T O R A YI S M
Annual Report 2016
April 1, 2015–March 31, 2016
CONTENTS
THIS IS TORAYISM
02-09
INTEGRATED VALUE CREATION
10-33
10
12
14
24
Toray Group’s vision
Consolidated Financial & Non-financial Highlights
To Our Stockholders and Investors
Special Feature
hitoe®: Functional Material that Biosenses Body Signals
26
Toray Group Segments
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INTEGRATED VALUE MANAGEMENT
34-54
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R&D and Intellectual Property
Sustainable Management
Corporate Information
FINANCIAL SECTION
55-96
56
Six-Year Summary of Selected Financial Data
57 Management’s Discussion and Analysis
62
64
64
65
66
67
95
96
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditor’s Report
Investor Information and Corporate Data
Cautionary statement with respect to forward-looking statements
Descriptions of predicted business results, projections and business plans contained
in this annual report are based on forecasts and assumptions regarding the future busi-
ness environment made at the present time. This annual report is not a guarantee of
the Company’s future business performance.
PROFILE
Toray Group is an integrated chemical industry group aiming to be a global top company in advanced materials based on the firm
belief that, “as the foundation of products, materials have the power to bring about fundamental transformations in society.”
Based on our core technologies of organic synthetic chemistry, polymer chemistry, biotechnology, and nanotechnology as
the sources of value creation, we develop the Core Growth Driving Businesses of Fibers & Textiles and Plastics & Chemicals,
Strategically Expanding Businesses of IT-related Products and Carbon Fiber Composite Materials, and Intensively Developing
and Expanding Businesses of Environment & Engineering and Life Science in 26 countries and regions around the world.
Toray aims to be a corporate group with high value for all stakeholders and seeks to use the power of chemistry to ad-
dress social issues worldwide guided by our corporate philosophy of “contributing to society through the creation of new
value with innovative ideas, technologies and products.”
CORPORATE PHILOSOPHY
Contributing to society through the creation of new value with innovative ideas, technologies and products
CORPORATE MISSIONS
For our customers To provide new value to our customers through high-quality products and superior services
For our employees To provide our employees with opportunities for self development in a challenging environment
For our stockholders To provide our stockholders with dependable and trustworthy management
For society To establish ties and develop mutual trust as a responsible corporate citizen
TORAYISM
GLOBAL BUSINESS DEVELOPMENT LEVERAGING
THE ADVANTAGE OF JAPANESE-STYLE MANAGEMENT
03
THE CONCEPT OF OUR CORPORATE SLOGAN,
“Innovation by Chemistry”
The Toray Group adopted “Innovation by Chemistry” as its corporate slogan in April 2006 as a dec-
laration of our intention to use chemistry as the driving force in our aim “to become a top global corporation in
advanced materials.”
The word “Chemistry” has two meanings. The obvious one is the science that forms the basis for the advanced
materials which we supply. The other is rapport. For us, that means maintaining a good rapport with everyone who
is involved with TORAY—customers, employees, stockholders, business partners, consumers, and people in the
local community—and maintaining good rapport among the companies in the TORAY group and strong connections
among our business offices throughout the world.
“Innovation” is how we will realize our corporate philosophy of “Contributing to society through the creation
of new value with innovative ideas, technologies and products.” “Innovation” refers not only to technological inno-
vation but to our intention to pursue innovation in all aspects of our corporate activities.
Toray Industries, Inc.Annual Report 2016 1
TORAYISM : THEORY
MATERIALS CAN
CHANGE OUR LIVES
04
Materials Play a Key Role in Manufacturing
The digitization of manufacturing processes has made it easier for companies to enter
the manufacturing industry without extensive technologies. Development at the materi-
als level, however, is key to creating innovative products, and development and commer-
cialization of materials can only be achieved through sophisticated collaboration with end
user manufacturing companies, in which Japanese companies particularly excel, as well
as with long-term commitment to R&D and accumulated know-how.
Moreover, end user manufacturing companies require major advances in functionality
in their new product development. As materials play an increasingly important role in man-
ufacturing, Toray continues to hone its ability to accurately find value in its materials and
aims for long-term growth by creating new businesses before existing businesses peak
out, diversifying operations, and advancing globalization.
“The Deeper, the Newer,” Challenge the Ultimate
Toray has always pursued the ultimate in R&D as a part of its DNA. Toray has achieved
numerous breakthroughs in advanced materials with groundbreaking functions the world
has never seen before. In 1971, for example, Toray was the first company in the world to
commence commercial production of carbon fiber. While other companies entered and
exited the field, Toray pushed forward research in carbon fiber with strongly held convic-
tions, resulting in its top share of the global market today. Toray has also developed carbon
fiber for other applications including the aviation and automobile industries. Our long-term
vision and unwavering commitment has led to sustained growth throughout our history.
Toray Industries, Inc.Annual Report 2016 HEATTECH
HEATTECH® is a brand of functional innerwear that quick-
ly absorbs and heats moisture given off by the human body.
HEATTECH® is made from a high-tech fiber that Toray created
by combining four different kinds of materials that convention-
al wisdom said could not work with traditional textile technol-
ogies, going through 10,000 prototypes to find the ultimate in
innerwear comfort in terms of heat generation, heat retention,
water absorption and quick-drying functions.
*HEATTECH® is a registered trademark of Fast Retailing Co., Ltd.
Carbon Fiber
Carbon fiber is one quarter the weight while providing 10 times
the tensile strength of steel, plus it does not rust. Toray’s car-
bon fiber composite materials are currently used for 50% of
the structural weight of Boeing Company’s state-of-the-art 787
Dreamliner. Toray and Boeing collaborated closely together from
the concept stage on the design of the aircraft to maximize po-
tential of Toray’s carbon fiber, and the 787 was born.
Reverse Osmosis Membranes
Reverse osmosis membranes are used for seawater desalination
and wastewater treatment. At desalination plants where sea-
water is turned into drinkable water, the number of systems that
use reverse osmosis membranes is increasing, as they constrain
energy use and costs compared with the traditional method of
saltwater evaporation, where salt and impurities are removed by
evaporating seawater. Toray is currently developing reverse os-
mosis membrane technologies with sub-nanometer scale filtra-
tion microstructures (one ten-billionth of a meter scale).
Water Separation Membranes
for Water Treatment
Pharmaceuticals
and Medical
Products
Carbon
Fiber
IT-related
Products
¥2 trillion
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¥1 trillion
Resin,
Film
Synthetic
Fiber
Rayon
Established
in 1926
1950
1960
1970
1980
1990
2000
2010
Global Business Development
05
Toray Industries, Inc.Annual Report 2016
TORAYISM : GLOBALIZATION
2
GLOBAL DEPLOYMENT OF
TECHNOLOGIES DEVELOPED
IN JAPAN
06
W O R L D S T A G E
Global Management with Respect for Diversity
Since Toray commenced local production of textile products in Southeast Asia in
the 1960s, global business development has been an engine of growth. Viewing
global business development from a long-term perspective, Toray’s basic policy is
to contribute to each country’s industrial development, export growth, and techno-
logical advancement. We aim to contribute to local communities while respecting
diversity and local customs, while at the same time bringing the best aspects of
Japanese-style management to our long-term commitment.
Creating a Sustainable Growth Cycle on a Global Scale
Toray conducts cutting-edge R&D in Japan to create advanced materials and high
value-added products. The Company strives to develop innovative processes all
the way through to the production technology stage in the commercialization of
new products. Toray then aims to expand the business further through the devel-
opment of applications that address local needs, as well as through the optimal
use of its overseas production bases in terms of demand location and cost com-
petitiveness. Profits earned are then reinvested in next-generation R&D at our
mother plants in Japan. These efforts nurture a long-term sustainable growth cycle
on a global scale.
JAPANESE QUALITYToray Industries, Inc.Annual Report 2016 Toray Group’s Overseas Sales (Billions of yen)
Domestic Sales Overseas Sales
2,500
2,000
1,500
1,000
500
0
FY
1998
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
W O R L D S T A G E
07
Mother Plants in Japan
Expand business and
strengthen cost competitiveness
Overseas Bases
Development of advanced materials
Creation of high value-added products
Development of innovative processes
Steep cost reductions
Development of applications that
address local needs
Local production based on location of
demand and cost competitiveness
Contribute to each country’s industrial
development, export growth, and
technological advancement from
long-term perspective
Reinvest in R&D
JAPANESE QUALITYToray Industries, Inc.Annual Report 2016 TORAYISM : MANAGEMENT
3
ACHIEVE SUSTAINABLE
GROWTH AND INCREASE
CORPORATE VALUE OVER
THE LONGER TERM
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DO THE RIGHT THINGS
Rapid Decision-Making via Board Members with
Deep Understanding of Business and Executive Responsibilities
Toray supplies highly specialized, advanced materials to a broad range of indus-
tries. Toray has put in place a system for monitoring the business execution of its
Board members, who are given responsibilities for rapid decision-making in busi-
ness execution based on their deep knowledge of its business. This governance
structure oversees operations through a system in which the management works
in tandem with on-site personnel, and, in supervising business management,
assesses wide-ranging, varying risks from diverse perspective based on special-
ized knowledge of each business. Through the management of its businesses,
Toray is expected to exhibit leadership in helping solve social issues through its
products and technologies, achieving sustainable growth with society and increas-
ing corporate value over the medium- and long-term.
Contributions to All Stakeholders
Toray does not solely prioritize the pursuit of short-term profits. Toray believes
companies are “public institutions” that exist for the benefit of society. We take a
long-term perspective on management, based on capitalism in the public interest,
emphasizing contributions (i.e., public interest) to all stakeholders including stock-
holders, employees, customers, partners and local communities. In this regard, the
corporate value of Toray depends on the trust placed in us by all stakeholders over
the long term.
Toray Industries, Inc.Annual Report 2016
DO THE RIGHT THINGS 09
Toray Industries, Inc.Annual Report 2016 4
TORAYISM : VISION
DO WHAT SHOULD BE DONE,
NOT WHAT CAN BE DONE
Long-term Corporate Vision: AP-Growth TORAY 2020
Toray Group’s vision is to be “a corporate group that continually increases revenues and profits,” “a corporate group
that proactively contributes to social development and environmental stewardship,” and “a corporate group that pro-
vides high value for all stakeholders” with the aim of achieving sustainable growth by mobilizing the full potential of
Toray Group. To realize this vision, we are stepping up efforts to broaden our global operations while focusing on ex-
panding businesses that help solve problems related to the global environment, natural resources and energy.
10
INTEGRATED VALUE CREATION
102.4
103.4
93.0
81.1
107.7
105.3
100.1
83.4
123.5
Trends in Operating Income
(Billion yen)
51.2
56.8
33.0
18.8
36.0
40.1
FY
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
(Target)
Around
2020
(Image)
NT-21
NT-II
IT-2010
IT-II
AP-G 2013
AP-G 2016
170.0
154.5
Toray Industries, Inc.Annual Report 2016 Medium-term Management Program: Project AP-G 2016
Project AP-G 2016 is a three-year medium-term management program for implementing our growth strategies and
fortifying our corporate structure to put us in a position to achieve our long-term corporate vision. Under the previ-
ous Project AP-G 2013, which was completed in fiscal 2013, we made substantial progress expanding our business-
es in growth business fields and growth regions and set the Group on a new path for growth. Project AP-G 2016 was
launched in fiscal 2014 to continue advancing and building on the measures enacted in Project AP-G 2013. We contin-
ue to advance our growth strategy and strengthen our corporate structure.
INTEGRATED VALUE CREATION
11
102.4
103.4
93.0
81.1
107.7
105.3
100.1
83.4
123.5
Trends in Operating Income
(Billion yen)
51.2
56.8
33.0
18.8
36.0
40.1
FY
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
(Target)
Around
2020
(Image)
NT-21
NT-II
IT-2010
IT-II
AP-G 2013
AP-G 2016
170.0
154.5
Toray Industries, Inc.Annual Report 2016 Consolidated Financial & Non-financial Highlights
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31
Financial Highlights
For the year:
Net sales
Operating income
Millions of yen
Thousands of
U.S. dollars*1
2016
2015
2014
2013
2012
2016
¥2,104,430
¥2,010,734
¥1,837,778
¥1,592,279
¥1,588,604
$18,623,274
Net income attributable to owners of parent
90,132
71,021
59,608
154,480
123,481
105,253
83,436
48,477
107,721
1,367,080
64,218
797,628
12
Cash flows from operating activities
196,142
141,282
161,455
100,815
104,410
1,735,770
Cash flows used in investing activities
(154,414)
(140,662)
(214,826)
(107,525)
(104,002)
(1,366,496)
Free cash flows
41,728
620
(53,371)
(6,710)
408
369,274
Cash flows from financing activities
(77,605)
(9,998)
41,475
Capital expenditures
Depreciation and amortization
R&D expenditure
136,556
124,929
118,207
91,168
58,783
81,480
59,504
78,743
55,500
26,167
99,135
67,588
53,342
(23,645)
(686,770)
98,384
67,443
51,450
1,208,460
806,796
520,204
At year-end:
Total assets
Net assets
¥2,278,386
¥2,357,925
¥2,119,683
¥1,731,933
¥1,581,501
$20,162,708
1,024,909
1,080,757
944,625
778,626
674,149
9,069,991
Per share of common stock (in yen and U.S. dollars):
Net income attributable to owners of parent:
Basic
Diluted
Cash dividends
Net assets
Ratios:
Operating income to net sales
Equity ratio
ROA
ROE
Debt/equity ratio (times)
Non-financial Highlights
Number of employees
Toray
Domestic
Overseas
Percentage of women in
management positions (non-consolidated)*2
Employment rate for the handicapped
(non-consolidated)*3
¥ 56.38
¥ 44.33 ¥ 36.59
¥ 29.75
¥ 39.41
$ 0.50
56.31
13.00
44.28
11.00
35.70
10.00
28.90
10.00
37.46
10.00
591.50
616.70
527.32
444.45
384.90
0.50
0.12
5.23
7.3%
41.5%
6.7%
9.3%
0.74
6.1%
41.8%
5.5%
7.7%
0.71
5.7%
40.5%
5.5%
7.5%
0.76
5.2%
41.8%
5.0%
7.2%
0.73
6.8%
39.7%
6.8%
10.5%
0.77
7,223
10,520
28,096
7,232
10,299
28,258
7,123
10,247
28,511
7,097
10,177
25,310
6,976
10,303
22,948
8.7%
8.3%
7.9%
7.5%
7.1%
2.1%
2.1%
2.1%
2.0%
2.0%
Social contribution activities*4 (billions of yen)
1.5
1.2
1.1
1.1
1.2
*1: U.S. dollar amounts have been converted from yen at the exchange rate of ¥113=US$1, the approximate exchange rate prevailing on March 31, 2016.
*2: As of end April each year
*3: As of end June each year
*4: See page 13 for more details.
Toray Industries, Inc.Annual Report 2016 Net Sales
Operating Income and
Operating Income to Net Sales
Net Income Attributable to
Owners of Parent
(Billions of yen)
(Billions of yen)
2,500
2,000
1,500
1,000
500
200
150
100
50
0
Mar/
12
13
14
15
16
17
(Forecast)
0
Mar/
12
13 14 15 16
Operating income (left)
17
(Forecast)
Operating income to net sales (right)
(%)
8
6
4
2
0
(Billions of yen)
120
100
80
60
40
20
0
Mar/
12
13
14
15
16
17
(Forecast)
Net Assets and Equity Ratio
Cash Dividend Per Share
Cash Flows
(Billions of yen)
200
150
100
50
0
-50
-100
-150
-200
-250
Mar/
12
13
14
15
16
Cash flows from operating activities
Cash flows used in investing activities
Free cash flows
(Billions of yen)
1,000
750
500
250
0
Mar/
12
13
14
15
16
Net assets (left)
Equity ratio (right)
(%)
60
45
30
15
0
ROA and ROE
Number of Employees
(%)
12
9
6
3
0
Mar/
ROA
ROE
50,000
40,000
30,000
20,000
10,000
12
13
14
15
16
0
Mar/
Toray
12
13
14
15
16
Domestic Overseas
13
(Yen)
15
12
9
6
3
0
Mar/
12
13
14
15
16
17
(Forecast)
Breakdown of
Social Contribution Activities
Academics, science
research, education
43%
Disaster relief and
other activities
8%
Environmental
preservation
5%
Community social
welfare, international
exchange
19%
Art, culture, sports
25%
Year ended
March 2016
¥1.5 billion
Toray Industries, Inc.Annual Report 2016 To Our Stockholders and Investors
With an eye on 2020, Toray Group will work to
achieve sustainable growth by expanding its
businesses into growth fields, countries, and regions
while ceaselessly enhancing its competitiveness.
Fiscal 2015 Performance Review
14
Achieved Record High
Net Sales and Profits
Two Years in a Row
I would like to begin this report by
expressing our profound gratitude to
our stockholders and investors for
their continuing support.
During fiscal 2015, the econ-
omy in China gradually slowed and
economic conditions in many other
emerging countries appeared to
be weak. On the other hand, eco-
nomic conditions in the U.S. con-
tinued to pick up and the European
economy also remained on a recov-
ery track. In Japan, although produc-
tion and exports looked sluggish, the
economy saw a gradual underlying
recovery amid improving corporate
earnings, employment, and wages.
Under
ditions, Toray Group
these operating con-
is steadily
implementing growth strategies and
further enhancing its total cost com-
petitiveness under the three-year
medium-term management program
Project AP-G 2016, which extends
from fiscal 2014 to fiscal 2016.
As a result, the Group saw record
high net sales and profits for a sec-
ond consecutive fiscal year, with
consolidated net sales increasing by
4.7% year on year to ¥2,104.4 billion,
operating income rising by 25.1% to
¥154.5 billion, and net income attrib-
utable to owners of parent climbing
by 26.9% to ¥90.1 billion. In addi-
tion, we significantly raised profit-
ability and capital efficiency, with
operating income to net sales ratio
rising 1.2 percentage points to 7.3%
and ROE increasing 1.6 percentage
points to 9.3%.
All segments except for Life
Science saw year-on-year sales and
profit gains. Carbon Fiber Composite
Materials achieved earnings growth
by meeting strong demand and
expanding applications. Fibers &
Textiles promoted business
inte-
grating fibers, textiles, to final prod-
ucts while enjoying steady sales for
automotive applications and hygiene
products.
In addition, Plastics &
Chemicals saw increases in ship-
ments of products for automotive
and packaging applications.
In terms of stockholder returns,
we have raised annual cash div-
idends per share by ¥2 year on
year to ¥13 based on a compre-
hensive consideration of every fac-
tor including the aforementioned
business performance, fiscal 2016
forecasts, financial standing and
retention of earnings necessary for
future investment.
Toray Industries, Inc.Annual Report 2016
15
Akihiro Nikkaku
President
Toray Industries, Inc.Annual Report 2016 Project AP-G 2016 Basic Strategies
16
Steadily Implementing
Project AP-G 2016
Initiatives to Achieve
Our Long-Term
Corporate Vision
Toray Group is working to further
expand its businesses globally under
AP-Growth TORAY 2020, a long-term
corporate vision formulated with an
eye on 2020. At the same time, the
Group will focus on expanding green
innovation businesses to become
a corporate group that “continually
increases revenues and profits,”
“proactively contributes to social
development and environmental
stewardship,” and “offers high val-
ues to all stakeholders.”
Under the Project AP-G 2016 medi-
um-term management program, the
second stage of AP-Growth TORAY
2020, we are working to further accel-
erate business expansion into fields
that display Toray Group’s strengths
while
formulating and undertak-
ing strategies and challenges that
will allow the Group to become the
global leader in advanced materials.
Based on this policy, we have
established eight basic strategies
under Project AP-G 2016. As key ini-
tiatives within these strategies, this
Group-wide project
is promoting
business expansion in growth fields,
countries and regions while bolster-
ing competitiveness.
Regarding business expansion in
growth fields, we are focusing on the
development of advanced materials
and the creation of new businesses
by leveraging the Group’s strong-suit
technological prowess and global
business foundation in two challeng-
ing fields: the “Green Innovation
Business Expansion (GR) Project,”
which contributes to solving prob-
lems in the areas of the environment,
resources, and energy, and the “Life
Innovation Business Expansion (LI)
Project,” which seeks to improve the
quality of healthcare, ease burdens
on medical institutions, and contrib-
ute to health and longevity.
Business expansion in growth
involves
countries and
regions
the “Asia, Americas,
promoting
and Emerging Country Business
Expansion (AE-II) Project” in order
to capture demand in promising
growth countries and regions in
Asia, emerging countries in other
regions and the Americas.
As for bolstering competitiveness,
under the “Total Cost Reduction
(TC-III) Project,” Toray Group aims to
achieve a world-leading level of cost
competitiveness by reducing vari-
able and fixed costs while pursuing
production process innovation and
total operational cost reduction.
While focusing on these proj-
ects, we will actively step up growth
investment to a greater extent than
before while maintaining financial
soundness using a D/E ratio of 1 or
below with the aim of steadily rais-
ing the dividend payment in line with
our earnings performance.
Now, I will provide an explanation of
the progress of each project within
Project AP-G 2016.
Toray Industries, Inc.Annual Report 2016 BASIC STRATEGIES AND GROUP-WIDE PROJECTS
Basic Strategies
Strengthening sales and marketing
1 Business expansion in growth business fields
2 Business expansion in growth countries and regions
3 Bolstering competitiveness
4
5 R&D strategies/Intellectual property strategies
Capital investment strategies
6
7 M&A and business alliance strategies
8 Human resources strategies
Group-wide Projects
Green Innovation
Business Expansion
(GR) Project
Life Innovation
Business Expansion
(LI) Project
Asia, Americas and
Emerging Country
Business Expansion
(AE-II) Project
Total Cost Reduction
(TC-III) Project
17
Progress of “Project AP-G 2016”
FY2013
FY2014
FY2015
1,837.8 2,010.7 2,104.4
154.5
123.5
105.3
(Billion of yen)
FY2016
Target
FY2016
Initial Target
2,230.0
170.0
2,300.0
180.0
5.7%
5.5%
7.5%
6.1%
5.5%
7.7%
7.3%
6.7%
9.3%
7.6%
approx.7%
approx.10%
7.8%
8%
10%
Net Sales
Operating Income
Operating Income to
Net Sales Ratio
ROA
ROE
Basic dividend
policy:
Aim for sustainable
increase of dividends
linked to earnings
performance
Guide line of
D/E ratio:
Below 1
ROA=Operating Income/Total Assets
ROE=Net Income Attributable to Owners of Parent/Owner’s Equity
D/E ratio=Interest-bearing Debts/Owner’s Equity
Toray Industries, Inc.Annual Report 2016 Project AP-G 2016
Green Innovation Business Expansion
(GR) Project
18
Successes in Carbon
Fiber Composite
Materials and Water
Treatment Membranes
to
Innovation Business
The Green
Expansion
(GR) Project aims to
expand business in fields that con-
resolving environmen-
tribute
tal, resource, and energy issues,
including energy conservation, new
energy, biomass derivatives, water
treatment, air purification, low envi-
ronmental burden, recycling, and
process innovation.
In fiscal 2015, GR Project net
sales were ¥657.1 billion owing to
successes in carbon fiber composite
materials business and water treat-
ment business, representing steady
progress toward the fiscal 2016 net
sales target of ¥700.0 billion.
Green Innovation Business
Expansion Plan
( ) net sales ratio
(Billion yen)
1,000
approx.700.0
(approx.30%)
657.1
(approx.31%)
565.5
(approx.28%)
463.1
(approx.25%)
800
600
400
200
0
FY
2013
Actual
2014
Actual
2015
Actual
2016
Target
2020
Image
Toray Formally Signs ¥1.3 Trillion-
plus Comprehensive Long-Term
Agreement with The Boeing
Company
Toray signed a comprehensive long-
term agreement with The Boeing
Company to supply carbon fiber
TORAYCA® prepreg for the produc-
tion of the new Boeing 777X large-
sized twin-engine passenger aircraft,
for which delivery of the first plane is
slated for 2020, extending the exist-
ing supply agreement for the Boeing
787 Dreamliner. The new agree-
ment has extended the comprehen-
sive agreement that was signed in
November 2005 by more than 10
years effective from 2015. The total
value of prepreg to be supplied by
Toray Group for both the 787 and
777X programs during the contract
period is expected to exceed 1.3 tril-
lion yen ($11 billion).
Toray Receives Large Order
for TORAYFIL® Hollow Fiber
Membrane Ultrafiltration Module
in the Republic of Korea
Toray received an order to sup-
ply TORAYFIL® hollow fiber ultrafil-
tration (UF) membrane module to
membrane-based water purification
facility in Yeosu (scheduled to start
operations in 2017), the largest in
the Republic of Korea. This order is
the largest of Toray UF membrane
supply projects, giving the Company
a near 50% share (Toray estimate) of
the amount of water treated using at
water purification membrane facili-
ties in the country.
Toray Group is actively expanding
global business activities that con-
tribute to finding solutions for water
resource problems. To that end, the
Group will continue working to obtain
large orders that use UF membrane
TORAYFIL® as a diversified mem-
brane manufacturer and steadily
accumulate orders for reverse osmo-
sis (RO) membrane ROMEMBRA®,
which already boasts a leading global
share, for treatment of sewage and
industrial waste water, in addition to
seawater and brine desalination.
Toray Industries, Inc.Annual Report 2016
Project AP-G 2016
Life Innovation Business Expansion
(LI) Project
toward the fiscal 2016 net sales tar-
get of ¥170.0 billion. In particular,
we are aggressively expanding our
lineup of Toray advanced materials in
the Life Innovation field while accel-
erating new business development.
management services.
* hitoe®: A nano-fiber that incorporates a highly
conductive/polymerized compound that is form-
fitting and durable.
For more information, please see
“Special Feature” on page 24.
19
Toray Commences Field Testing
of Safety Management Services
That Use hitoe®
In 2014, we began looking into intro-
ducing and developing applications for
bio-electrode fabric hitoe®* in a wide
array of industries and occupations.
Developed jointly by Toray and Nippon
Telegraph and Telephone Corporation
(NTT), hitoe® is being used in smart-
wear devices that measure with a
high degree of sensitivity biological
data such as heart rate and cardio-
graphic waveforms when it is worn.
With hitoe® wearable devices actually
being used by Obayashi Corporation
employees at construction sites and
Japan Airlines employees at outdoor
areas of Naha Airport, Toray and NTT
Communications Corporation have
begun field tests with the aim of com-
mercializing this fabric for use in heat
stroke prevention and other safety
Toray Receives Approval for
Catheter Ablation System Used
in the Treatment of Paroxysmal
Atrial Fibrillation
Toray received manufacturing and
marketing approval from Japan’s
Ministry of Health, Labour and
Welfare for its world’s first catheter
ablation system incorporating bal-
loons using high-frequency waves,
which is used to treat paroxysmal
atrial fibrillation, and commenced
sales of the system in April 2016.
While the treatment of atrial fibrilla-
tion includes the use of antiarrhyth-
mic drugs, catheter ablation, and
surgery, this system is expected to
make a major contribution in this
area as a new choice in catheter
ablation treatment capable of treat-
ing atrial fibrillation more safely and
over a shorter time span.
Expand Medical Device
Business and Make
Significant Progress
in New Business
Development
The Life
Innovation Business
Expansion (LI) Project aims to expand
business in our present pharmaceu-
tical and medical businesses and
apply Toray Group’s advanced mate-
rials, core and fundamental technol-
ogies, and business foundation to
improve the quality of healthcare,
ease the burden at medical institu-
tions, and contribute to health and
longevity. In fiscal 2015, LI Project
net sales were approximately ¥160.0
billion, representing steady progress
Life Innovation Business
Expansion Plan
( ) net sales ratio
(Billion yen)
300
approx.170.0
(approx.7%)
250
200
150
100
50
0
FY
approx.160.0
(approx.8%)
approx.
140.0
(approx.7%)
approx.
120.0
(approx.6%)
2013
Actual
2014
Actual
2015
Actual
2016
Target
2020
Image
Advanced Materials in LI Business
Pharmaceuticals & Medical
Toray Industries, Inc.Annual Report 2016 Project AP-G 2016
Asia, Americas and Emerging Country Business Expansion
(AE-II) Project
20
Pursuing Aggressive
Growth Strategy in the
Republic of Korea and
the Americas
The Asia, Americas and Emerging
Country Business Expansion (AE-II)
Project encompasses numerous ini-
tiatives, including developing prod-
ucts and strengthening marketing and
sales capabilities to meet the specific
needs of each country, strengthen-
ing existing production infrastructure
and establishing facilities in markets
where we are not yet active, acceler-
ating business expansion through alli-
ances with leading local companies,
and expanding the advanced materi-
als business to meet demand growth
from expanding middle- and upper-in-
come demographics
In fiscal 2015, AE-II Project net
sales were approximately ¥975.9
Asia, Americas and Emerging
Country Business Expansion Plan
(Billion yen)
( ) net sales ratio
1,800
approx.1,150.0
(approx.50%)
1,500
1,200
900
600
300
0
FY
975.9
(46%)
944.0
(47%)
809.3
(44%)
2013
Actual
2014
Actual
2015
Actual
2016
Target
2020
Image
billion, reflecting growth investment
and business base expansion. The
project targets fiscal 2016 net sales
of ¥1.15 trillion (approximately 50% of
total net sales), which would exceed
the ¥1 trillion mark. Key AE-II Project
topics in fiscal 2015 are as follows.
Battery Separator Film Business
Expansion in the Republic of Korea
Accompanying hybrid electric and
electric vehicle market growth, Toray
increased its production capacity to
a level 2.3 times the pre-expansion
amount in the Republic of Korea
(slated to start production in 2016) to
meet growing demand for SETELA™,
a high-performance and high-reliability
battery separator film for lithium-ion
secondary batteries. In addition, Toray
acquired battery separator film coat-
ing process facilities in the country
from LG Chem Ltd., which manufac-
tures lithium-ion batteries.
New Integrated TORAYCA®
Prepreg Facility in the United States
In conjunction with signing a compre-
hensive long-term agreement with
U.S.-based The Boeing Company to
supply carbon fiber TORAYCA® pre-
preg for the production of the Boeing
787 and 777X, Toray has decided to
construct an integrated facility with
operations that extend from pro-
ducing carbon fiber TORAYCA® yarn
(precursor) to carbonization as well
as a facility to produce prepreg used
in TORAYCA® (carbon fiber sheets
impregnated with resin). To this end,
Toray has invested approximately ¥50
billion in a new business site located
in South Carolina, U.S. Production of
TORAYCA® from yarn is scheduled to
be phased starting from May 2017.
Toray’s investment of around ¥100.0
billion through 2020 toward the new
site is part of its plan to expand the
carbon fiber composite materials
business in the U.S. Looking ahead,
Toray plans to enhance these produc-
tion facilities on an ongoing basis.
Enhancement of Large Tow
Carbon Fibers Production
Capacity in Mexico
Toray enhanced the production facil-
ities for large tow* carbon fibers at
Zoltek Companies, Inc. (“Zoltek”),
a subsidiary in the U.S., doubling
the production capacity of Zoltek’s
Mexican plant to 5,000 tons from
March 2016. Zoltek currently pro-
duces large tow carbon fibers at
its plants in Hungary and Mexico.
In addition to the rapidly growing
demand for this product in wind
power generation applications
in
recent years, large tow carbon fibers
are expected to be increasingly used
in automobile structures. In response
to the robust demand for large tow
carbon fibers, Zoltek plans to raise
its production capacity (including that
of the Hungary plant) of the material
by 100% by 2020 from the current
13,000 tons per year. Under the plan,
it will continue to carry out capacity
enhancement of the Mexican plant in
a phased manner.
* Large tow: Carbon fiber with a filament count of
40,000 or more
Toray Industries, Inc.Annual Report 2016
Project AP-G 2016
Total Cost Reduction
(TC-III) Project
Reducing Costs by
¥200.0 Billion over
Three Years Achievable
In addition to aggressively pursuing
the aforementioned growth strate-
gies, the Total Cost Reduction (TC-III)
Project aims to cut costs by ¥200.0
billion over three years between fis-
cal 2014 and fiscal 2016 by continu-
ing and deepening activities to reduce
existing variable and fixed costs as
well as by focusing on production pro-
cess innovation and total operational
cost reduction in sales and marketing.
