ANNUAL REPORT 2019
for the year ended March 31, 2019

Fi n a n c i a l H i g h l i g ht s (Con s ol i date d)ProfileFinancial Highlights (Consolidated)
The Japan Steel Works, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017, 2018, and 2019In 1907, the Japanese government launched a joint venture for the purpose of domestic weapons production in Muroran, Hokkaido—later to become a major steel manufacturing center—
consisting of two British firms (W.G. Armstrong and Vickers) and one Japanese company. That
was the birth of The Japan Steel Works, Ltd. (JSW).
After World War II, the company turned its sophisticated technologies and considerable experience to meeting peacetime needs. Continuing to produce high-quality steel, it developed
machinery making use of this steel and endeavored to open up new business fields. In addition
to heavy and chemical industries such as electric power, steel, shipbuilding, and petrochemicals,
the company broadened into areas from automobiles to electrical machinery and informationequipment, earning a worldwide reputation as an integrated producer of steel materials andmachinery.
Today, having grown into a comprehensive materials provider and manufacturer of mechatronics products, JSW is meeting society’s needs at the forefront. In the steel and energy products
business, we are serving the needs of the energy industry in areas such as electrical power generation, oil refining and natural gas. In the industrial machinery products business, we supply
equipment for manufacturing and processing plastic materials, along with a diverse range of
products in areas from information technology to defense.

Thousands ofMillions of yen

U.S. dollars

FY2016FY2017FY2018FY2018¥212,469¥211,700¥220,153$1,983,539

Operating income

12,34020,57824,290218,849

Profit (loss) attributable to owners of parent(4,968)

10,712

19,966

179,890

Total assets

275,315

297,365

305,471

2,752,239

Total net assets

107,587

118,600

129,827

1,169,718

ROE

−4.6%

9.6%

16.3%

11.0%

Equity ratio

38.6%

39.4%

42.0%

42.0%

¥(67.61)¥145.77¥271.69

$2.45

15.00

37.50

55.00

0.50

For the year
Net sales

At year-end

RatiosAmounts per share (yen and U.S. dollars)Contents

Profit (loss)
Cash dividends applicable to the year

Millions of yen

Millions of yen

Yen

Consolidated Statement of Income
Consolidated Statement of Changes in Net Assets

The performance forecasts included in thisreport are judgments based on the information

Notes to Consolidated Financial Statementsthat was available to the JSW Group at the time

Network

0

60,000−10,000

0271.69145.77

Forward-looking statements

Consolidated Statement of Cash Flows
Corporate Directory

120,000

150.0(67.61)

Consolidated Balance Sheet

10,000(226.62)

180,000

Financial Performance (consolidated)

300.0(71.94)Six-year Summary

194,674

Corporate Governance

19,96620,00010,712240,000

Environmental Management

Consolidated Statement of Comprehensive Income

31
32
33
54
55

Profit (loss)(4,968)

Research and Development

Profit (loss) attributableto owners of parent(16,600)

Special Feature

Net Sales(5,327)

Progress of The Priority Measures in ”JGP2020”

220,153

Our Business Domains

Value Creation Model of JSW,
”Yompo-Yoshi (Benefits in all 4 stakeholders)”

211,700

06
10
12
14
16
18
26
27
28
30

Notes 1: Amounts in U.S. dollars are presented solely for convenience and based on the rate of ¥110.99 = US$1.00, the rate of exchange on March 31, 2019.
2: The Company conducted a 1-for-5 reverse common stock split effective on October 1, 2016. For the sake of simplicity, the profit (loss) per share in the table
above is calculated using the number of shares after the reverse stock split.

Message from the President

212,469

Financial Highlights (Consolidated)

223,301

01
02
04

−60.0

this report was prepared and the actual results
may differ significantly from these forecasts due
to a variety of factors.

0−20,0002014 2015 2016 2017 2018 (FY)−240.02014 2015 2016 2017 2018 (FY)2014 2015 2016 2017 2018 (FY)01

M e s s a g e from t h e Pre s i de nt

Message from the President

Naotaka Miyauchi
Representative Director & President

Overview of Fiscal 2018
Business performance
In fiscal 2018, ended March 31, 2019, overseas economies continued to grow moderately. Despite concerns
over an economic slowdown arising from such factors as
escalating U.S.-China trade frictions, the decelerating
Chinese economy, and Brexit, overall overseas economies grew because of the favorable employment situation and strong consumer spending in the United States,
Europe, and other industrialized countries. Althoughsomewhat impacted by a succession of natural disasters

02

such as torrential rains and earthquakes, the Japanese
economy also achieved mild growth underpinned by an
improvement in the employment situation and an
expansion in capital investment.
With respect to the JSW Group’s operating environment, in the Industrial Machinery Products Business segment demand for plastic products was strong due inpart to a shift toward reducing automobile weight; however, demand for materials for automobile-use lithium-ion batteries was temporarily stagnant. In addition,
the operating condition became even tougher in thesecond half of the fiscal year as capital investment was
impacted by the U.S.-China trade frictions and turned

anemic. The Steel and Energy Products Business segment continued to face difficult operating circumstances
due to a contraction in the market for large cast/forgedsteel products despite a sign of recovery in demand forclad steel plates and pipes on the back of expanding
demand for natural gas.
Under these conditions, the JSW Group formulated abanner of “‘Growth’ in Industrial Machinery Products
Business, ‘Rebirth’ in Steel and Energy Products Business”
and promoted its business activities centered aroundthree basic policies in accordance with the medium-term
management plan entitled JGP2020, which was formulated in May 2018 to lay out strategies for the three years
until the fiscal year ending March 31, 2021. These threebasic policies are: 1) optimization of management
resources and strengthening of alliances; 2) strengthening after-sales services (stock-based business); and 3)
acceleration in exploration and development of new
businesses.
For fiscal 2018, total orders amounted to ¥216,155
million (US$1,948 million), down 8.3% from the previous
year, due to decreases in orders in both the Industrial
Machinery Products Business and Steel and Energy Products Business segments. Net sales edged up 4.0% to¥220,153 million (US$1,984 million), with higher sales inboth the Industrial Machinery Products Business andSteel and Energy Products Business segments. With
regard to profits, the JSW Group posted operating
income of ¥24,290 million (US$219 million), up 18.0%;
ordinary income of ¥27,925 million (US$252 million), up
26.3%; and profit attributable to owners of parent of¥19,966 million (US$180 million), up 86.4%.
Looking ahead, the world economy is expected tocontinue growing moderately, driven mainly by ongoing
improvements in employment and consumer spending

in the United States and an anticipated economic recovery due to the effects of various measures in China. In
Japan, we expect the economy to mildly grow on theback of improvements in employment and capital
investment. On the other hand, uncertainties regarding
trade issues, the impact on exporting companies due tothe prolonged Brexit process, the effect of the consumption tax hike on the Japanese economy, and other factors require close monitoring.
Under these circumstances, the JSW Group formulated the medium-term management plan (JGP2020),
which sets out strategies for the three years until thefiscal year ending March 31, 2021, and promoted business activities accordingly. However, more significant
changes have arisen in the market trends in our mainstay Industrial Machinery Products Business thanassumed at the time of the management plan formulation, including a stagnant market for materials for automobile-use lithium-ion batteries in China, uncertainties
in the capital investment trend due to the impact of U.S.China trade frictions, and other factors. As a result ofsuch drastic changes in our business environment, weare revising the numerical targets in the medium-term
management plan (net sales of over ¥260 billion(US$2,343 million) and consolidated operating incomeof ¥30 billion (US$270 million)). The new numerical targets will be disclosed as soon as possible after deliberateconsideration. We are certain, however, that our basic
strategies are still effective, so we will maintain the measures for implementing the plan.
June 201903

Valu e Cre at io n M o d e l o f JSW, ” Yo m p o -Yos h i ( B e n e fi t s i n a l l 4 s t a k e h ol de r s ) ”

Value Creation Model of JSW,
“Yompo-Yoshi (Benefits in all 4 stakeholders)”
Social Issues“Yompo-Yoshi (Benefits in 4 stakeholders)”

Value offered to society

Climate change,
Environment load issue,
Destruction of nature

Social responsibility
Customer satisfaction

Steel andenergyCustomersatisfaction

Corporate ethics

Engineering

Foresight

Inovation

Work-life balance,
Aging and shrinking
population,Work style reforms

04

FPD
equipment

Effective corporate governance andappropriate information disclosure system

Defenseequipment

Socialresponsibility

Molding
machines

Energy-saving measures,
Resource Depletion,
Nuclear power issue

Shareholders
satisfaction

Social responsibility

Stock Business | New Business

Manufacturing thatcreate market

Plastic
production
and processing

Employeesatisfaction

Products that contribute for
reduction of CO2● Injection Molding Machines(Promotion of light-weight vehicle)● Clad Steel Pipes(Spread of natural gas)

Customer satisfaction
Cutting-edge technologies andproducts that are indispensable forthe next generation● Film and sheet equipment(Separators for automotive batteries)● FPD equipment(Spread of OLED panels)

Social responsibility
Customer satisfaction
Products that help spread clean
energy● Clad steel pipes(Transport pipes for natural gas)
● Hydrogen station(Spread of hydrogen energy)

Employee satisfaction
Shareholder satisfaction
Accomplishment oftransformation into an attractive
firm and increase in stakeholders’satisfaction and corporate value05

O u r Bu s i n e s s D om a i n s

Our Business Domains

Orders Received

Sales

Millions of yen

Millions of yen

180,000

120,000

Business Lines
Production, sale, and maintenance ofplastic injection molding machines,
blow molders, magnesium
thixomolding machines

120,000

60,000We also offer and market laser lift-off (LLO) systems for the production of flexible displays, which are anticipated as promising next-generation displays. Leveraging laser application technology as
our core competence, we aim to expand into the fields of FPDs andsemiconductors.

06

2017

2018 (FY)

Large-size all-electric injection molding
machine60,000

0

0

2015

2016

2017

2018 (FY)

2015

2016

Magnesium alloy injection molding machine

Topic
Strengthening After-Sales Services

Flat Panel Display Devices
We have been designing and manufacturing excimer laser annealing (ELA) systems, which are used for mass production of high-quality liquid crystal displays(LCD), at the Yokohama Plant since 1995.

Polyolefin extruder/pelletizer

180,000

173,648

All of our standard plastic injection molding machines are provided
as an electric type to improve the basic performance of the machines
themselves, offer higher precision, and provide high productivity
and energy saving.
We promoted the development of a proprietary molding machineand process that utilize the thixomolding method (semi-solid injection molding technology). Currently, JSW is the only manufacturer ofmagnesium thixomolding machines in the world.
We have also supplied a diverse range of blow molders, which produce various tanks and bottles for automotive gas tanks, thereby
receiving high praise.

Production, sale, and maintenance ofplastic production and processing
machinery (including pelletizers,
compound extruders, film and sheet
equipment, etc.)

169,000

Molding Machines

Business Lines

167,875

We manufacture and sell a variety of plastic production and processing machinery, which are highly regarded by users around the world,
for a wide range of applications and purposes. Our product lineup in
this field includes pelletizers that manufacture plastic pellets; twinscrew extruders for compounding, reactive processing, dewatering,and devolatilizing; film and sheet equipment; and spinning extruders for synthetic fibers. We will promote the establishment of a structure oriented toward the “stock-type” business (recurring revenue
business model) through concerted efforts between manufacturing
and sales departments in the areas of product delivery and regular
maintenance services.
To respond to diverse market needs, we have established an
integrated development structure for products spanning from plastic manufacturing machines to processing machines that address
customers’ various issues and respond to market changes.

159,378

Plastic Production and Processing Machinery

144,358

78.9%

Orders totaled ¥175,757 million (US$1,585 million), down 5.6% from the previous
fiscal year, due mainly to decreases in plastic production and processing machinery
as well as FPD equipment.
Sales rose 2.8%, to ¥173,648 million (US$1,565 million), attributable primarily toincreases in sales of plastic production and processing machinery as well as molding machines.
Operating income was on par with the previous fiscal year, decreasing 0.4% to¥23,599 million (US$213 million). The slight decline resulted from a change in product sales composition offsetting an increase in sales.

175,757

Other Machinery Sector

Sales
Composition

186,253

Plastics Machinery Sector

Performance in Fiscal 2018

156,204

Industrial Machinery Products BusinessBusiness Lines
Electronic components and displays(laser annealing systems, thin-film
deposition systems, etc.)
Service and parts center for molding
machines (Hiroshima Plant)

We also provide a broad range of services such as equipment maintenance and parts
supply through our extensive global network.
In the field of plastic production and processing machinery, we have enhanced
customer support bases overseas. In the field of molding machines, we have expanded
the service and parts center within the premises of the Hiroshima Plant while newly
establishing a service and parts center in the Czech Republic.
Going forward, we will secure stable profits and further raise customer satisfaction
by reinforcing the foundation for our service structure.

07

O u r Bu s i n e s s D om a i n s

Steel and Energy Products Business
Steel Products Sector
Steel Plates and Structures Sector

Performance in Fiscal 2018
Sales
Composition

18.7%

Clad Steel Plates and Pipes
The Muroran Plant possesses Japan’s largest quadruple reversible
plate rolling machine, which enables rolling of ultra-thick, wide andlong steel plates of up to 350 millimeters thick, 4.8 meters wide, and20 meters long. Using advanced manufacturing technology, we now
mainly produce high-quality clad steel plates and clad steel pipes
using clad steel plates. All of our products are used in a wide range
of industrial applications in Japan and overseas, giving this businessa unique profile.

Orders totaled ¥34,123 million (US$307 million), down 20.7% year on year, due
mainly to a decrease in products for electronic devices and nuclear power plants.
Sales were up 13.7%, to ¥41,251 million (US$372 million). Despite a decrease insales of products for electronic devices and nuclear power plants, sales rose thanks
to an increase in clad steel plates and pipes.
Operating income amounted to ¥2,676 million (US$24 million), compared with
an operating loss of ¥1,019 million in the previous fiscal year, due mainly to anincrease in sales and a reduction in fixed costs.

Back-up Roll for Plate Mill

Business Lines
Production and sale of clad steel
plates, clad steel pipes, etc.

Orders Received

Sales

Millions of yen

Millions of yen

90,00090,000030,00041,251

51,207
34,12330,00060,00043,053

Production and sale of products for
power generation; nuclear powerrelated equipment die materials;
general cast and forged steel
products such as rolled materials
and dies; cast and forged steel
materials such as functional
materials; pressure vessels andrelated materials for oil refineries;
and other areas

60,00019,500Business Lines

39,785In addition to being a leading global supplier of numerous extralarge cast and forged steel products, the Muroran Plant produces awide range of high-quality small and medium-sized cast and forgedsteel products. Steel is manufactured in electric furnaces. In ingots
for forgings, we not only have one of the world’s largest production
capacities of 670 tons but also strive to improve quality by utilizing
the vacuum ingot-making method, ladle refinement method,
vacuum melting method, and electro slag remelting method. We
produce a diverse range of products corresponding to the individualand varying needs of customers.
We apply technological capabilities nurtured by meeting stringent specification requirements from customers in thermal, hydroelectric, and nuclear energy fields, and provide cast and forged steel
products for a variety of applications not only in the existing energy
fields but also in iron and steel, industrial machinery, and electronics
industries while making proposals to customers as necessary.
In addition, the Muroran Plant integrates the various forged steel
products it manufactures and leverages the Company’s state-of-theart welding technologies and facilities to produce very large welded
structures, such as pressure vessels for oil refineries and petrochemical plants, in an integrated process extending from raw materials tofinished products. Through after-sales services support, we aremeeting demand both in Japan and overseas.

36,287

Cast and Forged Steel Products

74,854

Clad steel plate

0

2015

2016

2017

2018 (FY)

2015

2016

2017

2018 (FY)

Topic
Rebuilding of Steel and Energy Products Business
Under the assumption that the current market environment will persist for a long
period of time, the JSW Group’s Steel and Energy Products Business is under consideration for establishing a new company centered around the Muroran Plant in April
2020. The move is aimed at securing profitability at the current business compositionand scale while accelerating the profit structure reform and promoting efficiencies by
eliminating redundant functions through a merger with an affiliated company.

Note: At the meeting of the Board of Directors held on April 24, 2019, the JSW Group resolved to withdraw from the manufacture and sales of wind power generators,
which were included in the Other Business. However, we will continue providing maintenance services for wind power generators.

08

Muroran Plant

09

Pro gre s s of Th e Pr i or i t y M e a s u re s i n ”J G P 2 0 2 0 ”

Progress of Medium-Term Management Plan “JGP2020”
Developing Foundations for Growth
To establish the ground to realize our growth in the “Next 10 Years”
FY2030I n d u st r i al M a c h i n e r y Pro d u c t s B u s i n e s s
Ste e l an d E n e rg y Pro d u c t s B u s i n e s s

JGP2020
Apr. 2019
Absorption merger of
Nikko Information
System Co.

〜JGP2017

Expansion of the existing business

Apr. 2019
Acquisition of
GM Engineering Co.

