Tokuyama Report

Fiscal year ended March 31, 2020

VISION

Our Vision

MISSION

Centered on the field of chemistry, the Tokuyama Groupwill continue to create value that enhances people’s lives

ASPIRATIONSShift from a focus on quantity to quality

VALUES• Customer satisfaction is the source of profits• A higher and broader perspective

FY2025Global leader

Leader in Japanin advanced
materials

in its traditional
businesses• Personnel who consistently surpass their predecessors• Integrity, perseverance, and a sense of fun

To k u y a m a R e p o r t 2 0 2 0
The Vision of Tokuyama was established in 2016 to
make the mission that the Company should fulfill clear
and signify the ideal image it would like to achieve forthe future.
The Vision of Tokuyama consists of its Mission,
Aspirations, and Values. It is the foundation of theCompany’s activities. All of the Company’s employees
should bear the Vision in mind as a code of behavior andguidance for their decision making.
The Company celebrated its 100th anniversary in 2018,
and as a “new foundation,” will achieve sustainable growthover the next 100 years.

Editorial Policy

Publication of the “Tokuyama Report”
Tokuyama has published annual reports as a tool providing management
and financial information to investors. We have changed the title of thisreport to the Tokuyama Report from this year, which also includes nonfinancial information. In an effort to convey the value of the TokuyamaGroup, we have included information about value creation in the past,present and future, while also enhancing the page content, beginning withthe message from the President. We hope that this report will deepen many
stakeholders’ understanding of the Company and will help facilitatecommunication.

Contents
At a Glance

2

Top Message

4

Value Creation Story
The Path Taken Together with Society

10

Our Strengths and Strategies

12

Value Creation Process

14

Roadmap for Sustainable Growth16

Segment Information
Chemicals

18

Specialty Products

20

Cement22

Life and Amenity

24
26

Research and Development
Focus
Feature 1 The Tokuyama Group’s Products
Contribute to the Improvement ofPeople’s Health and Hygiene

28

Corporate Social Responsibility
CSR Framework

30

Environmental Initiatives

31

Initiatives for Society

32

Focus
Feature 2 Initiatives for Reducing CO2 Emissions

34

Corporate Governance

36

Management Team40

Financial Highlights

42

Business Sites and Group Companies

44

Corporate Data

46

Financial Section

49

Tokuyama Re port 20201

At a Glance
Japan was once completely reliant on
imports for its soda ash. In 1918, Tokuyama
Corporation was established in Tokuyama(now Shunan City), Yamaguchi Prefecture,
to remedy this lack of a domestic source.
Tokuyama later began producing cement,
and then responded to the growth of Japan’s
chemicals industry by adding a broad arrayof chemicals to its product lineup. The
Company’s main business fields are ICT, inwhich its principal product is semiconductorgrade polycrystalline silicon; healthcare,which includes eyeglass lens materials,
dental materials and equipment, and othersuch products; and the environment, which
includes the recycling and environment
business.

Tokuyama Corporation

Digital related

Household products• Smartphones, mobile phones• Automobiles• Electronic devices• Data centers• Home appliances • Food packaging film•P lastic window• Bathtubs
sashes• Shampoo• F oods, seasonings, • Laundry detergent
wine

Major Products
CHEMICALSSPECIALTY PRODUCTS

CEMENT

LIFE & AMENITY

Soda Ash and Calcium Chloride
Business• Soda ash• Calcium chloride• Sodium bicarbonate

Electronic Materials Business• Semiconductor-grade polycrystalline silicon

Cement Business• Portland cement• Cement-type stabilizer• Ready-mixed concrete• Concrete repair material

Fine Chemicals Business• Pharmaceutical ingredients/
intermediates• Plastic lens-related materials

Chlor-Alkali and Vinyl Chloride
Business• Caustic soda
• Polyvinyl chloride resin• Vinyl chloride monomer• Propylene oxide (PO)• Sodium hypochlorite
New Organic Chemicals
Business• Isopropyl alcohol (IPA)2

T ok uy a m a R e p o r t 2 0 2 0

Fumed Silica Business• Fumed silica
Thermal Management Material
Business• High-purity aluminum nitride (AlN)
powder and granules• Aluminum nitride ceramics
IC Chemicals Business• High-purity chemicals forelectronics manufacturing• Photoresist developer

Recycling and Environment
Business• Waste plastic recycled as analternative fuel• Trash incinerator ash recycled as analternative raw material for cement• Gypsum recycled from waste
gypsum board

NF Business• Microporous film
[Group Companies]• Polyolefin film
• Medical diagnosis systems• Dental materials and equipment• Ion exchange membranes andelectrodialyzers• Plastic window sashes and related
products

Infrastructure• Buildings• Dams• Bridges• Materials for glass• Vinyl chloride pipes• Hydrogen

Healthcare• Medicine• Dental treatment• Paper diapers• Eyeglasses*The illustration shows the application examples of our products.

Business Portfolio

Soda Ash and Calcium Chloride

OthersPlastic Window Sashes
Ion Exchange Membranes
Dental Materials
and Equipment
Medical Diagnosis Systems
Polyolefin Film
NF (Microporous Film)
Fine Chemicals
Recycling and Environment
CementOthers18.4%
Life &
Amenity

15.8%

Consolidated
net sales¥316.0 billion
Fiscal 2019

Cement24.4%

Chemicals

26.2%

Specialty
Products

15.2%

Chlor-Alkali and Vinyl Chloride
New Organic Chemicals

Electronic Materials
Fumed Silica

Thermal Management Material
IC Chemicals

Tokuyama Re port 20203

Top Message

Hiroshi Yokota

Representative Director
President and Executive Officer

We would like to express our appreciation to all involved in
the fight against the new coronavirus (COVID-19).
We sincerely hope those who are suffering from the virus will recover as soon as possible.
We are striving to prevent the spread of the infection to our customers,
employees and other stakeholders.
We will take every measure possible in the hope that the pandemic will quickly subside.

 okuyama Continues to Grow withT
SocietyIn the Medium-Term Management Plan: Cornerstone of
the Group’s Revitalization, which was formulated in
May 2016, Tokuyama defined its mission as “Centeredon the field of chemistry, the Tokuyama Group willcontinue to create value that enhances people’s lives.”
We strive to provide a stable supply of products neededin society.

4

T ok uy a m a R e p o r t 2 0 2 0

Our history started with chemicals, particularly soda
ash, which was the reason for the foundation of
Tokuyama. Since then, the Company has been developing and manufacturing products that support andenhance people’s lives, including cement in the higheconomic growth period and semiconductor-grade
polycrystalline silicon and high-purity chemicals for electronics manufacturing in the IT revolution in the 1990s.
Society is now in a position where it must achieve
the Sustainable Development Goals (SDGs) to besustainable. The Company will expand its products,
technologies and businesses that help build a sustainable society, while widening and deepening its manufacturing to take advantage of its strengths more
speedily using its unique chemical technologies.

Results in Fiscal 2019
In 2019, U.S.-China trade friction increased uncertainty
surrounding the future of the world economy.
International trade and investment slowed, whichslowed economies. From the beginning of 2020, economic activity was sluggish and consumer spending fellaround the world due to COVID-19. Against this backdrop, the Japanese economy declined significantly.
The effect of the coronavirus on the Company’s
results in the fourth quarter of fiscal 2019 was relatively
small. However, net sales in the fiscal year fell year on
year, reflecting a decrease in the sales volume of mainstay products as a slowdown in the markets became
more apparent. Despite the weak sales performancedue to the deterioration of the market environment,
the decline in profit was less significant compared withthe fall in net sales owing to our avid pursuit of profits.
The Specialty Products segment, primarily in the ICT
business, and the Life & Amenity segment, primarily inthe healthcare business, which are positioned as growthbusinesses, struggled, showing a sluggish performancein the first half, chiefly because of U.S.-China trade

friction. However, in the second half, these segments,
primarily semiconductor-related products, strove torecover lost ground and make a profit.
As for traditional businesses, the Chemicals segment
posted a decrease in profit due to higher raw material
prices and lower market prices overseas despite the firmsales volume of caustic soda, a mainstay product. In the
Cement segment, sales volume was weak, reflecting afall in demand, but we strove to maintain sales prices
and increased market share.

 rogress of the Medium-Term
P
Management Plan
Of the four priority issues in the Medium-Term
Management Plan, “Change the Group’s Organizational
Culture and Structure” remains a top priority.
Tokuyama’s greatest assets are its people. We believethat recruiting, cultivating and utilizing excellent humanresources are the most important things for theCompany’s survival, growth and development. The
purpose of “Change the Group’s Organizational
Culture and Structure” is to create a vibrant corporate
culture where each employee carries out tasks independently and promptly. I believe, as president, that thisis my greatest mission.
Our efforts have resulted in faster actions in selecting research and development topics, building pipelines
for new operations and launching new businesses in● Business Strategies

Aspirations

GrowthBusinesses
Specialty ProductsLife & Amenity
New businesses

Traditional
Businesses
Chemicals
CementBecome a global leader in advanced
materials through unique technologies• Thoroughly understand customers’ needs,

and meet requirements through unique
technologies

Become a leader in Japan bystrengthening competitiveness• Overcome competition in the general-purpose products market• Become an entity that maintains a thirstfor increased efficiency

Means of Achieving Goals

Key Management
Indicators•A dhere strictly to customer-oriented businessactivities• Utilize open innovation• Leverage alliances

EBITDA growth rate•R
 eview the research and development
structure•A dopt a stringent approach toward
maintaining and renewing investments;
undertake strategic investments aimed atstrengthening competitiveness• Increase the efficiency of repairs andmaintenance expenses by shortening theperiods of periodic maintenance

ROA,
Cash conversion
cycle (CCC)• S trengthen cross-departmental improvement
activities• L everage alliances

Tokuyama Re port 20205

Top Message

growth businesses. We will expand this corporate
culture across the entire Company and will establish astrong business structure that will enable us to growsustainably as a top manufacturer with the ability to
manufacture products that are overwhelmingly superior
to those of our competitors in the international market
in terms of cost, functionality and quality.
We are actively recruiting work-ready humanresources with experience and techniques in specificfields in growth businesses.

Change the Group’s
Rebuild theorganizational
Group’s businessculture and structure
strategies

Four Priority Issues
Strengthen Groupmanagement

Improve theCompany’s
financial position

We are restructuring our business strategies. In the
ICT field, which is a focus, expansion work has been
completed as scheduled for aluminum nitride, a thermal
management material that is used primarily in environmentally friendly vehicles, renewable energy and 5G
products and is expected to grow in the medium- tolong-term, and a photoresist developer, a chemical usedin semiconductor processing.
New seeds are beginning to bear fruit in the healthcare business, another field of focus, including thedevelopment of a new manufacturing process forbiotin, a vitamin; the commercialization of materials
related to veterinary medicine; and the launch of
OMNICHROMA, a cavity-filling composite resin, in
Europe and the United States. We will continue to
steadily implement growth strategies in the fields of ICT
and healthcare.
To strengthen the Group’s management, we havedecided to accept investment from Panasonic
Corporation through a private placement to strengthen
and develop the plastic window sashes business of
Excel Shanon Corporation. Excel Shanon is a specialized
manufacturer of plastic window sashes and aims to
expand the plastic window sashes business by tapping

6

T ok uy a m a R e p o r t 2 0 2 0

into energy saving needs and cooperating with
Panasonic, which manufactures a range of building
materials. The Group companies involved in logistics are
striving to cut costs by reorganizing them to increase
efficiency.
Of the targets related to the improvement in our
financial position included in the Medium-Term
Management Plan, the ROA and CCC targets are not
likely to be achieved, but interest-bearing debt of¥120.0 billion, shareholders’ equity of ¥140.0 billion,
cash and deposits of ¥80.0 billion and a debt-equity
ratio of 0.9 were achieved in fiscal 2019, a year earlier
than planned. In July 2019, a certain rating agency’s
rating of Tokuyama rose to A again.
In this situation, we plan to repair manufacturing
equipment and make investments to save energy,
which we had not yet been able to do, in fiscal 2020 so
as not to carry over investments in repairs to the next
medium-term management plan. We will keep theshareholders’ equity ratio at around 50% and will
invest actively, considering economic conditions andcash flows.

Toward Realizing Our 2025 Vision
We are drawing up the next medium-term management
plan for the five years beginning from fiscal 2021.
Our vision for fiscal 2025 is to be a global leader inadvanced materials, and a leader in Japan in its traditional businesses. To achieve this vision, we intend tocontinue executing our strategy, focusing on ICT and
healthcare, and will develop the environment andenergy business as a new core business.
In the thermal management materials business, ademonstration test will be started for the mass production of silicon nitride for power semiconductor modules
at the Center for Commercialization of Advanced
Technology (Yanai City, Yamaguchi Prefecture) in April
2021 to promote quick commercialization. Meanwhile,boron nitride and aluminum nitride fillers, which arebeing developed, will be launched to expand thethermal management material product lineup.
In the IC chemicals business, we are enhancing thehigh purification of high-purity chemicals for electronics
manufacturing, quality and process management andanalysis techniques to meet leading-edge semiconductor
manufacturers’ quality requirements. We aim toBase in Taiwan for high-purity chemicals for electronics manufacturing(Yunlin Factory of Taiwan Tokuyama Corporation)

accelerate globalization, particularly in our operations in
Asia and promote the supply of locally produced goods.
In the electronic materials business, we will focus on
investing to improve the quality of semiconductor-grade
polycrystalline silicon and will continue to pursue differentiation from competitors’ products in terms of quality.
In the pharmaceutical ingredients / intermediates
business, we will strive to expand from the field ofpharmaceuticals into peripheral fields. Our targets areactive ingredients for supplements, cosmetic ingredientsand ingredients on the periphery of veterinary medicine,for which we intend to enhance production, development and marketing. Themes regarding applications for
the Company’s unique technologies and existing products are being pursued. We will strive for quick commercialization through open innovation with universities
and outside research institutions and by other means.
In the plastic lens-related materials business, we willtake steps to expand our market share in photochromic
dye materials and continue to develop high-performance
photochromic dye materials to contribute to improving
the quality of our customers’ products.
In the dental materials and equipment business, wewill continue to focus on increasing market share bydeveloping and expanding sales of the OMNICHROMA
series of composite resins, our mainstay product. We
will accelerate the development of materials for crownrestorations using digital technology as well as dental
and preventive dental care products, which are products
in next-generation businesses that we plan to makeinto major businesses following the composite resin
business.
We also aim for business creation in the field of theenvironment and energy to help achieve a sustainable
society. In the Chemicals Business Division, we will
pursue commercialization through the development oftechnology applying soda ash manufacturing technology to utilize CO2, and the development of alkaline
water electrolyzer units and systems to manufactureand sell green hydrogen and contribute to promoting
renewable energy.
In the Cement Business Division, the complete
recycling of waste gypsum board has been acclaimed asa recycling technology that does not depend on kilns(rotary kiln). We intend to seek new business development, following that recycling technology, which willcontribute to recycling and environmental protection.

 irection of the Company in theDMedium to Long Term
We believe that we cannot survive amid the international trend toward decarbonization and building asustainable society if we do not position our businesses
for the long-term, looking toward 2030 and 2050,
where the environment, energy and health are key
words, and for which we need to reconsider what ourbusinesses should be from the longer-term perspective.
We will continue to work toward globalization in
the chemicals and cement businesses, the businesses
that have traditionally been strong sources of revenue,
following the trend toward decarbonization and leveraging the technological capabilities that we have accumulated over many years. We will change the structuresof these businesses to transform them into businesses
that contribute internationally. However, the domestic
markets that these businesses target will shrink. We
cannot survive unless we take steps to evolve, such as
the creation of businesses that contribute to environmental protection. To maintain our existing businesses,
we will create new environmental businesses promptly.

Tokuyama Re port 20207

Top Message

In the Specialty Products business and the Life &Amenity business, we are considering new technologies
and new business areas to expand sales as well as new
products and businesses deriving from existing products. To develop these new businesses, we need tomake our strengths clear, enhance them and make themost of limited management resources. We also needto actively procure the resources necessary from outside
the Company. Instead of doing everything within the
Company, we will pursue every possibility, bringing in
new viewpoints and ideas through alliances with othercompanies, mergers and acquisitions and cooperation
with academia.
Open innovation is the key to creating new businesses outside the framework of our existing businesses
to reform our business structure over the long-term.
We have been increasing pipelines and themes for new
development by strengthening cooperation with universities and research institutions. We strongly believe that
great possibilities can be realized and a wealth ofknowledge can be gained through cooperation withacademia in open innovation, enabling us to makeingenious use of this knowledge.
For example, we have recently developed a newchemical synthesis process jointly with a university inthe healthcare field. The process enables the manufacture of high-quality active ingredients for supplements
and pharmaceutical ingredients at very low cost. The
process can be applied also to newly discovered drugs
that are already being sold.
We are also giving financial support to universities
and research institutions to support basic research andhelp develop new technologies. Through initiatives likethese, we have connected with many university teachers. Our network has been strengthened, and we have8

T ok uy a m a R e p o r t 2 0 2 0

hired mid-career employees. A virtuous cycle has beencreated, which has produced results.
We primarily have connections with domestic universities and research institutions. We are consideringbuilding relationships with overseas organizations tolearn about a wider range of cutting-edge technologies
and improve the quality and speed of research anddevelopment. We will work toward the globalization of
our businesses and marketing to demonstrate ourstrengths. From 2019, we have been conducting joint
development with the Industrial Technology ResearchInstitute of Taiwan (ITRI) through the Taiwan ResearchLaboratory established in 2018. There are many cutting-edge electronics companies in Taiwan, and ourtechnologies have been matched with some of them.

A research and development base focusing on healthcare (Tsukuba ResearchLaboratory)

Tokuyama’s ESG Management
To promote our CSR activities as a management priority,
we have determined nine material challenges* related
to the SDGs. Reconsidering coal-fired power plants, asource of our competitiveness, is a major theme inrelation to the global environment. We believe we needto set specific targets related to our direction in themedium- to long-term, reduce CO2 emissions andchange to alternative energy sources. (*See page 30 for
details.)
While we disclose risks and deal with them appropriately, we take steps to create new business opportunities. The key point is changing the business portfolio,
taking new environmental businesses into consideration, including enhancing the world’s most advanced
electrolyzer development technology, making thedevelopment technology a business and creating ahydrogen business.

We believe that we need to respect the diversity ofknowledge and hire more people with more diverse
knowledge, without discrimination, while being inclusive of women and foreign nationals, thereby creating
an environment that enables each person to actively
participate.
We believe we need to obtain diversity in our corporate governance by actions such as appointing female
external directors and foreign external directors associated with our globalization.

Looking to the Post-COVID WorldCOVID-19 has changed the ways in which we work
significantly. It has become clear that telework is aneffective means of conducting office work and data
analysis, among other types of work, and is expected to
improve productivity. We believe that striking a balance
between working at home and working at the officeimproves operational efficiency and we are revising thework-at-home system.
We will actively promote digitization, preparing
information tools and systems to facilitate operations

both at home and at the office.
We expect that COVID-19 will significantly change
trends in our divisions and the way cooperation occurs
around the world. This has a very significant impact on
the Company’s global strategy.
Japanese companies have followed the businesspractices of Europe and the United States. In recent
years, we have expanded business in Asia. However, it
is questionable whether we have really faced squarely
and accepted the cultures in Asia. If Japanese compa­
nies really wish to promote globalization, it is importantfor us to do so, considering the growth potential of
their markets and large populations.
The balance of power in the world, particularly
between the United States and China, is changing
significantly due to COVID-19. I strongly feel that theCompany needs to reconsider its approach toglobalization.

Message to Investors
Considering that it is important for society and theCompany to develop over the medium to long term,
Tokuyama has been developing technologies andhuman resources, and based on these, has been
expanding businesses for the future.
Our policy is to maximize profits, return profits tostakeholders, make appropriate investments and makeadequate payments to employees from a medium- tolong-term perspective.
To survive in today’s very uncertain environment, wehave to make adequate business plans to meet therequirements and expectations of society, invest andmake sure that we produce results. In this way, we haveto be indispensable to society.
I will listen to the voices of stakeholders and would
like to go forward together and share the results. Your
continued guidance and support are sincerely
appreciated.

Tokuyama Re port 20209

Value Creation Story 1

The Path Together with Society(Millions of yen)

Net Sales (Left)

Operating Profit (Right)

500,000

400,000

300,000

Second Oil Crisis

200,000

Nixon ShockTokyo Olympics
Opening of the Tokaido Shinkansen LineHigh Economic GrowthFirst Oil Crisis

100,000

0

1955

1960

1965

1975

1980

1918 - 1974

1975 - 1989n Foundation toward the expansion of the inorganic
chemicals business and entry into the petrochemicalbusinessn Expanded specialty and processing businesses

Established domestic production of soda ash to resolve difficulty insecuring imports during WWI. Entered the cement business and thepetrochemical business in response to expanding demand in a period ofhigh economic growth. Contributed to increasing people’s quality of life
and infrastructure development. Strengthened environmental measures
to meet social expectations in response to serious pollution problems.
1918

10

1970

Established Nihon Soda Kogyo Co., Ltd. to produce
soda ash in Tokuyama, Yamaguchi Prefecture(currently Shunan City)

1919

Started to produce soda ash

1936

The company name is changed to Tokuyama Soda Co., Ltd.

1938

Started to produce cement in the wet process from waste mud
produced during the production of soda ash

Promoted Company-wide energy conservation in response to
global energy crisis. Created many electronics materials and finechemical products, including semiconductor-grade polycrystalline
silicon and high-purity aluminum nitride, which are mainstay
products, to meet new social needs.

1976

Commenced production of polyolefin film

1982

Synthesized diallyl carbonate using the sodium
carbonate method and commenced sales as a plastic
lens-related material

1982

Developed an aluminum nitride sintered body that has a highthermal conductivity and transmits light

1983

Commenced production of high-purity chemicals for electronics
manufacturing

1983

Commenced sales of enzyme kits for polyamine tests,
which resulted in the Company’s entry into thediagnostic reagents and systems business

1940

Started to produce calcium chloride using distillery effluent
produced during the production of soda ash

1983

1952

Changed the manufacturing method of caustic soda to theelectrolytic process

Switched over from the caustic soda manufacturingmethod to the ion exchange membrane method

1983

1960

Completed construction of Nanyo Plant to expand
cement business

Commenced sales of Palfique, a dental composite resinthat applies polymer technology and powder control

1984

Commenced production of semiconductor-grade polycrystalline
silicon, from which silicon wafers are made, with thedevelopment of the information society

1985

Completed a plant to manufacture high-purity
aluminum nitride using a unique nitride reduction
process and commenced production

1985

Established the Kashima Factory in Hasaki City (present Kamisu
City), Ibaraki Prefecture, to expand fine chemicals business

1987

Commenced production of NF Sheet, a microporous film that
repels water but allows air to pass through1989Completed construction of the Tsukuba Research Laboratory in
Tsukuba, Ibaraki Prefecture

1961

Commenced ready-mixed concrete business in response toexpanding construction demand

1964

Commenced production of propylene oxide by employing chloride
that makes use of by-products from caustic soda operations

1967

Commenced production of ion exchange membranes that areused for salt production from concentrated seawater (The firstcommercialization of ion exchange membranes in Japan)

1972

Commenced production of isopropyl alcohol (IPA)

T ok uy a m a R e p o r t 2 0 2 0(Millions of yen)

50,000U.S.-China Trade Friction

Iraq WarGreat Hanshin Earthquake

Plaza Accord

Rapid Growth of Emerging Economies
and Surges in Resource Prices

Beginning of the Gulf War

Adoption of the Kyoto Protocol (COP 3)

Bursting of the Economic Bubble

Asian Currency Crisis

40,000Adoption of the Paris Agreement (COP 21)
Great East Japan Earthquake
30,000U.S. Terrorist Attacks

Black Monday

20,00010,000

1985

1990

1995

2000

2005

2010

2015

0

1990 - 2004

2005 - 20152016 -n Strengthened andrestructured core businessesn Focused on raising
corporate valuen Building a new foundation

Provided cutting-edge materials to thesemiconductor industry and contributed
to IT innovation. Responded to market
demand from a global perspective by
establishing business bases overseas
and consolidating operations and spinning off businesses.
1994

The company name is changed toTokuyama Corporation

1995

Established a joint venture forphotoresist developer in South Korea
and commenced production in Ulsan,South Korea

Companies’ social contributions,
including their contribution to thecreation of a recycling society, attracted
a great deal of attention, and Tokuyama
boosted its presence due to its contributions to zero emissions and resource
recycling. Promoted globalization.
2007

Established Tokuyama Chemicals (Zhejiang)
Co., Ltd. in Zhejiang, China, and commenced
production of fumed silica in China

2008

A GMP-compliant plant to produce drug
substances for pharmaceuticals wascompleted at the Kashima Factory

Established Tokuyama Electronic
Chemicals Pte. Ltd. in Singapore andcommenced the refinement and fillingof high-purity chemicals for electronics
manufacturing

2008

Established Shunan Bulk Terminal Co., Ltd.,a joint venture that stores and ships bulk
cargo, such as coal, etc.

2009

1998

Established Taiwan Tokuyama
Corporation in Taiwan and commenced
the refinement and filling of high-purity
chemicals for electronics manufacturing

Announced the construction of apolycrystalline silicon plant in Malaysia

2013

Tokuyama Chiyoda Gypsum Co., Ltd.
established as a joint venture to develop a
waste gypsum board recycling business

1999

Began operating a recycling plant
converting waste plastic into alternativeof thermal energy for cement

2013

Commenced production of liquified hydrogenat Yamaguchi Liquid Hydrogen Corporation, ajoint venture with Iwatani Corporation

2001

Established Yamaguchi Eco-tech
Corporation, a joint venture with Ube
Industries, Ltd., and commenced
recycling of waste incineration ash

2015

Commenced operation of cement clinker
loading facilities for exports

2004

Established Shanghai Tokuyama Plastics
Co., Ltd. in Shanghai, China, as amanufacturing and sales company of
microporous film

1997

To help achieve the SDGs and solve
social issues, Tokuyama prioritizes
ICT, healthcare and the environment
and promotes initiatives to develop
products and technologies that will
help solve social issues.

2017

Transferred Tokuyama Malaysia Sdn.
Bhd., a polycrystalline silicon
manufacturing and sales company in
Malaysia, to South Korea-based OCI
Company Ltd.

■ Chemicals ■ Specialty Products ■ Cement ■ Life & Amenity

Tokuyama Re port 202011

Value Creation Story 2
Our Strengths and Strategies

We have identified our strengths in each of the six capital
categories and have determined strategies for each category
to undertake a variety of initiatives.

