Consolidated Financial Results for the Fiscal Year ended December 31, 2013 (IFRS basis)

Transcription

1 February 7, 2014 Corporate Name: Asahi Glass Co., Ltd. President & CEO: Kazuhiko Ishimura (Code Number: 5201; TSE 1st section) Contact: Junichi Kobayashi, General Manager, Corporate Communications & Investor Relations (Tel: ) Consolidated Financial Results for the Fiscal Year ended December 31, 2013 (IFRS basis) (Fractions less than one million yen are rounded off.) 1. Financial Results for FY2013 (January 1 through December 31, 2013) (1) Consolidated Operating Results (Percentage figures show year-on-year changes.) FY2013 (Jan. through Dec. 2013) FY2012 (Jan. through Dec. 2012) millions of yen % millions of yen % Net sales 1,320, ,189,952 - Operating profit 79,894 (21.5) 101,751 - Profit before tax 44,381 (40.8) 74,998 - Profit for the year 19,023 (63.8) 52,512 - Profit for the year attributable to owners of the parent 16,139 (66.7) 48,433 - Total comprehensive income for the year 215, ,941 - Basic earnings per share (yen) Diluted earnings per share (yen) Profit ratio to equity attributable to owners of the parent (%) Ratio of profit for the year to total assets (%) Ratio of operating profit to net sales (%) Reference: Share of profit of associates and joint ventures accounted for using equity method -FY2013; 1,007 million yen -FY2012; 1,646 million yen (2) Consolidated Financial Position FY2013 (as of December 31, 2013) FY2012 (as of December 31, 2012) Total assets (millions of yen) 2,120,629 1,916,394 Total equity (millions of yen) 1,145, ,747 Equity attributable to owners of the parent (millions of yen) 1,087, ,304 Equity attributable to owners of the parent ratio (%) Equity attributable to owners of the parent per share (yen)

2 (3) Consolidated Cash Flows FY2013 (Jan. through Dec. 2013) FY2012 (Jan. through Dec. 2012) Cash flows from operating activities (millions of yen) 167, ,165 Cash flows from investing activities (millions of yen) (145,978) (158,646) Cash flows from financing activities (millions of yen) (33,562) (4,066) Cash and cash equivalents at the end of the year (millions of yen) 132, , Dividends (Base date) FY2012 FY2013 FY2014(forecast) End of the first quarter (yen) End of the second quarter (yen) Dividend per share End of the third quarter (yen) End of the fiscal year (yen) Full fiscal year (yen) Total dividend distribution (full fiscal year) (millions of yen) 30,049 20,804 - Payout ratio (consolidated) (%) Ratio of dividend distribution to equity attributable to owners of the parent (consolidated) (%) Forecast for FY2014 (January 1 through December 31, 2014) First half (Percentage figures show year-on-year changes.) Full fiscal year millions of yen % millions of yen % Net sales 700,000-1,400, Operating profit 30,000-75,000 (6.1) Profit before tax ,000 (9.9) Profit for the year , Profit for the year attributable to owners of the parent , Basic earnings per share (yen) (Note) The forecast for the six months ending June 30, 2014 consists of forecast net sales and operating profit only. *Notes (1) Changes in Significant Subsidiaries during the Period under Review (Changes in specific subsidiaries involving changes in the scope of consolidation): No (2) Changes in Accounting Policies and Changes in Accounting Estimates i. Changes in accounting policies required by IFRS: No ii. Changes in accounting policies other than "i" above: No iii. Changes in accounting estimates: No

3 (3) Number of Shares Issued (ordinary shares) ⅰ. Number of shares issued (including treasury shares) at the end of the period -FY2013 (as of December 31, 2013): 1,186,705,905 -FY2012 (as of December 31, 2012): 1,186,705,905 ⅱ. Number of treasury shares at the end of the period -FY2013 (as of December 31, 2013): 30,945,903 -FY2012 (as of December 31, 2012): 31,123,685 ⅲ. Average number of shares issued during the period -FY2013 (Jan. through Dec. 2013): 1,155,720,349 -FY2012 (Jan. through Dec. 2012): 1,155,879,351 [Reference] (1) Non-Consolidated Operating Results FY2013 (Jan. through Dec. 2013) (Percentage figures show year-on-year changes.) FY2012 (Jan. through Dec. 2012) millions of yen % millions of yen % Net sales 540,108 (0.6) 543,103 (3.1) Operating income 15,108 (17.4) 18,280 (71.1) Ordinary income 43, ,970 (59.9) Net income 37, ,543 (93.4) Net income per share -basic (yen) Net income per share -fully diluted (yen) (2) Non-Consolidated Financial Position FY2013 (as of December 31, 2013) FY2012 (as of December 31, 2012) Total assets (millions of yen) 1,244,448 1,157,597 Total net assets (millions of yen) 580, ,220 Equity ratio (%) Equity per share (yen) Reference: Total Shareholders' Equity at -FY2013; 578,562 million yen *Adoption of International Financial Reporting Standards ( IFRS ) 1) The AGC Group has adopted the International Financial Reporting Standards ( IFRS ) from the fiscal year ending December 31, In addition, the Group presented the consolidated financial statements for the full previous fiscal year in compliance with IFRS. -FY2012; 529,358 million yen 2) For differences between IFRS and Japanese Generally Accepted Accounting Principles ( Japanese GAAP ) in respect of the Group s financial data for the previous fiscal year, please refer to page 32 to 42. *Appropriate Use of Forecast and Other Information and Other Matters The above forecast in based on information available to the Company at the time of publication of this document and assumptions concerning uncertainties which might affect the AGC Group s future financial results. It is not intended to be a guarantee of future events, and may differ from actual results for various reasons. For matters concerning the above forecast, please see page 5 and 6. *Supplementary Materials for the Financial Results Supplementary materials are available on our website.

