T O P

M E S S A G E

T O P

M E S S A G E

A Resolute Dedication to Using Knowledge
and Technologies Backed by Many Yearsof Accomplishments to Contribute to Society
Q. Why is SHO-BOND issuing an integrated

Q. How would you describe SHO-BOND from

A. The public’s interest in infrastructure maintenance isincreasing year after year. I believe that SHO-BOND, as aleading company in this business sector, should provide
even more information within our organization and to the
public about business activities.
For more than 60 years, the SHO-BOND Group has
contributed to society as a company specializing in the
repair and reinforcement of infrastructure. We did notplace emphasis on public relations activities because we
operated mainly as a subcontractor in prior years andmost of our work is public-sector projects. However, thefrequency of calls from other countries about ourservices is increasing along with the importance ofinfrastructure maintenance. MITSUI & CO., LTD.
contacted us about working together and we haverecently started a joint overseas business. These events
made us realize that we needed to give the public evenmore information about our organization.
Our integrated report is also a means of explaining to
our workforce the philosophy and commitment of the
SHO-BOND Group’s senior management. We aredetermined to continue taking on new challenges. Mostof our operations are currently in Japan. I believe that
expanding our activities outside Japan will be vital to ourability to continue to grow. This is why the senior
executives have a strong commitment to taking on thechallenge of launching and enlarging operations in othercountries. We want everyone in our group to be aware ofthis goal and understand the thinking behind it.
I believe that this report will help our employees andtheir family members to share the SHO-BOND’s Purpose
and to realize that we are contributing to society throughour business activities of infrastructure repair andreinforcement.

A. We are a unique company that specializes in repair

report for the first time?

P r e s i d e n t a n d R e p r e s e n t a t i ve D i r e c t o r

Tatsuya Kishimoto

19

SHO-BOND 2022 Integrated Reportyour standpoint as the president?

and reinforcement work and is capable of providing a fullline of services for these projects.
Repair and reinforcement projects differ from theconstruction of new structures with regard to designs.
For new construction, a company is basically required
only to finish the project as designed. At our projects,
there is a drawing but we cannot know the true status ofa structure’s deterioration until we start working at thesite. Only then can we know what types of procedures
will be needed as well as the volume of work. For
instance, what initially appears to be a mild sprain may
turn out to be a broken bone requiring a completely
different type of treatment. Another difference regarding
repair and reinforcement work is time constraints
because a structure often continues to be used during a
project. This makes our work very difficult and explains
why our customers seek a company with a broad rangeof expertise. SHO-BOND has a long record of providing
customers with a full line of services, extending fromanalysis of deterioration to proposals for reinforcement,
the supply of materials, and the actual repair andreinforcement procedures. I believe this breadth of ourcapabilities is why we have earned a reputation for
reliability among our customers. Earning and retaining
this trust is not easy. At SHO-BOND, this reputation islargely backed by our team of highly skilled engineers.
We have a large number of engineers who are repair andreinforcement work enthusiasts and find this to be an
extremely interesting and rewarding job.
Our Technical Research Institute (note 1) is one of ourgreatest strengths. Repair engineering (note 1) is a
registered trademark of ours. This term expresses ourcommitment to shifting the basis of repair andreinforcement work from simply the experience ofworkers to the level of scientific research. Furthermore,this institute does not use our company name. This isbecause we want to advance repair and reinforcement
technologies for society overall rather than only for

SHO-BOND 2022 Integrated Report20

T O P

P 39▼

Research and Development

P 11

▼

Comprehensive Maintenance System

Notes:
1. Repair engineering (“補修工学 ®”) and the Technical Research Institute(“補修工学研究所®”) are registered trademarks of SHO-BOND
CORPORATION in Japan.
2. AI Shindanshi (“AI診断士®”) is a registered trademark of SHO-BOND
CORPORATION in Japan as of March 2023.

