ANN U L R T O F R€¦ · T h eWa te rT r e a tme n tA s s o c ia te dB u s in e s sc o n s is tso...

ANNUAL REPORT FOR THE YEAR ENDE

D M

ARC

H 31

, 2018

KobelcoEco-Solutionsgroup(the“Group”)consistsoftheParentCompany,KobelcoEco-SolutionsCo.,Ltd.,(the“Company”)andnineteensubsidiaries.InadditiontothemanufactureandsaleofproductsusedintheWaterTreatmentAssociatedBusiness,theWasteTreatmentAssociatedBusinessandtheChemicalandFoodMachineAssociatedBusiness,theGroupisinvolvedinprovidingafter-saleservicesintheirrespectivefields.WaterTreatmentAssociatedBusinessThe WaterTreatmentAssociated BusinessconsistsofKobelco Eco-SolutionsCo.,Ltd.and two subsidiaries.The mainproductsintheWaterTreatmentAssociatedBusinessarefacilitiesandequipmentforindustrialwastewater,watersupplysystemsandsewagesystems,processingequipmentforultrapurewater,waterpurification,industrialwasteandgeneralwastewater,recyclingequipmentfororganicwastesuchassewagesludgeandfoodproductsandcoolingtowersforindustrialapplicationsandair-conditioning.ThemainsubsidiariesareKobelcoEco-MaintenanceCo.,Ltd.andKobelcoEco-SolutionsVietnam Co.,Ltd.WasteTreatmentAssociatedBusinessTheWasteTreatmentAssociatedBusinessconsistsofKobelcoEco-SolutionsCo.,Ltd.andfourteensubsidiaries.Themainproductsin the Waste TreatmentAssociated Business are incinerating and melting equipmentforcity waste,recyclingequipmentforbulkywasteanddiscardedelectronicsandPCB detoxificationtreatmentfacilities.ThemainsubsidiariesareKobelcoEco-MaintenanceCo.,Ltd.,E.R.C.TakajoCo.,Ltd.,ToyotaEnvironmentServicesCo.,Ltd.,KakogawaEnvironmentServicesCo.,Ltd.andFukuiGreenPowerCo.,Ltd.ChemicalandFoodMachineAssociatedBusinessTheChemicalandFoodMachineAssociatedBusinessconsistsofKobelcoEco-SolutionsCo.,Ltd.andonesubsidiary.Themain productsin the Chemicaland Food Machine Associated Business are equipmentforchemicalindustries,powdermaterials,brewingindustriesandhydrogen-oxygengenerators.ThemainsubsidiaryisKobelcoEco-SolutionsVietnam Co.,Ltd.

YearsendedMarch31Millionsofyen

ThousandsofU.S.dollars(Note1)

2018 2017 2016 2018

Netsales ¥78,766 ¥78,698 ¥83,005 $741,397WaterTreatmentAssociatedBusiness 33,404 33,447 35,205 314,420WasteTreatmentAssociatedBusiness 36,568 37,175 41,601 344,202ChemicalandFoodMachineAssociatedBusiness 8,845 8,786 6,860 83,255Corporateandeliminations (51) (710) (661) (480)Segmentincome(loss) 3,849 3,011 3,624 36,229WaterTreatmentAssociatedBusiness 402 61 220 3,784WasteTreatmentAssociatedBusiness 2,972 2,421 3,306 27,974ChemicalandFoodMachineAssociatedBusiness 1,233 814 277 11,606Corporateandeliminations (758) (285) (179) (7,135)Incomebeforeincometaxes 3,849 3,011 3,624 36,229Netincomeattributabletoownersoftheparent 2,546 2,062 2,219 23,965Depreciation 1,552 1,525 1,805 14,608Capitalexpenditures 754 1,422 3,983 7,097Researchanddevelopmentexpenses 1,522 1,422 1,293 14,326Totalassets 71,750 69,713 73,980 675,358Netassets 25,661 23,812 22,261 241,538

Persharedata (Yen) (U.S.dollars)Netincome* ¥158.00 ¥127.92 ¥137.70 $1.49Netassets* 1,585.49 1,472.65 1,378.26 14.92Cashdividends 45.00 9.00 9.00 0.42

*TheCompanycarriedouta5-to-1shareconsolidationofitscommonstockeffectiveOctober1,2017.*TheCompanyNetincomepershareandnetassetspersharearecalculatedwiththeassumptionthattheconsolidationofshareswasconductedatthebeginningof2016.

1

DuringthefiscalyearendedMarch31,2018,theJapaneseeconomyremainedonamoderaterecoverypathowingtoeconomicmeasuresthatincludedmonetaryandfiscalpolicies.Capitalinvestmentslightlyincreasedintheprivatesectorandremainedconstantinthepublicsector.Althoughtheoverseaseconomycontinuedtorecover,itbecameincreasinglynecessarytopayattentiontotheeconomicoutlook,theimpactofuncertaintyconcerning economicpoliciesand fluctuationsin the financialand capitalmarketsmainlyin China and theemergingcountriesinAsia.WithregardtothebusinessenvironmentsurroundingourGroupofcompanies,domesticinvestmentinthepublicsectorrelated to the WaterTreatmentAssociated Business and the Waste TreatmentAssociated Businesspromotedpublic-privatepartnershipprojectsthatutilizedthefundingandexpertiseoftheprivatesector.Atthesame time,the value oftechnology used to convertwaste into renewable energy was being increasinglyrecognized.Owingtoimprovementsincorporateearnings,domesticinvestmentsintheprivatesectorrelatedtotheWaterTreatmentAssociatedBusinessandtheChemicalandFoodMachineAssociatedBusinesscontinuedtopromoteprojectsfortherenewalofagingfacilitiesandtherenovationofequipmenttomaintainandenhanceproductivityandbusinessesingrowthareas.Underthesecircumstances,theGrouphasexpandeditsbusinessinlinewiththemeasuresoutlinedinthe

basicpoliciesofthefive-year,medium-term managementplan(from fiscalyear2016through2020),including(1)“Renovation ofcore businesses,”(2)“Steadyexpansion in overseasmarketsand new businesses”and (3)“StrengtheningcoordinationwiththeKobeSteelGroup.”

Overall,theconsolidatedresultsforthefiscalyearsawordersdecline25,872millionyento75,132millionyen(a25.6% decrease)from thepreviousterm,duringwhichanumberoforderswerereceivedforlargeprojects.Saleswere78,766millionyen,similartothoseofthepreviousterm.Duemainlytocostreductions,operatingincomeincreased830millionyento3,814millionyenfrom thepreviousyear,ordinaryincomeincreased838millionyento3,849millionyen,andnetincomeattributabletotheownersoftheparentincreased481millionyento2,546millionyen.

June2018

TsuyoshiKasuyaPresident

2

Water Treatment Associated BusinessIntheWaterTreatmentAssociatedBusiness,weimplementedpowergenerationprojectsthatutilizedigestiongasgenerated

from multiplesewagetreatmentfacilities.Theseprojectsarepositionedandpromotedaslong-term ventures.Overseas,wesecuredordersforadvancedwatercleaningfacilitiesforawatersupplyprojectinVietnam andwatercleaning

facilitiesforawaterandsewertreatmentsystem inMyanmar.Asforthefinancialandoperatingresults,ordersincreasedyear-on-year3,103millionyento38,228millionyen.Sales

remainedonparwiththepreviousterm at33,404millionyen,andordinaryincomerosefrom 341millionyento402millionyen.

Theconditionofthebusinessesinourgroupisasfollows:

SewageTreatmentFacilitiesinMyanmar

AdvancedTwo−stageIncinerator

CoolingTower MembraneBio-reactor（MBR）

3

Chemical and Food Machine Associated Business

Waste Treatment Associated BusinessIntheWasteTreatmentAssociatedBusiness,wecommencedthelong-term comprehensivemanagementofmunicipalsolid

wastetreatmentfacilitiesinYamanashiandMiyagiPrefecturesandrenovatedthemainequipmentatmunicipalsolidwastetreatmentfacilitiesinHiroshimaPrefecture.Asforthefinancialandoperatingresults,ordersdecreasedyear-on-year30,487millionyento26,161millionyen.Salesremainedsimilartothepreviousterm at36,568millionyenandordinaryincomeincreased551millionyento2,972millionyen.

TheChemicalandFoodMachineAssociatedBusinessremainedfirm mainlybyimprovementsinplantoperationratesandcostreductionsthroughmeasuressuchasstrengtheningourmanufacturingcapabilitiesandfinancingcapitalinvestmentandequipmentrepairswithhigherdomesticearnings.Additionally,westartedsellingglass-linedstandardreactors(WS-R)thatachieveabalancebetweenlowpriceandhighqualityandenablepromptdelivery.Asforthefinancialandoperatingresults,ordersincreasedyear-on-year1,481millionyento10,771millionyen.Sales

remainedsimilartothepreviousterm at8,845millionyenandordinaryincomerose419millionyento1,233millionyen.