4 (Attached Documents) INDEX 1. Operating Results 2 (1) Analysis of Operating Results 2 (2) Qualitative Information Regarding Consolidated Financial Position 3 (3) Forecast for FY (4) Allocation and Distribution of Profits and Dividends 6 2. Overview of the AGC Group 6 3. Management Policy 8 (1) Fundamental Policy of Management 8 (2) Medium- and Long-Term Strategies <Management policy Grow Beyond> 8 (3) Issues to be addressed <Medium-term plan Grow Beyond-2015 > 8 4. Consolidated Financial Statements (IFRS) 11 (1) Consolidated Statement of Financial Position 11 (2) Consolidated Statement of Profit or Loss and Consolidated Statement of Comprehensive Income 13 (3) Consolidated Statement of Changes in Equity 15 (4) Consolidated Statement of Cash Flows 19 (5) Notes to the Consolidated Financial Statements 20 1

5 Qualitative Information and Financial Statements 1. Operating Results (1) Analysis of Operating Results Adoption of International Financial Reporting Standards ( IFRS ) From the fiscal year ending December 31, 2013, the Company and its affiliated companies (the AGC Group or the Group ) have adopted International Financial Reporting Standards ( IFRS ) in lieu of Japanese Generally Accepted Accounting Principles ( Japanese GAAP ) previously adopted. All the data are presented under IFRS, and analyses involving the previous fiscal year results have also been adjusted to be IFRS-based. For differences between IFRS and Japanese GAAP in respect of the Group s financial data for the previous fiscal year, please refer to 4. Consolidated Financial Statements (IFRS) (5) Notes to the Consolidated Financial Statements 7) First-time Adoption on page 32. Operating results for FY2013 During the fiscal year under review (from January 1, 2013 to December 31, 2013), the global economic environment surrounding the AGC Group had been characterized by a continued gradual recovery, despite the impact of fiscal and financial problems in Europe and a slowdown in the expansion of exports and domestic demand in fast-growing countries. In Europe, the economy remained weak due to high unemployment rates and declining consumer spending which were triggered by the fiscal crisis in some European countries. In Asia, economic conditions were generally favorable backed by its strong exports and consumer spending, despite the slowing economic growth in some countries, mainly in China. In Japan, the economy gradually picked up, driven by the recovery of exports and robust consumer spending. In the United States, the economy gradually recovered thanks to continued improvement in housing starts, though they remained at low levels, and stable consumer spending. Under such a business environment, the AGC Group posted net sales of 1,320.0 billion yen, a billion yen or 10.9% increase from the previous fiscal year thanks to increase of the shipments of electronics-related products and progress of yen depreciation. However, the Group was also affected by a price decline in products and price increases in fuels and raw materials, the reduction of profitability of foreign subsidiaries by progress of yen depreciation. As a result, operating profit decreased by 21.9 billion yen or 21.5 % year-on-year to 79.9 billion yen, and profit before tax decreased by 30.6 billion yen or 40.8% to 44.4 billion yen. Profit for the year attributable to owners of the parent was 16.1 billion yen, a 32.3 billion yen or 66.7% decrease on a year-on-year basis. Under Japanese GAAP (unaudited), this fiscal year s net sales, operating income, ordinary income and net income totaled 1,320.0 billion yen, 70.7 billion yen, 63.1 billion yen and 10.3 billion yen respectively. Overview by reportable segment (Unit: billions of yen) Net sales Operating profit FY2013 FY2012 FY2013 FY2012 Glass (13.1) (0.7) Electronics Chemicals Ceramics/Other Corporate or elimination (62.5) (63.0) (0.1) (0.5) Total 1, , Note: Figures are rounded to the nearest 100 million yen. - Glass In the flat glass business, shipments of architectural glass in Japan and Asia remained strong. Shipments in North America were on a modest recovery but earnings didn t improve mainly due to productivity issues. Shipments in Europe remained weak and price levels fell below the levels of the previous fiscal year. Shipments of glass for solar power systems decreased from the same period of the previous fiscal year as the tough competitive environment continued. Under such circumstances, while sales from the flat glass business, which consists of architectural glass and glass for solar power systems, increased from the previous fiscal year mainly due to the impact of the weak yen, earnings decreased owing to the continued harsh business environment. 2

