Business Report 2017
Year ended March 31, 2017

http://www.kureha.co.jp/

The Pursuit of Excellence
Printed in Japan

Investor Information

Building on Core Strengths
Kureha Corporation is a manufacturer of highly originative specialty chemicals andplastics that leverages proprietary technologies to develop products in the fields of(As of March 31, 2017)

Major Stockholders

Corporate Data
Corporate Name
Headquarters

advanced materials, agrochemicals, pharmaceuticals, and packaging materials. Since its

Kureha Corporation

Meiji Yasuda Life Insurance Company

3-3-2, Nihonbashi-Hamacho,

Japan Trustee Services Bank, Ltd. (Trust account)Chuo-ku, Tokyo 103-8552, JapanThe Master Trust Bank of Japan Ltd. (Trust account)Tel: 81-3-3249-4666

establishment in 1944, Kureha has utilized its strengths in technology and innovation to

Fax: 81-3-3249-4744
Date of Establishment

June 21, 1944

Paid-in Capital¥12,460 million

in harmony with the environment, and consistently create products that bring value to

Number of Employees

4,426

customers and society.

Independent Auditor

Ernst & Young ShinNihon LLC

provide a wide range of solutions suited to the market needs of each era.
Today, this corporate DNA drives Kureha to always pursue originality and excellence

Number of Shares ofCommon Stock Issued

To be a company supporting an ever-changing society.

We treasure people and the naturalenvironment.

●

We constantly evolve through innovation.

●

We contribute to society by developing
beneficial products.

Japan Trustee Services Bank, Ltd. (9 trust accounts)
Daiichi Sankyo Company, Ltd.
Japan Trustee Services Bank, Ltd. (5 trust accounts)

18,168,390 shares

Number of Shares Heldby Foreign Shareholders 4,276,480 (23.5% of total)

We formulated our Corporate Identity to reflect our●

Mizuho Bank, Ltd.

Number of Shareholders 13,517

To be a company that changes society for the better.
vision for Kureha.

JP MORGAN CHASE BANK 385166 (UK)Mizuho Trust & Banking Co., Ltd.

Stock Information

Corporate Philosophy

Tokio Marine & Nichido Fire Insurance Co., Ltd.

The Pursuit of
Excellence

Stock Exchange Listings Tokyo Stock Exchange
Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Contents
Profile......................................................................................01

Corporate Governance .............................................22

At a Glance.........................................................................02

Management Team .....................................................26

Consolidated Statements of
Changes in Equity .........................................................35

Consolidated Financial Highlights....................03

Consolidated Financial Summary ....................27

Consolidated Statements of Cash Flows ......37

President’s Message.....................................................04

Management Discussion and Analysis ........28

Business Plan Update..................................................08
The Year’s Highlights....................................................12

Consolidated Statements ofFinancial Position ...........................................................32

Notes to Consolidated Financial
Statements .........................................................................38

Review of Operations..................................................14

Consolidated Statements of Profit or Loss ....34

Research & Development........................................18

Consolidated Statements ofComprehensive Income ..........................................34

CSR.............................................................................................20

Major Subsidiaries and Affiliates.........................98
Investor Information ...................................................99

Kureha Corporation Business Report 201799

R&D Innovation:
The Source of Our CompetitivenessWe pride ourselves on our expertise in polymer engineering and processing as well asorganic synthesis and carbon materials development. These technologies provide thebase for the development of our original innovative materials and products. We areconstantly adding and fusing new ideas to these accumulated technologies, and in the spiritof “if it doesn’t exist, let’s create it,” each day we pursue technology solutions that only Kureha
can provide to meet unmet needs.

Originality and Quality to Answer Global Needs:
The Growth Potential in Global Markets
Kureha’s overseas sales had reached 26% of total revenue as of March 2017. Along with
exports from Japan, we have production, processing and sales locations in the United States,
Germany, the Netherlands, France, the U.K., China, Vietnam and Australia, enabling aneffective response to needs in overseas markets. With continued growth expected in newly
emerging countries and many other regions, we are taking active and strategic steps toexpand sales of highly competitive products in line with the needs of overseas markets,
whether for advanced materials, chemicals, or plastic products.

Maximizing Earnings & Diversifying Risks:
The Path to Sustainable Growth
Our innovative products and services are broadly based but highly specialized,
supporting a wide range of industries, including electrical and electronic-appliances,automotive, agriculture, medicine and energy. We maximize earnings and diversify risk
through broad-based business development in promising growth fields such as theenvironment, energy, health and lifestyle. We continuously optimize our portfolio to alignwith shifting market needs while securing our earnings path.

Kureha Corporation Business Report 201701

At a Glance
FY2016 Revenue by Segment

Advanced Materials¥33,369 million

25.2%

Specialty Chemicals¥25,866 million
FY2016
Revenue¥132,294 million

19.6%

Specialty Plastics¥42,791 million

32.3%

Construction and Other Operations¥13,934 million ¥16,332 million

10.5%(Construction)

02 Kureha Corporation Business Report 2017

12.3%

(Other Operations)Consolidated Financial Highlights
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 (FY2016) and 2016 (FY2015)

Business Areas
Thousands of
U.S. dollars

Millions of yen

Advanced Plastics
Carbon Fibers & Products
Battery Materials

For the year:
Revenue
Operating profit
Profit attributable to ownersof parent
Capital expenditure
Depreciation and amortization
Research and development
expensesYear-end:
Total assets
Total equity attributable toowners of parent
Interest-bearing debt

FY2016FY2015FY2016¥132,294
9,255¥ 140,779
7,384$1,179,196
82,493

7,001

4,881

62,403

10,304
10,191

11,422
10,333

91,844
90,836

4,734

4,885

42,196¥234,907¥ 239,807$2,093,831

124,297

118,177

1,107,915

71,007

632,917

81,184
Yen

Agrochemicals
Pharmaceuticals
Industrial Chemicals

Household Products

Amounts per share:
Basic profit per share
Owners' equity per share¥ 407.38
7,232.89

U.S. dollars$¥ 284.05
6,876.19

3.63
64.47

Percent

Ratios:Ratio of profit attributable toowners of parent to revenue
Return on equity
Return on assets
Owner’s equity ratio

5.3%

3.5%

5.8
3.8
52.9

4.1
2.7
49.3

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥112.19 to US$1, therate of exchange prevailing on the Tokyo Foreign Exchange Market on March 31, 2017.
2. For amounts per share, see Note 29 of the Notes to Consolidated Financial Statements.
3. Return on equity = Profit attributable to owners of parent/Shareholders’ equity × 100
4. Return on assets = Profit before tax/Total assets × 100
5. Owner’s equity ratio = Owner’s equity/Total liabilities and equity

Packaging Materials
Synthetic Fiber Products

Revenue

Operating Profit(Millions of yen)

(Millions of yen)

Profit Attributable to
Owners of Parent(Millions of yen) (Left scale)

Basic Profit per Share(Yen) (Right scale)
160,000

10,00010,000

500

8,000

8,000

400

6,000

6,000

300

4,000

4,000

200

2,000

2,000

100

140,000
120,000
100,000

Engineering & Construction

80,000

Environment Management

60,000Logistics

40,00020,000
0

(FY)

2015

2016

0

(FY)

2015

2016

0

(FY)

2015

2016

0

Kureha Corporation Business Report 201703

President’s Message

Laying the Groundwork for Lasting
Future Growth

Yutaka Kobayashi
President & Chief Executive Officer

04 Kureha Corporation Business Report 2017

Dear Shareholders,
In FY2016 (ended March 31, 2017), Kureha’s revenue was down by 6.0% to 132.3 billion yen, mainly due toa decline in the pharmaceuticals business caused by increasing market influence from generic drugs,
fierce competition in the polyphenylene sulfide (PPS) business, and the time required for business strategy
realignment in the polyglycolic acid (PGA) business. Operating profit, however, rose 25.3% to 9.3 billion
yen supported by continued strong performance in the Specialty Plastics segment as well as lower
restructuring costs.
Kureha is currently transitioning away from its previous profit structure. The pharmaceuticals businesshas been one of our main earnings drivers up to this point, but the growing market share of generic drugs
has reduced that contribution. In response to this situation, our mid-term management plan, titled“Kureha’s Challenge 2018,” designates the period from FY2016 through FY2018 as a time to lay a strong
foundation for future growth. We are now working to fundamentally change our business portfolio basedon three tenets: Boosting competitiveness and earnings capacity in existing businesses, steadily growing
the PGA business to establish it as an earnings pillar, and thoroughly exploring new business themes.
During FY2016, the first year of this plan, we fell short of our initial target in the Advanced Materials
business due to changes in the business environment. Competition in the PPS business has become
increasingly fierce with rising market demand, which severely affected our performance during the year.
However, we moved forward with determination to make strategic changes in the PGA business to better
respond to market needs. Although we saw some delays in this implementation during the year, we didgain the crucial ability to interact directly with customers. In this business, we are now focused on
establishing an earnings base from a long-term perspective, with less priority on short-term profit, thus
laying an important foundation for future growth.

Challenges for FY2017 and the Mid-termManagement Plan
For FY2017 (ending March 31, 2018), we are forecasting year-on-year increases in both revenue andoperating profit, with revenue of 142.0 billion yen (+7.3%), and operating profit of 11.0 billion yen(+18.8%). We expect this growth to be driven by accelerated market development and a strong sales
recovery in the PGA business.
We are also paving the way to ensure we achieve our management goals and quantitative targets for
FY2018 (revenue of 160.0 billion yen with operating profit of 14.0 billion yen), the final year of the current
mid-term management plan. Our efforts focus on building a strong foundation centered on the Advanced
Materials segment, particularly the highly profitable PGA business.
In addition to efforts to strengthen sales, Kureha has also pursued group-wide productivity gains and cost
reductions through the Reform Project since FY2013. Going forward, we will expand the scope of activities

Kureha Corporation Business Report 201705

President’s Message

under this project to include clear differentiation in cost as well as quality, operational efficiency inadministrative divisions, and improved productivity, in order to further strengthen competitiveness andenhance earnings capacity. From FY2017 onward, we will not limit our efforts to short-term improvements, butinstead seek innovations that provide bolder and substantive change.
Thorough exploration of new business themes is another key component of the current business plan. By
combining a grasp of latent market needs with multifaceted use of Kureha’s accumulated technologies, we will
create next-generation businesses that offer new value to society. In April 2016, Kureha launched the New
Business Creation Project to accelerate the search for new technologies and business themes. In collaboration
with a range of companies, universities and organizations, we have identified several promising themes in theareas of environment, energy, and quality of life in which Kureha can apply its technological strengths. We are
now conducting development in these areas aimed at commercialization within 5-10 years.

Strengthening Our Management Fundamentals
To demonstrate our relevance to society and make Kureha a high value-added enterprise that continuallycontributes to global society, we must always act in accordance with our corporate philosophy, The Pursuitof Excellence.
Guided by this philosophy, we spare no efforts to strengthen our management fundamentals to ensurethat Kureha maintains the high-quality management systems and governance that investors, and society atlarge, can trust. We adhere strictly to the Corporate Governance Guidelines formulated in 2015 to enhance theeffectiveness of our corporate governance.
Furthermore, in April 2016 we established the CSR Division to reinforce our group’s efforts to contributeto and co-exist with society. Under its guidance, Kureha is pursuing dialogue with various stakeholders tobetter integrate CSR into management decisions while promoting activities related to environmental
protection and operational safety. Our business divisions are currently in the process of establishing priority
action items based on environmental, social and governance (ESG) criteria. These action items are revised
and implemented annually.
Kureha has also implemented working style reforms to raise productivity and reduce working hours,
enhancing self-improvement and work-life balance for employees. Several measures are now underway tostrengthen individual and organizational competitiveness. In May 2016 we launched a company-wide project,
led by myself, to establish a work environment that encourages participation by all employees and a betterbalance between work and family responsibilities, and to put in place structures that support diversity. This
project concluded in March 2017 with a report submitted to management. We are now focusing on creating
workspaces and systems that allow all employees to gain a sense of personal growth through their work, andto carry out their duties and serve customers with renewed vigor.

06 Kureha Corporation Business Report 2017

Our Resolution to Achieve the Mid-termManagement Plan
Kureha recognizes that it has fallen short of its targets in past business plans. Our current mid-term
management plan, Kureha’s Challenge 2018, applies lessons from past strategies to achieve Kureha’s goal of
unique value creation through product differentiation and new business creation. To achieve this, all of ourgroup employees, myself included, are now working resolutely with a sense of urgency toward the plan’s
management goals and quantitative targets, driven by our watchwords Passion, Speed, and Commitment.
Kureha has maintained an identity as “a company built on technology” ever since its foundation in 1944.
We will continue to develop our technological strengths, enhance our presence in global markets, andgenerate new added value with the aim of being a company that continually contributes to society.
We thank you for your investment and your confidence in us, and look forward to your continued support.

Yutaka Kobayashi
President & Chief Executive Officer
June 2017

Kureha Corporation Business Report 201707

Business Plan Update

UPDATE: Mid-term Management Plan,
Kureha’s Challenge 2018 (FY2016– 2018)
Management Goals:
Kureha has defined this three-year plan as a “period to lay the foundation for future
expansion,” and set the following goals to fundamentally reform Kureha’s earnings structure.

1) Business strategies• Enhancing competitiveness and earnings capacity of existing businesses• Expanding the PGA business• Exploring new business themes

2) Promote CSR-based management
3) Strengthen the management fundamentals

Overview of FY2016
Kureha established a growth foundation in which household products were positioned as astable, high-margin business. However, results fell short of initial forecasts as the Advanced
Materials segment—a key to future growth—performed more slowly than expected due toincreased competition in the polyphenylene sulfide (PPS) market and delays in thebusiness strategy realignment in the polyglycolic acid (PGA) business.
In FY2017 and beyond, we will continue in the strategic direction outlined in Kureha’s
Challenge 2018, accelerate expansion of the PGA business which will be our future growth
driver, and strengthen cost competitiveness with the aim of achieving the quantitative
targets for the plan’s final year.

08 Kureha Corporation Business Report 2017

Expanding Overseas Sales
FY201626%

Quantitative Targets
Revenue¥132.3 billion

FY2017FY2018Targets

FY2017
Targets

FY201631¥142.0 billion ¥160.0 billion

Operating profit

9.3 billion¥ 11.0 billion¥ 14.0 billion

Profit attributableto owners ofparent

7.0 billion

8.4 billion

9.0 billion%

35
FY2018DE ratio
ROE

0.6

0.5

5.8%

6.0%

%

Presumptions• Currency exchange rates: ¥120/US$1, ¥130/€1, ¥18/CNY1• Crude oil price: US$40/bbl• Number of shares of common stock issued in FY2018: 206 million shares, including
conversion of convertible bonds

Strategic Direction:
As a company built on technology, Kureha
will develop differentiated products in thefield of specialty chemicals and become ahigh value-added enterprise that
continually contributes to global society.

Revenue and Operating Profit Targets by Segment
Revenue

Operating Profit(Billions of yen)(Billions of yen)

60

FY201650.0

5042.8 43.0

41.0

40

FY2017FY201847.0

25.9 26.5

FY20187.0

22.0
16.3 17.0

Construction

3.0

3
1

Specialty
Plastics

4.1

4
2

10
Specialty
Chemicals

5.0

5

28.0

13.9 14.5 13.0

Advanced
Materials

FY2017620

0FY2016

8
7

33.4

30

9

Other
Operations0

2.5 2.6

4.5

2.0

1.0

1.2

1.7

0.3

0.1

Advanced
Materials

1.7
0.6

Specialty
Chemicals

Specialty
Plastics

Construction

Other
Operations

Kureha Corporation Business Report 201709

Business Plan Update

Measures in Progress01

Enhancing Competitiveness for Existing Businesses• PVDF plant expansion under way
PVDF

PVDF production capacity at the Iwaki Factory in Japan is being increased to 2000 tons/year to meet growing
demand for binders in the lithium-ion batteries (LiBs) used in electric and plug-in hybrid vehicles. Operations
are scheduled to start in fall 2018.

• China technology center established (June 2017)

The center enables Kureha to rapidly support and respond to Chinese LiB manufacturers, thereby enhancing
customer satisfaction.

PPS

Krehalon• Manufacturing capacity at Iwaki Factory strengthened (Fall 2016)

Manufacturing capacity at the Iwaki Factory was increased by 700 tons (10,700 tons/year) to alleviate
bottlenecks and meet robust demand for PPS, mainly for automotive use.

• European business restructured to support global sales expansion (April 2017)

Manufacturing and sales companies in Europe were restructured to strengthen sales capacity for heatshrinkable multilayer films.

• Improved productivity for NEW Krewrap (Spring 2017)
HouseholdProducts

CarbonMaterials

The production volume for NEW Krewrap was increased by around 5%, alleviating a manufacturing bottleneck.

• Overseas market research begins for business expansion (April 2017)

Established a marketing team to study overseas markets for plastic wrap in preparation for sales expansion of
NEW Krewrap in Europe, North America, and Asia.

• Sales prices adjusted and supply structure streamlined

Earnings improved significantly by furthering sales of high value-added products at adjusted prices, and bystreamlining business operations in Japan and overseas.

02

Expanding the PGA Business• Kureha Energy Solutions LLC established (October 2016)

PGA

This new company provides Kureha with direct access to customers in the North American
market, as well as the structure to sell downhole tools developed by Kureha.

• Kureha-designed frac plugs launched

Low-temperature decomposition grade frac plugs have been developed to meet customer
needs. Sales are now ongoing under a new supply structure.

10 Kureha Corporation Business Report 2017

03
Exploring New Business Themes• New Business Creation Project established (April 2016)

Research&
Development

A group-wide project has been launched to conduct extensive market research and, based oncollaboration with outside organizations, to select and explore business themes with potential forcommercialization within 5-10 years.

• Comprehensive joint research contract concluded with Yamagata University (April 2016)
To support downstream business development, Kureha is conducting joint research with Yamagata
University on several themes aimed at enhancing technological capacities for polymer processing.

• Construction begun on process development laboratory

A process development laboratory tasked with lowering manufacturing process costs and support
new business creation is being constructed within the Iwaki Factory. Operations are scheduled tostart in fall 2017.

04

Strengthening the Management Fundamentals• Achieved 6.5 billion yen in cost reductions over four years
ReformProject

Kureha launched group-wide cost reduction efforts in 2013 to raise cost competitivenessand enhance earnings capacity in existing businesses. In the four-year period FY20132016, costs were lowered by a total of 6.5 billion yen compared with FY2012.

• Group-wide efforts implemented to enhance productivity

Kureha is working to further enhance operational efficiency and productivity inadministrative divisions.

05
Promoting CSR-based Management• All-employee activities and work-life balance initiatives implemented
Human
Resources

As part of the group-wide Shine-up Project started in May 2016, Kureha conducted fact-finding surveys
based on interviews and group discussions with employees to identify workplace issues. After
analyzing the results, Kureha is now promoting more efficient ways of working. We have also begun
considering new measures to improve work-life balance.

• CSR Division established (April 2016)
CSR

This new division is tasked with the comprehensive management and promotion of Kureha’s CSR
program, with the aim of accelerating the implementation of CSR-based management.

• Priority issues (materiality) for promoting CSR-based management specified

Kureha has identified priority issues for the company and stakeholders, marking the first step in an
ongoing action plan centered on materiality.

Kureha Corporation Business Report 201711

The Year’s Highlights

Business Enhancement

Accelerating the PGA Business in North America
In October 2016, Kureha established Kureha Energy Solutions LLC (KES), a joint venture with Japanese firm JGC
Corporation, in Texas, United States.
Kureha is the only company in the world with the capability for industrial production of polyglycolic acid (PGA).
With this material, which offers high mechanical strength and hydrolytic degradability, it is possible to produce
dissolvable downhole tools for shale oil and gas production that decompose after use due to underground heat andwater. Eliminating the drilling and mill out processes necessary with metal tools greatly enhances productivity for oil
and gas field operators and service companies.
In 2014, Kureha signed a partnership agreement with Magnum Oil Tools International, Ltd., which granted
Magnum the sales rights for PGA downhole tools in North America. However, in April 2016 we revised the contract
with Magnum to give Kureha direct access to the market, allowing us to meet customer needs by ourselves withtimely development and product upgrades, promote differentiation, and further expand in the market. The new joint
venture KES sells original products developed and manufactured by Kureha in major oil and gas producing regions ofNorth America, mainly in Texas. JGC Corporation also utilizes its accumulated knowledge and experience as a gas field
operator to provide high-quality service to customers.
The PGA business, which is instrumental to achieving the targets in the mid-term management plan, serves as an
excellent example of how downstream business development can support Kureha’s future growth.

Kuredux (polyglycolic acid) used to make downhole
tools in shale oil and gas extraction

PGA resins

12

Kureha Corporation Business Report 2017

Business Enhancement

PVDF Production Capacity to Expand at Iwaki Factory
Sales of electric, hybrid, and plug-in hybrid vehicles are expected to increase as countries tighten environmental
regulations, in turn leading to increased production of the lithium-ion batteries (LiBs) powering these vehicles. To meetdemand in the LiB market, Kureha is expanding manufacturing facilities for polyvinylidene fluoride (PVDF), which isused as the binder material in LiBs.
Kureha holds more than 50% of the global market for PVDF binder material for LiBs, and current efforts to expand
production will further solidify our position as a global leader in thismarket. Due to the trend toward higher storage capacity and lower
material costs for LiBs, and diversification in anode materials, demand
for specialty grade PVDF binders is expected to increase for theforeseeable future. Kureha’s expanded production capacity puts inplace a structure for stable supply of high-quality materials, while atthe same time allowing for product development and technologicalsupport services that anticipate the needs of LiB manufacturers.
KF Polymer (polyvinylidene fluoride) binds
electrodes in lithium-ion batteries

Research & Development

Joint Development of Speakers Using KF Piezo
KF Piezo is a ferroelectric-polymer film based on Kureha’s PVDF polymer. Owing to its properties of vibrating in
response to electric signals and producing electricity with the application of force or heat, it is widely used in speakers
and sensors to create and pick up sounds and vibrations. Kureha is currently pursuing a joint development project with
SoundFun Corporation to use KF Piezo for the Mirai Speaker “Filmo,” the firm’s next-generation speaker. Unlike a
conventional speaker, which uses a vibrating cone structure to convey sound, the Mirai Speaker incorporates auniquely shaped curved film that vibrates across the entire curve, producing a frequency response that is easier for
elderly and those with hearing difficulties to hear at normal
volume. This makes the speaker ideal for public offices, banks,
hospitals and other facilities. The sales launch is planned for
mid-2018.
We see potential for KF Piezo to be used in a broad range ofapplications, such as medical biosensors that can detect bodytemperature and pulse, and highly sensitive underwater sensors
that can efficiently locate fish shoals.
Mirai Speaker “Filmo”

Kureha Corporation Business Report 201713

Review of Operations

Advanced Materials
Major Product Areas:

Advanced plastics (PPS, PVDF, PGA), carbon materials
Advanced Materials segment revenue fell 6.2% year-on-year to 33.4 billion
yen while operating profit decreased to 0.1 billion yen.

Advanced plastics: Continued growth for PVDF, temporary
slowdown for PGA
While PVDF resin for use in lithium-ion battery binders continued to perform well on
the back of solid demand for automotive applications, this growth was offset by slow
sales of PPS resin and the impact of Kureha’s strategy realignment in North America in
the PGA business.

Carbon materials: Production optimizations narrow
operating loss

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)
50,0005,000

40,0004,000

30,0003,000

20,0002,000

10,000

1,000

0

(FY)

2015

2016

2017
(Planned)

0

Sales decreased for both carbon fiber and special carbon materials, mainly due toKureha’s shift to a profitability strategy based on higher pricing. However, efforts tooptimize and streamline production systems, alongside continued cost reductions,further narrowed the operating loss.
FY2017 Outlook
Advanced Materials segment revenue is forecast to increase by 23% to 41.0 billion yen
in FY2017. Operating profit will make a solid recovery, rising to 3.0 billion yen from 0.1
billion yen. These results will primarily be driven by the advanced plastics business, inwhich a new business structure for PGA solutions will begin to perform in earnest
following the completion of our strategy realignment in North America. Additionally,
Kureha foresees continued solid demand for PVDF lithium-ion battery binder materials
for automotive applications, as well as improved performance for PPS. In carbon
products, pricing adjustments and cost reductions will further improve operating
profit, despite lower sales volumes.

Kuredux (polyglycolic acid) used
to make downhole tools in
shale oil and gas extraction

Key products• Polyphenylene sulfide (PPS)• Polyvinylidene fluoride (PVDF)

KF Polymer (polyvinylidene fluoride)binds electrodes in lithium-ion batteries• Polyglycolic acid (PGA)• Carbon fibers• Bead-shaped activated carbon• Specialty carbon materials

14

Kureha Corporation Business Report 2017

Carbon-based Kreca FR is a thermal
insulation material suitable forhigh-temperature furnaces

Specialty Chemicals
Major Product Areas:

Industrial chemicals, agrochemicals, pharmaceuticals
Specialty Chemicals segment revenue fell by 15.5% year-on-year to 25.9
billion yen from 30.6 billion yen while operating profit decreased by 46.7%
to 2.5 billion yen. Segment results were particularly affected by slower
performance in the pharmaceuticals business.

Pharmaceuticals / agrochemicals: Earnings fall due toslower demand
Earnings in the pharmaceuticals business were mainly impacted by mandatory drug
price revisions, stiffening competition from government-promoted generic drugs, andslower sales of Kremezin, a therapeutic agent for chronic kidney disease. In
agrochemicals, inventory adjustments and continuing low market prices for
agricultural produce impacted on fungicide demand, with more farmers opting to not
add fungicide to their crop protection.

Revenue (Left scale)Operating Profit (Right scale)(Millions of yen)
35,00014,00030,00012,00025,00010,00020,0008,000

15,000

6,000

10,000

4,000

5,000

2,000

0

(FY)

2015

2016

2017
(Planned)0

Industrial chemicals: Decreased sales and income
Lower raw material prices for organic and inorganic chemicals necessitated lower
product pricing, resulting in decreases in revenue and operating profit.
FY2017 Outlook
Specialty Chemicals segment revenue is projected to increase by 2% in FY2017 to 26.5
billion yen. Operating profit is forecast to rise 2.0% to 2.6 billion yen. Kureha expects
this growth to be driven by a strong recovery in the sales of agrichemicals andhorticultural fungicides following the end of inventory adjustments in the market,
offsetting a continued sales decline in pharmaceuticals mainly caused by competition
from generic drugs. In industrial chemicals, sales will remain at a level similar to FY2016,
but product price increases will improve operating profit slightly.

Key products• Therapeutic agent for chronic
renal failure• Anti-cancer agent

Agricultural and horticulture
fungicide (Metconazole)• Agricultural and horticulture
fungicide• Caustic soda
• Hydrochloric acid• Sodium hypochlorite• Monochlorobenzene• para-Dichlorobenzene• ortho-Dichlorobenzene

Therapeutic agent forchronic renal failure (KREMEZIN)
Kureha Corporation Business Report 201715

Review of Operations

Specialty Plastics
Major Product Areas:

Household packaging products, food packaging materials
Specialty Plastics segment revenue rose slightly from 42.3 billion yen to42.8 billion yen while operating profit increased by 56.4% to 5.0 billion yen.
The results were mainly driven by strong growth in the consumer
products business.

Consumer products: Continued strong performance for
NEW Krewrap and Seaguar
In consumer products, both NEW Krewrap wrapping film and Seaguar fishing lines
continued their robust performance, leading to increases in both revenue and profit
for this business. This growth, underpinned by expanding sales of new high-margin
NEW Krewrap products, contributed significantly to Kureha’s overall results for FY2016.

Revenue (Left scale)Operating Profit (Right scale)
50,00010,000Food packaging materials: Cost reductions offset slower
sales of heat-shrink film

40,0008,000

Revenue from the high-performance heat-shrinkable multilayer film declined. However,continued cost reduction efforts produced a slight increase in operating profit.

30,0006,000

20,0004,000

10,0002,000(Millions of yen)

0

(FY)

2015

2016

2017
(Planned)0

Key products

FY2017 Outlook
Specialty Plastics segment revenue is expected to improve slightly to 43.0 billion yen.
Operating profit is forecast to fall 18% to 4.1 billion yen. This is mainly due to increased
marketing costs in the consumer products business, which is expected to affect profit
despite continued growth in the sales volumes of NEW Krewrap and Seaguar. In foodpackaging materials, we forecast increased revenue and profit driven by global sales
volume growth of heat-shrink film.

Home-use wrap film, NEW Krewrap• Household wrap film
• Plastic containers• PVDF fishing lines• Polyvinylidene chloride (PVDC) film

Seaguar fluorocarbon fishing lines• PVDC compound• Multilayer shrinkable film
• Multilayer non-shrinkable film
• Multilayer bottles• Machinery for auto-seal foodpackaging

16 Kureha Corporation Business Report 2017

Krehalon food packaging film

Construction and Other Operations
Major Product Areas:

Construction, environmental engineering, transport/
warehousing, operation of medical hospital
Construction: Slowdown in both private and publicconstruction projects
The construction business was affected by a slowdown in private construction projects
as well as declining demand for earthquake reconstruction, alongside higher labor andmaterial costs. As a result, revenue fell by 14.0% to 13.9 billion yen while operating profit
decreased by 33.0% to 1.0 billion yen.

