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2013ANNUAL REPORTFor the Year Ended March 31, 2013
For ward-Look ing StatementsThis annual report contains forward-looking statements that refl ect
Sumitomo Osaka Cement Co., Ltd.’s current views and judgments
with respect to current plans, strategies and beliefs. They are based
upon currently available information, and do not constitute promises,
commitments or guarantees. The forward-looking statements involve
both real and potential risks and uncertainties that can cause actual
events and results to differ materially from those anticipated in these
statements. Risks that can cause actual results to differ materially from
those stated or implied in the forward-looking statements and from
historical events include, but are not limited to, future economic trends,
competition in the industrial sector in which Sumitomo Osaka Cement
operates, market demand, rates of exchange, and other social, politi-
cal and economic factors.
We aim to be a business group that helps preserve the
global environment and contributes to the sustainment
and ongoing development of a prosperous society
through tireless technological innovation and wide-
ranging business activities.
Through the implementation of the Sumitomo Osaka
Cement Corporate Philosophy in the daily business
activities of all Group employees, we will gain the trust
of all stakeholders as we strive to improve our corporate
value in order to achieve sustainable growth.
ContentsTo Our Shareholders 1
At a Glance 3
Review of Operations 5
Corporate Governance 7
Our Management Team 9
Six-Year Summary 10
Financial Review 11
Consolidated Financial Statements 14
Notes to Consolidated Financial Statements 19
Independent Auditors’ Report 30
Company Profi le 31
Philosophy
To Our Shareholders
Performance during Fiscal 2013
During the fiscal year ended March 31, 2013, the Japanese economy saw gradual recovery backed by reconstruction demand related to the Great East Japan Earthquake but was impacted by the slowing of the global economy from summer onward. From around the beginning of calendar 2013, however, conditions began to improve due to the economic policies implemented by the newly elected Japanese government.
In the cement industry, both public- and private-sector demand related to disaster reconstruction picked up, as did private housing investment, mainly in urban areas, buoying private-sector demand. As a result, cement demand in Japan grew 4.5% year on year to 44,577 thousand
metric tons. Exports, however, retreated 3.7%. Consequently, the total sales volume of cement produced by domestic manufacturers, including exports, climbed 2.8% year on year to 53,387 thousand metric tons.
Under these circumstances, the Sumitomo Osaka Ce ment Group worked to provide a stable supply of cement and other materials for disaster reconstruction while promoting Groupwide efforts aimed at ensuring its sustainable growth, such as cost reduction measures. As a result, consolidated net sales during the fiscal year under review increased 0.9% year on year to ¥219,083 million, due largely to higher revenue in the cement business. Operating income increased 71.6% year on year to ¥13,959 million, and net income surged 104.6% to ¥7,460 million.
Of particular note is the fact that, despite increased costs resulting from the deflation of the yen in the latter half of the fiscal year, thanks to growth in sales and production volumes and reductions in manufacturing costs, the cement business achieved an increase in segment profit of ¥5,328 million compared with the previous fiscal year.
Fiscal 2014 Outlook
In the fiscal year ending March 31, 2014, while risks associ ated with the global economic downturn and other factors remain, the Japanese economy is expected to see gradual recovery, due in part to the economic policies of the government.
In the cement industry, strong private-sector demand is expected due to ongoing increases in private housing investment and private capital investment. Furthermore, public-sector demand is forecast to increase on the back of reconstruction demand related to the Great East Japan Earthquake. Accordingly, overall domestic demand is expected to grow.
Amid such circumstances, the Sumitomo Osaka Cement Group will continue to focus on ensuring supply stability by establishing flexible pro duction, sales and distribu tion systems to meet fluc tuations in demand in the domestic cement business while working to set appropriate sales prices. With regard to the overseas cement business, the Group will continue to examine the possibility of penetrating regions that are expected to grow in the future in order to facilitate new business expansion. In other business fields, the Group will investigate various measures to increase its business scale and profits through overseas production and sales as well as the focused distribution of management resources.
In line with its social mission, the Group will continue to actively contribute to the establishment of a tu yb yteicos detneiro-gnilcycer ilizing recycled raw materials and fuels, strive to reduce its environmental
impact, and accept and treat disaster waste produced during the Great East Japan Earthquake.
For the fiscal year ending March 31, 2014, Sumitomo Osaka Cement expects net sales of ¥225,000 million, an increase of 2.7% year on year, operating income of ¥16,000 million, an increase of 14.6%, and net income of ¥8,000 million, a rise of 7.2% from the fiscal year under review.
11
Returning Profits to Shareholders
Sumitomo Osaka Cement believes that earnings distributions to shareholders should be determined in accordance with the Company’s busi ness results. As a cement manufa cturer, it is essential for the Company to continually improve fa ni gnitsevni elihw seitilic facility renewal in order to secure future earnings. Therefore, we consider it vital to expand our reserves. Reflecting this conviction, we will determine earnings distribution from the viewpoint of overall business management.
Annual dividends for fiscal 2013 were increased ¥1 from the previous year to ¥5 to reflect improved business performance. In fiscal 2014, the Company plans to again pay an annual dividend of ¥5.
We would like to sincerely thank our shareholders and other stakeholders for their continuing support and understanding.
September 2013
22
At a Glance
Products
• Assorted cements• Ready-mixed concrete• Cement-related solidification materials• Supply of electrical power• Recycling of raw materials and fuels
Business Overview
With the cement business as our core operation, we have established plants and service stations throughout Japan and conduct manufacturing, distribution and sales of cement and solidification materials. The Group actively contributes to a recycling-based society by recycling waste materials and by-products, and improving its electricity self-supply ratio with in house power generation systems that mainly use wood biomass. At the same time, we focus on the development of high-performance cements and efficient manufacturing systems.
Products
• Limestone• Dolomite• Calcium carbonate• Aggregate• Silica powder
Business Overview
Sumitomo Osaka Cement owns limestone mines in various places throughout Japan and supplies limestone as an industrial material to the steel, chemical, cement and other industries. High-purity limestone enjoys robust demand and is exported to Asian countries. In addition, we apply our unique grinding and sorting technologies to manufacture and market aggregate for ready-mixed concrete, calcium carbonate, silica powder and other products.
Products
• Repairing and reinforcing products for concrete structures• Construction work• Cathodic protection for concre te structures (ELGARD SYSTEM)• Artificial marine reefs
Business Overview
We manufacture and sell product s used in the rehabilitation and reinforcement of concrete structures and implement projects related to rehabilitative construction. By usin g expertise gained in the cement business, we supply high-value-added products that respond to the many different causes of deterioration to concrete infrastructure and buildings, including damage from salt, acid rain and frost damage. We also develop large-scale, high-rise artificial marine reefs as well as seaweed bed technology, thus contributing to the preservation of the ocean environment.
3
Products
• LiNbO3 external optical modulators• Optical transmitters and receivers for CATV• Optical measurement equipment
Business Overview
Our optoelectronics business is engaged in the manufacture and sale of optical communications devices and components such as LiNbO 3
(LN) modulators and optical transmitters and receivers for cable television. These products offer high-quality, high-performance features for the expanding optical communications market in Japan and overseas.
Products
• Components of semiconductor manufacturing equipment• Various transparent and functional coating solutions• Heat and ultraviolet shielding films• Hydrophilic antifouling easy cleaning coating solutions• Functional films
Business Overview
The advanced materials business develops and manufactures such functional materials as films, coating and anti-bacterial agents based on the Group’s proprietary nanoparticle production technologies. These unique materials are being used in a wide array of fields that include various functional films and cosmetics. In addition, ceramics that combine sintering and engineering technologies are used mainly in semiconductor manufacturing equipment.
Products
• Leasing of real estate, including distribution warehouses• Secondary battery cathode materials• Sales of office appliances• Development of software• Engineering
Business Overview
The others business engages in the long-term leasing of office buildings, supermarkets, hardware stores, distribution centers and a wide array of other facilities constructed on the Group’s idle real estate. In addition, we manufacture and sell high-capacity and safe secondary battery cathode materials. We are involved in activities including the construction of electrical facilities and electric furnaces at Group companies.
44
Review of Operations
The volume of cement sales roseyear on year, causing net sales toincrease ¥5,944 million, or 3.5%,year on year to ¥175,846 million.Segment profit rose ¥5,328million, or 78.2%, to ¥12,145million due to cost reductions,including expanded use ofrecycled raw fuels. The total sales volume increased3.5% year on year to 10,232thousand metric tons, with thesales volume in Japan up 5.1% to9,191 thousand metric tons, whileexports fell 8.4% to 1,041thousand metric tons. Capital expenditures totaled¥12,236 million, an increase of¥3,152 million from the previousfiscal year.
In addition to a rise in the salesvolume of limestone andaggregate for use in overseassteel industries, the launch of theHiraodai joint mining project inJune 2012 led to an increase inthe volume of limestone sold.As a result, net sales rose to¥11,708 million, up ¥349 million,or 3.1%, year on year. Segmentprofit increased ¥290 million, or45.0%, to ¥934 million due in partto reductions in mining costs. Capital expenditures amountedto ¥2,557 million, a decrease of ¥303 million from the previous fiscal year.
The sales volume of materialsused in the rehabilitation andreinforcement of concretestructures increased, as didprivate soil improvement work,leading net sales to edge up to¥15,287 million, an increase of¥179 million, or 1.2%, year onyear. Segment profit came to¥297 million, up ¥165 million, or124.9%, from the previous fiscalyear. Capital expenditures amountedto ¥184 million, a decrease of ¥83million from the previous fiscalyear.
5
The sales volume of opticalcommunication devices increased,leading to net sales of ¥4,257million, up ¥700 million, or 19.7%,year on year. However, the salesvolume of optical measurementequipment for semiconductorinspection decreased, which, together with costs incurred inbuilding a mass-productionframework, led to a segment lossof ¥18 million, a ¥163 millionturnaround from the segmentprofit of ¥144 million in theprevious fiscal year. Capital expenditures were ¥847million, an increase of ¥278million from the previous fiscalyear.