6 In the automotive glass business, the AGC Group s shipments in Japan decreased from the previous fiscal year, reflecting a year-to-year decrease in auto production in the country. In Europe, shipments remained strong although auto production in the region remained sluggish. Shipments remained favorable in Asia and North America, leading to an increase in sales on a yearon-year basis partly thanks to the weak yen. As a result, net sales from the Glass Operations for the fiscal year were billion yen, up billion yen or a 18.2% increase from the previous fiscal year. Operating profit decreased by 12.4 billion yen year on year to a loss of 13.1 billion yen mainly due to the downturn of market conditions in the architectural glass business in Europe. - Electronics Shipments of glass substrates for display devices and specialty glass for display applications increased from the same period of the previous fiscal year. With regard to electronic materials, shipments of semiconductor-related products and optoelectronics materials increased from the same period of the previous fiscal year. As a result, net sales from the Electronics Operations for the fiscal year were billion yen, up 1.9 billion yen or a 0.5% increase from the previous fiscal year. Operating profit was 74.1 billion yen, down 10.3 billion yen or a 12.2% decrease from the previous fiscal year due to the price decline in the LCD glass substrate business and the reduction of profitability of foreign subsidiaries affected by the progress of the weak yen. - Chemicals Sales from chlor-alkali products and urethane materials increased from the same period of the previous fiscal year, supported by strong shipments in Asia. In the category of fluorine products and specialty products, shipments of pharmaceutical and agrochemical intermediates and active ingredients remained buoyant, resulting in sales increase from the previous year. As a result, net sales from the Chemicals Operations for the fiscal year were billion yen, up 33.4 billion yen or a 13.0% increase from the previous fiscal year, and operating profit was 17.7 billion yen, up 0.9 billion yen or a 5.6% increase from the previous fiscal year.. (2) Qualitative Information Regarding Consolidated Financial Position Overview of financial conditions (Unit: billions of yen) FY2013 FY2012 Change Total assets 2, , Total liabilities Total equity 1, Note: Figures are rounded to the nearest 100 million yen. - Total assets Total assets as of the end of fiscal year under review were 2,120.6 billion yen, up billion yen from the previous year. This rise is mainly due to an increase in property, plant and equipment stemming from the weakening of yen and an increase in other financial assets resulting from a rise in listed stock prices. - Total liabilities Total liabilities as of the end of fiscal year under review were billion yen, up 19.8 billion yen from the end of the previous year. This rise is chiefly attributable to an increase in interest-bearing debts after foreign currency translation due to a weaker yen. - Total equity Total equity as of the end of fiscal year under review were 1,145.1 billion yen, up billion yen from the end of the previous year. This increase chiefly reflects a rise in exchange differences on translation of foreign operations resulting from weakening of the yen and an increase in net gain (loss) on revaluation of financial assets measured at fair value through other comprehensive income due to a higher value of listed stock. 3

7 Overview of cash flows (Unit: billions of yen) FY2013 FY2012 Change Cash flows from operating activities (2.8) Cash flows from investing activities (146.0) (158.6) 12.7 Cash flows from financing activities (33.6) (4.1) (29.5) Cash & cash equivalents as of end of period (1.2) Note: Figures are rounded to the nearest 100 million yen. - Cash flows from operating activities Net cash from operating activities was billion yen for the fiscal year under review, down 2.8 billion yen from the previous year. The decrease is mainly due to a decrease in profit before tax. - Cash flows from investing activities Net cash used in investing activities decreased 12.7 billion yen year-on-year, to billion yen. This expenditure includes capital investment with a focus on growth areas and industries. As a result, free cash flows for the fiscal year under review, which is the sum of cash flows from operating activities and investing activities, increased 9.9 billion yen from the previous year, to 21.4 billion yen. - Cash flows from financing activities Net cash used in financing activities for the fiscal year under review was 33.6 billion yen, up 29.5 billion yen from the previous year. This expenditure is mainly due to payment of dividends. As a result, the outstanding balance of cash and cash equivalents as of the end of the fiscal year under review decreased 1.2 billion yen in comparison with that of the previous year, to billion yen. - Cash flow indices Equity attributable to owners of the parent ratio (%) Equity attributable to owners of the parent ratio based on market value (%) FY2012 FY Number of years for debt redemption Interest coverage ratio (Notes) Equity attributable to owners of the parent ratio (%): Total equity attributable to owners of the parent / Total Assets Equity attributable to owners of the parent ratio based on market value (%): Total market capitalization / Total Assets Number of years for debt redemption: Interest-bearing debts/operating cash flows Interest coverage ratio: Operating cash flows/interest payment - All indices were computed using consolidated financial figures. - Total market capitalization was computed based on the closing stock price at period-end multiplied by number of outstanding shares at period-end (after deducting treasury shares). - Operating cash flows represent cash flows from operating activities on the consolidated statements of cash flows. - Interest-bearing debts represent all debts on the consolidated financial position for which interest is paid. In addition, interest payment represents amount of interest paid on the consolidated statements of cash flows. 4