Q. What are you doing now to makeSHO-BOND even more powerful?

A. SHO-BOND is a unique company in the constructionindustry as a provider of a comprehensive maintenanceservices. But we should not become complacent. We
want to preserve our competitive edge of being able toprovide the same high level of work anywhere in Japan
precisely because we specialize in maintenance. This is
why we need to constantly upgrade our capabilities.
Our highest priority is human resource development.
Large projects on expressways require advanced skills.
The size of bridges, volume of traffic and othercharacteristics of these projects present big challenges.
Only engineers with the necessary know-how andexperience can handle this type of work. Years ago, we
at times accepted expressway project orders where our

Safety patrols by the president

21

SHO-BOND 2022 Integrated Reportskills were inadequate. We learned difficult lessons as
projects were delayed, we lost the trust of customers
and our employees were overworked. To prevent thissituation from happening again, we have beenstrengthening training programs, including by opening
the Tsukuba Training Center in 2021. We are alreadyreceiving positive feedback from people who attend
classes at this center.
In addition to human resource development, we aretaking many other actions based on the current
Medium-term Business Plan for building an evenstronger foundation for our operations. Reinforcing oursafety-first culture is one of our most important
initiatives. Even a small oversight regarding safety can
result in a fatality. A serious accident could also impact
our sales and earnings if clients force us to suspend
business operations. To reinforce everyone’s
commitment to safety, our entire group is conducting
initiatives for creating SHO-BOND culture of safety.
Training programs at the Tsukuba Training Center basedon actual jobsite tasks and safety awareness campaigns
have proven to be effective. We are also implementing
other strategic initiatives to create a stronger foundation
for more growth.
Medium-term Business Plan

P 25

▼

ourselves. The institute has a full lineup ofstate-of-the-art analytical equipment used for this field ofstudy. I believe that no other laboratory anywhere isbetter equipped to study the degradation of concrete
structures. To some extent, we accept requests forexperiments or analysis from people outside our group to
support progress involving repair engineering. One
recent accomplishment is the use of knowledge acquired
over many years to develop AI Shindanshi, an artificial
intelligence diagnosis system (note 2) for the degradationof concrete structures.

Q. What were some of your most memorable
jobs at SHO-BOND?

Q. Why did you decide to leave your position at
another company to join SHO-BOND?

A. After graduation, I started working at Kumagai Gumi,a large general contractor, because I wanted to work on
big civil engineering projects. My 15 years at thiscompany were very fulfilling as I participated mainly as adesign engineer at tunnel, levee and other projects.
During the construction sector downturn that began
when Japan’s bubble economy collapsed, I realized thatthe industry was likely to shift from building new
structures to the repair and reinforcement of existing
ones. My visit to SHO-BOND’s Technical ResearchInstitute convinced me that I wanted to become part ofthis organization.
Another reason I chose Kumagai Gumi was the large
scale of the company’s operations outside Japan. The
company had the intention of expanding their civilengineering business to other countries. In fact,overseas orders were a large share of their total sales.
This may partly explain why I decided that we should
expand SHO-BOND’s operations to other countries.

A. My first job at SHO-BOND was a repair project ofabout ¥50 million at the Sennin Tunnel in Iwate
prefecture. Traffic restrictions at the two-lane tunnel,
which is about 2.5km long, made this project very
challenging. We had to work on one side while vehicles
used the single lane on the other side. Drivers had to
wait as long as 15 minutes to enter the tunnel. I came up
with the idea of providing a rest area to allow drivers to
get out of their vehicles to relax and enjoy the beautiful
scenery of this area. In addition, I hired a person who
was friendly and particularly good at communicating as a
guard at the tunnel project. With these measures inplace, work to repair the tunnel went well. This type ofchallenge would not exist when building something new.
I learned a valuable lesson about the importance of
maintaining close ties with people living near a jobsite inorder to complete a project.
Complaints that force a suspension of work are oneof the biggest problems at construction projects. Work
must take place in a manner that does not disturb
nearby residents or create concerns for anyone else
associated with the project. This is especially important
for repair and reinforcement work on roads where traffic

M E S S A G E

needs to be restricted. A skillful field representative who
can manage these matters differs somewhat fromothers.
In addition, the Sennin Tunnel project showed me
where improvements were needed at SHO-BOND. In
those days, there was little education and follow-up
support for workers at the jobsite. As a result, there weredifferences in the skills of the people assigned to
manage construction sites. This is one reason that I am
now placing so much emphasis on human resource
development.
Another memorable job is a bridge project where I
learned a lesson by overcoming a mistake. We were
driving large steel parts into a road but had not
sufficiently checked what was underneath the road. We
hit a water pipe that spewed water high into the air. Until
then, most of SHO-BOND’s projects were at bridges andthere were not many engineers accustomed to placing
materials in the ground. Though I was not in charge ofthe project, I rushed to the jobsite and help them as an
excavation expert. I used my soil excavation know-how
acquired at Kumagai Gumi and was able to stop the leakafter about one month.
My experience at Kumagai Gumi was very helpful forthe underground work. This taught me the importance ofa workforce with diverse backgrounds. When an
unfamiliar accident happens, someone with theknow-how to respond properly will be needed.
Maintaining a team of engineers encompassing many
types of skills and experience reduces our exposure torisk concerning these accidents. Therefore, I always tellpeople to keep this diversity of backgrounds in mind
when hiring new employees.

