DOWA HOLDINGS CO., LTD. 14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo 101-0021, Japan URL: http://www.dowa.co.jp/ Cover photo (from the top): Silver powder Compound semiconductor wafer DOWA HOLDINGS CO., LTD. Magnetic powder Annual Report 2017 Printed in Japan For the year ended March 31, 2017 CONTENTS Through its business operations on the 2 Corporate History 12 Business Review 30 Subsidiaries and Affiliates 4 Our Five Core Business 22 CSR Policy and Planning 32 Financial Section world stage, Dowa seeks to contribute Segments 24 Corporate Governance 69 Corporate Data 6 Message from Management 27 Board of Directors and Officers to the creation of prosperous 10 Financial Highlights 28 Global Network communities and the emergence of a resource recycling society. Silver powder Heat treatment furnaces Compound semiconductor wafer Metals recycling Copper powder Precious Zinc metal-electroplating processing Metal-ceramics Waste treatment substrates Platinum group metals recycling High-performance copper alloys Cautionary note regarding forward-looking statements Within this report, present plans, forecasts, strategies, beliefs, and other statements relating to the Company and the Group that are not historical facts are forward-looking statements about future performance. These forward-looking statements are based on assessments by the Company’s management using information available at the time of writing, and many assumptions and opinions that form the basis for these statements derive from information that carries significant risk and uncertainty. Due to a variety of factors, actual performance may differ materially from the performance expressed or implied in these statements. Actual performance may be influenced by such factors as economic conditions, particularly changes in consumer trends and exchange rates, changes in legal and administrative systems, pressure due to competitors’ price and product strategies, a reduction in the salability of the Company’s existing and new products, interruption of production, infringement of the Company’s intellectual property rights, rapid technological innovation, and damaging court rulings in major lawsuits. However, factors that may influence performance are not only limited to those listed here. LEDs In this report, fiscal 2016 represents the year ended March 31, 2017. ANNUAL REPORT 2017 1 Corporate History 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Fujita Gumi (1881–) DOWA MINING CO., LTD. (1945–) DOWA HOLDINGS CO., LTD. (2006–) Expands to Southeast Asia (acquires Modern Asia 2009 Environmental Holdings, Inc.) Environmental Management Since its founding as a nonferrous metal mining and smelting company following the purchase of the Kosaka mine in Akita & Recycling Business Prefecture, the Dowa Group has worked from the field of basic materials to support economic development, in line with the 1996 Soil remediation business commences modernization of Japan. Later, as the Company was a witness to a turning point in Japan’s domestic mining industry, it took steps toward business diversification, with the environmental conservation technologies and infrastructure accumulated in the 1989 Starts precious metals recycling business Nonferrous Metals business becoming a cornerstone of the Environmental Management & Recycling business. Together with the utilization of recovered metals and initiatives taken to raise the added value of metals, these efforts have become the 2000 Acquires Chiba-based waste treatment company source of the Electronic Materials business, the Metal Processing business, and the Heat Treatment business. At present, the Company has positioned these five business divisions as core business segments, and is working toward 1986 Develops waste treatment business in Hanaoka area enhancing competitiveness and global development. 1977 Starts waste treatment business in Yanahara area 1915 / 1916 Acquires Hanaoka mine, Yanahara mine Mine closings 1991 / 1994 Nonferrous Metals Business 1994 Operations start at Tizapa zinc min, Mexico 1884 Purchases Kosaka mine Mine closings 1990 Full operations of a smelting facility for combined 1898 Pyrometallurgy operations for black ore commence in Kosaka New flash furnace commence operations 1967 2008 recycling commence Founding (September 18, 1884) AKITA ZINC CO., LTD. is established to operate a seaside zinc smelter 1971 Established as a nonferrous metal mining and smelting company through the pur- chase from the Meiji government of the 1991 Platinum group metals recycling business commences Kosaka mine in Akita Prefecture, which was Japan’s leading silver mine at the time. Okayama Works is established Sulfuric acid manufacturing is suspended Just over a decade later, the Company fell Manufacturing of sulfuric