In fiscal 2015, Toray Group
reduced variable costs by ¥31.4
billion year on year, with a reduc-
tion rate of 3.7%, and kept fixed
cost under budget by ¥14.0 billion.
Regarding fixed costs, the Group
has
introduced a Performance
Ratio (P-ratio) to monitor the ratio of
growth rates for fixed costs and mar-
ginal profit for each company and
business with the aim of maintaining
a rise in fixed costs in line with profit
growth during business expansion
phases. In fiscal 2015, we met our
budget with a Group-wide P-ratio of
0.97. Moreover, production process
innovation and total operational cost
reduction saved a total of ¥23.4 bil-
lion, thus boosting profits.
As a result of the above, total
reductions achieved under TC-III
Project in fiscal 2015 came to ¥68.7
billion, with a two-year total of ¥133.3
billion (achievement rate of 67%). In
light of this, we are well on our way
to reaching the cumulative target of
¥200.0 billion for fiscal 2016.
21
Continuation
of
TC-II
• Continuing activities to reduce variable
costs (over 3% each year and over 10% in
three years)
• Controlling fixed costs through P-ratio*
accounting method
(P-ratio = under 0.96 each fiscal year)
• Activities involve participation of employees
group-wide
Innovation of
Production
Process
• Set up innovative production processes to
achieve drastic cost reductions based on
new perspectives and approaches
• Collaborate across organizations, between
research, technical, production and engi-
neering departments
Total
Operational
Cost Reduction
in Sales and
Marketing
• Establish a highly competitive supply
chain, by analyzing and understanding the
operational costs and logistics systems
Results of FY2015
Variable costs:
Reduced 31.4 billion yen
(Reduction ratio 3.7%)
Fixed costs:
Reduced 14.0 billion yen
(P-ratio=0.97)
Effects from innovation
of production processes
and total operational cost
reduction in sales and
marketing
Total: 23.4 billion yen
* P(Performance)-ratio= fixed cost growth rate/marginal profit growth rate. Keep P-ratio below 1.0, or manage
fixed costs for each division versus budget
(Billion yen)
200
150
100
50
0
Reduce costs
200 billion yen
in three years
Reduced
68.7
billion yen
in FY 2015
Reduced
64.6
billion yen
in FY 2014
Target Actual
TotalOperationalCost Reductionin Sales andMarketing• Establish a highly competitive supply chain, by analyzing and understanding the operational costs and logistics systemsEffects from innovation of production processes and total operational cost reduction in sales and marketingTotal: 23.4 billion yenToray Industries, Inc.Annual Report 2016
Fiscal 2016
Performance Forecast
Target Net Profit of
over ¥100.0 Billion and
Dividend Increases for
a Third Straight
Fiscal Year
In fiscal 2016, we expect a gradual
recovery in the overall economy led
by the U.S. and other developed coun-
tries, but urge caution over risk factors
including a slowdown in the Chinese
economy, economic downturns
in
emerging countries, and the impact of
normalization of U.S. monetary policy.
In Japan, a gradual economic recovery
is expected as the current slowdown
fades amid ongoing improvement in
employment and wage conditions.
Nevertheless, there are concerns over
downward pressure on the economy
caused by a downturn in overseas eco-
nomic conditions and fluctuations in
global financial markets.
this backdrop, Toray
Against
Group will focus on promoting ongo-
ing growth strategies and bolstering
its earnings foundation in fiscal 2016,
the final year of Project AP-G 2016.
We forecast consolidated net
sales of ¥2,230.0 billion, operat-
ing income of ¥170.0 billion, ordi-
nary income of ¥170.0 billion, and
net income attributable to owners
of parent of ¥105.0 billion. This out-
look is based on pursuing growth
fields such as green innovation and
life innovation as well as business
expansion in growth countries and
regions in Asia, emerging countries
in other regions, and the Americas
under Project AP-G 2016. In addition,
we plan to hike cash dividends for
the third straight fiscal year (annual
cash dividend of ¥14).
22
Toray Group will constantly seek-
ing to be a global pioneer of techno-
logical advances and to develop and
commercialize leading-edge technol-
ogies and new materials under the
firm belief that, as the foundation of
products, materials have the power
to bring about fundamental transfor-
mations in society. In addition, the
Group seeks to realize its corporate
philosophy, “contributing to society
through the creation of new value
technolo-
with
gies and products,” by emphasizing
on-site capabilities in all corporate
activities and overcoming problems
through a thorough grasp and analy-
sis of current conditions.
We would like to ask for contin-
ued understanding and support of
our stockholders and investors as
we pursue these initiatives.
innovative
ideas,
Consolidated Performance Results
Forecast for Fiscal 2016
FY2016 (Forecast)
Net Sales
Operating Income
Net Income Attributable
to Owners of Parent
2,230.0
170.0
105.0
(Billions of yen)
Changes
+6.0%
+10.0%
+16.5%
Our forecasts are predicated on an assumed foreign currency exchange rate
of ¥105/US$1.
Released May 12, 2016
Forecast by Segment for Fiscal 2016
Fibers & Textiles
Plastics &
Chemicals
IT-related Products
Carbon Fiber
Composite
Materials
Environment &
Engineering
Life Science
Others
Adjustment
Consolidated
Net Sales
Operating Income
(Billions of yen)
910.0 (+18.0)
540.0 (+18.8)
280.0 (+28.9)
200.0 (+13.8)
220.0 (+36.7)
(+8.2)
64.0
(+1.3)
16.0
—
2,230.0 (+125.6)
71.0 (+2.1)
34.0 (+4.6)
31.0 (+4.9)
38.0 (+1.9)
12.0 (+2.4)
5.0 (+1.9)
(+0)
2.0
-23.0 (-2.3)
170.0(+15.5)
Figures in parentheses indicate year-on-year increase/decrease.
Forecast by Segment for Fiscal 2016(Billions of yen)Net SalesOperating IncomeFibers & Textiles910.0(+18.0)71.0(+2.1)Plastics & Chemicals540.0(+18.8)34.0(+4.6)IT-related Products280.0(+28.9)31.0(+4.9)Carbon Fiber Composite Materials200.0(+13.8)38.0(+1.9)Environment & Engineering220.0(+36.7)12.0(+2.4)Life Science64.0(+8.2)5.0(+1.9)Others16.0(+1.3)2.0(+0)Adjustment—-23.0(-2.3)Consolidated2,230.0(+125.6)170.0(+15.5)Figures in parenthesis indicate year-on-year increase/decrease.Toray Industries, Inc.Annual Report 2016 Engaging in Ongoing Growth
Investment
Project AP-G 2016 calls for aggres-
sive investment in R&D and facilities
aimed at realizing sustainable global
growth. For the three years begin-
ning in fiscal 2014, the program
projects spending ¥400.0 billion for
capital investment and ¥180.0 billion
for investment in R&D in such areas
as strengthening core products and
technologies, advancing
in new
fields, and technologies, and produc-
tion process innovation.
In fiscal 2016, we expect to
make solid progress in line with
our plan given above, undertaking
capital investment of ¥175.0 bil-
lion (three year total: ¥432.7 billion)
and investment in R&D of ¥65.0 bil-
lion (¥183.3 billion) in order to fur-
ther boost initiatives for accelerating
growth strategies implemented to
date and realize sustainable growth
going forward.
Major Capital Expenditure Projects
FY 2015
Toray Advanced Materials Korea Inc.
Toray Chemical Korea Inc.
Toray Composites (America), Inc.
Zoltek Companies, Inc.
FY 2016
P.T. Toray Polytech Jakarta
Toray Carbon Fibers America, Inc.
PPS (polyphenylene sulfide) resin
production facilities
Polyester staple fiber production
facilities
Carbon fiber TORAYCA® prepreg
production facilities
Large tow carbon fiber production
facilities
High-performance polypropylene
spunbond production facilities
Carbon fiber TORAYCA® prepreg
integrated production facilities
23
Toray Battery Separator Film
Korea Limited
Polyethylene film production
facilities
Capital Expenditures
Depreciation
R&D Expenses
92.0
86.8
77.5
(Billion yen)
200
175.0
(Billion yen)
100
128.5
129.2
150
100
50
0
80
60
40
20
0
(Billion yen)
70
65.0
59.5
58.8
60
50
40
30
20
10
0
FY 2014
2015
2016
Forecast
Consolidated subsidiaries
Toray
FY 2014
2015
2016
Forecast
Consolidated subsidiaries
Toray
FY 2014
2015
2016
Forecast
Consolidated subsidiaries
Toray
Toray Industries, Inc.Annual Report 2016
Special Feature
hitoe®:
FUNCTIONAL MATERIAL THAT
BIOSENSES BODY SIGNALS
A wide range of industries and
occupations has begun considering the
use of hitoe® functional material, which
senses heart rate and other biological
information by simply wearing it.
24
=
+
hitoe®
Conductive polymers
PET nanofibers
Accelerating the
Development of Wearable
Device Applications
As the ubiquitous society infrastruc-
ture rapidly develops, computers
are becoming accessible at anytime
and anywhere for help and support,
while the burden and discomfort of
body-worn devices has also dramat-
ically been reduced as they become
lighter and smaller. A wide variety of
data acquired and transmitted using
these devices can now be accumu-
lated and analyzed over cloud sys-
tems, leading to the advent of the
IoT era, wherein everything is con-
nected to the Internet. The commer-
cialization of wearable devices once
only seen in science fiction movies is
expanding in earnest.
Wearable devices used as ICT*
devices appear in various forms, such
as watches, wrist bands, glasses,
and clothing, and the development
of applications is advancing in a wide
range of fields including sports, health
and medicine, safety and security,
and entertainment.
Revolutionary hitoe ®
Functional Material Developed
Toray, in collaboration with Nippon
Telegraph and Telephone Corporation
(NTT), developed hitoe®, a bio-electrode
functional nanofiber fabric material
coated with a special electro-conductive
polymer compound. An inner T-shirt
using hitoe® can constantly and sta-
bly detect faint biological signals,
such as heart and muscle potential,
which can be readily monitored on a
smartphone, PC or tablet via a special
*ICT: Information and Communication Technology
removable data transmitter attached
to the shirt.
In normal polyester fibers, there
is a large gap between fibers and
the conductive polymer peels off
easily while wearing and wash-
ing. The hitoe® nanofiber fabric, on
the other hand, can withstand long
hours of wearing and repeated wash-
ing because the conductive polymer
Displays collected heart
rate on a smartphone
(for non-medical purposes)
Toray Industries, Inc.Annual Report 2016
hitoe®:
FUNCTIONAL MATERIAL THAT
BIOSENSES BODY SIGNALS
Used in efficient
training utilizing heart
rate information
Highways,
factories, mines,
construction sites,
government
offices, etc.
Drivers of taxis,
trains, buses,
trucks, etc.
Management of safe-
ty of people working
in small groups and
monitoring people
working under harsh
environment and/or
exposed to heat
Verification of the
drivers’ physical and
other health con-
ditions (to improve
passenger safety)
Cloud
Accumulation and
analysis of biological
information
Harsher
environments
Offices
Nursing care
facilities
Medical
institutions
Outer space,
mountains,
under water,
racing events,
etc.
Patient safety management
and early disease detection
Management of
mental health and
overwork
Reduction of the
work burden of
caregivers
25
is well woven and bonded with an
imperceptible gap as small as 1/7,500
the width of a strand of hair. In addi-
tion, rashes will not form even if worn
for many hours and it is comfortable
to wear. Furthermore, this nanofiber
material adheres tightly to the skin
and collects biological
information
more accurately.
* Bio-electrode functional material hitoe® is not a
medical device.
High-Function Sportswear,
the First Commercialized
hitoe ® Product
hitoe® was first adopted for use in
December 2014 in “C3fit IN-pulse,”
a high-function sportswear brand sold
by Goldwin Inc. hitoe®, which does
not use metal fiber and has a high
affinity for sweat and moisture, is
utilized in the brand’s products for a
variety of purposes from walking for
health maintenance to strategic ath-
letic competition.
hitoe ® Worker Monitoring
Service Commercialized in
Fiscal 2016
In summer in 2015, Toray, in collabo-
ration with Obayashi Corporation and
Japan Airlines, began using hitoe® to
monitor the physical condition of peo-
ple working at construction sites and
airport grounds, in addition to its facto-
ries, and to conduct verification tests
pertaining to physical condition man-
agement systems aimed at prevent-
ing accidents. Amid increasing risk of
heat stroke due to rising temperatures
caused by global warming, as well as
aging of field staff, the “hitoe® worker
monitoring service,” which effectively
ensures a healthy and safe work envi-
ronment by managing in real time on
the cloud system the heart rate data
of multiple people with individual dif-
ferences through work clothes that uti-
lize hitoe®, was placed on the market
in April 2016.
hitoe ® Attracting
Attention from Various
Industries and Occupations
The wearable-device clothing that
incorporates hitoe® as a material has
been studied for use to manage phys-
ical condition of drivers, provide men-
tal health care at offices and monitor
the elderly at nursing care facilities
and at home, and also in a wide range
of industries and occupations, includ-
ing the medical fields.
Utilization of biolog-ical informationCollection of biological informationToray Industries, Inc.Annual Report 2016 Toray Group Segments
Business Categories
Segments
CORE GROWTH
DRIVING
BUSIN ESSES
Net Sales
Ratio
67.2%
Operating
Income Ratio
56.1%
26
STRATEG IC ALLY
EXPANDI NG
BUSIN ESSES
INTENSI VELY
DEVELOPING
AND EXPANDING
BUSIN ESSES
Net Sales
Ratio
20.7%
Operating
Income Ratio
35.5%
Net Sales
Ratio
11.4%
Operating
Income Ratio
7.3%
Fibers & Textiles
Plastics &
Chemicals
IT-related
Products
Carbon Fiber
Composite
Materials
Environment &
Engineering
Life Science
Notes: 1 Each percentage shows the share of net sales and operating income in the consolidated net sales and consolidated operating income respectively in the segment.
2 Excludes other businesses, equivalent to ¥14.7 billion (0.7%) in net sales and ¥2.0 billion (1.1%) in operating income, and adjustment of operating income
of -¥20.7 billion.
Toray Industries, Inc.Annual Report 2016
Toray Group is able to secure stable expansion and profit growth from the Core Growth Driving Businesses of
Fibers & Textiles and Plastics & Chemicals, while it actively works to expand earnings through the Strategically
Expanding Businesses of IT-related Products and Carbon Fiber Composite Materials that it views as the drivers
of its earnings growth over the medium- and long-term. Moreover, Toray Group is nurturing the Intensively
Developing and Expanding Businesses of Environment & Engineering and Life Science as core earnings sourc-
es for future businesses to seek sustainable growth.
Main Products
Application Examples
Filament yarns, staple fibers spunyarns, woven
and knitted fabrics of nylon, polyester and acryl-
ics; non-woven fabrics; ultra-microfiber non-woven
fabric with suede texture; apparel products
Nylon, ABS, PBT, PPS and other resins and mold-
ed products; polyolefin foam; polyester, polypro-
pylene, PPS and other films and processed film
products; raw materials for synthetic fibers and
plastics; zeolite catalysts; fine chemicals such as
raw materials for pharmaceuticals and agrochemi-
cals; veterinary medicine (Except films and plastic
products included in IT-related Products)
Films and plastic products for IT-related products;
electronic circuit- and semiconductor-related ma-
terials; color filters for LCDs and related materials;
magnetic recording materials; graphic materials;
IT-related equipment
Carbon fibers, carbon fiber composite materials
and related molded products
• Women’s and men’s clothes (stockings: nylon fiber, dress shirts: polyester-
cotton blended fabric, apparel products, coats: ultra-microfiber non-woven
fabric with suede texture)
• Automobiles (airbags: nylon fiber, car seats, seatbelts: polyester fiber)
• Furniture & interior (sofas: ultra-microfiber non-woven fabric with suede
texture, carpets: BCF nylon, curtains: halogen-free, flame retardant materials)
• Disposable diapers: polypropylene filament yarn non-woven fabric
• Tents: polyester fiber
• Automobile components (radiator tanks, intake manifold: nylon resin, connec-
tors: PBT resin, capacitor for hybrid cars: polypropylene film)
• Home appliances (housing for washing machines, vacuum cleaners, air
conditioners: ABS resin)
• Power tools (circular tools housing: nylon resin)
• Backsheet of solar panels: PET film
• Packs for snack: polypropylene film, PET film
• Veterinary medicine (for dogs and cats)
• Flat panel display televisions: PET film and LCD color filter manufacturing
equipment
• PCs: PET film, circuit materials, polyimide coatings
• Cellular phones: color filters, LCP resin, circuit materials, PET film
• Lithium-ion secondary batteries: Battery separator film
• Printing: waterless printing plates, relief printing on resins, printing equipment
• Backup tapes for server: PET film
• Semiconductors: semiconductor coating materials
27
• Aircraft structure: carbon fiber composite materials
• Sports gear and goods (golf shafts, tennis rackets: carbon fiber composite materials)
• Bike frames: carbon fiber composite materials
• PC chassis: carbon fiber molded products
• Wind-power generator blades: carbon fibers
• Marine vessels: carbon fibers
• Industrial equipment materials: carbon fiber, carbon fiber composite materials
• Bridge pier reinforcement: carbon fiber woven fabrics
Comprehensive engineering; condominiums; in-
dustrial equipment and machinery; environment-
related equipment; water treatment membranes
and related equipment; materials for housing,
building and civil engineering applications
• Seawater desalination facilities: water treatment membranes and equipment
• Sewage and waste-water treatment facilities: water treatment membranes
and equipment
• Condominiums
• Housing: wall siding for houses, interior materials for buildings
• Plants and manufacturing facilities: comprehensive engineering services
Pharmaceuticals; medical devices
• Pharmaceuticals (natural interferon beta preparation, oral prostacyclin-
derivative, oral anti-pruritus drug)
• Medical treatment devices (hemodialyzers, blood purifiers for severe sepsis,
dialysis equipment)
Toray Industries, Inc.Annual Report 2016 CO RE GROWTH D RIVING BU SI N ES SE S
Fibers & Textiles
Fiscal
Net sales
Operating income
Assets
2014
856.7
55.6
705.5
2015
892.0
68.9
680.9
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
4.1%
23.9%
(Billions of yen)
2016 Forecast
910.0
71.0
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
Fibers & Textiles segment net sales in-
creased 4.1% year on year to ¥892.0 bil-
lion. Operating income rose 23.9% to
¥68.9 billion.
In Japan, demand for apparel appli-
cations remained weak and sales for in-
dustrial applications were affected by
inventory adjustment at some custom-
ers for automotive applications. Against
this background, Toray Group not only
strove to expand sales on the whole,
but also worked to improve profitabili-
ty by upgrading the business primarily
through promotion of a business format
that integrates fibers to textiles to final
products.
Overseas, despite being affected by
a slowdown in demand in Europe and
sluggish domestic demand in China, tex-
tile subsidiaries in China and Southeast
Asia pursued sales expansion and a shift
towards high value-added products. In
addition, shipment for automotive appli-
cations such as airbag fabric and interi-
or materials was strong, and demand for
hygiene products in Southeast Asia and
India expanded.
Outlook for the Year Ending
March 2017 (Fiscal 2016)
In Japan, there are concerns that demand
for apparel applications will remain weak
due to the effects of sluggish consumer
spending caused by the prolonged defla-
tionary trend. Overseas, we expect the
U.S. economy to remain strong, but over-
all we anticipate continued challenging
business conditions, such as political
instability in Europe and slowing growth
in emerging countries including China.
In this business environment, we will
continue strengthening and expanding the
integrated operations from fibers and tex-
tiles to end products businesses, which
is a core strength of the Toray Fibers &
Textiles segment, while seeking to grow
sales of applications for automotive air-
bags and hygiene products, the environ-
mental field and other growth fields, as
well as in China, emerging countries, the
U.S. and other growth regions. We will also
strengthen its business structure through
cost cuts and other measures and aim to
fulfill the earning potential of its core busi-
ness and expand its global business.
To pic
Entered Third Stage of
Strategic Partnership with
UNIQLO
Toray and UNIQLO Co., Ltd. entered into
an agreement for the third five-year plan
to further strengthen their “strategic
partnership,” which was first established
ten years ago, with the goal of creating a
new trailblazing industry that goes ahead
of its time. Toray, which aims to “be a
global top company in advanced materi-
als” under the firm belief that “materials
have the power to bring about funda-
mental transformations in society,” and
UNIQLO, which aims to “be the world’s
leading SPA (Specialty-store retailer of
Private-label Apparel) in LifeWear” with
a commitment to “Changing clothes.
Changing conventional wisdom. Change
the world.” will accelerate digitalization
and globalization to achieve the initiatives
listed below. During the five-year period
from 2016 to 2020, the total amount of
transactions between the two compa-
nies is expected to reach ¥1 trillion.
(1) Acceleration of globalization and
digitalization to create a new
industry:
• Further globalization and multipo-
larization of production sites and
locations
• Optimize production at each location
• Realize an end-to-end business
model by utilizing the Internet of
Things (IoT)
(2) Maximize LifeWear that is made
for all
• Improve comfort and functionality
of current products
• Conduct research and develop-
ment of products that offer com-
pletely new added value
• Develop new sportswear to en-
hance people’s daily lives
Net Sales
(Billions of yen)
892.0
2015
2014
892.0
856.7
892.0
856.7
521.2
28
2015
Operating Income
2015
(Billions of yen)
2014
68.9
2015
2014
2015
2014
2014
2015
68.9
55.6
68.9
496.4
55.6
29.4
2015
ROA (Operating income/Assets)
2014
23.9
521.2
2014
Operating income to net sales
23.9
2014
9.9%
2015
2015
2014
2015
7.7%
2015
2014
2014
496.4
29.4
251.1
248.0
26.2
24.5
251.1
248.0
186.2
Capital expenditures
2015
2015
2014
¥35.4billion
2014
26.2
24.5
158.4
2015
36.1
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2014
186.2
26.2
158.4
36.1
183.3
180.0
26.2
183.3
180.0
55.8
57.0
55.8
57.0
8.0
8.0
3.1
3.1
9.6
9.6
4.1
4.1
Toray Industries, Inc.Annual Report 2016
CO RE GROWTH D RIVING BU SI N ES SE S
Plastics & Chemicals
Fiscal
Net sales
Operating income
Assets
2014
496.4
23.9
562.1
2015
521.2
29.4
524.6
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
5.0%
23.1%
(Billions of yen)
2016 Forecast
540.0
34.0
To pic
Expanding Resins Business in
Europe and the U.S. for
Mainly Automotive
Applications
Toray newly established Toray Resins
Europe GmbH (TREU), a marketing and
distribution company for high-performance
resin products, in Germany. TREU will in-
troduce CAE analysis and resin evalua-
tion tools, develop products that meet
the needs of customers in Europe and
provide technical support. Furthermore,
Toray enhanced the Resin Technical
Center within Toray Resin Co. (TREC), a
resin subsidiary in the U.S., and built a
new building. TREC will introduce new
facilities, including a prototype extrud-
er and scanning electronic microscope,
in a bid to further strengthen resin com-
pound technology development and
technical support functions in the U.S.
With the establishment of a new
resin company in Germany and expan-
sion of the Resin Technical Center in
the U.S., Toray will deepen collaboration
with its customers, such as automo-
bile parts manufacturers with their R&D
functions in Europe and North America,
as well as Japanese parts manufactur-
ers, and propose even more detailed
technical solutions locally.
In addition, mutual collaboration
among Toray Group’s resin compound
bases in eight countries will allow the
bases to supply in a timely manner prod-
ucts that cater for customers’ needs to
the production sites of these customers
around the world.
29
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
Plastics & Chemicals segment net sales
rose 5.0% year on year to ¥521.2 billion.
Operating income expanded 23.1% to
¥29.4 billion.
In the resins business, while ship-
ment of automotive application prod-
ucts was affected in Japan by the
decline in automobile production, other
applications performed strongly in gen-
eral. Overseas, shipment at subsidiaries
in the U.S. expanded for automotive ap-
plications and shipment of ABS resin at
a Malaysian subsidiary remained strong.
In the films business, the products
for packaging applications performed
strongly both in Japan and abroad.
Toray Group, despite many applications
being affected by price competition,
strove to improve profitability of the
business by emphasizing sales expan-
sion of high value-added products and
cost reduction.
Outlook for the Year Ending
March 2017 (Fiscal 2016)
We forecast strong global automobile
production, especially in North America
and Europe, although the outlook for
raw material and fuel prices remain un-
certain. For packaging films demand for
high-performance products is expected
to expand as quality requirement levels
become higher around the world.
In this business environment, in the
resins business, we aim to expand high
value-added products both for automo-
tive and non-automotive applications,
for which we see brisk demand glob-
ally. We also aim to increase sales of
polyphenylene sulfide (PPS) resins, for
which production was launched in the
Republic of Korea. In the films busi-
ness, we will focus on expanding sales
of strong-selling products in packaging
and industrial applications as well as
high value-added products.
2015
2014
Net Sales
2015
(Billions of yen)
68.9
2015
2014
521.2
2014
55.6
2015
892.0
856.7
892.0
856.7
521.2
2015
2014
2014
2015
Operating Income
2015
(Billions of yen)
2014
29.4
2014
2015
2015
2014
2014
2015
55.6
23.9
23.9
68.9
496.4
521.2
496.4
251.1
248.0
29.4
29.4
26.2
2015
ROA (Operating income/Assets)
2014
24.5
251.1
2014
5.4%
2015
2015
2014
248.0
186.2
26.2
158.4
2014
Operating income to net sales
24.5
2015
5.6%
2015
2014
2014
36.1
186.2
26.2
158.4
183.3
180.0
183.3
180.0
55.8
57.0
55.8
57.0
Capital expenditures
2015
2015
2014
¥31.2billion
2014
36.1
26.2
2015
9.6
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2014
8.0
8.0
3.1
3.1
9.6
4.1
4.1
Toray Industries, Inc.Annual Report 2016
ST RAT E GICAL LY E XPAN DI NG BU SI N ESSE S
IT-related Products
2015
2014
2015
2015
2014
2014
2015
2015
2014
2014
Net Sales
2015
(Billions of yen)
892.0
856.7
892.0
856.7
521.2
68.9
55.6
68.9
496.4
55.6
29.4
521.2
496.4
29.4
251.1
248.0
2015
2014
251.1
2014
23.9
2015
30
2015
2014
2014
2015
Operating Income
2015
(Billions of yen)
2014
26.2
2014
2015
2015
2014
2014
2015
251.1
248.0
186.2
23.9
26.2
24.5
26.2
158.4
24.5
36.1
2015
ROA (Operating income/Assets)
2014
26.2
186.2
2014
7.2%
2015
2015
2014
158.4
36.1
183.3
180.0
2014
Operating income to net sales
26.2
2015
10.4%
2015
2014
2014
9.6
8.0
Capital expenditures
2015
2015
2014
¥29.8billion
2014
9.6
8.0
2015
3.1
2015
2014
2014
2015
2014
4.1
4.1
3.1
183.3
180.0
55.8
57.0
55.8
57.0
Fiscal
Net sales
Operating income
Assets
2014
248.0
24.5
360.4
2015
251.1
26.2
362.9
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
1.2%
6.8%
(Billions of yen)
2016 Forecast
280.0
31.0
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
IT-related Products segment net sales
increased 1.2% year on year to ¥251.1
billion. Operating income grew 6.8% to
¥26.2 billion.
In the IT-related Products segment,
regarding large LCD panel-related ma-
terials, the trend shifted to larger dis-
plays and demand for 4K TV expanded,
but related materials such as films and
processed film products were affect-
ed by production adjustment at cus-
tomers given the slowing demand in
China and other emerging countries.
Smartphone- and tablet terminal-related
materials performed strongly, as ship-
ment of high performance electric circuit
materials at a subsidiary in the Republic
of Korea expanded. A Japanese subsid-
iary expanded sales of LCD color filter
manufacturing equipment, etc. In the
meantime, all materials continued to be
affected by price competition and Toray
Group worked to maintain profitability of
the business through measures such as
cost reduction.
Sub-segments
(Billions of yen)
Fiscal
Display materials
Electronic
components,
semiconductors,
electric circuit
materials
Data storage
materials
Equipment, others
2014
83.8
Changes
2015
69.9 -17%
109.7 119.4 +9%
33.7
30.4 -10%
20.7
31.4 +52%
Outlook for the Year Ending
March 2017 (Fiscal 2016)
We anticipate an overall adjustment phase
materializing for large LCD panel demand
despite growing demand for 4K TV and
other products, while we expect brisk
demand for materials used in electronic
components. We also anticipate continued
pressure from customers to lower prices, in
tandem with declining end product prices.
In this business environment, we will
seek to increase sales and expand mar-
ket share in high value-added film and
processed film products for display and
electronic component applications, espe-
cially for applications experiencing strong
demand. We will also strive to expand
sales of semiconductor materials and print-
ing materials, in addition to organic EL mate-
rials of which demands look likely to grow.
In addition, we will enhance our pro-
duction systems for battery separator
films for lithium-ion secondary batteries,
demand for which is increasing led by that
for automotive applications.
To pic
Development of Water-
soluble Polyimide for Anode
Binders to Increase Capacity
of Lithium-ion Batteries
Toray has developed a water-soluble poly-
imide for anode binders to increase the
capacity of lithium-ion batteries. Sample
shipments began in January 2016.
Anode binders help adhere anode ma-
terials to metallic substrates in the anode
formation process for lithium-ion batter-
ies. Over the past few years, silicon-based
anode materials, which are able to store
a larger amount of lithium, have been in-
creasingly used to enhance the capaci-
ty of lithium-ion batteries. However, the
volume of silicon-based anode materials
changes considerably during electrical
charge/discharge. Existing anode binders
with lower strength tend to degrade and
break after repeated expansion and con-
traction of anode materials, resulting in
the separation of anode materials from
the substrate.
As a leading global producer of poly-
imide, Toray thought that high-strength,
high-elasticity polyimide, which is used as
protective coatings for semiconductors,
could also be applied to the anode bind-
er. As the formation of polyimide requires
thermal treatment in excess of 250°C,
however, it was extremely challenging
to use polyimide in the lithium-ion battery
production process. By modifying polyim-
ide at the molecular level, the Company
was able to lower the temperature of
the thermal treatment process to below
150°C, and it also successfully made the
polyimide water soluble.
Toray will work on assessment of this
water-soluble polyimide with its custom-
ers and accelerate the development of
new technologies for establishing mass
production as quickly as possible.
Toray Industries, Inc.Annual Report 2016
2015
892.0
ST RAT E GICAL LY E XPAN DI NG BU SI N ESSE S
856.7
Carbon Fiber Composite Materials
892.0
68.9
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
Net Sales
2015
(Billions of yen)
55.6
856.7
521.2
68.9
496.4
29.4
521.2
496.4
29.4
251.1
248.0
55.6
23.9
23.9
2015
2014
186.2
2014
2015
2015
2014
2014
26.2
2015
Operating Income
2015
(Billions of yen)
2014
36.1
2015
2014
2015
2014
251.1
248.0
186.2
26.2
24.5
26.2
158.4
24.5
36.1
186.2
158.4
36.1
183.3
180.0
2014
2015
26.2
9.6
2015
ROA (Operating income/Assets)
2014
8.0
183.3
2014
8.3%
2015
2015
2014
180.0
55.8
57.0
9.6
2014
Operating income to net sales
8.0
2015
19.4%
2015
2014
2014
3.1
4.1
55.8
57.0
Capital expenditures
3.1
2015
¥32.1billion
2014
4.1
Fiscal
Net sales
Operating income
Assets
2014
158.4
26.2
436.8
2015
186.2
36.1
429.5
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
17.6%
37.7%
(Billions of yen)
2016 Forecast
200.0
38.0
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
Carbon Fiber Composite Materials seg-
ment net sales increased 17.6% year on
year to ¥186.2 billion. Operating income
surged 37.7% to ¥36.1 billion.