SHO-BOND 2022 Integrated Report22

T O P

Q. What is your view of the current business

Q. What is SHO-BOND’s stance regarding

A. Repair and reinforcement projects are accounting fora steadily larger share of the demand in the constructionindustry. In Japan’s expressway sector, the large-scale
renewal and repair projects, totaling about ¥5 trillion
between 2015 and 2030, are progressing. The outlook is
positive, but we are always looking ahead to after theseprojects are completed. Local governments are
responsible for the maintenance of most bridges inJapan. Many governments are encountering difficulties
finding people with the right skills and the funding for
maintenance. I believe that we can help them to solvethese problems by using our decades of experience andhighly skilled workforce. Other countries have similar
problems concerning infrastructure maintenance. Thereis an increasing awareness that preventive maintenancecan lower the total cost of the utilization of a bridge orother structure. However, most governments are not yet
establishing budgets for these maintenance procedures.
We need to pay attention to these issues and try toassist them by using our knowledge and experience.
In other countries, we are at the stage of raisingawareness of the importance of preventive maintenancein order to start receiving orders. To accomplish this, we
are working with MITSUI & CO., LTD. and seeking
prominent partner companies in countries where wewant to do business. We want to share our unique
technologies, construction methods and materials withthese partner companies that perform construction
activities in other countries. We are also seeking to utilize
our AI diagnosis expertise as we expand overseas. Our
main targets are Thailand and other Southeast Asian
countries, as well as North America. Every region has its
own distinctive needs. In Thailand, for instance, we plan
to use materials that are easy to work with because
construction workers may have little or no experience at
repair and reinforcement projects. In North America, we
can share our exclusive earthquake resistancetechnologies that we have acquired over the years at our
projects in Japan. Receiving orders there will require
receiving official certifications and explaining ourtechnologies and other innovations to design
consultants. This process takes time, but I am confident
that creating a sound base for our operations like this will
start producing significant benefits in the near future.
I am also thinking about what kind of organization
SHO-BOND should be 10 or 20 years from now. First ofall, we must continue to make our highway and bridge
maintenance business, which is our key strength, theA. The SHO-BOND Group is a provider of maintenancefor infrastructure and many other types of structures. By
extending the lives of structures with proper
maintenance, we significantly lower the consumption ofenergy and resources. This is much more responsible
than using a structure until it fails and then replacing it.
Maintenance lowers CO 2 emissions too. A lower costover a structure’s entire life cycle is another benefit.
Consequently, our business activities are supporting
progress regarding sustainability.
The contribution of our core business activities is not
our only involvement with sustainability. We also have alarge number of initiatives based on ESG materiality. For
example, we use our business activities to reduce CO 2
emissions, we have rigorous water quality and hygiene
management programs, we provide our people with safe,
pleasant, productive workplaces, and we are always
seeking ways to strengthen our governance.

23

SHO-BOND 2022 Integrated Reportsustainability?

P 29

Sustainability of SHO-BOND

central component of our growth. Furthermore, although
this is still only a rough idea, we should think about using
this maintenance expertise to extend operations torailways, electric utilities and other market sectors inJapan. Building a network of relationships withcompanies in various industries could allow us to raise
the awareness of the necessity of repair andreinforcement and to increase utilization of thetechnologies and knowledge we have cultivated. The
market for the maintenance of structures is enormous.
The SHO-BOND cannot cover all categories of thismarket by itself. Expansion to more markets will
therefore require the creation of networks with othercompanies.

P 38

▼

Overseas Business

P15▼

Business Environment

P43▼

Materiality

infrastructure repair and reinforcement services, lives onin our corporate philosophy. Our senior executives
embrace this philosophy and make it an integral part oftheir words and actions. Our employees use thephilosophy as a guiding principle for the activities
needed to accomplish their respective missions. I want
the SHO-BOND Group to continue advancing together
by adhering to this philosophy.
I am very grateful for the support of ourshareholders. We will continue to aim for sustained
growth along with suitable distributions to shareholders.
I hope that our shareholders will share with us theawareness of the importance of contributing to society
through our business activities. I look forward to yourcontinued support.

▼

climate and the outlook?

