TKK ReportContents

Introduction

1
2

Management Principles
SnapshotSpecial Feature

3

History of Toyo Kanetsu

Management Strategy
To Our Stakeholders
18
26	The Toyo Kanetsu Group’s Value Creation Process

Business Review
Logistics Solutions Business
28
Plant & Machinery Business30
	OtherBusinesses
32(Including Life & Work Environmental Business)

Material Issues

34
36
44

The Toyo Kanetsu Group’s Material Issues
Progress on Initiatives Related to Material Issues
The Toyo Kanetsu Group’s ESG Data Highlights

Governance

46
48
55
56

Since fiscal 2019, Toyo Kanetsu K.K. (hereinafter, “Toyo Kanetsu” or “the Company”) has
published its TKK Report annually, an integrated
report to convey information about its finances,management strategy, business environment,
and ESG (environmental, social, and governance) issues, with the aim of furthering an
understanding of its corporate value from a
medium- and long-term perspective. In preparing this report, the Company referred tosources including the International Integrated
Reporting Framework (<IR> Framework) of
the Value Reporting Foundation. We welcome
any feedback or opinions from readers in orderto make this report better and easier tounderstand.
Details about results for fiscal 2020, thefiscal year ended March 31, 2021, are available in the TKK Report 2021 Financial
Section, which is on the Company’s website.

https://www.toyokanetsu.co.jp/global/
ir/tkk_report.php
Please visit the Company’s website for otherinformation for investors.

https://www.toyokanetsu.co.jp/global/ir/

Cautionary Note Regarding Forward-Looking
Statements

Board of Directors

In this report, contents not based on historical fact are

Corporate Governancefuture estimates and projections about Toyo Kanetsu

Business Risks
Discussion on Corporate Governanceand the Toyo Kanetsu Group’s plans, strategies, andearnings that were made based on currently available
information. Actual results may differ significantly
from these forward-looking statements due toFinancial Information

58
60
62
64

Editorial Policy

Financial Strategy
Consolidated Financial Highlights
Consolidated Balance Sheets
Consolidated Statements of Profit or Loss andComprehensive Income

65
66

Consolidated Statements of Changes in Equity

67

Corporate Profile and Stock Information

Consolidated Statements of Cash Flowsbusiness-related risks and various uncertain factors.

Introduction

Management Principles

Founding Philosophy:
Be Creative, Be Good for Society

Unwavering principles passed
down through the generations

Long-term objectives andguideposts to achieve as
principles take shape

Five Principles in the Toyo Kanetsu
Group’s Code of Conduct

Founding
Philosophy
Code of
Conduct• Adhere to laws, regulations, and rules• Fulfill responsibilities to society• Conduct business activities transparently and in good faith• Adhere to standards of ethical conduct• Create health-conscious work
environments

Management Vision
Innovative solutions forlogistics & energy

Business strategies, including
concrete action plans andnumerical targets, for realizing
our vision

Slogan shared by all Group
employees working toachieve our principles
and vision

Management Vision
Long-Term Vision

Medium-Term Business Plan

Long-Term Vision
Target Group consolidated net salesof ¥ 70.0 billion in 2030 by pursuing
new growth opportunities after securing
stable sources of earnings

Medium-Term Business Plan
(Fiscal 2019–Fiscal 2021)

Annual Plan

Challenge & Change

1Snapshot

Ratio of Net Sales by Segment

Other Businesses(Including Life & Work Environmental Business)

15 %Plant & Machinery Business23 %Net Sales

Logistics Solutions Business(FY2020)¥ 43.662 %billionFor details, please refer to the Consolidated Financial
Highlights on page 60.

Logistics Solutions Business

Digital picking systems in the co-op industry

The Logistics Solutions Business supports logistics infrastructure

Domestic market share: No.

1

by offering solutions capitalizing on its comprehensive proposal
capabilities, which encompass processes from the design of

Airport baggage handling systems­sorting, picking, and handling systems to maintenance for

Domestic market share: Over

Plant & Machinery Business

Number of storage tanks delivered globally

The Plant & Machinery Business contributes to the stable supply

More thanof energy in Japan and overseas and the safe upkeep of energy
storage facilities by leveraging its advanced project execution and

%

5,700

LNG storage tanks

maintenance capabilities in the construction of large-scale tanks.

Global market share: Over

14%

Other Businesses

Winches(Including Life & Work Environmental Business)

Domestic industry shipment track record:

Other Businesses include the Life & Work Environmental

No.

Business Division, which is centered on Group companies responsible for a variety of businesses, such as those for industrial
machinery, building construction, environmental surveys andassessments, and the maintenance and management of environmental measurement equipment.

280­customers centered on the logistics and airport industries.

1

Number of asbestos analyses in Japan

More than

30,000samples
per yearSpecial Feature

History of Toyo Kanetsu
Toyo Kanetsu celebrated its
80th anniversary in 2021.
We would like to express our sincere gratitude
to all of our stakeholders for their support,
which has enabled us to maintain our business
management over this long period.
To mark this milestone, we would like to describe
the history of the Toyo Kanetsu Group since its
founding by focusing on how we shaped anddeveloped the businesses and organizations oftoday in order to allow our stakeholders to gaina clearer understanding of the Group.

3

History of Toyo Kanetsu

Founding Years

Based on President Funo’s own convictions, we can

On May 16, 1941, Toyo Kanetsu Kogyo K.K., located inclearly see in these words an approach of contributing

Kamakuragashi in Kanda Ward, Tokyo, was establishedto the resolution of social problems through businesswith capital of ¥180,000 as a company engaged in theactivities that is consistent with the modern spirit ofmanufacture and sale of industrial kilns. Anticipating a

corporate social responsibility (CSR).

rise in military demand for firebricks and other refractories amid rumblings of the war that would start in that

Postwar Struggles

same year, Toyo Kanetsu Kogyo was founded when it

The plan at the time of our founding met with success,broke away to take over the industrial kilns manufactur-with the business fully occupied in sales of industrial

ing and sales division set up by Toyo Tile, a company

kilns following its designation as a munitions factory inthat manufactured and sold tiles.

the Second World War, which began a few months

The effective founder of Toyo Kanetsu Kogyo wasline with military demand, we acquired a company,

vacant), who joined in its establishment as the senior

Asakura Kousakusho, in 1943, thereby obtaining their

managing director and became the Company’s firstplant in Sunamachi, Koto Ward, Tokyo (later, the head

president the following year in 1942. With Zenkichi

office plant). However, as the tide of the war gradually

Kinugawa (appointed to succeed President Funo inturned against Japan, the Company lost its head office

1969 as the second president), who served as manag-building in Edobashi in an air raid at the beginning of

ing director at the time of Toyo Kanetsu Kogyo’s estab-

1945 before the war reached its conclusion.

lishment, as Funo’s right-hand man, President Funo

At the end of the war, military demand had disap-

managed the Company with Christian love and his

peared and we had no products to sell as a manufac-

spirit of service as a Rotarian as fundamental principles

turer, although our plant in Sunamachi had avoidedof his corporate management.

destruction by fire. In this critical situation, employees

Company Policy determined in 1955

devoted themselves to sales activities and eventually(our Founding Philosophy of today):

Yoshio Funo, our first president

Origins
received an order for a construction project to supply

Be Creative, Be Good for Society

4

after our establishment. As our operations expanded in

Yoshio Funo (the position of president was initially left

Zenkichi Kinugawa, our second president

Founding Philosophy, written by Yoshio FunoA row of trucks in front of the head office building in Nihonbashi carrying boilers made by the Company

Sunamachi Plant

Tank built at the Muroran Refinery of Showa Sekiyu, the firsttank order won by the Company

boiler equipment for use in air-conditioning at the vari-

However, at this time the Company was in a slump

ous garrisons of troops stationed in Japan. This orderto the extent that it could not pay the salaries of its

helped put the Company back on its feet after the war.

employees on time. This situation was due to the inef-

As we had many ex-national railway company employ-ficient and unprofitable management practice of pro-ees with expertise in combustion-related matters atducing a wide variety of products in small quantities

that time, we were able to manufacture the radiators,

according to order, combined with the impact of the

hot-water pipes, and various types of industrial boilers

recession brought about by the Dodge Line.*that comprise air-conditioning equipment. This technol-

Although the outbreak of the Korean War in 1950

ogy would subsequently enable us to begin the manu-

generated a brief boom stemming from special

facture of tanks.

demand for such products as steel poles for use in

Demand from troop garrisons waned within a few

barbed-wire fencing, challenging circumstances

years of the war’s end and we were forced to shift toreturned at the end of the war. In 1952, tough business

management aimed at tapping into civilian demand. In

conditions forced the Company to sell its head office

this era, we had to turn our hand to anything requestedbuilding in Kabutocho in Nihonbashi, Tokyo, and to relo-of us, such as tanks, transmission towers, bridges, util-

cate it within the grounds of the Sunamachi Plant, andity poles, and coal-conveying equipment.

pursue management rationalization.

We used the technology cultivated in the manufacture of boilers for troop garrisons to manufacture tanks
and received an order in 1950 for a fixed-roof, riveted* A financial and monetary contraction policy drafted by
Joseph Dodge for Japan to gain economic independence
after World War II

cone-roof tank (CRT) from the Muroran Refinery ofShowa Sekiyu Co., Ltd. (now Idemitsu Kosan Co.,
Ltd.), which would become our first tank order. We followed this with an order for our first welded CRT fromthe Shimotsu Refinery of Maruzen Oil Co., Ltd. (nowCosmo Energy Holdings Co., Ltd.).

5

History of Toyo Kanetsu

Major Decision
Concentration on the Tank and Conveyor
Businesses
President Funo visited the United States amid toughpossible by the technical alliance agreement with HIW.
We completed this FRT in 1953, attracting considerable attention in the industry.
In 1953, we also won an order from the Shimotsu

business conditions in 1951. Although overseas travel

Refinery of Maruzen Oil for a tube-sealed FRT

was extremely difficult in this era due to the strict for-(completed in 1955) with superior safety performanceeign currency restrictions, it is said that President Funo

and cost efficiency using technology developed by

was allowed to go to the United States thanks to a

HIW as well. Despite suffering under deflationary

special consideration by the Japanese government.

conditions, we carved out a reputation as a manufac-

During his stay in the United States, President Funo

turer with outstanding technologies by proactively

successfully concluded a provisional contract (formallyincorporating such cutting-edge technologies from theapproved by the Japanese government in 1954) toUnited States.

form a technical alliance for the manufacture of floating

During this period, we also received an order for 10

roof tanks (FRTs) with Hammond Iron Works (HIW), a

irrigation sluice gates in India as our first export project,leading FRT manufacturer (HIW was absorbed in awhich we completed and delivered in 1954, despite

merger with Pittsburgh-Des Moines Steel Co. (PDM) in

encountering difficulties with the local construction

1960.). The background to this contract was President

work and weather. Moreover, in 1952 we continued

Funo’s strong determination to overcome the adverse

endeavoring to rebuild our business in a variety ofbusiness circumstances faced by the Company byways, including leasing a plant in Yokohama for manu-

positioning the manufacture of tanks using the latest

facturing belt conveyors for use in construction work.

technology at the core of the business.
Owing to the contract with HIW, we became the

The year 1955 may be described as the starting

first in the industry in Japan to be able to manufacture

point of the present business management of Toyo

tanks using floating roof technology. In 1952, we

Kanetsu.

received an order from the Matsuyama Refinery of

As our business gradually began to make a recovery,

Decision
Maruzen Oil for Japan’s first metal-sealed FRT, madeour management team led by Funo and Kinugawa took

First tube-sealed FRT (supplied to Shimotsu Refinery of Maruzen Oil)

6

Sluice gate assembly work in India

on the challenge of formulating a new management
policy. Through a management assessment anddiagnosis carried out by the Japan Management
Association in 1954, we concluded that it would be to
our advantage to break away from high-mix, lowvolume production and adopt a business format thatallowed us to make use of our expertise as a manufacturer in order to stabilize our business management.
We therefore conceived the 3S principles ofSpecialization (focusing on a narrower range of production items), Standardization (pursuing rationality), andVarious types of tanks supplied to the Tokuyama Refinery ofIdemitsu Kosan

Simplification (enhancing efficiency through simplification) as our management policy and embarked onrebuilding unprofitable businesses that continued to

Rapid Growth of the Tank Businessengage in high-mix, low-volume production.

After deciding to concentrate on two businesses, Toyo

In 1955, we decided to establish a specialized two-

Kanetsu made concerted efforts on a Companywide

plant system focusing on two items: tanks that we hadbasis to work on them under President Funo’s slogan

been manufacturing at the Sunamachi head office plantof “No Sale, No Job.” In particular, we further focusedand belt conveyors for use in construction work that

our efforts on the sales activities of the tank business

we had just begun manufacturing at our plant indivision, which was seeing a sharp upturn in demand

Yokohama that year. At the same time, we also opted

at the time.

to withdraw completely from the manufacture of

In 1955, we received a major order for 25 tube-

pylons, bridges, boilers, and other such products. As

sealed FRTs from the Tokuyama Refinery, which

the backdrop against which this decision was made,Idemitsu Kosan was constructing as the largest refin-

we had not only already begun to garner a strong

ery in the East. The impact of this substantial order,

market reputation for our tanks but also, anticipated an

worth more than 10 times our capital at the time, wasincrease in energy demand during the coming period

such that it boosted our performance and raised theof rapid economic growth.

motivation levels of employees. Furthermore, we

In addition, despite still

succeeded in breaking free from the sluggish results

being at the market devel-caused by the recession that had persisted since theopment stage, we had also

end of the Korean War, in part thanks to the unprec-

seen the potential of con-edented economic growth at the time. There thenveyors as a type of labor-

followed a boom in the construction of large tanks insaving equipment. The shift

various regions, which prompted a rapid recovery infrom operating a jack-of-

our business results. This turnaround was made pos-

all-trades business to con-sible by the latest FRT technology of our partner, HIW,

centrating management
resources in two businesses was the key management decision that
helped create the Toyo
Kanetsu of the present.
Early conveyor for civil engineeringand construction work

7

History of Toyo Kanetsu

and the competitiveness that resulted from cost

1964, in Niigata

reductions realized by increased operational efficiency

Prefecture. While thestemming from the automatic welding machines

earthquake either dam-developed by our own engineering team.

aged or caused many ofIn 1958, Toyo Kanetsu became the first company inthe more than 30 tanks

Japan to have its tank manufacturing plant certified byof different shapes andthe American Petroleum Institute (API). This certifica-

sizes manufactured bytion was an indication that our manufacturing technol-other companies to

ogy was of a world-class standard.

catch fire, not one of

In 1959, a year after obtaining API certification, weElevated water tank underconstruction in Kuwait

received an order from the government of Kuwait tocrude oil tanks wasconstruct an elevated tank for supplying water, our firstdamaged or caught fire, providing verification of theiroverseas tank project. This order was also our first com-

safety. This verification further enhanced the reputationprehensive overseas construction project that saw usof our tanks, helping propel us from being Japan’s top

also undertake local construction work. Meanwhile, thetank manufacturer to one of the world’s leading tankorder we received from the American Independent Oil

manufacturers.

Company of the United States (acquired by the Phillips

As the size and quantity of tanks that we manufac-

Petroleum Company, also of the United States, in 1984)

tured grew, the need for larger and more sophisticatedfor an FRT in Kuwait in 1961 became our first overseas

manufacturing facilities became inevitable. Whileorder for a crude oil tank project. Subsequently, thesearching for a new production base to replace ourtank business entered a period of full-fledged overseas

outdated plant in Sunamachi, which had little room for

expansion in which the Toyo Kanetsu brand raised its

expansion, we were approached regarding a plan thatprofile in the global tank market.

had emerged for the construction of a large industrial

Our tanks demonstrated their superiority from atechnical point of view in the major earthquake of

Certification awarded by the American Petroleum Institute8

our nine tube-sealed

complex near Kisarazu, Chiba Prefecture. This plan
involved the blast furnace plant of Yawata Iron & Steel

GrowthChiba Plant immediately after completion

Co., Ltd. (now the Kimitsu Works of Nippon SteelCorporation) and a group of companies engaged inmeeting steel demand. After deciding to join the plan,
the Company acquired an approximately 200 thousandsquare meter site in the complex. In 1971, we completed the Chiba Tank Plant (now the Chiba Office),
which was equipped with state-of-the-art facilities anda wharf capable of accommodating 3,000-ton classcargo ships.
In 1974, the Company jointly established PT Toyo
Kanetsu Indonesia (TKI) in the export processing zone
on the island of Batam, Indonesia, with the Indonesianstate-owned oil company PT Pertamina, Nissho Iwai
Corporation (now Sojitz Corporation), and Toyo Kanetsu
taking stakes of 51%, 14%, and 35%, respectively (theventure is now a wholly owned subsidiary of Toyo

Rapistan conveyor (delivered to the Harumi Post Office of the Ministry of
Posts and Telecommunications)

Kanetsu.). The object of establishing the venture was tosecure a market for crude oil and liquefied natural gas

in 1958 with a plan to introduce the latest manufactur-(LNG) tanks in Indonesia and address demand in theing technologies from the country’s leading conveyor

Asia-Pacific region. In 1978, TKI built a plant in Batam as

manufacturers, as he had done with tanks. Aftera tank production base, thereby establishing a systeminspecting three leading local conveyor manufacturers,

for manufacturing large tanks in Chiba and in Batam.

Funo chose Rapids Standard Company (Rapistan), which

In 2005, the Batam Plant replaced the Chiba Plant

excelled in systems engineering, carrying out discus-

as the core plant for our tank business. Despite its loca-

sions with the company for a technical alliance andtion in an emerging country, the Batam Plant has estab-reaching an agreement in principle before returning tolished itself as a base for manufacturing our tanks,

Japan. Based on this agreement, we obtained theparticularly LNG tanks, possessing world-class technol-

approval of the appropriate authorities and concluded aogies and complying with various strict Japanese laws

technical alliance contract in 1960, beginning production

and regulations as well as global standards.

of automatic pressure conveyors (APCs) using worldleading technology developed by Rapistan. The APC

From the Conveyor Business to the Logistics
Business

system was the first in the world to solve the problem

In 1955, our conveyor business, one of two businesses

dling are on a powered conveyor. As such, this type ofon which we had decided to concentrate, produced

conveyor was suited to transporting packages in plants

conveyors for civil engineering and construction work

and warehouses, and its innovative features won wide

(Toyo Conveyor) at our plant in Yokohama. Although we

acceptance from customers in Japan who needed high-had only just launched sales in the business, the timing

speed, stable handling systems.

of “line pressure” that occurs when materials for han-of this decision coincided with the advent of a construction boom. Requests for labor-saving and rationalization in cargo handling operations saw a successionof leading construction companies adopt the Toyo
Conveyor, resulting in increased sales.
President Funo, who had high expectations for thepromising conveyor field, again visited the United States

9History of Toyo Kanetsu

In addition to its Toyo Conveyor for civil engineeringand construction work, the Company had now acquired
highly productive Rapistan conveyors for use in logistics in warehouses and other settings. Leveraging
these products, we subsequently succeeded in capturing a wide range of conveyor demand in Japan.
Later, Mannesmann, the German company that
acquired Rapistan, established Mannesmann Dematic
AG. This company was the predecessor of Dematic,
our technical partner for the Multishuttle system,
which is the key component equipment of our
Logistics Solutions Business today. In this way, thegroundwork laid by President Funo still underpins ourlogistics business of the present day.