Strategy• Expand production bases and build
new production bases in a timely
manner to meet customer needs• Continue investment in port infrastructure to strengthen export
systems

Manufacturing Capital• Highly integrated andhigh-efficiency production
structure of Tokuyama
Factory• The capacity of port infrastructure at Tokuyama
Factory enabling export andimport via large vessels

Strategy• Make Company-wide efforts to reduceenergy-originated CO2 emissions (byfiscal 2030, reduce emissions by 15%
from BAU* emissions in fiscal 2013)* BAU refers to Business as Usual. (emissions without
specified reduction measures)• Continue to examine in each process therisks, hazards, regulations of domestic
and overseas laws, and risk assessments
for chemical substances related to
products

Strategy• Develop products and technologies
to solve social issues and help
achieve a sustainable society• Promote disclosure and dialogue
with each type of stakeholder toensure the deepening of mutual
understanding

12

T ok uy a m a R e p o r t 2 0 2 0

Natural Capital• Environmental management in all businessprocesses• Development of products,
technologies and manufacturing processes that take
into consideration environmental impact

Six CapitalSocial Capital• Build sustainable relationships with adiverse range of stakeholders throughcommunication emphasizing disclosureand dialogue

Strategy• Treat, assign and cultivate employees
appropriately and link human resources
directly to the growth of the Company• Hire mid-career employees actively andaccelerate human resources innovation• Thoroughly conduct process safety anddisaster prevention activities andactivities for industrial safety and health

Human Capital• Create a vibrant corporate culture byincreasing employees’ sincerity andtenacity, traditional characteristics ofTokuyama, as well as their independence
and speed

Financial CapitalCate­gories

Strategy• Good, well-balanced relationships with financial institutions• A credit rating of A
• Improvement of the equity ratio
12.8％⇒ 44.0％(March 31, 2016)		

Intellectual Capital• Unique technologies based on
chemicals developed by Tokuyama• Build a financial structure that is
highly regarded by investors andmarkets that enables us to procure
funding stably at a low interest rateand in a timely manner• Examine investment plans not only
from a financial perspective but also
from the perspective of reducing CO2
emissions and the reduction ofrequired labor(March 31, 2020)

Strategy• Create new businesses in the fields of
ICT, healthcare and the environmentby enhancing distinctive technologies
and through open innovation• Improve safety management using
IoT and Big Data

Tokuyama Re port 202013

Value Creation Story 3
Value Creation Process

Tokuyama provides products that help solve social issues, shifting its focus from quantity
to quality using its unique technologies, based on the management resources that it hasdeveloped over 100 years, to realize its vision: Centered on the field of chemistry, theTokuyama Group will continue to create value that enhances people's lives. Tokuyama
aims to create social and economic value.

Social Issues

Management Resources

VisionManufacturing Capital
Global issues• Climate change and global
warming mitigation• Biodiversity conservation• Stable procurement ofenergy, resources andfood supplies• Highly integrated and highefficiency production structure of
Tokuyama Factory• Capacity of port infrastructure at
Tokuyama Factory enabling export
and import via large vessels

Human Capital• Human resources who possess
independence and speed
Number of employees:

Centered on
Tokuyama
value that

MissionTraditional Businesses• Chemicals• Cement

5,679 (consolidated)* As of March 31, 2020

Financial Capital
Safety and security• Natural disaster mitigation• Improved labor conditions• Cybersecurity measures• A credit rating of A
• JPX400 constituent• Improvement of the equity ratio

44.0%* Results in fiscal 2019

• Sustainable infrastructurebuilding• Improved industrial
competitiveness• Increased regional
vitalitySocial Capital• Build sustainable relationships
with a diverse range ofstakeholders

T ok uy a m a R e p o r t 2 0 2 0

Photopolymerization

Customer-oriented R&D
and Business Activities• Pharmaceutical ingredients /intermediates• High-purity chemicals forelectronics manufacturing• Semiconductor-grade polycrystalline silicon

Natural Capital• Environmental management in all
business processes
Waste recycling rate:

93.9%* Results in fiscal 201914

Powder control
Crystallization,
deposition

Intellectual Capital¥9,193 million• Contribute to health andlongevity

High purification* As of March 31, 2020

• Unique technologies based on
chemicals developed by Tokuyama
R&D expenses:

Low birth rates,
aging demographics

Tokuyama’s Unique
Technologies

Aspirations

Shift from a
Global leader
Leader in its

Considering the SDGs inbusiness activities
The Tokuyama Group is committed to contributing to the achievement of the Sustainable
Development Goals (SDGs) adopted by theUnited Nations General Assembly in September
2015. The Group verifies that its products andbusiness activities are in alignment with theSDGs in the conduct of its business.

Business Domains
the field of chemistry, theGroup will continue to create
enhances people’s lives

P.2-3

ICT
• Semiconductor materials• Thermal management materials• High-purity chemicals forelectronics manufacturing

Advanced Materials
Healthcare• Specialty Products• Life & Amenity

P.26-27
Nitride reduction

SinteringSol-gelMolecular design

Electrode andmembrane

Organic synthesis
and direct hydration• Pharmaceutical ingredients /intermediates• Plastic lens-related materials• Microporous film
• Dental materials and equipment• Medical diagnosis systems• Thermal management materials AlN/BN/Si3N4• Materials for dental cavity treatment(composite resin)• Photochromic dye materials• Technology for 100% recycling of waste
gypsum boards

Social value
P.16-17• Supporting Innovation
By supplying thermal management
materials and high-purity chemicals forelectronics manufacturing, among otherhigh-quality products, Tokuyama contributes to enhancing the performance of
cutting-edge electronic equipment andenergy saving while also supporting
technological innovation in digital society.

• Contributing to Health andLongevity
In addition to existing businesses, which
manufacture pharmaceutical ingredients /intermediates, dental materials andequipment, and other products, Tokuyama
is expanding into new business domains,
including supplements, cosmetics anddisease prevention, to contribute toenhancing the quality of life.

• Creating a Carbon-free,
Recycling-oriented Society

Environment

P.26-27

Value Creation• Recycling of industrial waste• Waste plastic recycled as an alternative fuel
• Waste liquid treatment• Plastic window sashes (PVC window)

Building businesses using unique technologies, including the recycling of waste,
Tokuyama pursues both profitability andcontribution to a sustainable society.

Economic value
Results in Fiscal 2019
P.42-43¥ 316 billion• Net sales• Operating profit¥ 34.2 billion

focus on quantity to quality
in advanced materials
traditional businesses in Japan• ROA• CCC*

9.0 %64 days* Cash conversion cycle (CCC): Accounts
receivable turnover period + Inventory
turnover period – Accounts payable
turnover period• D/E ratio

0.69

Tokuyama Re port 202015

Value Creation Story 4

Roadmap for Sustainable Growth
We have set a vision, and for creating social value, goals for fiscal 2025 in respective target
business domains, and have identified current challenges and possibilities to efficiently
undertake a variety of initiatives to achieve the goals.

Business
Domains

Goals for Fiscal 2025
(Aspirations)[Thermal Management Material Business]• Commercialization of thermal management
materials that come after high-purity aluminum
nitride (AlN)

Creating Social ValueICT[IC Chemicals Business]• An indispensable supplier of high-purity andhigh-quality materials[Electronic Materials Business]

Supporting innovation• Achieving the quality of semiconductor-grade
polycrystalline silicon that will meet customer
needs

Contributing to healthand longevity[Pharmaceutical Ingredients/
Intermediates Business]• Expanding into areas peripheral to thepharmaceutical field

Creating a carbon-free,recycling-oriented society[Plastic Lens-related Materials Business]

Healthcare• Continuing to develop high-performance
photochromic dye materials that continue to be
selected by customers[Dental Materials and Equipment Business]• Expanding market share in Japan and overseas,
particularly sales of OMNICHROMA[Recycling and Environment-related
Business]

Environment• Developing a new recycling business andbusinesses that will contribute to environmental
protection[Ion Exchange Membranes Business]• Expanding business in the environment andenergy business domain

16

T ok uy a m a R e p o r t 2 0 2 0Major Initiatives• Launch of filler-grade aluminum nitride as well
as boron nitride

Current Challenges andPossibilities• Inadequate product lineup• Expectations of increasing demand for thermal
management materials with the penetration of
5G and EV• Early commercialization of silicon nitride• Improving purification, analysis, quality
management and process improvement
technology• Developing optimal production and supply systems
Thermal Management Materials• Adequately responding in terms of technology,
equipment and supply capability tosemiconductor manufacturers’ quality andsupply requirements• Building a production system to respond to wafer
manufacturers’ quality requirements, which arebecoming more exacting with the miniaturizationand lamination of semiconductors• Building a supply chain, including marketing,contract manufacturing overseas and M&A, inthe fields of supplements, cosmetics and animal
medical medicine• Building research and development, sales andmanufacture systems to expand business• Investment in improved quality• Reducing semiconductor-grade polycrystalline
silicon manufacturing costs• Strengthening marketing as well as sales anddevelopment systems• Choosing appropriate development themes andensuring implementation• Hiring and cultivating human resources• Building optimum development andmanufacturing systems• Promoting digital marketing, primarily in the
United States• Strengthening the system for developing nextgeneration businesses• Lack of name recognition and sales capability
overseas• Early commercialization of the recycling of solar
cell modules• Inadequate product lineup• Seeking out and examining original non-kiln
themes• Selection of themes where the Company cantake advantage of its unique technologies andthe speed of commercialization

Supplements (application example)• Increasing supply capacity by investing in the
expansion of factories• Introducing initiatives to penetrate the Chinese
marketIon Exchange Membranes• Building a supply system to meet increasing
demand• Expanding sales in overseas markets

Tokuyama Re port 202017

Segment Information
Chemicals

Yutaka Tarutani Executive Officer, General Manager, Chemicals Business DivisionThis segment, one of our traditional businesses,
manufactures and sells inorganic chemicals andchlorine derivatives that are indispensable toindustry and society as part of the foundation oflife. Taking advantage of the manufacturing technologies and distribution and sales systems thathave been developed in this segment over many
years, the segment stably supplies high-quality,
cost competitive products.
In its sales strategy, the basic policy is “fullproduction and selling out.” The segment always
strives to optimize the balance of supply anddemand. To maintain full production, the segment continues to strengthen the domestic basethat it has built up over many years. Anticipatinga decline in domestic demand due to a declining
population and customers’ relocation overseas, thesegment endeavors to tap into overseas demand,
particularly in emerging countries where demandis expected to grow. Staff dedicated to overseas
operations in the planning group cooperate withthe sales company in Singapore (Tokuyama Asia
Pacific Pte. Ltd.) to build our user base overseas.
These initiatives resulted in the export ratio of
caustic soda increasing from 12% in fiscal 2018 to
18% in fiscal 2019. The export ratio of polyvinyl

chloride resin increased from 3% to 10%. To flexibly respond to an anticipated increase in demandfor caustic soda particularly in Southeast Asia,
the segment started to improve infrastructure at
the Tokuyama Factory to establish a system thatenables stable shipment.
Because the electrolytic plant and the soda ash
plant, which are the main plants of the segment,
consume large amounts of electricity, we strive
to enhance electrolyzer unit performance to saveenergy and reduce CO2 emissions (by reducing
power consumption) and to develop technologythat utilizes CO2, applying soda ash manufacturing
technology. We will use our unique technologies
to reduce environmental impact globally and mitigate global warming.
Due to the global impact of COVID-19, there isconcern over sluggish demand in the medium tolong term. Amid this situation, we will reinforce
our system for stable supply by strengthening the
supply chain and will seek decarbonization bybreaking away from the existing energy consuming businesses. Taking the SDGs into consideration,
we will promote new business in the environment
and energy business domain.

n SWOT• A unique domestic soda ash and calcium chloride manufacturer• Electrolyzer units and electrolytic and manufacturing technologies withan extensive track record• Inadequate sales networks overseas• Sales volumes of calcium chloride for cryoprotectants changes
depending on weather conditions

S: Strengths W: Weaknesses
T: Threats
O: Opportunities• Market penetration of fuel-cell vehicles, promotion of a hydrogen society• Expanding demand for caustic soda and polyvinyl chloride resin on theback of economic growth in Southeast Asia and India• Application of sodium hypochlorite and IPA in medicine and nursing care18

T ok uy a m a R e p o r t 2 0 2 0• Falling domestic demand due to a decline in the Japanese economy andthe relocation of users overseas• Falling demand due to a slowdown of the Chinese economy

l Sales by Segments(Fiscal 2019)l Net Salesl Operating Profit(Billions of yen)(Billions of yen)100

Others

18.4%

80

87.8

93.5

98.3

20

93.7

83.3

ChemicalsLife &
Amenity

15.8%

26.2%
Specialty
Products

Cement

24.4%

15.2%

16.1

15

15.3

12.9

60
10
40

8.9

5

20
0
(Fiscal) 2015

16.8

0
2016

2017

2018

(Fiscal) 2015

2019

2016

2017

2018

2019

Overview of Results in Fiscal 2019

Challenges to Address

Net sales in this segment stood at ¥93,730 million(down 4.7% year on year). Operating profit came to¥15,366 million (down 8.8% year on year).
The sales volume of caustic soda was firm, but earnings decreased, reflecting higher raw material prices andlower export prices due to a decline in overseas markets.
Earnings from polyvinyl chloride resin rose as the
spread between raw material prices and sales prices wasmaintained.
Earnings from propylene oxide decreased owing to adrop in sales volume for polyurethane, its main application.
Earnings from calcium chloride declined, reflecting adecrease in sales volume for snow melting applications dueto the warm winter and low snowfall, and an increase inlogistics costs.

Operations in Japan and overseas will likely be affectedby the spread of COVID-19 for some time to come. In
this environment, we will strive to secure profits by stably
supplying domestic customers, taking advantage of our
production bases in Japan, identifying customers overseas,building an optimum distribution network including warehouses and inventory control, enhancing cost competitiveness by reducing unit energy consumption and fixed
costs, and creating a production system enabling higher
productivity.
In January 2020, we reorganized the chemicals development department and began initiatives to help achieve
the SDGs. Our themes are the development of a brineelectrolyzer unit, an alkaline water electrolyzer unit andsystem, and technology utilizing CO2, an area where we
can use and apply our own technologies. Through thisdevelopment, we will reduce CO2 emissions and introduce renewable sources of energy, thereby improving ourenvironmental value. We will enhance our corporate value
by developing operations focusing on hydrogen in theenvironment and energy fields.

Major Topics

TopicsTokuyama and Toyota Start Verification Tests in Japan for
Stationary Fuel Cell Generator That Uses By-product Hydrogen
Tokuyama Corporation and Toyota Motor Corporation started verification
tests of a stationary fuel cell generator (FC generator) using a fuel cellsystem (FC system) that is installed in Toyota’s MIRAI fuel cell electricvehicles and has been set up within the Tokuyama Factory grounds.
In the verification tests, the by-product hydrogen generated during
Tokuyama’s manufacturing of caustic soda using brine electrolysis is used
as fuel for the FC generator. The electricity generated by the FC generator
is supplied to the Tokuyama Factory.
Tokuyama will examine a model regional contribution project using
by-product hydrogen as one of Japan’s leading diversified chemicals
manufacturers with the ability to supply high-purity by-product hydrogen.

l System Structure of FC Generator
Oxygen(Air)

HydrogenFC stack

Secondarybattery

Control
panel

PCS

Power supply to plant(Rated output: 50kw)

Direct current ⇒Alternating current

Tokuyama Re port 202019

Segment Information
Specialty Products

Hiroshi Nomura Director, Managing Executive Officer, General Manager, Specialty Products Business Division

The Specialty Products segment manufactures andsells high value-added products, such as semiconductor-grade polycrystalline silicon, fumed silica,
aluminum nitride and high-purity chemicals forelectronics manufacturing, which are used forstate-of-the-art digital devices and technologicalinnovation in the field of the environment and tosave energy. In the thermal management material
business, as a leading company that developed
the world’s first aluminum nitride sintered bodythrough which light passes in 1982, we supply
high-purity aluminum nitride, with its high ability to dissipate heat (thermal conductivity) and
its insulating properties. Our share of the global
market is over 70%.
The semiconductor market continues to technologically innovate, including in miniaturization,and there are volatile demand changes in themarket. The key requirement for market participation is meeting customers’ quality, volume,
price and service requirements in a timely manner.
The market is growing, and the number of newcompetitors entering the market is increasing
worldwide. Competition between existing competitors and new ones is expected to intensify. In thisbusiness environment, we focus on manufacturing

higher quality products, developing new products
and on accurately identifying the needs of the
manufacturers of leading-edge semiconductors
and semiconductor materials based on what we
consider are our strengths, namely our history ofdelivering to the world’s top manufacturers ofsemiconductors and semiconductor materials andour production technology and analysis techniquethat enables us to continue to manufacture highquality (high-purity) products.
Due to COVID-19, economic activities are sluggish, and the world economy is slowing remarkably. However, in the semiconductor industry,
demand for semiconductors for data centers is
expected to increase in response to increasing
communication volume due to the expansionof working from home and other hours spentat home. To ensure that sales opportunities are
seized, we will forcefully implement differentiation strategies. We will invest with the aimof reinforcing the facilities used for each of our
products in a timely manner to meet the needs ofthe market and customers, and we will accelerate
our efforts to improve quality and develop new
products.

n SWOT• Superior quality products related to semiconductors• Unique high purification technologies, such as nitride reduction (thermal
management materials) and direct hydration (IPA)• A large share of the thermal management material market• Inadequate marketing capability for the global market

S: Strengths W: Weaknesses
T: Threats
O: Opportunities• Shift to the next-generation communications standard(5G) and the sophistication of electronic equipment• Growth in the semiconductor field attributable chiefly to higher performance, higher-capacity memory and electrical equipment for vehicles• Higher customer quality requirements due to advances in miniaturizationand lamination

20

T ok uy a m a R e p o r t 2 0 2 0• Entrance of new overseas manufacturers• Technological innovation in the semiconductor market

l Sales by Segments(Fiscal 2019)l Net Salesl Operating Profit(Billions of yen)(Billions of yen)

80

Others18.4%
Life &
Amenity

Chemicals

60 60.9

12

67.7
58.6

59.6

26.2%

54.4

Specialty
Products
Cement

24.4%

15.2%

9.2

8

9.9
7.0

6

40

15.8%

11.0

10

4
2

20

0
0
(Fiscal) 2015

-2
2016

2017

2018

2019

(1.1)

(Fiscal) 2015

2016

2017

2018

2019

Overview of Results in Fiscal 2019

Challenges to Address

Net sales in this segment stood at ¥54,466 million (down
8.7% year on year). Operating profit was ¥7,058 million(down 29.0% year on year).
Although there were signs of recovery in the semiconductor-grade polycrystalline silicon and thermal management materials markets, sales volume fell due to inventory
adjustments and earnings decreased. The sales volume ofhigh-purity chemicals for electronics manufacturing,primarily those for overseas markets, recovered and wason a par with the level of the previous fiscal period.
In research and development, we upgraded existingsilica products and developed new conformal silica. We
strengthened the organization for the trial production ofaluminum nitride filler, boron nitride filler and silicon
nitride powder and made progress with customer evaluations. Development of a silicon nitride substrate wascommenced. We stepped up efforts to meet the need forhighly purified materials associated with the miniaturization and 3D integrated processes of semiconductor
devices.

We expect that the semiconductor market will continue
to grow in the medium to long term. Each business in
the Specialty Products segment is being deployed mainlyin Asia, particularly in Taiwan, South Korea and China.
We are considering expanding the businesses into otherregions. If certain conditions are met, we will actively
create new bases in new markets to increase the ratio ofoverseas sales.
We will prepare to continue to invest in what is necessary to expand business, improve quality and launch new
products in a timely manner. Meanwhile, we will enhance
the production and quality control technologies that makebusiness expansion, quality improvement and new productlaunches possible. We will also enhance engineering capabilities, designing and building facilities and plants thatwill enable the production of high-quality products. We
aim to build a cost-competitive production system that will
also maintain the quality of products to increase customer
satisfaction regarding quality and cost.

Major Topics

TopicsCenter for Commercialization of Advanced Technology to
Be Established for the Commercialization of Silicon Nitride l Center for Commercialization of
Tokuyama has started construction of the Center for Commercialization ofAdvanced Technology, which will be used for the commercialization of silicon
nitride, among other advanced materials. The center will begin operating in 2021.
The center will be used as a base for the development and commercializationof products that contribute to global environmental protection and the further
application of ICT. For the foreseeable future, the center will focus on the commercialization of silicon nitride for the power semiconductor modules used in environmentally friendly vehicles and renewable energy power generation equipment.
Tokuyama will contribute to the development of the environmentally friendly
and sustainable society by promoting the use of silicon nitride materials that areboth quality and cost.

Advanced Technology
Ceremony praying for the safety of
construction work

Tokuyama Re port 202021

Segment Information
CementTakahide Taniguchi Executive Officer, General Manager, Cement Business Division

Our cement business was born from the effective
use of the waste generated in the production of
soda ash. Tokuyama’s cement plant, in terms of
production capacity, is one of the largest single
plants in Japan. It provides cement and related
products, including cement-type stabilizer. These
products support infrastructure, such as buildings,
port facilities, bridges and roads. The plant’s port
facilities are capable of unloading raw materials
from ships and loading products onto large vessels. Three kilns enable optimized production andstable supply.
Although demand fell due to COVID-19, we
actively sell products for construction to increase
sales volume. Demand also fell overseas due to
COVID-19. We are changing destinations to markets where demand is rising, even if slightly, toincrease the volume of exports. On another front,
we are striving to tap into new sources of demand,such as customers’ capital expenditures, in cooperation with our other business segments.
Coal prices are falling, which is helping reduce
manufacturing costs. At the same time, theoperating rate is dropping due to a decrease insales volume, which is increasing costs. In this environment, we will continue to curb any increases
in fixed costs. The aging of equipment is anothermajor challenge. We will strengthen our safetysystem by continuing to conduct periodic maintenance and invest in replacement, in addition to
conducting routine inspections, thereby ensuring
stable and safe operation.
In 1995, we succeeded in burning waste plastics
in the front portion of the kiln, an industry first,
and we have also established a technology to treat
large amounts of waste plastics without polluting. While continuing to pursue the resourcesand environment business using the kiln, we areconsidering developing a recycling business thatwould be independent from the kiln to contributeto solutions to social issues.
We will help with measures to improve theaging infrastructure built or improved during theperiod of high economic growth through concrete
patching and reinforcement to support sustainablesocial development.

n SWOT• Contributing to environmental conservation by accepting waste in andoutside the Company and using it as raw materials for cement andalternative thermal energy sources• Increasing repair costs due to the aging of equipment

S: Strengths W: Weaknesses
T: Threats
O: Opportunities• Domestic demand related to the National Resilience Initiative and theLinear Chuo Shinkansen Line project• Demand for infrastructure development associated with economic
development in emerging countries

22

T ok uy a m a R e p o r t 2 0 2 0• Intensifying competition due to the reorganization of the cement
industry• The adverse effect of CO2 emissions on the cement industry• Falling domestic demand due to the declining population

l Sales by Segments(Fiscal 2019)l Net Salesl Operating Profit(Billions of yen)(Billions of yen)100

Others18.4%

80

Cement

82.9

87.3

8

26.2%

7.5

87.2
6

ChemicalsLife &
Amenity

15.8%

85.4

92.3

5.8

60

4.5

4
Specialty
Products

24.4%

15.2%

3.2

40
2

20
0
(Fiscal) 2015

3.8

0
2016

2017

2018

2019

(Fiscal) 2015

2016

2017

2018

2019

Overview of Results in Fiscal 2019

Challenges to Address

Net sales in this segment stood at ¥87,289 million yen(down 5.5% year on year). Operating profit came to¥3,835 million (up 19.7% year on year).
Although cement manufacturing costs fell due to adecrease in raw material prices, earnings from cement
dropped, reflecting lower sales volume and an increase in
fixed costs, including repair costs. Earnings from resource
recycling rose as a result of an increase in the volume ofwaste accepted.
In research and development, we are continuing
development for the utilization of waste and by-productsin the cement production process to reduce environmental
impact. We have started to develop a technology torecycle solar panels as a new theme to utilize waste effectively. As basic research into cement, we continued an
examination to lower the cement clinker burning temperature to save energy.

We are concerned about a decline in demand as construction work was suspended temporarily, primarily in large
cities, due to COVID-19.
In this environment, we will strive to secure earnings
through efforts to receive orders after construction work
resumes and significant reductions in manufacturing costs.
With regard to receiving orders, we are considering tapping into demand in the Tokai area, particularly demand
related to the Linear Chuo Shinkansen Line project andredevelopment in front of Nagoya Station, using the
Nagoya Service Station, which was established in 2019, asa base. To reduce manufacturing costs, we will create anorganization dedicated to the introduction of advanced
high energy efficiency technology in the cement manufacturing department and will take steps to ensure we arehighly competitive.
We will cultivate the building materials business, whichmainly engages in concrete repair materials used for the
repair and reinforcement of aging social infrastructure suchas roads, tunnels and bridges, as the next core business inthis segment by developing new products and enhancing
product sales.

Major Topics

TopicsTechnology for 100% Recycling of Waste Gypsum Boards Wins Minister ofthe Environment Award and LCA Society of Japan Chairman’s Award
Gypsum board is a material used to build interior walls and ceilings. When new buildings
are built and buildings are dismantled and rebuilt, waste gypsum board is generated, andmost of it is disposed of in landfills.
Tokuyama Chiyoda Gypsum and Tokuyama have developed a 100% recycling technology for producing material for gypsum board from waste gypsum board and have succeeded in commercializing the technology. The technology was recognized, with the twocompanies winning the Minister of the Environment Award at the 46th Environmental
Awards and the Chairman’s Award at the 16th LCA Society of Japan Awards.
There are high expectations as a technology enabling the conservation of raw
materials and significantly improving the environmental efficiency of housing
construction materials.