In
the Carbon Fiber Composite
Materials segment, shipment of carbon
fibers and intermediate products (pre-
preg) increased, as demand for aircrafts
as well as that in the environment and
energy fields including wind turbine ap-
plications expanded. The new facilities
that started production in the latter half
of 2014 and in the first half of 2015 con-
tributed to production increase and sales
expansion, and the shipment of products
for fuel cell vehicles started in earnest.
Sub-segments
(Billions of yen)
Fiscal
Aircraft
Sporting goods
Industrial
2014
2015 Changes
78.0
16.0
64.4
94.4 +21%
15.7
-2%
76.0 +18%
Outlook for the Year Ending
March 2017 (Fiscal 2016)
We anticipate strong growth in worldwide
demand for carbon fiber in 2016 driven by
continuing demand for aircraft and environ-
ment and energy-related applications. On
the other hand, despite strong demand for
materials for bicycles, we expect demand
for sports applications to remain at nearly
the same level as the previous fiscal year
affected by weakness in demand for ma-
terials for fishing rods due in part to inven-
tory adjustments by distributors.
In this business environment, we plan
to maintain steady shipments of carbon
fiber for aircraft applications centered
on the Boeing 787 Dreamliner. We also
plan to expand general industrial applica-
tion sales in the environment and energy-
related fields, which include wind pow-
er generation-related applications, among
other things, for which demand continues
to grow. In carbon fiber products for sports
applications, we will further shift to high
value-added products.
To pic
Comprehensive Agreement
with Boeing to Supply
Carbon Fiber TORAYCA®
Prepreg
Toray has signed a comprehensive
long-term agreement with The Boeing
Company
(hereinafter, “Boeing”) to
supply carbon fiber TORAYCA® prepreg
for the production of the new Boeing
777X aircraft, extending the existing
supply agreement for the Boeing 787
Dreamliner. The new agreement has ex-
tended the comprehensive agreement
that was signed in November 2005 by
more than 10 years effective from 2015.
The total value of prepreg that Toray
Group will supply for both 787 and 777X
programs for the contract period is ex-
pected to exceed ¥1.3 trillion ($11 bil-
lion). Together with the extension, Toray
decided to invest approximately ¥50
billion to construct an integrated pro-
duction line extending from yarn (pre-
cursor) to high-performance carbon fiber
TORAYCA®, with an annual production
capacity of 2,000 tons, and a production
line for TORAYCA® prepreg (carbon fi-
ber sheets impregnated with epoxy res-
in) in the new commercial premises it
acquired in Spartanburg County, South
Carolina in the U.S.
This represents the first phase of a
planned ¥100 billion investment as Toray
seeks to expand its carbon fiber com-
posite materials business in the U.S.
Toray is aiming to drive an exponen-
tial increase in aerospace applications
in the carbon fiber composite materials
business under its medium-term man-
agement program Project AP-G 2016.
It will continue to expand its infrastruc-
ture to ensure a stable material supply
to Boeing, while upgrading its business
structure and increasing revenue.
31
Toray Industries, Inc.Annual Report 2016
55.6
IN TE NS IVELY DEV ELO PI NG A ND EX PA NDING BUSINE SSES
Environment & Engineering
521.2
29.4
892.0
856.7
892.0
856.7
521.2
68.9
55.6
68.9
496.4
23.9
496.4
29.4
251.1
248.0
23.9
26.2
24.5
26.2
158.4
24.5
251.1
248.0
186.2
2015
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
Net Sales
2015
(Billions of yen)
36.1
186.2
158.4
36.1
183.3
180.0
9.6
9.6
183.3
180.0
55.8
57.0
32
2015
2014
183.3
2014
26.2
2015
2015
2014
2014
26.2
2015
Operating Income
2015
(Billions of yen)
2014
2014
9.6
2015
2015
2014
2014
2015
8.0
8.0
3.1
2015
ROA (Operating income/Assets)
2014
4.1
55.8
2014
4.8%
2015
57.0
3.1
2014
Operating income to net sales
4.1
5.2%
Capital expenditures
¥3.6billion
Fiscal
Net sales
Operating income
Assets
2014
180.0
8.0
204.2
2015
183.3
9.6
193.8
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
1.9%
19.5%
(Billions of yen)
2016 Forecast
220.0
12.0
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
Environment & Engineering segment
net sales increased 1.9% year on year
to ¥183.3 billion. Operating income
climbed 19.5% to ¥9.6 billion.
In the water treatment business, prof-
itability of exports including reverse os-
mosis membranes from Japan improved
thanks to the progress made in cost re-
duction and the weaker yen. Subsidiaries
in the U.S., China, and the Republic of
Korea also performed strongly.
As for domestic subsidiaries in the
segment, the number of plant con-
struction projects declined at an engi-
neering subsidiary.
Outlook for the Year Ending
March 2017 (Fiscal 2016)
We expect the outlook of business con-
ditions for the water treatment business
to remain uncertain globally due to fac-
tors including political instability in the
Middle East, postponement of new proj-
ect creation and of replacement proj-
ects in oil-producing countries due to
low oil prices, and economic slowdown
in China.
In this business environment, we
will strengthen cooperation of produc-
tion bases in Japan, with those in the
U.S., China, the Republic of Korea and
Saudi Arabia in order to further expand
sales, while also implementing rigorous
cost reduction.
In the engineering business, we
will aim to increase plant construction
projects and expand sales of industrial
equipment.
To pic
Toray Received an Order
for UF Membrane Module
TORAYFIL® for Korea’s
Largest Membrane Filtration
Water Purification Facility
Toray received an order for the hollow fi-
ber ultrafiltration (UF) membrane mod-
ule TORAYFIL® for a membrane-based
water purification facility in Yeosu City,
the largest in the Republic of Korea. The
facility has a water treatment capacity of
134,000 m³ per day, which is the largest
of Toray UF membrane supply projects.
This order brings the amount of water
treated using Toray water purification
membrane facilities in the Republic of
Korea to more than 220,000 m³ per day,
a nearly 50% share of the market*.
In the Republic of Korea, Toray has
the largest share in the water purifica-
tion membrane market. It has so far
supplied TORAYFIL® to the Gongju
and Imsil water treatment plants in
the country and has received an order
also for the Seongnam Bokjeong water
treatment plant, which is scheduled to
begin operations in 2017. Winning the
order for Yeosu facility signifies trust
the Company has built through these
achievements. In addition, in a bid to
further expand its water treatment
business, Toray acquired Woongjin
Chemical Co., Ltd.
(currently Toray
Chemical Korea Inc.), a major Korean
reverse osmosis (RO) membrane man-
ufacturer, in 2014.
Toray
to supply
TORAYFIL® to the Yeosu facility in 2016,
and the plant is expected to start opera-
tions in 2017.
is scheduled
* Calculation based on facilities whose water treat-
ment capacity is 5,000 m³ per day or more.
Estimates by Toray
Toray Industries, Inc.Annual Report 2016
892.0
856.7
892.0
856.7
521.2
68.9
55.6
55.6
23.9
68.9
496.4
29.4
29.4
521.2
496.4
251.1
248.0
2015
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
2015
2015
2014
2014
Net Sales
2015
(Billions of yen)
2015
2014
55.8
2014
2015
2015
2014
2014
2015
Operating Income
2015
(Billions of yen)
2014
2014
3.1
2015
24.5
248.0
186.2
26.2
158.4
24.5
36.1
186.2
26.2
158.4
36.1
183.3
180.0
26.2
9.6
9.6
183.3
180.0
55.8
57.0
4.1
55.8
57.0
8.0
8.0
3.1
3.1
2014
4.1
ROA (Operating income/Assets)
3.7%
Operating income to net sales
5.5%
Capital expenditures
¥3.2billion
IN TE NS IVELY DEV ELO PI NG A ND EX PA NDING BUSINE SSES
23.9
Life Science
251.1
26.2
Fiscal
Net sales
Operating income
Assets
2014
2015
57.0
4.1
82.9
55.8
3.1
83.3
Fiscal 2016 forecasts announced on May 12, 2016.
Changes
-2.1%
-24.7%
(Billions of yen)
2016 Forecast
64.0
5.0
To pic s
Obtained Approval for
Additional Indication
in Japan for REMITCH®
CAPSULES 2.5 µg
Toray received approval for REMITCH®
CAPSULES 2.5 µg on May 20, 2015 for
a new indication for improvement of
pruritus in chronic liver disease patients
in case of insufficient effectiveness of
the existing therapies or treatments.
Toray has already marketing approval for
the drug, which is being promoted and
distributed by Torii Pharmaceutical Co.,
Ltd. as a treatment of pruritus in hemo-
dialysis patients in Japan.
three medical devices:
Received Approval for
Catheter Ablation System for
Paroxysmal Atrial Fibrillation
Treatment
received marketing approv-
Toray
al on November 18, 2015 for the fol-
lowing
the
SATAKE•HotBalloon® Catheter, a bal-
loon catheter, the SATAKE•HotBalloon®
Generator, a dedicated radio frequency
generator, and the TRESWALTZ®, a guid-
ing sheath. The SATAKE•HotBalloon®
system, configured as a combination of
these three devices, is the world’s first
radiofrequency thermal balloon catheter
ablation system for treatment of parox-
ysmal atrial fibrillation.
33
Summary of Consolidated
Financial Results for the Year
Ended March 31, 2016
(Fiscal 2015)
Life Science segment net sales de-
clined 2.1% year on year to ¥55.8 billion.
Operating income decreased 24.7% to
¥3.1 billion.
In the pharmaceutical business, ship-
ment of natural-type interferon beta
preparation FERON® and orally active
prostacyclin derivative DORNER® re-
mained sluggish due to the impact of al-
ternative medicine and generic drugs.
License revenue also decreased from
the previous year. On the other hand,
sales volume of REMITCH®*, an oral
anti-pruritus drug increased, as the
product received approval in Japan for
the additional indication of treating pru-
ritus in chronic liver disease patients.
The medical devices business per-
formed strongly, as shipment of dia-
lyzers grew strongly and profitability of
exports improved.
Outlook for the Year Ending
March 2017 (Fiscal 2016)
The pharmaceutical and medical de-
vice markets are expected to face a
harsh business environment as National
Health Insurance drug prices and reim-
bursement prices are due to be revised
in April 2016.
In these conditions, in the pharma-
ceuticals business, we will seek to
expand sales of REMITCH®, an oral an-
ti-pruritus drug that obtained approval in
May 2015 for the additional indication of
treating pruritus in chronic liver disease
patients, while in the medical devices
business we will seek to expand sales
of dialyzers and dialysis equipment.
*REMITCH® is a registered trademark of
Torii Pharmaceutical Co., Ltd.
Toray Industries, Inc.Annual Report 2016
34
INTEGRATED VALUE MANAGEMENT
Toray Group aims to be a corporate group that delivers exceptional value to each and every one of
its stakeholders. Based on its corporate philosophy, “contributing to society through the creation of new val-
ue with innovative ideas, technologies and products by creating new value,” the Group advances its global op-
erations through the strategy trinity of business, R&D, and intellectual property. At the same time, the Group
promotes bolstered safety, accident prevention, and environmental preservation, corporate ethics, and legal
compliance to fulfill its corporate social responsibility (CSR) as its top priority management theme to achieve
sustainable growth.
Toray Industries, Inc.Annual Report 2016 R&D and Intellectual Property
INTEGRATED VALUE MANAGEMENT
35
Since its founding,
Toray has carried out
R&D on advanced materials
based on the firm conviction
that “research and technical
development provide the key
to building the Toray of
tomorrow.”
Toray Industries, Inc.Annual Report 2016 R&D
BASIC POLICY, FEATURES, AND STRENGTHS
Toray R&D Features
1
Culture of Commitment to Basic Research
Our culture prioritizes basic research that takes in the
larger picture, recognizes the value of materials and is not
swayed by popular trends and so provides a fertile founda-
tion for continuing to create innovative advanced materials
like our carbon fibers and reverse osmosis membranes.
2
Long-term and Persistent Efforts to Pursue
Advanced Materials and Technology to the Limit
Our commitment to unceasing pursuit in R&D—exem-
plified in our strong preference for advanced materials
and belief that delving deeper into a single theme yields
new inventions and discoveries—has taken root in the
form of persistent efforts over the long term. We believe
this “super-continuity” approach spurs innovation.
3
Specialist Teams in Many Fields
Toray’s teams of specialists have abundant knowledge
and experience in a wide variety of fields including poly-
mer design, function enhancement technology, and drug
discovery, formulation, and pharmacology, which are
applications of our core technologies.
36
4
Undivided R&D Organization
The Technology Center serves as the nexus for all R&D
functions enabling advanced materials created in one
field to be rapidly applied to other fields.
5
Leader in Industry-government-academia
Collaborative Research
Toray actively engages in technology fusion through
external collaboration and open innovation activities
with industries, governments, and academic institutions
in Japan and overseas with the aim of continuing to cre-
ate innovative advanced materials.
6
Strategic Partnerships with Industry Leaders
Toray produces first-to-market advanced materials in
growth markets through collaborations with leading com-
panies and venture companies in Japan and overseas.
7
Advanced Analytical Capabilities
Toray works closely with Toray Research Center Inc.,
which has extensive achievements in commissioned anal-
ysis and research studies, to enhance the Company’s anal-
ysis capabilities for its R&D and production technology.
R&D Innovation Center for the Future to be
Established to Take the Lead in the 21st Century with Advanced Materials
Toray will establish the R&D Innovation Center for the
Future at its Shiga Plant where the Company was founded
and will strengthen R&D to make people’s lives better
with Kotozukuri*, which utilizes the strengths of advanced
materials.
The R&D Center, composed of the
Integrated Research Site with the function
of idea creation for future society and the
Experimental Research Site that conducts
development, evaluation and demonstration
of prototypes based on those ideas, will be positioned as Toray’s
headquarters for its global research alliance. Furthermore, the
Center will pursue strategic open innovation through interac-
tion, integration and collaboration with academia and important
partners from diverse fields by performing inno-
vation hub functions such as an international
conference hall, exhibition and demonstration
area and open lab, and promote integration of
frontier technologies with Toray’s unique mate-
rials and technologies at its core.
* A way of finding value not only in products or in their quality but also in their life cycle from manufacturing to marketing, advertising, selling and after-services, as
well as in how they are handled and treated by people involved in their life cycle, by attaching stories unique to products created by people involved in their life cy-
cle through interaction and communication among people
Toray Industries, Inc.Annual Report 2016 Aiming to be the Global Leader in Advanced Materials
Toray Group aims to be the global leader in advanced materials. Following our motto that “innovative products only come
with innovative materials,” we are deepening and integrating our four core technologies of organic synthetic chemistry,
polymer chemistry, biotechnology, and nanotechnology to pursue innovation and play an active role developing society as
well as conserving and existing in harmony with the environment.
Material
Design
Textile Technology
TORAY’s
Core
Technologies
Fiber
Technology
Fine Technology
Polymer
Chemistry
Organic
Synthetic
Chemistry
Carbonization Technology
Molding Technology
Film
Technology
Film Processing
Technology
Dispersion Control
Technique
Coating Technology
Fine Patterning
Biotechnology
Microstructure Technology
Synthetic
Fibers
Textiles,
Apparels
Industrial Materials,
Amenity Materials
Man-made Suede
Carbon Fibers
Advanced Composite
Materials
37
Engineering
Plastics
High-performance
Films
Electronic
Materials
Printing
Materials
High-performance
Membranes, Water
Treatment Systems
Artificial Organs,
Medical Devices
Nanotechnology
Surface Control
Technology
Biotools
Gene Utilization Technology
Medicinal Technology
Fermentation Technology
Pharmaceuticals
Veterinary Medicines,
Fine Chemicals
Synthetic, Plastic
Raw Materials
Toray Industries, Inc.Annual Report 2016 R&D
R&D EXPENDITURE AND ACHIEVEMENTS
Toray Group’s R&D facilitates fortifying the stable reve-
nue bases and enhancing the earnings of the two Core
Growth Driving Businesses of Fibers & Textiles and
Plastics & Chemicals. R&D also supplies a steady stream
of advanced materials in the Group’s four priority growth
fields of environment, water-related and energy; informa-
tion, telecommunications and electronics; automobiles
and aircraft; and life science.
CORPORATE R&D
FIBERS &
TEXTILES
Toray applied high tensile
strength and high elastic mod-
ulus polyimide, in which Toray has ex-
tensive knowledge, to lithium-ion batteries
and developed water-soluble polyimide that
uses an anode binder in response to increased
battery storage capacity. In addition, Toray has
expanded business in this field by demonstrat-
ing its product and technological synergies with
Greenerity GmbH, a company acquired by Toray
and turned into a subsidiary, which is en-
gaged in the development, manufacture,
and sale of parts for fuel cells and
water electrolyzers.
Fiscal 2015 R&D Achievements
LIFE SCIENCE
Toray signed a licens-
ing agreement for the ter-
ritory of Japan for a compound
invented by BONAC Corporation that
is classified as a nucleic acid drug for id-
iopathic pulmonary fibrosis. Toray also de-
veloped the world’s first catheter ablation
system for the treatment of paroxysmal atrial
fibrillation by balloon utilizing high frequency.
Toray obtained approval from the Ministry
of Health, Labour and Welfare for the
manufacturing and marketing of
medical equipment that make
up this system.
9%
14%
19%
35%
Percentage Breakdown of
Total R&D Expenses
in Fiscal 2015
9%
4%
10%
I
n
t
e
n
s
i
v
e
l
y
D
e
v
e
l
o
p
i
n
g
ENVIRONMENT &
ENGINEERING
a
n
d
E
x
p
a
n
d
i
n
g
B
u
sin
e
s
s
e
s
Low-fouling reverse os-
mosis (RO) membrane suc-
cessfully established
the basic
technology to reduce the adhesion of
various foulants even more than before,
while maintaining high salt rejection and wa-
ter permeability performance. Toray also devel-
oped the TORAYVINO®CASSETTY206SMX, a
faucet-mounted water purifier equipped
with a cartridge that can be replaced easi-
ly and simply and with nearly twice the
filtration volume of the Company’s
existing products.
38
58.8
billion yen
R&D Expenses
(Billions of yen)
60
50
40
30
20
10
0
Fiscal/
11
12
13
14
15
Toray
Consolidated subsidiaries
C
o
r
e
G
r
o
w
t
h
D
r
i
v
i
n
g
PLASTICS &
CHEMICALS
B
u
s
i
n
e
s
s
e
s
IT-RELATED
PRODUCTS
CARBON FIBER
COMPOSITE
MATERIALS
S tr a te gic ally E xpanding Businesses
Toray Industries, Inc.Annual Report 2016
CORPORATE R&D
FIBERS &
TEXTILES
Toray developed a yarn
with a bi-component struc-
ture obtained by bonding two
types of nylon polymers, which has
been rolled out as the stretchable textile
Primeflex®. The Company also developed
the UV protection microfiber textile uts®50+.
Leveraging its fiber composite structuring tech-
nology, Toray developed a high-performance
flame-shielding paper using the PPS (poly-
phenylene sulfide) fiber TORCON™
and a flame-resistant yarn manufac-
tured by its subsidiary Zoltek
Companies, Inc.
C
o
r
e
G
r
o
w
t
h
D
r
i
v
i
n
g
PLASTICS &
CHEMICALS
B
u
s
i
n
e
s
s
e
s
Fiscal 2015 R&D Achievements
LIFE SCIENCE
35%
Percentage Breakdown of
Total R&D Expenses
in Fiscal 2015
9%
14%
19%
9%
4%
10%
Toray developed a high-performance
PPS resin with dramatically improved
toughness. The Company also developed
a self-repairing coating film capable of not
only quickly repairing minor abrasions on
surfaces from everyday use, but also deep
abrasions caused by a powerful force.
Taking advantage
IT-RELATED
PRODUCTS
of its nanostructure control
technology, Toray developed the
TAC-GU8 Toray Waterless Plate that
improves ink resiliency over that of previous
plates and provide a wider temperature range
in UV printing. Moreover, we achieved twice
higher carrier mobility in semiconductor-
type single-walled carbon nanotubes than
before, which is the world’s highest
performance for printing-type
Toray developed a car-
bon fiber reinforced material
that has the high rigidity of carbon fi-
ber reinforced plastics while having low
specific gravity comparable to that of typical
foam-sheet material. The material can be molded
into three-dimensional shapes using convention-
al press molding and achieves high flexural rigid-
ity with ultra-lightweight and high productivity.
Toray made its first shipment of vertical stabiliz-
ers that use carbon fiber composites for the
Mitsubishi Regional Jet, a small jetliner,
which Mitsubishi Heavy Industries,
Ltd. manufactures.
semiconductor.
CARBON FIBER
COMPOSITE
MATERIALS
S tr a te gic ally E xpanding Businesses
R&D Expenses
(Billions of yen)
58.8
billion yen
60
50
40
30
20
10
0
Fiscal/
11
12
13
14
15
Toray
Consolidated subsidiaries
I
n
t
e
n
s
i
v
e
l
y
D
e
v
e
l
o
p
i
n
g
a
n
d
ENVIRONMENT &
ENGINEERING
E
x
p
a
n
d
i
n
g
B
u
sin
e
s
s
e
s
R&D Topics
Topics
1
Printing-type CNT
Semiconductor achieves
World’s Highest Performance
Toray achieved twice higher carrier mobility*
of 36 cm2/Vs in single-walled carbon nano-
tubes (CNTs) than before, which is world’s
highest performance for printing-type semi-
conductors. Although single-walled CNTs
are being developed for thin film transistors
(TFT) for displays, it became more difficult to
uniformly disperse highly semiconductor en-
riched CNTs, hampering the exercise of the
high semiconductor performance.
Toray developed a proprietary semi-
conductor polymer that offers easier mu-
tual interaction with highly semiconductor
enriched CNTs and has successfully in-
creased the carrier mobility in printed TFTs
by about 40 times higher than that of amor-
phous silicon which is currently used in dis-
plays. Toray will establish the technology
for application in the field of RFID tags and
biosensors based on the advantage of low-
er costs, a characteristic of printing-type
semiconductors.
*Carrier mobility: An indicator of the mobility of car-
riers such as holes and electrons in semiconductors.
39
Topics
2
CFRTP for Injection Molding
with Improved Impact
Resistance Developed
While Toray lengthened the carbon fibers
and raised the impact resistance of carbon
fiber reinforced thermoplastic (CFRTP) to
deal with the problem of a tendency to
fracture during injection molding, Toray
developed CFRTP for injection molding,
which more than doubles impact resis-
tance over existing products while main-
taining tensile and mechanical strength by
combining flexible and difficult to break
heterologous fiber. Since this product
does not utilize an elastomer such as rub-
ber, it has the characteristic of being able
to maintain impact resistance at a level
equivalent to that at room temperature
even at low temperatures of 0°C or below,
and being difficult to deform at constant
stress with the passage of time.
Moving forward, we will acceler-
ate the development of technology for
mass-production with the aim of commer-
cialization within two years. We will utilize
the technology in a wide range of applica-
tions including automobiles, aircrafts, con-
sumer electronics, and mobile products.
Toray Industries, Inc.Annual Report 2016
INTELLECTUAL PROPERTY
BASIC POLICY AND PRIORITY STRATEGIES
Toray Patents Filed in
Year Ended March 31, 2016
Total Patents Held to Date
1,607
3,357
518
1,215
40
Overseas
Domestic
Overseas
Domestic
Intellectual property strategies must
The Company is currently stepping up
In fiscal 2015, Toray Group filed
be organically linked to business strat-
patent applications and rights acquisi-
1,607 patent applications in Japan
egies and R&D strategies. Toray pur-
tions and constructing a strong patent
and 3,357 overseas, and 518 patents
sues an intellectual property strategy
portfolio globally with a priority in the
in Japan and 1,215 overseas were
with coordination of these three areas
growth areas of the Project AP-G 2016
registered.
in line with management policies.
medium-term management program’s
While continuing to create innova-
Green Innovation Business Expansion
Toray publishes an annual Intellectual
tive new materials and technologies,
(GR) Project and Life
Innovation
Property Report describing the in-
Toray seeks to firmly maintain its tech-
Business Expansion (LI) Project.
tellectual property initiatives by the
nical advantages by pursuing an intel-
Under the Asia, Americas and
Toray Group. The report is available for
lectual property strategy comprising
Emerging Country Business Expansion
download at:
http://www.toray.com/ir/
library/lib_005.html
the following four points, the realiza-
(AE-II) Project, the Company is formu-
tion of which would be entry barriers
lating and advancing intellectual prop-
for competitors.
erty strategies correlated with the
business strategies and R&D strate-
1. Further enhance the quality of
gies that Toray Group is implementing
patents
globally with a focus on growth coun-
2. Construct a globally competitive
tries and regions showing promise for
network of patents
future business expansion. While for-
3. Protect the Company’s technical
tifying Toray’s patent applications and
advantages with effective mea-
rights acquisitions overseas, Toray
sures including strategic patent
Group companies overseas are also
applications
stepping up patent application and
4. Cultivate personnel with deep
rights acquisition activities to proper-
knowledge of overseas intellectu-
ly protect inventions created at Group
al property
R&D bases worldwide.
Toray Industries, Inc.Annual Report 2016
Sustainable Management
Creation of
New Value
Governance
• Contributing solutions
to social issues through
business activities
• Corporate governance and
management transparency
• Corporate ethics and legal
compliance
• Risk management
CSR
Guidelines
• Train personnel and
promote human rights
• Product safety and quality
• Facilitate CSR initiatives
throughout the supply chain
• Communication
• Social contribution
activities
• Emphasize safety, accident
prevention, and environmen-
tal preservation
Society
Environment
41
We regard advancing CSR,
especially safety, accident
prevention and environmental
preservation as well as corporate ethics
and legal compliance, as one of the most
important management priorities for Toray
Group. Our goal is to earn respect and
support in the international community
and become a corporate group that
contributes social value for all our
stakeholders through our core
business activities.
For more details, please refer to the Toray Group CSR Report 2016.
Toray Industries, Inc.Annual Report 2016 Sustainable Management
CSR INITIATIVES
TORAY
GROUP’S
MANAGEMENT
PHILOSOPHY AND
CSR
Toray’s Management Philosophy and Code of Conduct
Management
Philosophy
42
Declaration outlining
the obligations of
Toray Group as a
good corporate citizen
Corporate Ethics and Legal Compliance Code of Conduct
Concrete standards relating to ethics and compliance with laws
and regulations
Under our Corporate Philosophy of
“contributing to society through the
creation of new value with innovative
ideas, technologies and products,”
Toray Group has from the beginning
pledged to have a positive impact on
society through its business, realiz-
ing its corporate social responsibility
and management philosophy at the
same time.
Our Management Philosophy is
also supported by our Corporate
Ethics and Legal Compliance Code of
Conduct, which provide a reference
for specific standards of conduct for
all employees.
Toray Group’s CSR activities are
conducted in an organized and sys-
tematic manner following the three-
year CSR Roadmap. Toray Group is
strategically practicing social respon-
sibility under its Fifth CSR Road Map
for fiscal years 2014 to 2016, which
consists of carefully defined CSR
strategies, medium- and long-term
tasks, and a detailed action plan.
Toray Industries, Inc.Annual Report 2016CorporatePhilosophyCorporate MissionsBasic objectives are based on a break-down of the Corporate Philosophy as re-lated to each type of stakeholderCorporate Guiding PrinciplesPutting the Corporate Philosophy and the Corporate Mission into practice together with the aims and goals of each and every employee ENVIRONMENTAL
MANAGEMENT
INITIATIVES
Promotion of LCM-based
Environmental Management
To solve global environmental prob-
lems, it is vital that we address these
problems across the entire life cycle of
products and services, and reduce our
environmental footprint while improving
our economic and social value. To this
end, Toray Group promotes Lifecycle
Management (LCM).
This approach is the foundation of
Toray’s Green Innovation Businesses.
Toray Group has adopted LCA*1 meth-
the Toray Eco-Efficiency
ods and
Analysis (T-E2A)*2 tool to promote and
entrench LCM.
*1 Life cycle assessment: Assessment of environ-
mental impacts taking into account the entire life
cycle of products and services—from resource ex-
traction to manufacturing, use, and disposal.
*2 Toray Eco-Efficiency Analysis (T-E2A): Environ-
mental analysis tool developed by Toray. It produc-
es a map of multiple products plotted along the
axes of environmental impact and economic per-
formance, enabling users to select the most envi-
ronmentally friendly and economical products.
(GHG)
Initiatives to Conserve
Energy and Fight Global
Warming
Toray Group was an early adopter
of greenhouse gas
reduc-
tion initiatives with a view to helping
realize sustainable, low-carbon soci-
eties. Under the Fourth Medium-term
Environmental Plan in fiscal 2011, the
Group has systematically implemented
measures to reduce GHG emissions,
including improving its processes to
conserve energy and installing gas
cogeneration systems.
From fiscal 2016 onwards, Toray
Group intends to steadily implement initia-
tives for reducing GHG emissions in order
to achieve its new reduction targets.
Voluntary Reduction in
Atmospheric Emission of
Chemical Substances
Engaged in the chemicals business,
Toray Group believes that the reduc-
tion of environmental loads, including
release of chemical substances into the
atmosphere, is one of its most import-
ant priorities.
We achieved our targets set in the
Fourth Medium-term Environmental
Plan (from fiscal 2011 to fiscal 2015)
for reducing emissions of substances
covered by the PRTR law and volatile
organic substances (VOCs).
While business growth is likely to
result in higher production volumes, we
are resolutely implementing measures
to reduce emissions and achieve our
new reduction targets for fiscal 2020.
Initiatives to Prevent Air and
Water Pollution
Toray Group has ongoing environmental
protection initiatives in place at its pro-
duction facilities. The Group will focus
efforts on reducing sulfur oxide (SOx)
emissions by installing desulfurization
systems and converting to alternative
fuels, as well as on lowering chemi-
cal oxygen demand (COD) levels by
expanding our wastewater treatment
facilities and other measures.
Water Resource Management
Initiatives
Toray Group, through its water treatment
business, is addressing water resource
issues around the world based on the fol-
lowing principles. The Group also takes
steps to ensure the proper management
of water resources used in its business
activities, including using recycled water
to enhance water usage efficiency.
1. Toray Group recognizes that water is
one of the most important resources
for humanity, and that people are con-
fronting problems related to water
resources in many areas of the world.
2. Toray Group is committed to helping
to solve global water resources prob-
lems through its products, technolo-
gies and services.
3. Toray Group continuously monitors
the state of regional water resources,
and conducts appropriate manage-
ment of water resources according to
the basic principle of sharing precious
water resources with the local com-
munities where the Group operates.
the 3Rs
Toray Group practices
(reduce, reuse, recycle) in consuming
water resources, and monitors the qual-
ity of water that is released into public
bodies of water.
Initiatives to Reduce Waste
Toray Group recognizes the importance
of effectively utilizing resources and
facilitating zero emissions in creating
a sustainable, recycling-oriented soci-
ety. The Group implemented measures
to achieve the Fourth Medium-term
Environmental Plan’s fiscal 2015 numer-
ical targets for simply disposed waste,
landfill, and recycling ratios set as indi-
cators for measuring progress toward
attaining zero emissions.
Biodiversity Initiatives
Toray Group recognizes the protection
of biodiversity as an important theme
in its initiatives for reducing green-
house gases and confronting global
environmental problems. We aim to
help realize a sustainable society by
analyzing the impact of our business
activities on biodiversity.
Based on the Toray Group’s Biodi-
versity Initiatives, we have been for-
mulating three-year road maps and
implementing measures in order of pri-
ority. In fiscal 2015, the final fiscal year of
our second roadmap (fiscal 2013-2015),
which focused on the preservation of
greenery, we worked on follow-up activ-
ities to ensure the achievement of the
roadmap goals.
