ANNUAL REPORT 2004

April1,2003-March 31,2004

FOCUSING BUSINESS RESOURCES,

DELIVERING CORPORATE VALUE
Corporate Profile

The Taiheiyo Cement Group is founded on the world’s fifth largest cement business 

in production capacity. It comprises 531 group companies, organized into seven in-house 

companies encompassing cement, mineral-resources, environmental, real-estate, 

construction-materials, ceramics and electronics, and international businesses.

 Our mission is to contribute to social infrastructure development by providing solutions 

that are environmentally efficient, enhance our competitive position and 

bring value to our stakeholders. Based on this philosophy, we seek to integrate management 

resources and use them effectively, minimize costs and risks, enhance profitability and reinforce 

our financial structure, and maximize enterprise value. At the same time, 

we are committed to protecting the global environment and playing an active role in 

building a recycling based society by exploiting the recycling technologies 

we have developed over our many years in the cement business.

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CONTENTS

Financial Highlights

To Our Shareholders

Management Restructuring and Organizational Reform

Special Topics 2004

Review of Operations Fiscal 2004

Fiscal 2005 Business Strategy for In-house Companies

Financial Section 

Consolidated Balance Sheets

Consolidated Statements of Income and Retained Earnings

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Report of Independent Auditors

Taiheiyo Cement Network

Directors and Corporate Auditors

Corporate Data

Forward-Looking Statements

Descriptions of future business results, projections and business plans contained in this annual report are forecasts based on assumptions about the future 

business environment made on data available at that time. This annual report is not a guarantee of the Company’s future business performance.

Note:"Ton" as used in this report refers to metric tons.
Financial Highlights

2004 2004 2003

2004 2003 2004

Note: US dollar amounts have been translated from Japanese yen at the rate of ¥105.69 to US$1, the approximate effective rate of exchange prevailing on 31 March 2004. 

CONSOLIDATED 

NON-CONSOLIDATED 

For the Year : 

Net Sales 

Income from Operations 

Income before Income Taxes 

Net Income

 

At Year-End : 

Total Shareholders' Equity 

Total Assets 

For the Year : 

Net Sales 

Income from Operations 

Income before Income Taxes

Net Income 

 

At Year-End : 

Total Shareholders' Equity 

Total Assets 

 

Amounts per Share of Common Stock: 

(in yen and U.S. dollars) 

Net Income

Cash Dividends 

(Millions of yen)

 $ 8,321,364

424,326

264,415

156,297

2,102,176

12,337,941

 $ 2,830,703

88,409

83,092

6,065

2,267,471

6,966,534

0.006

0.024

(Thousands of U.S. dollars) 

(Thousands of U.S. dollars) 

(Millions of yen)

¥ 330,162

12,993

6,007

3,166

230,319

783,397

3.33

2.50

¥ 927,956

46,025

16,799

6,262

207,204

1,410,143

¥ 299,177

9,344

8,782

641

239,649

736,293

0.68

2.50

¥ 879,485

44,847

27,946

16,519

222,179

1,303,997
Michio Kimura (left)

Fumio Sameshima (right)

To Our Shareholders

In fiscal 2004 (the year to 31 March 2004), the Taiheiyo Cement Group achieved record-high 

consolidated ordinary income despite lower sales. We are making steady progress in reducing 

interest-bearing debt by ¥200 billion, a goal in our Taiheiyo 04 Medium-Term Management 

Plan, by enhancing profitability, selling off and liquidating assets, and other measures.

Though economic conditions in Japan remained challenging due to the depressed employment situation 

and sluggish consumer spending during fiscal 2004, the year’s second half saw long-awaited signs of 

recovery, including an increase in exports, improvement in corporate earnings, and a rise in stock prices.

Nevertheless, with ongoing cutbacks and reductions in domestic public-sector investment, demand 

in our mainstay cement as well as our minerals and aggregates businesses continued to decline. In 

particular, domestic cement demand fell below 60 million tons for the first time in 32 years.

In overseas business, demand in the US was up slightly, while the overall Asian market was buoyant 

thanks to continued expansion in China and a recovery in all but a few Southeast Asian countries.

The zero emissions business benefited from progresses in moving society closer to the ideals of a 

recycling based society and advances in proper waste disposal because of the adoption of recycling 

legislation and policies. The ceramics and electronics business also performed well on a recovery in 

the semiconductor and IT industries.

As a result, consolidated net sales declined 5.2% year-on-year to ¥879,485 million and income from 

operations declined 2.6% to ¥44,847 million in fiscal 2004. Ordinary income rose 50.3% to ¥35,142 

million while net income jumped 163.8% to ¥16,519 million thanks to earnings improvement at 

equity-method subsidiaries and other factors. Further, as part of efforts to improve our financial 

structure—a primary goal of the Taiheiyo 04 Medium-Term Management Plan, we reduced interestbearing debt by ¥104.8 billion, due partly to the sale of the Toyosu ON Building, a large Companyowned property in Koto-ku, Tokyo.

Chairman and Representative Director

President and Representative Director
We introduced a new “in-house company” corporate structure on 1 April 2004 after deciding that an organizational format appropriate 

to consolidated management methods was urgently required (see pages 4–5 for more information). As part of our work to maximize 

business value, the Company’s main business operations have been grouped together into single “companies” (specialized units that will 

ultimately have to stand on their own two feet) which will encompass group companies in related areas. The objective of this change is 

to define ownership of responsibility in each of our respective businesses and to expedite the making and the execution of management 

decisions. As a natural progression from this new corporate structure, we will continue to rigorously identify unprofitable and profitable 

areas of activity and concentrate on those in which we excel while consolidating and integrating group companies. In parallel, we 

reorganized the Company’s headquarters into a group headquarters with three function-based divisions. We are downsizing our 

organization to achieve a “small headquarters” in an effort to raise operational efficiency going forward.

As a measure to reduce costs and raise efficiency, we discontinued cement production and dissolved Kawara Taiheiyo Cement 

Corporation, a domestic cement manufacturing subsidiary, at the end of March 2004.

Moreover, in addition to ongoing cost - cutting measures, we established the General Logistics Department by integrating the 

distribution units in each business segment to optimize logistics and cut distribution costs. We set the goal of reducing distribution costs 

by ¥10 billion during the three-year period from fiscal 2004 to fiscal 2006. As noted earlier, we downsized our headquarters to help 

lower fixed costs, and—with cement demand forecast to decline going forward—we are implementing uncompromising cost-cutting 

measures to transform fixed costs into variable ones.

At the same time, previous efforts in the overseas cement business are now bearing fruit and the segment is beginning to reap the 

benefits. In addition to business operations in the US remaining favorable, Dalian Onoda Cement Co., Ltd. in China is paying stock 

dividends for the first time, and conditions at Qinhuangdao Asano Cement Co., Ltd. and Jiangnan-Onoda Cement Co., Ltd. as well as at 

Nghi Son Cement Corporation in Vietnam lead us to expect the payment of dividends in the near future.

 Global cement demand is increasing, and the cement industry in Asia in particular is positioned as a growth industry. While considering 

the improvement in our company-wide financial structure, we are looking to seize opportunities and invest in areas promising high 

returns. With cement demand is growing in the West Coast region of the US, we plan to expand production capacity at our Arizona plant.

In fiscal 2005, despite expectations for gradual economic recovery mainly in the manufacturing sector, the outlook remains uncertain in 

the absence of clear signs of improvement in the income and employment environment.

 For the Taiheiyo Cement Group, we believe a decline in cement demand is inevitable as a result of cutbacks and reductions in domestic 

public-sector investment. Given these circumstances, we forecast consolidated net sales of ¥865 billion, income from operations of ¥43 

billion, ordinary income of ¥31 billion, and net income of ¥16 billion.

We expect to achieve the target in the Taiheiyo 04 Medium-Term Management Plan of reducing interest-bearing debt by ¥200 billion. 

Considering some of the recent corporate scandals around the world, strengthening the framework for corporate governance and 

promoting corporate social responsibility is a key issue for all organizations. As part of management restructuring in April 2004, we 

separated the management and operating functions of the Board of Directors to strengthen corporate governance and clarify operating 

responsibility. The Board of Directors will draft management policies and monitor and supervise operations while executive officers will 

focus on company operations. We are also working to reinforce our management supervisory system through an auditing system 

composed of five auditors, including two outside auditors.

Furthermore, while implementing organizational reform we established the Legal Department and Corporate Social Responsibility

Department to provide support in supervising management. We also established the Risk Management Committee and determined risk 

management guidelines for the purpose of comprehensive risk management.

 Going forward, we will redouble our efforts to raise management transparency and increase shareholder value.

 We look forward to the continued support and understanding of our shareholders.
Management Restructuring and Organizational Reform

We carried out management restructuring and organizational reform by introducing an 

executive officer system and an In-house Company Corporate Structure on 1 April 2004, with 

the aim of strengthening and raising the efficiency of group-wide consolidated management.

We introduced an executive officer system with the aim of strengthening corporate governance and 

clarifying operating responsibility by separating the management and operating functions of the Board 

of Directors.

In this system, the Board of Directors will draft management policies and monitor and supervise 

operations while executive officers will focus on company operations. We also reduced the number of 

board members from 22 to ten at the General Meeting of Shareholders in June 2004 as a result of 

introducing the executive officer system.

 1 Establishment of Executive Committee

We established the Executive Committee as a body to provide support to the decision making of the 

Board of Directors. The Executive Committee deliberates and decides on matters pertaining to the 

policies and direction of group management. Committee members comprise the representative directors, 

presidents of each in-house company, and the executive officers in charge of the Corporate Staff 

Division, Professional Staff Division, and Research & Development Division. 

 2 Executive Officer System

Executive officers are selected by the Board of Directors from among the executives and employees of 

Taiheiyo Cement and group companies and are appointed for a term of two years. Executive officers are 

divided into senior executive officers, managing executive officers, and executive officers, and their 

rank and responsibilities are determined by the Board of Directors. Executive officers have authority 

and responsibility according to their rank and separately determined operating responsibilities.

1 Establishment of Seven In-house

  Companies

We established in-house companies 

with the aim of strengthening group 

management in our respective business 

segments and maximizing business 

value. We seek prompt decision making 

by delegating substantial authority to 

each in-house company and to increase 

our ability to respond to changes in the 

business environment. 

Each in-house company encompasses 

the pertinent business segment of 

Taiheiyo Cement and group companies, 

and a company president is appointed 

for each from among the executive 

officers.
 2 Downsizing Headquarters Organization

Taiheiyo Cement's head office is positioned as the headquarters for group management and has been reorganized into the three 

function-based divisions listed below. This reorganization is intended to raise operating efficiency and advance organizational

downsizing to help us achieve a “small headquarters” moving forward.

1) Corporate Staff Division: Responsible for management support and in-house company coordination and monitoring

2) Professional Staff Division: Responsible for providing services based on its expertise and cost consciousness and for management and

 control of segments in its purview

3) Research & Development Division: Responsible for group-wide research and development

Taiheiyo Cement Corporation Group Companies

Note: The General Logistics Department was established in September 

2003 by integrating the distribution units of our respective business 

segments. The Legal Department and Corporate Social Responsibility 

Department were established within the Corporate Staff Division as 

part of organizational reform in April 2004 to support the supervisory 

functions of the management.
Protecting rare

plants-chichibu-iwazakura

Chihayamaru cement carrier

WBCSD logo mark

Cement shipment truck

Special Topics 2004

Launch General Logistics Department

We established the General Logistics Department in September 2003 by integrating the 

distribution units in our respective business segments to create a distribution system that 

transcends the boundaries between business segments. We make efforts to minimize 

distribution costs by building an optimal distribution system for the entire Taiheiyo Cement 

Group.

