Annual Report 2006
ASAHI KASEI CORPORATION
00
Basic Credo of the Asahi Kasei Group
Basic tenets
We the Asahi Kasei Group, through constant innovation and advances based in
science and the human intellect, will contribute to human life and human livelihood.
Guiding precepts
We will create new value, thinking and working in unison with the customer, from
the perspective of the customer.
We will respect the employee as an individual, and value teamwork and worthy
endeavor.
We will contribute to our shareholders, and to all whom we work with and serve, as
an international, high earnings enterprise.
We will strive for harmony with the natural environment and ensure the safety of our
products, operations, and activities.
We will progress in concert with society, and honor the laws and standards of society
as a good corporate citizen.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this annual report with respect to Asahi Kasei’s estimated future revenues and profits, strategies, tenets, financial forecasts, and other statements
that are not historical facts are forward-looking statements. Such forward-looking statements are based on management’s judgments, predictions, and forecasts in light of
information currently available and involve many potential risks and uncertainties that could cause actual results to differ materially from the content of these statements.
Accordingly, undue reliance should not be placed on such forward-looking statements.
Annual Report 2006
01
C o n t e n t s
Consolidated Financial Highlights
........................................... 02
To Our Shareholders
................................................................. 03
Growth Action – 2010
................................................................. 04
Positioned for Growth
.............................................................. 06
Operating Segments
................................................................. 11
At a Glance
.............................................................................. 12
Operating Segments
................................................................ 14
New Business Development and Intellectual Property
........... 31
Research & Development and New Operations
........................... 32
Intellectual Property
................................................................. 34
Governance and Responsibility
................................................. 35
Corporate Governance
............................................................. 36
Corporate Social Responsibility
.................................................. 38
Directors, Auditors, Executive Officers
....................................... 40
Financial Section
....................................................................... 41
Major Subsidiaries and Affiliates
............................................. 72
Corporate Profile
...................................................................... 74
Investors Information
................................................................ 75
02
Consolidated Financial Highlights
Asahi Kasei Corporation and consolidated subsidiaries
Fiscal year beginning April 1
2005
¥ billion
2004
2003
For the year
Net sales
Operating profit
Income before income taxes
and minority interest
Net income
Capital expenditure
Depreciation and amortization
R&D expenditures
At year-end
Total assets
Shareholders’ equity
￥1,498.6
108.7
￥1,377.7
115.8
￥1,253.5
60.9
94.5
59.7
66.3
69.4
51.5
91.1
56.5
68.5
71.5
50.7
54.8
27.7
86.4
64.4
48.4
￥1,376.0
594.2
￥1,270.1
511.7
￥1,249.2
450.5
Fiscal year beginning April 1
2005
¥
2004
2003
Per share
Net income
Shareholders’ equity**
Cash dividends
￥ 42.46
￥ 40.16
￥ 19.62
424.34
10.00
365.43
8.00
321.41
6.00
US$ million*
2005
＄12,809
929
808
510
567
593
440
＄11,761
5,079
US$*
2005
＄0.36
3.63
0.09
* U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥117=US$1 as described in Note 3 of Notes to Consolidated Financial
Statements.
** At fiscal year end.
Fiscal year beginning April 1
2005
2004
2003
Key indexes
Operating profit margin
ROE
Shareholders’ equity to total assets
D/E ratio
7.3
%
10.8
%
43.2
%
0.40
8.4
%
11.7
%
40.3
%
0.49
4.9
%
6.4
%
36.1
%
0.62
Net Sales and Operating Profit Margin
Net Income and ROE
Total Assets and Shareholders’ Equity
Net sales, left scale
Operating profit margin, right scale
%
10
1,499
1,378
1,254
8.4
7.3
¥ billion
1,500
1,000
500
4.9
0
0
2003
2004
Fiscal year
2005
8
6
4
40
20
0
28
6.4
2003
¥ billion
60
Net income, left scale
ROE, right scale
56
11.7
Total assets
Shareholders’ equity
1,249
1,270
1,376
60
%
12
¥ billion
1,500
10.8
10
1,000
8
6
450
500
512
594
0
0
2003
2004
Fiscal year
2005
2004
Fiscal year
2005
To Our Shareholders
Annual Report 2006
03
The Japanese economy showed signs of recovery during fiscal 2005, the final year of our Ishin-05 strategic initiative, with
increased private-sector capital investment and strong corporate results. The operating environment nevertheless remained
challenging, with petroleum prices continuing to increase on strong demand growth world-wide, especially in China, driving
up the cost of naphtha and other petrochemical feedstocks.
Sales increased in chemicals operations, with strong overseas demand, and in electronics operations, with strong demand in
IT-related markets. Net sales were ¥1,498.6 billion, increasing by ¥120.9 billion from the previous year. Operating profit was
¥108.7 billion, with a decrease of ¥7.1 billion. Amortization of actuarial differences in retirement benefit accounts resulted in
a ¥16.2 billion decrease in operating profitability; a ¥4.0 billion surplus was amortized during the year, as opposed to a ¥20.2
billion surplus amortized during the preceding year. Operating profit excluding this amortization was ¥104.7 billion, increasing
by ¥9.1 billion. Ordinary profit was ¥104.2 billion, decreasing by ¥8.7 billion. Net income was ¥59.7 billion, increasing by
¥3.2 billion.
These were record highs in net sales and net income for the second year in a row, and operating profit excluding retirement
benefits amortization exceeded ¥100 billion for the first time, as we achieved our Ishin-05 targets. Dividends were increased
by ¥2 per share to ¥10 per share in light of these results.
Efforts are now dedicated to building on the solid achievements gained through Ishin-05, as we implement the new
Growth Action – 2010 strategic business plan to drive the expansion of global businesses and the enhancement of domestic
businesses through strategic investment and business portfolio realignment for expansion and growth, heightening corporate
value and brand strength.
August 2006
Nobuo Yamaguchi
Chairman of the Board
Shiro Hiruta
President
04
Strategic Five-Year Business Plan
Growth Action – 2010 is a plan of action to guide the growth of operations throughout the Asahi Kasei Group from fiscal
year 2006 through fiscal year 2010. It builds on the strong financial and operational base established through the Ishin-05
strategic initiative, advancing the transformation of the business portfolio with strategic investments for expansion and
growth, to effect greater corporate value and brand strength.
Strategic pillars of the plan are the expansion of businesses characterized by global competitiveness and the
enhancement of businesses focused on the domestic Japanese market. The plan provides for investment over the five
years totaling ¥800 billion, of which ¥400 billion is strategic investment including M&A. Targets for fiscal year 2010
include consolidated net sales of ¥1,800 billion, operating profit of ¥150 billion, and maintaining ROE at least 10%.
Conceptual Framework
Pillars of Strategy
The Asahi Kasei Group serves many different markets with a
wide range of outstanding technologies and a variety of
separate business models. Based on the strengths and
competences we enjoy in each area, our businesses with a
stable growth and earnings base are being enhanced for greater
performance while generating the resources which enable the
expansion of high-growth businesses, thus driving a new phase
of development and growth for the Asahi Kasei Group.
Asahi Kasei’s competences
Diverse markets
Wide-ranging
technologies
Multifaceted
business models
▲
Advancing business portfolio realignment
High growth businesses
Chemical-based,
specialized-
function
Electronic
materials
Medical
devices
Electronic
devices
Expanding global operations
•Reinforcement of strong businesses & expansion of business
areas
•Development of new businesses with global potential
Expansions are focused on global businesses whose growth is
unimpeded by the limits of the mature Japanese economy. In
addition to furthering the program of “building on strengths”
already advanced, this includes extending the geographical
cover of businesses with established presence in overseas
markets, and the creation of new businesses with potential for
development on a global scale. By fiscal year 2010 we aim to
raise the portion of sales in global businesses from the current
55% of our sales to 60% and to raise the rate of overseas sales
from 25% to one third or more.
Enhancing domestic operations
•Higher added value
•Development of services peripheral to established businesses
Growth and greater earnings in domestic businesses are
achieved by expanding into services peripheral to established
businesses, cultivating new demand by dynamic response to
emerging market trends, and pursuing higher added value
throughout.
Pursuing higher growth
with strong, stable base
Expanding global businesses
Stable growth, stable earnings businesses
Domestic businesses
Housing, construction materials,
pharmaceuticals, home-use products, etc.
Polymers
Monomers
Including processed products
Acrylonitrile, MMA, styrene monomer, etc.
Enhancing domestic businesses
▲
Ishin-2000
FY1999–2002
Ishin-05
FY2003–2005
Selectivity and focus
Selective diversification
Ishin-05 accomplishments
Establishment of selectively diversified enterprise group
Building on strengths
•Monomers, specialized-function products, electronics, medical
devices
Completion of restructuring
•Acrylic fiber, liquors, salt, large ALC panels, etc.
Establishment of New Business Development
•Enhanced holding company function for development of new
businesses
Annual Report 2006
05
Growth Action – 2010
Performance Targets
¥ billion
2,000
1,500
1,000
500
0
Net Sales
1,650.0
1,498.6
1,800.0
FY05
FY08
FY10
¥ billion
Operating Income
200
160
120
80
40
0
¥ billion
100
75
50
25
0
150.0
125.0
108.7
FY05
FY08
FY10
Net Income
80.0
59.7
65.0
FY05
FY08
FY10
Strategic investment
The Asahi Kasei Group currently invests on the order of
¥70–80 billion per year. In addition to ordinary
investment on this scale, the plan provides for strategic
investment of ¥400 billion, including M&A, by fiscal year
2010, for a total of some ¥800 billion of investment
during the five-year period. Strategic investment is
largely be directed to the four product categories of
monomers, chemical-based, specialized-function
products, electronics products, and medical devices,
including both business expansion and new business
creation.
¥400 billion
¥800 billion/year × 5
+ ¥400 billion
Strategic investment
¥800 billion
Breakdown of strategic
investment
Housing &
construction materials
Pharmaceuticals &
medical devices
Chemical-
based
Electronics
Greater
corporate
value and
brand
strength
▲
Transformation of operating structure for cash
flow creation
•Cash flow management in addition to EVA
•Improved free cash flow
Greater management speed & autonomy
•Transition to holding company configuration
•Separation of execution and oversight functions
•Adoption of executive officer system of management
(cid:0)(cid:1)(cid:2)(cid:3)(cid:4)(cid:5) (cid:7)(cid:8)(cid:4)(cid:9)(cid:2)(cid:10) (cid:11) (cid:12)(cid:13)(cid:14)(cid:13)
FY2006–2010
• Business portfolio realignment
for expansion and growth
• Strategic investment
06
Positioned for Growth
President Shiro Hiruta on the
strategic outlook
Shiro Hiruta
President
Ishin-05 retrospective
In our Ishin-05 strategic initiative from fiscal 2003 to fiscal
2005 we completed portfolio realignments to refound
ourselves as a selectively diversified enterprise group.
We reinforced and expanded our strong businesses,
heightening competitiveness in high value-added fields,
with investments for expansion in areas of competitive
superiority. The operational structure was transformed for
Major Investments since Formulation of Ishin-05
cash flow creation, with heightened awareness of cash flow
in day-to-day operation and strict cash flow criteria for
investment. Management speed and autonomy were
increased with the October 2003 transition to a holding
company configuration and with authority devolved to the
business units. Fiscal 2005 results show that these actions
have been effective, resulting in record high sales and net
income and enabling increased dividends for the second
year in a row.
Chemicals
New plant for Delaglas™ acrylic sheet for light-guide plates
Pyongtaek, Korea
November 2003
Back-light units for LCD panels
Location
Start-up
Applications
Expansion of plant for Hipore™ rechargeable Li-ion battery separators
Moriyama, Japan March 2005
Batteries for mobile electronics
Omega Process plant
Mizushima, Japan March 2006
Propylene production
Expansion of plant for Hipore™ rechargeable Li-ion battery separators
Moriyama, Japan
July 2006
Batteries for mobile electronics
New plant for Duranate™ hexamethylene diisocyanate based polyisocyanate
Nantong, Chaina
Spring 2007
Polyurethane coatings
Pharma
New hollow-fiber plant for Planova™ virus removal filters
Nobeoka, Japan
May 2004
Production of pharmaceuticals
New hollow-fiber plant for APS™ artificial kidneys
Nobeoka, Japan
April 2005
Hemodialysis for patients with renal failure
Expansion of hollow-fiber plant for APS™ artificial kidneys
Nobeoka, Japan
October 2005
Hemodialysis for patients with renal failure
New plant for assembly of APS™ artificial kidneys
Hangzhou, China
January 2006
Hemodialysis for patients with renal failure
Fibers
Expansion of plant for Roica™ spandex
Hangzhou, China
April 2004
Swimwear and other apparel
New plant for Roica™ spandex
Chonburi, Thailand December 2005
Swimwear and other apparel
Acquisition of spandex business from German Lanxess Group
Germany, America March 2006
Swimwear and other apparel
EMD
New plant for large pellicles
Expansion of plant for LSIs
Nobeoka, Japan
May 2004
Production of large LCD panels
Nobeoka, Japan
September 2004
Communications, signal processing
Expansion of plant for Sunfort™ dry film resist
Suzhou, China
November 2004
Production of printed wiring boards
Expansion of plant for large pellicles
Nobeoka, Japan
May 2005
Production of large LCD panels
Expansion of plant for LSIs
Nobeoka, Japan
July 2006
Communications, signal processing
Annual Report 2006
07
Improvement in Financial Strength
0.78
0.79
0.62
0.64
0.62
0.49
D/E ratio
Profit*, ¥ billion
Net income (loss), ¥ billion
74.3
51.2
0.54
96.0
17.4
20.5
25.2
Ishin - 2000
0.40
104.7
80.4
95.6
61.6
56.5
59.7
27.7
45.7
5.2
Ishin-05
ISHIN-05
(66.8)
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
* Operating profit from FY98 to FY01; operating profit absent amortization of actuarial differences in retirement benefits from FY02 to FY05.
Corporate governance
With the transition to a holding company configuration we
also adopted an executive officer system to separate
execution and oversight functions, and established a
management framework with clear delineation of executive
authority and responsibility. In our third year under the new
configuration it is clear that management speed has increased,
and that each core operating company is advancing as an
autonomous and self-reliant profit-making unit.
Other measures to enhance corporate governance
include the April 2005 formation of a CSR Council in the
holding company to lead the effort related to corporate
social responsibility throughout the Asahi Kasei Group, and
the October 2005 formation of an Internal Control Project
to lead the preparation and implementation of an optimum
system for internal control.
Holding Company Configuration
Strategic planning
& analysis
Administration of
resources
Oversight of
management execution
Development of
new businesses
Asahi Kasei
Chemicals
Asahi Kasei
Homes
Asahi Kasei
Pharma
Asahi Kasei
Fibers
Asahi Kasei
EMD
Chemicals
Housing
Pharmaceuticals,
medical products
Fiber, textiles
Electronics
materials
and devices
Asahi Kasei
Construction
Materials
Construction
materials
Asahi Kasei
Life & Living
Household
products,
packaging
materials
08
Challenges ahead
Despite the advances we have made, I see two challenges
that must be met. The first is the correspondence between
the growth of the Asahi Kasei Group and the growth of
Japan’s GDP. With the maturing of the Japanese economy,
it is natural that growth rates tend to be moderate. We
have to de-link our growth from that of Japan’s economy.
Asahi Kasei’s Operating Profit and Japan’s GDP
Asahi Kasei’s operating profit*
Japan’s GDP
10,000
1,000
The second challenge is to raise the proportion of business
1960=100
Business portfolio
restructuring
we have overseas. Our overseas sales are only about a
quarter of the total, and overseas production is only about
7%. The new strategic business plan we launched at the
beginning of fiscal 2006, Growth Action – 2010, sets the
path to meet these challenges and effect the expansion and
growth of the Asahi Kasei Group over the next five years.
100
10
Diversification
1963,1964 Nylon, synthetic rubber, construction materials
1972 Ethylene center, housing
1983 LSIs
1955
1965
1975
1985
1995
2005
Fiscal year
* Three-year moving average, non-consolidated until FY 1980.
Performance Targets
(¥ billion, except ROE)
Net sales
Operating profit
Net income
ROE (%)
FY05
results
1,498.6
108.7
59.7
10.8
FY08
targets
1,650.0
125.0
65.0
≥10
FY10
targets
1,800.0
150.0
80.0
≥10
Growth Action – 2010
The Asahi Kasei Group’s greatest strength lies in our
unparalleled combination of competences in diverse
markets, wide-ranging technologies, and multiple business
models. Growth Action – 2010 builds on this with strategic
action to expand global businesses and enhance domestic
businesses. The increased earnings ability and improved
financial foundation achieved through Ishin-05 has enabled
the execution of substantial strategic investment to advance
the transformation of our business portfolio for expansion
and growth.
For fiscal 2010 we are targeting net sales of ¥1,800
billion, operating profit of ¥150 billion, and net income of
¥80 billion. This operating profit figure is 38% higher than
our fiscal 2005 result, and the net income figure is 34%
higher. Sustained growth in earnings should also enable
successive dividends increases.
Annual Report 2006
09
Positioned for Growth
Expanding global businesses
Enhancing domestic businesses
Our global businesses are basically in four fields: Monomers,
including acrylonitrile and methyl methacrylate; chemical-
based, specialized-function products, including elastic
polyurethane filament, thermoplastic elastomers, and
battery materials; electronics, including electronic materials
and electronic devices; and medical devices. We will focus
strategic investment in these fields to expand in global
markets based on our competitive superiority.
Our domestic-oriented businesses are basically in three
fields: Housing, construction materials, and pharmaceuticals.
While Japan’s economy had in the past been centered on
capital-intensive production industries, a transformation of
the industrial structure is emerging where creative know-
how and services are playing an increasingly prominent
role. Our domestic businesses must adapt to these new
circumstances in order to add more value.
We are now the world’s second largest supplier of
The strategic focus of our housing business is the Long Life
acrylonitrile, and have developed the world’s first process to
produce acrylonitrile from propane. We are now studying a
joint project with PTT of Thailand for a propane-process
acrylonitrile plant. The completion of this project would
bring our total supply capacity to nearly one million tons per
year, on par with the world-leading position.
Our elastic polyurethane filament business was recently
augmented by the acquisition of the business of the Lanxess
Group of Germany, with production sites in Germany and
the US. Complementing our production sites in Japan,
China, Taiwan, and Thailand, this gives us a solid presence
in each of the world’s major market regions.
In electronics we will accelerate our global expansion with
M&A, and develop higher-function, higher-performance
electronic devices and electronic materials for new applica-
tions to expand a high-earnings operational structure.
In medical devices we are building global leadership
in blood purification systems and expanding production
capacity for artificial kidneys used in hemodialysis therapy.
Home product concept for Hebel Haus™ homes providing
long-term comfort and utility. The strategy is being extended
into peripheral services such as remodeling, real estate, and
financing, as the operational structure is expanded to include
value-additive customer support for the living environment
in addition to the provision of the home itself.
In construction materials we are expanding sales of high-
performance insulation material, bringing a more customer-
centered perspective into marketing activities, exploiting
synergies with housing operations, and advancing R&D for
new business.
Our pharmaceuticals business is sharpening the focus on
selected therapeutic fields, chiefly orthopedics, and building
alliances with domestic and international pharmaceutical
firms in joint development, joint sales, and licensing.
10
Strategic investment
Development of new businesses
Positioned for Growth
In October 2005 we reorganized the R&D function in the
holding company with the establishment of New Business
Development. Our traditional R&D process began with basic
investigation to identify projects to pursue, followed by
research, then development, and finally commercialization.
Projects were often passed from one team to another as
they progressed from one stage to the next. We have
adopted a new process in which the same team is
responsible from investigation through commercialization.
Projects are currently in progress in three main fields:
Electronics, with projects for flexible printed circuit materials,
flat panel display materials, and capacitors; chemical based,
specialized function products, with projects for polyketone
filament and battery materials; and medical devices. In each
field, the effort is directed toward the creation of new
businesses which can develop on a global scale. Projects to
develop new businesses peripheral to established businesses
are being advanced at each core operating company.
Vision for 2010
The strength of the Asahi Kasei Group has always lain in the
diversity of our operations, and this will be no less the case
in 2010. We hold contribution to human life and human
livelihood through constant innovation and advances based
in science and the human intellect as basic tenets, and this
provides a unified outlook and purpose which binds
together the many operations in different fields.
Our business portfolio has undergone many changes as
we adapt dynamically to new challenges and new
opportunities, and I cannot say just what changes will
emerge by 2010, but our products and technologies will
certainly be making more of a difference to more people’s
lives throughout the world.
In addition to our ordinary investment of around ¥70 to ¥80
billion per year, Growth Action – 2010 provides for strategic
investment of ¥400 billion including M&A over the five
years of the plan, for a five-year total of some ¥800 billion.
Investment for expansion has been around half of the total,
but with inclusion of the strategic investment this will
increase to around three fourths.
For expansion of global businesses, strategic investment will
be focused on chemicals, electronics, and medical devices.
For enhancement of domestic businesses, it will be focused
on housing and construction materials. M&A will be
primarily in chemical-based, specialized function products
and in electronic materials and devices. About 70% of the
strategic investment other than M&A should be done in the
first half of the five-year period.
Long-term Investment
Past 3 years
Plan for FY 2006 to 2010
Maintenance
Expansion
Maintenance
Expansion
¥70 to ¥80 billion/year (a)
(a)×5 + strategic investment of ¥400 billion
= ¥800 billion over 5 years
Allocation of Strategic Investment Funds
Expanding global
businesses
Monomers
Specialized function products
Electronics
Enhancing domestic businesses
New business creation
Renewing ethylene center, etc.
Total
(¥ billion)
FY 2006 to 2010
M&A
Organic
—
50
100
—
—
—
150
40
40
50
30
40
20
220
Return to shareholders (increased dividend, etc.)
20 〜 30
Operating Segments
Annual Report 2006
11
Chemicals
Homes
Pharma
Fibers
Electronics Materials
& Devices
Construction
Materials
Life & Living
Note: Leona™ nylon 66 filament operations were transferred from the Fibers segment to the Chemicals segment in April 2005. Results for the year-ago period
have been revised accordingly for comparison purposes.