The plants of Toray industries, Inc.
and its affiliated companies in Japan
operate greenery policies and plans
through 2020, guided by the Toray
Group Basic Policy for Increasing Green
Areas. The plans encompass initiatives
to conserve green areas, including nat-
ural forests*3 that have been protected
since
the plants began operating.
Sustainable greenery conservation ini-
tiatives also help to conserve the envi-
ronment for communities.
*3 Natural forests: Natural groves or forestation by
species based on potential native vegetation
We periodically conduct a survey to
determine the usage of bio-based raw
materials in product manufacturing. We
also incorporated into our management
rules a process for checking for impact
on biodiversity. We look to conserve bio-
diversity through our social contribution
activities as well.
43
Toray Industries, Inc.Annual Report 2016 Sustainable Management
CSR INITIATIVES
PROMOTING CSR IN
THE SUPPLY CHAIN
Toray Group is aware of the impor-
tance of CSR procurement in its corpo-
rate activities. In its CSR Procurement
Guidelines, Toray Group has declared
it will provide environmentally
that
friendly and socially responsible materi-
als and products to its customers using
environmentally friendly transportation
methods. The Group works with suppli-
ers and distribution partners to secure
socially responsible value chains.
CSR Procurement, Purchasing
and Distribution
While providing materials and products
as a manufacturer of advanced materi-
als, Toray Group emphasizes the needs
of its product users as the starting point
for its management of production facil-
ities and procured raw materials and
resources. Accordingly, the Group has
established its Basic Purchasing Policies
to emphasize this approach and ensure
fair purchasing practices.
Toray’s Basic Distribution Policies
emphasize environmental preserva-
tion and continuous work to improve
quality and
reduce environmental
impact, together with fair and equitable
transactions.
44
RESPECTING
HUMAN RIGHTS AND
NURTURING HUMAN
RESOURCES
Respect for Human Rights
Toray Group believes that respect for
human rights is a mandatory principle for
corporate management, without which it
would not be possible to engage in corpo-
rate activities while building positive rela-
tionships with stakeholders. Toray Group
works to promote and raise awareness of
human rights, and, in its Corporate Ethics
and Legal Compliance Code of Conduct,
outlines the importance of respecting
human rights. Discrimination of any kind
based on race, creed, skin color, gen-
der, religion, nationality, language, phys-
ical characteristics, possessions, place
of birth, or any other personal charac-
teristic is strictly forbidden in every pro-
cess —from recruiting and hiring to work
placement, compensation, training, and
retirement. In fiscal 2014, the Group
expanded this commitment to address
discrimination based on gender identifi-
cation and sexual orientation.
Internationally, Toray Group takes
stringent measures to comply with the
related laws and regulations of each coun-
try in which it operates. Furthermore, the
Group respects international standards
including the United Nations Universal
Declaration of Human Rights and the
International Labour Organization’s stan-
dards prohibiting all forced labor and child
labor. Toray Group makes every effort to
prevent it from becoming complicit in
human rights abuses.
Specific measures have been dis-
cussed at the human rights risk working
group, created in fiscal 2015 as a part
of the Risk Management Committee
under the CSR Committee, from the
standpoint of reducing risks related
to human rights, while monitoring
international trends related to global
human rights issues.
We hold human rights promotion
campaigns annually.
In fiscal 2015,
the campaign was aimed at fostering
a workplace culture that respects the
human dignity of others and promoting
a better understanding about preventing
sexual harassment, power harassment
and maternity harassment. The cam-
paign also addressed lesbian, gay, bisex-
ual, and transgender (LGBT) issues (i.e.,
sexual minorities).
Retaining and Nurturing
Employees who Generate
New Value
The success or failure of a company is
decided by its people—employees shape
its destiny. Guided by this concept, Toray
Group considers securing and develop-
ing outstanding human resources as one
of its most important tasks and a funda-
mental management priority.
As part of future global business
development, Toray Group will continue
to secure and develop human resources
that operate on a global level with a
strong sense of commitment.
Based on the following three goals,
Toray Group
is promoting human
resource development.
•Development of fair-minded individ-
uals who act with high ethical stan-
dards and a sense of responsibility
•Training of professionals with
advanced expertise, technical skills
and originality in problem solving
•Development of leaders who act with
foresight and a sense of balance
To achieve these goals, Toray Group con-
ducts various kinds of training programs
tailored to each of the three goals.
These programs are systematic and log-
ically organized, and they are offered
to employees of all levels working in
every field in the Group. With a view to
strengthening international operations,
Toray Group has designed the training
to improve management capabilities,
sales performance, production technical
skills, and specialized skills.
Toray Industries, Inc.Annual Report 2016
COMMUNICATION
ACTIVITIES
Toray Group has established Basic
Policies to Promote Dialogue with
Stakeholders, designed to ensure
that its management gives serious
consideration to each type of stake-
holder when deciding on basic man-
agement objectives. These policies
guide Toray Group’s efforts to com-
municate with stakeholders across
the spectrum of its business activ-
ities. A management-led Corporate
Communications Committee meets
twice a year to regularly report on and
discuss communication activities.
Strengthening
Communication via Our
Global Website
Toray Group is advancing the Asia,
Americas, and Emerging Country
Business Expansion (AE-II) Project as
a group-wide project. As a part of this
project, we are expanding our online
presence via the Toray Group global
website. As of fiscal 2014, we have
launched websites for our operating
bases in America, China, Indonesia,
Thailand, Malaysia, India and Taiwan.
In fiscal 2015, we launched new web-
sites for Europe and Brazil, and plan to
continue launching websites in coun-
tries and regions where we aim to pro-
mote business.
Toray Group’s websites use
responsive design to ensure opti-
mum access and viewing across a
wide range of devices and screen
sizes including smartphones and tab-
lets, and we make our websites eas-
ier to use for business purposes in all
countries and regions.
Stakeholder Communication
The Group actively communicates
with institutional investors and secu-
rities company analysts by providing
information materials when requested
and holding same-day results brief-
ings when quarterly earnings are
announced. The Group also provides
a wide variety of information about
management policy and strategy as
well as financial and earnings infor-
mation through its annual report and
information pages on its website for
stockholders and investors. The Group
endeavors to provide full and fair infor-
mation disclosure by making materi-
als used in meetings with institutional
investors and English-language ver-
sions of all materials promptly available
on its website. In fiscal 2015, Toray
held four results briefings and held 750
meetings with investors and analysts.
Feedback received at investor briefing
sessions and through communication
with investors and stockholders is reg-
ularly reported to the Board of Direc-
tors and Corporate Communications
Committee, helping to guide manage-
ment and business activities.
Toray believes that the customer
comes first, and we value commu-
nications with our customers, which
is mainly through our sales depart-
ments, and we periodically conduct
surveys of customer satisfaction. The
results of these surveys are shared
internally at Board meetings and
in-house newsletters, and feedback is
given to specific departments if there
are areas needing particular improve-
ment to help improve customer sat-
isfaction and quality of order-placing
and receiving operations.
Toray is celebrating the 90th anni-
versary of its founding in 2016. As
a part of commemorative events
that reach out to customers, we will
hold the Toray Advanced Materials
Symposium 2016 in October.
Toray Group holds policy briefings and
carries out CSR procurement surveys
for business partners to foster mutual
understanding and closer collaboration.
The Group communicates with employ-
in-house newsletters,
ees through
intranet, company-wide bulletin boards
and other media. To share information
and deepen understanding of man-
agement and business topics, mes-
sages from the Company president,
Japanese, English, and Chinese ver-
sions of in-house newsletters, and
explanations of management and busi-
ness topics and projects are made
available via all types of media.
Toray recognizes that public rela-
tions and corporate communica-
tion activities have a role in fulfilling
responsibilities for information disclo-
sure as well as influencing public opin-
ion. Accordingly, Toray’s Corporate
Communications Department reports
directly to the president, and actively
engages with a wide range of media
organizations, linking the Company
with the public. Based on Toray’s
Information Disclosure Principles,
the department provides fair and
impartial information, even if it may
cast the Company in a bad light, in a
timely and appropriate manner. In fis-
cal 2015, the Company issued 192
press releases and responded to 285
requests for information.
Toray Group strives to engage
in active dialogue with nearby resi-
dents in a variety of settings, includ-
ing participating in events sponsored
by local governments and inviting
local residents onto factory grounds
for summer festivals. We also pro-
actively engage
in CSR activities
through NPOs.
Principal SRI indexes in which
Toray is included
• DJSI Asia Pacific
• MSCI ESG Index
• Ethibel Pioneer & Excellence
Registers
• Euronext Vigeo World 120
Index
• Morningstar Socially
Responsible Investment Index
• SNAM Sustainability Indices
(as of March 31, 2016)
45
Toray Industries, Inc.Annual Report 2016
Sustainable Management
CSR INITIATIVES
SOCIAL
CONTRIBUTION
ACTIVITIES
Our Social Contribution Policy
Toray Group takes a proactive stance
on giving support to local communities
(social contribution activities) based on
the belief that having relationships of
trust with local communities is a prerequi-
site for all business activities. Formulated
in 2005, the Toray Group Social Initiative
Policies are based on our Corporate
Philosophy of “Contributing to society
46
through the creation of new value.” We
aim for our activities to contribute to sus-
tainable development while meeting the
expectations of local communities. Toray
Group will plan and implement activities
that use Group resources more effec-
tively than ever before.
In fiscal 2015, the Group invested
some ¥1.5 billion on a consolidated basis
(1.0% of consolidated ordinary income)
and ¥1.0 billion on a non-consolidated
basis (1.5% of non-consolidated ordi-
nary income). The main beneficiaries
were the Toray Science Foundation
in Japan and three ASEAN countries
Indonesia).
(Malaysia, Thailand, and
Moreover, Toray co-sponsored
the
Shanghai International Marathon.
Contributing to Future
Generations
For many years, as part of its efforts to
promote science and technology, Toray
Group has been carrying out various
educational programs for people pursu-
ing science and engineering. The Group
has broadened these activities to include
elementary and junior high school stu-
dents in recent years. Incorporating
information on its products into teach-
ing materials, the Group is implement-
ing educational programs and other
initiatives as it works to actively support
education around the world.
In fiscal 2015, Toray Group employ-
ees taught science classes at 34 ele-
mentary and junior high schools in
Fukui, Shiga, Tokyo, Osaka and Aichi.
Toray Group also collaborated with The
Boeing Company to hold events for
elementary and junior high school stu-
dents, and offered assistance for sci-
ence education programs at affiliated
companies located in the U.S., Thailand
and China.
Top ic
Delivery of Mobile Water Treatment Systems to Bangladesh
These systems have made it possible to supply res-
idents of Bangladesh with safe drinking water in areas
with water shortages.
Involved in an Official Development Assistance (ODA) proj-
ect, Toray has delivered 30 mobile water treatment sys-
tems to Bangladesh. These systems were ordered by the
Bangladesh government and paid for with grants-in-aid pro-
vided by the Ministry of Foreign Affairs in Japan as a part
of the “Programme for the Improvement of Capabilities to
cope with Natural Disasters caused by Climate Change.”
The mobile water treatment systems feature Toray’s
ultra-filtration (UF) and reverse osmosis (RO) membranes,
enabling the supply of 16 cubic meters of potable water
per day from water sources such as rivers and wells.
Water purification process: draw water, UF membrane, RO membrane, clean water
Disc filter
RO membrane
Raw
water
UF membane
P
P
Intermediate
tank
High-pressure
pump
Product
water tank
Concentrated
water
Product
water
Toray Industries, Inc.Annual Report 2016
Sustainable Management
CORPORATE GOVERNANCE
TORAY GROUP’S
BASIC POLICY
ON CORPORATE
GOVERNANCE
Basic Policy
From the outset, one of Toray Group’s
managerial principles has been that
the purpose of a company is to contrib-
ute to society. The Group has devel-
oped a Management Philosophy that
incorporates this principle.
The Group systematizes the Man-
agement Philosophy as a Corporate
Philosophy, Corporate Missions, and
Corporate Guiding Principles. Among
these, the Corporate Missions call for
desirable relationships with stakehold-
ers and enunciate the Group’s com-
mitment “To provide our stockholders
with dependable and trustworthy man-
agement.” In addition, the Corporate
Guiding Principles stipulate the Group’s
commitment to “Obtaining the trust of
society and meeting the expectations
by acting fairly while maintaining high
ethical standards and a strong sense of
responsibility and maintaining transpar-
ency in management.”
When establishing the corporate
governance structure, the Group seeks
to realize these philosophies as its
basic policy.
Toray Group’s Management Philos-
ophy is available on the Company’s
website.
http://www.toray.com/aboutus/
philosophy.html
Basic Policy on Internal
Control Systems and Their
Development
Toray is a company with Board of
Corporate Auditors, and the members
of the Board and corporate auditors
are elected at the general meeting of
stockholders.
Members of the Board and corpo-
rate auditors, as officers directly elected
at the general meeting of stockholders,
clearly recognize their fiduciary respon-
sibility to stockholders, who have
entrusted the management. They seek
to appropriately fulfill their respective
roles while discharging accountability
about management status to stockhold-
ers and other stakeholders.
General Stockholders Meeting
Election
Election
Election
Accounting Auditor
Board of Corporate Auditors
(Corporate Auditors)
Audit
Board of Directors
Audit
Audit
Auditing Department
President
Conference Organs
Executive Committee
Board of Senior Vice Presidents
Internal audit
Business Execution Divisions
As Toray Group supplies a wide
range of industries with basic materi-
als and globally plays an active part in a
broad scope of business fields, it is nec-
essary to evaluate various risks multi-
laterally based on expertise relevant to
worksites, not only for management
judgment and decision-making but also
for oversight. To that end, the Board
of Directors formulates a structure in
which members of the Board famil-
iar with Toray Group businesses over-
see management and make decisions
from various viewpoints. Furthermore,
the Board of Corporate Auditors over-
sees the execution of operations by
members of the Board based on pro-
fessional knowledge in fields such as
finance, accounting and law in addition
to an understanding about businesses,
from a standpoint entirely independent
of the Board of Directors as a system
to secure transparency and fairness of
oversight and decision-making.
Toray Group has established the
Governance Committee, with members
comprising the Chairman, President,
and all Outside Directors, in order to
increase the effectiveness of oversight
by the Board of Directors on all matters
pertaining to corporate governance.
The following chart outlines the cor-
porate governance system at Toray.
Oversight &
Decision-making Functions
Report
Governance Committee
Business Execution
Functions
Company-wide Committees
Corporate Ethics Committees
CSR Committee
Divisions,
offices and
plants in Japan
Japanese
subsidiaries
and affiliates
Overseas
subsidiaries
and affiliates
Departmental Committees
47
Toray Industries, Inc.Annual Report 2016 Sustainable Management
CORPORATE GOVERNANCE
Toray Group’s Basic Policy on Corporate Governance is available on the Company’s
website.
http://www.toray.com/aboutus/governance/gov_001.html
Basic Policy on Internal Control System
To realize the Management Philosophy, the Company shall establish a structure to
execute its business legally and effectively by improving its internal control system
according to the following basic policy as a structure to enable it to appropriately
establish organization, formulate regulations, communicate information, and moni-
tor the execution of operations.
48
1. System to ensure that the execution of duties by members of the Board and employees complies with laws
and regulations and the Company’s Articles of Incorporation
2. System to ensure the efficient execution of duties by members of the Board
3. System for preserving and managing information pertaining to the execution of duties by the members of
the Board
4. Regulations and other systems pertaining to controls over risks of loss
5. System for ensuring appropriate business operations within subsidiaries
6. System for reporting to corporate auditors and systems for ensuring that persons who report to corporate
auditors are not treated disadvantageously because of their reporting
7. Items pertaining to the handling of expenses and liabilities arising from the execution of duties by corpo-
rate auditors
8. Items pertaining to employees assisting with corporate auditors’ duties, items pertaining to the indepen-
dence of said employees from members of the Board, and items pertaining to the assurance of effective-
ness of instructions from the corporate auditors to said employees
9. Other systems for ensuring effective implementation of audits by corporate auditors
Details about the basic policy on internal control system are available on the
Company’s website.
http://www.toray.com/aboutus/policy.html
For information about compliance with the Corporate Governance Code, as well as
basic policies concerning and the status of internal control system, please read the
Corporate Governance Report.
http://www.toray.com/ir/pdf/cgo_001.pdf
Toray Industries, Inc.Annual Report 2016 REMUNERATION
FOR MEMBERS OF
THE BOARD
(I) Policy on Remuneration
for Members of the Board
and Corporate Auditors
Given their roles, remuneration for
members of the Board consists of
monthly remuneration, a bonus and
stock acquisition rights as stock options.
Remuneration for outside directors
consists only of monthly remuneration,
given their roles. Remuneration is set
at a level that enables the Company to
respect
secure superior human resources and
further motivate them to improve per-
formance, referring to the results of a
survey of other companies’ remuner-
ation by an external third-party orga-
nization. With
to monthly
remuneration, the maximum limit of
total remuneration is determined at
general meetings of stockholders.
Within the scope of the maximum
limit, monthly remuneration to each
member of the Board is determined by
the President based on the Company’s
internal regulations with a resolution at
a Board of Directors meeting.
The provision and the total amount
of bonuses are determined each time
at a general meeting of stockhold-
ers. Particulars of the agenda at the
general meeting of stockholders are
resolved by the Board of Directors
through conference among the senior
management, including the President,
in consideration of the consolidated
and non-consolidated business results
for each fiscal year plus the histor-
ical record. A bonus to each mem-
ber of the Board is determined by the
President according to each member’s
performance based on the Company’s
internal regulations with a resolution at
a Board of Directors meeting.
The maximum limit of total num-
ber of Stock Acquisition Rights as well
as the limit of remuneration relating to
the granting of the Stock Acquisition
Rights as stock options to members
of the Board is resolved at the general
meeting of stockholders, and within
that limit, the total number of Stock
Acquisition Rights to be allocated to
the members of the Board shall be
decided at the Board of Directors
meeting based on the Company’s
internal regulations.
From fiscal 2016 onwards, the Gov-
ernance Committee will consistently
review the level of director remuneration.
(II) Details of Remuneration in Fiscal 2015
Position
Total
remuneration
(millions of
yen)
Total remuneration by type (millions of yen)
Basic
Bonuses
Provision for the
allowance for
retirement benefits
Stock
options as
remuneration
Recipients
Members of the Board (excluding outside directors)
1,484
974
161
Corporate auditors (excluding outside corporate auditors)
Outside director
Outside corporate auditors
83
21
19
83
21
19
—
—
—
96
—
—
—
253
27
—
—
—
2
2
4
Notes: 1. Recipients included four members of the Board and two outside corporate auditors who retired during fiscal 2015.
2. Total amounts of remuneration do not include ¥72 million paid in salaries to eight employee-directors.
(III) Total Remuneration Received by Members of the Board and Corporate Auditors
Name
Total
consolidated
remuneration
(millions of yen)
Position
Status of
company
Total consolidated remuneration by type (millions of yen)
Basic
Bonuses
Provision for the
allowance for
retirement benefits
Stock
options as
remuneration
Sadayuki Sakakibara
Akihiro Nikkaku
128
149
Member of the Board
Filing company
Member of the Board
Filing company
26
104
—
21
96
—
6
24
Note: Total remuneration only includes persons receiving more than ¥100 million.
49
Toray Industries, Inc.Annual Report 2016
Sustainable Management
CORPORATE GOVERNANCE
CORPORATE
ETHICS AND LEGAL
COMPLIANCE
Toray Group is keenly aware that strict
adherence to laws, regulations and
social norms is an essential facet of
corporate management. Toray’s top
management takes a clear position on
corporate ethics and legal compliance,
and strives to improve the conduct of
all companies in Toray Group.
Framework for Promoting
Corporate Ethics and Legal
Compliance
Toray operates a Corporate Ethics
Committee chaired by the president.
The committee oversees corporate
policies relating to corporate ethics,
and implements initiatives through the
joint efforts of labor and management.
Underneath it is a Company-Wide Legal
50
Compliance Committee that functions
as a forum for sharing views and poli-
cies of management and reporting sta-
tus of implementation of compliance
initiatives at workplaces. This commit-
tee is primarily comprised of section
managers and, while communicating
with upper management, takes initia-
tives that address company-wide com-
pliance issues. Furthermore, CSR/legal
compliance committees operate at the
divisional and plant levels to imple-
ment initiatives rooted in the work-
place and fully engage all employees.
Toray has established CSR/legal
compliance committees at its domestic
group companies, and appointed execu-
tives and section managers in charge of
legal compliance. Furthermore, relevant
departments at Toray’s headquarters
collaborate to hold a group-wide corpo-
rate ethics and legal compliance meet-
ing annually to improve understanding
of revised laws and particular issues.
CSR/legal compliance committees
have also been established at Toray’s
group companies around the world.
With support from Toray’s International
Division, CSR Operations Department,
and other relevant sections, the com-
promote
independently
mittees
initiatives related to legal compliance
and corporate ethics.
The Corporate Ethics and Legal
Compliance Code of Conduct is a
strict set of standards that every Toray
Group executive and employee closely
follows when performing corporate
activities. In the event that a violation
is discovered, strict discipline is carried
out in consultation with the Company’s
Rewards and Sanctions Committee.
All Toray executives and employees,
including contracted, part-time and dis-
patched workers, receive a copy of the
Corporate Ethics and Legal Compliance
Handbook, which explains expecta-
tions for proper conduct in detail.
In fiscal 2015, Toray substantially
revised its Corporate Ethics and Legal
Compliance Handbook. Additions
and revisions were made to sections
regarding laws and regulations, internal
rules, and the creation and updating of
manuals, enhancing the content of the
handbook. The revisions also expanded
the scope of application to domestic
affiliated companies. We also intend to
create for our overseas affiliated com-
panies guidelines and handbooks that
meet conditions in each country and
region to ensure comprehensive under-
standing the code of conduct.
Framework for Promoting Corporate Ethics and
Legal Compliance in Toray
Corporate
Ethics
Committee*
* Chaired by Toray’s president
Company-wide Legal
Compliance Committee
Division-and Plant-level
CSR/Legal Compliance
Committees
Toray Industries, Inc.Annual Report 2016
RISK
MANAGEMENT
Toray has established a Risk Man-
agement Committee under the CSR
Committee to regularly monitor the
progress of risk reduction measures
across all Group companies and con-
duct planning and promotion of risk
management measures. Under the
Risk Management Committee, local
risk management committees have
been established at each of Toray’s divi-
sions, departments, offices, and plants.
Group-wide measures determined
by the Risk Management Committee
are given to local risk management
committees, which then incorporate
these measures in their own initia-
tives to reduce risks particular to their
respective division, department, office
or plant, while carrying out coordinated
risk management activities.
Toray Group has also established a
risk management system for group com-
panies, led by their presidents. The sys-
tem promotes initiatives to reduce the
specific risks faced by each company.
Each group company reports on the re-
sults of these initiatives to the Risk Man-
agement Committee every fiscal year.
Toray Group regularly evaluates
identifies risks
Companywide risks,
that should be prioritized in light of their
potential impact on management of the
Group, and is working to reduce these
risks through the PDCA cycle.
Addressing Priority Risks
Once every three years, Toray reviews
its priority risks. Fiscal 2015 was
the first year we implemented mea-
sures to address the risks we identi-
fied in our third risk priority screening.
We endeavored to reduce risk, mainly
through departments in charge of pro-
moting risk prevention measures, or
working groups created to work across
departments. For affiliated companies
inside and outside Japan, Toray iden-
tified the priority risks that each com-
pany should address based on their
unique traits, while referring to the pri-
ority risks it determined, and advanced
with measures to mitigate these risks.
Supply Chain Risk Reduction
In fiscal 2015, Toray revised its sur-
vey of CSR procurement and assessed
the level of measures taken for global
human rights issues throughout the
supply chain of Toray Group.
Toray Group conducts checks for
the use of conflict minerals in all prod-
ucts and has been working to make its
responses to customers’ requests for
surveys quicker and more efficient by
integrating data management.
Maintaining Information
Security
Toray Group offers education courses
on security on an ongoing basis main-
ly through e-learning. In fiscal 2015, a
total of 12,729 employees at 14 Affili-
ated companies inside and outside Ja-
pan took courses on data security via
our e-learning system.
Facing growing risks of Advanced
Persistent threat, we revised the Toray
Group Electronic Information Security
Guidelines based on security guidelines
published by the Information Technol-
ogy Promotion Agency, Japan (IPA).
Crisis Management System
In
its Crisis Management Regula-
tions, Toray Group has clearly defined
the basic principles for a group-wide
response to serious risks affecting Toray
Group in order to ensure a consistent
and comprehensive response in a crisis
situation. The regulations are revised
as appropriate so as to prepare for new
risks that may emerge as a result of
change in the social environment.
Preparedness for a Major
Earthquake
Identifying major earthquakes as a
significant risk factor, Toray Group con-
tinues to engage in activities based on
Major Earthquake Business Continuity
Plan. In fiscal 2015, Toray Group contin-
ued activities that started in fiscal 2014,
such as introduction of a safety confir-
mation system covering all domestic
affiliated companies, systematic imple-
mentation of earthquake-proofing of
plant buildings, and verification of our
business continuity planning for prod-
ucts for which we have a strong respon-
sibility to supply to society.
Since fiscal 2012, Toray Group
has conducted drills to create a tem-
porary group-wide headquarters. In
fiscal 2015, the Group began conduct-
ing drills based on a disaster scenario
involving Tonankai and Nankai earth-
quakes that cause extensive damage
to Group companies and plants situ-
ated in parts of Japan from Shizuoka
Prefecture to further west. Some drills
are designed to increase difficulty lev-
els with some parts of the scenario
undisclosed to drill participants.
In preparation for an earthquake di-
rectly hitting the Tokyo metropolitan
area, the Group revised the Tokyo busi-
ness site’s emergency response plan
for a major earthquake (the last revision
was three years ago), and distributed
the new version of the plan to all em-
ployees stationed in Tokyo head office.
The Group also added some new
functions to the Toray Disaster Map
System, a tool that was launched after
the Great East Japan Earthquake for rap-
idly and accurately grasping the extent
of damage caused by an earthquake to
Toray Group and at its business partners.
Preparedness for New
Influenza Pandemic
In June 2015, we revised the Toray
Group
against
Countermeasures
Influenza Pandemic to address both
strongly and weakly virulent influen-
zas. Toray Group’s business offices and
plants have revised and begun imple-
menting their crisis management sys-
tems and measures to prevent the
spread of disease in the event that a
human-to-human transmission of new
influenza occurs in Japan.
51
Toray Industries, Inc.Annual Report 2016
Corporate Information
Board of Directors and Corporate Auditors
(As of June 28, 2016)
President
and Representative
Member of the Board
Akihiro Nikkaku
Executive Vice President
and Representative
Member of the Board
Koichi Abe
Executive Vice President
and Representative
Member of the Board
Kazushi Hashimoto
Senior Vice President
(Member of the Board and Member
of the Executive Committee)
Ryo Murayama
Senior Vice President
(Member of the Board and Member
of the Executive Committee)
Yukichi Deguchi
Senior Vice President
(Member of the Board and Member
of the Executive Committee)
Akira Umeda
Senior Vice President
(Member of the Board and Member
of the Executive Committee)
Shogo Masuda
Senior Vice President
(Member of the Board and Member
of the Executive Committee)
Mitsuo Oya
52
Senior Vice President
(Member of the Board)
Akio Sato
Senior Vice President
(Member of the Board)
Hiroshi Otani
Senior Vice President
(Member of the Board)
Satoru Hagiwara
Senior Vice President
(Member of the Board)
Toru Fukasawa
Senior Vice President
(Member of the Board)
Yasuo Suga
Senior Vice President
(Member of the Board)
Hirofumi Kobayashi
Senior Vice President
(Member of the Board)
Kazuhiko Shuto
Senior Vice President
(Member of the Board)
Tetsuya Tsunekawa
Vice President
(Member of the Board)
Satoru Nishino
Vice President
(Member of the Board)
Yoshiyuki Tanaka
Vice President
(Member of the Board)
Takashi Fujimoto
Vice President
(Member of the Board)
Yuji Fukuda
Vice President
(Member of the Board)
Shigeki Taniguchi
Vice President
(Member of the Board)
Toshiyuki Kondo
Vice President
(Member of the Board)
Kenichiro Miki
Vice President
(Member of the Board)
Kunio Ito*1
Vice President
(Member of the Board)
Ryoji Noyori*1
Corporate Auditor
Motoyuki Yagita
Corporate Auditor
Shoshiro Taneichi
Corporate Auditor
Toshio Nagai*2
Corporate Auditor
Kazuya Jono*2
*1 Kunio Ito and Ryoji Noyori are outside directors.
*2 Toshio Nagai and Kazuya Jono are outside corporate auditors.
Toray Industries, Inc.Annual Report 2016 Organization
(As of July 1, 2016)
Board of Directors
Corporate Strategic Planning Division
President & Executive Vice President
Personnel & Industrial Relations Division
General Administration & Legal Division
Executive Committee &
Board of Senior Vice Presidents
Board of Corporate Auditors
Corporate Auditors
Finance & Controller’s Division
Investor Relations Dept.
Corporate Communications Dept.
Auditing Dept.
Intellectual Property Division
Information Systems Division
Purchasing & Logistics Division
International Division
Advertising Dept.
Corporate Marketing Planning Dept.
Automotive Material Strategic Planning Dept.
Global Environment Business Strategic Planning Dept.
Life Innovation Business Strategic Planning Dept.
53
Branch
Affiliated Companies Division
Fibers & Textiles Division
Resins & Chemicals Division
Films Division
Torayca & Advanced Composites Division
Electronic & Information Materials Division
Pharmaceuticals & Medical Products Division
Water Treatment & Environment Division
Product Safety & Quality Assurance Planning Dept.
Technology Center
Manufacturing Division
Engineering Division
Research & Development Division
Toray Industries, Inc.Annual Report 2016 Toray Group Worldwide Network
(As of March 31, 2016)
Toray Group operates businesses in 26 countries
and regions including Japan.
Consolidated subsidiaries
Subsidiaries accounted for by equity method
Total subsidiaries
Affiliates accounted for by equity method
Companies subject to consolidation
Japan Overseas Total
60
26
86
14
100
98
35
133
21
154
158
61
219
35
254
EUROPE
United Kingdom
Consolidated Subsidiaries
l Toray Textiles Europe Ltd. (TTEL)
n Toray International U.K. Ltd. (TIUK)
France
Consolidated Subsidiaries
n l Toray Films Europe S.A.S. (TFE)
n Toray Carbon Fibers Europe S.A. (CFE)
Switzerland
Subsidiary Accounted for by Equity Method
l Toray Membrane Europe AG (TMEu)
Italy
Consolidated Subsidiary
l Alcantara S.p.A.
Subsidiaries Accounted for by Equity Method
n Toray International Italy S.r.l. (TIIT)
n Composite Materials (Italy) S.r.l. (CIT)
n Delta-Tech S.p.A (DELTA)
Czech Republic
Consolidated Subsidiary
l Toray Textiles Central Europe s.r.o. (TTCE)
54
Germany
Consolidated Subsidiaries
n Euro Advanced Carbon Fiber Composites
GmbH (EACC)
n Toray International Europe GmbH (TIEU)
Others
ASIA
China
Consolidated Subsidiaries
n Toray Industries (China) Co., Ltd. (TCH)
l Toray Fibers (Nantong) Co., Ltd. (TFNL)
l Toray Sakai Weaving & Dyeing (Nantong)
Co., Ltd. (TSD)
l Toray Polytech (Nantong) Co., Ltd. (TPN)
l Toray Jifa (Qingdao) Textile Co., Ltd. (TJQ)
n l Toray Plastics (China) Co., Ltd. (TPCH)
n l Toray Plastics (Shenzhen) Ltd. (TPSZ)
n l Toray Plastics (Chengdu) Co., Ltd. (TPCD)
n l Toray Plastics Precision (Hong Kong) Ltd.
(TPPH)
n l Toray Plastics Precision (Zhongshan) Ltd.
