ASAHI KASEI CORP Annual Report 2009

Plain-text annual report

Annual Report 2009 ASAHI KASEI CORPORATION A S A H I K A S E I C O R P O R A T O N I A N N U A L R E P O R T 2 0 0 9 Contributing to human life and human livelihood through constant innovation and advances based in science and the human intellect. CONTENTS 1 Consolidated Financial Highlights 2 To Our Shareholders 4 A Message from the President 10 At a Glance 12 Operating Segments 12 Chemicals Asahi Kasei Chemicals Corp. 14 Homes Asahi Kasei Homes Corp. 16 Health Care Asahi Kasei Pharma Corp. Asahi Kasei Kuraray Medical Co., Ltd./Asahi Kasei Medical Co., Ltd. 18 Fibers Asahi Kasei Fibers Corp. 20 Electronics Asahi Kasei Microdevices Corp. Asahi Kasei E-materials Corp. 22 Construction Materials Asahi Kasei Construction Materials Corp. 24 Services, Engineering and Others 25 Toward Sustainable Growth 33 Financial Section 66 Major Subsidiaries and Afﬁ liates 68 Corporate Proﬁ le 69 Investors Information 1 (%) 60 Consolidated Financial Highlights Asahi Kasei Corporation and consolidated subsidiaries Fiscal year beginning April 1 2008 2007 ¥ billion 2006 2005 2004 US$ million* 2008 For the year Net sales Operating income Net income At year-end Total assets Net worth† Per share Net income Net worth‡ Cash dividends Key indexes Operating margin Payout ratio ROA ROE Net worth to total assets‡ D/E ratio‡ ¥ 1,553.1 ¥ 1,696.8 ¥ 1,623.8 ¥ 1,498.6 ¥ 1,377.7 $ 15,848 35.0 4.7 127.7 69.9 127.8 68.6 108.7 59.7 115.8 56.5 356 48 ¥ 1,379.3 ¥ 1,425.4 ¥ 1,459.9 ¥ 1,376.0 ¥ 1,270.1 $ 14,075 603.8 666.2 645.7 594.2 511.7 6,162 ¥ US$* ¥ 3.39 431.77 10.00 ¥ 50.01 ¥ 49.00 ¥ 42.46 ¥ 40.16 $ 0.03 476.39 13.00 461.50 12.00 424.34 10.00 365.43 8.00 4.41 0.10 2.3% 295.0% 0.3% 0.7% 43.8% 0.52 7.5% 26.0% 4.8% 10.7% 46.7% 0.32 7.9% 24.5% 4.8% 11.1% 44.2% 0.34 7.3% 23.6% 4.5% 10.8% 43.2% 0.40 8.4% 19.9% 4.5% 11.7% 40.3% 0.49 * U.S. dollar amounts in this annual report are translated from Japanese yen, for convenience only, at the rate of ¥98=US$1 as described in Note 1 of Notes to Consolidated Financial Statements. † Net assets less minority interest. Through the year beginning April 1, 2005, ﬁ gures for shareholders’ equity shown. ‡ At ﬁ scal year end. Net Sales (¥ billion) Operating Income, Operating Margin (¥ billion) 1,696.8 1,623.8 1,553.1 2,000 1,500 1,000 500 0 127.8 127.7 7.9 7.5 150 120 90 60 30 0 (%) 15 12 9 6 3 0 35.0 2.3 Net Income, ROE Total Assets, Net Worth to Total Assets (¥ billion) (%) (¥ billion) 68.6 69.9 11.1 10.7 80 60 40 20 0 20 15 10 5 1,500 1,459.9 1,425.4 1,379.3 1,000 500 44.2 46.7 43.8 40 20 0 4.7 0.7 0 0 FY 06 07 08 FY 06 07 08 FY 06 07 08 FY* 06 07 08 Operating income, left scale Net income, left scale Total assets, left scale Operating margin, right scale ROE, right scale Net worth to total assets, right scale * At year end. 2 Asahi Kasei Annual Report 2009 To Our Shareholders Nobuo Yamaguchi, Chairman of the Board (left), and Shiro Hiruta, President (right) “ Accelerating progress in the Growth Action – 2010 mid-term initiative to reinforce the stable foundation of earnings ” 3 The global economy entered a severe economic downturn beginning in the second half of the ﬁ scal year as the ﬁ nancial crisis triggered by the rise in subprime mortgage defaults in the US spread into the real economy worldwide. Sharply impacted by the global economic slump, the Japanese economy fell into an economic recession of historic proportions with a broad decline in exports and a rapid appreciation of the exchange value of the yen, which led to deteriorating corporate earnings, cuts in private sector capital investment, and curtailment of production, resulting in reduced employment and the emergence of related social problems. The Asahi Kasei Group faced an extremely challenging operating climate, with high feedstock and fuel costs continuing through the ﬁ rst half of the ﬁ scal year before falling sharply in the second half, and with the sharp rise in the value of the yen, steep declines in product demand, especially for petrochemicals and electronics products, and inventory adjustments among customers necessitating cutbacks in production for many products. The Group’s consolidated ﬁ nancial performance for the ﬁ scal year thus saw a decline in sales and a substantial decline in proﬁ ts. The year-end dividend was set at ¥3 per share for a total of ¥10 per share, ¥3 per share less than a year earlier. Due to the effects of the global economic downturn, it has become highly unlikely that we will be able to achieve our original performance targets in the Growth Action – 2010 mid-term initiative currently in progress. We therefore performed a strategic review, including a reexamination of strategies in place and a revision of ﬁ nancial performance forecasts. This review reinforced our view that there was no need to fundamentally change our management strategy focusing on the expansion of global businesses and the enhancement of domestic businesses. Rather, we will further accelerate our progress in advancing strategic actions to reinforce the stable foundation of earnings as a base for greater ﬁ nancial strength and the sustained expansion and growth of operations. August 2009 Nobuo Yamaguchi Chairman of the Board Shiro Hiruta President 4 Asahi Kasei Annual Report 2009 A Message from the President Transforming to a business portfolio for the future Steadily implementing strategic actions under Growth Action – 2010, advancing our business portfolio transformation for the future We have performed a strategic review of Growth Action – 2010 , our ﬁ ve-year management initiative for the ﬁ scal years 2006 through 2010, given that the global economic downturn which began in autumn 2008, triggered by the spread of subprime mortgage defaults in the US, has dramatically altered the operating environment when compared to our initial assumptions. Advancement of strategic management initiatives The development and growth of the Asahi Kasei Group over the years has been driven by constant realignments of the business portfolio, as we transformed from a ﬁ ber-centered operation to the diversiﬁ ed enterprise we are today – with ﬁ elds of Strategic management initiatives Ishin-2000 (FY 1999–2002) Ishin-05 (FY 2003–2005) Selectivity and focus Disposal of negative legacies Selective diversification Creation of cash flow Management speed and autonomy* * Transition to holding company configuration in Oct. 03. Growth Action – 2010 (FY 2006–2010) Business portfolio realignment for expansion and growth Strategic investment 5 Growth Action – 2010 concept Expanding global businesses Chemical-based, specialized function Electronic materials Medical devices Electronic devices High growth businesses Enhancing domestic businesses Domestic businesses (housing, construction materials, pharmaceuticals, home-use products, etc.) Polymers (including processed products) Monomers (acrylonitrile, MMA, styrene, etc.) Stable growth, stable earnings businesses Long-term investments (¥ billion) Investment from FY 2003 to FY 2005 70–80/year Strategic investment for FY 2006 to FY 2010 Total for FY 2006 to FY 2010 400 800 Organic M&A Resources for dividends 220 150 30 business spanning from chemicals to housing and construction, from health care to electronics. Since the 1990s we have achieved several notable structural transformations. From ﬁ scal 1999 to 2002 we executed our Ishin-2000 initiative to bring greater selectivity and focus to our business portfolio. This was followed by our Ishin-05 initiative to strengthen operations as a selectively diversiﬁ ed enterprise group, building greater ﬁ nancial strength. Based on this renewed strength, our Growth Action – 2010 initiative is directed toward the expansion of global businesses and the enhancement of domestic businesses, advancing the transformation to a growth-oriented portfolio, for greater corporate value and brand strength. Our plan provided for some ¥400 billion in strategic investment focused on the ﬁ elds of chemical-based/specialized function products, electronics products, and health care products. Together with ordinary investments, we targeted total capital expenditure over the ﬁ ve-year term of some ¥800 billion, with ﬁ scal 2010 performance targets including sales of ¥1,800 billion and operating income of ¥150 billion. Progress under Growth Action – 2010 As a result of progress under Growth Action – 2010 in expanding global businesses and making proactive strategic investments including M&A, results in ﬁ scal 2007 exceeded our targets for the year. The impact of the severe operating climate in ﬁ scal 2008, however, resulted in sales of ¥1,553.1 billion and operating income of ¥35.0 billion, and with ﬁ scal 2009 forecast to remain challenging, there is little prospect of achieving our initial targets for ﬁ scal 2010. There are three main factors behind this deterioration in ﬁ nancial performance. The ﬁ rst is a large decrease in sales and income from chemicals and electronics operations. In chemicals, despite progress in shifting to specialty products, we still have a high ratio of volume products in cyclical markets. The impact of petrochemical feedstock price ﬂ uctuations and the impact of falling demand both in Japan and overseas were substantial. In electronics, we have many products which are used in IT equipment and home electronics, where markets tend to be cyclical, and the launch of new products to extend our market coverage has been slower than planned. The second factor is a gradual decrease in sales and income from housing and construction materials operations. Recognizing that Japan’s declining population and ageing demographic mean that construction demand growth will be meager at best, we have achieved growth in housing-related operations 6 Asahi Kasei Annual Report 2009 Strategic review of Growth Action – 2010 Although the drastic change in the business environment has resulted in a substantial deterioration in the Asahi Kasei Group’s consolidated ﬁ nancial performance, we have determined that no fundamental change in our Growth Action – 2010 strategic management initiative is necessary. Rather, we will implement additional measures to accelerate the expansion of high-growth businesses such as electronics and health care, work to hold down inventories and cut ﬁ xed costs, and place greater management emphasis on proﬁ tability and investment efﬁ ciency, with accelerated streamlining of volume-product business operations and transformation of the business portfolio. As, in light of operating performance in the second half of ﬁ scal 2008, it has become highly unlikely that we will be able to achieve our original ﬁ nancial targets, the outlook for ﬁ nancial performance in ﬁ scal 2010 has been revised to ¥1,350–1,500 billion of net sales and ¥60–80 billion of operating income. such as remodeling and real estate. Our portfolio realignment has nevertheless been insufﬁ cient to overcome shrinking markets in this ﬁ eld. The third factor is a deterioration of ﬁ nancial strength. The sharp rise in feedstock and fuel prices followed by a drop in demand resulted in excessive cash-out for working capital, and the strategic investments we made under Growth Action – 2010 have yet to bring sufﬁ cient results, particularly with the recent economic decline. The result has been an increase in borrowings and a rise in our D/E ratio. Revision of ﬁ nancial performance forecasts (¥ billion) FY 2007 FY 2008 FY 2009 forecast (as of May 2009) FY 2010 outlook FY 2010 original target Net sales 1,696.8 1,553.1 1,355.0 1,350.0–1,500.0 1,800.0 Operating income Net income 127.7 69.9 35.0 4.7 41.0 15.0 60.0–80.0 — 150.0 80.0 Revision of investment plan Original plan (a) Results by FY08 Revised plan (b) (Decision adopted, ¥ billion) Decrease from original plan (b-a) Maintenance Expansion R&D M&A Subtotal Renewing petrochemical complex Dividends, restructuring, etc. Total 200 360 40 150 550 20 30 800 125 198.8 22.4 39.8 261 12 17 415 195 240 40 150 430 15 30 670 FY 09–10 ¥255 billion (5) (120) 0 0 (120) (5) 0 (130) 7 Four business sectors Holding company Asahi Kasei Core operating companies Asahi Kasei Fibers Asahi Kasei Chemicals Asahi Kasei Construction Materials Asahi Kasei Homes Asahi Kasei Microdevices Asahi Kasei E-materials Asahi Kasei Pharma Asahi Kasei Kuraray Medical Asahi Kasei Medical Chemicals & Fibers business sector Homes & Construction Materials business sector Electronics business sector Health Care business sector Whereas strategic investment of ¥800 billion had been planned for the ﬁ ve-year period of Growth Action – 2010, this will now be reduced by ¥130 billion to ¥670 billion. Investments for expansion of volume-product businesses are put on hold for the time being, and other investments are subject to careful selectivity in consideration of the business environment. By maintaining our D/E ratio at 0.5 or less, we will retain the ability to raise capital under competitive terms. Accelerating portfolio realignment and new businesses development To accelerate our business portfolio realignment with an overall strengthening of the Asahi Kasei Group, holding company Executive Ofﬁ cers were installed with purview corresponding to each of our four main business sectors: Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care. In their capacity as Executive Ofﬁ cers of the holding company, they work to advance strategic and effective allocation of resources to each business sector from the company-wide perspective, including investment, human resources, and R&D. In addition, a group- wide system was established for new business development to accelerate growth with the installation of ofﬁ cers responsible for technology and business development in each key ﬁ eld, and enhanced business development capability at the holding company. This portfolio realignment has also entailed the downsizing and withdrawal of underperforming businesses. At the end of September 2009, we will cease in-house production of polyester ﬁ lament and withdraw from monoﬁ lament operations. At the end of December 2009, we will withdraw from PTT ﬁ ber operations by dissolving our joint-venture for PTT ﬁ ber with Teijin Fibers Ltd. At the end of September 2009 we will withdraw from coenzyme Q10 operations, and at the end of March 2010 will close our construction materials plant in Shiraoi, Hokkaido. Even as further such restructuring will be implemented as necessary, we will continue to advance the creation and development of new businesses to effect a transformation of our business portfolio for healthy growth. Actions by business sector Chemicals & Fibers With operating losses in ﬁ scal 2008 and global oversupply forecast to continue, we are focused on heightening proﬁ tability rather than expanding the scale of operations. In chemicals, the efﬁ ciency of petrochemicals operations centered on the naphtha cracker in Mizushima will be raised, and the ratio of sales in specialty products will be increased through accelerated development of overseas business for water processing systems. In ﬁ bers, creation of new businesses will be accelerated through advancement of research and development at the new technology and R&D center in Moriyama. Homes & Construction Materials Under declining market conditions, stable earnings will be secured through expansion of peripheral businesses. In homes, new products featuring a new framing system and environmental compatibility will be launched to obtain increased orders for high-end urban homes, and housing-related businesses such as remodeling and real estate will be expanded. In construction materials, we will advance market development for Neoma™ foam high-performance insulation panels and expand other unique businesses such as piling systems for small-scale construction. 8 Asahi Kasei Annual Report 2009 Global business operations Taiwan Korea Formosa Asahi Spandex Co., Ltd. Asahi Kasei EMD Taiwan Corp. Asahi Kasei Wah Lee Hi-Tech Corp. Asahi-Schwebel (Taiwan) Co., Ltd. Hong Kong Asahi Kasei Plastics (Hong Kong) Co., Ltd. Asahi Chemical (HK) Ltd. Thailand Asahikasei Plastics (Thailand) Co., Ltd. Thai Asahi Kasei Spandex Co., Ltd. Singapore Asahi Kasei Plastics Singapore Pte. Ltd. Polyxylenol Singapore Pte. Ltd. Indonesia PT Nippisun Indonesia China Tong Suh Petrochemical Corp., Ltd. Asahi Kasei Chemicals Korea Co., Ltd. Asahi Kasei EMD Korea Corp. America Asahi Kasei America, Inc. Asahikasei Plastics (America) Inc. Asahi Kasei Plastics North America, Inc. Sun Plastech Inc. Asahi Kasei TechniKrom, Inc. Asahi Kasei Medical America Inc. Asahi Kasei Spandex America, Inc. AKM Semiconductor, Inc. Europe Asahi Kasei Plastics Europe SA/NV Asahi Kasei Medical Europe GmbH Asahi Kasei Planova Europe SA Asahi Pharma Spain, SL Asahi Kasei Spandex Europe GmbH Asahi Kasei Fibers Italy SRL Asahi Kasei Fibers Deutschland GmbH Asahi Photoproducts (Europe) SA/NV Asahi Photoproducts (UK) Ltd. Zhangjiagang Nantong Asahi-DuPont POM (Zhangjiagang) Co., Ltd. Asahi Kasei Performance Chemicals Corp. Suzhou Shanghai Asahikasei (Suzhou) Plastics Compound Co., Ltd. Asahi Kasei Electronics Materials (Suzhou) Co., Ltd. Hangzhou Asahi Kasei Business Management (Shanghai) Co., Ltd. Asahikasei Plastics (Shanghai) Co., Ltd. Asahi Kasei Microza (Hangzhou) Co., Ltd. Asahi Kasei Medical (Hangzhou) Co., Ltd. Hangzhou Asahikasei Spandex Co., Ltd. Hangzhou Asahikasei Textiles Co., Ltd. Holding Company Chemicals segment Health Care segment Fibers segment Electronics segment Japan Hozumi Shiga Moriyama Gunma Saitama Ageo Osaka head office Ono Mizushima Iwakuni Chikushino Oita Nobeoka Hyuga Mibu Tomobe Sakai Tokyo head office Chiba Tateyama Kawasaki Ohito Wakayama Fuji Nagoya Suzuka Electronics We will accelerate business expansion from the perspective of energy and resource conservation, adding new products in line with changing market trends. In electronic devices, the product lineup will be complimented with the power management semiconductor businesses acquired from Toko Inc. in April 2009. Development of products combining magnetic sensors and LSIs is advancing, and adoption of one such product, the electric compass, is expanding in cell phone applications. In electronic materials, Asahi Kasei E-materials began operation as a new core operating company in April 2009 to heighten management speed and efﬁ ciency. Production capacity for Hipore™ Li-ion rechargeable battery separators is being raised with an expansion of the plant in Moriyama and the construction of a new plant in Hyuga. To prepare for full-scale adoption of Li-ion batteries in automotive applications, R&D is being reinforced and an expansion of the business, including through M&A, is being studied. Health Care We are advancing the expansion and globalization of business in line with heightening health-related needs. In pharmaceuticals, the ﬁ rst priority is on ramping up sales and obtaining proﬁ tability from the Recomodulin™ intravenous anticoagulant approved in Japan in ﬁ scal 2008. By enhancing the sales network with an increased number of medical representatives, we will be able to obtain solid earnings from Recomodulin™ from ﬁ scal year 2011 onward. Having acquired from Roche Diagnostics GmbH all intellectual property rights related to naftopidil, an agent for the treatment of benign prostatic hyperplasia (BPH) marketed as Flivas™, we will expand operations to include production as well as sale. Development of the two compounds we have in Phase Ш clinical trials is advancing smoothly. In medical devices and related operations, we concluded alliance with NxStage Medical, Inc. of the US to secure a base in Germany for the assembly of Asahi Kasei Kuraray Medical’s artiﬁ cial kidneys. Following our assembly plant in China, this will serve 9 Operating income breakdown in FY 2015 Chemicals & Fibers Electronics Chemicals & Fibers Electronics Health Care Homes & Construction Materials Homes & Construction Materials Health Care FY 2005 Vision for FY 2015 as our second overseas base for artiﬁ cial kidney assembly. For the further global expansion of our dialysis products business, we are also considering the construction of new assembly lines in other overseas locations in line with market trends. Having acquired full ownership of TechniKrom’s bioprocess business, Asahi Kasei Medical will expand operations in products for biopharmaceutical production by building on the combination of its separation media technology with TechniKrom’s bioprocess equipment and systems technology. We have also entered into the ﬁ eld of advanced medical devices through the acquisition of exclusive rights for the sale in Japan of Medtronic Japan’s Reveal™ DX insertable cardiac monitor. This was followed by the start of clinical trials for the Evaheart™ ventricular assist system in the US in cooperation with Misuzu & Sun Medical Holdings. Return to shareholders While we had successively increased dividends along Net income and dividends (¥ billion) 100 80 60 40 20 0 FY (¥ per share) 14 13 12 68.6 69.9 10 10 10 59.7 56.5 8 6 27.7 03 04 05 06 07 15.0 4.7 08 09 (forecast) 12 10 8 6 2 0 Net income, left scale Cash dividends per share, right scale with growth in consolidated ﬁ nancial performance, dividends for ﬁ scal 2008 were reduced by ¥3 per share from a year earlier to ¥10 due to the substantial deterioration in operating results. Although the challenging operating climate is forecast to continue in ﬁ scal 2009, we intend to maintain annual dividends at ¥10 per share. Over the longer term, we will heighten return to shareholders by achieving growth in consolidated earnings. Vision for ﬁ scal 2015 In ﬁ scal 2005, the Chemicals & Fibers business sector earned around 40–45% of the Asahi Kasei Group’s total operating income, and in ﬁ scal 2007 this rose to around 50–55%. By steadily implementing strategic actions under Growth Action – 2010 and advancing our business portfolio transformation for the future, growth will be concentrated in the Electronics and Health Care business sectors, resulting in a balanced structure where roughly a quarter of operating income is earned in each of our four main business sectors by ﬁ scal 2015. At the same time we will advance preparations for the next phase of growth as a fast and lean enterprise coping effectively with challenges related to resources and the environment. Core Operating Company Directors (As of April 1, 2009) Fiscal 2008 Composition of Net Sales, Operating Income (Loss) 10 Asahi Kasei Annual Report 2009 At a Glance Operating Segments, Core Operating Companies Chemicals Asahi Kasei Chemicals Corp. Homes Asahi Kasei Homes Corp. Health Care Asahi Kasei Pharma Corp. Asahi Kasei Kuraray Medical Co., Ltd. Asahi Kasei Medical Co., Ltd. Asahi Kasei Chemicals Corp. Masaki Sakamoto Keiji Kamei Masami Fujimori Koji Fujiwara Kyosuke Komiya Hajime Nagahara Tadashi Akaishi Yuji Kobayashi Heiichiro Obanawa President & Representative Director Presidential Executive Ofﬁ cer Director, Vice-Presidential Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Asahi Kasei Homes Corp. Shingo Hatano Masahito Hirai Eisuke Ikeda Morio Watanabe Hiroshi Kobayashi President & Representative Director Presidential Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director Asahi Kasei Pharma Corp. Tsutomu Inada Akio Kobayashi Toshio Asano Yasuyuki Yoshida President & Representative Director Presidential Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director