12
At a Glance
Chemicals
Homes
Pharma
Fibers
Electronics
Materials &
Devices
Construction
Materials
Life & Living
Services, Engineering
and Others
Core Operating Companies
Taketsugu Fujiwara
Keiji Kamei
Masanori Warabi
Masami Fujimori
Kyosuke Komiya
Tadashi Akaishi
President & Representative Director, Presidential Executive Officer
Director, Vice-Presidential Executive Officer
Director, Primary Executive Officer
Director, Senior Executive Officer
Director, Senior Executive Officer
Director, Senior Executive Officer
Toshiaki Okamoto
Shingo Hatano
Katsuhiko Sato
Tsuyoshi Shimizu
Morio Watanabe
Chairman of the Board & Representative Director
President & Representative Director, Presidential Executive Officer
Director, Vice-Presidential Executive Officer
Director, Senior Executive Officer
Director, Senior Executive Officer
Kei Oe
Yasuyuki Yoshida
Tsutomu Inada
Akio Kobayashi
President & Representative Director, Presidential Executive Officer
Director, Primary Executive Officer
Director, Primary Executive Officer
Director, Senior Executive Officer
Masaki Sakamoto
Ryo Matsui
Hidehumi Takai
President & Representative Director, Presidential Executive Officer
Director, Senior Executive Officer
Director, Executive Officer
Makoto Konosu
Katsuhiko Yamazoe
Koji Yamada
President & Representative Director, Presidential Executive Officer
Director, Senior Executive Officer
Director, Executive Officer
Yoichi Saji
Ryozo Eguro
Hiroshi Kobayashi
Tsuyoshi Shimizu
President & Representative Director, Presidential Executive Officer
Director, Senior Executive Officer
Director, Senior Executive Officer
Director
Keiji Kamei
Kenji Haneda
Yasuyuki Itoh
President & Representative Director, Presidential Executive Officer
Representative Director, Vice-Presidential Executive Officer
Director, Executive Officer
Annual Report 2006
13
FY05
Net Sales
FY05
Operating Profit*
Major Consolidated Subsidiaries
Main Businesses
35%
¥41
billion
25%
¥28
billion
Sanyo Petrochemical Co., Ltd.
Japan Elastomer Co., Ltd.
Asahi Kasei Technoplus Co., Ltd.
Tong Suh Petrochemical Corp. Ltd.
Asahikasei Plastics (America) Inc.
Asahi Kasei Plastics Singapore Pte. Ltd.
NV Asahi Photoproducts (Europe) SA
Asahi Kasei Jyuko Co., Ltd.
Asahi Kasei Mortgage Corp.
Asahi Kasei Real Estate, Ltd.
Asahi Kasei Reform Co., Ltd.
Organic and inorganic industrial chemicals, synthetic
resin, synthetic rubber, high-compound fertilizer,
coating materials, latex, pharmaceutical and food
additives, explosives, photopolymers and platemaking
systems, separation and ion-exchange membranes,
systems, and equipment.
Hebel HausTM houses, Hebel MaisonTM apartments,
condominiums, remodeling, real estate, residential land
development, financial services.
10%
¥11
billion
Asahi Kasei Medical Co., Ltd.
Asahi Kasei N&P Co., Ltd.
Asahikasei Aime Co., Ltd.
Pharmaceuticals, pharmaceutical intermediates, feed
additives, diagnostic reagents, hemodialyzers and other
medical devices.
Kyokuyo Sangyo Co., Ltd.
Hangzhou Asahikasei Spandex Co., Ltd.
Hangzhou Asahikasei Textiles Co., Ltd.
Asahi Chemical (HK) Ltd.
Thai Asahi Kasei Spandex Co., Ltd.
RoicaTM elastic polyurethane filament (spandex), EltasTM
spunbond, LamousTM artificial suede, BemlieseTM cupro
cellulosic nonwoven, BembergTM cupro cellulosic fiber,
polyester filament, SolotexTM polytrimethylene
terephthalate (PTT) fiber.
Asahi Kasei Microsystems Co., Ltd.
Asahi Kasei Electronics Co., Ltd.
Asahi-Schwebel Co., Ltd.
Asahi-Schwebel (Taiwan) Co., Ltd.
Asahi Kasei Electronics Materials (Suzhou)
Co., Ltd.
PimelTM photosensitive polyimide precursor, SunfortTM
photosensitive dry-film resist, Hall elements, LSIs, glass
fabric for printed circuit boards.
Asahi Kasei Foundation Systems Corp.
Asahi Kasei Marinetech Co., Ltd.
HebelTM autoclaved lightweight concrete, construction
piles, NeomaTM foam and other thermal insulation,
artificial fish reef and other marine structures.
Asahi Home Products Co., Ltd.
Asahi Kasei Pax Corp.
Saran WrapTM cling film, ZiplocTM storage bags, plastic
film, sheet, and foam.
Asahi Research Center Co., Ltd.
Asahi Finance Co., Ltd.
Asahi Kasei Engineering Co., Ltd.
Asahi Kasei Amidas Co., Ltd.
Plant, equipment, process engineering, employment
agency, think tank.
44%
¥660
billion
27%
¥405
billion
7%
¥106
billion
6%
¥90
billion
7%
¥103
billion
3%
¥4
billion
17%
¥19
billion
4%
¥57
billion
3%
¥4
billion
3%
¥52
billion
2%
¥27
billion
4%
¥5
billion
3%
¥3
billion
* Before corporate expenses and eliminations
14
Operating Segment
Chemicals
Taketsugu Fujiwara
President, Asahi Kasei Chemicals
Net Sales
¥ billion
800
600
570.2
715.0
660.4
400
200
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
50
40
30
20
10
0
40.5
37.8
37.0
2004
2005
2006
Forecast
Fiscal year
Creating the Future with Chemistry is the basic
ideal to guide the advancement and growth of
operations. All businesses have been classified as
those for strategic expansion and those for stable
earnings. Management resources are focused on
advancing the growth of strategic expansion
businesses, while stable earnings businesses
are strengthened and enhanced to heighten
profitability.
The Year in Review
Sales for the segment increased by ¥90.2 billion to ¥660.4
billion, a 15.8% rise. Operating profit increased by ¥2.7
billion to ¥40.5 billion, a 7.1% rise. This included a credit
to amortize the actuarial surplus for retirement benefits
which was ¥4.3 billion smaller than a year ago.
In volume products, sales grew with strong overseas
demand but operating profit decreased due to higher
feedstock costs. Operating profit in monomers and basic
chemicals decreased with elevated feedstock costs for
acrylonitrile and styrene. Operating profit in polymers and
elastomers increased with improved market conditions for
Xyron™ modified polyphenylene ether and other
engineering resins.
Operating profit in specialty products and systems
increased. Sales of Hipore™ Li-ion rechargeable battery
separators continued to grow with strong demand. Sales of
both membrane-process salt electrolysis systems and their
ion-exchange membranes remained strong.
Notable Developments
The Microza™ membrane bioreactor (MBR) process was
selected in August 2005 for wastewater treatment at two
large-scale petrochemical complexes in China, which will be
among the largest such water treatment facilities in the world.
Microza™ microfiltration (MF) was selected in December
2005 for Singapore’s largest wastewater recovery project.
Asahi Kasei Performance Chemicals Corp. was established
in November 2005 in Nantong, Jiangsu, China, for the
production and sale of Duranate™ hexamethylene diiso-
cyanate (HDI) based polyisocyanate, with plant start-up
scheduled for spring 2007. Duranate™ is used as a curing
agent for non-yellowing polyurethane coatings and as a
production material for inks, adhesives, and cast moldings.
In May 2006, a memorandum of understanding was
concluded with PTT Plc. of Thailand for the establishment
of joint facilities for production of acrylonitrile (AN), methyl
20
15
20
15
Annual Report 2006
15
Major Products
Monomers and basic chemicals
Ammonia, nitric acid, caustic soda, high-compound fertilizers, acrylonitrile (AN), styrene, adipic acid, methyl methacrylate (MMA).
Polymers and elastomers
Suntec™ polyethylene (PE), Stylac™-AS styrene-acrylonitrile, Stylac™-ABS acrylonitrile-butadiene-styrene, polymethyl methacrylate (PMMA),
synthetic rubber and elastomer, styrene-butadiene latex, Tenac™ polyacetal, Xyron™ modified polyphenylene ether (mPPE), Leona™ nylon 66
polymer and filament.
Specialty products and systems
Coating materials, Ceolus™ microcrystalline cellulose, explosives, explosion-bonded metal clad, APR™ photosensitive resin, AFP™ photosensitive
plates, printing plate making systems, Microza™ UF and MF membranes and systems, Hipore™ microporous membrane, ion-exchange membranes
and electrolysis systems.
Those characterized by the potential to maintain stable
earnings through a strengthened operational base and
structure include petrochemicals, basic chemicals, and
ethylene center derivatives with the exception of those
marked for strategic expansion.
R&D
The structural configuration for R&D was reorganized in
April 2006. R&D related to each established business, with
the exception of monomers and basic chemicals, has been
devolved to the authority of the relevant business division.
Divisional R&D is focused on enhanced market development
in downstream fields. Corporate-level R&D comprises
chemical process and catalyst technology, and individual
projects to develop new businesses in the areas of
electronics/optics, environment/energy, and healthcare.
Throughout, the effort is directed to achieving global niche
leadership, enhanced competitiveness, and development of
peripheral business fields based on technological strengths
in catalysts, organic synthesis, chemical processes, and
polymer processing and modification.
methacrylate (MMA), and polymethyl methacrylate (PMMA),
with start-up scheduled for year-end 2009. The AN facility
will be the world’s first commercial plant to use propane
instead of propylene as starting material, and will raise the
AN supply capability of the Asahi Kasei Group to a world-
leading level.
Asahi Kasei’s non-phosgene process technology for
polycarbonate (PC) production was honored with an Okochi
Memorial Foundation Award in February 2006. The award
is granted in recognition of technology which makes
outstanding contribution to industrial development. The PC
process eliminates the need for the highly toxic phosgene as
process material, and by using CO2 as feedstock effects
carbon sequestration. Featuring low production costs, it has
elicited strong interest worldwide from potential licensees.
Growth Action – 2010
Asahi Kasei Chemicals has reviewed the position of each
business, classifying each either as a business for strategic
expansion, with management resources focused on
achieving growth and high earnings, or as a business for
stable earnings, with efforts focused on strengthening and
enhancement to heighten profitability.
Strategic expansion businesses, characterized by the
potential to attain greater earnings and stronger market
position through expansion of scale, include AN, MMA,
and synthetic rubber and elastomers. Those characterized
by the potential to attain growth through linkage with
growing market segments, building on established
strengths, and extension into peripheral fields, include
battery/fuel cell materials and water treatment systems.
Stable earnings businesses, characterized by the potential
to attain greater added value and stable earnings growth
through a leading position in growing market segments,
include polymers/compounds and performance chemicals.
16
Highlights
Water treatment systems
Water treatment systems is marked for growth as a
competitive, high value-added business. Adoption of
Microza™ microfiltration (MF) and ultrafiltration (MF)
modules and systems continues to grow at large-scale
water-treatment facilities throughout the world.
In August 2005, the Microza™ membrane bioreactor
(MBR) process was selected for wastewater treatment at
two large-scale petrochemical complexes in China, which
will be among the largest such water treatment facilities
in the world. Microza™ MBR enables outstanding water
treatment quality with a small space requirement.
In December 2005 Microza™ MF was selected for
Singapore’s largest wastewater recovery project.
Joint facilities with PTT in Thailand
In February 2006 Asahi Kasei Chemicals and PTT Plc. of
Thailand began studies for a joint project for the production
of acrylonitrile (AN), methyl methacrylate (MMA), and
polymethyl methacrylate (PMMA). A memorandum of
understanding was concluded with PTT in May 2006 for the
establishment of joint facilities in Thailand, with start-up
targeted for year-end 2009. The AN facility is to be the
world’s first commercial plant to use propane instead of
propylene as starting material, raising the AN supply
capability of the Asahi Kasei Group to a world-leading level.
Microza™ modules at a water treatment facility
Subsidiary for Duranate™ in China
Demand for Duranate™ hexamethylene diisocyanate (HDI)
based polyisocyanate has continued to grow, most notably
in Asia. To meet this growing demand, Asahi Kasei
Performance Chemicals Corp. was established in November
2005 in Nantong, Jiangsu, China, for the production and
sale of Duranate™ with plant start-up scheduled for
spring 2007.
Duranate™ is used as a curing agent for non-yellowing
polyurethane coatings and as a production material for inks,
adhesives, and cast moldings. Applications include the
automotive, architectural, and maritime fields. The new
capacity in China will reinforce our presence in the growing
Asia-Pacific region.
Signing ceremony with PTT Plc.
Omega Process facility
A facility using the proprietary Omega Process for catalytic
cracking of olefins began commercial operation at our
Mizushima Works in June 2006. The Omega Process is
used to produce ethylene and propylene from C4 and C5
raffinates which occur as by-products of petrochemical
plants and refineries. The process features unprecedented
selectivity for propylene, and with lower operating temper-
ature than conventional naphtha cracking enables reduced
energy consumption and CO2 emissions. The new facility
increases the self-sufficiency of feedstock supply at the
Mizushima Works, optimizing and enhancing the compet-
itiveness of operations. With the commercial validation of
the Omega Process, Asahi Kasei Chemicals is studying the
potential to license the technology to secure new sources
of propylene.
Groundbreaking ceremony for Duranate™ plant in China
Our Mizushima Works
Operating Segment
Homes
Shingo Hatano
President, Asahi Kasei Homes
Net Sales
¥ billion
500
400
375.8
404.5
415.0
300
200
100
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
40
30
20
10
0
33.0
29.0
28.2
2004
2005
2006
Forecast
Fiscal year
Annual Report 2006
17
Marketing resources are focused on demand for
rebuilding in urban areas, backed by the Long Life
Home product strategy to maintain and enhance
customer satisfaction over the long term.
The Year in Review
Sales for the segment increased by ¥28.8 billion to ¥404.5
billion, a 7.7% rise. Operating profit decreased by ¥0.8
billion to ¥28.2 billion, a 2.7% decline. This included a
credit to amortize the actuarial surplus for retirement
benefits which was ¥2.2 billion smaller than a year ago.
Sales of homes, both order-built and pre-built, increased
with higher unit prices and the completion of large
condominium reconstruction projects, but operating profit
decreased with higher costs for materials. The value of
orders received during the year increased by ¥11.5 billion
to ¥313.3 billion.
Sales and operating profit in real estate operations grew
with rising income from rentals. Sales and operating profit
in remodeling operations also grew.
Notable Developments
A new product line of Hebel Haus™ Long Life two-generation
homes featuring enhanced flexibility to adapt the floor-plan to
emerging changes in household composition went on sale in
April 2005. Two-story Hebel Maison Court Villa™ apartments
went on sale in September 2005.
20
15
20
15
18
Sales Trends of Homes Segment
Orders Received
Others
Pre-built homes
Order-built homes
¥ billion
400
306.2
16.5
300
280.0
16.7
354.1 359.0
0.9
1.1
25.6
33.6
332.0
1.1
20.1
318.2
1.1
36.0
¥ billion
400
300
273.0
289.3
318.1
301.8
313.3
329.0
200
100
0
289.6 263.3 281.1 310.7 319.4 332.5
2001
2002
2003
2004
2005
2006
Forecast
Fiscal year
200
100
0
2001
2002
2003
2004
2005
2006
Forecast
Fiscal year
Major Products
Hebel Haus™ houses, Hebel Maison™ apartments, condominiums, remodeling, real estate, residential land development, home financing.
R&D
R&D is focused on enhancing core technologies.
Shelter technology brings greater safety and security
through earthquake resistance, seismic damping, and fire
resistance; greater long-term usability through physical
durability/evaluation, systematic maintenance, and ease of
remodeling; enhanced livability through thermal insulation,
air circulation, and sound barrier; and enhanced ecology
through recycling and incorporation of greenery. Lifestyle
technology brings greater comfort, convenience, and
satisfaction, while evaluation/simulation technology is being
enhanced to enable buyers to more intuitively appreciate
the real-world effects of variations and modifications to a
home design so that it is optimized to taste before building.
Additional research is focused on the physiological and
psychological aspects of comfort, and how these can be
utilized through technological development to achieve
greater energy efficiency and environmental compatibility
in homes optimized for health and comfort.
Growth Action – 2010
Marketing of order-built homes is focused on demand for
home rebuilding in major urban areas, as a high-earnings
operational structure is reinforced and expanded. Specific
actions include:
• Successive development of new products tailored to
specific market characteristics in different regions.
• Advancement of cost reductions through shared logistical
networks with other home builders.
• Productivity enhancements through reduced home
construction time.
• Advanced development of technology to enhance the
Long Life Home product strategy.
Long-term customer relationships are maintained through
the provision of remodeling, real estate, and financial
services. Specific actions include:
• Expansion of real estate operations in brokerage of used
Hebel Haus™ homes.
• Expansion of remodeling operations through high value-
added services for long-term maintenance and
enhancement of home asset value.
• Establishment of stable earnings in home financing
operations with mortgage securitization and development
of homeowners insurance business.
• Development of new businesses utilizing proprietary
technology, know-how, and the asset value of Hebel
Haus™ homes.
Highlights
New Hebel Haus™ Long Life two-
generation home product line
A new product line of Hebel Haus™ Long Life two-
generation homes was launched in April 2005, building on a
long heritage that dates to the industry-leading introduction
of the two-generation home in 1975. As a pioneer in the
field of homes for two-generation occupancy, Asahi Kasei
Homes has constantly studied the needs of residents, the
features of a home which can meet them, and how these
change over time as a result of lifestyle adaptations,
changes which emerge in household composition, and
demographic trends.
The new product line is the latest development based on
the results of such study and analysis, and offers an
unprecedented level of flexibility to rearrange the floor-plan
of the home in order to adapt to changing needs over the
course of long-term ownership. The ability to rearrange
interior wall placement without diminishing structural
integrity enables the division between living zones to be
adjusted in response to changes in the numbers of residents.
If desired, part of the living space can also be separated for
use as a rental unit.
Hebel Haus™ Long Life two-generation home
Annual Report 2006
19
Hebel Maison Court Villa™
Two-story Hebel Maison Court Villa™ apartment buildings
went on sale in September 2005, meeting growing demand
in urban markets for innovative rental units designed with
recent demographic trends and current tastes in mind.
Featuring a higher degree of privacy and higher quality
amenities than with commonly available rental units, Hebel
Maison Court Villa™ apartments have strong appeal to
moderately affluent singles and couples without children, a
growing segment of the Japanese urban population.
Hebel Mansion Court Villa™
Urban renewal
Urban renewal and redevelopment, including reconstruction
of large condominiums and housing complexes, is a growing
field of business for Asahi Kasei Homes. Several large projects
were delivered during the year, including the Dojunkai
Edogawa Apartment Complex whose reconstruction was
completed in June 2005.
It has been estimated that at least a million older
condominium units throughout Japan are in need of
extensive renovation or demolishing and rebuilding.
With its established know-how and experience in the
field, Asahi Kasei Homes continues to expand its business
in this market.
▲
The Dojunkai Edogawa Apartment Complex, before rebuilding (left) and after (right)
20
Operating Segment
Pharma
Kei Oe
President, Asahi Kasei Pharma
Net Sales
¥ billion
120
103.9
105.8
108.0
80
40
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
15
13.4
12
9
6
3
0
11.1
10.0
2004
2005
2006
Forecast
Fiscal year
The pharmaceuticals business is advancing as a
specialized, R&D-centered operation, with the field
of orthopedics the central focus of management
resources. The medical device business is directed
toward for global leadership in systems for ther-
apeutic blood filtration.
The Year in Review
Sales for the segment increased by ¥1.9 billion to ¥105.8
billion, a 1.8% rise. Operating profit decreased by ¥2.3
billion to ¥11.1 billion, a 17.2% decline. This included a
credit to amortize the actuarial surplus for retirement
benefits which was ¥2.1 billion smaller than a year ago.
In pharmaceuticals, sales of Elcitonin™ calcitonin
formulation decreased as market share was lost to competing
products, but sales of Flivas™ therapy for benign prostatic
hyperplasia and Toledomin™ antidepressant continued to
grow, and operating profit from pharmaceuticals increased.
Shipments of APS™ artificial kidneys grew both in Japan
and overseas, but elevated capital depreciation following
plant expansions resulted in decreased operating profit for
medical devices.
20
15
20
Notable Developments
In June 2005 Asahi Kasei Pharma and Novartis Pharma K.K.
began co-promotion in Japan of Novartis Pharma’s
Voltaren* nonsteroidal anti-inflammatory drug. In March
2006 Asahi Kasei Pharma granted Eisai China Inc. rights to
promote Eril™ vasodilator in China beginning in June.
Asahi Kasei Medical’s artificial kidney assembly plant in
China began operation in November 2005.
15
Growth Action – 2010
Pharmaceuticals business:
Advancement as a specialized, R&D-centered operation, with
management resources focused on selected therapeutic
fields. Expansion of operations through structural reform
and slim, robust management, building on an established
presence in selected therapeutic fields in the Japanese
market. In pharmaceutical intermediates and diagnostic
reagents, structural reform is advancing to enable global
growth and expansion in selected fields of competitive
superiority.
Asahi Kasei Medical:
Directed toward global leadership in therapeutic blood
filtration systems. Global growth and expansion as a high-
earnings enterprise based on consolidation in the field of
hemodialysis, eliciting new demand for plasmapheresis
and leukocytapheresis products, expanding demand for
Annual Report 2006
21
Major Products
Elcitonin™, Bredinin™, Flivas™, Toledomin™, and other pharmaceuticals, pharmaceutical intermediates, functional food additives, diagnostic
reagents, APS™ artificial kidneys, Sepacell™ leukocyte reduction filters, Cellsorba™ leukocyte adsorption columns, Planova™ virus removal
filters, contact lenses.
Pharmaceutical Product Pipeline
Development stage
Product
Objective
Class
Indication
Pre-registration
ART-123 (injection)
New biologic
Recombinant human thrombomodulin
Disseminated intravascular coagulation
Phase III
AKT-120 (oral)
New chemical
Anti-virus
Herpes zoster
AT-877 (injection)
Additional indication
Rho-kinase inhibitor
Acute cerebral thrombosis
PTH (injection)
Additional indication
Synthetic human parathyroid hormone
Osteoporosis
Phase II
AT-877 (oral)
New dosage form
Rho-kinase inhibitor
KT-611 (oral)
Additional indication
α-1 blocker
Angina pectoris
Neurogenic bladder
Phase II (overseas)
ART-123 (injection)
New biologic
Recombinant human thrombomodulin
Deep vein thrombosis
Sepacell™ leukocyte reduction filters, and expanding
demand for Planova™ virus removal filters.
R&D
In pharmaceuticals, the focus is on new drug development
in the fields of orthopedics, the central nervous system, and
urology, and on extension of market life through enhanced
product conformation. In medical devices, developments
are advancing in fields related to hemodialysis, apheresis,
leukocyte removal, and virus removal. Next-generation
fields of research include autohemotherapy and cell therapy.