We established the General Logistics Department by separating sales from distribution and by 

integrating the distribution units in each business segment. This move was intended to create an optimal 

distribution system for the entire Taiheiyo Cement Group and reduce distribution costs. As a specific 

cost reduction target, we are looking to reduce domestic distribution costs at the parent company, 

which totaled approximately ¥70 billion in fiscal 2003, by 15%, or ¥10 billion, over the three-year period 

through fiscal 2006. We are also pursuing restructuring and cost reductions in our distribution 

operations overseas and at group companies. 

Specifically, we plan to raise efficiency by promoting return ship and truck transport, integrating 

shipping bases and converting them to other uses, and strengthening cooperation among group 

companies. Going forward, we will enhance our group-wide distribution service capabilities and provide 

robust distribution support to assist the development of each business segment.

Corporate Social Responsibility— Group Management Awareness

We established the Corporate Social Responsibility Department along with the introduction of 

the In-house Company Corporate Structure in April 2004. Going forward, we are stepping up 

corporate social responsibility (CSR) activities and seek to win the admiration of all our 

stakeholders and raise the enterprise value of the Taiheiyo Cement Group.

We have long since pursued a management direction that emphasizes CSR. As part of these efforts in 

recent years, we have aspired to meet the challenges of sustainable development and have been a 

member of the World Business Council for Sustainable Development (WBCSD) since 1999. More 

specifically, we aim for a “cement industry capable of continuous development with a view toward a 

sustainable society.” We launched and declared the “Agenda for Action” to the public in 2002.

Our Group management philosophy as well as our code of conduct also incorporates the concept of 

sustainable development. Our management is guided by a triple bottom line—one having economic, 

environmental, and social dimensions—and we are committed to making this approach permeate our 

entire organization to serve as the standard for day-to-day operations.

Going forward, we plan to establish a CSR Management Committee along with three subcommittees as 

vehicles for forging ahead with CSR-aware management. This committee will examine day-to-day 

operations and carry out activities from the perspective of corporate social responsibility. The Global 

Environment Conservation Committee and the SD Steering Committee will be integrated with the CSR 

Management Committee to facilitate a more comprehensive approach. Subcommittees will examine 

specific actions in a variety of areas, including corporate ethics, compliance, environmental 

conservation, and communications. We also plan to conduct an awareness survey and carry out training 

in order to deepen understanding about corporate social responsibility.
Ceremony for signing the

Tokyo Tama Ecocement contract

Artist's perspective of the

Tokyo Tama Ecocement plant

Shipping surplus

construction soil

Building a Recycling Based Society

Amid efforts to create a recycling based society, waste recycling is one area in which the cement 

industry can actively contribute. Taiheiyo Cement is helping to develop such a society based on 

recycling through an environmental business that recycles coal ash, waste plastics, sewage 

sludge, municipal waste incineration ash, blast furnace slag, waste plaster, and other waste 

materials and byproducts as raw material and fuel for making cement.

In June 2003, a consortium between Taiheiyo Cement and Ebara Corporation was awarded a “construct and 

operate” contract by the waste treatment association of Tama, Tokyo, to build and operate a facility that will 

convert waste from western Tokyo’s Tama district.

The project entails construction of an Ecocement plant on the grounds of the Futatsuzuka Waste Disposal 

Plant in Hinode-cho, Nishitama-gun, Tokyo, and the manufacture of ordinary Ecocement using the 

incineration ash discharged from waste incinerators operated by local municipalities (25 cities and one 

town) in the Tama area as the main raw material.

Construction work began in fiscal 2004 with completion expected in fiscal 2006. The construction 

contract is worth approximately ¥17.7 billion to Taiheiyo Cement. The operation contract is for a 20-year 

period commencing April 2006 and is valued at approximately ¥53 billion.

This marks the Company’s first comprehensive business project encompassing everything from 

construction of a public-sector facility to its operation on consignment.

Anticipating a stronger demand for recycling of surplus construction soil, Taiheiyo Cement 

intends to use its recycling technologies to recycle surplus construction soil as a raw material for 

cement.

In conjunction with the Soil Contamination Control Law taking effect in February 2003, the Taiheiyo 

Cement Group launched its surplus construction soil recycling business to provide support for a wide 

range of activities from soil sampling to recycling surplus soil as a raw material in cement. We also intend to 

increase the reprocessing and recycling capabilities in all the Taiheiyo Cement Group’s plants. This business 

is expanding favorably, and we anticipate significant growth in fiscal 2005.
Tsukumi plant (Oita prefecture)

Tosayama mine

(Kochi prefecture)

Hollow ceramic spheres

(E-spheres)

Jiangnan Onoda Cement Co., Ltd.

(China)

Review of Operations Fiscal 2004

Cement Business

Cement demand in Japan fell below the 60 million ton level to 59.68 million tons in fiscal 2004, 

representing a decrease of 6.0% year-on-year. In contrast, total export volume grew 15.4% to 9.87 

million tons. In this environment, the Company’s cement sales volume, including consignment sales, fell 

5.6% to 25.41 million tons. Domestic sales volume was down 7.6% at 21.62 million tons while exports 

rose 7.6% to 3.79 million tons.

Domestic cement prices increased as a result of negotiations for higher prices since the second half of 

fiscal 2003. Going forward, we are working to raise prices further as well as pass on the increase in 

costs from soaring coal prices.

 Export prices maintained an upward trend on a US dollar basis.

In overseas business, though sales in the US were firm on a slight increase in demand, surging 

electricity prices and other factors had an impact. Demand continued to expand in China thanks to 

infrastructure development, and it recovered in all but a few Southeast Asian countries. As a result, 

demand in the overall Asian market increased. Business in China and Vietnam was especially strong. At 

Ssangyong Cement Industrial Co., Ltd., an equity-method subsidiary in South Korea, the cement and 

ready-mixed concrete businesses performed well, and the company is moving forward with management 

restructuring based on its management rationalization plan.

Minerals and Aggregates Business

Aggregate sales decreased year-on-year due to the ongoing decline in demand for use in ready-mixed 

concrete. Mineral product sales were also down as relatively strong sales to the steel and other 

industries was unable to compensate for a decline in limestone and other products.

For landfill material, demand for the Central Japan International Airport ended in fiscal 2003, while 

shipment volume for the second phase of Kansai International Airport was down sharply.

In response to the Soil Contamination Control Law taking effect in February 2003, we launched the 

surplus construction soil recycling business and have received orders from numerous construction sites 

within Japan and have been processing it in all of our plants.
Ceraart trimming material

(A&A Material Corporation)

Kiyosumi golf club

 (Saitama prefecture)

Tokyo Tama Ecocement plant

ground-breaking ceremony

Construction and Construction Materials Business

In the autoclaved lightweight concrete (ALC), slate, and construction-materials businesses, though sales 

decreased as a result of slumping demand and depressed market prices, profits improved thanks to cost 

cutting and other factors.

The ready-mixed concrete business also continued to face a difficult operating environment, but due to 

ongoing streamlining measures, such as the consolidation of ready-mixed concrete subsidiaries, the 

business remained profitable.

Real Estate Business

We continued to operate the real estate leasing and sales businesses to effectively use property owned by 

the Group across Japan. However, conditions remained difficult on the back of the continuing slump in the 

real estate market and deterioration in the operating environment for the office building business.

Both sales and profits decreased year-on-year as a result of a decline in leasing revenue due to the 

liquidation of leasing properties as part of prioritizing efforts to improve the financial structure.

Other Businesses

The other-businesses segment continued to expand, driven by the mainstay zero emissions business and the 

ceramics and electronics business. The zero emissions business enjoyed favorable growth in the recycling 

of industrial waste such as coal ash, as well as municipal waste. We also received an order from the waste 

treatment association of Tama, Tokyo, in July 2003 to build and operate a facility that converts incineration 

ash from the Tama region into Ecocement. Plant construction started in January 2004.

 In the ceramics and electronics business, the Electronics Manufacturing Service (EMS) business performed 

well both in Japan and overseas and contributed to earnings.
Saitama plant

Tokyo cement terminal

Shin kansai Asano Mining Co., Ltd.

(Hyogo prefecture)

 Ofunato mine (Iwate prefecture)

Fiscal 2005 Business Strategy for 

In-house Companies

Cement Business Company Teiji Matsuda, President

As the main business of the Taiheiyo Cement Group, the Cement Business Company comprises 324 

group companies and is involved in the manufacture and sales of cement and ready-mixed concrete.

Domestic cement demand is decreasing as a result of shrinking public-sector investment and other factors, but 

from a global perspective, the cement market is growing, and we have an opportunity for growth through global 

expansion. Moreover, Japan’s cement industry is a global leader in responding to environmental issues through 

waste treatment, recycling technologies, and other means. The Taiheiyo Cement Group’s cement business can 

therefore grow and develop by applying the Group’s advanced technologies and expertise to its global business.

We are committed to increasing profits going forward, and, in particular, to raising the ratio of ordinary income 

to sales. We are also working to achieve a robust business structure that can secure earnings while balancing 

supply and demand. 

Our basic management stance is to pursue management practices that earn the trust of all our stakeholders, 

including shareholders, customers, local communities, industry, group companies, and company employees.

To secure stable earnings, we need to normalize cement prices while gaining the understanding of our 

customers in an effort to optimize balance in supply and demand. It is imperative that we be able to maintain 

price hikes carried out to date while working toward a new round of price increases.

At the same time, based on the theme of enhancing market competitiveness, we are focusing on reducing costs 

further while providing high value-added services that leverage group synergies through collaboration with other 

in-house companies in order to not be affected by price competition.

Mineral Resources Business Company Kazushige Kitamura, President

The Mineral Resources Business Company comprises 64 group companies and is primarily engaged in 

the mining, processing, and sale of mineral products, notably limestone.

The Mineral Resources Business Company seeks to enhance the efficiency of operations through an integrated 

manufacturing and sales system. Going forward, we aim to further develop and expand this business by 

effectively using the Group’s wealth of management resources, including personnel, mineral resources, and 

information.

Aggregate demand continues to decrease annually along with the decline in cement demand. Landfill material 

demand has compensated sales decreases in aggregates for several years and is approaching an end. To survive in 

this challenging business environment, we are working to cut manufacturing costs further, expand existing 

businesses, and actively pursue new business such as the recycling of surplus soil generated during construction.

In sales, we are working to normalize aggregate prices by focusing on deepening relationships with current 

customers and developing new customers. For mineral products, because sales volume is firm, buoyed by strong 

limestone demand from the steel industry, we continue to work on restoring prices as a priority issue. The 

surplus construction soil recycling business, launched in April 2003, is doing well thanks to the receipt of large 

orders, and we target volume of 500,000 tons in fiscal 2005.

 In the landfill material business, shipments to Kansai International Airport are in the final phase. Going forward, 

there are plans to expand Haneda Airport and, though construction methods are still undecided, we are making 

every effort to participate in this project.

In overseas business, we are exporting limestone to the steel industries in Taiwan and South Korea and, with 

numerous plans to construct steel mills and power plants afoot, we are also considering the future possibilities of 

business in China.
Wood biomass recycling unit

(Oita prefecture)

Kiyosumi golf club

 (Saitama prefecture)

HARMONITE SEIZE

trimming material

(Clion Co., Ltd.)

