Consolidated Financial Results for the Fiscal Year Ended March 31, 2012 [JGAAP]

Transcription

1 Consolidated Financial Results for the Fiscal Year Ended March 31, 2012 [JGAAP] May 11, 2012 Company Name: DAINICHISEIKA COLOR & CHEMICALS MFG. CO., LTD. Stock Code: 4116 (URL: Stock Exchange Listing: Tokyo Representative: Koji Takahashi, Representative Director and President Contact: Yoshihiko Takeichi, Director responsible for Finance & Accounting Department Phone: Scheduled date of Ordinary General Meeting of Shareholders: June 28, 2012 Scheduled date to commence dividend payments: June 29, 2012 Scheduled date to submit the Annual Securities Report: June 28, 2012 Availability of supplementary briefing material on annual results: None Scheduled date of Annual Results Briefing Session: Not scheduled (Figures are rounded down to the nearest million yen) 1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2012 (From April 1, 2011 to March 31, 2012) (1) Consolidated Results of Operations (% indicates changes from the previous corresponding term) Net sales Operating income Ordinary income Net income Millions of yen % Millions of yen % Millions of yen % Millions of yen % Year ended March 31, ,025 (2.0) 8,517 (11.2) 8,529 (7.6) 4,314 (7.5) Year ended March 31, , , , , (Note) Comprehensive income: Year ended March 31, 2012: 4,228 million [32.8 %] Year ended March 31, 2011: 3,184 million [(44.4 %)] Net income per share Ordinary Operating Fully diluted net income Return on equity income income per share to total assets to net sales Yen Yen % % % Year ended March 31, Year ended March 31, (Reference) Equity in earnings of affiliated companies: Year ended March 31, 2012: ( 15 million) Year ended March 31, 2011: 121 million (2) Consolidated Financial Position Year ended March 31, 2012 Year ended March 31, 2011 (Reference) Equity: Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen 152,405 50, ,740 47, Year ended March 31, 2012: 49,260 million Year ended March 31, 2011: 46,052 million (3) Consolidated Cash Flows Net cash provided by (used in) operating Year ended March 31, 2012 Year ended March 31, 2011 Net cash provided by Net cash provided by Cash and cash equivalents (used in) investing (used in) financing at end of period activities activities activities Millions of yen Millions of yen Millions of yen Millions of yen 7,761 (2,968) (2,765) 23,301 9,247 (1,211) (2,898) 21,484

2 2. Dividends Annual cash dividends per share Total dividends paid (annual) Payout ratio (consolidated) Dividends to net assets (consolidated) End of 1Q End of 2Q End of 3Q Year-end Annual Yen Yen Yen Yen Yen Millions of yen % % Year ended March 31, 2011 Year ended March 31, 2012 Year ending March 31, 2013 (Forecast) * In commemoration of the 80th anniversary of the Company in October 2011, a commemorative dividend will be paid as below. Breakdown of an interim dividend for the fiscal year ending March 2012: Ordinary dividend 5.00 yen, commemorative dividend 1.00 yen Breakdown of a year-end dividend for the fiscal year ending March 2012: Ordinary dividend 5.00 yen, commemorative dividend 1.00 yen (planned) , Forecast of Consolidated Financial Results for Fiscal Year Ending March 31, 2013 (From April 1, 2012 to March 31, 2013) (% indicates changes from the previous corresponding term) Net sales Operating income Ordinary income Net income Net income per share Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen First half 78,000 (0.9) 4,300 (7.2) 4,400 (1.3) 2,300 (2.7) Full year 160, , , , * Notes (1) Significant changes of subsidiaries during the fiscal year ended March 31, 2012 (changes in specific subsidiaries involving changes in the scope of consolidation): Not applicable (2) Changes in accounting policies, changes in accounting estimates and corrections of errors 1) Changes in accounting policies due to the revision of accounting standards, etc.: Not applicable. 2) Any changes in accounting policies other than 1) above: Not applicable. 3) Changes in accounting estimates: Not applicable. 4) Corrections of errors: Not applicable. (3) Total number of issued shares (common stock) 1) Total number of issued shares at the end of the period (including treasury stock): Year ended March 31, ,065,554 shares Year ended March 31, ,065,554 shares 2) Total number of treasury stock at the end of the period: Year ended March 31, ,430 shares Year ended March 31, ,743 shares 3) Average number of shares during the period : Year ended March 31, ,858,023 shares Year ended March 31, ,863,730 shares

