TAIHEIYO CEMENT CORPORATION

Daiba Garden City Building, 2-3-5 Daiba, Minato-ku, Tokyo 135-8578 Japan
tel: 03-5531-7334 fax: 03-5531-7551 e-mail: ir-com@taiheiyo-cement.co.jp
16111001NT

Committing to Long-Term Value

AN N UAL REPO RT 2016
April 1, 2015–March 31, 2016

2016

Committing to Long-Term Value
Corporate Profile
The Taiheiyo Cement Group aspires to leadership in pioneering a sustainable future for our planet. Committed to doing
business in ways that contribute to economic development, are environmentally efficient, and make a positive difference tosociety, we are working to be a leader of our industry in the Pacific Rim region.
In line with this, we aim to maximize our corporate value by making efficient use of managerial resources in an integrated
fashion to minimize costs and risks as we strengthen our overall earnings capacity and financial structure.
We are simultaneously committed to fulfilling our corporate social responsibilities and the cement industry’s mission of
ensuring plentiful supplies of cement and concrete, both materials that are indispensable for building and maintaining social
infrastructure that secures the safety and assets of the population. We are also committed to helping protect the environment andadvancing a new socioeconomic order built on closed loop materials sourcing by putting our cement plants and home-grownrecycling capabilities and technologies to work to reduce, recycle, and reuse large volumes of waste material and by-products.

Contents
		 Corporate Profile / Contents / Financial Highlights
1 Taiheiyo Cement Group Main Business Locations
2 To Our Stakeholders
4 Special Feature:
		 Strengthening Growth Investments and R&D
6 Fiscal 2016 Review of Operations
8 Fiscal 2017 Business Strategies
14 Directors and Corporate Auditors
15 Financial Data
16 Consolidated Balance Sheets
18 Consolidated Statements of Income
		Consolidated Statements of Comprehensive Income
19 Consolidated Statements of Changes in Net Assets
20 Consolidated Statements of Cash Flows
21 Notes to the Consolidated Financial Statements
37 Independent Auditor’s Report
38 Taiheiyo Cement Group Network
39 Corporate Data

Financial Highlights
CONSOLIDATED
For the year:

2016(Millions of yen)

2015

(Thousands of U.S. dollars)

2016

Net Sales
Operating Income
Profit before Income Taxes and Non-Controlling Interests
Profit Attributable to Owners of Parent¥ 835,359
60,43352,59236,404¥ 842,848
65,406
67,387
44,114

7,413,559
536,329
466,739
323,077

Net Assets
Total Assets

357,073
1,014,075

347,490
1,040,602

3,168,913
8,999,604

At year-end:

Earnings per ShareUNCONSOLIDATED
For the year:

Net Sales
Operating Income
Income before Income Taxes
Net Income
At year-end:

Net Assets
Total Assets
Net Income per ShareDividends per Share

29.63
2016

Yen

(Millions of yen)

35.91
2015

U.S. dollars

0.26(Thousands of U.S. dollars)

2016¥ 300,642
32,95235,52726,326¥ 312,712
36,36836,281
27,406

2,668,110
292,439
315,298
233,640

228,610587,574

211,271548,5402,028,847
5,214,539

21.30
6.00

Yen

22.17
5.00

U.S. dollars

0.18
0.05

G LO B A L N E TWO R K

Holding Company …………………………
Representative Office ……………………
Cement Plant ………………………………
Clinker Grinding Plant ……………………
Distribution Terminal ………………………

Taiheiyo Cement Group Main Business Locations

Net Sales(Millions of yen)
1,000,000
800,000(■Con. / ■Uncon.)840,288 842,848 835,359
727,849 747,616

600,000

Anchorage

400,000

273,184

SeattlePortlandBeijing
Qinhuangdao
TAIHEIYO CEMENT (CHINA)
DalianINVESTMENT
Nanjing
ShenzhenHong Kong
Hanoi
Nghi Son
Bangkok

TAIHEIYO CEMENT HEAD OFFICE

ShanghaiTaipeiTaichung
Kaohsiung

Ninh Thuy
Ho Chi Minh

Stockton
Mojave Las Vegas
Oro Grande
TAIHEIYO CEMENT U.S.A.
RillitoLos Angeles
San Diego

300,359

346,044

312,712 300,642

200,000
0

Mar/12

Mar/13

Mar/14

Mar/15

Ordinary Income
69,590 67,890

70,00060,22560,00048,82150,00039,46940,00032,66730,000Cebu

20,0000Lae36,214

29,416

18,496

10,000TAIHEIYO SINGAPORE
Singapore

Mar/16 (Fiscal year)

22,908Mar/12

Mar/13

Mar/14

Mar/15

Mar/16 (Fiscal year)

Profit Attributable to Owners of Parent (Net Income ( Uncon.)50,000

Domestic Main Business Locations

Con.)

44,11440,00036,40435,22330,00027,40626,326

Mar/15

Mar/16 (Fiscal year)

22,76720,00017,02915,102

10,000

Sales Composition By Geographic Segment(As of March 31, 2016/Consolidated)
Other:

China, Vietnam, Philippines, Singapore, Papua New Guinea
Other
11.7%

0

Mar/12

11,329Mar/13

Mar/14

Employees
20,00015,000

U.S.A
12.9%

7,845

14,467

13,832 13,087 13,059
12,57410,000

Japan

75.4%

5,000

0

1,652

1,645

1,679

1,710

Mar/12

Mar/13

Mar/14

Mar/15

1,697
Mar/16 (Fiscal year)

TAIHEIYO CEMENT CORPORATION1To Our Stakeholders

Committing toIncreasing corporate value to facilitate sustainable growth
During the fiscal year under review our country’s gradual recovery has been kept aliveby improvements in income, employment and corporate performance, thanks to thegovernment’s economic policies and monetary easing by the Bank of Japan. This is despite
signs of export and manufacturing weakness in the Japanese economy stemming from aslowdown in China and other overseas markets, and a resulting sense of uncertainty about
the future.
The U.S. economy is experiencing a modest recovery fueled by falling unemployment
and robust consumer spending, while China has seen a gradual slowdown caused by slowing
growth in consumer spending and fixed-asset investment. Across the rest of Asia growing
domestic demand has offset lagging exports to push national economies toward recovery.
In this environment the Group’s consolidated sales fell ¥7,488 million from theprevious year to ¥835,359 million. Consolidated operating income was ¥60,433 million,
down ¥4,972 million, while consolidated ordinary income fell ¥7,664 million to ¥60,225
million. Consolidated net profit attributable to owners of parent fell ¥7,710 million to¥36,404 million.

Shuji Fukuda

President and Representative Director
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A N N UA L R EP O R T 2 0 1 6

Long-Term Value

Looking to the future, Japan’s gradual recovery is expected to continue as factors such as
low resource prices and policy support lead to a firming of the corporate profit environment.
However, a sense of growing uncertainty reflects the influence of developments suchas concerns over a slowdown in China and other overseas markets, the effects of U.S.
financial policy and the international political situation. As a result, we expect the businessenvironment to remain unpredictable in the immediate future.
Turning our attention to the Taiheiyo Cement Group’s business environment, ourcore domestic cement business is expected to benefit from factors such as reconstruction
projects in the aftermath of the Great East Japan Earthquake, construction associated withdisaster prevention and mitigation projects, and construction related to Shinkansen bullet
train projects. At the same time, slowing public investment, the lengthening of construction
project timelines, worker shortages at construction sites, and other developments will weighon demand for domestic cement. Looking to the U.S. economy, a stable recovery is expected
to continue with employment growth and improvements in consumer spending, but thepossibility of rising interest rates and a slowdown in the global economy make it necessary
to closely monitor future trends.

Looking to the future, the Taiheiyo Cement Group has identified “leveraging all
Group capabilities to contribute to the safety and security of societies in the Pacific Rim” asa vision and direction to guide it towards the mid 2020s. We will continue to undertake avariety of initiatives to realize these goals, committing to long-term value while creating newshared value with society.
For the fiscal year ending March 2017 we expect consolidated sales of ¥824,000
million, operating income of ¥62,000 million, ordinary income of ¥62,000 million and net
profit attributable to owners of parent of ¥38,000 million.
I look forward to your continued support and cooperation as we pursue these goals.

TAIHEIYO CEMENT CORPORATION

3

S P E C IAL F EATURE

Strengthening Growth Investments and R&D
The Taiheiyo Group has identified growth strategies that strengthen its earnings base as amajor theme in its 17 Medium-Term Management Plan. This special feature introduces
growth investments in the U.S. West Coast and the Philippines—two areas where demandfor cement is expected to grow—together with two breakthroughs made possible by theGroup’s technological and R&D capabilities.

Acquiring cement business assets in the U.S.

U.S.A.

In September 2015, Taiheiyo subsidiary CalPortland Company (CPC) purchased a cement
plant in Oro Grande, California, together with several associated business assets.
The purchase of these assets will allow Taiheiyo to create a supply system capable ofaccommodating growth in cement demand on the U.S. West Coast. Based on the plant’s
proximity to Los Angeles, a major demand center, CPC is working to optimize production
and distribution by integrating the facility with two other cement plants that it alreadyowns. These changes are expected to contribute to additional growth in the Group’s U.S.
cement business and help strengthen its revenue base.
Overview of assets purchased

Cement plant:
Oro Grande Plant
Cement terminals: Two locations – in Stockton and San Diego
Purchase price:
US 420 million

Expanding our clinker mill in the Philippines

PHILIPPINESIn December 2015, Taiheiyo subsidiary Taiheiyo Cement Philippines Inc. (TCPI)
expanded the clinker mill at its San Fernando Plant.
With the Philippines experiencing a high rate of economic growth, cement demandis growing significantly. The expansion of our existing clinker mill has boosted TCPI’s
cement production capacity by 1.0 million tons to 2.4 million tons, close to double theprevious capacity, enabling the company to meet strong demand for cement in the country.
Currently, domestic demand in the Philippines is growing rapidly and the country’s
relatively low per capita consumption of cement indicates the prospect of even greater
growth in the future. TCPI will contribute to the development of the Philippines going
forward by continuing to strive to assure stable production and supply.

4

A N N UA L R EP O R T 2 0 1 6

Developing a new cement material with the world’s highest compressive
strength
In June 2015, Taiheiyo succeeded in developing a new cement material that boasts theworld’s highest compressive strength using normal pouring and forming techniques.
The material achieved a world-record 464 N/mm2 in use without sacrificing the naturaladvantage of concrete, which is the ability to shape it as desired simply by pouring it into
a form.
In addition to this newly developed cement, Taiheiyo also has confirmed that further
increases in compressive strength are possible by modifying the actual cement. Looking to
the future, Taiheiyo Cement will continue its research and development of new cement
materials in order to set new strength records that meet our customers’ high performanceneeds in a variety of fields including construction and civil engineering.
(Note) *N/mm2: Newton per square millimeter, a unit of pressure. A value of 1 N/mm2 describes a force of 1 Newton
per square millimeter. A pressure of 464 N/mm2 would result if a weight of about 4,700 kg (4.7 metric tons) rested on asquare area measuring 1 cm on each side.

Comparison of the cross-sectional areas of concrete that can withstand a weight of about 100 tons

Ceraclean, a water quality stabilizer for use in aquaculture
5mmWorking to commercialize water treatment products.
Due to its high feed conversion efficiency, shrimp is attracting attention as apotential solution for the food crisis caused by the world’s growing population. However,
the accumulation of shrimp waste and leftover feed at the bottom in aquaculture ponds
degrades the water quality, leading to reduced production volumes. Taiheiyo’s Ceraclean,a water quality stabilizer for use in aquaculture that consists of manmade calcium silicate
hydrate with numerous pores, cleans water by stimulating the activity of useful plankton.
Having already introduced the product in Taiwan, going forward we plan to grow sales by
expanding into major aquaculture markets throughout Southeast Asia.

TAIHEIYO CEMENT CORPORATION5

FY 2016 Review of Operations
Cement Business
Operating Income Falls as Domestic Demand Slows
During the fiscal year under review private-sector investment showed signs of a recovery fromthe decline that followed the hike in Japan’s consumption tax rate. However, a downtrend
in public sector demand due to factors such as soaring material and labor costs weighed on
performance, pushing domestic cement demand down 6.3% from the previous year to 42.66
million tons. Some 320,000 tons of that demand was met by imported cement, a year-on-year
decline of 36.2%. Total exports rose 12.3% to 10.58 million tons.
The Taiheiyo Group’s domestic cement sales by volume, including consignment sales, fell
8.0% from the previous year to 14.67 million tons, while exports rose 34.2% to 3.98 million tons.
As a result, sales in the domestic cement business fell ¥19,471 million from the previous
year to ¥392,700 million, while operating income fell ¥4,569 million to ¥28,510 million due tofactors that include declining sales volume.
Overseas, total shipments rose in most regions served by our U.S. West Coast cement andready-mixed concrete business where the market continues to recover. Our cement business in
China was impacted by falling demand and intensifying price competition, while our cementbusiness in Vietnam and the Philippines performed well on the back of robust domestic demand.
As a result of the above factors the Group’s overseas cement business posted net sales of¥182,023 million, up ¥23,514 million from the previous year. Operating income fell ¥1,049
million to ¥6,120 million due to factors that include deteriorating profitability in the Chinese
market.
Sales¥ 574,724 million
up ¥4,042 million year-on-year

Operating
Income¥ 34,631 million
down ¥5,619 million year-on-year

Mineral Resources Business
Sales Growth Slows as Profitability Improves
Our aggregate business performed well as improvements to the bottom line and streamliningof distribution offset slumping demand in most regions apart from Tohoku. Despite a decline
in shipments of limestone to customers in the domestic iron and steel industry, increased
shipments of other products in our mineral products business pushed sales volume above theprevious year’s levels. Intake in our surplus construction soil recycling business fell below theprevious year’s figures. However, lower costs due to factors such as the decline in crude oil
prices contributed to improved profitability.
Sales¥ 93,533 million

down ¥2,424 million year-on-year

6

A N N UA L R EP O R T 2 0 1 6

Operating
Income¥ 8,113 millionup ¥1,404 million year-on-yearEnvironmental Business
Growth in Coal Ash Intake Boosts Profits
We completed our processing of disaster waste, which led to a decline in revenue. However,existing environmental businesses, particularly coal ash processing, performed strongly as
coal-fired power plants nationwide maintained high rates of operation, driving up profits.
Sales¥ 73,460 million
down ¥1,327 million year-on-year

Operating
Income¥ 7,655 millionup ¥181 million year-on-year

Construction Materials BusinessProfits Rise despite Declining Sales
Despite improving market conditions for autoclaved lightweight aerated concrete (ALC) andbrisk sales of construction materials, results were affected by delays in the start of ground improvement projects.
Sales¥ 80,853 million
down ¥9,486 million year-on-year

Operating
Income¥ 6,130 million
up ¥639 million year-on-year

Other BusinessProfitability Rises
This segment includes our real estate, engineering, data processing, finance, transport andwarehousing, and sports facility businesses.
The engineering business performed well, but profits fell due in part to the sale of ourceramics business.
Sales¥ 85,222 million
up ¥3,457 million year-on-year

Operating
Income¥ 4,014 million
down ¥1,620 million year-on-year

TAIHEIYO CEMENT CORPORATION

7

Fiscal 2017 Business Strategies

8

A N N UA L R EP O R T 2 0 1 6

Taking company-wide action to spur
multifaceted business development

Domestic Cement Business

Focusing on assuring sales volume andmaintaining equitable pricing

We forecast total domestic demand for cement in FY 2017 will
be approximately 43 million tons, a figure on par with FY2016.
While demand will grow, mainly due to construction associatedwith the Tokyo 2020 Olympics and Paralympics, we anticipate
demand from disaster reconstruction in the Tohoku region tosoften, causing the challenging business climate to continue.
Against this backdrop we will focus on consolidating oursales volume. With sales competition likely to ratchet up in
intensity, we are striving to work through this challenging
environment while maintaining our prices. To achieve this, after
careful analysis of current market conditions, we will set anappropriate sales strategy and sales initiatives.
Our goal this year is to ensure equitable pricing, continuinga priority that was formulated in FY 2012, while working hardto achieve satisfactory sales prices.
To further strengthen our sales capabilities we will also focus
on leveraging the Group’s overall capabilities. By “Group” I refer
not only to the Taiheiyo Cement Group, but also our various
internal departments with responsibilities in fields that include
mineral resources, environment, construction materials and civilengineering.
Many of our customers, including both ready-mixed
concrete companies and secondary product companies, also
deal with our mineral resource and environmental businesses,
among other segments of our operations. We believe pooling
our internal capabilities to provide optimal services will be more
effective than having individual departments pursue separate
sales operations.
Next, because we consider stabilization of the ready-mixed
concrete industry to be an extremely important priority for ourown company, we will maintain an across-the-board focus on thisgoal. To achieve this, our directly owned ready-mixed concrete
companies will work to strengthen their finances, improve theirtechnological capabilities, and retain talented employees so thateach can become a core presence in its respective region. We will
also maintain plants in regions with special demand so that we

can accommodate these needs in an agile and flexible manner.
Looking at independent ready-mixed concrete companies,
our policy is to apply the Group’s overall capabilities toaccommodating the full array of customer needs, including
putting structures in place that enable us to provide technicalsupport and ensure a stable supply of aggregate.

