Creating New Strength

through Sustainable Growth

Corporate Profile
The Taiheiyo Cement Group “aspires to play a leading role in pioneering a sustainable future by ensuringthat its business activities reflect not only economic development priorities, but also environmental and social
responsibility considerations.” We put this philosophy into practice by strengthening our overall profitability andfinancial standing, and maximizing the sum total of our corporate value while striving to utilize management
resources in an integrated and efficient manner that minimizes costs and risks.
At the same time we are dedicated to protecting the Earth’s environment and realizing a recycling-basedsociety by taking advantage of both the unique ability of cement plants to process and recycle large volumesof waste products and byproducts, and the recycling technologies we have developed over time to enable thisapproach.
In addition, in keeping with our Vision and Direction for the mid-2020s, we will strive to demonstrate theGroup’s overall capabilities to contribute to the safety and security of communities in the Pacific Rim.

Contents

Financial Highlights

		 Corporate Profile / Contents / Financial Highlights

CONSOLIDATED

1 Taiheiyo Cement Group Main Business Locations
2 To Our Stakeholders
4 Special Feature:

20 Medium-Term Management Plan (FY2019 to FY2021)
		

6 FY2018 Review of Operations
8 Fiscal 2019 Business Strategies
14 Directors and Corporate Auditors
15 Major Corporate Data
16 Consolidated Balance Sheets
18 Consolidated Statements of Income
		Consolidated Statements of Comprehensive Income
19 Consolidated Statements of Changes in Net Assets
21 Consolidated Statements of Cash Flows
22 Notes to the Consolidated Financial Statements
28 Taiheiyo Cement Group Network
29 Corporate Data

For the year:

2018(Millions of yen)

2017

(Thousands of U.S. dollars)

2018

Net Sales
Operating Income
Income before Income Taxes
Profit Attributable to Owners of Parent¥ 871,113
65,12958,642
38,525¥ 798,588
63,23552,74147,597$ 8,199,484
613,041
551,978
362,627

Net Assets
Total Assets

432,326
1,022,142

400,034
1,015,415

4,069,342
9,621,071

383.91

2.93

At year-end:

Earnings per Share (EPS)*1

311.40Yen

U.S. dollars*1 The Company, with an effective date of October 1, 2017, conducted a reverse stock split for its common stock at a ratio of one
for 10. EPS (Con.) and Net income per share (Uncon.) are calculated assuming that the said share consolidation had been
conducted at the beginning of the fiscal year ended March 2017.

Note: U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.24=US$1, the approximate exchange
rate prevailing on the Foreign Exchange Market on March 31, 2018.

Net Sales

Ordinary Income

G LO B A L N E TWO R K

Taiheiyo Cement Group Main Business Locations

Domestic Main Business Locations

2018

UNCONSOLIDATED
For the year:

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

Net Assets
Total Assets
1

Net Income per Share*
Dividends per Share*2(Millions of yen)

2017

(Thousands of U.S. dollars)

2018¥ 321,162
27,86329,562
23,254¥ 300,398
30,61133,18736,970$ 3,022,988
262,270
278,260
218,883

274,554575,884

258,428
571,6132,584,288
5,420,597

296.39
6.00

1.76
–

187.41–Yen

U.S. dollars*2 Dividends per share figures reflect the actual dividend paid before the reverse stock split. Converted to reflect the reverse stock
split, dividends per share were 60.00 yen for both the fiscal year ended March 2017 and the fiscal year ended March 2018.

Profit Attributable to Owners of Parent (Net Income ( Uncon.)Con.)

Employees

Sales Composition By
Geographic Segment(As of March 31, 2018/Consolidated)

Other
10.0%
U.S.A.
15.4%

Japan

74.6%

Note: Net sales ratio are based on our customer businesslocations, composition by the country or geographic segments.

TAIHEIYO CEMENT CORPORATION1To Our Stakeholders

Creating New Strength
through Sustainable GrowthEstablishing a solid business foundation for future sustainable growth

During F Y2018 Japan’s economy continued to undergoa moderate recover y due to factors such as continued
improvements in employment and earnings, as well as
continued pick-up in capita l investment and persona lconsumption on the back of strong corporate earnings.
Meanwhile, attention paid to downside risk is mounting due
to a serious shortage of labor and uncertainty in the global
economy.
The U.S. economy continued to undergo moderate
growth due in part to reduced levels of the unemployment
rate and robust consumer spending. China’s economy saw
signs of recovery from economic deceleration, supported byvarious government policies. In Vietnam and the Philippines,
the economy has been on an expansionary trend due to theincrease in exports and strong personal consumption.
Under these circumstances, in F Y2018, the Group’s
consolidated net sales increased ¥72,524 million from theprevious year to ¥871,113 million. Consolidated operating
income was ¥65,129 million, up ¥1,894 million, while
consolidated ordinary income was ¥64,366 million, up ¥4,563
2

A N N UA L R EP O R T 2 0 1 8

million and profit attributable to owners of parent decreased¥9,071 million to ¥38,525 million.
Looking ahead, the Japanese economy is expected to continue
recovering moderately on the back of factors such as robust
corporate earnings and the employment env ironment.
Although the global economy also continues to undergo an
expansionary trend, uncertainty is growing due to concerns
over trade friction following U.S. international trade policies
and geopolitical risks.
Turning our attention to the Group’s business environment,in our core domestic cement business demand is expected torecover due to construction related to the Tokyo Olympics
and Paralympics in 2020, redevelopment investment in urban
areas, and disaster prevention and mitigation measures.
Meanwhile, the impact of serious labor shortages and increases
in raw material prices are concerns.
Additionally, in the U.S. economy, on the back of factors
such as robust corporate earnings and the employment
environment, personal consumption and capital investment

will maintain a recovery trend and economic growth is forecast
to continue. However, great uncertainty surrounds policy
management and trends must be monitored closely.
Under these circumstances the Group has set its future
Vision and Direction targeted at the mid-2020s. As thesecond step, the Group has formulated the 20 Medium-Term
Management Plan which covers the three-year period until
FY2021, and will establish a solid business foundation for
future sustainable growth.
In addition, the Group will seek to recognize and assess
its risks and opportunities in terms of ESG (environment,
society and governance) to minimize any potential mediumto long-term business uncertainties. We will concurrently
maximize the use of both tangible and intangible assets of
the Group, including merchandise, technology and knowhow, to contribute to solving social issues. Such activity willallow us to put into practice our efforts to create shared value
while fulfilling both the creation of social value and expansionof business opportunities. We intend to achieve the Group’s
sustainable growth and enhance medium- and long-term

enterprise value through these activities while contributing to
SDGs as a universal set of development goals.
For the fiscal year ending March 2019 we expect consolidated
net sales of ¥888,000 million, consolidated operating incomeof ¥68,000 million, consolidated ordinary income of ¥66,000
million, and profit attributable to owners of parent of ¥42,000
million.
I look forward to your continued understanding andsupport as we pursue these goals.

Masafumi Fushihara

President and Representative Director

TAIHEIYO CEMENT CORPORATION

3S PEC I A L F E AT U R E

20 Medium-Term Management Plan (FY2019 to FY2021)
Taiheiyo Cement Corporation has formulated its 20 Medium-Term Management Plan, covering the three years from FY2019 toFY2021, to take the next (second) step toward realizing our future Vision and Direction targeting the mid-2020s.

Future Vision and Direction
Mission of the Taiheiyo Cement Group

Future Vision and Direction (toward the mid-2020s)

Our mission is to contribute to social infrastructuredevelopment by providing solutions that areenvironmentally efficient, enhance our competitive position
and bring value to our stakeholders.

To become an enterprise group that provides a sense ofsafety and security to societies in the Pacific Rim bydemonstrating the Group’s overall capabilities.

Review of the 17 Medium–First Step Toward Realizing Our Future Vision and Direction
Plan

FY2018 Plan

Results

1) Earnings capacity• Enhance existing businesses.
Thorough cost reductions, etc.
• Formulate and implement growth strategies.
Growth investments for generating andimproving earnings capacity (100 billion yen).

• Significant decline in domestic cement demand, below expectations.
Management targets underperformed.
uContinue to strengthen our earnings capacity.
• Executed growth investments as planned.
Acquisition of the Oro Grande plant (U.S.) and construction of its new millCommencement of Biomass Power Generation Business
DC Co., Ltd. became a wholly-owned subsidiary2) Financial structure• Reduce interest-bearing debt.
• Improve the equity capital ratio.
• Promote selection and concentration.

• Significantly reduced interest-bearing debt. (110.5 billion yen fromend of FY2015)• Achieved net DER and other financial indicators one year earlier
than planned.
• Improved equity capital ratio. (end/FY2015: 29.1% g end/FY2018: 38.7%)• FY2016–2018: maintained dividends of 6 yen/share.*• FY2017: repurchased 10 billion yen of Taiheiyo Cement 		
Corporation’s shares.
*The Company has consolidated shares of common stocks at a rate of one share for every
ten shares, effective October 1, 2017. As a result, the year-end dividend per share for
FY2018 will be 30 yen. The dividends per share for the period and for the full year, without
reflecting the impact of share consolidation, are 3 yen and 6 yen, respectively.

Business Environment and Our View of the Future
Recognizing the Group’s business environment, risks and opportunities in terms of ESG
E: Environment
Business Climate change
environment Severe natural disasters
and risks
Resource constraints
Japan

Overseas

Waste treatment
Reinforcement ofenvironmental regulations
Climate change
Resource constraints
Waste treatment
Reinforcement ofenvironmental regulations

Creation and developmentof a recycling-oriented
society
Opportunities Provision of environmentallyfriendly productsTechnical assistance for
emerging economies

S: Society
Declining birth rates, an aging population and a labor
shortage
Deterioration of infrastructure
The Tokyo Olympics and Paralympics
Large infrastructure projects
Restoration and reconstruction in disaster-stricken
areasTechnological innovations (ICT, IoT, AI, etc.)
Expansion of production and consumption
Rapid urbanization
Growing infrastructure improvement
Technological innovations (ICT, IoT, AI, etc.)

G: GovernanceUnfair trade
Corruption andbribery
Falsificationof data

Stable provision of high-quality products
Disaster prevention and management projects andrestoration of deteriorating infrastructure
Compliance
Provision of solutions
Risk
Provision of labor-saving products
management
Restoration and reconstruction in disaster-stricken areas
Retention and development of capable human resources

Key Directions the Group Should Pursue
Key Directions

Principal Businesses
All businesses

S

Efforts to mitigate and respond to climate change

Cement (Japan and overseas)

E
E

Expansion of a strategic business domain

Cement (overseas), mineral resources, environmental,
construction materials, others

E, S

Construction of a new business model

Environmental, others

E, S

Retention and development of capable
human resources
Strengthening of Group governance
Enhancement of corporate governanceAll businesses

S, G

Reduce risks and expand business opportunities by addressing ESG issues

4

ESG

Stable provision of products and services

Creation and development of a recycling-oriented society Cement (Japan and overseas), mineral resources, environmental

A N N UA L R EP O R T 2 0 1 8

Operating income on sales
Return on assets (ROA)(ordinary income)Difference

8.4% or more

7.5%

-0.9％

7% or more

6.3%

-0.7％

Guidelines
Net sales

3) Shareholders’ Return• FY2016: dividend of 6 yen/share
Increased by 1 yen/share from FY2015.
• FY2017-2018
Determined dividends with considerationof fund needs from growth investments, etc.