3 (Reference) Summary of the Non-consolidated Financial Results 1. Overview of the Non-consolidated Financial and Operating Results for the Fiscal Year Ended March 31, 2012 (From April 1, 2011, to March 31, 2012) (1) Non-consolidated Results of Operations (% indicates changes from the previous corresponding term) Year ended March 31, 2012 Year ended March 31, 2011 Net sales Operating income Ordinary income Net income Millions of yen % Millions of yen % Millions of yen % Millions of yen % 134, ,124 (9.5) 5,564 (3.0) 972 (67.3) 134, , , , Year ended March 31, 2012 Year ended March 31, 2011 Net income per share Fully diluted net income per share Yen Yen (2) Non-consolidated Financial Position Year ended March 31, 2012 Year ended March 31, 2011 (Reference) Equity: Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen Year ended March 31, 2012: 37,491 million Year ended March 31, 2011: 37,292 million 116,295 37, ,475 37, * Presentation regarding the implementation status of the audit procedures: These consolidated financial results for the fiscal year ended March 31, 2012 are not covered by the audit procedure stipulated in the Financial Instruments and Exchange Act. At the time of the publication of these financial results, the audit procedure for consolidated financial statements stipulated in the Financial Instruments and Exchange Act is being implemented. * Explanation for the appropriate use of performance forecasts and other special notes: The statements regarding forecast of financial results in this report is based on the information that is available, as well as estimates, assumptions and projections that are believed to be reasonable at the time of publication. Therefore, there might be cases in which actual results differ from forecast values. For the premises of the forecast of financial results and the notes concerning the use of the forecast of financial results, please refer to 1. Operating Results (1) Analysis of Results of Operations on page 2 of the appendix to this report.

4 Table of Contents of Appendix 1. Operating Results 2 (1) Analysis of Results of Operations 2 (2) Analysis of Financial Position 3 (3) Principles of Appropriation of Profits and Dividend Payment for the Current Fiscal Year and the Next 4 2. Status of the Consolidated Group 5 3. Management Policy 6 (1) Basic Management Policy of the Company 6 (2) Targeted Management Benchmark 6 4. Consolidated Financial Statements 7 (1) Consolidated Balance Sheets 7 (2) Consolidated Statements of Income and Comprehensive Income 9 Consolidated Statements of Income 9 Consolidated Statements of Comprehensive Income 11 (3) Consolidated Statements of Changes in Net Assets 12 (4) Consolidated Statements of Cash Flows 14 (5) Notes to Going Concern Assumption 16 (6) Significant Matters Providing the Basis for Preparing Consolidated Financial Statements 16 (7) Additional Information 19 (8) Notes to Consolidated Financial Statements 19 (Notes to Consolidated Balance Sheets) 19 (Notes to Consolidated Statements of Income) 22 (Notes to Consolidated Statements of Changes in Net Assets) 22 (Notes to Consolidated Statements of Cash Flows) 24 (Segment Information, etc.) 25 (Per Share Information) 28 (Significant Subsequent Events) Other 29 Changes in Directors and Corporate Auditors 29 1

5 1. Operating Results (1) Analysis of Results of Operations During the fiscal year ended March 31, 2012, the Japanese economy was severely affected by the Great East Japan Earthquake, but with restoration of production activities by virtue of recovery of the supply chains, there were visible signs of gradual economic improvements. However, since there were still such concerns as the prolonged appreciation of the yen and the rise in the price of crude oil, the future of the economy remained uncertain. Looking overseas, in Asia, the pace of economic growth in China had been moderate but maintained a growth trend primarily driven by its own domestic demand. The U.S. economy showed moderate recovery due primarily to an increase in personal consumption, while in Europe, the economic environment was in a slump due to their sovereign debt problem. In such an economic environment, net sales for the fiscal year ended March 31, 2012 decreased to 156,025 million, down by 2.0% compared with the previous fiscal year, as, in large part, the yen s appreciation posted a loss generated from translating net sales of overseas subsidiaries into yen. In terms of profit, operating income decreased to 8,517 million, down by 11.2% compared with the previous fiscal year, and ordinary income decreased to 8,529 million, down by 7.6% compared with the previous fiscal year. These decreases were due to the decrease in net sales. Net income decreased to 4,314 million, down by 7.5% compared with the previous fiscal year, chiefly because the Company posted extraordinary losses, including loss on disaster caused by damages associated with the floods which occurred in Thailand and losses on valuation of investment securities and stocks of subsidiaries and affiliates. Operating results by business segment are as follows: The stated amount of operating income is before the reduction of corporate allocation. (Pigments business) In the Pigments business, the Group manufactures and sells various inorganic-organic pigments, various colorants, and information-recording materials. Although overall sales of general-use pigments mainly for the printing ink industry remained sluggish, suffering from the decline in advertising demand as a result of the earthquake, sales of information-recording materials for IT-related industries performed steadily, driven by an increase in demand in both the domestic and overseas markets. As a result, net sales in the segment stood at 24,767 million, down by 1.0% compared with the previous fiscal year, while operating income was 3,877 million, up by 6.0% compared with the previous fiscal year. (Prepared colors and Chemicals business) In the Prepared colors and Chemicals business, the Group manufactures and sells various colorants used in synthetic resins, various compounds and various coating materials. Sales of compounds intended for the automobile and OA equipment industries remained sluggish in the first half of the fiscal year, due to the impact of the earthquake. The floods that occurred in Thailand also caused damages such as the temporary closure of our subsidiaries in the latter half of the fiscal year. However, the business as a whole showed a gradual recovery following the restoration of the supply chain. On the other hand, sales of colorants for synthetic resins for lifestyle-related industries were strong, partly because of a certain demand for post-disaster reconstruction, while sales of various coating materials, mainly for the building materials industry, remained strong. As a result, net sales in the segment stood at 83,920 million, down by 3.3% compared with the previous fiscal year, while operating income was 5,618 million, down by 8.6% compared with the previous fiscal year. (Polymers business) In the Polymers business, the Group manufactures and sells polymer products and natural polymer products. Although domestic sales of urethane resins intended for the automobile industry slumped in the first half of the current period due to the impact of the Great East Japan Earthquake, they showed a moderate recovery following progress in restoration of the supply chain. Meanwhile, sales of urethane resins to the textile industries were steady throughout this fiscal year. 2

