Nikko
Corporate
Report2023

Nikko Corporate Report 2023

Fiscal year ended March 31, 2023

Update the social infrastructureby leveraging engineeringthat is one stepahead of others.

Future creation thatstarts from an ‘ ’Values of Nikko Group and What it Aspires to beContents

NIKKO CORPORATE IDENTITY

04 SUSTAINABILITY AND MANAGEMENT FOUNDATION

��

53

Sustainability Governance ������������������������� 54

Basic principles

Values of Nikko Group and What it Aspires to be ��� 1

Stakeholder Engagement ������������������������� 56
Realization of Carbon Neutrality������������������� 58〈Long-standing values since its establishment〉

01 INTRODUCTION■ Serve society through business.

 ���������������������

3�������������������������������

Establishment of Recycling-oriented Society, Early Restoration from
Intensifying Disasters, Co-existence with Local Communities�� 63■ Work toward prosperity with sincerity and responsibility.

Nikko Group in 2022

4

Creation of New Customer Values����������������� 65■ Produce appropriate profits through original ideas and improvement efforts.

Trajectory of Value Creation������������������������ 5

Human Resource Development and Improvement in Job Satisfaction ��� 67

Financial and Nonfinancial Highlights

Employee Roundtable Talk ������������������������ 71

 ���������������

7

Materiality 2023 ����������������������������������� 9

MISSION

Process of Value Creation������������������������� 11
Key Points of Value Creation Process�������������� 13〈Missions Nikko must fulfill in daily operations〉

Update the social infrastructure by leveraging
engineering that is one step ahead of others.
V I S IO N

Future axis

Symbolization〈Future we want to realize〉

2

3
4

5
6
7

Make work interesting.
 e conscious of theB
objective.
Come up with ideas.
Take on challenges without
fear.
Accomplish to the end.
Value time.
C ommunicate with care
to your counterpart.

8

9

10

11

12

Interview with CEO�������������������������������� 16
Medium-Term Management Plan������������������� 23

S L OGA N �����

75

Outside Director Roundtable Talk������������������ 76
Roles of the Board of Directors and Audit & Supervisory Board ��� 80

Employee axis

Customer axis

Help and enhance yourcolleagues.
Learn extensively, bothfrom within and outside.
Strive forward sincerely,
and with determination.
Be at ease mentally andphysically.
Give priority to safety.

Executives ���������������������������������������� 89’

VA L UE〈Value we offer〉

1

2

3

4

5

W e will pursue safety and security in all
products and services.
 e will identify true issues and makeW
proposals from a customer perspective.
 e will focus our eyes on where society andWthe era are heading towards, and continue
refining our technology.

03 STRATEGY FOR VALUE CREATION

 ��

26

Management Capital That Will Provide Strengths �� 27
CFO on Financial and Capital Strategies ����������� 31
Segment Highlights ������������������������������� 35
Business Strategies A
 P-Related Business ������������������� 37

 e will stay close to our customers andW
support them through the future.

BP-Related Business e will integrate our engineering capabilities
W
to exceed expectations.

Editorial Policy and Nikko Group’s Disclosure

06 CORPORATE DATA ����������������

91

FY 2022 Business Summary and FY 2023 Outlook������ 92

39

Financial Data of the Past 10 Years���������������� 95

Environment- and Conveyor-Related Business�� 41

Consolidated Financial Statements ���������������� 97

Other Business

42

Stock Information�������������������������������� 100

Technology Roundtable Talk����������������������� 43

Company Overview and Offices and Sites �������� 101

Risks and Opportunities��������������������������� 47

Summary of Subsidiaries������������������������� 102

 ������������������� �����������������������

Measures to Reinforce Platform for Value Co-creation to Realize 2030 Vision�� 49

Nikko Group Corporate Report 2023 aims to disclose Nikko Group’s medium- andlong-term value creation efforts from both financial and non-financial aspects toall stakeholders, including our shareholders and investors. The Report is edited
referring to The International Integrated Reporting Framework established by the
IFRS Foundation and the Guidance on Integrated Disclosure and Dialogues for
Joint Value Creation by the Ministry of Economy, Trade and Industry of Japan.

■Reporting scope
The Report covers the Nikko Group comprising Nikko Co., Ltd. and 11
subsidiaries (all of which are consolidated subsidiaries).
■Company name“Nikko” and the “Company” refer to Nikko Co., Ltd. The “Nikko Group” andthe “Group” refer to the Nikko Group, including consolidated subsidiaries.

■Target readers
All stakeholders connected to the Nikko Group.
■Reporting period
The Report mainly covers FY 2022 (April 1, 2022 to March 31, 2023)
but also includes information before and after this period.

■Note on forward-looking information
This Report includes statements on future outlook. We appreciate yourunderstanding that actual performance may differ from the Company’s
projections.

1 N ikko Corpo ra te R epo r t 2 0 2 3

15

05 CORPORATE GOVERNANCE

Future creationthat starts from an ‘

〈Spirit we treasure〉
1 ��

Compliance and Risk Management ���������������� 88

Making the world a resilientand gentle place.

S P IR I T

02 VALUE CREATION VISIONS & STORIES

N i kko C o r p o rate R ep o r t 2 0 2 3 2

Nikko Group in 2022

INTRODUCTION●Starts joint research for development of ammonia co-firing burner with Graduate School of Engineering, Osaka University

2022
Jan.

INTRODUCTION

Launched joint research on CO2 emission-free ammonia co-firing burner for asphalt plants in collaboration with Prof. Fumiteru
Akamatsu’s Combustion Engineering Laboratory, Division of Mechanical Engineering, Graduate School of Engineering, Osaka
University, which is driving forward active research and development in ammonia combustion technology and other fields.
●Introduces CO2-free electricity at the head office factory in Akashi, Hyogo Prefecture
The use of RE100-compliant electricity generated using renewable energy is expected to reduce CO2 emission of 1,260

Feb.

tons a year, which accounts for about 43% of the total CO2 emissions under Scope 1 at the head office factory.
●Develops Japan’s first aggregate diagnosis AI using image recognition AI
Developed Japan’s first aggregate diagnosis AI using image recognition AI that can be introduced at concrete plants.
Began first full-scale operation at a plant in March 2022 to promote evolution of concrete plants into smart factories.
●Makes Ube Kohki Co., Ltd. a wholly owned subsidiary
Acquired all shares in Ube Kohki Co., Ltd. (headquartered in Ube, Yamaguchi Prefecture; unlisted), which engages in design, manufacture,
installation, and facility maintenance of steel structures and various industrial machinery on March 1, 2022, making it a consolidated subsidiary.
●Participates in a NEDO Green Innovation Fund Project
Decided to participate in the concrete category of the Green Innovation Fund Project for Development of Technology for Producing
Concrete and Cement Using CO2 solicited by New Energy and Industrial Technology Development Organization (NEDO). It is a consortiumMar.

led by Kajima Corporation, Denka Company Limited, and Takenaka Corporation, who are the implementing entities, and Nikko Group willcontribute to the development and spread of technology for environmentally friendly concrete.
●Uniformly raises the monthly wages of the employees by 30,000 yen
Decided to uniformly raise monthly wages of employees who are the members of Nikko Labor Union by 30,000 yen from April 1, 2022.
●Formulates Medium-Term Management Plan (2022–2024)
Formulated and announced the new Medium-Term Management Plan positioning the period as the internal investment phase for realizing

Creating robust, people-friendly cities around the world.

2030 Vision. The Company aims to achieve net sales of 50.0 billion yen and operating margin of 6.0% in FY 2024, the final fiscal year.

May

July

●Develops AI’ll be sorter separating system using AI image recognition to replace visual identification
The AI’ll be sorter separation system based on AI image recognition analyzes images taken with cameras using AI to quickly
detect defective products and foreign substances. It will contribute to improvement in the recycling rate in the recycling industry.
●Starts joint development of the world’s first hydrogen burner for asphalt plants
Together with Tokyo Gas Co., Ltd., the Company started joint development of the world’s firstburner for asphalt plants that uses hydrogen fuel, which does not emit CO2.
●Decides to invest in green bonds to be issued by Hyogo Prefecture
Decided to invest in the green bonds to be issued by Hyogo Prefecture for raising funds
specifically for projects that improve environment.

Sept.

●Creates 20 meter-tall mural art at the head office building
The Company embarked on a joint initiative with Wall Share Inc., which produces mural arts, to solve theissues faced by the industry in which both companies have a stake, through a collaboration between civil

01

engineering plants and murals. A huge mural was unveiled at the head office building on October 13.

Nikko Group in 2022・ ・・・・・・・・・・・・・・・・・・・・・ 4
Trajectory of Value Creation・ ・・・・・・・・・・・ 5
Financial and Nonfinancial Highlights・・・ 7

Oct.

Materiality 2023・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 9
Process of Value Creation・ ・・・・・・・・・・・・ 11
Key Points of Value Creation Process・・・ 13●Announces the Partnership Building Declaration
Announced the Partnership Building Declaration with the aim of building new partnerships to collaborate,
co-exist, and co-enhance with suppliers in the supply chain and businesses with which it co-creates values.
●Makes donations as part of shareholder returns

Dec.

As part of shareholder returns in FY 2022, the Company added options to make donations to the Japanese Red Cross
Society and to organizations that support evacuees from and children in Ukraine. It received applications from many
shareholders and made donations to the Japanese Red Cross Society and the Hyogo Ukraine Support Project.

3 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 4Trajectory of Value Creation

INTRODUCTION

History of Nikko Group

1919 -1950

1951-1969

1970 -1989

1990 -20112012 - 2021

2022 - 2030

Start-up and postwar
reconstruction

Business expansion andrapid economic growth

Transformation into amachinery manufacturer

Foray into environmental business andstrengthening of group management

Switch to aggressive
management approach

Towards realizing New Medium-Term
Management Plan and 2030 Vision

1991: Establishes Development Technology Center
1994: Satte factory completed
1997: Develops WELL Burner, a new model
aimed at reducing CO2 emissions
1998: Starts sales of Recycle 4, a new
beverage container separator crusher
2002: Establishes Nikko (Shanghai)Construction Machinery Co., Ltd.
2004: Completes the construction of Jiading factoryof Nikko (Shanghai) Construction Machinery Co.,
Ltd., the Group’s first production base overseas
2006:  Establishes Nikko (Thailand) Co., Ltd. (sale andafter-sales service of asphalt and concrete plants)
2011: New Wuhan factory of Shantui Nikko
Construction Machinery Co., Ltd. completed

2012: Takahisa Nishikawa appointed
Representative Director andPresident
2012: Dissolves Nikko (Thailand) Co., Ltd.
2015: Starts activities as the sole Japanese
agent for Kleemann of Germany
2015: Closes Shantui Nikko
Construction Machinery Co., Ltd.
2016: Starts sales of Value Pack, a
new asphalt plant model
2018: Newly constructs Techno Center (Akashi)
2018: Establishes Mobile Plant Business Department
2019: Masaru Tsuji appointed Representative
Director and President
2020: Establishes Nikko Asia (Thailand) Co., Ltd.

2022: Announces the Medium-Term
Management Plan (2022–2024)
2023: Ships mobile plants forrestoration of Ukraine

2002: Acquires the asphalt plant divisionof Niigata Engineering Co., Ltd.
2006: Acquires the concrete pump business of Shimonoseki
Shipyard & Machinery Works of Mitsubishi Heavy
Industries, Ltd. and establishes Nikko Diacrete Co., Ltd.
2008: Makes Maekawa Kogyosho Co., Ltd. into a group company
2012: Absorbs Nikko Diacrete Co., Ltd. in absorption type merger

2022: Makes Ube Kohki Co., Ltd. intoa group company

2023: Makes Matsuda Kiko into agroup company

Offered anti-pollution plants
Offered products that takeenvironment and safety into accountStrengthened maintenance service

Offered high-quality ready-mix
concrete manufacturing technology
Offered energy-saving, low-noiseburners
Offered environmentally friendly andrecycling products

Enhanced products that reduce CO2
emissions and solve social issues
Strengthened disaster recovery
product lineup
Offered high quality, highenvironmental performance products
to the Asian market

Proposal of decarbonization technology
Roll-out of environmentally friendly products
Proposal of remote operations, automation,and manpowersaving utilizing
DX

Bubble economy and growing
environmental awareness

Growing need for environmentallyfriendly products

Exacerbation of various disasters

Post-COVID era

1956: Japan Highway Public
Corporation established
1958: Tokyo Tower opens
1964: Olympic Games Tokyo held
1965: Entire length of Meishin
Expressway opens
1967: Basic Act for Environmental
Pollution Control enacted

1970: The Japan World Exposition, Osaka, held
1972: Tohoku Expressway (Iwaki–
Utsunomiya) opens
1978: Narita Airport opens
1983: Entire length of Chugoku
Expressway opens
1988: Seto Ohashi Bridge opens

1994: Kansai International Airport opens
1995: The Great Hanshin-Awaji Earthquake
2008: The collapse of Lehman Brothers
2010: Expo 2010 Shanghai China held
2011: The Great East Japan Earthquake

2012: Tokyo Skytree opens
2015: Hokuriku Shinkansen (Tokyo–
Kanazawa) starts operation
2020: COVID-19 pandemic
2021: Olympic Games Tokyo 2020 held
2022: Russia’s invasion of Ukraine

2024: Workstyle reform bill for theconstruction industry to takeeffect2025: Takanawa Gateway City to open
2025: Expo 2025 Osaka, Kansai
2026: Asian Games Aichi-Nagoya

1958: Nikko’s
first asphalt plantcompleted

1968: The first made-in-Japan plant used in
the construction of Tomei Expressway
Nikko’s NAP-602

Introduction of plants especially for quake-disaster recovery

Ube Kohki Co., Ltd.

Mobile plant

1919: Nihon Kogu Product Co., Ltd.
established
1920: Shovel goes on sale
1921: Head Office relocated to Akashi
1934: Second Plant opens, starts
production of wooden handles
1938: Third Plant completed, starts
production
1948:  Completes constructionof Fourth Plant, starts
production of cast metal
1950: Starts production and sales
of Ryusen handles

1951: Starts production of winches
and mixers
1956: Starts production and salesof Manten shovels
1958: Nikko’s first asphalt plantcompleted
1962: Lists shares on the firstsection of the Tokyo Stock
Exchange
1963: The first automated batcher
plant completed
1966: Starts production of belt
conveyer system
1968: Company renamed to Nikko
Co., Ltd.

1970: New AP plant
1970: Starts production of lifts andscaffold planks
1971: Anti-pollution AP completed
1974: Signs technology tie-up
with Benninghoven of West
Germany
1979: Signs technology tie-up
on drum mixing plants
with Boeing Construction
Equipment Company of the US
1986: Opens Tokyo service center
1989: Opens US office

M&A history
Solutions offeredby Nikko Group

Offered shovels and spades forreconstruction demand

Post-war robust reconstruction
demandExternal environment

1924: Hanshin Koshien Stadium
completed
1936: Diet Building completed
1939: The Second World War begins
1945: Japan accepts the Potsdam Declaration
1950: The Korean War begins

Manufacture and sales of various
construction machinery
Started manufacture and sales of asphalt plants
Started manufacture and sales of batcher plants
Offered various large-scale machineryand automated plants

Rapid growth period

Head office factory at the time of founding

2024: The final fiscal year of theMedium-Term Management
Plan (targets: 50.0 billion yen
in sales and 6.0% in operating
margin)2030: 2030 Vision (targets: 60.0
billion yen in sales and 10.0%
in operating margin)(100 million yen)

700
600
500
400
300
200
100
0

(100 million yen)
Net sales

1972

1975

1980

1985

1990

1995

Note: In the fiscal year ended March 1991, the Company changed the reporting period ending in November to March. It started consolidated reporting in the fiscal year ended March 1995. It reported non-consolidated performance before that.

5 N ikko Corpo ra te R epo r t 2 0 2 3

2000

2005

2010

2015

2020

Operating income (right axis)

2023 2024 2025
estimate

estimate

2031

60
50
40
30
20
10
0
-10

targetN i kko C o r p o rate R ep o r t 2 0 2 3 6

Financial and Nonfinancial Highlights

INTRODUCTION

Financial highlights

Nonfinancial highlights◆ Number of female employees, number of new-graduate hires,◆ Net sales and operating margin（million yen）

Net sales

70,00060,000◆ Net income attributable to owners of parent, return on equity
（ROE）

5.8%

4.5%

6.1%

Operating margin

5.3%

50,00040,00030,00035,151

31,78038,84637,866

2.6%
39,665

2,000

2018

2019

2020

2021

2,082

3.2%

1,649

1,588

1,020

3.5%

3.1%

60,00045,66743,9694.3%

48,697

3.2%

ROA

1.9%
52.12752,079

0

2020

2021

2022 (ﬁscal year)

ROA in FY 2022 came to 1.9%, a decline of 1.3 pp compared with
FY 2021. This was due to a large decline in net income, eventhough net assets at the end of FY 2022 remained roughly
unchanged from FY 2021 at 52.1 billion yen. On the balance
sheet, cash and cash equivalents declined 2.1 billion yen whileinterest-bearing debts increased 1.9 billion yen, resulting in a
decline in net cash.

◆ Trends in capital investment, depreciation and amortization, R&D expenses（million yen）

Capital investment

3,000

2,748

Depreciation and amortization
R&D expenses

2,500

2,214
1,907

1,889

1,000
508
211

611
379

677
392

759
449

2018

2019

2020

2021

990
576
2022 (ﬁscal year)

The Group made capital investment of 2.2 billion yen in FY 2022 including
0.58 billion yen for construction of buildings for rent, 0.25 billion yen formachines and equipment for the AP-related business, and 0.11 billion yen for
construction of warehouses for the AP- and BP-related businesses. Further, it
spent 0.36 billion yen for purchase of software. Depreciation and amortizationis on a rising trend reflecting active capital investment. R&D expenses, at 0.58
billion yen, were up from 0.45 billion yen from FY 2021. Nevertheless, it was
below the level of the company plan under Medium-Term Management Plan.

7 N ikko Corpo ra te R epo r t 2 0 2 3

2021

Total dividend

79.7%

34.1%

Total return ratio

112.5%
69.5%

54.3
41.2 40

35.1

43.2
33

30

26.7 30

12
2018

2019

2020

2021

2022 (ﬁscal year)◆ Cash conversion cycle（days）

116.6

838

18.7%

19.1%

1,038

1,064

861

600

0

2018

2019

2020

2021

2022 (ﬁscal year)

111.7
94.5

◆ Average number of annual paid holidays per employee (non-consolidated)

10.4

9.7

10.0

11.1

2018

600

6

300

4

200

2

100
2018

2019

2020

2021

0

2022 (ﬁscal year)

The average number of annual paid holidays used per employee was
11.1 days in FY2022 on a non-consolidated basis compared with 10.0
days in FY 2021. The increase from FY 2021 is partly attributed to
the fact that improvements in the workplace environment have madeit easier for employees to take paid holidays. The Group believes thenumber of paid holidays taken by employees is important for improving
employee satisfaction and realizing a good work-life balance ultimately
to significantly raise labor productivity by improving operating efficiency.

7,471

2020

2021

2022 (ﬁscal year)

In FY 2022, the Company’s CCC was 111.7 days, which was significantly
longer than the 93.9 days in FY 2021. This was because inventory
turnover period worsened to 127.7 days from 108.5 days in FY 2021
partly due to a supply chain issue. On the other hand, turnover periodof trade receivables improved to 64.9 days from 73.6 days in FY
2021, while turnover period of notes and accounts payable-tradealso improved to 80.9 days compared with 84.9 days a year ago. The
Group intends to improve CCC in FY 2023 by reducing inventories.

0

2019

2020

396.7

2018

2019

2020

2021

Total expenses of ISO activity items (electricity, water, waste,
and paper) in FY2022 came to 105.4 million yen, up 28.6% fromFY2021. The expenses of ISO activity items have been increasing
for the past several years and the major factor behind this is therise in electric power charges due to increasing crude oil prices,
etc. The Group will promote effective utilization of resources andcontinue to make contributions to environmental activities.

3,000

1,803

2,000
1,000
0

353.5

2022 (ﬁscal year)

Power usage in FY 2022 came to 3,535,000 kwh, a decline of 10.9%
from 3,967,000 kwh in FY 2021. This was a result of the fact that
production volume declined 15.7% in FY 2022 compared with FY
2021, and power usage on a unit consumption basis continued to
decline. In accordance with the guidelines for achieving carbon
neutrality, the Group will continue to reduce CO2 emissions byincreasing the ratio of renewable energy as well as implementing
electricity conservation initiatives.

◆ Number of patent and design registrations

Patents

Designs

16
15

13

10

2022 (ﬁscal year)

2,139

390.3

8,198

2021

1,915

391.4

10
7

5

2018

2022 (ﬁscal year)

Output(right axis) （million yen）

381.1

20
9,069

32
21

22

2021

1,569

14,0009,087

2020

Power usage(left axis)（number of registrations）

10,540

13

29

1,392

10

0

2018

11

9
3

2,000
2019

2019

（10,000 yen）

4,000

2018

14

21

◆ Power usage, output (non-consolidated)

400

0

8

500

6,000

20

15

21

The number of female employees (non-consolidated) was 83 as ofthe end of FY 2022, an increase of five from 78 as of the end of
FY 2021. The number of new hires was 32 on a non-consolidated
basis, an increase from 29 in FY 2021, while the number of new
female hires was six compared to three in FY 2021. The numberof hires with prior work experience was 22 (21 in FY 2021) maintaininga high level. The Group will continue to boost such hiring in accordancewith the new Medium-Term Management Plan.

8

8,000

40

62

700
10.8

78

75

71

14

10,000

60

90
80
70
60
50
40
30
20
10
0

（10,000kwh）

12

Number of female employees (non-consolidated)
Number of new-graduate hires (non-consolidated)
Number of hires with prior work experience(non-consolidated)83（people）（days）

12,000

93.9

number of new hires with prior work experience (non-consolidated)

The number of consolidated employees was 1,064 at the end of
FY 2022, up 26 from the end of FY 2021. The change reflected
increases from the acquisition of Ube Kohki and the start ofoperations of the Nikko NilKhosol plant in Thailand at the end of
FY 2021. Among the employees, foreign employees were 205, anincrease of 11 from the end of FY 2021 and accounting for 19.1% of
the total. The primary reason for the increase in foreign employees isthe addition of 10 employees at the Nikko NilKhosol plant in Thailand.

◆ Changes in expenses of ISO activity items (non-consolidated)

107.7

100

0

799

800

10

Dividends for FY 2022 were 30 yen per share, exceeding the net
income per share of 26.7 yen. While the Company did not carryout share repurchase as treasury stock, total return ratio came to112.5%, up from 69.5% in FY 2021. The Group expects to pay a
dividend of 30 yen per share in FY 2023, with which payout ratio
is expected to reach 95.7%. Under the Medium-Term Management
Plan, the Company’s shareholder return policy is to maintainpayout ratio at 60% or higher.

120

13.5%

1,200

2022 (ﬁscal year)

80

1,483

1,500

2020

Net income per share

60

0

2019

2019

97.6%

20
2018

2018

100

15,000

12.3%

13.8%

Ratio of foreign employees

200

（yen）

40

30,0001,400

Net income attributable to owners of parent in FY 2022 decreased
38.1% from a year earlier to 1.02 billion yen. The rate was lessthan the 49.9% decline in operating income. Net assets fell 0.4
billion yen compared with FY 2021 to 31.6 billion yen, while ROE
came to 3.2%, a decline of 2.0 pp from 5.2% in FY 2021. The
Company expects ROE to recover in FY 2023, given the high levelof total return ratio and as it anticipates a recovery in businessresults.

80

Number of employees (consolidated)

1,600

1,000

◆ Net income per share, dividends, total return ratio

Total assets

90,00005.2%（people）

400

02022 (ﬁscal year)◆ Return on total assets（ROA）

500

5.2%

ROE

500

（million yen）

2,000

1,345

6.8%

1,000

Operating margin in FY 2022 came to 2.6%, down 2.7 pp from
5.3% in FY 2021. By business, operating margin of AP-related
business declined 2.8 pp and that of BP-related business fell 1.2
pp due to low-margin projects in unit products. Profitability of theenvironment and conveyor-related business and other businessalso worsened. The Company expects 4.3% in operating margin
in FY 2023 as it expects improvement in both AP- and BP-related
businesses.

45,000

4.4%

1,500

10,00075,000Net income attributable to owners of parent

3,000
2,500

20,0000（million yen）

◆ Number of consolidated employees, ratio of foreign employees

2019

2020

6

6

2021

2022 (ﬁscal year)

In FY 2022, the Group registered six patents, unchanged fromFY 2021, and 13 designs, up two from FY 2021. The patents
registered in FY 2022 include those related to woody biomass
facilities as well as related to the AP-related business. The design
registrations range widely including AP-related products, Nikko
Sec’s temporary scaffolding products, Tombo Industry’s handtools, and Nihon Kogu Product’s barbeque grill.

N i kko C o r p o rate R ep o r t 2 0 2 3 8

Materiality 2023

INTRODUCTION

Nikko Group recognizes that there have been various risks and opportunities for the Group resulting fromchanges in the external environment in recent years. Specifically, the initiatives addressing the following havebecome indispensable for corporate sustainability: increasing geopolitical risks, supply chain instability, etc. in
the political and economic fields; accelerating shift to carbon neutrality, biodiversity, etc. in the environmental
and energy fields; digital transformation, generative AI, etc. in the technological field; and diversity and inclusion,

diverse workstyles, employee engagement, human rights and demands on corporate ethics, etc. in the social field.
In order for Nikko Group to achieve what it aspires to be in its 2030 Vision, it is indispensable that we not
only appropriately grasp the changes in the external and industrial environments and maximize the corporate
value in the various issues identified there, but also solve the materiality by taking into account the impact on
stakeholders and sustainability.
Nikko Group established the Sustainability Committee in June
2023 with five members and appointed the Director andManager of Corporate Planning Department as the chairperson.
The committee’s roles include (1) identification of materiality
for realizing the long-term vision and (2) identification of therisks and opportunities of the materiality and clarification of the
progress management policy (indicators and targets). We will
implement our initiatives to address materiality, by bearing in
mind “promoting self-reform to win the broad trust from society
and fulfill our mission as a solutions partner that evolves withthe customers” as stated in our Management Philosophy, leading
to improvement in corporate values over the medium to longterm.

Changes in Nikko Group’s materiality map
Realization of carbon
neutrality
Creation of new
customer values
Stakeholders’ interests

Stakeholders’ interests

Establishment ofrecycling-oriented
society

High

High
Low

Realization of carbon
neutrality

Human resource
development andimprovement injob satisfaction
Creation of new
customer values

Impact on the Nikko Group and its corporate values

High

Establishment ofrecycling-oriented
societyLow

2022

Human resource
development andimprovement injob satisfaction

Impact on the Nikko Group and its corporate values

The material matters for 2023 are (1) realization of carbon
neutrality, (2) establishment of recycling-oriented society, (3)creation of new customer values, and (4) human resource
development and improvement in job satisfaction. While thesefour remain the same as in 2022, we have made slight changes
to their positioning. We changed the position of (4) humanresource development and improvement in job satisfaction,
which has been moved to the right-most position of themateriality map taking into account the impact of the new
personnel system enacted in April 2023, and its importancehas grown for improving the corporate value of Nikko Group.
The reasons for changing the position of (4) human resource
development and improvement in job satisfaction are as follows:

Human resource development and improvement in job satisfaction
Nikko Group is currently executing its Medium-Term Management
Plan for FY 2022–2024 towards achieving the 2030 Vision. We
consider the three pillars of salary raise, increase in personnel, andhuman resource development as measures to strengthen humancapital. In the first year of the medium-term plan, we were able toachieve results in them generally in line with the plan.
We set the KPI in materiality along with the three pillars of the humancapital strengthening measures and also launched the new personnel

High

2023

system from April 2023. The new personnel system aims to createa mechanism for future employees and boost job satisfaction as abusiness entity, while scrapping the existing seniority system. Thisis important for creating the foundation for expanding the revenuesof Nikko Group in the next medium-term plan (FY 2025–2027), andwe believe it is indispensable to raise not only the economic value
but also the social and environmental values. It is a high-priority
challenge for us to achieve the 2030 Vision.

Relationship between materiality and sustainability; KPI and SDGs to which they contribute
Materiality

Sustainability of society

Realization of carbon
neutrality（➡ P.58）

Establishment ofrecycling-oriented society（➡ P.63）

Nikko’s Sustainability

Creation of new customer
values（➡ P.65）

Human resource development
and improvement in job
satisfaction（➡ P.67）

9 N ikko Corpo ra te R epo r t 2 0 2 3What the Group aspires to be and how it is related
About 70% of CO2 emissions from APs in Japan (approx. 1.3
million tons a year) is estimated to be emitted by Nikko plants.
While it will become a major risk if Nikko is late to respondto this, the Group believes that it also offers opportunities
from various aspects starting from fuel conversion toelectrification, as it is also an important social issue.
The arrival of a global recycling-oriented society is beneficial
for Nikko in terms of the anticipated increase in recycling
AP in China, as Nikko boasts a 99% recycling rate of asphalt
waste and has a 70% share in AP in Japan. The Company has
been engaged in the development of technology for recycling
concrete sludge and is working on its practical applications.
In its 2030 Vision, Nikko Group aims to becomea “customers’ management partner throughoperation and maintenance service.” The Groupwill not only improve customer satisfaction byleveraging DX and AI but also pursue subscription
contracts of maintenance service.
The importance of leveraging human capital increases
further upon solving material matters 1 to 3. For Nikko toachieve the 2030 Vision, it is necessary to have humanresources based on diversity and inclusion, and improving
motivation by nurturing them, as well as improving theirwork-life balance and well-being also assuming importance.

KPI

SDGs to which it contributes

CO 2 emissions (Scope 1, 2, and 3)
FY 2030: 50% reduction (compared to FY 2021)
FY 2050: Net-zero● Net sales of decarbonization- and low-carbon-related products
FY 2030: 2.7 billion yen●

Recycling of asphalt waste
Recycling of plasterboards● Recycling of concrete sludge
●
●

●
●

Creating new values through DX
Flat-rate service outsourcing countFY 2030● Ratio of female managers: 7%● Training duration and expenses per person: 10 hours, 50,000 yen● Ratio of employees taking childcare leave: 100% for female and 50% for male (FY 2025)● Attrition rate: 7% for three years from joining the company

N i kko C o r p o rate R ep o r t 2 0 2 3 10

Process of Value Creation

INTRODUCTION

In 2023, we added time axis to Nikko Group’s process of value creation. In other words, we clarified
outcomes that can lead to value creation in relatively short to medium term, and those that can leadto value creation in long term after output. We will aim for making the world a resilient and gentle

place, which is the vision of the future we want to realize, by solving the materiality and leading it to
the desired outcome so as to ensure that the sustainability of the society and the Nikko Group is in
sync.

Social issues and changes in the industry (risks and opportunities)（see p. 47）

Nikko Group’s mission (raison d’être)（see P.1）

◆ Recycling of waste materials and establishment of recycling-oriented society
Carbon-neutral initiatives◆ Intensification of disasters and early restoration
Acceleration of digitization◆ Declining birthrate and aging population, declining workforce◆ Rising ESG awareness◆Update the social infrastructure by leveraging
engineering that is one step ahead of others.

◆

Input

Business activities

Financial capital（see p. 23）
Medium-Term Management Plan（2022–2024）（business foundation）

Output（business process）

Value chain（see p. 49）➡Total assets of 58.5 billion yen and net assetsof 34.0 billion yen at the end of FY 2024

Business transformation◆

AP-related business in Japan（see p. 37）◆

Overseas AP-related business（see p. 37）◆

BP-related business（see p. 39）◆

Environment- and conveyor-related business（see p. 41）◆

Maintenance service business（see p. 63）◆

Other businesses（see p. 42）

Sales and
consultation

Manufactured capital
Capital investment focusing
on the 2030 Vision（see p. 28）

R&D➡Capital investment worth 6.0
billion yen in FY 2022–2024

Human capital

Material
handling

Addition of more people and reformof diversity and work style（see p. 29）➡An increase of 145 employees
at Nikko in FY 2022–2024

Strengthening of operationand maintenance services
Planning
anddesigning

MixingCoretechnologies
Original technologies
protected by highentry barriers

Net sales: ¥50 billion ◆ Operating income: ¥3 billion（6% in operating margin）◆ ROE: 6.0%
◆ Payout ratio: Continue with 60% or more◆

Procurement
andmanufacturingIntellectual capitalBusiness model innovation byleveraging core technology（see p. 30）

OutcomeConstruction
work（creation of social values）➡R&D expenses of more than
2.5 billion yen in FY 2022–2024

Sustainability management（see p. 54）

Social and relationship capital➡Number of Akitsu-kai members as ofthe end of FY 2022: 200 companies

Natural capital
Utilization of energy, water
resources, etc.（see p. 58）

Materiality（see p. 9）

Trust as a solutions
partner（see p. 28）◆

Sustainability of society
Realization of carbon
neutrality◆ Establishment of recyclingoriented society◆Management
philosophy（see p. 1）◆

Lateral deployment of products
and markets

Financial targets for FY 2024

Heatingtechnology

Control
technology

Maintenanceservice

Scale expansion leveraging technology

Nikko’s Sustainability
Creation of new customer
values◆ Human resource development andimprovement in job satisfaction◆

Corporate
identity（see p. 1）◆

Corporate
governance（see p. 80）

Social and environmental values to be contributed

Economic values to be createdEstablishment of recycling-oriented,
environmentally friendly society（see p. 63）◆ Contribution to realization of decarbonized societ（see p. 58）◆ Contribution to disaster prevention and mitigation

Financial targets forFY 2030（see p. 23）◆◆◆

Support for early restoration from natural disasters（see p. 64）
Co-existence with local communities（see p. 64）

Net sales: ¥60 billion
Operating margin: 10.0%◆ ROE: 10.0%◆ Market cap: ¥50 billion or
more
◆
◆

Making the world a resilient and gentle place

Robust financial base andample cash（see pp. 27, 31）（business value）

Future
the
Group
wants
to
realize（see p. 1）

Achievement of 2030 Vision（see pp. 31, 43, 71, 76）

11 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 12

Key Points of Value Creation Process

long term after output and consider their relationship withmanagement capital.

Image of corporate value improvement towards 2030
Social and environmental values

Realization of the value creation process is necessary for
the Nikko Group to fulfill its long-term vision of “Making theworld a resilient and gentle place” based on the Group’s
raison d’être and mission of “Update the social infrastructureby leveraging engineering that is one step ahead of others.”
To this end, we have to appropriately grasp the social issues
and changes in the industry, achieve the medium-term planand solve the materiality through business activities in the
inputs where our strength lies, and realize the outcomes,
which are social, environmental, and economic values, fromthe output. The key to solving materiality lies in sustainability
transformation (SX) initiatives that would synchronize the twosocial sustainability-related items (establishment of recyclingoriented society and realization of carbon neutrality) andthe two items (creation of new customer values and humanresource development and improvement in job satisfaction)
related to the Group’s sustainability to enable value creationin the medium to long term. Further, in addition to outcomesthat can be created through business activities in short term,
we will identify those that need to be created in medium to

INTRODUCTION

Economic value KPIOperating margin
FY 2030 10.0％
Environmental value KPINet sales of decarbonizationand low-carbon-related products
FY 2030 2.7 billion yen

FY 2030

Corporate value KPI
Market cap
FY 2030 50 billion yen

FY 2024
FY 2021

Economic values

Note: The area of the circle represents market cap

Input（business foundation）● In terms of financial capital, Nikko Group had an equity ratio of

61% as of the end of FY 2022 with net cash of about 4.6 billion yen.
The Group has been pursuing active capital investment and salesof cross-shareholdings as shareholder return measures for the
past few years, and net cash has been declining from 10.3 billion
yen five years ago. Net assets have increased by 1.3 billion yen fromfive years ago to 31.6 billion yen, significantly slowing down fromthe increase of 5.9 billion yen in the five-year period prior to that.
● In manufactured capital, we have been carrying out capital
investment exceeding depreciation since FY 2013, and has
significantly increased the capital in waterproof boards andother growth areas and AP manufacturing and sales base in
Thailand among others since FY 2018. The acquisition of Ube
Kohki and Matsuda Kiko is also part of our efforts to strengthen
manufactured capital. As a result, property and equipment as ofthe end of FY 2022 more than doubled to 11.8 billion yen from 5.3
billion yen five years ago.
● In terms of human capital, Nikko Group had 1,064 employees as ofthe end of FY 2022, which is an increase from the 807 employees
at the end of FY 2017. However, further enhancement is necessary
to achieve the long-term vision target. We aim to achieve the
KPIs in our human resource development policy and internal

environment development policy in FY 2023 so as to evolve humancapital management.
● As for intellectual capital, we are thinking of something extra in
the future, in addition to the four core technologies we possess,and leverage that for business model reforms and to realize theoutcomes. R&D expenses for FY 2022 was about 0.6 billion yen,and have doubled over the past five years. We are expecting
expenses in excess of 2.5 billion yen in the medium-term plan andwill further accelerate it.
● As for social and relationship capital, we will leverage ourstrengths including Akitsu-kai and Tombo-kai to become a solution
partner of the customer as advocated by Nikko Group. We will also
strengthen the supply chain taking into account the anticipatedbusiness expansion.
● With respect to natural capital, we will work to expand the net
sales of carbon neutrality-related products to not only reduce CO2
emissions of Nikko Group but also contribute to reductions at ourcustomers. In outcome, based on the forecast of an increase insales of warm mix (foamed) equipment in FY 2023 to 55 units (19units in FY 2022), we consider it important to develop combustion
technology for decarbonized fuels such as ammonia and hydrogenburners for AP.

Output（business value）
In output, it will be necessary to realize business
transformation and scale expansion leveraging
technology so as to achieve the financial targets (50billion yen in net sales, 3 billion yen operating income,etc.) for FY 2024, the final year of the medium-term

plan. However, for the time being it is the period
for sowing seeds primarily for securing human andintellectual capital, for establishment of the businessfoundation, and therefore we believe it is important to
put the alignment in order for achieving the 2030 Vision.

Outcome（creation of social values）
Our business activities that will lead to social and environmental
value creation include support for early restoration from natural
disasters and co-existence with local communities. In support
for early restoration from natural disasters, recovering from
intensifying natural disasters, such as large typhoons, severe
rainstorms, and earthquakes, starts with quick recovery work of
the Group’s damaged plants. In FY 2022, Nikko-manufactured
plants suffered damage at 60 places, which was a decrease
from the 72 places in FY 2021. We will continue to collaborateclosely with customers and focus on early restoration and will
work to expand the social and relationship capital in the shortterm. As part of coexistence with local community, the Nikko
Business Foundation has been offering scholarships that do
not require repayment to domestic and overseas students
enrolled in universities and technical junior colleges in Hyogo
Prefecture and to students from Hyogo Prefecture studyingin the Kinki region. The foundation also provides grants toresearchers who conduct research on technology developmentin the laboratories of the universities and technical juniorcolleges in Hyogo Prefecture and to researchers who residein Hyogo Prefecture and work for universities outside theprefecture. We expect such efforts to lead to stabilization ofsocial and relationship capital in the medium to long term.
Our business activities that will lead to value creation after
output include contribution to disaster prevention andmitigation, establishment of recycling-oriented, environmentallyfriendly society, and contribution to realization of decarbonizedsociety. From the perspective of the contribution to disasterprevention and mitigation, the Group recognizes waterproof
boards as something indispensable for protecting people
from intensifying floods resulting from extreme weather.
While demand for waterproof boards fell in FY 2022, it willcontribute both in the short term and long term to financial
capital, social and relationship capital, and natural capital.
For the establishment of recycling-oriented, environmentallyfriendly society, we recycle almost all of the asphalt waste(more than 99%), and about 75% of the asphalt mixture weuse in new road pavement works is recycled mixture collected
as pavement waste. Going forward, we are expected to use
the domestically developed AP recycling technology in China,
where there is large demand, and also in the ASEAN region in
the future. Regarding recycling of plasterboards, the amount ofplasterboard waste is expected to reach 2 million tons in Japan
in 2025 and exceed 3 million tons in 2039 as the residentialbuildings built during the rapid economic growth period enters
the demolition stage. There is little capacity at final disposalsites and disposal costs are soaring mainly in large cities. In
this field, contributions can be expected from financial capital,
intellectual capital, social and relationship capital, natural capital,
and a wide range of management capital in the medium to longterm. Contribution to realization of decarbonized society is
an important outcome which the Group should achieve in themedium to long term. It is necessary to draw up technologicaland business roadmaps including collaboration with customers
and various businesses and implement them, and not justlimited to reduction of CO2 emissions at the Group. Warm mix(foamed) equipment has been shown to reduce CO2 emissions
in the short term, and demand for hydrogen and ammonia
burners for fuel transition is anticipated in the medium-term.
While it is expected to have a negative impact of a short-term
increase in costs including R&D and personnel expenses, it islikely to have a positive impact on the Nikko Group in the longrun including intellectual capital and social and relationshipcapital as well as a ripple effect on natural capital.

Business activities（business process）
Upon moving from input to business activities, we will add
something extra to Nikko Group’s four core technologies
for mixing, heating, control, and material handling to achievebusiness transformation and scale expansion leveraging
technology, which form the gist of the medium-term
management plan, ultimately leading to solving materiality.
Specifically, business transformation means strengtheningof operation and maintenance services led by subscription
service of mainstay maintenance service. Scale expansion

13 N ikko Corpo ra te R epo r t 2 0 2 3

leveraging technology points to expansion of AP-related
business to ASEAN market with the Group’s manufacturing
and sales base (NIC) in Thailand at the center, strengtheningof environmental products and waterproof board business,and lateral deployment of products and markets including
acquired businesses. As maintenance service accounts
for about 60% of the net sales of AP- and BP-related
businesses, we believe evolution here is important from thevalue chain perspective.