Due in part to decreases in thesales volumes of filters used inplasma display panels andelectronic materials used insemiconductor manufacturingequipment, net sales fell to¥5,835 million, down ¥4,240million, or 42.1%, year on year.However, thanks to streamliningand cost reductions related toplasma display panel filters,segment profit came to ¥575million, up ¥675 million from thesegment loss of ¥100 millionrecorded in the previous fiscalyear. Capital expenditures came to¥316 million, an increase of ¥120million from the previous fiscalyear.
Due to a drop in manufacturingfacility construction work in theengineering business andincreased repair costs in realestate leasing, net salesdecreased ¥894 million, or 12.7%,year on year to ¥6,148 million. Segment profit fell ¥417 million,or 85.9%, compared with theprevious year to ¥68 million. In November 2012, theproduction subsidiary SOCVietnam Co., Ltd. completed theconstruction of a lithium-ionbattery cathode material plant inHung Yen Province, Vietnam, andbegan operations there. Capital expenditures stood at¥2,509 million, an increase of¥779 million from the previousfiscal year.
6
Corporate Governance
We believe that a primary objective of co rporate governance is to constantly enhance corporate value by increasing management efficiency as well as by securing soundness and transparency in every phrase of business activities. We, therefore, recognize the fulfillment of this aim as our most important management issue.
Each Organization’s Roles
We promote a corporate governance syst em that is based on our view that it is appropriat e to improve our operational efficiency through management decision making carried out by a Board of Directors’ Meeting consisting of directors knowledgeable in business operations as well as to enhance the auditing functions of corporate auditors, and, therefore, we have adopted a corporate auditor system. In addition, we have taken steps to improve our operational efficiency by strengthening both the management decision making and supervisory functions of the Board of Directors, by accelerating the decision making process, and by defining authority and responsibility through the introduction of the Executive Officer System in June 2006, under which management decision making and superv osi ry functions are separated from the business execution function.
With the President as its chairman, the Board of Directors consists of se ven directors, including one outside director* who provides an outside perspective to management decision making. In addition, the term of office for directors is limited to one year in order to define the responsibility of directors and to build a management system that allows us to respond more quickly to changes in our business environment. The Board of Directors’ Meeting is held once or more each month to determine important management matters and to receive reports on business execution.
The Board of Corporate Auditors consists of five corporate auditors, including three outside auditors.* The Board of Corporate Auditors’ Meeting is held once or more each month. The corporate auditors audit the decision making of directors and business execution of executive officers to determine whether or not the decision making and business execution are being properly conducted. Also to this end, the corporate auditors participate in Board of Directors’ Meetings and other important meetings in addition to obtaining reports from directors and executive officers, employees and accounting auditors (audit corporations).
With regard to internal audits, we established the 10-member Internal Audit Department as an in-house organization to conduct audits in accordance with the Internal Audit Regulations. The Internal Audit Department works closely with the corporate auditors.
* The outside director and outside corporate auditors have been reported to the Tokyo Stock Exchange as an independent director and independent auditors.
77
Compliance System Status
We established a Compliance Committee chaired by the President for the purpose of raising the Groupwide awareness of compliance on the part of the Sumitomo Osaka Cement Group’s directors, executive officers and employees. In addition, we issued Compliance Committee Regulations to define the roles and responsibilities of the Compliance Committee. The Compliance Committee initiates annual compliance activity plans and monitors the progress of the plans. Compliance Audits are conducted by the Internal Audit Department, which submits a report to the Compliance Committee. The Compliance Committee then takes necessary measures, screening the results and subm itting a report to the Board of Directors and the corporate auditors.
Furthermore, we have introduced a reporting system (Compliance Hotline System) to enhance compliance. This system is designed to receive compliance reports from the Group’s directors, executive officers and employees and allows us to take corrective actions at an earlier stage. The syst em’s reporting methods and the scope of reportable subject matter have been revised in an effort to ensure an even higher level of effective compliance and to make sure that all our business transactions are conducted fairly.
Risk Management
Chaired by the President, the Risk Management Committee strives to identify and evaluate the Group’s risks. In order to define the Committee’s roles and responsibilities, we issued Risk Management Committee Regulations. The Risk Management Committee prepares a risk management plan each year. Risk Management Audits in accordance with the risk management plan are conducted by the Internal Audit Department, which submits a report to the Risk Management Committee. The Risk Management Committee then takes necessary measures, screens the results and submits a report to the Board of Directors and the corporate auditors.
Basic Policy regarding Control of the Company
At a Board of Directors’ Meeting held on May 14, 2008, we adopted a basic policy regarding parties who control the decisions on our financial and business policies as well as introduced countermeasures against the acquisition of its shares with a view of securing 20% or more of our voting rights by a specific shareholder group (hereafter “the Pl an”). The Plan was introduced as a measure to prevent certain parties, who are considered to be inappropriate in accordance with Sumitomo Osaka Cement’s basic policy, from controlling decisions on its financial and business policies.
The Plan (valid for a three-year period) went into forc e with the approval of the majority of shareholders at the 145th Ordinary General Meeting of Shareholders held on June 27, 2008, and, later, was partially revised and renewed with the approval of the majority of shareholders at the 148th Ordinary General Meeting of Shareholders held on June 29, 2011.
For details of the Plan, please visit our website ( http://www.soc.co.jp/wp-content/uploads/2013/09/20110513_News_Release.pdf , Japanese only).
88
Our Management Team (As of June 27, 2013)
Board of Directors
* enikeS ihciukuFtnediserP
* arustaK ikuyomoTtnediserP eciV
Director, Senior Managing Executive Officers Masafumi NakaoAkira Fujisue
Director, Managing Executive Officers Katsuji MukaiYushi Suga
adiaS oratinuKrotceriD lanretxE
* Representative Director
Auditors
Corporate Auditors Ryuji MuramatsuKatsuhisa Aoi
External Corporate AuditorsFuminori TomosawaShoji HosakaKazuo Suzuki
Executive Officers
Executive Officers
Shigemi YamamotoYasuo FujiwaraIsao YoshitomiFujitoshi NakagawaShinichi InoueToshihiko OnishiHiroyuki SakakibaraRyoji OgiTomonori NonomuraHirotsune Morohashi
9
Six-Year SummarySUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESYears ended March 31
Millions of yenThousands of U.S. dollars
(Note 2)
2008 2009 2010 2011 2012 2013 2013
For the year:
Net sales ¥197,358 ¥215,390 ¥194,624 ¥201,644 ¥217,044 ¥219,083 $2,329,437
Cost of sales 149,333 172,920 157,432 159,542 172,609 170,042 1,807,998
Selling, general and administrative expenses 36,097 36,496 34,415 35,362 36,297 35,082 373,016
Operating income 11,928 5,973 2,776 6,738 8,136 13,959 148,422
Net income (loss) 5,073 450 (1,002) 920 3,645 7,460 79,327
Net cash provided by operating activities ¥ 23,202 ¥ 17,593 ¥ 24,555 ¥ 21,548 ¥ 23,243 ¥ 30,015 $ 319,146
Net cash used in investing activities (18,329) (23,191) (21,525) (15,048) (16,314) (17,362) (184,604)
Net cash (used in) provided by financing activities 5,158 8,753 1,765 (10,991) (6,111) (15,173) (161,339)
Cash and cash equivalents at end of year 22,825 25,988 30,800 26,277 27,093 25,078 266,653
At year end:
Net assets ¥135,523 ¥121,682 ¥125,044 ¥128,541 ¥131,782 ¥142,976 $1,520,222
Total assets 316,835 309,465 311,707 310,746 309,890 315,734 3,357,096
Per share data (yen/dollars):
Net income (loss) ¥ 12.14 ¥ 1.08 ¥ (2.41) ¥ 2.21 ¥ 8.76 ¥ 17.92 $ 0.191
Cash dividends 6.00 4.00 4.00 4.00 4.00 5.00 0.053
Shareholders’ equity 320.83 288.62 296.41 305.37 313.21 340.14 3.617
Financial ratios:
ROE (Return on equity) 3.7% 0.4% (0.8)% 0.7% 2.8% 5.5%
ROA (Return on assets) 3.2% 1.4% 0.3% 0.4% 1.2% 2.4%
Equity ratio (Note 1) 42.3% 38.9% 39.6% 40.9% 42.1% 44.8%
Number of employees 2,646 2,706 2,808 2,816 2,769 2,834
Notes: 1. Equity = Total net assets – Share subscription rights – Minority interests2. U.S. dollar amounts have been translated from yen at the rate of ¥94.05=US$1 as of March 31, 2013.
Consolidated Financial Data
10
Financial Review
Scope of ConsolidationThe scope of these consolidated financial statements includes Sumitomo Osaka Cement, 36 consolidated subsidiaries and one equity-method affiliate.
Net Sales During the fiscal year under review, the Japanese economy saw gradual recovery backed by reconstruction demand related to the Great East Japan Earthquake, but was impacted by the slowing of the global economy from summer onward. However, from around the beginning of calendar 2013, conditions began to improve due to the economic policies implemented by Japan’s new government. In the cement industry, both public- and private-sector demand related to disaster reconstruction picked up, as did pri-vate housing investment, mainly in urban areas, buoying pri-vate-sector demand. As a result, cement demand in Japan grew 4.5% year on year to 44,577 thousand metric tons. Exports, however, retreated 3.7%. Consequently, the total sales volume of cement produced by domestic manufacturers, including exports, climbed 2.8% year on year to 53,387 thou-sand metric tons. Under these circumstances, the Sumitomo Osaka Cement Group worked to provide a stable supply of cement and other materials for disaster reconstruction while promoting Groupwide efforts aimed at sustainable development, such cost reduction measures. As a result, consolidated net sales during the fiscal year under review increased 0.9% year on year to ¥219,083 million (US$2,329,437 thousand), due largely to high-er revenue in the cement business. For more information on results by business segment, please refer to the Review of Operations.