(TPPZ)
n Toray Industries (H.K.) Ltd. (THK)
n Toray International (China) Co., Ltd. (TICH)
n Toray Film Products (Hong Kong) Ltd. (TFH)
n Toray Film Products (Zhongshan) Ltd. (TFZ)
l Toray BlueStar Membrane Co., Ltd. (TBMC)
n Toray Medical (Qingdao) Co., Ltd. (TMQ)
Others
Affiliate Accounted for by Equity Method
n Yihua Toray Polyester Film Co., Ltd. (YTP)
Taiwan
Consolidated Subsidiary
n Toray Advanced Film Kaohsiung Co., Ltd.
(TAFK)
Subsidiaries Accounted for by Equity Method
n Toray International Taipei Inc. (TITP)
Others
Republic of Korea
Consolidated Subsidiaries
l n l Toray Advanced Materials Korea Inc. (TAK)
l STEMCO, Ltd. (STEMCO)
l n l Toray Chemical Korea Inc. (TCK)
Affiliates Accounted for by Equity Method
l STECO, Ltd. (STECO)
Others
Malaysia
Consolidated Subsidiaries
l Penfabric Sdn. Berhad (PAB)
l n l Penfibre Sdn. Berhad (PFR)
n l Toray Plastics (Malaysia) Sdn. Berhad (TPM)
Others
Subsidiary Accounted for by Equity Method
n Toray Industries (Malaysia) Sdn. Berhad
(TML)
Affiliate Accounted for by Equity Method
n Toray BASF PBT Resin Sdn. Berhad (TBPR)
Singapore
Consolidated Subsidiary
n Toray International Singapore Pte. Ltd. (TISP)
Japan
Consolidated Subsidiaries
l n Ichimura Sangyo, Co., Ltd.
l n l Toray Fine Chemicals Co., Ltd.
n l Toyo Plastic Seiko Co., Ltd.
n l Toray Advanced Film Co., Ltd.
l Toray KP Films Inc.
l Toray Battery Separator Film Co., Ltd.
n Soda Aromatic Co., Ltd.
l l Toray Engineering Co., Ltd.
l Toray Construction Co., Ltd.
l Suido Kiko Kaisha, Ltd.
n Toray Medical Co., Ltd.
n Toray Research Center Inc.
n Toray International, Inc.
n Chori Co., Ltd.
Others
Subsidiaries Accounted for by Equity Method
n Toray Carbon Magic Co., Ltd.
n Toyo Business Support Inc.
Others
Affiliates Accounted for by Equity Method
l n l Du Pont-Toray Co., Ltd.
l Toray Opelontex Co., Ltd.
n l Dow Corning Toray Co., Ltd.
n Sanyo Chemical Industries, Ltd.
Others
Indonesia
Consolidated Subsidiaries
l P.T. Acryl Textile Mills (ACTEM)
l P.T. Century Textile Industry Tbk (CENTEX)
l P.T. Easterntex (ETX)
l P.T. Indonesia Synthetic Textile Mills (ISTEM)
l P.T. Indonesia Toray Synthetics (ITS)
l P.T. Toray Polytech Jakarta (TPJ)
Subsidiaries Accounted for by Equity Method
n P.T. Toray Industries Indonesia (TIN)
Others
Affiliates Accounted for by Equity Method
n P.T. Petnesia Resindo (PNR)
Others
Thailand
Consolidated Subsidiaries
l Luckytex (Thailand) Public Co., Ltd. (LTX)
l Thai Toray Textile Mills Public Co., Ltd. (TTTM)
l n l Thai Toray Synthetics Co., Ltd. (TTS)
n Carbon Magic (Thailand) Co., Ltd. (CMTH)
Subsidiary Accounted for by Equity Method
n Toray Industries (Thailand) Co., Ltd. (TTH)
Affiliate Accounted for by Equity Method
n Thai PET Resin Co., Ltd. (TPRC)
NORTH AMERICA
U.S.A.
Consolidated Subsidiaries
l Toray Fluorofibers (America), Inc. (TFA)
l n Toray International America Inc. (TIAM)
n Toray Plastics (America), Inc. (TPA)
n Toray Resin Co. (TREC)
n Toray Carbon Fibers America, Inc. (CFA)
n Toray Composites (America), Inc. (TCA)
n Zoltek Companies, Inc. (Zoltek)
l Toray Membrane USA, Inc. (TMUS)
Others
Mexico
Subsidiary Accounted for by Equity Method
n Toray Resin Mexico, S.A. de C.V. (TRMX)
n Regional Supervisory Organization
l Fibers & Textiles
n Plastics & Chemicals
l IT-related Products
n Carbon Fiber Composite Materials
l Environment & Engineering
n Life Science & Other Businesses
n Trading
Major Offices in Japan
Overseas Offices and Branches
Osaka Head Office
Nakanoshima Mitsui Building,
3-3, Nakanoshima 3-chome,
Kita-ku, Osaka 530-8222,
Japan
Telephone: 81 (6) 6445-4101
Facsimile: 81 (6) 7688-4001
New York
Toray Industries (America), Inc.
(TAM)
9th Fl., 461 Fifth Ave., New York,
NY 10017, U.S.A.
Telephone: 1 (212) 697-8150
Facsimile: 1 (212) 972-4279
Germany
Toray Industries, Inc., Europe
Office (TEU)
Hugenottenallee 175, 63263
Neu-Isenburg, Germany
Telephone: (49) 6102-7999-1000
Facsimile: (49) 6102-7999-1008
Beijing
Toray Industries, Inc., Beijing
Office
Beijing Fortune Bldg., No. 702, 5,
Dong San Huan Bei-Lu, Chao Yang
District, Beijing 100004, China
Telephone: 86 (10) 6590-8961—3
Facsimile: 86 (10) 6590-8964
Seoul
Toray Industries, Inc., Seoul Office
36F. FKI Tower, 24, Yeoui-daero,
Yeongdeungpo-gu, Seoul, 150-881 Korea
Telephone: 82 (2) 707-0381—2
Facsimile: 82 (2) 707-0067
India
Toray Industries (India) Private Limited
(TID)
Unit No. 504, 5th Floor, Vatika City Point,
MG Road Gurgaon, Haryana
122002, India
Telephone: 91 (12) 4387-7900
Facsimile: 91 (12) 4387-7901
Brazil
Toray do Brasil Ltda. (TBL)
Av. Paulista, 1048-Conj 71 Bela Vista Sao
Paulo - SP 01310-100, Brasil
Telephone/Facsimile: 55 (11) 4314-7792
Toray Industries, Inc.Annual Report 2016
FINANCIAL SECTION
55
Contents
58 Six-Year Summary of Selected Financial Data
59 Management’s Discussion and Analysis
64 Consolidated Balance Sheets
66 Consolidated Statements of Income
66 Consolidated Statements of Comprehensive Income
67 Consolidated Statements of Changes in Net Assets
68 Consolidated Statements of Cash Flows
69 Notes to Consolidated Financial Statements
97 Independent Auditor’s Report
Toray Industries, Inc.Annual Report 2016 Six-Year Summary of Selected Financial Data
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31
Net sales
Fibers & Textiles
Millions of yen
2016
2015
2014
2013*1
2012
2011
¥ 2,104,430 ¥ 2,010,734
¥ 1,837,778
¥ 1,592,279 ¥ 1,588,604 ¥ 1,539,693
892,039
856,676
755,474
632,150
638,375
584,115
Plastics & Chemicals
521,238
496,370
470,542
395,835
397,815
382,299
IT-related Products
251,072
247,975
245,741
237,593
243,404
262,027
Carbon Fiber Composite Materials
186,196
158,365
113,342
77,620
69,914
67,018
Environment & Engineering
183,324
179,988
180,197
178,355
170,247
178,183
Life Science
Others
55,841
57,039
58,205
56,599
55,554
52,430
14,720
14,321
14,277
14,127
13,295
13,621
Operating income
154,480
123,481
105,253
83,436
107,721
100,087
Income before income taxes and
non-controlling interests*2
Net income attributable to
owners of parent*2
Net cash provided by
operating activities
137,808
114,469
97,760
77,828
101,091
82,893
90,132
71,021
59,608
48,477
64,218
57,925
196,142
141,282
161,455
100,815
104,410
129,214
Depreciation and amortization
91,168
81,480
78,743
67,588
67,443
70,479
Capital expenditures
136,556
124,929
118,207
99,135
98,384
55,942
Total assets
2,278,386
2,357,925
2,119,683
1,731,933 1,581,501 1,567,470
Property, plant and equipment, net
830,612
855,593
781,235
627,240
561,923
531,595
Interest-bearing liabilities
704,253
700,258
654,163
532,002
481,906
493,509
Net assets
1,024,909 1,080,757
944,625
778,626
674,149
640,970
Yen
56
Per share of common stock:
Net income attributable to
owners of parent:
Basic
Diluted
Cash dividends
Net assets
Ratios:
¥
56.38
¥
44.33
¥
36.59
¥
29.75 ¥
39.41 ¥
56.31
44.28
35.70
28.90
37.46
13.00
11.00
10.00
10.00
10.00
36.41
34.43
7.50
591.50
616.70
527.32
444.45
384.90
363.90
Operating income to net sales
7.34%
6.14%
5.73%
5.24%
6.78%
6.50%
Net income attributable to
owners of parent to net sales
Equity ratio
Return on equity
4.28
3.53
3.24
3.04
4.04
41.5
41.8
40.5
41.8
9.3
7.7
7.5
7.2
39.7
10.5
0.77
Debt/equity ratio (times)
0.74
0.71
0.76
0.73
Yen
Common stock price range:
High
Low
¥
1,146.0 ¥
1,057.5 ¥
786 ¥
654 ¥
631 ¥
871.7
626
584
421
511
3.76
37.8
10.9
0.83
643
420
Number of employees
45,839
45,789
45,881
42,584
40,227
38,740
*1 Effective from the year ended March 31, 2014, certain overseas subsidiaries applied IAS 19 “Employee Benefits” (revised on June 16, 2011). As this change in
accounting policy is applied retrospectively, the related financial data for 2013 reflect the retrospective application.
*2 Effective from the year ended March 31, 2016, “Revised Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (ASBJ)
Statement No.21, September 13, 2013) has been applied. Accordingly, the titles “Income before income taxes and minority interests” and “Net income” have
been changed to “Income before income taxes and non-controlling interests” and “Net income attributable to owners of parent,” respectively.
Toray Industries, Inc.Annual Report 2016
Management’s Discussion and Analysis
OVERVIEW
INCOME ANALYSIS
During the period covered by year ended March 31, 2016 (fis-
cal 2015), while the Chinese economy continued to slow down
gradually and economies of many other emerging countries
also showed signs of weakness, the U.S. economy maintained
its recovery and the European economy also picked up steadily.
The Japanese economy continued on its modest recovery track
on the back of improving corporate earnings as well as employ-
ment and income situation, despite some signs of sluggish-
ness in production and exports.
Under such circumstances, Toray Group, based on the
medium-term management program “Project AP-G 2016” that
spans over three years from fiscal year 2014 to 2016, has been
implementing the growth strategy with focus on taking advan-
tage of growth business fields and business opportunities and
pursuing business expansion in growth countries and regions
and further bolstering its total cost competitiveness in accor-
dance with the program.
As a result of these efforts, Toray Group posted a year-on-
year increase in both revenues and earnings. Consolidated net
sales, operating income and net income attributable to owners
of parent were the highest ever.
Net Sales
Consolidated net sales in the year ended March 31, 2016
amounted to ¥2,104.4 billion, up 4.7% or ¥93.7 billion from the
previous fiscal year. Sales increased in all business segments
but Life Science.
Costs and Expenses
The ratio of total costs and expenses to net sales for the year
was 92.7%, down 1.2 percentage points from the previous fis-
cal year.
Consolidated net sales increased 4.7% year on year, and
cost of sales increased 3.2%. As a result, the cost of sales ratio
decreased 1.1 percentage points to 79.0%.
Selling, general and administrative expenses increased
¥11.6 billion, or 4.2%, to ¥287.4 billion. The ratio of selling, gen-
eral and administrative expenses to net sales decreased 0.1
percentage points to 13.7%.
R&D expenses decreased ¥0.7 billion, or 1.2%, to ¥58.8 billion.
57
Net Sales by Segment
Net Sales by Segment
Operating Income by Segment
Operating Income by Segment
(Billions of yen)
2,500
(Billions of yen)
2,500
2,000
2,000
2,104.4
2,104.4
2,010.7
2,010.7
1,837.8
1,837.8
1,500
1,539.7
1,500
1,588.6 1,592.3
1,539.7
1,588.6 1,592.3
(Billions of yen)
200
(Billions of yen)
200
150
150
154.5
154.5
123.5
123.5
107.7
105.3
107.7
105.3
100.1
100.1
83.4
83.4
100
100
1,000
1,000
500
500
0
0
50
50
0
0
-50
-50
Mar/ ‘11
‘12
‘13
Mar/ ‘11
‘12
‘14
‘15
‘13
‘16
‘14
‘15
‘16
Mar/ ‘11
‘12
‘13
Mar/ ‘11
‘12
‘14
‘15
‘13
‘16
‘14
‘15
‘16
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others ■ Adjustment
■ Life Science ■ Others ■ Adjustment
* Operating income by segment that is not attributable to any segment is included in “Adjustment.”
Total Assets and Net Assets
Total Assets and Net Assets
Interest-bearing Liabilities and D/E Ratio
Interest-bearing Liabilities and D/E Ratio
(Billions of yen)
2,400
(Billions of yen)
2,400
2,357.9
2.278.4
(%)
80
2,357.9
2.278.4
(%)
80
2,119.7
2,119.7
(Billions of yen)
800
(Billions of yen)
800
(Times)
1.40
(Times)
1.40
700.3
704.3
700.3
704.3
654.2
654.2
1,800
1,800
1,731.9
1,731.9
60
60
600
600
1.10
1.10
1,567.5
1,581.5
1,567.5
1,581.5
39.7
41.8
39.7
40.5
41.8
41.8
41.5
40.5
1,200
1,200
37.8
37.8
1,080.8
1,024.9
944.6
944.6
41.8
40
1,080.8
41.5
1,024.9
40
778.6
778.6
674.1
641.0
674.1
600
641.0
600
493.5
481.9
532.0
493.5
481.9
532.0
400
400
0.83
0.77
0.83
0.73
0.77
0.76
0.73
0.71
0.74
0.76
0.71
0.74
0.80
0.80
20
20
200
200
0.50
0.50
0
0
0
0
0
0
0.20
0.20
Mar/
‘11
‘12
Mar/
‘11
‘13
‘12
‘14
‘13
‘15
‘14
‘16
‘15
‘16
Mar/
‘11
‘12
Mar/
‘13
‘11
‘14
‘12
‘15
‘13
‘16
‘14
‘15
‘16
■ Total Assets ■ Net Assets —Equity Ratio
■ Total Assets ■ Net Assets —Equity Ratio
■ Interest-bearing Liabilities
■ Interest-bearing Liabilities
—D/E Ratio
—D/E Ratio
Cash Flows
Cash Flows
(Billions of yen)
(Billions of yen)
200
161.5
161.5
141.3
196.1
141.3
196.1
129.2
150
104.4
100
78.5
129.2
100.8
78.5
104.4
100.8
0.6
41.7
0.6
41.7
-6.7
0.4
-6.7
-50.7
-53.4
-53.4
-104.0
-107.5
-104.0
-107.5
-140.7
-154.4
-140.7
-154.4
-214.8
-214.8
200
150
100
50
0
-50
-100
-150
-200
-250
50
0
0.4
-50
-50.7
-100
-150
-200
-250
Mar/
‘11
‘12
Mar/
‘11
‘13
‘12
‘14
‘13
‘15
‘14
‘16
‘15
‘16
■ Cash Flows from Operating Activities
■ Cash Flows from Operating Activities
■ Cash Flows from Investing Activities
■ Cash Flows from Investing Activities
—Free Cash Flows
—Free Cash Flows
Toray Industries, Inc.Annual Report 2016
58
Operating Income and Net Income
Consolidated operating income increased ¥31.0 billion or
25.1% from the previous fiscal year, to ¥154.5 billion, and
the ratio of operating income to net sales rose 1.2 percent-
age points to 7.3%. Operating income rose in all business seg-
ments but Life Science.
In net other income (expenses), Toray Group reported
¥16.7 billion in expenses, a ¥7.7 billion year-on-year increase.
Interest and dividend income increased ¥0.9 billion over the
previous fiscal year to ¥5.0 billion, while interest expense
decreased ¥1.0 billion to ¥5.4 billion. As a result, net financial
expenses decreased ¥1.9 billion to ¥0.3 billion. Equity in earn-
ings of unconsolidated subsidiaries and affiliated companies
decreased ¥6.8 billion to ¥5.0 billion. Loss on impairment of
fixed assets increased ¥1.1 billion year on year to ¥9.1 billion.
Net loss on sales and disposal of property, plant and equip-
ment, decreased ¥0.6 billion to ¥5.1 billion. Gain on sales and
loss on write-down of investment securities, net, increased
¥1.8 billion to ¥2.3 billion.
As a result of the above, income before income taxes and
non-controlling interests increased ¥23.3 billion to ¥137.8 bil-
lion. After deductions for income taxes and non-controlling
interests in earnings of consolidated subsidiaries, net income
attributable to owners of parent amounted to ¥90.1 billion, up
¥19.1 billion from the previous fiscal year.
Net income per share was ¥56.38, an increase of ¥12.05.
The Company declared a year-end cash dividend of ¥7.00 per
share in light of the profit conditions for the year under review
and the profit outlook for the next fiscal term. Added to the
interim cash dividend, this brought the total annual dividend to
¥13.00 per share.
Business Performance by Segment
Fibers & Textiles
In Japan, demand for apparel applications remained weak and
sales for industrial applications were affected by inventory
adjustment at some customers for automotive applications.
Against this background, Toray Group not only strived to expand
sales on the whole but also worked to improve profitability by
upgrading the business primarily through promotion of a busi-
ness format that integrates fibers to textiles to final products.
Overseas, despite being affected by a slowdown in demand
in Europe and sluggish domestic demand in China, textile sub-
sidiaries in China and Southeast Asia pursued sales expansion
and a shift towards high value-added products. In addition, ship-
ment for automotive applications such as airbag fabric and inte-
rior materials was strong, and demand for hygiene products in
Southeast Asia and India expanded.
As a result, overall sales of Fibers & Textiles segment in the
fiscal year ended March 31, 2016 increased 4.1% to ¥892.0 bil-
lion from the previous year and operating income rose 23.9%
to ¥68.9 billion.
Plastics & Chemicals
In the resin business, while shipment of automotive application
products was affected in Japan by the decline in automobile
production, other applications performed strongly in gen-
eral. Overseas, shipment at subsidiaries in the U.S. expanded
for automotive applications and shipment of ABS resin at a
Malaysian subsidiary remained strong.
In the film business, the products for packaging applications
performed strongly both in Japan and abroad. Toray Group,
despite many applications being affected by price competition,
strived to improve the profitability of the business by empha-
sizing sales expansion of high value-added products and cost
reduction.
As a result, overall sales of Plastics & Chemicals segment
increased 5.0% to ¥521.2 billion from the previous year and
operating income rose 23.1% to ¥29.4 billion.
IT-related Products
In the IT-related Products segment, regarding large LCD panel-
related materials, the trend shifted to larger displays and
demand for 4K TV expanded, but related materials such as
films and processed film products were affected by produc-
tion adjustment at customers given slowing demand in China
and other emerging countries. Smartphone- and tablet termi-
nal-related materials performed strongly, as shipment of high
performance electric circuit materials at a subsidiary in Republic
of Korea expanded. A Japanese subsidiary expanded sales of
LCD color filter manufacturing equipment, etc. In the mean-
time, all materials continued to be affected by price compe-
tition and Toray Group worked to maintain profitability of the
business through measures such as cost reduction.
As a result, overall sales of IT-related Products segment
increased 1.2% to ¥251.1 billion from the previous year and
operating income rose 6.8% to ¥26.2 billion.
Carbon Fiber Composite Materials
In the Carbon Fiber Composite Materials segment, shipment
of carbon fibers and intermediate products (prepreg) increased,
as demand for aircrafts as well as that in the environment and
energy fields, including wind turbine applications, expanded.
The new facilities that started production in the latter half of
2014 and in the first half of 2015 contributed to production
increase and sales expansion, and the shipment of products for
fuel cell vehicles started in earnest.
As a result, overall sales of Carbon Fiber Composite Materials
segment increased 17.6% to ¥186.2 billion from the previous
year and operating income rose 37.7% to ¥36.1 billion.
Environment & Engineering
In the water treatment business, profitability of exports of
products including reverse osmosis membranes from Japan
improved thanks to the progress made in cost reduction and
the weaker yen. Subsidiaries in the U.S., China and Republic of
Toray Industries, Inc.Annual Report 2016
Korea also performed strongly.
As for domestic subsidiaries in the segment, the number of
plant construction projects declined at an engineering subsidiary.
As a result, overall sales of Environment & Engineering seg-
ment increased 1.9% to ¥183.3 billion from the previous year
and operating income rose 19.5% to ¥9.6 billion.
FINANCIAL POSITION
Analysis of Assets, Liabilities and Net Assets
As of March 31, 2016, Toray Group’s total assets stood at
¥2,278.4 billion, down ¥79.5 billion from the end of the pre-
vious fiscal year, as property, plant and equipment and invest-
ment securities decreased.
Net Sales by Segment
(Billions of yen)
2,500
Life Science
Net Sales by Segment
In the pharmaceutical business, shipment of natural-type inter-
(Billions of yen)
feron beta preparation FERON® and orally active prostacyclin
2,500
derivative DORNER® remained sluggish due to the impact of
alternative medicine and generic drugs. License revenue also
decreased from the previous year. On the other hand, sales vol-
2,000
ume of pruritus treatment REMITCH®* increased, as the prod-
uct received approval for the additional indication of treating
1,539.7
pruritus in chronic liver disease patients.
1,500
1,588.6 1,592.3
1,539.7
1,588.6 1,592.3
2,104.4
2,104.4
2,010.7
1,837.8
2,010.7
1,837.8
The medical devices business performed strongly, as shipment
of dialyzers grew strongly and profitability of exports improved.
As a result, overall sales of Life Science segment declined
1,000
2.1% to ¥55.8 billion from the previous year and operating
income fell 24.7% to ¥3.1 billion.
500
*REMITCH® is a registered trademark of Torii Pharmaceutical Co., Ltd.
2,000
1,500
1,000
500
0
0
‘12
Mar/ ‘11
‘13
Mar/ ‘11
Others
Net sales increased 2.8% to ¥14.7 billion from the previous
year and operating income increased 3.2% to ¥2.0 billion.
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others
‘12
‘14
‘15
‘13
‘16
‘14
‘15
‘16
(Billions of yen)
200
Operating Income by Segment
Total liabilities fell ¥23.7 billion from the end of the previous
Operating Income by Segment
fiscal year to ¥1,253.5 billion, primarily due to declines in notes
(Billions of yen)
and accounts payable and deferred tax liabilities.
200
Net assets declined by ¥55.8 billion compared with the end
of the previous fiscal year to ¥1,024.9 billion, reflecting fluctua-
123.5
tion in foreign currency translation adjustment. Net assets less
150
non-controlling interests and stock acquisition rights stood at
¥945.6 billion. The equity ratio at the end of the fiscal year
came to 41.5%, a 0.3 percentage-point decrease compared
100
with the level at the end of the previous fiscal year.
100.1
83.4
105.3
107.7
154.5
105.3
123.5
154.5
100.1
107.7
100
150
83.4
CASH FLOWS
50
50
0
0
In the year ended March 31, 2016, net cash provided by oper-
ating activities exceeded net cash used in investing activities
by ¥41.7 billion. On the other hand, net cash used in financing
activities was ¥77.6 billion. Including the effect of change in
accounting period of consolidated subsidiaries and fluctuations
‘15
‘13
in foreign currency exchange rates, cash and cash equivalents
at fiscal year-end stood at ¥109.8 billion, down ¥2.7 billion or
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
2.4% from the end of the previous fiscal year.
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Carbon Fiber Composite Materials ■ Environment & Engineering
■ Life Science ■ Others ■ Adjustment
■ Life Science ■ Others ■ Adjustment
‘13
Mar/ ‘11
Mar/ ‘11
‘12
‘14
‘16
‘14
‘16
‘15
-50
‘12
-50
59
Total Assets and Net Assets
Total Assets and Net Assets
Interest-bearing Liabilities and D/E Ratio
Interest-bearing Liabilities and D/E Ratio
(Billions of yen)
2,400
(Billions of yen)
2,400
2,357.9
2.278.4
(%)
80
2,357.9
2.278.4
(%)
80
2,119.7
2,119.7
(Billions of yen)
800
(Billions of yen)
800
(Times)
1.40
(Times)
1.40
700.3
704.3
700.3
704.3
654.2
654.2
1,800
1,800
1,731.9
1,731.9
60
60
600
600
1.10
1.10
1,567.5
1,581.5
1,567.5
1,581.5
493.5
481.9
532.0
493.5
481.9
532.0
39.7
41.8
39.7
40.5
41.8
41.8
41.5
40.5
1,200
1,200
37.8
37.8
1,080.8
1,024.9
944.6
944.6
778.6
778.6
674.1
641.0
674.1
600
641.0
600
41.8
40
1,080.8
41.5
1,024.9
40
400
400
0.83
0.77
0.83
0.73
0.77
0.76
0.73
0.71
0.74
0.76
0.71
0.74
0.80
0.80
20
20
200
200
0.50
0.50
0
0
0
0
Mar/
‘11
‘12
Mar/
‘11
‘13
‘12
‘14
‘13
‘15
‘14
‘16
‘15
‘16
0
0
Mar/
‘11
‘12
Mar/
‘13
‘11
‘14
‘12
‘13
‘15
‘16
‘14
‘15
‘16
0.20
0.20
■ Total Assets ■ Net Assets —Equity Ratio
■ Total Assets ■ Net Assets —Equity Ratio
■ Interest-bearing Liabilities
—D/E Ratio
■ Interest-bearing Liabilities
—D/E Ratio
* Effective from the year ended March 31, 2014, certain overseas subsidiar-
ies applied IAS 19 “Employee Benefits” (revised on June 16, 2011). As this
change in accounting policy is applied retrospectively, the related financial
data for 2013 reflect the retrospective application.
Cash Flows
Cash Flows
(Billions of yen)
200
(Billions of yen)
200
161.5
161.5
141.3
196.1
141.3
196.1
104.4
100.8
0.6
41.7
0.6
41.7
150
100
50
0
-50
-100
-150
-200
-250
129.2
150
104.4
100
78.5
129.2
100.8
78.5
50
0
0.4
-50
-50.7
-100
-150
-200
-250
-6.7
0.4
-6.7
-50.7
-53.4
-53.4
-104.0
-107.5
-104.0
-107.5
-140.7
-154.4
-140.7
-154.4
-214.8
-214.8
Mar/
‘11
‘12
Mar/
‘11
‘13
‘12
‘14
‘13
‘15
‘14
‘16
‘15
‘16
■ Cash Flows from Operating Activities
■ Cash Flows from Operating Activities
■ Cash Flows from Investing Activities
■ Cash Flows from Investing Activities
—Free Cash Flows
—Free Cash Flows
Toray Industries, Inc.Annual Report 2016
Net Sales by Segment
(Billions of yen)
2,500
Operating Income by Segment
(Billions of yen)
200
2,104.4
2,010.7
1,837.8
1,588.6 1,592.3
1,539.7
2,000
1,500
1,000
500
0
‘14
‘12
‘13
‘15
Mar/ ‘11
Cash Flows from Operating Activities
‘16
Net cash provided by operating activities amounted to ¥196.1
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
billion, up ¥54.9 billion from the previous fiscal year. Major fac-
■ Carbon Fiber Composite Materials ■ Environment & Engineering
tors for provision of cash include income before income taxes
■ Life Science ■ Others
and non-controlling interests of ¥137.8 billion and depreciation
and amortization of ¥91.2 billion, while major factors for use of
cash include an increase in trade receivables of ¥20.8 billion
and income taxes paid of ¥27.6 billion.
Total Assets and Net Assets
(Billions of yen)
Cash Flows from Investing Activities
2,400
Net cash used in investing activities totaled ¥154.4 billion, up
¥13.8 billion from the previous fiscal year. Main factors include
capital expenditures of ¥129.1 billion.
1,800
(%)
80
2,119.7
2,357.9
2.278.4
1,731.9
60
1,581.5
1,567.5
41.8
39.7
Cash Flows from Financing Activities
Net cash used in financing activities was ¥77.6 billion, up ¥67.6
billion from the previous fiscal year. Main factors include a net
1,200
decrease in short-term debt of ¥42.3 billion, repayment of
944.6
long-term debt of ¥66.9 billion and payments from changes in
ownership interests in subsidiaries that do not result in change
in scope of consolidation of ¥32.0 billion, which contrasted
with proceeds from long-term debt of ¥88.2 billion.
1,080.8
1,024.9
600
674.1
778.6
641.0
40.5
41.8
41.5
37.8
20
40
0
0
Mar/
‘11
‘12
‘13
‘14
‘15
‘16
60
■ Total Assets ■ Net Assets —Equity Ratio
Cash Flows
(Billions of yen)
200
161.5
141.3
196.1
129.2
78.5
104.4
100.8
0.4
-6.7
-50.7
-53.4
-104.0
-107.5
150
100
50
0
-50
-100
-150
-200
-250
-140.7
-154.4
-214.8
Mar/
‘11
‘12
‘13
‘14
‘15
‘16
■ Cash Flows from Operating Activities
■ Cash Flows from Investing Activities
—Free Cash Flows
154.5
123.5
107.7
105.3
100.1
83.4
150
100
50
0
-50
BUSINESS RISKS
Mar/ ‘11
‘12
‘13
‘14
‘15
‘16
■ Fibers & Textiles ■ Plastics & Chemicals ■ IT-related Products
Operational and other risks faced by Toray Group that could
■ Carbon Fiber Composite Materials ■ Environment & Engineering
have a major influence on the decisions of investors are
■ Life Science ■ Others ■ Adjustment
described below. Toray Group works constantly to avoid such
potential risks, minimize their impact, and build a system to
enable swift responses and accurate information disclosure on
the occurrence of unforeseen situations. Please note that the
risks described below are those identified by Toray Group when
this annual report was produced, and do not represent all the
operational and other risks that could affect Toray Group.
Interest-bearing Liabilities and D/E Ratio
(Billions of yen)
800
(Times)
1.40
700.3
704.3
654.2
0.73
0.74
0.83
600
400
532.0
481.9
493.5
1.10
0.80
(1) Domestic and overseas demand and market trends
As a supplier of basic materials to a broad range of industries,
Toray Group is exposed to various factors that could cause a
sharp drop in demand for its products. These include changes
in both worldwide and regional supply-demand conditions,
increased use of substitute materials, and changes to the pur-
0.77
chasing policies of business partners. In addition to severe
competition with other companies, Toray Group’s various busi-
nesses also face the risk of new players entering the market.
Price fluctuations, stemming from the reduction of National
Health Insurance (NHI) drug prices and reimbursement prices,
also affect the pharmaceuticals and medical products business.
Although Toray Group takes steps to maintain its competitive
advantage, a decline in demand for, or falling prices of, such
items, or the appearance of a credit risk affecting Toray Group’s
business partners, could have a negative impact on Toray
Group’s results of operations and financial conditions.
■ Interest-bearing Liabilities
—D/E Ratio
Mar/
0.20
0.50
200
‘11
‘12
‘13
‘14
‘15
‘16
0.71
0.76
0
(2) Rising prices of fuel and raw materials
The prices of petrochemical raw materials and fuel used by
Toray Group are subject to significant fluctuations. If Toray
Group is unable to fully pass the increases in such prices on
to its product prices, or cannot raise its product prices due to
lack of progress in shifting to high-value-added products, its
results of operations and financial conditions could be nega-
tively affected.
Toray Group makes capital expenditures in a wide range of busi-
ness fields. Its other activities include formation of various joint
ventures or strategic alliances with third parties, as well as busi-
ness acquisitions.