8 (3) Forecast for FY2014 Operating forecast for FY2014 FY 2014 (January 1 through December 31, 2014) FY 2013 (January 1 through December 31, 2013) Note: Figures are rounded to the nearest 100 million yen. Net Sales (Unit: billions of yen) Profit for the year attributable to Operating profit Profit before tax Profit for the year owners of the parent 1, , Change (%) 6.1 (6.1) (9.9) In 2014, the world economy is expected to maintain moderate growth, but at a slightly accelerated pace. In Europe, the economy is expected to return to a gradual recovery path, although the degree of recovery will vary by area. The North American economy is likely to accelerate its pace of growth. China and other emerging countries will continue their economic growth. In Japan, the economy is projected to remain on a recovery track. Under such a business environment, the AGC Group s shipments of architectural glass are expected to remain robust in Asia, including Japan, and North America. In Europe, there are concerns that such shipments would continue to be sluggish, but earnings are likely to improve due to restructuring measures. In the automotive glass business, shipments are projected to increase from the previous fiscal year with demand for automobiles forecast to grow mainly in emerging markets. However, shipments of glass for solar power systems are predicted to decrease, as the Group plans to downsize the business in response to an increasingly tough competitive environment. With regard to the business of glass substrates for display devices, shipments of LCD glass substrates are likely to remain stable for the full year, although the pace of market growth may slow. Shipments of specialty glass for display applications are predicted to grow through the expanded scope of their applications. Plasma display panel related products are expected to be adversely affected by weakening demand. In the category of electronic materials, shipments of both semiconductor-related products and optoelectronics materials are likely to be strong. Regarding chemical-related products, shipments of chlor-alkali products in Asia and shipments of fluorine products are likely to remain stable in Asia. Taking into account the above factors, net sales of the AGC Group for the fiscal year ending December 31, 2014 are forecast to be 1,400.0 billion yen, a year-on-year increase of 80.0 billion yen or 6.1%. In light of possible price decline in certain products and a risk of decrease in profitability caused by the continued depreciation of the Japanese yen, however, operating profit is forecast to be 75.0 billion yen, down 4.9 billion yen or 6.1% from a year earlier, and profit before tax to be 40.0 billion yen, down 4.4 billion yen or 9.9% from the previous year. Profit for the year attributable to owners of the parent is estimated to be 20.0 billion yen, up 3.9 billion yen or 23.9% from the previous year. Average exchange rates assumed for the fiscal year ending December 31, 2014 are 110 yen to the U.S. dollar and 150 yen to the Euro. Forecast of financial conditions for FY2014 Of the cash flows from operating activities, profit before tax is expected to decrease by 4.4 billion yen to 40.0 billion yen as compared with that for the fiscal year ended December 31, Depreciation expenses are expected to be billion yen, up 4.2 billion yen from the previous fiscal year. Of the cash flows from investing activities, capital expenditures are expected to increase 1.5 billion yen year-on-year to billion yen. As for financing activities, the AGC Group will repay interest-bearing debts and increase borrowings, in addition to dividend payments in accordance with the Group's dividend policy. 5

9 (4) Allocation and Distribution of Profits and Dividends Based on its policy to maintain stable dividends, the AGC Group is doing its utmost to proactively return profits to shareholders by aiming for a dividend payout ratio (consolidated) of approximately 30%, while giving comprehensive consideration to consolidated business results and future investment plans, among others. The AGC Group will also allocate retained earnings to R&D, capital investment as well as merger and acquisition activities, to strengthen its financial position and improve its corporate value. In consideration of the Group's financial results for the fiscal year under review, the current business environment and future business developments, the Group paid an interim dividend of 13 yen per share and plans to pay a year-end dividend of 5 yen for FY Consequently, the total full year dividend payout for FY 2013 will be 18 yen per share. With regard to dividend payments for FY 2014, the total full year dividend payout is scheduled to be 18 yen (9 yen per share for interim dividend, and 9 yen per share for year-end dividend) in light of the Group's financial forecasts. [Important notes with regard to the forecast] The above prospective results reflect the judgment of the Group's management on the basis of currently available information and, as such, contain risks and uncertainties. For this reason, investors are recommended not to base investment decisions solely on these prospective results. Please note that actual results may materially differ from the projection due to such various factors as business and market environment the Group is active in, currency exchange rate fluctuations, and others. 2. Overview of the AGC Group The AGC Group consists of the Company and its 229 subsidiaries and 49 affiliates, and its main businesses are as set out below. The classification below is the same as that of the business segment information. Reportable segment Main products Float flat glass, Figured glass, Polished wired glass, Low-E glass, Fabricated glass for architectural use(heat Insulating/shielding glass, Safety glass, Glass Fire-resistant glass, Security glass, etc.), Automotive tempered glass, Automotive laminated glass, Glass for solar power system, Fabricated glass for industrial use, Decorative glass, etc. Glass substrate for display devices, Specialty glass for display applications, Display related materials, Optical membranes, Optoelectronics materials, Electronics Synthetic quartz glass, Glass frit and paste, Materials for semiconductor manufacturing equipment, Lighting glass products, etc. Raw materials for vinyl chloride polymer, Caustic soda, Urethane, Gases, Solvents, Chemicals Fluorinated resins, Water and oil repellents, Pharmaceutical and agrochemical intermediates and active ingredients, Iodine-related products, Battery materials, etc. In addition to the above products, the AGC Group also handles ceramics products, logistics/financial services, etc. 6