Contributing to disaster recovery throughthe stable supply of cement

Reconstruction work in the aftermath of the Great East Japan
Earthquake, involving civil engineering projects such as seawall
construction and the relocation of structures to higher groundcentered in Miyagi Prefecture and Iwate Prefecture, has slowed.
Going forward, demand is transitioning to construction projects
such as private-sector plants and buildings, but there is likely tobe some lag as this shift occurs. On the other hand, recovery andreconstruction-related projects in Fukushima Prefecture, where
the processing of disaster debris has made little progress, should
intensify in the future. We will put in place structures to meetthat demand, taking advantage of our deep expertise and closely
sharing information with local dealers and ready-mixed concrete
companies.
At Taiheiyo we aim to optimize our contribution to thereconstruction of disaster-stricken areas by ensuring a stablesupply of cement and ready-mixed concrete.
We will also cooperate across the board to help speed
recovery and reconstruction efforts in areas affected by the
Kumamoto earthquakes of April 2016.
Looking at large projects, construction demand related to
the Tokyo Olympics and Paralympics is lagging behind initialexpectations, but we expect the pace on these projects to pick up
during the second half of the FY2017. As we have already taken
steps to prepare our distribution system to accommodate theseprojects we are ready to meet the demand at any time. We will doso with robust structures and systems to ensure we can maximize
the supply of not only cement, but also all Group products andservices.
We are also poised to participate in major construction
projects such as the Chuo Shinkansen, the No. 2 Tomei
Expressway, the Yamba Dam, and temporary storage facilities forradioactive waste in Fukushima. We are working to put in placestructures to secure orders in connection with these projects andensure a stable supply of our products.

Helping female employees pursue productive
careers

As a manufacturer our responsibility is to produce stable,
high-quality products and to supply them safely to customers.
Consequently, we are orchestrating a Group-wide safety
initiative with the goal of achieving an accident-free year in FY
2017.
Fostering the development of young employees is anotherkey priority. In the face of concerns about the domestic market
shrinking in the future we believe that fostering employee
talent and expertise in the mineral resource and environmental
businesses, as well as the cement business, will serve to facilitate
efficient operations. Since many of our directly owned readymixed concrete companies currently are being led by veteran
managers, we also anticipate assisting in training a newgeneration of leaders to smooth the transition in managementof these companies.
In addition we have high expectations for the careersof female employees. Today, women are working in jobs inareas such as distribution where there was little opportunity
for responsibility in the past. The Taiheiyo Cement Readymixed Concrete Association’s Committee to Promote Equal
Opportunity Employment continues to study how we can be
more proactive in this area. Going forward, we will look toprovide new opportunities for female employees to pursue
productive careers.

Masafumi Fushihara

Director, Managing Executive Officer
Senior General Manager of Cement Business Division

TAIHEIYO CEMENT CORPORATION

9

Fiscal 2017 Business Strategies
There are several products with promising growth prospects
in the functional materials business. Among those the market for
ChiccaLight remains small but is growing steadily. There is alsosignificant potential for growth in demand for products such as
high-purity silicon carbide and functional hollow materials, andwe plan to harness this potential to place the business on a growthtrajectory in the future.

Fostering the development of young
employees who are capable of contributinginternationally

Growing our existing core business andfocusing on overseas expansion andthe functional materials segment

Mineral Resources Business

Developing our business in a way thatcomplements the Group’s cement business
and where there is room for growth

Although FY 2016 was a challenging year we expect to see
movement on projects related to the Tokyo 2020 Olympics andParalympics during the second half of FY 2017. This should
lead to a slight improvement in overall demand compared to theprevious year.
To expand our existing core business in this demanding
environment we will pursue strategic commercialization of
aggregate in partnership with the cement business. Currently, ourshare of the domestic aggregate market is low compared to ourshare of the cement market, indicating there is ample room for
growth. Going forward, we will seek to develop the business ina way that allows us to expand shared benefits with the cementbusiness. As part of this approach we will work to increase sales
10

A N N UA L R EP O R T 2 0 1 6of coarse sand and to put in place supply structures to prepare for
Olympic demand. In addition, as we work to grow sales, rather
than supply limestone aggregate from the Kamiiso Plant and Oita
Plant to the Kanto region as we have in the past, going forward we
will primarily ship product from the Kamiiso Plant to East Japan,
and ship product from the Oita Plant to West Japan.
We will also work to expand our mineral products businessby reviewing sales strategies, including the potential relocationof limestone production and supply facilities, and maximizing
exports.
In our soil solutions business one area of focus is to strengthen
efforts to sell insolubilization materials for heavy metals, which aredesigned to prevent diffusion of heavy metals in contaminated soil
and used in large-scale projects.
Overseas expansion is another growth strategy. This March we
opened a representative office in Vietnam to complement similarbases in Shanghai and Thailand. Currently we are gathering
information about new business opportunities as well as pursuing
our trading business. Our next step is to give specific shape to the
expansion of our businesses overseas and to find good business
partners.

We see the development of our human resources as anothergrowth strategy. We must both increase the number of young
employees companywide and foster the development of those who
can make a contribution in overseas markets. In addition we will
promote equal opportunity by coming together as a company to
put in place a workplace environment in which female employees
are encouraged to pursue productive careers with confidence andpeace of mind.
Our policy regarding group companies is to review theirbusinesses through a process of selection and consolidation, toreduce interest-bearing debt, enhance financial strength, and makesuch investments as necessary to promote increased profitability inthe future.
In addition, efforts to ensure safety, quality and environmental
friendliness in both production and distribution, including at
Group and partner companies, lay at the root of our businessactivities. Going forward we will leverage all our capabilities asa manufacturer to contribute to society, prevent accidents andminimize our impact on the environment.

Kunihiro Ando

Director, Managing Executive Officer
Mineral Resources Business Division

Striving to achieve sales of ¥100 billion andoperating income of ¥10 billion

Environmental Business

Enhancing strategic overseas development

Our core approach for FY 2017 is to strive towards the goal set
out in the 17 Medium-Term Management Plan, which calls forconsolidated-basis sales and operating income of ¥100 billion and¥10 billion respectively.
To achieve this goal our first priority is to take maximum
advantage of business opportunities accompanying the increasein the number of coal-fired power plants. We will expand ourbusiness in this field, including coal ash exports. In addition to
pursuing packaged sales that combine disposal of coal ash withthe supply of materials such as calcium carbonate, gypsum, coaland chemicals, we expect to be able to significantly expand ourbusiness by establishing decarbonization (electrostatic separation)technology to improve the quality of coal ash as cement additives.
Our second priority is to maximize our existing waste
business. Specifically, we will expand the catchment area formunicipal waste incineration to increase the scale of the disposal
business launched in Ofunato. In the waste-to-fuel field we will
expand our sales of fuel for biomass power generation, in addition
to disposal of automotive shredder dust, waste plastics and waste
plasterboard.

Our third priority centers on strategic overseas expansion. We
will progressively plan to export coal ash to overseas countries suchas Vietnam, Thailand and the Philippines. We will also expand
the market area of the biomass fuel supply business and aquabusinesses to areas including Thailand, Vietnam and Singapore.
Our fourth priority is development, growth and informationgathering related to new business. The diffusion of Aqua BusinessGroup products such as Power House and Ceraclean at facilities
like aquariums and fish farms are expected to lead to significant
business growth, so we will undertake a decisive effort to boost
diffusion in such facilities. Another field that holds major potential
for the future is the development of technologies for recycling
difficult-to-process wastes. We are currently pursuing joint R&D
research in lithium-ion batteries and solar panels with the Central
Research Laboratory in cooperation with external partners such as
Matsuda Sangyo and Shimane University. A project on recyclingof carbon plastic funded by the Ministry of the Environment is
promoted with the Central Research Laboratory.
We are also looking to contribute to the reconstruction in
Fukushima Prefecture and Kumamoto Prefecture by applying
our expertise disposing more than 1 million tons of disaster waste
in Iwate Prefecture, and the recovery of precious metals frommunicipal waste incineration ash and shredder dust at cement
plants.

Strengthening initiatives that are independentof cement manufacturing

Going forward, as well as the development of technologies that
reduce the impact of cement kilns, we plan to pursue initiatives
in fields that are not dependent on cement kilns, including thecreation of environmental businesses. One example of suchinitiatives is a project to generate power using methane fromthe fermentation of energy crops which is being carried out inthe city of Minamisoma in Fukushima Prefecture. We also
anticipate developing technologies that will enable the feeding ofappropriate materials as alternative fuel or raw material into thecement production process, with pre-treatment processes such assorting and blending of waste. Each of these initiatives promises
to drive growth in our environmental business.
Since the environmental business accepts a variety of
waste products we will also ensure the full enforcement of legal
compliance as well as safety and health management system toeliminate accidents.

Shigeru Matsushima

Director, Managing Executive Officer
Environmental Business Division

TAIHEIYO CEMENT CORPORATION

11

Fiscal 2017 Business Strategies
Strengthening the foundation of existing
businesses and developing new businesses
targeting growthInternational Business

Investment in regions with growing demand

Broadly speaking the 17 Medium-Term Management Plan setsout four priorities. The first priority is to achieve operating incomeof ¥17.5 billion during the final year of the plan through measuresthat enhance the profitability of existing businesses.
The second is to pioneer and pursue new businesses that target
growth. We made significant investments in the U.S. during 2015
and going forward will study new investment opportunities inother regions as well.
The third priority is to expand and deepen our trading business.
With regard to exports from Japan we will work to maximize
Group profits from trading by taking advantage of our overseas
network, for example by accommodating domestic demand as
conditions warrant and ensuring a stable supply source for the
U.S., where economic conditions are improving. In addition, wedeveloped a blended cement suited to local standards in Singapore
and last year put distribution structures for this product in place byadding a silo at the receiving port. Going forward we will develop
distinctive products that meet the needs of various localities while
continuing to develop associated markets.
The fourth priority is to pursue CSR management withparticular emphasis on safety. We will work to raise employees’safety awareness through such means as safety inspections andmeetings, and strengthen associated management structures. In
addition, we will work to inspect and strengthen risk management,
human resources development and international businessgovernance structures.

Recovery in the U.S., strong performance in
the Philippines and Vietnam

Looking at individual regions, the recovery in the U.S. is continuing
at approximately the pace we anticipated. However, 2015 demandin the five West Coast states where Taiheiyo does businessremained below 60% of the peak 2005 level. Consequently we
expect the demand recovery to continue for several more years
and for prices to gradually return to their prior levels. Against thisbackdrop we will work to quickly realize the benefits of last year’s
acquisition and to strengthen profitability.

12

A N N UA L R EP O R T 2 0 1 6

In Asia we have seen extremely strong demand for cementin the Philippines, with the market growing by 14-15% last year.
To accommodate this demand Taiheiyo Cement Philippines
expanded its grinding capacity with the installation of a new millin December 2015. We believe that the low per capita cement
consumption in the Philippines compared to nearby countries will
underpin additional growth in the future.
Demand has also been strong in Vietnam where domestic
cement demand reached a record high during FY 2016. In
addition to meeting the expected growth in demand going
forward, Nghi Son Cement will also work to lower costs andstrengthen profitability.
In China the cement industry faces extremely challenging
conditions and reorganizing our business is a major goal forthis year. Planned initiatives include developing the business bytaking advantage of proprietary waste processing technologies andexpanding exports to the U.S.
Looking beyond 2020, to expand our international businessand strengthen our revenue base we will study the feasibility ofinvestments in Southeast Asia as a follow-up to similar spending

in the U.S. last year. One approach involves investments to expand
our existing businesses in countries such as Vietnam and thePhilippines where we are already active, and another involves
investments in new countries. We will move to strengthen thefoundation of our businesses by pursuing investments throughcareful and serious consideration of commercial viability.

Ken Kikuchi

Director, Senior Executive Officer
Senior General Manager of the International Business Division

Establishing a solid business foundation andprofitable structure

We are also building a database from sales information andother data from Group companies so that we can share useful
information to help facilitate the overall growth and expansion of
the construction materials business.

Seeking growth and expansion by developing
Group sales structures

Launching market research in Southeast Asiawith a view to the future

Construction Materials Business

The Construction Materials Business Division was formedin April 2015 as part of an initiative to selectively consolidate
various segments of the Group’s operations. It combines theoperations of all our building, construction and civil engineering
materials businesses. Its establishment and improved profitability
is the result of reassessing the position and significance of thesebusinesses.
The 17 Medium-Term Management Plan identifies establish­
ing a business foundation and profitable structure as goals for
the Taiheiyo Cement Group and it sets forth “growth andexpansion” as the strategy for achieving those goals. During FY
2017, which is the middle year of the three-year plan, we intend
to further strengthen our profitability and financial position, andto accelerate initiatives associated with our growth and expansion
strategy.
To that end we will refine our vision of the Group’s sales
structures and accelerate our efforts to develop those structures.
As we look to capture orders for large projects such as the Tokyo
Olympics and Paralympics, and the Chuo Shinkansen, we must
recognize that there are limits to our past approach of having Group
companies’ involvement in a broad range of business domains
pursuing their own, independent sales operations. I believe it isboth more efficient and more effective to have related divisions
work together, including the Central Research Laboratory, topursue sales under the banner of the Taiheiyo Cement Group.
We are already working to develop business models while taking
advantage of feedback from sales personnel at Group companies,
and once we have identified the target market segments we will
pursue an aggressive approach to sales designed to encourage
adoption of Group products starting during the design stage.
In addition we are working to identify the key products andtechnologies that each Group company brings to the table. I
believe we can discover hidden products and technologies thatperhaps were ahead of their time when first developed, and thenpioneer new applications or package them together to create
new businesses. We are working to do just that while listening to
feedback from sales and development personnel.

Group companies have proven track records in their respective
international businesses but the 17 Medium-Term Management
Plan identifies the active development of products andtechnologies that can be sold overseas by the Group as vital to
our new business model. To that end we are preparing to conduct
in-depth market research in Southeast Asia through which wewill be able to identify priority target areas. Overseas development
will be extremely important as we work to achieve growth andexpansion in the construction materials business over the medium
and long term, and we will actively pursue it together with humanresources development.
With regard to human resources development we urgently
need to foster the development of management candidates at
Group companies with similar businesses, as well as of employeeswith the skills needed to work internationally. We will strengthen
programs to train employees to contribute to the developmentof our business through exchanges between Group companies,
gatherings of personnel with similar responsibilities, and training
sessions.

