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Integrated Report 2017Fiscal Year Ended March 31, 2017
Alfresa Group
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For further information, please contact:
1-1-3, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
TEL: +81-3-5219-5102 E-MAIL: [email protected]
URL: www.alfresa.com
This report is compiled and printed with the following environmental considerations in mind.
• Printing • Paper • Ink
This report is printed on paper certified by the Forest Stewardship Council (FSC) to be made from wood sourced from responsibly managed forests.
This report is printed with non-VOC printing ink derived from plant oils.
Alfresa G
rou
p Integrated R
eport 2017
To Our Stakeholders
Aiming to Build a Sustainable SocietySince the establishment of the Alfresa Holdings Corporation as
a pure holding company in 2003, the Alfresa Group has contin-
ued to grow by adding new group companies and developing a
wide range of businesses including the Ethical Pharmaceuticals
Wholesaling Business. During this period, more than 14,000
employees at 18 consolidated companies have worked hard to
put into practice the group message, “Fresh life for all,” with a
strong sense of mission befitting our engagement in health- and
medical-related businesses.
As Japan has become the world’s first super-aged society,
the working population is on the decline. This and other factors
have exposed many challenges on the road to building a sus-
tainable society.
At the Alfresa Group, we aspire to achieve sustainable
growth while resolving social problems, focusing mainly on
those faced by Japan. The Group decided to issue an integrated
report starting this fiscal year, in place of the conventional
annual report, in the hope of sharing our future vision with all
stakeholders. In this report, we sought to make the Group’s
activities as transparent as possible and to describe comprehen-
sibly the kinds of strategies and mechanisms we use to run our
businesses, pursue CSR, and create value.
I hope that this integrated report helps our stakeholders to
gain a better understanding of the Alfresa Group.
September 2017
About the Corporate Name and Group Message
The corporate name “Alfresa” is a combination of the English word “all”
with the Esperanto word “fresa,” which means "fresh.” It symbolizes our
wish to be a corporation that contributes to the happiness of all people
by meeting their healthcare needs and creating an active lifestyle for the
coming era.
Our group message is “Fresh life for all.” The Alfresa Group aims to
grow by operating its life- and health-related businesses with pride and a
sense of responsibility.
Group Message
Taizo KuboRepresentative Director & President
Alfresa Holdings Corporation
01 02Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Overview of Alfresa Group’s Business
Medical products, starting with the pharmaceuticals that are prescribed at medical institutions and dispensed at
pharmacies, play a vital role in maintaining people’s health and lives. The Alfresa Group is engaged in a range
of businesses, from the manufacture of active pharmaceutical ingredients, to the manufacture and wholesale of
pharmaceuticals and other products, to the operation of dispensing pharmacies. Through the unified development
of these businesses, the Group strives to meet the full range of medical needs.
Information
Cap
ital
Shar
eho
lder
ret
urn
s
Suppliers Our people 1
Shareholders and investors
Alfresa Holdings CorporationManages subsidiaries that deal with wholesaling, manufacturing, marketing and import/export of pharmaceuticals, diagnostic reagents, medical devices/equipment, etc., and operating dispensing pharmacies and conducting related businesses
Information Customers
Medical institutions (hospitals, clinics, etc.)
Service (SPD2 business, etc.)
Products
Pro
du
cts
Marketing Specialists (MS) (pharmaceutical sales force)
Sales Assistants (SA)Delivery Sales (DS)
(delivery specialists)
Medical Representatives (MR) (pharmaceutical information providers)
Patients
Dispensing pharmacies, drug stores,
nursing care facilities, etc.
Dispensing
Provision of business environment
Cooperation from local community
Support for local community
Dialogue with local communityEnvironmental conservation
Medical-Related BusinessProvides a range of services to patients via the dispensing pharmacy business and other businesses
Global environment
Local communities Environment
Local residents and communities 1. The blue section at the center of this illustration shows how “our people” are at the core of the Alfresa Group’s business activities.
2. Supply Processing & Distribution
Regulations and supervision
Compliance with laws and regulations,
tax payment
Development of Information Systems for Customer and Supplier SupportDevelops and promotes shared use of information systems for the Group, aiming to improve the efficiency and sophistication of pharmaceutical distribution
Ministries and agencies such as the Ministry of Health, Labor and Welfare, prefectural and city governments, industry groups
Manufacturing BusinessManufactures and markets active pharmaceutical ingredients (API), pharmaceuticals, diagnostic reagents, medical devices and other products
API ManufacturingManufactures and markets active pharmaceutical ingredients
Consigned ManufacturingManufactures products on consignment to meet specifications provided by other pharmaceutical companies in and outside Japan
Procurement
Consigned manufacturing
Manufacturers of pharmaceuticals and
other products
Procurement
Procurement
Ethical Pharmaceuticals Wholesaling BusinessProvides ethical pharmaceuticals and other products, includ-ing diagnostic reagents and medical devices and materials, and provides services to hospitals, clinics, dispensing pharmacies and other customers
Self-Medication Products Wholesaling BusinessProvides over-the-counter drugs, health foods, supplements and other products to drug stores and pharmacies
Regulatory authorities, etc.
03 04Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Editorial PolicyThis integrated report summarizes the ways in which the Alfresa
Group aims to create corporate value and grow in a sustainable
manner into the future, making the most of the unique strengths
it has amassed over its years in business. The report is presented
in the hope that it will help a wide range of stakeholders to bet-
ter understand the Group and join us on our journey to higher
corporate value.
In compiling this report, a steering committee made up
primarily of management was established to discuss strategies
for the future, including the medium- to long-term vision, talent
development and the CSR basic policy.
This integrated report presents in a single report the types of
content that were covered by annual reports (published in English)
and CSR reports (published in Japanese) through 2016. Additional
CSR information is available on the Company’s CSR site.
Period CoveredApril 1, 2016 to March 31, 2017
Guidelines Used as Reference· International Integrated Reporting Framework,
International Integrated Reporting Council (IIRC)
· G4 Sustainability Reporting Guidelines,
Global Reporting Initiative (GRI)
ContentsPage
7 Value Creation Story9 Alfresa Group’s History
11 Alfresa Group’s Strengths
15 Alfresa Group’s Value Creation Model
17 Strategy19 Message from the President
23 Message from the Finance Director
25 Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
27 Strategy by Segment
27 Ethical Pharmaceuticals Wholesaling Business
29 Self-Medication Products Wholesaling Business
31 Manufacturing Business
33 Medical-Related Business
34 Overseas Business Development
35 Financial and Non-Financial Highlights
37 The Foundation for Growth39 Special Feature: Our Valuable People, Who Support the
Growth of the Alfresa Group
39 Basic Policy on Talent Development
41 How Our Valuable People Support the Value Chain
43 Respecting Human Rights and Developing a Proper Working Environment
45 Coexisting with the Local Community and Protecting the Environment
47 Conducting Sincere Business Activities through Enhanced Organizational Governance
49 Corporate Governance
53 Management Team
55 Financial Information55 Consolidated Balance Sheets
57 Consolidated Statements of Income and Comprehensive Income
58 Consolidated Statements of Changes in Net Assets
59 Consolidated Statements of Cash Flows
61 Corporate Profile
62 Stock Information
Disclaimer Concerning Forward-Looking StatementsPlease note that the information and materials published in this document include forward-looking statements based on forecasts available
at the time the document was prepared. Certain premises are used for these descriptions. The descriptions or premises contain inherent
known or unknown risks and uncertainties and may be proven inaccurate or fail to materialize in the future. Actual results may differ from
these forecasts because of various changes in the business environment and other factors.
In the event that revisions or amendments to the information are desirable due to new information, future events and other factors, it is
neither a policy nor an obligation of the Company to update such information.
Scope CoveredAlfresa Holdings Corporation
Alfresa Corporation
Shikoku Alfresa Corporation
TS Alfresa Corporation
Meisho Co., Ltd.
Odashima Limited
RYUYAKU CO., LTD.
Kowa Pharmaceuticals Co., Ltd.
Alfresa Medical Service Corporation
Alfresa Healthcare Corporation
Mogi Pharmaceutical Co., Ltd.
Alfresa Pharma Corporation
QINGDAO NESCO MEDICAL CO., LTD.
Alfresa Fine Chemical Corporation
Sannova Co., Ltd.
Apollo Medical Holdings Inc.
Nihon Apoch CO., LTD
Alfresa System Corporation
P19 Message from the President
P23 Message from the Finance Director
P39 Special Feature: Our Valuable People, Who Support the Growth of the Alfresa Group
05 06Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Value Creation StoryDriven by a Passion to Create Value
Our PhilosophyWe create and deliver a fresh life for all.
Our VisionWe aim to become a Healthcare Consortium that provides products and
services in every health-related field.
Our Promises• We always maintain the stable supply of reliable products and services that satisfy our customers.
• We strive to maintain and improve a safe and comfortable working environment, respect
individual characteristics and personalities and create a healthy corporate culture.
• We raise corporate value as a corporate group operating in the healthcare sector to meet
shareholder's expectations.
• We conduct proper trade under fair, transparent and free competition.
• We strive to protect personal information entrusted by our customers and business partners and
important company information, work to widely and proactively communicate with society, and
implement appropriate and timely information disclosure.
• We contribute to society through our business operations, proactively carry out social contribution
activities in local communities, and actively and voluntarily address global environmental issues.
The Alfresa Group’s Principles
Contents
9 Alfresa Group’s History
11 Alfresa Group’s Strengths
One-of-a-Kind Pharmaceutical Supply Chain
The Robust Distribution System of Japan’s Top Wholesaler of Ethical Pharmaceuticals
15 Alfresa Group’s Value Creation Model
SinceritySafetyReliability
Valu
e Creatio
n Sto
ryStrategy
Foundation for Grow
thFinancial Inform
ation
07 08Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Self-Medication Products Wholesaling Business
• CS YAKUHIN CO., LTD. (self-medication products wholesaling division)
• TAMPEI NAKATA CO., LTD.
• Alfresa Healthcare Corporation (self-medication products wholesaling division of CS YAKUHIN CO., LTD. and TAMPEI NAKATA CO., LTD. merge)
• Mogi Pharmaceutical Co., Ltd.
The business environment surrounding the Alfresa Group has changed dramatically in recent years. As the Japanese birth
rate declines and the population ages at an ever faster pace, the entire baby boom generation will have reached the age
of 75 by 2025. Bold reforms of healthcare policy are already underway to ensure that Japan’s medical and nursing care
systems are sustainable. While medical costs are expected to be curbed, medical services will be significantly transformed
with the introduction of integrated community care systems. The Alfresa Group will strengthen its business foundation
and create social value while carrying out its own series of reforms, ahead of future changes in the business environment.
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20162014 20172015 2018
• Alfresa Codupha Healthcare Vietnam Co., Ltd.
• Alfresa Fine Chemical Corporation • Sannova Co., Ltd.
• Nihon Apoch CO., LTD
• Alfresa Shinohara Chemicals Corporation
• TS Alfresa Corporation (SEIWA SANGYO CO., LTD. and Tokiwa Yakuhin Co., Ltd. merge)
* The number of Group employees includes the average number of temporary employees.* Company names shown in bold are consolidated subsidiaries (in fiscal year ended March 31, 2017)* Color block indicates the start of consolidated accounting in each business segment.* The Company’s fiscal year begins on April 1 and ends the following March 31.
• Tokiwa Yakuhin Co., Ltd.
• Alfresa System Corporation
• CS YAKUHIN CO., LTD. (ethical pharmaceuticals wholesaling division)
• RYUYAKU CO., LTD.
• Apollo Medical Holdings Inc.
• Odashima Limited• DAIWA Pharmaceutical Wholesalers Co., Ltd.
• Taishodo Co., Ltd.
• Alfresa Corporation• Alfresa Pip-Tokyo Corporation (currently
Alfresa Medical Service Corporation)
• Alfresa Nikken Sangyo Corporation• Shikoku Alfresa Corporation
(OKAUCHI KANKODO, Ltd., Kowa Yakuhin Co., Ltd., and DAIWA Pharmaceutical Wholesalers Co., Ltd. merge)
• SEIWA SANGYO CO., LTD.
• Meisho Co., Ltd.
• REMEJE PHARMACEUTICALS (CHINA) CO., LTD.
• Alfresa Pharma Corporation
Ethical Pharmaceuticals Wholesaling Business
Overseas Business Development
• Fukujin Co., Ltd.
• Kowa Pharmaceuticals Co., Ltd., Ando Co., Ltd.
• AZWELL Inc. (wholesaling division)
Manufacturing Business
• AZWELL Inc. (manufacturing division)
• QINGDAO NESCO MEDICAL CO., LTD.
Medical-Related Business
Stock transfer
Market size for pharmaceuticals in Japan (scaled at right)Statistics of Production by Pharmaceutical Industry, Ministry of
Health, Labour, and Welfare 10,000
8,000
6,000
4,000
2,000
0
(¥ billion)
Target of 2.7 trillion yen
2,551.8 billion yen
16-18 Mid-Term Management PlanBreak Through to
Tomorrow
Expansion of the Health and Medical-Related Fields
17 consolidated subsidiaries14,609 Group employees
(March 31, 2017)
07-09 Mid-term Management PlanAdvancement and
Expansion
10-12 Mid-term Management PlanAdvancement and
Expansion—Next Stage
13-15 Mid-term Management Plan
The Challenge of ReformUniting to Climb New Peaks
Centered on the Ethical Pharmaceuticals Wholesaling Business
Mid-term Management
Plan at establishment
New Mid-term Management
Plan
Establishment of Alfresa Holdings Corporation6 consolidated subsidiaries
8,214 Group employees (September 29, 2003)
500
1,500
0
1,000
2,000
2,500(¥ billion)
Alfresa Group’s Net Sales(Fiscal years*)
History of Group Expansion
Alfresa Group’s Net Sales and Mid-term Management Plans
No. 1 net sales in ethical pharmaceutical wholesaling industry
Alfresa Group’s History
Valu
e Creatio
n Sto
ryStrategy
Foundation for Grow
thFinancial Inform
ation
09 10Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Ethical Pharmaceuticals Wholesaling Business
See page 27 for more details.
See page 29 for more details.
See page 31 for more details.
See page 33 for more details.
See page 34 for more details.
Medical-Related Business
Overseas Business Development
Becoming a “Healthcare Consortium that provides products and services in every health-related field” is the vision set out
in the Alfresa Group’s principles. The Group is concentrating all of its efforts to realize this vision while exercising Group
synergies. It aims to become a corporate group that can meet all of patients’ and the general public’s health-related needs
by strengthening its supply chain for ethical pharmaceuticals and further expanding its business fields and sectors.
“Healthcare Consortium”
Further Expanding the Business Portfolio by Becoming a “Healthcare Consortium”
Diversified Business Portfolio
Increased Importance of Self-Medication Products Wholesaling BusinessIn this business segment, the Group delivers products such as over-the-counter drugs, health foods, supplements and other products to customers including drug stores and pharmacies. As Japan’s society ages and its medical expenditures rise, self-medication is becoming more important as a way of reducing national medical spending. This approach encourages everyone to take responsibility for their own health while using self-care to maintain good health and address mild to moderate symptoms.
Social infrastructure business with reliable distribution networkIn this business segment, the Group delivers a wide range of products and services such as ethical pharmaceuticals, diagnostic reagents, and medical devices and materials to customers* including hospitals, clinics, and dispensing pharmacies. In order to fulfill the Group’s responsibilities and mission as a key part of Japan’s social infra-structure that supports people’s health and lives, the Alfresa Group has effectively set up distribution centers equipped with advanced processing capability so that it can reliably deliver the needed pharmaceuticals to patients all over the country when and where needed. The Group’s Marketing Specialists (MS), who have a broad range of knowledge of pharmaceuticals, provide detailed sales support to customers.
Taking on the Challenge of Distinctive, High-Quality ManufacturingFrom a comprehensive perspective encompassing prevention, diagnosis, and treatment, in this business segment the Alfresa Group researches, develops, manufactures and markets distinctive, high-quality pharmaceuticals, diagnostic reagents, medical devices, and other products, seeking to help people lead healthy, fulfilling lives. It is also committed to safe, reliable and sincere manufacturing, including the manufacture and sale of active pharmaceutical ingredients, and consigned manufactur-ing of pharmaceuticals. The Group is working to augment this business by expanding the product lineup, reinforcing sales capability, and building up manufacturing and sales in overseas markets.
Growth Driven by Dispensing Pharmacy BusinessIn the fiscal year ended in March 2016, the Group newly established the Medical-Related Business segment. Under the 16-18 Mid-term Management Plan, which covers the year ended March 31, 2017 through the year ending March 31, 2019, in this business segment the Group is focusing on the operation of dispensing pharmacies. In the dispensing pharmacy business, the Group is expanding its business by opening new pharmacies and promoting cooperation within the Group, and boosting earnings ability by reinforcing functions though dispensing operations, pharmacist education and other measures. The Group also aims to transform its business by shifting from location-based to function-based strategies.
A Growing Contribution to Healthcare Outside JapanBased on the expertise and experience built up with its strong business model in Japan, the Group is expanding its businesses outside Japan, particularly in Asia. In addition to pharmaceuticals, medical devices and other products manufactured by the Group, it exports the medical devices and medical-related products of Japanese partner manufacturers via its international network. The Group aims to further extend its geographic reach and enter new fields by building on its experience in the marketing of medical devices in China and Vietnam, as well as its achievements in the import and sale of healthcare-related products, including pharmaceuticals and health foods.
Self-Medication Products Wholesaling Business
Manufacturing Business
The Alfresa Group has achieved its standing as the top wholesaler of ethical pharmaceuticals in Japan thanks to
strengths such as the relationships of trust it has built with customers and suppliers, including pharmaceutical
manufacturers, medical institutions and dispensing pharmacies, as well as its robust distribution system.
Making the most of these strengths, the Group aims to grow its business into the general healthcare field, to
cover such items as medical devices, diagnostic reagents, nutritional foods and nursing products.
Alfresa Holdings Group
23.1%
Medipal Holdings Group22.8%
Suzuken Group22.1%
Kyoso Mirai Group15.8%
Ashinokai (HEREON Inc.) Group13.1%
Other3.2%
Japan’s Top Wholesaler of Ethical Pharmaceuticals: A Testament to Trust from Customers and Suppliers
Note: This excludes Toho Pharmaceutical Co., Ltd. and Saywell Inc. Saywell Inc. is double counted as it is included in the total for Ashinokai Group as the equity-method company of VITAL KSK HOLDINGS, INC., and in the total for the Kyoso Mirai Group as its business partner.
Source: Drug Magazine Supplement “All Data & Ranking” (issued in March 2017)
Market Share in Japan’s Ethical
Pharmaceuticals Market, by
Wholesaler Group
The Alfresa Group worked to expand its business fields and areas under the 13-15 Medium-term Management Plan,
which covered the year ended March 31, 2014 through the year ended March 31, 2016. In doing so, it established a
diversified portfolio of businesses from manufacturing to dispensing pharmacies. Going forward, the Group will focus
on developing the following four key business segments as it works to strengthen its one-of-a-kind pharmaceutical
supply chain by expanding the health- and medical-related fields and growing its footprint in markets outside Japan.
One-of-a-Kind Pharmaceutical Supply Chain
* The term “customers” collectively refers to medical institutions, dispensing pharmacies, drug stores and other establishments to which the Group delivers products in the Ethical Pharmaceuticals Wholesaling Business and Self-Medication Products Wholesaling Business.
Strength
1
Alfresa Group’s Strengths
Self-medication Cure
Ethical pharmaceuticals manufacture
Ethical pharmaceuticals wholesale
Supply chain
Dispensing pharmacies, medical services, etc.
Diagnosis, treatment
Self-medication manufacture
Medical devices manufacture
Medical devices and materials
wholesale
Diagnostic reagents
manufacture
Diagnostic reagents
wholesale
Self-medication wholesale
Man
ufac
ture
Who
lesa
leRe
tail
Valu
e Creatio
n Sto
ryStrategy
Foundation for Grow
thFinancial Inform
ation
11 12Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Products Handled in Japan and Overseas
1,000 manufacturers
350,000 items
Closer to Customers
Number of warehouses: 230 nationwide
Field Specialists with a Strong Sense of Mission
MS (Marketing Specialists): 3,514 people
SA, DS (Delivery Specialists): 2,512 people
Number of Vehicles
About 7,600Annual Mileage Travelled
About
154,000,000 km
In Event of Large-Scale Disaster
Fulfill the mission of providing a stable supply of pharmaceuticals
Pitching in to sort, pack and ship pharmaceuticals by hand after the Great East Japan Earthquake
Ensuring a Stable Supply of Needed Pharmaceuticals, When and Where Needed
Thanks to its high-functioning distribution network and the strong sense of mission possessed by its valuable people,
the Alfresa Group is able to work as one to carry out pharmaceutical distribution, which is a key part of Japan’s social
infrastructure. The Group is dedicated to supporting people who want to be healthy on a daily basis.
The Robust Distribution System of Japan’s Top Wholesaler of Ethical Pharmaceuticals
Strength
2
Alfresa Group’s Strengths
Valu
e Creatio
n Sto
ryStrategy
Foundation for Grow
thFinancial Inform
ation
13 14Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
The Alfresa Group integrates its business
operations and CSR activities under the
Group’s CSR Basic Policy, in order to cre-
ate corporate value that responds to both
customer expectations and social require-
ments. All of these activities are promoted
based on the common perspectives of ESG
(Environment, Social, and Governance).
What the Group Aims to Be(The future commitment the Alfresa Group will aim to fulfill)In order to ensure that we put Our Philosophy, “We create and deliver a fresh life for all,” which is part of the Alfresa Group’s principles, into action, the Group seeks to:
• further develop the nationwide distribution network that we have built as Japan’s top wholesaler of ethical pharmaceuticals,
• participate actively in the advance of medical technologies, such as regenerative medicine and gene-based therapy,• exploit state-of-the-art technologies such as big data, artificial intelligence, and robotics, etc., and• nurture valuable next-generation management.
Through these efforts, we will secure the Alfresa Group’s position as a “Healthcare Consortium” enterprise group that contributes to building a society of healthy longevity, seeking to fulfill the universal hope to lead a healthy life.
External Factors from a Medium- to Long-Term Perspective
Integrated Promotion of Business Operations and CSR Activities
The Alfresa Group’s Value Creation Model, presented here for the first time, is a business model designed to depict how
the Group intends to ensure sustainable growth, while also defining the role that the Group should play in the future as
well as the external factors to watch. Going forward, the Group will continue to develop and refine this model.
Alfresa Group’s Value Creation Model
A society where everyone can lead an active, fulfilling life
Med
ium
- to
long
-ter
m s
trat
egie
s fo
r va
lue
crea
tion
Ach
ieve
men
ts a
nd a
sset
s to
dat
e
Robust distribution
system
Diversified business portfolio
Relationships of trust with
customers and suppliers
Group synergy
Creation andevolution of
business model
Distributionmodel innovation
Expansion ofnew business fields
Strengthenbusiness
foundation with OneAlfresa initiatives
Expand thehealth and
medical-relatedfields
Reformbusiness model
ahead of changes in the business environment
Sense of mission to provide the needed pharmaceuticals,when and where needed
Japan’s top wholesaler of ethical pharmaceuticals, and beyond
Alfresa Group strengths
Integrated community care systems
Demographic changes including declining birthrate, aging society, and population decline
Advances toward a society of healthy
longevity
Actual application of evolving big data analytical technologies to
several social issues
Innovation in distribution capability
by leveraging information technology
Customer expectations
Social requirements
Where business and CSR meet to create
corporate value
E GS
Valu
e Creatio
n Sto
ryStrategy
Foundation for Grow
thFinancial Inform
ation
15 16Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Strategy
A Growth Strategy That Meets the Expectations of SocietyContents
19 Message from the President
23 Message from the Finance Director
25 Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
27 Strategy by Segment: Ethical Pharmaceuticals Wholesaling Business
29 Strategy by Segment: Self-Medication Products Wholesaling Business
31 Strategy by Segment: Manufacturing Business
33 Strategy by Segment: Medical-Related Business
34 Overseas Business Development
35 Financial and Non-Financial Highlights
Value Creation Story
Strategy
Foundation for Grow
thFinancial Inform
ation
17 18Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
The Alfresa Group’s principles set out our philosophy, “We create and deliver a fresh life for all,” which forms the basis for all our business activities. To make this philosophy concrete, in April 2016 the Group launched its new three-year 16-18 Mid-term Management Plan Break Through to Tomorrow. The three Group management poli-cies, namely the “Challenge 3,” provide the strategic foundations for sustainable growth. They are: (1) strengthen business foundation with One Alfresa initiatives; (2) expand the health and medical-related fields; and (3) reform business model ahead of changes in the business environment. These three policies will be ongoing themes for action, even after the period of the 16-18 Mid-term Management Plan. Thus, they are also included in the Value Creation Model detailed in this report.
The overall ethical pharmaceuticals market in Japan in the fiscal year ended March 31, 2017 shrank by 3.8% for the first time in two years (based on estimates by CRECON Research & Consulting Inc.), due to such factors as NHI drug price revisions, including special repricing for market expansion; a reduction in long-listed drugs precipitated by the switch to generic drugs; and fall-off in demand for therapeutic agents for hepatitis C. With this trend, the Alfresa Group’s Ethical Pharmaceuticals Wholesaling Business saw a sales slowdown, although at a rate smaller than the decline of the overall market. This led to a downward revision of our initial forecast. On a brighter note, the Self-Medication Products Wholesaling Business and Manufacturing Business achieved excellent performance in the first year of the 16-18 Mid-term Management Plan. In the fiscal year ending March 2018, the second year of the current three-year plan, the Group will continue to pursue its “Challenge 3” management policies. Going forward, although we anticipate an impact from the annual revision of NHI drug prices, the expansion of generic drugs, and reduction in long-listed drugs, the Japanese ethical pharmaceuticals market is projected to experience gradual growth, buoyed by such factors as the advance of the aging society and the con-tribution of new drugs. As the top wholesaler of ethical pharmaceuticals in the country, the Alfresa Group will continue to give top priority to ensuring a stable supply of pharmaceuticals. We also recognize that our corporate earnings come partly from publicly-funded sources, which is why we focus on controlling selling, general and administrative expenses. Reducing such expenses has always been a focus for the Group, and we will continue to further improve the efficiency of pharmaceutical distribution, utilizing the latest technologies for pharmaceutical demand forecasting and proactively advancing automation, robotization and the introduction of radio frequency identi-fication (RFID) in distribution. We consider the Self-Medication Products Wholesaling Business to be a growth field. We expect the role of this segment to expand further following the introduction of Japan’s self-medication taxation system. In response, while reinforcing business foundations in distribution and other areas, the Group will work to widen its operational field including internet sales. In the Manufacturing Business, the Group will accelerate the pace of growth by seeking to acquire new consigned manu-facturing contracts and developing new active pharmaceutical ingredients.
Taizo Kubo Representative Director & President, Alfresa Holdings Corporation
The Alfresa Group is currently facing major changes in the business environment. In Japan, which is said to be a super-aging society, by 2025 all people of the baby-boomer generation will be aged 75 or older. In order to ensure that medical and nursing care evolve in step with actual needs and respond to the various challenges associated with the aging of society, the government is mak-ing an all-out effort to build integrated community care systems centered on local governments. As a group that is engaged in a wide range of medical and health-related fields, we believe it to be essential to respond to this situation by providing products and services that people need, when they need them. The Group is determined to accurately assess future policy changes in medical administration and create a strategy ahead of them. With this in mind, the Group concentrated resources on an analysis of the business environment and backcast the present priorities for the future when formulating the 16-18 Mid-term Management Plan.
P15-16: Alfresa Group’s Value Creation Model
P25-26: Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
P25-26: Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
Message from the President
Pursuing Transformation to
Help Build a Society That
Supports a Fresh Life for All
Concepts Behind the 16-18 Mid-term Management Plan Break Through to Tomorrow
Review of the Fiscal Year Ended March 2017 and Outlook for the Fiscal Year Ending March 2018
Value Creation Story
Strategy
Foundation for Grow
thFinancial Inform
ation
19 20Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
In Japan, a community healthcare vision is being forged with a view to the year 2025. With these policy changes, the provision of medical care and nursing services will undergo significant changes over the coming years. Advances in integrated community care systems are expected to drive a paradigm shift in the structure of medical care provision similar in impact to the past progress of the separation of drug dispensing from medical practice in Japan. This will result in reforms to “social hospitalization” of the elderly—a long-running challenge for medical institutions—and facilitate a transition to care in the home or in nursing facilities. We are determined to meet pharmaceutical needs outside hospitals, which are difficult to ascertain at present. It is vital to build new systems that can meet the needs not only of our conventional cus-tomers such as medical institutions and dispensing pharmacies, but also of places of care. By steadily implementing the measures set out in the 16-18 Mid-term Management Plan, the Alfresa Group will carry out reforms ahead of changes in the business environment. As a first step, we will enhance measures such as visits to nursing facilities and also work to expand sales of medi-cal devices, medical materials, and other non-pharmaceutical products. The Group will also be focusing on developing talent capable of responding to integrated com-munity care systems. The fostering of “Solution MS” (a proposal-based sales force) is a measure we are developing to raise the skill level of our sales force Group-wide. By deploying Solution MS in every region, the Group aims to expand and strengthen contacts with local communities. These people play an instrumental role in creating new business opportunities as they understand the vari-ous needs of medical institutions, pharmacies, places of care, and local governments, while facilitat-ing cooperation and coordination among these actors. During the year ending March 2018, the Group also launched support for its people to acquire Medical Management Specialist status, a professional qualification concerning the management of medical institutions. Approximately 500 people already possess this qualification, and the Group aims to increase the number of qualified professionals.