Future the Group wants to realize: Making the world a resilient and gentle place
At the Nikko Group, we believe that the corporate
identity we formulated will lead to “Making the world
a resilient and gentle place,” which is the future wewant to realize under our long-term vision, along thethree axes of customers, employees, and future,with our mission “Update the social infrastructureby leveraging engineering that is one step ahead ofothers” at the core.

N i kko C o r p o rate R ep o r t 2 0 2 3 14

Interview with CEO

VALUE CREATION VISIONS & STORIESCreating robust, people-friendly cities around the world.

VALUE CREATION VISIONS & STORIESIt is essential for the Nikko
Group to build a foundation
for growth and take on
new challenges forrealizing the vision of“Making the world aresilient andgentle place.”
My mission is to not
lose sight ofthis perspective.

Representative Director
and President

Masaru Tsuji

02
15 N ikko Corpo ra te R epo r t 2 0 2 3

Session.1 Nikko Group’s business model and what it aspires to be
Interview with CEO・・・・・・・・・・・・・・・・・・・・・・・ 16
Medium-Term Management Plan・・・・・ 23

─ First, could you please explain Nikko Group’sbusiness model? What are Nikko’s technologicalstrengths, and how do they differentiate it fromother companies?
Nikko’s business model is based on four core technologies ofheating, mixing and kneading, material handling, and control,and our strength lies in the integrated handling of everythingfrom development and design to manufacturing, construction,and maintenance. This is the point where we set ourselvesapart from other companies. Another feature of our businessmodel is that it consists largely of stock business, as we havethe top share of the domestic market for asphalt plants (AP)and batch plants (BP), and the maintenance service businessfor them accounts for about 60% of net sales.
We consider the requirements of the customers as our tasks andN i kko C o r p o rate R ep o r t 2 0 2 3 16

VALUE CREATION VISIONS & STORIES

the major theme here is the response to carbon neutrality (CN).
AP customers, mainly road pavement companies, bear a senseof mission to respond to CN, and I am confident that Nikko’s
technology development will play an important role in CN.
In CN initiatives, we so far have been carrying out R&D aheadof our competitors, and I am proud to say that we are in anadvantageous position globally in CN-related products.
For example, of the core technologies, heating technology
used in APs includes biomass fuel burners we have beendeveloping to achieve CN for many years. In April this year,
we succeeded in mixture manufacturing and pavement works
using hydrogen burners. In addition to the hydrogen burners,
our warm mix (foamed) equipment for warm mix (low-carbon)asphalt mixture is seeing a major growth in orders.
The equipment manufactures asphalt mixture at a temperature
lower than the usual heating temperature as it reduces theviscosity of asphalt by adding a small quantity of water toheated asphalt and foaming it, which leads to reduction in CO2emissions. As shown in the product development road map
through FY 2050, we will continue to develop decarbonizationrelated equipment to achieve CN（see pp. 35, 51）.
─ Domestic demand for APs and BPs, excluding
decarbonization-related and low-carbon-related products
for CN, has been sluggish. Taking into account the futurebusiness environment, how do you think the businessmodel needs to be changed from what it is now?
Our assessment shows that domestic demand for APs and
BPs is in a mature state, and we think that the key to business
continuity is the maintenance service business. In this field, we
have been receiving requests from customers for unmannedplant operation as part of workstyle reforms and as a solution

to the labor shortage, and we also have been continuing toapproach them. The workstyle reform law is about to be applied,which, in principle, will require the construction industry tolimit overtime work to 360 hours or less per year. It is the socalled 2024 problem. In the transportation field, also, customers
will face the 2024 problem as they manufacture and delivermaterials. We are considering a technological approach to lighten
the burden on the customers resulting from transportation ofmaterials. In utilizing the service stock business, we are working
on a remote maintenance service where the Customer Support
Center (CSC) at the head office would monitor the customers’
plants. We are also optimizing the division of labor in such a waythat maintenance staff can improve their skills and focus on
operations that require skills（see p. 65）.
Customers’ ultimate challenge is how many employees they
can reduce in plant operation, with the final aim of achieving
unmanned operation. In particular, customers operating
multiple plants are facing issues with employee management.
As a first step towards solving the issues, we developeda system called SiiLO that enables shipment from mixture
silos of multiple plants through remote operation in August
this year. Mixture silos are facilities that store manufactured
asphalt mixture while retaining the heat. Asphalt mixture
plants in urban areas with high shipment volume usually havestaff to handle shipping operations during night time andholidays to enable 24-hour shipping, and are facing issues
with attendance management and work styles. Our systemenables remote shipping from mixture silos regardless of
the location, reducing the working hours of employees atasphalt mixture silos, and will lead to work style reform. If
this remote operation of asphalt mixture silos of multiple
plants can be expanded to all the plants, labor saving can be
accelerated. What is important upon operation of the system
is guaranteeing its safety. In carrying out shipping operation,
SiiLO verifies the footage from a surveillance camera installedinside the plant and communicates with the driver of the
dump truck to confirm the safety. Going forward, we need toconsider measures including DX solutions.
In the future, we are aiming to transform the current
maintenance service business model from remote maintenanceto asset management where Nikko manages the assets of thecustomers including preventive maintenance. If we expand
the scope of asset management, emergency deploymentof maintenance staff will decrease, which will enable levelingof operations. We will work on DX and labor saving in plant
operations and the transition to asset management ofmaintenance service by using control technology, one of ourcore technologies. With the increasingly serious decrease inworking population in the construction and civil engineering
industries, we will strive to realize our vision of “Making theworld a resilient and gentle place” by ensuring labor-saving andWe will aim to transform the business model of maintenanceservice into asset management where we manage the assets ofthe customers

17 N ikko Corpo ra te R epo r t 2 0 2 3

In development, we are providing advanced technical support tocustomers based on our assumptions and hypotheses. We will
tenaciously continue with the trial-and-error method
deploying DX solutions in plant operation as we also addressthe 2024 problem.
─ You have apparently changed the approach to
R&D from what it was before upon pursing CN
initiatives and labor-saving. What are the specificinitiatives you are taking?
The technologies Nikko possess now were developed
through our long history of sincerely addressing each andevery one of customers’ requests. However, from now on it
is imperative that we grasp the requirements of customers,
take the social issues as our mission, and proceed with
development in advance. If we start development after
receiving a request from the customer, we will not make it intime. The same applies to the 2024 problem and CN. Among
those, CN requires drastic measures such as energy saving
and alternative fuels, and we need to respond in advance withtechnology based on our predictions. While these efforts will
most likely see the light of day some 10 years from now oreven later, we are pushing forward with our operations bytaking an R&D approach that is different from the past.
In this regard, we will take on challenges for various
developments without fear of failure or hesitation. We havestarted seeing some changes in the course of our trials
and errors. We follow the Ringi decision-making system indevelopment. Prior to that the person in charge has to present
a proposal of the objective, method, amount, etc. to theDevelopment Technology Committee and obtain its approval.
A project that has passed the committee goes through the

Ringi decision-making process by the executive board, andreceives investment if approved. Recently we have seen
more proposals from young engineers. Their explanations
are realistic and passionate, making meetings very lively. The
meetings of the Development Technology Committee used to
be boring for me, but have recently become very interesting.
Development themes also used to be often passive responses
to customers’ requests. Now we are carrying out quite a few
development projects that pass the Ringi decision-making
process based on ideas that will be needed in the future,even if they may not lead to sales for several years. I havebeen conveying to the employees that we should resolutely
continue with this（see p. 40）.

Session.2 Review of the first year of Medium-Term Management Plan and new businesses─ The first fiscal year of the Medium-Term Management
Plan ended in FY2022. How would you summarize it?
The results for the first year of the medium-term plan
regrettably fell much short of the passing score. While there
was the impact from many overlapping negative factors
such as the rapid depreciation of yen, soaring energy costs,
steep rise in price of supplies, and prolonged delivery times,
we also have numerous points to reflect on. Asphalt pricesrose due to the rise in crude oil price, and management ofroad pavement companies, the customers of our AP-related
business, worsened, which diminished their appetite for capital
investment. Overseas, the COVID-19 pandemic took the windout of the sails of the Thai business, which is yet to get backon track, and the resultant poor performance of the AP-

related business both in Japan and overseas has acted asa brake in the first year of the medium-term plan. However,even if orders stop for one year, our AP-related maintenanceservices cannot fully protect the customers’ plants unlessmaintenance work resumes the following year. If sales areconcentrated in a certain period, including maintenancework postponed, then there is a risk of us not being able tohandle work, so we will be reconsidering our supply structure,etc. On the other hand, the BP-related business is generally
performing well, as our customers in the ready-mix concrete
industry have successfully passed on cost increases to selling
prices, and as there are some regions where the economy
is good. We expect that delivery times for supplies willcontinue to be prolonged, and since the cycle from order
receipt to sale is expected to become longer, we will work

N i kko C o r p o rate R ep o r t 2 0 2 3 18

VALUE CREATION VISIONS & STORIESThe contract-based manufacturing by the two companies weacquired through M&A offers business chances for the future. We
can also grow the environmentally friendly and recycling products

for example, that you cannot win orders unless you offer
manufacturing at low cost. There is also the social issue ofbusiness succession in the manufacturing industry, and I thinkhigh-level contract-based manufacturing presents a businesschance for the future.

Session.3 Initiatives on sustainability transformation
received orders worth about 1.1 billion yen for mobile plantsfor Ukraine, which continues to be at war with Russia, as
ODA from Japan. We hope to contribute to the restorationof Ukraine through our AP and BP business as well. Thisis related to our vision of “Making the world a resilient andgentle place.”─ The Group acquired Matsuda Kiko this July following

the acquisition of Ube Kohki in March of 2022. What
was the objective in purchasing two contract-based
manufacturing companies, and what contributions doyou expect from them in the medium to long term?

to ensure appropriate cost management to secure profits
while upgrading management of schedules for production,
shipment, and on-site construction（see p. 32）.
─ What is your assessment of new businesses?
Regarding new businesses, while the expansion of sales ofwaterproof boards has slowed due to a delay in the shiftingof costs to prices, the mobile plant business including mobile
crushers has continued to grow with net sales rising 24%
year on year to 1.8 billion yen in FY 2022. We recognize that
this is partly due to the good market environment. At thesame time, requirements at stone crushing plants, etc. using
aged crushing equipment are changing from stationarytype to mobile machines. In emerging countries overseas,
crushing equipment started off originally with mobile ones,
whereas stationary machinery was popular in Japan. Whileit takes time for the facility to start operations in the caseof stationary machinery, mobile equipment can be deliveredat short notice and can start operations immediately ondelivery. With customers increasingly becoming cognizant ofmobile crushers, we were able to sell 170 units cumulatively
and we can also expand sales further to stock business, etc.
Though we are confident that German company KLEEMANN’s
products that we offer are superior in performance to ourcompetitors’ products, the current depreciation of the yen
against the euro is a negative factor for profit from them.
Nonetheless, the superiority of the products in performance
including running costs allows us to compete with othercompanies even at the current level of exchange rate. Also,
we expect that the net sales for the mobile plant businessfor FY 2023 will be close to 3 billion yen and that operating
income will turn profitable earlier than planned（see p. 42）.
Another topic to be mentioned here is that we recently

19 N ikko Corpo ra te R epo r t 2 0 2 3Many people feel contract-based manufacturing is
subcontracting, but the products being manufactured undercontract require high processing technology and experienceto handle various materials and temperatures and to ensure
accuracy.
It is necessary to broaden and improve the manufacturing
technology in order to broaden the range of Nikko’s products.
The M&A this time was also to attain this goal and I am
convinced that it will be a source of energy for us to grow asa manufacturer. We have been supplying improvement devices
for manufacturing equipment to many companies. Amongthem, many are recycling equipment for waste generated in
the production process at plants. Nikko has a track recordof solving, with engineering, the demands from companies
for stable treatment of the effluents and waste generated in
the production process to achieve their zero emission goals.
Nonetheless, we have not been able to develop this trackrecord into a major business pillar. Going forward, I would liketo make the environmentally friendly and recycling products
as a pillar of our business.
Till now we have been manufacturing the environmentallyfriendly and recycling products at the head office factory,
but it took a little longer to deliver them as regular products
were given priority. This disrupted the process of regular
products and was also disadvantageous from the profitability
perspective as we sometimes could not manufacture them ata low price. The reasons for acquiring Ube Kohki and Matsuda
Kiko are that they possess solid manufacturing capability
and adaptability in contract-based manufacturing. Withthe two companies carrying out the manufacturing of theenvironmentally friendly and recycling products, we would liketo grow it into a new pillar of Nikko Group’s business.
I was involved in launching the business for environmentallyfriendly and recycling products. I remember that staff at theplant felt demotivated when they found the products they
made based on orders from various companies were very
unprofitable despite the amount of time and effort they spent.
Now, contract-based manufacturing also has high profitability,
but in those days we were trapped by stereotypical views,

─ Sustainability transformation (SX), in whichsustainability of the society and that of Nikko aresynchronized so as to create values in the future,is gaining attention. We talked about the industry
environment at the beginning. What are thechallenges and risks in environment (E) and whatkind of strategies are you considering?
Nikko and customers share the same challenges suchas carbon neutrality and the 2024 problem. What is
important in advancing SX from now on is to come up
with countermeasures for common challenges and share acommon schedule for implementing the measures. In addition
to solving the challenges, it is important to develop a structure
for cooperation to accomplish growth. In other words, themost important thing is to create an environment in which
the market as a whole can work on solving them rather thandoing it on our own or alone. To this end, it will be effective to
involve the industries related to the market and we would liketo take the lead in doing this.
Risks faced in decarbonization include the fact that APs emit
1.3 million tons of CO2 a year. Road pavement companies are
required to take measures for large-scale decarbonization,
but they may not be able to do so in time if the industry as awhole does not take drastic measures.
Taking this as an oppor tunit y, we are considering
decarbonization measures as the most significant theme forour development investment, and we are allocating a large
amount of management resources to the development of
products that run on alternative fuels such as hydrogenand ammonia in addition to energy saving. In this field, warmmix (foamed) equipment among decarbonization-related
devices has been contributing to sales. In the future, weshould promote the launch of system products that can besignificantly effective in decarbonization, on a regional basis
rather than on a plant-by-plant basis. It is necessary to target
multiple plants in each area for sales through associations,etc., and to this end, the regional divisions of the Japan
Asphalt Mixture Association have been carrying out PR
activities such as lectures on a regular basis（see p. 61）.

─ In society (S), Nikko has introduced a new
personnel system along with three measures tostrengthen human capital in April 2023. What kindof effect are you expecting from this in the future?
The new personnel system is designed to create a structure
for young employees who will support Nikko in the future, andaims to make the company a more rewarding place to workthan it is now. Employees have various values such as income,position, how interesting the job is, and how well their opinions
are accepted. It may not be easy for this personnel system
to raise the motivation of the employees as a whole, but it
focuses on giving young employees hope in Nikko’s futureand is premised on the scrapping of the seniority system.
My hope is that by implementing the new personnel system
gradually and steadily, we will be able to increase the numberof motivated employees, raise the motivation of the company
and make it a corporate entity that can progress towards
goals in the shortest possible distance.
In formulating the new personnel system, we paid attention toensure that no one would have a feeling of unfairness. If wemake it a system that gives special recognition to employees
who tried hard, we would not be living up to our words. For

Strengthening of human capital is imperative for building
the foundation for growth towards 2023 vision. With the new
personnel system, we aim to become a corporate entity thatcan progress towards goals in the shortest possible distanceN i kko C o r p o rate R ep o r t 2 0 2 3 20

VALUE CREATION VISIONS & STORIES

this reason, we decided to let the employees set six goals
at the beginning of the fiscal year and then objectively
give scores for the results. Setting the targets also is not
something that should be forced on the employees. Our aim
is to let them develop the targets through dialogues with theirrespective managers and have both employees and managers
share not only short-term but also medium- to long-term
perspectives. Managers must have five one-to-one meetings
with employees and we are asking managers to spend halfof their working time for this purpose. It is embarrassing that
we lacked such a mechanism till now. While employees areevaluated based on scores, we make sure that managers use
their discretion to a certain extent.
The new personnel system is designed so that its introduction
will not significantly raise the personnel expenses for the
Nikko Group as a whole. Strengthening of human capitalis indispensable for the Nikko Group to enter the businessexpansion phase in the next medium-term plan and it also
leads to achieving sustainability（see p. 69）.
─ In governance (G), the number of outside directors
declined by one, and now they account for three outof the nine members of Board of Directors. What
did you learn in terms of management in relation
with the skill matrix of each outside director?

As the skill matrix indicates, we receive various management
advices from the three outside directors, who also supervise
the board of directors. Ms. Saeki, who manages a systemcompany and is also guiding us on SDGs, pointed out that
we need to set forth concrete numerical targets for female
managers and executives. She also proposed expanding thescope to include not just young employees but up to division
head level when hiring people with prior work experience.
Ms. Saeki also suggested to turn one floor of the three-story
bachelors’ dormitory into a women-only floor when we built it
last year and we adopted her proposal. With his experience ofserving as the Ambassador Extraordinary and Plenipotentiary
to Indonesia, Mr. Ishii is well versed in international affairs andwe have been consulting with him for our expansion into the
ASEAN region. He gives lectures once a month on overseas
situations to employees, helping to raising their awareness. He
also advised us to increase the opportunities for employees toexperience and learn English conversation in places where itis spoken. Mr. Sadakari, who is experienced in management offinancial institutions, is also an expert in financial matters andprovides us comprehensive opinions based on figures from athird-party perspective. He studies materials in advance andgives in-depth views backed by figures, and we are learningfrom them. He has served as the representative director ofa bank and knows various company managers, which also I
consider as one of his strengths（see p. 76）.

Session.4 Stakeholder engagement and improvement of corporate value─ Last year, the Group established its Corporate
Identity (CI). What are the new initiatives you
implemented in the past one year to instill it
throughout the Company?

to spread the philosophy and created a booklet of philosophy
cards and distributed them to all employees including those atgroup companies. We also watch the movie at the end of theIt has been one year since we established CI of Nikko Group.
CI consists of values, spirit, and slogans for bridging “Update
the social infrastructure by leveraging engineering that is
one step ahead of others,” which is Nikko’s raison d’être andmission on a day-to-day basis, to its vision of “Making theworld a resilient and gentle place.” We have retained the threebasic principles as long-standing values from the time of our
founding. CI is not something that an employee representative
decided from top down, but is something that emerged
from the various discussions held by employees who had
volunteered on their own, and was subsequently disseminatedas message from Nikko Group to the society. While there havebeen no visible changes resulting from the establishment of
CI till now, we produced a branding movie as one of the tools

Dialogue and engagement with employees enable us totake actions with confidence

21 N ikko Corpo ra te R epo r t 2 0 2 3I feel it is also necessary to improve external namerecognition to improve corporate value. We will continue
taking on various challenges
morning meeting held once a month.
In July this year, we started dialogue and engagement as aforum where I directly address the employees. I do not limit
the topics there to CI and philosophy, and I exchange views
with employees regarding various themes including job-related
doubts and measures for improvement for one to two hours.
Learn extensively, both from within and outside is one of CI
spirit items, and I feel I too learn a lot from the dialogue with
employees. If we take the dialogue I mentioned initially as an
example, all of the entries were from young employees, fiveof them. Through this dialogue, I felt a high level of interest
among young employees in the Medium-Term Management
Plan. Young employees nowadays are more interested inmanagement than when I was young, asking questions suchas what the Nikko Group’s key performance indicators (KPIs)
are and what needs to be done by when. Our website hasmaterials on the medium-term plan and employees have many
opportunities to learn such information, which enables them tounderstand the gist of management.
From the dialogue, I am learning the points I can relate toamong the opinions of the employees regarding the mediumterm plan and the questions I have regarding them. I am
thinking of leveraging the things I learn from this continued
dialogue and engagement in management. It is also true that
I used to be worried about how employees would react tothe policies, as we had announced them top down till now.
Now I can listen to employees’ opinions directly, which is very
effective for making management decisions, and I feel more
confident in implementing something based on that（see p. 1）.
─ What do you think is necessary in the future
for engagement with stakeholders other thanemployees? What roles are you going to play in thisand what are your responsibilities?
For me to engage with stakeholders other than employees,
I believe it is important to have them fully understandand empathize with the business of the Nikko Group.
Public relations activities are also important and we needto highlight our activities more externally. I need to makeefforts to increase contacts with customers in my role as
top management of the company. We are increasing steadyefforts, for example, to showcase our various initiatives by
joining the Japan Road Contractors Association as a support
member.
To improve our press releases and website, we are having
employees come up with various opinions and ideas as to how
to raise our name recognition, and have been driving forward
new initiatives. One example of the ideas was the launch of a
new game called Let’s Protect Roads! in Gokko Land, a social
experience app for children, in an effort to engage with future

generation. Gokko Land is a free app that enables children
to learn how the society works interactively through playing
pretend, which children love. There are about 5.5 million
households using the app, which account for about a third of
the child-rearing generation（see p. 57）.
We have long been supporting roads through delivery of APs.
The number of people engaged in the road pavement industry
has declined because of its 3K—kitsui, kitanai, and kiken(demanding, dirty, and dangerous) image. It is also difficult togain the understanding of local residents for building a newAP, and I have been feeling the need for improving the imageof the industry and correctly communicating the significanceof APs to maintain the infrastructure. For this reason, we
launched the game as we wish everyone including children
to deepen their understanding of roads and feel familiar with
APs. We are making an appeal to the future generation 20
years from now, with Japan facing social issues such as adecline in workforce and aging infrastructure.
I believe new initiatives like this aimed at improving namerecognition in the society will become more and more
relevant in order to think from the same perspective as
our stakeholders and to raise our corporate value throughengagement. My responsibility in these endeavors is to firmly
instill in employees the Nikko Group’s mission to “Update thesocial infrastructure by leveraging engineering that is one stepahead of others,” and to complete within the current mediumterm plan period the development of the foundation forgrowth towards “Making the world a resilient and gentle place,”
the future vision we want to achieve. In the next medium-term
plan, we will link it to raising not just economic value but alsosocial and environmental values（see p. 13）.
We look forward to the continuous support from ourstakeholders. We will continue to take on various challenges inour efforts to live up to their expectations.

N i kko C o r p o rate R ep o r t 2 0 2 3 22

Medium-Term Management Plan

VALUE CREATION VISIONS & STORIES

Overview of Medium-Term Management Plan and its progress

Progress in Medium-Term Management Plan and issues

Positioning of the internal investment phase towards realization of 2030 Vision

The results for the initial fiscal year fell short of the plan because of the worsening external environment and the burden from active investment

The Group positions the three-year Medium-Term Management
Plan (FY 2022–FY 2024) as the internal investment phase forbuilding structures, processes, and systems for realization of the2030 Vision (consolidated net sales target of 60 billion yen andoperating income target of 6 billion yen), which indicates what it
aspires to be in 2023. It positions the subsequent period from2025 to 2030 as the business expansion phase with improved

profitability, in which the Group expects to succeed in full-fledged
sales of environmentally friendly products for decarbonization,business expansion into the ASEAN region, actualizing the impact
of introduction of technologies such as automation and remote
operations, and review of production process. In 2030 Vision, theGroup declares as targets 50 billion yen or more in market cap and
60% or higher in payout ratio in addition to other numerical targets.

For FY 2022, which is the first fiscal year of the Medium-Term Management Plan,
consolidated net sales totaled 39.6 billion yen and operating income came to
1.0 billion yen (operating margin of 2.6%), falling short of the net sales target of
42.0 billion yen and operating income target of 2.3 billion yen (operating marginof 5.5%). By segment, the three business segments other than the AP-related
business exceeded the plan in general, while the AP-related business significantly
underperformed the plan. Nevertheless, the Group has been steadily implementing(million yen)Previous Medium-Term Management Plan

Sales

New Medium-Term Management PlanFY 2019 results

FY 2020 results

FY 2021 results

FY 2022 plan

FY 2022 results

FY 2023 plan

FY 2023 forecast

FY 2024 plan

1,588

2,082

1,649

1,600

1,020

1,900

1,200

2,100

35,151
2,053

Operating income

Net income attributableto owners of parent
Dividend per share(yen)
Total dividend
Dividend payout ratio
Net assets
ROE

37,8662,302

38,8462,053

42,0002,300

39,665
1,028

48,0002,800

44,0001,900

50,000
3,000

40

33

30

30

30

30

30

35

1,550
97.6%
30,293
5.2%

1,260
60.5%
31,451
6.8%

1,146
69.5%
32,050
5.2%

1,144
71.5%
32,5064.9%

1,147
112.5%
31,604
3.2%

1,144
60.2%
33,262
5.7%

1,147
95.7%
31,657
3.8%

1,334
63.5%
34,028
6.2%

Medium-term plan numerical targets by segment and progress
Asphalt Plant (AP)-Related Business: Aiming to improve operating margin
Net sales target for FY 2024 of 23.0 billion yen and operating income targetof 1.6 billion yen (operating margin target of 7.0%).
● We plan to restore operating margin to the 7% level through growth ofenvironmentally friendly products and profit recovery at overseas subsidiaries.
● In FY 2022, both net sales and operating income fell significantly short of the plan.
●

Net sales target for FY 2024 of 2.7 billion yen and operating incometarget of 0.558 billion yen (operating margin target of 20.4%).
● We will prioritize securing high profitability even as we anticipate
both sales and operating income to remain roughly unchanged.
● In FY 2022, both net sales and operating income exceeded the plan.
●

AP-Related BusinessMedium-Term Management Plan
1st yearNet sales target for FY 2024 of 10.8 billion yen and operating income target of 1.05
billion yen (operating margin target of 9.7%).
● We expect the prices in the market to remain high. We will maintain the market shareand focus on growth investment such as development of decarbonization products.
● In FY 2022, net sales exceeded the plan, while operating income fell slightly short of it.
●

6.4%

6.4%

3.1%

5.8%

7.0%

0.3%

20,00017,518 19,467 18,328
17,341
1,118

1,239

21

Environment- andConveyor-Related Business21.3%

23 plan 23 forecast

1st year

20.2% 19.5% 20.0%

20

9,212

1,600

761

879

24 plan

19

20

600

49
22 plan 22 results

9,158

21

18.1%

2nd year20.0%

2,500 2,888 2,500
522
500
500
22 plan 22 results

3rd year

16.7%

20.4%

3,000

2,700
550
500

23 plan 23 forecast

24 planNet sales

10.4%

10.0%

10,83910,500 11,111

1,123

1,050 1,017

21

1st year

12.2%
16.1%

20

21

Operating income

20

年

21

年

set down by the 2030 Vision and for enhancement of theorganizational capability required for that at each business.

BP

●
●

Implement comprehensive management of ready-mixed concrete plants
Develop products that satisfy the requirements for high quality of
precast concrete

Design and launch standard model products that are competitive also
Overseasin overseas markets
AP● Build an organizational structure for expansion in the ASEAN market●

Realize short delivery time and low price through further
modularization and offer convenience and efficiency that go
beyond the boundaries of manufacturers, enabled by engineering
Conveyorsconveyor lines● Improve online service and design structure to build the foundation
for delivering new products and services

Key themes

Progress in FY 2022

Support for decarbonization
Remote operations and automation support○○

Comprehensive management and plant support
center● Mobile plants and environmentally friendly products

○

●
●

●

○

Global standard machines
Expansion to the ASEAN region△△

Further modularization of portable conveyors
Offering of conveyor lines in package (fullfledged entry into the stringer conveyor
market)○○Stabilization of the mobile plant business and strengtheningof profitability● New product development, development of proposed products(-> To achieve a 50% market share and No.1 sales share in FY
2024)

○

●
●

Mobileplants(otherbusiness)

Develop sales network, promote sales for rental business,promote the maintenance business● Promote sales of in-house developed products in Japan andabroad (study the needs of market and customer)
●

●
●

●

○

9,000

8,324
1,100 1,044

22 plan 22 results

Progress by segment and issues
Asphalt Plant-Related Business in Japan

10.4%

9.7%

10,800 11,500

10,800（1）Support for decarbonization

1,200

1,050

9.7%

1,050

23 plan 23 forecast

3rd year

2nd year

10.7% 12.5%
11,7001,250

Medium-term plan (FY 2022–FY 2024)

Progress in FY 2022●

24 planDevelopment of
low-carbon mixture
manufacturing system●

3rd yearDevelopment of combustion
technology for decarbonizedfuels

Offered biomass and gas
combustion technology

●

9.6%

10,00013,500

1,250

1,300

23 plan 23 forecast●

24 planWarm mix (foamed) equipment
units
FY 2022 orders 40 units          19SalesFY 2023 estimate
units
Orders 64 units          55SalesHydrogen burner
Developed hydrogen burner for AP jointly with
Tokyo Gas Co., Ltd. (100% hydrogen-fired;
mixed-combustion with city gas is possible)
In April 2023, we manufactured asphalt mixture at
Maeda Road Construction Co., Ltd. and paved a roadon a trial basis.
● Ammonia burner
Carried out in-house combustion test of LNG and ammonia
Developed biomass burner that uses rice hulls.
We are in business negotiations for applications
other than for AP, such as pulverized coalIssue: Stagnation of capital investment at customers due toworsening business environment（2）
Remote operations and automation support
Medium-term plan (FY 2022–FY 2024)

Progress in FY 2022●

Remote shipment from silos
From April 1 to 3, we carriedout necessary work at a userand started demonstration
experiment for remote
shipment.

●

In the process ofdeveloping technology that
leads to remote operation
and automation from the
aspects of both mechanicaland control equipment●

Concluded five contracts
More proposals underway

Offering of partially remoteshipping system

Development of remote
operations and automation
technologies
Accumulation of plant operation
data based on expansion of
the number of maintenancesubscription contracts

N i kko C o r p o rate R ep o r t 2 0 2 3 24
売上高営業利益率

19 年

12.5%

Operating margin

23 N ikko Corpo ra te R epo r t 2 0 2 3
8
7
6
5
4
3
2
1
0

AP in
Japan

Develop environmental products by leveraging the top
manufacturer’s development capability● Support customers’ plant management as a solutions partner●

Establishment of technologies for decarbonization, remote
operation, and automation● Provision of more support to plant operations at customers

2nd year

Medium-Term Management Plan

5,840 6,796 6,660
1,020 1,170 1,073
19

9.2%

22 plan 22 results

Other Related
Business

17.5% 17.2%(million yen)

Medium-Term Management Plan
1st year

9.5%

23,000

The Group will make active investment in launch of new products
and services for achieving the business structure reform
Basic policies

Net sales target for FY 2024 of 13.5 billion yen and operating incometarget of 1.3 billion yen (operating margin target of 9.6%).
● We aim to secure stable operating income by absorbing the negative
impact of the weaker yen with sales expansion.
● In FY 2022, both net sales and operating income fell short of the plan.

8.3%

Medium-Term Management Plan

2,634 2,390 3,018
562
587
482
19

19,500

7.0%●●

3rd year

3.1%

1,600

1,150

562

(ﬁscal year) 19 20

23,000

Other Related Business: Aiming to secure stable operating income

BP-Related Business2nd year

Basic policy by segment in Medium-Term Management Plan●

Batcher Plant (BP)-Related Business: Expecting steady business performance

Environment- and Conveyor-Related Business: To maintain operating margin at 20% level

investment for growth by examining items that are necessary for achievement of
the medium-term plan including increasing the number of employees by 26 froma year earlier to 1,064 as of the end of March (the medium-term plan calls forincreasing the number of employees by 145 during the period), a 0.3 billion yen
increase year on year in capital investment to 2.2 billion yen (the medium-term
plan: 6.0 billion yen), and a 0.127 billion yen increase in R&D expenses to 0.576
billion yen (the medium-term plan: 2.53 billion yen).

22

年度計画 22

年度実績 23

年度計画 23

年度予想 24

年度計画

Concrete Plant (BP)-Related Business●

Carrying out comprehensive management of ready-mixed concrete
plants and product development to meet high quality expectations for●（3）Comprehensive management system and plant support center
Medium-term plan (FY 2022–FY 2024)

Promotion of plant
standardization throughdeployment of in-housedeveloped control
panels and accumulationof customer plant
operation information

Introduction of customer
plant operation support
service（4）Enhancement of mobile plants and environmentally friendly products

Progress in FY 2022●●

precast concrete
Aim to become the top manufacturer, which is also environmentally friendly

Medium-term plan (FY 2022–FY 2024)

Promoted capturing other companies’ shares as
we expand sales of in-house developed control
panels. (to improve market share)
FY 2022 delivery share: 42%
Working on manufacture of ready-mixed
concrete with higher quality through visualizationof plant using mobile equipment by collecting
plant big data and enhancing facility ledger
function as well as through demonstration
experiment of comprehensive plant management
and linkage with other systems

Deployment of mobile
plants in areas that
became unreachable dueto the consolidation ofplantsProgress in FY 2022●●

Product development
and deployment inresponse to customers’
environmental needs
such as CO2 emissions
reduction

Started working on plant maintenance that utilizes
a prototype image processor and various sensors
for predictive and preemptive maintenance fromthe perspectives of both infrastructure and services
developed under the theme of DX plant management

Delivered a plant to aprecast concrete user for a
project
We are receiving inquiries
for disaster recovery and forspecial concrete demand

STRATEGY FOR VALUE CREATION

Participated in a GI
Fund project to develop
manufacturing technology
2
for concrete, etc. using CO  and received an order for
demonstration plant
Delivered an Eco Tankaru
manufacturing facility toa precast concrete user.
Continuing to receive inquiries.

Overseas Asphalt Plant (AP)-Related Business●

Build an organizational structure for expansion in the ASEAN market(Early takeoff of the Thailand production base and building a sales
structure in Indonesia and Vietnam)● Development of global standard products
Issue: Delay in making the Thailand business profitable（5）
Expansion to the ASEAN region
Medium-term plan (FY 2022–FY 2024)（6）
Development of global standard plant

Progress in FY 2022

Medium-term plan (FY 2022–FY 2024)

Singed an agent agreement with aconstruction machinery dealer in Vietnam● To monitor the local demand and thendecide on such agreements in Indonesia

Entry into theIndonesian and
Vietnamese markets●

Enhancement of
production capacity in
Thailand to cover theentire area of ASEAN●

Building collaboration
structures with local
sales agents●

Launch of a marketing
team for grasping theneeds of each country

Making active capital investment at the Thai plant
Plan to increase the scope of products
manufactured in Thailand from current
Nikko:NIC* = 8:2 to 2:8 from the products to be
shipped in FY 2023

Discussed a system that generates synergies with
the Thai agent● Promoted plant education at the Vietnamese agent

Designing of a standard plantwith price competitivenessthat corresponds to the needsof the overseas markets
including introduction of
locally purchased supplies

Progress in FY 2022●●

Established ASEAN Business Strategy
Office to comprehensively discuss theASEAN business and accelerate theimplementation of numerous measures
we need to drive forward

Creating robust, people-friendly cities around the world.

Finalized the concept
We aim to complete it by the end of FY
2023.
Also, we plan to expand the scope of local
procurement in Thailand from current
Nikko:NIC = 8:2 to 2:8 from the products
to be shipped in FY 2023

*NIC: Nikko NilKhosol (a local manufacturing subsidiary in Thailand)

Mobile Plants (Other Business): Aim for 50% market share by sales units in FY 2024●

Aim to stabilize the business and reinforce profitability（7）
Stabilization of businessMedium-term plan (FY 2022–FY 2024)

Progress in FY 2022
Continuing with the activities to increase thenumber of new sales agents in addition to the
Mobile Plant Subcommittee (12 companies)of the Nikko Dealers’ Association to build astructure of 66 sales agents in Japan fromFY 2019 to FY 2022 and further add newsales agents● Established a sales structure with eightsales companies belonging to crusher
construction machinery manufacturers that
do not have mobile machines●

Promotion ofmaintenance business

Strengthen development of new products and proposal-based products（8）In-house development of products and development of proposal-based products●

Building sales network,
establish and promoterental business●

Increased the number of employees
engaged in maintenance from five to eight
Net sales of maintenance increased 103%
compared with FY 2021 due to an increasein the number of units in the market

Medium-term plan (FY 2022–FY 2024)
Research of market
and customer needs

Progress in FY 2022●

Delivery to users with strong
influence over industries suchas crushing, mining, steel, and AP
recycling increased● ODA orders for Ukraine(orders for three units and salesof two units)● Publishing articles and ads inindustry newspapers●

Promotion ofsales in Japan andoverseas through thedevelopment of inhouse products

Creation of new hit
products●

Management Capital That Will Provide
Strengths・ ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 27

Continue to work to increase thevariations and sales of new products
and other products we offer

Development of an improved
version of mobile soil improver
Mobix and its launch in FY 2023

03

CFO on Financial and Capital Strategies・ ・・ 31
Segment Highlights・・・・・・・・・・・・・・・・・・・・・・・・・・ 35
Business Strategies: AP-Related Business・ ・・ 37
BP-Related Business・ ・・・・・・・・・・・・・・・・・・・・・・・ 39
Environment- and Conveyor-Related
Business・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 41
Other Business・ ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 42
Technology Roundtable Talk・・・・・・・・・・・・・・・・ 43
Risks and Opportunities・ ・・・・・・・・・・・・・・・・・・・ 47
Measures to Reinforce Platform for Value
Co-creation to Realize 2030 Vision・・・・・・・・・ 49

25 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 26

Management Capital That Will Provide Strengths

STRATEGY FOR VALUE CREATION

Financial Capital

Manufactured Capital and Social and Relationship Capital“We will make active investments during the current Medium-Term Management
Plan period for future improvement in corporate value”“We will support infrastructure around the world with our high-quality products
backed by our integrated production and high technological capability”┃Basic policy┃┃Basic policy┃
We have an integrated production structure where we manufacture
everything in-house from the plant to the control panels, and our basic
policy is to manufacture high quality products efficiently and deliver
them to customers through collaboration with our business partners.
Also, we take all possible measures to ensure safety and quality while
meeting delivery deadlines. These include measures such as carryingout appropriate construction of plants and machinery depending on theenvironment and location in addition to checking the operation of theplants using digital twins. We strengthened our Customer Support Center(CSC) in 2018 and are focusing on maintenance services for customers’facility assets, including preventive maintenance and other support. We willbolster our on-site capabilities by making capital investment to the tune of
6.0 billion yen in the three years of the current medium-term plan.

Towards achieving the numerical targets (consolidated net salesof 60.0 billion yen, operating income of 6.0 billion yen, andoperating margin of 10.0%) set forth in the 2030 Vision, we will
position the current Medium-Term Management Plan period
as the internal investment phase, in which we will make active
investments to boost earning power while promoting sale ofstrategically-held shares and improvement of cash conversion
cycle (CCC). We will aim to raise ROE (FY 2024 target: 6.2%)
by keeping net assets in check and improving profitability. As
share valuation (PER) also improves through strengthening ofsustainability activities and active shareholder returns, we would
take on the challenge of achieving 50.0 billion yen in market
cap and ROE of 8.0% or higher in 2030.

┃Nikko’s financial capital┃

In terms of financial capital, Nikko Group had total assets of
52.1 billion yen as of the end of FY 2022, invested capital of
35.7 billion yen (shareholders’ equity of 29.9 billion yen andinterest-bearing debts of 5.7 billion yen), net cash of 4.6 billion
yen (cash and cash equivalents of 10.3 billion yen and interestbearing debts of 5.7 billion yen), and equity ratio of 60.7%.
Nikko Group has a strong balance sheet based on stable cash
generating ability.

┃Source of strength┃

Our AP-related business has a 70% share of the domestic
market, while the BP-related business boasts a 40% share,
and we have been maintaining top shares in both businesses
in Japan. Total net sales in maintenance service of bothbusinesses, in which Nikko Group expects stable revenues,
account for about 30% of its consolidated net sales (bothbusinesses together account for 55.5% of total domestic sales),and the service has high capability to create cash flow. Further,
the operating margin of our environment- and conveyor-related
business for FY 2022 was 18.1%, and other businesses, with◆ The current Medium-Term Management Plan
period is the phase for building structures,
2030
Consolidated net
processes, and systems towards 2030
Current Medium-Term Management
Plan (2022-2024)
・Capital investment
・R&D expenses
・Human resource investment
・M&A

sales: 60.0 billion
yen
Operating margin
10.0%
Business

expansion
2024
phase
Consolidated net

sales: 50.0
billion yen
Internal(FY 2021)
Operating margin
Consolidated net investment
6.0%
phase
sales: 38.8 billion yen
Present

Operating margin
5.3%

Build structures, processes, andsystems that form the foundation of
the 10-year vision in the three years
during the next medium-term planand promote testing and systemdevelopment of new services with aneye towards the next 10 years.

27 N ikko Corpo ra te R epo r t 2 0 2 3

・In Japan, release newservices and systems
・For overseas, establish
new revenue base・Introduce technology,
rebuild production
structure

Financial capital
Total assets of 52.1 billion yen
Invested capital of 35.7 billion yen● Net cash of 4.6 billion yen●●

OutputNet sales of 39.6 billion yen, operating income of 1.0
billion yen● Cumulative FCF for the past five years of 67million yen● Dividend of 30 yen per share (payout ratio of 112.5%)●

Outcome
Stable profit creation
Attractive dividend yield (about 4.4%)● High financial stability (equity ratio of 60.7%)●●

operating margin of 12.5%, also similarly posted stable highprofitability.

┃Strategy towards the achievement of the MediumTerm Management Plan┃

While Nikko Group has been maintaining a strong balance
sheet, its ROE for FY 2022 stayed at 3.2% and PBR also has
remained low. While focusing on ROE, we aim to achieve an
operating margin of 6.0% in FY 2024 by prioritizing investment
in fields that would generate profits in the future towards thebusiness expansion phase starting from FY 2025. As for growthinvestment, in the three-year period of the current mediumterm plan, we will carry out staff reinforcement (addition of
145 employees at parent Nikko), R&D (2.53 billion yen), capital
investment (6.0 billion yen), and M&A investment projects (UbeKohki and Matsuda Kiko already made into group companies).
The policy is to allow equity ratio to decline to around 50%
depending on the projects while assessing the profitability.