Toshihide Nishimura

Director, Managing Executive Officer
Construction Materials Business Division

TAIHEIYO CEMENT CORPORATION

13

Directors and Corporate Auditors (As of June 29, 2016)
Board of Directors
President andRepresentative Director

Representative Director,
Senior Executive Officer

Director,
Senior Executive Officer

Shuji Fukuda

Yuuichi Kitabayashi

Ken Kikuchi

Directors, Managing Executive Officers

Directors

Shigeru Matsushima Masafumi Fushihara Toshihide Nishimura Youichi Funakubo

14

Keiichi Miura

Masahiro Karino

Kunihiro Ando

Corporate Auditors (Standing)Corporate Auditors

Executive Officers

Kohji lshii
Hidehiko Kasamura

Takashi Nonaka
Yoshio Narukage

Yasuhiro Sagara
Tomoya Sakamoto
Toshiaki Suzuki
Satoshi Asami
Toru Kanai

A N N UA L R EP O R T 2 0 1 6

Ichirou Egami

Katsuhide Hukuhara
Masakatsu Kifushi
Seiichi Araki
Yoshiaki Tominaga
Kazuo Horikawa

Yoshiko Koizumi

Yuuzou Arima

Yoshiyuki Uenoyama
Hideaki Asakura
Tetsuya Ohashi

FI NA N C I A L S E C T I ON

Financial Data
Total Domestic Cement Demand /Group Sales

42.65

44.57

47.70

45.55

Net Sales

Operating Income /Operating Income to Net Sales
840,288 842,848 835,359

42.66

42.34 727,849

65,40670,434

747,616

Profit Attributable to Owners of Parent/
Earnings per Share (EPS)

16.3

60,4337.8

36,404

14.64

15.44

16.67

FY Mar/12

13

14

15.96

14.67

15

16

4.0

7.16

5.4
4.0

7,845

FY Mar/12

13

14

15

Total Domestic Cement Demand ■■■Group Sales

Net Sales ■■Total Assets

Ordinary Income /Return on Assets (ROA)16

FY Mar/12

13

14

Operating Income
Operating Income to Net Sales

15

16

■■

FY Mar/12

9.22

29.63

28.67

5.1
11,32913

14

Net Assets /Equity Ratio

16

15

■■

Profit Attributable to Owners of Parent
Earnings per Share (EPS)			

■

11.7

35.91

7.2

29,185

16.3

44,11435,223

8.4

40,659Return on Equity (ROE)FY Mar/12

6.3

13

Return on Equity (ROE)

14

15

16

■

■

Net Assets per Share

Interest-Bearing Debt

347,490 357,073
982,231 982,473 1,015,564

69,5901,040,602 1,014,075

67,89032,667
18,496

7.0

196,144
6.6
5.9

3.3

246.31

31.4

273,31260,22529.1

219,826

259.11

510,184

473,959

195.5723.7

138.0919.5

435,118
399,138 394,497

155.8517.3

1.9

FY Mar/12

13

14

15

16

Total Assets ■■FY Mar/12

13

14

Ordinary Income
Return on Assets (ROA)

Interest-Bearing Debt /Cash Flow

15

16

■■
■

35,78539,094

13

14

15

16

FY Mar/12

13

14

Net Assets per Share

Depreciation

R&D Expense

1516

FY Mar/12

13

14

15

16

Interest-Bearing Debt ■■■■Capital Expenditure

13.9

FY Mar/12

Net Assets ■■Equity Ratio

13

42,16044,076

41,62439,42240,55342,401

43,957

13

14

15

16

3,684

3,846

4,052

4,422

4,228

32,5247.7
4.9

FY Mar/12

13

14Interest-Bearing Debt/Cash Flow

5.2

5.2

15

16

■

13

14

Capital Expenditure

FY Mar/12

■■

15

16

FY Mar/12
Depreciation■■

FY Mar/12
R&D Expense

13

14

15

16

■■

TAIHEIYO CEMENT CORPORATION

15

Consolidated Balance Sheets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

2016

2015

2016
(Thousands of U.S. dollars)(Note 5)

(Millions of yen)

AssetsCurrent assets:
Cash and deposits (Notes 6, 7 and 10)
Notes and accounts receivable – trade (Notes 6 and 10)
Less: allowance for doubtful accounts
Merchandise and finished goods (Note 15)
Work in process (Note 15)
Raw materials and supplies (Note 15)
Deferred tax assets (Note 18)
Other
Investments and other assets:
Investment securities (Notes 6, 8 and 10)
Long-term loans receivable
Assets for retirement benefits (Note 11)
Deferred tax assets (Note 18)
Other (Notes 10 and 20)
Less: allowance for doubtful accounts
Property, plant and equipment (Notes 10 and 20):
Buildings and structures
Machinery, equipment and vehicles
Other
Less: accumulated depreciation
Land (Notes 10 and 14)
Construction in progress
Goodwill and other intangible assets (Note 10)
Total assets
The accompanying notes are an integral part of these statements.

16

A N N UA L R EP O R T 2 0 1 6¥53,539
161,392(938)¥53,859
178,350(2,329)176,020
28,5872,183
43,252
10,705
15,374
329,981

31,187
1,485
42,624
6,886
12,740308,918$475,148
1,432,310(8,326)
1,423,984
276,780
13,183
378,276
61,117113,065
2,741,556

113,747
1,249
20,338
16,84831,997
184,181(5,961)
178,219

115,443
1,127
8,968
23,25831,483
180,282(6,655)
173,626

1,024,524
10,00879,593
206,414
279,4071,599,948(59,069)
1,540,878

478,522842,647
108,537
1,429,706(1,117,608)
312,098
164,647
13,819490,565
41,836¥1,040,602

448,950
841,895
108,807
1,399,653(1,073,719)
325,934
140,726
20,950487,611
43,919¥1,014,075

3,984,295
7,471,563
965,631
12,421,490(9,528,927)
2,892,563
1,248,907
185,926
4,327,396
389,772$8,999,604

160,454

2015

2016

2016
(Thousands of U.S. dollars)(Note 5)

(Millions of yen)

Liabilities and net assets
Current liabilities:
Short-term loans payable (Notes 6, 9 and 10)
Current portion of long-term loans payable (Notes 6, 9 and 10)
Commercial papers (Note 6)
Notes and accounts payable – trade (Notes 6 and 10)
Income taxes payable (Note 18)
Deferred tax liabilities (Note 18)
Other (Note 10)
Noncurrent liabilities:
Long-term loans payable (Notes 6, 9 and 10)
Lease obligations (Note 9)
Deferred tax liabilities (Note 18)
Deferred tax liabilities for land revaluation (Note 18)
Liabilities for retirement benefits (Note 11)
Provision for directors’ retirement benefits
Provision for asset removal
Asset retirement obligations (Note 22)
Other provision
Other (Note 10)
Contingent liabilities (Note 12)
Net assets (Note 13):
Shareholders’ equity:
Capital stock:		
Authorized: 1,977,308,000 shares Issued: 1,237,800,586 shares in 2016 and 1,237,800,586 shares in 2015
Capital surplus
Retained earnings
Treasury stock (9,412,172 shares in 2016 and 9,106,837 shares in 2015)
Accumulated other comprehensive income:
Revaluation reserve for land (Note 14)
Valuation difference on available-for-sale securities
Deferred gains on hedges
Remeasurements of retirement benefit
Foreign currency translation adjustments
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets¥119,254
84,7675,000
85,036
10,730073,027
377,817¥110,048
61,664–73,8938,351
567,265321,229$976,650
547,255–
655,785
74,11648
596,957
2,850,813

194,942
22,6164,314
4,770
26,889
514
41
7,673
1,106
52,426315,295

233,626
15,662
3,527–
22,814
433
–
7,990
992
50,725
335,772

2,073,358
139,001
31,308–202,474
3,846–
70,911
8,806
450,1702,979,878

86,17450,757
158,939(934)

86,17450,925
188,731(979)

764,769
451,947
1,674,936(8,693)

4,295
6,908
2
(4,148)649
7,707
44,845
347,490¥1,040,602

4,665
4,755
16
(11,829)(4,174)(6,566)38,787357,073¥1,014,075

41,402
42,202
149(104,986)(37,043)(58,276)
344,229
3,168,913$8,999,604

The accompanying notes are an integral part of these statements.

TAIHEIYO CEMENT CORPORATION

17

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

2015

2016

2016

Net Sales
Cost of sales (Note 15)
Gross profit

Selling, general and administrative expenses (Notes 16 and 17)
Operating income

Non-operating income (expenses):
Interest and dividends income
Interest expenses
Loss on sales/disposal of property, plant and equipment
Gain on sales of investment securities
Loss on valuation of stocks of subsidiaries andaffiliates
Equity in earnings of unconsolidated subsidiaries
and affiliates
Impairment loss (Note 20)
Gain on step acquisitions
Business structure reform costs
Gain on forgiveness of debts
Other, net$7,413,559

Profit200,203

194,983

1,730,421

Valuation difference on available-for-sale securities
Deferred losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
Remeasurements of retirement benefit	Share of other comprehensive income or (loss) of
associates accounted for using equity method

16,002(2,869)(25,464)

5,072(3,378)(29,985)

Comprehensive income¥79,736¥21,971$194,988

Owners of parent
Non-controlling interests¥68,922¥21,758$193,098

640,375

134,796

134,550

65,40660,433

1,322

1,563

5,683,137
1,194,092

536,329
13,874(6,847)(6,492)(57,615)5

1,243

11,038(797)(1,539)(13,659)(1,231)(374)(3,319)

5,293

5,292

46,966(1,069)(5,757)(51,097)(1,180)

–

–

916

4,569

–
–

–
–

(15,776)

Profit before income taxes and non-controlling interests

67,38752,592466,739

Income taxes (Note 18):
Current
Deferred

18,17014,334

127,210

Profit16,285
51,101

15,012

133,232

6,986

1,175

The accompanying notes are an integral part of these statements.

A N N UA L R EP O R T 2 0 1 6

2016(Thousands of U.S.
dollars) (Note 5)¥835,359

642,645(1,777)Per share (Note 4 (13)):
Profit		Basic
Cash dividends

2016(Millions of yen)

¥842,848

998

Profit attributable to non-controlling interests
Profit attributable to owners of parent

18

2015

(Thousands of U.S.
dollars) (Note 5)(Millions of yen)

1,980

(7,841)(1,884)678

37,579¥ 44,114¥36,404(Yen)¥35.91
5.00(69,590)

6,022

333,506
10,428$323,077(U.S. dollars) (Note 5)¥29.63
6.00

$0.26
0.05

Other comprehensive income:

Total other comprehensive income (Note 21)
Comprehensive income attributable to:¥51,101¥37,579$333,506

1,854(1,864)(16,542)

494

237

2,110

(14)

5,226

28,635¥10,813(5)(7,728)(15,608)

¥212

(44)

(68,592)(138,517)$1,890Consolidated Statements of Changes in Net Assets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

(Millions of yen)
Shareholders’ equity

Balance at 31st March, 2014
Cumulative effects of changes in accounting policies
Balance at 1st April, 2014
Dividends from surplus
Profit attributable to owners of parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Net changes in items other than shareholders’ equity
Balance at 31st March, 2015
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Dividends from surplus
Profit attributable to owners of parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock
Change in scope of consolidation
Net changes in items other than shareholders’ equity
Balance at 31st March, 2016

Capitalstock¥86,174¥86,174

Capitalsurplus¥50,690¥50,690

Accumulated other comprehensive income

Retainedearnings¥121,212(87)¥121,124(6,142)

Treasurystock¥ (936)¥ (936)

Revaluation
reserve forland¥4,252¥4,252

Valuationdifference on
available-for-sale securities¥5,084¥5,084

Deferred gains
on hedges¥50¥50Remeasurementsof retirement
benefits¥ (9,472)¥ (9,472)

Foreigncurrencytranslation
adjustments¥ (16,799)¥ (16,799)

Non-controllinginterests¥33,055(9)¥33,046

44,114¥86,174¥50,75765¥(934)

132

43¥4,295

1,824¥6,908

(48)
¥2

5,323

¥(4,148)

17,449¥649

11,799¥44,845(190)

36,391¥347,490
167(7,370)(7,370)36,40436,40414

0¥50,925(6,142)(63)

167¥86,174(97)¥273,214

33

(63)

(190)
¥158,939¥273,312

44,114

33

66

Total
net assets

(46)

0

743
¥188,731

14(46)¥(979)

0369¥4,665(2,153)¥4,75514¥16(7,680)¥(11,829)(4,823)¥(4,174)(6,057)¥38,787743(20,331)¥357,073(Thousands of U.S. dollars) (Note 5)
Shareholders’ equity

Balance at 31st March, 2015
	Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Dividends from surplus
Profit attributable to owners of parent
Reversal of revaluation reserve for land
Purchase of treasury stock
Disposal of treasury stock
Change in scope by consolidation
Net changes in items other than shareholders’ equity
Balance at 31st March, 2016

Capitalstock$764,769

Capitalsurplus$450,456

Accumulated other comprehensive income

Retainedearnings$1,410,542

Treasurystock$(8,289)

Revaluation
reserve forland$38,124

Valuationdifference on
available-for-sale securities$61,311

Deferred gains
on hedges$18

Remeasurementsof retirement
benefits$(36,820)

Foreigncurrencytranslation
adjustments$5,767

Non-controllinginterests$397,987

1,488(65,406)

323,077125$764,769$451,947$3,083,868
1,488(65,406)

1

Total
net assets

6,598$1,674,936

323,077
125

(409)

(409)

5

$(8,693)

7

3,277$41,402(19,108)$42,202131$149(68,166)$(104,986)(42,811)$(37,043)(53,758)$344,229

6,598(180,436)$3,168,913

TAIHEIYO CEMENT CORPORATION

19

Consolidated Statements of Cash Flows
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

2015

2016

2016

(Millions of yen)

Net cash provided by operating activities

Profit before income taxes and non-controllinginterests
Depreciation and amortization
Amortization of goodwill
Equity in earnings of unconsolidated subsidiaries
and affiliates
Gain on sales of investment securities
Loss on liquidation of subsidiaries and affiliates
Loss on valuation of stocks of subsidiaries and affiliates
Changes in asset and liability for retirement benefits
Decrease in provision for directors’ retirement benefit
Increase (decrease) in allowance for doubtful accounts
Interest and dividends income
Interest expenses
Loss on sales/disposal of property, plant and equipment
Impairment loss
Decrease in notes and accounts receivable – trade
Increase in inventories
Decrease in notes and accounts payable – trade
Business structure reform costs
Gain on forgiveness of debts
Decrease in provision for asset removal
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities

Net cash used in investing activities(Increase) decrease in time deposits
Purchase of property, plant and equipment, etc
Proceeds from sales of property, plant and equipment, etc
Purchase of investment securities
Proceeds from sale and redemption of investment securities
Purchase 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 (Note 25)
Payments for sales of shares of subsidiaries resulting
in change in scope of consolidation (Note 25)
Payments of loans receivableCollections of loans receivable
Payments for transfer of business (Note 25)
Other, net
Net cash used in investing activities

20

A N N UA L R EP O R T 2 0 1 6

2015(Thousands of U.S.
dollars) (Note 5)¥67,387¥52,592$466,739

42,401
2,771

43,9572,967

390,110
26,335(5,293)(5,292)(46,966)

(5)
466
1,231
485
(6)
435
(1,322)
6,847
797
1,069
2,429
(1,069)(872)
1,180(4,569)(533)(5,949)107,879
1,705(6,920)(25,664)
77,000(1,243)–374(1,027)(32)(689)(1,563)
6,492
1,539
5,757
7,259
(3,694)(6,525)––(41)(3,918)96,9101,971(6,599)(16,655)
75,627(11,038)–
3,319(9,118)(287)(6,120)(13,874)
57,615
13,65951,09764,428(32,791)(57,914)––(368)(34,771)860,053
17,499(58,567)(147,816)
671,169

848(38,403)
5,017(1,444)370(350)(36,050)
6,061
(342)
995

(3,107)(319,939)
53,794(3,043)
8,831

(516)

–

–

–

6,747

59,882–(1,040)(9,235)(1,562)
3,631–
680¥(31,377)

(693)
3,510
(50,863)927¥(71,099)(6,153)31,157(451,398)
8,229$(630,982)

2016

2016
(Thousands of U.S.
dollars) (Note 5)(Millions of yen)

Net cash used in financing activities

Decrease in short-term loans payable
Increase (decrease) in commercial papers
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury stocks
Cash dividends paid
Dividends paid to non-controlling interests
Proceeds from sales of treasury stock
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash andcash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting frommergerDecrease in cash and cash equivalents from
corporate division
Increase (decrease) in cash and cash equivalents
resulting from change of scope of consolidation
Cash and cash equivalents at end of year (Note 7)

The accompanying notes are an integral part of these statements.