Highlights
Co-promotion of Voltaren
In June 2005 Asahi Kasei Pharma and Novartis Pharma K.K.
began co-promotion of Voltaren* diclofenac sodium in
Japan. Voltaren* is a nonsteroidal anti-inflammatory drug
(NSAID) widely used to reduce inflammation and alleviate
pain. The co-promotion was expanded effective April 2006
to include gel, tape, and other transdermal formulations,
further reinforcing Asahi Kasei Pharma’s established position
in orthopedics as a core field of competence.
* Voltaren is a trademark of Novartis.
Promotion of Eril™ in China
In March 2006 Asahi Kasei Pharma and Eisai China Inc.
concluded an agreement for Eisai China to promote
injectable formulations of Eril™ in China beginning in June.
Eril™ fasudil hydrochloride is a vasodilator indicated for
prevention of cerebral vasospasm and ensuing cerebral
ischemia following surgery for subarachnoid hemorrhage.
With a strong presence in China in the field of neurology,
Eisai China is well positioned to expand sales of Eril™ in this
key market. Consignment of promotion of Eril™ in China
to Eisai China enables Asahi Kasei Pharma to focus its
Chinese resources on expanding sales of Elcitonin™
osteoporosis therapy and Bredinin™ immunosuppressant.
Artificial kidney assembly plant in China
Asahi Kasei Medical’s plant in China for assembly of APS™
polysulfone-membrane artificial kidneys began operation in
November 2005. To meet strong demand growth, a
decision was made in April 2006 to add a second assembly
line. The expanded plant in China will enhance Asahi Kasei
Medical’s capacity to maintain stable supply, and will
provide an optimum base from which to serve China,
Southeast Asia, the Middle East, and other developing
markets.
The market for artificial kidneys is growing steadily
in Japan and throughout the world, as the number
of hemodialysis patients increases and facilities for
hemodialysis therapy become increasingly available.
Demand growth is particularly strong for polysulfone-
membrane dialyzers, due to their exceptional performance
and biocompatibility. The new assembly line is part of an
ongoing program of R&D and plant investments to heighten
the trust and satisfaction of the hemodialysis community, to
advance Japan’s world-leading hemodialysis technology,
and ultimately to contribute to the quality of life for
hemodialysis patients.
New APS™ assembly plant in China
The focus is on achieving growth through the
global expansion of products with exceptional
performance features and the development of
new businesses in industrial-use materials.
The Year in Review
Sales for the segment decreased by ¥1.8 billion to ¥89.7
billion, a 2.0% decline. Operating profit decreased by ¥4.3
billion to ¥4.0 billion a 51.8% decline. This included a
credit to amortize the actuarial surplus for retirement
benefits which was ¥1.3 billion smaller than a year ago.
Operating profit in Roica™ spandex decreased with
elevated feedstock prices and lower sales prices due to
intensified competition. Operating profit in Bemberg™
cupro filament, used principally in linings, increased with
strong overseas sales.
Sales of Eltas™ spunbond increased in diaper and hand-
warmer applications, but operating profit in nonwovens
decreased with elevated feedstock costs.
Notable Developments
In March 2006 Asahi Kasei Fibers acquired the spandex
business of Lanxess, with production facilities in Germany
and the US. Together with production facilities in Japan,
China, Taiwan, and Thailand, Asahi Kasei Fibers now has
a truly global supply infrastructure for spandex filament
and yarn.
Growth Action – 2010
Achieving continuous growth by advancing a transformation
from a business structure centered on products for the
Japanese market for apparel through expansion of overseas
business and development of business in non-apparel,
industrial-use materials. R&D is focused on driving the
growth of business in industrial-use materials to develop as
a new core field of operation.
For greater earnings in established businesses:
• Expansion in global markets. Development of Roica™ as
a leading global spandex brand, with production in six
countries.
• Full utilization of available resources to expand earnings.
Concerted forward-looking execution of investment for
expansion.
• Intensive development of high value-added products.
Establishment of pricing structure to reflect added value.
For expansion of new businesses:
• Expansion of Solotex™ polytrimethylene terephthalate
(PTT) fiber business in new application fields.
22
Operating Segment
Fibers
Masaki Sakamoto
President, Asahi Kasei Fibers
Net Sales
¥ billion
120
108.0
91.5
89.7
80
40
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
10
8.3
4.0
4.0
2004
2005
2006
Forecast
Fiscal year
20
15
8
6
4
2
0
20
15
Annual Report 2006
23
Major Products
Roica™ elastic polyurethane filament (spandex), Eltas™ spunbond, Lamous™ artificial suede, and other nonwovens, Bemberg™
cuprammonium rayon, polyester filament.
Commercialization of polyketone filament business.
• Development of new businesses peripheral to established
cellulosic and nonwovens businesses. Rapid scale-up to
form new core business.
• Extension of business domain based on established
technology and know-how, not limited to traditional fields
of fiber production.
• Flexible implementation of alliances and joint projects with
75th anniversary for Bemberg™
In June 2006, Asahi Kasei Fibers celebrated 75 years of
production of Bemberg™ cupro fiber in Nobeoka.
Bemberg™ is an environmentally compatible fiber made
from cotton linter, short fibers on the seeds of cotton plants
which are not used in cotton yarn. Production technology
was licensed from Germany in 1929 and the first
commercial shipment from Nobeoka was in June 1931.
partners within and outside the Asahi Kasei Group.
Bemberg™ cupro is widely used in high quality linings,
and use is growing in fashionable apparel, innerwear,
bedding, and sportswear.
Newspaper advertisement commemorating
the 75th anniversary of Bemberg™
R&D
The ratio of R&D expenditure on new materials to that on
existing materials is 2:3 and increasing as greater emphasis
is focused on development of new materials. R&D on
existing materials is directed toward the development of
new high value-added grades of Roica™ spandex,
Bemberg™ cupro, and nonwovens which meet market
needs for advanced performance. R&D on new materials is
directed toward the development of unique products which
will elicit new demand. A pilot plant for polyketone
filament started up at the beginning of 2006, with samples
supplied to users for evaluation.
Highlights
Acquisition of spandex business
In March 2006 Asahi Kasei Fibers acquired the spandex
business of the German Lanxess Group, including
production facilities in Germany and the US. Featuring
elastic stretch and recovery, spandex is widely used in
sportswear, swimwear, and stockings. The product lineup
of Roica™ spandex is distinguished by high-performance
grades with added functionality enabled by innovative
technological advances and integrated production from raw
material to finished yarns. The newly acquired production
bases complement those in Japan, China, Taiwan, and
Thailand, establishing Asahi Kasei Fibers as a truly global
supplier of spandex products. The business will be
expanded and grown
to establish Roica™
as a leading global
spandex brand.
Press conference announcing acquisition of
spandex business from Lanxess
Swimwear made with Roica™
24
Operating Segment
Electronics Materials
& Devices
Growth of a high-earnings operational structure is
obtained through leadership in the development of
products for emerging applications in each market
segment for electronic materials and electronic devices.
The Year in Review
Sales for the segment increased by ¥9.8 billion to ¥102.9
billion, a 10.6% rise. Operating profit increased by ¥1.7
billion to ¥19.3 billion, a 9.9% rise. This included a credit to
amortize the actuarial surplus for retirement benefits which
was ¥1.1 billion smaller than a year ago.
Operating profit in electronics devices grew with strong
demand in cell phone, DVD recorder, and other home
electronics applications. Operating profit in electronics
materials grew with increased sales of Sunfort™ dry film
resist for printed wiring board production following an
expansion of capacity in China.
Notable Developments
A second production line began commercial operation in
May 2005 at Asahi Kasei EMD’s plant for large pellicles in
Nobeoka. In September 2005 Asahi Kasei Electronics
announced the development of a high-precision contact-free
rotation angle sensor for use in automotive and industrial
applications. In March 2006 Asahi Kasei Microsystems
announced the development of the world’s smallest and
thinnest 6-axis electronic compass for use in cell-phone
navigation systems and other portable electronics
applications.
Growth Action – 2010
In electronic devices:
• Established LSI and sensor businesses are being expanded.
• New high-performance hybrid devices combining sensors
and LSIs, including a contact-free position detector IC, are
being developed.
• Marketing is being expanded world-wide.
In electronic materials:
• Industry-leading positions are being reinforced for
Sunfort™ DFR, Pimel™ PSPI, and photomask pellicles for
LCD panel production.
• Other core businesses including glass fabric are also being
expanded.
Makoto Konosu
President, Asahi Kasei EMD
Net Sales
¥ billion
120
100
93.0
115.0
102.9
80
60
40
20
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
25
21.0
19.3
17.6
2004
2005
2006
Forecast
Fiscal year
20
15
10
5
0
20
15
20
15
Major Products
Pimel™ photosensitive polyimide precursor (PSPI), Sunfort™ photosensitive dry film resist (DFR), photomask pellicles, Luminous™ plastic optical
fiber, LSIs, Hall elements, glass fabric.
Annual Report 2006
25
World’s smallest and thinnest 6-axis
electronic compass
The AK8976A developed by Asahi Kasei Microsystems
(AKM) comprises a 3-axis geomagnetic sensor and a 3-axis
acceleration sensor to form the world’s smallest and thinnest
6-axis electronic compass. AKM is one of the world’s lead-
ing suppliers of 3-axis electronic compasses widely used in
GPS-enabled cell phones for pedestrian navigation systems.
The new 6-axis electronic compass provides accurate navi-
gation performance regardless of handset orientation,
enabling advanced functions and services such as
continuous alignment of 3D map display with handset
orientation angle, and access to real-time shopping or
events information by pointing the handset at a building.
AK8976A 6-axis electronic compass
• Development of new applications is being advanced,
including materials for flat-panel displays using established
core technology in photosensitive materials and materials
for semiconductor packaging.
R&D
R&D is directed toward meeting needs and providing
solutions to problems identified through interaction with
the customer. Developments in electronics devices include
combinations of sensor technology with digital/analog
mixed-signal LSI technology for hybrid devices with unique
functions. Developments in electronics materials include
high-performance structural materials for LCD panels and
organic electroluminescent (EL) materials for flat-panel
displays, and next-generation package substrate materials
compatible with emerging standards for high transmission
speeds, performance, and reliability.
Highlights
Contact-free rotation angle sensor
The high-precision contact-free rotation angle sensor
developed by Asahi Kasei Electronics (AKE) comprises the
AE-8001 controller IC and two high-sensitivity Hall elements.
It is the world’s first magnetic rotation angle sensor to
achieve the high precision standard of ±0.5° across the
broad temperature range of – 40° to 125°C. The sensor
also features reliable performance under severe conditions
of dust and vibration, making it well suited for use in
automotive applications including electric motor control
and steering angle detection, and in industrial applications
including control of machine tools and robotic equipment.
AKE is the world’s leading supplier of Hall elements,
magnetic sensors widely used in the control of electric
motors for consumer electronics. Advanced products of
AKE include Hall ICs and cell phone input devices. New
sensor solutions for emerging applications are being
developed through a combination of magnetic sensor
function with digital/analog signal processing technology
and innovative algorithms to efficiently extract the required
information from
electronic signals.
Contact-free rotation angle sensor controller IC (left)
and Hall elements (right)
26
Operating Segment
Construction
Materials
Yoichi Saji
President, Asahi Kasei Construction Materials
Net Sales
20
¥ billion
80
60
40
15
20
0
59.9
56.5
59.0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
5
4
3
2
1
0
3.8
4.0
2.6
2004
2005
2006
Forecast
Fiscal year
20
15
With a reinforced commitment to customer focus,
safety, security, and comfort, operational reform is
advancing for heightened competitiveness of estab-
lished businesses, expansion and development of
new businesses, and establishment of new business
models.
The Year in Review
Sales for the segment decreased by ¥3.4 billion to ¥56.5
billion, a 5.7% decline. Operating profit increased by ¥1.2
billion to ¥3.8 billion, a 48.6% rise. This included a credit to
amortize the actuarial surplus for retirement benefits which
was ¥1.5 billion smaller than a year ago.
Operating profit in building materials and housing
materials increased with operating cost reductions and
growing sales of Hebel™ autoclaved lightweight concrete
(ALC) panels in large retail outlets, factories, and apartment
buildings, and with operating cost reductions and growing
sales of Hebel Powerboard™ ALC panels in new market
segments.
Sales of pre-cast concrete piles decreased, but operating
profit in foundation systems increased with growing sales of
Eazet™ and ATT Column™ piles for small-scale construction.
Operating profit in insulation materials decreased with
elevated feedstock costs and lower demand for Neoma™
high-performance foam insulation panels due to a downturn
in wood-frame home construction.
Notable Developments
Nanoroof™ fiber-reinforced cement roofing tiles went on
sale in November 2005. The E-coupler™ steel column
coupling system went on sale in January 2006.
Growth Action – 2010
Further reinforcing the enhanced operational structure with
growth through the expansion and development of new
businesses and the establishment of new business models.
Enhancing competitiveness of established businesses:
• Ongoing operating cost reductions and enhanced product
quality and service to ensure stable profitability of the
Hebel™ ALC business.
• Expansion and reinforcement of Hebel Lite™, Hebel
Powerboard™, and small-scale piles businesses.
Expansion and development of new businesses:
• Wide-ranging study of new business opportunities, both
domestic and overseas.
• Swift commercialization of projects under development.
• Collaboration with Asahi Kasei Homes.
Major Products
Hebel™ autoclaved lightweight concrete (ALC) panels, steel-frame structural components, piles and foundation systems, Neoma™ foam
insulation panels, artificial fish reefs and marine structures.
Annual Report 2006
27
E-coupler™ steel column coupling system
The E-coupler™ coupling system for steel columns went on
sale in January 2006. The system enables quick and precise
coupling of steel columns for building frames without the
need for welding at the construction site. Based on column
coupling technology developed jointly by Asahi Kasei Homes
and Unytite Corp. for use in the Hebel Haus Frex™ series of
homes, the E-coupler™ system is the product of a three-way
collaboration including Asahi Kasei Construction Materials to
develop material components enabling general use in build-
ing frames. Asahi Kasei Construction Materials is advancing
the development of other innovative structural systems and
components with strong demand growth foreseen.
▲
▲
▲
E-coupler™ steel column coupling system
Establishment of new business models:
• Expansion of installation business for piles and foundation
systems and for ALC panels and other exterior wall products.
• Identification of new research projects based on customer
needs.
• Intensified marketing of housing materials and insulation
materials through direct contact with builders and
constructors.
R&D
The phenolic foam thermal insulation business will be
expanded through developments to enhance production
efficiency and enable composite product variations.
Products under development include materials with
humidity/temperature regulating function and the
incorporation of added function to ALC panels.
Highlights
Nanoroof™ cement roofing tiles
Nanoroof™ fiber-reinforced cement roofing tiles went on
sale in November 2005. While the clay roofing tiles most
commonly used in Japan feature durability and a substantial
appearance, their heavy weight poses a danger in the event
of an earthquake. Many attempts to develop a lighter-
weight roofing tile have failed to find market approval due
to lack of sufficient durability and indistinct appearance.
With the Nanoroof™ tile, Asahi Kasei Construction
Materials has succeeded in matching the durability and
appearance of traditional clay tiles at half the weight
loading per unit of roof area.
The outstanding strength and durability of the thin
Nanoroof™ tiles is made possible by the proprietary
development of an ultra-fine material composition in which
the pores in the cement are reduced to nanometer-order size,
in contrast to the micrometer-order pores in conventional
cement. Containing no asbestos, Nanoroof™ is a safe,
environmentally compatible product.
Nanoroof™ cement roofing tiles
A revitalization of operations is advancing by
reinforcing strong businesses, selecting and
prioritizing new businesses, quickly performing
necessary restructuring, and strengthening links
with other core operating companies.
The Year in Review
Sales for the segment decreased by ¥7.2 billion to ¥51.9
billion, a 12.2% decline, largely due to the transfer of
biaxially oriented polystyrene sheet operations to a joint
venture with Dainippon Ink and Chemicals, Inc. Operating
profit decreased by ¥1.2 billion to ¥4.8 billion, a 20.5%
decline. This included a credit to amortize the actuarial
surplus for retirement benefits which was ¥0.6 billion
smaller than a year ago.
Feedstock costs rose, but operating profit in home-use
products increased with higher sales of Saran Wrap™ cling
film and increased exports of Saran™ fiber.
Sales prices for packaging and cushioning materials
continued to rise, but operating profit decreased due to still
higher feedstock costs.
Notable Developments
Ziploc™ containers with twist-sealing lids and Ziploc™ bags
with double zippers went on sale in March 2006.
Growth Action – 2010
Reinforcing strong businesses and expanding into growth
applications. Strengthening links with Asahi Kasei Chemicals
and other core operating companies.
In home-use products:
Expansion of operations by reinforcing the Saran Wrap™
brand and development of new products which meet
market demand.
In packaging products:
Expansion and growth with applications development in
films for use in electronics and pharmaceuticals packaging,
in addition to the main-line foods application field.
28
Operating Segment
Life & Living
Keiji Kamei
President, Asahi Kasei Life & Living
Net Sales
¥ billion
60
59.1
51.9
54.0
40
20
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
8
6
4
2
0
6.1
4.8
4.5
2004
2005
2006
Forecast
Fiscal year
20
15
20
15
Major Products
Saran Wrap™ cling film, Ziploc™ storage bags, film, sheet, foam.
R&D
Development in the main business fields of Saran Wrap™
food wrapping film, cushioning material, Saran™ fiber, and
plastic containers, is directed toward heightening
productivity and eliciting new demand through product
differentiation. R&D for new business growth is focused on
the following areas: Development of performance films,
packaging systems, functional packaging, and easy-opening
packaging for enhanced consumer safety, reliability, and
convenience in food and pharmaceutical applications;
development of improved performance and new
applications for biodegradable polymers; development of
new consumer products which enable more comfortable
living; and advanced utilization of the PAOSS™ cushioning
design and simulation technology.
Highlights
Biodegradable plastic cups
Biodegradable Green Promax™ cups from Asahi Kasei Pax
were used at Aichi Expo 2005. The cups are made with
100% polylactic acid (PLA), a biodegradable plastic material
derived from corn. Asahi Kasei Pax developed proprietary
technology for thermal processing and additive formulation
to enable the production of PLA cups with transparency and
strength equivalent to plastic drinking cups made of
polystyrene or polypropylene. Green Promax™ cups are
used at fast food chains, and other new applications based
on the established technology are emerging.
Biodegradable Green Promax™ cup
Annual Report 2006
29
New Ziploc™ products
Ziploc™ containers with twist-sealing lids, rectangular
Ziploc™ containers, and Ziploc™ bags with double zippers
went on sale in March 2006. With a tighter seal, the twist-
sealing containers are ideal for storage of soups, stews, or
other liquid foodstuffs without spillage, and also for
protecting dry ingredients from humidity. The rectangular
Ziploc™ containers are specially designed for use in the
limited space of a Japanese kitchen, and are perfect for
efficient storage of small portions. The new Ziploc™ bags
feature two zippers to assure a tight and secure seal.
Ziploc™ containers with twist-sealing lids
Rectangular Ziploc™ containers
Ziploc™ bags with double zippers
The Year in Review
Sales for the segment increased by ¥2.6 billion to ¥26.8
billion, a 10.7% rise. Operating profit decreased by ¥0.3
billion to ¥3.3 billion, a 7.9% decline, largely as a result of
the exclusion of Asahi Kasei Information Systems as a
consolidated subsidiary with the April 2005 divestment of a
majority of its shares to TIS Inc.
Sales and operating profit in engineering operations
increased with growing business in domestic plant
construction.
Sales and operating profit in personnel staffing and
placement operations increased with growing business in
staffing and an expanded sales network.
R&D
Projects under development at Asahi Kasei Engineering
include technology for evaluation of high performance films
and sheets used in display panels, technology for
examination of minute metallic impurities, and technology
for microbicidal photocatalysis. During the fiscal year, Asahi
Kasei Engineering and Asahi Research Center completed a
three-year commission from the New Energy and Industrial
Technology Development Organization (NEDO) for
development of biodiesel fuel production technology in a
joint project including Kyoto University and others.
Major Products
Plant engineering, environmental engineering, personnel
staffing and placement, think tank services.
30
Operating Segment
Services,
Engineering and
Others
Net Sales
¥ billion
30
29.0
26.8
24.2
20
10
0
2004
2005
2006
Forecast
Fiscal year
Operating Profit
¥ billion
4
3.6
3.3
3.5
3
2
1
0
2004
2005
2006
Forecast
Fiscal year
20
15
20
15
New Business Development and
Intellectual Property
Annual Report 2006
31
32
Research & Development and New Operations
Asahi Kasei Corporation CTO Kageyasu Akashi
on the new approach to development.
Kageyasu Akashi
Director, Executive Officer
R&D
Renewing the organizational
structure
Since the holding company configuration was adopted in
October 2003, R&D related to established businesses has
been the responsibility of the core operating companies.
The holding company has continued to perform basic
research and new business projects. In August 2005 these
were brought together with intellectual property in a new
organization, New Business Development. As part of this,
basic research functions are performed by the Central R&D
Laboratories.
New Business Development
Corporate IP & Research Administration
Shibasaki Laboratory
Yoshino Laboratory
Strategic Planning & Development
Central R&D Laboratories
Information Technology Laboratory
Internet Business
Marketing Center for FPC and FPD Materials
Medical Service Support Center
Speech Solutions
(As of August 1, 2006)
The role of New Business
Development
While each core operating company remains responsible for
development of new businesses in its own field of operation,
New Business Development performs the development of
new businesses which extend beyond the range of any single
operating segment, or would be impractical for any single
core operating company to perform independently. In the
past our corporate R&D organs had served to support the
R&D efforts of the business units. With the new structure,
in contrast, the core operating companies support our work
in New Business Development with their established market-
ing capabilities and infrastructure. In this sense there has
been quite a change in the way we function at the core of
the Asahi Kasei Group’s effort for the expansion and
growth of operations.
Flexible printed circuit (FPC) and flat
panel display (FPD) materials
The Marketing Center for FPC and FPD Materials was
established as a holding company project in October 2004,
to develop new businesses in electronic chemicals. The
project combines personnel and technology from Asahi Kasei
Chemicals, Asahi Kasei EMD, and the holding company.
It marks a new way of doing things for us in that the same
organ is responsible for the whole process encompassing
research, development, and commercialization, tailoring its
work in real time to emerging market needs, with the
Annual Report 2006
33
biotechnology. Our internet businesses include an electronic
marketplace for construction materials and home fixtures,
and a web-based personal diet management system.
Outlook
We have a clear mission to develop new businesses that can
grow to become the next generation of core businesses for
Asahi Kasei. The growth fields we are targeting require
speed and flexibility if we going to succeed, and the
personnel we have in New Business Development welcome
and enjoy the challenge. Fiscal 2006 will be a pivotal year
for much of our work, and we look forward to achieving
progress in several areas.