Other Operations: Growth in micro-PCB waste treatment,
continued cost reductions
Revenue (Left scale)Operating Profit (Right scale)

Construction

35,000

Other
Operations
7,000

30,0006,000

25,0005,000

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

(Millions of yen)

0

(FY)

2015

2016

2017
(Planned)0

Kureha’s environmental engineering business continued to perform steadily, driven by
further volume growth in the micro-PCB (polychlorinated biphenyls) waste treatment
business. In the logistics business, sales slowed but successful cost reduction measuresboosted operating profit. In the hospital business, Kureha successfully narrowed theoperating loss through increased sales and cost reductions. As a result, revenue
increased slightly to 16.3 billion yen while operating profit rose from 1.5 billion yen to
1.7 billion yen.
FY2017 Outlook
While revenue form the Construction business is projected to grow 4% to 14.5 billion yen
due to an increase in both public and private projects, operating profit is expected to fall
to 0.6 billion yen as a result of higher labor and material costs.
Other Operations are estimated to increase its revenue by 4% to 17.0 billion yen on
continued demand for micro-PCB waste treatment services in the environmental
engineering business. However, due to increasing market competition, operating profit
is projected to fall 30% to 1.2 billion yen.
Facility to detoxify low-concentration
PCB wastes[Kureha Ecology Management Co.]

Key products and services• Civil engineering andconstruction• Plant engineering andmaintenance• Environmental engineering andindustrial waste treatment• Environmental andphysiochemical testing andanalysis• Transport and warehousing• Medical hospital operation

Reconstruction work completed for the
Fukushima bay area
[Kurehanishiki Construction Co.]
Kureha Corporation Business Report 201717

Research & Development

Since its founding, Kureha has worked with creativity and passion to
generate proprietary technologies that enrich people’s lives andcontribute to the advancement of industry. With core strengths in organic
synthesis, polymer technology, carbon control, evaluation techniques, andprocess engineering, Kureha has pursued niche markets and global
business expansion to bring unique value creation to society.
To ensure sustainable growth built on strength in technology
development, Kureha will continue to reinforce its position in the market
through product differentiation. The main priority for our R&D efforts will
be to create new businesses that generate new sources of earnings. For
existing businesses, drawing on our long-established strength in materials
development, Kureha will strengthen processing technologies to develop
downstream businesses, and focus on developing production processes
for which Kureha has a competitive advantage. Further, through the New
Business Creation Project, established to support new business generation
through the synthesis of latent market needs and Kureha’s unique
technologies, we will explore business themes based on future projectionsin the areas of environment, energy, and quality of life (medicine andfood). For both existing and new businesses, Kureha will pursue open
innovation based on collaboration with outside organizations.

Research Center & Process Innovation
Research Laboratories

Polymer Processing ResearchLaboratories

Strategy for Intellectual Property
Kureha uses three intellectual property strategies to maintain its technological advantages and advance its business operations.
1. Assert intellectual property rights to R&D results to establish barriers to entry.
2. Utilize intellectual property rights to advance businesses.
3. Respect the intellectual property rights of others, and conduct appropriate intellectual property clearance.
The Kureha Group held 2,016 intellectual property rights as of May 2017, of which 1,356 are patent registrations. With theglobalization of Kureha’s business, we are also acquiring intellectual property rights in countries and territories outside Japan.
Currently, 63% of the intellectual property rights held by the Kureha Group are outside Japan.

IP Held by Kureha Group

Global Distribution of IP
Pending
applications

Total
2,016

660

patents

Registeredpatents

49
60
299

313

Total
2,016

patents

1,356
550

18 Kureha Corporation Business Report 2017745

IP in Business Segments
Japan
Asia
EuropeNorth America
WIPO
Others

153
472

Total
2,016

patents
313

WIPO: World Intellectual
Property Organization

1,078

Advanced Materials
Specialty Chemicals
Specialty Plastics
Others

R&D Expenditure in Fiscal 2016: ¥4,734 million
Advanced Materials Division
For Fortron KPS (PPS) which is widely used in automobiles and electronic devices and KF
Polymer (PVDF), Kureha is developing new improved grades, exploring ways to further
raise productivity, and expanding applications. For Kuredux (PGA), while working to
improve resin manufacturing technologies, we are actively developing applications
particularly in the area of shale oil and gas extraction, where PGA’s easy-to-degrade
attribute has proved useful. We are also developing technologies that allow extended
application of PGA and its various unique properties in other fields.
Among battery-related materials, our development effort has centered on bindermaterials for the large lithium-ion batteries used in hybrid and electric vehicles. We areaccelerating the development of advanced binder grades and improved solutions forcustomers, which will enable us to secure and expand our market share.
FY2016 R&D spending in this division amounted to ¥1,860 million.

Specialty Chemicals Division
In the agrochemicals business, we are working to expand markets, both in Japan andoverseas, for agricultural and horticultural fungicides. We are also improving
productivity for Metconazole fungicide.
In pharmaceuticals, we are providing supporting research to enhance the earnings
of Kremezin, a therapeutic agent for chronic renal failure.
FY2016 R&D spending in this division amounted to ¥1,814 million.

Specialty Plastics Division
For food packaging film, Kureha is pursuing technology development to ensure stablesupply and improve quality. In addition, to further expand global sales, we are actively
providing technical support to customers in Japan and overseas.
FY2016 R&D spending in this division amounted to ¥1,059 million.

Kureha Corporation Business Report 2017

19

CSR

Corporate Social Responsibility
Kureha is continually working to strengthen its competitiveness andenhance its enterprise value over the longer term. These efforts arefounded in what we call CSR-based management, in which we seek
to ensure harmony with the environment, motivate employees,
support the development of local communities, reduce risks, andenhance benefits for all stakeholders. Kureha maintains a

Responsible Care program centered on the types of activities
expected of a chemical company, including environmental conservation, disaster risk reduction, worker safety, product safety, andquality assurance. We firmly believe that generating environmental
and social value alongside economic value leads to sound, sustainable growth as a company.

Kureha Group’s CSR Philosophy

Corporate Philosophy

Local communities
Customerss
Suppliers
S Shareholders/Investors
Employees
NPO/NGO
Educational institutions
Government/Industry groups

DialogueSociety

Responsible
Care

EconomyDevelopment of Human Resources
and Technology
Stakeholders

Code of Conduct,
Governance, Compliance

Strengthening CSR Measures
In April 2016, Kureha established the CSR Division to coordinate andfurther strengthen the Group’s CSR activities. Based on ISO26000
criteria, we have specified priority measures and created a Plan-DoCheck-Action structure to support implementation. In addition, we
utilize internal seminars and an in-house information newsletter todeepen understanding of CSR among management andemployees, thus furthering the roll-out of CSR-based management
across our group.

Diversity – an integrated part of Kureha’s CSR
Sunshine Kureha Co., Ltd. is an example of Kureha’s diversity
program. Established within the Iwaki Factory in 2014, Sunshine
Kureha has 12 employees with disabilities who conduct

Note books made from recycled
paper at Sunshine Kureha

20 Kureha Corporation Business Report 2017

Business operations

Global environment
Energy/Resources
Food
Daily living
Medical care/Health
Sustainability

Social issues connected tobusiness operations

administrative duties on behalf of Kureha, including data entry,
scanning documents and handling internal mail. One notable task is
to make notepads and business cards for Kureha employees using
recycled paper made from discarded internal documents. Thesematerials are of high quality, and the waste reduction from this work
contributes toward Kureha’s environmental efforts.
				

Cooperation for Local Healthcare

The Kureha General Hospital was established in 1935 by Kureha’s
predecessor company as a clinic for the Iwaki Factory, and has been
an integral part of the community as a core hospital for the area
since 1972. In 2008, an elderly care facility was established next tothe hospital, where residents can receive the care they need to leadsound, fulfilling lives, with doctors and nurses available around theclock to provide specialist
medical support. Homecare services are alsoavailable to enable
patients who are ill or
have suffered injuries tolive with peace of mind intheir own homes.
Kureha General Hospital

Plan

Environmental
Security anddisaster
response

ActionCommunity
relations

RC
PolicyEnergyconservation

Logistics
safetyLabor
safetyand healthDo

Kureha, an inaugural member of the Japan Responsible
Care Council founded in 1995, continues to pursue
Responsible Care initiatives to improve health, safety andenvironmental performance throughout its operations. We
regard our commitment to Responsible Care as an integral
part of our corporate responsibility.

Product safety
Quality assurance

Check

Responsible Care Implementation

Safety and Disaster Prevention

Kureha is continually enhancing its responsible care initiatives under
the direction of the Corporate Social Responsibility Committee andthe Kureha Group Responsible Care Committee. We take proactive
actions to protect the environment, improve labor safety and healthand ensure product safety and quality, while being responsive andsensitive to community concerns. Our actions are in line with
ISO14001, the international standards for environmental management, ISO9001 for product quality management as well as
OHSAS18001 for labor safety and hygiene management, and are
constantly improving through the Plan-Do-Check-Act cycle.

Safety and disaster prevention are among the most important
responsibilities of a chemical manufacturing company. Kureha
manages its facilities and operations in strict compliance with therelevant laws and regulations as well as voluntary safety standards
set to best protect its employees and community. Comprehensive
safety and emergency drills and training have been also conduced
regularly at our manufacturing sites in order to enhance our
preparedness for emergency situations, including a large-scale
earthquake.

Reducing the Burden on the Environment

In addition to Kureha General Hospital serving as a community
medical facility in the southern part of Iwaki City, Kureha contributes
to the local community in a variety of different ways. These include
opening company sports facilities for public use, volunteering forclean up activities, teaching science classes at elementary schools
and holding community meetings to initiate dialogue with local
neighborhood associations.

Since its establishment, Kureha has developed technologies andproducts with a view to reducing the burden on the environment.
In our manufacturing facilities, we strive to minimize environmental impact by implementing strict measures to prevent air
and water pollution, reduce chemical material and industrial
wastes, and make effective use of energy.

Contributing to the Community

Waste Generated

GHG (CO2) Emissions(Thousands of tonnes) (Left scale)(Thousands of tonnes) (Left scale)

Recycled Rate

Specific Energy Consumption Index(%) (Right scale)(Right scale)

32

100

450

125

30

80

430

100

28

60

410

75

26

40

390

50

24

20

370

25

22

(FY) 2012

2013

2014

2015

2016

*The above data were obtained from Kureha
Corporation and its facilities in Japan.

0350(FY) 2012

2013

2014

2015

2016

Disaster prevention and safety drill at the
Iwaki Factory (November 2016)0*The above data were obtained from Kureha
Corporation and its facilities in Japan.

Kureha Corporation Business Report 201721

Corporate Governance

Kureha’s Corporate Philosophy, Corporate Mission, and Employee Code of Conduct together constitute ourcompany’s identity. All executives and employees share these ideals, and constantly strive to achieve ambitious
goals. Corporate governance is a critical element in maintaining and acting in accordance with this identity, andwe have outlined our basic policies and stance in Kureha’s Corporate Governance Guidelines. Kureha follows theseguidelines to ensure compliance and enhance internal control functions, provide for fair and transparent
management, and ensure a high standard of corporate governance.

Corporate Philosophy• We treasure people and the natural environment.
• We constantly evolve through innovation.
• We contribute to society by developing beneficial products.
Corporate Mission
Kureha will continually strive in the pursuit of excellence.
Employee Code of Conduct
We always act as global corporate citizens, recognizing our corporate social responsibilities.
In relation to our clients: We will act with sincerity and with customer satisfaction as our priority.
In relation to our work: We will consistently pursue progress and innovation.
		 We will consistently respond to change and act with a global perspective.
In relation to our colleagues: We will maintain mutual respect and exhibit teamwork.

Decision-Making, Execution and Management Framework
1. Supervisory and executive responsibilities are clearly
distinguished to strengthen corporate governance andaccelerate managerial decision-making and execution.
The Board of Directors, which is limited in size to a maximumof 10 directors, of whom at least 2 should be outside directors,
consists of 3 directors and 2 outside directors as of June 2017.
The Board, presided over by the President & Representative
Director, meets once a month in principle, to make decisions onimportant management issues and supervise execution.
The Executive Committee, chaired by the President & CEO
and comprised of executive officers meets twice a month inprinciple. The committee considers basic authoritative policies
and mid- and long-term management strategy that cover all
aspects of general management. The committee members
pass resolutions on issues as authorized in official company
regulations and take steps to ensure speedy implementation.
To clarify responsibilities for fiscal year results, a one-year
term is given to all directors and executive officers.
2. The consolidated Executive Committee, set up to unify the
Kureha Group’s internal policies and long-term management
vision, is chaired by the President & CEO. It serves as a forum toexchange views on basic management policies and business

22 Kureha Corporation Business Report 2017

strategies with representatives from each group company, withthe aim of strengthening consolidated management.
Meanwhile, the operations of group companies are supervised
and managed in accordance with the Group Company
Management Rules, in which the obligations of groupcompanies are clearly specified, while giving autonomy, interms of certain business and management issues required forreporting and consultation prior to making decisions within
their companies.
3. A total of three corporate auditors (including two independent
outside auditors) forms the Audit & Supervisory Board. Thisbody works within a framework that allows them to monitor
the deliberation processes of board resolutions and reports, aswell as have a representative corporate auditor attend andmonitor meetings of the Executive Committee and theConsolidated Executive Committee. In addition, auditors areable to access documentation including all documents
requiring senior approval, results of internal audits, anddocumentation on the status of customer inquiries.
Corporate auditors interact with accounting and internal
control functions, for example to exchange opinions on audit
planning and progress. They also regularly exchange opinions

Diagram of Internal Control Systems (As of June 27, 2017)
General Meeting of Shareholders
Appoints

Appoints

Supervisory Function
Board of Directors(Maximum of 10 directors, including 2 or more external directors)

Audit

LiaiseAppoints

Audit & Supervisory Board(Maximum of 4 members,
including 2 or more
external members)
LiaiseLiaiseCompliance Committee
Trade Control (Export/Import) Committee
Labeling and Trade Promotions Committee
Antitrust Committee
Personal Information Protection Committee

Executive Function

Independent
AuditorPresident &Chief Executive Officer

Executive
Committee

Internal Control and
Auditing Department

CSR Committee
Energy Management Committee

Information Management
Committee
Information Disclosure Committee
Information Security Committee

Audit

All divisions ofKureha Corporation

Audit
Audit

Kureha Group companies

Risk Management Committee

Internal Control ofFinancial Reporting Committeewith the President & Representative Director and outside
directors on management matters including corporate
governance, business conditions and issues that the Company
should address.
In addition, the Internal Control and Auditing Department
acts independently of other departments and under direct
management and supervision of the President & CEO. Based on

an annual internal audit plan approved by the Board of
Directors, this department assesses the suitability andeffectiveness of internal management control systems including
compliance and risk management. It then proposes necessary or
desired changes and improvements, so as to enhance bothmanagement efficiency and public trust in Kureha.

Internal Control System
To further strengthen its internal control system, Kureha hasestablished a set of basic policies, committees and internal rules toensure that it observes laws and regulations and conducts its
business operations in an appropriate and fair manner.
Under this system, Kureha publishes Internal Control Reports
under the responsibility of the President & CEO.

In addition, Kureha has also established a set of Basic Rules forInternal Control of Financial Reports to ensure the reliability of thefinancial reports and to guarantee implementation ofmanagement’s assessment and certified public accountant’s
auditing of the effectiveness of internal control of financial reports,
as stipulated in the Financial Instruments and Exchange Law.

Kureha Corporation Business Report 201723

Corporate GovernanceAppointment of Independent Directors and Auditors
Kureha has appointed two outside directors and two outside
auditors. Outside directors utilize their extensive experienceand insight as former managers to provide independent andfair supervision of the Company’s management decisions.
Outside auditors provide auditing from an independent
perspective based on their extensive experience and expertise
regarding corporate law, corporate finance, and accounting.
The outside directors and outside auditors currently serving
Kureha fulfill the requirements for independent executives asprescribed by the Tokyo Stock Exchange, as well as the “Criteria
for Determining the Independence of Outside Executives”
established by the Company. The Company has determinedthat there is no conflict of interest with general shareholders.

Outside Directors
1. Osamu Tosaka
Dr. Tosaka worked at Ajinomoto Co., Inc. for over 40 years,
accumulating extensive experience in business operations
through overseas postings and by serving in the company’s
research and production divisions. He has particular experiencein company management from the perspective of technology
and research, having served as Representative Board Director
and Corporate Executive Deputy President for Ajinomoto from2007 to 2011. He was appointed as outside director for Kureha
in June 2016.

firm for 33 years, where he was chiefly engaged incommercial banking, special financing and corporate
advisory businesses. As a banker and later as a Managing
Executive Officer of a hydraulic equipment manufacturer, he
has accumulated experiences in business operation andmanagement mainly in Europe. He was appointed as outside
director for Kureha in June 2017.

Outside Auditors
1. Haruki Yamaguchi
Mr. Yamaguchi has served as president of domestic andoverseas affiliates of Yasuda Life Insurance Company(currently Meiji Yasuda Life Insurance Company), and brings
extensive insight and experience regarding global
management. He has been an outside auditor for Kureha
since June 2012.
2. Masaru Kitamura
Mr. Kitamura has served as a lawyer with Japan’s Ministry ofForeign Affairs, and in 1992 established the Kitamura Law
Office (currently Kitamura & Makiyama). He has been an
outside auditor for Kureha since June 2011, andconcurrently holds the positions as Corporate Auditor ofJapan Pacific Century Group, Corporate Auditor of PacificCentury Hotel, and Outside Corporate Auditor of Kowabo
Company, Ltd.

2. Tadao Ogoshi
Mr. Ogoshi previously worked at the Fuji Bank, Ltd (currently
Mizuho Bank, Ltd.) and its affiliated trust bank and securities

Executive Remuneration
Executive remuneration reflects corporate performance. It isdetermined with consideration to enhancing medium- tolong-term enterprise value, and in accordance with thecompensation structure and levels appropriate to the roles andresponsibilities required of each executive.
Total remuneration paid to directors and auditors in fiscal
2016 (ended March 31, 2017) was as follows.

24 Kureha Corporation Business Report 2017

Board directors(for total of 7 directors)¥262.0 mil(of which ¥38.2 mil was paid to 3 outside directors)

Auditors(for total of 5 auditors)¥70.9 mil(of which ¥30.9 mil was paid to 2 outside auditors)

Note: • The remuneration for board directors includes stock acquisition rights at a total value
equivalent to 14.9 million yen, issued as reward-type stock options to 4 directors, notincluding outside directors.

Compliance Program Framework
Kureha has in place a compliance program framework, based on
the Kureha Group Ethical Charter and its Compliance Rules.
Kureha’s compliance objective is to ensure that all executives
and employees act in a manner that is consistent with legal
compliance and that also meets the standards of our society. This
framework is constantly being improved and reinforced so as tocultivate a compliance-focused corporate culture.
The Compliance Committee, led by the President & Chief
Executive Officer (CEO), keeps employees informed of complianceissues through training programs and other activities based on
the Compliance Handbook and the Compliance Standards. In
addition, direct access to internal and external (legal) advisers forinquiries and reporting on compliance issues is maintained so thatlegal violations, confirmed or suspected, can be detected anddeterred at an early stage.

Disclosure and Transparency
Impartial and continuous information disclosure ensuresmanagement transparency and builds trust with stakeholders. Kureha
provides timely and appropriate disclosure in accordance with allapplicable laws and regulations, as well as the Timely Disclosure Rules
prescribed by the Tokyo Stock Exchange. Kureha also proactively
releases information deemed to be valuable to shareholders.
Kureha’s General Meeting of Shareholders is held annually in
June. To ensure that shareholders have sufficient time to review
the proposals, the proxy statement for the shareholders’ meetingis posted on the Company’s website at the end of May, and mailedin early June. Shareholders are able to exercise their voting rights
by post or via the Internet.
During the shareholders’ meeting, Kureha uses video to clearly
explain its business content and results, and makes every effort torespond directly and fully to shareholders’ questions.
Kureha also holds regular briefings for institutional investors
and analysts regarding its medium-term business strategies andresults, and regularly provides individual hearings for investors inJapan and overseas.

Risk Management System
In response to various types of risk accompanying businessactivities, Kureha has established a risk management structure
consisting of a Risk Management Committee, a CSR Committee
and an Information Management Committee. Each committee istasked with recognizing related risks, and proposes concretemeasures to the President & Representative Director aimed at
reducing and avoiding risk and manages implementation.
In addition, to respond to unforeseen circumstances, aBusiness Continuity Plan is in place for the establishment of an
emergency response task force, with the objective of prioritizing
the safety of personnel, minimizing economic damage, andensuring the continuation of corporate activities.
In terms of information management, Kureha works rigorously
to ensure appropriate security and disclosure based on its
regulations for information control, security and disclosure, withindividual committees set up to oversee each of these areas.
To address environmental and safety risks, management
procedures for the environment, quality, and labor safety havebeen established that comply with ISO 14001, ISO 9001, and
OHSAS 18001 standards. In addition, Kureha is also continuingwith ongoing efforts to improve environmental conservation,
quality assurance, and occupational health and safety.

Compliance with the Corporate Governance Code
The Corporate Governance Code is a compilation of various
regulations aimed at ensuring substantive corporate governanceat listed companies. It was formulated in March 2015 in responseto revisions made to the Japanese government’s growth strategy,
the Japan Revitalization Strategy, in 2014.

Kureha considers thorough corporate governance to be ofvital importance for strengthening the management base toachieve medium- to long-term corporate growth. In November
2015, the Company formulated its own Corporate Governance
Guidelines to comply with the government code.

Kureha Corporation Business Report 201725

Management Team

Board of Directors

Yutaka Kobayashi

Yoshio Noda

Michihiro Sato

President &Chief Executive Officer

Senior Vice President
General Manager ofCorporate Planning,
Finance & Accounting Division
General Manager of CSR Division

Senior Vice President
General Manager of Manufacturing &Technology Division
General Manager of R&D Division

Osamu Tosaka

Tadao Ogoshi

Outside Director

Outside Director

Audit & Supervisory Board

Haruki Yamaguchi

Toru Yoshida

Masaru Kitamura

Naoki Fukuzawa

Fumihiko Yamada

Satoshi Yonezawa

Executive Vice President, General
Manager of Krehalon Division

Vice President, General Manager of
Administration Division

Vice President, General Manager of
Performance Materials Division

Yoshinori Shiojiri

Masahiro Namikawa

Vice President, General Manager ofIwaki Factory, General Manager ofTechnology Center

Vice President, General Manager of
Pharmaceuticals & Agrochemicals
Division

Naomitsu Nishihata

Koji Suyama

Vice president, General Manager of
PGA Division and KF Products Division

Vice President, General Manager ofHome Products Division

Executive Officers

26 Kureha Corporation Business Report 2017

Consolidated Financial Summary
Kureha Corporation and Consolidated Subsidiaries
Years ended March 31, 2017 (FY2016) and 2016 (FY2015)

Thousands of
U.S. dollars (Note 2)

Millions of yen

FY2015FY2016
For the year:
Revenue:
Domestic
Overseas
Revenue by segment:
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations
Operating profit
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations
Elimination or corporate
Profit attributable to owners of parent
Capital expenditure
Depreciation and amortization
Research and development expenses
Advanced materials
Specialty chemicals
Specialty plastics
Construction
Other operations
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Year-end:
Total assets
Total equity
Interest-bearing debt

FY2016¥ 132,294
97,63034,664¥140,779
98,742
42,037$1,179,196
870,220
308,975

33,36925,866
42,791
13,934
16,332
9,255
79
2,538
4,986
1,026
1,726
(1,101)
7,001
10,304
10,191
4,734
1,860
1,814
1,059
—
—
12,350(1,071)(11,727)

35,56530,621
42,311
16,201
16,079
7,384
1,441
4,760
3,188
1,537
1,497
(5,040)4,881
11,422
10,333
4,885
1,863
1,866
1,155
—
—
14,559(6,049)(9,935)

297,432
230,555
381,415
124,200
145,574
82,493704
22,62244,442
9,145
15,384(9,813)62,403
91,844
90,83642,196
16,57916,1689,439——
110,081(9,546)(104,528)¥ 234,907
124,297
71,007¥239,807
118,177
81,184$2,093,831
1,107,915
632,917

Yen

Amounts per share:
Basic profit per share
Owners’ equity per share
Cash dividends per share¥ 407.38
7,232.89
11

U.S. dollars¥ 284.05
686.06
12

$

3.63
64.47
0.09

Percent

Ratios:Operating profit to revenue
Profit attributable to owners of parent to revenue
Return on equity
Return on assets
Owner’s equity ratio

7.0%
5.3
5.8
3.8
52.9

5.2%
3.5
4.1
2.7
49.3

Notes: 1. For convenience only, U.S. dollar amounts have been translated from Japanese yen at the rate of ¥112.19 to US$1, the rate of exchange prevailing on the Tokyo Foreign
Exchange Market on March 31, 2017.
2. For amounts per share, see Note 29 of the Notes to Consolidated Financial Statements.
3. Return on equity = Profit attributable to owners of parent/Shareholders’ equity × 100
4. Return on assets = Profit before tax/Total assets × 100
5. Owner’s equity ratio = Owner’s equity/Total liabilities and equity
Kureha Corporation Business Report 201727

Management Discussion and Analysis
Business environment
During the fiscal year ended March 31, 2017(FY2016), the Japanese economy
showed a moderate recovery trend throughout the second half despite continuing
uncertainties due to weak consumer spending and capital expenditure.
Meanwhile, the world economy recovered moderately as well, despite the uncertainties caused by the change of administration in the United States, economic
trends in China and instability of the European economy following United
Kingdom’s decision to leave the European Union.

Revenue

75,000The balance of cash and cash equivalents at the end 50,000of the subject fiscal year
(March 31, 2017) amounted to ¥6,222 million, a decrease of ¥472 million from25,000the end of the previous fiscal year (March 31, 2016). An outline of individual
cash flows and the main factors affecting each is as follows:0
Domestic
Overseas
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥12,350 million, aOperating
Profitdecrease ofRevenue¥2,208 million from the previous fiscal year.
This was mainly
due to(Left scale) (Millions of yen)of yen)assets and other factors.
an increase(Millions
in inventory(Right scale) (%)

100,000

9,000

4

2016

Domestic

Overseas0(FY)-6,000-9,000

(FY)

2015
2015

2016
2016

Cash Flows fromTotal Assets(Millions of yen)

2016

Domestic

Overseas

0

(FY)

Pro
to o
(Left
Total
Pro
(Millions(Left scale) (Millions of yen)

OperatingCash FlowsProfit
fromto(Rightscale) (%)
Revenue
Operating
Activities
Cash Flows from12,000 Investing Activities 8(Righ12,00010,000250,000

15,0009,000
12,000

6

9,000
6,000
6,000

4

3,000
3,000
0

2

8,000
200,0000

6,000
150,000
4,000

2015
2015

2016

0

100,000
2,000
50,000 0

(FY)

0

2016

(FY)

Profit attributableto owners of the parent(Leftscale)(Millions of yen)
Total
Assets(Millions ofyen)ProfittoRevenue
Returnon
Assets(Rightscale) (%)
Returnon
Equity 6
12,000

Tot
(Left
Inter
Rat
(Million
Att
Ow

(%)

10,000250,000
8,000
200,000
6,000
150,000

6
5
4

100,000 3
2,000
50,000 2
0

(FY)
0

(FY)

1
0

(FY)

28 Kureha Corporation Business Report 20172015

Operating Profit

4,000
2

-3,000

2015

0

(FY)

(FY)

Operating
ProfittoCash Flows
from

0

3,000
25,000-9,000

Revenue
Operating Activities
Cash flows from investing activities
Cash Flows from
Net cashused in investment activities amounted to¥1,071 million, a decrease of8
150,000
12,000Investing Activities¥4,977 million from the previous fiscal year. This was mainly
dueoftoproceeds(Millionsyen)
from125,000
subsidy for Fukushima Business Investment Subsidy
15,000 for Revitalization of
9,000
6Industries despite a decline in proceeds from sales ofinvestment
securities.
12,000(FY)

50,000-3,0000-6,000(FY)

2016

Cash 75,000
flows from financing activities
6,000
6,000 million, an increase
Net cash used in financing activities amounted to ¥11,727
of ¥1,791
millionfromtheprevious
fiscal
year.
This
was
50,0003,000mainly due to repay3,000
ment of interest-bearing debt associated with an increasein free cash flows and0other 25,000
factors.

6,000(Millions of yen)

75,0002015

12,0009,000

Revenue in the subject fiscal year decreased by 6.0% from the previous fiscal yearto ¥132,294 million. Gross profit decreased by ¥3,211 million, or 8.3%, to¥35,503 million and gross profit margin fell from 27.5% in the previous fiscal
year to 26.8%. On the other hand, selling, general and administrative expenses
decreased by ¥1,424 million, or 5.1%, to ¥26,632 million. Operating profit in
the subject fiscal year increased by ¥1,871 million, or 25.3%, to ¥9,255 million,
with the posting of ¥1,619 million in share of profit of entities accounted forusing equity method, ¥1,398 million in other income and ¥2,633 million inother expenses. The ratio of operating profit to revenue improved
from 5.2% toRevenue(Millions of yen)
7.0%.