¥(31,899)
5,000
44,752(78,335)
20,000(610)(50)(6,142)(583)
67(4,911)(52,713)¥(9,798)(5,000)105,866(60,055)–(20,395)(43)(7,370)(1,015)0(6,216)(4,027)$(86,959)(44,373)939,529(532,975)–(180,999)(385)(65,406)(9,013)
7(55,169)(35,744)

1,712

(510)

(4,531)(5,377)55,604(10)
50,645(90)449,465

76

138

1,231

–

(105)

(937)

342

(596)

(5,291)¥50,645¥50,072$444,377

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

<Yen in millions and U.S. dollars in thousands, unless otherwise
indicated.>
1.	Basis of Presentation of the Consolidated Financial
Statements
The accompanying consolidated financial statements of Taiheiyo
Cement Corporation (the “Company”) and consolidated
subsidiaries (collectively, the “Companies”) are prepared on
the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards, and are compiled from the consolidated financial
statements prepared by the Company as required by the
Financial Instruments and Exchange Law of Japan.
The accounts of overseas subsidiaries are adjusted according
to ASBJ PITF No.18. In preparing the accompanying
consolidated financial statements, certain items presented in
the consolidated financial statements filed with the Directorsof Kanto Finance Bureau in Japan have been reclassified and/or recapitulated and certain notes have been added for theconvenience of readers outside Japan.
Figures stated in this Annual Report are rounded off to thenearest unit of presentation (first decimal place in the case ofpercentages), except for profit per share, which is rounded off
to the third decimal place, and average age and average lengthof service of employees of the Companies, which are rounded
off to the second decimal place.
Certain amounts previously reported have been reclassified
to conform to the current year’s presentation.
2.	Scope of Consolidation and Investments in
Unconsolidated Subsidiaries and Affiliates
Under Japanese accounting standards, a subsidiary and anaffiliate are defined as follows:· a subsidiary:	a company in which the reporting entity
directly or indirectly holds more than 50% of
the voting rights thereof or which is deemed
to be controlled directly or indirectly by thereporting entity; and· an affiliate:	a company in which the reporting entity
directly or indirectly holds 20% or more of thevoting rights thereof or in which the reporting
entity is deemed to exercise significant
influence directly or indirectly on its decision
making.
(1)	Scope of Consolidation
The numbers of subsidiaries the Company had for theyears ended 31st March, 2016 and 2015 are 198 and
228, respectively, of which 121 and 131, respectively, areconsolidated in the respective years.
The significant subsidiaries that have been consolidated by
the Company are listed below:
Consolidated subsidiaries(Domestic)
NM Cement Co., Ltd.
Mitsui Wharf Co., Ltd.
Clion Co., Ltd.
Onoda Chemical Industry Co.,Ltd.
Myojo Cement Co., Ltd.
Taiheiyo Materials Corporation
Taiheiyo Precast Concrete Industry Co., Ltd.
Tsuruga Cement Co., Ltd.

Equity ownership* Share capital*(%)(Millions of yen)

70.0
100.0
97.4
76.1
100.0
100.0
100.0
67.1

¥7,001
3,500
3,075
2,750
2,500
1,631
1,242
1,050
(Millions of
U.S. dollars)(Overseas)
Taiheiyo Cement U.S.A., Inc. (USA)
CalPortland Company (USA)
Jiangnan-Onoda Cement Co., Ltd. (China)
Dalian-Onoda Cement Co., Ltd. (China)
Qinhuangdao Asano Cement Co., Ltd. (China)
Nghi Son Cement Co., Ltd. (Vietnam)* as of 31st March, 2016

100.0
100.0
88.5
84.8
71.9
65.0

$63.5
24.1
134.3
82.7
93.0
180.1

The remaining 77 unconsolidated subsidiaries for the year
ended 31st March, 2016 (97 for the year ended 31st March,2015) have not been consolidated with the Company since
the total assets, net sales, retained earnings, and profit of thosecompanies in the aggregate are not significant in relation
to those of the consolidated financial statements of theCompanies.
(2)	Investments in Unconsolidated Subsidiaries andAffiliates
For the year ended 31st March, 2016, the Company has 77
unconsolidated Subsidiaries and 102 affiliates (97 and 100 for
the year ended 31st March, 2015), of which 9 unconsolidated
subsidiaries (11 for the year ended 31st March, 2015) and

40 affiliates (37 for the year ended 31st March, 2015) areaccounted for by the equity method.
Investments in the remaining 68 unconsolidated subsidiaries
and 62 affiliates (86 and 63, respectively, for the year ended 31st
March, 2015) are carried at cost due to the immateriality ofthese entities in relation to the consolidated financial position
and the results of operations of the Companies.
The unconsolidated subsidiaries and significant affiliates, towhich the equity method is applied, include:
Equity ownership* Share capital*(%)(Millions of yen)

Unconsolidated subsidiaries/affiliates(Domestic)
DC Co., Ltd.
A&A Material Corporation
Fuji P.S Corporation
Azuma Shipping Co., Ltd.
Yakushima Denko Co., Ltd.
Okutama Kogyo Co., Ltd
Chichibu Railway Co., Ltd

31.0
42.6
21.1
39.9
49.5
37.4
49.5

¥4,013
3,889
2,379
2,294
2,006
1,000
750
(Billions of
Korean Won)

(Overseas)
Ssangyong Cement Industrial Co., Ltd. (Korea)

32.3

401.5
(Millions ofSingapore dollars)

Taiheiyo Singapore Pte., Ltd.

100.0

47.0
(Millions of Hong
Kong dollars)

Morehead Company., Ltd.
* as of 31st March, 2016

100.0

11.4

3. Consolidation Policies
For consolidation purposes, all significant inter-company
transactions, account balances and unrealized profit/loss
excluding the portion expected to be uncollected arising frominter-company transactions have been eliminated.
Where the year-end dates of consolidated subsidiaries andunconsolidated subsidiaries and affiliates accounted for by
the equity method are different from that of the Company,
necessary adjustments have been made for any significant
transactions that took place between such different year-end
dates.
Adjustments are made to eliminate the depreciation of assets
related to unrealized profits incurred from inter-company
transactions among the Companies.
The difference between the purchase cost of an investment
in a consolidated subsidiary and the amount of the underlying
TAIHEIYO CEMENT CORPORATION

21

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

equity in net assets at fair value of such subsidiary is directly
charged/credited, as the case may be, against income for the year
unless such difference is material. If the difference is material
and the effective period is able to be estimated, the difference isamortized over the relevant estimated effective periods.
4. Summary of Significant Accounting Policies
Significant accounting policies employed by the Companies in
preparing the accompanying consolidated financial statements
are outlined below:(1) Inventories
Generally, inventories are stated at cost, which is determinedby the moving average method. Appropriate write-downs arerecorded for inventories, which are deemed impaired in value.
However the cost for contract work in process is determinedby the specific identification cost method. Of note, inventories
at the consolidated subsidiary in the U.S. are stated at lower ofcost or market, based on the gross average method.
(2) Property, Plant and Equipment (Excluding Lease Assets)
Property, plant and equipment are stated at cost.
Depreciation is computed generally based on the decliningbalance method by the Company and its domestic consolidated
subsidiaries at rates based on the estimated useful lives ofassets. The depreciation of buildings, excluding accompanying
facilities, purchased on or after 1st April, 1998 is computed
based on the straight-line method.
The depreciation of property, plant and equipment heldby the subsidiaries in foreign countries is calculated by thestraight-line method.
The range of useful lives is summarized as follows:
			 Buildings and structures
10 – 75 years
			 Machinery, equipment and vehicles 4 – 15 years
Normal repairs and maintenance, including minor renewals
and improvements, are charged to income as incurred.
(3) Intangible Fixed Assets (Excluding Lease Assets)
Intangible fixed assets are amortized by the straight-line
method.
Capitalized software is amortized by the straight-line
method over the estimated useful lives (basically 5 years).
22

A N N UA L R EP O R T 2 0 1 6

Of note, mining rights are amortized primary based on the
production output method.
(4) Lease Assets
Financial lease transaction that do not transfer ownership
Lease assets are depreciated down to a residual value ofeither zero or the amount calculated as their residual guarantee
value, over their lease period. The accounting treatment offinance lease transaction that do not transfer ownership in casewhere the lease transaction on or before 31st March, 2008 is
in accordance with the accounting method for ordinary rental
transactions.
(5) Financial Instruments(a) Derivatives
All derivatives, except for derivatives that are designated as“hedging instruments” (see (c) Hedge Accounting below),
are stated at market value, and changes in market value areincluded in net profit or loss for the period in which theyarise.
(b) Securities
Securities are classified in accordance with Japanese
accounting standards into four categories, trading
securities, held-to-maturity debt securities, shares inequity of subsidiaries and affiliates, and available-for-salesecurities.
Trading securities and certain financial instruments thatmeet strict conditions are categorized as current assets, andall other securities other than investments in consolidated
subsidiaries are shown as “Investments in securities” in theaccompanying consolidated balance sheets, as the case may be.
Valuation of securities is as follows:
Trading securities are stated at the year-end fair market
value, and the resulting valuation gain/loss is charged toincome;Held-to-maturity debt securities are stated by applying
amortization/
accumulation unless impairments in value are to berecognized;
andWith respect to other securities, such securities withmarket values are stated at average market price, etc. in
the one-month period before the end of the fiscal year,

and those without market values are stated at cost unless
impairments in the value of those investments are to
be recognized. The unrealized gain/loss resulting fromthe valuation of other securities at year-end is shown as“Valuation difference on available-for-sale securities,” netof deferred income taxes thereon, in the accompanying
consolidated balance sheets. Cost of securities sold isdetermined by the moving-average method.
When market values of other securities are 50% of thecost or lower at the end of the fiscal year, such securities are
written down to such market value. With respect to othersecurities of which market values have declined between
30% and 50% of the respective costs, amounts to be written
off are determined by considering the recoverability of therespective securities.
(c) Hedge Accounting
Gains or losses arising from changes in fair value ofderivatives designated as hedging instruments aredeferred as “Deferred gains or losses on hedges,” net ofdeferred income taxes, in net assets. Such gains or losses
are included in net profit or loss in the same period
during which the gains and losses on the hedged items ortransactions are recognized. When certain conditions aremet, appropriation treatment is applied for currency swaps,
and exceptional treatment is applied for interest rate swaps.
The derivatives designated as hedging instruments are
principally interest swaps and forward exchange contracts.
The related hedged items are borrowings, bonds payable,
and raw materials and fuel, etc.
The Company has a policy to limit hedging to those
aimed at hedging against the risk of interest rate, exchange
rate, and raw materials and fuel price fluctuations of thehedged items and those aimed at eliminating hedging.
Effectiveness of hedging activities is evaluated on atransaction-by-transaction basis at the end of eachaccounting period with respect to hedging instruments
and hedged items by reference to the accumulated gains orlosses on the hedging instruments and the related hedged
items from the commencement of the hedges.
(6) Foreign Currency Translation(Translation of foreign currency financial statements ofoverseas subsidiaries and affiliates)

Exchange rates at the balance sheet date are applied for
all assets and liabilities and the historical exchange rates areapplied to shareholders’ equity whereas profit and loss items aretranslated at the average exchange rates prevailing during theyear.
The difference in the debits and credits in the balance sheets
resulting from the translation in the above manner is shown
as “Foreign currency translation adjustments” in accumulated
other comprehensive income of the accompanying consolidatedbalance sheets, net of the amount attributable to noncontrolling interests in consolidated subsidiaries.
(Translation of foreign currency items)
Receivables and payables denominated in foreign currencies
are translated into Japanese yen at the exchange rates at
the year-end date. Gains or losses arising from translation
in foreign currency receivables and payables are credited or
charged to income as incurred.
(7) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statementof cash flows consist of cash on hand, bank deposits readily
available, and short-term investments with a maturity of threemonths or less when purchased.
(8) Income Taxes
Deferred tax accounting is applied for the preparation of theaccompanying consolidated financial statements. The asset
and liability approach is used to recognize deferred tax assets
and liabilities in respect of temporary differences between the
carrying amounts and the tax base of assets and liabilities.
(9) Recognition of Certain Accrued Expenses
In general, the accrual basis of accounting for all income
and expense items is followed for the preparation of theaccompanying consolidated financial statements.
(a) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on theestimated uncollectible amounts of doubtful receivables, inaddition to a general provision computed by applying pastcredit loss experience. Consolidated overseas subsidiaries
mainly provide for such allowance at the estimatedamounts of credit losses.

(b) Retirement benefits(Retirement benefits to employees)
Employees are generally entitled to lump-sum
retirement payments and/or annuity upon termination ofservices, the amount of which is determined in light of theregulations set forth within the relevant companies of theCompanies. As a part of such employees’ retirement benefit
scheme, the Company and certain subsidiaries have noncontributory pension funds.
Provision for retirement benefits to employees areprovided for in the amount of projected benefit obligation
less the fair value of plan assets at the end of the fiscal year.
The retirement benefits obligations are calculated byallocating the estimated retirement benefit amount until
the end of the current fiscal year on a benefit formula basis.
The actuarial gains and losses and prior service costare being amortized by the straight-line method over thecertain number of years within the expected remaining
service period for employees (primarily 10 years), from thefiscal year following the year in which they arise and thefiscal year in which they arise, respectively.
The Company and certain subsidiaries establish aretirement benefit trust by contributing a certain shares ofstock.
When the value of plan assets exceeds the amountof the retirement benefit obligation, the amount of suchexcess is included as prepaid pension costs in “Assets for
retirement benefits” under “Investment and other assets.”(Retirement benefits to directors and corporate auditors)
As is customary practice in Japan, some consolidated
subsidiaries pay lump-sum retirement benefits to retiring
directors or corporate auditors, the amount of which
is determined by the internal rules similar to those for
employees. The payment of such retirement benefits is
subject to approval by shareholders at the annual general
meeting. The consolidated subsidiaries recognize 100% of
the amounts the consolidated subsidiaries would have paid
if all directors and statutory auditors had retired at the
year-end.
(c) Provision for directors’ bonuses
Domestic consolidated subsidiaries account for allowancefor directors’ bonuses based on the estimated amount of

payment for the current year.
(d) Provision for directors’ retirement benefits
Certain consolidated subsidiaries provide for retirement
allowances for directors and statutory auditors at thenecessary amount in full at the year-end based on theirinternal regulations.
(10) Method and Period of Amortization of Goodwill
Goodwill is amortized over the estimated number of years
in cases that the number of years can be estimated based onpractical judgment starting from the fiscal year of acquisition
while the entire amount of goodwill is amortized in the fiscal
year of acquisition without analyzing the causes in cases thatthe amount of goodwill is insignificant.
(11) Appropriation of Retained Earnings
Under the Corporation Law of Japan, the appropriationsof retained earnings, including year-end cash dividends, aresubject to shareholders’ approval at the annual general meeting
to be held within three months after the respective fiscal
year-ends. The board of directors is allowed to make interim
cash distributions (“interim cash dividends”) with certain strict
conditions stipulated in the Law.
The appropriation of retained earnings shown in theaccompanying consolidated statements of net assets reflects
the results of the appropriation of retained earnings applicableto the immediately preceding year and approved at theshareholders’ meeting and the interim cash dividends madeduring the current year.
(12) Accounting for Treasury Stock
The shares of the Company held by consolidated subsidiaries
are recognized as treasury stock after netting off the amounts
attributable to non-controlling interests. With respect to thoseshares held by affiliates to which the equity method is applied,
the amounts attributable to the Companies are also recorded
as treasury stock in the accompanying consolidated balance
sheets, and debit/credit differences (gain/loss) incurred fromtransactions involving treasury stocks are charged to additional
paid-in capital.
(13) Per Share Information
Profit per share is computed based on the weighted-average
TAIHEIYO CEMENT CORPORATION

23

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

number of shares of common stock outstanding during therespective periods.
The amount of cash dividends is the total of interim cash
dividends paid during the respective periods and dividends
declared as applicable to the respective periods.
(14) Revenues and Costs of Construction
Revenues and cost of construction contracts, of which thepercentage of completion can be reliably estimated, arerecognized by the percentage-of-completion method.
The percentage of completion is calculated at the cost incurred
as a percentage of the estimated total cost. The completedcontract method continues to be applied for contracts forwhich the percentage of completion cannot be reliably
estimated.
(15) Changes in Accounting Policies
The Accounting Standard for Business Combinations(Accounting Standards Board of Japan (“ASBJ”) Statement
No. 21, September 13, 2013; hereinafter the “Business
Combinations Accounting Standard”), Accounting Standard
for Consolidated Financial Statements” (ASBJ Statement
No. 22, September 13, 2013; hereinafter the “Consolidated
Financial Statements Accounting Standard”), and “AccountingStandard for Business Divestitures” (ASBJ Statement No. 7,
September 13, 2013; hereinafter the “Business Divestitures
Accounting Standard”) and related standards are applied fromthe fiscal year under review onward. Under this new applicationof these standards, the company changed its accounting policies
to recognize in capital surplus the differences arising from thechanges in the Company's ownership interest of subsidiaries
over which the Company continues to maintain control and torecord acquisition related costs as expenses in the fiscal year inwhich the costs are incurred.
Additionally, the method has been changed such that forbusiness combinations that occur on or after the beginningof the fiscal year under review, in cases where revisions to the
distribution amount of the acquisition cost resulting fromprovisional accounting treatment are conducted during the fiscal
year following the year of the business combination taken place,the amount of the effect will be categorized and displayed in
the consolidated financial statements for the fiscal year in which
the business combination took place. Additionally, changes have24