R&D Expenditure (consolidated)
¥ billion
60
40
20
0
48.4
50.7
51.5
56.0
2003
2004
2005
2006
Forecast
authority to license technology or make acquisitions as
necessary. A two-layer flexible copper-clad laminate (FCCL)
for flexible printed wiring boards and a wire-grid polarizing
film for liquid crystal displays are in advanced stages of
development, with preparations for sample shipment.
Marketing Center for FPC and FPD Materials
Asahi Kasei EMD
Photoresist,
film processing
Asahi Kasei Chemicals
Optical materials,
hardening agents, polymers,
silicone, microfabrication
Talent, technology,
market access
Talent, technology,
market access
Marketing center
for FPC and
FPD materials
FCCL
FPD materials
Other areas of development
One area with great potential we are looking at is
biotechnology. Successful developments with biotechnology
have largely been limited to the fields of crop science and
pharmaceuticals, but important new fields of application will
emerge, including therapeutic devices and systems, and we
are studying the prospects for establishing a new business
model using biotechnology in such emerging fields.
Another project we have is to develop a business which
can support the establishment of private clinics and medical
offices. Established in November 2004, this project combines
personnel and technology from Asahi Kasei Homes, Asahi
Kasei Pharma, and Asahi Kasei Medical. This project also has
the potential to lead to new developments in biotechnology
utilizing information related to hemodialysis technology.
Our speech recognition technology also has the potential
for cross-application to data processing related to
34
Intellectual Property
A systematic patent portfolio is maintained to secure the
market superiority of operations. Strategic development of
the patent portfolio is directed toward international patent
protection to support the globalization of business. The
figures below show domestic patents held by category of
use and overseas patents held by region of registration.
Domestic patents of the Asahi Kasei Group,
by category of use
Overseas patents of the Asahi Kasei Group,
by region of registration
In practice
44%
1,574
Defensive
and other
30%
1,081
Scheduled for
practice
26%
945
Other
9%
351
Asia
34%
1,385
United States
21%
869
EPC* signatory
nations
36%
1,477
* European Patent Convention
Public recognition of inventions
Many key inventions which support Asahi Kasei Group
businesses have been honored with prestigious awards and
commendations in recognition of the public benefits which
have been made possible. The main awards received from
fiscal 2003 to fiscal 2005 are shown below.
Japan Medal of Merit,
Purple Ribbon
Akira Yoshino,
Asahi Kasei Group Research Fellow
Ichiro Shibasaki,
Asahi Kasei Group Research Fellow
Li-ion rechargeable battery
InSb Hall element
Science and Technology Award
(Distinguished Service Award until 2004)
from Minister of Education, Culture, Sports,
Science and Technology
National Commendation for Invention,
Japan Institute of Invention and Innovation
Oil-extended SBR with functional groups
for silica-compound tires
Novel catalytic reaction with high-concentration
heteropolyacid
Li-ion rechargeable battery
Virus removal filter
FY 2004
FY 2003
FY 2005
FY 2005
FY 2003
FY 2005
Governance and Responsibility
Annual Report 2006
35
36
Corporate Governance
The Asahi Kasei Group constantly endeavors to heighten
fast-moving and transparent management as essential for
maximum corporate value and greater earnings. The effort
for enriched and enhanced corporate governance is
ongoing, building on the October 2003 transformation to
Corporate Governance System
a holding company configuration with separate execution
and oversight functions which established a management
framework with clear delineation of executive authority and
responsibility.
Shareholders
Holding Company
Asahi Kasei
Board of Corporate Auditors
Board of Directors
Group Advisory Committee
Chairman of the Board
President
Strategic Management Council
CSR Council
Group staff functions
• Strategic planning & analysis
• Compliance & risk management
• Resources administration
Development of new businesses
Internal Auditing
Internal Control Project
Group Executives Council
Core Operating
Companies,
business fields
Asahi Kasei
Chemicals
Asahi Kasei
Homes
Asahi Kasei
Pharma
Asahi Kasei
Fibers
Asahi Kasei
EMD
Chemicals
Housing
Pharmaceuticals,
medical products
Fiber, textiles
Electronics
materials
and devices
Asahi Kasei
Construction
Materials
Construction
materials
Asahi Kasei
Life & Living
Household
products,
packaging
materials
(As of April 1, 2006)
Board of Directors
Oversees group management, and deliberates and decides
on basic group policy and strategy, and on substantive
proposals by the Strategic Management Council.
The chairman of the holding company chairs meetings of
the Board of Directors. Meets once or twice per month.
Strategic Management Council
Deliberates and decides on substantive matters relating to
the operation of the holding company and of the group. Its
decisions are made by the president of the holding
company, who chairs meetings of the council, after
deliberation by the attending constituent members. Meets
twice per month.
Group Advisory Committee
The advisory body to the holding company Board of
Directors, composed of the chairman and the president of
the holding company and outside advisors. Meets twice
per year.
Group Executives Council
Conducts the dissemination of substantive group
information and the exchange of group information, and
deliberates on matters requiring coordination among the
core operating companies. Meets once per month.
Board of Corporate Auditors
Comprises four Corporate Auditors, of which two are Outside
Auditors. Corporate Auditors exchange views, deliberate, and
decide on substantive matters relating to auditing. Meets at
least once per quarter.
Annual Report 2006
37
Membership of Group Advisory Committee (as of March 31, 2006)
External Members
Internal Members
Yuzo Seto
Kodama Yukiharu
Norio Wada
Masumi Shiraishi
Kazuo Tezuka
Akio Makabe
Nobuo Yamaguchi
Shiro Hiruta
Counsellor
President
President and CEO
Professor
Attorney
Professor
Chairman of the Board & Representative Director
President & Representative Director,
Presidential Executive Officer
Asahi Breweries, Ltd.
Japan Information Processing Development Corporation
Nippon Telegraph and Telephone Corporation
Faculty of Economics, Toyo University
Kaneko & Iwamatsu
Faculty of Economics, Shinshu University
Asahi Kasei Corporation
Asahi Kasei Corporation
Internal Observer
Secretariat
Ichiro Ito
Kenichi Shibukawa
Director, Primary Executive Officer
Director, Senior Executive Officer
Asahi Kasei Corporation
Asahi Kasei Corporation
Executive Officer System
Audits
An executive officer system of management is employed at
the holding company and at each core operating company.
Authority and responsibility for the management of each
core operating company is held by the president and the
other executive officers of that company. Authority and
responsibility for the management of the holding company
and of the group is held by the president and the other
executive officers of the holding company.
The president of the holding company oversees the
executive management and performance of the core
operating companies and of their presidents. The holding
company board of directors oversees the executive
management and performance of the holding company
president and of the group.
For both the holding company and the core operating
companies, the number of board directors and executive
officers is as small as possible. In all cases, the term of office
is one year, and management results and performance are
reviewed each fiscal year.
Recent developments
The Board of Directors, Strategic Management Council,
Group Advisory Committee, Group Executives Council, and
Board of Corporate Auditors met as scheduled. In October
2005 an Internal Control Project was formed to lead the
preparation and implementation of an optimum system for
internal control. After studying what would be the
optimum content of documentation for the Asahi Kasei
Group based on a standard internal control framework, the
project began in earnest in April 2006. The Corporation
Law which came into effect in May 2006 requires a Board
of Directors resolution related to the preparation of an
internal control system. At its May 2006 meeting, our
Board of Directors adopted a basic policy for the Asahi Kasei
Group’s internal control system.
Internal Auditing is a corporate organ under the direct
authority of the president of the holding company. Each
year, Internal Auditing prepares plans for an internal audit
in accordance with basic corporate regulations for internal
audits, obtains the president’s approval for these plans, and
then performs the internal audit.
In accordance with the audit policy adopted by the Board
of Corporate Auditors, each Corporate Auditor attends
meetings of the Board of Directors and audits Directors in
the discharge of their duties through examination of
business performance. The Statutory Auditors Office
provides staff to assist Corporate Auditors.
Chuo Aoyama PricewaterhouseCoopers was contracted
as an independent auditor to perform the financial audit in
accordance with the Commercial Code and Securities Law.
Partners of the independent auditor designated to perform
the audit for fiscal 2005 and the number of years auditing
Asahi Kasei were as follows.
• Koji Kobayashi, CPA, 10 years
• Takahiro Nakazawa, CPA, 5 years
• Tetsuo Kitagawa, CPA, 10 years
The independent auditor forms a team of assistants for
performance of the audit in accordance with its audit plan.
The team mainly comprises certified public accountants and
junior accountants, and also includes certified information
systems accountants and other specialist assistants.
Internal Auditing, the Board of Corporate Auditors, and
the corporate auditors of core operating companies and
other subsidiaries regularly meet to confirm the
effectiveness of internal governance systems for legal
compliance and risk management. The Board of Corporate
Auditors provides counsel to the independent auditor with
respect to its audit plan, and receives the results of the
consolidated financial audit of Asahi Kasei for the fiscal half-
year and fiscal year.
38
Corporate Social Responsibility
CSR at the Asahi Kasei Group
CSR in Action
We believe that CSR is achieved through the sustainable
expansion of operations effecting increased corporate value,
enabling fulfillment of the needs and expectations of our
various stakeholders, in accordance with our basic tenets of
contribution to human life and human livelihood through
constant innovation and advances based in science and the
human intellect.
CSR Fundamentals
Based in an understanding of the effects of our operations
on the global environment and the global community,
efforts and actions related to CSR are based in our four CSR
Fundamentals: Compliance, Respect for Employee
Individuality, Responsible Care*, and Corporate Citizenship.
Asahi Kasei Group CSR
The
employee
Employee
fulfillment
The
community
Community
outreach
The
environment
Environmental
protection
The customer
Customer
satisfaction
Sustainable increase
in corporate value
The
shareholder
Shareholder
returns
The supplier
Fair business
dealings
The local
economy
Local economic
participation
Business operations
CSR Fundamentals
Compliance
Respect for Employee
Individuality
Responsible Care
Corporate Citizenship
* Responsible Care represents the commitment and initiative to secure and improve safety and environmental protection at every step of the product life-cycle through the individual
determination and responsibility of each firm producing and handling chemical products. As of April 2006, fifty-two countries throughout the world have a Responsible Care
program.
Framework for advancement
The CSR Council formed in April 2005, with the president
serving as chair, formulates CSR policy and guides the CSR
effort throughout the Asahi Kasei Group. The Asahi Kasei
CSR Fundamentals were promulgated by the CSR Council in
November 2005.
Specific CSR initiatives are implemented by the
committees under the authority of the CSR Council,
including the Corporate Ethics Committee to ensure
Framework for Advancement of CSR
President
CSR Council
• Formulation of unified policy and
action plans
• Guidance and counsel for the
subordinate committees
• Preparation of reports
• Monitoring of independent evaluation
• Disclosure of CSR information
Public recognition of CSR results
In April 2006 the Asahi Kasei Group received the Grand
Prize in the 15th Annual Global Environment Award
sponsored by Fujisankei Communications Group with the
support of WWF Japan. The award cited the Asahi Kasei
Group’s advancement of Responsible Care, particularly
curtailment of fiscal 2004 greenhouse gas emissions to
approximately half the level of the baseline year fiscal 1990,
and also the provision of the “Eco-footprint Club” website
for children to learn about the environment, ecology, and
conservation.
Annual Report 2006
39
regulatory compliance and the Responsible Care Committee
to guide efforts for environment, health, and safety.
The Risk Management Committee formulates the response
to contingencies such as a major earthquake. The Commu-
nity Fellowship Committee promotes and coordinates the
effort for outreach and fellowship in each local community
where we operate.
Corporate Ethics
Committee
Advancement of ethics education and
operation of compliance hotline
Market Compliance
Committee
Compliance with Antimonopoly Law and
prevention of violation
Export Control
Committee
Compliance with export-related regulations
and prevention of violation
Responsible Care
Committee
Risk Management
Committee
Environmental preservation, product safety,
physical integrity and safe operation, work-
place safety, hygiene, and health, and
community outreach
Crisis prevention and damage minimization
Community Fellowship
Committee
Advancement of community fellowship
activities
President Hiruta accepts the Grand Prize at the Global
Environment Award Ceremony
40
Directors, Auditors, Excecutive Officers
(As of June 30, 2006)
Yuji Tsuchiya
Auditor
Kenji Nakamae
Auditor
Hidefumi Sakamoto
Outside Auditor
Katsuo Wajiki
Outside Auditor
Hatsuki Onitsuka
Executive Officer
Masanori Mizunaga
Executive Officer
Koji Fujiwara
Executive Officer
Yoshio Hayashi
Executive Officer
Nobuo Yamaguchi
Chairman of the Board &
Representative Director
Shiro Hiruta
President & Representative
Director, Presidential
Executive Officer
Ichiro Itoh
Director, Vice-Presidential
Executive Officer
Strategy; Accounting &
Finance
Kunio Kohga
Director, Primary Excective
Officer
ESH; Production
Technology; PL
Kenichi Shibukawa
Director, Senior Executive
Officer
Legal & General Affairs;
Procurement; Compliance
Shigeru Mizutani
Director, Executive Officer
ESH; Production
Technology; PL
Kageyasu Akashi
Director, Executive Officer
R&D
Kiyoshi Tsujita
Director, Executive Officer
Human Resources
Financial Section
Annual Report 2006
41
C o n t e n t s
Consolidated Eleven-Year Summary
........................................ 42
Management’s Discussion and Analysis
.................................. 44
Risk Analysis
.............................................................................. 50
Consolidated Balance Sheets
................................................... 52
Consolidated Statements of Income
........................................ 54
Consolidated Statements of Shareholders’ Equity
.................. 55
Consolidated Statements of Cash Flows
................................. 56
Notes to Consolidated Financial Statements
.......................... 57
Report of Independent Auditors
............................................. 71
42
Consolidated Eleven-Year Summary
Asahi Kasei Corporation and Consolidated Subsidiaries
For the year ended March 31
Net Sales
Chemicals
Chemical and Chemical-related
Chemicals and Plastics
Homes
Housing and Construction Materials
Pharma*
Fibers*
Electronics Materials & Devices*
Construction Materials
Life & Living
Special Products and Services
Electronics
Membranes and Systems
Biotechnology and Medical Products
Speciality Products
Foods and Liquors
Engineering and Others*
Services, Engineering and Others*
Domestic sales
Overseas sales
Operating profit
Ordinary profit
Income (loss) before income taxes
Net income (loss)
Net income (loss) per share (yen)
Capital expenditure
Depreciation and amortization
R&D expenditures
Cash dividends per share (yen)
As of March 31
Total assets
Inventories
Property, plant and equipment
Investments and other assets
Shareholders’ equity
Shareholders’ equity per share (yen)
Shareholders’ equity to total assets (%)
Number of employees
2006
2005**
2004
2003
2003†
¥1,498,620
660,402
–
–
404,539
–
105,842
89,704
102,859
56,512
51,942
–
–
–
–
–
–
–
26,821
1,125,454
373,166
108,726
104,166
94,481
59,668
42.46
66,310
69,399
51,467
10.00
¥1,377,697
570,182
–
–
375,755
–
103,933
91,518
93,024
59,908
59,149
–
–
–
–
–
–
–
24,228
1,067,893
309,804
115,809
112,876
91,141
56,454
40.16
68,479
71,531
50,715
8.00
¥1,253,534
453,707
–
–
361,273
–
105,965
101,514
82,484
60,622
59,813
–
–
–
–
–
–
–
28,156
1,011,366
242,168
60,932
53,643
54,820
27,672
19.62
86,387
64,408
48,420
6.00
¥1,193,614
424,673
–
–
320,553
–
105,463
110,551
71,579
63,101
52,908
–
–
–
–
–
–
–
44,786
981,064
212,550
61,555
50,389
(100,869)
(66,791)
(47.63)
93,985
60,808
49,311
6.00
¥1,193,614
–
477,581
–
–
383,654
105,463
110,551
71,579
–
–
–
–
–
–
–
–
–
44,786
981,064
212,550
61,555
50,389
(100,869)
(66,791)
(47.63)
93,985
60,808
49,311
6.00
2006
2005
2004
2003
2003
¥1,376,044
214,062
414,368
284,390
594,211
424.34
43.2
23,030
¥1,270,057
202,521
419,969
223,958
511,726
365.43
40.3
23,820
¥1,249,206
181,609
428,302
226,825
450,451
321.41
36.1
25,011
¥1,212,374
176,788
427,188
198,697
407,639
290.92
33.6
25,730
¥1,212,374
176,788
427,188
198,697
407,639
290.92
33.6
25,730
* For continuity, figures for business categories which were renamed are shown on the same line.
• Through the year ended March 31, 2003: Figures shown as Pharma are those for the previous Health Care sector, figures shown as Fibers are those for the previous
Fibers and Textiles sector, figures shown as Electronics Materials & Devices are those for the previous Electronics sector, and figures shown as Services, Engineering and
Others are those for the previous Liquors, Services and Others sector.
• With the divestment of foods operations, the “foods and liquors” and “engineering and services” segments are combined as “engineering and others.” Through the
year ended March 31, 1999, figures shown as “engineering and others” are those for the previous “engineering and services” segment.
** For comparison purposes, results for the year ended March 31, 2005 are recalculated to reflect the April 2005 transfer of Leona™ nylon 66 filament operations from the
Fibers segment to the Chemicals segment.
† For comparison purposes, results by business category for the year ended March 31, 2003 are recalculated in accordance with the revised categories for the year ended
March 31, 2004, which are aligned with the core operating companies in the holding company configuration adopted in October 1, 2003.
• The “fabricated home products” segment of the Chemical and Chemical-related sector is separated to an independent Life & Living segment. The remainder of the
Chemical and Chemical-related sector is reclassified as the Chemicals segment.
• The Housing and Construction Materials sector is separated into the Homes segment and the Construction Materials segment.
• The Health Care sector is renamed the Pharma segment.
• The Fibers and Textiles sector is renamed the Fibers segment.
• The Electronics sector is renamed the Electronics Materials & Devices segment.
• With the divestment of liquors operations, the Liquors, Services and Others sector is renamed the Services, Engineering and Others segment.
Annual Report 2006
43
2002
2001‡
2001
2000
1999
1998§
1998
Millions of yen, except where noted
1996
1997
¥1,195,393
–
440,698
–
–
408,474
98,686
125,908
64,062
–
–
–
–
–
–
–
–
–
57,565
1,006,810
188,583
45,664
39,849
10,679
5,180
3.61
74,826
60,676
49,574
6.00
¥1,269,415
–
449,470
–
–
433,440
95,481
134,791
95,999
–
–
–
–
–
–
–
–
–
60,234
1,086,219
183,196
96,024
86,747
50,318
25,177
17.45
69,188
62,222
49,768
6.00
¥1,269,415
–
–
430,934
–
433,440
–
134,791
–
–
–
270,250
96,228
18,307
95,481
–
–
60,234
–
1,086,219
183,196
96,024
86,747
50,318
25,177
17.45
69,188
62,222
49,768
6.00
¥1,194,462
–
–
379,677
–
412,954
–
139,181
–
–
–
262,650
80,653
17,967
93,460
–
–
70,570
–
1,044,630
149,832
74,323
85,853
39,615
20,525
14.23
63,213
63,629
50,015
6.00
¥1,171,845
–
–
375,048
–
372,649
–
148,277
–
–
–
275,871
66,212
18,133
88,050
–
90,068
13,408
–
1,009,439
162,406
51,237
42,443
37,525
17,392
12.06
70,461
63,845
56,844
6.00
¥1,281,675
–
–
400,420
–
425,553
–
181,542
–
–
–
274,160
63,235
20,828
82,703
–
88,478
18,916
–
1,127,590
154,085
62,814
56,271
40,264
20,809
14.43
74,981
67,117
57,023
6.00
¥1,281,675
–
–
373,874
–
424,532
–
181,542
–
–
–
301,727
62,337
–
82,703
33,593
88,478
34,616
–
1,127,590
154,085
62,814
56,271
40,264
20,809
14.43
74,981
67,117
57,023
6.00
¥1,291,599
–
–
363,589
–
451,407
–
184,065
–
–
–
292,538
59,457
–
82,058
29,464
89,014
32,545
–
1,133,811
157,788
72,103
60,686
49,259
25,353
17.57
73,217
70,897
55,591
6.00
¥1,210,170
–
–
354,595
–
392,030
–
177,499
–
–
–
286,046
56,794
–
81,294
28,810
82,742
36,406
–
1,065,670
144,500
56,271
47,604
27,075
9,235
6.40
71,908
74,875
55,306
6.00
2002
2001
2001
2000
1999
1998
1998
1997
1996
¥1,193,011
180,826
415,193
181,618
496,826
353.16
41.6
26,227
¥1,240,008
196,510
419,168
176,177
516,013
357.70
41.6
26,695
¥1,240,008
196,510
419,168
176,177
516,013
357.70
41.6
26,695
¥1,180,372
181,771
416,881
127,013
476,159
330.07
40.3
26,580
¥1,185,249
193,691
435,005
132,251
464,339
321.88
39.2
29,263
¥1,206,872
198,651
424,499
141,388
455,250
315.64
37.7
27,792
¥1,206,872
198,651
424,499
141,388
455,250
315.64
37.7
27,792
¥1,250,921
206,253
424,002
151,804
442,730
306.89
35.4
26,721
¥1,235,054
198,282
426,744
156,984
425,947
295.26
34.5
28,155
‡ For comparison purposes, results by business category for the year ended March 31, 2001 are recalculated in accordance with the revised categories for the year ended
March 31, 2002.
• Operations of the “membranes and systems” segment combine with the Chemicals and Plastics sector to form the Chemical and Chemical-related sector.
• The “electronics” segment is reclassified as the Electronics sector.
• Operations of the “biotechnology and medical products” segment are reclassified as the Health Care sector.
• The remaining operations comprise the Liquors, Services and Others sector, in place of the “engineering and others” segment.
§ For comparison purposes, results by business category for the year ended March 31, 1998 are recalculated in accordance with the revised categories for the year ended
March 31, 1999.
• Photopolymer and explosives operations are transferred from the Special Products and Services sector to the Chemicals and Plastics sector.
• Artificial fish reef operations are transferred from the Special Products and Services sector to the Housing and Construction Materials sector.
• Within the Special Products and Services sector, functional membrane operations are transferred from the “speciality products” segment to the “membranes and
systems” segment, and ion-exchange product operations are transferred from the “engineering and services” segment to the “membranes and systems” segment.
