DOWA HOLDINGS CO., LTD. LTD. HOLDINGS CO., DOWA 14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo 101-0021, Japan URL: http://www.dowa.co.jp/index_e.html Annual Report 2019 Annual Report DOWA HOLDINGS CO., LTD. Cover Photo: Annual Report 2019 Employee of DOWA THERMOENGINEERING CO., LTD. Printed in Japan For the year ended March 31, 2019 Corporate Philosophy CONTENTS 2 Introduction 2 Business Model 4 Corporate History 6 Our Five Core Business DOWA Helps Create Segments 8 Message from Management an Affluent, Recycling-Oriented 8 President’s Message 14 Business Review Society through its Business 14 Consolidated Financial Highlights Activities Worldwide. 16 Business Review 26 Management Foundation 26 ESG Initiatives Based on technologies and experience accumulated through the mining and 28 Corporate Governance smelting business, the DOWA Group operates unique, recycling-oriented 32 Board of Directors and Officers businesses ranging from the production of metals and the manufacturing of high-value-added materials to the recycling of waste. 34 Financial / Corporate Information 34 Global Network 36 Subsidiaries and Affiliates 38 Financial Review 42 Consolidated Performance Trends 44 Consolidated Balance Sheet 46 Consolidated Statement of Income 47 Consolidated Statement of Comprehensive Income 48 Consolidated Statement of Changes in Equity 50 Consolidated Statement of Cash Flows 51 Report of Independent Auditors 52 Corporate Data 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. In this report, fiscal 2018 represents the year ended March 31, 2019. ANNUAL REPORT 2019 1 Message from Management Financial / Introduction Management Business Review Foundation Corporate Information Business Model The DOWA Group plays a key functional role in the venous industry by employing three resource-recycling cycles rooted in its metal recovery technology. At the same time, the Group is helping create a more DOWA’s Businesses and the SDGs convenient society by developing and manufacturing high-value-added materials. Through the utilization of In September 2015, the United Nations General Assembly adopted the 2030 Agenda for Sustainable Development that includes the 17 Sustainable Development Goals (SDGs). For DOWA, which aims to operate resource-recycling-style this resource-recycling business model, we will contribute to achieving a sustainable society. businesses, the most relevant of these goals is SDG 12, “Ensure sustainable consumption and production patterns.” DOWA views the effective use of resources as an important social issue and strives to make progress in this area. DOWA’s Strengths DOWA’s Strengths Three resource-recycling cycles rooted in metal recovery technology Developing and manufacturing high-value-added materials 1 2 3 Electronic Metal Processing Heat Treatment Effective recovery of metals Metal recovery from waste, including Recycling of metal from Materials Business Business Business from raw materials via coordinated waste generated from factories discarded products (waste) smelting operations operated by external manufacturers Silver powder Copper rolled products Atmospheric heat treatment Worldwide share Domestic share furnaces Domestic share * * * No. 1 No. 1 No. 1 (for use in automotive components) Natural resources (for use in solar panels) (for use in automotive components) Concentrates (raw materials) * Based on in-house Nonferrous Metals Precious metals and investigation Business base metals Mine KOSAKA SMELTING & AKITA ZINC CO., LTD. REFINING CO., LTD. Venous industry Metal recycling Arterial industry Environmental Recycle material Management & Recycling Business Society Metal Clients (plants) Ash from recycling incineration Incineration Waste Raw materials Collection Landfill Waste and Waste transport Customer 2 DOWA HOLDINGS CO., LTD. ANNUAL REPORT 2019 3 Message from Management Financial / Introduction Management Business Review Foundation Corporate Information Corporate History Since its founding as a nonferrous metal mining and smelting company following the purchase of the Kosaka mine in Akita Prefecture, the DOWA Group has worked from the field of basic materials to support economic development, in line with the modernization of Japan. Later, as the Company was a witness to a turning point in Japan’s domestic mining industry, it took Environmental Management & Recycling Business steps toward business diversification, with the environmental conservation technologies and infrastructure 1977 1986 1989 1996 2003 2009 accumulated in the Nonferrous Metals business becoming a cornerstone of the Environmental Management & Recycling business. Starts waste Develops Starts Soil remediation Presence is Expands to treatment waste precious business established Southeast Asia Together with the utilization of recovered metals and initiatives taken to raise the added value of metals, business in treatment metals commences in China these efforts have become the source of the Electronic Materials business, the Metal Processing business, Yanahara area business in recycling Hanaoka area business and the Heat Treatment business. 1884 1959 1990 Mines are closed 1915–1916 1991–1994 Mines are closed 1898 1967 1971 1991 1994 2008 Nonferrous Purchases Acquires Hanaoka mine, New ore deposit New flash furnace AKITA ZINC CO., LTD. Platinum Operations Full operations of a Metals Kosaka mine Yanahara mine is discovered at commences is established to group start at Tizapa smelting facility for Kosaka mine operations operate a seaside metals zinc mine, combined recycling Pyrometallurgy zinc smelter recycling Mexico commence Business operations for black business ore commence commences in Kosaka 1953 Okayama Works is 2003 Sulfuric acid manufacturing is suspended established and begins manufacturing sulfuric acid 1968 2000 Business is suspended 1965 1973 1983 Electronic Production High-quality Metal compound and Compound Materials of magnetic iron oxide chemical production semiconductor powder for manufacturing begins in Honjyo area wafer manufacturing Business tapes begins begins begins in Akita area Production of magnetic powder for tapes begins 1919 1928 1957 1973 1992 2002 2007 2016 Metal Processing Toyosaki site Toyosaki site is Toyosaki Plant Co., Ltd. Plating process Metal-ceramics Processing base Copper rolled Presence is Business is established renamed becomes a subsidiary business begins in substrates for copper rolled product established in Toyosaki Plant Honjyo area manufacturing products is manufacturing Mexico Co., Ltd. begins established in for electronic China parts expands 1958 1991 1997 2015 Heat Treatment Business Tokyo Heat Capital investments Heat treatment Presence is Treatment Co., Ltd. made into India- processing begins established in becomes a based heat in the United Mexico subsidiary treatment company States (becoming a subsidiary in 2011) 1884 1945– 1970– 2000– The End of World War II and Rising Demand for An Evolving Business Environment Leads to Concentration on Core Business Segments and Founding Basic Materials Business Diversification Global Development The DOWA Group was established as a nonferrous metal mining When the war ended, the Company sought a fresh start, changing The impact of yen appreciation, a result of the shift to the floating Economic activities have become globalized, and corporate and smelting company through the purchase from the Meiji its corporate name to DOWA MINING CO., LTD. Then, responding exchange rate system, caused domestic metal prices to decline activities have undergone dramatic change, such as with the government of the Kosaka mine in Akita Prefecture, which was to the boom in agricultural products, the Company boosted precipitously, forcing the discontinuation of the mining business. shift of manufacturing sites to locations around the world. The Japan’s leading silver mine at the time. Just over a decade later, production at its Yanahara mine in Okayama Prefecture by This was a turning point in this business, which until then had Company has positioned five of its diversified business divisions the Company fell into financial crisis due to the depletion of silver expanding its output of iron sulfide ore, which is the raw material been the Company’s mainstay business. Faced with this situation, as core business segments, and together with concentrating its ore reserves. Nonetheless, it succeeded in