WasteTreatmentFacilityinMiyagiPrefecture PCBWasteTreatmentFacility

GlasslinedEquipment LongDucPlant

4

CONSOLIDATEDBALANCESHEETSKobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesAsofMarch31,2018and2017

Assets

MillionsofyenThousandsofU.S.dollars(Note1)

2018 2017 2018

Currentassets:Cashandcashequivalents(Note5)・・・・・・・・・・・・ ¥ 2,563 ¥ 2,019 $ 24,125

Notesandaccountsreceivable(Notes5and11):Trade・・・・・・・・・・・・・・・・・・・・・・・ 37,844 38,097 356,213Electronicallyrecordedmonetaryclaims・・・・・・・・・ 1,064 1,418 10,015Short-termloansreceivable・・・・・・・・・・・・・・ 3,695 1,458 34,780Other・・・・・・・・・・・・・・・・・・・・・・・ 951 578 8,951Allowancefordoubtfulreceivables・・・・・・・・・・・ (77) (80) (725)

43,477 41,471 409,234

Inventories(Note3)・・・・・・・・・・・・・・・・・・ 3,233 2,745 30,431Deferredincometaxes(Note13)・・・・・・・・・・・・ 2,798 2,483 26,337Other・・・・・・・・・・・・・・・・・・・・・・・・ 486 662 4,574Totalcurrentassets・・・・・・・・・・・・・・・・・ 52,557 49,380 494,701

Property,plantandequipment(Note4):Land ・・・・・・・・・・・・・・・・・・・・・・・・ 3,634 3,682 34,205Buildingsandstructures・・・・・・・・・・・・・・・・ 17,423 17,316 163,997Machineryandequipment・・・・・・・・・・・・・・・・ 14,147 13,970 133,161Constructioninprogress・・・・・・・・・・・・・・・・ 269 69 2,532

35,473 35,037 333,895Lessaccumulateddepreciation・・・・・・・・・・・・・・ (21,018) (19,740) (197,835)Totalproperty,plantandequipment・・・・・・・・・・ 14,455 15,297 136,060

Intangibleassets(Note4)・・・・・・・・・・・・・・・・ 619 638 5,826

Investmentsandotherassets:Investmentinsecurities(Notes5and6)・・・・・・・・・ 480 592 4,518Investmentinunconsolidatedsubsidiariesandaffiliates(Notes5and6) 123 430 1,158Deferredincometaxes(Note13)・・・・・・・・・・・・ 1,610 1,462 15,154Netdefinedbenefitasset(Note9)・・・・・・・・・・・・ 1,340 1,301 12,613Other・・・・・・・・・・・・・・・・・・・・・・・・ 696 743 6,551Allowancefordoubtfulreceivables・・・・・・・・・・・・ (130) (130) (1,223)Totalinvestmentsandotherassets・・・・・・・・・・・ 4,119 4,398 38,771

Totalassets・・・・・・・・・・・・・・・・・・・・・・ ¥ 71,750 ¥ 69,713 $ 675,358

Seeaccompanyingnotes.

5

LiabilitiesandNetAssets


2018 2017 2018

Currentliabilities:Short-termborrowings(Notes5,7and11)・・・・・・・・ ¥ 331 ¥ 2,374 $ 3,116Long-termdebtduewithinoneyear(Notes5and7)・・・ 316 115 2,974Notesandaccountspayable(Note5):Trade・・・・・・・・・・・・・・・・・・・・・・・ 11,054 20,692 104,048Electronicallyrecordedobligations・・・・・・・・・・・ 12,257 － 115,371Construction ・・・・・・・・・・・・・・・・・・・・ 243 421 2,287Unconsolidatedsubsidiaries・・・・・・・・・・・・・・ 31 109 292Other・・・・・・・・・・・・・・・・・・・・・・・ 1,004 842 9,450

24,589 22,064 231,448

Advancesfromcustomers・・・・・・・・・・・・・・・・ 1,559 1,293 14,674Incomeandenterprisetaxespayable(Note5)・・・・・・・ 1,729 969 16,274Accruedexpenses・・・・・・・・・・・・・・・・・・・ 2,605 2,404 24,520Provisionforproductwarranties・・・・・・・・・・・・・ 3,548 4,044 33,396Reserveforlossonconstructioncontracts・・・・・・・・・ 630 100 5,930Other・・・・・・・・・・・・・・・・・・・・・・・・ 959 2,750 9,027Totalcurrentliabilities・・・・・・・・・・・・・・・・ 36,266 36,113 341,359

Long-term liabilities:Long-termdebt(Notes5and7)・・・・・・・・・・・・・ 3,281 3,597 30,883Netdefinedbenefitliability(Note9)・・・・・・・・・・・ 5,779 5,347 54,396Assetretirementobligations・・・・・・・・・・・・・・・ 457 455 4,302Other・・・・・・・・・・・・・・・・・・・・・・・・ 306 389 2,880Totallong-termliabilities・・・・・・・・・・・・・・・ 9,823 9,788 92,461

Netassets(Note10):Stockholders’equity:CommonstockAuthorized－ 64,000,000sharesIssued－ 16,120,000shares ・・・・・・・・・・・・・ 6,020 6,020 56,664Capitalsurplus・・・・・・・・・・・・・・・・・・・・ 3,332 3,332 31,363Retainedearnings・・・・・・・・・・・・・・・・・・・ 16,482 14,669 155,139Lesstreasurystock ・・・・・・・・・・・・・・・・・・ (6) (6) (56)Totalstockholders’equity・・・・・・・・・・・・・・・ 25,828 24,015 243,110

Accumulatedothercomprehensiveincome(Note14):Unrealizedgainsonsecurities,netoftaxes・・・・・・・・ 138 137 1,299Unrealizedlosses(gains)onhedgingderivatives,netoftaxes (8) 4 (75)Foreigncurrencytranslationadjustments ・・・・・・・・・ 38 59 357Remeasurementsofdefinedbenefitplans,netoftaxes・・・ (444) (482) (4,179)Totalaccumulatedothercomprehensiveincome・・・・・ (276) (282) (2,598)

Non-controllinginterests・・・・・・・・・・・・・・・・・ 109 79 1,026Totalnetassets ・・・・・・・・・・・・・・・・・・・・ 25,661 23,812 241,538Totalliabilitiesandnetassets・・・・・・・・・・・・・・ ¥ 71,750 ¥ 69,713 $ 675,358


6

CONSOLIDATEDSTATEMENTSOFINCOMEKobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesYearsendedMarch31,2018and2017


2018 2017 2018

Netsales(Note11)・・・・・・・・・・・・・・・・・・・ ¥ 78,766 ¥ 78,698 $ 741,397Costofsales・・・・・・・・・・・・・・・・・・・・・・ 65,474 66,257 616,284Grossprofit・・・・・・・・・・・・・・・・・・・・・ 13,292 12,441 125,113

Selling,generalandadministrativeexpenses(Note12)・・・ 9,478 9,457 89,213Operatingincome・・・・・・・・・・・・・・・・・・・ 3,814 2,984 35,900

Otherincome(expenses):Interestanddividendincome(Note11)・・・・・・・・・・ 27 28 254Interestexpense(Note11)・・・・・・・・・・・・・・・ (50) (51) (471)Lossonsalesanddisposalsofproperty,plantandequipment (5) (13) (47)Gainonsalesofinvestmentsecurities(Note6)・・・・・・ 50 18 471Other,net・・・・・・・・・・・・・・・・・・・・・・ 13 45 122Ordinaryincome・・・・・・・・・・・・・・・・・・・・ 3,849 3,011 36,229Incomebeforeincometaxes・・・・・・・・・・・・・・・ 3,849 3,011 36,229

Incometaxes(Note13):Current・・・・・・・・・・・・・・・・・・・・・・・ 1,747 998 16,444Deferred・・・・・・・・・・・・・・・・・・・・・・・ (475) (79) (4,471)

Netincomeattributabletonon-controllinginterests・・・・ 31 30 292Netincomeattributabletoownersoftheparent・・・・・・ ¥ 2,546 ¥ 2,062 $ 23,964

Amountspershare: Yen U.S.dollars

Netincome*・・・・・・・・・・・・・・・・・・・・・ ¥ 158.00 ¥ 127.92 $ 1,49Cashdividendsapplicabletotheyear・・・・・・・・・・ 45.00 9.00 0.42

*TheCompanycarriedouta5-to-1shareconsolidationofitscommonstockeffectiveOctober1,2017.*TheCompanyNetincomepershareiscalculatedwiththeassumptionthattheconsolidationofshareswasconductedatthebeginningof2017.