44
Management’s Discussion and Analysis
Fiscal year 2005 (April 1, 2005 – March 31, 2006)
Overview of Fiscal 2005 Consolidated
results
Operating Environment
The Japanese economy showed signs of recovery during the
year, with increased private-sector capital investment and
strong corporate results. The operating environment
nevertheless remained challenging, with petroleum prices
continuing to increase on strong demand growth world-
wide, especially in China, driving up the cost of naphtha
and other petrochemical feedstocks.
Net Sales, Operating Profit
Sales increased in chemicals operations, with strong overseas
demand, and in electronics operations, with strong demand
in IT-related markets. Net sales increased by ¥120.9 billion
to ¥1,498.6 billion, an 8.8% rise.
Operating profit decreased by ¥7.1 billion to ¥108.7
billion, a 6.1% decline. Amortization of actuarial differences
in retirement benefit accounts resulted in a ¥16.2 billion
decrease in operating profitability (a ¥20.2 billion surplus
was amortized during the year-ago term, and a ¥4.0 billion
surplus was amortized during the term under review),
reducing cost of sales by ¥5.5 billion and selling, general
and administrative expenses (SGA) by ¥10.7 billion.
Operating profit excluding this amortization grew by ¥9.1
billion to ¥104.7 billion, a 9.5% increase. As a percentage
of net sales, cost of sales increased by 1.8 percentage points
to 75.2%, largely due to feedstock cost increases and the
above amortization. SGA increased by ¥11.0 billion, but
decreased as a percentage of net sales by 0.7 percentage
points to 17.5% due to the higher rate of growth in net
sales. Operating profit as a percentage of net sales
decreased by 1.1 percentage points to 7.3%.
Non-operating Income and Expenses, Ordinary Profit
Net non-operating expenses were ¥4.6 billion, ¥1.6 billion
higher than the ¥2.9 billion of a year earlier. Net financing
expenses decreased by ¥0.4 billion. Equity in net earnings of
unconsolidated subsidiaries and affiliates was ¥0.5 billion,
¥2.1 billion lower than the ¥2.6 billion of a year earlier, with
declining performance of overseas subsidiaries and affiliates.
As a result, ordinary profit decreased by ¥8.7 billion to
¥104.2 billion, a 7.7% decline.
Special Gains and Losses
Special gains of ¥5.9 billion included a ¥5.7 billion gain on
sale of idle land. Special losses of ¥15.6 billion included a
¥7.0 billion loss on sale disposal of property, plant, and
equipment and a ¥3.8 billion impairment loss on idle land.
The net special loss of ¥9.7 billion was ¥12.1 billion lower
than a year earlier, when significant restructuring charges
were incurred including for closure of overseas subsidiaries.
Net Income
With ordinary profit of ¥104.2 billion and the net special
loss of ¥9.7 billion, income before income taxes and
minority interests was ¥94.5 billion. Current income taxes of
¥39.0 billion and deferred income taxes of ¥4.4 billion
Net Sales
¥ Billion
Operating Profit,
Operating Profit Margin
¥ Billion
%
Net Income,
Net Income per Share
¥ Billion
1,500
1,200
900
600
300
0
’03
’04
Fiscal year
’05
125
100
75
50
25
0
’03
’04
Fiscal year
Operating profit, left scale
’05
Operating profit margin,
right scale
10
8
6
4
2
0
60
48
36
24
12
0
’03
’04
Fiscal year
’05
Net income, left scale
Net income per share,
right scale
¥
45
36
27
18
9
0
Annual Report 2006
45
resulted in a net income tax expense of ¥34.5 billion.
Minority interest in income of consolidated subsidiaries was
¥0.3 billion. As a result, net income increased by ¥3.2 billion
to ¥59.7 billion, a 5.7% rise, and net income per share in-
creased by ¥2.30 to ¥42.46 from the ¥40.16 of a year earlier.
Results by Segment
Operating Segments
Leona™ nylon 66 filament operations were transferred from
the Fibers segment to the Chemicals segment in April 2005.
Results for the year-ago period have been revised
accordingly for comparison purposes.
Within each segment, operating performance of
individual businesses is described absent amortization of
actuarial differences in retirement benefits accounting.
Chemicals
Sales for the segment increased by ¥90.2 billion to ¥660.4
billion, a 15.8% rise. Operating profit increased by ¥2.7
billion to ¥40.5 billion, a 7.1% rise. This included a credit to
amortize the actuarial surplus for retirement benefits which
was ¥4.3 billion smaller than a year ago.
In volume products, sales grew with strong overseas
demand but operating profit decreased due to higher
feedstock costs. Operating profit in monomers and basic
chemicals decreased with elevated feedstock costs for
acrylonitrile and styrene. Operating profit in polymers and
elastomers increased with improved market conditions for
Xyron™ modified polyphenylene ether and other
engineering resins.
Operating profit in specialty products and systems
increased. Sales of Hipore™ Li-ion rechargeable battery
separators continued to grow with strong demand. Sales of
both membrane-process salt electrolysis systems and their
ion-exchange membranes remained strong.
Homes
Sales for the segment increased by ¥28.8 billion to ¥404.5
billion, a 7.7% rise. Operating profit decreased by ¥0.8
billion to ¥28.2 billion, a 2.7% decline. This included a
credit to amortize the actuarial surplus for retirement
benefits which was ¥2.2 billion smaller than a year ago.
Sales of homes, both order-built and pre-built, increased
with higher unit prices and the completion of large
condominium reconstruction projects, but operating profit
decreased with higher costs for materials. The value of
orders received during the year increased by ¥11.5 billion to
¥313.3 billion.
Sales and operating profit in real estate operations grew
with rising income from rentals. Sales and operating profit
in remodeling operations also grew.
Pharma
Sales for the segment increased by ¥1.9 billion to ¥105.8
billion, a 1.8% rise. Operating profit decreased by ¥2.3
billion to ¥11.1 billion, a 17.2% decline. This included a
ROE
%
15
10
5
0
’03
’04
Fiscal year
’05
Chemicals
¥ Billion
¥ Billion
Homes
¥ Billion
¥ Billion
700
560
420
280
140
0
’03
’04*
Fiscal year
’05
45
36
27
18
9
0
500
400
300
200
100
0
’03
’04
Fiscal year
’05
30
24
18
12
6
0
Net sales, left scale
Operating profit, right scale
* Including Leona™ filament operations.
Net sales, left scale
Operating profit, right scale
46
credit to amortize the actuarial surplus for retirement
benefits which was ¥2.1 billion smaller than a year ago.
In pharmaceuticals, sales of Elcitonin™ calcitonin formu-
lation decreased as market share was lost to competing
products, but sales of Flivas™ therapy for benign prostatic
hyperplasia and Toledomin™ antidepressant continued to
grow, and operating profit from pharmaceuticals increased.
Shipments of APS™ artificial kidneys grew both in Japan
and overseas, but elevated capital depreciation following
plant expansions resulted in decreased operating profit for
medical devices.
Fibers
Sales for the segment decreased by ¥1.8 billion to ¥89.7
billion, a 2.0% decline. Operating profit decreased by ¥4.3
billion to ¥4.0 billion a 51.8% decline. This included a credit
to amortize the actuarial surplus for retirement benefits
which was ¥1.3 billion smaller than a year ago.
Operating profit in Roica™ elastic polyurethane filament
decreased with elevated feedstock prices and lower sales
prices due to intensified competition. Operating profit in
Bemberg™ cupro filament, used principally in linings, in-
creased with strong overseas sales.
Sales of Eltas™ spunbond increased in diaper and
hand-warmer applications, but operating profit in
nonwovens decreased with elevated feedstock costs.
billion, a 10.6% rise. Operating profit increased by ¥1.7
billion to ¥19.3 billion, a 9.9% rise. This included a credit to
amortize the actuarial surplus for retirement benefits which
was ¥1.1 billion smaller than a year ago.
Operating profit in electronics devices grew with strong
demand in cell phone, DVD recorder, and other home elec-
tronics applications. Operating profit in electronics materials
grew with increased sales of Sunfort™ dry film resist for
printed wiring board production following an expansion of
capacity in China.
Construction Materials
Sales for the segment decreased by ¥3.4 billion to ¥56.5
billion, a 5.7% decline. Operating profit increased by ¥1.2
billion to ¥3.8 billion, a 48.6% rise. This included a credit to
amortize the actuarial surplus for retirement benefits which
was ¥1.5 billion smaller than a year ago.
Operating profit in building materials and housing materials
increased with operating cost reductions and growing sales
of Hebel™ autoclaved lightweight concrete (ALC) panels in
large retail outlets, factories, and apartment buildings, and
with operating cost reductions and growing sales of Hebel
Powerboard™ ALC panels in new market segments.
Sales of pre-cast concrete piles decreased, but operating
profit in foundation systems increased with growing sales
of Eazet™ and ATT Column™ piles for small-scale
construction.
Electronics Materials & Devices
Sales for the segment increased by ¥9.8 billion to ¥102.9
Operating profit in insulation materials decreased with
elevated feedstock costs and lower demand for Neoma™
Pharma
¥ Billion
¥ Billion
Fibers
¥ Billion
150
120
90
60
30
0
’03
’04
Fiscal year
’05
15
12
9
6
3
0
150
120
90
60
30
0
¥ Billion
10
8
6
4
2
0
’03
’04*
Fiscal year
’05
Electronics Materials & Devices
¥ Billion
¥ Billion
Construction Materials
¥ Billion
¥ Billion
150
120
90
60
30
0
’03
’04
Fiscal year
’05
20
16
12
8
4
0
90
60
30
0
(30)
(60)
’03
’04
Fiscal year
’05
6
4
2
0
(2)
(4)
Net sales, left scale
Operating profit, right scale
Net sales, left scale
Operating profit, right scale
* Not including Leona™ filament
operations.
Net sales, left scale
Operating profit, right scale
Net sales, left scale
Operating profit, right scale
Annual Report 2006
47
high-performance foam insulation panels due to a down-
turn in wood-frame home construction.
Life & Living
Sales for the segment decreased by ¥7.2 billion to ¥51.9
billion, a 12.2% decline, largely due to the transfer of biax-
ially oriented polystyrene sheet operations to a joint venture
with Dainippon Ink and Chemicals, Inc. Operating profit
decreased by ¥1.2 billion to ¥4.8 billion, a 20.5% decline.
This included a credit to amortize the actuarial surplus for
retirement benefits which was ¥0.6 billion smaller than a
year ago.
Feedstock costs rose, but operating profit in home-use
products increased with higher sales of Saran Wrap™ cling
film and increased exports of Saran™ fiber.
Sales prices for packaging and cushioning materials
continued to rise, but operating profit decreased due to
still higher feedstock costs.
Services, Engineering and Others
Sales for the segment increased by ¥2.6 billion to ¥26.8
billion, a 10.7% rise. Operating profit decreased by ¥0.3
billion to ¥3.3 billion, a 7.9% decline, largely as a result of
the exclusion of Asahi Kasei Information Systems as a
consolidated subsidiary with the April 2005 divestment of
a majority of its shares to TIS Inc.
Sales and operating profit in engineering operations
increased with growing business in domestic plant
construction.
Sales and operating profit in personnel staffing and
placement operations increased with growing business
in staffing and an expanded sales network.
Geographical Information
Geographic segment information is not shown because over
90% of total sales were from operations domiciled in Japan
and over 90% of total assets were located in Japan.
Overseas Sales
Overseas sales increased, largely in Chemicals, by ¥63.4
billion to ¥373.2 billion, a 20.5% increase and a 2.4
percentage points increase to 24.9% of consolidated
net sales.
Liquidity and Capital Resources
Financial Position
Total assets at fiscal year end were ¥1,376.0 billion, ¥106.0
billion (8.3%) higher than a year earlier.
Current assets increased by ¥54.5 billion (9.2%) to
¥644.2 billion. Notes and accounts receivable increased by
¥17.3 billion and inventories increased by ¥11.5 billion with
higher selling prices and greater sales in the Chemicals
segment. Cash on-hand and in banks increased by ¥18.1
billion.
Fixed assets increased by ¥51.5 billion (7.6%) to ¥731.9
billion. Investment securities increased by ¥58.7 billion with
Life & Living
¥ Billion
¥ Billion
Services, Engineering
and Others
¥ Billion
¥ Billion
80
60
40
20
0
’03
’04
Fiscal year
’05
8
6
4
2
0
40
30
20
10
0
4
3
2
1
0
’03
’04
Fiscal year
’05
Net sales, left scale
Operating profit, right scale
Net sales, left scale
Operating profit, right scale
48
increased fair value of shares held. Tangible fixed assets
decreased by ¥5.6 billion and intangible fixed assets
decreased by ¥3.3 billion as the value of depreciation and
disposals exceeded the value of asset acquisitions. Notable
capital expenditure included capacity expansions for
Hipore™ microporous membrane and APS™ polysulfone-
membrane hemodialyzers.
Current liabilities increased by ¥36.7 billion (9.1%) to
¥439.7 billion. Short-term borrowings increased by ¥24.9
billion, and accrued expenses increased by ¥11.5 billion.
Long-term liabilities decreased by ¥13.8 billion (3.9%) to
¥335.2 billion. Bonds decreased by ¥23.0 billion, and long-
term debt decreased by ¥6.9 billion. Deferred income tax
liabilities increased by ¥18.8 billion.
Interest-bearing debt decreased by ¥13.0 billion to ¥235.8
billion, with ¥31.0 billion of bonds redemption.
Shareholders’ equity increased by ¥82.5 billion (16.1%) to
¥594.2 billion. Retained earnings increased by ¥46.9 billion
with net income of ¥59.7 billion, while net unrealized gain
on securities increased by ¥30.7 billion. Shareholders’ equity
per share increased by ¥58.91 to ¥424.34. Shareholders’
equity/total assets increased from 40.3% to 43.2%, and
debt-to-equity ratio decreased from 0. 49 to 0.40.
Capital Expenditure
Capital expenditure was primarily for new and expanded
production plant and equipment in long-term growth fields.
Investments were also made for rationalization, modification,
maintenance, and IT systems to bring greater product
reliability and cost reductions. Capital expenditure by
operating segment shown below is for tangible and
intangible fixed assets, combined, before consumption tax.
For comparison purposes, the previous year’s segment
figures have been revised to reflect the April 2005 transfer
of Leona™ nylon 66 filament operations from Fibers to
Chemicals.
Totals for the year
(¥ Million)
Compared to
previous year
Chemicals
Homes
Pharma
Fibers
Electronics Materials & Devices
Construction Materials
Life & Living
Services, Engineering and Others
Combined
Corporate assets and eliminations
Consolidated
26,632
3,583
4,897
5,417
14,960
2,313
4,655
1,038
63,495
2,815
66,310
106.2 %
103.9 %
59.3 %
109.9 %
91.0 %
104.7 %
107.5 %
72.9 %
96.0 %
119.6 %
96.8 %
Notable capital expenditure by operating segment was as follows:
• Chemicals: New facility for propylene production.
• Homes: IT systems.
• Pharma: Capacity expansion for APS™ polysulfone-membrane
hemodialyzers.
• Fibers: Capacity expansion for Bemliese™ nonwoven cellulose
filament; IT systems.
• Electronics Materials & Devices: Capacity expansion for large pellicles.
• Construction Materials: Plant modification, rationalization, and
maintenance.
• Life & Living: Plant modification, rationalization, and maintenance.
• Services, Engineering and Others: IT systems, rationalization, labor-
saving, and maintenance.
• Corporate assets: Corporate research facilities; maintenance.
Total Assets and Total
Shareholders’ Equity
¥ Billion
1,500
Interest-Bearing Debt,
D/E Ratio
¥ Billion
400
1,200
900
600
300
0
’03
’05
’04
Fiscal year
Total assets, left scale
Total shareholders’ equity, right scale
300
200
100
0
’03
’04
Fiscal year
’05
Interest-bearing debt,
left scale
D/E ratio, right scale
1.00
0.75
0.50
0.25
0.00
Annual Report 2006
49
Cash Flows
Free cash flows were ¥48.2 billion as cash generated,
principally operating profit and depreciation and amor-
tization, exceeded cash used, principally for acquisition of
fixed assets and investment securities. Cash flows from
financing activities, principally for reduction of interest-
bearing debt and payment of dividends, were a net ¥30.9
billion net cash used. After including ¥0.1 billion cash and
cash equivalents held by newly consolidated subsidiaries,
cash and cash equivalents at fiscal year end were ¥86.4
billion, ¥17.9 billion greater than a year earlier.
fixed assets. Cash generated from sales of idle land and
other property, plant and equipment aggregated ¥8.8
billion. Net cash used in investing activities was ¥60.4
billion, ¥2.5 billion less than a year earlier.
Cash flows from financing activities
A net ¥17.6 billion was used for interest-bearing debt such
as borrowings and bonds. A further ¥12.6 billion was used
for payment of parent-company dividends. A net ¥30.9
billion was used in financing activities, ¥8.7 billion less than
a year earlier.
Cash flows from operating activities
Greater sales and higher selling prices resulted in increases
in notes and accounts receivable, trade, and in inventories,
aggregating ¥27.5 billion cash used, while ¥29.1 billion was
used for payment of income taxes. Income before income
taxes and minority interest generated ¥94.5 billion, and
depreciation and amortization generated ¥69.4 billion. Net
cash generated from operating activities was ¥108.6 billion,
¥10.3 billion more than a year earlier.
Cash flows from investing activities
Cash used included ¥59.1 billion for acquisition of tangible
fixed assets for continuing expansion of competitive-
superiority operations and enhancement of overall
competitiveness and ¥7.3 billion for acquisition of intangible
Capital Expenditure,
Depreciation and
Amortization
¥ Billion
Cash Flows
¥ Billion
100
80
60
40
20
0
’03
’04
Fiscal year
’05
150
100
50
0
(50)
(100)
’03
’04
Fiscal year
’05
Capital expenditure
Depreciation and
amortization
Net cash provided by
operating activities
Net cash used in
investing activities
Net cash used in
financing activities
50
Risk Analysis
Operating risks and non-operating risks which may
influence investor decisions are described below. The
management maintains awareness of the possibility that
these scenarios may emerge, and measures to avoid their
emergence and to minimize their impact on corporate
performance in the event that they do emerge are
implemented to the fullest possible extent.
The description of risks given here includes elements
which may emerge in the future, but being based on
current evaluations as this report is being prepared it does
not include risks which could not be foreseen at this time.
Crude Oil and Naphtha Prices
Operating costs in operations based on petrochemicals are
affected by prices for crude oil and naphtha. If crude oil
and naphtha prices rise, selling prices for products derived
from these feedstocks must be increased in a timely manner
to maintain sufficient price spreads. Price spreads may
diminish, thereby affecting our consolidated performance
and financial condition.
Exchange Rate Fluctuation
Operations based overseas maintain accounts in the local
currency where they operate. The yen value of items carried
in these accounts is affected by the rate of exchange at the
time of conversion to yen. Although measures such as
currency exchange hedges are utilized to minimize the
short-term effects of exchange rate fluctuations, such
fluctuations may exceed the foreseeable range over the
short to long term, thereby affecting our consolidated
performance and financial condition.
Overseas Operations
Overseas operations may face a variety of risks which
cannot be foreseen, including the existence or emergence
of economically unfavorable circumstances due to legal and
regulatory changes, vulnerability of infrastructure, difficulty
in hiring/retaining qualified employees, or other factors, and
social or political instability due to terrorism, war, or other
factors. Overseas operations may be impaired by such
scenarios, thereby affecting our consolidated performance
and business plans.
Housing-Related Tax Policy, Interest Rate Fluctuation
Operations in the Homes segment are affected by Japanese
tax policies as they relate to home acquisition and by
fluctuations in Japanese interest rates. Changes in Japanese
tax policy, including consumption taxes, or fluctuations in
Japanese interest rates may result in diminished housing
demand, thereby affecting our consolidated performance
and financial condition.
Profitability of Electronics-Related Businesses
The electronics industry is characterized by sharp market
cycles. The profitability of electronics-related businesses
may decline significantly in a relatively short time, thereby
affecting our consolidated performance and financial
condition. Because products in this field rapidly become
obsolete, the timely development and commercialization of
leading-edge devices and materials is required. New product
development may be delayed, or demand fluctuations may
exceed expectations, thereby affecting our consolidated
performance and financial condition.
Pharmaceuticals and Medical Devices
Pharmaceutical and medical device businesses may be
significantly affected by government measures to curtail
health care expenditure or other changes in government
policy. Unforeseeable side effects or complications may
emerge, significantly affecting these businesses. The
pharmaceutical business additionally faces the possibility
that product approval may be withdrawn as a result of
Japan’s reexamination system, and that competition may
intensify as a result of the market entry of generics. For
pharmaceuticals and medical devices under development,
regulatory approval may fail to be obtained, market demand
may be lower than expected, and the national
reimbursement prices may be lower than expected. Such
scenarios may affect our consolidated performance and
financial condition.
Industrial Accidents and Natural Disasters
The occurrence of a significant industrial accident or natural
disaster at a plant or elsewhere may result in a loss of public
trust, the emergence of costs associated with accident
Annual Report 2006
51
response, including compensation, and the emergence of
costs associated with plant shutdown, including opportunity
loss and compensation to customers, thereby affecting our
consolidated performance and financial condition.
Intellectual Property, Product Liability, and Legal
Regulation
An unfavorable ruling may emerge in a dispute relating to
intellectual property, a product defect resulting in a large-
scale recall and compensation whose costs exceed insurance
coverage may emerge, and detrimental legal and regulatory
changes may emerge in any country where we operate.
Such scenarios may affect our consolidated performance
and financial condition.
Irrecoverable Credits
Credits extended to customers may become irrecoverable to
an unforeseeable extent, necessitating additional losses or
allowances to be recorded in financial accounts, and
thereby affecting our consolidated performance and
financial condition.
52
Consolidated Balance Sheets
Asahi Kasei Corporation and Consolidated Subsidiaries
March 31, 2006 and 2005
Millions of yen
2006
2005
Thousands of
U.S. dollars
(Note 3)
2006
¥
86,422
¥
68,279
$
738,650
269,509
252,210
446
307
214,062
202,521
29,385
45,828
(1,460)
25,670
42,209
(1,477)
2,303,496
3,812
1,829,590
251,154
391,692
(12,479)
644,192
589,719
5,505,915
155,630
170,364
55,240
18,108
15,026
155,667
174,754
59,912
14,601
15,035
1,330,171
1,456,103
472,137
154,769
128,427
414,368
419,969
3,541,607
5,700
27,394
33,094
5,974
30,437
36,411
48,718
234,137
282,855
248,616
189,894
2,124,923
3,043
8,915
24,680
(864)
2,992
10,452
22,643
(2,023)
26,008
76,197
210,940
(7,385)
284,390
223,958
2,430,683
731,852
680,338
6,255,145
¥1,376,044
¥1,270,057
$11,761,060
ASSETS
Current assets:
Cash on hand and in banks (Note 5)
Notes and accounts receivable, trade (Note 6)
Marketable securities (Notes 5 and 7)
Inventories
Deferred income taxes (Note 11)
Other current assets (Note 6)
Allowance for doubtful accounts
Total current assets
Fixed assets:
Property, plant and equipment, net of
accumulated depreciation (Notes 8 and 9) –
Buildings
Machinery and equipment
Land
Construction in progress
Other
Intangible fixed assets –
Goodwill
Other
Investments and other assets –
Investment securities (Notes 6 and 7)
Long-term receivables (Note 6)
Deferred income taxes (Note 11)
Other
Allowance for doubtful accounts
Total fixed assets
Total assets
The accompanying notes are an integral part of these statements.