A N N UA L R EP O R T 2 0 1 6

been made to the display method of profit, etc., and minority
interests have been changed to non-controlling interests.
With regard to the application of the Business Combinations
Accounting standards and its related standards, the Company
followed the provisional treatment in Article 58-2(4) of theBusiness Combinations Accounting Standards, Article 44-5(4)of the Consolidated Financial Statements Accounting Standard,and Article 57-4(4) of the Business Divestitures AccountingStandard with application from the beginning of the fiscal year
under the review prospectively.
In the consolidated statement of cash flows, cash flows frompurchase or disposal of shares of subsidiaries resulting in nochanges in scope of consolidation are included in “Net cashused in financial activities” and cash flows from purchase related
costs for shares of subsidiaries resulting in changes in scope of
consolidation or costs related to purchase or disposal of sharesof subsidiaries resulting in no changes in scope of consolidation
are included in “Net cash provided by operating activities”.
Furthermore, the impact of this change on capital surplus asof the end of the fiscal year under review and operating income,and profit before income taxes and non-controlling interests forthe fiscal year under review is immaterial.
(16) Accounting Standards Not Yet Adopted•“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, March 28,
2016)(a) Outline
Following the framework in Auditing Committee
Report No. 66 “Audit Treatment regarding the Judgmentof Recoverability of Deferred Tax Assets”, whichprescribes estimation of deferred tax assets according to
the classification of the entity by one of five types, thefollowing treatments were changed as necessary:
1. 	Treatment for an entity that does not meet any of thecriteria in types 1 to 5;
2. Criteria for types 2 and 3;
3.	Treatment for deductible temporary differences which
an entity classified as type 2 is unable to schedule;
4.	Treatment for the period which an entity classified as
type 3 is able to reasonably estimate with respect tofuture taxable income before consideration of taxable ordeductible temporary differences that exist at the end of

the current fiscal year; and5.	Treatment when an entity classified as type 4 also meetsthe criteria for types 2 or 3.
(b) Effective date
Effective from the beginning of the fiscal year ended
March 31, 2017.
(c) Effect of adoption of new accounting standard
The effect in the consolidated financial statements asa result of the adoption of this accounting standard iscurrently being evaluated.
5. United States Dollar Amounts
The accompanying consolidated financial statements areprepared in Japanese yen. The U.S. dollar amounts includedin the consolidated financial statements and notes thereto
represent the arithmetical results of translating Japanese yen
to U.S. dollars on a basis of ¥112.68 = U.S. 1, the approximate
effective rate of exchange prevailing at 31st March, 2016. The
inclusion of such U.S. dollar amounts is solely for convenienceof the readers and is not intended to imply that yen amounts
have been or could be converted, realized or settled in U.S.
dollars at that or any other rate.
6. Financial Instruments(1) Status of Financial Instruments(a) Policy for financial instruments
In consideration of plans for financial investment, theTaiheiyo Cement Group limits the scope of its fundmanagement activities to short-term deposits, etc. In
addition, when raising funds, the Companies have a policyof relying principally on bank borrowings and corporate
bonds. The Companies use derivatives for the purpose of
reducing risk for fluctuation of future exchange /interest
rate and of raw materials and fuels price and do not enter
into derivatives for speculative or trading purposes.
(b) Types of financial instruments and related risk
Notes and accounts receivable – trade are exposed to credit
risk in relation to customers. In addition, the Companies
are exposed to foreign currency exchange risk arising fromreceivables denominated in foreign currencies.
Investment securities are exposed to market risk.

Those securities are the shares of common stock of othercompanies with which the Companies have business
relationships, or affiliated companies. The Companies havealso long-term loans receivable from other companies withwhich they have business relationships.
Most of notes and accounts payable – trade havepayment due dates within one year. The Companies are
exposed to foreign currency exchange risk arising fromthose payables originated from import transactions of raw
materials and fuels.
Short-term borrowings are raised mainly in connection
with business activities, and long-term loans payable andbonds payable are taken out principally for the purpose of
making capital investments. Some long-term loans payable
have covenants commitments and may influence liquidity
risks regarding fund raising activities. Long-term debt withvariable interest rates is exposed to interest rate fluctuation
risk. However, to reduce such risk and fix interest expense
for long-term debt bearing interest at variable rates,
the Companies utilize interest rate swap transactions as
hedging instruments on a contract by contract basis.
Additionally, borrowings in foreign currencies are
exposed to foreign exchange risk, but of these, for a portionof long-term borrowings, derivative transactions (currency
swap transactions) are used as a hedging method to avoid
foreign currency fluctuation risk.
(c) Risk management for financial instruments(i)		 Management of credit risk (the risk that customers or
counterparties may default)
			 In accordance with the internal policies of theCompanies for managing credit risk arising fromreceivables, each related division monitors credit worthinessof their main customers periodically, and monitors due
dates and outstanding balances by individual customer. In
addition, the Companies are making efforts to identify andmitigate risks of bad debts from customers who are having
financial difficulties.
			 The Companies also believe that the credit risk ofderivatives is insignificant as they enter into derivativetransactions only with financial institutions which have asound credit profile.
			 At the balance sheet date, the carrying values ofthe financial assets represent the maximum credit risk
exposures of the Companies.
(ii) Management of market risks (the risks arising fromfluctuations in foreign exchange rates, interest rates andothers)			 In order to mitigate the interest rate risk for loans
payable bearing interest at variable rates, the Companies
may also enter into interest rate swap transactions. In
addition, the Company may enter into currency swap
transactions to mitigate the foreign exchange risk.
			 For a part of purchasing raw materials and fuel, in orderto mitigate the price volatility risk for raw materials andfuel, the Companies may also enter into raw materials andfuel swap transactions.
			 For investment securities, the Companies periodicallyreview the fair values of such financial instruments and thefinancial position of the issuers. In conducting derivativetransactions, the division in charge of each derivativetransaction follows the internal policies, which set forthdelegation of authority and maximum upper limit on
positions.
(iii) Management of liquidity risk (the risk that the Companies
may not be able to meet its obligations on scheduled due
dates)
			 Trade payables and borrowings are exposed toliquidity risk. Based on the report from each division, theCompanies prepare and update its cash flow plans on atimely basis to manage liquidity risk.
(d)	Supplementary explanation of the estimated fair value offinancial instruments
		 The fair value of financial instruments is based on theirquoted market price, if available. When there is no quoted
market price available, fair value is reasonably estimated.
Since various assumptions and factors are reflected inestimating the fair value, different assumptions and factors
could result in different fair value. In addition, the contract
amounts of derivatives in Note 24 “Derivative Transactions”
are not necessarily indicative of the actual market risk
involved in derivative transactions.
(2) Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidatedbalance sheet at 31st March, 2016 and 2015 are shown in thefollowing table. The following table does not include financial
instruments for which it is extremely difficult to determine thefair value (Please refer to Note 2 below).
Carrying value

Assets1) Cash and deposits
2) Notes and accounts receivable-trade3) Investment securities
Stock of affiliates
Other securities
Total assets
Liabilities
1) Notes and accounts payable-trade2) Short-term loans payable3) Commercial papers
4) Bonds payable
5) Long term loans payable
Total liabilities
Derivatives transaction (*1)

Assets1) Cash and deposits
2) Notes and accounts receivable-trade3) Investment securities
Stock of affiliates
Other securities
Total assets
Liabilities
1) Notes and accounts payable-trade2) Short-term loans payable3) Commercial papers
4) Bonds payable
5) Long term loans payable
Total liabilities
Derivatives transaction (*1)
Assets1) Cash and deposits
2) Notes and accounts receivable-trade3) Investment securities
Stock of affiliates
Other securities
Total assets
Liabilities
1) Notes and accounts payable-trade2) Short-term loans payable3) Commercial papers
4) Bonds payable
5) Long term loans payable
Total liabilities
Derivatives transaction (*1)

2015
Fair value

Difference¥53,859
178,350¥53,859
178,350¥––

53,65722,420¥308,287

56,542
22,420¥311,172

2,885–¥2,885¥85,036
119,254
5,000
67,090207,794¥484,174¥(9)¥85,036
119,254
5,000
67,438209,323¥486,053
¥(9)

¥–
–
–
348
1,529
¥1,878¥–Carrying value

2016
Fair value

Difference¥53,539
161,392¥53,539
161,392¥––

58,255
18,225¥291,413

60,35018,225¥293,508

2,094–¥2,094¥73,893
110,048–
46,605
237,843¥468,391¥(12)¥73,893
110,048–
46,894
238,493¥469,331
¥(12)

¥–
–
–
289
650
¥939
¥–

Carrying value

Fair value$475,148
1,432,310$475,148
1,432,310$––

517,002535,593
161,741
161,741$2,586,203 $2,604,794

18,590–$18,590$655,785 $655,785
976,650
976,650––
413,604
416,173
2,110,790 2,116,558$4,156,830 $4,165,167$(115)$(115)

$–
–
–
2,568
5,768
$8,336$–

Difference

TAIHEIYO CEMENT CORPORATION

25

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016(*1) The value of assets and liabilities arising from derivatives
is shown at net value, and with the amount in parentheses
representing net liability position.
Note 1 Methods to determine the fair value of financial
instruments and other matters related to securities
and derivative transactions
Assets(1) Cash and deposits and (2) Notes and accounts receivable –trade
			 Since these items are settled in a short period of time,
their carrying value approximates fair value.
(3) Investment securities
		 The fair value of stocks is based on quoted market prices.
Liabilities(1) Notes and accounts payable – trade, (2) Short-term loans
payable and (3) Commercial papers
			 Since these items are settled in a short period of time,
their carrying value approximates fair value.
(4) Bonds payable		 The fair value of bonds is based on the present value of thetotal of principal and interest discounted by an interest rate
determined taking into account the current credit risk. Bonds
payable include the bonds that are due within one year.
(5) Long term loans payable		 The fair value of long-term loans payable is based on
the present value of the total of principal and interest
discounted by the interest rate to be applied if similar
new loans were entered into. Long term loans payable
include long term loans payable that is due within one
year. A portion of long-term loans payable are subject toappropriated treatment for currency swaps and exceptional
treatment for interest rate swaps, and the calculation
method involves discounting the sum of the principal andinterest, which is an aggregate of the currency swap andinterest rate swap, with a reasonably-estimated interest thatwould be applied if a similar loan is taken out.

26

A N N UA L R EP O R T 2 0 1 6

Derivatives Transactions
Please refer to Note 24, “Derivatives Transactions”

Note 4 The redemption schedule for long-term debt and so on
after one
Due in one year Due
year throughor less
two years

Note 2 Financial instruments for which it is extremely
difficult to determine the fair value
2015
Carrying amountUnlisted stocks¥37,669

2016
Carrying amount¥38,962$345,781

Because no quoted market price is available and it is extremely
difficult to determine the fair value, the above financial
instruments are not included in the table at (2) Fair Value of
Financial Instruments.
Note 3 Redemption schedule for receivables and marketablesecurities with maturities at 31st March, 2016 and2015
Due in one
year or less

Cash and deposit¥53,859
Notes receivable and178,350accounts receivable-trade
Investment securities with maturities
19
Total¥232,229
Due in one
year or less

Cash and deposit¥53,539
Notes receivable and161,392
accounts receivable-trade
Investment securities with maturities–
Total¥214,932
Due in one
year or less

Cash and deposit$475,148
Notes receivable and1,432,310
accounts receivable-trade
Investment securities with maturities–
Total$1,907,459

2015
Due after one year Due after five years
through five years through ten years

Due after
ten years

¥–

¥–

¥–

–

–

–

–
¥–

–
¥–

–
¥–

2016
Due after one year Due after five years
through five years through ten years

Due after
ten years

¥–

¥–

¥–

–

–

–

–
¥–

–
¥–

–
¥–

Due after one year Due after five years
through five years through ten years

Due after
ten years

$–

$–

$–

–

–

–

–
$–

–
$–

–
$–

Short-termloans payable
Commercial paper
Bonds payable
Long-termloans payable
Total

Due after
five years¥119,254

¥–

¥–

¥–

¥–

¥–

5,000
20,380–525–
11,150–15,035–
10,000–10,00059,562

46,91936,14755,022

6,567

3,574

¥204,196¥47,444¥47,297¥70,057¥16,567¥13,574

after one
Due in one year Due
year throughor less
two years

Short-termloans payable
Commercial paper
Bonds payable
Long-termloans payable
Total

2015
Due after two Due after three Due after four
years through years through years throughthree years
four years
five years

2016
Due after two Due after three Due after four
years through years through years throughthree years
four years
five years

Due after
five years¥110,048

¥–

¥–

¥–

¥–

¥–

–
450

–
11,120–15,035–
10,000–––10,00050,37240,75970,78534,545

10,65430,725¥160,871¥51,879¥85,820¥44,545¥10,654¥40,725

after one
Due in one year Due
year throughor less
two years

Short-term$976,650
loans payable
Commercial paper–
Bonds payable
3,993
Long-term
447,043
loans payable
Total$1,427,687

Due after two Due after three Due after four
years through years through years throughthree years
four years
five years

Due after
five years

$–

$–

$–

$–

$–

–
98,686–
133,430–
88,746–––88,746

361,727

628,202306,581

94,559272,676$460,413$761,633$395,328$94,559$361,423

7. Cash and Cash Equivalents“Cash and deposits” in the accompanying consolidated balance
sheets at 31st March, 2016 and 2015 are reconciled to cash andcash equivalents in the accompanying consolidated statementsof cash flows as follows:
Cash and deposits
Time deposits with a maturity of over three months
Cash and cash equivalents

2015

2016

¥53,859(3,213)¥50,645¥53,539 $475,148(3,467)(30,771)¥50,072 $444,377

8. Investment Securities
Investments securities shown in the accompanying
consolidated balance sheets at 31st March, 2016 and 2015
comprises:

2015

Investments securities forunconsolidated subsidiaries and affiliates¥86,249

2015

2016

¥91,347 $810,676

At 31st March, 2016 and 2015, information with respect
to “available-for-sale securities” for which market prices areavailable is summarized as follows:

As of 31st March, 2015
Acquisition Fair value
Unrealized
costgain (loss)

Securities with fair value exceeding theiracquisition cost:
Equity securities
Bonds
Other

¥10,13619
0
10,157¥21,91720
021,938¥11,7810011,781546–
546¥10,703481–
481¥22,420

(64)
–
(64)
¥11,717

As of 31st March, 2016
Unrealized Acquisition Fair value
gain (loss)
cost

Unrealized
gain (loss)

Securities with fair value not exceeding theiracquisition cost:
Equity securities
Bonds

Acquisition
cost

Securities withfair value
exceeding theiracquisition cost:
Equitysecurities
Bonds
Securities withfair value notexceeding theiracquisition cost:
Equitysecurities
Bonds

Fair value

Equity securities
Sales amounts
Gains
Losses
Other
Sales amounts
Gains
Losses

2016

¥116
33
–

¥182
91
0

$1,623
815
0

–
–
–

3
2
–

2
1
–

9. Short-Term Loans Payable and Long-Term Loans
PayableWeighted average interest rates on short-term loans payable
and current portion of long-term loans payable at 31st
March, 2016 and 2015 are 0.79 and 1.22%, 0.92 and 1.28%
respectively.
Interest bearing liabilities at 31st March, 2016 and 2015 are
as follows:
2015

2016

Weighted averageinterest rates (%)

Short-term loans
payableWeighted averageinterest rates (%)¥8,285¥16,623¥8,337$73,533$147,530$73,996–
8,285–
16,623–
8,337–
73,533–
147,530–
73,996