7

CONSOLIDATEDSTATEMENTSOFCOMPREHENSIVEINCOMEKobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesYearsendedMarch31,2018and2017


2018 2017 2018

Netincome ・・・・・・・・・・・・・・・・・・・・・・ ¥ 2,577 ¥ 2,092 $ 24,256

Othercomprehensiveincome(Note14):Unrealizedgainsonsecurities,netoftaxes・・・・・・・・ 1 10 9Unrealizedlosses(gains)onhedgingderivatives,netoftaxes (12) 7 (113)Foreigncurrencytranslationadjustments ・・・・・・・・・ (21) (13) (197)Remeasurementsofdefinedbenefitplans・・・・・・・・・ 38 181 358Totalothercomprehensiveincome・・・・・・・・・・・ 6 185 57

Comprehensiveincome・・・・・・・・・・・・・・・・・ 2,583 2,277 24,313

Comprehensiveincomeattributableto:Ownersoftheparent・・・・・・・・・・・・・・・・・ 2,552 2,247 24,021Non-controllinginterests・・・・・・・・・・・・・・・・ ¥ 31 ¥ 30 $ 292


8

CONSOLIDATEDSTATEMENTSOFCHANGESINNETASSETSKobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesYearsendedMarch31,2018and2017

Millionsofyen

Numberofsharesofcommonstock

Commonstock

Capitalsurplus

Retainedearnings

Treasurystock

Unrealizedgainsonsecurities,netoftaxes

Unrealizedgains(losses)onhedgingderivatives,netoftaxes

Foreigncurrencytranslationadjustments

Remeasurementsofdefinedbenefitplans,netoftaxes

Non-controllinginterests

Total

NetassetsatApril1,2016 80,600,000 ¥6,020 ¥3,332 ¥13,333 ¥(6) ¥127 ¥(3) ¥72 ¥(663) ¥49 ¥22,261Cashdividendspaid (726) (726)Netincomeattributabletoownersoftheparent 2,062 2,062Purchaseoftreasurystock (0) (0)Changesinstockholders’interestduetotransactionswithnon-controllinginterestsChangesinscopeofconsolidationNetchangesinitemsotherthanstockholders’equity 10 7 (13) 181 30 215

BalanceatMarch31,2017 80,600,000 ¥6,020 ¥3,332 ¥14,669 ¥(6) ¥137 ¥4 ¥59 ¥(482) ¥79 ¥23,812

Millionsofyen


Commonstock

Capitalsurplus

Retainedearnings

Treasurystock






Total

NetassetsatApril1,2017 16,120,000 ¥6,020 ¥3,332 ¥14,669 ¥(6) ¥137 ¥4 ¥59 ¥(482) ¥79 ¥23,812Cashdividendspaid (725) (725)Netincomeattributabletoownersoftheparent 2,546 2,546Purchaseoftreasurystock (0)Changesinstockholders’interestduetotransactionswithnon-controllinginterestsChangesinscopeofconsolidation (8) (8)Netchangesinitemsotherthanstockholders’equity 1 (12) (21) 38 30 36

BalanceatMarch31,2018 16,120,000 ¥6,020 ¥3,332 ¥16,482 ¥(6) ¥138 ¥(8) ¥38 ¥(444) ¥109 ¥25,661

ThousandsofU.S.dollars(Note1)


Commonstock

Capitalsurplus

Retainedearnings

Treasurystock






Total

NetassetsatApril1,2017 16,120,000 $56,664 $31,363 $138,073 $(56) $1,290 $38 $555 $(4,537) $744 $224,134Cashdividendspaid (6,824) (6,824)Netincomeattributabletoownersoftheparent 23,965 23,965Purchaseoftreasurystock (0) (0)Changesinstockholders’interestduetotransactionswithnon-controllinginterestsChangesinscopeofconsolidation (75) (75)Netchangesinitemsotherthanstockholders’equity 9 (113) (198) 358 282 338

BalanceatMarch31,2018 16,120,000 $56,664 $31,363 $155,139 $(56) $1,299 $(75) $357 $(4,179) $1,026 $241,538


9

CONSOLIDATEDSTATEMENTSOFCASHFLOWSKobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesYearsendedMarch31,2018and2017


2018 2017 2018

Cashflowsfrom operatingactivities:Incomebeforeincometaxes ・・・・・・・・・・・・・・ ¥ 3,849 ¥ 3,011 $ 36,229

Adjustmentstoreconcileincomebeforeincometaxestonetcashprovidedby(usedin)operatingactivities:Depreciation ・・・・・・・・・・・・・・・・・・・・・ 1,552 1,525 14,608Interestanddividendincome・・・・・・・・・・・・・・ (27) (28) (254)Interestexpense・・・・・・・・・・・・・・・・・・・・ 50 51 471Lossonsalesanddisposalsofproperty,plantandequipment 2 13 19Decrease(increase)inprovisionforproductwarranties・・・ (494) 710 (4,650)Increaseanddecreaseinnetdefinedbenefitassetandliability 444 393 4,179Decrease(increase)intradereceivables・・・・・・・・・・ 859 3,554 8,086Decrease(increase)ininventories・・・・・・・・・・・・ (492) 407 (4,631)Increase(decrease)intradepayables・・・・・・・・・・・ 2,755 (6,439) 25,932Other・・・・・・・・・・・・・・・・・・・・・・・・ (1,361) 2,672 (12,811)Subtotal・・・・・・・・・・・・・・・・・・・・・・ 7,137 5,869 67,178Interestanddividendsreceived ・・・・・・・・・・・・・ 27 28 254Interestpaid ・・・・・・・・・・・・・・・・・・・・・ (50) (51) (470)Incometaxespaid・・・・・・・・・・・・・・・・・・・ (1,008) (736) (9,488)Netcashprovidedby(usedin)operatingactivities・・・・ 6,106 5,110 57,474

Cashflowsfrom investingactivities:Increase(decrease)inshort-termloansreceivable・・・・・・ (2,237) 912 (21,056)Collectionoflong-termloansreceivable ・・・・・・・・・ 1 6 9Paymentsforpurchasesofproperty,plantandequipment・・ (651) (1,685) (6,128)Paymentsforpurchasesofintangiblefixedassets・・・・・ (166) (207) (1,562)Paymentsforpurchasesofinvestmentsecurities・・・・・・－ (320) －Proceedsfromsalesofinvestmentsecurities・・・・・・・・ 162 58 1,525Other・・・・・・・・・・・・・・・・・・・・・・・・ (3) (15) (28)Netcashusedininvestingactivities・・・・・・・・・・ (2,894) (1,251) (27,240)

Cashflowsfrom financingactivities:Increase(decrease)inshort-termborrowings・・・・・・・・ (2,024) (5,131) (19,051)Proceedsfromlong-termdebt・・・・・・・・・・・・・・－ 2,683 －Cashdividendspaid・・・・・・・・・・・・・・・・・・ (726) (725) (6,834)Other・・・・・・・・・・・・・・・・・・・・・・・・ (199) (85) (1,873)Netcashprovidedby(usedin)financingactivities・・・・ (2,949) (3,258) (27,758)

Effectofexchangeratechangesoncashandcashequivalents (20) 7 (188)Increaseincashandcashequivalents・・・・・・・・・・ 243 608 2,288Cashandcashequivalentsatbeginningofyear・・・・・・ 2,019 1,411 19,004Increaseincashandcashequivalentsfrom newlyconsolidatedsubsidiary 301 － 2,833Cashandcashequivalentsatendofyear ・・・・・・・・ ¥ 2,563 ¥ 2,019 $ 24,125


10

NOTESTOCONSOLIDATEDFINANCIALSTATEMENTS

1.BasisofPresentingConsolidatedFinancialStatements―――――――――――――TheaccompanyingconsolidatedfinancialstatementshavebeenpreparedinaccordancewiththeprovisionssetforthintheJapaneseFinancialInstrumentsandExchangeLaw andits related accounting regulations and in conformity withaccountingprinciplesgenerallyacceptedinJapan(“JapaneseGAAP”),which are different in certain respects as toapplication and disclosure requirements from InternationalFinancialReportingStandards.

Theaccompanyingconsolidatedfinancialstatementshavebeen restructured and translated into English with someexpanded descriptions and the inclusion ofconsolidatedstatements ofstockholders’equity from the consolidatedfinancialstatements of Kobelco Eco-Solutions Co., Ltd.preparedinaccordancewithJapaneseGAAPandfiledwiththe appropriate LocalFinance Bureau ofthe Ministry ofFinance as required by the Financial Instruments andExchangeLaw.Somesupplementaryinformationincludedinthe statutory Japanese language consolidated financialstatements,butnotrequired forfairpresentation,is notpresented in the accompanying consolidated financialstatements.

The translation ofthe Japanese yen amountsinto U.S.dollaramounts is included solely forthe convenience ofreadersoutsideJapan,usingtheprevailingexchangerateatMarch 31,2018,which was¥106.24 to U.S.$1.00.ThetranslationsshouldnotbeconstruedasrepresentationsthattheJapaneseyenamountshavebeen,couldhavebeenorcouldinthefuturebeconvertedintoU.S.dollarsatthisoranyotherrateofexchange.

2.SummaryofAccountingPolicies―――――――TheconsolidatedfinancialstatementsincludetheaccountsoftheCompanyanditsfifteen(fourteenin2017)significantmajority-ownedsubsidiaries(the“Companies”).Intercompanytransactionsandaccountshavebeeneliminated.The Company does not account for unconsolidated

subsidiariesusingtheequitymethodbecausedoingsowouldnothave a materialaffecton the consolidated financialstatements.Intheeliminationofinvestmentsinsubsidiaries,the assetsand liabilitiesofthe subsidiaries,including theportion attributable to non-controlling stockholders, areevaluated using the fairvalue atthe time the Companyacquired the control of the respective subsidiary. Thedifference,ifconsideredsignificant,betweenthecostoftheinvestmentandtheequityinthenetassetsatthedateofacquisitionisamortizedoveranestimatednumberofyearswhentheamortizationperiodcanbeestimatedoroverfiveyears.When the difference is small,itis recognized asexpensewhenincurred.