Asahi Kasei Kuraray Medical Co., Ltd. Yasuyuki Yoshida President & Representative Director Presidential Executive Ofﬁ cer Director, Vice-Presidential Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director Hideo Horii Naoyuki Ohya Takao Kiyota Tsutomu Inada Asahi Kasei Medical Co., Ltd. Yasuyuki Yoshida President & Representative Director Presidential Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director Fibers Asahi Kasei Fibers Corp. Naoyuki Ohya Takao Kiyota Tsutomu Inada Asahi Kasei Fibers Corp. Hidefumi Takai Fujio Nishimura Masaki Sakamoto President & Representative Director Presidential Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director Asahi Kasei Microdevices Corp. Makoto Konosu Hideki Kobori Masafumi Nakao President & Representative Director Presidential Executive Ofﬁ cer Director, Primary Executive Ofﬁ cer Director, Executive Ofﬁ cer Asahi Kasei E-materials Corp. Katsuhiko Yamazoe Koji Yamada Tetsuro Ota Makoto Konosu President & Representative Director Presidential Executive Ofﬁ cer Director, Executive Ofﬁ cer Director, Executive Ofﬁ cer Director Asahi Kasei Construction Materials Corp. Hiroshi Kobayashi Fumio Nakagawa Masafumi Funaki Shingo Hatano President & Representative Director Presidential Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director, Senior Executive Ofﬁ cer Director Electronics Asahi Kasei Microdevices Corp. Asahi Kasei E-materials Corp. Construction Materials Asahi Kasei Construction Materials Corp. Services, Engineering and Others Note: The former Pharma and Electronics Materials & Devices segments were renamed Health Care and Electronics, respectively, on April 1, 2009. Net Sales 48% ¥741.5 billion ¥741.5 billion ¥741.5 billion Operating loss ¥0.4 billion ¥0.4 billion ¥0.4 billion Net Sales 26% ¥409.9 billion Operating income ¥21.9 billion Net Sales 8% ¥119.6 billion Operating income ¥12.0 billion Net Sales 7% ¥102.2 billion Operating loss ¥0.9 billion Net Sales 6% ¥91.7 billion Operating income ¥3.3 billion Net Sales 4% ¥60.9 billion Operating income ¥1.7 billion Net Sales 2% ¥27.3 billion Operating income ¥5.6 billion 11 Main Businesses Major Consolidated Subsidiaries Organic and inorganic industrial chemicals, synthetic resin, synthetic rubber, coating materials, latex, pharmaceutical and food additives, explosives, photopolymers and plate-making systems, separation and ion-exchange membranes, systems, and equipment. Sanyo Petrochemical Co., Ltd. Asahi Kasei Pax Corp. Asahi Kasei Home Products Corp. Japan Elastomer Co., Ltd. Asahi Kasei Technoplus Co., Ltd. Tong Suh Petrochemical Corp., Ltd. Asahi Kasei Plastics Singapore Pte. Ltd. Asahikasei Plastics (America) Inc. Asahi Kasei Performance Chemicals Corp. Asahi Kasei Microza (Hangzhou) Co., Ltd. Hebel Haus™ houses, Hebel Maison™ apartments, condominiums, remodeling, real estate, residential land development, ﬁ nancial services. Asahi Kasei Jyuko Co., Ltd. Asahi Kasei Mortgage Corp. Asahi Kasei Reform Co., Ltd. Asahi Kasei Real Estate, Ltd. Pharmaceuticals, pharmaceutical intermediates, diagnostic reagents, hemodialyzers and other medical devices. Asahikasei Aime Co., Ltd. Asahi Kasei Medical (Hangzhou) Co., Ltd. Roica™ elastic polyurethane ﬁ lament (spandex), Eltas™ spunbond, Lamous™ artiﬁ cial suede, Bemliese™ cupro cellulosic nonwoven, Bemberg™ cupro cellulosic ﬁ ber, polyester ﬁ lament, Solotex™ polytrimethylene terephthalate (PTT) ﬁ ber. Kyokuyo Sangyo Co., Ltd. Thai Asahi Kasei Spandex Co., Ltd. Hangzhou Asahikasei Spandex Co., Ltd. Asahi Kasei Spandex Europe GmbH Asahi Kasei Spandex America, Inc. Asahi Chemical (HK) Ltd. Hangzhou Asahikasei Textiles Co., Ltd. Pimel™ photosensitive polyimide precursor, Sunfort™ dry ﬁ lm photoresist, Hall elements, LSIs, glass fabric for printed circuit boards, photomask pellicles. Asahi Kasei Electronics Materials (Suzhou) Co., Ltd. Asahi-Schwebel (Taiwan) Co., Ltd. Hebel™ autoclaved aerated concrete, construction piles, Neoma™ foam and other thermal insulation. Asahi Kasei Foundation Systems Corp. Plant, equipment, process engineering, employment agency, think tank Asahi Research Center Co., Ltd. Asahi Finance Co., Ltd. Asahi Kasei Engineering Co., Ltd. Asahi Kasei Amidas Co., Ltd. 12 Asahi Kasei Annual Report 2009 Operating Segments With Creating the Future with Chemistry as our basic ideal, we will contribute to environmental protection and human health through our diverse business operations, advancing as a vigorous, high- earnings company. Masaki Sakamoto President, Asahi Kasei Chemicals Chemicals MAJOR PRODUCTS Chemicals and derivative products Ammonia, nitric acid, caustic soda, acrylonitrile (AN), styrene, adipic acid, methyl methacrylate (MMA), Suntec™ polyethylene (PE), synthetic rubber and elastomer. Polymer products Stylac™-AS styrene-acrylonitrile, Stylac™-ABS acrylonitrile-butadiene- styrene, Tenac™ polyacetal, Xyron™ modiﬁ ed polyphenylene ether (mPPE), Leona™ nylon 66 polymer and ﬁ lament*, Saran Wrap™ cling ﬁ lm, Ziploc™ storage bags, plastic ﬁ lm, sheet, and foam. Specialty products Coating materials, styrene-butadiene latex, Ceolus™ microcrystalline cellulose, explosives, 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. * Leona™ ﬁ lament transferred to Fibers operating segment on April 1, 2009. ** Products transferred to Electronics operating segment on April 1, 2009. Growth Action – 2010 Each business is classiﬁ ed either as a strategic expansion business, with management resources focused on achieving growth and high earnings, or as a stable growth, stable earnings business, with efforts focused on strengthening and enhancement to heighten proﬁ tability. 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 ﬁ elds, include water treatment systems and ion-exchange membrane 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. 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. Fiscal 2008 Review Sales decreased by ¥137.7 billion (15.7%) from a year ago to ¥741.5 billion and an operating loss of ¥0.4 billion resulted with a ¥65.6 billion decline in proﬁ tability. In volume products operations, both chemicals and derivative products and polymer products, proﬁ tability fell with the sharp impact of high feedstock prices in the ﬁ rst half of the ﬁ scal year and with a steep decline in shipment volumes due to deteriorating market conditions both in Japan and worldwide, the sharp impact of the appreciation of the yen, and the impact of devaluation of inventories in the second half of the ﬁ scal year. Although specialty products operations performed well during the ﬁ rst half of the ﬁ scal year, shipments of Hipore™ Li-ion rechargeable battery separator membranes and of ion-exchange membranes for chlor-alkali electrolysis decreased with the sudden deterioration of market conditions in the second half of the ﬁ scal year, and operating income decreased. Operating Income (Loss), Operating Margin (¥ billion) 7.0 56.6 7.4 65.2 (%) 9.0 6.0 3.0 (0.4) 0 (0.06) (2.0) 06* 07 08 80 60 40 20 0 (100) FY Net Sales (¥ billion) 1,000 879.2 800 805.2 741.5 600 400 200 0 FY 06* 07 08 * Including former Life & Living segment. Fiscal 2009 Outlook The severe operating climate which began in the second half of ﬁ scal 2008 is expected to continue, with weak product demand and a strong yen. For volume products, we forecast falling prices for naphtha and other feedstocks, some extent of recovery in sales volumes, and lower inventory valuation losses. In specialty products operations, we forecast falling feedstock prices and recovering sales volumes. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 19.2 18.5 2.6% 2.1% 45.7 34.3 36.7 37.1 Major Capital Investments Completed in ﬁ scal 2008 Capacity expansion of solution-polymerized styrene-butadiene rubber production facility Under construction in ﬁ scal 2008 New boiler and power generation turbine using SDA pitch New AN and MMA plants in Thailand Capacity expansion for Hipore™ Li-ion rechargeable battery separators New plant for Hipore™ Li-ion rechargeable battery separators R&D Technology development in line with the basic ideal of Creating the Future with Chemistry is directed toward the ﬁ elds of petrochemicals, electronics and optics, and environment and energy. The focus in petrochemicals and monomers is on advances and innovations in catalysts and chemical processes for diversiﬁ cation of feedstocks, as with the world’s ﬁ rst propane process for acrylonitrile (AN) which was recently developed. In electronics and optics, a wide range of functional sheets and ﬁ lms are nearing commercialization. Development in the ﬁ eld of energy will be expanded from the base of Hipore™ Li-ion rechargeable battery separator technology to various materials for distributed energy systems. In ecology, development of water treatment materials technology is advancing for expansion into promising new markets. In polymers/ compounds and performance chemicals, the focus is on obtaining higher added value. 13 HIGHLIGHTS Wastewater recycling plant in Suzhou, China In February 2009, Asahi Kasei Chemicals began operation of a plant to provide wastewater recycling service to Sony Chemicals (Suzhou) Co., Ltd. in a BOO (build- own-operate) project. In addition to design and construction, Asahi Kasei Chemicals owns and operates the plant, treating recovered wastewater and supplying industrial water to the client. This project marks a milestone for further expansion of the water treatment business of Asahi Kasei Chemicals, enabling full utilization of the company’s superior membrane performance, experience, and operating know-how, extending the business model beyond the sale of Microza™ ﬁ ltration membrane modules and systems. Sony Chemicals (Suzhou), site of the ﬁ rst BOO project for wastewater recycling Expansion of production capacity for Hipore™ Hipore™ Li-ion rechargeable battery separators used in notebook PCs and cell phones hold a global market share of over 50%. To meet strong demand growth, Asahi Kasei Chemicals is expanding production capacity at its existing plant in Moriyama, Shiga, Japan, and at the same time building a new plant in Hyuga, Miyazaki, Japan. Market development is also being advanced, particularly in the ﬁ eld of batteries for hybrid electric vehicles and all-electric vehicles, an example of chemical technology helping to contribute to ecological compatibility. Hipore™ Li-ion rechargeable battery separator 14 Asahi Kasei Annual Report 2009 Marketing capability is strengthened through a reconﬁ guration of the sales organization, and the Long Life Home product strategy for maintaining and enhancing customer satisfaction over the long term is advanced to obtain growth in new orders. Expansion of housing- related businesses will be built on the established base of Hebel Haus™ homes sold to date. Shingo Hatano President, Asahi Kasei Homes Homes MAJOR PRODUCTS Hebel Haus™ houses, Hebel Maison™ apartments, condominiums, remodeling, real estate, residential land development, home ﬁ nancing. Sales Trends (Asahi Kasei Homes non-consolidated) 354.1 1.1 33.6 347.5 1.0 28.9 319.4 317.6 332.0 1.1 20.1 310.7 322.5 1.0 24.5 323.0 1.5 35.5 338.7 1.5 29.9 307.3 297.1 286.0 (¥ billion) 400 300 200 100 0 FY 04 05 06 07 08 09 Forecast Others Pre-built homes Order-built homes Orders Received (¥ billion) 400 300 301.8 313.3 303.4 306.1 309.0 291.1 200 100 0 FY 04 05 06 07 08 09 Forecast 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. Speciﬁ c actions include: • Successive development of new products tailored to speciﬁ c market characteristics in different regions. • Advancement of cost reductions through shared procurement and 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 ﬁ nancial services. Speciﬁ c 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 ﬁ nancing 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. Fiscal 2008 Review Sales increased by ¥23.7 billion (6.1%) from a year ago to ¥409.9 billion and operating income increased by ¥0.5 billion (2.3%) to ¥21.9 billion. Although deliveries of Hebel Haus™ unit homes recovered from the decline a year ago due to falsiﬁ cation of the performance of certain components as came to light in late October 2007, and there were deliveries of condominium units with the completion of a large construction project, operating income in order-built and pre- built homes operations decreased with the impact of high costs for materials and a devaluation of real estate held as inventory for sale. Although real estate operations struggled, operating income from housing-related operations increased with remodeling and ﬁ nancing operations performing well. New orders for order-built homes decreased by ¥15.0 billion from a year ago to ¥291.1 billion as an effect of a sharp decline in market conditions beginning in the second half of the ﬁ scal year. Net Sales (¥ billion) 500 400 405.7 409.9 386.2 300 200 100 0 FY 06 07 08 Operating Income, Operating Margin (¥ billion) 30 20 10 0 FY 27.5 21.4 21.9 6.8 5.5 5.3 06 07 08 (%) 9.0 6.0 3.0 0 15 HIGHLIGHTS New Hebel Haus™ structure The Fine Hebel Haus™ series of home products featuring high- endurance thermal insulation and airtight structure was launched in September 2008, extending performance from the perspective of long-term home durability. By separating the insulation layer and airtight barrier layer from interior walls and ceilings, the new product line enables future remodeling with no loss of insulation performance. This new structure marks a notable advance in the Long Life Home concept for maintenance of high asset value over the long term. In May 2009 it was adopted for all Hebel Haus™ products, supplanting the Fine series. Fiscal 2009 Outlook Deliveries of large condominiums will increase and housing-related operations will expand. Deliveries of unit homes will decline due to decreased orders received. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fine Hebel Haus™ Fiscal 2008 Fiscal 2007 2.5 2.1 0.6% 0.5% 7.0 7.5 3.4 2.7 R&D R&D is focused on enhancing core technologies. Shelter technology brings greater safety and security through earthquake resistance, seismic damping, and ﬁ re 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 energy conservation and reduced CO2 emissions. 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 modiﬁ cations 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 efﬁ ciency and environmental compatibility in homes optimized for health and comfort. In October 2007, the main functions for housing R&D were transferred to a new center in Fuji, the central location of R&D facilities for the Asahi Kasei Group. The location of the new R&D center in Fuji affords a larger scale and wider range of facilities, with housing R&D further advanced by the synergy of interaction with other Asahi Kasei research facilities at the same site. Hebel Haus™ homes featuring electric power generation A promotion campaign for Hebel Haus™ homes featuring electric power generation with leading-edge performance began in January 2009. The homes are available with a solar panel array combined with either an “Ene Farm” residential fuel cell or the geothermal heating/ cooling system developed by Asahi Kasei Homes. The company will continue to advance the development of eco-efﬁ cient homes which facilitate energy conservation and reduced CO2 emissions while maintaining convenience and comfort. Hebel Haus™ with power generation 16 Asahi Kasei Annual Report 2009 The pharmaceutical business is advancing as a specialized, R&D-centered operation, expanding earnings through the launch of new drugs and reinforcing the operational foundation through the steady advancement of R&D. Tsutomu Inada President, Asahi Kasei Pharma Health Care MAJOR PRODUCTS Pharmaceutical-related Elcitonin™, Bredinin™, Flivas™, Toledomin™, Recomodulin™, and other pharmaceuticals, diagnostic enzymes and reagents. Medical device-related APS™ artiﬁ cial kidneys, Cellsorba™ leukocyte adsorption columns, Planova™ virus removal ﬁ lters, Sepacell™ leukocyte reduction ﬁ lters. With the expansion of medical devices-related operations identiﬁ ed as a strategic objective for the group, the global development of business will be advanced through proactive capital investment and R&D for innovative therapeutic and medical-related devices and systems. Yasuyuki Yoshida President, Asahi Kasei Kuraray Medical & Asahi Kasei Medical (formerly Pharma segment) Growth Action – 2010 Pharmaceutical-related: Advancement as a specialized, R&D-centered operation, with management resources focused on selected therapeutic ﬁ elds. Expansion of operations through structural reform and slim, robust management, building on an established presence in selected therapeutic ﬁ elds in the Japanese market. In diagnostics, investment of management resources is focused on products with strong growth prospects. Medical device-related: Based on established leadership in devices for extracorporeal circulation, the business is being transformed for development as a comprehensive leader in blood-related healthcare systems, spanning from disease treatment to preventive medicine and blood-based risk-factor analysis/diagnosis. Over the longer term, healthcare systems will be developed in regenerative medicine, the nervous system, and other ﬁ elds. Fiscal 2008 Review Sales increased by ¥8.4 billion (7.5%) from a year ago to ¥119.6 billion and operating income decreased by ¥0.6 billion (5.0%) to ¥12.0 billion. Although reimbursement prices decreased and R&D expenses increased, operating income from pharmaceutical operations increased with licensing income for the anti-herpes agent Famvir™. Although shipments of APS™ polysulfone-membrane artiﬁ cial kidneys and Planova™ virus removal ﬁ lters increased, particularly exports, operating income in devices operations decreased with increased depreciation expenses following production capacity expansion and with the effect of the appreciating yen. Fiscal 2009 Outlook For the pharmaceutical business, we forecast an increase in sales volume for Flivas™ therapy for benign prostatic hyperplasia, a decrease in licensing income, and an increase in R&D expenditure for the development of new pharmaceuticals. For the medical device-related business, we forecast an increase in sales volume for APS™ artiﬁ cial kidneys and Planova™ virus ﬁ lters, and an impact on proﬁ tability from increased expenses for depreciation and R&D, and from appreciation of the yen. Net Sales (¥ billion) 120 104.5 100 119.6 111.2 80 60 40 20 0 FY Operating Income, Operating Margin (¥ billion) 13.9 12.7 13.3 15 12 9 6 3 0 (%) 15.0 12.0 12.0 11.4 10.1 9.0 6.0 3.0 0 06 07 08 FY 06 07 08 17 HIGHLIGHTS Lucica™ GA-L selected by Japanese Red Cross Society In March 2009, the Japan Red Cross Society (JRCS) selected Asahi Kasei Pharma’s Lucica™ GA-L liquid reagent kit for the measurement of glycated albumin as a marker for glycemic control in diabetes. Having decided to add a marker for glycemic control to its slate of biochemical tests on donated blood, the JRCS selected the measurement of glycated albumin with Lucica™ GA-L for the low cost and ease of use enabled. Lucica™ GA-L thus now plays a key role in helping to counteract the increase in the number of diabetes patients in Japan. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 16.4 14.7 13.7% 13.2% 31.6 10.0 10.3 6.1 Major Capital Investments Completed in ﬁ scal 2008 New plant with integrated spinning & assembly lines for APS™ polysulfone- membrane dialyzers Lucica™ GA-L liquid reagent kit New plant for Sepacell™ virus removal ﬁ lters Under construction in ﬁ scal 2008 Capacity expansion for spinning polysulfone hollow-ﬁ ber membrane for APS™ dialyzers New assembly plant for Planova™ virus removal ﬁ lters R&D In pharmaceuticals, the focus is on new drug development in the ﬁ elds of orthopedics, the central nervous system, and urology; clinical development; and extension of market life through enhanced product conformation. In medical devices and related systems, developments are advancing in hemodialysis, therapeutic apheresis, leukocyte reduction, and virus removal, with next-generation ﬁ elds of research including regenerative medicine utilizing autohemotherapy. Pharmaceutical Product Pipeline Development stage Product Objective Class Phase III AT-877 (injection) PTH (injection) Additional indication Rho-kinase inhibitor New biologic Synthetic human parathyroid hormone (as of May 2009) Indication Acute cerebral thrombosis Osteoporosis Acquisition of TechniKrom’s bioprocess business In March 2009, Asahi Kasei Medical acquired the bioprocess business of TechniKrom, Inc., a world leader in bioprocess equipment technology. This acquisition accelerates Asahi Kasei Medical’s expansion of business in the growing bioprocess market, enabling the provision of a wide range of equipment and separation media used in biopharmaceutical production in addition to Planova™ virus removal ﬁ lters. Preparing for Phase III AK-120 (oral) Phase II AT-877 (oral) Preparing for Phase II Phase II (overseas) AK150 (injection) ART-123 (injection) Additional indication Additional indication Famiclovir antiviral Herpes simplex Rho-kinase inhibitor Pulmonary hypertension New biologic Pentosan polysulfate Osteoarthritis New biologic Recombinant human thrombomodulin Septicemia with disseminated intra- vascular coagulation Planova™ virus removal ﬁ lter AK106 New biologic Anti-inﬂ ammatory Rheumatoid arthritis 18 Asahi Kasei Annual Report 2009 We are advancing our business portfolio realignment through development of business in non-apparel and industrial-use materials, expansion of global business, and enhancement of production infrastructure, in line with our basic strategy to reinforce the operational foundation and achieve stable growth. Hidefumi Takai President, Asahi Kasei Fibers Fibers MAJOR PRODUCTS Roica™ elastic polyurethane ﬁ lament, Eltas™ spunbond, Lamous™ artiﬁ cial suede and other nonwovens, Bemberg™ cupro cellulosic ﬁ ber, polyester ﬁ lament. Growth Action – 2010 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 and industrial-use materials. Strengthening base for proﬁ tability in domestic business operations. Developing new businesses as next-generation core ﬁ elds of operation. For greater earnings in established businesses: • Advancement of global development. • Expansion and development of non-apparel and industrial-use materials. • Securing proﬁ tability by heightening facilities utilization and enhancing the processing and production infrastructure. • Continuous cost reduction. For expansion of new businesses: • Commercialization of Cyberlon™ polyketone ﬁ ber business. • Development of new businesses peripheral to established cellulosic ﬁ bers and nonwovens businesses. Rapid scale-up to form new core business. • Extension of business domain based on established technology and know- how, in growth ﬁ elds not limited to ﬁ ber production. • Advancement of alliances and joint projects with partners within and outside the Asahi Kasei Group. Fiscal 2008 Review Sales decreased by ¥11.9 billion (10.4%) from a year ago to ¥102.2 billion and an operating loss of ¥0.9 billion resulted with an ¥8.1 billion decline in proﬁ tability. Operating income in elastic polyurethane ﬁ lament operations decreased as deteriorating overseas market conditions resulted in lower product prices and shipment volumes, and with the effect of the appreciating yen. Although shipments to overseas markets remained ﬁ rm, operating income in Bemberg™ regenerated cellulose ﬁ ber operations decreased with high feedstock and fuel costs and with the effect of the appreciating yen. Proﬁ tability of nonwovens operations fell with high feedstock and fuel costs and decreased shipment volumes as an effect of deteriorating market conditions. Net Sales (¥ billion) 120 100 80 60 40 20 0 FY 114.1 106.6 102.2 06 07 08 Operating Income (Loss), Operating Margin (¥ billion) 8 6 4 2 0 (20) FY 7.2 6.3 4.2 3.9 (0.8) (0.9) 06 07 08 (%) 8.0 6.0 4.0 2.0 0 (2.0) Fiscal 2009 Outlook Feedstock and fuel costs will be lower and shipments of Lamous™ artiﬁ cial suede will increase in automobile interior applications, but recovery in shipments of other products will take more time. