Sustainable Growth:

The Road Ahead

Integrated Report
Year Ended March 31, 20172017

Philosophy“Market-driven
collaborative innovation:
Improving the future
through gases”

Guiding Principles

SloganProgressive, united in creativity,
forward looking
We pledge to listen to the views of stakeholders
and to contribute—through both our gas
technologies and collaboration with partners
in other industries—to the creationof a spiritually and materiallywealthy society.

Striving tirelessly to fulfill our potential as
industrial gas professionals and as theglobal leader in this field in terms of bothmarket position and expertise.

Corporate Symbol
Taiyo Nippon Sanso’s corporate logo represents the seamless integration of state-of-theart technology and nature, as well as the Company’s business domain, founded on its
advanced technologies for controlling oxygen, nitrogen, argon and other gases. The logo
also evokes the Company’s resolve to achieve growth through superior quality andtransparency and to ensure a future that is clean, safe and healthy.

CONTENTS
Our Businesses

Our Foundation

Value Creation Process .............................................. 2

Corporate Governance ............................................ 22
Members of the Board of Directors,

Our Strategies

Members of the Audit & Supervisory Board

Ortus Stage 2 ............................................................ 4

and Executive Ofﬁcers ........................................... 25

A Message to Stakeholders ....................................... 6

Working with Stakeholders ...................................... 26

Special Features 1 and 2 ......................................... 10

Environmental Protection Initiatives .......................... 28

Our Performance

Financial and Corporate Information

Strategic Perspectives ............................................. 14

Six-Year Summary ................................................... 30
Management’s Analysis of Operating Results andFinancial Position ................................................... 31
Consolidated Financial Statements .......................... 34
Investor Information ................................................. 39
Corporate Data........................................................ 40

Editorial Policy

The Taiyo Nippon Sanso Group’s Relations with Stakeholders*

Effective from ﬁscal year 2017, Taiyo Nippon Sanso has combined its Annual
Report and its Environmental and Social Responsibility Report into a single
integrated report. The purpose of this report is to provide ﬁnancial informationsuch as that related to corporate strategies and operations, and nonﬁnancial
information, including that related to environmental protection, social contribution initiatives and corporate governance, with the aim of giving readers an
accurate overall picture of Taiyo Nippon Sanso Corporation and the companiesof the Taiyo Nippon Sanso Group.

Scope of Reporting
In principle, this report covers the activities of Taiyo Nippon Sanso and its
Group companies. For some nonﬁnancial information, however, the scope islimited to the domestic activities of Taiyo Nippon Sanso. Accordingly, entities
covered by individual graphs are speciﬁed in notes. To the extent possible,
information is for the entire global Taiyo Nippon Sanso Group.

Period Covered
Data in this report is for ﬁscal year 2017, ended March 31, 2017, althoughsome activities from ﬁscal year 2018 and future tasks and goals are also
featured.

Disclosure Format
The integrated report aims to provide information of particular importance tostakeholders. Other nonﬁnancial information can be found on the corporatewebsite.

Relations with suppliers
Value partnerships and ensure fairness andimpartiality in selecting suppliers and seeking to
expand opportunities for market entry.

Relations withcustomers

Relations withshareholders
and investors

Fulﬁll our responsibility
to customers, placing
the highest priority on
our pledge to guarantee safe and stablesupplies of gas.

Establish solid relationships built on trust by
ensuring the appropriate
distribution of proﬁts
and maintaining open,
robust communications.

Relations with society

Relations with employees

Work to ensure harmony with local
communities and to contribute toregional prosperity.

Respect human rights and strive toenhance working environments andensure appropriate working conditions.

Guidelines Used
The report was prepared in accordance with Environmental Reporting
Guidelines (2012 Edition), published by Japan’s Ministry of the Environment,
and Sustainability Reporting Guidelines (2006), published by the Global
Reporting Initiative (GRI).

*Stakeholders are individuals, groups and organizations, such as those indicated in thischart, that have an interest in, and can be affected by the actions of, Taiyo Nippon Sanso.

Taiyo Nippon Sanso Corporation | Integrated Report 2017

1

Value Creation Process
In line with our philosophy, “Market-driven collaborative innovation: Improving the future through gases,” wecontinue to allocate a variety of management resources to grow our operations, which are currently divided
into six segments. By applying our state-of-the-art gas technologies, we will continue working to support thebusinesses of customers in different industries, contribute to the realization of a sustainable society andincrease our corporate value.

Allocation ofManagement
Resources

Philosophy“Market-driven collaborative innovation: Improving the future through gases”

Natural capital

Long-Term Vision

Manufactured
capitalPlant andEngineering
We are a leading global
manufacturer of air separation
units.

Intellectual
capitalIndustrial Gases

Electronics-Related
Products

We provide stable supplies ofindustrial gases to customers
in Japan and overseas,
thereby helping to support theefforts of customers in adiverse range of industries.

We provide cutting-edge
solutions to leaders in theelectronics industry.

Social capital
Taiyo Nippon Sanso’s Businesses

Other Businesses(Housewares)

Human capital

We respond to society’s calls
for modern lifestyles that
contribute to sustainability.

Liquid Petroleum Gas(LPG)

Financial
capital

We provide environmentfriendly clean energy thatis a familiar presence indaily life.

Corporate Governance2

Taiyo Nippon Sanso Corporation | Integrated Report 2017

MedicalWe supply a variety of crucial
medical equipment for use in
hospitals and home healthcare.
We also provide products fordiagnostics and medical care.

Principal Industrial Sectors We Serve

Contribution to
Sustainability

EnergyRechargeable batteries, renewable energy, solar cells,
other alternative energy choices

ChemicalsPetrochemicals, chemical industry (bioreﬁneries),
rubber, plastics, organic materials

Life Sciences
Healthcare, pharmaceuticals, biotechnology

Fabrication
Manufacturing (processing and assembly of materials
in automobile manufacturing, shipbuilding and bridge
construction and other areas) and processing (surface
coating of metal, ceramics and functional materials,
among others)

Materials
Steel, nonferrous metals, glass, ceramics, cement,
paper, other materials

Agriculture
Farming, ﬁsheries, forestry, other primary industries

Creation of newenergies
Environmental
protection
Efﬁcient use ofresources
A safe and securesociety
Industrial andtechnological advances
Healthy lifestyles
Improved QOL
Realization of moresophisticated medical
treatments, early
detection of illnesses
Food safety and quality

Food
Food production, food processing

Taiyo Nippon Sanso Corporation | Integrated Report 20173

Ortus Stage 2

In fiscal year 2018, we embarked on a new, four-year medium-term
management plan, Ortus Stage 2, the second step in our drive to attainour long-term vision. Guided by our new “Total TNSC” concept, the entire
Taiyo Nippon Sanso Group will implement a variety of measures designed
to achieve the targets set forth under Ortus Stage 2 with the aim of
ensuring sustainable growth.

Yujiro Ichihara
President and CEO

Notes: 1. “Ortus” is a Latin word meaning “beginning” or “birth.”
2. The “Total TNSC” concept calls for optimizing the entire
Taiyo Nippon Sanso Group by augmenting collaboration
among Group companies.

4

Taiyo Nippon Sanso Corporation | Integrated Report 2017Formulating Ortus Stage 2
Medium-Term Financial Targets(Billions of yen)

Years ended/ending March 31

2017 (Actual)2021 (Projection)¥581.5¥800.0Core operating income

54.7

76.0

Core operating income margin

9.4%

9.5%

Overseas revenue ratio

40.8%

45.0%

ROCE

8.4%

9.0%

Revenue

Investment plan (four years)

Investment Plan

¥340.0 billion
Strategic investments: 70%

Net cash provided by operating
activities over four years¥325.0 billion

Ordinary investments: 30%

Basic Policies
Reinforce operating
foundation

Reinforce safety, quality andcompliance efforts

Implement growth strategies

Strengthen corporate
functions

Advance R&D strategy

Expand domestic gas
business

Promote globalization

Core Strategies
Transformation

Maximize Grouppower byaugmenting
collaboration

Innovation

Promote innovation bycapitalizing on external
resources and IoT• Innovation in R&D• Strengthen collaboration in sales • Innovation in engineeringand marketing functions• Innovation in sales approaches• Integrate engineering functions• Innovation in production andlogistics• Consolidate production andlogistics management• Promote shared services

Globalization

M&A

Enhance governanceSeek promising M&A
opportunities toensure sustainability andaccelerate growth• Strengthen the functions of the
Global Operations Division• Reinforce the functions ofregional holding companies

Growth strategies• Broaden business areas• Promote “Total Electronics”• Expand business reach andstrengthen operational density• Acquire new products,
technologies and supply chains• Expand medical businessTaiyo Nippon Sanso Corporation | Integrated Report 2017

5

A Message to Stakeholders

Background to the Formulation of Ortus Stage 2 and Perception of the Operating Environment
Taiyo Nippon Sanso continues to operate in a challenging
environment. In Japan, market growth is expected to remain
slow, with demand for industrial gases over the medium term
not expected to return to levels reached prior to the economic downturn triggered by the collapse of Lehman Brothers.
Overseas, growth in Asian economies is expected to continue driving markets for industrial gases, with demand forelectronics applications in the People’s Republic of China(PRC), in particular, expected to boost demand for specialty
gases. Demand in the United States, the world’s largest market for industrial gases, remains firm, led by demand fromdomestic customers, and it is expected to continue growing
in the years ahead.
Competition in the global industrial gas market has also
continued to intensify. In 1990, a substantial number of companies fought for market presence, including Air Liquide
S.A., the BOC Group plc, Praxair, Inc., Air Products andChemicals, Inc. and the Linde Group. Since then, the market
has undergone a steady process of consolidation, reducing
the number of key players. In 2006, the BOC Group was
acquired by the Linde Group. In 2016, industry leader the Air
Liquide Group acquired Airgas, Inc., a leading U.S. industrial

gas producer. In 2017, the Linde Group, then the world’s
second-largest producer, signed a business combinationagreement to merge with number three producer Praxair.
This will result in the market being dominated by two giants,
the Air Liquide Group and the Linde Group, soon to also
encompass Praxair. Going forward, the rapid execution ofstrategies will be indispensable if we are to capitalize on thegrowth of the global market and compete successfully with
the industry’s major global players.

The Changing Face of the Global Industrial Gas Market

Market shares in 1990

Air Liquide Group
Others24%

18%

Market shares in 2014

Messer Group

Messer Group

Others1%

17%

Airgas4%Market shares assuming integration

Air Liquide Group

Others

1%

17%

23%

Linde Group + Praxair

37%

BOC Group

MesserGroup

14%
Air Products andChemicals

5%
TNSC

Praxair

TNSC

5%

14%

6%

12%

Praxair

14%

Air Products andChemicals

Linde Group

23%

TNSC

6%

12%
Air Liquide Group + Airgas

27%

Linde Group + AGA

10%

Air Products andChemicals

10%
Source: Gas Diorama
Notes: 1. The market share shown for TNSC in 1990 is the combined shares of predecessors Nippon Sanso, Taiyo Sanso and Toyo Sanso.
2. The impact of the integration of the Linde Group and Praxair and of the Air Liquide Group and Airgas is reflected. Market shares assuming integration is the simple sum of shares of
the respective companies in 2014 and does not take into account the impact of the sale of assets on market share.

6

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Positioning of Ortus Stage 2 in Our Long-Term Vision
Our long-term vision calls for consolidated revenue of¥1 trillion, an operating margin of 10%, a return on capital
employed (ROCE) of at least 10% and an overseas revenue
ratio of 50% or higher. As its name implies, Ortus Stage 1,
which guided our efforts from fiscal year 2014 to fiscal year
2017, was positioned as the first stage in our drive to attainthese targets. The plan, the overarching goal of which was
to reinforce our operating foundation, set forth four core
strategic policies, summarized simply as “transformation,”“innovation,” “globalization” and “M&A.” In fiscal year 2017,
we achieved consolidated revenue of ¥581.5 billion.
With the realignment of the global industrial gas industry
and emergence of an oligopoly, securing a position as amajor player will depend on sharpening our global competitive edge while at the same time expanding our operations.
Recognizing this, we will work to achieve our ¥1 trillion
consolidated revenue target as swiftly as possible.
Under Ortus Stage 2, the second stage of our push to realize our long-term vision, we will continue to implement measures in line with the four strategic policies of Ortus Stage 1.
Having positioned the four years of the plan as a period for
promoting growth, we will seek to harvest the benefits ofseeds planted under Ortus Stage 1. We have set a target of¥800 billion for consolidated revenue in fiscal year 2021.

Ortus Stage 2

As the realignment of the global industrial gas industry progresses, we will continue
working to enhance global competitiveness with the aim of ensuring a robust market
position.
Years ended/ending March 31(Billions of yen)

¥1,000.0¥800.0¥581.5FY2017

FY2021Long-term vision

Ortus Stage 1
Reinforce operating
foundation

Ortus Stage 2
Promote growth

Accelerate
growthTransformation

Innovation

Globalization

M&A

Taiyo Nippon Sanso Corporation | Integrated Report 20177

A Message to Stakeholders

Basic Policies and Goals of Ortus Stage 2
Our new medium-term management plan outlines five basic
policies. Ortus Stage 2’s biggest departure from its predecessor is the positioning of our domestic businesses. In addition to a basic policy of expanding our domestic gas
business, the plan defines a clear strategy for implementing
this policy. Under Ortus Stage 1, we focused on a strategic
policy of transformation, that is, on structural reforms, withthe aim of reinforcing our operating foundation in Japan, but
we did not seek to broaden the scale of our operations.
However, given the scale and pace of change in the market
today, we recognize that unless we push for expansion our
position will weaken. Accordingly, under Ortus Stage 2 wewill work to ensure business continuity in Japan by promoting the decisive expansion of our domestic gas business.
In Japan, the key concept underpinning our growth strategies is “Total TNSC.” This concept calls for maximizing thepower of the Taiyo Nippon Sanso Group by strengthening
collaboration among Group companies to further cement ourleading position in the domestic market. Accordingly, we will
strengthen collaboration among sales and marketing functions under the Total TNSC banner with the aim of creating asolid configuration that facilitates comprehensive gas

services, fortifying our ability to provide services to customers
as a single cohesive entity. We will also work to integrateengineering functions, consolidate production and logistics
management, and promote shared services. In addition, we
will seek to expand domestic gas-related businesses,
including gas equipment.
Another basic policy of Ortus Stage 2 is to promote globalization by advancing growth strategies in the United States,
Asia and Oceania, among others. Maintaining the strategic
policy set forth in Ortus Stage 1, we will continue to explore
entry into new markets to expand our business area.
In addition to expanding our domestic and overseas businesses, we will emphasize the reinforcement of our operating
foundation. Ortus Stage 2 also outlines a policy of reinforcing
safety, quality and compliance efforts, acknowledging theimportance of these concerns to business continuity and to
our performance as a producer of industrial gases. Under
Ortus Stage 1, we pursued strategies for growing our global
businesses, facilitating the steady expansion of our Group
network. Ortus Stage 2 acknowledges the importance of
creating a global governance system and reinforcing oursafety, quality and compliance framework.

Maximizing Group Power by Augmenting Collaboration

Taiyo Nippon Sanso Corporation
Integrate engineeringfunctions

Separated gases, others
Nissan Tanaka Corporation
Cutting and welding equipment

Consolidate production
and logistics
management

Nippon Ekitan Co., Ltd.
Carbon dioxide gas, others
Taiyo Nippon Sanso Gas and Welding Corporation
Welding materials, industrial materials, others

Promote shared services
Other Group companies
Other materials

8

Taiyo Nippon Sanso Corporation | Integrated Report 2017

• A close-knit team• Greater collaboration• Group unity

Customers
Comprehensive
servicesBasic Policies of Ortus Stage 2

Expanddomestic gas
business

Promoteglobalization

Strengthen
corporatefunctions

Guided by a policy of advancing our R&D strategy, we willcontinue to implement a variety of initiatives. Under Ortus
Stage 1, we recorded substantial achievements in suchareas as hydrogen stations and stable isotope Water-18O. We
recognize that advancing technological innovation to broaden
our product portfolio and bolster revenue is crucial for us asa manufacturer. Accordingly, we will continue to advance thetargeted allocation of essential management resources, as

Reinforcesafety, quality
and complianceefforts

Advance R&D
strategy

well as to promote open innovation, thereby gaining accessto external technologies that complement our own coretechnologies.
The fifth basic policy of Ortus Stage 2 is to strengthen our
corporate functions. To this end, we will implement a varietyof human resources, information and finance strategies andseek to provide stronger support to all Group companies.

Ensuring Sustainable Growth
Under Ortus Stage 1, we succeeded in achieving substantial
improvements in our consolidated operating results. Underscoring the success of our efforts, our full-term dividend
per share rose from ¥13.00 per share for fiscal year 2015
to ¥16.00 per share for fiscal year 2016 and ¥20.00 per
share for fiscal year 2017. Recognizing the provision of fairreturns to shareholders as a key management responsibility,
we will continue to place a high priority on stable dividends
while at the same time ensuring that our dividend policy iscommensurate with our consolidated operating results.
As explained, one of the core policies of Ortus Stage 2 isto reinforce our safety, quality and compliance efforts, which
we view as a key aspect of our efforts to reinforce our operating foundation. As a provider of industrial gases, we have a
responsibility to ensure safe and stable supplies of gases. It

is absolutely critical that supplies are not interrupted. We thus
place a high priority on managing and minimizing technological risks associated with security, product quality and safety,
the environment and intellectual property.
The Mitsubishi Chemical Holdings Group is implementing adiverse range of initiatives in line with its KAITEKI concept,
which describes “a sustainable condition which is comfortable for people, society and the earth.” As a member of thegroup, we will continue taking steps in line with this concept.
In line with our philosophy, which outlines our fundamental
goal of “improving the future through gases,” we will also
continue leveraging our gas technologies to contribute to thecreation of a spiritually and materially wealthy society and theprogress of the industry. In all of our efforts, we look forward
to the ongoing support and guidance of our stakeholders.

Taiyo Nippon Sanso Corporation | Integrated Report 20179

Special Feature 1

Food-Related Gas Technologies That Help
Reduce Food Loss and CO2 Emissions
Demand is growing for food-related technologies that offer solutions to such
key global issues as food waste and global warming. Against this backdrop, in2017 we launched Bistranza, a new brand for applications developed for foodrelated gas technologies. We will continue to promote the development of newtechnologies and expand their use in an increasingly diverse range of fields.

The Bistranza Brand:
Applications for Food-Related Gas Technologies
According to the United Nations’ Food and Agriculture
Organization (FAO), approximately 1.3 billion tonnes of foodproduced globally are wasted annually—sufficient to feed theclose to 1.0 billion people worldwide suffering from chronicmalnutrition. Japan has been singled out as a major offender.
According to the Consumer Affairs Agency’s White Paper on
Consumer Affairs 2016, food loss, i.e., food that was still edible, accounts for approximately 6.42 million metric tonnes ofthe 28.01 million metric tonnes of food-derived waste generated by the country. This is approximately double the total
amount of the 3.2 million tonnes of food aid provided annuallyworldwide (World Food Programme, 2014). As this indicates,
food waste is an issue of concern to all developed countries.
In addition to the issue of food loss, changing dietary habits
and lifestyles in recent years have continued to fuel a trend
towards eating alone and an attendant preference for quality
over quantity. This has stimulated a growing emphasis on gas

packaging and rapid refrigeration and freezing technologies
for food products. Against this backdrop, in 2017 welaunched Bistranza, a new brand for gas-related products forthe food industry. The brand name—a combination of “bistro”
and “esperanza” (Spanish for “hope”)—was coined to convey
the idea of gas technology applications that bring new hopeto the food industry.

Extending the Shelf Life of Food with Gas Packaging
Our history in the development of technologies for the foodindustry dates back to 1962, when we began conducting
research in the area of continuous freezing equipment. We
subsequently entered into a technological tie-up with a company based in the United States, then considered the world
leader in food refrigeration and freezing, as well as pursued
our own independent research. We also expanded our focus
to include equipment for freezing bakery goods, Japanese
sweets, high-end seafood, and other processed food products, developing a diverse range of technologies designed to,

Bistranza Gas Equipment and Services for the Food Industry
Liquid nitrogen freezer

Bistranza FZ
The origin of our food product freezing technology,
Bistranza FZ rapidly freezes food to a temperature of–120°C. In addition to facilitating the high-quality freezingof food, the unit also allows the adjustment of temperature
settings. A pioneer in the world of freezers for specialty
foods, Bistranza FZ is the first unit capable of freezing
fried rice so that it remains fluffy, rather than in a clump,and can also be used to freeze processed meat, seafoodand other specialty food products. In recent years,
Bistranza FZ has also been used for ready-preparedJapanese New Year’s dishes, boxed lunches, sweets andseasonal foodstuffs.

10

Taiyo Nippon Sanso Corporation | Integrated Report 2017

among others, improve the quality and extend the shelf life of,as well as increase production efficiency for, frozen foodproducts.
Bistranza represents the outcome of efforts to reinforce ourposition in the market for gas technologies for food products
by revamping technologies cultivated over the years. The
brand focuses on gas packaging and liquid nitrogen freezers.
Gas packaging technologies are used to substitute theatmospheric air inside food packages with gases or gas mixtures. Inserting gases such as nitrogen, carbon dioxide gas,
oxygen and helium into the package slows down the processof decay by inhibiting the growth of microbes, thereby keeping perishables, ready-prepared foods and other products
fresh an estimated 1.5 to 3.0 times longer. This not only helps
reduce the disposal of food that has expired but also facilitates the automation of packaging, as well as reducing thefrequency of markdowns and display reorganizations, thereby
helping to lower costs. Less food waste also means lessenergy needed for disposal, while a decrease in the frequency of deliveries also contributes to reduced CO2 emissions. Accordingly, the use of gas packaging is rising quickly,
particularly by convenience store chains and supermarkets.
Food trays made with gas barrier film developed by
Mitsubishi Chemicals Corporation, also a Mitsubishi Chemical
Holdings Group company, are chosen by some companies
that use gas packaging and we supply the gases they use.
Our gas packaging solutions business thus also leverages
Group synergies.

Improving the Safety and Security of Food Supplies
Demand for liquid nitrogen freezers continues to rise sharply.
The revision in October 2016 of the Montreal Protocol on
Substances that Deplete the Ozone Layer brought an agreement among global signatories regarding regulating the useof chlorofluorocarbons, which have a particularly high global
warming potential (GWP). Accordingly, there is a chance that
refrigerators and freezers using chlorofluorocarbons or chlorofluorocarbon substitutes as refrigerants will be prohibited in
the future. This is expected to bolster demand for liquid
nitrogen freezers, which do not require catalysts, to replace
conventional equipment employing mechanical cooling.
As their name implies, liquid nitrogen freezers use nitrogenin its liquid phase (–196°C). In addition to rapid freezing, liquid
nitrogen freezers inhibit the breakdown of cell membranes.

Liquid nitrogen freezing is particularly suited to the rapid
chilling of cooked foods, offering significant advantages overmechanical freezing. We are
currently conducting R&D tofurther enhance the benefits ofliquid nitrogen freezers by, forexample, replacing mesh belts,
which are currently standard,
Hisao Shibuya
with steel belts, and realizing
Manager, Strategic Sales
Team, Planning & Strategic
new chilling methods that
Sales Section,
reduce uneven temperature
Gas Businesses Division
distribution in frozen products.
Looking ahead, we will continue to cultivate applications inareas where demand is expected to increase. At the sametime, we will also take steps to ensure our ability to provide
stable supplies of gases to the more than 50,000 foodprocessing facilities across Japan.
“The key to our competitiveness is our nationwide gas
production and supply capacity, which is among the largest
in the industry,” says Hisao Shibuya of the Gas Businesses
Division. “Going forward, we will continue working tostrengthen relations with our official dealers across Japan.
We will also reinforce our supply configuration for foodadditive gases by establishing five regional Bistranza filling
stations (Tohoku, Kita-Kanto, Chubu, Kansai and Chugoku–
Shikoku). In addition, we plan to partner with leading local
companies to market Bistranza-brand products in key
overseas markets, notably in Southeast Asia and Oceania.”
Our technologies for the food industry go beyond those forgas packaging and freezing. By leveraging these technologies, we aim to diversify into other fields. We see our technologies for equipment and materials used in inland aquaculture,that is, the farming of aquatic animals at noncoastal locations, as offering particular promise. For example, we havehigh hopes for our oxygen enrichment technologies, whichfacilitate high-density cultivation, the rapid culture and growthof farmed fish and reduced wastewater discharges, thereby
maximizing finite marine resources. We will also continue toadvance the development of new technologies with the aimof helping to resolve various food-related issues, thereby
contributing to the improved safety and security of foodsupplies, a goal shared by people everywhere.

Gas packaging technology

Granular freezing system

Ice cream freezer

Bistranza MAP

Bistranza IQF*

Bistranza ICE

Bistranza MAP uses thegases or gas mixtures tailored to the food product tobe packaged. Gas packaging extends shelf life, helping to reduce food waste
and CO2 emissions, among
others. By streamlining
packaging processes, gas
packaging also facilitateslabor savings and cost
reductions.

A liquid nitrogen freezer forfreezing liquid materials into
granules, Bistranza IQF isused for the granular freezing of acidophilus, ice
cream and cultures. In
addition to food packaging,
Bistranza IQF is also usedin the pharmaceuticals
industry.

Used on commercial ice
cream production lines,
Bistranza ICE uses liquid
nitrogen in a variety of
specialized processes,
including the applicationof chocolate coatings
and the hardening of
surfaces.

*Individual quick freezing

Taiyo Nippon Sanso Corporation | Integrated Report 201711

Special Feature 2

Home Healthcare Services:
Medical and Lifestyle Support
Services for a Super-Aged
Society
Japan’s coming super-aged society is driving demand for abetter system of home healthcare. We are taking steps toenhance our home healthcare services, which center on homeoxygen therapy. By ensuring the provision of safe, easy-to-use
products and services, we will continue working to contributeto improved quality of life for patients across the country.

Establishing a Better System of Home Healthcare
By 2025, the percentage of Japan’s population over 65 yearsof age is forecasted to exceed 30%. The Ministry of Health,Labour and Welfare (MHLW) is promoting a variety of efforts
aimed at enabling seniors to continue living their lives
securely in familiar surroundings, containing increases inhealthcare costs associated with long-term care. Of particular note, the ministry is taking steps to create a holistic system that shifts the focus of healthcare for seniors frommedical facilities to community- and home-based care.
We provide medical gases and equipment to a variety ofcustomers, from major hospitals to private homes. Our homehealthcare business encompasses the development, saleand rental of equipment for home healthcare, principally forhome oxygen therapy (HOT). We also extend support in theform of around-the-clock services, including installation,collection and maintenance, which we provide through anationwide network of sales offices.
HOT is a medical treatment involving the provision of highconcentration oxygen using oxygen concentrators, cylinders
and other devices in non-hospital settings. Used primarily inthe management of chronic obstructive pulmonary disease(COPD), a cause of chronic respiratory insufficiency, HOT isalso used in the treatment of a variety of other conditions,
including interstitial pneumonia and advanced lung cancer.
The use of HOT has expanded significantly since it was first
approved for coverage under Japan’s national health insurance program in 1985, with an estimated 160,000 patientscurrently receiving this therapy. In addition to enabling
patients to better balance the demands of everyday life withtreatment, there is also strong evidence of additional medical

Patient Concerns Regarding HOT Revealed in Data fromthe Japanese Respiratory Society
Concerns over what
happens in the event of apower outage or disaster

39%
32%

Twisting of tube
Burden on family

27%

Inconvenience caused bybeing unable to adjust thedevice manually

26%

Inability of patients tochoose the devices they use

21%
18%

Dissatisfaction with device
used

14%

Lack of understanding on
the part of other people

14%

Source: “Concerns and Complaints from Patients Using HOT (Multiple Selections Possible),”White Paper on Home Respiratory Care, The Japanese Respiratory Society, 2013
(Analysis of COPD user survey results by illness)

12

This regulator, which allows oxygen to be delivered
efficiently, is lightweight, compact and offers one-touchattachment/detachment.

53%

Concerns over leaving thehouse

Problems with the nasal
cannulaTouch One Duo/Touch One Solo

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Easy switching between continuous
and regulated modes
One-touch attachment/
detachment

Ourultracompactcylinder is similarin size toa 500 ml
PET bottle.

Height:Approx. 20 cm
Weight:Approx. 1.0 kg
Capacity:
0.4 L

Ultracompact portable oxygen cylinderThis compact oxygen cylinder, which weighs 0.99 kg,
can be carried about easily in many situations, expanding
the scope of activities possible for patients. A convenient
dedicated shoulder strap leaves both hands free.

The result is a lightweight, compact andeasy-to-operate oxygen cylinder and regulator
that together weigh approximately 1.4 kg.

benefits, including prolonged survival, improved mobility anda reduction in the frequency of hospitalization. In addition tosystems for use when patients are at home or out, there is aneed for systems that can be used in a variety of everyday
situations, including at school and work, as well as whentravelling. Moreover, because they are operated by patientsor family members, HOT systems must be easy to use toensure safety and peace of mind.

electricity, supplies can be lost
if the power goes out. To relieve
such concerns, we developed
a concentrator that automatically switches to supply froman oxygen cylinder in the eventof a power outage or malfunction, as well as a model that
includes a back-up battery as astandard feature.
Masahiro Minami“We survey patients, conduct
Manager, Home Care Team,Sales Department,
field tests and repeatedly
Bio Medical Section,
improve and enhance devices
Medical Division
to better reflect the patient’s
perspective as we work toward commercialization,” recalls
Masahiro Minami of the Medical Division. “In addition, we
make sure that product features are properly understood bymedical professionals by organizing study sessions anddemonstrations across the country.”
Bolstered by the endorsement of the MHLW, the numberof home healthcare patients in Japan continues to increase.
The scope of home healthcare is also expanding beyond
HOT to include a variety of other services. Our lineup of medical equipment today encompasses a wide range of devices,
including ventilators, infusion pumps and continuous positive
airway pressure (CPAP) devices for sleep apnea syndrome(SAS), and we recognize that the importance of this businesswill continue to grow. “Home healthcare service providers
must also offer around-the-clock maintenance and emergency back-up services in the event of a disaster,” says
Mr. Minami. “We will continue working to reinforce our service
framework, particularly our emergency back-up services.”
With an increasing number of patients now able to choose
HOT, we will also continue to promote the development ofeasy-to-use devices that can be used free of worry and toenhance our supply configuration.

