Reinforcing Our Commitment
to Sustainable Growth

ANNUAL REPORT
April 1, 2016–March 31, 20172017

Reinforcing Our Commitment to
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.

Contents

Financial Highlights

		 Corporate Profile / Contents / Financial Highlights

CONSOLIDATED

1 Taiheiyo Cement Group Main Business Locations

2017

For the year:(Millions of yen)(Thousands of U.S. dollars)

2016

2017

Net Sales
Operating Income
Income before Income Taxes
Profit Attributable to Owners of Parent¥ 798,588
63,23552,74147,597¥ 835,359
60,43352,59236,404$ 7,118,183
563,642
470,104
424,254

8 Fiscal 2018 Business Strategies

Net Assets
Total Assets

400,034
1,015,415

357,073
1,014,075

3,565,692
9,050,858

14 Directors and Corporate Auditors

Earnings per Share

29.63

0.34

2 To Our Stakeholders
4 Special Feature:
Growth Investments and Initiatives to Achieve				 the Taiheiyo Cement Group’s Vision and Future Direction

6 FY 2017 Review of Operations

15 Major Corporate DataAt year-end:

38.39

Yen

16 Consolidated Balance Sheets

Net Sales

Ordinary Income

18 Consolidated Statements of Income(Millions of yen)

(Millions of yen)		Consolidated Statements of Comprehensive Income

1,000,000

19 Consolidated Statements of Changes in Net Assets

800,000

21 Consolidated Statements of Cash Flows
22 Notes to the Consolidated Financial Statements
30 Taiheiyo Cement Group Network
31 Corporate Data(■Con. / ■Uncon.)840,288 842,848 835,359 798,588
747,616400,000

346,044

312,712 300,642 300,398

200,000
060,225 59,802

60,00040,000300,359

69,590 67,890

70,00048,82150,000600,000

30,00020,000U.S. dollars

39,46932,66736,214 34,702

29,416

10,000Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 (Fiscal year)0

Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 (Fiscal year)

G LO B A L N E TWO R K

Taiheiyo Cement Group Main Business Locations

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

Anchorage

SeattlePortlandBeijing
Qinhuangdao
TAIHEIYO CEMENT (CHINA)
DalianINVESTMENTTAIHEIYO CEMENT HEAD OFFICE
ShanghaiTaipeiTaichung
Kaohsiung

Nanjing
ShenzhenHong Kong
Hanoi
Nghi Son
Bangkok

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

Domestic Main Business Locations

Ninh Thuy Cebu
Ho Chi Minh

Head Company …………………
Branch ……………………………
Plant ………………………………
R&D Center ………………………
Group Production Plant ………

TAIHEIYO SINGAPORE
Singapore
Lae

Central ResearchLaboratory

2017

UNCONSOLIDATED
For the year:

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

Net Assets
Total Assets(Millions of yen)

35,22330,00022,76720,00010,000047,597

44,11440,000Con.)

36,40436,97027,406 26,326

2017¥ 300,642
32,95235,52726,326$ 2,677,589
272,855
295,811
329,532

258,428
571,613

228,610587,574

2,303,489
5,095,049

21.30
6.00

0.26
0.05

29.64
6.00

Profit Attributable to Owners of Parent (Net Income ( Uncon.)(Thousands of U.S. dollars)

2016¥ 300,398
30,61133,18736,970Net Income per ShareDividends per Share

50,000(Millions of yen)

Yen

Sales Composition By
Geographic Segment(As of March 31, 2017/Consolidated)

Other
10.1%
U.S.A
13.9%

U.S. dollars

Japan

76.0%
Employees
20,00015,000

Other:
13,832 13,087 13,059
12,574 13,008

10,000China, Vietnam, Philippines, Singapore,
Papua New Guinea

15,102
5,000

1,645

11,329Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 (Fiscal year)

0

1,679

1,710

1,697

1,702

Mar/13 Mar/14 Mar/15 Mar/16 Mar/17 (Fiscal year)

TAIHEIYO CEMENT CORPORATION

1Reinforcing Our Commitment to
Sustainable Growth
Strengthening initiatives to achieve sustained growth2

A N N UA L R EP O R T 2 0 1 7

To Our Stakeholders

The fiscal year under review saw the continuation of Japan’s gradualeconomic recovery as corporate profitability and employment firmed
thanks, in part, to support from economic and financial policies
implemented by the Japanese government and the Bank of Japan,
respectively, despite lackluster figures for consumer spending andcapital investment. With uncertainty about the global economic
situation rising due to factors such as the UK’s exit from the EU andthe policy priorities of the new U.S. administration, companies aretaking a particularly careful look at market trends.
Gradual growth continued in the U.S. where unemployment
remained low amidst robust consumer spending. In China, policy
support and other factors showed signs of halting the country’s
economic slowdown. Elsewhere in Asia a recovery in exports andother developments suggested an end to the recent slump.
In this environment the Group’s consolidated net sales fell
¥36,770 million from the previous year to ¥798,588 million.
Consolidated operating income was ¥63,235 million, up ¥2,801
million, while consolidated ordinary income fell ¥422 million to¥59,802 million. Consolidated net profit attributable to owners ofparent rose ¥11,192 million to ¥47,597 million.
The gradual recovery of the Japanese economy is expected
to continue thanks to the positive effects of various government
and Bank of Japan policies, and improvements in the employment
environment, among other factors. However, it will continue to benecessary to exercise caution and discernment concerning changes inthe business environment as increasing uncertainty about the global
economy and confusion with regard to the international politicalsituation bring the risk of downward pressure on the economy.
Turning our attention to the Taiheiyo Cement Group’s businessenvironment, our core domestic cement business is expected tobenefit from a recovery in demand fueled by reconstruction projects
in the aftermath of the Great East Japan Earthquake, construction
associated with disaster prevention and mitigation projects, andlarge-scale urban redevelopment projects, as well as a gradual rampup in construction related to the Tokyo Olympics and Paralympics.
At the same time, the effects of labor shortages at construction
sites are beginning to be felt and we also need to remain watchfulconcerning the risk of a softening of demand.
Looking to the U.S. economy, growth is expected to accelerateon the back of a robust employment environment, favorable businessconditions, and a recovery in capital investment and consumer
spending. However, persisting uncertainty about policy priorities will
make it necessary to monitor trends closely.
Looking to the future, the Taiheiyo Cement Group has
identified “leveraging all Group capabilities to contribute to thesafety and security of societies in the Pacific Rim” as a vision anddirection to guide it towards the mid 2020s. In keeping with thisvision we will redouble our commitment to working to achievesustained growth in FY2018.
For the fiscal year ending March 2018, we expect consolidated
net sales of ¥853,000 million, operating income of ¥65,000 million,
ordinary income of ¥61,000 million, and net profit attributable toowners of parent of ¥35,000 million.
I look forward to your continued understanding and support as
we pursue these goals.

Shuji Fukuda

President and Representative Director

TAIHEIYO CEMENT CORPORATION

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

Growth Investments and Initiatives to Achieve the Taiheiyo Cement Group’s Vision and Future Direction

DC Co., Ltd., becomes a wholly-owned subsidiary
In August 2016,Taiheiyo Cement completed a stock swap to convert
equity-method affiliate DC Co., Ltd., to a wholly-owned subsidiary.

metropolitan area. Like Taiheiyo, it is also working to recycle waste
products and byproducts to help achieve a recycling-based society.

DC Co., Ltd. has operations including cement, mineral
resources, environmental and real estate businesses, and is centeredin the Tokyo metropolitan area. It is working to leverage its coastal
plant in the Rinkai area in Kawasaki, Kanagawa Prefecture,
as it plays a key role in supplying construction materials forinfrastructure development and other projects in the Tokyo

Going forward, we will strengthen the core of our businesses
in the Tokyo metropolitan area by optimizing management
resources through the integration of DC’s operations with thoseof the Taiheiyo Cement Group. At the same time we will actively
work to help build a safe and secure society by supplying highquality products and solutions.