Environmental Business Company Kazushige Kitamura, President

The Environmental Business Company is comprised of six group companies and is engaged in the 

recycling of waste materials and byproducts and in the development, manufacture, and sale of 

environmental products such as flue gas desulfurization products.

The objective of the environmental business is to expand the recycling of waste at cement factories and other 

recycling businesses. The Company used a total of 322kg of waste and byproducts per ton of cement in fiscal 2004, 

but a report by an investigative committee established by the Ministry of Economy, Trade and Industry recommended 

that the cement industry use 400kg by 2010. To this end, we are developing a more efficient regional distribution 

system and expanding waste recycling, especially at our mainstay Kamiiso Plant (Hokkaido) and Tsukumi Plant (Oita). 

We are also considering entry into new environmental businesses that address social needs, including the treatment 

of contaminated soil and illegally dumped waste. 

NACODE Corporation is augmenting its wood chip processing business and is currently building facilities to launch a new 

waste plasterboard processing business. Taiheiyo Soil Corporation is expanding sales and developing new customers for its 

powder-based compound products and liquefied soil stabilization method, which are produced at the Kanto Ash Center. 

Tokyo Tama Ecocement Inc. is working hard to lay the groundwork to begin operations at its Ecocement plant in fiscal 2007.

Real Estate Business Company Tadaharu Kamei, President

The Real Estate Business Company comprises eight group companies and is engaged in real estate, nonlife insurance, sports facility management, and other areas of business.

We aspire to achieve a non-asset business from the perspective of “using”rather than “owning” assets. Further, we 

take full advantage of newly created business opportunities while seeking to employ securitization, liquidation and 

other techniques.

The Real Estate Business Company is actively assuming its role as a real estate management hub for the Taiheiyo 

Cement Group as a means of putting real estate owned by group companies to effective use. The group companies 

comprising the Real Estate Business Company are engaged in a variety of businesses, including real estate, sports 

facility management, and non-life insurance, and we are strengthening cooperation among group companies with the 

aim of optimal management.

Construction Materials Business Company Takashi Shimoda, President

The Construction Materials Business Company comprises 35 companies and is engaged in the 

manufacture and sale of construction and civil engineering materials and concrete products and in 

concrete diagnostics and repair.

Our primary objective is to achieve customer satisfaction by providing high-performance, high-quality construction 

and civil engineering materials and by performing construction and civil engineering work with superior cost 

performance. In seeking cooperation among group companies, we have established the action guidelines of “speed, 

efficiency, and tangible results”and are pursuing “results management”based rigorous time and figures to achieve 

profit targets.
Ceratec Porefree, an

epoch-making ceramic material

(NIHON CERATEC Co., Ltd.)

TAIHEIYO CEMENT

PHILIPPINES, INC.

(Philippines)

ALC Clion tile panel

In our construction materials-related businesses, the concrete diagnostic and repair business is performing well, 

and we are focusing on renovation construction such as the conversion of office buildings into residential 

condominiums. Additionally, we have growing expectations for the future use of Ductal R with companies 

concluding sublicensing agreements and developing variety of products. Going forward, we seek to offer one-stop 

shopping by creating a single package for the products and construction methods of group companies targeting 

the same market, and to strengthen businesses that target growth markets.

Ceramics & Electronics Business Company Takashi Shimoda, President

The Ceramics & Electronics Business Company comprises eight companies and is engaged in the 

manufacture and sale of semiconductor and LCD manufacturing equipment components and 

piezoelectric ceramic products and in the Electronics Manufacturing Service (EMS) business.

We are accelerating growth by pursuing technology as a unifying force for group companies comprising the 

Ceramics & Electronics Business Company. Nihon Ceratec Co., Ltd., a manufacturer of a variety of ceramic 

products, including semiconductor and LCD manufacturing equipment components, is enjoying extremely strong 

growth. CELANX KK which manufactures metal matrix composites (MMC) is also strong, and we are raising our 

ability to respond to the increasingly sophisticated needs of our customers in terms of larger products and other 

requirements. At Sanshin Electric Co., Ltd., which manufactures car tuners and measurement and control 

equipment and operates the EMS business (outsourced electronics production), we aim to increase earnings 

further by enhancing management efficiency.

Nihon Ceratec and CELANX KK are involved in complementary businesses. We are therefore combining their 

areas of specialty, separating components based on size and required features, and emphasizing the strengths that 

differentiate them from their competitors. We also seek to link ceramics and electronics and develop business in 

areas that are expected to grow. Moving forward, we are looking to enhance our market presence by broadening 

the scope of our business.

International Business Company Keiji Tokuue, President

The International Business Company comprises 43 group companies and is engaged in the overseas 

manufacture and sale of cement and ready-mixed concrete and in exporting cement.

The International Business Company aims to be internationally competitive and a leading player in global 

markets. Our first basic policy is to achieve stable growth and maximizing earnings in existing businesses by 

reforming our general growth platform for overseas business. We are also promoting localization. Our second 

basic policy is to continuously strive to rapidly expand overseas business. We previously prioritized the reduction 

of interest-bearing debt and held off on large-scale investment, but starting in fiscal 2005, we plan to lay the 

groundwork for the next round of growth.

Our third basic policy is to sharpen our focus on overseas business and introduce a more effective risk 

management system. We are pursuing rigorous “selection and consolidation”of our businesses, working to 

improve unprofitable businesses within one to two years, and developing measures to avoid the risks associated 

with launching new businesses. Our fourth basic policy is internal reform. We seek to establish an in-house 

company with a competitive advantage and are working to toward quick and efficient decision making, the ability 

to adapt flexibly in problem solving, and a streamlined organization.

Fiscal 2005 Business Strategy for 

In-house Companies
Financial Section

14

16

17

18

29

30

32

33

CONTENTS

Consolidated Balance Sheets

Consolidated Statements of Income and Retained Earnings

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Report of Independent Auditors

Taiheiyo Cement Network

Directors and Corporate Auditors

Corporate Data
Consolidated Balance Sheets

Assets

Current assets:

 Cash and time deposits (Notes 6 and 9)

 Notes and accounts receivable (Note 9)

 Less: allowance for doubtful accounts

 Inventories

 Deferred income taxes (Note 17)

 Other 

Investments, advances and other assets:

 Investments in securities (Notes 7 and 9)

 Long-term loans

 Other (Note 9)

 Less: allowance for doubtful accounts

Property, plant and equipment, at cost (Note 9):

 Buildings and structures

 Machinery and equipment

 Other

 Less: accumulated depreciation

 Land (Note 13)

 Construction in progress

Goodwill and other intangibles

Deferred income taxes (Note 17)

 Total assets

(Thousands of U.S. dollars) 

2003

(Millions of yen)

(Note 5)

2004 2004

The accompanying notes are an integral part of these statements.

¥ 85,851

188,360

(2,643)

185,717

66,218

2,904

23,378

364,068

159,375

9,582

65,304

234,261

(15,856)

218,405

504,691

813,654

52,630

1,370,975

(959,243)

411,732

222,279

20,815

654,826

50,965

15,733

¥1,303,997

$ 812,291

1,782,193

(25,007)

1,757,186

626,530

27,477

221,194

3,444,678

1,507,951

90,661

617,883

2,216,492

(150,024)

2,066,468

4,775,201

7,698,495

497,966

12,971,662

(9,076,005)

3,895,657

2,103,122

196,944

6,195,723

482,212

148,860

$12,337,941

¥ 96,716

185,043

(2,468)

182,575

69,096

1,709

36,820

386,916

145,559

8,556

71,682

225,797

(18,150)

207,647

577,386

895,752

55,575

1,528,713

(1,042,970)

485,743

228,118

18,966

732,827

53,920

28,833

¥ 1,410,143

Taiheiyo Cement Corporation and Subsidiaries 

As of 31st March, 2003 and 2004
Liabilities, minority interests and shareholders’ equity 2003 2004 2004

Current liabilities:

 Short-term bank loans (Notes 8 and 9)

 Commercial paper (Note 8)

 Current portion of long-term debt (Notes 8 and 9)

 Notes and accounts payable (Note 9)

 Income taxes payable (Note 17)

 Deferred income taxes (Note 17)

 Other (Note 9)

Non-current liabilities:

 Long-term debt (Notes 8 and 9)

 Deposits received from retailers (Note 8)

 Deferred income taxes (Note 17)

 Accrued retirement benefits to:

 Employees (Note 10)

 Directors and corporate auditors

Other (Note 9)

Minority interests in consolidated subsidiaries

Contingent liabilities (Note 11)

Shareholders’ equity (Note 12):

Common stock:

 Authorized:

 1,977,308,000 shares as of 31st March, 2003 and 2004

 Issued:

 950,300,586 shares as of 31st March, 2003 and 2004

Additional paid-in capital

Retained earnings

Revaluation excess (Note 13)

Unrealized gain on other securities

Foreign currency translation adjustments

Less: treasury stock, at cost

(24,684,936 shares as of 31st March, 2003 and 19,633,970 shares 31st March, 2004)

Total shareholders’ equity

Total liabilities, minority interests and shareholders’ equity

¥ 297,288

8,000

154,596

119,399

3,630

3,670

71,789

658,372

383,513

19,204

34,253

36,183

2,714

38,897

40,813

516,680

27,887

69,499

58,229

74,610

7,615

2,293

(1,406)

(3,636)

207,204

¥ 1,410,143

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

(Note 5)

$ 2,641,357

–

966,336

1,100,265

68,199

1,523

581,152

5,358,832

3,379,922

173,186

294,825

337,686

29,056

366,742

386,858

4,601,533

275,400

657,574

553,410

839,900

50,847

155,199

(125,953)

(28,801)

2,102,176

$12,337,941

¥ 279,165

–

102,132

116,287

7,208

161

61,422

566,375

357,224

18,304

31,160

35,690

3,071

38,761

40,887

486,336

29,107

69,499

58,490

88,769

5,374

16,403

(13,312)

(3,044)

222,179

¥1,303,997
2003 2004 2004

The accompanying notes are an integral part of these statements.

(Thousands of U.S. dollars) (Millions of yen) (Note 5)

¥ 927,956

734,053

193,903

147,878

46,025

2,497

(16,543)

9,233

598

(2,044)

(7,032)

(1,702)

(4,992)

2,099

(6,436)

(1,647)

–

–

(3,257)

(29,226)

16,799

7,597

1,652

9,249

1,288

6,262

70,440

513

98

129

(2,756)

(76)

¥ 74,610

¥ 6.64

2.50

(Yen) (U.S. dollars) (Note 5)

¥  879,485

688,443

191,042

146,195

44,847

5,827

(15,011)

2,761

2,945

(2,006)

(183)

(2,153)

(1,305)

–

504

–

2,875

(5,603)

(5,552)

(16,901)

27,946

12,191

(3,165)

9,026

2,401

16,519

74,610

–

–

2

(2,299)

(63)

¥ 88,769

¥ 17.71

2.50

$  8,321,364

6,513,795

1,807,569

1,383,243

424,326

55,133

(142,029)

26,123

27,865

(18,980)

(1,731)

(20,371)

(12,347)

–

4,769

–

27,202

(53,014)

(52,531)

(159,911)

264,415

115,347

(29,946)

85,401

22,717

156,297

705,932

–

–

19

(21,752)

(596)

$ 839,900

$ 0.17

0.02

Net sales

Cost of sales

  Gross profit

Selling, general and administrative expenses (Notes 14 and 15)

  Income from operations

Other income (expenses):

Interest and dividend income

Interest expenses

Gain on sales/disposal of property, plant and equipment

Gain on sale of investments in securities

Liquidation of unconsolidated subsidiaries and affiliates

Write-off of investments in securities

Special allowance to employees retired under early retirement scheme

Provision for allowance for doubtful accounts

Gain on exemption from payment of future benefit obligation (Note 4(8))

Equity in earnings (losses) of unconsolidated subsidiaries and affiliates

Loss on discontinued operation

Gain on dilution of ownership in affiliated companies

Loss on closure of a cement plant (Note 16)

Other, net

  Income before income taxes

Income taxes (Note 17):

Current

Deferred

Minority interests in net income of consolidated subsidiaries

Net income

Retained earnings

Balance at beginning of year

   

  Increase:

   Changes in scope of consolidation and application of equity method 

    of accounting

   Merger of consolidated subsidiaries

   Reversal of revaluation excess

  Decrease:

   Cash dividends

   Directors’ and corporate auditors’ bonuses

   Balance at end of year

Per share (Note 4(11)):

  Net income

  Cash dividends

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004

Consolidated Statements of Income and Retained Earnings
2003 2004 2004

The accompanying notes are an integral part of these statements.