FY2018 Actual

Management Targets(Billions of yen, unless otherwise stated)

950.0 or more

871.1

-78.9

Operating income

80.0 or more

65.1

-14.9

EBITDA*

125.0 or more

111.6

-13.4

Net debt/equity ratio (DER)(times)Less than 1.0

0.6

-0.4

2.6 or less

2.1

-0.5

Net interest-bearing
debt/EBITDA (times)*EBITDA= Operating income + Depreciation (including goodwill amortization)

Outline of the 20 Medium-Term Management Plan

Reference: Net Sales and Operating Income by Segment
The following presumptions have been applied for the period covered by the 20 Medium-Term
Management Plan.
Estimated domestic cement demand: 42 to 43 million tons
Estimated exchange rate:
110 yen/US$(Billions of yen)

Net Sales
FY2018 Actual
CementBusiness

Operating Income

FY2021 Plan

FY2018 Actual

FY2021 Plan

Japan

408.5

423.0

25.5

29.0

Overseas

203.4

223.0

15.1

25.5

Sub-total

611.9

646.0

40.6

54.5

Mineral Resources Business

81.4

90.0

8.0

9.5

Environmental Business

90.2

111.0

7.4

9.0

Construction Materials Business

77.0

88.0

4.7

6.0

Other Business

79.0

95.0

3.9

6.0

Intergroup Elimination

-68.5

-80.0

0.2

-0

Total

871.1

950.0

65.1

85.0

Plans and other forward-looking statements in this document are based on information available to the Company as of the date of the release of this document and on certain assumptions the Company deems reasonable,
and therefore are subject to risks and uncertainties.
As such, we do not offer any promise or guarantee that planned results and measures included in this document will be realized in the future. Actual results may differ significantly due to a variety of factors.

TAIHEIYO CEMENT CORPORATION

5

FY2018 Review of Operations

Cement Business
Sales and Profits Increase with Strong Performance
Overseas, Particularly in the U.S.
Domestic cement demand in the public sector was solid in the firsthalf of FY2018 due to the enforcement of the supplementary budget
for the previous year, while it was stagnant in the second half due tothe effects of unseasonable weather and prolongation in construction
duration etc. For the full year, public sector demand was lower thanthe previous year. Domestic cement demand in the private sector
exceeded the previous year due to an increase in capital investment
and, as a whole, domestic cement demand increased 0.2% fromthe previous year to 41.87 million tons, of which imported cement
decreased 37.4% from the previous year to 0.17 million tons. Total
exports increased 2.4% to 11.80 million tons.
Under these circumstances the Taiheiyo Cement Group's domestic
cement sales by volume, including consignment sales, increased 2.4%
from the previous year to 14.72 million tons, whilst exports decreased
2.7% to 4.23 million tons.
As a result of the above, sales in the domestic cement businessincreased ¥23,452 million from the previous year to ¥408,513 million,
and Operating income declined ¥4,020 million to ¥25,505 million
due to factors including increased variable costs.
Shipment volume rose, served by our U.S. West Coast cement andready-mixed concrete businesses where the market prices are generally
on a recovery trend. Our cement business in China saw a partial
recovery trend in demand and price. Our cement business in Vietnam
was affected by competition with other products, among other factors.
Our cement business in the Philippines is facing weak market prices,
although domestic demand is expanding.
As a result of the above, sales in the Group’s overseas cement businessincreased ¥29,550 million from the previous year to ¥203,405 million,
and Operating income increased ¥5,774 million to ¥15,146 million.
Sales¥ 611,918 million

up ¥53,003 million year-on-year

Operating
Income¥ 40,652 millionup ¥1,753 million year-on-year

Mineral Resources Business
Sales and Profits Increase as Mineral Product
Sales Volume Grows
In our aggregates business, although demand related to the Tokyo
Olympics and Paralympics began to increase, demand as a wholedecreased since the restoration and reconstruction works in the Tohoku
region neared completion. In our mineral products business, shipmentsof limestone to overseas customers in the iron and steel industry were
solid. Intake in our surplus construction soil recycling business exceeded
levels of the previous year.
Sales
Operating
Income6

A N N UA L R EP O R T 2 0 1 8¥ 81,483 millionup ¥1,306 million year-on-year¥ 8,061 million

up ¥302 million year-on-yearEnvironmental Business
Increased Fixed Costs such as Depreciation andAmortization of Capital Investments Depressed Profits
Waste processing operations, such as for waste plastics, etc., and electric
power-related business were strong and, while measures were
promoted for disaster waste processing operations associated withthe 2016 Kumamoto Earthquakes, depreciation and amortization
costs increased due to capital investments. These factors resulted in adecrease in consolidated operating income.
Sales
Operating
Income¥ 90,206 millionup ¥12,305 million year-on-year¥ 7,463 million

down ¥203 million year-on-year

Construction Materials Business
Reduced Profitability of Ground Improvement Projects
Led to Decline in Profits
Consolidated sales was up on increased sales of materials related tocivil engineering and construction. However, consolidated operating
income decreased due to declining profitability of ground improvement
projects.
Sales¥ 77,033 million

up ¥3,006 million year-on-year

Operating
Income¥ 4,740 million

down ¥1,321 million year-on-year

Other Business
Sales and Profits Increase as Real Estate andData Processing Post Strong PerformanceThis segment includes our real estate, engineering, data processing,finance, transport and warehousing, chemical products, sports facility,
and other businesses. Our real estate and data processing businesses
posted strong performance.
Sales
Operating
Income¥ 79,020 million

up ¥3,689 million year-on-year¥ 3,926 million

up ¥658 million year-on-year

TAIHEIYO CEMENT CORPORATION

7

Yamba Dam construction site

Fiscal 2019 Business Strategies
Quickly realizing fair prices and strengthening profitability

Domestic Cement Business
Dealing with geographical imbalances
in demand is a key issue
The 20 Medium-Term Management Plan anticipates annual domestic
cement demand of 42 million tons in an environment in whichconstruction work remains concentrated in central Tokyo. We expect
cement demand during FY2019 to track these expectations at 42
million tons thanks to construction related to the Tokyo Olympics andParalympics as well as an uptick in construction in regional cities, where
demand is currently depressed.
Against this backdrop, we have made prompt implementationof fair prices adjustments and strengthened profitability as our basic
policies in FY2019. To realize fair prices, we increased current prices
by at least ¥1,000 per ton from shipments as of April 1, 2018. We havegained customer understanding for this increase by carefully explaining
the impact of rising distribution and maintenance costs due to Japan’slabor shortage, as well as the reality of a business environment in whichcoal prices have been soaring for the past several years.
As the geographic imbalance between regions with demand and those
without becomes more striking, and as natural disaster recovery projects
account for an increasingly large percentage of total demand, we believe
the need to avoid the creation of “blank areas” in the supply of ready-mixed
concrete and concrete products will
emerge as a key issue. Because theJapanese Industrial Standard (JIS)requires ready-mixed concrete becast (poured into forms) no later
than 90 minutes from the time it
was first mixed in order to ensure
quality, the product can only be
supplied in areas near plants. Thisrequirement explains why there aremany ready-mixed concrete plants
located throughout the country. As
plants become less viable in regions
where demand is falling, it becomes
more difficult to provide a stablesupply of ready-mixed concrete asa finished product in these areas.
This trend is a serious problem forus as a cement manufacturer, andYamba Dam Concrete Placing

8

A N N UA L R EP O R T 2 0 1 8

we see it as an issue for which the entire cement and concrete industry
needs to study potential solutions.
In addition, this imbalance in demand is being accompanied by anincreasingly serious shortage of drivers and vehicles. We have been working
closely with customers to address this challenge and will continue to work
to secure drivers and vehicles in the future.
Strengthening profitability from three perspectives
The 20 Medium-Term Management Plan identifies two key sales
priorities for the Domestic Cement Business: (a) strengthening
profitability by quickly realizing fair prices and aggressive cost-cuttingand (b) contributing to national and other projects by strengthening
and expanding our capacity for reliably supplying products.
We described the basic policies we will pursue in FY2019 in order toquickly realize fair prices. To strengthen profitability we will undertake
three initiatives: sales measures, ready-mixed concrete policies andconcrete product measures.
Sales measures will consist primarily of strengthening constructionrelated orders and establishing supply structures for cement with special
specifications (low-heat cement, moderate-heat cement, blended
cement, etc.). In working to strengthen construction-related orders wewill focus on gaining useful information about business opportunities
from ready-mixed concrete companies and concrete product companies
so we can boost the volume of orders from worksites where our added
value benefits us. Since specialty cements are part of a category where
we can fully leverage our competitive advantages, we will also work
to enhance our supply structures in this area of our operations. Other
initiatives include planning and reliably implementing sales policies inconcert with DC Co., Ltd., a Kawasaki, Kanagawa Prefecture-based
wholly owned subsidiary that we acquired in 2016, in order to leveragesynergies with that company so that we can fulfill brisk demand in theTokyo metropolitan area.
Ready-mixed concrete policies consist of strengthening the financial
footing of our directly-owned ready-mixed concrete facilities andimplementing measures targeting group customers. Ready-mixed concrete
companies located throughout Japan have access to regional information
and we will maintain and enhance our ability to gather this information,
which we consider to be an important part of our operations. In addition,
we will enhance our ability to market products to clients and work to earna larger percentage of orders on large projects. We will also continue toKamiiso Plant

work closely with ready-mixed concrete industry associations nationwide
to popularize concrete paving. Going forward, we have high expectations
concerning the industry’s ability to tap the changeover from asphalt toconcrete paving as a new source of demand.
Concrete product measures will consist of strengthening our
relationships with concrete product companies throughout Japan.
Labor shortages at construction sites are driving a trend toward greateruse of pre-cast concrete, but the different characteristics of ready-mixed
concrete and concrete products require the appropriate use of these
based on site conditions. Going forward, we will support development
of distinctive and appealing products so that we can continue tocontribute to the development of the concrete product and ready-mixed
concrete industries, for example by building win-win relationships thatcombine both product types. We will also work to accommodate thei-Construction initiative. Currently, general contractors are dominant
in leading new industry initiatives, but the cement industry will carefully
analyze where advantages can be realized for the cement industry andmove forward accordingly.

Note: The i-Construction initiative aims to increase the overall productivity of construction
production systems by introducing measures such as across-the-board use of informationand communications technology (so-called “ICT in earthworks”) at construction sites.