The accompanying notes are an integral part of these statements.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Current liabilities –
Notes and accounts payable, trade (Note 6)
Short-term borrowings (Notes 6 and 9)
Current portion of long-term debt (Note 9)
Accrued income taxes
Deferred income taxes (Note 11)
Accrued expenses (Note 6)
Advances received
Other current liabilities
Total current liabilities
Long-term liabilities –
Long-term debt (Note 9)
Accrued pension and severance costs (Note 10)
Deferred income taxes (Note 11)
Customers’ guarantee deposits
Other long-term liabilities
Total long-term liabilities
Annual Report 2006
53
Millions of yen
2006
2005
Thousands of
U.S. dollars
(Note 3)
2006
¥ 132,980
¥ 133,918
$ 1,136,581
46,380
32,842
19,511
–
110,231
48,877
48,902
439,723
156,300
132,433
27,781
18,306
373
27,369
34,991
10,405
0
98,759
50,053
47,527
396,410
280,701
166,761
–
942,145
417,752
417,966
403,022
3,758,316
186,246
135,565
8,964
17,806
376
1,335,898
1,131,906
237,444
156,462
3,188
335,193
348,957
2,864,898
Minority interest in consolidated subsidiaries
6,917
6,352
59,120
Shareholders’ equity:
Common stock –
Authorized – 4,000,000,000 shares
Issued and outstanding – 1,442,616,332 shares
Capital surplus
Retained earnings (Note 19)
Revaluation surplus (Note 12)
Net unrealized gain on securities (Note11)
Cumulative translation adjustments
Treasury stock, at cost
103,389
79,433
342,450
966
85,383
(99)
103,389
79,423
295,594
966
54,703
(5,380)
883,667
678,915
2,926,923
8,256
729,769
(846)
611,522
528,695
5,226,684
(2006 – 42,799,834 shares, 2005 – 42,260,226 shares)
Total shareholders’ equity
(17,311)
594,211
(16,969)
511,726
(147,958)
5,078,726
Commitments and contingent liabilities (Notes 17 and 20)
Total liabilities and shareholders’ equity
¥1,376,044
¥1,270,057
$11,761,060
The accompanying notes are an integral part of these statements.
54
Consolidated Statements of Income
Asahi Kasei Corporation and Consolidated Subsidiaries
Years ended March 31, 2006 and 2005
Net sales (Notes 6 and 18)
Cost of sales (Notes 6 and 13)
Gross profit
Selling, general and administrative expenses (Note 13)
Operating profit (Note 18)
Non-operating income:
Interest and dividend income
Equity in net earnings of unconsolidated subsidiaries and affiliates
Insurance recoveries
Other
Total non-operating income
Non-operating expenses:
Interest expense
Loss due to disasters
Loss on disposal of inventories
Other
Total non-operating expenses
Ordinary profit
Special gains:
Gain on sales of investment securities
Gain on sale of property, plant and equipment
Reversal of allowance for doubtful account
Total special gains
Special losses:
Loss on sales of investment securities
Loss on devaluation of investment securities
Loss on disposal of property, plant and equipment
Impairment loss (Note 14)
Litigation settlement (Note 15)
Restructuring charges (Note 16)
Total special losses
Income before income taxes and minority interest
Income taxes (Note 11) – current
– deferred
Minority interest in income of consolidated subsidiaries
Millions of yen
2006
2005
Thousands of
U.S. dollars
(Note 3)
2006
¥1,498,620
¥1,377,697
$12,808,718
1,127,530
1,010,526
371,090
262,364
108,726
2,653
536
1,292
2,935
7,416
3,570
1,285
2,703
4,418
11,976
104,166
–
5,670
210
5,880
854
703
7,038
3,799
–
3,171
15,565
94,481
(38,963)
4,417
(267)
367,171
251,362
115,809
2,286
2,617
2,381
3,323
10,607
3,648
1,393
3,324
5,175
13,540
112,876
3,373
1,016
411
4,800
–
429
8,568
–
2,617
14,921
26,535
91,141
(29,245)
(4,760)
(682)
9,637,009
3,171,709
2,242,427
929,282
22,675
4,581
11,043
25,086
63,385
30,513
10,983
23,102
37,761
102,359
890,308
–
48,461
1,795
50,256
7,299
6,008
60,154
32,470
–
27,103
133,034
807,530
(333,017)
37,752
(2,282)
Net income
¥
59,668
¥
56,454
$
509,983
Per share data:
Net income (Note 21) – Basic
– Diluted
Cash dividends
The accompanying notes are an integral part of these statements.
2006
42.46
–
10.00
¥
¥
¥
Yen
2005
40.16
–
8.00
¥
¥
¥
U.S. dollars
(Note 3)
2006
$
$
$
0.36
–
0.09
Consolidated Statements of Shareholders’ Equity
Asahi Kasei Corporation and Consolidated Subsidiaries
Years ended March 31, 2006 and 2005
Millions of yen
Annual Report 2006
55
Common
stock
¥103,389
Capital
surplus
¥79,396
27
Net
Retained Revaluation unrealized
gain on
earnings
securities
(Note 19)
surplus
(Note 12)
Cumulative
translation
adjustments
Treasury
stock,
at cost
¥249,820
¥1,066
¥43,413
¥(9,973)
¥(16,660)
Balance at March 31, 2004
Gain on sales of treasury stock
Net income for the year ended
March 31, 2005
Decrease in retained earnings due to
newly consolidated subsidiaries and affiliates,
or subsidiaries and affiliates excluded
from consolidation
Net change in revaluation surplus
Net change in unrealized gain on securities
Foreign currency translation adjustments
Purchase of treasury stock
Cash dividends
Bonuses to directors and corporate auditors
Balance at March 31, 2005
Gain on sales of treasury stock
Net income for the year ended
March 31, 2006
¥103,389
¥79,423
10
Decrease in retained earnings due to
newly consolidated subsidiaries and affiliates,
or subsidiaries and affiliates excluded
from consolidation
Net change in revaluation surplus
Net change in unrealized gain on securities
Foreign currency translation adjustments
Purchase of treasury stock
Cash dividends
Bonuses to directors and corporate auditors
Balance at March 31, 2006
¥103,389
¥79,433
56,454
(692)
(9,806)
(182)
¥295,594
59,668
(11)
(12,602)
(199)
¥342,450
(100)
11,290
4,593
(309)
¥ 966
¥54,703
¥(5,380)
¥(16,969)
30,680
5,281
(342)
¥ 966
¥85,383
¥
(99)
¥(17,311)
Total
¥450,451
27
56,454
(692)
(100)
11,290
4,593
(309)
(9,806)
(182)
¥511,726
10
59,668
(11)
30,680
5,281
(342)
(12,602)
(199)
¥594,211
Common
stock
Capital
surplus
Net
Retained Revaluation unrealized
gain on
earnings
securities
(Note 18)
surplus
(Note 12)
Cumulative
translation
adjustments
Treasury
stock,
at cost
Total
$883,667 $678,829 $2,526,444
$8,256 $467,547
86
$(45,983) $(145,034) $4,373,726
86
Thousands of U.S. dollars (Note 3)
509,983
(94)
262,222
509,983
(94)
45,137
262,222
45,137
(2,924)
(107,709)
(1,701)
(846) $(147,958) $5,078,726
(2,924)
(107,709)
(1,701)
$883,667 $678,915 $2,926,923
$8,256 $729,769
$
Balance at March 31, 2005
Gain on sales of treasury stock
Net income for the year ended
March 31, 2006
Decrease in retained earnings due to
newly consolidated subsidiaries and affiliates,
or subsidiaries and affiliates excluded
from consolidation
Net change in revaluation surplus
Net change in unrealized gain on securities
Foreign currency translation adjustments
Purchase of treasury stock
Cash dividends
Bonuses to directors and corporate auditors
Balance at March 31, 2006
The accompanying notes are an integral part of these statements.
56
Consolidated Statements of Cash Flows
Asahi Kasei Corporation and Consolidated Subsidiaries
Years ended March 31, 2006 and 2005
Cash flows from operating activities:
Income before income taxes and minority interest
Depreciation and amortization
Impairment loss
Amortization of goodwill
Decrease in accrued pension and severance costs
Interest and dividend income
Interest expense
Equity in net earnings of unconsolidated subsidiaries and affiliates
Gain on sales of investment securities
Loss on sales of investment securities
Loss on devaluation of investment securities
Gain on sale of property, plant and equipment
Loss on disposal of property, plant and equipment
Litigation settlement
Increase in notes and accounts receivable, trade
Increase in inventories
(Decrease) Increase in notes and accounts payable, trade
Increase in accrued expenses
(Decrease) Increase in advances received
Other
Sub total
Interest and dividend income, received
Interest expense, paid
Litigation settlement, paid
Income taxes, paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of time deposits
Proceeds from maturities of time deposits
Payments for purchases of marketable securities
Proceeds from sales of marketable securities
Payments for acquisition of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for acquisition of intangible fixed assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Proceeds from sales of consolidated subsidiaries
Payments for loan receivables
Collections of loan receivables
Other
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from short-term borrowings
Repayment of short-term borrowings
Proceeds from issuance of commercial papers
Repayment of commercial papers
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from issuance of bonds
Repayment of bonds
Payments for purchases of treasury stock
Proceeds from sale of treasury stock
Dividends paid by parent company
Dividends paid to minority interests in consolidated subsidiaries
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents held by newly consolidated subsidiaries
Cash and cash equivalents at end of year (Note 5)
The accompanying notes are an integral part of these statements.
Millions of yen
2006
2005
¥ 94,481
69,399
3,799
259
(3,127)
(2,653)
3,570
(536)
–
854
703
(5,670)
7,038
–
(16,393)
(11,075)
(2,075)
11,532
(1,192)
(11,695)
137,219
4,110
(3,656)
–
(29,053)
108,620
(498)
125
–
30
(59,074)
8,824
(7,341)
(6,848)
1,099
1,962
(5,293)
7,600
(959)
(60,373)
25,019
(7,923)
–
–
2,903
(6,584)
–
(31,000)
(378)
33
(12,592)
(355)
(4)
(30,881)
¥ 91,141
71,531
–
248
(23,365)
(2,286)
3,648
(2,617)
(3,373)
–
429
(1,016)
8,568
2,617
(15,117)
(20,317)
13,037
18,488
222
2,266
144,104
3,413
(3,897)
(2,617)
(42,704)
98,299
(669)
718
(0)
20
(72,408)
8,733
(6,262)
(1,889)
8,440
–
(2,056)
4,354
(1,827)
(62,846)
8,715
(13,171)
5,000
(5,000)
1,265
(2,895)
2,000
(25,104)
(414)
129
(9,800)
(268)
(14)
(39,557)
Thousands of
U.S. dollars
(Note 3)
2006
$ 807,530
593,154
32,470
2,214
(26,727)
(22,675)
30,513
(4,581)
–
7,299
6,008
(48,461)
60,154
–
(140,111)
(94,658)
(17,735)
98,564
(10,188)
(99,958)
1,172,812
35,128
(31,248)
–
(248,316)
928,376
(4,256)
1,068
–
256
(504,906)
75,419
(62,744)
(58,530)
9,393
16,769
(45,239)
64,957
(8,196)
(516,009)
213,838
(67,718)
–
–
24,812
(56,274)
–
(264,957)
(3,231)
282
(107,624)
(3,034)
(34)
(263,940)
426
17,792
68,456
142
¥ 86,390
122
(3,982)
70,898
1,540
¥ 68,456
3,641
152,068
585,094
1,214
$ 738,376
Notes to Consolidated Financial Statements
Asahi Kasei Corporation and Consolidated Subsidiaries
March 31, 2005 and 2004
1. Major policies for preparing the consolidated financial statements
Annual Report 2006
57
The consolidated financial statements, which are filed with the
Japanese Ministry of Finance (hereinafter called the “MOF”) as
required by the Securities and Exchange Law in Japan, are
prepared in accordance with accounting principles generally
accepted in Japan, which are different in certain respects from
the application and disclosure requirements of International
Financial Reporting Standards. The accompanying consolidated
financial statements are a translation of those filed with the
MOF and incorporate certain modifications to enhance foreign
readers’ understanding of the financial statements. In addition,
the notes to the consolidated financial statements include
certain financial information which is not required under the
disclosure regulations in Japan, but is presented herein as
additional information. In addition, certain reclassifications of
previously reported amounts have been made to conform to
current classifications. Such modifications or reclassifications
have no effect on net income or retained earnings.
Consolidation and investments in affiliated companies –
The consolidated financial statements consist of the account
of parent company and 105 subsidiaries (106 subsidiaries at
March 31, 2005) (hereinafter collectively referred to as the
“Company”) which, with minor exceptions due to materiality,
are all majority and wholly owned companies, including 7 Core
operating companies (Asahi Kasei Chemicals Corporation, Asahi
Kasei Homes Corporation, Asahi Kasei Pharma Corporation,
Asahi Kasei Fibers Corporation, Asahi Kasei EMD Corporation,
Asahi Kasei Construction Materials Corporation, and Asahi
Kasei Life & Living Corporation), Tong Suh Petrochemical
Corp. Ltd. (Korea), Sanyo Petrochemical Co., Ltd., Asahi Kasei
2. Significant accounting policies
(a) Cash and cash equivalents
For cash flow statement purposes, cash and cash equivalents
include all highly liquid investments, generally with original
maturities of three months or less, which are readily convertible
to known amounts of cash and are so near maturity that they
present an insignificant risk of changes in value due to changes
in interest rates.
(b) Inventories
Inventories are principally stated at the lower of average cost or
market value. Residential lots and dwellings under construction
are stated at specifically identified costs.
(c) Fixed assets and depreciation / amortization
Property, plant and equipment are stated at cost. Significant
renewals and improvements are capitalized at cost, while
maintenance and repairs are charged to income as incurred.
Depreciation is provided for under the declining-balance
method for property, plant and equipment, except for buildings
which are depreciated using the straight-line method, at rates
based on estimated useful lives of the assets, principally ranging
Microsystems Co., Ltd. and Asahi Kasei Medical Co., Ltd. All
significant inter-company transactions and accounts have been
eliminated.
Investments in unconsolidated subsidiaries and 20% to 50%
owned companies in which the Company exercises significant
influence are accounted for, with minor exceptions due to
materiality, using the equity method of accounting. There were
55 such unconsolidated subsidiaries and 20% to 50% owned
companies to which the equity method is applied at March 31,
2006 (53 at March 31, 2005), including Asahi Kasei Metals
Ltd., Asahi Kasei Finechem Co., Ltd. and Asahi Organic
Chemicals Industry Co., Ltd.
Certain subsidiaries results are reported in the consolidated
financial statements using a December 31, or a February 28
year-end. Material differences in inter-company transactions
and accounts arising from the use of different fiscal year-ends
are appropriately adjusted for through consolidation
procedures.
The excess of the cost over the underlying net equity of
investments in subsidiaries and affiliated companies accounted
for using the equity method of accounting is allocated to
identifiable assets and liabilities based on fair values at the date
of acquisition. The unassigned residual value of the excess of
the cost over the underlying net equity is recognized as
goodwill. The Company amortizes goodwill using the straight-
line method over the estimated period of benefit over a five or
twenty-year period, with the exception of minor amounts,
which are charged to income in the year of acquisition.
from five to sixty years for buildings and from four to twenty-
two years for machinery and equipment.
Intangible fixed assets including software for internal use are
amortized using the straight-line method over the estimated
useful life of the asset. The estimated useful life of software
for internal use is five years.
(Accounting for impairment of fixed assets)
On August 9, 2002, the Business Accounting Council in Japan
issued “Accounting Standards for Impairment of Fixed Assets.”
The standard requires that fixed assets should be reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable. An impairment loss is recognized in the income
statement by reducing the carrying amount of impaired assets
or a group of assets to the recoverable amount to be measured
as the higher of the net selling price or value in use. The stan-
dard became effective for the fiscal year ended March 31,
2006. The Company adopted this new standard in the fiscal
year ended March 31, 2006, this had the effect of decreasing
58
income before income taxes and minority interests by ¥3,799
million (US$32,470 thousand). Accumulated impairment losses
on fixed assets are deducted directly from the corresponding
assets in the consolidated balance sheets.
(d) Accrued pension and severance costs
Accrued pension and severance costs at March 31, 2006 and
2005 represent the estimated present value of projected
benefit obligations in excess of the fair value of the plan assets.
Unrecognized prior service costs are being amortized on a
straight-line basis primarily over ten years. Unrecognized
actuarial gains / losses are being fully recognized in the year
following that in which they arise.
(Change in method of amortization of unrecognized actuarial
gains / losses)
The parent company and certain Japanese subsidiaries have
been fully amortizing unrecognized actuarial gains / losses in
the year following that in which they arose. Beginning with the
fiscal year ended March 31, 2006, actuarial gains / losses which
arise each year are amortized on a straight-line basis over the
following ten years.
This change was adopted due to the following reasons.
(1) Stock markets, both in Japan and overseas, have fluctuated
more widely than was foreseen when the policy of one-year
amortization was adopted, bringing large actuarial gains / losses
on pension fund investments each fiscal year. As a result, year-
to-year fluctuations in operating profit, ordinary profit, and net
income have largely been attributable to amortization of the
previous year’s large unrecognized actuarial gains / losses as an
operating expense.
(2) This situation is undesirable in terms of clarity of disclosure,
as levels of profit have not always directly represented trends
and evaluations of business performance.
(3) Adoption of a method where unrecognized actuarial gains /
losses were amortized over a longer term will enable gains on
pension fund investments from stock market rises in some years
to offset losses from stock market declines in other years. In
consideration of the gains / losses on pension fund investments
in recent years, the economic circumstance is more suitable to
the conventional approach of stable, long-term amortization of
actuarial gains / losses.
As the full amount of the actuarial gain which occurred in
the fiscal year ended March 31, 2005 was amortized in one
year in accordance with the previously adopted policy, this
change will not affect profits for the fiscal year ended March
31, 2006. Because the ¥23,604 million (US$201,744 thousand)
actuarial gain occurring in the year ended March 31, 2006 will
be amortized on a straight-line basis over the following ten
years, net pension and severance costs will be ¥21,244 million
(US$181,573 thousand) higher, ordinary profit will be ¥19,639
million (US$167,855 thousand) lower, and income before
income taxes and minority interests will be ¥19,639 million
(US$167,855 thousand) lower in the year ended March 31,
2007 than if one-year amortization were continued. The effect
by industry segment is shown in Note 18.
Provision is made for lump-sum indemnities to directors and
corporate auditors equal to the estimated liability calculated
under the internal rules of the Company.
(e) Financial instruments
i) Securities
Securities are classified into four categories; trading securities,
held-to-maturity debt securities, equity securities of unconsoli-
dated subsidiaries and affiliates, and other securities. At
March 31, 2006 and 2005, the Company did not have trading
securities or held-to-maturity debt securities.
Equity securities of unconsolidated subsidiaries and
affiliates are accounted for, with minor exceptions due to
materiality, using the equity method of accounting.
Other securities, whose fair values are readily determinable,
are carried at fair value with net unrealized gains or losses
included as a component of shareholders’ equity, net of
related taxes. Other securities not practicable to fair value are
stated at cost. In cases where any significant decline in the
realizable value is assessed to be other than temporary, the
cost of other securities is devalued by the impaired amount
and is charged to income.
Realized gains and losses are determined using the average
cost method and are reflected in the income statement.
ii) Derivative financial instruments
All derivatives are stated at fair value. Gains or losses arising
from changes in fair value are charged or credited to income
for the period in which they arise, except for derivatives that
are designated as hedging instruments. Gains or losses arising
from changes in fair value of the derivatives designated as
hedging instruments are deferred as assets or liabilities to be
off-set against gains or losses on the underlying hedged
assets and liabilities.
(f) Taxes
Accrued income taxes are stated at the estimated amount
payable for corporation, enterprise, and inhabitant taxes. The
asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences
of temporary differences between the carrying amounts and
the tax bases of assets and liabilities.
The Company applied to file its return under the consolidated
tax filing system.
(g) Leases
Under Japanese accounting practices, financing leases must be
capitalized by the lessee except for those leases that do not
transfer ownership of the leased asset to the lessee as part
of the lease. Such exceptions can be accounted for either as
financing leases or operating leases with an appropriate foot-
note disclosure. Periodic lease charges for financing leases
entered into by the parent company and its Japanese sub-
sidiaries, where lessors retain the ownership of the leased
assets, are charged to income as incurred.
(h) Translation of foreign currencies
Foreign currency receivables and payables are translated into
Japanese yen at the exchange rates prevailing at the balance
sheet date. Resulting gains and losses are charged or credited
to income for the period.
Assets, liabilities, income and expenses of foreign subsidiaries
and 20% to 50% owned companies accounted for using the
equity method of accounting are translated into Japanese yen
3. United States dollar amounts
The U.S. dollar amounts presented in the financial statements
are included solely for the convenience of readers. 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. As the amounts shown in
U.S. dollars are for convenience only, and are not intended to
4. Derivative financial instruments
The Company operates internationally, giving rise to exposure
to market risks from fluctuations in foreign currency exchange
and interest rates. In the normal course of its risk management
efforts, the Company uses a variety of derivative financial in-
struments, which are comprised of foreign currency forward
exchange contracts, interest rate swap agreements and currency
swap agreements, to reduce its exposures. In accordance with
the Company’s policy, these financial instruments are utilized
solely for hedging purposes and the Company does not hold or
issue financial instruments for trading or speculation purposes.
The Company has entered into foreign currency forward
exchange contracts with banks as hedges against receivables
and payables denominated in foreign currencies. As these
foreign currency forward exchange contracts are utilized solely
for hedging purposes, the resulting gains or losses are offset
against foreign exchange gains or losses on the underlying
hedged assets and liabilities.
Annual Report 2006
59
at year-end rates. Shareholders’ equity of foreign subsidiaries
and 20% to 50% owned companies is translated into Japanese
yen at the historical rates. The translation differences in
Japanese yen amounts arising from the use of different rates
are recognized as cumulative translation adjustments in the
balance sheets.