Launching an environmentally friendly biomass power generation business in Ofunato City, Iwate Prefecture
In August 2016 we launched an electric power wholesale businessby establishing Ofunato Power Inc., (OPI) in Ofunato, Iwate
Prefecture. In a joint investment with new power company eREX
Co., Ltd., OPI will build a 75 MW thermal power station that uses
woody biomass (among the largest in Japan to use biomass fuel). The
power station in the grounds of the Taiheiyo Cement Ofunato Plant
uses a circulating fluidized-bed boiler and will generate wholesale
electric power under Japan’s Feed-in Tariff Scheme for Renewable
Energy. Construction of the thermal power station will be completed
by the end of 2019, after which commercial operation of the power
generation business will continue for 20 years.
The principal biomass fuel is palm kernel shells (PKS) but theplant is also designed to accommodate other fuel types such as palm
empty fruit bunches (EFB) which, in the past, have been discarded
after the palm oil extraction process. Working with Saraya Co., Ltd.,in Osaka; Rematec & KSN Thailand Co., Ltd., in Thailand; andThe Green Biomass Sdn. Bhd., in Malaysia, Taiheiyo Cement has
successfully developed EFB as a power generation fuel. The business
4

A N N UA L R EP O R T 2 0 1 7

will achieve stable operation by burning a mixture of EFB and
PKS. In generating 480,000 MWh of power per year (equivalent
to the power consumption of about 110,000 typical households) thethermal power station will help reduce CO2 emissions by 285,000
tons per year.
In addition to promoting the production and use of eco-friendly,
renewable energy, we will assist in the recovery of the Tohoku regionand stimulate the local economy by hiring employees locally for the
new company and creating employment in operations such as fueltransportation.
Overview of new company and plantCompany name:
Ofunato Power Inc.
Total project cost: ¥23.5 billion
Investment:
Taiheiyo Cement 65%, eREX 35%
Generating facilities: Circulating fluidized-bed boiler,
reheat-type steam turbine
Capacity:
75 MW

Strengthening capabilities of the Tokyo Service Station to ensure stable supply of products ahead of
the Tokyo 2020 GamesTo meet the anticipated growth in cement demand in advance of
the Tokyo 2020 Games our Tokyo Service Station built a cementbased soil stabilizer* facility in March 2016 and a 20,000-ton
cement silo in March 2017.

structures in place to handle projects related to the constructionof Olympic venues. The new soil stabilization material facility has
already begun shipping product for use in the construction of the
Olympic Stadium.

The cement storage capacity at the Tokyo Service Station isamong the largest of all such facilities in Japan and the site hasa successful track record in providing a stable supply of cement
to the Tokyo area, Japan’s largest market. The recent expansionof facilities reflects Taiheiyo’s commitment to put robust supply

Going forward, we will continue to work to ensure a stablesupply of cement for large projects planned in the region.

Palm empty fruit bunches (EFB): Empty bunches remaining after the fruit has
been extracted.

Palm kernel shells (PKS): Kernels generated during the process of extracting oilfrom the fruit of palm trees grown in Southeast Asian countries such as Malaysia
and Indonesia.

* Cement-based soil stabilizer: Materials for solidifying soft soil,
excavated soil and other types of construction spoil.

TAIHEIYO CEMENT CORPORATION5

FY 2017 Review of Operations

Cement Business
Operating Income Rises Despite Lower Domestic andOverseas Revenue
Public and private sector demand for cement in Japan fell 2.0% fromthe previous year to 41.77 million tons due to factors such as a decline
in the number of publicly funded construction projects and risingmaterial and labor costs. Some 270,000 tons of that demand was met
by imported cement, a year-on-year decline of 12.6%. Total exportsrose 8.9% to 11.52 million tons.
The Taiheiyo Group’s domestic cement sales by volume, including
consignment sales, fell 2.0% from the previous year to 14.37 million
tons, while exports rose 9.2% to 4.35 million tons.
As a result, sales in the domestic cement business fell ¥7,639
million from the previous year to ¥385,060 million, while operating
income rose ¥1,015 million to ¥29,526 million due to factors including
increased profitability in the ready-mixed concrete segment and successin controlling variable costs.
Overseas, total shipments rose in our U.S. West Coast cement andready-mixed concrete business where market trends generally pointed
to a recovery. Our cement business in China continued to suffer fromfalling demand, while our cement businesses in Vietnam and thePhilippines performed well on the back of robust domestic demand. In
addition, the yen appreciated against other currencies.
As a result of the above factors the Group’s overseas cement businessposted net sales of ¥173,854 million, down ¥8,168 million from theprevious year. Operating income rose ¥3,251 million to ¥9,371 million
thanks to bullish conditions in the U.S. market.
Sales¥ 558,915 million

down ¥15,808 million year-on-year

Operating
Income¥ 38,898 million

up 4,266 million year-on-year

Mineral Resources Business
Sales and Profits Fall as Subsidiaries are Excluded from
Consolidated Results
Streamlining of distribution and other improvements helped bolster thebottom line in our aggregate business, offsetting slumping demand in
most areas apart from the Tohoku and Shikoku regions. In our mineralproducts business, shipments of limestone to customers in the overseas
iron and steel industry firmed. Intake in our surplus construction soil
recycling business grew from the previous year. However, the conversionof some consolidated affiliates into equity-method affiliates led to adrop in both sales and profits.

6

A N N UA L R EP O R T 2 0 1 7

Sales¥ 80,177 million

down ¥13,356 million year-on-year

Operating
Income¥ 7,759 million

down ¥353 million year-on-yearEnvironmental Business
Sales and Profits Rise as Waste Processing andGypsum Sales Rise
Sales in waste processing, gypsum, and other products and services
strengthened. Initiatives involving the processing of disaster debris
from the Kumamoto Earthquake also drove up sales and profits.
Sales¥ 77,901 million

up ¥4,440 million year-on-year

Operating
Income¥ 7,666 millionup ¥11 million year-on-year

Construction Materials BusinessSlowing Demand Weighs on Sales and Profits
Slowing sales of building and civil engineering materials caused profits
to decline.
Sales¥ 74,027 million

down ¥6,826 million year-on-year

Operating
Income¥ 6,061 million

down ¥68 million year-on-year

Other Business
A Slowdown in the Engineering Business Impacts
Sales and Profits
This segment includes our real estate, engineering, data processing,finance, transport and warehousing, chemical products, sports facility
and other businesses. Sales and profits fell due to factors including a
slowdown in construction orders in the engineering business.
Sales¥ 75,331 million

down ¥9,890 million year-on-year

Operating
Income¥ 3,267 million

down ¥746 million year-on-year

TAIHEIYO CEMENT CORPORATION

7

Fiscal 2018 Business Strategies

8

A N N UA L R EP O R T 2 0 1 7

Transitioning from defense to offense, proactively developing proposal-based sales

Domestic Cement Business
Recovery in demand for cement

Demand for cement contracted during FY2017, falling to 41.77 million
tons. However, the market reversed course around November 2016 andbegan to grow on a year-on-year basis. We therefore expect demand for
cement to grow during FY2018 and forecast demand to be 43 million
tons, an increase of about 1.20 million tons on the previous year.
With a number of large-scale construction projects in prospect,
including venues for the Tokyo Olympics and Paralympics, the new
Chuo Shinkansen, the extension of the Hokkaido Shinkansen andthe Hokuriku Shinkansen, as well as reconstruction work in theaftermath of the Kumamoto Earthquake, a strong case can be madefor increased cement demand going forward. At the same time, recentchanges in construction techniques and other factors have had theeffect of dampening cement utilization, with the result that continued
forecasting of demand based on conventional assumptions runs therisk of error. Our forecast of 43 million tons considers and includes theeffects of such trends.
Over the medium and long term we assume demand will growsteadily until the first half of FY2020. We do not believe that demand
will fall excessively after demand associated with the Olympics andParalympics ends. Instead, our assessment is that the need to update
infrastructure such as sewer lines and bridges throughout Japan will
maintain demand at around 41 million tons and prevent it from falling
below 40 million tons. Indeed, additional demand associated withoccasional large-scale projects could underpin annual demand ranging
from 43 to 44 million tons.