Carefully Tailored Product Development:
Prioritizing the Patient’s Perspective
We promote product development with the aim of addressing
the diverse needs of HOT patients, with an emphasis on
user-friendliness. For example, when HOT patients leave thehouse they can transport oxygen cylinders easily using a
dedicated cart, but this is shunned by more than a few
patients for a variety of reasons, including the weight of portable cylinders and the attention they attract. In response toconcerns such as these, we upended conventional ideas ofoxygen cylinders by developing an ultracompact portablemodel that can be carried with only a shoulder strap, thus
leaving both hands free in an entirely inconspicuous fashion.
Integrating the cylinder valve with a built-in oxygen regulator
allows oxygen to be delivered efficiently when breathed in,thereby making cylinders last longer. In addition, we extended
the continuous usage time and reduced the weight of the unit
by combining it with a lightweight conserver. In response tocomplaints regarding cannulae, the flexible tubes fitted into
patients’ nostrils to enable breathing in of oxygen, we developed a cannula that employs a spiral configuration for a portion of the tube and can be extended only when pulled. Thisaddresses the inconvenience associated with cannulae which
are too long or too short for patients’ preferences.
Another common concern among patients relying on HOT
is that because oxygen concentrators are powered by

HOT-Related Products
Oxygen concentrators

Liquid oxygen devices

Accessories for portable cylinders

Oxygen concentrators are devices that deliver
highly concentrated oxygen to patients. Because
they are powered by electricity, oxygen
concentrators are primarily used in the home.

These devices gasify liquid oxygen and supply
it to patients as highly concentrated oxygen.
Because there is no external power source,
operation is not affected by power outages.
They can also be used as portable units andrefilled from a bulk storage reservoir.

Nasal cannulae are narrow tubes used todeliver oxygen, one end of which is placed in
the patient’s nostrils and the other connectedto the cylinder.

A light indicates the startand finish of refilling.

Oxywell Portable

Oxywell 5A

This new and even smaller
concentrator includes a
back-up battery as a standard feature and can thus
be taken out of the house.

This concentrator automatically switches to supply
from an oxygen cylinder inthe event of a power
outage or malfunction.
Remaining volume canbe confirmed visually.

HotaruOxygen flow checker

This model features a newlever that facilitates onehanded refilling. The compact
body enables it to be takenout of the house.

A flow checker for portable oxygen cylinders thatindicates when filling istaking place, relieving
patient concerns.

Nissei Nasal Cannula
OX-01 (spiral type)This cannula employs aspiral configuration for a
portion of the tube and thus
extends only if pulled, which
prevents ear chafing anddragging.

Taiyo Nippon Sanso Corporation | Integrated Report 201713

Strategic Perspectives

Gas Business in JapanAs Japan’s leading manufacturer of industrial gases,
with a market share of approximately 40%, we provide stable supplies of gases to customers in diverse
industries, including manufacturers of steel, chemicals, transportation equipment and electronics. We
primarily use two delivery formats, namely, on-siteplants (air separation units built on or adjacent tocustomers’ production facilities), from which we supply separated gases directly via pipeline, and tanker
trucks, which enable us to supply liquid gases inbulk via a nationwide network of production andsales locations. We have also created an official
dealer system, the Taiyo Nippon Sanso Major Club,
with the aim of responding accurately and effectively
to the needs of end users across Japan, further reinforcing our robust supply chain, which encompasses
both production and sales.
In addition to industrial gases, we extend a wide
range of peripheral products through the companiesof the Taiyo Nippon Sanso Group, which include
Nippon Ekitan Corporation, Japan’s leading supplierof carbon dioxide gas and dry ice, Nissan Tanaka
Corporation, a manufacturer of cutting and otherequipment, and Taiyo Nippon Sanso Gas andWelding Corporation, which provides welding
materials, among others.

Fiscal Year 2017 in Brief
Revenue: –2.0% from ﬁscal year 2016
Revenue was down, as sales prices
declined in tandem with energy prices
A downward rebound in sales ofhydrogen stations, robust in the previous
fiscal year, pushed revenue down
Revenue increased, reflecting higher
demand for use in the manufacture of LCs
and semiconductors
Falling energy prices hindered sales
prices, pushing revenue down

On-site gases
Gas equipment
Electronics materials
gases
LPG

Segment income: +5.7% from ﬁscal year 2016
Electronics materials
gases

Brisk revenue bolstered income

Costs

Lower costs, a consequence of falling
crude oil prices, had a positive impact

Growth Strategies
With demand increasing for nitrogen for certain applications,
including electronics components for export, we anticipate
moderate growth in overall demand for industrial gases inJapan. With a significant increase in the market for industrial
gases unlikely, our focus going forward will be on consolidating our number one market position by expanding our gas
and gas-related businesses, as well as by maximizing Groupsynergies.

Revenue and Segment Income

Percentage of Revenue(Billions of yen)

(Fiscal year 2017)

400

40

CAGR: Revenue –0.5% Segment income +1.9%

300

30

200

20

55.3%
(¥321.4 billion)(Billions of yen)
Industrial gases (¥223.0)

100

10Bulk gases (¥76.3)
On-site gases (¥46.4)

0

0
2012

Revenue

14

2013

2014

2015
2016
Japanese GAAP

Segment income

Taiyo Nippon Sanso Corporation | Integrated Report 2017

2016
IFRS

2017

2018
Forecast

Electronics-related products (¥71.1)

Packagedgases
Plants and(¥11.7)equipment
Hard goods (¥41.7)(¥23.2)

Energy-related
products (¥27.2)

Electronics
materials
gases(¥46.5)

Medical gases(¥23.4)Gases(¥24.2)Equipment andinstallation (¥24.6)
Equipment(¥2.9)

In line with the Total TNSC concept, we will work toenhance customer service through close collaboration with
Taiyo Nippon Sanso Group companies providing carbon
dioxide gas, welding equipment, welding materials and otherproducts, with the aim of offering comprehensive gas solutions. In gas-related businesses, we have broadened ouroperations to provide the full scope of electronics-related
products, including nitrogen supply, electronics materials
gases, and equipment and installation. Looking ahead, we
will continue to transform other gas-related businesses tocreate additional major pillars of our operations. We will also
actively seek M&A opportunities that promise to yield synergies that will further strengthen our market presence andexpand the borders of our business.
Ortus Stage 2 sets forth a strategy for transforming our
medical business into a core business. To this end, we positioned products for cutting-edge medical care (stable isotopes and products for the biotechnology field), respiratory
therapy and home healthcare, as key areas of focus and will
work eagerly to expand this business through M&As and bypromoting the development of innovative products.
In the energy field, we will work to expand sales of LPG bypromoting fuel conversions and expand commercial rights
through M&As, as well as to enhance our lineup of energy
products other than LPG.

Ensuring Stable Supplies of Carbon Dioxide Gas
In Japan, sources of raw materials for carbon dioxide gas havedwindled, owing to a decline in the availability of fuel oil attributableto falling operating rates at petroleum refineries, as well as to thetermination of ammonia production by a number of manufacturers.
As a result, we have been forced to transport such materials overlong distances and obtain them from overseas sources. In response,
we are taking steps to ensure stable supplies of these materials inall regions. In the Chugoku–Shikoku region, for example, we are
installing carbon dioxide gas production equipment at Nippon
Ekitan’s Mizushima Plant, while in the Chubu region we plan toexpand production capacity at Chita Tansan Co., Ltd., our principal
regional production base. Through such efforts, we are working toenhance our domestic sales and supply network and ensuresustainable growth for our carbon dioxide gas business.
Nippon Ekitan’s Production Bases
Mizushima Plant(Nippon Ekitan Co., Ltd.)
Location:
Mizushima, Okayama Prefecture
Production capacity of new facilities:
250 tonnes/day
Capital investment: ¥5.0 billion
Scheduled start of production:
October 2017

Chita Tansan Co., Ltd.

Note: Production figures include production
under contract and from facilities inwhich Taiyo Nippon Sanso has invested.

Location: Chita, Aichi Prefecture
Production capacity of new facilities:
70 tonnes/day
Capital investment: Approx. ¥1.2 billion
Scheduled start of production: December 2018

Business Sites in Japan

Head office
Branches
Branch offices/sales offices
R&D facilities
Sanso centers/liquid oxygen facilities
Semiconductor gas production facilities
K.K. JFE SANSO CENTER

Taiyo Nippon Sanso Corporation | Integrated Report 201715

Strategic Perspectives

Gas Business in the United States
We first established operations in the United Statesin the 1980s. Initial efforts to broaden our presence,
which began in 2004, focused on the southernstates and emphasized reinforcing our operations
through an ambitious M&A program and capital
investments. These and later efforts facilitated theestablishment of a robust operating foundation that
includes California, which boasts the largest economy of any state, as well as Texas and Louisiana,
leaders in petroleum development and production.
In 2016, we acquired a portion of the Air Liquide
Group’s U.S. operations, a move that substantiallystrengthened our operating foundation in the southand enabled us to build an industrial gas supply network that encompasses the southern, eastern andMidwestern states, establishing us as a major
national player.
Our U.S. operations center on the supply of liquefied gases, which are transported as bulk gases tothe customer’s site by tanker truck, and packaged
gases, which are filled into cylinders and other containers for customers requiring smaller volumes. We
also offer an extensive lineup of original hard goods,
including welding equipment, which we sell together
with packaged gases, for which we are number three
in terms of market share. In recent years, we havefurther diversified our product lineup through theacquisition of acetylene and carbon dioxide gas
producers and are currently the largest supplier ofacetylene and second-largest supplier of dry ice.

Fiscal Year 2017 in Brief
Revenue: –1.5% from ﬁscal year 2016
Revenue was robust, thanks to brisk
sales of carbon dioxide gas for use infood and beverage products
A decline in sales for petroleum
development and production pushed
revenue down
Revenue was bolstered by theacquisition of business from the Air
Liquide Group in fiscal year 2016
Revenue declined, hampered by astrong yen

Bulk gases

Hard goods

Impact of acquisition
Currency translation
effects

Segment income: +30.7% from ﬁscal year 2016
Brisk sales of carbon dioxide gas
pushed income up
Income increased, owing to theacquisition of business from the Air
Liquide Group in fiscal year 2016

Bulk gases
Impact of acquisition
Currency translation
effects

Yen appreciation had a negative impact

Growth Strategies
In the United States, the world’s largest industrial gases
market, gentle economic growth is expected to bring anattendant increase in demand for industrial gases. Having
positioned our U.S. operations as a key growth engine, wewill continue to promote active capital investment and M&As.

Revenue and Segment Income

Percentage of Revenue(Billions of yen)

(Fiscal year 2017)

CAGR: Revenue +10.5% Segment income +24.7%

200

20

150

15

100

10

25.3%
(¥147.2 billion)(Billions of yen)
Industrial gases (¥136.6)

50

5
Bulk gases (¥54.9)
On-site gases (¥6.1)

0

Packaged gases (¥47.2)
Hard goods (¥28.4)

02012

Revenue

2013

2014

2015
2016
Japanese GAAP

2016
IFRS

2017

2018
Forecast

Segment income

Note: In fiscal year 2016, a change in accounting period by Matheson Tri-Gas, Inc., resulted in the inclusion of
15 months of results for the company.

16

Electronics-related products (¥10.5)

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Electronics materials gases(¥8.4)
Equipment and installation(¥2.1)

Our U.S. M&A strategy is two-pronged. We start by acquiring
gas distributors in new areas. Once we have secured a market position, we install air separation units and commence
sales of products through our local sales channels. Throughmultiple subsequent acquisitions and/or investments, we willcontinue to increase the density of our operations, helping us
reduce costs associated with production, purchasing andtransport, thereby enhancing the competitiveness of both ourbulk and packaged gas businesses. The cumulative successof this strategy, together with a key acquisition in September
2016, have allowed us to build a potent production networkthat extends across the continental United States.
Our medium- to long-term strategic priority in the UnitedStates is to expand our on-site gas business, which provides
stable earnings. Proposing new large-scale on-site projects

Expanding Our On-Site Business
Since winning a major on-site order in Louisiana from Sasol Chemicals(USA) in August 2014, we have received orders in various locations
across the country. In the on-site business, we sign long-term contracts
to supply gases directly to customers’ facilities by pipeline, which facilitates stable earnings and at the same time enables us to produce liquefied gases, which we supply to other local users. Our U.S. subsidiary
Matheson Tri-Gas, Inc., has established a dedicated team to further
expand this business, which is taking decisive steps to secure new onsite orders. The team is capitalizing on both the technological prowess of
our plant engineering department and our robust local sales capabilities
to further expand this business.

Business Sites in the United Statesrequires an effective backup supply configuration. Our robust
nationwide production network thus positions us well to build
a steady stream of new on-site units in various locations,
including the south and the Midwest.
We will also focus on maximizing synergies between our
existing operations and the operations acquired from the Air
Liquide Group in September 2016. We will integrate theacquired plants into our centralized management system tooptimize production and transport. We will also gradually shift
to internal procurement of source gases for packaged gases,
which we currently purchase from outside suppliers. Over the
medium to long term, we will seek to acquire distributors in
the eastern states and the Midwest, as we have done in thesouth, and establish on-site plants to facilitate the vertical
integration of our operations.

On-Site Gas Business Model
Air separationunit

Long-term contracts ensure stable earnings
Supplied by pipeline

On-site gas
users

Reasonably priced bulk and packaged gases are supplied to
local users
Transported by tanker truck

Supplied in cylinders

Bulk gasusers

Packaged gas
users

Corporate headquarters
Air separation units
Carbon dioxide gas production facilities
Nitrous oxide production facilities
Filling stations and distribution facilities

Matheson Tri-Gas’ plant in Vernon, California

Taiyo Nippon Sanso Corporation | Integrated Report 201717

Strategic Perspectives

Gas Business in Asia and Oceania
Our operations in Asia and Oceania center on the
supply of industrial gases to customers in Southeast
Asia, China, India and Australia and of electronicsrelated products to customers in China, Taiwan andSouth Korea.
We entered the Singaporean market in the early
1980s by establishing National Oxygen Pte. Ltd. andhave expanded our operations there in the years
since. In 2012, we acquired Leeden Limited, a provider of welding equipment and other products withan extensive region-wide network. In 2014, we
merged Leeden with National Oxygen, thereby
strengthening our operations in Singapore andMalaysia.
We have also established a presence in thePhilippines and Vietnam, where we are currently the
top producer of liquefied gases in terms of production capacity, and continue to seek promising investment opportunities in both countries that will
position us to capitalize effectively on economic
growth. Further expanding our geographic reach, weestablished locations in Indonesia in 2014, Australia
in 2015 and Myanmar in 2016.
In the area of electronics-related products, we area leading supplier of electronics materials gases tocustomers in China, Taiwan and South Korea. We
have also expanded our focus to include the provision of exhaust gas abatement systems, high-purity
gas refining equipment and installation services.

Fiscal Year 2017 in Brief
Revenue: –3.9% from ﬁscal year 2016
Revenue rose, reflecting strong resultsin the Philippines and Vietnam
Acquisitions in Thailand and Australia
pushed revenue up

Industrial gases
Impact of acquisition
Currency translation
effects

Yen appreciation had a negative impact

Segment income: +71.6% from ﬁscal year 2016
Income rose, bolstered by robust
revenueAcquisitions in Thailand and Australia
pushed income up
The absence of an impairment loss
reported in Singapore in the previous
fiscal year had a positive impact

Bulk gases
Impact of acquisition
Impairment loss
Currency translation
effects

Yen appreciation had a negative impact

Growth Strategies
Emerging economies in Asia are expected to remain thedriving force behind global economic growth. In thePhilippines and Vietnam, demand for industrial gases is burgeoning, particularly for use in the manufacture of electronics
components, and is likely to grow further. In China, demandfor electronics-related products is expected to increase.
We will continue to promote active investment in Asia andOceania, a key growth strategy of Ortus Stage 1, to fortify

Revenue and Segment Income

Percentage of Revenue(Billions of yen)

(Fiscal year 2017)

CAGR: Revenue +24.3% Segment income +38.6%

120

10.0

90

7.5

60

5.0

14.8%
(¥85.8 billion)(Billions of yen)
Industrial gases (¥51.9)

30

2.5
Bulk gases (¥27.0)
On-site gases (¥2.6)

0

0
2012

Revenue

2013

2014

2015
2016
Japanese GAAP

2016
IFRS

2017

2018
Forecast

Segment income

Note: In fiscal year 2016, a change in accounting period by certain subsidiaries resulted in the inclusion of 15
months of results for these companies.

18

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Packagedgases(¥4.7)
Hard goods(¥5.8)

Electronics-related products (¥33.9)

Plants andequipment(¥11.5)

Electronics materials gases(¥26.7)Equipment and installation(¥7.2)

profitability in individual geographic areas and expand thegeographical scope of our operations. At the same time, wewill improve the capabilities of our regional headquarters inShanghai and Singapore with the aim of reinforcing
governance and Group capabilities.
In Southeast Asia, we will install air separation units inareas where we currently have operations. We will also seek
advantageous M&A opportunities and take steps to strengthen our business foundation for strategically important products such as carbon dioxide gas and specialty gases. Having
set up operations in Myanmar in 2016, we will step up efforts
to expand into other markets with latent growth potential
where we have yet to establish a presence.
Guided by the concept of “Total Electronics,” we will
endeavor to respond flexibly to the increasing global operations of key customers, notably semiconductor and display
manufacturers, by creating a global strategic customer management function in China (Shanghai), where capital investment is concentrated, that will promote a unified Groupbusiness strategy. We will also build a new electronics
materials gas production facility in China.
In India, which continues to see exceptional economic
growth, we will consider making capital investments to meetrising demand, as well expanding into neighboring markets.
We will also work to expand the scale of our operations inAustralia, where we established a presence in 2015, as wellas to increase synergies between the two companies weacquired in the country to further reinforce our operating
foundation.

Business Sites in Asia and Oceania

Establishing Operations in Myanmar
In 2016, we entered the Myanmar market with the establishmentof an operating company in the country’s Thilawa Special
Economic Zone. To date, manufacturers in Myanmar have had todepend on bulk gases imported from other countries. We will seek
to swiftly cement the position of our bulk gases business in the
country, as well as to lock in rising demand for industrial gases, bybuilding air separation units across the country. Our initial focus
will be on fortifying our operating foundation in Yangon with a viewto expanding into Mandalay and Dawei.

Mandalay
Naypyitaw
Thilawa
YangonBangkok
Dawei

Phnom Penh

Southern Economic Corridor
Ho Chi Minh

Regional headquarters
Air separation units
Branches and sales offices

Production facility at the corporate headquarters ofRenegade Gas Pty Ltd. (New South Wales, Australia)

Taiyo Nippon Sanso Corporation | Integrated Report 201719

Strategic Perspectives

Thermos and Other Businesses
Our Thermos business dates back to 1978, whenpredecessor Nippon Sanso Corporation, seeking todiversify into new businesses in which it could
leverage its existing technologies, developed astainless steel high vacuum insulated bottle. In 1989,
Nippon Sanso acquired the Thermos business of aU.S. firm and commenced sales of Thermos-brandstainless steel vacuum insulated bottles. In the years
since, the Thermos Group, headed by Thermos K.K.,
has introduced sports-use vacuum insulated beverage bottles, portable vacuum insulated mugs andother popular products, which have driven steady
growth. In 2014, Thermos acquired alfi GmbH, amanufacturer of vacuum-insulated bottles and containers based in Germany, thereby reinforcing its
European sales network and further enhancing its
product lineup.
The Thermos Group is noted for its excellent
product development capabilities, with approximately 30% of its annual production accounted forby newly released products, and it continues tolaunch a steady stream of attractive new products,
stimulating market growth. From a production configuration encompassing facilities in Malaysia, China
and the Philippines, the Thermos Group currently
sells products in more than 120 countries worldwide,
including Japan, the United States and China.

Fiscal Year 2017 in Brief
Revenue: –1.9% from ﬁscal year 2016
Market environment

Conditions flagged, owing to a lull in
inbound demand

Sales

Sales of new products were brisk

Segment income: +11.3% from ﬁscal year 2016
Yen appreciation pushed down importpricesResults at overseas affiliates in China
and elsewhere were healthyJapan
Affiliated companies

Growth Strategies
With inbound demand stabilizing, competition for sales inJapan is expected to escalate as market growth dulls.
Although the volume of sales in China is not expected to
decline significantly, competition for overseas sales is likely tointensify as shipments of low-priced products from overseas
manufacturers to the United States and Europe result in theemergence of competitors to Thermos-brand offerings.
Our growth strategies for the Thermos business center on
maximizing the power of the Thermos brand, promoting area
marketing and reinforcing production capacity. A brand witha proud history, the original Thermos was founded in 1904 in
Germany. Going forward, we will continue to maximize

Revenue and Segment Income

Percentage of Revenue(Billions of yen)

(Fiscal year 2017)

40

12

CAGR: Revenue +12.4% Segment income +29.3%

30

9

20

6

4.6%
(¥27.0 billion)(Billions of yen)
Other (¥27.0)

103
Thermos (¥24.6)

0

0
2012

Revenue

20

2013

2014

2015
2016
Japanese GAAP

Segment income

Taiyo Nippon Sanso Corporation | Integrated Report 2017

2016
IFRS

2017

2018
Forecast

Other(¥2.3)

Thermos’ outstanding brand recognition and solid reputation
for quality, which is backed by rigorous quality control. Efforts
to promote area marketing will continue to emphasize tailoring our marketing initiatives to conditions and customs in different parts of the world. We will also work to further expand
our production capabilities, which in April 2016 were bolstered by the start of operations at a new production facility
in the Philippines.
In Japan, we will focus on developing products for new
applications. To date, the Thermos lineup has focused on
products designed for carrying about, including sports-use
vacuum insulated beverage bottles and portable vacuum
insulated mugs. Looking ahead, we intend to create an
entirely new product category by using Thermos technology
to develop tableware and other everyday items that deliver
greater convenience. We will also promote the developmentof products tailored to specific markets, including vacuum
insulated beverage bottles for mountain climbing and for
cycling.
In addition to expanding our product lineup, we will takesteps to enhance our sales channels, which include directly
operated brick-and-mortar shops and the Thermos on-line
store. We will also work to incorporate information gained
through directly operated shops, which enable us to communicate directly with customers, into the development of new
products.

Leveraging Synergies with alfi
Since acquiring alfi GmbH, a well-known German manufacturer ofvacuum-insulated bottles and containers, in 2014, Thermos has
sought to promote the sharing of sales networks and to leveragesynergies in the area of product development. February 2017brought the launch of new products combining Thermos’ outstanding stainless steel processing technologies and alfi’s exquisite design capabilities. The two companies will continue tocapitalize on their respective capabilities to further expand thelineup of jointly developed products.

Coral stainless steel vacuum
insulated tumblers

Juwel stainless steel
vacuum insulated carafe

The Thermos Group’s Global Network

Head office
Sales offices
Production facilities

Taiyo Nippon Sanso Corporation | Integrated Report 201721

Corporate Governance

Basic Philosophy
From the perspective of ensuring sustainable growth for the
Taiyo Nippon Sanso Group and increasing corporate value
over the long term, and taking into account the positions ofshareholders, customers, employees and local communities,
we strive to guarantee the transparency and fairness ofmanagement. We believe that the essence of corporate
governance is ensuring the effective use of available
management resources while bolstering the strength ofmanagement through prompt and decisive decision making.
Accordingly, we continue to promote efforts to enhance ourcorporate governance capabilities in line with the following
five basic beliefs.

(1) We will respect shareholder rights and ensure equality.
(2) We will consider the benefits of shareholders and otherstakeholders, and work appropriately in partnership withthose stakeholders.
(3) We will ensure transparency by releasing appropriate
corporate information at appropriate times.
(4) By separating supervisory and executive functions, we will
improve effectiveness of the board of directors’ supervisory function over the company’s business executions.
(5) We will engage in constructive dialogue with shareholders
in order to contribute to the sustainable growth of thegroup and the medium- to long-term improvement ofcorporate value.
(Excerpted from Taiyo Nippon Sanso’s Principles of Corporate Governance)

Initiatives to Improve Corporate Governance
Date

Area

Initiative

June 2015

Composition of theBoard of Directors

Revised Articles of Incorporation to reduce the maximum number of directors on the Board of
Directors from 20 to 15 to accelerate decision making
Reduced number of directors on the Board of Directors from 16 to 11
Appointed two independent outside directors

June 2015–
July 2015

Compliance

Established the position of Chief Compliance Ofﬁcer (CCO) with the aim of ensuring theeffectiveness of compliance
Established the Corporate Audit Ofﬁce to assist the efforts of the CCO

October 2015

Other

Formulated principles of corporate governance
Formulated disclosure policy

June 2016

Committees

Established the Advisory Committee on Appointments and Remuneration, consisting of thechairman of the Board of Directors, the president (CEO) and independent outside directors, toimprove the transparency and objectivity of procedures for appointing and determining
remuneration for directors

June 2016

Remuneration for
directors

Introduced performance-linked bonuses tied to degree of achievement of medium-term businessplan targets as an incentive with the goal of driving medium-term growth

July 2017

Committees

Established the Information Management Committee to create an appropriate framework for thejoint management of information among pertinent departments

Management Structure
We have adopted an internal auditing system and clarified
accountability on a fiscal year basis by setting the term ofoffice for our directors at one year. In fiscal year 2017, ourBoard of Directors met 13 times to discuss important mattersand hear reports on the status of business activities. We havealso established the Advisory Committee on Appointments
and Remuneration, a discretionary committee under the
Board of Directors consisting of the chairman of the Board of
Directors, the president (CEO) and independent outside
directors. The Board of Directors consults with the Advisory

Committee on Appointments and Remuneration to selectcandidates for the position of director, Audit & Supervisory
Board member and executive officer and candidates to succeed the president (CEO), as well as regarding revisions to
the internal regulations governing the Board of Directors,
thereby ensuring the transparency and objectivity of decision
making. In addition, we have established a Management
Committee, which meets as necessary, helping to facilitate
swift management decisions.

Auditing Structure
To ensure adequate monitoring capabilities, our Audit &Supervisory Board comprises four auditors, three of whomsatisfy the requirements of outside auditors. One of the threeoutside auditors, who is currently in his second term,
attended all 13 meetings of the Board of Directors in fiscal

22

Taiyo Nippon Sanso Corporation | Integrated Report 2017

year 2017, while the two new outside auditors attended 11 of
the 13 meetings. Audit & Supervisory Board members met
with the independent auditors 10 times in fiscal year 2017and accompanied the independent accountants on theirperiodic site audits. This enables them to keep abreast of theimplementation status and to exchange opinions with theindependent accountants on key aspects of the auditing
process and on the assessment of internal control risks
associated with auditing. Audit & Supervisory Board members are also briefed on essential aspects of audits and theassessment of risks associated with internal control by theinternal auditing body, as well as by the Technical Audit Office
on annual safety plans and their implementation. They also
oversee management appropriateness and efficiency.

Remuneration for Directors
In fiscal year 2017, remuneration for 11 directors totaled¥479 million, while that for seven auditors totaled ¥104 million(including remuneration for one director and three auditors
who retired during the period). Remuneration for directors
consists of basic remuneration and performance-linked

bonuses (medium- and short-term). Medium-term
performance-linked bonuses are tied to degree of achievement of medium-term business plan targets, while short-term
performance-linked bonuses are tied to year-on-year
improvements in consolidated operating results.

Internal Control System
In line with Japan’s Companies Act, we have established asystem for ensuring appropriate business practices and are
reinforcing internal control by clarifying decision-making
authority and business practices, among others. We havealso established the Compliance, Risk Assessment,
Technological Risk Management and Information
Management committees with the aim of reinforcing
compliance and ensuring the effectiveness of our internal
control system.
Compliance Committee
Recognizing that we must act in accordance with the norms
and ethics expected of us as a member of society, we work
continuously to earn trust by responding in good faith tosocial imperatives with the aim of ensuring sustainablegrowth for the Taiyo Nippon Sanso Group and increasing corporate value. To this end, we continue working to enhanceand reinforce our compliance capabilities. In addition to formulating the Taiyo Nippon Sanso Code of Business Conduct,
which sets forth standards to guide the conduct of all Group
employees, we have established the Compliance Committee,
which is chaired by the CCO and meets twice annually tohear reports on the status of compliance within the Groupand the progress of efforts to address previously detectedissues. The committee also briefs the Management
Committee and the Board of Directors on its activities. Goingforward, the committee will continue to be responsible forappointing the CCO, while regional headquarters will be
responsible for establishing regional CCOs, and for creatinga framework for global communication that will help Group
companies overseas fortify their compliance frameworks.
Risk Assessment Committee
Risks faced by the Taiyo Nippon Sanso Group include, but
are not limited to, ﬂuctuations in electric power rates, theprice of crude oil and other resources, foreign exchange andinterest rate swings, product defects, changing demand
trends and moves by customers to shift production offshore.
The Risk Assessment Committee, which is chaired by theindividual responsible for Groupwide internal control management, spearheads risk management for the entire Group. In
addition to assessing risks identiﬁed as likely to affect our
performance in terms of frequency and quantitative impact,
the committee reports on accidents at production facilities,
product defects and other risks that have manifested as
actual issues. Should it determine that risks remain for which
management systems do not yet exist, the committee pinpoints the departments responsible and implements appropriate countermeasures. The committee also reports on its
activities to the Management Committee and the Board of
Directors.
Technological Risk Management Committee
We place a high priority on the reduction of risks related tosecurity, product quality and safety, the environment andintellectual property, and we have established theTechnological Risk Management Committee to prevent
such risks from manifesting into actual issues. The committee, which is chaired by the general manager of theTechnological Affairs Division, has established dedicatedteams to manage risks in different categories. The committee meets twice annually to ensure an accurate grasp oflatent risks and reports to the Board of Directors on thesemeetings, as well as on efforts to address such risks.
Each February, the Technological Risk Management
Committee holds the Technological Risk Management
Conference, which is chaired by the president. The conference is responsible for making decisions regarding the coordination of risk management for the Group as a whole, as
well as for annual technological risk management policies andpriority issues.
Information Management Committee
To ensure the appropriate management of critical personal,
technological, business and accounts-related information,
pertinent departments have cooperated to establish theInformation Management Committee. The committee, which
is chaired by the individual responsible for managing internalTaiyo Nippon Sanso Corporation | Integrated Report 201723

control Groupwide, has created a framework that facilitates
management tailored to different types of information andoversees the implementation of measures to ensure thesecurity of information systems, provides education andtraining on procedures for managing information, and determines policies for responding in the event of major incidents
pertaining to information management. The committee
reports on its activities to the Board of Directors.