(Thousands of U.S. dollars) (Millions of yen) (Note 5)

¥  27,946

45,228

943

(504)

(2,945)

2,006

183

529

(2,104)

(5,827)

15,011

1,280

(6,037)

1,884

(612)

(177)

76,804

2,648

(16,483)

(7,293)

55,676

57

(32,111)

46,514

(1,583)

10,438

(194)

(22,954)

26,732

4,686

¥   31,585

¥ (21,241)

(8,000)

56,259

(77,527)

27,600

(72,562)

(84)

1,096

(2,594)

1,049

(96,004)

(1,884)

(10,627)

91,235

16

(90)

¥ 80,534

$ 264,415

427,931

8,922

(4,769)

(27,865)

18,980

1,731

5,005

(19,907)

(55,133)

142,029

12,111

(57,120)

17,826

(5,791)

(1,674)

726,691

25,054

(155,956)

(69,003)

526,786

539

(303,822)

440,098

(14,978)

98,761

(1,836)

(217,182)

252,929

44,337

$ 298,846

$ (200,975)

(75,693)

532,302

(733,532)

261,141

(686,555)

(795)

10,370

(24,543)

9,925

(908,355)

(17,826)

(100,549)

863,232

151

(851)

$ 761,983

¥ 16,799

54,006

1,198

6,436

(598)

2,044

7,032

(1,206)

(630)

(2,497)

16,543

(9,233)

24,465

978

(22,799)

(11,604)

80,934

2,350

(16,666)

(7,436)

59,182

1,288

(35,587)

36,408

(4,487)

5,686

974

(25,964)

25,868

(2,165)

¥ 2,021

¥ (47,407)

(13,000)

79,764

(67,276)

11,650

(10,108)

(172)

–

(2,852)

–

(49,401)

(1,118)

10,684

80,808

151

(408)

¥ 91,235

Cash flows from operating activities

Income before income taxes

Depreciation and amortization

Amortization of difference between equity in net assets of consolidated subsidiaries and investment cost

Equity in losses (gains) of unconsolidated subsidiaries and affiliates

Disposal of investments in unconsolidated subsidiaries and affiliates

Liquidation of unconsolidated subsidiaries and affiliates

Write-off of investments

Decrease (increase) in accrued retirement benefits

Decrease in allowance for doubtful accounts

Interest and dividend income

Interest expenses

(Gain) loss on sale/disposal of property, plant and equipment

Decrease (increase) in notes and accounts receivable

Decrease in inventories

Decrease in notes and accounts payable

Other, net

  Subtotal

Interest and dividends received

Interest paid

Income taxes paid

Net cash provided by operating activities

Cash flows from investing activities

Decrease in time deposits

Purchase of property, plant and equipment

Proceeds from sale of property, plant and equipment

Purchase of investments in securities

Proceeds from sale of investments in securities

Proceeds from sale (payment for purchase) 

  of subsidiaries’ stock resulting in changes in the scope of consolidation

Long-term loans made

Collections of long-term loans receivable

Other, net

Net cash provided by investing activities

Cash flows from financing activities

Decrease in short-term borrowings

Decrease in commercial paper

Proceeds from long-term borrowings

Repayment of long-term borrowings

Proceeds from issuance of bonds

Redemption of bonds

Repayment of treasury stocks

Issue of shares

Cash dividends paid

Disposal of treasury stock

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Increase in cash and cash equivalents resulting from merger of consolidated subsidiaries

Cash and cash equivalents at beginning of year resulting from changes in the scope of consolidation

Cash and cash equivalents at end of year (Note 6)

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004

Consolidated Statements of Cash Flows
<Yen in millions and U.S. dollars in thousands, except Note 2 

(1) and (2) and share capital amounts in Note 2, conversion 

price of convertible bonds and per share amounts and unless 

otherwise indicated.>

The accompanying consolidated financial statements of Taiheiyo 

Cement Corporation (the “Company”) and consolidated 

subsidiaries are prepared on the basis of accounting principles 

generally accepted in Japan, which are different in certain 

respects as to application and disclosure requirements of 

International Financial Reporting Standards, and are compiled 

from the consolidated financial statements prepared by the 

Company as required by the Securities and Exchange Law of 

Japan.

For preparing the accompanying consolidated financial 

statements, certain items presented in the consolidated financial 

statements filed with the Directors of Kanto Finance Bureau in 

Japan have been reclassified and/or recapitulated in these 

accounts and certain notes have been added for the convenience 

of readers outside Japan and to comform to the current year 

presentation.

Under Japanese accounting standards, a subsidiary and an 

affiliate are defined as follows:

● a subsidiary : a company in which the reporting entity directly 

or indirectly holds more than 50% of the voting rights thereof or 

which is deemed to be controlled directly or indirectly by the 

reporting entity; and

● an affiliate : a company in which the reporting entity directly 

or indirectly holds 20% or more of the voting rights thereof or in 

which the reporting entity is deemed to exercise significant 

influence directly or indirectly on its decision making

(1) Scope of Consolidation

The number of subsidiaries the Company had for the year ended 

31st March, 2003 and 2004 were 383 and 356, respectively, of 

which 201 and 189, respectively, were consolidated in the 

respective years.

The significant subsidiaries which have been consolidated with 

the Company are listed below:

The remaining 167 unconsolidated subsidiaries for the year 

ended 31st March, 2004 (182 for the year ended 31st March, 

2003) have not been consolidated with the Company since the 

total assets, net sales and net income of those companies in the 

aggregate were not significant in light of those of the 

consolidated financial statements of the Companies.

(2) Investments in Unconsolidated Subsidiaries and

 Affiliates

For the year ended 31st March, 2004, the Company had 174 

affiliates (188 for the year ended 31st March, 2003), of which 65 

affiliates (72 for the year ended 31st March, 2003) were 

accounted for by the equity method as are 19 unconsolidated 

subsidiaries (25 for the year ended 31st March, 2003).

Investments in the remaining 148 unconsolidated subsidiaries 

and 109 affiliates (157 and 116, respectively, for the year ended 

31st March, 2003) were carried at cost due to the immateriality 

of the effect to the consolidated financial position and the 

results of operations of the Companies.

1. Basis of Presenting the Consolidated Financial Statements

2. Scope of Consolidation and Investments in

 Unconsolidated Subsidiaries and Affiliates

Consolidated subsidiaries

(Domestic)

 NM Cement Co., Ltd.

 CLION Co., Ltd.

 Chichibu Onoda Fudousan Co., Ltd.

 Mitsui Wharf Co., Ltd.

 Myojo Cement Co., Ltd.

 Taiheiyo Material Corporation

 Teihyu Co., Ltd.

(Overseas)

 Taiheiyo Cement U.S.A., Inc. (USA)

 California Portland Cement Company (USA)

 Jiangnan-Onoda Cement Co., Ltd. (China)

 Dalian Onoda Cement Co., Ltd. (China)

 Qinhuangdao Asano Cement Co., Ltd. (China)

 Nghi Son Cement Corporation (Vietnam)

70.0

94.5

100.0

100.0

100.0

100.0

100.0

100.0

100.0

80.8

77.2

71.9

65.0

¥ 8,650

5,489

3,600

3,500

2,500

1,631

1,498

$ 63.5

24.2

134.3

82.8

93.1

108.1

* as of 31st March, 2004

Equity ownership*

(%)

Share capital*

(Millions of yen)

(Millions of U.S. dollars)

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004
The unconsolidated subsidiaries and significant affiliates, to 

which the equity method was applied, include:

For subsidiaries and affiliates which are accounted for by the 

equity method and of which net assets are negative, ¥5,879 

($55,630) has been directly deducted from “Investments in and 

advances to unconsolidated subsidiaries and affiliates” in the 

accompanying consolidated balance sheet as of 31st March, 2004 

by taking into account the amounts of loans to and guarantees 

for those companies (¥7,395 as of 31st March, 2003).

For consolidation, all significant inter-company transactions, 

account balances and unrealized profit / loss arising from intercompany transactions have been eliminated.

Where the year-end dates of consolidated subsidiaries and 

unconsolidated subsidiaries and affiliates accounted for by the 

equity method are different from that of the Company, necessary 

adjustments have been made to any significant transactions that 

took place between such different year-end dates.

Adjustment is made to computation of depreciation of assets 

carrying unrealized profits incurred from inter-company 

transactions among the Companies.

Difference between the cost of an investment in a consolidated 

subsidiary and the amount of underlying equity in net assets at 

fair value of such subsidiary is directly charged/credited, as the 

case may be, against income for the year unless such difference is 

material. If the difference is material and the effective period is 

able to be estimated, the difference is amortized over the 

relevant estimated effective period.

Significant accounting policies employed by the Company and its 

consolidated subsidiaries in preparing the accompanying 

3. Consolidation Policies

consolidated financial statements are outlined below:

(1) Inventories

Generally, inventories are stated at cost, which is determined by 

the moving average method. Appropriate write-downs are 

recorded for inventories which are deemed impaired in value. 

Inventories held by the consolidated subsidiaries in the U.S.A. 

are valued at the lower of cost or market, cost being determined 

by the average method.

(2) Property, Plant and Equipment

Property, plant and equipment are stated at cost.

 Depreciation is computed generally based on the decliningbalance method by the Company and its domestic consolidated 

subsidiaries at rates based on the estimated useful lives of assets. 

The depreciation of buildings, excluding leasehold 

improvements, purchased on and after 1st April, 1998 is 

computed based on the straight-line method. 

Depreciation of property and equipment held by the 

subsidiaries in foreign countries is calculated by the straight-line 

method in accordance with accounting standards generally 

accepted in the respective countries.

The range of useful lives is summarized as follows:

 Buildings and structures 10 – 75 years

 Machinery and equipment 4 – 15 years

Normal repairs and maintenance including minor renewals and 

improvements are charged to income as incurred.

(3) Financial Instruments

(a) Derivatives

All derivatives, except for derivatives that are designated as 

“hedging instruments” (see (c) Hedge Accounting below), are stated 

at fair value, and the changes in fair value are included in the determination of net profit or loss for the period in which they arise.

(b) Securities

 Securities are classified in accordance with Japanese accounting 

standards into four categories, namely, trading securities, held-tomaturity securities, shares in equity of subsidiaries and affiliates 

and other securities. 