M E S S A G E

Q. What is your message to the stakeholders of
the SHO-BOND Group?

A. The importance of the SHO-BOND Group in society
will continue to increase as the public becomes moreaware of the need for infrastructure maintenance. We are
one of only a very few companies specializing in thisfield. I believe that we have a responsibility to meet the
expectations of shareholders, employees and all otherstakeholders by resolutely dedicating ourselves to using
knowledge and technologies backed by many years ofaccomplishments to contribute to society. This
integrated report with information about our past,present and vision for the future is one way to express
our commitment to fulfill this responsibility. I wanteveryone at our group to read this report so that we canall move forward as a unified team to accomplish thegoals that we all share.
Our corporate philosophy is the fundamental
guideline for all of our group’s activities. The philosophy
embodies the thinking of our founder Akira Ueda. The
spirit of Mr. Ueda, who identified trends in the businessclimate and was first to recognize the need for

SHO-BOND 2022 Integrated Report24Medium-term Business Plan
Financial Targets
SHO-BOND will aim for sustainable growth of 10% or more over three
years with the operating profit target of ¥17,500 million in the final year byincreasing net sales further and maintaining the operating profit ratio at ahigh level. By continuing management that prioritizes capital efficiency,
return on equity (ROE) will be maintained at 12% or more through themedium-term period.

Further initiatives for large-scale construction by reinforcing organizational capabilities

Technologicaldevelopment

Financialsoundness

Operating Profit

17.26 billion yen

17.5 billion yen

Profit Attributable to Owners of Parent

12.36 billion yen

12.0 billion yen

13.4%

12.0%

(¥bn)
14

Plan

Plan

(%)

12

16

10
Product sales

More competitive forreceiving orders
Maintain advanced
construction capability

14

Full-scale start of operationsof SB&M
Diversification of sales channels

A company specializing in maintenance

Shareholders’ equity ratio: 82%

87.5 billion yen

8

17.5

6
11.3

4

Dividend payout ratio: 50%
Total return ratio: 75%

Operating margin: 19%
ROE: 12%

15.7

12

17.8

17.3

10

2

8

Shareholder
returns

Operating Profit

Profitability

12.4 12.7 12.0

Business Strategies

New construction methods andproduct development
Effective use of training centers81.19 billion yen

ROE & Profit Attributable to Owners of Parent

(¥bn)
18

More ESG activities and contributions to SDGs

Constructionwork

Net Sales

ROE

Operating Profit

FY2024 Targets

FY2021

FY2023

FY2022

Operating Margin

0

FY2024FY2018FY2021 FY2022 FY2023 FY2024

Profit Attributable to Owners of Parent

Management Strategies“Honing our inherent
strengths what it is thatmakes us SHO-BOND”

Develop new technologies ahead of other companies and take on the challenge of a new productsales strategy
Increase orders through human resource development that can respond to market changes
and the increase of productivity
Manage both profitability and financial soundness and enhance shareholder returns

FY2022 Results

What is the SHO-BOND Group?

In the “Medium-term Business Plan (the fiscal year ended June 30, 2022 - the fiscal year ending June 30, 2024),” we will work to achieve sustainable profit
growth and the improvement of corporate value under the basic policy of “Honing our inherent strengths what it is that makes us SHO-BOND.” We defined the“what it is that makes us SHO-BOND” in terms of business as “construction work capability,” “technological development capability” and “product sales
capability,” and in terms of management as “profitability,” “financial soundness” and “shareholder returns.” In accordance with the Medium-term Business Plan,
we are trying to refine SHO-BOND’s strengths and proceeding with building a system ready for the stage of further accelerated growth. For the fiscal year ended
June 30, 2022, we set steady results for “upgrade the order receipt strategy utilizing the in-house company structure” and “more activities for large projects andconstruction work capability” as business strategy. In terms of stronger foundations for growth, we focused on various measures related to human resources
operation, such as “to become more competitive for capturing orders by developing human resources capable of adapting to changing markets” and “a strong
safety culture and rigorous on-site training.”

ROE

Capital Policy
Strategic Initiatives

Progress in FY2022

A Stronger Foundation for Growth
Strategic Initiatives

Progress in FY2022

In-house companies hold the large project review
meetings to discuss the order receipt strategy andcheck the optimal appointment of engineers, levelingof quarterly sales, and the construction work
capability involving partner companies.