Our valuable people are the driving force for value creation at the Alfresa Group. I recognize that their growth is the source of the Group’s continued growth. Key themes in our talent develop-ment include providing opportunities at work to acquire the necessary work-related knowledge and insight, developing shared values for the Company and its organizations, and encouraging self-motivation. Ultimately, I want to ensure that our people are proud of their work and where they work, making them into real Alfresa Group fans. I want to make it easy for everyone to communicate, enabling them to experience true fulfillment. This, in turn, will drive further corporate growth. Furthermore, given that the Group’s business activities are directly involved with the lives and health of people, conducting business activities with integrity is something that reflects both our CSR activities and corporate values. In other words, by developing talent and appropriately advanc-ing business and CSR activities, the Group will be able not only to generate profit but also to make a positive impact on society, thereby accomplishing sustainable growth. These are the basic concept of the Group’s sustainability management, and we have formulated the CSR Basic Policy to set out this commitment. Going forward, the Group will implement all of its corporate activities based on this basic policy.
Seeking to achieve continuous growth in corporate value, the Group must carefully look at factors such as Japan’s declining population, growing consumer health-consciousness, and innovations in advanced technologies and medical care. Japan’s population is projected to decrease to approximately 88 million in 50 years’ time, with the working age population (aged 15-64) forecast to shrink by 40% to approximately 45 million (estimates by the National Institute of Population and Social Security Research). On the other hand, as utilization of health promotion and preventive services expands, including measures not covered by public health insurance, it is likely that the commercialization of advanced medicine will enable the provision of ever more sophisticated medical care. We also anticipate that technological innovation will spur improvements of productivity in distribution and manufacturing, and that the utilization of big data technology such as the data from the National Database of Health Insurance Claims and Specific Health Checkups of Japan (NDB) will rapidly advance. In anticipation of these major changes in the business environment, the Group has visualized its process for long-term value creation for the first time, in the form of its Value Creation Model. This model sets out how we will continue to provide value to society as we ensure the evolution of our unique capabilities and pursue transformation. We perceive the impacting factors mentioned above as opportunities, and we will continue to work to build a society of healthy longevity, seeking to fulfill the universal hope to lead a healthy life.
P15-16: Alfresa Group’s Value Creation Model
P38: CSR Basic Policy
P39-40: Basic Policy on Talent Development
P25-26: Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
Message from the President
Ongoing Initiatives for Integrated Community Care Systems Unique Strengths of the Alfresa Group
Sustainability Management, with Our Valuable People as the Driving Force
Helping to Build a Society of Healthy Longevity
The Alfresa Group considers pharmaceutical distribution to be a social infrastructure business that must be protected from interruption at all costs. The key to this business is maintaining a strong distribution structure that enables stable supply not just under normal conditions, but also in times of emergency such as natural disasters. The Group is capable of delivering about 350,000 items to its customers, including pharmaceuticals that require strict temperature control—in response to or even anticipating their orders. This capacity is thanks to our integrated efforts to build a high-perfor-mance distribution network and the strong sense of mission our people have. The Group will build on these strengths and keep enhancing them as we deal with the changing business environment. Another major strength of the Alfresa Group is its broad business portfolio. Our business centers on pharmaceutical wholesaling and reaches from the manufacturing of active pharmaceuti-cal ingredients and pharmaceuticals, to wholesaling, to dispensing. Based on our “Healthcare Consortium” concept, the entire Group shares added-value and information, working flexibly together to respond to the needs of our customers and suppliers. The Group’s standing as the top wholesaler of ethical pharmaceuticals in Japan demonstrates the relationship of trust it has built with its customers and partners. It is from this position that we will work to provide further added value, thereby ensuring that we continue to maintain that bond of trust.
P11-12: Alfresa Group’s Strengths: One-of-a-Kind Pharmaceutical Supply Chain
P13-14: Alfresa Group’s Strengths: The Robust Distribution System of Japan’s Top Wholesaler of Ethical Pharmaceuticals
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21 22Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Shunichi MiyakeDirector, Deputy President, Assistant to the President, Internal Control, Financial Planning,Public and Investor Relations, General AffairsAlfresa Holdings Corporation
Ethical Pharmaceuticals Market Growth Rate (year on year)
Rating by Rating and Investment Information, Inc. (R&I)
16-18 Mid-term Management Plan:Group Management Targets
Review of Fiscal Year Ended March 31, 2017 and Future OutlookHere are the consolidated results of the Alfresa Group for the fiscal year ended March 31, 2017. Net sales decreased 1.0% year-on-year to ¥2,551,801 million, operating income decreased 26.6% to ¥33,228 million, ordinary profit decreased 21.4% to ¥43,628 million, and profit attributable to owners of the parent decreased 11.7% to ¥30,894 million. Although the Self-Medication Products Wholesaling Business and the Manufacturing Business each recorded growth in both sales and operating income, the Ethical Pharmaceuticals Wholesaling Business, which accounted for approximately 90% of consolidated net sales, recorded a decrease in both sales and operating income due to the 3.8% year-on-year contraction in the ethical pharmaceuticals market in Japan. The Alfresa Group foresees that systemic reforms and other factors will impact the ethical pharmaceuticals market in Japan and, accordingly, forecasts gentle growth for the Group. What is more, the government is working on a community health care vision, as part of the future vision for medical and nursing services in 2025. The Group believes that the ongoing development of integrated community care systems will bring medium- to long-term changes in local governments’ structures for provision of medical and nursing care functions. The Alfresa Group, the top wholesaler of ethical pharmaceu-ticals in Japan, is delivering continuously growing corporate value by steadily executing the priority measures in its 16-18 Mid-term Management Plan in order to implement reforms ahead of changes in the business environment, while enhancing productivity and management efficiency.
Investment StrategyThe Group will engage actively in growth invest-ment and business expansion investment to keep growing corporate value. Under the 16-18 Mid-term Management Plan, we are planning growth invest-ments of ¥42 billion in our core Ethical Pharmaceuticals Wholesaling Business and ¥12 billion in the Manufacturing Business. These investments will be predominantly allocated to optimization of distribution centers and expansion of production capacity. We have also secured approximately ¥40 billion for business expansion investment for the Group as a whole, which will target entry into new business fields and expansion of the size of existing businesses. These planned invest-ments will amount to a combined total of about ¥100 billion by the fiscal year ending March 31, 2019.
(Fiscal years ended March 31)
1. Ethical Pharmaceuticals Wholesaling Business2. Estimate by CRECON Research & Consulting, Inc.
2015 2016 2017
Alfresa Group1 -3.6% 3.9% -1.7%
Market2 -2.7% 8.3% -3.8%
Issuer rating Rating outlook
A Positive, changed from stable
Reason for rating (excerpt*)“Through excellent cost control, the ethical pharmaceuticals wholesaling business keeps SG&A expense growth low. Alfresa Holdings' SG&A expenses to sales ratio is outstandingly low among pharmaceutical wholesalers. The financial base is sound with a net cash position and accumulated equity capital.”
The Alfresa Group’s businesses touch every phase of the phar-maceutical supply chain, from manufacturing to wholesaling and dispensing pharmacies, all of which form a critical part of Japan’s social infrastructure. We help the nation to ensure a stable supply of needed pharmaceuticals, when and where they are needed. Therefore, investment is essential for fulfilling our social responsibili-ties as a company and for continuing to create value into the future. This is why the Group will prioritize funding for growth investment and business expansion investment, going forward.
Corporate Capital PolicyThe capital efficiency target in the 16-18 Mid-term Management Plan is a return on equity (ROE) of around 8%. In Japan, ethical pharmaceutical costs are largely covered by Japan’s publicly funded national health insurance system, with a relatively small out-of-pocket share paid by patients. The government has an urgent need to control these and other social security costs in the face of Japan’s aging society and declining birthrate. In this environment, it is critical that the Group not only pursue profitability, but also comprehen-sively improve capital efficiency, including the total asset turnover ratio and the leverage in our financial position. This is why I have set ROE at a level that will provide a positive equity spread, taking into account shareholder’s equity costs, with a view to delivering continu-ously growing corporate value. Our basic policy on shareholder returns is to provide a dividend on equity (DOE) greater than 2.0%. This is based on our commitment to return profits to shareholders commensurate with consolidated results, while taking into comprehensive consideration matters such as strengthening of the financial structure, stability of the management foundation and future business development. Of course, future dividends cannot be guaranteed, but I am happy to report that the Group has been able to increase the dividend every year since our establishment in 2003.
Policy on Engagement with Shareholders and InvestorsThe Alfresa Group is actively engaged in medium- to long-term ini-tiatives to deliver on the Alfresa Group’s principles. These initiatives are based on our determination to contribute to society as well as to increase corporate value. The Group provides returns to shareholders through the fair market appraisal of Alfresa Holdings shares and an appropriate dividend payment. The Group’s Engagement Policy aims to build good medium- to long-term relations with shareholders and investors who find themselves in accord with the Group’s determination, via interac-tions that engender understanding for the Group’s corporate social responsibilities and appreciation of our objectives for corporate value creation. This year, for the first time, we have issued an integrated report that provides a full picture of our activities in the medium to long term, including our initiatives in ESG areas. We will continue to work to improve usability and convenience in order to further enhance our dialogue with shareholders and investors.
*From the R&I news release of April 27, 2017.
Net Sales
Operating IncomeMargin
Pro�t Margin1
2,700 billion yen 2,551.8 billion yen
1.5% + 1.3%
1.2% + 1.2%
8% level 8.1%
DOE2 2.0% + DOE2 2.06%
Initial Year (Results)(Fiscal year ended March 31, 2017)
Final Year (Targets)(Fiscal year ending March 31, 2019)
ROE
ShareholderReturn Policy
1. Profit margin attributable to owners of the parent2. DOE: Dividend on Equity
* The Company implemented a stock split of four shares for one share of common stock on October 1, 2014. Dividends are shown retroactively reflecting this stock split.
(¥)
(Fiscal Year ended/ending March 31)
Dividends per Share
(Projected)
Shareholder return policy
2010 2011 2012 2013 2014 2015 2016 2017 2018
DOE of 2.0% +
(¥)
(Fiscal Year ended/ending March 31)
Dividends per Share
(Projected)
Shareholder return policy
2010 2011 2012 2013 2014 2015 2016 2017 2018
DOE of 2.0% +
Investment About 100 billion yen level(cumulative total)
Manufacturing Business12.0 billion yen
Shareholders returns(DOE 2%+), etc.
Business expansion investment
Approx. 40.0 billion yen
Depreciation, etc.(cumulative)Approx.35.0 billion yen
Pro�t*(cumulative)Approx.93.0 billion yen
Growth investment
Business expansion investment
Ethical Pharmaceuticals
Wholesaling Business
42.0 billion yen
Others
*Profit attributable to owners of the parent
16-18 Mid-term Management Plan: Capital Allocation & Investment
Message from the Finance Director
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23 24Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Ethical Pharmaceuticals Wholesaling Business
Reform sales functions in line with customer needs
Address integrated community care systems
Expand sales of medical-related products
Strengthen specialty pharmaceuticals distribution (coverage ratio, sophisticated distribution)
Further improve the efficiency of sales distribution
Optimize distribution bases with a view toward nationwide distribution
Self-Medication Products Wholesaling Business
Further reinforce business foundations
Strengthen value-added marketing activities
Manufacturing Business
Advance reliable, safe, and sincere manufacturing
Expand product lineup and reinforce sales capabilities
Expand overseas business
Advance consigned manufacturing and the active pharmaceutical ingredients business
Medical-Related Business Strengthen promotion of family pharmacies and health support pharmacies
Overseas Business Development
Expand business centered on Asia
(Vietnam business: medical devices and materials, diagnostic reagents, etc.)
In May 2016, the Alfresa Group announced the 16-18 Mid-term Management Plan Break Through to Tomorrow for the three-year period from the year ended March 31, 2017 to the year ending March 31, 2019. Under the Group Management Policy “Challenge 3,” all group companies are concentrating their efforts on executing the mid-term management plan as their top priority. In formulating the plan, the Group spent ample time on an analysis of the business environment of the future. This process clarified the major changes that will occur in the Group’s business environment through 2025 and helped reaffirm that the Group must implement its strategies for the medium- to long-term with a clear view of the challenges that the Group faces and the roles it should play. An overview of the Group strategy and the status of progress to date are given below.
All the people of the Alfresa Group are exerting all their energy to work on top priority issues under the plan. Our people, ten years from now, will
look back on the time of the 16-18 Mid-term Management Plan, and say, “That was the turning point in the sustainable growth of the Alfresa
Group.” Progress so far is reported below.
Major Initiatives and Outcomes
Major Changes in Medical Care AreasThe Japanese government is currently implementing “Comprehensive Reform of Social Security and Tax” initiatives to enhance and stabilize the social security system and ensure fiscal soundness ahead of the so-called “2025 problem,” when everyone in the baby-boomer generation will be aged 75 or older. Various initiatives are being implemented in medical care areas and this is having a major impact on the industry as a whole. The diagram below illustrates the major changes that are anticipated during the period of the 16-18 Mid-term Management Plan.
Initiatives by Japan’s Ministry of Health, Labour and Welfare for 2025The Ministry of Health, Labour and Welfare has set the goal of maintaining the dignity of the elderly and supporting independent living. To facilitate this, it is fostering the formation of systems for integrated support and service provision in communities, otherwise known as “integrated community care systems.” The idea of these systems is to empower people, as far as is possible, to con-tinue to live the rest of their lives as they wish, in a place that feels familiar.
Group Management Policy “Challenge 3”“Challenge 3” is the name the Alfresa Group has given to the three key strategies of the 16-18 Mid-term Management Plan which it is pursuing to leverage the changes in the business environment in the run-up to 2025. These three key strategies have been reflected in action plans in each business segment and are being used to drive transfor-mation. They represent extremely important themes that the Group is determined to exe-cute not just in the current medium-term management plan but beyond. This is why the Group does not call them “priority measures” under the medium-term plan, but “Group Management Policy.” The Group is executing its mid-term initiatives based on “Challenge 3” in order to realize the “Our Vision” section of the Alfresa Group’s principles.
“Challenge 3”
Strengthen Business Foundations with One Alfresa Initiative
Expand the Health and Medical-related Fields
Reform Business Model Ahead of Changes in the Business Environment
Addressing the Medium- to Long-Term Theme of Integrated Community Care Systems
A functional system that enables patients to continue to live in familiar
surroundings and communities requires seamless cooperation among
all actors, including local governments, clinics and small and mid-sized
hospitals, dispensing pharmacies and drugstores, home care providers,
and nursing care facilities.
The Alfresa Group seeks to become a key member in multidis-
ciplinary cooperation by leveraging its collective strengths in a broad
range of business areas and the relationships of trust it has built with
customers and suppliers through community-based businesses.
Marketing Reform
Home care services, nursing care facilities, etc.
ClinicsSmall and mid-sized hospitals
Dispensing pharmacies & drugstores
Municipalities
Integrated Community Care Systems
Familyhospitals
Familypharmacies
Patients
Progress on the 16-18 Mid-term Management PlanTwo Major Projects on Marketing and Distribution Underway
Medium- to Long-Term Growth Scenarios: 16-18 Mid-term Management Plan
Yasuki IzumiDirector, Senior Vice President & Executive Officer,Group Business & Affiliate Control & Group Information SystemAlfresa Holdings Corporation
2016
Revision of medical feesNHI drug price revision
2017 2018 2025
6th Medical Care Plan
Generic drug substitution rate 70% Generic drug substitution rate 80%
7th Medical Care Plan
6th Long-Term Care Insurance Plan
Formulation of community health care visionSeparation of functions for beds and strengthening of cooperation in communities
Establishment of community medical cooperation promotional corporationCreation of not-for-profit holding companies
Formation of integrated community care systemsDevelopment of home medical and nursing care, strengthening of local multidisciplinary cooperation, promotion of family doctors
Promotion of “Pharmacy Vision for Patients”Promotion of family pharmacists and pharmacies, from location-based to community-based
Pharmacies
Pharmaceuticals
Clinics
Hospitals
Simultaneous revision of medical fees and long-term
care feesNHI drug price revision
Population above age 75 years: 22 million
Patients with dementia: 7 million
Basic plans by prefecture
Medical care 6 years, Nursing care 3 years
Anticipating Major Changes through 2025
Distribution Reform
* See pages 27 to 34 for details on each business.
1
2
3
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25 26Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
OverviewThe ethical pharmaceuticals market in Japan contracted by 3.8%* in the fiscal
year ended March 31, 2017 due to factors such as NHI drug price revisions in April
2016, a reduction in long-listed drugs precipitated by the switch to generic drugs,
and saturated demand for therapeutic agents for hepatitis C. In view of antici-
pated changes in the business environment, the 16-18 Mid-term Management
Plan sets out priority measures to tackle various challenges, among which a top
priority is advancing distribution reforms. These measures are detailed below. By
implementing them, the Group aims to keep strengthening its business foundation
as Japan’s top wholesaler of ethical pharmaceuticals.
*Estimate by CRECON Research & Consulting Inc.
Key Strategies Under the 16-18 Mid-term Management PlanReforming Sales Functions in Line with Customer NeedsThe Group’s ability to identify and forecast customer needs and provide various
support measures enables it to help customers to improve efficiency and profit-
ability. The Group will also work to develop Solution Marketing Specialists (Solution
MS) from among our frontline Marketing Specialist (MS) staff. These Solution MS
will be equipped with skills such as the ability to suggest improvements based on
customer needs, and expert knowledge of the medical field in general by acquiring
qualifications such as Medical Management Specialist.
Expanding Sales of Medical-related ProductsWith a view to fulfilling the product lineups required by customers, Group-wide efforts
will be made to expand sales of medical-related products, as well as ethical pharma-
ceuticals, including diagnostic reagents, medical devices and medical materials.
Pursuing Optimization for the Alfresa Group• Strengthening Specialty Pharmaceuticals Distribution
A specialty pharmaceuticals distribution network has been established with
Specialty Medical Distribution Corporation, a subsidiary of Alfresa Corporation, at
its core, together with two strategic partners, TOMITA Pharmaceutical Co., Ltd. and
Moroo Co., Ltd., who hold shares in this company. The aim for the future is to gain
more exclusive distribution consignments.
• Shared Use of Customer Support Systems
Group companies are benefiting from shared use of customer support systems
including medical information provision and inventory management, which are
developed and operated by Alfresa System Corporation. Through its network of
Group companies, the Group can provide uniform customer services to medical
institutions and dispensing pharmacies nationwide.
Optimizing Distribution Bases With a View to Nationwide DistributionThe Alfresa Group aims to maintain distribution functions that ensure stable sup-
ply not just under normal conditions, but also in times of emergency. The following
initiatives are being advanced to establish a shared Group distribution platform.
• Sophistication of Distribution Functions
· Use of state-of-the-art technologies including robotics, automatic operation
and RFID
· Sophisticated quality control distribution (including super-sophisticated distri-
bution capabilities for investigational drugs, regenerative medicine, etc.)
· Conformity with PIC/S GDP
• Optimization of Distribution Functions
· Realignment of distribution bases
· Standardization of distribution facilities
· Pursuit of further cost reductions
Addressing Integrated Community Care SystemsIn anticipation of the future development of integrated community care systems,
the Group will strengthen customer-oriented marketing as a medical service provi-
sion partner. It will organize the above-mentioned Solution MS, in order to become
a key player in community medical cooperation in integrated community care
systems by engaging in dialogue with doctors, pharmacists and care managers.
RFID (Radio Frequency Identifier)Automated contact-free recognition technology for reading/writing electronic data tags using radio waves (Source: Ministry of Economy, Trade and Industry, April 2017)
PIC/S GDP (Pharmaceutical Inspection Co-operation Scheme Good Distribution Practice)An international quality control standard in the distribution of pharmaceuticals
30,000 Items in StockLocal sales branches are located within the Osaka Distribution Center to ensure fast and efficient delivery directly to customers. The Center is equipped with an in-house power generator and underground refueling tanks and provides emergency-use washrooms and stockpiles such as drinking water accessible to local residents.
Alfresa’s Osaka Distribution Center
Separation of Marketing Specialist (MS) Functions
Ethical Pharmaceuticals Wholesaling Business
Net Sales: ¥2,400 billion
Operating Income Margin: 1.5%
Investment (cumulative): ¥42 billion
16-18 Mid-term Management Plan Targets
Net Sales Operating Income
Operating Companiesn Alfresa Corporationn Shikoku Alfresa Corporationn TS Alfresa Corporationn Meisho Co., Ltd.n Odashima Limitedn RYUYAKU CO., LTD.n Kowa Pharmaceuticals Co., Ltd.n Alfresa Medical Service Corporation
Strategy by Segment
Koichi MasunagaPresidentAlfresa Corporation
2015 2016 2017
2,205.22,290.8 2,251.4
27.5
41.0
27.9
2015 2016 2017
¥ billion
Separation of drug dispensing from medical practice
Sales
Delivery
Separation of sales and distribution functions Reform of MS functions
Promotion of community health care vision and integrated community care systems
(Fiscal years ended March 31)
¥ billion
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27 28Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Self-Medication Products Wholesaling Business
Operating Companiesn Alfresa Healthcare Corporationn Mogi Pharmaceutical Co., Ltd.
• Utilizing Next-Generation Marketing Support Tools
Alfresa Healthcare Corporation provides “alf-net,” an online marketing support
tool developed by the Group, to help enable rapid sharing of various kinds of
information with manufacturers and the Group’s MS. The website also comes with
an internet-based ordering system which makes it possible to provide the shared
information to customers instantly.
Strengthening Sales of Exclusive ProductsRecently, products have been required to be safer and more effective than ever
before. Backed by a wealth of evidence, the Alfresa Group is engaged in the sale
and development of exclusive products its competitors cannot match, and this
leads to the creation of new product categories. To ensure that these products
are selected by customers, the Group organizes regular exhibits and study groups,
enabling it to make proposals to retailers and raise awareness.
Strategy by Segment
Hisashi KatsukiPresidentAlfresa Healthcare Corporation
Japan’s Self-Medication Taxation SystemA special tax refund program introduced in Japan for the period from January 1, 2017 to December 31, 2021 as part of the government’s measures to promote the switch from ethical pharmaceuticals to alternatives under proper health management. Under this program, individuals engaged in certain health management and disease prevention efforts are eligible to deduct from their total taxable income for a year the expenditures used to purchase designated OTC drugs within the year in excess of ¥12,000, up to a maximum amount of ¥88,000. Purchases for the taxpayer’s spouse or other household members can be included in the expenditure.
n Source: Ministry of Health, Labour and Welfare website: “About the Self-Medication Taxation System”
“Digipop”—an in-store sales promotion tool for exclusive products sold by Alfresa Healthcare
Exhibition panel at a solution-proposal business conference held by Alfresa Healthcare
199.9
244.9 251.4
2015 2016 2017
0.3
1.3
2.1
2015 2016 2017
OverviewPriority measures the Group has set out in the 16-18 Mid-term Management Plan
include “Further reinforce business foundations,” and “Strengthen value-added
marketing activities.” The Group will press forward with these measures by
engaging in cost reduction efforts via company-wide distribution reform, holding
solution-proposal business conferences for proposing new added-value ideas to
customers, and also by enhancing its lineup of high-margin, exclusive products.
In the year ended March 31, 2017, this business secured stable profits thanks to
increases in market share. Looking ahead to the roll-out of the Self-Medication
Taxation System and other developments, the Group will execute the following
strategies with the aim of growing this business.
Key Strategies Under the 16-18 Mid-term Management PlanFurther Reinforcing Business Foundations• Company-Wide Reform, Starting from Distribution
Changes are being seen in pharmacy business models, including growth of the
dispensary business at drugstores and dispensing pharmacies increasingly han-
dling over-the-counter (OTC) pharmaceuticals as they aim to take on the role of
health support pharmacies. In response to these changes, the Group is working to
build an efficient and stable distribution system for OTC pharmaceuticals accom-
panying the Group’s reform of distribution of ethical pharmaceuticals, aiming to
strengthen the overall distribution infrastructure.
• Further Strengthening Profit Management
The Group will engage in thorough profit management, using management indi-
cators such as item-by-item marginal income.
Strengthening Value-added Marketing Activities• Solution-Proposal Business Conferences
In addition to the regular private exhibition named “Life Support Fair,” the Group
holds business conferences to make new proposals to customers, including loca-
tion and customer-based shelving allocation plans. The three main themes are
sales floor reforms, creating new customers and providing customer solutions.
16-18 Mid-term Management Plan Targets
Net Sales Operating Income ¥ billion
Net Sales: ¥245 billion
Operating Income Margin: 0.4%
Investment (cumulative): ¥1 billion
(Fiscal years ended March 31)
¥ billion
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1. Good Manufacturing Practice (GMP): Standards for manufacturing control and quality control of pharmaceuticals and quasi-drugs2. Quality Management System (QMS): Standards for manufacturing control and quality control of medical devices and external diagnostic reagents3. Point-of-Care Testing (POCT): A rapid testing at the site of patient care
Manufacturing Business
Strategy by Segment
Operating Companiesn Alfresa Pharma Corporationn QINGDAO NESCO MEDICAL CO., LTD.n Alfresa Fine Chemical Corporation n Sannova Co., Ltd.
OverviewThe priority measures in the Manufacturing Business under the 16-18 Mid-term
Management Plan include “Advance reliable, safe and sincere manufacturing,”
“Advance consigned manufacturing and the active pharmaceutical ingredients
(API) business,” “Expand product lineup and reinforce sales capabilities,” and
“Expand overseas business.” In the first year, the Group’s efforts resulted in oper-
ating income significantly exceeding the initial plan. With the new consolidation of
Sannova Co., Ltd. under the Group, efforts were made to step up the acquisition of
new contracts for consigned manufacturing and also to promote cost reductions.
In the API business, the Group introduced new production facilities and worked to
develop new products. In July 2016, Alfresa Pharma Corporation released Sabril®
500 mg powder packets, an antiepileptic drug jointly developed with Sanofi K.K.,
and in February 2017 launched sales of “AA01,” a fully automated urine and
excrement analysis device jointly developed with ARKRAY, Inc. Responding to
expanding demand for surgical sutures in the China market, a new plant building
was completed on the grounds of Alfresa Pharma’s subsidiary QINGDAO NESCO
MEDICAL CO., LTD., whose head office is located in Qingdao City, Shandong
Province, in the People’s Republic of China.
Key Strategies Under the 16-18 Mid-term Management PlanAdvancing Reliable, Safe, and Sincere Manufacturing• Rigorous Quality Control
For the manufacture and sale of pharmaceuticals, diagnostic reagents and medical
devices, the Group has constructed a rigorous quality control system covering
all processes from acceptance of raw materials to shipment of finished products.
As part of these efforts, the Group ensures compliance with GMP1, QMS2 and
other requirements and has also acquired ISO13485, ISO9001 and other quality
management system certifications.
• Manufacturing That Reflects “Our Promises”
“Our Promises,” part of the Alfresa Group’s principles, represent the Group’s code
of conduct. In its business activities, the three keywords of “Reliability,” “Safety,”
and “Sincerity” are positioned as values to be upheld by all Group companies
and our people. The Group is committed to ensuring that its Manufacturing
Business, in particular, shares and practices these values by conducting, reliable,
trustworthy manufacturing.
Demonstrating Group Synergy• Cooperation between Group Manufacturing Companies on Consigned
Manufacturing
Cooperation between Alfresa Pharma and Sannova enables:
· stronger marketing propositions to pharmaceutical manufacturers,
· enhancement of production technologies, including formulation and packaging, and
· further cost reductions.
These in turn lead to the acquisition of consignments for new products.
• Cooperating with Group Wholesaling Companies
Alfresa Pharma is pursuing collaboration and strategic division of roles with
Marketing Specialists (MS) at the Group’s wholesaling companies, seeking to
expand market share in the POCT3 products that include rapid diagnosis kits for
the influenza virus, and also for sales of long-listed drugs.
Further Expanding the Product LineupAlfresa Pharma continues to develop and improve products in order to strengthen
competitiveness by leveraging its core field and technologies, with a focus on ethi-
cal pharmaceuticals, diagnostic reagents and medical devices. In the area of medi-
cal devices, the company is working to develop the world’s first bio-absorbable
medical device for use in cancer ionized radiation therapy, under a Ministry of
Economy, Trade and Industry project to support development of cutting-edge
medical devices. Alfresa Fine Chemical Corporation has also introduced new
manufacturing facilities for APIs with the aim of increasing the variety of items it
can manufacture.
Expansion of Overseas BusinessThe Group is aiming to strengthen sales in global markets—particularly in China
and Southeast Asia—selecting target areas based on overseas market research
before establishing clearly defined strategies. The Group will work to expand sales
by leveraging international networks, not only for the diagnostic reagents and
medical devices that are developed and manufactured by the Group, but also for
medical-related products of partner manufacturers in Japan.