acid 1953 2003 Electronic Materials into financial crisis due to the depletion of silver ore reserves. Nonetheless, it suc- Business ceeded in developing a technology for High-quality iron oxide manufacturing begins 1968 Business is suspended 2000 refining a complex sulfide ore, known as “black ore,” which helped revive the Okayama Works Company as a copper mine. (currently DOWA ELECTRONICS 1983 Production of magnetic powder for tapes begins MATERIALS OKAYAMA CO., LTD.) 1965 Production of reduced iron powder begins The end of World War II and rising demand for basic materials Compound semiconductor wafer manufacturing begins in Akita area When the war ended, the Company sought a fresh start, changing its corporate name to DOWA 1982 MINING CO., LTD. Then, responding to the boom in agricultural products, the Company boosted production at its Yanahara mine in Okayama Prefecture by expanding its output of iron Metal compound and chemical production begins in Honjyo area sulfide ore, which is the raw material for sulfuric acid in fertilizers. In addition, in the high-growth 1973 period of the Japanese economy, when the demand for basic materials increased due to rapid industrialization, Dowa steadily grew its mining operations and Nonferrous Metals business. 1973 Plating process business begins in Honjyo area Metal Processing Overall view of the Kosaka mine Business smelting site (1907) Toyosaki Plant Co.,Ltd. is made into a subsidiary, copper rolled product manufacturing begins 1957 An evolving business environment leads to business diversification 2002 Processing base for copper rolled products is established in China The impact of yen appreciation, a result of the shift to the floating exchange rate system, caused domestic metal prices to decline precipitously, severely buffeting the domestic mining business. This was a turning point in this business, which until then Copper rolled product manufacturing for electronic had been the Company’s mainstay business. Faced with this situation, the Company 2007 parts begins bolstered its competitiveness in the smelting and processing businesses, and also took measures to develop its businesses further to downstream sectors, sought new businesses, and commenced manufacturing overseas in its efforts to advance its 1993 Metal-ceramics substrates manufacturing begins diversification in its business operations. Copper rolled products plant in 1958 Hamamatsu Heat Treatment Business (currently DOWA METAL CO., LTD.) Tokyo Heat Treatment Co., Ltd. becomes a subsid- iary, Heat Treatment business begins Capital investments made into India-based heat treatment company 1991 (becoming a subsidiary in 2011) 1997 Heat treatment processing begins in the United States 2015 Presence is established in Mexico Concentration on core business segments and global development Tokyo Heat Treatment Co., Ltd., headquarters and plant Economic activities have become globalized, and corporate activities have undergone dramatic change, such as with the shift of manufacturing sites to locations around the world. The Company has positioned five of its diversified business divisions as core business segments, and together with concentrating its management resources in those divisions, thereby improving its competitiveness, it has been expanding its business areas in and outside of Japan. 2 DOWA HOLDINGS CO., LTD. ANNUAL REPORT 2017 3 Our Five Core Business Segments Net Sales and Operating Income and Composition Ratios* Composition Ratios* (Fiscal year ended March 31, 2017) (Fiscal year ended March 31, 2017) Segment Policy Environmental Management Secure the top position in Asia in a bid to help improve & Recycling Business DOWA ECO-SYSTEM CO., LTD. the environment as one of the leading environmental companies in the world Waste treatment business: Integrated and comprehensive services extending from the col- Dowa Eco-System is expanding operations in Japan and lection and transport of municipal and industrial waste to intermediate waste treatment and abroad by furnishing comprehensive and reliable waste landfill disposal. ¥ 96.9 billion ¥ 6.6 billion management, soil remediation, and recycling services. As the leading environmental and recycling company in Asia, P. Soil remediation business: Provision of total support services ranging from soil survey and 12 % % we are strengthening our business foundations and increas- remediation to monitoring. 20.2 19.8 ing operating bases overseas to help improve the environ- Recycling business: Recovery of a variety of valuable metals from scrap generated during ment in Asia. production processes, consumer electronics, automobiles, and other discarded products. Nonferrous Metals Establish the world’s best recycling and smelting complex Business DOWA METALS & MINING