1,867

1,601

(265)

–
1,867
¥10,153–
1,601¥18,225–(265)¥8,071

16,571

14,210(2,360)––16,571
14,210$90,105 $161,741–(2,360)$71,636

Gains and losses incurred from the sale of other securities
included in the accompanying consolidated statements ofincome for the years ended 31st March, 2016 and 2015 are as
follows:

Long-termloans payableLease
obligations

Total

2016
2017
2018
2019
2020

¥20,380525
11,15015,035
10,000¥59,562
46,91936,14755,022
6,567¥4,825
9,918
3,445
5,382
1,173

¥84,767
57,36250,74375,43917,741

Year ending
31st March,
2016

2017
2018
2019
2020
2021
Year ending
31st March,
2016

2017
2018
2019
2020
2021

Bonds payable¥450
11,12015,035
10,000–$3,993
98,686
133,430
88,746–Long-term loans payable¥50,372
40,75970,78534,545
10,654$447,043
361,727
628,202306,581
94,559Lease obligations¥10,841
4,537
5,994
1,899
1,542

$96,218
40,26853,201
16,855
13,688

Total¥61,664 $547,255
56,416 500,681
91,815 814,835
46,444 412,183
12,197 108,248¥119,254¥110,048

0.79$976,650

10. Assets Pledged as Collateral and Secured Liabilities

1.39¥207,794¥237,843

1.21$2,110,790

Assets pledged as collateral and secured liabilities at 31st
March, 2016 and 2015 are as follows:

0.92

67,090274,884

46,605
284,4480.73

413,604
2,524,395(1) Assets pledged as collateral

Less: due within
one yearLong-term loans
payableBonds payable

Bonds
payable0.92

Long-term loans
payableLong-term loans
payableBonds payableYear ending
31st March,
2015

1.28

59,56250,3721.22

447,043

0.56

20,38079,942¥194,942

450
50,822¥233,626

0.56

3,993
451,036$2,073,358“Current portion of long-term loans payable” on the
consolidated balance sheets includes lease obligation due
within one year of ¥10,841 ( 96,218) and ¥6,356 at 31st
March, 2016 and 2015 respectively as well as long-term loans
payable and bonds payable due within one year as above.
Aggregate annual maturities of long-term loans payable,bonds payable, and lease obligations outstanding at 31st March,2016 and 2015 for the next five years are as follows:

2015

Cash and deposits
Notes and accounts receivable – trade
Investments securities
Other assets
Buildings and structures
Machinery, equipment and vehicles
Land
Other property, plant and equipment
Total¥1,657
240
108
3,152
15,398
11,817
41,56718¥73,961

2016¥1,439
–
91
3,051
6,968
5,481
21,7780¥38,810$12,775–808
27,077
61,84048,643
193,2746$344,426(2) Secured liabilities
2015

Notes and accounts payable – trade
Short-term loans payable
Long- term loans payable
Bonds payable
Other liabilities
Total¥5,641
17,76016,340195
916¥40,853

2016¥3,648
9,120
6,003
–
850
¥19,622$32,381
80,94353,277–
7,544$174,146TAIHEIYO CEMENT CORPORATION

27

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

11. Retirement Benefits
The Company and certain consolidated subsidiaries havefunded and unfunded defined benefit pension plans. Certain
consolidated subsidiaries have defined contribution pension
plans.
Under the funded defined benefit pension plans, employees
terminating their employment are entitled to retirement
benefits determined on based on the rate of payment and yearsof service.
The retirement benefit trusts have been established for somedefined benefit pension plans.
Under the lump-sum retirement benefit plans (unfunded
except for plans establishing the retirement benefit trust),
benefits are determined based on the rate of payment and yearsof service.
Certain consolidated subsidiaries have joined the welfare
pension fund system of multi-employer pension plans.
Contributions made by certain consolidated subsidiaries tothe multi-employer pension plans are expensed when paid of
which the plan assets attributable to each participant cannot bereasonably determined.
In addition, certain consolidated subsidiaries calculateliability for retirement benefits and retirement benefit expenses
for defined benefit pension plans and lump-sum retirement
benefit plans, by using the simplified method.
(1) Defined benefit plans
The changes in the retirement benefit obligation during theyear ended 31st March, 2016 and 2015 are as follows:
2015

Retirement benefit obligation at
the beginning of fiscal year
Cumulative effect of accounting change
Retirement benefit obligation of changes
in accounting policies
Service cost
Interest cost
Actuarial loss
Benefit paid
Prior service cost
Decrease due to the deconsolidation
Other
Retirement benefit obligation at the endof fiscal year

28

A N N UA L R EP O R T 2 0 1 6¥77,589

Plan assets at the beginning of fiscal year
Expected return on plan assets
Actuarial gain and loss
Contributions by the employer
Benefit paid
Decrease due to the deconsolidation
Other
Plan assets at the end of fiscal year

2015

2016

¥ 64,364
1,002
7,099
1,947
(2,286)–316¥72,444¥72,444 $642,922
1,197
10,625(7,711)(68,433)
1,205
10,695(2,461)(21,844)(1,069)(9,487)
5
48¥63,610 $564,527

The reconciliation of the retirement benefit obligations andplan assets to the liabilities and assets for retirement benefits
recognized in the consolidated balance sheet at March 31, 2016
and 2015 are as follows:
Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net amount of liabilities and assets for
retirement benefits in the consolidatedbalance sheet
Liabilities for retirement benefits
Assets for retirement benefits
Net amount of liabilities and assets for
retirement benefits in the consolidatedbalance sheet

2015

2016

¥53,566(72,444)(18,878)
25,429¥55,492 $492,474(63,610) (564,527)(8,118)(72,052)
21,965
194,933¥6,551¥13,846¥26,889(20,338)¥22,814 $202,474(8,968)(79,593)¥6,551¥13,846$701,065

105

–

–

¥77,694¥78,996$701,065

3,113
1,570
3,040
(4,832)(2,283)
–
693

2,921
1,562
4,581
(5,470)–(4,256)(876)

25,924
13,86940,656(48,552)–(37,777)(7,777)¥78,996¥77,457$687,408$122,881$122,881

The breakdown of the retirement benefit expenses for theyear ended 31st March, 2016 and 2015 are as follows:
2015

2016

¥78,996

The changes in plan assets during the year ended 31st
March, 2016 and 2015 are as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Other
Retirement benefit expense¥3,113
1,570(1,002)
1,830
(52)
269
¥5,7282016¥2,921
1,562(1,197)
1,720
(265)
220
¥4,962$25,924
13,869(10,625)
15,272(2,358)1,959$44,042

The breakdown of remeasurements (before tax effect) for theyear ended 31st March, 2016 and 2015 are as follows:
2015

Prior service cost
Actuarial gain and loss
Total

¥2,231
5,446¥7,6782016¥(265)(10,645)¥(10,910)$(2,358)(94,472)$(96,830)

The breakdown of items remeasurements of retirement
benefit (before tax effect) for the year ended 31st March, 2016
and 2015 are as follows:
Unrecognized prior service cost
Unrecognized actuarial loss
Total

2015

2016

¥(2,513)
9,595¥7,082¥(2,247) $(19,944)
20,241
179,633¥17,993 $159,688

The breakdown of pension assets by major category as apercentage of total plan assets at 31st March, 2016 and 2015
are as follows:
Equity securities
Insurance general accountDebt securities
Other
Total

2015

2016

66%
16%
15%
3%
100%

61%
19%
17%
3%
100%

The retirement benefit trusts of the lump-sum retirement
benefit plans and the defined benefit pension plans at 31st
March, 2016 and 2015 account for 31% and 27%, 21% and18%, respectively, in the above total.
The expected return rate on plan assets is estimated basedon the current and anticipated allocation to each asset category
and current and anticipated long-term return rate on each asset
category.
The items of actuarial assumptions at 31st March, 2016 and2015 are as follows:
Discount rate
Expected long-term return rate on plan
assets2015

2016

Mainly 1.3%

Mainly 0.2%

Mainly 2.5%

Mainly 2.5%

(2) Defined contribution plans
The amount which consolidated subsidiaries paid to defined
contribution pension plans including the welfare pension fundsystem of multi-employer pension plans at 31st March, 2016
and 2015 are ¥454 ( 4,037) and ¥323.
12. Contingent Liabilities(1)	At 31st March, 2016, the Companies are contingently
liable for notes discounted by banks in the aggregate
amount of ¥5,815( 51,609) (¥9,827 as of 31st March,2015), notes endorsed for payments in the aggregate
amount of ¥2,061 ( 18,291) (¥2,960 at 31st March, 2015).

(2)	The Companies are also contingently liable as guarantors
of bank loans and trade payables for certain companies,
the balances of which at 31st March, 2016 and 2015 are as
follows:
2015

Guarantees for bank loans payable, etc.
Guarantees for account payables to
Ready-mixed Cooperative Association,
etc.

2016

¥2,639¥2,197$19,506

1,027

930

8,254

13. Shareholders’ Equity
The Corporation Law of Japan provides that an amountequivalent to 10% of interim cash distributions (interim cash
dividends) and at least 10% of cash distributions including
cash dividends made as a result of the appropriation of retained
earnings is required to be transferred to the legal reserve until
the balance of the total of the additional paid-in capital andthe legal reserve reaches 25% of the stated share capital. Thebalance of legal reserve is included in retained earnings, the useof which is strictly limited under the Law.
The amount in excess of 25% of the stated share capital,
as the case may be, allowed to be distributed as dividends
when certain conditions specifically stipulated in the Law aresatisfied.
14. Revaluation of Land

Partial Revision of the Act on Revaluation of Land (revisedon March 31, 1999). With respect to the amount of unrealized
profit less deferred taxes thereon the amount attributable to theCompany is included in “Revaluation reserve for land” in theaccompanying consolidated balance sheets.
Year ended 31st March, 2016
A&A Material Corporation, DC Co., Ltd., and Chichibu
Railway Co., Ltd., domestic affiliates accounted for by theequity method, revalued their land in accordance with the
Act on Revaluation of Land (Act No. 34, promulgated on
31st March, 1998) and the Act on Partial Revision of the
Act on Revaluation of Land (revised on March 31, 1999).
With respect to the amount of unrealized profit less deferredtaxes thereon, the amount attributable to the Company isincluded in “Revaluation reserve for land” in the accompanying
consolidated balance sheets.
15.	Loss on Write-down of Inventories by
Decreased Profitability
2015

Cost of sales¥113$1,358

16. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended
31st March, 2016 and 2015 are summarized as follows:
2015

Year ended 31st March, 2015
Chichibu Railway Co., Ltd. revalued land on 31st March, 2000
in accordance with the Act on Revaluation of Land (Act No.
34, promulgated on 31st March, 1998).
With respect to the amount of unrealized profit less deferredtaxes thereon, the amount attributable to non-controllinginterests is credited to “Non-controlling interests”, and the rest
is recorded as “Revaluation reserve for land” accompanying
consolidated balance sheets.
With respect to the land revalued as mentioned above, thedifference between the aggregate book value of such land (after
revaluation) and the aggregate fair value thereof is ¥6,995 at
31st March, 2015.
A&A Material Corporation and DC Co., Ltd., domestic
affiliates accounted for by the equity method, revalued theirland in accordance with the Act on Revaluation of Land (ActNo. 34, promulgated on 31st March, 1998) and the Act on

2016

¥153

2016

Labor and payroll cost
¥34,395¥34,962 $310,284
Freight and transportation/distribution expenses
56,561
60,274534,917
Provision for accrued bonuses to employees
1,833
1,924
17,082
Expenses related to accrued retirement benefits
2,793
2,580
22,897
Amortization of goodwill
2,771
2,967
26,335
Provision of allowance for doubtful accounts
(113)
(305)
(2,710)
Provision for directors' retirement benefits
64
78
696
Others36,49032,067
284,589
Total¥134,796 ¥134,550 $1,194,092

17. Research and Development Costs
Research and development costs charged to general andadministrative expenses and manufacturing costs for the years
ended 31st March, 2016 and 2015 were ¥4,228 ( 37,527) and¥4,422, respectively.

18. Income Taxes
Income taxes in Japan applicable to the Company and its
domestic consolidated subsidiaries consist of corporatetax, inhabitants’ taxes and enterprise tax. Enterprise tax isdeductible when paid as expenses for the purpose of thecalculation of other income taxes. The effective statutory
tax rate for the years ended 31st March, 2016 and 2015 areapproximately 33.06% and 34.61%, respectively. 30.86% is used
for the measurement of deferred tax assets and liabilities which
are expected to be settled or realized between April 1, 2016 andMarch 31, 2018, and 30.62 is used for those which are expected
to be settled or realized on and after April 1, 2018.
The significant components of deferred tax assets andliabilities at 31st March, 2016 and 2015 are as follows:
2015

Deferred tax assets:
Nondeductible portion of:Provision for doubtful accounts
Provision for bonus to employees
Liabilities for retirement benefits
Unrealized gain of property, plant andequipment
Impairment loss
Loss carried forward
OthersSubtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Special tax reserve on property, plantand equipment
Other reserves under Special Taxation
Measures Law
Depreciation
Goodwill
Unrealized holding gain on
available-for-sale securities
Land revaluation
OthersTotal deferred tax liabilities
Net deferred tax assets

2016¥1,461
1,754
8,546¥2,348
1,667
11,445$20,838
14,797
101,576

10,98010,73895,302

9,708
28,14821,94382,542(30,876)
51,665

9,877
23,221
21,931
81,230(25,258)
55,971

87,661
206,081
194,636
720,892(224,161)
496,731(9,213)(8,775)(77,882)

(228)

(198)

(1,758)(6,933)(5,004)(7,263)(5,420)(64,463)(48,105)(3,381)(2,297)(20,393)(4,770)(3,666)(33,198)¥18,466–(5,403)(29,359)¥26,612–(47,952)(260,556)$236,175

For the year ended 31st March, 2016 and 2015 components
of differences between the statutory effective tax rate and theincome tax and other burden rate after the application of tax
effect accounting are as follows:

TAIHEIYO CEMENT CORPORATION

29

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

Statutory effective tax rate
(Adjustments)
Entertainment and other expenses that are permanently
nondeductible
Dividends and other income that are permanently
deductible
Amortization of goodwill
Equity in earnings of unconsolidated subsidiaries andaffiliates
Amount of valuation allowance
OthersIncome tax and other burden rate after the applicationof tax effect accounting

2015

2016

34.61%

33.06%

0.77

0.72(0.32)(0.15)

1.42

1.79

2015
Carrying value
As of 31st March,
2014¥57,330¥104,393

2016(3.36)(8.09)(1.51)(3.76)
0.25¥57,330$508,794

24.17

28.55

Net rental income from the rental property is ¥3,001 ( 26,633)
and ¥3,940 for the year ended 31st March, 2016 and 2015
(rental revenues are included in net sales or non-operating
income, and rental expenses are included in cost of sales or
non-operating expenses).
Carrying value and fair value of the rental property for theyear ended 31st March, 2016 and 2015 are as follows:¥2,161

As of 31st March,
2015

Carrying value(2.71)

19.	Accounting Standard for Disclosures about Fair Value ofInvestment and Rental Property

Net Change¥55,169

As of 31st March,
2015

On March 29, 2016, amendments to the Japanese tax
regulations were enacted into law. Based on the amendments,
the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on or after
April 1, 2018 are changed from 31.33% for the fiscal ended
March 31, 2015 to 30.86% and 30.62%, respectively, as ofMarch 31, 2016.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities)
decreased by ¥83 ( 741), Income taxes-deferred increased by¥65 ( 580), valuation difference on available-for-sale securities
increased by ¥68 ( 607), Remeasurements of retirement
benefit decreased by ¥86 ( 768), and Deferred gains on hedges
decreased by ¥0 ( 0) as of March 31, 2016.