A portion of the cumulative translation adjustments is
allocated to “Minority interest in consolidated subsidiaries” and
the Company’s portion is presented as a separate component
of shareholders’ equity in the balance sheets.
(i) Net income per share
The computation of net income per share is based on the
weighted average number of shares outstanding each year.
Net income per share of common stock, assuming full dilution,
is determined on the assumption that convertible bonds out-
standing were converted into common stock at the beginning
of the year or at the time of debt issuance, if later.
be computed in accordance with generally accepted translation
procedures, the approximate current exchange rate of ¥117=
US$1 prevailing on March 31, 2006 has been used for the
purpose of presentation of the U.S. dollar amounts in the
accompanying consolidated financial statements.
Interest rate swap agreements and currency swap agree-
ments are used to limit the Company’s exposure to losses in
relation to interest expense from adverse fluctuations in foreign
currency exchange and interest rates. The related differentials
to be paid or received under the interest rate swap agreements
are recognized in interest expense over the terms of the agree-
ments. Currency swap agreements are accounted for in a manner
similar to that used for foreign currency forward exchange
contracts.
The Company does not anticipate any credit loss from
nonperformance by the counter-parties to foreign currency
forward exchange contracts, interest rate swap agreements
and currency swap agreements.
Since the derivative financial instruments of the Company are
solely for hedging purposes, gains or losses arising from changes
in fair value are deferred as assets or liabilities to be off-set
against foreign exchange gains or losses on the underlying
hedged assets and liabilities. Accordingly, the information
relating to fair values is not applicable.
60
5. Cash and cash equivalents
Reconciliation of cash and cash equivalents on the consolidated statements of cash flows to the amounts disclosed on the balance
sheets at March 31 is as follows:
Cash on hand and in banks
Time deposits with deposit term of over 3 months
Money market funds, medium-term government bond funds
and others included in marketable securities
Cash and cash equivalents
Millions of yen
2005
2006
¥86,422
(454)
¥68,279
(74)
Thousands of
U.S. dollars
2006
$738,650
(3,880)
422
¥86,390
251
¥68,456
3,606
$738,376
6. Account balances and transactions with affiliated companies
Major account balances with unconsolidated subsidiaries and 20% to 50% owned companies accounted for using the equity method
of accounting are as follows:
Notes and accounts receivable, trade
Other current assets
Investment securities
Long-term receivables
Notes and accounts payable, trade
Short-term borrowings
Accrued expenses
Millions of yen
2005
2006
¥15,606
7,692
44,383
2,064
5,171
1,093
4,028
¥14,285
15,394
38,788
1,457
6,069
1,098
4,730
Thousands of
U.S. dollars
2006
$133,385
65,744
379,342
17,641
44,197
9,342
34,427
Major transactions between the Company and its unconsolidated subsidiaries and 20% to 50% owned companies accounted for
using the equity method of accounting are as follows:
Sales
Purchases
7. Marketable securities and investment securities
Millions of yen
2005
2006
¥65,818
13,436
¥69,170
13,325
Thousands of
U.S. dollars
2006
$562,547
114,838
(a) Other securities with available fair value
The aggregate cost, carrying amount which was identical to fair value, gross unrealized gains and losses of debt and equity securities
classified as other securities for which fair values were available at March 31 are as follows:
Securities with unrealized gains:
Equity securities
Securities with unrealized losses:
Equity securities
Debt securities
Millions of yen
2006
Unrealized
gains
(losses)
Carrying
amount
¥181,704
181,704
¥142,930
142,930
106
24
130
¥181,834
(24)
–
(24)
¥142,906
Cost
¥38,774
38,774
130
24
154
¥38,928
Securities with unrealized gains:
Equity securities
Debt securities
Securities with unrealized losses:
Equity securities
Debt securities
Securities with unrealized gains:
Equity securities
Securities with unrealized losses:
Equity securities
Debt securities
Annual Report 2006
61
Millions of yen
2005
Unrealized
gains
(losses)
¥91,955
0
91,955
(125)
–
(125)
¥91,830
Carrying
amount
¥129,511
60
129,571
1,601
28
1,629
¥131,200
Cost
¥37,556
60
37,616
1,726
28
1,754
¥39,370
Thousands of U.S. dollars
2006
Cost
Carrying
amount
Unrealized
gains
(losses)
$331,402
331,402
$1,553,026
1,553,026
$1,221,624
1,221,624
1,111
205
1,316
$332,718
906
205
1,111
$1,554,137
(205)
–
(205)
$1,221,419
Losses on devaluation of other securities, whose fair values were readily determinable, for the years ended March 31, 2005 was
¥11 million.
(b) The realized gains and losses on the sale of other securities during the year ended March 31 are as follows:
Selling amount
Gain on sales of securities
Loss on sales of securities
Millions of yen
2005
2006
¥625
267
4
¥4,922
1,514
23
Thousands of
U.S. dollars
2006
$5,342
2,282
34
(c) The carrying amounts of other securities for which it was not practicable to determine fair value at March 31 are as
follows:
Equity investment in funds
Equity investments in nonpublic companies
Millions of yen
2005
2006
¥10,001
7,521
¥10,005
7,625
Thousands of
U.S. dollars
2006
$85,479
64,282
62
(d) Redemption schedules for maturity of debt securities at March 31 are as follows:
Debt securities:
Government and municipal bonds
Debt securities:
Government and municipal bonds
Corporate debt securities
Due within one year
Due after one year,
within five years
Due after five years,
Due after
within ten years more than ten years
¥23
¥23
¥1
¥1
¥–
¥–
¥–
¥–
Millions of yen
2006
Due within one year
Due after one year,
within five years
Due after five years,
Due after
within ten years more than ten years
Millions of yen
2005
¥46
10
¥56
¥42
–
¥42
¥–
–
¥–
¥–
–
¥–
Thousands of U.S. dollars
2006
Debt securities:
Government and municipal bonds
Due within one year
Due after one year,
within five years
Due after five years,
Due after
within ten years more than ten years
$197
$197
$9
$9
$–
$–
$–
$–
8. Accumulated depreciation
Accumulated depreciation at March 31 comprised the following:
Buildings
Machinery and equipment
Other
9. Borrowings
Millions of yen
2005
2006
Thousands of
U.S. dollars
2006
¥ 208,128
891,598
84,591
¥1,184,317
¥207,781
867,851
82,112
¥1,157,744
$ 1,778,872
7,620,496
723,000
$10,122,368
Short-term borrowings at March 31, 2006 and 2005 represented loans, principally from banks. The weighted average interest rates
on these borrowings were 1.23 % in 2006 and 1.32 % in 2005.
Long-term debt at March 31 comprised the following:
Loans, principally from banks and insurance companies due 2006 to 2018 with weighted
average interest rates of 2.12% (short-term portion) and 1.83% (long-term portion):
Secured
Unsecured
Unsecured 0.54% to 2.15% yen bonds due 2006 to 2009
Unsecured 1.0% to 1.8% step up coupon Euro yen bonds due 2011
Unsecured 10 years constant maturity swap rate less 0.9% Euro yen bonds due 2006
Unsecured 10 years constant maturity swap rate less 6 months yen
LIBOR multiplied by 0.45 Euro yen bonds due 2006
Unsecured 0.29% to 3.45% Euro yen bonds due 2006 to 2009
Unsecured US$1.9% to 3.5% reversal dual currency Euro yen bonds due 2007 to 2013
Less – Portion due within one year
Millions of yen
2005
2006
¥ 1,354
80,788
65,000
10,000
–
¥ 1,596
81,641
90,000
10,000
1,000
2,000
18,000
12,000
189,142
(32,842)
¥156,300
3,000
22,000
12,000
221,237
(34,991)
¥186,246
Thousands of
U.S. dollars
2006
$
11,573
690,496
555,556
85,470
–
17,094
153,846
102,564
1,616,599
(280,701)
$1,335,898
Annual Report 2006
63
Thousands of
U.S. dollars
$ 280,701
295,214
270,923
769,761
$1,616,599
Thousands of
U.S. dollars
$48,120
Millions of yen
¥5,630
The aggregate annual maturities of long-term debt after March 31, 2006 are as follows:
Years ending March 31
2007
2008
2009
2010 and thereafter
Millions of yen
¥ 32,842
34,540
31,698
90,062
¥189,142
A summary of assets pledged as collateral for short-term loans and long-term debt at March 31, 2006 is as follows:
Property, plant and equipment
10. Accrued pension and severance costs
Upon terminating employment, employees of the parent
company and its major subsidiaries in Japan are entitled, under
most circumstances, to lump-sum severance indemnities and/or
pension payments determined by reference mainly to their
current basic rate of pay and length of service. Additional
benefits may be granted to employees depending on the
conditions under which termination of employment occurs.
Certain foreign subsidiaries have defined benefit pension
plans or defined contribution plans.
The obligation for these severance indemnity benefits is
provided for through accruals, contributory funded defined
benefit pension plans, contributory funded defined benefit
enterprise pension plans and/or non-contributory funded tax-
qualified pension plans.
The parent company and 16 Japanese subsidiaries (16 sub-
sidiaries at March 31, 2005) have non-contributory tax-qualified
pension plans. On April 1, 1999, the portion of indemnities to
the parent company’s employees, who had not qualified as
vested at April 1, 1999, was transferred to the contributory
funded defined benefit pension plan from the non-contributory
funded tax-qualified pension plan of the parent company.
Currently, the parent company’s non-contributory funded
tax-qualified pension plan covers the indemnities of employees
qualified as vested at April 1, 1999.
Information on accrued severance and pension costs as at March 31, 2006 and 2005 are as follows:
Projected benefit obligations
Fair value of plan assets
Unrecognized actuarial gains/losses
Unrecognized prior service costs
Prepaid pension cost
Retirement benefits for employees
Retirement benefits for directors and corporate auditors
Accrued pension and severance costs
Millions of yen
2005
2006
¥(300,327)
206,022
(94,305)
(23,619)
(9,797)
(3,896)
(131,617)
(816)
¥(132,433)
¥(290,655)
172,419
(118,236)
(2,663)
(11,176)
(2,730)
(134,805)
(760)
¥(135,565)
Thousands of
U.S. dollars
2006
$(2,566,898)
1,760,872
(806,026)
(201,872)
(83,735)
(33,299)
(1,124,932)
(6,974)
$(1,131,906)
Note: The figures in the above table do not include additional benefit payables amounting to ¥1,352 million (US$11,556 thousand) and ¥219 million at March 31, 2006
and 2005, respectively. The amounts are recorded as part of current liabilities on the consolidated balance sheets at March 31, 2006 and 2005.
64
Net periodic pension and severance costs for employees for the years ended March 31, 2006 and 2005 included the following
components:
Service cost (Note 1)
Interest cost
Expected return on plan assets
Amortization of unrecognized actuarial gains / losses
Amortization of unrecognized prior service costs
Net pension and severance costs
Millions of yen
2005
2006
¥ 8,697
7,293
(4,409)
(2,726)
(1,394)
¥ 7,461
¥ 8,438
7,049
(4,158)
(23,480)
(1,394)
¥(13,545)
Thousands of
U.S. dollars
2006
$ 74,333
62,333
(37,684)
(23,299)
(11,914)
$ 63,769
Note 1: The figures in the above table do not include the contributions made by employees.
Note 2: In addition to the above costs, additional benefits amounting to ¥1,962 million (US$ 16,769 thousand) and ¥1,376 million were charged to income for the year
ended March 31, 2006 and 2005, respectively.
The assumptions used in calculation of the above information are as follows:
Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefits to periods of employee service
Amortization of unrecognized prior service costs
Amortization of unrecognized actuarial gains / losses
11. Taxes
2006
2.5%
2.5%
Straight-line basis
Mainly 10 years
1 year
2005
2.5%
2.5%
Straight-line basis
Mainly 10 years
1 year
Income taxes applicable to the parent company and subsidiaries
in Japan include (1) corporation tax, (2) enterprise tax and (3)
inhabitants tax which, in the aggregate. For the year ended
March 31, 2005, a corporation size-based enterprise tax was
introduced which reduces the income-based enterprise tax rate.
As a result, the statutory tax rate is approximately 40.7%.
Significant components of the deferred tax assets and liabilities at March 31 are as follows:
Deferred tax assets:
Accrued pension and severance costs
Accrued bonuses
Loss on disposal of property, plant and equipment
Unrealized gain on fixed assets and others
Tax loss carryforwards
Devaluation of inventories
Accrued enterprise tax
Impairment loss
Devaluation of investment securities
Allowance for doubtful accounts
Depreciation
Other
Sub total deferred tax assets
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains on securities
Property, plant and equipment
Reserve for special depreciation
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)
Millions of yen
2005
2006
Thousands of
U.S. dollars
2006
¥ 53,496
8,317
6,205
4,130
3,196
3,016
2,145
1,308
1,037
525
425
13,817
97,617
(6,203)
91,414
¥52,517
8,747
6,710
3,736
3,580
2,863
2,152
–
906
703
433
9,996
92,343
(4,144)
88,199
(60,281)
(15,777)
(1,621)
(3,216)
(80,895)
¥ 10,519
(39,845)
(16,256)
(1,790)
(3,150)
(61,041)
¥ 27,158
$457,231
71,085
53,034
35,299
27,316
25,778
18,333
11,180
8,863
4,487
3,633
118,094
834,333
(53,017)
781,316
(515,222)
(134,846)
(13,855)
(27,487)
(691,410)
$ 89,906
Annual Report 2006
65
Reconciliation of the differences between the statutory tax rate and the effective income tax rate for the year ended March 31 is as
follows:
Statutory tax rate
Increase (reduction) in taxes resulting from:
Non-deductible expenses and non-taxable income
Equalization inhabitants taxes
R&D expenses deductible from income taxes
IT investments deductible from income taxes
Amortization of goodwill
Equity in earnings of unconsolidated
subsidiaries and affiliates
Other
Effective income tax rate
2006
40.7%
2.1
0.4
(6.4)
(0.4)
0.1
(0.2)
0.3
36.6%
Statutory tax rate
Increase (reduction) in taxes resulting from:
Non-deductible expenses and non-taxable income
Equalization inhabitants taxes
R&D expenses deductible from income taxes
IT investments deductible from income taxes
Amortization of goodwill
Equity in earnings of unconsolidated
subsidiaries and affiliates
Other
Effective income tax rate
2005
40.7%
2.6
0.4
(4.5)
(0.4)
0.1
(1.2)
(0.4)
37.3%
In Japan, the consumption tax system is designed so that all goods and services are taxed at a flat rate of 5% unless specifically
provided otherwise. Assets, liabilities and profit and loss accounts were stated net of consumption tax.
12. Revaluation surplus
A revaluation surplus was recorded by a consolidated foreign subsidiary, based on the applicable laws.
13. Selling, general and administrative expenses
Major components of selling, general and administrative expenses were as follows:
Freight and storage
Salaries and benefits
Depreciation
Research and development
Advertising
Rent
Millions of yen
2005
2006
¥32,554
87,117
10,718
35,832
13,411
28,072
¥33,637
71,357
10,759
36,445
15,167
30,069
Thousands of
U.S. dollars
2006
$278,239
744,590
91,607
306,256
114,624
239,932
Note: The aggregate amounts of research and development expenses included in manufacturing costs and selling, general and administrative expenses for the years ended
March 31, 2006 and 2005 were ¥51,467 million (US$ 439,889 thousand) and ¥50,715 million, respectively.
14. Impairment loss
Grouping of operating assets is based on managerial accounting
categories, with consideration given to production process,
geographic location, and domain of authority for making
investment decisions. Idle assets are recorded separately in each
fixed assets class.
In the fiscal year ended March 31, 2006, the book value of
idles assets with diminished market value was reduced to the
recoverable amount, resulting in a special loss of ¥3,799 million
(US$ 32,470 thousand) as impairment loss. Recoverable amount
for these assets was taken as net selling price mainly based on
the appraisal value as determined by the real estate appraiser.
66
15. Litigation settlement
A settlement agreement was concluded in March 2005 with the
plaintiffs in class action litigation in US district court who
claimed damages related to an alleged violation of US antitrust
law with respect to microcrystalline cellulose, a tableting agent
16. Restructuring charges
Major components of the restructuring charges were as follows:
Loss on disposal and devaluation of assets and others
Loss on liquidation of subsidiaries and others
Total
17. Leases
Periodic lease charges for the Company’s financing leases,
where lessors retain the ownership of the leased assets, are
charged to income. Such lease charges were ¥4,554 million
and food additive, by the Company and a US maker of
microcrystalline cellulose. After the relevant court procedures for
approval, this settlement was determined in July 2005.
Millions of yen
2005
2006
¥2,456
715
¥3,171
¥ 6,983
7,938
¥14,921
Thousands of
U.S. dollars
2006
$20,992
6,111
$27,103
(US$38,923 thousand) and ¥6,230 million for the year ended
March 31, 2006 and 2005, respectively.
The future lease payments under the Company’s financing leases and noncancelable operating leases at March 31, including
amounts representing interest, were as follows:
Due within one year
Due after one year
Millions of yen
2005
2006
¥ 3,971
6,161
¥10,132
¥ 4,488
5,798
¥10,286
Thousands of
U.S. dollars
2006
$33,940
52,658
$86,598
The leased assets under the Company’s financing leases, where lessors retain ownership of the leased assets were accounted for
as operating leases by the Company. If the leases had been capitalized, then the cost of the assets and the related accumulated
amortization, computed using the straight-line method over the term of the lease, at March 31, 2006 and 2005 would have been
as follows:
Buildings
Machinery and equipment
Other tangible fixed assets
Intangible fixed assets – other
Buildings
Machinery and equipment
Other tangible fixed assets
Intangible fixed assets – other
Millions of yen
2006
Thousands of
U.S. dollars
2006
Cost
¥15,125
616
1,724
628
¥18,093
Accumulated
amortization
¥6,387
378
841
355
¥7,961
Net
amount
¥ 8,738
238
883
273
¥10,132
Net
amount
$74,684
2,034
7,547
2,333
$86,598
Cost
¥16,043
648
4,448
1,577
¥22,716
Accumulated
amortization
¥ 8,250
349
2,780
1,051
¥12,430
Millions of yen
2005
Net
amount
¥ 7,793
299
1,668
526
¥10,286
The amortization amount of the leased assets, computed using the straight-line method over the term of the lease, would have
been ¥4,554 million (US$38,923 thousand) and ¥6,230 million for the year ended March 31, 2006 and 2005, respectively.
No impairment loss is allocated to the leased assets.
Annual Report 2006
67
18. Business segment information
(1) Industry segments –
Sales and operating profit (loss) for the year ended March 31:
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Corporate
expenses and
Combined
eliminations Consolidated
Millions of yen
2006
Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit (loss)
¥660,402
16,659
677,061
636,549
¥ 40,512
¥404,539 ¥105,842
19
105,861
94,803
¥ 28,218 ¥ 11,058
111
404,650
376,432
¥89,704
2,262
91,966
87,950
¥ 4,016
¥102,858
992
103,850
84,517
¥ 19,333
¥56,512
11,596
68,108
64,292
¥ 3,816
¥51,942
3,624
55,566
50,740
¥ 4,826
¥26,821
27,247
54,068
50,785
¥ 3,283
¥1,498,620
62,510
1,561,130
1,446,068
¥ 115,062
¥
–
(62,510)
(62,510)
(56,174)
¥1,498,620
–
1,498,620
1,389,894
¥ (6,336) ¥ 108,726
Millions of yen
2005
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Corporate
expenses and
Combined
eliminations Consolidated
¥570,182
14,175
584,357
546,545
¥ 37,812
¥375,755 ¥103,933
35
103,968
90,611
¥ 28,988 ¥ 13,357
86
375,841
346,853
¥91,518
2,071
93,589
85,251
¥ 8,338
¥93,024
709
93,733
76,142
¥17,591
¥59,908
11,326
71,234
68,666
¥ 2,568
¥59,149
4,613
63,762
57,695
¥ 6,067
¥24,228
36,447
60,675
57,111
¥ 3,564
¥1,377,697
69,462
1,447,159
1,328,874
¥ 118,285
¥
–
(69,462)
(69,462)
(66,986)
¥ (2,476)
¥1,377,697
–
1,377,697
1,261,888
¥ 115,809
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Thousands of U.S. dollars
2006
Corporate
expenses and
Combined
eliminations Consolidated
142,385
$5,644,462 $3,457,598 $904,632 $766,701
19,333
949
786,034
5,786,847 3,458,547
751,709
5,440,590 3,217,368
$ 346,257 $ 241,179 $ 94,512 $ 34,325
162
904,794
810,282
$879,128
8,479
887,607
722,368
$165,239
$483,009
99,111
582,120
549,504
$ 32,616
$443,949
30,975
474,924
433,675
$ 41,249
$229,239 $12,808,718
534,274
13,342,992
12,359,556
983,436
232,880
462,119
434,060
$ 28,059 $
$
– $12,808,718
(534,274)
–
(534,274) 12,808,718
(480,120) 11,879,436
929,282
$ (54,154) $
Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit (loss)
Sales:
Customers
Intersegment
Total
Operating expenses
Operating profit (loss)
Identifiable assets, depreciation and amortization, impairment loss and capital expenditure as of and for the year ended March 31:
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Millions of yen
2006
Corporate
assets and
Combined
eliminations Consolidated
¥529,100
¥200,066 ¥118,721 ¥105,718
¥114,743
¥49,557
¥50,970
¥317,171
¥1,486,046
¥ (110,002) ¥1,376,044
31,281
–
26,632
2,448
251
3,583
6,364
–
4,897
5,337
–
5,417
12,051
–
14,960
3,129
–
2,313
4,352
–
4,655
715
–
1,038
65,677
251
63,495
3,722
3,548
2,815
69,399
3,799
66,310
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Millions of Yen
2005
Corporate
assets and
Combined
eliminations Consolidated
¥494,313
¥186,837 ¥ 123,762 ¥100,031
¥109,055
¥58,068
¥55,738
¥297,826
¥1,425,630
¥ (155,573)
¥1,270,057
31,553
25,084
2,280
3,447
6,372
8,260
5,200
4,927
13,312
16,446
3,797
2,209
4,535
4,329
1,192
1,423
68,241
66,125
3,290
2,354
71,531
68,479
Identifiable assets
Depreciation
and amortization
Impairment loss
Capital expenditure
Identifiable assets
Depreciation
and amortization
Capital expenditure
68
Chemicals
Homes
Pharma
Fibers
Electronics
Materials Construction
Materials
and Devices
Life & Living
Services,
Engineering
and Others
Thousands of U.S. dollars
2006
Corporate
assets and
Combined
eliminations Consolidated
Identifiable assets
Depreciation
and amortization
Impairment loss
Capital expenditure
$4,522,222 $1,709,966 $1,014,710 $903,573
$980,709
$423,564
$ 435,641
2,710,863 $12,701,248
$(940,188) $11,761,060
267,359
–
227,624
20,923
2,145
30,624
54,393
–
41,855
45,615
–
46,299
103,000
–
127,863
26,744
–
19,769
37,197
–
39,786
6,111
–
8,872
561,342
2,145
542,692
31,812
30,325
24,060
593,154
32,470
566,752
Note 1: The Company’s industry segments are aggregated into eight segments based primarily upon similarities of products, services, and economic characteristics.