Entry into the Airport BHS Market

BHS at Kuala Lumpur International Airport

Anticipating an increase in the size of jet aircraft,
Rapistan also became the first manufacturer of

airports in Japan adopted it in the space of just threecommercialized pallets for air transportation and airport

years from the first delivery in 1971 through 1974. In

baggage handling systems (BHSs) by extending theiraddition, New Tokyo International Airport (Narita)

excellent cargo handling technology.

adopted the Tri-Planar® as its baggage handling system

In 1971, we delivered the Tri-Planar , which our®

on its opening in 1978. Equipped with a frictionlessengineering team created by improving and developing

drive, our new Tri-Planar has become a global standard-

the BHS technology that we had introduced frombearer when it comes to low noise, ease of mainte-

Rapistan, to Fukuoka Airport as our first BHS. The

nance, and reliability, and since it was first installed in

Tri-Planar® is an airport conveyor system that can be

Okayama Airport in 1992, Toyo Kanetsu now has anfreely installed to move horizontally and vertically andover 80% market share of all baggage handlingwhich can handle a large volume of air passengers’

systems at Japan’s airports.

baggage with greater efficiency in a shorter time than

We have also proactively engaged in the supply of

previous systems. The suitability of this system to con-baggage handling systems to major overseas airports

ditions in Japanese airports, where large aircraft arrive

and in major airport development projects in emerging

and depart frequently, was such that more than 30

countries associated with the Japanese government’s
Official Development Assistance (ODA). In respect tomajor overseas airports, we supplied baggage handlingsystems at the opening of both Singapore’s Changi
Airport (delivered in 1981) and Malaysia’s Kuala Lumpur
International Airport (delivered in 1998) and delivered
many such systems for airport projects under ODA programs, such as the Bohol-Panglao International Airport
in the Philippines (delivered in 2018).
As for airport equipment, we are developing cutting-edge technologies that meet the needs of a variety of airport-related customers, such as for combating
terrorism and facilitating smooth immigration control

Tri-Planar® three-dimensional conveyor

10Pioneer
A self-service baggage drop unit equipped with facial recognition system delivered to Haneda Airport

measures, as well as addressing requests for improved

screening system to Tokyo International Airport

air cargo handling in fields other than passengers’ bag-

(Haneda) in 2004, we have delivered the system togage handling. In response to the need to detect

other airports while continuously adapting it to cater toexplosives in baggage at airports, we have incorpo-

the scale and needs of a wide range of airports inrated a new explosive detection system using X-rays,

Japan and overseas.

known as an in-line screening system, into our baggage handling systems. Since delivering the first in-line

In addition, Haneda Airport started the verification
tests of their “One ID”concepts in April 2021, in which

Company Name and Emblem
When the Company was founded as Toyo Kanetsu Kogyo K.K. in 1941, its name
(東洋火熱工業株式会社) was written in Chinese characters.
“東洋 = Toyo” means “the East.” “火 = Ka ” means “fire.”“工業 = Kogyo” means “Industrial.”“熱 = Netsu” means “heat.”“株式会社 = Kabushiki Kaisha (K.K.)” means “Company Limited.”
Former company emblem
As tanks developed to become the pillar of our business, the Company subsequently decided
that the characters for “fire” and “heat,” which featured in the original name, should not be associated with the tank business and began discussing a name change.
In 1969, we modified our name to Toyo Kanetsu K.K.(トーヨーカネツ株式会社), written in
katakana (Japanese syllabary) instead of Chinese characters, after deciding that it would be
unwise to change our name completely given that the Toyo Kanetsu brand was already wellknown overseas. Although the new company name no longer had “heat” and “fire” in characters,
Current company emblem
the pronunciation of the name remained the same (Toyo Kanetsu).
Meanwhile, immediately after our foundation in 1941, we had created a company emblem
based on a design using the Chinese character for “fire, 火” in tribute to our business. However,on the basis that fire was not suitable for tanks, the Company also altered its emblem to that of its current one, ahead of
the name change, on the 15th anniversary of its founding in 1956. The new emblem, featuring a metal pot standing on threelegs indicating robust foundations and a surrounding circle representing Companywide harmony, expresses our hope for the
future and wish for our development.

11

History of Toyo Kanetsu

boarding procedure. We delivered self-service baggage

Provision of Energy Infrastructure
Underpinning Rapid Economic Growthdrop units compatible with “One ID” that are equipped

An increase in global energy demand during the era ofwith a facial recognition system.

rapid economic growth in Japan from the mid-1950s

facial recognition at check-in would simplify the total

In these ways, the innovative features of our air-prompted a shift in the energy mix from coal to crude

port-related systems are providing support for the safeoil, which led to a sudden increase in demand for crude

and comfortable entry and departure of air passengers.

oil storage tanks. We responded proactively to thistrend by increasing the size of our tanks and joining

Stock Exchange Flotation

overseas tank construction projects. The emergence ofIn 1955, President Funo decided to concentrate ourthe problem of air pollution associated with the burn-management resources in two businesses while

ing of fossil fuels also forced us to cater to the cleaner

acquiring the latest technologies from the Unitedenergy that is commonplace today.

States ahead of other manufacturers in Japan. The

In terms of increased tank size, the Company

management decision of its first president to secure

broke the world record almost every year for the sizea leading position through technological superiorityof its crude oil tanks per tank delivered, rising from ahelped create the business foundation for today’s

capacity of 100,000 kiloliters in 1965 to reach 160,000

Toyo Kanetsu.

kiloliters in 1970 before continuing to increase further.

As the two businesses stabilized its operations,

As for overseas projects, in 1965 we won an order

the Company entered the capital market with a view tofor a large-scale FRT in Singapore from Royal Dutch

securing stable financing and solidifying public trust in

Shell plc, a major oil company, which proved that ourits brand. To that end, the Company’s shares were

technology had reached a level at which it was in held

listed on the Over-the-Counter Section of the Tokyo

in high regard by major overseas players. The year 1973

Stock Exchange in 1959, the Second Section in 1961,

saw the Company receive an order for the world’s larg-

and the First Section in 1970.

est tank (at the time) in Abu Dhabi, with a capacity of
185,000 kiloliters, from British Petroleum (now BP plc),
another major oil company. In this manner, buoyed by
the booming overseas market, the Company was

Energyworking simultaneously on overseas tank construction
sites in 12 locations as of March 31, 1972.

Newspaper advertisement announcing the Company’s listing on theFirst Section of the Tokyo Stock Exchange

12

LPG tanks delivered to the Mizushima Refinery of
Nippon MiningIn respect to cleaner energy, the growing attention

control in the manufacture of pressure vessels. In pro-placed on the problem of pollution caused by exhaustcuring materials and equipment, engineering compa-

gas from automobiles led to the beginning of a trend

nies in the United States give priority to ordering fromfor switching from oil to gas (liquefied petroleum gas

suppliers with plants that have obtained these stamps.

(LPG) and liquefied natural gas (LNG)) as a cleaner typeThe fact that the Company had obtained these stampsof fuel. We responded quickly to this trend while coop-

underlined the high level of its technology.

erating with Pittsburgh-Des Moines Steel Co., ourWe have consistently received orders for LNG

technical alliance partner (HIW merged with Pittsburgh-tanks from companies in Japan and overseas thanks to

Des Moines Steel Co., the tank division of which was

our continuous efforts in conducting technologicalsubsequently acquired by the Chicago Bridge & Irondevelopment. As part of such efforts, we completed aCompany (CBI) in 2002.).

full-containment tank with a PC (prestressed concrete)

In 1965, we received an order for a metallic,outer tank in 1993. To date, we have supplied 100

double shell, low-temperature storage tank for LPG

large-scale LNG tanks globally (34 of which in Japan),from the Mizushima Refinery of Nippon Mining Co.

including a 230,000-kiloliter class tank that is one of(now ENEOS Holdings, Inc.), the largest such tank in

the largest in the world. Our share of the world’s

Japan at the time. Moreover, in 1969 we received ourmarket for large-scale LNG tanks stands at approxi-

first order for LNG tanks in Brunei (two 60,000-cubic

mately 14% (based on number of tanks).

meter tanks, among the largest in the world at theWe also operate a tank maintenance business

time, completed in 1972). The same year 1969 was themaking use of the know-how we have accumulated

year which witnessed the first import of LNG to Japanthrough the manufacture and construction of large-

from Alaska. In 1972, we won an order from Algeria forscale tanks to meet the needs of tank owners for com-three LNG tanks at a size of 100,000 cubic meters, which

plying with periodic open inspections of tanks that are

were also among the largest in the world. We thenmandatory under the Fire Service Act at oil refineries

received our first domestic order for two 75,000-cubic

and oil storage terminals in Japan.

meter LNG tanks from Osaka Gas Co., Ltd. in 1974.

Hydrogen is attracting significant expectations as a

In 1977, the Chiba Plant became the first manufac-

next-generation energy source. Amid explorations intoturer of tanks in Japan to obtain two types of stamps

storage methods at ultra-low temperatures lower than(certifications) from the American Society of Mechanicalthose for LNG, we are promoting technological devel-

Engineers (ASME), which indicate a high level of quality

opment with the backing of the New Energy andFirst LNG tanks ordered from Brunei

A full-containment tank with a PC (prestressed concrete) outertank delivered to the Donggi-Senoro LNG project in Indonesia

13History of Toyo Kanetsu

Industrial Technology Development Organization

switching device. We offered a quiet and high-(NEDO), a national research and development agency,

performance system by changing the switch compo-

to construct a large-scale, 10,000-kiloliter class liquid

nent of this device from an air cylinder drive system tohydrogen tank in cooperation with the Tokyo Institutea system using an electromagnet with no moving parts.

of Technology and Hokkaido University.

In 1996, we delivered the world’s first conveyorbased automatic handling system for a potted plant

Provision of Logistics Solutions Meeting
the Needs of Societymarket. This system, which automates the flow ofDuring Japan’s period of rapid economic growth, rising

ment, won the Technology Prize in the Logistics

labor costs triggered a sharp increase in the need forAwards organized by the Japan Institute of Logistics

labor-saving solutions while logistics demand

Systems in the same year.

expanded dramatically. As a result, the Company’s

Furthermore, in 1999 we delivered a warehouse

Rapistan conveyor business was required to address

logistics system underpinning the business model ofthe growing scale of logistics centers and the diversi-

ASKUL Corporation, a mail-order office supplies com-fying requirements of customers. One of the achieve-pany, for which we were honored with the grand prize

ments of our technological development in responsein the Logistics Awards alongside ASKUL Corporation

to these circumstances was the delivery of theand Hitachi, Ltd.

Rapistan conveyor system to the Fuchu Distribution

In 2002, we concluded a strategic business alli-

Center of Seiyu Store Co., Ltd., the largest and mostance with Siemens Dematic AG (now Dematic), one ofefficient of such systems in the East at the time,

the world’s leading logistics solutions manufacturers.

which we completed in 1969.

Dematic is a manufacturer of Multishuttle technology

Following this delivery, we developed a series ofthat facilitates the quick entrance and exit of products

new and innovative logistics systems to lead the indus-

from warehouses by performing the four tasks of stor-

try. In 1981, we delivered the first domestically manu-

ing, picking, sorting, and replenishing in order tofactured pick director system to Sanrio Company, Ltd.

address the requirements of online shopping compa-

This product, for which we adapted the picking systemnies for the quick delivery of a high mix of products.

developed by Rapistan for the Japanese market toThrough the introduction of this Multishuttle technol-

dramatically improve picking efficiency, has sinceogy, we have provided a host of solutions that leverage

played a significant role in driving demand in Japan,

and develop its functions. Consequently, we haveincluding in the co-op market.

accumulated a track record for delivering logistics

In 1993, we developed the New Posi-Sorter®, anultra-high-speed sorter using an electromagnetic

Rapistan conveyor system delivered to the Fuchu Distribution Centerof Seiyu Store

14

potted plants from arrival through to auction and ship-

warehouse equipment to not only mail-order andonline retailers but also a great number of companies,

World’s first conveyor-based automatic handling system for a potted plant market

Logistics

GTP system (AutoStore)
installed at the Wakayama Plant

including those in the manufacturing industry thattrolleys and folding containers used on the premises ofstore a vast amount of components and products.

companies, for which we received the 15th Automatic

In 2019, we launched the Goods to Person (GTP)

Identification Systems Award in 2003 sponsored by thesystem, deploying enhanced Multishuttle functionality

Japan Automatic Identification Systems Association.

to offer unparalleled labor-savings and efficiency in

In 2013, with a view to addressing increasing

picking by facilitating the movement of products fordemand and customer needs, the Company rational-

delivery to a picking worker’s station instead of theized its procurement of materials and equipment via

worker walking to pick up the products.

the outsourcing of production to partner plants andToyo Kanetsu was among the first companies tostrengthened its in-house production system byincorporate radio frequency identification (RFID), which

opening the Wakayama Plant, which produces logis-

updates data in a non-contact manner using radio com-tics equipment.

munication, into its logistics systems, opening a facility

Given Japan’s aging society and low birth rate, ourfor conducting RFID verification testing at its Chiba

businesses will almost certainly see increasing labor-

Plant in 2005. Using the data obtained through testing,saving and energy conservation requirements. Amid

we developed a system for managing the transport

these circumstances, we will supply systems tailored

Multishuttle

15

History of Toyo Kanetsu

to the needs of customers and offer backup servicesof our two core businesses through partnerships withthat can be operated with peace of mind while utilizing

start-up companies. Meanwhile, we added, throughthe latest artificial intelligence (AI) and Internet of

M&A, Kankyo Research Institute Inc., known for envi-

Things (IoT) technologies.

ronmental analysis and consulting, and Eco Analysis
Corporation, with strengths in the environmental infra-

Progress of New Businesses

structure field, such as the maintenance of environ-

Since establishing a course concentrating on two busi-

mental assessment equipment, to the Group in Marchnesses in 1955, our tank and logistics businesses have2018 and April 2021, respectively. In this way, we havesupported the Toyo Kanetsu Group. In the intervening

reinforced our foothold in the promising field of envi-

period, the biggest management task for Toyo Kanetsu

ronment-related businesses.

has been to create a business that will serve as the

The Life & Work Environmental Business Division,next pillar while growing its two core businesses. In

established in April 2020, is in charge of these newparticular, we explored the creation of new busi-

businesses and subsidiaries.

nesses, established new corporations, and focused on
many businesses during the period between the lateToyo Kanetsu—Protecting Infrastructure

1980s and 2000s. Although the Company attempted to

The infrastructure systems that Toyo Kanetsu manu-

commercialize a wide range of businesses, such as thefactures and sells must run 24 hours a day, 365 days aleasing of construction machinery, solar system engi-

year. Such infrastructure includes tanks that receive,neering, manufacture and sale of cosmetics, manage-

store, and deliver oil and gas, which are essential for

ment of restaurants, and import and export of marine

industry and daily life; systems that support

products, many have disappeared from the Toyo
Kanetsu portfolio of businesses.
Those that have survived include the Group company Toyo Koken K.K., established in 1957 as a conveyor
components manufacturer that today engages in the
manufacture and sale of ancillary equipment for industry,
such as winches, hoists, and balancers. Anothersurviving Group company is Toyo Kanetsu Builtec K.K.,
which we established in 1991 as a division of the tankbusiness and spun off in 2014 to operate a building
construction business and a gondola leasing business.
We began taking on a new challenge in the mid2010s. In 2017, we established two corporate venture
capital (CVC) funds. These funds primarily focus on
acquiring technology that will assist the development

Maintenance and management conducted by
Eco Analysis Corporation employee

16e-commerce, which is becoming a part of daily life;

maintenance and repair. In 2020, we developed andwarehouse systems that underpin the transport oflaunched sales of predictive maintenance services,

daily essentials to supermarkets, co-ops, and conve-

leveraging the latest AI and IoT technologies that facilitate

nience stores; and baggage handling systems thatmaintenance by monitoring the operating conditions ofcontrol incoming and outgoing baggage at airports

logistics equipment and predicting abnormalities using

operating 24 hours a day. To ensure they can operate

IoT sensors.

equipment expected to be running non-stop withpeace of mind, we strive to realize the stable opera-

Toyo Kanetsu not only creates social infrastructure
but also watches over its operation.

tion of these areas of infrastructure while working
together closely with customers.
While supplying high-quality and robust equipment

Toward the Next Era in Harmony with Society
In today’s world, corporate management is impossible

is a given, maintaining a smooth support system towithout initiatives for the environment, society, anddeal with accidents and breakdowns is also essential.

governance and corporate social responsibility.

In respect to tanks, we have put in place a system

Furthermore, coexisting harmoniously with the envi-

for swiftly assisting customers by setting up a dedi-ronment and society is essential to business manage-cated team to deal with major disasters. For logistics,

ment, as we have seen with the prominence of the

we have developed systems that are resilient to earth-

United Nations Sustainable Development Goals.

quakes and other disasters and have established nine

Looking ahead to its 100th anniversary, the Toyoservice centers throughout Japan that offer round-the-

Kanetsu Group will continue contributing to the cre-Innovative
Solutionsclock support and meet customer requests foration of a sustainable society through its businesses.

17

Management Strategy

To Our Stakeholders

Toru Yanagawa
President andRepresentative Director

18

We will achieve further growth byresolving various social issues toensure that we remain a company
with lofty ambitions as we lookahead to our 100th anniversary.
The Toyo Kanetsu Group celebrated its 80th anniversary on May 16,
2021. I would like to take this opportunity to express my deep gratitude
to all our stakeholders for their support throughout our history. While wehave overcome many adversities over those 80 years, the year 2020,
which was marked by the global spread of the COVID-19 pandemic, may
well be described as the most turbulent of all. I would like to express our
sincere condolences to anyone who has lost loved ones because of thepandemic and pray for a quick recovery for all those who have contracted the virus and for a safe end to this crisis. I would also like toexpress our respect and deep gratitude to those working to prevent the
spread of the infection.
While we had fully understood that we would not be completely
unaffected by the impact of COVID-19 in fiscal 2020, the Plant &Machinery Business in particular faced extremely severe headwinds.
Consequently, in November 2020 we were regrettably forced to institutea downward revision of the targets set in our three-year Medium-TermBusiness Plan, launched in fiscal 2019. On the other hand, the Logistics
Solutions Business enjoyed favorable tailwinds and the Company madesteady progress with its environmental, social, and governance (ESG)
initiatives centered on the important management issues (material
issues) that it began addressing in earnest three years ago. In TKK
Report 2021, we will describe the progress we made in fiscal 2020, thesecond year of the current Medium-Term Business Plan and our strategy
for going forward as well as the initiatives we are pursuing with an eye
on our 100th anniversary.