◆ Numerical targets
FY 2022 results

FY 2024 target

Operating income

1.0 billion yen

3.0 billion yen

Operating margin

2.6%

6.0%

ROE

3.2%

6.2%

(Concerned net income: million yen)

1,020

2,100

(Net assets: million yen)

31,60434,02826.67 yen

55.09 yen

Dividend per share

30 yen35 yenDividend payout ratio

112.5%

63.5%

Net income per share

Market cap

25.3 billion yen   ──   

┃Nikko’s manufactured, and social and relationship capital┃

With the head office factory at Akashi city in Hyogo Prefecture as
the mother plant, we have five factories in Japan and two overseas (inChina and Thailand). Ube Kohki and Matsuda Kiko, which newly joined
the Nikko Group, have their own plants and carry out contract-based
manufacturing of various plants and industrial machinery. In termsof material procurement, Nikko has a fair and equitable collaborative
relationship with about 20 external suppliers of materials based on
Nikko’s design and some 100 suppliers of general materials. We havea highly efficient integrated production structure in the manufacturing
division that combines high-precision machine tools, including a five-facemachining center, with automated lines. Further, Nikko’s own contractor
network Akitsu-kai has some 200 companies as its members.

Manufactured capital and social and relationship capital
Capital investment of 2.214 billion yen
Production capability and strong sales agent andprocurement network to achieve medium-term plan goals● Five factories in Japan and two overseas● Akitsu-kai, Tombo-kai (sales network: 124 companies)●●

OutputNikko products in the four businesses
High market share● Thorough maintenance services● Production of 39.1 billion yen, up 2.4% from year earlier●●

Outcome
Safe and employee-friendly production environment
High rating from customers● Development of safe and secure roads and infrastructures● Contribution to environment-friendly recycling-oriented society● Strong relationship of trust with business partners●●┃Strategy towards the achievement of the MediumTerm Management Plan┃

Our strength lies in our comprehensive support system based on integrated
production where we not only manufacture the plant internally, but also thecontrol panels. In addition to the high share primarily in the AP- and BPrelated markets, Nikko boasts an ample track record of supplying to morethan 4,000 companies around the world. Stable replacement demand as
well as introduction of environmentally friendly products are contributing to
the stable operation of plants. As for the maintenance business, we aim tocontribute to the stable operation, labor saving, and automation of customer
plants by leveraging various data and other means.

Nikko Group plans to make a cumulative capital investment of 6.0 billion
yen during the three-year period of the current medium-term plan(cumulative 6.1 billion yen in the previous three-year medium-term plan
period), which includes construction of a new plant in Hyogo Prefecture(0.5 billion yen) and development test center (1.0 billion yen). In FY
2022, we carried out capital investment worth 2.2 billion yen (ratio to
net sales of 5.6%), up 0.3 billion yen compared to the previous fiscal
year. Major investment projects in the AP-and BP-related businesses
included expansion and renovation of factories, acquisition and updateof production facilities, and 0.4 billion yen for construction of bachelors’
dormitory. Depreciation and amortization, including amortization of
goodwill, totaled 0.99 billion yen, up 0.231 billion yen from a year earlier,and its ratio to sales was 2.5%.
In FY 2023, we are expecting capital investment of 2.0 billion yen (ratio
to sales of 4.5%) and depreciation and amortization of 1.0 billion yen(ratio to sales of 2.3%).

◆ Capital investment◆ Trends in capital investment, depreciation and amortization, and consolidated output┃Source of strength┃

Investment(total for three years)

Three-year plan for
FY 2022–FY 2024

FY 2022 results

Machinery andinstallation expenses
in AP-related businessincluding Shanghai
and Thailand(0.25 billion yen)
● Construction of
warehouses for
AP- and BP-related
businesses(0.11 billion yen)
● Total of 2.21 billion
yen including 0.35
billion yen for software●

6.0 billion
yen(6.1 billion yen
cumulative
for the threeyear period of
the previous
medium-term
plan)

●

●

Constructionof new plantin Hyogo
Prefecture(0.5 billion yen)
Constructionof development
test center, etc.
(1.0 billion yen)(million yen)

4,500

Capital investment
Depreciation and amortization
Consolidated output (right axis)

39,1364,000

32,83932,311
38,21832,2453,500 31,938
34,19133,902
33,849
3,000
2,748

2,500
2,000
1,500

1,907

1,889
1,483

2,214

(million yen)

45,00040,00035,00030,0002,000

25,00020,00015,0001,261
990 1,000
1,000 815 877
10,000677 759
508 611487 482 550
422
500
5,000
472
0
0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (ﬁscal year)(Company forecast)

N i kko C o r p o rate R ep o r t 2 0 2 3 28

STRATEGY FOR VALUE CREATION

Human Capital“We aim to become a professional group that will contribute to a sustainable
society through active investment in human resources”┃Basic policy┃

All employees are the most valuable asset for Nikko Group. We areengaged in building an organization capable of making sustainable
contribution to society and nurturing our human resources while quickly
responding to all changes surrounding our business. We have defined ourideal human resource as human resource that reinvents for the future,human resource that takes on challenges without fear of failure, andhuman resource that respects and collaborates with diverse coworkers,
and along with developing a rewarding work environment and investing
actively in human resources we are also raising the effectiveness by
setting metrics and targets. We aim to become a professional group thatwill contribute to a sustainable society towards realizing our future visionof “Making the world a resilient and gentle place.”┃Nikko’s human capital┃

As of the end of FY 2022, the number of consolidated employees
working at Nikko Group was 1,064 (up 26 from the end of the previous
fiscal year). On a non-consolidated basis, the average age of theemployees is 40.3 with an average length of service of 14.7 years. The
average annual salary has risen 580,000 yen from four years ago in
FY 2018 to 7.28 million yen. The proactive hiring of human resources
is not only lowering the average age and shortening average length ofservice but also diversifying and energizing the organization.

┃Source of strength┃

We introduced a new personnel system (Nikko’s version of job-based
employment) in FY 2022 and also started position-based training for
employees towards achieving the 2030 Vision. In September 2019, we
granted treasury stock with restriction on transfer to all employeesof Nikko Group. In August 2021, we allotted 100 shares in treasury
stock to long-time employees, new hires, and hires with prior work
experience. Furthermore, we uniformly raised the monthly wages ofthe employees by 30,000 yen from April 2022. We also made progressin the strengthening of support for nurturing the next generation andadvancing female participation, and we are seeing further vitalizationof the organization as well as improvement in motivation. We will aim
to raise the ratio of female employees from 14.5% in FY 2022 to22.5% in FY 2030, and that of female managers from 0% in FY 2022
to 7% in FY 2030.
◆ Staff reinforcement
Investment(total for three years)

●

Nikko
(nonconsolidated)
Increaseof 145
employees(added 69 employees
in the previous
medium-term plan)●●

AP-related
business field59

BP-related
business field

20

Environmentand conveyorrelated field

Overseas● Development● Mobile plants
●

Other
Total

●

FY 2022 results

Number of employees: 1,064 (including 203 foreign nationals)
Number of female employees: 83 (non-consolidated)● Annual training expenses: 29 million yen●●

OutputNet sales per person: 37 million yen● Ratio of employees taking childcare leave:
100% for female and 33.3% for male
● Length of service: 18.7 years for men, 11.0 years for women●

Outcome
Fostering job satisfaction● High motivation● Employee-friendly work environment●

We are rebuilding the human resources management platform andsystem and carrying out active investments in human resources
towards enhancing our human capital. The long-term (10-year) basic
policy looking into the future lists the implementation of workstylereforms for the employees and aims to significantly raise laborproductivity. In the current Medium-Term Management Plan, we areplanning to increase the number of employees by 145 during thethree-year period. Specifically, the AP-related business field will see
an increase of 59 people, 20 in the BP-related business field, 12 in
the environment- and conveyor-related business, six overseas, 12 indevelopment, 11 in mobile plant, and 25 in other business. In FY 2022,
we hired a total of 53 people (of which, eight are women) comprisedof 31 new graduates and 22 with prior work experience. We raised
the monthly wages of employees in FY 2022 and implemented a 5%
increase in base pay in FY 2023. We will continue to raise wages
with the aim of not only vitalizing the organization and improving job
satisfaction but also achieving the Medium-Term Management Plan.

●

●

●

12
6
12
11
25
145

17

BP-related
business field

15

Overseas● Development● Mobile plants
●

Other
Total

●

1,400

AP-related
business field

Environmentand conveyorrelated field

1,600

1
0
4
1
15
53

1,200
1,000
800
600
400
200
0

Number of employees (consolidated)
Net sales per employee (right axis)(million yen)

50
42 41
42
45
40
39
44
44 37 37 40
35
1,064
30
861 1,038
796 803 797 807 799 838
25
20
15
10
5
0
2014 2015 2016 2017 2018 2019 2020 2021 2022
(ﬁscal year)

29 N ikko Corpo ra te R epo r t 2 0 2 3

Adding measurement technology to the four core technologies(mixing and kneading, heating, control, and material handling) of
Nikko Group, we will accelerate the development of differentiatedtechnology and the commercialization of resulting products aheadof other companies. Our basic policy is to contribute towards solving
the decarbonization, labor shortage, environmental, and otherissues faced by our customers by strengthening our maintenanceservice business such as remote monitoring and operation of plants
leveraging data analysis, IoT, AI, and other technologies. Pursuing,
now more than ever, R&D based on the approach to offer whatcustomers want, we will aim for operational management focused on
profitability. Nikko Group is planning to make R&D investment worth
2.53 billion yen in the three years of the current medium-term plan.

Intellectual capital
R&D expenses (about 576 million yen, or 1.5% of net sales)
Number of development personnel: 28 (2.6%of consolidated employee count)● Number of patents held: 214; number of design registrations: 86●●

OutputNet sales of environmentally friendly products: 420 million yen
Products for low carbonization, remote operation,
automation, and efficiency improvement● Customized products that satisfy diverse customer needs●●

OutcomeHighly differentiating technology (including
control panels made in-house)● Solution products that surpass other companies’ products● Creation of new markets●┃Nikko’s intellectual capital┃┃Strategy towards the achievement of the MediumTerm Management Plan┃(people)“Based on Nikko’s four differentiated core technologies, we will accelerate thedevelopment of products that can solve social issues”┃Basic policy┃

Human capital◆ Number of consolidated employees and net sales per employee

Three-year planfor 2022-2024

Intellectual Capital

We have 28 engineers, who account for 2.6% of consolidated
employees, working in the R&D department. Nikko holds 214 patents
and 86 design registrations. In addition to our own development
based on the 4+α differentiated technologies made up of the four
core technologies plus the newly added measurement technology, we
also carry out industry-academia collaborative development with ourcustomers, external research institutes, and companies.

┃Strategy towards the achievement of the MediumTerm Management Plan┃

Currently, we are speeding up the initiatives aimed at commercializationof environmentally friendly products and their social implementation
focused on decarbonized society in the short- to medium-termin accordance with the technological and product development
roadmap through 2050. Nikko Group is also leveraging DX and AI to
respond to the adoption of the workstyle reform bill and the serious
manpower shortage in the construction industry, while strengthening
development of technology for improving efficiency and laborsaving such as remote operation of plants that ensures safety
and preventive maintenance. We also have good prospects for thedevelopment of a global standard model asphalt plant for capturing
the ASEAN market. We are planning to make R&D investment of
2.53 billion yen in the three years of the current Medium-Term
Management Plan. In FY 2022, we made R&D investments worth
0.576 billion yen, up 28% compared to the previous year, primarily
in the AP- and BP-related businesses. We plan to make investments
worth 0.75 billion in FY2023, raising the ratio to net sales to 1.7%.
We aim to achieve the Medium-Term Management Plan and 2030
Vision with technical prowess and product appeal that are a cut
above the competition.

◆ R&D◆ R&D expenses and its ratio to net sales┃Source of strength┃

Nikko boasts the top share domestically in both AP- and BP-related
businesses, and its conveyors, handled by the environment- andconveyor-related business, also has the No. 1 share of about 60%
in the domestic market. In addition to the four differentiated coretechnologies of mixing and kneading (mixing all kinds of materials),heating (able to control temperature to suit diverse materials and fuels),material handling (cumulative conveyor shipment of about 300,000
units), and control (in-house development and production of the brains
behind the plants), our strong track record of supplying to more than
4,000 companies worldwide has led to high customer confidence andexpectations on next-generation technologies and products.

Three-year planfor 2022-2024

Investment(total for three years)

AP-related business◆ New environmentallyfield (incl. overseas)
friendly products
240 million yen◆ Remote operations
and automation support ● BP-related business field● BP-related business field
220 million yen◆ Operation support center● Environment- and◆ Product improvement◆ System development
conveyor-related field● Environment- and55 million yen
conveyor-related field ● Other business, etc.
◆ Product development
61 million yen◆ EC and other IT investment
Total:● Overseas
569 million yen◆ Development of standard model●

2.53 billion
yen(total of 1.19
billion yen
during thethree years of
the previous
medium-term
plan)

AP-related business field

FY 2022 results●(million yen)

R&D expenses

900

Ratio to net sales (right axis)

800
700

1.1

600
500 0.9400

0.7300 276

200
100
0

227

0.8 0.8
271 291(%)

1.7 1.8
1.5 750 1.6

1.2
1.0

0.7 379 392
211

449

576

1.4
1.2
1.0
0.8
0.6
0.4
0.2

0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023(fiscal year)(Company forecast)

N i kko C o r p o rate R ep o r t 2 0 2 3 30

CFO on Financial and Capital Strategies

STRATEGY FOR VALUE CREATION

We believe
the upfront
investment forboosting theearning power
required forachieving 2030
vision has utmost
importance in our
financial strategy

2022, we hired 53 people of which 31 were new hires and 22 were
mid-career hires. Net increase was 35. We stipulated the policy forhuman resource development, which is one of the three pillars, in FY
2022, and will implement the policy from FY 2023. Specifically, we

Achievements and issues of the first year of the Medium-Term Management Plan, and future outlook
Income worsened in AP-related business due to overlapping complicated factors

Director and Vice President
and General Manager
of Administrative Division

Hiroshi Fujii

Nikko Group’s financial and capital policy, and investment in human capital
Financial and capital policy and key points of FY 2022
Nikko Group’s financial strategy has been to make active capital
investment as well as R&D, human resources, and other investmentsthat will lead to medium- to long-term growth. We have set forthfinancial targets of 60 billion yen in net sales and 6 billion yen in
operating income under the 2030 Vision. The challenge, however,in achieving this is to enhance our earning power, and towards thatend we will need support from the financial aspect. In FY 2022, thefirst year of the current Medium-Term Management Plan, we actively
carried out capital investment for enhancing earning power for the
future along with investment in R&D, human capital, and M&A.
We attach importance to return on equity (ROE) as the KPI for
earning power. By focusing on how much we can earn in terms of
net income attributable to owners of parent, which is the numerator,
without significantly increasing the denominator, i.e., net assets,
we will focus on maintaining ROE above the 5% level of cost ofshareholders’ equity. In reality, net assets were 31.6 billion yen at theend of FY 2022, a modest increase from the 30.4 billion yen four
years ago at the end of FY 2018, which was before we strengthened
the measure to ensure shareholder returns. However, ROE was 3.2%
in FY 2022 due to complex, overlapping factors that worsened the
profit in the AP-related business, and went below the capital cost for
the first time in two years. While we do not have a KPI for financial
soundness, we consider equity ratio above 50% as a benchmark.
As the equity ratio at the end of FY 2022 was 60.5%, we believe wehave room to increase our net assets.
Upon making proactive investments, assessing where we should be
earning future profits is also an important role as the CFO. Basically,
I would like to keep away from high risk, high return projects aswell as those with low relevance to our current business. While I do
understand the importance of new businesses, there are many fields

31 N ikko Corpo ra te R epo r t 2 0 2 3plan to offer position-based training for all employees from FY 2023.
While placing importance on acquisition of knowledge, I hope thetraining will give the personnel an opportunity to gain some insightand voluntarily learn about future career formation.

that we thought we should engage in and have not done so yet. I
would like to place priority on such fields.
Accelerating investment in human capital
Since FY 2022 we have been boosting investment in human capital,
which is the source of growth, and we have set raising wages,
increasing personnel, and human resource development as threepillars in the current medium-term plan. In FY2022, the first year,
we raised the starting salary of new hires and wages of employees
who are union members uniformly by 30,000 yen, while in FY 2023
we raised salary by 5% on average in combination of an increase in
the base salary and a regular pay raise. We will strive to maintainthe average 5% increase continuously without ending it in just one
fiscal year. We are targeting a net increase of 145 employees (atparent Nikko) over the three years of the medium-term plan. In FY◆ Trend in net assets and ROE(million yen)

60.00050.0004.8

40.00030.00020.0003.4
26,167

Net assets

ROE (right axis)

6.8

6.6
4.6 4.9

27,845 28,528 29,089

（%）

5.2

7.0

6.0

5.2

4.4

30,286 30,414 30,293 31,451 32,050

5.0
31,604
3.2

3.0
2.0

10.0000

4.0

1.0
FY FY FY FY FY FY FY FY FY FY2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0

In FY 2022, the first year of the medium-term plan, we carried out
capital investment as well as R&D, human resources, and otherinvestments generally in line with the plan, but issues remained as theconsolidated business results fell short of the plan at the beginningof the fiscal year, with net sales totaling 39.7 billion yen and operating
income of 1.0 billion yen. By business, the gap with the budget target
was large at the AP-related business due to overlapping complicatedfactors. Specifically, earnings at domestic road pavement companies
worsened because the rise in asphalt price resulted in a significant fallin the net sales of our high-margin maintenance service, and we wereunable to pass on the rise in steel and other raw material prices to theselling price as the delivery time for AP is long. The Thai subsidiary also
posted an operating loss of 400 million yen in FY 2022 (operating lossof 250 million yen in FY 2021).
Currently, growth in net sales in the AP maintenance service has turned
positive year on year from July 2023 partly due to the recovery inperformance of road pavement companies. We are also expecting thatmaintenance service sales will rebound after the suppressed demand
for maintenance investment. The rise in raw material prices is also
expected to gradually slow down, and we are entering the phase forrecording sales of the projects in which we raised the unit price. Herealso, we are expecting improvement in profitability. Further, in the APrelated business, orders for warm mix (foamed) equipment among
environmentally friendly products increased significantly since FY
2022, and we expect to sell around 60 units in FY 2023 for net salesof approximately 1.0 billion yen. This is a new environmentally friendly
product, and it has quite good profitability compared to regular AP.
However, the demand for warm mix (foamed) equipment may disappear
once we complete one round of installation, and therefore it isnecessary to continuously introduce environmentally friendly products.
Aiming to turn the Thai subsidiary profitable in FY 2025
The biggest challenge we face is to turn the Thai subsidiary establishedin 2019 profitable early on. The plan for the Thai subsidiary is to
manufacture AP with local employees and sell the products in Thailand
and the ASEAN region. We needed to develop customers from scratch
in Thailand, and we also had to teach everything from monozukuri toprocurement of materials from the beginning to local employees, who
had no experience with AP. For that reason, we entered into a joint
venture with local company NilKhosol, but it took time to get production
on track. That was partly because we could not dispatch employees
because of COVID-19. From January 2023 we are providing support
with a 26-member team on dispatch for the project.
The local sales agent for the Thai subsidiary is TIPCO ASPHALT, a majorasphalt supplier, and as of now there is a steady increase in orders
with the company having an order backlog worth 700 million yen asof the end of June 2023. We believe that a net sales of 1.5 billion yen
would be enough to turn it profitable, but attaining the sales would be
difficult in FY 2024 and we expect a 200 million operating loss for theyear. Therefore, we are expecting the Thai business to turn profitable in
FY 2025 or later. Also, the order backlog of 700 million yen is entirely
from within Thailand, and we do not have any orders from Indonesia or
Vietnam as we had expected.
Till now, 70% of the products for the market in Thailand have been
manufactured in Japan, with the local subsidiary producing theremaining 30%. We have prospects for achieving the production ratioof 70% in Thailand and 30% in Japan in FY 2024, and we expect the
manufacturing cost also to go down. In Thailand, we have been selling
export models made in Japan, but the customers were not seeking suchhigh specifications. So, we are thinking of paring down the excessively
high specifications and lowering the cost by a total of 20% throughlocalization and model change. We will complete this model within theyear. Parallel to the cost reduction, we are also hoping to win new orders
for a total of about 10 units from Indonesia and Vietnam. Competition
is a Chinese company in Thailand and a South Korean company inVietnam. In Indonesia, we compete with both Chinese and South Korean
companies.

Future financial strategy for improving cash flow creation capability
Cash flow creation and allocation policy
Nikko Group plans to invest 6 billion yen in the three years of themedium-term plan and made investments worth 2.2 billion yen in FY
2022. This does not include M&A, but we have spent 1.9 billion yen for
the two M&As till now, and we are thinking of one or two more M&As.
Operating cash flow creation ability is crucial for funding such growthinvestments, but our operating cash flow for FY 2022 was -1.6 billion
yen. As we maintained a dividend of 30 yen per share for shareholder
returns with payout ratio of 112.5%, the net cash at the end of FY 2022
was 4.5 billion yen, a significant decline from 8.6 billion yen as of theend of FY 2021.
Judging from this, it cannot be helped if a shareholder gets theimpression that our cash flow creation capability of the main businesshas deteriorated and we would not be able to afford future investments.
Nonetheless, gross profit margin has not declined at around 26 to 27%
during this period, but cash flow creation ability has fallen because of
the increase in selling, general and administrative expenses. This is inpart because proactive measures such as capital investment, R&D,
human resources, and other investments as well as the M&A of Ube
Kohki have been driving up selling, general and administrative expenses.
Selling, general and administrative expenses for FY 2022 were 9.3 billion
yen, going up by 1.7 billion yen in the past three years.
The increase in selling, general and administrative expenses is upfront
investment for increasing future net sales and improving gross profit

N i kko C o r p o rate R ep o r t 2 0 2 3 32

STRATEGY FOR VALUE CREATION

margin. As it would take time to bear fruits, we are not going to be
pessimistic about short-term results nor modify the financial and capital
policy. Nikko Group is expecting the results from the price revision
addressing the high raw material prices to take effect from the second half
onwards. Also, in order to secure appropriate profits, we will continue toraise prices in projects where the returns are low in assessment of values
offered. Raising prices were difficult in the past because of deflation, but
now more customers are understanding the values we create. We need tocontinue implementing initiatives to increase prices to enable us to raise
the wages of employees by 5% every year.
◆ Trends in capital investment, depreciation and amortization, R&D expenses(million yen)

3,000

Capital investment
Depreciation and amortization
2,748
R&D expenses

2,500

2,214
1,889

2,000

1,907

1,500
1,000
500
0

1,261

1,483

944
745
677
550 508 611
392 419 483 478468
576
211
379 392 449
295 276 227 271 291

844 815 877

FY FY FY FY FY FY FY FY FY FY2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Cash flow creation from balance sheet
We are also pursuing cash flow creation from balance sheet. In FY 2022,
we sold 370 million worth of strategically-held shares, bringing the valueof such shares held at the end of the fiscal year to about 2.2 billion yen,and their ratio to shareholders’ equity was 9.56%. Going forward, it may

not be easy to decrease the strategically-held shares as many of thesebelong to business partners, but we will continue to reduce them. Behind
the worsening of total asset turnover ratio and cash flow creation is
the requirement to keep the stock for long because of the continuing
prolonged delivery time of motor and electronic parts. Traditionally, weused to place orders for parts once we received an order, but now weare maintaining stock of necessary items to enable prompt delivery andthis has led to accumulation of stock on the balance sheet. Taking thisperspective also into account, it is necessary to further increase thecollection of contract liabilities (down payments). We receive payments
equivalent to a third of the contract amount from customers at the timeof order as contract liabilities, and they were more than 3.7 billion yen
as of the end of FY 2022. However, we have not been able to collectthem from about 30% of the customers. There is the need to change
business practices and it takes time, but we are negotiating tenaciously
and hope to achieve future cash generation.
◆ Trend in operating cash flow and net cash
Operating CF(million yen)

12,000

6,000
4,000

9,952

8,582
6,294 6,590

8,577

7,268
5,064
3,839

2,641

2,000

1,001

4,509
2,784

2,224

274

0
-2,00010,788

10,635 10,311

10,0008,000

Net cash-218-1,040-1,644FY FY FY FY FY FY FY FY FY FY2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Business portfolio management and future direction
As for business portfolio management, we have been failing to meetthe initial forecast in operating profit in the AP-related business in thepast few years. Remedying this is the issue with the utmost priority. The
reason for the worsening profitability in AP-related business has been
the strategic pricing for domestic orders. However, the reason now
is the delay in passing on costs caused by the price increase of steel
plates and other raw materials (up 200 to 300 million yen) because of
the post-COVID prolongation of delivery after the receipt of orders.
Further, in FY 2022, the business performance of domestic roadpavement companies deteriorated due to the soaring asphalt prices,
so the highly profitable maintenance service also declined by 11%. In
addition to this, there has been overlapping negative factors such as
worsening profitability of the earlier mentioned Thai subsidiary to 400
million yen in loss in FY 2022.
Nevertheless, we have to grow the maintenance service business if
we are to expand net sales in the medium to long term, as we cannot
expect AP demand to increase in Japan. Therefore, although Nikko
Group has been making various related up-front investments, it takes
a few years for them to bear fruits. Specifically, AP customers are
moving towards outsourcing the repair work, which they were doing
themselves till now, because of labor shortage, but we are also lacking inservice personnel to respond to this latent demand. We are, therefore,changing our structure so that service personnel can work efficiently by

33 N ikko Corpo ra te R epo r t 2 0 2 3

introducing a flat-rate subscription system. The gross profit margin of
maintenance service is high at about 30%, but we believe there is stillroom for improvement through business transformation. In FY 2024,
we expect operating income of AP-related business to improve by
600 to 700 million yen compared to FY 2022 as the raw material priceincreases and losses at the Thai subsidiary would have completed a fullcircle, and here we expect sales increase in maintenance service.
◆ Trends in operating margin by business
25.0

AP-related business
BP-related business
Environment- and conveyor-related business
Other business

20.0

18.5

（%）

15.0
10.0
5.0
0

21.3

14.7
12.3
9.8
9.0
7.9

10.0
8.6
8.0

8.5
7.1
6.4

20.2 19.5
18.1
17.5 17.2
16.1
15.0

13.9

12.5

10.7
10.7 10.3 10.7
8.3

10.1
7.5

7.8
7.8

8.4
5.9

6.4

9.5

10.4

6.4

3.1

9.1

0.3

FY FY FY FY FY FY FY FY FY FY2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Ube Kohki and Matsuda Kiko, which we acquired in 2022–2023, havetechnical prowess in contract manufacturing. In the future, we would
like to grow contract-based manufacturing as one of Nikko Group’sbusiness as its profitability is also high. There is also the issue of lackof successors, and weeding out is expected in the medium to longterm among companies carrying out contract-based manufacturing
and installation. We also cannot imagine major companies newly
entering the contract-based manufacturing field. The two companies
have a combined net sales of approx. 2.5 billion yen, with operating

margin of around 10%, and they more or less do not have any goodwill
amortization. On of the reasons for the acquisition of the two companies
also was to outsource manufacturing of Nikko Group’s environmentallyfriendly products and recycling equipment (net sales of about 1.0 billion
yen) to group companies, and we expect contract-based manufacturingof recycling equipment to continue increasing in the future. Ube Kohki
has seen an improvement in hiring of human resources by forming apart of the Nikko Group, and Matsuda Kiko is also expecting similar
improvement in the future.

Financial and capital policies for improving corporate value and engagement with shareholders
Taking into consideration a recent request for the Action to Implement
Management that is Conscious of Cost of Capital and Stock Price fromthe Tokyo Stock Exchange, we will strive to achieve the target of 60
billion yen in net sales and 6 billion yen in operating income (10% in
operating margin) under 2030 Vision towards improving our corporate
value. The current fiscal year is the second year of the medium-term
management plan and we are expecting the investment we are currently
making to bear fruits in the next medium-term management plan. In
particular, during the next medium-term plan from FY 2025 to FY 2027,
we will ensure at least 8% in operating margin, if 10% is difficult, in the
final fiscal year, and achieve 50 billion yen in net sales, 4 billion yen in
operating income, nearly 3 billion yen in profit attributable to owners ofparent, and about 8% in ROE, a level at which equity spread expands.
That is because operating income will increase by 0.6 to 0.7 billion yen
if the current losses and high raw material prices at the Thai subsidiarycome a full circle, the impact of upfront investment in human resources,
facilities, and R&D will add 0.5 to 1 billion yen, and on top of these willbe the increase in gross profit from sales increase. We are expectingthat if these take place, we can increase the dividends significantly asshareholder returns. If the payout ratio does not change from the current
60%, the dividend amount will be 1.8 billion yen, which is a 50% increase
from the current 1.2 billion yen.
At the moment, Nikko Group is actively investing overseas and in facilities
and human resources, and this is because we have the financial strength
to withstand this scale of investment. I basically do not think that theGroup’s capability to generate cash has deteriorated. While our operating
cash flow may appear to be weak because we are spending upfront, it is
not that the Company’s profitability has worsened fundamentally.
Dialogue with shareholders and investors, engagement-related initiatives
In engagement activities, shareholders and investors have consistently
pointed out the low profitability of the AP-related business. They ask
us if we intend to raise the price because we are the price leader with
a 70% share of the domestic AP market, which is an oligopoly. We havereported this at the Executive Committee meeting and our management
team is also aware of it. With respect to this, we have been driving
forward measures such as standardization of models but we basicallyfeel there is sufficient room for making efforts to sell products at pricesthat match the value they offer. Another point is the seasonality of net
sales, which is high across the Company, with delivery concentrated at
the end of a fiscal year, and this is a factor contributing to inefficientmanagement. We do have an idea to implement unprecedented initiatives
to level quarterly sales, provided that it would be accepted by thecustomers.
The number of shareholders totaled 14,541 as of the end of FY 2022, amajor increase compared with 8,200 in FY 2019 and 12,504 in FY 2021.

Many of the new shareholders are individuals and the rate of replying to
the shareholder questionnaire survey enclosed in the notice of the resultsof the Ordinary General Shareholders’ Meeting has been high at about
36%. As a commitment to attach importance to shareholders’ opinions,
we not only disclose the results of the shareholder survey on our website
but also post individual opinions there. This is an act of engagementthat visualizes whether or not shareholders’ opinions are reaching themanagement team, and enables us to think from the shareholders’viewpoint. According to the shareholder questionnaire survey result in FY
2022, shareholders who have been holding Nikko shares for one to three
years was 51.1% (45.2% in FY 2021) and those who plan to hold Nikko
shares for a long period of time (five years or longer) accounted for
63.2% (57.5% in FY 2021). Dividends and shareholder return policy werecited as the attractiveness of Nikko shares and top reasons for choosing
the period of holding them, and the management team is keeping thisin mind upon managing the Company. We have also been disclosing thematerials used for the financial results briefing for institutional investors
and securities analysts, but 36% of the respondents of the shareholder
questionnaire survey did not know about this. So, we have beenstrengthening information disclosure through measures including video
streaming the meeting on our website.
To commemorate the 100th anniversary of the Company’s foundation,
we, in September 2019, distributed 100 shares in the Company to all
employees of Nikko Group (equivalent to 500 shares currently following
subsequent share split) and in 2021 we introduced a system to allot
treasury stock with restriction on transfer with the aim of improving
engagement and raising awareness among employees to participate
in management. These moves made almost all employees into Nikko
shareholders, and we are hoping that having the same perspective as
our shareholders would lead them to actively make contributions to thebusiness performance.

N i kko C o r p o rate R ep o r t 2 0 2 3 34

Segment Highlights

STRATEGY FOR VALUE CREATIONIn FY 2022, consolidated net sales of Nikko Group totaled 39.7 billion yen, of which the AP-related businessaccounted for 43.7% (47.1% in FY 2021), BP-related business 28.0% (27.9%), environment- and conveyorrelated business 7.3% (7.8%), and other businesses 21.0% (17.1%). Overseas, sales at Nikko Shanghai
increased significantly and accounted for 14.7% (12.2%) of the total. By segment, net sales of the AP-

AP-Related Business

related business declined 5.4% compared with FY 2021 due to slowdown in capital investment by roadpavement companies reflecting high raw material prices; those of the BP-related business increased 2.5%;
those of the environment- and conveyor-related business rose 4.3%; and those of the other businesses
grew 25.0% owing to contribution from making Ube Kohki a consolidated subsidiary and other factors.

Environment- and ConveyorRelated Business

BP-Related Business

Other Business

Main products

Main products

Main products●Asphalt plants●Recycling plants●Crushing plants●Mixture silos●Electronic control devices, plant
management system●Concrete plants●Mobile concrete plants●Concrete pumps●Electronic control devices,plant management system●Concrete productmanufacturing plantfacilities, etc.

●Belt conveyors, conveyors
for facilities, beveragecontainer recycling plants●Soil remediation plant,
Portable conveyor
plastic recycling plant Conveyor using pipe frames●Pipe scaffoldings, steel gangplanks●Temporary aluminum staircases●Shovels, spades●Small-sized concrete mixers, mortar mixers●Floodgates, waterproof boards, crushers Hammer crusher●Real estate leasing, construction Particle size can be adjustedwith grate size and the desired
machinery product leasing
particle size can be obtained●Sales of housing renovation
with a single crushing

ABD
Made-to-order AP models that canhandle diverse needs

ONZEMIX-T50
Mobile BP

whose lengths can be adjusted
in increments of 10cm

A plaster-basedsolidificationmaterial
manufacturing
facility
It manufactures gypsum hemihydrateby drying gypsum powder. The facility
manufactures solidification material byblending with cement and lime.

DASH-H275EvoV
220R-ADV
Ultra-strong
concrete plants

5.8%

Operating income

6.4%(million yen)

16,434 17,518

963(ﬁscal year) 2018

Exports
4.6%

6.4%

Maintenanceservice
45.0%

0.3%

3.1%

1,239
2020

562
49
2021 2022

600
2023(estimate)

Net sales

8.4%

Maintenance
Plant sales
service
57.3%
39.9%

Operating income

8.3%

9.5%

9,158

9,212

(million yen)

7,893
666
(ﬁscal year) 2018

Nikko Shanghai
0.5%

Concrete
pumps
2.2%

Sales composition ofplant sales declined 1.1
pp compared with FY
2021, while that of MS
rose 0.8 pp.

Operating margin

19,467 18,323
19,50017,341

1,118
2019

3.1%

Plant
sales
19.9%

Operating margin

10.4%

9.2%

10.4%

10,84011,111

11,500

761

879

2019

2020

1,123
2021

Exports
0.1%

Net sales

1,200

2022

2023(estimate)

Environmental
products
22.0%

Conveyor products
74.6%

Operating income

Waterproof board
Waterproof boards, which are effective
against water damage (internal flooding)caused by global warning

Ube Kohki joined the segment, accounting Nikko-developed
products
for 26.0 pp, while the composition of
6.3%
other businesses fell. Among these,

Net sales

10.7%

Operating income

417(ﬁscal year) 2018

2,634

2,390

2,888

562

482

588

522

2019

2020

2021

2022

3,000

(million yen)

4,677
500
2023(estimate)502(ﬁscal year) 2018

Operating margin

12.5% 12.5%

17.5% 17.2% 16.1%(million yen)

3,018

Other 1.8%
Temporary
construction
materials 16.5%

the composition of waterproof boards
Ube Kohki
Waterproof boards,
and floodgates fell 10.2 pp due to
26.0%
ﬂoodgates 13.9%
postponement of construction projects
caused by soaring material prices, andMobile plantsthat of temporary construction materials Crushers
21.6%
5.1%
Hand tools
also declined 6.4 pp.
8.9%

Operating margin

21.3% 20.2%
19.5% 18.1% 16.7%
15.0%
2,775

1,017

Conveyor
service
3.4%

Sales composition ofenvironmental products fell
1.6 pp as the number oflarge-scale projects declined
compared with FY 2021, whilethat of conveyor productsrose 1.5 pp reflecting solid
demand, despite sales decline.

Mobile plant
One set of crusher line (crushers,
screens, belt conveyors, etc.)

5,840

6,790

1,170

1,020
2019

6,660

2020

8,324

1,073
2021

10,000

1,044
2022

1,250
2023(estimate)

In FY 2022, net sales slightly increased reflecting a continued
increase in projects thanks to the solid ready-mixed concrete market.
Operating income declined due to the presence of low-profit margin
projects among unit products. For FY 2023, the segment is expecting
growth in both sales and profits partly thanks to order backlog.

In FY 2022, net sales declined due to lack of large-scale orders like in FY 2021
despite sales of coke drying system, etc in the environmental business. Operating
income declined owing to sales decline. In FY 2023, the segment expects sales toincrease from business negotiations related to the World Expo 2025 Osaka, Kansai,in the environmental business while operating income is likely to decline slightly.

In FY 2022, Ube Kohki contributed 2.16 billion yen. Among existingproducts, sales of mobile products increased, while those of waterproof
boards and temporary construction materials fell. Operating income slightly
declined due to poor performance of the highly profitable businesses. The
segment expects both sales and profits to increase in FY 2023.

The AP demand inJapan was 20 units in
FY 2022, down 22 units
from FY 2021. Nikko’s
dynamic share fell 9 pp
to 60%.

The BP demand was
unchanged at 71 units
in FY 2022, but Nikko’s
steady-state share
increased 0.6 pp to33.0% from FY 2021.

In FY 2022, demandfor portable conveyors
totaled 4,000 units,
down 300 units
compared with FY
2021. Nikko’s sharerose 2 pp to 62%.

In FY 2022, demand formobile crushers andscreens was 154 units,
down six units from FY
2021. Nikko’s share fell
1.2 pp to 20.1%.

35 N ikko Corpo ra te R epo r t 2 0 2 3

Nikko
share
60.0%

Nikko
share
33.0%

Portableconveyor(Nikko share)
62.0%

Mobilecrushers
and screens
20.1%

Market share (based on Nikko’s survey)

Market share (based on Nikko’s survey)

In FY 2022, net sales of plant products in Japan and those of MS
declined significantly by 29% and 11%, respectively, while overseas
net sales rose 30%. Operating income declined greatly due to highraw material costs and loss in Thailand. The segment expects arecovery of 600 million yen in operating income in FY 2023.

Net sales and operating income by segment (margin)

Net sales and operating income by segment (margin)

Net sales

Thai business
3.0%
Chinesebusiness
27.5%

Stringer conveyors
High-quality conveyors withsuperior cost performance throughmodularized body and options

FY 2022 business breakdown

FY 2022 business breakdown

Sales composition of plantsales in Japan significantly
declined 6.6 pp compared to
FY 2021 and that of MS also
fell 3.0 pp. On the other hand,that of the Chinese businessincreased 6.9 pp and theThailand business rose 2.0 pp.

DASH-225Pro
065ITBF
Large-scale precast
concrete plant

CBD
Global model AP for Thailand
and Southeast Asia markets

VP Ⅳ
Latest high-end model AP,
primarily for recycling

Business description

Business description

Main products

N i kko C o r p o rate R ep o r t 2 0 2 3 36

Business Strategies

STRATEGY FOR VALUE CREATIONSWOT analysis
Strength

AP-Related Business

Weakness
Opptunity

With the business performance of road pavement companies,
who are our customers, expected to recover, we aim to becomea one-and-only top manufacturer by leveraging our proprietary
technology and service capabilities that lead the competition

FY 2022 key points●Road pavement companies, our customers, were forced
into a difficult business environment in FY 2022 dueto the soaring raw material prices. The companies are
expected to recover and post profit growths in FY 2023.
●The AP-related business posted a significant decline in profit
in FY 2022 but the profit is expected to increase in FY 2023.
●While net sales of its maintenance service declined
11.4% in FY 2022 from a year ago, there is growing
momentum for recovery in FY 2023.
●There has been no change to our medium-term plan of
23.0 billion yen in net sales, 1.6 billion yen in operating
income, and 7.0% in operating margin for FY 2024.

Manager, AP SalesManagement Department,
Business Division

ThreathToshimasa Miyake●The start-up of the Thai plant has been delayed but thedevelopment of the global strategic model targeting
the ASEAN market is making steady progress.
●Signed an agent agreement with a construction machinery
dealer in Vietnam for development of the ASEAN market.
●We sold 19 units of warm mix (foamed) equipment in
FY 2022 and sales are expected to grow to 55 units in
FY 2023.
●Development and introduction of products contributing
to the environment have been progressing in accordancewith the road map towards 2050.
●We have already signed five maintenance subscription
contracts.

Road investment and AP market overview

Business performance trend of road pavement companies
In terms of the FY 2022 business performance of the seven roadpavement companies, who are the customers of the AP-related
business, while total net sales were unchanged at 938.2 billion yen fromthe previous fiscal year, operating income fell 29.8% to 30.1 billion yen,declining for two consecutive years due to soaring raw material prices
and other factors. For FY 2023, total net sales of the seven companies
are expected to increase by 2.7% to 963.7 billion yen from a year earlier
and operating income is forecast to rise by 61% to 48.5 billion yen
reflecting the impact of sales growth and product price increases. In FY
2022, the companies curbed or postponed their capital investment given
the worsening performance and some even cut back on maintenanceinvestment. However, since around July 2023, some companies haveresumed maintenance investment. In addition to the increase inenvironment-related investment aimed at decarbonization, attention will
be focused on the public work value indicated by the cost approach inresponse to the workstyle reform bill to be enacted in April 2024 andthe investment trends in efficiency improvement and manpower savings.