To become more competitive for
capturing orders by developing
human resources capable ofadapting to changing markets

More activities for large
projects and construction
work capability

Both in-house companies have sought to secure
construction work capabilities by appointing partnercompanies in larger areas than ever. SHO-BOND
received 21 large orders of 1 billion yen or more (9orders in the previous fiscal year), and the share ofsales from expressway companies rose up to 60%(47% in the previous fiscal year).

Personnel system reforms
that reflect the changing
business environment

With the keywords of “satisfaction”, “growth”,“confidence” and “sense of fulfillment”, we haveembarked on a reform of personnel systems.
External consultants were brought in to ensure
objectivity, and the project is being carried out
while taking into account internal needs.

Challenge a new productsales strategy by SB&M

We have worked on business activities in Thailand
and North America, and approached new privatecompanies and sales of foreign products in Japan
though the impact of the COVID-19 crisis is still
significant. In May 2022, we have started local
manufacturing of our products in Thailand.

A strong safety culture andrigorous on-site training

The action plans for creating a safety culture are
steadily progressing, and new initiatives such as
remote and video-based training have been
started. The frequency rate (0.67), the KPI, is below
the national average.

We as a whole have aimed to reduce construction
costs by having Kyna-Tech undertake water jet
construction work within the group. In addition, a
new cross-company team has been established inorder to strengthen partnerships with partnercompanies and to pursue further cost reduction
measures.

New technologies forpreventive infrastructure
maintenance

We are researching new technologies in various
fields, and some developed inorganic materials havebeen utilized in construction projects. We have also
worked to shorten delivery time and reduce costs
for existing products and to make resin-based ones
non-poisonous.

Use of the digitaltransformation (DX)for higher productivity

Build a framework for
responding to ESG issues

In terms of on-site DX, we have encouraged broaduse of digital tools such as construction
management applications and 3D design software,and the development of an AI damage diagnosis
system has advanced to the level of a practical
study.
In July 2022, we expressed our support for the
TCFD recommendations and calculated ourgreenhouse gas emissions under the guidance of
external consultants. In addition, we havepromoted the disclosure of non-financial
information, including the formulation of various
policies and KPIs related to ESG.

Dividend Payout Ratio

51.1%

50.0%

Total Return Ratio

75.1%

75.0%

Total Return Ratio
(¥bn)
10

FY2024 Targets

Cross-shareholdings
Plan

3.0

8

(%)

(¥bn)
9

FY2022 Result
Sale
▲0.54
Changes inmarket value +0.32▲0.22￥bn

8

Plan

6

6.3
5.7

4
2
0

3.4

FY2018

7

8.4
7.3

6

7.1

5

FY2021 FY2022 FY2023 FY2024

Total Dividends
Total Return Ratio
Purchase of Treasury Shares

4

(%)

5.8
FY2015FY2018FY2021 FY2022 FY2023 FY2024

Cross-shareholdings
The Ratio of Cross-shareholdings to Net Assets

Company Information

More joint activities by
increasing cooperation
among group companies andother companies

FY2022 Results

Corporate Governance

Upgrade the order receipt
strategy utilizing thein-house company structure

The workforce reached 951 at the end of June 2022 (916 at
the end of June last year). The operation has been started at
Tsukuba Training Center in January 2022, providing practicaltraining for SHO-BOND young people and the staff of partnercompanies. Both in-house companies also have implemented
their own human resource development measures to raise thelevel of personnel capabilities.

About dividends for the continuous and stable return of profits, SHO-BOND
will aim to steadily increase the dividend amount per share by maintaining adividend payout ratio of 50% or more. Additionally, we will purchase¥10,000 million of treasury shares over three years, and maintain a total
return ratio of 75% or more.We will reduce the ratio of cross-shareholdings
to net assets by selling 20% on a fair value basis.

Sustainability

Business Strategy

Message from the Chief Financial Officer

Director and General Manager of Corporate Planning Department

Yasuhiro Sekiguchi

Figure 1: Percentage of Expressway Sales andAmount of Orders(Million yen)
60%

150.0

40%

100.0

20%

50.0

0%

FY2016(Billion yen)
20
15
10

1Q

2Q

3Q

FY2018FY202054.1

27FY2016FY2017FY2018

SHO-BOND 2022 Integrated Report

FY2019FY2020

FY2021

FY20220

FY2016FY201780.3
65.4

FY2020

FY2021

40.5

FY2018FY201911.0%

1.50
FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

1.00

PBR

Figure 6: Profit Attributable to Owners of Parent(Billion yen)15

As a rule, the SHO-BOND Group does not purchase or hold the stock ofsuppliers and other business partners with the exception of cases wherepurchasing and holding stock helps conduct business operations
efficiently and maintain and strengthen business relationships, thereby
contributing to the medium to long-term growth of its corporate value.
When a company that holds our stock as a cross-shareholding notifies
us of the intention to sell this stock, we will never make any attempt tostop this sale. The current Medium-term Business Plan includes the plan
to reduce the ratio of cross-shareholdings to net assets from about 8% to
6% by selling 20% on a fair value basis (as of June 30, 2021).