(FY)

Oper
Reve

125,000

Analysis of business results

Cash flow analysis(Left sca

150,000

100,000

Finance losses, the difference between finance income and finance costs,
decreased by ¥528 million from the previous fiscal year to ¥275 million. As a
150,000
result, profit before tax increased by ¥2,401 million, or 36.5%, to ¥8,981
million. Of the amount of profit for the year, that is,
profit before tax less
125,000
income tax expense, profit attributable to owners of parent increased by ¥2,120
100,000
million, or 43.4%, to ¥7,001 million.

Oper(Millions of yen)

2015

2016

2015

2016

2015

2016

Total Equity(Left scale) (Millions of yen)5

150,000

4

90,000125,000

3

100,000

2

60,00075,0001

50,000030,00025,000
0

(FY)

0

(FY)

(Righ

50,000
3,000
25,000
0

2015

2016

Domestic

Overseas(FY)

Revenue

Financial policy(Left scale) (Millions of yen)

The Kureha Group’s basic policy is to maximize cash flows from operating
activities by securing earnings in line with its business plan and by enhancing
asset efficiency, and to allocate cash with priority given
to capital expenditure for
150,000
new businesses and expansion of existing businesses, investments and loans,
125,000
research and development, and dividend payments toinvestors. In line with thispolicy, Kureha procures required capital with priority given to securing long-term
100,000
funding, and in consideration of the balance between long- and short-termborrowings.
75,00050,000

As of March 31, 2017, total assets amounted to ¥234,907
25,000 million, a decrease of¥4.9 billion from the end of the previous fiscal year (March 31, 2016). Current
0
assets totaled ¥75,272 million, an increase of ¥2,378 million
from the end of the
(FY)
2015
2016
previous fiscal year, mainly due to an increase in inventory assets. Despite an
Domestic
Overseasincrease in gain on valuation of investment securities included in other financial
assets, non-current assets amounted to ¥159,634 million, a decrease of ¥7,278
Revenue
Operating Profit
million fromthe endof the previous fiscal year. This was
mainlydue toofthe(Leftscale) (Millions
yen)(Millionsof yen)completion of large-scale capital expenditures and a direct
deductionofsubsidy
Operating
ProfittoCash Flows from
(Rightscale)(%)
income, which caused property, plant and equipment toRevenue
decreaseby¥9,075
Operating Activities
million to ¥115,911 million.
Cash Flows from
150,000liabilities at the end of the subject fiscal year
12,000amounted
Investing
Activities8
Total
to ¥108,934(Millions of yen)million, a decrease of ¥11,432 million from the end of the previous fiscal year.
125,000
15,000This was mainly because of a decline in interest-bearing
debt, by ¥10,176
9,000
612,000 million.
millionfrom the end of the previous fiscal year to ¥71,007
100,000
Total equity at the end of the subject fiscal year amounted
to ¥125,972
9,000
75,000
million,an increase of ¥6,532 million from the end6,000of the previous fiscal year. 4
6,000This was mainly due to the posting of profit attributable to owners of parent of
50,000¥7,001 million and an increase in other component3,000
of3,000
equity primarily associ- 20securities, despite theated withanincreasein
gain
onvaluationofinvestment
25,000payment of dividends in an amount of ¥1,890 million.
-3,000
0

2015

2016

Domestic

Overseas(FY)

Overview of capital expenditure0-6,000
(FY)

2015

2016

0

-9,0002016
Total capital expenditure of the Kureha Group during (FY)the fiscal2015
year ended
March 31, 2017 amounted to ¥10,304 million.

Operating
Cash
FlowsProfit
from toscale) (%)
Revenue (Right
Operating
Activities
Cash Flows from12,000 Investing Activities 8Return on Assets
Return on Equity
(%)

2015

2016

Interest-Bearing Debt
(Millions of yen)

10,000250,000
6

9,000
6,000
6,000

4

3,000
3,000
0

2

8,000
200,000
6,000
150,000
4,000-3,0000-6,000(FY)-9,000

(FY)

2015

2016

2015

2016

0

100,000
2,000
50,000

0

(FY)
0

2

(FY)

Profit attributableto owners of the parent(Left scale) (Millions of yen)
Total
AssetsProfitofto
Revenue(Millionsyen)
Return(Rightscale)on(%) Assets
Return on Equity
6
12,000Tot(Left
IntereRat(Millions
Att
Ow

(%)

10,000250,000

5

150,000

6
8,000
200,000

4

90,000125,000

5
6,000

3

100,000

150,000
44,000

260,00075,000100,0003
2,000

1

50,000030,00025,00050,00002

2015

2016

(FY)

2015

2016

(FY)

2015

2016

(FY)

1
0
0

Total Assets(Millions of yen)
Operating
Activities
onmanufacAssets
The Advanced Materials Division invested ¥3,904 million,Return
mainly in
Cash Flows fromReturn on Equity
turing facilities
for
PVDF
resin
(Kureha)
and
PPS
resin
(Kureha).
Investing Activities
(%)

(FY)

(Righ

12,000(Millions of yen)

15,0009,000
12,000Cash Flows
from
Capital expenditureby businessdivision:

The Specialty
Division invested ¥1,333 million, primarily in(MillionsChemicals
of yen)production
250,000
15,000 facilities for inorganic chemicals (Kureha).
The12,000
Specialty Plastics Division invested ¥1,633 million,
6 primarily in manufacturing facilities for PVDC resin (Kureha).
200,000
9,000
5
The Construction Division invested ¥171 million in facilities.
The6,000
Other Operations Division invested ¥1,082
million, mainly in industrial
150,000
4waste processing
facilities (Kureha Ecology Management Co., Ltd.).
3,000
In addition,
as a joint initiative, the Advanced100,000
Materials,
Specialty
30Chemicals, and Specialty Plastics Divisions invested ¥2,179 million in such areas-3,0002
as private power plant facilities (Kureha), and common
facilities
50,000 factory-6,000(Kureha).
1
Capital0 from cash-at-hand,-9,000 required for these investments was procured
2016
2015
2015
2016
(FY)
(FY)
corporate bonds, and borrowings.
0

2

Pro
to o
(Left
Total
Pro
(MillionsOperating Profit(Millions of yen)

Balance sheet analysis

0

(FY)

0

0

(FY)

2

(FY)

Total Equity(Left scale) (Millions of yen)Interest-Bearing
Ratio
of Equity Debt
(Millions of yen)
Attributable to
Owners of Parent
150,000(Right scale) (%)

90,000125,000

50

100,000

40

60,00075,00030

50,00020

30,00025,000

10

0

2015

2016

(FY)

2015

2016

0

Cap
Dep
amo

(Millio

60

(FY)

(Righ

0

12,00010,000
8,000
6,000
4,000
2,000
0

(FY)

KurehaCorporation Business Report 2017 29
CapitalExpenditure
Depreciation and

0

(FY)

100,000

0

25,0002015

2016-3,0000-6,000(FY)

Domestic

Overseas-9,000(FY)

Revenue

Operating Profit(Millions of yen)

(Left scale) (Millions of yen)

Operating
ProfittoCash Flows
from(RightActivities
scale) (%)
Revenue
Operating
The Kureha Group’s business operations are diverse, comprising
the Advanced
Cash Flows
from
150,000
12,000 products,
Materials
Division focused on PGA resin and processed
PVDF
resin, 8
Investing
Activities

Business and other risks(Millionsof yen)and PPS resin; the Specialty Chemicals Division focused on
pharmaceuticals,
125,000
agrochemicals
and industrial chemicals; the Specialty 15,000
Plastics Division focused
9,000
6
on householdproducts and food packaging; the Construction
Division focused
12,000100,000
on construction and engineering; and the Other Operations
Division including
9,000
environmental
businesses
andlogistics.
Byregion,theGroupconducts business 4
75,0006,000
6,000
in Japan as well as Europe, North America, and Asia.
50,0003,000
Themain factors that could affect the operating results,
stock price, financial
3,000
2
positionand
otheraspectsoftheKurehaGroupareasfollows.
0
25,000Forward-looking statements in this text are based -3,000
on evaluations made at thetime of the0 Company’s securities report filing (June 27,0 2017).
0
(FY)

2015

2016

-6,000
(FY)

2015

2016

Overseas(1) Changes inDomestic
the businessenvironment in Japan and-9,000
overseas; changes in the
(FY)
2015
2016
market price of products
The Kureha Group’s business is exposed to external factors such as changes inmarkets or customers, and intensification of competition with rival companies.
Flows
Total
Assets
Accordingly,Cashchangessuch fromas a decrease in demand for theGroup’sprinciple(Millions of yen)
Operating Activities
Returninon
Assetsproducts, customers shifting production overseas, and an increase
production
Cash Flows fromReturnon Equity
capacity by competingfirms,
could
haveanegative
effectontheGroup’s
operInvesting Activities(%)
of yen) position.
ating results(Millions
and financial
250,000

15,000-3,00050,000 2(3) Product liability-6,000 Group’s core business is chemical manufacturing. The Group is
The Kureha
1
acutely -9,000
aware of the risks connected with its products 0and the manufacturing
2016
2015
(FY)
(FY)
2016
process, and is careful to continually exercise Responsible0Care2015(autonomous
2015
2016
(FY) andmanagement for environmental conservation, disaster safety
other measures).
However, should a significant, unforeseen quality issue arise, there could be anegative effect on the Group’s operating results and financial position.

Return on Assets

5

2016

2015

2016

30 Kureha Corporation Business Report 2017

(FY)

2015

2016

50,000

0

(FY)
0

20

(FY)

Tot
(Left
IntereRat(MillionsAtt
Ow

10,000250,000

5

150,000

6
8,000
200,000

4

90,000125,000

5
6,000

3

100,000

150,000
44,000

260,00075,000100,0003
2,000

1

50,000030,00025,00050,00020

2015

2016

(FY)

2015

2016

(FY)

2015

2016

(FY)
1
0
0

(Right scale) (%)

0

0

20

(FY)

90,000125,000

50

100,000

40

60,00075,00030

50,00020

30,00025,000

10

0

0

2015

2016

(FY)

2015

2016

0

Capital Expenditure
Depreciation andamortization(Millions of yen)
12,000

8,000
6,000
4,000
2,000
0

(FY)

2015

Cap
Dep
amo

(Millio

60

(FY)

2016

(Righ

(FY)

Total Equity(Left scale) (Millions of yen)Interest-Bearing
Ratio
of Equity Debt
(Millions of yen)
Attributable to
Owners of Parent

10,000(5) Country risks for overseas businesses
60,0004
The Kureha Group conducts business in Europe, North America and Asia.
Accordingly,3 changes such as deterioration in the political or economic situationin these regions, the enactment or abolishment of laws and regulations, interna30,000and deterioration in2tional tax practicerisks such as transfer price taxation,
public safety, as well as unforeseen circumstances such as terrorism, armed1
conflict or natural
disaster, could have a negative effect on the Group’s operating
results and 0financial position.
0
(FY)

2015

0

(%)

Interest-Bearing Debt

(Millions of yen)
Returnon Equity(4) The Specialty
Chemicals
Division’s pharmaceutical business(%)
One of the Kureha Group’s main businesses is the manufacture and sale ofpharmaceuticals. Accordingly, revisions to drug prices under Japan’s medical
insurance system,
as well as the rise of the usage of90,000
generic drugs, could have a6negative effect on the Group’s operating results.

2016

Profit attributableto owners of the parent(Left scale) (Millions of yen)
Total
AssetsProfitofto(Millionsyen)Revenue
Returnon(Right scale)(%)Assets
Return on Equity
6
12,000150,000(2) Changes
6
12,000 in fuel and raw material prices
200,000
Raw materials such as naphtha and coal used by the
Kureha Group, as well as
9,000
fuel, are susceptible to changes in market conditions. As a5 result, changes such as
6,000
150,000
an increasein the price of these raw materials, or theinability to shift the addi4
3,000to product prices in a timely and appropriate manner, could have ational cost
100,000
negative effecton the Group’s operating results andfinancial
position.
3
0

2015

2,000

12,00010,000
8,000
6,000
4,000
2,000
0

(FY)

(6) Currency fluctuations
The items in the Kureha Group’s financial statements not denominated in yen are susceptible to fluctuations in exchange rates whenconverted into yen. The Group concludes exchange contracts and takes other steps to minimize the effects of fluctuations in exchange
rates. However, fluctuations in exchange rates beyond those predicted could have a negative effect on the Group’s operating results andfinancial position.
(7) Investment securities
The Kureha Group holds investment securities (approximately 10% of total assets on a consolidated basis) for the purpose of long-termholdings as of the end of the subject fiscal year. Significant changes in market prices, or in the financial position of the issuing companies, could have a negative effect on the Group’s operating results and financial position.
(8) Occurrence of natural disasters or accidents
Manufacturing of the Kureha Group’s principal products is concentrated in the Iwaki Factory (Iwaki, Fukushima Prefecture), and assuch the Company makes continual efforts focused on this facility for environmental conservation and to ensure safety. However,damage to production facilities as a result of natural disasters such as major earthquakes or typhoons, or due to fires and other accidents, could have a negative effect on the Group’s operating results and financial position.
(9) Litigation
The Kureha Group has established the “Kureha Group Ethical Charter,” “Compliance Rules” and “Compliance Standards,” and strives
to ensure that the Group strictly complies with all laws, regulations and societal norms. However, there is a risk that the Group’s
domestic or overseas businesses could be the target of lawsuits, administrative measures or other action. A major lawsuit or other action
filed against Kureha could have a negative effect on the Group’s operating results and financial position.
(10) Emergence of new technologies
The Kureha Group is committed to research and development in all its business fields, aiming to “develop differentiated products inthe specialty chemicals field, and become a high value-added company that continually contributes to society.” Particularly in the
Advanced Materials Division, the Company considers it essential to develop and bring to market new products in a timely manner,
given the remarkable pace of technological innovation. However, in cases where it is not possible to continuously develop and supply
new products to meet customer needs, or in cases where other companies come up with revolutionary new technologies, there is a riskof obsolescence of some Kureha products and technologies due to rapid technological advance, or of product prices falling more steeply
than anticipated due to intensified price competition triggered by new entrants in Japan and overseas. In such case, they could have anegative effect on the Group’s operating results and financial position.

Kureha Corporation Business Report 201731

Consolidated Statements of Financial Position
Kureha Corporation and its Consolidated Subsidiaries
As of March 31, 2017 (FY2016) and 2016 (FY2015)

Thousands of
U.S. dollars(Note 2)Millions of yen

Transition date
(April 1, 2015)
ASSETS
Current assets:
Cash and cash equivalents(Notes 7 & 23)
Trade and other receivables(Notes 8 & 23)
Other financial assets (Note 23)
Inventories (Note 9)
Assets held for sale(Notes 10 & 23)
Other current assets
Total current assets

FY2016FY2015FY2016¥7,911¥6,222¥6,695$55,459

30,201
232
32,42929,387332
36,49730,928234
33,077

261,9392,959
325,314—2,277
73,051772
2,060
75,272—
1,958
72,894

6,881
18,361
670,933

130,952

115,911

124,987

1,033,166

1,825

1,395

1,666

12,434

10,93910,714

10,393

95,498Non-current assets:
Property, plant and equipment,net (Notes 11, 13 & 16)
Intangible assets, net(Notes 12 & 13)
Investments accounted forusing equity method(Note 14)
Other financial assets(Notes 16 & 23)
Deferred tax assets (Note 15)
Other non-current assets(Note 19)
Total non-current assets

30,417
2,066

25,342
1,350

24,568
1,692

225,884
12,033

3,779
179,981

4,920
159,634

3,605
166,91343,854
1,422,889

Total assets¥253,032¥234,907¥239,807$2,093,831

32 Kureha Corporation Business Report 2017

Thousands of
U.S. dollars(Note 2)Millions of yen

Transition date
(April 1, 2015)
LIABILITIES AND NET ASSETS
Current liabilities:
Trade and other payables(Notes 16, 17 & 23)
Bonds and loans payable(Notes 16 & 23)
Other financial liabilities(Notes 16 & 23)
Accrued income taxes
Provisions (Note 18)
Other current liabilities
Total current liabilities
Non-current liabilities:
Bonds and loans payable(Notes 16 & 23)
Other financial liabilities(Notes 16 & 23)
Deferred tax liabilities(Note 15)
Provisions (Note 18)
Net defined benefit liability(Note 19)
Other non-current liabilities
Total non-current liabilities
Total liabilities
Equity:Shareholders’ equity:
Capital stock, no par value(Note 21)
Capital surplus (Note 21)
Less: Treasury stock, at cost
(Note 21)
Retained earnings (Note 21)
Other components of equity(Note 21)
Total equity attributable toowners of parent
Non-controlling interests
Total equity
Total liabilities and equity

FY2016FY2015FY2016¥21,174¥20,369¥19,817$181,558

35,207

46,68933,986416,160

1,233
2,430
5,953
8,322
74,322

836
873
5,742
6,161
80,672

763
1,419
5,835
7,755
69,5787,451
7,781
51,181
54,915719,065

52,26023,561

46,323210,009

1,978

1,291

1,534

11,507

2,759
669

1,492
386

870
490

13,298
3,440

557
1,088
59,314
133,636382
1,147
28,261
108,934434
1,135
50,788120,366

3,404
10,223251,903
970,977

12,46012,46012,460111,061

10,013

9,430

9,430

84,053(4,487)(4,456)(4,450)(39,718)

90,726

101,731

95,723906,774

9,710

5,132

5,013

45,743

118,422973
119,396¥253,032

124,297
1,674
125,972¥234,907

118,177
1,263
119,440¥239,807

1,107,915
14,921
1,122,845$2,093,831

Kureha Corporation Business Report 201733

Consolidated Statements of Profit or Loss
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2017 (FY2016) and 2016 (FY2015)

Thousands of
U.S. dollars(Note 2)Millions of yen

FY2015FY2016FY2016¥132,294
96,79135,503¥140,779
102,064
38,714$1,179,196
862,741
316,454

26,632

28,056237,383

1,619
1,398
2,633
9,255
577
852
8,981
1,874
7,106

1,706
918
5,899
7,384
784
1,587
6,580
1,762
4,818

14,43012,461
23,46982,493
5,143
7,594
80,051
16,703

Profit attributable to:
Owners of parent
Non-controlling interests
Total

7,001
105
¥ 7,106

4,881
(63)
¥ 4,818

62,403935$63,338

Profit per share (in Yen):
Basic (Note 29)
Diluted (Note 29)¥ 407.38
338.77¥ 284.05
236.23$3.63
3.01

Revenue (Notes 6 & 25)
Cost of sales (Notes 9, 11, 12 & 19)
Gross profit
Selling, general and administrative expenses(Notes 11, 12, 19 & 20)
Share of profit of entities accounted for using equity
method (Notes 6 & 14)
Other income (Note 26)
Other expenses (Notes 11, 13 & 27)
Operating profit (Note 6)
Finance income (Note 28)
Finance costs (Note 28)
Profit before tax
Income tax expense (Note 15)
Profit for the year

Consolidated Statements of Comprehensive Income
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2017 (FY2016) and 2016 (FY2015)

Thousands of
U.S. dollars(Note 2)Millions of yen

FY2015FY2016
Profit for the year
Other comprehensive income (loss):
Items that will not be reclassified to profit or loss:
Financial assets measured at fair value through othercomprehensive income (Notes 23 & 30)
Remeasurements of defined benefit plans (Note 30)
Total
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations(Note 30)
Cash flow hedges (Note 30)
Share of other comprehensive income of entities accounted
for using equity method (Note 30)
Total
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
Comprehensive income (loss)

34 Kureha Corporation Business Report 2017

FY2016¥7,106¥4,818$63,338

1,780
190
1,970

948
(806)
142

15,865
1,693
17,559(698)
2(1,879)5(6,221)

(199)
(896)
1,074
¥8,181(816)(2,690)(2,548)¥2,269(1,773)(7,986)
9,573$72,920¥7,993
187¥8,181¥2,438(169)¥2,269$71,245
1,666$72,920

17

Consolidated Statements of Changes in Equity
Kureha Corporation and its Consolidated Subsidiaries

FY2016 (From April 1, 2016 To March 31, 2017)
Millions of yen
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Changes in equity
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 2017

Capital, nopar value

CapitalsurplusTreasurystock, at cost

¥12,460¥9,430——Retainedearnings

StockacquisitionrightsExchangedifferences ontranslating
foreign
operations¥304¥(2,682)

¥ (2)

—

(900)
(900)

2
2

—
¥(3,582)—¥—¥(4,450) ¥ 95,723
7,001
—
(5)
0

0

7,001

Cash flow
hedges14(1,890)—¥12,460

888
8
(5)
(993)
¥(4,456) ¥101,731

0¥9,43014¥319

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Changes in equity
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 2017

¥7,393

¥ —

1,711
1,711

179
179

(708)

(179)

(708)
¥8,395(179)¥ —Non-controllinginterests

Total

Total

¥5,013
—
992
992
—
—
14
—
—
—

¥118,177
7,001
992
7,993
(5)
0
14
(1,890)
—
—

(888)
—
(873)
¥5,132—8(1,872)¥124,297¥1,263105
82
187

Total equity

260¥119,440
7,106
1,074
8,181
(5)
0
14
(1,926)—260

224¥1,674—8(1,648)¥125,972(35)

Kureha Corporation Business Report 201735

FY2016 (From April 1, 2016 To March 31, 2017)
Thousands of U.S. dollars
Total equity attributable to owners of parent
Other components of equity

BALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Changes in equity
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 2017

Capital, nopar value

CapitalsurplusTreasurystock, at cost

$111,061$84,053$(39,664) $853,222
62,403

—

—

—
(44)
0

0

Retainedearnings

StockacquisitionrightsExchangedifferences ontranslating
foreign
operations$2,709$(23,905)

$(17)

—

(8,022)(8,022)17
17—$(31,927)—$—

62,403

Cash flow
hedges124(16,846)—$111,061

0$84,053

7,915
71
(44)
(8,851)$(39,718) $906,774

124$2,843

Total equity attributable to owners of parent
Other components of equity
Financial assets
measured at fair Remeasurements
value throughof definedotherbenefit planscomprehensive
incomeBALANCE-APRIL 1, 2016
Profit for the period
Other comprehensive income
Comprehensive income
Acquisition of treasury stock (Note 21)
Disposal of treasury stock (Note 21)
Share-based payment transaction (Note 20)
Dividends (Note 22)
Changes in equity
Increase of subsidiaries
Reclassification from other components of equity toretained earnings
OthersTotal transactions with owners
BALANCE-MARCH 31, 201736 Kureha Corporation Business Report 2017$65,897$—

15,25015,250

1,595
1,595

(6,310)(1,595)(6,310)$74,828(1,595)
$ —

Total

Total

Non-controllinginterests

Total equity$44,683 $1,053,364—
62,403
8,842
8,842
8,842
71,245
—
(44)
—
0
124
124
—
(16,846)————$11,257 $1,064,622
935
63,338
730
9,573
1,666
72,920
(44)
0
124
(311)
(17,167)
—
2,317
2,317

(7,915)——71(7,781)(16,685)$45,743 $1,107,915

—
71
1,996
(14,689)$14,921 $1,122,845

Consolidated Statements of Cash Flows
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2017 (FY2016) and 2016 (FY2015)

Thousands of
U.S. dollars

Millions of yen

FY2015FY2016
Cash flows from operating activities:
Profit before tax
Depreciation and amortization
Business restructuring costs
Loss on business withdrawal
Finance income
Finance costs
Share of (profit) loss of entities accounted for using equity method
Loss on disposal and sale of property, plant and equipment, andintangible assets(Increase) decrease in trade and other receivables(Increase) decrease in inventories
Increase (decrease) in trade and other payables
Increase (decrease) in provision
Increase (decrease) in net defined benefit asset and liability
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Cash flows from operating activities
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment, andintangible assets
Payments for purchases of property, plant and equipment, andintangible assets
Proceeds from sales of investment securities
Purchase of investment securities
Purchase of shares of subsidiaries
Proceeds from government grants
Other, net
Cash flows from investing activities
Cash flows from financing activities:
Dividends paid
Dividends paid to non-controlling interests
Net increase (decrease) in commercial paper and short-term loans
payableProceeds from non-current loans payable
Repayments of non-current loans payable
Repayments of bonds
Proceeds from contributions of non-controlling interests
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
Other, net
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

FY2016¥8,981
10,191
1,194
378
(550)
557
(1,619)¥6,580
10,333
4,024
—
(784)
720
(1,706)$80,051
90,836
10,642
3,369(4,902)
4,964(14,430)486
1,597(3,630)340(188)(1,172)(2,235)
14,3281,395(481)(2,890)12,3501,118(1,029)
(957)
(164)
(287)
(1,206)662
17,303
2,220(712)(4,252)
14,5594,331
14,234(32,355)
3,030(1,675)(10,446)(19,921)
127,711
12,434(4,287)(25,759)
110,081

32

407

285

(9,379)
1,320
(38)
—
7,780
(786)
(1,071)(12,515)
7,238
(117)
(64)
—
(997)
(6,049)(83,599)
11,765(338)—
69,346(7,005)(9,546)(1,890)(35)(2,061)(30)(16,846)
(311)

(117)
4,090
(13,715)
—
260

2,457
8,202
(7,167)(10,000)—(1,042)36,456(122,247)
—
2,317

—
(317)
(11,727)
(24)
(472)
6,695
¥6,222(1,026)(309)(9,935)210(1,215)7,911¥6,695—(2,825)(104,528)(213)(4,207)59,675$55,459

Kureha Corporation Business Report 201737

Notes to Consolidated Financial Statements
Kureha Corporation and its Consolidated Subsidiaries
For the fiscal years ended March 31, 2017 (FY2016) and 2016 (FY2015)

1. Reporting entity

Kureha Corporation (the “Company”) is a company registered in Japan and listed on the Tokyo Stock Exchange. The locationsof the Company’s registered headquarters and main offices are available on the Company’s website at http://www.kureha.co.jp/
en/. The consolidated financial statements of the Company for FY2016 (from April 1, 2016 to March 31, 2017) comprise theCompany and its subsidiaries (collectively the “Group”), and the Group’s interests in its affiliates. The Group operates its
businesses primarily in the manufacturing and sale of advanced materials, specialty chemicals, and specialty plastics, and engages
in business activities including construction and repair of facilities, logistics and environmental protection, and other services.