When Toray Group becomes involved in capital expendi-
tures, joint ventures, alliances and acquisitions, it considers the
potential for profitability and return on investment. However,
there is not necessarily any guarantee that the outcome will be
consistent with expectations. If unforeseen market changes or
significant discrepancies between actual results and initial busi-
ness plans occur due to sudden changes in the operating envi-
ronment, there could be a loss on impairment of fixed assets
or equity in losses of unconsolidated subsidiaries and affiliated
companies. As a result, Toray Group’s results of operations and
financial conditions could be negatively affected.
0.6
41.7
(3) Capital expenditures, joint ventures,
alliances and acquisitions
Toray Industries, Inc.Annual Report 2016
(9) Laws and regulations, taxes, competition policies and
internal controls
Various laws and regulations apply in the countries and regions
where Toray Group conducts its business. These laws and reg-
ulations include regulations related to the environment, com-
mercial trading, labor, intellectual property, taxation and foreign
exchange, investment approval protocols and import/export
controls, and policies on competition based on antitrust laws.
Through the establishment and maintenance of internal control
systems, Toray Group endeavors to comply with all such laws
and regulations. However, changes to such laws and regula-
tions, including the introduction of new environmental regula-
tions and taxes, as well as changes to the corporate income tax
rate could affect Toray Group’s results of operations and finan-
cial conditions. Also, if Toray Group is judged as having violated
such laws and regulations, is subject to government sanctions
initiated by a fair trade commission, receives a notice of correc-
tion from tax authorities, has an employee who engages in illicit
behavior, or is unable to uphold internal controls pertaining to
financial statements, its results of operations and financial con-
ditions could be negatively affected.
(10) Natural disasters and accidents
Toray Group places top priority on safety, accident prevention,
and environmental preservation. To minimize losses caused
by the suspension of production, Toray Group conducts regu-
lar accident prevention inspections, maintenance of its manu-
facturing facilities, and safety activities. However, the advent
of a major natural disaster or unprecedented accident could
cause damage to Toray Group’s manufacturing facilities, or
could cause inadequate supply of raw materials, which could
have a negative impact on its results of operations and finan-
cial conditions.
(11) Information security risk
The Toray Group’s information systems and networks are fun-
damentally essential elements in the execution of the Group’s
business operations and every security precaution is taken in
their formulation and operation. Unauthorized access, data
alteration, theft or deletion, an interruption of system opera-
tions that causes a work stoppage or leads to a lost of trust
in the Group, or a leak of confidential information outside the
Company, or other such incident could negatively impact the
Toray Group’s earnings and financial conditions.
61
(4) Foreign currency, interest rate and
securities market fluctuations
Foreign currency exchange rate fluctuations affect Toray
Group’s consolidated financial statements when the financial
statements of the overseas operations presented in local cur-
rencies are translated into yen. Toray Group takes measures,
such as entering forward exchange contracts, to alleviate risks
associated with transactions denominated in foreign curren-
cies. However, unforeseen exchange rate fluctuations could
have an impact on Toray Group’s results of operations and
financial conditions.
Moreover, rapid and unforeseen changes in interest rates
and other aspects of financial market turmoils, as well as
changes in the value of securities and pension assets held by
Toray Group, may have an impact on Toray Group’s results of
operations and financial conditions.
(5) Changes in assumptions on which forecasts are
based that might affect employee retirement benefit
obligations and deferred tax assets
Toray’s consolidated financial statements contain employee
retirement benefit obligations based on future pension pay-
ments calculated in accordance with certain criteria, as well
as deferred tax assets stated according to likely tax refunds
based on taxable income estimates for the future fiscal years.
However, if changes in the criteria used to calculate pension
payments were to occur, or if fluctuations arose in the esti-
mates of future taxable income, Toray Group’s results of opera-
tions and financial conditions could be affected.
(6) Overseas operations
Toray Group is developing a broad geographical presence,
with operations in various countries of Asia, Europe, and the
Americas. Some of the major potential risks associated with
various regions are summarized below. If such risks were to
become reality, Toray Group’s results of operations and finan-
cial conditions could be negatively affected.
— Unforeseen introduction, changes or abolition of laws and
regulations such as changes in taxation systems
— Unforeseen economic or political events
— Social upheaval, including acts of terror or war
(7) Product liability
Toray Group strives to supply the world’s best-in-class product
quality. However, it cannot always guarantee against a major
unforeseen quality problem. If quality-related serious situations
were to occur, Toray Group’s results of operations and financial
conditions could be negatively affected.
(8) Lawsuits
In the course of conducting its wide range of business activi-
ties, Toray Group faces the risk of being targeted by legal action
pertaining to various matters such as intellectual property, prod-
uct liability, environment, and labor issues. If Toray Group were
subject to a major lawsuit, its results of operations and financial
conditions could be negatively affected.
Toray Industries, Inc.Annual Report 2016
Consolidated Balance Sheets
Toray Industries, Inc. and Consolidated Subsidiaries
March 31, 2016 and 2015
Assets
Current assets:
Cash (Note 5)
Time deposits (Notes 4 and 5)
Trade receivables (Notes 5 and 7):
Notes receivable
Accounts receivable
Inventories (Note 3)
Deferred tax assets (Note 10)
Prepaid expenses and other current assets (Notes 5 and 6)
Allowance for doubtful accounts
Total current assets
Property, plant and equipment (Notes 4 and 13):
Land
Buildings
Machinery and equipment
Construction in progress
62
Accumulated depreciation
Property, plant and equipment, net
Intangible assets (Note 13):
Goodwill
Other
Total intangible assets
Investments and other assets:
Investments in unconsolidated subsidiaries and affiliated companies (Note 5)
Investment securities (Notes 4, 5 and 6)
Long-term loans receivable
Deferred tax assets (Note 10)
Other (Notes 4 and 8)
Allowance for doubtful accounts
Millions of yen
Thousands of
U.S. dollars (Note 2)
2016
2015
2016
¥
89,976
¥
84,402
$
796,248
30,192
31,791
267,186
35,633
366,587
394,034
24,113
70,815
26,548
378,782
391,629
31,034
75,384
(1,791)
(1,702)
315,336
3,244,133
3,487,027
213,389
626,681
(15,850)
1,009,559
1,017,868
8,934,150
76,942
78,327
680,903
584,763
585,009
5,174,894
1,915,242
1,981,679
16,949,044
97,497
68,865
862,805
2,674,444
2,713,880
23,667,646
(1,843,832) (1,858,287)
(16,317,097)
830,612
855,593
7,350,549
54,299
32,860
87,159
63,369
35,137
98,506
480,522
290,796
771,319
118,949
158,541
1,494
12,633
62,868
121,164
185,078
1,523
13,294
67,733
(3,429)
(2,834)
1,052,646
1,403,018
13,221
111,796
556,354
(30,345)
Total investments and other assets
351,056
385,958
3,106,690
Total assets
¥ 2,278,386
¥ 2,357,925
$ 20,162,708
See accompanying notes to consolidated financial statements.
Toray Industries, Inc.Annual Report 2016
Liabilities and Net Assets
Current liabilities:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2016
2015
2016
Short-term bank loans (Notes 4, 5 and 7)
¥ 135,960
¥ 142,346
$ 1,203,186
Current portion of long-term debt (Notes 4, 5 and 7)
Commercial paper (Note 5)
Trade payables (Notes 5 and 7):
Notes payable
Accounts payable
Income taxes payable (Note 10)
Accrued liabilities
Other current liabilities (Notes 4 and 10)
Total current liabilities
48,507
6,000
57,338
5,000
429,265
53,097
38,273
36,557
338,699
174,870
183,616
1,547,522
15,815
57,645
94,278
13,027
57,596
105,373
139,956
510,133
834,319
571,348
600,853
5,056,177
Long-term debt (Notes 4, 5 and 7)
510,349
490,717
4,516,363
Deferred tax liabilities (Note 10)
34,632
43,669
306,478
Net defined benefit liability (Note 8)
104,803
106,293
927,460
Customers’ guarantee deposits and other liabilities (Note 4)
32,345
35,636
286,239
Total liabilities
1,253,477
1,277,168
11,092,717
63
Commitments and contingent liabilities (Note 12)
Net assets (Note 11):
Stockholders’ equity:
Common stock:
Authorized—4,000,000,000 shares
Issued—1,631,481,403 shares
Capital surplus
Retained earnings
Treasury stock, at cost
Total stockholders’ equity
Accumulated other comprehensive income:
Net unrealized gains on securities
Net deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Stock acquisition rights (Note 9)
Non-controlling interests
Total net assets
Total liabilities and net assets
147,873
147,873
119,180
614,334
136,727
544,557
(21,163)
(21,345)
1,308,611
1,054,690
5,436,584
(187,283)
860,224
807,812
7,612,602
61,272
79,093
(490)
(387)
29,270
100,097
(4,708)
(947)
85,344
177,856
1,181
78,160
1,207
93,882
542,230
(4,336)
259,027
(41,664)
755,257
10,451
691,681
1,024,909
1,080,757
9,069,991
¥ 2,278,386
¥ 2,357,925
$ 20,162,708
Toray Industries, Inc.Annual Report 2016
Consolidated Statements of Income
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Net sales
Costs and expenses:
Millions of yen
Thousands of
U.S. dollars (Note 2)
2016
2015
2016
¥ 2,104,430
¥ 2,010,734
$ 18,623,274
Cost of sales (Notes 3, 8, 13 and 14)
1,662,556
1,611,469
14,712,885
Selling, general and administrative expenses (Notes 8, 9, 13 and 14)
287,394
275,784
2,543,310
1,949,950
1,887,253
17,256,195
154,480
123,481
1,367,080
Operating income
Other income (expenses):
Interest expense
Interest and dividend income
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Loss on sales and disposal of property, plant and equipment, net
Loss on impairment of fixed assets (Note 15)
Gain on sales and loss on write-down of investment securities, net
Other, net
(5,350)
(6,347)
5,042
5,016
(5,098)
(9,063)
2,273
(9,492)
(16,672)
4,121
11,816
(5,708)
(7,915)
446
(5,425)
(9,012)
Income before income taxes and non-controlling interests
137,808
114,469
Income taxes (Note 10):
Current
Deferred
Net income
31,435
9,191
40,626
97,182
24,945
14,792
39,737
74,732
64
Net income attributable to non-controlling interests
(7,050)
(3,711)
(47,345)
44,619
44,389
(45,115)
(80,204)
20,115
(84,000)
(147,540)
1,219,540
278,186
81,336
359,522
860,018
(62,389)
Net income attributable to owners of parent
¥
90,132
¥
71,021
$
797,628
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Net income
Other comprehensive income (Note 16)
Net unrealized (losses) gains on securities
Net deferred (losses) gains on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income of unconsolidated subsidiaries and
affiliated companies accounted for by the equity method
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.
Millions of yen
Thousands of
U.S. dollars (Note 2)
2016
2015
2016
¥ 97,182
¥ 74,732
$ 860,018
(17,868)
31,308
(100)
97
(59,118)
64,185
(3,273)
15,619
(158,124)
(885)
(523,168)
(28,965)
(3,933)
5,186
(34,805)
(84,292)
116,395
(745,947)
¥ 12,890
¥ 191,127
$ 114,071
¥ 10,881
¥ 180,678
$
96,292
2,009
10,449
17,779
Toray Industries, Inc.Annual Report 2016
Consolidated Statements of Changes in Net Assets
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Stockholders’ equity
Accumulated other comprehensive income
Millions of yen
Common
stock
Retained
earnings
¥ 147,873 ¥ 136,735 ¥ 505,834 ¥ (1,455) ¥ 788,987
Capital
surplus
Treasury
stock,
at cost
Total
stockholders’
equity
(15,989)
(15,989)
Net
unrealized
gains on
securities
¥ 49,546
Net
deferred
losses on
hedges
¥ (508)
Foreign
currency
translation
adjustments
¥ 37,664
Remeasure-
ments of
defined
benefit plans
¥ (16,688)
Total
accumulated
other compre-
hensive
income
¥ 70,014
Non-
Stock
controlling
acquisition
interests
rights
¥ 991 ¥ 84,633 ¥ 944,625
Total net
assets
(15,989)
147,873
136,735
489,845
(1,455)
772,998
49,546
(508)
37,664
(16,688)
70,014
991
84,633
928,636
(16,145)
71,021
(41)
(20,054)
165
(16,145)
71,021
(20,054)
124
—
—
33
(164)
(1)
(132)
(16,145)
71,021
(20,054)
124
—
—
(132)
(8)
—
34,814
¥ 147,873 ¥ 136,727 ¥ 544,557 ¥ (21,345) ¥ 807,812
¥ 147,873 ¥ 136,727 ¥ 544,557 ¥ (21,345) ¥ 807,812
(19,890)
54,712
29,547
121
62,433
15,741
107,842
216
9,249
117,307
29,547
¥ 79,093
¥ 79,093
121
¥ (387)
¥ (387)
62,433
¥ 100,097
¥ 100,097
15,741
¥ (947)
¥ (947)
107,842
¥ 177,856
¥ 177,856
216
152,121
9,249
¥ 1,207 ¥ 93,882 ¥ 1,080,757
¥ 1,207 ¥ 93,882 ¥ 1,080,757
147,873
136,727
544,557
(21,345)
807,812
79,093
(387)
100,097
(947)
177,856
1,207
93,882 1,080,757
—
—
(19,191)
90,132
(64)
246
(52)
(17,547)
(1,105)
52
(59)
(19,191)
90,132
(64)
194
(17,547)
(1,105)
(7)
65
(19,191)
90,132
(64)
194
(17,547)
(1,105)
(7)
—
52,412
69,777
¥ 147,873 ¥ 119,180 ¥ 614,334 ¥ (21,163) ¥ 860,224
(17,547)
182
(17,821)
(103)
(70,827)
(3,761)
(92,512)
(26)
(15,722)
(108,260)
(17,821)
¥ 61,272
(103)
¥ (490)
(70,827)
¥ 29,270
(3,761)
¥ (4,708)
(92,512)
¥ 85,344
(26)
(55,848)
(15,722)
¥ 1,181 ¥ 78,160 ¥1,024,909
Stockholders’ equity
Accumulated other comprehensive income
Thousands of U.S. dollars (Note 2)
Common
stock
Capital
surplus
Retained
earnings
Treasury
stock,
at cost
$ 1,308,611 $ 1,209,973 $ 4,819,088 $ (188,894)
Total
stockholders’
equity
$ 7,148,779
Net
unrealized
gains on
securities
$ 699,938
Net
deferred
losses on
hedges
$ (3,425)
Foreign
currency
translation
adjustments
$ 885,814
Remeasure-
ments of
defined
benefit plans
$ (8,381)
Total
accumulated
other compre-
hensive
income
$ 1,573,947
Stock
acquisition
rights
Non-
controlling
interests
Total net
assets
$ 10,681
$ 830,814 $ 9,564,221
1,308,611
1,209,973
4,819,088
(188,894)
(169,832)
797,628
(566)
2,177
(460)
(155,283)
(9,779)
(522)
460
—
7,148,779
(169,832)
797,628
(566)
1,717
(155,283)
(9,779)
(62)
699,938
(3,425)
885,814
(8,381)
1,573,947
10,681
830,814
—
9,564,221
(169,832)
797,628
(566)
1,717
(155,283)
(9,779)
(62)
— (155,283)
1,611
$ 1,308,611 $ 1,054,690 $ 5,436,584 $ (187,283)
617,496
463,823
$ 7,612,602
(157,708)
(157,708)
$ 542,230
(912)
(912)
$ (4,336)
(626,788)
(626,788)
$ 259,027
(33,283)
(33,283)
$ (41,664)
(818,690)
(818,690)
$ 755,257
(230)
(230)
$ 10,451
(958,053)
(139,133)
(139,133)
(494,230)
$ 691,681 $ 9,069,991
Balance as of April 1, 2014
Cumulative effect of changes in
accounting policies
Restated balance
Changes in:
Dividends
Net income attributable to
owners of parent
Purchase of treasury stock
Disposition of treasury stock
Change in equity attributable
to parent arising from
transaction with
non-controlling shareholders
Effect of change in accounting
period of subsidiaries and
affiliated companies
Other
Items other than
stockholders’ equity, net
Total changes
Balance as of March 31, 2015
Balance as of April 1, 2015
Cumulative effect of changes in
accounting policies
Restated balance
Changes in:
Dividends
Net income attributable to
owners of parent
Purchase of treasury stock
Disposition of treasury stock
Change in equity attributable
to parent arising from
transaction with
non-controlling shareholders
Effect of change in accounting
period of subsidiaries and
affiliated companies
Other
Items other than
stockholders’ equity, net
Total changes
Balance as of March 31, 2016
Balance as of April 1, 2015
Cumulative effect of changes in
accounting policies
Restated balance
Changes in:
Dividends
Net income attributable to
owners of parent
Purchase of treasury stock
Disposition of treasury stock
Change in equity attributable
to parent arising from
transaction with
non-controlling shareholders
Effect of change in accounting
period of subsidiaries and
affiliated companies
Other
Items other than
stockholders’ equity, net
Total changes
Balance as of March 31, 2016
See accompanying notes to consolidated financial statements.
Toray Industries, Inc.Annual Report 2016
Consolidated Statements of Cash Flows
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Cash flows from operating activities:
Income before income taxes and non-controlling interests
¥ 137,808
¥ 114,469
$ 1,219,540
Adjustments to reconcile income before income taxes and non-controlling
Millions of yen
Thousands of
U.S. dollars (Note 2)
2016
2015
2016
interests to net cash provided by operating activities:
Depreciation and amortization
Loss on impairment of fixed assets
Interest and dividend income
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Interest expense
Loss on sales and disposal of property, plant and equipment, net
Gain and loss on sales and loss on write-down of investment securities, net
Decrease in net defined benefit liability
Increase in trade receivables
Increase in inventories
Decrease in trade payables
Other, net
Subtotal
Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
66
Cash flows from investing activities:
Capital expenditures
Purchases of investment securities
Proceeds from sales of property, plant and equipment
Proceeds from sales of investment securities
Acquisition of shares of consolidated subsidiaries resulting in
change in scope of consolidation
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Net decrease in short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Cash dividends paid
Payments from changes in ownership interests in subsidiaries that do not
result in change in scope of consolidation
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
91,168
9,063
(5,042)
(5,016)
5,350
5,098
(1,998)
(2,829)
(20,775)
(15,207)
(473)
16,817
213,964
14,945
(5,212)
(27,555)
196,142
81,480
7,915
(4,121)
(11,816)
6,347
5,708
(857)
(364)
(33,861)
(5,006)
(694)
9,395
168,595
8,456
(6,277)
(29,492)
141,282
806,796
80,204
(44,619)
(44,389)
47,345
45,115
(17,681)
(25,035)
(183,850)
(134,575)
(4,186)
148,823
1,893,487
132,257
(46,124)
(243,850)
1,735,770
(129,114)
(11,308)
1,702
5,762
(126,889)
(5,893)
4,608
4,061
(1,142,602)
(100,071)
15,062
50,991
(6,226)
(702)
(55,097)
(15,230)
(154,414)
(15,847)
(140,662)
(134,779)
(1,366,496)
(42,255)
88,182
(66,894)
(66)
(20,600)
(3,707)
136,850
(104,266)
(20,058)
(17,530)
(373,938)
780,372
(591,982)
(584)
(182,301)
(32,024)
(3,948)
(77,605)
(7,860)
(43,737)
—
(283,398)
(1,287)
(9,998)
8,730
(648)
(34,938)
(686,770)
(69,558)
(387,053)
Cash and cash equivalents at beginning of year
112,489
113,137
995,478
Beginning balance of cash and cash equivalents at subsidiaries not
previously included in consolidation
57
—
504
Increase in cash and cash equivalents resulting from change in accounting
period of consolidated subsidiaries
Cash and cash equivalents at end of year
40,969
—
362,558
¥ 109,778
¥ 112,489
$ 971,487
See accompanying notes to consolidated financial statements.
Toray Industries, Inc.Annual Report 2016
Notes to Consolidated Financial Statements
Toray Industries, Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
1. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Toray
Industries, Inc. (the “Company”) and its consolidated subsid-
iaries have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Law of
Japan and its related accounting regulations, and in conformity
with accounting principles and practices generally accepted
in Japan, which are different in certain respects as to appli-
cation and disclosure requirements of International Financial
Reporting Standards.
For the preparation of consolidated financial statements, the
accounting policies and procedures applied to a parent com-
pany and its subsidiaries for similar transactions and events
under similar circumstances should be unified, in principle.
However, financial statements prepared by overseas sub-
sidiaries in accordance with International Financial Reporting
Standards or the generally accepted accounting principles in
the United States tentatively may be used for the consolidation
process. In addition, some items should be adjusted in the con-
solidation process so that net income is accurately accounted
for, unless they are not material.
Certain items presented in the original consolidated financial
statements in Japanese have been reclassified for the conve-
nience of readers outside Japan.
b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and substantially all of its subsidiaries.
Assets and liabilities of the consolidated subsidiaries are
revalued to fair market value when the Company acquires con-
trol over the subsidiaries.
Investments in unconsolidated subsidiaries and affiliated
companies are accounted for by the equity method.
All intercompany accounts and transactions have been elim-
inated in consolidation. The difference between the acquisition
cost and the underlying net assets of the subsidiaries is recog-
nized as goodwill and amortized principally over its estimated
useful life not exceeding twenty years on a straight-line method.
c) Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2016 and 2015 include
cash, short-term time deposits which may be withdrawn on
demand without diminution of principal and highly liquid invest-
ments with original maturities of three months or less.
Cash and cash equivalents consisted of:
Millions of yen
Thousands of
U.S. dollars
Cash
Time deposits
Less — Time deposits with
maturities of over 3 months
Marketable securities with
original maturities of 3
months or less
Cash and cash equivalents
2016
2015
¥ 89,976 ¥ 84,402 $ 796,248
30,192 31,791 267,186
2016
(10,390)
(7,437)
(91,947)
—
3,733
—
¥ 109,778 ¥ 112,489 $ 971,487
d) Financial Instruments
Derivatives:
All derivatives are stated at fair value, with changes in fair
value included in net income or loss for the period in which
they arise, except for derivatives that are designated as
“hedging instruments” (see Hedge Accounting below).
Securities:
Held-to-maturity debt securities that the Company and its con-
solidated subsidiaries have the intent to hold to maturity, are
stated at cost after accounting for premium or discount on
acquisition, which are amortized over the period to maturity.
Other securities for which market quotations are avail-
able are stated at fair value. Net unrealized gains or losses
on these securities are reported as a separate item in net
assets at a net-of-tax amount.
Other securities for which market quotations are unavailable
are stated at cost, except as stated in the paragraph below.
In cases where the fair value of held-to-maturity debt
securities or other securities has declined significantly and
such impairment of the value is not deemed temporary,
those securities are written down to fair value and the result-
ing losses are included in net income or loss for the period.
Hedge Accounting:
67
Gains or losses arising from changes in fair value of deriv-
atives designated as “hedging instruments” are deferred
as a separate item of net assets at a net-of-tax amount and
included in net income or loss in the same period during
which the gains and losses on the hedged items or transac-
tions are recognized.
The derivatives designated as hedging instruments by
the Company and its consolidated subsidiaries are principally
interest rate swaps and forward foreign exchange contracts.
The related hedged items are trade accounts receivable and
payable, long-term bank loans and debt securities issued by
the Company and its consolidated subsidiaries.
The Company and its consolidated subsidiaries have a policy
to utilize the above hedging instruments in order to reduce their
exposure to the risk of interest rate and foreign currency fluc-
tuations. Thus, their purchases of the hedging instruments are
limited to, at maximum, the amounts of the hedged items.
The Company and its consolidated subsidiaries evalu-
ate the effectiveness of hedging activities by reference
to the accumulated gains or losses on the hedging instru-
ments and the related hedged items from the commence-
ment of the hedges.
e) Allowance for Doubtful Accounts
In the Company and its domestic consolidated subsidiaries, an
allowance for doubtful accounts, including receivables and loans,
is determined from the amounts considered unlikely to be recov-
ered, estimated from past actual bad debt ratio records for gen-
eral receivables and from studying the probability of recovery in
individual cases where there is concern over claims.
Toray Industries, Inc.Annual Report 2016
68
f) Inventories
Inventories are stated at the lower of acquisition cost, princi-
pally determined by the moving average method, or net selling
value to reflect any decreased profitability of inventories.
g) Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation for property, plant and equipment (except leased
assets) is principally computed by the straight-line method at
rates based on estimated useful lives that are as follows:
Buildings
3–60 years
Machinery and equipment 3–15 years
Principally, a depreciation method of leased assets is iden-
tical to the method applicable to its own fixed assets. In the
Company and its domestic consolidated subsidiaries, finance
lease transactions which do not transfer ownership of the
leased assets whose lease inceptions are on or before March
31, 2008 are accounted for by a method similar to the method
applicable to ordinary operating lease transactions.
h) Income Taxes
Income taxes of the Company and its domestic consolidated
subsidiaries consist of corporate income taxes, local inhabitants
taxes and enterprise taxes. Deferred income taxes are deter-
mined using the asset and liability approach, where deferred tax
assets and liabilities are recognized for temporary differences
between the tax basis of assets and liabilities and their reported
amount in the financial statements. The Company also provides
for the anticipated tax effect of future remittances of retained
earnings from subsidiaries and affiliated companies.
Effective from the year ended March 31, 2016, the Company
and some of its domestic consolidated subsidiaries have adopted
the consolidated taxation system.
i) Consumption Taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes.
j) Retirement Benefits
The Company and its domestic consolidated subsidiaries have
an unfunded lump-sum benefit plan, a funded contributory pen-
sion plan and a defined contribution pension plan covering all
eligible employees.
Under the terms of the unfunded lump-sum benefit plan, eli-
gible employees are entitled under most circumstances, upon
mandatory retirement or earlier voluntary severance, to indem-
nities based on compensation at the time of severance and
years of service.
The funded contributory pension plan and the defined con-
tribution pension plan provide, in general, pension payments for
life commencing from age 60.
To provide for the payment of retirement benefits to employ-
ees, net defined benefit liability is recognized at an amount equal
to the expected retirement benefit obligations net of the fair
value of pension assets at the end of the period.
Past service cost is amortized as incurred using the
straight-line method over a certain period within the employ-
ees’ average remaining years of service (primarily 13 years).
Actuarial gains and losses are amortized from the following
fiscal year after recognition using the straight-line method over
a certain period within the employees’ average remaining years
of service (primarily 13 years).
Unrecognized actuarial gains and losses and unrecognized
past service cost are recognized in remeasurements of defined
benefit plans in accumulated other comprehensive income
under the net assets section, net of deferred taxes.
Allowance for retirement benefits for members of the Board
and corporate auditors (“executives”) of the Company and cer-
tain of its domestic consolidated subsidiaries is provided based
on the companies’ pertinent rules and is calculated as the esti-
mated amount which would be payable if all executives were to
retire at the balance sheet date. Any amounts payable to exec-
utives upon retirement are subject to approval at the annual
stockholders’ meeting. The amount is included in “customers’
guarantee deposits and other liabilities” on the consolidated
balance sheets.
k) Appropriation of Retained Earnings
Cash dividends are recorded in the fiscal year when the pro-
posed appropriation of retained earnings is approved by the
Board of Directors and/or stockholders.
l) Foreign Currency Transactions
All monetary assets and liabilities denominated in foreign cur-
rencies, whether long-term or short-term, are translated into
Japanese yen at the exchange rates prevailing at the balance
sheet date. Resulting gains and losses are included in net
income or loss for the period.
m) Translation of Foreign Currency Financial Statements
Translation of foreign currency financial statements of overseas
subsidiaries into Japanese yen for consolidation purposes is
made by using the current exchange rates prevailing at their
balance sheet dates, with the exception that the translation of
stockholders’ equity is made by using historical rates. Revenue
and expense accounts are principally translated at the average
exchange rates during the year. Differences in yen amounts
arising from the use of different rates are presented as “for-
eign currency translation adjustments” in net assets except for
the portion belonging to non-controlling shareholders, which is
included in “non-controlling interests” in net assets.
n) Changes in Accounting Policy
Effective from the year ended March 31, 2016, the Company
has adopted the “Revised Accounting Standard for Business
Combinations” (the Accounting Standards Board of Japan
(ASBJ) Statement No. 21, September 13, 2013, hereinafter
“Business Combinations Accounting Standard”), “Revised
Accounting Standard for Consolidated Financial Statements”
(ASBJ Statement No. 22, September 13, 2013, hereinaf-
ter “Consolidation Accounting Standard”) and “Revised
Accounting Standard
(ASBJ
Statement No. 7, September 13, 2013, hereinafter “Business
Divestitures Accounting Standard”). Accordingly, the Company
for Business Divestitures”
Toray Industries, Inc.Annual Report 2016
records differences arising from changes in its equity interest in
subsidiaries that remain under its control as capital surplus and
charges acquisition-related costs for business combinations
to expenses in the period when such costs are incurred. With
regard to any business combination made on or after April 1,
2015, any adjustment of an allocated amount of acquisition costs
arising from a determination of provisional treatment is reflected
in the consolidated financial statements for the period when the
business combination occurs. Furthermore, the Company has
changed the presentation of net income, etc. and the presenta-
tion of “minority interests” to “non-controlling interests.”
When applying the accounting standards, the Company fol-
lows the transitional treatment set forth in Section 58-2 (4) of the
Business Combinations Accounting Standard, Section 44-5 (4) of
the Consolidation Accounting Standard and Section 57-4 (4) of
the Business Divestitures Accounting Standard. The accounting
standards are applied to periods from April 1, 2015 onward.
As a result, capital surplus at the end of the year ended
March 31, 2016 decreased by ¥17,547 million ($155,283 thou-
sand). The impact on the consolidated statement of income for
the year ended March 31, 2016 was insignificant.
In the consolidated statement of cash flows for the year
ended March 31, 2016, cash flows from the acquisition or dis-
posal of the shares of subsidiaries with no changes in the scope
of consolidation were included in “Cash flows from financing
activities” and cash flows from acquisition-related costs of the
shares of subsidiaries with changes in the scope of consolida-
tion or costs related to the acquisition or disposal of the shares
of subsidiaries with no changes in the scope of consolidation
were included in “Cash flows from operating activities.”
In the consolidated statement of changes in net assets for
the year ended March 31, 2016, capital surplus at the end of
the year ended March 31, 2016 decreased by ¥17,547 million
($155,283 thousand).
Net assets per share decreased by ¥9.99 ($0.09) while the
impact on net income per share and diluted net income per
share was insignificant.
o) Standards Issued but Not Yet Adopted
Implementation Guidance on Recoverability of Deferred
Tax Assets
On March 28, 2016, the ASBJ issued “Revised Implementation
Guidance on Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26).
(1) Overview
Regarding the treatment of the recoverability of deferred tax
assets, a review was conducted following the framework of
the Japanese Institute of Certified Public Accountants Audit
Committee Report No. 66 “Audit Treatment on Determining
the Recoverability of Deferred Tax Assets,” whereby com-
panies are categorized into five categories and deferred tax
assets are calculated based on each of these categories.
(i) Treatment of companies that do not satisfy any of the cat-
egory requirements for (Category 1) through (Category 5)
(ii) Category requirements for (Category 2) and (Category 3)
(iii) Treatment related to future deductible temporary dif-
ferences which cannot be scheduled in companies that
qualify as (Category 2)
(iv) Treatment related to the reasonable estimable period
of future pre-adjusted taxable income in companies that
qualify as (Category 3)
(v) Treatment in cases that companies that satisfy the
category requirements for (Category 4) but qualify as
(Category 2) or (Category 3)
(2) Scheduled Date of Adoption
The Company expects to adopt the revised implementation
guidance from the beginning of the year ending March 31, 2017.