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 3.8 3.4 3.7% 3.0% 12.3 9.3 6.4 5.7 Major Capital Investments Completed in ﬁ scal 2008 Capacity expansion for Roica™ elastic polyurethane ﬁ lament in Thailand New technology and R&D center Under construction in ﬁ scal 2008 Capacity expansion for Roica™ elastic polyurethane ﬁ lament in Thailand R&D R&D is focused on the development of new materials and high value-added grades of existing materials. In September 2008, a new technology and R&D center was opened in Moriyama, Shiga, as a base for R&D of Asahi Kasei Fibers. R&D for new materials includes development of Cyberlon™ polyketone, creation of new cellulose-related business, and development of new nonwovens. R&D on existing materials is directed toward the development of new high-value added grades of Roica™ spandex, Bemberg™ cupro, Leona™ nylon 66, and nonwovens which meet market needs for advanced performance. 19 HIGHLIGHTS Completion of new technology and R&D center In June 2008, a new ﬁ bers technology and R&D center was completed in Moriyama, Shiga. The functions of two former research centers of Asahi Kasei Fibers in Moriyama and Takatsuki, Osaka, were integrated and expanded in the new R&D center. With its enhanced capabilities, the new center will enable Asahi Kasei Fibers to accelerate R&D to achieve its mid-range strategic objectives to expand overseas business and develop new applications for industrial-use materials, accelerating the establishment of new core businesses. New technology and R&D center Leona ™ nylon 66 ﬁ lament business transfer The Leona™ ﬁ lament business was transferred from Asahi Kasei Chemicals to Asahi Kasei Fibers in April 2009. Leona™ ﬁ lament is used in industrial applications such as tire cord, with strong growth forecast in automobile air-bag applications. The addition of Leona™ ﬁ lament to the product family of Asahi Kasei Fibers will accelerate the realignment of the business portfolio through expansion in the ﬁ eld of industrial- use materials. Asahi Kasei Fibers will further reinforce and expand the Leona™ ﬁ lament business through applications development based on its advanced technical know-how in the ﬁ eld of ﬁ bers. Leona™ nylon 66 ﬁ lament 20 Asahi Kasei Annual Report 2009 Growth of a high-earnings operational structure is obtained through leadership in the development of products for emerging applications in electronic devices markets. Proﬁ table growth in market share is obtained through ongoing development of competitive grades and advancement of cost performance as well as development of new products which provide new value to customers. Makoto Konosu President, Asahi Kasei Microdevices Katsuhiko Yamazoe President, Asahi Kasei E-materials Electronics (formerly Electronics Materials & Devices segment) MAJOR PRODUCTS Pimel™ photosensitive polyimide precursor (PSPI), Sunfort™ dry ﬁ lm photoresist (DF), glass fabric, photomask pellicles, mixed-signal LSIs, Hall elements, ﬁ ne-pattern coils. A new core operating company of the Asahi Kasei Group, Asahi Kasei E-materials Corp., integrating businesses in electrochemicals-related* product ﬁ elds, was established in April 1, 2009. The “E” represents the company’s main business ﬁ elds – “energy materials” and “electronic materials” – and “ecology” as a key focus in products and operations. Asahi Kasei E-materials is committed to contributing to sustainable growth and prosperity, using chemical technology for green electronic materials, enhancing the environmental performance of electronic products. Operating performance of Asahi Kasei E-materials will be reported in the Electronics segment beginning with ﬁ scal 2009. Proﬁ le of Asahi Kasei E-materials: President: Katsuhiko Yamazoe Paid-in capital: ¥3 billion Address: 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan Phone: +81-(0)3-3296-3939 Main products: Hipore™ microporous membrane, photomask pellicles, plastic optical ﬁ ber, light-diffusion plates, APR™ photosensitive resin and systems, epoxy resin, Pimel™ photosensitive polyimide precursor, Sunfort™ dry ﬁ lm photoresist, glass fabric. * Electronic materials based on chemical technology used in applications such as semiconductor packaging, displays, and batteries. Growth Action – 2010 Advancement of high-earnings operations securing industry leadership status in each market segment and functional category, building a presence as a vital partner which provides customers with materials and functions that are indispensable for production processes and ﬁ nal products, utilizing superior development, design, and production technologies and marketing strength. In electronic devices: Expansion of business maintaining high proﬁ tability through addition of peripheral functions in established applications and market development in new high-growth ﬁ elds, based on the two core technologies of sensor technology and analog/digital mixed-signal LSI technology, including new developments which combine the two core technologies. Further business expansion in markets in Europe and the US with synergies between our proprietary technologies and the IP cores and process technologies for power management semiconductors held by the business obtained from Toko Inc. In electronic materials: Expansion and reinforcement of No. 1 businesses including Hipore™ Li-ion rechargeable battery (LiB) separators, Sunfort™ dry ﬁ lm photoresist, and large photomask pellicles, while launching new products featuring reduced environmental burden. For Hipore™, reinforcement of the No. 1 position in portable applications and establishment of a leading position in the promising market for automobile applications. For Sunfort™, with the world’s largest production capacity, solidifying the market position in high-end applications and heightening competitiveness to further expand market share. Fiscal 2008 Review Sales decreased by ¥21.5 billion (19.0%) from a year ago to ¥91.7 billion and operating income decreased by ¥18.9 billion (85.0%) to ¥3.3 billion. Operating income in electronics materials and electronics devices operations decreased as a broad and rapid deterioration of market conditions occurred throughout all product sectors including cell phones, notebook PCs, and other IT and home electronics products, resulting in decreased shipment volumes, and with a sharp impact of the appreciating yen. Net Sales (¥ billion) 120 112.1 113.3 91.7 Operating Income, Operating Margin (¥ billion) 22.6 22.2 20.2 19.6 25 20 15 10 5 0 (%) 30.0 20.0 10.0 0 3.6 3.3 08 06 07 08 FY 06 07 100 80 60 40 20 0 FY Fiscal 2009 Outlook For electronic materials, we forecast growing sales volume in line with a recovery of market conditions beginning in the second half of the ﬁ scal year, although product prices are likely to decline. For electronic devices, the semiconductor business purchased from Toko Inc. will contribute to sales and a cost-cutting effort will yield positive effects. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 11.2 9.7 12.2% 8.5% 21.6 17.0 15.4 13.9 Major Capital Investments Completed in ﬁ scal 2008 R&D Construction of a new production line for photomask pellicles Capacity expansion for Sunfort™ dry ﬁ lm photoresist in China R&D Swift R&D keeping pace with the rapid technology innovation of the electronics industry is directed toward the creation of products which meet emerging needs and demanding requirements, as identiﬁ ed through close interaction with the customer. In electronic devices, advanced development of high-performance products is based on compound semiconductor process technology gained through development of high-sensitivity magnetic sensors and digital/analog mixed-signal LSI technology. Development of new electronic materials compatible with emerging standards for ﬁ ne patterning, high density, and high transmission speeds in the ﬁ eld of semicon- ductors and package substrates is based on technologies for the design, synthesis, thin-ﬁ lm coating, and ﬁ ne-pattern processing of photosensitive polymers. Other advanced developments include materials with new added value for ﬂ at-panel displays. 21 HIGHLIGHTS Capacity expansion for Sunfort™ dry ﬁ lm photoresist* To meet growing demand for dry ﬁ lm photoresist (dry ﬁ lm) used to form circuit patterns for cell phones and home electronics, Asahi Kasei EMD completed a large expansion of production capacity at its plant in China for Sunfort™ dry ﬁ lm in June 2008. With this expansion, the company has obtained the world’s largest dry ﬁ lm capacity, securing stable product supply as demand grows, particularly in China. * Sunfort™ business transferred to Asahi Kasei E-materials on April 1, 2009. Sunfort™ dry ﬁ lm photoresist Transfer of semiconductor business from Toko Inc. In January 2009 Asahi Kasei EMD concluded an agreement to acquire the semiconductor business of Toko Inc., and Asahi Kasei Toko Power Device Corp. began operation in April 2009 as a consolidated subsidiary. Demand for LSIs with higher performance is forecast to grow as consumer electronics products feature greater functionality, smaller size, and lower power consumption. Integration of the power management semiconductor business from Toko will enable higher added value, faster product development, provision of products and services more closely aligned with consumer needs, and advancement of the global expansion of operations. LSI products 22 Asahi Kasei Annual Report 2009 With a reinforced commitment to customer focus, safety, security, and comfort, we contribute to a heightening of the quality of construction through enhancement of our unique product family, development of promising peripheral businesses, and establishment of new business models. Hiroshi Kobayashi President, Asahi Kasei Construction Materials Construction Materials MAJOR PRODUCTS Hebel™ autoclaved aerated concrete (AAC) panels, steel-frame structural components, piles and foundation systems, Neoma™ foam insulation panels. Growth Action – 2010 AAC-related: Thorough reduction of operating costs and strengthening of operations. Development of peripheral businesses. Foundation systems: Expansion and reinforcement of Eazet™ and ATT Column™ small-scale piles business. Development of new construction methods. Insulation materials: Expansion of sales of Neoma™ high-performance foam insulation panels in line with extended implementation of next-generation energy conservation standards. Development of new applications for Neoma™ foam. Structural materials: Expansion of sales through reinforced marketing capability and enhanced product lineup, with demand supported by the revision of Building Standards Act. Fiscal 2008 Review Sales increased by ¥5.2 billion (9.3%) from a year ago to ¥60.9 billion and operating income decreased by ¥1.1 billion (39.5%) to ¥1.7 billion. Although the BasePack™ earthquake-resistant column base attachment system performed well and shipments of Hebel™ autoclaved aerated concrete panels were maintained, operating income in building materials and housing materials operations decreased with increased costs for fuel and materials. Operating income in foundation systems operations increased as shipments of the Eazet™ and ATT Column™ piling systems for small-scale construction, and of the DynaWing™ pre-cast concrete piling system featuring minimal soil disposal and high load-bearing capacity, increased. Despite increased costs for fuel and materials, proﬁ tability of insulation materials operations improved with higher product prices. Operating Income, Operating Margin (¥ billion) 5.0 4.0 3.0 2.0 1.0 0 FY 5.0 8.3 2.8 5.0 1.7 2.8 06 07 08 (%) 10.0 8.0 6.0 4.0 2.0 0 Net Sales (¥ billion) 70 60.8 60.9 55.7 60 50 40 30 20 10 0 FY 06 07 08 Fiscal 2009 Outlook Although a decline of sales volume is forecast due to decreasing construction demand, we will cut ﬁ xed costs, including through optimization of the production infrastructure. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 1.0 0.9 1.7% 1.7% 2.4 2.5 3.6 3.1 R&D The Neoma™ phenolic foam thermal insulation business will be expanded through developments to enhance production efﬁ ciency and enable composite product variations. High-performance materials for housing, ecoefﬁ cient building foundation systems, and AAC panels with additional functions are under development. 23 HIGHLIGHTS Launch of CSV™ system in Japan Having acquired an exclusive license from Bauer Spezialtiefbau GmbH to use the CSV™ process and related equipment in Japan, Asahi Kasei Construction Materials launched business with the CSV™ system in the Kanto area in October 2008. The original system has been widely used in Germany, including for reinforcement of the roadbed for the Inter City Express high-speed train and for an extension of the Autobahn. Enabling the formation of foundations with no waste soil generation and minimal noise and vibration, the CSV™ system was modiﬁ ed by Asahi Kasei Construction Materials to match conditions in Japan. Orders for foundations made using the system in small-scale construction projects are growing. Foundation formed with CSV™ system Expansion of FreeDonut™ product lineup Four new products were added to the FreeDonut™ lineup in January 2008. The FreeDonut™ system for reinforcement of openings to pass plumbing and wiring through steel I- beams has been used in a wide range of buildings since its launch in 2006, enabling freedom in design, cost savings, and shortened construction periods. In response to customer demand, the new products are applicable for larger openings. This expansion of the FreeDonut™ lineup is part of a strategic expansion of business by Asahi Kasei Construction Materials in the ﬁ eld of innovative structural components and systems for steel frames. Plug weld Sleeve Ring FreeDonut™ installation schematic 24 Asahi Kasei Annual Report 2009 Net Sales (¥ billion) 40 37.0 28.9 27.3 30 20 10 0 Operating Income, Operating Margin (¥ billion) 5.6 5.2 3.9 20.6 13.3 13.9 6 5 4 3 2 1 0 (%) 30 25 20 15 10 5 0 Services, Engineering and Others FY 06 07 08 FY 06 07 08 MAJOR PRODUCTS Fiscal 2008 Review Plant engineering, environmental engineering, personnel stafﬁ ng and placement, think tank services. Sales decreased by ¥9.7 billion (26.3%) from a year ago to ¥27.3 billion and operating income increased by ¥0.5 billion (9.2%) to ¥5.6 billion. Although overseas plant engineering decreased with the completion of a major phase of work, operating income in engineering operations increased with business related to the provision of services for Asahi Kasei Group operations performing well. Fiscal 2009 Outlook Sales and operating income will decline due to deterioration of performance in plant engineering operations. R&D and Capital Expenditure R&D expenditure R&D expenditure as % of net sales Capital expenditure (¥ billion except %) Depreciation and amortization Fiscal 2008 Fiscal 2007 0.09 0.05 0.3% 0.1% 1.1 0.8 0.8 0.8 R&D Engineering developments in progress include technology to inspect for internal pipe corrosion and a joint project for next-generation automotive safety features. 25 Toward Sustainable Growth CONTENTS 26 Corporate Governance 30 Corporate Social Responsibility 32 Directors, Corporate Auditors, Executive Ofﬁ cers 26 Asahi Kasei Annual Report 2009 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 a holding company conﬁ guration with separate execution and oversight functions which established a management framework with clear delineation of executive authority and responsibility. Corporate Governance System Holding company Asahi Kasei Board of Corporate Auditors Shareholders Board of Directors Group Advisory Committee Chairman of the Board President Strategic Management Council CSR Council Executive Officers for the four main business sectors Group staff functions (cid:129) Strategic planning & analysis (cid:129) Compliance & risk management (cid:129) Resources administration New Business Development Internal Auditing Internal Control Core operating companies Asahi Kasei Fibers Asahi Kasei Chemicals Asahi Kasei Construction Materials Asahi Kasei Homes Asahi Kasei Microdevices Asahi Kasei E-materials Asahi Kasei Pharma Asahi Kasei Kuraray Medical Fiber, textiles Chemicals Construction materials Housing Electronic devices Electronic materials Pharmaceuticals Medical devices Asahi Kasei Medical Medical-related products/ systems Services, Engineering and Others Chemicals & Fibers business sector Homes & Construction Materials business sector Electronics business sector Health Care business sector (As of April 1, 2009) 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. Board of Corporate Auditors Comprises four Corporate Auditors, two of whom are Outside Corporate Auditors. Corporate Auditors exchange views, deliberate, and decide on substantive matters relating to auditing. Meets at least once per quarter. 27 Executive Ofﬁ cer System Authority and responsibility for the management of each core operating company is held by the President and the other Executive Ofﬁ cers 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 Ofﬁ cers 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. Installation of Executive Ofﬁ cers for the main business sectors In April 2009, holding company Executive Ofﬁ cers were installed with purview corresponding to the four main business sectors: Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care. In their capacity as Executive Ofﬁ cers of the holding company, they work to advance strategic and effective allocation of resources to each business sector, and the enhancement of synergies within the group. Election of Outside Directors Three Outside Directors, Yuzo Seto, former President and Representative Director of Asahi Breweries, Ltd., Yukiharu Kodama, former Administrative Vice Minister of the Ministry of International Trade and Industry, and Morio Ikeda, former President and CEO of Shiseido Co., Ltd., were elected at the 117th Ordinary General Meeting of Shareholders held in June 2008. Outside Directors now comprise 30% of the membership of the Board of Directors. Audits 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 Corporate Auditors Ofﬁ ce provides staff to support Corporate Auditors in their duties. PricewaterhouseCoopers Aarata is contracted as the Independent Auditors to perform ﬁ nancial audits in accordance with the Companies Act and Financial Instruments and Exchange Act. Partners of the Independent Auditors designated to perform the audit for ﬁ scal 2008 were Mr. Katsunori Sasayama and Mr. Masahiko Hagimori. The Independent Auditors form a team of assistants for performance of the audit in accordance with its audit plan. The team mainly comprises certiﬁ ed public accountants and junior accountants, and also includes certiﬁ ed information systems accountants and other specialist accountants. Internal Auditing, the Board of Corporate Auditors, and the Corporate Auditors of core operating companies and other subsidiaries regularly meet to conﬁ rm the effectiveness of internal governance systems for legal compliance and risk management. The Board of Corporate Auditors provides counsel to the Independent Auditors with respect to its audit plan, and receives the results of the consolidated ﬁ nancial audit of Asahi Kasei each quarter and each ﬁ scal year. 28 Asahi Kasei Annual Report 2009 Adoption of Shareholder Rights Plan The Asahi Kasei Group has established a basic corporate policy concerning the nature of parties who would control the company’s ﬁ nancial and operational decisions. The adoption of a Shareholder Rights Plan, comprising measures in response to large acquisition of shares to prevent control of the company’s ﬁ nancial and operational decisions by inappropriate parties in light of this basic corporate policy, was approved at the Ordinary General Meeting of Shareholders held in June 2008. The purpose of the Shareholder Rights Plan is to secure and heighten the company’s corporate value and the common interest of shareholders in the event of a purchase of 20% or more of the company’s shares, by ensuring necessary and sufﬁ cient information and time for shareholders to make proper judgment, by obtaining an opportunity to negotiate with the purchasing party, and otherwise. Please refer to the relevant news release at www.asahi-kasei.co.jp/asahi/en/news/2008/e080423. html for more details. Compliance Corporate Ethics Our Corporate Ethics – Basic Policy and Code of Conduct is the standard and guide for ethical conduct throughout the day-to-day work of each and every member of the Asahi Kasei Group. It has been translated into English and Chinese, and in principle applies to all majority-held subsidiaries the world over. Protection of Personal Information Asahi Kasei is committed to the proper handling and use of personal information, in accordance with our basic policy shown below. Education and training for all employees includes the distribution of an information security handbook which covers issues related to personal information protection, is monitored by the Corporate Ethics Committee. Corporate Ethics – Basic Policy (cid:129) Creating value, contributing to society (cid:129) Caring for environment, health, and safety (cid:129) Honoring law and norms of society (cid:129) Excluding subversive elements (cid:129) Respecting the individual (cid:129) Ensuring transparency (cid:129) Respecting information and intellectual property (cid:129) Practicing corporate ethics Basic Policy for Protection of Personal Information (cid:129) We handle personal information properly and in compliance with the Personal Information Protection Law and other applicable statutes, and in conformance with generally accepted norms and standards. (cid:129) We ensure that personnel throughout the Asahi Kasei Group thoroughly understand and faithfully comply with corporate standards and regulations for the handling of personal information. (cid:129) We use personal information only for the speciﬁ c purposes which have been indicated or announced at the time of its receipt. (cid:129) We employ appropriate measures in the maintenance and management of personal information to ensure against unauthorized alteration, disclosure, and loss of personal information. (cid:129) We will respond in good faith to requests to conﬁ rm, revise, cease using, or delete personal information. 