CashandCashEquivalentsIn preparing the consolidated statementsofcash flows,cash on hand,readily available deposits and short-termhighlyliquidinvestmentswithmaturitiesnotexceedingthreemonthsatthetimeofpurchaseareconsideredtobecashandcashequivalents.

AllowanceforDoubtfulAccountsReceivablesTheallowancefordoubtfulaccountsreceivablesisprovidedin amounts considered to be sufficientto coverpossiblelossesoncollection.Withrespecttonormaltradeaccountsreceivable,the allowance isbased on the actualrate ofhistoricalbad debts.Forcertain doubtfulreceivables,theuncollectibleamountisindividuallyestimated.

InventoriesWork-in-process is stated at specific identified cost.

Merchandiseandfinishedgoods,raw materialsandsuppliesarestatedataveragecost.TheCompanieswritedownthevalue ofinventory based on decreases in profitability tocalculatetheinventoryvalueonthebalancesheets.

Property,PlantandEquipmentProperty,plantand equipmentare carried atcostlessaccumulated depreciation and accumulated impairment.Depreciation is computed mainly using the straight-linemethod overthe estimated usefullife ofthe assetinaccordancewithtaxlaws.

SoftwareCostsTheCompaniesincludeinternalusesoftwareinintangibleassetsandamortizeitusingthestraight-linemethodovertheestimatedusefullifeoffiveyears.

LeasesDepreciationforleaseassetsiscomputedbythestraight-linemethodovertheterm oftheleasewitharesidualvalueofzero.

MarketableSecuritiesandInvestmentsinSecuritiesAvailable-for-salesecuritieswithavailablefairmarketvaluesare stated atfair marketvalue.Unrealized gains andunrealized losseson these securitiesare reported,netofapplicable income taxes, as a separate component ofstockholders’equity.Realized gains on the sale ofsuchsecuritiesarecomputedusingmovingaveragecost.Available-for-salesecuritieswithnoavailablefairmarketvaluesarestatedatmovingaveragecost.

HedgeAccountingThe Companies deferrecognition ofgains and lossesresultingfrom changesinthefairvalueofderivativefinancialinstrumentsuntiltherelatedlossesandgainsonthehedgeditems are recognized. When forward foreign exchange

KobelcoEco-SolutionsCo.,Ltd.anditsConsolidatedSubsidiariesYearsendedMarch31,2018and2017

11

Millionsofyen ThousandsofU.S.dollars(Note1)

2018 2017 2018Merchandiseandfinishedgoods ¥18 ¥16 $170Work-in-process 2,269 1,647 21,357Rawmaterialsandsupplies 946 1,082 8,904Total ¥3,233 ¥2,745 $30,431

contractsmeetcertain hedging criteria,related transactionsarerecordedusingthecontractedforwardrate.

ProvisionforProductWarrantiesA provision for product warranties provides for the

estimatedfuturecostsarisingfrom therepairorreplacementofproductsaftersale.Theprovisioniscalculatedbasedona percentage ofpastcosts multiplied by the sales ofproductsforthe yearand the estimated costsassociatedwithcertainindividualcontracts.

ReserveforLossonConstructionContractsA reserveforlossonconstructioncontractsprovidesforlossesonconstructioncontractsforuncompletedworkattheendofthefiscalyear.Todeterminetheamountofreserve,the Companies recognize reasonably estimated losses forspecificconstructionorderswhichareexpectedtoresultinlosses.

Employees’SeveranceandRetirementBenefitsThe employee projected benefitobligation is computedprimarilybasedonthestraight-lineattributionstandardusingtheprojectedbenefitobligationattheendoftheconsolidatedfiscalyear.Pastservicecostisamortizedusingthestraight-line method overthe estimated average remaining serviceyearsoftheemployees.Actuarialdifference are amortizedfrom the yearfollowing the yearin which the actuarialdifferenceareincurredusingthestraight-linemethodovertheestimatedaverageremainingserviceyearsoftheemployees.

RevenueRecognitionForconstructioncontractsforwhichtheprogressthroughthefiscalyear-endcanbemeasured,theCompaniesrecordrevenuesbythepercentageofcompletionmethod.Theworkcompletedismeasuredbythepercentageofcostmethod.For other construction contracts, the Companies recordrevenue atthe time ofcompletion using the completedcontractmethod.

ResearchandDevelopmentExpensesExpensesassociatedwiththedevelopmentofnewproductsandresearchintoandtheapplicationofnew technologiesare charged directly to income and loss.Research anddevelopmentexpensesfortheyearsendedMarch31,2018and2017were¥1,522million($14,326thousand)and¥1,422million,respectively.

IncomeTaxesIncome taxes consist of corporation, inhabitants and

enterprisetaxes.TheCompaniesapplydeferredincometaxaccounting to recognize the tax effects of temporarydifferences between the carrying amounts ofassets andliabilitiesfortaxandfinancialreportingpurposes.

TranslationofForeignCurrenciesReceivablesandpayablesdenominatedinforeigncurrencies

are translated into Japanese yen atthe year-end rates.Balance sheets ofconsolidated overseas subsidiaries aretranslatedintoJapaneseyenatyear-endrates,exceptnetassetaccounts,which are translated athistoricalrates.StatementsofincomeofconsolidatedoverseassubsidiariesaretranslatedintoJapaneseyenattheaverageratesfortheperiod. The Company and its domestic consolidatedsubsidiariesreportforeigncurrencytranslationadjustmentsinnetassets.

AmountsPerShareNetincomepershareisbasedontheweightedaveragenumber of shares outstanding during the year. Cashdividendsapplicabletotheyearincludeyear-enddividendsapprovedbythegeneralstockholdersmeetingheldaftertheendofthefiscalyear.Dilutednetincomepershareisnotdisclosed because potentially dilutive securities are notissued.

StandardsandguidancenotyetadoptedThefollowingstandardandguidancewereissuedbutnotyetadopted.“Accounting Standard for Revenue Recognition” (ASBJStatementNo.29,March30,2018)“Implementation Guidance on Accounting Standard forRevenueRecognition”(ASBJGuidance No.30,March 30,2018)a)OverviewThe Accounting Standards Board of Japan (ASBJ)

announcedtheabovestandardandguidancefollowingthemove of The InternationalAccounting Standards Board(IASB)andtheFinancialAccountingStandardsBoard(FASB)in the United Statesthatjointlydeveloped comprehensiveaccountingstandardsforrevenuerecognitionandannounced"Revenuefrom ContractswithCustomers"(IFRS 15intheIASB and Topic 606 in the FASB)in May 2014.ASBJdevelopeditsthestandardandguidancebasedonIFRS15and the basic principle of comparability of financialstatements.ASBJaddedsomealternativeapproachesoutofconsideration fordomestic business practice and withoutdamagingthecomparability.

b)EffectivedateEffective from the beginning ofthe fiscalyearendingMarch31,2022.

c)EffectsoftheapplicationTheCompanyand itsconsolidated domesticsubsidiariesarein the processofdetermining the effectsofthe newstandard and guidance on the consolidated financialstatements.

3.Inventories ―――――――――――――――――InventoriesatMarch31,2018and2017consistedofthefollowing:

12


2018 2017 2018Buildingsandstructures ¥326 ¥326 $3,068Machineryandequipment 486 486 4,574Intangibleassets 26 26 245Total ¥838 ¥838 $7,887

March31,2018 MillionsofyenBookvalues Fairvalues Differences

1.Cashandcashequivalents ¥2,563 ¥2,563 －2.Notesandaccountsreceivable-trade 37,844 37,844 －

3.Electronicallyrecordedmonetaryclaims 1,064 1,064 －

4.Short-term loansreceivable 3,695 3,695 －5.Investmentinsecurities 365 365 －Totalassets ¥45,531 ¥45,531 －1.Notesandaccountspayable-trade ¥11,054 ¥11,054 －

2.Electronicallyrecordedobligations 12,257 12,257 ¥(0)

3.Short-term borrowingsandlong-term debtduewithinoneyear

647 647 －

4.Incomeandenterprisetaxespayable 1,729 1,729 －

5.Long-term debt 3,281 3,174 (107)Totalliabilities ¥28,968 ¥28,861 ¥(107)Derivativetransactions ¥(12) ¥(12) －

March31,2017 MillionsofyenBookvalues Fairvalues Differences

1.Cashandcashequivalents ¥2,019 ¥2,019 －2.Notesandaccountsreceivable-trade 38,097 38,097 －


4.Short-term loansreceivable 1,458 1,458 －5.Investmentinsecurities 308 308 －Totalassets ¥43,300 ¥43,300 －1.Notesandaccountspayable-trade ¥20,692 ¥20,692 －