Transitioning from defense to offense

Reflecting a business environment in which we expect to see cement
demand recover during FY2018, we have identified “Transitioning
from a defensive to an offensive position” as a major theme for the year,
and we will be carrying out a variety of measures to achieve this. In
particular, we will focus on securing as much demand as possible fromthe Tokyo Olympics and Paralympics and other projects that can be
expected to spur demand in the Tokyo metropolitan area where we are
well positioned to capitalize on our strengths.
Turning to sales policies, we are studying whether to establish
new programs to revitalize dealers’ businesses. For example, we areconsidering introducing programs to incentivize the large number ofcompanies that offer products other than cement and ready-mixed
concrete to more actively sell our products.
At the same time we will focus on ascertaining customer needs andadopting a proposal-based approach to sales. We plan to not only address
customers’ wishes, but also to assess their challenges and requirements sothat we can offer proposals that offer solutions to those problems.
With regard to pricing policy, we will work to communicate thevalue of our comprehensive menu of services to customers in order toencourage them to make decisions that are not based simply on pricealone. However, coal prices have been rising rapidly since autumn lastyear, pushing up manufacturing costs. We will study how to address
this challenge following a multifaceted assessment of the changing
conditions.

We will also work to strengthen the financial footing of directly
owned ready-mixed concrete companies to help them grow into
regional leaders capable of competing successfully in every aspect of
their businesses. Furthermore, we plan to offer active support to help
group customers recruit employees and foster a new generation of
executives to address the labor shortages and successor-related issues
that are proving to be particularly challenging in rural areas.
The Ministry of Land, Infrastructure, Transport and Tourism’s
i-Construction initiative is currently attracting attention. This initiativewas conceived to help boost productivity and shorten working hours atconstruction sites through the use of information and communications
technology, and we plan to address such modernization initiatives
ourselves by deepening dialog with ready-mixed concrete companies.
We also plan to pursue closer partnerships with secondary productmanufacturers as adoption of pre-cast concrete techniques in whichconcrete materials are manufactured “off-site” and then transported toconstruction sites for assembly gather momentum. We have acquired
stakes in, and offered technological guidance to, many secondary
product manufacturers since the time of our founding, and we believethat strengthening such relationships will serve to further enhance our
status in the secondary products industry in the event that the movetoward off-site pre-cast concrete gathers momentum.

Accommodating increased demand for
cement-based soil stabilizer

Sales of our cement-based soil stabilizers approached record levels
during FY2017 as the products saw use in more locations and ina broader range of applications. For example, they were utilized inreconstruction work in the aftermath of the Kumamoto Earthquake,even though liquefaction was not a contributing factor in that disaster.
Cement-based soil stabilizers are also being injected into cracks in dams
to solidify these structures nationwide. From the perspective of ourbusiness, the use of concrete and other materials often follows the initialuse of cement-based soil stabilizer, so we are paying close attention toassociated demand trends. As demand for cement-based soil stabilizer
grows, we will work to build new facilities, increase supply capacity, andenhance distribution and transportation methods.

Masafumi Fushihara

Director, Senior Executive officer
Senior General Manager, Cement Business Division
TAIHEIYO CEMENT CORPORATION

9

Fiscal 2018 Business Strategies
Expanding existing core businesses and growing strategic core businesses of the future

Mineral Resources Business
Boosting earning power and maximizing profit

The top priorities in our core aggregate and mineral products businesses
in FY2018 are to boost earning power and maximize profit.
We expect our aggregate business to experience growth in the Kanto
area. Since the start of 2017 we have seen an uptick in demand related to
the Tokyo Olympics and Paralympics, marking an improvement over the
lower level of demand that characterized FY2017. Since Tokyo’s winningbid to host the Games we have taken steps to enhance and strengthen our
distribution structures, for example by expanding our Tokyo Bay yard, inorder to capture as much of that demand as possible.
Whereas in the past we sourced limestone aggregate for delivery to
the Kanto region from both our Kamiiso Plant in Hokkaido and our Oita
Plant, we have now taken steps to maximize earnings by shipping productbound for the Kanto area from Kamiiso and product bound for WestJapan from Oita. The resulting streamlining of distribution has allowed
us to cut costs and boost profit, even as sales volume remains flat.
We are also working with the Cement Business Division to commer­
cialize strategic products in our aggregate business. Our development of
aggregate as a strategic product reflects the belief that our offerings in thesegment can be differentiated from those of competitors, unlike cement
which allows limited opportunity for differentiation.
In our mineral products business we will focus on increasing sales oflimestone, our flagship product, to iron and steel manufacturers and on
normalizing pricing. Many steelmakers are facing tough competition andgrappling with excess production capacity in China. The thin operating
margins of those companies made it impossible for us to raise prices
during the previous fiscal year but we will continue to strive to normalize
pricing going forward as we supply product to domestic customers as wellas customers in South Korea and Taiwan. Expanding exports to moreregions would serve to increase sales but we believe that this approachis difficult in light of market prices. Going forward we will continue to
strive to maximize profits, including by increasing market share.
Our soil solutions business has begun to receive large volumes of spoil(excavated dirt and sand) from the construction of the Tokyo Gaikan
Expressway for processing. As with spoil from building construction,
we will work hard to promote our soil solutions services and gather allnecessary information to secure stable profits. The most promising aspectof this business involves Denite, a Taiheiyo Cement product used torender soil contaminated by heavy metals insoluble. The Tokyo Gaikan
Expressway project is expected to use a cement-based soil stabilizer using
Denite technology, and we believe we will see even higher volumes when10

A N N UA L R EP O R T 2 0 1 7

the Chuo Shinkansen construction gathers momentum in the future.
Conditions in Japan as well as the country’s strict regulatory environment
suggest that demand will come from a variety of sources in the future.

Overseas development and the functional materials
business as drivers of our growth strategy

To grow the core businesses of the future we will focus on overseas
development and our functional materials business. To promote ouroverseas development we have already established facilities in Shanghai,
Thailand and Vietnam, with a focus on products offered by ourenvironmental business in Japan such as flue-gas gypsum and anhydrite.
We plan to use this approach to develop business for mineral products
such as high-purity silica stone.
Our functional materials business has numerous promising products,
including ChiccaLight, a high-purity phosphor raw material. While still
small, the market is growing steadily and we are studying future steps todevelop the business overseas. Ultra-High-Purity Silicon Carbide (SiC)
is another promising product, and we are studying its potential for use
in power semiconductor applications where its properties to minimize
electricity losses has spurred growing interest in recent years. Our SiC
has already been evaluated favorably in testing and we are working on
capital investments to increase production before the end of the current
fiscal year. We are also involved in a close partnership with our Central
Research Laboratory to commercialize functional hollow particles
starting during the next fiscal year.
In addition, we are working to strengthen the management foundationof our Group companies. In keeping with our policy of selection andconsolidation, we have merged, integrated, and otherwise combined
operations to trim the Group to 37 companies. We are making progressin the drive to bolster the financial strength of those companies and wewill continue to work to maximize profits by adjusting our integrated
manufacturing and sales strategy.
Going forward, Group and partner companies will work together
to prevent accidents and complaints so that we can take pride as amanufacturer while contributing to society.

Expanding and developing our coal ash business while boosting profitability in existing businesses

Environmental Business
Building business models toaccommodate conditions overseas

Our first priority for FY2018 will be to expand and develop our coal ash
processing business. Significant, sustained growth in the number of coalfired power plants underpins the importance of our mission of processing
coal ash, which is expected to grow in volume in the future. However,since we are already approaching the limits of how much coal ash can beprocessed as a raw material in cement production, we will turn to exports
to boost processing volume in the future. Exporting coal ash requires us
to accommodate differences in the environmental regulations of both theimporting and exporting countries, and to satisfy the requirements ofinternational treaties and other agreements. We have a successful trackrecord in exporting coal ash to South Korea and Hong Kong, and arelooking at expanding exports to include other countries. We have alreadyreceived regulatory approval to export coal ash to Thailand, and we expect
to start exports during the second half of FY2018.
In Japan we are studying potential applications for coal ash, which has
not enjoyed widespread use in the past. Examples include increasing useof the material in finishing processes during the manufacture of cement
and blended cement. We have finalized plans to introduce technology foreliminating or reducing levels of unburned carbon in coal ash, which has
been a barrier to its use in the past, and are planning to start operational
trials at the end of FY2018. This technology is expected to stimulate theincreased utilization of coal ash in the production of building materials
and additives.
Our second priority will be to maximize the profitability of existing
businesses. Whereas most industrial waste received by cement plants isotherwise difficult to process and would normally require disposal in
landfill sites, we have a successful track record in overcoming technicalobstacles and commercializing processes. One example of this is ourash washing system to remove chlorine from incinerator fly ash. Goingforward, we plan to utilize our R&D resources to target novel, difficultto-process materials such as carbon fiber, lithium batteries, and solar
panels so that we can grow the processing of those materials into a major
source of profit in the future.
Our third priority is to pursue strategic overseas development. Theinternational business team we created in FY2017 has been working
with the International Business Division and during FY2018 it will focus
on increasing exports of coal ash and other materials that we have been
receiving in growing volumes. We will also bring Ceraclean, a productoffered as part of our Aqua Business, to Southeast Asia. In addition, weare studying how to license technologies such as our eco-cement system,ash washing system, and AK system (which biodegrades municipal
solid waste so that it can be recycled in cement production) to overseas
customers.
We believe that areas surrounding local cement plants provide thebest locations for developing business operations overseas. However, we
will work to establish business models that can accommodate conditions
and circumstances specific to the various countries and regions in which
we do business.