29 Information Disclosure Policy The Asahi Kasei Group has established an Information Disclosure Policy, enhancing the management and disclosure of corporate information to obtain greater corporate value. Corporate regulations for information disclosure based on this policy were adopted on July 1, 2008. The basic principles of the Information Disclosure Policy are shown below. • With our Basic Credo of “contributing to human life and human livelihood through constant innovation and advances based in science and the human intellect,” we hold “progressing in concert with society, and honoring the laws and standards of society as a good corporate citizen” as a Guiding Precept. “Ensuring transparency” is a fundamental element of our Corporate Ethics – Basic Policy. We proactively engage in information disclosure and communication based on these basic concepts. • Corporate information is disclosed fairly, impartially, accurately, and as swiftly as possible to stakeholders such as customers, suppliers, shareholders, investors, employees, and local communities, and to the general public. • In our communication with stakeholders and with the general public, we strive for dialog which fosters a relationship of trust, promoting greater understanding of the Asahi Kasei Group and its operations, to increase brand strength and heighten corporate value. Compliance Monitoring by the Corporate Ethics Committee Monitoring of compliance and oversight of education and training for compliance throughout the Asahi Kasei Group are performed by the Corporate Ethics Committee, which was formed in July 1998. Where shortcomings are discovered, the committee formulates and implements measures for improvement. The committee discusses the training programs implemented at each group company, measures for prevention of sexual harassment, environmental countermeasures, the state of compliance with personal information protection law, and operation of the Compliance Hotline. Risk Management Risk Management Committee The Risk Management Committee was established in April 2005 to enhance the risk management system for prevention of operational crises and minimization of the effects should a crisis occur. The Board of Directors enacted Basic Risk Management Regulations, effective April 1, 2007, providing clear guidelines to heighten the capability and effectiveness for risk management and emergency response throughout the Asahi Kasei Group. Corporate Risk Management Corporate Risk Management works with the various divisions and departments to guide the proper response to any major accidents, incidents, or problems which cause signiﬁ cant damage to Asahi Kasei Group operations or which may foreseeably cause Asahi Kasei Group operations to have adverse effects on the general public. In ﬁ scal 2008, a New Inﬂ uenza Response Manual was instituted in preparation for any global pandemic of a new strain of inﬂ uenza. Role of Corporate Risk Management Information disclosure through Corporate Communications Corporate Risk Management Emerging crisis Direction and guidance Stakeholders Employees Typhoon, earthquake, or other natural disaster; industrial accident causing pollution or injury; terrorism; infectious disease; product safety incident, etc. Response Fact checking, Fact checking, Fact checking, coordination coordination coordination Responsible division or department 30 Asahi Kasei Annual Report 2009 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 fulﬁ llment 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 customer Customer satisfaction The employee Employee fulfillment The supplier Fair business dealings The community Community outreach The environment Environmental protection Sustainable increase in corporate value The shareholder Shareholder returns 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 ﬁ rm producing and handling chemical products. As of October 2008, ﬁ fty-three countries throughout the world have a Responsible Care program. 31 Highlight Life-cycle CO2 emissions reduced by 7.2 million tons/year in three product families CO2 reduction equivalent to emission from some 1.34 million households Products and technologies of the Asahi Kasei Group used in production processes of caustic soda, water for injection, colloidal silica, and polycarbonate, have an annual reduction of CO2 emissions of approximately 7.2 million tons, as quantiﬁ ed by Life Cycle Assessment, when compared with the CO2 emissions generated with the conventional production processes. This reduction is equivalent to the annual CO2 emissions from some 1.34 million households in Japan (average 5.35 tons/year per household*). * According to The GHGs Emissions Data of Japan (1990–2007) by the Greenhouse Gas Inventory Ofﬁ ce of Japan. Caustic soda production Water treatment in production of water for injection and colloidal silica Polycarbonate production Conventionally mercury process and diaphragm process Conventionally evaporation and distillation Conventionally phosgene process, etc. CO2 reduced by 5.2 million tons/year CO2 reduced by 1.2 million tons/year CO2 reduced by 0.8 million tons/year Asahi Kasei’s ion-exchange membrane process There are three production processes which are generally employed in the production of caustic soda: The membrane process, the diaphragm process, and the mercury process. Asahi Kasei Chemicals produces ion-exchange membranes for production of caustic soda by the membrane process. Among those processes, the ion- exchange membrane process features highest energy-efﬁ ciency and lowest power consumption, thus reducing the CO2 emissions generated for production of the required electricity. Water treatment with Asahi Kasei’s microﬁ ltration membrane Production of water for injection conventionally requires distillation, and production of colloidal conventionally requires concentration of silica sol by evaporation. Each of these processes requires a large amount of energy. Microﬁ ltration using Microza™ modules from Asahi Kasei Chemicals enables water for injection to be produced without distillation and colloidal silica to be produced without evaporation. As the process of water circulation and ﬁ ltration using Microza™ requires much less energy than distillation and evaporation, generation of CO2 is reduced. Asahi Kasei’s non-phosgene process Asahi Kasei Chemicals has developed a phosgene-free polycarbonate production process which uses CO2 as a starting material, and is licensing the process to polycarbonate producers around the world. By using CO2 as a starting material, and by eliminating the need to use phosgene and caustic soda, whose production is energy- intensive, the non-phosgene process results in lower CO2 release than the conventional processes. Ion-exchange membrane Microza™ microﬁ ltration membrane CDs made of polycarbonate 32 Asahi Kasei Annual Report 2009 Directors, Corporate Auditors, Executive Ofﬁ cers (As of June 26, 2009) Nobuo Yamaguchi Shiro Hiruta Ichiro Itoh Taketsugu Fujiwara Chairman of the Board & Representative Director President & Representative Director Presidential Executive Ofﬁ cer Director Vice-Presidential Executive Ofﬁ cer (Strategy, Accounting & Finance, Internal Control) Director Vice-Presidential Executive Ofﬁ cer (Production Technology, ESH, PL, Procurement, Logistics, IT) Kiyoshi Tsujita Yuji Mizuno Director Senior Executive Ofﬁ cer (HR, Compliance) Director Lead Executive Ofﬁ cer (General Affairs, Compliance) Yoshio Hayashi Director Lead Executive Ofﬁ cer (R&D) Yuzo Seto Outside Director Yukiharu Kodama Morio Ikeda Outside Director Outside Director Yuji Tsuchiya Corporate Auditor Ryo Matsui Lead Executive Ofﬁ cer Makoto Konosu Executive Ofﬁ cer Haruyuki Yoneda Executive Ofﬁ cer Kenji Nakamae Corporate Auditor Masanori Mizunaga Lead Executive Ofﬁ cer Masaki Sakamoto Executive Ofﬁ cer Shinichiro Nei Executive Ofﬁ cer Kazuo Tezuka Outside Corporate Auditor Toshikatsu Sunami Lead Executive Ofﬁ cer Shingo Hatano Executive Ofﬁ cer Yuji Aoki Outside Corporate Auditor Yutaka Shibata Lead Executive Ofﬁ cer Tsutomu Inada Executive Ofﬁ cer 33 Financial Section CONTENTS 34 Consolidated Eleven-Year Summary 36 Management’s Discussion and Analysis 42 Risk Analysis 44 Consolidated Balance Sheets 46 Consolidated Statements of Income 47 Consolidated Statements of Changes in Net Assets 48 Consolidated Statements of Cash Flows 49 Notes to Consolidated Financial Statements 65 Report of Independent Auditors 34 Asahi Kasei Annual Report 2009 Consolidated Eleven-Year Summary Asahi Kasei Corporation and consolidated subsidiaries For the years ended March 31 Net sales Chemicals Life & Livinga Chemical and Chemical-related Chemicals and Plastics Homes Housing and Construction Materials Pharmab Fibersb Electronics Materials & Devicesb Construction Materials Special Products and Services Electronics Membranes and Systems Biotechnology and Medical Products Foods and Liquors Engineering and Othersb Services, Engineering and Othersb Domestic sales Overseas sales Operating income Ordinary income 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 Net worthc Net worth per share, yen Net worth/total assets, % Number of employees 2009 2008 2007 2006 ¥ 1,553,108 ¥ 1,696,789 ¥ 1,623,791 ¥ 1,498,620 741,486 879,235 752,632 660,402 — — — — — — 52,558 51,942 — — — — 409,882 386,227 405,695 404,539 — — — — 119,619 111,232 104,474 105,842 102,176 114,072 106,639 89,704 91,721 113,267 112,094 102,859 60,927 55,732 60,818 56,512 — — — — — — — — — — — — — — — — — — — — — — — — 27,297 37,024 28,881 26,821 1,159,143 1,209,452 1,195,751 1,125,454 393,965 487,337 428,040 373,166 34,959 127,656 127,801 108,726 32,500 120,456 126,507 104,166 19,031 105,599 114,883 4,745 69,945 68,575 3.39 126,725 79,436 60,849 10.00 50.01 82,911 73,983 56,170 13.00 49.00 84,413 71,646 52,426 12.00 94,481 59,668 42.46 66,310 69,399 51,467 10.00 2009 2008 2007 2006 ¥ 1,379,337 ¥ 1,425,367 ¥ 1,459,922 ¥ 1,376,044 273,539 272,372 240,006 214,062 441,271 424,193 426,959 414,368 218,477 234,873 281,502 284,390 603,846 666,244 645,655 594,211 431.77 476.39 461.50 424.34 43.8 46.7 44.2 43.2 24,244 23,854 23,715 23,030 a. The Life & Living segment was combined with the Chemicals segment in the year ended March 31, 2008. b. For continuity, ﬁ gures for business categories which were renamed are shown on the same line. (cid:129) Through the year ended March 31, 2003: Figures shown as Pharma are those for the previous Health Care sector, ﬁ gures shown as Fibers are those for the previous Fibers and Textiles sector, ﬁ gures shown as Electronics Materials & Devices are those for the previous Electronics sector, and ﬁ gures shown as Services, Engineering and Others are those for the previous Liquors, Services and Others sector. (cid:129) 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, ﬁ gures shown as “engineering and others” are those for the previous “engineering and services” segment. c. Net assets less minority interest. Though the year ended March 31, 2006, ﬁ gures for shareholders’ equity shown. d. For comparison purposes, results for the year ended March 31, 2005, are recalculated to reﬂ ect the April 2005 transfer of Leona™ nylon 66 ﬁ lament operations from the Fibers segment to the Chemicals segment. 35 Millions of yen, except where noted 2005d 2004 2003e 2003 2002 2001f 2001 2000 1999 ¥ 1,377,697 ¥ 1,253,534 ¥ 1,193,614 ¥ 1,193,614 ¥ 1,195,393 ¥ 1,269,415 ¥ 1,269,415 ¥ 1,194,462 ¥ 1,171,845 570,182 453,707 424,673 59,149 59,813 52,908 — — — — — — — 477,581 440,698 449,470 — — — — — — — — — — — — — — 375,755 361,273 320,553 — — — — — 430,934 379,677 375,048 — — — — — — — 383,654 408,474 433,440 433,440 412,954 372,649 103,933 105,965 105,463 105,463 98,686 95,481 — — — 91,518 101,514 110,551 110,551 125,908 134,791 134,791 139,181 148,277 71,579 64,062 95,999 — — — — — — — — 270,250 262,650 275,871 93,024 59,908 82,484 60,622 71,579 63,101 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 96,228 18,307 95,481 — 80,653 17,967 93,460 — 60,234 70,570 66,212 18,133 88,050 90,068 13,408 — 24,228 28,156 44,786 44,786 57,565 60,234 — — 1,067,893 1,011,366 981,064 981,064 1,006,810 1,086,219 1,086,219 1,044,630 1,009,439 309,804 242,168 212,550 212,550 188,583 183,196 183,196 149,832 162,406 115,809 112,876 60,932 53,643 61,555 50,389 61,555 50,389 91,141 56,454 40.16 68,479 71,531 50,715 8.00 54,820 (100,869) (100,869) 27,672 (66,791) (66,791) 19.62 86,387 64,408 48,420 6.00 (47.63) 93,985 60,808 49,311 6.00 (47.63) 93,985 60,808 49,311 6.00 45,664 39,849 10,679 5,180 3.61 74,826 60,676 49,574 6.00 96,024 86,747 50,318 25,177 17.45 69,188 62,222 49,768 6.00 96,024 86,747 50,318 25,177 17.45 69,188 62,222 49,768 6.00 74,323 85,853 39,615 20,525 14.23 63,213 63,629 50,015 6.00 51,237 42,443 37,525 17,392 12.06 70,461 63,845 56,844 6.00 2005 2004 2003 2003 2002 2001 2001 2000 1999 ¥ 1,270,057 ¥ 1,249,206 ¥ 1,212,374 ¥ 1,212,374 ¥ 1,193,011 ¥ 1,240,008 ¥ 1,240,008 ¥ 1,180,372 ¥ 1,185,249 202,521 181,609 176,788 176,788 180,826 196,510 196,510 181,771 193,691 419,969 428,302 427,188 427,188 415,193 419,168 419,168 416,881 435,005 223,958 226,825 198,697 198,697 181,618 176,177 176,177 127,013 132,251 511,726 450,451 407,639 407,639 496,826 516,013 516,013 476,159 464,339 365.43 321.41 290.92 290.92 353.16 357.70 357.70 330.07 321.88 40.3 36.1 33.6 33.6 41.6 41.6 41.6 40.3 39.2 23,820 25,011 25,730 25,730 26,227 26,695 26,695 26,580 29,263 e. 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 conﬁ guration adopted on October 1, 2003. (cid:129) 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 reclassiﬁ ed as the Chemicals segment. (cid:129) The Housing and Construction Materials sector is separated into the Homes segment and the Construction Materials segment. (cid:129) The Health Care sector is renamed the Pharma segment. (cid:129) The Fibers and Textiles sector is renamed the Fibers segment. (cid:129) The Electronics sector is renamed the Electronics Materials & Devices segment. (cid:129) With the divestment of liquors operations, the Liquors, Services and Others sector is renamed the Services, Engineering and Others segment. f. 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. (cid:129) Operations of the “membranes and systems” segment combine with the Chemicals and Plastics sector to form the Chemical and Chemical-related sector. (cid:129) The “electronics” segment is reclassiﬁ ed as the Electronics sector. (cid:129) Operations of the “biotechnology and medical products” segment are reclassiﬁ ed as the Health Care sector. (cid:129) The remaining operations comprise the Liquors, Services and Others sector, in place of the “engineering and others” segment. 36 Asahi Kasei Annual Report 2009 Management’s Discussion and Analysis Fiscal year 2008 (April 1, 2008 – March 31, 2009) Overview of ﬁ scal 2008 consolidated results Operating environment Domestic sales decreased by ¥50.3 billion (4.2%) to ¥1,159.1 billion due to a decrease in demand and a steep decline in product shipments, particularly in Chemicals. The global economy entered a severe economic downturn Operating income decreased by ¥92.7 billion to ¥35.0 beginning in the second half of the ﬁ scal year as the billion, a 72.6% decline. As a percentage of net sales, cost ﬁ nancial crisis triggered by the rise in subprime mortgage of sales increased by 3.7 percentage points to 79.7%, defaults in the US spread into the real economy worldwide. largely due to increases in the cost of feedstock and fuel in Sharply impacted by the global economic slump, the the ﬁ rst half of the year and reduced operating rates in line Japanese economy fell into an economic recession of with decreased demand. SG&A increased by ¥0.2 billion historic proportions with a broad decline in exports and a and increased as a percentage of net sales by 1.5 rapid appreciation of the exchange value of the yen, which percentage points to 18.0% as an effect of the sales led to deteriorating corporate earnings, cuts in private decline. Operating income as a percentage of net sales sector capital investment, and curtailment of production, decreased by 5.2 percentage points to 2.3%. resulting in reduced employment and the emergence of related social problems. Non-operating income and expenses, ordinary income The Asahi Kasei Group faced an extremely Net non-operating expenses were ¥2.5 billion, ¥4.7 billion challenging operating climate, with high feedstock and fuel lower than the ¥7.2 billion of a year earlier. This was largely costs continuing through the ﬁ rst half of the ﬁ scal year due to lower foreign exchange loss and a change to before falling sharply in the second half, and with the sharp recording loss on disposal of inventories under cost of rise in the value of the yen, steep declines in product sales, although equity in earnings of afﬁ liates decreased by demand, and inventory adjustments among customers ¥2.9 billion. As a result, ordinary income decreased by necessitating cutbacks in production for many products. ¥88.0 billion to ¥32.5 billion, a 73.0% decline. Net sales, operating income Extraordinary income and loss Consolidated net sales for the ﬁ scal year decreased by The net extraordinary loss was ¥13.5 billion, ¥1.4 billion lower ¥143.7 billion (8.5%) from a year ago to ¥1,553.1 billion. than the ¥14.9 billion of a year earlier. Although business Overseas sales decreased, largely in Chemicals, by ¥93.4 structure improvement expenses increased by ¥3.7 billion, billion (19.2%) to ¥394.0 billion, a 3.3 percentage point impairment loss decreased by ¥4.5 billion and loss on decrease from 28.7% to 25.4% of consolidated net sales. disposal of noncurrent assets decreased by ¥0.9 billion. Net Sales (¥ billion) 2,000 1,500 1,000 500 0 Operating Income, Operating Margin (¥ billion) 150 120 90 60 30 0 SG&A, SG&A Ratio (%) 15 (¥ billion) 300 12 240 9 6 3 0 180 120 60 0 (%) 20 16 12 8 4 0 Net Income, Net Income per Share (¥ billion) 80 60 40 20 0 (¥) 60 45 30 15 0 FY 06 07 08 FY 06 07 08 FY 06 07 08 FY 06 07 08 Operating income, left scale SG&A, left scale Net income, left scale Operating margin, right scale SG&A ratio, right scale Net income per share, right scale 37 Net income volumes due to deteriorating market conditions both in With ordinary income of ¥32.5 billion and the net Japan and worldwide, the sharp impact of the appreciation extraordinary loss of ¥13.5 billion, income before income of the yen, and the impact of devaluation of inventories in taxes was ¥19.0 billion. Currently payable income taxes of the second half of the ﬁ scal year. ¥8.5 billion and deferred income tax obligation of ¥5.2 Although specialty products operations performed billion combined for an income tax expense of ¥13.7 well during the ﬁ rst half of the ﬁ scal year, shipments of billion. Minority interest in income of consolidated Hipore™ Li-ion rechargeable battery separator membranes subsidiaries was ¥0.6 billion. As a result, net income and of ion-exchange membranes for chlor-alkali decreased by ¥65.2 billion to ¥4.7 billion, a 93.2% electrolysis decreased with the sudden deterioration of decrease, and net income per share decreased by ¥46.62 market conditions in the second half of the ﬁ scal year, and to ¥3.39 from the ¥50.01 of a year earlier. operating income decreased. Results by segment Operating segments Homes Sales increased by ¥23.7 billion (6.1%) from a year ago to ¥409.9 billion and operating income increased by ¥0.5 Six operating segments correspond to the main ﬁ elds of billion (2.3%) to ¥21.9 billion. business, and the Services, Engineering and Others Although deliveries of Hebel Haus™ unit homes segment comprises the remainder of operations. recovered from the decline a year ago due to falsiﬁ cation of Consolidated net sales and consolidated operating income the performance of certain components as came to light in and loss in each operating segment were as follows. late October 2007, and there were deliveries of Chemicals condominium units with the completion of a large construction project, operating income in order-built and Sales decreased by ¥137.7 billion (15.7%) from a year ago pre-built homes operations decreased with the impact of to ¥741.5 billion and an operating loss of ¥0.4 billion high costs for materials and a devaluation of real estate resulted with a ¥65.6 billion decline in proﬁ tability. held as inventory for sale. In volume products operations, both chemicals and Although real estate operations struggled, operating derivative products and polymer products, proﬁ tability fell income from housing-related operations increased with with the sharp impact of high feedstock prices in the ﬁ rst remodeling and ﬁ nancing operations performing well. half of the ﬁ scal year and with a steep decline in shipment New orders for order-built homes decreased by ¥15.0 ROE (%) 12 9 6 3 0 Chemicals Homes (¥ billion) 1,000 800 600 400 200 0 (200) (¥ billion) (¥ billion) (¥ billion) 7.0% 7.4% 100 500 80 60 40 20 0 400 300 200 100 (0.06)% (20) 0 6.8% 5.5% 5.3% 30 24 18 12 6 0 FY 06 07 08 FY 06* 07 08 FY 06 07 08 Net sales, left scale Net sales, left scale Operating income (loss), right scale Operating income, right scale Operating margin (%) Operating margin (%) * Including former Life & Living segment. 