtfulreceivables(1,216)

1,216

－

－

Total fixed assets

452,638(4,215)40,075

488,498

Total non-current
assets590,797(7,982)

39,270622,085

Total assets

Total assets

20②

Deferred tax assets

(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities
Current liabilities
Notes and accounts
payable - trade

Liabilities
Current liabilities
35,803－(43)

35,760

Short-term bank loans

27,991(27,991)－－

Commercial paper

41,000(41,000)－－

Current portion of bonds

10,072(10,072)－－－

79,062(16)

79,046⑥

Bonds and borrowings

－

2,906

3,790

6,696

④

Lease obligations

1,090

－

(3)

1,087

－

33,747

11

33,759－

Income taxes payable

Trade and other payables

Income tax payables⑤

Other financial liabilities⑦

Other current liabilities

Accrued bonuses

4,826(4,826)－

Liquor taxes payable

18,157(18,157)－－

Deposits received

8,872(8,872)

－

－

Other

49,978(4,892)

5,882

50,969Total current liabilities

197,789

(94)

9,622

207,317

Bonds

40,129(40,129)－－

Long-term bank loans

114,158(114,158)－－－

154,287247

154,533⑥

Bonds and borrowings⑥

Other financial liabilities

Total current liabilities

Long-term liabilities

Net defined benefit liability

Non-current liabilities－

44,582499

45,082

8,655

－

189

8,844

Net defined benefit liability

－

6,651

17,32923,980Dealers’ deposits forguarantees

30,907(30,907)

－

－

Other

39,541(38,752)

1,925

2,714

－

10,537

14,53325,070233,389(7,888)34,722

260,223

431,179(7,982)

44,344

467,540

Common stock

53,887－－53,887

Capital surplus

46,090－(5,383)40,706－－(1,798)36,737－(6,676)30,061⑨Retained earnings

19,159－8,109

27,268⑧

Other components of equity

Total long-term liabilities
Total liabilities④

Other non-current liabilities②

Retained earnings
Accumulated othercomprehensive income

Total liabilities
Equity(1,798)⑤

Capital surplus
Treasury shares

Total equity attributable toowners of parent
Non-controlling interests－(1,124)

4,421

Total net assets

159,619－(5,074)

154,545

Total liabilities and net assets

590,797(7,982)

39,270622,085

21

Share capital

150,124
5,544

Non-controlling interests

Deferred tax liabilities
Total non-current liabilities

Net assets

Treasury stock, at cost

Lease obligations

Total equity
Total liabilities and equity

Reconciliations of equity as of the end of FY2017 (December 31, 2017)(millions of yen)Accounts under JGAAP

JGAAP

Recognition
Presentation
andreclassification measurement
differences

IFRS

Notes

Assets

Accounts under IFRS
AssetsCurrent assets

Current assets
Cash and cash
equivalents
Trade and otherreceivables

12,718(181)－

12,53798,605

(103)

(176)

98,325

24,681(24,681)－－

13,638(13,638)－－－

38,718(846)

37,873①

Inventories

－

8,216

892

9,107

⑥

Other financial assets

Other

15,413(8,433)

(66)

6,914

Deferred tax assets

3,900(3,878)(22)－

Allowance for doubtfulreceivables

(103)

103

－

－

Total current assets

168,852(3,878)(219)

164,755

Cash and cash equivalents
Notes and accounts
receivable - trade
Merchandise and finishedproducts
Raw materials andsupplies①

Other current assets

Total current assets

Fixed assets
Property, plant andequipment

Non-current assets
343,763(219,266)

26,837

151,334③④⑤

Property, plant andequipment

Intangible assets
Goodwill

26,948－(2,006)24,942

Other

13,575(391)

155

13,339Intangible assets－

219,658－

219,658

Investment property

62,146(62,146)

－

－

－

391

－

391

－

66,904

11,77378,677

428

(428)

－

－

Goodwill

Investments and otherassetsInvestment securities

Long-term loans
receivable
Other

14,828(5,938)

419

9,309

Deferred tax assets

1,306(5,201)

6,220

2,326

Allowance for doubtfulreceivables(1,216)

1,216

－

－

461,779(5,201)

43,398499,976

630,631(9,079)43,179664,731

Total fixed assets
Total assets

22

Investments accounted
for using equity method⑥

Other financial assets②

Deferred tax assets

Other non-current assets

Total non-current assets
Total assets

(millions of yen)Accounts under JGAAP

JGAAPPresentation
reclassification

Recognition
andmeasurement
differences

IFRS

Notes

Accounts under IFRS
Liabilities and equities

Liabilities

Liabilities

Current liabilities

Current liabilities

Notes and accounts
payable - trade36,530－(43)