Award ceremony for the 46th Environmental
AwardsTokuyama Re port 202023

Segment Information
Life & Amenity

Ryo Sugiyama Managing Executive Officer, General Manager, Life & Amenity Business DivisionThis segment provides pharmaceutical ingredients /intermediates, dental materials and equipment,
medical diagnosis systems, food packaging materials and materials for disposable diapers, among
other products, to help people live comfortable
lives. Of these products, photochromic dye materials, which are created using an organic synthetic
technology in which we excel, are widely usedas photochromic dye materials in plastic eyeglass
lenses to protect people’s eyes due to their uniqueproperties in which their color quickly develops
and fades and they filter out ultraviolet light.
In the present super-aging society, healthcare markets, particularly overseas markets, areexpanding. The domestic market is undergoingdrastic change, including falling drug prices dueto the policy of reducing healthcare spending andintensifying competition attributable to the entryof overseas manufacturers, especially Chinese manufacturers, into the market.
In this market environment, the Company
operates state-of-the-art manufacturing equipment that conforms to the manufacturing control
and quality control standards for pharmaceuticals
and quasi drugs under a strict control system that
ensures product reliability, and it also develops

high value-added products that are both pricecompetitive and superior in terms of performance,
efficacy and usability. The departments responsiblefor development, manufacturing and sales cooperate with each other to meet the diverse expectations of customers promptly and faithfully.
We also promote open innovation, including
joint research with external organizations, anddevelop products for markets where the uses of
products are different from existing markets. To
strengthen marketing capabilities overseas, we
actively hire human resources that are knowledgeable regarding overseas markets. We aim
to expand the markets for dental materials andequipment, medical diagnosis systems and ion
exchange membranes, among other types of
products.
As environmental regulations that apply tocorporate activities are becoming more stringent,
we are developing environment-related businesses. The ion exchange membranes business, forexample, recycles resources recovered from industrial effluent. Tokuyama will contribute to building a sustainable society by providing productsthat reduce environmental impact, including ion
exchange membranes and plastic window sashes.

n SWOT• Ability to develop products and technologies based on extensive
experience• The unification of the sales and development divisions enables theCompany to respond to users’ requests promptly and meticulously• Presence in overseas markets• Insufficient expansion into overseas markets

S: Strengths W: Weaknesses
T: Threats
O: Opportunities• Growth in the healthcare field due to the arrival of a super-aging society
and increasing health consciousness• Increasing demand for energy-saving products, including plastic window
sashes and home building materials

24

T ok uy a m a R e p o r t 2 0 2 0• Existing products no longer used due to changes in lifestyles.

l Sales by Segments(Fiscal 2019)l Net Salesl Operating Profit(Billions of yen)(Billions of yen)

60

57.6

50
Others18.4%
Life &
Amenity

15.8%

Chemicals

26.2%

50.7

51.5

54.3

8

56.3

6

40

5.3

30
Specialty
Products

Cement

24.4%

15.2%

4

20

3.7

3.2

2

10
0
(Fiscal) 2015

6.5

2.8

0
2016

2017

2018

2019

(Fiscal) 2015

2016

2017

2018

2019

Overview of Results in Fiscal 2019

Challenges to Address

Net sales in this segment came to ¥56,307 million (up3.5% year on year). Operating profit stood at ¥2,885
million (down 10.8% year on year).
Although sales volume of dental materials and equipment increased mainly overseas, earnings from dental
materials fell chiefly due to an increase in advertisingexpenses related to the launch of new products. Earnings
from medical diagnosis systems rose, reflecting steadyorders for clinical testing devices and systems. Earnings
from ion exchange membranes fell due to a decrease inlarge-scale projects.
The Company developed products in each business.
With regard to plastic lens-related materials, the Company
developed next-generation photochromic dye materials. In
relation to ion exchange membranes, it expanded application technology of bipolar membrane electrodialysis anddeveloped ion exchange membranes for which there were
customer needs.

Due to the impact of COVID-19 in Europe and the UnitedStates, sales volume of dental materials and equipment,
among other products, is expected to fall temporarily. In
this environment, the Company will focus on developing and selling new healthcare products in response tochanges in customer needs and the market, aiming to
expand earnings.
In the pharmaceutical ingredients / intermediates
business, we will develop products for supplements andcosmetics, which support healthy and comfortable lives,
including skin whitening and skincare products and healthfoods. We will build optimal development, production
and sales systems, while considering alliances with outside
entities as well as mergers and acquisitions.
In the ion exchange membranes business, where
demand is growing for applications other than existinguses, including resource recovery and the reduction ofprocess effluents that contribute to reducing environmental impact, we will improve the supply system to meet
expanding demand. In the polyolefin film business, where
the main product is food packaging film, we will focus onenvironmentally friendly products using biomass plastics.

Major Topics

TopicsTokuyama Chosen as a CPhI Pharma Awards 2019 Finalist
In recognition of our success in active pharmaceutical ingredient (API) process development, Tokuyama was chosen as one of six finalists for the Excellence in Pharma award in
the API Development category of the CPhI Pharma Awards 2019.
The CPhI Pharma Awards are given to technologies based on actual production ineach of the sectors in the healthcare business. Nominated in the API Development
category that Tokuyama entered are manufacturing technologies in which process
chemists from original and generic manufacturers throughout the world pursued thelimits of creativity, efficiency and economy. The Company’s process development technology can reduce the existing manufacturing process by nearly half and can improve
productivity and economic efficiency significantly. Tokuyama will continue striving todevelop competitive technologies in both product development and process development to provide technologies and products that contribute to healthy and better lives.

Tokuyama Re port 202025

Research and Development
R&D

Fumiaki Iwasaki

Director, Managing Executive Officer, General Manager, Research & Development Division

Role of the Research & Development Division and R&D Policy
The raison d’être of the Research & Development Division
is to contribute to the growth of the Tokuyama Group by
supporting existing businesses and creating new businesses in the fields of ICT, healthcare and the environment
through open innovation and the development of theCompany’s unique technologies. The main role of thedivision is to comprehensively understand the current stateof the Tokuyama Group’s technologies from a bird’s eyeview and to set and implement the development themes

necessary for future growth.
The Company strengthens marketing, which links
the Company’s technologies to the needs of society. The
Company and the Research & Development Division arealways considering who our customers are, whether wehave a market, whether we are correctly managing schedules and whether prices meet the expectations of ourcustomers, and this is beginning to produce results.

Characteristics of the Company’s R&D
The Company develops new technologies and productswith a main focus on the ICT, healthcare and environment
fields, leveraging its unique technologies including thoselisted at right.
Particularly in the area of ICT, we have many themes
related to miniaturization and 3D technology that utilize
the Company’s unique high purification technology. The
Research & Development Division will continue to focus on
pursuing these themes in cooperation with businessdivisions.

Technologies and Products

UniqueTechnologies

High purification / Nitride reduction / Sintering / Sol-gel /Powder control / Crystallization, deposition / Electrode andmembrane / Photopolymerization / Molecular design / Organic
synthesis and direct hydration

Uses of
Proprietary
Technologies

Pharmaceutical ingredients / intermediates, IPA SE / TMAH highpurity chemicals for electronics manufacturing, semiconductorgrade polycrystalline silicon, fumed silica, materials for dental
cavity treatment (composite resins), photochromic dye materials,
hard coat materials, thermal management materials (AlN, BN and
Si3N4), technology for 100% recycling of waste gypsum boards

Achievements in Fiscal 2019
In the fiscal year under review, progress was made in thedevelopment themes almost as planned. A major achievement is that a new chemical solution for semiconductors
and silica aerogel, “Airlica®,” came very close to being
adopted in customers’ products.
In September 2018, the Taiwan Research Laboratory
was established to promote open innovation with semi-

conductor manufacturers in Taiwan, a place with advanced
semiconductor technology and the location of theIndustrial Technology Research Institute (ITRI). In fiscal
2019, we began joint development with ITRI in the fieldsof healthcare including technology development for
semiconductor-related products.

Future Strategy
In our medium- to long-term management strategy, theCompany aims to become a global leader in advanced
materials. We will put resources primarily into the fields of
ICT, healthcare and the environment and will conduct
research and development to expand and develop eachbusiness.

26

T ok uy a m a R e p o r t 2 0 2 0

Reducing CO2 emissions is an important management
issue. We will promote the reduction of CO2 emissions
from technical aspects by developing technology for
utilizing CO2, forming alliances with external companies
and helping develop business plans to create new
businesses.

R&D Topics

TopicsNew Chemical Solution for Semiconductors
At the Tsukuba Research Laboratory, we are developing a new chemical solution
for semiconductors to be used as release agents and washing solutions. We havealways developed products from the customer’s perspective, using the Taiwan
Research Laboratory as a point of contact, to manufacture products that meetthe needs of the manufacturers of cutting-edge semiconductors and that are inline with trends in the semiconductor industry where technology evolves rapidly.
While the Company has continued to enhance the quality and features of its
products, it has failed to identify market needs accurately. As a result, many
development themes have not resulted in commercialization. Considering thisfailure, in the development of the new chemical solution for semiconductors, wetook full advantage of our high purification technology, one of the strengths of
the Company, and responded thoroughly to cutting-edge semiconductor manufacturers’ challenging requests for quality and speed. This is a major achievement
resulting from our actions in line with one of the Company’s values: Customer
satisfaction is the source of profits. We plan to build a plant with the goal oflaunching the product in fiscal 2022.

Airlica® Silica Aerogel

Development at the Tsukuba Research Laboratory

10μm

Development started when we generated an interesting type of silica using
powder control technology, in which the Company has a leading edge.
Airlica® is a type of silica. Each particle has many pores, and it has high oil
absorbance capabilities. It has a very smooth texture. With high oil absorbancecapabilities and a smooth texture, Airlica® is a unique type of silica. We havedecided to take advantage of these features to develop foundation and othercosmetic products using Airlica®.
We had no previous experience in the cosmetics field. We assessed thefunctions and features of products being developed and undertook comprehensive marketing along with making proposals to cosmetic manufacturers andproviding samples. Currently, Airlica® is close to being selected by a major manufacturer for their cosmetic products and is in the process of final adjustments. We
are also accelerating development of the second and third phases for cosmetic
products following the development of Airlica®, with a view toward establishinga cosmetics business in the future.
A magnified photograph of an Airlica® particle,
with many holes on its surface

New Thermal Management Materials (Aluminum Nitride Fillers, Boron Nitride, Silicon Nitride)
In the thermal management materials business, we will expand the businessdomain, augmenting the product lineup of nitride ceramic materials leveraging
the Company’s unique technology to achieve effective heat management, which
is an indispensable part of improving the performance of EV, HEV and otherpower devices.
We are focusing on developing high-purity aluminum nitride, a mainstay
product, and boron nitride, a product being developed, for fillers. Our goal is tosee the products used in metal substrates, resin substrates and TIM.
Meanwhile, research and development and demonstration tests for mass
production of silicon nitride will be conducted at the Center for Commercializationof Advanced Technology (Yanai City, Yamaguchi), which is expected to commence operations in 2021. Silicon nitride is a hard ceramic that does not breakeasily. In addition, it has high thermal conductivity. As increasing numbers ofautomobiles include computerized equipment, demand for silicon nitride to be
used in the circuit boards of the electrical control parts installed in automobiles is
expected to increase significantly. We will continue to develop products that are
useful in the promotion of ICT.

Silicon nitride powder and ceramics

Tokuyama Re port 202027

FocusFeature 1

The Tokuyama Group’s Products
Contribute to the Improvement ofPeople’s Health and Hygiene
The Tokuyama Group manufactures and sells products that contribute to improving
people’s health and hygiene and curbing the spread of infectious diseases.
The Group will continue to focus on and expand its business in the healthcare field
and will promote product development and marketing for growth businesses.

Sodium Hypochlorite (Tokuyama Corporation)
Sodium hypochlorite is used widely by the public in chlorine disinfectants. A familiar example is household chlorine bleach, whose
principal component is sodium hypochlorite. In addition to household chlorine bleach, sodium hypochlorite is used for publichygiene. It is added to tap water, swimming pools and septic tanks.
It is used also on dairy farms. It is used to disinfect elderly carefacilities and milk handling equipment and also to disinfect anddeodorize barns for livestock. Sodium hypochlorite is considered aneffective means of controlling norovirus.
Although sodium hypochlorite is a widely distributed chemical
product, it strongly irritates the skin and generates a toxic gas if
mixed with acidic detergents. It requires careful handling. It is
important to use sodium hypochlorite carefully and properly after it
has been diluted to the appropriate concentration.

n Donation to Shunan City

We donated sodium hypochlorite to Shunan Cityin Yamaguchi Prefecture to help the city preventthe spread of COVID-19. The sodium hypochlorite
donated was delivered to the city and diluted toan effective concentration. The diluted sodium
hypochlorite was distributed to businesses in thecity for the disinfection of their facilities.

Isopropyl Alcohol (Tokuyama Corporation)
Isopropyl alcohol is used for pharmaceuticals (see the column atright) and is an important raw material in the medical and pharmaceutical fields.
The isopropyl alcohol delivered to our customers’ sites wasprocessed and sold as isopropyl alcohol for disinfection. In Japan,
isopropyl alcohol is preferred for disinfection before injections andethanol is preferred for everyday hand disinfection because of theirsterilizing power and rough skin that they can cause. Isopropyl
alcohol is often used to disinfect medical devices, and our products
contribute to improving hygiene at hospitals and other places.

(Note) Isopropyl alcohol is highly flammable and volatile. Users need to be very
careful about fire and static electricity in places where isopropyl alcohol
is used. They also must comply with instructions for use, including
requirements for adequate ventilation.

28

T ok uy a m a R e p o r t 2 0 2 0n Contribution to the Manufacture of

Pharmaceuticals
The Company’s high-quality isopropyl alcohol ismanufactured using a unique direct hydration
technique. It is also used as an extraction solvent
in pharmaceutical manufacturing processes and iswell received by customers.

A plant for manufacturing isopropyl alcoholPharmaceutical Ingredients / Intermediates (Tokuyama Corporation)
Tokuyama manufactures pharmaceutical ingredients / intermediates forlifestyle-related diseases (diabetes drugs, antihypertensives), eye drops,
allergy medication, drugs for improving gastrointestinal function andantipsychotic agents, among other drugs.
We have advanced organic synthesis technology, crystallization
technology, powder control and analysis technology. Using thosetechnologies, we are is providing high-purity products that meetcustomer needs. In addition, we have established a consistent quality
assurance system that covers processes from research and development to commercial production, which has enabled us to meet ourcustomers’ requirements for high-quality products for many years. At
present, we are focused on developing original and novel processes
and are striving to manufacture high-purity pharmaceutical ingredientsthat are very economical.
In addition, the Company has identified the development ofcosmetics and supplement active ingredients, areas that are peripheral
to pharmaceuticals, as a new priority area and is currently strengthening development and marketing.
We will win the trust of customers with our strengths in development, sales, manufacturing and quality assurance, as well as continue
to provide products that contribute to the improvement of people’squality of life (QOL).

Voice of a Development Staff Member

Takayuki Miyaoku
Life & Amenity Business
Division
MA Department

Every day, we strive to develop and introduce new technologies and develop
competitive processes, leveraging thetechnological capabilities that we havedeveloped through the development ofpharmaceutical ingredients / intermediates. We have expanded into fields
peripheral to pharmaceuticals, including
cosmetics and supplements, and are
expediting development to contribute to
the further enhancement of people’s lives.

Tokuyama Dent Zia (Tokuyama Dental Corporation)
Tokuyama Dental Corporation's mission is to contribute to the development of dental care through the manufacture and sale of dental
materials and equipment and to contribute to achieving a healthy andprosperous global society.
In addition to expanding our existing business centering aroundthe company’s mainstay product, composite resin (a material for dental
cavity treatment), we have been strengthening our system for developing next-generation technologies and products, including materials for
dentures, prevention and oral care, with the arrival of a super-agedsociety.
In this environment, we launched Tokuyama Dent Zia high-purity,
stabilized hypochlorous acid water in September 2018, inspired by thesodium hypochlorite manufactured by Tokuyama. Tokuyama Dent Zia,
which was launched for dental care, is making contributions in dental
care settings as a product capable of killing germs and preventing
infections at dental clinics. The National Institute of Technology and
Evaluation (NITE) has announced that hypochlorous acid water at a certain concentration more
effectively controls COVID-19. Tokuyama Dent
Zia meets the concentration standard at therecommended dilution ratio.
We will expand beyond the existing businessdomain and continue to develop unique products from our own perspective to contribute to
the development of dental care and people’s
health.

Voice of a Dentist

Dr. Kimiyoshi
Tsuchiya
Director
Nihonbashi Tsuchiya Dental
Clinical Office

We have chosen Tokuyama Dental’s
Tokuyama Dent Zia, which has a variety ofuses. We use a spray to sterilize toothform models, chairs for patients, cabinets,
doorknobs, floors and slippers, among
other things. Dent Zia has a deodorizing
effect, and we use it for restrooms. It isconvenient in many ways.

(Note) Tokuyama Dent Zia is solely for dental treatment
and is not sold to the general public.

Tokuyama Re port 202029

Corporate Social Responsibility
CSR

Tokuyama practices corporate social responsibility (CSR) by fulfilling its mission to use
chemistry to create value that enhances people’s lives. By leveraging the chemical
technologies it has developed and practicing socially responsible management, Tokuyama
will help achieve the Sustainable Development Goals (SDGs) while continuing to create andsupply new value that brings contentment to people and contributes to social progress.

CSR Frameworkn Materiality
Tokuyama conducted a materiality assessment to align its
CSR initiatives and management priorities. This assessment
extracted and identified issues that are of particular material importance to Tokuyama, so that it can concentrate its
management resources on resolving these issues.

Board of Directors
CSR Promotion Council

President

Risk Management and Compliance Committee

Financial Reporting Committee

Seven Committees

Tokuyama operates a CSR Promotion Council that ischaired by the President and comprises all executive
officers in Japan. The Council decides on CSR policies
and goals, and facilitates their implementation. CSR isbuilt upon a platform of appropriate corporate governance and internal controls. Accordingly, the Council
discusses important matters related to internal controls.

Fair Trade and Competition Committee
Security Trade Committee
Information Security Committee
Environment Committee
Safety Committee
Product Safety and Quality Assurance Committee

For details, please refer to the CSR Report or the website.

https://www.tokuyama.co.jp/eng/csr/materiality.html

Materiality (Identified in March 2019)

Environment

Helping to fight global warming

Aspirations (Fiscal 2025)· Reduce CO2 emissions from energy consumption: 15% reduction in BAU CO2emissions by fiscal 2030, compared with fiscal 2013 levels· Expand Scope 3 emissions and c-LCA disclosure data

· Promote recycling and maintain zero landfill waste· Maintain low emissions of environmental impact substances· Comply with legal requirements and other regulations, achieve zeroenvironmental accidents· Maintain zero accidents and disasters
Preventing accidents and preparing for disasters
Safety and Accident· Foster and improve the safety culture
Prevention/Occupational· Improve process safety management level
Health and Safety· Provide amenable working conditions
Developing products and technologies that address social issues · Expand the development of products and technologies that help to resolve
Technical Quality
social issues, focusing on the SDGs
Conserving the environment

Society

Managing chemical substances· Continue to strengthen chemicals management

Engaging with local communities· Harmoniously co-exist and cooperate with communities· Contribute to communities

Promoting CSR procurement· Survey and manage supply chains based on CSR procurement guidelines

Developing human resources· Develop the next generation of managers· Put the right people in the right positions according to their career plan andjob skills, and increase job rotations· Develop global human resources· Promote diversity and inclusion· Employ persons with disabilities· Respect for human rights· Promote work-life balance

Emphasizing diversity

30

T ok uy a m a R e p o r t 2 0 2 0

Basic Philosophy of Tokuyama’s CSR-Oriented Management
Tokuyama approaches its CSR activities in accordance with a basic
philosophy of continuously working with society to build a sustainable
future by contributing to the resolution of social issues and earning
greater trust from various stakeholders with the aim of improving
corporate value.

Environmental Initiatives
For Tokuyama, the pursuit of proactive initiatives toprotect the earth’s environment is an important partof its corporate social responsibilities. Accordingly, theCompany practices environmental management thattakes into account the natural environment in all
business activities.
n Helping to Fight Global Warming
Tokuyama is helping to mitigate global warming by conserving energy used in its business activities, developing
and manufacturing products that help to reduce GHG
emissions and managing Scope 3 emissions.
n Reducing Substances with Environmental

Impact and Waste

Tokuyama is working to reduce its emissions of air andwater pollutants and implementing environmental conservation initiatives such as waste recycling.
In order to reduce atmospheric pollution, Tokuyama
equips boilers, cement kilns and other pollutant-generating facilities with flue gas desulfurizers, denitrationequipment, low-NOx burners and high-performance dust
collectors.
As for the prevention of water pollution, the Tokuyama
Factory follows a stringent system for monitoring industrial
effluent and purifying wastewater using treatment equipment in order to comply with regulatory standards andlimits set by the local government, as well as theCompany’s own standards, which are even stricter.
The effective utilization rate for waste and the “zeroemissions” rate remained high in fiscal 2019 due to efforts
to reduce the volume of waste and comprehensive
recycling efforts.
n Proper Management of Chemical Substances
Tokuyama practices thorough product quality control andverifies the hazard level and toxicity of chemical substances
so that they can be used with peace of mind. It also complies with chemical regulations in and outside Japan.

l Flow of Materials in Business Activities (Unit: 1,000 metric tons)

INPUT

OUTPUT

Waste andby-products

Carbon dioxide (CO2)

CO₂

1,850
Fuel

2,150

Production
TOKUYAMA(49,200,000 gigajoules)

6,600
Waste (incinerated
and landfill)

20.4
Substances withenvironmental impact

Raw materials

6,720

11.4
Products

Industrial water

43,5006,500

Process effluent

22,200
Coolant water and other types of effluent* All amounts are for Tokuyama Corporation on a non-consolidated basis in fiscal 2019.

Tokuyama Re port 2020

31

CSR
Initiatives for Society
As a company that is needed in society, particularly in local communities, Tokuyama places emphasis on communication with local communities and with many different stakeholders as it conducts a range of activities.

32

n Social Contribution Activities
Tokuyama helps educate children, holding company tours
for elementary school children and giving lectures at elementary schools and junior high schools mainly in Yamaguchi
Prefecture, where the Tokuyama Factory is located.
The third-grade children of four elementary schools in
Shunan City visited the Tokuyama Factory and learned
about the production from sea salt of many different
products familiar to them, the size of the factory, plantfacilities and safety measures.
Tokuyama lectured at the Hikari Kankyo Mirai Juku
(class on the environment in the future) held by Hikari City
for first-year students at Asae Junior High School. The
topic was “What is hydrogen energy?” The MIRAI hydrogen vehicle, powered by hydrogen the Company supplies,
was shown to the students, and a sustainable society andthe utilization of hydrogen were explained.

Students touring the Tokuyama Factory

Workshop on hydrogen energy at a local schooln Tokuyama Human Resource Development
Tokuyama has established the Human Resources Policy toclarify how employees, who are responsible for the survival, growth and development of the Company, areexpected to work, how the Company will encourage themto grow and what they are expected to be. Under thispolicy, Tokuyama has reformed its personnel system toincrease the work satisfaction of employees. The aim is tochange the organizational culture by encouraging adoption of the Tokuyama Vision, while adhering to the basics
and ensuring that all employees receive impartial treatment under a thoroughly applied, fair evaluation system.
Following changes in the personnel systems for managers
and senior contract employees, a new personnel system
for general employees is being introduced in fiscal 2020.
While the new personnel system is based on theexisting performance-based qualifications grade system, it
has shifted to being a role-based qualifications system thatemphasizes people’s roles and work activities. In the new
system, the levels of the roles and duties required by theCompany for each qualification grade are shown, which
encourages employees to take on challenges.
It has been decided that a human resource management system will be introduced in fiscal 2020 for theproper operation of the new personnel system. The humanresource management system is expected to have positiveeffects, including the enhancement of the process fromtarget setting to evaluation, the unified management andsharing of information on human resources and the development of human resources and personnel rotations basedon different types of data.

T ok uy a m a R e p o r t 2 0 2 0n Promoting Diversity
Tokuyama is promoting diversity to ensure that all
employees are able to work energetically and succeed.
These initiatives emphasize the utilization of employees’knowledge and wisdom (diversity of knowledge) and fairly
evaluate employees to ensure their skills are utilized basedon their contribution to the improvement of corporate
value. For example, we offer opportunities for everyone todiversify their knowledge through the sharing of employees’ own knowledge through the introduction of new
employees hired mid-career in the Company newsletterand study sessions that are held once a month during
lunch within the Group. Additionally, we have discontinued the general system that limited promotions, and in the
new personnel system, we created a path for the growthof female employees, which account for a majority of
employees. We believe this will lead to achieving the goalsof the Action Plan to Promote Opportunities for Women(e.g., ensuring that women make up no less than 6% ofmanagement). Moreover, we are expanding the current
work from home system, which is currently limited tothose raising children or needing to provide nursing care,
to improve productivity and employee work satisfaction.
Tokuyama is also working to improve workplace environ-extended to within one year of childbirth. Childcare leave
can be taken until the child reaches two years of age*2.
Employees can also take family care leave for up to
two years (legal requirement: 93 days in total) for eachfamily member requiring care. With family care time off(unpaid), regardless of the number of care recipients, it ispossible to take off two days a week (legal requirement:
five days a year).
In addition, an employee reinstatement (rehiring)system has been established to allow employees who
resigned for childcare or family care reasons to be rehired.

ments for persons with disabilities, aiming for the legallyrequired employment rate of 2.2%.
n Promoting Work-Life Balance
At Tokuyama, employees in workplaces eligible for flextime
can choose their workday schedules with no core workperiod requirement. The Company is also striving to optimize working hours by tracking and presenting aggregate
data based on the computer log details of employees,
enabling actual working conditions to be managed.
Under a program to help employees balance work andchildcare responsibilities, eligible employees can also use
flextime from the time that pregnancy is determined until
the child reaches sixth grade*1. Starting April 2019, theperiod during which paid parental leave can be taken was*1 Employees who are pregnant or raising a child in sixth grade or younger canwork shortened hours below the prescribed monthly work hours, and canwork intermittently with interruptions and resumption of work.
*2 In certain cases, leave can be taken until the child reaches age two.

l Usage of Childcare and Family Care Leave, etc.

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

10

13

11

12

12

90.0%

84.6%

100.0%

100.0%

100.0%

18

13

25

33

65

Number of employees taking childcare leave
Return to work rate
Number of employees taking parental leave
Family care leave-taker

1

1

2

2

1

Number of employees taking family care time off

1

1

0

1

1

Number of flextime users

52

55

54

50

52

n Accident Prevention and Occupational

Health and Safety

Recognizing that safety is the basis for its business activities, Tokuyama practices safety as the first step to maintaining good relations with the communities in which it
operates. Based on this approach, the Company carries out
stringent accident prevention measures and occupational
health and safety initiatives in its efforts to create a positiveand safe work environment that is free of accidents.
n Disaster Preparedness Drills
Tokuyama has carried out various training activities. These
include disaster drills for pipe leaks and fires caused by anearthquake, emergency drills at individual company divisions, joint drills involving affiliated companies and contractors, and workplace safety competitions.