+69%

10

0

7.3

FY20188.1

FY201911.3

9.0

FY2020

FY2021

12.4

FY2022

Figure 7: Total Amount of Shareholder Returns(Billion yen)
10

+176%

3.0

5

(Billion yen)

32.4

Distributing earnings to shareholders is one of our highest priorities. The
basic policy is to pay a dividend consistently that is based on results ofoperations. Figures 6 and 7 show our net income and shareholder
returns during the past four years. Since FY2018, net income has
increased 69% and shareholder returns, including the purchase oftreasury shares, are up 176%. Furthermore, the average annual incomeof employees increased 35%. Based on our policy of distributing
earnings to shareholders and employees, improving remuneration for
employees is a priority along with raising shareholder returns.

4Q

70.9

2.00

Shareholder Returns

FY2022

50

26.6

12.0%

ROE

Cross-shareholdings

17.6

FY2016

2.50

5

19.5

18.7

17.2

13.0%

10.0%

Amount per Order

Figure 2: Quarterly Construction Sales

25.1

20

0.0

3.00

FY2022Further Challenges for Improving
Productivity
As was explained earlier, Japan’s infrastructure maintenance market has
been growing year after year since 2016. Sales and earnings of the
SHO-BOND Group have increased significantly along with measures toreceive orders for large-scale projects. We believe that the expansion ofthis market will continue at a moderate pace. Numerous activities areunder way for more improvements in productivity. At the Tsukuba
Training Center, our employees as well as people from partnercompanies receive training that will enable them to perform construction
tasks even more efficiently. In addition, we plan to use the operations of
our overseas infrastructure maintenance joint venture with MITSUI & CO.,LTD. for raising earnings per employee in our construction material sales
business. The SHO-BOND Group, as a specialist in infrastructure
maintenance, will continue using productivity initiatives possible only atan organization with our expertise and resources in order to aim for theconsistent growth of sales and earnings.

0

3.4

3.6

FY2018FY2019Dividends

5.7

4.3

FY2020

FY2021

6.3

FY2022

Purchase of Treasury SharesCompany Information

23.5

FY2022

14.0%

Corporate Governance

25

24.4

25.5

FY2021

31.8
28.6

30

FY2020Figure 4: Order Backlogs (at the End of Fiscal Year)
33.3

+42%

FY2019(PBR)
3.50

Sustainability(Million yen)
35

FY2018Pct. of Expressway Sales

5

Figure 3: Labor Productivity

FY2017

Figure 5: ROE and PBR
(ROE)
15.0%

Business Strategies

The start of large-scale renewal and repair projects by all expressway
companies has greatly changed Japan’s infrastructure maintenancemarket. These very costly projects are difficult and will take a few years
to complete. As a result, the characteristics of this market differ fromprior years when most orders were from the national and local
governments.
The SHO-BOND Group is taking many actions to take on these large
expressway projects. One measure is revisions to the internal infrastructure
for conducting business operations that began with the previous
Medium-term Business Plan (FY2019-FY2021). As shown in Figure 1, thesize of each new order has been increasing and expressway company
projects rose to 60% of all construction sales in FY2022.
The large-scale renewal and repair projects of the expressway
companies will not be based on the fiscal year of the Japanese
government, which makes these activities different from public-works
projects of the national and local governments. Orders can be received andwork can proceed throughout the year. The resulting higher utilization rateof construction engineers is levelling off, as shown in Figure 2.
The increase in large projects, backed by benefits of numerous
initiatives and the efforts of our engineers, has significantly raised our laborproductivity, as shown in Figure 3. During the past six years, this figure has
increased about 42%.
Another big change due to the larger number of big projects is the ability
to maintain large order backlogs at the end of every fiscal year, as shown in
Figure 4. Most national and local government orders can be completed in
the same fiscal year that the orders were received. Therefore, theseorders generally do not become part of the fiscal year-end backlogs. The
larger volume of this backlogs has raised the stability of sales andearnings. As a result, beginning with the previous Medium-term Business
Plan, we have been increasing the workforce and further upgrading ourability to receive orders.