Koichi ShimadaPresident and CEOAlfresa Pharma Corporation
Alfresa Pharma’s Okayama Pharmaceutical Plant: Expanding the product lineup
Sannova: Responsible for consigned manufacturing
Alfresa Fine Chemical: Manufacturing APIs
26.0
31.5
41.4
2015 2016 2017
1.3
1.8
2.6
2015 2016 2017
16-18 Mid-term Management Plan Targets
Net Sales Operating Income¥ billion ¥ billion
Net Sales: ¥44 billion
Operating Income Margin: 7.7%
Investment (cumulative): ¥12 billion
(Fiscal years ended March 31)
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Medical-Related BusinessOverseas Business Development
Operating Companiesn Apollo Medical Holdings Inc.n Nihon Apoch CO., LTD
Teruo AzumaChief Executive OfficerApollo Medical Holdings Inc.
Ryuji ArakawaDirector, Vice President & Executive Officer,Business Development & International Business Alfresa Holdings Corporation
OverviewAgainst the backdrop of advancing globalization, the Alfresa Group currently has opera-
tions in the People’s Republic of China and the Socialist Republic of Vietnam, where the
Group is contributing to health and medical care. The Group entered the Chinese market
in 2005 with the establishment of a joint wholesaling venture. It has also established
a manufacturing base in Qingdao City, and it constructed additional plant buildings in
2005 and 2016 to enhance production capacities. In Vietnam, the Group established a
joint venture with a major local wholesaler in 2013. In addition to continuing to pro-
mote the growth and development of these three companies, the Group will also move
to expand to more locations outside Japan, carefully examining market size, growth
potential, social security systems and regulations on foreign capital in other countries.
Growing by Collaborating with Local and Japanese Partners• Chinese Market
The Group is involved in a joint capital investment with ITOCHU Corporation, called
REMEJE PHARMACEUTICALS (CHINA) CO., LTD. In this process, the Group has con-
structed a business model that is responsive to new medical system reforms in China,
including tie-ups with local companies, thereby developing its pharmaceuticals and
healthcare-related businesses.
• Vietnamese Market
The Group has established a joint venture with Codupha, a local medical-related product
wholesaler, through which it engages in the importation and sale of medical devices and
materials and diagnostic reagents. In addition, a supply processing and distribution (SPD)
project for the consignment of internal hospital distribution proposed by Alfresa Medical
Service Corporation has been adopted by the Japan International Cooperation Agency
(JICA) as one of its “Collaboration Programs with the Private Sector for Disseminating
Japanese Technology for the Social and Economic Development of Developing Countries.”
The project is currently being moved forward in collaboration with JICA.
Manufacturing and Marketing Alfresa Pharma ProductsQINGDAO NESCO MEDICAL CO., LTD. is a subsidiary of Alfresa Pharma Corporation
established in the National Economic and Technological Development Zone in Qingdao
City, and it serves as an Asian manufacturing hub for the Group. QINGDAO NESCO
MEDICAL manufactures high-quality silk sutures and other products using the same
technologies as those used in Japan. A marketing structure has also been developed and
efforts are being advanced to expand sales in overseas markets, focusing on China and
other Asian countries.
Furthermore, based on clearly defined strategies that include selecting target areas
on the basis of market research, the Group is considering expanding sales of major
products such as fecal occult blood products and sutures to global markets, including
Europe and North America.
What Are Family Pharmacies?Family pharmacies are part of an integrated community care system and offer a family pharmacist who is always available for consultation about drugs. They fulfill the following functions: · Unified and continuous understanding of information on patient’s medications · 24-hour availability and capacity to make home-visits · Cooperation with medical institutions, etc.
n Source: Pharmacy Vision for Patients (Ministry of Health, Labour and Welfare, October 2015)
Strategy by Segment
2016 2017
31.3 30.3
2016 2017
1.1
0.5
16-18 Mid-term Management Plan Targets
Net Sales Operating Income¥ billion ¥ billion
Net Sales: ¥36 billion
Operating Income Margin: 2.5%
Investment (cumulative): ¥1.5 billion
OverviewThe dispensing pharmacy business of the Medical-Related Business segment faced
a tough situation, impacted by such factors as the revisions to NHI drug prices and
dispensing fees in April 2016. As part of priority measures to “Address business
model transformation” under the 16-18 Mid-term Management Plan, the Group has
advanced measures relating to family pharmacies and has promoted intra-Group
cooperation with the aim of further adding value and improving operating efficiency.
Key Strategies Under the 16-18 Mid-term Management PlanBoosting Earnings Ability• Advancing Business Expansion by Opening New Pharmacies and
Engaging in M&A
Information from Group wholesaling companies will be actively utilized to achieve
efficient expansion of business.
• Further Improving Efficiency and Strengthening Functions
Cooperation with Apollo Medical Holdings Inc. and Nihon Apoch CO., LTD will be
strengthened, and joint projects will be advanced relating to employee education and
training, dispensing operations, and core IT systems. The aim is to boost earnings abil-
ity by promoting efficiency and strengthening functions, including risk management.
Pursuing Business Model TransformationIn line with moves by the government to complete the development of integrated
community care systems by 2025, the Group will shift to family pharmacies and
also expand health support pharmacies that provide functions for health mainte-
nance support. To achieve this shift, the Group will work to secure and develop
pharmacists and strengthen cooperation with community organizations, including
medical institutions. Looking further ahead, the Group will continue to pursue the
creation of new added value.
Major Overseas Business Developmentsn REMEJE PHARMACEUTICALS (CHINA) CO., LTD.
Huizhou City, Guangdong Province, People’s Republic of China Distributor of pharmaceutical and healthcare-related
products.
n Alfresa Codupha Healthcare Vietnam Co., Ltd. (Alcopha) Ho Chi Minh City, Socialist Republic of Vietnam A joint venture with Vietnamese company Codupha,
engaged in the import and sale of medical devices and
materials, and diagnostic reagents.
n QINGDAO NESCO MEDICAL CO., LTD. Qingdao City, Shandong Province, People’s Republic of China A manufacturing and sales subsidiary of Alfresa Pharma.
A new plant building was completed in November 2016
and manufacture of surgical sutures launched, with the
aim of expanding sales in the Chinese market.
New plant building of QINGDAO NESCO MEDICAL
Conventional pharmacy
Family pharmacy
Health support pharmacy
Pursue furthervalue-added
pharmacy
Future Business Changes
(Fiscal years ended March 31)
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Financial and Non-Financial Highlights
(¥ million) (US$ thousand)
2013 2014 2015 2016 2017 2017
Financial performance for the year:
Net sales ¥2,387,511 ¥2,504,504 ¥2,421,162 ¥2,576,406 ¥2,551,801 $22,745,352
Gross profit 159,358 171,544 165,756 197,195 182,565 1,627,284Selling, general and administrative (SG&A) expenses 135,811 136,580 136,527 151,906 149,337 1,331,108
Operating income 23,547 34,964 29,229 45,289 33,228 296,176Profit attributable to owners of the parent 20,771 25,567 22,923 34,976 30,894 275,372
Financial position at year-end:Net assets ¥ 283,957 ¥ 305,436 ¥ 354,123 ¥ 368,728 ¥ 393,551 $ 3,507,897
Total assets 1,189,241 1,169,547 1,220,781 1,253,495 1,255,923 11,194,607
Owners’ equity 283,758 305,233 352,519 366,542 392,335 3,497,058
Cash flows for the year:Net cash provided by (Used in) operating activities ¥ 82,339 ¥ (27,507) ¥ 35,813 ¥ 37,836 ¥ 34,342 $ 306,106
Net cash used in investing activities (1,870) (21,770) (6,583) (15,246) (13,410) (119,529)
Net cash used in financing activities (8,067) (8,643) (8,011) (25,996) (11,808) (105,251)
Free cash flow 80,469 (49,277) 29,230 22,590 20,933 186,577Cash and cash equivalents at end of the year 195,997 138,819 160,265 158,462 167,554 1,493,484
Per share data (¥/US$):Net assets ¥ 1,281.94 ¥ 1,379.04 ¥ 1,576.07 ¥ 1,691.63 ¥ 1,810.68 $ 16.14Profit attributable to owners of the parent 97.48 115.51 102.48 158.99 142.58 1.27
Dividend 23.25 26.00 29.75 33.00 36.00 0.32
Ratios (%):
SG&A expenses ratio 5.7 5.5 5.6 5.9 5.9
Operating income margin 1.0 1.4 1.2 1.8 1.3 Profit margin attributable to owners of the parent 0.9 1.0 0.9 1.4 1.2
Owners’ equity ratio 23.9 26.1 28.9 29.2 31.2
Return on assets (ROA) 1.8 2.2 1.9 2.8 2.5
Return on equity (ROE) 7.9 8.7 7.0 9.7 8.1
Dividend on equity (DOE) 1.9 2.0 2.0 2.0 2.1
Environmental data:
CO2 emissions (t-CO2) 68,275 72,276 67,498 68,565 89,157
Amount of energy consumed (GJ) 1,185,048 1,176,754 1,148,656 1,161,315 1,531,553
Social data:
Number of employees 10,939 10,936 11,366 11,788 11,825
Average years of employment 16.0 17.0 16.4 15.4 16.3
Percentage of female managers – – – 3.2 3.7
Number of elderly people re-employed 830 859 907 996 1,072
Note 1: The Company implemented a 4-for-1 stock split of its common stock on October 1, 2014. The above per share data have been calculated taking into account the stock split.Note 2: Number of employees excludes part-time and temporary staff.Note 3: US$ figures above were calculated using an exchange rate of US$1=¥112.19.
Alfresa Holdings Corporation and consolidated subsidiariesFiscal years ended March 31
3,000
2,500
0
1,000
500
1,500
2,000
2013 2014 2015 2016 2017
2,387.52,504.5
2,421.22,576.4 2,551.8
100
75
-50
0
-25
25
50
2013 2014 2015 2016 2017
-27.5
82.3
-1.9
80.5
29.2
-49.3
-6.6
-15.2 -13.4
37.8
22.6 20.9
35.8 34.3
-21.8
Net Cash Provided by (Used in) Operating Activities / Net Cash Used in Investing Activities / Free Cash Flow(¥ billion)
90,000
30,000
60,000
0
2013 2014 2015 2016 2017
68,27572,276
67,498 68,565
89,157
CO2 Emissions(t-CO2)
Amount of Energy Consumed(Thousand GJ)
Percentage of Female Managers(%)
60 2.0
1.5
1.0
0.5
0
50
0
20
10
30
40
2013 2014 2015 2016 2017
23.5
1.0
35.0
1.4
29.2
1.2
45.3
1.8
33.2
1.3
60 10
8
6
4
2
0
50
0
20
10
30
40
2013 2014 2015 2016 2017
20.8
7.9
25.6
8.7
22.9
7.0
35.0
9.7
30.9
8.1
500 30
20
10
0
400
0
100
200
300
2013 2014 2015 2016 2017
283.8
23.9
305.2
26.1
352.5
28.9
29.2
366.5
31.2
392.3
50 2.5
2.0
1.5
1.0
0.5
0
40
0
10
20
30
2013 2014 2015 2016 2017
23.25
1.9
26.00
2.0
29.75
2.0 2.0
33.00
2.1
36.00
2,000
1,000
500
1,500
0
2013 2014 2015 2016 2017
1,185 1,177 1,149 1,161
1,532
Operating Income Operating Income Margin
Owners’ Equity Owners’ Equity Ratio Dividend per Share DOE
Profit Attributable to Owners of the Parent ROE
Net Cash Provided by (Used in) Operating Activities Net Cash Used in Investing Activities Free Cash Flow
5.0
0
2.0
1.0
3.0
4.0
2016 2017
3.2
3.7
Net Sales
(¥ billion)
Dividend per Share / DOE
(¥) (%)
Operating Income / Operating Income Margin(¥ billion) (%)
Profit Attributable to Owners of the Parent / ROE(¥ billion) (%)
Owners’ Equity / Owners’ Equity Ratio
(¥ billion) (%)
Note: Increases in CO2 emissions and the amount of energy consumed in fiscal year ended at March 31, 2017, are attributable to the increase in the number of Group companies.
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35 36Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
We contribute to the development of a society in which everyone
can live in health by conducting business activities based on
the Alfresa Group’s principles and by addressing social and
environmental agendas.
The Alfresa Group established the CSR Basic Policy to guide the Group in unified pursuit
of CSR. Based on the basic policy, the Group is implementing the 16-18 CSR Activities
Policy (shown below) laid out in its medium-term management plan for the period from
the year ended March 31, 2017 to the year ending March 31, 2019.
CSR Basic Policy
Addressing ESG Issues
Respecting Human Rights and Developing a Proper Working Environment
Coexisting with the Local Community and Protecting the Environment
Conducting Sincere Business Activities through Enhanced Organizational Governance
• Respect human rights and prevent harassment
• Promote diversity, including promoting active female participation initiatives
• Advance work-life balance (work-style reform)
• Strengthen efforts to promote health
• Actively contribute to society
• Advance efforts to protect the environment
• Spread and practice the Group’s principles
• Enhance and strengthen internal controls and compliance
• Strengthen risk management
To Continue as a Corporate Group Trusted by Society
The Foundation for GrowthHigh Ethical Standards for a Life-Related Business
Contents
39 Special Feature: Our Valuable People, Who Support the Growth of the Alfresa Group39 Basic Policy on Talent Development
41 How Our Valuable People Support the Value Chain
43 Respecting Human Rights and Developing a Proper Working Environment
45 Coexisting with the Local Community and Protecting the Environment
47 Conducting Sincere Business Activities through Enhanced Organizational Governance
49 Corporate Governance
52 Message from an Outside Director
53 Management Team
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Special Feature: Our Valuable People, Who Support the Growth of the Alfresa Group
In anticipation of major changes in the business environment, the Group will reinforce training for people with the following talents through the
above-mentioned programs.
(1) People who are skilled at using cutting-edge technology and capable of creating innovations in healthcare distribution
(2) People capable of becoming the next generation of management responsible for laying out a long-term vision and navigating the Company through the
medical and health fields
Moreover, starting the current fiscal year, the Group has been implementing training programs for directors and executive officers to enhance
the decision-making capabilities of the management.
Alfresa Group Executive Program (AEP)
Training for future top executives
Alfresa Group Study Program
Abroad Course (ASPAC)
Developing a global mindset and perspective
Alfresa Group Business School (ABS)
Developing next-generation management candidates
12
3
45
6
Reliability
Safety
Sincerity
Our Promises
How We See Our Valuable People
The Alfresa Group pursues businesses closely connected with people’s health and lives, and this requires stable operations. The Group owes its
capacity to deliver on this to the strong sense of mission of the Group’s more than 14,000 employees. The Group recognizes that its employees
are a valuable asset and trains them to share and practice the Group’s principles while respecting the individuality and values of each employee.
Driving Sustainable Value Creation
The Alfresa Group carries out a range of training programs to equip its people with the capacity to drive future growth, including the
programs below.
Ensuring the Vision for Our Valuable People Takes Root
In order to help Group companies hire and train employees to become the kind of “valuable people” it aims to employ, and to realize the
Alfresa Group’s principles (see page 8) in daily operations over the medium to long term, the Group works out mechanisms through which its
vision for its valuable people can penetrate the organization and be put into practice, thereby ensuring that it takes root throughout the Group.
Expectations for Our Valuable People, as Described in Our Promises
Vision for Our Valuable People
The Alfresa Group strives to develop the capabilities of its people to drive the Group’s future growth. To achieve this, the Group uses an approach
to talent development that combines Group-wide, cross-cutting programs and individual initiatives at each Group company. As part of these
efforts, the Group established the Alfresa Group’s Four Requirements for Our Valuable People. These represent the basic characteristics the Group
expects of its people, and they also serve as talent development goals in parallel with each Group company’s own code of conduct and human
resource requirements.
Process of Establishing the Vision for Our Valuable People
Basic Policy on Talent Development
Willingness to venture into
uncharted areas
Ability to adapt to changing
environments
High ethical standards that
earn trust
The Group upholds “Our Promises,” a part of the Group’s principles, which
serve as the Group’s code of conduct, and uses them as the basis for talent
development and corporate governance. “Our Promises” not only lay out what
the Group wants to be, but also describe what the Group expects the valuable
people, who share in its journey, to do. They are also the basis for the Group’s
relationship with its people, as set out in Section 3, Article 11 of the Group’s
Corporate Governance Guidelines.
We always maintain the stable supply of reliable products and
services that satisfy our customers.
We strive to maintain and improve a safe and comfortable working
environment, respect individual characteristics and personalities
and create a healthy corporate culture.
We raise corporate value as a corporate Group operating in the
healthcare sector to meet shareholders’ expectations.
We conduct proper trade under fair, transparent and free competition.
We strive to protect personal information entrusted by our customers
and business partners and important company information, work to
widely and proactively communicate with society, and implement
appropriate and timely information disclosure.
We contribute to society through our business operations, proactively
carry out social contribution activities in local communities, and
actively and voluntarily address global environmental issues.
Strong sense of mission
for work that supports life
Alfresa Group’s Four Requirements for Our Valuable People (Group-Wide Requirements)
Ensure the Alfresa Group’s
principles penetrate
Articulate the vision for our valuable
people
Ensure penetration of the vision
for our valuable people
Reflect vision in talent
management measures
Put vision into practice, ensuring it takes root
Realize the Group’s
principles
Improvements through PDCA
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Pharmaceutical distribution is the social infrastructure business that supports medical services.
Alfresa Group people support the value chain from manufacturing to delivery and dispensing of products to those who need medicine,
ensuring a stable supply.
How Our Valuable People Support the Value Chain
Keisuke TanakaProduction, Akita Plant Alfresa Fine Chemical Corporation
Takumi YamadaArakawa and Taito Branch Alfresa Corporation
Ryu SugiyamaProduction, Okayama PlantAlfresa Pharma Corporation
Kurumi HonmaBunkyo and Toshima BranchAlfresa Corporation
Nobuhiko ImaiBunkyo Pharmaceuticals CenterAlfresa Corporation
Miho AidaPharmacy DirectorTaguchi-machi Branch, Island PharmacyApollo Medical Holdings Inc.
We comply with the three principles of GMP including (1) minimize human error, (2) prevent contamination and quality degrada-tion of pharmaceuticals, and (3) establish a system for quality assurance. In doing so, we manufacture products safely, reliably and sincerely. In all of our work we have the keen awareness and sense of responsibility that comes with handling products that affect people’s health and lives. We hope to help people lead healthy, fulfilling lives by stably providing high-quality active pharmaceutical ingredients, always thinking of the patients who need pharmaceuticals.
We strive to provide accurate and timely information with high ethical standards and a sense of awareness and responsibility befit-ting people handling life-related products. We acquire knowledge and compile information related not only to pharmaceuticals, but also to medical devices and medical management. This ensures that we can address changes in the times and meet the needs of our custom-ers. Currently, we are addressing the move to integrated community care systems and working to be sure we can provide support not only to medical facilities but also to home care service providers and nursing homes for the elderly.
We run our facilities stably from the diverse perspectives of productivity, quality, cost, sta-ble supply and safety. We perform production management and quality control in line with GMP standards. Our role is to dependably manufacture high-quality pharmaceuticals that patients—end users—feel safe to use. I feel pride and a sense of responsibility about how I am contributing to society via my work in pharmaceutical manufacturing.
We safely and dependably deliver pharma-ceuticals to hospitals, clinics and pharmacies in order to contribute to the medical care and health of communities. We not only deliver with precision and promptness; we are also very careful to deliver on time and observe driving etiquette. When delivering pharma-ceuticals, we greet our customers with good cheer and tact, and we value our communica-tion with them.
Since demand for pharmaceuticals changes depending on the season, we always confirm the product shipment status and adjust orders placed with manufacturers so that we can control purchase volume and inventory. We have a system in place that enables us to work closely with our Marketing Specialists (MS) to promptly deliver the pharmaceuticals our customers need. Pharmaceuticals are life-related products, and there is nothing more important than ensuring safe and reliable quality and stable supply. Providing pharma-ceuticals where they’re needed, when they’re needed, and in the needed amount is what gives me a sense of social mission.
The dispensing pharmacy is the only position involving direct communication with patients. In today’s super-aging society, we are seeing a paradigm shift in the pharmacist’s function. The social role we play in community health-care is becoming even more important as we promote the shift to family pharmacists, check to make sure elderly patients do not acciden-tally take the wrong drug, check that they are taking the prescribed dose, and optimize medications. I try to learn more every day so that I can raise my skills as a trusted pharma-cist, with the basic belief that everything I do is for patients.
*Active pharmaceutical ingredients
The Alfresa Group provides high-quality active pharmaceutical ingredients stably and at a low cost, as the starting point for the value chain. It is precisely because the Group handles life-related products that it is so com-mitted to achieving the highest quality.
Ensuring the effectiveness and safety of pharmaceuticals is essential. The Alfresa Group complies with GMP and other standards in manufacturing high-quality pharmaceuticals and providing a stable supply. The Group’s Medical Representatives (MR) provide, compile and convey academic information on pharmaceuticals and other products to medical professionals, and support medical settings.
The Alfresa Group effectively locates distribution bases in each region, including large-scale distribution centers, urban phar-maceutical centers and branch warehouses. This efficient and prompt distribution system allows the Group to deliver a diverse range of pharmaceuticals wherever they are needed.
The Alfresa Group recommends pharmaceuti-cals and other products and services to medi-cal institutions, dispensing pharmacies, and other customers. While offering information on healthcare and pharmaceuticals, it listens to customer feedback about the effect and side-effects of drugs and conveys this information back to its business partners. In this way, the Group serves an important role as a bridge.
The Alfresa Group has built a detailed delivery system so that it can provide pharmaceuticals and other products safely and reliably while ensuring the quality of the products that customers and patients need.
In dispensing, the final stage of pharmaceuti-cal distribution, the Group’s pharmacists pro-vide patients with pharmaceuticals along with instructions for taking them and explanations of its effect and any precautions. The Group responds to patients’ needs by offering phar-maceutical and health consultations, thereby supporting people in the local community to lead healthy, fulfilling lives.
Special Feature: Our Valuable People, Who Support the Growth of the Alfresa Group
API* Manufacturing
Pharmaceutical Manufacturing Distribution Information
Provision Delivery Dispensing
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Respecting Human Rights and Developing a Proper Working Environment
2013 2014 2015 2016 2017
Number of employees* Including part-time and temporary employees
Men – – 8,591 8,606 8,588
Women – – 5,429 5,950 6,021
Total 13,510 13,434 14,020 14,556 14,609
Number of employees, by type of employment
Full-time employees 7,618 7,521 7,668 8,168 8,455
Advisers, contract employees, fixed-term employees
3,321 3,415 3,698 3,620 3,370
Part-time and temporary employees
2,571 2,498 2,654 2,768 2,784
Number of new graduates hired 167 226 213 227 236
Average number of years employed 16.0 17.0 16.4 15.4 16.3
Basic Policy and Approach
The Alfresa Group’s philosophy is “We create and deliver a fresh life for all.” In pursuit of this philosophy, it is essential to establish a proper
working environment that allows people to tackle their jobs with good health, a positive mindset, and strong motivation.
The Group views the changing social environment as an opportunity for growth. It believes that the starting point for business growth is
to ensure that its diverse talent pool can all develop and demonstrate their capabilities. Accordingly, the Group respects the human rights of its
people and works hard to build a continually improving working environment.
Main Initiatives and Achievements
Key Strategies Main Initiatives
Respect human rights and prevent harassment • Promoting harassment prevention (Establishing guidelines and implementation of educational programs for harassment prevention)
Promote diversity, including promoting active women’s participation
• Proactively hiring female employees• Job assistance for the elderly and people with disabilities
Advance work-life balance (work-style reform) • Promoting the “Alfresa Group Fresh-Up Campaign” (encour-aging our people to observe “no overtime” days and take paid leave, etc.)
• Enhancing childcare and nursing care support programs
Strengthen efforts to promote health • Ensuring the health of our people• Enhancing mental health support programs
• Respect for Human Rights and Prevention of Harassment
The Alfresa Group respects basic human rights and does everything it can to avoid any human rights violation. The Group does not discriminate on the basis of nationality, age, gender or disability in the hiring and evaluation of employees or in operations. The Group also strives to prevent sexual harassment and workplace harassment, and has established harassment prevention policies in its compliance guidelines. It has also set up special help desks to enable employees to discuss issues and concerns related to human rights and harassment.
• Promoting Diversity, Including Promoting Active Women’s Participation
Identifying diverse needs and adapting to changes in the business environment are essential preconditions in order to realize the Group’s vision of being a “Healthcare Consortium.” The Group works hard to build organizations which embrace various values and indi-vidual characteristics. It seeks to empower all of its diverse people by creating an environment in which individuals can demonstrate their ability to the full extent. This includes re-employing retired people and hiring people with disabilities. Since the fiscal year ended March 31, 2017, each of the Group companies has been taking extra steps to enhance women’s careers, in line with Japan’s Act on Promotion of Women’s Participation and Advancement in the Workplace. Group companies have established and are implementing action plans regarding the Act to promote diversity. In addition to initiatives in hiring, the Group intends to create more opportunities for active and talented women to participate in manage-ment. The Group aims to raise the percentage of female managers Group-wide to over 5% by the fiscal year ending March 31, 2021.
Number of female executive officers
4
Percentage of female employees
23.5%
Number of elderly people (over age 60)
re-employed
1,072
Target percentage of female managers Group-wide
Over 5% by March 31, 2021
Percentage of female managers
Group-wide
3.7%
Number of people with disabilities hired
245Basic Data on Human Resources (Alfresa Group) (Fiscal years ended March 31)
Background and Issues
What the Group Wants to Be
Initiatives to Achieve What the
Group Wants to Be
In Japan, the declining birth rate and aging population is leading to a drop in the working population. Securing an adequate labor force is an urgent issue for ensuring business sustainability and stable, continuing growth. Companies are expected to make the most of their human resources, especially women and others who typically have had fewer opportunities until now. The Japanese government is promoting initiatives aimed at the “dynamic engagement of all citizens,” starting with the Act on Promotion of Women’s Participation and Advancement in the Workplace promulgated in 2015. The Ministry of Health, Labour and Welfare is advocating for reform to create fulfilling work styles that meet the needs of men and women, young and old, and those with disabilities and illnesses. Moreover, the occupational health and safety of corporate employees has been given even greater emphasis in recent years. Today, companies are required to curb excessive working hours in order to protect the mental and physical health of their employees and to reform work styles in order to raise productivity.
• Our workplace environments are safe and conducive to good work for our people, and the Group makes every effort to continuously improve them.
• The Group secures a sound corporate culture. • Diverse people with various values and ideas are proud of their individuality and strive to maximize their abilities
under the Alfresa Group’s principles.• All of our people work with energy and a positive mindset.
• Advancing Work-Life Balance (Work-Style Reform)
The Group believes that people are more satisfied with their lives when they are motivated by their work, and that, in turn, people who lead fulfilling lives deliver better results on the job. The Group has introduced the “Alfresa Group Fresh-Up Campaign” as a Group-wide effort to promote work-style reform. The campaign is designed to help its people achieve work-life balance, enhance their productiv-ity, and stay highly motivated on the job.
• Seeking to Reduce Working HoursGroup companies optimize their working hours with campaigns encouraging employees to go home early and with designated “no overtime” days. This raises awareness about the need to manage overtime work. Group companies are each undertaking their own efforts, including requiring that employees ask for authorization to work beyond regular working hours, to help raise awareness of time management and to encourage employees to be systematic in their work. In addition, they provide guidance on efficient work allocation and review division of roles.
• Augmenting Programs to Promote Work-Life BalanceTo foster sound work-life balance, the Group is augmenting a number of programs and striving to foster an environment that makes these programs easy to use. The Group provides programs for childcare and nursing care leave, as well as a number of other programs tailored to the needs of its people and the characteristics of each Group company.
• Strengthening Efforts to Promote HealthThe Alfresa Group, which does business in the healthcare industry, recognizes that it is vital to help its people to maintain and strive to improve their mental and physical health. In addition to regular health checkups, Group companies pro-vide complementary checkups, including medical examinations for employees engaged in special work and medical examinations by age, as well as offering more detailed exams. Group companies follow up on employees with positive findings, and encourage them to have secondary examinations. The Group also takes steps to support mental health through the Alfresa Group Mental Health Special Help Desk, which ensures that its people have someone to talk to when needed.
(Fiscal years ended March 31) 2013 2014 2015 2016 2017
Number of people taking childcare leave
50 72 73 102 52
Number of people taking nursing care leave
0 6 2 0 1
Percentage of paid leave days taken (%)
– – – 39.0 36.6
* Including contract employees and part-time employees.
Mental health counseling card
Data on Diversity in the Alfresa Group (fiscal year ended March 31, 2017)
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Basic Policy and Approach
As a corporate group with business locations all over Japan, the Alfresa Group values community engagement in its local business activities. The
Group strives to maintain harmonious relationships with the local communities where it does business and cooperates with them to achieve
mutual development.