General disaster preparedness drill

The Company has also conducted drills for initiating its
business continuity plan (BCP) in the scenario of a Tokyoinland earthquake by designating the Tokyo Head Office as
the disaster response headquarters and the Tokuyama
Factory as the crisis response headquarters.
n Tokuyama Health Management
Based on the basic Company-wide health management
plan that focuses on the sound mental and physical healthof employees and the promotion of measures to mitigate
lifestyle-related diseases, Tokuyama has established thefollowing goals: to improve personal health awareness, tomaintain and reduce the rate at which employees are
diagnosed with heath conditions (below 44%) and to
reduce employees’ absence rate. The Company performs avariety of activities, with the promotion of the Smart Life
Program, health guidance, measures to mitigate lifestylerelated diseases and mental health care as priority tasks.
The Company received Health and Productivity
Management certification in March 2020. Tokuyama waspraised for its promotion of weight management andanti-smoking measures, its implementation of occupational
stress evaluations and its establishment of a consulting
service both inside and outside the Company.
* This certification considers employees’ health management from amanagerial viewpoint and is awarded
to particularly superior companies
from among those strategicallyworking on health management. The
Ministry of Economy, Trade andIndustry established this system andthe Nippon Kenko Kaigi awards
certification.

Tokuyama Re port 202033

FocusFeature 2

Initiatives for Reducing
CO2 Emissions

Reduction of CO2 Emissions as a Management
Issue
Tokuyama has a coal-fired power plant at the Tokuyama
Factory and reducing CO2 emissions has been a management issue for many years.
The Company has promoted energy consumption rate
management, the reduction of greenhouse gas (GHG)
emissions and emission intensity management. In 2019,
the Company identified material issues for promoting CSR
activities and made contributing to the mitigation of global
warming its top priority. In addition to the energy-saving
activities that the Company has conducted using theenergy consumption rate as an indicator, Tokuyama has set
a new target of a 15% reduction in energy-originated CO2
emissions from BAU (base year: fiscal 2013) by fiscal 2030
based on the Paris Agreement. In this way, the Company isaccelerating its efforts to mitigate global warming. The
Company has already reduced CO2 emissions by 10% andis undertaking a range of initiatives to achieve the final
target.

Features of In-House Power Generation at the
Tokuyama Factory
General thermal power plants supply only electricity, andenergy efficiency is said to be around 42%. The thermal
power plant within the Tokuyama Factory supplies steam in
addition to electricity, and the total thermal efficiency is56%. Efficiency is approximately 1.3 times higher than
general thermal power plants and is about equal toleading-edge thermal power plants.
In its in-house power generation, Tokuyama is taking
steps to begin carbon recycling, in which the Company
considers CO2 as a resource and reuses it as a fuel or
raw material.

Losses 44%

Losses 58%
Heat
input

Heat
input
Electricity 42%

From the 200,000kW pulverizedcoal-fired power plant design
thermal efficiency BAT referencetable of the Ministry of Economy,
Trade and Industry (as of January2020), generating end, LHV

34

T ok uy a m a R e p o r t 2 0 2 0Heat 21%

56%

Electricity 35%

Energy flow for the Company’s
power plant, generating end, LHV

CO2 Project Group Established
To achieve the goal of a 15% reduction from BAU, theCompany established the CO2 Project Group within the
Tokuyama Factory in January 2020. The project group isundertaking the following initiatives.
n New Technology Development
CO2 Capture and Reuse
In cooperation with outside research institutions, including universities, and other companies, Tokuyama isdeveloping technologies, including a technology tocapture CO2 generated from the Tokuyama Factory as
well as a technology for using captured CO2.
n Hydrogen Production Using Electric Power

Derived from Renewable Energy

The Company is developing and demonstrating acommercial-scale electrolytic cell and process for developing hydrogen production equipment that can use
large, variable amounts of power from renewableenergy. The Company aims to procure power fromrenewable energy, which involves variable factors, stably
at low cost by producing hydrogen, which is a storable
energy source.
n Renewable Energy Introduction
Biomass Combustion
The Company will use more biomass at its thermal
power generation facility and will reduce the consumption of fossil fuels. The Company will use wood pellets
made mainly from waste materials as forest friendly
sources of energy.
Energy Mix
Tokuyama will examine an energy mix (power sourcemix) at the Tokuyama Factory in fiscal 2030, devising a
scenario about environmental administration and theenergy situation by leveraging the knowledge about
the environment and energy of Yamaguchi University,with which Tokuyama has concluded a comprehensive
collaborative agreement*, and the chemical technologies that Tokuyama has developed over many years(see following page).
*	Comprehensive collaborative agreement between Yamaguchi University andTokuyama Corporation: In 2004, Tokuyama concluded a comprehensive
collaborative agreement with Yamaguchi University for joint research, theexchange of personnel and cooperation in human resources development.
Since November 2019, Tokuyama and Yamaguchi University have been jointly
conducting a study examining a future power source mix (energy source) to
reduce CO2 emissions at the Tokuyama Factory.

n Optimization of Energy Efficiency at the

Tokuyama Factory

In addition to energy saving at each plant within the
Tokuyama Factory, Tokuyama will promote energy
circulation between plants and the supply of heat andenergy to users outside the facility to optimize energy
efficiency throughout the Tokuyama Factory. Tokuyama
is examining joint energy use at plants and energy

Columncirculation outside the Company’s facilities and within
the Shunan Industrial Complex for energy saving inrespective manufacturing departments.
In fiscal 2020, Tokuyama will work out a roadmap
for the above initiatives up to fiscal 2030 based on key
performance indicators (KPIs). The Company will makea Company-wide effort to steadily achieve the plan.

Kazuhiro Fukuyo
Director and Professor at Yamaguchi University’s Graduate School of Innovation
and Technology Management

Background of Academic Guidance
I conduct research on technology management in theindustrial sector where large amounts of energy are generated and consumed at industrial complexes. One of theresearch themes is energy circulation systems connecting
multiple companies (plants), for example, systems wherecompanies (plants) provide emitted steam to each other orwhere waste heat from electric furnaces is reused indifferent plants.
I have executed a variety of projects with Tokuyama,
forming comprehensive alliances. I proposed the development of a future energy mix using scenario planning, andTokuyama has agreed to it.
At the Tokuyama Factory, multiple plants are connectedto each other for the reuse and effective use of energy,
and this is closely related to my research.

Concept of Technology Management
In the technological world, engineers play a central role. In
technology management, the perspective of management
is incorporated and profitability through the effective useof technology is taken into consideration. How will thecompany use the technologies that it has? What services
will the company provide using the technologies that it
has? Who will it provide the services to? In addition toincreasing efficiency and profitability, technology management identifies future growth areas for development.
Creating a vision for the company is one of the roles oftechnology management.

Evaluation of CO2 Reduction by Tokuyama
The chemical industry plays an important role in people’s
lives. However, due to large volumes of CO2 emissions, thechemical industry tends to be have a negative feeling.
Amid this environment, Tokuyama aims to reuse CO2, and I
appreciate Tokuyama’s stance. Reusing emitted CO2
for products in addition to reducing CO2 emissions byefficiently reusing thermal energy is a bold initiative that
only a chemical manufacturer can take.
ICT companies can contribute to reducing CO2 emissions by replacing power from fossil fuels with power fromrenewable energy and through carbon offsets. However,inherently, chemical manufacturers cannot avoid CO2
emissions. It can be said that reducing CO2 emissions andreusing CO2 are the missions of the chemical industry. I
appreciate Tokuyama’s stance of taking the initiative before
global warming becomes more serious.

Expectations for Tokuyama Going Forward
Global environmental conservation is a long-term issue
that needs to be addressed. Reducing CO2 emissions is aparticularly significant issue. It is the mission of the chemical industry to tackle this problem from a long-term perspective. I believe Tokuyama, a leading global company inYamaguchi Prefecture, has this same mission. I would liketo conduct research with Tokuyama while taking into
consideration Tokuyama’s long-term growth.

Kazuhiro Fukuyo

Director and Professor at
Yamaguchi University’s Graduate
School of Innovation andTechnology Management

In 1998, completed the doctoral program at theDivision of Environmental Engineering of the
Osaka University Graduate School ofEngineering. Joined Hitachi, Ltd. Engaged in thedevelopment of air-conditioning equipment. In
2001, won the Award of The Society of Heating,
Air-Conditioning, and Sanitary Engineers ofJapan. In 2002, became a lecturer at the Facultyof Engineering of Yamaguchi University. From2002 to 2004, served as manager of theEnvironmental Engineering Committee of The
Architectural Institute of Japan. From 2003,
engaged in MOT education. In 2004, received
the Education Award from Yamaguchi
University’s Faculty of Engineering for his
engagement in MOT education. In 2005,
became an Associate Professor at Yamaguchi
University’s Graduate School of Innovation andTechnology Management. In 2010, assumed
current position.

Tokuyama Re port 202035

Corporate Governance
Message from an External Director

Shin Kato

Director, Audit and Supervisory Committee Member(External Director)

Toward the Facilitation of Management
I have been involved in the management of Tokuyama as
an external director for about seven years. Through myduties during that time, I have strongly felt that there are
no definitive answers in the tasks of external directors.
Different directors have different areas of expertise anddifferent careers, and each company that brings in external
directors also has different needs.
At Tokuyama, external directors have had diverse
careers. I have learned a lot from working with them.
In this environment, I have always asked where in the
Company I can apply my expertise and experience.
Manufacturing and technology are not my fields of expertise and there is little I can do here in the way of assistance. I have thus sought to contribute to the facilitationof management by giving advice about organizational
structures, personnel affairs and management methods.

The Corporate Culture of Tokuyama andChallenges to Address
It is not easy for a manufacturer to operate for 100 years.
Over a century, the things needed by society change.
Products do not continue to sell. Manufacturers cannot survive unless they respond to changes in society. Tokuyama’s
strengths lie in its history of responding to social change.
However, Tokuyama has not been able to respondto certain changes. Tokuyama is said to be a sound anddiligent company in society. From a different perspective,
Tokuyama appears to be a company that avoids risk anddoes not take on challenges. This will not create problems
if things go well. However, if the Company faces difficulties, the employees involved tell themselves that they cansomehow deal with any difficulties if they work together
and do not assume responsibility for doing so. I think thisis the type of corporate culture and the challenge thatneeds to be addressed.
The Company is confident about the products andtechnologies that it has developed over its 100-year history
and has actively conducted research and development.
In the past, however, the Company was not enthusiastic
about bringing in outside human resources and tended
to adopt a self-reliant policy. The Company is not determined enough to demonstrate greater-than-expected,

36

T ok uy a m a R e p o r t 2 0 2 0

overwhelming speed or technology, maybe because of its
long history. If the Company continues to take this attitude, it may be able to maintain its traditional businesses,
but will not succeed in advanced materials.

Not Repeating the Failure of Tokuyama Malaysia
The failure at Tokuyama Malaysia is related to theCompany’s unique corporate culture. The direction of
the business plan as a whole was wrong. The system was
unclear. The person in charge was not able to correctly
respond to drastic changes in the business environment.
There was a discrepancy between management andfrontline staff. Tokuyama Malaysia was not able to correct
its direction.
Considering this failure, Tokuyama changed its management system significantly in 2017. In addition tochanging from a company with a Board of Auditors to acompany with an Audit and Supervisory Committee, theCompany reviewed the organization of Board of Directors
meetings and the methods for discussion. To exchange
information in and outside the Company, a communicative
system has been established enabling employees to talkdirectly with the president and executive officers at any
time if necessary. One of the roles of external directors inthis system is to take the lead in gathering negative information about possible risks and proposing agenda items
related to this information. This is an important initiativethat ensures that the failure in Malaysia is not repeated.

Expectations for Tokuyama and Recommendations
The COVID-19 that we are facing now will substantiallyaffect the Company. The effects are not limited to numerical results. Management will be requested to make decisions more actively than ever before regarding what they
expect each employee to do, how they ask employees towork and how they connect employees’ work to businessresults. Employees are important assets that we cannot
replace. Moreover, we have human resources that overcame the failure of Tokuyama Malaysia. I believe that we
can overcome COVID-19.
External director Yuzo Kawamori stated: “When adrastic change occurs, change is irreversible and a newworld emerges. Companies cannot survive unless they

be responding to the change. Considering this, I willcontinue to actively help Tokuyama grow.

quickly become aware of this new world. If companies
can respond to the change, they will find opportunities todevelop.” This is an important message. We should already* Interview held on April 7, 2020

Corporate Governance
Basic Stanceappointed three external directors as of June 2020.
In 2017, the Company transitioned from a company
with a Board of Auditors to a company with an Audit
and Supervisory Committee. The Audit and Supervisory
Committee is comprised of four directors, including
three outside committee members. They attend Board of
Directors meetings and other important meetings to monitor the execution of business by executive officers.
As a company with an Audit and Supervisory Committee,
Tokuyama seeks to enhance corporate governance at all
times by making the best of its rapid decision making aswell as effective supervising/auditing functions.

Tokuyama, guided by its philosophy, contributes to people’s happiness and the development of society by continuing to create and provide new value using the chemical
technologies developed by the entire Group. We believethat the relationships of trust and cooperation that havebeen built with customers, business partners, employees, local communities and other stakeholders are indispensable in continuing to create and provide new value.
These relationships result in sustainable growth and anincrease in corporate value over the medium to long term.
We believe that corporate governance is an importantmanagement issue for achieving sustainable growth andenhancing corporate value, and we consider it necessary
to continue striving to strengthen corporate governance.
Taking into consideration the introduction of the
Corporate Governance Code in Japan as its basic policy,
the Company places the utmost emphasis on ensuring therights and equality of its shareholders and cooperating
properly with various stakeholders while strengthening thesupervisory function and securing the independence of
the Board of Directors. At the same time, Tokuyama works
diligently to accelerate decision making and to clarify thebusiness execution responsibilities of its Board of Directors
while ensuring appropriate disclosure and transparency
and promoting constructive dialogue with its shareholders.

Policies and Procedures When the Board of
Directors Selects/Dismisses Management
Executives and Nominates Director and
Auditor Candidates
To enable the direction and supervision of business execution as well as appropriate decision making with regard to
the Company’s business operations, which are centered on
chemicals, the selection of executive officers and thenomination of internal candidates for directorships
appoints people who are well-balanced in terms of theirknowledge of each business segment and area as well as
the experience they possess.
When nominating executive officer and director candidates (excluding directors who are Audit and Supervisory
Committee members), discussions are held at a Human
Resources Committee meeting in advance of the subject
appearing on the agenda at a Board of Directors’ meeting.
The Human Resources Committee is an entity that

Corporate Governance Structure(as of June 25, 2020)
Tokuyama introduced an executive officer system to separate the supervision and execution functions. It hasl Corporate Governance Structure

Shareholders’ Meeting
Appoint/dismiss

Appoint/dismiss

Appoint/dismiss
ReportBoard of Directors
Human Resources
Committee
Decide/supervise

Whistle-Blowing System
Helpline

Accounting Auditors

Audit andsupervise

Audit and Supervisory
Committee
Audit

Assistance

Audit andSupervisory
Committee Office

Collaborate

Audit

Business Operations

Executive Committee
Strategy
Committee

President

CSR Promotion Council
Departments Responsible
for Internal Auditing
Auditing Dept.
RC Management Dept.
Internal audit

Helpline Committee

Risk Management andCompliance Committee
Seven Committees*
Instruct/support/request

Business Divisions, Back-Office Divisions, Research Laboratories, Factories and Group Companies* Tokuyama operates committees focused on risk management and compliance in seven critical and specialized areas, separately from the Risk Management and Compliance
Committee. The committees operate under the CSR Promotion Council, overseeing the following areas: financial reporting, antimonopoly and security trade, export tradecontrol, information security, environmental measures, security measures and product safety and quality assurance.

Tokuyama Re port 202037

Corporate Governancecomprises representative directors and external directors.
The Board of Directors makes its decisions in response to the
Human Resources Committee’s report. In the case of thenomination of directors who are Audit and Supervisory
Committee member candidates, the Board of Directors
makes its decisions after receiving the assent of the Audit
and Supervisory Committee.

Criteria for Defining the Independence ofExternal Directors
In April 2019, the criteria for selecting external directors
was revised. This enables freer choice of independent
external director candidates suitable for improving the governance of the Company and enhances the independence
and supervisory function of the Board.

Support System for External Directors
Prior to each meeting of the Board of Directors, theCorporate Planning Division explains the agenda items toexternal directors and answers their questions. If external
directors have any inquiries about management issues,
industry trends, business strategies, the construction andoperation of internal control systems or other issues, directors and executive officers meet with them individually toanswer their questions.
When external directors take office, the Company
provides opportunities to take plant tours and understandthe Company, including the status of business operations
and functions.

Analysis and Evaluation of the Effectivenessof the Board of Directors
To ensure transparent and fair processes, the Company
commissioned an external organization to evaluate theeffectiveness of the Board of Directors.
From March to May 2020, all directors answered aquestionnaire and were interviewed, and an analysis of theresults was reported at a meeting of the Board of Directors
held in May 2020. The answers to the questionnaire
revealed that the Board of Directors is generally effective.
The promotion of digital transformation and the development of a risk management system were pointed out aschallenges to be addressed.
The interviews reveal that relationships of trust havebeen built between those supervising (external directors)
and those executing business activities (management)
and that the provision of adequate information to theexternal directors has contributed to enhancing the advisory and supervisory functions of the Board of Directors.
Meanwhile, it was pointed out that the examination of
medium- to long-term management policies from a broad
perspective based on an objective analysis of the businessenvironment is not adequate.
The Board of Directors will continue to increase its
effectiveness by selecting agenda items at Board of
Directors meetings, reinvigorating deliberation throughintelligent explanations and creating meeting materials
that make points clear.

l External Directors
NameAudit andIndependent
Supervisory
External
Committee
Directors
Members

Reason for Selection

Attendance (FY2019)
Meetings of the Audit
and Supervisory
Committee

Meetings of theBoard of Directors

Shin Kato○○Given his wealth of experience and broad insight and knowledge as an attorney at law, Mr. Kato is put
forward for election as an external director who is an Audit and Supervisory Committee member.

17 / 1725 / 25

Yuzo
Kawamori○○

The Company appoints those whom it judges, from their outstanding insight and wealth of experiencein overseas business development as managers of industry-leading companies, to be suitably qualified
to serve as external directors who will be members of the Company’s Audit and Supervisory Committee.

13 / 1318 / 18

Naoki
Matsumoto○○

The Company appoints those whom it judges, from their wealth of experience and outstanding insights
into finance and accounting as managers in a wide variety of businesses in the finance industry, to besuitably qualified to serve as external directors who will be members of the Company’s Audit andSupervisory Committee.

12 / 1317 / 18* The difference in the total number of times for both the Board of Directors and the Audit and Supervisory Committee is due to the difference in the time of inauguration.

Executive Remuneration
Based on the executive remuneration rules and executive
remuneration stock issuance rules, the remuneration of theCompany’s executives (excluding directors who are Audit
and Supervisory Committee members) comprises fixedbasic remuneration and performance-linked stock remuneration, the specific calculations of which will be made by
the representative director, president and executive officer
upon authorization by the Board of Directors in accordance with the following policy.
(1)	For the fixed portion, the basic remuneration is calculated by taking into consideration the previous year’s
consolidated performance and the achievement levelof each director’s business goals.
(2)	To realize the Company’s Medium-Term Management38

T ok uy a m a R e p o r t 2 0 2 0Plan, performance-linked stock remuneration has been
introduced from September 2018 to clarify the link
between executive remuneration and the corporate
value of the Company. Consolidated operating profit
and other indicators, which are the main financial
targets of the Medium-Term Management Plan, havebeen adopted as indicators for performance-linked
remuneration. Based on the achievement level for the
fiscal year ending March 31, 2021, which is the final
fiscal year of the target period, the system involves theissuance of stock, etc. of the Company as executive
remuneration.
(3)	The appropriateness of the level of remuneration, etc.
is to be confirmed based on the findings of surveys
of domestic competitors and comparable companies

obtained from a remuneration research company.
Remuneration for directors who are Audit andSupervisory Committee members is limited to fixed remuneration only, taking into consideration the distinction
between full- and part-time work, the status of the division of audit duties, and the content and level of remuneration of directors. This is decided following discussions
with directors who are Audit and Supervisory Committee
members.
To achieve more transparent and objective management from the perspective of corporate governance, wehave set up a Human Resources Committee, comprising amajority of external directors, who have the task of deliberating on personnel matters and remuneration concerning officers and making reports or recommendations to
the Board of Directors.
The content of executives’ remuneration (excluding
directors who are Audit and Supervisory Committee members) is calculated in detail by the representative director,
president and executive officer and discussed and determined by the Board of Directors after deliberation by the
Human Resources Committee.
l Amount of Remuneration Paid to Directors and Audit andSupervisory Committee Members (For FY 2019)
Subject of Remuneration

Number of Remuneration
PeopleAmountDirectors (Excluding external directors)

7¥238 million

Directors who are Audit and Supervisory Committee members(Excluding external directors)

2¥33 million

External Directors

5¥42 million

Policy on the Holding of Listed Shares for
Purposes Other Than Pure Investment
Tokuyama holds shares of publicly listed companies on a
strategic basis in accordance with the necessities of its business activities as a part of its overall management strategy.
This includes the need to maintain and bolster transactions,raise funds and stably procure raw materials. As far as thestrategic holding of shares in publicly listed companies
is concerned, the Company will limit its holdings to theminimum level possible taking into consideration the needto ensure efficient corporate management. It sold all sharesof one listed issue in 2019, resulting in a total of 24 listed
issues of shareholdings as of March 31, 2020.
In addition, the Board of Directors takes steps to verify
the economic rationality of holding shares in publicly listedcompanies by comparing capital costs that factor in associated risks with accrued benefits while confirming the
propriety of its holdings based on an outlook of the futureeach year.

Risk Management
Tokuyama manages risk through the Risk Management
and Compliance Committee, which operates under the
CSR Promotion Council. It also has expert committees
focused on risk management and compliance in sevencritical and specialized areas to ensure management
through the deliberation of key issues. The Company has

designated a unit responsible for regulations concerning
management of the risk of loss and conducts activities
based on the management regulations.
It also works to mitigate compliance risk by establishing management systems for understanding importantlaws and regulations that are relevant to business execution and keeping track of trends in amendments to theselaws and regulations. The Company also has established abusiness continuity plan (BCP) and other measures in orderto ensure an appropriate response for the type and severityof any crisis.

ComplianceTokuyama understands “compliance” to have a broad
meaning, including not only compliance with laws andinternal rules but also behaving sensibly in a mannerthat conforms with corporate ethics and meets social
expectations. To communicate and spread awareness ofcompliance throughout the Group, the Company has put
together a handbook that includes the Tokuyama Group
Code of Conduct. It is distributed to all Group employees.

Promoting Information Security
In order to reinforce the security of information assets,such as client information, Tokuyama has formulated asecurity policy and implemented various measures, including the establishment of a computer security incident
response team (CSIRT) which works to prevent incidents
and to minimize damage if an incident occurs. In March
2020, it was found that at an overseas subsidiary, employees’ account information was stolen and (approximately
440) spam emails were sent by an entity that was not
authorized to access the system. No secondary damage
has been confirmed. We will take steps to prevent a recurrence, including the thorough management of accounts
and passwords, and will bolster information security.

Business Continuity Management (BCM)
For the continuation of important operations in unforeseen
circumstances, the Company has formulated a BCP and
updates it, secures funding and resources to ensure business continuity, engages in business continuity management in normal times, including the taking of preventive
measures, and thereby improves its ability to continue its
business operations.