Fair value
As of 31st March,
2015

Fair value

Net Change

As of 31st March,
2016

As of 31st March,
2016¥(11,231)$(99,673)¥46,099$409,121¥97,217$862,772

20. Impairment Loss
The Company evaluates the impairment of fixed assets bygrouping assets based on segments by business type, except
for assets used for rent, important idle properties and assets
scheduled for disposal, which are individually considered.
Each consolidated subsidiary principally forms an asset group.
Certain significant subsidiaries form asset groups by segment
for management accounting purposes, except for important
idle properties and assets scheduled for disposal, which areindividually considered.
As a result, the Companies recognize impairment losses of¥5,757 ( 51,097) and ¥1,069 in non-operating expenses forthe years ended 31st March, 2016 and 2015, respectively, as
follows:
2015

Business assets of Cement
Buildings and structures
Machinery, equipment and vehicles
Other
Assets used for rent
Buildings and structures
Land
Idle properties
Buildings and structures
Machinery, equipment and vehicles
Land
Other
Emission credits
Investment and other assets-other

2016

¥–
–
–
–

¥903
2,240
1,099
4,244

$8,01919,885
9,760
37,665

13
258
272

–
758
758

–
6,730
6,730

548
21
146
33
749

141
65
543
4
755

1,253
580
4,824
43
6,702

47
47
¥1,069––¥5,757––$51,097

The impairment losses are measured as the excess of thebook value over the higher of (1) the fair market value of theassets, net of disposal costs or (2) the present value of future30

A N N UA L R EP O R T 2 0 1 6

cash flows arising from ongoing utilization of the assets anddisposal after the assets’ use.
The fair market value of the assets, net of disposal costs, isestimated as the residual value for tax purpose less disposal
costs for tangible depreciable assets including buildings andstructures, and an appraised value for land. The fair market
value for mining lands is the aggregated amount of appraisedvalues of lands and raw materials which consists of mining
lands.
The present value of future cash flows is calculated using
discount rate of 5%.
Emission credits are valued at prices of ICE futures
exchanges.
21. Consolidated Statement of Comprehensive Income
The following table presents reclassifications adjustments andtax effects allocated to each component of other comprehensive
income for the year ended 31st March, 2016 and 2015:
2015

Valuation difference on available-for-sale securities:
Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effect
Valuation difference on available-for-sale securities
Deferred losses on hedges:
Amount arising during the year
Adjustments of asset acquisition costs
Amount before tax effectTax effect
Deferred losses on hedges
Revaluation reserve for landTax effectRevaluation reserve for land
Foreign currency translation adjustments:
Amount arising during the year
Reclassification adjustment
Foreign currency translation adjustments
Remeasurements of retirement benefit
Amount arising during the year
Reclassification adjustments
Amount before tax effectTax effectRemeasurements of retirement benefit:
Share of other comprehensive income or (loss)of associates accounted for using equity method:Amount arising during the year
Reclassification adjustments
Share of other comprehensive income or (loss)of associates accounted for using equity method
Total other comprehensive income

2016¥2,248
(27)
2,220
(366)
1,854

¥(3,100)(70)(3,170)1,306(1,864)$(27,515)(623)(28,139)
11,596(16,542)

(22)
–
(22)
8
(14)

(52)
46
(6)
1
(5)

(468)
411
(57)
13
(44)

494
494

237
237

2,110
2,110

16,700(698)
16,002(2,834)(34)(2,869)(25,154)(309)(25,464)

5,901
1,776
7,678
(2,451)
5,226(12,364)
1,453(10,910)3,181(7,728)(109,731)
12,901(96,830)
28,238(68,592)

5,046
25(3,362)(16)(29,841)(143)(3,378)(29,985)

5,072¥28,635¥(15,608) $(138,517)

22. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidatedbalance sheets are primarily obligation to take measures toprevent pollution and ensure safety, etc. at the time of mineclosing in accordance with the Mine Safety Act, obligation
to restore the site to its original condition in accordance withthe real estate lease agreement, obligation to take measures
to prevent the dispersion of asbestos in accordance with theIndustrial Safety and Health Act, the Ordinance on Preventionof Health Impairment due to Asbestos, and the Air Pollution
Control Act, etc.
The value of asset retirement obligations is estimated byusing useful periods of 3 years to 348 years and discount rates
from 0.0% to 6.8% according to the type of asset retirement
obligation.
The following table indicates the changes in asset retirement
obligations for the year ended 31st March, 2016 and 2015:
Balance at 1st April, 2014
Liabilities incurred due to the acquisition ofproperty, plant and equipment
Accretion expense
Liabilities settled
OthersBalance at 31st March, 20152015
¥7,231

Machinery, equipment and vehicles
Total

31st March, 2015
Accumulated Accumulated
Net balance
depreciation impairment loss

¥1,230¥1,230Acquisition
costs

Machinery, equipment and vehicles
Total
Machinery, equipment and vehicles
Total

¥880
¥880

¥–
¥–

¥349
¥349

31st March, 2016
Accumulated Accumulated Net balance
depreciation impairment loss

¥471
¥471
$4,185$4,185¥307¥307$2,727$2,727

¥–
¥–
$–
$–

¥164
¥164
$1,458$1,458Future minimum lease payments at 31st March, 2016 and2015 and lease rental expenses for the years ended at 31st
March, 2016 and 2015 are as follows.
31st March, 2015

The scheduled maturities of future lease
payments on such lease:
Due within one year
Due over one year

¥157
192
¥349
¥172

Lease rental expenses for the year

31st March, 2016

¥84
79
¥164
¥78

$751
706
$1,458$697

27

There is no impairment loss allocated to lease assets.
(b) Future lease payments under operating leases are as follows:

156
(56)
314
¥7,67331st March, 20152016
Balance at 1st April, 2015
Liabilities incurred due to the acquisition ofproperty, plant and equipment
Accretion expense
Liabilities settled
OthersBalance at 31st March, 2016

Acquisition
costs¥7,673$68,098

494

4,388

151
(99)
(229)
¥7,9901,345(879)(2,040)$70,911

23. Lease
The Companies have various lease agreements whereby theCompanies act as lessees.
(a) Finance lease contracts other than those that are deemed
to transfer the ownership of the leased assets to lessees,
which were commenced before 1st April, 2008 are
accounted for by the method that is applicable to ordinary
rental transaction. Assumed data as to acquisition costs,
accumulated depreciation, accumulated impairment loss
and net balance of the leased assets are as follows:

Due within one year
Due over one year

¥448
783
¥1,231

31st March, 2016

¥932
2,267
¥3,199$8,275
20,120$28,395

24. Derivative Transactions
Summarized below are the contract amounts and the estimatedfair values of the derivatives outstanding at 31st March, 2016
and 2015.
Derivatives transaction to which hedging accounting isappliedCurrency related transactions

2015

Method ofhedgingaccounting

Hedgeditems

Contract
amountFair value

Method of (Forward exchange Accounts
treatment in Contracts)payableprinciple
trade
Euro
Total

¥204
¥204

¥(8)
¥(8)

Hedging instruments

Fair value is determined based on the price obtained fromfinancial institutions.
2016

Method ofhedgingaccounting

Hedgeditems

Hedging instruments(Currency Swaps)
Appropriation
treatment
Receive/US Dollar
and pay/Yen
Total

Contract
amountFair value

Contract
amountFair value

Long-term
andshort-term
loans¥30,870 ¥(3,216) $273,961 $(28,544)
payable¥30,870 ¥(3,216) $273,961 $(28,544)

Fair value is determined based on the price obtained fromfinancial institutions.
Interest rate relation
2015

Method ofhedgingaccounting

Hedging instruments

Hedgeditems

Long term
Method of (Interest rate swaps) andtreatment inshort-term
Receive/floating and loans
principle
pay/fixed
payableExceptional (Interest rate swaps) Long term
andtreatment ofshort-term
interest rate Receive/floating and loans
swap
pay/fixed
payableTotal

Contract
amountFair value

¥90

¥(0)

47,680(358)¥47,770¥(359)

2016
Method ofhedgingaccounting

Hedging instruments

Hedgeditems

Long term
Method of (Interest rate swaps) andtreatment inshort-term
Receive/floating and loans
principle
pay/fixed
payableExceptional (Interest rate swaps) Long term
andtreatment ofshort-term
interest rate Receive/floating and loans
swap
pay/fixed
payableTotal

Contract
amountFair value

Contract
amountFair value

¥30

¥(0)

$266

$(1)

51,322(635) 455,469(5,635)¥51,352¥(635) $455,735$(5,637)

Fair value is determined based on the price obtained fromfinancial institutions.

TAIHEIYO CEMENT CORPORATION

31

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

Merchandise relation
Not applicable in the year ended 31st March, 2015.
2016

Method ofhedgingaccounting

Hedging instruments

Hedgeditems

Contract
amount(Raw materials andMethod of fuel swaps)
Rawtreatment inmaterials
Receive/floating and and fuelprinciple
pay/fixed
Total

Fair value

Contract
amountFair value

¥281

¥(12)

$2,500$(113)

¥281

¥(12)

$2,500$(113)

Fair value is determined based on the price obtained fromfinancial institutions.
25. Notes to the Consolidated Statements of Cash Flows(1)	Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation
With regard to the deconsolidation of Nihon Ceratec Co.,
Ltd. and a subsidiary as a result of the sales of shares, thebreakdown of assets and liabilities of Nihon Ceratec Co.,
Ltd. and a subsidiary at the time of sales and the relationshipbetween the sales price of shares and the proceeds from thesales transactions are as follows:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Foreign currency translation adjustment
Gain on sales of shares of subsidiaries
Sales price of shares of subsidiaries
Cash and cash equivalents
Proceeds from sales of shares ofsubsidiaries resulting in change inscope of consolidation¥5,6573,757(2,004)
(662)
(28)
581
7,300
(552)

$50,21133,342(17,793)(5,880)(254)
5,158
64,785(4,903)¥6,747$59,882(2)	Payments for sales of shares of subsidiaries resulting inchange in scope of consolidation
With regard to the change of accounting method fromconsolidation to equity method applied to Okutama Kogyo
Co., Ltd. and a subsidiary as a result of the sales of shares, thebreakdown of assets and liabilities of Okutama Kogyo Co.,
Ltd. and a subsidiary at the time of sales and the relationshipbetween the sales price of shares and the payments for the sales
transaction are as follows:
32

A N N UA L R EP O R T 2 0 1 6

Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Non-controlling interests
Investment account after selling theshares of subsidiaries
Gain on sales of shares of subsidiaries
Sales price of shares of subsidiaries
Cash and cash equivalents
Payments for sales of shares ofsubsidiaries resulting in change inscope of consolidation¥7,34532,523(12,351)(17,896)(4,925)$65,193288,636(109,614)(158,822)(43,712)(4,731)(41,989)

83
48(1,089)739
430(9,665)¥1,040$9,235(3)	Payments for transfer of businessWith regard to acquisition of cement business of Martin
Marietta Materials, Inc. and its group companies by
CalPortland Company, a subsidiary of the company, thebreakdown of assets and liabilities acquired at the time ofacquisition and the relationship to the payments for transfer ofbusiness are as follows:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Foreign currency translation adjustments
Payments for transfer of business¥4,11247,429
(49)
(836)
207
¥50,863$36,498
420,923(443)(7,420)1,840$451,398

26. Business Combination
Business combination via acquisition(1) Summary of business combination(a)	Name of counterparty and description of acquired
business			Name of counterparty: Martin Marietta Materials, Inc.
and its group companies (hereinafter the “MM Group”)
			 Business description: Cement business(b) Reasons for business combination
			With the aim of creating a production structure that can
respond to increase demand for cement in the states ofCalifornia, Arizona, and Nevada in the United States,
and with the aim of reducing logistics expenses andoptimizing production for cement plants already heldin the states of California and Arizona, the Company
acquired cement business assets in the state of California
from the MM Group.
(c) Date of business combination
			 September 30, 2015(d) Legal type of business combination
			Business transfer by CalPortland Company, a subsidiaryof the Company(e) Name after business combination
			CalPortland Company(2)	Period included in the Consolidated Financial
Statements for the acquired business		 October 1, 2015 to December 31, 2015
(3) Cost of acquisition and price breakdown		 Acquisition consideration: Cash ¥50,656 ( 449,558)(4) Description and amount of major acquisition related cost
		 Advisory fee, etc.: ¥202 ( 1,798)(5)	Amount of goodwill, reasons for goodwill, amortization
method, and amortization period
		 Not applicable.
(6)	Amount of assets and liabilities acquired on the date ofbusiness combination
Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities¥4,11247,42951,542
49836¥886$36,498
420,923
457,422443
7,420$7,864(7)	Effect on the consolidated statements of income on theassumption that business combination is completed at
the beginning of the fiscal year.
As it is difficult to estimate the amount, an estimate has notbeen prepared.
27. Segment Information[Segment Information]
The reportable segments of the Company are components forwhich discrete financial information is available and whose
operating results are regularly reviewed by the Executive
Committee to make decisions about resource allocation and toassess performance.

The Company has four reportable segments consisting of“Cement,” “Mineral Resources,” “Environmental Business,”“Construction Materials,” for its products and services. The
principal products, etc. of each reportable segment are as
follows.
Reportable Segment

Principal Products, etc.

CementVarious cement, ready-mixed concrete
Mineral Resources
Aggregates, limestone products
Environmental Business Waste recycling, desulfurization materials
Construction
Concrete secondary products, autoclavedMaterials
lightweight aerated concrete (ALC), chemicals

The accounting policies of the segments are substantially thesame as those described in the significant accounting policies inNote 4. Segment performance is evaluated based on operating
income or loss. Inter-segment transactions are recorded at thesame prices used in transactions with third parties.

TAIHEIYO CEMENT CORPORATION

33

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016

Information of net sales, profit or loss, assets, liabilities, and other items by reportable segment are as follows:
CementNet sales:(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
Depreciation
Amortization of goodwill
Equity in earnings of unconsolidated
subsidiaries and affiliates
Impairment loss
Investment in unconsolidated subsidiaries andaffiliates accounted for by the equity method
Increase for property, plant, equipment, andintangible assets¥559,558
11,123¥570,681¥40,251¥629,897¥28,623¥2,753Mineral resources

Environmental
business

Construction
materials

2015
Subtotal

Other

Total

¥72,960
22,996¥95,957¥6,708¥120,429¥5,208¥0¥69,226
5,561¥74,787¥7,474¥16,279¥361¥1¥86,0314,308¥90,340¥5,491¥81,518¥2,341¥15¥787,776
43,989¥831,766¥59,925¥848,126¥36,535¥2,771¥55,071
26,693¥81,764¥5,634¥231,062¥5,271¥0¥842,848
70,683¥913,531¥65,560¥1,079,188¥41,806¥2,771¥4,264

¥–

¥12

¥670

¥4,948

¥344

¥211

¥340

¥–

¥–

¥552

¥460

¥60,699¥–¥250¥10,455¥71,405¥25,773¥6,988¥224¥2,916¥35,902

Adjustment

Consolidated total¥–(70,683)¥(70,683)¥(153)¥(38,585)¥594¥–¥842,848¥–¥842,848¥65,406¥1,040,602¥42,401¥2,771¥5,292¥0¥5,293¥1,013¥55¥1,069¥9,964¥81,370¥312¥81,682¥5,732¥41,634¥525¥42,160

2016
CementNet sales:(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
Depreciation
Amortization of goodwill
Equity in earnings of unconsolidated
subsidiaries and affiliates
Impairment loss
Investment in unconsolidated subsidiaries andaffiliates accounted for by the equity method
Increase for property, plant, equipment, andintangible assets¥564,303
10,420¥574,724¥34,631¥659,165¥30,284¥2,965Mineral resources¥71,293
22,239¥93,533¥8,113¥95,171¥4,096¥–

Environmental
business

Construction
materials¥68,1545,305¥73,460¥7,655¥17,158¥370¥1¥75,2285,624¥80,853¥6,130¥67,574¥2,338¥–Subtotal

Other

Total

Adjustment

Consolidated total¥778,980
43,590¥822,570¥56,530¥839,068¥37,089¥2,967¥56,379
28,842¥85,222¥4,014¥223,144¥6,358¥–¥835,359
72,433¥907,793¥60,544¥1,062,213¥43,448¥2,967¥–(72,433)¥(72,433)¥(111)¥(48,138)¥509¥–¥835,359–¥835,359¥60,433¥1,014,075¥43,957¥2,967¥3,484¥–¥9¥1,117¥4,611¥680¥5,291¥0¥5,292¥4,778

¥292

¥–

¥38

¥5,109¥642¥5,752¥5¥5,757¥59,933¥–¥253¥11,551¥71,739¥15,168¥86,907¥332¥87,240¥28,141¥7,878¥488¥2,899¥39,408¥3,896¥43,305¥770¥44,076