2. Basis of preparation of the consolidated financial statements(1) Compliance with IFRS and matters concerning its first-time adoption
The Group’s consolidated financial statements have been prepared in accordance with the International Financial ReportingStandards (“IFRS”).
The Group has adopted the provision of Article 93 of Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements because the Group satisfies the requirements for a “Designated IFRS Specified Company” as
set forth in Article 1-2 of said Ordinance.
The Group has adopted IFRS from FY2016 (from April 1, 2016 to March 31, 2017) and the full-year consolidated financial
statements for the fiscal year beginning on April 1, 2016 are the Group’s first consolidated financial statements prepared inaccordance with IFRS. The date of transition to IFRS (“transition date”) is April 1, 2015. The Group had previously adopted
J-GAAP and the closing date of the accounting period stated on the most recent consolidated financial statements under
J-GAAP is March 31, 2016.
An explanation regarding the exemptions provided by IFRS 1 First-time Adoption of International Financial ReportingStandards (“IFRS 1”) and adopted by the Group and the reconciliation required for disclosure under IFRS is provided in thesection titled “35. First-time adoption of IFRS.”(2) Basis of measurement
The Group’s consolidated financial statements have been prepared on a historical cost basis except for some of the financial
assets, financial liabilities, employee benefits and other items, which have been measured at fair value, as stated in “3. Significant
accounting policies.”(3) Functional currency and presentation currency
The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency. In principle,
all financial information presented in Japanese yen has been rounded down to the nearest million.
In addition, the U.S. dollar amounts, which have been translated from Japanese yen into U.S. dollars on the basis of¥112.19, the rate of exchange prevailing on March 31, 2017, are provided in the accompanying consolidated financial
statements and notes herein for convenience. These U.S. dollar amounts are not intended to imply that the Japanese yenamounts have been or could be converted, realized or settled in U.S. dollars at this or any other rate.
(4) Approval of the consolidated financial statements
The consolidated financial statements have been approved at the Board of Directors meeting held on June 27, 2017.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all the periods presented in the consolidated financial
statements (including the consolidated statements of financial position as of the transition date).
The Group has early adopted IFRS 9 Financial Instruments (issued in November 2009, as amended in July 2014).
(1) Basis of consolidation
1) Subsidiaries
A subsidiary is an entity which is controlled by the Group. The Group controls an entity when it is exposed, or has rights, tovariable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The financial statements of a subsidiary are included in the scope of consolidation from the date the Group obtains controlof the subsidiary until the date it loses such control of the subsidiary.
When the accounting policies adopted by a subsidiary differ from those adopted by the Group, the financial statements of a
subsidiary are adjusted as necessary.
When the closing date of the financial statements of a subsidiary differs from that of the Group’s consolidated financial
statements, the Group uses the financial statements based on a provisional settlement of accounts.
Intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, areeliminated in preparing the consolidated financial statements.
Comprehensive income of the subsidiaries is allocated to owners of the parent and non-controlling interests, even when the
non-controlling interests will result in a negative balance.
38 Kureha Corporation Business Report 2017

2) Affiliates
An affiliate is an entity over which the Group has significant influence in the financial and operating policy decisions, but that is
not controlled or jointly controlled by the Group. If the Group holds between 20 percent and 50 percent of the voting rights ofanother entity, it is presumed that the Group has significant influence over the other entity. An investment in an affiliate isaccounted for using the equity method.
When the closing date of the affiliate’s financial statements differs from that of the Group’s consolidated financial statements,
the Group uses the financial statements based on a provisional settlement of accounts.
3) Joint ventures
A joint venture is an entity with a contractual agreement whereby two or more parties including the Group undertake aneconomic activity that is subject to joint control, which is the contractually agreed sharing of control over an economic activity,and exists only when the strategic financial and operating decisions relating to the activity require the unanimous consent of theparties sharing control.
The joint ventures held by the Group are accounted for using the equity method.
(2) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred by the Company as an
acquirer is measured as the aggregate of the acquisition-date fair value of the assets given, liabilities assumed and equity
instruments issued by the Company in exchange for control of the acquiree. If (a) the aggregate of the consideration transferredby the Company, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held
equity interest in the acquiree in a business combination achieved in stages (step acquisitions) exceeds (b) the fair value ofidentifiable assets and liabilities, the excess is recognized as goodwill in the consolidated statements of financial position. If, in
the contrary, the amount of (a) above falls below the amount of (b), the difference is recognized immediately as profit or loss inthe consolidated statements of profit or loss.
Acquisition-related costs, which are the costs the Group incurs to effect a business combination, are expensed as incurred.
As additional acquisitions of non-controlling interests in the Group’s subsidiaries are accounted for as equity transactions, nogoodwill is recognized as a result of such transactions.
The Group has adopted exemptions under IFRS 1 to elect not to apply IFRS 3 Business Combinations retrospectively inregards to business combinations that occurred prior to the transition date (April 1, 2015).
(3) Foreign currency translation
1) Foreign currency transactions
The items included in the financial statements of each entity of the Group are measured in its functional currency. Foreign
currency transactions are converted into the functional currency of each entity using the spot exchange rate at the transaction
date. Monetary assets and liabilities denominated in foreign currencies are converted into the functional currency using theexchange rate at the end of the reporting period. Foreign exchange gains and losses resulting from the currency conversion andsettlement are recognized in profit or loss, except where gains and losses arising from designated investments in equity
instruments to be measured at fair value through other comprehensive income and cash flow hedges are recognized in othercomprehensive income.
2) Financial statements of foreign operations
Assets and liabilities of foreign operations (including goodwill and fair value adjustments arising from the acquisition of foreign
operations) are translated into Japanese yen using the exchange rate at the end of the reporting period, and revenue and expense
items are translated into Japanese yen using the average exchange rates during the period. Exchange differences arising from thetranslation of financial statements of the foreign operations are recognized in other comprehensive income. In the event of a lossof control or significant influence (or joint control) due to the disposal of foreign operations, the relevant cumulative amount oftranslation differences associated with the foreign operations is reclassified into profit or loss as part of gain or loss on disposal.
Based on the application of the exemptions under IFRS 1, the Group has deemed the cumulative exchange differences offoreign operations that existed at the transition date to be zero and reclassified all the amount into retained earnings.
(4) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand; demand deposits; and short-term, highly liquid investments with amaturity of three months or less from the date of acquisition that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value.
(5) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes costs of purchase, costs of
conversion and all the other costs incurred in bringing the inventories to their present location and condition, and the cost isdetermined using the periodic average method if items of inventories are interchangeable or the specific identification method ifthey are not interchangeable. Net realizable value is the estimated selling price in the ordinary course of business less theKureha Corporation Business Report 201739

estimated costs of completion and the estimated costs necessary to make the sale. Any difference arising from the measurement
is recognized in profit or loss.
(6) Assets held for saleNon-current assets or disposal groups that recover their carrying amount principally through a sale transaction rather than
through continued use are classified as held for sale if the asset is available for immediate sale in its present condition, themanagement is committed to a plan to sell the asset, and the asset is expected to be sold within a year.
Non-current assets or disposal groups classified as held for sale are measured at the lower of their carrying amount and fairvalue less costs to sell.
(7) Property, plant and equipment
The Group uses the cost model to measure items of property, plant and equipment. They are stated at cost less any accumulated
depreciation and any accumulated impairment losses.
The cost of an item of property, plant and equipment includes directly attributable costs of acquisition, costs of dismantling,
removing or restoring the item, and borrowing costs eligible for capitalization.
Except for non-depreciable assets such as land, an item of property, plant and equipment is depreciated using the straight-line
method over the estimated useful life. The estimated useful lives of the major classes of assets are presented as follows:
Buildings and structures:
Machinery and equipment:
Vehicles, tools, furniture and fixtures:

10 to 50 years
7 to 20 years
4 to 10 years

The estimated useful life, depreciation method and residual value of an asset are reviewed at the end of each reporting
period. Any changes are accounted for prospectively as a change in accounting estimate.
(8) Intangible assets
1) Goodwill
The measurement of goodwill upon initial recognition is described in “3. Significant accounting policies, (2) Businesscombinations.” Goodwill is stated at cost less any accumulated impairment losses.
Goodwill is not amortized, but instead tested for impairment annually or whenever there are indications that goodwill may
be impaired. An impairment loss for goodwill is recognized in the consolidated statement of income and is not subsequently
reversed.
2) Other intangible assets
The Group uses the cost model to measure a separately acquired intangible asset other than goodwill. With respect to aninternally generated intangible asset, expenditure on such an asset is recognized as expenses in the period in which they are
incurred except for development expenditures that qualify for capitalization.
Intangible assets with definite useful lives are stated at cost less any accumulated depreciation and any accumulated impairment
losses, depreciated using the straight-line method over the estimated useful life, and tested for impairment whenever there areindications that the assets may be impaired. The estimated useful lives of the major classes of assets are presented as follows:
Trademarks:
Software:10 years
5 years

The estimated useful life, amortization method and residual value of an asset are reviewed at the end of each reporting
period. Any changes are accounted for prospectively as a change in accounting estimate.
Intangible assets with indefinite useful lives and those not yet available for use are not amortized, but instead tested for
impairment individually or at a cash-generating unit level annually or whenever there are indications that they may be impaired.
(9) Lease
The Group determines whether the agreement contains a lease based on the substance of the arrangement at the commencement
date of the lease transaction.
If a lease transfers to the Group, substantially all risks and rewards incidental to ownership of an asset, such a lease isclassified as a finance lease, or otherwise it is classified as an operating lease.
A leased asset under a finance lease transaction is initially recognized at the lower of the fair value of the leased asset
determined at inception of the lease and the present value of the minimum lease payments, and subsequently depreciated basedon the applicable accounting policies using the straight-line method over shorter of the estimated useful life and the lease term.
40 Kureha Corporation Business Report 2017

Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge isallocated to each period over the lease term so as to produce a constant periodic rate of interest on the remaining balance of theliability.
Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. Contingent
rents are charged as expenses in the periods in which they are incurred.
(10) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is any indication that its non-financial assets other thaninventories and deferred tax assets may be impaired. If any such indication exists, it estimates the recoverable amount of theasset. Goodwill and an intangible asset with indefinite useful life or an intangible asset not yet available for use are tested for
impairment annually regardless of whether there is an indication of impairment.
The recoverable amount of an asset or a cash-generating unit is the higher of its value in use and fair value less costs ofdisposal. In determining the value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects
the time value of money and the risks specific to the asset.
Assets that are not individually tested for impairment are integrated with the smallest cash-generating unit that generates
cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets. The
Group’s corporate assets do not generate independent cash inflows. If there is an indication that the corporate assets may be
impaired, the recoverable amount is determined for the cash-generating unit to which the corporate assets belong.
Goodwill acquired in a business combination is allocated to each of the cash-generating units that is expected to benefit fromthe synergies of the combination to ensure that goodwill is tested for impairment reflecting the smallest unit to which the
goodwill relates.
Impairment losses are recognized as profit or loss when the carrying amount of an asset or a cash-generating unit exceeds its
estimated recoverable amount.
The Group assesses at the end of each reporting period whether there is any indication that an impairment loss recognized inprior periods for an asset other than goodwill may have decreased or may no longer exist. An impairment loss is reversed if there
is a change in the estimates used to determine the asset’s recoverable amount.
(11) Financial Instruments
1) Non-derivative financial assets(i) Initial recognition and measurement
The Group initially recognizes a financial asset on the account day in its consolidated statements of financial position when theGroup becomes party to the contractual provisions of the financial asset.
At initial recognition, the financial assets are classified as financial assets measured at fair value through profit or loss,
financial assets measured at fair value through other comprehensive income, or financial assets measured at amortized cost.
Financial assets are classified as financial assets measured at amortized cost if both of the following conditions are met.
Otherwise financial assets are classified as financial assets measured at fair value.
• The financial assets are held within a business model whose objective is to hold assets in order to collect contractual cash
flows; and• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
Of financial assets measured at fair value, certain equity instruments such as stocks that are held with the purpose of
facilitating business relations with investees are initially designated as financial assets measured at fair value through othercomprehensive income. Other financial assets are designated as financial assets measured at fair value through profit or loss.
All financial assets are measured at fair value plus transaction costs directly attributable to acquisition of the financial assets
unless the financial assets are classified as financial assets measured at fair value through profit or loss.
(ii) Subsequent measurement
Measurement of financial assets after initial recognition is performed as follows according to the classification:(a) Financial assets measured at amortized cost
These financial assets are measured at amortized cost using the effective interest method.
(b) Financial assets measured at fair value through other comprehensive income
These financial assets are measured at fair value after initial recognition, and subsequent changes in fair value areincluded in other comprehensive income. If the Group disposes of an investment, or if the fair value of the investment
declines significantly, the cumulative gains or losses recognized in other comprehensive income are reclassified fromother components of equity to retained earnings.
Dividends from the financial assets measured at fair value through other comprehensive income are recognized as
finance income in profit or loss.

Kureha Corporation Business Report 201741

(c) Financial assets measured at fair value through profit or loss
Financial assets designated to be measured at fair value through profit or loss, or financial assets other than (a) and (b)above are measured at fair value at initial recognition, and subsequent changes in their fair value are recognized in profit
or loss.
(iii) Derecognition of financial assets
The Group derecognizes financial assets when the rights to receive benefits expire or when the Group transfers financial assets or
substantially all the risks and rewards of ownership of the financial assets.
(iv) Impairment of financial assets
With respect to financial assets measured at amortized cost, the Group recognizes allowance for doubtful accounts based on the
expected credit loss model for such financial assets. At each reporting date, the Group assesses whether the credit risks on thefinancial assets have increased significantly since initial recognition. If the credit risk on a financial asset has increased
significantly since the initial recognition, the allowance for doubtful accounts is measured at an amount equal to the lifetime
expected credit losses. If the risk on a financial asset has not increased significantly since the initial recognition, the allowance for
doubtful accounts for the financial asset is measured at an amount equal to the 12-month expected credit losses. However, theallowance for doubtful accounts on trade and other receivables is always measured at an amount equal to the lifetime expectedcredit losses.
The Group estimates expected credit losses of a financial asset in a way that reflects:• an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;• the time value of money; and• reasonable and supportable information that is available without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic conditions.
The amounts of these measurements are recognized in profit or loss.
2) Non-derivative financial liabilities(i) Initial recognition and measurement
The Group initially recognizes a financial liability in its consolidated statements of financial position when the Group becomesparty to the contractual provisions of the financial liability.
At the initial recognition, the Group classifies financial liabilities as financial liabilities measured at fair value through profit
or loss or financial liabilities measured at amortized cost.
All financial liabilities are measured in the full amount after deducting transaction costs directly attributable to the financial
liabilities from the fair value unless the financial liabilities are classified as financial liabilities measured at fair value throughprofit or loss.
(ii) Subsequent measurement
Financial liabilities measured at fair value though profit or loss are measured at fair value, and subsequent changes in the fairvalue are recognized in profit or loss.
After initial recognition, financial liabilities measured at amortized cost are measured at amortized cost using the effective
interest method. Amortization using the effective interest method and gains and losses upon derecognition are recognized in
profit or loss in its consolidated statements of profit or loss for the period.
(iii) Derecognition of financial liabilities
The Group derecognizes financial liabilities when they are discharged, cancelled or expired.
3) Issuance of compound financial instruments
The Group issues bonds with stock acquisition rights. At initial recognition, proceeds from issuance are split between thecomponent of consideration received for bonds and the component of consideration received for stock acquisition rights, andthe bond component is classified and presented as liability while the stock acquisition right component as equity. On initialrecognition, stock acquisition rights are measured as difference between the proceeds and initially measured fair value of theliability component. All of the transaction costs associated with issuing bonds with stock acquisition rights are allocated pro rata
to each component on the basis of initial ratio of carrying amount of a liability component and an equity component. Afterinitial recognition, a liability component of compound financial instrument is measured at amortized cost using the effective
interest method. An equity component of compound financial instrument is not remeasured after initial recognition.
4) Derivatives and hedge accounting
The Group uses derivatives such as forward exchange contracts and interest rate swaps to hedge foreign currency risk andinterest rate risk.
42 Kureha Corporation Business Report 2017

Derivatives are initially measured at fair value at the date when the derivative contract is entered into and are subsequently
measured at fair value. Changes in the fair value of derivatives are immediately recognized in profit or loss except for those that
qualify for hedge accounting.
The Group formally designates and documents the hedging relationship and the risk management objective and strategy forundertaking the hedge. The documentation includes the hedging instrument, the hedged item, the nature of the risk being
hedged and the methods of assessing whether the hedging relationship meets the hedge effectiveness requirements. In addition,
the Group assesses whether the hedging relationship meets the hedge effectiveness requirements, both at the inception and on an
ongoing basis.
Hedging relationship that meet the criteria for hedge accounting are accounted as follows.
Changes in fair value of a derivative designated as fair value hedges are recognized in profit or loss. The carrying amount ofhedged items is measured at fair value and the changes in the fair value of hedged items attributable to the hedged risk arerecognized as profit or loss with adjustments to the carrying amount of the hedged items.
With regard to cash flow hedge, the effective portions of the gain or loss on the hedging instrument are recognized in othercomprehensive income as the line item titled “Cash flow hedges.” Subsequently, such amounts associated with forward exchange
contracts are reclassified as reclassification adjustment from equity to profit or loss in the same period in which the hedged item
affects profit or loss. With regard to interest rate swaps, the changes in gains and losses on the hedging instrument are recognizedas other comprehensive income.
Hedge accounting is discontinued prospectively when, and only when, the hedging relationship ceases to meet the qualifying
criteria. This includes instances when the hedging instrument expires or is sold, terminated or exercised.
(12) Employee benefits
1) Post-retirement benefits
The Group has defined benefit plan and defined contribution plan as post-employment benefit plan.
The net defined benefit liability (asset) associated with the defined benefit plans is calculated by deducting the fair value ofthe plan assets from the present value of defined benefit obligations. The present value of defined benefit obligations and related
current service costs and prior service costs are measured annually by independent actuaries based on the projected unit credit
method. The discount rate is calculated by reference to market yields at the end of the fiscal year on highly rated corporate
bonds denominated in the same currency as those used for future benefit payment, corresponding to the discount period
determined based on the period until annual future payment dates.
Remeasurements of all of the net benefit liability (asset) arising from the defined benefit plans are recognized at once in othercomprehensive income in the period in which they are incurred and immediately reclassified from other components of equity
to retained earnings.
Prior service costs are immediately recognized as profit or loss for the period in which they are incurred.
Contributions to defined contribution plans are recognized as an expense when they are paid.
2) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis, and are recognized at once when the related
services are rendered. When there is a legal or constructive obligation to make payments of bonuses and paid leave expenses, andthe obligation can be estimated reliably, the estimated amount to be paid under the relevant plans is accounted for as a liability.
(13) Share-based payments
The Group has a stock option plan accounted for as an equity-settled share-based payment plan. Stock options are estimatedusing its fair value at the grant date and recognized in profit or loss as expenses over the vesting periods with corresponding
increases to equity and taking into account the estimated number of options to be vested. The fair value of options granted ismeasured using the Black-Scholes model based on the terms and conditions of the options.
(14) Provisions
The Group recognized a provision when the Group has a present obligation (legal or constructive) as a result of a past event; it isprobable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of theobligation.
The amount of provision is measured at the present value of the expenditures expected to be required to settle the obligation.
In calculating the present value, the pre-tax discount rate that reflects the current market assessment of the time value of money
and the risks that are specific to the obligation is applied. Unwinding of the discount associated with the passage of time isrecognized as finance costs.
(15) Levies
For levies that are an outflow of resources embodying economic benefits required by a government to entities in accordance withlaws and regulations, the estimated payment is recognized as a liability when the obligation event that triggers the payment oflevies prescribed by laws and regulations occurs.

Kureha Corporation Business Report 201743

(16) Revenue
1) Sale of goods
Revenue from the sale of goods is recognized when the Group has transferred the significant risks and rewards of ownership of
the goods to the buyer; the Group retains neither continuing managerial involvement nor effective control over the goods sold;
it is probable that future economic benefits related to the transaction will flow to the Group; and these benefits andcorresponding costs can be measured reliably. Revenue is usually recognized at the time of delivery of goods to customers.
Revenue is measured at the fair value of the consideration received or receivable less any discounts, rebates and consumption
taxes.
Taxes collected on behalf of the third parties and transaction amounts where the Group acted as agent are deducted fromrevenue, and inflow of economic benefits excluding those amounts is recognized as revenue.
2) Royalty
Royalty revenue is recognized on an accrual basis in accordance with the substance of the contractual arrangement.
3) Rendering of services
Revenue from the rendering of services is recognized in accordance with such transaction’s degree of progress as of the end of thereporting period in which the service is rendered.
4) Construction contracts
Revenues from construction contracts are calculated based on the stage of completion of the contract (multiplying the mostrecent total selling price by the proportion of the most recent contract costs incurred to the most recent estimated total contract
costs) if the outcome of the construction contract can be estimated reliably. Otherwise, contract revenues are recognized only tothe extent of the contract costs incurred very likely to be recovered and contract costs are expensed when incurred.
(17) Government grants
Government grants are recognized at fair value when there is reasonable assurance that the entities will comply with theconditions attaching to them and the grants will be received.
Government grants related to expense items are recognized as revenue on a systematic basis over the period in which theGroup recognizes the related expenses for which the grants are intended to compensate. Government grants related to assets are
directly deducted in arriving at the carrying value of the assets. Government grants are recognized in profit or loss over the useful
lives of the depreciable assets as a reduction in depreciation.
(18) Finance income and finance costs
Finance income consists mainly of interest income and dividend income. Interest income is recognized when accrued by using
the effective interest method. Dividend income is recognized when the Group’s right to receive the dividends is established.
Finance costs consist mainly of interest expenses. Interest expenses are recognized when incurred by using the effective
interest method.
(19) Income taxes
Income tax expenses consist of current tax expense and deferred tax expense. Income taxes are recognized in profit or loss, except
when they arise from business combinations, and from items that are recognized directly in equity or in other comprehensive
income.
Current tax expense is measured by the expected taxes payable to or receivable from tax authorities. The tax rates and tax
laws that are used to calculate the tax amount are those enacted or substantively enacted by the end of the fiscal year injurisdictions in which the Group operates business and earns taxable income.
Deferred tax expense is calculated based on temporary differences between the carrying amounts of assets and liabilities forfinancial accounting purposes and the tax bases of such assets and liabilities. Deferred tax assets are recognized for deductible
temporary differences, the carryforwards of unused tax credits and the carryforwards of unused tax losses to the extent that it isprobable that future taxable income will be available against which such deferred tax assets can be recovered. Deferred tax
liabilities are recognized, in principle, for taxable temporary differences.
Deferred tax assets and liabilities are not recognized for the following temporary differences:• Temporary differences arising from initial recognition of goodwill,• Temporary differences arising from initial recognition of assets and liabilities from transactions that are not businesscombinations and affect neither accounting profit nor taxable income (tax loss),• Deductible temporary differences on investments in subsidiaries and affiliates, when it is probable that such temporary
differences will not reverse in the foreseeable future, or when it is unlikely that taxable income will be earned against which
the temporary difference can be utilized,

44 Kureha Corporation Business Report 2017• Taxable temporary differences on investments in subsidiaries and affiliates, when the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable
futureDeferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets are
realized or the liabilities are settled, based on the tax rates and tax laws enacted or substantively enacted by the end of the fiscal
year.
Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to set off current tax assets against
current tax liabilities and income taxes are levied by the same taxation authority on the same taxable entity.
(20) Treasury stock
Treasury stock is recognized at cost and deducted from equity. No gains or losses are recognized on the repurchase, sale orretirement of shares of the Company’s treasury stock. Any difference between the carrying amount and consideration received on
the sale of shares of the treasury stock is recognized directly as capital surplus.
(21) Profit per share
Basic profit per share are calculated by dividing profit attributable to owners of parent by the weighted average number ofordinary shares outstanding during the period, adjusted for treasury stocks held. Diluted profit per share is calculated byadjusting for the effects of all dilutive potential ordinary shares.

4. Significant accounting estimates and associated judgments

In preparing the Group’s consolidated financial statements in compliance with IFRSs, the management is required to makejudgments, estimates and assumptions that affect the adoption of accounting policies and the reportable amount of assets,
liabilities and revenue and expenses. Actual results may differ from such estimates.
The estimates and their underlying assumptions are reviewed on an ongoing basis. The effect of a change in accounting
estimates is recognized in the accounting period in which such estimates are changed and also in the future accounting periods.
Estimates and assumptions that may have material impact on the preparation of the Group’s consolidated financial statements
are as follows:• Impairment of property, plant and equipment; goodwill and intangible assets (Item (10) of 3. Significant accounting
policies and Note 13. Impairment of non-financial assets),• Valuation of inventories (Item (5) of 3. Significant accounting policies and Note 9. Inventories),• Recoverability of deferred tax assets (Item (19) of 3. Significant accounting policies and Note 15. Income taxes),• Valuation of defined benefit obligations (Item (12) of 3. Significant accounting policies and Note 19. Employee benefits),• Recognition of provisions (Item (14) of 3. Significant accounting policies and Note 18. Provisions) and• Assumption on valuation of financial instruments (Item (11) of 3. Significant accounting policies and Note 23. Financial
instruments).
Judgments made by the management in the course of applying the accounting policies are as follows:• Determination of scope of consolidation (Item (1) of 3. Significant accounting policies) and• Classification of financial instruments (Item (11) of 3. Significant accounting policies and Note 23. Financial instruments).

5. Standards and interpretations issued but not yet adopted

Of the new standards or interpretations that were established or amended by the date of approval of the consolidated financial
statements, the following are the titles and other related information of the major new IFRSs. The Group has not yet adopted
these standards in FY2016, and is currently evaluating the effects of their application.
Standard

Title

Effective dateFiscal year in which
the Group will apply
the standard

Summary of new or amended standard

IFRS 15

Revenue fromContracts with
Customers

Fiscal year
January 1, 2018 ending March
31, 2019

An entity shall recognize revenue to depict the transfer
of promised goods or services to customers in an
amount that reflects the consideration to which theentity expects to be entitled in exchange for those
goods or services.

IFRS 16

LeasesFiscal year
January 1, 2019 ending March
31, 2020

A lessee is required to recognize assets and liabilities
for most leases.
Kureha Corporation Business Report 201745

6. Segment information(1) Overview of reportable segments
The Group’s reportable segments are components for which separate financial information is available and whose operating
results are regularly reviewed by the Board of Directors to decide on the allocation of operating resources and assess theirperformance.
The Group has separate divisions by product, and each division formulates a comprehensive strategy for business activities indomestic and overseas markets.
Accordingly, the Group consists of segments by product and service on the basis of the business divisions, and has the fivereportable segments of “Advanced Materials,” “Specialty Chemicals,” “Specialty Plastics,” “Construction,” and “Other
Operations.”
Major products and services for each segment are as follows:
Segment
Advanced Materials
Specialty Chemicals
Specialty Plastics
Construction
Other Operations

Products and services
polyphenylene sulfide (PPS), polyvinylidene fluoride (PVDF), carbon fiber, bead-shaped
activated carbon, anode materials for lithium ion batteries, polyglycolic acid (PGA) and its
processed producttherapeutic agent for chronic renal failure, anti-cancer agent, agricultural and horticultural
fungicides, caustic soda, hydrochloric acid, sodium hypochlorite, monochlorobenzene, paradichlorobenzene, ortho-dichlorobenzene
household plastic wrap, garbage bags for kitchen sink, plastic food containers, cooking
paper, PVDF fishing lines, polyvinylidene chloride (PVDC) compounds and film,
multilayer heat-shrinkable film, multilayer bottle, auto-pack machinery (for food packaging)
civil engineering and construction contracting business, construction and management
serviceenvironmental engineering, industrial waste management, transport and warehousing,physiochemical and biochemical testing, analysis and measurement services, medical services(2) Information on reportable segments
The accounting policies for the reportable segments are the same as those of the Group stated in “3. Significant accounting
policies.” Intersegment revenue is principally based on the market price.
The Group’s segment information is as follows:

Advanced
Materials

Specialty
ChemicalsMillions of yen
Transition date (April 1, 2015)
Reportable segment
Specialty
Other
Plastics
Construction Operations

Total

Adjustment(Note)

Consolidated

Segment assets¥87,679¥25,248¥46,349¥9,145¥17,777 ¥186,200¥66,832 ¥253,032
Note: Reconciliation of segment assets includes corporate assets not allocated to reportable segments, which mainly consist of
cash and deposits, investment securities and shared facilities of the Company.

46 Kureha Corporation Business Report 2017

Millions of yen

FY2015 (From April 1, 2015 To March 31, 2016)

Revenue
Revenue to externalcustomers
Intersegment revenue
Total
Operating profit
Finance income
Finance costs
Profit before income tax
Other items
Segment assets
Depreciation andamortization
Impairment loss
Share of profit ofentities accounted forusing equity method
Increases in property,
plant and equipment,
and intangible assets

Advanced
Materials

Specialty
Chemicals

Reportable segment
Specialty
Plastics
Construction¥35,565750
36,315
1,441¥30,621387
31,0094,760¥42,311233
42,544
3,188

79,60425,375

3,805

Adjustment(Note)

Other
Operations

Total¥16,201
6,270
22,472
1,537¥16,079
5,777
21,856
1,497¥140,779
13,418154,198
12,42445,146

9,100

18,495

177,72262,084

239,807

934

2,390

111

1,169

8,412

1,921

10,333

—

—

—

—

—

—

4,024

4,024

1,539

—

167

—

—

1,706

—

1,706

¥ 3,783¥ 1,387¥ 1,778¥51¥ 1,270¥8,272¥3,150¥ 11,422

Consolidated¥— ¥140,779(13,418)—(13,418) 140,779(5,040)7,384
784(1,587)
6,580

Note:	Reconciliation of operating profit consists mainly of 59 million yen of loss resulting from elimination of intersegment transactions, 918
million yen of other income and 5,899 million yen of other expenses not allocated to reportable segments.
	Reconciliation of segment assets includes corporate assets not allocated to reportable segments which mainly consist of cash anddeposits, investment securities and shared facilities of the Company.
	Reconciliation of impairment losses includes impairment loss for fixed assets of 4,024 million yen associated with the Advanced
Materials segment.
Millions of yen

FY2016 (From April 1, 2016 To March 31, 2017)

Revenue
Revenue to externalcustomers
Intersegment revenue
Total
Operating profit
Finance income
Finance costs
Profit before tax
Other items
Segment assets
Depreciation andamortization
Impairment loss
Share of profit ofentities accounted forusing equity method
Increases in property,
plant and equipment,
and intangible assets

Advanced
Materials

Specialty
Chemicals

Reportable segment
Specialty
Plastics
Construction

Other
Operations

Total¥33,369627
33,997
79¥25,866
278
26,144
2,538¥42,791
184
42,976
4,986¥13,934
5,401
19,336
1,026¥16,332
5,638
21,9701,726¥132,294
12,130144,425
10,357¥— ¥132,294(12,130)—(12,130) 132,294(1,101)
9,255
577
(852)
8,981

81,33023,85037,894

7,439

19,631

170,145

64,761

234,907

3,385
—

1,064
—

2,342
—

102
—

1,228
—

8,122
—

2,068
1,572

10,191
1,572

1,357

—

261

—

—

1,619

—

1,619

¥ 3,904¥ 1,333¥ 1,633¥171¥ 1,082¥8,125¥ 2,179¥ 10,304

Adjustment(Note)

Consolidated

Note:	Reconciliation of operating profit consists mainly of 133 million yen of profit resulting from elimination of intersegment transactions,
1,398 million yen of other income and 2,633 million yen of other expenses not allocated to any reportable segment.
	Reconciliation of segment assets includes corporate assets not allocated to reportable segments, which mainly consist of cash anddeposits, investment securities and shared facilities of the Company.
	Reconciliation of impairment losses includes impairment losses for fixed assets of 1,194 million yen associated with the Advanced
Materials segment and 378 million yen for fixed assets of the Specialty Chemicals segment.
Kureha Corporation Business Report 201747

Thousands of U.S. dollars

FY2016 (From April 1, 2016 To March 31, 2017)
Advanced
Materials

Revenue
Revenue to external$297,432
customers
Intersegment revenue
5,588
Total
303,030
Operating profit
704
Finance income
Finance costs
Profit before tax
Other items
724,930
Segment assets
Depreciation andamortization
30,172
Impairment loss—
Share of profit ofentities accounted forusing equity method
12,095
Increases in property,
plant and equipment,
and intangible assets $ 34,798

Specialty
Chemicals

Reportable segment
Specialty
Plastics
Construction

Other
Operations$230,555
2,477
233,033
22,622$381,415
1,640
383,064
44,442$124,200
48,141
172,350
9,145$145,574 $1,179,196
50,254
108,120
195,828 1,287,325
15,38492,316$— $1,179,196(108,120)—(108,120) 1,179,196(9,813)82,493
5,143(7,594)80,051

212,585

337,766

66,307

174,979 1,516,579

577,243 2,093,831

9,483
—

20,875—909—

10,945—72,395—

18,43314,011

90,836
14,011

—

2,326

—

—

14,430—14,430$ 11,881$ 14,555$1,524

Total$9,644 $72,421

Adjustment(Note)

Consolidated$19,422 $91,844

Note:	Reconciliation of operating profit consists mainly of 1,185 thousand dollars of profit resulting from elimination of intersegment
transactions, 12,461 thousand dollars of other income and 23,469 thousand dollars of other expenses not allocated to reportablesegments.
	Reconciliation of segment assets includes corporate assets not allocated to reportable segments, which mainly consist of cash anddeposits, investment securities and shared facilities of the Company.
	Reconciliation of impairment losses includes impairment losses for fixed assets of 10,642 thousand dollars associated with the Advanced
Materials segment and 3,369 thousand dollars for fixed assets of the Specialty Chemicals segment.