Responsibility in the Value Chain
Tokuyama recognizes that the cooperation and support
received from all of its trading partners play an underpinning role in the Company’s business activities. We would
also like to remain a good partner with the common goalof creating valuable products that enhance people’s lives.
To achieve this goal, we will carry out purchasing activities
according to the following basic policy and CSR procurement guidelines.

https://www.tokuyama.co.jp/eng/company/purchase_policy.html

Tokuyama Re port 202039

Management Team (as of June 24, 2020)
Directors

Hiroshi Yokota

Hideki Adachi

Apr. 1985 Joined the Company
Mar. 2015 President and Executive Officer
Jun. 2015	Representative Director,
President and Executive Officer (To present)

Apr. 1981 Joined the Company
Apr. 2012 Executive Officer
Apr. 2015 Managing Executive Officer
Jun. 2015 Director, Managing Executive Officer
Apr. 2019 Director, Senior Managing Executive Officer
Jun. 2019	Representative Director, Senior Managing
Executive Officer (To present)

Hideo Sugimura

Hiroshi Nomura

Apr. 1984 Joined the Company
Apr. 2015 Executive Officer
Apr. 2017 Managing Executive Officer
Jun. 2017 	Director, Managing Executive Officer(To present)

Apr. 1983 Joined the Company
Apr. 2014 Deputy Executive Officer
Apr. 2015 Executive Officer
Apr. 2018 Managing Executive Officer
Jun. 2019	Director, Managing Executive Officer(To present)

Representative Director,
President and Executive Officer

Director, Managing Executive Officer

Representative Director,
Senior Managing Executive Officer

Director, Managing Executive Officer

Fumiaki Iwasaki

Director, Managing Executive Officer
Apr. 1986 Joined the Company
Apr. 2017 Executive Officer
Apr. 2020 Managing Executive Officer
Jun. 2020 	Director, Managing Executive Officer(To present)

Youji Miyamoto

Shin Kato

Apr. 1980 Joined the Company
Jun. 2013 Audit and Supervisory Board Member
Jun. 2017	Director (Audit and Supervisory Committee
Member)Jun. 2019	Director (Audit and Supervisory Committee
Chair) (To present)

Apr. 1990 Registered as Lawyer, Hiranuma Law Office
Apr. 1995 Aoyama Central Law Office
Sep. 2001 South Toranomon Law OfficeJun. 2013 	Audit and Supervisory Board Member of theCompany
Jan. 2014 	Representative lawyer, Kato Law Office (Topresent)
Jun. 2017 	Director (Audit and Supervisory Committee
Member) of the Company (To present)

Yuzo Kawamori

Naoki Matsumoto

Apr. 1971 Joined Kansai Paint Co., Ltd.
Jun. 2002 Director
Jun. 2005 Managing Director
Jun. 2007 Senior Managing Director
Apr. 2010 Representative Director and President
Apr. 2013 Representative Director
Jun. 2013 Advisor
Jun. 2017 Honorary Councilor (To present)
Jun. 2019 	Director (Audit and Supervisory Committee
Member) of the Company (To present)

Apr. 1975 Joined The Sanwa Bank, Ltd.
Jan. 2002 Executive Officer, UFJ Bank Ltd.
Jun. 2004 Managing Executive Officer
Oct. 2005 	Managing Executive Officer, Mitsubishi
Tokyo UFJ Financial Group, Inc.
Jan. 2006 	Managing Executive Officer, The Bank ofTokyo-Mitsubishi UFJ, Ltd.
Jun. 2007 	Representative Director, Senior Executive
Officer, JCB Co., Ltd.
Apr. 2011 	Representative Director, Vice President andExecutive Officer
Jun. 2012 	President and Director, Toyo Carmax
Corporation
Jun. 2016 	President and CEO, MST Insurance Service
Co., Ltd.
Jun. 2019 	Director (Audit and Supervisory Committee
Member) of the Company (To present)

Director, Audit and Supervisory Committee
Chair

Director, Audit and Supervisory Committee
Member (External Director)

40

T ok uy a m a R e p o r t 2 0 2 0

Director, Audit and Supervisory Committee
Member (External Director)

Director, Audit and Supervisory Committee
Member (External Director)

Executive Officers

President and Executive Officer

Hiroshi Yokota

Senior Managing Executive Officer

Hideki Adachi

General Manager, Tokuyama FactoryManaging Executive Officer

Ryo Sugiyama

General Manager, Life & Amenity Business Division

Hideo Sugimura

General Manager, Corporate Planning Division and Procurement &Logistics Division

Hiroshi Nomura

General Manager, Specialty Products Business Division

Fumiaki Iwasaki

General Manager, Research & Development Division and Tsukuba ResearchLaboratory

Kazuo Matsuya

General Manager, Corporate Social Responsibility Division

Executive Officer

Takahide Taniguchi General Manager, Cement Business Division
Yutaka Tarutani

General Manager, Chemicals Business Division

Hiroshi Fujimoto

General Manager, General Affairs & Human Resources Division

Naoki Tamura

Deputy General Manager, Life & Amenity Business Division

Reason for Selection of Directors
Name

Reason for Selection

Hiroshi Yokota

Mr. Hiroshi Yokota is responsible for the management of the Company as Representative Director and President. He has
experience in sales, personnel and labor issues, and information systems operations, as well as in serving as General Manager of
the Specialty Products Business Division. Based on this abundant operational experience and his track record in bringing to a close
the rebuilding of the deteriorated financial base, actively reforming the Tokuyama Group’s organizational culture and structure
and rebuilding the Group’s business strategies to achieve growth, we have determined that he is the right person to play a part inincreasing the corporate value of the Tokuyama Group. Therefore, he has been reappointed as a Director.

Hideki Adachi

Mr. Hideki Adachi is responsible for the management of the Company as Representative Director. He has operational experienceat the Cement Manufacturing Department, etc., and has been serving as General Manager of the Tokuyama Factory, our main
production base, since 2013. Based on his abundant operational experience to date in the areas of manufacturing and production
technology, and track record of increasing the competitiveness of the entire plant as well as promoting safety and disastermanagement, we have determined that he is the right person to play a part in increasing the corporate value of the TokuyamaGroup. Therefore, he has been reappointed as a Director.

Hideo Sugimura

Mr. Hideo Sugimura is responsible for the management of the Company as a Director. He has worked to promote an information
system, managed an overseas subsidiary and reconstructed a domestic subsidiary. Based on this abundant operational experienceand his track record in promoting growth as a general manager with responsibility for corporate business management in his
capacity as General Manager of the Corporate Planning Division from 2015 and as General Manager of the Corporate Planning
Division from 2019, we have determined that he is the right person to play a part in increasing the corporate value of theTokuyama Group. Therefore, he has been reappointed as a Director.

Hiroshi Nomura

Mr. Hiroshi Nomura is responsible for the management of the Company as a Director. He previously gained operational experiencein the areas of polysilicon manufacturing, specialty products planning and management of overseas subsidiaries, and has been
involved in running the specialty products business as General Manager of the Specialty Products Business Division since 2015.
Based on his wide-ranging operational experience to date and his track record of furthering the business, including undertaking
overseas business development, we have determined that he is the right person to play a part in increasing the corporate value of
the Tokuyama Group. Therefore, he has been reappointed as a Director.

Fumiaki Iwasaki

Mr. Fumiaki Iwasaki provides overall supervision for the field of research and development at the Company and for thedevelopment of its pharmaceutical ingredients business as Managing Executive Officer and General Manager of the Research& Development Division and of the Tsukuba Research Laboratory. Based on the wealth of knowledge he has gained from his
experience to date in research and development and in manufacturing technology, and his track record of furthering the business,
we have determined that he is the right person to play a part in increasing the corporate value of the Tokuyama Group. Therefore,
he has been appointed as a Director for the first time.

Youji Miyamoto

Mr. Youji Miyamoto is supervising the management properly as a Director who is an Audit and Supervisory Committee Member.
He has high degree of expertise in finance and accounting gained through his years of accounting operation at the Company, andserved as an Audit and Supervisory Board Member from 2013 to 2017, when the Company became a company with an Audit
and Supervisory Committee. For this reason, he has been appointed as a Director who is an Audit and Supervisory Committee
Member.

Shin Kato

Mr. Shin Kato has actively expressed opinions and given advice at meetings of the Board of Directors and the Audit and Supervisory
Committee because he has a wealth of experience and broad and deep insight in addition to his technical perceptive as an attorneyat law. For this reason, he has been appointed as an External Director who is an Audit and Supervisory Committee Member.

Yuzo Kawamori

Mr. Yuzo Kawamori has abundant experience in overseas businesses and as a corporate manager. For this reason, he has been
appointed as an External Director who is an Audit and Supervisory Committee Member as we expect him to offer appropriate
supervision on the management and provide invaluable advice.

Naoki Matsumoto

Mr. Naoki Matsumoto has abundant experience as a corporate manager in the financial industry. For this reason, he wasappointed as an External Director who is an Audit and Supervisory Committee Member as we expect him to offer appropriate
supervision on the management and provide invaluable advice.

Tokuyama Re port 202041

Financial Highlights

Fiscal 2010

Fiscal 2011

Fiscal 2012l Fiscal year

Net sales(Millions of yen)

289,786

282,381258,632

Operating profit(Millions of yen)

19,313

12,721

3,993

Ordinary profit(Millions of yen)

17,341

11,524

3,232

Profit (loss) attributable to owners of parent(Millions of yen)

9,765

9,351

(37,916)

Cash flows from operating activities(Millions of yen)

37,04327,06017,071

Cash flows from investing activities(Millions of yen)

(88,508)(57,666)(60,673)

Cash flows from financing activities(Millions of yen)

23,994

20,791

36,465

Capital expenditures(Millions of yen)

35,80777,602

97,549Depreciation and amortization(Millions of yen)

31,47628,492

23,242R&D expenses(Millions of yen)

11,46911,704

10,076

Total assets(Millions of yen)

474,708

501,181518,251

Net assets(Millions of yen)

247,656

255,460

223,871

Interest-bearing debt

(Millions of yen)

126,219

148,667

187,706

Basic earnings per share（Yen)

140.32134.37(544.88)

Net assets per share（Yen)

3,465.91

3,581.95

3,126.42

Cash dividends per share

（Yen)

6.00

6.00

3.00

Shareholders’ equity ratio

(%)

50.8

49.7

42.0

Return on equity (ROE)

(%)

4.1

3.8

(16.2)

D/E ratio

0.52

0.60

0.86

Price earnings ratio (PER)

15.82

9.56

—

l At year end

l Per share informationl Major indicators(Notes) 1. Net sales do not include consumption tax, etc.
2. Depreciation and amortization includes amortization of long-term prepaid expenses.
3. The Company consolidated its common shares at a ratio of one share for each five shares effective as of October 1, 2017.
On this basis, basic earnings (loss) per share and net assets per share are calculated on the assumption that the consolidation of shares was conducted as of the beginningfiscal year ended March 31, 2011.
4. The Company’s shares held in the Director Renumeration BIP (Board Incentive Plan) Trust are included in the treasury shares deducted from the number of shares issued andoutstanding as of the end of the period used to calculate net assets per share, as well as in the treasury shares deducted in the calculation of the average number of sharesfor the period used in the calculation of earnings per share.
5. The price earnings ratios in fiscal 2012, fiscal 2014 and fiscal 2015 are not stated because a loss was posted in those fiscal periods.
6. Effective from the fiscal year ended March 31, 2019, Tokuyama has applied the Partial Amendments to Accounting Standard for Tax Effect Accounting (hereinafter “Partial
Amendments to Tax Effect Accounting Standard,” Accounting Standards Board of Japan (ASBJ) Statement No. 28, issued on February 16, 2018).

●

Net Sales●(Billions of yen)
350

Operating Profit / Operating Margin
Operating profit(%)
Operating Margin
15(Billions of yen)
50

300 307.1 299.1 308.0

324.6 316.0

12.9

40

250

38.5

13.4
41.2

200

10.9 10.8
34.2

9

20

6

21.9

100
50

42

58.5

24.6

20

12.4
15.6

0

10

3

0

0

-40
-60
-80

0

(Fiscal) 2015

(%)
60

-20

7.5
150

ROE

40
12

35.2

30

●

2016

2017

T ok uy a m a R e p o r t 2 0 2 0

2018

2019

(Fiscal) 2015

2016

2017

2018

2019

-100

(94.0)(Fiscal) 2015

2016

2017

2018

2019

●

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019287,330

302,085

307,115

299,106

308,061

324,661

316,096

17,96018,70521,93638,533

41,26835,262

34,281

14,965

12,92017,72533,99836,19633,40032,837

10,218(65,349)(100,563)

52,165

19,69834,27919,937

34,10530,77230,09820,012

61,88538,531

52,364(64,402)(25,519)

13,400(10,089)(12,665)(16,174)(20,548)

45,93940,502(37,689)(11,911)(101,209)(21,104)(18,348)

61,051

25,345

13,945

17,36015,941

18,581

23,768

16,77018,84520,084

14,215

13,98515,093

16,122

8,709

10,156

8,522

7,508

7,903

8,052

9,193

576,315554,527

401,342424,433

361,949

379,630

383,447

236,453

169,445

60,205

135,976

136,591

163,525

180,429

240,767

283,196244,152

213,955

139,917

128,966

116,344146.86(939.26)(1,445.49)

738.92259.81493.26287.053,300.88

2,336.78

739.901,527.42

1,806.56

2,199.83

2,431.21

6.00

—

—

—

30.00

50.00

70.00

39.9

29.3

12.8

29.9

34.7

40.2

44.0

4.6

(33.3)(94.0)

58.5

15.6

24.6

12.4

1.05

1.74

4.74

1.68

1.11

0.84

0.69

11.51

—

—

3.64

13.03

5.30

7.29

ROA

●

(%)
12

D/E Ratio
5

10

9.6

●

Total Shareholder Return (TSR)/TOPIX
Total Shareholder Return (TSR)

(%)
300

4.74

271.0

10.5
4

9.5

8

9.0

TOPIX

213.7

213.5

200
3

177.9

6
2
4

100

4.8
1

2

0.84

0

2016

2017

2018

2019

(Fiscal) 2015

2016

118.5

112.5 101.8

2017

2018

69.0
1.11

0

(Fiscal) 2015

1.68

89.2

102.3

2017

2018

0.69
2019

0

(Fiscal) 2015

2016

2019

(Note) ROA = Operating profit / Total assets

Tokuyama Re port 2020

43

Business Sites and Group Companies (as of March 31, 2020)
Business Sites■ Business Sites in JapanTokyo
Head Office

FRONT PLACE AKIHABARA 7-5 Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
TEL: +81-3-5207-2500 FAX: +81-3-5207-2580

Osaka
OfficeNakanoshima Central Tower 2-7 Nakanoshima 2-chome, Kita-ku, Osaka-shi, Osaka 530-0005, Japan
TEL: +81-6-6201-7200 FAX: +81-6-6201-7220

Hiroshima
BranchHiroshima Nissay Green Bldg. 8-18 Teppocho, Naka-ku, Hiroshima-shi, Hiroshima 730-0017, Japan
TEL: +81-82-221-9431 FAX: +81-82-223-2347

Takamatsu
BranchNew Annex, Takamatsu Dai-ichi Seimei Building 2-1-1 Kotobuki-cho, Takamatsu-shi,
Kagawa 760-0023, Japan
TEL: +81-87-822-0063 FAX: +81-87-822-3627

Fukuoka
BranchKyowa Building 8-38 Tenjin 2-chome, Chuo-ku, Fukuoka-shi, Fukuoka 810-0001, Japan
TEL: +81-92-751-6566 FAX: +81-92-711-1089

Sendai
BranchDai 6 Doya Building 17-20 Kamisugi 1-chome, Aoba-ku, Sendai-shi, Miyagi 980-0011, Japan
TEL: +81-22-262-2431 FAX: +81-22-262-4087

Shunan Sales
Branch1-1 Mikage-cho, Shunan-shi, Yamaguchi 745-8648, Japan
TEL: +81-834-34-2009 FAX: +81-834-33-3580

Tokuyama
Factory

1-1 Mikage-cho, Shunan-shi, Yamaguchi 745-8648, Japan
TEL: +81-834-34-2000 FAX: +81-834-33-3790

Kashima
Factory

26 Sunayama, Kamisu-shi, Ibaraki 314-0255, Japan
TEL: +81-479-46-4700 FAX: +81-479-46-1933

Tsukuba
Research Laboratory

40 Wadai, Tsukuba-shi, Ibaraki 300-4247, Japan
TEL: +81-29-864-6000 FAX: +81-29-864-6050■ Global Network[U.S.A.]
Tokuyama America Inc.

3655 Torrance Blvd., 3rd Floor, Torrance, CA 90503, U.S.A
TEL: +1-424-247-1142 FAX: +1-424-247-1143[Germany]
Tokuyama Europe GmbHAm Gierath 20A 40885 Ratingen, Germany
TEL: +49-2102-56-50-66-0 FAX: +49-2102-56-50-66-90[Singapore]
Tokuyama Asia Pacific Pte. Ltd.

61 Robinson Road, #14-02 Robinson Centre, Singapore 068893
TEL: +65-6533-5258 FAX: +65-6533-5256[China]1003, Shanghai International Group Mansion, 511 WeiHai Road, Shanghai, China 200041
Tokuyama (Shanghai) Co., Ltd.
TEL: +86-21-6218-1177 FAX: +86-21-5382-2894
Tokuyama Trading (Shanghai) Co., Ltd.
[Korea]Tokuyama Korea Co., Ltd.

#415, Korea Air City Terminal Bldg. 22, Teheran-ro 87-gil, Gangnam-gu, Seoul 06164, Korea
TEL: +82-2-517-3851 FAX: +82-2-517-3856

Group Companies
Company

Capital(millions of yen)

Scope

Ownership(%)

Chemicals
Tokuyama Soda Trading Co., Ltd.
Shin Dai-ichi Vinyl Corporation (Note 1)
Sun Arrow Kasei Co., Ltd.

10

Sale of soda ash and calcium chloride

100.0

2,000

Production and sale of polyvinyl chloride

85.5

98

Production and sale of polyvinyl chloride
compounds

100.0

Production and sale of fumed silica

100.0

Category also includes another 4 companies
Specialty Products
Tokuyama Chemicals (Zhejiang) Co., Ltd. (Note 1)
Tokuyama-Dowa Power Materials Co., Ltd.

Production and sale of aluminum nitride

65.0

SGD 11,000
thousand

Production and sale of high-purity chemicals forelectronics manufacturing

100.0

Taiwan Tokuyama Corporation

TWD 200 million

Production and sale of high-purity chemicals forelectronics manufacturing

100.0

Hantok Chemicals Co., Ltd.*KRW 4,500 million

Production and sale of photoresist developer

50.0

Tokuyama Electronic Chemicals Pte. Ltd.

Category also includes another 1 company

44

CNY 433 million

T ok uy a m a R e p o r t 2 0 2 0250

Company

Capital(millions of yen)

Ownership
(%)

Scope

CementHiroshima Tokuyama Ready Mixed ConcreteCo., Ltd. (Note 2)

100

Tokuyama Nouvelle Calédonie S.A.

XPF 210 million

Tokyo Tokuyama Concrete Co., Ltd.

Production and sale of ready-mixed concrete

67.2 (17.2)

Production and sale of cement

75.6

80

Production and sale of ready-mixed concrete andconcrete products

99.9

Seibu Tokuyama Ready Mixed Concrete Co., Ltd.

100

Production and sale of ready-mixed concrete

100.0

Kawasaki Tokuyama Ready Mixed ConcreteCo., Ltd. (Note 2)

40

Production and sale of ready-mixed concrete

100.0 (100.0)

Chugoku Ready Mixed Concrete Co., Ltd.

80

Production and sale of ready-mixed concrete

52.3

Tokuyama Tsusho Trading Co., Ltd.

95

Sale of cement and ready-mixed concrete

100.0

Kansai Tokuyama Trading Co., Ltd.

80

Sale of cement and ready-mixed concrete

100.0

Tokushou Co., Ltd.

40

Sale of cement and ready-mixed concrete

100.0

Tokushin Co., Ltd.

40

Sale of cement and ready-mixed concrete

100.0

Tokuyama Mtech Corporation

50

Processing and sale of building materials

100.0

Yamaguchi Eco-tech Corporation*

90

Recycling business of incinerated ash of wastes

50.0

Production and sale of microporous film

100.0

300

Production and sale of polyolefin films

80.0

577

Production and sale of diagnostic reagents,
analyzers and systems

40.2

100

Production and sale of dental and medical materials

Category also includes another 24 companies
Life & Amenity
Shanghai Tokuyama Plastics Co., Ltd. (Note 2)
Sun・Tox Co., Ltd.
A&T Corporation (Notes 3, 4)
Tokuyama Dental Corporation
Tokuyama Dental Italy S.r.l. (Note 2)

CNY 85 million

EUR 99 thousand

Sale of dental and medical materials

100.0
51.0 (51.0)

ASTOM Corporation450

Production, sale and maintenance of ion-exchange
membranes and related equipment

55.0

Excel Shanon Corporation

495

Production and sale of plastic window sashes

100.0

Tohoku Shanon Co., Ltd. (Note 2)

300

Production and sale of plastic window sashes

72.0 (72.0)

Tomitec Co., Ltd.

100

Production and sale of plastic molded products

60.0

Figaro Engineering Inc.*

99

Production and sale of sensor devices

33.4

SGD 800 thousand

Sale of Tokuyama’s products

100.0

CNY 5 million

Sale of Tokuyama’s products

100.0

KRW 500 million

Sale of Tokuyama’s products

100.0Management company to provide services forother group companies in China

100.0

Category also includes another 5 companies
OthersTokuyama Asia Pacific Pte. Ltd.
Tokuyama Trading (Shanghai) Co., Ltd.
Tokuyama Korea Co., Ltd.
Tokuyama (Shanghai) Co., Ltd.

CNY 12 million

Shunan System Sangyo Co., Ltd.

100

Real estate, civil engineering, construction

100.0

TOKUYAMA KAIRIKU UNSO K.K.

63

Transportation and warehousing

100.0

Kyouei Sekiyu Corporation (Note 2)

20

Sale of petroleum products

Tokuyama Information Service Corporation

20

Information processing services

Shunan Bulk Terminal Co., Ltd. (Note 2)

150

Warehouse operations for bulk cargoes of coal, etc.

CoorsTek Tokuyama Corporation*

100

Production and sale of ceramics andelectrochemical products

30.0

Tokuyama Polypropylene Co., Ltd.*100

Production and sale of polypropylene

50.0

50

Production of metal parts and anti-rust surface
coating materials

50.0

Nishinihon Resicoat Co., Ltd.*

100.0 (100.0)
100.0
83.3 (11.1)

Category also includes another 10 companies*Equity method affiliates(Notes) 1. The company is a specified subsidiary.
2. The percentage of voting rights held by the Company in parentheses includes indirect holdings.
3. The company submits annual securities reports.
4. Although the Company’s holdings are 50% or less, the company is a subsidiary because the Company effectively controls it.

Tokuyama Re port 202045

Corporate Data (as of March 31, 2020)
Corporate Data
Corporate name:

Tokuyama Corporation

EstablishedFebruary 16, 1918

Location

Tokyo Head Office
FRONT PLACE AKIHABARA, 7-5, Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
Tel: +81-3-5207-2500 Fax: +81-3-5207-2580
Tokuyama Factory
1-1, Mikage-cho, Shunan-shi, Yamaguchi 745-8648, Japan (Registered address)
Tel: +81-834-34-2000 Fax: +81-834-33-3790
Other Facilities in Japan
Kashima Factory, Tsukuba Research Laboratory, Osaka Office, Hiroshima Branch,
Takamatsu Branch, Fukuoka Branch, Sendai Branch, Shunan Sales Branch

Capital¥10,000 million

Number of employees

5,679 (consolidated basis; 540 working overseas);2,063 (non-consolidated basis)

Stock Information
Total number of shares authorized to be issued

Common shares: 200,000,000 shares

Number of shares issued

Common shares: 69,934,375 shares(Treasury shares: 384,146 shares)

Number of shareholders

19,334

Fiscal year

From April 1 to March 31

General shareholders’ meeting

June

Stock listing

Tokyo Stock Exchange

Number of shares per unit

100 shares

Securities code

4043

Shareholder registry administrator

Mitsubishi UFJ Trust and Banking Corporation

Composition of Shareholders (Thousands of shares)
Other Domestic Corporations

Securities Companies

12.5%

3.0%
(2,122)(8,707)

Individual/Other

16.7%(11,698)

Non-Japanese Corporations/
Foreign Residents

24.7%(17,268)46

T ok uy a m a R e p o r t 2 0 2 0Type ofshareholders

Financial Institutions

43.1%(30,137)

Major Shareholders
Number of Shares Held(Thousands)

Percentage of Shares Held(%)

The Master Trust Bank of Japan, Ltd. (trust account)

8,048

11.57

Japan Trustee Services Bank, Ltd. (trust account)

6,625

9.53

Nippon Life Insurance Company

2,174

3.13

The Yamaguchi Bank, Ltd.

1,649

2.37

Meiji Yasuda Life Insurance Company

1,488

2.14

Sojitz Corporation

1,296

1.86

JP MORGAN CHASE BANK 385151

1,223

1.76

Sumitomo Metal Mining Co., Ltd.

1,180

1.70

Japan Trustee Services Bank, Ltd. (trust account 5)

1,148

1.65

Tokio Marine & Nichido Fire Insurance Co., Ltd.

1,104

1.59

Name

Note: The percentage of shares held is calculated after deducting the shares held by the Company as treasury share (384,146 shares).

WebsiteFor detailed information about the Company, please visit the Company’s website.

Corporate information:

https://www.tokuyama.co.jp/eng/

Dividend Policy
Dividends will be paid to the shareholders
stated in the final version of the register ofshareholders on March 31 and September
30. As far as the distribution of profits isconcerned, Tokuyama’s basic policy is toensure the continuous and stable payment
of dividends to its shareholders. In carryingout this policy, the Company takes into
consideration performance trends and theroadmap established under its Medium-Term
Management Plan.

Shareholder andinvestor information:

https://www.tokuyama.co.jp/eng/ir/

Dividends / Payout Ratio
(yen)

90

(%)
Cash Dividends Per Share

Payout Ratio

60

70
60

40

50
30

30

11.5

10.1

2017

2018

0
(Fiscal)

24.4

20

0
2019

*1 A 1-for-5 reverse split of the common share was conducted on October 1, 2017.
*2 The year-end dividend per share for fiscal 2017 included a commemorative dividend of ¥10 to celebrate theCompany’s 100th anniversary.

Tokuyama Re port 202047

Financial Section
Financial Review

50

Consolidated Balance Sheets

54

Consolidated Statements of Income

56

Consolidated Statements of Comprehensive Income

57

Consolidated Statements of Changes in Net Assets

58

Consolidated Statements of Cash Flows59

Notes to Consolidated Financial Statements

60

Financial Review

Operating Environment
Against the backdrop of trade friction between the United States and China, which put
the brakes on trade and investment activities, the pace of global economic growthdeclined in fiscal 2019 (April 1, 2019 to March 31, 2020) due to increased uncertainty
over the future. From the beginning of 2020, the Japanese economy was affected by
the spread of COVID-19 and subsequently experienced a major downturn due to a
decline in exports and drop in consumer spending.

Net Sales and Operating Profit
Even though the impact of the spread of COVID-19 on the Group was minimal,
consolidated net sales decreased 2.6%, or ¥8,564 million compared with the previous
fiscal year, to ¥316,096 million due mainly to weak sales of major products.
Cost of sales decreased 4.1%, or ¥9,218 million compared the previous fiscal year, to¥217,446 million. This decrease largely reflected the downswing in raw material and fuelcosts as a result of the decrease in domestic naphtha and coal prices. SG&A expenses
increased 2.6%, or ¥1,636 million compared with the previous fiscal year, to ¥64,369
million. In addition to the increase in advertising expenses associated with the release of
new products to the market, this increase largely reflected R&D expenses of thermal
management materials.
As a result of the above, operating profit decreased 2.8%, or ¥981 million comparedwith the previous fiscal year, to ¥34,281 million.

Net sales

Operating profit¥324.6 billion¥35.2 billion¥316.0 billion(Year-on-year change minus ¥8.5 billion)

50

Tokuy a m a R e p o r t 2 0 2 0¥34.2 billion(Year-on-year change minus ¥0.9 billion)

Changes in Operating Profit (Year-on-year change)
By Factor(Billions of yen)Price decline of
caustic soda
exports (-)

Decreased raw
material and fuelcosts (+)

Increase indepreciation
expenses (-)

Price decline ofpetrochemical
products (-)

Increase in R&D
expenses (-)

(0.0)
+7.1

Increase insales volume ofelectricity (+)

FY2018(0.9)

Decrease insales volume
of major
products forsemiconductor
industry (-)

35.2

Raw material
andfuel prices

Sales
volumeIncrease inadvertisingexpenses (-)

(5.0)

(2.0)
34.2

Selling
price

Improvement of
Others(Fixed costs, etc.)
operation

FY2019(+)/(-) Denote the factors of increase/decrease in profit

Financial Position
Net assets at the end of fiscal 2019 totaled ¥180,429 million, an increase of ¥16,904
million compared with those as of March 31, 2019. The shareholders’ equity ratio was
44.0% (40.2% at the end of the previous fiscal year), and the D/E ratio improved by 0.16
from the end of the previous fiscal year to 0.69.
The Group is endeavoring to acquire a “single A” rating from relevant agencies by theend of the Medium-Term Management Plan. Under this policy, the Group acquired a“single A-” rating from relevant agencies on July 19, 2019. The Group will continue toimprove its financial position.