As countermeasures to global environmental problems, the Alfresa Group recognizes the importance of reducing the environmental impact
of its business activities. The Group also ensures that its business operations make a social contribution, while proactively giving back to local
communities and taking the initiative to address environmental issues.
Fostering Social Safety via Neighborhood WatchShikoku Alfresa Corporation and RYUYAKU CO., LTD., which operate the Alfresa Group’s ethical pharmaceuticals wholesaling business, have formed an agreement with local governments to help watch over the community as part of the move to integrated community care systems. Under the agreement, the product delivery staff will notify the local government if they observe any irregularities during delivery,
thereby helping to ensure the safety of elderly people with dementia and to quickly find and protect missing persons. As society ages, the Group aims to foster communities in which elderly people with dementia and their families can live with peace of mind.
Training Dementia Care AdvocatesThe number of patients with dementia is increasing as society ages, and building a patient support system in local communities is a major issue. As companies that support Japan’s medical system, Alfresa Group companies strive to train “dementia care advocates” — people with an accurate knowledge of dementia who can understand dementia patients and their families well. The companies hold a variety of training courses to increase the number of volunteer lecturers, while proactively implementing programs to deepen social understanding of dementia.
Donations and EndowmentsAlfresa Group companies donate to various foundations and non-profit organizations as part of their social contribution activities. Starting with donations of welfare vehicles to local authorities, the Group prioritizes forming ties with local communities by donat-ing to support various sectors, including social welfare, health, and academia and research.
Following the recent Kumamoto Earthquake, the Group made donations to aid reconstruction of dam-aged areas and to support those affected.
Reducing Environmental Impact with Fuel-Efficient CarsIn the Alfresa Group’s business, Marketing Specialists (MS) and deliv-ery staff use cars when visiting medical institutions and delivering pharmaceuticals to customers. This represents a good opportunity to reduce environmental impact. The Group is adopting fuel-efficient cars by switching to light motor vehicles and hybrid cars.
Manufacturing Plant Aiming for Zero EmissionsAlfresa Fine Chemical Corporation, a manufacturer of active pharmaceutical ingredients in the Alfresa Group, detoxifies high concentrations of effluent from the manufacturing process containing fluorine, as part of its efforts to achieve zero emissions. By recycling the result-ing sludge, the final waste landfill rate for the industrial waste produced by the factory is kept at 1% or lower. The quality of wastewater released from the plant is also monitored constantly by telemeter.
• Advancing Efforts to Protect the Environment
Main Initiatives and Achievements• Actively Contributing to SocietyHelping to Improve the Health of the CommunityApollo Medical Holdings Inc. and Nihon Apoch CO., LTD, two Alfresa Group companies which operate dispensing pharmacies, are deeply engaged in efforts to improve the health of people in their local communities. Island Pharmacy, a dispensing pharmacy chain run by Apollo Medical Holdings, is anticipating Japan’s super-aging society with its program for visiting house-bound patients in their homes and giving them advice on managing their medicines. The pharmacists also give customers advice on nutritional choices to improve their health. The pharmacy chain pursues affiliations with doctors, nutritionists, sports trainers and others, aiming to serve as a local health consultation desk where local people can come for advice and support on all of their health-related needs. Nihon Apoch holds health checkup events for the public, allowing participants to check their blood pressure, body fat percentage, bone mass, lung age, and other health data. Based on the results, the pharmacists then give advice. The company also holds health seminars to provide information on diseases and medicine.
TS Alfresa Corporation donates welfare vehicles to Tsuyama City in Okayama Prefecture. Wastewater is monitored
constantly.
The orange wristband is the symbol for dementia care advocates.
Scope: Alfresa Holdings Corporation, Alfresa Corporation, Shikoku Alfresa Corporation, TS Alfresa Corporation, Meisho Co., Ltd., Odashima Limited, CS YAKUHIN CO., LTD. (merged with Alfresa Corporation in October 2016), RYUYAKU CO., LTD., Kowa Pharmaceuticals Co., Ltd., Alfresa Medica Service Corporation, Alfresa Healthcare Corporation, Alfresa Pharma Corporation, Alfresa Fine Chemical Corporation, Sannova Co., Ltd., Nihon Apoch CO., LTD, Alfresa System CorporationPeriod: April 2016 – March 2017In calculating CO2 emissions, reference was made to the Manual for Calculating and Reporting Greenhouse Gas Emissions Ver. 4.2 for compliance with Japan’s Act on Promotion of Global Warming Countermeasures.
Input
Business Activities
Output
Total energy used: 1,531,553 GJElectricity (daytime): 69,481 MWhElectricity (nighttime): 9,968 MWhGasoline: 13,443 klKerosene: 1,691 klLight diesel oil: 356 klA heavy fuel oil: 1,452 klCity gas: 1,429,000 m3
LPG: 1,677 t
CO2 emissions: 89,157 t-CO2
Key Strategies Main Initiatives
Actively contribute to society • Promoting communication with local communities• Contributing to social welfare• Supporting non-profit activities
Advance efforts to protect the environment • Switching to energy-saving cars and promote eco-driving• Implementing energy-saving measures• Reducing environmental impact of the manufacturing business
Background and Issues
Since social issues in Japan’s regional cities, including population decline and aging demographics, are becoming more severe, companies that operate in those areas are facing higher expectations when it comes to creating jobs and contributing to local prosperity. Companies are required to create economic opportunities by putting down deep roots in the community and building relationships of mutual trust, thereby ensuring the local community and the companies grow together in a sustainable manner. Meanwhile, at the 2015 United Nations Climate Change Conference (COP21) in Paris, Japan pledged to reduce greenhouse gas emissions by 26% by 2030, compared to 2013 levels. To achieve this goal, Japanese companies are expected to strive to reduce greenhouse gas emissions by reducing energy use in their business activities.
• Our business activities have deep roots in the local community, and the Group enjoys a relationship of trust as it works together with society.
• The Group understands its overall environmental impact and manages operations to reduce impact.
What the Group Wants to Be
Initiatives to Achieve What the
Group Wants to Be
Overview of the Alfresa Group’s Environmental Impact
Island Pharmacy, aiming to serve as a local health consultation desk
Health events organized by Nihon Apoch
RYUYAKU signs agreement with Okinawa Prefecture on neighborhood watch activities to protect elderly people with dementia.
Adoption of Light Motor Vehicles for Freight Vehicles Used in Sales and Delivery Activities
(Fiscal years ended March 31) 2013 2014 2015 2016 2017
Number of light motor vehicles adopted
4,339 4,440 4,571 4,471 4,555
Percentage of total freight vehicles (%)
64.9 68.5 70.1 70.1 70.9
Coexisting with the Local Community and Protecting the Environment
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Mutualbackup
Mutual backup
Mutualbackup
Hokkaido
Tohoku
Hokuriku
Kanto-Koshinetsu
Tokai
KinkiShikoku
Chugoku
Kyushu
Okinawa
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Basic Policy and Approach
The Alfresa Group defines compliance as “complying with laws, internal and external regulations and social norms, and proactively taking the
initiative to fulfill legal responsibilities and ethical responsibilities expected by society.” Under this definition, we promote sincere business
activities. The Group works to practice appropriate business transactions in a spirit of fairness, transparency and free competition in order to
earn trust and maintain good relationships with stakeholders.
As a corporate group that distributes pharmaceuticals—a key element of social infrastructure—the Alfresa Group is strengthening its busi-
ness continuity plan (BCP) and preparing so that the distribution of pharmaceuticals affecting people’s lives will not be interrupted, even in the
event of an earthquake or other large-scale natural disaster.
• Spread and Practice the Group’s PrinciplesSpreading the Group MessageSharing the Alfresa Group’s principles with its people and spreading them to each individual is the key to increasing the Group’s sense of unity and capitalizing on Group-wide synergies. In 2013, the Alfresa Group created posters that publicized the Group message and put them on display in Group companies. This was intended to enhance the sense of Group unity and help everyone understand the message. It also helped to foster the sense of ethics and responsibility that is so essential to ensuring that the Group’s business activities fulfill its social mission.
• Enhance and Strengthen Internal Controls and Compliance
Compliance Promotion SystemThe Alfresa Group views compliance as an important theme for CSR and has set up the Group Compliance Council under the CSR Promotion Committee. In addition, each Group company has a promo-tion system and promotes compliance using the following approach.
(1) Set voluntary targets exceeding the legal mandates and use the PDCA cycle for improvement.
(2) Ensure that all employees understand the Alfresa Group Compliance Guidelines and provide support so that they can practice the guidelines through daily behavior.
Compliance TrainingGroup companies carry out training and educational activities using the Compliance Handbook and other materials, striving to spread awareness of compliance. In addition to training for new employees, compliance education is given to managerial personnel, and compliance information is distributed on the Company’s intranet. In the year ended March 2017, the Compliance Handbook was revised. While addressing recent legal changes, the revisions were made to cover some familiar case stud-ies, making the handbook even more user-friendly.
Compliance Consulting Offices (Internal Reporting System)The Group complies with the Alfresa Group Compliance Guidelines in carrying out its business activities in line with high ethical stan-dards. It also has Compliance Consulting Offices in place as a means for its people to consult and make reports. This ensures that viola-tions of laws and corporate ethics are discovered early or prevented. Compliance Consulting Offices are set up within the Group companies, and Alfresa Holdings also operates the General Compliance Consulting Office which is open to consultations from the entire Group. In addition, external hotlines are available at Group companies to make it easier for people at Group companies to make a report. Due consideration is given to the privacy and other human rights of users, with confidentiality ensured. As for people who provide information for the benefit of the public, whistleblow-ers’ rights are protected.
Corruption PreventionThe Group complies with Article 18, “Prohibition of provision of illicit profit, etc. to foreign public officials, etc.,” of Japan’s Unfair Competition Prevention Act, and respects laws related to the prevention of corruption both in and outside Japan. The Compliance Handbook provides cases of bribery and other practices that are deemed provision of illicit payments to foster better understanding of this issue.
Unified Group InitiativesThe Group-wide initiatives were started in the year ended March 2015 to bring all employees together and put the Group’s prin-ciples into practice. The CSR Promotion Committee* confirms the progress made by each Group company with priority issues for the Group, such as traf-fic accident reduction, disaster drills, diversity initiatives and promot-ing work-life balance. This information is shared by Group companies and the initiatives are reinforced using the PDCA cycle according to each company’s conditions.
* CSR Promotion Committee: Made up of members selected from among executives at Group companies and chaired by the Deputy President responsible for internal control of Alfresa Holdings Corporation, this committee discusses important policies concerning CSR and reports on and evaluates activities based on the action plan.
* Alfresa Group Compliance Guidelines: A set of guidelines that outlines the actions concerning compliance to be taken by management and employees. These guidelines are covered by the Alfresa Group Compliance Handbook.
• Strengthen Risk ManagementDisaster CountermeasuresThe Group is strengthening its countermeasures in preparation for large-scale disasters. It is taking into account lessons learned in the Great East Japan Earthquake and the Kumamoto Earthquake as well as the government’s recent revisions to the scope of damage expected in an earthquake with an epicenter in Tokyo or a major earthquake in the Nankai Trough. The Group focuses on being ready to respond in the event of a disaster. For example, Group companies update their regulations and manuals and hold disaster response training events. They also check and secure the environment and emergency stockpiles.
Business Continuity Plan (BCP)The Group has reinforced its business continuity plan (BCP) in prepa-ration for a large-scale disaster or pandemic. Group companies engaged in the ethical pharmaceuticals wholesaling business have established a support system which is prepared for a disaster. A nationwide response system is in place so that even if distribution centers or branches in specific areas are affected in a disaster, other locations will be able to step in and continue supplying pharmaceuticals where they are needed. In the area of information systems, disaster recovery plans are in place. If the Group’s data center becomes damaged, systems can be switched over to a backup data center, ensuring that shared-use mission critical systems keep functioning. Starting in October 2014, the Group gradually began adopting new email system that would still be usable in a disaster, to secure post-disaster communication between Group companies.
The Alfresa Group Business Continuity Plan in the Ethical Pharmaceuticals Wholesaling Business
Key Strategies Main Initiatives
Spread and practice the Group’s principles • Implementing Group-wide initiatives
Enhance and strengthen internal controls and compliance
• Implementing compliance training• Publishing Compliance Handbook (5th edition) • Implementing educational programs to raise awareness of
internal reporting system
Strengthen risk management • Strengthening the BCP• Reinforcing information systems with disaster countermeasures
Background and Issues
There has been a steady stream of corporate scandals where compliance violations result in the loss of trust in major companies and the deterioration of the very foundations of their business. Compliance is the basis for all business activities, and it is vital that all employees understand their company’s code of conduct and act in accordance with it.
• The Alfresa Group’s principles completely penetrate the workforce and are always put into practice. • Our people observe the Alfresa Group Compliance Guidelines* and conduct business with sincerity.• A solid business continuity plan (BCP) is in place.• The Alfresa Group maintains the trust of society.
What the Group Wants to Be
Initiatives to Achieve What the
Group Wants to Be
Meisho Co., Ltd.(Ishikawa)
TS Alfresa Corporation(Hiroshima)
RYUYAKU CO., LTD.(Okinawa)
Shikoku Alfresa Corporation (Kagawa)
Odashima Limited(Iwate)
Alfresa Corporation(Tokyo)
Kowa Pharmaceuticals Co., Ltd. (Fukushima)
Main Initiatives and Achievements
Conducting Sincere Business Activities through Enhanced Organizational Governance
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Corporate Governance
Basic Policy Corporate Governance StructureThe Company has adopted the organizational structure of a “com-pany with an Audit & Supervisory Board.” The Audit & Supervisory Board and Audit & Supervisory Board members audit directors’ performance of their duties. The Company has also introduced an executive officer system to clarify the division of responsibilities for managerial decision-making, supervision, and business execution. The responsibilities for decision-making and supervision are assumed by the Board of Directors, and responsibility for business execution is assumed by the executive officers. Of the 11 directors three are outside directors (of whom two are women), who provide advice and proposals based on their respective expert viewpoints.
Board of DirectorsThe Board of Directors of the Company is made up of 11 directors (nine men and two women, of whom three are outside directors). Meetings are attended by the Audit & Supervisory Board members. Regular meetings are held once per month, in principle, but extraor-dinary meetings may also be convened as necessary. These meetings are held to approve important matters stipulated by laws and regulations, as well as determine matters pertaining to management, and to supervise directors’ performance of their duties.
Executive CommitteeThe Executive Committee is made up of the representative director & president of the Company, and executive officers nominated by the Company’s Board of Directors. Meetings are attended by Audit & Supervisory Board members. The Committee deliberates and approves matters related to the management of the Company, apart from the matters the Company’s General Meeting of Shareholders and Board of Directors are responsible for approving. Regular meetings are held twice per month, in principle, but extraordinary meetings may also be convened as necessary.
Corporate Governance CommitteeThe Corporate Governance Committee is composed of outside direc-tors, outside Audit & Supervisory Board members, standing Audit & Supervisory Board members, representative directors, and the directors who are elected on the basis of resolutions of the Board of Directors. The chairperson is elected mutually from among the independent officers. The Committee’s purpose is to enhance the transparency and fairness of management and ensure the continual improvement of corporate governance from the standpoint of all stakeholders. It engages in exchanges of opinions from long-term and varied per-spectives with regard to corporate governance, visions and strategies encompassing all aspects of corporate management, and matters such as the progress of the medium-term management plan, and provides advice and proposals to the Board of Directors.
Nomination and Remuneration Committee for Directors and Executive OfficersThe Nomination and Remuneration Committee for Directors and Executive Officers is made up of six directors (including three outside directors, of whom one is chairperson) who are elected on the basis of resolutions of the Board of Directors. The Committee deliberates on per-sonnel matters and remuneration with respect to directors and execu-tive officers, and on other important matters related to management.
Group Management CommitteeThe Group Management Committee is made up of the directors, certain executive officers, and certain Group company presidents. Regular meetings are held three times a year, in principle, but extraor-dinary meetings may also be convened as necessary. The Committee’s role is to align the management intentions of Group companies in several aspects of Group-wide matters. As such, the Committee discusses the common issues related to overall Group management.
Corporate Governance Structure Business Strategy CommitteeThe Business Strategy Committee comprises directors and executive officers of the Company, and certain directors of affiliated compa-nies. In addition to regular meetings, extraordinary meetings may be convened as necessary. This Committee deliberates on issues related to the Group’s management strategy, as an advisory body to the representative directors of the Company.
Audit & Supervisory BoardThe Audit & Supervisory Board members attend important meetings of the Board of Directors and other meetings, and carry out auditing of directors’ performance of duties. The Audit & Supervisory Board is made up of four Audit & Supervisory Board members (three of whom are outside members). The Board reports on audit results and discusses audit details, and meetings are held once a month, in principle.
Internal AuditThe Company has formed an Audit Department reporting directly to the representative director & president. Under the direction of the representative director & president, the Department performs internal audits. The Department also strives to promote collaboration such as by reporting on the status of internal audits to the Audit & Supervisory Board members as necessary.
Corporate Governance Structure
As a corporate group conducting business in a field related to life and health, the Alfresa Group is determined to put the Group’s principles into practice and to fulfill its responsibilities to vari-ous stakeholders. The Group believes that the enhancement of corporate governance is fundamental to fulfilling corporate social responsibilities and to enhancing corporate value. Going forward, the Group will continue to promote initiatives in line with the purpose of the Corporate Governance Code, working to further increase corporate value. From the perspective of achieving sustainable growth and long-term enhancement of corporate value, the Group regards the essence of corporate governance as being the assurance of the transparency and fairness of decision-making, the full and effective use of management resources, and the improvement of management vitality by means of rapid and resolute decision-making. Accordingly, the Group will work to enhance corporate governance in line with the following basic concepts.
(1) To respect shareholders’ rights and ensure equality of treatment.
(2) To build good and harmonious relationships with stake-holders including shareholders.
(3) To disclose corporate information appropriately and ensure transparency.
(4) To build a structure that effectively utilizes outside directors and outside Audit & Supervisory Board members, ensuring the effectiveness of the Board of Directors’ supervisory function of business execution.
(5) To enhance internal-control systems, including the assur-ance of the reliability of financial reporting.
(6) To engage in constructive dialogue with shareholders whose investment policies match the medium- to long-term interests of shareholders.
Establishment of Corporate Governance GuidelinesAlfresa Holdings Corporation has established Corporate Governance Guidelines as basic principles concerning corporate governance. The purpose of these guidelines is to further enhance corporate value so that the Group can fulfill its responsibilities to customers, business partners, employees, shareholders, local communities and other stakeholders in a manner characterized by reliability, safety and sin-cerity by realizing the Alfresa Group’s principles in the form of “Our Philosophy,” “Our Vision,” and “Our Promises.”
Corporate Governance Guidelineshttps://www.alfresa.com/eng/ir/pdf/cgguideline.pdf
Cooperate
Report Supervise
Discuss
Participate
Participate
Elect and dismiss Elect and dismiss Elect and dismiss
Advise, proposeand report
Advise, propose
Cooperate
Cooperate
Audit
Internal audit Cooperate among departments
Audit
Nomination andRemuneration
Committee for Directorsand Executive Of�cers
Corporate GovernanceCommittee
Business StrategyCommittee
Group ManagementCommittee
Representative Directors
Executive Of�cers
Executive Committee
AuditDepartment
RespectiveDepartments
General Meeting of Shareholders
Audit & SupervisoryBoard
Audit & SupervisoryBoard Members
4 Members (of whom 3 are outside members)
Board of Directors11 Directors
(of whom 3 are outside directors)
IndependentAuditor
ConsolidatedSubsidiaries
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Corporate Governance
Outside Directors The Company makes it a basic policy to include more than one inde-pendent outside director on the Board of Directors. Outside directors are elected from among candidates that meet not only the outside director requirements stipulated by Japan’s Companies Act, but also the Company’s independence standards for outside directors, etc. Outside directors are elected from persons with points of view that are pragmatic, based on extensive corporate-management experi-ence, or objective and professional, based on high-level insight into such areas as social and economic trends.
Independence Standards for Outside Directors, etc.The Company shall select candidates for outside directors, etc., who have a high level of independence.
Reasons for Election of Outside Directors and Outside Audit & Supervisory Board Members
Ensuring Active General Shareholders’ Meetings and the Exercise of Voting RightsThe Company takes the following initiatives to ensure that general shareholders’ meetings are active and that voting rights are exercised.
• Notices of the general shareholders’ meetings are sent early • General shareholders’ meetings are set so that they do not overlap with
common dates for such meetings• Electronic methods to exercise voting rights are available• Initiatives to improve environment for institutional investors to exercise
their voting rights, including participating in an online voting platform, are implemented
• Notices of the general shareholders’ meeting are summarized in English and available at the Company’s website and TDnet
Takeover Defense MeasuresThe Company has not adopted takeover defense measures.
Framework for Ensuring Appropriate Conduct of BusinessAlfresa Holdings Corporation has established a Basic Policy on Internal Controls to ensure appropriate conduct of the Group’s business, in accordance with the Companies Act and the Ordinance for Enforcement of the Companies Act. The Basic Policy on Internal Controls stipulates items including legal compliance, management of risk of loss and the auditing structures to ensure effective audit by Audit & Supervisory Board members. The Group manages each Group company’s operations based on the Group Company’s Operating Bylaws, and has put in place a reporting structure for important matters. In addition, the Group facilitates mutual coopera-tion and information sharing among group companies through various meetings and intra-Group personnel exchanges. An overview of the status of operation of the framework for ensuring the appropriate conduct of the Group’s business is described in the Business Report section of the notice of the general shareholders’ meetings.
Message from an Outside Director
It has been two years since I was appointed as an
outside director of Alfresa Holdings Corporation.
During this period, I have always sought to be
vigilant at the Board of Directors meetings, offer-
ing my opinions from a more neutral position with
the fresh perspective of an outsider, while sharing
the issues facing the pharmaceutical industry. We
know that the sustainability of the social security
system is a long-term issue for Japan’s public
finances. I hope to give advice and recommenda-
tions utilizing my economic knowledge to raise
medium- to long-term corporate value, while
projecting the impact that future trends in social
security policies and medical insurance finance
will have on the pharmaceutical industry.
The Alfresa Group aims to become a
“Healthcare Consortium that provides products
and services in every health-related field.” Under
this vision, the Group is pursuing new business
development in all of its fields: the mainstay
Ethical Pharmaceuticals Wholesaling Business,
Self-Medication Products Wholesaling Business,
Manufacturing Business and Medical-Related
Business. Since taking up challenges involves
risks, the Group must invest based on cautious
and accurate demand forecasts, but my sense is
that the Alfresa Group is not shrinking from the
issues it faces and is firmly determined to adapt
to changes in the management environment and
reform management approaches.
I also feel that the Group’s management
policies and its decision-making process prioritize
soundness and balance. The Group’s executives
and employees feel honored to be part of Japan’s
excellent pharmaceutical distribution system.
They also feel a sense of urgency and pride about
working in an industry that society pays more
attention to and has high expectations for, in light
of concerns that medical insurance finance will
worsen as the population ages.
I am the chairperson of the Corporate
Governance Committee and have had opportunities
to discuss the ways in which the spirit behind the
Corporate Governance Code can be reflected in
concrete ways in the Board of Directors’ adminis-
tration and the methods for evaluating the Board of
Directors. I sensed that priorities differed between
internal and outside directors and between direc-
tors and Audit & Supervisory Board Members, but
sharing diverse opinions to identify commonalities
and reach consensus is extremely important.
Finally, although Alfresa Holdings
Corporation is already in compliance with virtu-
ally all of the requirements of Japan’s Corporate
Governance Code, there is a need for a more care-
ful discussion of succession planning. Establishing
a future-oriented process for selecting successors
while not losing sight of Alfresa’s history and
culture is critical for the Group’s ongoing growth
and consistent contribution to society.
Kimiko TeraiDirector (Outside Director) Alfresa Holdings CorporationPh.D., Professor, Faculty of Economics Keio University
1. Outside directors, etc., must be economically indepen-dent from the Group.1) Outside directors, etc., must not have directly received from the
Group in the previous five years compensation in excess of a certain level (excluding compensation received in their capacity as directors, etc.), or money or assets in consideration for work or transactions performed. · “In excess of a certain level” is defined as having received in excess of ¥10 million in any fiscal year for the previous five years.
2) Outside directors, etc., must not have served as directors or executives of the following companies or organizations in the previous five years. · Major clients of the Group whose total net sales account for more than 2 percent of the Group’s consolidated net sales, and major suppliers of the Group whose total net sales account for more than 2 percent of the consolidated net sales of the corporate group to which the supplier belongs.
· Companies that have a substantial interest in the Group, including the independent auditor of the Company.
· Companies that are major shareholders in the Company (holding more than 10 percent of the total number of issued shares).
· Companies in which the Group is the major shareholder (hold-ing more than 10 percent of the total number of issued shares).
2. Outside directors, etc., must not be close relatives of directors or Audit & Supervisory Board members of the Group.
· “Close relatives” is defined as a person’s spouse, blood rela-tives within the third degree of relationship or living under the same roof.
3. There should be no other circumstances surround-ing outside directors, etc., that could reasonably be considered to make them unfit as independent and neutral executives.
4. Outside directors, etc., shall continue to fulfil the requirements for independence and neutrality stipu-lated in these standards after their appointment.
Director (Independent Officer)
Kimiko Terai In addition to her high-level insight and broad experiences as an economist, Dr. Kimiko Terai is an academic expert specialized in the financial field including the social security system. We therefore consider that she will provide her opinions from a broad perspective to reflect on the management of the Company based on her profes-sional knowledge and experiences.
Yoichiro Yatsurugi Mr. Yoichiro Yatsurugi has a wealth of experience, a proven track-record and a high level of insight based on his years of experience as an executive at multiple companies. He also has a high level of IT expertise. Therefore, we believe that he will provide his opinions from a broad perspective based on his deep insight into corporate management and apply them to the management of the Company.
Shiho Konno In addition to her high-level of expertise as attorney at law, Ms. Shiho Konno has broad knowledge, including in the area of corpo-rate governance. Therefore, we believe that she will provide opinions from a broad perspective based on her professional knowledge and experience, and apply them to the management of the Company.
Audit & Supervisory Board Member (Independent Officer)
Yuji Noguchi Mr. Yuji Noguchi has a high level of expertise in the areas of finance and accounting as a certified public accountant, and is expected to help ensure objectivity and neutrality.
Seisui Kamigaki Mr. Seisui Kamigaki has served as a prosecutor and a commissioner at the Japan Fair Trade Commission. He has a high level of expertise and broad insight into general legal affairs and corporate compliance. We expect that his opinions from an objective and neutral perspec-tive will be useful in strengthening the Company’s audit system.
Yoshitaka Kato Mr. Yoshitaka Kato has a high level of expertise in the areas of finance and accounting as a certified public accountant. We believe that he will provide opinions from an objective and neutral perspective as an accounting expert, and apply them to the audit system of the Company.
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Management Team
1Denroku IshiguroRepresentative Director & ChairmanDec 1979 Joined Meiki Co., Ltd. (currently Meisho Co., Ltd.)Dec 1989 Representative Director & President of Meiki Co., Ltd.Apr 1998 Representative Director & Deputy President of Kasamatsu
Meiki Co., Ltd. (currently Meisho Co., Ltd.)Dec 2000 Representative Director & President of Kasamatsu Meiki
Co., Ltd.Jun 2005 Director of the CompanyApr 2006 Representative Director of Meisho Co., Ltd.Jul 2006 Director, Vice President & Executive Officer of the
Company, Business Strategies (BS)Apr 2007 Director, Senior Vice President & Executive Officer of the
Company, BSJun 2007 Representative Director & President of Alfresa CorporationApr 2008 Director, Deputy President, Assistant to the President of
the CompanyApr 2009 Representative Director & President of the CompanyApr 2016 Representative Director & Chairman of Sannova Co., Ltd.