2,489 2,489 ¥0

3.Incomeandenterprisetaxespayable 969 969 －

4.Long-term debt 3,597 3,511 (86)Totalliabilities ¥27,747 ¥27,661 ¥(86)Derivativetransactions ¥5 ¥5 －

4.ReductionEntriesDuetoStateSubsidies,Etc.―Cumulativereductionentriesduetostatesubsidies,etc.,forthe acquisition of property, plant and equipment andintangibleassetsasofMarch31,2018and2017wereasfollows:

5.FinancialInstruments ――――――――――――a)PoliciesforusingfinancialinstrumentsThe Companies raise funds according to theircapitalbudgets.Short-term financingforoperatingcapitalislimitedto borrowings in accordance with the Cash ManagementSystem (CMS),anefficientfundmanagementsystem oftheKobeSteelGroup.Long-term financingforpurposessuchascapitalinvestment is sourced from financial institutions.Temporarysurplusesoffundsarelimitedtodepositsorloansmade under the CMS in accordance with internalmanagementrules.TheCompaniesenterintoderivativecontractstohedgetherisks discussed below and do notenterinto derivativetransactionsfortradingorspeculativepurposes.

b)FinancialinstrumentsandexposuretoriskAlthough notes and accounts receivable generally havepaymentdateswithinoneyearandaresettledintheshortterm,theyexposetheCompaniestocreditrisk,theriskthatthe customermightdefaulton payment.The Companiesminimizetheirexposuretothecreditriskoftheircustomersatthebusinessdivisionlevelbymonitoringtheduedatesand balances ofreceivables and regularly evaluating thecreditstatusofmajorcustomers.

c)Managingrisks(1)CreditriskmanagementWith regard to operating receivables, the Companies

closely monitor the due dates and balances for eachcustomeratthebusinessdivisionlevel.TheCompaniesseekearly identification of any deterioration in the financialconditionofitscounterpartiesorotherpaymentconcernsandworktoalleviatetheseconcernsthroughreceivablecontrolmanagement, including the implementation of receivablerecoveryschedules.

(2)Marketriskmanagement(exchangeratefluctuationrisk)Forreceivables and liabilities in foreign currencies,theCompaniesgenerallyhedgeagainstexchangeratefluctuationriskbyusingforwardcurrencyexchangecontracts.Forwardcurrency exchange contracts are executed through thefinance division according to the rules governing foreignexchange contracts that set out trading authority andmaximum contractlimits.Tomanageinvestmentsinsecurities,thefinancedivisionregularlyevaluatesmarketpricesandthefinancialstatusoftheissuingcompanies(clientcompanies,etc.).

(3)Managementofliquidityriskrelatedtofinancing(theriskofnotbeingabletomakepaymentbypaymentdeadlines)Liquidityriskismanaged atthe Companiesbycreating

and updating cash flow plans at the finance division,receiving reportsfrom allthe divisionsand maintaining areadyliquidityposition.

d) SupplementalinformationonfairvaluesThefairvalueoffinancialinstrumentsincludesestimatesmade using reasonable methods ofvaluation as wellasquotedmarketprices.Estimatesresultingfrom thesemethodsare subjective in nature and involve uncertainties and,therefore,cannotbedeterminedwithprecision.Changesinassumptions upon which the estimates are made couldsignificantlyaffectthevaluations.The contracted amounts ofthe derivative transactionspresentedinNote8donotreflectexposuretothemarketriskforthederivativeinstrumentsthemselves.

FairValueofFinancialInstrumentsThebookvaluesofthefinancialinstrumentsincludedintheconsolidatedbalancesheetsandtheirfairvaluesatMarch31,2018and2017wereasfollows:

13

March31,2018 ThousandsofU.S.dollars(Note1)Bookvalues Fairvalues Differences

1.Cashandcashequivalents $24,125 $24,125 －2.Notesandaccountsreceivable-trade 356,212 356,212 －


4.Short-term loansreceivable 34,780 34,780 －5.Investmentinsecurities 3,435 3,435 －Totalassets $428,567 $428,567 －1.Notesandaccountspayable-trade $104,048 $104,048 －

2.Electronicallyrecordedobligations 115,371 115,371 $(0)


6,090 6,090 －

4.Incomeandenterprisetaxespayable 16,274 16,274 －

5.Long-term debt 30,883 29,876 (1,007)Totalliabilities $272,666 $271,659 $(1,007)Derivativetransactions $(113) $(113) －

March31,2018 Millionsofyen ThousandsofU.S.dollars(Note1)

Non-listedequitysecurities ¥115 $1,082Non-listedsecuritiesofsubsidiaries 123 1,158Total ¥238 $2,240

Cashandcashequivalents Millionsofyen ThousandsofU.S.dollars(Note1)

2019 ¥2,563 $24,1252020andthereafter －－Total ¥2,563 $24,125

Notesandaccountsreceivable-trade Millionsofyen ThousandsofU.S.dollars(Note1)


Electronicallyrecordedmonetaryclaims Millionsofyen ThousandsofU.S.dollars(Note1)


Short-term loansreceivable Millionsofyen ThousandsofU.S.dollars(Note1)


Short-term borrowingsandlong-term debtduewithinoneyear Millionsofyen Thousandsof

U.S.dollars(Note1)

2019 ¥647 $6,0902020andthereafter －－Total ¥647 $6,090

Long-term debt Millionsofyen ThousandsofU.S.dollars(Note1)

2019 －－2020 ¥366 $3,4452021 366 3,4452022 366 3,4452023 286 2,6922024andthereafter 1,897 17,856Total ¥3,281 $30,883

Assetsandliabilitiesarisingfrom derivativetransactionsarepresentedasnetamounts,withparentheses()iftheresultisaliability.

MethodsUsedtoEstimatetheFairValueWereasFollows:a)Assets(1)Cashandcashequivalents,notesandaccountsreceivable-trade,electronicallyrecordedmonetaryclaimsandshort-termloansreceivableThecarryingamountofcashandcashequivalents,notesandaccountsreceivable-trade,electronicallyrecordedmonetaryclaimsandshort-termloansreceivableapproximatesfairvaluebecauseoftheshortmaturitiesoftheseinstruments.(2)InvestmentinsecuritiesThefairvalueofinvestmentsinsecuritiesisbasedmainlyonquotedmarketprices.

b)Liabilities(1)Notesandaccountspayable-trade,electronicallyrecordedobligations,short-term borrowings and long-term debtduewithinoneyearandincomeandenterprisetaxespayableThecarryingamountofnotesandaccountspayable-trade,short-term borrowingsandlong-term debtduewithinoneyearand income and enterprise taxespayable approximate fairvaluebecauseoftheshortmaturitiesoftheseinstruments.The fairvalue oflong-term debtdue within one yearisestimatedbasedonthepresentvalueoffuturecashflowsusing the current borrowing rate for similar debt ofcomparablematurity.(2)Long-term debtThefairvalueoflong-term debtisestimatedbasedonthepresent value of future cash flows using the currentborrowingrateforsimilardebtofcomparablematurity.

c)DerivativetransactionsInformationonderivativetransactionsisdescribedinNote8.

Financialinstrumentsforwhichfairvaluewasdifficulttoestimatewereasfollows:

Non-listed equity securities and non-listed securities ofsubsidiarieshave no marketprice and cannotbe reliablyestimated.Therefore,they are notincluded in item 5,“Investmentinsecurities,”intheabovetables.

Theaggregateannualmaturitiesoffinancialassetswereasfollows:

Theaggregateannualmaturitiesofshort-term borrowingsandlong-term debtduewithinoneyearwereasfollows:

Theaggregateannualmaturitiesoflong-term debtwereasfollows:

14

March31,2018 MillionsofyenAcquisitioncost

Book(fair)value Difference

Equitysecurities ¥194 ¥365 ¥171

March31,2017 MillionsofyenAcquisitioncost


Equitysecurities ¥194 ¥308 ¥114

March31,2018 ThousandsofU.S.dollars(Note1)Acquisitioncost


Equitysecurities $1,826 $3,436 $1,610


2018 2017 2018Available-for-salessecuritiesNon-listedequitysecurities ¥115 ¥284 $1,082

March31,2018 Millionsofyen

Sales Gainsonsales

Lossesonsales

Equitysecurities ¥162 ¥50 －


Sales Gainsonsales

Lossesonsales

Equitysecurities ¥58 ¥18 －

March31,2018 ThousandsofU.S.dollars(Note1)

Sales Gainsonsales

Lossesonsales

Equitysecurities $1,525 $471 －


2018 2017 2018Investmentinunconsolidatedsubsidiaries － ¥200 －Total － ¥200 －


2018 2017 2018Bankloans ¥331 ¥2,374 $3,116


2018 2017 2018Unsecured:Loansfrom banks,interestrateof0.6%,due2018to2032 ¥3,597 ¥3,712 $33,857

Lessamountsduewithinoneyea 316 115 2,974Total ¥3,281 ¥3,597 $30,883

Lease:Leaseobligations,interestrateof3.7%,due2018to2028 ¥358 ¥435 $3,370

Lessamountsduewithinoneyear 74 77 697Total ¥284 ¥358 $2,673

Long-term debt Millionsofyen ThousandsofU.S.dollars(Note1)

2020 ¥441 $4,1512021 442 4,1602022 406 3,8222023andthereafter 2,277 21,433Total ¥3,566 $33,566

6.Securities――――――――――――――――――a)ThefollowingtablessummarizesecuritieswithavailablefairvaluesasofMarch31,2018and2017.Available-forsalesecuritiesBookvalues(fairvalues)exceedingacquisitioncosts:

b)Thefollowingtablesummarizesbookvaluesofsecuritieswithnoavailablefairvaluesasof March31,2018and2017.

c)Salesofavailable-for-salesecuritiesfortheyearsendedMarch31,2018and2017wereasfollows:

d) Securities pledged as collateral for subsidiaries’maintenanceandmanagementofwastetreatmentfacilities:

Otherthantheabove,securitiesintheamountof¥305million ($2,871 thousand) eliminated in intercompanytransactions were pledged as collateralfor subsidiaries’maintenance and managementofwaste treatmentfacilitiesfortheyearsendedMarch31,2018and2017.