ProfitsOperating income grew 71.6% year on year to ¥13,959 million (US$148,422 thousand) due to a rise in earnings primarily in the cement business. Net income surged 104.6% compared with the previous fiscal year to ¥7,460 million (US$79,327 thou-sand). Consequently, net income per share stood at ¥17.92.
Financial PositionTotal assets as of March 31, 2013, stood at ¥315,734 million (US$3,357,096 thousand), an increase of ¥5,844 million from the previous fiscal year-end. Current assets decreased ¥1,553 million from the previous fiscal year-end to ¥95,515 million (US$1,015,582 thousand), attributable primarily to a decrease in cash and deposits. Total noncurrent assets rose ¥7,398 mil-lion from the previous fiscal year-end to ¥220,219 million (US$2,341,514 thousand), mainly as a result of an increase in securities. Within noncurrent assets, property, plant and equip-ment increased ¥1,007 mil l ion to ¥159,809 mil l ion (US$1,699,193 thousand), while investments and other assets rose ¥7,153 million to ¥56,997 million (US$606,030 thousand). Total liabilities declined ¥5,349 million from the previous fiscal year-end to ¥172,758 million (US$1,836,874 thousand). Current liabilities decreased ¥15,525 million to ¥90,373 million (US$960,912 thousand) largely due to a decrease in the bal-ance of the current portion of long-term loans payable and cor-porate bonds scheduled to be reimbursed within one year. Long-term liabilities increased ¥10,176 million to ¥82,384 mil-lion (US$875,961 thousand) as a result of such factors as a rise in long-term loans payable. Total interest-bearing debt declined ¥13,398 million to ¥102,810 million (US$1,093,148 thousand) compared with the previous fiscal year-end, while the interest
0
50
100
150
200
250
197.4 194.6
219.1217.0201.6
215.4
Net Sales(Billions of yen)
’13’12’11’10’09’080
15
10
5
11.9
14.0
8.1
6.7
2.8
6.0
Operating Income(Billions of yen)
’13’12’11’10’09’080
400
300
200
100
316.8 311.7335.7
309.9310.7309.5
Total Assets(Billions of yen)
’13’12’11’10’09’08
11
repayment of long-term loans payable and redemption of cor-porate bonds. As a result, cash and cash equivalents at the fiscal year-end decreased ¥2,015 million, or 7.4%, year on year to ¥25,078 million (US$266,653 thousand).
Dividend PolicySumitomo Osaka Cement believes that earnings distributions to shareholders should be determined in accordance with the Company’s business results. As a cement manufacturer, it is essential for the Company to continuously improve facilities while investing in facility renewal in order to secure future earn-ings. To this end, the Company considers it vital to expand its reserves. Based on this viewpoint, the Company will determine earnings distribution from the viewpoint of overall business management. For f iscal 2013, interim dividends were not paid. Consequently, the year-end dividend was ¥5.00 per share, and the full-year dividend payment totaled ¥5.00 per share.
Fiscal 2014 OutlookIn the fiscal year ending March 31, 2014, while risks associated with the global economic downturn and other factors remain, the Japanese economy is expected to make a gradual recov-ery, due in part to the economic policies of the government. In the cement industry, strong private-sector demand is expected due to ongoing increases in private housing invest-ment and private capital investment. Furthermore, public-sector demand is forecast to increase on the back of reconstruction demand related to the Great East Japan Earthquake. Accordingly, overall domestic demand is expected to grow. Amid such circumstances, the Sumitomo Osaka Cement Group will continue to focus on ensuring supply stability by establishing flexible production, sales and distribution systems
coverage ratio increased from 12.0 times in the previous fiscal year to 17.7 times. Net assets at the end of the fiscal year under review stood at ¥142,976 million (US$1,520,222 thousand), up ¥11,194 million from a year earlier. This increase was mainly the result of a rise in retained earnings. Consequently, the shareholders’ equity ratio edged up from 42.1% as of March 31, 2012, to 44.8% as of March 31, 2013. Capital Investment, Depreciation and AmortizationThe Company is taking steps to stabilize its business founda-tion in the cement business by making further efforts to stream-line production and distribution. In other business fields, the Company implements capital investment based on its medium- and long-term management strategies to expand revenues by allocating key management resources to growth fields. As a result, total capital expenditures undertaken throughout the Group increased ¥3,943 million, or 26.8%, from the previous fiscal year to ¥18,652 mill ion as of March 31, 2013. Depreciation and amortization fell ¥2,251 million, or 11.4%, to ¥17,485 million. Cash FlowNet cash provided by operating activities totaled ¥30,015 mil-lion (US$319,146 thousand), up ¥6,772 million from the previ-ous fiscal year. In addition to income before income taxes and minority interests, cash inflows were primarily composed of internal adjustments, including depreciation and amortization. Net cash used in investing activities amounted to ¥17,362 mil-lion (US$184,604 thousand), up ¥1,048 million from the previ-ous fiscal year, mainly reflecting purchases of property, plant and equipment. Net cash used in financing activities was ¥15,173 million (US$161,339 thousand), up ¥9,062 million from the previous fiscal year, Cash outflows comprised mainly the
0
30
60
90
120
150135.5
143.0
131.7128.5125.0121.7
Net Assets(Billions of yen)
’13’12’11’10’09’08–2
0
2
4
6
3.7
0.40.7
2.8
(0.8)
5.5
ROE (Return on Equity)(%)
’13’12’11’10’09’080
1
2
3
4
3.2
1.4
0.3
ROA (Return on Assets)(%)
’13’12’11’10’09’08
0.4
1.2
2.4
12
stable supply of limestone, the primary raw material of cement, over the long term. On the other hand, the price of coal, the pri-mary raw fuel used in cement production, may potentially increase due to future circumstances. The Group is making efforts to limit the effects on its performance by improving cement sales prices to reflect operating cost increases caused by rising expenses for coal procurement.
• Collection of DebtThe Sumitomo Osaka Cement Group has business with major customers in the construction and retail industries for its main-stay cement products and concrete. In the event that the per-formance of such major customers rapidly deteriorates and the Group is unable to collect receivables, its financial condition, results and cash flows may be seriously affected. The Sumitomo Osaka Cement Group is therefore working to strengthen credit administration by holding down accounts receivable through direct sales at cement service stations and by seeking to secure liquidity guarantees from customers.
• Plant OperationsBecause cement plants contain large-scale equipment and facilities, in the event of a significant incident, fire, accident, nat-ural disaster, electric outage or other unforeseen circumstance that may interfere with plant operations, the Group’s financial condition, results and cash flows may be significantly affected due to excessive recovery time and costs. However, the Group conducts regular inspections and disaster-prevention patrols at all of its plants in order to ensure stable operations based on its production plan. Accordingly, the Group estimates the possi-bility of such an occurrence to be low. Further, Sumitomo Osaka Cement has six cement plants nationwide (four operated by the Company; two by affiliated companies), and should operations at one plant be interrupted, the Group will respond by shifting orders among cement plants and by purchasing needed cement from business partners in an effort to ensure stable supply.
• Impairment of Property, Plant and EquipmentIn the event that the Group is unable to recover its investment due to decreased profitability or a decline in the market value of property, plant and equipment following the application of impairment accounting, Sumitomo Osaka Cement will be required to write down the book value of fixed assets to a price that may be recovered, based upon future earnings plans and related forecasts. At the current moment, the Group has recorded all impairment accounting of property, plant and equipment, which is required. However, impairment loss may be caused by changes in future land prices and operating con-ditions, and the Group’s financial condition and results may be significantly affected.
to meet fluctuations in demand in the domestic cement busi-ness while working to set appropriate sales prices. With regard to the overseas cement business, the Group will continue to examine the possibility of penetrating regions that are expected to grow in the future in order to facilitate new business expan-sion. In other business fields, the Group will investigate various measures to increase its business scale and profits through overseas production and sales as well as the focused distribu-tion of management resources. In line with its social mission, the Group will continue to actively contribute to the establishment of a recycling-oriented society by utilizing recycled raw materials and fuels, strive to reduce its environmental impact, and accept and treat disaster waste produced during the Great East Japan Earthquake. For the fiscal year ending March 31, 2014, Sumitomo Osaka Cement expects net sales of ¥225,000 million, an increase of 2.7% year on year, operating income of ¥16,000 million, an increase of 14.6%, and net income of ¥8,000 million, a rise of 7.2% from the fiscal year under review. The Company plans to pay a full-year dividend of ¥5.00 per share.
The aforementioned figures are based on information available as of May 2013, and therefore may differ in accordance with various factors in the future. Major possible risk factors are described as follows:
Business Risks• Decrease in Domestic Demand for CementIn the Sumitomo Osaka Cement Group’s mainstay cement business, domestic demand is significantly impacted by public investment and private-sector capital expenditure in Japan. Therefore, in the event that public works spending and private-sector capital expenditure deteriorate at a pace that exceeds the Company’s forecasts, the Group’s financial condition, results and cash flows may be substantially affected. However, given that cement is an indispensable material contributing to social capital, it is projected that demand above a certain level can be consistently secured in the medium to long term. Based on an anticipated decline in domestic demand for the foresee-able future, the Sumitomo Osaka Cement Group has restruc-tured its production framework by closing certain cement plants in prior years and will continue to implement various cost reductions and revisions of sales prices.