10 The following shows the organization chart of the Company, its consolidated subsidiaries and its affiliates under the equity method in the AGC Group. Glass (154 companies in total) Chemicals (26 companies in total) Domestic operations (13 companies in total) AGC Glass Products Co., Ltd. AGC Glass Kenzai Co., Ltd. etc. Supply of products and materials Supply of products Supply of materials Supply of products and materials Domestic operations (14 companies in total) Ise Chemicals Corporation etc. Overseas Operations (141 companies in total) P.T. Asahimas Flat Glass Tbk (Indonesia) AGC Flat Glass North America, Inc. (U.S.A.) AGC Glass Europe (Belgium) AGC Automotive Europe S.A.(Belgium) AGC Flat Glass Czech A.S. (Czech Republic) AGC Flat Glass Klin LLC (Russia) AGC Bor Glassworks (Russia) Electronics (32 companies in total) Domestic operations (8 companies in total) AGC Display Glass Yonezawa Co., Ltd. AGC Techno Glass Co., Ltd. etc. etc. Supply of products Supply of products Supply of materials Supply of products Asahi Glass Co., Ltd. Supply of products Supply of products Supply of products and services Overseas operations (12 companies in total) P.T. Asahimas Chemical (Indonesia) Ceramics/Other (26 companies in total) Domestic operations (10 companies in total) AGC Ceramics Co., Ltd. AGC Finance Co., Ltd. AGC Logistics Co., Ltd. etc. etc. Overseas operations (24 companies in total) AGC Display Glass Taiwan Co., Ltd. (Taiwan) Asahi Glass Fine Techno Korea Co., Ltd. (South Korea) etc. Supply of products and materials Supply of products Overseas operations (16 companies in total) AGC Singapore Services Pte. Ltd. (Singapore) AGC Capital, Inc. (U.S.A.) AGC America, Inc. (U.S.A.) etc. Note: The number of companies in each category does not include the Company. 7

11 3. Management Policy (1) Fundamental Policy of Management Under the Group vision Look Beyond, the AGC Group regards the values of "Innovation & Operational Excellence," "Diversity," "Environment" and "Integrity" as the key values to be shared across the Group ("Our Shared Values"). Based on these Shared Values, the AGC Group is committed to the following challenges. (2) Medium- and Long-Term Strategies <Management Policy Grow Beyond> The AGC Group defines its aspirations for 2020 as follows. AGC Group aspires to excel as a highly profitable and fast-growing global enterprise making contributions to a sustainable society by: - Having strong and differentiated technologies - Incorporating environmental friendliness not only in our products but also in our production processes and business activities - Contributing to the development of fast-growing regions To achieve these goals, the AGC Group is building growth foundations based on the following strategies. (The Group s three strategies) -Glass-technology-driven company The Group will promote business differentiation through the integration and development of the Group's core technologies in glass, chemicals, and ceramics and by further advancing its glass technology. -Technology solutions for environment and energy The Group will contribute to solving global environment/energy issues through energy-saving in its manufacturing processes and by offering products created with the Group's core technology. -Second Round of Globalization The Group will strive to enhance its earnings capabilities in mature markets, and expand the business in fast-growing markets by taking measures suited to the situation of each region. The following business areas have been designated as the Group's business domains in which the Group sees customer industries from a broad perspective and will achieve a long-term growth by leveraging its technology and expertise. - Higher Quality Display Devices & Communication - Clean & Green Energy - Safe, Sound & Comfortable Living Spaces & Materials The AGC Group aims to accelerate its growth by leveraging its comprehensive strength and providing greater value to various cross-industrial businesses. (3) Issues to be addressed < Medium-term plan Grow Beyond-2015 > 1) Progress on the mid-term management plan, and revision to numerical targets Under Grow Beyond-2015, the mid-term management plan for fiscal years , the AGC Group has been implementing various measures toward its goal of becoming a truly strong AGC Group. Specifically, the Group aims to achieve the following two targets during these three years: strengthening its growth foundations and generating substantial results from them and bringing the business back on an upward trend. In the first year of the mid-term management plan, the Group aggressively implemented measures to boost its business performance. Its financial results for 2013, however, saw a decline in profit due to two unexpected factors. One is that the continued depreciation of the Japanese yen affected the profitability of overseas subsidiaries engaged in display businesses. The other is a delayed recovery of the architectural glass business in Europe because of the sluggish demand in Western and Central Europe, and deceleration of the Russian economy. In light of such harsh business environment, the AGC Group has reviewed and revised the details of the mid-term management plan. Capital expenditure for was reduced by 20 billion yen to 280 billion yen. R&D expense for the same period was reduced by 10 billion yen to 90 billion yen. In addition, the target year for achieving a return on equity (ROE) of 12% or above was revised to fiscal 2020 from the current target of fiscal 2015, and the short-term target was set at 5%. The debt-to-equity ratio (D/E) remains to be 0.5 or less as set under the initial plan. 8