2016
CementNet sales:(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
Depreciation
Amortization of goodwill
Equity in earnings of unconsolidated
subsidiaries and affiliates
Impairment loss
Investment in unconsolidated subsidiaries andaffiliates accounted for by the equity method
Increase for property, plant, equipment, andintangible assets

34

A N N UA L R EP O R T 2 0 1 6$5,008,015
92,482$5,100,497$307,346$5,849,885$268,766$26,319

Mineral resources

Environmental
business

Construction
materials

Subtotal

Other

Total

$632,707
197,370$830,077$72,000$844,613$36,351$–$604,852
47,083$651,936$67,940$152,273$3,290$15$667,633
49,916$717,550$54,404$599,700$20,752$–$6,913,208
386,852$7,300,061$501,691$7,446,473$329,160$26,335$500,350
255,970$756,320$35,625$1,980,342$56,427$–$7,413,559
642,823$8,056,382$537,316$9,426,815$385,587$26,335$30,925$–$86$9,915$40,927$6,035$42,409$2,595$–$343$45,348$5,702$531,893$–$2,248$102,520$636,662$249,750$69,918$4,339$25,730$349,738

Adjustment

Consolidated total$–(642,823)$(642,823)$(987)$(427,210)$4,523$–$7,413,559–$7,413,559$536,329$8,999,604$390,110$26,335$46,962$4$46,966$51,050$47$51,097$134,615$771,278$2,951$774,229$34,584$384,322$6,840$391,16328. Major Subsequent Events
1.	Acquisition of DC Co., Ltd. as a Wholly-Owned
Subsidiary in the Form of Share Exchange
Taiheiyo Cement Corporation (hereinafter referred to as"Taiheiyo") and DC Co., Ltd. (hereinafter referred to as "DC")passed a resolution at their respective meeting of the board of
directors on May 12, 2016, to execute a share exchange wherein
Taiheiyo becomes a wholly-owning parent company of DC and
DC becomes a wholly-owned subsidiary of Taiheiyo (hereinafterreferred as “Share Exchange”), and a share exchange agreement
was entered into between the two companies on the same date.
The Share Exchange is subject to an approval of a relevantJapanese government agency such as Fair Trade Commission,and Taiheiyo, under the short-form share-for-share exchange
procedures pursuant to the Companies Act, Article 796 (2),which does not require an approval at a shareholders meeting,and DC, after obtaining an approval at a general shareholders
meeting scheduled on June 28, 2016, executed the Share
Exchange on August 1, 2016, which should be deemed as theeffective date.
(1) Purpose of the Share Exchange
Taiheiyo and DC came to an understanding that integrating
resources nurtured at each company for optimal operationand maximizing the corporate value as the Taiheiyo Group asa whole, rather than each company pursuing its own interest
separately, would be the best course for sustainable growthof both companies and improvement of the mid-long term
corporate value, which then would further the common interestof all of the shareholders of Taiheiyo and DC.
(2) Overview of DC Co., Ltd.
		 Business Name: DC Co., Ltd.
		Business Type: Cement business, resources business,environment business, real estate business, etc.
(3) The Share Exchange Date (Effective date)		 August 1, 2016(4) Method of the Share Exchange
The Share Exchange was executed whereby Taiheiyo became
a wholly-owning parent company of DC and DC became awholly-owned subsidiary of Taiheiyo.
(5) Content of the Allocation Pursuant to the Share Exchange
Taiheiyo(wholly-owning parent
company)
Exchange ratio in the
Share Exchange
Number of new sharesissued in the Share
Exchange1DC(wholly-owned subsidiary)
1.375

Common stock: 33,602,198 shares

2.	Transfer of Shareholder Interest in Equity-Method
Affiliate
On June 29, 2016, the Board of Directors of Taiheiyo Cement
Corporation (“Taiheiyo”) resolved to transfer the company’s
entire shareholder interest in South Korean company Ssangyong
Cement Industrial Co., Ltd. (“Ssangyong”), an equity-method
affiliate of Taiheiyo, to Hahn & Co. No. 10 Co., Ltd. (“Hahn& Co.”), and entered into an agreement on the same date. The
transfer included all shares of Ssangyong owned by Taiheiyo as
well as those owned by TCC Holdings Labuan, Inc., a wholly
owned subsidiary of Taiheiyo. Following the transfer, Ssangyong
will no longer be an equity-method affiliate of Taiheiyo.
(1) Reason for Transferring Shareholder Interest
Taiheiyo first acquired its shareholder interest in Ssangyong in2000 and began participating in the company’s management.
At that time, major European and North American cementcompanies were expediting entry into Asian markets in the wakeof the Asian currency crisis. By incorporating Ssangyong (South
Korea’s leading cement manufacturer) into Taiheiyo’s production
and distribution network in the Pacific Rim, the investment
presented an attractive opportunity for Taiheiyo to boost its
international presence and level of competition in the global
marketplace. As a result, Taiheiyo elected to acquire a stake in
the South Korean company.
In the fifteen (15) years since Taiheiyo acquired shares in
Ssangyong, and during that time the vision it set forth at theoutset has been realized, for example by facilitating the supplyof Ssangyong products to Taiheiyo’s U.S. business. Recently,
however, the business environment in which the cement industry
operates in Asia has undergone dramatic change due to factors
such as the Chinese economic slowdown and the emergence of
local capital in the cement industry in emerging markets.
The Taiheiyo Group has been implementing its 17 MediumTerm Management Plan, which ends in FY 2017, as part ofan effort to achieve a vision for operations into the mid-2020s.
While this effort includes an active program of investment thattargets overseas business as a growth sector, there are inevitable
limits to the management resources that are available to pursue
such priorities. Taiheiyo has always studied how to best utilize
available funds for the purpose of making investments in regions
promising growth by reviewing its business portfolio andreallocating management resources as necessary.
It was against this backdrop that Hahn & Co.’s recently
purchased a large number of shares in Ssangyong to becomethat company’s largest shareholder. Together with Hahn &Co.’s desire to solidify its controlling interest in Ssangyong byacquiring shares owned by Taiheiyo and TCC holdings Labuan,Inc., Taiheiyo’s determination that recouping its investment inSouth Korea for subsequent investment in a region promising
greater growth opportunities would be the best way to increase
the Group’s corporate value led to a series of negotiations
concerning a transfer of Ssangyong shares owned by Taiheiyo
and TCC holdings Labuan, Inc to Hahn & Co.
Now that both companies have reached agreement on theterms of the transaction, the Taiheiyo Group has decided totransfer its stake in Ssangyong.
(2) Name of the Purchaser in the Share Transfer
		 Hahn & Co. No.10 Co., Ltd.
(3) Date of Execution of Share Transfer (Tentative)
		 By the end of the 2nd quarter of Taiheiyo’s FY 2016

TAIHEIYO CEMENT CORPORATION

35

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2016(4)	Overview of Ssangyong, as the Equity-Method Affiliate
Whose Shares will be Transferred(1) Name(2) Address(3) Name and title of representatives

Ssangyong Cement Industrial Co., Ltd.
34 Supyo-ro Jung-gu, Seoul, South
Korea
Yeo-Eul Yoon, Joint representative
director and chairman of the board
Dong-Chul Hwang, Joint representativeand president(4) Business type

Cement manufacture(5) Capital

KWR 401.5 billion(6) Date of establishment

May 14, 1962(7) M ajor shareholders and percentage
shares (as of April 21, 2016)

Hahn & Co. No. 10 Co., Ltd.:
Taiheiyo Cement Corporation:
TCC Holdings Labuan, Inc.:

46.80%
27.49%
4.87%(5)	Number of Shares to be Transferred, Transfer Price,	Gain on the Sale, and Number of Shares Owned after
Transfer(1)	Number of shares to be transferred

Shares owned by Taiheiyo:
20,820,960 shares of common stock
1,250,000 shares of preferred stock(Total: 22,078,960 shares)
Shares owned by TCC holdings Labuan,
Inc:
3,910,050 shares of preferred stock(Total shares owned by the Taiheiyo
Group: 25,989,010 shares)(2) Transfer priceKWR 454,807,675,000(3) Gain on the sales of shares(Non-operating income)(4)	Number of shares owned after
transfer(Consolidated) ¥2.5 billion(Non-consolidated) ¥24.4 billion
0 shares

Taiheiyo expects to book a reversal of allowance for doubtful
accounts of ¥4.4 billion as non-operating income as well as thegain on the sales of shares on the non-consolidated base.
An exchange rate of KRW 1 = ¥0.087297 has been used to
calculate the above figures. The gain from the sale of shares
may vary with the exchange rate in effect at the time of thetransaction as well as other factors.

36

A N N UA L R EP O R T 2 0 1 6

Independent Auditor’s Report
To the Board of Directors of
Taiheiyo Cement Corporation
We have audited the accompanying consolidated financial statements of Taiheiyo Cement
Corporation and its consolidated subsidiaries, which comprise the Consolidated Balance Sheets
as at March 31, 2016 and 2015, and the Consolidated Statements of Income, the Consolidated
Statements of Comprehensive Income, the Consolidated Statements of Changes in Net Assets
and the Consolidated Statements of Cash Flows for the years then ended, and a summary ofsignificant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We conducted our audits in accordance with auditing standards generally accepted inJapan. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements arefree from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on ourjudgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, weconsider internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, while the objective of the financial statement audit is not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Taiheiyo Cement Corporation and its consolidated subsidiaries as at March
31, 2016 and 2015, and their financial performance and cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Emphasis of Matter
Without qualifying our opinion, we draw attention to significant subsequent events in the Note
28 to the consolidated financial statements which describes followings;
1.	Taiheiyo Cement Corporation passed a resolution at the board of Directors meeting held on
May 12, 2016, to execute a share exchange wherein the Company becomes a wholly-owningparent company and DC Co., Ltd. becomes a wholly-owned subsidiary. They entered into anagreement on the same date.
2.	Taiheiyo Cement Corporation passed a resolution at the board of Directors meeting held on
June 29, 2016, to transfer the entire shares of South Korean company Ssangyong Cement
Industrial Co., Ltd., an equity-method affiliate of the Company, to Hahn & Co. No. 10 Co.,
Ltd. The transfer included all shares of Ssangyong Cement industrial Co., Ltd. owned by theCompany and TCC Holdings Labuan, Inc., a wholly owned subsidiary of the Company. They
entered into an agreement on the same date.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2016 are presented solely for convenience. Our audit also included
the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has
been made on the basis described in Note 5 to the consolidated financial statements.
KPMG AZSA LLC
September 9, 2016
Tokyo, JapanTAIHEIYO CEMENT CORPORATION

37

Taiheiyo Cement Group Network
DOMESTIC NETWORK
Taiheiyo Cement’s facilities include our head office and Research & Development Center, eight branch offices, and six cement plants.
OVERSEAS NETWORKMAJOR SUBSIDIARIES AND AFFILIATES

Taiheiyo Cement U.S.A., Inc.
2025 East Financial Way, Glendora, CA 91741, U.S.A.
Tel: +1-626-852-6200
Fax: +1-626-852-6217

CEMENT AND READY-MIXED CONCRETE

Taiheiyo Cement (China) Investment Co., Ltd.
1006 Room, Chang Fu Gong Office Building, 26,
Jian Guo Men Wai Da Jie,
Chao Yang District, Beijing, China
Tel: +86-10-8591-1815
Fax: +86-10-8591-1870
Taiheiyo Singapore Pte. Ltd.
16 Raffles Quay, #41-03 Hong Leong Building,Singapore 048581
Tel: +65-6220-9495
Fax: +65-6225-5853
Vietnam Representative Office
Suite 801, 8th Fl., Sun Red River Building,
23 Phan Chu Trinh Street,
Hoan Kiem District, Hanoi, Vietnam
Tel: +84-4-3933-0913
Fax: +84-4-3933-0921
Bangkok Representative Office
5 Sitthivorakit Building, 17th. Fl., Soi Pipat, Silom Road,
Silom, Bangrak, Bangkok 10500, Thailand
Tel: +66-2-266-8741
Fax: +66-2-266-8742
Taipei Representative Office
5F, 139, Cheng-Chou Road, Taipei 103, Taiwan
Tel: +886-2-2557-8098
Fax: +886-2-2553-9853
Hong Kong Representative Office
20F, Tern Centre, Tower 1, 237 Queen’s Road Central,
Hong Kong
Tel: +852-2545-9987
Fax: +852-2542-0474

38

A N N UA L R EP O R T 2 0 1 6

DC Co., Ltd.
Kokusai Kigyo Co., Ltd.
Myojyo Cement Co., Ltd.
Sanyo White Cement Co., Ltd.
Tsuruga Cement Co., Ltd.
MINERAL RESOURCES

Abekawa Kaihatsu Co., Ltd.
Buko Mining Co., Ltd.
Chichibu Mining Co., Ltd.
Chichibu Taiheiyo Cement Corporation
Ishizaki Co., Ltd.
Kansai Matech Co., Ltd.
Kansai Taiheiyo Minerals Corporation
Kosyu Saiseki Co., Ltd.
Oita Taiheiyo Mining Corporation
Okutama Kogyo Co., Ltd.
Ryushin Mining Co., Ltd.
Yuko Mining Co., Ltd.
ENVIRONMENTNACODE Corporation
Tokyo Tama Ecocement Inc.
CONSTRUCTION AND CONSTRUCTION MATERIALS

A&A Material Corporation
Chichibu Concrete Industry Co., Ltd.
Clion Co., Ltd.
Fuji P.S Corporation
Onoda Chemico Co., Ltd.
Taiheiyo Materials Corporation
Taiheiyo Precast Concrete Industry Co., Ltd.
Taiheiyo Soil Corporation

OTHERS

Azuma Shipping Co., Ltd.
Chichibu Railway Co., Ltd.
Onoda Chemical Industry Co., Ltd.
Pacific Systems Corporation
Taiheiyo Accounting & Financial Services Corporation
Taiheiyo Engineering Corporation
Taiheiyo Real Estate Co., Ltd.
OVERSEAS ACTIVITIESCalPortland Company (USA)
Dalian Onoda Cement Co., Ltd. (CHINA)
Jiangnan Onoda Cement Co., Ltd. (CHINA)
Jidong Taiheiyo (Beijing) Environmental Engineering Co., Ltd. (CHINA)
Kalahari Dry (Thailand) Co., Ltd. (THAILAND)
Nghi Son Cement Corporation (VIETNAM)
PNG-Taiheiyo Cement Limited (PAPUA NEW GUINEA)
Qinhuangdao Asano Cement Co., Ltd. (CHINA)
Shanghai Sanhang Onoda Cement Co., Ltd. (CHINA)
Shenzhen Haixing-Onoda Logistics Development Co.,Ltd. (CHINA)
Taiheiyo Cement Philippines, Inc. (PHILIPPINES)
Taiheiyo International (Thailand) Co., Ltd. (THAILAND)C OR P O R AT E P RO F IL E

Corporate Data (As of March 31, 2016)
Company Name
Head Office
Established
Paid-in Capital
Fiscal Year
Annual Meeting
Common StockTAIHEIYO CEMENT CORPORATION

Daiba Garden City Building, 2-3-5 Daiba, Minato-Ku, Tokyo 135-8578 JapanMay 1881¥ 86,174 million

April 1–March 31
June

Authorized: 1,977,308,000

Issued: 1,237,800,586 (including 1,920,052 shares of treasury stock)

No. of Stockholders

69,752Agent of Record

Sumitomo Mitsui Trust Bank, Ltd.

Major Stockholders

Stockholder

Holding (thousand shares)% of shares issued

Japan Trustee Services Bank, Ltd. (Trust Account)

89,901		

7.2

HSBC-Fund Services Bank Negara Malaysia-Equity

35,829		

2.8

The Master Trust Bank of Japan, Ltd. (Trust Account)
Mizuho Bank, Ltd.		
MSCO Customer Securities		

70,273		
23,756		

23,543		

5.6
1.9

1.9

State Street Bank and Trust Company 505225

20,960		

1.6

Japan Trustee Services Bank, Ltd. (Trust Account 7)

16,990		

1.3State Street Bank West Client-Treaty 505234		

The Bank of NewYork Mellon SA/NV 10		
Meiji Yasuda Life Insurance Company		

20,857		
15,482		
15,273		

1.6
1.2
1.2

TAIHEIYO CEMENT CORPORATION

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