38 Asahi Kasei Annual Report 2009 billion from a year ago to ¥291.1 billion as an effect of a ﬁ ber operations decreased with high feedstock and fuel sharp decline in market conditions beginning in the second costs and with the effect of the appreciating yen. half of the ﬁ scal year. Pharma Proﬁ tability of nonwovens operations fell with high feedstock and fuel costs and decreased shipment volumes as an effect of deteriorating market conditions. Sales increased by ¥8.4 billion (7.5%) from a year ago to ¥119.6 billion and operating income decreased by ¥0.6 Electronics Materials & Devices billion (5.0%) to ¥12.0 billion. Sales decreased by ¥21.5 billion (19.0%) from a year ago Although reimbursement prices decreased and R&D to ¥91.7 billion and operating income decreased by ¥18.9 expenses increased, operating income from billion (85.0%) to ¥3.3 billion. pharmaceutical operations increased with licensing income Operating income in electronics materials and for the anti-herpes agent Famvir™. electronics devices operations decreased as a broad and Although shipments of APS™ polysulfone-membrane rapid deterioration of market conditions occurred artiﬁ cial kidneys and Planova™ virus removal ﬁ lters throughout all product sectors including cell phones, increased, particularly exports, operating income in devices notebook PCs, and other IT and home electronics operations decreased with increased depreciation products, resulting in decreased shipment volumes, and expenses following production capacity expansion and with the sharp impact of the appreciating yen. with the effect of the appreciating yen. Construction Materials Fibers Sales increased by ¥5.2 billion (9.3%) from a year ago to Sales decreased by ¥11.9 billion (10.4%) from a year ago ¥60.9 billion and operating income decreased by ¥1.1 to ¥102.2 billion and an operating loss of ¥0.9 billion billion (39.5%) to ¥1.7 billion. resulted with an ¥8.1 billion decline in proﬁ tability. Although the BasePack™ earthquake-resistant Operating income in elastic polyurethane ﬁ lament column base attachment system performed well and operations decreased as deteriorating overseas market shipments of Hebel™ autoclaved aerated concrete panels conditions resulted in lower product prices and shipment were maintained, operating income in building materials volumes, and with the effect of the appreciating yen. and housing materials operations decreased with Although shipments to overseas markets remained increased costs for fuel and materials. ﬁ rm, operating income in Bemberg™ regenerated cellulose Operating income in foundation systems operations Pharma Fibers Electronics Materials & Devices (¥ billion) (¥ billion) (¥ billion) (¥ billion) (¥ billion) (¥ billion) 13.3% 11.4% 10.1% 150 120 90 60 30 0 FY 06 07 08 15 12 9 6 3 0 120 90 60 30 0 (30) FY 6.3% 3.9% 8 6 4 2 0 (0.8)% (2) 150 20.2% 19.6% 120 90 60 30 0 30 24 18 12 6 0 3.6% 06 07 08 FY 06 07 08 Net sales, left scale Net sales, left scale Net sales, left scale Operating income, right scale Operating income (loss), right scale Operating income, right scale Operating margin (%) Operating margin (%) Operating margin (%) 39 increased as shipments of the Eazet™ and ATT Column™ piling systems for small-scale construction, and of the Liquidity and capital resources DynaWing™ pre-cast concrete piling system featuring Financial position minimal soil disposal and high load-bearing capacity, Total assets at ﬁ scal year end were ¥1,379.3 billion, ¥46.0 increased. billion (3.2%) lower than a year earlier. Despite increased costs for fuel and materials, Although cash and deposits were increased by ¥15.1 proﬁ tability of insulation materials operations improved with billion to secure liquidity, current assets decreased by higher product prices. Services, Engineering and Others ¥57.9 billion (7.8%) to ¥682.2 billion, with notes and accounts receivable, trade, decreasing by ¥89.9 billion as net sales declined due to lower product market prices and Sales decreased by ¥9.7 billion (26.3%) from a year ago to decreased shipment volumes. ¥27.3 billion and operating income increased by ¥0.5 Although the market value of investment securities billion (9.2%) to ¥5.6 billion. decreased by ¥33.9 billion, noncurrent assets increased by Although overseas plant engineering decreased with ¥11.8 billion (1.7%) to ¥697.1 billion. Property, plant and the completion of a major phase of work, operating equipment increased by ¥17.1 billion and intangible assets income in engineering operations increased with business increased by ¥11.2 billion as increases from capital related to the provision of services for Asahi Kasei Group expenditure exceeded depreciation and amortization operations performing well. Geographical information combined with loss on disposal of noncurrent assets. Deferred tax assets increased by ¥16.1 billion. Notable capital expenditure included the construction of a plant Geographic segment information is not shown because with integrated spinning and assembly lines for APS™ over 90% of total sales were from operations domiciled in polysulfone-membrane dialyzers, a new assembly plant for Japan and over 90% of total assets were located in Japan. Planova™ virus removal ﬁ lters, and a new R&D complex in Fuji, Shizuoka, Japan. Although short-term loans payable were increased by ¥57.6 billion as necessary for operating funds due to deteriorating ﬁ nancial performance, current liabilities decreased by ¥25.5 billion (5.0%) to ¥487.9 billion. Notes and accounts payable, trade, decreased by ¥41.7 billion Construction Materials Services, Engineering and Others (¥ billion) (¥ billion) (¥ billion) (¥ billion) 8.3% 90 60 30 0 6 4 2 0 5.0% 2.8% 40 30 20.6% 20 13.3% 13.9% 10 0 8 6 4 2 0 FY 06 07 08 FY 06 07 08 Net sales, left scale Net sales, left scale Operating income, right scale Operating income, right scale Operating margin (%) Operating margin (%) 40 Asahi Kasei Annual Report 2009 due to lower feedstock and fuel prices and reduced operating rates at production facilities, and accrued expenses decreased by ¥22.0 billion. Noncurrent liabilities increased by ¥42.3 billion (17.8%) to ¥280.1 billion, with a ¥69.3 billion increase in long-term loans payable. Although ¥25.0 billion in bonds were redeemed, interest-bearing debt increased by ¥104.2 billion to ¥315.6 billion, with a ¥126.9 increase in borrowings from ﬁ nancial institutions. Chemicals Homes Pharma Fibers Electronics Materials & Devices Construction Materials Services, Engineering and Others Net assets decreased by ¥62.8 billion (9.3%) from the Combined Totals for the year (¥ million) Compared to previous year (%) 45,667 7,037 31,569 12,257 21,557 2,430 1,082 121,598 133.0 94.4 315.5 132.4 126.7 96.9 136.4 149.4 333.8 152.8 ¥674.2 billion of a year ago to ¥611.4 billion. With net Corporate assets and eliminations 5,127 income of ¥4.7 billion, dividend payments were ¥19.6 billion, valuation difference on available-for-sale securities decreased by ¥27.8 billion, and foreign currency translation Consolidated 126,725 adjustment decreased by ¥19.6 billion. Net worth per Notable capital expenditure by operating segment was as share decreased by ¥44.62 to ¥431.77. Net worth/total follows. assets decreased from 46.7% to 43.8%, and debt-to- (cid:129) Chemicals: Expansion of capacity for Hipore™ Li-ion equity ratio increased by 0.20 to 0.52. rechargeable battery separators; plant modiﬁ cation, rationalization, and maintenance. Capital expenditure (cid:129) Homes: Leases; construction system modiﬁ cation, Capital expenditure was primarily for new and expanded rationalization, and maintenance. production plant and equipment in long-term growth ﬁ elds. (cid:129) Pharma: Acquisition of intellectual property rights for Investments were also made for rationalization, Flivas™ agent for treatment of benign prostatic modiﬁ cation, maintenance, and IT systems to bring greater hyperplasia; expansion of capacity for assembly of product reliability and cost reductions. Capital expenditure APS™ polysulfone-membrane artiﬁ cial kidneys; by operating segment shown below is for property, plant expansion of capacity for Planova™ virus removal ﬁ lters; and equipment and intangible assets, combined, before plant modiﬁ cation, rationalization, and maintenance. consumption tax. Total Assets, Net Worth Net Worth to Total Assets Interest-Bearing Debt, D/E Ratio Capital Expenditure, Depreciation and Amortization (¥ billion) 1,500 1,200 900 600 300 0 (%) (¥ billion) 50 40 30 20 10 0 400 300 200 100 0 (¥ billion) 1.00 150 0.75 0.50 0.25 0.00 120 90 60 30 0 FY 06 07 08 FY 06 07 08 FY 06 07 08 FY 06 07 08 Total assets Net worth Interest-bearing debt, left scale Capital expenditure D/E ratio, right scale Depreciation and amortization 41 (cid:129) Fibers: Expansion of capacity for Roica™ elastic Cash ﬂ ows from operating activities polyurethane ﬁ lament; construction of new R&D and Cash used included ¥37.3 billion for decrease in notes and technology center; plant modiﬁ cation, rationalization, and accounts payable, trade, ¥21.5 billion for decrease in maintenance. accrued expenses, and ¥25.0 billion for income taxes, (cid:129) Electronics Materials & Devices: Expansion of capacity paid. Income before income taxes generated ¥19.0 billion, for LSIs; expansion of capacity for Sunfort™ dry ﬁ lm depreciation and amortization generated ¥79.4 billion, and photoresist; plant modiﬁ cation, rationalization, and decrease in notes and accounts receivable, trade, largely maintenance. in Chemicals and Homes, generated ¥83.7 billion. Net (cid:129) Construction Materials: Plant modiﬁ cation, cash generated from operating activities was ¥68.8 billion, rationalization, and maintenance. ¥4.1 billion less than a year earlier. (cid:129) Services, Engineering and Others: IT systems, rationalization, labor-saving, and maintenance. Cash ﬂ ows from investing activities (cid:129) Corporate assets: Corporate research facilities; Cash used included ¥97.2 billion for purchase of property, maintenance. Cash ﬂ ows plant and equipment for continuing expansion of competitively superior operations and enhancement of overall competitiveness, ¥22.0 billion for purchase of Free cash ﬂ ows were a negative ¥66.9 billion as cash intangible assets, and ¥17.5 billion for purchase of used, principally for acquisition of noncurrent assets and investment securities. Net cash used in investing activities investment securities, exceeded cash generated, was ¥135.7 billion, ¥66.6 billion more than a year earlier. principally operating income and depreciation and amortization. Cash ﬂ ows from ﬁ nancing activities, Cash ﬂ ows from ﬁ nancing activities principally increased borrowings, were a net ¥87.3 billion In addition to ¥25.0 billion for redemption of bonds, ¥19.6 cash generated. Effect of exchange rate change on cash billion was used for payment of parent-company dividends. and cash equivalents was a ¥5.4 billion decrease. As a Fund-raising including through borrowing generated result, cash and cash equivalents at ﬁ scal year end were ¥132.0 billion. A net ¥87.3 billion was generated by ¥98.1 billion, ¥15.1 billion more than a year earlier. ﬁ nancing activities, ¥109.6 billion more than a year earlier. Free Cash Flows Cash Flows (¥ billion) 50 25 0 (25) (50) (75) FY (¥ billion) 150 75 0 (75) (150) 06 07 08 FY 06 07 08 Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities 42 Asahi Kasei Annual Report 2009 Risk Analysis Operating risks and non-operating risks which may inﬂ uence 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 Housing-related tax policy, interest rate ﬂ uctuation Operating costs in operations based on petrochemicals Operations in the Homes segment are affected by are affected by prices for crude oil and naphtha. If crude Japanese tax policies as they relate to home acquisition oil and naphtha prices rise, selling prices for products and by ﬂ uctuations in Japanese interest rates. Changes in derived from these feedstocks must be increased in a Japanese tax policy, including consumption taxes, or timely manner to maintain sufﬁ cient price spreads. Price ﬂ uctuations in Japanese interest rates may result in spreads may diminish, thereby affecting our consolidated diminished housing demand, thereby affecting our performance and ﬁ nancial condition. consolidated performance and ﬁ nancial condition. Exchange rate ﬂ uctuation Proﬁ tability of electronics-related businesses Operations based overseas maintain accounts in the local The electronics industry is characterized by sharp market currency where they operate. The yen value of items cycles. The proﬁ tability of electronics-related businesses carried in these accounts is affected by the rate of may decline signiﬁ cantly in a relatively short time, thereby exchange at the time of conversion to yen. Although affecting our consolidated performance and ﬁ nancial measures such as currency exchange hedges are utilized condition. Because products in this ﬁ eld rapidly become to minimize the short-term effects of exchange rate obsolete, the timely development and commercialization of ﬂ uctuations, such ﬂ uctuations may exceed the foreseeable leading-edge devices and materials is required. New range over the short to long term, thereby affecting our product development may be delayed, or demand consolidated performance and ﬁ nancial condition. ﬂ uctuations may exceed expectations, thereby affecting our consolidated performance and ﬁ nancial condition. Overseas operations Overseas operations may face a variety of risks which Pharmaceuticals and medical devices cannot be foreseen, including the existence or emergence of economically unfavorable circumstances due to legal Pharmaceutical and medical device businesses may be and regulatory changes, vulnerability of infrastructure, signiﬁ cantly affected by government measures to curtail difﬁ culty in hiring/retaining qualiﬁ ed employees, or other health care expenditure or other changes in government factors, and social or political instability due to terrorism, policy. Unforeseeable side effects or complications may war, or other factors. Overseas operations may be emerge, signiﬁ cantly affecting these businesses. The impaired by such scenarios, thereby affecting our pharmaceutical business additionally faces the possibility consolidated performance and business plans. that product approval may be withdrawn as a result of 43 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 ﬁ nancial condition. Industrial accidents and natural disasters The occurrence of a signiﬁ cant 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 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 ﬁ nancial 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 ﬁ nancial condition. Irrecoverable credits Credits extended to customers may become irrecoverable to an unforeseeable extent, necessitating additional losses or allowances to be recorded in ﬁ nancial accounts, and thereby affecting our consolidated performance and ﬁ nancial condition. 44 Asahi Kasei Annual Report 2009 Consolidated Balance Sheets Asahi Kasei Corporation and consolidated subsidiaries March 31, 2009 and 2008 ASSETS Current assets: Cash and deposits (Note 8 (a)) Notes and accounts receivable, trade Millions of yen Thousands of U.S. dollars (Note 1) 2009 2008 2009 ¥ 97,969 ¥ 82,903 $ 999,681 208,868 298,788 2,131,305 Short-term investment securities (Notes 8 (a) and 10) 406 303 4,143 Merchandise and ﬁ nished goods (Note 3 (a)) 138,098 131,505 1,409,168 Work in progress (Note 3 (a)) Raw materials and supplies (Note 3 (a)) Deferred tax assets (Note 13) Other Allowance for doubtful accounts Total current assets Noncurrent assets: Property, plant and equipment Buildings and structures (Note 5 (c), (e)) Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles (Note 5 (c), (e)) Accumulated depreciation Machinery, equipment and vehicles, net Land (Note 5 (e)) Lease assets (Notes 3 (c) and 9) Accumulated depreciation Lease assets, net Construction in progress Other (Note 5 (c), (e)) Accumulated depreciation Other, net Subtotal Intangible assets— Goodwill Other Subtotal 82,832 52,609 18,444 85,626 (2,648) 93,597 47,269 26,130 61,239 (1,660) 845,227 536,823 188,206 873,737 (27,019) 682,205 740,075 6,961,272 381,725 (217,710) 164,014 1,138,427 (977,646) 160,781 53,740 2,540 (227) 2,313 44,140 377,385 (217,434) 159,951 1,123,378 (958,159) 165,220 54,096 — — — 29,339 3,895,149 (2,221,533) 1,673,616 11,616,606 (9,975,980) 1,640,626 548,372 25,922 (2,318) 23,604 450,405 109,437 103,908 1,116,700 (93,155) 16,282 (88,320) 15,588 (950,557) 166,144 441,271 424,193 4,502,766 7,449 29,935 37,384 5,707 20,519 26,226 76,013 305,459 381,472 Investments and other assets— Investment securities (Notes 3 (e), 5 (b) and 10) 157,091 190,991 1,602,973 Long-term receivables Deferred tax assets (Note 13) Other Allowance for doubtful accounts Subtotal 2,670 28,874 29,993 (151) 4,703 12,777 26,514 (113) 27,244 294,632 306,048 (1,539) 218,477 234,873 2,229,357 Total noncurrent assets 697,132 685,292 7,113,596 Total assets ¥ 1,379,337 ¥ 1,425,367 $ 14,074,868 The accompanying notes are an integral part of these statements. 45 LIABILITIES AND NET ASSETS Liabilities: Current liabilities— Millions of yen Thousands of U.S. dollars (Note 1) 2009 2008 2009 Notes and accounts payable, trade ¥ 113,378 ¥ 155,120 $ 1,156,914 Short-term loans payable (Notes 5 (c) and 18) Commercial paper (Note 18) Current portion of bonds (Note 18) Lease obligations (Notes 3 (c) and 9) Income taxes payable 100,786 55,000 20,000 489 4,097 Deferred tax liabilities (Notes 3 (e) and 13) — 43,220 55,000 25,000 — 9,730 58 108,947 49,718 4,716 6,018 55,885 1,028,433 561,224 204,082 4,987 41,804 — 887,215 410,236 17,080 95,881 570,933 86,947 40,203 1,674 9,396 55,951 487,921 513,413 4,978,790 5,000 132,474 1,845 4,257 25,000 63,187 — 9,155 51,020 1,351,776 18,825 43,443 109,864 116,133 1,121,065 1,046 4,499 19,149 1,931 997 2,078 18,935 2,314 10,671 45,904 195,396 19,707 280,065 767,986 237,798 751,211 2,857,807 7,836,597 Accrued expenses Advances received Provision for repairs Provision for product warranties (Note 2 (d) iii)) Other Total current liabilities Noncurrent liabilities— Bonds payable (Note 18) Long-term loans payable (Notes 5 (c) and 18) Lease obligations (Notes 3 (c) and 9) Deferred tax liabilities (Notes 3 (e) and 13) Provision for retirement beneﬁ ts Provision for directors’ retirement beneﬁ ts Provision for repairs Long-term guarantee deposited Other Total noncurrent liabilities Total liabilities Net assets: Shareholders’ equity: Capital stock— Authorized—4,000,000,000 shares Issued and outstanding—1,402,616,332 shares 103,389 103,389 1,054,985 Capital surplus Retained earnings (Note 7 (b) (2)) Treasury stock— (2009—4,070,731 shares, 2008—4,080,805 shares) Total shareholders’ equity Valuation and translation adjustments Valuation difference on available-for-sale securities (Note 3 (e)) Deferred gains or losses on hedges Revaluation surplus (Notes 3 (b) and 5 (a)) Foreign currency translation adjustment Total valuation and translation adjustments Minority interest Total net assets Commitments and contingent liabilities (Notes 5 (d) and 9) 79,404 79,427 810,244 418,292 432,246 4,268,288 (1,946) (2,019) (19,858) 599,139 613,042 6,113,659 23,301 (178) — (18,416) 4,708 7,504 51,091 11 873 1,226 53,201 7,912 237,766 (1,813) — (187,916) 48,038 76,575 611,351 674,156 6,238,271 Total liabilities and net assets ¥ 1,379,337 ¥ 1,425,367 $ 14,074,868 The accompanying notes are an integral part of these statements. 46 Asahi Kasei Annual Report 2009 Consolidated Statements of Income Asahi Kasei Corporation and consolidated subsidiaries Years ended March 31, 2009 and 2008 Net sales (Note 15) Cost of sales (Note 6 (a), (b)) Gross proﬁ t Selling, general and administrative expenses (Note 6 (a)) Operating income (Note 15) Non-operating income: Interest income Dividends income Equity in earnings of afﬁ liates Insurance income Other Total non-operating income Non-operating expenses: Interest expense Loss on disposal of inventories (Note 6 (b)) Foreign exchange loss Other Total non-operating expenses Ordinary income Extraordinary income: Gain on sales of investment securities (Note 7) Gain on sales of noncurrent assets (Note 6 (c)) Gain on change in equity Total extraordinary income Extraordinary loss: Loss on sales of investment securities Loss on valuation of investment securities Loss on disposal of noncurrent assets (Note 6 (d)) Impairment loss (Notes 6 (e) and 15) Environmental expenses (Note 6 (f)) Business structure improvement expenses (Notes 6 (g) and 15) Total extraordinary loss Income before income taxes Income taxes (Note 13)—current —deferred Total income taxes Minority interest in income Net income The accompanying notes are an integral part of these statements. Millions of yen Thousands of U.S. dollars (Note 1) 2009 2008 2009 ¥ 1,553,108 ¥ 1,696,789 $ 15,848,038 1,237,815 315,293 280,333 34,959 1,288,965 407,824 280,168 127,656 12,630,767 3,217,271 2,860,543 356,728 1,021 2,594 831 1,131 2,963 8,540 4,284 — 1,359 5,356 10,999 32,500 17 524 — 540 70 721 5,943 343 1,932 5,001 14,009 19,031 8,521 5,174 13,695 592 879 3,188 3,757 941 3,335 12,100 4,202 2,658 5,428 7,012 19,300 120,456 3,432 309 559 4,300 — 1,027 6,821 4,802 2,239 3,000 1,269 19,157 105,599 34,555 450 35,005 649 10,419 26,469 8,477 11,536 30,239 87,139 43,718 — 13,869 54,652 112,238 331,629 171 5,343 — 5,514 710 7,359 60,639 3,495 19,717 — 51,032 142,952 194,192 86,945 52,797 139,741 6,036 ¥ 4,745 ¥ 69,945 $ 48,414 Charge for remediation of homes delivered in previous years — 47 Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and consolidated subsidiaries Years ended March 31, 2009 and 2008 Shareholders’ equity Valuation, translation adjustments Millions of yen Capital stock Capital surplus Retained earnings (Note 7 (b)) Treasury stock Total shareholders’ equity Valuation difference on available-for- sale securities Deferred gains or losses on hedges Revaluation surplus (Note 5 (a)) Foreign currency translation adjustment Total valuation, translation adjustments Minority interest Total net assets Balance at March 31, 2008 ¥ 103,389 ¥ 79,427 ¥ 432,246 ¥ (2,019) ¥ 613,042 ¥ 51,091 ¥ 11 ¥ 873 ¥ 1,226 ¥ 53,201 ¥ 7,912 ¥ 674,156 Reversal of revaluation reserve due to uniﬁ cation of accounting standards at overseas subsidiaries (Note 3 (b)) Changes during the ﬁ scal year Dividends from surplus Net income Purchase of treasury stock Disposal of treasury stock Change of scope of equity method Net changes of items other than shareholders’ equity Total changes of items during the period 873 873 (873) (873) — (19,581) 4,745 (23) (241) 314 10 (19,581) 4,745 (241) 291 10 (19,581) 4,745 (241) 291 10 — (23) (14,826) 73 (14,777) (27,790) (189) — (19,642) (47,621) (408) (62,805) (27,790) (189) — (19,642) (47,621) (408) (48,029) Balance at March 31, 2009 ¥ 103,389 ¥ 79,404 ¥ 418,292 ¥ (1,946) ¥ 599,139 ¥ 23,301 ¥ (178) ¥ — ¥ (18,416) ¥ 4,708 ¥ 7,504 ¥ 611,351 Shareholders’ equity Valuation, translation adjustments Millions of yen Capital stock Capital surplus Retained earnings (Note 7 (b)) Treasury stock Total shareholders’ equity Valuation difference on available-for- sale securities Deferred gains or losses on hedges Revaluation surplus (Note 5 (a)) Foreign currency translation adjustment Total valuation, translation adjustments Minority interest Total net assets Balance at March 31, 2007 ¥ 103,389 ¥ 79,396 ¥ 380,515 ¥ (1,544) ¥ 561,755 ¥ 79,823 ¥ 58 ¥ 1,106 ¥ 2,913 ¥ 83,900 ¥ 7,855 ¥ 653,510 Changes during the ﬁ scal year Dividends Net income Purchase of treasury stock Disposal of treasury stock Decrease due to merger Net increase (decrease) in net assets others than shareholders’ equity Total changes during the ﬁ scal year (18,188) 69,945 31 (26) (18,188) 69,945 (542) 98 (26) (542) 67 (18,188) 69,945 (542) 98 (26) — 31 51,731 (475) 51,287 (28,732) (47) (233) (1,687) (30,699) 57 20,646 (28,732) (47) (233) (1,687) (30,699) 57 (30,642) Balance at March 31, 2008 ¥ 103,389 ¥ 79,427 ¥ 432,246 ¥ (2,019) ¥ 613,042 ¥ 51,091 ¥ 11 ¥ 873 ¥ 1,226 ¥ 53,201 ¥ 7,912 ¥ 674,156 Thousands of U.S. dollars (Note 1) Shareholders’ equity Valuation, translation adjustments Capital stock Capital surplus Retained earnings (Note 7 (b)) Treasury stock Total shareholders’ equity Valuation difference on available-for- sale securities Deferred gains or losses on hedges Revaluation surplus (Note 5 (a)) Foreign currency translation adjustment Total valuation, translation adjustments Minority interest Total net assets Balance at March 31, 2008 $ 1,054,985 $ 810,477 $ 4,410,670 $ (20,599) $ 6,255,533 $ 521,342 $ 114 $ 8,907 $ 12,507 $ 542,870 $ 80,738 $ 6,879,142 Reversal of revaluation reserve due to uniﬁ cation of accounting standards at overseas subsidiaries (Note 3 (b)) Changes during the ﬁ scal year Dividends from surplus Net income Purchase of treasury stock Change of scope of equity method Net changes of items other than shareholders’ equity Total changes of items during the period 8,907 8,907 (8,907) (8,907) — Disposal of treasury stock (234) 3,200 2,966 (199,807) 48,414 (199,807) 48,414 (2,458) (2,458) 103 103 (199,807) 48,414 (2,458) 2,966 103 — (234) (151,289) 742 (150,781) (283,575) (1,927) — (200,423) (485,926) (4,163) (640,870) (283,575) (1,927) — (200,423) (485,926) (4,163) (490,089) Balance at March 31, 2009 $ 1,054,985 $ 810,244 $ 4,268,288 $ (19,858) $ 6,113,659 $ 237,766 $ (1,813) $ — $ (187,916) $ 48,038 $ 76,575 $ 6,238,271 The accompanying notes are an integral part of these statements. 