Number of units shipped in AP industry and road project expenditure

180,000

Road project expenditure (left axis)

Asphalt mixture manufacturing volume (left axis)

160,000
140,000
120,000
100,000
80,00060,000

160
140

1,400

120

1,200

100

1,000

80

800

60

600

40,00040

20,000

20

0

1980

1990

2000

2010

AP (R) is asphalt plants for recycled materials and AP (V) is those for virgin asphalt materials.
Source: Ministry of Land, Infrastructure, Transport and Tourism, prepared by Nikko

37 N ikko Corpo ra te R epo r t 2 0 2 3

Trends of total operating income at 7 road pavement companies and business performance of the AP-related business(100 million yen,million yen)(units)Number of units in AP (V) industry (right axis)
Number of units in AP (R) industry (right axis)

02023

estimate

Total operating income of 7 road pavement companies (left axis)
Operating income of the AP-related business (left axis)
Net sales of the AP-related business (right axis)

400
200
0

2018

(ﬁscal year)

2019

2020

Countermeasures by Nikko

Full support of customer plants including MS

PEST analysis

Proposal of new solutions such asenvironmentally friendly products andmaintenance services ahead of thecompetition

Price competitiveness

Re-analysis of user needs andintroduction of semi-custom-made units

Sales expansion of environmentally friendly
products towards a carbon-free society

Development of burners that run onhydrogen and ammonia

Needs for remote and automatedoperations in response to manpower
shortage and workstyle reform

MS proposal utilizing data analysis and DX

Introduction of similar products by rival
companies

Strengthening of product development
capability and human resource investment

Entry of foreign rival companies

Proposals that go as far as support forplant operation

Politices

EconomySociety
Technology

Investment in roads, as per the Ministry of Land, Infrastructure,
Transport and Tourism, has been on a recovery trend after
bottoming at 4.833 trillion yen in FY 2011, and probably
reached 7 trillion yen in FY 2020. Since then, the amount ofinvestment has declined for both ordinary road and expressway
projects. For FY 2023, judging from the budget requests, it ishighly likely to return to growth for the first time in three years.
The asphalt plant (AP) market is basically linked to roadinvestment, and the plants built in 1980s and 1990s haveentered the replacement demand period as 30 to 40
years have passed since they started operating. Japan’s
pavement ratio has reached around 80% and the amount ofasphalt mixture manufactured has been falling by the year.
Nevertheless, we can expect relatively stable sales of 30 to 40
units a year in the AP market in the future as it is necessary todeliver the mixture from an asphalt plant to the work site within
an hour and a half.
(100 million yen/1,000 tons)

Details
Overwhelming market share andcredibility in the Japanese market

2021

2022

2023

(million yen)

20,00019,50019,00018,50018,00017,50017,00016,50016,00015,50015,00014,500Company forecast

Business overview

Details
Asphalt and recycling plants

Customers

Construction companies, road pavement companies

Market share

Static share in Japan: 78%

Sales composition andbreakdown by region

44% of overall sales (Japan: 69%,
Thailand: 3%, China: 28%)

Operating margin: 0.3% (6.4% in FY 2019 before the pandemic)

Ratio of MS net sales

45.0%

Production bases

Akashi head office factory, Thailand, and Shanghai, China
MS: maintenance service

Values to be realized●We will offer asphalt plants that will ensure a secure, safe,
comfortable, and sustainable road environment in Japan.
●We will contribute to the reduction of traffic accidents, easingof traffic congestion, and development of environmentallyfriendly road transportation network by supporting the roadinfrastructure development of the ASEAN region.
●We will contribute to realization of a decarbonized society
through expansion of sales of environmentally friendly
products such as burners that enable fuel transition fromheavy oil to LNG, ammonia, and hydrogen as well as warmmix (foamed) equipment.
●We will offer safe and highly operational plants that do notshut down and an employee-friendly work environment byoffering predictive maintenance as well as remote operation
and automation service in response to manpower shortage.
Source of strength●Our asphalt quality has been highly rated and we have a 100%
market share in asphalt plants for expressways in Japan.
●We boast an integrated production system combining
machinery and electronics (control) and have high market
share and trust.
Net sales by product, operating margin, medium-term plan numerical targets

7.8

15000

790
3,092

10000

8,280

5.9
477
3,320
8,973

5000
0

（％）

Net sales under the medium-term plan
Plant sales
Thailand business
Nikko Shanghai
Maintenance
Exports (left axis)
Operating margin (right axis)

20000

5,033 3,665
2017 2018

Rising needs for environmentally friendly facilities
for achieving decarbonization

Bolstering development ofenvironmentally friendly products

Expectation for the implementation of recycling
laws in Thailand and China

Product development that satisfies
local needs

Worsening performances and suppression of
investment by road pavement companies due tosoaring asphalt price

Offering of values for improving
operating rate of customer plants
Offering of plants and devices that
help achieve low carbonization

Soaring prices and difficulties in purchasing various
materials and equipment

Revision of product prices

Growing needs for remote and automated operationreflecting labor shortage

Promotion of remote operations andautomation support

Data analysis utilizing control panels developed by Nikko

Bolstering of R&D

Development and commercialization of newenvironmentally friendly products

Strengthening of development team

7.0

214

plan

Future business opportunities
Business opportunities in the Japanese market include stimulating
replacement demand with our proprietary and differentiated warmmix (foamed) equipment, various burners aimed at decarbonizationsuch as biomass, ammonia, and hydrogen, and proposals for new
plant systems. Moreover, we can expect rising needs for automation
and remote operation to address manpower shortage and workstylereform at customers. In fact, a demonstration experiment of remote
shipment has started at a customer with multiple plants located in
Kansai. While there remain issues that need to be solved such as
ensuring safety, demand is expected to grow in the future given
serious labor shortage and workstyle reform. On the other hand,road pavement ratio in the ASEAN market led by Thailand is low
and there is large room for growth, and we will focus on the market
towards 2030.
Medium-Term Management Plan implementation strategy
Our strategy in the Japanese market is to raise the market share andenhance profitability by not only introducing environmentally friendly
products that lead the competition leveraging our development
capability as the top manufacturer but also carrying out remote
operation, monitoring, and automation of plants, with our collective
ability extending even to control, and supporting plant operation.
We received orders for 40 units of warm mix (foamed) equipment in
FY 2022 and expect orders for 64 units in FY 2023. We began joint
development of a hydrogen burner with Tokyo Gas. In the markets
overseas, our strategy is to introduce a global strategic standard
model as early as possible with quality and price competitiveness thatcan win against foreign rivals, promote local production, and acquire
agents and build an organizational structure to cultivate the ASEAN
market including Vietnam and Indonesia. The Thai business, which istaking time to turn profitable, aims to post a profit in FY 2025.

9.0

FY 2022 results

FY 2023 forecast

8.0

Net sales

Net sales

7.0
6.4 715798
183
6.0
753 3,465
3,776 520 19,500
3,591
5.0
4,769
8,797
9,364
23,000 4.0
8,233
3.1
3.1
3.0
7,803
2.0
3,451
6,424
1.0
4,940
4,857
0.3
0
2019 2020 2021 2022 2023 2024
6.4

Countermeasures by Nikko
Acquisition of market share andstrengthening of maintenance services●We offer environmentally friendly products and maintenanceservices that lead the competition.

Products(million yen)

Details
Risk of changes in public investment policy due
to change of government

17.3 billion yen

FY 2024 numerical targets
Net sales

19.5 billion yen

23.0 billion yen

Operating income 0.049 billion yen

Operating income 0.6 billion yen

Operating income 1.6 billion yen

Operating margin 0.3％

Operating margin 3.1％

Operating margin 7.0％

Business Strategies■ Support for decarbonization■ Remote operations and automation support■ Development of standard overseas models with competitive edge
■ Build an organizational structure for business expansion in the ASEAN market

plan (ﬁscal year)

N i kko C o r p o rate R ep o r t 2 0 2 3 38

STRATEGY FOR VALUE CREATIONSWOT analysis
Strength

BP-Related Business

Weakness

In the steady market environment, we will emphasize
on increasing market share and improving profitability
by leveraging differentiating technologies and aim tobecome an environmentally friendly top manufacturer

FY 2022 key points●The ready-mixed concrete price index, which is a leading
indicator of the business environment, is showing arising trend and the market is set to further rise in 2023.
●For FY 2022, the business posted an increase in net sales
while its operating income declined due to the impact of
unprofitable temporary projects. For FY 2023, we expect
increased sales and double-digit growth in operating income.
●Ready-mixed concrete shipped in FY 2022 declined
2.2% from a year earlier to 7,445 m3, while net sales ofmaintenance services increased 4.8% from a year earlier.
●We are maintaining the medium-term plan of 10.8 billion
yen in net sales, 1.05 billion yen in operating income,Opptunity

Senior Executive Officer
Manager, Industrial Machinery SalesManagement Department,
Business Division

ThreathMorie Okaaki

and 9.7% in operating margin for FY 2024, but as per
our forecasts for FY 2023, we will achieve the above
targets one year earlier than planned.
●Our static share in the BP market for FY 2022 reacheda record 33%, rising 3.4 pp in the past five years.
●We are also strengthening external sales of Nikkomanufactured control panels, and we secured 43% in
the dynamic share for control panels in FY 2022.
●We participated in a GI Fund project to develop
manufacturing technology for concrete, etc. using CO2
and received an order for demonstration plant.
●We delivered mobile plants to users of precast concrete,
which requires high quality performance.

Trend in construction investment and BP demand

Trend in leading indicator (ready-mixed concrete price)

Having declined to 42 trillion yen in FY 2010, construction demand
subsequently continued on a recovery trend and is expected to havereached 68.79 trillion yen in FY 2022. In addition to steady private
construction investment, we are expecting moves related to the FiveYear Acceleration Measures for Disaster Prevention and Mitigation
and National Resilience in the future. Tokyo has already launched theTokyo Resilience Project, in which it plans to invest 6 trillion yen over
10 years from 2023.
Since FY 2018, ready-mix concrete shipments have declined for
four consecutive years and were 74.45 million m3 in FY 2022. It
is expected to decline again in FY 2023 to around 72 million m3.
Nevertheless, the market for concrete plant (BP) is closely linked
to construction investment and the market continues to be steadyalso buoyed by expansion in business at ready-mixed concrete
manufacturers. Along with the consolidation of ready-mixed concrete
plants, there are signs of demand for larger plants and increase inunit price (about 15% increase compared to three years earlier).

Prices of cement and aggregates, which are ready-mixed concrete
raw materials, began rising around year 2000 and ready-mixed
concrete manufacturers, who are customers of Nikko Group, havealso made efforts to raise selling price of ready-mixed concrete
to their clients. Osaka saw the largest increase in the price: priceindex, with FY 2015 set as 100, grew to 160.9 in FY 2022 and208.6 in August 2023. Similarly in Tokyo, the index rose to 123.9
in FY 2022 and 137.5 in August 2023. The index showed rapid
growth in all regions especially in 2023. The recent rise in readymixed concrete appears to be spreading throughout the country.
(Source: Construction material price index by Economic Research
Association)Ready-mixed concrete manufacturers appear to be
performing strongly on the back of rising ready-mixed concrete
price, and they continue to have steady appetite for capital
investment. In addition to emerging demand for replacement,
demand is expected to spread in the future to plant operation
support services and other areas.

Trend in construction investment and BP demand

Ready-mixed concrete price index by city (FY 2015 = 100)

(trillion yen)

80
70

Construction investment (left axis)
BP market (right axis)(100 million yen)

300
250

60
200

50
40

150

30

100

20
50

10
0

2002 2005(ﬁscal year)

39 N ikko Corpo ra te R epo r t 2 0 2 3

2010

2015

2020 2023

0

estimate

SapporoTokyo
NagoyaDynamic market share (left axis, %)BP demand in value (right axis)

Osaka

Fukuoka (100 million yen)

208.6 700
220200
179.9 600
180
160.9
162.3
160
500
137.5
135.8
140
400
125.1
120
123.9
120.1
107.2
100
300
267
241 251 259
239 240
80
220
218
233
199
200
60
40 27.1 27.7 27.8 28.4 29.6 30.4 31.1 32.0 32.6 33.0
100
20
0
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source:August (ﬁscal year average)
BP Subcommittee, Japan Construction Equipment Manufacturers Association
Economic Research Association

Details

Countermeasures by Nikko

The top market share in the Japanese market

Offering differentiating products thatcannot be found at other companies suchas predictive maintenance in addition tohigh-quality plants and equipment

Solid in-house maintenance service structure
and offering products that integrates
machinery and electronics
Relatively high fixed cost ratio

Continuous price revision and strategy toincrease maintenance revenue

Advancement in use of precast concretefor building components

Product development that satisfies highlevel demands

Needs of CO2 absorbing concrete

Product development addressing customers’
environmental needs and social implementation

Increase in market share

Strengthening of external sales of Nikko-manufactured
control panels and proposal of solutions

Decline in the number of ready-mixed
concrete plants in operation

Strengthening of mobile plant sales

Price war with rival companies

Provision of differentiated products and services

Business overview

PEST analysis
Politices

EconomyCustomers

Ready-mixed concrete manufacturers,
construction companies, etc.

Market share

Static share in Japan: 33%

Sales composition andbreakdown by region

28% of overall sales (Japan: 99%, China: 1%)

Operating margin

10.4%

Ratio of MS net sales

39.9%

Production bases

Akashi head office factory and Shanghai, China

Strengthening of plant operation support
service, etc.

Technology

Development of next-generation mixers

Source of strength

Net sales by product, operating margin, medium-term plan numerical targets
Net sales under the medium-term plan
Plant sales（％）
Operating margin (right axis)
Other (left axis)
Maintenance

10,000
8,000

619

395
3,770

6,000

3,686

8.3
339
3,791

0

5,132

3,812

10.4

271

308

4,238

9.2
4,433

12

9.7

6
11,500 10,800

5,028

4,892

10

6,330

Shipment of ready-mixed concrete is showing a declining
trend as steel frame construction is increasingly adopted forbuildings and more precast concrete manufactured at plants
is used in place of ready-mixed concrete in order to shorten
the construction period. Accordingly, the number of readymixed concrete plants in Japan has fallen by 395 in 10 years,
from 3,456 locations in FY 2012 to 3,061 locations in FY 2022.
However, demand for new BP increased in the same period from55 to 71 units, and unit price also rose from 250 million yen to
380 million yen. The growing size of plants due to consolidation,
an increase in the number of attached equipment, and theimpact of product price increase are considered to be behind
this trend. The need for plant operation support is expected togrow, reflecting the shortage of operators and the adoption ofworkstyle reform, on top of the expected demand for around 70
units per year mainly due to replacement demand.
Medium-Term Management Plan implementation strategy
We will strengthen customer plant operation support service
including predictive maintenance as well as standardization ofplants by accumulating and analyzing various operation-related
information of customer plants. We will also aim to further
increase the market share by capturing new demand resulting
from consolidation of ready-mixed concrete plants. The areas towhich a plant can supply ready-mixed concrete is limited as theconcrete needs to be used within 90 minutes after production.
We will strengthen the sales of mobile plants that can be easilytransported to areas where it is difficult to supply ready-mixed
concrete within 90 minutes due to consolidation of the plants.
Further, we will also strengthen the sales of plants for high quality
precast concrete building components. The key to quality of
precast concrete is the performance of the mixer. We will expand
the sales of mobile concrete plants for precast concrete whilestrengthening the development of mixers.
FY 2022 results

FY 2023 forecast

Net sales

Net sales

11.1 billion yen

6,367

4
2

2017 2018 2019 2020 2021 2022 2023 2024
plan

0

FY 2024 numerical targets
Net sales

11.5 billion yen

10.8 billion yen

Operating income 1.0 billion yen

Operating income 1.2 billion yen

Operating income 1.05 billion yen

Operating margin 9.2％

Operating margin 10.4％

Operating margin 9.7％

8

4,035

4,000
2,000

10.4

286

Offering of services that address the shortageof operators at customers

Improvement of strength and diversificationof concrete products●We develop and manufacture control technology and control panels inhouse, which are the brains behind plant facilities, and we have a trackrecord of supplying more than 4,000 such units including AP products
in Japan and abroad. It enables optimum operation and preventative
maintenance based on various data analysis in addition to the remotemonitoring and operation of ready-mixed concrete plants.
●Nikko is the only manufacturer that has high ability to propose
technology and can offer from construction through maintenanceas a package in addition to solid sales structure and customer
base. We have established a customer support system that can
promptly respond to electrical as well as mechanical problems.

8.4

Offering of values for improving output atcustomer plants

Society

Values to be realized

9.5

Business performance improvement at
customers following the improvementin the ready-mixed concrete market andgrowing replacement investment needs

Revision of product prices●We will ensure the stable supply of high quality products thatmeet the standards of not only JIS standard-concrete but also
special precast concrete and CO2 absorbing concrete.
●We will offer highly efficient maintenance services that improvecustomers’ profits through provision of predictive and preemptive
maintenance services as well as stable operation support services
for customer plants, which address workstyle reform andmanpower shortage in the construction industry.

12,000

Joint development with customers, etc.

Promotion of workstyle reform at customers

MS: maintenance service

10.7

Re-evaluation of concrete for CO2 absorption

Future business opportunities

Concrete plants, etc.

14,000Countermeasures by Nikko
Expansion of market share and capturing ofmaintenance demand

Soaring prices and difficulties in purchasing
various materials and equipment

Details

Products(million yen)

Details
Risk of changes in public investment policy
due to change of government

Business Strategies■ Data management and analysis using Nikko-developed control panels■ Customer plant operation support service■ Expansion of mobile plants to address consolidation of ready-mixed

concrete plants■ Product development addressing customers’ environmental needs

plan (ﬁscal year)

N i kko C o r p o rate R ep o r t 2 0 2 3 40

STRATEGY FOR VALUE CREATION

Environment- and Conveyor-Related Business

Other Business

Making smooth progress towards achievement of themedium-term plan. We will expand into new fields andachieve stable growth while maintaining high profitability
FY 2022 key points●Inquiries related to large-scale projects such as Expo 2025
Osaka, Kansai and the integrated resort have been increasing.
●Demand in the conveyor business, which has a broad rangeof customers, is expected to be relatively stable.
●In FY 2022, net sales declined 4.3% compared with a year ago andValues to be realized●Conveyors accurately and safely carry diverse materials by adapting
to various tilt angles.
●In the environmental business, we will contribute to building a recyclingoriented society that is friendly to the earth’s environment throughsoil improvement, recycling lithium batteries and plasterboards,
biomass-related facilities, can and bottle separators, etc.
Source of strength●We have the capability to modularize conveyors ensuring
shortened delivery time, low cost, and easy assembly. We outstrip
other companies in high quality maintenance services, productlineup, and capability to respond to complaints, and the total
shipment volume reaches about 300,000 units.
●In the environmental business, we have an integrated systemstarting from development to maintenance services that satisfy
customer requirements in addition to various original testing
facilities based on Nikko’s four unique core technologies (mixing
and kneading, heating, material handling, and control).
Business overview
Products
Customers
Market share
Sales breakdown
Operating margin
Ratio of MS net sales
Production bases

Details

Various types of conveyors and environmental recycling equipment
Waste treatment, civil engineering, various manufacturing, etc.
Share of the portable conveyor market: 60%
8% of overall sales (conveyors: 75%, environmental equipment: 22%, service: 3%)
18.1%

Yosuke Kojima

Medium-Term Management Plan implementation strategy
We will promote the mainstay portable conveyors through speedy proposalbased sales activities to improve customer satisfaction, and aim to establish theunique position of shortened delivery time of high-price products. In addition, inthe stringer conveyor market, which is large and crowded with local rivals, we will
introduce low-priced products with short delivery time leveraging our modularization
capability and strengthen sales of conveyor and peripheral machinery in a package
by promoting sharing of customer information with sales agents.
For the environmental business, we, while emphasizing on profitability, will advancenew market development and business deployment that satisfy customer needs toachieve the numerical targets of the medium-term plan by leveraging Nikko’s core
proprietary technologies.
SWOT analysis
Strength

Weakness

FY 2023 forecast

FY 2024 numerical targets

Net sales

Net sales

Net sales

2.888 billion yen

3.0 billion yen

2.7 billion yen

Operating income 0.522 billion yen

Operating income 0.5 billion yen

Operating income 0.55 billion yen

Operating margin 18.1％

Operating margin 16.7％

Operating margin 20.4％

Business
Strategies■ Modularization and customization of portable conveyors■ Strengthening of relationship with customers utilizing online services■ Offering stringer conveyors with short delivery times at low price■ Engineering proposals for conveyor lines

Business environment
Regarding the scale of conveyor market, the portable conveyor market, in which
Nikko has a share of about 60%, is about 3.0 billion yen and the stringer conveyor
market is 6.0–10.0 billion yen. The conveyor market has been shrinking due toreasons such as popularization of compact construction machinery, but net sales of

41 N ikko Corpo ra te R epo r t 2 0 2 3●We received order for three mobile plants for restoration of
Ukraine. We are also expecting additional orders.
●We are seeing continued rise in net sales as sales to new
customers increase and as we expand our product lineup
including Nikko-developed soil improving apparatus.
●For FY 2022, net sales increased 25.0% compared with a year earlier

our conveyor products have been stable at around 2.2 billion yen (including about
1.5 billion yen from portable products) for the past six years. Going forward, we will
expand the share in the large stringer market and grow the target markets throughsales activities based on value-addition proposals .
In the environment-related market, business negotiations of large-scale projects
related to Expo 2025 Osaka, Kansai and the integrated resort have been increasing.
The size of the market fluctuates depending on the project, but it is expected to
grow reflecting the rising needs related to environmental issues and recycling.

MS: maintenance service

FY 2022 results

FY 2022 key points

operating income fell 11.2%. Net sales are expected to increase
in FY 2023, while operating income is likely to continue declining
modestly due to the residual impact of rises in material prices.
●We are maintaining the medium-term plan targets for FY 2024
of 2.7 billion yen in net sales, 0.55 billion yen in operating
income, and 20.4% in operating margin.

3.4%
Akashi head office factory

We aim for a 50% market share in mobile plants alongwith profitability improvement. We will realize synergies
with companies that have become our subsidiaries

Manager, Industrial Machinery Sales Department,
and Manager, Sales Section 2,
Industrial Machinery Sales Management Department

Opptunity
ThreathDetails

Countermeasures by Nikko

Top share in portable conveyors in Japan

Increased market share throughstandardization and shorter delivery time

Business operation combining manufacturing
and sales as well as maintenance service

Proposal of synergies with crushers, etc.

Product development based on the four core technologies

Comprehensive ability that includes testing facilities

Growth potential of portable conveyor market

Expansion of product domains

Calcination technology and human resource
shortage

Expansion of synergies with the AP-related
business

Entry into the stringer conveyor market,
which is large

Proposal of short delivery time and low
price through modularization

New markets including lithium battery recycling

Product proposal in response to customer needs

Intensifying competition

Proposal of short delivery time and differentiation,
capturing a niche market

Net sales by product, operating margin, medium-term plan numerical targets
Conveyor products
Net sales under the medium-term plan
(million yen)（％）
nvironmental products
Conveyor service
Operating margin (right axis)

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0

21.3

102

1,572 15.0 111 96
297
436
7.8
2,256

2,228

2,242

20.2
67
222
2,101

19.5
18.1
100
98
712
635
2,206

2,154

20.4
16.7

25
20
15

3,000

2,700

2017 2018 2019 2020 2021 2022 2023 2024
plan

10
5
0

plan (ﬁscal year)

Values to be realized●Mobile plants (mobile crushers) boast both world’s highest fuel efficiency
and high crushing performance and offer large advantages such as easeof installation and transport as well as sale as second hand machinery.
●Waterproof boards protect housing, building, and train stations
from torrential rains.
●Temporary construction materials offer construction scaffold
environment that is safe, secure, and efficient.

Director
Manager, Service Planning Department, and Manager,
Mobile Plant Business Department, Business Division

Takeshi Sone

while operating income declined 2.7% partly due to the weaker yen. We
expect both net sales and operating income to increase in FY 2023.
●In addition to creating synergy effects with Ube Kohki and Matsuda
Kiko, which were made into subsidiaries, we will strengthen theenvironment and recycling business.
●We aim to achieve the medium-term plan targets for FY 2024 of 13.5 billion yen
in net sales, 1.3 billion yen in operating income, and 9.6% in operating margin.

requirement for high-output machines to reduce work hours at customers increases,
and steel mills increasingly adopt such machines. There is large potential demand forwaterproof boards, but there has been some delay in delivery due to postponementof construction works caused by material shortage. The Five-Year Acceleration
Measures for Disaster Prevention and Mitigation and National Resilience have started,which is expected to boost demand. The temporary construction materials market isa niche market, with an environment of strong demand. We are raising prices of our
products in response to soaring prices of aluminum materials.

Source of strength

Medium-Term Management Plan implementation strategy●We mainly offer high-performance mobile plants by KLEEMANN of Germany
along with Nikko-made soil improving apparatus. We are leveraging our highsales and service capability as well as the network of existing businesses.
●We have an integrated structure from design to construction work forwaterproof boards and a good track record.

The mobile plant business has been enhancing its product lineup, in which we haveintroduced Mobix, an improved version of Nikko-developed mobile soil improving apparatus
leveraging the core business. Further, we will take on the challenge of deepening the existing
markets and exploring new markets such as mines and steel works through enhancement ofsales force, strengthening of engineering and maintenance service structure, and expansionof sales network. We aim to achieve 50% in sales share (No. 1) and improve profitability
through sales increase and growth in net sales of maintenance services.
Ube Kohki and Matsuda Kiko, which we made into subsidiaries, are highly profitablecompanies engaged mainly in contract-based manufacturing. We aim to maximize synergy
effects with these companies to strengthen the environment and recycling business.

Business overview

Details

Mobile crushers, waterproof boards, floodgates, temporary
Products
construction materials, hand tools, etc.
Stone crushing, mining, civil engineering andCustomers
construction companies, rental services, OEMs, etc.
Mobile crushers: 20% share in Japan; small-sized
Market sharealuminum staircases: 40%
21% of overall sales (Ube Kohki: 26%, mobile: 22%, temporary construction
Sales breakdown
materials: 17%, waterproof boards and floodgates: 14%, other: 21%)

Operating margin 12.5%
Ratio of MS net sales 20.0％

Satte factory, Fukusaki factory, Mobile Center, Kakogawa factory, Tokyo
Production bases
factory, Akashi head office factory, Japanese subsidiaries Ube Kohki
Mobile = mobile crushers

FY 2022 results

FY 2023 forecast

FY 2024 numerical targets

Net sales

Net sales

Net sales8.324 billion yen

10.0 billion yen

Strength
Weakness

Opptunity

13.5 billion yen

Operating income 1.044 billion yen

Operating income 1.25 billion yen

Operating income 1.3 billion yen

Operating margin 12.5％

Operating margin 12.5％

Operating margin 9.6％

Business
Strategies

SWOT analysis

ThreathDetails

Countermeasures by Nikko

The world’s highest fuel efficiency
and high crushing performanceStrengthening of expansion of product lineupand sales channels

Ample experience and business ability
starting from design to construction work

In-house product development capability

A weaker yen is a disadvantage formobile equipment, as they are imported

Expansion of the products we offer and price revision

Shift of demand from stationary
machines to mobile ones

Offer large advantage from introduction

Needs for automation and efficiency
improvement in workstyle reform

Proposal of shortened work time through offeringof high-output products

An increase in natural disasters suchas torrential rains

Securing a system for prompt delivery

Development of new market such as
steel works

Reinforcement of sales structure and humanresource development

Entry of rival companies

Offering of products and services with higher customer satisfaction

Intensifying price competition

Strengthen proposal of special products, which havehigh profitability, and value addition proposals■ Sales expansion of mobile plants and strengthening of profitability

Net sales by product, operating margin, medium-term plan numerical targets■ Strengthening of sales structure and promotion of maintenance service business

16,000(million yen)Temporary construction materials Waterproof boards, ﬂoodgates
Hand tools Mobile plants （％）
Operating margin
Other
Ube Kohki Net sales under the medium-term plan (left axis)
20(right axis)

12,00017.5■ Enhancement of product lineup■ Realization of synergies with Ube Kohki

Business environment

The scale of the Japanese market of mobile crushers is 100 to 120 units per year, thatof soil improving apparatus is about 40 to 50 units, and that of automated screens isaround 60 units, and these markets have been stable. In the future, the market is likely
to steadily expand as customers switch from stationary machines to mobile machines,

8,000
4,000
0

17.2
1,647
508
654
1,343
1,688

2019

12.5 2,164 12.5

16.1
1,704
1,073
672
1,609
1,731

2020

1,359
1,445
726
1,605
1,525

2021

1,090
1,798
741 10,000
1,157
1,373

2022

2023
plan

15
9.6
13,500

2024

10
5
0

plan (ﬁscal year)

N i kko C o r p o rate R ep o r t 2 0 2 3 42

Technology Roundtable Talk

STRATEGY FOR VALUE CREATION

We aim to realize 2030 Vision by leveraging
technologies contributing to environmentallyfriendly technologies for decarbonized society
from our customers’ perspective
Nikko Group places environmentally friendly products as a pillar of the differentiation strategy forachievement of 2030 Vision. Managers in charge of the AP- and BP-related businesses and technology
development got together and discussed topics such as changes in customer needs on sites, Nikko’s coretechnologies and their superiority, and future business expansion and contributions to business performance.

Session.1

Q

Capital investment in pursuit of decarbonization to gradually increase

What initiatives are the customers in the
AP- and BP-related businesses taking forrealization of a decarbonized society?

Miyake：I feel our customers are increasingly conscious ofdecarbonization initiatives, but in recent years profits atroad pavement companies have been squeezed by surging
asphalt prices, and the companies have been holding backon capital investment. It is difficult to raise the price of asphalt mixture products given the high dependence on public
works, which is also contributing to the sluggish businessperformance. Some customers, who are major road pavement companies, have strong appetite for capital investment
and they are introducing warm mix (foamed) equipment

43 N ikko Corpo ra te R epo r t 2 0 2 3(it reduces CO2 emissions by lowering the temperature forheating asphalt) that can be retrofitted to existing plants.
The industry as a whole, however, places strong importanceon profits. So, even though they do make some investments
for decarbonization, they keep postponing investments inexisting facilities. In addition to the decline in crude oil price,passing on the cost increases to selling price of asphalt
mixture is required for any recovery in capital investment.
Road pavement companies in general have a plan to halve
their CO2 by 2030 and make it net zero in 2050. At present,
we are not yet in a situation where a company has to be environmentally friendly to win an order, but going forward, it
is likely that environment-related initiatives will increase thedisparity between customer companies.

Okamoto：In the concrete industry, weak alkaline calcium
carbonate is manufactured by reacting strong alkaline calcium extracted from concrete waste materials and collectedslightly acidic CO2. There is a move to capture CO2 in concrete by mixing and kneading the manufactured calcium
carbonate in concrete. In this case, CO2 will not be released
into the air even when the concrete is broken up. There istremendous room for capturing CO2 using this method because concrete is the most widely distributed construction
material in the society. The concrete industry as a wholealso faces the issue of leftover concrete. Leftover concrete
is disposed as industrial waste. Utilizing extracted calcium
contributes to decarbonization while reducing disposal
costs. Nevertheless, CO2 emissions of ready-mixed concrete
companies, who are customers of the BP-related business,is negligible when CO2 emissions from the raw materials andtransportation of ready-mixed concrete are excluded. Morethan 80% of CO2 emitted in the manufacturing processof concrete, which mixes sand, water, admixture, etc. into
cement comes from cement. For this reason, technology is
being developed (with 20.84 billion yen in government funding) for capturing the CO2 emitted in cement manufacturing
process as well as for utilizing the captured CO2 as carbonate in a GI Fund project of the New Energy and Industrial
Technology Development Organization (NEDO) towards
realization of carbon neutrality at cement manufacturers.
The ready-mixed concrete and concrete secondary productindustries are also driving forward development of materials
for capturing CO2, technology to capture calcium carbonate,and quality control system (government funding of 35.94
billion yen). Nikko Group has been enhancing its initiatives
by participating in the GI Fund projects in the concrete field.

the manufacturing temperature by 30°C, is used for worksof the municipality, it is calculated to reduce CO2 emissions
by about 3,470 tons a year. This move has been spreading
throughout the country and is resulting in expansion of themarket for warm mix (foamed) equipment for asphalt. In
addition to warm mix (foamed) equipment, some companies
are switching burner fuel from heavy oil to city gas andpropane but such movement has been sluggish given thestagnant business performances of road pavement companies. In the future, investment for decarbonization will gather pace if carbon credit (trading of the rights for reduced
GHG emissions) becomes popular and the momentum for
introduction of carbon tax increases. It is also necessary tolobby the involved industry organizations and participate inworking groups. Formulation of a certain level of industry
standards would promote environment-related investments.

Kawamura： In June 2022, Tokyo Metropolitan Government
for the first time approved use of low-carbon (warm mix)asphalt mixture for decarbonization of public works of theTokyo Metropolitan Government. Tokyo aims to halve GHG
emissions in the prefecture by 2030 compared with thelevel in 2020. If warm-mix asphalt mixture, which reduces

Directly joined Nikko in 1994 and currently serving as theManager of Development Department, Technology Division. I
have been long engaged in formulation of plans for asphalt
plants in the AP-related business. I try to develop products andtechnologies from the customers’ perspective by leveraging
my experience of interacting with numerous customers.

Session.2

Executive Officer and Manager ofDevelopment Department, Technology Division

Katsuhiro Kawamura

We supply products from the customers’ perspective by leveraging proprietary technologies

What are the strengths that Nikko Gro
Q uprelies on when supplying products
for solving problems? What are the Gr
oup’s value creating activities?

Kawamura: We have high market shares in AP and BP, andwe are the only AP manufacturer who can supply a plant andcontrol panel together. This is also highly rated by the customers. When introducing a new technology at a plant, Nikko
Group’s differentiating factors include the ability to offer our
proprietary technology and propose optimal solutions for theentire plant. For example, the warm mix (foamed) equipment
has features only Nikko can offer such as interlinking the plantwith peripheral devices and controlling their operations. In the
BP-related business also, we are planning to introduce and sellan overseas technology called CarbonCure to inject CO2 into
a concrete mixer and capture CO2 in concrete. We are aiming
to offer values that cannot be matched by other companies
as we assemble the plant ourselves and understand the flowin the entire plant. Commercial application of ammonia andhydrogen burners in the AP-related business is long way off
but we are pushing ahead with product development in an
approach of offering what customers want so as to build anentry barrier and capture the first-mover advantage.
Miyake: The customers of the AP-related business are making necessary capital investment primarily for burner fuel transition and warm mix (foamed) equipment by carefully selecting
investment targets. Our customers, both regional businesses
and major companies, are increasingly shifting from heavy

N i kko C o r p o rate R ep o r t 2 0 2 3 44

STRATEGY FOR VALUE CREATION

oil to city gas and propane, which are more environmentallyfriendly. In fact, a customer in an area where city gas is notavailable, adopted a propane burner with the aim of reducing
CO2 emissions by half by 2030. I believe that such moves
would result in sustained replacement demand towards 2030
or 2050. Nikko Group is not considering entering into the fuelsupply field but the Thai agent is currently considering a local
biomass fuel supply business for asphalt burners. Nikko Groupis considering making contributions by leveraging its coretechnologies, and there is also the possibility of the fuel supply
business resulting in lock-in of plant projects.
Manager, AP Sales Management Department,
Business Division

Toshimasa Miyake

I also joined Nikko in 1994. Initially I was engaged in sales in the APrelated business in Tokyo, and then got involved in establishment of
the Environmental Business Department and Business Development
Department. Subsequently, I gained experience in sales of industrial
machinery, and in April 2022 I was appointed as manager of the AP SalesManagement Department. My motto is carrying out sales activities thattake into consideration mutual advantages of Nikko and its customers.

Session.3

Q

Okamoto : The equipment offered by the BP-related business can play an active part in decarbonization by capturing
CO2 in aggregates of ready-mixed concrete, in water, or
during the kneading process. For more than 10 years, Nikko
Group, together with Nippon Concrete Industries Co., Ltd.,
has been producing calcium carbonate by having CO2 reactwith highly alkaline sludge water generated in the concrete
manufacturing process. Initially, the business was started
to reduce waste treatment costs arising from disposing
leftover concrete at construction sites, but we are currently
promoting its decarbonization aspect.

We aim for business expansion with focus on profitability as well as environmental contribution

What kind of contributions and profita
bility do you expect from environment
ally friendly products?

Miyake: This time, I had a fresh look at the net sales targetof the environmentally friendly products (see p. 61). The
target figure we were disclosing till last year was an estimate reflecting our expectations towards formulation of themedium-term plan two to three years ago. So, I once again
calculated it based on actual business negotiations. In the
AP-related business, we are anticipating investment projects
through around 2026 based on business negotiations andcapital investment plans of major road pavement companies. Investment projects may be postponed if the profit
environment continues to worsen, but we feel that suchprojects have started moving forward from around July thisyear reflecting growing momentum for the bottoming offinancial results of road pavement companies. Profitabilityof environmentally friendly products is relatively high compared with the existing businesses. We aim to expand themarket share and improve profitability by promoting deployment of differentiated proprietary products while making
optimum proposals from the perspective of the customers.
Kawamura: We can calculate the optimum selling prices forhydrogen and ammonia burners, which are long-term development projects, but we are not calculating their profitability. On the other hand, we are carrying out development
taking into account customers’ return on investment (ROI)in short-term development projects. Nikko Group has beenworking on product development in an approach based

45 N ikko Corpo ra te R epo r t 2 0 2 3

on customers’ needs. I think we had a certain arrogancethat customers have no choice but to purchase from Nikko Group because of our high market share. In an era thatseeks new and different values, there may also be potential
risks from newly entering companies. Going forward, weplan to pursue reforms aimed at organizational management

focused on profitability by closely working with sales staff inaddition to developing products and technologies based on
the approach of offering what customers want.
Okamoto: Calcium carbonate manufacturing equipment, which
we are supplying to Nippon Concrete Industries, is an environmentally friendly product that is expected to contribute to theperformance of the BP-related business. In the sales forecastof environmentally friendly products, we count it as part ofSession.4

carbon dioxide capture and utilization (CCU). Currently, Nippon
Concrete Industries has a road map to introduce it at eachplant of its group and we see investment projects through2026 or 2027. We began recording sales in FY 2023 andthey will double in FY 2025, and we are expecting the sales
to further increase from 2027 onwards. For contributions tobusiness performance after that, we are considering expansion of the customer base and new business deployment incollaboration with the AP-related business.

We will solve social issues including decarbonization in Japan and abroad

are the technology and product
Q Whatstrategies as well as regional strategi
es for the future?

Okamoto: The strategy of the BP-related business is to continue promoting the business with Nippon Concrete Industries.
At the same time, we are considering business collaboration
between customers who are located near to each other andhave introduced Nikko Group BP- and AP-related products. In
particular, ready-mixed concrete companies, who are the customers of the BP-related business, have calcium but they do
not emit CO2. Meanwhile, customers in the AP-related businessemit CO2 because they have burners, but do not have calcium.
The two sides can collaborate to manufacture calcium carbonate by reacting calcium with CO2. We want to contribute toenvironmentally friendly urban development by realizing suchsynergy effects going beyond the boundary of businesses,
and this is something only Nikko Group can achieve. Whencapturing CO2 in aggregates, it is necessary to break up concrete to increase the surface area. We are expecting demand
increase for crushers and mobile plants (mobile crushers)
offered by Nikko Group in the CO2 capture process, although
they are not directly an environmentally friendly product.
Kawamura: The target, for now, of the environmentally friendly products is the Japanese market. We will drive forward

product development in accordance with the technology andproduct road map and steadily pursue development with focus
on profitability as well as improvement in social value throughenvironmental contribution. At the same time, we would liketo actively expand sales overseas, especially ASEAN countries
and Thailand, if the momentum for introducing environmentally friendly products is high, but right now the interest is weak.
First, we would like to install a model plant locally and start
promoting it. However, there is high level of interest in warmmix (foamed) equipment and we have been receiving inquiries
from customers in Taiwan. We also have a track record ofshipping it to Shanghai, China.
Miyake: We will implement sales strategy for environmentallyfriendly products at an optimum timing ahead of other companies by determining the trends in customer needs, various
regulations, and stable procurement of hydrogen and ammonia fuels. In addition, we consider plant operation service(remote operation of plants) to address the lack of successors
and labor shortage at customers as one of business strategies
for profitability improvement. We have embarked on educationof employees engaged in sales to strengthen proposal-based
sales skills including ability to explain the value of not only the
product but also the value created by the product to the customer and convince them, with the aim of instilling the measures and improving implementation capability.

Manager, Sales Section 3, Industrial Machinery
Sales Management Department, Business Division,and Low Carbon Task Force, CEO’s Office

Takeshi Okamoto

I also joined Nikko in 1994 and has been engaged in sales in the BPrelated business. I was engaged in BP sales mainly in China for about
six and a half years from year 2000, and I am the only one withoverseas experience among the three today. I was assigned to thecurrent department in 2020 and am marketing BP-related products
to general contractors and precast concrete manufactures.

N i kko C o r p o rate R ep o r t 2 0 2 3 46

Risks and Opportunities

STRATEGY FOR VALUE CREATION

Nikko identifies risks that could significantly impact the business activities in the future and pursues thedevelopment of a corporate culture resilient to crisis by grasping and managing those risks.
The key risks currently recognized by the management as likely to significantly impact the consolidated
companies’ financial status, operation results, and cash flow are listed below. By recognizing these risks, we
believe that it is necessary for us to strive to avoid the occurrence of such situations, and respond to them ifthey occur.

Related risks and opportunities
Risk

❹
●

Risk of reduction in public
investment budget

Related risks and opportunities

Risk ofinsufficient

Details of risks and opportunities
Risk

competitors

Opportunity

The Company will pursue differentiation by developing new products that contribute to realizing carbonneutral society and CO2 reduction and through business model reform of the maintenance service businessas well as provision of support for remote operation and automation to secure our position as the overwhelming top manufacturer.

Risks related to

Risk ofthe asphalt plant(AP)-related

overseas

manufacturers

business inentering theJapan

JapanesemarketRisk of shrinking
market due toreorganization of roadpavement industry

Risk

❺
●

Risk regarding securing of

human resources to engage
in on-site operations

installation on site and offering of maintenance service all in-house. In recent years,

staff and construction work staff. If we are unable to hire the required number of on-site workers,
it may become difficult to maintain a competitive edge with our business model.

Major road builders are going through active reorganization, which may develop into reorganization of the road pavement
industry in the future. If integration of asphalt plants advances due to the industry reorganization, the market may shrink.