(3) Impact of Adopting Revised Implementation Guidance
The impact of adopting the revised implementation guid-
ance on the consolidated financial statements is currently
under evaluation.
p) Changes in Accounting Estimate
When accounting for retirement benefits, actuarial gains and
losses and past service costs were previously amortized pri-
marily over 14 years but are now amortized primarily over 13
years, effective from the year ended March 31, 2016, due to a
decrease in the employees’ average remaining years of service.
The impact of this change on the consolidated statement of
income for the year ended March 31, 2016 was insignificant.
q) Changes in Accounting Period of Consolidated
69
Subsidiaries
For consolidated subsidiaries having a year-end date of
December 31, the relevant computations in previous fis-
cal years were made on the basis of the subsidiaries‘ year-
end date, while their major transactions carried out during the
period between such date and the Company’s year-end date
were addressed with necessary adjustments for the purpose
of consolidation in preparing the consolidated financial state-
ments. From among these subsidiaries, however, effective
from the year ended March 31, 2016, Toray Advanced Materials
Korea Inc. and 33 subsidiaries have changed their year-end
date to March 31, and the relevant computations have been
made for Toray Fibers (Nantong) Co., Ltd. and 18 subsidiaries
on the basis of a provisional settlement of accounts as of the
Company’s year-end date equivalent to a regular settlement
of accounts. For consolidated subsidiaries having a year-end
date of September 30, the relevant computations in previous
fiscal years were made on the basis of a provisional settle-
ment of accounts as of December 31 equivalent to a regular
settlement of accounts, while their major transactions carried
out during the period between such date and the Company’s
year-end date were addressed with necessary adjustments
for the purpose of consolidation in preparing the consolidated
financial statements. Effective from the year ended March 31,
2016, however, Zoltek Companies, Inc. and 7 subsidiaries have
changed their year-end date to March 31.
Net income or loss of these subsidiaries during the period
between January 1, 2015 and March 31, 2015 was adjusted on
a net basis as a decrease in retained earnings in the consoli-
dated financial statements for the year ended March 31, 2016.
Toray Industries, Inc.Annual Report 2016
2. U.S. DOLLAR AMOUNTS
The Company and its domestic consolidated subsidiaries maintain
their accounting records in yen. The U.S. dollar amounts included
in the accompanying consolidated financial statements and notes
thereto represent the arithmetic results of translating yen into U.S.
dollars at the rate of ¥113 to $1.00, the approximate exchange
rate prevailing on March 31, 2016. The inclusion of such U.S. dol-
lar amounts is solely for the convenience of readers outside Japan
and is not intended to imply that yen amounts and assets and liabil-
ities that originated in yen have been or could be readily converted,
realized or settled in U.S. dollars at this or at any other rate.
3. INVENTORIES
At March 31, 2016 and 2015, inventories consisted of the following:
Merchandise and finished goods
Work in process
Raw materials and supplies
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ 229,199
¥ 220,763
$ 2,028,310
75,992
78,606
88,843
92,260
672,496
786,221
¥ 394,034
¥ 391,629
$ 3,487,027
Losses recognized and charged to cost of sales as a result of valuation at March 31, 2016 and 2015 were ¥6,443 million ($57,018
thousand) and ¥2,193 million, respectively.
4. SHORT-TERM BANK LOANS, LONG-TERM DEBT AND LEASE OBLIGATIONS
70
Short-term bank loans at March 31, 2016 and 2015 represented bank overdrafts and short-term notes. The Company is not required
to pay commitment fees on unused balances of the bank overdraft agreements.
Long-term debt and lease obligations at March 31, 2016 and 2015 were as follows:
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
Loans principally from banks and insurance companies with interest rates
primarily from 0.04% to 11.50%, maturing serially through 2026:
Unsecured
Secured
Lease obligations maturing serially through 2028:
Unsecured
Yen notes with an interest rate of 0.42% due 2018
Yen notes with an interest rate of 0.93% due 2022
Yen notes with an interest rate of 1.01% due 2023
Zero coupon convertible bonds due 2019
Zero coupon convertible bonds due 2021
Less amounts due within one year
At March 31, 2016, assets pledged as collateral were as follows:
Time deposits
Property, plant and equipment, net
Investment securities
Others
¥ 418,581
¥ 408,025
$ 3,704,257
255
—
2,257
3,437
20
20,000
20,000
50,000
50,000
562,293
49,558
4,857
30
20,000
20,000
50,000
50,000
552,912
58,608
30,416
177
176,991
176,991
442,478
442,478
4,976,044
438,566
¥ 512,735
¥ 494,304
$ 4,537,478
Millions of yen
¥ 774
7,072
799
512
Thousands of
U.S. dollars
$ 6,850
62,584
7,071
4,531
¥ 9,157
$ 81,035
Toray Industries, Inc.Annual Report 2016
The annual maturities of long-term debt and lease obligations subsequent to March 31, 2016 were as follows:
Years ending March 31:
2017
2018
2019
2020
2021
2022 and thereafter
Millions of yen
Thousands of
U.S. dollars
¥ 49,558
$ 438,566
113,013
48,914
57,803
60,642
232,363
1,000,115
432,867
511,531
536,655
2,056,310
¥ 562,293
$ 4,976,044
5. FINANCIAL INSTRUMENTS
Conditions of Financial Instruments
a) Policy in Relation to Financial Instruments
The policy of the Company and its consolidated subsidiaries is
to manage funds only by short-term deposits, etc. and to raise
funds by borrowing from banks and issuing corporate bonds.
The Company and its consolidated subsidiaries use derivatives
to hedge risks associated with foreign currency exchange rates
and fluctuations of borrowing interest rates and do not enter
into derivative transactions for speculative or trading purposes.
b) Contents and Risk of Financial Instruments and Risk
Management System
Trade receivables are operating receivables and therefore are
exposed to customer credit risk. Under its internal regulations,
the Company carefully manages the payment periods for receiv-
ables and outstanding balances of all customers and regularly
monitors the credit standing of major clients. Consolidated sub-
sidiaries also monitor and manage the credit standings of their
clients. Operating receivables and payables denominated in
foreign currencies that arise from the global business opera-
tions are also exposed to foreign currency exchange risk. The
Company and its consolidated subsidiaries hedge this risk
mainly through the use of forward exchange contracts against
positions after netting receivables and payables denominated
in the same foreign currencies. Likewise, the Company and its
consolidated subsidiaries mainly use currency swaps to hedge
the foreign currency exchange risk of bank loans denominated
in foreign currencies.
Investment securities are mostly the shares of corpora-
tions with which the Group has business relationships and are
exposed to the risk of market price fluctuations. The fair value of
the investment securities and financial positions of the issuing
entities (clients) are regularly monitored.
Trade payables are operating payables, most of which are
due and payable within one year.
Short-term bank loans and commercial paper are financing
instruments mainly for operating transactions, while long-term
bank loans and bonds (due within ten years, in principle) are
primarily for capital expenditures. Bank loans and bonds are
exposed to the risk of interest rate fluctuation. Bank loans and
bonds at floating interest rates carry the risk of higher inter-
est expenses when rates rise, while bank loans and bonds at
fixed interest rates carry the risk of higher interest expenses
when rates fall. The Company and its consolidated subsidiar-
ies use derivative transactions (interest rate swap transactions)
to minimize the risk of interest rate fluctuation, taking into con-
sideration the balance between fixed interest rates and floating
interest rates.
Hedging instruments, hedged items, the policy for uti-
lizing such hedging instruments and the method for evalu-
ating the effectiveness of hedging activities are described
in Note 1. SIGNIFICANT ACCOUNTING POLICIES d)
Financial Instruments, Hedge Accounting in the Notes to the
Consolidated Financial Statements.
Derivative transactions are executed and managed in accor-
dance with the internal regulations prescribing the authorization
for transactions. To mitigate credit risk, the Company and its
consolidated subsidiaries carry out derivative transactions only
with highly rated financial institutions.
c) Supplemental Explanation on Fair Value of Financial
Instruments
The fair value of financial instruments is based on market
prices, or reasonable estimate of fair value for instruments for
which market prices are not available. Estimates of fair value
are subject to fluctuation because they employ various factors
and assumptions. In addition, the contract amount of deriva-
tives in Note 7. DERIVATIVES in the Notes to the Consolidated
Financial Statements is not an indicator of market risk associ-
ated with derivative transactions.
71
Toray Industries, Inc.Annual Report 2016
Fair Value of Financial Instruments
Carrying value, fair value and unrealized gain (loss) as of March 31, 2016 and 2015 were as follows.
In addition, financial instruments, for which it is extremely difficult to measure the fair value, are not included. (Please refer to Note
2 below).
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Investment securities in subsidiaries and affiliated companies
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
72
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Investment securities in subsidiaries and affiliated companies
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
Millions of yen
2016
Carrying value
Fair value
Unrealized gain (loss)
¥ 120,168
¥ 120,168
¥
402,220
402,220
105
110
20,785
151,051
19,178
151,051
—
—
5
(1,607)
—
¥ 694,329
¥ 692,727
¥ (1,602)
¥ 213,143
¥ 213,143
¥
135,960
135,960
6,000
6,000
—
—
—
140,020
418,836
163,078
422,631
23,058
3,795
¥ 913,959
¥ 940,812
¥ 26,853
¥
¥
56
12
68
¥
¥
56
12
68
¥
¥
—
—
—
Millions of yen
2015
Carrying value
Fair value
Unrealized gain
¥ 116,193
¥ 116,193
¥
405,330
405,330
84
27,486
181,235
84
27,593
181,235
¥ 730,328
¥ 730,435
¥ 220,173
¥ 220,173
142,346
142,346
5,000
5,000
¥
¥
—
—
0
107
—
107
—
—
—
140,030
408,025
166,617
413,250
26,587
5,225
¥ 915,574
¥ 947,386
¥ 31,812
¥
¥
(193)
(398)
¥
(591)
¥
(193)
(398)
(591)
¥
¥
—
—
—
Toray Industries, Inc.Annual Report 2016
Cash and time deposits
Trade receivables
Investment securities
$ 1,063,434 $ 1,063,434
$
3,559,469
3,559,469
Held-to-maturity debt securities
929
973
—
—
44
Investment securities in subsidiaries and affiliated companies
183,938
169,717
(14,221)
Thousands of U.S. dollars
2016
Carrying value
Fair value
Unrealized gain (loss)
Other securities
Assets
Trade payables
Short-term bank loans
Commercial paper
Bonds *1
Long-term bank loans *2
Liabilities
Derivative transactions *3
Hedge accounting is not applied
Hedge accounting is applied
Derivative transactions
1,336,735
1,336,735
—
$ 6,144,504 $ 6,130,327
$ (14,177)
$ 1,886,221 $ 1,886,221
$
1,203,186
1,203,186
53,097
53,097
—
—
—
1,239,115
1,443,168
204,053
3,706,513
3,740,097
33,584
$ 8,088,133 $ 8,325,770
$ 237,637
$
496 $
496
$
106
106
$
602 $
602
$
—
—
—
*1: Bonds include bonds due within one year.
*2: Long-term bank loans include long-term bank loans due within one year.
*3: Receivables and payables arising from derivative transactions are indicated in net amounts. Total net payables, if any, are shown in parentheses.
Notes:
1. Estimation method for fair value of financial instruments and items related to securities and derivative transactions
Assets
Cash and time deposits and Trade receivables
Carrying value is used for fair value since the items will be settled within the short term and the fair value is approximately
equal to the carrying value.
73
Investment securities
Securities are valued at quoted market price. Debt securities, etc. are valued at quoted market price or at the price provided
by correspondent financial institutions. For information on securities classified by holding purpose, please refer to Note 6.
SECURITIES of the Notes to the Consolidated Financial Statements.
Liabilities
Trade payables, Short-term bank loans and Commercial paper
Carrying value is used for fair value since the items will be settled within the short term and the fair value is approximately
equal to the carrying value.
Bonds
The fair value of bonds with market price is based on market price. The fair value of bonds without market price is estimated
by discounting the principal amounts and interest based on interest rates adjusted for the remaining periods and credit risk
of the bonds. However, for floating-rate bonds or fixed-rate bonds converted to floating using interest rate swaps accounted
for under the special accounting treatment for interest rate swaps, the fair value is approximately equal to the carrying value
because the interest rates are adjusted periodically. Therefore, the fair value is based on the carrying value.
Long-term bank loans
The fair value of long-term bank loans is estimated by discounting the principal amounts and interest based on estimated
interest rates if similar new loans were entered into in the current period. The fair value of long-term bank loans for which the
special accounting method for interest rate swaps is applied is estimated by discounting the total principal amount and inter-
est (accounted for together with the interest rate swaps) based on estimated interest rates if similar new loans were entered
into in the current period. For long-term bank loans at floating interest rates, however, the fair value is approximately equal to
the carrying value because the interest rates are adjusted periodically. Therefore, the fair value is based on the carrying value.
Derivative transactions
Please refer to Note 7. DERIVATIVES in the Notes to the Consolidated Financial Statements.
Toray Industries, Inc.Annual Report 2016
2. Financial instruments for which it is extremely difficult to determine the fair value
Unlisted equity securities
Unlisted debt securities
Millions of yen
2016
2015
¥ 83,080
¥ 79,533
2,000
—
Thousands of
U.S. dollars
2016
$ 735,221
17,699
These securities have no quoted market price and the fair value is extremely difficult to determine. Therefore, they are not included
in the preceding table.
3. Redemption schedule for receivables and investment securities with maturities at March 31, 2016 and 2015
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
74
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
Cash and time deposits
Trade receivables
Investment securities
Held-to-maturity debt securities
Other securities
Millions of yen
2016
Due within
one year
Due after one year
through five years
Due after five years
through ten years
Due after
ten years
¥ 120,168
402,106
16
986
¥ 523,276
¥ —
114
79
—
¥ 193
¥ —
—
10
10
¥ 20
¥ —
—
—
100
¥ 100
Millions of yen
2015
Due within
one year
Due after one year
through five years
Due after five years
through ten years
Due after
ten years
¥ 116,193
405,329
7
4,282
¥ 525,811
¥ —
1
70
—
¥ 71
¥ —
—
7
10
¥ 17
¥ —
—
—
700
¥ 700
Thousands of U.S. dollars
2016
Due within
one year
Due after one year
through five years
Due after five years
through ten years
Due after
ten years
$ 1,063,434
3,558,460
142
8,726
$ 4,630,761
$ —
1,009
699
—
$ 1,708
$ —
—
88
88
$ 177
$ —
—
—
885
$ 885
4. The redemption schedule for long-term debt is disclosed in Note 4. SHORT-TERM BANK LOANS, LONG-TERM DEBT AND LEASE
OBLIGATIONS of the Notes to the Consolidated Financial Statements.
Toray Industries, Inc.Annual Report 2016
6. SECURITIES
At March 31, 2016 and 2015, information on securities classified as held-to-maturity debt securities was as follows:
Held-to-maturity debt securities
Carrying
value
¥ 105
Fair
value
¥ 110
Unrealized
gains
Unrealized
losses
¥ 5
¥ —
Carrying
value
$ 929
Fair
value
$ 973
Unrealized
gains
Unrealized
losses
$ 44
$ —
Millions of yen
2016
Thousands of U.S. dollars
2016
Held-to-maturity debt securities
¥ 84
Carrying
value
Millions of yen
2015
Fair
value
¥ 84
Unrealized
gains
Unrealized
losses
¥ 0
¥ —
At March 31, 2016 and 2015, information on securities classified as other securities was as follows:
Millions of yen
2016
Thousands of U.S. dollars
2016
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Other securities
¥ 151,051
¥ 65,632
¥ 87,758
¥ 2,339
$ 1,336,735 $ 580,814 $ 776,619
$ 20,699
Millions of yen
2015
Carrying
value
Acquisition
cost
Unrealized
gains
Unrealized
losses
Other securities
¥ 181,235
¥ 67,556
¥ 114,383
¥ 704
75
Toray Industries, Inc.Annual Report 2016 7. DERIVATIVES
The Company and its consolidated subsidiaries had the following derivative contracts outstanding at March 31, 2016 and 2015:
Hedge accounting is not applied
Millions of yen
Thousands of U.S. dollars
Forward foreign exchange contracts:
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Thai baht
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
Foreign currency swaps:
Contract
amount
2016
Fair
value
Unrealized
gain (loss)
Contract
amount
2016
Fair
value
Unrealized
gain (loss)
¥ 7,408
¥ (332)
¥ (332)
$ 65,558
$ (2,938)
$ (2,938)
31
680
360
7,678
11,923
187
41
18
1,614
(0)
(2)
(12)
55
(0)
(2)
(12)
55
274
6,018
3,186
67,947
(0)
(18)
(106)
487
(0)
(18)
(106)
487
296
296
105,513
2,619
2,619
(7)
1
(0)
41
(22)
38
(7)
1
(0)
41
(22)
38
1,655
363
159
14,283
9,522
45,416
(62)
9
(0)
363
(195)
336
(62)
9
(0)
363
(195)
336
Receiving U.S. dollar, paying Korean won
1,076
Receiving U.S. dollar, paying Thai baht
5,132
¥ —
¥ 56
¥ 56
$
— $
496
$ 496
76
Forward foreign exchange contracts:
Buying U.S. dollar
Buying euro
Buying Thai baht
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Japanese yen
Foreign currency swaps:
Millions of yen
2015
Fair
value
Contract
amount
Unrealized
gain (loss)
¥ 4,843
¥ 59
¥ 59
42
366
2,578
8,628
477
131
8
1,099
0
34
(27)
(189)
2
(1)
0
(5)
0
34
(27)
(189)
2
(1)
0
(5)
Receiving U.S. dollar, paying Korean won
1,198
(74)
(74)
Receiving U.S. dollar, paying Thai baht
1,835
Interest rate swaps:
Floating-rate receipt, fixed-rate payment
1,098
4
4
4
4
¥ —
¥ (193)
¥ (193)
Toray Industries, Inc.Annual Report 2016
Hedge accounting is applied
Hedge accounting method Type of derivative and principal hedged items
Forward foreign exchange contracts:
Accounted for as part of trade receivables
Deferral hedge
method
Millions of yen
2016
Contract amount Fair value
Estimation method for fair value
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
and trade payables
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling Japanese yen
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Korean won
Receiving Japanese yen, paying Korean won
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fixed-rate payment
Interest rate swaps:
Accounted for as part of bonds
¥ 1,856
772
367
258
¥ 31 Forward foreign exchange quotes
24
(14)
3
396
198
3 The price provided by correspon-
(2)
dent financial institutions
6,403
6,000
234 The price provided by correspon-
dent financial institutions
26
14,790
(153)
The price provided by correspon-
dent financial institutions
and long-term bank loans
Floating-rate receipt, fixed-rate payment
Floating-rate receipt, floating-rate payment
Fixed-rate receipt, floating rate payment
2,000 *1
26,900
53,000
—
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Korean won
Buying Indian rupee
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Selling Japanese yen
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Selling Japanese yen
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Japanese yen
Receiving Australian dollar,
paying Japanese yen
26,720
542
566
174
179
13,467
1,117
7
75
2
29
19,569 *2
190
410
5
34,467
3,684
22
592
20
2
177,778 *2
3,129
(707) Forward foreign exchange quotes
77
6
(7)
(4)
(0)
564
9
0
(1)
0
0
—
—
¥
—
¥ 12
Toray Industries, Inc.Annual Report 2016
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
78
Hedge accounting method Type of derivative and principal hedged items
Forward foreign exchange contracts:
Accounted for as part of trade receivables
Deferral hedge
method
and trade payables
Buying U.S. dollar
Buying Japanese yen
Selling U.S. dollar
Selling euro
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Korean won
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fixed-rate payment
Interest rate swaps:
Accounted for as part of bonds
Millions of yen
2015
Contract amount Fair value
Estimation method for fair value
¥
103
1,349
606
255
¥ 5 Forward foreign exchange quotes
(23)
(12)
(2)
210
126
(8) The price provided by
5
correspondent financial institutions
3,460
(35)
The price provided by
correspondent financial institutions
641
(15)
The price provided by
correspondent financial institutions
and long-term bank loans
Floating-rate receipt, fixed-rate payment
Floating-rate receipt, floating-rate payment
Fixed-rate receipt, floating rate payment
26,200 *1
37,600
53,000
—
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Canadian dollar
Buying Chinese yuan
Buying Korean won
Buying Indian rupee
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Selling Japanese yen
Foreign currency swaps:
Accounted for as part of long-term bank loans
(Forecasted transactions)
Receiving U.S. dollar, paying Japanese yen
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying British pound
Buying Chinese yuan
Buying Korean won
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Japanese yen
Receiving Australian dollar,
paying Japanese yen
26,003
2,594
475
1,993
152
1,084
23,822
1,550
6
285
57
107
316 Forward foreign exchange quotes
(90)
(1)
60
8
3
(335)
62
0
(4)
(1)
(1)
20,000
(330)
The price provided by
correspondent financial institutions
21,497 *2
258
11
82
155
4
36,436
2,904
34
1,399
78
154,320 *2
3,129
—
—
¥
—
¥ (398)
Toray Industries, Inc.Annual Report 2016
Hedge accounting method Type of derivative and principal hedged items
Forward foreign exchange contracts:
Deferral hedge
method
Accounted for as part of trade receivables
and trade payables
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling Japanese yen
Foreign currency options:
Accounted for as part of trade payables
Buying Japanese yen (call)
Selling Japanese yen (put)
Thousands of U.S. dollars
2016
Contract amount
Fair value
Estimation method for fair value
$ 16,425
6,832
3,248
2,283
$ 274 Forward foreign exchange quotes
212
(124)
27
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Korean won
Receiving Japanese yen, paying Korean won
3,504
1,752
27 The price provided by correspon-
(18)
dent financial institutions
56,664
53,097
2,071 The price provided by correspon-
dent financial institutions
230
Special accounting
method for interest
rate swaps
Allocation method
for forward foreign
exchange contracts
Interest rate swaps:
Accounted for as part of long-term bank loans
Floating-rate receipt, fixed-rate payment
Interest rate swaps:
Accounted for as part of bonds
130,885
(1,354)
The price provided by correspon-
dent financial institutions
and long-term bank loans
Floating-rate receipt, fixed-rate payment
Floating-rate receipt, floating-rate payment
Fixed-rate receipt, floating rate payment
17,699 *1
238,053
469,027
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables (Forecasted transactions)
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Korean won
Buying Indian rupee
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Selling Japanese yen
236,460
4,796
5,009
1,540
1,584
119,177
9,885
62
664
18
257
Forward foreign exchange contracts:
Accounted for as part of trade receivables
and trade payables
Buying U.S. dollar
Buying euro
Buying Chinese yuan
Buying Japanese yen
Selling U.S. dollar
Selling euro
Selling British pound
Selling Chinese yuan
Selling Thai baht
Selling Japanese yen
173,177 *2
1,681
3,628
44
305,018
32,602
195
5,239
177
18
Foreign currency swaps:
Accounted for as part of long-term bank loans
Receiving U.S. dollar, paying Japanese yen 1,573,257 *2
Receiving Australian dollar,
27,690
paying Japanese yen
—
(6,257) Forward foreign exchange quotes
79
53
(62)
(35)
(0)
4,991
80
0
(9)
0
0
—
—
*1 The fair value of interest rate swaps to which a special accounting method is applied is included in the fair value of bonds and long-term bank loans in Note 5.
FINANCIAL INSTRUMENTS of the Notes to the Consolidated Financial Statements because such interest rate swaps are accounted for together with the cor-
responding bonds and long-term bank loans.
*2 The fair value of forward foreign exchange contracts to which the allocation method is applied, except for forecasted transactions, is included in the fair value of
trade receivables, trade payables and long-term bank loans in Note 5. FINANCIAL INSTRUMENTS of the Notes to the Consolidated Financial Statements since
such forward foreign exchange contracts are accounted for together with the corresponding trade receivables, trade payables and long-term bank loans.
$
— $ 106
Toray Industries, Inc.Annual Report 2016
8. RETIREMENT BENEFIT PLAN
The changes in the retirement benefit obligation during the years ended March 31, 2016 and 2015 were as follows:
Retirement benefit obligation at beginning of the year
¥ 210,751
¥ 192,516
$ 1,865,053
Cumulative effect of changes in accounting policies
—
24,477
—
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
Restated balance
Service cost
Interest cost
Actuarial gains and losses
Retirement benefit paid
Past service cost
Effect of change in accounting period
Other
210,751
216,993
1,865,053
7,489
1,660
1,270
7,358
1,769
(610)
66,274
14,690
11,239
(16,203)
(16,100)
(143,389)
—
1,363
(2,904)
(97)
—
1,438
—
12,062
(25,699)
Retirement benefit obligation at end of the year
¥ 203,426
¥ 210,751
$ 1,800,230
The changes in the plan assets at fair value during the years ended March 31, 2016 and 2015 were as follows:
80
Plan assets at beginning of the year
Expected return on plan assets
Actuarial gains and losses
Contributions
Retirement benefit paid
Effect of change in accounting period
Other
Plan assets at end of the year
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ 140,541
¥ 123,844
$ 1,243,726
2,888
2,657
(6,789)
18,024
7,727
(10,873)
(336)
(1,798)
6,809
(11,612)
—
819
25,558
(60,080)
68,381
(96,221)
(2,973)
(15,912)
¥ 131,360
¥ 140,541
$ 1,162,478
The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
March 31, 2016 and 2015 for the Company’s and its consolidated subsidiaries’ defined benefit plans:
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheets
Net defined benefit liability
Net defined benefit asset (included in other non-current assets)
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ 108,274
¥ 114,841
$ 958,177
(131,360)
(140,541)
(1,162,478)
(23,086)
95,152
72,066
(25,700)
95,910
70,210
104,803
106,293
(32,737)
(36,083)
(204,301)
842,053
637,752
927,460
(289,708)
Net liability for retirement benefits in the balance sheets
¥ 72,066
¥ 70,210
$ 637,752
Toray Industries, Inc.Annual Report 2016
The components of retirement benefit expense for the years ended March 31, 2016 and 2015 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gains and losses
Amortization of past service cost
Retirement benefit expense
Millions of yen
2016
2015
¥ 7,489
¥ 7,358
1,660
(2,888)
7,107
(4,300)
1,769
(2,657)
9,234
(3,566)
Thousands of
U.S. dollars
2016
$ 66,274
14,690
(25,558)
62,894
(38,053)
¥ 9,068
¥ 12,138
$ 80,248
In addition to the above, special severance payments of ¥1,329 million ($11,761 thousand) and ¥519 million were recognized for the
years ended March 31, 2016 and 2015, respectively. Contributions to the defined contribution pension plan of ¥6,057 million ($53,602
thousand) and ¥5,544 million were recognized for the years ended March 31, 2016 and 2015, respectively.
The components of remeasurements of defined benefit plans included in other comprehensive income (before tax effect) for the years
ended March 31, 2016 and 2015 were as follows:
Past service cost
Actuarial gains and losses
Total
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ (4,300)
¥ (3,469)
$ (38,053)
(559)
27,580
(4,947)
¥ (4,859)
¥ 24,111
$ (43,000)
The components of remeasurements of defined benefit plans included in accumulated other comprehensive income (before tax
effect) as of March 31, 2016 and 2015 were as follows:
81
Unrecognized past service cost
Unrecognized actuarial gains and losses
Total
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ (8,423)
¥ (12,909)
$ (74,540)
15,276
¥ 6,853
13,816
¥
907
135,186
$ 60,646
The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2016 and 2015 was as follows:
Bonds
Stocks
Life insurance
Cash and time deposits
Other
Total
2016
2015
10%
57%
24%
7%
2%
11%
59%
22%
4%
4%
100%
100%
The expected return on plan assets has been estimated based on the anticipated allocation to each asset class and the expected long-
term returns on assets held in each category.
The assumptions used in accounting for the above plans were as follows:
Discount rate
Expected rate of return on plan assets
Expected rate of salary increase
2016
2015
Primarily 0.6% primarily 0.6%
Primarily 2.0% primarily 2.0%
Primarily 7.5% primarily 7.5%
Toray Industries, Inc.Annual Report 2016
9. STOCK OPTION PLANS
1. Stock option expense included in selling, general and administrative expenses amounted to ¥351 million ($3,106 thousand) and
¥347 million for the years ended March 31, 2016 and 2015, respectively.
2. Information on stock options issued
The following table summarizes the stock options outstanding as of March 31, 2016.
Company name
Toray Industries, Inc.
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
Members of the Board
of the Company
Directors of the
Company
28
32
26
32
26
26
Common stock
747,000 shares
844,000 shares
583,000 shares
August 20, 2011
Based on the number of
months that have elapsed
during the vesting period
June 24, 2011-
June 22, 2012
August 21, 2011-
August 20, 2041
August 4, 2012
Based on the number of
months that have elapsed
during the vesting period
June 22, 2012-
June 26, 2013
August 5, 2012-
August 4, 2042
August 10, 2013
Based on the number of
months that have elapsed
during the vesting period
June 26, 2013-
June 25, 2014
August 11, 2013-
August 10, 2043
Toray Industries, Inc.
No.4 Stock
Option Plan
No.5 Stock
Option Plan
Members of the Board
of the Company
Directors of the
Company
25
27
23
31
Common stock
569,000 shares
358,000 shares
August 9, 2014
Based on the number of
months that have elapsed
during the vesting period
June 25, 2014-
June 24, 2015
August 10, 2014-
August 9, 2044
August 22, 2015
Based on the number of
months that have elapsed
during the vesting period
June 24, 2015-
June 28, 2016
August 23, 2015-
August 22, 2045
82
Position and number of
grantees
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Company name
Position and number of
grantees
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Company name
Toray Chemical Korea Inc.
No.1 Stock
Option Plan
15
No.2 Stock
Option Plan
1
No.3 Stock
Option Plan
5
Position and number of
Executives of the
grantees
Company
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Common stock
526,816 shares
18,815 shares
108,160 shares
March 21, 2008
Holders must be in
continuous employment
from the grant date to the
vesting date of
March 20, 2011
March 21, 2008-
March 20, 2011
March 21, 2011-
March 20, 2018
July 22, 2008
Holders must be in
continuous employment
from the grant date to the
vesting date of
July 21, 2011
July 22, 2008-
July 21, 2011
July 22, 2011-
July 21, 2018
March 20, 2009
Holders must be in
continuous employment
from the grant date to the
vesting date of
March 19, 2012
March 20, 2009-
March 19, 2012
March 20, 2012-
March 19, 2019
Toray Industries, Inc.Annual Report 2016 Company name
Toray Chemical Korea Inc.
Position and number of
Executives of the
grantees
Company
No.4 Stock
Option Plan
2
No.5 Stock
Option Plan
4
No.6 Stock
Option Plan
5
Type and number of shares
to be issued upon exercise
Grant date
Vesting conditions
Vesting period
Exercise period
Common stock
20,000 shares
38,468 shares
41,120 shares
March 19, 2010
Holders must be in
continuous employment
from the grant date to the
vesting date of
March 18, 2013
March 19, 2010-
March 18, 2013
March 19, 2013-
March 18, 2020
March 18, 2011
Holders must be in
continuous employment
from the grant date to the
vesting date of
March 17, 2014
March 18, 2011-
March 17, 2014
March 18, 2014-
March 17, 2021
March 23, 2012
Holders must be in
continuous employment
from the grant date to the
vesting date of
March 22, 2015
March 23, 2012-
March 22, 2015
March 23, 2015-
March 22, 2022
The following table summarizes movements of stock options during the year and price information on stock options as of March
31, 2016. The number of stock options are translated into the number of shares.
(1) Number of stock options
Company name
Toray Industries, Inc.
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
No.4 Stock
Option Plan
No.5 Stock
Option Plan
Stock acquisition rights not yet vested
As of March 31, 2015
Granted
Forfeited
Vested
As of March 31, 2016
Stock acquisition rights already vested
As of March 31, 2015
Vested
Exercised
Forfeited
As of March 31, 2016
—
—
—
—
—
447,000
—
95,000
—
352,000
—
—
—
—
—
627,000
—
115,000
—
512,000
—
—
—
—
—
505,000
—
84,000
—
421,000
170,000
—
—
170,000
—
399,000
170,000
89,000
—
480,000
—
358,000
—
255,000
103,000
—
255,000
—
—
255,000
83
Company name
Toray Chemical Korea Inc.