19

To Our Stakeholders

Performance Impacted by COVID-19
Looking back on our performance in fiscal 2020, the Logistics Solutions and Plant & Machinery
businesses—our two business pillars—experienced starkly contrasting fortunes. Although delays in a portionof its projects resulting from the impact of COVID-19 brought about a decrease in net sales of 5.7% year on
year, to ¥27.23 billion, the Logistics Solutions Business posted record profits for the second consecutive
year with operating profit increasing 11.7% year on year, to ¥3.14 billion, thanks to an improvement in the
profitability of large-scale projects due to a strengthening of revenue management and the expansion of
the maintenance business. In recent years, project management had become an issue as the Logistics
Solutions Business saw not only an increase in project numbers, such as those for e-commerce-relatedcompanies, but also an expansion in the scale of acquired projects. To address this issue, we placed
executive officers in charge of each large-scale project to clarify responsibility and established a system tomanage costs and schedules as well as to control quality throughout the entire value chain, from orderprocessing to design, manufacture, and installation, which I believe led to the business’ record performance.
Meanwhile, the Plant & Machinery Business raised its profit margin by implementing strict revenue
management while capturing periodic demand for oil refinery maintenance in Japan. However, despite
efforts to win orders with the aim of capturing emerging small to medium-scale projects, severe conditions
persisted overseas with delays in decisions on investment plans for large-scale liquefied natural gas (LNG)
tanks, which had been a forte of the business. In particular, the Batam Plant in Indonesia experienced adramatic decline in orders, which led to the operating rate falling to between 20% and 30% of its capacity.
As a result of these factors, net sales in the Plant & Machinery Business declined 1.5% year on year, to¥9.8 billion, and operating loss worsened from ¥0.3 billion in fiscal 2019 to ¥0.6 billion. Due to these severebusiness conditions and trends in performance, the business recorded impairment losses of ¥1.04 billion on
non-current assets.
In fiscal 2020, reflecting the performance and other factors in these two businesses, consolidated net
sales of the Company were down 6.2%, to ¥43.61 billion, while consolidated operating profit was up 1.2%
year on year, to ¥2.62 billion. Profit attributable to owners of parent increased 3.5% year on year, to ¥1.77
billion, in part due to the recording of extraordinary income stemming from a reduction in our crossshareholdings, and ROE rose 0.1 percentage point year on year, to 5.0%.
In fiscal 2021, we expect the Logistics Solutions Business to achieve a 10.1% increase in net sales, to¥30.0 billion, by steadily executing orders received in previous years, such as those related to e-commerceand co-ops. In addition, we are forecasting a 14.0% decrease in operating profit, to ¥2.7 billion, due to anincrease in our depreciation costs because of growth investments, such as those in relation to digital transformation (DX) and capital expenditures, under favorable business conditions. In the Plant & Machinery
Business, we expect a 46.9% increase in net sales, to ¥14.4 billion, accompanying the impact of changes
in accounting standards. Meanwhile, although depreciation costs may be eliminated due to the impairment
losses of the previous fiscal year, the business will reduce its operating loss to ¥80.0 million by further
enhancing profitability in its maintenance business in Japan and implementing thorough cost reductions.
Lastly, we plan for Other Businesses to achieve an increase in net sales of 58.1%, to ¥10.4 billion, and adecrease in operating profit of 1.1%, to ¥0.78 billion, by expanding its environmental domain through M&A.
As a result, in terms of our performance forecast for the Group as whole in fiscal 2021, we are expecting an in increase in net sales of 25.4%, to ¥54.7 billion, a decrease in operating profit of 9.7%, to ¥2.37
billion, a decline in profit attributable to owners of parent of 1.6% year on year, to ¥1.75 billion, and ROE of20

5.0%, the same level as fiscal 2020. In light of the downward revision of the current Medium-TermBusiness Plan’s targets that we instituted in fiscal 2020, we will strive to ensure that we achieve therevised targets.
(Billions of yen) Previous
Medium-Term Business Plan

Current
Medium-Term Business Plan

60

5

54.7
41.9

10.7%

20

46.5

45.1

41.7

3.08

40

2.26

2.59

1.40

6.5%

4.9%

2.9%

46.0

43.6
2.62

3

2.37

5.0%

4

2.10

5.0%

5.0%

0

2
1
0

FY2016FY2017FY2018FY2019Results
Net sales

Operating profit (right)

FY2020

FY2021

FY2021

Forecast

Targets

ROE

Confronting the Issue of Climate Change and Advancing
New Initiatives
In fiscal 2018, we formulated 10 material issues and strengthened our ESG initiatives and information
disclosure related thereto, while in fiscal 2019 we began the publication of the TKK Report, our integrated
report. In fiscal 2020, we established the Companywide, cross-functional CSR Committee, appointing theexecutive vice president as chair of the committee, in which the head of each division takes part as acommittee member. At each of these milestones, I have communicated information on our material issues,
ESG management, and the United Nations Sustainable Development Goals (SDGs), and I believe that wehave made progress in instilling awareness of these topics within the Company. Social demand for initiatives aimed at achieving ESG targets and the SDGs has been increasing in recent years. With this in mind,
I feel strongly that the first step we took three years ago was of great significance for improving ourcorporate value into the future.
Currently, our most important material issue is to “respond to changes in the business environment
caused by climate change.” The Plant & Machinery Business views investment in LNG-related equipment
as its primary business opportunity. Taking an overview of future developments in this market, we expect
demand for such equipment to grow as we approach the latter half of the 2020s. In fact, we have recently
begun to see plans for the construction of small to medium-sized LNG tanks. However, although LNG has
a lighter environmental footprint than other fossil fuels, it still emits greenhouse gases when it is burned.
Given the increasing importance of measures to address climate change in recent years, I believe that wecannot continue to thrive through business development that relies largely on LNG.
Considering the recent acceleration of the pace of the development of technology for co-firing withammonia in order to significantly reduce CO2 emissions from coal-fired power generation, we expect tosee business opportunities for ammonia tanks. We aim to contribute to the demand for such new energy
sources by making use of our technological capabilities in terms of storage.

21

To Our Stakeholders

Furthermore, in consideration of the acceleration of global trends toward the realization of acarbon-neutral society, we are working steadily todevelop the world’s first large-scale liquid hydrogen tank. We have been promoting this initiative
since 2015 while leveraging industry–academia–
government collaboration and are scheduled toestablish the essential technologies for it in 2022.
In order to contribute to the full-fledged introduction of hydrogen power generation using thetechnology we have cultivated through the construction of ultra-low-temperature LNG tanks,
I believe we must rebuild the Plant & Machinery Business with a strong determination and sense of urgency.
In Other Businesses, we expanded our environmental business domain by following the March 2018acquisition of Kankyo Research Institute Inc., which has strengths in the environmental consulting field,with the April 2021 acquisition of Eco Analysis Corporation, which specializes in the environmental infrastructure field and holds the leading share in the industry for maintaining and managing environmental
measurement equipment. We will endeavor to solve environmental issues such as abnormal weather
caused by climate change, which has emerged in recent years, while aiming to establish a third businesspillar, which has long been a management issue.
We are also strengthening measures in response to our own CO2 emissions. Currently, approximately
90% of our CO2 emissions are from power consumption at our head office and business sites. In July
2021, as a first step toward making these locations carbon free, we installed solar power generation equipment to provide power for in-house consumption at the Chiba Office. Thanks to the installation, we expect
to replace approximately 7% of our annual power consumption with renewable energy, based on the
results for fiscal 2020. Going forward, we will examine the possibility of installing solar power generationequipment at other Group plants, and we plan to switch to CO2-free electricity when purchasing powerfrom third parties.
Although we carry out discussions on addressing climate change at meetings of the Management
Council and the Board of Directors, I view it as vital that all Group employees in Japan and overseas areconscious of this issue.

Promoting Digital Transformation to Ensure We Become an Even More
Trusted Partner for Customers
The next most important material issue is to “respond to the decline in Japan’s population.” While also of
relevance to our own efforts to secure human resources, I regard the promotion of labor-saving, labor-reducing, and automation technologies in the Logistics Solutions Business as of great significance for solving thissocial issue. As an example of our accomplishments in this regard, in April 2021 we delivered self-service
baggage drop units to the Tokyo International Airport (Haneda) that are a principal element of the ”One ID”
check-in-to-boarding process utilizing facial recognition technology at the airport. Despite the current stagnation in airport-related capital expenditures due to the spread of COVID-19, we expect appetite for such22

expenditures to once again increase in the next two to three years in Japan, which is seeking to establish
itself as a tourism-oriented country. Toyo Kanetsu boasts a market share of over 80% for airport baggage
handling systems in Japan; however, rather than resting on our laurels, we will proactively introduce thelatest technologies while capturing business opportunities by advancing development in close collaboration
with customers.
In the e-commerce domain, we constantly propose solutions contributing to the improvement of operational efficiency in logistics centers, such as those for labor-savings in picking and packing work, including
the Goods to Person (GTP) system, which moves products to the worker’s station. Accordingly, our technological superiority has garnered high praise from customers. The e-commerce and distribution industries
have been boosted by the increase in stay-at-home demand accompanying the spread of COVID-19 andcompetition is intensifying as the market expands. In such an environment, I believe that we must proactively offer consulting in tune with customer needs to become a presence with strong proposal capabilities
that makes customers glad they worked with us, in order to further heighten our competitiveness going
forward and move on to our next stage of growth as a logistics systems manufacturer.
To that end, it is vital that we work to “develop and use new technologies,” which is also one of ourmaterial issues. In particular, gathering and using data to promote digital transformation (DX) will become
crucial to our business strategies going forward. As an example, in April 2020 we began providing predictive maintenance services that make extensive use of AI and IoT technologies to detect abnormalities as
we seek to realize non-stop logistics through the stable operation of equipment in logistics centers.
Looking ahead, we believe that gathering and analyzing image data will also become a key subject, andwe aim to focus on increasing efficiency and promoting visualization based on an overarching view ofentire logistics centers.
We recognize that it is difficult to take on such a challenge armed with only our own resources. As such,
we are promoting open innovation, including partnerships with start-up companies. It is my belief that if we
can make the kind of proposals that our competitors and customers have yet to come up with, we can wineven greater trust as a company that provides unique logistics systems for its customers.

Enhancing Diversity Will Be Indispensable to Future Management
Another material issue that I view as particularly important is to “train and deploy human resources.” Whilethe importance of human resources as the source of our value creation will remain unchanged, I believe
the future course of enriching human capital will involve assembling human resources with diverse characteristics to fully leverage their capabilities. The expansion of diversity, not only in regard to the empowerment of women, is essential for enabling us to change continuously. If we fall into the trap of recruiting andselecting homogenous human resources because that approach was successful in the past, we will be left
with an inflexibly uniform organization that will find it difficult to adapt to an era of accelerating change.
Based on this awareness, I aim to make decisions from a management perspective emphasizing diversity.
Given this aim, I understand that the participation and advancement of women in the workplace is amajor task for the Company. Although I have no choice but to acknowledge that there are very few womenin management positions at Toyo Kanetsu at present, the Company has finally increased the ratio of
women serving as team leaders—a position introduced in fiscal 2020 for the next generation of candidates
for management positions—to around 15%. I have high hopes that female employees will accumulate23

To Our Stakeholders

leadership experience in this position and develop into human resources who can soon be promoted to
management positions. Needless to say, we intend to nurture female employees in anticipation of theirplaying a role in management in the future, rather than promoting them for the purpose of making superficial improvements. I personally view promotions to management positions and the development of humanresources, regardless of gender, as essential to corporate growth.
In terms of workstyles, the Company has endeavored to improve the working environment with theuse of staggered working hours, teleworking, and other arrangements, partly in response to COVID-19.
Viewing these changes as an opportunity for permanent change, we aim to create more appealing workplace environments even after the COVID-19 pandemic is over. In addition to promoting the taking of childcare leave regardless of gender as a measure for improving the work–life balance of our employees, inAugust 2021 we began initiatives toward obtaining recognition under the Certified Health & Productivity
Management® Organization Recognition Program by formulating the Toyo Kanetsu Group Health andProductivity Management Declaration, with myself as president serving as the chief health and productivity
management officer.
Note: Health and Productivity Management® is the registered trademark of Nonprofit Organization Kenkokeiei.

<The Toyo Kanetsu Group Health and Productivity Management Declaration>
Based on its belief that the mental and physical health of each employee is an essential foundation
for creating corporate value, the Toyo Kanetsu Group will work to promote health and create workplace environments so that diverse employees can work enthusiastically and demonstrate theirindividuality and talents to the fullest extent possible.
<Establishment of Priority Fields and Key Measures>(1)	Creation of comfortable working environments that emphasize a work–life balance
We will work to encourage the taking of annual paid vacation, promote mental well-being,
prevent harassment, and ensure reasonable working hours.
(2) Support for health promotion and healthy lifestyle habits
We will strive to improve the health of our employees by communicating information on lifestyle
habits and holding health seminars.
(3) Improvement of follow-up response in accordance with the results of regular health checkups
We will promote the early detection and treatment of diseases by encouraging those with positive findings to undergo detailed examinations while also creating environments that facilitate areturn to the work place after recovery.

Refining Our Ability to Respond to Change through Interactions with
External Parties
Toyo Kanetsu, which celebrated its 80th anniversary in 2021, is looking ahead to its 100th anniversary. We
have a duty to further enhance the assets built by our predecessors over those 80 years and pass them onto the next generation. Whether we can do that or not will depend on how well we can respond to environmental changes ahead of time during an unpredictable next 20 years. I believe we must proactively change
the orientation of our businesses according to the environment, a point that applies to the Logistics
Solutions Business, the Plant & Machinery Business, and Other Businesses.

24Guided by this belief, the Company set up the Future Creation Project in April 2021 under my directsupervision. Based upon this project, we have established three cross-departmental projects with the aimof creating and realizing a vision for our future. The first project is on a growth strategy for the Logistics
Solutions Business. We will formulate and implement a strategy for achieving sustainable growth by
improving our profitability and our ability to respond quickly to a changing market environment. The second
project involves rebuilding the Plant & Machinery Business. In this project, we will begin transforming its
business model targeting the new era of energy and rebuild its business foundation, even amid adversity.
The third project is for reforming the operations of the Corporate Division. This project aims to increase theefficiency of management departments and raise the level of corporate planning capabilities.
To give a specific example, we are striving to improve our ability to gather a wide range of informationin order to identify changes in advance. As I believe that we will not be able to overcome the challenges
ahead by relying solely on our own past experience, we are proactively taking a number of measures, suchas recruiting human resources from outside the Company and exchanging opinions with experts. I feel that
I myself had accumulated experience internally in the Plant & Machinery and Logistics Solutions businesses and after becoming president, grew by acquiring a variety of knowledge through dialogue withfinancial institutions, investors, and other third parties. While our executives have engaged in discussions
with outside experts, I aim to provide a greater number of our human resources with such opportunities tostimulate their growth. We are also planning to create a system to enable the smoother sharing of information internally across departments and business divisions. After all is said and done, a company cannot
grow without the growth of its people, and it is my belief that such dialogue and information gathering
helps facilitate that growth.

In Conclusion
Fiscal 2021 will mark the concluding year of the current Medium-Term Business Plan and see the Company
formulate its next such plan. In the next Medium-Term Business Plan, we intend to further integrate ESG
and SDG elements into the strategies of each business division. While financial targets are of course
important, such targets alone are unlikely to inspire employees to hold lofty ambitions. Reflecting on that,
I aim to set forth a vision for the Group as a whole that also encompasses what we will offer society. I knowthat employees take great pride in the Company’s contribution to society, in the manner of its Founding
Philosophy, “Be creative, be good for society,” the spirit of which has long lived within those at Toyo
Kanetsu. I hope to set goals that will strike a chord with employees, inspire their ambitions as membersof the Toyo Kanetsu Group, and drive Companywide growth.
I would like to thank all our stakeholders in advance for their understanding and continued support of
the Toyo Kanetsu Group.
August 2021

Toru Yanagawa
President and Representative Director

25

The Toyo Kanetsu Group’s Value Creation Process

Social Issues Affecting
the Toyo Kanetsu Group

Respond to the decline in Japan’s
population

Founding Philosophy“Be creative, be goodBusiness Activities and Strengths• Labor shortages due to declining birth rate
and aging society• Decline in purchasing power of consumers• Shortages of skilled laborers

Logistics Solutions Business• Ability to propose comprehensive solutions encompassing
everything from design to maintenance

Respond to changes in consumer
spending patterns• Trust from customers and a reputation based on track recordof deliveries to broad range of industries

Page 28• Sharp rise in small-lot distribution fromgrowth in e-commerce

Plant & Machinery Business

Strengthen industrial infrastructure• Aging energy infrastructure• Building of social foundation resilient tobreakdowns and natural disasters• Technologies for constructing and maintaining
large-scale tanks that require advanced technologies• Trust and reputation from global customers based on many
years of high quality and safety

Page 30

Combat climate change• Expansion of use of liquefied natural gas
as energy source• Strong need for energy conservation
technology• Advent of a hydrogen society

Provide better working environments

Other Businesses (Including Life & Work Environmental Business)• Development of multifarious businesses in fields including the industrial machinery, building construction, andenvironmental businesses

Page 32• Need for training and deployment of
personnel and productivity improvements(workstyle reforms)• Importance of ensuring occupational
health and safety

Creation of new businesses leveraging M&A and CVC,
and reinforcement of existing businesses and pursuitof growth opportunities

A

Social issues that could
have a major impact on
corporate value

Foundation That Supports Businesses

Page 36
Human resources• Advanced technical capabilities and specialization• Abundant experience in overseas projects

Partnerships• Close partnerships with partner companies,
universities, and research institutions built on
extensive experience

B

26

Initiatives addressing material
issues to sustainably improve
corporate value

Page 38

for society”
Value Propositions
Reduce burden on workers with labor-saving
technologies using AI, the IoT, and robotics

Realize highly efficient logistics fordiversifying patterns of consumer spending

Management Vision

Innovative

Provide non-stop logistics that support supply
chains and consumer spending

solutions forOffer technologies that contribute to
the realization of a carbon-neutral society

logistics & energy

Provide highly dependablesocial infrastructure

Provide safe and secure working andliving environments for people

Realize attractive workplaces that are
comfortable and inclusive of diversity• Sound financial foundation that enables
Financial
growth investments in technology andfoundation
business operations

Governance• Governance structure that enables highly
efficient and transparent work management• Appropriate risk management

Corporate
culture• High awareness of contributions to society• Flexible, rapid decision-making ability

C

Initiatives prerequisite for sustainably
improving corporate value

Page 58

Page 46

Page 41

27

Business Review

Logistics Solutions Business

The Logistics Solutions Business will
endeavor to address social issues throughunique solutions that shape the future oflogistics while responding to diverse
customer needs.