Opportunity

Risk

In maintenance service, we can solve the issue of securing human resources by promoting
labor saving through systemization of maintenance services using IoT, etc.

COVID-19 infections have come down and its impact on daily lives has declined, and therefore theCompany expects its impact in the future to be small. Nevertheless, risk of resurgence in infections

caused by variants still remains, and large-scale infections and their spread may affect the Group’s business. In

Japanese market. Therefore, if a customer, who purchased a product from a foreign manufacturer,

realizes the excellence in our after sales service, we can expect it to boost our rating among customers.

little possibility of customers rushing to curb investment and we can rather expect expansion of investment.

manpower shortages has made it difficult to hire on-site workers such as maintenance service

manufacturers are gradually acquiring technical prowess and they may be planning to enter into the Japanese

It is difficult for a foreign manufacturer without a sufficient maintenance structure to enter into the

The Fundamental Plan for National Resilience received a budget of 15 trillion yen for five years and there isWith our business model, we carry out the entire process from plant manufacture toOpportunity

In recent years, no foreign manufacturer has entered the asphalt plant market in Japan, but Chinese and Korean

Opportunity

Risk

❷
●

may shift to curb investment like they did during the previous Democratic Party of Japan regime.

Riskmarket. If foreign manufacturers enter into the Japanese market, the competition among manufacturers may intensify.

Risk

became a slogan and many of our customers shifted to limit capital investment. As a result, our sales declined

significantly. In the future, if a party that holds up a policy to reduce public investment forms the government, our customers

Opportunity

account for almost 100% of the market. Nikko’s market share exceeds 70% and our position as the top manufacturer

has not changed for a long time. However, our ability to showcase our differentiation to customers may weaken if we fail to carryout sufficient product development or if the other company develops a meticulous maintenance structure equivalent to ours.

❶●

In the past, when the Democratic Party of Japan replaced the Liberal Democratic Party, “from concrete to people”

The asphalt plant market in Japan is an oligopoly where two companies, Nikko and another company, together

differentiation
with

Details of risks and opportunities❻●

Risk of spread of COVID-19

If shipment from a plant increases because of integration, we canoverseas operations similarly, if the spread of COVID-19 in countries where we have operations restricts social
activities, it may become difficult to carry out production and sales activities there. In particular, if the infection
spreads in China, Thailand, and Taiwan, where the Nikko Group has business bases, it may have a direct impact.
Opportunity

expect the amount spent on capital investment to increase in total.

The Japanese construction industry, in general, has not had any
significant direct impact from the COVID-19 pandemic and has been

performing solidly, and we expect minimal impact on the industry also in the future.

Asphalt plants primarily use fossil fuels as energy source. About 1.3 million tons a year of CO2 is estimatedto be emitted in Japan for manufacturing asphalt mixture, and 70% of the emissions are thought to be

Prices continue to rise around the world due to factors such as Russia’s invasion of Ukraine andfrom Nikko-manufactured plants based on the market share. If the push towards reducing environmental burden

Risk

technological innovation notglobally advances faster than expected, there is a possibility that our technological innovation cannot keep pace with it.

the U.S. and Europe, have been implementing inflation countermeasures of monetary tightening such as

for reducing environmental

Opportunity

Risk related to Nikko’s

catching up with the initiatives
burdenIn close collaboration with road pavement companies, who are the customers, Nikko is working on early social
implementation of technological innovations such as combustion efficiency improvement and shifting of heatsource at asphalt plants (carbon-neutral fuels, electrical heating technology, etc.), improvement of transportation efficiency throughinnovation of mixture transportation method, collection of CO2 emitted by asphalt plants, and CO2 absorption using ready-mixed concrete.

Risk ofintensifying

Opportunity

So far, the rivals in the high-end market are two European companies and one or two top Chinesecompanies, and the competition is not very tough. In the future, environmental restrictions andpromotion of recycling will be strengthened also in China, which would lead to expansion of the high-end model market, andthe Company expects to expand its share by leveraging the technologies it has developed in Japan.

Risks related

to the overseas
Risk of failingto achievesales inaccordancewith the planin the ASEAN
market47 N ikko Corpo ra te R epo r t 2 0 2 3interest-rate hike and there are some signs of slowing of price increases, concerns over prices and inflation
remain strong. If this situation continues, prices of materials the Company purchases may increase, which may
result in worsening of profits. Further, the impact of rising prices on our customers may cause them topostpone or suspend their capital investment plans, which may result in a decline in the Company’s net sales.
Opportunity

Chinese companies in general have gained technological capability and there is a possibility of many Chinese

AP market in❸●material prices

category and we are steadily recording sales and profits every year. In recent years, however,

manufacturers entering the high-end model market in the future leading to intensified competition.

China

Risks related to increases inIn the asphalt plant market in China, Nikko has secured a certain position in the high-end modelcompetition in
the high-end

business

Risk

❼
●

demand growth towards the end of the COVID-19 pandemic. While the central banks, primarily in

Risk

Risk

❽
●

Risks related to the Russia-

Nikko reflects the material price increases in the quotations for AP and BP
customers and this is expected to lessen the impact on profits in the future.

Nikko has suspended business with Russia. The impact of the suspension of business with Russia is
negligible, as they were limited to parts transactions worth several tens of millions of yen a year in

the past. However, there is a possibility of capital investment plans at Nikko’s customers getting affected by
the increases in crude oil prices due to the Russia-Ukraine situation and the changes in the global economy.

Ukraine situation

The prolonged war destroyed buildings and infrastructure in Ukraine and the first thing

As part of the growth strategy, we established a manufacturing subsidiary in Thailand in FY 2020

Opportunity

and invested more than 1.0 billion yen in the factory. The premise of this investment is that we canmobile crushers can be taken to the sites and can satisfy the restoration demand in Ukraine.

stably sell asphalt plants every year in Thailand and other ASEAN countries. However, if our plants are not able
to sufficiently gain the trust of customers in Thailand and other ASEAN countries contrary to the plan andsales volume falls short of the plan, the factory would post loss, resulting in risk of impairment of the factory.
Opportunity

The ASEAN market is not yet large enough for two European companies,
Nikko’s competitors, to invest resources. Hence, competition with European

manufacturers is not intense, and we can expect to capture the market early on.

❾●

Risks related to exchange
rate fluctuations

Risk

for restoration in the future is the disposal of the enormous amount of rubble. Nikko’s

The Company’s mobile plant business imports its mainstay products from Europe and sells them. If foreignexchange hedge is not implemented, the Company may be affected by risks of exchange rate fluctuations.

Opportunity

We have been hedging risks related to foreign exchange fluctuations by purchasing foreign currencies
or arranging exchange contracts in advance, and therefore such impacts are expected to be negligible.

N i kko C o r p o rate R ep o r t 2 0 2 3 48

Measures to Reinforce Platform for Delivering Value to Realize 2030 Vision

STRATEGY FOR VALUE CREATION

Nikko Group upholds a customer-first policy as its corporate philosophy. Our mission is to provide
products and services that truly satisfy our customers while gaining widespread trust from society,and becoming a solution partner that grows with our customers.

Measures to Reinforce Platform for

Input (management resources)
R&D

Kawamura, Manager

Sales and
consultation

Nakayama,
General Manager

Planning anddesigning

Uehara, Manager

Goals in 2030

Full-scale installation of low-carbon andenvironmentally friendly products● Installation of automated products
leveraging AI and IoT technologies● Lateral deployment of environmentrelated equipment

Platform for delivering value

R&D expenses: 0.75 billion yen● Development division engineers: 28 people● Joint development with customers andexternal organizations●
4+α core technologies (drying, mixing and kneading,material handling, and control) + measurement●Establishment of a marketing division
Adaptation of the organization for
globalization● Utilization of past and future data● Support of comprehensive operation ofplants●Group of skilled engineers who respond to
customer needs● Core technologies (mixing and kneading,heating, material handling, and control)● Accumulation of knowhow regarding plantdesign and technical bases● Cooperation structure with technical design
partner companies

●

●

● 
●

●

O ffering of environmentallyfriendly products for low
carbonization●Offering of products+operation
through remote operation andautomation●No. 1 manufacturer in Asia

Plant solution provider● Proposals that create values atboth customers and society● Comprehensive support of
remote operation, automation,saving manpower● Overseas expansion of global
standard products
Operation structure focused on stablepurchasing and cost reduction● Information sharing with suppliers andfavorable relationship of trust with them● Acquisition of ample knowledge of
products and industry trends andenhancement of communications with
suppliers and within the company● C o n t r i b u t e t o t h e m i t i g a t i o n o fenvironmental burden

Issues to be addressed (short, medium, and long term)

Human resource development for transfer andexpansion of core technologies● Short-term and medium- to long-term productdevelopment aimed at decarbonization● Building a development platform for environmentrelated equipment● Improvement of development speed for increasing theamount of social implementation●

Development of environmental products
Acquisition of plant operation knowhow● Acquisition of overseas partners (agents)● Expansion of the ASEAN market● Nurturing of human resources who willplay the main role in developing fields●●Systematic human resource hiring, strengthening theknowledge of the workers through nurturing● Enhancement of core standard products that respondto customer needs● Improvement of customer satisfaction in quality,
safety, and environment friendliness● Proposal of suitable products that reflect customer
requests and meeting the delivery date● Improvement of design work efficiency and shift ofresources to new expanding business fields●To realize the 2030 Vision, it is important to make the value co-creation platform strong and it isnecessary to continue refining the four core technologies of mixing and kneading, heating, control,and material handling.

Delivering Value to Realize 2030 Vision
Measures (short, medium, and long term)

R&D expenses from FY 2022 to FY 2024: 2.5 billion yen (2.1 times)● The number of development personnel to be hired from FY 2022 to FY 2024: 12● Nurturing based on active implementation of human resource rotation● Promotion of open innovation with customers and external organizations
including universities● Update of product development roadmap and redistribution of resources● Establishment of a team specialized in product development and starting its
operation●

Trade shows for new products
Collaboration with customers (development, education)● Establishment of overseas planning division and support
for acquisition of products and partners● Establishment of ASEAN Business Strategy Office at Nikko
to pursue synergies with the Thai subsidiaries (NAT and NIC)
● Enhancement of the hiring of new graduates● Arranging more environmentally friendly products by
joining an industry association

Umezawa, Manager

Manufacturing

Yamada, FactoryManager

Construction work
Noguchi, Section
ManagerIntroduction of a new core system
Construction of new materials
warehouse● Human resources to build
procurement base● ●

3 latest fiber laser processors, twowarehouse blocks for shipment● Integrated technology and skills for
integrated in-house products fromprimary processing of materials tocanning welding, machine processing,
final assembly, and trial run as well as
production and shipment control●

Operation engineers: 20 including
8 field management engineers and17 chief engineers● Contractors around the country● End-to-end structure from assemblyto operation adjustment●Further improving productivity by 10%
Promotion of flexible delivery of a wide
variety of products in short delivery time
● Achievement in both quality improvement
and reduction of manufacturing cost● Thailand subsidiary NIC to turn profitable ina stable manner● Synergies with Ube Kohki, Matsuda Kiko, etc.
●●Operation engineers: 50 (up 20 fromexisting level)● Increase field management engineers
and chief engineers and take on all sortsof plant installation works● Digitization of work plan, safety
documents, etc. to enable a structure
where anyone can handle them●

Maintenance
Sone, PlanningManager

49 N ikko Corpo ra te R epo r t 2 0 2 3Service staff: 120 employees
Transfer of front office operation,
strengthening of organization● Development of workplace safety
and machinery management system●●Plant management throughasset management● Start of operation service● Global operation of customer
support● 

FY2022 evaluation

Human resource rotation implemented: 2 employees
FY 2022: Number of new graduates hired increasedby 2 compared with FY 2021 and the number offoreign engineers rose by 1
● Joint R&D: 6 projects being implemented● Updating product development roadmap every six
months○A trade show for new products in November 2022
Collaboration with customers: To be implemented formutual education● Conclusion of agent agreements with one company
each in Thailand and Vietnam● Review of supply chain and capturing the recycling AP market● 1 GM and 2 overseas (1 for sales and 1 for Customer Support Center)● Joined Japan Road Contractors Association (JRCA)
as a support member○

Active investment in resources, placing engineers at theeastern and western bases● A new block-type plant has been completed. The ratio ofstandardized plants is 70%. Deployment for further
extension of the series● Building an organization in charge of design quality control
and development of engineering method● Establishment of a team dedicated to overseas markets,
hiring of human resources for overseas expansion● Development of a new control panel model○

Cost reduction ⇒ rate of achievement in FY 2022:
approx. 70%Rate of achievement in FY 2023:
approx. 90% (estimate)● Reconsider supply chain ⇒ Being implemented● New system ⇒ Completed. Currently in the processof shifting to EDI, etc. for achieving paperlessShift to EDI FY 2022: approx. 50%; FY 2023: approx.
80%△

Human resource rotation
Vitalization through appointment of young employees
as group leaders● Currently building an environmentally friendly plant● Cooperation with Ube Kohki, etc.

○

Improvement of product finish, development of amechanism for ensuring safe construction work
● Initiatives for reviewing construction work processes● Two new contractors. Continued efforts fordiscovering more contractors● Increasing operation engineers○

Concluded agreements with 10 AP users and 25 BP
users. Expecting 20 contracts a year from now on● Plan to appoint employees who are in charge of areabased front office operations● Start of data monitor operation

△

●

● 

● 

●

● 

●

The number of engineers to be hired from FY 2022 to FY 2024: 35● Promotion of standardization and development of products withhigh added values● Building of engineering structure that combines sales andmaintenance service● Restructuring and development of global models andtechnological involvement in overseas production● Promotion of outsourcing and digitization of operations
● 

●

Procurement

Progress, outlook

●

● 

Soaring prices and shortage of raw materials,
etc. and sudden foreign exchange fluctuations● Closure or scaling back of suppliers as well as
their discontinuation or prolonged delivery● Aging of core system and increasing burden ofdaily operations●Further improving productivity by 10%
Flexible, large variety and enhancement of
production corresponding to destinations● Achievement in both quality improvement
and reduction of manufacturing cost● Thailand subsidiary NIC to turn profitable
in a stable manner
● 
● 

Cost reduction through centralized and distributedpurchasing and averting risks● Work with designing section and promote functionalpurchase● Reconsider sustainable supply chain● Shift to paperless and PDM using new system●Expansion of the manufacturing factory block ofhead office factory● Replacement of aged equipment● Reconstruction of factory layout● Promoting engineers to acquire multiple skills● Utilization of foreign technical interns●Actions for safe work and safety
instruction● I d e n t i f y i n g n e w c o n t r a c t o r s a n dcollaboration with other departments● Easy-to-implement structure in the designand construction work stages●

Switch from after-incident maintenance topreemptive maintenance● Acquisition of on-site human resources● Remote management of plant operation
and utilization of operation data forprevention and prediction

● 

● 

● 

Digitization of work plans and safety documents(conversion to online, and online work)● E a s y - t o - c o n s t r u c t u n i t s t r u c t u r e , i n c r e a s i n g t h epercentage of parts built in-house● Promotion of structure designs that facilitates safe work
● Proactive negotiations with contractors throughout Japan

Predictive maintenance based on next-generation diagnosis andpromotion of shift to next-generation preventative and predictive
maintenance● Hiring, reduction of emergency repair, and improvement ofefficiency through division of labor● Starting actual operations at cooperating factories and refining it

● 
●

● 

● 

N i kko C o r p o rate R ep o r t 2 0 2 3 50

STRATEGY FOR VALUE CREATION

Nikko Group’s business activities and value chain

EnergySales
andconsultation

Concrete plant-related business

Mixingandkneading

Material
handling

Heating

4 plus α coretechnologies

Product lineup that addresses customer
needs including Dash series,
a leading brand in the industry

Environment-related businessControl
technologyαDevelopment of cutting-edge
environmentally friendly plants andequipment including biomass fuelcombustion system

Dairy
farming
Mainstaybusinesses
leveraging
the coretechnologies

Chemicals

Planning
anddesigning

R&D

Deployment of
the technologies
in other fields

Value
chain
Procurement
andmanufacturing

MaintenanceAsphalt plant-related business

Food

A manufacturer with the top market
share in Japan with lineup of variety of
unique plants

Construction
work
Construction

Feedback from customers
To make the platform for value co-creation more resilient, we need to
ask customers about their opinions and requests regarding their levelof satisfaction with the plants and machinery that were delivered andthe improvements they seek, and utilize them in improving quality of
products and services as well as development.
We are also conducting operator training on a regular basis in responseto requests for plant managers and engineers who can operate plants
at customers and are well-versed in involved technology.

Customer’s
voice

1
Shibata
Ready-Mixed
Concrete,
Shibata Shoten Ltd.
Shibata Ready-Mixed Concrete of Shibata Shoten Ltd.
is a member of the Osaka Kouiki Ready-mixed Concrete
Cooperative Association and has a plant in Harima Block.
Himeji Castle was registered as a World Heritage site andredevelopment work for making the surrounding area atourist attraction is underway. Meanwhile, the first generationbatching plants (BP) constructed in 1984 are up for the thirdround of replacement. It turned out to be a difficult task, as
the company purchased an adjacent plot to build the new plant
while the old plant continued to function.

Q Why did you choose scrap and build (S&B) of BP?
51 N ikko Corpo ra te R epo r t 2 0 2 3

Originally, along with Chairman Shibata, we had a plan to

A implement S&B by 2028. In the spring of 2020, wepurchased the adjacent land to the north, which we had beenplanning to purchase. With this as a starting point werequested Nikko to prepare a new plant scheme plan for the
future. However, it became clear with the new scheme drawingthat it was difficult to build the plant as we wanted, so we
decided to change the contents. In 2020 winter, the adjacentland on the east side became available for purchase, and we
decided to carry out S&B. In the spring of 2021, we once again
requested a scheme drawing for new plant construction to
Nikko, and we finalized the exterior drawing and began moving
toward full implementation of S&B. Subsequently, the new BP
started operating on February 1, 2023.
What are the points you considered upon construction? Pleasealso tell us what you think of the equipment you have adopted.
We aimed to shorten the plant downtime and began
construction while shipping from the existing plant so as
to avoid causing trouble to our customers. We placed thecement transport pipes inside the plant, and housing the pipes
inside the building made it easier to perform inspections andcarry out replacement work safely. Further, even if the pipe
gets worn out and a hole is formed, it would not cause any
trouble to people living in the neighborhood.
We are satisfied with the completed plant as it has
incorporated a lot of the requests we made. Going forward, weplan to maintain it so that it will become even better.
We have heard that you have been proactively carrying out
recruitment activities such as giving plant tour to students.
We are also experiencing super aging of our employees.
We need to hire young people to facilitate generationalchange and to sustain the company. We are visiting highschools to explain the ready-mixed concrete industry and theplant so that students will choose us as a place of employment.
Students still think of working in the ready-mixed concrete

Q
A

Q
A

plant as demanding and dirty and that it is hard to take days
off, so we are preparing a plan to invite students to the new
BP plant.

Q Finally, what are your opinions and requests for Nikko?
We would like Nikko to put in place a structure that
A enables us to exchange various opinions so as to realize aplant that is easy to manage and use in terms of bothinfrastructure and operational aspects.

Customer’s
voice

2Daioh ShinyoCo., Ltd.

Daioh Shinyo Co., Ltd. is located in Kochi City, Kochi Prefecture,
which is famous as the place where Sakamoto Ryoma, Tosa’s
hero of Meiji Restoration, was born. We visited its Kochi
Mixture Center, which had introduced the VP III successfully,
and asked about the areas where the company had trouble
while rebuilding the plant.

Q Why did you plan to rebuild the plant?
Some 35 years had passed since we started operating our
A old plant and it was deteriorating. Its maintenance costs

were also rising with each passing year. In addition, we were
facing various issues such as insufficient capacity of theformer recycling plant, inadequacy of asphalt tank, which is a

Most of Nikko Group’s business is B-to-B and ourcustomers are road pavement companies and businesses
related to infrastructure and construction. Our businessconsists of asphalt plant (AP)-related business, concrete
plant (BP)-related business, environment- and conveyorrelated business, and other business. Overseas net sales
account for 14.7% of overall sales.
Each business department has production, sales, andengineering functions and they receive orders either
directly from customers or through sales agents. For
built-to-order products, which account for most ofthem, we prepare an estimate following meetings withthe customer. Once a contract is signed, the businessvalue chain starts with design and includes production,
procurement, installation, delivery, collection of bills, andmaintenance services. Nikko Group’s value chain has
safety and security, quality, and compliance included
as standards and we combine them with our uniquebusiness activities to enable co-creation of values withcustomers.

peripheral equipment, and environmental consideration. Taking
these points into account, we judged that it was time to rebuild
the plant so as to reduce the burden on the local environment
such as soot, increase the rate of recycled aggregates, andreduce CO 2 through improvement of fuel efficiency, andthereby contribute to the sustainable development of society,which is an SDG philosophy.

Q What is the reason behind adopting Nikko-made VP III?
When planning to rebuild a plant within a limited space due
A to site restrictions, the fact that VP III can be built in asmall space made it the number one reason to adopt it. As it
became possible to install the plant and save space, we werealso able to add asphalt tanks and install a recycling agent
tank. Also, we selected VP III because the model met our needs
such as improvement in safety performance and working
environment in terms of specifications.

Q What are the problems you faced while rebuilding the plant?
Drawing a layout plan including traffic lines was difficult
A because the plot is small, as we had problems with theshape and we were going to use the existing structures. We
focused on safe and efficient operation and have repeateddiscussions with Nikko staff engaged in sales as well as design.
What do you think of VP III once it was installed and what
are your opinions and requests for Nikko?
Thanks to Nikko, construction of VP III was completed
without any troubles. We are grateful to the company forensuring safety management during the construction period
and completing the work safely without any incidents. Goingforward, we are determined to make further contributions to
the development of the region and we would like to request
your support more than ever.
We are yet to get used to VP III, and would like Nikko toprovide appropriate advices. We also would like the company
to support us more than ever in maintenance and also when
there are problems.

QA

N i kko C o r p o rate R ep o r t 2 0 2 3 52

Sustainability Governance

SUSTAINABILITY AND MANAGEMENT FOUNDATIONSUSTAINABILITY AND MANAGEMENT FOUNDATIONAs the world faces a wide range of environmental and social issues, creating social andenvironmental values is imperative to ensure sustainable improvement in the corporate valueof Nikko Group. We aim to realize the Group’s vision of “Making the world a resilient and gentle
place” through continuous dialogue with stakeholders.

Nikko Group Sustainability Basic Policies
Responsibility to societyWe will respect human rights and support their protection, enhance our corporate ethics and share them acrossthe entire value chain, and practice fair business activities in order to realize a sustainable society.
● 
We will promote new workstyles and create diverse, healthy, safe, and secure workplaces that offer job
satisfaction.
● We recognize our role as a market leader, and will contribute to the realization of a prosperous future andresilient society through the products, services, and solutions we offer.
●Responsibility to global environment
We will act as a company responsible for the future of the global environment by promoting the shift todecarbonized economy and striving to improve the efficiency of material recycling and prevent pollution so as
to contribute to the preservation of biodiversity.

●

Sustainability promotion structure

Creating robust, people-friendly cities around the world.

Nikko Group established the Sustainability Committee
in June 2023 to summarize the Group’s discussions
regarding sustainability and to further improve thequality and speed of implementation in cooperation
with the Compliance and Risk Management
Committee.
The Sustainability Committee is chaired by the
Director and Manager of Corporate Planning
Department and has four other members from theupper management including the Director and Vice

President supervising financial and human resources
who chairs the Compliance and Risk Management
Committee. The committee discusses Nikko’s
sustainability-related issues and report and makeproposals to the Board of Directors. Its secretariat
consists of five employees from the departments
supervised by the committee chair and members. The
committee meets four times a year as a rule.
The roles and functions of the Sustainability
Committee are as follows.

Roles
1. Identifying materiality for realizing the long-term vision
2. Identifying risks and opportunities of materiality
and clarifying how to manage the progress (metrics
and targets)
3. Preparing a draft of the Medium-Term Management

Plan by backcasting from the long-term vision
4. D eveloping the structure for offering values tostakeholders
5. C ooperating with the Compliance and Risk
Management Committee

FunctionsSustainability Governance・ ・・・・・・・・・・・・・・・・・ 54

04

Stakeholder Engagement・ ・・・・・・・・・・・・・・・・・・ 56
Realization of Carbon Neutrality・・・・・・・・・・・・ 58
Contribution to Recycling-oriented Economy,
Early Restoration from Intensifying Disasters,
Co-existence with Local Communities・ ・・・・・・・・ 63

1. Formulating the Sustainability Basic Policies
2. Formulating human rights policies and implementing
human rights due diligence3. F ormulating anti-corruption (corporate ethics)
policies
4. Promoting awareness-building activities based on
the policies
Sustainability promotion structure

5. F ormulating environmental policies (decarbonization, material
recycling, water resources, and biodiversity conservation)
6. Applying the policies to the supply chain (formulatingprocurement guidelines)
7. Enhancing human capital (engagement, diversity,
life support, and health and safety)
8. H
 olding dialogues with stakeholders

Board of Directors

Proposal and report

Proposal and reportCreation of New Customer Values・ ・・・・・・・・ 65

Sustainability Committee

Compliance and Risk Management Committee

Human resource development andimprovement in job satisfaction・・・・・・・・・・・・ 67

Chair: Director and Manager of Corporate Planning Department
Members: Upper management

Chair: Vice President (General Manager of Administrative Division)
Members: Upper management

Cooperation

Employee Roundtable Talk・・・・・・・・・・・・・・・・・・ 71

53 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 54

Stakeholder Engagement

The business of Nikko Group is established on the relationship of trust with its stakeholders. The Group believes it isimportant to engage in active dialogue with all stakeholders to solve social issues through its business and raise its corporate
value. Nikko Group aims to contribute to the sustainability of society and to achieve sustainable growth as a company, in linewith the stakeholders’ understanding regarding the direction it is pursuing and the path of its value creation.

Cooperation between Sustainability Committee and other committees and taskforces
The five members of the Sustainability Committee
have the following respective roles and cooperate witheach other in the committee.

Sustainability Committee members●●

SUSTAINABILITY AND MANAGEMENT FOUNDATION oichi Kawakami (chair): Corporate planning, DX, safety and healthKHiroshi Fujii: Financial, human resources, compliance andrisk management (chair)

Value co-creation with stakeholders

 omomi Nakayama: Sales and overseas businessTKazuhiro Yamada: Manufacturing and procurement● 
Katsuhiro Kawamura: Development, GX (decarbonization)●●

Customers

Identification of materiality
Along with the formulation of the 2030 Vision, Nikko
Group reviewed its materiality for sustainable creationof corporate values in 2022. We believe that solving
material issues by bearing in mind “promoting selfreform to win the broad trust from society andfulfill our mission as a solutions partner that evolves
with the customers” as stated in our Management
Philosophy would lead to achievement of the 2030
Vision. The Group will set forth the most important
KPIs for the following four materiality areas to raise

Sustainability management at
Nikko Group

Three sustainability issues Nikko Group is working on

effectiveness and strengthen monitoring by the Boardof Directors.

1

Nikko Group’s materiality
Realization of Carbon Neutrality

P58●

Establishment of recycling-oriented society

P63●

Creation of New Customer Values

P65●

Human resource development and improvement in job satisfaction P67

Employees

Early restoration from natural disasters
Initiatives towards intensifying disasters
Development of business continuity
management● Disaster prevention and mitigation,
addressing aging infrastructure

●

●

●

Relationship with stakeholders and main channels of dialogue

Human resource
development and improvement
in job satisfaction

M IS S IO N
〈Value we offer〉

Update the social infrastructureby leveraging engineeringthat is one step ahead of others.

S P IRIT〈Spirit we treasure〉

Customers

Three sustainability issues Nikko Group is working onof
1 Strengthening
national resiliencewith
2 Harmonynatural environmentof a
3 Development
prosperous society

B a s i c pr i n c i pl e s 〈long-standing values since its establishment〉
Serve society
through business.

55 N ikko Corpo ra te R epo r t 2 0 2 3Work toward
prosperity with sincerity
and responsibility.

Produce appropriate profits
through original ideas
and improvement efforts.

Business
partners

Local community,
future generation

Shareholders,investors〈Missions Nikko must fulfill in daily operations〉

Pursuit of customer satisfaction
Improvement of employee engagement● Collaboration with business partners● Co-existence with local communities●●〈Future the Group wants to realize〉

Creation of
new customer values

Decarbonized society
Recycling-oriented society● Water resources● Biodiversity●

Nikko Group’s 4 material matters

VALUE

of a
3 Development
prosperous society●

V IS IO N

Establishment ofrecycling-oriented society

with
2 Harmonynatural environment

Reference●

Making the world a resilient and gentle place.
Realization of
Carbon Neutrality

Strengthening of
national resilience

Employees

Relationship with stakeholders

Stakeholders’ main interests

Nikko Group is contributing tobusiness expansion andproductivity improvement at
customers through theprovision of products andservices. At the same time, it
contributes to the developmentof a prosperous society
together with customers
through the development ofsocial infrastructure.

●

Employees are the mostvaluable asset of Nikko. We
focus our efforts on building
an organization and nurturing
our human resources so that
we can quickly respond to allchanges surrounding ourbusiness to make sustained
contribution to society. We will
strive to develop a workplaceenvironment that offers job
satisfaction by responding to
the expectations of employees,
who have diverse attributesand values.

 ffering of high-performance,Ohigh-quality products●
S ervice structure that offers
safety and security●Appropriate price setting●
Ability to propose solutions to
issues●
Response to technologicalinnovation●E arly restoration from natural
disasters
 espect to basic labor rightsR●
Offering opportunities for
growth and self-realization●
E qual opportunities and fairevaluation●Creating a workplace that is verysafe mentally●E nsuring safe operations andconsideration for naturalenvironment●Realization of work-life balance●
Securing of diversity andworkstyle options●

Main dialogue channels

 aily sales and service activities
DVarious trade shows (holding the 2022
Nikko Messe and participation in
N-EXPO 2022)●
Offering of plant operator training●
Journals (editing and publication of
NAP NEWS and BP EYES)●
Nikko website (One Nikko Platform)●● irect dialogue between the presidentDand groups of employees●Intranet●Company newsletter (Tombo )●Target setting and progress confirmation,
evaluation feedback●
E nglish and special skill training,
autonomous and elective development
seminars●
C ampaign to improve operating
efficiency●Whistleblowing system●A llotting shares with restriction ontransfer●

N i kko C o r p o rate R ep o r t 2 0 2 3 56

Realization of Carbon Neutrality

Relationship with stakeholdersS uppliers of outsourced
products based on Nikko
design (about 20 companies)●
General materials suppliers(about 100 companies)●

Materials
suppliers

Tombo-kaiBusiness
partners(sales agent
network)

Akitsu-kai(contractors’
network)Nikko Group
believes that it isessential to workon solving thesocial issues faced
by its supply chain
together with all
business partners
including material
suppliers, sales
agents, andcontractors.

Members:
124 companies

Stakeholders’ main interests
E qual, fair transaction terms●
Quality assessment●Centralized purchasing●Support for businesssuccession, technology
transfer

Main dialogue channels●●●

P roposal of new products
S upport for seeking newsales channels

S afe work environment●Advice regarding specializedskills and technologies●
Securing stable work load
over the long term aily procurement activities
DQuality improvement support●
Factory, warehouse visits●Quality audit●●●

 olding general meetingsHand subcommittee meetings

Information disclosed based on TCFD framework
Climate change caused by greenhouse gas (GHG) emission
has an enormous impact on society and economy, and Nikko
Group recognizes that it is the most pressing social issue theGroup should work on. For the realization of a decarbonizedsociety targeted in the Paris Agreement, Nikko Groupis aiming to achieve a 50% reduction in CO 2 emissions(compared with FY 2021) from its business activities as well as
operation of Nikko-made plants at customers as an interim
target for FY 2030.

Members:
200 companies o-existence withC
local communities●
Creation of employment●Contribution to local
development● Preservation of the local
natural environment●Safe operation●

For Nikko Group to develop and grow,it needs to contribute to raising thesustainability of society. Nikko
considers the realization of carbon
neutrality as its responsibility towards
future generations.

I m p r o v i n g o u r
corporate value● P r o m o t i o n o f f a i r
disclosure● Capital policy that is
conscious of capitalefficiency● A c h i e v e m e n t o fbusiness returns thatexceed the capitalcost● S t r e n g t h e n i n g o finitiatives towards
ESG and sustainability,and enhancement of
information disclosure● I m p r o v e m e n t i neffective governanceNikko Group’s initiatives●

The Group has established the Low Carbon Task Force (LCTF) led by the managers of business and development divisions, which
gathers and analyzes carbon neutrality-related information and carries out planning (once a month meetings).
The Committee of Inside Executives sets forth targets based on the proposals by LTCF and formulates detailed strategies forachieving them (as necessary).
● The Sustainability Committee and the Finance Committee work together to identify risks and opportunities and discuss countermeasures (as necessary)● Key measures and action plans formulated by the committee are promoted company-wide and the progress is reported to the Board of Directors.
● 
The Board of Directors deliberates on the validity of strategies and inherent risks and supervises the progress towards targets (twice a year or more).

Safety and health meeting●●

Governance ffering of grant-type
Oscholarship to students in
the Kinki region●Offering of research grants
to researchers from Hyogo
Prefecture●Support for disasterprevention education at
primary and special needs
schools (14 of them) within
Akashi city (offering ofdisaster prevention tenugui
towels)●
R esponsible responses toclimate risks●C ompany and plant tours
for high school students in
Akashi City●
Nikko Marche (exhibition andsale of disaster prevention
and BBQ goods)●Let’s Protect Roads!, a game
offered in a social experienceapp for children●

Shareholders,investors

Shareholders and investors, who offer
financial capital, support the growth of
Nikko Group and has the role ofmonitoring its management. We willfurther strengthen our relationships oftrust with them through our efforts inimproving corporate value andenhancing information disclosure.

The Group is promoting the development of technologies for
reducing CO2 emissions and provision of related products
and services towards achieving carbon neutrality in 2050.
After endorsing the TCFD recommendations in October
2021, it has been disclosing information in accordancewith the TCFD framework for smooth communication
regarding climate change issues with stakeholders including
shareholders and investors.

Status of the initiatives related to the four core elements of the TCFD recommendations●●

Local community,
future generation

SUSTAINABILITY AND MANAGEMENT FOUNDATION eneral Shareholders’G
Meeting (attended by
6,835 people including
online participants)● F i n a n c i a l r e s u l t s
briefing sessions (fourtimes)● Individual meetings
with institutional
investors (six meetings
with 10 investors)●

Identify risks and opportunities in scenario analysis considering the 2°C and 4°C scenarios, decide on medium- to long-term
measures, and manage their progress● Analyze the impact of risks and opportunities on business and finance● 
Formulate development plan for low-carbon and decarbonization-related products and their market introduction plans● Strategy

RiskManagement

The Risk Management Committee chaired by Director and Executive Officer identifies and manages risks that have major impact on
business and finance as priority management risks.
The committee shares risk information with the Committee of Inside Executives and the Board of Directors and decides appropriate
responses from the perspective of company-wide risk management.

●●

Verification of CO2 emissions by Nikko Co., Ltd.
Switch to renewable energy-based electricity and establishment of RE100 target● Verification of Scope 3 (in the entire supply chain) CO2 emissions● Setting of the FY 2030 interim target and the FY 2050 target based on scenario analysis● CO2 emissions (Scope 1 and 2): 544t-CO2 (down 79.8% vs. FY 2021)〈FY 2022 results〉● CO2 emissions (Category 11 of Scope 3): 664,082t-CO2 (down 16.4% vs. FY 2021)
		〈FY 2030 emission targets〉● CO2 emissions (Scope 1, 2, and 3): 436,970t-CO2 (vs. FY 2021 results)● Aim for net-zero CO2 emissions (Scope 1, 2, and 3)〈FY 2050 target〉●●

Metrics
andTargets

Governance
Carbon neutrality promotion structure
Nikko established the Low Carbon Task Force (LCTF) led by
the managers of the Business and Technology Development
Divisions to promote the realization of carbon neutrality.
Through its monthly LCTF meetings, it examines and discusses
the issues in a cross-divisional manner for the realization ofcarbon neutrality based on data verification and evidence.
The Committee of Inside Executives discusses the plan
proposal drafted by LCTF and formulates concrete target

values and specific strategies for achieving the targets.
It also works together with the Sustainability Committee
chaired by the Director and Executive Officer as well as the
Finance Committee as necessary. The Board of Directors,
at its meetings, deliberates the investment plan, productdevelopment plan, and risk countermeasures formulatedby the Committee of Inside Executives and supervises theiradequacy and progress.

Governance structure diagram
Board ofDirectors

ReportSupervision

Instructions

Committee
of Inside
Executives

Instructions
ReportCooperation

Sustainability
Committee

Instructions

Low Carbon
Task Force

ReportBusiness
divisions,subsidiaries

Cooperation

Finance Committee

The figures are results for FY 2021.

57 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 58

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Four steps and seven approaches towards the realization of carbon neutrality

Strategy
Climate change scenario analysis
Nikko assumes the future temperature rise scenarios in the range of 2°C and 4°C upon carrying out the scenario
analyses for 2030 and 2050.
Reference scenarios: ■World Energy Outlook 2020 by IEA● STEPS (current policy scenario) ● SDS (sustainable development scenario)
■IPCC AR5● RCP2.6 (2°C scenario) ● RCP8.5 (4°C scenario)

Four steps

Business and financial impact of climate-related risks and opportunities based on scenario analysis;
medium- to long-term measures addressing risks and opportunities and results for FY 2022
Impact on
financeHigh

Likelihood of
occurrence
MediumHigh

MediumHigh

Low

Increase in R&D expenses and capital investment

MediumHigh(decarbonized burners, CO2 capture and storage technology, etc.)

MediumHigh

New entry by boiler, burner, and electric furnace
manufacturers

MediumMediumDecrease in the number of operating plants due tocentralization to large plants

MediumMedium

Low

High

Low

High

Risks
Rapid shift to decarbonized burners (plants)
Request from users to share the carbon tax
burden (discount)Market introduction of highly carbon-efficientroadbed materials alternative to asphalt

2°C scenario(assuming
progress in lowcarbonization)

Increase in the cost of procurement of raw
materials (steel materials, etc.)
Increase in the cost of electricity derived fromrenewable energy
Increase in the cost of procurement of alternative fuels
Opportunity
Demand for updating to low-carbon or decarbonized burners (plants)
Growth in market share due to superiority in the
R&D competition
Increase in demand for concrete products (roadbed
materials alternative to asphalt)
Growth in demand for recycling and low-carbon plants due to stricter
environmental restrictions in China and Southeast Asian countries
Provocation of demand for new plants due tospread of CO2 fixation concrete
Increase in demand for lithium battery recycling
equipment due to expansion of the EV market
Risks
Expansion of the new roadbed and construction material
markets due to measures against heat island effect(shrinkage of the existing asphalt and concrete markets)
Increase in the cost of procurement of materials
due to suspension of supply chains
Increase in BCP expenses

4°C scenario(assuming lowcarbonization
scenario is notpromoted)

Opportunity
Increase in demand for preemptive maintenancefor stable operation
Increase in demand for disaster prevention or mitigation models
Increase in demand for disaster prevention products(waterproof boards, temporary scaffolding, etc.)
Increase in demand for counter-disaster mobile plants
Increase in demand for transferring plants to areas with low disaster risk
Increase in demand for concrete products (roadbed
materials alternative to asphalt)
Growth in demand for recycling and low-carbon plants due to stricter
environmental restrictions in China and Southeast Asian countries
Provocation of demand for new plants due tospread of CO2 fixation concrete
Increase in demand for lithium battery recycling
equipment due to expansion of the EV market

Countermeasures
Speed up product development.
Tirelessly explain to andnegotiate with customers

Improve efficiency ofdevelopment. Clarify priorities.
Speed up product development.
Strengthen analysis of expected newentrants. Acquire related intellectual
properties at an early stage.
Identify users who will survive andrecommend systematic maintenanceto such users
Strengthen function-focusedpurchasing, etc.
Streamline plant operations and passon costs to product prices
Promote a wide range of fuelprocurement methods

FY 2022 results

 ompleted demonstrationC
tests of burners fired bydecarbonized fuels suchas hydrogen, ammonia,
and powder biomass.
● Increased R&D expenses(700 million yen)
● Prepared a decarbonization
technology roadmap.
● R evised the price table
due to increase inprocurement costs.
● T he head office factory
switched to green
electricity.
● Sales of decarbonizationrelated products
increased.

Low

High
Likelihood of
occurrence
High

High

MediumMediumLow

MediumMedium

Low

High

Low

Medium

Impact on
finance

Likelihood of
occurrence

MediumLow

Low

MediumLow

High

Appropriately pass on
costs to product prices

Impact on
finance

Likelihood of
occurrenceE stablished a dedicateddepartment for lateral
deployment of the coretechnologies.
●
U nearthed new suppliers
mainly in the ASEAN region.
●R evised the price list as
needed.

Countermeasures

ResultsHigh

Low

MediumMediumMedium

High

Low
Low

MediumLow

MediumLow

MediumMedium

Low

High

Low

MediumCountermeasures

Reinforce overseas production bases
Enhance lineup of plants for
CO2-absorbing concrete
Enhance lineup of environmentallyfriendly and recycling products

FY 2022 results
Increased number ofbusiness negotiations for
CO2-absorbing plants● Promoted proposals forrecycling plants targeting
ASEAN● Increased the number of
employees engaged intechnology development● The number of patentapplications increased.
● Countermeasures
Launch products developed
using core technologies in the
new construction material market
Diversify supply chains
including those overseas

Improve the efficiency of themaintenance business using IoT
Strengthen manufacturing
capacity and reorganize
manufacturing sites
Transform plants to pavement
concrete production
Reinforce overseas
production bases
Enhance lineup of plants for
CO2-absorbing concrete
Enhance lineup of environmentallyfriendly and recycling products

Results●

 romoted use ofP
subscription service
for maintenance.
● E s t a b l i s h e daproduction base in
ASEAN.
● A c q u i r e d l a n d f o r
factories in Japan asneeded.
● I n c r e a s e dthenumber of employees
engaged in technology
development● The number of patentapplications increased.
●

The degree of financial impact is evaluated across three levels between high, medium, and low, depending on the likeliness of occurrence of the risks and opportunities and their impact on periodic income.