Continuing to contribute to reconstruction in
Fukushima

In our Fukushima reconstruction business, research into processing
disaster debris incineration ash and contaminated soil to isolate
radioactive components and allow their use in building materials, which
has now entered Phase 2, has earned extremely high praise. Furthermore,
if requested by the government, we are ready to study the feasibility ofa “post-Iitate” program. We are also working to develop model projects
for recovering precious metals under the Fukushima Innovation Coast
program. In pursuing these businesses and projects our principal focus
remains on contributing to Fukushima rather than on generating profit.
We will also address international environmental problems by looking
at recycling businesses that reduce carbon dioxide in the broadest sense,
starting with exports of fly ash cement.
With regard to the management of Group companies, we areconsidering expanding operations of the industrial waste processor
Nacode in light of the company’s robust performance. Now 10 years into
its 20-year contract, Tokyo Tama Ecocement
continues to operate in a stable manner.
We are also planning to strengthen Tohoku
Eco-Techno (located in Minamisoma,
Fukushima Prefecture), which is playing
an important role in our reconstruction
business, and Comres (located in Hekinan,
Aichi Prefecture), which offers advantages asa supplier of products for use in constructionof the Chuo Shinkansen.
Kunihiro Ando

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

11

Fiscal 2018 Business Strategies
Focusing on CSR management and achieving our operating income target underthe 17 Medium-Term Management Plan

International Business
Four priorities

We have identified four priorities for our business in FY2018. The firstis to achieve our operating income target of ¥17.5 billion under the 17
Medium-Term Management Plan. Although we were not able to achieve
the plan’s targets during FY2017 due to lower-than-expected demand in
the U.S. and China, we will work to strengthen the revenue base at eachof our facilities during this fiscal year.
Our second priority is to develop and pursue new businesses. One
goal of this initiative is to boost cement production and sales in Asian
regions that are expected to see market growth, for example through theacquisition of production facilities and by constructing or purchasing
plants. Fulfilling this goal will take time, and requires a calm and clearheaded assessment of funding and investment approaches as well asfactors such as the environment, market, and business partners in eachcountry together with global conditions. It is a continuation of our policyof expanding our network of overseas facilities.
Our third priority is to expand our trading business. Although during
FY2017 we recorded the highest volume of cement and clinker exports
since FY2010, these figures reflect an increase in surplus export capacity
due to lower-than-expected demand in Japan. During FY2018 we willcontinue to respond to fluctuations in domestic demand in a flexible
manner while working to ensure a high level of profitability throughcareful monitoring of changes in conditions in export markets. At thesame time we will continue to dedicate resources to increasing exportsof blended cement. Finally, we will continue to evaluate factors such as
regulations and market conditions in the countries where we pursue offshore trade and bulk exports, both areas of bullish performance during
FY2017.
Our fourth priority is to pursue CSR management. In particular,
we have identified an initiative to eliminate industrial accidents as a toppriority. Overseas worksites have more employees and partner vendors
than their Japanese counterparts, and there are regions where it will
be challenging to raise safety awareness to the same level as in Japan.
Nonetheless, worker safety is an issue that transcends national borders,
and we must ensure an equally high level of safety in every country.
We will work to strengthen safety management structures as part ofa dedicated effort to significantly increase safety awareness throughmeasures such as regular safety inspections by the International Business
Division’s engineering & technology department team and by convening
meetings of safety coordinators from overseas subsidiaries.
12

A N N UA L R EP O R T 2 0 1 7

Trends in international markets and boosting profits

The U.S. economy is expected to continue to grow in FY2018. The Oro
Grande Plant that we acquired in September 2015 began contributing
fully to our bottom line in FY2017, with the result that sales grew 20%.
We are currently in the process of raising prices as part of an effort tofurther grow both sales and operating income.
Although the business environment in China was extremely
challenging in FY2017 as both demand and prices fell, demand began
increasing during the second half of the fiscal year, and prices arerecovering as well. We expect these trends to continue during FY2018 as
we work to improve the performance of our Chinese business.
In Vietnam demand has continued to steadily grow, but increasing
supply capacity on the part of competing manufacturers has made thecountry a net exporter of cement. Our Vietnamese business has achieved
robust results but going forward we will carefully monitor developments
such as the privatization of government-owned companies and plant
expansions by competing manufacturers.
In the Philippines we believe demand for cement will continue
to grow as economic growth accelerates, and will work to increase our
supply capacity in order to capture as much of that demand as possible. In
addition, we are planning to construct a supply base to enhance our sales
capabilities in the country.

Ichiro Egami

Director, Managing Executive Officer
Senior General Manager, International Business DivisionExpanding operations to achieve our targets in the 17 Medium-Term Management Plan

Construction Materials BusinessAccelerating our “Growth and Expansion”
strategy by strengthening our earnings power andfinancial strength

Since our division was established the profitability of our business hasgrown continuously, although we do expect performance to remain flat in
FY2018 due to delays in construction projects. Nonetheless, as FY2018
is the final year of the 17 Medium-Term Management Plan we will
strengthen our revenue base by expanding operations in an effort to boost
earning power and financial strength so that we can achieve the targets
set out in the plan. Specifically, we plan to expand operations throughpartnerships with other companies and M&A in regions where webelieve these steps can achieve synergies with existing businesses.
At the same time we will carry out measures in anticipation ofproviding management assistance and business reorganization atGroup companies, while carefully monitoring each company’s businessenvironment from the standpoint of profitability and efficiency.
We have identified three priorities as we work to accelerate our“Growth and Expansion” strategy. The first is to actively pursue sales
activities in partnership with Group companies in an effort to capture
demand created by large projects such as the Tokyo Olympics andParalympics, the Chuo Shinkansen, and rail line construction in andaround Tokyo. Anticipating the need for an early start in building
structures to accomplish this goal, we are currently setting up a Project
Advancement Meeting and a Synergy Development Liaison Team.
The goal of the Project Advancement Meeting is to pursue corporate
sales activities through the Group so we can reliably secure orders for thelarge projects described above. Group companies’ operations span a broad
range of fields, from the earthworks that comprise the most fundamental
stage of a project to exterior and paving work carried out in the runup to project completion. We will build Group management structures
so that Group companies can efficiently reap significant benefits frompartnerships.
The Synergy Development Liaison Team is an initiative to develop
new products and techniques through the mutual utilization of Group
companies’ products and technologies. This initiative is being pursued
in partnership with our Central Research Laboratory, and we formed
a working group to intensify the study of options by exploring topics
identified last year.
Our second priority is to strengthen the domestic pre-mix business.
The growth in the market for maintaining and repairing outdated
infrastructure and an intensifying labor shortage are both driving demand

for labor-saving innovation at construction sites. Pre-mix is blended inadvance at the plant by adding material known as “essence” to cement andthen shipped in bags, but we need to focus on saving labor during its use.
Approaches to address the range of anticipated customer needs include
possibilities such as supplying the product in light, easier-to-handle sizes,
reflecting the increasing prevalence of female workers on construction
sites. This business is also positioned to contribute to the Ministry ofLand, Infrastructure, Transport and Tourism’s i-Construction programand its goal of encouraging use of pre-cast techniques, which we see as
an opportunity for expansion. We plan to meet customer needs, includingin the product domain, by stimulating technology exchanges with Groupcustomers that are pre-cast product manufacturers.
Our third priority is to strengthen overseas development. Group
company Onoda Chemico is currently involved in an earthwork
improvement project as part of subway construction in Ho Chi Minh,
Vietnam, and the company is proceeding with plans to establish a local
subsidiary in the country. The company has also opened a representative
office in Myanmar, where the market is expected to grow, as part of an
initiative to gather information and pursue sales opportunities. Meanwhile,
Taiheiyo Materials Corporation continues to work on boosting exports
of its products, including studies into creating new business models inSoutheast Asia.