Auditing and Risk Management Structure
General Meeting of Shareholders
Appointment/dismissal

Audit & Supervisory
Board
Four members
three of whom are outside

Appointment/dismissal

Advisory Committee on
Appointments andRemuneration
Audit ofoperations

Consultation

Response

Appointment/dismissal

Board of Directors

Reporting

Independent auditors

7 members
two of whom are outside

Appointment/dismissal

Audit of accounts

Supervision

Audit ofaccounts

President and Representative Director/CEO
Management Committee

Compliance Committee
Chairperson: CCO

Coordination

Coordination

Coordination

Risk Management Committee

Chairperson: Individual responsible for Groupwide internal
control management

Corporate Audit Office

Technological Risk Management Committee

Chairperson: General Manager of the Technological Affairs
DivisionInternal audit

Information Management Committee

Chairperson: Individual responsible for managing internal
control Groupwide

Divisions and Group companies

President’s Basic Policy on Technological Risk Management
To fulﬁll the responsibilities implied in our corporate slogan, “The Gas
Professionals,” we recognize that we have an obligation to ensure
stringent compliance with pertinent laws and regulations and to prioritize the management of key technological risks, i.e., risks related tosecurity, product quality, product safety, the environment and intellectual property. Accordingly, we have formulated the President’s Basic
Policy on Technological Risk Management.
We will continue taking steps to minimize such risks and toenhance customer satisfaction across all areas of our operations.
These include ensuring the President’s Basic Policy on Technological
Risk Management is fully understood and applied by every Taiyo
Nippon Sanso Group employee, as well as formulating and implementing a Groupwide technological risk management system andeffective business continuity planning (BCP) to guarantee criticaloperations are maintained in the event of a disruption caused by anearthquake or other major disaster. At the same time, we will work tocontribute to greater public safety and environmental preservation,
thereby earning the trust of society at large, ensuring the soundgrowth of our businesses and building greater corporate value.

Safety:Implement decisive, practical measures toensure the safety of our operations, in linewith our belief that selling gas is commensurate with selling safety and peace of mind.

Product quality: Accurately grasp the increasingly sophisticated and diverse customer needs andsocial imperatives and respond by ensuring
optimum product quality.
Product safety:

Minimize safety risks at all stages of the
product life cycle to ensure the safety andsecurity of the products we supply.

Environment:

Take steps to reduce the negative impact of
our operations on the global environment
and to prevent pollution.

Intellectual
property:

Obtain and make use of intellectual property
rights as necessary to preclude competition
with other companies.
(As of June 27, 2014)24

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Members of the Board of Directors, Members of the Audit &Supervisory Board and Executive Officers(As of June 20, 2017)

Members of the Board of Directors

Member of the Board,
ChairmanMember of the Board,
Vice Chairman

Shotaro Yoshimura

Kunishi Hazama

Representative Director,
President and Chief
Executive Officer
Yujiro Ichihara

Member of the Board,
Senior Managing Executive
Officer and Chief
Sustainability Officer
Shigeru Amada

Member of the Board

Member of the Board

Member of the Board

Akio Yamada*

Mitsuhiro Katsumaru*

Shushichi Yoshimura

Members of the Audit & Supervisory Board

Executive Officers

Kazunari Higuchi**Managing Executive

Executive Officers

Kinji Mizunoe

Officers

Masahisa Kanzaki

Daiji Nakajima

Naoya Fujimori**

Yuki Hajikano

Kunihiro Kobayashi

Masanobu Narita

Akihiro Hashimoto**

Jun Ishikawa

Nobuaki Kobayashi

Yoshifumi Koide

Masami Myobatake*Outside Director**Outside Auditor

Senior Executive

Yasuhiko Kawano

Officers

Yuki Endo

Masahiro Sakamoto

Toshikazu Kurishita

Hiroyuki Tanizawa

Satoshi Wataru

Norikazu Ishikawa

Tsutomu Moroishi

Hirohisa Yanagida

Toyoyuki Sato

Masahiro Uehara

Yasushi Nagaoka

Haruhiko Yasuga

Masaharu Takagi

Kenji Nagata

Toru Yanagawa

Taiyo Nippon Sanso Corporation | Integrated Report 201725

Working with Stakeholders
Recognizing that our longevity and future prosperity depend on our ability to earn the trust of society as a whole, we haveestablished a framework for fulfilling our responsibilities to stakeholders and are implementing a variety of initiatives aimed
at maintaining a strong corporate culture.

Health Management Declaration: Supporting and Motivating Employees
On April 1, 2017, we announced the Taiyo Nippon Sanso
Health Management Declaration, the stated goal of which is
to create a work environment that supports and motivates
employees. This move reflects our belief that workplaces
conducive to professional and personal fulfillment help tobolster job satisfaction, which in turn is directly related to ourability to increase corporate value. Looking ahead, we will rollout various wellness initiatives in three categories.
Categories

Key Themes

Healthy people(Promoting healthy individuals)• Encourage healthy lifestyles• Improve health awareness

Healthy workplaces(Promoting healthy workplaces)• Reform working styles• Promote measures to prevent
occupational accidents thatconsider human factors• Create secure, healthy
workplaces

Healthy families and communities• Bolster awareness of family(Promoting healthy families andhealthvaluing ties with the community)

Chemistry Lab Lesson for Children Held in Vietnam
In November 2016, affiliate Vietnam Japan Gas Joint Stock
Company conducted a chemistry lab lesson for children at
the Japan Vietnam Festival 2016 in HCMC. This was the firsttime the company participated in the festival, which was heldin Ho Chi Minh City and welcomed more than 150,000 visitors. The lab lesson provided a fun and informative opportunity for a substantial number of children to participate inhands-on experiments using liquid nitrogen and learn aboutindustrial gases. Looking ahead, we will continue to promote
the staging of chemistry lab lessons using liquid nitrogen in
Japan as well as overseas.

Taiyo Nippon Sanso’s
Health Management Declaration
Creating a work environment that supports and motivates employees
We look for three key qualities in our employees, namely, health,integrity and resourcefulness. With the aim of giving form to the ﬁrst
of these, health, and recognizing that employee health is the driving
force behind everything we do, we hereby declare our commitment topromoting sound corporate management and helping realize aspiritually aﬄuent society through the creation of a health-ﬁrst
corporate culture.
Recognizing the health and wellness of all of our employees as a
crucial corporate asset, we will also strive to realize secure and pleasant
workplaces.
We also understand that the health and wellness of each individual
employee and of his or her family is a critical motivating factor for
employees in both their professional and private lives. Accordingly, we
encourage employees to be proactive in maintaining their own healthand ask for their active participation in the creation of a health-ﬁrst
corporate culture.
April 1, 2017
Yujiro Ichihara, President and CEO,Taiyo Nippon Sanso Corporation

Nippon Sanso Memorial Museum Earns Chemistry
Heritage Accreditation from the Chemical Society ofJapan
Nippon Sanso Memorial Museum, located within the
Yamanashi Laboratory, recently earned Chemistry Heritageaccreditation from the Chemical Society of Japan. The
museum is a recreation of the production facility from which
we operated at the time of our establishment and exhibits avariety of gas production equipment that represents the history of Taiyo Nippon Sanso, including a complete gas production unit in its original condition and the first liquid gas
production unit built in Japan.

The Japan Vietnam Festival 2016 in HCMC provided an opportunity to increase recognition among local residents

26

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Air separation unit housed in a wooden
barrel (built in 1911)

Taiyo Nippon Sanso Major Club Official Dealer System
In April 2005, we launched an official dealer system, dubbed
the Taiyo Nippon Sanso Major Club, with the aim of responding accurately and effectively to the needs of end users
across Japan. In addition to providing official dealers (“partnercompanies”) with competitive products, we leverage ourposition to provide a wide range of services, including
domestic and overseas sales support, technical assistanceand management consultation.
The Taiyo Nippon Sanso Major Club—comprising the core
Partners’ Club and two functional subgroups, the LP Gas
Club and the Medical Club—boasts a robust national
network that is instrumental in ensuring our products aredelivered safely and reliably to end users. For each of theconstituent clubs, we offer seminars and training sessions on
operational safety and other themes. Partner companies also
promote a variety of ongoing independent skill-building initiatives aimed at enhancing customer satisfaction and improving their own performance as responsible corporate citizens.
Going forward, we will continue working to reinforce customer satisfaction and enhance our reputation in society as
an organization worthy of trust through ongoing initiatives incollaboration with Taiyo Nippon Sanso Major Club partners.

Organization of the Taiyo Nippon Sanso Major ClubLogo

LP Gas Club
(Functional subgroup)

Partners’ Club*

Medical Club
(Functional subgroup)

Inaugurated: April 1, 2005

Chairperson: President and CEO of
Taiyo Nippon Sanso

Number of participating
official dealers: 288 (as of June 2017)

Secretariat: Gas Business Division,
Taiyo Nippon Sanso*The Partners’ Club is divided into seven regional blocks:
Tohoku, Kita-Kanto, Chubu, Kansai, Chugoku–Shikoku and Kyushu

The Major Club Magazine enables us tocommunicate with Major Club members

Fostering Global Business Skills Among Employees through the Overseas Trainee Program
In response to needs arising from our increasing global
expansion, in fiscal year 2017 we launched the Overseas
Trainee Program. By giving employees from Japan theopportunity to live and undergo practical training overseas,
the program seeks to provide them with the capabilities necessary to function equally well in business settings whether
they are in Japan or overseas, including effective communication, an understanding of other cultures and networking
skills. The duration of the program, which targets new andmid-level employees, is nine months. In the first year, six
employees were dispatched to Group bases in Singapore,
Malaysia, Vietnam, the Philippines and China (Shanghai). In
July 2017, a debriefing session was held to hear from participants regarding achievements and personal growth and to

discuss future targets and initiatives. We expect participation
to prove beneficial to these individuals in the years ahead
and look forward to their future endeavors.
The human resources policy of our current medium-termbusiness plan, Ortus Stage 2, calls for human resource
development that willaccommodate further
globalization. We willcontinue to promote theOverseas Trainee Programas an integral componentof this policy.
Debriefing session for the first participantsin our Overseas Trainee Program

Facility Tour Held for Technical High School Students
In November 2016, we held a facility tour and industrial safety
workshop at the Keihin Factory for students of Kanagawa
Prefectural Mukainooka Technical High School in Kawasaki.
We will continue to promote facility tours and other initiatives
aimed at increasing familiarity with industrial gases, as well asat providing information on potential careers.

Facility tours encourage understanding of Taiyo Nippon Sanso and industrial gases

Taiyo Nippon Sanso Corporation | Integrated Report 201727

Environmental Protection Initiatives
In addition to ensuring a solid grasp of the environmental impact of the Taiyo Nippon Sanso Group’s business activities,
we promote a broad range of initiatives aimed at helping to mitigate global warming, the central theme of our environmental protection efforts. Of particular note, we are taking steps to reduce energy consumed per unit of production at
gas production facilities, promoting energy-saving measures at various sites, and striving to increase the efficiency oftransport by tanker truck.
Electric power used here
represented 99.8% of total
electric power consumed.

Electric power

5,196 million kWh

Other energy

884,000 GJ

Chemical
substances
Water

334 tonnes

12,070,000 m3
We recycled and reusedwater and curbed resource
consumption.

Resources/materials

INPUT
Raw material

Development and production
Environmental impact of oxygen, nitrogen and argon production

Argon

Oxygen

0.9%

20.9%

Air separation units produce oxygen, nitrogen andargon simultaneously by separating atmospheric
air into its constituent gases. Air is first compressed, which uses a considerable amount ofenergy. The use of electric power for this purpose
represents the Taiyo Nippon Sanso Group’s single
most significant environmental impact.

Other

0.1%

Atmospheric air consists of oxygen,nitrogen, argon and other gases.

Main heat exchanger
Distillation column
Cold box
Purifier unit
(Removal of CO2 and water)

Argon
Gaseousnitrogen

Liquefied nitrogen and oxygen

Compressed air is cooled almost to the point
where the gases liquefy, after which it is ready forthe distillation column, where it is separated into
gas and liquid components using a thermal distillation process. Nitrogen, which has a low boilingpoint, concentrates in the gas and is withdrawn
from the top of the column, while oxygen, which
has a higher boiling point, concentrates in theliquid and is withdrawn from the bottom section.
Argon, which has an intermediate boiling point, iswithdrawn from the middle of the column.

Nitrogen 78.1%

Air Separation Unit: Simplified Process Flow

Waste gas

Atmosphericair

Gaseousoxygen

Air
inlet

Air
compressor

Atmospheric air(Raw material)

Ambient temperature

Cryogenic temperature

Electric power used to compress atmospheric air
accounts for most of the electric power used by
the Taiyo Nippon Sanso Group.

OUTPUT

Atmospheric air isthe raw material used to produce
industrial gases.

Greenhouse gas
emissions
3,723,000 tonnes CO2
Calculated Emissions due to the use
in tonnes of electric power
3,669,000 tonnes CO2of CO2Emissions due to the useof other energy
52,000 tonnes CO2
Emissions of greenhousegases other than CO22,000 tonnes CO2

Chemical substancesdischarged 36.0 tonnes
Waterdischarged 4,020,000 m3(Estimate)

Industrial waste
discharged 2,708 tonnes

Volume ofindustrial waste
recycled:
1,444 tonnes

Initiatives Aimed at Helping to Mitigate Global Warming
Challenges and targets

Principal initiatives

Challenge: Lower energy consumption at
gas production facilities
Target:• Develop and install energy-efficient air separation units• Replace air separation unit components with new high-efficiency
versions
Reduce energy consumed per• Optimize facility operations to better reflect demand volume
unit of production

Challenge: Promote energy-saving
measures at various sites
Target:Reduce electricity consumed(1%+ annual reduction overthe medium to long term)

Challenge: Increase the efficiency oftransport by tanker truck
Target:Reduce fuel used in thetransport of products

Relevant companies/
departments/sites

Gas production facilities
Down 1.7%
belonging to and gas production(from fiscal year 2006) companies managed by Taiyo
Nippon Sanso• Cut unnecessary electric power consumption by OA and lighting
equipment• Replace air conditioning, OA, lighting, shared and otherequipment with energy-efficient new models• Implement no overtime days and Cool Biz (liberal summer dress
code to reduce use of air conditioning)

All Taiyo Nippon Sanso sites
Up 2.0%(excluding gas production(from fiscal year 2016)
facilities)• Optimize shipping routes• Rethink delivery intervals• Promote the weighing of cargo in the presence of the customer• Introduce new-model tanker trucks• Reinforce green driving training

Down 30.8%
Group and subcontracted(from fiscal year 1991) logistics companies

Scope of data: Taiyo Nippon Sanso sites and affiliates in Japan.

28

Progress as of
fiscal year 2017

Taiyo Nippon Sanso Corporation | Integrated Report 2017Electric
power*2

13.0 million kWh

Other energy

Fuel oil/gasoline*1

16,000 GJ

Fuel oil/gasoline*3 300 kL

18,000 kL

INPUT

After use, most industrial
gases are returned tothe atmosphere. There isvery little waste.

INPUT
SupplyUse

Gas
production
facilities
Supplied bypipeline

OxygenO2Supplied bytanker truck

OxygenO2

Gas filling
stations

Sales

Atmospheric air is separated into its primary
components and at our gas production facilities.
The resulting gases are supplied directly by
pipeline or liquefied and transported by tanker
truck. For smaller customers, we compress
gases into cylinders, which we convey by truck.
NitrogenN2

NitrogenN2• Petroleum/chemicals• Automobiles/
machinery

Argon

Ar

• Glass/papermaking

Argon• Healthcare

Ar• Food• Others
Service vehicles

OxygenNitrogenHeliumLPG Specialty
gases

O2

CarbondioxideCO2

Hydrogen

H2• Electronics

Sites

Gases are transported from production facilities
by tanker truck to filling stations, where
vaporized gases are compressed into cylinders.

Supplied incylindersCustomers• Steel/nonferrous
metalsHe

N2

Industrial gases are used
in a broad range of industries, from healthcare andfood to petroleum andchemicals and electronics.

Argon

Ar

OUTPUTOUTPUT

Greenhouse gas
emissions
46,000 tonnes CO2*1 Used by Group specified consignors*2 Used by Group sites*3 Used by Taiyo Nippon Sanso service vehicles

Greenhouse gas
emissions
8,000 tonnes CO2

Industrial waste
discharged
778 tonnes

Calculated Emissions due to the use
in tonnes of electric power
6,000 tonnes CO2of CO2Emissions due to the useof fuel oil/gasoline
1,000 tonnes CO2
Emissions due to the useof other energy
1,000 tonnes CO2

Volume ofindustrial waste
recycled:
483 tonnes

Reducing Energy Consumption
at Gas Production Facilities

Consumption of Electricity and Consumption of Electricity
per Unit of Production by Gas Production Facilities

We have established an Energy Saving Working Group as a subsection of ourEnvironmental Management Committee to guide our ongoing efforts to
reduce energy consumption per unit of production. In fiscal year 2017,energy consumption per unit of production at these facilities was down 1.7%
from fiscal year 2006, the base year used for this measurement. Moreover,these facilities’ consumption of electricity, which accounts for approximately
98% of the energy they use, was down 26.4% from fiscal year 1991.
Principal initiatives undertaken by gas production facilities to reduce energy
consumption include the development and installation of energy-efficient air
separation units, the replacement of air separation unit components with new
high-efficiency versions, and the optimization of facility operations to betterreflect demand volume.

6,000(Million kWh) 100

1991 = 100

100
73.6

4,500
3,000

2,909

50
25

1,500
0

75
4,578

1991

Base year
Electricity consumed

2013

2014

2015

2016

2017

0

(Years ended March 31)

Electricity consumed per unit of production (index)

Scope of data: Gas production facilities belonging to and gas production
companies managed by Taiyo Nippon Sanso

Taiyo Nippon Sanso Corporation | Integrated Report 201729

Six-Year Summary
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries(Millions of yen)

Years ended/as of March 31

IFRS

IFRS

Japanese
GAAP

Japanese
GAAP

Japanese
GAAP

Japanese
GAAP

Japanese
GAAP

2017

2016

2016

2015

2014

2013

2012

Financial indicators¥581,586¥594,421¥641,516¥559,373¥522,746¥468,387¥477,451

Operating income

53,66448,92543,36235,29731,48924,88431,067

Net income (loss) attributable to owners of
the parent

34,74029,03025,845

20,764

20,194(2,071)

21,200

Revenue

Selling, general and administrative expenses/
revenue

28.4%

27.1%

28.4%

26.7%

26.4%

26.8%

26.3%

Return on equity

10.3%

9.1%

8.2%

7.0%

8.4%

(1.0)%

10.8%

Return on capital employed

8.4%

8.1%

7.4%

Capital expenditures

43,79652,65753,611

Investment and loans

102,034

25,507

Depreciation and amortization

40,04839,696

Amortization of goodwill

6.2%

6.2%

5.5%
31,7157.0%

35,201

32,532

31,452

32,941

5,710

35,749

5,672

8,035

44,86435,56833,507

29,40030,471
2,472

—

—

7,352

4,959

3,668

2,719

3,323

3,238

3,348

3,430

3,170

3,177

3,458

Interest-bearing debt

359,528

266,215

274,424

266,276

278,063

253,424

241,121

Net interest-bearing debt

304,308

215,492

223,638

212,855

219,727

228,681

206,524

Net debt-to-equity (times)

0.87

0.67

0.71

0.67

0.80

1.12

1.03

Total equity attributable to owners of theparent351,576

320,457

337,974

341,207

298,475

224,253

219,611

Total assets

924,281787,505

783,248782,357

731,677

615,820

607,024

Net income (loss)

80.28

67.08

59.72

47.98

49.42

(5.25)

53.33

Cash dividends

20.00

16.00

16.00

13.00

12.00

12.00

12.00

Dividends payout ratio

24.9%

23.9%

26.8%

27.1%

24.3%

Price earnings ratio (times)

16.22

15.92

17.88

34.16

16.43

(121.52)

10.95

Years ended March 31

2017

2016

2015

2014

2013

2012

Number of directors

10

11

17

15

15

15

Number of outside directors

2

2

0

1

1

1

20.0%

18.2%

0.0%

6.7%

6.7%

6.7%

Research and development expenses

Amounts of per share of common stock:

—

22.5%

Non-financial indicators

Outside directors as a percentage of total
number of directors
Number of employees

15,86014,107

14,127

13,142

12,955

11,468

11,588

Number of overseas employees

10,033

8,332

8,332

7,395

6,977

5,848

5,894

59.1%

59.0%

56.3%

53.9%

51.0%

50.9%

Overseas employees as a percentage of total
number of employees

63.3%

CO2 emissions (thousands of tonnes)*1

3,777

3,401

3,512

3,359

3,153

2,864

Energy consumption (thousands of GJ)*1

51,47945,50445,736

46,18643,92242,890Electric power (millions of kWh)

5,209

4,607

4,611

4,630

4,400

4,296

Other energy (thousands of GJ)

901

790

963

1,234

1,193

1,135

Patents owned in Japan

701

689

684

636

590

542

Patents owned overseas

328

295

300

293

272

272

Composition:

Patent portfolio*2*1 CO2 emissions and energy consumption figures are for Taiyo Nippon Sanso sites and affiliated companies in Japan.
*2 Patent information for each year is for Taiyo Nippon Sanso and is as of December 31 of the previous year.

30

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Management’s Analysis of Operating Results and Financial Position

Operating Results

products, sales of electronics materials gases rose sharply,
reflecting an increase in demand. In the energy field, revenue

In fiscal year 2017, ended March 31, 2017, consolidated

from sales of LPG dropped substantially, owing to falling

revenue declined 2.2% from fiscal year 2016, to ¥581,586

import prices. For these and other reasons, revenue to exter-

million. Cost of sales decreased 5.4%, to ¥365,578 million,

nal customers decreased 2.0%, to ¥321,416 million, while

equivalent to 62.9% of revenue, down 2.2 percentage points

segment income increased 5.7%, to ¥29,450 million.

from the previous fiscal year. Selling, general and administrative expenses rose 2.4%, to ¥165,071 million, and were

Gas Business in the United Statesequivalent to 28.4% of revenue, up 1.3 percentage points

In the area of industrial gases, sales of bulk gases increased

from fiscal year 2016. As a consequence, operating income

substantially, bolstered by higher shipments of carbon diox-

advanced 9.7%, to ¥53,664 million, and the operating mar-ide gas, as well as by the consolidation in September 2016

gin improved 1.0 percentage point, to 9.2%. Core operatingof a company acquired from the Air Liquide Group. In con-income—operating income excluding gains or losses associ-trast, sales of hard goods declined. In electronics-related

ated with nonrecurring factors such as withdrawals from or

products, sales of electronics materials gases decreased.

the scaling down of businesses—amounted to ¥54,736

Owing to the continued appreciation of the yen, currency

million, an increase of 15.3%, or ¥7,280 million.

translation effects had a ¥14,200 million negative impact on

These factors underpinned a 19.7% increase in net income

segment sales. These and other factors led to a 1.5%

attributable to owners of the parent, to ¥34,740 million. Basicdecline in revenue to external customers, to ¥147,274

earnings per share rose ¥13.20, to ¥80.28, while return on

million. Nonetheless, segment income climbed 30.7%, tocapital employed (ROCE) edged up 0.3 percentage point,¥12,074 million.

to 8.4%.
At the general meeting of shareholders held on June 20,

Gas Business in Asia and Oceania

2017, shareholders approved a proposal to pay a year-end

In the area of industrial gases, sales increased steadily in thedividend of ¥11.00 per share, up ¥2.00, bringing cash divi-

Philippines and Vietnam, but decreased in Singapore anddends for the period, comprising interim and year-end divi-

Malaysia. Sales of industrial gases also benefited from thedends, to ¥20.00 per share. This represented a payout ratio

consolidation of Air Products Industry Co., Ltd. in Thailand inof 24.9%.

May 2015 and Renegade Gas Pty Ltd and Supagas

Capital expenditures, on a final acceptance basis, totaled

Holdings Pty Ltd in Australia in July 2015 and December¥43,796 million, a decline of ¥8,861 million. Depreciation and2016, respectively. In the area of electronics-related prod-

amortization rose ¥352 million, to ¥40,048 million. Researchucts, sales of electronics materials gases and gas equipment

and development expenses increased ¥85 million, to ¥3,323

edged up in Taiwan, China and South Korea. Currency trans-million, equivalent to approximately 0.6% of revenue.

lation effects had a ¥9,100 million negative impact on revenue to external customers, which decreased 3.9%, to¥85,875 million. In contrast, segment income soared 71.6%,

Results by Segment

to ¥5,165 million, owing to the absence of impairment losses
on gas production facilities in Singapore reported in theGas Business in Japanprevious fiscal year.

In the area of industrial gases, sales of our core products, airseparated gases (oxygen, nitrogen and argon) were down,

Thermos and Other Businesses

owing to declines in unit sales prices for gases supplied

Despite a slight decline in demand from tourists visiting

directly via pipeline to customers in the steel and chemicals

Japan, sales of Thermos products were on a par with theindustries. In the area of gas equipment, sales of hydrogenprevious fiscal year thanks to brisk sales of new products. As

stations, which had been robust in the previous period, fella consequence, revenue to external customers slipped

sharply, although sales of air separation units rose steadily,

1.9%, to ¥27,018 million, while segment income increased

thanks to higher demand. Among electronics-related

11.3%, to ¥10,017 million.

Taiyo Nippon Sanso Corporation | Integrated Report 201731

Financial Position

Net cash provided by financing activities amounted to¥80,777 million, compared with ¥2,385 million used in such

Total assets as of March 31, 2017, amounted to ¥924,281

activities in fiscal year 2016. Contributing factors included

million, an increase of 17.4%, or ¥136,776 million. The

proceeds from long-term borrowings of ¥122,212 million andappreciation of the yen, which was ¥0.49 higher against theproceeds from issue of corporate bonds of ¥30,000 million.

U.S. dollar on March 31, 2017, than on the same day a year

Operating, investing and financing activities thus resulted inearlier, had a negative impact of approximately ¥5,000 mil-balance of cash and cash equivalents at term-end oflion. Total current assets rose 3.9%, or ¥10,095 million, to¥52,857 million, up ¥3,641 million from ¥49,216 million in the¥268,132 million, owing to increases in operating receivablesprevious fiscal year.

and cash and cash equivalents. Non-current assets
increased 23.9%, or ¥126,680 million, to ¥656,149 million,
owing to increases in goodwill and property, plant andBusiness Risks

equipment.
Current liabilities declined 1.5%, or ¥3,351 million, toManagement Policy- and Business-Related Risks¥213,602 million, reflecting a decrease in corporate bonds

Capital Investment

and borrowings. Non-current liabilities jumped 47.9%, or

The Company maintains large-scale gas supply facilities for¥108,130 million, to ¥333,816 million, a consequence of an

major customers and needs to spend heavily to build, main-increase in corporate bonds and borrowings. The current

tain and upgrade these facilities. Accordingly, interest rate

ratio was 126%, up 7.0 percentage points.

trends could have a material impact on the Company’s

Total equity was up 9.3%, or ¥31,996 million, to ¥376,862

business performance.

million. Contributing factors included an increase in net
income and a decrease in retained earnings paid as divi-

Manufacturing Costs

dends. As a consequence, total equity attributable to owners

Electricity is the major component of the cost of manufactur-of the parent as a percentage of total liabilities and net assets

ing such core products as oxygen, nitrogen and argon.

slipped 2.7 percentage points, to 38.0%. Total equity attrib-

Accordingly, a sharp increase in the price of crude oil could

utable to owners of the parent per share was ¥812.40, an

result in a substantial increase in electricity charges, which

increase of ¥71.92.

the Company may be unable to reflect in the pricing of its
products.

Cash Flows

Overseas Factors
The Company maintains operations overseas, particularly in

Net cash provided by operating activities in fiscal year 2017

the United States and Asia. Political and economic changes

amounted to ¥74,596 million, ¥1,249 million higher than inin countries where the Company has operations may have an

the previous fiscal year, despite an increase in notes andadverse impact on its business performance.

accounts receivable—trade, as both income before income
taxes and depreciation and amortization were up.
Net cash used in investing activities, at ¥147,082 million,

Technological and Safety Factors
Technological Development

was up ¥72,830 million. The principal factor behind this result

The Company actively promotes technological development

was payments for transfer of business.

activities aimed at facilitating future business expansion.
However, the creation of new products and technologies
entails various risks.

32

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Intellectual Property

Legal Issues

The Company’s business depends on proprietary techno-

Unanticipated changes to existing laws and the introduction

logical development. The Company endeavors to obtainof new laws—particularly in countries overseas where theintellectual property rights as necessary for its proprietary

Company maintains operations—may adversely affect thetechnologies. However, there are no guarantees that its

Company’s business performance. Revisions to environmen-

technologies are completely protected.

tal laws that result in a tightening of restrictions may result in
an increase in costs to ensure compliance, which may also

Product Defects

adversely affect the Company’s business performance.

The Company sells high-pressure gas-related products,

Because the Company does business both in Japan andincluding toxic and flammable gases used in semiconductor

overseas, there is a risk that it may become involved in legal

fabrication. While the Company strives to ensure the effective

disputes or be the subject of investigations and/or legal

management of related risks, it cannot guarantee that all ofaction by relevant authorities in the markets in which it oper-

its products are free of defects.

ates. Such legal and regulatory action may adversely affect
the Company’s operations, business performance, financial

Financial Risks and Other Factors

condition, reputation and reliability.

Foreign Exchange Risk
The Company exports products for sale outside of Japan.

Medium-Term Business Plan

The Company strives to hedge foreign exchange risks by

The Company’s ability to meet the targets of its medium-term

entering into forward exchange contracts and other deriva-

business plan may be adversely affected by a number oftive transactions. However, the Company may not be able tofactors, including changes in the operating environment.

respond to sudden fluctuations in currency rates, which
therefore may have an adverse impact on its business

Capital Alliance with Mitsubishi Chemical Holdings

performance.