2020
Absorption merger
with Meiki Co.
(Plan)

2018〜2020
Investment for greater production capacity
at Hiroshima plant

New business, M&A

Expansion of the business scales“Aggressive management”
expansion of our business fields
Restructuring of the

Securing profitability in the current scale

production system

Exploration of the new opportunities
Aug. 2019
Joint Venture withJX Nippon Mining &MetalsStrengthening competitiveness of clad steel plates and pipes

Continuous profit making

In step with an expansion in demand for natural gas, growth is anticipated for clad steel plates and pipes. To strengthen
competitiveness of our products, we are proceeding with capital investment over four years from fiscal 2018 (fiscal year
ended March 31, 2019) to fiscal 2021 (fiscal year ending March 31, 2022).

from the existing business
Apr. 2020
Establishment of new company
and integration of subsidiaries(Plan)

3 Basic Policies (Priority Issues) in “JGP2020”

GrowthRebirthSteel and Energy
Products Business

Ⅰ. Optimization of Management Resources and Strengthening of Alliances
Optimization through rearrangement of the resources→ Active investment for industry machinery product business, Rebuild of cost structure in the steel and energy
products business that suits the current sales scale
Expansion of the businesses through alliance and M&A→ Breaking free of adherence toward self-sufficient policies
Ⅱ. Strengthening After-Sales Services (Stock-Based Business)
Enhancement of service force mainly in industrial machinery→ Securing stable profitability, improvement of customer satisfaction
Strengthening customer relationship through service business→ Development of foundations for the next business
Ⅲ. Acceleration in Exploration and Development of New Businesses
Exploration of new businesses from the view point of mega trends
Fostering and commercialization in the 4 fields (aircrafts, hydrogen, crystals and thin films) + α

Revision of numerical targets in the JGP2020 medium-term management planDue to the drastic change in our business environment arising from the impact of U.S.-China trade frictions and other factors, we are revising
the numerical targets in the medium-term management plan (net sales of over ¥260.0 billion (US$2,343 million) and consolidated operating
income of ¥30.0 billion (US$270 million)). The new numerical targets will be disclosed as soon as possible after deliberate consideration.
We are certain, however, that our basic strategies are still effective, so we will maintain the measures for implementing the plan.

10Enhancing Production Structure of Large Injection Molding Machines
Meiki Co., Ltd., a wholly owned subsidiary of the JSW Group, steadily engages in business centered around large injection molding machines for automobile-related products. In response to a trend toward the increasing use of plastic
automotive components, an expansion in demand is expected for large injection molding machines in the automobile
industry. To accommodate such expanding demand, we decided on a policy to absorb and merge Meiki on April 1,
2020. Taking this opportunity, we will reinforce production capacity through the optimal allocation of management
resources.

Fostering new business2018〜2021 Investment for clad steel businessIndustry Machinery
Products Business

Expanding business scale for film and sheet manufacturing equipment
In response to medium- to long-term expansion in demand mainly for manufacturing separator films, we reinforced
production capacity and established a structure for expanding the business scale.
In April 2018, we commenced a capital and business alliance with GM Engineering Co., Ltd., which possesses a strength
in medium to small sheet manufacturing equipment mainly for food use. In April 2019, we acquired additional shares of
GM Engineering and welcomed it as a subsidiary of the JSW Group. Through a synergistic effect with JSW’s strength inlarge film manufacturing equipment, we intend to promote rapid business expansion.

Steel and Energy Products Business

Sowing and nurturing of seeds forApr. 2019
Cooperation with
Tsukishima Kikai Co.

Industrial Machinery Products Business

Commencing cooperation in production activity with Tsukishima Kikai Co., Ltd.
Aimed at cooperation in production activity with Tsukishima, we transferred the manufacturing function of its Ichikawa
Factory to the No. 4 steel factory and other factories within our Muroran Plant. The Muroran Factory of Tsukishima Kikai
commenced operation in April 2019.

Establishing Muroran Copper Alloy, Co., Ltd., a joint venture to melt and cast copper alloys
In August 2019, Japan Steel Works, Ltd. and JX Nippon Mining & Metals Corporation established Muroran Copper Alloy,
Co., Ltd., a joint venture to melt and cast copper alloys. The establishment of the joint venture enables JSW to expand its
business in the high-performance metal materials field in addition to existing steel products and accelerate the rebuilding of the Steel and Energy Products Business.

Giving consideration into the establishment of a new company
To secure stable profitability at the current business composition and scale in the Steel and Energy Products Business,
we are under consideration for reorganizing the Steel and Energy Products Business throughout the entire JSW Groupand establishing a new company in April 2020.

Other Business
Strengthening the information technology function
Aiming to strengthen the function for cutting-edge information technology such as machine learning, we absorbed andmerged Nikko Information System Co., Ltd., our wholly owned subsidiary, on April 1, 2019. By keeping the information
system department within the same organization, we will strive to solidify the structure related to utilizing the latest
infor-mation technologies such as the Internet of Things (IoT) and to further improve the value of our products andservices.

11

S p e c i a l Fe at u reSpecial Feature

Enhancing Customized Injection
Molding Machines
Enabling quicker services and globalized
response via the Remote Maintenance function<Customer’s factory> Exchanges of video data <JSW service bases>
and system information
Smart device

Providing precise
instructions via remote
operation, etc.

JSW Worldwide loT Solutions ofEnhancement

Based on the Mass Customization Strategy* of our injection molding machine business, we developed and commenced sales of three
new customized products. The J’s Drive System™ realizes both highload and high-speed injection, while the SOFIT™ offers improvements in such issues as stable production and manufacturing costsof foaming molding technology, which is expected to contribute to
the weight reduction of automotive parts. The third customized
injection molding machine is the J-WiSe™, which helps realize turning existing facilities into smart factories through the utilization ofInternet of Things (IoT) technologies.
We are committed to providing solutions using injection molding technology in such fields as automobiles, home appliances,office automation equipment, food containers, and daily goods.
* Using the common, standardized components as the foundation, providing customized machines in
response to regional and customer needs to aim for product differentiation

The aircraft business necessitates state-of-the-art technologies andextremely sophisticated quality management. Thinking the JSWGroup could apply its advantages, it launched its own aircraftbusiness.
In October 2018, we obtained JIS Q 9100 certification (2016), aquality management system, which is required by manufacturers toenter into the aerospace and defense industries in Japan (for the honeycomb core processing of aircraft rotor blades). We aim to firmly
establish the mass-production structure of the product while at thesame time strengthening activities toward obtaining certification for
carbon fiber resin composite materials as well.
By making full-fledged entry into the aircraft business, for whichabundant demand is expected mainly for commercial airplanes, weare dedicating earnest efforts into expanding our business.

12

No. 6 assembly factoryNo. 7 assembly factory

The Hiroshima Plant is our production
base for industrial machinery products. In
response to robust demand mainly forplastic machinery, in September 2018 weestablished the No. 6 and No. 7 assembly
factories as well as a new service center
for injection molding machine parts.
Through these capital investments, theproduction capacity of the Hiroshima
Plant has been increased by 15%.
To provide a pleasant and comfortable work environment for employees, a
new welfare wing complete with a cafeteria, locker rooms, and showers has also
been built.

Policy Decided for Absorption-Type
Merger of Meiki Co., Ltd.

Full-Fledged Entry into theAircraft Business* Honeycomb core refers to a structure with hexagonal cells pressed together. It is lightweight yet
features such attributes as high strength, high rigidity, shock absorption, and heat resistance.

Raising Production Capacity by
15% at the Hiroshima Plant

Aluminum honeycomb core

Meiki Co., Ltd. is a pioneering company that developed an injection molding machine for the first time inJapan. Since concluding a capital and business alliancein October 2008, we have gradually forged a close
relationship, culminating in 2016 to make Meiki into a
JSW Group subsidiary.
Meiki has steadily performed well mainly in thearea of large injection molding machines for automobile-related manufacturers. Aiming to pursue a futurebusiness expansion for the entire JSW Group, we
decided on a policy to absorb and merge Meiki in April
2020 to optimally allocate management resources.
We are determined to link this merger to more efficient business operations, productivity improvements,and higher profitability.

Meiki Co., Ltd.

13

R e s e a rc h a n d D e ve l op m e nt

Research and Development

products and businesses and pursue innovations for existing products.

Research and development activities were almost entirely funded by the Company during fiscal 2018. Combined spending on research and development for

The focuses in Machinery Products are to enhance plastics machinery, IT

the Industrial Machinery Products Business, the Steel and Energy Products Busi-equipment, and other industrial machinery. We will allocate significant

ness, and the Other Business amounted to ¥4,506 million (US$41 million).

resources to such machinery by clarifying that our commercialization frame-

Aiming to become a company that contributes to the prosperity of society bywork is open to mergers, acquisitions, and alliances. In Steel Products, we

generating changes through our innovative technologies, we strive to develop

aim for improving profitability of existing products while commercializing

new products and production techniques using our proprietary technologies. To

Muroran Research Laboratory

new areas.

bring these products and techniques to market as soon as possible, we actively
promote multidisciplinary and technological tie-ups and joint development.

Activities by Business Segment

Business divisions and Group companies collaborate to 1) improve the capabilities, performance, and reliability of core products; 2) develop and nurture

Industrial Machinery Products Business

offerings in new business fields based on core and differentiated technologies;

In machine-related product development, we are working to develop

and 3) promote the development and commercialization of new products

advanced processing technology for plastic molding machines; enhance thethrough synergies with Group companies.

performance of plastic extruders; improve the functionality and perfor-

In order to facilitate R&D across the Group as well as further accelerate themance of film and sheet equipment; enhance the performance and lower

R&D of existing products and the commercialization of products in new businessthe cost of magnesium injection molding equipment and compressors; andfields, in April 2018 JSW implemented a partial reorganization of the Researchdevelop manufacturing equipment for fiber-reinforced plastic composite

and Development Headquarters. Details are as follows:

components. We are also incorporating advanced technologies and systems(1) The Technological Strategy Office, which was tasked with the planning of

to develop laser annealing equipment and other laser application equip-

R&D-related themes and the commercialization of new business as well as

ment. R&D spending in this segment was ¥2,024 million (US$18 million) in
fiscal 2018.

the survey of market and technological trends, has been integrated into the
New Business Promotion Headquarters with its functions transferred.

Hiroshima Plant
Technical Development Department

Steel and Energy Products Business(2) Each research laboratory has been placed under the authority of the individual plants, and the research laboratories in Hiroshima and Yokohama

Product development centers on developing materials and manufacturing

have been reorganized into the Technological Development Department.

process technologies, notably for clad steel pipes for natural gas transportation pipelines as well as large steel castings and high alloys for high-efficiency

Basic Research and Development Policy

thermal power generation. Our technological development focuses on

In terms of the promotion and commercialization of new businesses, the New

ment R&D spending totaled ¥685 million (US$6 million) in fiscal 2018.

improving materials and element technologies for existing products. Seg-

Business Promotion Headquarters collaborates with each business divisionand prioritizes R&D on new energy and energy savings, information and tele-

Other Business

communications, nanotechnology and materials, aircraft components, andIn addition to establishing the structure for commercializing the aircraft busi-

new production technologies, all of which are related directly to JSW’s busi-

ness and developing and enhancing materials and element technologies tonesses. Through these efforts, we aim to focus on expanding and upgrading

create lighter and more reliable pressure accumulators for hydrogen fuelingstations, we also conduct research into practical application of composite

core technologies while cultivating and growing existing businesses.
We engage in basic research for future technologies and contemporarysocial needs and in researching component technologies for existing products. We will build on these efforts to undertake R&D projects that create new

14

Yokohama Plant
Technical Development Department

substrates for surface acoustic wave (SAW) devices and development ofplasma application equipment. Segment R&D spending totaled ¥1,796 million (US$16 million) in fiscal 2018.

15

E nv i ron m e nt a l M a n a g e m e nt

Environmental Management
As a responsible member of society, JSW regards operating in harmony with the environment as animportant corporate responsibility. In our pursuit of production activities and environmental technologies that respect environmental integrity, we engage in business activities that contribute to the ecologically sustainable development of society.
Ever since we formulated a medium-term environmental plan in fiscal 2001 for the first time, we havebeen proactively promoting environmental management activities throughout the company. In fiscal
2018, we formulated the Fifth Medium-Term Environmental Plan (fiscal 2018 to fiscal 2019) and widened
the scope of environmental activities to include the entire JSW Group. Accordingly, we are engaged in
activities to achieve the goals set out in the plan.
Action Plan
1. We
	 aim to carry out environmental tasks in an organized way,
and to implement environmental preservation activities
continuously.
2. 	We will set appropriate objectives and targets for reducing theburden our activities impose on the environment with conserving biodiversity.

Environmental Management Structure

ISO 14001 Certification Progress

The Environmental Management Committee, headed by the
director in charge of environmental management, determines
matters such as annual environmental management policies andprograms of environmental activities for the whole company.
Each plant has its own Environmental Supervisory Committee,
which promotes environmental management activities andworks hand in hand with other Group companies including affiliates to reduce the environmental impact of the Company’s
activities.

The Company’s Muroran, Hiroshima, and Yokohama plants and
its Group companies, Meiki Co., Ltd., Fine Crystal Precision (S.Z.)
Co., Ltd., and NIKKO-YPK SHOJI CO., LTD. (Head Office, Saitama
Office, Kansai Branch, Kansai Sales District Office, Chubu Branch,
Sendai Sales District Office, Nagano Sales District Office, Toyama
Sales District Office, Kyushu Sales District Office), have obtained
certification under ISO 14001, an international standard for environmental management systems.
We leverage third-party certification bodies and internal
inspections to conduct checks at least once annually to ensurethat ISO 14001-certified business sites are endeavoring to maintain and improve their environmental management systems.
The Company and Group companies have adhered strictly tolaws and ordinances, and there were again no violations infiscal 2018.

President
Chief Environmental Management Supervisor/
Environmental Management Committee Chairman(Director in charge of Environmental Management)

ISO 14001 Certifications of Business Sites

Environmental
Management Committee
JSW Group companies Environmental
Management Supervisors(Company presidents)

JSW plants Environmental
Management Plant Supervisors(General plant managers)

Environmental
Supervisory
Committees

Environmental
Supervisory
Committees

JSW Group companies Environmental
Management Supervisors

Departments

16

3. 	We aim to provide society with products and services that
contribute to the preservation of the environment.
(1)	We endeavor to increase the social value of our products interms of environmental protection, safety and hygiene.
(2)	We will provide products and services that reduce environmental loads by obtaining a clear grasp of environmental
needs and developing technologies.

Affiliatedcompanies

JSW plants Environmental
Management Supervisors

Departments

Affiliatedcompanies

Business Site

Certification Date

Current Certification Body

Muroran Plant

December 18, 1998

Lloyd’s Register Quality
Assurance

Hiroshima Plant

December 18, 1998

Japan Quality Assurance
Organization

Yokohama Plant

September 4, 2006

Lloyd’s Register Quality
Assurance

Meiki Co., Ltd.

March 4, 2005

ASR International Corporation

Fine Crystal Precision(S.Z.) Co., Ltd.

March 7, 2007

Intertek

NIKKO-YPK SHOJI
CO., LTD.

February 7, 2005

Japan Value-Added
Certification Co., Ltd.

Business activities and environmental impact
In the process of manufacturing activities related to our core business sectors, steel and energy products business and industrial machinery products business, the environmental impact status is shown below.
We measure both inputs (consumption of energy, water, and the like) and outputs (such as waste, carbon dioxide, and water resulting
from manufacturing processes), and use the data in our environmental improvement activities.

INPUT

MANUFACTURING

OUTPUT

Materials

Industrial machinery products• Metals(including steel,
non-ferrous metal)• Twin-screw extruders

Total waste volume
92,950 t• Plastics• Rubber, timber, etc.

Energy2,966 TJ
Chemical
substances
7,315 tWater

• Single-screw extruders

Waste emission volume• Film and sheet equipment• Electric servo drive molding machines• Blow molding machines• Magnesium alloy injection molding machines• Excimer laser annealing systems

12,369 t

Recycling volume

80,581 t

87%

of total
waste volume
is recycled

CO2 (from electric power and fuel)186,547 t-CO2

Steel and energy products• Forged steel components for nuclear power reactors• Monobloc rotor shafts• Turbine casings for thermal power generation• Reactors for petroleum refineries

CO2 (from domestic transportation)
3,030 t-CO2
Chemical substances(amounts emitted and transferred)

213 t• Clad steel plates/clad steel pipes

Waste water
16.37 million m3

22.60 million m3

ECO Magnesium Alloy Injection Molding Machines
With emission regulations becoming ever more stringent all over
the world to curb global warming, it has become a pressing issue
to reduce body weight for both internal-combustion and electricvehicles. To achieve this goal, carmakers are considering the use ofvarious lightweight materials. Among such materials, magnesiumis drawing much attention as an eco-friendly material for its lightweight and excellent recyclability. In particular, an increase in its
applications in the automotive field is anticipated. Compared withaluminum alloy, which has been similarly drawing attention as alightweight material, magnesium alloy weighs approximately onethird less. In addition, depending on the product design, magnesium alloy makes it possible to reduce the overall weight of the
product even further, and thus is expected to bring significant
effects.
JSW has been involved in the magnesium-related business formore than 25 years. Our core product, magnesium alloy injection
molding machines, is the only machine in the world that enables
the molding of magnesium. The machine melts magnesium in asealed cylinder. This makes it unnecessary to use non-flammablegas (mainly sulfur hexafluoride, a potent greenhouse gas that has ahigh global warming potential), which was needed in the conventional die casting method to prevent molten metal in the furnacefrom being exposed to the atmosphere. In this way, magnesium
alloy injection molding machines contribute to the protection of
the environment in terms of the manufacturing method.
We have now commenced sales of large molding machines forthe production of large magnesium parts, which are expected toachieve a greater effect on weight reduction. JSW will remain committed to developing eco-conscious products.