Tokyo Service Station

Securing orders from large-scale infrastructuredevelopment projects
With regard to the policy of contributing to national projects bystrengthening and enhancing our capacity to provide a stable supply,
we will work to cut costs by strengthening our overland transport
capabilities and carefully identifying optimal distribution cost
structures. Specifically, we will study how to implement a return-loadtransport system, including through partnerships with other industries.
We believe this approach will yield the dual benefits of enabling us tosecure the means of transport while simultaneously lowering transport
costs. In addition, we will pursue initiatives to realize stable supply fromboth production and distribution perspectives as we prepare for thestart of OEM operations for Hitachi Cement Co., Ltd., in April 2019.
Regarding our contributions to national and other projects, orders
related to the Tokyo Olympics and Paralympics have slowed but wewill continue to work to ensure reliable deliveries until these projects
have been completed. Going forward, a number of large infrastructuredevelopment projects are coming up, including the Naruse Dam in Akita
Prefecture, which will be one of the largest dams in Honshu, the extensionof the Hokuriku Shinkansen and Hokkaido Shinkansen lines, and theconstruction of the Chuo Shinkansen, and we will work together withGroup companies to supply products and ready-mixed concrete.
Although construction is currently concentrated in the Tokyo
metropolitan area we expect to see a renewed surge of private-sector
redevelopment in major cities such as Osaka and Nagoya. We plan topromote our extensive network of shipping facilities, which is one of
Taiheiyo’s core strengths, to earn new orders from these projects.
We shipped a record volume of cementbased soil stabilizer in FY2018. Conditions
following the Great East Japan Earthquake
spurred calls for projects using this productleading to a rapid increase in sales. We
expect this growth to continue in the future
and will ensure our ability to accommodate
growing demand by enhancing our supply
and transport structures.
In addition to the above measures we willcontinue to focus on ensuring safety, reassessing
our quality control structures and fostering the
Toshiaki Suzuki
Director, Managing Executive Officer
development of talented workers.
Senior General Manager, Cement Business Division
TAIHEIYO CEMENT CORPORATION

9Shin-Tsukumi Quarry

Fiscal 2019 Business Strategies
Establishing a robust system for ensuring the stable supply of mineral resources and taking
full advantage of the abundant resources of the Group to boost the profitability of our businesses

Mineral Resources Business
Boosting the profitability at existing businesses
during FY2019

Among our core businesses we expect profits to grow in the aggregatesbusiness. We have expanded our sand plant to accommodate expected
growth in demand for fine aggregate in the Kanto region, and will workwith DC Co., Ltd., a subsidiary with a sand business in Chiba Prefectureand surrounding regions, to meet this demand.
Our mineral products business is planning for higher profits due
to stable shipments of limestone to the iron and steel industry. Our
production of quicklime has reached capacity and we aim to implement
price increases going forward. We will focus on maintaining production
facilities so that we can continue to realize maximum production and sales
volumes. We will also work to expand our silica stone facilities to enable us
to put structures in place to bundle sales of silica stone with limestone tocustomers in the iron and steel industry.
In our geo-solutions business, we expect to increase sales of Denite®,a heavy metal immobilization material from Taiheiyo Cement, as large
public works projects such as the Tokyo-Gaikan Expressway finally getunderway. We also aim to boost profitability in operations involving
surplus construction soil by working closely with subsidiaries DC Co.,
Ltd., and Mitsui Wharf Co., Ltd., to capture more orders.
In our functional materials business we will work to increase sales byaugmenting ChiccaLight®, a high-purity phosphor raw material used in
LED production that we have shipped in stable quantities for several years,
with a range of new products such as High-Purity Silicon Carbide (SiC)
which is attracting attention as a material for use in next-generation power
semiconductor applications.
We also plan to establish a local subsidiary in Vietnam to allow our mineral
resources business to aggressively pursue sales in overseas markets.

Steadily implementing the business strategy set out inthe 20 Medium-Term Management Plan

For the 20 Medium-Term Management Plan we set three priority objectives:• Establish a robust system for ensuring the stable supply of mineral resources• Take full advantage of the abundant resources of the Group to boost the
profitability of our businesses• Focus on developing future-oriented businesses as well as creating an overseas
resource businessWith regard to the first objective to establish a robust system forensuring the stable supply of mineral resources, we will work to develop
10

A N N UA L R EP O R T 2 0 1 8

quarries over the next three years to ensure a stable supply of products going
forward. We will focus not only on limestone, but also on silica stone as webuild structures to ensure the Group can leverage its exceptional capabilities
in our mineral resource operations to provide a stable supply of products.
Because distribution costs are a significant expense in our aggregatesbusiness, we will enhance our supply structures to enable us to supply products
from our Garo quarries in Hokkaido to customers in Kanto and locations
further north, and products from our Shin-Tsukumi Quarry in Oita tocustomers in West Japan. In the Kanto region, we will allocate product basedon customer wishes by combining marine shipments with supply from inland
facilities operated by Buko Mining Co., Ltd., Chichibu Mining Co., Ltd.,
Kosyu Saiseki Co., Ltd., and Yuko Mining Co., Ltd.
With regard to the second objective to take full advantage of theabundant resources of the Group to boost the profitability of our businesses,
we plan to focus on increasing prices and growing market share in ouraggregates business as we expand associated production facilities. Because ofhigh distribution costs, the aggregates business has a strong local component.
However, increasing volume means operating a wide network of production
facilities that requires active investment in order to increase profitability. We
believe increasing the number of such facilities we operate will also boost
sales in regions that are not currently serviced.
In our mineral products business, we will build supply structures forlimestone that optimize the characteristics of the products from individual
mines. In addition, in the Horoshi area of our Ofunato Quarry (in Iwate
Prefecture), we are able to extract crystalline limestone of sufficiently
high quality to supply the paper industry. We will work to increase theprofitability of this business while strategically expanding it by augmenting
our existing Kawara Quarry (in Fukuoka Prefecture) with new production
facilities for crystalline limestone.
In our geo-solutions business, we will work to increase sales of Denite®,a heavy metal immobilization material from Taiheiyo Cement, while
collaborating with DC and Mitsui Wharf as described above to increase
profitability in operations involving surplus construction soil.
With regard to the third objective of focusing on developing futureoriented businesses as well as creating an overseas resource business, we will
work to commercialize High-Purity Silicon Carbide (SiC) and functional
hollow particles to advance our functional materials business.
We plan to utilize our new local subsidiary in Vietnam as a base fromwhich to launch a more aggressive globalization program focusing on
Southeast Asia.

Kanto Ash Center

Crushed waste plastic

A year for upfront investments to facilitate future growth

Environmental Business
Establishing technology for the future

We anticipate the following management environment for each of ourbusinesses in the coming financial year.
In our e-materials business the volume of coal ash we handle is trending
down due to growth in renewable energy driven by widespread introductionof solar power and restrictions on the operation of coal-fired power plants.
In the previous financial year our materials recycling business completed
the processing of waste and debris from disasters, including a series ofearthquakes in Kumamoto and heavy rains in northern Kyushu. This year
we will strive to increase profitability by boosting sales of biomass fuel to therapidly growing number of biomass power plants, processing incineration
ash from these facilities and processing waste plastic, a service for which we
expect demand to grow due to Chinese import restrictions on waste.
In our aqua business, during the previous financial year we worked to
selectively consolidate our product range. This year we will work to increase
sales of Power House® high-performance filtering media and Ceraclean®
water purification material. In May 2018 we obtained the Environmental
Technology Verification (ETV) mark from the Ministry of the Environment
for our Ceraclean® water purification material. It has been praised for its
effectiveness in Southeast Asia, where shrimp cultivation is a booming
business, and we expect it to continue to attract growing interest and sales
going forward.
In light of these conditions we expect business performance on a parwith the previous financial year. We consider this year a time for making
future-focused investments, and will move forward with a broad range of
R&D and demonstration programs designed to establish new technologies
for processing difficult-to-process materials such as lithium-ion batteries
and carbon fiber, a field in which we expect growing demand.

While our conventional cement plants accept a wide range of waste
products and incorporate them into the cement manufacturing process,in the future we will actively separate and sort valuable resources. Waste
products include heavy metals such as copper, zinc and lead, as wellas precious metals like gold and silver. We plan to enrich and sort theseelements and sell them as raw materials to non-ferrous metal businesses. We
have already commercialized this business at Group company Tokyo Tama
Ecocement Inc., and are studying its introduction at other plants. As part ofthis initiative we have set-up a demonstration trial at our Ofunato Plant.
By not only tapping the stream of waste products and byproducts we
receive for use as cement raw materials and fuel as we have in the past,
but also extracting valuable resources other than cement raw materials
and returning them to the market, we will further contribute to resource
recycling in Japan. Going forward, we will work with diverse industries, local
governments and other partners to expand resource recycling to successfully
implement the “Resource Complex” initiative.
We will also actively work on expanding the Environmental Businessoverseas by focusing on pioneering new business domains, for example byassigning personnel to overseas facilities and establishing local subsidiaries.
The Environmental Business Development Department is responsible for
procuring biomass fuel for Ofunato Power Inc., which will start operatinga biomass-fueled power generation business in 2019, and we will work to
expand our fuel procurement operations in step with its operation.

Implementing the “Resource Complex” initiative

The 20 Medium-Term Management Plan sets forth a basic policy of“quickly achieving and subsequently maintaining operating income of¥9 billion” while identifying the need to “maximize the earnings capacityof our businesses while constructing a new business model by developing
advanced technology” and to “contribute to creating a new recycling system
for unutilized resources”.
In addition to expanding and strengthening the foundation of ourrecycling business with a focus on conventional cement plants, we will
actively pursue new businesses that are not dependent on cement plant
operation with the goal of establishing them as major profit-drivers.

Kunihiro Ando

Director, Managing Executive Officer
Mineral Resources Business Division
Environmental Business Development Department
TAIHEIYO CEMENT CORPORATION

11

Oro Grande Plant

Fiscal 2019 Business Strategies
Expanding existing businesses and investing in new businesses in the Pacific Rim

International Business
Boosting production capacity in the U.S. andSoutheast Asia to meet growing demand

Cement demand in the U.S. during FY2019 is expected to rise 2% to 3%
nationwide and by several percentage points in the five West Coast states
where we do the majority of our business (Washington, Oregon, California,
Arizona and Nevada). Based on our belief that this trend will continue forsome time, we are working to expand the cement grinding mill (finish mill)at the Oro Grande Plant that we acquired in 2015. We plan to complete
these enhancements during the first quarter of FY2020.
In China the cement market prices have been recovering since the second
half of 2016. Although there is a striking geographic imbalance in the market
as demand shrinks in the north while expanding in the south, we believe thatthe market continues to be a promising one overall with annual demand of
about 2.3 billion tons. However, initiatives by the government to strengthen
environmental regulations have led to halts in plant operation, retirement of
outdated equipment and the discontinuation of low-specification productsin the cement industry. The effect of this has been to add to the cost andinvestment burden on manufacturers as they find themselves faced with theneed to purchase equipment that complies with the new regulations as well as
newly required chemicals and other additives. In addition, the government’s
peak shift policy that halts operations during certain periods is expanding. We
see opportunities in this environment as the retirement of outdated equipment
and other factors will weigh on production and force up prices, and ourenvironmental business—a key area of strength for Taiheiyo—will have theopportunity to expand nationwide.
Turning to Southeast Asia, we failed to achieve planned targets during
FY2018 in both Vietnam and the Philippines due to factors that include
a deterioration in the cement market caused by intensifying competition.
However, we continue work to boost production capacity and strengthen supply
structures based on our expectation that cement demand will continue to growin both countries. In the Philippines in particular, we see growth continuing in
the immediate future as large-scale infrastructure construction proceeds under
the Duterte administration’s “Build, Build, Build” initiative.
As exports from Japan remain at the 4-million ton level we will work toboost shipments of blended cement and cement with special specifications
to overseas customers. We will also seek to strengthen supply structures inoffshore trade to route cement from China, South Korea and other nations
to the U.S. to accommodate growing demand in that market.