59 N ikko Corpo ra te R epo r t 2 0 2 3

Step

1

Step

Accurately grasp
the volume of emissions

2

Step

Reducethe emissions

3

Step

4

OffsetCapture●Impact on
financeHigh

Diversify fuels and enhance product lineup
Further strengthen technology
development investment
Transform plants to pavement
concrete production2022), accounting for 90.1% of overall emissions in
Scope 3. The Group will offer products and services
by identifying the most cost-effective methods for
reducing CO2 emissions, while sharing with customers
the evidence extracted from verification data.

To grasp CO 2 emissions in Scope 1, 2, and 3 asaccurately as possible, we have been verifying major
categories by setting certain conditions since FY
2021. The results of the verification show that CO 2
emissions from the use of products such as Nikkomade plants sold were 664,000 tons (verified in FY

the energy consumption in the drying and heatingprocess. Based on such verified data, Nikko has been
taking seven approaches to developing products
aimed at decarbonization as part of efforts to reduce
emissions.

To accurately understand the CO2 emissions during
the mixture manufacturing process, Nikko analyzed
the energy consumption at the mixture plants. Since
about 80% of energy is used to remove water andheat aggregates (recycled materials), reducing thewater content has proved effective in reducing
Seven approaches

1

2

Fuel
transition

Warm mix

3

Transformationof the material
storage system

4

Reformof the plantsystem5
CCU

6Transformationof the mixture
delivery system

7
Electrification

Nikko is conducting product development by combining seven technologies for the realization of carbon neutrality.
1 Fuel transition
To replace heavy oil, which has high CO2 emissions, the Group has embarked on the R&D of burners using
ammonia and hydrogen, which are promising CO2-free fuels, in addition to the development and improvement ofburners that use city gas, natural gas, and biomass fuels.
2 Warm mix
Manufactures asphalt mixture at a temperature lower than the usual heating temperature by reducing theviscosity of asphalt by adding water to heated asphalt and foaming it. Use of warm mix reduces the energy
consumption in heating, thus helping reduce CO2 emissions.
3 Transformation of the material storage system
Reducing water in aggregate, which is the raw material of asphalt mixture, enables to lower energy consumption
in the aggregate incineration process, thus reducing CO2 emissions.
4 Reform of the plant system
CO2 emissions can be reduced by lowering the amount of newly used consumption energy by recycling exhaustgas and heat from plant operation for heating and processing aggregate.
5 CCU
The external CO2 emissions of a plant can be reduced by absorbing CO2 emitted at the plant using the technology
to absorb CO2 with concrete. We are also promoting research and development for absorbing the CO2 emitted
from asphalt plants at concrete plants.

N i kko C o r p o rate R ep o r t 2 0 2 3 60

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Risk Management

6 Transformation of the mixture delivery system
CO2 emissions can be reduced by lowering energy consumption by improving production efficiency of mixture
through establishment of technology for extending the distance of mixture transport and improving transport
efficiency from the plant to the destination.
7 Electrification
Assuming that the use of CO2 -free electricity would spread, we are considering development of an all-electric
plant to replace fossil fuels by promoting the electrification of drying and heating equipment.

Road
map to Carbon
Neutral at Asphalt Plant
Road map for the developmentof carbon-neutral
AP products
材料の製造・運搬 材料の貯蔵・管理

燃料転換

プラントシステム

CCU

制御

合材の貯蔵

The Low Carbon Task Force (LCTF) formulates and drafts the carbon
neutrality-related plans and promotes company-wide response to
climate change.
The Risk Management Committee evaluates and identifies climatechange-related impact on the Company and manages the effects.
Furthermore, it plays the role of integrating the impact of climatechange-related risks into company-wide risks by closely collaboratingwith the Committee of Inside Executives.
The Committee of Inside Executives discusses the impact of andresponse to climate change and evaluates them. It also formulates
policies, key measures and targets, and action plans for minimizing
climate risks. The contents of the discussion at the meetings of
the Committee of Inside Executives are reported to the Board of
Directors twice a year or more.
The Board of Directors performs the supervisory function, regularly
receiving reports on climate change-related action plan and risk
evaluation from the Committee of Inside Executives and the Risk
Management Committee, and deliberating on those reports.

合材の運搬

Metrics and Targets
実装可能技術
骨材水分管理強化型ヤード▲5〜14%▲30〜100%▲15〜25%

機械式
フォームド装置

液体バイオマスバーナ

ガスバーナ

Nikko Group aims to realize virtually zero CO2 emissions from its
business activities and Nikko products it sells in 2050. It promotes
the development of products that contribute to the reduction of
CO2 emissions as well as thorough energy saving activities andproactive utilization of renewable energy. Including these responses,▲20%※

RAVシステム※脱臭装置導入プラントとの比較

2021

小規模テスト▲50％▲5%予備乾燥装置（からっとサンド）2022

F/0ドライヤ

Verified Scope 1, 2, and 3 CO2 emissions (t-CO2)

基礎研究▲30〜50％▲30〜100％

小規模テスト2023▲50〜100％

粉体バイオマスバーナ

中温化合材対応
プラント設備（130℃対応）

基礎研究（粉体+油）フィールド

基礎研究▲15〜25%

フィールド

乾燥砂製造装置（エコサンド）▲15%

アンモニア/水素 バーナ

基礎研究

市場導入調査小規模テスト

都市ガス
低NOXバーナフィールド

生コンスラッジ
CO2固定化装置

▲5%

交流式
Rドライヤ

新バーナ制御装置

基礎研究

フィールド

小規模テスト

基礎研究

フィールド

フィールド

小規模テスト

小規模テスト

材料最適化管理システム

小規模テスト
小規模テストフィールド

同時検討・開発

フィールド

2026

Scope 1 and 2

フィールド

合材用
サテライトサイト

フィールド

基礎研究

乾燥材料
貯蔵・輸送装置

2028

2029

フィールド

アンモニア/水素
ハイブリットバーナ

オール電化
プラント

アンモニア/水素
バーナ(大型)

2050

AP排ガスCO2
回収システム

燃料電池
利用システム合材工場外の排熱利用技術セントラル
プラント構想

430

305

341

353

2,639

2,454

2,354

191

Purchased products and services

Emissions in upstream of the products purchased(including raw materials and office supply)

39,07348,002

46,876

40,9582

Capital goods

Emissions in upstream of capital investment thathas been recently introduced

2,137

3,946

2,278

2,342

3

Fuel- and energy-related activities
not included in Scope 1 and 2

Emissions from mining, refining, etc. of the fuel used forburning and generating electricity in Scope 1 and 2

367

328

321

314

4

Transport, delivery (upstream)

Procurement and transport of raw materials and parts, andshipment of products (costs borne by the company)

26,386

24,67027,02028,613

5

Waste from the business

Waste disposal, recycling of goods other thanvaluables, emissions from transport

115

61

42

41

6

Business trips

Emissions from business trips by employees (rail service and airplane)

84

83

85

91

7

Commuting by employees

Emissions from employees’ commute (rail service, bus,
ship, automobile, motor bike)

310

304

310

329

Emissions from operating asphalt plants (AP) sold1,091,313

620,840

718,339559,136

Emissions from operating batching plants (BP) sold

33,716

20,58629,82928,367

Emissions from operating conveyors sold

101,819

57,07546,052

76,5811,226,848

698,501

794,220664,084

12 Disposal of products sold
[Development investment](million yen)

Vs. FY 2013

300
5

2,500
2,000

5
5

1,500
5

1,000

5

500

2
2

1

2021
①Fuel transition

61 N ikko Corpo ra te R epo r t 2 0 2 3

2

5

5

3

3

2

2

2

5
3

4

2

250

3

200

4

150

3

3

3

4

2
2

2

100
50

1

1

1

1

1

1

1

1

1

2022

2023

2024

2025

2026

2027

2028

2029

0
2030 (ﬁscal year)④Transformation of the mixture transport system⑤CCU

Development investment②Warm mix

③Reform of the plant system

Emissions from disposal of AP, BP, and conveyors sold

Total

3,000

0

Emissions from manufacturing, processing, and experimenting

Total for Category 11[Net sales](million yen)

FY 2022

Electricity use at all companies including dorms

11 Use of products soldNet sales target of decarbonization and low-carbon products andinvestment plan (the figures for FY 2021 and 2022 are results)

FY 2021

Combustion of fuels

フィールド

▲100％

2030

FY 2020

Use of electricity

小規模テスト2027

FY 20132
1▲30〜35%

低温化合材対応
プラント設備（90℃対応）

Target activities

1

Scope 3

合材再加熱装置
基礎研究

フィールド

（粉体+ガス）フィールド

Category

基礎研究

LNGサテライトフィールド

小規模テスト2025

オカモチ

同時検討・開発2024

the Group has reduced the verified Scope 1, 2, and 3 CO2 emissions
to 56.8 in FY 2022 when the emissions in FY 2013 are set at 100.
(There are discrepancies with previously verified figures, as wechanged the conditions for service life for some asphalt plantrelated products.)

Utilization of renewable energy-based electricity
Nikko Co., Ltd. switched all electricity used at its head office factory
to electricity generated from renewable energy sources in March
2022. The move significantly reduced the Scope 2 CO2 emissions
from 2,354t-CO 2 in FY 2021 to 191t-CO 2 in FY 2022. Goingforward, we will pursue this initiative also at sales offices and groupcompanies throughout Japan.
Ratio of introduction of electricity generated fromrenewable energy sources (green electricity) at Nikko (nonconsolidated)
FY 2021 7.9% FY 2022 91.8%
RE100 achievement target: FY 2030 at the Nikko Group in Japan

93

95

93

74

1,298,482

778,749

873,940

737,390

100.0%

60.0%

67.3%

56.8%

Interim targets (2030) of CO2 emissions (Scope 1, 2, and 3)

FY 2021 emission results: 2,695t-CO2 (Scope 1 and 2); 873,940tCO2 (Scope 3)2030 emission targets: 436,970t-CO2 (Scope 1, 2, and 3; down 50%
from FY 2021)〈Nikko Co., Ltd.〉
2021

2030
50%
reduction●CO2 emissions in Scope1, 2, and 3

2040

2050

80%
reduction

Achievementof net-zeroemissions

OffsetN i kko C o r p o rate R ep o r t 2 0 2 3 62

Establishment of Recycling-oriented Society, Early Restoration from Intensifying Disasters, Co-existence with Local Communities

3 Recycling of cement sludge

Establishment of recycling-oriented society
Since the 1970s, the Nikko Group has been pursuing thedevelopment of plants capable of recycling construction
and road waste materials for reducing the environmental
burden, thus contributing towards improving resource

productivity and establishing a recycling-oriented society.
We have been proactively implementing various initiatives
such as recycling of plaster boards and concrete sludge
towards minimizing industrial waste.

1 Recycling of asphalt waste〈more than 99% is recycled〉
To advance the recycling of asphalt mixture andconcrete waste materials, Nikko in the 1970s
commercialized asphalt mixture recycling plants andcrushing plants that handled resource recycling.
Since then, we have been continuously improving the
products, and as a result, have been recycling almost
all of the asphalt waste generated (more than 99%).
Currently, about 75% of the asphalt mixtures used
for paving roads are mixtures that use the aggregate
recycled from asphalt waste as raw material.

Flow of recycling pavement waste

Crushing andsegregationcrushing plants.

Recycled aggregates

Recyclingoriented
societydevelopment
cycle

offers plants forrecycling asphalt waste andAcceptance

SupplyAsphalt mixture
manufacturing plants

Volume related to dismantlement

Collection of wastefrom pavement works

exceed 3 million tons in 2039*. At the same time, the cost of
disposal has been soaring especially in urban areas as there
is only limited space available at controlled final disposalsites. *Estimate by Gypsum Board Association of Japan
Nikko developed and introduced a recycling plant thatenables recycling of plasterboards as solidification agent
used as soil improver at construction sites by applying its
proprietary heating, mixing and kneading, and drying andother plant-related technologies. It contributes to a recycleoriented economy by simultaneously achieving disposal ofplasterboards and manufacture of solidifying agent.
See “Development of Manufacturing System for Hemihydrate Gypsum
and Type II Anhydrous Gypsum,” an academic paper by Nikko engineers,for details. https://www.nikko-net.co.jp/product/pdf/technicalreport-2020_06.pdf

Volume related to new construction

2
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
20
28
20
29
20
30
20
31
20
32
20
33
20
34
20
35
20
36
20
37
20
38

1

20
1

0

20
1

20
1

9

0

Concrete sludge

Ordinary temperature and pressure
No chemicals used

Separation of solids
LiquidPrecipitated calcium carbonate CaCO3

Solid

PAdeCS Phosphorus remover
Source: PAdeCS Study
Group, Nippon Concrete
Industries Co., Ltd.

Early restoration from intensifying disasters

Carrying out

100

20
0

material: pharmaceuticals, paper, cosmetics, ferrite, condensers,
optical glass, coatings, rubber, and plastics. Phosphorus remover isalso expected to have many applications: rock phosphate substitute,neutralizer, night soil treatment agent, deodorizer, antiseptic, heavy
metal remover, and water-bloom suppressant. Precipitated calcium
carbonate absorbs CO2 in the refining process that could reduce
CO2. Nikko will contribute to technology development for recycling
cement sludge and its practical applications by closely working
with the ready-mixed concrete, secondary concrete products, andcement industries.

Various products using the recycled materials

200(year)

Prepared by Nikko based on the FY2013 Investigative Report for Discussion of Measures to Promote Recycling of Plasterboard Waste by Ministry of the Environment

63 N ikko Corpo ra te R epo r t 2 0 2 3

Contributes to CO2emission reduction(asphalt plant)

Trend in plasterboard waste generated(10,000t)
300

Flow of recycling concrete sludge
Exhaust gas from boilers(CO2 level of about 10%)

2 Recycling of plasterboards
Plasterboards, which are used for walls and ceilings of abuilding’s interior, are composite materials made of plastermolded into a board shape set between two sheets ofpaper. They have been used widely because they are cheap,
easy to install, and superior in fire resistance and soundinsulation. However, if they are disposed of directly into soil,
their main raw material of calcium sulfate and other organic
contents will be decomposed by microorganisms and may
generate hydrogen sulfide, a substance harmful to humans.
For this reason, plasterboards are required by law to bedisposed as industrial waste at a controlled final disposal
site.
With housing built during the high economic growth era
beginning to be demolished, the plasterboard waste volume
is estimated to reach 2 million tons in Japan in 2025, andCement sludge comes from residual concrete and returned
concrete generated during the manufacture of ready-mixed
concrete and secondary concrete products. Cement sludge
requires specific processes, such as dewatering and drying, before
being disposed of as industrial waste. Japan produces about 3.5
million tons of cement sludge every year, and the disposal cost is
5,000 yen to 10,000 yen per ton.
When cement sludge is separated into liquid and solid, precipitatedcalcium carbonate (CaCO3) is extracted from the liquid andphosphorus remover (PAdeCS) is extracted from the solid portion.
Various products use precipitated calcium carbonate as a raw

Recycled roadbed materials

Crushing
plant

Nikko GroupSUSTAINABILITY AND MANAGEMENT FOUNDATIONTo recover from intensifying natural disasters such as large
typhoons, severe rainstorms, and earthquakes, we start with a quick
recovery work of the Group’s damaged plants. In recent years,
it has rained a lot unexpectedly around the country, frequently
causing torrential damages. Natural disasters, including largescale typhoons and frequent occurrence of linear precipitation
zone, large earthquakes such as the Nankai Trough and Tokyo
Metropolitan near-field earthquakes, and the resultant tsunamis
and volcanic eruptions, are anticipated. The disaster risks facing
Japan area moving into a new stage. As the top manufacturer ofasphalt and concrete plants, Nikko Group focuses on ensuring earlyrecovery from disasters by closely collaborating with customers so
as to fulfill its supply responsibility.

Trend in natural disaster damage to Nikko plants
Number of cases (locations)
80
60

72
62

53

52

2018

2019

60

40
20
0

2020

2021

2022 (ﬁscal year)

Co-existence with local communities
Our Head Office is located in Akashi City, Hyogo Prefecture—theplace our factory was located when the company was established.
The Nikko Business Foundation has been offering scholarships that
do not require repayment since 1989 to domestic and overseas
students enrolled in universities and institutes of technology
offering a five-year program specializing in technology/engineeringin Hyogo Prefecture and to students from Hyogo Prefecture
studying in the Kinki region.
It is also offering research grants to those who are engagedin academic research related to technology development atuniversities and technology/engineering institutes in the Kinki
region. The recipients of these grants are not obligated in any way
to join the Nikko Group or to provide the results of their research
to the Group. It incorporates the strong feeling of the Nikko
Group “to contribute to the development of the local economy
and communities by providing assistance for human resource
development and technological innovations.”

Number of scholarships and grants offered so far(cumulative from FY 1989 to FY 2022)

New scholarships and research grants awarded in FY 2022

Number of scholarships awarded: 141
Number of research grants awarded: 197

Number of scholarships Number of research grants awarded: Two●awarded: Two
Kobe City College of Technology●Osaka Metropolitan(Research theme: development of resistance fusion bonding process
Universityof carbon fiber-reinforced thermoplastic using carbon nanotube● University of Hyogo
added resistive heating element and evaluation of bonding strength)●University of Hyogo
(Research theme: development of plastic that dissolves in ocean)N i kko C o r p o rate R ep o r t 2 0 2 3 64

Creation of New Customer Values

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Nikko brand products contributing to realization of low-carbon and decarbonized society
Nikko Group offers solid after sales service so that customers can use the products with ease of mind. In
addition to the nation-wide service network, we also carry out regular inspections to prevent troubles andprovide plant operator training to nurture engineers. However, the analog-type plant maintenance service until now was
based on post-incident maintenance where repair was carried out after malfunction and preventive maintenancethat relied on the experience and intuition of the service personnel. We are currently working on establishinga next-generation preventive and predictive maintenance that utilizes advance measuring equipment andcommunication network, in addition to introducing a new service model, aiming to create new customer values.
The other pillar of customer value creation is our responses to climate change led by CO2 emission reduction.
Customers of the Nikko Group led by the road pavement industry have been strengthening their initiatives
for realization of low-carbon and decarbonized society and the Group supports problem solving at customers
through technology and product development as well as offering of solutions towards its realization.

Creation of new values through DX
Stable operation of asphalt and concrete plants is
indispensable for improving the productivity of roadpavement and construction sites. To this end, it isimportant to detect the necessity of maintenanceservice in advance and take required action before

the operation status of the plant becomes unstable.
In order to resolve such issues, Nikko Group will
remotely monitor the plant operation status, catchsigns of malfunction based on data analysis, andreplace parts and carry out repair in advance.

Offering of new values(customer information database)Nikko service
divisions(CSC)

Nikko sales
divisionsNikko
development
and design
divisionsCustomer

Nikko

Data to be obtained

Plant

cloud
Number of rotations● Coolant temperature● Volume of residual oil● Operation time		● Overload● Alert signal			● Electric current					 ● Pressure ● Vibration					● Power supply voltage
Internet					 ● Image information					● Numberof operations ofthe drive unit●

1 Asphalt warm mix equipment (warm mix [foamed] equipment)
Nikko has developed Blue Cyclone, mechanical warm mix (foamed) equipment
required for manufacturing warm mixture, and has been offering it to the roadpavement industry, which has been actively incorporating warm mix as partof efforts to reduce CO2 emissions. The use of the product enables*1 a 6%
reduction in CO2 emissions compared with a conventional plant.

Mechanical warm mix (foamed) equipment Blue Cyclone

2 Fuel transition
Nikko has completed testing a small-sized model of asphalt mixture
manufacturing plant using a test burner fired by the next-generation fuelhydrogen instead of heavy oil. Similarly, it has completed the combustion test
phase of an ammonia burner and has embarked on the development of asmall-sized model. Nikko will continue developing these products to address
new fuels aimed at reducing CO2 emissions by considering the development
status of fuel supply infrastructure.
Hydrogen burners (in development)

Plant

Plant

Nikko’s area service staff
Contractor information●

 onitoring of plantM
status3 Enhancement of aggregate moisture management●Instant information
sharing with Nikko’s
service division●

 eduction of plantRlife cycle cost

The amount of water contained in aggregate has thebiggest impact on CO2 emissions in manufacture ofasphalt mixture. Nikko has been developing a system● etention of plantRproduct value

Offering of swift and precise support

We can propose appropriate advance maintenanceby accumulating various operation information,
inspection data, and repair and work history ofcustomer plants in the Nikko cloud and visualizing
operation status. Taking action after the occurrence ofmalfunction requires suspension of plant operations,which significantly lowers productivity. In addition tothe operation information of the plant, collecting andanalyzing facility environment information enables

to identify the cause of the problem. We also offer
plant failure prediction reports by analyzing theaccumulated data, which can be utilized to formulatea maintenance plan over the life cycle of the plant.
Visualizing the operation status allows to collect
failure information and identify the location of thefault. It enables to examine the cause without waiting
for an engineer to arrive and greatly shortens thetime taken for recovery.

In the new CRM (customer information database)being built, we are aiming to create new values bydeveloping a system that leverages IoT tools and AI
to connect customers and Nikko. We are envisaging
a future, where, in case of suspension of operationsof a plant, we limit the downtime to the minimum by

One Nikko Platform,
which connects customers and Nikko

65 N ikko Corpo ra te R epo r t 2 0 2 3

Replacement

Status of flat-rate service outsourcing count (cumulative)(cases)30

APBP

Total of 27

20
10
0

Total of 7
6
2021

22
1

5
2022

Total of 33
25
8(ﬁscal year)2023
As of the end of June

device that reduces the amount of water in aggregate
before the drying process, and it plans to make itavailable within the current fiscal year.

One Nikko Platform, which realizes new value creation

Introduction of flat-rate (subscription) service
For introduction of the next-generation predictive
maintenance service, we have introduced a flat-rate
charge to replace the existing charge system based oneach recovery project. We aim to contribute to improved
productivity and cost performance at customers bycarrying out regular repairs and parts replacement inaccordance with the long-term preliminary maintenanceplan and by reducing maintenance cost as well as
emergency post-incident repairs.

See the following pages for details of value creation inrealization of carbon neutrality.
● Technology Roundtable Talk (pp. 43–46) ● TCFD recommendations-compliant disclosure(pp. 58–62)*1 Nikko’s calculation for the CO2 emitted at a mixture plant.

Next-generation preventive and predictive maintenance
CRM Offering of new values

Customers who own asphalt and concrete plants havebeen driving forward various initiatives for realizationof low-carbon and decarbonized society. As theleading brand in plant manufacturing, Nikko Grouphas been offering various products and solutions tojointly solve the issues faced by customers.

Quality assurance anddevelopment divisions
Complaint information
Product development request
New customer needs

Improvement anddevelopment ofnext products

Information of
replacement partson EC websites

sending staff from a nearby Nikko Group base, utilize
data from CRM in new product development, andenhance customer contacts also in digital space, while
managing the life cycle of plants, which are customers’
assets, in asset management through next-generation
preventive and predictive maintenance.

Marketing division
Trade show
Product survey

Inquiry proposals
and comparison

Sales division
Productionplan

One NIKKO Platform
Next-generation preventive andpredictive maintenance
Periodic
inspection

Repair,maintenance,
inspection

Service division

Sharing information withthe design and manufacturing
divisions from the early stages ofbusiness negotiations

Conclusion ofcontract, order

Procurement andmanufacturing divisions
Collaboration with suppliers

Delivery,
construction

Information sharing
with contractors

N i kko C o r p o rate R ep o r t 2 0 2 3 66

Human Resource Development and Improvement in Job Satisfaction

SUSTAINABILITY AND MANAGEMENT FOUNDATION
Indicators and targets

To realize its vision of “Making the world a resilient and gentle place, ” Nikko has defined thefollowing three types of human resources who would develop new markets, products, andservices by leveraging the Company’s high technological prowess.

Human resource thatreinvents for the future

Human resource thattakes on challenges
without fear of failure

Human resource that
respects andcollaborates withdiverse coworkers.

Category

Indicators

Ratio of female
managers

Human resource
development
policyTo realize its vision of “Making
the world a resilient and gentle
place, ” Nikko needs humanresources who would develop new markets, products,
and services by leveraging the Company’s hightechnological prowess. In particular, we believe it is
an important factor for further growth of employees
and realizing the Company’s vision that individual

employees independently carry out reforms and takeon challenges while respecting and collaborating withdiverse coworkers and others outside the company.
To this end, we will drive forward initiatives todevelop mechanisms to nurture independent humanresources, create connections with people inside andoutside the company, and support cooperation for
new reform and challenges.

Creation of opportunities for having dialogue with the management team and managerial employees for instilling the vision●Improvement of training system●

Establishment and instilling of the concept of organization-wide human resource development

8.5 hours per employee(5,086 hours in total)

10 hours per employee

49,586 yen per employee(29.751 million yen in total)

50,000 yen per employee

100% for female and33.3% for male

100% for female and
50% for male (FY 2025)

Ratio of female
employees

14.5% *including executives

22.5%

Attrition rate(new graduates)

One year from joining the company: 3.1%
Three years from joining the company: 7.7%

One year from joining the company: 3.0%
Three years from joining the company: 7.0%

Number of occupational
accidents

Accidents with lost workdays: 1
Accidents without lost workdays: 7

Accidents with lost workdays: 0
Accidents without lost workdays: 3 or fewer

Number of death fromoccupational
accidents

0

Zero deaths

 entral Safety Training
CCentral Health Training●
Health classes

Same as left
(to be held continuously)

Ratio of employees
taking childcare leave

Concrete initiatives●

7%

Cost of training

In-houseenvironment
development
policies

Targets (FY 2030 or indicated)

0%Time spent on training

Based on this, we have set forth policies for developing human resources and in-house environment and havebeen disseminating these policies in and outside the Company.

Human resource
development policy

Results (FY 2022)

Training on health andwork safety●●

Situation by gender (Nikko Co., Ltd.)As the pre-condition forengaging in human resource
development towards realizing
Nikko’s vision, we believe that it is important for employees
to respect and feel respected by the diverse people in andoutside the company, and to develop an environment where

In-house environment
development policies

employees feel secure and energetically cooperate with eachother. For this reason, we have been pursuing initiatives fordeveloping a culture where individual employees respect thevalues of diverse coworkers and for improving the senseof safety, well-being, and job satisfaction of employees andtheir family as well as colleagues.

Concrete initiatives

Rehiring of employees who left for childbirth or child rearing and establishment of a rehiring system for them●Measures to promote utilization of annual paid leave●Introduction of workstyle that is not dependent on location such as work from home and telecommuting

Promoting active participation of women●

Active promotion towards job applicants, of being a workplace where women can play an active role●Awareness building to create a workplace culture where men as well as women can contribute to both workplace and family●

Realization of a flexible workstyle such as shortened working hour system, work from home, telecommuting, etc. and consideration of flexible working hour system●

Spreading a strong message regarding the rectification of long working hours from those at the top of the organization●

Personnel evaluation with focus on hourly labor productivity●

Fair evaluation for the use of childcare leave, shortened working hours, etc.

●

Proactive operation of the system to shift employees from non-regular positions to regular positions

67 N ikko Corpo ra te R epo r t 2 0 2 3

FemaleCareer track

535

27

Clerical work

2

42

Contract employees*1

47

19

*2

Master22

0

Senior*3

90Partner employees

014

Executive Officer

6

0

*4

Measures to support development of next generation●(people)
Male

Total

621

102

Average age

42.8

44.0

Average years of service

17.9

10.7

Average wage (10,000 yen)*5

755

358

*1 Contract employees: rehired employees who are post-seniors or post-masters (non-regular employees) *2 Master: employees rehired after retirement (non-regular employees) *3
Senior: employees who are post-masters with extended employment (non-regular employees) *4 Partner: part-time employees with no fixed term (non-regular employees) *5 Male andfemale average wage: While there is no wage gap between men and women in the same position, wage gap does occur due to differences in office organization and lengths of service.

Trend of the number of hires
fiscal year

(people)New graduates

People with prior work experience

Total

Male

FemaleMale

Female2023 (as of the end of June)

27

5

3

2

37

2022

26

6

19

2

53

2021

26

3

17

5

51

2020

13

0

17

4

34

2019

14

0

3

5

22

2018

19

0

6

1

26

Retention rate three years after joining（％）
New
graduates

92.3

People withprior work
experience

81.0

N i kko C o r p o rate R ep o r t 2 0 2 3 68

SUSTAINABILITY AND MANAGEMENT FOUNDATION
Introduction and operation of a new personnel system

The manager and the employee communicate through five one-on-one meetings a year regarding the established goal for close follow-up and goal management.

realization of the vision. We clarified employee treatment
reflecting their duties and roles (Nikko Version Job-based
Employment) and are operating the system to enableeach employee to independently select their career paths.

Based on the policies for developing human resources
and in-house environment, Nikko in FY 2022 introduced
a new personnel system aimed at promoting the growthand success of human resources who support theWhat we aim to achievethrough the system

Basic policies ofthe system revision

Promote growth and success of human resources
who support realization of 2030 Vision

Basic policies
Persuasiveness

2030
VisionFairness

Motivation

Key points of the revision
Activeinvolvement

Human
resources
Growth1

Adoption of personnel evaluation criteria that reflect characteristics of a job group

2

Clarification of personnel group for each grade

3

Strict implementation of promotion to section chief and above4

A system where both demotion and pay cut are possible

5

Evaluation from the perspectives of results and process6

Development of base pay and allowance system that are transparent and rational

Meeting items

When

Goal-setting meeting

April or May

Interim meeting

September

Fiscal year-end
meeting

February

Evaluation
meeting
Evaluation
feedback meeting

Purpose●Set forth goals for the current fiscal year for each employee being evaluated taking into account company-wide and departmental goals.

●

The evaluator grasps the progress of the goals set forth at the beginning of the term, and consider measures as needed.
If a situation that was not foreseen at the beginning of the term occurs and necessitates changes to the contents of thegoals, the goals are reset to carry out the procedure for changing goals mid-term.

●●

The evaluator grasps progress towards the goals set forth at the beginning of the fiscal year.
The evaluator communicates preparation for the evaluation meeting to the employee being evaluated.

April of next
fiscal year●

Confirm and evaluate the facts regarding achievement of the goals set at the beginning of the fiscal year and level of execution of the role.

June of next
fiscal year●

Provide feedback on the evaluation ranks and basic pay for the next fiscal year after company-wide adjustment.

●

Allotment of treasury stock with restriction on transfer to employees
engagement and promoting their awareness as a shareholder
for participating in management. Almost all employees havebecome Nikko shareholders and the Company expects theiractive contributions from a shareholder perspective to achieve
60.0 billion yen in consolidated net sales and operating marginof 10%, which are Nikko Group’s 2030 Vision goals.

Commemorating the 100th anniversary of its foundation,
Nikko allotted 100 shares in treasury stock to all employeesof Nikko Group (worth 298,000 yen) in September 2019.
Subsequently, the Company in 2021 introduced a system forallotting shares in treasury stock with restriction on transfer
to its employees with the main aims of improving employee

Status of allotment of shares in treasury stock with restriction on transfer
Presentation of skill map and support for learning through training program

Implementation period

September 2019

August 2021

August 2022

August 2023

Target857 employees(all employees including
non-regular employees)(1) Number of employees who
received president’s award(individuals, groups)(2) Employees who have achieved
10, 20, and 30 years in service(3) New hires (new graduates andmid-career hires)(4) Hires with prior work
experience other than thoseallotted treasury stock in 2019(1) Number of employees who
received president’s award(individuals, groups)(2) Employees who have achieved
10, 20, and 30 years in service(3) New hires (new graduates andmid-career hires)(4) Employees at affiliatedcompanies other than thoseallotted treasury stock in 2019(1) Number of employees who
received president’s award(individuals, groups)(2) Employees who have achieved
10, 20, and 30 years in service(3) New hires (new graduates andmid-career hires)(4) Employees at affiliatedcompanies other than thoseallotted treasury stock in 2019

Target857 people

106 people

169 people

140 people

Number ofshares awarded(per person)

100 shares

100–1,000 shares

100–1,000 shares

100–1,000 shares

Price at whichshares are awarded

2,980 yen

687 yen649 yen

675 yen

Period of restriction
on transfer

3 years

15 months

15 months

15 months

The new personnel system clarifies skills required of each grade and we actively support each employee to acquire
skills suitable for their careers through various training programs.
Skill map for career track and managerial staff
Item

G1

G2

G = grade JG = job grade

G3

G4
Logical thinking ability

Ability toraise concerns

JG1

JG2

Communication skills

Interpersonal
skills

JG3

Critical thinking ability
Lateral thinking ability
Multifaceted perspective
Having insight, bird’s-eye view
Ability to negotiate
Leadership

Listening skills
Presentation skills

Job execution skills

Management strategies

Understanding Nikko’s products and services

Formulation of functional strategies

Marketing

Formulation of business strategies

Formulation of business strategies and resource distribution plan, future insightMarketingAccounting, financePeople, organization

Financial analysis
Business manner, communications

Team management

Organizational management

Business plan, corporate financeCorporate culture development, organizational development

Progress management and time management
Understanding of laws, regulations, specs regarding job execution
Understanding business processing procedure of the department

Operations

PDCA cycle

Risk management

Business improvement

BPR

SMART goal setting and thorough goal management
In goal setting, we aim to ensure that each and every employee sets goals with SMART in mind to enable fair evaluation.
SMART in goal setting
Requirements, meaning

Key points

S

Specific (Is it specific?)M

Measurable (Can it be measured?)A

Achievable (Is it achievable?)R

Related (Is it linked to higher policies?)

It describes goals that are linked to those of the company and department.

T

Time-bound (Is the deadline clear?)

The deadline for achieving the goal is clearly presented and it is adequate.

69 N ikko Corpo ra te R epo r t 2 0 2 3The content is clear and easy to understand also for a third party.

Development of environment ensuring occupational safety and health

Annual targets
Accidents
with lost
workdays

Trend of occupational accidents

0

Accidents
without lost
workdays

3 or
fewer

Ratio of accidents
with lost workdays(Nikko Co., Ltd.: FY 2022)
0.0(number of accidents)

FY 2018

Nikko
Group

The level of goal achievement has been converted into numbers or quantified
It describes procedures and steps towards achieving the goal.

and special health examination for employees with focus on
improvement of personal as well as workplace environment. In
the manufacturing divisions, which are associated with higher
risks of accidents, the Group aims to achieve zero occupational
accidents through the enhancement of education and support.

Nikko Group is ensuring compliance with safety and healthrelated laws and ordinances and improving its health andsafety management level through company-wide training
programs such as Central Safety Training and Central HealthTraining. It is also making sure to implement stress level tests

Contractors(Nikko-related
local projects)

FY 2019

FY 2020

FY 2021

FY 2022

Severe accidents

0

1

1

0

0

Accidents with lost workdays

3

1

1

2

1

Accidents without lost  workdays

5

4

3

10

6 (including 2 accidents during commute)

Total

8

6

5

12

6

Severe accidents

0

1

0

2

2

Accidents with lost workdays

0

2

7

6

4

Accidents without lost workdays

6

8

6

9

3

Total

6

11

13

17

9

N i kko C o r p o rate R ep o r t 2 0 2 3 70

Employee Roundtable Talk

SUSTAINABILITY AND MANAGEMENT FOUNDATION

Vision’s and mission’s connection with my work
Shiozaki : I am serving as a staff member of the Sustainability
Committee Secretariat. I belong to the Fund Section of the
Financial Department and am engaged in payment and collectionof funds. First of all, please tell us the relationship of the visionand mission with your own work and how you perceive them.

Naoki Taniguchi

Quality Assurance Office,CEO’s Office

Employee

Roundtable

Kohka Ning

Service Planning Department,
Business Division

Talk

For Improvementof Job Satisfaction
and Achievementof 2030 Vision

Nanako Kawasaki

Mechanical design department,
Technology Division

In February 2022, volunteering employees started Nikko Mirai Project aimed at redefining Nikko’s
corporate philosophy. Based on the discussions at the project, the mission of Nikko Group wasclarified as “Update the social infrastructure by leveraging engineering that is one step ahead ofothers.” Group employees share “Making the world a resilient and gentle place” as the future (vision)
the Group wants to realize through the mission. Small meetings of top management and employees
also have been held and the new corporate philosophy has been shared and put into practice.
Along with redefinition of the corporate philosophy, Nikko revised the personnel system so thatits employees can play active roles and feel their own growth towards achievement of 2030
Vision. Five employees discussed the formulation and instilling of the vision, how they perceive theoperation of the new personnel system, their expectations on achievement of 2030 Vision, and thechallenges they find in achieving it. (The talk was held in August 2023.)

Taniguchi : After stints at AP design and the Corporate Planning
Department, I am now working in the Quality Assurance
Office where I verify the quality and consider mechanisms formaintaining and improving quality. When I was working at the
Corporate Planning Department, I participated in the project toformulate the vision and mission. I believe that the high quality
of Nikko products is something that cannot be compromised
because our vision “Making the world a resilient and gentle place”
is achieved through customers using Nikko products. I would
like to make contributions from the aspect of quality assurance
as I feel “engineering that is one step ahead of others” meansoffering Nikko products and services, backed by technologicalprowess and quality, to customers at a reasonable price.
Kawasaki : I am engaged in the design of BP. Initially when I
heard Nikko’s vision, I felt the scale was big, but now I consider it
as a future we can reach by fulfilling the mission. In design work,
I repeat trial and error in pursuit of optimization including timeand cost, as I believe that if we can design products addressing

Development Department, Technology Division

71 N ikko Corpo ra te R epo r t 2 0 2 3

Koji Shiozaki

Sustainability Committee Secretariat(Financial Department, Administrative Division)

Kagawa : I analyze and measure machines using analysis
equipment at the Development Department. I joined Nikko froma chemicals manufacturer in mid-career recruitment. When theDevelopment Department or other departments find an issue
with durability and other properties of a device, my main duty is
to analyze the cause and offer tips to solve the issue. I believe it
will be “engineering that is one step ahead of others” if the resultof the analysis of my team can increase the added values of a
product.
Ning: I am supporting customer plants in the Customer
Support Center. Safe and secure operation of Nikko plants is
indispensable for realization of the vision. I feel that monitoring
the operations of AP, BP, and environmental plants right fromthe time they are shipped and offering complete support tocustomers is linked to the realization of “Making the world
a resilient and gentle place.” We also handle inquiries from
employees engaged in service in Thailand and other bases in
Asia, and I can very much relate to the mission “Update thesocial infrastructure by leveraging engineering that is one stepahead of others” when considering the local situation.

Expectations on the new personnel system
Shiozaki : In the last fiscal year, Nikko revised the personnel
system, which was fully implemented in April 2023. The
revised system is aimed at improving the persuasiveness andfairness of the personnel evaluation and raising the motivationof employees. What kind of changes would you like to seein the future? I hope that flexible workstyle will be promoted
further and that the evaluation will become more convincing
based on the achievement compared with the goal.
Taniguchi : I am hoping that the evaluation will become moreconvincing because the method of setting goals, which isthe base of evaluation, was standardized company wide. I
am sure that managers have difficult tasks but I hope goals
will be set in such a way so that there are no disparities in
the levels between divisions in order to make the evaluation
results more convincing.

Kumiko Kagawa

the increasingly diverse and sophisticated needs of customers,
we will be closer to realizing “engineering that is one step aheadof others.”

Kagawa : I am not paying too much attention to personnel
evaluation because what is most important to me is that I canenjoy the work I want to do (laughter). I was able to clearlystate six goals from the medium- to long-term as well as
short-term perspectives considering my growth and ability
development, and it became clearer as to what I want to do
and what I should do, and by when. I feel it would be easierto evaluate because what I achieved becomes clearer as thetime passes. In my previous job also I set goals and had a goal
management meeting every six months, so I feel comfortablewith this, but I find Nikko’s goal setting meticulous.
Kawasaki : The design division also had semi-annual goal
setting, but I did not feel that it was closely linked to personnel
evaluation. We are now required to set personal goals that arelinked to departmental goals, so promoting standardizationof products and development of database, which are theissues of the department, are also my personal goals. I havestrong motivation to contribute to the achievement of thedevelopmental goals, but I am a little concerned about how much
I can do because of the time constraints due to childrearing.
Taniguchi : It would be good if it can remove worries that the time
restrictions from childrearing or other reasons may work negatively
in evaluation. I also took childcare leave, and the number of male
employees taking childcare leave is also increasing. Even after
returning to work, the time we can work decreases temporarily
because we use shortened working hour system depending on
the situation. I think productivity will improve if the recognition
spreads that we are evaluated in a fair manner based on the levelof achievement compared to the goals and processes rather than
the time we worked. The new system includes five one-on-one
meetings a year with the manager for close goal management.

N i kko C o r p o rate R ep o r t 2 0 2 3 72

SUSTAINABILITY AND MANAGEMENT FOUNDATIONThis will offer a forum for communication including own requests
between manager and subordinate on a regular basis and I hope
this will lead to improved employee satisfaction.
Shiozaki : The Administrative Division tends to set goals that
attach importance to the policies of the Company at the top,
so I feel it is better if the team has an opportunity to discuss
the departmental goals for the Fund Section of the Financial
Department. I think I understand the issues and goals of thedepartment to a certain extent, but it probably becomes easier
to incorporate the team’s goals in individual goals if all members
discuss the team goals together and share them.

Ning: In customer support, the departmental goals wereannounced in advance, so I was able to refer to themwhen setting my own goals. My ultimate goal is to raisecustomers’ satisfaction with swift and meticulous support.
Kawasaki : I have been involved in design for a long periodof time, so I also feel like trying something new. While I
would like to try the job of chief or section chief, I feel theburden may be heavy while I am engaged in childrearing. I
would like to convey my independent idea of career in detailin one-on-one meetings.