17

Cor p orate G ove r n a n ce

Corporate Governance
JSW recognizes that it must earn the trust of shareholders, customers, employees, and other stakeholders to aim to enhance enterprise value and thereby contribute to the economy and society as a whole.
We therefore created a corporate governance setup that encompasses a management organizationand framework to implement essential measures and pursues fair disclosure to ensure business
transparency.
On November 18, 2015, we formulated “Corporate Governance Policy of The Japan Steel Works, Ltd.”
based on a resolution of the Board of Directors. The aim of the Policy is to clarify our basic stance, initiatives, and approach with respect to corporate governance. The Policy can be found at the following
website: https://www.jsw.co.jp/en/ir/governance.html

Overview of Corporate Governance
Structure

plant managers, headquarters managers, and executive

reports to the Board of Directors. Likewise, the Remuneration Advisory Committee deliberates on matters related

environment and monitoring the progress of the Com-

comprising nine directors, two of whom are indepen-pany’s business plan. Its goals are to share such knowl-

dent, and four audit & supervisory board members, twoedge throughout management and reflect it in theirof whom are external.

decisions as well as to ensure risk management andcompliance.

Name

Title

Naotaka Miyauchi

Representative
Director &President

Yutaka Higashiizumi

Representative
Director &Executive Vice
President

Takashi Shibata

Director,
Managing
Executive Officer

Masao Oshita

Director,
Managing
Executive Officer

Toshio Matsuo

Director,
Managing
Executive Officer

Junichiro Deguchi

Director,
Managing
Executive Officer

Board ofDirectors

Executive
Board

Management
Council(Chairman)(Chairman)(Chairman)

The Audit & Supervisory Board comprises four audit &ing and oversight from the executive functions ofsupervisory board members, two of whom are external

Takashi Iwamoto

Director,
Executive Officer

executive officers. The goal is to accelerate decision-mak-as part-time. These members attend meetings of theing and enhance oversight and execution.

Board of Directors, the Executive Board, the Manage-Nobuo MochidaDirector(Note 1)

(Notes 4)

Sadao Degawa

Director(Note 1)

(Notes 4)

Kenji Watanabe

Audit &
Supervisory Board
Members(full-time)(Notes 3 & 4)

Toru Nishiyama

Audit &
Supervisory Board
Members(full-time)(Notes 3 & 4)

Itaru Masuda

Audit &
Supervisory Board
Members(Note 2)

Fumihiko Yazawa

Audit &
Supervisory Board
Members(Note 2)

Toyohiko Kagawa

Managing
Executive Officer

Yoshitaka Sato

Executive Officer

Shingo Mito

Executive Officer

Hiroki Kikuchi

Executive Officer

Shigeki Inoue

Executive Officer

ment Council, and other important gatherings. In princi-

monthly to decide and report on basic operational poli-ple, they visit the Company’s plants and offices as well as

cies, legally stipulated matters, and other importantmajor subsidiaries once every six months. The members

management issues. Managing executive officers andreceive divisional reports as necessary and exchange

above attend these meetings, positioning the Board as aopinions with directors, executive officers, and key

vehicle for mutual oversight of directors and executive

employees. Based on these efforts, the members express

officers.

their views to management from an objective and neu-

The Executive Board—consisting of two representative directors, executive officers nominated by the presi-

tral perspective, and exercise strict oversight with regard
to the execution of directors’ duties.

dent, two outside directors, and an audit & supervisory

Seeking to ensure fairness and transparency of deci-board member (chosen by rotation)—meets once asion-making processes related to executive nomination

week to deliberate and decide on important manage-

and remuneration, the Company established the Nomi-

ment matters and important business execution deci-

nation Advisory Committee and the Remuneration Advi-

sions made by directors and executive officers in addition

sory Committee. Consisting of five members, including

to discussing, reporting on, and monitoring overall oper-

several outside executives, the committees serve as advi-

ational matters.

sory bodies to the Board of Directors. The Nomination

Our Management Council also convenes once

Advisory Committee deliberates on matters related tomonthly, in principle. Members include directors, audit &appointment and dismissal of directors, audit &The constituent members of each entity are as
follows.

Constituent members

tain an executive officer system: separate decision-mak-In principle, the Board of Directors convenes once

reports to the Board of Directors.

to renumeration of directors and executive officers andofficers. This body’s tasks include assessing the businessWe employ an audit & supervisor board member system

The term of office of directors is one year. We main-

18

supervisory board members, divisional heads, generalsupervisory board members, and executive officers andOther constituent members

Audit &
Supervisory
Board

Nomination
Advisory
Committee

Remuneration
Advisory
Committee(Chairman)(Chairman)(Chairman)(Notes 5)(Notes 5)(Notes 4)

Divisional heads,
deputy director ofheads, generalplant managers,
headquarters
managers

Notes: 1. Nobuo Mochida and Sadao Degawa are outside directors. 2. Itaru Masuda and Fumihiko Yazawa are outside audit & supervisory board members.
3. One audit & supervisory board member attends by rotation. 4. Attends as an observer. 5. Attends as an advisor.

19

Cor p orate G ove r n a n ce

as expressing opinions to management from an objec-

Reason for Adopting the Corporate
Governance Structure

tive and neutral perspective.
In addition to attending aforementioned important

whistleblowers.
• The Company clearly stipulates in its Corporate Codeof Behavior the thorough enforcement of organiza-

Each director reports on the business execution status atmeetings as well as other meetings, each audit & super-

The Company recognizes the importance of its manage-

important meetings of the Board of Directors, the Execu-

visory board member conducts audits of headquarters

tional crisis management against anti-social forces,

ment responsibilities with respect to establishing andtive Board, the Management Council, and other bodies,

divisions, business divisions, subsidiaries, and otherand firmly rejects unwarranted demands from themproperly managing the necessary systems to ensure

which ensures mutual oversight of directors. Ten execu-

organizations on a regular basis. When deemed neces-in accordance with the law and in collaboration withappropriate business operations. Based on this recogni-

tive officers, five of which concurrently serve as directors,sary, they receive reports on information related to risk

relevant authorities.

tion, it has set up a specialist unit to supervise internal

are appointed at the meeting of the Board of Directors.

management, compliance, and other matters fromcontrols, and its Internal Control Committee also meets

They execute business operations and make business-re-respective departments. By exchanging opinions withas necessary. The Company is working to improve its

lated decisions to the extent delegated, and report on

directors, executive officers, and key employees, theyinternal control system in line with its Basic Policy on

the business execution status at meetings of the above-

keep tabs on the business execution status of directors• The Company appoints a director or an executive offi-

Internal Control Systems, adopted by the Board of Direc-

mentioned Executive Board, Management Council, andand express opinions to management from an objective

cer as the person responsible for safeguarding andtors, as described below.

other bodies, thereby ensuring oversight of executive

and neutral perspective.

managing information. Adhering to document and2. Safeguarding	and managing information relating
to the execution of duties by directors

information management rules and regulations, theofficers by directors. Outside directors also attend each

The Company believes these measures ensure the

1. Adhering	
to laws and regulations and the Articles

of important meetings mentioned above, participating

current corporate governance structure to fully exert theCompany stores and manages important informationof Incorporation relating to the execution of duties

in the decision-making process of management as welloversight function over management.

relating to the execution of duties by directors andby directors and employees

executive officers as printed or digital records. This

Shareholders’ meetings
Board of Directors

Audit & Supervisory Board
Monitoring

Executive Directors
Outside directors

Decisionmaking

Reporting

Audit & supervisory board members
Cooperation

Outside audit & supervisory board members

Oversight/
monitoring

Nomination Advisory Committee

Cooperation

Monitoring

Monitoring

Accounting
auditors

Cooperation

Executive Board

Information Security
Committee

Business execution organizations
Headquarters divisions
Business divisions
Plants
Subsidiaries

General Safety andHygiene Council

Directors with business execution responsibilities/executive officers

Export Control Administration
Committee

Management Council

Environmental Management
Committee

Internal Auditors OfficeInternal Control Committee

President• At the Company, compliance extends beyond pre-information includes the minutes of important meet-venting fraud and adhering to laws and regulations

ings and written requests for approvals. Further,and in-house rules. It also encompasses the fulfill-

directors and audit & supervisory board members

ment of broad social responsibilities and establish-

may review or copy this information as needed.

ment of various compliance-related rules. The• The Company discloses financial and important man-essence of its compliance activities centers on direc-

agement information in an appropriate and timely

tors and executive officers taking the lead and prac-manner.

ticing integrity and raising employee awareness ofcompliance issues through education and training.

Remuneration Advisory Committee<Business execution>

20

Status of Internal Control System System

3. Rules on managing risk of losses• The Company established the Internal Audit Division• Directors, executive officers, and employees concur-

to ensure that all of its corporate operations comply

rently serving as general managers identify and evalu-

with all laws and regulations and in-house rules. The

ate risks arising in the course of business. They address

Division conducts regular and spot audits and submits

these risks in keeping with regulations and the man-the results of its audits to the president and to otheragement approval system. The Board of Directors andrelevant parties as appropriate, including the Board of

the Executive Board deliberate on key risks.

Directors, the Executive Board, the Management Council, and audit & supervisory board members.

• The Company maintains risk management rules anda Companywide risk management system. Divisions• The Company ensures multiple ways, including inter-overseeing risks in such areas as safety and hygiene,

nal and external channels, for reporting and discuss-environmental management, information security,

ing compliance-related problems uncovered byand export control administration set up committees

employees, based on a guarantee of protection forand create and administer rules for properly

21

Cor p orate G ove r n a n ce

managing such risks throughout the Company. The• The Company guarantees that persons making reports

Company also appoints a director or an executive

5. Ensuring appropriate conduct at Group companies

Appointing audit & supervisory board member
6. 	

to audit & supervisory board members are not subject

officer as the person responsible for risk manage-• The Company encourages Group subsidiaries to work

assistants, securing their independence from direc-

to unfavorable treatment based on the content of suchment. In collaboration with the Internal Audit Divi-

to establish and build Companywide internal controls

tors, and ensuring the effectiveness of instructions

reports.

sion, that person monitors the progress of risk

according to JSW’s Vision, Management Philosophy,

given to them

management and reports to the Board of Directors or

and Corporate Code of Behavior. The Company also• On request from audit & supervisory board members,

8. 	Policies on advance payment and compensation

the Executive Board as appropriate.

supports Group subsidiaries to strive for efficient

the Company offers employees as assistants. The

pertaining to costs and obligations incurred in the• At key headquarters divisions, business divisions, andbusiness execution and autonomous management

Company seeks the opinions and consent of these

execution of duties by audit & supervisory board

plants, the Company has risk managers who evaluate

by ensuring proper division of duties and clarification

members for appointments, dismissals, evaluations,members

measures and identify daily risks. It also has a crisisof decision-making authority based on their own

and other personnel treatment regarding these assis-• The Company assumes responsibility for any neces-management headquarters to handle critical situa-

in-house rules.

tants to secure their independence from directors

sary costs incurred in the execution of duties by audit

and executive officers.

& supervisory board members.

tions. Accordingly, the Company is prepared for bothordinary and emergency situations.

• The Company has formulated operational and management rules for subsidiaries and defined the• The Company ensures that employees assigned as

related management responsibilities and leadershipassistants can perform their duties according to the

4. Ensuring the efficient execution of duties by directors

structures. The Company maintains a system fordirections and instructions of audit & supervisory• The Company ensures rapid decision-making andreporting, notifying, and gathering information

board members.

flexible and efficient business execution by having

about subsidiary decisions on important matters andthe president act as chief executive officer, with direc-	
9. Ensuring
the effectiveness of audits conducted byaudit & supervisory board members• The Company encourages directors, executive officers, and employees to recognize the importance and7. Reporting	
to audit & supervisory board members

value of audits conducted by audit & supervisory

tors overseeing key headquarters divisions and busi-• In addition to dispatching directors and audit &by directors and employees of the Company and its

board members and to accord them their fullest

ness units. Under this command and management

supervisory board members to Group subsidiaries,

subsidiaries, other structures for reporting to audit

cooperation. These members can request assistancestructure, executive officers appointed by the Board

the Company ensures that subsidiaries comply with& supervisory board members, and preventing

from the Internal Audit Division, headquarters divi-of Directors perform the duties assigned to them.

all laws and regulations and in-house rules by man-unfavorable treatment based on the content of

Directors and executive officers deliberate, decide,dating periodic and spot internal audits through rele-

what is reported

and report on important matters in meetings of thevant departments or the Internal Audit Division. It• Audit & supervisory board members are guaranteed

Board of Directors and the Executive Board.

also audits operations directly and instructs subsid-

the opportunity to attend meetings of the Board ofiaries on internal control improvements.

Directors, the Executive Board, the Management• Audit & supervisory board members have the discre-

Council, and other managerial meetings that deliber-tion to employ the services of legal advisors andate, decide, and report on important matters.

other outside experts.

• The Board of Directors formulates the medium-term

important facts.

management plan and annual business plans as Com-• The Company supports the efforts of Group subsidiar-panywide objectives for directors, executive officers,

ies to establish systems to identify and evaluate risks

and employees. Directors and executive officers plan

according to division of duties determined indepen-• Based on its management approval system, the Com-and implement specific policies for reaching goals,

dently based on rules concerning risk management.

sions, and all other divisions for auditing tasks.
• The Company enables audit & supervisory board
members to collaborate closely with the accounting
auditor and the Internal Audit Division.

pany presents approval records to audit & supervisory

10. Ensuring reliable financial reporting

segregating tasks in line with in-house rules. They alsoboard members. Audit & supervisory board members• The Company evaluates the effectiveness of internal

evaluate the results, review progress, and submit peri-

can at any time request reports from directors, executive

controls for financial reports in keeping with basic

odic and spot reports to the Board of Directors, theofficers, and employees of the Company and Group

policies for such controls. The Board of Directors andExecutive Board, and the Management Council.

subsidiaries. Also, persons who have received reports

the Executive Board deliberate and report on thefrom directors, executive officers, and employees of thefindings of such evaluations.

Company and Group subsidiaries can convey suchreports to audit & supervisory board members.

22

23

Cor p orate G ove r n a n ce

Outline of Liability Limitation Agreement

Special Resolution Requirements of the
Meeting of Shareholders

In accordance with Article 427, Paragraph 1 of the Com-

The Articles of Incorporation stipulates that the resolu-

panies Act as well as Articles 28 and 36 of the Articles oftion stipulated by Article 309, Paragraph 2 of the Compa-

Incorporation, the Company has concluded a Liability

nies Act shall require the presence of shareholders

Limitation Agreement with two outside directors andholding one-third or more of the voting rights of share-four audit & supervisory board members as stipulated inholders who can exercise voting rights as well as a two-

Article 423, Paragraph 1 of the Companies Act. The liabil-thirds majority of such voting rights. The aim for the

ity limit based on this agreement shall be the amountrequirement is to smoothly lead the meeting of share-

stipulated in the act.

holders by relaxing the quorum for special resolutions at

Liability limitation will be applicable only when theshareholder meetings.

execution of duties by outside directors and audit &supervisory board members giving rise to such liabilities
is recognized to have been carried out in good faith andwith no gross negligence.

Number of Directors
The Articles of Incorporation stipulates the number of
directors to be 10 or less.

Requirements for Resolution forElection of Directors

Shareholder Meeting Resolutions
That Can Be Resolved at Meetings of theBoard of Directors
1.	Acquisition of treasury stock   • To execute a flexible capital policy, the Articles of Incor-

Article 165, Paragraph 2 of the Companies Act.
2.	Interim dividends   • The Articles of Incorporation stipulates the payment

As of September 1, 2019

Representative Director &President

Naotaka Miyauchi

Representative Director &Executive Vice President

Yutaka Higashiizumi

Directors, Managing
Executive Officers

Takashi Shibata
Masao Oshita
Toshio Matsuo
Junichiro Deguchi

Directors, Executive Officers

Takashi Iwamoto

Directors

Nobuo Mochida (Outside)
Sadao Degawa (Outside)

As of September 1, 2019

Audit & Supervisory Board
Members

dance with Article 454, Paragraph 5 of the Companies

ence of shareholders holding one-third or more of theAct. The aim is to enable the swift return of profits tovoting rights of shareholders who can exercise voting

shareholders.