Takashi Owada
Director and Executive Vice President
Division Manager, Logistics Solutions Division

Value Propositions
1

2

3

Reduce burden on workers

Realize highly efficient logistics

Provide non-stop logistics thatwith labor-saving technologies

for diversifying patterns ofsupport supply chains andusing AI, the IoT, and robotics

consumer spending

consumer spending

Status of Progress on the Medium-Term Business Plan
In the second year of the current Medium-Term Business Plan, theLogistics Solutions Business posted record profits for the second consecutive year by growing its maintenance business, further strengthening
project control management, and steadily improving project execution
capabilities in line with its basic policy of increasing profitability. In fiscal
2020, we responded to new needs that emerged during the COVID-19
pandemic while making use of our long-cultivated technologies.
For logistics centers, amid increasing growth in the e-commerce andco-op industry markets, we provided solutions adapted to the requirements of the “era with-COVID-19” that help maintain social distancing
using such systems as the Multishuttle, our key product.
For airports, we installed self-service baggage drop units at Haneda
Airport that are a principal element of the “One ID” check-in-to-boarding
process utilizing facial recognition technology. Through the installation,
we are not only helping shorten waiting times at check-in but also reducing contact risks.
In response to the favorable market tailwind, we are also working to
improve our business foundations by promoting a cross-departmental
system renewal project aimed at increasing operational efficiency in order
to augment our order processing system. Going forward, we will continue
aiming to further increase profitability and strengthen competitiveness.

28

Net Sales and Operating Profit(Billions of yen)

40

30

20

6.0

28.8 27.2 30.0 28.0
2.81

2.70 2.60

4.5

3.0

3.14
10

1.5

0

0

FY2019 FY2020 FY2021 FY2021
Results

Net sales

Forecast Targets

Operating profit (right)

Logistics Solutions BusinessBusiness Environment
General logistics• Market expansion of e-commerce, the co-op industry, and other sectors due to the spread of newlifestyles•	Increase in labor-saving and efficiency needs inretail-, wholesale-, and third-party-logistics-related
fields resulting from labor shortages

Airport logistics• Latent capital expenditure demand focused on the
with- and post-COVID-19 erasCompetitive Advantages

Challenges• Know-how and system creation capabilities
cultivated by specializing in distribution andairport fields•	Sophisticated project execution capabilities
leveraging highly reliable products and systems• Catering to the growth of the e-commerce market•	Keeping pace quickly and accurately with accelerating technological innovations

Business Topics
Provision of predictive maintenance services 
The Logistics Solutions Business has launched predictive maintenance services
for logistics centers—which have become an indispensable part of social infrastructure—that detect abnormalities ahead of time by leveraging AI and the IoTwith the aim of realizing non-stop logistics through the stable operation ofequipment. Combining our own high-performance IoT sensors and AI, these
services detect failure signs by registering and analyzing changes in the vibrations of operational logistics equipment. As a result, predictive maintenanceservices optimize the timing of parts changes and greatly increase the efficiency of equipment maintenance.

IoT sensor units for predictive
maintenanceImproved efficiency of logistics center operations via open innovation 
Leveraging digital twin technology to recreate in cyberspace the operations of
the Multishuttle system used in existing logistics centers, we are aiming toincrease operational efficiency by using an AI algorithm jointly developed inpartnership with a start-up company. We are also conducting traffic flow analysis to improve the overall efficiency of logistics centers by optimizing layout andvia an integrated analysis of center layouts, actual workers’ movements, andoperational data visualizing work efficiency.

Simulation using digital twin technology

Fiscal 2021 Focus Areas• Improve marketing capabilities by strengthening proposal-based selling•	Standardize operational processes and add further value to existing services by promoting digitaltransformation

29

Plant & Machinery Business

The Plant & Machinery Business contributes to the stablesupply of energy in Japan and overseas and to the­maintenance of safety of energy storage facilities byleveraging its advanced project execution and maintenance capabilities in the construction of large-scale tanks.

Hiroshi Ohgi
Senior Managing Officer
Division Manager, Plant & Machinery Division

Value Propositions
1

2

Offer technologies that contribute to theProvide highly dependable

realization of a carbon-neutral societysocial infrastructure

Status of Progress on the Medium-Term Business Plan
In the second year of the current Medium-Term Business Plan, the Plant& Machinery Business promoted the rebuilding of its business in a variety
of ways, such as by thoroughly implementing cost reductions and scaling
down its organization to an appropriate size by transferring personnel.
In fiscal 2020, orders for new construction projects accounted for
only a small portion of overall orders as a harsh business environment
persisted in Japan and overseas, including successive project delays andcancellations due to COVID-19. Nevertheless, our maintenance businessfor oil refineries in Japan was able to secure stable earnings by improving its profit margin thanks to efforts in strengthening order processing
and management systems that emphasize profitability.
At the same time, our Indonesian subsidiary, which had undertaken
fabrication projects for steel products other than tanks, saw a significant
decline in orders due to the impact of COVID-19. In view of such a business environment, the Plant & Machinery Business posted impairment
losses of ¥1.04 billion in fiscal 2020.
As a result, while losses exceeded projections in fiscal 2020, we areaiming to reduce these losses and rebuild the business by continuing totarget opportunities to capture new construction projects while striving
to maintain and expand a stable earnings foundation with a small,talented, and experienced group of personnel.

30

Net Sales and Operating Profit/Loss(Billions of yen)

20

2.0

14.4

15

10

5

1.0

9.9 28.1
9.8 –0.08 -6.0
9.1
–0.30

–0.60

–0.40

0

0

–1.0

–2.0

FY2019 FY2020 FY2021 FY2021
Results

Net sales

Forecast Targets

Operating profit/loss (right)

Plant & Machinery BusinessBusiness Environment• Trends toward the consolidation of oil refineries inJapan due to decreasing demand for petroleum
products•	Continuous maintenance demand arising frommeasures to address the aging of tanks•P ostponement and revision of investment decisions
for overseas projects due to the impact of COVID-19• Divestment trends and a shift to non-fossil energy
sources aimed at realizing carbon neutrality•	Expansion in the use of LNG, a cleaner energy
despite being a fossil fuel• Growth in the importance of hydrogen and fuelammonia storage technology for achieving a carbonneutral society

Competitive Advantages

Challenges• Expertise in the construction and maintenance oflarge-scale tanks that require sophisticatedtechnologies•	Trust from customers and a reputation aroundthe world based on many years of high quality
and safety• Transforming our business model to restore profitability•	Responding to global shifts in the energy mix•	Addressing the aging of project engineers and theshortage of successors• Utilizing existing resources such as overseas
production bases

Business Topics
Establishment of a new company for strengthening the securement anddevelopment of frontline human resources On April 1, 2021, the Plant & Machinery Business established TKK Plant
Engineering K.K. in cooperation with a partner company in order to strengthen its
maintenance business. Through this new company’s business activities, we will
focus on maintaining a system that allows us to steadily execute our maintenancebusiness into the future by strengthening the recruitment and development of
human resources engaged in maintenance while advancing workstyle reforms for
those on the front lines.
Winner of the High Pressure Institute of Japan’s Science andTechnology Award 
Toyo Kanetsu has received the High Pressure Institute of Japan’s Science andTechnology Award for the “Development of Large Liquid Hydrogen Tank,” a paper
it contributed to the institute’s journal. In this paper, we presented the distinctive
features, specifications, and test results for a thermal insulation structure that canbe applied to the actual construction of such tanks. We were able to gain such recognition through our efforts to date and thanks to the cooperation of our coauthors, including the Tokyo Institute of Technology, and other related parties. We
will continue to promote the development of large-scale liquid hydrogen tanks
while endeavoring to network with related institutions and gathering information.

Fiscal 2021 Focus Areas• Pursue initiatives to secure and develop human resources and promote workstyle reforms in our maintenancebusiness in Japan•	Leverage alliances to capture small to medium-scale new construction projects• Cater to needs relating to fuel ammonia and promote the development of liquid hydrogen tanks

31

Other Businesses (Including Life & Work Environmental Business)
Besides the Logistics Solutions and Plant & Machinery businesses, the Toyo Kanetsu Group operates the industrial
machinery, building construction, environmental, and other businesses. In fiscal 2020, we established the Life &Work Environmental Business Division centered on Group companies responsible for these three businesses. In
April 2021, we added Eco Analysis Corporation to this division through an M&A. Under a basic policy of contributing
to the creation of environments and infrastructure that are friendly to people, we aim to expand growth domains,pursue synergies among Group businesses, and enter new domains while leveraging M&A and CVC.

Other Businesses(In addition to the following businesses, which are operated by major Group companies in Japan, real estate leasing management, equipment leasing,and copying and printing businesses are included within the Other Businesses accounting segment.)

Life & Work Environmental Business Division
Toyo Kanetsu Builtec K.K.

Toyo Koken K.K.

Industrial
machinerybusiness

Building
construction
business

Value Proposition

Labor-saving and safety
equipment for the civil engineering and construction fields
and inside factories

Building construction,
gondola leasing, andsteel pipe pile businesses

Provide safe and secure
working and living environmentsfor people

Kankyo Research Institute Inc.

Environmental
business

Environmental surveys, assessments,
and analysis and development of newenvironmental solution technologies

Eco Analysis Corporation

Maintenance and management of environmental
measurement equipment, environmental surveys andassessments, and system solutions

Synergistic benefits through the execution of growth investments

M&A

CVC

• Introduction of new technologies aimed at strengthening existing businesses• Entry into growth domains to create businesses over the medium to long term
• Creation of new businesses without regard to existing businesses

Utilization of M&A and CVC in fields not limited to the Life & Work Environmental Business Division

New businesses

32

Logistics Solutions andPlant & Machinery businessesOther Businesses
Net Sales and Operating Profit(Billions of yen)

12

2.0

10.4
Akira Kakihara
Senior Managing Officer
Division Manager, Life & Work
Environmental Business Division

Status of Progress on the Medium-Term Business Plan

9

6

7.8
0.88

6.7

8.0

0.78 0.78 0.80

1.5

1.0

3

0.5

0

0

In the second year of the current Medium-Term Business Plan, we
FY2019 FY2020 FY2021 FY2021
Forecast Targets
Results
promoted various measures in accordance with our basic policy of
selection and concentration in existing businesses and the prompt
Net sales
Operating profit (right)
achievement of profitability in new businesses. In existing businesses,
we promoted the development of new products through the applicationof our accumulated technologies while entering into new domains using M&A as a way to expand our environmental
business. In terms of business results, net sales and operating profit declined, reflecting the impact of restraints on
capital expenditures due to COVID-19, particularly in the industrial machinery and building construction businesses.
Conversely, we secured a profit margin on a par with the previous fiscal year by promoting measures that
included reducing selling, general and administrative expenses. We will continue to expand our business domains
while leveraging M&A and CVC investments to operate businesses that solve environmental issues in people’s
working and living environments in a broader manner.

Business Topic
Addition of Eco Analysis Corporation to the Group 
In April 2021, we conducted an M&A of Eco Analysis Corporation(EAC) and welcomed the company into the Toyo Kanetsu Group. EAC
Location
Kyoto City, Kyoto Prefectureholds the leading share in the industry for the maintenance and manEstablishedMarch 23, 1971
agement of environmental measurement equipment while also operCapital¥75 million
ating businesses in the environmental survey and assessment,
No.
of
employees
173
disaster preparedness, and system solutions fields.
In recent years, as cases of abnormal weather have increased infrequency and the transition to a carbon-neutral society has accelerated, we have seen a greater emphasis being
placed on the importance of environmental surveys, assessments, and measurements and of consideration for thenatural environment. We will endeavor to solve social and environmental issues while catering to this constantdemand by leveraging EAC’s extensive track record and sophisticated technologies.
Since adding Kankyo Research Institute Inc. (KRI) to the Group in 2018, we have expanded our business in theenvironmental consulting domain, which includes environmental surveys, assessments, and analysis as well as avariety of solutions for addressing environmental issues. With the newly welcomed EAC developing business in theenvironmental infrastructure domain, the Group will further grow its environmental business by expanding existing
services and entering into new domains while leveraging KRI’s and EAC’s strengths.

Fiscal 2021 Focus Areas• Expand environmental business through continuous strategic investments, including M&A•	Increase synergies among Group businesses•	Create new businesses by promoting collaboration with CVC investees

33Material Issues

The Toyo Kanetsu Group’s Material Issues

1

Basic Approach to Material Issues

The Toyo Kanetsu Group has identified 10 important management issues (material issues) to prioritize in management with the objective of sustainably improving corporate value through business activities. By solving theseissues, the Group will ensure sustained growth and financial performance. Our material initiatives are designed
to help contribute to the relevant SDGs, and by proactively working to solve these issues, we will fulfill the role
expected of us by society.

2 The Toyo Kanetsu Group’s Three Categories of Material Issues
The Toyo Kanetsu Group has divided material issues into three categories (A, B, and C) in accordance with theircharacteristics. The two topics in category A are social issues that could have a major impact on the Group. We
will provide value to society and improve corporate value by contributing to the resolution of those two issues,
primarily through our business activities. The four topics in category B are important management issues to beaddressed in order for the Group to carry out these business activities sustainably. In addition, the four topics in
category C are prerequisites for improving corporate value.

A

Social issues that could
have a major impact on
corporate value(1) Respond to changes in the business environment caused byclimate change(2) Respond to the decline in Japan’s population(3) Train and deploy human resources

B

Initiatives addressing
material issues to­sustainably improve
corporate value(4) Develop and use new technologies(5) Promote collaboration with partner firms(6) Increase productivity(7) Ensure occupational health and safety

C

Initiatives prerequisite
for sustainably
improving corporate
value(8) Execute steadfast compliance and corporate governance(9) Practice sophisticated risk management(10) Evolve our corporate culture into one that encourages employees
to quickly and proactively take on challenges

Please refer to pages 36–43 for more details about each material issue.
34

3 Process for Identifying Material Issues and KPIs*
By paying due consideration to opinions inside and outside the Company and referencing global standards, The
Toyo Kanetsu Group identified its material issues in March 2019 through the following process. In addition, we
set KPIs in August 2020.
* Key performance indicators: Indicators for visualizing the progress of identified material issues.

Research andpreparation

Management examined methods for identifying issues that are important for sustaining the growth of the Toyo Kanetsu Group and of society, referring to international guidelines, such as the SDGs adopted at the UN Sustainable Development
Summit in 2015 and the Sustainability Accounting Standards Board (SASB), as wellas to the Corporate Governance Code. We furthered the understanding of ouremployees in these areas by holding in-house seminars about ESG initiatives, theSDGs, and integrated reports.

Listing of social issues,
identification of­important issues

All members of upper management participated in multiple discussions about material issues to reach a consensus on the strengths of the Toyo Kanetsu Group, social
issues that directly affect its operations, and the role that the Group should play inthe future. As a result, we identified priority social issues needing to be solved, as
well as the Group’s own issues that must be addressed to solve such social issues.

3

Incorporation of­opinions ofstakeholders

Toyo Kanetsu exchanged opinions with outside experts and institutional investors,
listened to the concerns and expectations of stakeholders of the Group, and made alist of identified issues.

4

Identification of­material issues

The material issues discovered through this process were deliberated by theManagement Council and the Board of Directors, which identified and approved 10
material issues for the Group to address in the future.

Setting of KPIs

Referring to guidelines, examples from other companies, interviews with relevantinternal divisions, and other sources of information, we set KPIs by conducting
discussions at internal meetings with the participation of members of management,
after having listed several candidate KPIs for each material issue.

1

2

5

4 The Toyo Kanetsu Group’s Approach
The Toyo Kanetsu Group engages in business activities while positioning these 10 material issues as important
guides to consider when formulating business strategies and making decisions in each business.
In regard to initiatives for addressing material issues, the director serving as the chair of the CSR Committee
is tasked with monitoring progress in resolving said issues. In addition, through dialogue with various stakeholders,management will keep track of changes in stakeholder concerns and expectations of the Group while monitoringsocial trends, including the prolonging of the COVID-19 pandemic. If deemed necessary, the Company will flexibly
revise its material issues and KPIs.

35

Progress on Initiatives Related to Material Issues

A

Social issues that could have a major impact on corporate value(1) Respond to changes in the business environment caused by climate change
Climate change may have a major impact on the Company’s business environment. There is the risk of anegative impact from weaker demand for storage tanks as energy use shifts away from fossil fuels.
While considering measures to combat global warming, the Company will work on projects related todemand for fossil fuel alternatives, such as hydrogen energy, and develop products and services withexcellent environmental performance. In these and other ways, Toyo Kanetsu will seek out new business
opportunities in a bid to sustain business growth.

KPI

FY
CO2 Emissions

2018

2019

2020

2021 (Target)

Unit

1,905

1,763

1,959

1,728

t-CO2

Toyo Kanetsu, non-consolidated. The figure for fiscal 2018 includes Toyo Kanetsu Solutions.
In fiscal 2020, we began calculating emissions using adjusted emission intensity. Figures for fiscal 2018 and fiscal 2019, which wereoriginally calculated using basic emission intensity, have been revised accordingly.
We aim to achieve a 1% reduction every fiscal year (compared with fiscal 2019), in compliance with the target set forth in ISO 14001.

Although the Company fell short of its KPI target due to factors including an increase in workload at the Chiba Office, it is
now examining and implementing response measures, such as the installations of solar power generation equipment, toprovide power for in-house consumption.

TopicsToward the Realization of a Carbon-Neutral Society
Toyo Kanetsu is continuing to develop the world’s firstlarge-scale liquid hydrogen tank in order to achieve thefull-fledged commercialization of hydrogen power generation by 2030. Based on the progress we have made in
our research to date, we will continue resolving issues torealize the actual construction of such a tank and advance
this project with the aim of establishing the essential
technology for it in 2022 while receiving the support ofexternal organizations, notably the New Energy andIndustrial Technology Development Organization (NEDO),
a national research and development agency. In connection with this research and development, we wereselected by the Ministry of Economy, Trade and Industry
for inclusion in a list of “Companies Taking On the ZeroEmission Challenge and Paving the Way to the Realizationof a Decarbonized Society by Taking Advantage of
Innovations.” In addition, we are striving to gather andcommunicate information through our participation in“Challenge Zero,” a project launched by Keidanren (Japan
Business Federation), and in organizations including
Tokyo Zero-emission Innovation Bay, the Japan Hydrogen
Association, and the Clean Fuel Ammonia Association.
We will continue aiming to contribute to the realizationof carbon neutrality while networking and gathering
information.

36

Installation of Solar Power Generation Equipment
to Provide Power for In-House Consumption
The Toyo Kanetsu Group installed solar power generationequipment to provide power for in-house consumption at
its Chiba Office in Kisarazu City, Chiba Prefecture, andbegan using it to generate power in July 2021.
We expect the operation of this equipment to facilitate the supply of renewable energy equivalent to 7%*
of our annual power consumption. Moreover, as thisequipment runs independently, the Chiba Office can use
it as an emergency power source and local residents may
utilize it for charging their cell phones in the event of
a disaster.
The Group will continue working to address thesocial issue of reducing CO2 emissions in a variety ofways, including installing solar power generation equipment to provide power for in-house consumption at its
major business sites.
* Compared with annual power consumption in fiscal 2020

Solar power generation equipment at the Chiba Office(2) Respond to the decline in Japan’s population
It has become harder to secure human resources due to the decrease in Japan’s population amid adeclining birth rate and an increase in the number of elderly citizens. The Company understands theimportance of maintaining attractive workplaces that are comfortable and inclusive of diversity andwhich facilitate rewarding work.
In the Logistics Solutions Business, there is a risk that the contraction in the population will lower
the purchasing power of consumers and lead to weaker demand overall. By developing labor-saving
systems and taking other steps amid labor shortages, the Company believes it can turn this into a major
growth opportunity.