48 Asahi Kasei Annual Report 2009 Consolidated Statements of Cash Flows Asahi Kasei Corporation and consolidated subsidiaries Years ended March 31, 2009 and 2008 Cash ﬂ ows from operating activities: Income before income taxes Depreciation and amortization Impairment loss Amortization of goodwill Amortization of negative goodwill Increase (decrease) in provision for repairs Increase in provision for product warranties Decrease in provision for retirement beneﬁ ts Interest and dividend income Interest expense Equity in earnings of afﬁ liates Loss (gain) on sales of investment securities Loss on valuation of investment securities Gain on sale of property, plant and equipment Loss on disposal of noncurrent assets Decrease (increase) in notes and accounts receivable, trade Increase in inventories Decrease in notes and accounts payable, trade Increase (decrease) in accrued expenses Increase (decrease) in advances received Other, net Subtotal Interest and dividend income, received Interest expense, paid Income taxes, paid Net cash provided by operating activities Cash ﬂ ows from investing activities: Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation Payments of loans receivable Collection of loans receivable Other, net Net cash used in investing activities Cash ﬂ ows from ﬁ nancing activities: Increase in short-term loans payable Decrease in short-term loans payable Proceeds from issuance of commercial paper Redemption of commercial paper Proceeds from long-term loans payable Decrease in long-term loans payable Redemption of bonds Repayment of lease obligations Purchase of treasury stock Proceeds from disposal of treasury stock Cash dividends paid Cash dividends paid to minority shareholders Other Net cash provided by (used in) ﬁ nancing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Increase in cash and cash equivalents resulting from change of scope of consolidation Cash and cash equivalents at end of year (Note 8 (a)) The accompanying notes are an integral part of these statements. Millions of yen Thousands of U.S. dollars (Note 1) 2009 2008 2009 ¥ 19,031 79,436 343 619 (90) (621) 3,380 (6,011) (3,615) 4,284 (831) 53 721 (524) 5,943 83,714 (6,737) (37,272) (21,530) (9,498) (18,728) 92,068 5,925 (4,185) (24,996) 68,812 (97,214) 1,948 (22,016) (17,518) 516 — (6,374) 5,791 (839) (135,707) 81,230 (34,439) 135,000 (135,000) 97,131 (11,947) (25,000) (206) (249) 147 (19,581) (352) 581 87,314 (5,360) 15,059 83,033 ¥ 105,599 73,983 4,802 478 (171) 2,287 2,617 (9,211) (4,067) 4,202 (3,757) (3,432) 1,027 (309) 6,821 (104) (33,295) (30,571) 6,120 553 (6,168) 117,403 5,613 (4,497) (45,572) 72,947 (68,822) 1,026 (7,384) (2,115) 10,231 998 (9,748) 8,333 (1,654) (69,135) 27,057 (45,147) 75,000 (20,000) 2,585 (9,258) (34,000) — (551) 89 (18,174) (145) 213 (22,330) (219) (18,736) 101,719 $ 194,192 810,569 3,495 6,321 (923) (6,341) 34,491 (61,337) (36,887) 43,718 (8,477) 539 7,359 (5,343) 60,639 854,223 (68,740) (380,324) (219,690) (96,915) (191,099) 939,468 60,462 (42,700) (255,063) 702,167 (991,981) 19,876 (224,654) (178,759) 5,266 — (65,038) 59,089 (8,564) (1,384,766) 828,876 (351,420) 1,377,551 (1,377,551) 991,133 (121,911) (255,102) (2,097) (2,542) 1,496 (199,807) (3,595) 5,925 890,957 (54,696) 153,662 847,277 — ¥ 98,092 50 ¥ 83,033 — $ 1,000,939 49 Notes to Consolidated Financial Statements Asahi Kasei Corporation and consolidated subsidiaries 1. Major policies for preparing the consolidated ﬁ nancial statements: The consolidated ﬁ nancial statements, which are ﬁ led with the prime minister of Japan as required by the Financial Instruments and Exchange Act 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 ﬁ nancial statements are a translation of those ﬁ led with the prime minister of Japan and incorporate certain modiﬁ cations to enhance foreign readers’ understanding of the ﬁ nancial statements. In addition, the notes to the consolidated ﬁ nancial statements include certain ﬁ nancial information which is not required under the disclosure regulations in Japan, but is presented herein as additional information. In addition, certain reclassiﬁ cations of previously reported amounts have been made to conform to current classiﬁ cations. Such modiﬁ cations or reclassiﬁ cations have no effect on net income or retained earnings. The U.S. dollar amounts presented in the ﬁ nancial 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 be computed in accordance with generally accepted translation procedures, the approximate current exchange rate of ¥98=US$1 prevailing on March 31, 2009, has been used. Consolidation and investments in afﬁ liated companies— The consolidated ﬁ nancial statements consist of the accounts of the parent company and 103 subsidiaries (106 subsidiaries at March 31, 2008, hereinafter collectively referred to as the “Company”) which, with minor exceptions due to materiality, are all majority and wholly owned companies, including 8 core operating companies 2. Signiﬁ cant accounting policies: (a) Cash and cash equivalents For cash ﬂ ow 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 insigniﬁ cant risk of changes in value due to changes in interest rates. (b) Inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net sales value. Residential lots and dwellings for sale are stated at speciﬁ cally identiﬁ ed costs. (c) Noncurrent assets and depreciation/amortization Property, plant and equipment (except lease assets) are stated at cost. Signiﬁ cant 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 from ﬁ ve to sixty years for buildings and from four to twenty-two years for machinery and equipment. Intangible ﬁ xed assets (except lease assets), including software for internal use, are amortized using the straight-line method over the estimated useful lives of the assets. The estimated useful life of software for internal use is mainly ﬁ ve years. Lease assets are depreciated/amortized on a straight-line basis over the period of the lease with no residual value. For (Asahi Kasei Chemicals Corp., Asahi Kasei Homes Corp., Asahi Kasei Pharma Corp., Asahi Kasei Kuraray Medical Co., Ltd., Asahi Kasei Medical Co., Ltd., Asahi Kasei Fibers Corp., Asahi Kasei EMD Corp. [English name changed to Asahi Kasei Microdevices Corp. on April 1, 2009], and Asahi Kasei Construction Materials Corp.), Tong Suh Petrochemical Corp. Ltd. (Korea), and Sanyo Petrochemical Co., Ltd. Material inter-company transactions and accounts have been eliminated. Investments in unconsolidated subsidiaries and 20% to 50% owned companies in which the Company exercises signiﬁ cant inﬂ uence are accounted for, with minor exceptions due to materiality, using the equity method of accounting. There were 51 such unconsolidated subsidiaries and 20% to 50% owned companies to which the equity method is applied at March 31, 2009 (50 at March 31, 2008), 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 ﬁ nancial 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 ﬁ scal year-ends are appropriately adjusted for through consolidation procedures. The excess of the cost over the underlying net equity of investments in subsidiaries and afﬁ liated companies accounted for using the equity method of accounting is allocated to identiﬁ able 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 or negative good- will. The Company amortizes goodwill and negative goodwill using the straight-line method over the estimated period of beneﬁ t over a ﬁ ve or twenty-year period, with the exception of minor amounts, which are charged to income in the year of acquisition. ﬁ nancial lease transactions without title transfer whose transaction date is before March 31, 2008, the previous method of accounting for lease transactions continues to be applied, with periodic lease charges for ﬁ nancing leases charged to income as incurred. (See (c) Application of Accounting Standard for Lease Transactions and related guidance., Sec. 3 Changes in signiﬁ cant accounting policies.) (d) Signiﬁ cant allowances i) Allowance for doubtful accounts Estimates of the unrecoverable portion of receivables, generally based on historical rates and for speciﬁ c receivables of particular concern based on individual estimates of recoverability, are recognized as allowance for doubtful accounts. ii) Provision for repairs The portion of foreseeable repair expenses deemed to corre- spond to normal wear and tear of plant and equipment as of the closing date of the consolidated ﬁ scal period is recognized as provision for repairs. iii) Provision for product warranties Estimates of product warranty expenses based on historical rates and the amount required for remediation of deﬁ cient eave assembly speciﬁ cation are recognized as provision for product warranties. iv) Provision for retirement beneﬁ ts Provision for retirement beneﬁ ts represent the estimated present value of projected beneﬁ t obligations in excess of the fair value of the plan assets. Unrecognized actuarial gains/losses, 50 Asahi Kasei Annual Report 2009 resulting from variances between actual results and economic estimates or actuarial assumptions, are amortized on a straight- line basis primarily over the following ten years. Unrecognized prior service costs are amortized on a straight-line basis primarily over the following ten years. v) Provision for directors’ retirement beneﬁ ts 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 classiﬁ ed into four categories; trading securities, held-to-maturity debt securities, equity securities of unconsoli- dated subsidiaries and afﬁ liates, and other securities. At March 31, 2009 and 2008, the Company did not have trading securities or held-to-maturity debt securities. Equity securities of unconsolidated subsidiaries and afﬁ liates 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 net assets, net of related taxes. Other securities whose fair values are not readily determinable are stated at cost. In cases where any signiﬁ cant 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 reﬂ ected in the income statement. ii) Derivative ﬁ nancial 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 3. Changes in signiﬁ cant accounting policies: (a) Accounting Standards for Measurement of Inventories The Accounting Standards Board of Japan (ASBJ) issued ASBJ Statement No. 9, “Accounting Standards for Measurement of Inventories.” The Company has adopted the Standard, effective from the ﬁ scal year ended March 31, 2009, while inventories were stated at the lower of cost or market value (residential lots and dwellings of sale were stated at speciﬁ cally identiﬁ ed costs) until previous years. The Standard requires that inventories held for sale in the ordinary course of business are stated at the lower of cost or net sales value. The effect is to lower operating income by ¥12,923 million (US$131,864 thousand), ordinary income and income before income taxes by ¥2,536 million (US$25,882 thousand), respectively than they would have been using the previous method. Further, losses on devaluation of inventories using the previous method have been recorded in the non-operating expenses previously, whereas loss on devaluation of inventories is currently recorded in the cost of sales. The effect is to lower operating income by ¥10,386 (US$105,982 thousand) than it would have been using the previous method. In addition, whereas loss on disposal of inventories was previously classiﬁ ed in non-operating expenses, it is currently classiﬁ ed into the cost of sales with the application of the Accounting Standard. The effect is to lower operating income by ¥3,933 million (US$40,134 thousand) than it would have been using the previous method. changes in fair value of these qualifying hedges are deferred as “Deferred gains or losses on hedges” to be offset against gains or losses of 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. In Japan, the consumption tax system is designed so that all goods and services are taxed at a ﬂ at rate of 5% unless speciﬁ ed otherwise. Assets, liabilities, and proﬁ t and loss accounts are stated net of consumption tax. The Company has elected to ﬁ le its return under the consolidated tax ﬁ ling system. (g) 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 and liabilities of foreign subsidiaries and 20% to 50% owned companies accounted for using the equity method of accounting are translated into Japanese yen at year-end exchange rates, and income and expenses of same are translated into Japanese yen at the average exchange rate for the ﬁ scal year. Shareholders’ equity of foreign subsidiaries and 20% to 50% owned companies is translated into Japanese yen at the historical exchange rates. The translation differences in Japanese yen amounts arising from the use of different rates are recognized as foreign currency translation adjustment in the balance sheets. A portion of the foreign currency translation adjustment is allo- cated to “Minority interest” and the Company’s portion is presented as a separate component of net assets in the balance sheets. The effect of this application by industry segment is presented in Note 15. (b) Practical Solution on Uniﬁ cation of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements ASBJ issued ASBJ Practical Issues Task Force No. 18, “Practical Solution on Uniﬁ cation of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements.” The Company has adopted the Standard in the ﬁ scal year ended March 31, 2009, and necessary adjustments have been made for consolidation accounts. The effect of the application is not signiﬁ cant. (c) Accounting Standard for Lease Transactions and its Implementation Guidance ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions” and ASBJ Guidance No. 16, “Guidance on Accounting Standard for Lease Transactions.” The Company has adopted these Standards, effective form the ﬁ scal year ended March 31, 2009, that require the ﬁ nance lease transactions, which do not transfer its ownership, to be accounted for in a similar manner with ordinary sale and purchase transactions. Previously, ﬁ nance lease transactions that do not transfer ownership to be accounted for in a manner similar to accounting treatment for ordinary rental transactions. At the inception of the lease, a lessee shall recognize the leased asset and the related lease obligation at present value. 51 Depreciation expenses arising from a leased asset in a ﬁ nance lease transaction that does not transfer ownership shall be calcu- lated based on the assumption that the useful life equals to the lease term and the residual value equals to zero. Depreciation is provided for under the straight-line method. With respect to lease transactions whose commencement day falls prior to the ﬁ rst year of implementation of the Accounting Standard, the accounting treatment has continued to be applied for similar method used for ordinary rental transactions. The impact of this change is immaterial. (d) Change in translation method of income and expenses of foreign subsidiaries and afﬁ liates Previously income and expense accounts of foreign subsidiaries and afﬁ liates were translated at the prevailing exchange rates at ﬁ scal year end of the subsidiaries and the afﬁ liates. However, effective from the ﬁ scal year ended March 31, 2009, the conversion rate into reporting currency in Japanese yen is changed to use the average exchange rate during the period. This change allows more realistic translations of all income and expense items that accrue during the ﬁ scal year. The effect is to increase net sales by ¥21,505 million (US$219,439 thousand), operating income by ¥1,235 million (US$12,597 thousand), ordinary income by ¥1,559 million (US$15,906 thousand), income before income taxes by ¥1,330 million (US$13,567 thousand), and net income by ¥921 million (US$9,397 thousand), than they would have been using the previous method. The effect by industry segment is shown in Note 15. (e) Changes in a valuation basis of other securities Effective for the year ended March 31, 2009, the Company has changed its accounting method relating to valuation of fair value for such equity securities from using mark-to-market on an average current-value for one month prior to the year end to mark-to-market on a current value as of the year end. This change was applied for in order to present the ﬁ nancial condition in better. As a result, investment securities are increased by ¥1,758 million (US$17,941 thousand), deferred tax liabilities by ¥714 million (US$7,283 thousand), valuation difference on available-for-sale securities by ¥1,040 million (US$10,615 thousand), and income before income taxes by ¥4 million (US$43 thousand), respectively than they would have been using the previous basis. 4. Additional information: With regard to the cost of remediation work to restore deﬁ cient eave assembly speciﬁ cations for certain order-built homes delivered by consolidated subsidiary Asahi Kasei Homes Corp. other than that attributable to the company, a memorandum has been concluded with the supplier of sofﬁ t panels, and expenses forecast to be incurred are seen to be recoverable. Expenses forecast for remediation work including that attributable to the company are included in provision for product warranties in the consolidated balance sheets, and the amount to be recovered from the supplier is included in other under current assets and in other under investments and other assets in the consolidated balance sheets. 5. Notes to Consolidated Balance Sheets: (a) Revaluation surplus A revaluation surplus which had been recorded by a consolidated foreign subsidiary in accordance with applicable law was reversed in the year ended March 31, 2009, due to the application of Practical Solution on Uniﬁ cation of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements. (See Note 3 (b).) (b) Investment securities Among investment securities, shares of unconsolidated subsidiaries and afﬁ liates as of March 31, 2009 and 2008, amounted to ¥62,170 million (US$634,384 thousand) and ¥51,247 million, respectively. Included in those amounts are investments in joint ventures of ¥25,583 million (US$261,047 thousand) and ¥17,238 million, respectively. (c) Hypothecated assets and secured debt A summary of assets pledged as collateral and secured debt as of March 31, 2009 and 2008, is shown below: Hypothecated assets Buildings and structures Machinery, equipment and vehicles Land Other Secured debt Short-term loans payable Long-term loans payable Millions of yen 2009 ¥ 534 21 — 1 ¥ 556 ¥ 4 8 ¥ 12 2008 ¥ 642 34 97 1 ¥ 774 ¥ 113 757 ¥ 870 Thousands of U.S. dollars 2009 $ 5,446 217 — 6 $ 5,669 $ 46 79 $ 124 Besides the above, investment securities pledged to suppliers as transaction guarantee at March 31, 2009 and 2008, were ¥80 million (US$817 thousand) and ¥112 million, respectively. 52 Asahi Kasei Annual Report 2009 (d) Contingent liabilities Contingent liabilities at March 31, 2009 and 2008, arising in the ordinary course of business are as follows: Loans guaranteed Commitment for guarantees Letters of awareness Completion guarantees Notes discounted Millions of yen 2009 ¥ 8,525 1,394 637 4,764 152 2008 ¥ 9,737 1,738 267 — 208 Thousands of U.S. dollars 2009 $ 86,991 14,221 6,500 48,614 1,554 ¥ 15,472 ¥ 11,950 $ 157,880 The parent company and certain of its subsidiaries and afﬁ liates are defendants in several pending lawsuits. However, based upon the information currently available to both the Company and its legal counsel, management of the Company believes that any damages from such lawsuits will not have a material effect on the Company’s consolidated ﬁ nancial statements. (e) Reduction entries due to state subsidies, etc. Cumulative reduction entries due to state subsidies, etc. for the acquisition of property, plant and equipment as of March 31, 2009 and 2008, were ¥4,078 million (US$41,609 thousand) and ¥2,454 million, respectively. The breakdown of reduction entries as of March 31, 2009, is as follows: Buildings and structures Machinery, equipment and vehicles Land Other 6. Notes to Consolidated Statements of Income: (a) Selling, general and administrative expenses Major components of selling, general and administrative expenses are as follows: Freight and storage Salaries and beneﬁ ts Research and development (*) Millions of yen 2009 ¥ 2,105 1,622 238 112 ¥ 4,078 Thousands of U.S. dollars 2009 $ 21,480 16,551 2,431 1,147 $ 41,609 Millions of yen 2009 ¥ 33,940 88,988 43,249 2008 ¥ 35,086 89,729 39,618 Thousands of U.S. dollars 2009 $ 346,331 908,037 441,318 (*) The aggregate amounts of research and development expenses included in manufacturing costs and selling, general and administrative expenses for the years ended March 31, 2009 and 2008, were ¥60,849 million (US$620,909 thousand) and ¥56,170 million, respectively. (b) Loss on devaluation of inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net sales value as of March 31, 2009. Loss on devaluation of inventories of ¥12,923 million (US$131,864 thousand) was included in cost of sales for the year ended March 31, 2009. (c) Gain on sales of noncurrent assets Gain on sales of noncurrent assets for the years ended March 31, 2009 and 2008, was primarily gain on the sale of land, etc. amounting to ¥514 million (US$5,245 thousand) and ¥253 million, respectively. (d) Loss on disposal of noncurrent assets Loss on disposal of noncurrent assets for the years ended March 31, 2009 and 2008, was primarily loss on abandonment and sale, etc. of buildings, machinery and equipment, etc. The abandonment and sale of buildings, machinery and equipment, etc. was performed under a single, all-inclusive contract for each facility. 