36,488

Short-term bank loans

37,882(37,882)－－

Commercial paper

32,000(32,000)－－

Current portion of bonds

10,068(10,068)－－－

79,950765

80,716⑥

Bonds and borrowings

Lease obligations

2,691

－

3,842

6,533

④

Lease obligations

Income taxes payable

5,202

－

5

5,207

－

33,060216

33,277

Accrued bonuses

3,090(3,090)－－Liquor taxes payable

34,408(34,408)－－

Deposits received

7,817(7,817

－

－

Other

50,484

12,2553,850

66,590Total current liabilities

220,173

(0)

8,636

228,809

Trade and otherpayablesIncome tax payables⑥

Other financial
liabilities⑦

Other current liabilities
Total current liabilities

Long-term liabilities

Non-current liabilities

Bonds

50,061(50,061)－－Long-term bank loans

103,578(103,578)－－－

153,639(455)

153,184－

45,548408

45,956

Net defined benefit liability

5,493

－

790

6,283

Lease obligations
Dealers’ deposits forguarantees

5,960

－

18,33524,29531,086(31,086)

－

－

Other

15,324(14,462)

1,759

2,621

Deferred tax liabilities

21,292(9,079)15,65827,872

Total long-term liabilities

232,795(9,079)36,496260,212452,968(9,079)45,132

489,021

Total liabilities⑥

Bonds and borrowings⑥

Other financial
liabilities
Net defined benefit
liability④

Other non-current
liabilities②

Total liabilities
Equity53,887－－

Capital surplus

46,091－(5,266)40,825

Treasury stock, at cost

(1,807)－－(1,807)Retained earnings

50,023－(5,532)44,491⑨

Accumulated othercomprehensive income

25,274－

9,385

34,659⑧－

53,887⑤

Capital surplus
Treasury shares
Retained earnings

172,055

Non-controlling interests

－

(539)

3,655

Total net assets

177,663－(1,952)

175,710

Total liabilities and net assets

630,631(9,079)43,179664,731

23

Share capital

Other components ofequityTotal equity attributable toowners of parent

4,195

Non-controlling interests

Deferred tax liabilities
Total non-current
liabilities

Net assets
Common stock

Lease obligations

Total equity
Total liabilities and equity

Notes on reconciliations of equity(1) Presentation reclassification
A. Trade and other receivables
Under JGAAP, “Notes and accounts receivable - trade” and “Allowance for doubtful receivables” were
presented separately, though under IFRS, these line items are included in “Trade and other receivables.”B. Inventories
Under JGAAP, “Merchandise and finished products” and “Raw materials and supplies” were presented
separately, and work in progress was included in “Other,” though under IFRS, these line items are reclassified
as “Inventories.”
C. Other financial assets and other financial liabilities
Based on presentation rules of IFRS, “Other financial assets” and “Other financial liabilities” are presented
separately.
Under JGAAP, “Investment securities” and “Long-term loans receivable” were separately presented andderivative assets were included in “Other” in Fixed assets. Though under IFRS, they are included in “Other
financial assets.”
In addition, under JGAAP, “Deposits received” was separately presented in current liabilities, though under
IFRS, it is included in “Other financial liabilities.”
D. Deferred tax assets and deferred tax liabilities
Under JGAAP, “Deferred tax assets” and “Deferred tax liabilities” were separately presented in current assets
and current liabilities, respectively, though under IFRS, these line items are presented in non-current assets
and non-current liabilities.
E. Assets held for sale
Based on IFRS 5, “Assets held for sale” is presented separately.
F. Investment property
Under JGAAP, fixed assets that meet the definition of investment property was included in “Property, plant andequipment” in fixed assets, though under IFRS, it is presented as “Investment property.”(2) Differences on recognition and measurement
1) Trade and other receivables and inventories
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it is recognized
mainly at the point of delivery.
In addition, under JGAAP, goods held mainly for advertisement and promotion were recognized as
inventories, though under IFRS, they are recognized as expenses at the point of purchase.
2) Deferred tax assets and deferred tax liabilities
Amounts of deferred tax assets and deferred tax liabilities have been adjusted for reasons such as temporary
differences arising from transition to IFRS from JGAAP.
3) Property, plant and equipment
In line with adoption of IFRS, the Group revised the depreciation method and other procedures for property,
plant and equipment and reduced their book value. In addition, for certain property, plant and equipment
items, the Group applied the exemption that permits the first-time adopter to use the fair value as of thetransition date as deemed cost. The book value of those property, plant and equipment before the applicationof deemed cost as of the transition date was 39,044 million yen and their total fair value was 71,253 million
yen.
4) Lease obligations
Under JGAAP, lease transactions of lessee were classified into finance lease and operating lease. For
operating lease, lease transactions were accounted for in a similar manner with ordinary rental transactions.
Under IFRS, the Group records all of its lease transactions in both leased assets (right-of-use asset) andlease obligations (lease liabilities), as lease transactions of lessee are not classified into finance lease and24operating lease.
5) Goodwill
Under JGAAP, goodwill was amortized with the straight-line method over a reasonable period up to 20 years,
though from the date of transition to IFRS, the Group ceased to amortize goodwill and instead started toperform an impairment test every year.
In addition, under JGAAP, changes in ownership interests in subsidiaries that do not result in loss ofcontrol (additional acquisition of ownership interests) were accounted for as external transaction withadjustments of goodwill or income and loss. Under IFRS, such changes are accounted for as equity
transaction, which affects “Capital surplus" without any change in goodwill or income and loss.
6) Other financial assets and other financial liabilities
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated, though under IFRS, theGroup has elected to measure them at fair value through other comprehensive income.
In addition, under JGAAP, interest-rate swaps that meet specific requirements were treated with a specificaccounting method. Under IFRS, however, they are treated with principle hedge accounting, where derivative
assets/derivative liabilities are recognized accordingly, and valuation differences are recognized in othercomprehensive income.
7) Other current liabilities
Under JGAAP, unused compensated absences were not required to be accounted for, though under IFRS,
they are recognized as liabilities.
Under JGAAP, levies including real-estate tax were recognized at the time of payment, though under
IFRS, they are recognized on the day when the liability is accrued.
8) Other components of equity
With respect to cumulative exchange differences on translations of foreign operations recognized under
JGAAP, the total amount was transferred to “Retained earnings” as of the transition date.
Under JGAAP, the Group recorded unlisted shares based on their acquisition costs and, if necessary,recognized their impairment when the financial position of an issuer deteriorated. Under IFRS, the Group has
elected to measure them at fair value through other comprehensive income.
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
9) Retained earnings(millions of yen)Transition date
(January 1, 2017)