Kenji Watanabe
Toru Nishiyama
Itaru Masuda (Outside)
Fumihiko Tanizawa (Outside)

Executive Officers
As of September 1, 2019

Managing Executive
Officer

Toyohiko Kagawa

Executive Officers

Yoshitaka Sato
Shingo Mito
Hiroki Kikuchi
Shigeki Inoue

Organization
General Meeting of Shareholders

of interim dividends with September 30 as the record
date by a resolution of the Board of Directors in accor-

resolution.

Audit & Supervisory Board Members

resolution of the Board of Directors in accordance withtion for the election of directors shall require the pres-that no cumulative voting shall be accepted for the

Board of Directors

poration allows the acquisition of treasury stock by a

The Articles of Incorporation stipulates that the resolu-

rights as well as a majority vote of such shareholders, andBoard of Directors, Audit & Supervisory Board Members, and Executive Officers

Board of Directors

Corporate Planning Office

Domestic Office

Office of Information Technology

Overseas Office

Personnel Dept.
Executive Board

Secretary Office
General Affairs Dept.

PresidentInternal Auditors Office
Audit＆Supervisory Board Members

Finance & Accounting Dept.
New Business Promotion Headquarters

Muroran Plant

Wind Power Business Office

Hiroshima Plant

Steel Business Division

Yokohama Plant

Machinery Business Division
Injection Molding Machinery Business Division
FPD System Business Division
Ordnance Business Headquarters

24

25

Si x-Yea r Su m m ar y

Six-Year Summary

Fi n a n c i a l Pe r for m a n ce (Con s ol i date d)Financial Performance (Consolidated)

Years ended March 31¥194,674¥223,301¥212,469¥211,700¥220,153

5,527(5,327)(16,600)(4,968)

10,712

19,966

Total assets

293,139

319,667

293,138

275,315

297,365

305,471

Total net assets

139,268

138,234

111,340

107,587

118,600

129,827¥74.58¥(71.94)¥(226.62)¥(67.61)¥145.77¥271.69¥155,211¥153,455¥176,116¥166,722¥160,787¥165,624

6,645(5,658)(18,719)(8,260)8,559

17,129Profit (loss) attributable toowners of parent

Amounts per share (yen):
Profit (loss)
Non-Consolidated
Net sales
Profit (loss)
Total assets

267,241

291,793

263,112242,353259,342

263,005

Total net assets

127,416

124,381

97,107

88,83796,596

106,055

Profit (loss)¥89.67¥(76.41)¥(255.55)¥(112.40)¥116.48¥233.08

Cash dividends applicable to the year

¥5.00

¥4.00

¥5.00

¥15.00¥37.50¥55.00

Amounts per share (yen):

Sales by Region

The Japanese market accounted for sales of ¥103,898 million(US$936 million) and the Chinese market for ¥54,318 million(US$489 million), with all other markets accounting for ¥61,936
million (US$558 million).

0

Cash Flow from Financing Activities

Net cash used in financing activities was ¥3,758 million (US$34 million) compared with ¥2,457 million in the previous fiscal year. This
was attributable primarily to cash dividends paid and repaymentsof finance lease obligations.

Financial Position
As of March 31, 2019, total assets amounted to ¥305,471 million(US$2,752 million), up ¥8,105 million from a year earlier. This wasdue primarily to an increase in such current assets as notes andaccounts receivable and work in process.
Total liabilities stood at ¥175,643 million (US$1,583 million),
down ¥3,121 million from a year earlier. This was due mainly to adecrease in current liabilities, including advances received for
products and provision for loss on wind power generator
business.
Net assets amounted to ¥129,827 million (US$1,170 million),up ¥11,227 million, due mainly to an increase in retained earnings.

Equity Ratio

ROE

%

%

40,000

45

20

37.5

129,827

118,600

80,000107,58730

111,340

19,721

116,254

108,199

120,000

Net cash used in investing activities totaled ¥1,334 million(US$12 million) compared with ¥5,077 million in the previous fiscal year. This was due mainly to real estate held for sale offsetting
an increase in tangible and intangible assets.

60

138,234

160,000

20,00015

2015 2016 2017 2018 2019

Net cash provided by operating activities amounted to ¥1,092 million (US$10 million) compared with ¥26,712 million in the previous
fiscal year. Despite posting profit before income taxes, the primaryMillions of yen

30,00010,00040,000Cash Flow from Operating Activities

Millions of yen

26,712

52.8

50.8

51.3

60

At year-end, cash and cash equivalents stood at ¥73,820 million(US$665 million), a decrease of ¥4,059 million from a year earlier.

Total Net Assets

45

108,893

122,996

48.4

%

0

2015 2016 2017 2018 2019

Profit attributable to owners of parent was ¥19,966 million(US$180 million), up ¥9,253 million, or 86.4%, over the previous fiscal year. This equates to profit per share of ¥271.69 for the year.

Net Cash Provided byOperating Activities

12,023

12,34094,256

20,578120,000

80,0007,517

14,42324,290160,000

026% of total sales

Millions of yen

55.1

Millions of yen

7,000

Profit Attributable to Owners of Parent

Cash Flow from Investing Activities

10

30

0

15

−10

1,092

Overseas Sales

11,580Operating Income

14,000Operating income increased ¥3,711 million, or 18.0%, to ¥24,290
million (US$219 million), and the operating income marginincreased 1.3 percentage points to 11.0%.

42.7

table above are calculated using the number of shares after the reverse stock split.

21,000Operating Income

Cash Flow

Note: The Company conducted a 1-for-5 reverse common stock split effective on October 1, 2016. For the sake of simplicity, the profit (loss) per share in the

28,000Net sales totaled ¥220,153 million (US$1,984 million), up ¥8,452
million, or 4.0%, year on year. This was due to higher sales in boththe Industrial Machinery Products Business and the Steel andEnergy Products Business.

16.3¥188,719

Net sales

Net Sales

contributing factors for the decrease included provision for operating funds and an increase in provision for loss on wind power
generator business.

9.6

Consolidated

Operating Results

(4.6)

2019

2018

(13.5)

2017

(3.9)

2016

42.0

2015

39.4

2014

38.6

Millions of yen

002015 2016 2017 2018 201902015 2016 2017 2018 2019−20

2015 2016 2017 2018 20192015 2016 2017 2018 201927

Con s ol i date d Ba l a n ce S h e e t

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
March 31, 2018 and 2019

AssetsCurrent assets:
Cash on hand and in banks (Notes 6 and 18)
Notes and accounts receivable:   Unconsolidated subsidiaries and affiliates   Trade (Note 18)  Other   Less allowance for doubtful accounts
Inventories (Note 5)
Other current assets    Total current assets

Property, plant and equipment, at cost (Notes 7 and 9):Land
Buildings and structures
Machinery and equipment
Leased assets
Construction in progress
Less accumulated depreciation    Property, plant and equipment, net

Intangible assets

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates
Investment securities (Notes 18 and 19)
Long-term loans receivable
Retirement benefit asset (Note 21)
Deferred tax assets (Note 22)
Other assets
Less allowance for doubtful accounts    Total investments and other assets   Total assets

2018

Millions of yen

Thousands of
U.S. dollars(Note 4)

2019

2019

¥   79,032¥ 74,304$   669,466

485
54,061757(142)
61,882
4,947
201,024

1,009
63,916223(137)
69,447
6,316
215,080

9,091
575,872
2,009(1,234)
625,705
56,906
1,937,832

10,33571,541
134,3192,701
288
218,905(185,868)
33,3178,250
70,519135,423
2,458
1,764
218,416(183,901)
34,51474,331
635,364
1,220,137
22,146
15,893
1,967,889(1,656,915)
310,965

1,774

2,226

20,056

1,144
34,129293
2,736
20,2163,131(402)
61,249¥ 297,365

1,268
28,412333
2,374
18,5663,091(397)
53,650¥ 305,471

11,424
255,987
3,000
21,389167,276
27,849(3,577)483,377$ 2,752,239

Liabilities and net assets
Current liabilities:
Short-term borrowings (Notes 11 and 18)
Current portion of long-term debt (Notes 11 and 18)
Notes and accounts payable:   Unconsolidated subsidiaries and affiliates   Trade (Note 18)  Other
Advances received for products
Accrued income taxes (Note 22)
Provision for loss on wind power generator business
Provision for business restructuring
Other current liabilities    Total current liabilities
Long-term liabilities:
Long-term debt (Notes 11 and 18)
Accrued retirement benefits   For directors and corporate auditors
Retirement benefit liability (Note 21)
Deferred tax liabilities (Note 22)
Other long-term liabilities    Total long-term liabilities
Net assets:
Shareholders’ equity (Note 15)
Common stock:  Authorized — 200,000,000 shares  Issued— 74,309,108 shares
Capital surplus
Retained earnings
Treasury stock, at cost(803,082 shares in 2019 and 802,503 shares in 2018)    Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Remeasurement of retirement benefit plans    Total accumulated other comprehensive income
Non-controlling interests    Total net assets    Total liabilities and net assets

2018

Millions of yen

Thousands of
U.S. dollars(Note 4)

2019

2019

¥ 12,004
625¥ 12,088
696$  108,911
6,271

137
54,8191,184
18,843
2,296
3,365
6,389
15,752
115,418

205
55,374
3,685
16,619
3,326
1,887
5,295
13,290112,469

1,847
498,910
33,201
149,734
29,967
17,00247,707
119,741
1,013,326

40,01640,004360,42975
10,046100
13,107
63,34673
10,49490
12,511
63,174658
94,549811
112,722569,186

19,694
5,467
86,256

19,716
5,362
102,915

177,638
48,311
927,246(2,310)109,107(2,312)
125,682(20,831)
1,132,372

7,269
305
(21)
370
7,923
1,569
118,600¥297,365

3,290
(226)
(222)
(115)
2,725
1,419
129,827¥305,471

29,642(2,036)(2,000)(1,036)24,552
12,785
1,169,718$2,752,239

See notes to consolidated financial statements.

28

29

Co n s o l id ated Statement of I ncome

Consoli d ated Statement of Comprehensive I n co m e

Co n so lid ate d St ate m e nt of C h a n g e s i n N e t As s e t s

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

For the years ended March 31, 2018 and 2019

For the years ended March 31, 2018 and 2019

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets
Millions of yen

2018

Net sales
Cost of sales (Note 12)
Gross profit
Selling, general and administrative expenses (Note 12)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Impairment loss (Note 9)
Other, net (Note 13)
Income before income taxes
Income taxes (Note 22):
Current
DeferredIncome (Note 28)
Profit attributable to non-controlling interests
Income attributable to shareholders of The Japan Steel Works, Ltd.

2019

Millions of yen

Thousands of
U.S. dollars(Note 4)

Shareholders’ equity

2019¥211,700
162,995
48,70528,126
20,578¥220,153
166,62253,531
29,24024,290$1,983,539
1,501,234
482,305
263,447
218,849827(258)(1,352)(4,902)(5,686)
14,892903(246)(1,623)
5,992
5,027
29,3178,136(2,216)(14,623)
53,98745,292
264,141

3,633
307
10,951238¥ 10,712

5,335
3,791
20,190223¥ 19,966

48,06734,156
181,908
2,009$  179,890

See notes to consolidated financial statements.

Commonstock

CapitalsurplusRetainedearnings

Balance at April 1, 2017
Changes during the year
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchases of treasury stock
Disposal of treasury stock
Transfer of loss on disposalof treasury shares
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2018

¥ 19,694¥ 5,467¥ 77,748

Balance at April 1, 2018
Changes during the year
Issuance of new shares
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchase of shares of consolidated
subsidiaries
Purchases of treasury stock
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2019

Treasury stock(Note 15)

Total
shareholders’equityUnrealized
holding gain
(loss) on
securities¥ (2,308)¥ 100,601¥ 6,381(2,204)
10,712(2)0(0)

Unrealized gain
(loss) fromhedging
instruments

Translation
adjustments¥ (301)¥ (170)

Total
Remeasurement accumulated
otherbenefit plansadjustments comprehensive Non-­controllingincomeinterest(Note 21)

¥ (211)¥ 5,698¥ 1,287

Total
net assets¥ 107,587(2,204)(2,204)

10,712(2)
0

10,712
(2)
0

—

—

0

(0)

—
¥19,694—¥ 5,467

8,508¥ 86,256(2)¥ (2,310)

8,505¥ 109,107

887
887¥ 7,269

606
606
¥ 305

149
149
¥ (21)

581
581
¥ 370

2,225
2,225
¥ 7,923282
282¥ 1,569

2,507
11,013¥ 118,600¥19,694¥5,467¥ 86,256¥ (2,310)¥109,107¥7,269¥ 305¥ (21)¥ 370¥7,923¥1,569¥118,600

2222(3,307)44(3,307)44(3,307)

19,966

19,966

19,966

(1)

(127)
(1)

(127)
(1)

(1)
¥ (2,312)

16,575¥125,682(127)

22¥19,716(104)¥5,362

16,659¥102,915(3,978)(3,978)¥3,290(532)(532)¥(226)(200)(200)¥(222)(486)(486)¥(115)(5,197)(5,197)¥2,725(150)(150)¥1,419(5,348)
11,227¥129,827

Thousands of U.S. dollars (Note 4)

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Shareholders’ equity

Consolidated Statement of Comprehensive Income
For the years ended March 31, 2018 and 20192018

IncomeOther comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Remeasurement of retirement benefit plans
Total other comprehensive income (Note 14)
Comprehensive income
Total comprehensive income attributable to:Shareholders of The Japan Steel Works, Ltd.
Non-controlling interests

Accumulated other comprehensive income

Millions of yen

Thousands of
U.S. dollars(Note 4)

2019

2019

¥10,951¥20,190$181,908

887
606
203
597
2,295
¥13,246(3,978)
(532)
(232)
(478)
(5,221)¥14,968(35,841)(4,793)(2,090)(4,307)(47,040)$134,859¥12,937¥ 308¥14,768¥ 200$133,057$  1,802

Balance at April 1, 2018
Changes during the year
Issuance of new shares
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchase of shares of consolidated
subsidiaries
Purchases of treasury stock
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2019

Accumulated other comprehensive income

Treasury stock(Note 15)

Total
shareholders’equityUnrealized
holding gain
(loss) on
securities

Unrealized gain
(loss) fromhedging
instruments

Translation
adjustments$65,492$ 2,748$ (189)Total
Remeasurement accumulated
otherbenefit plansadjustments comprehensive Non-­controllingincomeinterest(Note 21)Total
net assets

Commonstock

CapitalsurplusRetainedearnings$177,439$49,257$777,151$(20,813) $ 983,035

198

198
(29,795)

396(29,795)

396(29,795)

179,890

179,890

179,890(1,144)(9)(1,144)(9)(1,144)(9)
198$177,638(937)$48,311150,095$927,246(9)
149,338$(20,831) $1,132,372(35,841)(35,841)$29,642(4,793)(4,793)$(2,036)(1,802)(1,802)$(2,000)$ 3,334(4,379)(4,379)$(1,036)$71,385(46,824)(46,824)$24,552$14,136$1,068,565(1,351)(48,185)(1,351)
101,153$12,785 $1,169,718

See notes to consolidated financial statements.

See notes to consolidated financial statements.

30

31

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Consoli d ated Statement of Cash Flows

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

For the years ended March 31, 2018 and 2019

Operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Interest and dividend income
Interest expense
Equity in losses of affiliates(Gain) loss on valuation of investment securities(Gain) loss on sales of investment securities
Loss on disposal of tangible and intangible assets
Gain on sales of property, plant and equipment and intangible assets
Increase (decrease) in provision for warranties for completed construction
Increase (decrease) in provision for loss on construction contracts
Decrease in provision for loss on wind power generator business
Increase in provision for business restructuring
Changes in operating assets and liabilities:   Trade assets (Note 18)   Trade liabilities   Inventories (Note 5)  Other   Subtotal
Interest and dividends received
Interest paid
Income taxes paid    Net cash provided by operating activities
Investing activities
Investments into time deposits
Proceeds from withdrawal of time deposits
Increase in tangible and intangible assets
Decrease in tangible and intangible assets
Proceeds from sale of investment securities
Purchases of investment securities
Reimbursement of long-term deposits on contracts
Payments of long-term loans receivableCollection of long-term loans receivable
Purchase of investments in subsidiaries
Payments for asset retirement obligations
Other    Net cash used in investing activities
Financing activities (Notes 11 and 18)
Net increase (decrease) in short-term borrowings
Increase in long-term debt
Decrease in long-term debt
Cash dividends paid
Acquisition of treasury stock
Repayments of finance lease obligations
Other    Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Notes 16 and 18)
See notes to consolidated financial statements.