KPI

FY

2018

2019

2020

2021 (Target)

Unit

54

58

68

70

%

Rate of Annual Paid Vacation Taken

Toyo Kanetsu, non-consolidated. The rate for fiscal 2018 includes Toyo Kanetsu Solutions.

In particular, we have advanced the following initiatives to promote the taking of childcare leave by male employees.
Implementation of communication on an individual basis with male employees whose spouses have given birth andwith their superiors
Implementation of awareness-raising training for general employees and managers
Provision of a handbook summarizing the childcare leave system in an easy-to-understand format

TopicsVarious Systems for Realizing Flexible Workstyles

Initiatives through Our Business Activities

The Toyo Kanetsu Group is introducing and improving
various systems designed to enhance the work–lifebalance of each of its employees. In fiscal 2020, weestablished a new system for employees to take annual
paid vacation in one-hour increments and revised a systemenabling them to utilize staggered working hours in a
flexible manner. We are also promoting the establishmentof systems, including those for working from home, withan eye on a post-COVID-19 society. We will continue
working to create comfortable working environments bydeveloping workstyles that are flexible in terms of timeand place.

The Logistics Solutions Business is advancing a range ofinitiatives, such as AI-based operational efficiency simulations using digital twin technology and the development of solutions for optimizing layouts within
warehouses by visualizing and analyzing the traffic flowof people and goods.

Simulator using digital twin technology

37

Progress on Initiatives Related to Material Issues

B

Initiatives addressing material issues to sustainably improve corporate value(3) Train and deploy human resources
To sustain growth, the Company must train its employees, imbuing them with knowledge and technicalskills related to its businesses, while enhancing leadership skills, international awareness, and responsiveness to changes in the business environment. We must advance measures to secure, train, anddeploy diverse human resources.

KPI

FY

2018

2019

2020

2021 (Target)

Unit

–

2.2

12.7

15.0

%

Female Semi-Management Team
Leaders as a Percentage of Total
Semi-Management Team Leaders

Toyo Kanetsu, non-consolidated
Note: A percentage is not recorded for fiscal 2018 because this fiscal year preceded the introduction of the team leader system.

With the aim of increasing the proportion of women in management candidate
positions (team leaders) to 15% or higher by fiscal 2021, we are working on
measures to develop and promote women, including through the establishmentof workplace environments and the implementation of training that enables
their active participation. As part of these efforts, in February 2021 we set up a
project team for promoting the active participation of women and developing
the next generation of human resources. This project team will endeavor torevitalize our human resources while further reinforcing our planning capabilities
and driving force.

Topic
Creation of the Education Center
The Logistics Solutions Business has established afacility within the Chiba Office centered on fixed equipment in order to provide training for employees engaged
primarily in the installation of products to be delivered
to customers.

38

While we previously carried out technical training
with a focus on on-the-job training at installation sites, we
decided to establish our own educational facility with aview to further improving the skills of our humanresources. At this facility, we have installed materials
handling equipment, our primary product, which we use
to implement training based on actual site conditions. By
doing so, we will develop human resources who can not
only adapt flexibly to any conditions but also acquire
operational know-how.
We have also installed equipment for experiencebased safety-training. By providing a simulated experience of accidents, this training encourages employees toreconfirm hazards and heighten their safety awareness.
Going forward, we also plan to extend safety training
to customers and partner firms and make use of the
Education Center as a facility for them to deepen theirunderstanding of our products and services.

(4) Develop and use new technologies
The development and use of new technologies will allow the Company to provide new products andservices, in addition to strengthening the competitiveness of existing businesses. Moreover, new technologies are likely to become the driving force behind new business creation. In particular, efforts todevelop new technologies in the fields of AI, the IoT, robotics, and failure prediction should be effective
in resolving the social issue of increasing efficiency in logistics by helping conserve and reduce labor aswell as stabilize operations.

Topic
The Logistics Solutions Business is rolling out the GP3(Goods to Person (GTP) for Pick and Pack) system, integrating automated packing into the GTP system, whichmoves products to picking workers’ stations instead ofrequiring them to walk to pick up said products. Thissystem has already been installed at logistics centers,
where it is improving efficiency and saving space. In
addition, in order to address growing demand related to
e-commerce, we are advancing the development of afull-line GTP system that enables efficient processing byleveraging the respective characteristics of theMultishuttle high-throughput storage system, our key
product, and AutoStore, our high-density storage system,

Product picking

through their hybrid operation. We have also initiated thedevelopment of a Goods to Robot (GTR) system, forwhich we are installing a demonstration machine at the
Chiba Office.
Amid growing demand for labor-saving due to thedecline in the working-age population in Japan, we arecontributing to more efficient logistics by offering systems that realize “no searching, no mistakes, and nowalking” for picking operations with a view to achieving
complete automation within logistics centers. We willcontinue to evolve in tune with the times while making
use of the know-how we have amassed.

GP3

Packing

The GP3, which automates picking and packing

39Progress on Initiatives Related to Material Issues

B

Initiatives addressing material issues to sustainably improve corporate value(5) Promote collaboration with partner firms
The value chains in the Company’s businesses depend on numerous partners inside and outside Japan
involved in the supply of parts and materials, installation work, and IT engineering. Toyo Kanetsu works
with its partners to supplement areas where it has insufficient resources and provide cutting-edge technologies, such as AI and the IoT. These partnerships expand the scope of business domains that Toyo
Kanetsu can enter and increase opportunities to start new businesses.

Topic
The Logistics Solutions Business is further expanding its
market presence by strengthening collaboration withpartner firms. April 2021 saw the launch of verification
tests for a new check-in-to-boarding process at terminals
two and three of Haneda Airport, where we haveinstalled self-service baggage drop units equipped with afacial recognition system by leveraging our own technological capabilities and know-how as well as those of ourbusiness partner. In this way, we are helping reduce

contact risks and improve convenience for passengers
when checking in.
We are also continuing a wide-ranging search for new
partner firms by strengthening our public relations activities,
such as participating in online exhibitions, revamping our
website, and collaborating with external organizations, including the Organization for Small & Medium Enterprises andRegional Innovation, JAPAN (SME Support, JAPAN).

(6) Increase productivity
Amid stronger demand from customers for the delivery of high-performance, low-price equipment, Toyo Kanetsu must
continuously increase productivity with innovative technologies to keep winning orders and booking sales.

KPI

FY

2018

2019

2020

2021 (Target)

Unit

–

2,608

3,306

1,912

Thousands of yen

Operating Profit per Employee

Toyo Kanetsu, non-consolidated
Note: A figure is not recorded for fiscal 2018 because this fiscal year preceded the business integration with Toyo Kanetsu Solutions.

The further strengthening of earnings management and the steady growth of operational execution skills in the Logistics
Solutions Business contributed to the increase in profitability.

Topic
Efforts to Strengthen Competitiveness
The Logistics Solutions Business has set up a project withthe aim of improving operational and production efficiency. We are promoting the construction of a new crossdepartmental system that will enable the visualization ofinternal information and management of the progress ofprojects. Meanwhile, the introduction of AutoStore, ahigh-density storage system, at the Wakayama Plant
reduced the space taken up by inventory to a third of theoriginal space. We are also saving and reducing laborthrough the automation of picking operations.
The Plant & Machinery Business is endeavoring to

40

make effective use of its resources while scaling down
its organization to an appropriate size and implementing
thorough cost reductions.

AutoStore

C

Initiatives prerequisite for sustainably improving corporate value(7) Ensure occupational health and safety
Safety is a priority issue in everything that Toyo Kanetsu does. If a safety or health problem arises with
employees, our most important resource, there is a risk that corporate value will be damaged considerably. Since accidents must not happen, the Company is reinforcing its safety-first mind-set by creating
and implementing safety management plans to prevent accidents from occurring.

KPI

2018

2019

2020

2021 (Targets)

Units

Frequency Rate of Industrial
Accidents

0.63

0.95

1.39

0.00

Casualties/million
working hours

Severity Rate of Industrial Accidents

0.00

0.01

0.05

0.00

Days lost/thousandworking hours

0

0

0

0

Cases

FY

Number of Fatal Work Accidents

Toyo Kanetsu, non-consolidated. The figures for fiscal 2018 include Toyo Kanetsu Solutions.

Although the Plant & Machinery Business went through fiscal 2020 without any incidents or accidents, lost work time
resulting from accidents increased for the Toyo Kanetsu Group as a whole compared with fiscal 2019, which led to aworsening of both the frequency rate and the severity rate of industrial accidents. In response to industrial accidents, we
thoroughly investigate the causes and take measures to prevent a recurrence in compliance with the ISO 45001 certification
for management systems. At the same time, we carry out accident prevention education through ways that include sharing
accident information and holding Group safety meetings with the aim of maintaining secure and safe working environments.

TopicsEnsuring of Occupational Health and Safety andPromoting Related Activities
Based on its Occupational Health and Safety Policy, theToyo Kanetsu Group strives to cultivate a culture thatprioritizes safety by maintaining ISO 45001 certification,
holding Group safety meetings, implementing safety
patrols, and maintaining and augmenting safety systems,
including at partner firms.
In the Plant & Machinery Business, we focus on not
only tank construction in Japan and overseas but also
the maintenance business, centered on oil refineries inJapan, where we are engaged in the maintenance andrepair of approximately 100 tanks per year. In order toachieve zero industrial accidents, our site managers,
project engineers, and partner firms work as one atworksites to vigorously carry out occupational health andsafety activities on a daily basis by returning to the basic
stance of “accidents must not be allowed to happen,” inaccordance with the principle of respect for human life.
Thanks to these efforts, which we continue to pursue,
the Plant & Machinery Business has achieved a record ofzero incidents and accidents spanning from 2015 to thepresent day.
We will continue offering high-quality services whilestrengthening plan–do–check–act (PDCA) functions andthoroughly implementing safety management centeredon the Safety, Environment, and Quality Assurance
Department, an independent organization that we reorganized under the direct control of the president infiscal 2019.

Improvement of Our Health Support System
In August 2020, we began implementing health status
follow-ups and mental health guidance using publichealth nurses in order to improve our system for supporting the mental and physical well-being of employees. In
cooperation with industrial physicians, we have established opportunities to provide support for employees’
well-being through in-person or online consultations,
thereby maintaining an environment in which employees
can work in good mental and physical health. In addition,
the Company is promoting the creation of workplaces
that raise the health consciousness of employees bycommunicating a range of useful health information tothem through the publication on its in-house portal website of a newsletter, which it produces with the cooperation of public health nurses.

41

Progress on Initiatives Related to Material Issues

C

Initiatives prerequisite for sustainably improving corporate value(8) Execute steadfast compliance and corporate governanceAs compliance with laws and regulations is a vital cornerstone for Toyo Kanetsu to conduct trustworthy business activities, the Company requires that all employees maintain a value system in which
compliance is their highest priority. In addition, Toyo Kanetsu continuously reinforces its corporate
governance system.

Topic
In June 2021, we revised our Corporate Governance
Guidelines and made announcements on matters including the establishment of a succession plan, the clarification of our policy for determining the compensation of
directors (excluding directors who are Audit &Supervisory Committee members), and the formulationof a skills matrix for directors. In addition, we are examining our response to the recent revision of the Corporate
Governance Code.

In regard to compliance, we raise employee awareness by implementing internal training, communicating
information via our internal newsletter, and conducting
self-assessments while laying the basis for fair businessactivities in a variety of ways, such as revising our manualin accordance with changes in the law and social affairs.
Please visit our website to view our Corporate Governance
Guidelines (in Japanese only).

https://www.toyokanetsu.co.jp/ir/corporate.php(9) Practice sophisticated risk management
Since Toyo Kanetsu engages in operations related to social infrastructure, management responds properly and quickly to demand from society when a problem arises while taking steps to prevent accidents
from occurring. As the scope of business expands with new businesses and projects overseas, and as
the fabric of society changes with greater speed, the risks the Company must address have grown in
number and magnitude. Toyo Kanetsu aims to further strengthen its ability and systems for identifying,assessing, and minimizing various risks, such as by improving its credit and project screening capabilities
and strengthening internal security, in addition to preparing for emergency situations around the world.

KPI

2018

2019

2020

2021 (Targets)

Units

Rate of Information Security Training
Participation

–

100

100

100

%

Number of Training Sessions Held on
Risk Management

4

6

5

3

Times

FY

Toyo Kanetsu and consolidated subsidiaries
Note: A rate is not recorded for fiscal 2018 because this fiscal year preceded the implementation of Companywide training.

The Toyo Kanetsu Group regularly implements information security training for all employees in order to thoroughly raiseawareness of the importance of handling a variety of confidential information, including technological information, and tostrengthen information management. We are also striving to update the knowledge of employees by conducting risk
management training with the goal of developing our ability to respond quickly to diversifying risks.

42

TopicDisaster Preparedness and Risk Countermeasures
In preparation for emergencies brought about by natural
disasters such as earthquakes and floods, the Toyo Kanetsu
Group works on disaster preparedness measures by stockpiling supplies for emergencies and carrying out drills on aregular basis, including safety confirmation drills andevacuation drills.
We have been publishing a newsletter every second
month since September 2020 on our in-house portal website to increase employees’ awareness of disaster preparedness. In preparation not only for risks related to earthquakes
but also floods, which have been increasing in frequency inrecent years, we aim to raise each employee’s awarenessof disaster preparedness by communicating the importanceof precautionary measures and the Code of Conduct in theevent of a disaster.
In response to risks associated with the spread of the
COVID-19 pandemic, we are quickly sharing information
centered on our COVID-19 countermeasures project andresponding in an appropriate manner based on prompt decision-making and instructions. We are also taking a range ofsteps as we continue striving to prevent the spread of infection. These steps include improving cloud storage and electronic authorization systems, which underpin working fromhome and other workstyles, and recommending the proactive utilization of work arrangements such as staggered
working hours.

(10) Evolve our corporate culture into one that encourages employees toquickly and proactively take on challenges
In order to advance existing businesses and create new ones, we must nurture a corporate culture where all of ouremployees can work together as one on challenges in new fields.

—Challenge & Change—
KPI

FY

2018

2019

2020

2021 (Target)

Unit

Commendation System: Improvement
Proposal Submission Rate

74.6

76.4

72.3

100.0

%

Submission rate = Total number of proposals submitted (Toyo Kanetsu, non-consolidated) ÷ number of eligible Toyo Kanetsu employees
at the end of the second fiscal quarter. Total number of proposals is the aggregate; multiple proposals from one person are all counted.

Given that we fell short of achieving our KPI target, we will continue striving to create a system to promote and assess
new proposals and proactive operational improvement activities.

TopicsLaunch of the Future Creation Project under the
Direct Control of the President
Toyo Kanetsu celebrated its 80th anniversary in May 2021.
In fiscal 2020, the Company set up and commenced theactivities of the Future Creation Project under the directcontrol of the president in order to reflect on its history andcontinue achieving further growth. As part of this project,
each business configured a cross-departmental project
team to identify issues via several rounds of discussions,create a future vision for the management of the Group,
and implement measures designed to realize that vision.

Activities in Local Communities
The Toyo Kanetsu Group conducts social contribution activities in the communities of various cities that have long been
supportive of its business activities. In Koto Ward andHachioji City in Tokyo, Kisarazu City in Chiba Prefecture,
Minami Alps City in Yamanashi Prefecture, and Arida City inWakayama Prefecture, we have made donations to libraries
advancing the Plan for the Promotion of Children’s Reading
Activities. We make these donations out of a wish to create
opportunities for children to come into contact with books
and to contribute to achieving the SDG of “Quality Education”
for everyone. Besides these efforts, in Koto Ward, the homeof our headquarters, we co-sponsored and supported
Artpara Fukugawa—which primarily displays the artwork ofpeople with disabilities—and our employees cooperated in
the operation of the event as volunteers. We will continue
proactively engaging in such activities as a member of thelocal community while working to create a corporate culturethat is conducive to further invigorating them.