12 2) Group s measures for 2014 and onward To become a truly strong AGC Group, the Group will take the following measures in 2014 and onward. ⅰ) Bringing the business back on an upward trend Turn around the performance of the glass business The pressing issue facing the Group s glass business is improvement in the profitability of the flat glass business in Europe. For the flat glass business in Europe, the AGC Group has implemented a structural reform to achieve a quick business recovery, including improvement of the supply and demand balance through termination of furnace operations and plant closure in Western Europe, and streamlining of back office staff. In 2014, the Group will continue to promote the ongoing structural reform such as termination of the production of photovoltaic cover glass (patterned glass) in Europe. For the architectural glass business in North America, the AGC Group accelerated the release of new products and high valueadded products to the markets in an effort to strengthen its sales, and implemented cost improvement measures by revising the Group s production system. Despite such initiatives, production trouble and other factors affected its business performance and the operating income for 2013 did not make improvement. In 2014 and onward, the AGC Group will take further measures in addition to ongoing initiatives to increase the profitability in the North American region. Specifically, it will place more emphasis on the housing market which has been less focused as compared with the commercial building market. Also, the Group aims to ensure a stable facility operation and improve the productivity. By improving the profitability of the overall glass business through above measures, the AGC Group will eliminate the deficit in the glass business in 2014 and restore and maintain a surplus in 2015 and onward. Minimize the profitability decline in the display business The AGC Group will strive to minimize the profit decline of the display business by expanding its business in promising markets such as the Chinese market and small/mid-sized markets and, at the same time, by further improving productivity with the use of high-efficiency production facilities and promoting cost reduction through optimization of group-wide operations of the existing production bases. Group-wide efforts to enhance efficiency across the Group In addition to earnings improvement measures taken by each business segment, the AGC Group will carry out a group-wide cost reduction initiative to build up overall corporate strength. This group-wide project is aimed to increase the efficiency of the overall business operation from receiving orders to product shipment and also the efficiency of R&D and administrative operations. ⅱ) Strengthening the Group s growth foundations and generating substantial results Enhance business in fast-growing countries and regions Under its Second-round of Globalization strategy, the AGC Group has made aggressive investments in fast-growing countries and regions in recent years. Together with its new production facilities in Brazil, China and Indonesia that are already in operation, new production bases in Mexico and Vietnam, and facility expansion of some existing production bases will solidify the Group s business foundation in fast-growing countries and regions. Going forward, the AGC Group will capture the growth of fast-growing markets, and secure and increase the profit contribution from investments in these markets. Accelerate new product launches and promote sales expansion The AGC Group has released new products in recent years, including 99% UV-blocking UV Verre Premium series and AN Wizus, a display glass substrate with super-low thermal shrinkage. The Group will continue to release new products, expand sales and accelerate profit generation in each of the business domains: Safe, Sound & Comfortable Living Spaces and Materials, Higher Quality Display Devices & Communication and Clean & Green Energy. A representative example is glass for chemical strengthening. Its product lineup has been expanded with the release of Dragontrail X, a specialty glass for chemical strengthening for electronic devices with increased strength from the existing product. The AGC Group will expand sales of this specialty glass through diversification of applications to include the markets for vehicles, photovoltaic power generation, and building materials by utilizing its wide-ranged business channels. 9

13 Growth in Chemicals business Chemicals business is one of the most promising growth drivers among business segments for the Group to pursue the goal of strengthening its growth foundations and generating substantial results from them. In Southeast Asia, which is one of the emerging markets in the world, the AGC Group already has a significant market share for caustic soda and other products. By using such business base and also by making aggressive investments in Indonesia and Vietnam, the Group will capture market growth of the region. In addition, the Group will aim to expand sales of high-performance fluorinated products such as pharmaceutical and agrochemical intermediates, which is expected to see demand increase, and of a new refrigerant, which has overwhelmingly low global-warming potential as compared to conventional products. By steadily and quickly implement the above measures, the AGC Group will turn around the current business performance during the mid-term management plan period. At the same time, the Group aims to achieve mid-and-long term growth by establishing and strengthening, and generating profits from its three strategies Glass-technology-driven Company, Second Round of Globalization and Technology Solutions for Environment and Energy. 10

14 4.Consolidated Financial Statements (IFRS) (1) Consolidated Statement of Financial Position Assets Transition Date (as of January 1, 2012) (Unit: millions of yen) FY2012 FY2013 (as of December 31, 2012) (as of December 31, 2013) Current assets Cash and cash equivalents 117, , ,649 Trade receivables 228, , ,901 Inventories 194, , ,611 Other receivables 34,680 31,939 35,446 Income tax receivables 4,513 11,051 7,305 Other current assets 13,402 9,635 9,265 Total current assets 593, , ,179 Non-current assets Property, plant and equipment 841, ,806 1,059,946 Goodwill 17,856 30,599 34,944 Intangible assets 21,386 24,986 27,272 Investments accounted for using equity method 29,885 34,745 39,336 Other financial assets 131, , ,053 Deferred tax assets 79,049 49,921 29,743 Other non-current assets 1,255 3,558 4,154 Total non-current assets 1,123,133 1,277,521 1,438,450 Total assets 1,716,302 1,916,394 2,120,629 11

15 Liabilities and equity Transition Date (as of January 1, 2012) (Unit: millions of yen) FY2012 FY2013 (as of December 31, 2012) (as of December 31, 2013) Liabilities Current liabilities Trade payables 112, , ,559 Short-term interest-bearing debt 42,264 43,908 57,068 Long-term interest-bearing debt due within one year 108,892 59, ,618 Other payables 122, ,007 98,669 Income tax payables 9,220 15,325 15,055 Provisions 4,307 1,558 2,438 Other current liabilities 7,428 16,722 13,609 Total current liabilities 407, , ,018 Non-current liabilities Long-term interest-bearing debt 328, , ,327 Deferred tax liabilities 18,657 12,789 29,267 Post-employment benefit liabilities 145, ,581 86,505 Provisions 12,096 11,394 14,147 Other non-current liabilities 5,377 5,759 5,217 Total non-current liabilities 510, , ,465 Total liabilities 917, , ,484 Equity Share capital 90,873 90,873 90,873 Capital surplus 100, , ,650 Retained earnings 636, , ,740 Treasury shares (29,888) (30,076) (29,884) Other components of equity (40,046) 91, ,835 Total equity attributable to owners of the parent 757, ,304 1,087,216 Non-controlling interests 40,843 52,443 57,929 Total equity 798, ,747 1,145,145 Total liabilities and equity 1,716,302 1,916,394 2,120,629 12