(present)Representative Director & Chairman of the Company (present)
2Hiroyuki KanomeRepresentative Director & Deputy ChairmanApr 1972 Joined Fukujin Co., Ltd. (currently Alfresa Corporation)Jun 1998 Director of Fukujin Co., Ltd.Jun 2000 Managing Director of Fukujin Co., Ltd.Jun 2002 Director, Vice President & Executive Officer of Fukujin
Co., Ltd.Jun 2003 Director, Senior Vice President & Executive Officer of
Fukujin Co., Ltd.Jun 2006 Director, Deputy President of Alfresa CorporationJun 2008 Representative Director & Deputy President of Alfresa
CorporationApr 2009 Representative Director & President of Alfresa CorporationJun 2009 Director, Deputy President, Assistant to the President of the
Company, Group Sales Promotion (GSP)Jul 2011 Director, Deputy President, Assistant to the President of the
Company, Pharmaceutical Business (PB)Jun 2012 Representative Director & Deputy President, Assistant to
the President of the Company, Pharmaceutical Wholesaling Business (PWB)
Apr 2016 Representative Director & Chairman of Alfresa Corporation (present)Representative Director & Deputy Chairman of the Company (present)
3Taizo KuboRepresentative Director & PresidentMar 1979 Joined Fukujin Co., Ltd. (currently Alfresa Corporation)Jun 2000 Director of Fukujin Co., Ltd., General Manager, Sales
Planning (SP) DepartmentJun 2002 Director, Vice President & Executive Officer of Fukujin Co., Ltd.Apr 2006 Vice President & Executive Officer of the Company, Group
Administration (GAd) and Affiliate Control (AC), Internal Control (IC)
Jun 2006 Director, Vice President & Executive Officer of the Company, GAd & AC & IC
Apr 2008 Director, Senior Vice President & Executive Officer of the Company, GAd & AC & IC
Apr 2009 Representative Director & President of Shikoku Alfresa Corporation
Jun 2012 Director of the CompanyApr 2013 Director, Senior Vice President & Executive Officer of
the Company, Group Business (GB) & AC, and Group Information System (GIS)
Jun 2015 Director, Deputy President, Assistant to the President of the Company, GB & AC, GIS, and Hospital & Dispensing Pharmacy
Apr 2016 Representative Director & President of the Company (present)
4Shunichi MiyakeDirector, Deputy President, Assistant to the President, Internal Control, Financial Planning, Public and Investor Relations, General AffairsApr 1976 Joined Nippon Shoji Kaisha, Ltd. (currently Alfresa Pharma
Corporation)Apr 2003 Executive Officer of AZWELL Inc. (currently Alfresa Pharma
Corporation)Oct 2004 Executive Officer of Alfresa CorporationApr 2006 Executive Officer of the Company, General Manager,
Financial Planning (FP) Department, and Public and Investor Relations (PR/IR) Office
Apr 2008 Vice President & Executive Officer of the Company, FP & PR/IR, General Manager, FP Department
Apr 2009 Vice President & Executive Officer of the Company, FP & PR/IR, General Manager, FP Department, and PR/IR Office
Jun 2010 Director, Vice President & Executive Officer of the Company, FP & PR/IR, General Manager, FP Department, and PR/IR Office
Apr 2012 Director, Vice President & Executive Officer of the Company, FP & PR/IR
Jul 2012 Director, Vice President & Executive Officer of the Company, FP & PR/IR, General Manager, General Affairs (GAf) Department
Apr 2013 Director, Senior Vice President & Executive Officer of the Company, FP & PR/IR, General Manager, GAf Department
Jul 2014 Director, Senior Vice President & Executive Officer of the Company, FP & PR/IR and GAf
Apr 2016 Director, Senior Vice President & Executive Officer of the Company, FP & PR/IR & GAf
Jun 2016 Director, Deputy President of the Company, Internal Control (IC) & FP & PR/IR & GAf
Apr 2017 Director, Deputy President, Assistant to the President of the Company, IC & FP & PR/IR & GAf (present)
5Koichi MasunagaDirector, Deputy President, Assistant to the President, Wholesaling BusinessMar 1978 Joined Fukujin Co., Ltd. (currently Alfresa Corporation)Jun 2002 Executive Officer of Fukujin Co., Ltd.Sep 2003 Executive Officer of the Company, General Manager,
Corporate Strategy (CS) DepartmentApr 2006 Executive Officer of the Company, General Manager,
Group Administration (GAd) and Affiliate Control (AC) Department
Jul 2006 Executive Officer of Alfresa CorporationOct 2008 Vice President & Executive Officer of Alfresa CorporationJun 2010 Director, Vice President & Executive Officer of Alfresa
CorporationApr 2013 Director, Senior Vice President & Executive Officer of
Alfresa CorporationApr 2016 Representative Director & President of Alfresa Corporation
(present)Jun 2016 Director of the CompanyApr 2017 Director, Deputy President, Assistant to the President of the
Company, Wholesaling Business (WB) (present)
12Kenji KuwayamaAudit & Supervisory Board Member (Standing)Apr 1978 Joined the Mitsui Bank Limited (currently Sumitomo Mitsui
Banking Corporation)Nov 2000 Managing Director, Sakura Capital India LimitedApr 2002 Chief Executive Officer and General Manager of Mumbai
Branch, Sumitomo Mitsui Banking CorporationOct 2007 Joined Alfresa Holdings CorporationApr 2009 General Manager, Internal Control & Legal (IC&L)
DepartmentJun 2014 Audit & Supervisory Board Member (Standing) of the
Company (present)
9Kimiko TeraiDirector (Outside Director)Apr 2002 Ph.D., Associate Professor, Faculty of Business
Administration, Hosei UniversityApr 2007 Ph.D., Visiting Researcher, University of California, IrvineApr 2008 Ph.D., Professor, Faculty of Business Administration, Hosei
UniversityApr 2012 Ph.D., Professor, Faculty of Economics, Keio University
(present)Apr 2012 Ph.D., Adjunct Professor, Faculty of Business
Administration, Hosei UniversityApr 2013 Ph.D., Adjunct Professor, Keio Law SchoolJun 2015 Director of the Company (present)
6Yasuki IzumiDirector, Senior Vice President & Executive Officer,Group Business & Affiliate Control & Group Information SystemApr 1978 Joined Nippon Shoji Kaisha, Ltd. (currently Alfresa Pharma
Corporation)Oct 2006 General Manager, Group Administration (GAd) and
Affiliate Control (AC) Department Apr 2010 Executive Officer of the Company, General Manager, GAd
& AC Department and General Affairs (GAf) DepartmentJun 2012 Executive Officer of the Company, Group Business (GB)
& AC, General Manager, Business Development (BD) Department
Oct 2012 Vice President & Executive Officer of the Company, GB & AC, General Manager, BD Department
Apr 2013 Vice President & Executive Officer of the Company, BD, General Manager, BD Department
Apr 2014 Vice President & Executive Officer of the Company, BD and International Business (IB), General Manager, BD Department
Jun 2014 Director, Vice President & Executive Officer of the Company, BD and IB, General Manager, BD Department
Apr 2015 Director, Vice President & Executive Officer of the Company, BD and IB
Apr 2016 Director, Vice President & Executive Officer of the Company, GB & AC & Group Information System (GIS), and BD & IB
Jun 2016 Director, Senior Vice President & Executive Officer of the Company, GB & AC & GIS, and BD & IB
Oct 2016 Director, Senior Vice President & Executive Officer of the Company, GB & AC & GIS (present)
13Yuji NoguchiAudit & Supervisory Board Member (Outside)Apr 1984 Joined Andersen Consulting (currently Accenture Japan Ltd)Oct 1989 Joined ASAHI SHINWA & Co. (currently KPMG AZSA LLC)May 1993 Joined Showa Ota & Co. (currently Ernst & Young
ShinNihon LLC)Apr 1995 Established Noguchi Accounting Firm (present)Jun 2006 Audit & Supervisory Board Member of the Company
(present)
10Yoichiro YatsurugiDirector (Outside Director)Apr 1978 Joined IBM Japan, Ltd.Jun 1999 President of AT&T Global Network Services Japan LLCMay 2001 Chairman of AT&T Global Network Services Japan LLC and
President of AT&T Asia PacificApr 2004 Executive Vice President of JAPAN TELECOM CO., LTD
(currently SoftBank Corp.)Jan 2005 President and CEO of WILLCOM, Inc. (currently SoftBank
Corp.)Apr 2007 Representative Director, Executive Vice President of SAP
Japan Co., Ltd.Sep 2007 Representative Director and President of SAP Japan
Co., Ltd.Feb 2010 Executive Counsel of Works Applications Co., Ltd.Dec 2011 Representative Director and President of Igreque, Inc.Dec 2015 Director, Executive Counsel of Works Applications Co.,
Ltd. (present)Jan 2016 Director of Igreque, Inc. (present)Jun 2017 Director of the Company (present)
7Ryuji ArakawaDirector, Vice President & Executive Officer, Business Development & International BusinessApr 1987 Joined Yamanouchi Pharmaceutical Co., Ltd. (currently
Astellas Pharma Inc.)Apr 1999 Joined CS YAKUHIN CO., LTD.Jun 2000 Director of CS YAKUHIN CO., LTD.Jun 2005 Managing Director of CS YAKUHIN CO., LTD.Jun 2007 Senior Managing Director of CS YAKUHIN CO., LTD.
Director of the Company Jun 2008 Director, Senior Vice President & Executive Officer of CS
YAKUHIN CO., LTD.Apr 2009 Representative Director & President of CS YAKUHIN
CO., LTD.Jun 2016 Director of the CompanyOct 2016 Director, Vice President & Executive Officer of the
Company, Business Development (BD) & International Business (IB) (present)
14Seisui KamigakiAudit & Supervisory Board Member (Outside)Apr 1973 Prosecutor of Tokyo District Public Prosecutors OfficeOct 2000 Chief Prosecutor of Naha District Public Prosecutors OfficeSep 2003 Director-General, General Affairs Department, Supreme
Public Prosecutors OfficeDec 2004 Chief Prosecutor of Chiba District Public Prosecutors OfficeAug 2005 Chief Prosecutor of Yokohama District Public Prosecutors
OfficeJul 2007 Commissioner of Japan Fair Trade CommissionJul 2012 Attorney at law of Hibiya Sogo Law Offices (present)Jun 2013 Audit & Supervisory Board Member of the Company
(present)Outside Audit & Supervisory Board Member of Mitsubishi Shokuhin Co., Ltd (present)
May 2015 Outside Director (Audit and Supervisory Committee Member) of YONDOSHI HOLDINGS INC. (present)
Jun 2015 Outside Director of Universal Entertainment Corporation (present)
11Shiho KonnoDirector (Outside Director)Apr 1991 Registered as an attorney at law (Daiichi Tokyo Bar
Association)Jun 2005 Auditor of Yahoo Japan CorporationMar 2008 Auditor of Advanced Softmaterials Inc.Apr 2009 Professor of Waseda Law School, Waseda UniversityApr 2014 Member, Committee on Realization of a Gender-Equal
Society of Japan Federation of Bar Associations (present)Aug 2014 Auditor of Japan Corporate Governance Network (present)Mar 2015 Established Shiho Konno Habataki Law Office (present)Jun 2015 Outside Director of Watami Co., Ltd. (present)Jun 2016 Outside Director of Kakaku.com, Inc. (present)Jun 2017 Director of the Company (present)
8Hisashi KatsukiDirectorOct 1984 Joined Pigeon CorporationMay 2009 Joined TAMPEI NAKATA CO., LTD. (currently Alfresa
Healthcare Corporation)Jun 2009 Representative Director & President of TAMPEI NAKATA
CO., LTD.Oct 2011 Representative Director & President of Alfresa Healthcare
Corporation (present)Oct 2014 Representative Director & Chairman of Mogi
Pharmaceutical Co., Ltd. (present)Jun 2017 Director of the Company (present)
15Yoshitaka KatoAudit & Supervisory Board Member (Outside)Oct 1983 Joined Pricewaterhouse (currently PricewaterhouseCoopers
Aarata LLC)Oct 1990 Joined Fidelity Investments Management (Japan) Limited
(currently FIL Investments (Japan) Limited)May 1994 Joined Yamada Accounting Office (currently Yamada &
Partners Certified Public Tax Accountants' Co.)Nov 1999 Partner of YUSEI Audit & Co.Mar 2002 Managing partner of YUSEI Audit & Co.Jan 2010 CEO of YUSEI Advisory Co., Ltd.Jan 2017 Chairman, Partner of YUSEI Audit & Co. (present)Jun 2017 Audit & Supervisory Board Member of the Company
(present)
11 1087 5 42 13 69 131214 15
Directors
Audit & Supervisory Board Members
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Financial Information
53 54Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
(¥ million) (US$ thousand)
Assets 2017 2016 2017
Current assets:
Cash and cash equivalents ¥ 167,554 ¥ 158,462 $ 1,493,484
Receivables:
Trade notes and accounts 601,963 612,182 5,365,567
Other 52,815 51,483 470,764
Allowance for doubtful accounts (400) (343) (3,565)
654,378 663,322 5,832,766
Inventories:
Merchandise and finished goods 127,540 129,817 1,136,821
Work in process 1,268 572 11,302
Raw materials and supplies 3,295 2,882 29,370
132,103 133,271 1,177,493
Deferred tax assets 6,226 6,559 55,495
Other 2,612 3,522 23,282
total current assets 962,873 965,136 8,582,520
Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates 7,724 7,624 68,847
Investments in securities 121,231 118,050 1,080,587
Net defined benefit asset 3,375 2,958 30,083
Long-term receivables:
Long-term loans receivable 2,405 2,269 21,437
Other 5,830 6,673 51,965
Allowance for doubtful accounts (3,867) (5,006) (34,468)
4,368 3,936 38,934
Deferred tax assets 843 987 7,514
Other 8,512 9,362 75,871
total investments and other assets 146,053 142,917 1,301,836
Property, plant and equipment:
Land 64,578 64,728 575,613
Buildings and structures 102,713 103,066 915,527
Machinery, equipment, vehicles, tools and fixtures 33,869 31,743 301,890
Leased assets 10,069 9,883 89,750
Construction in progress 1,441 1,815 12,844
212,670 211,235 1,895,624
Less accumulated depreciation (79,474) (80,746) (708,388)
Net property, plant and equipment 133,196 130,489 1,187,236
Deferred charges and intangibles 13,801 14,953 123,015
¥1,255,923 ¥1,253,495 $11,194,607
(¥ million) (US$ thousand)
LIABILItIes AND Net Assets 2017 2016 2017
Current liabilities:
Short-term debt ¥ 160 ¥ 90 $ 1,426
Long-term debt due within one year 390 590 3,476
Long-term lease liabilities due within one year 1,476 1,775 13,156
Payables:
Trade notes and accounts 784,539 795,006 6,992,949
Other 10,528 12,395 93,841
795,067 807,401 7,086,790
Accrued expenses 1,783 1,972 15,893
Income taxes payable 4,654 12,628 41,483
Allowance for employees’ bonuses 7,310 7,888 65,157
Allowance for bonuses to directors and corporate auditors 370 373 3,298
Allowance for sales rebates 61 44 544
Allowance for sales returns 704 823 6,275
Other 2,601 1,929 23,185
total current liabilities 814,576 835,513 7,260,683
Long-term liabilities:
Long-term debt due after one year 1,287 1,310 11,472
Long-term lease liabilities 3,245 3,347 28,924
Net defined benefit liability 14,732 17,763 131,313
Directors’ and corporate auditors’ retirement benefits – 62 –
Deferred tax liabilities 26,089 24,094 232,543
Deferred tax liabilities for land revaluation 446 446 3,975
Asset retirement obligations 783 698 6,979
Provision for loss on guarantees 61 87 544
Other 1,153 1,447 10,277
total long-term liabilities 47,796 49,254 426,027
Contingent liabilities
Net assets:
Shareholders’ equity:
Common stock
Authorized—540,000,000 shares
Issued—235,017,600 shares in 2017 and 2016 18,454 18,454 164,489
Capital surplus 101,937 103,121 908,610
Retained earnings 229,116 205,784 2,042,214
Less treasury stock, at cost—18,339,053 shares in 2017 and 18,337,555 shares in 2016 (16,020) (16,017) (142,793)
total shareholders’ equity 333,487 311,342 2,972,520
Accumulated other comprehensive income:
Unrealized gains on available-for-sale securities, net of taxes 62,479 59,546 556,903
Unrealized losses on deferred hedge (4) (13) (36)
Revaluation reserve for land (3,948) (4,143) (35,190)
Foreign currency translation adjustments 115 175 1,025
Remeasurements of defined benefit plans, net of taxes 206 (365) 1,836
Total accumulated other comprehensive income 58,848 55,200 524,538
Non-controlling interests 1,216 2,186 10,839
total net assets 393,551 368,728 3,507,897
¥1,255,923 ¥1,253,495 $11,194,607
Consolidated Balance Sheets
Alfresa Holdings Corporation and consolidated subsidiariesAs of March 31, 2017 and 2016
Value Creation Story
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55 56Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
(¥ million) (US$ thousand)
2017 2016 2017
Net sales ¥2,551,801 ¥2,576,406 $22,745,352Cost of sales 2,369,236 2,379,211 21,118,068
Gross profit 182,565 197,195 1,627,284
selling, general and administrative expenses 149,337 151,906 1,331,108Operating income 33,228 45,289 296,176
Other income (expenses):Interest and dividend income 2,578 2,596 22,979Interest expense (104) (121) (927)Write-down of securities (3) (128) (27)Loss on disposal of property, plant and equipment (272) (434) (2,424)Information fees 5,948 5,962 53,017Expenses for rental property (133) (161) (1,185)Loss on impairment of fixed assets (1,575) (884) (14,039)Gain (loss) on sales of property, plant and equipment 3,195 (89) 28,478Gain on sales of securities 187 253 1,667Provision of allowance for doubtful accounts – (18) –
Equity in losses of affiliates (19) (171) (169)Compensation income 159 83 1,417Merger expenses (299) (139) (2,665)Extra retirement payment (195) (15) (1,738)Loss on sales of subsidiaries and affiliates' stocks (138) – (1,230)Other, net 2,127 2,072 18,959
11,456 8,806 102,113Profit before income taxes 44,684 54,095 398,289
Income taxes:Current 12,706 18,573 113,254Deferred 896 141 7,987
13,602 18,714 121,241Profit ¥ 31,082 ¥ 35,381 $ 277,048
Profit attributable to:Profit attributable to owners of the parent ¥ 30,894 ¥ 34,976 $ 275,372 Profit attributable to non-controlling interests 188 405 1,676
Other comprehensive income:Unrealized gains on available-for-sale securities, net of taxes 2,935 3,032 26,161Unrealized gains (losses) on deferred hedge 12 (16) 107Revaluation reserve for land – 30 –
Foreign currency translation adjustments (60) (30) (535)Remeasurements of defined benefit plans, net of taxes 601 (2,061) 5,357Share of other comprehensive income of entities accounted for using equity method (1) 8 (9)
total other comprehensive income 3,487 963 31,081
Comprehensive income ¥ 34,569 ¥ 36,344 $ 308,129
Comprehensive income attributable to:Comprehensive income attributable to owners of the parent ¥ 34,347 ¥ 35,943 $ 306,150Comprehensive income attributable to non-controlling interests 222 401 1,979
(¥) (US$)
Per share amounts:Profit attributable to owners of the parent ¥ 142.58 ¥ 158.99 $ 1.27 Cash dividends applicable to the year 36.00 33.00 0.32
(¥ million)
Shareholders’ equity Accumulated other comprehensive income
Number of shares of
common stockCommon
stockCapital surplus
Retained earnings Treasury stock
Total shareholders'
equity
Unrealized gains on
available- for-sale
securities, net of taxes
Unrealized gains (losses) on deferred
hedge
Revaluation reserve for
land
Foreign currency
translation adjustments
Remeasure-ments of defined
benefit plans, net of taxes
Total accumulated
other comprehensive
income
Non- controlling
interests Total
Net assets at April 1, 2015 235,017,600 ¥18,454 ¥103,799 ¥177,062 ¥ (1,007) ¥298,308 ¥56,512 ¥ 3 ¥(4,211) ¥205 ¥1,702 ¥54,211 ¥1,604 ¥354,123
Cash dividends paid at ¥32.00 per share (7,095) (7,095) (7,095)
Profit attributable to owners of the parent 34,976 34,976 34,976
Treasury stock acquired (15,010) (15,010) (15,010)
Sale of treasury stock 0 0 0 0
Change of scope of consolidation 879 879 879
Change in the parent’s equity arising from transactions with non-controlling shareholders (678) (678) (678)
Reversal of revaluation reserve for land (38) (38) (38)
Increase in unrealized gains on available-for-sale securities 3,034 3,034 3,034
Decrease in unrealized gains on deferred hedge (16) (16) (16)
Revaluation reserve for land 68 68 68
Foreign currency translation adjustments (30) (30) (30)
Remeasurements of defined benefit plans (2,067) (2,067) (2,067)
Non-controlling interests 582 582
Other 0 0 0
Balance at March 31, 2016 235,017,600 ¥18,454 ¥103,121 ¥205,784 ¥(16,017) ¥311,342 ¥59,546 ¥(13) ¥(4,143) ¥175 ¥ (365) ¥55,200 ¥2,186 ¥368,728
Cash dividends paid at ¥36.00 per share (7,367) (7,367) (7,367)
Profit attributable to owners of the parent 30,894 30,894 30,894
Treasury stock acquired (3) (3) (3)
Sale of treasury stock 0 0 0 0
Change in the parent’s equity arising from transactions with non-controlling shareholders (1,184) (1,184) (1,184)
Reversal of revaluation reserve for land (195) (195) (195)
Increase in unrealized gains on available-for-sale securities 2,933 2,933 2,933
Decrease in unrealized losses on deferred hedge 9 9 9
Revaluation reserve for land 195 195 195
Foreign currency translation adjustments (60) (60) (60)
Remeasurements of defined benefit plans 571 571 571
Non-controlling interests (970) (970)
Other (0) (0) (0)
Balance at March 31, 2017 235,017,600 ¥18,454 ¥101,937 ¥229,116 ¥(16,020) ¥333,487 ¥62,479 ¥ (4) ¥(3,948) ¥115 ¥ 206 ¥58,848 ¥1,216 ¥393,551
(US$ thousand)
Shareholders’ equity Accumulated other comprehensive income
Common stock
Capital surplus
Retained earnings Treasury stock
Total shareholders'
equity
Unrealized gains on
available- for-sale
securities, net of taxes
Unrealized gains (losses) on deferred
hedge
Revaluation reserve for
land
Foreign currency
translation adjustments
Remeasure-ments of defined
benefit plans, net of taxes
Total accumulated
other comprehensive
income
Non- controlling
interests Total
Net assets at April 1, 2016 $164,489 $919,164 $1,834,245 $(142,766) $2,775,132 $530,760 $(116) $(36,928) $1,560 $(3,253) $492,023 $19,485 $3,286,640
Cash dividends paid at $0.32 per share (65,665) (65,665) (65,665)
Profit attributable to owners of the parent 275,372 275,372 275,372
Treasury stock acquired (27) (27) (27)
Sale of treasury stock 0 0 0 0
Change in the parent’s equity arising from transactions with non-controlling shareholders (10,554) (10,554) (10,554)
Reversal of revaluation reserve for land (1,738) (1,738) (1,738)
Increase in unrealized gains on available-for-sale securities 26,143 26,143 26,143
Decrease in unrealized losses on deferred hedge 80 80 80
Revaluation reserve for land 1,738 1,738 1,738
Foreign currency translation adjustments (535) (535) (535)
Remeasurements of defined benefit plans 5,089 5,089 5,089
Non-controlling interests (8,646) (8,646)
Other (0) (0) (0)
Balance at March 31, 2017 $164,489 $908,610 $2,042,214 $(142,793) $2,972,520 $556,903 $ (36) $(35,190) $1,025 $ 1,836 $524,538 $10,839 $3,507,897
Consolidated Statements of Income and Comprehensive Income
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
Consolidated Statements of Changes in Net Assets
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
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57 58Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
(¥ million) (US$ thousand)
2017 2016 2017
Cash flows from operating activities:
Profit before income taxes ¥ 44,684 ¥ 54,095 $ 398,289
Adjustments to reconcile profit before income taxes
to net cash provided by (used in) operating activities:
Depreciation and amortization 9,151 9,218 81,567
Loss on impairment of fixed assets 1,575 884 14,039
Amortization of goodwill 1,867 1,632 16,641
(Decrease) increase in allowance for doubtful accounts (1,082) 1,247 (9,644)
(Decrease) increase in allowance for employees' bonuses (821) 1,107 (7,318)
(Decrease) increase in allowance for bonuses to directors and corporate auditors (2) 89 (18)
Decrease in directors' retirement benefits (62) (69) (553)
Decrease in net defined benefit liability (3,429) (902) (30,564)
Interest and dividend income (2,578) (2,596) (22,979)
Interest expense 104 121 927
(Gain) loss on sales of property, plant and equipment (3,195) 89 (28,478)
Loss on disposal of property, plant and equipment 272 434 2,424
Gain on sales of securities (187) (253) (1,667)
Write-down of securities 6 128 53
Compensation income (159) (83) (1,417)
Merger expenses 299 139 2,665
Extra retirement payment 195 15 1,738
Decrease (increase) in trade notes and accounts receivable 12,985 (14,850) 115,741
Decrease (increase) in inventories 2,786 (484) 24,833
Increase in other receivables (169) (3,307) (1,506)
(Decrease) increase in trade notes and accounts payable (10,997) 6,080 (98,021)
Other, net 2,100 (1,970) 18,718
53,343 50,764 475,470
Interest and dividends received 2,586 2,598 23,050
Interest paid (104) (123) (927)
Proceeds from compensation income 159 83 1,417
Extra retirement payment (134) (15) (1,194)
Payments for business restructuring expenses of subsidiaries and affiliates – (179) –
Payments for merger expenses (308) (155) (2,745)
Income taxes paid (21,200) (15,137) (188,965)
Net cash provided by operating activities 34,342 37,836 306,106
Consolidated Statements of Cash Flows
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
(¥ million) (US$ thousand)
2017 2016 2017
Cash flows from investing activities:
Net decrease in time deposits 819 340 7,300
Proceeds from sales of securities – 5,000 –
Payments for purchase of property, plant and equipment (10,648) (10,558) (94,910)
Proceeds from sale of property, plant and equipment 6,150 939 54,818
Payments for purchase of intangible assets (2,961) (3,687) (26,393)
Payments for acquisition of long-term prepaid expense (79) (217) (704)
Payments for purchase of investment securities (1,186) (484) (10,571)
Proceeds from sale of investment securities 1,125 540 10,028
Advances of loans receivable (449) (180) (4,002)
Repayments of loans receivable 443 202 3,948
Purchase of shares of subsidiaries resulting in change in scope of consolidation (6,459) (7,004) (57,572)
Other, net (165) (137) (1,471)
Net cash used in investing activities (13,410) (15,246) (119,529)
Cash flows from financing activities:
Net increase (decrease) in short-term debt 70 (410) 624
Proceeds from long-term debt 400 200 3,565
Repayments of long-term debt (623) (471) (5,553)
Repayments of lease liabilities (1,909) (2,006) (17,016)
Payments for purchase of treasury stock (3) (15,010) (27)
Proceeds from sale of treasury stock 0 0 0
Purchase of treasury stock of subsidiaries (2) (11) (18)
Cash dividends paid (7,367) (7,095) (65,665)
Dividends paid to non-controlling interests (15) (14) (134)
Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation (2,359) (1,179) (21,027)
Net cash used in financing activities (11,808) (25,996) (105,251)
Foreign currency translation loss on cash and cash equivalents (32) (16) (285)
Net increase (decrease) in cash and cash equivalents 9,092 (3,422) 81,041
Cash and cash equivalents at beginning of the year 158,462 160,265 1,412,443
Increase in cash and cash equivalents from newly consolidated subsidiary – 1,619 –
Increase in cash and cash equivalents resulting from merger – 0 –
Cash and cash equivalents at end of the year ¥167,554 ¥158,462 $1,493,484
(¥ million) (US$ thousand)
2017 2016 2017
significant non-cash transactions:
Assets under finance leases ¥ 1,359 ¥ 2,310 $ 12,113
Obligations under finance leases 1,472 2,513 13,121
Value Creation Story
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59 60Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Corporate Profile Stock Information(As of March 31, 2017) (As of March 31, 2017)
Corporate Name: Alfresa Holdings Corporation
Address: 1-1-3 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
Established: September 29, 2003
Paid-in Capital: ¥18,454 million
Representative: Taizo Kubo, Representative Director & President
Business: Management of subsidiaries that deal with wholesaling, manufacturing, marketing and import/export of pharmaceuticals, diagnostic reagents, medical devices/equipment, etc., and operating dispensing pharmacies and conducting related businesses.
Number of employees: 14,609 (consolidated) *Including 2,784 part-time and contract employees
Total number of shares authorized: 540,000,000
Total number of shares issued and outstanding: 235,017,600
Number of shareholders: 11,082
Number of shares of treasury stock: 18,339,053
Trading unit of shares: 100
Top 10 Shareholders
Name
Number of shares held
(thousand shares)
Ownership ratio (%)
Alfresa Holdings Corporation 18,339 7.8
Japan Trustee Services Bank, Ltd. (Trust Account) 7,860 3.3
The Master Trust Bank of Japan, Ltd. (Trust Account) 6,760 2.9
Alfresa Holdings Employees Shareholders' Association 5,974 2.5
Eisai Co., Ltd. 4,602 2.0
Japan Trustee Services Bank, Ltd. (Trust Account 5) 4,289 1.8
Trust & Custody Services Bank, Ltd. as trustee for DAIICHI SANKYO COMPANY, LIMITED Retirement Benefit Trust Account re-entrusted by Mizuho Trust & Banking Co., Ltd.