• Increase in Raw Material and Fuel PricesThe Group’s mainstay product of cement requires a variety of raw materials and fuels, including limestone, clay and coal. Therefore, price hikes in raw materials and fuels used in the cement manufacturing process have the potential to significant-ly affect the Group’s financial condition, results and cash flows. However, the Group’s own mine can provide an extremely
13
Consolidated Balance SheetsSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2012 and 2013
Millions of yenThousands of U.S. dollars
(Note 1)
2012 2013 2013
ASSETS
Current assets:
Cash and deposits (Note 4) ¥ 27,237 ¥ 25,225 $ 268,215
Notes and accounts receivable—trade 47,676 47,697 507,148
Securities 0 0 2
Merchandise and finished goods 6,831 6,540 69,541
Work in process 1,465 1,990 21,166
Raw materials and supplies 9,544 9,533 101,366
Short-term loans receivable 689 567 6,029
Deferred tax assets (Note 11) 1,717 2,267 24,110
Other 2,265 1,954 20,782
Less: Allowance for doubtful receivables (357) (261) (2,781)
Total current assets 97,069 95,515 1,015,582
Property, plant and equipment, net:
Land 39,080 38,914 413,764
Buildings and structures 50,689 53,240 566,087
Machinery, equipment and vehicles 46,384 46,393 493,281
Construction in progress 7,783 5,888 62,606
Other 14,864 15,372 163,452
Total property, plant and equipment, net 158,802 159,809 1,699,193
Intangible assets:
Goodwill 649 357 3,799
Other 3,506 3,055 32,491
Total intangible assets 4,156 3,413 36,290
Investments and other assets:
Investment securities (Note 6) 40,663 48,925 520,205
Long-term loans receivable 1,787 1,714 18,226
Deferred tax assets (Note 11) 905 788 8,386
Other 7,349 6,329 67,299
Less: Allowance for doubtful accounts (843) (760) (8,087)
Total investments and other assets 49,862 56,997 606,030
Total noncurrent assets 212,821 220,219 2,341,514
Total assets ¥309,890 ¥315,734 $3,357,096
See accompanying notes to the consolidated financial statements.
14
Millions of yenThousands of U.S. dollars
(Note 1)
2012 2013 2013
LIABILITIES AND NET ASSETS
Current liabilities:
Notes and accounts payable—trade ¥ 26,541 ¥ 27,245 $ 289,690
Short-term loans payable (Note 7) 33,839 34,086 362,429
Current portion of long-term loans payable (Note 7) 21,169 11,290 120,045
Current portion of bonds (Note 7) 10,000 — —
Income taxes payable 2,183 4,320 45,935
Provision for bonuses 2,058 2,091 22,236
Provision for loss on disaster 6 — —
Other 10,100 11,340 120,575
Total current liabilities 105,899 90,373 960,912
Long-term liabilities:
Bonds payable (Note 7) 15,000 15,000 159,489
Long-term loans payable (Note 7) 36,200 42,433 451,183
Deferred tax liabilities (Note 11) 9,602 13,013 138,367
Provision for retirement benefits (Note 13) 1,392 1,299 13,816
Provision for directors’ retirement benefits 234 221 2,356
Asset retirement obligations 299 642 6,830
Other 9,478 9,773 103,917
Total long-term liabilities 72,207 82,384 875,961
Total liabilities 178,107 172,758 1,836,874
Contingent liabilities (Note 8)
Net assets:
Shareholders’ equity
Capital stock 41,654 41,654 442,892
Capital surplus (Note 9) 31,084 31,084 330,510
Retained earnings (Note 9) 44,865 50,620 538,226
Treasury stock (1,972) (1,989) (21,158)
Total shareholders’ equity 115,630 121,368 1,290,471
Accumulated other comprehensive income:
Unrealized gain on available-for-sale securities 14,822 20,125 213,982
Foreign currency translation adjustments (55) 95 1,019
Total accumulated other comprehensive income 14,767 20,220 215,002
Minority interests 1,384 1,387 14,749
Total net assets 131,782 142,976 1,520,222
Total liabilities and net assets ¥309,890 ¥315,734 $3,357,096
15
Consolidated Statements of IncomeSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2012 and 2013
Millions of yenThousands of U.S. dollars
(Note 1)
2012 2013 2013Net sales ¥217,044 ¥219,083 $2,329,437
Cost of sales 172,609 170,042 1,807,998
Gross profit 44,434 49,041 521,438
Selling, general and administrative expenses 36,297 35,082 373,016
Operating income 8,136 13,959 148,422
Non operating income:
Interest income 78 96 1,030
Dividend income 1,237 1,093 11,628
Foreign exchange gain — 728 7,744
Compensation income 278 326 3,471
Equity in earnings of affiliates 33 122 1,304
Rental income 157 189 2,014
Other 509 626 6,658
Total non operating income 2,294 3,183 33,852
Non operating expenses:
Interest expense 1,921 1,647 17,513
Foreign exchange loss 23 — —
Other 820 883 9,392
Total non operating expenses 2,765 2,530 26,905
Ordinary income 7,666 14,612 155,369
Extraordinary income:
Gain on sales of noncurrent assets 37 132 1,407
Gain on sales of investment securities 86 4 48
Compensation income 313 — —
Other 4 — —
Total extraordinary income 441 136 1,455
Extraordinary loss:
Loss on retirement of noncurrent assets 1,255 613 6,522
Loss on sales of noncurrent assets 97 38 411
Loss on valuation of investment securities 22 16 177
Loss on impairment of noncurrent assets (Note 14) 610 517 5,503
Loss on business restructuring (Note 15) — 541 5,752
Loss on disaster (Note 16) 228 — —
Other 17 68 727
Total extraordinary loss 2,231 1,795 19,094
Income before income taxes and minority interests 5,876 12,953 137,730
Income taxes (Note 11):
Current 2,554 5,468 58,139
Deferred (333) (2) (31)
Income before minority interests 3,654 7,488 79,622
Minority interests in net income of consolidated subsidiaries (8) (27) (295)
Net income ¥ 3,645 ¥ 7,460 $ 79,327
Yen U.S. dollars (Note 1)
2012 2013 2013
Per share information (Note 2 (n)):
Net income ¥ 8.76 ¥ 17.92 $ 0.191
Net income assuming dilution — — —
See accompanying notes to the consolidated financial statements.
16
Consolidated Statements of Comprehensive IncomeSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2012 and 2013
Millions of yenThousands of U.S. dollars
(Note 1)
2012 2013 2013
Income before minority interests ¥3,654 ¥ 7,488 $ 79,622
Other comprehensive income (Note 12):
Unrealized gain on available-for-sale securities 1,244 5,299 56,346
Foreign currency translation adjustments (8) 151 1,611
Share of other comprehensive income of affiliates accounted for using the equity method (0) 2 30
Comprehensive income ¥4,889 ¥12,942 $137,609
Total comprehensive income attributable to:
Shareholders of Sumitomo Osaka Cement Co., Ltd. ¥4,880 ¥12,914 $137,315
Minority interests 8 27 295
See accompanying notes to the consolidated financial statements.
17
Consolidated Statements of Changes in Net AssetsSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2012 and 2013
Millions of yen
Shareholders’ equity
Shares of common stock
Capital stock
Capital surplus
Retained earnings
Treasury stock Total
Balance at March 31, 2011 427,432,175 ¥41,654 ¥31,084 ¥42,839 ¥(1,959) ¥113,619 Cash dividend paid — — (1,665) — (1,665) Net income for the year — — 3,645 — 3,645 Acquisition of treasury stock — — — (14) (14) Disposal of treasury stock — 0 — 0 0 Increase due to change in accounting
period of consolidated subsidiary — — 44 — 44 Other, net — — — — —Balance at March 31, 2012 427,432,175 ¥41,654 ¥31,084 ¥44,865 ¥(1,972) ¥115,630 Cash dividend paid — — 1,665 — 1,665 Net income for the year — — 7,460 — 7,460 Acquisition of treasury stock — — — (17) (17) Disposal of treasury stock — 0 — 0 0 Decrease due to change in accounting
period of consolidated subsidiary — — (40) — (40) Other, net — — — — —Balance at March 31, 2013 427,432,175 ¥41,654 ¥31,084 ¥50,620 ¥(1,989) ¥121,368
Millions of yen
Accumulated other comprehensive income
Unrealized gain on available-for-sale
securities
Foreign currency translation
adjustmentsTotal
Minority interests
Total net assets
Balance at March 31, 2011 ¥13,578 ¥(46) ¥13,532 ¥1,390 ¥128,541 Cash dividend paid — — — — 1,665 Net income for the year — — — — 3,645 Acquisition of treasury stock — — — — (14) Disposal of treasury stock — — — — 0 Increase due to change in accounting
period of consolidated subsidiary — — — — 44 Other, net 1,243 (9) 1,234 (5) 1,229Balance at March 31, 2012 ¥14,822 ¥(55) ¥14,767 ¥1,384 ¥131,782 Cash dividend paid — — — — 1,665 Net income for the year — — — — 7,460 Acquisition of treasury stock — — — — (17) Disposal of treasury stock — — — — 0 Decrease due to change in accounting
period of consolidated subsidiary — — — — (40) Other, net 5,302 151 5,453 2 5,456Balance at March 31, 2013 ¥20,125 ¥ 95 ¥20,220 ¥1,387 ¥142,976
Thousands of U.S. dollars (Note 1)
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock Total
Balance at March 31, 2012 $442,892 $330,509 $477,034 $(20,978) $1,229,459 Cash dividend paid — — (17,706) — (17,706) Net income for the year — — 79,327 — 79,327 Acquisition of treasury stock — — — (180) (180) Disposal of treasury stock — 0 — 0 0 Decrease due to change in accounting
period of consolidated subsidiary — — (428) — (428) Other, net — — — — —Balance at March 31, 2013 $442,892 $330,510 $538,226 $(21,158) $1,290,471
Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Unrealized gain on available-for-sale
securities
Foreign currency translation
adjustmentsTotal
Minority interests
Total net assets
Balance at March 31, 2012 $157,605 $(591) $157,013 $14,725 $1,401,198 Cash dividend paid — — — — (17,706) Net income for the year — — — — 79,327 Acquisition of treasury stock — — — — (180) Disposal of treasury stock — — — — 0 Decrease due to change in accounting
period of consolidated subsidiary — — — — (428) Other, net 56,376 1,611 57,988 23 58,011Balance at March 31, 2013 $213,982 $1,019 $215,002 $14,749 $1,520,222
See accompanying notes to the consolidated financial statements.