43

The Toyo Kanetsu Group’s ESG Data Highlights

FY

Material issues

A

(1) R
 espond to changes
in the businessenvironment causedby climate change*1(2) R espond to
the decline in Japan’s
population*1

2020

Units

927

885

927

kl

Energy consumption (electricity)

3,030

2,951

3,231

Thousand kWh

Energy consumption (LPG)

112

95

72

t

Energy consumption (city gas)

0.1

0.1

0.1

Thousand m3

1,905

1,763

1,959

t-CO2

CO2 emissions per unit of net sales*3

–

0.05

0.05

t-CO2/millions of yen

Water consumption

10.0

10.2

9.6

Thousand m3

Total amount of waste generated

227

190

258

t

Paper consumption*4

8.3

13.4

12.2

t

Rate of employee participation in e
­ nvironmental
management training*5

36

–

37

%

Rate of employees voluntarily leaving theCompany*6

2.6

2.8

1.7

%

Average number of service years

15.7

15.3

15.5

Years

Number of employees taking childcare leave

5

6

4

Persons

Number of employees taking childcare leave(male)

0

2

1

Persons

Number of employees taking childcare leave(female)5

4

3

Persons

Number of employees returning to work afterchildcare leave

2

3

4

Persons

Number of employees working shortened hours

6

6

8

Persons

Number of employees working shortened
hours (male)

0

0

0

Persons

Number of employees working shortened
hours (female)

6

6

8

Persons
Persons

CO2 emissions*2

Number of employees taking nursing care leave

0

0

1

Rate of annual paid vacation taken

54

58

68

%

Average number of work hours*7, 8

–

2,015

1,814

Hours

Average number of overtime work hours*8

–

23.95

20.48

Hours

Initiatives addressing material issues to sustainably improve corporate value
552

560

575

Persons

Number of employees (male)

455

457

470

Persons

Number of employees (female)

97

103

105

Persons

Average age of employees

43.9

44.0

44.4

Years old

Average age of managers

52.7

53.0

53.0

Years old

Number of new graduate recruits

16

19

16

Persons

Number of new graduate recruits (male)

8

12

14

Persons

Number of new graduate recruits (female)

8

7

2

Persons

Number of mid-career recruits

14

11

16

Persons

Number of non-Japanese employees

4

7

8

Persons

Managers as a percentage of all employees

14.5

15.4

16.2

%

Number of semi-management team leaders*10

–

46

55

Persons

Female semi-management team leaders as aper­centage of total semi-management teamleaders*10

–

2.2

12.7

%

Number of employees*9(3) Train and deploy
human resources*1

52,311

52,143

44,699Thousands of yen

Annual cost of training (per employee)

95

93

78

Thousands of yen

Number of rewards provided for qualificationacquisition

23

21

14

Cases

Annual cost of training*11

44

2019

Social issues that could have a major impact on corporate value
Energy consumption (crude oil equivalent)

B

2018

FY

2018

2019

2020

Units

Amount of compensation givens for qualificationacquisition

1,950

1,100

850

Thousands of yen

Number of employees acquiring an importantqualification*12

109

106

97

Persons

543,183

541,497

597,420

Thousands of yen

Sales revenue per employee–

55,07651,327

Thousands of yen

Operating profit per employee

–

2,608

3,306

Thousands of yen

Material issues(3) Train and deploy
human resources*1(4) Develop and use newtechnologies*13(6) Increase productivity*3

C

Annual cost of research and d­ evelopment(consolidated)

Initiatives prerequisite for sustainably improving corporate value(7) Ensure occupational
health and safety*1

Frequency rate of industrial accidents

0.63

0.95

1.39

Casualties/
million working hours

Severity rate of industrial accidents

0.00

0.01

0.05

Days lost/thousandworking hours

Number of fatal work accidents

0

0

0

Cases

Frequency rate of industrial accidents not resulting in lost work time

1.26

3.50

1.39

Casualties/
million working hours

3,168,563

3,146,153

2,882,716

Hours

1

1

1

Times

Total number of work hours
Number of Group safety meetings held(8) Execute steadfast
compliance andcorporate governance(9) Practice sophisticatedrisk management*13(10) Evolve our corporate
culture into one thatencourages employees
to quickly and proactively take on challenges

Number of safety patrols implemented

185

185

167

Times

Response rate for stress checks

95.4

94.0

93.8

%

Rate of compliance training participation*14

91.8

92.5

92.5

%

Number of helpline (whistleblower system)
cases*1

7

7

5

Cases

Rate of information security training
participation*15

–

100

100

%

Rate of safety confirmation drill participation(annual average)

88.5

93.6

93.5

%

Number of training sessions held on risk
management

4

6

5

Times

Number of automated external defibrillator(AED) certificate holders

13

39

39

Persons

Commendation system:
Number of improvement proposals*16

950

1,066

1,048

Cases

Commendation system:
Improvement proposal submission rate*17

74.6

76.4

72.3

%

*1	Toyo Kanetsu, non-consolidated. The figure for fiscal 2018 includes Toyo Kanetsu Solutions.
*2	In fiscal 2020, we began calculating emissions using adjusted emission intensity. Figures for fiscal 2018 and fiscal 2019, which were originally calculatedusing basic emission intensity, have been revised accordingly.
*3	A figure is not recorded for fiscal 2018 because this fiscal year preceded the business integration with Toyo Kanetsu Solutions.
*4	The figure for fiscal 2019 has been revised because results for the Logistics Solutions Division were originally omitted due to business integration.
*5	Employees of Toyo Kanetsu Solutions in fiscal 2018 and employees of the Logistics Solutions Division in fiscal 2020 are not included in the rates as there
are no plans to implement training for them for the ISO plan. Training was not implemented in fiscal 2019 due to the impact of COVID-19.
*6	Includes full-time employees (including senior employees but excluding assignees) + Contract employees + Temporary workers + Number of incoming assignees*7	Includes full-time employees (including senior employees but excluding assignees)*8	A figure is not recorded for fiscal 2018 because this fiscal year preceded the introduction of the attendance management system.
*9	Includes directors and full-time employees*10	A figure is not recorded for fiscal 2018 because this fiscal year preceded the introduction of the team leader system.
*11	The figure for fiscal 2019 has been revised due to the duplication of a portion of data as a result of business integration.
*12	Number of employees who are architects, engineers, or construction management engineers*13	Toyo Kanetsu and consolidated subsidiaries*14	Includes directors, executive officers, and new employees, including those at Group companies.
*15	A rate is not recorded for fiscal 2018 because this fiscal year preceded the implementation of Companywide training.
*16	Overall number of proposals for the Toyo Kanetsu Group as a whole, including subsidiaries. The total number of proposals is the aggregate; multiple
proposals from one person are all counted.
*17	Submission rate = Total number of proposals submitted (Toyo Kanetsu, non-consolidated) ÷ Number of eligible Toyo Kanetsu employees at the end of
the second fiscal quarter. The total number of proposals is the aggregate; multiple proposals from one person are all counted.

45

Governance

Board of Directors (As of June 29, 2021)
Kazuo UshidaToshiaki Hiwatari

Outside Director and Audit &Outside Director and Audit &Supervisory Committee Member

Supervisory Committee Member

Kazuhito Watanabe

Keisuke Kodama

Director

Director and Executive Vice President

Senior Managing Officer
Division Manager, Corporate Division46

Kazuto Abe

Shigeharu Nakamura

Director and Audit &Outside Director and Audit &Supervisory Committee Member

Supervisory Committee Member

Toru Yanagawa

Takashi Owada

President and Representative Director

Director and Executive Vice President
Division Manager,
Logistics Solutions Division

47

Corporate Governance	Toyo Kanetsu has disclosed its Corporate Governance Guidelines (in Japanese only) on its website.
https://www.toyokanetsu.co.jp/ir/corporate.php

Basic Approach
Toyo Kanetsu manages its operations while considering
the perspectives of its stakeholders, including shareholders,customers, suppliers, employees, creditors, and local
communities, and striving to ensure efficiency,

soundness, and transparency in management. The
Company has a corporate governance system that facilitates accurate decision-making, rapid business execution,and proper supervision and monitoring of operations.

Strengthening of Corporate Governance2000

Introduces an executive officer system2005

 stablishes the Compliance CommitteeEChanges the maximum number of directors stipulated in its
Articles of Incorporation from 20 to seven2008

Abolishes the retirement allowance scheme for directors

2015 ransitions to a “company with an audit and supervisoryTcommittee” structure (shortening the term of office of
directors from two years to one year)
Changes its Articles of Incorporation to stipulate the maximum number of directors who are not Audit & Supervisory
Committee members as seven and the maximum number ofAudit & Supervisory Committee members as fourAppoints outside directors (three members of the Audit &Supervisory Committee members)Establishes the Nomination and Compensation Committee(chaired by an outside director)

2015Formulates a shareholder return policy
Establishes its Corporate Governance Guidelines

2016C ommences evaluations of the effectiveness of the Boardof DirectorsF ormulates a basic capital policy

2018 evises its Articles of Incorporation to allow an executive
R
officer to be appointed as president

2019Introduces a performance-linked stock compensation
system2020

Establishes the CSR Committee

2021

Resolves a policy for determining the compensation of
executive directors

Structure

Director compensation system

Operational policy

Corporate Governance System
On June 26, 2015, Toyo Kanetsu switched from a “company with an audit and supervisory board” to a “company
with an audit and supervisory committee” structure. By
giving voting rights in the Board of Directors to directors
who are members of the Audit & Supervisory Committee(including a number of outside directors), we strengthened the functions of the Board of Directors, as well as
auditing and supervisory functions, with the aim of building a more effective corporate governance system.

Board of Directors
The Company’s Board of Directors consists of a maximum of four directors who are members of the Audit &Supervisory Committee (including one inside director, inprinciple) and no more than seven directors who are notmembers of the Audit & Supervisory Committee, for no
more than 11 directors. These directors have extensive
experience, deep insight, high levels of specialization,and international perspectives for ensuring the Board of
Directors is sufficiently diverse and of an appropriate size.
Directors who are members of the Audit &Supervisory Committee are selected for their experience48

in corporate management and/or in-depth understandingof the Company’s operations, as well as for their knowledge in the necessary fields of finance, accounting, andlaw. At least one of these directors is an expert in financeand accounting. The Company will examine the possibilityof nominating a female director in the future while trying
to achieve an appropriate balance between the diversity
and size of the Board of Directors.
Utilizing the framework provided by the “company
with an audit and supervisory committee” structure, theBoard of Directors meets once a month, in principle, todeliberate and decide on important matters that are fundamental to the Company based on resolutions approvedby the General Meeting of Shareholders; matters thatshould be discussed and authorized as defined by laws,
regulations, and the Articles of Incorporation; and important matters related to management principles, aims,
strategic directions, and business execution. The Board of
Directors also monitors business execution. From thestandpoint of enhancing the effectiveness and efficiencyof business execution, important matters related to theoperations of the Company and the Group are deliberated

and consulted on by the Management Council, and thendecided by the Board of Directors. In accordance withlaws, regulations, and the Articles of Incorporation, certain decisions related to important aspects of businessexecution are entrusted to a certain director, and coremanagement matters that are especially important must
be approved by the Board of Directors.

Audit & Supervisory Committee
The Audit & Supervisory Committee has four members,
including three outside directors to form a majority inaccordance with the Companies Act. The Audit &Supervisory Committee conducts organizational audits
using the internal control system with the intention of
improving corporate value from an independent andobjective standpoint, fully aware of the authority given
only to members of the committee and of the importance of the roles and duties they are expected to perform. The Audit & Supervisory Committee also audits
and monitors business execution from an independentand objective vantage point. For this reason, candidates
who will serve as both outside directors and membersof the Audit & Supervisory Committee are independentand highly specialized and possess extensive experience
as corporate managers.
The Audit & Supervisory Committee meets once amonth, in principle, and has one full-time member. Whilecoordinating with the Internal Audit Division and theaccounting auditor, committee members participate inBoard of Directors’ and other important meetings, read
documents of significance, listen in on updates to business execution, visit important bases for audits, monitor
and evaluate updates to the internal control system, andaudit business reports and other briefing materials by
investigating conditions at subsidiaries, all in accordancewith the auditing policies and auditing plans determinedby the Audit & Supervisory Committee. While monitoringand evaluating whether the accounting auditor is properly
conducting audits, the committee receives reports andexplanations from the accounting auditor about the stateof progress on its work and also audits financial statements, supplementary documents, and the consolidated
financial statements.

Nomination and Compensation Committee
Toyo Kanetsu established the Nomination andCompensation Committee, on which outside directors
form a majority, as an advisory body to the Board of
Directors to ensure transparency and appropriateness inthe nomination of director candidates and decisions
related to their compensation. In this regard, theCompany has put in place a structure where fair andhighly transparent procedures are followed, including thecreation of opportunities for outside directors to get

Corporate Governance System (as of June 29, 2021)

General Meeting of Shareholders
Appointment, dismissal

Board ofDirectors

Non-committee member
directors

Committee member
directors

Consultation
Supervision

Business
Execution
Division

Appointment,
dismissal,
non-reappointment

Appointment, dismissal

Audit & Supervisory
Committee

Recommendation

LinkageAccounting auditor

Auditing,supervision

Nomination and Compensation Committee

ReportMonitoring,guidance

Audit

President andRepresentative Director

ReportManagement Council
Business execution in each division(businesses, Group companies, etc.)

Controlsupport

Audit

Monitoring,guidance

Internal Control
Division

Audit andcontrolassessment

Linkage

Internal Audit
Division49

Corporate Governanceinvolved and advise on matters in an appropriate manner.
For matters concerning the nomination and compensation of directors, the committee meets as often as
required to deliberate and make recommendations, andthen the Board of Directors arrives at a final decision.

The committee comprises four directors who are members of the Audit & Supervisory Committee, including a
representative director and three outside directors.
Outside Director Toshiaki Hiwatari is the chair of theNomination and Compensation Committee.

Evaluation of Effectiveness of the Board of Directors
In order to confirm that the Board of Directors is functioning effectively overall, each director completes a selfevaluation every year after gathering the necessary
information from relevant divisions for evaluating theeffectiveness of the Board of Directors, which thenreaches a final evaluation decision while referring tothese opinions on its effectiveness. In addition to evaluating the effectiveness of the Board of Directors, evaluations are conducted every year on whether the entire
corporate governance system is operating in accordancewith the Company’s Corporate Governance Guidelines,
with the objective of constantly improving the effectiveness of overall corporate governance.

Summary of Results of EffectivenessEvaluation in Fiscal 2020
The Company’s Board of Directors evaluated the effectiveness of the Board of Directors mainly by asking, “Is
the Board of Directors operating in accordance with the
Corporate Governance Guidelines?”(1) Method of Evaluation
From March to May 2021, the Board of Directors conducted an evaluation of its effectiveness by following theprocedures outlined below.
1.	The secretariat provided the reference materials
needed to evaluate effectiveness.
2.	The Board of Directors asked questions about the reference materials supplied by the secretariat,
exchanged opinions, and asked for additional information to be provided.
3.	Each director completed a self-evaluation based on ascoring sheet for effectiveness.
4.	At the Board of Directors’ meeting held on May 14,
2021, the directors discussed the self-evaluations andreached a decision on the final evaluation.
(2) Results of Evaluation and Analysis of Effectiveness ofBoard of Directors

50

Through this evaluation process, the Company’s Board of
Directors affirmed that the Board of Directors is functioning effectively overall. Below is a summary of the resultsof the evaluation.
1.	The Company’s Board of Directors is appropriately
structured and operating in accordance with its
Corporate Governance Guidelines.
2.	Each director is fully aware of the roles and responsibilities expected of them by the Board of Directors
while properly carrying out their duties.
3.	The Board of Directors formulated and disclosed theMedium-Term Business Plan (fiscal 2019–fiscal 2021)
to clarify the Company’s strategic direction and has
disclosed the status of progress of this plan at results
briefings. In addition, the Board of Directors provided
various non-financial information, including the statusof the Company’s ESG initiatives, in TKK Report 2020,
an integrated report emphasizing ESG management.
4.	The Board of Directors established the Nomination
and Compensation Committee as an advisory body to
the Board of Directors. This committee deliberates
matters concerning the nomination and compensationof directors, and it makes sure this decision-making
process is fair and transparent with the appropriate
level of involvement of independent outside directors.
5.	The Board of Directors has deliberated on and implemented projects for optimizing internal systems andhas executed plans for maintaining internal infrastructure in order to advance the digitalization of corporate
management.
(3) Future Issues and Response
The Board of Directors will continue to ensure the effectiveness of the Board of Directors, undertaking the following measures so that it can adequately fulfill its vitalroles, including setting the strategic direction for theCompany and facilitating independent and objective audit
functions:
1. Gather information necessary for making decisions;2.	Hold in-depth discussions from multiple perspectives;and
3.	Take appropriate risks and proactively and boldly makedecisions.

In addition, amid calls to further strengthen publicand private-sector initiatives to address climate change,
the Company will conduct appropriate information disclosure regarding its initiatives in this regard.

Skills Matrix of the Board of Directors
The Company has determined the skills that the Board of Directors possesses as a whole and organized and disclosed
them in a skills matrix.

Expected areas of expertise based on experience

Generalmanagement

International
experience

Sales

Manufacturing /technology /research anddevelopment

Law / risk management / ESG

Finance /accounting

Toru Yanagawa
Keisuke Kodama
Takashi Owada
Kazuhito Watanabe
Kazuto Abe
Toshiaki Hiwatari
Shigeharu Nakamura
Kazuo Ushida

Matters Related to Outside Directors
Toshiaki Hiwatari

Shigeharu Nakamura

Kazuo Ushida

Professional knowledge
cultivated as a prosecutor andattorney and extensive experience in the legal profession,
including serving as the attorney general and in otherimportant posts

Extensive experience in all
aspects of corporate management and broad knowledge offinance and accounting cultivated through many years ofexperience in financial institutions, including as a manager

Extensive technological development experience at a listedcompany (manufacturingindustry) and extensive experience and broad knowledge of
all aspects of corporate management cultivated as amanagerNumber of Company
shares owned

520 shares

520 shares—

Attendance at Board of
Directors’ meetings

11/11 times (100%)

11/11 times (100%)—

Attendance at Audit &Supervisory Committee
meetings

11/11 times (100%)

11/11 times (100%)—

Attendance at Nomination
and Compensation
Committee meetings

8/8 times  (100%)

8/8 times  (100%)

—

Name

Field of expertise

Note: Number of shares as of June 29, 2021. Meeting attendance shown for fiscal 2020
Kazuo Ushida became an outside director who is a member of the Audit & Supervisory Committee at the General Meeting of Shareholders heldon June 29, 2021.

51

Corporate GovernanceDirector Compensation
The Company resolved a policy for determining thedetails of compensation for individual directors (excluding
outside directors and Audit & Supervisory Committee
members who are directors (hereinafter referred to as“executive directors”)) at a meeting of the Board of
Directors held on February 26, 2021. In passing this resolution, the Board of Directors consulted in advance with
the Nomination and Compensation Committee, on which
independent outside directors form a majority, regarding
the resolution details and received the committee’s
recommendations.
The following is an overview of the policy on determining the details of compensation for individual executive directors.
a) Basic policy•	To ensure that compensation for executive directors
enhances their motivation to improve its performance andincrease its corporate value over the medium to long term
and functions properly as an incentive to share risks andreturns arising from changes in its share price with shareholders, the Company has adopted a compensation system
linking compensation with its business results and stock
value. The basic policy of this system is to establish appropriate criteria that take into consideration each individual’s
responsibilities when determining the compensation for
individual executive directors. Compensation for directors(excluding directors who are Audit & Supervisory Committee
members) comprises basic (monetary) compensation,
performance-linked monetary compensation, and performance-linked stock compensation.

•	In consideration of their duties, the Company pays only basic
compensation as compensation for directors who are members of the Audit & Supervisory Committee, which is
responsible for the supervisory function.

b) Policy on determining individual compensation
amounts for basic (monetary) compensation (including
the policy on determining the timing and the conditions
for granting compensation)•	Basic (monetary) compensation for the Company’s directors(excluding directors who are Audit & Supervisory Committee
members) shall be monthly fixed compensation. This compensation is determined in line with a pre-existing compensation table according to rank, comprehensively taking into
consideration factors including the compensation levels ofother companies, the Company’s performance, and thesalary level of its employees.
•	Alongside performance-linked monetary compensation (seec) 1. on the next page), the Company will pay such basic(monetary) compensation as monthly fixed compensation ona monthly basis for one year during the next fiscal year.

c) Policy on determining the details of performance-linked
monetary compensation and non-monetary compensation (hereinafter referred to as “performance-linked stockcompensation“) and the method for calculating the amountand number of points (including the policy on determining
the timing and conditions for granting compensation)

Total Compensation by Director Category, Total Compensation by Type, and Number of Eligible Directors in Fiscal 2020

Basiccompensation

Additional
compensation

Performance-linked
stock compensation

Directors (excluding members of the Audit &Supervisory Committee and outside directors)

146

76

61

9

6

Directors (members of the Audit & Supervisory
Committee) (excluding outside directors)

16

16

–

–

1

Outside directors

26

26

–

–

3

Notes:

52

Total amount of compensation by type (¥ million)

Total amount ofcompensation(¥ million)

Director category

Number of
eligible directors

1	The number of directors (excluding Audit & Supervisory Committee members and outside directors) as of March 31, 2021 was four. This number differs from that shown above
as the above number includes two directors who completed their terms and retired at the conclusion of the 112th General Meeting of Shareholders held on June 26, 2020.
2	The amounts paid to directors (excluding Audit & Supervisory Committee members and outside directors) do not include employee salaries of those serving concurrently as
employee and director.
3	The maximum amount of compensation for directors (excluding those who are Audit & Supervisory Committee members) was resolved to be within ¥15 million per month (notincluding employee salaries) at the 107th General Meeting of Shareholders held on June 26, 2015 (the number of directors at the time of this meeting was seven.). Separate
from this compensation, a performance-linked stock compensation system using a trust for directors (excluding outside directors and Audit & Supervisory Committee members
who are directors) and executive officers who are ranked managing executive officer or higher and who are not directors was introduced at the 111th General Meeting of
Shareholders held on June 27, 2019 (the number of directors at the time of this meeting was six.), with the maximum amount of trust money resolved to be ¥150 million foreach of the three fiscal years of the period covered.
4	The maximum amount of compensation for directors (Audit & Supervisory Committee members) was resolved to be within ¥5 million per month at the 107th General Meetingof Shareholders held on June 26, 2015 (the number of directors (Audit & Supervisory Committee members) at the time of this meeting was four.).
5	The performance-linked stock compensation column for the above directors (excluding Audit & Supervisory Committee members and outside directors) represents theamounts reported as expenses for fiscal 2020.