Three months
ended March 31,
2017Year ended
December 31,2017

(418)

(330)

(510)

(1,610)(2,043)(4,851)

Lease obligations (see 4)

252

243

217

Goodwill (see 5)

－

956

3,904

Other financial assets、Other financial liabilities (see 6)

263

258

275

Other current liabilities (see 7)(2,739)(4,093)(2,643)

Other components of equity (see 8)(1,382)(1,600)(1,739)

16

(68)

(185)

(5,617)(6,676)(5,532)

Trade and other receivables and Inventories (see 1)
Property, plant and equipment (see 3)

OtherTotal adjustments to retained earnings

25

Reconciliations of profit or loss and comprehensive income for the first three months of FY2017(January 1, 2017 - March 31, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRSNet sales

117,788－

ሺ3,225)

114,564①

Revenue

Cost of sales

77,262－

4,905

82,166①②④

Cost of sales

Gross profit

40,527－

ሺ8,12932,397

41,980－

ሺ6,350)35,630

－

230

1

231

Other operating income
Other operating expenses

Selling, general andadministrative expenses

Gross profit①②③④

Selling, general andadministrative expenses

－

660

ሺ6)

654

ሺ1,453)

ሺ431)

ሺ1,771)

ሺ3,655)Non-operating income

417

ሺ417)

－

－

Non-operating expenses

910

ሺ910)

－

－

Extraordinary gains

5

ሺ5)

－

－

Extraordinary losses

426

ሺ426)

－

－

－

188

1

189

Finance income

－

676

105

781

－

4

ሺ0)

4

Finance costs
Share of profit of investments
accounted for using equity
methods

ሺ2,368)－

ሺ1,875)

ሺ4,243)

ሺ87)

－

ሺ768)

ሺ855)

ሺ2,281)－

ሺ1,108)

ሺ3,389)Operating loss

Loss before income taxes
Income taxes
Loss

Operating loss

Loss before tax⑤

Loss

Other comprehensive
incomeOther comprehensive income

Unrealized holding gain
on securities

ሺ394)

－

1

(394)

⑤

Remeasurements ofdefined benefit plans

ሺ87)

－

93

6

④

Foreign currencytranslation adjustments

ሺ1,112)－(4)(1,116)

Deferred hedge gains(losses)

2

－

84

86

ሺ3,872)－(935)(4,807)