D/E ratio

0.84

Rating0.69(-0.16)BBB+

A-

Financial Section

51

Cash FlowsNet cash provided by operating activities totaled ¥52,364 million, an increase ¥13,833
million compared with the previous fiscal year. Principal items included profit before
income taxes of ¥27,917 million and depreciation and amortization of ¥16,122 million.
Net cash used in investing activities totaled ¥20,548 million, an increase of ¥4,374
million compared with the previous fiscal year. Major contributory factors were paymentsfor purchases of property, plant and equipment of ¥19,706 million.
Net cash used in financing activities amounted to ¥18,348 million, a decrease of¥2,756 million compared with the previous fiscal year. This was primarily attributed to an
outflow due to repayments of long-term borrowings of ¥12,739 million.
In fiscal 2020, the Company expects that net cash used in investing activities will
increase as a result of an increase in investments in growth.

Cash Flow Plan
80
(Billions of yen)

 Operating CF
 Investing CF
 Free CF

61.8
60

52.3

49.2
38.5

40

31.8

35.2

20.0
22.3

20

9.9

3.6

0

(10.0)(12.6)-20(16.1)(20.5)(31.6)-40

FY201652

Tokuy a m a R e p o r t 2 0 2 0FY2017FY2018FY2019FY2020 Plan

Capital Expenditures, Depreciation and Amortization and
R&D Expenses
In fiscal 2020, we plan capital expenditures of ¥32.7 billion. Depreciation andamortization is planned at ¥18.4 billion, which reflects increased investment over the
past several years.
Although R&D expenses decreased briefly when we streamlined our development
themes, we plan R&D expenses of ¥11.3 billion because we will accelerate R&D thatmeets customer needs such as in the Specialty Products and Life & Amenity segments.

Progress in Investment Plan
Total Investment (Billions of yen)
50

40

30

Cumulative Total Investment (Billions of yen)120

 Expansion of capacity
 R&D
 Rationalization
 Infrastructure Growth, others
 Maintenance and renewal
 Cumulative total

100

32.7

60

23.7
20

17.4

80

18.6

40

15.9

10

20

0

0

FY2016FY2017FY2018FY2019FY2020•	Increase in production ofaluminum nitride powder•	Increase in production ofand granules
aluminum nitride powder •	Investments to improve •	Increase in production of •	Development of newaluminum nitride powder•	Expansion of A&T
the quality ofthermal management
Corporation’s Esashi
semiconductor related•	Expansion of capacity ofmaterials
Factorymaterials
TMAH•	Increase in production of•	Introduction of the latest•	Expansion of the yard•	Building a second plant •	Building supply base forhealthcare- related
polyolefin film facilities(Shunan Bulk Terminal)
in Taiwan
IC chemicals in China
products(Sun•Tox)

Major Growth Investments

Financial Section

53

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019

Millions of yen

Assets:Current assets:
Cash and deposits
Notes and accounts receivable - trade (Note 8)
Lease receivables
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property, plant and equipment:
Buildings and structures (Notes 2, 3)
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles (Notes 2, 3)
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures (Note 3)
Accumulated depreciation
Tools, furniture and fixtures, net
Land (Note 2)
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets:
Goodwill
Leased assets
Other (Note 3)
Total intangible assets
Investments and other assets:
Investment securities (Notes 1, 2)
Long-term loans receivable
Deferred tax assets
Retirement benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
See notes to consolidated financial statements.

54

Tokuy a m a R e p o r t 2 0 2 0

2020

2019

81,52472,92934
18,506
10,051
16,0884,823(108)
203,849

68,61380,35830
16,4589,554
17,462
10,554(94)
202,936

108,636(78,109)
30,526
465,761(420,631)
45,12922,488(20,024)
2,463
33,3635,011(2,370)2,641
9,067
123,192

106,214(76,233)
29,981
459,535(414,813)
44,721
22,106(19,905)
2,201
32,296
4,548(2,237)2,311
4,592
116,104

3
59
1,594
1,657

208
71
1,693
1,973

19,385
2,302
19,164
9,569
4,382
(56)
54,747
179,597
383,447

21,7182,444
21,091
9,796
3,621
(57)
58,614
176,693379,630

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019

Millions of yen

Liabilities:
Current liabilities:
Notes and accounts payable - trade
Short-term borrowings (Note 2)
Current portion of long-term borrowings (Note 2)
Lease obligations
Income taxes payable
Provision for bonuses
Provision for repairs
Provision for decommissioning and removal
Provision for product warranties
Provision for loss on compensation for damage
Provision for restructuring
Other (Note 2)
Total current liabilities
Non-current liabilities:
Long-term borrowings (Note 2)
Lease obligations
Deferred tax liabilities
Provision for retirement benefits for directors (and other officers)
Provision for share-based remuneration
Provision for repairs
Provision for decommissioning and removal
Allowance for loss on compensation for building materials
Provision for environmental measures
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities

2020

2019

42,795
3,082
16,106
870
2,896
3,175
5,159
439
84
84
—
20,545
95,24147,268
4,361
12,667
758
3,816
2,664
3,569
—
137
91
233
17,68093,24894,255
2,028
204
239
86
944
529
158
196
2,277
6
6,848
107,775
203,017

109,411
1,767
220
224
48
1,546
—
260
222
2,149
6
6,999
122,856
216,104

Net assets:
Shareholders' equity:
Share capital
Authorized: 200,000,000 shares
69,934,375 shares
Issued:Capital surplus
Retained earnings
Treasury shares
482,765 shares
2019:
478,862 shares
2020:
Total shareholders' equity

10,00020,018
137,665

10,00020,018
121,901(1,809)165,874(1,823)150,095

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

332
(35)
703
1,986
2,986
11,568
180,429
383,447(1,566)
(61)
1,672
2,640
2,685
10,743
163,525
379,630

See notes to consolidated financial statements.

Financial Section

55

Consolidated Statements of Income
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019

Millions of yen

Net sales
Cost of sales (Notes 1, 4)
Gross profit

2020
316,096
217,446
98,650324,661
226,664
97,996

Selling, general and administrative expenses:
Selling expenses (Note 2)
General and administrative expenses (Notes 3, 4)
Total selling, general and administrative expenses
Operating profit

42,265
22,10464,36934,281

41,524
21,20862,73335,262Non-operating income:Interest income
Dividend income
Share of profit of entities accounted for using equity method
Outsourcing service income
Rental income from non-current assets
Other
Total non-operating income

145
352
756
650
531
1,669
4,105

123
390
921
716
649
2,000
4,802

Non-operating expenses:
Interest expenses
Provision for decommissioning and removals
Fiduciary obligation expenses
Cost of loans payable
Other
Total non-operating expenses
Ordinary profit

1,689
985
676
—
2,198
5,549
32,837

2,453
—
685
884
2,640
6,664
33,400Extraordinary income:Gain on sales of non-current assets (Note 5)
Gain on bargain purchase
Gain on sales of investment securities
Subsidy income
Gain on insurance claims
Gain on step acquisitions
Compensation for damage income
Other
Total extraordinary income

23
157
8
144
470
56
—
—
861

47
964
1
133
169
—
6,006
27
7,351

19
34
82
191
685
1
4,531
—
234
5,781

10
363
30
100
807
—
—
851
569
2,733

Profit before income taxes
Income taxes
Current
Deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

27,91738,017

4,898
2,026
6,924
20,992
1,055
19,937

5,074(2,085)
2,988
35,029750
34,279Per share amounts:
Net profit
Cash dividends

2020
287.0570.00

Extraordinary losses:
Loss on sales of non-current assets (Note 6)
Impairment loss (Note 7)
Loss on disaster
Loss on tax purpose reduction entry of non-current assets
Loss on disposal of non-current assets
Loss on sales of investment securities
Loss on valuation of investment securities
Compensation for damage
Other
Total extraordinary losses

2019

Yen

See notes to consolidated financial statements.

56

Tokuy a m a R e p o r t 2 0 2 02019

493.2650.00

Consolidated Statements of Comprehensive Income
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019

Millions of yen

ProfitOther comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income (Note 1)
Total comprehensive income
Attributable to:
Owners of parent
Non-controlling interests

2020
20,99235,029

1,921
25
(891)
(654)
(100)
300
21,293(2,919)
90
(304)
(434)
(139)
(3,707)31,321

20,237
1,055

30,596725

2019

See notes to consolidated financial statements.

Financial Section

57

Consolidated Statements of Changes in Net Assets
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019[2020]

Millions of yen
Shareholders’ equity

Balance at beginning of year

Accumulated other comprehensive income

SharecapitalCapitalsurplusRetainedearnings

Treasuryshares

Total

Valuationdifferenceonavailablefor-salesecurities

10,00020,018

121,901(1,823)150,095(1,566)

Deferred
gains orlosses onhedges(61)

RemeaForeign surements
currency of definedtranslation
benefitadjustment
plans
1,672

2,640

Total

Noncontrollinginterests

Total
net
assets

2,685

10,743

163,525

Changes during the fiscal year
Profit attributable to ownersof parent

19,937

19,937

19,937

Dividends of surplus(4,173)(4,173)(4,173)

(5)

(5)

(5)

20

20

20

Purchase of treasury shares
Disposal of treasury shares
Net changes of items other thanshareholders' equity
Total changes of items
during the period
Balance at end of year

(0)

1,898

25

(969)

(654)

300

825

1,125

—

(0)

15,76414

15,779

1,898

25

(969)

(654)

300

825

16,90410,00020,018

137,665(1,809)165,874

332

(35)

703

1,986

2,986

11,568

180,429

Total

Noncontrollinginterests

Total
net
assets

6,368

10,935

136,591[2019]

Millions of yen
Shareholders’ equity

Balance at beginning of year

Accumulated other comprehensive income

SharecapitalCapitalsurplusRetainedearnings

Treasuryshares

Total

Valuationdifferenceonavailablefor-salesecurities

10,00020,00890,752(1,472)

119,288

1,352

Deferred
gains orlosses onhedges(151)

RemeaForeign surements
currency of definedtranslation
benefitadjustment
plans
2,093

3,074

Changes during the fiscal year
Profit attributable to ownersof parent

34,27934,27934,279Dividends of surplus(3,129)(3,129)(3,129)

(351)

(351)

(351)

0

9

9

0

0

(0)

(0)

Purchase of treasury shares
Disposal of treasury shares
Change in scope of
consolidation
Purchase of shares of
consolidated subsidiaries
Net changes of items other thanshareholders' equity
Total changes of items
during the period
Balance at end of year

58

Tokuy a m a R e p o r t 2 0 2 0

9
0
(0)

(2,918)

90

(420)

(434)

(3,682)(191)(3,874)—9

31,149(351)

30,807(2,918)

90

(420)

(434)

(3,682)(191)

26,933

10,00020,018

121,901(1,823)150,095(1,566)

(61)

1,672

2,640

2,685

10,743

163,525

Consolidated Statements of Cash Flows
Tokuyama Corporation and Consolidated Subsidiaries
Years ended March 31, 2020 and 2019

Millions of yen

2020

2019

Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Increase (decrease) in provisions
Increase (decrease) in retirement benefit liability
Decrease (increase) in retirement benefit asset
Interest and dividend income
Foreign exchange losses (gains)
Loss (gain) on sales of property, plant and equipment
Loss (gain) on sales of investment securities
Share of loss (profit) of entities accounted for using equity method
Gain on bargain purchase
Loss (gain) on step acquisitions
Subsidy income
Interest expenses
Cost of loans payable
Loss on tax purpose reduction entry of non-current assets
Impairment loss
Loss (gain) on disposal of non-current assets
Gain on insurance claims
Loss (gain) on valuation of investment securities
Compensation for damage income
Compensation for damage
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease (increase) in other current assets
Increase (decrease) in trade payables
Increase (decrease) in other current liabilities
Other, net
SubtotalInterest and dividends received
Interest paid
Proceeds from insurance income
Compensation for damage received
Compensation for damage paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities

27,917
16,122
2,118
129
(709)
(497)
321
(4)
(6)
(756)
(157)
(56)
(144)
1,689
—
191
34
685
(470)
4,531
—
—
7,343
(1,268)(323)(4,385)752(74)
52,981
1,041(1,709)
470
5,865
(832)
(5,451)
52,36438,017
15,093
(693)
58
(761)
(514)
8
(36)
(1)
(921)
(964)
—
(133)
2,453
884
100
363
807
(169)
—
(6,006)851
928(4,071)335(1,090)(403)
943
45,077938(2,529)169——(5,123)38,531

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Long-term loan advances
Collection of long-term loans receivable
Subsidies received
Other, net
Net cash provided by (used in) investing activities

(52)
174
(19,706)
68
(24)
21
137
(110)
(5)
181
144
(1,376)(20,548)(269)
498(16,765)
219
(22)
3
583
—
(3)
214
133
(765)
(16,174)

Cash flows from financing activities
Increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Dividends paid
Dividends paid to non-controlling interests
Decrease (increase) in treasury shares
Other, net
Net cash provided by (used in) financing activities(1,403)
1,092(12,739)(4,164)
(276)
(0)
(856)
(18,348)247
59,713(76,512)(3,122)
(357)
(308)
(764)
(21,104)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Decrease in cash and cash equivalents resulting from exclusion of subsidiaries from consolidation
Cash and cash equivalents at end of period (Note 1)(540)
12,92667,991—80,918(49)
1,202
66,807(18)
67,991

See notes to consolidated financial statements.

Financial Section

59

Notes to Consolidated Financial Statements
Tokuyama Corporation and Consolidated Subsidiaries

1.

BASIS OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared from accounts and records maintained by
Tokuyama Corporation (the “Company”) and its subsidiaries. The Company and its consolidated domestic subsidiaries havemaintained their accounts and records in accordance with the provisions set forth in the Companies Act (the “Act”) and the
Financial Instruments and Exchange Act and in conformity with accounting principles and practices generally accepted inJapan, which are different from the accounting and disclosure requirements of International Financial Reporting Standards.
The accounts of consolidated overseas subsidiaries are based on their accounting records maintained in conformity withgenerally accepted accounting principles and practices prevailing in the respective countries of domicile.
The consolidated financial statements are not intended to present the consolidated financial position, results of operations
and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions
other than Japan.

2.

GOING CONCERN ASSUMPTION
Not applicable.

3.

SCOPE OF CONSOLIDATIONThe consolidated financial statements include the accounts of the Company and its 54 significant subsidiaries (52 in 2019).
Significant intercompany transactions and accounts have been eliminated in consolidation.
Major consolidated subsidiaries are as follows: Sun•Tox Co., Ltd.
Shin Dai-ichi Vinyl Corporation
A&T Corporation
Tokuyama Dental Corporation
Excel Shanon Corporation
Hiroshima Tokuyama Ready Mixed Concrete Co., Ltd.
Tokuyama Mtech Corporation
Sun Arrow Kasei Co., Ltd.
Taiwan Tokuyama Corporation
Tokuyama Chemicals (Zhejiang) Co., Ltd.
Shirokawa Co., Ltd., for which the Company has acquired shares, has been included into the scope of consolidation from theconsolidated fiscal year under review.
TS Fine Chemical Inc., which the Company newly established, has been included into the scope of consolidation from theconsolidated fiscal year under review.
Of consolidated subsidiaries, A&T Corporation closes its accounts on December 31. Its financial statements as of December
31 are used in the preparation of consolidated financial statements, and adjustments necessary for consolidation purposes
are made to material transactions arising between that date and the consolidated fiscal year-end. Of consolidated subsidiaries,
Tokuyama Chemicals (Zhejiang) Co., Ltd. and other four companies whose original fiscal year-end is December 31, areconsolidated by performing provisional settlement of accounts on March 31, the consolidated fiscal year-end, in compliancewith the regular settlement of accounts.
Investments in 10 affiliates (9 in 2019) are accounted for by the equity method. Major equity method affiliate is Hantok
Chemicals Co., Ltd.
Of equity method affiliates, with regard to the company of which the last date of its fiscal year is different from the consolidated
fiscal year-end, the financial statements of its fiscal year are used in the preparation of consolidated financial statements.
During the consolidated fiscal year under review, the Company acquired the shares of Shirokawa Co., Ltd. and made this60

Tokuy a m a R e p o r t 2 0 2 0company into a subsidiary. Accordingly, Kasuga Kawauchi Kyodo Ready Mixed Concrete Co., Ltd, an investee of Shirokawa
Co., Ltd., is included in the scope of application of the equity method.
Major affiliates that are not accounted for by the equity method are Oita Mining Co., Ltd. and others because they have little
impact on the consolidated financial statements in terms of profit/loss (corresponding to equity interest), retained earnings(corresponding to equity interest), etc. when they are excluded from the scope of application of the equity method, nor haveany material impact on an aggregate basis.

4.

SIGNIFICANT ACCOUNTING POLICIES(1) Valuation basis and valuation methods for significant assets(i) Securities
Available-for-sale securities
Securities with fair value
Stated at the fair value based on the quoted market price as of the fiscal year-end (Valuation differences arerecognized in net assets; the cost of securities sold is calculated by the moving-average method).
Securities without fair value
Stated at cost by the moving-average method.
(ii) Derivatives
Derivatives are stated at fair value.
(iii) Inventories
Inventories held for sale in the ordinary course of businessStated at cost mainly by the moving-average method. (The balance sheet value of the inventories is calculated by
write-down based on the decreased profitability.)(2) Depreciation and amortization methods of significant depreciable and amortizable assets(i) Property, plant and equipment (excluding leased assets)
Buildings and structures acquired on or after April 1, 2016:

Depreciated mainly by the straight-line method.

Other than the above:

Depreciated mainly by the declining-balance method.

The estimated useful lives of major items are as follows:
Buildings and structures: 2 to 75 years
Machinery, equipment and vehicles: 2 to 20 years(ii) Intangible assets (excluding leased assets)
Amortized mainly by the straight-line method.
Internal use software is amortized by the straight-line method over the internally expected useful life (5 years).
(iii) Leased assets
Leased assets in finance lease transactions that transfer ownership
The Company uses the same depreciation method that is applied to owned fixed assets.
Leased assets in finance lease transactions that do not transfer ownership
Depreciated by the straight-line method based on the assumption that the useful life is equal to the lease term
and the residual value is equal to zero.
(3) Significant allowances and provisions(i) Allowance for doubtful accounts
To cover possible bad debt expenses on notes and accounts receivable – trade, loans receivable and others, theallowance for doubtful accounts is provided at the estimated uncollectable amounts based on the historical default
rate for normal receivables, or taking into account collectability on a case-by-case basis for certain receivables suchas doubtful receivables with higher possibility of default.

Financial Section

61

(ii) Provision for bonuses
To prepare for the payment of next bonuses to employees, provision for bonuses is recorded based on the portion of
the estimated amount of bonus payments attributable to the consolidated fiscal year under review.
(iii) Provision for repairs
Repair expenses are calculated individually and recorded to prepare for periodic repairs of manufacturing facilities.
(iv) Provision for product warranties
For required expenses incurred during the warranty period with free servicing (warranty expenses for free servicing)for clinical test information systems and laboratory test automation systems, the estimated amount of expenses isrecorded based on the historical rate of incurrence (proportion of expenses paid to net sales).
(v) Provision for loss on compensation for damage
The Company records provisions based on reasonably estimated monetary amounts at the end of the consolidated
fiscal year under review for loss on compensation for damages caused by customer delivery delays.
(vi)	Provision for retirement benefits for directors (and other officers)
At certain consolidated subsidiaries, the amount to be required at the end of the consolidated fiscal year underreview in accordance with internal rules is recorded to prepare for payment of directors’ retirement benefits.
(vii) Provision for share-based remuneration
The Company records estimated amounts for share benefit obligations at the end of the consolidated fiscal year
under review in order to prepare for the Company share benefits provided to directors and other executives basedon the Company’s share issuance rules.
(viii) Allowance for loss on compensation for building materials
The estimated amount of losses incurred in replacement, renovation, etc. is recorded to prepare for repairs andmaintenance of plastic sashes for houses and buildings (fire protection and resistance grade).
(ix) Provision for decommissioning and removal
	Decommissioning and removal expenses are calculated individually and recorded to prepare for decommissioning
and removal of manufacturing facilities.
(x) Provision for environmental measures
Pursuant to the “Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes,” theestimated amount at the end of the consolidated fiscal year under review is recorded to prepare for payments for
disposal of PCB waste.
(4) Accounting method of retirement benefits(i)	Methods of attributing estimated retirement benefits to accounting periods
When calculating retirement benefit obligations, the benefit formula basis is used to attribute estimated retirement
benefits to the period through the end of the consolidated fiscal year under review.
(ii) Amortization of actuarial differences
Actuarial differences are amortized by using the straight-line method over a period of time within the averageremaining service period of employees (14 years) from the subsequent consolidated fiscal year when they are
incurred.
(iii) Application of simplified accounting method used by small companies
In calculating retirement benefit liability and retirement benefit expenses, some of the consolidated subsidiaries apply
a simplified accounting method in which an assumed amount of benefits to be paid for voluntary base retirement at
the consolidated fiscal year-end is deemed as retirement benefit obligations.

62

Tokuy a m a R e p o r t 2 0 2 0

(5) Application of the consolidated taxation system
The Company applies the consolidated taxation system.
(6)	Application of tax effect accounting associated with the transition from the consolidated taxation system to thegroup tax sharing system
With regard to the transition to the group tax sharing system established under the “Act for Partial Amendment of the
Income Tax Act, etc.” (Act No. 8 of 2020) and the items for which the nonconsolidated taxation system was revised
in line with the transition to the group tax sharing system, pursuant to Paragraph 3 of the “Practical Solution on theTreatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing
System” (ASBJ PITF No. 39, issued on March 31, 2020), the Company and certain domestic consolidated subsidiaries
did not apply the provision of Paragraph 44 of the “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance
No. 28, issued on February 16, 2018), and the amounts of deferred tax assets and deferred tax liabilities are based on
the provisions of the tax laws before the revision.
(7) Accounting method for deferred assets
All deferred assets are charged to expenses when incurred.
(8)	Translation of significant assets or liabilities denominated in foreign currencies into Japanese yen
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rate in effect at
the consolidated balance sheet date and the resulting exchange gains or losses are credited or charged to income as
incurred.
Assets and liabilities of overseas subsidiaries and the like are translated into yen at the exchange rate in effect at theconsolidated balance sheet date, while their revenues and expenses are translated into yen at the average rates of
exchange prevailing during the year. The resulting translation adjustments are included in “Foreign currency translation
adjustment” and “Non-controlling interests” in net assets.
(9) Method of significant hedge accounting(i) Method of hedge accounting
For the method of hedge accounting, in general, the deferral hedge accounting is applied. Among hedging instruments,
forward exchange contracts that fulfill the requirement for allocation method are subjected to the allocation method.
Interest rate swaps that fulfill the requirement for special treatment are subjected to the special treatment.
(ii) Hedging instruments and hedged items
Hedging instruments and hedged items to which hedge accounting has been applied in the fiscal year under review
are as follows:
Hedging instruments:

Forward exchange contracts, interest rate swaps

Hedged items:	Forecast transactions in foreign currencies, accounts receivable borrowings denominated inforeign currencies(iii) Hedging policy
Foreign exchange risk and interest rate risk of hedged items are hedged within a certain range.
(iv) Method of assessing hedge effectivenessHedge effectiveness is assessed by comparing cumulative changes in cash flows or market fluctuations of hedged
items and cumulative changes in cash flows or market fluctuations of hedging instruments on a quarterly basis andbased on changes in the both, etc. For interest rate swaps to which the special treatment is applied, assessment ofhedge effectiveness is omitted.
(10) Amortization method and amortization period of goodwill
Goodwill is equally amortized over five years.

Financial Section63

(11) Scope of cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents in the consolidated statements of cash flows consist of cash on hand, at-call deposits withbanks and short-term investments that have maturities within three months from acquisition, are readily convertible tocash and are subject to an insignificant risk of changes in value.
(12)	Other significant matters forming the basis of preparing the consolidated financial statements
Accounting for consumption taxes
Consumption tax and local consumption tax are accounted for using the tax-excluded method. Non-deductible
consumption tax and local consumption tax are accounted for as expenses for the consolidated fiscal year under review.

5.

CHANGES IN ACCOUNTING POLICY
Not applicable.

6.

NEW ACCOUNTING STANDARDS NOT YET APPLIED•	“Accounting Standard for Revenue Recognition,” (ASBJ Corporate Accounting Standard No. 29, March 31, 2020)•	“Implementation Guidance on Accounting Standard for Revenue Recognition,” (ASBJ Corporate AccountingStandard Implementation Guidance No. 30, March 31, 2020)
1. Summary
This is a comprehensive accounting standard for revenue recognition. Revenue is recognized applying the following five steps.
1. Identify the contracts with customers.
2. Identify the performance obligations in the contracts.
3. Determine the transaction prices.
4. Allocate the transaction prices to the performance obligations in the contracts.
5. Recognize revenue when or as performance obligations are satisfied.
2. Planned date for implementation
The Company will implement these accounting standards from the beginning of the fiscal year ending March 2022.
3. Impact of implementing said accounting standards
The impact of implementing the “Accounting Standard for Revenue Recognition” to the consolidated financial
statements is being evaluated at this time.

•

Accounting Standards for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)•	Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019)•

Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019)•

Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)•	Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19,
March 31, 2020).
1. Summary
To improve comparability with international accounting standards, Accounting Standards for Fair Value Measurement
and Implementation Guidance on Accounting Standard for Fair Value Measurement (hereinafter referred to as
Accounting Standards for Fair Value Measurement) were developed and guidance on how to calculate fair value wasprescribed. Accounting Standards for Fair Value Measurement is applied to the fair value of the following items.
•	Financial instruments in Accounting Standard for Financial Instruments•	Inventories held for trading purposes in Accounting Standard for Measurement of Inventories

64

Tokuy a m a R e p o r t 2 0 2 0Additionally, Implementation Guidance on Disclosures about Fair Value of Financial Instruments was also revised andexplanatory notes have been established such as the breakdown of the fair value of financial instruments at each level.
2. Planned date for implementation
The Company will implement this accounting standard from the beginning of the consolidated fiscal year ending March
31, 2022.
3. Impact of implementing said accounting standard
The amount of the impact is being evaluated at the time of preparation of the consolidated financial statements.