18
Consolidated Statements of Cash FlowsSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESYears ended March 31, 2012 and 2013
Millions of yenThousands of U.S. dollars
(Note 1)
2012 2013 2013Operating activities:Income before income taxes and minority interests ¥ 5,876 ¥12,953 $137,730Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,736 17,485 185,920 Amortization of goodwill 188 152 1,621 Loss on impairment of fixed assets 610 517 5,503 Increase (decrease) in provision for retirement benefits 329 (131) (1,401) Increase (decrease) in provision for directors’ retirement benefits (12) 14 159 Increase (decrease) in provision for loss on disaster (474) (6) (69) Increase (decrease) in allowance for doubtful accounts 500 (90) (964) Interest and dividend income (1,315) (1,190) (12,658) Interest expenses 1,921 1,647 17,513 Foreign exchange loss (gain) (61) 256 2,727 Equity in earnings of affiliates (33) (122) (1,304) Gain on sales of noncurrent assets (37) (132) (1,407) Loss on sales of noncurrent assets 97 38 411 Loss on retirement of noncurrent assets 943 274 2,922 Loss (gain) on sales of investment securities (86) 29 318 Loss on valuation of investment securities 22 16 177 Decrease (increase) in notes and accounts receivable—trade (5,371) 156 1,668 Decrease (increase) in inventories 2,107 (220) (2,342) Increase in notes and accounts payable—trade 1,724 778 8,273 Other (818) 1,411 15,008Subtotal 25,848 33,839 359,805 Interest and dividends income received 1,310 1,186 12,616 Interest expenses paid (1,932) (1,693) (18,008) Income taxes paid (1,983) (3,316) (35,266) Net cash provided by operating activities 23,243 30,015 319,146
Investing activities:Proceeds from redemption of securities 0 0 1Proceeds from sales of property, plant and equipment 405 492 5,233Purchases of property, plant and equipment (15,156) (17,746) (188,696)Proceeds from sales of investment securities 300 62 663Purchases of investment securities (3) (10) (109)Purchases of investments in subsidiaries resulting in change in scope of consolidation (186) — —Payments for sales of investments in subsidiaries resulting in change in scope of consolidation — (19) (203)Payments for investments in capital of subsidiaries and affiliates (920) — —Collection of loans receivable 231 739 7,861Payments of loans receivable (984) (883) (9,393)Other (1) 3 36 Net cash used in investing activities (16,314) (17,362) (184,604)
Financing activities: Increase (decrease) in short-term loans payable (437) 239 2,550Proceeds from long-term loans payable 2,530 18,598 197,745Repayment of long-term loans payable (9,452) (22,253) (236,617)Proceeds from issuance of bonds 10,000 — —Proceeds from sales of treasury stock 0 0 0Redemption of bonds (7,000) (10,000) (106,326)Purchase of treasury stock (14) (17) (180)Cash dividends paid (1,665) (1,665) (17,706)Cash dividends paid to minority shareholders (4) (1) (11)Other (67) (74) (793) Net cash used in financing activities (6,111) (15,173) (161,339)Effect of exchange rate changes on cash and cash equivalents (2) 154 1,644Net (decrease) increase in cash and cash equivalents 815 (2,365) (25,152)Cash and cash equivalents at beginning of year 26,277 27,093 288,079Increase in cash and cash equivalents resulting from change in scope of consolidation — 350 3,726Increase in cash and cash equivalents resulting from change in accounting period of consolidated subsidiary 0 — —Cash and cash equivalents at end of year (Note 4) ¥27,093 ¥25,078 $266,653
See accompanying notes to the consolidated financial statements.
19
Notes to Consolidated Financial StatementsSUMITOMO OSAKA CEMENT CO., LTD. AND CONSOLIDATED SUBSIDIARIESMarch 31, 2012 and 2013
1. BASIS OF PREPARATION OF CONSOLIDATED
FINANCIAL STATEMENTS
Sumitomo Osaka Cement Co., Ltd. (the “Company”) maintains its
accounting records and prepares its financial statements in accordance
with accounting principles and practices generally accepted and
applied in Japan.
The accompanying consolidated financial statements of the
Company and its consolidated subsidiaries are prepared on the basis of
accounting principles generally accepted in Japan, and are compiled
from the consolidated financial statements prepared by the Company
as required by the Financial Instruments and Exchange Law of Japan.
In addition, the notes to the consolidated financial statements include
certain information which is not required under accounting principles gen-
erally accepted in Japan but is presented herein as additional information.
The U.S. dollar amounts are included solely for the convenience of
the reader and are stated, as a matter of arithmetic computation only, at
US$1.00=¥94.05, the exchange rate prevailing on March 31, 2013.
These translations should not be construed as representations that the
Japanese yen amounts actually represent, or have been or could be
converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its significant subsidiaries. All significant
intercompany balances and transactions have been eliminated in consol-
idation. Any material differences between the cost of investments in con-
solidated subsidiaries and the underlying equity in their net assets at the
dates of acquisition are amortized over five years. Significant investments
in unconsolidated subsidiaries and affiliates are accounted for by the
equity method. Investments in unconsolidated subsidiaries and affiliates
which are not accounted for by the equity method are carried at cost.
Three consolidated subsidiaries have a December 31 year end which
differs from that of the Company. As a result, adjustments have been
made for any significant intercompany transactions which took place
during the period between the year end of the subsidiaries and the year
end of the Company.
(b) Cash and cash equivalents
Cash and cash equivalents include all highly liquid debt instruments
purchased with a maturity of three months or less.
(c) Inventories
Inventories are stated principally at the lower of cost or market, cost
being determined principally by the moving average method.
(d) Allowance for doubtful receivables
Allowance for doubtful receivables is provided at an estimated amount
of the anticipated loss on bad debts plus an amount calculated at the
average rate of historical losses on bad debts charged to income for
the past three years.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Depreciation is calculated mainly by the declining-balance
method for property, plant and equipment at rates based on the esti-
mated useful lives of the respective assets. The depreciation of build-
ings purchased on and after April 1, 1998, in-house power generation
facility at the Ako Plant, the Kochi Plant and the Tochigi Plant, and
property, plant and equipment of certain subsidiaries is calculated by
the straight-line method. Leased assets under finance leases which do
not transfer ownership of the leased property are depreciated or amor-
tized by the straight-line method over the lease terms assuming no
residual value. The useful lives range as follows: buildings and struc-
tures, 2 to 75 years; machinery, equipment and tools, 2 to 22 years.
Quarry sites are depreciated by the unit-of-production method.
Normal repairs and maintenance, including minor renewals and
improvements, are charged to income as incurred.
(f) Investment securities
Securities are classified and accounted for, depending on manage-
ment’s intent, as follows: i) “trading securities,” which are held for the
purpose of earning capital gains in the short term, are stated at fair
value, and the related unrealized gain or loss is included in earnings, ii)
“held-to-maturity debt securities,” which are expected to be held to
maturity with the positive intent and ability to hold to maturity, are stated
at amortized cost and iii) “available-for-sale securities,” not classified in
either of the aforementioned categories, are stated at fair value with
unrealized gain and loss, net of the applicable taxes, stated as a sepa-
rate component of accumulated other comprehensive income.
The Company classified all securities as “available-for-sale securities.”
Available-for-sale securities with fair value are stated at average mar-
ket value for the month ended on the balance sheet date. Other securi-
ties without a fair value are stated at cost determined by the
moving-average method.
The difference between the acquisition cost and the carrying value of
available-for-sale securities, net of the applicable taxes, is recognized in
“unrealized gain (loss) on available-for-sale securities.” The cost of available-
for-sale securities sold is computed based on the moving-average method.
20
(g) Foreign currency translation
Balance sheets of consolidated overseas subsidiaries are translated into
Japanese yen at the rates of exchange in effect at the balance sheet
date for all assets and liabilities, and at the historical rates for the compo-
nent of net assets excluding minority interests. Differences arising from
such translations are shown as “foreign currency translation adjust-
ments” as a separate component of accumulated other comprehensive
income.
Exchange rates as of the subsidiaries’ balance sheet date are used
for the translation of income and expenses. Gain or loss resulting from
the translation of foreign currency transactions is credited or charged to
income as incurred.
(h) Leases
All finance lease transactions are capitalized and recognized as leased
assets and lease obligations on the consolidated balance sheets,
except for finance lease transactions executed on or before March 31,
2008 that do not involve a transfer of ownership, which are accounted
by the same method as former fiscal years.
(i) Income taxes
Deferred tax assets and liabilities are determined based on the differ-
ences between the carrying amounts of the existing assets and the lia-
bilities for financial reporting purposes and their respective tax bases,
and the operating loss carryforwards. Deferred tax assets and liabilities
are measured using the enacted tax rates and laws which will be in
effect when the differences are expected to reverse.
(j) Provision for bonuses
Provision for bonuses is recorded based on an estimated amount.
(k) Provision for retirement benefits
Employees of the Company are covered by its funded pension plan.
Benefits under this plan are based on current basic salary rates and
length of service.
Accrued severance benefits are stated based on the projected bene-
fit obligation and the estimated assets in the pension plan at the end of
the year. The unrecognized actuarial gain or loss is amortized over a
period of 15 years, which falls within the remaining years of service of
the eligible employees and is amortized from the year following the year
in which the gain or loss was incurred.
Directors and statutory auditors are generally entitled to receive
lump-sum retirement benefit payments based on their level of compen-
sation and years of service at the time of retirement. Such lump-sum
payments are covered by an unfunded retirement benefit plan and
accrued at an amount to be required at the balance sheet date accord-
ing to internal regulations.
(l) Revenue recognition
The percentage-of-completion method is applied if the outcome of the
construction activities can be accurately estimated as of the fiscal year-
end. Otherwise, the completed-contract method shall be applied.
(m) Appropriation of retained earnings
Under the Corporation Law and the Articles of Incorporation of the
Company, appropriations of retained earnings (primarily for the payment
of cash dividends) proposed by the Board of Directors must be
approved at a shareholders’ meeting held within three months of the
end of each fiscal year. The appropriations of retained earnings reflected
in the accompanying financial statements represent appropriations
applicable to the immediately preceding fiscal year, which were duly
approved at a shareholders’ meeting and implemented during that year.