16 (2) Consolidated Statement of Profit or Loss and Consolidated Statement of Comprehensive Income (Consolidated Statement of Profit or Loss) (Unit: millions of yen) FY2012 (Jan. 1 through Dec. 31, 2012) FY2013 (Jan. 1 through Dec. 31, 2013) Net sales 1,189,952 1,320,006 Cost of sales (846,048) (971,031) Gross profit 343, ,974 Selling, general and administrative expenses (243,798) (270,087) Share of profit (loss) of associates and joint ventures accounted for using equity method 1,646 1,007 Operating profit 101,751 79,894 Other income 15,789 4,176 Other expenses (38,533) (38,235) Business profit 79,008 45,835 Finance income 4,443 5,137 Finance costs (8,453) (6,591) Net finance costs (4,009) (1,453) Profit before tax 74,998 44,381 Income tax expenses (22,485) (25,358) Profit for the year 52,512 19,023 Attributable to: Owners of the parent 48,433 16,139 Non-controlling interests 4,079 2,883 Earnings per share Basic earnings per share (yen) Diluted earnings per share (yen)

17 (Consolidated Statement of Comprehensive Income) (Unit: millions of yen) FY2012 (Jan. 1 through Dec. 31, 2012) FY2013 (Jan. 1 through Dec. 31, 2013) Profit for the year 52,512 19,023 Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss, net of tax Remeasurement of the net defined benefit liability (asset) 10,290 23,163 Net gain (loss) on revaluation of financial assets measured at FVTOCI (Note) 29,095 42,318 Share of other comprehensive income of associates and joint ventures accounted for using equity method Total 39,602 65,865 Components of other comprehensive income that may be reclassified to profit or loss, net of tax Net gain (loss) in fair value of cash flow hedges 127 (117) Exchange differences on translation of foreign operations 94, ,138 Share of other comprehensive income of associates and joint ventures accounted for using - (126) equity method Total 94, ,893 Other comprehensive income, net of tax 134, ,759 Total comprehensive income for the year 186, ,782 Attributable to: Owners of the parent 180, ,567 Non-controlling interests 6,369 7,214 (Note) FVTOCI: Fair Value Through Other Comprehensive Income 14

18 (3) Consolidated Statement of Changes in Equity FY2012 (Jan. 1 through Dec. 31, 2012) Equity attributable to owners of the parent (Unit: millions of yen) Other components of equity Share capital Capital surplus (Note) FVTOCI: Fair Value Through Other Comprehensive Income Retained Earnings Remeasurement Net gain (loss) Treasury shares of net defined on revaluation benefit liability of financial (asset) assets measured at FVTOCI (Note) Balance as of January 1, , , ,610 (29,888) (59,842) 19,748 Changes in equity Comprehensive income Profit for the year , Other comprehensive income ,837 29,089 Total comprehensive income for the year ,433-10,837 29,089 Transactions with owners Dividends - - (30,054) Increase through treasury shares transactions (214) - - Decrease through treasury shares transactions - - (3) Changes in ownership interests in subsidiaries that do not result in loss of - (125) control Transfer from other components of equity to (435) retained earnings Share-based payment transactions Others (business combinations and others) Total transactions with owners (29,622) (188) 7 (435) Balance as of December 31, , , ,421 (30,076) (48,996) 48,402 15

19 FY2012 (Jan. 1 through Dec. 31, 2012) Equity attributable to owners of the parent Other components of equity Net gain (loss) in fair value of cash flow hedges Exchange differences on translation of foreign operations Total Total Noncontrolling interests (Unit: millions of yen) Total equity Balance as of January 1, (40,046) 757,818 40, ,661 Changes in equity Comprehensive income Profit for the year ,433 4,079 52,512 Other comprehensive income , , ,138 2, ,428 Total comprehensive income for the year , , ,571 6, ,941 Transactions with owners Dividends (30,054) (1,012) (31,066) Increase through treasury shares transactions (214) - (214) Decrease through treasury shares transactions Changes in ownership interests in subsidiaries that do not result in loss of (117) 1,372 1,255 control Transfer from other components of equity to - - (435) retained earnings Share-based payment transactions Others (business combinations and others) ,870 4,870 Total transactions with owners - - (427) (30,085) 5,230 (24,855) Balance as of December 31, ,083 91, ,304 52, ,747 16

20 FY2013 (Jan. 1 through Dec. 31, 2013) Equity attributable to owners of the parent (Unit: millions of yen) Other components of equity Share capital Capital surplus (Note) FVTOCI: Fair Value Through Other Comprehensive Income Retained Earnings Net gain (loss) Remeasurement Treasury shares on revaluation of net defined of financial benefit liability assets measured (asset) at FVTOCI (Note) Balance as of January 1, , , ,421 (30,076) (48,996) 48,402 Changes in equity Comprehensive income Profit for the year , Other comprehensive income ,056 42,295 Total comprehensive income for the year ,139-23,056 42,295 Transactions with owners Dividends - - (30,047) Increase through treasury shares transactions (44) - - Decrease through treasury shares transactions - - (29) Changes in ownership interests in subsidiaries that do not result in loss of control Transfer from other components of equity to (256) retained earnings Share-based payment transactions Others (business combinations and others) Total transactions with owners (29,820) (256) Balance as of December 31, , , ,740 (29,884) (25,940) 90,441 17