“Honing our inherent strengths what it is that makes us SHO-BOND” isthe central theme of the current Medium-term Business Plan
(FY2022-FY2024). In terms of finances, what makes us SHO-BOND are
financial soundness, profitability and shareholder returns. Figure 5 shows
our return on equity (ROE) and price-to-book ratio (PBR) during the past
several years. For a high PBR, we must maintain an equity spread bykeeping our ROE higher than the cost of equity. We will continue to placepriority on the ROE. In addition, we will enhance the disclosure of
non-financial information, including environment-related information, as
we continue the IR activities that we have been focusing on. We believethat raising the visibility of the outlook for results of operations will holddown the cost of equity.

Management Strategies

Results of Operations

Financial Management Policy

What is the SHO-BOND Group?

SHO-BOND is the only listed construction company in Japanthat is a specialist in infrastructure maintenance. The stock has ahigh PBR due to this unique identity and financial managementwith emphasis on the ROE by prioritizing profitability andcarefully selecting orders to accept.

SHO-BOND 2022 Integrated Report28Materiality

Materiality
https://www.sho-bondhd.jp/english/csr/materiality/

Sustainability Policy
Comprehensive Maintenance System backed by the organizational capabilities
S Comprehensive maintenance capabilities (investigation, designs, construction)

for public safety and confidence■■

Process to Identify Materiality
Establishment ofpriorities

Materiality
proposalConfirmation ofsuitability

Identification anddisclosure ofmateriality

Social issues

Materiality

S Develop and use technologies for social issues

Corresponding SDGs

maintenance resources tocontribute to society

S Ensuring occupational health and safety

Contribute to the development of social infrastructureby using partner companies interactions and thegroup’s aggregate resources for all maintenanceprocesses, whether large or small.

Ensure sustainable consumption and production
patterns.

There are many programs for the physical and mental well-being of employees,
including measures to eliminate long working hours and provision of mental healthcare.

S Activities to increase productivity

We use advanced technologies combining technologies in the fields of chemistry
and civil engineering for the development of environmentally and socially
responsible materials and construction methods.

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Strengthen the means of implementation andrevitalize the global partnership for sustainable
development.

We do everything possible to hire many types of people and make hiring decisions
with fairness and no discrimination of any kind.
We maintain a training and education infrastructure for giving people the knowledge
to play key roles in the sustainable growth of the SHO-BOND Group. We arededicated to giving everyone the opportunity to reach his or her full potential.

■

Strengthening technological skills and improving operating efficiency results inmore added value and working style reform activities contribute to higher
productivity.
We use many types of equipment for raising productivity in order to raise theefficiency of all tasks required for investigation, design, construction and othertypes of work.

S Employee retention and sound labor relations■

We will use a fair personnel system for evaluating performance to retain talented
people and ensure that knowledge is passed on. We will put focuses especially on
giving younger employees opportunities to advance and providing many job
opportunities for seniors.

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We comply with all labor laws and regulations and have established numerous
programs and frameworks for maintaining pleasant and productive workplaces atgroup companies and our partner companies.
We maintain sound labor relations by encouraging dialogues between labor andmanagement, providing access to consultations and using other measures.

Business Strategies

S Leverage comprehensive

Comprehensive maintenance systembacked by the organizational capabilities■

S Recruiting and training programs■

S Establish a resilient infrastructure

We use our expertise as an infrastructure maintenance specialist for infrastructure
repair and reinforcement projects for resistance to natural disasters and other threats.

Our highest priorities are the protection of life and the safety of construction
activities. Based on this philosophy, our goal is no workplace accidents atconstruction and manufacturing sites. We have rigorous health and safetymeasures that include activities for reducing vulnerability to risk factors.

Productivity improvement through technology development■

Materiality and the Sustainable Development Goals■

We work closely with customers on every stage of maintenance projects, including
investigation, designs and construction, and draw on the strengths of all groupcompanies to provide services of the highest quality for ensuring infrastructure safety.

Management Strategies

Identification ofsocial issues

S Workplace health and safety

What is the SHO-BOND Group?