Mitsubishi Chemical Holdings Corporation owns a 50.57%
stake in the Company. With the aim of further strengthening

Retirement Benefit Liabilities

the capital alliance, established on May 13, 2014, andA sudden deterioration in retirement plan returns resulting inenhancing corporate value, the two companies have agreed

an increase in retirement benefit costs may have an adversethat Mitsubishi Chemical Holdings will maintain its stake inimpact on the Company’s business performance.

the Company at the current level. Accordingly, the Company
does not at present anticipate any increase or decrease in

Natural Disasters and Contingencies

the percentage of its shares held by Mitsubishi Chemical

The occurrence of earthquakes or other natural disasters in

Holdings. However, there is still a chance that the capitalareas where the Company has manufacturing facilities may

alliance between the two companies will change. Any suchdamage those facilities. In particular, damage to thechange has the potential to significantly affect the Company’s

Company’s large-scale manufacturing facilities may lead to afinancial condition and business performance.

significant decline in production capacity and incur major
recovery costs. Such factors may adversely affect theCompany’s business performance. Major accidents occurring as a result of contingencies, including those attributableto human factors, may also adversely affect the Company’sbusiness performance.

Taiyo Nippon Sanso Corporation | Integrated Report 201733

Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

Consolidated Statements of Financial Position(Millions of Yen)
Notes

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

Cash and cash equivalents

6¥ 52,857¥ 49,216¥ 52,769

Trade receivables

7

149,979

145,850

151,702

Inventories

8

51,93551,85947,579Other ﬁnancial assets

13

5,533

5,755

5,533

Other current assets

14

7,826

5,354

7,080

268,132

258,036

264,664

AssetsCurrent assets

Total current assets
Non-current assets
Property, plant and equipment

9379,553

331,906

316,335

Goodwill

10

123,60281,17968,789Intangible assets

10

51,30522,82725,907

Investments accounted for using the equity method

1222,95820,87020,793

Other ﬁnancial assets

13

65,17860,82372,596Retirement beneﬁt asset

19

8,443

6,499

8,891

Other non-current assets

14

709

694

643

Deferred tax assets

28

4,399

4,667

4,238

656,149

529,468

518,196¥924,281¥787,505¥782,860

Total non-current assets

Total assets
See notes to consolidated ﬁnancial statements.

34

Taiyo Nippon Sanso Corporation | Integrated Report 2017

(Millions of Yen)
Notes

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

Trade payables

15¥ 73,046¥ 72,743¥ 76,896

Bonds and borrowings

16

88,72094,12764,689

6,289

8,192

7,107

30,152

28,27025,489Liabilities and equity
Liabilities
Current liabilities

Income taxes payable
Other ﬁnancial liabilities

17

Provisions

20

534

718

389

Other current liabilities

21

14,85812,89914,425

213,602

216,953

188,997

Total current liabilities
Non-current liabilities
Bonds and borrowings

16

263,833

165,174

189,141

Other ﬁnancial liabilities

17

5,622

7,130

6,152

Retirement beneﬁt liability

19

4,216

4,515

4,281

Provisions

20

5,859

594

1,026

Other non-current liabilities

21

13,783

12,413

8,464

Deferred tax liabilities

28

40,50135,85739,761

Total non-current liabilities
Total liabilities

333,816

225,685

248,827

547,419442,639437,824

EquityShare capital

22

37,34437,34437,344

Capital surplus

22

52,98855,54555,955

Treasury shares

22

(250)

(244)

(232)

Retained earnings

22

261,717

232,877

211,247

Other components of equity

22

Total equity attributable to owners of parent(224)(5,066)

16,724

351,576

320,457

321,040

Non-controlling interests

25,286

24,40923,995

Total equity

376,862

344,866

345,035¥924,281¥787,505¥782,860

Total liabilities and equity

Taiyo Nippon Sanso Corporation | Integrated Report 201735

Consolidated Statements of Profit or Loss
(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥ 581,586(365,578)
216,007¥ 594,421(386,621)
207,800(165,071)
2,571(2,241)(161,169)
4,448(4,680)12

2,397
53,664

2,526
48,925

Financial income
Financial costs
Proﬁt before income taxes

27
27

1,429
(4,918)50,176

1,316(3,665)46,575

Income taxes
Proﬁt

28

(13,963)¥ 36,212(16,069)¥ 30,506¥ 34,740
1,472¥ 29,030
1,475

29¥80.28¥67.08Notes

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥ 36,212¥ 30,506

24
24

5,534
1,563

(7,058)(1,806)

24

12
7,109

(37)
(8,902)24(787)(14,810)

24

268

333

24

(995)

(1,043)(1,514)
5,594¥ 41,807(15,520)(24,422)¥ 6,083¥ 40,733
1,074¥ 5,743
339

Notes

Revenue
Cost of sales
Gross proﬁt
Selling, general and administrative expenses
Other operating income
Other operating expenses
Share of proﬁt of investments accounted for using the equity
methodOperating proﬁt

4

26
26

Proﬁt attributable to:
Owners of parent
Non-controlling interests
Earnings per share
Basic earnings per share (yen)See notes to consolidated ﬁnancial statements.

Consolidated Statements of Comprehensive Income(Millions of Yen)

Proﬁt
Other comprehensive income
Items that will not be reclassiﬁed to proﬁt or loss
Financial assets measured at fair value through othercomprehensive income
Remeasurements of deﬁned beneﬁt plans
Share of other comprehensive income of investments
accounted for using the equity method
Total of items that will not be reclassiﬁed to proﬁt or loss
Items that may be reclassiﬁed subsequently to proﬁt or loss
Exchange differences on translation of foreign operations
Effective portion of net change in fair value of cash ﬂow
hedgesShare of other comprehensive income of investments
accounted for using the equity method
Total of items that may be reclassiﬁed subsequently to
proﬁt or loss
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated ﬁnancial statements.

36

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Consolidated Statements of Changes in Equity(Millions of Yen)FYE2017 (April 1, 2016 to March 31, 2017)

Balance at April 1, 2016
Proﬁt
Other comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Transfer from other components of equity to retained earnings
Change in scope of consolidation
Other changes

Notes

Share capital

Capital surplus

Treasury shares

Retainedearnings

24¥37,344——¥55,545——¥(244)——¥232,877
34,740
—

—
—
—
—
—
—
—
—

—
—
(0)
—
(2,557)
—
—
—

—
(6)
0
—
—
—
—
—

34,740——(7,792)
—
1,150
741
—

22
22
23

Total transactions with owners—(2,557)(5)(5,900)¥37,344¥52,988¥(250)¥261,717

Total

Total equity
attributable toowners ofparentNon-controllinginterests

Total equity

—
—
1,539

¥(5,066)—
5,992¥320,457
34,740
5,992¥24,409
1,472
(397)

¥344,866
36,212
5,594

1,539
—
—
—

5,992
—
—
—

40,733(6)
0(7,792)

1,074
—
—
(963)

41,807(6)
0(8,755)

Balance at March 31, 2017

Other components of equity

Balance at April 1, 2016
Proﬁt
Other comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in
subsidiaries
Transfer from other components ofequity to retained earnings
Change in scope of consolidation
Other changes

Financial assets
measured at fairvalue throughother Remeasurements
comprehensive of deﬁned beneﬁt
income
plans

Notes

Foreign currencytranslation
adjustments

Effective portionof net change infair value of cash
ﬂow hedges

24¥(14,840)—(1,294)¥(332)—
268¥10,107
—
5,479

22
22
23

(1,294)
—
—
—

268
—
—
—

5,479
—
—
—

—

—

—

—

—

(2,557)262(2,294)

—
—
—

—
—
—

389
—
—

(1,539)——(1,150)
—
—

—
741
—

—
606
(102)

—
1,347
(102)

Total transactions with owners
Balance at March 31, 2017

—

—

389

¥(16,135)¥ (64)¥15,975¥(1,539)(1,150)(9,614)(197)(9,811)¥¥ (224)¥351,576¥25,286¥376,862—(Millions of Yen)FYE2016 (April 1, 2015 to March 31, 2016)

Balance at April 1, 2015
Proﬁt
Other comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in subsidiaries
Business combinations or business divestitures
Transfer from other components of equity to retained earnings
Change in scope of consolidation
Other changes

Notes

Share capital

Capital surplus

Treasury shares

Retainedearnings

24¥37,344——¥55,955——¥(232)——¥211,247
29,030
—

—
—
—
—
—
—
—
—
—

—
—
0
—
(410)
—
—
—
—

—
(11)
0
—
—
—
—
—
—

29,030——(6,060)——(1,509)
169
—

22
22
23

Total transactions with owners

—

(410)

(11)

(7,400)¥37,344¥55,545¥(244)¥232,877

Total

Total equity
attributable toowners ofparentNon-controllinginterests

Total equity¥——(1,758)¥ 16,724—(23,286)¥321,040
29,030(23,286)¥23,995
1,475(1,136)¥345,035
30,506(24,422)

339
—
—
(650)

6,083
(11)
0
(6,711)

Balance at March 31, 2016

Other components of equity

Notes

Balance at April 1, 2015
Proﬁt
Other comprehensive income
Comprehensive income
Purchase of treasury shares
Disposal of treasury shares
Dividends
Changes in ownership interest in
subsidiaries
Business combinations or businessdivestitures
Transfer from other components ofequity to retained earnings
Change in scope of consolidation
Other changes

Foreign currencytranslation
adjustments¥

Effective portionof net change infair value of cash
ﬂow hedges

Financial assets
measured at fairvalue throughother Remeasurements
comprehensive of deﬁned beneﬁt
income
plans

24

—
—
(14,840)¥(666)—
333¥17,390—(7,021)22
22
23(14,840)
—
—
—

333
—
—
—

(7,021)———(1,758)———(23,286)
—
—
—

5,743
(11)
0
(6,060)

—

—

—

—

—

(410)

(791)

(1,201)

—

—

—

—

—

—

1,571

1,571

—
—
—

—
—
—

(248)
—
(13)

1,758
—
—

1,509
—
(13)

—
169
(13)

—
483
(539)

—
653
(552)

Total transactions with owners
Balance at March 31, 2016

—

—

(262)

¥(14,840)¥(332)¥10,107

¥

1,758

1,495

(6,326)73(6,253)—¥ (5,066)¥320,457¥24,409¥344,866

See notes to consolidated ﬁnancial statements.

Taiyo Nippon Sanso Corporation | Integrated Report 201737

Consolidated Statements of Cash Flows(Millions of Yen)
Notes

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥ 50,176¥ 46,575

40,04839,696

Cash ﬂows from operating activities
Proﬁt before income taxes
Depreciation and amortization
Impairment losses

231

1,731

Gain on step acquisition—(1,813)

Interest and dividend income(1,271)(1,316)

Interest expenses

4,484

3,661

Share of (proﬁt) loss of investments accounted for using theequity method(2,397)(2,526)(Gains) losses on sale of property, plant and equipment andintangible assets

(727)

794

(2,818)

7,632(Increase) decrease in inventories

232(3,884)

Increase (decrease) in trade payables(770)(4,951)(Increase) decrease in retirement beneﬁt asset

112

(217)

Increase (decrease) in retirement beneﬁt liability

1,855

(404)

Other

2,335

3,728
88,705(Increase) decrease in trade receivables

Subtotal

91,490Interest received

273

193

Dividends received

2,650

3,391

Interest paid

(4,493)(3,689)

Income taxes paid

(15,325)(15,253)

Net cash provided by operating activities

74,59673,347(41,442)(51,537)

Cash ﬂows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment

2,459

955

Purchase of investments(2,944)(1,060)

Proceeds from sales and redemption of investments
Payments for acquisition of subsidiaries
Payments for acquisition of business
Other

5

Net cash used in investing activities

4,630

1,373

(20,020)(19,685)(77,775)—(11,989)(4,297)(147,082)(74,252)

434

9,663

Cash ﬂows from ﬁnancing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings

122,212

39,104

Repayments of long-term borrowings(48,839)(40,231)

Proceeds from issuance of bonds

30,000—

Redemption of bonds(10,000)—

Purchases of investments in subsidiaries not resulting inchange in scope of consolidation(1,279)(2,224)(7,792)(6,060)

(963)

(650)

Other

(2,994)(1,986)

Net cash provided by (used in) ﬁnancing activities

80,777(2,385)

Dividends paid

23

Dividends paid to non-controlling interests

Effect of exchange rate changes on cash and cash equivalents(5,404)(569)

Net increase (decrease) in cash and cash equivalents

2,886(3,860)

Balance of cash and cash equivalents at beginning of ﬁscal year

49,21652,769

Increase (decrease) in cash and cash equivalents resulting fromchange of scope of consolidation

727

307

Increase in cash and cash equivalents resulting from merger
Balance of cash and cash equivalents at end of ﬁscal year
See notes to consolidated ﬁnancial statements.

38

Taiyo Nippon Sanso Corporation | Integrated Report 2017

6

27

—

¥ 52,857¥ 49,216

Notes to Consolidated Financial Statements
Taiyo Nippon Sanso Corporation and Consolidated Subsidiaries

1. Reporting Entity
Taiyo Nippon Sanso Corporation (the “Company”) is a company
located in Japan and is listed on the First Section of the Tokyo Stock
Exchange. The registered address of the Company’s head ofﬁce isdisclosed on its website (http://www.tn-sanso.co.jp/en). The consolidated ﬁnancial statements of the Company and its subsidiaries (collectively, the “TNSC Group”) comprise interests in the TNSC Group,
its associates and joint arrangements, with March 31 as the end of
the ﬁscal year. The TNSC Group conducts gas businesses in Japanand overseas, mainly for customers in the steel, chemical, and electronics industries. In addition, the TNSC Group manufactures andsells housewares such as stainless steel vacuum bottles, and conducts real-estate rental and other businesses. Details are describedin Note “4. Segment Information.”
The Company’s parent is Mitsubishi Chemical Holdings
Corporation.

2. Basis of Preparation(1) Conformity with IFRSThe consolidated ﬁnancial statements of the TNSC Group have been
prepared in compliance with International Financial ReportingStandards (IFRS) published by the International AccountingStandards Board. Since the Company meets the requirements of a“Speciﬁed Company Applying Designated IFRS” prescribed under
Article 1-2 of the Japanese Ordinance on Terminology, Forms, andPreparation Methods of Consolidated Financial Statements, theCompany has adopted the provisions of Article 93 of said ordinance.
The TNSC Group has adopted IFRS for the ﬁrst time for the ﬁscal
year beginning on April 1, 2016, and the transition date to IFRS (the“Transition Date”) is April 1, 2015. The impacts of the transition to
IFRS on the ﬁnancial position, operating results and cash ﬂows of the
TNSC Group as of the Transition Date and for the comparative ﬁscal
years are described in Note “36. First-time Adoption.”(2) Approval of financial statements
The TNSC Group’s consolidated ﬁnancial statements were approved
by Yujiro Ichihara, President and CEO of the Company, on June 21,
2017.
(3) Basis of measurement
The TNSC Group’s consolidated ﬁnancial statements were preparedon a historical cost basis, except for certain assets and liabilities
including ﬁnancial instruments measured at fair value as described in
Note “3. Signiﬁcant Accounting Policies.”(4) Presentation currency
The TNSC Group’s consolidated ﬁnancial statements are presented
in Japanese yen, which is the functional currency of the Company,
and amounts are rounded down to the nearest million yen.
(5) Use of judgments, estimates and assumptions
In preparing the TNSC Group’s consolidated ﬁnancial statements inaccordance with IFRS, management is required to make judgments,
estimates and assumptions that affect the application of accounting
policies and reported amounts of assets, liabilities, income andexpenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. The impacts of changes in accounting estimates are recognized in the accounting period in which the estimates are changed
and in future accounting periods affected.
Major information on accounting judgments, estimates andassumptions that may have signiﬁcant impacts on the TNSC Group’s
consolidated ﬁnancial statements is as follows:• Impairment of non-ﬁnancial assets (“11. Impairment Losses”)• Recoverability of deferred tax assets (“28. Income Taxes”)• Measurement of deﬁned beneﬁt obligations (“19. Postemployment Beneﬁts”)• Fair value of ﬁnancial instruments (“30. Financial Instruments”)• Contingent liabilities (“34. Contingent Liabilities”)(6) Early adoption of new accounting standards
The TNSC Group has early adopted IFRS 9 “Financial Instruments”
from the Transition Date.

(7) New accounting standards and interpretations that are not yet applied
Regarding the major accounting standards and interpretations issued before the approval date of the consolidated ﬁnancial statements, theaccounting standards and interpretations that are not yet applied as of March 31, 2017 because the application is not mandatory are as follows.
The impact of the application on the TNSC Group’s consolidated ﬁnancial statements is under evaluation and cannot be estimated at present.
Accounting standards andinterpretations

Timing of mandatory
application(Effective ﬁscal year
beginning on or after)

Effective ﬁscal year of
the TNSC GroupIFRS 15

Revenue from January 1, 2018
Contracts with
Customers

Fiscal year ending
March 31, 2019

IFRS 16

LeasesFiscal year ending
March 31, 2020

January 1, 2019

Outline of newly established/revised standards and interpretations

This standard revised the existing accounting treatments anddisclosure requirements on revenue recognition.
Speciﬁcally, the standard requires entities to recognize revenue
to depict the transfer of goods or services to customers in an
amount that reﬂects the compensation to which the entities
expect to be entitled in exchange for such goods and services.
This standard revised the existing accounting standard anddisclosure requirements on lease transactions.
Speciﬁcally, the standard introduces a single model, and for allleases with a term of more than 12 months, the standard in principle requires a lessee to reﬂect the right-of-use of its assets andan obligation to make lease payments on the ﬁnancial statements.

Taiyo Nippon Sanso Corporation | Integrated Report 201739

3. Significant Accounting Policies(1) Basis of consolidation
1) Subsidiaries
Subsidiaries refer to companies controlled by the TNSC Group. The
TNSC Group judges that it controls a company if the TNSC Group
has the exposure or rights to variable returns arising from its involvement in the investee and has the ability to inﬂuence such returns due
to power over the investee.
In preparing the consolidated ﬁnancial statements, the ﬁnancial
statements of each Group company prepared at the same closing
date based on the uniﬁed accounting policies of the TNSC Group areused. If accounting policies applied by a subsidiary are different fromthe accounting policies applied by the TNSC Group, adjustments are
made to the ﬁnancial statements of such subsidiary as necessary.
Consolidation of subsidiaries begins on the date when the TNSCGroup acquires control over the subsidiaries until the date when thecontrol over the subsidiaries is lost.
Transactions between consolidated companies, as well as the balance of receivables and payables and unrealized gains and losses
arising from such transactions, are eliminated in preparing theconsolidated ﬁnancial statements.
If there is a change in interests in consolidated subsidiaries without
involving a loss of control, it is accounted for as an equity transaction.
The difference between the adjustment amount of the non-controllinginterest and the fair value of the consideration is recognized directly inequity as equity attributable to owners of the parent.
In the event of a loss of control, the TNSC Group measures andrecognizes the remaining investment at fair value on the date when
the control has been lost. Gains and losses arising from the loss ofcontrol are recognized in proﬁt or loss.
Non-controlling interests in consolidated subsidiaries’ net assets
are identiﬁed separately from the TNSC Group’s interests.
Comprehensive income of consolidated subsidiaries is attributable toowners of the parent and non-controlling interests, even if this resultsin the non-controlling interests having a deﬁcit balances.
2) Associates
Associates refer to companies over which the TNSC Group has asigniﬁcant inﬂuence on their ﬁnancial and operating policies but does
not have control or joint control.
The TNSC Group accounts for investments in associates using theequity method.
Investments in associates under the equity method are recognizedat cost at the time of acquisition and recorded in the consolidated
statements of ﬁnancial position after adjusting the TNSC Group’s
interests in changes in net assets of the associates after acquisition.
The consolidated statements of proﬁt or loss reﬂect the TNSCGroup’s interests in the performance of associates. If there is achange in the amount recognized in other comprehensive income ofassociates, the TNSC Group’s interests in such change arerecognized in other comprehensive income.
Adjustments are made to consolidated ﬁnancial statements inorder to eliminate the TNSC Group’s interests in unrealized gains andlosses arising from transactions between the TNSC Group andassociates.
Financial statements of associates are prepared for the same
reporting period as the TNSC Group. Adjustments are made to makeaccounting policies of the associates consistent with the TNSCGroup’s accounting policies.
In the event of loss of signiﬁcant inﬂuence over associates, the
TNSC Group measures and recognizes the remaining investment at
fair value on the date when signiﬁcant inﬂuence is lost. Gains andlosses arising from the loss of signiﬁcant inﬂuence are recognized in
proﬁt or loss.
3) Joint arrangements
Joint arrangements refer to arrangements that require the unanimous
consent of the parties sharing control over decision-making on relevant activities.
A joint venture (jointly controlled entity) refers to a joint agreement
where parties with joint control over the arrangement have the rightto the net assets of such arrangement.
If the TNSC Group has a share in a joint venture, the TNSC Groupaccounts for such share using the equity method.

40

Taiyo Nippon Sanso Corporation | Integrated Report 2017

A joint operation (jointly controlled business) refers to a business inwhich parties with joint control substantially have the right to assets
and the obligation to liabilities related to joint arrangements.
If the TNSC Group has a share in a joint operation, the TNSCGroup recognizes the investment concerning such joint operation
only at the equivalent amount of the TNSC Group’s interests in theassets, liabilities, income and expenses arising from jointly-controlled
operating activities. Transactions between the TNSC Group companies, as well as the balance of receivables and payables and unrealized gains and losses arising from such transactions are eliminated.
The TNSC Group has more than 50% of voting rights of Sakai Gas
Center, Inc. The TNSC Group judges that said company qualiﬁes asa joint operation.
(2) Business combinations
Business combinations are accounted for using the acquisition
method.
If the initial accounting for business combinations has not been
completed by the end of the period in which the business combinations occurred, they are accounted for at a provisional amount for theitems for which the accounting is incomplete. The provisional amountis adjusted during the measurement period, which is within one year
from the acquisition date.
The consideration transferred in a business combination is calculated as the sum of acquisition-date fair values of assets transferredby the acquirer, liabilities incurred by the acquirer to former owners of
the acquiree, and equity interests issued by the acquirer.
Non-controlling interests in the acquiree are measured for eachbusiness combination either at fair value or at the amount equivalent
to the non-controlling interest in proportion to the fair value ofidentiﬁable net assets of the acquiree.
Acquisition-related costs incurred in connection with businesscombinations are recognized as expenses for the period in whichsuch costs were incurred.
When the TNSC Group acquires a business, it classiﬁes and designates assets to be acquired and liabilities to be assumed based oncontract terms, economic conditions and related conditions at theacquisition date. In addition, identiﬁable assets acquired and liabilities
assumed are in principle measured at fair value on the acquisition
date.
If a business combination is achieved in stages, the interest held
before acquiring the control of the acquiree is revalued at fair value atthe acquisition date, and the difference is recognized in proﬁt or loss.
The amount of the interest in the acquiree that was recorded in othercomprehensive income before the acquisition date is accounted forin the same manner as in the case where the acquirer disposed of its
interests.
Goodwill is measured as the amount of the aggregate amount of
the consideration transferred and the amount recognized as noncontrolling interests exceeding the net of identiﬁable assets acquired
and liabilities assumed.
If the aggregate amount recognized as the consideration transferred and non-controlling interests is less than the net of identiﬁable
assets acquired and liabilities assumed, the difference is recognizedin proﬁt or loss.
After initial recognition, goodwill acquired through a business combination is not amortized but is recorded at the amount initially recognized less the accumulated impairment loss. In addition, impairment
tests are performed each year and whenever there is an indication of
impairment.
(3) Foreign currency translation
The consolidated ﬁnancial statements of the TNSC Group are presented in Japanese yen, the functional currency of the Company. In
addition, each company within the TNSC Group designates its ownfunctional currency, and transactions of each company are measured
in its functional currency.
Transactions denominated in a foreign currency are translated intofunctional currencies at the spot exchange rate at the transaction
date or at a rate similar thereto.
Monetary assets and liabilities denominated in a foreign currency
are translated into functional currencies at the spot exchange rate at
the end of the reporting period. Translation differences arising fromsuch translation and settlement are recognized in proﬁt or loss.
However, ﬁnancial assets measured through other comprehensive
income and translation differences arising from cash ﬂow hedges arerecognized in other comprehensive income.
The assets and liabilities of foreign operations are translated into
Japanese yen at the spot exchange rate at the end of the reporting
period, and the income and expenses of foreign operations are translated into Japanese yen at the spot exchange rate at the transaction
date or at a rate similar thereto. The translation differences arerecognized in other comprehensive income.
If a foreign operation is disposed of, the cumulative translation differences related to such operation are recognized in proﬁt or loss forthe period in which the disposal occurs.
(4) Financial instruments
1) Financial assets (excluding derivatives)(i) Initial recognition and measurement
The TNSC Group initially recognizes trade receivables at the datewhen they are incurred. All other ﬁnancial assets are initially recognized at the transaction date when the TNSC Group becomes acontractual party to such ﬁnancial assets.
The TNSC Group classiﬁes its ﬁnancial assets into (a) ﬁnancial
assets measured at amortized cost and (b) ﬁnancial assets measured
at fair value through other comprehensive income. The classiﬁcation
is determined at the time of initial recognition of the ﬁnancial assets.
(a) Financial assets measured at amortized cost
Debt ﬁnancial assets are classiﬁed as ﬁnancial assets measured atamortized cost if both of the following criteria are met:
• Financial assets are held based on a business model with anobjective of holding ﬁnancial assets to recover contractual
cash ﬂows.
• Contractual terms of ﬁnancial assets give rise to cash ﬂows
that are solely payments of principal and interest on theprincipal amount outstanding on a speciﬁed date.
Financial assets measured at amortized cost are measured atfair value plus transaction costs directly attributable to theacquisition of such ﬁnancial assets.
(b) Financial assets measured at fair value through othercomprehensive income
Debt ﬁnancial assets are classiﬁed as ﬁnancial assets measured atfair value through other comprehensive income if both of thefollowing criteria are met:
• Financial assets are held based on a business model with anobjective of collecting contractual cash ﬂows and sellingﬁnancial assets.
• Contractual terms of ﬁnancial assets give rise to cash ﬂows
that are solely payments of principal and interest on theprincipal amount outstanding on a speciﬁed date.
Equity ﬁnancial assets are designated as ﬁnancial assets measured at fair value through other comprehensive income, and suchdesignation is applied on an ongoing basis.
Financial assets measured at fair value through other comprehensive income are measured at fair value plus transaction costs
directly attributable to the acquisition of such ﬁnancial assets.
(ii) Subsequent measurement
After initial recognition, ﬁnancial assets are measured according totheir classiﬁcation as follows:(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are measured atamortized cost using the effective interest method.
(b) Financial assets measured at fair value through othercomprehensive income
Financial assets other than ﬁnancial assets measured at amortizedcost are measured at fair value.
For ﬁnancial assets measured at fair value through other comprehensive income, changes in fair value are recognized in othercomprehensive income. If they are derecognized or their fair value
signiﬁcantly declines, they are transferred to retained earnings.

(iii) Derecognition
The TNSC Group derecognizes ﬁnancial assets only if contractual
rights to cash ﬂows arising from the ﬁnancial assets cease to exist, or
if the ﬁnancial assets are transferred and substantially all the risks andrewards have been transferred.
If the TNSC Group does not transfer or retain substantially all therisks or rewards but continues to control the ﬁnancial assets transferred, recognition of such ﬁnancial assets is continued to the extent
to which the TNSC Group has a continuing involvement, and in thatcase, related liabilities are also recognized.
(iv) Impairment
The TNSC Group recognizes impairment of ﬁnancial assets based onwhether there is a signiﬁcant increase in credit risk from the time ofinitial recognition in ﬁnancial assets or ﬁnancial asset groups measured at amortized cost at the end of each reporting period.
For ﬁnancial assets or ﬁnancial asset groups measured at amortized cost, expected credit losses for 12 months are recognized asallowance for doubtful accounts, if credit risk has not signiﬁcantly
increased from the time of initial recognition. However, for tradereceivables, expected credit losses over the remaining period arerecognized.
If there is a signiﬁcant increase in credit risk from the time of initialrecognition, expected credit losses over the remaining period arerecognized as allowance for doubtful accounts.
Whether or not the credit risk has signiﬁcantly increased is judged
based on a change in the default risk. In judging whether there is any
change in the default risk, overdue (past-due information) is mostly
considered.
In addition, expected credit losses are measured based on the discounted present value of the difference between the amount receivable on a contract basis and the amount expected to be received
based on past credit losses, etc.
2) Financial liabilities (excluding derivatives)(i) Initial recognition and measurement
The TNSC Group classiﬁes its ﬁnancial liabilities into (a) ﬁnancial liabilities measured at amortized cost and (b) ﬁnancial liabilities measured
at fair value through proﬁt or loss. The classiﬁcation is determined atinitial recognition of the ﬁnancial liabilities. All ﬁnancial liabilities are initially measured at fair value. However, ﬁnancial liabilities measured atamortized cost are measured at fair value less transaction costs
directly attributable to such ﬁnancial liabilities.
(ii) Subsequent measurement
After initial recognition, ﬁnancial liabilities are measured according totheir classiﬁcation as follows:(a) Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost are measured atamortized cost using the effective interest method after initial recognition. Amortization by the effective interest method and gains
and losses from derecognition are recognized in proﬁt or loss.
(b) Financial liabilities measured at fair value through profit orloss
For ﬁnancial liabilities measured at fair value through proﬁt or loss,
the portion related to changes in the TNSC Group’s credit risk fromchanges in fair value and interest expenses is recognized in othercomprehensive income after initial recognition, and the remaining
amount is recognized in proﬁt or loss.
(iii) Derecognition
The TNSC Group derecognizes ﬁnancial liabilities in cases of the performance, exemption or expiration of the obligation of ﬁnancial liabilities, the exchange occurs under substantially different terms, orwhen there has been a substantial modiﬁcation of the terms.
3) Offset of financial instruments
Financial assets and ﬁnancial liabilities are offset only if there is a current enforceable legal right to offset the recognized amounts, and if
there is an intention to settle at a net amount or realize the assets
and settle the liabilities simultaneously. They are then recorded at a
net amount in the consolidated statements of ﬁnancial position.