Chemicals –
The Company produces, processes and sells Monomers and basic chemicals (such as Ammonia, Nitric acid, Caustic soda, Acrylonitrile, Styrene monomer, Methyl
Methacrylate (MMA) monomer, PMMA resin, High-compound fertilizers, and Adipic acid), Polymer and elastomers (such as Suntec™ polyethylene (PE), Stylac™ -
AS (styrene-acrylonitrile), Stylac™-ABS (acrylonitrile-butadiene-styrene), synthetic rubber, Tenac™ polyacetal, Xyron™ modified polyphenylene ether (mPPE), and
Leona™ nylon 66 polymer and filament), Specialty products and systems (such as Coating materials, Latex, Ceolus™ microcrystalline cellulose, Explosives,
Explosion-bonded metal clad, APR™ photosensitive resin and printing plate making systems, Microza™ UF and MF membranes and systems, Hipore™ microporous
membrane, and ion-exchange membranes andelectrolysis systems).
Homes –
The Company builds Hebel Haus™ pre-fabricated, custom-built homes, and Hebel Maison™ apartments, and operates related businesses such as condominiums,
remodeling, real estate, residential land development, and home financing.
Pharma –
The Company produces and sells pharmaceuticals (such as Elcitonin™, Bredinin™, Flivas™, and Toledomin™), pharmaceutical intermediates, diagnostics reagents.
The Company also manufactures APS™ artificial kidneys, Sepacell™ leukocyte reduction filters, Cellsorba™ leukocyte adsorption columns, Planova™ virus removal
filters, and contact lenses.
Fibers –
The Company produces and sells Roica™ elastic polyurethane filament, nonwoven fabrics (such as Eltas™ spunbond and Lamous™ artificial suede), Bemberg™
cuprammonium rayon, and polyester filament.
Electronics Materials and Devices –
The Company produces and sells Pimel™ photosensitive polyimide, Sunfort™ photosensitive dry film resist (DFR), photomask pellicles, LSIs, Hall elements, and glass
fabric.
Construction Materials –
The Company produces and sells autoclaved lightweight concrete (ALC) panels (such as Hebel™), piles, Neoma™ foam insulation panels, and artificial fish reefs.
Life & Living –
The Company produces and sells Saran Wrap™ cling film, Ziploc™ storage bags, and plastic films, sheets, and foams.
Services, Engineering, and Others –
The Company provides Plant engineering, Environmental engineering, Personnel staffing and replacement, and Think tank services.
2: Accounting Standards for Impairment of Fixed Assets became effective for the fiscal year ended March 31, 2006. The Company applies this new standard in the
fiscal year ended March 31, 2006, this had the effect of decreasing “Home segment” Identifiable assets by ¥251 million (US$2,145 thousand) and “Corporate
assets and eliminations” by ¥3,548 million (US$30,325 thousand).
3: The parent company and certain Japanese subsidiaries have been fully amortizing unrecognized actuarial gains/losses in the year following that in which they arose.
Beginning with the fiscal year ended March 31, 2006, actuarial gains/losses are amortized on a straight-line basis over the ten years following that in which they
arise.
As the full amount of the actuarial gain which occurred in the fiscal year ended March 31, 2005 was amortized in one year in accordance with the previously
adopted policy, this change will not affect profits for the fiscal year ended March 31, 2006. Because the ¥23,604 million (US$201,744 thousand) actuarial gain
occurring in the year ended March 31, 2006 will be amortized on a straight-line basis over the following ten years, net pension and severance costs will be ¥19,639
million (US$167,855 thousand) higher. The effect by industry segment is that operating expenses in the following segment will be lower by the following amounts:
“Chemicals” ¥6,064 million (US$51,829 thousand), “Homes” ¥3,097 million (US$26,470 thousand), “Pharma” ¥2,830 million (US$24,188 thousand), “Fibers”
¥1,869 million (US$15,974 thousand), “Electronics Materials and Devices” ¥1,077 million (US$9,205 thousand), “Construction Materials” ¥1,368million
(US$11,692thousand), “ Life & Living” ¥855million (US$7,308thousand), “Corporate” ¥2,478million (US$21,179 thousand) in the year ended March 31, 2007
than if one-year amortization had been continued.
4: With the April 1, 2005 transfer of Leona™ nylon 66 filament operations from Asahi Kasei Fibers Corporation to Asahi Kasei Chemicals Corporation, classification of
the corresponding sales, operating expenses, operating profit (loss), identifiable assets, depreciation and amortization, and capital expenditure for the year ended
march 31,2005 has been changed from the Fiber segment to the Chemicals segment.
5: Corporate operating expenses included in “Corporate expenses and eliminations” in 2006 and 2005 amount to ¥15,209 million (US$129,991 thousand) and
¥10,205 million, respectively.
6: Corporate assets such as surplus funds (cash on hands and in banks), long-term-investment funds (investment securities etc.) and lands etc. included in “Corporate
assets and eliminations” in 2006 and 2005 amount to ¥447,076 million (US$3,821,162 thousand) and ¥390,975 million, respectively.
Annual Report 2006
69
(2) Geographic areas –
Total sales and assets of consolidated subsidiaries located in countries or regions outside of Japan as of and for the years ended
March 31, 2006 and 2005 were not significant.
(3) Overseas sales –
Overseas sales for the years ended March 31, 2006 and 2005 were as follows:
Millions of yen
Millions of yen
Thousands of U.S. dollars
East Asia
Others
2006
Total
East Asia
Others
2005
Total
East Asia
Others
2006
Total
Overseas sales
Consolidated net sales
Percentage of
consolidated
net sales (%)
¥222,377
–
¥150,789 ¥ 373,166 ¥187,017 ¥122,787 ¥ 309,804 $1,900,658 $1,288,795 $ 3,189,453
– 12,808,718
– 1,498,620
1,377,697
–
–
–
14.8%
10.1%
24.9%
13.6%
8.9%
22.5%
Note 1: Geographical distance is considered in the classification of country or area.
2: Major countries or areas included in each category are as follows;
East Asia: China (including Hong Kong), Korea and Taiwan
Others: Southeast Asia (except East Asia), U.S.A., Europe and others.
3: Overseas sales represent the sales of the Company to countries and areas outside of Japan.
19. Appropriation of retained earnings
Appropriations of retained earnings are not accrued in the
financial statements for the period to which they relate, but are
recorded in the subsequent accounting period after shareholders’
approval has been obtained. Retained earnings at March 31,
2006 include amounts representing final cash dividends of
20. Contingent liabilities
¥6,999 million (US$59,821 thousand) and bonuses to directors
and corporate auditors of ¥73 million (US$624 thousand) which
were approved at the shareholders’ meeting held on June 29,
2006.
Contingent liabilities at March 31, arising in the ordinary course of business were as follows:
Notes discounted
Loans guaranteed
Commitment for guarantees
Letters of awareness
Millions of yen
2005
2006
¥
296
15,569
2,646
734
¥19,245
¥
225
17,044
2,739
190
¥20,198
Thousands of
U.S. dollars
2006
$ 2,530
133,068
22,615
6,274
$164,487
The parent company and certain of its subsidiaries and affiliates were defendants in several pending lawsuits. However, based upon
the information currently available to both the Company and its legal counsel, the management of the Company believes that any
damages from such lawsuits will not have a material effect on the Company’s consolidated financial statements.
70
21. Reconciliation of the differences between basic and diluted net income per share:
Reconciliation of the differences between basic and diluted net income per share for the year ended March 31 is as follows:
Net income
Amount not allocated to the common stock
Net income allocated to the common stock
Effect of dilutive securities
Net income allocated to the common stock for computation of diluted net income per share
Weighted-average shares
Effect of dilutive securities
Weighted-average shares for computation of diluted net income per share
Millions of yen
2005
2006
¥59,668
(218)
¥59,450
–
¥59,450
¥56,454
(199)
¥56,255
–
¥56,255
Thousands of
U.S. dollars
2006
$509,983
(1,863)
$508,120
–
$508,120
Thousands of shares
2005
2006
1,400,109
–
1,400,109
1,400,671
–
1,400,671
2006
Yen
2005
U.S. dollars
2006
Basic net income per share
Diluted net income per share
$0.36
–
$
As the Company had no dilutive securities as at March 31, 2006 and 2005, the Company does not disclose diluted net income for
¥42.46
–
¥
¥40.16
–
¥
the years ended March 31, 2006 and 2005.
Annual Report 2006
71
72
Major Subsidiaries and Affiliates
As of April 1, 2006
Company
Main products/business line
Paid-in capital
(million)
Equity
interest (%)
Chemicals
Benzene, ethylene
Epoxy resin
Aluminum paste
Specialty chemicals
Shotgun cartridges
Sale of industrial explosives, civil engineering materials
Processing and sale of plastic and fiber
Synthetic rubber
Silicone
Caustic soda, chlorine
Sale of fertilizer
Polystyrene
Synthetic resin, fabricated plastic products
Sale of compounded performance resin
Coloring and compounding of performance resin
Sale of acrylonitrile
Sale of purging compound
Acrylonitrile, sodium cyanide
Sale of adipic acid
PMMA sheet for light-guide plates
Sale of performance resin
Chemicals Segment
Asahi Kasei Chemicals Corp.*
Sanyo Petrochemical Co., Ltd.*
Asahi Kasei Epoxy Co., Ltd.*
Asahi Kasei Metals Ltd.
Asahi Kasei Finechem Co., Ltd.
Asahi SKB Co., Ltd.
Asahi Kasei Geotechnologies Co., Ltd.
Asahi Kasei Technoplus Co., Ltd.*
Japan Elastomer Co., Ltd.*
Wacker Asahikasei Silicone Co., Ltd.
Okayama Chemical Co., Ltd.
Chisso Asahi Fertilizer Co., Ltd.
PS Japan Corp.
Asahi Organic Chemicals Industry Co., Ltd.
Asahikasei Plastics (America) Inc.*
Asahi Kasei Plastics North America, Inc.*
Asahi Chemical Intermediates Inc.*
Sun Plastech Inc.*
Tong Suh Petrochemical Corp. Ltd.*
Asahi Kasei Adipic Acid (Korea) Co., Ltd.
Delaglas Korea Corporation
Asahikasei Plastics (Shanghai) Co., Ltd.
Asahikasei (Suzhou) Plastics Compound Co., Ltd. Coloring and compounding of performance resin
SAL Petrochemical (Zhangjiagang) Co., Ltd.
Asahi-DuPont POM (Zhangjiagang) Co., Ltd.
Styron Asia Ltd.
Asahi Kasei Performance
Chemicals Corporation
Polystyrene
Polyacetal
Sale of polystyrene
Asahi Kasei Microza (Hangzhou) Co., Ltd.
Asahi Kasei Plastics Singapore Pte. Ltd.*
Polyxylenol Singapore Pte. Ltd.*
Asahikasei Plastics (Thailand) Co., Ltd.
PT Nippisun Indonesia
NV Asahi Thermofil (Europe) SA*
NV Asahi Photoproducts (Europe) SA*
Asahi Photoproducts (UK) Ltd.*
AK&N (UK) Ltd.*
Asahi Thermofil (UK) Ltd.*
Asahi Thermofil (France) SA*
Homes Segment
Asahi Kasei Homes Corp.*
Asahi Kasei Jyuko Co., Ltd.*
Asahi Kasei Mortgage Corp.*
Asahi Kasei Real Estate, Ltd.*
Asahi Kasei Reform Co., Ltd.*
Pharma Segment
Asahi Kasei Pharma Corp.*
Asahi Kasei Medical Co., Ltd.*
Asahi Kasei N&P Co., Ltd.*
* Consolidated subsidiary
** Including capital reserve
High-performance HDI-based polyisocyanate
Industrial membranes and systems
Performance resin
PPE powder
Coloring and compounding of performance resin
Coloring and compounding of styrenic resin
Sale of compounded performance resin
Sale of photopolymer, printing plate making systems
Sale of photopolymer, printing plate making systems
Compounded performance resin operations
Coloring and compounding of performance resin
Coloring and compounding of performance resin
Housing
Steel frames
Financial services
Home leasing, real estate brokerage
Home maintenance and remodeling
Pharmaceuticals, medical products
Medical devices, medical systems
Functional food ingredients
¥
¥
¥
¥
¥
¥
¥
¥
¥
¥
¥
¥
¥
¥
US$
US$
US$
US$
W
W
W
CNY
CNY
CNY
US$
US$
US$
¥
US$
US$
B
US$
A
A
£
£
£
A
¥
¥
¥
¥
¥
¥
¥
¥
3,000
2,000
300
250
175
100
132
160
1,000
4,200
1,000
305
5,000
5,000
17.8**
21.5**
16.4
1.0
50,642
1,500
5,000
18
50
222
32.0
1.0
20.0
400
46.0
35.0
140
6.3
5.0
3.4
0.3
11.1
5.3
4.3
3,250
2,820
500
200
250
3,000
800
495
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.4
75.0
50.0
50.0
50.0
45.0
29.8
100.0
100.0
100.0
100.0
100.0
100.0
60.0
100.0
51.0
50.0
50.0
50.0
100.0
100.0
100.0
70.0
100.0
25.7
100.0
100.0
100.0
65.0
65.0
65.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Company
Main products/business line
Asahikasei Aime Co., Ltd.*
Asahi Kasei Medical America Inc.
Nikkiso Asahi Kasei Medical Korea Co., Ltd.
Asahi Kasei Medical (Hangzhou) Co., Ltd.
Asahi Kasei Medical Europe GmbH
NV Asahi Kasei Planova Europe SA
Asahi Pharma Spain, SL
Contact lenses
Sale of medical devices, medical systems
Sale of medical devices
Hemodialyzers
Sale of medical devices, medical systems
Sale of virus removal filters
Sale of pharmaceuticals
Fiber, textiles
Processing and sale of fiber, textiles
Flash spun
Polytrimethylene terephthalate fiber
Spandex
Fibers Segment
Asahi Kasei Fibers Corp.*
Kyokuyo Sangyo Co., Ltd.*
DuPont-Asahi Flash Spun Products Co., Ltd.
Solotex Corp.
Asahi Kasei Fibers America, Inc.
(Asahi Kasei Fibers America, Inc. was renamed Asahi Kasei Spandex America, Inc. on May 1, 2006.)
Hangzhou Asahikasei Spandex Co., Ltd.*
Hangzhou Asahikasei Textiles Co., Ltd.*
Formosa Asahi Spandex Co., Ltd.
Asahi Chemical (HK) Ltd.*
Thai Asahi Kasei Spandex Co., Ltd.*
Asahi Kasei Spandex Europe GmbH
Asahi Kasei Fibers Italy SRL
Asahi Kasei Fibers Deutschland GmbH
Spandex
Knitting and dyeing of spandex
Spandex
Sale of fiber and textiles
Spandex
Spandex
Sale of spandex and cupuro cellulosic fiber
Sale of artficial suede
EMD Segment
Asahi Kasei EMD Corp.*
Asahi Kasei Microsystems Co., Ltd.*
Asahi-Schwebel Co., Ltd.*
Asahi Kasei Electronics Co., Ltd.*
AKM Semiconductor, Inc.*
Asahi Kasei Electronics
Materials (Suzhou) Co., Ltd.*
Asahi Kasei Wah Lee Hi-Tech Corp.*
Asahi-Schwebel (Taiwan) Co., Ltd.*
Electronics materials and devices
LSIs
Glass fabric
Hall elements
Sale of LSIs
Photosensitive dry film resist
Photosensitive dry film resist
Glass fabric
Constructions Materials Segment
Asahi Kasei Construction Materials Corp.*
Asahi Kasei Foundation Systems Co., Ltd.*
Asahi Kasei Marintech Co., Ltd.*
Construction materials
Installation of piles
Sale of marine structures
Life & Living Segment
Asahi Kasei Life & Living Corp.*
Asahi Kasei Pax Corp.*
Asahi Home Products Co., Ltd.*
Sundic Inc.
Asahi Packaging GmbH
Household products, packaging material
Packaging products and solutions
Sale of cling film, other household products
Biaxially oriented polystyrene sheet
Sale of food packaging material
Service, Engineering and Others Segment
Asahi Research Center Co., Ltd.*
Asahi Finance Co., Ltd.*
Asahi Kasei Engineering Co., Ltd.*
Asahi Kasei Trading Service Co., Ltd.*
Sun Trading Co., Ltd.*
Asahi Kasei Amidas Co., Ltd.*
AJS Inc.
Information and analysis
Investment, finance
Plant, equipment, process engineering
Sale of Asahi Kasei products
Sale of Asahi Kasei products
Employment agency, consulting
Computer software, IT systems
* Consolidated subsidiary
** Including capital reserve
Annual Report 2006
73
Paid-in capital
(million)
Equity
interest (%)
¥
US$
W
US$
A
A
A
¥
¥
¥
¥
US$
CNY
CNY
NT$
HK$
B
A
A
A
¥
¥
¥
¥
US$
CNY
NT$
NT$
¥
¥
¥
¥
¥
¥
¥
A
¥
¥
¥
¥
¥
¥
¥
480
0.2
4,400
10.0
0.2
0.2
0.1
3,000
80
450
250
10.2**
132
78
801
65
520
10.0**
3.0
0.3
3,000
14,000
648
400
2.9
60
49
326
3,000
200
30
3,000
490
250
1,050
0.7
3,000
800
400
98
94
80
800
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
50.0
100.0
100.0
82.5
50.0
100.0
60.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.6
51.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
74
Corporate Profile
As of April 1, 2006
Company Name
Asahi Kasei Corporation
Date of Establishment
May 21, 1931
Paid-in Capital
¥103,388,521,767
Employees
23,030 (Consolidated)
806 (Non-consolidated)
Asahi Kasei Group Offices
Asahi Kasei Corporation
Tokyo Head Office
1-1-2 Yurakucho, Chiyoda-ku
Tokyo 100-8440, Japan
Phone: +81-3-3507-2060
Fax: +81-3-3507-2495
Osaka Head Office
1-2-6 Dojimahama, Kita-ku
Osaka 530-8205, Japan
Phone: +81-6-6347-3111
Fax: +81-6-6347-3077
Beijing Office
Room 1408
New China Insurance Tower
No.12 Jian Guo Men Wai Avenue
Chao Yang District
Beijing 100022
P. R. China
Phone: +86-10-6569-3939
Fax: +86-10-6569-3938
Shanghai Office
Room 2321
Shanghai Central Plaza
381 Huaihai Zhong Road
Shanghai 200020
China
Phone: +86-21-6391-6111
Fax: +86-21-6391-6686
Asahi Kasei America Inc.
535 Madison Avenue, 33rd Floor
New York, NY 10022, USA
Phone: +1-212-371-9900
Fax: +1-212-371-9050
Core Operating Companies
Asahi Kasei Chemicals Corporation
1-1-2 Yurakucho, Chiyoda-ku
Tokyo 100-8440, Japan
Phone: +81-3-3507-2220
Asahi Kasei Homes Corporation
1-24-1 Nishi-shinjuku, Shinjuku-ku
Tokyo 160-8345, Japan
Phone: +81-3-3344-7111
Asahi Kasei Pharma Corporation
9-1 Kanda Mitoshiro-cho, Chiyoda-ku
Tokyo 101-8481, Japan
Phone: +81-3-3259-5777
Asahi Kasei Fibers Corporation
1-2-6 Dojimahama, Kita-ku
Osaka 530-8205, Japan
Phone: +81-6-6347-3600
Asahi Kasei EMD Corporation
1-23-7 Nishi-shinjuku, Shinjuku-ku
Tokyo 160-0023, Japan
Phone: +81-3-6911-2700
Asahi Kasei Construction Materials Corporation
2-12-7 Higashi-shinbashi, Minato-ku
Tokyo 105-0021, Japan
Phone: +81-3-5473-5251
Asahi Kasei Life & Living Corporation
1-1-2 Yurakucho, Chiyoda-ku
Tokyo 100-8440, Japan
Phone: +81-3-3507-2939
Annual Report 2006
75
Investors Information
Stock Listings
Tokyo, Osaka, Nagoya, Fukuoka, Sapporo
Authorized Shares
Outstanding Shares
Transfer Agent
Independent Auditors
4,000,000,000
1,442,616,332
Sumitomo Trust & Banking Co., Ltd.
4-5-33 Kitahama, Chuo-ku
Osaka 541-8639, Japan
ChuoAoyama PricewaterhouseCoopers
(PricewaterhouseCoopers Aarata was appointed Interim Independent Auditors on July 1, 2006)
Largest Shareholders
% of equity
Master Trust Bank of Japan, Ltd. TS .........................................................5.43
Japan Trustee Services Bank, Ltd. TS ........................................................4.94
Nippon Life Insurance Co. .......................................................................4.66
Employees’ Stockholding .........................................................................2.84
Sumitomo Mitsui Banking Corp. ..............................................................2.45
Dai-ichi Mutual Life Insurance Co. ...........................................................2.23
Tokio Marine & Nichido Fire Insurance Co., Ltd........................................2.16
Meiji Yasuda Life Insurance Co. ...............................................................1.70
Nomura Securities Co., Ltd. .....................................................................1.57
Japan Trustee Services Bank, Ltd. TS4 ......................................................1.43
Distribution by Type of Shareholder
Distribution by Number of Shares Held
Japanese financial institutions
Japanese individuals and groups
Foreign investors
Japanese securities companies
Other Japanese companies
44.08%
25.02%
23.09%
2.26%
4.73%
100,000 or more
10,000~99,999
1,000~9,999
less than 1,000
80.25%
6.50%
12.81%
0.44%
TM: Trademark or registered trademark of Asahi Kasei Corporation, affiliated companies,
or third parties granting rights to Asahi Kasei Corporation or affiliated companies.
A copy of the Company,s annual report and further information
will be made available upon request in writing to:
Corporate Communications
Asahi Kasei Corporation
1-1-2 Yurakucho, Chiyoda-ku, Tokyo 100-8440, Japan
Phone: +81-3-3507-2060
www.asahi-kasei.co.jp
Fax: +81-3-3507-2495
This annual report was printed with veg-
etable-based ink on recycled paper.