Building a brand image that emphasizes sustainability

Recognizing that investment is critical to maintaining growth, the International
12

A N N UA L R EP O R T 2 0 1 8

Business Division is planning to expand existing businesses and invest in new
businesses in the Pacific Rim. Specific initiatives include boosting cement
production capacity and terminal capacity, and our approach is to select the mostappropriate investment scheme for each project from a menu of choices that
include green field investments, M&A and asset acquisitions, and joint ventures.
The most important consideration as we determine where to invest will
be whether proposed projects can achieve synergies with existing businesses.
We will also emphasize the relationship with existing business projects wheninvesting in new countries and locations, as we consider the most appropriate
timing and location for each investment.
In addition to cement, we are working to increase the volume of bulk
materials such as fly ash and slag that we handle. Exports of blended cement toSingapore are growing and we expect to expand exports of this product to othercountries in the future. However, we anticipate that the volume available forexport of bulk materials from the domestic Japanese market will be insufficientin the future, so we will work with the Environmental Business Development
Department and the Mineral Resources Business Division to study the viabilityof procuring materials such as fly ash and slag from overseas coal-fired power
plants and steel mills as a way to establish stable supply structures.
In formulating the 20 Medium-Term Management Plan we emphasizedsustainability. Awareness of the importance of this concept is rising, including
in emerging nations, and Japanese companies such as Taiheiyo are receiving
increasingly high praise for their sustainability initiatives. Japanese products win
praise for their high quality, legal compliance, environmental friendliness, andsafety; all characteristics that justify their prices. We believe that by building astrong brand image and earning consumer trust we can realize a competitive
advantage in our operations, and a stance that makes safety our top priority andvalues our employees helps build this trust.
Going forward, global human resources
development will play an essential role as wedevelop our businesses overseas. Taiheiyo has
adopted a policy of hiring more multilingual
employees who speak languages other thanJapanese and English and more non-Japaneseemployees. In the area of human resources
development we have begun training engineersby opening a training center in the Philippines,
where English is the official language, and weplan to assign those trainees to Group
Ichiro Egami
companies and overseas facilities in
Director, Managing Executive Officer
the future.
Senior General Manager,
International Business DivisionVietnam Subway Construction (ground improvement)

Establishing a sustainable business foundation

Construction Materials Business
Securing profits in FY2019 by adapting to changes
in the business environment

Although our Construction Materials Business posted rising profits forfive years in a row starting in FY2012 and achieved the 17 Medium-Term
Management Plan’s operating income target of ¥6.0 billion earlier than
anticipated, profits fell significantly during FY2018, the plan’s final year.
While special-procurement projects made a major contribution to the bottom
line during FY2016 and FY2017, construction delays caused by various factors,
including labor shortages and work-style reforms, had a noticeable impact in
FY2018. We believe the declining profitability of ground improvement projects,
due in part to lower demand from reconstruction work following the Great
East Japan Earthquake and resulting in smaller scale projects, exacerbated thesechallenges and were a major factor in our earnings decline.
We anticipate substantial orders from projects that will contribute toprofits during FY2019, including the start of construction on the TokyoGaikan Expressway following a series of delays that have slowed progress on
the project to date. At the same time, I believe it is important to introduce
measures that adapt to changes in the scheduling of construction projects inlight of ongoing labor shortages, which are expected to become even tighter inthe coming year, and work-style reforms. While it has been standard practicein the construction industry to ramp up work during the fourth quarter tocomplete projects before the end of the fiscal year, I feel we have reacheda point where we need to reassess the viability of this approach. This fiscal
year we will focus on securing profits in a changing business environment bybuilding flexible management structures in a timely manner.

20 Medium-Term Management Plan: Changing focus
from business expansion to operating margins

The 20 Medium-Term Management Plan seeks to address changes in thebusiness environment such as Japan’s labor shortage by focusing on operating
margins rather than business expansion during the term of the Plan. We
believe this will reinforce the company’s business foundation and lay thegroundwork for the next medium-term management plan.
We have adopted two basic priorities:• Establish a sustainable business foundation capable of adapting to changes inthe business environment and strengthen the competitiveness and financial
structure of our businesses• Cultivate a new earnings source in a growth field and maximize synergies withour businesses

Our first initiative is to pursue labor savings across all business activities in orderto address Japan’s labor shortage and other changes in the business environment.

We are also planning to reallocate management resources by promoting
selection and concentration of existing businesses and products using
labor productivity and profitability as yardsticks. The Group includes
companies with portfolios that have hundreds of products, some of which
are only marginally profitable. We are looking to review these portfolios
to concentrate on high-added-value products. At the same time, we will
strengthen partnerships within the Group like never before as we work to
implement efficient Group management structures as quickly as possible andbuild cooperative relationships in the distribution field.
In addition, to prepare for the contraction of the domestic market in the
future, we will minimize costs, including by reassessing existing businessfacilities. For instance, we will build collaborative structures with other Groupand non-group companies. Under the 17 Medium-Term Management Plan
we have built networks of contacts through sales activities in partnership withGroup companies. We will continue to expand this initiative with the aim ofachieving significant results during the 20 Medium-Term Management Plan.
Initiatives to strengthen the financial structure of Group companies
made excellent progress under the 17 Medium-Term Management Plan andwe will continue these efforts as some companies still have a less than robust
financial base.
To realize our second priority of cultivating a new earnings source in a
growth field and maximizing synergies with our businesses, we will strengthen
our partnership with the Central Research Laboratory to develop products thatmeet labor-saving needs and create new opportunities for Group companies totake advantage of pre-cast products, a category we expect to grow in the future.
We believe that these and related initiatives will help alleviate the labor shortageat domestic construction sites.
We will also actively advance into overseas
markets, particularly in Southeast Asia. As a firststep, in September 2017 Onoda Chemico Co.,
Ltd. established a local subsidiary in Vietnam.
Going forward, we will work closely with theInternational Business Division to determine theneeds of each Group company and local needs.
In addition to these initiatives, we will
actively invest in safety measures and work
to further strengthen our quality control
structures. We will also work on strengthening
our management structures to
Katsuhide Fukuhara
enhance governance, including
Director, Managing Executive Officer
at affiliates of Group companies. Construction Materials Business Department
TAIHEIYO CEMENT CORPORATION

13

Directors and Corporate Auditors(As of June 29, 2018)

Board of Directors
Chairman and
Director

President andRepresentative Director

Vice President andRepresentative Director

Director,
Senior Executive Officer

Shuji Fukuda

Masafumi Fushihara

Yuuichi Kitabayashi

Shigeru Matsushima

Directors, Managing Executive Officers

Youichi Funakubo

Keiichi Miura

Masahiro Karino

Directors, Managing Executive Officers

Directors

Katsuhide Fukuhara

Yoshiko Koizumi

Toshiaki Suzuki

Kunihiro Ando

Ichiro Egami

Yuzo Arima

Corporate Auditors (Standing)Corporate Auditors

Executive Officers

Hidehiko Kasamura
Toshihide Nishimura

Yoshio Narukage
Wakako Mitani

Toru Kanai
Seiichi Araki
Yoshiaki Tominaga
Kazuo Horikawa
Yoshiyuki Uenoyama
Hideaki Asakura
Tetsuya Ohashi
Yukimasa Nakano
Katsuyoshi Fukagawa
Yoshifumi Taura
Isao Takaki
Takayoshi Okamura
Atsuhiro Koike

14

A N N UA L R EP O R T 2 0 1 8

Tomoya Sakamoto

FI N A N C I A L S E C T I O N

Major Corporate Data
Total Domestic Cement Demand/
Group Sales

Net Sales

Operating Income/Operating Income on Net Sales

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

Total Domestic Cement Demand ■■Group Sales■

Net Sales ■■Operating Income■■
Operating Income on Net Sales

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

Return on Equity (ROE)

Total Assets

Ordinary Income/Return on Assets (ROA)

Net Assets/
Equity Ratio

Return on Equity (ROE)

Total Assets ■■Ordinary Income
Return on Assets (ROA)

■

■

■■
■

■

Interest-Bearing Debt

Interest-Bearing Debt/
Cash Flow

Capital Expenditure

Net Assets per Share

Interest-Bearing Debt ■■Interest-Bearing Debt/Cash Flow

Capital Expenditure ■■Depreciation

Depreciation ■■■Net Assets ■■Equity Ratio

Net Assets per Share*

■

■■

■

R&D Expense

R&D Expense■■*The Company, with an effective date of October 1, 2017, conducted a reverse stock split for its
common stock at a ratio of one for 10. Earnings per Share (EPS) and Net Assets per Share is
calculated assuming that the said share consolidation had been conducted at the beginning of the
fiscal year ended March 2014.