Taiyo Nippon Sanso Corporation | Integrated Report 2017414) Derivatives and hedge accounting
The TNSC Group uses derivatives such as forward exchange contracts, interest rate swap contracts and currency swap contracts tohedge currency risks and interest rate risks. These derivatives are initially measured at fair value at the time when the contracts wereentered and remeasured at fair value thereafter.
Fair value changes of derivatives are recognized in proﬁt or loss.
However, the effective portion of cash ﬂow hedges is recognized inother comprehensive income.
At inception of the hedge, the TNSC Group formally designatesand documents the hedging relationships to which hedge accounting
is applied and the risk management objective and strategy for undertaking the hedge. Such documentation includes speciﬁc hedging
instruments, hedged items or transactions, the nature of the risk
being hedged, and how the TNSC Group will assess effectiveness ofthe hedging instruments in fair value changes when offsetting theexposure to changes in fair value or cash ﬂows of the hedged items
attributable to the hedged risks. The TNSC Group evaluates whether
or not derivatives used for hedging transactions are effective for offsetting changes in fair value or cash ﬂows of the hedged items at
inception of the hedge and on an ongoing basis. Speciﬁcally, the
TNSC Group determined that a hedge is effective in the case where
the economic relationship between the hedged item and the hedging
instruments results in an offset.
Hedges that meet strict criteria for hedge accounting are classiﬁed
and accounted for under IFRS 9 as follows.

Inventories are measured at the lower of cost and net realizablevalue. The weighted average method is principally used to calculate
the cost. In addition, the net realizable value is calculated at the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to
make the sale.

(i) Fair value hedges
Fair value changes in derivatives are recognized in proﬁt or loss. For
fair value changes in the hedged items attributable to the risks to behedged, the carrying amount of the hedged items is adjusted andrecognized as proﬁt or loss.

(8) Intangible assets
The TNSC Group adopts the cost model for measurement ofintangible assets.
Intangible assets are presented at cost less accumulated
amortization and accumulated impairment losses.
Intangible assets acquired separately are initially measured at cost.
The cost of intangible assets acquired through business combinations is measured at fair value as of the acquisition date. For internallygenerated intangible assets, except for development costs that qualify for capitalization, all expenditures are recognized as expenses forthe periods when they are incurred.
Intangible assets with ﬁnite useful lives are amortized over theirestimated useful lives using the straight-line method. Impairment
tests are performed whenever there is an indication of impairment.
Estimated useful lives and method of amortization of intangible
assets with ﬁnite useful lives are reviewed at the end of each reporting period, and if there is any change, it is applied prospectively as achange in accounting estimates.
Estimated useful lives of major intangible assets are as follows:(ii) Cash flow hedges
The effective portion of gain or loss on the hedging instruments is
recognized as other comprehensive income, and the ineffective
portion is immediately recognized in proﬁt or loss.
The amount related to the hedging instruments recorded in othercomprehensive income is transferred to proﬁt or loss when hedgedtransactions affect proﬁt or loss. If the hedged item results in the recognition of non-ﬁnancial assets or non-ﬁnancial liabilities, the amountrecognized in other comprehensive income is treated as an adjustment of the initial carrying amount of the non-ﬁnancial assets or
non-ﬁnancial liabilities.
If forecasted transactions are no longer expected to occur, thecumulative gain or loss previously recognized as equity through othercomprehensive income is transferred to proﬁt or loss.
If the hedging instrument is terminated or exercised without expiration, sale or exchange or renewal to another hedging instrument, or if
it no longer qualiﬁes for hedge accounting due to events such as achange in risk management objective, the cumulative gain or loss
previously recognized in equity through other comprehensive income
is continuously recorded in equity until the forecasted transaction
occurs, or is no longer expected to occur.
5) Fair value of financial instruments
The fair value of ﬁnancial instruments traded in active ﬁnancial markets as of the end of the reporting period refers to quoted prices inmarkets or dealer prices.
The fair value of ﬁnancial instruments for which active markets do
not exist is calculated by referring to appropriate valuation techniquesor prices provided by counterparty ﬁnancial institutions.
(5) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits thatcan be withdrawn at any time, and short-term investments with amaturity of three months or less from the acquisition date that arereadily convertible into cash and subject to an insigniﬁcant risk ofchanges in value.
(6) Inventories
The cost of inventories includes costs of purchase, costs of conversion, and all other costs incurred in bringing the inventories to theirpresent location and condition.

42

Taiyo Nippon Sanso Corporation | Integrated Report 2017(7) Property, plant and equipment
The TNSC Group adopts the cost model for measurement ofproperty, plant and equipment.
Property, plant and equipment are presented at cost lessaccumulated depreciation and accumulated impairment losses.
The cost includes the costs directly attributable to the acquisitionof the assets, the costs of their dismantlement, removal or
restoration, and the borrowing costs that meet the recognition
criteria.
All property, plant and equipment other than land are depreciated
so that the depreciable amount, which is cost less the residual value
at the end of the ﬁscal year, is allocated on a systematic basis using
the straight-line method.
Estimated useful lives of major property, plant and equipment are
as follows:
Buildings and structures:
Machinery and vehicles:
Tools, furniture and ﬁxtures:

Customer-related intangible assets:

3 to 50 years
3 to 20 years
2 to 25 years

5 to 20 years

Intangible assets with indeﬁnite useful lives and intangible assets
not available for use are not amortized. Impairment tests are performed separately or by a cash-generating unit whenever there is anindication of impairment.
(9) Leases
Lease contracts are classiﬁed as ﬁnance leases if the risks andrewards incidental to ownership of the lease assets are substantiallytransferred to the TNSC Group. Otherwise, they are classiﬁed as
operating leases.
For ﬁnance lease transactions, lease assets and lease liabilities arerecorded in the consolidated statements of ﬁnancial position at thelower of the fair value of the leased property and the present value ofthe minimum lease payment calculated at the inception date of thelease. In addition, lease payments are allocated to ﬁnancial expenses
and repayment of lease liabilities under the interest method, and suchﬁnancial expenses are recognized in proﬁt or loss. Lease assets are
depreciated using the straight-line method over the shorter of theirestimated useful lives or the lease term.
For operating lease transactions, lease payments are recognized
as expenses using the straight-line method over the lease term. In
addition, variable lease payments are recognized as expenses for theperiod when they are incurred.

Whether or not a contract is a lease or whether or not a lease isincluded in a contract is determined according to the substance ofthe contract, even if it is not in the legal form of a lease.
(10) Impairment of assets
1) Impairment of non-financial assets
The TNSC Group assesses at the end of each reporting period
whether there is any indication that an asset may be impaired. If any
such indication exists, and if assets need to be annually tested for
impairment, the TNSC Group estimates the recoverable amount of
the asset. The recoverable amount of the asset is the higher of anasset’s fair value less costs of disposal and its value in use. If therecoverable amount of each asset cannot be estimated, the recoverable amount of a cash-generating unit or a group of cash-generating
units to which the asset belongs is estimated. If the carrying amountof a cash-generating unit or a group of cash-generating units
exceeds the recoverable amount, impairment loss of the asset is recognized and write-downs of the asset are recorded up to the recoverable amount. In measuring the value in use, the discounted present
value of expected future cash ﬂows is calculated using the pre-tax
discount rate that reﬂects current market assessments of the timevalue of money and the risks speciﬁc to the asset. The business planused to estimate future cash ﬂows is in principle limited to ﬁve years.
Future cash ﬂows beyond the projected period of the business plan
are calculated based on the long-term average growth rate according
to individual circumstances.
In calculating fair value less costs of disposal, an appropriate
valuation model is used supported by indices of fair value available.
Goodwill is allocated to individual cash-generating units, or groupsof cash-generating units, that are expected to beneﬁt from thesynergies of a business combination after the acquisition date.
Goodwill or intangible assets with indeﬁnite useful lives, and intangible assets not available for use are tested for impairment annuallyor whenever there is an indication of impairment.
2) Reversal of an impairment loss
For assets other than goodwill, impairment losses recognized in theprevious ﬁscal years are assessed at the end of the reporting period
as to whether or not there is any indication of possibility of a decreaseor extinguishment of loss, due to factors such as a change in theassumption used in calculating the recoverable amount. If such indication exists, the recoverable amount of such assets, cashgenerating units or groups of cash-generating units is estimated. Ifsuch recoverable amount exceeds the carrying amount of such
assets, cash-generating units or groups of cash-generating units, theimpairment loss is reversed up to the lower of the recoverable amountcalculated and the carrying amount less the accumulated depreciation if the impairment loss was not recognized in previous ﬁscal years.
The reversal of impairment loss is recognized in proﬁt or loss.
For goodwill, impairment loss is not reversed.
(11) Assets held for sale and discontinued operations
Non-current assets (or disposal groups) are classiﬁed as “assets held
for sale” if their carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use.
The above requirements only apply if the sale is highly probablewithin one year and such assets (or disposal groups) are available for
immediate sale in their present condition. Non-current assets (or disposal groups) classiﬁed as assets held for sale are measured at thelower of their carrying amount and fair value less costs to sell.
Property, plant and equipment and intangible assets classiﬁed asassets held for sale are not depreciated or amortized.
Discontinued operations include a component of an entity that has
already been disposed of or classiﬁed as assets held for sale, andthey are recognized if they constitute one operation of the TNSCGroup and if there is a plan to dispose of one of the operations.
(12) Borrowing costs
For assets that necessarily take a substantial period of time to prepare for intended use or sale, borrowing costs directly attributable toacquisition, construction or production of such assets are capitalized
as part of the cost of such assets. Other borrowing costs arerecognized as an expense for the period when they are incurred.

(13) Retirement benefits
The TNSC Group provides deﬁned beneﬁt plans and deﬁned
contribution plans as retirement beneﬁt plans for employees.
The TNSC Group separately calculates the present value of thedeﬁned beneﬁt obligations, related current service costs and past
service costs for each plan using the projected unit credit method.
The discount rate is calculated based on market yields at the endof the reporting period on high quality corporate bonds.
Liabilities or assets related to the deﬁned beneﬁt plans are calculated by deducting the fair value of plan assets from the present valueof deﬁned beneﬁt obligations.
Remeasurements of liabilities or assets relating to the deﬁned beneﬁt plans are all recognized in other comprehensive income for theperiod when they are incurred, and immediately reﬂected in retained
earnings. In addition, past service costs are expensed for the period
when they are incurred.
Expenses related to deﬁned contribution plans are recognized as
expenses for the period when they are incurred.
(14) Provisions
A provision is recognized when the TNSC Group has a present obligation (legal or constructive) as a result of a past event, when it isprobable that an outﬂow of resources embodying economic beneﬁts
will be required to settle the obligation, and when a reliable estimate
can be made of the amount of the obligation.
The TNSC Group measures the provisions at the present value of
expenditures expected to be required to settle the obligation, whenthe effect of the time value of money is material. In calculating thepresent value, the TNSC Group uses a pre-tax discount rate thatreﬂects current market assessments of the time value of money andthose risks speciﬁc to the liability.
(15) Equity
1) Ordinary shares
The issue price of ordinary shares is recorded in share capital andcapital surplus.
2) Treasury shares
When the TNSC Group purchases treasury shares, the consideration
paid is recognized as a deduction from equity.
When the TNSC Group disposes of treasury shares, the difference
between the carrying amount and the consideration at the time ofdisposal is recognized in capital surplus.
(16) Revenue
1) Revenue recognition
Revenue is recognized to the extent that it is probable that economic
beneﬁts will ﬂow to the TNSC Group and the amounts can be measured reliably. In addition, revenue is measured at the fair value ofconsideration received after deducting trade discounts, rebates,
value added taxes, etc. or consideration receivable.
2) Sale of goods
Revenue arising from the sale of goods is recognized when the
TNSC Group has transferred to the buyer the signiﬁcant risks andrewards of ownership, when the TNSC Group retains neither effective
control over the goods sold nor continuing managerial involvement to
the degree usually associated with ownership, when the amount ofrevenue can be measured reliably, when it is probable that the economic beneﬁts associated with the transaction will ﬂow to the TNSCGroup, and when the costs incurred or to be incurred in respect of
the transaction can be measured reliably.
3) Construction contracts
If the outcome of construction contracts can be reliably estimated,
the revenue related to the construction contracts is recognized inproportion to the stage of completion of construction contracts at theend of the reporting period. If the outcome of construction contracts
cannot be reliably estimated, the revenue related to construction
contracts is recognized only to the extent that contract costs
incurred are expected to be recoverable. If the total contract cost is
likely to exceed the total revenue related to construction contracts,
such excess is immediately recognized as an expense.

Taiyo Nippon Sanso Corporation | Integrated Report 2017434) Rendering of services
For rendering of services, revenue is recognized by reference to thestage of completion of the transaction, in principle when the estimateof the outcome can be measured reliably. If the estimate cannot be
made, the costs incurred are recognized as expenses for the period
when they are incurred, and the revenue is recognized only to theextent that the costs incurred are expected to be recoverable.
5) Dividends
For dividends, income is recognized when shareholders’ rights toreceive payment are established.
(17) Government grants
A government grant is recognized at fair value when there is reasonable assurance that the TNSC Group will comply with any conditions
attached to the grant and the grant will be received.
Government grants are recognized in proﬁt or loss on a systematic
basis over the periods in which the TNSC Group recognizes
expenses for the related costs for which the grants are intended tocompensate.
Government grants related to assets are recorded by deducting
the amount of such grants from the cost of the assets.
(18) Income taxes
Current taxes for the current and prior periods are calculated at theamount expected to be paid to (recovered from) taxation authorities.
The rates and laws used to calculate the tax amount are those thathave been enacted or substantively enacted at the end of thereporting period.
Deferred taxes are recorded as the difference between the tax
bases and the carrying amounts of assets and liabilities at the end of
the reporting period (temporary difference) using the asset andliability method.
Deferred tax liabilities are in principle recognized for all taxable temporary differences. Deferred tax assets are recognized for deductible
temporary differences, unused tax losses and unused tax credits tothe extent that it is probable that taxable proﬁt will be available
against which the deductible temporary differences can be utilized.
However, there are exceptions in which deferred tax assets andliabilities are not recorded for the following temporary differences:• Arising from initial recognition of goodwill• Arising from initial recognition of an asset or liability in a transaction other than a business combination which does not affecteither the accounting income or the taxable proﬁt (or loss) at thetime of the transaction• For deductible temporary differences associated with investments in subsidiaries and associates, and interests in joint
arrangements, when it is probable that the reversal will notoccur in the foreseeable future, or it is less probable that taxable
proﬁt will be available against which the deductible temporary
differences can be utilized• For taxable temporary differences associated with investments
in subsidiaries and associates, and interests in joint arrangements, when the TNSC Group is able to control the timing of thereversal of the temporary differences and it is probable that thereversal will not occur in the foreseeable future
The carrying amount of deferred tax assets and liabilities (including
unrecognized deferred tax assets) is reviewed at the end of eachreporting period. Deferred tax assets and liabilities are calculated at
the tax rates that are expected to apply to the period when theassets are realized or liabilities are settled, based on tax rates thathave been enacted or substantively enacted at the end of thereporting period.
(19) Earnings per share
The amount of basic earnings per share is calculated by dividing net
income attributable to ordinary shareholders of the Company by theweighted average number of ordinary shares outstanding after
adjusting for treasury shares during the period. The amount of diluted
earnings per share is calculated by adjusting the effects of all dilutive
potential ordinary shares with dilutive effects.

4. Segment Information(1) Overview of reportable segments
The reportable segments of the TNSC Group are those for which
discrete ﬁnancial information is available and whose operating results
are regularly reviewed by the Board of Directors to make decisions
about resource allocation and to assess performance.
The TNSC Group conducts gas businesses in Japan and overseas, mainly for customers in the steel, chemical, and electronics
industries, and has built production and sales structures for its main

products in Japan, the United States, and Asia and Oceania. In addition, the TNSC Group manufactures and sells housewares such as
stainless steel vacuum bottles, and conducts real-estate rental andother businesses. Therefore, the Company has established the following four reportable segments: Gas Business in Japan, Gas
Business in the United States, Gas Business in Asia and Oceania,
and Thermos and Other Businesses.

The principal products and services included in the four segments are shown in the table below.
Reportable segments

Major products and services

Gas Business in Japan
Gas Business in the United States
Gas Business in Asia and Oceania

Oxygen, nitrogen, argon, carbon dioxide, helium, hydrogen, acetylene, gas-related equipment, specialty
gases (electronic materials gases, pure gases, etc.), electronics-related equipment and installation,
semiconductor manufacturing equipment, cutting and welding equipment, welding materials, plants andmachinery, liquid petroleum gas (LPG) and related equipment, medical-use gases (oxygen, nitrous oxide,etc.), medical equipment, stable isotopes
Housewares, real-estate rental

Thermos and Other Businesses

The accounting methods adopted for the reported operating
segments are the same as the TNSC Group’s accounting policies
described in “3. Signiﬁcant Accounting Policies.”

44

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Revenue from intersegment transactions and transfers is based
primarily on prevailing market prices.

(2) Revenue and profit (loss) amounts by reportable segment
FYE2017 (April 1, 2016 – March 31, 2017)(Millions of Yen)Gas Business inJapan

Revenue
Revenues from externalcustomers
Intersegment revenues
and transfers
Total
Segment proﬁt (Note 2)
Other items
Depreciation andamortization
Impairment losses
Share of proﬁt (loss)of investments
accounted for using
the equity method

Gas Business in
Gas Business in
Thermos andthe United States Asia and Oceania Other Businesses

Total¥321,416¥147,274¥85,875¥27,018¥581,586

8,160
329,576
29,4508,473
155,748
12,074

1,081
86,957
5,165

1,349
28,36810,017

15,627
4

17,557
—

5,964
85

104

(178)

4

Reconciling
items(Note 1)¥

Amounts on theConsolidated
Statements ofProﬁt or Loss—

¥581,586

19,065600,651
56,707(19,065)(19,065)(1,970)—581,586
54,736

942—

40,09189(43)—

40,048
89

4,412

4,341

(0)

4,341

Notes: 1. The ¥1,970 million negative reconciling item for segment proﬁt is comprised of ¥357 million of intersegment eliminations and companywide expenses of¥1,613 million that were not allocated to any particular reportable segment. These companywide expenses related principally to basic research expenses
that were not allocated to a particular reportable segment.
2. Segment proﬁt represents core operating proﬁt, which is calculated as operating proﬁt excluding certain gains or losses attributable to non-recurring factors(losses incurred by business withdrawals, streamlining, and others).

FYE2016 (April 1, 2015 – March 31, 2016)(Millions of Yen)Gas Business inJapan

Revenue
Revenues from externalcustomers
Intersegment revenues
and transfers
Total
Segment proﬁt (Note 2)
Other items
Depreciation andamortization
Impairment losses
Share of proﬁt (loss)of investments
accounted for using
the equity method

Gas Business in
Gas Business in
Thermos andthe United States Asia and Oceania Other Businesses

Total¥327,952¥149,553¥89,375¥27,541¥594,421

7,805
335,758
27,8506,660
156,213
9,241

3,615
92,9903,009

1,166
28,707
9,001

15,865—

16,872
—

6,364
1,386

(22)

(177)

(106)

Reconciling
items(Note 1)¥

Amounts on theConsolidated
Statements ofProﬁt or Loss—

¥594,421

19,247
613,669
49,102(19,247)(19,247)(1,646)—594,42147,456708—

39,812
1,386

(115)
—

39,696
1,386

2,831

2,525

0

2,526

Notes: 1. The ¥1,646 million negative reconciling item for segment proﬁt is comprised of ¥56 million of intersegment eliminations and companywide expenses of¥1,703 million that were not allocated to any particular reportable segment. These companywide expenses related principally to basic research expenses
that were not allocated to a particular reportable segment.
2. Segment proﬁt represents core operating proﬁt, which is calculated as operating proﬁt excluding certain gains or losses attributable to non-recurring factors(losses incurred by business withdrawals, streamlining, and others).

Reconciliation of segment proﬁt with proﬁt before income taxes is as follows:(Millions of Yen)

Segment proﬁt
Gain on sales of ﬁxed assets
Gain on step acquisition
Share of proﬁt (loss) of investments accounted for using the equity
methodImpairment losses
Operating proﬁt
Financial income
Financial costs
Proﬁt before income taxes

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥54,736
1,012—¥47,456—
1,813(1,943)(141)
53,664
1,429(4,918)50,176—(344)
48,925
1,316(3,665)46,575

Taiyo Nippon Sanso Corporation | Integrated Report 201745

(3) Information about geographical area
A breakdown of revenues from external customers and non-current assets by geographical area is as follows:
Revenues from external customers(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥338,239
141,009102,336¥581,586¥346,558
143,090
104,772¥594,421Japan
The United States
Asia, Oceania and others
Total
Note: Revenue is classiﬁed by country or region based on the customers’ location.

Non-current assets(Millions of Yen)Japan
The United States
Asia, Oceania and others
Total

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥146,740
304,824
103,604¥555,169¥144,909
215,906
75,792¥436,607¥146,311
218,262
47,103¥411,676

Note: Non-current assets are classiﬁed by their location, and they do not include ﬁnancial assets, deferred tax assets or Retirement beneﬁt asset.

(4) Information about major customers
Information about major customers is not disclosed since there is no single external customer that accounts for 10% or more of revenue.

5. Business Combinations(3) Goodwill, assets acquired and liabilities assumed

FYE2017 (April 1, 2016 to March 31, 2017)(Millions of Yen)

Acquisition of Industrial Gas Operations(1) Overview of business combination
1) Name and business description of acquirees
Names of acquirees:
Air Liquide Industrial U.S. LP and
Airgas, Inc.
Business description:
Gas separation, carbon dioxide,packaged gases and nitrous oxidebusinesses
2) Acquisition date
September 8, 2016
3) Main reason for business combination
The objective was to become a national supplier by expanding
gas separation business network of Matheson Tri-Gas, Inc. in
the East and Midwest of the United States, solidifying its position as a manufacturer, improving its supply stability and customer trust nationwide, reinforcing production capacity for its
carbon dioxide business, and entering the packaged gas business in Alaska and the nitrous oxide business, thereby expanding into new domains and solidifying foundations and proﬁtabilityof Matheson Tri-Gas, Inc. through expansion in the UnitedStates, the world’s largest industrial gas market.
4) Method for gaining control of acquirees
A wholly owned subsidiary Matheson Tri-Gas, Inc. acquired partof the American industrial gas operations and related businessassets of Air Liquide Industrial U.S. LP and Airgas, Inc.
(2) Fair value of consideration transferred(Millions of Yen)
Acquisition date
(September 8, 2016)

Cash
Total of consideration transferred

46

Taiyo Nippon Sanso Corporation | Integrated Report 2017

¥77,402¥77,402

Acquisition date
(September 8, 2016)

Current assets:
Inventories
Other
Non-current assets:
Property, plant and equipment (Note 1)
Intangible assets (Note 1)
Assets acquired
Current liabilities
Non-current liabilities
Liabilities assumed
Net assets acquired and liabilities assumed
Goodwill (Note 2)

¥

406
369
28,911
24,502
54,188
12
3,744
3,756
50,432
26,970The consideration transferred is allocated to assets acquired andliabilities assumed on the acquisition date based on fair value. As the
allocation has yet to be completed, the amounts above are provisional fair values based on prevailing best estimates. Amounts may
be revised up to one year after the acquisition following an assessment of additional information relating to facts and circumstances at
the acquisition date.
Notes: 1. Details of property, plant and equipment and intangible assets
Property, plant and equipment are mainly machinery and vehicles of¥23,346 million. Intangible assets are customer-related intangible
assets of ¥24,502 million.
2. Goodwill
Goodwill mainly comprises anticipated synergies and excess earnings capabilities arising from acquisition that do not match speciﬁc
recognition criteria. Goodwill is deductible for a certain period underfull taxation.

(4) Acquisition-related costs
Acquisition-related costs were ¥421 million, and are included in“Selling, general and administrative expenses” in the consolidated
statements of proﬁt or loss.

(5) Impact on the TNSC Group’s results
The TNSC Group’s consolidated statements of proﬁt or loss include
revenue and proﬁt generated by the acquirees subsequent to theacquisition date of ¥14,742 million and ¥1,162 million, respectively.
The revenue and proﬁt (pro forma information) assuming that thebusiness combination was undertaken on April 1, 2016, the beginning of the ﬁscal year, are ¥593,123 million and ¥37,302 million,
respectively. The pro forma information has not been audited.

Acquisition of Supagas Holdings Pty Ltd(1) Overview of business combination
1) Name and business description of acquired company
Name of acquired company: Supagas Holdings Pty Ltd andrelated landBusiness description:
Sells LPG, industrial gases(including oxygen, nitrogen, argon,
and carbon dioxide), and related
equipment
2) Acquisition date
December 16, 2016
3) Main reason for business combination
The Company acquired Renegade Gas Pty Ltd in July 2015 to
fully enter the Australian industrial gas market. Renegade Gas
Pty Ltd operates principally in New South Wales, Queensland,and elsewhere on Australia’s east coast. The Company planned
to further expand its operations in Australia. In acquiring
Supagas Holdings Pty Ltd, the Company augmented existing
operations, including in Victoria and Western Australia, to complete a nationwide sales network. It was thereby able to reinforce its national account efforts and its user supply structure.
In leveraging a nationwide sales network, the Company is positioned to capitalize on infrastructural demand, which should
continue to expand solidly, while cultivating new resources andenergy-related demand. The Company should also materialize
synergies with Renegade Gas Pty Ltd to boost earnings andundertake activities to further expand its Australian business.
4) Percentage of voting rights acquired
100.0%
5) Method for gaining control of acquired company
Consolidated subsidiary, TNSC (Australia) Pty Ltd acquired all of
the shares and related land of Supagas Holdings Pty Ltd bypurchasing shares for cash and exchanging shares.
(2) Fair value of consideration transferred(4) Goodwill, assets acquired and liabilities assumed(Millions of Yen)
Acquisition date
(December 16, 2016)

Current assets:
Cash and cash equivalents
Trade receivables
Inventories
Other
Non-current assets:
Property, plant and equipment
Intangible assets
Other
Assets acquired
Current liabilities
Non-current liabilities
Liabilities assumed
Net assets acquired and liabilities assumed
Goodwill (Note 1)

¥

717
1,566
334
112

10,0484,577
125
17,479
1,189
8,382
9,571
7,908
13,670The consideration transferred is allocated to assets acquired andliabilities assumed on the acquisition date based on fair value. As the
allocation has yet to be completed, the amounts above are provisional fair values based on prevailing best estimates. Amounts may
be revised up to one year after the acquisition following an assessment of additional information relating to facts and circumstances at
the acquisition date.
Note: 1. Goodwill
Goodwill mainly comprises anticipated synergies and excess earnings
capabilities arising from acquisition that do not match speciﬁc
recognition criteria. Goodwill is not tax-deductible.

(5) Acquisition-related costs
Acquisition-related costs were ¥542 million, and are included in“Selling, general and administrative expenses” in the consolidated
statements of proﬁt or loss.
(6) Impact on the TNSC Group’s results
The TNSC Group’s consolidated statements of proﬁt or loss include
revenue and proﬁt generated by the acquired company subsequent
to the acquisition date of ¥2,073 million and ¥70 million, respectively.
The revenue and proﬁt (pro forma information) assuming that thebusiness combination was undertaken on April 1, 2016, the beginning of the ﬁscal year, are ¥588,072 million and ¥36,771 million,
respectively. The pro forma information has not been audited.

FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)

Acquisition date
(December 16, 2016)

Cash
TNSC (Australia) Pty Ltd shares
Total of consideration transferred¥20,737 (Note 1)
841¥21,578

Note: 1. In addition, the TNSC Group also made a cash loan of ¥7,686 million
to the acquired company. This loan, which is repayable by theacquired company, is classiﬁed in the consolidated statements ofcash ﬂows within “Cash ﬂows from investing activities” as “Other.”
The acquired company is using this loan to fund debt repayment.

(3) Number of shares transferred and method for measuring
fair value thereof
A total of 9,158,348 ordinary shares were transferred to the former
owners of Supagas Holdings Pty Ltd and the fair value, based on theﬁnancial position, results, and other numbers for TNSC (Australia) Pty
Ltd, was agreed between the parties.

Acquisition of Renegade Gas Pty Ltd(1) Overview of business combination
1) Name and business description of acquired company
Name of acquired company: Renegade Gas Pty Ltd
Business description:
Filling and sales of LPG andindustrial gases, and sales andrentals of related equipment
2) Acquisition dateJuly 31, 20153) Main reason for business combination
The Company is exploring ways to expand its operations into
new countries to broaden its regional scope as part of efforts toreach the globalization objectives that are part of its “Ortus
Stage 1” medium-term management plan. Australia has the 12thlargest GDP in the world and a population growth rate of 1% to
2% annually, a high level among advanced nations. Its economy
is set to expand at around 3% annually over the next few years,
reﬂecting growth in housing investment and personal consumption. The industrial gas market should beneﬁt from steady
growth in housing construction and infrastructure-related
demand and from new demand from mining and energy sectors.

Taiyo Nippon Sanso Corporation | Integrated Report 201747

The Company will position Renegade Gas Pty Ltd as a step indeveloping the industrial gas markets of Australia and the rest of
Oceania, leveraging that company’s existing network to broaden
its product lineup and expanding its geographic reach.
The TNSC Group will launch efforts to materialize synergies
from Renegade Gas Pty Ltd and establish a solid footing in theAustralian industrial gas business.
4) Percentage of voting rights acquired
100.0%
5) Method for gaining control of acquired company
Consolidated subsidiary, TNSC (Australia) Pty Ltd acquired all of
the shares of Renegade Gas Pty Ltd through acquisition ofshares for cash and exchange of shares.
(2) Fair value of consideration transferred(Millions of Yen)
Acquisition date(July 31, 2015)

Cash¥12,717TNSC (Australia) Pty Ltd shares

2,244

Total of consideration transferred¥14,961(3) Share exchange ratio by share class and its calculation
method, and number of shares issued
1) Share exchange ratio by share class
1 ordinary share of Renegade Gas Pty Ltd for 100 ordinary
shares of TNSC (Australia) Pty Ltd
2) Calculation method for share exchange ratio
Calculated as a result of discussions with the relevant parties
referring to stock valuation reports submitted by third-party
appraisal institutions and other sources.
3) Number of shares issued
Shares of TNSC (Australia) Pty Ltd: 15,868,013(4) Goodwill, assets acquired and liabilities assumed(Millions of Yen)
Acquisition date(July 31, 2015)

Current assets:
Cash and cash equivalents
Trade receivables
Inventories
Other
Non-current assets:
Property, plant and equipment
Intangible assets
Assets acquired
Current liabilities
Non-current liabilities
Liabilities assumed
Net assets acquired and liabilities assumed
Goodwill (Note 1)

¥

249
1,338
279
88
7,787
700
10,441
1,796
4,623
6,419
4,022
10,939Note: 1. Goodwill
Goodwill mainly comprises anticipated synergies and excess earnings
capabilities arising from acquisition that do not match speciﬁc
recognition criteria. Goodwill is not tax-deductible.