32

Millions of yen

Thousands of
U.S. dollars(Note 4)

2018

2019

2019

¥14,892
4,308
1,352
(827)
258
0
2
(789)
273
(1)
(1,027)(2,184)(1,289)6,389¥ 29,317
4,639
1,623
(903)
246
(89)
51
(263)
228
(3,900)(1,409)(553)(1,478)(1,093)$ 264,141
41,797
14,623(8,136)
2,216
(802)
460
(2,370)2,054(35,138)(12,695)(4,982)(13,317)(9,848)(2,848)
6,101
3,994
(252)
28,351827(257)(2,207)
26,712(13,217)(1,155)(7,618)
376
4,797
893
(265)
(4,334)
1,092(119,083)(10,406)(68,637)
3,388
43,2208,046(2,388)(39,049)
9,839

(607)
657
(6,549)
76
1,869
(12)
(89)
(300)
50
(147)
(15)
(8)
(5,077)(56)544(7,347)
6,057
272
(43)
(177)
(50)
10
(497)
(71)
25
(1,334)

(505)
4,901
(66,195)
54,572
2,451(387)(1,595)(450)
90(4,478)(640)
225(12,019)96
4,500(4,215)(2,204)
(2)
(621)
(9)
(2,457)30
19,20858,671¥77,879

83
250
(242)
(3,307)(1)(550)
9(3,758)(58)(4,059)77,879¥ 73,820

748
2,252(2,180)(29,795)(9)(4,955)
81(33,859)(523)(36,571)
701,676$ 665,105

1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with thefinancial accounting standards of Japan, and its foreign subsidiaries maintain their books of account in conformity with those of
their respective countries of domicile.
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally
accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of IFRS, and have been
compiled from the consolidated financial statements prepared by
the Company as required by the Financial Instruments andExchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law
of Japan, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and in U.S. dollars) do not necessarily agree with the sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial
statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a)	Principles of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the Company and any significant companies controlled directly or indirectly by the Company.
Companies over which the Company exercises significant
influence in terms of their operating and financial policies havebeen accounted for by the equity method. All significant intercompany balances and transactions have been eliminated inconsolidation.
As of March 31, 2019, the numbers of consolidated subsidiaries, and subsidiaries and affiliates accounted for by the equity
method were 31 and 2 (31 and 1 in 2018), respectively.
As a result of the acquisition of additional shares of GM Engineering Co., Ltd., has been included as equity method affiliatesfrom the current fiscal year.
Certain foreign subsidiaries are consolidated on the basis of
fiscal years ended December 31, which differ from that of the Company. However, the necessary adjustments have been made if theeffect of the difference is material.
Investments in subsidiaries and affiliates which are neither
consolidated nor accounted for by the equity method are carriedat cost or less. Where there has been a permanent decline in thevalue of such investments, the Company has written them down.
Differences between the cost and the underlying net equity atfair value of investments in consolidated subsidiaries and in companies accounted for by the equity method have been amortizedby the straight-line method over five years after acquisition andare included in selling, general and administrative expenses.

(b) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date, except for the components of net assets
excluding Non-controlling interests which are translated at their
historical exchange rates. Revenue and expense accounts aretranslated at the average rates of exchange in effect during theyear. Differences arising from the translation are presented astranslation adjustments and Non-controlling interests in the consolidated financial statements.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at therates of exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect atthe balance sheet date and differences arising from the translation
are included in the consolidated statements of income.
(c) Cash equivalents
Short-term investments with a maturity of three months or lesswhen purchased which can easily be converted to cash and are
subject to little risk of change in value are considered to be cash
equivalents.
(d) Inventories
Real estate held for sale, finished products and work in process arestated at the lower of cost or net realizable value determined principally by the specific identification method. Raw materials arestated at the lower of cost or replacement cost determined principally by the moving average method.
(e) Investment securities
Marketable securities classified as other securities are carried atfair value with changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad
debts at an amount estimated based on the historical experience
with bad debts on normal receivables plus an additional allowance for specific uncollectible amounts determined by reference
to the collectability of individual doubtful accounts.
(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed
construction by estimating losses on possible future claims.
(h) Provision for loss on construction contracts
The Company provides a provision for loss on construction contracts, which has not been delivered by the fiscal year end, by estimating the amount of total losses anticipated in the following
fiscal year and thereafter to be incurred, when the amounts can bereasonably estimated.

33

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s(i) Provision for loss on wind power generator business
The Company provides a provision for loss on wind power generator business by estimating the amount of total losses caused by
the defects of certain parts used in wind power generators.
(j) Provision for business restructuring
The Company provides a provision for the anticipated losses onwind power generators sold in previous years in order to restructure the wind power generator business.
(k) Property, plant and equipment and depreciation
Depreciation of property, plant and equipment is calculated by the
declining-balance method based on the estimated useful lives andthe residual value determined by the Company, except for certain
buildings which are depreciated by the straight-line method.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to profit. The estimate useful
lives of the assets are as follows:
Buildings and structures:
6 to 65 years
Machinery, equipment and vehicles: 3 to 20 years(l) Intangible fixed assets
Amortization of intangible fixed assets is calculated using thestraight-line method.
Software products for internal use are amortized mainly overthe estimated useful lives of five years.
(m) Leases and depreciation
Finance lease transactions which do not stipulate the transfer ofownership of the leased assets to the lessee are accounted for aspurchase and sales transactions.
With regard to the depreciation method of leased assets, thestraight-line method is applied using the lease period as the estimated useful life and a residual value of zero.
(n) Retirement benefit
The retirement benefit obligation for employees is attributed toeach period by the benefit formula method.
Prior service cost is being amortized as incurred by thestraight-line method over ten years, which is shorter than the average remaining years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following theyear in which the gain or loss is recognized by the straight-line
method over ten years, which is shorter than the average remaining years of service of the employees participating in the plans.
Certain subsidiaries use a simplified method in the calculationof their retirement benefit obligation.
(o) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated balance sheets with respect to the differences between
financial reporting and the tax bases of the assets and liabilities,
and are measured using the enacted tax rates and laws which will
be in effect when the differences are expected to reverse.
(p) Research and development expenses
Research and development expenses are charged to income whenincurred.

34(q) Revenue and cost recognition
Revenues on sales of products are generally recognized at thetime of shipment.
Revenues and costs, of which the percentage of completioncan be reliably estimated, are recognized by the percentage-of-completion method. The percentage of completion is calculated at the cost incurred as a percentage of the estimated total
cost. The completed-contract method is applied to contracts forwhich the percentage of completion cannot be reliably estimated.
(r) Derivative financial instruments
Derivative financial instruments are carried at fair value. Gain orloss on derivatives designated as hedging instruments is deferred
as a component of net assets until the loss or gain on the underlying hedged items is recognized. Foreign currency receivables andpayables are translated at the applicable forward foreign exchange
rates when certain conditions are met. In addition, the related
interest differential paid or received under interest-rate swaps utilized as hedging instruments is recognized over the terms of theswap agreements as an adjustment to the interest expense of theunderlying hedged items when certain conditions are met.
(s) Consumption tax
Accounting treatment of consumption tax is the tax exclusion
method.
(t) Provision for directors’ bonuses
Provision for directors’ bonuses is provided based on estimatedamounts to be paid in the subsequent period that are applicableto the current year.
(u) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided based on
estimated amounts determined by internal rules.
(v) Standards issued but not yet effective
Accounting Standard and Implementation Guidance on Revenue
Recognition
On March 30, 2018, the ASBJ issued “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29) and “Implementation
Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30).
(1) Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes thefollowing five-step model that will apply to revenue from
customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4.	Allocate the transaction price to the performance­obligations in the contract
5.	Recognize revenue when (or as) the entity satisfies a­performance obligation(2) Scheduled date of adoption
The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal
year ending March 31, 2022.
(3)	Impact of adoption of accounting standard and­implementation guidance
The Company is currently evaluating the effect of the a­ doptionof this accounting standard and implementation guidance on
its consolidated financial statements.
3. Accounting Changes(Disclosure for the year ended March 31, 2019)(a)	Partial Amendments to Accounting Standard for Tax EffectAccounting
The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018) (hereinafter, the“Partial Amendments”) from the beginning of the fiscal year ended
March 31, 2019. As such, deferred tax assets and deferred tax liabilities are included within investments and other assets and longterm liabilities, respectively, and related income tax disclosures
have been expanded.
As a result, ¥7,376 million of deferred tax assets in current
assets previously presented in consolidated balance sheet as ofMarch 31, 2018 have been reclassified and included within ¥20,216
million of deferred tax assets in investments respectively. In addition, deferred tax liabilities of fixed liabilities of ¥168 million
decreased by ¥68 million.
Also, “Note 22 Income Taxes” in the Notes to the consolidated
financial statements has been expanded in accordance with Article 8 and Article 9 of Interpretive Notes to Accounting for Tax EffectAccounting. However, comparative information for the year ended
March 31, 2018 has not been disclosed in Note 22 in accordancewith the transitional provisions set forth in Article 7 of the Partial
Amendments.
(b)	Consolidated balance sheet
In the previous consolidated fiscal year, the assets related to thereal estate leasing business, which were included in inventory of
current assets, were changed to buildings and structures of fixed
assets due to a change in management method accompanying
the contraction of the real estate leasing business. It is reclassified
as a building and a structure land.
To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.
As a result, in the consolidated balance sheet of the previous
consolidated fiscal year, inventory of current assets of ¥62,160 million, buildings and structures of fixed assets of ¥71,536 million,
and land of ¥10,059million Although the figure is stated at ¥10,000
million, it has been reclassified as Inventory of ¥61,882 million,
Buildings and structures of ¥71,541 million, and Land of ¥10,335
million.

(c)	Consolidated statement of income
The income and expenses related to the real estate leasing business, which were included in sales, cost of sales, and selling, general and administrative expenses in the previous consolidated
fiscal year, are managed according to the contraction of the realestate leasing business. Due to the change, Gain on fixed assets in
Non-operating income has been reclassified.
To reflect this change in presentation, the consolidated financial statements for the previous fiscal year have been reclassified.
As a result, in the consolidated statement of income for theprevious consolidated fiscal year, sales of ¥212,957 million, cost of
sales of ¥163,455 million, Selling, and general administrative
expenses of ¥6,290 million Sales of ¥211,700 million, Cost of sales¥162,995 million, Selling , and general administrative expenses of¥6,236 million, Non-operating income: Rent income on non-current assets of ¥851 million.
4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely
for convenience, as a matter of arithmetic computation only, at¥110.99 = U.S.$1.00, the approximate rate of exchange prevailingon March 31, 2019. This translation should not be construed as arepresentation that all amounts shown could be converted into
U.S. dollars at such rate.
5. Inventories
Inventories at March 31, 2019 and 2018 consisted of the following:

Finished products
Work in process
Raw materials andsupplies
Total

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥ 2,027
54,663¥ 2,767
61,004$ 24,930
549,635

5,191¥61,882

5,675¥69,447

51,131$625,705

Work in process related to construction contracts of which aloss is anticipated to be incurred was offset with a provision forloss on construction contracts of ¥852 million ($7,676 thousand) at
March 31, 2019 and ¥750 million at March 31, 2018.
6. Assets Pledged as Collateral
The assets pledged as collateral for derivative transactions etc., at
March 31, 2019 and 2018 were as follows:

Time deposit

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥106

¥99

$892

Note: The assets pledged as collateral have no corresponding obligations at
March 31, 2019.

35

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

7. Advanced Depreciation
Accumulated advanced depreciation related to government
grants received has been deducted directly from the acquisition
costs of certain tangible fixed assets (plant, machinery and equipment). Such accumulated depreciation at March 31, 2019 and2018 are summarized as follows:

Accumulated advanced
depreciation expense

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥1,306¥1,455Use

Asset typeMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥  293¥  435$ 3,919¥1,592¥1,836$16,542¥  242¥  941$ 8,478¥    3¥    1$     9Location

Property for rent
Land
Other Businesses:
Machinery, equipment andBusiness assets at
vehicles, etc.
investee subsidiary$13,109

8.	Notes Receivable and Notes Payable Maturing at Fiscal
Year-End
Although March 31, 2019 was a bank holiday, notes maturing onthat date were accounted for as if they were settled on their maturity date. The corresponding amounts of notes receivable andnotes payable maturing on March 31, 2019 were as follows:

Trade notes and accounts
receivable
Trade notes and accounts
payableOther current
liabilities
Endorsed trade notes
receivable

9. Impairment Loss
Current fiscal year (From April 1, 2018 to March 31, 2019)
The Group recorded an impairment loss on the following groupsof assets in the current fiscal year:

Fuchu, Tokyo
Muroran,
Hokkaido andGuangdong,China(1) Grouping of assets
The Company and its consolidated subsidiaries (hereinaftercollectively known as the “Group”) determine whether to recognize an impairment loss and measure the loss by grouping
assets based on the smallest units used in management
accounting that generate cash flows which are largely independent and whose revenue and expenditures are identified
on an ongoing basis. Property for rent is grouped by the individual properties. However, the Group determines whether torecognize impairment and measures the impairment on an
individual asset basis if the asset is idle and not expected to be
used in the future.
(2)	Circumstances that led to the recognition of
the impairment loss
Carrying amounts of non-current assets were reduced torecoverable amounts and the reduced amounts were recognized in extraordinary losses as impairment loss because
investment amounts were no longer expected to be recovered
due to a decrease in profitability.
Breakdown of the impairment loss is as follows:
Machinery, equipment andvehicles
Land
Other
Total

¥   19 million
1,597
6¥1,623$   171 thousand
14,38954$14,623(3) Calculation method for recoverable amounts
The property for lease is measured by the net selling price andis evaluated by the real estate appraisal value. For business-use
assets, the recoverable value is measured based on the value
in use, and is assessed based on the memorandum value.

Prior fiscal year (From April 1, 2017 to March 31, 2018)
The Group recorded an impairment loss on the following groupsof assets in the prior fiscal year:
Use

Asset typeMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥ 92

¥ 68

$  613

305

243

2,189

8

—

—

849
13

720
4

6,487
36

Location

Steel and Energy
Products:
Business assets

Buildings and structures,
Muroran,Machinery, equipment and Hokkaido
vehicles, Tools, furnitureand fixture, Construction inprogress, etc.
Other Businesses:
Machinery, equipment and Muroran,
Business assets
vehicles, Tools, furniture
Hokkaido
and fixture
Other Businesses:
Machinery, equipment and Muroran,
Business assets at
vehicles, Construction in
Hokkaido andinvestee subsidiary progress, etc.
Guangdong,China(1) Grouping of assets
The Group determines whether to recognize an impairment
loss and measures the loss by grouping assets based on thesmallest units used in management accounting that generatecash flows which are largely independent and whose revenue
and expenditures are identified on an ongoing basis.
However, the Group determines whether to recognize
impairment and measures the impairment on an individual
asset basis if the asset is idle and not expected to be used in
the future.
(2)	Circumstances that led to the recognition of
the impairment loss
Carrying amounts of non-current assets were reduced torecoverable amounts and the reduced amounts were recognized in extraordinary losses as impairment loss because
investment amounts were no longer expected to be recovered
due to a decrease in profitability.
Breakdown of the impairment loss is as follows:
Buildings and structures
Machinery, equipment andvehiclesTools, furniture and fixtures
Construction in progress
Other
Total

10. Contingent Liabilities
Contingent liabilities at March 31, 2019 and 2018 consisted of thefollowing:¥  145 million
718
129
174
184
¥1,352As endorsers of trade notes
receivable:
Endorsed to otherAs guarantors of loans:
Muroran Environmental
Plant Service Co., Ltd.
Obligation to guarantee
uncollected receivablesof leasing companies
Gotsu Wind Power
Co., Ltd
Employees and other

11. Short-Term Borrowings and Long-Term Debt
All short-term borrowings, with interest at annual rates ranging
from 0.2690% to 1.4750% at March 31, 2019 and 0.2454% to1.4750% at March 31, 2018, were unsecured.
Long-term debt at March 31, 2019 and 2018 were as follows:

Loans from banks andinsurance companies withinterest at annual rates
ranging from 0.1934% to0.9609%Less those maturing within
one yearLease obligations
Less those maturing within
one yearLong-term indebtedness
reflected in the
consolidated balance
sheetsMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥39,401¥39,408$355,059

(132)
1,241

(199)
1,292

(1,793)
11,641

(493)

(496)

(4,469)¥40,016¥40,004$360,429(3) Calculation method for recoverable amounts
Recoverable amounts of the groups of assets are calculated atvalue in use. It is evaluated by memorandum value.