TAIHEIYO CEMENT CORPORATION

15FI N AN C I A L S E C T I O NConsolidated Balance Sheets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

2018

2017
(Millions of yen)

2018
(Thousands of U.S. dollars)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims-operating
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts
Total current assets¥60,516
166,625
5,320
31,835
1,708
42,422
9,098
3,896
12,595(1,125)332,895¥53,766

182,272
10,98929,193
2,383
41,761
7,320
3,464
10,560(1,116)
340,595$506,084
1,715,670
103,440
274,786
22,432
393,089
68,90632,61399,398(10,512)3,205,909

Noncurrent assets
Property, plant and equipment
Building and structures, net
Machinery, equipment, and vehicles, net
Land
Leased assets
Construction in progress
Other, net
Total property, plant and equipment

136,454
135,380
160,571
22,31919,083
23,341
497,151

134,456
136,603
158,057
20,99832,64722,674505,438

1,265,596
1,285,796
1,487,740
197,647
307,300
213,430
4,757,513

Intangible assets
Goodwill
Other
Total intangible assets

3,409
34,25037,660777
32,26133,0387,314
303,661
310,976

84,781
3,238
17,352
19,056
31,613(8,333)
147,708
682,520¥1,015,415

86,834
2,941
21,29812,194
28,341(8,539)143,070
681,546¥1,022,142

817,341
27,688200,476
114,782
266,764(80,381)
1,346,672
6,415,161$9,621,071

Investments and other assets
Investment securities
Long-term loans receivable
Assets for retirement benefits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

16

A N N UA L R EP O R T 2 0 1 8

2017

2018
(Millions of yen)

2018
(Thousands of U.S. dollars)

Liabilities
Current liabilities
Notes and accounts payable-trade
Electronically recorded obligations-operating
Short-term loans payable
Current portion of bonds
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Other provision
Other
Total current liabilities¥78,441
1,234
134,428
11,120
5,914
4
5,742
410
71,613308,910¥91,113
4,670
153,181
15,035
6,416
3
6,021
121
83,986
360,550$857,623
43,963
1,441,841
141,519
60,39334
56,676
1,142
790,536
3,393,731

Noncurrent liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Liability for retirement benefits
Provision for directors’ retirement benefits
Provision for special repairs
Other provision
Lease obligations
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities

35,035160,346
8,378
24,217568
121
981
21,285
7,520
48,013
306,469
615,380

20,000100,390
10,051
24,559520
128
750
18,844
7,553
46,466229,265589,815

188,253
944,941
94,607
231,170
4,895
1,212
7,059
177,380
71,100437,375
2,157,997
5,551,728

86,17459,548228,914(10,911)363,725

86,17460,339260,016(10,947)
395,582

811,128
567,951
2,447,440(103,044)
3,723,475

9,830
48
5,065
(12,862)(3,987)(1,906)
38,215400,034¥1,015,415

10,941
1
5,057(16,201)
(111)
(313)
37,058432,326¥1,022,142

102,985
1147,601(152,497)(1,052)(2,951)
348,817
4,069,342$9,621,071

Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Retirement benefits liability adjustments
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

TAIHEIYO CEMENT CORPORATION

17

FI N AN C I A L S E C T I O NConsolidated Statements of Income
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

2017

2018
(Millions of yen)

Net Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends income
Equity in earnings of unconsolidated subsidiaries and affiliates
Other
Total non-operating income
Non-operating expenses
Interest expenses
Provision of allowance for doubtful accounts
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on disposal of non-current assets
Gain on sales of investment securities
Gain on bargain purchase
Other
Total extraordinary income
Extraordinary loss
Loss on disposal of non-current assets
Loss on sales of investment securities
Loss on valuation of investment securities
Impairment loss
Loss on step acquisitions
Other
Total extraordinary loss
Income before income taxes
Income taxes-current
Income taxes-deferred
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent

2018(Thousands of U.S. dollars)¥798,588
599,924
198,664
135,429
63,235¥871,113
664,996
206,117140,987
65,129$8,199,484
6,259,376
1,940,107
1,327,066
613,041

1,650
2,009
2,228
5,888

1,969
3,196
3,212
8,378

18,53930,09030,23878,868

4,998
120
4,201
9,320
59,802

4,639
1,030
3,471
9,141
64,366

43,673
9,696
32,67986,049605,860

648
4,012
16,874
126
21,661

1,417
92
–
106
1,616

13,346868–
1,004
15,2193,965
24
68
20,6933,034
936
28,72352,741
8,830(3,646)47,556(40)¥47,597

4,725
23
1,356
577
–
658
7,341
58,642
10,2007,356
41,085
2,559¥38,525

44,479218
12,772
5,436
–
6,194
69,101
551,978
96,016
69,241
386,720
24,092$362,627

2017

2018

Consolidated Statements of Comprehensive Income
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

(Millions of yen)

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit retirement plans, net of tax
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
18

A N N UA L R EP O R T 2 0 1 8

2018(Thousands of U.S. dollars)¥47,556¥41,085$386,720

3,721
18(8,851)
7,966
588
3,443
¥51,000

811(7)(4,620)
3,994
423
601
¥41,686

7,636(71)(43,489)
37,6003,986
5,662$392,382¥52,257¥(1,257)¥40,118¥1,568$377,620$14,761

Consolidated Statements of Changes in Net Assets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 20182017

(Millions of yen)
Shareholders’ equity

Balance at pre end of term
Changes of items during period	Change in treasury shares ofparent arising from transactions
with non-controllingshareholders
Dividends of surplus
	Profit attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of this term

Capitalstock¥86,174

Capitalsurplus¥50,925

Retainedearnings¥188,731

Accumulated other comprehensive income

Treasurystock

Valuationdifference
on availableTotal
for-saleshareholders’securities
equity¥(979) ¥324,851(88)(7,474)47,597¥4,755

Deferred
gains orlosses onhedges¥16

Revaluation
reserve forland¥4,665

Foreigncurrencytranslation
adjustment¥(4,174)

Total
Retirement accumulated
benefitsotherliability
comprehensive
adjustments
income¥(11,829)¥(6,566)

Noncontrollinginterests¥38,787

Total
net assets¥357,073

(88)

(88)

(7,474)(7,474)47,59747,597(10,045)(10,045)(10,045)

546

482

1,029

1,029

8,165

(369)

7,795

7,795

59

59

59

–

8,623

40,182¥86,174¥59,548¥228,914

5,074

31

400

(8,688)

7,842

4,660

(571)

4,088

38,873

5,074

31

400

(8,688)

7,842

4,660

(571)

42,961¥(10,911) ¥363,725¥9,830¥48¥5,065¥(12,862)¥(3,987)¥(1,906)¥38,215¥400,034(9,932)TAIHEIYO CEMENT CORPORATION

19

FI N AN C I A L S E C T I O NConsolidated Statements of Changes in Net Assets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 20182018

(Millions of yen)
Shareholders’ equity

Balance at pre end of term
Changes of items during period	Change in treasury shares ofparent arising from transactions
with non-controllingshareholders
Dividends from surplus
	Profit attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of this term

Capitalstock¥86,174

Capitalsurplus¥59,548

Retainedearnings¥228,914

Accumulated other comprehensive income
Valuationdifference
on availableTotal
for-saleshareholders’securities
equityTreasurystock¥(10,911) ¥363,725

66¥9,830

Deferred
gains orlosses onhedges¥48

Revaluation
reserve forland¥5,065

Foreigncurrencytranslation
adjustment¥(12,862)

Total
Retirement accumulated
benefitsotherliability
comprehensive
adjustments
income¥(3,987)¥(1,906)

Noncontrollinginterests¥38,215

Total
net assets¥400,034

66

66(7,423)(7,423)(7,423)38,52538,52538,525

(113)

(113)

(113)

78

802

802

724

–
–

–

790

31,101¥86,174¥60,339¥260,016

1,111

(47)

(8)

(3,338)

3,875

1,592

(1,157)435

31,856

1,111

(47)

(8)

(3,338)

3,875

1,592

(1,157)32,291¥(10,947) ¥395,582¥10,941¥1¥5,057¥(16,201)¥(111)¥(313)¥37,058¥432,326

Total
Retirement accumulated
benefitsotherliability
comprehensive
adjustments
incomeNoncontrollinginterests

Total
net assets(35)(Thousands of U.S. dollars)
Shareholders’ equity

Balance at pre end of term
Changes of items during period
Change in treasury shares ofparent arising from transactions
with non-controllingshareholders
Dividends of surplus
	Profit attributable to owners ofparentPurchase of treasury stock
Disposal of treasury stock
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes of items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of this term

20

A N N UA L R EP O R T 2 0 1 8

Capitalstock$811,128

CapitalsurplusRetainedearnings

Accumulated other comprehensive income

Treasurystock

Valuationdifference
on availableTotal
for-saleshareholders’securities
equity$560,510 $2,154,690 $(102,707) $3,423,621

622$92,526

Deferred
gains orlosses onhedges$458

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment$47,677 $(121,073)$(37,533)$(17,944) $359,713 $3,765,389

622

622

(69,877)(69,877)(69,877)

362,627

362,627

362,627(1,072)(1,072)(1,072)

735

7,554

7,554

6,818

–
–

–
$811,128

10,459(447)

299,854

10,459(447)$567,951 $2,447,440 $(103,044) $3,723,475$102,985

$11

7,441

292,750

(336)

(76)

(31,423)(76)(31,423)$47,601 $(152,497)

36,481

14,993(10,895)

4,098

36,481

14,993(10,895)

303,952$(1,052)$(2,951) $348,817 $4,069,342

Consolidated Statements of Cash Flows
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

2017

2018
(Millions of yen)

Cash flows from operating activities:

2018(Thousands of U.S. dollars)Profit (loss) before income taxes
Depreciation
Amortization of goodwill
Share of (profit) loss of entities accounted for using equity method
Loss (gain) on valuation of investment securities
Increase (decrease) in net defined benefit asset and liability
Increase (decrease) in provision for directors’ retirement benefits
Increase (decrease) in provision for bonuses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in other provisionInterest and dividends income
Interest expenses
Loss (gain) on sales of investment securities
Loss (gain) on disposal of non-current assets
Impairment loss
(Increase) Decrease in notes and accounts receivable-trade
Decrease in inventories
Decrease in notes and accounts payable-trade
Loss (gain) on step acquisitions
Gain on bargain purchase
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Cash flows from operating activities:¥52,741
44,4592,518(2,009)
68
3,648
107
(29)
826
(601)
(1,650)
4,998(3,988)3,317
20,693(3,236)
(267)
1,200
3,034
(16,874)(102)
108,854
2,046(5,006)(11,460)
94,433¥58,642
44,003
2,497(3,196)
1,356
2,390
(48)
276
946
(513)
(1,969)
4,639
(69)
3,307
577
(21,864)
1,859
16,405––
10,200
119,442
2,678(4,630)(9,808)
107,683$551,978414,191
23,507(30,090)
12,77222,502
(456)
2,602
8,912
(4,836)(18,539)
43,673(649)
31,132
5,436(205,800)
17,505
154,418––
96,012
1,124,273
25,213(43,582)(92,320)
1,013,583

Decrease (Increase) in time deposits
Purchase of property, plant, and equipment
Proceeds from sales of property, plant, and equipment
Purchase of other depreciated assets
Proceeds from sales of other depreciated assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Other, net
Cash flows from investing activities:(4,855)(48,638)
4,276(1,995)66(870)
41,062–(3,950)3,826
685(10,394)(492)(52,588)
2,812
(108)
0
(121)
1,157
55
(2,792)
3,393
223(48,460)(4,635)(495,000)
26,471(1,023)0(1,139)10,898518(26,283)
31,9452,104(456,142)(23,513)
15,253(51,609)
(450)
1,400
1,144
(10,045)(7,474)(639)(5,921)(81,855)(1,474)710
50,072
1,108
83¥51,974(14,323)
16,659(41,802)(11,120)
–
1,123
(102)
(7,423)(2,619)(6,209)(65,818)(459)(7,054)
51,974–57¥44,976(134,824)
156,805(393,474)(104,668)–
10,573(963)(69,877)(24,651)(58,444)(619,525)(4,321)(66,405)
489,219–537$423,351