(3) Information on products and services
This information is omitted because the same information is disclosed in “(1) Overview of reportable segments” and “(2)Information on reportable segments.”(4) Information by geographical area
Revenue to external customers
Millions of yen

FY2016(From April 1, 2016
To March 31, 2017)

Japan
Europe
Asia
Other

Total
Note: Revenues are classified based on the location of customers.

¥ 97,630
10,301
13,986
10,377¥132,294

FY2015(From April 1, 2015
To March 31, 2016)¥ 98,742
16,142
14,587
11,306¥140,779

Thousands of
U.S. dollars

FY2016(From April 1, 2016
To March 31, 2017)$ 870,220
91,817
124,663
92,494$1,179,196

Non-current assets (property, plant and equipment and intangible assets)
Thousands of
U.S. dollars

Millions of yen

Japan
U.S.
Other

Total

48 Kureha Corporation Business Report 2017

Transition date
(April 1, 2015)¥96,385
19,922
16,470¥132,777

FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥89,205
16,241
11,860¥117,306¥95,504
17,335
13,813¥126,654$795,124
144,763
105,713$1,045,601

Note: Non-current assets are classified based on the location of the assets.
(5) Information on major customers
This information is omitted because no customer accounted for 10% or more of revenue to external customers in the
consolidated statements of profit or loss.

7. Cash and cash equivalents

Cash and cash equivalents comprise cash and deposits. The balances of “cash and cash equivalents” in the statements of financial
position as of the transition date and the end of FY2015 and FY2016 equal the balances of “cash and cash equivalents”
presented in the corresponding consolidated statements of cash flows.

8. Trade and other receivables

The breakdown of trade and other receivables is as follows:
Thousands of
U.S. dollars

Millions of yen

Trade notes and accounts receivable
Other
Allowance for doubtful accounts
Total

Transition date
FY2015FY2016(As of March 31, 2017) (As of March 31, 2016)(April 1, 2015)¥28,950¥28,374¥30,183
1,443
1,186
955
(193)
(173)
(211)
¥30,201¥29,387¥30,928

FY2016(As of March 31, 2017)$252,910
10,571(1,542)$261,939

9. Inventories

The breakdown of inventories is as follows:
Thousands of
U.S. dollars

Millions of yen

Transition date
FY2015FY2016FY2016(As of March 31, 2017) (As of March 31, 2016)(As of March 31, 2017)(April 1, 2015)
Merchandise and finished goods¥26,474¥30,474¥27,281$271,628
Work in process
1,144
1,001
1,080
8,922
Raw materials and supplies
4,809
5,021
4,715
44,754
Total¥32,429¥36,497¥33,077$325,314
Note: The amounts of inventory write-down recognized as expense for FY2015 and FY2016 are 13 million yen and 766 million
yen (6,827 thousand dollars), respectively. These amounts are included in “Cost of sales” in the consolidated statements ofprofit or loss.

10. Assets held for sale

The breakdown of assets held for sale is as follows:
Thousands of
U.S. dollars

Millions of yen

Transition date
(April 1, 2015)

FY2016(As of March 31, 2017)

FY2015(As of March 31, 2016)

FY2016(As of March 31, 2017)

Assets held for sale
Other financial assets
¥—
¥772
¥—
$6,881
Total
¥—
¥772
¥—
$6,881
Note: As the Company made a decision to sell its investment in an entity located in China, the assets associated with theinvestment were reclassified to assets held for sale in FY2016. The fair value of those assets are based on a selling priceprovided by the sales agreement and is classified as Level 3 of the fair value hierarchy.

Kureha Corporation Business Report 201749

11. Property, plant and equipment(1) Changes in carrying amount, cost, and accumulated depreciation and accumulated impairment losses
Carrying amountMillions of yen

Balance as of the transition date (April 1, 2015)
Acquisitions
Disposals
Depreciation
Impairment loss
Exchange rate differences
Other changes
Balance as of the end of FY2015 (March 31, 2016)
Acquisitions
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of the end of FY2016 (March 31, 2017)

Buildings andstructures

Machinery,equipment
and vehicles

Land¥41,335
6,719(283)(2,876)
(799)
(463)
(42)
¥43,589
3,429(19)(2,919)(805)(2,940)(206)(58)¥40,070¥49,569
13,307(233)(5,730)(3,107)(1,660)
11¥52,156
6,122(55)(5,629)(489)(3,746)(603)
49¥47,802¥18,134
63
(88)
—
—
(3)
(6)
¥18,099
50
(0)
—
(269)
—
(10)
(5)
¥17,864

Constructionin progress¥18,427(11,116)
(75)
—
—
(239)
—
¥6,996
(243)
—
—
—
—
(1)
0
¥ 6,752

Other¥3,4852,165(14)(1,324)
(115)
(51)
0
¥4,144792(11)(1,226)
(8)
(223)
(36)
(8)
¥3,421

Total¥130,952
11,139(695)(9,932)(4,022)(2,418)(36)¥124,987
10,151(87)(9,775)(1,572)(6,910)(858)(22)¥115,911

Thousands of U.S. dollars

Balance as of the end of FY2015 (March 31, 2016)
Acquisitions
Disposals
Depreciation
Impairment loss
Direct deduction due to government grants
Exchange rate differences
Other changes
Balance as of the end of FY2016 (March 31, 2017)

Buildings andstructures

Machinery,equipment
and vehicles

Land

Constructionin progress$388,528
30,564(169)(26,018)(7,175)(26,205)(1,836)(516)$357,161$464,889
54,568(490)(50,173)(4,358)(33,389)(5,374)436$426,080$161,324445(0)—(2,397)—(89)(44)$159,229$62,358(2,165)
—
—
—
—
(8)
0
$60,183

Other

Total

$36,937 $1,114,065
7,059
90,480(98)(775)(10,927)(87,128)(71)(14,011)(1,987)(61,591)(320)(7,647)(71)(196)$30,492 $1,033,166

Notes: 1.	Depreciation is recorded in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated
statements of profit or loss.
2.	Impairment loss is recorded in “Other expenses” in the consolidated statements of profit or loss. See the section
entitled 13. Impairment of non-financial assets” for further details on impairment.
3.	The line item “Acquisitions” above includes transfers from construction in progress to items of property, plant andequipment.

50 Kureha Corporation Business Report 2017

Cost
Millions of yen

Balance as of the transition date (April 1, 2015)
Balance as of the end of FY2015 (March 31, 2016)
Balance as of the end of FY2016 (March 31, 2017)

Buildings andstructures

Machinery,equipment
and vehicles

Land

Constructionin progress

Other

Total

¥ 98,082¥103,061¥102,705¥158,207¥166,250¥165,649¥18,471¥18,425¥18,459¥18,427¥ 6,996¥ 6,752¥15,685¥16,648¥16,411¥308,874¥311,382¥309,979

Buildings andstructures

Machinery,equipment
and vehicles

Other

Total

Thousands of U.S. dollars

Balance as of the end of FY2016 (March 31, 2017)$915,455 $1,476,504

LandConstructionin progress$164,533$60,183$146,278 $2,762,982

Accumulated depreciation and accumulated impairment losses
Millions of yen

Balance as of the transition date (April 1, 2015)
Balance as of the end of FY2015 (March 31, 2016)
Balance as of the end of FY2016 (March 31, 2017)

Buildings andstructures

Machinery,equipment
and vehicles¥56,746¥59,471¥62,635¥108,638¥114,093¥117,847

Land

Other

Total

¥12,200¥12,503¥12,989¥177,922¥186,395¥194,067

Land

Other

Total

$5,294$115,776 $1,729,806

¥337
¥325
¥594

Thousands of U.S. dollars
Buildings andstructures

Balance as of the end of FY2016 (March 31, 2017)

Machinery,equipment
and vehicles$558,293 $1,050,423(2) Government grants that were directly deducted from the cost of fixed assets (by applying reduction entry to fixed
assets) are as follows:
Millions of yen

Thousands of
U.S. dollars

Transition date
FY2015FY2016FY2016(As of March 31, 2017) (As of March 31, 2016)(As of March 31, 2017)(April 1, 2015)
Amount subject to reduction entry¥305¥7,215¥305$64,310
Note: The amount subject to reduction entry for FY2016 represents direct deduction of subsidy from the carrying amounts ofbuilding, machinery and equipment, etc. related to Fukushima Business Investment Subsidy for Revitalization ofIndustries.
(3) Deemed cost
The Group has elected an exemption under the provisions of IFRS 1 and uses the fair value at the transition date as deemed costfor certain lands. The fair value at the transition date of the lands subject to deemed cost and their carrying amount under
J-GAAP are 10,456 million yen (93,199 thousand dollars) and 6,248 million yen (55,691 thousand dollars), respectively.

Kureha Corporation Business Report 201751

12. Intangible assets(1) Changes in carrying amount, cost, and accumulated amortization and accumulated impairment losses
Carrying amountMillions of yen
Other

SoftwareBalance as of the transition date (April 1, 2015)
Acquisitions
Disposals
Amortization
Impairment loss
Exchange rate differences
Other changes
Balance as of the end of FY2015 (March 31, 2016)
Acquisitions
Disposals
Amortization
Exchange rate differences
Other changes
Balance as of the end of FY2016 (March 31, 2017)

¥870
282
(2)
(294)
(1)
(2)
0
¥851
152
(2)
(308)
(1)
(0)
¥692

¥954
0
(0)
(106)
—
(33)
0
¥814
1
(1)
(107)
(8)
4
¥703
Thousands of U.S. dollars
Other

SoftwareBalance as of the end of FY2015 (March 31, 2016)
Acquisitions
Disposals
Amortization
Exchange rate differences
Other changes
Balance as of the end of FY2016 (March 31, 2017)

Total$7,5851,354(17)(2,745)(8)(0)$6,168¥1,825
282
(3)
(401)
(1)
(35)
0
¥1,666
153
(3)
(415)
(9)
4
¥1,395
Total$7,255
8
(8)
(953)
(71)
35
$6,266$14,849
1,363(26)(3,699)(80)
35$12,434

Notes: 1.	Amortization of intangible assets is recorded in “Cost of sales” and “Selling, general and administrative expenses” inthe consolidated statements of profit or loss.
2.	The line item “Acquisitions” above mainly represents the amounts of intangible assets purchased from external parties.
Cost
Millions of yen
Other

SoftwareBalance as of the transition date (April 1, 2015)
Balance as of the end of FY2015 (March 31, 2016)
Balance as of the end of FY2016 (March 31, 2017)¥1,669¥1,812¥1,883
SoftwareBalance as of the end of FY2016 (March 31, 2017)

52 Kureha Corporation Business Report 2017$16,784

Total¥1,163¥1,099¥1,037
Thousands of U.S. dollars
Other$9,243¥2,832¥2,911¥2,920
Total$26,027

Accumulated amortization and accumulated impairment losses
Millions of yen
Other

SoftwareBalance as of the transition date (April 1, 2015)
Balance as of the end of FY2015 (March 31, 2016)
Balance as of the end of FY2016 (March 31, 2017)¥ 798¥960¥1,191
SoftwareBalance as of the end of FY2016 (March 31, 2017)

Total

¥208
¥284
¥333

¥1,006¥1,244¥1,525

Thousands of U.S. dollars
Other$10,615

Total$2,968$13,593(2) Research and development expenses
The total amounts of expenditures for research and development recognized as expense for FY2015 and FY2016 are 4,885
million yen and 4,734 million yen (42,196 thousand dollars), respectively.

13. Impairment of non-financial assets(1) Impairment loss
The Group recognizes impairment losses when either the carrying amount of an asset or a cash-generating unit exceeds its
estimated recoverable amount.
The Group recognized impairment losses for property, plant and equipment and intangible assets for FY2015 and FY2016
in an amount of 4,024 million yen and 1,572 million yen (14,011 thousand dollars), respectively.
(2) Main events and circumstances that led to recognition of impairment losses
FY2015 (From April 1, 2015 To March 31, 2016)
Millions of yen

Segment

Purpose of use
Manufacturing
facility

Advanced Materials
Idle assets

Location
Type of assets
Iwaki, Fukushima Buildings
Structures
Machinery and equipment
Other
Iwaki, Fukushima Machinery and equipment
Other
Kasumigaura,
Machinery and equipment
IbarakiOther
Shanghai, PRC Machinery and equipment
Total

Amount
¥363
283
1,873
116
122
32
686
121
425
4,024

In principle, the Group has grouped the operating assets by business units and by company, and idle assets and assets for lease byindividual properties.
Recoverable value of an asset is the higher of its value in use and its fair value less costs of disposal. Value in use is taken as
zero because future cash flows are not expected to be derived from the assets. Fair value less costs of disposal is also taken as zero
because sale of the assets cannot be expected.
1) Advanced Materials segment
For manufacturing facility, under carbon products business in the Advanced Materials segment which was affected by the weak
demand and increasingly fierce competition, the Group conducted a thorough review and assessment of business, including its
future operating environment and projected earnings. Consequently, for the above mentioned manufacturing facility, the Groupwrote down the carrying amount of fixed assets associated with carbon products business to their recoverable value andrecognized the reduction of 2,635 million yen ($23,384 million) under other expenses. The Group applies value in use forrecoverable values.
For idle assets, since these assets in the carbon products business are not expected to be used in the future, the Group wrote
down the carrying amount of the fixed assets to their recoverable value and recognized the reduction of 1,388 million yen underother expenses. The Group applies value in use for recoverable value.

Kureha Corporation Business Report 2017

53

FY2016 (From April 1, 2016 To March 31, 2017)
Millions of yen

Segment

Purpose of use

Advanced Materials Manufacturing
facility
Specialty Chemicals Manufacturing
facility

Location

Type of assets
Buildings
Kasumigaura,
Structures
IbarakiLand
Shanghai, PRC Machinery and equipment
Buildings
Iwaki, Fukushima
OthersTotal

Amount
¥336
137
269
451
303
74
1,572

Thousands of
U.S. dollars

Amount$2,994
1,221
2,397
4,019
2,700
659
14,011

In principle, the Group has grouped the operating assets by business units and by company, and idle assets and assets for lease byindividual properties.
Recoverable value is the higher of value in use and fair value less costs of disposal. Value in use is the present value of future
cash flows calculated by using pre-tax weighted average cost of capital (between 3% and 13%) of a cash-generating unit. If
future cash flows are not expected to be derived from a cash-generating unit, the value in use is taken as zero. Fair value less costsof disposal is evaluated either by the estimated disposal amount or the amount reasonably calculated based on assessed values of
fixed assets for property tax, and it is taken as zero when sale cannot be expected.
1) Advanced Materials segment
For manufacturing facility in Kasumigaura City, Ibaraki Prefecture, after reviewing the future operating environment andprojected earnings following the change in the expected use of the facilities associated with restructuring of resin processing
systems in the advanced plastics business, the Group wrote down the carrying amount of fixed assets associated with theadvanced plastics business to their recoverable value and recognized the reduction of 743 million yen (6,622 thousand dollars)
under other expenses. In addition, the Group applies value in use for recoverable value, which is calculated as 567 million yen(5,053 thousand dollars).
For manufacturing facility in Shanghai City, PRC, under carbon products business in the Advanced Materials segment
which was affected by the weak demand and increasingly fierce competition, the Group conducted a thorough review andassessment of business, including its future operating environment and projected earnings. Consequently, for the above
mentioned manufacturing facility, the Group wrote down the carrying amount of fixed assets associated with carbon products
business to their recoverable value and recognized the reduction of 451 million yen (4,019 thousand dollars) as other expenses.
In addition, the Group applies value in use for recoverable value, which is calculated as 996 million yen (8,877 thousand
dollars).
2) Specialty Chemicals segment
For manufacturing facility in Iwaki City, Fukushima Prefecture, after reviewing the future operating environment and projected
earnings following the change in the expected use of the facilities associated with discontinuance of some production in thepharmaceuticals business, the Group wrote down the carrying amount of fixed assets associated with the pharmaceuticals
business to their recoverable value and recognized the reduction of 378 million yen under other expenses. In addition, theGroup applies value in use for recoverable value, which is calculated as zero.

14. Investments accounted for using the equity method(1) The aggregate carrying amounts of the Group’s interests in individually immaterial affiliates and joint ventures are as follows:
Thousands of
U.S. dollars

Millions of yen

Joint ventures
Affiliates

54 Kureha Corporation Business Report 2017

Transition date
(April 1, 2015)¥7,7283,211

FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥8,1242,590¥7,5082,885$72,41223,085

(2) T he aggregate amounts of profit for the year, other comprehensive income and comprehensive income of individually
immaterial affiliates and joint venture that are adjusted to reflect the portion of ownership interests are as follows:
Joint ventures
Millions of yen

FY2016(From April 1, 2016
to March 31, 2017)

Profit for the year
Other comprehensive income
Comprehensive income

Thousands of
U.S. dollars

FY2015FY2016(From April 1, 2015
to March 31, 2016)(From April 1, 2016
to March 31, 2017)¥1,539(499)
1,040¥1,357(10)
1,347$12,095(89)
12,006

Affiliates
Millions of yen

FY2016(From April 1, 2016
to March 31, 2017)

Profit for the year
Other comprehensive income
Comprehensive income

Thousands of
U.S. dollars

FY2015FY2016(From April 1, 2015
to March 31, 2016)(From April 1, 2016
to March 31, 2017)

¥167
(317)
(150)

¥261
(189)
72

$2,326(1,684)641

15. Income taxes(1) Breakdown of deferred tax assets and deferred tax liabilities
The breakdown of deferred tax assets and deferred tax liabilities by major cause and the details of changes are as follows:
Transition date
(April 1, 2015)

Deferred tax assets
Tax loss carryforwards
Provisions
Unrealized gain on fixed assets
Impairment loss
Amount in excess of allowed depreciation limit
Inventory valuation loss
Other
Subtotal
Deferred tax liabilities
Accelerated depreciation and amortization offoreign operations
Financial assets measured at fair value throughother comprehensive income
Deemed cost
Net defined benefit assets
Other
Subtotal
Net amountMillions of yen
Amount recognized in
Amount recognized inother comprehensive
profit or loss
incomeFY2015(As of March 31, 2016)¥6,536
2,054
1,824
53
616
453
2,970
14,509¥(262)
(190)
(113)
983
(54)
53
(719)
(302)

¥—
—
—
—
—
—
3
3

¥6,273
1,863
1,711
1,037
562
506
2,254
14,210(6,720)352—(6,368)(4,460)(2,316)(1,000)(704)(15,202)¥(693)

—
116
(254)
28
242
¥(60)

1,202
—
369
—
1,571
¥1,575(3,258)(2,200)(885)(676)(13,389)¥821

Note: Difference between the amount recognized in profit or loss and total deferred tax expenses is mainly due to exchange rate
fluctuations.

Kureha Corporation Business Report 201755

FY2016(As of April 1, 2016)

Deferred tax assets
Tax loss carryforwards
Provisions
Unrealized gain on fixed assets
Impairment loss
Amount in excess of allowed depreciation limit
Loss on valuation of inventories
Other
Subtotal
Deferred tax liabilities
Accelerated depreciation and amortization offoreign operations
Financial assets measured at fair value throughother comprehensive income
Deemed cost
Net defined benefit assets
Other
Subtotal
Net amountMillions of yen
Amount recognized in
Amount recognized inother comprehensive
FY2016
profit or loss
income(As of March 31, 2017)¥6,273
1,863
1,711
1,037
562
506
2,254
14,210¥(492)
(70)
26
115
45
297
504
427

¥—
—
—
—
—
—
(20)
(20)

¥ 5,781
1,793
1,737
1,153
607
804
2,739
14,617(6,368)(233)—(6,601)(3,258)(2,200)(885)(676)(13,389)
¥821

—
—
(300)
156
(377)
¥50

(928)
—
(65)
—
(994)
¥(1,014)(4,187)(2,200)(1,252)(519)(14,760)¥ (142)

Note: A difference between the amount recognized in profit or loss and total deferred tax expenses is due to exchange rate
fluctuations.

FY2016(As of April 1, 2016)

Deferred tax assets
Tax loss carryforwards
Provisions
Unrealized gain on fixed assets
Impairment loss
Amount in excess of allowed depreciation limit
Loss on valuation of inventories
Other
Subtotal
Deferred tax liabilities
Accelerated depreciation and amortization offoreign operations
Financial assets measured at fair value throughother comprehensive income
Deemed cost
Net defined benefit assets
Other
Subtotal
Net amount

56 Kureha Corporation Business Report 2017

Thousands of U.S. dollars
Amount recognized in
Amount recognized inother comprehensive
FY2016
profit or loss
income(As of March 31, 2017)$55,914
16,605
15,250
9,243
5,009
4,510
20,090126,660$(4,385)
(623)
231
1,025
401
2,647
4,492
3,806

$—
—
—
—
—
—
(178)
(178)

$ 51,528
15,981
15,482
10,277
5,410
7,166
24,413130,287(56,760)(2,076)—(58,837)(29,040)(19,609)(7,888)(6,025)(119,342)$7,317——(2,674)
1,390(3,360)$445(8,271)—(579)—(8,859)$(9,038)(37,320)(19,609)(11,159)(4,626)(131,562)$ (1,265)

(2) Deductible temporary differences, etc. for which deferred tax assets are not recognized
Deductible temporary differences and tax loss carryforwards for which deferred tax assets were not recognized are as follows:
Thousands of
U.S. dollars

Millions of yen

Deductible temporary differences
Tax loss carryforwards
Total

Transition date
FY2016FY2015FY2016(April 1, 2015)(As of March 31, 2017) (As of March 31, 2016) (As of March 31, 2017)¥6,867¥6,875¥8,407$61,279
3,449
3,008
3,987
26,811¥10,316¥9,884¥12,394$88,100

Note: The breakdown by expiry date of tax loss carryforwards for which deferred tax assets were not recognized is as follows:
Thousands of
U.S. dollars

Millions of yen

Due in one year or lessDue after one year through fiveyears
Due after five years
Total

Transition date
FY2016FY2015FY2016(April 1, 2015)(As of March 31, 2017) (As of March 31, 2016) (As of March 31, 2017)¥—¥ 706¥—$ 6,292
1,931
1,518
¥3,4493,987—¥3,9872,301—¥3,00820,509—$26,811(3) Temporary differences arising from investments in subsidiaries for which deferred tax liabilities were not recognizedNot applicable.
(4) Income tax expense
The breakdown of income tax expense is as follows:

FY2016

Millions of yen(From April 1, 2016
to March 31, 2017)

Current tax expense
Deferred tax expense
Total¥1,921(47)¥1,874

Thousands of
U.S. dollars

FY2015FY2016(From April 1, 2015
to March 31, 2016)(From April 1, 2016
to March 31, 2017)¥1,73923¥1,762$17,122(418)$16,703(5) Reconciliation of statutory effective tax rate and actual tax rate
The reconciliation of the statutory effective tax rate and actual tax rate is as follows. The actual tax rate represents the ratio ofincome tax expense to profit before tax.
FY2016(From April 1, 2016
to March 31, 2017)

Statutory effective tax rate
Permanently non-deductible items such as entertainment expenses
Permanently non-taxable items such as dividend income
Tax credit on research expense
Effect of unrecognized tax loss carryforwards or temporary differences
Adjustment of ending balance of deferred tax assets due to changes in tax rates
Other
Actual tax rate

30.69%
1.14%(0.37)%(6.71)%(8.22)%
0.13%
4.21%
20.87%FY2015(From April 1, 2015
to March 31, 2016)32.83%
1.61%(0.66)%(14.91)%
3.49%
0.60%
3.82%
26.78%

Note: The Group is subject mainly to income tax, inhabitant tax and enterprise tax, based on which the statutory effective tax
rate above is calculated. The Group’s foreign operations are subject to income and other taxes at their respective locations.

Kureha Corporation Business Report 201757

(6) Adjustment of the amounts of deferred tax assets and deferred tax liabilities due to a change in income tax rates
The “Act, etc. for Partial Amendment of the Act for Partial Amendment of the Consumption Tax Act for the Drastic Reform of
the Taxation System for Ensuring, etc. Stable Financial Resources for Social Security” and the “Act for Partial Amendment of theAct, etc. for Partial Amendment of the Local Tax Act, the Local Allocation Tax Act for the Drastic Reform of the Taxation
System for Ensuring, etc. Stable Financial Resources for Social Security” were passed by the Diet on November 18, 2016. As aresult, the statutory effective tax rate used to calculate the Group’s deferred tax assets and deferred tax liabilities for FY2016 has
been changed from the prior fiscal year’s rate.
The impact of this change on the tax rate is immaterial.

16. Assets pledged as collateral and secured obligations

Assets pledged as collateral and obligations with pledged assets are as follows:(1) Assets pledged as collateralThousands of
U.S. dollars

Millions of yen

Property, plant and equipment
Other financial assets
Total

Transition date
(April 1, 2015)¥43,119
4,998¥48,117

FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥42,183
947¥43,130¥43,192
6,449¥49,641$375,996
8,441$384,437(2) Obligations with pledged assets
Thousands of
U.S. dollars

Millions of yen

Trade and other payables
Loans payable
Other financial liabilities
Total
Current liabilities
Non-current liabilities

Transition date
(April 1, 2015)
¥ 502
1,101
331
1,936
906
¥1,029FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)

¥ 785
582
295
1,663
927
¥ 736

¥ 493
819
312
1,625
710
¥ 915

$ 6,997
5,187
2,629
14,823
8,262$ 6,560

17. Trade and other payables

The breakdown of trade and other payables is as follows:
Thousands of
U.S. dollars

Millions of yen

Trade notes and accounts payable
Other
Total

58 Kureha Corporation Business Report 2017

Transition date
(April 1, 2015)¥13,976
7,198¥21,174

FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥15,014
5,355¥20,369¥14,114
5,703¥19,817$133,826
47,731$181,558

18. Provisions

The breakdown of provisions and the details of changes are as follows:
Millions of yen
Provision for
employee benefits(Note)

Balance as of the transition date (April 1, 2015)
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of the end of FY2015 (March 31, 2016)
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of the end of FY2016 (March 31, 2017)

Other¥5,731
4,175(4,253)
—
(9)
5,643
4,019
(4,088)—(9)¥5,564

Total

¥890
251
(453)
(7)
—
682
297
(414)
(1)
—
¥563

¥6,6224,426(4,706)
(7)
(9)
6,325
4,316
(4,503)(1)(9)¥6,128

Thousands of U.S. dollars
Provision for
employee benefits(Note)

Balance as of the end of FY2015 (March 31, 2016)
Increases during the period
Decreases during the period (provisions used)
Decreases during the period (provisions reversed)
Exchange rate differences
Balance as of the end of FY2016 (March 31, 2017)$50,298
35,823(36,438)—(80)$49,594

Other

Total

$6,078
2,647(3,690)(8)—$5,018

Thousands of
U.S. dollars

Millions of yen

Current liabilities
Non-current liabilities
Total

Transition date
(April 1, 2015)¥5,953669¥6,622FY2016$56,377
38,470(40,137)(8)(80)$54,621

FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥5,742386¥6,128¥5,835490¥6,325$51,1813,440$54,621

Note:Provision for employee benefits represent an estimated amount of expenditures for costs associated mainly with unused
paid leaves and bonuses. The expected timing of any resulting outflows of economic benefits is mostly within one year
from the end of each fiscal year.