6 As a result, net sales in the segment stood at 15,534 million, down by 2.3% compared with the previous fiscal year, while operating income was 2,183 million, down by 5.9% compared with the previous fiscal year. (Printing Inks business) In the Printing Inks business, the Group manufactures and sells various printing inks and also offers merchandise and services associated with the business. Sales of gravure printing ink for foods and everyday items-related packaging industry remained solid throughout this fiscal year due to the special procurement in the wake of the earthquake. Sales of offset printing ink, particularly for commercial printed matters, stagnated, reflecting the decrease in advertising demand in consequence of the Great East Japan Earthquake. Profits remained sluggish partly due to the effects of rising raw material costs. As a result, net sales in the segment stood at 30,084 million, up by 1.2% compared with the previous fiscal year, while operating income was 1,829 million, down by 12.1% compared with the previous fiscal year. (Other business) In the Other business, the Group engages in resale of raw materials, leasing of real estate properties and financial businesses for group companies, and others. Net sales in this segment stood at 1,717 million, down by 0.5% compared with the previous fiscal year, while operating loss was 207 million due to the posting of real estate lease-related income as non-operating income, not as net sales. Consolidated financial results for the fiscal year ending March 31, 2013 are forecasted as follows: Consolidated net sales Consolidated operating income Consolidated ordinary income Consolidated net income 160,000 9,100 9,100 5,400 (2) Analysis of Financial Position (i) Assets, Liabilities and Net Assets (Assets) Total assets as at the end of the fiscal year ended March 31, 2012 increased by 4,665 million compared with the end of the previous fiscal year to 152,405 million. This is largely because of a 5,658 million increase in current assets due primarily to an increase in cash and deposits as well as notes and accounts receivable-trade by the effect of a bank holiday on the last day of the current fiscal year, and a 993 million decrease in noncurrent assets due primarily to a decline in reversal of long-term deferred tax assets. (Liabilities) Total liabilities as at the end of the fiscal year ended March 31, 2012 increased by 1,068 million compared with the end of the previous fiscal year to 101,720 million. This is largely because of an increase in notes and accounts payable-trade by the effect of a bank holiday on the last day of the current fiscal year and an increase in accounts payable-other due to accelerated capital investment, along with decreases in loans payable and provision for retirement benefits. (Net assets) Net assets as at the end of the fiscal year ended March 31, 2012 increased by 3,596 million compared with the end of the previous fiscal year to 50,684 million. This is largely because of a 3,292 million increase in retained earnings as a result of posting net income. (ii) Cash Flows In the fiscal year ended March 31, 2012, cash and cash equivalents (hereinafter referred to as net cash ) at the end of the current fiscal year increased by 1,817 million (or 8.5%) compared with the end of the previous fiscal year to 23,301 million. 3

7 Net cash provided by (used in) respective activities are as follows: (Net cash provided by (used in) operating activities) Net cash provided by operating activities decreased by 1,485 million (or 16.1%) compared with the previous fiscal year to 7,761 million, mainly because 7,055 million of income before income taxes and minority interests was recorded. (Net cash provided by (used in) investing activities) Net cash used in investing activities increased by 1,757 million (or 145.1%) compared with the previous fiscal year to 2,968 million. This was because of the 3,066 million spent in capital investment. (Net cash provided by (used in) financing activities) Net cash used in financing activities decreased by 132 million (or 4.6%) compared with the previous fiscal year to 2,765 million, mainly because of the 1,444 million used for the repayment of loans payable. (Reference) Transition of cash flow-related ratios Year ended March 31, 2008 Year ended March 31, 2009 Year ended March 31, 2010 Year ended March 31, 2011 Year ended March 31, 2012 Equity ratio (%) Equity ratio on a market value basis (%) Cash flows/ interest-bearing debt ratio (years) Interest coverage ratio (times) Equity ratio: Equity / Total assets Equity ratio on a market value basis: Market capitalization / Total assets Cash flows / interest-bearing debt ratio: Interest-bearing debt / Cash flows Interest coverage ratio: Cash flows / Interest payment Note 1: All ratios are calculated based on the consolidated financial data. Note 2: Market capitalization is calculated based on the number of shares issued excluding treasury stock. Note 3: Net cash provided by operating activities is quoted as cash flow here. Note 4: Interest-bearing debt refers to all debts involving interest payment, of all the debts recorded on the consolidated balance sheets. (3) Principles of Appropriation of Profits and Dividend Payment for the Current Fiscal Year and the Next The Company makes it a principle to pursue dividend policy in which the return of profits to shareholders is regarded as an important management priority, yet with broader consideration to the reinforcement of its operation basis through building up of internal reserves, for the business development in future. Dividend payment at the end of the fiscal year ended March 31, 2012 will be 6.00 per share (the sum of an ordinary dividend of 5.00 per share and a commemorative dividend of 1.00 per share for the 80th anniversary of the Company), based on the overall consideration of operating results, financing status and business environment of the current fiscal year. As a result, the annual dividend for the current fiscal year will be the sum of the year-end dividend of 6.00 per share and an interim dividend of 6.00 per share (the sum of an ordinary dividend of 5.00 per share and a commemorative dividend of 1.00 per share), which will result in per share. Dividends for the next fiscal year ending March 31, 2013 will be the sum of 6.00 per share for an interim dividend, and 6.00 per share for a year-end dividend, amounting to per share on an annual basis. 4