(5) Acquisition-related costs
Acquisition-related costs were ¥305 million, and are included in“Selling, general and administrative expenses” in the consolidated
statements of proﬁt or loss.
(6) Impact on the TNSC Group’s results
The TNSC Group’s consolidated statements of proﬁt or loss include
revenue and proﬁt generated by the acquired company subsequent
to the acquisition date of ¥4,393 million and ¥486 million,
respectively.
The revenue and proﬁt (pro forma information) assuming that thebusiness combination was undertaken on April 1, 2015, the beginning of the previous ﬁscal year, are ¥598,342 million and ¥30,938
million, respectively. The pro forma information has not been audited.

6. Cash and Cash Equivalents
A breakdown of cash and cash equivalents is as follows:(Millions of Yen)FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

Cash and deposits¥52,857¥49,216¥52,769

Total¥52,857¥49,216¥52,769

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥151,965¥147,914¥153,784

7. Trade Receivables
A breakdown of trade receivables is as follows:(Millions of Yen)

Notes and accounts receivable—trade
Allowance for doubtful accounts
Total
Trade receivables are classiﬁed as ﬁnancial assets measured at amortized cost.

48

Taiyo Nippon Sanso Corporation | Integrated Report 2017

(1,985)(2,063)(2,082)¥149,979¥145,850¥151,702

8. Inventories
A breakdown of inventories is as follows:(Millions of Yen)FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥32,493
10,837
8,604¥51,935¥30,877
11,406
9,575¥51,859¥30,401
8,758
8,419¥47,579

Merchandise and ﬁnished goods
Work in process
Raw materials and supplies
Total

Amounts of inventories measured based on net realizable value at March 31, 2017, March 31, 2016 and April 1, 2015 were ¥6,641 million,¥6,673 million and ¥3,259 million, respectively.
Amounts of write-downs of inventories recognized as expenses for FYE2017 and FYE2016 were ¥195 million and ¥234 million, respectively.

9. Property, Plant and Equipment(1) Table of changes
Changes in costs, accumulated depreciation and accumulated impairment losses, and carrying amounts of property, plant and equipment are
as follows:
FYE2017 (April 1, 2016 to March 31, 2017)
Costs(Millions of Yen)

Balance at April 1, 2016
Individual acquisition
Acquisition through business combination
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2017

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand ﬁxtures¥548,336
31,10432,747(6,807)
2,898¥127,978
2,205
2,085
(722)
91

¥43,871
850
2,360
(164)
(131)

Total

¥34,279
2,004
282
(122)
(109)

¥104,145
6,513
9,470
(2,462)(2,634)¥858,612
42,67846,946(10,279)114

493¥608,772

144¥131,784

86¥46,87324¥36,358(162)¥114,870

586¥938,659

Construction inLand
progress

Tools, furnitureand ﬁxtures

Total

Accumulated depreciation and accumulated impairment losses(Millions of Yen)

Balance at April 1, 2016
Depreciation
Impairment losses
Acquisition through business combination
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2017

Machinery andvehiclesBuildings andstructures¥(384,252)(25,642)(0)(3,450)5,633
389¥(74,660)(4,505)
(4)
(2)
604
17

¥(3,115)
—
(114)
—
101
—

¥—
—
—
—
—
—

¥(64,678)(6,372)(0)(2,252)2,206
180¥(526,706)(36,519)(118)(5,705)
8,546
587

483
¥(406,839)

179¥(78,371)(8)¥(3,135)—¥—

156¥(70,759)

811¥(559,106)

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand ﬁxtures

Total¥164,084¥201,933¥53,318¥53,413¥39,467¥44,111¥331,906¥379,553

Carrying amounts(Millions of Yen)

Balance at April 1, 2016
Balance at March 31, 2017¥40,756¥43,737¥34,279¥36,358

Taiyo Nippon Sanso Corporation | Integrated Report 201749

FYE2016 (April 1, 2015 to March 31, 2016)
Costs(Millions of Yen)

Balance at April 1, 2015
Individual acquisition
Acquisition through business combination
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2016

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand ﬁxtures¥531,217
26,00918,191(11,376)916¥127,062
4,178
1,741
(890)
(742)

¥41,699
951
2,219
(217)
(160)

Total

¥20,325
14,459
1,240
(63)
(108)

¥100,372
6,710
5,988
(2,422)(1,271)¥820,677
52,30829,382(14,970)(1,366)(16,622)¥548,336(3,370)¥127,978(621)¥43,871(1,573)¥34,279(5,232)¥104,145(27,419)¥858,612

Construction inLand
progress

Tools, furnitureand ﬁxtures

Total

Accumulated depreciation and accumulated impairment losses(Millions of Yen)

Balance at April 1, 2015
Depreciation
Impairment losses
Acquisition through business combination
Sale and disposal
Transfer
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2016

Machinery andvehiclesBuildings andstructures¥(365,610)(26,127)(1,386)(8,794)
10,696(1,836)¥(71,984)(4,705)
—
(613)
739
617

¥(2,829)
—
(267)
—
—
(6)

¥—
—
—
—
—
—

¥(63,916)(5,623)
—
(693)
2,284
1,018

¥(504,341)(36,455)(1,654)(10,101)
13,720(206)

8,806¥(384,252)

1,286¥(74,660)(11)¥(3,115)

—
¥—

2,252
¥(64,678)

12,333¥(526,706)

Machinery andvehiclesBuildings andstructures

Construction inLand
progress

Tools, furnitureand ﬁxtures

Total¥165,607¥164,084¥55,077¥53,318¥36,455¥39,467¥316,335¥331,906

Carrying amounts(Millions of Yen)

Balance at April 1, 2015
Balance at March 31, 2016

¥38,869¥40,756¥20,325¥34,279

Depreciation of property, plant and equipment is included in “Cost of sales” and “Selling, general and administrative expenses” on the
consolidated statements of proﬁt or loss.
(2) Lease assets
Carrying amounts of leased assets under ﬁnance leases included in property, plant and equipment are as follows:(Millions of Yen)

Machinery and vehicles
Other
Total

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥2,387
1,732¥4,119¥2,506
1,691¥4,197¥2,534
1,818¥4,353

10. Goodwill and Intangible Assets(1) Table of changes
Changes in costs, accumulated amortization and accumulated impairment losses, and the carrying amounts of goodwill and intangible assets
are as follows:
FYE2017 (April 1, 2016 to March 31, 2017)
Costs(Millions of Yen)
Intangible assets

Balance at April 1, 2016
Individual acquisition
Acquisition through business combination
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 201750

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Goodwill

Customer-related
intangible assets

Other

Total

¥ 82,797
208
40,855—¥29,244—
27,935—¥14,593
715
1,196
(118)

¥43,837
715
29,131(118)

1,376¥125,238

2,468¥59,648(135)¥16,252

2,333¥75,900

Accumulated amortization and accumulated impairment losses(Millions of Yen)
Intangible assets

Balance at April 1, 2016
Amortization
Impairment losses
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2017

Goodwill

Customer-related
intangible assets

Other

Total

¥(1,617)—(27)—¥(11,534)(2,645)(38)—¥ (9,476)
(924)
(46)
87

¥(21,010)(3,569)(85)87

8¥(1,636)(17)¥(14,235)(0)¥(10,359)(17)¥(24,594)

Carrying amounts(Millions of Yen)
Intangible assets

Balance at April 1, 2016
Balance at March 31, 2017

Goodwill

Customer-related
intangible assets

Other

Total

¥ 81,179¥123,602¥17,710¥45,412¥5,117¥5,892¥22,827¥51,305

FYE2016 (April 1, 2015 to March 31, 2016)
Costs(Millions of Yen)
Intangible assets

Balance at April 1, 2015
Individual acquisition
Acquisition through business combination
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2016

Goodwill

Customer-related
intangible assets

Other

Total

¥70,443325
16,843—¥30,13655
919—¥14,818
229
121
(20)

¥44,955
285
1,041
(20)

(4,815)¥82,797(1,868)¥29,244(556)¥14,593(2,424)¥43,837

Accumulated amortization and accumulated impairment losses(Millions of Yen)
Intangible assets

Balance at April 1, 2015
Amortization
Impairment losses
Sale and disposal
Exchange differences on translation of foreign
operations, etc.
Balance at March 31, 2016

Goodwill

Customer-related
intangible assets

Other

Total

¥(1,653)—(76)—¥(10,231)(2,043)——¥(8,816)(1,006)—15¥(19,047)(3,050)—15

112¥(1,617)741¥(11,534)

330¥(9,476)

1,072¥(21,010)

Carrying amounts(Millions of Yen)
Intangible assets

Balance at April 1, 2015
Balance at March 31, 2016

Goodwill

Customer-related
intangible assets

Other

Total

¥68,789¥81,179¥19,905¥17,710¥6,002¥5,117¥25,907¥22,827

There were no signiﬁcant internally generated intangible assets for
FYE2017 and FYE2016.
Amortization of intangible assets is included in “Cost of sales” and“Selling, general and administrative expenses” in the consolidated
statements of proﬁt or loss.
Research and development costs recognized as expenses for
FYE2017 and FYE2016 were ¥3,323 million and ¥3,238 million,
respectively.
The carrying amount of assets with indeﬁnite useful lives in theintangible assets above was ¥1,174 million at March 31, 2017.
Principally, the assets were trademarks acquired at the time of abusiness combination, and the TNSC Group determined that theiruseful lives cannot be estimated because the assets will exist for as
long as the business continues.
(2) Significant intangible assets
Signiﬁcant intangible assets recorded in the consolidated statements
of ﬁnancial position were customer-related intangible assets held byMatheson Tri-Gas, Inc., a consolidated subsidiary. Their carrying
amounts at March 31, 2017, March 31, 2016 and April 1, 2015 were¥41,131 million, ¥16,769 million and ¥19,705 million, respectively.
The remaining period of amortization is principally 19 years.

Taiyo Nippon Sanso Corporation | Integrated Report 201751

11. Impairment Losses
The TNSC Group groups assets into the smallest cash-generating
units that generate cash ﬂows largely independently. For idle assets,
recognition of impairment loss is determined by individual assets.
Impairment losses for FYE2017 and FYE2016 were ¥231 millionand ¥1,731 million, respectively. Impairment losses were included in“Other operating expenses” in the consolidated statements of proﬁt
or loss.
Major assets for which impairment losses were recognized are as
follows:
FYE2017 (April 1, 2016 to March 31, 2017)
There was no individually signiﬁcant impairment loss incurred for
FYE2017.

FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)
Usage

LocationType

Gas production facilities

Singapore

Machinery

Impairment losses¥1,386

Breakdown of impairment losses• Gas production facilities¥1,386 million
The carrying amount of gas production facilities was written down
to the recoverable amount of ¥95 million, since proﬁtability was
expected to decline due to changes in the business environment andfuture cash ﬂows have proven to be below the carrying amount. The
recoverable amount was measured by value in use, and calculatedby discounting the future cash ﬂows at 10.1%. Such losses were
included in the reportable segment “Gas Business in Asia & Oceania.”

Carrying amounts of goodwill and intangible assets with indeﬁnite useful lives allocated to a cash-generating unit (group of cash-generating units)
are as follows:(Millions of Yen)
Cash-generating unit
(group of cash-generating units)

Matheson Tri-Gas, Inc.
Renegade Gas Pty Ltd
Supagas Holdings Pty Ltd
Other
Total
Intangible assets with indeﬁnite useful lives at March 31, 2017 of¥1,174 million were included in Supagas Holdings Pty Ltd.
The recoverable amount of a cash-generating unit (group of
cash-generating units) is measured by value in use.
Value in use is calculated reﬂecting past experiences and external
information based on business plans within ﬁve years approved by
the management. Cash ﬂows exceeding the period of a business planare determined by reference to the long-term average growth rateof a market or a country that the cash-generating unit belongs to.

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 92,403
9,492
15,207
7,673¥124,776¥62,668
10,910—7,600¥81,179¥64,945——
3,844¥68,789

The major growth rates used for measuring the value in use for
FYE2017, FYE2016 and the Transition Date were 4.0%, 3.6% and3.6%, respectively. The major discount rates used for calculating therecoverable amount for FYE2017, FYE2016 and the Transition Date
were 8.8%, 9.7% and 9.1%, respectively.
The TNSC Group determined that it is less probable to incur
signiﬁcant impairment even if the major assumptions used in the
impairment test ﬂuctuate to a reasonably predictable extent.

12. Investments Accounted for Using the Equity Method
The carrying amount of investments in joint ventures accounted for using the equity method that are individually insigniﬁcant is as follows:(Millions of Yen)

Carrying amount of investments in joint ventures

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥1,302¥3,287¥2,491

Share of comprehensive income of joint ventures accounted for using the equity method is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥(2,112)(49)¥(2,162)¥(347)(54)¥(401)

Share of proﬁt (Note)
Share of other comprehensive income
Total share of comprehensive income

Note: For FYE2017, impairment losses of ¥1,943 million were recognized since the recoverable amount was less than the carrying amount of investments in certain
joint ventures.

The carrying amount of investments in associates accounted for using the equity method that are insigniﬁcant is as follows:(Millions of Yen)

Carrying amount of investments in associates

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥21,656¥17,582¥18,300

Share of comprehensive income of associates accounted for using the equity method is as follows:(Millions of Yen)

Share of proﬁt
Share of other comprehensive income
Total share of comprehensive income

52

Taiyo Nippon Sanso Corporation | Integrated Report 2017

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥4,510(934)¥3,576¥ 2,873(1,026)¥ 1,846

13. Other Financial Assets
A breakdown of other ﬁnancial assets is as follows:(Millions of Yen)

Equity securities and investments in capital
Other
Allowance for doubtful accounts
Total
Current assets
Non-current assets
Total

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥51,767
19,453(509)¥70,711¥ 5,533
65,178¥70,711¥47,094
19,891(406)¥66,579¥ 5,755
60,823¥66,579¥62,481
15,982(333)¥78,129¥ 5,533
72,596¥78,129

Equity securities and investments are classiﬁed as equity ﬁnancial assets measured at fair value through other comprehensive income. Otheris classiﬁed mainly as ﬁnancial assets measured at amortized cost.
Equity securities are designated as equity ﬁnancial assets measured
at fair value through other comprehensive income because they areheld mainly for the purpose of maintaining and strengthening business and collaborative relationships and ﬁnancial transaction relationships, etc. Names of issuers and fair value of principal equity ﬁnancial
assets measured at fair value through other comprehensive income
are as follows:
FYE2017 (March 31, 2017)

FYE2016 (March 31, 2016)(Millions of Yen)
Name

Amount

JFE Holdings, Inc.
Azbil Corporation
Koatsu Gas Kogyo Co., Ltd.
Tosoh Corporation
IBIDEN CO., LTD.

¥7,383
2,420
2,125
2,104
1,822

(Millions of Yen)
Name

Amount

JFE Holdings, Inc.
Tosoh Corporation
Azbil Corporation
Koatsu Gas Kogyo Co., Ltd.
IBIDEN CO., LTD.

¥4,661
4,353
3,141
2,382
2,296

Transition Date (April 1, 2015)(Millions of Yen)
Name

Amount

JFE Holdings, Inc.
Azbil Corporation
Tosoh Corporation
IBIDEN CO., LTD.
Tokyo Tatemono Co., Ltd.

¥12,926
2,738
2,695
2,684
2,235

In order to improve the efﬁciency and effective utilization of assets held, the TNSC Group conducts sales (derecognition) of equity ﬁnancial assets
measured at fair value through other comprehensive income. The fair value at the time of sales and cumulative gains or losses on sales are as
follows. Cumulative gains or losses (after tax) recognized in other comprehensive income in equity were transferred to retained earnings at thetime of sales.
(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥4,627(561)¥1,237421

Fair value
Cumulative gains or losses

For equity ﬁnancial assets measured at fair value through other comprehensive income, dividends received were recognized as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

Financial assets that were derecognized
Financial assets held at the end of the ﬁscal year

FYE2016(April 1, 2015 to March 31, 2016)

¥ 63
935

¥

17
1,096

14. Other Assets
A breakdown of other assets is as follows:(Millions of Yen)

Prepaid expenses
Other
Total
Current assets
Non-current assets
Total

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥5,6632,871¥8,535¥7,826709¥8,535¥3,5042,544¥6,049¥5,354694¥6,049¥2,898
4,825¥7,723¥7,080643¥7,723

Taiyo Nippon Sanso Corporation | Integrated Report 201753

15. Trade Payables
A breakdown of trade payables is as follows:(Millions of Yen)FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥73,046¥73,046¥72,743¥72,743¥76,896¥76,896

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 34,973
43,747
10,000208,833
55,000¥352,553¥ 88,720
263,833¥352,553¥ 32,399
51,72810,000130,174
35,000¥259,302¥ 94,127
165,174¥259,302¥ 23,246
41,442—
144,141
45,000¥253,830¥ 64,689
189,141¥253,830

Notes and accounts payable—trade
Total
Trade payables are classiﬁed as ﬁnancial liabilities measured at amortized cost.

16. Bonds and Borrowings
A breakdown of bonds and borrowings is as follows:(Millions of Yen)

Short-term borrowings
Current portion of long-term borrowings
Current portion of bonds
Long-term borrowings
Bonds
Total
Current liabilities
Non-current liabilities
Total

Bonds and borrowings are classiﬁed as ﬁnancial liabilities measured at amortized cost.
Average interest rates applicable to short-term borrowings and long-term borrowings at March 31, 2017 were 1.61% and 1.50%, respectively.
Average interest rates applicable to short-term borrowings and long-term borrowings at March 31, 2016 were 1.41% and 1.51%, respectively.
Average interest rates applicable to short-term borrowings and long-term borrowings at April 1, 2015 were 1.18% and 1.45%, respectively.
The repayment term of long-term borrowings at March 31, 2017 is from 2017 to 2035.
A breakdown of bonds is as follows:(Millions of Yen)
Company
name

*1

*1

*1

*1

*1

*1

Name

The 9th Domestic
Unsecured Straight
Corporate Bonds
The 10th Domestic
Unsecured Straight
Corporate Bonds
The 11th Domestic
Unsecured Straight
Corporate Bonds
The 12th Domestic
Unsecured Straight
Corporate Bonds
The 13th Domestic
Unsecured Straight
Corporate Bonds
The 14th Domestic
Unsecured Straight
Corporate Bonds
Total

Issuance date

FYE2017(March 31, 2017)

February 29,
2012

¥

—

¥10,000¥10,000

0.55

None

February 28,
2017

June 14,2012

10,00010,00010,0000.44

None

June 14,2017

February 27,
2014

15,00015,00015,0000.32

None

February 27,
2019

February 27,
2014

10,00010,00010,0000.56

None

February 26,
2021

December 15,
2016

15,000

—

—

0.14

None

December 15,
2021

15,000¥65,000—¥45,000—¥45,000

0.39

None

December 15,
2026

December 15,
2016

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

Interest rate(%)

Collateral

Maturity date

*1 The bonds were issued by the Company.

Assets pledged as collateral and secured obligations are as follows:
Assets pledged as collateral(Millions of Yen)

Property, plant and equipment
Total

54

Taiyo Nippon Sanso Corporation | Integrated Report 2017

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥1,468¥1,468

¥102
¥102

¥472
¥472

Secured obligations(Millions of Yen)FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

¥906
73
¥980

¥—
18
¥18

¥10
31
¥41

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 6,975
21,1693,699
3,931¥35,775¥30,152
5,622¥35,775¥ 8,633
19,535
4,589
2,643¥35,401¥28,270
7,130¥35,401¥ 6,535
18,5703,767
2,767¥31,641¥25,489
6,152¥31,641

Bonds and borrowings
Other ﬁnancial liabilities (current)
Total

17. Other Financial Liabilities
A breakdown of other ﬁnancial liabilities is as follows:(Millions of Yen)

Lease liabilities
Accrued expenses
Accounts payable—other
Other
Total
Current liabilities
Non-current liabilities
Total

Other ﬁnancial liabilities are mainly classiﬁed as ﬁnancial liabilities measured at amortized cost.

18. Lease Transactions(1) Finance leases
Minimum lease payments and their present value are as follows:(Millions of Yen)

Minimum
lease
payments

One year or lessMore than one year but
within ﬁve years
More than ﬁve years
Total

FYE2017(March 31, 2017)
FutureﬁnancePresent
chargesvalue

Minimum
lease
payments

FYE2016(March 31, 2016)
FutureﬁnancePresent
chargesvalue

Transition Date
(April 1, 2015)
Minimum
lease
payments

Futureﬁnancecharges

Present
value¥2,500¥(125)¥2,374¥3,013¥(193)¥2,820¥1,953¥(108)¥1,844

4,071
707¥7,279(152)(26)¥(304)

3,919
681¥6,975

5,415
794¥9,224(333)(63)¥(590)

5,081
731¥8,633

4,074
808¥6,836(148)(42)¥(300)

3,925
766¥6,535(2) Operating leases
Future minimum lease payments under non-cancellable operating lease contracts are as follows:(Millions of Yen)

One year or lessMore than one year but within ﬁve years
More than ﬁve years
Total

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 3,193
7,082
2,845¥13,120¥ 2,732
7,874
3,109¥13,716¥ 2,317
6,485
2,785¥11,588

Lease payments recognized as expenses for FYE2017 and FYE2016 were ¥4,415 million and ¥5,344 million, respectively.

19. Post-employment Benefits
The Company and certain consolidated subsidiaries have funded andunfunded retirement deﬁned beneﬁt plans and deﬁned contributionplans for employees’ retirement beneﬁts, and the plans coversubstantially all the employees.
(1) Defined benefit plans
Major deﬁned beneﬁt plans of the Company’s consolidated subsidiaries are cash balance plans. Amounts of beneﬁts under the cash balance plans are set based on various conditions such as years ofservice, points based on achievements during the service period, etc.

The investment yield is determined taking into consideration the yieldon government bonds.
In accordance with laws and regulations, the pension plans aremanaged by the Company’s consolidated subsidiaries or a pension
fund that is legally separate from the Company’s consolidated subsidiaries. The Company’s consolidated subsidiaries, or the Board of
Directors of the pension fund and the trustees of pension fund management are required by laws and regulations to act in the best interest of policyholders, and responsible for operating plan assets basedon the prescribed policies.

Taiyo Nippon Sanso Corporation | Integrated Report 201755

Amounts of deﬁned beneﬁt plans in the consolidated statements of ﬁnancial position are as follows:(Millions of Yen)

Present value of deﬁned beneﬁt obligations
Fair value of plan assets
Net amount of deﬁned beneﬁt asset
Retirement beneﬁt liability
Retirement beneﬁt asset
Net amount of deﬁned beneﬁt asset

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 32,694(36,921)¥ (4,226)¥ 4,216(8,443)¥ (4,226)¥ 33,942(35,926)¥ (1,984)¥ 4,515(6,499)¥ (1,984)¥ 32,944(37,554)¥ (4,610)¥ 4,281(8,891)¥ (4,610)

For deﬁned beneﬁt plans, amounts recognized as expenses in the consolidated statements of proﬁt or loss are as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥1,398174(141)¥1,432¥1,485286(172)¥1,599Current service cost
Interest expenses
Interest income
Total
Changes related to the present value of deﬁned beneﬁt obligations are as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥33,942
1,398
174¥32,944
1,485
286

(594)
(2,097)(129)¥32,694

1,135(1,909)—¥33,942

Balance at beginning of the ﬁscal year
Current service cost
Interest expenses
Remeasurements
Actuarial gains and losses arising from changes in ﬁnancial assumptions
Retirement beneﬁts paid
Other
Balance at end of the ﬁscal year
Changes related to the fair value of plan assets are as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥35,926
141¥37,554
172

1,538
981
(1,847)
180¥36,921(1,430)1,256(1,627)—¥35,926

Balance at beginning of the ﬁscal year
Interest income
Remeasurements
Return on plan assets
Contributions from companies
Retirement beneﬁts paid
Other
Balance at end of the ﬁscal year

Major actuarial assumptions used to calculate the present value of deﬁned beneﬁt obligations are as follows:

Discount rate

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

0.66%

0.56%

1.04%

If discount rates, the major actuarial assumptions, ﬂuctuate, the present values of deﬁned beneﬁt obligations at March 31, 2017 and March
31, 2016 change as follows. This sensitivity analysis is based on the assumption that all actuarial assumptions other than actuarial assumptions
subject to analysis remain constant.
(Millions of Yen)

Increase by 0.5%
Decrease by 0.5%

56

Taiyo Nippon Sanso Corporation | Integrated Report 2017

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)(1,563)
1,705(1,560)1,707

Fair values of plan assets at March 31, 2017 are as follows:(Millions of Yen)
Plan assets for which there
are quoted market prices
in an active market

Cash and cash equivalents
Equity ﬁnancial instruments
Domestic equity securities
Jointly managed trusts
Total equity ﬁnancial instruments
Debt ﬁnancial instruments
Jointly managed trusts
Total debt ﬁnancial instruments
Life insurance general accounts
Other
Total

¥4,236

Plan assets for which there
are no quoted market prices
in an active market

¥

Total

—

¥ 4,236

5,153
—
5,153

—
5,872
5,872

5,153
5,872
11,025————¥9,3909,718
9,718
11,886
53¥27,530

9,718
9,718
11,88653¥36,921

Plan assets for which there
are quoted market prices
in an active market

Plan assets for which there
are no quoted market prices
in an active market

Fair values of plan assets at March 31, 2016 are as follows:(Millions of Yen)

Cash and cash equivalents
Equity ﬁnancial instruments
Domestic equity securities
Jointly managed trusts
Total equity ﬁnancial instruments
Debt ﬁnancial instruments
Jointly managed trusts
Total debt ﬁnancial instruments
Life insurance general accounts
Total¥3,588

¥

Total

—

¥ 3,588

4,022
—
4,022

—
1,745
1,745

4,022
1,745
5,767

—
—
—
¥7,61014,541
14,541
12,029¥28,315

14,541
14,541
12,029¥35,926

Plan assets for which there
are quoted market prices
in an active market

Plan assets for which there
are no quoted market prices
in an active market

Fair values of plan assets at April 1, 2015 are as follows:(Millions of Yen)

Cash and cash equivalents
Equity ﬁnancial instruments
Domestic equity securities
Jointly managed trusts
Total equity ﬁnancial instruments
Debt ﬁnancial instruments
Jointly managed trusts
Total debt ﬁnancial instruments
Life insurance general accounts
Other
Total

¥ 749

¥

—

Total

¥

749

5,326
—
5,326

—
4,066
4,066

5,326
4,066
9,392

—
—
—
—
¥6,075

12,275
12,275
11,8003,336¥31,479

12,275
12,275
11,8003,336¥37,554

Under the TNSC Group’s plan asset management policy, the purpose of management is to secure the required combined returns
over the medium and long term to the extent of allowable risks inorder to ensure payments of the beneﬁts of the deﬁned beneﬁt
obligations in the future.
For plan assets, the TNSC Group seeks to reduce risks by diversifying investments widely in domestic and foreign equity securities,
debt securities and life insurance general accounts based on asset
allocation objectives of a policy asset mix formulated to achieve
management objectives.

For asset allocation, the TNSC Group sets the allocation to be
maintained for the medium and long term, based on the correlation
between expectations of risks and returns for the medium and longterm and actual management results of each asset. The TNSC Group
reviews asset allocation according to the situation as necessary, suchas when there is a signiﬁcant change in the market environment.
For FYE2018, the TNSC Group plans to contribute ¥1,039 million
to plan assets.
The weighted average durations of the deﬁned beneﬁt obligation atMarch 31, 2017, March 31, 2016 and April 1, 2015 were 12.2 years,
12.0 years and 12.7 years, respectively.

(2) Defined contribution plans and public pension systems
Amounts recognized as expenses under deﬁned contribution plans and public pension systems are as follows:(Millions of Yen)

Expenses under deﬁned contribution plans
Expenses under public pension systems

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥1,6413,870¥2,065
3,586

Taiyo Nippon Sanso Corporation | Integrated Report 201757

20. Provisions
A breakdown of changes in provisions is as follows:
FYE2017 (April 1, 2016 to March 31, 2017)(Millions of Yen)

Balance at April 1, 2016
Increase during the ﬁscal year
Decrease during the ﬁscal year (intended use)
Decrease during the ﬁscal year (reversal)
Other
Balance at March 31, 2017
Current liabilities
Non-current liabilities
Total

Provision for
construction warranties

Asset retirement
obligations

Other provisions

Total

¥ 616
170
(226)
(88)
—
¥ 471
¥ 471
—
¥ 471

¥ 594
4,999
(73)
—
338
¥5,859¥—5,859¥5,859

¥102
22
(60)
(0)
—
¥ 63
¥ 63
—
¥ 63

¥1,313
5,191
(360)
(89)
338
¥6,394¥ 534
5,859¥6,394

Provision for
construction warranties

Asset retirement
obligations

Other provisions

Total

¥ 340
596
(313)
(7)
—
¥ 616
¥ 616
—
¥ 616

¥1,026
286
(620)
—
(97)
¥ 594
¥
—
594
¥ 594

¥ 48
102
—
(48)
—
¥102
¥102
—
¥102

¥1,415
985
(934)
(56)
(97)
¥1,313¥ 718
594¥1,313

FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)

Balance at April 1, 2015
Increase during the ﬁscal year
Decrease during the ﬁscal year (intended use)
Decrease during the ﬁscal year (reversal)
Other
Balance at March 31, 2016
Current liabilities
Non-current liabilities
Total

Provision for construction warranties
In order to prepare for construction-related compensation expenses
for machinery and device products, provision for construction warranties is recorded based on the latest estimated amount of compensation based on shipment amounts of machinery and device
products in the previous ﬁscal year. Of these, amounts expected tobe paid within one year are recorded. However, there is uncertainty inthe occurrence of construction-related compensation expenses.