3,908 1.7
NORTHERN TRUST CO. (AVFC) RE U.S. TAX EXEMPTED PENSION FUNDS 3,775 1.6
DAIICHI SANKYO COMPANY, LIMITED 3,202 1.4
Japan Trustee Services Bank, Ltd. (Trust Account 1) 3,194 1.4
Note: Number of shares held is rounded down to the nearest thousand
Composition of Shareholders
Foreign corporations and individuals29.0%
Securities companies1.6%
Individuals and others22.9%
Financial institutions21.0%
Treasury stock7.8%
Dividend PolicyThe Company targets an annual dividend on equity (DOE) of 2% or more from the 16-18 Medium-term Management Plan period. The Company paid an annual dividend of 36 yen per-share for the year ended March 31, 2017, up 3 yen compared to the previous fiscal year. The planned annual dividend for the year ending March 31, 2018 is 38 yen per share.* The Company implemented a 4-for-1 stock split of its common stock as of October 1,
2014. The dividends on the right are calculated on the assumption that the stock split was implemented at the beginning of the year ended March 31, 2013.
Dividends per Share(¥)
Trading Volume(thousand shares)
Share Prices(¥)
Akihiko Miyadera President and CEOAlfresa Fine Chemical Corporation
Kinichiro Odashima PresidentOdashima Limited
Toru Takekawa PresidentSannova Co., Ltd.
Yasuo Takita PresidentKowa Pharmaceuticals Co., Ltd.
Toshiyuki Tachi President Nihon Apoch CO., LTD
Kenzo Edahiro PresidentTS Alfresa Corporation
Koichi Shimada President and CEOAlfresa Pharma Corporation
Keiji Kawashima PresidentShikoku Alfresa Corporation
Teruo Azuma Chief Executive OfficerApollo Medical Holdings Inc.
Masashi Imanari PresidentAlfresa System Corporation
Tadashi InaminePresidentRYUYAKU CO., LTD.
Hisashi Katsuki PresidentAlfresa Healthcare Corporation
Yusuke Mogi PresidentMogi Pharmaceutical Co., Ltd.
Seiji Nakamura PresidentAlfresa Medical Service Corporation
Kenji Orimoto PresidentMeisho Co., Ltd.
2013
23.25 26.00 29.75 33.00 36.00 38.00
2015 20172014 2016 2018(Projected)
Other Japanese corporations17.7%
Koichi Masunaga PresidentAlfresa Corporation
* Excluding the representative of a consolidated subsidiary outside Japan.
3,000
2,000
2,500
1,500
1,000
500
0
Apr May Jun MarJul Aug Sep Oct Nov Dec May Jun Jul Aug Sep Oct Nov DecJan Feb MarJan FebApr2015 2016 2017
25,000
20,000
15,000
10,000
5,000
0
Apr May Jun MarJul Aug Sep Oct Nov Dec May Jun Jul Aug Sep Oct Nov DecJan Feb MarJan FebApr2015 2016 2017
Alfresa Group
TS Alfresa Corporation(Hiroshima)
Meisho Co., Ltd.(Ishikawa)
QINGDAO NESCO MEDICAL CO., LTD. (Qingdao, Shandong, China)
Sannova Co., Ltd.(Gunma)
Alfresa Fine Chemical Corporation (Akita)
Shikoku Alfresa Corporation (Kagawa)
Alfresa Pharma Corporation (Osaka)
Odashima Limited(Iwate)
Kowa Pharmaceuticals Co., Ltd. (Fukushima)
Nihon Apoch CO., LTD(Saitama)
RYUYAKU CO., LTD.(Okinawa)
Alfresa Medical Service Corporation (Tokyo)
Alfresa Healthcare Corporation (Tokyo)
Mogi PharmaceuticalCo., Ltd. (Tokyo)
Alfresa Corporation(Tokyo)
Apollo Medical Holdings Inc. (Tokyo)
Alfresa System Corporation (Tokyo)
Ethical Pharmaceuticals Wholesaling Business Self-Medication Products Wholesaling Business Manufacturing Business Medical-Related Business Information System Business for the Alfresa Group
(Fiscal years ended/ending March 31)
Stock listing: Tokyo Stock Exchange (1st Section)
Stock Code: 2784
Transfer agent: Mitsubishi UFJ Trust and Banking Corporation
61 62Alfresa Group Integrated Report 2017 Alfresa Group Integrated Report 2017
Integrated Report 2017Fiscal Year Ended March 31, 2017
Alfresa Group
0.08
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
h. 22m
d. 26cm
238.11kg of CO2 is the amount that 17.08 fifty-year-old cedar trees would absorb in one year.(Source: Forestry Report, Forestry Agency of Japan)
Reusing aluminum plates during the printing of this integrated report reduced
waste and contributed to the reduction of CO2 emissions by 238.11kg.
Japan Smart Energy Co., Ltd. examined this numerical value and confirmed it.
For further information, please contact:
1-1-3, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
TEL: +81-3-5219-5102 E-MAIL: [email protected]
URL: www.alfresa.com
This report is compiled and printed with the following environmental considerations in mind.
• Printing • Paper • Ink
This report is printed on paper certified by the Forest Stewardship Council (FSC) to be made from wood sourced from responsibly managed forests.
This report is printed with non-VOC printing ink derived from plant oils.
Alfresa G
rou
p Integrated R
eport 2017
Financial Section of Integrated Report 2017For the year ended March 31, 2017
Alfresa Group
0.08
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
h. 22m
d. 26cm
238.11kg of CO2 is the amount that 17.08 fifty-year-old cedar trees would absorb in one year.(Source: Forestry Report, Forestry Agency of Japan)
Reusing aluminum plates during the printing of this integrated report reduced
waste and contributed to the reduction of CO2 emissions by 238.11kg.
Japan Smart Energy Co., Ltd. examined this numerical value and confirmed it.
For further information, please contact:
1-1-3, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
TEL: +81-3-5219-5102 E-MAIL: [email protected]
URL: www.alfresa.com
This report is compiled and printed with the following environmental considerations in mind.
• Printing • Paper • Ink
This report is printed on paper certified by the Forest Stewardship Council (FSC) to be made from wood sourced from responsibly managed forests.
This report is printed with non-VOC printing ink derived from plant oils.
印刷会社にて差替
印刷会社にて差替 印刷会社にて差替
CONTENTS
3 Independent Auditor’s Report
4 Consolidated Balance Sheets
6 Consolidated Statements of Income and Comprehensive Income
7 Consolidated Statements of Changes in Net Assets
8 Consolidated Statements of Cash Flows
9 Notes to Consolidated Financial Statements
Forward-looking Statements
Plans, forecasts, and strategies of Alfresa Holdings Corporation and its Group companies in this integrated
report are forward-looking statements based on information available at the time such statements were
prepared. As such, actual results may significantly differ from forecasts due to a variety of factors.
01Alfresa Group Financial Section of Integrated Report 2017Alfresa Group Financial Section of Integrated Report 2017
Independent Auditor’s Report
To the Board of Directors of Alfresa Holdings Corporation:
We have audited the accompanying consolidated financial statements of Alfresa Holdings Corporation and its consolidated
subsidiaries, which comprise the consolidated balance sheets as at March 31, 2017 and 2016, and the consolidated statements of
income and comprehensive income, statements of changes in net assets and statements of cash flows for the years then ended, and a
summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits
in accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control
relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Alfresa Holdings
Corporation. and its consolidated subsidiaries as at March 31, 2017 and 2016, and their financial performance and cash flows for the
years then ended in accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2017 are
presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,
such translation has been made on the basis described in Note 1 to the consolidated financial statements.
June 27, 2017
Tokyo, Japan
02 Alfresa Group Financial Section of Integrated Report 2017 03Alfresa Group Financial Section of Integrated Report 2017
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
ASSeTS 2017 2016 2017
Current assets:
Cash and cash equivalents (Notes 4, 10 and 18) ¥ 167,554 ¥ 158,462 $ 1,493,484
Receivables:
Trade notes and accounts (Note 4) 601,963 612,182 5,365,567
Other (Note 4) 52,815 51,483 470,764
Allowance for doubtful accounts (400) (343) (3,565)
654,378 663,322 5,832,766
Inventories:
Merchandise and finished goods (Note 10) 127,540 129,817 1,136,821
Work in process 1,268 572 11,302
Raw materials and supplies 3,295 2,882 29,370
132,103 133,271 1,177,493
Deferred tax assets (Note 6) 6,226 6,559 55,495
Other (Notes 3 and 4) 2,612 3,522 23,282
Total current assets 962,873 965,136 8,582,520
Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates 7,724 7,624 68,847
Investments in securities (Notes 3, 4 and 10) 121,231 118,050 1,080,587
Net defined benefit asset (Note 8) 3,375 2,958 30,083
Long-term receivables:
Long-term loans receivable 2,405 2,269 21,437
Other 5,830 6,673 51,965
Allowance for doubtful accounts (3,867) (5,006) (34,468)
4,368 3,936 38,934
Deferred tax assets (Note 6) 843 987 7,514
Other (Note 10) 8,512 9,362 75,871
Total investments and other assets 146,053 142,917 1,301,836
Property, plant and equipment:
Land (Notes 10, 15 and 16) 64,578 64,728 575,613
Buildings and structures (Notes 9, 10 and 15) 102,713 103,066 915,527
Machinery, equipment, vehicles, tools and fixtures 33,869 31,743 301,890
Leased assets (Note 12) 10,069 9,883 89,750
Construction in progress 1,441 1,815 12,844
212,670 211,235 1,895,624
Less accumulated depreciation (79,474) (80,746) (708,388)
Net property, plant and equipment 133,196 130,489 1,187,236
Deferred charges and intangibles 13,801 14,953 123,015
¥1,255,923 ¥1,253,495 $11,194,607
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
LIABILITIeS AND NeT ASSeTS 2017 2016 2017
Current liabilities:
Short-term debt (Note 7) ¥ 160 ¥ 90 $ 1,426
Long-term debt due within one year (Notes 7 and 10) 390 590 3,476
Long-term lease liabilities due within one year (Notes 7 and 12) 1,476 1,775 13,156
Payables:
Trade notes and accounts (Notes 4 and 10) 784,539 795,006 6,992,949
Other 10,528 12,395 93,841
795,067 807,401 7,086,790
Accrued expenses 1,783 1,972 15,893
Income taxes payable 4,654 12,628 41,483
Allowance for employees’ bonuses 7,310 7,888 65,157
Allowance for bonuses to directors and corporate auditors 370 373 3,298
Allowance for sales rebates 61 44 544
Allowance for sales returns 704 823 6,275
Other 2,601 1,929 23,185
Total current liabilities 814,576 835,513 7,260,683
Long-term liabilities:
Long-term debt due after one year (Notes 7 and 10) 1,287 1,310 11,472
Long-term lease liabilities (Notes 7 and 12) 3,245 3,347 28,924
Net defined benefit liability (Note 8) 14,732 17,763 131,313
Directors’ and corporate auditors’ retirement benefits – 62 –
Deferred tax liabilities (Note 6) 26,089 24,094 232,543
Deferred tax liabilities for land revaluation (Note 16) 446 446 3,975
Asset retirement obligations (Note 9) 783 698 6,979
Provision for loss on guarantees 61 87 544
Other 1,153 1,447 10,277
Total long-term liabilities 47,796 49,254 426,027
Contingent liabilities (Note 11)
Net assets (Note 13) :
Shareholders’ equity :
Common stock
Authorized—540,000,000 shares
Issued—235,017,600 shares in 2017 and 2016 18,454 18,454 164,489
Capital surplus 101,937 103,121 908,610
Retained earnings 229,116 205,784 2,042,214
Less treasury stock, at cost—18,339,053 shares in 2017 and 18,337,555 shares in 2016 (16,020) (16,017) (142,793)
Total shareholders’ equity 333,487 311,342 2,972,520
Accumulated other comprehensive income :
Unrealized gains on available-for-sale securities, net of taxes 62,479 59,546 556,903
Unrealized losses on deferred hedge (4) (13) (36)
Revaluation reserve for land (Note 16) (3,948) (4,143) (35,190)
Foreign currency translation adjustments 115 175 1,025
Remeasurements of defined benefit plans, net of taxes 206 (365) 1,836
Total accumulated other comprehensive income 58,848 55,200 524,538
Non-controlling interests 1,216 2,186 10,839
Total net assets 393,551 368,728 3,507,897
¥1,255,923 ¥1,253,495 $11,194,607
See notes to consolidated financial statements.
Consolidated Balance Sheets
Alfresa Holdings Corporation and consolidated subsidiariesAs of March 31, 2017 and 2016
04 Alfresa Group Financial Section of Integrated Report 2017 05Alfresa Group Financial Section of Integrated Report 2017
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Net sales ¥2,551,801 ¥2,576,406 $22,745,352Cost of sales 2,369,236 2,379,211 21,118,068
Gross profit 182,565 197,195 1,627,284
Selling, general and administrative expenses 149,337 151,906 1,331,108Operating income 33,228 45,289 296,176
Other income (expenses):Interest and dividend income 2,578 2,596 22,979Interest expense (104) (121) (927)Write-down of securities (Note 3) (3) (128) (27)Loss on disposal of property, plant and equipment (272) (434) (2,424)Information fees 5,948 5,962 53,017Expenses for rental property (133) (161) (1,185)Loss on impairment of fixed assets (Note 15) (1,575) (884) (14,039)Gain (loss) on sales of property, plant and equipment 3,195 (89) 28,478Gain on sales of securities (Note 3) 187 253 1,667Provision of allowance for doubtful accounts – (18) –
Equity in losses of affiliates (19) (171) (169)Compensation income 159 83 1,417Merger expenses (299) (139) (2,665)Extra retirement payment (195) (15) (1,738)Loss on sales of subsidiaries and affiliates' stocks (138) – (1,230)Other, net 2,127 2,072 18,959
11,456 8,806 102,113Profit before income taxes 44,684 54,095 398,289
Income taxes (Note 6):Current 12,706 18,573 113,254Deferred 896 141 7,987
13,602 18,714 121,241Profit ¥ 31,082 ¥ 35,381 $ 277,048
Profit attributable to:Profit attributable to owners of the parent ¥ 30,894 ¥ 34,976 $ 275,372 Profit attributable to non-controlling interests 188 405 1,676
Other comprehensive income (Note 17):Unrealized gains on available-for-sale securities, net of taxes 2,935 3,032 26,161Unrealized gains (losses) on deferred hedge 12 (16) 107Revaluation reserve for land – 30 –
Foreign currency translation adjustments (60) (30) (535)Remeasurements of defined benefit plans, net of taxes 601 (2,061) 5,357Share of other comprehensive income of entities accounted for using equity method (1) 8 (9)
Total other comprehensive income 3,487 963 31,081
Comprehensive income ¥ 34,569 ¥ 36,344 $ 308,129
Comprehensive income attributable to:Comprehensive income attributable to owners of the parent ¥ 34,347 ¥ 35,943 $ 306,150Comprehensive income attributable to non-controlling interests 222 401 1,979
YenU.S. Dollars
(Note 1)
Per share amounts:Profit attributable to owners of the parent ¥ 142.58 ¥ 158.99 $ 1.27 Cash dividends applicable to the year 36.00 33.00 0.32
See notes to consolidated financial statements.
Millions of Yen
Shareholders’ equity Accumulated other comprehensive income
Number of shares of
common stockCommon
stockCapital surplus
Retained earnings Treasury stock
Total shareholders'
equity
Unrealized gains on
available- for-sale
securities, net of taxes
Unrealized gains (losses) on deferred
hedge
Revaluation reserve for
land
Foreign currency
translation adjustments
Remeasure-ments of defined
benefit plans, net of taxes
Total accumulated
other comprehensive
income
Non- controlling
interests Total
Net assets at April 1, 2015 235,017,600 ¥18,454 ¥103,799 ¥177,062 ¥ (1,007) ¥298,308 ¥56,512 ¥ 3 ¥(4,211) ¥205 ¥1,702 ¥54,211 ¥1,604 ¥354,123
Cash dividends paid at ¥32.00 per share (7,095) (7,095) (7,095)
Profit attributable to owners of the parent 34,976 34,976 34,976
Treasury stock acquired (15,010) (15,010) (15,010)
Sale of treasury stock 0 0 0 0
Change of scope of consolidation 879 879 879
Change in the parent’s equity arising from transactions with non-controlling shareholders (678) (678) (678)
Reversal of revaluation reserve for land (38) (38) (38)
Increase in unrealized gains on available-for-sale securities 3,034 3,034 3,034
Decrease in unrealized gains on deferred hedge (16) (16) (16)
Revaluation reserve for land 68 68 68
Foreign currency translation adjustments (30) (30) (30)
Remeasurements of defined benefit plans (2,067) (2,067) (2,067)
Non-controlling interests 582 582
Other 0 0 0
Balance at March 31, 2016 235,017,600 ¥18,454 ¥103,121 ¥205,784 ¥(16,017) ¥311,342 ¥59,546 ¥(13) ¥(4,143) ¥175 ¥ (365) ¥55,200 ¥2,186 ¥368,728
Cash dividends paid at ¥36.00 per share (7,367) (7,367) (7,367)
Profit attributable to owners of the parent 30,894 30,894 30,894
Treasury stock acquired (3) (3) (3)
Sale of treasury stock 0 0 0 0
Change in the parent’s equity arising from transactions with non-controlling shareholders (1,184) (1,184) (1,184)
Reversal of revaluation reserve for land (195) (195) (195)
Increase in unrealized gains on available-for-sale securities 2,933 2,933 2,933
Decrease in unrealized losses on deferred hedge 9 9 9
Revaluation reserve for land 195 195 195
Foreign currency translation adjustments (60) (60) (60)
Remeasurements of defined benefit plans 571 571 571
Non-controlling interests (970) (970)
Other (0) (0) (0)
Balance at March 31, 2017 235,017,600 ¥18,454 ¥101,937 ¥229,116 ¥(16,020) ¥333,487 ¥62,479 ¥ (4) ¥(3,948) ¥115 ¥ 206 ¥58,848 ¥1,216 ¥393,551
Thousands of U.S. Dollars (Note 1)
Shareholders’ equity Accumulated other comprehensive income
Common stock
Capital surplus
Retained earnings Treasury stock
Total shareholders'
equity
Unrealized gains on
available- for-sale
securities, net of taxes
Unrealized gains (losses) on deferred
hedge
Revaluation reserve for
land
Foreign currency
translation adjustments
Remeasure-ments of defined
benefit plans, net of taxes
Total accumulated
other comprehensive
income
Non- controlling
interests Total
Net assets at April 1, 2016 $164,489 $919,164 $1,834,245 $(142,766) $2,775,132 $530,760 $(116) $(36,928) $1,560 $(3,253) $492,023 $19,485 $3,286,640
Cash dividends paid at $0.32 per share (65,665) (65,665) (65,665)
Profit attributable to owners of the parent 275,372 275,372 275,372
Treasury stock acquired (27) (27) (27)
Sale of treasury stock 0 0 0 0
Change in the parent’s equity arising from transactions with non-controlling shareholders (10,554) (10,554) (10,554)
Reversal of revaluation reserve for land (1,738) (1,738) (1,738)
Increase in unrealized gains on available-for-sale securities 26,143 26,143 26,143
Decrease in unrealized losses on deferred hedge 80 80 80
Revaluation reserve for land 1,738 1,738 1,738
Foreign currency translation adjustments (535) (535) (535)
Remeasurements of defined benefit plans 5,089 5,089 5,089
Non-controlling interests (8,646) (8,646)
Other (0) (0) (0)
Balance at March 31, 2017 $164,489 $908,610 $2,042,214 $(142,793) $2,972,520 $556,903 $ (36) $(35,190) $1,025 $ 1,836 $524,538 $10,839 $3,507,897
See notes to consolidated financial statements.
Consolidated Statements of Income and Comprehensive Income
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
Consolidated Statements of Changes in Net Assets
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
06 Alfresa Group Financial Section of Integrated Report 2017 07Alfresa Group Financial Section of Integrated Report 2017
1. BASIS OF PReSeNTING CONSOLIDATeD FINANCIAL STATeMeNTS
The accompanying consolidated financial statements of Alfresa Hold-
ings Corporation (“the Company”) and its consolidated subsidiaries
have been prepared in accordance with the provisions set forth in the
Japanese Financial Instruments and Exchange Act and its related
accounting regulations, and in conformity with accounting principles
generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to application and disclosure requirements from
International Financial Reporting Standards.
The accompanying consolidated financial statements have been
reformatted and translated into English (with some expanded
descriptions) from the consolidated financial statements of the
Company prepared in accordance with Japanese GAAP and filed
with the appropriate Local Finance Bureau of the Ministry of Finance
as required by the Financial Instruments and Exchange Act. Some
supplementary information included in the statutory Japanese
language consolidated financial statements, but not required for fair
presentation, is not presented in the accompanying consolidated
financial statements.
The translations of the Japanese yen amounts into U.S. dollars are
included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2017, which was ¥112.19
to U.S.$1.00. The translations should not be construed as
representations of what the Japanese yen amounts have been, could
have been, or could in the future be when converted into U.S.
dollars at this or any other rate of exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIeS
(a) ConsolidationConsolidated financial statements include the accounts of the
Company and 17 significant subsidiaries (“the Companies”) over which
the Company has power of control through majority voting rights or
existence of certain conditions evidencing control by the Company.
Investments in unconsolidated subsidiaries and affiliates are not
accounted for by the equity method with the exception of one
affiliate, as the application of the equity method would not have a
material effect on the consolidated financial statements.
One of the Company’s subsidiaries is consolidated using a fiscal
period ended December 31. Significant transactions occurring from
January 1 to March 31 are adjusted in these consolidated financial
statements.
The overall market value method is used for valuation of
consolidated subsidiaries’ assets and liabilities.
Significant Subsidiaries and Affiliates(Year ended March 31, 2017)
Company NameOwnership Interest (%)
Common Stock (Millions of Yen) Main Business
Alfresa Corporation 100.0 ¥4,000Ethical Pharmaceuticals Wholesaling
Shikoku Alfresa Corporation 100.0 162Ethical Pharmaceuticals Wholesaling
TS Alfresa Corporation 100.0 1,144Ethical Pharmaceuticals Wholesaling
Meisho Co., Ltd. 100.0 395Ethical Pharmaceuticals Wholesaling
Odashima Limited 100.0 30Ethical Pharmaceuticals Wholesaling
RYUYAKU CO., LTD. 100.0 44Ethical Pharmaceuticals Wholesaling
Kowa Pharmaceuticals Co., Ltd.
100.0 105Ethical Pharmaceuticals Wholesaling
Alfresa Medical Service Corporation
100.0 450Ethical Pharmaceuticals Wholesaling
Alfresa Healthcare Corporation
100.0 499Self-medication Products Wholesaling
Mogi Pharmaceutical CO., Ltd.
100.0(100.0)
10Self-medication Products Wholesaling
Alfresa Pharma Corporation
100.0 1,000Pharmaceutical Manufacturing
QINGDAO NESCO MEDICAL CO., LTD. (Year ended December 31, 2016)
100.0(100.0)
300Pharmaceutical Manufacturing
Alfresa Fine Chemical Corporation
100.0(100.0)
400Pharmaceutical Manufacturing
Sannova Co., Ltd. 100.0 300Pharmaceutical Manufacturing
Apollo Medical Holdings Inc.68.2(0.6)
404Dispensing Pharmacy Business
Nihon Apoch CO., LTD 96.0 271Dispensing Pharmacy Business
Alfresa System Corporation 51.0 150Information System Operation, Maintenance, and Development
Hanshin Dispensing Pharmacy Holdings Co., Ltd.
28.4 300
Control and Management of Business Activities of Pharmaceutical Dispensing Companies
Notes: 1. Figures in parentheses ( ) in the ownership interest column represent the percentage of voting rights indirectly held.
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Cash flows from operating activities:Profit before income taxes ¥ 44,684 ¥ 54,095 $ 398,289 Adjustments to reconcile profit before income taxesto net cash provided by (used in) operating activities:
Depreciation and amortization 9,151 9,218 81,567 Loss on impairment of fixed assets 1,575 884 14,039 Amortization of goodwill 1,867 1,632 16,641 (Decrease) increase in allowance for doubtful accounts (1,082) 1,247 (9,644)(Decrease) increase in allowance for employees' bonuses (821) 1,107 (7,318)(Decrease) increase in allowance for bonuses to directors and corporate auditors (2) 89 (18)Decrease in directors' retirement benefits (62) (69) (553)Decrease in net defined benefit liability (3,429) (902) (30,564)Interest and dividend income (2,578) (2,596) (22,979)Interest expense 104 121 927 (Gain) loss on sales of property, plant and equipment (3,195) 89 (28,478)Loss on disposal of property, plant and equipment 272 434 2,424 Gain on sales of securities (187) (253) (1,667)Write-down of securities 6 128 53 Compensation income (159) (83) (1,417)Merger expenses 299 139 2,665 Extra retirement payment 195 15 1,738 Decrease (increase) in trade notes and accounts receivable 12,985 (14,850) 115,741 Decrease (increase) in inventories 2,786 (484) 24,833 Increase in other receivables (169) (3,307) (1,506)(Decrease) increase in trade notes and accounts payable (10,997) 6,080 (98,021)Other, net 2,100 (1,970) 18,718
53,343 50,764 475,470
Interest and dividends received 2,586 2,598 23,050Interest paid (104) (123) (927)Proceeds from compensation income 159 83 1,417Extra retirement payment (134) (15) (1,194)Payments for business restructuring expenses of subsidiaries and affiliates – (179) –Payments for merger expenses (308) (155) (2,745)Income taxes paid (21,200) (15,137) (188,965)
Net cash provided by operating activities 34,342 37,836 306,106
Cash flows from investing activities:Net decrease in time deposits 819 340 7,300Proceeds from sales of securities – 5,000 –Payments for purchase of property, plant and equipment (10,648) (10,558) (94,910)Proceeds from sale of property, plant and equipment 6,150 939 54,818Payments for purchase of intangible assets (2,961) (3,687) (26,393)Payments for acquisition of long-term prepaid expense (79) (217) (704)Payments for purchase of investment securities (1,186) (484) (10,571)Proceeds from sale of investment securities 1,125 540 10,028Advances of loans receivable (449) (180) (4,002)Repayments of loans receivable 443 202 3,948Purchase of shares of subsidiaries resulting in change in scope of consolidation (Note 18) (6,459) (7,004) (57,572)Other, net (165) (137) (1,471)
Net cash used in investing activities (13,410) (15,246) (119,529)
Cash flows from financing activities:Net increase (decrease) in short-term debt 70 (410) 624Proceeds from long-term debt 400 200 3,565Repayments of long-term debt (623) (471) (5,553)Repayments of lease liabilities (1,909) (2,006) (17,016)Payments for purchase of treasury stock (3) (15,010) (27)Proceeds from sale of treasury stock 0 0 0Purchase of treasury stock of subsidiaries (2) (11) (18)Cash dividends paid (7,367) (7,095) (65,665)Dividends paid to non-controlling interests (15) (14) (134)Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation (2,359) (1,179) (21,027)
Net cash used in financing activities (11,808) (25,996) (105,251)
Foreign currency translation loss on cash and cash equivalents (32) (16) (285)Net increase (decrease) in cash and cash equivalents 9,092 (3,422) 81,041Cash and cash equivalents at beginning of the year 158,462 160,265 1,412,443Increase in cash and cash equivalents from newly consolidated subsidiary – 1,619 –Increase in cash and cash equivalents resulting from merger – 0 –Cash and cash equivalents at end of the year ¥167,554 ¥158,462 $1,493,484
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Significant non-cash transactions:
Assets under finance leases ¥ 1,359 ¥ 2,310 $ 12,113
Obligations under finance leases 1,472 2,513 13,121
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
Notes to Consolidated Financial Statements
Alfresa Holdings Corporation and consolidated subsidiariesYears ended March 31, 2017 and 2016
08 Alfresa Group Financial Section of Integrated Report 2017 09Alfresa Group Financial Section of Integrated Report 2017
(b) Cash and cash equivalentsCash and cash equivalents include all highly liquid investments,
generally with original maturities of three months or less those are
readily convertible into known amounts of cash and are so near
maturity that they present insignificant risk of changes in value
because of changes in interest rates.
(c) Allowance for doubtful accountsThe allowance for doubtful accounts is provided in amounts
management considers sufficient to cover possible losses on
collection. The allowance is mainly based on past collection
experience and management’s estimate of the collectability of
individual receivables.
(d) SecuritiesEquity securities issued by subsidiaries and affiliated companies
which are not consolidated are stated at moving-average cost.
Available-for-sale securities with available fair market values are
stated at fair market value. Unrealized gains and losses on these
securities are reported, net of applicable income taxes, as a separate
component of net assets. Available-for-sale securities with no
available fair market value are stated at moving-average cost.
If the fair market value of available-for-sale securities declines
significantly, such securities are stated at fair market value and the
difference between fair market value and the carrying amount is
recognized as a loss in the period of the decline.
If the fair market values of equity securities issued by
unconsolidated subsidiaries and affiliated companies not accounted
for by the equity method, and available-for-sale securities which are
not readily available, such securities should be written down to net
asset value with a corresponding charge in the statement of
operations in the event net asset value declines significantly.
In these cases, such fair market value or the net asset value will be
the carrying amount of the securities at the beginning of the next year.
(e) InventoriesInventories of consolidated domestic subsidiaries (the “domestic
companies”) are stated at the lower of weighted-average cost or net
realizable value. Inventories of the overseas consolidated subsidiary are
stated at the lower of moving-average cost or net realizable value.