Cash flows from investing activities:

Cash flows from financing activities:

Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Proceeds from share issuance to non-controlling shareholder
Proceeds from sales of treasury stock
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Cash flows from financing activities:
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from share exchanges
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end the period

TAIHEIYO CEMENT CORPORATION

21

FI N AN C I A L S E C T I O N

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

1.	Notes, etc. on Significant Matters Serving as the Basis for
Preparation of Consolidated Financial Statements(1) Matters Concerning Scope of Consolidation(i) Number of consolidated subsidiaries and name of major
consolidated subsidiaries
Number of consolidated subsidiaries: 123
Name of major consolidated subsidiaries:			 Major consolidated subsidiaries are DC Co., Ltd., Clion Co.,
Ltd., Myojyo Cement Co., Ltd., Taiheiyo Materials Corporation,
CalPortland Company, Jiangnan-Onoda Cement Co., Ltd.,
Qinhuangdao Asano Cement Co., Ltd., Dalian Onoda Cement
Co., Ltd., Nghi Son Cement Corporation and Taiheiyo Cement
Philippines, Inc.
			 Of note, DC Co., Ltd. was made into a wholly-owned subsidiary
via share exchange, so DC Co., Ltd. and its four subsidiaries were
included in the scope of consolidation. Additionally, Ofunato
Power Inc. was newly established, so it was included in the scope of
consolidation. Tsuruga Ready Mixed Concrete Industry Co., Ltd.
and another subsidiary had completed the liquidation process, sothese subsidiaries were excluded from the scope of consolidation.
(ii) Name, etc. of major unconsolidated subsidiaries
Name of major unconsolidated subsidiaries:			 Major unconsolidated subsidiaries are Taiheiyo Singapore Pte.
Ltd., Morehead Company, Ltd. and Kawara Seikousho Corporation.
Reason for excluding from the scope of consolidation:			 All unconsolidated subsidiaries are small companies, and none ofthem have a material impact on the consolidated financial statements
in terms of the amount of equity interest including total assets, net
sales, net income and retained earnings as a whole; accordingly, they
were excluded from the scope of consolidation.
(2) Matters Concerning Application of Equity Method(i) Number of unconsolidated subsidiaries and affiliates accounted forby the equity method and name of major companies, etc.
	Number of unconsolidated subsidiaries accounted for by the equity
method: 7
Name of major companies, etc.:			 Major unconsolidated subsidiaries accounted for by the equity
method are Taiheiyo Singapore Pte. Ltd. and Morehead Company,
Ltd.
	Number of affiliates accounted for by the equity method: 38
Name of major companies, etc.:			 Major equity-method affiliates are Okutama Kogyo Co., Ltd.,
A&A Material Corporation, Fuji P.S Corporation, Yakushima
Denko Co., Ltd., Chichibu Railway Co., Ltd. and Azuma ShippingCo., Ltd.
			 Kyowa Remicon Co., Ltd. was excluded from the scope of equitymethod as a result of extinction due to absorption-type merger
wherein the Company’s consolidated subsidiary Tohoku Taiheiyo
Namacon Co., Ltd. is the surviving company.
(ii) Name, etc. of unconsolidated subsidiaries and affiliates notaccounted for by the equity method
Name of major companies, etc.:(Unconsolidated subsidiaries)		Unconsolidated subsidiaries not accounted for by the equity method
22

A N N UA L R EP O R T 2 0 1 8

are Asaka Taiheiyo Namacon Co., Ltd. and 71 other companies.
(Affiliates)		Affiliates not accounted for by the equity method are Cement
Terminal Corporation and 66 other companies.
Reason for not applying the equity method:			 Unconsolidated subsidiaries and affiliates not accounted for by theequity method were excluded from the scope of the equity method
because the amount of equity interest including their respective
net income and retained earnings all have minimal impact on the
consolidated financial statements.
(iii) Particularly noteworthy matters concerning procedures for 					 application of the equity method
For companies accounted for by the equity method whose fiscal yearend is different from the consolidated fiscal year-end, their respective
non-consolidated financial statements for the most recent fiscal year
have been used.
(3) Matters Concerning Accounting Policies(i) Standards and methods for valuation of significant assets
		 a. Available-for-sale securities
		 a) Securities with market value:			Such securities are marked to market by the Company and someconsolidated subsidiaries based on the average market price, etc. in
the one-month period before the end of the fiscal year.
			 (Valuation differences are all charged/credited directly to net 					 assets, and the cost of selling the securities is determined by the 					moving-average method.)		 b) Securities without market value:
			 Such securities are stated at cost, based on the moving-average 					method.
		 b. Derivatives
			 Derivatives are stated at market value.
		 c. Inventories
			 Inventories are mainly stated at cost, which is determined by the 					 moving average method (subject to write-down due to diminished			profitability.)
			 However, the cost for contract work in process is determined by			 the specific identification cost method.
			 Of note, inventories at the consolidated subsidiary in the U.S.
			 are stated at lower of cost or market, based on the gross average 					method.
(ii) Depreciation method for significant depreciable assets
		 a. Property, plant and equipment (excluding leased assets)			The declining balance method is adopted by the Company and its
domestic consolidated subsidiaries, and the straight-line methodby its consolidated overseas subsidiaries.
			However, the depreciation of buildings (excluding accompanying
facilities) purchased on and after April 1, 1998 and accompanying
facilities and structures purchased on and after April 1, 2016 iscomputed based on the straight-line method by the Company andits domestic consolidated subsidiaries.
			 The range of useful lives of main property, plant and equipment is			as follows:				 Buildings and structures:		
10 - 75 years				 Machinery, equipment and vehicles:
4 - 15 years				 b. Intangible assets (excluding leased assets)			 Intangible assets are amortized by the straight-line method.
			However, software is amortized by the straight-line method overits useful life assuming in-house use (5 years).
		 c. Leased assets			Leased assets are depreciated by the straight-line method thatassumes their lease periods are useful lives and residual values
are zero (or if there is a residual value guarantee, the guaranteed
residual value).
(iii)	Accounting standards for significant provisions
		 a. Allowance for doubtful accounts
			Allowance for doubtful accounts is provided for by the Company
and its domestic consolidated subsidiaries at the estimateduncollectible amount, which is calculated based on the historicalcredit loss ratio with respect to ordinary receivables, and inconsideration of collectibility on a case-by-case basis with respect
to specified receivables such as doubtful accounts. Consolidated
overseas subsidiaries mainly provide for such allowance atthe estimated uncollectible amount with respect to specified
receivables.
		 b. Provision for bonuses			To prepare for the payment of bonuses payable to employees, theCompany and its domestic consolidated subsidiaries record theestimated payable amount to be borne in the consolidated fiscal
year under review.
		 c. Provision for directors’ retirement benefits			Certain consolidated subsidiaries provide for retirement
allowances for directors and corporate auditors at the necessary
payment amount in full at the year-end based on their internal
regulations.
(iv)	Accounting standards for revenue recognition of construction
			Completed construction volume is recorded under theconstruction progress method (percentage of completion estimatesfor construction are via the cost to cost method) for construction
for which progress results can be determined with certainty by theend of the fiscal year under review, and for others, the completed
construction method is applied.
(v)	Standards for translating significant foreign currency assets andliabilities into Japanese yen			Monetary claims and obligations denominated in foreign
currencies are translated into Japanese yen based on the spot
exchange rate as at the consolidated closing date, and translation
gains (losses) are recognized in profit (loss). Of note, consolidated
overseas subsidiaries’ assets and liabilities are translated
into Japanese yen based on the spot exchange rate as at theconsolidated closing date, revenue and expenses are translated into
Japanese yen based on the average exchange rate for the fiscal year,
and translation gains (losses) are included in “Foreign currencytranslation adjustment” and “Non-controlling interests” under Net
Assets.
(vi) Significant hedge accounting methods
		 a. Method of hedge accounting			Gains/losses on hedges are deferred. Allocation treatment
is applied when the currency swaps meet the conditions forapplication of such allocation treatment. Exceptional treatment
is applied when the interest rate swaps meet the conditions forapplication of such exceptional treatment.

		 b. Hedging instruments and hedged items
			Hedging instruments:
			 Interest rate swaps, currency swaps, raw materials and fuel swaps,
			 interest-rate options, currency options, raw materials and fuel 					 options and forward exchange contracts are employed as hedging
			instruments.			
			Hedged items:
			 Borrowings, bonds payable, fuel, etc.
		 c. Hedging policy			Hedge accounting policy is to limit hedging to those aimed at
hedging against the risk of interest rate, exchange rate, and raw
materials and fuel price fluctuations of the hedged items and those
aimed at eliminating hedging.
		 d. Method of evaluating hedge effectiveness			Hedge effectiveness is verified on a transaction-by-transaction
basis at the end of each accounting period with respect to hedging
instruments and hedged items; however, if the principal, interest
rate, period, and other such significant terms of the hedging
instruments and hedged items are the same, such verification isomitted.
(vii) Method and period of amortization of goodwill
			Goodwill is amortized over the estimated number of years incases that the number of years can be estimated based on practical
judgment starting from the fiscal year of acquisition while theentire amount of goodwill is amortized in the fiscal year ofacquisition without analyzing the causes in cases that the amountof goodwill is insignificant.
(viii) Accounting procedures for liability for retirement benefits			To prepare for the payment of retirement benefits to employees,
liability for retirement benefits is recorded in the amount of
retirement benefit obligation less plan assets based on the
projected amount at the end of the consolidated financial year
under review.
			Actuarial gains and losses and prior service cost are amortizedin equal amounts as expenses by the straight-line method over acertain number of years (primarily 10 years) within the averageremaining years of service of employees at the time of accrual,commencing in the consolidated fiscal year following the year of
accrual for actuarial gains and losses and in the consolidated fiscal
year of accrual for prior service cost.
			Unrecognized actuarial gains and losses and unrecognizedprior service cost are recorded as “Retirement benefits liability
adjustments” in “Accumulated other comprehensive income”
under Net Assets, after making tax effect adjustments. When thevalue of plan assets exceeds the amount of the retirement benefit
obligation, the amount of such excess is recorded in “Assets for
retirement benefits”.
(ix)	Accounting treatment of consumption tax, etc.
			 Tax exclusion method is applied.
			Of note, there were no applicable transactions in consolidated
overseas subsidiaries.
(x)	Amounts shown in these consolidated financial statements arerounded down to the nearest million yen.

TAIHEIYO CEMENT CORPORATION

23

FI N AN C I A L S E C T I O N

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018

(4) United States Dollar Amounts
The accompanying consolidated financial statements are prepared inJapanese yen. The U.S. dollar amounts included in the consolidated
financial statements and notes thereto represent the arithmeticalresults of translating Japanese yen to U.S. dollars on a basis of ¥106.24= U.S.$1, the approximate effective rate of exchange prevailing at
31st March, 2018. The inclusion of such U.S. dollar amounts is solely
for convenience of 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.