The SHO-BOND Group has designated four Materialities based on social demands and the expectations of stakeholders. The Materialities are our priorities inorder to achieve sustainable growth with our stakeholders as the SHO-BOND Group plays a role in solving social issues while continuing to increase corporate
value.
To identify Materiality, we evaluated social issues from the standpoints of the importance to stakeholders and the importance to business operations. Then 22
social issues that were particularly important from both standpoints were selected as the issues that the SHO-BOND Group should target.
We have also established a Sustainability Policy to improve the medium to long-term corporate value, and contribute to creating a sustainable society bycontinuously implementing initiatives in accordance with materiality priorities.

Sound governance and measures for more improvements
S Develop and use technologies for social issues
S Activities to increase productivity

S Employee retention and sound labor relations

Improve productivity by combining chemical and civilengineering technologies to create new technologies
and by conducting training and education programs.

S Improve economic performance

Promote sustained, inclusive and sustainableeconomic growth, full and productive
employment and decent work for all.

Build resilient infrastructure, promote inclusive
and sustainable industrialization and foster
innovation.

G Strengthen corporate governance
G Strengthen risk management■

G Strengthen risk management■■

G Fair business practices

Make sound and transparent governance to maintainthe foundation for relationships with all stakeholders.

Promote peaceful and inclusive societies forsustainable development, provide access tojustice for all and build effective, accountable
and inclusive institutions at all levels.

G Proper management of intellectual property■

Make cities and human settlements inclusive,
safe, resilient and sustainable.

E Assessment of environmental impact of projects

S Health and safety of customers and consumers■

Position the social infrastructure maintenance businessas a key component of the development of sustainable
cities that are environmentally responsible.

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SHO-BOND 2022 Integrated Report

G GovernanceWe contribute to the sustainability of public-sector resources by using advanced
maintenance technologies for life extension of infrastructure.

We properly manage and protect our intellectual property rights and performsurveys and other procedures to prevent the infringement of the rights of others.

We are dedicated to playing a role in creating a society where resources arerecycled. We use renewable resources and parts across the entire supply chain asmuch as possible and utilize resources in a manner that supports sustainability.

E Assessment of environmental impact of projects■

We use proper and responsible activities for the management and disposal ofwaste materials created by our business operations.

■

Take urgent action to combat climate change
and its impacts.

■

We are contributing to the fight against climate change by constantly working on
the reduction of greenhouse gases generated by our business operations.
We understand that life extension of infrastructure helps lower greenhouse gas
emissions. Skills as an infrastructure maintenance specialist are used for theutilization of business operations to play a part in combating climate change.

We will comply with the environmental requirements of every project and take otheractions for minimizing the effects of our activities on the environment and society.

S Development of sustainable cities as Japan’s population ages and declines■

We will use our maintenance expertise to supply practical and effective solutions
for problems involving aging infrastructure and other public facilities as Japan’s
population declines.

S Health and safety of customers and consumers■

E Measures to combat climate change■

S Social■

E Proper management of waste materials

Contribution to the development ofsustainable cities

S Community relationship

E Environment

G Proper management of intellectual property

We will maintain the management systems required to ensure the health and safetyof the people who use the infrastructure we help maintain and of customers whopurchased building materials from us. We will respond properly if a problem occurs.

S Community relationships■

We understand that the infrastructure can have a significant effect on communities
and regions and will maintain strong lines of communication in order to earn thetrust of the public.

Company Information

S Develop sustainable cities

IT systems and other measures are used for information security and there arestrict measures for the protection of personal and other confidential information. In
addition, education and training programs are provided to employees in order toreinforce their commitment to information security.

There are extensive education and training programs about compliance for
employees as well as monitoring and other activities in order to maintain aframework for fair business practices.

E Sustainable use of resources

E Sustainable use of resources

S Measures involving Japan’s falling population■

Contribution to the development of sustainable cities■

E Measures to combat climate change

Numerous measures are taken for the proper management of risk, including asystem of internal controls, a culture of recognizing and prudently taking on risk,
and a risk identification, evaluation and monitoring system that incorporates ESG
considerations.

G Information security measures

Corporate Governance

G Compliance with laws and regulations

E Proper management of waste materials

To meet the expectations of stakeholders for sustainable growth, our corporate
governance is structured for transparency, fairness, and the ability to makemanagement decisions with speed and confidence.

G Strict compliance with laws and regulations/fair and ethical business practices

Sound governance and measures formore improvements

G Information security measures

G Strengthen corporate governance

Sustainability

S Recruiting and training programs

Productivity improvement throughtechnology development

We are committed to using infrastructure reinforcement for natural disaster
resilience and other business activities in order to play a role in the fight against
climate change on the entire society.

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