19. Employee benefits

The Company and certain consolidated subsidiaries have adopted the funded and unfunded defined benefit plans and defined
contribution plans to provide for retirement benefits to the employees.
(1) Defined benefit plan
The defined benefit plans adopted by the Group mainly consists of defined benefit corporate pension plans and lump-sum
retirement benefit plans.
The Group’s defined benefit corporate pension plan is a contract-type corporate pension plan managed under a cash balanceplan. Under the plan, each participant is given a hypothetical individual account to record their funded amount which will be
the source of pension payment. Interest credit based on the market interest rate trends and contribution credit based primarily
on a level of compensation are the two main items accumulated in the hypothetical individual account. Certain consolidated
subsidiaries make lump-sum or pension payments based on the amount of salary and the lengths of service.
Kureha Corporation Business Report 201759

Under the contract-type corporate pension plan, plan assets management is entrusted to asset management institutions inaccordance with the defined benefit corporate pension regulations agreed between labor and management. In addition, theGroup abides by the rules provided under the Defined-Benefit Corporate Pension Law that requires recalculation of the amountof contribution at least every five years to maintain the plan’s funded status into the future.
Under the lump-sum retirement benefit plan, lump-sum payment is made based on the amount of salary and the lengths ofservice.
(2) Amounts related to defined benefit plans reported in the consolidated financial statements
1) Amounts recognized in the consolidated statements of financial position
The amounts recognized in the consolidated statements of financial position are as follows:
Millions of yen

Transition date
(April 1, 2015)
Present value of defined benefit obligations under funded plans(with plan assets)
Fair value of plan assets
Funded status
Present value of defined benefit obligations under unfundedplans (without plan assets)
Net amount of liability and asset recognized in the
consolidated statements of financial position
Net defined benefit liability
Net defined benefit asset

FY2016FY2015(As of March 31, 2017)(As of March 31, 2016)¥21,195(23,407)(2,211)¥21,999(25,696)(3,697)¥22,339(24,611)(2,272)

290

251

274

(1,921)(3,446)(1,997)557¥2,478382¥3,829434¥2,431

Note: Net defined benefit asset is recorded under “Other non-current assets” in the consolidated statement of financial position.
Thousands of
U.S. dollars

FY2016(As of March 31, 2017)

Present value of defined benefit obligations under funded plans (with plan assets)
Fair value of plan assets
Funded status
Present value of defined benefit obligations under unfunded plans (without plan assets)
Net defined benefit liability (asset) recognized in the consolidated statements of financial position
Net defined benefit liability
Net defined benefit asset$196,086(229,040)(32,953)
2,237(30,715)3,404$34,129

Note: Net defined benefit asset is recorded under “Other non-current assets” in the consolidated statement of financial position.
2) Amounts recognized in the consolidated statements of profit or loss
The amounts of defined benefit cost recognized in the consolidated statements of profit or loss are as follows:
FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

Service cost
Net interest
Total defined benefit cost

FY2015(From April 1, 2015
To March 31, 2016)¥1,182(4)¥1,178

Note: Defined benefit cost is recorded under “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statements of profit or loss.

60 Kureha Corporation Business Report 2017

¥1,132(34)¥1,098

Thousands of
U.S. dollars

FY2016(From April 1, 2016
To March 31, 2017)

Service cost
Net interest
Total defined benefit cost

$10,535(35)$10,500

Note: Defined benefit cost is recorded under “Cost of sales” and “Selling, general and administrative expenses” in the
consolidated statements of profit or loss.
3) Changes in the present value of defined benefit obligations
Changes in the present value of defined benefit obligations are as follows:
FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

Present value of defined benefit obligations (beginning of the year)
Service cost
Interest cost
Benefits paid
Remeasurements(i) Actuarial differences arising from changes in demographical assumptions(ii) Actuarial differences arising from changes in financial assumptions(iii) Other adjustments to actual results
Exchange rate differences
Present value of defined benefit obligations (end of the year) (Note)¥22,6131,182
118(1,552)
(86)
—
(200)
114
(25)
¥22,250

FY2015(From April 1, 2015
To March 31, 2016)¥21,4851,132
243(1,517)
1,279
(6)
1,279
5
(9)
¥22,613

Note: The weighted average duration of defined benefit obligations for FY2015 and FY2016 were 10.0 years and 10.3 years,
respectively.
Thousands of
U.S. dollars

FY2016(From April 1, 2016
To March 31, 2017)

Present value of defined benefit obligations (beginning of the year)
Service cost
Interest cost
Benefits paid
Remeasurements(i) Actuarial differences arising from changes in demographical assumptions(ii) Actuarial differences arising from changes in financial assumptions(iii) Other adjustments to actual results
Exchange rate differences
Present value of defined benefit obligations (end of the year) (Note)$201,559
10,535
1,051(13,833)(766)—(1,782)
1,016(222)$198,324

Note: The weighted average duration of defined benefit obligations for FY2015 and FY2016 were 10.0 years and 10.3 years,
respectively.
4) Fair value of plan assets
The Group’s investment policy is designed to ensure the total return in a long term to fund for the stable payments of pension
benefits and lump-sum payments into the future.
Accordingly, taking into account the maturity and financial position of the Group by giving consideration to expected rate of
return from fundamental investment assets, standard deviation of the rate of return, and the correlation coefficient of these rates,
the Group formulates a strategic asset mix ratio from a mid-to-long term standpoint, which is considered as an optimal portfolio
on a long-term basis. The Group reviews the investment policy as necessary and provides comprehensive management over its
assets and liabilities.
Kureha Corporation Business Report 2017

61

The Group manages risks appropriately through diversified asset management by investing in multiple asset classes andfunds that have different risk and return characteristics, thereby balancing the risk exposure.
Changes in fair value of plan assets are as follows:
FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

Fair value of plan assets (beginning of the year)
Interest income
Return on plan assets
Contributions by the employer (Note)
Benefits paid
Exchange rate differences
Fair value of plan assets (end of the year)¥24,611
122
189
2,254
(1,461)(19)¥25,696

FY2015(From April 1, 2015
To March 31, 2016)¥23,407
277
96
2,261
(1,426)(5)¥24,611

Note: Expected contribution for the year ending March 31, 2018 is 1,917 million yen.
Thousands of
U.S. dollars

FY2016(From April 1, 2016
To March 31, 2017)

Fair value of plan assets (beginning of the year)
Interest income
Return on plan assets
Contributions by the employer (Note)
Benefits paid
Exchange rate differences
Fair value of plan assets (end of the year)$219,368
1,087
1,684
20,090(13,022)(169)$229,040

Note: Expected contribution for the year ending March 31, 2018 is 17,087 thousand dollars.
5) The breakdown of the fair value of plan assets
The breakdown of the fair value of plan assets are as follows:
Millions of yen

Bonds
StocksGeneral accounts of life insurance companies
Other
Total

62 Kureha Corporation Business Report 2017

Transition date
(April 1, 2015)
Quoted market pricein an active market
Not
Available
available¥14,352
¥—
5,644
—
—
3,102
—
307
¥19,997¥3,410FY2016(As of March 31, 2017)
Quoted market pricein an active market
Not
Available
available¥15,908
¥—
4,932
—
—
4,344
—
511
¥20,840¥4,855

FY2015(As of March 31, 2016)
Quoted market pricein an active market
Not
Available
available¥15,526
¥—
5,146
—
—
3,527
—
410
¥20,672¥3,938

Thousands of U.S. dollars

FY2016(As of March 31, 2017)
Quoted market pricein an active market
Not
Available
available$141,795$—43,961——
38,720—4,554$185,756$43,274

Bonds
StocksGeneral accounts of life insurance companies
Other
Total
6) Major assumptions used for actuarial calculations
Major assumptions used for actuarial calculations are as follows:

Discount rate (weighted average)

Transition date
(April 1, 2015)
1.1%

FY2016FY2015(As of March 31, 2017)(As of March 31, 2016)

0.6%

0.5%

7) Sensitivity analysis
Effects on defined benefit obligations due to changes in actuarial assumptions are as follows:
Sensitivity analysis is performed by applying the same method used to calculate defined benefit obligations recognized in the
consolidated statements of financial position, based on the change in assumption that can be reasonably estimated at the end of
the reporting period. Under the analysis, all other variables are assumed to remain constant.
Millions of yen

0.5% increase in discount rate
0.5% decrease in discount rate

Transition date
(April 1, 2015)¥(954)
954

FY2016FY2015(As of March 31, 2017)(As of March 31, 2016)¥(1,114)
1,114¥(1,031)
1,031
Thousands of
U.S. dollars

FY2016(As of March 31, 2017)0.5% increase in discount rate
0.5% decrease in discount rate$(9,929)9,929(3) Defined contribution plan
Amounts of contribution to the defined contribution plan recognized as expenses for FY2015 and FY2016 were 2,014 million
yen and 2,025 million yen (18,049 thousand dollars), respectively. The amounts are recorded under “Cost of sales” and “Selling,
general and administrative expenses” in the consolidated statements of profit or loss.
(4) Employee benefit expenses
Total employee benefit expenses excluding the above items for FY2015 and FY2016 were 30,544 million yen and 29,200
million yen (260,272 thousand dollars), respectively. The amounts are recorded under “Cost of sales” and “Selling, general andadministrative expenses” in the consolidated statements of profit or loss.

Kureha Corporation Business Report 201763

20. Share-based payments

The Company conducted a ten-to-one share consolidation on October 1, 2016. The number of shares, fair value, share prices,and expected dividends were adjusted accordingly.
(1) Details of share-based payment plan
The Company has a stock option plan that grants rights to its directors (excluding outside directors) to purchase the Company’s
shares. The plan is accounted for as an equity-settled share-based payment plan.
The Company’s stock option plan outstanding as at the transition date and in FY2015 and FY2016 are as follows:
Date of resolution

Number of shares
granted (shares)
Grant date
Fair value at grant
date (yen)Fair value at grant
date (U.S. dollar)
Vesting condition
Expiry date
Shares outstanding
as of thetransition date
Shares outstanding
as of the end of
FY2015
Shares outstanding
as of the end of
FY2016
Date of resolution

Number of shares
grantedGrant date
Fair value at grant
date (Yen)Fair value at grant
date (U.S. dollar)
Vesting condition
Expiry date
Shares outstanding
as of thetransition date
Shares outstanding
as of the end of
FY2015
Shares outstanding
as of the end of
FY2016

June 27, 2007

June 26, 2008

June 25, 2009

June 25, 2010

June 24, 2011

June 26, 2012

4,750
July 18, 2007

4,940
July 23, 2008

5,550
July 22, 2009

5,530
July 21, 2010

5,660
July 20, 2011

7,650
July 18, 2012

5,510

5,660

4,870

4,060

3,600

2,780

49.11
Continued service
from June 27,
2007 to June 26,
2008 (Note)
July 17, 2037

50.45
Continued service
from June 26,
2008 to June 25,2009 (Note)
July 22, 2038

43.40
Continued service
from June 25,2009 to June 24,2010 (Note)
July 21, 2039

36.18
Continued service
from June 25,2010 to June 24,2011 (Note)
July 20, 2040

32.08
Continued service
from June 24,2011 to June 23,
2012 (Note)
July 19, 2041

24.77
Continued service
from June 26,
2012 to June 25,2013 (Note)
July 17, 2042

430

440

1,700

1,860

2,120

4,000

—

—

1,060

1,160

1,320

2,140

—

—

1,060

1,160

1,320

2,140

June 25, 2013

June 25, 2014

June 24, 2015

June 24, 2016

Total

5,670
July 17, 2013

3,390
July 16, 2014

3,410
July 22, 2015

4,050
July 20, 2016

50,600
—

2,890

5,060

4,260

3,680

—

25.75
Continued service
from June 25,2013 to June 24,2014 (Note)
July 16,2043

45.10
Continued service
from June 25,2014 to June 24,2015 (Note)
July 15, 2044

37.97
Continued service
from June 24,2015 to June 23,
2016 (Note)
July 21, 2045

32.80
Continued service
from June 24,2016 to June 23,2017 (Note)
July 19, 2046

—

5,670

3,390

—

—

19,610

3,060

1,870

3,410

—

14,020

3,060

1,870

3,410

4,050

18,070——Note: If a director retires during the vesting period, exercisable stock acquisition rights will decrease in accordance with thedirector’s service period.

64 Kureha Corporation Business Report 2017

(2) Number of outstanding stock options and weighted average exercise price
FY2015FY2016

Number of options(shares)

FY2016(From April 1, 2015
To March 31, 2016)(From April 1, 2016
To March 31, 2017)
Weighted average
exercise price (yen)Number of options(shares)

Weighted average
exercise price (yen)(From April 1, 2016
To March 31, 2017)
Weighted average
exercise price(U.S. dollar)

Outstanding at the beginning of
14,0201
19,6101
0.00
the year
Granted
4,050
1
3,410
1
0.00
Exercised——(9,000)1—
Outstanding at the end of the year
18,0701
14,0201
0.00
Exercisable at the end of the year
—
—
—
—
—
Notes: 1.	For stock options exercised during the period, the weighted average share price as of the exercise date was 4,930 yen
for FY2015.
2.	Weighted average fair value of stock options outstanding at the end of FY2015 and FY2016 were 3,809 yen and 3,780
yen (33.69 dollars), respectively. Weighted average contractual life remaining for FY2015 and FY2016 were 26.7 years
and 26.4 years, respectively.
(3) Expenses in relation to stock options are as follows:
Millions of yen

FY2016

Selling, general and administrative expenses(From April 1, 2016
To March 31, 2017)¥14

Thousands of
U.S. dollars

FY2015(From April 1, 2015
To March 31, 2016)¥15

FY2016(From April 1, 2016
To March 31, 2017)$124(4) Fair value of stock options granted were calculated as follows:

FY2016FY2015(As of March 31, 2017)(As of March 31, 2016)
Expected volatility (Note 1)
29.0%
29.1%
Expected remaining life (Note 2)
3.0 years
4.0 years
110 yen/share (0.98
Expected dividend (Note 3)
120 yen/share
dollar/share)
Risk-free rate (Note 4)(0.33)%
0.05%
Notes: 1.	Expected volatility for FY2015 and FY2016 are calculated using the actual share price over a period of four years (fromJuly 2011 to July 2015) and three years (from July 2013 to July 2016), respectively.
2.	Expected retirement date used in the computation is estimated based on the average service period.
3.	Expected dividend for FY2015 and FY2016 are calculated based on the actual annual dividend amounts for the year
ended March 2015 and March 2016, respectively.
4.	Risk-free rates are calculated by linear interpolation between spot rates of separated principal component of JGBs witha maturity corresponding to the expected remaining life.

Kureha Corporation Business Report 201765

21. Paid-in capital and other equity items(1) Numbers of authorized shares and issued (and fully paid) shares
Changes in the numbers of authorized shares and issued shares are as follows:
FY2016

Number of authorized shares
Common stock
Number of issued shares
Balance as of the beginning of the year
Increases during the year
Decreases during the year (Note 2)
Balance as of the end of the year

Shares

FY2015(From April 1, 2016
To March 31, 2017)(From April 1, 2015
To March 31, 2016)

60,000,000

600,000,000

181,683,909—
163,515,519
18,168,390

181,683,909——
181,683,909

Notes: 1.	All of the shares issued by the Company are shares of common stock with no par value and no limits to any rights ofthe shareholders.
2.	Decreases during the current fiscal year were due to the share consolidation.
(2) Treasury stock
Changes in treasury stock are as follows:
FY2016

Shares(From April 1, 2016
To March 31, 2017)

Balance as of the beginning of the year
Increases during the year (Note 1)
Decreases during the year (Note 2)
Balance as of the end of the year

9,819,315
4,000
8,840,035
983,280

FY2015(From April 1, 2015
To March 31, 2016)

9,900,843
8,472
90,0009,819,315

Notes: 1.	Increases during the year were due to the purchase of shares less than one trading unit and the purchase of fractional
shares less than one share that resulted from the share consolidation. The Company conducted a ten-to-one shareconsolidation on October 1, 2016, and the major components of the 4,000 shares of the Company’s stock acquired
during FY2016 are as follows: 2,938 shares resulting from the purchase of shares less than one trading unit before theshare consolidation, 890 shares resulting from the purchase of shares less than one trading unit after the shareconsolidation, and 172 shares resulting from the purchase of fractional shares less than one share due to the shareconsolidation.
2.	Decreases during FY2015 were due to the exercise of stock option. Decreases during FY2016 were due to the shareconsolidation and sale of shares less than one trading unit.
(3) Capital surplus and retained earnings(a) Capital surplus
Under the Companies Act, 50% or more of the total amount paid in or contributed upon share issue must be recorded as sharecapital while the remaining amount must be recorded as legal capital surplus, which is a component of capital surplus. The
amount of legal capital surplus may be transferred to share capital by a resolution of a general meeting of shareholders.
(b) Retained earnings
Under the Companies Act, 10% of the amount of surplus that decreased due to distribution of surplus must be accumulates aslegal capital surplus or legal retained earnings until the aggregate amount of legal capital surplus and legal retained earnings
equals 25% of the capital stock. The amount reserved in legal retained earnings may be appropriated to compensate
accumulated deficit. It may also be reversed by a resolution of a shareholders’ meeting.
(4) Other components of equity(a) Stock acquisition rights
This amount represents the increase in equity arising from the reception or acquisition of goods or services pertaining to equitysettled share-based payment plan.
(b) Exchange differences on translating foreign operations
This amount represents exchange differences arising from translating the financial statements of foreign operations to Japaneseyen, which is the presentation currency of the Group.

66 Kureha Corporation Business Report 2017

(c) Cash flow hedges
The amount represents the fair value measurement of forward exchange contracts and interest rate swaps for future forecast
transactions.
(d) Financial assets measured at fair value through other comprehensive income
The amount represents the difference between the cost and the year-end fair value of equity instruments measured at fair value
through other comprehensive income.

22. Dividends(1) Amounts of dividends paid
Amounts of dividend paid are as follows:
FY2015 (From April 1, 2015 To March 31, 2016)

Resolution

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock¥1,116

Common stock

945

Class of shares

Board of Directors’
meeting held on April 21,
2015
Board of Directors’
meeting held on October
20, 2015

Record date

Effective date

¥6.50

March 31, 2015

June 2, 2015

5.50

September 30,
2015

December 2, 2015

FY2016 (From April 1, 2016 To March 31, 2017)
Resolution

Board of Directors’
meeting held on
April 19, 2016
Board of Directors’
meeting held on
October 18, 2016

Class of shares

Total amount of dividends(Millions(Thousands ofof yen)U.S. dollars)

Dividend per share(Yen)

Record date

Effective date

March 31,2016

June 2,
2016(U.S. dollar)

Common stock¥945$8,423

¥5.50

$0.04

Common stock

945

8,423

5.50

0.04

September 30, December 2,
2016
2016

Note: The Company conducted a ten-to-one share consolidation on October 1, 2016. Dividend per share shown above
represents the amount before the share consolidation.
(2) Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year
Dividends whose record date is in the current fiscal year but whose effective date is in the following fiscal year are as follows:
FY2015 (From April 1, 2015 To March 31, 2016)

Resolution

Board of Directors’
meeting held on
April 19, 2016

Source of dividends

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Common stock Retained earnings

¥945

¥5.50

Class of shares

Record date

Effective date

March 31,2016

June 2,2016

FY2016 (From April 1, 2016 To March 31, 2017)

Resolution

Board of Directors’
meeting held on
April 18, 2017Class ofshares

Source ofdividends

Commonstock

Retainedearnings

Total amount of dividends(Millions of (Thousands ofyen)
U.S. dollars)¥945$8,423

Dividend per share(Yen)(U.S. dollar)¥55.00$0.49

Record date

Effective date

March 31,2017

June 2,2017

Kureha Corporation Business Report 201767

23. Financial instruments(1) Capital management
In order to maintain proper capital adequacy ratio and to maximize shareholder’s value, the Group determines an appropriate
amount of dividends, acquires its own shares, grants stock acquisition rights and raises funds through debt capital and equity
capital.
The followings are the key indicators employed by the Group in managing the Group’s capital. The Group is not subject toany significant externally imposed capital requirements (except for general requirements such as those required by theCompanies Act and other laws and regulations).
Thousands of
U.S. dollars

Millions of yen

Interest-bearing debt
Less: Cash and cash equivalents
Net interest-bearing debt
Equity capital
Equity-to-asset ratio (Equity ratio)

Transition date
(April 1, 2015)¥ 88,329(7,911)80,417
118,42246.8%

FY2016FY2015FY2016(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥ 71,007(6,222)64,785
124,297
52.9%¥ 81,184(6,695)74,489118,177
49.3%$ 632,917(55,459)
577,457
1,107,915
52.9%

Note: Equity capital presented above represents total equity attributable to owners of the parent.
Equity-to-asset ratio (Equity ratio) = Equity capital / Total liabilities and equity(2) Basic policies on financial instruments
The Group uses financial instruments, mainly bank loans and bonds for the purpose of raising its necessary fund based on its
capital expenditure plan. Cash surpluses, if any, are invested only in short-term deposits, etc. Working capital for short-term
ongoing operations is procured from short-term bank loans. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described below.
(3) Description of financial instruments and associated risk
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign currencies
are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign
currencies, is hedged principally by using forward foreign currency contracts. Other financial assets such as investments
securities are equity instruments of customers and suppliers of the Group, and are exposed to the risk of market pricefluctuations. The Group also provides long-term loans to the employees.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign
currencies, partly accompanied by the import of materials, are exposed to the market risk of fluctuation in foreign currency
exchange rates, the position, net of payables in foreign currencies, is hedged principally by using forward foreign currency
contracts.
Loans payable, bonds payable and lease obligations related to finance lease are mainly used to procure necessary funds forcapital expenditure most of which carry fixed interest rates.
Derivatives mainly include forward foreign currency contracts which are used to manage exposure to risks from fluctuations
in foreign currency exchange rates of trade receivables and payables denominated in foreign currencies.
(4) Risk management structure related to financial instruments and quantitative information on risk
a. Credit risk
1) Management of risk pertaining to counterparty default
Credit risk is the risk of economic loss arising from counterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include
setting up an individual credit limit and monitoring of payment terms and balances of major customers by each businessadministration department to identify the default risk of customers at an early stage. A credit limit is changed, if necessary,
based on a periodic monitoring of customers’ financial positions. The Group mitigates the risk of receivable collection due
to deteriorating financial position by utilizing such facilities as credit insurance or factoring. In using derivatives, theGroup chooses highly creditworthy financial institutions to avoid counterparty risk.
The same method of risk control is applicable to consolidated subsidiaries.
2) Quantitative information on credit riski) Maximum exposure to credit risk
Maximum exposure to the credit risk is the sum of the carrying amounts of financial assets, net of impairment losses
presented in the consolidated statements of financial position, and the balance of guarantee obligations.
68 Kureha Corporation Business Report 2017

ii) Credit risk exposure of the Group pertaining to trade and other receivables
The credit risk exposure of the Group pertaining to trade and other receivables are as follows:
Transition date (April 1, 2015)

Days in arrears(Millions of yen)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

¥2,79200—
18¥2,811

¥—
—
—
—
—
¥—

¥28,243
436
51
58
161
¥28,950

¥ 41
—
—
—
123
¥164

Total

¥31,077
436
51
58
302
¥31,927

FY2015 (As of March 31, 2016)

Days in arrears(Millions of yen)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

¥2,286—0—
16¥2,303

¥—
—
—
—
—
¥—

¥29,484
486
26
13
173
¥30,183

¥ 35
—
—
—
91
¥127

Total

¥31,807
486
26
13
281
¥32,614

FY2016 (As of March 31, 2017)

Days in arrears

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

(Millions of yen)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets¥2,708100
11¥2,721

¥—
—
—
—
—
¥—

¥27,789
319
50
26
188
¥28,374

¥ 35
—
—
—
76
¥111

Total

¥30,533
321
50
26
275
¥31,208

Kureha Corporation Business Report 2017

69

FY2016 (As of March 31, 2017)

Days in arrears

Current
Within 30 days
Between 31 to 60 days
Between 61 to 90 days
Over 90 days
Total

(Thousands of U.S. dollars)
Financial assets for which the allowance for doubtful accounts is measured
at an amount equal to lifetime expected credit loss
Financial asset for which
Financial assets forthe allowance forwhich the allowance for
doubtful accounts is
doubtful accounts is
Financial assets foralways measured at an
measured at an amountwhich credit risk
amount equal to aequal to 12-monthincreased significantly lifetime expected credit
Credit-impaired
expected credit loss
after initial recognition
loss
financial assets$24,13780098$24,253

$—
—
—
—
—
$—

$247,695
2,843
445
231
1,675
$252,910

$311
—
—
—
677
$989

Total

$272,154
2,861
445
231
2,451
$278,170iii) Analysis of changes in allowance for doubtful accounts
The Group reviews the recoverability of trade receivables depending on the credit conditions of counterparties andrecords allowance for doubtful accounts accordingly. Changes in allowance for doubtful accounts are as follows:
FY2015 (From April 1, 2015 To March 31, 2016)

12-month expectedcredit loss

Beginning balance
Increases during the year
(allowances made)Decreases during the year
(allowances used)
Decreases during the year
(allowances reversed)
Exchange differences
Ending balance

70 Kureha Corporation Business Report 2017

(Millions of yen)
Lifetime expected credit loss
Financial asset for which
the allowance for
doubtful accounts is
Financial assets foralways measured at an
which credit risk
amount equal to aincreased significantly lifetime expected credit
after initial recognition
loss

Credit-impaired
financial assets

Total

¥—

¥—

¥ 193

¥ 136

¥ 330

—

—

218

7

226

—

—

—

(17)

(17)

—
—
¥—

—
—
¥—

(195)
(4)
¥ 211

(22)
(0)
¥ 104

(217)
(4)
¥ 316

FY2016 (From April 1, 2016 To March 31, 2017)12-month expectedcredit loss

Beginning balance
Increases during the year
(allowances made)Decreases during the year
(allowances used)
Decreases during the year
(allowances reversed)
Exchange differences
Ending balance(Millions of yen)
Lifetime expected credit loss
Financial asset for which
the allowance for
doubtful accounts is
Financial assets foralways measured at an
which credit risk
amount equal to aincreased significantly lifetime expected credit
after initial recognition
loss

Credit-impaired
financial assets

Total

¥—

¥—

¥ 211

¥104

¥ 316

—

—

172

3

175

—

—

—

(0)

(0)

—
—
¥—

—
—
¥—

(201)
(9)
¥ 173

(13)
0
¥ 94

(214)
(9)
¥ 267

FY2016 (From April 1, 2016 To March 31, 2017)12-month expectedcredit loss

Beginning balance
Increases during the year
(allowances made)Decreases during the year
(allowances used)
Decreases during the year
(allowances reversed)
Exchange differences
Ending balance(Thousands of U.S. dollars)
Lifetime expected credit loss
Financial asset for which
the allowance for
doubtful accounts is
Financial assets foralways measured at an
which credit risk
amount equal to aincreased significantly lifetime expected credit
after initial recognition
loss

Credit-impaired
financial assets

Total

$—

$—

$ 1,880$ 926$ 2,816

—

—

1,533

26

1,559

—

—

—

(0)

(0)

—
—
$—

—
—
$—

(1,791)(80)$ 1,542

(115)
0
$ 837

(1,907)(80)$ 2,379b. Liquidity risk
1) Management of liquidity risk related to fund procurement
The Group manages its liquidity risk by formulating a monthly cash flow plan and the Company manages it by using
commercial paper and commitment line.

Kureha Corporation Business Report 2017712) Quantitative information on liquidity risk
The breakdown of financial liabilities including derivative financial instruments by due date is as follows:
Transition date (April 1, 2015)

Trade and other payables
Bonds and loans payable
Other financial liabilities
Derivative liabilities
Total

Carrying
amountContractual
cash flows

Due within
one year¥ 21,174
87,4683,212
10¥111,865¥ 21,174
87,7383,212
10¥112,136¥21,174
35,2071,233
10¥57,626(Millions of yen)
Due after one Due after two Due after three Due after four
year through years through years through years through Due after five
two years
three years
four years
five years
years

¥

—
6,597
234
—
¥6,831¥—
26,038
192—¥26,231

¥

—
8,753
125
—
¥8,878

¥

—
9,771
74
—
¥9,845

¥

—
1,369
1,352
—
¥2,722FY2015 (As of March 31, 2016)

Trade and other payables
Bonds and loans payable
Other financial liabilities
Derivative liabilities
Total

Carrying
amountContractual
cash flows

Due within
one year¥ 19,817
80,3092,298
1¥102,427¥ 19,817
80,4952,298
1¥102,613¥19,81733,986763
1¥54,569(Millions of yen)
Due after one Due after two Due after three Due after four
Due after five
year through years through years through years throughyears
two years
three years
four years
five years¥—
26,123
343—¥26,467

¥

—
8,914
254
—
¥9,169

¥

—
9,944
144
—
¥10,088

¥

—
1,119
71
—
¥1,191

¥

—
407
720
—
¥1,127FY2016 (As of March 31, 2017)

Trade and other payables
Bonds and loans payable
Other financial liabilities
Derivative liabilities
Total

Carrying
amountContractual
cash flows

Due within
one year¥20,369
70,2502,127—¥92,748¥20,369
70,351
2,127—¥92,849¥20,369
46,758836—¥67,965(Millions of yen)
Due after one Due after two Due after three Due after four
Due after five
year through years through years through years throughyears
two years
three years
four years
five years

¥

—
9,831
287
—
¥10,119¥—
10,886
181—¥11,068

¥ —
1,952
102
—
¥2,054

¥ —
694
45
—
¥740

¥ —
227
673
—
¥901

FY2016 (As of March 31, 2017)

Trade and other payables
Bonds and loans payable
Other financial liabilities
Derivative liabilities
Total

72 Kureha Corporation Business Report 2017

Carrying
amountContractual
cash flows

Due within
one year$181,558
626,169
18,958—$826,704$181,558
627,070
18,958—$827,604$181,558
416,775
7,451—$605,802(Thousands of U.S. dollars)
Due after one Due after two Due after three Due after four
Due after five
year through years through years through years throughyears
two years
three years
four years
five years$—
87,6282,558—$90,195$—
97,031
1,613—$98,654$—
17,399909—$18,308

$ —
6,185
401
—
$6,595

$ —
2,023
5,998
—
$8,031

c. Market risk
1) Market risk management
The Company and certain consolidated subsidiaries manage market risk resulting from fluctuations in foreign currency
exchange rates of foreign currency trade receivables and payables, which are to be identified through management permonth and per currency. Such foreign exchange risk is hedged principally by forward foreign currency contracts.
Investment securities are managed by monitoring market values and financial position of issuers on a regular basis.
Basic principles of derivative transactions are based on the internal guidelines which prescribe the authority and the limit
for each transaction. The same principles are applicable to the consolidated subsidiaries.
2) Quantitative information on market riski) Sensitivity analysis of foreign currency risk
With regard to the foreign-currency-denominated loans payable and receivable held by the Group as of the end of
FY2015 and FY2016, the following sensitivity analysis shows an impact on profit before tax in the consolidated
statements of profit or loss of the Group, when the yen depreciates by 1% against the U.S. dollar and Chinese yuan(sensitivity to foreign currency). The analysis is based on the assumption that all other variable factors are held constant.
Item

FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

U.S. dollar
Chinese yuan

Thousands of
U.S. dollars

FY2015(From April 1, 2015
To March 31, 2016)

¥32
29

¥24
2

FY2016(From April 1, 2016
To March 31, 2017)

$213
17

ii) Sensitivity analysis of interest rate risk
With regard to the financial instruments held by the Group as of the end of FY2015 and FY2016, the following
sensitivity analysis shows an impact on profit before income taxes in the consolidated statements of profit or loss of theGroup, when the interest rate increases by 1% (sensitivity to interest rate). The analysis is based on the assumption that
all other variable factors are held constant.