8 2. Status of the Consolidated Group The Group (the Company and its subsidiaries and affiliates) comprises the Company (Dainichiseika Color & Chemicals Mfg. Co., Ltd.) and its 51 subsidiaries and affiliates. The Company has consolidated 27 of its principal subsidiaries. Of the unconsolidated 13 subsidiaries and 11 affiliates, 3 are subject to equity method. The Group s principal businesses and the relationships of the Group companies to each business are as follows. (Pigments business) In the Pigments business, the Group manufactures and sells various inorganic-organic pigments, various colorants, and information-recording materials. The Company and its consolidated subsidiary, DAICOLOR ITALY S.R.L., are principally engaged in manufacturing and distribution of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Prepared colors and Chemicals business) In the Prepared colors and Chemicals business, the Group manufactures and sells various colorants used in synthetic resins, various compounds and various coating materials. The Company and its consolidated subsidiaries including DAINICHISEIKA (HK) COLORING CO., LTD., and DAINICHI COLOR (THAILAND), LTD. are principally engaged in manufacturing and distribution of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Polymers business) In the Polymers business, the Group manufactures and sells polymer products and natural polymer products. The Company and its consolidated subsidiary, UKIMA COLOR & CHEMICALS MFG. CO., LTD., are principally engaged in manufacturing and sales of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Printing Inks business) In the Printing Inks business, the Group manufactures and sells various printing inks and also offers merchandise and services associated with the business. The Company and its consolidated subsidiary, P.T.HI-TECH INK INDONESIA, are principally engaged in manufacturing and sales of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Others Division) In the Other business, the Group engages in resale of raw materials, leasing of real estate properties and financial businesses for group companies, and others. The Company and its consolidated subsidiary, DSF CO., LTD., are principally engaged in these businesses. 5

9 3. Management Policy (1) Basic Management Policy of the Company Richness in our daily lives goes together with colorful environment. DAINICHISEIKA COLOR & CHEMICALS MFG. CO., LTD., a comprehensive high-tech manufacturer of color materials, and its 51 subsidiaries and affiliates comprise the Group. Each Group company provides colors using sophisticated fine chemical technologies, thus fulfills our corporate philosophy that we contribute to the creation of a beautiful color environment of the earth community. As chemical manufacturers, we take environmental issue seriously by developing systematic approaches to manage environment, along with responsible care movement which involves responsible attitude paying due attention and consideration to health, safety and environment. Furthermore, we endeavor to develop global business as an environment-conscious excellent company of the 21st century, providing sponsorship to various color-creating activities as part of our corporate philanthropy. Our basic business policies are as follows: (i) Activities to create demand for various colors by marketing effort closely integrating sales and engineering functions within the Group (ii) Development of original products capitalizing on the Group s sophisticated technologies that have been developed over many years in the areas of pigment synthesis, organic synthesis, special resin synthesis, creation of functional substance, along with technologies for fine particles dispersion (iii) Further development of overseas businesses to keep up with the globalized market (2) Targeted Management Benchmark 5% or higher consolidated ROA (return on asset) is targeted as the principal management objective of the Group, by way of efficient investment of assets, enhancement of earning power, as well as improvement and reinforcement of financial position. 6

10 4. Consolidated Financial Statements (1) Consolidated Balance Sheets (As of March 31, 2011) (As of March 31, 2012) Assets Current assets Cash and deposits 21,512 23,458 Notes and accounts receivable-trade 44,128 *7 45,731 Short-term investment securities Merchandise and finished goods 13,275 14,107 Work in process Raw materials and supplies 7,884 7,878 Deferred tax assets 1,402 1,676 Other 851 1,860 Allowance for doubtful accounts (119) (141) Total current assets 89,300 94,958 Noncurrent assets Property, plant and equipment Buildings and structures *2 35,506 *2 36,488 Accumulated depreciation (23,424) (24,239) Buildings and structures, net *3 12,081 *3 12,248 Machinery, equipment and vehicles 43,389 45,001 Accumulated depreciation (37,133) (38,628) Machinery, equipment and vehicles, net *3 6,256 *3 6,373 Tools, furniture and fixtures 9,340 9,452 Accumulated depreciation (8,368) (8,472) Tools, furniture and fixtures, net *3 972 *3 980 Land *3 20,312 *3 19,943 Lease assets 884 1,149 Accumulated depreciation (255) (407) Lease assets, net Construction in progress 203 1,142 Total property, plant and equipment 40,455 41,430 Intangible assets Other Total intangible assets Investments and other assets Investment securities *1 *3 10,474 *1 *3 10,057 Investments in capital *1 1,600 *1 1,491 Deferred tax assets 3,247 1,874 Other 2,216 1,975 Allowance for doubtful accounts (472) (364) Total investments and other assets 17,066 15,035 Total noncurrent assets 58,440 57,447 Total assets 147, ,405 7