Trading securities and certain financial instruments which meet 

strict conditions are categorized as current assets, and all other 

securities other than investments in consolidated subsidiaries are 

shown as “Investments in securities” and included in 

“Investments in and advances to unconsolidated subsidiaries and 

affiliates” in the accompanying consolidated balance sheets, as 

the case may be.

Valuation of securities is as follows:

Trading securities are valued at fair market value at the year-end 

and the resulting valuation gain/loss is charged to income;

4. Summary of Significant Accounting Policies

Unconsolidated subsidiaries/affiliates

(Domestic)

 NIPPON HUME CORPORATION

 A&A Material Corporation

 DC Co., Ltd.

 ORIENTAL Construction Co., Ltd.

 Fuji P.S Corporation

 Magu Co., Ltd.

 Yakushima Denko Co., Ltd.

 Asahi Concrete Works Co., Ltd.

(Overseas)

 Ssangyong Cement Industrial Co., Ltd. (Korea)

30.9

43.0

33.4

19.9

21.4

45.8

49.5

21.5

27.7

¥ 5,251

3,889

3,402

2,985

2,379

2,217

2,006

1,204

1,810.8

* as of 31st March, 2004

Equity ownership*

(%)

Share capital*

(Millions of yen)

(Billions of Korean Won)
Held-to-maturity debt securities are valued by applying 

amortization/accumulation unless impairments in value are to be 

recognized;

and

With respect to other securities, such securities with market 

value are valued at market value and those without market value 

are valued at cost unless impairments in value of those 

investments are to be recognized. The unrealized gain/loss 

resulting from the valuation on other securities at the year-end is 

shown as “Unrealized gain on other securities” in the amount 

after netting deferred income taxes thereon in the 

accompanying consolidated balance sheets. Cost of securities 

sold is determined by the moving-average method.

Where market values of other securities are 50% of the 

carrying value or lower at the end of the financial year, such 

securities are written off to such market value. With respect to 

other securities of which market values have declined between 

30% and 50% of the respective carrying values, amounts to be 

written off are determined by considering the recoverability of 

the respective securities.

(c) Hedge Accounting

Gains or losses arising from changes in fair value of the 

derivatives designated as hedging instruments are deferred as an 

asset or liability and included in net profit or loss in the same 

period during which the gains and losses on the hedged items or 

transactions are recognized.

The derivatives designated as hedging instruments are 

principally interest swaps and forward exchange contracts. The 

related hedged items are trade accounts receivable and payable, 

long-term bank loans, and debt securities.

The Company has a policy to utilize the above hedging 

instruments in order to reduce the exposure to the risk of 

interest rate fluctuation. Thus, the purchases of the hedging 

instruments are limited to, at maximum, the amounts of the 

hedged items. Effectiveness of hedging activities is evaluated by 

reference to the accumulated gains or losses on the hedging 

instruments and the related hedged items from the 

commencement of the hedges.

(4) Foreign Currency Translation

(Translation of foreign currency financial statements of overseas 

subsidiaries and affiliates)

Exchange rates at the balance sheet date are applied for all assets 

and liabilities and the historical rates are applied to 

shareholders’ equity whereas profit and loss items are translated 

at the average exchange rates prevailing during the year. Items 

related to inter-company transactions with the Company which 

are subject to elimination on consolidation are translated in the 

amounts the Company recorded. 

 The difference in the debits and credits in the balance sheets 

resulting from translation in the above manner is shown as 

“Foreign currency translation adjustments” in the shareholders’ 

equity in the amounts after netting the amount attributable to 

the minority interests in consolidated subsidiaries in the 

accompanying consolidated balance sheets.

(Translation of foreign currency items)

Receivables and payables denominated in foreign currencies 

were translated into Japanese yen at the exchange rates at the 

balance sheet date. Gains or losses arising from transactions in 

foreign currency receivables and payables are credited or 

charged to income as incurred.

(5) Cash and Cash Equivalents

Cash and cash equivalents in the consolidated statement of cash 

flows consist of cash in hand, bank deposits always available, and 

short-term investments with a maturity of three months or less 

when purchased.

(6) Income Taxes

Deferred tax accounting is applied for the preparation of the 

accompanying consolidated financial statements. The asset and 

liability approach is used to recognize deferred tax assets and 

liabilities in respect of temporary differences between the 

carrying amounts and the tax basis of assets and liabilities.

(7) Amortization of Goodwill and Software

(Goodwill)

In accordance with SFAS No. 142, goodwill recorded in the 

consolidated subsidiary in the U.S.A. is no longer subject to 

amortization effective from the year ended 31st March, 2003 but 

is tested for impairment annually and when symptom of 

impairment thereon is recognized.

(Software)

Capitalized software is amortized by the straight-line method 

based over the estimated useful lives (basically 5 years).

(8) Recognition of Certain Accrued Expenses

In general, the accrual basis of accounting for all income and 

expense items are followed for the preparation of the 

accompanying consolidated financial statements.

(i) Allowance for doubtful accounts

Allowance for doubtful accounts is provided based on the 

estimated uncollectible amounts for doubtful receivables in 

addition to a general provision for normal receivables computed 

by applying past credit loss experience. Consolidated overseas 

subsidiaries mainly provide for such allowance at the estimated 

amounts of credit losses.

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004
(ii) Accrued retirement benefits

(Retirement benefits to employees)

Employees are generally entitled to lump-sum retirement and/or 

annuity upon termination of services to a company, the amount 

of which is determined in light of the regulations set forth 

within the relevant companies of the Group. As a part of such 

employees retirement benefit scheme, the Company and certain 

subsidiaries have non-contributory pension funds.

Accrued retirement benefits to employees are provided in the 

amount of projected benefit obligation less fair value of fund 

assets at the end of the financial year.

A part of the Japanese national pension scheme had been run 

by the Company with permission granted by the Minister of 

Health, Labor and Welfare, but on 1st August, 2002, the Company 

obtained an approval from the Minister of Health, Labor and 

Welfare for exemption from the payment of future benefit 

obligation by returning relevant pension fund assets to the 

government. Consequently, the projected benefit obligation and 

the corresponding fund assets under that scheme were 

accounted for as deemed extinguished on that date in 

accordance with the Japanese accounting standards.

The actuarial gains and losses and prior service cost are being 

amortized by the straight-line method over a certain number of 

years within the expected remaining years of service of the thenactive employee participants (mainly 10 years) corresponding 

the year following the year in which they arise and effective the 

period in which they arise, respectively.

The Company established a retirement benefit trust by 

contributing a certain shares of stock.

The Company revised its lump-sum payment plan and changed 

its retirement benefit plan to a tax-quantified pension plan 

(“cash balance plan”) in June 2003.

On 31st March, 2004, the Company received approval from the 

Minister of Health, Labor and Welfare with respect to its 

application for a return of past obligation for benefits related to 

employees’ services under the substitutional portion of the 

welfare pension fund plan (“WPFP”). In accordance with the 

transitional provision stipulated in “Practical Guidelines for 

Accounting for Retirement Benefits,” the Company accounted for 

the change in retirement benefit obligation as prior service cost. 

The unrecognized actuarial gain or loss as of and prior to this 

revision are accounted for by the previous method and with in 

the previous number of years.

The effect of this change and the transition was not significant.

(Retirement benefits to directors and corporate auditors)

As is customary practice in Japan, the Company pays lump-sum 

retirement benefits to retiring directors or corporate auditors, 

the amount of which is determined by the internal rules similar 

to those for employees. The payment of such retirement benefits 

is subject to approval by shareholders at the annual general 

meeting. The Company recognizes 100% of the amounts the 

Company would have paid if all directors and statutory auditors 

had retired at the year-end.

(9) Appropriation of Retained Earnings

Under the Japanese Commercial Code (the “Code”), the 

appropriations of retained earnings including year-end cash 

dividends are subject to shareholders’ approval at the annual 

general meeting to be held within three months after the 

respective periods. The board of directors is allowed to make 

interim cash distribution (“interim cash dividends”) with certain 

strict conditions stipulated in the Code.

The appropriation of retained earnings shown in the 

accompanying consolidated statements of income and retained 

earnings reflects the results of the appropriation of retained 

earnings applicable to the immediately preceding year and 

approved at the shareholders’ meeting and the interim cash 

dividends made during the current year. 

(10) Accounting for Treasury Stock

Due to the recent amendments to Japanese accounting standards 

effective from 1st April, 2002, the shares of the Company held by 

consolidated subsidiaries are recognized as treasury stock after 

netting off the amounts attributable to minority interests. With 

respect to those shares held by affiliates to which an equity 

method applied, the amounts attributable to the Group are also 

recorded as treasury stock in the accompanying consolidated 

balance sheets and debit/credit differences (gain/loss) incurred 

from transactions involving treasury stocks are charged to 

additional paid-in capital instead of charging to income as 

previously required.

(11) Per Share Information

Net income per share is computed based on the weightedaverage number of shares of common stock outstanding during 

the respective periods.

The amount of cash dividends is the total of interim cash 

dividends paid during the respective periods and such dividends 

declared as applicable to the respective periods.

The accompanying consolidated financial statements are 

prepared in Japanese yen. The U.S. dollar amounts included in 

the consolidated financial statements and notes thereto 

represent the arithmetical results of translating Japanese yen to 

U.S. dollars on a basis of ¥105.69 = U.S.$1, the approximate 

effective rate of exchange prevailing at 31st March, 2004. The 

inclusion of such U.S. dollar amounts is solely for convenience of 

the readers and is not intended to imply that yen amounts have 

been or could be converted, realized or settled in U.S. dollars at 

that or any other rate.

5. United States Dollar Amounts
“Cash and time deposits” in the accompanying consolidated 

balance sheets as of 31st March, 2003 and 2004 are reconciled to 

cash and cash equivalents in the accompanying consolidated 

statements of cash flows as follows:

Investments in securities shown in the accompanying 

consolidated balance sheets as of 31st March, 2003 and 2004 

comprises;

At 31st March, 2003 and 2004, information with respect to 

“other securities” for which market prices were available is 

summarized as follows:

Other securities without market value as of 31st March, 2003 

and 2004 were as follows:

Gain and loss incurred from sale of other securities included in 

the accompanying consolidated statements of income and 

retained earnings for the years ended 31st March, 2003 and 2004 

were as follows:

The aggregated maturities of other securities with maturity at 

31st March, 2004 were as follows:

Weighted average interest rates on short-term bank loans, and 

deposits received from retailers to secure trade receivables 

outstanding at 31st March, 2004 were 1.01% and 1.88%, respectively.