1. Policy on determining the details of performance-linked
monetary compensation and the method for calculating
the amount and number of points•	Performance-linked monetary compensation is cash-based
compensation reflecting key performance indicators (KPIs)
that the Company has established in order to raise awareness of the importance of enhancing performance eachfiscal year. The amount of this compensation is calculated byadding the amount of consolidated net income before taxes
and other adjustments for each fiscal year to the projectedamount of consolidated net income before taxes and otheradjustments for the next fiscal year.
•	Executive bonuses of a certain portion of profits may be paidby resolution of the General Meeting of Shareholders only inthe event that the consolidated net income before taxes andother adjustments and stock dividend amounts are at a
certain level or higher.

2. Policy on determining the details of performance-linked
stock compensation and the method for calculating theamount and number of points(i) Details, amount, and method for calculating performance-linked stock compensation•	Performance-linked stock compensation grants the following
points each fiscal year to executive directors and executive
officers who are ranked managing executive officer or higher
and who are not directors (hereinafter, “directors and executive officers“) in accordance with their rank and level ofachievement of earnings indicators based on the MediumTerm Business Plan and other materials on the basis of theshare delivery regulations of the Performance-Linked Stock
Compensation System for Directors, which was resolved ata meeting of the Board of Directors on May 14, 2019, andthe determination of compensation details and amounts
associated with the introduction of the Performance-Linked
Stock Compensation System for Directors and Executive
Officers, which was resolved at the 111th General Meetingof Shareholders held on June 27, 2019.
•	Directors and executive officers who are not responsible forbusiness divisions or are responsible for corporate divisions:	Points granted = Base points for rank × Performance-linked coefficient((1) x 1.0)*•	Directors and executive officers responsible for businessdivisions	Points granted = Base points for rank × Performance-linked coefficient((1) x 0.5 + (2) x 0.5)** The performance-linked coefficients (1) and (2) vary between 0% and144% according to the level of achievement of targets for ROE and theoperating profit of each division.

•	Directors and executive officers shall be granted a maximumof 41,000 points (corresponding to 41,000 shares) (of which
30,340 points (corresponding to 30,340 shares) are for
executive directors) each fiscal year in the three fiscal years
from fiscal 2019 through fiscal 2021 (hereinafter referred toas the “initial period”, which is assumed to be the period of
the Medium-Term Business Plan) and a maximum of

123,000 points (corresponding to 123,000 shares) (of which
91,020 points (corresponding to 91,020 shares) are for
executive directors) in the three fiscal years of the initialperiod. Moreover, the points granted shall be converted into
the Company’s shares at the rate of one share per point
when providing shares of the Company’s stock to directors
and executive officers.

(ii) Policy on determining the timing and conditions for
granting performance-linked stock compensation•	The period of the performance-linked stock compensation
system shall cover the initial period and every three fiscal
years starting from the end of the initial period (or the periodof the Medium-Term Business Plan formulated following theinitial period).
•	In principle, shares of the Company’s stock shall be provided
to directors and executive officers following the determination of the Company’s performance in the final fiscal year ofeach period covered by the compensation system, in accordance with the cumulative total of points granted in the
period covered. However, from the perspective of ensuring
capital for the payment of taxes, a number of shares of theCompany, corresponding to 50% of the cumulative points,
shall be converted into cash and the cash amount equal tothe amount of converted shares shall be paid to directors
and executive officers.

d) Policy on determining the ratio of the amount of basic(monetary) compensation, the amount of performancelinked monetary compensation, and the amount of performance-linked stock compensation to the amount ofcompensation for individual directors
Regarding the ratio of each type of compensation for
executive directors, as performance-linked monetary compensation is calculated based on performance in the preceding fiscal year and projected performance in the next
fiscal year, and as performance-linked stock compensationis the number of shares calculated based on ROE anddivisional operating profit—which are target KPIs of theMedium-Term Business Plan for the initial period—theCompany has not determined the ratio, as said ratio will bedecided by the performance in the relevant single fiscal
year and the next fiscal year and by the degree of achievement of targets for ROE and divisional operating profit byeach executive director in the initial period and the subsequent three fiscal years. However, in consideration of theintention behind introducing performance-linked compensation, the structure of compensation types is such thatthe higher an executive director’s rank, the more weight is
assigned to performance-linked compensation.

53

Corporate Governancee) Matters regarding the method for determining thedetails of compensation for individual executive directors
The Company has stipulated policies and procedures fordetermining compensation for directors (excluding outside directors and Audit & Supervisory Committee members who are directors) in its Corporate Governance
Guidelines, based on which it determines the amount ofcompensation for individual executive directors by a resolution of the Board of Directors following deliberations
and recommendations by the Nomination andCompensation Committee, of which independent outside
directors form a majority, thereby ensuring the transparency of the process for determining compensation.

f) Reasons why the Board of Directors decided to bring
the details on compensation for individual executive
directors in relation to fiscal 2020 in line with this policy
The Nomination and Compensation Committee, which
was consulted by the Board of Directors, conducted amulti-faceted examination of the draft proposal, includingof its consistency with decision-making policy, and confirmed specific amounts by applying them to the compensation table before making its recommendations to
the Board of Directors. Accordingly, in determining thedetails of compensation for individual executive directors,
the Board of Directors basically respects the committee’s
recommendations, deeming them to be in line with decision-making policy.

Cross-Shareholdings
Toyo Kanetsu has the following basic policies on holding
cross-shareholdings and the exercise of voting rights.
(1)	Toyo Kanetsu does not have cross-shareholdings forpurposes other than strengthening relationships andpartnerships with customers and suppliers, with theobjective of increasing corporate value. New acquisitions of cross-shareholdings, as well as buying and selling shareholdings, are conducted and reported to theBoard of Directors in accordance with internal rules.
(2)	Every year, the Board of Directors examines the purpose for owning individual shares, the benefits andrisks of holding these shares, and whether the holdings align with the cost of capital, in order to determine whether it is appropriate to own these shares.
(3)	With regard to the exercise of voting rights, the Company
shall, in principle, be in opposition when there are concerns that its purpose for owning the stock does not alignwith management, such as when:
1. Earnings have worsened for several years at theinvestee company, with no sign of a recovery insight; and2. Significant problems come to light in internal controls related to financial reporting by the investee,
and improvements seem unlikely.
(4)	In the event that a company that owns shares of Toyo
Kanetsu for cross-shareholding purposes indicates its
intention to sell these shares, the Company shall nottake inappropriate action that may interfere with thesale of the shares, such as suggesting the company
would lose business with the Company.
(5)	Toyo Kanetsu shall not engage in business transactions with a company (in which it owns stock forcross-shareholding purposes) that conflict with its
interests as well as with the common interests of its
shareholders, such as continuing to conduct businesswithout adequate evidence of economic rationality forthe business transactions.
In fiscal 2020, the Company sold the listed shares of
two stocks from among its cross-shareholdings (including
a partial sale), the proceeds of which came to ¥765 million.

Risk Management
Under the Company’s risk management system, basedon its Risk Management Rules, the division manager of
the Corporate Division oversees the risk management of
the Company and the Group as the risk management officer. Under the command of the risk management officer,
a department in charge of Groupwide risk management
identifies risks and monitors evaluations and results.
Important risks are regularly reviewed after consideringchanges in the business environment and the status of54

risk responses, and we strive to ensure that effective risk
countermeasures are being appropriately implemented ina timely manner.
In fiscal 2020, the Company carried out measures
expediently both to ensure safety and maintain business
continuity by clarifying the position of the emergency project team, which is dealing with the COVID-19 pandemic,
in revisions to its organizational and office regulations.

Business Risks

Of all the risks that could affect its business activities, certain of those potentially having a significant impact on the
Toyo Kanetsu Group are shown below.However, this is not an exhaustive list of risks related to the Group and there arerisks that are difficult to foresee.
For details, please see the TKK Report 2021 Financial Section, which is available on the Company’s website.
https://www.toyokanetsu.co.jp/global/ir/tkk_report.php

Category

1 Climate change

Nature of risk
• Impact on the business environment in the event of a decrease in demand for tanks amid an acceleration in the shiftingenergy mix prompted by growing global environmental awareness and the transition to a low-carbon and carbon-neutral
society• Decrease in social trust in the event of the occurrence of environmental problems arising from business activities

Logistics Solutions Business• Unexpected increase in costs due to various factors, such as compressed construction periods due to unforeseenchanges in construction plans under pressure to shorten delivery times and delivery deadline adjustments due tocarrying out multiple large projects simultaneously within a certain period of time
• Impact on the execution of projects in the event that principal products and materials purchased from specific overseas
business partners cannot be purchased in a stable manner

2 Execution of projects

Plant & Machinery Business• Impact on business execution in the event of shortages of construction workers, rising procurement prices of materials
and equipment, and delays in the transfer of technologies to project engineers• Deterioration in profits from projects and adverse effect on the Group’s social reputation due to serious quality
complaints or problems with products•	In addition, the Group’s overseas operations carry the following inherent risks.
a) Unexpected changes in laws and regulations, b) Political and economic instability, c) Difficulties in securing humanresources, d) Unfavorable tax system revisions, and e) Social disorder due to terrorism, war, epidemics, disasters, orother factors

Securing and developing
human resources• Impact on business activities from an outflow of human resources and rise in recruitment costs

4

Intensifying competition
for orders• Unreasonable downward pressure on profitability•	Impact on the Group’s ability to obtain orders due to changes in terms of customer policies and plans, the businessenvironment of the industry, and industry restructuring•	Impact on business results and financial position stemming from the recording of impairment losses on non-current
assets in the event that profitability declines and the Group cannot generate sufficient cash flows due to dramaticchanges in the business environment and business conditions

5

Launch of new
businesses• Adverse effect on business results and financial position in the event of delays in creating a business that will becomea third pillar to follow the Group’s two core businesses

6

Occupational health andsafety• Compensation for damages, criminal penalties, administrative punishment, and a decline in public trust in the event of
an incident or accident

3

7 Compliance8• Financial penalties and a decline in public trust in the Group stemming from the violation of laws and regulations inJapan and overseas

Natural disasters andepidemics• Serious material damage and human injury caused by greater-than-expected natural disasters• Risks in a wide range of areas caused by the impact of COVID-19

Information security and• Damage to the Group’s reputation for reliability due to the loss or leakage of confidential information as a result of
unforeseen cyberattacks•	Loss of business opportunities in the event that the Group lags behind in digital transformation initiatives

9 maintenance of information infrastructure

Logistics Solutions Business• Slowdown in investments in logistics-related facilities due to a lower volume of logistics as a result of a recession orJapan’s declining birth rate and aging population• Decline in demand for air travel

10 Market trends, etc.

Plant & Machinery Business• Cancellation, postponement, or major revision of investment plans due to factors including global economic trends,
economic and social conditions in oil and gas producing and consuming countries, energy and environmental policies invarious countries, and trends in crude oil and LNG prices• In addition, the following risks are also possible in the event of the deterioration of the economic environment.
a) Fluctuations in foreign exchange rates, b) Fluctuations in interest rates, and c) Valuation of securities held

Note: F orward-looking statements contained in this section are based on the understanding of the Company as of the submission date (June 29, 2021) of
its Securities Report (in Japanese only) for the fiscal year ended March 31, 2021.

55

Discussion on Corporate Governance

Shigeharu Nakamura

Kazuto Abe

Outside Director and Audit &Supervisory Committee Member

Director and Audit & Supervisory
Committee Member

The Company held a discussion on corporate governance and diversity between a director andan outside director, both of whom serve as Audit & Supervisory Committee members.

 wift Organizational Reform with the Aim ofS
Strengthening Corporate Governance
Abe: Toyo Kanetsu transitioned from a “company with anaudit and supervisory board” to a “company with an audit
and supervisory committee” structure a month after therevision of the Companies Act in May 2015. While thischange of organizational design represented a decisive
judgment for Toyo Kanetsu at a time when few othercompanies were making such changes, I have a strong
sense that the transition has strengthened many aspectsof its corporate governance. Examples include the Boardof Directors’ voting rights and right to state opinions on
executive appointments, which relates directly to the revision of the Companies Act, and the reorganization of theInternal Audit Division from being under the direct controlof the Company’s president to being under the direct controlof the Audit & Supervisory Committee, which has improved
the independence and effectiveness of internal audits.
Nakamura: The speed at which Toyo Kanetsu responded
to each revision of the Corporate Governance Code,which I see as a clear manifestation of the Company’s
pride in occupying a certain position in the industry, isworthy of high praise. I also believe that placing the internal audit system within the purview of the Audit &Supervisory Committee, separate from those carryingout business execution, represents an outstanding organizational form of corporate governance.

56

 ecurement of the Effectiveness ofS
Corporate Governance through Uninhibited
Debates at Meetings of the Nomination andCompensation Committee
Abe: The transition to a “company with an audit andsupervisory committee” structure granted the Audit &Supervisory Committee the right to state opinions at theGeneral Meeting of Shareholders regarding the appointment and compensation of directors who are not members of the Audit & Supervisory Committee.
Nevertheless, in order to enhance transparency and fairness, the Company established the Nomination andCompensation Committee comprising a representative
director and all members of the Audit & Supervisory
Committee, including outside directors, rather thanhaving only Audit & Supervisory Committee members
discuss the appointment and compensation of directors.
Six years have passed since the establishment of theNomination and Compensation Committee.
Nakamura: The appointment and compensation of directors should not be arbitrarily decided by the opinion of thepresident, who leads those in charge of business execution. I feel the idea that management would not be viablewithout first eliminating the possibility of such a situation
has long been embedded in the minds of the Company’s
management personnel. In this sense, the establishmentof the Nomination and Compensation Committee wasinevitable for the Company.
The Nomination and Compensation Committee
makes recommendations after conferring extensively inresponse to consultations from the Board of Directors,
and I endeavor to offer frank opinions, as is my duty as an
outside director. For example, at times I express a dissenting viewpoint with regard to director nomination proposals. In considering such proposals, the committee
carries out discussions on the candidate’s suitability forthe requirements of the post while making reference tothe objective perspective of Director Abe, whose standpoint differs from those in charge of business execution,
as well as conducting exchanges of opinion involving only
the candidate and outside directors. I also stated myopinion during a free discussion in the past that theCompany was lagging behind other companies in introducing a performance-linked stock compensation system.
Abe: I am grateful for your frank opinions as I havecounted on them in order to carry out repeated substantive discussions at Nomination and Compensation
Committee meetings. To give an example, the committee
discussed the appointment of directors in 2020 on a totalof nine occasions, including exchanges of opinion, before
reporting to the Board of Directors. In addition, Director
Nakamura’s viewpoint on compensation was a key factor
behind the introduction of the performance-linked stockcompensation system in 2019.
Nakamura: I believe the fact that the Nomination andCompensation Committee not only makes recommendations in response to consultations from the Board,but also is a committee where uninhibited debates
are possible.
 uccession Plan Looking Ahead to the NextS
Generation
Nakamura: Given that I have served as an outside director at Toyo Kanetsu for a number of terms, I have a generalidea of the Company’s human resource pool and regard all
those ranked at the executive officer level or higher as
future candidates for the positionof president.
Abe: In respect to the successionplan, the Company amended its
Articles of Incorporation in 2018
to allow executive officers who
are not directors to be appointed
as president with the aim ofbroadening the range of potential
candidates for president. In addition, the Company strives
to provide a variety of opportunities for outside directors
to interact with those ranked at the executive officer levelor higher in order for them to understand the personality
and temperament of candidates for president.

Nakamura: I make use of any andall opportunities to look at candidates, such as the manner inwhich executive officers answer in
response to questions on their presentations at meetings of theBoard of Directors or the way they
provide explanations and deal withpeople on worksite visits. Although
only one among other criteria for assessing candidates forpresident, based on my past experience I believe it isimportant whether or not I can actually imagine themserving as president in the future, and I place a particularemphasis on whether or not they possess the leadershipto energize the Company as a whole.
Improvement of Diversity and Reform ofAwareness for the Next Stage of Growth
Nakamura: I believe it is important for companies tochange positively and grow as a result of diversity, rather
than simply aiming to promote diversity. To that end, I
am of the opinion that, unless companies achieve inclusion as well as diversity, they will not see positive
results. To be direct, I have the impression that Toyo
Kanetsu has not yet reached a point where it can be said
to be inclusive, although it is putting the foundations fordiversity in place.
Abe: As you correctly point out, although the Company ismaking such efforts as increasing the number of female
management candidates and recruiting non-Japanesepersonnel, I am afraid that at this point it still has more todo. While the presence of many female employees withpotential within the Company offers high hopes for the
future, achieving diversity and inclusion is likely to require
some more time.
Nakamura: In Toyo Kanetsu’s case, while I think thatworksites have historically been male-dominated, womenare now beginning to make inroads. It is important for
management to make decisions that provide truly equal
opportunities, rather than separating men and womenbased on the nature of their work. I am convinced thatproviding such opportunities will encourage competition
among employees, which will in turn lead to the emergence of women active at the executive officer level orhigher, although it may take a little time.
Abe: As generational shifts progress, possibilities areopen today for individuals to step up to executive positions, regardless of their age or gender. As you haveindicated, senior management and executives must
further change their mind-sets accordingly.

57

Financial Information

Financial Strategy	Analysis and Examination of
Financial Position
Total assets were ¥58.76 billion as of March 31, 2021, adecrease of ¥2.22 billion compared with March 31, 2020.
The decline was mainly attributable to a decrease in cash
and deposits of ¥4.09 billion and an increase in investment securities of ¥1.89 billion.
Total liabilities amounted to ¥22.28 billion, down
¥4.10 billion compared with March 31, 2020. The decline
primarily reflected a total decrease of ¥3.74 billion inborrowings (short-term borrowings, current portion of
long-term borrowings, and long-term borrowings) andbonds from financial institutions.
Total net assets came to ¥36.48 billion, an increaseof ¥1.88 billion compared with March 31, 2020. This
increase was primarily due to such factors as the recording of profit attributable to owners of parent of ¥1.77
billion and an increase in the valuation difference on
available-for-sale securities of ¥1.27 billion, as well as on
the distribution of dividends of surplus of ¥0.85 billion.
Given the uncertainty over the outlook for the business environment at the end of fiscal 2019 due to the
spread of the COVID-19 pandemic, the Company curbed
its repayment of borrowings from financial institutions
and other bodies from the perspective of securing liquidity on hand. However, taking into consideration theimpact of COVID-19 on the economy, the Company
steadily advanced the repayment of borrowings in fiscal
2020, resulting in a decrease in cash and deposits as wellas in borrowings from financial institutions. In addition,
investment securities and the valuation difference on

available-for-sale securities increased due to a rise in themarket price of investment securities stemming from the
upturn in the stock market through fiscal 2020.
Further, the equity ratio at the end of fiscal 2020
stood at 62.1%, up 5.4 percentage points compared withthe end of fiscal 2019, thanks to the downsizing of thebalance sheet and the increase in total net assets.