7.Short-term BorrowingsandLong-term DebtShort-term borrowingsatMarch31,2018and2017consistedofthefollowing:

The weighted average interest rate on short-termborrowingsoutstanding atMarch 31,2018 and 2017 was1.7% and1.2%,respectively.

Long-term debtatMarch31,2018and2017consistedofthefollowing:

Theweightedaverageinterestrateonlong-term loansfrombanksoutstandingatMarch31,2018and2017was0.6%and0.6%,respectively.The weighted average interestrate on long-term leaseobligations atMarch 31,2018 and 2017 was 3.7% and3.7%,respectively.

Theaggregateannualmaturitiesoflong-term debtwereasfollows:

8.DerivativeTransactions ―――――――――――The Companies enter into forward currency exchangecontractstohedgetheriskofchangesinforeigncurrencyexchangeratesassociatedwithtransactionsdenominatedinforeign currencies. The Companies do not enter intoderivativetransactionsforspeculativepurposes.

TheCompaniesmaybeexposedtolossfrom fluctuationsinforeigncurrencyexchangerates.However,theCompaniesdo notanticipate any significantcreditrisk because thecounterparties for its derivatives are highly rated majorfinancialinstitutions.

Derivative transactions are made in accordance withinternalregulationsandarereportedtomanagement.

Derivative transactions for which hedge accounting wasappliedForwardcurrencyexchangecontractsoutstandingatMarch

15


Foreigncurrencyexchange contracts:

Hedgeditems

Contractedamount

Contractedamount

(overoneyear)Fairvalue

DeferredhedgemethodTobuyforeigncurrencies:U.S.dollars Tradepayables ¥265 ¥23 ¥(11)Euros Tradepayables 26 － (1)


Foreigncurrencyexchangecontracts:

Hedgeditems

Contractedamount

Contractedamount


DeferredhedgemethodTobuyforeigncurrencies:U.S.dollars Tradepayables ¥209 ¥5 ¥9Tosellforeigncurrencies:U.S.dollars Tradereceivables 41 － (4)AssigningmethodTobuyforeigncurrencies:Euros Tradepayables ¥14 －－

March31,2018 ThousandsofU.S.dollars(Note1)

Foreigncurrencyexchange contracts:

Hedgeditems

Contractedamount

Contractedamount


DeferredhedgemethodTobuyforeigncurrencies:U.S.dollars Tradepayables $2,494 $216 $(104)Euros Tradepayables 245 － (9)


2018 2017 2018Definedbenefitplans(1)Movementinprojectedbenefitobligations

Balanceatbeginningoftheyear ¥8,528 ¥8,496 $80,271Servicecost 675 690 6,353Interestcost 68 68 640Actuarialdifferences 14 (63) 132Benefitspaid (362) (663) (3,407)

Balanceatendoftheyear ¥8,923 ¥8,528 $83,989


2018 2017 2018(2)MovementsinplanassetsBalanceatbeginningoftheyear ¥4,482 ¥4,576 $42,187Expectedreturnonplanassets 59 57 555

Actuarialdifferences (22) 57 (207)Contributionspaidbytheemployer 126 130 1,186

Benefitspaid (161) (338) (1,515)Balanceatendoftheyear ¥4,484 ¥4,482 $42,206

(3)Reconciliationfrom projectedbenefitobligationsandplanassetstonetdefinedbenefitliabilityandassetFundedprojectedbenefitobligations ¥7,531 ¥7,282 $70,886Planassets (4,484) (4,482) (42,206)

3,047 2,800 28,680Unfundedprojectedbenefitobligations 1,392 1,246 13,103

Totalnetdefinedbenefitliabilityandassetatendoftheyear ¥4,439 ¥4,046 $41,783

Netdefinedbenefitasset (1,340) (1,301) (12,613)Netdefinedbenefitliability 5,779 5,347 54,396

Totalnetdefinedbenefitliabilityandassetatendoftheyear ¥4,439 ¥4,046 $41,783

(4)RetirementbenefitcostsServicecost ¥675 ¥690 $6,354Interestcost 68 68 640Expectedreturnonplanassets (59) (57) (555)Amortizationofactuarialdifferences 100 155 941Amortizationofpastservicecost (9) (9) (85)

Totalretirementbenefitcostsforthefiscalyearendedoftheyear ¥775 ¥847 $7,295

(5)AdjustmentsforretirementbenefitPastservicecost ¥(8) ¥(9) $(75)Actuarialdifferences 63 276 593Total ¥55 ¥267 $518

(6)AccumulatedadjustmentsforretirementbenefitUnrecognizedpastservicecost ¥(11) ¥(20) $(104)Unrecognizedactuarialdifferences 651 715 6,128

Totalbalanceatendoftheyear ¥640 ¥695 $6,024

(7)Planassets1.Planassetscomprise:Generalaccountsoflifeinsurance ¥3,224 ¥3,215 $30,346

Bonds 545 354 5,130Cashandcashequivalents 414 626 3,897Equitysecurities 297 283 2,795Other 4 4 38Total ¥4,484 ¥4,482 $42,206

2.Long-term expectedrateofreturnCurrentandtargetassetallocations,historicalandexpectedreturnsonvariouscategoriesofplanassetshavebeenconsideredindeterminingthelong-term expectedrateofreturn.

2018 2017

Discountrate 0.8%~0.9% 0.8%~0.9%Long-term expectedrateofreturn 1.5% 1.4%

31,2018and2017wereasfollows:

Thefairvalueisrecognizedatthepricepresentedbythefinancialinstitution.

AssigningmethodForcertain accounts receivable denominated in foreigncurrencies forwhich foreign currency exchange contractswereusedtohedgetheforeigncurrencyfluctuations,thefairvalues ofthe foreign currency exchange contracts wereincludedinthefairvaluesofthehedgedaccountsreceivable.

9.Employees’SeveranceandRetirementBenefitsSummaryofadoptedretirementbenefitsThe Companies operate two types ofdefined benefitretirementplans,unfunded lump-sum paymentplans andfunded non-contributorypension plans.The Companyalsooperatesaretirementbenefittrust.

Netdefined benefitassetorliabilityin the consolidatedbalancesheetsforthe yearsended March 31,2018 and2017consistedofthefollowing:

(8)ActuarialassumptionsTheprincipalactuarialassumptionsatMarch31,2018and2017wereasfollows:

16


2018 2017 2018Currentreceivables ¥1,057 ¥1,539 $9,949


2018 2017 2018Sales ¥1,248 ¥1,876 $11,747


2018 2017 2018Short-term loansreceivables ¥960 － $9,036Short-term borrowings － ¥2,028 －


2018 2017 2018Loansadvanced ¥5,270 ¥6,788 $49,605Interestincome 2 3 19Borrowingfunds 1,750 2,347 16,472Interestexpense 2 4 19


2018 2017 2018Short-term loansreceivables ¥2,267 ¥1,112 $21,338


2018 2017 2018Loansadvanced ¥2,201 ¥1,231 $20,727Interestincome 1 1 9


2018 2017 2018Employees’salariesandallowances ¥2,289 ¥2,284 $21,546

Bonuses 838 772 7,888Severanceandretirementbenefitexpenses 176 184 1,657

Depreciation 185 182 1,741Expensesforestimatesanddesigns 1,567 1,464 14,750

Otherexpenses 4,423 4,571 41,631Total ¥9,478 ¥9,457 $89,213

Informationabouttheexpectedrateofpayincreaseisnotdisclosed because the Companieshave mainlyadopted apointbasisand the effecton the calculation ofprojectedbenefitobligationswouldbeinsignificant.

10.NetAssets―――――――――――――――――Underthe Japanese CompaniesAct,the entire amountpaidfornewsharesisrequiredtobedesignatedascommonstock.However,a companymay,by a resolution oftheBoardofDirectors,designateanamountnotexceedingonehalfofthe price ofthe new sharesasadditionalpaid-incapital,whichisincludedincapitalsurplus.