36

37

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

The aggregate annual maturities of long-term debt and leaseobligations subsequent to March 31, 2019 are summarized asfollows:
Millions of yen

Thousands of
U.S. dollars Millions of yen

Year ending March 31,

Long-term loans

2020
2021
2022
2023
2024
2025 and thereafter¥   199
5,000
1,800
15,7002,208
14,500Thousands of
U.S. dollars

Lease obligations$  1,793
45,04916,218141,454
19,894130,642

¥496
346
234
148
63
2

$4,469
3,117
2,108
1,333
568
18

12. Research and Development Expenses
Research and development expenses included in manufacturingcosts, and selling, general and administrative expenses for theyears ended March 31, 2019 and 2018 were as follows:

Research and ­development
expensesMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥4,369¥4,506$40,598

13. Other Income (Expenses)—Other, Net
The details of “Other, net” in “Other income (expenses)” for theyears ended March 31, 2019 and 2018 were as follows:2018

Foreign exchange
gain (loss)
Equity in gain (losses) ofaffiliates
Gain on sales of property,
plant and equipment
Gain on sales ofinvestment securities
Rent income on
non-current assets
Cancellation fee received
Loss on sales or disposal ofproperty, plant andequipment
Provision for businessrestructuring
Other, net
Total

38

14. Other Comprehensive Income
The following table presents reclassification adjustments and tax
effects allocated to each component of other comprehensive
income for the years ended March 31, 2019 and 2018:

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥  (115)¥   38$   342

(0)

89

802

30

3,933

35,436

791

263

2,370

851
33

786
1,186

7,082
10,686

(302)

(260)

(2,343)(6,389)197¥(4,902)(711)
666¥5,992(6,406)
6,001$53,9872018

Unrealized holding gain
(loss) on securities:
Amount arising during
the year
Reclassification
adjustments for gains
and losses realized in
net income
The amount of
unrealized holding gain
(loss) on securities
before tax effectTax effectUnrealized holding gain
(loss) on securities
Unrealized gain (loss) fromhedging instruments:
Amount arising during
the yearTax effectUnrealized gain (loss) fromhedging instruments
Translation adjustments:
Amount arising during
the yearTranslation adjustments
Remeasurement benefits
plans adjustments:
Amount arising during
the year
Reclassification
adjustments for gains
and losses realized in
net income
The amount of
unrealized holding gain
(loss) on securities
before tax effectTax effectRemeasurement benefits
plans adjustments
Total other comprehensive
incomeMillions of yen

Thousands of
U.S. dollars

2019

2019

15.	Supplementary Information for Consolidated Statementof Changes in Net Assets
Year ended March 31, 2019(a)	Information regarding the number and type of sharesissued and treasury stock:(793)¥(5,750)

51$(51,806)

460

1,257
(369)

(5,699)1,720(51,347)
15,497887(3,978)(35,841)

874
(267)

(765)
233

(6,892)
2,099

606

(532)

(4,793)

203
203

(232)
(232)

(2,090)(2,090)

767

(951)

(8,568)

95

261

2,352

863
(265)

(689)
210

(6,208)
1,892

597

(478)

(4,307)¥2,295¥(5,221)$(47,040)

Number of sharesYear ended
March 31,2017

Number of sharesYear ended
March 31,2018

¥2,050Year ended March 31, 2018(a)	
Information regarding the number and type of sharesissued and treasury stock:

Shares issued:
Common stock
Treasury stock:
Common stock(Notes 1 and 2)

Increaseduringthe year

Decreaseduringthe yearYear ended
March 31,
2019

74,292,607

16,501—

74,309,108

802,503

579—

803,082

Notes: 1.	The increase in shares issued – common stock of 16,501 was due toissuance of new shares as restricted stock.
2.	The increase in treasury stock – common stock of 579 was due to theacquisition of fractional shares of less than one unit.

(b) Dividends(i) Dividends paid to shareholders
Resolution:	Annual general meeting ofshareholders held on June 26, 2018
Type of shares:
Common stock
Total amount ofdividends:¥1,469 million ($13,235 thousand)
Dividends per share: ¥20.0 ($0.180)
Cut-off date:
March 31, 2018
Effective date:June 27, 2018
Note: Dividends per share include ¥2.5 of commemorative 110th anniversary
dividend.

Resolution:
Meeting of Board of Directors held on		November 5, 2018
Type of shares:
Common stock
Total amount ofdividends:¥1,837 million ($16,551 thousand)
Dividends per share: ¥25.0 ($0.225)
Cut-off date:
September 30, 2018
Effective date:
December 5, 2018(ii)	Dividends of which the cut-off date was in the year ended
March 31, 2019, but the effective date is in the following fiscal
year
Resolution:
Annual general meeting of		shareholders held on June 21, 2019
Type of shares:
Common stock
Total amount ofdividends:¥2,205 million ($19,867 thousand)
Dividends per share: ¥30.0 ($0.270)
Cut-off date:
March 31, 2019
Effective date:June 24, 2019
Source of dividends: Retained earnings

Shares issued:
Common stock
Treasury stock:
Common stock(Notes 1 and 2)

Increaseduringthe year

Decreaseduringthe yearYear ended
March 31,2018

74,292,607——

74,292,607

801,4801,055

32

802,503

Notes: 1.	The increase in treasury stock – common stock of 1,055 was due to theacquisition of fractional shares of less than one unit.
2.	The decrease in treasury stock – common stock of 32 was due to salesof fractional shares of less than one unit.

(b) Dividends(i) Dividends paid to shareholders
Resolution:	Annual general meeting ofshareholders held on June 27, 2017
Type of shares:
Common stock
Total amount ofdividends:¥918 million
Dividends per share: ¥12.5
Cut-off date:
March 31, 2017
Effective date:June 28, 2017
Resolution:
Meeting of Board of Directors held on		November 6, 2017
Type of shares:
Common stock
Total amount ofdividends:¥1,286 million
Dividends per share: ¥17.5
Cut-off date:
September 30, 2017
Effective date:
December 6, 2017(ii)	Dividends of which the cut-off date was in the year ended
March 31, 2018, but the effective date is in the following fiscal
year
Resolution:	Annual general meeting ofshareholders held on June 26, 2018
Type of shares:
Common stock
Total amount ofdividends:¥1,469 million
Dividends per share: ¥20.0
Cut-off date:
March 31, 2018
Effective date:June 27, 2018
Source of dividends: Retained earnings
Note: Dividends per share include ¥2.5 of commemorative 110th anniversary
dividend.

39

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

16. Cash Flow Information(a) Cash and cash equivalents
The reconciliation between cash and cash equivalents in theaccompanying consolidated statements of cash flows and cash on
hand and in banks in the accompanying consolidated balance
sheets at March 31, 2019 and 2018 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2019

2018

Cash on hand and in banks
in the consolidatedbalance sheet
Other current assets
Time deposits withmaturities of more than
three months
Cash and cash equivalentsin the consolidated
statement of cash flows¥79,032
156¥74,304
283$669,466
2,550(1,309)(768)(6,920)¥77,879¥73,820$665,105(b) Significant transactions without cash flows
Assets and liabilities corresponding to finance lease transactions
that have been recorded by the Company and its domestic­consolidated subsidiaries at March 31, 2019 and 2018 were as
follows:

Lease assets
Lease obligations

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥402
433

¥557
601

$5,0185,415

17. Leases
Year ended March 31, 2019
Future minimum lease payments subsequent to March 31, 2019
under non-cancelable operating leases are summarized asfollows:
Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2020
2021 and thereafter
Total

¥110
179
¥289

$  991
1,613$2,604

Year ended March 31, 2018
Future minimum lease payments subsequent to March 31, 2018
under non-cancelable operating leases are summarized asfollows:
Year ending March 31,
20192020 and thereafter
Total

40

Millions of yen

¥ 72
145
¥217

18. Financial Instruments
Overview(a) Policy for financial instruments
In consideration of plans for operations and capital investment,
the Group utilizes funds provided by operating cash flows first. The
Group uses bond issuances and bank borrowings in order to raise
additional funds, if needed. The Company manages temporary
cash surpluses through low-risk financial assets. The Company
uses derivatives for the purpose of reducing risks and does notenter into derivative contracts for speculative or trading purposes.
(b) Types of financial instruments and related risk
Trade receivables – trade notes and accounts receivable – areexposed to credit risk in relation to customers. In addition, theCompany is exposed to foreign currency exchange risk arisingfrom receivables denominated in foreign currencies. The foreign
currency exchange risks deriving from the trade receivables
denominated in foreign currencies are hedged by forward foreignexchange contracts, if needed.
Investment securities are exposed to market risk. These­securities are mainly composed of the shares of common stock ofcompanies with which the Company has business relationships.
Trade payables – trade notes and accounts payable – havepayment due dates within one year. Since the Company is exposed
to foreign currency exchange risk arising from those payables
denominated in foreign currencies, forward foreign exchange­contracts are arranged to reduce the risk, if needed.
Loans payable are used to raise funds mainly in connection
with capital investments. The repayment dates of the long-term
debts extend up to nine years from the balance sheet date. Longterm debt with variable interest rates is exposed to interest rate
fluctuation risk and foreign currency exchange risk. However, toreduce such risk and fix the interest payments for long-term debt
with variable rates, the Company utilizes interest rate swap
transactions and interest-rate currency swaps as hedging­
instruments.
Regarding derivatives, the Company enters into forward
foreign exchange contracts to reduce the foreign currency­
exchange risk arising from the receivables and payables denominated in foreign currencies. The Company also enters into interest
rate swap transactions and interest-rate currency swaps to reduce
the fluctuation risk of interest payments for long-term debt withvariable rates.
Information regarding the method of hedge accounting,hedging instruments and hedged items, hedging policy, and theassessment of the effectiveness of hedging activities is found in
Note 2 (p).

(c) Risk management for financial instruments(i)	Monitoring of credit risk (the risk that customers or­counterparties may default)
In accordance with the internal policies of the Company for
managing credit risk arising from receivables, each related
division monitors credit worthiness of their main customers
periodically, and monitors due dates and outstanding balances by individual customer. In addition, the Company ismaking efforts to identify and mitigate risks of bad debts from
customers who are having financial difficulties. The consolidated subsidiaries also manage credit risk using the C­ ompany’s
internal policies and methods.
The Company also believes that the credit risk of derivatives is insignificant as it enters into derivative transactions
only with financial institutions which have a high ­credit-rating.
(ii)	Monitoring of market risk (the risk arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Company identifies the foreign currency
exchange risk for each currency on a monthly basis and enters
into forward foreign exchange contracts to hedge such risk. In
order to mitigate the interest rate risk for loans payable bearing interest at variable rates, the Company may also enter into
interest rate swap transactions and interest-rate currency
swaps.
For investment securities, the Company periodicallyreviews the fair values of such financial instruments and thefinancial position of the issuers. In addition, the Company continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with theissuers.
In conducting derivative transactions, the division in
charge of each derivative transaction follows the internal policies, which set forth delegation of authority. Monthly reports
including actual transaction data are submitted to top management for their review. The consolidated subsidiaries also
conduct derivative transactions using the Company’s internal
policies.
(iii)	Monitoring of liquidity risk (the risk that the Company may
not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Company preparesand updates its cash flow plans on a timely basis to manage
liquidity risk. The consolidated subsidiaries manage the liquidity risk using cash flow plans and report to the Company
periodically.
(d)	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no available quoted market price, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 20 Derivative
Transactions are not necessarily indicative of the actual market risk
involved in derivative transactions.

Estimated Fair Value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheet as of March 31, 2019 and estimated fair value areshown in the following table. The following table does not include
financial instruments for which it is extremely difficult to determine the fair value (Please refer to Note (ii) below).
Year ended March 31, 2019
Millions of yen

AssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:  Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

Carrying
amountEstimated
fair value

Difference¥ 74,304¥ 74,304¥ —64,92164,921(0)26,852¥166,078

26,852¥166,077—¥  (0)¥ 55,579
12,088¥ 55,579
12,088¥ ——199
39,208¥107,076¥   (326)

199
39,723¥107,590¥   (326)

0
514
¥514
—

Carrying
amountEstimated
fair value$  669,466$  669,466

584,927584,927

241,932$1,496,333

241,932$1,496,324$  500,757
108,911$  500,757
108,911

Thousands of U.S. dollars

AssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:  Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

1,793
1,793
353,257
357,897$  964,736 $  969,367$   (2,937) $   (2,937)

Difference

$

—
(0)

$

$

—
(0)

—
—

0
4,631
$4,631—(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

41

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Year ended March 31, 2018
Millions of yen

Carrying
amountAssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:  Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

Estimated
fair value

Difference¥ 79,032¥ 79,032¥ —54,54254,541(0)

32,589¥166,164

32,589¥166,163—¥   (0)¥ 54,957
12,004¥ 54,957
12,004¥ ——132
39,268¥106,362¥    436

145
39,860¥106,967¥    436

12
591
¥604
—

(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

(i) Method	
to determine the estimated fair value of financial
instruments and other matters related to securities and­derivative transactions
AssetsCash on hand and in banks
The carrying amount is used for bank deposits without maturities, because the fair value approximates the carrying value.
The fair value of time deposits in banks with maturities is calculated based on the present value of the total principal andinterest discounted at a rate supposing a newly made deposit.
Trade notes and accounts receivables
The fair value is calculated by categories of the remaining­periods of the receivables based on the present value using
discount rates determined by the period to maturity and credit
risk.
Securities
The carrying amount is used for other securities with maturities, because the fair value approximates the carrying amount.
Quoted market price is used for other securities.
Liabilities
Trade notes and accounts payable and short-termborrowings
The carrying amount is used for these items because the fairvalue approximates the carrying amount.

42

Current portion of long-term debt and long-term debt
The fair values are calculated by applying a discount rate,
based on the assumed interest rate if a similar new debt isissued, to the total of the principal and interest. The current
portion of long-term debt and long-term debt with variableinterest rates are subject to the special treatment of interest
rate swaps or the integral treatment of interest rate currency
swaps and is calculated by applying a discount rate, based on
the assumed interest rate if a similar new debt is issued, to thetotal of the principal and interest including that of the interest
rate swap.
Derivative transactions
Please refer to Note 20 Derivative Transactions, of the notes tothe consolidated financial statements.
(ii) 	Financial instruments for which it is extremely difficult todetermine the fair value

2018

Unlisted stocks¥2,081Millions of yen

Thousands of
U.S. dollars

2019

2019

¥2,226$20,056

Because the fair values of these financial instruments are
extremely difficult to determine, given that they do not havequoted market prices and future cash flows cannot be estimated, they are not included in “Securities” in the precedingtable.

Year ended March 31, 2018
Millions of yen

Due after
one yearthroughfive years

Due after
five years¥ 79,032¥ ——53,980¥133,012

561
¥561

—
—

Due inone yearor less

Cash on hand andin banks
Trade notes andaccounts receivable
Total

Millions of yen

Due after
one yearthroughfive years

Due after
five years¥ 74,304¥ ——64,593¥138,898

327
¥327

—
—

Due inone yearor less

Cash on hand andin banks
Trade notes andaccounts receivable
Total

Thousands of U.S. dollars

Cash on hand andin banks
Trade notes andaccounts receivable
Total

Due inone yearor less

Due after
one yearthroughfive years$  669,466$

581,971$1,251,446

—

2,946
$2,946

Due after
five years———

March 31, 2019(iv) The redemption schedule for long-term debt
Year ended March 31, 2019

Millions of yen

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
Stocks
Total

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥14,079¥21,598¥ 7,519

8,041¥22,120

5,253¥26,852(2,787)¥ 4,731

Acquisition
cost

Carrying
amountUnrealized
gain (loss)$126,849$194,594$ 67,745

72,448$199,297

47,329$241,932(25,110)$ 42,625

Thousands of U.S. dollars

Millions of yen

Long-termloans

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years(iii) 	Redemption schedule for receivables and securities withmaturities at March 31, 2019 and 2018Year ended March 31, 201919. Securities(a) Other securities¥   1995,000
1,800
15,7002,208
14,500Lease
obligations

¥496
346
234
148
63
2

Thousands of U.S. dollars

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Long-term
loans

Lease
obligations$  1,793
45,04916,218141,454
19,894130,642$4,469
3,117
2,108
1,333
568
18

Year ended March 31, 2018
Millions of yen

Long-termloans

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years¥   132
60
5,000
1,800
15,70016,708Lease
obligations

¥493
366
218
114
43
4

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
StocksTotal
March 31, 2018

Millions of yen

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
Stocks
Total

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥13,441¥25,824¥12,382

8,721¥22,163

6,765¥32,589(1,956)¥10,425

When their fair values have declined by 50% or more, impairment
losses are recorded on those securities. When their fair values havedeclined by 30% up to 50%, impairment losses are recorded on
those securities on an individual basis to the values considered tobe recoverable.
(b) Impairment of investment securities
For the year ended March 31, 2019

Other securities
Stock

Millions of yen¥51

Thousands of
U.S. dollars

$460

43

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

20. Derivative Transactions(a) Derivatives not subject to hedge accounting

Year ended March 31, 2018
Millions of yen

Year ended March 31, 2019
None applicableYear ended March 31, 2018
None applicable

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
Thai baht
JPY
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound

Accounts receivable(b) Derivatives subject to hedge accounting
The contract amounts or the amount corresponding to principal as specified by the contract as of the date of the closing of the consolidated
accounts is shown below by type of hedge accounting method.
(i) Currency-related transactions
Year ended March 31, 2019

Contract
amountOver
one year

Fair value¥10,853
1,688
75
33
31

¥1,258
185
—
—
—

¥473
11
5
(1)
2

¥

¥

¥ (22)(5)(27)

Accounts payable
617
852
255

—
—
125

Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
JPY
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound

Accounts receivable

Contract
amountOver
one year

Fair value(ii) Interest-related transactions¥17,161
1,557
41¥2,670131—¥(266)
30(0)¥   853
2,661
124

¥

¥

Accounts payable
—
682
—

8
(84)
(14)

Thousands of U.S. dollars

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
JPY
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound

Accounts receivable

Note: Calculation of fair value is based on the forward exchange rates.