•	Revised Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections(ASBJ Statement No. 24, March 31, 2020)
1. Summary
This standard aims to show a summary of the accounting principles and procedures adopted in the event that theestablishment of relevant accounting standards is not clear.
2. Planned date for implementation
The Company will implement this accounting standard from the end of the fiscal year ending March 31, 2021.

•	Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020)
1. Summary
This standard aims to disclose information that will help users of the financial statements understand details of the basis
for accounting estimates for risk items with a material impact on the financial statements of the following fiscal year
among the estimated amounts recorded on the financial statements in the current consolidated fiscal year.
2. Planned date for implementation
The Company will implement this accounting standard from the end of the fiscal year ending March 31, 2021.

7.

CHANGES IN PRESENTATION(Consolidated Statements of Income)In the consolidated fiscal year under review, “Trial products income,” which was in stated as a separate item in “Nonoperating income” in the previous consolidated fiscal year, is now included in “Other” under in “Non-operating income” since“Trial products income” is 10% or less of the total amount of “Non-operating income”. Therefore, items in the consolidated
financial statements for the previous consolidated fiscal year have been reclassified to reflect this change in the presentation.
Consequently, ¥666 million and ¥1,333 million that were presented in “Trial products income” and “Other” under “Nonoperating income” in the previous fiscal year have been reclassified to “Other” of ¥2,000 million in “Non-operating income.”

8.

CHANGES IN ACCOUNTING ESTIMATES
Not applicable.

Financial Section

65

9.

ADDITIONAL INFORMATION(Performance-based stock remuneration program)
On September 3, 2018, the Company introduced a performance-based stock remuneration program geared for its directors(excluding directors who are Audit and Supervisory Committee members, non-executive directors, external directors andpersons not resident in Japan) and executive officers (excluding persons not resident in Japan).
1. Transaction summary
For this program, the Company adopted a Director Remuneration BIP (Board Incentive Plan) Trust (hereinafter referred
to as “the BIP Trust”). As with performance-linked stock (performance share) remuneration and transfer-limited stock(restricted stock) remuneration in the United States and Europe, the BIP Trust is a program that grants the Company’s
shares and benefits as well as the equivalent amount of convertible bonds of the Company’s shares in accordance withbusiness performance and the director’s position.
2. Company’s own shares that remains in trust
The Company’s shares that remains in trust is recorded as treasury shares in the net assets section based on the
carrying amount (excluding the amount of incidental expenses) of the trust. The book value and number of shares oftreasury shares are ¥320 million and 94 thousand shares.

10. CONSOLIDATED BALANCE SHEETS(1) Items corresponding to unconsolidated subsidiaries and affiliates are as follows:
Millions of yen

Investment securities

2020
8,222

2019

8,086

(2) Assets pledged as collateral and liabilities for which collateral is pledged
Assets pledged as collateral are as follows:
Millions of yen

Pledged assets
Buildings and structures
Machinery, equipment and vehicles
Land
Investment securities
Total

2020

2019

64
1,684
562
1,124
3,436

69
1,094
562
25
1,750

Liabilities for which collateral is pledged are as follows:
Millions of yen

Pledged liabilities
Short-term borrowings
Current portion of long-term borrowings
Long-term borrowings
Other
Total

66

Tokuy a m a R e p o r t 2 0 2 0

2020

2019

133
47
1,754
18
1,954

135
34
1,185
19
1,375

(3) Reduction entry
In the consolidated fiscal year under review, reduction entries of ¥87 million for buildings and structures, ¥101 million
for machinery, equipment and vehicles and ¥1 million for tools, furniture and fixtures were made due to receipt ofsubsidies, etc.
In addition, as a result of the retirement of buildings and structures that were subject to the reduction entry,
cumulative reduction entries decreased by ¥4 million, as a result of the retirement of machinery, equipment andvehicles that were subject to the reduction entry, cumulative reduction entries decreased by ¥149 million, and as aresult of the retirement of tools, furniture and fixtures that were subject to the reduction entry, cumulative reduction
entries decreased by ¥1 million.
The cumulative reduction entries due to the receipt of subsidies, etc. in association with fixed assets are as follows:
Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Intangible assets Other
Total

2020
1,538
2,710
163
4
4,417

2019

1,455
2,759
164
4
4,382

(4) Guarantee obligation
The Company provides guarantee of obligations concerning loans from financial institutions by the employee.
Millions of yen

Employee
Chuyo Ready-mixed Concrete Cooperative Association
Kasuga Kawauchi Kyodo Ready Mixed Concrete Co., Ltd.
Total

2020
104
50
11
166

2019

99
—
—
99

(5) Contingent liabilities pertaining to unsecured bond debt assumption agreements
With regard to the following unsecured bonds, the Company will be delegating the performance of the obligation
based on an unsecured bond trust-type debt assumption agreement that has been executed with a bank. Accordingly,
although the liabilities pertaining to those unsecured bonds and the amount paid under that same contract offset
each other, the obligation to redeem the Company’s unsecured bonds to bondholders continue until the time of theirredemption.
Millions of yen

20th unsecured bonds without collateral
22nd unsecured bonds without collateral
24th unsecured bonds without collateral
Total

2020
—
15,0009,400
24,4002019

10,00015,0009,400
34,400(6) Repurchase obligation due to liquidation of notes receivable
Millions of yen

Repurchase obligation due to liquidation of notes Receivable

2020
1,481

2019

1,867

(7) Notes receivable endorsed
Millions of yen

Notes receivable endorsed

2020
511

2019

822

Financial Section67

(8) Trade notes that mature on last day of consolidated fiscal year
Settlement processing for trade notes that mature at the end of the consolidated fiscal year is carried out on theirclearing days.
As the last day of the consolidated fiscal year under review fell on a weekend and financial institutions were closed, tradenotes maturing at the end of the current consolidated fiscal year are included in the consolidated fiscal year-end balance.
Millions of yen

Notes receivable – trade

2020
—

2019

1,540

11. CONSOLIDATED STATEMENTS OF INCOME(1)	Inventories at the consolidated fiscal year-end represent the amount after the book value was reduced inconnection with a decline in the profitability, and the following losses on valuation of inventories (the amount inparentheses represents gains on reversal) are included in cost of sales.
Millions of yen

Loss on valuation of inventories

2020
(176)

2019

269

(2) Major items and amounts of selling expenses are as follows:
Millions of yen

Selling expenses:
Freight-out expenses
Shipping charges
Salaries and bonuses
Provision for bonuses
Provision for repairs
Retirement benefit expenses
Provision of allowance for doubtful accounts

2020

2019

23,491
5,973
5,026
451
146
96
(12)

23,111
5,889
5,230
399
39
50
(49)

(3) Major items and amounts of general and administrative expenses are as follows:
Millions of yen

General and administrative expenses:
Technical research expenses
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Provision for retirement benefits for directors (and other officers)

2020

2019

8,013
4,629
408
79
49

7,077
4,282
333
48
50

(Note) Technical research expenses for the previous consolidated fiscal year include provision for bonuses of ¥268 million and retirement benefit expenses of¥23 million.
	Technical research expenses for the consolidated fiscal year under review include provision for bonuses of ¥363 million and retirement benefit
expenses of ¥30 million.

(4)	Total amount of research and development expenses included in general and administrative expenses andproduction cost
Millions of yen

Research and development expenses

68

Tokuy a m a R e p o r t 2 0 2 0

2020
9,193

2019

8,052

(5) The breakdown of gain on sales of non-current assets is as follows:
Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Other
Total

2020
—
16
1
5
—
23

2019

6
22
3
13
2
47

(6) The breakdown of loss on sales of non-current assets is as follows:
Millions of yen

Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

2020
0
4
0
13
19

2019

0
8
1
0
10

(7) Impairment loss
Fiscal year ended March 31, 2020
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the consolidated fiscal year ended March 31, 2020, the Group recorded impairment losses.
Of note, description of content has been omitted due to the low level of importance.
Fiscal year ended March 31, 2019
The Group groups its assets mainly according to the smallest units independently generating cash flows based on
business categories. During the consolidated fiscal year ended March 31, 2019, the Group recorded impairment losses.
Of note, description of content has been omitted due to the low level of importance.

Financial Section6912. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(1) Reclassification adjustments and tax effects relating to other comprehensive income
Millions of yen

2020

2019

(2,475)
4,525
2,049
(127)
1,921

(3,487)(1)(3,488)569(2,919)Deferred gains or losses on hedges:
Gains arising during the year
Amount before income tax effect
Income tax effectTotal deferred gains or losses on hedges

36
36
(11)
25

130
130
(39)
90

Foreign currency translation adjustment:
Gains arising during the year
Total foreign currency translation adjustment

(891)
(891)

(304)
(304)

Remeasurements of defined benefit plans, net of tax:
Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal remeasurements of defined benefit plans, net of tax

(553)
(383)
(937)
282
(654)

(201)
(422)
(624)
190
(434)

Share of other comprehensive income of entities accounted for using equity method:
Gains arising during the year
Total share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income

(100)
(100)
300

(139)
(139)
(3,707)

Valuation difference on available-for-sale securities:
Gains arising during the year
Reclassification adjustment to profit or loss
Amount before income tax effect
Income tax effectTotal valuation difference on available-for-sale securities

13. CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Fiscal year ended March 31, 2020
(1) Class and total number of shares issued and class and number of treasury shares
Thousand shares[2020]

Issued shares
Common shares
Total
Treasury shares
Common shares (Notes 1, 2, 3)
Total

Beginning of year

Increase during the
fiscal year

Decrease during the
fiscal year

End of year

69,934
69,934————

69,934
69,934

482
482

2
2

6
6

478
478

(Note 1) The increase in the number of treasury shares of common shares is due to an increase of 2 thousand shares due to purchase of less than ashare-trading unit.
(Note 2) T he decrease of 6 thousand shares in the number of treasury shares of common shares is a decrease due to the request for additional purchase of
0 thousand shares constituting less than one share unit and the sale of a portion of the Company’s shares totaling 6 thousand shares held byDirector Remuneration BIP (Board Incentive Plan) Trust.
(Note 3) Included in the aforementioned treasury shares of common shares is 94 thousand shares held by The Master Trust Bank of Japan, Ltd. (executive
compensation BIP trust account; 76292 account).

70

Tokuy a m a R e p o r t 2 0 2 0

(2) Dividends(i) Dividend amount paid
Resolution

Class of shares

Dividend(Millions of yen)

Dividend pershares (yen)Reference date

Effective date

Source ofdividends

Ordinary General Meetingof Shareholders(June 21, 2019)

Commonshares

1,738

25.00

March 31,2019

June 24,2019

Retainedearnings

Board of Directors(October 31, 2019)

Commonshares

2,434

35.00

September
30, 2019

December 2,
2019

Retainedearnings(Note) Included in the total amount of dividends decided by the Ordinary General Meeting of Shareholders on June 21, 2019 is ¥2 million worth of dividends
related to 100 thousand Company shares (treasury shares) held in the executive compensation BIP trust account.
Included in the total amount of dividends decided by the Board of Directors on October 31, 2019 is ¥3 million worth of dividends related to 94
thousand Company shares (treasury shares) held in the executive compensation BIP trust account.

(ii)	Dividends whose record date is within the consolidated fiscal year and whose effective date is in the following
consolidated fiscal year
Resolution

Ordinary General Meetingof Shareholders(June 24, 2020)

Class of shares

CommonsharesDividend(Millions of yen)

Dividend pershares (yen)

2,434

35.00

Reference date

Effective date

Source ofdividends

March 31,2020

June 25,
2020

Retainedearnings(Note) Included in the total amount of dividends decided by the Ordinary General Meeting of Shareholders on June 24, 2020 is ¥3 million worth of dividends
related to 94 thousand Company shares (treasury shares) held in the executive compensation BIP trust account.

Fiscal year ended March 31, 2019(1) Class and total number of shares issued and class and number of treasury shares
Thousand shares
Beginning of year

[2019]

Issued shares
Common shares
Total
Treasury shares
Common shares (Notes 1, 2, 3)
Total

Increase during the
fiscal year

Decrease during the
fiscal year

End of year

69,934
69,934————

69,934
69,934

378
378

104
104

0
0

482
482

(Note 1) The increase in the number of treasury shares of common shares is due to an increase of 3 thousand shares due to purchase of less than ashare-trading unit and due to an increase of 100 thousand shares due to the adoption of a Director Remuneration BIP Trust.
(Note 2) T he decrease of 0 thousand shares in the number of treasury shares of common shares is a decrease due to the request for additional purchase ofshares constituting less than one share unit.
(Note 3) Included in the aforementioned treasury shares of common shares is 100 thousand shares held by The Master Trust Bank of Japan, Ltd. (executive
compensation BIP trust account; 76292 account).

(2) Dividends(i) Dividend amount paid
Resolution

Class of shares

Dividend(Millions of yen)

Dividend pershares (yen)Reference date

Effective date

Source ofdividends

Ordinary General Meetingof Shareholders(June 22, 2018)

Commonshares

1,391

20.00

March 31,2018

June 25,
2018

Retainedearnings

Board of Directors(October 31, 2018)

Commonshares

1,738

25.00

September 30,
2018

December 3,
2018

Retainedearnings(Note) Included in the total amount of dividends decided by the Board of Directors on October 31, 2018 is ¥2 million worth of dividends related to 100
thousand Company shares (treasury shares) held in the executive compensation BIP trust account.

Financial Section

71

(ii)	Dividends whose record date is within the consolidated fiscal year and whose effective date is in the following
consolidated fiscal year
Resolution

Ordinary General Meetingof Shareholders(June 21, 2019)

Class of shares

CommonsharesDividend(Millions of yen)

Dividend pershares (yen)

1,738

25.00

Reference date

Effective date

Source ofdividends

March 31,2019

June 24,2019

Retainedearnings(Note) Included in the total amount of dividends decided by the Ordinary General Meeting of Shareholders on June 21, 2019 is ¥2 million worth of dividends
related to 100 thousand Company shares (treasury shares) held in the executive compensation BIP trust account.

14. CONSOLIDATED STATEMENTS OF CASH FLOWS(1)	Reconciliation between the balance of cash and cash equivalents at end of period and relevant amount on the
consolidated balance sheets
Millions of yen

Cash and deposits
Time deposit whose deposit period exceeds 3 months
Cash and cash equivalents

2020
81,524(605)
80,9182019

68,613(621)
67,991

15. LEASE TRANSACTIONS(Lessee)(1) Operating Lease transactions
Future lease payments related to noncancelable operating lease transactions
Millions of yen

Due within one year
Due beyond one year
Total

2020
477
1,042
1,520

2019

529
972
1,502

(Lessor)(1) Operating Lease transactions
Future lease income related to noncancelable operating lease transactions
Millions of yen

Due within one year
Due beyond one year
Total

2020
123
945
1,069

2019

129
1,008
1,137

16. FINANCIAL INSTRUMENTS(1) Matters Regarding Financial Instruments(i) Management policy on financial instruments
The Group raises funds as required (mainly through bank loans and the issuance of corporate bonds) in line withits business investment program aimed at implementing a customer-oriented approach toward “strengthening the
profitability of its businesses.” The Group invests temporary surplus funds in highly secure financial assets and raises
short-term operating capital with bank loans and CP (commercial paper). We use derivatives only to hedge risks
described below and have a policy of not implementing derivative transactions for speculative purposes.

72

Tokuy a m a R e p o r t 2 0 2 0

(ii) Type and risk of financial instruments
Notes and accounts receivable – trade, which are operating receivables, are exposed to credit risks of customers.
In addition, although foreign currency-denominated receivables are exposed to foreign exchange fluctuation risk, theCompany takes measures to reduce that risk by managing its foreign currency exposure by letting them be equal toforeign currency-denominated debts and implementing forward exchange contracts on an as needed basis.
Investment securities are mainly shares related to business or capital tie-ups with counterparties, etc., and availablefor-sale securities are exposed to the risk of market price fluctuations. In addition, the Group provides long-termloans to counterparties and others.
Notes and accounts payable – trade, which are operating payables, become due within one year.
In addition, although foreign currency-denominated debts are exposed to foreign exchange fluctuation risk, theCompany takes measures to reduce that risk by managing its foreign currency exposure by letting them be equal toforeign currency-denominated receivables and implementing forward exchange contracts on an as needed basis.
Borrowings and bonds payable are principally for raising funds necessary for capital investments, and the repayment
date comes up to 58 years after the balance sheet date. Floating rate borrowings are exposed to interest rate risk,some of which are hedged using derivative transactions (interest rate swaps).
There are three types of derivative transaction: forward exchange contracts for the purpose of curbing the foreignexchange fluctuation risks associated with foreign currency-denominated receivables and payables and forecast
transactions; interest rate swap transactions for the purpose of fixing the interest rate on borrowings or reducing theinterest expenses; and currency swap transactions aimed at reducing exchange rate risk in transactions between
the Company and its overseas subsidiaries. With regard to hedging instruments and hedged items related to hedge
accounting, hedge policies and hedge effectiveness evaluation methods, please refer to “(9) Method of significant
hedge accounting” described in “4. SIGNIFICANT ACCOUNTING POLICIES.”(iii) Risk management system for financial instruments(a)	Management of credit risk (risk related to default of counterparties, etc.)	With regard to operating receivables and loans receivable, the Company has a division in charge in eachbusiness department monitoring the status of major counterparties regularly and managing maturities andbalances for each counterparty in accordance with the credit management rules and others, while making
efforts to identify early and mitigate any concerns about collection arising from deterioration in the economic
environment, their financial position, etc. Consolidated subsidiaries also conduct similar management as
necessary in conformity with the Company’s credit management rules and others.
	In the use of derivative transactions, the Company conducts transactions only with financial institutions with highcredit ratings to mitigate counterparty risk.
(b) Management of market risk (fluctuation risk of foreign exchange, interest rate, etc.)	On an as needed basis, the Company and some of its consolidated subsidiaries use forward exchange
contracts with respect to the identified currency fluctuation risks of foreign currency-denominated receivables
and debts. Some overseas subsidiaries also use currency swap transactions to reduce their exposure to
exchange rate risk in their transactions with the parent company.
	In addition, the Company and some of its consolidated subsidiaries use interest rate swaps to reduce the risk offluctuations in interest payments on borrowings.
	The Company periodically assesses the fair value of securities and investment securities as well as financial
conditions of issuers (counterparty companies), etc., and continuously reviews the holding status in view ofrelationships with counterparty companies.
	With regard to derivative transactions, the Finance & Investment Management Dept. conducts transactions
based on the interest rate risk management policy and foreign exchange risk management policy approved by
the Board of Directors, makes entries and collates the balances with contract partners, etc. For consolidated
subsidiaries, the Finance & Investment Management Dept. also manages derivative transactions by having them
report the content of derivative transactions to the center when they conduct such transactions or by othermeans.

Financial Section73

(c) Management of liquidity risk associated with financing (risk of inability to make a payment on due date)	The Company manages liquidity risk through timely preparation and updating of the cash flow management
plan by the Finance & Investment Management Dept. based on reports from each division and by maintaining
liquidity on hand at a certain level and by other means.
(iv) Supplemental remarks on fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably determined values
where market prices are unavailable. Since variable factors are incorporated in calculation of the fair value, the value
may vary depending on different preconditions adopted. In addition, the contract amounts of derivative transactions
described in “(2) Fair values of financial instruments” should not be, in themselves, considered indicative of themarket risk associated with derivative transactions.
(2) Fair values of financial instruments
The book value of financial instruments, their fair value, and the differences between the two were as follows. The
financial instruments whose fair value is extremely difficult to determine are not given in the table below.
As of March 31, 2020
Millions of yen[2020]

Book value

Fair value

Difference

Cash and deposits
Notes and accounts receivable – trade
Investment securities
Available-for-sale securities
Long-term loans receivable
Total assets

81,52472,92981,52472,929

—
—

9,280
2,302
166,036

9,280
2,302
166,036———

Notes and accounts payable – trade
Short-term borrowings
Long-term borrowings (Note 1)
Total liabilities

42,795
3,082
110,361
156,240

42,795
3,082
110,918
156,796

—
—
556
556

(10)
(51)
(61)

(10)
(54)
(64)

—
(2)
(2)

Derivative financial instruments (Note 2)
In which hedge accounting is not applied
In which hedge accounting is applied
Total derivative financial instruments(Note 1) The book value and fair value of long-term borrowings include the current portion of long-term borrowings.
(Note 2) R eceivables and payables arising from derivative transactions are presented on a net basis, and a value of a net payable after totaling receivables
and payables is shown in parentheses.

74

Tokuy a m a R e p o r t 2 0 2 0

As of March 31, 2019
Millions of yen[2019]

Book value

Fair value

Difference

Cash and deposits
Notes and accounts receivable – trade
Investment securities
Available-for-sale securities
Long-term loans receivable
Total assets

68,61380,35868,61380,358——

11,7482,444
163,164

11,7482,444
163,164———

Notes and accounts payable – trade
Short-term borrowings
Long-term borrowings (Note 1)
Total liabilities

47,2684,361
122,078
173,70947,268
4,361
122,956
174,587

—
—
878
878

(8)
(88)
(96)

(8)
(92)
(101)

—
(4)
(4)

Derivative financial instruments (Note 2)
In which hedge accounting is not applied
In which hedge accounting is applied
Total derivative financial instruments(Note 1) The book value and fair value of long-term borrowings include the current portion of long-term borrowings.
(Note 2) R eceivables and payables arising from derivative transactions are presented on a net basis, and a value of a net payable after totaling receivables
and payables is shown in parentheses.

*Note1: Method for calculating the fair value of financial instruments, and matters regarding securities and derivative transactions
Assets(i)	Cash and deposits, (ii) Notes and accounts receivable – trade	Because these assets are mostly settled in a short period, their fair value is nearly equal to their book value. Therefore, their fair value is based on thebook value.
(iii) Investment securities
The fair value of available-for-sale securities is based on the price on the relevant exchange.
For matters to be noted on securities for each holding purpose, refer to the note “17. SECURITIES.”(iv)	Long-term loans receivable	Because all long-term loans receivable bear floating interest rates and reflect market interest rates in a short period, and credit standing of borrowers has
not changed significantly since the loans were executed, their fair value is based on the book value.
Liabilities(i)	Notes and accounts payable – trade, (ii) Short-term borrowings
	Because these liabilities are settled in a short period, their fair value is nearly equal to their book value. Therefore, their fair value is based on the bookvalue.
(iii)	Long-term borrowings
	The fair value of these liabilities is determined as the present value, which is calculated by discounting the total of principal and interest using the interest
rate that would be charged for a new similar loan.
Derivatives
Refer to the note “18. DERIVATIVES.”*Note2: Financial instruments whose fair value is extremely difficult to determine
Millions of yen

2020
1,882
7,142
1,080
10,104

Unlisted shares
Shares of associates
Bonds of associates
Total

2019

1,882
7,006
1,080
9,969

These financial instruments have no market price, and estimation of their future cash flows is expected to require excessive cost. Therefore, since it isconsidered extremely difficult to determine the fair value, they are not included in “Investment securities.”*Note3: Redemption schedule for monetary receivables and securities with maturities after the consolidated balance sheet date
As of March 31, 2020
Millions of yen[2020]

Within 1 year

Cash and deposits
Notes and accounts receivable – tradeLong-term loans receivable
Total

81,52472,929—154,453

More than 1 year,
within 5 years

More than 5 years,
within 10 years

More than 10 years

—
—
944
944

—
—
847
847

—
—
510
510

Financial Section75

As of March 31, 2019

Millions of yen[2019]

Within 1 year

More than 1 year,
within 5 years

More than 5 years,
within 10 years

More than 10 years

Cash and deposits
Notes and accounts receivable – tradeLong-term loans receivable
Total

68,61380,358—148,971

—
—
695
695

—
—
848
848

—
—
899
899

*Note4: Repayment schedule by term for bonds payable, long-term borrowings and other interest-bearing debt after the consolidated balance sheet
date
As of March 31, 2020
Millions of yen[2020]

Short-term borrowings
Bonds payable (Note 1)
Long-term borrowings
Total

Within 1 year

3,082—
16,10619,189More than 1 year, More than 2 years, More than 3 years, More than 4 years,
More than 5 years
within 2 years
within 3 years
within 4 years
within 5 years

—
—
9,918
9,918

—
—
21,966
21,966

—
—
1,122
1,122

—
—
536
536

—
—
60,71160,711(Note 1) In the cases of the 22nd and 24th series of unsecured bonds, we delegated the performance of the obligation based on an unsecured bondtrust-type debt assumption agreement that had been executed with a bank. Accordingly, although the liabilities pertaining to those unsecured
bonds and the amount paid under that same contract offset each other, since the obligation to redeem the Company’s unsecured bonds tobondholders continues until the time of their redemption, this is noted as a contingent liability on the consolidated balance sheets.
As of March 31, 2019[2019]

Short-term borrowings
Bonds payable (Note 1)
Long-term loans payable
Total

Millions of yen
Within 1 year

4,361—
12,667
17,029More than 1 year, More than 2 years, More than 3 years, More than 4 years,
More than 5 years
within 2 years
within 3 years
within 4 years
within 5 years——
15,994
15,994

—
—
9,770
9,770

—
—
21,837
21,837

—
—
1,000
1,000

—
—
60,80760,807(Note 1) In the cases of the 20th, 22nd and 24th series of unsecured bonds, we delegated the performance of the obligation based on an unsecured bondtrust-type debt assumption agreement that had been executed with a bank. Accordingly, although the liabilities pertaining to those unsecured
bonds and the amount paid under that same contract offset each other, since the obligation to redeem the Company’s unsecured bonds tobondholders continues until the time of their redemption, this is noted as a contingent liability on the consolidated balance sheets.