Learning opportunity and independent career choice
Shiozaki : The new personnel system presents positionbased skill map showing what is required of career track andmanagerial staff. It is indispensable to improve your skills forachieving growth. What are the training programs and learning
opportunities you wish to have? Also, what are your opinions
regarding career selection?
Kawasaki : I am in the ninth year with the Company and I did
not have many opportunities to interact with employees ofother divisions after the new hire training and follow-up training.
So, I feel I do not know much about the situation outside ofthe design division. If you become managerial staff, you willprobably have more opportunities for cross-divisional training,but it would be nice if there are opportunities to learn based on
the same theme before becoming managerial staff. Personally, I
want to exchange opinions with employees in similar positions inother divisions regarding nurturing of young employees, which I
am yet to get a grip of.
Taniguchi : The other day, I had a meeting with members ofthe manufacturing division of Ube Kohki, and I gained insights
regarding manufacturing technology as they had an approachdifferent from Nikko. We may come up with some interestingideas from diverse concepts if there are opportunities tolearn technologies and skills of not only Nikko but also Group
companies. Also, though there is the issue of language, it would
be stimulating if local employees of overseas group companies
also can participate.
Nei : It has been four years since I started engaging in customer
support, and I am interested in learning skills necessary forproviding thorough support. If I am well versed in PLC circuitsof plant control panel, machine, and electricity, I can respond to
customers more quickly. Currently, the Company is developing
a new control panel, so I would like to have an opportunity togain knowledge regarding the new control panel, machine, andelectricity.
Kagawa : I joined the Company with prior job experience so
I fully understand that the Company expects me to be workready. However, it was my first time to engage in development ofconstruction machinery such as AP and BP, so I was initially perplexed

73 N ikko Corpo ra te R epo r t 2 0 2 3

as my knowledge of industry terminology and product specs waslimited. It is something that can be solved after some time, but if there
are opportunities to participate in lectures on industry knowledge
and technical terms, and opportunities for asking questions together
with other employees who joined the Company as mid-career hires
at around the same time, we would be able to start communications
smoothly also with other departments. The number of employees
joining in mid-career hiring is also increasing and if they flood original
employees with questions, it would affect their work. So, I would
appreciate if the Company considers having introductory training for
mid-career hires.
Ning: I have been in customer support for about three years
now, and I feel great satisfaction when I solve a customer’s
trouble. As a future career, I hope to gain more specialized
knowledge and skills such as control program. Going forward,
I will be taking calls from group companies in China and other
Asian countries, so I want to gain the knowledge and skills I willneed for that. I have not really had opportunities to discuss
my career with my superior, so I will do so in the one-on-one
meetings.

For achievement of 2030 Vision
Shiozaki : Your workplaces must be implementing various
initiatives toward achievement of 2030 Vision. What support
do the individual employees need to execute their daily duties
while being clearly aware of achievement of the vision? Thisis something I felt when I attended a group meeting withthe president. Directly talking to the president boosted mymotivation. I was able to confirm the direction the Company isheading and clarify the relationship between that and my job.
I feel that the sense of unity of Nikko will increase if we havemore opportunities to directly talk to the upper managementin addition to direct superiors.

would teach what to those who join the company in midcareer hiring when they come to the workplace. It is difficult
to address this only through OJT. It is not so often that people
well versed in AP or BP join the company even if they join
through a system similar to job-based hiring, so it would begood if they are given a certain level of knowledge before
assigning them to the sites. The number of veteran employeeswith lots of experience and engaged in training on site is also
declining due to retirement, therefore it would be a good start
to prepare introductory manuals for employees with prior job
experience.

Taniguchi : I understand that we are in the internal investment
phase towards 2030 Vision. I feel it is necessary to makeinvestment to resolve the issue of jobs becoming dependent
on individuals. Especially in manufacturing and design, there
are many operations that only certain individuals can handle,
which results in a situation where the employees cannot
take leave or transfer to another department. If we prepare
manuals for operations so that anyone can achieve a certain
level of results, it becomes easier for male employees totake childcare leave, and this increases the chance of getting
a transfer to a desired department or organization. We
are increasing the number of employees for the businessexpansion phase, so I would like to accelerate the companywide initiatives.

Ning: In customer support, the number of remote maintenancecontracts has been increasing and we can swiftly confirm
where the trouble is. However, if there is no remote contract,
we can respond only through telephone calls and it takes
time to solve the problem because the amount of information
regarding the cause of the trouble is limited. I am hopingthat the Company would continue investing, as securingexperienced operators and enhancing remote support service
are indispensable for improving customer satisfaction.

Kawasaki : As Kagawa also pointed out, it is not clear who

Shiozaki : Thank you all for your valuable opinions today. This
roundtable talk was new and very beneficial because my work
experience is limited only to the Administrative Division. I will
share your opinions today with the Sustainability Committee
Secretariat and personnel and general affairs divisions andutilize them in improving employees’ job satisfaction.

Taniguchi : I have experience working in different departmentsof AP such as corporate planning, and quality assurance and I
feel my views have widened. There are cases where employees
left the Company because their transfer wishes did not cometrue, so I hope the one-on-one meetings with managers would
boost freedom of career selection. Meanwhile, it is not realisticthat all employees transfer to departments of their choice.
So, it would be good to have a procedure in place for transfer
between departments such as open application system or FA
system. If you can dedicate yourself to the work you want todo, you will be able to feel your growth, and the job satisfaction
also increases.
Kagawa : I want to contribute to the growth of Nikko by training
myself as a professional of analysis, so I wish to work in thecurrent department for a long time. In my previous job also I
was engaged in analysis, but they closed down that department,
and I chose to change jobs rather than transferring within theprevious company, and joined Nikko. I would like to hone mycareer further as a specialist.

N i kko C o r p o rate R ep o r t 2 0 2 3 74

Outside Director Roundtable Talk

CORPORATE GOVERNANCECORPORATE GOVERNANCE

Initiatives for Achieving 2030 Vision
and Improving Corporate ValueAt Nikko, we have positioned the 2024 Medium-Term Management Plan as the investment
phase for achieving 2030 Vision, aiming for business expansion from FY2025. The threeoutside directors of the Company discussed how to monitor the initiatives aimed at realizing
the 2030 Vision as well as the effectiveness of the Board of Directors (held in August 2023).

Creating robust, people-friendly cities around the world.

Shigeru Sadakari（Appointed in 2022）
Outside Director
Nomination andRemuneration Committee
Member05
75 N ikko Corpo ra te R epo r t 2 0 2 3

Outside Director Roundtable Talk・ ・・・・・・・・・ 76
Roles of the Board of Directors andAudit & Supervisory Board・ ・・・・・・・・・・・・・・・・ 80Compliance and Risk Management・ ・・・・・ 88
Executives・ ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 89

Rika Saeki（Appointed in 2021）
Outside Director
Nomination andRemuneration Committee
MemberSadakari : From the current fiscal
y e a r, t h e r e a r e t h r e e o u t s i d e
directors, and the percentage ofoutside directors on the Board of
Directors is slightly down from 44%
last year. Outwardly, it looks as if theBoard of Directors’ independence
has come down, but including thethree outside Audit & Supervisory
Board members there are six outside
officers, who have been able to oversee the management based on
their respective experiences and insights. So, I feel there has been no

Effectivenessof Board of
Directors andquality of
discussions

Masafumi Ishii（Appointed in 2021）
Outside Director

substantial changes to its independence.
Ishii : Some of the Outside Audit & Supervisory Board members haveexperience in managing manufacturing enterprises, and the percentage
of outside officers including them is 46%, close to half, which I thinkis an adequate level of independence. The six outside officers, morethan half of whom have experience in managing organizations including
companies, also possess specialized knowledge in ICT, finance, global
matters, financial accounting, and legal and risk management. So, there issufficient diversity. As for quality of discussions, outside officers express
their views freely and actively without pandering to the management, andfulfill the function of management supervision in my opinion.

N i kko C o r p o rate R ep o r t 2 0 2 3 76

CORPORATE GOVERNANCE

Active participation of
women is indispensable forrevitalization and growth of theorganization and I am looking
forward to definitive actions
on this high priority theme.

Saeki : Two years have passed since I was appointed as the first female
director of Nikko. From this fiscal year I am also a member of theNomination and Remuneration Committee. There are also meetings
for outside officers to exchange opinions with Audit & Supervisory
Board members and opportunities for outside officers to exchange
information with executive officers who supervise the business divisions.
The Company also holds preliminary briefings of the proposals to bepresented to the Board of Directors meetings, which is a progress interm of establishing an environment for us to gain information useful for
decision-making discussions prior to the Board of Directors meetings.
At the time when I was appointed, I used to be given a large volume ofmaterials just before the Board of Directors meetings, which was often
difficult to process fully, but now I have a deeper understanding of theissues faced by Nikko, and I am able to proactively suggest a path tosolving them from an outside perspective.
Sadakari : Regarding the improvement in the independence of Boardof Directors sought by shareholders and investors, from a longterm perspective, I don’t think it will be a problem for Nikko if outside
directors have a majority. Even now the major part of decision-making
discussions is carried out by the president, chairman, CFO, and theoutside officers including Audit & Supervisory Board members. Internal
directors responsible for the execution of specific businesses have athorough discussion at the executive officers’ meetings in advance,
so they sometimes tend to make the same statements at the Boardof Directors meetings. I believe that the best decision can be madethrough discussions from an outside perspective over whether there
are any overlooked risks and whether there are any other options, after
proposals are refined by the management and presented to the Boardof Directors.
Ishii : A simple question from an outside perspective often triggers
further discussions. The rising global inflation following Russia’s invasionof Ukraine meant that the precedents set under the deflationary
economy so far are no longer applicable, and proposing flexible pricing
strategies in response to rising raw material and labor costs will notwork with a deflationary mindset. There have been many situations
where outside perspectives and ideas provide new insights duringsignificant changes. I feel mutual trust has grown as the Company
responds to outside officers’ questions and views and the management
provides appropriate answers.

77 N ikko Corpo ra te R epo r t 2 0 2 3

Saeki : To be honest, right after my appointment, I had the impressionthat the Company was a male-centered organization as I could not see
any female faces. Recently, I have had an opportunity to directly talkwith a group of female employees and I was able to listen to various
requests from them. I reported the outcome of the meetings at a Boardof Directors meeting, and made suggestions regarding work style offemale employees and their fair evaluation. The Company has alreadyembarked on promoting flexible workstyles and revising the personnel
evaluation system, although this is not an easy task as it requires achange in the prevailing mindset. Active participation of women is
indispensable for revitalization and growth of the organization and I am
looking forward to definitive actions on this high priority theme. I would
also like Nikko to actively promote hiring of foreigners, but providing
support to their families is imperative for them to play an active role. It
is also necessary to raise understanding regarding LGBT community andbe considerate of religions, so I would like to strive to foster a corporate
culture that embraces diversity and inclusion.
Ishii : It may take some time before we see natural born female
managers, but the ratio of newly hired female graduates and female
mid-career hires has increased, and the Company also has built animpressive dormitory for female employees. The Company will alsoneed to hire talented international students from countries such as
Thailand, Indonesia, and Vietnam in order to accelerate the expansion
into Southeast Asia. I would like Nikko to consider increasing personnel
exchanges with overseas bases in order to develop a workplace where
diverse employees can demonstrate their abilities to the fullest.
Sadakari : Ensuring diversity is indispensable for sustainableimprovement of corporate value. So, it will be good to increase crossborder learning opportunities including interactions with a different
culture also for Japanese employees. While classroom-based programs
such as language training have been put in place, you learn morethings through actual experiences and therefore it is necessary tofirmly nurture the soil for fostering global human resources throughactual practice at overseas bases. With the source of growth shifting tooverseas markets, I am looking forward to that as a pillar of the humanresources strategy. As for the quality of discussions at the Board of
Directors meetings, we set aside time for continuous deliberations torepeatedly report on important management issues, and also discuss
new measures. The Board of Directors continuously deliberates on theimportant issues and risks disclosed in the notice of convocation of
the general meeting of shareholders and securities report to ensure
awareness of the issues.
Ishii : Accurately understanding the progress in important management
issues is indispensable for overseeing management. Since initiatives foreliminating occupational accidents and the progress of DX are taken up
as subjects for continuous deliberations with detailed progress reports,
outside officers also have a grasp of the overall picture, and this leads
to deep discussions on measures necessary for the next stage. Saeki:
The progress of DX is followed up in detail as a subject for continuous
deliberations so that it can be discussed thoroughly at the Board of
Directors meetings. We cannot have individual discussions regarding
Nikko’s DX without understanding the actual situation, even if we canoffer general opinions. The information gap between the inside andoutside directors is reduced through preliminary briefing of agenda
items and initiatives on subjects for continuous deliberations.
Sadakari : From the current fiscal year, Nikko has started regularinteraction of executive officers supervising business divisions
with outside officers as part of efforts to reduce the asymmetry in
information between management and outside officers. This is anattempt to confirm the progress of concrete initiatives and receive
suggestions and advices from outside officers in order to achieve the2030 Vision and the 2024 Medium-Term Management Plan goals. I hope
it will be implemented in a way that is beneficial to both sides in order toachieve the medium- to long-term management goals.

Supervisory Board member also attends as an observer, and the sevenpeople responsible for audit and supervision of management will now
be holding regular discussions. As for the sharing of information andissues, in addition to the meetings between the president and outside
officers that are held for some time, steady progress is being madein developing an environment that serves as a monitoring board suchas meetings between outside and executive officers and preliminary
briefings of agenda items.

Ishii : I would like to thoroughly understand its processes as well as thereports of its results so as to be able to discuss the progress of themedium- to long-term management goals. I can now listen to the people
who are in charge of executing measures that are successful or arefacing new challenges, so I believe I am now able to express opinions
that are more to the point. In February this year, the six outside officers
visited the production site in Thailand with the aim of understanding thesituation at overseas subsidiaries as accurately as possible for future
discussions of strategies. Achieving profits at the Thai subsidiary, which
is at the core of the ASEAN business strategy, is an important taskthat we cannot afford to overlook for achieving the long-term targets.
We interviewed local Thai staff there to grasp the actual situation. The
subsidiary employs many foreign workers including Cambodians, andwe have understood that the impact of the COVID-19 pandemic, which
restricted the flow of people, was greater than imagined.

Ishii : Personally, the details I hear in meetings with the Audit &Supervisory Board members are really helpful. I am now able to confirm
minute details on individual issues being faced.

Sadakari : The way public works are carried out there is different fromthat in Japan, and we had been told that simply following the Japanese
way of doing things will not work well. Hearing directly from local staff
enabled us to deepen our understanding of the business environment.
Labor market is also different from Japan, so it is necessary to aim
for early profitability by raising the competency of human resourcesmanagement.
Saeki : As a new initiative that began in the current fiscal year, there isa forum for outside officers to exchange opinions. The full-time Audit &S a d a k a r i : Tw o y e a r s h a v epassed since the establishmentof the optional Nomination andRemuneration Committee, and I
think it is now in the development
phase. The achievements so
far are that the Company has
started discussions on what thedesign of officers’ remuneration
system should be, and that there
is a mechanism in place now for committee members to express
their opinions freely on the appointment of executive officers
or directors in response to proposals from President Tsuji,
the chairperson of the committee. Issues are that sufficient
discussions are yet to be held regarding how to align corporate
value improvement with performance-based remuneration andthat there are fewer opportunities for committee members tointeract with manager-level employees who are candidates for
executive officers.

Role of theNomination
andRemuneration
Committee

Saeki : It has not been long since I became a committee
member, but I would surely like Nikko to increase opportunities

Accurately understanding
the progress in importantmanagement issues
is indispensable foroverseeing management.

to have contact with executive officer candidates. Regarding
nomination of the next CEO also, I feel there is a need to deepen
the discussions bit by bit as to what method is the best for
Nikko to raise its corporate value in a sustainable manner.
Sadakari : At present, the main evaluation indicator for officers’
remuneration is the consolidated operating income. I feel there
is a tendency now to emphasize quantitative evaluation including
single-year sales performance of not only officers but also
employees. I think it would be good to consider steady initiatives
towards GX and DX from the medium- to long-term perspectives
and the efforts to improve employee engagement and othersuch measures as axes of evaluation. Financial performancefor a single year does have the advantage of being easy tounderstand as an evaluation indicator, but personally I would liketo make changes so that we can evaluate the steady plantingof seeds for the future and progress of structural reforms.
The outside members of the Nomination and Remuneration
Committee also have changed and I would like to carry out
deliberations with responsibility and awareness so that I will beable to say with confidence that “These are the findings of thecommittee” regarding remuneration and nomination.

N i kko C o r p o rate R ep o r t 2 0 2 3 78

Roles of the Board of Directors and Audit & Supervisory Board

Saeki : Progress of DX is also a
topic for continuous deliberations
and therefore I monitor it closely.
As a result of Nikko having
adopted separate IT tools foreach division, there was a delay
in information sharing between
divisions using differing tools. In
order to improve that situation, theCompany is building an IT platform
called One Nikko Platform that can be used in common globally.
It allows information to be shared across the entire value chain of
Nikko Group, streamlining operations and increasing the speedof customer service. I also have expectations regarding reductionof overtime and promotion of flexible workstyles, and these areimperative for achieving the 2030 Vision.

Monitoring
towards
achieving
Vision2030 goals

Ishii : In overseas business, I am paying attention in particular to theimplementation status of the ASEAN strategy centered on Thailand.
I am also looking at the Company’s forays into Vietnam, where thepopulation exceeds 100 million, and Indonesia, which has a large
market, by leveraging the production base in Thailand. While trying
to make the Thai subsidiary profitable quickly, it is also necessary tocontinuously invest in the surrounding countries. The key to ensure
success, of course, is human resource development. In addition tolanguage skill acquisition by Japanese employees, I would like to see
Nikko establish a nurturing program in a systematic way including
hands-on training at the overseas site. Focus should be on hiringand education as active participation of foreign employees is also
indispensable. I expect the Thai business model to have establisheditself with prospects of entering into Indonesia by the final fiscal
year of the 2030 Vision.
Sadakari : I am also paying attention to the efficiency of thedomestic business and return on invested capital in terms ofmonitoring the progress of 2024 medium-term plan and 2030
Vision. I would like to see Nikko break out of the situation where it
cannot become the price leader in Japan although we face limitedcompetitors and hold a 70% share of the market. Though theCompany is implementing measures such as standardization ofplants, the problem is that it is not receiving adequate compensation
for meeting the customization demands. Strengthening the
profitability of the domestic business is essential also for continuing
the investments in the growing Asian markets. Towards achieving
the ROE target of 8%, people will become more conscious of capital
productivity in the operation process if invested capital and capitalefficiency are managed by individual business divisions.
Saeki : Human resources strategy linked to management strategy
will become important for achieving the targets of 2030 Vision.
In the past two years, Nikko has improved personnel system andleave management system, and I recognize that it is making some
progress, but there is still significant room for improvement. It isespecially necessary to change the workstyle, including for male
employees, by establishing a flexible and employee-friendly work
environment where female employees, who could be temporarily
restricted due to life events, will be able to demonstrate theirabilities fully. Active participation of senior employees is also
indispensable and therefore I would like Nikko to focus on healthmanagement so that employees can work long and healthy. I would

79 N ikko Corpo ra te R epo r t 2 0 2 3

CORPORATE GOVERNANCE

Basic approach

I would like to carry out
deliberations with responsibility
and awareness so that I will
be able to say with confidence
that “These are the findingsof the committee” regarding
remuneration and nomination.

like the Company to work on improving health literacy of managerial
staff and employees. When you think of expansion into Asia,
strengthening hiring of foreign employees also should be given
importance from the perspective of human resource strategy.
Sadakari : Contributions to carbon neutrality is an important
challenge in Nikko’s sustainability strategy, and therefore it isnecessary to steadily lay the groundwork including technologicalinnovations. I look forward to Nikko making major contribution
towards solving the issues in the environmental field given its
position as a pioneer of the resource recycling economic modelin recycling asphalt and concrete waste. If the Company cancommunicate its cutting-edge initiatives in carbon neutrality andresource recycling more to the stakeholders, it would generate
more interest in Nikko. Active public relations activities have helped
in increasing exposure in local media, and the Company’s presencein the local community has grown. I would like to see the circle ofcommunication expand from Hyogo prefecture to the Kinki region
and further to the entire nation.
Ishii : Conducting business in emerging nations is accompanied byunforeseen risks such as political uncertainties and supply chain
confusions. It is important to prepare countermeasures in advanceassuming all kinds of situations. Currently Nikko has two businessbases: Shanghai in China and Thailand. Extending these points intolines, and then to expand them to a wider area will, in my opinion,
help in dispersing the risks.
Saeki : The Company will have to further bolster the service division
if it is to increase profitability. In addition to offering the nextgeneration preventive and predictive service based on DX at a fixed
rate, raising customer satisfaction through close collaboration ofsales and service using the One Nikko Platform is also indispensable
for boosting profitability. If remote operation of plants in Asia
can be carried out from Japan, it could lead to improvements incustomer convenience while also reducing operation risks. I believe
Nikko’s risks and opportunities lie in DX, GX, and overseas markets,and therefore I would like to contribute towards achieving the goalsof the 2030 Vision by controlling the risks and supporting theacquisition of business opportunities.

& Supervisory Board, we endeavor to clarify
management accountability, speed up businessexecution, increase the transparency of management
decision-making, and strengthen compliance in orderto ensure sound business management.

Nikko positions corporate governance as “themanagement governance function for maximizing
corporate value for our shareholders and otherstakeholders.” Under the Executive Officer system
built upon the Board of Directors and the Audit

Reason for adopting a corporate structure with the Audit & Supervisory Board structure
Outside Audit & Supervisory Board members arerespectively a person with management experience,a certified public accountant, and a lawyer and are
well-versed in the contents of Nikko’s business. Theyclosely cooperate with the outside directors, full-time
Audit & Supervisory members, and Internal Audit
Division to provide appropriate advices and thus
ensure the objectivity and neutrality of management
and supervision functions.

The Company’s decisions based on the on-sitesituation are made in an appropriate manner byhuman resources who understand and are capable ofputting into practice the Nikko Group’s Management
Philosophy. We have set the term of directors andexecutive officers as one year to clarify management
responsibilities while striving to separate theexecution and supervision of duties. Further, Nikko
appoints three outside directors as independent
officers to enhance corporate governance. The three
Governance structure

A full-time Audit & Supervisory Board member andrelevant staff members of Internal Audit Officeattend the meetings of these committees.

Nikko is a company with the Audit & Supervisory
Board. To smoothly execute business, we have acommittee of internal executives and other various
committees as consultative organs for the President.

Ordinary General Shareholders’ Meeting
Appoint/Dismiss

Appoint/Dismiss
ReportNomination andRemuneration
Committee

Board of Directors
9 Directors

ReportReportConsult （including 3 Outside Directors）

Audit

Audit & Supervisory Board
4 Audit & Supervisory Board Members（including 3 Outside Audit & Supervisory
Board Members）

Appoint / dismiss / audit

Committees,
projects
Present
opinionsGroup
companies

Audit

ReportGive
instructions

Executive
Committee

ReportCooperation

Accounting
AuditorJudge theappropriateness ofaccounting audits

Audit & Supervisory
Board Office（Secretariat of the Audit& Supervisory Board）

Cooperation

Cooperation

Proposepolicies（Committee of Inside Executives）

Present opinions / report

Director andPresidentInternal
Audit Office
Audit

Executive Officer

Management Strategies Committee（information exchange meetings forpresidents of subsidiaries）

Report

Audit

Audit

Present opinions/ report

Bamboo Group

Give
instructions

Exchange
information

GeneralManager,
Technology
Division

GeneralManager,Business
Division

GeneralManager,
Manufacturing
Division

GeneralManager,
Administrative
Division

GeneralManager,President
OfficeN i kko C o r p o rate R ep o r t 2 0 2 3 80

CORPORATE GOVERNANCE

Roles and composition of supervisory bodies
Organization

Board of Directors

History of ensuring management transparency and strengthening of governance

Audit & Supervisory Board Nomination and Remuneration Committee

2004 Increased the number of outside Audit & Supervisory Board members from two to three
2006 Established the Internal Audit Office and developed internal control system
Established the Compliance and Risk Management Committee

Composition

Chair

Head

Chair

6 inside members + 3 outside members ● 1 inside members + 3 outside members ● 1 inside members + 2 outside members● Representative Director and President is the chair ● Internal, full-time Audit & Supervisory Board Member is the chair● Representative Director and President is the head●

Deliberation of agenda details
regarding appointment anddismissal of Directors to besubmitted to Ordinary General
Shareholders’ Meeting● Formulation of successor
nurturing plan
● Deliberation of policies regarding
remuneration, etc. of Directors
and Executive Officers● Deliberation of policies regarding
performance evaluation of
Directors and Executive Officers●

Supervision of the duties
of Directors and Executive
Officers● Preparation of audit
reports● Determination of theagenda details regarding
the appointment anddismissal of an accounting
auditor●Resolution of matters
including determinationof the basic management
policies● Supervision of theexecution of duties by
Executive Officers, etc.
●

Purposeandauthority

2000 Carried out reform of the Board of Directors, introduced the executive officer system

Ratio of independent
outside officers

33％

75％

67％

Number of meetings
in FY 2022

13

15

3

OfficeCorporate Planning Department

Audit & Supervisory Board Office

Corporate Planning Department

Inside directors

Independent outside officers

2007 Shortened the term of directors from two years to one year
2015 Appointed an outside director
2016 Increased the number of outside directors to two
2017 Carried out the effectiveness evaluation of the Board of Directors
2018 Introduced the performance-linked bonus and stock compensation（shares with restriction ontransfer）system
2021 Increased the number of outside directors to four including a female director（three outside
directors including female director in 2023）
Established the Nomination and Remuneration Committee（optional）
2023 Established the Sustainability Committee
Trend in ratio of independent outside directors at Board of Directors
14

12
10

29

◆ Board of Directors

9 Directors（including 3 Outside Directors）+ 4 Audit & Supervisory Board Members（including 3 Outside Audit & Supervisory Board Members）
Chair：Masaru Tsuji（Representative Director and President）◆ Audit & Supervisory Board

4 Audit & Supervisory Board Members（including 3 Outside Audit & Supervisory Board Members）
Chair：Nobutaka Yasuda（Full-time Audit & Supervisory Board Member）

29

Independent Outside Director

29

2
0

Ratio of independent ofﬁcers

44

（%）

50

44

33
25

25

20

2

1
5

6

2015

40
30

17

4

〈Meeting bodies on the monitoring side〉

Inside directors

8
6Main decision-making bodies

Directors（people）

5

2
7

2016

5

2
7

2017

5

7

2018

6

4

2

2
8

6

2019

9

8

2020

10

3

4

0

9

9

5

5

2021

2022

6

2023

◆ Nomination and Remuneration Committee

3 Directors（including 2 Outside Directors）+ 1 Full-time Audit & Supervisory Board Member（observer）
Head：Masaru Tsuji（Representative Director and President）◆ President and Outside Officers Meeting（1 Inside Director + 6 Outside Officers）+ 1 Full-time Audit & Supervisory Board Member（observer）

Chair：Masaru Tsuji（Representative Director and President）〈Meeting bodies on business executive side〉◆ Committee of Inside Executives

6 Inside Directors + 1 Full-time Audit & Supervisory Board Member + 4 Executive Officers + Internal Audit Office
Chair：Masaru Tsuji（Representative Director and President）◆ Management Strategies Committee

Internal directors involved in strategic themes + Executive Officers + Divisional General Managers
Chair：Masaru Tsuji（Representative Director and President）◆ Compliance and Risk Management Committee

Head： Hiroshi Fujii◆ Safety and Health Committee

Head：Koichi Kawakami◆ Sustainability Committee◆ Personnel Evaluation Committee◆ M&A Examination Committee◆ Reward and Punishment Committee

Head：Koichi Kawakami
Head：Hiroshi Fujii

Head：Hiroshi Fujii
Head：Hiroshi Fujii◆ Finance Committee◆ Personnel System Committee◆ Development Technology Committee◆ Improvement Activity Committee

Head：Hiroshi Fujii

Head：Katsuhiro Kawamura

81 N ikko Corpo ra te R epo r t 2 0 2 3

Head：Hiroshi Fujii◆ Tombo-kai Vitalization Committee

Head：Morie Okaaki◆ Product Commercialization Committee of eachbusiness
Head：General Manager of each businessdivision◆ Bamboo Group（information exchange

meetings for presidents of subsidiaries）
Chair：Masaru Tsuji

Main deliberation items at the Board of Directors Meeting in FY 2022
In FY 2022, Nikko formulated a new threeyear Medium-Term Management Plan towards
achievement of 2030 Vision. The meeting repeatedly
discussed expansion of the overseas (ASEAN)
business, the first pillar of the Company’s growth◆ Examining strengthening of human capital◆ Deliberation and review of M&As
◆ Revision of internal rules regarding

remuneration and bonuses for officers andexecutive officers◆ Revision of whistleblowing rules◆ Internal control evaluation policies

strategies, from various aspects, while outside
officers carried out visiting audit of local sites. The
Board also deliberated intensively and received
reports on the following matters.
◆ Self-evaluation questionnaire survey regarding

effectiveness of the Board of Directors◆ Review of strategically-held shares◆ Status of reports based on the whistleblowing

rules◆ Concrete measures for promoting active

participation of female employees◆ Supervision regarding initiatives for safe work

Head：Kazuhiro Yamada

N i kko C o r p o rate R ep o r t 2 0 2 3 82

CORPORATE GOVERNANCE
Members of Board of Directors Meeting（as of July 2023）
DirectorcandidatenumberName

1 Takahisa Nishikawa

Appointed（Board of Directors Meeting in FY 2022）
in
Attendance

Title

Independence（outside officers alone）

Insight and experience（＊1）expected

Corporate
management andbusiness operation

Industrial
knowledge

11/13

June 2008

120,200 shares●●●

Financial
LegalInternational
Sales
accounting compliance experience experience

ICT（＊2）●

Technical Administrative
experience
experience

Masaru Tsuji

Representative
Director and President

13/13

June 2008

108,900 shares●

3

Hiroshi Fujii

Director andVice President

13/13

June 2011

66,400 shares●

Managing Director

12/13

June 2019

42,800 shares

●

●

●

●

June 2023

8,400 shares

●

●

●

●

June 2023

3,700 shares●●

DirectorTakeshi Sone （newly appointed） （Not applicable）
Director

6 Koichi Kawakami （newly appointed） （Not applicable）(Outside/Independent)

独 7
8

Masafumi Ishii

Director

13/13

June 2021

2,500 shares●

Rika Saeki

Director

13/13

June 2021

None

●

●

Director

10/10

June 2022

2,500 shares●●

Appointed in

Number of Nikko
shares held

Independence（outside officers alone）

Corporate management
and business operation

Industrial
knowledge

June 2016

45,800 shares●●

June 2019

300 shares●

June 2019

300 shares●

June 2022

300 shares●

外 9 Shigeru Sadakari

●
●

●

●

Chair of Board of Directors
Head of Nomination and Remuneration Committee

●

●

●
●

●

●

●

●
Nomination and Remuneration
Committee member●●

Delegation of
authority of chairand head

●

2

5

社

Number of
Nikko shares
held

Director andChairman

4 Tomomi Nakayama （General Manager of Sales Division）

立

Main expertise and experience

Nomination and Remuneration
Committee member●

Members of Audit & Supervisory Board（as of July 2023）
Audit & Supervisory
Board Member
candidate number

Name

Attendance

Title（Upper row：Audit & Supervisory Board Meeting in FY 2022）（Lower row：Board of Directors Meeting in FY 2022）

Full-time Audit &- Nobutaka Yasuda Supervisory Board Member(Outside/Independent)

独 1
立
社

Naoki Ota

2 Tsuyoshi Fukui

外 3

Koji Yoneda

Audit & Supervisory
Board Member
Audit & Supervisory
Board Member
Audit & Supervisory
Board Member

13/13
15/15
13/13
15/15
13/13
15/15
13/13
15/15

Financial
LegalInternational
Sales
accounting compliance experience experience

ICT（＊2）

Technical Administrative
experience
experience●●

Delegation of authorityof chair and head

Chair of Audit &Supervisory Board●●●＊1 The above list does not indicate all insights and experiences the officers possess.
＊2 ICT in the above list stands for information and communication technology.

Reasons for appointment and expected roles of Outside Officers

Outside officer

Name

Appointed in

Date of birth

Career background

Reasons for appointment and expected roles

Independent Outside
Director

Masafumi Ishii

June 2021

November 3, 1957

Diplomatic
official

Ishii possesses extensive insight into international affairs, nurtured through his rich international experience including long service in various
key positions at the Ministry of Foreign Affairs, as well as knowledge of the Asian region where Nikko aims to expand in the future. He is
expected to provide diverse and broad range of advice and contribute to realization of sustainable growth in corporate value of Nikko.

Independent Outside
Director

Rika Saeki

June 2021

February 27, 1961

Corporate
management

Saeki will reflect her abundant knowledge and experience, nurtured through founding of a business company and her ongoing engagement in corporate management as a business
manager, in Nikko’s management. The Company believes that Saeki’s knowledge of ICT, which is her main field of business, as well as the opinions from diverse perspectives she bringsin are necessary for the company’s future development, and expects her to supervise and advise Nikko on its business execution. As a Nomination and Remuneration Committee
member of the Company, she is engaged in the selection of officer candidates and decision on the remunerations among other matters from an objective and neutral standpoint.
Sadakari will reflect his abundant experience and broad knowledge, nurtured through his long engagement in corporate management at financial institutions andbusiness companies, in Nikko’s management. The Company also believes that incorporating diverse opinions regarding capital policies and financial accounting isimportant for its future development, and expects him to supervise and advise Nikko on its business execution. As a Nomination and Remuneration Committee memberof Nikko, he is engaged in the selection of officer candidates and decision on the remunerations among other matters from an objective and neutral standpoint.

Independent Outside
Director

Shigeru Sadakari

June 2022

September 22, 1957

Corporate
management

Independent Outside Audit &Supervisory Board Member

Naoki Ota

June 2019

March 1, 1955

Corporate
management

Ota will audit and provide instructions regarding the soundness and transparency of management execution from an objective and neutral standpoint, leveraging
his abundant experience in overall corporate management and broad knowledge gained in his long engagement in corporate management at a business company.

Independent Outside Audit &Supervisory Board Member

Tsuyoshi Fukui

June 2019

July 24, 1965

Certified Public
Accountant of Japan

Fukui will audit and provide instructions regarding the soundness and transparency of management execution from an objective and neutral standpoint, leveraging
his professional position as a Certified Public Accountant. Fukui has been demonstrating high performance from a specialist perspective as a Certified Public
Accountant and also has deep insight in management, and he is expected to appropriately execute his duty as an Outside Audit & Supervisory Board Member.

Independent Outside Audit &Supervisory Board Member

Koji Yoneda

June 2022

February 17, 1957

Attorney

Yoneda will audit and provide instructions regarding the soundness and transparency of management execution from an objective and neutral standpoint,
leveraging his professional position as an attorney. Yoneda has been demonstrating high performance from a specialist perspective as an attorney andalso has deep insight in management, and he is expected to appropriately execute his duty as an Outside Audit & Supervisory Board Member.

83 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 84

CORPORATE GOVERNANCE

Activities of Nomination and Remuneration Committee

Initiatives for improving the effectiveness of Board of Directors

candidates, and other matters regarding directors andexecutive officers, which is then decided through a resolution
by the Board of Directors. In FY 2022, the Nomination andRemuneration Committee held three meetings.

From the perspective of enhancing corporate governanceby raising the fairness and objectivity of the functions of
the directors, the Nomination and Remuneration Committee
deliberates the nomination, remuneration, nurturing of
Head

Position

Name

Attendance and attendance ratio of the Nomination andRemuneration Committee Meeting（number of meetings attended）●

Director and President

Masaru Tsuji

100％
（３/３）

Outside Director

Noriaki Nagahara（retired in June 2022）

100％
（１/１）

Outside Director

Tsutomu Yuasa（retired in June 2023）

100％
（３/３）

Outside Director

Shigeru Sadakari

100％
（２/２）

As initiatives for improving the effectiveness of Board of
Directors, Nikko has been evaluating the effectivenessof the Board of Directors every year since FY 2017.

● Anonymous questionnaire survey of all directors and Audit &◆ Treatment of officers after retirement

7. Matters for continued deliberation・ ・・・・・・・・・ three questions
8. Free description

The evaluation following the above process found that there
were no problems regarding the current corporate governancestructure and operation of the Board of Directors of Nikko, that

Issues identified in Board of Directors in FY 2022

directors comprises basic compensation as fixed compensation,
performance-linked compensation, and stock compensation.
To outside directors whose main function is supervision, basic
compensation, performance-linked compensation, etc. are paid.
From April 2021, Nikko established the optional Nomination andRemuneration Committee, and remuneration is revised as necessary
based on reports from the committee.

Nikko set out a basic policy to develop a system of remuneration ofits directors that adequately functions as an incentive to sustainably
improve corporate value while paying attention to the interestsof shareholders, and to decide remuneration of each director at
an appropriate level based on their duties in accordance with theInternal Regulations on Remuneration and Bonuses of Executives
set by the Board of Directors. Specifically, remuneration of executive
Basic remuneration system for executive directors

restriction on transfer form the non-monetary compensation.
The Nomination and Remuneration Committee will discuss
the basic remuneration system and deliberate and review
appropriate ratios.

Composition ratio of remuneration types for executive directors
is set at 7 : 2 : 1 for basic compensation, performance-linked
compensation, and non-monetary compensation. Performancelinked compensation is the bonus for officers, while shares with
Breakdown of director’s remuneration

Initiatives in 2023

Issue 1

Provision of information regarding executive officers’ executionof duties to outside officers (status of the initiatives regarding
the Medium-Term Management Plan, understanding of andstatus of responses regarding the business environment, etc.)

Issue 2

Provision of information regarding the status ofsubsidiaries and affiliates outside Japan (overseas
affiliated companies) to outside directors

Issue 3

Setting up a forum for exchange of opinions among
outside officers●

Started holding meetings with only outside officers(directors and Audit & Supervisory Board members)
on a regular basis from FY2023 (semiannual)

Issue 4

Provision of materials to the Board of Directors Meetings●

Promotion of digitization●

Meetings between outside officers (directors and Audit& Supervisory Board members) and executive officers
on a regular basis from FY 2023 (every quarter)

Outside officers carried out visiting audit of a Thai
subsidiary in February 2023
● They plan to carry out visiting audit of the Chinese
subsidiary (and its local affiliated companies) as
soon as the situation normalizes in China●〈Performance-linked compensation〉③ Stock compensation（shareswith restriction on transfer）
10％（Standard case）

Main evaluation indicators ● Consolidated operating income ● Level of achievement of the management plan

To raise awareness regarding growth and performance improvement of the overall
group for each fiscal year, performance-linked compensation is determined basedon the consolidated operating income, which is considered as the basic performanceindicator, and taking into account the non-consolidated performance of Nikko, dividends
to shareholders, and bonuses to employees. It is provided as bonuses for officers.
From April 2021, Nikko established the Nomination and Remuneration Committee, andremuneration is revised as necessary by the Board of Directors based on reports fromthe committee.

Functions and roles of the Audit & Supervisory Board
The Audit & Supervisory Board consists of one full-time Audit &Supervisory Board member and three part-time members, andthree of them are outside members. The Audit & Supervisory
Board Meeting is usually held monthly prior to the Board of

Performance evaluation indicators and inter-relation
Bonuses for officers consists of performance evaluationand contribution evaluation. In performance evaluation, thebonus amount for each officer rank is decided based on theachievement of 2.5 billion yen in consolidated operating incomeand 2% is added to or subtracted from the amount for each
0.1 billion increase or decrease. In the contribution evaluation

they were functioning appropriately, and the effectiveness of
the Board of Directors is ensured. The directors of the current
fiscal year will work on improving newly recognized issues.

Issues identified in the survey of the effectiveness of Board of Directors in FY 2022 and initiatives for improvement

Basic policy

with respect to the management plan, the committee adds to or
subtracts up to 20% from the evaluations of individual officers.
The results of both performance and contribution evaluation
are then finalized at a Board of Directors Meeting. In the case oflarge amount of extraordinary gain or loss also, the committee
deliberates it and the Board of Directors makes the decision.

Total remunerations by officer rank（results for FY 2022）
Officer ranks

Total amount of
remuneration（million yen）

Fixed
compensation

Performance-linked
compensation

Non-monetarycompensation

Number of
officers

Total amount of all types of remuneration（million yen）

Directors（excluding outside directors）

148

113

22

12

5

Audit & Supervisory Board Members

23

18

3

1

1

Outside officers

46

43

3

−

9

（excluding outside Audit & Supervisory Board members）

6. Utilization of the internet・ ・・・・・・・・・・・・・・・・・seven questions(anonymous)

Basic policy regarding determination of director’s remuneration＋

5. Provision of information and training・・・・・・・・ eight questions

Supervisory Board members (12 in total)● Multiple choice questions are scored across four levels◆ Remuneration for officers◆ Candidates for officers for the next fiscal year, successors＋

4. Agenda items of and discussions at the Boardof Directors Meetings・・・・・・・・・・・・・・・・・・・・・ eight questions

Method for effectiveness evaluation

Evaluation results◆ Bonuses for officers② Performance-linked
compensation
20％

3. Operation of the Board of Directors・ ・・・・・・・・ eight questions〈Evaluation method〉

free description section.

◆ Personnel affairs of directors, executive officers, and advisors ◆ Nomination and Remuneration Committee member candidates① Basic compensation70％

2. Composition of the Board of Directors・ ・・・・・・・ five questions● The survey consists of 48 questions over seven items and a

Main deliberation matters in FY 2022●

1. Overall evaluation of the Board of Directors・・・・ nine questions

Directors meeting, and also held as necessary. It was held a totalof 15 times in FY 2022, and the time spent per meeting was about
1.5 hours. The following resolutions, discussions, deliberations, andreports were made at the meetings through the course of the year.