Training a new generation of workers
with a global outlook

In human resources development we will work to enhance the skills of
the next generation of workers who will be responsible for our businesses
going forward by redoubling human resource exchanges with Group
companies and helping Group companies
to accumulate and share expertise in theiroperations. We will also foster the trainingof workers with a global outlook by assigning
Group company employees with businessexpertise to overseas facilities.
In addition, we will pursue Group-wide
initiatives in compliance, just as we do in thefields of safety and health, risk management
and quality control.
Katsuhide Fukuhara

Director, Managing Executive Officer
Construction Materials Business Division
TAIHEIYO CEMENT CORPORATION

13

Directors and Corporate Auditors(As of June 29, 2017)

Board of Directors
President andRepresentative Director

Vice President andRepresentative Director

Directors,
Senior Executive Officers

Shuji Fukuda

Yuuichi Kitabayashi

Shigeru Matsushima

Masafumi Fushihara

Directors, Managing Executive Officers

Youichi Funakubo

Keiichi Miura

Masahiro Karino

Kunihiro Ando

Ichiro Egami

Tomoya Sakamoto

Directors

Yoshiko Koizumi

Yuzo Arima

Corporate Auditors (Standing)Corporate Auditors

Executive Officers

Hidehiko Kasamura
Toshihide Nishimura

Takashi Nonaka
Yoshio Narukage

Toshiaki Suzuki
Satoshi Asami
Toru Kanai
Seiichi Araki
Yoshiaki Tominaga
Kazuo Horikawa
Yoshiyuki Uenoyama
Hideaki Asakura
Tetsuya Ohashi
Yukimasa Nakano
Katsuyoshi Fukagawa
Yoshifumi Taura

14

A N N UA L R EP O R T 2 0 1 7

Katsuhide Fukuhara

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

Major Corporate Data
（百万円／円）Total Domestic Cement Demand /Group Sales

44.57

47.70

45.55

（百万円／％）
Operating Income /Operating Income to Net Sales

Net Sales

840,288 842,848 835,359
42.66

41.77

747,616

70,434

798,588

65,40660,433

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

63,23536,40435,22340,659

8.4

7.8

7.2

35.91

7.9
28.67

5.4
15.44

16.67

15.96

14.67

14.37

FY Mar/13

14

15

16

17

Total Domestic Cement Demand ■■■Group SalesFY Mar/13

13/3

Return on Equity (ROE)
13/3

14/3

15/3

16.3

16.3

16/3

14

15

16

17

Net Sales ■■

17/3

14/3

15/3

16/3

15

16

Operating Income
Operating Income to Net Sales

14

■■

17

（百万円／％）

69,5901,015,564 1,040,602 1,014,075 1,015,415

6.3

13/3

17/3

16

17

FY Mar/13

14

15

16

17

Total Assets ■■

■

15/3

16/3

17/3

Net Assets per Share

67,89060,22559,802

7.0

5.9

13/3

14/3

15/3

16/3

17/3
（百万円）

Interest-Bearing Debt

FY Mar/13

259.11293.02473,959

195.57

14

Ordinary Income
Return on Assets (ROA)
13/3
14/3

15

16

17

■■
■

15/3

14

13/3

15

16

17

14/3

15/3

16/3

17/3

Depreciation
13
138.0939,422FY Mar/13
Depreciation
13/3

FY Mar/13

13/3

42,401

43,95744,459

14

15

16

17

FY Mar/13

17/3

R&D Expense
13/3

■■

14/3

14

15

16

17/3
（年）

Interest-Bearing Debt /Cash Flow

15/3

16/3

3,846

14/3

4,052

14
■■

14/3

15

16

17

15/3

16/3

17/3

Capital Expenditure（百万円）

196,144

54,38417.3
39,094340,930

5.2

42,16044,076

5.2

17

15/3

4,422

FY Mar/13

14

3.6

15

Interest-Bearing Debt/Cash Flow
16/3

R&D Expense

40,55314

32,524

Interest-Bearing Debt ■■■FY Mar/13

Net Assets ■■Equity13/3
Ratio
14/3
■

16/3

4.9

FY Mar/13

23.7
19.5

435,118
399,138 394,497

Net Assets per Share

31.4
29.1

5.9

1.9
7.7

155.8535.6

273,312219,826

6.6

18,496246.31Net Assets /Equity Ratio
347,490 357,073

3.3

14/3

17

16
■

13/3
14/3
15/3
16/3
Ordinary
Income/Return on Assets (ROA)

32,66715

15（百万円／％）

11.7

14

14

400,034
982,473

FY Mar/13

FY Mar/13

Profit Attributable to Owners of Parent ■■Earnings per Share (EPS)			
13/3
14/3
15/3
16/3
17/3

■

14.0

Return on Equity (ROE)

38.39
29.63

9.22
11,329

17/3

（百万円）

Total Assets

FY Mar/13

47,597

44,114

4,228

17/3

13/3

14/3

15/3

16

17

■

16/3

17/3

15

16

17

Capital Expenditure ■■
13/3
14/3
15/3

16/3

17/3

FY Mar/13

14

（百万円）

4,538

15

16

17

15/3

16/3

17/3
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, 2017

2017

2016
(Millions of yen)

2017
(Thousands of U.S. dollars)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable – trade
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¥53,539
161,392
31,187
1,485
42,624
6,886
3,018
9,721
(938)
308,918¥60,516

171,946
31,835
1,708
42,422
9,098
3,896
12,595(1,125)332,895$539,407
1,532,634
283,764
15,232
378,127
81,101
34,734112,270(10,029)
2,967,243

Noncurrent Assets
Property, plant and equipment
Buildings and structures
Machinery, equipment and vehicles
Land
Construction in progress
Other
Total property, plant and equipment

132,708
147,151
140,726
20,95046,074
487,611

136,454
135,380
160,571
19,08345,660497,151

1,216,277
1,206,709
1,431,249
170,102406,996
4,431,335

Intangible assets
Goodwill
Other
Total intangible assets

6,432
37,48743,9193,409
34,25037,66030,391
305,290335,682

115,443
1,127
8,968
23,25831,483(6,655)
173,626
705,156¥1,014,075

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

755,692
28,866
154,670
169,858
281,788(74,278)
1,316,596
6,083,614$9,050,858

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 7

2016

2017
(Millions of yen)

2017
(Thousands of U.S. dollars)

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of bonds
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Other provision
Other
Total current liabilities¥73,893
160,421
450
8,351
5
5,723
751
71,631
321,229¥79,676
134,428
11,120
5,914
4
5,742
410
71,613308,910$710,190
1,198,219
99,11752,722
41
51,186
3,658
638,325
2,753,461

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

46,155
187,471
3,527
22,814433
245
747
15,662
7,990
50,725
335,772
657,002

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

312,282
1,429,243
74,680215,865
5,067
1,085
8,752
189,726
67,035427,964
2,731,704
5,485,166

86,17450,925
188,731(979)
324,851

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

768,109530,7832,040,416(97,260)
3,242,049

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

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

87,619434
45,149(114,652)(35,543)(16,993)
340,635
3,565,692$9,050,858

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 adjustments
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, 2017

2016

2017
(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
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

2017(Thousands of U.S. dollars)¥835,359
640,375
194,983
134,550
60,433¥798,588
599,924
198,664
135,429
63,235$7,118,183
5,347,395
1,770,787
1,207,144
563,642

1,563
5,292
4,600
11,456

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

14,707
17,915
19,86352,486

6,492
5,172
11,66460,225

4,998
4,321
9,320
59,80244,55638,521
83,078533,051

1,666
1,325
–
290
3,282

648
4,012
16,874
126
21,661

5,779
35,768150,406
1,125
193,079

3,205
81
374
5,757
–
1,497
10,91552,592
14,334678
37,5791,175¥36,404

3,965
24
68
20,6933,034
936
28,72352,741
8,830(3,646)47,556(40)¥47,597

35,349218
610
184,451
27,0488,348
256,026
470,104
78,714(32,505)
423,896(357)$424,254