17. SECURITIES(1) Trading securities
Not applicable(2) Held-to-maturity debt securities
Not applicable(3) Available-for-sale securities
As of March 31, 2020
Millions of yen[2020]

Available-for-sale securities:
Securities with book values exceeding acquisition costs
Equity securities
Debt securities
Other
Subtotal
Securities with book values not exceeding acquisition costs
Equity securities
Debt securities
Other
Subtotal
Total

76

Tokuy a m a R e p o r t 2 0 2 0Book value

Acquisition cost

Unrealized gain

3,944
—
—
3,944

2,532
—
—
2,532

1,412
—
—
1,412

5,335
—
—
5,335
9,280

5,898
—
—
5,898
8,430

(562)
—
—
(562)
850

As of March 31, 2019
Millions of yen[2019]

Available-for-sale securities:
Securities with book values exceeding acquisition costs
Equity securities
Debt securities
Other
Subtotal
Securities with book values not exceeding acquisition costs
Equity securities
Debt securities
Other
Subtotal
Total

Book value

Acquisition cost

Unrealized gain

4,654
—
—
4,654

2,796
—
—
2,796

1,858
—
—
1,858

7,094
—
—
7,094
11,748

10,155——
10,155
12,951(3,060)——(3,060)(1,202)

Book value

Acquisition cost(4) Available-for-sale securities sold
As of March 31, 2020
Millions of yen[2020]

Available-for-sale securities sold during 2020 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Unrealized gain

14

8

1

—
—
—
—
14

—
—
—
—
8

—
—
—
—
1

As of March 31, 2019
Millions of yen[2019]

Available-for-sale securities sold during 2019 :Equity securities
Debt securities
Government and municipal bonds
Corporate bonds
Other
Other
Total

Book value

Acquisition cost

Unrealized gain

46

1

—

—
—
—
—
46

—
—
—
—
1

—
—
—
—
—

(5) Impairment of marketable securities
During the consolidated fiscal year under review, an impairment of ¥4,531 million was made for securities (equity
securities of available-for-sale securities). In making impairments of stocks that decline 30% to 50%, the Company
makes a comprehensive assessment for each individual issue by considering the stock price movements over the
past two years and quantitatively evaluating credit risk by examining various figures based on the published financial
statements.

Financial Section

77

18

DERIVATIVES(1) Derivative transactions to which hedge accounting is not applied(i) Currency-related derivatives
As of March 31, 2020
Millions of yen[2020]

Main hedged items

Not applied Hedge accounting method
Principle-based accounting
Currency Swap
Receiving JPY, Paying TWD
Total

Long-term borrowings

Notional value

400
400

Maturing after one year

220
220

Fair value

(10)
(10)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

As of March 31, 2019
Millions of yen[2019]

Main hedged items

Not applied Hedge accounting method
Principle-based accounting
Currency Swap
Receiving JPY, Paying TWD
Total

Long-term borrowings

Notional value

400
400

Maturing after one year

400
400

Fair value

(8)
(8)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

(ii) Interest
Not applicable(2) Derivative transactions to which hedge accounting is applied(i) Currency-related derivatives
As of March 31, 2020
Not applicable
As of March 31, 2019
Millions of yen[2019]

Main hedged items

Notional value

Maturing after one year

Fair value

Hedge accounting method
Principle-based accounting
Forward exchange contracts
Call
Korean Won
Total

Forecast transaction inforeign currencies

42

—

(0)

42

—

(0)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

78

Tokuy a m a R e p o r t 2 0 2 0

(ii) Interest
As of March 31, 2020
Millions of yen[2020]

Main hedged items

Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive floating rateLong-term borrowings
SubtotalSpecial treatment for interest rate swaps
Interest rate swaps
Pay fixed rate, receive floating rateLong-term borrowings
Subtotal
Total

Notional value

Maturing after one year

Fair value

3,800
3,800

2,200
2,200

(51)
(51)

450
450
4,250

270
270
2,470

(2)
(2)
(54)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

As of March 31, 2019
Millions of yen[2019]

Main hedged items

Hedge accounting method
Principle-based accounting
Interest rate swaps
Pay fixed rate, receive floating rateLong-term borrowings
SubtotalSpecial treatment for interest rate swaps
Interest rate swaps
Pay fixed rate, receive floating rateLong-term borrowings
Subtotal
Total

Notional value

Maturing after one year

Fair value

5,400
5,400

3,800
3,800

(87)
(87)

630
630
6,030

450
450
4,250

(4)
(4)
(92)

(Note) Method for calculation of fair value
Fair values are calculated based on the price presented by counterparty financial institutions, etc.

Financial Section7919. RETIREMENT BENEFITS(1) Outline of adopted retirement benefit plans
The Company and its consolidated domestic subsidiaries have lump-sum severance benefits plans and defined
benefit pension plans as a vested benefits system (DB scheme). They also have defined contribution pension plans as
DC scheme. The Company and its consolidated domestic subsidiaries may pay, under certain circumstances, extra
retirement allowances when their employees leave the companies. The Company has a retirement benefit trust.
(2) Defined benefit plans(i) Reconciliation of beginning and ending balances of retirement benefit obligations
Millions of yen

2020
17,279
946
124
(54)
(905)
(23)
17,367

Balance of defined benefit obligations at beginning of year
Service cost
Interest cost
Occurrence of actuarial gain and loss
Payments of retirement benefits
Other
Balance of defined benefit obligations at end of year2019

16,952843
125
95(1,292)553
17,279(Note) The consolidated domestic subsidiaries, except for two companies, have adopted the simplified accounting method in calculating retirement benefit
obligations.

(ii) Reconciliation of beginning and ending balances of pension assets
Millions of yen

2020
24,926
470
(608)
562
(692)
24,659Balance of pension assets at beginning of year
Expected return on pension assets
Occurrence of actuarial gain and loss
Corporation's contributions
Payments of retirement benefits
Balance of pension assets at end of year2019

25,082
473
(105)
575
(1,098)24,926(iii)	Reconciliation of ending balances of retirement benefit obligations and pension assets to retirement benefit
liability and retirement benefit asset recorded in the consolidated balance sheets
Millions of yen

Funded defined benefit obligations
Pension assets
Unfunded defined benefit obligations
Net amount shown on consolidated balance sheets
Retirement benefit liability
Retirement benefit asset
Net amount shown on consolidated balance sheets

2020
15,343(24,659)(9,315)
2,023(7,291)
2,277(9,569)(7,291)

2019

15,289(24,926)(9,636)
1,989(7,647)2,149(9,796)(7,647)(iv)	Retirement benefit expenses and a breakdown of the retirement benefit expenses
Millions of yen

Service cost (Note)
Interest cost
Expected return on pension assets
Expensed actuarial gain and loss
Retirement benefit expenses regarding to vested benefits system

2020
946
124
(470)
(383)
217

2019

843
125
(473)
(422)
72

(Note) Retirement benefit expenses of the consolidated domestic subsidiaries that have adopted the simplified accounting method are included in “Service
cost.”

80

Tokuy a m a R e p o r t 2 0 2 0

(v) Remeasurements of defined benefit plans
A breakdown of items recorded in adjustment of retirement benefit (before deduction of tax effects) is as follows:
Millions of yen

Actuarial gain and loss
Total

2020
(937)
(937)

2019

(624)
(624)

(vi) Accumulated adjustment of retirement benefits
A breakdown of items recorded in accumulated adjustment of retirement benefit plans (before deduction of tax
effects) is as follows:
Millions of yen

Unrecognized actuarial gain and loss
Total

2020
2,850
2,850

2019

3,787
3,787

(vii) Matters relating to pension assets(a) Principal items of pension assets
The proportion of each principal category to the total of pension assets is as follows:

Domestic stocks
Foreign stocks
Domestic bonds
Foreign bonds
Insurance product (General account)
Deposits
Other
Total

2020
9%
6
25
9
17
12
22
100%

2019

10%
7
28
13
16
11
15
100%

(Note 1) Total of pension assets as of March 31, 2019 and March 31, 2020 included a retirement benefit trust, established for the Company’s
pension plans that represented 10% and 10% of the total of pension assets, respectively.

(b) Method for setting the expected long-term rate of return
The expected long-term rate of return on pension assets has been set based on the allocation of the pension
assets as well as the current and expected rate of return from each category of the pension assets.
(viii) Matters relating to the basis for calculation used in the actuarial calculation
Main basis for calculation used in the actuarial calculation (principally represented by the rate used)

Discount rate
Expected long-term return on pension assets

2020
0.8%
2.1%

2019

0.8%
2.1%

(3) Defined contribution plans
The amount which the Company and its consolidated subsidiaries were required to contribute to the defined
contribution plans was ¥507 million for the previous consolidated fiscal year and ¥526 million for the consolidated fiscal
year under review.

20. STOCK OPTIONS
Not applicable

Financial Section8121. TAX EFFECT ACCOUNTING(1) Breakdown of deferred tax assets and liabilities by their main occurrence causes
Millions of yen

2020

2019

Deferred tax assets:
Deficits (Note 2)
Excess depreciation and amortization
Provision for repairs
Investment securities
Amount carried forward tax credit limit excess
Provision for bonuses
Retirement benefit liability
Inventories
Other
Subtotal
Valuation allowance (Deficits) (Note 2)
Valuation allowance (Temporary difference)Less valuation allowance (Note 1)
Total deferred tax assets

51,827
2,388
2,051
1,392
1,125
989
832
692
2,872
64,173(35,222)(4,514)(39,736)
24,43656,371
2,698
1,447
16
1,186
832
785
532
2,867
66,738(37,464)(3,075)(40,540)
26,198Deferred tax liabilities:
Prepaid benefit costReserve for reduction entry
Retained earnings of subsidiaries and affiliates
Other
Subtotal
Valuation allowance
Total deferred tax liabilities
Net deferred tax assets(2,729)(1,167)(747)(833)(5,478)0(5,477)
18,959(2,795)(1,235)(646)(650)(5,328)0(5,327)
20,871(Note 1) Valuation allowance decreased by ¥804 million. This decline is primarily due to a ¥2,242 million decrease in valuation allowance (deficits) due to a
decline in loss carry-forwards and a ¥1,378 million increase in valuation allowance due to the impairment of investment securities.
(Note 2) A mounts of deficits and related differed tax assets by tax loss carry-forwards were as follows.

As of March 31,2020Millions of yen[2020]

Within 1 year

More than 1 year, More than 2 years, More than 3 years, More than 4 years,
More than 5 years
within 3 years
within 4 years
within 5 years
within 2 years

Total

Deficits (Note 1)

50

340

531

281

587

50,036

51,827

Valuation allowance

(41)

(202)

(530)

(245)

(587)

(33,615)(35,222)

Deferred tax assets

9

137

1

35

—

16,421

16,605(Note2)(Note 1) Deficits are the amount after multiplying the statutory tax rate.
(Note 2) Regarding
deficits of ¥51,827 million (amount after multiplying the statutory tax rate), the Company recorded deferred tax assets of ¥16,605 million.
Regarding deficits, valuation allowance related to the portion deemed to be recoverable based on future taxable income forecasts is not recognized.

As of March 31,2019Millions of yen[2019]

Within 1 year

More than 1 year, More than 2 years, More than 3 years, More than 4 years,
More than 5 years
within 3 years
within 4 years
within 5 years
within 2 years

Deficits (Note 3)

548

60

383

567

330

54,481

56,371

Valuation allowance

(417)

(56)

(367)

(546)

(327)

(35,748)(37,464)

Deferred tax assets

131

4

16

21

2

18,732

18,907(Note 3) Deficits are the amount after multiplying the statutory tax rate.

82

Total

Tokuy a m a R e p o r t 2 0 2 0

(2)	Reconciliation of significant difference between the statutory tax rate and the effective tax rate after applying
tax effect accounting

Statutory tax rate
Increase (decrease) in income taxes resulting from:
Change in valuation allowance allocated to income tax expenses
Effect of tax credits
Dividend and other items excluded permanently from taxable income
Entertainment expenses and other items excluded permanently from deductible expenses
Inter-company eliminations of dividends income
Inter-company eliminations of allowance for doubtful accounts
Elimination of tax loss carried forwards
Tax rate differential of overseas subsidiaries
Other
Effective income tax rate

22.

2020
30.5%

30.5%

(4.4)
(3.7)
(3.7)
2.1
1.5
1.4
1.1
(1.0)
1.1
24.8%

(19.3)
(3.4)
(1.9)
0.3
1.4
—
0.5
0.1
(0.2)
7.9%

2019

BUSINESS COMBINATION
Description of content has been omitted due to a lack of importance.

23. ASSET RETIREMENT OBLIGATIONS(1) Asset retirement obligations included in the consolidated balance sheets
The Group has obligations to restore a site to its original state at the time of leaving or termination of the businessand after termination of mining for branches, etc., that use an office under a real estate lease agreement or certain
business offices that use a plant or site for sales facilities, as well as mines. Of these obligations, for certain obligations
to restore a site to its original state at the time of leaving a rental building under a building lease agreement for which thetiming of performance and amount can be reasonably estimated at the present moment based on past records, asset
retirement obligations have been recorded. The note on the content of asset retirement obligations is omitted because ofimmateriality.
(2) Asset retirement obligations not included in the consolidated balance sheets
Because past records other than those stated in (1) above are poor, the period of use of the leased asset related to the
obligations is uncertain, and there is no plan for relocation, etc., or mine closure at the present moment, it is difficult
to reasonably estimate the timing, scope and probability of execution for the obligations. Therefore, asset retirement
obligations corresponding to the obligations have not been recorded.

24. INVESTMENT AND RENTAL PROPERTIES
Information is omitted because of immateriality of the total amount of investment and rental properties.

Financial Section8325. SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION(1) Summary of reportable segments
The reportable segments in the Company are defined as individual units, where separate financial information is available
and which are subject to regular review to evaluate their results and decide the allocation of management resources by
the board of directors.
The Company has business divisions by product group, and conducts business operations through each businessdivision devising its comprehensive product strategy for domestic and overseas markets.
The Company is, therefore, composed of reportable segments by product group based on business divisions and has
four reportable segments, “Chemicals,” “Specialty Products,” “Cement” and “Life & Amenity.”
Main products and services of each reportable segment are as follows:
Chemicals: Caustic soda, Soda ash, Calcium chloride, Sodium silicate, Vinyl chloride monomer, Polyvinyl chloride resin,
Propylene oxide, Isopropyl alcohol, Chlorinated solvents and hydrogenSpecialty Products: Polycrystalline silicon, Fumed silica, Tetrachlorosilane, Aluminum nitride, High-purity chemicals forelectronics manufacturing and Photoresist developer
Cement: Cement, Ready-mixed concrete, Cement-type stabilizer and Resource recycling businessLife & Amenity: Polyolefin film, Plastic window sashes, Medical diagnosis systems, Dental materials and equipment,
Ion exchange membranes, Pharmaceutical ingredients and intermediates, Plastic lens-related materials for glasses andMicroporous film
(2) Changes in reportable segments
In accordance with the change in management categorizations, a certain subsidiary previously included in the Others
segment has been included in the Life & Amenity segment from this consolidated fiscal year.
Segment information for the corresponding period of the previous consolidated fiscal year has been prepared inaccordance with this change.
(3) Calculation of sales, income (loss), assets and other items by reportable segment
The accounting methods applied to reportable segments are identical to those stated in “4. SIGNIFICANTACCOUNTING POLICIES.”
Inter-segment sales or transfer are based on market prices.
Reportable segment’s profit (loss) is based on operating profit.

84

Tokuy a m a R e p o r t 2 0 2 0

(4) Information on net sales, profit (loss), assets and other items by reportable segment
Fiscal year ended March 31, 2020
Millions of yen
Chemicals

Specialty
Products

CementLife &
Amenity

Others(Note 1)

Total

Sales to customers

92,75543,726

86,61654,34738,651

Inter-segment sales/transfer

975

10,739673

1,960

Total sales

93,73054,46687,289Segment profit

15,366

7,058

3,835

Segment assets

48,27761,039Depreciation andamortization (Note 4)

2,750

Increase in property,
plant and equipment
and intangible assets(Note 5)3,106[2020]

Adjustment(Note 2)

Consolidated(Note 3)

316,096—

316,096

26,58140,929(40,929)—

56,307

65,232357,026(40,929)

316,096

2,885

6,935

36,082(1,801)

34,281

55,277

57,95550,001

272,551

110,895

383,447

2,926

3,422

2,460

3,679

15,239882

16,122

8,059

4,219

2,602

3,478

21,467

3,182

24,649Sales

Other items(Note 1) The “Others” segment comprises businesses other than those of the reportable segments and includes overseas sales business, a distribution
business, a real estate business, etc.
(Note 2) A djustments are as follows:(i) The segment profit adjustment amount consists mainly of basic R&D expenses that are not allocable to a specific reportable segment and theamount of inter-segment eliminations.
(ii) T he segment assets adjustment amount includes corporate assets that are not allocated to a specific reportable segment (¥137,395 million).
(Note 3) S egment profit is adjusted for operating profit in the consolidated financial statements.
(Note 4) D epreciation and amortization includes amortization of long-term prepaid expenses.
(Note 5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term prepaid expenses.

Fiscal year ended March 31, 2019
Millions of yen
Chemicals

Specialty
Products

CementLife &
Amenity

Others(Note 1)

Total

Sales to customers

97,47147,19391,49153,26035,243

Inter-segment sales/transfer

908

12,474874

2,018

Total sales

98,38059,66892,366

Segment profit

16,850

9,934

3,204

Segment assets

53,99562,916

Depreciation andamortization (Note 4)

2,582

Increase in property,
plant and equipment
and intangible assets(Note 5)

3,375

[2019]

Adjustment(Note 2)

Consolidated(Note 3)324,661—

324,661

26,12742,404(42,404)—

55,27961,370367,065(42,404)

324,661

3,236

4,337

37,564(2,301)35,26255,42759,19051,408282,938

96,691

379,630

2,533

3,359

2,399

3,441

14,315

777

15,093

5,404

3,507

2,059

2,750

17,0981,970

19,069Sales

Other items(Note 1) The “Others” segment comprises businesses other than those of the reportable segments and includes overseas sales business, a distribution
business, a real estate business, etc.
(Note 2) A djustments are as follows:(i) T he segment profit adjustment amount consists mainly of basic R&D expenses that are not allocable to a specific reportable segment and theamount of inter-segment eliminations.
(ii) T he segment assets adjustment amount includes corporate assets that are not allocated to a specific reportable segment (¥123,060 million).
(Note 3) S egment profit is adjusted for operating profit in the consolidated financial statements.
(Note 4) D epreciation and amortization includes amortization of long-term prepaid expenses.
(Note 5) Increase in property, plant and equipment and intangible assets includes the amount of increase in long-term prepaid expenses.

Financial Section

85

RELATED INFORMATION
Fiscal year ended March 31, 2020
(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.
(2) Information by region(i) Net sales
Millions of yen

2020
256,493
47,29012,312
316,096

Japan
Asia
Others
Total(Note) Net sales are categorized into countries or regions based on the location of customers.

(ii) Property, plant and equipment
The listed amount of property, plant and equipment has been omitted because over 90% of property, plant andequipment listed on consolidated balance sheets is located in Japan.
(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.
Fiscal year ended March 31, 2019(1) Information by product and service
Information is omitted as identical information is disclosed in segment information.
(2) Information by region(i) Net sales
Millions of yen

2019

Japan
Asia
OthersTotal

263,449
49,292
11,919324,661(Note) Net sales are categorized into countries or regions based on the location of customers.

(ii) Property, plant and equipment
The listed amount of property, plant and equipment has been omitted because over 90% of property, plant andequipment listed on consolidated balance sheets is located in Japan.
(3) Information by major customer
Information is omitted because no external customer accounts for 10% or more of net sales in the consolidated
statements of income.

INFORMATION ON IMPAIRMENT LOSS OF NON-CURRENT ASSETS BY REPORTABLE SEGMENT
Fiscal year ended March 31, 2020
Millions of yen[2020]

Impairment loss

86

Tokuy a m a R e p o r t 2 0 2 0

Chemicals

Specialty
Products

Cement34——

Life & Amenity—

OthersAdjustment

—

—

Total

34

Fiscal year ended March 31, 2019
Millions of yen[2019]

Chemicals

Specialty
Products

Cement———Impairment loss

Life & Amenity

363

OthersAdjustment

—

—

Total

363

INFORMATION ON AMORTIZATION OF GOODWILL AND UNAMORTIZED BALANCE BYREPORTABLE SEGMENT
Fiscal year ended March 31, 2020
Millions of yen
Chemicals

Specialty
Products

OthersAdjustment

Amortization of goodwill

—

7

197

—

—

—

204

Unamortized balance

—

3

—

—

—

—

3

[2020]

CementLife & Amenity

Total

There is neither amortization of negative goodwill nor unamortized balance arising from business combinations conducted on and before April 1, 2010.

Fiscal year ended March 31, 2019
Millions of yen
Chemicals

Specialty
Products

OthersAdjustment

Amortization of goodwill

—

7

937

—

—

—

944

Unamortized balance

—

10

197

—

—

—

208

[2019]

CementLife & Amenity

Total

There is neither amortization of negative goodwill nor unamortized balance arising from business combinations conducted on and before April 1, 2010.

INFORMATION ON GAIN ON BARGAIN PURCHASE BY REPORTABLE SEGMENT
Fiscal year ended March 31, 2020
In the fiscal year under review, the Company records gain on bargain purchase of ¥157 million under “Cement” segment.
Fiscal year ended March 31, 2019
In the fiscal year under review, the Company records gain on bargain purchase of ¥964 million under “Others” segment.

INFORMATION ON RELATED PARTIES
Fiscal years ended March 31, 2020 and 2019
Not applicable.

Financial Section8726. PER SHARE INFORMATIONyen

Net assets per share

2020
2,431.21

2,199.83

Earnings per share

287.05493.26——

Diluted earnings per share2019(Note 1) The basis for calculation
1. Net assets per share
Millions of yen

Total net assets on Balance Sheets

2020
180,429

163,525

Net assets related to common shares

168,861

152,781

11,568

10,7432019

Major breakdown of difference
Non-controlling interests

Thousand shares

Number of shares outstanding of common shares
Number of treasury shares of common shares
Number of common shares used to calculate net assets per share

2020
69,934

2019

69,934478

482

69,45569,451

2. Earnings per share
Millions of yen

Profit attributable to owners of parent
Amount not attributable to common shareholders

2020
19,937

201934,279——Profit related to common shares attributable to owners of parent

19,93734,279Average number of common shares during the period

2020
69,455

Thousand shares

2019

69,495(Note 2) Company shares held in the executive compensation BIP (Board Incentive Plan) trust are included in treasury shares deducted from the total number ofshares issued at the end of the consolidated fiscal year in calculating “net assets per share.” The number of Company shares held in the executive
compensation BIP (Board Incentive Plan) trust at the end of the consolidated fiscal year under review was 94 thousand shares. (The number of Company
shares at the end of the previous fiscal year was 100 thousand shares)		Company shares held in the executive compensation BIP trust are included in treasury shares deducted when calculating the average number ofcommon shares for the consolidated fiscal year. Of note, the average number of Company shares for the consolidated fiscal year under review held in theexecutive compensation BIP trust is 96 thousand shares (the average number of Company shares for the previous consolidated fiscal year was 58
thousand shares.)(Note 3) Diluted earnings per share is not listed due to the absence of diluted shares.

27. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable88

Tokuy a m a R e p o r t 2 0 2 028. ANNEXED CONSOLIDATED DETAILED SCHEDULES(1) Schedule of bonds payable
Millions of yen
Company

Issue

20th unsecured
Tokuyama bonds without
collateral

Date of IssuanceInterest rate

collateral

March 10,2010

1.760%

No

22nd unsecured
September 9,
Tokuyama bonds without
2010
collateral

1.478%

24th unsecured
Tokuyama bonds without
collateral

1.371%

September 8,
2011

No

No

the term of redemption

2019

2020

March 10, 2020—

10,000

The amounts to beredeemed within 1 year—

10,000

September 9, 2020

15,00015,000

The amounts to beredeemed within 1 year

15,000—

September 8, 2021

9,400

9,400

—

—

24,40034,40015,00010,000

The amounts to beredeemed within 1 year

Total
The amounts to beredeemed within 1 year

(Note 1) In the cases of the 20th, 22nd and 24th series of unsecured bonds, we delegated the performance of the obligation based on an unsecured bondtrust-type debt assumption agreement that had been executed with a bank. Accordingly, although the liabilities pertaining to those unsecured
bonds and the amount paid under that same contract offset each other, since the obligation to redeem the Company’s unsecured bonds tobondholders continued until the time of their redemption, this is noted as a contingent liability on the consolidated balance sheets.
(Note 2) A mounts of redemption within five years after the consolidated balance sheet date are as follows:
Millions of yen

Year ending March 31
2021
2022
2023
2024
2025

15,0009,400———(2) Schedule of borrowings
Millions of yen

Short-term borrowings (0.51%)
Current portion of long-term borrowings (0.91%)
Current portion of lease obligations
Long-term borrowings due in 2021-2078 (1.36%)
Lease obligations due in 2021-2028
Total

2020
3,082
16,106870
94,255
2,028
116,344

2019

4,361
12,667758
109,411
1,767
128,966(Note 1) “Average interest rate” shows the weighted average interest rate on the ending balance of borrowings, etc.
(Note 2) T he average interest rate on lease obligations is not presented because lease obligations are recorded at the amount before deduction of theamount equivalent to interest included in total lease payments, in the consolidated balance sheets.
(Note 3) T he amounts of long-term borrowings, and lease obligations (excluding current portion of them) to be repaid within five years after the consolidatedbalance sheet date are as follows:
Long-term borrowings

Year ending March 31
2022
2023
2024
2025

Millions of yen

9,918
21,966
1,122536

Financial Section89Lease obligations

Millions of yen

Year ending March 31
2022
2023
2024
2025

763
591
347
200

(3) Schedule of asset retirement obligations
Information is omitted since the amounts of asset retirement obligations at the beginning and end of the consolidated
fiscal year under review are 1% or less of the total of liabilities and net assets at the beginning and end of theconsolidated fiscal year under review.
(4) Others
Quarterly information for the consolidated fiscal year ended March 31, 2020

1Q

2Q

3Q

Current consolidated
fiscal year

Net sales (Millions of yen)

76,465

152,749

236,543

316,096

Profit before income taxes (Millions of yen)

6,158

13,41023,39027,917

Profit attributable to owners of parent(Millions of yen)

4,859

10,40018,011

19,937

Earnings per share (yen)69.97

149.75259.32287.05

1Q

2Q

3Q

Current consolidated
fiscal year

69.97

79.67

109.5727.73

Accumulated period

Accumulated period

Earnings per share (yen)(Note) The Company records shares held in the executive compensation BIP (Board Incentive Plan) trust as treasury shares. In addition, said shares areincluded in treasury shares deducted when calculating the average number of shares for the fiscal year based on calculations of earnings per share.

90

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Financial Section

91

92

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Financial Section

93

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FRONT PLACE AKIHABARA,
7-5, Sotokanda 1-chome, Chiyoda-ku, Tokyo 101-8618, Japan
Corporate Communications & Investor Relations Department
Corporate Social Responsibility Division
TEL: +81-3-5207-2552 FAX: +81-3-5207-2578
URL: https://www.tokuyama.co.jp/eng/