53 (e) Impairment loss Impairment loss for the years ended March 31, 2009 and 2008, was as follows: Use Asset class Location Production facility for autoclaved aerated concrete (AAC) panels and others Machinery and equipment, etc. Shiraoi, Hokkaido, and elsewhere Production facility for polyester ﬁ lament Machinery and Nobeoka, Miyazaki Production facility for functional food additives Production facility for ﬁ ne-pattern devices equipment, etc. Machinery and equipment, etc. Machinery and equipment, etc. Shiraoi, Hokkaido Hyuga, Miyazaki 2009 ¥ 754 264 112 79 Millions of yen 2008 Thousands of U.S. dollars 2009 ¥ — $ 7,691 3,753 — 1,049 2,694 1,142 801 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 ﬁ xed assets class. With respect to assets shown in the above table, the book value was reduced to the recoverable amount due to diminished proﬁ tability. The recoverable amount is stated as future cash ﬂ ow less 5% as measured by usability value. The resulting extraordinary loss for production facility for autoclaved aerated concrete (AAC) panels and others and for production facility for functional food additives was recorded under business structure improvement expenses for the year ended March 31, 2009. (f) Environmental expenses Environmental expenses for the years ended March 31, 2009 and 2008, were mainly for decontamination of idle land etc. (g) Business structure improvement expenses Major components of the business structure improvement expenses are as follows: Loss on disposal and devaluation of assets and others Impairment of ﬁ xed assets Loss on liquidation of subsidiaries and others 7. Notes to Consolidated Statements of Changes in Net Assets: (a) Class and total number of issued and outstanding shares and treasury stock Millions of yen 2009 ¥ 3,271 866 865 ¥ 5,001 2008 ¥ 1,123 — 146 ¥ 1,269 Thousands of U.S. dollars 2009 $ 33,376 8,833 8,823 $ 51,032 Issued and outstanding shares Capital stock Total Treasury stock Capital stock (Notes 1 & 2) Total Number of shares as of March 31, 2008 Increase in number of shares during the ﬁ scal year Decrease in number of shares during the ﬁ scal year Number of shares as of March 31, 2009 Thousands of shares 1,402,616 1,402,616 4,081 4,081 — — 530 530 — — 540 540 1,402,616 1,402,616 4,071 4,071 Notes: 1. The increase of 530 thousand shares in capital stock of treasury stock was due to purchase of shares in quantities of less than one share unit. 2. Of the decrease of 540 thousand shares in capital stock of treasury stock, a decrease of 348 thousand was due to sale of shares in quantities of less than one share unit, and a decrease of 193 thousand was the portion of the Company’s shares which had been recorded as the Company’s treasury stock which were sold by an afﬁ liate for which the equity method applies. (b) Dividends (1) Cash dividends paid a) The following was resolved by the Board of Directors on May 8, 2008. Regarding dividends for capital stock Total dividends Dividend per share Date of record Payment date ¥9,791 million (US$99,909 thousand) ¥7.00 (US$0.07) March 31, 2008 June 6, 2008 54 Asahi Kasei Annual Report 2009 b) The following was resolved by the Board of Directors on November 5, 2008. Regarding dividends for capital stock Total dividends Dividend per share Date of record Payment date ¥9,790 million (US$99,898 thousand) ¥7.00 (US$0.07) September 30, 2008 December 1, 2008 (2) Dividends for which the date of record falls within the ﬁ scal year under review but the payment date occurs in the following ﬁ scal year a) The following was resolved by the Board of Directors on May 12, 2009. Regarding dividends for capital stock Total dividends Source of dividends Dividend per share Date of record Payment date ¥4,196 million (US$42,813 thousand) Retained earnings ¥3.00 (US$0.03) March 31, 2009 June 3, 2009 8. Note of Consolidated Statements of Cash Flows: (a) Cash and cash equivalents Reconciliation of cash and cash equivalents on the consolidated statements of cash ﬂ ows to the amounts disclosed on the balance sheets at March 31, 2009 and 2008, is as follows: Cash and deposits 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 9. Leases: (a) Financial lease transactions Financial lease transactions without title transfer i) Components of lease assets are as follows: Millions of yen 2009 ¥ 97,969 (163) 286 ¥ 98,092 2008 ¥ 82,903 (170) 300 ¥ 83,033 Thousands of U.S. dollars 2009 $ 999,681 (1,662) 2,919 $ 1,000,939 a) Property, plant and equipment: Mainly model homes (buildings and structures) for housing operations. b) Intangible ﬁ xed assets: Software. ii) Depreciation of lease assets: As stated in 2. Signiﬁ cant accounting policies (c) Noncurrent assets and depreciation/amortization. For ﬁ nancial lease transactions without title transfer whose transaction date is before March 31, 2008, the previous method of accounting for lease transactions continues to be applied. 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, 2009 and 2008, would have been as follows: Buildings and structures Machinery, equipment and vehicles Property, plant and equipment—other Intangible ﬁ xed assets—other Millions of yen 2009 Accumulated amortization ¥ 6,418 191 926 223 ¥ 7,758 Net amount ¥ 3,433 160 534 187 ¥ 4,315 Cost ¥ 9,851 351 1,460 410 ¥ 12,072 55 Millions of yen 2008 Accumulated amortization ¥ 8,421 258 972 242 ¥ 9,892 Thousands of U.S. dollars 2009 Accumulated amortization $ 65,489 1,949 9,452 2,271 $ 79,160 Cost ¥ 15,191 457 1,837 527 ¥ 18,012 Cost $ 100,521 3,582 14,903 4,180 $ 123,186 Net amount ¥ 6,770 199 866 285 ¥ 8,120 Net amount $ 35,032 1,633 5,451 1,910 $ 44,026 Buildings and structures Machinery, equipment and vehicles Property, plant and equipment—other Intangible ﬁ xed assets—other Buildings and structures Machinery, equipment and vehicles Property, plant and equipment—other Intangible ﬁ xed assets—other The future lease payments under the Company’s ﬁ nancing leases and non-cancelable operating leases at March 31, 2009 and 2008, including amounts representing interest, were as follows: Due within one year Due after one year Millions of yen 2009 ¥ 2,353 1,961 ¥ 4,315 2008 ¥ 3,761 4,359 ¥ 8,120 Thousands of U.S. dollars 2009 $ 24,014 20,012 $ 44,026 Lease charges were ¥3,459 million (US$35,293) and ¥4,628 million for the years ended March 31, 2009 and 2008, respectively. The amortization amounts of the leased assets, computed using the straight-line method over the term of the leases and no residual value, were ¥3,459 million (US$35,293 thousand) and ¥4,628 million for the years ended March 31, 2009 and 2008, respectively. No impairment loss is allocated to the leased assets. (b) Operating lease transactions Future lease payments for the non-cancelable portion of the Company’s operating leases at March 31, 2009, were as follows: Due within one year Due after one year Millions of yen 2009 ¥ 4,525 16,172 ¥ 20,696 Thousands of U.S. dollars 2009 $ 46,170 165,017 $ 211,187 10. Marketable securities and investment securities: (a) Other securities with available fair value— The aggregate cost, carrying amount which was identical to fair value, and gross unrealized gains and losses of debt and equity securities classiﬁ ed as other securities for which fair values were available at March 31, 2009 and 2008, were as follows: Securities with unrealized gains: Equity securities Securities with unrealized losses: Equity securities Debt securities Millions of yen 2009 Carrying amount Cost Unrealized gains (losses) ¥ 32,070 ¥ 73,118 ¥ 41,048 11,177 0 11,177 ¥ 43,247 9,478 0 9,478 ¥ 82,596 (1,700) — (1,700) ¥ 39,349 56 Asahi Kasei Annual Report 2009 Securities with unrealized gains: Equity securities Securities with unrealized losses: Equity securities Debt securities Securities with unrealized gains: Equity securities Securities with unrealized losses: Equity securities Debt securities Millions of yen 2008 Carrying amount Cost Unrealized gains (losses) ¥ 37,310 ¥ 123,847 ¥ 86,537 3,943 23 3,966 ¥ 41,276 Cost 3,261 23 3,283 ¥ 127,130 (683) — (683) ¥ 85,854 Thousands of U.S. dollars 2009 Carrying amount Unrealized gains (losses) $ 327,243 $ 746,102 $ 418,859 114,055 1 114,055 $ 441,298 96,712 1 96,713 $ 842,815 (17,342) — (17,342) $ 401,517 Losses on devaluation of other securities whose fair values are readily determinable for the years ended March 31, 2009 and 2008, totaled ¥497 million (US$5,074 thousand) and ¥404 million, respectively. (b) The realized gains and losses on the sale of other securities during the year ended March 31, 2009 and 2008, were as follows: Selling amount Gain on sales of securities Loss on sales of securities Millions of yen 2009 ¥ 463 17 70 2008 ¥ 8,673 3,278 — Thousands of U.S. dollars 2009 $ 4,728 171 712 (c) The carrying amounts of other securities for which fair values were not readily determinable at March 31, 2009 and 2008, were as follows: Equity investment in funds Equity investment in nonpublic companies Millions of yen 2009 ¥ 8,001 3,907 2008 ¥ 5,001 6,980 Thousands of U.S. dollars 2009 $ 81,639 39,869 (d) Redemption schedules for maturity of debt securities at March 31, 2009 and 2008, were as follows: Debt securities: Government and municipal bonds Corporate bonds Debt securities: Government and municipal bonds Corporate bonds Millions of yen 2009 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years ¥ 2 120 ¥ 122 ¥ 7 — ¥ 7 ¥ — — ¥ — ¥ — — ¥ — Millions of yen 2008 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years ¥ 5 — ¥ 5 ¥ 9 120 ¥ 129 ¥ — — ¥ — ¥ — — ¥ — 57 Debt securities: Government and municipal bonds Corporate bonds 11. Derivative ﬁ nancial instruments: Thousands of U.S. dollars 2009 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years $ 23 1,224 $ 1,247 $ 70 — $ 70 $ — — $ — $ — — $ — The Company operates internationally, giving rise to exposure to market risks from ﬂ uctuations in foreign currency exchange and interest rates. In the normal course of its risk management efforts, the Company uses a variety of derivative ﬁ nancial instruments, which include 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 ﬁ nancial instruments are utilized solely for hedging purposes and the Company does not hold or issue ﬁ nancial 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 currencies 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. Interest rate swap agreements and currency swap agreements are used to limit the Company’s exposure to losses in relation to interest expense from adverse ﬂ uctuations 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 agreements. Currency swap agreements are accounted for in a manner similar to that used for foreign currency forward exchange contracts. Interest rate swap agreements for housing loan securitization transactions are used to reduce interest volatility risk between the time of execution of housing loans and the time of execution of their securitization. The Company does not anticipate any credit loss from non- performance by the counter-parties to foreign currency forward exchange contracts, interest rate swap agreements, or currency swap agreements. Hedging accounting is applied for all derivative ﬁ nancial instruments of the Company other than those for housing loan securitization, with gains or losses arising from changes in fair value deferred as “Deferred gains or losses on hedges” to be off-set against foreign exchange gains or losses on the underlying hedged assets and liabilities. The fair value of the housing loan securitization transactions as of March 31, 2009 and 2008, was as follows: Classiﬁ cation Items Dealings other than market dealings Interest rate swap receipt change / payment ﬁ xation Amount of contract (Amount of contract over 1 year) Fair value Proﬁ t (loss) from valuation 12. Provision for retirement beneﬁ ts: Millions of yen 2009 ¥ 750 — 8 8 2008 ¥ 1,700 — (46) (46) Thousands of U.S. dollars 2009 $ 7,653 — 77 77 Upon terminating employment, employees of the parent company and its major subsidiaries in Japan are entitled, under most circum- stances, 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 beneﬁ ts may be granted to employees depending on the conditions under which termination of employment occurs. Certain foreign subsidiaries have deﬁ ned beneﬁ t pension plans or deﬁ ned contribution plans. The obligation for these severance indemnity beneﬁ ts is provided for through accruals, contributory funded deﬁ ned beneﬁ t pension plans, contributory funded deﬁ ned beneﬁ t enterprise pension plans and non-contributory funded tax-qualiﬁ ed pension plans. Information on provision for retirement beneﬁ ts at March 31, 2009 and 2008, was as follows: (a) Projected beneﬁ t obligations (b) Fair value of plan assets (c) Unfunded beneﬁ t obligations [(a)+(b)] (d) Unrecognized actuarial gains/losses (e) Unrecognized prior service costs (f) Amount shown on balance sheet [(c)+(d)+(e)] (g) Prepaid pension cost (h) Provision for retirement beneﬁ ts [(f)-(g)] Millions of yen 2009 2008 Thousands of U.S. dollars 2009 ¥ (296,676) ¥ (297,343) $ (3,027,310) 152,927 (143,749) 45,072 (5,615) (104,292) 5,572 190,955 (106,388) 2,639 (7,009) 1,560,484 (1,466,826) 459,921 (57,300) (110,758) (1,064,204) 5,374 56,861 ¥ (109,864) ¥ (116,133) $ (1,121,065) Note: The ﬁ gures in the above table do not include additional beneﬁ t payables amounting to ¥59 million (US$597 thousand) and ¥310 million at March 31, 2009 and 2008, respectively. The amounts were recorded as part of current liabilities on the consolidated balance sheets at March 31, 2009 and 2008. 58 Asahi Kasei Annual Report 2009 Periodic retirement beneﬁ t expenses for employees for the years ended March 31, 2009 and 2008, include the following components: Service cost* Interest cost Expected return on plan assets Amortization of unrecognized actuarial gains/losses Amortization of unrecognized prior service costs Retirement beneﬁ t expenses Millions of yen 2009 ¥ 8,896 7,282 (4,728) (249) (1,394) 2008 ¥ 8,856 7,325 (5,289) (2,814) (1,393) Thousands of U.S. dollars 2009 $ 90,777 74,303 (48,242) (2,544) (14,227) ¥ 9,807 ¥ 6,685 $ 100,068 Note: In addition to the above costs, additional beneﬁ ts amounting to ¥453 million (US$4,619 thousand) and ¥1,303 million were charged to income for the years ended March 31, 2009 and 2008, respectively. * Not including contributions made by employees. The assumptions used in calculation of the above information are as follows: Discount rate Expected rate of return on plan assets 2009 2.5% 2.5% 2008 2.5% 2.5% Method of attributing the projected beneﬁ ts to periods of employee service Straight-line basis Straight-line basis Amortization of unrecognized prior service costs Amortization of unrecognized actuarial gains/losses Mainly 10 years Mainly 10 years Mainly 10 years Mainly 10 years 13. Taxes: Income taxes applicable to the parent company and subsidiaries in Japan include (1) corporation tax, (2) enterprise tax, and (3) inhabitants tax. Signiﬁ cant components of the deferred tax assets and liabilities at March 31, 2009 and 2008, were as follows: Deferred tax assets: Provision for retirement beneﬁ ts Tax loss carryforwards Accrued bonuses Loss on disposal of noncurrent assets Unrealized gain on noncurrent assets and others Impairment loss Provision for repairs Devaluation of investment securities Devaluation of inventories Provision for product warranties Environmental expenses Depreciation Allowance for doubtful accounts Accrued enterprise tax Other Subtotal deferred tax assets Less: Valuation allowance Total deferred tax assets Deferred tax liabilities: Valuation difference on available-for-sale securities Reserve for noncurrent assets reduction Reserve for special depreciation Other Total deferred tax liabilities Net deferred tax assets Millions of yen 2009 2008 Thousands of U.S. dollars 2009 ¥ 44,448 ¥ 46,847 $ 453,550 14,736 6,496 3,764 3,225 2,887 2,396 2,141 1,947 1,418 1,030 934 801 692 8,452 95,366 (15,016) 80,350 (18,479) (13,585) (164) (5,061) (37,289) 5,795 8,722 6,826 4,354 3,897 2,644 1,401 2,817 2,501 874 551 476 1,409 8,741 97,854 (11,770) 86,084 (37,484) (14,235) (537) (4,134) (56,390) 150,368 66,289 38,407 32,907 29,458 24,444 21,843 19,869 14,473 10,508 9,527 8,175 7,056 86,247 973,122 (153,226) 819,896 (188,563) (138,619) (1,672) (51,647) (380,502) ¥ 43,061 ¥ 29,694 $ 439,394 59 Net deferred tax assets (liabilities) at March 31, 2009 and 2008, were included in the following entries on the consolidated balance sheets. Current assets—Deferred tax assets Non-current assets—Deferred tax assets Current liabilities—Deferred tax liabilities Non-current liabilities—Deferred tax liabilities Millions of yen 2009 ¥ 18,444 28,874 — (4,257) 2008 ¥ 26,130 12,777 (58) (9,155) Thousands of U.S. dollars 2009 $ 188,206 294,632 — (43,443) Reconciliation of the differences between the statutory tax rate and the effective income tax rate for the year ended March 31, 2009 and 2008, was as follows: Statutory tax rate 2009 40.7% Statutory tax rate Increase (reduction) in taxes resulting from: Increase (reduction) in taxes resulting from: Non-deductible expenses and non-taxable income 15.0 Non-deductible expenses and non-taxable income Equalization of inhabitants taxes Amortization of goodwill Equity in earnings of unconsolidated subsidiaries and afﬁ liates Difference of tax rates for foreign subsidiaries Valuation allowance Unrealized proﬁ t Consolidated tax ﬁ ling system Other Effective income tax rate 2.2 0.9 (2.4) (5.5) 17.1 8.0 (3.8) (0.3) Equalization of inhabitants taxes R&D expenses tax credit from income taxes Amortization of goodwill Equity in earnings of unconsolidated subsidiaries and afﬁ liates Difference of tax rates for foreign subsidiaries Other 72.0% Effective income tax rate 2008 40.7% 2.7 0.4 (4.7) 0.2 (1.5) (3.3) (1.3) 33.2% 14. Business combinations, etc.: 1. Transactions under common control, etc. Transactions under common control, etc. in the ﬁ scal year ended March 31, 2009, were as follows: a) Transfer of common shares by Corporate Split under Company Law of Asahi Kasei Kuraray Medical Co., Ltd., and Asahi Kasei Medical Co., Ltd., subsidiaries of Asahi Kasei Pharma Corp., a consolidated subsidiary of Asahi Kasei Corp. i. Names of entities combining subject to transaction Asahi Kasei Corp., Asahi Kasei Pharma Corp. ii. Nature of businesses Shares of Asahi Kasei Kuraray Medical Co., Ltd. and Asahi Kasei Medical Co., Ltd., companies engaged in medical-related operations. v. Outline of transaction including purpose of transaction Medical-related operations are positioned as a ﬁ eld of focus for growth in the Asahi Kasei Group, and a growth strategy including proactive business development and capital expenditure has been advanced. For continuous growth from ﬁ scal 2010 onward, reconﬁ guration of the management conﬁ guration was considered necessary. The transfer of common shares of Asahi Kasei Kuraray Medical Co., Ltd. and Asahi Kasei Medical Co., Ltd. to Asahi Kasei Corp. will both clarify medical-related operations as a ﬁ eld of focus for growth in the Asahi Kasei Group and facilitate greater management efﬁ ciency in a structure for swift execution of strategic decisions and resource investment. iii. Statutory form of business combination b) Outline of the accounting treatment implemented Transfer of common shares of Asahi Kasei Kuraray Medical Co., Ltd. and Asahi Kasei Medical Co., Ltd., owned by Asahi Kasei Pharma Corp., to Asahi Kasei Corp. by Corporate Split under Corporate Law. iv. Name of company after transaction Asahi Kasei Corp. (unchanged) Asahi Kasei Pharma Corp. (unchanged) Asahi Kasei Kuraray Medical Co., Ltd. (becoming a subsidiary of Asahi Kasei Corp.) Asahi Kasei Medical Co., Ltd. (becoming a subsidiary of Asahi Kasei Corp.) This transaction was accounted for as a transaction under common control based on the Accounting Standard for Business Combinations issued by the Business Accounting Council in Japan and Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (Accounting Standard Guidance No. 10) issued by the Accounting Standards Board of Japan. 60 Asahi Kasei Annual Report 2009 15. Business segment information: (1) Industry segments— Sales and operating income (loss) for the year ended March 31: Sales: Chemicals Homes Pharma Fibers Millions of yen 2009 Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate expenses and eliminations Consolidated Customers ¥ 741,486 ¥ 409,882 ¥ 119,619 ¥ 102,176 ¥ 91,721 ¥ 60,927 ¥ 27,297 ¥ 1,553,108 ¥ — ¥ 1,553,108 Intersegment Total 15,728 71 11 1,990 654 12,676 32,567 63,697 (63,697) — 757,214 409,952 119,630 104,166 92,375 73,603 59,864 1,616,804 (63,697) 1,553,108 Operating expenses 757,632 388,082 107,590 105,027 89,030 71,919 54,237 1,573,519 (55,370) 1,518,148 Operating income (loss) ¥ (419) ¥ 21,871 ¥ 12,040 ¥ (861) ¥ 3,345 ¥ 1,683 ¥ 5,627 ¥ 43,286 ¥ (8,326) ¥ 34,959 Sales: Chemicals Homes Pharma Fibers Millions of yen 2008 Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate expenses and eliminations Consolidated Customers ¥ 879,235 ¥ 386,227 ¥ 111,232 ¥ 114,072 ¥ 113,267 ¥ 55,732 ¥ 37,024 ¥ 1,696,789 ¥ — ¥ 1,696,789 Intersegment Total 14,081 86 6 2,120 1,045 11,742 27,534 56,613 (56,613) — 893,316 386,313 111,238 116,192 114,312 67,474 64,559 1,753,402 (56,613) 1,696,789 Operating expenses 828,098 364,933 98,560 108,972 92,081 64,690 59,407 1,616,741 (47,608) 1,569,133 Operating income (loss) ¥ 65,218 ¥ 21,380 ¥ 12,678 ¥ 7,220 ¥ 22,230 ¥ 2,784 ¥ 5,151 ¥ 136,661 ¥ (9,005) ¥ 127,656 Sales: Chemicals Homes Pharma Fibers Thousands of U.S. dollars 2009 Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate expenses and eliminations Consolidated Customers $ 7,566,181 $ 4,182,465 $ 1,220,605 $ 1,042,617 $ 935,928 $ 621,700 $ 278,543 $ 15,848,038 $ — $ 15,848,038 Intersegment 160,488 723 109 20,305 6,676 129,349 332,315 649,966 (649,966) — Total 7,726,669 4,183,188 1,220,714 1,062,922 942,604 751,049 610,857 16,498,003 (649,966) 15,848,038 Operating expenses 7,730,944 3,960,018 1,097,861 1,071,708 908,471 733,872 553,440 16,056,313 (565,003) 15,491,309 Operating income (loss) $ (4,274) $ 223,170 $ 122,854 $ (8,786) $ 34,133 $ 17,177 $ 57,418 $ 441,690 $ (84,962) $ 356,728 Identiﬁ able assets, depreciation and amortization, impairment loss and capital expenditure as of and for the year ended March 31: Millions of yen 2009 Chemicals Homes Pharma Fibers Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate assets and eliminations Consolidated Identiﬁ able assets ¥ 583,614 ¥ 216,716 ¥ 176,699 ¥ 107,781 ¥ 115,154 ¥ 43,736 ¥ 449,637 ¥ 1,693,337 ¥ (314,000) ¥ 1,379,337 Depreciation and amortization Impairment loss 36,666 3,439 10,275 6,440 15,428 3,619 806 76,673 2,763 79,436 — — 112 264 79 754 — 1,208 — 1,208 Capital expenditure 45,667 7,037 31,569 12,257 21,557 2,430 1,082 121,598 5,127 126,725 61 Millions of yen 2008 Chemicals Homes Pharma Fibers Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate assets and eliminations Consolidated Identiﬁ able assets ¥ 618,877 ¥ 213,846 ¥ 142,774 ¥ 113,251 ¥ 122,310 ¥ 44,993 ¥ 332,164 ¥ 1,588,214 ¥ (162,847) ¥ 1,425,367 Depreciation and amortization Impairment loss 37,122 2,690 6,102 5,727 13,902 3,138 792 69,474 4,509 73,983 — — — 3,753 1,049 — — 4,802 — 4,802 Capital expenditure 34,344 7,451 10,007 9,255 17,018 2,507 793 81,375 1,536 82,911 Thousands of U.S. dollars 2009 Chemicals Homes Pharma Fibers Electronics Materials & Devices Construction Materials Services, Engineering and Others Combined Corporate assets and eliminations Consolidated Identiﬁ able assets $ 5,955,240 $ 2,211,383 $ 1,803,054 $ 1,099,811 $ 1,175,037 $ 446,290 $ 4,588,134 $ 17,278,949 $ (3,204,081) $ 14,074,868 Depreciation and amortization Impairment loss 374,144 35,092 104,845 65,719 157,432 36,928 8,222 782,381 28,191 810,572 — — 1,142 2,694 801 7,691 — 12,328 — 12,328 Capital expenditure 465,988 71,803 322,135 125,069 219,972 24,792 11,036 1,240,795 52,320 1,293,115 Notes: 1. The Company’s industry segments are aggregated into seven segments based primarily upon similarities of products, services, and economic characteristics. Chemicals — The Company produces, processes and sells chemicals and derivative products (such as ammonia, nitric acid, caustic soda, acrylonitrile, styrene monomer, methyl methacrylate (MMA) monomer, PMMA resin, and adipic acid), polymer products (such as Suntec™ polyethylene (PE), Stylac™-AS (styrene-acrylonitrile), Stylac™-ABS (acrylonitrile-butadiene-styrene), synthetic rubber, Tenac™ polyacetal, Xyron™ modiﬁ ed polyphenylene ether (mPPE), and Leona™ nylon 66 polymer and ﬁ lament), specialty products (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, ion-exchange membranes and electrolysis systems, Saran Wrap™ cling ﬁ lm, Ziploc™ storage bags, and plastic ﬁ lms, sheets, and foams). Homes — The Company builds Hebel Haus™ custom-built pre-fabricated homes and Hebel Maison™ apartments, and operates related businesses such as condominiums, remodeling, real estate, residential land development, and home ﬁ nancing. Pharma — The Company produces and sells pharmaceuticals (such as Elcitonin™, Bredinin™, Flivas™, and Toledomin™), pharmaceutical intermediates, and diagnostics reagents. The Company also manufactures APS™ artiﬁ cial kidneys, Sepacell™ leukocyte reduction ﬁ lters, Cellsorba™ leukocyte adsorption columns, Planova™ virus removal ﬁ lters, and contact lenses. Fibers — The Company produces and sells Roica™ elastic polyurethane ﬁ lament, nonwoven fabrics (such as Eltas™ spunbond and Lamous™ artiﬁ cial suede), Bemberg™ cuprammonium rayon, and polyester ﬁ lament. Electronics Materials & Devices — The Company produces and sells Pimel™ photosensitive polyimide, Sunfort™ dry-ﬁ lm photoresist (DF), photomask pellicles, LSIs, Hall elements, and glass fabric. Construction Materials — The Company produces and sells autoclaved aerated concrete (AAC) panels (such as Hebel™), piles, and Neoma™ foam insulation panels. Services, Engineering and Others — The Company provides plant engineering, environmental engineering, personnel stafﬁ ng and placement, and think tank services. 