(f) Property, plant and equipment (excluding leased assets)
Property, plant and equipment of the Company and its consolidated
subsidiaries are carried at cost. Depreciation is computed using the
straight-line method.
(g) Deferred charges and intangibles (excluding leased assets)
Deferred charges and intangibles mainly consist of goodwill and
software. Software is amortized using the straight-line method over
a useful life of five years. Goodwill is amortized equally within a
period benefited of twenty years by straight-line method.
(h) Leased assetsAssets concerning finance leases in which ownership is transferred
to the lessee are depreciated using the same method of depreciation
for tangible fixed assets owned by the Alfresa Group.
Assets concerning finance leases in which ownership is not
transferred to the lessee are depreciated to a residual value of zero
based on the straight-line method over a useful life period
corresponding to the lease contract period.
The Company’s consolidated domestic subsidiaries capitalized
assets used under finance leases commencing after March 31, 2008,
except for certain immaterial short-term finance leases, which are
accounted for as operating leases. As permitted, finance leases
which commenced prior to April 1, 2008 and have been accounted
for as operating leases, continue to be accounted for as operating
leases with disclosure of certain “as if capitalized” information.
(i) Allowance for employees’ bonusesThe allowance for employees’ bonuses is provided for the estimated
amounts, which the Company and its consolidated domestic
subsidiaries are obligated to pay to employees after the fiscal year-
end, based on services provided during the current year.
(j) Allowance for bonuses to directors and corporate auditors
The allowance for bonuses to directors and corporate auditors is
provided for the estimated amounts which the Company and its
consolidated domestic subsidiaries are obligated to pay to directors
and corporate auditors after the fiscal year-end, based on services
provided during the current year.
(k) Allowance for sales rebatesThe allowance for sales rebates is provided for future payment of
sales rebates based upon actual rebates experienced in the past.
(l) Allowance for sales returnsThe allowance for sales returns is provided based upon the
estimated loss from sales returns.
(m) Provision for loss on guaranteesProvision for loss on guarantees is provided in an estimated amount
based on the financial position and solvency of parties guaranteed
by the Companies.
(n) Income taxesThe asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes.
(o) Accounting method for retirement benefits for employees
The benefit formula basis is used as a method of attributing projected
benefit obligations to the period through the end of the fiscal year.
Certain consolidated subsidiaries apply the simplified method that
assumes the amount required for voluntary resignation at the end of
the year to be projected benefit obligations in computing net defined
benefit liability and retirement benefit expenses.
Actuarial gains and losses are amortized using the straight-line
method over 5 to 10 years commencing with the following year and
prior service costs are amortized using the straight-line method over
10 to 13 years from the year incurred.
(p) Translation of foreign currenciesReceivables and payables denominated in foreign currencies are
translated into Japanese yen at the year-end spot exchange rates.
The balance sheets of a consolidated overseas subsidiary are
translated into Japanese yen at the spot exchange rate on the year-
end closing date and the statements of income are translated at the
average exchange rate for the fiscal year, except that net assets
accounts are translated at historical rates.
(q) Research and development expensesResearch and development expenses for the improvement of
existing products, the development of new products, basic research
and fundamental development are charged to the statement of
income in the period incurred.
Such expenses for the years ended March 31, 2017 and 2016 were
¥1,137 million (US$10,135 thousand) and ¥1,123 million, respectively.
(r) Derivatives and hedge accountingIn principal, the Alfresa Group adopts the deferred hedging
accounting method.
In cases where foreign currency forward exchange contracts are
used as hedges and meet certain hedging criteria, foreign currency
forward exchange contracts and hedged items are accounted for in
the following manner:
If a foreign currency forward exchange contract is executed to
hedge a future transaction denominated in a foreign currency, the
future transaction will be recorded using the contracted forward
rate, and no gains or losses on the foreign currency forward
exchange contract are recognized.
(s) Profit per shareThe computations of profit per share of common stock are based on
the weighted average number of shares outstanding during each
period (except for treasury stock).
(t) ReclassificationsCertain prior year amounts have been reclassified to conform to the
2017 presentation. These changes had no impact on previously
reported results of operations or shareholders’ equity.
(u) Change in accounting policiesProperty, plant and equipment (excluding leased assets) have been
mainly depreciated using the declining-balance method. Effective
from the year ended March 31, 2017, the Company and its
domestic consolidated subsidiaries changed its depreciation method
for property, plant and equipment (excluding leased assets) to the
straight-line method.
In formulating “16-18 Mid-term Management Plan Break Through
to Tomorrow”, the Company reviewed its depreciation method and
concluded that the straight-line method is more appropriate
considering the actual usage of property, plant and equipment of
the Group that performs the function of stable supply of
pharmaceuticals.
As a result, operating income, ordinary income and profit before
income taxes for the current fiscal year increased by ¥1,466 million
(US$13,067 thousand).
(v) Additional informationThe Company and its domestic subsidiaries adopted “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets”
(ASBJ Guidance No. 26, March 28, 2016) from the current fiscal year.
Notes to Consolidated Financial Statements
10 Alfresa Group Financial Section of Integrated Report 2017 11Alfresa Group Financial Section of Integrated Report 2017
3. SeCURITIeS(a) The following tables summarize acquisition costs, book values
(fair market values) of available-for-sale securities with available
fair values as of March 31, 2017 and 2016:
Securities with fair values exceeding acquisition costs:Millions of Yen
2017 2016
Acquisition cost
Book (market)
value DifferenceAcquisition
cost
Book (market)
value Difference
Equity securities ¥30,937 ¥118,814 ¥87,877 ¥30,236 ¥113,870 ¥83,634
Bonds – – – 30 32 2
Other – – – 16 16 0
Total ¥30,937 ¥118,814 ¥87,877 ¥30,282 ¥113,918 ¥83,636
Thousands of U.S. Dollars (Note 1)
2017
Acquisition cost
Book (market)
value Difference
Equity securities $275,755 $1,059,043 $783,288
Bonds – – –
Other – – –
Total $275,755 $1,059,043 $783,288
Securities with fair values not exceeding acquisition costs:Millions of Yen
2017 2016
Acquisition cost
Book (market)
value DifferenceAcquisition
cost
Book (market)
value Difference
Equity securities ¥1,731 ¥1,432 ¥(299) ¥ 1,569 ¥ 1,081 ¥(488)
Bonds 930 930 – 320 320 (0)
Other 4,014 4,013 (1) 42,002 42,002 –
Total ¥6,675 ¥6,375 ¥(300) ¥43,891 ¥43,403 ¥(488)
Thousands of U.S. Dollars (Note 1)
2017
Acquisition cost
Book (market)
value Difference
Equity securities $15,429 $12,764 $(2,665)
Bonds 8,289 8,289 –
Other 35,779 35,770 (9)
Total $59,497 $56,823 $(2,674)
(b) The following table summarizes available-for-sale securities sold
in the years ended March 31, 2017 and 2016:
Available-for-sale securities:
Millions of YenThousands of U.S.
Dollars (Note 1)
2017 2016 2017
Sales value ¥2,327 ¥660,540 $20,742
Gain on sale 209 265 1,863
Loss on sale 22 6 196
(c) The Company recognized impairment losses of ¥3 million
(US$27 thousand) and ¥128 million on available-for-sale
securities with fair values during the fiscal years ended
March 31, 2017 and 2016.
4. FINANCIAL INSTRUMeNTS (a) Qualitative information on financial instruments
The Companies finance necessary funds by bank loans according to
the capital investment plan. Temporary excess funds are operated
by highly stable financial instruments such as short-term bank
deposits, and the Companies finance short-term operating capital by
bank loans. Derivative transactions are only utilized to hedge the
following risks and it is our policy not to enter into derivative
transactions for speculative purpose.
(1) Details of financial instruments and their risks
Operating receivables such as trade notes and accounts receivable,
and monetary claims such as accounts receivable—other are
exposed to credit risk. Some of the operating receivables are
dominated in foreign currencies and they are exposed to foreign
currency fluctuation risk. Marketable securities mainly consist of
highly secure negotiable deposits. Investments in securities mainly
consist of securities of companies in which a business relationship
has been established, or securities of companies in which a
business and capital tie-up has been formed. These are exposed
to market fluctuation risk. Long-term loans receivables mainly
consist of construction assistance fund receivable at each business
location and they are exposed to credit risk. Operating payables
such as trade notes and accounts payable-trade are due within
one year. Some of the operating payables relating to imports of
raw materials are dominated in foreign currencies and are exposed
to foreign currency fluctuation risk. Long-term loans and finance
lease obligations are mainly used for the purpose of financing
capital investments. A part of these are exposed to interest
fluctuation risk. Regarding derivative transactions, the Companies
utilize foreign currency forward contracts to hedge foreign
currency fluctuation risk of operating receivables and payables
dominated in foreign currencies.
(2) Risk management of financial instruments
(i) Credit risk management (risk of default by the counterparties)
Consolidated subsidiaries of the Company follow sales
management rules, monitor the customers’ credit conditions
periodically and manage the due date and balance per customer.
The Companies keeps track of the adverse financial conditions of
our customers in the early stage to mitigate the bad debt.
(ii) Market risk management (risk of foreign currency fluctuations
and interests)
Regarding the operating receivables and operating payables
dominated in foreign currencies, some of the consolidated
subsidiaries principally utilize foreign currency forward contracts
to hedge future foreign currency fluctuation risk. Order and
management of foreign currency forward contract is based on
the trade operation rules, and it is performed and reported by
actual demand basis. For marketable securities and investment
in securities, the Companies regularly review the fair value and
issuers’ financial condition and readjust Companies’ portfolio
on an ongoing basis considering the business relationship
with counterparties.
(iii) Liquidity risk management (risk of default at the due dates)
The Company operates group cash management system as a
genuine holding company, optimizes Company-wide financing
and operating of funds, and prepares for liquidity risk by setting
the commitment line. Consolidated subsidiaries of the Company
prepare and update the cash management plan appropriately
based on the reports from each department and manage liquidity
risk by maintaining liquidity.
(3) Supplemental information on fair value of financial instruments
As well as the values based on market prices, fair values of
financial instruments include values which are reasonably
calculated in case market prices do not exist. As the calculation
of those values adopts certain assumptions, those values may
vary in case different assumptions are applied. Also, for the
contract amount regarding derivative transactions described in
“Note 5. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
TRANSACTIONS”, the contract amount itself does not indicate
market risk related to derivative transactions.
(b) Market values of financial instruments
Book values and market values of the financial instruments on the
consolidated balance sheet at March 31, 2017 and 2016 are as follows:
Millions of Yen
2017
Carrying value Fair Value Difference
Cash and cash equivalents ¥167,554 ¥167,554 ¥–
Notes and accounts receivable—trade 601,963 601,963 –
Accounts receivable—other 52,815 52,815 –
Marketable securities and investments in securities 120,029 120,029 –
Total assets ¥942,361 ¥942,361 ¥–
Notes and accounts payable—trade ¥784,539 ¥784,539 ¥–
Total liabilities ¥784,539 ¥784,539 ¥–
Derivative transaction ¥ (2) ¥ (2) ¥–
Millions of Yen
2016
Carrying value Fair Value Difference
Cash and cash equivalents ¥158,462 ¥158,462 ¥–
Notes and accounts receivable—trade 612,182 612,182 –
Accounts receivable—other 51,483 51,483 –
Marketable securities and investments in securities 115,321 115,321 –
Total assets ¥937,448 ¥937,448 ¥–
Notes and accounts payable—trade ¥795,006 ¥795,006 ¥–
Total liabilities ¥795,006 ¥795,006 ¥–
Derivative transaction ¥ (19) ¥ (19) ¥–
Notes to Consolidated Financial Statements
12 Alfresa Group Financial Section of Integrated Report 2017 13Alfresa Group Financial Section of Integrated Report 2017
Thousands of U.S. Dollars (Note 1)
2017
Carrying value Fair Value Difference
Cash and cash equivalents $1,493,484 $1,493,484 $–
Notes and accounts receivable—trade 5,365,567 5,365,567 –
Accounts receivable—other 470,764 470,764 –
Marketable securities and investments in securities 1,069,873 1,069,873 –
Total assets $8,399,688 $8,399,688 $–
Notes and accounts payable—trade $6,992,949 $6,992,949 $–
Total liabilities $6,992,949 $6,992,949 $–
Derivative transaction $ (18) $ (18) $–
The financial instruments whose fair value is extremely difficult to
determine are not included above.
(1) Valuation method for financial instruments
(i) Notes and accounts receivable—trade, Accounts receivable—other
The carrying value is deemed as the fair value since it is
scheduled to be settled in a short period of time.
(ii) Marketable securities and investments in securities
Fair value of shares is based on the price on securities exchanges
and that of bonds is based on the price on bond markets or price
presented by the counterparty financial institutions.
(iii) Notes and accounts payables—trade
The carrying value is deemed as the fair value since it is
scheduled to be settled in a short period of time.
(2) Carrying value of financial instruments that have extreme
difficulty in determining fair value as of March 31, 2017 and
2016 are as follows:
Millions of YenThousands of U.S.
Dollars (Note 1)
2017 2016 2017
Unlisted securities ¥8,691 ¥10,089 $77,467
The above shares do not have market value and thus their fair
values are not disclosed, as it is extremely difficult to determine the
fair value.
(c) The redemption schedule for financial instruments and securities
with maturity as of March 31, 2017 and 2016 is as follows:
Millions of Yen
2017
Due in one year or less
Due after one year through
five years
Due after five years through
ten yearsDue after ten
years
Cash and cash equivalents ¥167,554 ¥ – ¥ – ¥ –
Trade notes and accounts receivable 601,963 – – –
Other receivable 52,815 – – –
Marketable securities and investments in securities
Available-for-sale securities
Bonds (corporate bonds) 50 310 370 200
Total ¥822,382 ¥310 ¥370 ¥200
Millions of Yen
2016
Due in one year or less
Due after one year through
five years
Due after five years through
ten yearsDue after ten
years
Cash and cash equivalents ¥158,462 ¥ – ¥– ¥–
Trade notes and accounts receivable 611,831 351 – –
Other receivable 51,483 – – –
Marketable securities and investments in securities
Available-for-sale securities
Bonds (corporate bonds) 10 1,204 – –
Commercial paper 2 – – –
Total ¥821,788 ¥1,555 ¥– ¥–
Thousands of U.S. Dollars (Note 1)
2017
Due in one year or less
Due after one year through
five years
Due after five years through
ten yearsDue after ten
years
Cash and cash equivalents $1,493,484 $ – $ – $ –
Trade notes and accounts receivable 5,365,567 – – –
Other receivable 470,764 – – –
Marketable securities and investments in securities
Available-for-sale securities
Bonds (corporate bonds) 446 2,763 3,298 1,782
Total $7,330,261 $2,763 $3,298 $1,782
5. DeRIVATIVe FINANCIAL INSTRUMeNTS
AND HeDGING TRANSACTIONSAlfresa Pharma Corporation, a consolidated subsidiary of the
Company, uses foreign currency forward exchange contracts as
derivative financial instruments only for the purpose of mitigating
future risks of fluctuations of foreign currency exchange rates with
respect to foreign currency receivables from the sale of Alfresa
Pharma’s products and payables (including future transactions).
Foreign currency forward exchange contracts are subject to risks of
fluctuations of foreign exchange.
The derivative transactions are executed and managed by Alfresa
Pharma’s Overseas Division in accordance with the established
policies and within the specified limits on the amounts of derivative
transactions allowed.
The following summarizes hedging derivative financial
instruments used by Alfresa Pharma and items hedged:
Hedging instruments: Foreign currency forward exchange contracts
Hedged items: Trade receivables and trade payables
denominated in foreign currencies
There are no transactions where hedge accounting has not been
applied for the years ended March 31, 2017 and 2016. The fair value
of derivatives held as of March 31, 2017 and 2016 are as follows:
Millions of YenThousands of U.S.
Dollars (Note 1)
2017 2016 2017
Foreign currency forward contracts: Hedged items Contract
Fair value Contract
Fair value Contract
Fair value
USD (Selling)
Trade receivables ¥ 2 ¥(0) ¥ 3 ¥(0) $ 18 $ (0)
USD (Buying)
Trade payables 104 (2) 756 (19) 927 (18)
Total ¥106 ¥(2) ¥759 ¥(19) $945 $(18)
6. INCOMe TAXeSThe Companies are subject to a number of taxes based on income,
which, in the aggregate, indicate a statutory income tax rate in
Japan of 30.86% and 33.06% for the years ended March 31, 2017
and 2016, respectively.
(a) Reconciliation of tax rates
The following table summarizes the significant differences between
the statutory tax rate and the Companies’ effective tax rate for
financial statement purposes for the years ended March 31, 2017
and 2016:
2017* 2016
Statutory tax rate – 33.1%
Non-deductible expenses – 0.8
Non-taxable dividend income – (0.4)
Valuation allowance – (1.5)
Per capita inhabitants’ tax – 0.6
Amortization of goodwill – 1.0
Tax credits – (0.4)
Reduction of deferred tax assets and liabilities due to income tax rates change – 1.5
Other – (0.0)
Effective tax rate – 34.6%
* Since the difference between the statutory tax rate and the actual tax rate is not significant (less than 5% of the statutory tax rate), no reconciliation of these two rates is presented.
Notes to Consolidated Financial Statements
14 Alfresa Group Financial Section of Integrated Report 2017 15Alfresa Group Financial Section of Integrated Report 2017
(b) Significant components of deferred tax assets and liabilities
Significant components of the Companies’ deferred tax assets and
liabilities as of March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Deferred tax assets:
Accrued enterprise tax ¥ 314 ¥ 834 $ 2,799
Accrued social insurance expenses 366 382 3,262
Excess allowance for doubtful accounts 1,430 1,705 12,746
Bonuses accrued 2,278 2,461 20,305
Directors’ and corporate auditors’ retirement benefits – 300 –
Provision for loss on guarantees 13 26 116
Net defined benefit liability 4,306 4,700 38,381
Write-down of inventories 1,139 1,064 10,153
Loss on devaluation of membership 192 6 1,711
Write-down of investments 640 2,580 5,705
Loss on impairment of fixed assets 1,329 1,520 11,846
Sales discount 1,455 1,041 12,969
Excess depreciation 727 540 6,480
Tax loss carry forwards 706 1,173 6,293
Other 1,397 1,643 12,452
16,292 19,975 145,218
Valuation allowance (3,622) (6,449) (32,285)
Total deferred tax assets 12,670 13,526 112,933
Deferred tax liabilities:
Difference between fair value and cost of assets and liabilities of consolidated subsidiaries (1,571) (1,823) (14,003)
Unrealized gains on available-for- sale securities (29,426) (27,916) (262,287)
Other (693) (335) (6,177)
Total deferred tax liabilities (31,690) (30,074) (282,467)
Net deferred tax liabilities ¥(19,020) ¥(16,548) $(169,534)
7. SHORT-TeRM DeBT AND LONG-TeRM DeBTShort-term debt borrowings at March 31, 2017 and 2016 consisted
principally of bank overdrafts bearing interest at average annual
rates of approximately 0.2% and 0.3%, respectively.
The weighted-average interest rate on the long-term debt due
within one year at March 31, 2017 and 2016 were approximately
0.4% and 0.3%, respectively.
Long-term debt as of March 31, 2017 and 2016 consisted of
the following:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Unsecured long-term loans, average interest rates of 0.6% in 2017 and 0.8% in 2016, maturing through 2025 ¥ 1,677 ¥ 1,900 $ 14,948
Unsecured long-term lease liabilities, average interest rates of 1.7% in 2017 and 1.6% in 2016, maturing through 2036 4,721 5,122 42,080
6,398 7,022 57,028
Less amounts due within one year (1,866) (2,365) (16,632)
Total ¥ 4,532 ¥ 4,657 $ 40,396
The aggregate annual maturities of long-term debt outstanding
as of March 31, 2017 are as follows:
Millions of YenThousands of U.S.
Dollars (Note 1)
2018 ¥390 $3,476
2019 390 3,476
2020 271 2,416
2021 191 1,703
Thereafter 435 3,877
The aggregate annual maturities of long-term lease liabilities
outstanding as of March 31, 2017 are as follows:
Millions of YenThousands of U.S.
Dollars (Note 1)
2018 ¥1,476 $13,156
2019 1,123 10,010
2020 876 7,808
2021 552 4,920
Thereafter 694 6,186
8. eMPLOYeeS’ SeVeRANCe AND
ReTIReMeNT BeNeFITSCertain consolidated subsidiaries of the Company provide
Employees’ Pension Fund System, the contract-type corporate
pension plan and unfunded lump-sum payment plans as defined
benefit plans, as well as the defined contribution pension plan. In
certain circumstances, premium retirement payments, that are not
considered to be retirement benefit obligations based on actuarial
calculation in accordance with retirement benefit accounting, are
paid to employees who are retiring.
Additionally, Alfresa Corporation, Alfresa Pharma Corporation and
TS Alfresa Corporation, which are the Company’s consolidated
subsidiaries, establish retirement benefit trusts.
Certain consolidated subsidiaries of the Company apply the
simplified method in computing net defined benefit liability and
retirement benefit costs for their defined benefit corporate pension
plans and unfunded lump-sum payment plans.
Information about the multi-employer plans which the amount to
be contributed is recognized in retirement benefit expenses as of
March 31, 2017 and 2016 are as follows. The information
represents actual amounts based on pension financing calculation at
the latest available timing before the balance sheet dates which are
March 31, 2016 for the year ended March 31, 2017 and March 31,
2015 for the year ended March 31, 2016.
(1) Latest funded status of multi-employer plans
1. Tokyo Pharmaceutical Welfare Pension Fund Association
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017(as of March
31, 2016)
2016(as of March
31, 2015)
2017(as of March
31, 2016)
Plan assets ¥531,917 ¥571,380 $4,741,216
Sum of actuarial obligations based on the pension financing calculation and minimum reserve 538,161 561,736 4,796,872
Difference ¥ (6,244) ¥ 9,644 $ (55,656)
2. Osaka pharmaceutical Welfare Pension Fund Association
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017(as of March
31, 2016)
2016(as of March
31, 2015)
2017(as of March
31, 2016)
Plan assets ¥306,491 ¥334,668 $2,731,892
Sum of actuarial obligations based on the pension financing calculation and minimum reserve 365,489 381,438 3,257,768
Difference ¥ (58,998) ¥ (46,770) $ (525,876)
3. Other plans
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017(as of March
31, 2016)
2016(as of March
31, 2015)
2017(as of March
31, 2016)
Plan assets ¥140,314 ¥145,567 $1,250,682
Sum of actuarial obligations based on the pension financing calculation and minimum reserve 127,287 133,272 1,134,566
Difference ¥ 13,027 ¥ 12,295 $ 116,116
(2) Percentage of the Companies’ contribution in whole plans:
2017(For the year ended
March 31, 2016)
2016(For the year ended
March 31, 2015)
Tokyo Pharmaceutical Welfare Pension Fund Association 5.0% 5.0%
Osaka Pharmaceutical Welfare Pension Fund Association 6.0% 6.1%
Other plans (at the weighted average) 16.2% 16.4%
The above contribution percentages do not coincide with actual
share of contribution by the Companies.
Notes to Consolidated Financial Statements
16 Alfresa Group Financial Section of Integrated Report 2017 17Alfresa Group Financial Section of Integrated Report 2017
(3) Supplementary information
The difference for Tokyo Pharmaceutical Welfare Pension Fund
Association is mainly due to prior service costs based on pension
financing calculation of ¥34,541 million (US$307,880 thousand) and
¥40,108 million as of March 31, 2017 and 2016, respectively, and
deficit carried forward of ¥21,455 million (US$191,238 thousand) as
of March 31, 2017 by deducting voluntary retained earnings of
¥49,752 million (US$443,462 thousand) and ¥35,441 million as of
March 31, 2017 and 2016, respectively, and surplus of ¥14,311
million as of March 31, 2016. The prior service costs are amortized
through amortization of the principal and interest using the straight-
line method over the remaining period of 6 years and 7 years for the
years ended March 31, 2017 and 2016, respectively.
The difference for Osaka Pharmaceutical Welfare Pension Fund
Association is mainly due to prior service costs based on pension
financing calculation of ¥47,872 million (US$426,705 thousand) and
¥49,404 million as of March 31, 2017 and 2016, respectively, and
deficit carried forward of ¥11,126 million (US$99,171 thousand) as
of March 31, 2017 by deducting voluntary retained earnings of
¥2,634 million as of March 31, 2016. The prior service costs are
amortized through amortization of the principal and interest using
the straight-line method over the remaining period of 15 years and
16 years for the years ended March 31, 2017 and 2016, respectively.
The difference for other plans is mainly due to prior service costs
based on pension financing calculation of ¥10,678 million
(US$95,178 thousand) and ¥11,613 million as of March 31, 2017
and 2016 and deficit carried forward of ¥592 million (US$5,276
thousand) as of March 31, 2017 by deducting voluntary retained
earnings of ¥24,297 million (US$216,570 thousand) and ¥21,394
million as of March 31, 2017 and 2016, respectively, and surplus of
¥2,514 million as of March 31, 2016. The prior service costs are
amortized through amortization of the principal and interest using
the straight-line method over the remaining period of 7 years to 11
years and 4 months for the year ended March 31, 2017 and 8 years
to 11 years and 11 months for the year ended March 31, 2016.
(a) Defined benefit plans, except plan applied simplified method
(1) Movement in retirement benefit obligations
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Balance at beginning of the year ¥35,580 ¥33,353 $317,141
Service cost 1,894 1,668 16,882
Interest cost 35 329 312
Actuarial differences (155) 1,515 (1,382)
Prior service costs – (93) –
Benefits paid (2,968) (1,489) (26,455)
Increase due to business combination 3,055 297 27,230
Balance at end of the year ¥37,441 ¥35,580 $333,728
(2) Movements in plan assets
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Balance at beginning of the year ¥21,420 ¥21,445 $190,926
Expected return on plan assets 278 249 2,478
Actuarial differences 326 (456) 2,906
Contributions paid by the employer 1,525 1,476 13,593
Benefits paid (1,710) (1,294) (15,242)
Increase due to business combination 1,468 – 13,085
Contributions to Employees’ Pension Fund System 3,000 – 26,740
Balance at end of the year ¥26,307 ¥21,420 $234,486
(3) Movement in net defined benefit liability for plan applying the
simplified method
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Balance at beginning of the year ¥ 644 ¥549 $ 5,740
Retirement benefit costs 61 119 544
Benefits paid (17) (39) (151)
Contribution to corporate pension plan (48) (53) (428)
Increase due to business combination (417) – (3,717)
Other – 68 –
Balance at end of the year ¥ 223 ¥644 $ 1,988
(4) Reconciliation from projected benefit obligations and plan assets
to net defined benefit liability
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Funded projected benefit obligations ¥ 33,105 ¥30,103 $ 295,080
Plan assets (26,851) (21,670) (239,335)
6,254 8,433 55,745
Unfunded projected benefit obligations 5,103 6,372 45,485
Total net defined benefit liability at end of the year ¥ 11,357 ¥14,805 $ 101,230
Net defined benefit liability ¥ 14,732 ¥17,763 $ 131,313
Net defined benefit asset (3,375) (2,958) (30,083)
Total net defined benefit liability at end of the year ¥ 11,357 ¥14,805 $ 101,230
(5) Retirement benefit costs
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Service cost ¥3,697 ¥3,826 $32,953
Interest cost 35 329 312
Expected return on plan assets (278) (249) (2,478)
Net actuarial differences amortization 657 42 5,856
Prior service costs amortization (249) (240) (2,220)
Retirement benefit costs calculated using the simplified method 61 119 544
Other 358 226 3,191
Total retirement benefit costs ¥4,281 ¥4,053 $38,158
The above service cost includes ¥1,803 million (US$16,071
thousand) and ¥2,157 million of contribution to Employees’ Pension
Fund System for the years ended March 31, 2017 and 2016,
respectively.
(6) Other comprehensive income on remeasurements of defined
retirement benefit plans
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Prior service costs that are yet to be recognized ¥ (249) ¥ (149) $(2,220)
Actuarial differences that are yet to be recognized 1,136 (2,871) 10,126
Total balance at end of the year ¥ 887 ¥(3,020) $ 7,906
(7) Accumulated adjustments for retirement benefit
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Prior service costs that are yet to be recognized ¥ 76 ¥ 325 $ 678
Actuarial differences that are yet to be recognized 472 (664) 4,207
Total balance at end of the year ¥548 ¥(339) $4,885
(8) Plan assets
1. Plan assets comprise:
2017 2016
Bonds 30% 28%
Equity securities 45 45
Cash and cash equivalents 3 3
Life insurance general accounts 18 20
Other 4 4
Total 100% 100%
Total plan assets include retirement benefit trusts of 26% and
11% as of March 31, 2017 and 2016, which were set for corporate
pension plans.
2. Long-term expected rate of return
Current and target asset allocations, historical and expected returns
on various categories of plan assets have been considered in
determining the long-term expected rate of return.
(9) Actuarial assumptions
The principal actuarial assumptions at March 31, 2017 and 2016
(expressed as weighted averages) are as follows:
2017 2016
Discount rate 0.00% to 1.00% 0.00% to 1.00%
Long-term expected rate of return 0.00% to 2.50% 0.00% to 2.50%
(b) Defined contribution plan
The amount to be contributed to the defined contribution pension
plans of the consolidated subsidiaries as of March 31, 2017 and 2016
are ¥494 million (US$4,403 thousand) and ¥520 million, respectively.