6. Cash and Cash Equivalents

 7. Investments in Securities

8. Short-Term Bank Loans, Commercial Paper and

 Long-Term Debt

 2003 2004

$ 812,291

(50,308)

$ 761,983

¥ 96,716

(5,481)

¥ 91,235

¥ 85,851

(5,317)

¥ 80,534

Cash and time deposits 

Time deposits with a maturity of 

 over three months 

Cash and cash equivalents 

 2003 2004

As of 31st March, 2004

Acquisition

cost

Carrying

amount

Unrealized

gain (loss)

Acquisition

cost

Carrying

amount

Unrealized

gain (loss)

Securities with fair value

exceeding their acquisition cost:

Equity securities

Bonds:

  Government bonds

  Corporate bonds

Other securities

Securities with fair value not 

exceeding their acquisition cost:

Equity securities

Bonds:

  Government bonds

  Corporate bonds

Other securities

As of 31st March, 2003

Securities with fair value 

exceeding their acquisition cost:

Equity securities

Bonds:

  Government bonds

  Corporate bonds

Other securities

Securities with fair value not 

exceeding their acquisition cost:

Equity securities

Bonds:

  Government bonds

  Corporate bonds

Other securities

¥ 9,118

92

27

23

9,260

13,736

64

442

32

14,274

¥23,534

¥17,834

93

28

23

17,978

12,075

64

438

22

12,599

¥30,577

¥ 8,716

1

1

0

8,718

(1,661)

(0)

(4)

(10)

(1,675)

¥ 7,043

Acquisition cost   Carrying amount Unrealized gain (loss)

¥19,182 ¥18,637 $176,336

 245 204 1,930

Shares other than listed shares and 

 shares traded on the OTC market

Other equity securities 

 2003 2004

Sale amounts

Gain

Loss

 2003 2004

¥4,380

675

1,154

¥6,917

2,048

385

 $65,446

19,377

3,643

Within 1 year 1 – 5 years 5 – 10 years Over 10 years

¥71 ¥62 ¥ –

$668 $588 $ –

¥ –

$ –

Investments in and advances to 

unconsolidated subsidiaries and affiliates

Others

¥ 79,835

65,724

¥145,559

¥ 78,126

81,249

¥159,375

$ 739,200

768,748

$1,507,951

¥16,321

20

36

42

16,419

3,360

64

–

11

3,435

¥19,854

¥43,918

21

39

44

44,022

3,037

64

–

8

3,109

¥47,131

¥27,597

1

3

2

27,603

(323)

0

–

(3)

(326)

¥27,277

$154,423

189

341

397

155,350

31,791

606

–

104

32,501

$187,851

$415,536

199

369

416

416,520

28,735

606

–

75

29,416

$445,936

$261,113

10

28

19

261,170

(3,056)

0

–

(29)

(3,085)

$258,085

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004
Interest bearing liabilities as of 31st March, 2003 and 2004 were 

analyzed as follows:

Aggregate annual maturities of long-term bank loans and bonds 

outstanding as of 31st March, 2004 for the next five years are as 

follows:

Assets pledged as collateral and secured payables as of 31st 

March, 2003 and 2004 were as follows:

(1) Assets pledged as collateral

(2) Secured payables

Accrued retirement benefits to employees as of 31st March, 2003 

and 2004 were analyzed as follows:

Expenses related to the retirement benefits to employees 

incurred for the year ended 31st March, 2003 and 2004 were as 

follows:

Assumptions used in calculation of the above information were 

as follows:

(1)

9. Assets Pledged as Collateral and Secured Payables

10. Accrued Retirement Benefits to Employees

11. Contingent Liabilities

2003 2004

 ¥367,232

170,876

–

538,108

68,918

85,677

154,595

¥383,513

2.18

0.45 – 7.0

1.96

0.45 – 7.0

 ¥333,476

113,880

12,000

459,356

71,562

30,570

102,132

¥357,224

2.20

0.45 –2.975

0.00

1.93

0.450 –2.900

$3,155,223

1,077,493

113,542

4,346,258

677,094

289,242

966,336

$3,379,922

Long-term debt

Long-term bank loans

Bonds

Convertible bonds *

Less: due within one year

Long-term bank loans

Bonds

Weighted average 

interest rates

(%)

Weighted average 

interest rates

(%)

Cash and time deposits

Notes and accounts receivable

Investments in securities

Other assets

Buildings and structures

Machinery and equipment

Land

Other property, plant and equipment

Total

¥ 1,471

615

54,062

1,414

54,277

40,324

73,727

193

¥226,083

¥ 1,534

255

50,698

984

62,628

52,510

75,205

256

¥244,070

$ 14,514

2,413

479,686

9,310

592,563

496,830

711,563

2,422

$2,309,301

 2003 2004

Year ending 31st March,

2005

2006

2007

2008

2009

¥30,570

20,770

60,870

1,070

600

$289,242

196,518

575,930

10,124

5,677

¥71,562

69,947

78,729

29,811

38,512

$677,094

661,813

744,905

282,061

364,386

¥102,132

90,717

139,599

30,881

39,112

$ 966,336

858,331

1,320,835

292,185

370,063

Bonds Long-term bank loans Total

Notes and accounts payable

Short-term bank loans

Long-term bank loans

Bonds

Other liabilities

Total

¥ 1,796

53,406

115,479

2,650

5,168

¥178,499

¥ 2,098

40,952

103,670

2,800

4,662

¥154,182

$ 19,850

387,473

980,888

26,493

44,110

$1,458,814

 2003 2004

 2003 2004

Projected benefit obligations

Plan assets

Unrecognized actuarial differences 

¥ 114,672

27,752

86,920

50,738

¥ 36,182

¥102,108

50,338

51,770

16,080

¥ 35,690

$966,108

476,279

489,829

152,143

$337,686

 2003 2004

Service cost

Interest cost

Expected return on plan assets

Amortization of actuarial loss

Gain on exemption from payment 

 of future benefit obligation

Amortization of unrecognized prior service cost

Expenses for the year

¥ 5,897

2,662

(898)

4,425

(2,099)

–

¥ 9,987

¥ 4,653

2,150

(306)

5,641

–

(146)

¥11,992

$44,025

20,342

(2,895)

53,373

–

(1,381)

$113,464

Discount rate

Expected rate of return on plan assets 

Method of attributing the 

projected benefits to periods of services

Amortization of actuarial differences

Mainly 2.5% 

Mainly 2.5% 

Straight-line basis

Mainly 10 years from the 

year following of recognition

* : Zero coupon convertible bonds were issued on 5th November, 2003 with 

maturity on 5th November, 2013 in the principal amount of ¥12,000 with the 

conversion price of ¥382 per share.

As at 31st March, 2004, the Companies were contingently liable 

for notes discounted by banks in the aggregate amount of 

¥16,376 ($154,951) (¥25,648 as of 31st March, 2003), notes 

endorsed for payments in the aggregate amount of ¥844 ($7,988) 

(¥1,286 as of 31st March, 2003), and assignment of receivable 

with recourse ¥484 ($4,579) (¥2,300 as of 31st March, 2003).
(2) 

(3) 

Under the Code, at least 50% of the issue price of new shares is 

required to be designated as stated capital, which is determined 

by a resolution of the Board of Directors. Proceeds in excess of 

the amount designated as stated capital are credited to additional 

paid-in capital.

Under the Code, an amount equivalent to 10% of interim cash 

distribution (interim cash dividends) and at least 10% of cash 

distribution including cash dividends made as a result of the 

appropriation of retained earnings is required to be transferred 

to the legal reserve until the balance of that reserve reached 25% 

of the stated share capital. The balance of legal reserve is 

included in retained earnings, use of which is strictly limited 

under the Code.

In October, 2002, the Code was amended and transfer to the 

legal reserve is no longer required if the balance of the total of 

the additional paid-in capital and the legal reserve stated above 

reaches 25% of the stated share capital. The amount in excess of 

25% of the stated share capital is allowed to be distributed as 

dividends when certain conditions specifically stipulated in the 

Code are satisfied.

The legal reserve included in retained earnings in the 

accompanying consolidated balance sheets was ¥15,261 

($144,394) at 31st March, 2004 and 2003.

Chichibu Railway Co., Ltd., a domestic consolidated subsidiary, 

revalued land on 31st March, 2000 in the aggregate book value of 

¥1,065 at the fair value of ¥15,867 in accordance with the Law 

for Land Revaluation.

With respect to the amount of unrealized profit less deferred 

taxes thereon, the amount attributable to minority interests is 

credited to “Minority interests in consolidated subsidiaries” and 

the rest is recorded as “Revaluation excess” in the accompanying 

consolidated balance sheets.

With respect to the land revalued as mentioned above, the 

difference between the aggregate book value of such land (after 

revaluation) and the aggregate fair value thereof was ¥3,616 

($34,213) at 31st March, 2004 (¥2,315 at 31st March 2003).

During the year ended March 31, 2002, A&A Material 

Corporation and DC Co., Ltd., domestic affiliates accounted for 

by the equity method, revalued their land in accordance with the 

Law for Land Revaluation. With respect to the amount of 

unrealized profit less deferred taxes thereon, the amount 

attributable to the Company is included in “Revaluation excess” 

in the accompanying consolidated balance sheets.

Selling, general and administrative expenses for the year ended 

31st March, 2003 and 2004 are summarized as follows:

Research and development costs charged to selling, general and 

administrative expenses and manufacturing costs for the year 

ended 31st March, 2003 and 2004 were ¥6,849 and ¥6,019 

($56,950), respectively.

12. Shareholders’ Equity

13. Revaluation of Land

14. Selling, General and Administrative Expenses

 15. Research and Development Costs

 2003 2004

Guarantees for bank loan payables

Guarantees for account payables to 

Ready-mixed Cooperative Association

Guarantees (forward commitments) 

for bank loans payables

¥19,830 ¥25,049 $237,004

2,266 2,180 20,626

1,551 1,378 13,038

Labor and payroll cost

Freight and transportation/distribution expenses

Provision for accrued bonuses to employees

Expenses related to accrued retirement benefits

Amortization of difference between equity in net

 assets of consolidated subsidiaries and investment cost

Others

Total

¥ 43,843

55,051

2,382

8,011

1,198

37,393

¥147,878

¥ 41,835

51,900

1,906

9,682

944

39,928

¥146,195

$ 395,827

491,059

18,034

91,608

8,932

377,783

$1,383,243

 2003 2004

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004

The Companies were also contingently liable as guarantors of 

bank loans and trade payables for certain companies 

(including guarantee forward commitments), the balance of 

which as of 31st March, 2003 and 2004 were as follows:

The Company and a consolidated subsidiary have invested 

the aggregate amount of ¥63,512 since October 2000 in 

Ssangyong Cement Industries Co., Ltd. (“Ssangyong”), which 

is undergoing a rehabilitation process. The Company has 

been jointly managing Ssangyong under a joint management 

contract. The Company, Ssangyong and its financial creditors 

committee agreed on the acceleration of the restructuring of 

Ssangyong in November 2001. In August 2003, the Company, 

Ssang Yong, and its financial creditors committee additionally 

agreed to an extension of the reschedule of debt repayment, 

additional financial support, a type of debt-equity swap and 

to a lowered interest rate. The Company recognizes that the 

rehabilitation of Ssang Yong is an important issue. With 

respect to the investment in Ssangyong, the equity method of 

accounting has been applied for preparation of the 

accompanying consolidated financial statements.
Kawara Taiheiyo Cement Corporation, a consolidated subsidiary, 

ceased its operation at 31st March, 2004. Loss incurred in 

conjunction therewith is shown as loss on closure of a cement 

plant in the accompanying consolidated statements of income 

and retained earnings, which includes loss on disposition of 

fixed assets in ¥4,040 ($38,225).

Income taxes in Japan applicable to the Company and its 

domestic consolidated subsidiaries consist of corporate tax, 

inhabitants’ taxes and enterprise tax. Enterprise tax is 

deductible when paid as expenses for the purpose of the 

calculation of other income taxes. The effective statutory tax 

rate is approximately 40.87% for the year ended 31st March, 

2003 and 2004.