11 (As of March 31, 2011) (As of March 31, 2012) Liabilities Current liabilities Notes and accounts payable-trade 28,359 *7 30,266 Short-term loans payable 26,982 25,042 Current portion of long-term loans payable *3 7,293 *3 9,110 Lease obligations Income taxes payable 1,171 1,245 Provision for bonuses 2,040 2,024 Provision for loss on plant closing 3 - Provision for environmental measures Other 3,636 5,616 Total current liabilities 70,071 73,836 Noncurrent liabilities Long-term loans payable *3 18,876 *3 17,501 Lease obligations 1,100 1,057 Deferred tax liabilities Provision for retirement benefits 8,602 7,631 Provision for directors' retirement benefits Provision for environmental measures Negative goodwill 94 - Other Total noncurrent liabilities 30,580 27,883 Total liabilities 100, ,720 Net assets Shareholders' equity Capital stock 10,039 10,039 Capital surplus 9,193 9,193 Retained earnings 31,349 34,642 Treasury stock (87) (89) Total shareholders' equity 50,495 53,786 Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges (27) (17) Foreign currency translation adjustment (4,674) (5,138) Total accumulated other comprehensive income (4,442) (4,525) Minority interests 1,036 1,424 Total net assets 47,088 50,684 Total liabilities and net assets 147, ,405 8

12 (2) Consolidated Statements of Income and Comprehensive Income (Consolidated Statements of Income) (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Net sales 159, ,025 Cost of sales 133, ,397 Gross profit 25,484 24,627 Selling, general and administrative expenses Haulage expenses 2,702 2,581 Provision of allowance for doubtful accounts Salaries and allowances 4,951 4,967 Provision for bonuses Provision for directors' retirement benefits Retirement benefit expenses Other 6,819 7,159 Total selling, general and administrative expenses 15,887 16,109 Operating income 9,596 8,517 Non-operating income Interest income Dividends income Rent income on noncurrent assets Equity in earnings of affiliates Amortization of negative goodwill Dividends income of insurance Insurance income Other Total non-operating income 1,223 1,077 Non-operating expenses Interest expenses Rent expenses on noncurrent assets Foreign exchange losses Loss on sales of notes payable Equity in losses of affiliates - 15 Other Total non-operating expenses 1,583 1,065 Ordinary income 9,236 8,529 Extraordinary income Gain on step acquisitions Gain on sales of noncurrent assets Gain on negative goodwill Reversal of allowance for doubtful accounts Insurance income - *1 404 Other Total extraordinary income 1,

13 Extraordinary loss (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Loss on sales of noncurrent assets 6 8 Loss on retirement of noncurrent assets Loss on valuation of investment securities Impairment loss 1,613 - Loss on valuation of stocks of subsidiaries and affiliates Environmental expenses Loss on adjustment for changes of accounting standard for asset retirement obligations Loss on disaster 148 *2 863 Other Total extraordinary loss 2,393 2,121 Income before income taxes and minority interests 7,944 7,055 Income taxes-current 1,536 1,775 Income taxes-deferred 1, Total income taxes 3,148 2,693 Income before minority interests 4,796 4,362 Minority interests in income Net income 4,665 4,314 10

14 (Consolidated Statements of Comprehensive Income) (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Income before minority interests 4,796 4,362 Other comprehensive income Valuation difference on available-for-sale securities (681) 371 Deferred gains or losses on hedges 21 9 Foreign currency translation adjustment (825) (424) Share of other comprehensive income of associates accounted for using equity method (127) (89) Total other comprehensive income (1,612) (133) Comprehensive income 3,184 4,228 Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to minority interests 3,100 4, (2) 11

15 (3) Consolidated Statements of Changes in Net Assets Shareholders' equity (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Capital stock Balance at the beginning of current period 10,039 10,039 Changes of items during the period Total changes of items during the period - - Balance at the end of current period 10,039 10,039 Capital surplus Balance at the beginning of current period 9,193 9,193 Changes of items during the period Total changes of items during the period - - Balance at the end of current period 9,193 9,193 Retained earnings Balance at the beginning of current period 27,612 31,349 Changes of items during the period Dividends from surplus (928) (1,021) Net income 4,665 4,314 Total changes of items during the period 3,737 3,292 Balance at the end of current period 31,349 34,642 Treasury stock Balance at the beginning of current period (85) (87) Changes of items during the period Purchase of treasury stock (2) (1) Total changes of items during the period (2) (1) Balance at the end of current period (87) (89) Total shareholders' equity Balance at the beginning of current period 46,760 50,495 Changes of items during the period Dividends from surplus (928) (1,021) Net income 4,665 4,314 Purchase of treasury stock (2) (1) Total changes of items during the period 3,734 3,291 Balance at the end of current period 50,495 53,786 12