In cases in which a dividend distribution ofsurplus ismade,the smallerofan amountequalto 10% ofthedividendortheexcess,ifany,of25% ofcommonstockoverthe totalofadditionalpaid-in capitaland legalearningsreservemustbesetasideasadditionalpaid-incapitalorlegalearningsreserve.Legalearningsreserveisincludedinretainedearningsintheaccompanyingconsolidatedbalancesheets.

Additionalpaid-incapitalandlegalearningsreservemaynotbedistributedasdividends.However,alladditionalpaid-incapitalandalllegalearningsreservemaybetransferredtoothercapitalsurplusandretainedearnings,respectively,whicharepotentiallyavailablefordividends.

Themaximum amountthattheCompanycandistributeasdividends is calculated based on the nonconsolidatedfinancialstatements ofthe Company in accordance withJapaneseCompaniesAct.

Atthe generalstockholders meeting held on June 27,2018,thestockholdersapprovedcashdividendsamountingto¥725 million ($6,824 thousand).These appropriationshavenotbeenaccruedintheconsolidatedfinancialstatementsasofMarch31,2018.Suchappropriationsarerecognizedintheperiodinwhichtheyareapprovedbythestockholders.

11.RelatedPartyTransactions―――――――――a)RelatedpartytransactionsbetweentheCompanyanditsrelatedcompaniesAccountbalances with Kobe Steel,Ltd.,the majoritystockholderoftheCompany,atMarch31,2018and2017wereasfollows:

Transactions with Kobe Steel,Ltd.forthe years endedMarch31,2018and2017wereasfollows:

Accountbalances with Kobelco FinancialCenter,Ltd.,afellowsubsidiaryofKobeSteel,Ltd.atMarch31,2018and2017wereasfollows:

TransactionswithKobelcoFinancialCenter,Ltd.fortheyearsendedMarch31,2018and2017wereasfollows:

b)Related party transactions between the Company’sconsolidatedsubsidiariesanditsrelatedcompaniesAccountbalances with Kobelco FinancialCenter,Ltd.atMarch31,2018and2017wereasfollows:

TransactionswithKobelcoFinancialCenter,Ltd.fortheyearsendedMarch31,2018and2017wereasfollows:

12.Selling,GeneralandAdministrativeExpensesSelling,generaland administrative expensesforthe yearsendedMarch31,2018and2017wereasfollows:

17


2018 2017 2018Deferredincometaxassets:Netdefinedbenefitliability ¥1,702 ¥1,574 $16,020Provisionforproductwarranties 1,075 1,235 10,119Accruedbonuses 608 549 5,723Percentageofcompletionmethod 533 323 5,017Researchanddevelopmentexpenses 276 199 2,598Depreciation 255 172 2,400Consolidatedadjustmentforgainfrom transferofbusiness 221 368 2,080

Provisionforlossonconstructioncontracts 202 52 1,901

Assetretirementobligations 127 126 1,196Accruedbusinessenterprisetax 116 89 1,092Other 574 552 5,403Totaldeferredincometaxassets 5,689 5,239 53,549Valuationallowance (279) (254) (2,627)Deferredincometaxassets,net 5,410 4,985 50,922Deferredincometaxliabilities:Reserveforadvanceddepreciationofnon-currentassets 770 (801) 7,248

Assetretirementobligations 113 (119) 1,064Goodwill 61 (61) 574Other 58 (59) 546

Totaldeferredincometaxliabilities 1,002 (1,040) 9,431Netdeferredincometaxassets ¥4,408 ¥3,945 $41,491


2018 2017 2018Currentassets ¥2,798 ¥2,483 $26,337Investmentsandotherassets 1,610 1,462 15,154Netdeferredincometaxassets ¥4,408 ¥3,945 $41,491

2018 2017Statutorytaxrate 30.8 % － %Nondeductibleexpenses 1.2 －Nontaxabledividendincome (0.1) －Percapitainhabitantstaxes 1.1 －Taxcreditforresearchanddevelopmentexpenses,etc. (2.2) －

Valuationallowance 0.8 －Recalculationofdeferredincometaxassetsandliabilities from changesintaxrates 0.5 －

Other 0.9 －Effectivetaxrate 33.0 % － %


2018 2017 2018Unrealizedgains(losses)onsecuritiesIncreaseduringtheyear ¥51 ¥32 $480Reclassificationadjustments (50) (18) (471)Subtotal,beforetax 1 14 9Tax(expense)orbenefit (0) (4) (0)Subtotal,netoftax 1 10 9

Unrealizedgains(losses)onhedgesIncrease(decrease)duringtheyear (17) 10 (160)Reclassificationadjustments －－－Subtotal,beforetax (17) 10 (160)Tax(expense)orbenefit 5 (3) 47Subtotal,netoftax (12) 7 (113)

ForeigncurrencytranslationadjustmentsDecreaseduringtheyear (21) (13) (198)Reclassificationadjustments －－－Subtotal,beforetax (21) (13) (198)Tax(expense)orbenefit －－－Subtotal,netoftax (21) (13) (198)

RemeasurementsofdefinedbenefitplansIncrease(decrease)duringtheyear (36) 121 (339)Reclassificationadjustments 91 146 857Subtotal,beforetax 55 267 518Taxexpense (17) (86) (160)Subtotal,netoftax 38 181 358

Totalothercomprehensiveincome ¥6 ¥185 $56

13.IncomeTaxes ―――――――――――――――Significantcomponentsofthe Companies’deferred incometaxassetsandliabilitiesasofMarch31,2018and2017wereasfollows:

Netdeferred income tax assets were included in theconsolidatedbalancesheetsasfollows:

ThefollowingtablesummarizesthesignificantdifferencesbetweenthestatutorytaxrateandtheCompanies’effectivetaxrateforfinancialstatementpurposesfortheyearsendedMarch31,2018and2017.

14.ConsolidatedStatementsofComprehensiveIncomeAmountsreclassifiedtonetincomeinthecurrentperiodthatwere recognized in othercomprehensive income in thecurrentorprevious periods and the tax effects foreachcomponentofothercomprehensiveincomewereasfollows:

15.SegmentInformation――――――――――――a) GeneralinformationaboutreportablesegmentsTheCompanies’reportablesegmentsareconsistentunitsofthe Companies for which separate financialdata isaccessible.TheBoardofDirectorsconductsregularreviewsofeach segmentin order to decide the allocation ofmanagerialresourcesandanalyzeandassessresults.TheCompany has three reporting segments,WaterTreatmentAssociatedBusiness,WasteTreatmentAssociatedBusinessandChemicalandFoodMachineAssociatedBusiness,basedon the businessdivisionsestablished atthe Companyfordifferentproducts.Each segmentdevelops comprehensivestrategiesforthe business itis responsible for(includingbusinessatsubsidiaries)bothwithinJapanandoverseasandpromotesbusinessactivitiesaccordingly.

b)Basisofmeasurementaboutreportablesegmentincomeorloss,segmentassets,segmentliabilitiesandothermaterialitemsThe accounting policies ofthe reportable segments arethose same as ones described in Note 2.Reportablesegmentincome orloss is ordinary income.Intersegmenttransactionsarebasedonmarketprices.

c)Information aboutreportable segmentincome orloss,segmentassets,segmentliabilitiesandothermaterialitems

18


2018 2017 2018Netsales:WaterTreatmentAssociatedBusiness ¥33,404 ¥33,447 $314,420WasteTreatmentAssociatedBusiness 36,568 37,175 344,202ChemicalandFoodMachineAssociatedBusiness 8,845 8,786 83,255

Adjustment (51) (710) (480)Total ¥78,766 ¥78,698 $741,397

Segmentincomeorloss:WaterTreatmentAssociatedBusiness ¥402 ¥61 $3,784WasteTreatmentAssociatedBusiness 2,972 2,421 27,974ChemicalandFoodMachineAssociatedBusiness 1,233 814 11,606

Adjustment (758) (285) (7,135)Total ¥3,849 ¥3,011 $36,229

Segmentassets:WaterTreatmentAssociatedBusiness ¥18,441 ¥17,741 $173,579WasteTreatmentAssociatedBusiness 29,524 30,300 277,899ChemicalandFoodMachineAssociatedBusiness 8,213 7,845 77,306

Adjustment 15,572 13,827 146,574Total ¥71,750 ¥69,713 $675,358

Segmentliabilities:WaterTreatmentAssociatedBusiness ¥13,223 ¥11,280 $124,464WasteTreatmentAssociatedBusiness 18,261 18,186 171,884ChemicalandFoodMachineAssociatedBusiness 3,110 1,951 29,273

Adjustment 11,495 14,484 108,198Total ¥46,089 ¥45,901 $433,819

Depreciation:WaterTreatmentAssociatedBusiness ¥634 ¥694 $5,968WasteTreatmentAssociatedBusiness 479 357 4,509ChemicalandFoodMachineAssociatedBusiness 188 189 1,769

Adjustment 251 285 2,362Total ¥1,552 ¥1,525 $14,608

Interestincome:WaterTreatmentAssociatedBusiness ¥198 ¥173 $1,864WasteTreatmentAssociatedBusiness 302 241 2,842ChemicalandFoodMachineAssociatedBusiness 14 11 132