The effective tax rate reflected in the consolidated statements 

of income and retained earnings for the years ended 31st March, 

2003 and 2004 is reconciled to the effective statutory tax rate as 

follows:

 

The significant components of deferred tax assets and liabilities 

as of 31st March, 2003 and 2004 were as follows:

The Companies have various lease agreements whereby the 

Companies act both as lessees and lessors. Finance lease 

contracts other than those which are deemed to transfer the 

ownership of the leased assets to lessees are accounted for by 

the method that is applicable to ordinary operating leases.

(1) As lessees

(a) Assumed data as to acquisition costs, accumulated

 depreciation and net balance of the leased assets

16. Loss on Closure of a Cement Plant

17. Income Taxes

18. Leases

Effective statutory tax rate

Effect of:

 Entertainment expenses

 Tax-exempt income including certain dividends

 Per capita

 Equity in (earnings) losses of unconsolidated 

 subsidiaries and affiliates

 Valuation allowance for deferred tax assets

 Dilution gain of affiliated company

 Differences of tax rates between Japan and overseas

 Amortization of difference between equity in net assets 

 of consolidated subsidiaries and investment cost

 Others

Effective tax rate in the consolidated statements of 

 income and retained earnings

40.87%

4.31

(0.82)

1.22

(0.74)

(1.89)

(4.20)

(8.12)

1.38

0.29

32.30%

 2003 2004

Deferred tax assets:

 Nondeductible portion of:

 - provision for doubtful accounts

 - provision for bonus to employees

 - accrued retirement benefits to employees

 Unrealized loss of property, plant and equipment

 Others

 Loss carried forward

 Subtotal

 Valuation allowance

 Total deferred tax assets

Deferred tax liabilities:

 Special tax reserve on property, plant and equipment

 Other reserves under Special Taxation Measures Law

 Depreciation

Difference between the cost of investments and 

 their underlying net equity at fair value

 Unrealized holding gain on other securities

 Land revaluation

 Others

 Total deferred tax liabilities

 Net deferred tax liabilities

¥ 4,215

2,238

24,006

18,488

10,116

2,376

61,439

(26,071)

35,368

(22,786)

(525)

(5,609)

(1,814)

(11,263)

(5,949)

(106)

(48,052)

¥(12,684)

¥ 3,761

2,075

24,560

18,511

7,638

10,585

67,130

(30,424)

36,706

(27,572)

(558)

(5,706)

(2,025)

(2,140)

(5,950)

(135)

(44,086)

¥ (7,380)

$ 39,881

21,175

227,136

174,927

95,714

22,480

581,313

(246,674)

334,639

(215,593)

(4,967)

(53,070)

(17,163)

(106,566)

(56,287)

(1,004)

(454,650)

$(120,011)

 2003 2004

Buildings and structures

Machinery and equipment

Other tangible assets

Total

Buildings and structures

Machinery and equipment

Other tangible assets

Total

Acquisition

costs

Accumulated

depreciation

Net

balance

¥ 59

57,902

3,918

¥ 61,879

$ 558

547,847

37,071

$585,476

¥ 25

23,629

1,896

¥ 25,550

$ 237

223,569

17,939

$241,745

¥ 34

34,273

2,022

¥ 36,329

$ 321

324,278

19,132

$343,731

31st March, 2004

40.87%

13.07

(6.21)

2.37

15.66

(9.77)

--

(2.80)

2.93

(1.06)

55.06%
(b) Future minimum lease payments and lease rental expenses

(c) Operating lease payments

(2) As lessors

Certain assets of the Companies including buildings and 

structures with aggregated acquisition costs of ¥786 ($7,442) as 

of 31st March, 2004 (¥935 for 2003) were leased out, from which 

lease rental income of ¥77 ($732) was recorded for the year 

ended 31st March, 2004 (¥94 for 2003).

Derivative financial instruments are utilized for the purpose of 

hedging exposure to adverse fluctuations in foreign currency 

exchange rates and interest rates, but no such transactions for 

speculation or trading purposes were entered into.

The Companies are exposed to market risks such as volatility of 

foreign currency exchange rates and interests rates, but use 

these derivative financial instruments to hedge the related risk 

effectively. Accordingly, these risks would not be material.

Credit loss in the event of nonperformance by the 

counterparties to the derivative financial instruments may incur, 

but any such loss from such event would not be material 

because the Company enters into transactions only with 

financial institutions with high credit ratings. The notional 

amounts of the derivative financial instruments do not 

necessarily represent the amounts exchanged by the parties and, 

therefore, are not a direct measure of the Company’s risk 

exposure in connection with derivative financial instruments.

19. Derivative Transactions

Summarized below are the notional amounts and the estimated 

fair value of the derivative transactions outstanding at 31st 

March, 2003 and 2004:

Interest related transactions

Acquisition

costs

Accumulated

depreciation

Net

balance

31st March, 2003

Buildings and structures

Machinery and equipment

Other tangible assets

Total

¥ 49

55,187

3,991

¥59,227

¥ 32

18,514

2,106

¥20,652

¥ 17

36,673

1,885

¥38,575

31st March, 2004

The scheduled maturities of future

Lease rental payments on such lease:

 Due within one year

 Due over one year

Lease rental expenses for the year

¥ 7,340

28,989

¥36,329

¥ 7,523

$ 69,451

274,287

$343,738

$ 71,184

31st March, 2004

Due within one year 

Due over one year

¥ 395

1,316

¥1,711

$ 3,737

12,455

$16,192

2004

Notional

amount

Fair

value Unrealized

gain (loss) Notional

amount

Fair

value

Unrealized

gain (loss)

(Interest rate swaps)

 Receive/

 fixed and pay

 /floating

 Receive/

 floating and pay/

 fixed

 Receive/

 floating and pay/

 floating

(Options)

 Caps

 Total

¥ 1,500

12,305

238

2,262

¥16,305

¥ (37)

(277)

0

0

¥(314)

¥ (37)

(277)

0

0

¥(314)

$ 14,192

116,425

2,252

21,403

$154,272

$ (350)

(2,621)

(9)

9

$(2,971)

$ (350)

(2,621)

(9)

9

$(2,971)

Notional

amount

Fair

value

Unrealized

gain (loss

2003

(Interest rate swaps)

 Receive/fixed and pay/floating

 Receive/floating and pay/fixed

 Receive/floating and pay/ floating

(Options)

 Caps

 Total

¥ 1,000

15,480

406

2,418

¥19,304

¥ (19)

(489)

(2)

0

¥(510)

¥ (19)

(489)

(2)

0

¥(510)

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004
2004

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income from operations

Assets

Depreciation

Capital expenditures

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income from operations

Assets

Depreciation

Capital expenditures

¥ 249,439

37,444

286,883

260,543

 ¥ 26,340

 ¥ 523,959

 ¥ 22,107

 ¥ 11,457

 $ 2,260,100

354,281

2,714,381

2,465,162

 $ 249,219

 $ 4,957,508

 $ 209,168

 $ 108,402

¥ 75,517

23,396

98,913

96,322

 ¥ 2,591

 ¥ 146,828

 ¥ 5,808

 ¥ 4,336

 $ 714,514

221,364

935,878

911,363

 $ 24,515

 $ 1,389,233

 $ 54,953

 $ 41,026

¥ 348,680

9,081

357,761

351,449

 ¥ 6,312

 ¥ 253,400

 ¥ 5,649

 ¥ 6,577

 $ 3,299,082

85,921

3,385,003

3,325,281

 $ 59,722

 $ 2,397,578

 $ 53,449

 $ 62,229

¥ 9,377

4,365

13,742

10,425

 ¥ 3,317

 ¥ 111,358

 ¥ 3,268

 ¥ 662

 $ 88,722

41,300

130,022

98,638

 $ 31,384

 $1,053,629

 $ 30,921

 $ 6,264

¥ 196,472

38,129

234,601

226,216

 ¥ 8,385

 ¥ 278,777

 ¥ 5,401

 ¥ 7,741

 $ 1,858,936

360,763

2,219,699

2,140,373

 $ 79,326

 $ 2,637,686

 $ 51,102

 $ 73,243

¥ 879,485

112,415

991,900

944,955

 ¥ 46,945

 ¥ 1,314,322

 ¥ 42,233

 ¥ 30,773

 $ 8,321,354

1,063,629

9,384,983

8,940,817

 $ 444,166

 $12,435,634

 $ 399,593

 $ 291,164

¥ (–)

(112,415)

(112,415)

(110,317)

 ¥ (2,098)

 ¥ (10,325)

 ¥ 2,995

 ¥ 3,476

 $ (–)

(1,063,629)

(1,063,629)

(1,043,789)

 $ (19,840)

 $ (97,693)

 $ 28,338

 $ 32,898

¥ 879,485

–

879,485

834,638

 ¥ 44,847

 ¥ 1,303,997

 ¥ 45,228

 ¥ 34,249

 $ 8,321,354

–

8,321,354

7,897,028

 $ 424,326

 $ 12,337,941

 $ 427,931

 $ 324,062

¥ 263,101

38,437

301,538

276,209

 ¥ 25,329

 ¥ 547,552

 ¥ 25,491

 ¥ 20,464

¥ 92,783

21,840

114,623

108,890

 ¥ 5,733

 ¥ 155,068

 ¥ 6,622

 ¥ 5,184

¥ 381,892

11,462

393,354

389,276

 ¥ 4,078

 ¥ 278,687

 ¥ 6,624

 ¥ 3,517

¥ 13,463

4,476

17,939

12,198

 ¥ 5,741

 ¥ 135,834

 ¥ 5,694

 ¥ 710

¥ 176,717

38,448

215,165

208,177

 ¥ 6,988

 ¥ 283,766

 ¥ 7,172

 ¥ 7,870

¥ 927,956

114,663

1,042,619

994,750

 ¥ 47,869

 ¥ 1,400,907

 ¥ 51,603

 ¥ 37,745

¥ (–)

(114,663)

(114,663)

(112,819)

 ¥ (1,844)

 ¥ 9,236

 ¥ 2,403

 ¥ 1,480

¥ 927,956

–

927,956

881,931

 ¥ 46,025

 ¥ 1,410,143

 ¥ 54,006

 ¥ 39,225

Consolidated total Minerals and

aggregates

Construction and

construction material Real estate Other Total Eliminations or

corporate assets Cement 

2003

Consolidated total Minerals and

aggregates

Construction and

construction material Real estate Other Total Eliminations or

corporate assets Cement 

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income from operations

Assets

Depreciation

Capital expenditures

20. Segment Information

(1) Industry segments
(2) Geographic segments

(3) Export sales

Export sales by the Company and its domestic subsidiaries plus the sales of overseas consolidated subsidiaries for the year ended 

31st March, 2003 and 2004 are presented below:

1. In May 2004, the Company issued ¥22,000,000,000 zero coupon convertible bonds due 2014 with the conversion price of ¥506 

per share based on the resolution at the board of directors meeting held on 13th April, 2004.

2. Shareholders of the Company approved at the annual general meeting held on 29th June, 2004 as the appropriation of the 

retained earnings the year end cash dividends of ¥2.5 (¢2.4) per share in the total amount of ¥2,373 ($22,449).