2. Corporate operating expenses included in “Corporate expenses and eliminations” for the years ended March 31, 2009 and 2008, amounted to ¥14,726 million (US$150,263 thousand) and ¥16,149 million, respectively. 3. Corporate assets such as surplus funds (cash and deposits), long-term-investment funds (investment securities etc.), and land etc. included in “Corporate assets and eliminations” for the years ended March 31, 2009 and 2008, amounted to ¥457,979 million (US$4,673,258 thousand) and ¥413,698 million, respectively. 4. Among impairment losses for the year ended March 31, 2009, ¥112 million (US$1,142 thousand) in Pharma and ¥754 million (US$7,691 thousand) in Construction Materials are included in business structure improvement expenses under extraordinary losses. 5. Changes in the basis for preparation of consolidated ﬁ nancial statements a) Accounting Standards for Measurement of Inventories The Accounting Standards Board of Japan (ASBJ) issued ASBJ Statement No. 9, “Accounting Standards for Measurement of Inventories.” The Company has adopted the Standard, effective from the ﬁ scal year ended March 31, 2009, while inventories were stated at the lower of cost or market value (residential lots and dwellings of sale were stated at speciﬁ cally identiﬁ ed costs) until previous years. The Standard requires that inventories held for sale in the ordinary course of business are stated at the lower of cost or net sales value. The effect by segment of the change to statement of inventories at the lower of cost or net sales value is that operating income is lower by ¥9,286 million (US$94,751 thousand) in Chemicals, ¥2,536 million (US$25,882 thousand) in Homes, ¥862 million (US$8,794 thousand) in Pharma, ¥174 million (US$1,777 thousand) in Fibers, ¥53 million (US$542 thousand) in Electronics Materials & Devices, and ¥11 million (US$114 thousand) in Services, Engineering and Others than they would have been using the previous method. The effect by segment of the change to recording loss on disposal of inventories under cost of sales is that operating income is lower by ¥1,055 million (US$10,765 thousand) in Chemicals, ¥15 million (US$155 thousand) in Homes, ¥1,008 million (US$10,281 thousand) in Pharma, ¥183 million (US$1,865 thousand) in Fibers, ¥1,598 million (US$16,311 thousand) in Electronics Materials & Devices, ¥68 million (US$696 thousand) in Construction Materials, and ¥6 million (US$61 thousand) in Services, Engineering and Others than they would have been using the previous method. As a result, consolidated operating income is lower by ¥3,933 million (US$40,134 thousand). b) Change in translation method of income and expenses of foreign subsidiaries and afﬁ liates Previously income and expense accounts of foreign subsidiaries and afﬁ liates were translated at the prevailing exchange rates at ﬁ scal year end of the subsidiaries and the afﬁ liates. However, effective from the ﬁ scal year ended March 31, 2009, the conversion rate into reporting currency in Japanese yen is changed to use the average exchange rate during the period. The effect by segment of the change to conversion of sales and costs at foreign subsidiaries and afﬁ liates to yen at the average market value during the ﬁ scal period is that net sales are higher by ¥16,847 million (US$171,909 thousand) in Chemicals, ¥3,052 million (US$31,144 thousand) in Fibers, ¥1,542 million (US$15,730 thousand) in Electronics Materials & Devices, and ¥64 million (US$656 thousand) in Services, Engineering and Others than they would have been using the previous method, and that operating income is higher by ¥877 million (US$8,954 thousand) in Chemicals, ¥27 million (US$280 thousand) in Pharma, ¥57 million (US$577 thousand) in Fibers, ¥270 million (US$2,758 thousand) in Electronics Materials & Devices, and ¥3 million (US$28 thousand) in Services, Engineering and Others than they would have been using the previous method. As a result, consolidated sales is higher ¥21,505 million (US$219,439 thousand) and consolidated operating income is higher by ¥1,235 million (US$12,597 thousand). 62 Asahi Kasei Annual Report 2009 (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, 2009 and 2008, were not signiﬁ cant. (3) Overseas sales— Overseas sales for the years ended March 31, 2009 and 2008, were as follows: Millions of yen Thousands of U.S. dollars 2009 2008 East Asia Others Total East Asia Others Total East Asia 2009 Others Total Overseas sales ¥233,219 ¥160,746 ¥393,965 ¥287,862 ¥199,475 ¥487,337 $2,379,784 $1,640,263 $4,020,047 Consolidated net sales — — 1,553,108 — — 1,696,789 — — 15,848,038 Percentage of consolidated net sales (%) 15.0% 10.3% 25.4% 17.0% 11.8% 28.7% Notes: 1. Geographical distance is considered in the classiﬁ cation of country or area. 2. Major countries or areas included in each category are as follows; East Asia: China, 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. 16. 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 years ended March 31, 2009 and 2008, was as follows: Basic net assets per share Basic net income per share (a) Net assets per share Total net assets Amount deducted from total net assets Of which, minority interest Net assets allocated to capital stock Yen 2009 ¥ 431.77 ¥ 3.39 2008 ¥ 476.39 ¥ 50.01 Millions of yen 2009 2008 U.S. dollars 2009 $ 4.41 $ 0.03 Thousands of U.S. dollars 2009 ¥ 611,351 ¥ 674,156 $ 6,238,271 7,504 7,504 7,912 7,912 76,575 76,575 ¥ 603,846 ¥ 666,244 $ 6,161,696 Number of shares of capital stock outstanding at ﬁ scal year end used in calculation of net assets per share (thousand) 1,398,546 1,398,536 1,398,546 (b) Net income per share Net income Amount not allocated to capital stock Net income allocated to capital stock Millions of yen 2009 ¥ 4,745 2008 ¥ 69,945 — — ¥ 4,745 ¥ 69,945 Thousands of U.S. dollars 2009 $ 48,414 — $ 48,414 Weighted-average number of shares of capital stock (thousand) 1,398,428 1,398,704 1,398,428 As the Company had no dilutive securities at March 31, 2009 and 2008, the Company does not disclose diluted net income for the years ended March 31, 2009 and 2008. 63 17. Subsequent events: (1) Acquisition of company etc. through purchase of shares On April 1, 2009, Asahi Kasei Microdevices Corp., subsidiary of Asahi Kasei Corp., purchased 80% of the issued and outstanding shares of Tateyama Device Inc. from Toko Inc. based on an agree- ment concluded on February 4, 2009, pertaining to share transfer, etc. Based on said agreement, Asahi Kasei Microdevices Corp. is scheduled to purchase the remaining issued and outstanding shares (20%) from Toko Inc., in principle three years later. ii. From Asahi Kasei Chemicals Corp. (cid:129) Hipore & Battery Materials Division (Hipore™ Li-ion rechargeable battery separators) (cid:129) Photoproducts & Epoxy Resins Division (APR™ photopolymer and printing plate making systems, etc.) (cid:129) Portions of Polymer Products Division (light diffusion plates) iii. From Asahi Kasei EMD Corp. (cid:129) Electronics Materials Division (Pimel™ photosensitive a) Reason for company acquisition through purchase of shares It was determined that the IP cores and process technology related to power management semiconductors included in the acquired business would enable synergies in product develop- ment, and that it would be effective to utilize the company’s commercial record in overseas markets in the further expansion of business in European and American markets. b) Name of company from which shares were acquired Toko Inc. c) Acquired company name Tateyama Device Inc. d) Nature of business acquired All semiconductor operations of Toko Inc. and its subsidiaries. e) Scale of business acquired The consolidated net sales of the semiconductor operations of Toko Inc. in the ﬁ scal year ended March 31, 2008, were ¥15.6 billion. f) Number of shares purchased, purchase price Of the 2,000 issued and outstanding shares of Tateyama Device Inc., 1,600 shares were purchased on April 1, 2009. The purchase price is currently being calculated based on the March 31, 2009, book value of assets and liabilities transferred from Toko Inc. (2) Change in classiﬁ cation of businesses within industry segments Reconﬁ guration of electrochemicals-related operations Asahi Kasei E-materials Corp. was established in April 1, 2009, by business split of Asahi Kasei Chemicals Corp. and Asahi Kasei EMD Corp. (renamed Asahi Kasei Microdevices Corp. on April 1, 2009). Beginning with the year ended March 31, 2010, the business of Asahi Kasei E-materials Corp. will be in the Electronics segment based on the similarity of product types and characteristics to those of electronics operations. a. Main organizational entities transferred i. From Asahi Kasei Corp. Marketing Center for FPC/FPD Materials, New Business Development polyimide precursor) (cid:129) Electronics Interconnecting Materials Division (Sunfort™ dry ﬁ lm photoresist) (cid:129) Electronics Insulation Materials Division (glass fabric for printed wiring boards) (cid:129) Electronics Performance Products Division (photomask pellicles, etc.) Note: No segment change for the entities listed under iii., above. b. Effect of segment reclassiﬁ cation (based on results for the year ended March 31, 2009). i. From corporate expenses and eliminations to Electronics segment Operating income Assets Millions of yen ¥ (2,817) 2,615 Thousands of U.S. dollars $ (28,745) 26,684 ii. From Chemicals segment to Electronics segment Net sales Operating income Assets Millions of yen ¥ 37,934 6,758 39,782 Thousands of U.S. dollars $ 387,082 68,959 405,939 Transfer of Leona ﬁ lament business On April 1, 2009, Asahi Kasei Chemicals Corp., operating the Company’s Leona™ businesses, performed a reorganization related to the Leona™ ﬁ lament business, transferring said business to Asahi Kasei Fibers Corp, operating ﬁ bers businesses. As a result, beginning with the ﬁ scal year ending March 31, 2010, the Leona™ ﬁ lament business will be included in the Fibers segment. a) Business transferred Nylon 66 ﬁ lament b) Effect of segment reclassiﬁ cation Net sales Operating income Assets Millions of yen ¥ 14,229 (648) 12,108 Thousands of U.S. dollars $ 145,194 (6,612) 123,551 64 Asahi Kasei Annual Report 2009 18. Borrowings: (1) Bonds payable at March 31, 2009 and 2008, comprised the following: Unsecured 1.02% to 2.15% yen bonds due 2008 to 2009 Unsecured 0.29% to 2.83% Euro yen bonds due 2007 to 2009 Unsecured 2.45%, US$1.90% to 3.10% reversal dual currency Euro yen bonds due 2008 to 2013 Notes: 1. Current portion of bonds payable is recorded under current liabilities on the consolidated balance sheets. 2. In the case of ﬂ oating interest rates, the rate at the end of March is shown. 3. The interest rates of Euro yen bonds paid in yen and paid in US dollars are shown separately. 4. The aggregate annual maturities of long-term debt after March 31, 2009, are as follows: 2009 2010 2011 2012 2013 and thereafter (2) Loans payable at March 31, 2009 and 2008, are comprised of the following: Short-term loans payable with interest rate 1.23% Current portion of long-term loans payable with interest rate 1.63% Current portion of lease obligations with interest rate 2.38% Millions of yen 2009 ¥ 20,000 — 5,000 ¥ 25,000 2008 ¥ 35,000 4,000 11,000 ¥ 50,000 Millions of yen ¥ 20,000 — — — 5,000 ¥ 25,000 Millions of yen 2009 ¥ 78,373 22,413 489 2008 ¥ 34,116 9,104 — Long-term loans payable (except portion due within one year) with interest rate 1.42% 132,474 63,187 Lease obligations (except portion due within one year) with interest rate 2.39% Commercial papers with interest rate 0.57% 1,845 55,000 ¥ 290,594 — 55,000 ¥ 161,407 Notes: 1. Interest rates shown are weighted average interest rates for the balance outstanding at the end of March. 2. The aggregate annual maturities of long-term loans payable and lease obligations (except portion due within one year) after March 31, 2009, are as follows: Thousands of U.S. dollars 2009 $ 204,082 — 51,020 $ 255,102 Thousands of U.S. dollars $ 204,082 — — — 51,020 $ 255,102 Thousands of U.S. dollars 2009 $ 799,726 228,707 4,987 1,351,776 18,825 561,224 $ 2,965,246 Year ending March 31 2010 2011 2012 2013 2014 and thereafter Long-term loans payable Lease obligations Millions of yen ¥ 14,839 30,217 29,704 23,229 34,485 Thousands of U.S. dollars $ 151,421 308,337 303,100 237,036 351,883 Millions of yen ¥ 500 512 517 307 8 Thousands of U.S. dollars $ 5,106 5,526 5,274 3,134 8 65 66 Asahi Kasei Annual Report 2009 Major Subsidiaries and Afﬁ liates As of April 1, 2009 Company Chemicals Segment Asahi Kasei Chemicals Corp.* Sanyo Petrochemical Co., Ltd.* Asahi Kasei Pax Corp.* Main products/business line Chemicals Benzene, ethylene Packaging products and solutions Asahi Kasei Home Products Corp.* Cling ﬁ lm, other household products Asahi Kasei Metals Ltd. Asahi Kasei Finechem Co., Ltd.* Aluminum paste Specialty chemicals Asahi Kasei Geotechnologies Co., Ltd. Sale of industrial explosives, civil engineering materials Asahi SKB Co., Ltd. Shotgun cartridges Asahi Kasei Clean Chemical Co., Ltd. Water treatment equipment, environmental chemicals Asahi Kasei Technoplus Co., Ltd.* Processing and sale of plastic and ﬁ ber Japan Elastomer Co., Ltd.* Synthetic rubber Sundic Inc. Biaxially oriented polystyrene sheet Wacker Asahikasei Silicone Co., Ltd. Silicone Okayama Chemical Co., Ltd. Kayaku Japan Co., Ltd. PS Japan Corp. Chisso Asahi Fertilizer Co., Ltd. Caustic soda, chlorine Industrial explosives Polystyrene Fertilizer Asahi Organic Chemicals Industry Co., Ltd. Synthetic resin, fabricated plastic products Asahikasei Plastics (America) Inc.* Compounded performance resin operations Asahi Kasei Plastics North America, Inc.* Coloring and compounding of performance resin Sun Plastech Inc.* Sale of purging compound Tong Suh Petrochemical Corp., Ltd.* Acrylonitrile, sodium cyanide Asahi Kasei Chemicals Korea Co., Ltd. Adipic acid Asahikasei Plastics (Shanghai) Co., Ltd. Sale of performance resin Asahikasei (Suzhou) Plastics Compound Co., Ltd. Coloring, compounding, and sale of performance resin Asahi-DuPont POM (Zhangjiagang) Co., Ltd. Polyacetal Asahi Kasei Performance Chemicals Corp.* High-performance HDI-based polyisocyanate Asahi Kasei Microza (Hangzhou) Co., Ltd.* Industrial membranes and systems Asahi Kasei Plastics (Hong Kong) Co., Ltd. Sale of performance resin Asahi Kasei Plastics Singapore Pte. Ltd.* Performance resin Polyxylenol Singapore Pte. Ltd.* PPE powder Paid-in capital (million) Equity interest (%) ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ 3,000 100.0 2,000 100.0 490 250 250 175 132 100 100 160 1,000 1,050 1,050 1,000 60 5,000 305 5,000 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.4 75.0 50.0 50.0 50.0 50.0 45.0 35.0 30.1 US$ US$ US$ 17.8** 100.0 21.7** 100.0 1.0 100.0 W 50,642 100.0 W 1,500 100.0 CNY CNY US$ CNY CNY HK$ US$ US$ 18 50 32.0 100.0 51.0 50.0 149 100.0 49 20 46.0 35.0 100.0 100.0 100.0 70.0 Asahikasei Plastics (Thailand) Co., Ltd. Coloring, compounding, and sale of performance resin B 140 100.0 PT Nippisun Indonesia Coloring, compounding, and sale of styrenic resin Asahi Kasei Plastics Europe SA/NV* Sale of compounded performance resin US$ A 6.3 5.0 25.7 100.0 Homes Segment Asahi Kasei Homes Corp.* Asahi Kasei Jyuko Co., Ltd.* Asahi Kasei Mortgage Corp.* Asahi Kasei Reform Co., Ltd.* Asahi Kasei Real Estate, Ltd.* Health Care Segment Asahi Kasei Pharma Corp.* Housing Steel frames Financial services Home maintenance and remodeling Home leasing, real estate brokerage Pharmaceuticals, medical products Asahi Kasei Kuraray Medical Co., Ltd.* Hemodialyzers, therapeutic apheresis devices Asahi Kasei Medical Co., Ltd.* Medical devices, medical systems Asahikasei Aime Co., Ltd.* Asahi Kasei TechniKrom, Inc.* Contact lenses Bioprocess equipment and systems Asahi Kasei Medical America Inc. Sale of medical devices, medical systems * Consolidated subsidiary ** Including capital reserve ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ 3,250 100.0 2,820 100.0 1,000 100.0 250 200 100.0 100.0 3,000 100.0 800 200 480 93.0 100.0 100.0 US$ US$ 30.0 100.0 0.5 93.0 67 Paid-in capital (million) Equity interest (%) CNY A A A ¥ ¥ Company Main products/business line Asahi Kasei Medical (Hangzhou) Co., Ltd.* Hemodialyzers Asahi Kasei Medical Europe GmbH Sale of medical devices, medical systems Asahi Kasei Planova Europe SA/NV Sale of virus removal ﬁ lters Asahi Pharma Spain, SL Fibers Segment Asahi Kasei Fibers Corp.* Kyokuyo Sangyo Co., Ltd.* Asahi Kasei AGMS Corp.* Pharmaceuticals Fiber, textiles Processing and sale of ﬁ ber, textiles Computerized grading, marking, and pattern-making systems ¥ DuPont-Asahi Flash Spun Products Co., Ltd. Flash spun Asahi Kasei Spandex America, Inc.* Hangzhou Asahikasei Spandex Co., Ltd.* Spandex Spandex Hangzhou Asahikasei Textiles Co., Ltd.* Warp-knit spandex textiles Formosa Asahi Spandex Co., Ltd. Spandex Asahi Chemical (HK) Ltd.* Promotion and marketing of ﬁ ber and textiles Thai Asahi Kasei Spandex Co., Ltd.* Asahi Kasei Spandex Europe GmbH* Spandex Spandex Asahi Kasei Fibers Italy SRL* Sale of spandex and cupro cellulosic ﬁ ber Asahi Kasei Fibers Deutschland GmbH Sale of artﬁ cial suede Electronics Segment Asahi Kasei Microdevices Corp.* Asahi Kasei E-materials Corp.* Asahi Kasei Epoxy Co., Ltd.* Asahi Kasei Microsystems Co., Ltd.* Asahi-Schwebel Co., Ltd.* Asahi Kasei Electronics Co., Ltd.* Electronic devices Electronic materials Epoxy resin LSIs Glass fabric Hall elements Asahi Kasei Toko Power Devices Corp.* Power management semiconductors AKM Semiconductor, Inc.* Asahi Kasei EMD Korea Corp. Sale of LSIs Sale of pellicles Asahi Kasei Electronics Materials (Suzhou) Co., Ltd.* Dry ﬁ lm photoresist Asahi Kasei EMD Taiwan Corp. Sale of pellicles Asahi Kasei Wah Lee Hi-Tech Corp.* Dry ﬁ lm photoresist Asahi-Schwebel (Taiwan) Co., Ltd.* Glass fabric Asahi Photoproducts (Europe) SA/NV* Sale of photopolymer, printing-plate making systems Asahi Photoproducts (UK) Ltd.* Sale of photopolymer, printing-plate making systems Construction Materials Segment Asahi Kasei Construction Materials Corp.* Construction materials Asahi Kasei Foundation Systems Corp.* Installation of piles Services, Engineering and Others Segment Asahi Research Center Co., Ltd.* Information and analysis Asahi Finance Co., Ltd.* Investment, ﬁ nance Asahi Kasei Engineering Co., Ltd.* Plant, equipment, process engineering Asahi Kasei Trading Co., Ltd.* Sun Trading Co., Ltd.* Asahi Kasei Amidas Co., Ltd.* AJS Inc. Asahi Kasei America, Inc.* Sale of Asahi Kasei products Sale of Asahi Kasei products Employment agency, consulting Computer software, IT systems Business support services Asahi Kasei Business Management (Shanghai) Co., Ltd. Business support services * Consolidated subsidiary ** Including capital reserve ¥ US$ CNY CNY NT$ HK$ B A A A ¥ ¥ ¥ ¥ ¥ ¥ ¥ US$ W CNY NT$ NT$ NT$ A £ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ US$ US$ 163 0.2 0.2 0.1 93.0 93.0 100.0 100.0 3,000 100.0 80 50 100.0 100.0 450 50.0 32.3** 100.0 132 100.0 78 801 82.5 50.0 65 100.0 1,350 60.0 19.6** 100.0 3.0 0.3 100.0 100.0 3,000 100.0 3,000 100.0 300 100.0 50 50 50 100 2.9 820 181 1 49 326 3.4 0.3 100.0 100.0 100.0 80.0 100.0 100.0 100.0 100.0 80.6 51.0 100.0 100.0 3,000 100.0 200 100.0 1,000 100.0 800 400 98 94 80 800 0.1 3.0 100.0 100.0 100.0 100.0 100.0 49.0 100.0 100.0 68 Asahi Kasei Annual Report 2009 Corporate Proﬁ le As of March 31, 2009 Company Name Asahi Kasei Corporation Date of Establishment May 21, 1931 Paid-in Capital ¥103,388,521,767 Employees 24,244 (consolidated) 823 (non-consolidated) Asahi Kasei Group Ofﬁ ces Asahi Kasei Corporation Core Operating Companies Tokyo Head Ofﬁ ce 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3000 Fax: +81-3-3296-3161 Osaka Head Ofﬁ ce* 3-3-23 Nakanoshima, Kita-ku Osaka 530-8205 Japan Phone: +81-6-7636-3111 Fax: +81-6-7636-3077 Beijing Ofﬁ ce Room 1407 New China Insurance Tower No.12 Jian Guo Men Wai Avenue Chao Yang District Beijing 100022 China Phone: +86-10-6569-3939 Fax: +86-10-6569-3938 Shanghai Ofﬁ ce 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 Asahi Kasei Chemicals 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3200 Asahi Kasei Homes 1-24-1 Nishi-shinjuku, Shinjuku-ku Tokyo 160-8345 Japan Phone: +81-3-3344-7111 Asahi Kasei Pharma 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3600 Asahi Kasei Kuraray Medical 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3750 Asahi Kasei Medical 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3750 Asahi Kasei Fibers* 3-3-23 Nakanoshima, Kita-ku Osaka 530-8205 Japan Phone: +81-6-7636-3500 Asahi Kasei Microdevices† 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3911 Asahi Kasei E-materials‡ 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3939 Asahi Kasei Construction Materials 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3500 * Moved to this address on May 7, 2009. † Renamed from Asahi Kasei EMD on April 1, 2009. ‡ Began operation as a core operating company on April 1, 2009. 69 Investors Information As of March 31, 2009 Stock Listings Stock Code Tokyo, Osaka, Nagoya, Fukuoka, Sapporo 3407 Authorized Shares 4,000,000,000 Outstanding Shares 1,402,616,332 Transfer Agent Sumitomo Trust & Banking Co., Ltd. 4-5-33 Kitahama, Chuo-ku Osaka 541-8639 Japan Independent Auditors PricewaterhouseCoopers Aarata Number of Shareholders 133,188 Largest Shareholders % of equity* Master Trust Bank of Japan, Ltd. (trust account) Japan Trustee Services Bank, Ltd. (trust account 4G) Japan Trustee Services Bank, Ltd. (trust account) Nippon Life Insurance Co. Employees’ Stockholding Sumitomo Mitsui Banking Corp. Tokio Marine & Nichido Fire Insurance Co., Ltd. Meiji Yasuda Life Insurance Co. Mizuho Corporate Bank, Ltd. Sumitomo Life Insurance Co. * Percentage of equity ownership after exclusion of treasury stock. 6.18 6.03 5.75 5.22 2.84 2.53 2.22 1.49 1.45 1.40 Distribution by Type of Shareholder Distribution by Number of Shares Held Japanese financial institutions 49.39% Foreign investors 21.19% 100,000 or more 78.56% Japanese individuals and groups 24.08% Japanese securities companies 0.73% 10,000–99,999 1,000–9,999 7.43% 13.62% Other Japanese companies 4.61% Less than 1,000 0.39% In this annual report, the TM symbol indicates a trademark or registered trademark of Asahi Kasei Corporation, afﬁ liated companies, or third parties granting rights to Asahi Kasei Corporation or afﬁ liated companies. A S A H I K A S E I C O R P O R A T O N I A N N U A L R E P O R T 2 0 0 9 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan www.asahi-kasei.co.jp Corporate Communications Tel: +81-3-3296-3008, Fax: +81-3-3296-3162 This annual report was printed with vegetable-based ink on recycled paper. Printed in Japan 2009.10

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