Dividends are paid to shareholders of record at the end of the fiscal year.
(n) Net income per share
Basic net income per share is computed by dividing net income avail-
able to common shareholders by the weighted-average number of
common shares outstanding for the period.
(o) Derivatives
The Company and consolidated subsidiaries enter into derivative
agreements to manage their exposures to fluctuations in interest rates.
Interest rate swaps are utilized to reduce interest rate risks on borrow-
ings. The Company and consolidated subsidiaries do not enter into
derivative agreements for trading or speculative purposes. Interest rate
swaps which qualify for hedge accounting and meet specific matching
criteria are not remeasured at fair value, but accounted for as if the
interest rates applied to the interest rate swaps had originally applied to
the underlying borrowings.
Hedged items are identified by transaction at the time when the
Company and the consolidated subsidiaries enter into derivative agree-
ments, and the hedging instruments and the hedged items are sepa-
rately recorded and maintained. The Company and the consolidated
subsidiaries evaluate the effectiveness of derivatives based on either
the difference between the accumulated amount of cash flows from the
hedging instrument and from the corresponding hedged item or
variance between the fair value of the hedging instrument and the
hedged item, except for interest rate swaps which meet specific
matching criteria.
(p) Asset retirement obligations
An asset retirement obligation is recorded at the time of acquisition or
construction of a tangible fixed asset and when there is a statutory or
similar obligation associated with the removal of such tangible fixed
asset. The asset retirement obligation is measured at the discounted
21
value of the liability at the time the tangible fixed asset is acquired or
constructed and the amount of the liability is added to the book value of
the relevant tangible fixed asset. The cost component of the obligation is
depreciated over the remaining useful life of the tangible fixed asset.
(q) Accounting standards issued but not yet applied
The Company plans to adopt the Accounting Standard for Retirement
Benefits (Accounting Standards Board of Japan (ASBJ), Statement No.
26, issued on May 17, 2012) and the Guidance on Accounting
Standard for Retirement Benefits (ASBJ Guidance No. 25, issued on
May 17, 2012).
Summary
Under the revised accounting standard, actuarial gains and losses and
past service costs will be recognized on the balance sheet within net
assets after adjusting for tax effects, and the difference between retire-
ment benefit obligations and plan assets will be recognized as a liability
or asset. With respect to the method of attributing expected benefits to
periods, the standard allows the use of a benefit formula basis, in addi-
tion to a straight-line basis. Furthermore, the method of calculating the
discount rate has also been amended.
Effective date
The new standard will be applied from the end of the fiscal year begin-
ning April 1, 2013.
Effect of application
The effect of adopting this new standard on the Company’s financial
statements was under evaluation at the time the accompanying consol-
idated financial statements were being prepared.
3. CHANGES IN ACCOUNTING POLICY
Effective April 1, 2012, the Company and its consolidated subsidiaries
in Japan have applied a new depreciation method for newly acquired
tangible fixed assets based on changes to the Corporation Tax Act
brought about by the Act on Partial Revision of the Income Tax Act to
Build a Tax System Which Adapts to Changing Economic and Social
Structures (Act No. 114 of 2011, promulgated on December 2, 2011)
and the Cabinet Order for Partial Revision of the Order for Enforcement
of the Corporation Tax Act (Cabinet Order No. 379 of 2011, promulgat-
ed December 2, 2011).
As a result, operating income, ordinary income and income before
income taxes and minority interests each increased ¥444 million
(US$4,724 thousand) for the year ended March 31, 2013.
4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at March 31, 2012 and 2013 consisted of
the following:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Cash and deposits ¥27,237 ¥25,225 $268,215
Time deposits with a maturity of over three months (143) (146) (1,561)
¥27,093 ¥25,078 $266,653
5. FINANCIAL INSTRUMENTS
1. Items Concerning the Status of Financial Instruments
(a) Policies for Financial Instruments
The Sumitomo Osaka Cement Group (the “Group”) procures necessary
funds primarily through bank loans and the issuance of bonds in accor-
dance with capital expenditure plans and financial plans mainly to
engage in the business of producing and selling cement. Temporary
surpluses are invested in low-risk financial instruments and bank loans
provide short-term working capital. It is the Group’s policy to use deriv-
atives as a way to avoid the below-stated risks and to not engage in
trading or speculative transactions.
(b) Types and Risks of Financial Instruments and Risk Management
Trade receivables, such as notes and accounts receivable, are subject
to credit risk in relation to customers. In accordance with its internal
policies for managing such risk, the Company has established a system
that manages the due dates and outstanding balances by each cus-
tomer. Securities and investment securities are composed of mainly
stocks associated with business and capital alliances, and are subject
to market risk.
Trade payables, such as notes and accounts payable, usually have a
payment due dates within one year. Furthermore, a certain portion of
such payables are denominated in a foreign currency, associated with
the import of raw materials, thus subject to exchange rate fluctuation
risk. However, such risks are minor. Loans, bonds and lease obligations
related to finance lease transactions are taken out principally for the
purpose of making capital investments. Such obligations’ redemption
dates are a maximum of 15 years from the balance sheet date. A cer-
tain portion of said liabilities have variable interest rates and are subject
to interest rate fluctuation risk. However, to hedge such risk, the interest
rates are fixed through the use of derivative transactions (interest rate
swap transactions). Evaluation of the effectiveness of derivatives is
omitted since all of the interest rate swap transactions meet the specific
matching criteria.
22
Derivative transactions are entered into and managed in accordance
with internal policies, which determine the authority to undertake such
transactions. To minimize credit risk, derivative transactions are entered
into only with highly rated financial institutions.
Furthermore, trade payables and loans are subject to liquidity risks
(the risk that the Group may not be able to meet its obligations). The
Group manages such risks by preparing monthly cash flow plans.
(c) Supplemental Explanation of the Estimated Fair Value of
Financial Instruments
The values of contracts related to derivative transactions as stated in “2.
Estimated Fair Value of Financial Instruments” do not by themselves indi-
cate the market risk associated with the respective derivative transaction.
2. Estimated Fair Value of Financial Instruments
Consolidated balance sheet amounts, estimated fair values and their
differences as of March 31, 2013 (the consolidated account closing
date for the fiscal year under review) are as follows. The following table
does not include financial instruments for which it is extremely difficult
to determine the fair value (see Note 2).
Millions of yen
2013Consolidated
Balance Sheet Amounts Fair Value Difference
Cash and deposits ¥25,225 ¥25,225 ¥ —
Notes and accounts receivable —trade 47,697 47,697 —
Securities and investment securities:
Available-for-sale securities 44,308 44,308 —
Short-term loans receivable (Note 5) 567 567 —
Long-term loans receivable 151 155 4
Total assets 117,949 117,953 4
Notes and accounts payable —trade 27,245 27,245 —
Short-term loans payable 34,086 34,086 —
Bonds payable 15,000 15,188 188
Long-term loans payable 53,724 54,251 527
Total liabilities 130,055 130,771 715
Derivative transactions — — —
Total derivative transactions — — —
Thousands of U.S. dollars
2013Consolidated
Balance Sheet Amounts Fair Value Difference
Cash and deposits $ 268,215 $ 268,215 $ —
Notes and accounts receivable —trade 507,148 507,148 —
Securities and investment securities:
Available-for-sale securities 471,115 471,115 —
Short-term loans receivable (Note 5) 6,029 6,029 —
Long-term loans receivable 1,605 1,655 49
Total assets 1,254,112 1,254,161 49
Notes and accounts payable —trade 289,690 289,690 —
Short-term loans payable 362,429 362,429 —
Bonds payable 159,489 161,493 2,004
Long-term loans payable 571,228 576,832 5,603
Total liabilities 1,382,838 1,390,446 7,607
Derivative transactions — — —
Total derivative transactions — — —
Note 1: Methods to determine the estimated fair value of financial instruments
and other matters related to securities and derivative transactions
Cash and deposits, trade receivables and short-term loans receivable
Since these items are settled in the short-term, their fair market value
approximates the carrying amount. Therefore, the carrying amount is
used to estimate fair value.
Securities and investment securities
The fair value of such securities is based on quoted market prices.
Please refer to Note 6. Securities, of these notes to the consolidated
financial statements for information on securities classified by holding
purpose.
Long-term loans receivable
Long-term loans receivable are classified by remaining length of time to
maturity. The fair values are estimated based on the present value of
future cash flows discounted by the contracted rates as adjusted con-
sidering the rate for Japanese government issued bonds.
Trade payables and short-term loans payable
Since these items are settled in the short-term, their fair market value
approximates the carrying amount. Therefore, the carrying amount is
used to estimate fair value.
Bonds payable
The fair value of bonds issued by the Company is based on the quoted
market price.
23
Long-term loans payable
Long-term loans payable are classified by remaining length of time to
maturity. The fair values are estimated based on the present value of
future cash flows discounted by interest rates applicable to new bor-
rowings. Long-term loans payable are hedged by interest rate swaps
that meet the specific matching criteria.
Therefore, the fair value of such loans payable is estimated based on
the present value of future cash flows estimated in accordance with the
accounting treatment described in Note 2 (o) Derivatives.
Accordingly, such future cash flows include cash flows from applica-
ble interest rate swap transactions as well as payment of principal and
interest. Future cash flows are discounted by the interest rate to be
applied if similar new borrowings were entered into.
Derivative Transactions
(a) Items not subject to hedge accounting: None
(b) Items subject to hedge accounting:
Information on derivative transactions subject to hedge accounting as
of March 31, 2013 is as follows.
Millions of yen
Hedge accounting
method
Type of derivative
transaction
Major hedged items
Contracted amount
Amount due after one year
Fair value
Special accounting treatmentfor interest rate swaps
Interest swap transactions(Pay fixed; receive floating)
Long-term loans payable
¥27,750 ¥22,950 *
Thousands of U.S. dollars
Hedge accounting
method
Type of derivative
transaction
Major hedged items
Contracted amount
Amount due after one year
Fair value
Special accounting treatmentfor interest rate swaps
Interest swap transactions(Pay fixed; receive floating)
Long-term loans payable
$295,055 $244,019 *
* The fair value of the interest rate swaps is not shown since it is included in
long-term loans payable (please refer to the abovementioned long-term
loans payable).