Adjustment (499) (411) (4,697)Total ¥15 ¥14 $141

Interestexpense:WaterTreatmentAssociatedBusiness ¥267 ¥256 $2,513WasteTreatmentAssociatedBusiness 238 188 2,240ChemicalandFoodMachineAssociatedBusiness －－－

Adjustment (455) (393) (4,283)Total ¥50 ¥51 $471

Capitalexpenditures:WaterTreatmentAssociatedBusiness ¥302 ¥42 $2,842WasteTreatmentAssociatedBusiness 77 1,657 725ChemicalandFoodMachineAssociatedBusiness 172 158 1,619

Adjustment 203 (435) 1,911Total ¥754 ¥1,422 $7,097


2018 2018Salestoexternalcustomers:WaterTreatmentAssociatedBusiness ¥33,364 $314,044WasteTreatmentAssociatedBusiness 36,568 344,202ChemicalandFoodMachineAssociatedBusiness 8,833 83,142

Adjustment 1 9Total ¥78,766 $741,397

Majorcustomers Millionsofyen ThousandsofU.S.dollars(Note1) Reportablesegment

JapanEnvironmentalStorage&SafetyCorporation

¥8,108 $76,318WasteTreatmentAssociatedBusiness

ReportablesegmentinformationfortheyearsendedMarch31,2018and2017wasasfollows:

(1)Thesegmentincomeorlossadjustmentof¥(758)million($7,135thousand)referstocompany-wideexpensesandnon-operatingincomenotallocatedtothereportablesegments.Company-wide expenses are mostly generalmanagementexpensesnotbelonging to a particularreportable segment(includingallocationvarianceforthereportablesegments).(2) The segmentassets adjustment of ¥15,572 million($146,574thousand)referstocashanddeposits,short-termloans receivable, fixed assets of the managementdepartmentsnotallocatedtothereportablesegments.(3)The segmentliabilities adjustmentof¥11,495 million($108,198 thousand)refers to accrued income taxes andexpensesnotallocatedtothereportablesegments.(4)The depreciation expense adjustmentof¥251 million($2,362thousand)referstodepreciationexpenseforbuildings,etc,belongingtothemanagementdepartmentsnotallocatedtothereportablesegments.(5)Interestincome adjustmentof¥(499)million ($(4,697)thousand)refers to the differences between the expectedinterestratesandtheactualinterestrates.(6)Interestexpense adjustmentof¥(455)million ($(4,283)thousand)refers to the differences between the expectedinterestratesandtheactualinterestrates.(7)Capitalexpendituresadjustmentof¥203million($1,911thousand)refersto the increase in systems related fixedassets belonging to the management departments notallocatedtothereportablesegments.

Informationaboutproductsandservices

Salestoexternalcustomersadjustmentof¥1million($9thousand)referstosalesthatdonotbelongtothereportablesegments.

Informationaboutgeographicareas(1)SalesInformation aboutsales by geographic area was notdisclosedbecausesalestoexternalcustomersinJapanweremorethan90% ofconsolidatednetsales.(2)TangiblefixedassetsInformationabouttangiblefixedassetsbygeographicareawasnotdisclosedbecausetangiblefixed assetsin Japanweremorethan90% ofconsolidatedtangiblefixedassets.(3)Informationaboutmajorcustomers

19

Shares2018 2017 Difference

Outstandingstock:Commonstock 16,120,000 80,600,000 (64,480,000)Total 16,120,000 80,600,000 (64,480,000)

Treasurystock:Commonstock 4,074 20,157 (16,083)Total 4,074 20,157 (16,083)

16.ChangesintheNumberofShares―――――Changesinthenumberofsharesissued and outstandingduringtheyearsendedMarch31,2018and2017wereasfollows:

(1)The Company consolidated shares atthe ratio of5sharesto1sharewithaneffectivedateofOctober1,2017(2)The numberofoutstanding shares ofcommon stockdecreasedby64,480,000shareswiththereversestocksplit.(3)Thenumberofsharesoftreasurystockdecreasedby16,083shareswiththereversestocksplit.

20

●WaterTreatment・Citywaterandsewagetreatmentplant・Sludgetreatment/Sludgevolumereductionequipment・Sludgeincineration/Melting/Recyclingsystem・WastewaterTreatmentFacilities・Industrialwaterprocessingsystem・Watertreatmentsystem forliquidcrystalsandsemiconductors・Purewater/Ultrapurewaterproductionequipment・Leachatetreatmentsystem・Seawaterdesalinationsystem●Biomass・BiogasUpgradingSystem・Biogastechnologyfortheinjectionintothenaturalgasgrid●CoolingTower・Coolingtowerfordistrictheatingandcooling・Super−low−noisecoolingtower・Industrialcoolingtower●WasteTreatmentandWastetoEnergy(Incinerator)・FluidizedBedGasificationandMeltingFurnace・PlasmaMeltingFurnace・Fluidized−bedfurnace●DetoxificationofPCBs・Sodium PulverulentProcess“SPProcess”・SolventExtractionandDecompositionProcess“SEDProcess”・PlasmaMeltingTechnologyforPCB−contaminatedWaste・HeatedOil.CirculationWashing●TechnologicalDevelopment・WaterTreatment/SludgeTreatment/Recycling・CoolingTower・WasteTreatmentandRecycling・EnvironmentalRestorationandRecycling・ProcessEquipment・BusinessDevelopment&InnovativeTechnologies●EnvironmentalAnalysisService・Potablewaterandsewagesludge・Wastewaterfrom factories,researchcenters,etc.・Industrialwaste(PCB,metals,organics,etc.)●ProcessEquipmentforChemicalandFoodIndustries,etc.・GlasslinedReactor・Polymerizer/Reactor・Mixer/Dryer・Evaporator●Hydrogen-Related・High-purityHydrogenOxygenGenerator

●HeadOffice:4-78,1-chome,Wakinohama-cho,Chuo-ku,Kobe,651-0072,JapanTEL:+81-78-232-8018 FAX:+81-78-232-8051(San-nomiyaGrandBuilding)2-21,2-chome,Isogami-dori,Chuo-ku,Kobe,651-0086,JapanTEL:+81-78-232-8018 FAX:+81-78-232-8051*Theswitchboardnumberisforalldivisions.●TokyoBranchOffice:(ONBuilding)9-12,5-chome,Kitashinagawa,Shinagawa-ku,Tokyo,141-8688,JapanTEL:+81-3-5739-5800 FAX:+81-3-5739-5821(OsakiMTBuilding)9-11,5-chome,Kitashinagawa,Shinagawa-ku,Tokyo,141-0001,JapanTEL:+81-3-5739-5800 FAX:+81-3-5739-5821*TheswitchboardnumberissameasONBuilding.●OsakaBranchOffice:(MidosujiMitsuiBuilding)1-3,4-chome,Bingomachi,Chuo-ku,Osaka,541-8536,JapanTEL:+81-6-6206-6751 FAX:+81-6-6206-6760●KyusyuBranchOffice:(ShinkansenHakataBuilding)1-1,HakataekiChuo-gai,Hakata-ku,Fukuoka,812-0012,JapanTEL:+81-92-474-6565 FAX:+81-92-441-4440●HarimaPlant:19,Niijima,Harima-cho,Kako-gun,Hyogo,675-0155,JapanTEL:+81-79-436-2500 FAX:+81-79-436-2506●TechnicalResearchCenter:1-4,1-chome,Murotani,Nishi-ku,Kobe,651-2241,JapanTEL:+81-78-992-6500 FAX:+81-78-997-0550●SalesOffice:Sapporo,Sendai,Nagoya●DüsseldorfOffice:BerlinerAllee55,40212Düsseldorf,GermanyTEL:+49-211-7792-0430 FAX:+49-211-7792-0450●Phnom PenhOffice:SomaTower,1stFloor,#2C,Street120,SangkatPhsarThmeyII,KhanDaunPenh,Phnom Penh,Kingdom ofCambodiaTEL:+855-23-210-301 FAX:+855-23-210-309

●HeadOffice:31stFloor,PearlPlaza,561ADienBienPhuStreet,Ward25,Dist.BinhThanh,HoChiMinhCity,VietnamTEL:+84-28-3899-1355 FAX:+84-28-3899-1525●HanoiBranchOffice:6thFloor,TIDBuilding,4LieuGiaistreet,CongViWard,BaDinhDistrict,HanoiCity,VietnamTEL:+84-24-3762-1940 FAX:+84-24-3762-1942●LongDucPlant:LotⅠ-1,LongDucIndustrialPark,LongDucWard,LongThanhDistrict,DongNaiProvince,VietnamTEL:+84-251-320-1050 FAX:+84-251-320-1051

URL:http://www.kobelco-eco.co.jp/english/

PrintedinJapan18080200FThis brochure is made of recycled papers.

ANN U L R T O F R€¦ · T h eWa te rT r e a tme n tA s s o c ia te dB u s in e s sc o n s is tso...

Documents

Transcript of ANN U L R T O F R€¦ · T h eWa te rT r e a tme n tA s s o c ia te dB u s in e s sc o n s is tso...