	Approach to Building a Financial
Foundation
As it has maintained its equity ratio, a general indicator of
the stability of a company, at 50% or higher, Toyo
Kanetsu’s financial foundation remains sufficiently stable.
The Company believes it is possible to strike a balance
between maintaining the soundness of its financial foundation and increasing corporate value in a sustainable
manner by allocating retained earnings to shareholder
returns and investments for future growth in equal proportion while maintaining an equity ratio of 50% to 60%.

	 Key Financial Indicators
The Company’s indicator for profitability is return on
equity (ROE) and it views achieving its target of 5.0%
as mandatory, as indicated in its Medium-TermBusiness Plan and other information disclosure materials. We also use indicators including an operating
margin and a gross profit margin, which are general indicators for determining business profit, as key indicatorsin operating our businesses.

Equity Ratio

ROE

(%)

(%)
80

12

66.7

65.7

62.1

60

10.7

9

54.4

40

6.5

56.7

6

20

3

0

0

4.9

5.0

5.0

FY2019FY2020

FY2021

2.9
FY2016FY2017FY2018FY2019FY2020FY2016FY201658

FY2017FY2017FY2018FY2018FY2019FY2020TargetAs for indicators of financial stability, we focus on
those such as the equity ratio, the current ratio, and thefixed ratio with the aim of maintaining a well-balanced
portfolio.
Toyo Kanetsu compares results for these indicatorswith those from previous years and analyzes the reasons
behind increases and decreases.

	 Investment Policy
While its approach to investments is to conduct capital
expenditures within the range of depreciation in the given
fiscal year in principle, the Company makes decisions on
a case-by-case basis regarding system investments for
streamlining and increasing the efficiency of operations
and the acquisition of non-current assets essential for
operating its businesses.
In addition, we make decisions on investments aimed
at securing a certain controlling interest in other companies, such as mergers and acquisitions, to directly
increase our corporate value, after comparing and examining a range of factors, including future prospects, benefits,
and costs.

Shareholder Returns
Toyo Kanetsu has formulated a shareholder return policy
based on optimizing the balance between financial
soundness and the return of profits to its shareholders.
For fiscal 2020, we paid a full-year dividend of ¥115
per share for a consolidated dividend payout ratio of
54.1%, based on this shareholder return policy, andincluding a commemorative dividend for the 80th anniversary of our founding.
Given that its financial position is at present solid toa certain degree, the Company views the manner inwhich it balances growth investments for the future withshareholder returns as vital. Although we have set forth aconsolidated dividend payout ratio of at least 50% as anindicator during the period of the current Medium-TermBusiness Plan, we believe that the ratio will be determined going forward by the business environment of thetime and future projections.

Shareholder return policy during the periodof the current Medium-Term Business Plan
(fiscal 2019–fiscal 2021)

	 Approach to Raising Funds
Consolidated dividend payout ratio
While Toyo Kanetsu uses funds obtained through free
cash flows for the financing required to operate its businesses in a stable manner, its basic policy regarding
shortfalls is to raise funds with a focus on the cost of­liabilities and the cost of shareholders’ equity.
In principle, we raise funds through long-term borrowings, bonds, and other means when the reason forusing the funds is long term in nature and through shortterm borrowings when the reason is short term in nature,
thereby optimizing our use of assets and liabilities.

of at least 50%(minimum annual dividend of ¥100 per share)
Unless there are considerable capital needs(1) Retained earnings will be applied to investments and capital expenditures for increasing corporate value(2) Share buybacks will be flexibly undertaken

59Consolidated Financial Highlights (Fiscal years ended March 31)

FY2013

FY2014FY2015¥ 48,395
4,341
4,776
2,879

¥ 52,457
3,588
3,891
3,019

¥ 46,572
3,024
3,227
1,906

Total assets
Total net assets
Total shareholders’ equity

54,51533,78932,10555,92836,58033,52551,36834,37632,136

Basic earnings per share*1
Dividends per share*1
Net assets per share*1

241.7750.00
2,821.75

260.7640.00
3,159.08

174.5350.00
3,339.15

Equity ratio
Dividend payout ratio

61.6
20.7

65.0
15.3

66.9
28.6

Return on equity (ROE)
Return on assets (ROA)

9.0
8.5

8.6
7.1

5.4
6.0

2,606
(402)
(767)

(213)
(1,120)(1,774)

4,041
(766)
(3,640)Net sales
Operating profit
Ordinary profit
Profit attributable to owners of parent

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities

The Toyo Kanetsu Group prepares its consolidated financial statements in accordance with Japanese generally accepted accounting principles (GAAP).
Figures are rounded down to the nearest million yen.
*1 Toyo Kanetsu conducted a 10:1 reverse stock split for ordinary shares effective on October 1, 2017.
As a result, figures prior to the fiscal year ended March 31, 2017 have been restated for basic earnings per share, dividends per share, and net assets per share.
*2 Figures denominated in U.S. dollars were converted at a rate of ¥110.71 = $1, referring to the prevailing rate on March 31, 2021.

Net Sales by Business Segment(Millions of yen)
50,00040,00030,00020,00010,000
0

60

2017

2018

2019

2020

FY2017FY2018FY2019FY2020Logistics Solutions Business

25,93929,27428,887

27,239Plant & Machinery Business

10,030

8,421

9,950

9,800

Other Businesses

6,470

8,237

7,813

6,729

Adjustment

(682)

(745)

(133)

(151)

Net Sales by Business Segment

FY2016

FY2017FY2018FY2019FY2020(Reference) FY2020(Millions of yen)(Thousands of U.S. dollars)*2¥ 41,932
3,080
3,441
3,746

¥ 41,758
2,265
2,646
2,362

¥ 45,188
1,406
1,771
1,025

¥ 46,518
2,591
2,970
1,717

¥ 43,617
2,623
3,053
1,777

$393,975
23,692
27,576
16,05053,22835,481
33,97855,81836,66634,20764,75635,23433,32460,98534,60232,722

58,76436,48433,068

530,792
329,545
298,690(Yen)

373.78120.003,702.00

251.26100.003,941.68

112.80100.003,897.68

195.87100.004,095.51

212.41115.004,461.06

66.7
32.1

65.7
39.8

54.4
88.7

56.7
51.1

62.1
54.1

10.7
6.6

6.5
4.8

2.9
2.9

4.9
4.7

5.0
5.1

(2,131)(1,714)(2,820)

3,726
(85)
2,032

(6,698)(1,315)
3,249

6,955
(812)
(2,351)(U.S. dollars)*2

1.92
1.04
40.30
(%)

(Millions of yen)(Thousands of U.S. dollars)*2

1,482
(338)
(5,176)

13,386(3,053)(46,752)

Operating Profit (Loss) by Business Segment(Millions of yen)
3,000
2,000
1,000
0
–1,000–2,000

2017

2018

2019

2020

FY2017FY2018FY2019FY2020Logistics Solutions Business

1,931

1,907

2,812

3,140

Plant & Machinery Business(178)(1,221)

(305)

(602)

Other Businesses

914

1,108

880

789

Operating Profit (Loss) by Business Segment

61

Consolidated Balance Sheets(Japanese GAAP)(Millions of yen)

AssetsPrevious fiscal period

Current fiscal period(As of March 31, 2020)(As of March 31, 2021)

Current assets
Cash and deposits¥11,507¥ 7,413

Notes and accounts receivable–trade15,413

13,489Investments in leases

937

550

Merchandise and finished goods

27

57

Work in process

5,179

6,732

Raw materials and supplies

1,977

2,523

Other

435

863

Allowance for doubtful accounts

(16)

(13)

35,461

31,616

4,142

Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net

4,218

Machinery, equipment and vehicles, net

1,016

716

Tools, furniture and fixtures, net

364

284

10,568

10,122

Construction in progress

253

356

Other, net

20

18

16,442

15,641

381

481

9,909

Land

Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities

8,013

Deferred tax assets

45

42

Retirement benefit asset

38

452

Other

889

847

Allowance for doubtful accounts

(286)

(227)

Total investments and other assets
Total non-current assets
Total assets

62

8,699

11,02425,52327,147¥60,985¥58,764

(Millions of yen)

Liabilities

Previous fiscal period

Current fiscal period(As of March 31, 2020)(As of March 31, 2021)

Current liabilities
Notes and accounts payable–trade
Short-term borrowings
Current portion of long-term borrowings
Accrued expenses¥

919¥ 1,091

7,849

3,620

619

8

4,763

3,778

Income taxes payable

553

914

Advances received

2,790

2,354

Provision for bonuses

267

259

Provision for loss on order received

241

30

Provision for warranties for completed construction

389

348

Other

455

681

18,84813,086

Total current liabilities
Non-current liabilities

—

1,000

Long-term borrowings

4,488

4,580

Deferred tax liabilities

1,520

2,138

Deferred tax liabilities for land revaluation

1,095

1,095

Bonds payable

Retirement benefit liability

152

107

Asset retirement obligations

235

230

Other
Total non-current liabilities
Total liabilities

Net assets

40

41

7,534

9,193

26,382

22,280Previous fiscal period

Current fiscal period(As of March 31, 2020)(As of March 31, 2021)

Shareholders’ equity
18,580Share capital

18,580Capital surplus

1,273

1,273

Retained earnings

15,224

16,148Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities(2,355)(2,933)32,72233,068

2,666

3,937

0

9

Revaluation reserve for land

106

106

Foreign currency translation adjustment

(729)

(833)

Remeasurements of defined benefit plans

(165)

195

Total accumulated other comprehensive income

1,878

3,415

Deferred gains or losses on hedges

10

Total net assets

34,602

36,484

Total liabilities and net assets¥60,985¥58,764

Non-controlling interests

63

Consolidated Statements of Profit or Loss and Comprehensive Income(Japanese GAAP)(Millions of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Subsidy income
Reversal of allowance for doubtful accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Bond issuance costs
Commission for purchase of treasury shares
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Impairment losses
Loss on disaster
Other
Total extraordinary losses
Profit before income taxes
Income taxes–current
Income taxes–deferred
Total income taxes
ProfitProfit (loss) attributable to:Profit attributable to owners of parent
Loss attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

64

Previous fiscal year

Current fiscal year

(From April 1, 2019
to March 31, 2020)(From April 1, 2020
to March 31, 2021)¥46,518
37,355
9,162
6,570
2,591

¥43,617
34,369
9,247
6,623
2,623

9
277
5
34
0
125
452

14
259
—
104
84
113
576

59
—
1
—
13
74
2,970

59
23
17
37
11
147
3,053

0
578
—
579

9
913
65
989

673
—
39
48
761
2,788

73
1,047
13
15
1,149
2,892

759
311
1,070
¥ 1,717

1,199
(83)
1,115
¥ 1,777¥ 1,717(0)¥ 1,777
(0)

44
0
30
(104)
(29)
¥ 1,688

1,271
9
(104)
360
1,536
¥ 3,313¥ 1,688(0)¥ 3,314(0)

Consolidated Statements of Changes in Equity(Japanese GAAP)(Millions of yen)
Shareholders’ equity
Share capital

Balance as of March 31, 2019¥18,580
Changes during period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Net changes in items other thanshareholders’ equity
Total changes during period—
Balance as of March 31, 2020
¥18,580
Changes during period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Net changes in items other thanshareholders’ equity
Total changes during period—
Balance as of March 31, 2021
¥18,580

Total
shareholders’equityCapitalsurplusRetainedearnings

Treasuryshares¥1,273¥14,549¥(1,077) ¥33,324—¥1,273

(903)

(903)

1,717

1,717

(138)

(1,416)138(1,416)—675¥15,224(1,277)¥(2,355)(602)¥32,722

(853)

(853)

1,777

1,777
(583)
5

—
¥1,273924¥16,148

(583)
5

(578)
345
¥(2,933) ¥33,068(Millions of yen)
Accumulated other comprehensive income

Balance as of March 31, 2019
Changes during period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2020
Changes during period
Dividends of surplus
Profit attributable to ownersof parent
Purchase of treasury shares
Disposal of treasury shares
Net changes in items other thanshareholders’ equity
Total changes during period
Balance as of March 31, 2021

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedges

Revaluation
reserve forland¥2,621¥—¥106

Foreigncurrencytranslation
adjustment¥(759)

Total
Remeasureaccumulated
ments ofother
definedcom­prehensive
benefit plansincome¥ (61)¥1,907

Noncontrollinginterests¥1

Total net
assets¥35,234(903)
1,717(1,416)
—

44

0

—

30

(104)

(29)

44
¥2,666

0
¥0

—
¥106

30
¥(729)(104)¥(165)(29)¥1,878

(0)

(29)

(0)
(631)
¥1 ¥34,602
(853)
1,777
(583)
5

1,271

9

—

(104)

360

1,536

(0)

1,271
¥3,937

9
¥9

—
¥106

(104)
¥(833)

360
¥195

1,536
¥3,415(0)1,882¥ 0 ¥36,484

1,536

65

Consolidated Statements of Cash Flows(Japanese GAAP)(Millions of yen)

Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in retirement benefit liability
Decrease (increase) in retirement benefit asset
Increase (decrease) in provision for loss on order received
Increase (decrease) in provision for warranties for completed
construction
Interest and dividend income
Interest expenses
Loss on disaster
Foreign exchange losses (gains)
Loss (gain) on valuation of investment securities
Loss (gain) on sales of investment securities
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in trade receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments to suppliers
Increase (decrease) in trade payables
Increase (decrease) in advances received
Other, net
SubtotalInterest and dividends received
Interest paid
Payments associated with disaster loss
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of bonds
Purchase of treasury shares
Proceeds from disposal of treasury shares
Proceeds from share issuance to non-controlling shareholders
Dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

66

Previous fiscal year

Current fiscal year

(From April 1, 2019
to March 31, 2020)(From April 1, 2020
to March 31, 2021)¥ 2,788
718
—
(9)
(195)
139
120

¥ 2,892
776
1,047
(61)
(39)
94
(211)

(165)

(41)

(287)
59
39
(17)
673
(578)
6
(18)
7,865
562
(1,221)
1(3,428)
769
(287)
7,533
287
(67)
(24)
(772)
6,955

(273)
59
13
97
73
(913)
(9)
4
1,865
370
(2,134)
(228)
(785)
(436)
(54)
2,104
273
(62)
(28)
(804)
1,482

(166)
118
(1,424)
4
(250)
878
27
(812)

(102)
102
(1,131)
11
(470)
1,238
12
(338)

—
480
(514)
—
(1,566)149
0(901)(2,351)
1
3,793
7,609
¥11,402(4,229)
100
(619)
1,000
(583)
5
—
(850)
(5,176)(59)(4,093)
11,402¥ 7,309

Corporate Profile and Stock Information (As of March 31, 2021)
Corporate Profile

Major Shareholders

Corporate nameToyo Kanetsu K.K.

Headquarters

11-1, Minamisuna 2-chome, Koto-ku,
Tokyo 136-8666, Japan

EstablishedMay 16, 1941

Capital¥18.58 billion

Number ofissued shares

9,323,074

Share unit

100

Number of
employees

986 (on a consolidated basis)

Ticker code

6369

Share registrar

Mitsubishi UFJ Trust and Banking
Corporation

Share registrar
address andcontact
information

Stock Transfer Agency Department
Mitsubishi UFJ Trust and Banking
Corporation
1-1 Nikko-cho, Fuchu City, Tokyo 137-8081
TEL (free dial within Japan): 0120-232-711
Mailing address:
P.O. Box 29, Shin-Tokyo Post Office,Tokyo 137-8081, Japan

Name

Stock exchange
listing

Tokyo Stock Exchange First Section

Independentaccounting
auditorGyosei & Co.

The Master Trust Bank of Japan, Ltd.
(Trust account)
Nippon Life Insurance Company
Resona Bank, Limited
Custody Bank of Japan, Ltd.
(Trust account)
Daiei Real Estate & Development
Co., Ltd.
Mizuho Bank, Ltd.
SUMITOMO LIFE INSURANCECOMPANY
Custody Bank of Japan, Ltd.
(Trust account 5)
UBS AG LONDON A/C IPBSEGREGATED CLIENT ACCOUNT
Sato Kogyo Co., Ltd.

Number ofshares(Thousands)

Shareholding
(%)

516

6.25

414
409
319

5.01
4.95
3.86

212

2.57

153
115

1.86
1.39

115

1.39

113

1.37

111

1.34

Notes: 1. In addition to the aforementioned, the Company holds 1,063 shares of treasury stock.
2. The calculation of the percentage of total shares outstanding excludes treasury stock.

Shareholders and Distribution of Shares
Japanese individuals andothers 33.5%

Japanese financial
institutions 29.4%
Japanese securities
firms 3.3%

Treasury stock 11.4%

Other corporations 10.3%

Overseas institutions
and individuals 12.1%

Note: Percentage of total shares outstanding held by shareholder

Share Price and Trading Volume
Share price (¥) (left)
Trading volume (1,000 shares) (bottom right)
TOPIX (¥) (top right)
Note: Takes into account a 10:1 reverse stock split carried out on October 1, 2017

6,000

2,400

5,000

2,000

4,000

1,600

3,000

1,200

2,000

4,000

1,000

2,000

0

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3FY2016FY2017FY2018FY20190

FY2020Thank you for taking the time to read TKK Report 2021. With the aim of improving corporate value
from an ESG standpoint, the Toyo Kanetsu Group began publishing the TKK Report in fiscal 2019.
For this year’s report, the Company again referenced the valuable feedback of its stakeholders tofurther enhance the content by presenting information on its material issues, an overview of its
businesses, and a history of Toyo Kanetsu, which celebrated its 80th anniversary in 2021.
Please feel free to contact us if you have any opinions on this report.


Keisuke Kodama
Director and Executive Vice President
Chair of the CSR Committee

67

TOYO KANETSU K.K. TKK Report 2021

Contact Information

Toyo Kanetsu K.K.
Corporate Planning Department
Corporate Division
TEL: +81-3-5857-3333 FAX: +81-3-5857-3170
E-MAIL: tkkreport@toyokanetsu.co.jp
URL: https://www.toyokanetsu.co.jp/global/• This report is made of material from well-managed, FSC®-certified forests and other controlled sources. It uses a non-VOC(volatile organic compound) ink, which does not contain VOCs, and a waterless printing process that does not emit harmful effluents.

Printed in Japan