Contract
amountOver oneyear

Fair value$154,618
14,028369$24,056
1,180—$(2,397)270(0)$  7,685
23,975
1,117$$

Year ended March 31, 2019
Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings

Contract
amountOver
one year

Fair value¥25,000¥25,000

(*)

708

708

(*)

Contract
amountOver
one year

Fair value$225,246$225,246

(*)

6,379

6,379

(*)

Thousands of U.S. dollars

Accounts payable
—
6,145
—

72
(757)
(126)

Hedge accounting method

Type of derivative

Principal items hedged

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings

Note: Calculation of fair value is based on the forward exchange rates.
(*) Interest rate swaps subject to the special treatment for interest rate swaps and interest rate currency swaps subject to integral treatment for interest rate currency swaps
are accounted for together with the long-term debt, accordingly the fair value of the interest rate swaps is included in the fair value of the corresponding long-term debt.
Note: Calculation of fair value is based on the stated price by financial institutions.

4445

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Year ended March 31, 2018
Millions of yen

Hedge accounting method

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)Type of derivative

Principal items hedged

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings

Contract
amount¥25,000

708

Over
one year¥25,000

708

Fair value(*)

Note: Calculation of fair value is based on the stated price by financial institutions.

The changes in the retirement benefit obligation for the years
ended March 31, 2019 and 2018 are as follows:

Balance at the beginningof the year
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Prior service cost
Balance at the endof the year

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥20,128
1,119
120
(237)
(1,338)—¥19,792
996
112
438(1,328)20$178,322
8,974
1,009
3,946
(11,965)
180¥19,792¥20,031$180,476

The changes in plan assets for the years ended March 31, 2019 and2018 are as follows:

2018

Balance at the beginningof the year
Expected return on plan
assetsActuarial gain and loss
Contributions by theCompany
Retirement benefits paid
Balance at the end
the year¥14,969

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥15,517$139,805

299
529

310
(493)

2,793
(4,442)

479
(760)

475
(885)

4,280
(7,974)¥15,517¥14,924$134,463

The changes in retirement benefit liability accounted for using thesimplified method for the years ended March 31, 2019 and 2018
are as follows:

Balance at the beginningof the year
Retirement benefit
expenses
Retirement benefits paid
Contributions
Balance at the end
the year

2018

(*)

(*) Interest rate swaps subject to the special treatment for interest rate swaps and interest rate currency swaps subject to integral treatment for interest rate currency swaps
are accounted for together with the long-term debt, accordingly the fair value of the interest rate swaps is included in the fair value of the corresponding long-term debt.

21. Retirement Benefit Plans
The Company and its consolidated subsidiaries have either fundedor unfunded defined benefit plans and/or defined contributionplans.
The Company and its domestic consolidated subsidiaries havedefined benefit plans, i.e. lump-sum payment plans, defined benefit plans, welfare pension fund and tax-qualified pension plans,
covering substantially all employees who are entitled to lump-sum
or annuity payments, the amounts of which are determined by reference to their basic rates of pay, length of service, and the conditions under which termination occurs.

The following table sets forth the funded status of the plans andthe amounts recognized in the consolidated balance sheets as ofMarch 31, 2019 and 2018 for the Company’s and the consolidated
subsidiaries’ defined benefit plans:Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥2,989¥3,034$27,336

592
(361)
(185)

642
(473)
(191)

5,784
(4,262)(1,721)¥3,034¥3,012$27,138

Funded retirement benefit
obligation
Plan assets at the value
Unfunded retirement
benefit obligation
Net liability for retirement
benefits in the balance
sheet
Retirement benefit liability
Retirement benefit assets
Net liability for retirement
benefits in the balance
sheet¥ 19,587(16,717)
2,869

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥ 19,804 $ 178,430(16,180) (145,779)
3,623
32,643

4,439

4,496

40,5087,309
10,046(2,736)

8,119
10,494(2,374)73,151
94,549(21,389)¥   7,309¥   8,119$   73,151

The components of retirement benefit expense for the years
ended March 31, 2019 and 2018 are as follows:

Service cost
Interest cost
Expected return on plan
assetsAmortization of actuarial
gain and loss
Amortization of priorservice cost
Simplified method for
retirement benefit
expenses
Other
Retirement benefit
expenseMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥1,119
120

¥ 996
112

$ 8,974
1,009

(299)

(310)

(2,793)

95

261

2,352

—

2

18

592
45

642
42

5,784
378

¥1,674¥1,747$15,740

The components of retirement benefits plans adjustments
included in other comprehensive income (before tax effect) for theyears ended March 31, 2019 and 2018 are as follows:

Prior service costs
Actuarial gain and loss
Total

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥ —
863
¥863

¥ (18)(670)¥(689)$  (162)(6,037)$(6,208)

The components of retirement benefits plans adjustments
included in accumulated other comprehensive income (before tax
effect) as of March 31, 2019 and 2018 are as follows:

Unrecognized prior service
costs
Unrecognized actuarial
gain and loss
Total

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥ —

¥ (18)$  (162)

531
¥531

(138)
¥(157)(1,243)$(1,415)

The fair value of plan assets, by major category, as a percentage of
total plan as of March 31, 2019 and 2018 is as follows:
March 31,

Bonds
StocksCash on hand and in banks
General account
Other
Total

2018

2019

29%
44
0
16
11
100%

30%
44
0
17
9
100%

Retirement benefit trust set for the lump-sum and corporate pension plans accounts for 20% and 20% of the total plan assets, forthe years ended March 31, 2019 and 2018, respectively.
The expected return on assets has been estimated based on
the anticipated allocation to each asset class and the expectedlong-term returns on assets held in each category.
The assumptions used in accounting for the above plans are as
follows:
March 31,

Discount rates
Expected rates of return on plan assets

2018

2019

0.62%
2.00

0.51%
2.00

Contributions made to defined contribution plans for the years
ended March 31, 2019 and 2018 were ¥64 million ($577 thousand)and ¥68 million, respectively.

46

47

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

22. Income Taxes
The significant components of the Company’s deferred tax assets
and liabilities at March 31, 2019 and 2018 were as follows:

2018

Deferred tax assets:
Accrued enterprise taxes
Accrued bonuses
Depreciation
Amortization of long-term
prepaid expenses
Loss on revaluation of
inventory items
Loss on revaluation offinancial instruments
Impairment loss
Retirement benefit liability
Provision for warranties forcompleted construction
Provision for loss on
construction contracts
Provision for loss on wind
power generator business
Provision for businessrestructuring
Less allowance for doubtful
accounts
Asset retirement obligations
Percentage-of-completion
methodTax loss carry forwards
Unrealized loss on
investment securities
Deferred loss on hedges
Unrealized gain on
intercompany transactions
Other   Gross deferred tax assets
Valuation allowance for tax
loss carryforwards
Valuation allowance for the
total of future deductible
temporary differences etc.
Total valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for advanced
depreciation
Net defined benefit asset
Disposal cost with asset
retirement obligations
Unrealized gain on
investment securities
Deferred gain on hedges
Other
Total deferred tax liabilities
Net deferred tax assets

48¥   184
955
938

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥   245 $  2,207
1,105
9,956
890
8,018

105

105

946

1,656

1,216

10,956

189
13,5894,381

184
12,383
4,468

1,658
111,569
40,256

528

137

1,234

239

86

775

1,026

575

5,181

1,948

1,615

14,551

133
416

131
397

1,180
3,577

16
2,189

280
1,630

2,523
14,686

596
26

849
120

7,649
1,081

499
1,158
30,782624
1,113
28,163

5,622
10,028
253,744—(1,465)(13,199)—(4,132)
26,650(2,584)(4,049)24,113(23,281)(36,481)217,254

1,220
839

2,051
712

18,479
6,415

233

230

2,072

3,764
160
316
6,534
¥20,116

2,296
20,687
20
180
326
2,937
5,637
50,788¥18,475 $166,456

Tax loss carry forward and its deferred tax asset carry forward due
date at March 31, 2019 were as follows:
Millions of yen

Tax losscarryforwards

Due in 1 year or lessDue after 1 year through2 years
Due after 2 years through3 years
Due after 3 years through4 years
Due after 4 years through5 years
Due after 5 years
Total

Valuation Deferred tax
allowance
assets¥  234¥   (74)

¥159

—

—

—

33

(33)

—

358

(357)

0

569
434
¥1,630(569)(430)¥(1,465)—
3¥164

Thousands of U.S. dollars

Tax losscarryforwards

Valuation Deferred tax
allowance
assets$ 2,108$   (667)$1,433

—

—

—

297

(297)

—

3,226

(3,217)

0

5,127
3,910
$14,686(5,127)(3,874)$(13,199)—27$1,478Due in 1 year or lessDue after 1 year through2 years
Due after 2 years through3 years
Due after 3 years through4 years
Due after 4 years through5 years
Due after 5 years
Total

Change in deferred tax assets and deferred tax liabilities due toreduction in corporate income tax rate
2018

Statutory tax rates
Effect of:Permanent differences(Expense)
Permanent differences(Benefits)
Tax credit
Evaluation reserve amount
Retained earnings ofoverseas subsidiaries
Tax effect not recognizedon unrealized income
Other
Effective tax rates
23. Business Combinations
None applicable2019

30.7% Notes are omitted
because the difference
between the statutory
0.9 effective tax rate andthe tax burden rate after(0.5) application of tax effect(2.1) accounting is less than
(5.3) 5% of the statutory
effective tax rate.
1.0
0.5
1.3
26.5%

24. Asset Retirement Obligations
The following table presents the changes in asset retirement­obligations for the years ended March 31, 2019 and 2018:

Balance at beginningof yearLiabilities incurred dueto the acquisition of­property, plant andequipment
Accretion expense
Liabilities settled
Other
Balance at end of year

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

¥1,320¥1,364$12,289

35
22
(15)
2
¥1,364

2
22
(71)
(9)
¥1,308

18
198
(640)
(81)
$11,785

25. Investment and Rental Properties
The Company has omitted the disclosure of investment and rental properties due to immateriality for the years ended March 31, 2019 and2018.
26. Segment Information
Beginning this current period, the management system has been reviewed in line with the organizational revision and together with the
reduction of the real estate leasing business, As a result, “Real Estate and Other Business” has been changed to “Other Businesses”.
In conjunction with this change, the business segment of the consolidated subsidiary that handles the film deposition business previously included in the “Industrial Machinery Products Business” has been changed to “Other Businesses”. Wind power generators and crystals
that were included in the “Steel and Energy Products Business”. Change the business segment of the consolidated subsidiary that handles thebusiness to “Other business”. Sales and cost of sales for the real estate leasing business previously included in “real estate and other business”
were reclassified to non-operating income and non-operating expenses previously.
The segment information for the previous consolidated fiscal year has been reclassified to the reportable segment classification for thecurrent consolidated fiscal year.
The reportable segments of the Group are components for which discrete financial information is available and whose operating results
are regularly reviewed by the Executive Committee to make decisions about resource allocation and to assess performance.
The Steel and Energy Products segment includes steel castings and forgings, steel plates, pressure vessels and steel structures. The Industrial Machinery Products segment includes injection molding machines, film and sheet machinery, blow molding machines, magnesium
injection molding machines, waste treatment equipment and manufacturing equipment for electronic products. The Other Businesses­segment includes crystal business and wind power generation equipment.
Millions of yen

Reportable segments
Year ended March 31, 2019

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures

Industrial
Machinery
Products

Steel andEnergyProducts

Other
Businesses

Total

AdjustmentsandEliminations

Consolidated¥173,648
1,038
174,687¥ 23,599¥41,251
4,159
45,410¥ 2,676¥5,252
3,740
8,993¥  343¥220,153
8,938
229,091¥ 26,618¥—(8,938)(8,938)¥ (2,328)¥220,153—
220,153¥ 24,290¥149,979
3,450
7,171

¥39,347
239
2,033¥8,041477
520¥197,369
4,166
9,725

¥108,102257
219¥305,471
4,424
9,945

49

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Thousands of U.S. dollars

Reportable segments
Industrial
Machinery
Products

Year ended March 31, 2019

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures$1,564,537
9,352
1,573,899$  212,623

Steel andEnergyProducts

Other
Businesses$371,664
37,472
409,136$ 24,110$47,320
33,69781,025$ 3,090

AdjustmentsandEliminations

Total$1,983,539
80,5302,064,069$  239,823

Consolidated$—(80,530)(80,530)$ (20,975)$1,983,539—
1,983,539$  218,849$1,351,284
31,08464,609$354,509
2,153
18,317$72,448
4,298
4,685

$1,778,259
37,53587,621$973,980
2,316
1,973

$2,752,239
39,85989,603

Millions of yen

Reportable segments
Industrial
Machinery
Products

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures
Total assets
Depreciation and amortization
Capital expenditures

Steel andEnergyProducts¥169,000
1,002
170,002¥ 23,691

Other
Businesses¥36,287
4,215
40,503¥ (1,019)¥ 6,412
3,691
10,104¥ (310)AdjustmentsandEliminations

Total¥211,700
8,909
220,610¥ 22,360

Consolidated¥—(8,909)(8,909)¥ (1,782)¥211,700—
211,700¥ 20,578

Steel andEnergyProducts

Other
Businesses

Sales tothird parties¥169,000¥36,287¥6,412

Total

Industrial
Machinery
Products

Steel andEnergyProducts¥211,700

Impairment
loss—¥1,331(b) Geographical information(i) Sales

Japan
China
OthersConsolidated¥103,501
48,04360,156¥211,700¥125,768
3,248
3,244

¥35,500
176
1,549¥ 8,689
359
1,519¥169,958
3,785
6,313

¥127,407
312
123¥297,365
4,097
6,436

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥103,898 $  936,102
54,318489,395
61,936
558,032¥220,153 $1,983,539

Note: Net sales information above is based on customer location.

(ii) Tangible assets
The Company has omitted the disclosure of tangible assets bycountry or region as of March 31, 2019 and 2018 because theamount of tangible assets in Japan accounted for more than
90% of the carrying amount in the consolidated balance sheet.
(c) Significant customer information
The Company has omitted the disclosure of significant customer
information for the years ended March 31, 2019 and 2018 because
no individual customer accounted for more than 10% of net sales
in the consolidated statement of income.
(d) Information on loss on impairment of fixed assets
Impairment losses on fixed assets by reportable segment for theyears ended March 31, 2019 and 2018 are summarized as follows:(a) Product and service information
Thousands of U.S. dollars

Millions of yen

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Other
Businesses

Sales tothird parties¥173,648¥41,251¥5,252

Total

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts¥220,153

Sales tothird parties $1,564,537$371,664

Other
Businesses

Total$47,320 $1,983,539

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Impairment
loss

—

—

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Impairment
loss

—

—

Adjustments
Other
and
Businesses Eliminations¥25¥1,597

Adjustments
Other
and
Businesses Eliminations¥21

Industrial
Machinery
Products

Steel andEnergyProducts

¥215

—

—

—

¥215

268

—

—

—

268

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Amortization
Balance as ofMarch 31

$1,937———$1,937

2,415

—

—

—

2,415

Year ended
March 31,2018

Industrial
Machinery
Products

Steel andEnergyProducts

¥211

—

—

—

¥211

509

—

—

—

509

Amortization
Balance as ofMarch 31

Adjustments
Other
and
Businesses Eliminations

Total

Thousands of U.S. dollars

Adjustments
Other
and
Businesses Eliminations

Total

Millions of yen

Amortization
Balance as ofMarch 31

Adjustments
Other
and
Businesses Eliminations¥1,623

Year ended March 31, 2019
None applicable$225 $14,389 $14,623¥1,352Millions of yen

Year ended
March 31,2019(f) Information on gain on negative goodwill

Total

—

Total

(e) Amortization and balance of goodwill
The following table presents the amortization and balance of negative goodwill arising from business combinations on or prior to
March 31, 2010 as of and for the years ended March 31, 2019 and2018 by reportable segment:

Total

Thousands of U.S. dollars

Adjustments
Other
and
Businesses Eliminations

Millions of yen

Year ended
March 31,2018

Millions of yen

Notes: 1.	Adjustments and eliminations for segment profit of ¥1,782 million ($16,773 thousand) include elimination of inter-segment profit on inventories and corporate
general administration expense which are not allocable to a reportable segment.
2.	Adjustments and eliminations for segment assets of ¥127,407 million ($1,199,238 thousand) include offset of inter-segment debt and credit, and corporate assets
which are not allocable to a reportable segment.
3.	Adjustments and eliminations for depreciation and amortization of ¥312 million ($2,937 thousand) include depreciation and amortization for corporate assets.
		 Adjustments and eliminations for capital expenditures of ¥123 million ($1,158 thousand) include capital expenditures for corporate assets.

50

Industrial
Machinery
Products

2018

Notes: 1.	Adjustments and eliminations for segment profit of ¥2,328 million ($20,975 thousand) include elimination of inter-segment profit on inventories and corporate
general administration expense which are not allocable to a reportable segment.
2.	Adjustments and eliminations for segment assets of ¥108,102 million ($973,980 thousand) include offset of inter-segment debt and credit, and corporate assets
which are not allocable to a reportable segment.
3.	Adjustments and eliminations for depreciation and amortization of ¥257 million ($2,316 thousand) include depreciation and amortization for corporate assets.
		 Adjustments and eliminations for capital expenditures of ¥219 million ($1,973 thousand) include capital expenditures for corporate assets.