(ii) Secured liabilities
		 Notes and accounts payable-trade
		 Short-term loans payable
		 Notes discounted
		 Other current liabilities
		 Long-term loans payable
		 Other noncurrent liabilities
		 Total(Millions of yen) (Thousands of U.S. dollars)¥4,701¥7,336¥111¥3¥5,872¥19¥18,045$44,253$69,057$1,053$35$55,277$180$169,856(2) Accumulated depreciation of property, plant and equipment(5) Changes in presentation
The Consolidated Balance Sheets“Electronically recorded monetary claims-operating” (¥5,320 million
in the previous consolidated fiscal year), which has been included in“notes and accounts receivable–trade” in the previous consolidated fiscal
year, “leased assets” (¥22,319 million in the previous consolidated fiscal
year), which has been included in “other” under “property, plant andequipment” in the previous consolidated fiscal year, and “electronicallyrecorded obligations-operating” (¥1,234 million in the previous
consolidated fiscal year), which has been included in “notes and accounts
payable-trade” in the previous consolidated fiscal year, are separately
presented from the consolidated fiscal year under review due to theirincreased monetary importance.
The Consolidated Statements of Income“Provision of allowance for doubtful accounts” (¥120 million in theprevious consolidated fiscal year), which has been included in “other”
under “non-operating expenses” in the previous consolidated fiscal year,
is separately presented from the consolidated fiscal year under review
due to its increased monetary importance.
(6) Additional information
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in
the U.S. and the federal corporate tax rate applied to the consolidated
subsidiary in the U.S. was reduced from 35% to 21%. As a result of
this tax decrease, deferred tax assets (net of deferred tax liabilities) andforeign currency translation adjustment decreased by ¥1,273 million and¥9 million, respectively, while income taxes-deferred increased by ¥1,263
million for the consolidated fiscal year under review.
2. Notes to the Consolidated Balance Sheets(1) Assets Pledged as Collateral and secured liabilities(i)Assets pledged as collateral		 Cash and deposits
		 Property, plant and equipment
		 Intangible assets
		 Investment securities
		 Investments and other assets-other		 Total(Millions of yen) (Thousands of U.S. dollars)¥653¥36,442¥801¥122¥1,821¥39,840$6,146$343,023$7,545$1,149$17,142$375,007			(Millions of yen) (Thousands of U.S. dollars)¥1,141,884$10,748,162(3) Guarantee obligations
			 Guarantees for loans payable from banks, etc.

(Millions of yen) (Thousands of U.S. dollars)			¥1,397$13,149
			Guarantees for account payables to Ready-mixed Cooperative
Association, etc.
			
¥1,824$17,170(4) Discounted trade notes receivable(Millions of yen) (Thousands of U.S. dollars)			¥3,039
			 Trade notes receivable transferred by endorsement			¥1,076$28,608$10,128(5) Trade notes maturing on the balance sheet date
The settlement of trade notes maturing on the balance sheet date of
the consolidated fiscal year under review is accounted for on the date ofbank clearance.
		 As the balance sheet date of the consolidated fiscal year under review
was a bank holiday, the following notes maturing on the balance sheet
date were included in the balance of the respective items outstanding at
the end of the consolidated fiscal year under review:			
Notes receivable-trade:			
Notes payable-trade:			
Notes payable-facilities:(Millions of yen) (Thousands of U.S. dollars)¥11,541¥4,351¥210$108,638$40,961$1,982(6) Revaluation of Land
A&A Material Corporation and Chichibu Railway Co., Ltd., the Company’s
affiliates accounted for by the equity method, revalued their business-purpose
land in accordance with the Act on Revaluation of Land (Act No. 34,
promulgated on March 31, 1998) and the Act on Partial Revision of the Act
on Revaluation of Land (revised on March 31, 1999). With respect to thevaluation difference, the amount of the Company’s share in the valuationdifference is recorded in Net Assets as “Revaluation reserve for land”.
3. Notes to the Consolidated Statements of Changes in
Net Assets(1) Class and total number of outstanding shares as at the endof the consolidated fiscal year under review:			Common stock			
127,140,278 shares

24

A N N UA L R EP O R T 2 0 1 8

(2) Matters concerning dividends(i) Amount of dividends paid
Resolution

Total amount Amount ofClass of of dividends dividend
per Record dateshares(millions of
share
yen)

Effective
date

Ordinary General
Meeting ofCommonStockholders
stock
held on June 29,
2017

3,722
(Note 1)

¥3.00
(Note 3)

March 31,2017

June 30,
2017

Meeting of Boardof Directors held Common
onstock
November 9,
2017

3,722
(Note 2)¥3.00
(Note 3)September
30, 2017

December 4,
2017(Notes) 1. Includes dividends of ¥15 million associated with treasury stock heldby consolidated subsidiaries.
				 2. Includes dividends of ¥6 million associated with treasury stock held					by consolidated subsidiaries.
				 3. With an effective date of October 1, 2017, the Company conducted					 a reverse stock split for its common stock at a ratio of one for 10. 		
					 The amounts of dividend per share, with a record date of March 31,					 2017, and September 30, 2017, are the amounts before the reverse					stock split.

(ii) Dividends whose record date is at the end of the consolidated 					 fiscal year under review whereas its effective date falls in the next 					 consolidated fiscal year
			 The following matters concerning dividends for common stock 					 are scheduled to be proposed at the Ordinary General Meeting of
			Stockholders.
				 Total amount of dividends:¥3,722 million				 Amount of dividend per share:¥30.00				 Record date:
March 31, 2018				 Effective date:June 29, 2018				 Of note, the source of funding dividend payments is scheduled				 to be retained earnings.
				 Total amount of dividends includes dividends of ¥6 million 						 associated with treasury stock held by consolidated subsidiaries.
(iii) Class and number of shares to be issued upon exercise of share			 options at the end of the consolidated fiscal year under review 					 (excluding those for which the first day of the exercise period has
			 not yet arrived)
			Not applicable.
4. Notes on Financial Instruments(1) Matters concerning Status of Financial Instruments
The Taiheiyo Cement Group limits its fund management activities
to short-term deposits, etc., and raises funds principally by bankborrowings and corporate bonds. It performs derivative transactions forthe purpose of averting risks due to future exchange-rate, interest-rate,
and raw materials and fuel price fluctuations and does not perform
speculative transactions.
		 While notes and accounts receivable-trade and electronicallyrecorded monetary claims-operating. which are operating receivables,
are exposed to credit risk in relation to customers, each responsible
department periodically identifies the financial position, etc. of thecounterparties and manages the due date and outstanding balancewith respect to each counterparty, in an effort to identify and reduce

collectibility concerns in the early stages. In addition, operatingreceivables denominated in foreign currencies related to exporttransactions are exposed to exchange rate fluctuation risks. Investment
securities are primarily shares of companies with which the Company
has a business relationship, and are exposed to the risk of market pricefluctuations.
		 Notes and accounts payable-trade and electronically recorded
obligations-operating, which are operating payables, have payment
due dates within one year. For a portion of raw materials and fuelprocurement, derivative transactions (raw fuel swap transactions) areused as hedging methods to limit risk in the variation of raw materials
and fuel prices. Among borrowings, short-term loans payable are mainly
funds raised in connection with business transactions, and long-termloans payable and bonds payable are principally funds raised for the
purpose of making capital investments. Some long-term loans payable
have financial covenants and may influence liquidity risks regarding
fund raising activities. Borrowings with variable interest rates are
exposed to interest rate fluctuation risk; however, to avert the risk offluctuations of interest payable and fix interest expenses for some longterm loans payable, derivatives (interest rate swap transactions) are usedas hedging instruments on a contract-by-contract basis. Additionally,
borrowings in foreign currencies are exposed to foreign exchangerisk, but of these, for a portion of long-term borrowings, derivativetransactions (currency swap transactions) are used as a hedging method
to avoid foreign currency fluctuation risk.
(2)	Matters concerning Market Value, etc. of
Financial Instruments
The consolidated balance sheet amount and market value of financial
instruments and the difference between the two at March 31, 2018
(i.e., end of the consolidated fiscal year under review) are shown in thefollowing table.

(Unit: Millions of yen)(i) Cash and deposits(ii) Notes and accounts receivable-trade(iii) Electronically recorded monetaryclaims-operating(iv) Investment securities
Total assets(v) Notes and accounts payable-trade(vi) Electronically recorded obligations-operating(vii) Short-term loans payable(viii) Bonds payable(ix) Long-term loans payable
Total liabilities(x) Derivative transactions*

Consolidated balance
sheet amountMarket value

Difference

53,766
182,272

53,766
182,272––

10,98910,989–43,695
290,724
91,11340,690287,719
91,113(3,005)(3,005)
–

4,670

4,670

–

77,93535,035
175,636
384,391–

77,93535,129176,105
384,954
–

–
94
468
563
–

* Net receivables and payables arising from derivative transactions are shown in		 net amount.
(Notes) 1. Calculation method of market value of financial instruments andmatters related to securities and derivative transactions				 (i)	Cash and deposits, (ii) Notes and accounts receivable-trade and (iii)Electronically recorded monetary claims-operating					Since these items are settled in a short period of time, their market
value is more or less the same as carrying value; therefore, the carrying
value is adopted.
				(iv) 
Investment securities					The market value of investment securities is based on quoted market
prices.
TAIHEIYO CEMENT CORPORATION

25

FI N AN C I A L S E C T I O N

Notes to the Consolidated Financial Statements
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2018				 (v) Notes and accounts payable-trade, (vi) Electronically recorded 							 obligations-operating, (vii) Short-term loans payable					 Since these items are settled in a short period of time, their market 							 value is more or less the same as carrying value; therefore, the 							carrying value is adopted.
				(viii) Bonds payable					 The calculation method involves discounting the sum of the principal					 and interest by an interest rate that takes into account the credit risk.
					 The presentation of market value of bonds payable includes the 							current portion of bonds.
				 (ix) Long-term loans payable
The calculation method involves discounting the sum of the principal
and interest by the interest rate that is expected to be applied if asimilar new loan is taken out. The presentation of market value of
long-term loans payable includes the current portion of long-termloans payable. A portion of long-term loans payable are subject toappropriated treatment for currency swaps and exceptional treatment
for interest rate swaps (see (x) below), and the calculation method
involves discounting the sum of the principal, which is an aggregateof the currency swap and interest rate swap, with a reasonably-estimatedinterest rate that would be applied if a similar loan is taken out.
				(x) Derivative transactions
The market value of derivatives is calculated based on prices, etc.
presented by financial institutions with which derivative transactions
are performed. Of note, those subject to allocation treatment for
exchange rate swaps and exceptional treatment for interest rate swaps
are processed integrally with the hedged long-term loans payable, so
their market value is included in the presentation of such long-termloans payable (see (ix) above).
				 2. Unlisted stocks and investments in capital, etc. (consolidated balance
sheet amount: ¥43,138 million) are not included in “(iv) Investment
securities” as it is deemed extremely difficult to determine their market
value because there is no quoted market price and it is impossible toestimate future cash flows.