21. Subsequent Event

 2003 2004

2004

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income (loss) from operations

Assets

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income (loss) from operations

Assets

Domestic (in Japan) North America Asia Other

Other

¥ 713,617

1,790

715,407

682,715

¥ 32,692

¥ 1,074,867

 $ 6,751,982

16,936

6,768,918

6,459,599

 $ 309,319

 $10,169,997

¥ 71,568

744

72,312

66,237

¥ 6,075

¥ 128,959

 $ 677,150

7,039

684,189

626,710

 $ 57,479

 $ 1,220,163

¥ 89,532

5,226

94,758

87,689

¥ 7,069

¥ 97,509

 $ 847,128

49,446

896,574

829,681

 $ 66,893

 $ 922,594

¥ 4,768

135

4,903

4,675

¥ 228

¥ 4,446

 $ 45,104

1,277

46,381

44,233

 $ 2,148

 $ 42,066

¥ 879,485

7,895

887,380

841,316

¥ 46,064

¥ 1,305,781

 $ 8,321,364

74,698

8,396,062

7,960,223

 $ 435,839

 $ 12,354,820

¥ (–)

(7,895)

(7,895)

(6,678)

¥ (1,217)

¥ (1,784)

 $ (–)

(74,698)

(74,698)

(63,185)

 $ (11,513)

 $ (16,879)

¥ 879,485

–

879,485

834,638

¥ 44,847

¥ 1,303,997

 $ 8,321,364

–

8,321,364

7,897,038

 $ 424,326

 $ 12,337,941

¥ 781,273

2,383

783,656

750,068

¥ 33,588

 ¥ 1,146,117

¥ 76,618

859

77,477

68,208

¥ 9,269

 ¥ 107,937

¥ 65,832

1,079

66,911

62,303

¥ 4,608

 ¥ 143,473

¥ 4,233

11

4,244

4,552

 ¥ (308)

 ¥ 4,092

¥ 927,956

4,332

932,288

885,131

¥ 47,157

 ¥ 1,401,619

¥ (–)

(4,332)

(4,332)

(3,200)

¥ (1,132)

¥ 8,524

¥ 927,956

–

927,956

881,931

 ¥ 46,025

 ¥ 1,410,143

Consolidated total Eliminations or

corporate assets Total

2003

Domestic (in Japan) North America Asia Consolidated total Eliminations or

corporate assets Total

Net sales:

(1) Net sales to outside customers

(2) Inter-segment net sales

Total

Operating costs and expenses

Income from operations

Assets

Export sales and sales by overseas subsidiaries:

 North America

 Asia

 Others

Total (a)

Net sales of the Companies (b)

 (a) / (b)

¥ 76,150

97,003

11,727

¥ 184,880

¥ 879,485

21.0%

¥ 82,009

71,207

9,371

¥ 162,587

¥ 927,956

17.5%

$ 720,503

917,807

110,957

$ 1,749,267

$ 8,321,364

21.0%

Notes to the Consolidated Financial Statements

Taiheiyo Cement Corporation and Subsidiaries 

For the years ended 31st March, 2003 and 2004
To the Board of Directors

Taiheiyo Cement Corporation

We have audited the accompanying consolidated balance sheets of Taiheiyo Cement Corporation and consolidated 

subsidiaries as of 31st March, 2003 and 2004, and the related consolidated statements of income and retained earnings, 

and cash flows for the years then ended, all expressed in yen. These financial statements are the responsibility of the 

Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require 

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in 

the financial statements. An audit also includes assessing the accounting principles used and significant estimates made 

by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a 

reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated 

financial position of Taiheiyo Cement Corporation and consolidated subsidiaries at 31st March, 2003 and 2004, and the 

consolidated results of their operations and their cash flows for the years then ended in conformity with accounting 

principles generally accepted in Japan.

As described in Note 11(3), Taiheiyo Cement Corporation and its consolidated subsidiary have invested in Ssang Yong 

Cement Industrial Co., Ltd., a Korean company which has been under rehabilitation process.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended 31st 

March, 2004 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar 

amounts and, in our opinion, such translation has been made on the basis described in Note 3.

Report of Independent Auditors

27th June, 2004

Shin Nihon & Co.

ChuoAoyama PricewaterhouseCoopers
Taiheiyo Cement Network

Domestic Network

Taiheiyo Cement's facilities include our head office and Central 

Research Laboratory, 10 branch offices, 16 sales offices, 8 

cement plants and 152 cement distribution terminals.

Overseas Network

Taiheiyo Cement U.S.A., Inc.

 2025 East Financial Way, Glendora, CA 91741, U.S.A.

 Tel : +1- 626-852- 6200

 Fax : +1- 626-852- 6217

Taiheiyo Cement (China) Investment Co., Ltd.

 No. 1806, E-Tower, C12

 Guang Hua Road, Chao Yang District, Beijing 100020, China

 Tel : + 86-10 - 6586 - 2711

 Fax : + 86-10 - 6586 -2782

Taiheiyo Singapore Pte. Ltd.

 16 Raffles Quay, #41-03 Hong Leong Building, 

 Singapore 048581

 Tel : + 65- 6220 - 9495

 Fax : + 65- 6225 -5853

Vietnam Representative Office

 Suite 801, 8th F1., Sun Red River Building, 23 Phan

 Chu Trinh Street, Hoan Kiem District, Hanoi, Vietnam

 Tel : + 84-4-9330912

 Fax : + 84-4- 9330921

Bangkok Representative Office

 5 Sitthivorakit Building, 12th. F1., Soi Pipat, Silom Road

 Bangrak, Bangkok 10500, Thailand

 Tel : + 66 -2-266 - 8741

 Fax : + 66 -2-266 - 8742

Taipei Representative Office

 5F, 139, Cheng-Chou Road, Taipei 103, Taiwan

 Tel : + 886 -2-2557- 8098

 Fax : + 886 -2-2553- 9853
 Major Subsidiaries and Affiliates

CEMENT AND READY-MIXED CONCRETE

 Bay Frontier Onoda Co., Ltd.

 Chichibu Taiheiyo Cement Corporation

 DC Co., Ltd.

 Kokusai Kigyo Co., Ltd.

 Myojo Cement Co., Ltd.

 Sanyo White Cement Co., Ltd.

 Tsuruga Cement Co., Ltd.

CONSTRUCTION AND CONSTRUCTION MATERIALS

 A&A Material Corporation

 Chichibu Concrete Industry Co., Ltd.

 Clion Co., Ltd.

 FUJI P.S CORPORATION

 ILB Co., Ltd.

 Onoda Chemico Co., Ltd.

 ORIENTAL Construction Co., Ltd.

 Taiheiyo Materials Corporation

 Taiheiyo Precast Concrete Industry Co., Ltd.

MINERAL RESOURCES

 Abekawa Kaihatsu Co., Ltd.

 Buko Mining Co., Ltd.

 Chichibu Mining Co., Ltd.

 Ishizaki Co., Ltd.

 Kansai Matech Co., Ltd.

 Kosyu Saiseki Co., Ltd.

 Okutama Mining Co., Ltd.

 Ryushin Mining Co., Ltd.

 Shin Kansai Asano Mining Co., Ltd.

 Tsukumi Mining Co., Ltd.

 Yuko Mining Co., Ltd.

CERAMICS AND ELECTRONICS

 CELANX KK

 Nihon Ceratec Co., Ltd.

 Sanshin Electric Co., Ltd.

 Sanshin (Hungary) KFT

 Sanshin (Malaysia) Sdn. Bhd.

ENVIRONMENT

 Ichihara Ecocement Corporation

 NACODE Corporation

 Taiheiyo Soil Corporation

TRANSPORTATION

 Azuma Shipping Co., Ltd.

 Chichibu Railway Co., Ltd.

OTHERS

 Asano Real Estate Co., Ltd.

 Onoda Chemical Industry Co., Ltd.

 PACIFIC SYSTEMS CORPORATION

 Taiheiyo Accounting & Financial Service Corporation

 Taiheiyo Engineering Corporation

OVERSEAS ACTIVITIES

 Beijing Asano Cement Co., Ltd. (CHINA)

 California Portland Cement Company (USA)

 Dalian Onoda Cement Co., Ltd. (CHINA)

 Glacier Northwest, Inc. (USA)

 Jiangnan Onoda Cement Co., Ltd. (CHINA)

 Nghi Son Cement Corporation (VIETNAM)

 NM Cement Co., Ltd. (VIETNAM)

 PNG-Taiheiyo Cement Limited (PAPUA NEW GUINEA)

 Qinhuangdao Asano Cement Co., Ltd. (CHINA)

 Shanghai Sanhang Onoda Cement Co., Ltd. (CHINA)

 Shenzhen Haixing Onoda Cement Co., Ltd. (CHINA)

 Ssangyong Cement Industrial Co., Ltd. (SOUTH KOREA)

 Taiheiyo Cement (China) Investment Co., Ltd. (CHINA)

 Taiheiyo Cement Philippines, Inc. (PHILIPPINES)

 Taiheiyo Cement U.S.A., Inc. (USA)
Directors and Corporate Auditors

(As of 29th June, 2004)

Board of Directors

Takashi Shimoda Kazushige Kitamura Teiji Matsuda

Director, Managing Executive Officer 

Tadaharu Kamei

Director, Senior Executive Officer

Michio Kimura Fumio Sameshima

Chairman and Representative Director President and Representative Director

Executive Officers 

Kanzaburo Suto

Hiroto Murata

Hisahiko Higano

Noriyoshi Terui

Ryohei Kaminishi

Norio Mori

Jin Kanoda

Toshiyuki Hiwatashi

Rokurou Tomita

Nobuyoshi Kano

Hideo Fukushima

Hideya Goto Kazuo Morikawa Yukio Anzai Keiji Tokuue

Corporate Auditors (Standing)

Yasumasa Mihara

Norikazu Noguchi

Corporate Auditors

Sadayoshi Fujikawa

Haruhisa Kawasaki

Hiromichi Tsuda
Corporate Data 

(As of 31st March, 2004)

101,657

88,433

33,197

31,523

20,033

16,623

14,987

14,472

12,100

11,258

10.69

9.30

3.49

3.31

2.10

1.74

1.57

1.52

1.27

1.18

Taiheiyo Cement Corporation 

 Head Office

 St.Luke's Tower, 8-1, Akashi-cho, Chuo-ku, Tokyo 104-8518 

 JAPAN

 Branches

 Hokkaido, Tohoku, Tokyo, Kanto, Hokuriku, Chubu, Kansai,

 Shikoku, Chugoku and Kyushu

 Cement Plants

 22 (including four at domestic and Ten at

 overseas subsidiaries, affiliates)

 Central Research Laboratory

 2-4-2, Osaku, Sakura, Chiba 285-8655, JAPAN

 Date Established

 May,1881

 Paid-in Capital

 ¥ 69,499 million

 Fiscal Year-End

 31st March

 Annual Meeting

 The annual meeting of shareholders is normally held in June in

 Tokyo, Japan.

 Common Stock

 Authorized : 1,977,308 thousand

 Issued : 950,301 thousand

Number of Shareholders with More Than One Unit of 

Shares

 50,213

Stock Exchange Listings

 Tokyo Stock Exchange, Fukuoka Stock Exchange in Japan. 

 

Transfer Agent and Registar

 The Chuo Mitsui Trust and Banking Company, Limited.

Independent Auditors

 ChuoAoyama PricewaterhouseCoopers

 Shin Nihon & Co.

Japan Trustee Services Bank, Ltd. (Trust Account)

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

Nippon Life Insurance Company

Mizuho Corporate Bank, Ltd.

The Dai-Ichi Mutual Life Insurance Company

Meiji Yasuda Life Insurance Company

Sumitomo Mitsui Banking Corporation

The Bank of New York Europe Limited Lux Branch 131800

Mitsui Mutual Life Insurance Company

The Chuo Mitsui Trust and Banking Company, Limited

Shares held (Thousand) Percentage of total (%) Major Shareholders