No.1 Stock
Option Plan
No.2 Stock
Option Plan
No.3 Stock
Option Plan
Stock acquisition rights not yet vested
As of December 31, 2014
Granted
Forfeited
Vested
As of March 31, 2016*
Stock acquisition rights already vested
As of December 31, 2014
Vested
Exercised
Forfeited
As of March 31, 2016*
—
—
—
—
—
136,408
—
—
136,408
—
—
—
—
—
—
18,815
—
—
—
18,815
—
—
—
—
—
75,240
—
—
75,240
—
Toray Industries, Inc.Annual Report 2016 Company name
Toray Chemical Korea Inc.
No.4 Stock
Option Plan
No.5 Stock
Option Plan
No.6 Stock
Option Plan
Stock acquisition rights not yet vested
As of December 31, 2014
Granted
Forfeited
Vested
As of March 31, 2016*
Stock acquisition rights already vested
As of December 31, 2014
Vested
Exercised
Forfeited
As of March 31, 2016*
—
—
—
—
—
20,000
—
—
20,000
—
—
—
—
—
—
28,468
—
—
28,468
—
41,120
—
—
41,120
—
—
41,120
—
41,120
—
* Effective from the year ended March 31, 2016, Toray Chemical Korea Inc. has changed its year-end date from
December 31 to March 31.
(2) Price information
Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
84
Yen
Toray Industries, Inc.
No.3 Stock
Option Plan
¥ 1
1,004
546
No.4 Stock
Option Plan
¥ 1
1,004
605
No.5 Stock
Option Plan
¥ 1
—
987
No.1 Stock
Option Plan
¥ 1
1,004
513
No.2 Stock
Option Plan
¥ 1
1,004
394
Won
Company name
Toray Chemical Korea Inc.
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
No.1 Stock
Option Plan
W 6,030
—
5,006
No.2 Stock
Option Plan
W 8,480
—
7,067
Won
No.3 Stock
Option Plan
W 6,900
—
5,597
Company name
Toray Chemical Korea Inc.
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
No.4 Stock
Option Plan
W 10,800
—
8,120
No.5 Stock
Option Plan
W 11,900
—
9,310
No.6 Stock
Option Plan
W 9,980
—
5,360
U.S. dollars
Company name
Toray Industries, Inc.
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
No.1 Stock
Option Plan
$ 0.01
8.88
4.54
No.2 Stock
Option Plan
$ 0.01
8.88
3.49
U.S. dollars
No.3 Stock
Option Plan
$ 0.01
8.88
4.83
No.4 Stock
Option Plan
$ 0.01
8.88
5.35
No.5 Stock
Option Plan
$ 0.01
—
8.73
Company name
Toray Chemical Korea Inc.
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
No.1 Stock
Option Plan
$ 5.28
—
4.38
No.2 Stock
Option Plan
$ 7.42
—
6.18
No.3 Stock
Option Plan
$ 6.04
—
4.90
Toray Industries, Inc.Annual Report 2016 Company name
Exercise price
Weighted average price at exercise
Fair value per share at the grant date
U.S. dollars
Toray Chemical Korea Inc.
No.4 Stock
Option Plan
$ 9.45
—
7.10
No.5 Stock
Option Plan
$ 10.41
—
8.15
No.6 Stock
Option Plan
$ 8.73
—
4.69
3. Estimation method and assumptions used for the per share fair value of stock options
(1) Estimation method
Black-Scholes model
(2) Assumptions used for the per share fair value of stock options
Company name
Expected volatility*1
Expected holding period*2
Expected dividend*3
Risk-free rate*4
Toray Industries, Inc.
No.5 Stock Option Plan
32.473%
8 years
¥11 per share ($0.10)
0.223%
*1 The expected volatility is based on actual share prices during 8 years from August 23, 2007 to August 21, 2015.
*2 The expected holding period is calculated based on the service period of past members of the Board.
*3 This is based on the dividend for the year ended March 31, 2015.
*4 The risk-free interest rate is the yield on Japanese government bonds for the period that corresponds to the remaining life of the option.
Because it is difficult to reasonably estimate the number of options that will expire in the future, only the number of options that have
actually forfeited is applied.
85
10. INCOME TAXES
The statutory tax rates in Japan for the years ended March 31, 2016 and 2015 were 33.1% and 35.6%, respectively.
At March 31, 2016 and 2015, significant components of deferred tax assets and liabilities were as follows:
Deferred tax assets:
Accrued bonuses
Depreciation and impairment loss
Net defined benefit liability
Tax loss carryforwards
Unrealized intercompany profits
Investments in subsidiaries and affiliated companies
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for advanced depreciation
Depreciation
Undistributed earnings of subsidiaries and affiliated companies
Unrealized gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ 5,778
11,932
34,731
18,080
15,612
20,418
31,403
137,954
(44,154)
93,800
5,019
22,882
16,028
26,227
21,589
91,745
¥ 2,055
¥ 6,091
8,988
36,633
36,630
13,107
17,259
27,865
146,573
(41,113)
105,460
5,422
25,402
15,325
35,923
22,761
104,833
627
¥
$
51,133
105,593
307,354
160,000
138,159
180,690
277,903
1,220,832
(390,743)
830,088
44,416
202,496
141,841
232,097
191,053
811,903
18,186
$
Toray Industries, Inc.Annual Report 2016
At March 31, 2016 and 2015, deferred tax assets and liabilities were classified as follows:
Deferred tax assets - current
Deferred tax assets - non-current
Deferred tax liabilities - current (included in other current liabilities)
Deferred tax liabilities - non-current
Millions of yen
2016
¥ 24,113
12,633
59
34,632
2015
¥ 31,034
13,294
32
43,669
Thousands of
U.S. dollars
2016
$ 213,389
111,796
522
306,478
The reconciliation of the statutory tax rate and the effective income tax rate for the years ended March 31, 2016 and 2015 was as follows:
Statutory tax rate
Increase (decrease) in taxes resulting from:
Permanent differences
Equity in earnings of unconsolidated subsidiaries and affiliated companies
Differences of tax rates for overseas consolidated subsidiaries
Undistributed earnings of subsidiaries and affiliated companies
Change in statutory tax rate
Amortization of goodwill
Other
Effective income tax rate
2016
33.1%
2015
—%
0.2
(1.2)
(3.3)
0.5
1.3
2.2
(3.3)
29.5%
—
—
—
—
—
—
—
—%
* Information for the year ended March 31, 2015 was not provided because the difference between the statutory tax rate and the effective income tax rate was less
than 5% of the statutory tax rate.
86
The “Act to partially revise the Income Tax Act and Others”
and the “Act to partially revise the Local Tax Act and Others”
were enacted on March 29, 2016. As a result, the effective
statutory tax rate used to measure the Company’s deferred tax
assets and liabilities was changed from 32.3% to 30.9% for the
temporary differences expected to be realized or settled in the
period from April 1, 2016 to March 31, 2018 and 30.6% for the
temporary differences expected to be realized or settled on or
after April 1, 2018. The effect of the announced reduction of
the effective statutory tax rate was to decrease deferred tax
assets, after offsetting deferred tax liabilities, by ¥583 million
($5,159 thousand), net deferred losses on hedges by ¥4 mil-
lion ($35 thousand) and remeasurements of defined benefit
plans by ¥204 million ($1,805 thousand), and increase deferred
income taxes by ¥1,788 million ($15,823 thousand), net unre-
alized gains on securities by ¥1,411 million ($12,487 thousand)
and foreign currency translation adjustments by ¥2 million ($18
thousand) as of and for the year ended March 31, 2016.
11. NET ASSETS
The Corporation Law of Japan provides that an amount equal
to 10% of the amount to be disbursed as distributions of capi-
tal surplus (other than the capital reserve) and retained earnings
(other than the earned reserve) be transferred to the capital
reserve and the earned reserve, respectively, until the sum
of the capital reserve and the earned reserve equals 25% of
the capital stock account. Such distributions can be made at
any time by resolution of the stockholders, or by the Board of
Directors if certain conditions are met.
At the June 2016 annual stockholders’ meeting, stockhold-
ers approved the payment of cash dividends of ¥7.00 per share,
aggregating to ¥11,196 million ($99,080 thousand) which has
not been reflected in the accompanying consolidated financial
statements for the year ended March 31, 2016.
Toray Industries, Inc.Annual Report 2016
12. COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 2016, commitment line of credit to unconsolidated subsidiaries and affiliated companies was as follows:
Total commitment line of credit
Loans receivable outstanding
Balance
Millions of yen
¥ 400
156
¥ 244
Thousands of
U.S. dollars
$ 3,540
1,381
$ 2,159
This commitment does not necessarily imply that the unused amount may be fully utilized.
At March 31, 2016 and 2015, contingent liabilities were as follows:
As guarantors of loans to:
Unconsolidated subsidiaries and affiliated companies
Other
Notes discounted
Export bills discounted
Notes endorsed
Contingent liabilities associated with securitization of receivables
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ 11,283
9,148
¥ 20,431
89
¥
635
1,160
¥ 9,573
¥ 4,552
6,346
¥ 10,898
—
¥
1,341
743
¥ 10,032
$ 99,850
80,956
$ 180,805
788
$
5,619
10,265
$ 84,717
13. LEASES
87
Finance leases
The Group holds certain buildings, machinery and equipment
and intangible assets by leases.
Finance lease transactions which do not transfer ownership
of the leased assets whose lease inceptions are on or before
March 31, 2008 are accounted for by a method similar to the
method applicable to ordinary operating lease transactions.
Total lease payments under these leases were ¥10 million ($88
thousand) and ¥133 million for the years ended March 31, 2016
and 2015, respectively. Pro forma information relating to acquisi-
tion costs, accumulated depreciation/amortization and net book
value for property held under finance lease transactions which
do not transfer ownership of the leased property to the lessee
on an “as if capitalized” basis at March 31, 2016 and 2015 was
as follows:
March 31, 2016:
Machinery and equipment
March 31, 2015:
Machinery and equipment
March 31, 2016:
Machinery and equipment
Millions of yen
Accumulated
depreciation/
amortization
Acquisition costs
¥ 19
¥ 19
¥ 17
¥ 17
Millions of yen
Accumulated
depreciation/
amortization
Acquisition costs
¥ 101
¥ 101
¥ 89
¥ 89
Net book value
¥ 2
¥ 2
Net book value
¥ 12
¥ 12
Thousands of U.S. dollars
Acquisition costs
$ 168
$ 168
Accumulated
depreciation/
amortization
$ 150
$ 150
Net book value
$ 18
$ 18
Toray Industries, Inc.Annual Report 2016
Future minimum lease payments under finance leases subsequent to March 31, 2016 and 2015 were as follows:
Due within one year
Due after one year
Total
Millions of yen
2016
¥ 2
—
¥ 2
2015
¥ 10
2
¥ 12
Thousands of
U.S. dollars
2016
$ 18
—
$ 18
The acquisition costs and future minimum lease payments under finance leases include the imputed interest expense portion.
Operating leases
Future minimum lease payments under noncancellable operating leases subsequent to March 31, 2016 and 2015 were as follows:
Due within one year
Due after one year
Total
14. RESEARCH AND DEVELOPMENT EXPENSES
Millions of yen
2016
¥ 368
1,323
¥ 1,691
2015
¥ 411
1,687
¥ 2,098
Thousands of
U.S. dollars
2016
$ 3,257
11,708
$ 14,965
Research and development expenses included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2016 and 2015 were ¥58,783 million ($520,204 thousand) and ¥59,504 million, respectively.
15. LOSS ON IMPAIRMENT OF FIXED ASSETS
88
The Company and its consolidated subsidiaries grouped assets used for business based on the classification under the management
accounting. For assets to be disposed and idle assets, each asset is considered to constitute a group.
For the year ended March 31, 2016, the carrying value of certain business-use assets for which profitability declined were written
down to the recoverable amount. As a result, the Company and its consolidated subsidiaries recognized loss on impairment of fixed
assets in the amount of ¥9,063 million ($80,204 thousand).
The major assets for which a loss on impairment was recognized were as follows:
Millions of yen
Thousands of
U.S. dollars
Location
Use
Classification
Loss on impairment
Otsu, Shiga, Japan
Films production facilities
St-Maurice de Beynost, France Films production facilities
Buildings
Machinery and equipment
Other
Machinery and equipment
Other
¥ 594
1,401
243
¥ 3,949
87
$ 5,257
12,398
2,150
$ 34,947
770
The recoverable amount of the above assets was measured at their value in use. The value in use was calculated by discounting
future cash flows at discount rates of 5% - 8%.
For the year ended March 31, 2015, the carrying value of certain business-use assets for which profitability declined were writ-
ten down to the recoverable amount. As a result, its consolidated subsidiaries recognized loss on impairment of fixed assets in the
amount of ¥7,915 million.
The major assets for which a loss on impairment was recognized were as follows:
Location
Use
Classification
Kaohsiung City, Taiwan
Films production facilities
Machinery and equipment
Millions of yen
Loss on
impairment
¥ 3,359
Gumi-si, Gyeongsangbuk-do,
Korea
Aramid fiber production
facilities
Machinery and equipment
Other
¥ 1,808
26
The recoverable amount of the above assets was measured at their value in use. The value in use was calculated by discounting
future cash flows at discount rates of 6% - 8%.
Toray Industries, Inc.Annual Report 2016
16. OTHER COMPREHENSIVE INCOME
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2016 and 2015.
Net unrealized (losses) gains on securities:
Amount arising during the year
Millions of yen
Thousands of
U.S. dollars
2016
2015
2016
¥ (26,313)
¥ 41,773
$ (232,858)
Reclassification adjustments for gains and losses included in net income
(2,099)
(50)
(18,575)
Before tax effect
Tax effect
Net unrealized (losses) gains on securities
Net deferred (losses) gains on hedges:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Assets acquisition cost adjustment
Before tax effect
Tax effect
Net deferred (losses) gains on hedges
Foreign currency translation adjustments:
Amount arising during the year
(28,412)
41,723
(251,434)
10,544
(10,415)
93,310
(17,868)
31,308
(158,124)
(137)
13
22
(102)
2
(100)
(110)
225
42
157
(60)
97
(1,212)
115
195
(903)
18
(885)
(59,123)
64,219
(523,212)
Reclassification adjustments for gains and losses included in net income
—
(2)
—
(59,123)
64,217
(523,212)
5
(32)
44
(59,118)
64,185
(523,168)
89
Before tax effect
Tax effect
Foreign currency translation adjustments
Remeasurements of defined benefit plans:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
2,807
5,668
Before tax effect
Tax effect
Remeasurements of defined benefit plans
(4,859)
24,111
1,586
(8,492)
(3,273)
15,619
Share of other comprehensive income of unconsolidated subsidiaries and
affiliated companies accounted for by the equity method:
(7,666)
18,443
(67,841)
24,841
(43,000)
14,035
(28,965)
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Share of other comprehensive income of unconsolidated subsidiaries and
affiliated companies accounted for by the equity method
(3,722)
(211)
5,315
(129)
(32,938)
(1,867)
(3,933)
5,186
(34,805)
Total other comprehensive income
¥ (84,292)
¥ 116,395
$ (745,947)
17. BUSINESS COMBINATIONS
Common control transactions
1. Summary of transaction
(1) Name and business of the combined company
Name of the combined company: Toray Chemical Korea Inc.
Business: Manufacture and distribution of fibers, water treatment filters, and A-PET sheets (cast film), etc.
(2) Dates of business combination
April 23, 2015 and July 23, 2015
(3) Legal form of business combination
Acquisition of shares from non-controlling shareholders
Toray Industries, Inc.Annual Report 2016
(4) Company name after business combination
No change
(5) Other matters concerning the summary of transaction
Toray Advanced Materials Korea Inc., the Company’s consolidated subsidiary, acquired the shares in Toray Chemical Korea Inc.,
another consolidated subsidiary, through the tender offer to improve the efficiency and speed of management by strengthening
the overall operation in the country, ultimately to respond swiftly and accurately to the changing business environment and to
enable further business expansion in Korea.
2. Overview of accounting treatments
The transaction was treated as a transaction with non-controlling shareholders from among the common control transactions in
accordance with the “Revised Accounting Standard for Business Combinations” and the “Revised Implementation Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.”
3. Information relating to additional acquisition
Acquisition cost and its breakdown
Cash ¥33,349 million ($295,124 thousand)
4. Information relating to changes in equity attributable to parent
(1) Main cause of changes in capital surplus
Additional acquisition of shares in the subsidiary
(2) Decrease in capital surplus arising from transaction with non-controlling shareholders
¥17,541 million ($155,230 thousand)
18. SEGMENT INFORMATION
90
(Segment information)
1. Outline of reportable segments
The reportable segments of the Group are components for which discrete financial information is available and whose operating results are
regularly reviewed by the Board of Directors to make decisions about resource allocation to the segments and assess performance.
The Company identifies the following six segments according to the nature of the products and market for their products.
Reportable segment
Main products
Fibers & Textiles
Plastics & Chemicals
IT-related Products
Filament yarns, staple fibers, and woven and knitted fabrics of nylon, polyester and acrylic
fibers, etc.; non-woven fabrics, ultra-microfiber non-woven fabric with suede texture and
apparel products
Nylon, ABS, PBT, PPS and other resins and molded products, polyolefin foam; polyester, poly-
propylene, PPS and other films and processed film products; raw materials for synthetic fibers
and other plastics; zeolite catalysts; fine chemicals for pharmaceuticals and agrochemicals; vet-
erinary medicine (excludes film and resin covered in IT-related Products segment)
Films and plastic products for information and telecommunications related products; materi-
als for electronic circuits and semiconductors; color filters for LCDs and related materials and
equipment; magnetic recording materials; graphic materials and related equipment
Carbon Fiber Composite Materials
Carbon fibers, carbon fiber composite materials and their molded products
Environment & Engineering
Comprehensive engineering; condominiums; industrial equipment and machinery;
environment-related equipment; water treatment membranes and related equipment; mate-
rials for housing, building and civil engineering
Life Science
Pharmaceuticals and medical devices
2. Measurement of sales, income, assets and other material items of reportable segments
The accounting policies for the reportable segments are the same as those described in Note 1. SIGNIFICANT ACCOUNTING POLICIES.
The figures of segment income are based on operating income.
Intersegment sales are determined based on consideration of the market price and related information.
Toray Industries, Inc.Annual Report 2016
3. Information on sales, income, assets and other material items of reportable segments
Millions of yen
Year ended
March 31, 2016:
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Life Science
Others
Total
Adjustments
Consolidated
Total
Sales to outside customers
¥ 892,039 ¥ 521,238 ¥ 251,072 ¥ 186,196 ¥ 183,324 ¥ 55,841 ¥ 14,720 ¥ 2,104,430 ¥
— ¥ 2,104,430
Intersegment sales
1,035
19,148
7,614
369
62,608
8
16,422
107,204
(107,204)
—
Total sales
¥ 893,074 ¥ 540,386 ¥ 258,686 ¥ 186,565 ¥ 245,932 ¥ 55,849 ¥ 31,142 ¥ 2,211,634 ¥ (107,204) ¥ 2,104,430
Segment income
¥ 68,909 ¥ 29,384 ¥ 26,150 ¥ 36,115 ¥
9,584 ¥ 3,068 ¥ 1,962 ¥ 175,172 ¥
(20,692) ¥ 154,480
Segment assets
¥ 680,947 ¥ 524,558 ¥ 362,851 ¥ 429,503 ¥ 193,837 ¥ 83,277 ¥ 55,302 ¥ 2,330,275 ¥
(51,889) ¥ 2,278,386
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affiliated
companies accounted for
by the equity method
25,839
18,514
17,034
21,313
4,408
2,832
1,201
91,141
27
91,168
34,860
39,492
1,873
10,273
10,613
3,243
6,331
106,685
(451)
106,234
Capital expenditures
35,436
31,244
29,773
32,095
3,604
3,223
1,531
136,906
(350)
136,556
Year ended
March 31, 2015:
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Life Science
Others
Total
Adjustments
Consolidated
Total
Sales to outside customers
¥ 856,676 ¥ 496,370 ¥ 247,975 ¥ 158,365 ¥ 179,988 ¥ 57,039 ¥ 14,321 ¥ 2,010,734 ¥
— ¥ 2,010,734
Intersegment sales
1,070
30,390
7,020
348
62,867
1
16,060
117,756
(117,756)
—
91
Millions of yen
Total sales
¥ 857,746 ¥ 526,760 ¥ 254,995 ¥ 158,713 ¥ 242,855 ¥ 57,040 ¥ 30,381 ¥ 2,128,490 ¥ (117,756) ¥ 2,010,734
Segment income
¥ 55,600 ¥ 23,875 ¥ 24,494 ¥ 26,228 ¥
8,020 ¥ 4,072 ¥ 1,901 ¥ 144,190 ¥
(20,709) ¥ 123,481
Segment assets
¥ 705,465 ¥ 562,144 ¥ 360,401 ¥ 436,761 ¥ 204,166 ¥ 82,933 ¥ 57,236 ¥ 2,409,106 ¥
(51,181) ¥ 2,357,925
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affiliated
companies accounted for
by the equity method
23,234
18,957
15,702
15,913
4,089
2,287
1,152
81,334
146
81,480
34,197
45,962
1,978
7,822
11,082
3,361
6,015
110,417
(693)
109,724
Capital expenditures
36,987
21,458
16,324
45,495
3,252
2,462
1,208
127,186
(2,257)
124,929
Toray Industries, Inc.Annual Report 2016
Thousands of U.S. dollars
Year ended
March 31, 2016:
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering
Life Science
Others
Total
Adjustments
Consolidated
Total
Sales to outside customers
$ 7,894,150 $ 4,612,726 $ 2,221,876 $ 1,647,752 $ 1,622,336 $ 494,168 $ 130,265 $ 18,623,274 $
— $ 18,623,274
Intersegment sales
9,159
169,451
67,381
3,265
554,053
71 145,327
948,708
(948,708)
—
Total sales
$ 7,903,310 $ 4,782,177 $ 2,289,257 $ 1,651,018 $ 2,176,389 $ 494,239 $ 275,593 $ 19,571,982 $
(948,708) $18,623,274
Segment income
$ 609,814 $ 260,035 $ 231,416 $ 319,602 $
84,814 $ 27,150 $ 17,363 $ 1,550,195 $
(183,115) $ 1,367,080
Segment assets
$ 6,026,080 $ 4,642,106 $ 3,211,071 $ 3,800,912 $ 1,715,372 $ 736,965 $ 489,398 $ 20,621,903 $
(459,195) $ 20,162,708
Depreciation and
amortization
Investment in unconsolidated
subsidiaries and affiliated
companies accounted for
by the equity method
228,664
163,841
150,743
188,611
39,009
25,062
10,628
806,558
239
806,796
308,496
349,487
16,575
90,912
93,920
28,699
56,027
944,115
(3,991)
940,124
Capital expenditures
313,593
276,496
263,478
284,027
31,894
28,522
13,549 1,211,558
(3,097) 1,208,460
Notes:
1) “Others” represents service-related businesses such as analysis, survey and research.
2) a) “Adjustments” of segment income for the year ended March 31, 2016 of ¥(20,692) million ($(183,115) thousand) includes
intersegment eliminations of ¥(167) million ($(1,478) thousand) and corporate expenses of ¥(20,525) million ($(181,637) thou-
sand). “Adjustments” of segment income for the year ended March 31, 2015 of ¥(20,709) million includes intersegment
eliminations of ¥(1,303) million and corporate expenses of ¥(19,406) million. The corporate expenses consist of the headquar-
ters’ research expenses, etc. that are not allocated to each reportable segment.
b) “Adjustments” of segment assets for the year ended March 31, 2016 of ¥(51,889) million ($(459,195) thousand) includes
intersegment eliminations of ¥(68,133) million ($(602,947) thousand) and corporate assets of ¥16,244 million ($143,752
thousand). “Adjustments” of segment assets for the year ended March 31, 2015 of ¥(51,181) million includes intersegment
eliminations of ¥(69,543) million and corporate assets of ¥18,362 million. The corporate assets consist of the headquarters’
research assets, etc. that are not allocated to each reportable segment.
3) “Segment income” is reconciled to operating income.
92
(Related information)
Geographic information
Sales to outside customers
Millions of yen
Asia
Year ended March 31, 2016:
Japan
China
Others
North America,
Europe
and other areas
Total
Sales to outside customers
¥995,093
¥ 352,967
¥ 387,219
¥ 369,151
¥ 2,104,430
Year ended March 31, 2015:
Japan
China
Others
Millions of yen
Asia
North America,
Europe
and other areas
Total
Sales to outside customers
¥ 929,797
¥ 344,545
¥ 387,962
¥ 348,430
¥ 2,010,734
Year ended March 31, 2016:
Japan
China
Others
Thousands of U.S. dollars
Asia
North America,
Europe
and other areas
Total
Sales to outside customers
$ 8,806,133
$ 3,123,602
$ 3,426,717
$ 3,266,823
$ 18,623,274
Sales amounts are allocated to countries or regions according to the customers’ location.
Toray Industries, Inc.Annual Report 2016
Property, plant and equipment, net
Millions of yen
Asia
North America, Europe
and other areas
March 31, 2016:
Japan
Republic of Korea
Others
U.S.A.
Others
Total
Property, plant and equipment, net
¥ 315,020
¥ 168,706
¥ 158,930
¥ 91,080
¥ 96,876
¥ 830,612
March 31, 2015:
Japan
Republic of Korea
Others
U.S.A.
Others
Total
Property, plant and equipment, net
¥ 321,535
¥ 164,467
¥ 173,970
¥ 84,589
¥ 111,032
¥ 855,593
Millions of yen
Asia
North America, Europe
and other areas
March 31, 2016:
Japan
Republic of Korea
Others
U.S.A.
Others
Total
Property, plant and equipment, net
$ 2,787,788
$ 1,492,973
$ 1,406,460
$ 806,018
$ 857,310
$ 7,350,549
Thousands of U.S. dollars
Asia
North America, Europe
and other areas
(Information about loss on impairment of fixed assets by reportable segments)
Year ended
March 31, 2016:
Loss on impairment
Year ended
March 31, 2015:
Loss on impairment
Year ended
March 31, 2016:
Loss on impairment
Millions of yen
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
¥ —
¥ 5,281
¥ 3,297
¥ —
¥ 485
¥ —
¥ —
¥ —
¥ 9,063
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
93
¥ 1,925
¥ 1,545
¥ 3,612
¥ —
¥ 833
¥ —
¥ —
¥ —
¥ 7,915
Millions of yen
Thousands of U.S. dollars
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
$ —
$ 46,735
$ 29,177
$ —
$ 4,292
$ —
$ —
$ —
$ 80,204
(Information about amortization and balance of goodwill by reportable segments)
Millions of yen
Year ended
March 31, 2016:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
¥ 1,331 ¥ 1,132
4,328
9,762
¥ 3,102 ¥ 3,116 ¥ 356
2,609
17,814 19,786
¥ —
—
¥ —
—
¥ — ¥ 9,037
— 54,299
Millions of yen
Year ended
March 31, 2015:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
¥ 1,239 ¥ 234
12,624
1,180
¥ 3,109 ¥ 2,659 ¥ 344
3,374
21,692 24,499
¥ —
—
¥ 1
—
¥ — ¥ 7,586
— 63,369
Thousands of U.S. dollars
Year ended
March 31, 2016:
Amortization of goodwill
Balance of goodwill
Fibers
&
Textiles
Plastics
&
Chemicals
IT-
related
Products
Carbon Fiber
Composite
Materials
Environment
&
Engineering Life Science
Others
Elimination
& Corporate
Total
$ 11,779 $ 10,018
86,389 38,301
$ 27,451 $ 27,575 $ 3,150
157,646 175,097 23,088
$ —
—
$ —
—
$ — $ 79,973
— 480,522
“Others” represents service-related businesses such as analysis, survey and research.
Toray Industries, Inc.Annual Report 2016
19. AMOUNTS PER SHARE
Basic net income per share is computed based on the net
income attributable to owners of parent available for distribu-
tion to stockholders of common stock and the weighted-average
number of shares of common stock outstanding during the year.
Diluted net income per share is computed based on the net
income attributable to owners of parent available for distribu-
tion to the stockholders and the weighted-average number of
shares of common stock outstanding during the year after giv-
ing effect to the dilutive potential of shares of common stock to
Net income attributable to owners of parent:
Basic
Diluted
Cash dividends applicable to the year
Net assets
be issued upon the exercise of warrants and stock acquisition
rights.
Amounts per share of net assets are computed based on the
net assets available for distribution to the stockholders and the
number of shares of common stock outstanding at year end.
Cash dividends per share represent the cash dividends pro-
posed by the Board of Directors applicable to the respective
years together with any interim cash dividends paid.
Yen
2016
2015
U.S. dollars
2016
¥ 56.38
56.31
13.00
591.50
¥ 44.33
44.28
11.00
616.70
$ 0.50
0.50
0.12
5.23
94
Toray Industries, Inc.Annual Report 2016
95
Toray Industries, Inc.Annual Report 2016 Investor Information
(As of March 31, 2016)
Common Stock:
Issued:
1,599,428,579 shares
(excluding treasury stock)
Number of Stockholders: 144,798
Annual General Meeting:
The annual general meeting of stockholders is
normally held in June in Tokyo.
Listings:
Common stock is listed on the Tokyo Stock
Exchange.
Independent Auditors:
Ernst & Young ShinNihon LLC
Transfer Agent:
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi Chiyoda-ku, Tokyo
100-0005, Japan
Cash Dividends Per Share
Total for the year
Interim
Principal Stockholders
The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
Nippon Life Insurance Co.
Mitsui Life Insurance Co., Ltd.
Sumitomo Mitsui Banking Corporation
Japan Trustee Services Bank, Ltd. (Trust 4 Account)
Japan Trustee Services Bank, Ltd. (Trust 9 Account)
State Street Bank West Client – Treaty 505234
Japan Trustee Services Bank, Ltd. (Trust 7 Account)
The Bank of New York Mellon SA/NV 10
FY 2015
FY 2014
¥13.00
¥11.00
6.00
5.00
Thousands of
shares
Percentage of
shares held
120,414
104,611
71,212
35,961
30,022
24,701
21,696
20,679
20,083
19,859
7.53
6.54
4.45
2.25
1.88
1.54
1.36
1.29
1.26
1.24
* Percentage of shares held is calculated excluding 32,052,824 shares of treasury stock.
Stock Price Range
Composition of Stockholders (Thousands of shares)
96
(Yen)
1,200
1,000
800
600
400
200
0
2011
April
2012
April
2013
April
2014
April
2015
April
2016
March
Treasury Stock
32,053
1.96%
Individuals and
Others
353,215
21.65%
Companies and
Individuals in
Foreign Countries
437,865
26.84%
Financial
Institutions
650,908
39.90%
Securities
Companies
18,845
1.16%
Other
Japanese
Companies
138,596
8.50%
Corporate Data
(As of March 31, 2016)
Toray Industries, Inc.
Head Office
Nihonbashi Mitsui Tower, 1-1,
Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8666, Japan
Telephone: 81 (3) 3245-5111
Facsimile: 81 (3) 3245-5054
URL:
http://www.toray.com
Established:
January 1926
Paid-in Capital:
¥147,873,030,771
Number of Employees:
45,839
Parent company:
7,223
Japanese subsidiaries: 10,520
Overseas subsidiaries: 28,096
Toray Industries, Inc.Annual Report 2016
97
Toray Industries, Inc.Annual Report 2016 Toray Industries, Inc.
1-1, Nihonbashi-Muromachi 2-chome,
Chuo-ku, Tokyo 103-8666, Japan
Telephone: 81(3)3245-5111
Facsimile: 81(3)3245-5054
URL:
http://www.toray.com
For questions about this report:
Contact IR Dept.
Telephone: 81(3)3245-5113
Facsimile: 81(3)3245-5459
e-mail:
ir@nts.toray.co.jp
T O R A YI S M
Printed in Japan
Issued: September 2016