Year ended March 31, 2018

Millions of yen

Year ended
March 31,
2018

Total

Year ended March 31, 2018
None applicable
27. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to
10% of the amount to be disbursed as distributions of capital­surplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolutionof the meeting of shareholders, or by the Board of Directors if­certain conditions are met.

51

Notes to Consoli d ated Fi nanci al St ate m e nt s

I n de p e n de nt Au di tor ’s R e p or t

Independent Auditor’s Report
28. Amounts per ShareProfit (loss) attributable to owners of parent per share is calculated
based on the Profit (loss) attributable to owners of parent available
for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding during the year. Net assets per share are calculated based on thenumber of shares of common stock outstanding at year end.
Amounts per share at March 31, 2019 and 2018 and for the years
then ended were as follows:

Profit (loss) attributableto owners of parent
Net assets

Yen

U.S. dollars

2018

2019

2019

¥ 145.77
1,592.47¥ 271.69
1,746.91$ 2.4515.74

29. Subsequent Events(Significant subsequent events)
1. Mergers and acquisitions of consolidated subsidiaries
Based on a resolution of the board of directors meeting held on
January 29, 2019, the company absorbed its consolidated
subsidiary, Nikko Information Systems Co., Ltd. on April 1, 2019.
(1) Overview of transactions(a) The names and business details of the Constituent
Enterprises
Name of the Company: Nikko Information Systems Co., Ltd.
Business details:
Computer system consulting,contract development, technicalguidance, etc.
(b) Date of business combination
April 1, 2019(c) Legal form of business combination
An absorption-type merger where the Company becomes
the surviving company and Nikko Information Systems Co.,
Ltd. becomes the marged company(d) The name of the Combined Enterprise
The Japan Steel Works, Ltd.
(e) Matters concerning the outline of other transactions
Since its establishment in April 1990 as a wholly-owned subsidiary of the company, Nikko Information Systems Co., Ltd.
has been in charge of the Company‘s information system
operation and management as well as the entrusted development business. However, given that advanced information technology (Machine learning, etc.) is an importantelement for the enhancement of the Company‘s productand service values, Nikko Information Systems Co., Ltd. hasdecided to merge with Our Company to strengthen its
functions.
(2) Overview of accounting
Accounting will be conducted as a transaction under common
control in accordance with “Accounting Standard for Business
Combinations” (ASBJ Statement No. 21 of January 16, 2019) and“Application Guidelines for Accounting Standards for Business
Combinations and Accounting Standards for Business
Divestitures” (ASBJ Guidance No. 10 of January 16, 2019).

52

2. Making an affiliate a subsidiary by acquiring additional
equity interests
At the meeting of the Board of Directors held on March 19, 2019,
Our Group resolved to make GM Engineering Co., Ltd., a former
affiliate, a subsidiary. As a result, shares were acquired on April 1,
2019.
(1) Overview of business combinations(a) The name of the Acquired Enterprise and the nature of its
business
Name of recipient company: GM Engineering Co., Ltd.
Nature of business:
Design, manufacture, and saleof plastic sheet equipment,
extruders, etc.; design, manufacture, and sale of dies andauxiliary equipment(b) The main reasons for the business combination
Strengthen and expand sheet equipment business(c) Date of business combination
April 1, 2019(d) Legal form of business combination
Stock acquisition in exchange for cash(e) The name of the Combined Enterprise
There is no change in the name of the combined company.
(f ) Percentage of voting rights acquired
21.75% of the voting rights held immediately before thebusiness combination
60.5% of the voting rights additionally acquired on the dateof the business combination
82.25% of total voting rights after acquisition(g) Main basis for determining acquiring companies
Our Company acquired the shares in exchange for cash.
(2) Acquisition costs of acquired enterprises and their breakdown
Consideration for acquisition: ¥131 million in cash
Acquisition cost:¥131 million(3) Details and amounts of major acquisition-related expenses¥5 million for advisory expenses(4) The difference between the acquisition cost of the AcquiredEnterprise and the total amount of the acquisition cost for eachtransaction leading to the acquisition
Loss on phased acquisition: ¥89 million(5) The amount of negative goodwill that occurred, and the cause
for the occurrence(a) The amount of negative goodwill that occurred¥360 million(b) Cause of occurrenceThis was because the net assets at market value of GM
Engineering Co., Ltd. exceeded the acquisition cost.
(6) The amount of assets accepted and liabilities assumed on thedate of the Business Combination, and the major breakdown
thereofCurrent assets:¥1,722 million
Fixed assets:¥654 million
Total assets:¥2,377 million
Current liabilities:
Fixed liabilities:
Total liabilities:¥1,275 million¥503 million¥1,778 million

53

Cor porate Dire c to r y

Corporate DirectoryN e t wor k

Network

Düsseldorf

Gurgaon(near Delhi)
Hanoi
Bangkok

Corporate Data
The Japan Steel Works, Ltd.

New York
HoustonManilaHead Office

Gate City Ohsaki-West Tower, 11-1, Osaki 1-chome,Shinagawa-ku, Tokyo, JapanFoundation

November 1, 1907

Paid-in Capital¥19,716 million

Employees

2,222 (Consolidated 5,174)

AuditorErnst & Young ShinNihon LLC Hibiya Kokusai Bldg., 2-3, Uchisaiwai-cho 2-chome, Chiyoda-ku, Tokyo, Japan

JakartaDomestic(as of March 31, 2019)

Head Office

Hiroshima Office

Muroran Plant

Nagoya Office

Fukuoka Office

Hiroshima Plant

Gate City Ohsaki-West Tower, 11-1, Osaki 1-chome,
Shinagawa-ku, Tokyo 141-0032, Japan
Phone: +81-3-5745-2001 Facsimile: +81-3-5745-2025
Mitsui Sumitomo Kaijo Nagoya Shirakawa Bldg. 7F, 9-15,
Sakae 2-chome, Naka-ku, Nagoya-shi, Aichi 460-0008, Japan
Phone: +81-52-222-1271 Facsimile: +81-52-222-1275

Stock Information

6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602, Japan
Phone: +81-82-822-0991 Facsimile: +81-82-822-0997
23-2, Sakuragaoka 1-chome, Kasuga-shi, Fukuoka 816-0872, Japan
Phone: +81-92-582-8111 Facsimile: +81-92-582-8124

Osaka Office

Authorized Shares

200,000,000 shares

Issued and Outstanding Shares

74,309,108 shares

Overseas

Shareholders

21,589Japan Steel Works America, Inc.

Stock Listings

Tokyo

Transfer Agent and Registrar

Sumitomo Mitsui Trust Bank, Ltd. 4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan

Major Shareholders(shareholding ratio)(as of March 31, 2019)

Classification of Shareholders by Percentage ofShares Held (As of March 31, 2019)

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

10.91%

Japan Trustee Services Bank, Ltd. (Trust Account)

8.33%

Mitsui Life Insurance Co., Ltd.

3.85%

Sumitomo Mitsui Banking Corp.

2.99%

Sumitomo Mitsui Trust Bank, Ltd.

2.22%

Mitsui Sumitomo Insurance Co., Ltd.

2.13%

RBC IST-OMNIBUS 10 LENDING AC - CLIENT ACCOUNT

1.98%

Nippon Steel & Sumitomo Metal Corp.

1.78%

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

1.60%

Mitsubishi Heavy Industries, Ltd.

1.37%

Securities
Companies

Japan Steel Works Europe GmbH

2.69%

Foreign Corporations
and Foreign
Individuals

25.51%

General Companies
and Other
Corporations

Individuals andOthers

14.78%

Number of
Shares Issued

74,309,108

13.79%(as of March 31, 2019)

Notes 1: The shareholding ratios are calculated after deducting 803,082 treasury shares from the total number of shares issued.
2: Mitsui Life Insurance Company Limited changed its name to Taiju Life Insurance Company Limited as of April 1, 2019.
3: Nippon Steel & Sumikin Corporation changed its name to Nippon Steel Corporation as of April 1, 2019.

sharesHead Office
379 Thornall Street, 5th Floor, Edison, NJ 08837, U.S.A.
Phone: +1-212-490-2630 Facsimile: +1-212-490-2575
Chicago Office
540 Capital Drive, Suite 130, Lake Zurich, IL 60047, U.S.A.
Phone: +1-847-550-0704 Facsimile: +1-847-550-0725
Los Angeles Office
555 South Promenade Ave., Unit 104, Corona, California 92879,
U.S.A.
Phone: +1-951-898-0934 Facsimile: +1-951-898-0944
Detroit Office24387 Halsted Road Unit B, Farmington Hills, MI 48335, U.S.A.
Phone: +1-248-536-0288 Facsimile: +1-212-490-2575
Atlanta Office1395 S. Marietta Parkway, Building 200 Suite 201
Marietta, GA 30067
Phone: +1-770-575-0383 Facsimile: +1-678-403-1846
Head OfficeFriedrichstr. 19, 40217 Düsseldorf, Germany
Phone: +49-211-3116660 Facsimile:+49-211-31166640
Technical Center
Bonnerstr. 243 40589 Düsseldorf, Germany
Phone: +49-211-788600-0 Facsimile:+49-211-788600-21

THE JAPAN STEEL WORKS (SINGAPORE) PTE. LTD.
17, Gul Lane, Singapore 629413
Phone: +65-6861-4511 Facsimile: +65-6862-3166

JAPAN STEEL WORKS INDIA PRIVATE LIMITED

Financial
Institutions

43.23%

611, Time Tower, MG Road, Sector 28, Gurgaon,
Haryana, 122001, India
Phone: +91-124-469-4444 Facsimile: +91-124-469-4433

SM PLATEK CO., LTD.

29, Cheomdan-ro, 181beon-gil, Danwon-gu, Ansan-si, Kyeonggi-do,
Korea
Phone: +82-31-488-3401 Facsimile: +82-31-488-9982

JSW IT KOREA CO., LTD.

1805, 6, Samseong-ro 96-gil, Gangnam-gu, Seoul, Korea
Phone: +82-2-2191-5294/5295 Facsimile: +82-2-2191-5296

JSW Plastics Machinery (Philippines) Inc.

Unit 2205, 22nd floor, Asian Star Building, Asean Drive, Filinvest
Corporate City, Alabang, Muntinlupa City, 1781, Philippines
Phone: +63-2-478-2533/2534 Facsimile: +63-2-809-6221

PT. JSW Plastics Machinery Indonesia

Gajah Building, Unit K Jl. Dr. Saharjo Raya No.111Tebet, Jakarta
Selatan 12810, Indonesia
Phone: +62-21-8370-2536/2537 Facsimile: +62-21-829-8264

4, Chatsumachi, Muroran-shi,
Hokkaido 051-8505, Japan
Phone: +81-143-22-0143 Facsimile: +81-143-24-3440
6-1, Funakoshi-Minami 1-chome, Aki-ku,
Hiroshima-shi, Hiroshima 736-8602, Japan
Phone: +81-82-822-3181 Facsimile: +81-82-285-2038

Yokohama Plant

Shinanobashi Mitsui Bldg., 11-7, Utsubohonmachi 1-chome,
Nishi-ku, Osaka-shi, Osaka 550-0004, Japan
Phone: +81-6-6446-2480 Facsimile: +81-6-6446-2488



54

Corona(near Los Angeles)
Shanghai
ShenzhenTaipeiHong Kong

Kuala Lumpur
Singapore

Trade Name

Detroit

Ansan (near Seoul)

2-1, Fukuura 2-chome, Kanazawa-ku,
Yokohama-shi, Kanagawa 236-0004, Japan
Phone: +81-45-781-1111 Facsimile: +81-45-787-7200

JSW Plastics Machinery (M) SDN. BHD.
Head Office
D6-5-G Block D6, Pusat Perdagangan Dana, 1 Jalan
PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan,
Malaysia
Phone: +60-3-7842-6076 Facsimile: +60-3-7842-6078
Johor Office
No.207, Ground Floor Industry Center, Technovation Park UTM
KM20, Jalan Pontian Lama, 81300 Skudai, Johor Bahru, Malaysia
Phone: +60-7-554-3637 Facsimile: +60-7-554-3711

The Japan Steel Works (Thailand) Co.,Ltd.

78/6 JST Building 4th Floor, Moo7, Kingkaew Road, Rachatewa,
Bangplee, Samutprakarn 10540, Thailand
Phone: +66-2-738-5272~6 Facsimile: +66-2-738-5277

JSW Plastics Machinery Vietnam Ltd.
Head Office
Room 103, Techno-Center Thang Long Industrial Park,
Kim Chung Commune, Dong Anh District, Hanoi, Vietnam
Phone: +84-24-3951-6383 Facsimile: +84-24-3951-6384
Ho Chi Minh Office
G-Floor, DC Tower, 111D Ly Chinh thang Ward 7, Dist3,
Ho Chi Minh, Vietnam
Phone: +84-28-3526-1295 Facsimile: +84-28-3526-1296

JSW Plastics Machinery (H.K.) Co., Ltd.

Room 907, Corporation Park, 11 On Lai Street, Shatin,
New Territories, Hong Kong
Phone: +852-2648-0720 Facsimile:+852-2686-8204

JSW Plastics Machinery (TAIWAN) Corp.
Head Office
1F., No. 21, Dahu 1st Road., Guishan Shiang, Dist., Taoyuan
City 33373, Taiwan, R.O.C.
Phone: +886-3-396-2102 Facsimile: +886-3-396-2104
Tainan Branch
15F-7, No.689-78, Xiaodong Road., Yongkang Dist.,
Tainan City 71052, Taiwan, R.O.C.
Phone: +886-6-311-4192 Facsimile: +886-6-311-4193

JSW Machinery Trading (Shanghai) Co., Ltd.
Head Office301-304 Metro Plaza, 555 Loushanguan Rd., Changning District,
Shanghai, 200051, China
Phone: +86-21-5206-7031/7032 Facsimile: +86-21-5206-7033
Dalian Branch
Room1055, Development Building, Rong Hui Road,
Area No.9, Dalian Development District,
Dalian Liaoning 116600, China
Phone: +86-411-8761-0339 Facsimile: +86-411-8750-9182
Tianjin Branch
Room 609, HaiHe Creative Center No. 5, JuXing Road No. 9,
XianShuiGu Town, JinNan District, Tianjin, 300350 China
Phone: +86-22-8538-5431 Facsimile: +86-22-8535-5431

Suzhou Branch
C-219, Dong Chuang Technical Park, No. 216 Jinfeng Rd,
Mudu, Wuzhong District, Suzhou, Jiansu 215101, China
Phone: +86-512-6831-6246 Facsimile: +86-512-6831-6249
Chengdu Branch
Room 11003, 10# building, area C, No.8 GuangFu Road,
QingYang industrial headquarters base, QingYang District,Cheng Du 610031, China

JSW Plastic Machinery (Shenzhen) Co., Ltd.

1F, YiBen Electronic & Business Industrial Park,
NO.1063 Chaguang Road, Xili Town, Nanshan District, Shenzhen
City, Guangdong Province, 518055, China
Phone: +86-755-8602-0930 Facsimile: +86-755-8602-0934

NINGBO TONGYONG PLASTIC MACHINERYMANUFACTURING CO., LTD.

No.1 Zhuhan Industrial Zone Hengzhang Village Shiqi
Street Yinzhou District Ningbo 315155, China
Phone: +86-574-8821-7608 Facsimile: +86-574-8821-4801

JSW Machinery (Ningbo) Co., Ltd.

No.1 Zhuhan Industrial Zone Hengzhang Village Shiqi
Street Yinzhou District Ningbo 315155, China
Phone: +86-574-8823-6758 Facsimile: +86-574-8308-1589

YPK TRADING (HONG KONG) CO., LTD.

Flat C, 20/F, Young Ya Industrial Bldg., 381-389 Sha T sui Road T suen
wan N.T., Hong Kong
Phone: +852-3521-0437 Facsimile: +852-3905-7216

YPK Machine Trading (Shenzhen) Co., Ltd.

Head OfficeFlat C, 10/F, Laifu Bldg., Fuyong Road, Baoan Shenzhen, Guangdong, 518103, China
Phone: +86-755-2733-2114 Facsimile: +86-755-2733-2106
Shanghai Branch
Room 12 BOl, TB, Bohong Building, No.495 Jinging Road. 		
Shanghai, China

Fine Crystal (H.K.) Co., Ltd.

Room 903, 9/F Aitken Vanson Centre, 61 Hoi Yuen Road, Kwun Tong,
Kowloon, Hong Kong
Phone: +852-2345-7485 Facsimile: +852-2357-9104

Fine Crystal Precision (S.Z.) Co., Ltd.

No.14, Tongfuyu Industrial Estate, Longtian Community,
Longtian Sub-District, Pingshan District, Shenzhen City, Guangdong
Province, P. R. China
Phone: +86-755-8411-6005 Facsimile: +86-755-8411-5009

55

ANNUAL REPORT 2019