Asset retirement obligations
If the TNSC Group has legal obligations required by laws andregulations or contracts concerning retirement of ﬁxed assets that areused for the ordinary course of business, such as obligations to
restore the original condition accompanying lease contracts of factory facilities and properties used by the TNSC Group, asset retirement obligations are recognized based on the estimated amount of
future expenditures calculated based on historical results, etc.
Although these expenses are expected to be paid mainly after one
year or more, they will be affected by future business plans, etc.

21. Other Liabilities
A breakdown of other liabilities is as follows:(Millions of Yen)

Advances received
Deferred income
Employees’ bonuses
Employees’ paid absence
Other
Total
Current liabilities
Non-current liabilities
Total

58

Taiyo Nippon Sanso Corporation | Integrated Report 2017

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥ 4,840
4,716
3,483
2,310
13,290¥28,641¥14,858
13,783¥28,641¥ 4,566
4,220
3,691
2,205
10,629¥25,312¥12,899
12,413¥25,312¥ 4,190
—
3,326
1,989
13,384¥22,890¥14,4258,464¥22,89022. Equity(1) Share capital and treasury shares
Numbers of shares authorized and shares issued are as follows:(Thousand shares)
FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)

1,600,000

1,600,000

433,092—
433,092

433,092—
433,092

Number of shares authorized
Number of shares issued
Beginning of the ﬁscal year
Changes during the ﬁscal year
End of the ﬁscal year
All shares are ordinary shares with no par value. Shares issued are fully paid.
Changes in the number of treasury shares during the ﬁscal year are as follows:(Thousand shares)
FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)

323
4
0
328

314
9
0
323

Beginning of the ﬁscal year
Increase
Decrease
End of the ﬁscal year

Major factors of changes during the ﬁscal year were due to the purchase or requests for sales of shares less than one unit.
(2) Capital surplus and retained earnings
Capital surplus consists of amounts not included in share capital aspart of the amounts arising from capital transactions, and the main
component is capital reserve. Retained earnings consist of legal
retained earnings and other reserves.
The Companies Act of Japan stipulates that more than one-half of
payments or delivery in relation to the issuance of shares shall be
included in share capital, and the remaining shall be included in capital reserve. Capital reserve may be incorporated into share capital byresolutions of the shareholders’ meeting.
In addition, the Act stipulates that one-tenth of the amount to be
paid as cash dividends from surplus shall be appropriated as capitalreserve or legal retained earnings until the total amount of capitalreserve and legal retained earnings equals one-fourth of sharecapital.
The accumulated legal retained earnings may be used to eliminate
or reduce a deﬁcit, and the legal retained earnings may be reversedby resolution of the shareholders’ meeting.

(3) Other components of equity
Other components of equity are as follows:(Exchange differences on translation of foreign operations)Exchange differences on translation of foreign operations are translation differences arising when consolidating the ﬁnancial statements offoreign operations prepared in foreign currencies.
(Effective portion of net change in fair value of cash flow hedges)
The effective portion of net change in fair value of cash ﬂow hedges
is the cumulative amount of the effective portion of hedges as part ofgains or losses arising from changes in fair value of the hedging
instrument related to cash ﬂow hedges.
(Financial assets measured at fair value through othercomprehensive income)
Other components of equity include valuation differences in fairvalue of ﬁnancial assets measured at fair value through othercomprehensive income.
(Remeasurements of defined benefit plans)Remeasurements of deﬁned beneﬁt plans are the effect of differences
between actuarial assumptions at the beginning of the ﬁscal year andthe actual results and the effect of changes in actuarial assumptions.
These are recognized in other comprehensive income when incurred,and immediately transferred from other components of equity toretained earnings.

23. Dividends
Payments of dividends are as follows:
FYE2017 (April 1, 2016 to March 31, 2017)
Resolution

Type of stock

Ordinary General Meeting of
Shareholders held on June 21, 2016
Board of Directors’ meeting held on
November 2, 2016

OrdinarysharesOrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥3,896¥9March 31, 2016

June 22, 2016

3,896

9 September 30, 2016

December 1, 2016

FYE2016 (April 1, 2015 to March 31, 2016)
Resolution

Type of stock

Ordinary General Meeting of
Shareholders held on June 23, 2015
Board of Directors’ meeting held on
November 4, 2015

OrdinarysharesOrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥3,030¥7

March 31, 2015

June 24, 2015

3,030

7 September 30, 2015

December 1, 2015

Taiyo Nippon Sanso Corporation | Integrated Report 2017

59

The dividends of whose effective date falls in the next ﬁscal year are as follows:
FYE2017 (April 1, 2016 to March 31, 2017)
Resolution

Type of stock

Ordinary General Meeting of
Shareholders held on June 20, 2017

OrdinarysharesTotal cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥4,762¥11

March 31, 2017

June 21, 2017

Total cash dividends(Millions of Yen)

Dividends per share(Yen)

Record date

Effective date

¥3,896¥ 9

March 31, 2016

June 22, 2016

FYE2016 (April 1, 2015 to March 31, 2016)
Resolution

Type of stock

Ordinary General Meeting of
Shareholders held on June 21, 2016

Ordinaryshares

24. Other Comprehensive Income
Changes in each item in other comprehensive income during the year are as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥ 7,952(2,418)5,534¥(10,824)
3,766(7,058)

2,132
(569)
1,563

(2,565)759(1,806)

(787)
(787)

(14,810)(14,810)

36
350
(119)
268

(432)
947
(181)
333

(983)
(983)
¥ 5,594(1,080)(1,080)¥(24,422)

Financial assets measured at fair value through other comprehensive
incomeAmount arising during the ﬁscal year
Tax effects
Net amountRemeasurements of deﬁned beneﬁt plans
Amount arising during the ﬁscal year
Tax effects
Net amount
Exchange differences on translation of foreign operations
Amount arising during the ﬁscal year
Net amount
Effective portion of net change in fair value of cash ﬂow hedges
Amount arising during the ﬁscal year
Reclassiﬁcation adjustments
Tax effects
Net amount
Share of other comprehensive income of investments accounted for using
the equity method
Amount arising during the ﬁscal year
Net amount
Total other comprehensive income

25. Employee Benefit Expenses
Employee beneﬁt expenses other than post-employment beneﬁts are as follows:(Millions of Yen)

Wages and salaries
Social security contributions
Total

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥86,426
7,180¥93,607¥79,328
6,926¥86,255

26. Other Operating Income and Other Operating Expenses
A breakdown of other operating income is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

Gain on step acquisition
Grant income
Gain on sales of property, plant and equipment
Other
Total

60

Taiyo Nippon Sanso Corporation | Integrated Report 2017

¥

—
90
1,142
1,338
¥2,571FYE2016(April 1, 2015 to March 31, 2016)¥1,813
711
327
1,595
¥4,448

A breakdown of other operating expenses is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)

¥ 231
420
89
1,501
¥2,241¥1,731
1,122
711
1,115
¥4,680

Impairment losses
Loss on retirement and sales of property, plant and equipment
Loss on reduction of property, plant and equipment
Other
Total

27. Finance Income and Finance Costs
A breakdown of ﬁnance income is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)

¥ 273

¥ 202

998
158
¥1,4291,113—¥1,316

Interest income
Financial assets measured at amortized cost
Dividend income
Financial assets measured at fair value through othercomprehensive income
Other
Total
A breakdown of ﬁnance costs is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥4,484255
178¥4,918¥3,6613
0¥3,665Interest expenses
Financial liabilities measured at amortized cost
Foreign exchange losses
Other
Total

28. Income Taxes(1) Deferred tax assets and deferred tax liabilities
Major factors giving rise to deferred tax assets and deferred tax liabilities and their changes are as follows:
FYE2017 (April 1, 2016 to March 31, 2017)(Millions of Yen)

Recognized in
proﬁt or loss

Recognized inothercomprehensive
income¥ 2,203
4,201
2,144
2,189
4,579
15,319¥¥(4,603)(32,093)(3,749)(6,062)(46,509)¥(31,190)—(3,071)(485)(537)(4,094)¥(2,566)

April 1, 2016

Deferred tax assets
Employees’ bonuses
Accrued expenses
Property, plant and equipment (excess depreciation, etc.)
Unrealized gains (inventories and property, plant and equipment)
Other
Total
Deferred tax liabilities
Securities and other investments
Property, plant and equipment (excess depreciation, etc.)
Retained earnings of overseas consolidated subsidiaries, etc.
Other
Total
Net deferred tax liabilities

62
287
60
(72)
1,190
1,527

Other
(Note 1) March 31, 2017

—
—
—
—
(86)
(86)

¥ —
—
—
—
1
1

¥ 2,266
4,489
2,204
2,117
5,684
16,762(2,582)——(437)(3,020)¥(3,106)

—
—
—
759
759
¥760

(7,186)(35,164)(4,235)(6,277)(52,864)¥(36,102)

Taiyo Nippon Sanso Corporation | Integrated Report 2017

61

FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)
Recognized inothercomprehensive
incomeApril 1, 2015

Recognized in
proﬁt or loss

¥ 2,100
4,220
2,191
2,279
3,977
14,768

¥ 102
(18)
(48)
(89)
715
662

¥

(8,423)(33,933)(3,383)(4,551)(50,291)¥(35,523)

—
(68)
(366)
(215)
(651)
¥ 11

3,744
—
—
487
4,232
¥4,343

Deferred tax assets
Employees’ bonuses
Accrued expenses
Property, plant and equipment (excess depreciation, etc.)
Unrealized gains (inventories and property, plant and equipment)
Other
Total
Deferred tax liabilities
Securities and other investments
Property, plant and equipment (excess depreciation, etc.)
Retained earnings of overseas consolidated subsidiaries, etc.
Other
Total
Net deferred tax liabilities

—
—
—
—
111
111

Other
(Note 1) March 31, 2016

¥

—
—
2
—
(225)
(222)

¥ 2,203
4,201
2,144
2,189
4,579
15,31975
1,909—(1,783)201¥ (21)(4,603)(32,093)(3,749)(6,062)(46,509)¥(31,190)

Note 1: Other includes exchange differences on translation of foreign operations.

For recognition of deferred tax assets, the TNSC Group considers
the possibility that some or all deductible temporary differences will
be available for future taxable income. For the assessment of therecoverability of deferred tax assets, the TNSC Group considers theplanned reversal of deferred tax liabilities, projected future taxable
income and tax planning. For deferred tax assets recognized, the
TNSC Group believes that it is probable the tax beneﬁts will be

realized based on historical taxable income levels and the projectionof future taxable income during periods when deferred tax assets
may be deducted.
Deductible temporary differences for which deferred tax assets
have not been recognized at March 31, 2017, March 31, 2016 andApril 1, 2015 were ¥14,217 million, ¥15,094 million and ¥12,472
million, respectively.

(2) Income taxes
A breakdown of income taxes is as follows:(Millions of Yen)

Current income taxes
Deferred income taxes
Total

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥11,396
2,566¥13,963¥16,080(11)¥16,069(3) Table of reconciliation of effective tax rates
The Company is mainly subject to corporate income tax, inhabitant tax and enterprise tax. The statutory tax rates based on these taxes for
FYE2017 and FYE2016 were 30.86% and 33.06%, respectively. Overseas subsidiaries are subject to the corporate income tax, etc. of theirlocation.
A breakdown of major items that caused differences between the statutory tax rate and the effective tax rate is as follows:

Statutory tax rate
Permanently non-deductible or non-taxable items
Unrecognized deferred tax assets
Differences in tax rates for overseas consolidated subsidiaries
Retained earnings of overseas consolidated subsidiaries, etc.
Share of proﬁt of investments accounted for using the equity method
Reversal of deferred tax liabilities of overseas consolidated subsidiaries
Other
Effective tax rates

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)30.86%
0.41
0.10
0.30
0.97
(1.60)(2.24)(0.97)
27.83%

33.06%
0.38
0.90
0.65
0.78
(2.00)—
0.72
34.50%

FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥34,740
432,766¥80.28¥29,030
432,774¥67.0829. Earnings Per Share
Basic earnings per share and the basis of calculation are as follows:

Proﬁt attributable to owners of parent (Millions of Yen)
Average number of shares during the ﬁscal year (Thousand shares)
Basic earnings per share (Yen)
Note: Diluted earnings per share are not presented as there are no dilutive potential shares.

62

Taiyo Nippon Sanso Corporation | Integrated Report 201730. Financial Instruments(1) Equity management
The TNSC Group manages equity aiming at maximizing corporate value through sustainable growth. The major indices used by the Company inequity management are return on capital employed (ROCE) and net D/E ratio.
FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)

8.4%
0.87

8.1%
0.67

—
0.64

Return on capital employed (ROCE) (Note 1)
Net D/E ratio (Note 2)

Note 1: Core operating proﬁt / invested capital (average of the beginning and the end of the ﬁscal year)
Invested capital refers to total of interest-bearing liabilities and equity attributable to owners of parent.
Note 2: Net interest-bearing liabilities / equity attributable to owners of parent
Net interest-bearing liabilities refer to interest-bearing liabilities less cash and cash equivalents.

(2) Matters related to risk management
The TNSC Group is exposed to ﬁnancial risks in the course of conducting business activities in various countries and regions throughout a wide range of ﬁelds. In order to reduce or avoid such risks, the
TNSC Group manages risks based on certain policies, etc.
In addition, derivative transactions are used to hedge currency
ﬂuctuation risk or interest rate ﬂuctuation risk. In principle, derivativetransactions are only conducted based on actual demand and notused for speculative purposes.
(3) Credit risk
Trade receivables, etc., which are receivables arising from the TNSCGroup’s business activities, are exposed to the credit risk of customers. In addition, derivative transactions that the TNSC Group uses tohedge ﬁnancial risks are exposed to the credit risk of ﬁnancial
institutions that are counterparties to the transactions.

In accordance with internal policies of each Group company, suchas credit management regulations, the TNSC Group monitors due
dates and outstanding balances of individual customers and establishes a system to periodically assess credit status. The TNSC Group
thereby aims to early identify and alleviate collection concerns due toa deteriorating ﬁnancial situation. In addition, derivative transactions
are limited to ﬁnancial institutions with high creditworthiness in orderto minimize counterparties’ credit risk related to contract default.
The TNSC Group records allowance for doubtful accounts at an
unrecoverable amount for individually signiﬁcant ﬁnancial assets, andat an amount based on historical experience, etc. for individuallyinsigniﬁcant ﬁnancial assets, at the end of each ﬁscal year. Allowancefor doubtful accounts related to such ﬁnancial assets is included in“Trade receivables” and “Other ﬁnancial assets” in the consolidated
statements of ﬁnancial position.

Allowance for doubtful accounts is as follows. Since the amount of expected credit losses for 12 months is not material, it is added to the
expected credit losses for the entire period.
(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥2,470
992
(538)
(421)
(8)
¥2,495¥2,416
584
(226)
(231)
(72)
¥2,470

Balance at beginning of the ﬁscal year
Increase during the ﬁscal year
Decrease during the ﬁscal year (intended use)
Decrease during the ﬁscal year (reversal)
Other
Balance at end of the ﬁscal year

The maximum exposure to credit risk of ﬁnancial assets is the carrying amount after impairment that is presented in the consolidated ﬁnancial
statements.
(4) Liquidity risk
The TNSC Group’s trade payables and borrowings, etc. are exposed to liquidity risk. The TNSC Group manages the risk by preparing cash
management plans and secures liquidity by establishing commitment lines with several ﬁnancial institutions.
Balances of ﬁnancial liabilities (including derivative instruments) by due date are as follows:
FYE2017 (March 31, 2017)(Millions of Yen)

Non-derivative ﬁnancial liabilities
Trade payables
Accounts payable—other
Short-term borrowings
Long-term borrowings
Bonds
Lease liabilities
Accrued expenses
Other
Derivative liabilities
Forward exchange contracts
Currency swaps
Interest rate swaps

Carrying
amountUndiscounted
contractual
cash ﬂows

One yearor less¥ 73,046
3,699
34,973
252,580
65,0006,975
21,1693,676¥ 73,046
3,699
34,973
252,580
65,0007,279
21,1693,676¥73,046
3,699
34,97343,747
10,0002,500
21,169
2,728

86
2
166

86
2
171

86
0
70

More than
one year
but within
two years¥———
39,112
15,000
1,789
—
1
—
0
69

More than
two years
but within
three years

¥

—
—
—
57,989
—
1,596
—
228
—
0
25

More than
three years
but withinfour years

¥

—
—
—
53,792
10,000
453
—
1
—
0
5

More thanfour years
but within
ﬁve years

More thanﬁve years

¥

¥

—
—
—
35,14015,000
231
—
14
—
0
0

—
—
—
22,79815,000
707
—
700
—
0
0

Taiyo Nippon Sanso Corporation | Integrated Report 2017

63

FYE2016 (March 31, 2016)(Millions of Yen)

Non-derivative ﬁnancial liabilities
Trade payables
Accounts payable—other
Short-term borrowings
Long-term borrowings
Bonds
Lease liabilities
Accrued expenses
Other
Derivative liabilities
Forward exchange contracts
Interest rate swaps

More than
one year
but within
two years

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
ﬁve years

Carrying
amountUndiscounted
contractual
cash ﬂows

One yearor less¥ 72,743
4,589
32,399181,903
45,0008,633
19,535
1,953¥ 72,743
4,589
32,399181,903
45,0009,224
19,535
1,953¥72,743
4,589
32,39951,72810,0003,013
19,535
979

215
474

215
373

215
131

—
158

—
50

—
27

—
5

More than
one year
but within
two years

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
ﬁve years

More thanﬁve years

¥

¥

¥

—
—
—
35,87410,000
2,256
—
1

¥

—
—
—
23,71915,000
1,404
—
1

¥

—
—
—
30,110
—
1,020
—
199

More thanﬁve years¥———
30,59810,000
734
—
1

¥

—
—
—
9,871
—
794
—
768
—
—

Transition Date (April 1, 2015)(Millions of Yen)

Non-derivative ﬁnancial liabilities
Trade payables
Accounts payable—other
Short-term borrowings
Long-term borrowings
Bonds
Lease liabilities
Accrued expenses
Other
Derivative liabilities
Forward exchange contracts
Currency swaps
Interest rate swaps

Carrying
amountUndiscounted
contractual
cash ﬂow

One yearor less¥ 76,896
3,767
23,246
185,583
45,0006,535
18,5701,719¥ 76,896
3,767
23,246
185,583
45,0006,836
18,5701,719¥76,896
3,382
23,24641,442—
1,953
18,570
758

719
14
319

719
14
456

719
14
231

¥

—
385
—
50,87010,000
1,917
—
—

¥

—
—
—
31,813
10,000
1,284
—
1

—
—
97

—
—
64

¥

—
—
—
22,072
15,000
530
—
1

—
—
—
27,959
—
340
—
187

—
—
39

—
—
—
11,42410,000
808
—
770

—
—
19

—
—
4

Unused overdraft agreements and loan commitment lines are as follows:(Millions of Yen)

Unused overdraft agreements and loan commitment lines

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥60,728¥48,374¥53,877(5) Currency risk
Receivables and payables denominated in foreign currencies arising from the TNSC Group’s global business development are exposed to therisk of exchange rate ﬂuctuations. The TNSC Group hedges trade receivables and payables denominated in foreign currencies, borrowings, andloans by using forward exchange contracts and currency swaps as necessary.
Currency sensitivity analysis
The following is the impact on proﬁt before income taxes on the consolidated statements of proﬁt or loss from the foreign currency ﬁnancial
instruments held by the TNSC Group at the end of the ﬁscal year, if the yen appreciates by 1% against the U.S. dollar and Euro, respectively, atthe end of the ﬁscal year.
This analysis is calculated by multiplying each exposure of currency risk by 1%. It is assumed that there is no impact of the ﬂuctuation of eachexchange rate on other variables (foreign exchange rates of other currencies, interest rates, etc.).
(Millions of Yen)

U.S. dollar (1% appreciation of the yen)Euro (1% appreciation of the yen)

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

¥(1)
(0)

¥ (0)
(14)

(6) Interest rate risk
The TNSC Group’s interest rate risk arises from interest-bearing liabilities, net of cash equivalents, etc. Borrowings and corporate bonds that are
based on ﬂoating interest rates are exposed to interest rate ﬂuctuation risk.
The TNSC Group hedges such risks by using derivative transactions (interest rate swaps) as necessary.
Interest rate sensitivity analysis
The following is the impact on proﬁt before income taxes on the consolidated statements of proﬁt or loss if the interest rate rises by 1% forﬁnancial instruments held by the TNSC Group at the end of the ﬁscal year.

64

Taiyo Nippon Sanso Corporation | Integrated Report 2017

This analysis is intended for ﬁnancial instruments impacted by ﬂuctuations in interest rates, and it is assumed that other factors, such as theimpact of exchange rate ﬂuctuations, remain constant.
(Millions of Yen)FYE2017(March 31, 2017)

FYE2016(March 31, 2016)¥(760)¥(667)

Proﬁt before income taxes(7) Risk of market price fluctuations
Securities, etc. held by the TNSC Group are exposed to the risk of market price ﬂuctuations.
The TNSC Group periodically evaluates the fair value and the ﬁnancial status of issuers (business partners) for securities, etc., and eachsupervising department reviews the holding status taking into consideration the relationship with the business partners on an ongoing basis.
(8) Fair value of financial instruments
For fair value hierarchy of ﬁnancial instruments, Level 1 to Level 3 is categorized as follows:
Level 1: Fair value measured by the unadjusted quoted prices in active markets of identical assets or liabilities
Level 2: Fair value calculated using an observable prices directly or indirectly, other than Level 1
Level 3: Fair value calculated by valuation techniques including inputs not based on signiﬁcant observable market data
Transfers between levels of ﬁnancial instruments are determined at the end of each reporting period. There were no ﬁnancial instruments withsigniﬁcant transfers between levels for FYE2017 and FYE2016.
1) Financial instruments measured at fair value on a recurring basis
Financial instruments measured at fair value are as follows:
FYE2017 (March 31, 2017)(Millions of Yen)

AssetsEquity securities and investments in capital
Derivative assets
Total
Liabilities
Derivative liabilities
Total

Level 1

Level 2

Level 3

Total

¥35,218—¥35,218

¥ —
214
¥214

¥16,548—¥16,548¥51,767
214¥51,982

¥
¥

—
—

¥255
¥255

¥
¥

¥
¥

Level 1

Level 2

Level 3

Total

¥30,728—¥30,728

¥ —
124
¥124

¥16,366—¥16,366¥47,094124¥47,218

¥
¥

—
—

¥690
¥690

¥
¥

¥
¥

Level 1

Level 2

—
—

255
255

FYE2016 (March 31, 2016)(Millions of Yen)

AssetsEquity securities and investments in capital
Derivative assets
Total
Liabilities
Derivative liabilities
Total

—
—

690
690

Transition Date (April 1, 2015)(Millions of Yen)

AssetsEquity securities and investments in capital
Derivative assets
Total
Liabilities
Derivative liabilities
Total¥41,672—¥41,672¥¥¥¥1,047¥1,047

—
—

¥

—
55
55

Level 3

Total

¥20,809—¥20,809¥62,48155¥62,536¥¥¥ 1,047¥ 1,047——

Equity securities and investments in capital
The fair value of marketable equity securities categorized as Level 1 is based on unadjusted quoted prices in active markets of identical assets or
liabilities.
The fair value of unlisted stocks categorized as Level 3, for which quoted prices are not available in active markets, is calculated using thesimilar company comparison method or other appropriate valuation techniques based on reasonably available inputs. In addition, certain
illiquidity discounts, etc. are added as necessary.
Derivative assets and liabilities
The fair value of derivative assets and derivative liabilities categorized as Level 2 is calculated based on observable inputs such as prices
provided by counterparty ﬁnancial institutions or exchange rates and interest rates.

Taiyo Nippon Sanso Corporation | Integrated Report 201765

For ﬁnancial instruments categorized as Level 3, the evaluator determines the valuation techniques to measure each ﬁnancial instrument
covered in accordance with valuation policies and procedures including valuation techniques to measure fair value approved by the appropriate
authorized person, and the fair value is calculated. The results are reviewed and approved by the appropriate authorized person.
Changes in ﬁnancial instruments classiﬁed as Level 3 are as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)¥16,366(1,044)
2,620(572)(1,383)561¥16,548¥20,809
(136)
978
(900)
(3,599)(784)¥16,366

Balance at beginning of the ﬁscal year
Other comprehensive income (Note)
Purchase
Sale
Change in the scope of consolidation
Other changes
Balance at end of the ﬁscal year

Note: This is included in “Financial assets measured at fair value through other comprehensive income” in the consolidated statements of comprehensive income.

2) Financial instruments measured at amortized cost
The carrying amount and fair value of ﬁnancial instruments measured at amortized cost are as follows:
FYE2017 (March 31, 2017)(Millions of Yen)

Liabilities
Long-term borrowings
Bonds
Total

Carrying amount

Level 1

Level 2

Level 3

Fair value
Total¥252,580
65,000¥317,580¥——¥—¥252,020
65,171¥317,192¥——¥—¥252,020
65,171¥317,192

FYE2016 (March 31, 2016)(Millions of Yen)

Liabilities
Long-term borrowings
Bonds
Total

Carrying amount

Level 1

Level 2

Level 3

Fair value
Total¥181,903
45,000¥226,903¥——¥—¥184,751
45,342¥230,093¥——¥—¥184,751
45,342¥230,093

Transition Date (April 1, 2015)(Millions of Yen)

Liabilities
Long-term borrowings
Bonds
Total

Carrying amount

Level 1

Level 2

Level 3

Fair value
Total¥185,583
45,000¥230,583¥——¥—¥186,839
45,266¥232,105¥——¥—¥186,839
45,266¥232,105

For ﬁnancial instruments measured at amortized cost other than long-term borrowings and bonds, their fair value reasonably approximatesthe carrying amount.
Long-term borrowings
The fair value of long-term borrowings is calculated based on the present value calculated by discounting the total amount of principal and interest by the interest rate assumed when similar borrowings are newly made.
Bonds
The fair value of bonds is calculated based on market price.
(9) Transfer of financial assets
At March 31, 2017 and March 31, 2016, for trade receivables transferred without meeting the requirements for derecognition of ﬁnancial assets,¥2,176 million and ¥1,720 million were included in “Trade receivables,” respectively, and the amounts received due to the transfer of ¥1,565 million and ¥1,720 million were included in “Bonds and borrowings,” respectively. Of these Trade receivables, it is determined that the TNSC Groupholds almost all of the risks and rewards related to ownership of the transferred assets, because it will assume the payment obligations if theissuer of the notes or the debtor fails to make payment.

66

Taiyo Nippon Sanso Corporation | Integrated Report 2017

(10) Derivative transactions
1) Derivative transactions for which hedge accounting is applied
Analysis of contract amounts, etc. of the hedging instruments by due date is as follows:
FYE2017 (March 31, 2017)(Millions of Yen)

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

More than
one year
but within
two years

More than
two years
but within
three years

Contract
amounts, etc.

One yearor less¥ 6,714¥ 6,714

29,267

10,1491,076

Contract
amounts, etc.

One yearor lessMore than
one year
but within
two years¥10,565¥10,565

36,997

9,516

9,922

1,168

Contract
amounts, etc.

One yearor lessMore than
one year
but within
two years

More than
two years
but within
three years¥ 9,478¥ 9,47880
47,25280
12,028¥—¥—More than
three years
but withinfour years¥

More thanfour years
but within
ﬁve years—¥ —15,465

1,286

286

More than
two years
but within
three years

More than
three years
but withinfour years

More thanfour years
but within
ﬁve years

More thanﬁve years

¥

—
1,003

FYE2016 (March 31, 2016)(Millions of Yen)

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

¥

—

¥

—

¥

—

¥

More thanﬁve years—¥—

15,3891,000—

More than
three years
but withinfour years

More thanfour years
but within
ﬁve years

Transition Date (April 1, 2015)(Millions of Yen)

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Currency swaps
Interest rate swaps

¥

—
—
8,438

¥

—

¥ —

—
9,406

—
953

¥

—
—
15,314More thanﬁve years

¥

—
—
1,111

Major forward rates of foreign exchange contracts and major interest rates of interest rate swaps are as follows:

Cash ﬂow hedges
Currency risk
Forward exchange contracts
U.S. dollar
EuroInterest rate risk
Interest rate swaps
Fixed payables and ﬂoating receivables

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)

Transition Date
(April 1, 2015)¥101.02–¥114.65¥112.94–¥127.35¥115.84–¥118.95¥109.98–¥118.74¥101.58–¥120.46¥129.18–¥147.77

0.34%–0.74%

0.34%–1.97%

0.34%–4.80%

Taiyo Nippon Sanso Corporation | Integrated Report 201767

Amounts related to items designated as hedging instruments are as follows:
FYE2017 (March 31, 2017)(Millions of Yen)
Carrying amountItems on the
consolidated statements
of ﬁnancial position

Changes in fair value used to
calculate ineffective portion ofhedges for the ﬁscal year

Contract
amounts, etc.

AssetsLiabilities¥ 6,714¥77¥ 86

Other ﬁnancial assets
Other ﬁnancial liabilities¥143

10,1491

166

Other ﬁnancial assets
Other ﬁnancial liabilities

248

Carrying amountItems on the
consolidated statements
of ﬁnancial position

Changes in fair value used to
calculate ineffective portion ofhedges for the ﬁscal year

Other ﬁnancial assets
Other ﬁnancial liabilities
—

¥515

(95)

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

FYE2016 (March 31, 2016)(Millions of Yen)
Contract
amounts, etc.

AssetsLiabilities¥10,565

¥63

¥215

—

—

—

36,99761

474

Other ﬁnancial assets
Other ﬁnancial liabilities

Carrying amountItems on the
consolidated statements
of ﬁnancial position

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Currency swaps
Interest rate risk
Interest rate swaps

6

Transition Date (April 1, 2015)(Millions of Yen)
Contract
amounts, etc.