Item
Effect on profit before tax

FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

Thousands of
U.S. dollars

FY2015(From April 1, 2015
To March 31, 2016)¥(170)¥(149)FY2016(From April 1, 2016
To March 31, 2017)$(1,328)iii) Sensitivity analysis of share price fluctuation risk
With regard to the listed shares held by the Group as of the end of FY2015 and FY2016, the following sensitivity
analysis shows an impact on other comprehensive income (before taking into account tax benefit) in the consolidated
statements of comprehensive income of the Group, when the share price declines by 10% (sensitivity to share price).
The analysis is based on the assumption that all other variable factors are held constant.

Item
Effect on other comprehensive income

FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)¥(2,260)

Thousands of
U.S. dollars

FY2015(From April 1, 2015
To March 31, 2016)¥(1,986)

FY2016(From April 1, 2016
To March 31, 2017)$(20,144)

Kureha Corporation Business Report 201773

(5) Fair value of financial instruments
1) Carrying amounts and fair values of financial assets and financial liabilities
Carrying amounts and fair values of financial assets and financial liabilities by class held by the Group are as follow:
Thousands of
U.S. dollars

Millions of yen

Transition date
FY2016FY2015(April 1, 2015)(As of March 31, 2017) (As of March 31, 2016)
Carrying Fair value Carrying Fair value Carrying Fair value
amountamountamountFinancial assets
Financial assets measured atamortized cost
Other financial assets
Financial assets measured at fairvalue through othercomprehensive income
Other financial assets
Assets held for sale
Derivative assets
Total
Financial liabilities
Financial liabilities measured atamortized cost
Bonds and loans payable
Other financial liabilities
Financial liabilities measured atfair value through profit or loss
Derivative liabilities
Total

FY2016(As of March 31, 2017)

Carrying Fair value
amount¥ 1,395¥ 1,397¥ 1,552¥ 1,553¥ 1,370¥ 1,372$ 13,833 $ 13,842

29,254——30,65029,254——30,651

24,121772
36
26,482

24,121772
36
26,48323,431—
43
24,84523,431—
43
24,847215,001
6,881
320
236,045

215,001
6,881
320
236,054

87,468
3,212

91,594
3,212

70,2502,12773,1142,127

80,3092,298

81,413
2,298

626,169
18,958651,698
18,958

10¥90,69110¥94,817—¥72,378—¥75,2411¥82,6091¥83,712——$645,137 $670,656

2) Method of fair value measurement
Fair values of key financial assets and financial liabilities are determined as follows.
i) Cash and cash equivalents, trade and other receivables and trade and other payables
Classified as financial assets measured at amortized cost. The carrying amounts of these accounts approximate fair value
because of their short maturities. Therefore, information on fair values is omitted.
ii) Other financial assets and assets held for sale
The fair values of marketable shares are presented based on the price on the stock exchange. The fair values of unlisted
shares are determined using reasonable valuation techniques.
The fair values of long-term loans receivable are measured at the present value of the future cash flows discounted by arate of return, an appropriate rate such as government bond rate added to a credit spread, with respect to each credit
risk segment of credit control.
The carrying amount of others approximates fair value because of its short maturities.
iii) Bonds and borrowings
The fair values of bonds are measured based on the market price or the price presented by counterparty financial
institutions.
The fair values of borrowings are measured by discounting the principal and interest by an assumed new borrowing
rate.
iv) Other financial liabilities
The fair values of lease obligations are measured by discounting them at the prevailing interest rate to be applied forsimilar lease transactions.
The carrying amount of others approximates fair value because of its short maturities.
v) Derivative transactions
The fair values of forward exchange contracts are measured based on forward exchange rates.

74

Kureha Corporation Business Report 2017

3) Classification of the fair values of financial instruments measured at fair value by hierarchy level
The fair value measurements are categorized into the following three levels in a fair value hierarchy.
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Group can access at themeasurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level 3: Unobservable inputs for the asset or liability.
In the case of several inputs used to measure the fair value, the fair value measurement is categorized in its entirety in thesame level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. Transfers
between the levels of fair value hierarchy are recognized assuming that such transfers occurred at the end of each reporting
period.
i) Financial assets and liabilities recognized at fair value
Transition date (April 1, 2015)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Total
Financial liabilities
Financial liabilities measured at fair value
through profit or loss
Derivative liabilities
Total

Level 2

Level 3

Total

¥25,637
25,637¥——¥3,617
3,617

—
—

10
¥10

¥

¥

—
—

¥29,254
29,254¥1010

Note: There were no transfers between different levels of the fair value hierarchy.
FY2015 (As of March 31, 2016)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Derivative assets
Total
Financial liabilities
Financial liabilities measured at fair value
through profit or loss
Derivative liabilities
Total

Level 2

Level 3

Total

¥19,860—
19,860¥—43
43¥3,571
—
3,571

—
—

1
¥1

¥

¥

—
—

¥23,43143
23,474¥11

Note: There were no transfers between different levels of the fair value hierarchy.

Kureha Corporation Business Report 201775

FY2016 (As of March 31, 2017)
Millions of yen
Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Assets held for sale
Derivative assets
Total

Level 2

¥22,605——¥22,605

Level 3

¥—
—
36
¥36

¥1,516772—¥2,288

Total¥24,121772
36¥24,930

Note: There were no transfers between different levels of the fair value hierarchy.
FY2016 (As of March 31, 2017)
Thousands of U.S. dollars
Level 2
Level 3

Level 1

Financial assets
Financial assets measured at fair value throughother comprehensive income
Other financial assets
Assets held for sale
Derivative assets
Total$201,488——$201,488

$ —
—
320
$320

$13,512
6,881—$20,393

Total$215,001
6,881
320$222,212

Note: There were no transfers between different levels of the fair value hierarchy.
ii) Information on fair value measurement categorized in Level 2 and Level 3
Financial assets and financial liabilities categorized in Level 2 arise from derivative transactions. The fair value of theseassets and liabilities are measured based on the observable inputs such as the forward exchange rate or the interest rate.
Financial assets categorized in Level 3 are mainly unlisted equity instruments. The fair values of unlisted equity
instruments are measured by applying valuation techniques such as market multiple method and net asset value
method, in addition to using unobservable inputs including valuation multiples.
The fair values of financial assets categorized in Level 3 on a recurring or non-recurring basis are measured inaccordance with the provisions of the Group’s accounting policies. In measuring the fair value, the Group uses valuation
techniques and inputs that reflect the nature, characteristics and risks of the relevant financial instruments mostappropriately. The results of the measurement are reviewed by senior managers.
If each unobservable input used to measure financial instruments categorized in Level 3 is changed to a reasonable
alternative assumption, no material changes in the amount of fair values would be assumed.
iii) Changes in financial instruments categorized in Level 3
FY2016

Millions of yen(From April 1, 2016
To March 31, 2017)

Beginning balance
Gains or losses for the period
Purchase
Sale
Ending balance

FY2015(From April 1, 2015
To March 31, 2016)

Financial assets
Financial assets
measured at fairmeasured at fairvalue through other value through othercomprehensive
comprehensive
incomeincome¥ 3,571¥3,617(1,167)
(109)
20
64
(135)
(0)
¥ 2,288¥3,571Thousands of
U.S. dollars

FY2016(From April 1, 2016
To March 31, 2017)

Financial assets
measured at fairvalue through othercomprehensive
income$ 31,829(10,401)178(1,203)$ 20,393

Note: The line item “Gains or losses for the period” above is presented in “Financial assets measured at fair value through othercomprehensive income” in the consolidated statements of comprehensive income.
76 Kureha Corporation Business Report 2017

iv) Information on financial assets measured at fair value through other comprehensive income
The Group classifies long-term investments held mainly for the purpose of maintaining amicable relationships with its
business partners as financial assets measured at fair value through other comprehensive income.
(a) Major items and fair values
The fair values of financial assets measured at fair value through other comprehensive income by item are as follows:
Transition date (April 1, 2015)
Item

Millions of yen
Fair value

Daiichi Sankyo Company, Limited
Inner Mongolia 3F Wanhao Fluorochemical Co., Ltd.
NOF Corporation
Tosoh Corporation
Taiyo Nippon Sanso Corporation¥11,443
2,168
1,625
1,581
1,519

FY2015 (As of March 31, 2016)
Item

Daiichi Sankyo Company, Limited
Inner Mongolia 3F Wanhao Fluorochemical Co., Ltd.
NOF Corporation
Tosoh Corporation
Taiyo Nippon Sanso Corporation

Millions of yen
Fair value¥8,758
1,947
1,453
1,234
990

FY2016 (As of March 31, 2017)
Item

Daiichi Sankyo Company, Limited
Tosoh Corporation
NOF Corporation
Taiyo Nippon Sanso Corporation
Kuraray Co., Ltd.

Millions of yen
Fair value¥7,521
2,554
2,153
1,206
1,110

FY2016 (As of March 31, 2017)
Item

Daiichi Sankyo Company, Limited
Tosoh Corporation
NOF Corporation
Taiyo Nippon Sanso Corporation
Kuraray Co., Ltd.

Thousands of U.S. dollars
Fair value$67,038
22,76419,19010,749
9,893

Kureha Corporation Business Report 201777

(b) Dividend income
The breakdown of dividend income on financial assets measured at fair value through other comprehensive income
is as follows:
Item

FY2016

Millions of yen

Thousands of
U.S. dollars

FY2015FY2016(From April 1, 2016
To March 31, 2017)(From April 1, 2015
To March 31, 2016)(From April 1, 2016
To March 31, 2017)

¥494
33
¥527

¥536
230
¥767

$4,403294$4,697

Investments held at the end of the year
Investments derecognized during the year
Total(c) Derecognized financial assets measured at fair value through other comprehensive income
The fair values on the date of derecognition and cumulative gains and losses (before taxes) of the financial assets
measured at fair value through other comprehensive income that were derecognized during the year are as follows:
Item

FY2016

Millions of yen

Thousands of
U.S. dollars

FY2015FY2016(From April 1, 2016
To March 31, 2017)(From April 1, 2015
To March 31, 2016)(From April 1, 2016
To March 31, 2017)¥1,320973¥7,1894,560$11,765
8,672

Fair value
Cumulative gains or losses

Notes: 1.	For the purpose mainly of reviewing the relationship with the customers, the Group disposes the financial assets
measured at fair value through other comprehensive income and derecognizes such financial assets.
2.	The Group reclassifies to retained earnings cumulative gains or losses arising from changes in the fair values offinancial assets measured at fair values through other comprehensive income in either of the following cases: when an
asset is derecognized; or when there is a significant decline in the fair value. The amount of cumulative gains or losses(after taxes) in other comprehensive income reclassified to retained earnings for FY2015 and FY2016 were 3,024
million yen and 708 million yen (6,310 thousand dollars), respectively.
v) Breakdown of fair values of financial instruments measured at amortized cost by hierarchy level
The breakdown of financial assets and liabilities measured at amortized cost by fair value hierarchy is as follows. The
financial assets whose carrying amounts approximate their fair values are not included in the table below.
Transition date (April 1, 2015)
Millions of yen
Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Total

Level 2

Level 3

Total

¥—
—

¥ 1,397
1,397

¥—
—

¥ 1,397
1,397

—
—
¥—

45,76645,827¥91,594——¥—

45,76645,827¥91,594

FY2015 (As of March 31, 2016)
Millions of yen
Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Commercial papers
Total
78 Kureha Corporation Business Report 2017

Level 2

Level 3

Total

¥—
—

¥ 1,372
1,372

¥—
—

¥ 1,372
1,372

—
—
—
¥—

32,76744,6454,000¥81,413———¥—32,76744,6454,000¥81,413

FY2016 (As of March 31, 2017)
Millions of yen
Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Commercial papers
Total

Level 2

Level 3

Total

¥—
—

¥ 1,553
1,553

¥—
—

¥ 1,553
1,553

—
—
—
¥—

34,70636,4072,000¥73,114———¥—34,70636,4072,000¥73,114

FY2016 (As of March 31, 2017)
Thousands of U.S. dollars
Level 2
Level 3

Total

$—
—

$ 13,842
13,842$——$ 13,842
13,842———$—309,350
324,511
17,826$651,698———$—

309,350
324,511
17,826$651,698

Millions of yen
Contract amountdue after one year
Fair value

Unrealized
gains or losses

Level 1

Financial assets
Other financial assets
Total
Financial liabilities
Bonds payable
Loans payable
Commercial papers
Total(6) Derivatives
1) Derivative transactions to which hedge accounting is applied
Transition date (April 1, 2015)
The disclosure is omitted because they were immaterial.
FY2015 (As of March 31, 2016)
The disclosure is omitted because they were immaterial.
FY2016 (As of March 31, 2017)
Not applicable.
2) Derivative transactions to which hedge accounting is not applied
Transition date (April 1, 2015)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
U.S. dollar(Buying)
British pound
Chinese yuan
U.S. dollar
Total

Contract amount

¥ 906
1,127

¥—
—

¥ 25
(24)

¥ 25
(24)

92
77
458
¥2,662

—
—
—
¥—

(2)
0
(0)
¥ (0)

(2)
0
(0)
¥ (0)

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.

Kureha Corporation Business Report 2017

79

FY2015 (As of March 31, 2016)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
U.S. dollar(Buying)Euro
Chinese yuan
Japanese yen
U.S. dollar
Total

Contract amountMillions of yen
Contract amountdue after one year
Fair value

Unrealized
gains or losses¥1,378
1,184

¥ —
—

¥(20)
29

¥(20)
29

50
173
569
1,287
¥4,643

—
—
158
—
¥158

(0)
0
43
(8)
¥ 43

(0)
0
43
(8)
¥ 43

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.
FY2016 (As of March 31, 2017)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
Chinese yuan
U.S. dollar(Buying)Euro
Chinese yuan
Japanese yen
U.S. dollar
Total

Contract amountMillions of yen
Contract amountdue after one year
Fair value

Unrealized
gains or losses

¥ 301
139
1,457

¥

—
24
54

¥ 2
0
4

¥ 2
0
4

132
49
1,884
2,958
¥6,923——935
7¥1,021

(1)
(0)
45
(14)
¥ 36

(1)
(0)
45
(14)
¥ 36

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.
FY2016 (As of March 31, 2017)
Type

Off-market
transactions

Forward exchange contracts(Selling)
Euro
Chinese yuan
U.S. dollar(Buying)Euro
Chinese yuan
Japanese yen
U.S. dollar
Total

Contract amountThousands of U.S. Dollars
Contract amountdue after one year
Fair value$ 2,682
1,238
12,986

$

—
213
481

$ 17
0
35

$ 17
0
35

1,176
436
16,792
26,365$61,707

—
—
8,334
62
$9,100

(8)
(0)
401
(124)
$ 320

(8)
(0)
401
(124)
$ 320

Notes: 1. The fair values of derivative transactions are calculated using forward exchange rates.
2. Unrealized gains or losses on foreign exchange contracts are presented as the fair values of the contracts.
80 Kureha Corporation Business Report 2017

Unrealized
gains or losses

(7) Compound financial instruments
Bonds with stock acquisition rights issued by the Company are as follows:
Type of stock to be issued
Common stock
Issue price of stock acquisition rights
Zero (no consideration)
Initial conversion price
4,330 yen (38.59 dollars) (Note)
Aggregate amount of bonds issued
15,000 million yen (133,701 thousand dollars)
Aggregate amount of stock issued by exercising stock—acquisition rights
Ratio of stock acquisition rights granted
100%
Maturity date
March 14, 2018
Exercise period
From March 28, 2013 to February 28, 2018
(Local time at the place where the stock acquisition rights are
exercised)
Provided that early redemption is permitted under certain
circumstances.
Carrying amount of bonds with stock acquisition rights
14,933 million yen (133,104 thousand dollars)
Fair value of stock acquisition rights
254 million yen (2,264 thousand dollars)
When the bond holders request to exercise stock acquisition rights, full value that should be paid in exercising stock acquisitionrights is deemed to have been paid in, instead of the redemption of the full amount of the bond with stock acquisition rights.
Moreover, such request is deemed to have been made in the event that the stock acquisition rights were exercised.
Note: Since the Company conducted a ten-to-one share consolidation on October 1, 2016, the initial conversion price wasadjusted accordingly.

24. Construction contracts

The amounts due from and to clients for construction contracts at the end of FY2015 and FY2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

FY2015FY2016(As of March 31, 2017) (As of March 31, 2016)

Amount due from clients based on contracts
Amount due to clients based on contracts
Cumulative costs incurred and gross profit earned (lessgross loss incurred)
Amount of progress billings
Amount due from and to clients

FY2016(As of March 31, 2017)992—¥ 1,586—$ 8,842—

4,089(3,097)
¥ 992

4,254
(2,668)¥ 1,586

36,447(27,604)$ 8,842¥

The balances of advances received from clients before associated services were rendered as of the end of FY2015 and FY2016
were 65 million yen and 103 million yen (918 thousand dollars), respectively. There were no balances withheld by clients at theend of FY2015 and FY2016. Revenue from construction contracts recognized for FY2015 and FY2016 were 17,026 million yen
and 15,165 million yen (135,172 thousand dollars), respectively.

25. Revenue

The Group’s revenue is generated primarily from sale of goods. See “6. Segment information” for further details.

Kureha Corporation Business Report 201781

26. Other income

The breakdown of “Other income” is as follows:
Millions of yen

FY2016

Gain on government grants (Note)
Compensation income
Other
Total

(From March 31, 2016
To March 31, 2017)¥1,01422361¥1,398FY2015(From March 31, 2015
To March 31, 2016)

¥169
218
530
¥918

Thousands of
U.S. dollars

FY2016(From March 31, 2016
To March 31, 2017)$ 9,038196
3,217$12,461

Note: Gain on government grants for the current fiscal year mainly consists of 7,780 million yen (69,346 thousand dollars) ofproceeds from subsidy for Fukushima Business Investment Subsidy for Revitalization of Industries, net of 6,910 million
yen (61,591 thousand dollars) as a direct deduction from the cost of property, plant and equipment acquired using said
subsidy.

27. Other expenses

The breakdown of “Other expenses” is as follows:
Millions of yen

FY2016

Business restructuring costs (Note 1)
Loss on business withdrawal (Note 2)
Loss on retirement and sale of property, plant andequipment, and intangible assets
Other
Total

(From March 31, 2016
To March 31, 2017)¥1,194713

FY2015

Thousands of
U.S. dollars

FY2016(From March 31, 2015
To March 31, 2016)(From March 31, 2016
To March 31, 2017)

1,130
244
¥5,8994,465
1,996$23,469¥4,524—501
224¥2,633$10,642
6,355

Notes: 1.	Business restructuring costs include an impairment loss on property, plant and equipment of 4,024 million yen for
FY2015 and 1,194 million yen (10,642 thousand dollars) for FY2016.
2.	Loss on business withdrawal includes an impairment loss on property, plant and equipment of 378 million yen (3,369
thousand dollars) for FY2016.

28. Finance income and finance costs

The breakdown of finance income is as follows:
Millions of yen

FY2016

Interest income
Dividend income
Other
Total

82 Kureha Corporation Business Report 2017

(From March 31, 2016
To March 31, 2017)

¥ 22
527
27
¥577

FY2015(From March 31, 2015
To March 31, 2016)

¥ 16
767
—
¥784

Thousands of
U.S. dollars

FY2016(From March 31, 2016
To March 31, 2017)

$ 196
4,697
240
$5,143

The breakdown of finance costs is as follows:
Millions of yen

FY2016

Interest expenses
Foreign exchange losses
Other
Total

(From March 31, 2016
To March 31, 2017)

¥557
279
15
¥852

FY2015(From March 31, 2015
To March 31, 2016)

¥ 720
852
14
¥1,587

Thousands of
U.S. dollars

FY2016(From March 31, 2016
To March 31, 2017)$4,964
2,486
133$7,59429. Profit per share(1) Basis for determining basic profit per share
Basic profit per share and the basis for its calculation are as follows:
Millions of yen,unless otherwise stated

FY2016

Profit attributable to ordinary equity holders of parent:
Profit attributable to owner of parent
Profit not attributable to ordinary equity holders ofparentProfit used for determining basic profit per share
Weighted average number of common stock during theperiod (shares)

FY2015

Thousands of
U.S. dollars,
unless otherwise stated

FY2016(From March 31, 2016
To March 31, 2017)(From March 31, 2015
To March 31, 2016)(From March 31, 2016
To March 31, 2017)¥7,001¥4,881$62,403

—
7,001

—
4,881

—
62,403

17,185,950

17,185,363

407.38284.05

Basic profit per share (yen/dollars)

3.63

Note: Since the Group conducted a ten-to-one share consolidation on October 1, 2016, basic profit per share was calculated on
the assumption that the share consolidation was conducted at the beginning of the FY2015.
(2) Basis for determining diluted profit per share
Diluted profit per share and the basis for its calculation are as follows:
Millions of yen,unless otherwise stated

FY2016

Profit attributable to ordinary equity holders including
dilutive effects:
Profit used for determining basic profit per share
Adjustments on profit
Profit used for determining diluted profit per share
Weighted average number of common stock during theperiod (shares):
Dilutive effects
Weighted average number of common stock including
dilutive effects (shares)
Diluted profit per share (yen/dollars)

FY2015

Thousands of
U.S. dollars,
unless otherwise stated

FY2016(From March 31, 2016
To March 31, 2017)(From March 31, 2015
To March 31, 2016)(From March 31, 2016
To March 31, 2017)¥7,001—
7,001¥4,881—
4,881$62,403—62,403

17,185,950
3,480,568

17,185,363
3,478,960

20,666,518

20,664,323

338.77236.233.01

Note: Since the Company conducted a ten-to-one share consolidation on October 1, 2016, basic profit per share was calculatedon the assumption that the share consolidation was conducted at the beginning of FY2015.

Kureha Corporation Business Report 201783

30. Other comprehensive income

Reclassification adjustment and tax effect for other comprehensive income are as follows:
FY2015 (From April 1, 2015 To March 31, 2016)
Amount arisingduring the year

Reclassification
adjustment

Millions of yen
Amount before tax
effect¥ 1,267(1,182)85¥———¥ 1,267(1,182)85¥(318)
375
57(1,879)(0)—
8(1,879)8—(3)(1,879)5(816)(2,696)—8(816)(2,687)

—
(3)

(816)
(2,690)¥(2,611)¥ 8¥(2,602)¥ 53¥(2,548)

Amount arisingduring the year

Reclassification
adjustment

Millions of yen
Amount before tax
effect¥3,006
275
3,282

¥—
—
—

¥3,006275
3,282¥(1,226)(85)(1,311)¥1,780
190
1,970

(698)
1

—
1

(698)
2

—
(0)

(698)
2

(199)
(896)

—
1

(199)
(895)

—
(0)

(199)
(896)

¥2,385¥1¥2,386¥(1,312)¥1,074

Items that will not be reclassified to profit or
loss:
Financial assets measured at fair value
through other comprehensive income
Remeasurements of defined benefit plans
Total
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Cash flow hedges
Share of other comprehensive income ofentities accounted for using equity
methodTotal
Total

Tax effectAmount after tax
effect

¥

948
(806)
142

FY2016 (From April 1, 2016 To March 31, 2017)

Items that will not be reclassified to profit or
loss:
Financial assets measured at fair value
through other comprehensive income
Remeasurements of defined benefit plans
Total
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Cash flow hedges
Share of other comprehensive income ofentities accounted for using equity
methodTotal
Total

84 Kureha Corporation Business Report 2017

Tax effectAmount after tax
effectFY2016 (From April 1, 2016 To March 31, 2017)
Amount arisingduring the year

Items that will not be reclassified to profit or
loss:
Financial assets measured at fair value
through other comprehensive income
Remeasurements of defined benefit plans
Total
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translating foreign
operations
Cash flow hedges
Share of other comprehensive income ofentities accounted for using equity
method
Total
Total

Thousands of U.S. dollars
Reclassification Amount before tax
adjustment
effectTax effectAmount after tax
effect$26,793
2,451
29,253$———$26,793
2,451
29,253$(10,927)(757)(11,685)$15,865
1,693
17,559(6,221)8—
8(6,221)17—(0)(6,221)17(1,773)(7,986)—
8(1,773)(7,977)—(0)(1,773)(7,986)$21,258$8$21,267$(11,694)$ 9,573

31. Related party transactions(1) Related party transactions
There were no related party transactions to be reported (excluding those eliminated in the consolidated financial statements).
(2) Executive compensation
The compensation for the Group’s management executives was as follows:
Millions of yen

FY2016

Basic compensation
Bonus
Share-based compensation
Total(From March 31, 2016
To March 31, 2017)

¥288
30
14
¥332

FY2015(From March 31, 2015
To March 31, 2016)

¥293
39
14
¥347

Thousands of
U.S. dollars

FY2016(From March 31, 2016
To March 31, 2017)$2,567267
124$2,95932. Major subsidiaries

Major subsidiaries of the Group are disclosed in page 98 of our Business Report.

Kureha Corporation Business Report 201785

33. Loan commitments

The Company and certain consolidated subsidiaries have entered into overdraft agreements and loan commitment agreementswith multiple financial institutions in order to efficiently procure working capital. The balances of undrawn credit facilities
pursuant to these agreements are as follows:
Thousands of
U.S. dollars

Millions of yen

Aggregate amount of maximum
overdraft limit and loan commitment
Less: Drawn down balance
Balance of undrawn credit facilities

Transition date
(April 1, 2015)(As of March 31, 2017)(As of March 31, 2016)(As of March 31, 2017)¥10,97326¥10,947¥7,27555¥7,220¥7,896—¥7,896$64,845490$64,355

FY2016FY2015FY2016

34. Subsequent events
Not applicable.

35. First-time adoption of IFRSThe Group has adopted IFRS from FY2016 beginning on April 1, 2016, and the full-year consolidated financial statements forthe fiscal year beginning on April 1, 2016 are the Group’s first consolidated financial statements prepared in accordance with
IFRS. The date of transition to IFRS is April 1, 2015. The Group had previously adopted J-GAAP and the closing date of theaccounting period stated on the most recent consolidated financial statements under J-GAAP is March 31, 2016.
In principle, IFRS 1 requires the retrospective application of IFRS for entities adopting IFRS for the first time. However,certain exemptions are available. The exemptions that the Group has applied are as follows:• The Group has elected not to retrospectively apply IFRS 2 Share-based Payment to past share-based compensation that wasvested before the transition date.
• The Group has elected not to retrospectively apply IFRS 3 Business Combinations to past business combination that
occurred before the transition date.
• The cumulative foreign currency translation differences for foreign operations are deemed to be zero as of the transactiondate.
• The Group uses fair value at the transition date as deemed cost for certain land under IFRS.