Note 2: Financial instruments for which fair value is extremely difficult to
determine as of March 31, 2013
Millions of yen
Classification Consolidated Balance Sheet Amounts
Unlisted securities ¥2,047
Long-term loans receivable 1,563
Thousands of U.S. dollars
Classification Consolidated Balance Sheet Amounts
Unlisted securities $21,771
Long-term loans receivable 16,620
Unlisted securities have no available market price and the estimation of
future cash flows is expected to entail excessive costs. Consequently,
their fair value is recognized as extremely difficult to estimate and, unlisted
securities are not included in available-for-sale securities.
In addition, the abovementioned long-term loans receivable are not
included in long-term loans receivable of the preceding table because
future cash flows cannot be estimated reliably.
Note 3: Redemption schedule for receivables and securities with
maturities at March 31, 2013.
Millions of yen
2013
Within one year
Over one year and under five years
Over five years and under ten years
Over ten years
Cash and deposits ¥25,190 ¥— ¥ — ¥—Trade receivables 47,697 — — —Securities: Available-for-sale
securities 0 0 201 —Short-term loans receivable 567 — — —Long-term loans receivable 1 68 6 75Total ¥73,456 ¥68 ¥207 ¥75
Thousands of U.S. dollars
2013
Within one year
Over one year and under five years
Over five years and under ten years
Over ten years
Cash and deposits $267,842 $ — $ — $ —Trade receivables 507,148 — — —Securities: Available-for-sale
securities 1 2 2,140 —Short-term loans receivable 6,029 — — —Long-term loans receivable 15 725 64 801Total $781,038 $727 $2,204 $801
6. SECURITIES
The acquisition cost and fair value of the securities classified as
available-for-sale at March 31, 2012 and 2013 are summarized as follows:
Millions of yen
2012Acquisition
costFair
valueUnrealized
gainUnrealized
loss
Classified as:
Available-for-sale ¥12,789 ¥36,099 ¥23,683 ¥(373)
Millions of yen
2013Acquisition
costFair
valueUnrealized
gainUnrealized
loss
Classified as:
Available-for-sale ¥12,779 ¥44,308 ¥31,536 ¥(7)
24
Thousands of U.S. dollars
2013Acquisition
costFair
valueUnrealized
gainUnrealized
loss
Classified as:
Available-for-sale $135,879 $471,115 $335,316 $(80)
Proceeds from sales of investment securities for the years ended
March 31, 2012 and 2013 consisted of the following:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Proceeds ¥200 ¥60 $648
Gross realized gain 91 4 48
Gross realized loss 4 34 366
A significant decline in the fair value of investment securities is recog-
nized as an impairment loss if the decline is not considered recoverable.
Losses on devaluation of investments classified as available-for-sale
securities as a result of a permanent decline in value amounted to ¥22
million and ¥16 million (US$177 thousand) for the years ended March
31, 2012 and 2013, respectively.
7. SHORT-TERM BANK LOANS AND BONDS
The annual interest rates applicable to the loans outstanding at March
31, 2012 and 2013 ranged from 0.2% to 2.0% and from 0.5% to 1.9%,
respectively.
Long-term debt at March 31, 2012 and 2013 consisted of
the following:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Loans, principally from banks and insurance companies, due from 2012 to 2024 (2011 to 2024 in 2011) ¥57,396 ¥53,724 $571,228
Bonds 25,000 15,000 159,489
¥82,369 ¥68,724 $730,718
Less: Current portion of long-term debt:
Loans ¥21,169 ¥11,290 $120,045
Bonds 10,000 0 0
31,169 11,290 120,045
¥51,200 ¥57,434 $610,673
The annual interest rates applicable to the long-term loans outstanding
at March 31, 2012 and 2013 ranged from 0.8% to 2.9% and from 0.8%
to 2.5%, respectively.
The aggregate annual maturities of long-term loans subsequent to
March 31, 2013 are summarized as follows:
Years ending March 31, Millions of yenThousands of U.S. dollars
2015 ¥15,700 $166,933
2016 8,074 85,850
2017 7,094 75,437
2018 3,789 40,287
2019 and thereafter 7,775 82,675
¥42,433 $451,183
Assets pledged as collateral at March 31, 2012 and 2013 are sum-
marized as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Property, plant and equipment, at net book value ¥25,120 ¥21,509 $228,698
Other 534 557 5,932
¥25,655 ¥22,066 $234,630
The obligations secured by such collateral as at March 31, 2012 and
2013 are as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Short-term loans payable ¥1,117 ¥ 635 $ 6,751
Current portion of long-term loans payable 893 812 8,633
Long-term loans payable 3,684 2,742 29,158
Other 430 395 4,209
¥6,125 ¥4,585 $48,752
8. CONTINGENT LIABILITIES
Contingent liabilities at March 31, 2012 and 2013 are as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Guarantees of loans and other ¥158 ¥223 $2,381
9. SHAREHOLDERS’ EQUITY
The Corporation Law of Japan provides that an amount equal to 10%
of the amounts to be disbursed as distributions of earnings be appropri-
ated to the legal reserve until the sum of the legal reserve equals 25%
of the common stock account.
10. LEASES
(a) Finance leases
Finance leases commencing on or before March 31, 2008 continue to
be accounted for in the same method as operating leases. The follow-
ing amounts represent the acquisition costs, accumulated depreciation
and amortization and net book value of the leased property at March
31, 2012 and 2013 which would have been reflected in the consolidated
25
balance sheets if finance lease accounting had been applied to the
finance leases currently accounted for as operating leases:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Acquisition costs
Machinery, equipment and vehicles ¥160 ¥ 9 $106
Other 61 20 216
222 30 322
Accumulated depreciation and amortization
Machinery, equipment and vehicles 131 6 71
Other 52 15 169
184 22 241
Net book value
Machinery, equipment and vehicles 29 3 34
Other 8 4 46
¥ 37 ¥ 7 $ 81
Lease payments relating to finance leases accounted for as operating
leases amounted to ¥70 million and ¥17 million (US$186 thousand),
which are equal to the depreciation and amortization expenses of the
leased assets computed by the straight-line method over the lease
terms, for the years ended March 31, 2012 and 2013, respectively.
Future minimum lease payments (including the interest portion there-
on) subsequent to March 31, 2013 for finance leases accounted for as
operating leases are summarized as follows:
Millions of yenThousands of U.S. dollars
2014 ¥4 $45
2015 and thereafter 3 36
¥7 $81
(b) Operating leases
Future minimum lease payments subsequent to March 31, 2013 for
non-cancelable operating leases are summarized as follows:
Millions of yenThousands of U.S. dollars
2014 ¥ 78 $ 838
2015 and thereafter 166 1,774
¥245 $2,613
11. INCOME TAXES
A reconciliation of the statutory tax rates to the effective tax rates for the
years ended March 31, 2012 and 2013 is presented as follows.
2012 2013
Statutory tax rates 41.0% 38.0%
Change in valuation allowance 7.4 4.1
Nondeductible expenses 1.3 0.5
Tax credit (7.5) (1.6)
Other (4.4) 1.3
Effective tax rates 37.8% 42.2%
The significant components of the Company’s deferred income tax
assets and liabilities at March 31, 2012 and 2013 are as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Deferred tax assets:
Impairment loss on fixed assets ¥2,354 ¥2,468 $26,246
Deferred tax loss 1,567 1,090 11,599
Accrued bonuses 782 796 8,466
Unrealized holding gain 678 694 7,383
Provision for retirement benefits 496 468 4,979
Unpaid enterprise tax 184 396 4,216
Allowance for doubtful accounts 209 214 2,279
Other 1,762 1,705 18,135
Gross deferred tax assets 8,038 7,835 83,307
Less valuation allowance (4,369) (4,161) (44,243)
Total deferred tax assets ¥ 3,668 ¥ 3,674 $39,064
Deferred tax liabilities:
Difference between cost of investments and their underlying net equity at fair value ¥ (1,641) ¥ (1,530) $ (16,271)
Unrealized gain on available-for-sale securities (8,367) (11,346) (120,643)
Other (638) (754) (8,019)
Total deferred tax liabilities (10,647) (13,631) (144,935)
Deferred tax liabilities, net ¥ (6,979) ¥ (9,957) $(105,870)
12. OTHER COMPREHENSIVE INCOME
The following table presents reclassification adjustments and tax effects
allocated to each component of other comprehensive income for the
years ended March 31, 2012 and 2013.
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Unrealized gain (loss) on available-for-sale securities:
Amount arising during the year ¥ 202 ¥8,267 $87,907
Reclassification adjustments for gains and losses included in net income (64) 12 129
Amount before tax effect 138 8,279 88,036
Tax effect 1,105 (2,980) (31,692)
Unrealized gain (loss) on available-for-sale securities 1,244 5,299 56,346
Foreign currency translation adjustments:
Amount arising during the year (8) 151 1,611
Share of other comprehensive income of affiliates accounted for using the equity method
Amount arising during the year (0) 2 30
Total other comprehensive income ¥1,234 ¥5,453 $57,988
26
13. RETIREMENT BENEFITS FOR EMPLOYEES
The Company and consolidated subsidiaries have a defined benefit
pension plan covering substantially all employees.