21 FY2013 (Jan. 1 through Dec. 31, 2013) Equity attributable to owners of the parent Other components of equity Net gain (loss) in fair value of cash flow hedges Exchange differences on translation of foreign operations Total Total Noncontrolling interests (Unit: millions of yen) Total equity Balance as of January 1, ,083 91, ,304 52, ,747 Changes in equity Comprehensive income Profit for the year ,139 2,883 19,023 Other comprehensive income (244) 127, , ,428 4, ,759 Total comprehensive income for the year (244) 127, , ,567 7, ,782 Transactions with owners Dividends (30,047) (549) (30,597) Increase through treasury shares transactions (44) - (44) Decrease through treasury shares transactions Changes in ownership interests in subsidiaries that do not result in loss of (2,079) (1,978) control Transfer from other components of equity to - - (256) retained earnings Share-based payment transactions Others (business combinations and others) Total transactions with owners - - (256) (29,656) (1,728) (31,384) Balance as of December 31, 2013 (69) 219, ,835 1,087,216 57,929 1,145,145 18

22 (4) Consolidated Statement of Cash Flows (Unit: millions of yen) FY2012 (Jan. 1 through Dec. 31, 2012) FY2013 (Jan. 1 through Dec. 31, 2013) Cash flows from operating activities Profit before tax 74,998 44,381 Depreciation and amortization 117, ,751 Interest and dividend income (4,410) (5,096) Interest expenses 7,189 6,437 Share of profit (loss) of associates and joint ventures accounted for using equity method (1,646) (1,007) Loss (gain) on sale or disposal of non-current assets 5,951 2,505 Decrease (increase) in trade receivables 6,071 10,216 Decrease (increase) in inventories 5,419 (3,712) Increase (decrease) in trade payables (5,278) 542 Others (9,886) (3,635) Subtotal 196, ,382 Interest and dividends received 4,952 5,885 Interest paid (5,942) (6,175) Income taxes paid (25,109) (18,721) Net cash from operating activities 170, ,371 Cash flows from investing activities Purchase of property, plant and equipment and intangible assets (155,983) (148,477) Proceeds from sale of property, plant and equipment 6,413 4,510 Purchase of other financial assets (7,288) (3,005) Proceeds from sale and redemption of other financial assets 13,851 3,091 Others (15,638) (2,097) Net cash used in investing activities (158,646) (145,978) Cash flows from financing activities Changes in current interest-bearing debt (7,052) 1,149 Proceeds from borrowing or issuing long-term interest-bearing debt 145,124 59,274 Repayment or redemption of long-term interest-bearing debt (110,660) (58,684) Proceeds from sale of shares in subsidiaries to non-controlling interests 1,238 ー Payment from purchase of shares in subsidiaries from noncontrolling interests - (1,978) Acquisition of treasury shares (27) (44) Dividends paid (30,054) (30,047) Others (2,635) (3,230) Net cash used in financing activities (4,066) (33,562) Effect of exchange rate changes on cash and cash equivalents 8,806 11,001 Net increase (decrease) in cash and cash equivalents 16,259 (1,168) Cash and cash equivalents at beginning of year 117, ,818 Cash and cash equivalents at end of year 133, ,649 19

23 (5) Notes to the Consolidated Financial Statements 1) Basis of preparations (a) Statement of compliance with IFRS The Group s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ), based on the stipulations of Article 93 of the Ordinance on Consolidated Financial Statements. The Group s consolidated financial statements satisfy all of the requirements for a Specified Company prescribed by Article 1-2 of the Ordinance on Consolidated Financial Statements. These consolidated financial statements are the Group s first to be prepared in accordance with IFRS. The Group s IFRS transition date ( transiton date ) is January 1, Furthermore, the Group has adopted IFRS 1 First-time Adoption of International Financial Reporting Standards ( IFRS 1 ). The impact of the first-time adoption of IFRS on the Group s financial position, business results, and cash flows is explained in 7) First-time adoption. (b) Basis of measurement The consolidated financial statements have been prepared on a historical cost basis, except for the following significant items on the consolidated statement of financial position: - Derivative financial instruments are measured at fair value. - Equity instruments are measured at fair value. - Defined benefit pension plan assets and liabilities are measured at the present value of defined benefit plan liabilities less the fair value of the plan assets. (c) Presentation currency The consolidated financial statements are presented in Japanese yen. The currency unit is millions of yen, with figures less than one million yen rounded down. (d) Use of estimates and judgments The preparation of consolidated financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions that affect the adoption of accounting policies and the reported amounts of assets and liabilities, and income and expenses. Actual results could differ from these estimates. The estimates and their underlying assumptions are reviewed continuously. Changes in accounting estimates will affect the period in which the estimates are changed and future periods. Judgments and estimates made by management that have a significant effect on the amounts recognized in the consolidated financial statements in the reporting period and subsequent periods are as follows: - Inventory valuation - Estimates of useful lives and residual values of property, plant and equipment and intangible assets - Calculation of the value in use in cash-generating units, the smallest unit of measurement for impairment of property, plant and equipment, goodwill and intangible assets - The recoverability of deferred tax assets - Actuarial assumptions for defined benefit pension plans - The recoverable amount of trade receivables (e) Early adoption of new standards The Group has early adopted IFRS 9 Financial Instruments (published in November 2009, amended in October 2010) since the transition date. 20