2016

2017

Consolidated Statements of Comprehensive Income
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2017

(Millions of yen)

ProfitOther comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustments
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 7

2017(Thousands of U.S. dollars)¥37,579¥47,556$423,896(1,864)(5)237(2,869)(7,728)(3,378)(15,608)¥21,9713,721
18–(8.851)(7,966)588
3,443¥51,000

33,174
160–(78,899)
71,011
5,242
30,689$454,586¥21,758¥212¥52,257¥(1,257)$465,791$(11,205)

Consolidated Statements of Changes in Net Assets
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 20172016

(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 ofparent	Reversal of revaluation reserve
for landPurchase of treasury stock
Disposal of treasury stock	Change in scope of consolidation
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes in items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of this term

Capitalstock

86,174

Capitalsurplus50,757Retainedearnings

158,939

Accumulated other comprehensive income

Treasury
stock

(934)

167

Valuationdifference
Total
on availableshareholders’for-saleequitysecurities

294,937

6,908

Deferred
gains orlosses onhedges2

Revaluation
reserve for
land

4,295

Foreigncurrencytranslation
adjustment

649

Total
Retirement accumulated
benefitsotherliability
comprehensive
adjustments
income(4,148)

7,707

Noncontrollinginterests

44,845Total
net assets

347,490

167

167(7,370)(7,370)(7,370)36,40436,40436,404

14

14

14

(46)

(46)

(46)

0

0

0

743

743

0
743

–

167

29,791¥86,174¥50,925¥188,731(2,153)14369(4,823)(7,680)(14,274)(6,057)(20,331)

29,914(2,153)14369(4,823)(7,680)(14,274)(6,057)9,582¥(979) ¥324,851¥4,755¥16¥4,665¥(4,174)¥(11,829)¥(6,566)¥38,787¥357,073(45)

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, 20172017

(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 ofparent	Reversal of revaluation reserve
for landPurchase of treasury stock
Disposal of treasury stock	Change in scope of consolidation
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes in items other thanshareholders’ equity
Total changes of items during
the period
Balance at end of this term

Capitalstock¥86,174

Capitalsurplus¥50,925

Retainedearnings

Accumulated other comprehensive income
Valuationdifference
Total
on availableshareholders’for-saleequitysecurities

Treasurystock¥188,731¥(979) ¥324,851(88)¥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)(7,474)47,59747,59747,597–(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

Total
Retirement accumulated
benefitsotherliability
comprehensive
adjustments
incomeNoncontrollinginterests

Total
net assets(9,932)(Thousands of U.S. dollars)
Shareholders’ equity

Capitalstock$768,109
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 ofparent	Reversal of revaluation reserve
for landPurchase of treasury stock
Disposal of treasury stock	Change in scope of consolidation
Change by share exchanges
	Increase by merger ofconsolidated subsidiary andnon-consolidated subsidiary	Net changes in 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 7–$768,109

CapitalsurplusRetainedearnings$453,920 $1,682,251

Accumulated other comprehensive income

Treasurystock

Valuationdifference
Total
on availableshareholders’for-saleequitysecurities$(8,731) $2,895,551(788)$42,386

Deferred
gains orlosses onhedges$150

Revaluation
reserve forland$41,582

Foreigncurrencytranslation
adjustment$(37,205) $(105,445)$(58,530) $345,732 $3,182,753

(788)

(788)

(66,622)(66,622)(66,622)424,254424,254424,254–(89,539)(89,539)(89,539)

4,870

4,304

9,174

9,174

72,781(3,293)

69,487

69,487

533

533

–

533

76,862

358,164$530,783 $2,040,416

45,232

283

3,566(77,446)

69,902

41,537(5,097)36,440346,498

45,232

283

3,566(77,446)

69,902

41,537(5,097)

382,938$(97,260) $3,242,049$87,619$434$45,149 $(114,652)$(35,543)(88,529)$(16,993) $340,635 $3,565,692

Consolidated Statements of Cash Flows
Taiheiyo Cement Corporation and Subsidiaries for the year ended 31st March, 2017

2016

2017
(Millions of yen)

Cash flows from operating activities:

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 provision for removal of assets
Increase (decrease) in other provision

2017(Thousands of U.S. dollars)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:¥52,592
43,957
2,967(5,292)374(1,027)
(32)
509
(689)
(41)
(158)
(1,563)
6,492(1,243)
1,539
5,757
7,259
(3,694)(6,525)––(4,268)96,9101,971(6,599)(16,655)
75,627¥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$470,104
396,283
22,448(17,915)610
32,517
955
(267)
7,366
–
(5,359)(14,707)
44,556(35,550)
29,570184,451(28,844)(2,386)
10,704
27,048(150,406)(914)
970,265
18,244(44,626)(102,152)
841,731

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 investments in subsidiaries resulting from change in scope of consolidation
Payments from sales of investments in subsidiaries resulting from change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Payments for transfer of business
Other, net
Cash flows from investing activities:(350)(35,922)
6,061
(128)
0
(342)
995
6,747
(1,040)(693)
3,510(50,863)927(71,099)(4,855)(48,638)
4,276(1,995)66(870)
41,062––(3,950)3,826–
685(10,394)(43,282)(433,541)
38,117(17,784)590(7,759)366,009––(35,214)
34,106–
6,111(92,646)(9,798)(5,000)105,866(60,055)(20,395)–
0(43)(7,370)(1,015)(6,216)(4,027)(510)(10)
50,645
(596)
–
138
(105)
¥50,072(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(209,588)–
135,963(460,021)(4,011)
12,478
10,204(89,540)(66,622)(5,696)(52,778)(729,611)(13,139)6,333
446,318
–
9,879
742
–
$463,273

Interest and dividends income

Cash flows from investing activities:

Cash flows from financing activities:

Net increase (decrease) in short-term loans payable
Increase (decrease) in commercial paper
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
Decrease in cash and cash equivalents resulting from change of scope of consolidation
Increase in cash and cash equivalents resulting from share exchanges
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Increase (decrease) in cash and cash equivalents from corporate division
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, 2017

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: 125
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: 8
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.
			 Additionally, change in equity-method subsidiaries are as follows.
Nobeoka Onoda Remicon Co., Ltd. was excluded from the scope ofequity-method as a result of completion of the liquidation process.
Ssangyong Cement Industrial Co., Ltd. was excluded from the scopeof equity-method as a result of stock sales. Additionally, DC Co.,
Ltd. transformed into a consolidated subsidiary from an equitymethod affiliate.
(ii) Name, etc. of unconsolidated subsidiaries and affiliates notaccounted for by the equity method
22

A N N UA L R EP O R T 2 0 1 7

Name of major companies, etc.:(Unconsolidated subsidiaries)		Unconsolidated subsidiaries not accounted for by the equity method
are Kawara Seikousho Corporation and 77 other companies.
(Affiliates)		Affiliates not accounted for by the equity method are Cement
Terminal Corporation and 65 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 forapplication 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 themoving-average method.)		 b) Securities without market value:			Such securities are stated at cost, based on the moving-averagemethod.
		 b. Derivatives
			 Derivatives are stated at market value.
		 c. Inventories
			Inventories are mainly stated at cost, which is determined by themoving average method (subject to write-down due to diminishedprofitability.)			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 averagemethod.
(ii) Depreciation method for significant depreciable assets
		 a. Property, plant and equipment (excluding lease 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 lease 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. Lease assets			Lease 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 adjustments” and “Non-controlling interests” under Net
Assets.
(vi) Significant hedge accounting methods
		 a. Method of hedge accounting			Gains/losses on hedges are deferred. For currency swaps, allocation
treatment is applied when the swap meets the conditions forapplication of such allocation treatment. For interest rate swaps,
exceptional treatment is applied when the swap meets theconditions for application 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 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, 2017(4) United States Dollar Amounts(3) Guarantee obligations

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 ¥112.19= U.S.$1, the approximate effective rate of exchange prevailing at
31st March, 2017. 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.

			 Guarantees for loans payable from banks, etc.