AssetsLiabilities¥ 9,478

¥45

¥713

80

8

14

47,252

1

319

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Currency swaps
Interest rate risk
Interest rate swaps

Other ﬁnancial assets
Other ﬁnancial liabilities
Other ﬁnancial assets
Other ﬁnancial liabilities
Other ﬁnancial assets
Other ﬁnancial liabilities

Amounts related to items designated as hedged items are as follows:(Millions of Yen)FYE2017(March 31, 2017)

Transition Date
(April 1, 2015)

Cash ﬂow hedge
reserves

Cash ﬂow hedge
reserves

Changes in fairvalue used to
calculate ineffective
portion of hedges
for the ﬁscal year

Cash ﬂow hedge
reserves

Changes in fairvalue used to
calculate ineffective
portion of hedges
for the ﬁscal year

¥ 96

¥ 34

¥399

¥ (62)¥(461)

171

(98)

(66)

(270)

(204)

Cash ﬂow hedges
Currency risk
Planned purchase
Interest rate risk
Interest on borrowings

68

FYE2016(March 31, 2016)

Taiyo Nippon Sanso Corporation | Integrated Report 2017

Details of cash ﬂow hedges are as follows:
FYE2017 (April 1, 2016 to March 31, 2017)(Millions of Yen)
Changes in fair valueof hedging
instruments
recognized in othercomprehensive
incomeIneffective portion ofhedges recognized in
proﬁt or loss

Items on the
consolidated
statements of proﬁt
or loss that include
ineffective portion ofgain or loss onhedges

¥ 96

¥—

¥—

¥164

Finance costs

171

—

—

78

Finance costs

Changes in fair valueof hedging
instruments
recognized in othercomprehensive
incomeIneffective portion ofhedges recognized in
proﬁt or loss

Items on the
consolidated
statements of proﬁt
or loss that include
ineffective portion ofgain or loss onhedgesReclassiﬁcation
adjustments fromcash ﬂow hedge
reserves to
proﬁt or loss

Items on the
consolidated
statements of proﬁt
or loss that include
gain or loss due toreclassiﬁcation
adjustments

¥399

¥—

¥—

¥515

Finance costs

(66)

—

—

122

Finance costs

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps

Reclassiﬁcation
adjustments fromcash ﬂow hedge
reserves to
proﬁt or loss

Items on the
consolidated
statements of proﬁt
or loss that include
gain or loss due toreclassiﬁcation
adjustments

FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)

Cash ﬂow hedges
Currency risk
Forward exchange contracts
Interest rate risk
Interest rate swaps2) Derivative transactions for which hedge accounting is not applied
Amounts related to items not designated as hedging instruments are as follows:(Millions of Yen)

Contract
amount, etc.

Currency swaps¥863

FYE2017(March 31, 2017)
More than
one year
Fair value¥726

Contract
amount, etc.

¥133

¥—

FYE2016(March 31, 2016)
More than
one year
Fair value¥—

Transition Date
(April 1, 2015)
Contract
amount, etc.

More than
one year

Fair value

¥—

¥—

¥—

¥—

31. Subsidiaries
For FYE2017, FYE2016 and the Transition Date, there were no individually signiﬁcant subsidiaries with non-controlling interests.

32. Related Parties
Remuneration for major executives
Remuneration for the TNSC Group’s major executives is as follows:(Millions of Yen)FYE2017(April 1, 2016 to March 31, 2017)

FYE2016(April 1, 2015 to March 31, 2016)

¥583
¥583

¥731
¥731

Remuneration and bonuses
Total

33. Commitments
Commitments on acquisition of property, plant and equipment and intangible assets are as follows:(Millions of Yen)

Acquisition of property, plant and equipment and intangible assets

FYE2017(March 31, 2017)

FYE2016(March 31, 2016)¥16,712¥6,867

Taiyo Nippon Sanso Corporation | Integrated Report 201769

34. Contingent Liabilities
Guaranteed obligations
Guarantees and quasi-guarantees for borrowings from ﬁnancial institutions are as follows:(Millions of Yen)FYE2017(March 31, 2017)

Joint ventures
Associates
Other (Note)
Total

¥

—
363
1,728
¥2,092FYE2016(March 31, 2016)

¥ 150
126
2,082
¥2,359Note: Other mainly consists of guarantees for employees’ bank loans based on the employees’ house ownership support system.

35. Subsequent Events
Not applicable.

36. First-time Adoption
From the ﬁscal year ended March 31, 2017, the TNSC Group discloses its consolidated ﬁnancial statements in accordance with
International Financial Reporting Standards (IFRS). The most recent
consolidated ﬁnancial statements prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP)
were those for the ﬁscal year ended March 31, 2016. The Transition
Date to IFRS is April 1, 2015.
In principle, companies applying IFRS for the ﬁrst time must apply
the standards required by IFRS retrospectively. However, IFRS 1“First-time Adoption of International Financial Reporting Standards”
speciﬁes items to which exemptions may be applied arbitrarily tocertain standards required by IFRS.

• Designation of financial instruments recognized before theTransition Date to IFRS
Under IFRS 1, a ﬁrst-time adopter may determine classiﬁcation under
IFRS 9 based on the facts and circumstances at the Transition Date,not the facts and circumstances that exist at the time of initial recognition. A ﬁrst-time adopter may also designate equity ﬁnancial assets
as ﬁnancial assets measured at fair value through other comprehensive income based on the facts and circumstances that exist at theTransition Date. The TNSC Group has determined classiﬁcation
under IFRS 9 based on the facts and circumstances that existed at
the Transition Date and designated equity ﬁnancial assets as ﬁnancial
assets measured at fair value through other comprehensive income.

Exemptions adopted by the TNSC Group for the transition fromJapanese GAAP to IFRS are as follows:

The reconciliation tables required to be disclosed in the ﬁrst-time
adoption of IFRS are as follows. In the reconciliation tables,“Reclassiﬁcation” includes items that do not affect retained earnings
and comprehensive income, “Effect of change in the closing date”(*)
includes differences due to uniﬁcation of the closing date in accordance with IFRS, and “Differences in recognition and measurement”
includes items that affect retained earnings and comprehensive
income.
“Notes to reconciliation of equity” and “Notes to reconciliation of
proﬁt or loss and comprehensive income” do not include the above“Effect of change in the closing date.”• Business combinations
A ﬁrst-time adopter may elect not to apply IFRS 3 “Business
Combinations” retrospectively to business combinations that
occurred before the Transition Date to IFRS. The TNSC Group has
applied such exemption and elected not to apply IFRS 3 retrospectively to business combinations that occurred before the Transition
Date. As a result, the amount of goodwill arising from business combinations that occurred before the Transition Date was based on the
carrying amount at the Transition Date in accordance with Japanese
GAAP. For goodwill, impairment tests were performed at theTransition Date, regardless of whether or not there was any indicationof impairment.
• Exchange differences on translation of foreign operations
Under IFRS 1, a ﬁrst-time adopter may elect to consider the cumulative translation differences of foreign operations as of the Transition
Date to IFRS as zero. The TNSC Group has elected to consider the
cumulative exchange differences on translation of foreign operations
as of the Transition Date as zero.

70

Taiyo Nippon Sanso Corporation | Integrated Report 2017*For the previous ﬁscal year (ﬁscal year ended March 31, 2016) underJapanese GAAP, the ﬁscal period used in consolidation of Matheson Tri-Gas,
Inc., a consolidated subsidiary, was 15 months from January 1, 2015 toMarch 31, 2016. Under IFRS, a provisional settlement was made as if theclosing date was changed to March 31, 2015.

Reconciliation of equity as of Transition Date (April 1, 2015)(Millions of Yen)

Accounts presented
under Japanese GAAP

AssetsCurrent assets
Cash and deposits
Notes and accounts
receivable—trade
Merchandise and ﬁnished
goodsWork in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful
accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Intangible assets
Goodwill
Other
Investments and other assets
Investment securities
Long-term loans receivable
Net deﬁned beneﬁt asset
Other
Deferred tax assets
Valuation allowance forinvestments
Allowance for doubtful
accounts
Total noncurrent assets
Total assets

Japanese
GAAP

Reclassiﬁcation

Effect ofchange inthe closing
date

Differences inrecognition andmeasurement

IFRS Notes Accounts presented under IFRS

¥ 53,420¥ (1,873)¥1,326¥ (104) ¥ 52,769

150,552(2,520)

3,943

(274)

151,70230,252
8,758
9,782
8,387
—
9,470

(30,252)(8,758)39,011(8,387)
5,533(3,659)

—
—
(50)
—
5
1,267

—
—
(1,164)
—
(4)
—

—
—
47,579
—
5,533
7,080

(2,520)268,105

2,520(8,387)—
6,493—(1,546)—
264,664

324,842—(574)(7,932)

316,335

66,47125,701

—
—

2,317
206

—
—

68,78925,90775,377
1,199
—
8,396
10,542
2,073(54,892)(1,199)65,636—(9,898)
8,387

—
—
(53)
—
—
(185)

308
—
7,012
494
—
(6,037)

20,793—72,596
8,891
643
4,238

(20)

20

—

—

—

(333)
514,251¥782,357

333
8,387
¥
—

—
1,710
¥8,203——(6,153) 518,196¥(7,700) ¥782,860(1)

AssetsCurrent assets
Cash and cash equivalents(1)

Trade receivables(2)

Inventories
Other ﬁnancial assets
Other current assets(1)

Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments accounted forusing the equity method

(3)

(4)

Other ﬁnancial assets
Retirement beneﬁt asset
Other non-current assets
Deferred tax assets

Total non-current assets
Total assets

Taiyo Nippon Sanso Corporation | Integrated Report 201771

(Millions of Yen)

Accounts presented
under Japanese GAAP

Liabilities
Current liabilities
Notes and accounts
payable—trade
Short-term loans payable
Income taxes payable
Provision
Other
Total current liabilities
Noncurrent liabilities
Bonds
Long-term loans payable
Lease obligations
Provision for executive ofﬁcers’
retirement beneﬁts
Net deﬁned beneﬁt liability
Provision for directors’ andcorporate auditors’
retirement beneﬁts
Other
Deferred tax liabilities
Total noncurrent liabilities
Total liabilities
Net assets
Common stock
Capital surplus
Treasury stock
Retained earnings
Accumulated othercomprehensive income

Non-controlling interests
Total net assets
Total liabilities and net assets

Japanese
GAAP

Reclassiﬁcation

Effect ofchange inthe closing
date

Differences inrecognition andmeasurement

IFRS Notes Accounts presented under IFRS

Liabilities and equity
Liabilities
Current liabilities¥ 77,036
65,746
7,113
—
3,758
30,915
184,570¥———
23,900(3,369)(20,530)
—

¥ 119
(257)
—
1,417
—
2,589
3,867

45,000148,904
4,779—(45,000)
45,000(4,779)
6,126

—
3,445
—
(87)

—
(8,208)—113—
189,141
—
6,152

420
3,824

(420)
420

—
—

—
35

—
4,281

810
—
9,387
43,451
256,579
441,149

(810)
1,041
(1,578)
—
—
—

—
(15)
164
—
3,506
7,373

—
—
491
(3,689)(11,258)(10,698)

—
1,026
8,464
39,761
248,827
437,824

37,34455,955(232)
190,957

—
—
—
—

—
—
—
1,237

—
—
—
19,05337,34455,955(232)
211,247(6)

33,219—(379)(16,114)

16,724(7)317,244
23,963
341,207¥782,357

—
—
—
—

857
(27)
829
¥8,203¥¥(258) ¥ 76,896(800)
64,689
(5)
7,107
172
25,489—389
1,451
14,425559 188,997

2,938 321,040
59
23,9952,998 345,035¥ (7,700) ¥782,860

(1)
(1)

(5)

(1)

Trade payables
Bonds and borrowings
Income taxes payable
Other ﬁnancial liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Bonds and borrowings
Other ﬁnancial liabilities

Retirement beneﬁt liability

(5)
(4)

Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
EquityShare capital
Capital surplus
Treasury shares
Retained earnings
Other components of equity
Total equity attributable toowners of parent
Non-controlling interests
Total equity
Total liabilities and equity

Notes to reconciliation of equity(1) Cash and cash equivalents, trade receivables, property, plant and equipment, trade payables, and bonds and borrowings
The TNSC Group reviewed the scope of consolidation for adopting IFRS. As Sakai Gas Center, Inc., which was a consolidated subsidiary underJapanese GAAP, became a joint operation under IFRS, there were decreases in cash and cash equivalents, trade receivables, property, plantand equipment, trade payables, and bonds and borrowings.
(2) Inventories
The TNSC Group transferred replacement parts and maintenance goods that were included in supplies in “Inventories” under Japanese GAAP,
to property, plant and equipment under IFRS. Accordingly, there was a decrease in inventories.
(3) Other financial assets (non-current assets)
The TNSC Group measured unlisted stocks mainly using the cost method based on the moving-average method under Japanese GAAP.
Under IFRS, unlisted stocks are measured at fair value. Accordingly, there was an increase in other ﬁnancial assets.
(4) Deferred tax assets and deferred tax liabilities
The TNSC Group offset deferred tax assets and liabilities in current and noncurrent categories, respectively, under Japanese GAAP. Under IFRS,
all deferred tax assets and liabilities are classiﬁed under the non-current category. Accordingly, there was an increase in offset amounts and adecrease in deferred tax assets and deferred tax liabilities.
(5) Other current liabilities and other non-current liabilities
The TNSC Group recognized employees’ paid absence, etc., which was not recognized under Japanese GAAP, as liabilities under IFRS.
Accordingly, there was an increase in other current liabilities and other non-current liabilities.

72

Taiyo Nippon Sanso Corporation | Integrated Report 2017

(6) Retained earnings
The effect on retained earnings due to reconciliation resulting from the adoption of IFRS is as follows. The amounts below are the amounts afterreconciliation of related tax effects and non-controlling interests.
(Millions of Yen)
Transition Date
(April 1, 2015)

Reconciliation of cumulative exchange differences on translation of foreign operations (see (7))¥19,687

Recognition of employees’ paid absence, etc. (see (5))(1,331)

Other

696

Total reconciliation of retained earnings¥19,053(7) Other components of equity
The TNSC Group elected the exemptions stipulated in IFRS 1 and transferred all the cumulative exchange differences on translation of foreign
operations to retained earnings as of April 1, 2015, the Transition Date.
(8) Reclassification
In addition to the above, the TNSC Group made reclassiﬁcations to conform to the provisions of IFRS. Major items are as follows:• Under Japanese GAAP, short-term time deposits with a deposit period exceeding three months were included in “Cash and deposits.”
They are included in “Other ﬁnancial assets” in current assets under IFRS.
• For deferred tax assets and deferred tax liabilities, all current portion was reclassiﬁed to non-current.
• Under Japanese GAAP, asset retirement obligations were included in “Other” in noncurrent liabilities. They are included in “Provisions” innon-current liabilities under IFRS.

Reconciliation of equity as of the end of FYE2016 (March 31, 2016)(Millions of Yen)
Accounts presented
under Japanese GAAP

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable—
trade
Merchandise and ﬁnished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Intangible assets
Goodwill
Other
Investments and other assets
Investment securities
Long-term loans receivable
Net deﬁned beneﬁt asset
Other
Deferred tax assets
Valuation allowance forinvestments
Allowance for doubtful accounts
Total noncurrent assets
Total assets

Japanese
GAAP

Reclassiﬁcation

Differences inrecognition andmeasurement¥

IFRS Notes Accounts presented under IFRS

AssetsCurrent assets
Cash and cash equivalents¥ 50,785¥ (1,506)(63) ¥ 49,216

146,460
30,877
11,406
10,827
4,467
—
9,130
(2,063)261,891(2,063)(30,877)(11,406)
42,283(4,467)
5,697(4,190)2,063(4,467)

1,454——(1,251)
—
57
415
—
612

145,850——
51,859
—
5,755
5,354
—
258,036(1)

Trade receivables(2)

Inventories

339,096—(7,190)331,906(3)

75,323
22,827

—
—

5,856
—

81,17922,827(4)

60,275
3,421
—
6,499
12,0382,302(39,608)(3,421)53,947—(11,344)
4,467

203
—
6,876
—
—
(2,101)

20,870—60,823
6,499
694
4,667

(20)
(406)
521,357¥783,248

20
406
4,467
¥
—

—
—
—
—
3,644 529,468¥ 4,256 ¥787,505

Other ﬁnancial assets
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments accounted for using
the equity method
(5)

(6)

Other ﬁnancial assets
Retirement beneﬁt asset
Other non-current assets
Deferred tax assets

Total non-current assets
Total assets

Taiyo Nippon Sanso Corporation | Integrated Report 201773

(Millions of Yen)
Accounts presented
under Japanese GAAP

Liabilities
Current liabilities
Notes and accounts payable—trade
Short-term loans payable
Current portion of bonds
Income taxes payable
Provision
Other
Total current liabilities
Noncurrent liabilities
Bonds
Long-term loans payable
Lease obligations
Provision for executive ofﬁcers’
retirement beneﬁts
Net deﬁned beneﬁt liability
Provision for directors’ and corporate
auditors’ retirement beneﬁts
Other
Deferred tax liabilities
Total noncurrent liabilities
Total liabilities
Net assets
Common stock
Capital surplus
Treasury stock
Retained earnings
Accumulated other comprehensive
incomeNon-controlling interests
Total net assets
Total liabilities and net assets

Japanese
GAAP¥ 72,987
83,207
10,000
8,199
—
4,459
35,293214,145

Reclassiﬁcation¥—(83,207)
83,207—28,134(3,740)(24,394)—

Differences inrecognition andmeasurement¥

IFRS Notes Accounts presented under IFRS(243) ¥ 72,743——
920
94,127
(7)
8,192
136
28,270—718
2,000
12,8992,807 216,953

(3)
(1)

(7)

35,000137,583
5,813—(35,000)
35,000(5,813)
6,787—(7,408)—343—
165,174
—
7,130

510
3,867

(510)
510

—
136

—
4,515

801
—
12,621
34,929231,128445,274

(801)
594
(766)
—
—
—

—
—
558
927
(5,443)(2,635)—594
12,41335,857
225,685442,639

37,34455,537(244)
210,911

—
—
—
—

—
7
—
21,96637,34455,545(244)
232,877

(8)

9,916

—

(14,982)(5,066)(9)313,465
24,508337,974¥783,248————

6,991 320,457(99)
24,4096,892 344,866¥ 4,256 ¥787,505¥(3)Liabilities and equity
Liabilities
Current liabilities
Trade payables
Bonds and borrowings
Income taxes payable
Other ﬁnancial liabilities
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Bonds and borrowings
Other ﬁnancial liabilities

Retirement beneﬁt liability

(7)
(5)

Provisions
Other non-current liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
EquityShare capital
Capital surplus
Treasury shares
Retained earnings
Other components of equity
Total equity attributable to owners ofparentNon-controlling interests
Total equity
Total liabilities and equity

For Matheson Tri-Gas, Inc., a consolidated subsidiary, the closing date under Japanese GAAP was December 31. At the end of the previous
ﬁscal year (March 31, 2016), the closing date was uniﬁed with that of the Group on March 31, which is the consolidated closing date, as with
IFRS. Accordingly, the “Effect of change in the closing date” is not presented.
Notes to reconciliation of equity(1) Trade receivables, bonds and borrowings (current liabilities)
When transferring trade receivables in transactions involving liquidation of receivables, the TNSC Group derecognized all receivables as ﬁnancial
assets under Japanese GAAP. This treatment does not meet the derecognition criteria of ﬁnancial assets for certain trade receivables under
IFRS, and the TNSC Group recorded both trade receivables and borrowings. Accordingly, there were increases in trade receivables, bonds andborrowings.
(2) Inventories
The TNSC Group transferred replacement parts and maintenance goods that were included in supplies in “Inventories” under Japanese GAAP,
to property, plant and equipment under IFRS. Accordingly, there was a decrease in inventories.
(3) Property, plant and equipment, trade payables, and bonds and borrowings (non-current liabilities)
The TNSC Group reviewed the scope of consolidation for adopting IFRS. As Sakai Gas Center, Inc., which was a consolidated subsidiary underJapanese GAAP, became a joint operation under IFRS, there were decreases in property, plant and equipment, trade payables, and bonds andborrowings.
(4) Goodwill
The TNSC Group amortized goodwill over a certain period under Japanese GAAP, whereas goodwill is not amortized under IFRS. Accordingly,
there was an increase in goodwill.
(5) Other financial assets (non-current assets) and deferred tax liabilities
The TNSC Group measured unlisted stocks mainly using the cost method based on the moving-average method under Japanese GAAP. Under
IFRS, unlisted stocks are measured at fair value. Accordingly, there was an increase in other ﬁnancial assets and deferred tax liabilities.

74

Taiyo Nippon Sanso Corporation | Integrated Report 2017

(6) Deferred tax assets
The TNSC Group offset deferred tax assets and liabilities in current and noncurrent categories, respectively, under Japanese GAAP. Under IFRS,
all deferred tax assets and liabilities are classiﬁed under the non-current category. Accordingly, there was an increase in offset amount and adecrease in deferred tax assets.
(7) Other current liabilities and other non-current liabilities
The TNSC Group recognized employees’ paid absence, etc., which was not recognized under Japanese GAAP, as liabilities under IFRS.
Accordingly, there was an increase in other current liabilities and other non-current liabilities.
(8) Retained earnings
The effect on retained earnings due to reconciliation resulting from the adoption of IFRS is as follows. The amounts below are the amounts afterreconciliation of related tax effects and non-controlling interests.
(Millions of Yen)
End of FYE2016(March 31, 2016)

Reconciliation of cumulative exchange differences on translation of foreign operations (see (9))
Reconciliation of amortization of goodwill (see (4))
Recognition of employees’ paid absence, etc. (see (7))
Other
Total reconciliation of retained earnings¥19,687
4,920(1,517)(1,124)¥21,966(9) Other components of equity
The TNSC Group elected the exemptions stipulated in IFRS 1 and transferred all the cumulative exchange differences on translation of foreign
operations to retained earnings as of April 1, 2015, the Transition Date.
(10) Reclassification
In addition to the above, the TNSC Group made reclassiﬁcations to conform to the provisions of IFRS. Major items are as follows:• Under Japanese GAAP, short-term time deposits with a deposit period exceeding three months were included in “Cash and deposits.”
They are included in “Other ﬁnancial assets” in current assets under IFRS.
• For deferred tax assets and deferred tax liabilities, all current portion was reclassiﬁed to non-current.
• Under Japanese GAAP, asset retirement obligations were included in “Other” in noncurrent liabilities. They are included in “Provisions” innon-current liabilities under IFRS.
Reconciliation of profit or loss and comprehensive income for FYE2016 (April 1, 2015 to March 31, 2016)(Millions of Yen)

Accounts presented
under Japanese GAAPNet sales
Cost of sales
Gross proﬁt
Selling, general andadministrative expenses

Operating income
Non-operating income
Non-operating expenses
Extraordinary income
Extraordinary losses

Income before income taxes
Income taxes—current
Income taxes—deferred
Net income

Japanese
GAAP

Reclassiﬁcation

Effect ofchange inthe closing
date

Differences inrecognition andmeasurement

IFRS Notes Accounts presented under IFRS

¥ 641,516(416,102)
225,413¥———¥(42,812)
25,296(17,516)¥(4,281) ¥ 594,421
4,183 (386,621)(97) 207,800

(1)
(1)

(182,051)
—
—

—
4,452
(4,352)

14,937(2)(232)

5,944 (161,169)
(1)
4,448
(95)
(4,680)(2)—
43,362
6,148(6,340)2,673(2,226)——
43,6162,626
2,726(6,148)6,340(2,673)
2,226
1,742(4,214)—

4(2,809)
—
—
—
—
(8)
465
(2,352)

(104)
5,646
—
—
—
—
(417)
83
5,311

—
—

1,078
¥ (1,274)(16,219)¥ 27,396¥

2,526
48,925
—
—
—
—
1,316
(3,665)46,575(927) (16,069)¥ 4,384 ¥ 30,506

Revenue
Cost of sales
Gross proﬁt
Selling, general andadministrative expenses
Other operating income
Other operating expenses
Share of proﬁt of investments
accounted for using the equity
methodOperating proﬁt

Finance income
Finance costs
Proﬁt before income taxes(2)

Income taxes
ProﬁtTaiyo Nippon Sanso Corporation | Integrated Report 201775

(Millions of Yen)

Accounts presented
under Japanese GAAP

Japanese
GAAP

Reclassiﬁcation

Effect ofchange inthe closing
date

Net income¥ 27,396¥—¥(1,274)

Differences inrecognition andmeasurement¥4,384IFRS Notes Accounts presented under IFRS

¥30,506

Other comprehensive income
Valuation difference on
available-for-sale securities
Remeasurements of deﬁned
beneﬁt plans(7,328)——270(7,058)(1,403)

—

—

(402)

(1,806)

Foreign currency translation
adjustments(15,453)

—

441

201

(14,810)

399

—

—

(66)

333

(586)
¥ 3,024—¥——¥ (832)(494)¥3,892(1,080)¥ 6,083

Deferred gains or losses onhedgesShare of other comprehensive
income (loss) of associates
accounted for using the equity
methodComprehensive income

Proﬁt
Other comprehensive income
Financial assets measured atfair value through othercomprehensive income
Remeasurements of deﬁned
beneﬁt plans
Exchange differences ontranslation of foreign
operations
Effective portion of net change
in fair value of cash ﬂow
hedgesShare of other comprehensive
income of investments
accounted for using the equity
methodComprehensive income

Notes to reconciliation of profit or loss and comprehensive income(1) Revenue and cost of sales
The TNSC Group reviewed the scope of consolidation for adopting IFRS. As Sakai Gas Center, Inc., which was a consolidated subsidiary underJapanese GAAP, became a joint operation under IFRS, there were decreases in revenue and cost of sales, accordingly.
(2) Selling, general and administrative expenses and income taxes
The TNSC Group amortized goodwill over a certain period under Japanese GAAP, whereas goodwill is not amortized under IFRS. Accordingly,
there was a decrease in selling, general and administrative expenses and an increase in income taxes.

Reconciliation of cash flows for FYE2016 (April 1, 2015 to March 31, 2016)
Major differences between the consolidated statements of cash ﬂows under IFRS and the consolidated statements of cash ﬂows underJapanese GAAP were related to the change in the closing date of Matheson Tri-Gas, Inc., a consolidated subsidiary.
(2) Other
Quarterly information, for FYE2017 (April 1, 2016 to March 31, 2017)(Cumulative period)

Revenue (Millions of Yen)
Proﬁt before income taxes (Millions of Yen)
Proﬁt attributable to owners of parent (Millions of Yen)
Basic earnings per share (Yen)(Quarterly period)

Basic earnings per share (Yen)76

Taiyo Nippon Sanso Corporation | Integrated Report 2017

First quarter of
FYE2017First half of
FYE2017First three quarters of
FYE2017

FYE2017

133,436
11,703
6,481
14.98

268,782
24,534
16,46938.06

415,881
39,027
26,034
60.16

581,586
50,17634,74080.28First quarter

Second quarter

Third quarter

Fourth quarter

14.98

23.08

22.10

20.12

Report of Independent Auditors

Taiyo Nippon Sanso Corporation | Integrated Report 201777

Investor Information(At March 31, 2017)

Number of shares authorized:

1,600,000,000

Number of shares issued:

433,092,837

Number of shareholders:

16,100Major Shareholders:Thousands of shares owned

Percentage of total

Mitsubishi Chemical Holdings Corporation

218,996

50.59

Taiyo Nippon Sanso Client Shareholding Society

19,3894.48

Mizuho Bank, Ltd.

16,365

3.78

JFE Steel Corporation

12,627

2.92

Meiji Yasuda Life Insurance Company

10,007

2.31

Japan Trustee Services Bank, Ltd. (Trust Account)

9,249

2.14

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

8,305

1.92

The Norinchukin Bank

7,000

1.62

Japan Trustee Services Bank, Ltd. (Trust Account 9)

4,626

1.07

Employee Shareholding Association

3,649

0.84

Notes: 1. The Company holds 175,000 treasury shares.
2. Percentage of total is calculated excluding treasury shares.

Common Stock Price Range and Trading Volume

Stock price

Trading volume(Yen)(Thousands of shares)

2,400

60,0002,000

50,0001,600

40,0001,200

30,000800

20,000400

10,000

0

78

2013
4

2014
1

Taiyo Nippon Sanso Corporation | Integrated Report 2017

2015
1

2016
1

2017
1 3

0

Corporate Data
(At March 31, 2017)

Company name:Taiyo Nippon Sanso Corporation (Stock code: 4091)

Date founded:

October 30, 1910

Date established:

July 19, 1918

Paid-in capital:¥37,344 million

Head ofﬁce:

Toyo Building, 1-3-26 Koyama, Shinagawa-ku, Tokyo 142-8558, Japan
Tel: +81-3-5788-8000

Number of employees:

15,860Independent public accountants: Ernst & Young ShinNihon LLC
Stock exchange listing:Tokyo

Transfer agent:Mizuho Trust & Banking Co., Ltd.
2-8-4 Izumi, Suginami-ku, Tokyo 168-8507, Japan
Tel (toll free in Japan): 0120-288-324

Contact:

Public Relations/IR Department, Taiyo Nippon Sanso Corporation

Number of Employees and Percentage of Total Labor Force by Reportable Segment

Shared/support (365)2.3%

Gas Business in Japan (5,035)

31.7%

Thermos and Other Businesses (2,283)

14.4%

Gas Business in Asia and Oceania (3,739)

23.6%

Gas Business in the United States (4,438)28.0%Disclaimer Regarding Forward-Looking Statements
This integrated report contains forward-looking statements. These statements reﬂect management’s assumptions and beliefs based on information available as ofthe date of this document’s publication and inherently involve risks and uncertainties. Actual results may differ substantially from these statements. Investors should
refrain from relying solely on these forward-looking statements in making investment decisions. The Company undertakes no obligation to update any forward-looking
statements as a result of new information or other developments.

Taiyo Nippon Sanso Corporation | Integrated Report 201779

Toyo Building, 1-3-26, Koyama, Shinagawa-ku,Tokyo 142-8558, Japan
Tel: 81-3-5788-8000
www.tn-sanso.co.jp

Printed in Japan