86 Kureha Corporation Business Report 2017

The table below presents reconciliations requiring disclosure in the first-time adoption of IFRS.
Equity reconciliation as of the transition date (April 1, 2015)

Line item under
J-GAAPASSETS
Current assets:
Cash and time deposits
Trade notes and accounts
receivable
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
OthersLess: Allowance for doubtful
accounts
Total current assets
Non-current assets:
Property, plant and equipment,
net:
Buildings and structures, net
Machinery, equipment andvehicles, net
LandConstruction in progress
Others, net
Intangible assets:
Investments and other assets:
Investment securities
Investments in capital
Long-term loans receivable

Net defined benefit asset

Deferred tax assets
OthersLess: Allowance for doubtful
accounts
Total non-current assets
Total assets

Amount under
J-GAAP¥

Millions of yen
Differences inrecognition
Reclassifiand
Amount undercationmeasurement
IFRS

7,772
28,984¥26,303
1,144
5,327
2,506
4,102

¥ 1,235404
6,471(1,144)(5,327)(2,506)(1,832)(192)
75,949192(2,506)39,198(39,198)

49,514
13,264
18,123
3,085(49,514)(13,264)(18,123)(3,085)

2,448

123,185(624)

26,96013,178
1,975(26,960)(13,178)(1,975)

2,415

10,89732,370(2,415)

Notes

Line item under
IFRS

7,911 (1)ASSETS
Current assets:
Cash and cash equivalents

(18)
(171)
(346)

30,201 (1),(3)232 (1)
32,429 (1),(3)Trade and other receivables
Other financial assets
Inventories

6

2,277 (1),(3)Other current assets

138

¥

(391)

73,051

7,766
1(1),(3),130,952 (4)1,825 (1)Property, plant and equipment, net
Intangible assets

42(1,952)

10,939 (2)30,417 (1),(7)Investments accounted for using
equity method
Other financial assets(1),(3),(5),(6),(7),(8),2,066 (9)3,779 (1)Deferred tax assets
Other non-current assets

1,787
1,927

2,506
1,755

(2,227)96(129)
173,748¥249,697

129
2,506
¥
—

3,726
¥3,335

179,981¥253,032

Total current assets
Non-current assets:

Total non-current assets
Total assets

Kureha Corporation Business Report 201787Line item under
J-GAAP

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable
Short-term loans payable
Current portion of bonds
Current portion of long-term loans
payableOther payables
Accrued income taxes
Accrued expenses
Provision for bonuses
Provision for directors’ bonuses
Reserve for environmental
measures
OthersTotal current liabilities
Long-term liabilities:
Bonds payable
Bonds with stock acquisition rights
Long-term loans payable
Deferred tax liabilities
Retirement allowance for directors
and corporate auditors
Reserve for environmental
measures
Net defined benefit liability
Asset retirement obligations
OthersTotal long-term liabilities
Total liabilities
Net assets:
Shareholders’ equity:
Capital, no par value
Capital surplus
Retained earnings
Less: Treasury stock, at cost
Accumulated othercomprehensive income (loss):
Unrealized gain on available-forsale securities
Deferred loss on hedges
Translation adjustments
Remeasurements of defined
benefit plans
Stock acquisition rights

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

88 Kureha Corporation Business Report 2017

Amount under
J-GAAP¥ 13,766
18,09410,000Millions of yen
Differences inrecognition
Reclassifiand
Amount undercationmeasurement
IFRS

¥

7,247
16,772(10,000)

6,772(6,772)
1,233(7,247)¥

Notes

Line item under
IFRS¥ 21,174 (1)35,207 (1)

LIABILITIES AND EQUITYCurrent liabilities:
Trade and other payables
Bonds and loans payable

1,233

Other financial liabilities

2,430 (1)Accrued income taxes

3,018

5,953 (1),(6)Provisions

542
4,063

8,322 (1),(5)74,322

159
341

7,247
2,430
5,734
2,712
196

(5,734)
221
(196)

21
3,285
70,262

(21)
4,494
(3)

17,00015,00019,77034,770(15,000)(19,770)
671

490

52,260 (1),(7)

1,307

4,125

3

(1,369)1,978 (1),(10)(4),(7),2,759 (8),(9)

229

374

64

669 (1)

Provisions

374
550
804
955
58,810129,072(374)

7557 (1)

Net defined benefit liability

(804)
133
3
—

12,46010,01384,163(4,487)

500
4,563

6,562

9,352
(5)
7,272

6,718
5
(7,272)

(615)
68

615
(68)

2,403
120,624¥249,697

0¥(6,361)

—

201

—
—
—

(1,429)(1,228)¥ 3,335

1,088
59,314
133,636

OthersTotal current liabilities
Non-current liabilities:
Bonds and loans payable
Other financial liabilities
Deferred tax liabilities

OthersTotal non-current liabilities
Total liabilities
Equity:12,46010,01390,726 (12)(4,487)

Capital stock, no-par value
Capital surplus
Retained earnings
Less: Treasury stock, at cost(7),(8),9,710 (10),(11)Other components of equity

118,422(4),(7),(8),(9),973 (10)
119,396¥253,032

Total equity attributable to ownersof parent
Non-controlling interests
Total equity
Total liabilities and equity

Equity reconciliations as of March 31, 2016 (prior year-end)

Line item under
J-GAAPASSETS
Current assets:
Cash and time deposits
Trade notes and accounts
receivable
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
OthersLess: Allowance for doubtful
accounts
Total current assets
Non-current assets:
Property, plant and equipment,
net:
Buildings and structures, net
Machinery, equipment andvehicles, net
LandConstruction in progress
Others, net
Intangible assets:
Investments and other assets:
Investment securities
Investments in capital
Long-term loans receivable

Net defined benefit asset

Deferred tax assets
OthersLess: Allowance for doubtful
accounts
Total non-current assets
Total assets

Amount under
J-GAAP¥

Millions of yen
Differencesin recognition
Reclassifiand
Amount undercationmeasurement
IFRS

6,621
30,222¥¥

27,157
1,080
4,946
2,347
3,192

634
395
6,026
(1,080)(4,946)(2,347)(1,240)(210)
75,357210(2,347)41,592(41,592)

52,00913,5236,924
3,758(52,009)(13,523)(6,924)(3,758)2,213

117,808(548)

20,984
12,746
1,808(20,984)(12,746)(1,808)2,345

10,311
26,352(2,345)

Notes

Line item under
IFRS

6,695 (1)ASSETS
Current assets:
Cash and cash equivalents

71
(161)
(106)

30,928 (1),(3)234 (1)33,077 (1),(3)Trade and other receivables
Other financial assets
Inventories

6

1,958 (1),(3)Other current assets

74

¥

(115)

72,894

7,179
1(1),(3),
124,987 (4)1,666 (1)Property, plant and equipment, net
Intangible assets

81(1,784)

10,393 (2)24,568 (1),(7)Investments accounted for using
equity method
Other financial assets(1),(3),(5),(6),(7),(8),
1,692 (9)3,605 (1)Deferred tax assets
Other non-current assets

1,651
1,817

2,347
1,669

(2,307)118(99)
161,275¥236,633

99
2,347
¥
—

3,289
¥ 3,174

166,913¥239,807

Total current assets
Non-current assets:

Total non-current assets
Total assets

Kureha Corporation Business Report 201789Line item under
J-GAAP

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable
Short-term loans payable
Current portion of long-term loans
payableOther payables
Accrued income taxes
Accrued expenses
Provision for bonuses
Provision for directors’ bonuses
OthersTotal current liabilities
Long-term liabilities:
Bonds payable
Bonds with stock acquisition rights
Long-term loans payable
Deferred tax liabilities
Retirement allowancefor directors and corporate auditors
Reserve for environmental
measures
Net defined benefit liability
Asset retirement obligations
OthersTotal long-term liabilities
Total liabilities
Net assets:
Shareholders’ equity:
Capital, no par value
Capital surplus
Retained earnings
Less: Treasury stock, at cost
Accumulated othercomprehensive income (loss):
Unrealized gain on available-forsale securities
Deferred loss on hedges
Translation adjustments
Remeasurements of defined
benefit plans
Stock acquisition rights

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

90 Kureha Corporation Business Report 2017

Amount under
J-GAAP

Millions of yen
Differences inrecognition
Reclassifiand
Amount undercationmeasurement
IFRS¥ 13,870
16,162¥ 5,748
17,554

13,554(13,554)
1,175(6,562)
1(4,978)
192
(192)
604
(11)

6,562
1,417
4,978
2,441
192
6,737
65,917¥Notes¥ 19,817 (1)33,986 (1)(411)

763 (1)Other financial liabilities

01,419 (1)Accrued income taxes

3,202

5,835 (1),(6)Provisions

413
3,672

7,755 (1),(5)69,57828,968(15,000)(13,968)
1,233

355

46,323 (1),(7)

301

2,183

11

(1,324)

1,534 (1)(4),(7),870 (8),(9)

236

253

253
430
816
1,552
51,440117,358(253)

12,4609,982
89,416(4,450)3,445
0(4,768)(1,371)
49

1,371
(49)

1,315
119,274¥236,633

4
(664)
3,008

(551)
6,306

7,104
(0)
4,768

¥

LIABILITIES AND EQUITYCurrent liabilities:
Trade and other payables
Bonds and loans payable

199
268

17,00015,00013,968

(816)
(417)
11
—

Line item under
IFRS(5,536)

—

218

—
—
—

(52)
165
¥ 3,174

OthersTotal current liabilities
Non-current liabilities:
Bonds and loans payable
Other financial liabilities
Deferred tax liabilities

490

Provisions

434 (1)

Net defined benefit liability

1,135
50,788120,366

OthersTotal non-current liabilities
Total liabilities
Equity:12,4609,430 (10)95,723 (12)(4,450)Capital stock, no par value
Capital surplus
Retained earnings
Less: Treasury stock, at cost(2),(7),(8),(10),
5,013 (11)Other components of equity

118,177(4),(7),(8),(9),1,263 (10)119,440¥239,807

Total equity attributable to ownersof parent
Non-controlling interests
Total equity
Total liabilities and equity

Notes on reconciliation of equity(1) Reclassification
Reclassifications are made to comply with the provisions of IFRS. The main reclassifications are as follows:• The current portion of deferred tax assets and deferred tax liabilities is reclassified as non-current items.
• “Investments accounted for using equity method” are presented separately.
• Financial assets and financial liabilities are presented separately.
• “Accumulated other comprehensive income” and “Stock acquisition rights” are presented in “Other components of equity.”(2) Differences in recognition and measurement
1) Review of scope of consolidation
While J-GAAP does not require a not-for-profit entity to be included in the scope of consolidation, IFRS requires it to beconsolidated as long as it is controlled by the Group; therefore not-for-profit entities are included in the scope of
consolidation as consolidated subsidiaries.
2) Reconciliation of the closing date of an entity accounted for using the equity method
When the closing date of an entity accounted for using the equity method differs from that of the parent, an additional
financial statement as of the closing date of the parent will be prepared by such entity to be accounted for using the equity
method.
3) Reconciliation of trade receivables and inventories
While trade receivables for certain sale of goods had been recognized at the time of shipment under J-GAAP, in accordancewith IFRS, trade receivables are recognized at the time of arrival when risks and rewards associated with the goods aretransferred to customers.
While spare parts for equipment and goods for sales promotion had been recognized as supplies as part of inventories
under J-GAAP, spare parts for equipment are recognized as property, plant and equipment and goods for sales promotion arerecognized as selling, general and administrative expenses under IFRS.
4) Reconciliation of property, plant and equipment
The Group has elected an exemption under the provisions of IFRS 1 and uses the fair value at the transition date as deemed
cost for certain lands.
While under J-GAAP, real estate acquisition tax had been expensed as incurred, it is included in cost of property, plantand equipment as an expense directly attributable to acquisition under IFRS.
Regarding the reduction entry to account for subsidies other than government grants, J-GAAP allows an entity to
reduce the subsidized amount directly from the cost of property, plant and equipment. However, as IFRS does not allow
such a treatment, the Group has cancelled the reduction entry.
5) Reconciliation of levies
Levies such as property tax that had been expensed at the time of payment under J-GAAP, are recognized at once as liabilities
and expenses when the obligating event occurs in accordance with IFRS.
6) Reconciliation of liabilities associated with paid leaves
Unused paid leaves that are not recognized as a liability under J-GAAP has been recognized as a liability in accordance with
IAS 19 Employee Benefits.
7) Reconciliation of financial instruments
Unlisted stocks that had been carried at cost under J-GAAP are measured at fair value under IFRS.
Corporate bonds that had been carried at the amount of a debt obligation, or face amount, under J-GAAP are measured
using the amortized cost method under IFRS.
Convertible bonds with stock acquisition rights that had been recorded as liabilities in its entirety under J-GAAP, aresplit between bonds as liabilities and stock acquisition rights as equity under IFRS.
8) Reconciliation of retirement benefit plan
Whereas actuarial gains and losses were recognized in other comprehensive income as incurred and recognized in profit orloss by amortizing them over a certain period under J-GAAP, in accordance with IFRS, they are recognized in othercomprehensive income as incurred and immediately reclassified to retained earnings.
While J-GAAP uses the discount rate and expected return on plan assets, IFRS uses only the discount rate that is
applied to net defined benefit liability (asset).

Kureha Corporation Business Report 2017919) Reconciliation of deferred tax assets and deferred tax liabilities
In calculating tax effect with respect to elimination of unrealized gains and losses, while J-GAAP had applied the seller’s tax
rate, IFRS applies the buyer’s tax rate. The Group has reviewed the recoverability of deferred tax assets following the
adoption of IFRS.
The Group has changed the offset amount of financial assets and liabilities following the adoption of IFRS.
10) Reconciliation of non-controlling interests
While under J-GAAP, the excess amount arising when the subsidiaries’ losses allocated to non-controlling interests exceeds
the amount required to be borne by the non-controlling interests were borne by the parent, under IFRS, such losses areallocated to non-controlling interests without any adjustments.
Non-voting preferred stock issued by subsidiaries and its dividends are recognized as non-controlling interests under
J-GAAP, while they are recognized as liabilities under IFRS.
11) Reconciliation of other components of equity
The Group has elected an exemption under the provisions of IFRS 1, and reclassified the balance of exchange differences ontranslating foreign operations into retained earnings as of the transition date.
12) Reconciliation of retained earnings(Millions of yen)Transition date
(April 1, 2015)
Review of scope of consolidation
Reconciliation of the closing dates of entities accounted for using the equity method
Reconciliation of trade receivables and inventories
Reconciliation of property, plant and equipment
Reconciliation of levies
Reconciliation of liabilities associated with paid leaves
Reconciliation of financial instruments
Reconciliation of retirement benefit plan
Reconciliation of deferred tax assets and deferred tax liabilities
Reconciliation of non-controlling interests
Reconciliation of other components of equity
Other
Total

92 Kureha Corporation Business Report 2017

FY2015(As ofMarch 31, 2016)
(461)
(121)
(19)
194
(300)
(326)
2,297
2,421
(391)
(424)
(1,901)(2,023)
10
(88)
(605)
(1,379)
312
270
283
452
7,277
7,277
62
54
6,562
6,306

Reconciliation of profit or loss and comprehensive income for the fiscal year of FY2015 (From April 1, 2015 To March 31,
2016)(Millions of yen)
Items under
J-GAAP

Net sales
Cost of sales

Gross profit
Selling, general andadministrative expenses

Amount under
J-GAAP¥142,549¥ (475)¥(1,294)

102,269(204)

40,280(475)(1,090)27,680Operating income
Non-operating income

12,6001,443

Non-operating expenses

2,080

Extraordinary gains
Extraordinary losses
Income before income taxes
Income taxes

4,891
6,243
10,610

Income7,317

Income (loss) attributable tonon-controlling interests
Income attributable to ownersof parent

Reclassification

Differences in
Recognition and Amount under
Measurement
IFRS

376

28,056 (1),(4),(6)

153

1,553

1,706 (2)

700
6,306
(5,928)(1,443)
5,482(2,080)
1,542(4,891)(6,243)
—

218
(407)
712

918 (1)
5,899 (1)7,384

(4,030)¥(2,499)3,293

Items under IFRSRevenue
Cost of sales

Gross profit
Selling, general andadministrative expenses
Share of profit of entities
accounted for using equity
methodOther income
Other expenses
Operating profit(4,697)784 (1),(5)Finance income

44

1,587 (1),(5)Finance costs(1,531)—

Notes¥140,779 (1),(3)102,064 (1),(3),(4),(6)
38,714(25)(38)¥ 7,342¥(2,461)

6,580

Profit before tax(1),(3),(4),1,762 (5),(6),(7) Income tax expense
4,818
Profit for the period
Profit attributable to:Non-controlling interests(63)¥ 4,881

Owners of parent(Millions of yen)

Items under
J-GAAP

Amount under
J-GAAP

Reclassification

IncomeOther comprehensive income(loss):
Unrealized gain (loss) on
available-for-salesecurities
Deferred gain on hedges
Translation adjustments¥ 7,317¥—

Remeasurements of defined
benefit plans
Share of othercomprehensive income inaffiliates
Total other comprehensive
income (loss)
Comprehensive income
Comprehensive income
attributable to:
Owners of parent
Non-controlling interests

Differences in
Recognition and Amount under
Measurement
IFRS¥(2,499)¥ 4,818(2,272)3,221

948 (5)5(0)

5(2,386)507(1,879)

(760)

(45)

(806) (6)

(146)

(670)

(816) (2)(5,561)—

3,012(2,548)

1,756

¥—

513

2,269

¥

1,840
(83)

¥

598
(85)

2,438
¥ (169)Notes

Items under IFRSProfit for the period
Other comprehensive income(loss):
Financial assets measured at fairvalue through othercomprehensive income
Cash flow hedges
Exchange differences ontranslating foreign operations
Remeasurements of defined
benefit plans
Share of other comprehensive
income of entities accounted
for using equity method
Total other comprehensive
income (loss), net of tax
Comprehensive income (loss)
Comprehensive income (loss)
attributable to:
Owners of parent
Non-controlling interests

Kureha Corporation Business Report 201793

Notes on reconciliations of profit or loss and comprehensive income(1) Reclassification
Reclassifications are made to comply with the provisions of IFRS. The main reclassifications are as follows:• Among items that are classified as non-operating profit, non-operating expenses, extraordinary gains and extraordinary
losses under J-GAAP, finance-related items are classified as finance income or finance costs and other items are classified asother income or other expenses under IFRS.
(2) Differences in recognition and measurement
1) Review of scope of consolidation
While J-GAAP does not require a not-for-profit entity to be included in the scope of consolidation, IFRS requires it to beconsolidated as long as it is controlled by the Group; therefore not-for-profit entities are included in the scope of consolidationas consolidated subsidiaries.
2) Reconciliation of the closing date of an entity accounted for using the equity method
When the closing date of an entity accounted for using the equity method differs from that of the parent, an additional financial
statement as of the closing date of the parent will be prepared by such entity to be accounted for using the equity method.
3) Reconciliation of revenue and cost of sales
While revenue for certain sale of goods had been recognized at the time of shipment under J-GAAP, in accordance with IFRS,
revenue is recognized at the time of arrival when risks and rewards associated with the goods are transferred to customers.
While under J-GAAP, gross amount was presented as sales in transactions where the Group acted as an agent, in accordance with
IFRS, net amount of sales and cost of sales corresponding to the amount of fee is presented as revenue.
4) Reconciliation of levies
Levies such as property tax that had been expensed at the time of payment under J-GAAP, are recognized at once as liabilities
and expenses when the obligating event occurs in accordance with IFRS.
5) Reconciliation of financial instruments
Unlisted stocks that had been carried at cost under J-GAAP have been measured at fair value under IFRS.
Corporate bonds that had been carried at the amount of a debt obligation, or face amount, under J-GAAP have been measured
using the amortized cost method under IFRS.
Gains and losses on sale of stocks and other securities previously recognized in profit or loss under J-GAAP are recognized asother comprehensive income under IFRS.
6) Reconciliation of retirement benefit plan
Whereas actuarial gains and losses were recognized in other comprehensive income as incurred and recognized in profit or loss
by amortizing them over a certain period under J-GAAP, in accordance with IFRS, they are recognized in other comprehensive
income as incurred and immediately reclassified to retained earnings.
While J-GAAP uses the discount rate and expected return on plan assets, IFRS uses only the discount rate that is applied to
net defined benefit liability (asset).
7) Reconciliation of income tax
In calculating tax effect with respect to elimination of unrealized gains and losses, under the J-GAAP seller’s tax rate is usedwhile IFRS applies buyer’s tax rate.
Notes on reconciliations of cash flow
There are no significant differences between Consolidated Statements of Cash Flows based on J-GAAP and those based on
IFRS.

94 Kureha Corporation Business Report 2017

5) Consolidated supplementary schedules[Details of bonds]

Issuer(Millions of yen, Thousands of U.S. dollars)
BeginningbalanceEnding balance
FY2016FY2016
Issue date
(As of(As of March 31, 2017)
April 1, 2016)
Yen
Yen
Dollars

Type

KurehaCorporation
KurehaCorporation
KurehaCorporation

Interest rate
Collateral(%)

16, ¥ 4,992 ¥ 4,997 $ 44,540 0.95 per
The 3rd unsecured bonds September
2010(4,997)(44,540) annum
October20,
per
The 4th unsecured bonds
4,987
4,992
44,495 0.82
2011
annum
March 6,per
The 5th unsecured bonds
6,968
6,976
62,180 0.30
2015
annum
Zero coupon convertible
March 14,bonds due 20182013
14,933
133,104
14,866 (14,933)—(bonds with stock(London(133,104)
acquisition rights)
time)
31,898284,321——¥31,814 ¥(19,930)—$(177,645)

KurehaCorporation
Total

Maturity date

15,
None September
2017

None

October 19,
2018
March 6,
2020

None

March 14,
2018

—

—

None

Notes: 1.	The amounts shown in parenthesis in “Ending balance” column represent the current portion of bonds payable.
2.	The aggregate annual amounts to be redeemed within five years after the end FY2016 are as follows:(Millions of yen, Thousands of U.S. dollars)Over one year andOver two years andOver three years andwithin two years
within three years
within four years

Within one year

Yen
¥20,000

Dollars$178,269

Yen¥5,000Dollars$44,567

Yen¥7,000Dollars$62,394

Yen¥—

Dollars$—

Over four years andwithin five years

Yen¥—

Dollars$—[Details of loans payable]

Classifications

Short-term loans payable
Current portion of long-term loans
payableCurrent portion of lease obligations
Commercial papers (current portion)
Long-term loans payable (excluding
the current portion)
Lease obligations (excluding thecurrent portion)
Total

Beginning balance
FY2016(As of April 1, 2016)
Yen(Millions of yen, Thousands of U.S. dollars)Ending balance
FY2016
Average interest rate (%) Maturity date
(As of March 31, 2017)
Yen
Dollars¥16,329¥17,974$160,210

0.76—

13,656

6,784

60,468

0.95

—

281
4,000

278
2,000

2,477
17,8260.55(0.00)

14,50911,592

103,324

0.95

593

478

4,260

0.55

¥49,370¥39,108$348,587———
April 2018 toMarch 2033
April 2018 toNovember
2024—

Notes: 1.	“Average interest rate” is presented as the weighted average interest rate against the loans outstanding at the end of the year.
2.	The aggregate annual amounts of long-term loans payable and lease obligations to be repaid within five years after theend of FY2016 are as follows:

Kureha Corporation Business Report 201795

(Millions of yen, Thousands of U.S. dollars)Over two years andOver three years andwithin three years
within four years
Yen
Dollars
Yen
Dollars

Over one year andwithin two years
Yen
Dollars

Long-term loans payable
Lease obligations¥4,831
206$43,060
1,836¥3,886140$34,637
1,247¥1,952
82$17,399730

Over four years andwithin five years
Yen
Dollars¥694
26$6,185231[Details of asset retirement obligations]
The disclosure is omitted because the amounts of asset retirement obligations as of the beginning and end of FY2016 were lessthan 1% of the total liabilities and equity as of the same dates.
(2) Other information
Quarterly information for FY2016(Millions of yen, unless otherwise stated)(Cumulative period)

Revenue
Profit before tax
Profit (loss) attributableto owners of parent
Basic profit (loss) per
share (yen/dollars)(Each quarter)

Basic profit (loss) per
share

First quarter

Second quarter

Third quarter(Thousands of U.S. dollars,
unless otherwise stated)
FY2016FY2016(From April 1, 2016
(From April 1, 2016
To March 31, 2017)
To March 31, 2017)¥28,291273¥60,228
3,564¥93,4119,144¥132,294
8,981$1,179,196
80,051

(34)

3,052

7,317

7,001

62,403(2.00)

177.61425.80407.38

3.63

First quarter¥(2.00)

Second quarter¥179.61

Third quarter¥248.20(Yen)
Fourth quarter¥(18.43)(Dollars)
Fourth quarter$(0.16)

Note: The amounts of basic profit (loss) per share are adjusted to reflect the ten-to-one share consolidation conducted on
October 1, 2016.

96 Kureha Corporation Business Report 2017

Kureha Corporation Business Report 201797

Major Subsidiaries and Affiliates

Country

Company Name

Major BusinessJapan

Kureha Trading Co., Ltd.

Trading of chemical and plastic products

Resinous Kasei Co., Ltd.

Manufacture/sale of advanced materials

Kureha Extech Co., Ltd.

Manufacture/sale of plastic film and products

Kureha Extron Co., Ltd.

Manufacture/sale of plastic products

Kureha Gohsen Co., Ltd.

Manufacture/sale of plastic fiber and products

Kurehanishiki Construction Co., Ltd.

Construction

Kureha Engineering Co., Ltd.

Plant engineering and maintenance

Kureha Ecology Management Co., Ltd.

Waste treatment and management

Kureha Special Laboratory Co., Ltd.

Environmental/physiochemical evaluation and analysis

Kureha Unyu Co., Ltd.

Transportation and storage services

Kureha Service Co., Ltd.

Real estate, travel and welfare services for Kureha Group

Kureha Staff Service Co., Ltd.

Recruiting and staffing services

Kureha-kai Medical Corporation

Hospital operations (Kureha General Hospital)

Kureha America Inc.

Holding company and finance

Kureha America LLC

Sale of advanced products and packaging materials

Kureha PGA LLC

Manufacture/sale of PGA resins

Kureha Energy Solutions LLC

Sale of PGA downhole tools

Fortron Industries LLC*

Manufacture/sale of PPS resins and compounds

Germany

Kureha GmbH

Sale of advanced products

Netherlands

Kureha Europe B.V.

Holding company and financeKrehalon B.V.

Manufacture/sale of food packaging products

Australia

Krehalon Australia Pty. Ltd.

Sale of food packaging products

China

Kureha (China) Investment Co., Ltd.

Holding company and finance

Kureha (Shanghai) Carbon Fiber Materials Co., Ltd.

Manufacture/sale of carbon fiber products

Kureha (Changshu) Fluoropolymers Co., Ltd.

Manufacture/sale of PVDF resins and compounds

Nantong SKT New Material Co., Ltd.*

Manufacture/sale of PVDC resins and compounds

Kureha Vietnam Co., Ltd.

Manufacture/sale of food packaging films

USA

Vietnam*Affiliates accounted for by equity method

98 Kureha Corporation Business Report 2017

Investor Information

Building on Core Strengths
Kureha Corporation is a manufacturer of highly originative specialty chemicals andplastics that leverages proprietary technologies to develop products in the fields of(As of March 31, 2017)

Major Stockholders

Corporate Data
Corporate Name
Headquarters

advanced materials, agrochemicals, pharmaceuticals, and packaging materials. Since its

Kureha Corporation

Meiji Yasuda Life Insurance Company

3-3-2, Nihonbashi-Hamacho,

Japan Trustee Services Bank, Ltd. (Trust account)Chuo-ku, Tokyo 103-8552, JapanThe Master Trust Bank of Japan Ltd. (Trust account)Tel: 81-3-3249-4666

establishment in 1944, Kureha has utilized its strengths in technology and innovation to

Fax: 81-3-3249-4744
Date of Establishment

June 21, 1944

Paid-in Capital¥12,460 million

in harmony with the environment, and consistently create products that bring value to

Number of Employees

4,426

customers and society.

Independent Auditor

Ernst & Young ShinNihon LLC

provide a wide range of solutions suited to the market needs of each era.
Today, this corporate DNA drives Kureha to always pursue originality and excellence

Number of Shares ofCommon Stock Issued

To be a company supporting an ever-changing society.

We treasure people and the naturalenvironment.

●

We constantly evolve through innovation.

●

We contribute to society by developing
beneficial products.

Japan Trustee Services Bank, Ltd. (9 trust accounts)
Daiichi Sankyo Company, Ltd.
Japan Trustee Services Bank, Ltd. (5 trust accounts)

18,168,390 shares

Number of Shares Heldby Foreign Shareholders 4,276,480 (23.5% of total)

We formulated our Corporate Identity to reflect our●

Mizuho Bank, Ltd.

Number of Shareholders 13,517

To be a company that changes society for the better.
vision for Kureha.

JP MORGAN CHASE BANK 385166 (UK)Mizuho Trust & Banking Co., Ltd.

Stock Information

Corporate Philosophy

Tokio Marine & Nichido Fire Insurance Co., Ltd.

The Pursuit of
Excellence

Stock Exchange Listings Tokyo Stock Exchange
Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Contents
Profile......................................................................................01

Corporate Governance .............................................22

At a Glance.........................................................................02

Management Team .....................................................26

Consolidated Statements of
Changes in Equity .........................................................35

Consolidated Financial Highlights....................03

Consolidated Financial Summary ....................27

Consolidated Statements of Cash Flows ......37

President’s Message.....................................................04

Management Discussion and Analysis ........28

Business Plan Update..................................................08
The Year’s Highlights....................................................12

Consolidated Statements ofFinancial Position ...........................................................32

Notes to Consolidated Financial
Statements .........................................................................38

Review of Operations..................................................14

Consolidated Statements of Profit or Loss ....34

Research & Development........................................18

Consolidated Statements ofComprehensive Income ..........................................34

CSR.............................................................................................20

Major Subsidiaries and Affiliates.........................98
Investor Information ...................................................99

Kureha Corporation Business Report 201799

Business Report 2017
Year ended March 31, 2017

http://www.kureha.co.jp/

The Pursuit of Excellence
Printed in Japan