16 Accumulated other comprehensive income (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Valuation difference on available-for-sale securities Balance at the beginning of current period Changes of items during the period Net changes of items other than shareholders equity (673) 370 Total changes of items during the period (673) 370 Balance at the end of current period Deferred gains or losses on hedges Balance at the beginning of current period (48) (27) Changes of items during the period Net changes of items other than shareholders' equity 21 9 Total changes of items during the period 21 9 Balance at the end of current period (27) (17) Foreign currency translation adjustment Balance at the beginning of current period (3,760) (4,674) Changes of items during the period Net changes of items other than shareholders' equity (913) (463) Total changes of items during the period (913) (463) Balance at the end of current period (4,674) (5,138) Total accumulated other comprehensive income Balance at the beginning of current period (2,877) (4,442) Changes of items during the period Net changes of items other than shareholders' equity (1,565) (83) Total changes of items during the period (1,565) (83) Balance at the end of current period (4,442) (4,525) Minority interests Balance at the beginning of current period 1,309 1,036 Changes of items during the period Net changes of items other than shareholders' equity (272) 388 Total changes of items during the period (272) 388 Balance at the end of current period 1,036 1,424 Total net assets Balance at the beginning of current period 45,192 47,088 Changes of items during the period Dividends from surplus (928) (1,021) Net income 4,665 4,314 Purchase of treasury stock (2) (1) Net changes of items other than shareholders' equity (1,838) 304 Total changes of items during the period 1,895 3,596 Balance at the end of current period 47,088 50,684 13

17 (4) Consolidated Statements of Cash Flows Net cash provided by (used in) operating activities (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Income before income taxes and minority interests 7,944 7,055 Depreciation and amortization 3,595 3,608 Impairment loss 1,613 - Increase (decrease) in provision for retirement benefits (1,239) (963) Increase (decrease) in provision for directors retirement benefits 40 (48) Increase (decrease) in provision for bonuses (37) (98) Increase (decrease) in allowance for doubtful accounts (1,678) (83) Interest and dividends income (226) (238) Interest expenses Foreign exchange losses (gains) Equity in (earnings) losses of affiliates (121) 15 Proceeds from dividends income from affiliates accounted for by equity method Loss (gain) on valuation of investment securities Loss (gain) on sales of property, plant and equipment (566) (57) Loss on retirement of property, plant and equipment Decrease (increase) in notes and accounts receivable-trade (1,883) (1,916) Decrease (increase) in inventories (1,169) (883) Increase (decrease) in notes and accounts payable-trade 2,547 2,264 Other, net 797 (903) Subtotal 11,002 9,760 Interest and dividends income received Interest expenses paid (892) (800) Income taxes paid (1,088) (1,436) Net cash provided by (used in) operating activities 9,247 7,761 Net cash provided by (used in) investing activities Payments into time deposits (50) (62) Proceeds from withdrawal of time deposits Purchase of short-term investment securities (19) (2) Proceeds from sales of short-term investment securities 26 1 Purchase of property, plant and equipment (2,487) (3,066) Proceeds from sales of property, plant and equipment 1, Purchase of investment securities (129) (63) Proceeds from sales of investment securities 20 0 Purchase of investments in capital of subsidiaries resulting in change in scope of consolidation - *2 (249) Payments of loans receivable (96) (31) Collection of loans receivable Other, net 106 (178) Net cash provided by (used in) investing activities (1,211) (2,968) 14

18 Net cash provided by (used in) financing activities (From April 1, 2010 to March 31, 2011) (From April 1, 2011 to March 31, 2012) Increase in short-term loans payable 17,399 18,180 Decrease in short-term loans payable (18,346) (20,071) Proceeds from long-term loans payable 8,104 8,150 Repayment of long-term loans payable (8,911) (7,703) Repayments of lease obligations (196) (271) Purchase of treasury stock (2) (1) Cash dividends paid (928) (1,021) Cash dividends paid to minority shareholders (17) (27) Net cash provided by (used in) financing activities (2,898) (2,765) Effect of exchange rate change on cash and cash equivalents (423) (209) Net increase (decrease) in cash and cash equivalents 4,714 1,817 Cash and cash equivalents at beginning of period 16,770 21,484 Cash and cash equivalents at end of period *1 21,484 *1 23,301 15

19 (5) Notes to Going Concern Assumption Not applicable. (6) Significant Matters Providing the Basis for Preparing Consolidated Financial Statements (From April 1, 2011 to March 31, 2012) 1. Scope of consolidation (1) Number of consolidated subsidiaries: 27 companies Names of the principal consolidated subsidiaries are omitted, as they are outlined in 2. Status of the Consolidated Group. SHANGHAI MITSUI PLASTIC COMPOUNDS LTD. has been included in the scope of consolidation since the current fiscal year due to the additional equity acquisition. (2) Name of principal non-consolidated subsidiaries Principal non-consolidated subsidiaries: DAICOLOR DO BRASIL IND.E COM.LTDA. (Reason for exclusion from scope of consolidation) Subsidiaries classified as non-consolidated are all small, and none has total assets, net sales, net income (loss) (corresponding to the percentage of equity held), retained earnings (corresponding to the percentage of equity held), etc. that materially impact the consolidated financial statements. 2. Scope of application of the equity method (1) Number of affiliates accounted for by the equity method: 3 companies TAI CHIN CHEMICAL INDUSTRY CO., LTD. SAMBO FINE CHEMICAL MANUFACTURING CO., LTD. PLALLOY MTD B.V. (2) As net income (loss) and retained earnings (corresponding to the percentage of equity held) of non-consolidated subsidiaries not accounted for by the equity method (such as SANWA PROCESS INC.) and affiliates not accounted for by the equity method (such as KYOSEI CHEMICAL CO., LTD.) have minor impact on the consolidated financial statements even if they are excluded from the scope of equity method, and their overall importance is also small. Therefore, they are not included in the scope of the equity method. (3) For the affiliates accounted for by the equity method having fiscal year end different from the consolidated fiscal year end, the financial statements regarding their respective fiscal year are used. 3. Fiscal year, etc. of consolidated subsidiaries The fiscal year end of all 27 consolidated subsidiaries except for 15 overseas consolidated subsidiaries is March 31, the same as the consolidated fiscal year end. The fiscal year end of overseas consolidated subsidiaries is December 31 and the Company used their financial statements as of their respective fiscal year end in the preparation of the consolidated financial statements, making adjustments, if necessary, for significant transactions that occurred in the period from their fiscal year end to the consolidated fiscal year end. 4. Accounting standards (1) Valuation standards and methods regarding significant assets 1) Short-term investment securities a. Short-term investment securities for trading purposes: Market value method (cost of securities sold is calculated primarily using the moving-average method.) b. Held-to-maturity debt securities: Cost amortization method (straight-line) c. Available-for-sale securities: Securities with market value Market value method based on the quoted market price at the fiscal year-end (with any unrealized gains or losses being reported directly as a component of shareholders equity and the cost of securities sold is calculated primarily using the moving-average method). 16