Accrued severance benefits at March 31, 2012 and 2013 consisted
of the following:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Projected benefit obligation ¥(14,856) ¥(14,821) $(157,594)
Fair value of pension fund 10,600 11,742 124,856
Unrecognized actuarial loss 2,936 1,956 20,805
Prepaid pension expenses (71) (177) (1,884)
Provision for retirement benefits ¥ (1,392) ¥ (1,299) $ (13,816)
Retirement benefit expenses for the years ended March 31, 2012
and 2013 are as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Service cost ¥ 878 ¥ 744 $ 7,911
Interest cost 239 240 2,556
Expected return on pension fund assets (182) (176) (1,877)
Recognized actuarial loss 370 393 4,187
Net retirement benefit expenses ¥1,305 ¥1,201 $12,778
Assumptions adopted for the years ended March 31, 2012 and 2013
are as follows:
2012 2013
Discount rate 2.0% 2.0%
Expected rate of return on pension fund assets 2.0% 2.0%
Period over which actuarial loss is recognized 15 years 15 years
14. LOSS ON IMPAIRMENT OF NONCURRENT ASSETS
For the years ended March 31, 2012 and 2013, the Company and certain
consolidated subsidiaries recognized ¥610 million and ¥517 million
(US$5,503 thousand), respectively, of losses on impairment of fixed
assets as follows:
Millions of yenThousands ofU.S. dollars
2012 2013 2013
Idle assets ¥305 ¥106 $1,133
Business assets 305 411 4,370
¥610 ¥517 $5,503
As for idle assets, their grouping of assets is based on the corre-
sponding property unit, and for business assets, on the smallest seg-
ments used in management accounting.
The Company and consolidated subsidiaries recognize impairment
losses if the undiscounted expected future cash flows are less than
carrying amounts of the assets.
In such case, the carrying amounts of the assets are written down to
their recoverable amounts. The recoverable amounts in these asset
groups were calculated using respective net selling prices based primari-
ly on appraisal valuations or discounted expected future cash flows.
15. LOSS ON BUSINESS RESTRUCTURING
This loss is due to the discontinuation of production of plasma display
panel (PDP) filters following a restructuring of the high functional film
business in the Advanced Materials segment during the year ended
March 31, 2013.
16. LOSS ON DISASTER
Loss on disaster for the years ended March 31, 2012 and 2013
referred mainly to the restoration costs for fixed assets damaged by the
Great East Japan Earthquake and the disposal losses on inventories.
17. SUBSEQUENT EVENTS
The following appropriation of retained earnings was approved at the
meeting of the shareholders of the Company held on June 27, 2013:
Millions of yenThousands of U.S. dollars
Cash dividends ¥2,081 $22,130
18. FAIR VALUE OF INVESTMENT AND RENTAL PROPERTY
The Company and certain subsidiaries own rental warehouses, rental
office buildings (including the surrounding land), idle land and other
properties in Osaka prefecture and other areas. During the fiscal year
ended March 31, 2013, rental income from rental property was ¥748
million (US$7,963 thousand) (rental income was recorded as sales and
rental costs were recorded as cost of sales), net gains from sales of
rental property amounted to ¥9 million (US$105 thousand) (recorded as
extraordinary income) and impairment loss amounted to ¥286 million
(US$3,042 thousand) (recorded as extraordinary loss).
27
The carrying amount of rental property and corresponding fair value
as of March 31, 2013 and changes in carrying amount during the fiscal
year are as follows:
Millions of yen
Consolidated balance sheet amountsFair value as of March 31, 2013As of March 31, 2012 Net change As of March 31, 2013
¥20,610 ¥2,749 ¥23,360 ¥32,168
Thousands of U.S. dollars
Consolidated balance sheet amountsFair value as of March 31, 2013As of March 31, 2012 Net change As of March 31, 2013
$219,144 $29,238 $248,382 $342,040
Notes: 1. The consolidated balance sheet amounts represent the acquisition
cost less accumulated depreciation and cumulative impairment loss.
2. The fair value (which includes adjustments using relevant indices) is
estimated by the Company in accordance with standard for real
estate appraisal for significant assets, estimated based on the
value calculated for property tax for other assets.
19. SEGMENT INFORMATION
For the years ended March 31, 2012 and 2013:
The reportable segments of the Company are components for which
discrete financial information is available and whose operating results
are regularly reviewed by the Executive Committee to make decisions
about resource allocation and to assess performance.
The Company’s reportable segments are composed of products and ser-
vices based on the Cement segment and departments. The Company’s six
reportable segments are: Cement, Mineral Resources, Cement-Related
Products, Optoelectronics, Advanced Materials, and Others.
Main products for each reportable segment are as follows:
Cement: Assorted cement, ready-mix concrete, cement-related solidifi-
cation materials, supply of electrical power, and recycling of raw materi-
als and fuel
Mineral Resources: Limestone and mineral products
Cement-Related Products: Repairing and reinforcing products for con-
crete structures, and secondary products of concrete
Optoelectronics: Optical communications devices and components,
and optical measurement equipment
Advanced Materials: Ceramic products, plasma display panels (PDPs)
filters, and nanoparticle materials
Others: Leasing of real estate, engineering, development of software,
and secondary cell materials
Information on the reportable segments as of and for the years ended
March 31, 2012 and 2013 is as follows:
Millions of yen
2012
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Net sales:
Outside customers ¥169,902 ¥11,359 ¥15,108 ¥3,556 ¥10,075 ¥ 7,043 ¥217,044 ¥ — ¥217,044
Intersegment sales 2,971 4,242 1,819 18 0 4,910 13,962 (13,962) —
Total 172,873 15,601 16,927 3,574 10,075 11,953 231,006 (13,962) 217,044
Segment profit or loss 6,816 644 132 144 (100) 485 8,123 13 8,136
Segment assets 204,234 32,394 11,998 3,497 9,180 30,680 291,986 17,903 309,890
Other items:
Depreciation and amortization 15,808 2,194 549 228 403 821 20,006 (269) 19,736
Amortization of goodwill 211 34 (59) 1 — — 188 — 188
Capital expenditures 9,084 2,860 267 569 196 1,730 14,709 — 14,709
Notes: 1. Eliminations and adjustments for segment profit and loss include ¥(13) million of elimination of inter-segment profit and loss.
2. Eliminations and adjustments for segment assets include ¥(10,545) million of elimination of inter-segment profit and loss and ¥28,448 million of corpo-
rate assets.
3. Eliminations and adjustments for depreciation and amortization include ¥(34) million of elimination of inter-segment profit and loss and ¥20 million of
depreciation and amortization for corporate assets, which are not allocable to a reportable segment.
28
Millions of yen
2013
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Net sales:
Outside customers ¥175,846 ¥11,708 ¥15,287 ¥4,257 ¥5,835 ¥ 6,148 ¥219,083 ¥ — ¥219,083
Intersegment sales 3,611 4,193 2,034 15 14 5,162 15,032 (15,032) —
Total 179,458 15,902 17,321 4,272 5,850 11,311 234,116 (15,032) 219,083
Segment profit or loss 12,145 934 297 (18) 575 68 14,002 (43) 13,959
Segment assets 209,616 32,527 13,161 4,941 5,228 32,275 297,752 17,982 315,734
Other items:
Depreciation and amortization 13,431 2,074 433 348 305 893 17,485 (0) 17,485
Amortization of goodwill 169 34 (59) 7 — — 152 — 152
Capital expenditures 12,236 2,557 184 847 316 2,509 18,652 — 18,652
Thousands of U.S. dollars
2013
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Net sales:
Outside customers $1,869,713 $124,496 $162,543 $45,264 $62,042 $65,377 $2,329,437 $ — $2,329,437
Intersegment sales 38,401 44,584 21,634 165 159 54,891 159,836 (159,836) 0
Total 1,908,114 169,081 184,178 45,430 62,201 120,268 2,489,274 (159,836) 2,329,437
Segment profit or loss 129,135 9,939 3,163 (201) 6,120 725 148,882 (459) 148,422
Segment assets 2,228,781 345,857 139,943 52,545 55,590 343,174 3,165,892 191,203 3,357,096
Other items:
Depreciation and amortization 142,809 22,056 4,605 3,707 3,244 9,497 185,920 (0) 185,920
Amortization of goodwill 1,806 363 (628) 80 — — 1,621 — 1,621
Capital expenditures 130,110 27,193 1,956 9,011 3,368 26,682 198,322 — 198,322
Notes: 1. Eliminations and adjustments for segment profit and loss include ¥(43) million ($(459) thousand) of elimination of inter-segment profit and loss.
2. Eliminations and adjustments for segment assets include ¥(11,382) million ($(121,030) thousand) of elimination of inter-segment profit and loss and
¥29,365 million ($321,234 thousand) of corporate assets.
3. Eliminations and adjustments for depreciation and amortization include ¥(14) million ($(159) thousand) of elimination of inter-segment profit and loss
and ¥14 million ($158 thousand) of depreciation and amortization for corporate assets, which are not allocable to a reportable segment.
Geographical information
Information regarding geographical areas is omitted for the years ended March 31, 2012 and 2013, because sales and total assets in the Japan area
constitute more than 90% of all geographical areas.
Impairment loss on fixed assets by reportable segment for the years ended March 31, 2012 and 2013 is summarized as follows:
Millions of yen
2012
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Loss on impairment of fixed assets ¥328 ¥75 ¥— ¥— ¥— ¥— ¥403 ¥207 ¥610
Millions of yen
2013
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Loss on impairment of fixed assets ¥188 ¥12 ¥50 ¥— ¥— ¥— ¥251 ¥265 ¥517
Thousands of U.S. dollars
2013
CementMineral
resourcesCement-related
products Optoelectronics Advanced materials Others Total
Eliminations and adjustments Consolidated
Loss on impairment of fixed assets $2,006 $130 $541 $— $— $— $2,678 $2,825 $5,503
29
tropeR s’rotiduIndependent A
3030
Company Profile
Company Name Sumitomo Osaka Cement Co., Ltd
President Fukuichi Sekine
Headquarters 6-28, Rokubancho, Chiyoda-ku, TOKYO, 102-8465, Japan
Date Established November 29, 1907
ney noillib 6.14latipaC
Number of Employees 1,250 employees (As of March 31, 2013)
Net Sales 140 billion yen (Year ended March 31, 2013)
31
6-28, Rokubancho, Chiyoda-ku, Tokyo 102-8465, Japan
Tel: +81-3-5211-4500 Fax: +81-3-3221-4652
http://www.soc.co.jp