(5) Changes in Accounting Policies
In line with the revisions to the Corporation Tax Act of Japan, theCompany applied the Practical Solution on a change in depreciation
method due to Tax Reform 2016 (Practical Issues Task Force (PITF)
No. 32, June 17, 2016) from the fiscal year under review. Accordingly,
the depreciation method for accompanying facilities and structuresacquired on or after April 1, 2016 was changed from the decliningbalance method to the straight-line method.
Furthermore, the impact of this change on the consolidated financial
statements for the fiscal year under review is immaterial.
(6) Additional Information
The Company applied the Revised Implementation Guidance on
Recoverability of Deferred Tax Assets (Accounting Standards Board ofJapan (ASBJ) Guidance No. 26, March 28, 2016) from the 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(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)¥887¥34,411¥812¥114¥2,004¥38,230$7,908$306,728$7,244$1,017$17,868$340,767(Millions of yen) (Thousands of U.S. dollars)¥3,736¥9,065¥830¥3¥4,773¥26¥18,435$33,301$80,801$7,403$33$42,549$238$164,327(2) Accumulated depreciation of property, plant and equipment
			24

A N N UA L R EP O R T 2 0 1 7(Millions of yen) (Thousands of U.S. dollars)¥1,120,799$9,990,191(Millions of yen) (Thousands of U.S. dollars)			¥1,449$12,922
			Guarantees for account payables to Ready-mixed Cooperative
Association, etc.
			
¥1,791$15,971(4) Discounted trade notes receivable(Millions of yen) (Thousands of U.S. dollars)			¥5,242
			 Trade notes receivable transferred by endorsement			¥1,889$46,726$16,840(5) Revaluation of Land
A&A Material Corporation and Chichibu Railway Co., Ltd., theCompany’s affiliates accounted for by the equity method, revalued theirbusiness-purpose land in accordance with the Act on Revaluation ofLand (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 the valuation difference, the amount of theCompany’s share in the valuation difference 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
1,271,402,783 shares(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,
2016

3,707
(Note 1)

¥3.00

March 31,2016

June 30,
2016

Meeting of Boardof Directors held Common
onstock
November 10,
2016

3,808
(Note 2)¥3.00

September
30, 2016

December 2,
2016(Notes) 1. Includes dividends of ¥16 million associated with treasury stock heldby consolidated subsidiaries.
				 2. Includes dividends of ¥24 million associated with treasury stock heldby consolidated subsidiaries.

(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 ofStockholders.
				 Total amount of dividends:¥3,722 million				 Amount of dividend per share:¥3.00				 Record date:		March 31, 2017				 Effective date:		June 30, 2017				Of note, the source of funding dividend payments is scheduled
to be retained earnings.
				Total amount of dividends includes dividends of ¥15 million
associated with treasury stock held by consolidated subsidiaries.
(iii)	Class and number of shares to be issued upon exercise of shareoptions 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, which are operatingreceivables, are exposed to credit risk in relation to customers, each
responsible department periodically identifies the financial position,etc. of the counterparties and manages the due date and outstandingbalance with respect to each counterparty, in an effort to identify andreduce 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 Group
has a business relationship, and are exposed to the risk of market pricefluctuations.
		 Notes and accounts payable-trade, which are operating payables, havepayment due dates within one year. For a portion of raw materials andfuel procurement, derivative transactions (raw fuel swap transactions)
are used 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, andlong-term loans payable and bonds payable are principally funds raisedfor 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, 2017
(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) Investment securities
Total assets(iv) Notes and accounts payable-trade(v) Short-term loans payable(vi) Bonds payable(vii) Long-term loans payable
Total liabilities(viii) Derivative transactions*

Consolidated balance
sheet amountMarket value

Difference

60,516
171,946
42,018274,481
79,67689,296
46,155
205,478
420,606
11

60,516
171,946
38,862
271,324
79,67689,29646,434
207,644
423,051
11––(3,156)(3,156)
–
–
279
2,165
2,445
–

* 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 and (ii) Notes and accounts receivable-trade					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.
				(iii) Investment securities					The market value of investment securities is based on quoted market
prices.
				 (iv) N otes and accounts payable-trade, (v) 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.
				(vi) 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 thecurrent portion of bonds.
				 (vii) 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 (viii) 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 reasonablyestimated interest rate that would be applied if a similar loan is takenout.
				(viii) 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 (vii) above).
				 2. Unlisted stocks and investments in capital, etc. (consolidated balance
sheet amount: ¥42,762 million) are not included in “(iii) 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.

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, 2017

5. Notes on Real Estate for Rent, etc.

(Unit: Millions of yen)

Purpose(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.

Location

Cement business Jiangsu Province,
assetsChina, etc.

Type

Impairment loss*

Buildings and structures,
machinery, equipment andvehicles, etc.

19,383

Assets for rent

Sanyo Onoda City,
Buildings and structures,
Yamaguchi
land
Prefecture, etc.

805

Idle properties

Tano District,
Buildings and structures,
Gunma Prefecture,land, etc.
etc.

504

(Unit: Millions of yen)

Consolidated balance sheet amountMarket value

54,121

109,820* Breakdown of Impairment loss by purpose(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.

6. Notes on Per Share Information
Net assets per share:
Net income per share:
7.

¥293.02¥38.39Notes on Significant Subsequent Events

Not applicable.
8. Other Notes(Notes on Impairment Loss)
The Company’s assets are grouped together based on segments bybusiness type, except for assets for rent, important idle properties andassets scheduled for disposal, which are grouped together by treating
individual property as a single unit.
In the case of consolidated subsidiaries, in principle, a businesscompany is deemed as a single asset group, and in the case of importantcompanies, assets are grouped together based on management
accounting classifications, etc., except for important idle properties andassets 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 amountwith respect to cement business assets with reduced profitability due
to such factors as the decrease in demand and substantial fall in themarket value of land, assets for rent, and idle properties that are notexpected to be used in the future as follows, and such reduction in theamount of ¥20,693 million was recorded as an impairment loss under
Extraordinary loss.

26

A N N UA L R EP O R T 2 0 1 7

Purpose(Unit: Millions of yen)

Breakdown

Cement business Buildings and structures: 5,488,
assets
Machinery, equipment and vehicles: 11,068,
Total: 19,383
Assets for rent

Buildings and structures: 10,
Total: 805

Land: 794,

Idle properties

Buildings and structures: 5,
Total: 504

Land: 496,

Other: 2,826,

Other: 3,

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%.
(Notes on Business Combinations, etc.)
Business combination via acquisition(1) Summary of business combination
		 1) Name of acquired company and description of its business			 Name of acquired company: DC Co., Ltd. (hereinafter “DC”)
			 Business description:
Cement business		 2) Reasons for business combination
			The Company and DC will integrate resources nurtured at eachcompany for optimal operation and maximize the corporate value
as the Group as a whole, thereby aiming to achieve sustainablegrowth of both companies and improvement of the mid-long term
corporate value.
		 3) Date of business combination: August 1, 2016		 4) Legal type of business combination: Share exchange		 5)	Name of the company after the business combination: DC Co., Ltd.
		 6) Ratio of voting rights acquired
			 Ratio of voting rights held before the business combination
31.06%
			Ratio of voting rights additionally acquired on the date of businesscombination
68.94%
			 Ratio of voting rights after the acquisition
100.00%		 7) Grounds for determining the acquired company
			The Company acquired 100% of the voting rights for the said
company by way of share exchange and made it a wholly-owned
subsidiary.
(2)	Period included in the Consolidated Financial Statements for theacquired company: April 1, 2016 to March 31, 2017
			As July 1, 2016 is the deemed acquisition date, the business resultof DC for the period until June 30, 2016 has been recorded as
equity in earnings of unconsolidated subsidiaries and affiliates.