Comprehensive income

Income tax expense

26

Financial assets measured atfair value through othercomprehensive income
Remeasurements of defined
benefit plans
Exchange differences ontranslation of foreign
operations
Effective portion of gains andlosses on fair value of cash
flow hedges
Comprehensive income

Reconciliations of profit or loss and comprehensive income for FY2017(January 1, 2017 - December 31, 2017)(millions of yen)Accounts under JGAAP

Recognition
Presentation
and
JGAAP
reclassification measurement
differences

IFRS

Notes

Accounts under IFRSNet sales

551,549－(14,963) 536,585①

Revenue

Cost of sales

358,573－

14,576 373,148①②④

Cost of sales

Gross profit

192,976－(29,539) 163,437

175,944－(29,952) 145,992

－

2,716

Selling, general andadministrative expenses(1,687)Gross profit①②③④

Selling, general andadministrative expenses

1,029

Other operating income

(144)

5,669

Other operating expenses(1,130)12,806－

5,813

Operating income

17,033(3,097)

Non-operating income

2,093

ሺ2,093)－－Non-operating expenses

2,715

ሺ2,715)－－Extraordinary gains

6,814

ሺ6,814)－－Extraordinary losses

5,423

ሺ5,423)

－

－

－

6,171

(4,833)

1,338

Finance income

－

2,324

302

2,626

－

19

(0)

19

Finance costs
Share of profit of investments
accounted for using equity
methods

17,802－(6,264)

11,5378,182－(3,012)

5,170

9,619

－

(3,252)

6,367

Profit before income
taxes
Income taxes
ProfitOperating profit

Profit before tax⑤

Income tax expense
ProfitOther comprehensive
incomeOther comprehensive income

Unrealized holding gain
on securities

3,416

－

4,785

8,202

⑤

Remeasurements ofdefined benefit plans

189

－

348

537

④

Foreign currencytranslation adjustments

1,019

－

13

1,032

Deferred hedge gains(losses)

ሺ60)

－

174

114

Comprehensive income

14,184－

2,068

16,25227

Financial assets measured atfair value through othercomprehensive income
Remeasurements of defined
benefit plans
Exchange differences ontranslation of foreign
operations
Effective portion of gains andlosses on fair value of cash
flow hedges
Comprehensive income

Notes on reconciliations of income and comprehensive income(1) Presentation reclassification
A. Other operating income, other operating expenses, finance income, finance costs and share of profit ofinvestments accounted for using equity methods
With respect to line items presented in “Non-operating income,” “Non-operating expenses,” “Extraordinary
gains” and “Extraordinary losses” under JGAAP, the Group has reclassified financial-related items to “Financeincome” or “Finance costs” and other items to “Other operating income,” “Other operating expenses” or“Share of profit of investments accounted for using equity methods” in accordance with IFRS.
(2) Differences on recognition and measurement
1) Revenue, cost of sales and selling, general and administrative expenses
Under JGAAP, some rebates and other related costs were presented in “Selling, general and administrative
expenses,” though under IFRS, these costs are deducted from “Revenue.”
Under JGAAP, revenue was recognized mainly at the point of shipment, though under IFRS, it isrecognized mainly at the point of delivery.
2) Cost of sales and selling, general and administrative expenses
As the Group revised the depreciation method and other procedures for property, plant and equipment in linewith adoption of IFRS, depreciation expense included in cost of sales and selling, general and administrative
expenses have been changed.
In addition, under JGAAP, levies including real-estate tax were recognized at the time of payment, though
under IFRS, they are recognized on the day when the liability is accrued.
3) Selling, general and administrative expenses
Under JGAAP, goodwill was amortized over the period for which its effects are estimated to last, though under
IFRS, goodwill is no longer amortized after the transition date.
4) Cost of sales, selling, general and administrative expenses, and remeasurements of defined benefit plans
Under JGAAP, past service cost was recognized in net assets through other comprehensive income when
they occurred and was expensed using the straight-line method over a certain number of years within the
average remaining service period of the employees. Under IFRS, past service cost is recognized in full as
either profit or loss when it occurs.
5) Income tax expense, financial assets measured at fair value through other comprehensive income
Under JGAAP, the Group recognized gain on sales of investment securities and tax on the gain in“Extraordinary gains” and “Income taxes,” respectively. Under IFRS, which permits to designate certain equity
instruments as financial assets measured at fair value through other comprehensive income, the Group
recognizes the gain on sales of designate equity instruments as “Other comprehensive income.”

Reconciliations of cash flows for the fiscal year ended December 31, 2017 (January 1, 2017 - December 31, 2017)
There are no material differences between the statements of cash flows based on JGAAP and those based on
IFRS.

28