5. Notes on Real Estate for Rent, etc.
(1) Matters concerning status of real estate for rent, etc.
The Company and some of its consolidated subsidiaries have plants,
warehouses (including land), etc. for lease purposes in Tokyo and otherregions.
(2) Matters concerning market value of real estate for rent, etc.
(Unit: Millions of yen)

Consolidated balance sheet amountMarket value

52,360110,280(Notes) 1. Consolidated balance sheet amount equals the acquisition cost minus
accumulated depreciation and accumulated impairment loss.
				 2. The market value of major properties as at the end of the consolidated
fiscal year under review is the amount based on a real estate appraisal
conducted by an outside real estate appraiser, whereas the market
value of other properties is a certain appraisal value or the amountcalculated in-house based on indicators deemed to properly reflect themarket price. However, if there are no significant changes in a certain
level of valuation amounts or indices which are believed to accuratelyreflect market values from the most recent evaluation, amounts
utilizing these valuations and indices are applied.
26

A N N UA L R EP O R T 2 0 1 8

6. Notes on Per Share Information
Net assets per share:
Earnings per share:¥3,193.65¥311.40

The Company, with an effective date of October 1, 2017, conducted a reverse
stock split for its common stock at a ratio of one for 10. Accordingly, net assets
per share and earnings per share are calculated on the assumption that the reverse
stock split was conducted at the beginning of the consolidated fiscal year underreview.

7.

Notes on Significant Subsequent Events

Not applicable.
8. Other Notes(Notes on Impairment Loss)
The Company’s assets are grouped together based on segments by business type,
except for assets for rent, important idle properties and assets scheduled for
disposal, which are grouped together by treating individual property as a single
unit.
In the case of consolidated subsidiaries, in principle, a business company isdeemed as a single asset group, and in the case of important companies, assets aregrouped together based on management accounting classifications, etc., except forimportant assets for rent, idle properties and assets scheduled for disposal, which
are grouped together by treating individual property as a single unit.
As a result, the carrying value was reduced to the recoverable amount withrespect to assets for rent with reduced profitability due to such factors as thedecrease in demand and substantial fall in the market value of land, and idle
properties that are not expected to be used in the future as follows, and such
reduction in the amount of ¥577 million was recorded as an impairment loss
under Extraordinary loss.
(Unit: Millions of yen)

PurposeLocationType

Impairment loss*

Assets for rent

Mito City, Ibaraki
Prefecture, etc.

Buildings and structures,land, etc.

355

Idle properties

Inabe City, Mie
Prefecture, etc.

Machinery, equipment andvehicles, land, etc.

221

* Breakdown of Impairment loss by purpose(Unit: Millions of yen)

PurposeBreakdown

Assets for rent

Buildings and structures: 71,
Machinery, equipment and vehicles: 0,
Total: 355

Idle properties

Buildings and structures: 47,
Machinery, equipment and vehicles: 59, Land: 109,
Other: 5, Total: 221

Land: 283,

Recoverable amount is measured at the higher of net selling price orvalue in use.
If it is measured at net selling price, it is calculated by making reasonableadjustments based on real estate appraisal standards, etc.
If it is measured at value in use, it is calculated by discounting future
cash flows by 5%.

[Industry Segments]

Information of net sales, profit or loss, assets, liabilities, and other items by reportable segment are as follows:(Millions of yen)

2017

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

Mineralresources

Environmental
business

Construction
materials

Subtotal

Other

Total

Consolidated
total

Adjustment¥546,891
12,023¥558,915¥38,898¥643,586¥58,559
21,617¥80,177¥7,759¥93,828¥70,405
7,495¥77,901¥7,666¥18,052¥69,912
4,114¥74,027¥6,061¥71,788¥745,769
45,250¥791,020¥60,386¥827,256¥52,819
22,511¥75,331¥3,267¥222,818¥798,588
67,762¥866,351¥63,654¥1,050,074¥–(67,762)¥(67,762)¥(418)¥(34,658)¥798,588–¥798,588¥63,235¥1,015,415¥29,923¥2,516¥6,069¥–¥246¥1¥2,202¥–¥38,442¥2,518¥5,490¥–¥43,933¥2,518¥525¥–¥44,459¥2,518

¥40

¥(43)

¥26

¥1,506¥1,530¥479¥2,010¥(0)¥2,009¥19,393

¥357

¥–

¥–

¥19,751¥942¥20,693¥–¥20,693¥16,101¥–¥275¥12,726¥29,103¥15,959¥45,063¥331¥45,394¥34,841¥7,563¥1,235¥2,572¥46,212¥7,584¥53,796¥587¥54,384

Environmental
business

Construction
materials

2018
CementNet sales:(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
Other
Depreciation
Amortization of goodwill
Equity in earnings ofunconsolidated subsidiaries
and affiliates
Impairment loss
Investment in unconsolidated
subsidiaries and affiliates
accounted for by the equity
methodIncrease for property, plant,
equipment, and intangible assets

Mineralresources

Subtotal

Other

Total

¥601,598
10,320¥611,918¥40,652¥644,989¥58,185
23,298¥81,483¥8,061¥95,429¥82,964
7,241¥90,206¥7,463¥20,787¥73,210
3,822¥77,033¥4,740¥74,826¥815,959
44,683¥860,643¥60,917¥836,033¥55,153
23,866¥79,020¥3,926¥212,757¥871,113
68,550¥939,663¥64,843¥1,048,790¥–(68,550)¥(68,550)¥286¥(26,648)¥871,113–¥871,113¥65,129¥1,022,142¥30,686¥2,495¥4,578¥–¥397¥1¥2,391¥–¥38,053¥2,497¥5,490¥–¥43,543¥2,497¥460¥–¥44,003¥2,497

¥731

¥(62)

¥10

¥1,505¥2,185¥1,005¥3,191¥5¥3,196

¥37

¥91

¥12

¥–

¥141

¥436

¥577

¥–

¥577

¥17,529¥–¥272¥13,695¥31,497¥16,435¥47,933¥337¥48,270¥36,186¥8,476¥1,780¥3,462¥49,905¥7,624¥57,529¥557¥58,087(Thousands of U.S. dollars)

2018
CementNet sales:(1) Net sales to outside customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
Other
Depreciation
Amortization of goodwill
Equity in earnings ofunconsolidated subsidiaries
and affiliates
Impairment loss
Investment in unconsolidated
subsidiaries and affiliates
accounted for by the equity
methodIncrease for property, plant,
equipment, and intangible assets

Consolidated
total

Adjustment

Mineralresources

Environmental
business

Construction
materials

Subtotal

Other

Total

Consolidated
total

Adjustment

5,662,637
97,142
5,759,779
382,643
6,071,064

547,678
219,300
766,979
75,881
898,243

780,918
68,163
849,082
70,247
195,663

689,108
35,984
725,093
44,618704,316

7,680,343
420,591
8,100,934
573,391
7,869,288

519,141
224,650
743,791
36,9572,002,614

8,199,484
645,241
8,844,726
610,349
9,871,902–(645,241)(645,241)
2,692(250,831)

8,199,484–
8,199,484
613,041
9,621,071

288,841
23,49043,092–

3,739
16

22,507–358,182
23,50751,677–

409,859
23,5074,331–

414,191
23,507

6,886

(585)

99

14,175

20,574

9,467

30,04247

30,090

352

863

115

–

1,331

4,104

5,436

–

5,436

165,000–

2,564

128,911

296,476

154,700

451,177

3,175

454,353

340,60979,785

16,761

32,587469,743

71,765541,5095,251

546,761[Geographic Segments](Millions of yen)Japan

U.S.A.

Other

Total

Net sales

649,909

134,197

87,006871,113

Non-current assets

352,940

103,779

48,718505,438TAIHEIYO CEMENT CORPORATION

27

Taiheiyo Cement Group Network

DOMESTIC NETWORKMAJOR SUBSIDIARIES AND AFFILIATES

Taiheiyo Cement’s facilities include our head office and Research &Development Center, eight branch offices, and six cement plants.

CEMENT AND READY-MIXED CONCRETEOVERSEAS NETWORK
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
Taiheiyo Cement (China) Investment Co., Ltd.
Room 4008, 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: +84-4-3933-0922
Bangkok Representative Office
17th Fl., 5 Sitthivorakit Building, Soi Pipat, Silom Road,
Silom, Bangrak, Bangkok 10500, Thailand
Tel: +66-2-266-8741
Fax: +66-2-266-8742
Taipei Representative Office
5th Fl., 139, Cheng-Chou Road, Taipei 103, Taiwan
Tel: +886-2-2557-8098
Fax: +886-2-2553-9853
Hong Kong Representative Office
20th Fl., Tern Centre, Tower 1, 237 Queen’s Road Central,
Hong Kong
Tel: +852-2545-9987
Fax: +852-2542-0474

DC Co., Ltd.
Kokusai Kigyo Co., Ltd.
Myojyo 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.

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)
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)
Taiheiyo Cement Philippines, Inc. (PHILIPPINES)
Taiheiyo International (Thailand) Co., Ltd. (THAILAND)

28

A N N UA L R EP O R T 2 0 1 8

C O R P O R AT E P RO F I L E

Corporate Data
(As of March 31, 2018)

Company Name
Head Office
Established
Paid-in Capital
Fiscal Year
Annual Meeting
Common Stock*

TAIHEIYO 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: 197,730,800

Issued: 127,140,278 (including 3,072,988 shares of treasury stock)* The company, with an effective date of October 1, 2017, changed the number of shares constituting one unit of stock from 1,000 shares		to 100 shares, and also conducted a reverse stock split for its common stock at a ratio of one for 10. As a result, the total number of sharesauthorized to be issued changed from 1,977,308,000 shares to 197,730,800 shares, and the total number of shares outstanding changed
from 1,271,402,783 shares to 127,140,278 shares.

No. of Stockholders

55,822Agent of Record

Sumitomo Mitsui Trust Bank, Ltd.

Major Stockholders

Stockholder

Holding (thousand shares)

Stockholding ratio (%)*

Japan Trustee Services Bank, Ltd. (Trust Account)

8,727

7.0

NORTHERN TRUST CO. (AVFC) SUB A/C NON TREATY

5,122

4.1

The Master Trust Bank of Japan, Ltd. (Trust Account)
JP MORGAN CHASE BANK 385632

STATE STREET BANK AND TRUST COMPANY
Japan Trustee Services Bank, Ltd. (Trust Account 5)
Mizuho Bank, Ltd.		

STATE STREET BANK WEST CLIENT - TREATY 505234
GOVERNMENT OF NORWAY

Japan Trustee Services Bank, Ltd. (Trust Account 1)

7,328
2,464
2,415
2,413
2,375
2,311
1,877
1,790

5.9
1.9
1.9
1.9
1.9
1.8
1.5
1.4

* The stockholding ratio is calculated by excluding treasury stocks.

TAIHEIYO CEMENT CORPORATION

29