20 (From April 1, 2011 to March 31, 2012) Securities with no market value Stated at cost calculated primarily using the moving-average method. 2) Derivatives Market value method 3) Monetary trusts for investment purposes Market value method 4) Inventories Mainly stated at cost, computed on a periodic average basis (where amounts shown on the balance sheet taken into account declines in book values based on reduced profitability) for the Company and consolidated subsidiaries in Japan, and mainly stated at cost or market, computed on FIFO basis for consolidated overseas subsidiaries. (2) Depreciation method for significant depreciable assets 1) Property, plant and equipment (excluding lease assets) The declining balance method is applied in principle. However, for buildings, machinery and equipment of the Company s Tokai manufacturing plant, and buildings and structures, machinery, equipment and vehicles, and tools, furniture and fixtures of overseas consolidated subsidiaries, the straight-line method is applied. In addition, for buildings acquired by the Company s plants other than Tokai manufacturing plant or domestic consolidated subsidiaries on and after April 1, 1998 (excluding accompanying facilities), the straight-line method is also applied. Useful lives for major items are as follows: Buildings and structures 8 50 years Machinery, equipment and vehicles 4 10 years 2) Intangible assets (excluding lease assets) Straight-line method is applied. To software for sale, straight-line method over an estimated marketable life (3 years) is applied, and to software for internal use, straight-line method over an estimated internal useful life (5 years) is applied. 3) Lease assets Lease assets on finance leases that do not transfer ownership: Straight-line method is applied, with useful lives being lease terms and assuming that residual values would be zero. All lease transactions entered into on or before March 31, 2008 related to finance leases that do not transfer ownership continue to be treated as ordinary rental transactions for accounting purposes. (3) Accounting standards for significant allowances and provisions 1) Allowance for doubtful accounts The Company and domestic consolidated subsidiaries provide for possible credit losses stemming from notes and accounts receivable-trade and loans receivable. Estimates of irrecoverable amounts are calculated based on historical default rates for ordinary receivables, and on a consideration of feasibly recoverable amounts in individual cases of specific debts where recovery is doubtful. Overseas subsidiaries recognize allowances primarily for specific receivables based on the estimated uncollectible amounts. 2) Provision for bonuses The Company and domestic consolidated subsidiaries provide for payments of employee bonuses based on the estimated amount that is attributable to the fiscal year. 3) Provision for environmental measures The Company provides for expenditure for environmental measures based on the estimated amount of such expenditure as of the end of this fiscal year. 17

21 (From April 1, 2011 to March 31, 2012) 4) Provision for loss on plant closing The Company provides for estimated expenses for closing of Montcada Factory and Barcelona office of DAICOLORCHEM EU, S. A. (Spain). 5) Provision for retirement benefits The Company and its domestic consolidated subsidiaries provide for the payment of employees retirement benefits based on the projected retirement benefit obligations and related pension assets as of the end of this fiscal year. Past service liabilities are charged to expenses, using the straight-line method, over the determined years (10 years) that are no longer than average remaining service years of the employees at the time of occurrence. Actuarial differences are amortized evenly using the straight-line method over the determined years (14 years) that are no longer than the average remaining service years of employees, beginning from the fiscal year following the time of occurrence. 6) Provision for directors retirement benefits The Company provides for the payment of retirement benefits to directors based on the amount of liabilities as of the end of this fiscal year in accordance with internal regulations regarding directors retirement benefits. (4) Translation of significant assets and liabilities denominated in foreign currencies into yen Monetary claims and liabilities denominated in foreign currencies have been translated into yen at the rates of exchange in effect at the fiscal year end. Translation adjustments are treated as gains or losses. Assets and liabilities as well as revenues and expenses of overseas subsidiaries have been translated into yen at the exchange rates in effect as of the fiscal year end, and the resulting translation differences are included in foreign currency translation adjustment and minority interests in net assets. (5) Significant hedge accounting method 1) Hedge accounting method In principle, deferred hedge accounting is adopted. Designation transactions are applied to foreign exchange forward contracts which conform to the requirements for designation transactions. Special treatment is applied to interest rate swaps which conform to the special treatment requirements. 2) Means of hedging and hedging items Means of hedging: Foreign exchange forward contracts Hedging items: Foreign currency-denominated monetary claims and liabilities and provisional foreign currency-denominated transactions Means of hedging: Interest rate swaps Hedging items: Borrowings 3) Hedging policy The Company enters into hedging transactions principally in accordance with internal regulations, the Risk Management Policy regarding Derivative Transactions for the sole purpose of hedging risks from fluctuations in foreign exchange rate and interest rate. The Company will not make use of them for the purpose of short-term gain on sales or speculative transactions. 4) Methods for evaluating the effectiveness of hedges In principle, the Company evaluates the effectiveness of transactions to hedge cash-flow fluctuation risks caused by interest rate fluctuations on floating-rate loans payable by performing a ratio analysis of the total of the interest rate fluctuation amount on the underlying loans payable and the interest rate fluctuation amount on the interest rate swap transaction. The Company evaluates hedge effectiveness on a periodic basis. However, the Company does not evaluate the effectiveness of interest rate swaps that meet the conditions established for exceptional treatment. 18