Notes to Consolidated Financial Statements
18 Alfresa Group Financial Section of Integrated Report 2017 19Alfresa Group Financial Section of Integrated Report 2017
9. ASSeT ReTIReMeNT OBLIGATIONSThe Companies accrued asset retirement obligations primarily related
to future restoration obligation of office buildings and structures
under term leasehold agreement or other lease agreement.
Assumptions used in calculation of asset retirement obligations
for the years ended March 31, 2017 and 2016 are as follows:
2017 2016
Expected useful life 4 years to 47 years 5.83 years to 47 years
Discount rate 0.0% to 3.1% 0.4% to 3.1%
Changes in gross asset retirement obligations for the years ended
March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Balance at beginning of the year ¥760 ¥273 $6,774
Increase due to acquisition of property, plant and equipment 66 76 588
Change of scope of consolidation – 398 –
Adjustments by time passage 12 13 107
Decrease from execution of asset retirement obligations (25) – (222)
Balance at end of the year ¥813 ¥760 $7,247
10. PLeDGeD ASSeTSAssets pledged as collateral for borrowing, and transaction
guarantees, at March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Time deposits ¥ 129 ¥ 429 $ 1,150
Merchandise and finished goods 78 75 695
Buildings and structures, net of accumulated depreciation 1,417 1,613 12,630
Land 1,814 2,236 16,169
Investments in securities 7,239 7,724 64,525
Other 117 116 1,043
Total ¥10,794 ¥12,193 $96,212
Secured liabilities:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Trade notes and accounts payable ¥10,634 ¥14,242 $ 94,785
Long-term debt due within one year 210 520 1,872
Long-term debt due after one year 846 1,056 7,541
Total ¥11,690 ¥15,818 $104,198
11. CONTINGeNT LIABILITIeSContingent liabilities at March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Guarantee of payables and loans to affiliates ¥1,619 ¥630 $14,431
Guarantee of loans to employees 1 2 9
Total ¥1,620 ¥632 $14,440
12. FINANCe LeASeSNon-capitalized finance leases at March 31, 2017 and 2016 as
discussed in “Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (h) Leased assets” are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Machinery and equipment ¥ 0 ¥ 1,203 $ 0
Less accumulated depreciation (0) (1,077) (0)
Total ¥ 0 ¥ 126 $ 0
The above “as if capitalized” depreciation is calculated on the
straight-line method over lease terms.
Lease payments for such leases for the years ended March 31,
2017 and 2016 are ¥95 million (US$847 thousand) and ¥170
million, respectively.
If the above finance leases had been capitalized, depreciation of
¥81 million (US$722 thousand) and ¥140 million and interest of ¥1
million (US$9 thousand) and ¥4 million would have been recorded
for the years ended March 31, 2017 and 2016, respectively.
Obligations under non-capitalized finance leases, excluding the
interest portion, at March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Due within one year ¥0 ¥102 $0
Due after one year – 33 –
Total ¥0 ¥135 $0
Future minimum lease payments for operating leases of the
Companies, as lessee, at March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Due within one year ¥1,266 ¥1,324 $11,285
Due after one year 2,030 2,015 18,094
Total ¥3,296 ¥3,339 $29,379
13. SHAReHOLDeRS’ eQUITY AND NeT ASSeTSSince May 1, 2006, Japanese companies have been subject to the
Companies Act of Japan (“the Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting
matters are summarized below:
(a) DividendsUnder the Companies Act, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon
resolution at the shareholders’ meeting. For companies that meet
certain criteria such as; (1) having a Board of Directors, (2) having
independent auditors, (3) having a Board of Corporate Auditors, and
(4) the term of service of the directors is prescribed as one year rather
than two years of normal term by its articles of incorporation, the
Board of Directors may declare dividends (except for dividends in kind)
if the company has prescribed so in its articles of incorporation.
The Companies Act permits companies to distribute dividends in
kind (non-cash assets) to shareholders subject to certain limitations
and additional requirements.
Semiannual interim dividends may also be paid once a year upon
resolution by the Board of Directors if the articles of incorporation of
the company so stipulate.
The Companies Act provides certain limitations on the amounts
available for dividends or the purchase of treasury stock. The
limitation is defined as the amount available for distribution to the
shareholders, and the amount of net assets after dividends must be
maintained at no less than ¥3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of
dividends must be appropriated as a legal earnings reserve (a
component of retained earnings) or as additional paid-in capital (a
component of capital surplus) depending on the equity account
charged upon the payment of such dividends until the total of the
aggregate amount of legal earnings reserve and additional paid-in
capital equals 25% of the common stock. Under the Companies
Act, the total amount of additional paid-in capital and legal earnings
reserve may be reversed without limitation.
The Companies Act also provides that common stock, legal
earnings reserve, additional paid-in capital, other capital surplus and
retained earnings can be transferred among the accounts under
certain conditions upon resolution at the shareholders’ meeting.
(c) Treasury stock and treasury stock acquisition rightsThe Companies Act provides for companies to purchase treasury
stock and dispose of such treasury stock by resolution of the Board
of Directors. The amount of treasury stock purchased cannot
exceed the amount available for distribution to the shareholders,
which is determined by a specific formula. Under the Companies
Act, share acquisition rights are presented as a separate component
of net assets.
The Companies Act also provides that companies can purchase both
treasury stock acquisition rights and treasury stock. Such treasury stock
acquisition rights are presented as a separate component of net assets
or deducted directly from share acquisition rights.
Type and number of shares issued and treasury stocks for the
years ended March 31, 2017 and 2016 are as follows:
Number of Shares (Thousands of Shares)
Types of sharesApril 1,
2016
Increase during the
year
Decrease during the
yearMarch 31,
2017
Stock issued:
Common stock 235,018 – – 235,018
Treasury stocks:
Common stock 18,338 1 0 18,339
Number of Shares (Thousands of Shares)
Types of sharesApril 1,
2015
Increase during the
year
Decrease during the
yearMarch 31,
2016
Stock issued:
Common stock 235,018 – – 235,018
Treasury stocks:
Common stock 11,348 6,990 0 18,338
Notes: 1. Increase in treasury stocks for the year ended March 31, 2017 is acquisition as a result of a purchase of odd-lot shares of less than one unit (1 thousand shares).
2. Decrease in treasury stocks for the year ended March 31, 2017 is due to a sale of odd-lot shares of less than one unit (0 thousand shares).
3. Increase in treasury stocks for the year ended March 31, 2016 is acquisition as a result of a resolution by the Board of Directors (6,985 thousand shares) and a purchase of odd-lot shares of less than one unit (5 thousand shares).
4. Decrease in treasury stocks for the year ended March 31, 2016 is due to a sale of odd-lot shares of less than one unit (0 thousand shares).
Notes to Consolidated Financial Statements
20 Alfresa Group Financial Section of Integrated Report 2017 21Alfresa Group Financial Section of Integrated Report 2017
14. SeGMeNT INFORMATION
(a) General information about reportable segmentThe Companies’ reportable segments are those for which separately
financial information is available and regular evaluation by the Board
of Directors is being performed in order to decide how resources are
allocated among the Companies.
The Company engages in business activities creating a
comprehensive domestic and international strategy relating to the
products and services it handles.
Accordingly, the Company has four reportable segments, namely,
ethical pharmaceuticals wholesaling business, self-medication
products wholesaling business, manufacturing business and
medical-related business.
Ethical pharmaceuticals wholesaling business offers wholesale of
ethical pharmaceuticals, diagnostic reagents, medical devices and
equipment, and raw materials.
Self-medication products wholesaling business sells
general pharmaceuticals.
Manufacturing business produces and sells pharmaceuticals,
diagnostic reagents, active pharmaceutical ingredients, medical
devices and equipment.
Medical-related business operates dispensing pharmacies.
(b) Basis of measurement about reported segment profit or loss, segment assets and other material items
Accounting policies of the reportable segments are the substantially
the same as the ones mentioned in “Note 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES”. Income by the reportable
segment is based on operating income. Intersegment transactions
are based on prevailing market price.
(c) Adoption of new accounting standardsAs described in “Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES”, effective from the year ended March 31, 2017, the
Company and its domestic consolidated subsidiaries changed the
depreciation method for property, plant and equipment from the
declining-balance method to the straight-line method. The Company
and its domestic subsidiaries also changed the depreciation method
in operating segments in the same manner.
As a result of those changes, in comparison with the former
method, segment income for ethical pharmaceuticals wholesaling
business, self-medication products wholesaling business,
pharmaceutical manufacturing business and medical-related business
for the current fiscal year increased by ¥1,127 million (US$10,045
thousand), ¥18 million (US$160 thousand), ¥243 million (US$2,166
thousand) and ¥63 million (US$562 thousand), respectively.
(d) Information about reported segment profit or loss, segment assets, segment liabilities and other material items
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Net Sales:
Ethical Pharmaceuticals Wholesaling
Customers ¥2,239,494 ¥2,278,925 $19,961,619
Intersegment 11,941 11,859 106,435
Total ¥2,251,435 ¥2,290,784 $20,068,054
Self-medication Products Wholesaling
Customers ¥ 249,948 ¥ 244,091 $ 2,227,899
Intersegment 1,407 778 12,541
Total ¥ 251,355 ¥ 244,869 $ 2,240,440
Pharmaceutical Manufacturing
Customers ¥ 32,091 ¥ 22,071 $286,042
Intersegment 9,329 9,478 83,153
Total ¥ 41,420 ¥ 31,549 $369,195
Medical-related
Customers ¥ 30,267 ¥31,317 $269,784
Intersegment 0 0 0
Total ¥ 30,267 ¥ 31,317 $ 269,784
Adjustments (22,676) (22,113) (202,121)
Consolidated ¥2,551,801 ¥2,576,406 $22,745,352
Segment Income:
Ethical Pharmaceuticals Wholesaling ¥ 27,929 ¥ 40,998 $ 248,944
Self-medication Products Wholesaling 2,127 1,281 18,959
Pharmaceutical Manufacturing 2,596 1,803 23,139
Medical-related 533 1,114 4,751
Adjustments 43 93 383
Consolidated ¥ 33,228 ¥ 45,289 $ 296,176
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Segment Assets:
Ethical Pharmaceuticals Wholesaling ¥1,084,015 ¥1,096,563 $ 9,662,314
Self-medication Products Wholesaling 82,689 80,505 737,044
Pharmaceutical Manufacturing 50,939 37,086 454,042
Medical-related 17,437 17,463 155,424
Adjustments 20,843 21,878 185,783
Consolidated ¥1,255,923 ¥1,253,495 $11,194,607
Depreciation and Amortization:
Ethical Pharmaceuticals Wholesaling ¥ 4,220 ¥ 4,913 $ 37,615
Self-medication Products Wholesaling 352 392 3,138
Pharmaceutical Manufacturing 1,948 1,674 17,363
Medical-related 311 372 2,772
Adjustments 2,320 1,867 20,679
Consolidated ¥ 9,151 ¥ 9,218 $ 81,567
Amortization of Goodwill (Selling, general and administrative expenses):
Ethical Pharmaceuticals Wholesaling ¥ 1,042 ¥ 1,044 $ 9,288
Self-medication Products Wholesaling 5 5 45
Pharmaceutical Manufacturing 352 152 3,137
Medical-related 468 431 4,171
Adjustments – – –
Consolidated ¥ 1,867 ¥ 1,632 $ 16,641
Loss on Impairment of Fixed Assets:
Ethical Pharmaceuticals Wholesaling ¥ 1,402 ¥837 $ 12,497
Self-medication Products Wholesaling 104 3 927
Pharmaceutical Manufacturing – – –
Medical-related 69 44 615
Adjustments – – –
Consolidated ¥ 1,575 ¥ 884 $ 14,039
Increase in Property, Plant and Equipment and Intangible Assets:
Ethical Pharmaceuticals Wholesaling ¥ 7,133 ¥ 9,385 $ 63,580
Self-medication Products Wholesaling 176 203 1,569
Pharmaceutical Manufacturing 4,147 1,417 36,964
Medical-related 504 743 4,492
Adjustments 2,309 2,714 20,581
Consolidated ¥14,269 ¥14,462 $127,186
Notes: 1. “Adjustments” in the above segment information include following items:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Segment Income:
Intersegment ¥ 7,156 ¥ 6,125 $ 63,784
Corporate expenses (7,113) (6,032) (63,401)
Total ¥ 43 ¥ 93 $ 383
Segment Assets:
Intersegment ¥(36,594) ¥(39,940) $(326,179)
Corporate assets 57,437 61,818 511,962
Total ¥ 20,843 ¥ 21,878 $ 185,783
Depreciation and Amortization:
Corporate expenses ¥ 2,320 ¥ 1,867 $ 20,679
Total ¥ 2,320 ¥ 1,867 $ 20,679
Increase in Property, Plant and Equipment and Intangible Assets:
Corporate assets ¥ 2,309 ¥ 2,714 $ 20,581
Total ¥ 2,309 ¥ 2,714 $ 20,581
2. “Segment Income” in the above segment information is reconciled with operating income in the consolidated statements of income and comprehen-sive income.
3. “Depreciation and Amortization” and “Increase in Property, Plant and Equipment and Intangible Assets” in the above segment information include long-term prepaid expenses and amortization of the long-term prepaid expenses.
(e) Information about amortization and unamortized balances of goodwill
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Amortization of Goodwill:
Ethical Pharmaceuticals Wholesaling ¥1,042 ¥1,044 $ 9,288
Self-medication Products Wholesaling 5 5 45
Pharmaceutical Manufacturing 352 152 3,137
Medical-related 468 431 4,171
Corporate and elimination – – –
Consolidated ¥1,867 ¥1,632 $16,641
Unamortized Balance of Goodwill:
Ethical Pharmaceuticals Wholesaling ¥ 521 ¥1,563 $ 4,644
Self-medication Products Wholesaling 16 21 142
Pharmaceutical Manufacturing 2,729 2,283 24,325
Medical-related 3,042 3,470 27,115
Corporate and elimination – – –
Consolidated ¥6,308 ¥7,337 $56,226
Notes to Consolidated Financial Statements
22 Alfresa Group Financial Section of Integrated Report 2017 23Alfresa Group Financial Section of Integrated Report 2017
(Related information)
(1) Information about products and services
There is no mention of information about products and services,
because similar information is disclosed in the segment
information section.
(2) Information about geographical areas
Information about geographical areas is not disclosed since sales
in Japan accounted for more than 90% of consolidated net sales
of the Company.
Property, plant and equipment information by geographical
areas is not disclosed since property, plant and equipment in
Japan accounted for more than 90% of property, plant and
equipment on the consolidated balance sheets of the Company.
(3) Information about major customers
Information about major customers is not disclosed since there
are no outside sales for major customers accounted for more
than 10% of consolidated net sales of the Company.
15. LOSS ON IMPAIRMeNT OF FIXeD ASSeTSThe Companies recognized impairment losses for groups of fixed
assets in the years ended March 31, 2017 and 2016 as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
Use Type of assets 2017 2016 2017
Idle propertiesBuildings and structures, land ¥1,107 ¥402 $9,867
Business properties
Buildings and structures, land 468 476 4,172
Rental properties Buildings – 6 –
The Companies grouped business properties based on business
premises, idle properties and rental properties based on each
property. The recoverable values are their net realizable values
based on amounts determined by valuations made in accordance
with real estate appraisal standards.
16. LAND ReVALUATIONUnder the “Law of Land Revaluation,” promulgated on March 31,
1998 and revised on March 31, 2001, certain consolidated subsidiaries
elected a one-time revaluation of their own-use land to a value based
on real estate appraisal information as of March 31, 2002.
The resulting land revaluation represents the unrealized
devaluation of land, net of deferred tax assets and liabilities, and is
stated as a component of net assets. There is no effect on the
statements of income.
Continuous readjustment is not permitted unless the land value
subsequently declines significantly, in which case the amount of the
decline in value should be included in the revaluation reserve for
land account and related deferred tax assets and liabilities.
The carrying amounts of the land after the one-time revaluation
noted above exceeded market value by ¥2,481 million
(US$22,114 thousand) and ¥2,383 million at March 31, 2017 and
2016, respectively.
17. COMPReHeNSIVe INCOMeEach component of other comprehensive income for the years
ended March 31, 2017 and 2016 are as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2016 2017
Unrealized gains on available-for-sale securities, net of taxes:
Gains arising during the year ¥ 4,634 ¥ 2,448 $ 41,305
Reclassification (203) (78) (1,809)
Amount before income tax effect 4,431 2,370 39,496
Income tax effects (1,496) 662 (13,335)
Total ¥ 2,935 ¥ 3,032 $ 26,161
Unrealized gains (losses) on deferred hedge:
Gains (losses) arising during the year ¥ 17 ¥ (23) $ 152
Reclassification – – –
Amount before income tax effect 17 (23) $ 152
Income tax effects (5) 7 (45)
Total ¥ 12 ¥ (16) $ 107
Revaluation reserve for land:
Income tax effects ¥– ¥30 $ –
Foreign currency translation adjustments:
Adjustments arising during the year ¥ (60) ¥ (30) $ (535)
Remeasurements of defined benefit plans, net of taxes:
Adjustments arising during the year ¥ 480 ¥(2,823) $ 4,278
Reclassification 408 (197) 3,637
Amount before income tax effect 888 (3,020) 7,915
Income tax effects (287) 959 (2,558)
Total ¥ 601 ¥(2,061) $ 5,357
Share of other comprehensive income of entities accounted for using equity method:
Adjustments arising during the year ¥ (1) ¥ 8 $ (9)
Total other comprehensive income ¥ 3,487 ¥ 963 $ 31,081
18. SUPPLeMeNTARY CASH FLOW INFORMATIONAssets and liabilities of newly consolidated subsidiaries by share
acquisition during the year ended March 31, 2017
Assets and liabilities of Sannova Co., Ltd., at the date of
consolidation by share acquisition, acquisition cost of shares and
“Purchase of shares of subsidiaries resulting in change in scope
of consolidation” on the consolidated statements of cash flows are
as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2017
Current assets ¥ 6,277 $ 55,950
Non-current assets 4,509 40,191
Goodwill 797 7,104
Current liabilities (1,470) (13,103)
Non-current liabilities (1,159) (10,331)
Acquisition cost of shares 8,954 79,811
Cash and cash equivalent (2,495) (22,239)
Net: purchase of shares of subsidiaries resulting in change in scope of consolidation ¥ 6,459 $ 57,572
Assets and liabilities of newly consolidated subsidiaries by share
acquisition during the year ended March 31, 2016
Assets and liabilities of Alfresa Fine Chemical Corporation, at the
date of consolidation by share acquisition, acquisition cost of shares
and “Purchase of shares of subsidiaries resulting in change in scope
of consolidation” on the consolidated statements of cash flows are
as follows:
Millions of Yen
2016
Current assets ¥1,232
Non-current assets 4,622
Goodwill 2,435
Current liabilities (409)
Non-current liabilities (80)
Acquisition cost of shares 7,800
Cash and cash equivalent (796)
Net: purchase of shares of subsidiaries resulting in change in scope of consolidation ¥7,004
19. ReLATeD PARTY INFORMATIONSignificant transactions between the consolidated subsidiaries of the Company and related parties for the years ended March 31, 2017 and
2016 were as follows:
(a) Directors and major individual shareholders of the Company
For the year ended March 31, 2017
Not applicable.
For the year ended March 31, 2016
Millions of Yen / Thousands of U.S. Dollars (Note 1)
Category Name Location Paid-in capitalPrincipal business
Share of voting rights Relationship
Details of transactions
Transaction amount Account
Resulting account balances
Companies which directors and their close relatives own more than 50% of the voting rights
HART Medical Corporation
Naka-ku, Hiroshima
¥4 million Clinic – Sale of products by Alfresa Corpo-ration and TS Alfresa Corporation
Sale of medical products
¥125 Trade receivables
¥13
Notes to Consolidated Financial Statements
24 Alfresa Group Financial Section of Integrated Report 2017 25Alfresa Group Financial Section of Integrated Report 2017
(b) Directors of significant subsidiaries of the Company
For the year ended March 31, 2017
Millions of Yen / Thousands of U.S. Dollars (Note 1)
Category Name Location Paid-in capitalPrincipal business
Share of voting rights Relationship
Details of transactions
Transaction amount Account
Resulting account balances
Companies which directors of significant subsidiaries of the Company and their close relatives own more than 50% of the voting rights
Y.K. Orimoto Komatsu, Ishikawa
¥5 million (US$45 thousand)
Pharmacy Held directly: (0.0%)
Sale of products by Meisho Co., Ltd. and Alfresa Healthcare Corporation
Sale of medical products
¥23 (US$205)
Trade receivables
¥5 (US$45)
Y.K. Odashima Pharmacy
Hanamaki, Iwate
¥10 million (US$89 thousand)
Pharmacy – Sale of products by Odashima Limited and Alfresa Health-care Corporation
Sale of medical products
¥227 (US$2,023)
Trade receivables
¥60 (US$535)
Odashima Shouji Corporation
Hanamaki, Iwate
¥40 million (US$357 thousand)
Wholesale of agrochemicals and veterinary drugs, etc.
– Sale and purchase of products by Odashima Limited
Sale of goods
¥109 (US$972)
Trade receivables
¥19 (US$169)
Odashima Acty Corporation
Hanamaki, Iwate
¥30 million (US$267 thousand)
Sale of medial and care foods, etc.
– Sale and purchase of products by Odashima Limited
Sale of goods
¥274 (US$2,442)
Trade receivables
¥49 (US$437)
For the year ended March 31, 2016
Millions of Yen / Thousands of U.S. Dollars (Note 1)
Category Name Location Paid-in capitalPrincipal business
Share of voting rights Relationship
Details of transactions
Transaction amount Account
Resulting account balances
Directors of significant subsidiaries of the Company and their close relatives
Kazunari Hayashi
– – Representative director of Alfresa Nikken Sangyo Corporation
Held directly: (0.0%)
Sale of investment securities by Alfresa Nikken Sangyo Corporation
Sale of investment securities: Proceeds from sales Gain on sales
¥140
¥130
–
–
Companies which directors of significant subsidiaries of the Company and their close relatives own more than 50% of the voting rights
Y.K. Orimoto Komatsu, Ishikawa
¥5 million Pharmacy Held directly: (0.0%)
Sale of products by Meisho Co., Ltd. and Alfresa Health-care Corporation
Sale of medical products
¥24 Trade receivables
¥6
Y.K. Odashima Pharmacy
Hanamaki, Iwate
¥10 million Pharmacy – Sale of products by Odashima Limited and Alfresa Health-care Corporation
Sale of medical products
¥196 Trade receivables
¥51
Odashima Shouji Corporation
Hanamaki, Iwate
¥40 million Wholesale of agrochemicals and veterinary drugs, etc.
– Sale and purchase of products by Odashima Limited
Sale of goods
¥108 Trade receivables
¥18
Odashima Acty Corporation
Hanamaki, Iwate
¥30 million Sale of medial and care foods, etc.
– Sale and purchase of products by Odashima Limited
Sale of goods
¥280 Trade receivables
¥46
Nikken Kogyo Co., Ltd.
Gifu, Gifu ¥40 million Nursing care business, etc. such as control and operation of care facilities
Held directly: (0.0%)
Sale of land and buildings by Alfresa Nikken Sangyo Corporation
Sale of land and buildings: Proceeds from sales Gain on sales
¥14
¥13
–
–
Nikken Health Medical Co., Ltd.
Gifu, Gifu ¥60 million Nursing care business, etc.
Held directly: (0.0%)
Sale of land and buildings by Alfresa Nikken Sangyo Corporation
Sale of goods
Sale of land and buildings: Proceeds from sales Loss on sales
–
¥38
¥55
Trade receivables
¥28
–
–
Notes: 1. The transaction amount does not include consumption taxes and the resulting account balances include consumption taxes. 2. The terms and conditions of the transactions (1) The terms and conditions of the transactions for sale of products are determined with reference to the market price, etc. (2) The terms and conditions of the transactions for sale of investment securities are determined with reference to the results of calculated values rendered by the third party. (3) The terms and conditions of the transactions for sale of land and buildings are determined with reference to the appraisal value assessed by the real estate appraiser
20. BUSINeSS COMBINATIONS(Business combination through acquisition)
(a) Overview of business combination
(1) Name of acquired company
Sannova Co., Ltd.
(2) Description of the business
Research, development, manufacturing and sales of medical
supplies, quasi-drugs, etc. (Pharmaceutical manufacturing business).
(3) Purpose of the business combination
Sannova Co., Ltd. expects to continue stable contract
manufacturing of medicines mainly for Eisai group companies by
possessing manufacturing equipment which can provide various
formulations such as granule, powder, tablet, liquid, ointment,
cream, lotion, etc. under advanced manufacturing and quality
control structure as a consolidated subsidiary of Eisai group. In
addition, Alfresa Group expands the manufacturing ability in the
contract manufacturing business and further strengthens
revenue base in medicine manufacturing business with the
manufacturing ability of Alfresa Pharma Corporation, which
manufactures, exports and imports, and sells medical supplies,
diagnostic drugs, medical equipment, medical materials, etc.
under Alfresa Group.
(4) Date of the business combination
April 1, 2016
(5) Legal form of the business combination
Acquisition of shares
(6) Company name after the business combination
Unchanged
(7) Percentage of voting rights acquired
100%
(8) Reasons for determining the acquired company
The Company acquired the shares by cash consideration.
(b) Periods of the operating results of the acquired company
included in the consolidated financial statements
From April 1, 2016 to March 31, 2017
(c) Details of acquisition cost
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
ConsiderationDirect expenses related to the acquisition ¥8,954 $79,811
Acquisition cost ¥8,954 $79,811
(d) The details and the amount of major acquisition related expenses
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
Advisory fees, etc. ¥107 $954
(e) Detail of goodwill, reason for recognition, amortization method
and period
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
Amount of goodwill ¥797 $7,104
Reason for recognition The goodwill was recognized based on excess earning power in the future.
Amortization method and period Straight-line method over 4 years.
(f) Details of assets acquired and liabilities assumed at the date of
business combination
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
Current assets ¥ 6,277 $55,950
Non-current assets 4,509 40,191
Total assets ¥10,786 $96,141
Current liabilities ¥ 1,470 $13,103
Non-current liabilities 1,159 10,331
Total liabilities ¥ 2,629 $23,434
Notes to Consolidated Financial Statements
26 Alfresa Group Financial Section of Integrated Report 2017 27Alfresa Group Financial Section of Integrated Report 2017
(Transaction under common control)
Additional acquisition of subsidiary’s shares
(a) Overview of business combination
(1) Name of acquired company
Nihon Apoch Co., LTD.
(2) Description of the business
Dispensing Pharmacy Business (medical-related business)
(3) Date of the business combination
March 31, 2017
(4) Legal form of the business combination
Purchase of shares from non-controlling shareholders
(5) Company name after the business combination
Unchanged
(6) Other matters with regard to the transaction
Total voting rights became 96% after additional acquisition with
voting rights of 30%.
(b) Outline of the accounting treatment
The transaction was treated as a transaction with non-controlling
shareholders under common control in accordance with the
“Accounting Standard for Business Combinations” and the
“Implementation Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”.
(c) Additional acquisition of shares in subsidiary
Acquisition cost and consideration paid
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
Consideration paid for acquisition Cash ¥2,359 $21,027
(d) Changes in the portion held by the Company in connection with
the transactions with non-controlling shareholders
(1) Main reason for changes in capital surplus
Additional acquisition of subsidiary’s shares
(2) Decreases in capital surplus due to transactions with non-
controlling interests
¥1,185 million (US$10,562 thousand)
21. SUBSeQUeNT eVeNTAt the Board of Directors’ Meeting held on May 12, 2017, retained
earnings at March 31, 2017 were appropriated as follows:
Millions of Yen
Thousands of U.S. Dollars
(Note 1)
2017 2017
Cash dividends (¥19 (US$0.17) per share) ¥4,117 $36,697
Notes to Consolidated Financial Statements
28 Alfresa Group Financial Section of Integrated Report 2017 29Alfresa Group Financial Section of Integrated Report 2017
Financial Section of Integrated Report 2017For the year ended March 31, 2017
Alfresa Group
0.08
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
h. 22m
d. 26cm
238.11kg of CO2 is the amount that 17.08 fifty-year-old cedar trees would absorb in one year.(Source: Forestry Report, Forestry Agency of Japan)
Reusing aluminum plates during the printing of this integrated report reduced
waste and contributed to the reduction of CO2 emissions by 238.11kg.
Japan Smart Energy Co., Ltd. examined this numerical value and confirmed it.
For further information, please contact:
1-1-3, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
TEL: +81-3-5219-5102 E-MAIL: [email protected]
URL: www.alfresa.com
This report is compiled and printed with the following environmental considerations in mind.
• Printing • Paper • Ink
This report is printed on paper certified by the Forest Stewardship Council (FSC) to be made from wood sourced from responsibly managed forests.
This report is printed with non-VOC printing ink derived from plant oils.
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