(3)	Acquisition cost for the acquired company and breakdown			Market value of DC’s common stock held prior to businesscombination as of the date of business combination:¥3,213 million
			Market value of the Company’s common stock issued on the dateof business combination:¥8,165 million
			 Acquisition cost:¥11,379 million(4)	Exchange ratio by class of stock, calculation method, and numberof shares issued
		 1) Exchange ratio by class of stock			The Company allotted 1.375 shares of the Company’s common
stock per one share of DC’s common stock.
		 2) Calculation method of share exchange ratio			In consideration of respective calculation results for the shareexchange ratio received from third-party appraisers andadvice from legal advisors, the Company and DC each madeconsiderations on results of due diligence that each party madeon the counterparty, etc., and in comprehensive consideration offactors such as the financial status, asset status, and future outlookof both companies, calculations were made upon negotiation anddeliberation between the two companies.
		 3) Number of shares issued:
33,602,197 shares(5)	Content of major acquisition related expenses and amount thereof			 Compensation and fees, etc., to advisors, etc.:¥141 million(6)	Difference between acquisition cost of acquired company and sumof each acquisition cost of step acquisition transactions:¥3,034 million
			Of note, this amount is recorded as “Loss on step acquisitions”
under Extraordinary loss on the Consolidated Statements ofIncome.
(7)	Amount of gain on bargain purchase accrued and reason for
occurrence		 1) Amount of gain on bargain purchase:¥16,874 million
		 2) Reason for occurrence			As the acquisition cost was lower than the net amount of assets
received and liabilities borne, the difference is recognized as gain
on bargain purchase.
(8)	Amount of assets received and liabilities borne on the date ofbusiness combination and primary breakdown			 Current assets¥14,925 million
			 Noncurrent assets¥40,256 million
			 Total assets¥55,182 million
			 Current liabilities¥14,874 million
			 Noncurrent liabilities¥12,053 million
			 Total liabilities¥26,928 million(9)	Estimate and calculation method for effects on the Consolidated
Statements of Income on the fiscal year under review assumingthat the business combination was completed at the beginning of
the fiscal year under review
			As the amount of this effect is immaterial, it is omitted.
Additionally, this note has not received audit attestation.

TAIHEIYO CEMENT CORPORATION

27

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, 2017

[Industry Segments]

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

2016

CementNet sales:(1) N et sales to outside
customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
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¥564,303¥71,293¥68,154¥75,228¥778,980¥56,379¥835,359¥–¥835,359

10,420¥574,724¥34,631¥659,165¥30,284¥2,96522,239¥93,533¥8,113¥95,171¥4,096¥–

5,305¥73,460¥7,655¥17,158
¥370
¥1

5,624
¥80,853¥6,130¥67,574¥2,338¥–43,590¥822,570¥56,530¥839,068¥37,089¥2,967

28,842¥85,222¥4,014¥223,144¥6,358¥–72,433¥907,793¥60,544¥1,062,213¥43,448¥2,967(72,433)¥(72,433)¥(111)¥(48,138)
¥509
¥–

–
¥835,359¥60,433¥1,014,075¥43,957¥2,967¥3,484¥–¥9¥1,117¥4,611¥680¥5,291¥0¥5,292¥4,778

¥292

¥–

¥38

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

Environmental
business

Construction
materials

2017
CementNet sales:(1) N et sales to outside
customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
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

¥546,891¥58,559¥70,405¥69,912¥745,769¥52,819¥798,588¥–¥798,588

12,023¥558,915¥38,898¥643,586¥29,923¥2,516

21,617¥80,177¥7,759¥93,828¥6,069¥–7,495¥77,901¥7,666¥18,052
¥246
¥1

4,114
¥74,027¥6,061¥71,788¥2,202¥–¥45,250¥791,020¥60,386¥827,256¥38,442¥2,51822,511¥75,331¥3,267¥222,818¥5,490¥–67,762¥866,351¥63,654¥1,050,074¥43,933¥2,518(67,762)¥(67,726)¥(418)¥(34,658)
¥525
¥–

–
¥798,588¥63,235¥1,015,415¥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(Thousands of U.S. dollars)

2017
CementNet sales:(1) N et sales to outside
customers(2) Inter-segment net sales
Total
Segment profit (loss)
Segment assets
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

28

A N N UA L R EP O R T 2 0 1 7

Consolidated
total

Adjustment

Mineralresources

Environmental
business

Construction
materials

Subtotal

Other

Total

Consolidated
total

Adjustment

4,874,692

521,971627,556

623,159

6,647,380

470,803

7,118,183–

107,172
4,981,864
346,717
5,736,573
266,720
22,432

192,682
714,654
69,164
836,338
54,101

66,810694,367
68,339160,908
2,200
16

36,676
659,836
54,032639,885
19,635403,3427,050,722
538,253
7,373,705
342,658
22,448200,658
671,461
29,123
1,986,080
48,937604,000
7,722,184
567,377
9,359,786
391,595
22,448(604,000)(604,000)(3,734)(308,928)
4,688

362

(386)

240

13,42813,643

4,272

17,916(0)

172,862

3,190

176,053

8,397

184,451

143,522
310,554

67,412

7,118,183
7,118,183
563,6429,050,858
396,283
22,44817,915
184,451

2,455

113,435

259,413

142,256

401,669

2,954

404,623

11,012

22,932411,91267,603

479,516

5,237

484,754

[Geographic Segments](Millions of yen)Japan

America

Other

Total

Net sales

606,996

111,186

80,405

798,588

Non-current assets

346,686

103,831

46,634

497,151TAIHEIYO CEMENT CORPORATION

29

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.
Taiheiyo Soil Corporation
OTHERS

Azuma Shipping Co., Ltd.
Chichibu Railway Co., Ltd.
Onoda Chemical Industry Co., Ltd.
Pacific Systems Corporation
Taiheiyo Accounting & Financial Services Corporation
Taiheiyo Engineering Corporation
Taiheiyo Real Estate Co., Ltd.
OVERSEAS ACTIVITIESCalPortland Company (USA)
Dalian Onoda Cement Co., Ltd. (CHINA)
Jiangnan Onoda Cement Co., Ltd. (CHINA)
Jidong Taiheiyo (Beijing) Environmental Engineering Co., Ltd. (CHINA)
Kalahari Dry (Thailand) Co., Ltd. (THAILAND)
Nghi Son Cement Corporation (VIETNAM)
PNG-Taiheiyo Cement Limited (PAPUA NEW GUINEA)
Qinhuangdao Asano Cement Co., Ltd. (CHINA)
Shanghai Sanhang Onoda Cement Co., Ltd. (CHINA)
Shenzhen Haixing-Onoda Logistics Development Co., Ltd. (CHINA)
Taiheiyo Cement Philippines, Inc. (PHILIPPINES)
Taiheiyo International (Thailand) Co., Ltd. (THAILAND)30

A N N UA L R EP O R T 2 0 1 7

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

Corporate Data
(As of March 31, 2017)

Company Name
Head Office
Established
Paid-in Capital
Fiscal Year
Annual Meeting
Common StockTAIHEIYO CEMENT CORPORATION

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

April 1–March 31
June

Authorized: 1,977,308,000

Issued: 1,271,402,783 (including 30,501,997 shares of treasury stock)

No. of Stockholders

69,882Agent of Record

Sumitomo Mitsui Trust Bank, Ltd.

Major Stockholders

Stockholder

Holding (thousand shares)% of shares issued

Japan Trustee Services Bank, Ltd. (Trust Account)

88,846

6.9

Mizuho Bank, Ltd.

25,155

1.9

The Master Trust Bank of Japan, Ltd. (Trust Account)

71,844

5.6

Japan Trustee Services Bank, Ltd. (Trust Account 5)

23,209

1.8

STATE STREET BANK AND TRUST COMPANY

19,783

1.5

STATE STREET BANK WEST CLIENT - TREATY 505234 19,222

1.5

HSBC-FUND SERVICES BANK NEGARA MALAYSIA-EQUITY 21,189
MSCO CUSTOMER SECURITIESJapan Trustee Services Bank, Ltd. (Trust Account 7)

STATE STREET BANK AND TRUST COMPANY 505225

1.6

19,533

1.5

17,555

1.3

17,422

1.3

Details of the reverse stock split(1) Class of stock for the reverse stock split and ratio of reverse stock split
	The Company will conduct a reverse stock split for its common stock at a ratio of one for 10. If fractions of less than one share are produced as a result of the reverse stock split, theCompany shall collectively dispose of them and distribute the proceeds resulting from the disposal to all the shareholders whose shares have produced fractions, in proportion to theratio of such fractions in accordance with Article 235 of the Companies Act.
(2) Effective date of the reverse stock split
October 1, 2017(3) Total number of shares authorized to be issued as of the effective date
197,730,800 shares
The Company will decrease the total number of shares authorized to be issued of the Company to one-tenth the current number in line with the reverse stock split ratio.

TAIHEIYO CEMENT CORPORATION

31

www.taiheiyo - cement.co.jp

TAIHEIYO CEMENT CORPORATION

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

17110001NT