22 (From April 1, 2011 to March 31, 2012) (6) Amortization of goodwill Goodwill is in principle amortized on a straight line basis over 5 years from the date of accrual. Though negative goodwill is in principle recorded as income of the fiscal year in which negative goodwill is accrued, negative goodwill accrued before March 31, 2010 is amortized on a straight line basis over 5 years. (7) Scope of cash and cash equivalents in the consolidated statements of cash flows Cash and cash equivalents as stated in the consolidated statements of cash flows consist of cash in hand, readily available deposits, and any short-term liquid investments with a maturity not exceeding three months at the time of purchase whose value is not subject to significant fluctuation risk. (8) Other significant matters for preparing consolidated financial statements Accounting method for consumption taxes All accounting transactions are booked to the exclusion of any national or local consumption taxes. (7) Additional Information (From April 1, 2011 to March 31, 2012) (Application of Accounting Standards for Accounting Changes and Error Corrections) For accounting changes and error corrections made on and after the beginning of the current fiscal year, the Company applies the Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No.24, December 4, 2009), and the Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ Guidance No.24, December 4, 2009). (8) Notes to Consolidated Financial Statements (Notes to Consolidated Balance Sheets) *1 Items and their amount to non-consolidated subsidiaries and affiliates are as follows: Investment securities (stocks) Investment in capital (As of March 31, 2011) 1,854 1,538 (As of March 31, 2012) 1,296 1,486 *2 For the structures acquired in past fiscal year, the amount of reduction entry for the subsidies from local governments is deducted from the amount on the consolidated balance sheets. The amounts are as follows: (As of March 31, 2011) (As of March 31, 2012)

23 *3 Pledged assets and secured debt Pledged assets are as follows: Buildings and structures (factory foundation) Machinery, equipment and vehicles (factory foundation) (As of March 31, 2011) 3,397 (3,371) 2,945 (2,945) (As of March 31, 2012) 3,796 (3,796) 2,930 (2,930) Tools, furniture and fixtures (factory foundation) 455 (455) 442 (442) Land (factory foundation) 1,300 (1,199) 1,199 (1,199) Investment securities Total (factory foundation) 308 8,407 (7,972) 323 8,692 (8,369) Secured debts are as follows: Long-term loans payable (Including current portion of long-term loans payable) (factory foundation) (As of March 31, 2011) 4,832 (4,730) (As of March 31, 2012) 4,333 (4,333) In addition to the secured debts above, the Company provides the aforementioned pledged assets (investment securities) for long-term loan payable of DAINICHI COLOR INDIA PRIVATE LIMITED to financial institutes. The amounts are as follows: (As of March 31, 2011) (As of March 31, 2012)

24 4 Guarantee liabilities The Company guarantees loans payable of companies other than consolidated subsidiaries to financial institutes, etc. (As of March 31, 2011) (As of March 31, 2012) Loans affiliated with employees DAINICHI COLOR INDIA PRIVATE LIMITED DAINICHISEIKA INK (GUANGZHOU) LTD. Other (four) DAINICHI COLOR INDIA PRIVATE LIMITED Loans affiliated with employees DAINICHISEIKA INK (GUANGZHOU) LTD. Other (five) Total 1,100 Total 1,075 5 Notes receivable discounted (As of March 31, 2011) (As of March 31, 2012) Notes receivable discounted 2,506 2,001 6 Notes receivable transferred by endorsement Notes receivable transferred by endorsement (As of March 31, 2011) 2 1 (As of March 31, 2012) *7 Bills to be matured on the last day of the fiscal year For the accounting method of bills that are matured on the last day of the fiscal year, the settlement of those bills is made on the days of bill clearing. Since the last day of the current fiscal year was a bank holiday, the following bills have been included in the balance at the end of the current fiscal year. Notes receivable Notes payable (As of March 31, 2011) (As of March 31, 2012) The Company concluded commitment line contract with three banks for the efficient procurement of operating funds. The balance of unused portion of the commitment line contract is as follows: Total amount of commitment line contract Balance of debt based on the commitment line contract (As of March 31, 2011) 5,000 (As of March 31, 2012) 5,000 Balance 5,000 5,000 21