Resolutions

Audit & Supervisory Board audit policy, audit plan, segregation of duties, budget; selectionof full-time Audit & Supervisory Board member; audit report by Audit & Supervisory Board;
re-appointment of accounting auditor; and consent for the audit fees of accounting auditor

Discussions

Remuneration for Audit & Supervisory Board members

Deliberation

Audit & Supervisory Board audit policy draft, audit plan draft, draft for segregation ofduties, budget draft, and Audit & Supervisory Board audit report draft; decision on thecontents of the agenda item regarding appointment, dismissal, and non-reappointmentof accounting auditor; audit plan and audit report of accounting auditor

ReportMonthly activity report by Audit & Supervisory Board members, report on cooperation
with accounting auditor and internal audit division, report on whistleblowing, etc., report on
activities of the executive divisions (in the current fiscal year, the Board received reports from
employees in charge of engineering, development, general affairs, and internal audit divisions)

Note: Performance-linked compensation is the bonus for officers, while shares with restriction on transfer form the non-monetary compensation.

85 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 86

Compliance and Risk Management

Compliance and risk management

Procedure of Audit & Supervisory Board audit and division of roles
Meeting, inspects important documents, visits branches andwarehouses, holds interviews with employees of operating divisions,and conducts visiting audit. Part-time Audit & Supervisory Board
members mainly participates in important meeting such as theBoard of Directors Meeting and Audit & Supervisory Board Meeting
and actively express their opinions. Together, they form a structurethat enables monitoring of execution of operations by the directors.

Audit & Supervisory Board members led by the full-time member
implement systematic and exhaustive audit of overall operations of
the Company and its consolidated subsidiaries based on the audit
plan formulated by the Audit & Supervisory Board.
The full-time Audit & Supervisory Board member participates inimportant meetings including the Board of Directors Meeting,
Audit & Supervisory Board Meeting, and Executive Committee
Key audit items and activity results (FY 2022)
Development and operation
structure of internal control
system of the group companies
in Japan and abroad

Activities of the two Thai subsidiaries, which were delayed due to the COVID-19 pandemic, have started in full-swing,
while one Japanese company has joined the Nikko Group. The Audit & Supervisory Board members held visiting auditof the said company as well as the existing group companies and interviewed officers and other employees, strived tograsp the current situation and share information in cooperation with the internal audit divisions and accounting auditors,
and expressed their opinions whenever necessary. The number of visiting audits, interviews, and meetings in which themembers participated: 74 for Japanese business entities, 57 for Japanese subsidiaries, and 17 for overseas subsidiaries

Initiatives for elimination ofoccupational accidents

The members strived to grasp the situation by confirming the progress made in initiatives by participating in safety
meetings, etc. (six times), Board of Directors Meetings (13 times), and Executive Committee Meetings (24 times) andgathering information during visiting audits at business entities and subsidiaries, and expressed opinions whenevernecessary.

Initiatives towards MediumTerm Management Plan

The members confirmed the progress by participating in the Board of Directors Meetings, Executive Committee Meetings,
and Initiative Progress Meetings (seven times) and holding interviews at visiting audit of business entities and subsidiaries
and expressed their opinions whenever necessary.

Status of reducing strategically-held shares
last five years, we sold a total of 30 issues (12 sold-off issues)
at a total value of 2.52 billion yen. We aim to achieve the ratioof market capitalization to shareholders’ equity of 9%.
We judge exercise of voting rights upon comprehensive
consideration of not only short-term results and stock priceof the issuers but also Nikko’s relationship with them.

Status of reducing strategically-held shares（million yen）
FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

Number of shares sold

6
（1）

6
（2）

9
（5）

7
（4）

2
（0）

Amount sold

194

720

506

691

371

Book value

106

272

469

376

192

Gain on sales

88

448

38

314

178

Ratio of market capitalization to shareholders’ equity（％）

17.2

11.6

11.8

12.7

9.6

（）denotes the number of shares that have been completely sold off.

Dialogues with shareholders and investors
by our management staff. The opinions of our Japanese andoverseas shareholders and investors we have learned throughmeetings with them are reported to the Board of Directors
and shared with relevant sections to reflect them in ourmanagement decisions and reports for investors.

We position the building of long-term, trusting relationships with
our shareholders and investors as an important management
issue. We proactively work on improving constructive dialogues
through the appropriate information disclosure in both
Japanese and English and regular information dissemination

Results of dialogues with shareholders and investors
Event types

FY 2019

FY 2020

FY 2021

FY 2022

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Numberof events

Number ofparticipants

Financial results briefing session

4

69

4

90

4

134

4

111

Individual meetings

23

28

17

23

10

18

6

10

Small group meetings by Nikko

2

8

0

0

0

0

0

0

Ordinary General Shareholders’ Meeting1

21／3,3031

19／4,7091

23／5,0621

40／6,795(attendance in person/attendance in writing)

87 N ikko Corpo ra te R epo r t 2 0 2 3

The Nikko Group believes that it is important to clarify
management responsibility, accelerate the speed of executionof duties, and strengthen compliance to secure soundness ofmanagement, and has been driving forward development of asystem and measures for ensuring compliance in the Group.
Code of Conduct

The Code of Conduct of Nikko Group lists compliance as
the top priority and all employees share it as their identity.
In addition, the Group has been striving to practice fair,transparent, and sensible corporate activities conscious ofsocial norms and company rules.
Legal compliance promotion structure① Compliance

The Board of Directors annually examines whether or not tocontinue holding strategically-held shares and facilitates thegradual sales of the shares if it determines that there is norationale to keep holding them. To make this decision, theBoard looks into the purpose of holding the shares, their risks,
Nikko’s relationship with the issuers, and capital cost. In the

CORPORATE GOVERNANCE

We shall follow our conscience, comply with laws and orders, social
norms, company rules, refrain from engaging in malpractice, andcarry out sensible corporate activities.

Board ofDirectors

Audit, report

Give
instructions② Provision of better products and services

Report③ Communication with society

Representative
Director and President

We shall offer good-quality products and services, with full attention
paid to safety and quality, by enhancing research and technology
development.
We shall strive to communicate with customers, shareholders,business partners, and local communities to ensure transparency ofmanagement and fulfill accountability.

④ In search of safety and abundance

We shall place utmost priority on safety, improve workplaceenvironment and work conditions, and strive to ensure that eachand every employee feels at ease and has a sense of prosperity.

⑤ Environmental preservation

We shall promote environmental conservation initiatives andcontribute to creation of favorable environment.

⑥ Elimination of anti-social forces

We shall have no involvement with anti-social forces or organizations
that threaten the order, safety, and security of citizens.

Audit &
Supervisory Board
Cooperation

ReportInternal Audit
OfficeGive
instructions

ReportCooperation

Compliance and Risk Management Committee

Head: Hiroshi Fujii(Director and President, General Manager, Administrative Division)
Give
instructions

ReportOperating divisions,group companies

ReportGive
instructions

Helpline at the generalaffairs division

Operation of the corporate ethics helpline
The group companies in Japan have in place awhistleblower system that is compliant with therevised Whistleblower Protection Act and are

disseminating the information to directors, executive
officers, and other employees.

Main information disseminated regarding the operation of helpline

1

In many cases, we recognize that officers and employees commit misconducts, which affect a company’s
existence, for the benefit of the company and organization rather than to gain unfair profits for themselves
without being aware of their illegality.

2

It is important that departments with specialized knowhow are available for consultation at any time so that
officers and employees would not make wrong judgments.

3

A whistleblowing system would put psychological pressure on the employees and act as a deterrent tocommit fraud.

4

It is necessary to develop a mechanism where a misconduct always comes to light → Thorough complianceawareness

5

Whistleblowers are protected by the Whistleblower Protection Act (Act No. 122 of 2004) enacted on April 1,
2006.

6

Issues related to employee treatment such as transfer and promotion or defamation are not included in thesystem.

7

The user can report the issue through a letter or via the portal or email using his or her own name oranonymously → Those involved in receiving the report have the duty of confidentiality.

8

Upon responding to whistleblowers, the investigation policy and schedule are disclosed first, and a promise
is made to provide a reply within a certain period of time.

The number of reports to the helpline
Number of reports

FY 2020

FY 2021

FY 20220

1

5

N i kko C o r p o rate R ep o r t 2 0 2 3 88

Executives

CORPORATE GOVERNANCE

Director

Audit & Supervisory Board Member

Nobutaka Yasuda

Naoki Ota

Born on September 27, 1959

Born on March 1, 1955

(standing)April 1982
June 2007
June 2008
June 2011
June 2012
April 2019

Takahisa
Nishikawa

MasaruTsuji

HiroshiFujii

Born onMarch 31, 1959

Born onJune 4, 1960

Born onJanuary 16, 1959

Joined Nikko Co., Ltd
Executive Officer
Director
Managing Director
Director and President
Director and Chairman (current)
Affiliates in-charge and General Manager
of Manufacturing Division (current)

September 1987
June 2007
June 2008
June 2011
June 2015
April 2016
April 2019

Joined Nikko Co., Ltd.
Executive Officer
Director
Managing Director
Senior Managing Director
General Manager, Business Division
Director and President (current)Internal Control in-charge and General
Manager of Technology Division (current)

April 1982 Joined Nikko Co., Ltd.
June 2010 Executive Officer and Branch Manager of Chubu Branch
January 2011 Executive Officer and Manager ofBatching Plant (BP) Business Department
June 2012 Executive Officer and Manager of Business Planning Department
June 2013 Executive Officer, General Manager of the Tokyo Head Office,Business Division, and Manager of Business Planning Department
June 2015 Audit & Supervisory Board Member
June 2019 Standing Audit & Supervisory Board Member (full-time)(current)

April 1982 Joined Taiyo-Kobe Bank Limited(current Sumitomo Mitsui Banking Corporation)
April 2009 Manager of Kansai Corporate Solution
Sales Department, SMBC Consulting Co., Ltd.
June 2011 Director and Manager of Financial Department, Nikko Co., Ltd.
June 2018 Managing Director and General Manager of Financial Division
April 2020 Managing Director, General Manager of Financial
Division, and Security Export Control in-charge
April 2021 General Manager of Management Division and Security Export Control in-charge
May 2021 General Manager of Management Division
and Security Export Control in-charge (current)
June 2021 Senior Managing Director
April 2023 Director and Vice President (current)

TakeshiSone

KoichiKawakami

Born onJanuary 10, 1963

Born onFebruary 25, 1970

Born onJuly 8, 1965

April 1979 Joined Nittoseiko Co., Ltd.
February 2009 Representative Director and President,
Wacoh Corporation
March 2011 Director, Nittoseiko Co., Ltd.
March 2013 Director and Manager of Fasteners
Business Department, Nittoseiko Co., Ltd.
March 2016 Full-time Audit & Supervisory Board Member
June 2019 Audit & Supervisory Board Member,
Nikko Co., Ltd. (current)

Tsuyoshi Fukui

Koji Yoneda

Born on July 24, 1965

Born on February 17, 1957

(Outside/Independent)(Outside/Independent)

April 1990 Certified as attorney
Joined Motohara & Tanaka Law Office(current Tamon Law Office) (current)
June 2022 Outside Audit & Supervisory Board
Member, Nikko Co., Ltd. (current)

October 1991 Joined the Kobe Office of Century
Audit Corporation(currently Ernst & Young ShinNihon LLC)
August 1995 Certified as Certified Public Accountant of Japan
April 2018 Joined the Kobe Office of RSM Seiwa(current)
June 2019 Outside Audit & Supervisory Board Member,
Nikko Co., Ltd. (current)）<Important concurrent position>
Representative Director and President, Nikko Kosan Co., Ltd.
Representative Director and President, Nikko Baumaschinen GmbH

Tomomi
Nakayama(Outside/Independent)<Important concurrent position>
Representative Partner, Tamon Law Office
Executive Officer<Important concurrent position>
Partner, RSM Seiwa

Executive Officer
April 1982 Joined Nikko Co., Ltd.
April 1990
January 2011 Branch Manager of Chubu Branch
June 2012
July 2013 Manager of Asphalt Plant Sales Management
Department, Tokyo Head Office
October 2013
June 2015 Executive Officer, Manager of Business Planning
April 2015
Department, Business Division, and Manager of Asphalt
Plant Sales Management Department, Tokyo Head Office
April 2016 Manager of Business Planning Department, Business
April 2016
April 2018
Division, Manager of Asphalt Plant Sales Management
April 2019
Department, and Director of AP Technology Center
April 2018 Executive Officer, Manager of Business Planning Department,
Business Division, Manager of Asphalt Plant Sales Management
June 2019
Department, Director of AP Technology Center, and Manager ofJune 2022
Mobile Plant Business Department
April 2023
April 2019 General Manager of Business Division, Manager of Business Planning
Department, and Manager of Asphalt Plant Sales Management Department June 2023
June 2019 Director
June 2022 Managing Director (current)
April 2023 General Manager of Business Division, Manager of Business Planning Department (current)

Joined Nikko Co., Ltd.
Director, Tokyo Service Center,
Service Planning Department
Director of Tokyo Service Center and Director of
Wangan Service Station, Service Planning Department
Deputy Manager of Service Planning Department
and Director of TSC Center, Business Division
Branch Manager of Chubu Branch
Branch Manager of Kanto Branch
Branch Manager of Kanto Branch and Manager ofMobile Plant Business Department, Business Division
Executive Officer
Senior Executive Officer (current)Manager, Service Planning Department, and Manager, Mobile
Plant Business Department, Business Division (current)
Director and Executive Officer
Manager, Service Planning Department, and Manager, Mobile
Plant Business Department, Business Division (current)

December 1988
March 2003
April 2010
October 2014
April 2018
April 2021
June 2021
January 2022

October 2022

April 2023
June 2023

Joined Nikko Co., Ltd.
General Manager of Corporate Planning Office, Administrative Division
General Manager of International Planning Office, International Business Department
General Manager of General Affairs Office, General Affairs Department
Branch Manager of Chubu Branch
General Manager of President Office, Manager of Corporate Planning Section,
Manager of Secretary Section, and General Manager of Quality Assurance Office
Executive Officer (current)Manager of Corporate Planning Department, CEO’s Office, DX Business
Team Leader (CDO), Manager of Corporate Planning Section, Manager ofSecretary Section, and General Manager of Quality Assurance Office
Manager of Corporate Planning Department, CEO’s Office,DX Business Team Leader (CDO), Manager of Corporate
Planning Section, and Manager of Secretary Section
Deputy General Manager of Administrative Division, Manager of Corporate
Planning Department, CEO’s Office, DX Business Team Leader (CDO) (current)
Director and Executive Officer, Deputy General Manager of
Administrative Division, Manager of Corporate Planning Department,
CEO’s Office, DX Business Team Leader (CDO) (current)

Morie Okaaki

Kazuhiro Yamada

Born on November 2, 1963

Born on December 16, 1970

Senior Executive Officer

April 1986
April 2004
January 2007
April 2009
April 2010
July 2013
April 2016
June 2016
April 2017
April 2021

Masafumi
Ishii

April 1980
February 2002
January 2004
July 2006
January 2013
July 2014
March 2017
January 2021
June 2021(Outside/Independent)(Outside/Independent)

Born onNovember 3, 1957

Born onFebruary 27, 1961

Joined the Ministry of Foreign Affairs
Private Secretary to the Minister for Foreign Affairs
Minister, Embassy of Japan in the UK
Minister, Embassy of Japan in the USA
Director-General, International Legal Affairs Bureau, Ministry of Foreign Affairs
Ambassador Extraordinary and Plenipotentiary, Embassy of Japan in Belgium
Ambassador Extraordinary and Plenipotentiary, Embassy of Japan in Indonesia
Retired from the Ministry of Foreign Affairs
Outside Director, Nikko Co., Ltd. (current)

89 N ikko Corpo ra te R epo r t 2 0 2 3

Rika Saeki

April 2002 Established Usystem Limited (current
Usystem Co., Ltd.)Representative Director
and President, Usystem Co., Ltd. (current)
June 2021 Outside Director, Nikko Co., Ltd. (current)
June 2022 Director, Kobe Commerce, Industry and Trade Center (current)<Important concurrent position>
Representative Director and President, Usystem Co., Ltd.
Director, Kobe Commerce, Industry and Trade Center

Shigeru
Sadakari(Outside/Independent)
Born onSeptember 22, 1957

April 1980 Joined Taiyo-Kobe Bank Limited (current Sumitomo
Mitsui Banking Corporation)
April 2010 Executive Officer and Manager of Internal Audit
Department, Sumitomo Mitsui Banking Corporation
May 2011 Managing Executive Officer, The Minato Bank, Ltd.
April 2013 Senior Representative Managing Director and Senior
Managing Executive Officer, The Minato Bank, Ltd.
June 2015 Representative Director and Vice President, Kobe Tochi Tatemono Co., Ltd.
June 2016 Representative Director and President, Kobe Maintenance of Building Co., Ltd.
June 2019 Outside Audit & Supervisory Board Member, Nikko Co., Ltd.
June 2022 Outside Director, Nikko Co., Ltd. (current)

Joined Nikko Co., Ltd.
Manager of Kitakanto Sales Office
Manager of BP Business Department
Manager of BP Business Department and Business Expansion Promotion TeamManager of BP Business Department, and Conveyance & Environmental Business
Department, Special Environment Sales Section, Conveyance Sales Department
Manager of BP Sales Management Department
Manager of BP Sales Management Department, Manager of Industrial Machinery SalesManagement Department, and Director of Industrial Machinery Technology Center
Executive Officer, Manager of BP Sales Management Department, Manager of Industrial Machinery
Sales Management Department, and Director of Industrial Machinery Technology Center
Executive Officer, Manager of Industrial Machinery Sales Management Department, and Director of Industrial Machinery Technology Center
Senior Executive Officer
Manager, Industrial Machinery Sales Management Department, Business Division (current)

Senior Executive Officer

April 1995
December 1995
April 2006
April 2008
April 2019
June 2020

Joined Nikko Co., Ltd.
Development Team, Development Research Center
Business Development Promotion Office(Transfer) Representative Director and President, Maekawa Kogyosho Co., Ltd.
(Reinstatement) Manager of Head Office Factory, Manufacturing Division, Nikko Co., Ltd.
Executive Officer, Manager of Head Office Factory, Manufacturing
Division, General Manager of Manufacturing Technology Office,and General Manager of Quality Assurance Office, Nikko Co., Ltd.
June 2022 Executive Officer
Manufacturing Division Head Office Factory Manager, General
Manager of Manufacturing Technology Office, Nikko Co., Ltd.,and Representative Director and President, Ube Kohki Co., Ltd.
(current)

Toyokazu Uehara

Katsuhiro Kawamura

Born on July 3, 1969

Born on February 26, 1968

Executive Officer

April 1990 Joined Nikko Co., Ltd.
April 2009 Product Development Group Leader, Chief of Production Sales Section, Market
Development Department, and Business Development Promotion Office, R&D Center
June 2012 Acting Manager of Development Sales Department and Chief ofProduction Sales Section, R&D Center
April 2016 Vice Director of R&D Center and Manager of Business Development Department
April 2019 Manager of Engineering, Techno Center, Technology Division
April 2021 Manager of Technology Management Department, Technology Division
June 2021 Executive Officer
Manager of Technology Management Department, Technology Division (current)

Executive Officer

April 1994 Joined Nikko Co., Ltd.
April 2009 Chief of Design Section I, Design Department
April 2016 Manager of Tokyo Technology Department, General Manager of Tokyo
Technology Office, and Chief of Tokyo Design Section, AP Technology Center
April 2019 Manager of Development Department, Techno Center, Technology Division
April 2021 Manager of Development Department, Technology Division
June 2021 Executive Officer and Manager of Development Department,
Technology Division (current)
June 2022 Manager of Development Department, Technology Division and
Low Carbon Task Force, CEO’s Office

N i kko C o r p o rate R ep o r t 2 0 2 3 90

FY 2022 Business Summary and FY 2023 Outlook

FY 2022 Construction investment overview
Steady investment by the private sector,
while public investment continues to stagnate

CORPORATE DATA

Creating robust, people-friendly cities around the world.

In FY 2022 (fiscal year ended March 2023), construction investment
in Japan (nominal value) is expected to have increased 1.5%
compared with the previous fiscal year to 68.79 trillion yen. While itis 82% of the record 84 trillion yen of FY 1992, there has been asteady expansion from the bottom of 42 trillion yen recorded in FY
2010. Breakdown of the investment shows that private construction
investment, which accounts for 65% of the investment, is expected
to have risen 1.8% to 44.54 trillion yen, while government
investment, which accounts for the remaining 35%, is expected tohave increased 0.9% to 24.25 trillion yen.
By region, investment in Hokkaido is expected to have risen 11.4%,
Hokuriku 3.6%, Chubu 3.8%, Kinki 5.6%, Chugoku 6.9%, and Kyushu
2.8%, while that in Tohoku probably fell 3.9%, Kanto 1.0%, Shikoku
6.2%, and Okinawa 15.3%. Construction investment in Hokkaido
turned positive for the first time in two years and that in regions
from Hokuriku to Chubu, Kinki, and Shikoku are on a stable
expansion track. By contrast, there appears to be a lull in Tohoku
and Kanto, which had led construction investment in the past. In
recent years, some construction projects are being delayed or
postponed citing soaring prices of various construction materials,
labor shortage, and heat waves in summer.
Labor shortage in construction industry and workstylereform bill bolster investment in automation andmanpower saving
While construction investments grew on one hand, the number ofworkers in the construction industry decreased on the other by
1.2% from a year earlier to 4.79 million people in 2022, falling to
70% of the 1997 peak of 6.85 million. Of that, those above 55
years in age accounted for a record 35.9% (in comparison, it was
24% in 2001 and 33% in 2010). With construction investment
expected to remain steady, the decline in the number of workers in
the industry coupled with their aging is becoming a structural issue
in the medium- to long- term. On top of this, the workstyle reform
建設投資、
bill for the construction industry will take effect in April 2024. It is

Amount of construction investment and number ofpeople engaged in the construction industry●

Public construction
investment

522

504

06

FY 2022 Business Summary and
FY 2023 Outlook・ ・・・・・・・・・・・・・・・・・・・・・・・・・・・ 92(trillion yen)

70

Financial Data of the Past 10 Years・ ・・・・・・・ 95

60

Consolidated Financial Statements・・・・・・・・・ 97

50

Stock Information・ ・・・・・・・・・・・・・・・・・・・・・・・・ 100

Private construction
investment

530
520
507 503505
510
502 503 500
500
499
495
494
500
485
490
479
480
470

(10,000
people)40
30Company Overview and Offices and Sites・・・ 101

20

Summary of Subsidiaries・ ・・・・・・・・・・・・・・・・ 102

10
0

25

23.9 25.8 26.4

29.9 28.9

40.93
38.5 40.2 39.8
36.4 37.7

expected to facilitate the introduction of five-day workweek in theindustry and the evolution of i-Construction for productivity
improvement while expanding the need for automation and laborsaving of mobile plants and other construction machinery as well asasphalt plants and concrete plants.

Business performance in FY 2022
The results for the first fiscal year of the MediumTerm Management Plan fell short of the plan
In FY 2022, new orders and net sales at Nikko Group were steady,with the former increasing 2.5% to 40,849 million yen comparedwith a year earlier and the latter rising 2.1% to 39,665 million yen,and BB ratio (new orders received / net sales) came to 1.03 times.
As a result, order backlog at the end of the fiscal year increased
7.1% to 17,656 million yen (about 5.3 months’ worth of the annual
sales). Despite increased revenues, operating income decreased
49.9% year on year to 1,028 million yen, and operating margin also
fell 2.7 pp to 2.6%. The main factors for the profit decline are an
increase in expenses intended to enhance human capital, loss on
valuation of inventory at Nikko Nilkhosol Co., Ltd., a Thaiconsolidated subsidiary, an increase in selling, general andadministrative expenses including R&D expenses and costs ofholding Nikko Messe, and a decline in net sales of maintenanceservice. Ordinary income fell 44.8% from a year earlier to 1,255
million yen partly due to recording of foreign exchange gains. Net
income attributable to owners of parent declined 38.1% from a year
earlier to 1,020 million yen, partly reflecting the 564 million yen inproceeds from sale of investment securities recorded as an
extraordinary income.
FY 2022 was the first fiscal year of the three-year Medium-Term
Management Plan, and both net income and operating income
results fell short of the plan (net income plan: 42.0 billion yen →result: 39.6 billion yen; operating income plan: 2.3 billion yen →result: 1.0 billion yen. Particularly, the increase in asphalt pricecaused by the rise in heavy oil price accelerated the deterioration inbusiness performance of road pavement companies, which
subsequently postponed asphalt plant-related capital investment,
causing the downward swing in earnings at the Group.
売上と受注、●

Number of people engaged in
the construction industry

43.21 44.46

Net sales by segment and consolidated orders
AP-related
business

18

18

16.3

16

BP-related
business

Environment- andconveyor-related
business

Otherbusiness

Consolidated
orders(million yen)

50,00045,00040,00035,00030,00025,00020,00040,009 39,852 40,847
35,10433,069 34,134 33,617
4,301 4,133 4,481
3,932 4,677
2,289
2,647
2,775
10,267 9,356 9,522
7,893

33,916
5,840
2,634
9,158

6,790

6,660

8,324

2,390

3,018

2,888

43,03810,0003,000

9,212 10,839 11,111 11,500

15,00010,00018.4 18.6 20.2

CORPORATE DATA

21 21.8 21.6 22.48 24.43 23.39 22.53

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 (ﬁscal
estimate outlook outlook year)

17,252 16,580 17,180 16,434 17,518 19,467 18,328 17,341 19,500

5,000
0

2015 2016 2017 2018 2019 2020 2021 2022 2023 (ﬁscal year)
company
forecast

Note: The number of people engaged in the industry is on a calendar year basis
and its source is the Construction Handbook .

91 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 92

CORPORATE DATA

Shareholder returns
Dividend payment for payout ratio of 112.5%,
which exceeds pledged ratio of 60% or higher
Regarding shareholder returns, the dividend of 30 yen per share(mid-term dividend of 15 yen and year-end dividend of 15 yen),which translates to a dividend payout ratio of 112.5% given the
1,020 million yen in net income attributable to owners of parent(26.67 yen per share). The payout ratio exceeded the target of 60%
or higher presented in the Medium-Term Management Plan.

Business overview by segment
Businesses other than AP-related business posted
steady results in generalIn the AP-related business, new orders in FY 2022 declined 3.1%
from a year earlier to 17,614 million yen, net sales fell 5.4% to17,341 million yen, while BB ratio, derived by dividing orders with
net sales, came to 1.01. Some large-scale projects were postponedin Japan, while orders were stagnant in Thailand. In terms of net
sales, overseas net sales grew 30.3%, but net sales of products inJapan decreased 28.8% and those of maintenance services also fell
11.4%. Order backlog at the end of fiscal year was 7,998 billion yen(5.5 months’ worth of net sales for the fiscal year). In the meantime,
operating income of the business decreased 91.3% year on year to
49 million yen, and operating margin fell 2.8 pp to 0.3%. The large
profit decline was unavoidable given the soaring prices of supplies,
investment burden in Thailand, and an increase in personnel
expenses among other reasons.
The BP-related business recorded new orders of 11,461 million yen,down 5.2% year on year, and its net sales were steady at 11,111
million yen, up 2.5% year on year. The business’s BB ratio came to
1.03 times, stably maintaining ratio of 1. While the volume of readymixed concrete shipment was weak, down 2.2% in FY 2022, themarket is maintaining a high level and users’ appetite for investment
continues to be high. Order backlog at the end of the fiscal year
increased 6.1% to 6,105 million yen (6.5 months’ worth of net sales
for fiscal year). However, operating income of the businessdecreased 営業利益と営業利益率とROE、
9.4% year on year to 1,017 million yen, and operating
margin also fell 1.2 pp to 9.2%. Low profitability of some unit

Operating income and margin, ROE, and ROIC
Operating margin

ROE

7.0

5.9
5.4

5.0
4.8

4.7

4.0
3.0
2.0

1,944

6.0
5.0
4.9

4.5
4.4

2,103

1,629
2.5

1.0
0

5.8
5.2
4.3

2,053
3.3

1,427

純資産と自己資本比率、(million yen)

45,000Net assets

66.4 66.1 64.7 67.5

69.2

5.3
5.2

2,302
3.6
2,053

4.3

(million
yen)

2,500

66.3

3.2 1,900

2,000

2.6
1,028

1,500
1,000
500

2015 2016 2017 2018 2019 2020 2021 2022 2023

0(ﬁscalcompany forecast year)

35,00030,00027,845 28,528

29,08930,286 30,414 30,293

64.5

Equity ratio

（％）

70.0

Net cash status maintained
Net assets as of the end of FY 2022 increased 48 million yen year
on year to 52,127 million yen. Net assets as of the end of FY 2022
totaled 31,604 million yen, down 446 million yen, and equity
excluding non-controlling interests of -40 million yen was 31,644
million yen, which resulted in equity ratio of 60.7, derived by
dividing equity with total assets, down 0.8 pp from a year earlier.
Current assets came to 33,723 million yen, and non-current assets
totaled 18,404 million yen. Main items that increased include notes
and accounts receivable-trade including electronically recordedmonetary claims, which rose 203 million yen to 11,235 million,
inventory, which increased 1,219 million yen to 10,874 million yen,and property, plant and equipment, which increased 1,170 million
yen to 11,839 million yen. Main items that decreased include cash
and cash equivalents, which fell 2,118 million yen to 10,317 million
yen, and investment securities, which declined 848 million yen to
3,488 million yen.
Current liabilities were 15,338 million yen, and non-current liabilities
were 5,184 million yen. Main items that increased include interestbearing debts, which were up 1,949 million yen from a year earlier
to 5,761 million yen. Main items that declined include contract
liabilities, which fell 691 million yen year on year to 3,713 million
yen, and accounts payable-factoring, which decreased 428 million
yen to 2,355 million yen.
Cash and cash equivalents as of the end of FY 2022 declined 2,119
million yen from a year earlier to 10,317 million yen and net cash
derived by subtracting interest-bearing debts of 5,761 million yen
from cash and cash equivalents came to 4,556 million yen (8,624
million yen as of the end of FY 2021).

Cash flows
FCF became negative, while cash remained at a high level
Cash used in operating activities totaled 1,644 million yen, down
3,868 million yen. While depreciation and amortization increased
199 million yen year on year to 944 million yen, net income before
income taxes declined
906 million yen to 1,693 million yen,キャッシュフロー、
inventories increased 1,156 million, gain on sale and valuation ofCash flow and cash and cash equivalents(millionyen)

Operating
CF

7,000

InvestingCF12,6226,000

61.5 60.7

60.0

31,451 32,050 31,604

50.0
40.0

25,000

5,000

8,796

15,000

1,000

20.0

0

10.0

5,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 (ﬁscal
year)

0

5,064

-1,000-2,000-3,000Cash andcash equivalents(millionyen)

14,00012,000

3,809

8,000
2,784

1,978

-1,690-526-883 -1,021 -609-868

4,000

FY 2023 financial results to be dependent more on
second half than usual
FY 2023 (fiscal year ending March 2024) is the second fiscal yearof the Medium-Term Management Plan, whose final fiscal year is FY
2024 (fiscal year ending March 2025). In the final fiscal year of theplan, Nikko Group expects net sales of 50,000 million yen, operating
income of 3,000 million yen, and operating margin of 6.0%. For FY
2023, it expects orders to increase 5.3% from a year earlier to
43,000 million yen and net sales to rise 10.9% to 44,000 million
yen. It expects operating income to increase by 84.8% to 1,900
million yen with operating margin of 4.3%, net income per share of
31.36 yen, and dividend of 30 yen per share (payout ratio of
95.7%).
When broken down, it assumes net sales of 17,000 million yen in
the first half and 27,000 million yen in the second half; operating
income of 50 million yen in the first half (operating margin of 0.2%)
and 1,850 million yen in the second half (operating margin of 6.8%).
In the second half, the Group expects to record sales from the
projects that have been delayed from the first half and it also
anticipates the impact from 1株配当金、
raising product prices and a recovery
in sales of highly profitable maintenance services.

Dividend per share, payout ratio, total return ratio
Dividend per share(yen)

Payout ratio

-282

0

-1,129-1,226-1,644-1,867-2,1652014 2015 2016 2017 2018 2019 2020 2021 2022 (ﬁscal
year)

Total return ratio

70

106.9

97.6
97.6

60

79.7

50
40
30

2,000

710

27441
-218
-305-430 -264 -316
-876

6,000

2,224

1,001

FY 2023 performance outlook

10,00010,27010,300investment securities came to 564 million yen, and contract
liabilities declined 708 million yen.
Cash used in investing activities totaled 1,226 million yen, down
939 million yen. Main factors include expenditure of 2,174 million
yen for purchase of property, plant and equipment and intangible
assets and proceeds from sales and redemption of investment
securities of 1,002 million yen. As a result, free cash flow derived
by subtracting investing cash flow from operating cash flow cameto negative 2,870 million yen, compared with 59 million yen in FY
2021.
Cash used in financing activities totaled 710 million yen. Main items
included a 968 million yen increase in short-term loans payable and1,084 million yen in proceeds from long-term loans payable as wellas 1,147 million yen in cash dividends paid. The balance of cash
and cash equivalents at the end of FY 2022 was 10,270 million yen,down 2,119 million yen from a year ago.

●

12,575 12,444 12,389

12,110

3,000

30.0

10,000

9,630

Financing
CF

4,000

2,000

20,000

0

Financial position●

40,0001.3

93 N ikko Corpo ra te R epo r t 2 0 2 3

ROE in FY 2022 declined 2.0 pp to 3.2% from a year earlier, fallingshort of 4.9%, the plan. Net assets declined 399 million yen year on
year to 31,604 million yen (average net assets for the past two
fiscal year were 31,827 million yen) as the Group made progress in
reducing them, while net income attributable to owners of parent
remained at 1,020 million yen, falling short of the plan. Return on
invested capital (ROIC) declined 2.3 pp to 1.3% from a year earlier.
NOPAT (operating income subtracted by income taxes) fell 791
million yen year on year to 277 million yen, while invested capitalrose 1,855 million yen to 35,760 million yen as interest-bearing
debts increased.

Operating income

6.1
5.9

Decline in net income had an impact despite theprogress in reducing net assets

●

6.8

6.7

6.0

ROIC

ROE and ROIC

Net assets and equity ratio

●

（％）

products reflecting soaring raw material prices temporarily pushed
down profits.
In the environment- and conveyor-related business, new orders
declined 18.5% year on year to 2,456 million yen, net sales fell 4.3%
year on year to 2,888 million yen, and order backlog totaled 182
million yen. Delivery of coke drying system, for which the Group
received order in the previous fiscal year, required manpower, which
led to subdued order and sales activities. While operating income
decreased 11.2% year on year to 522 million yen, and operating
margin fell 1.4 pp to 18.1%, the business is maintaining a highprofitability.
In the other business, new orders increased 41.8% year on year to
9,316 million yen and net sales rose 25.0% to 8,324 million yen.
Order backlog also increased significantly by 41.7% to 3,369 billion
yen (4.8 months’ worth of net sales for fiscal year). Orders for andsales of mobile plants, which account for 22% of net sales,
expanded steadily. By contrast, net sales of waterproof boards,
which had been strong, fell 27.8% and are entering the adjustment
phase. Operating income of the other business decreased 2.7%
year on year to 1,044 million yen owing mainly to the sales declineof waterproof boards and operating margin fell 3.6 pp to 12.5%.

22.2

31.9

22.1

47.3
34.1
30.8

34.1

12

12

0

60.5
33

120

112.5 95.7

100

69.5

80

69.5

60
40

30

30

30

20
0

20
10

40

（％）

112.5

10

11

2015 2016 2017 2018 2019 2020 2021 2022 2023 (ﬁscal
company year)
forecast

N i kko C o r p o rate R ep o r t 2 0 2 3 94

Financial Data of the Past 10 Years

CORPORATE DATA2013
Key results

Net sales

Cost of sales（million yen）
（million yen）

Gross profit（million yen）

Operating income（million yen）

Selling, general and administrative expenses （million yen）
Ordinary income

Net income before income taxes（million yen）
（million yen）

Net income attributable to owners of parent （million yen）
Net income per share（yen）

Number of consolidated subsidiaries （companies）
Number of affiliates accounted for using equity method （companies）

Profitability

Operating margin
ROA
ROE

Segment results

Japan

Overseas
China

Other

Net sales by business

35,151

23,736

22,68325,825

24,131

26,301

23,48525,512

6,087

6,192

6,655

6,641

6,708

6,868

7,585

8,337
2,249
1,982
1,987

8,024
1,832
1,582
1,800

8,285
1,629
1,648
2,940

8,586
1,944
1,993
1,878

8,812
2,103
2,239
2,299

8,295
1,427
1,576
1,933

37,866

27,6752021
38,84628,3462022（fiscal year）
39,66529,348

9,639

10,191

10,500

10,317

2,053

2,302

2,053

1,028

2,142
2,440

7,889
2,973
3,045

8,447
2,274
2,599

9,288
1,255
1,693

888

1,348

1,896

1,340

1,490

1,345

1,588

2,082

1,649

1,020

8

8

8

8

8

8

9

10

11

11

21.1

45.2

34.3

38.7

35.1

41.2

54.3

ー

7.0

6.0

4.8

5.9

6.0

4.5

5.8

6.1

5.3

2.6

（％）

3.4

4.8

6.6

4.6

4.9

4.4

5.2

6.8

5.2

3.2

（million yen）

29,403

27,881

31,13029,761

31,14827,941

30,761

34,13034,09934,061

1,684

2,072

2,220

2,026

3,389

3,357

3,637

3,509

3,670

4,829

（million yen）
（million yen）
（million yen）

2.2

2,669
984

3.3

2,825
753

4.5

2,980
760

3.0

2,956
930

3.3

3,965
576

3.0

3,838

3.5

4,390

481

1,083

4.4

3,735

ー

26.6

ー

（％）

ー

43.1

ー

（％）

2

32.1

3.3

4,746

ー

2.0

5,604

226

1,076
12.2

14.1

775

Asphalt Plant-Related Business（million yen）

17,25815,071

Concrete Plant-Related Business（million yen）

8,577

Other Business（million yen）

4,292

Asphalt Plant-Related Business（million yen）

2,125

1,214

1,234

1,253

1,348

963

1,118

1,239

562

49

Concrete Plant-Related Business（million yen）

678

712

878

1,006

1,015

666

761

879

1,123

1,017

Other Business（million yen）

388

451

277

417

462

502

1,020

1,170

1,073

1,044

Corporate expenses（million yen）

（1,109）（1,122）（1,409）（1,469）（1,293）（1,605）

Total new orders received（million yen）

33,915

1,944

166
ー

9.2

9.0

11.3

12.1

17,252

16,58017,17916,434

17,51819,46718,32817,341

8,287

10,267

9,356

9,521

7,893

9,158

9,212

10,83911,111

4,495

4,301

4,133

4,480

4,677

5,840

6,796

6,660

8,324

2,853

527
ー

（1,074）34,500

8.7

2,289

337
ー

（1,097）33,284

2,647

369
ー

（1,102）
34,134

3,931

308
ー

（1,031）
33,616

2,775

417
ー

35,103

12.5

2,634

562
ー

33,915

9.9

2,390

482
ー

40,009

3,018

588
ー

39,852

2,888

522
ー

40,849Total order backlog（million yen）

7,246

11,03910,212

11,62910,132

13,454

12,21914,361

16,49017,656

Total assets（million yen）

40,34841,964

43,18944,97644,87643,96945,677

48,69752,07952,127

2,212

2,206

2,362

1,987

1,799

1,718

1,787

2,492

3,812

5,761

Net assets（million yen）
（million yen）（％）

Net assets per share（yen）

Dividend per share（yen）

Total dividend（million yen）

26,167
64.9

624.2
7.0

293

27,845
66.4

28,52866.1

29,08964.7

30,28667.5

30,414
69.2

664.3

680.7

749.2

791.1

793.7

9.0

10.0

11.0

12.0

12.0

376

418

426

458

30,293
66.3

780.6
40.0

31,451
64.5

823.0
33.0

32,050
61.5

837.2
30.0

1,146

1,147

1.5

5.1

4.0

3.6

3.6

1.1

27.9

22.0

31.9

30.8

34.2

Capital investment（million yen）

844

815

877

1,261

550

1,889

1,483

2,748

1,907

295

276

227

271

291

211

379

392

449

Depreciation and amortization
R&D expenses

Cash flow from operating activities
Cash flow from investing activities

Free cash flow

（million yen）
（million yen）（％）
（million yen）
（million yen）
（million yen）

Term-end balance of cash and cash equivalents （million yen）

392
0.92
2,641

419

483

0.90

0.67

1,001

（1,040）

696

1,102

（936）

（305）

8,506

8,796

1,705

1.5

1.5

478

1.5

468

0.83

0.83

5,064

274

2,142

（316）

9,630

12,622

4,748

30.0

1,260

33.1

1.4

60.7

826.7

1,550

（％）

（％）

31,604459

Dividend on equity

R&D expenses to net sales

95 N ikko Corpo ra te R epo r t 2 0 2 331,7802020

8.3

Payout ratio

Cash flows

35,1142019（％）

Equity ratio

Capitalinvestment,
etc.

2018

Ratio of net sales outside Japan

Interest-bearing debts

Dividends

32,7172017

ーAmount after elimination of transactions between segments （million yen）

Financialconditions

34,1102016

ーEnvironment- and Conveyor-Related Business （million yen）

Orders30,7072015

1

Environment- and Conveyor-Related Business （million yen）
Operating income (loss)

32,073

2014

508

0.66
（218）

97.6

611

1.08
3,839

60.5

677

1.04
2,784

69.5

745

1.15
2,224

112.5

2,214

944
576

1.45
（1,644）41（1,021）（609）（1,867）（2,165）（1,226）

12,11010,30012,575

12,444

12,38910,270315（1,239）

3,200

917

59

（2,870）N i kko C o r p o rate R ep o r t 2 0 2 3 96

Consolidated Financial Statements

CORPORATE DATA

Consolidated Balance Sheet
Assets（million yen）

2021

Liabilities

2022 (fiscal year)

Current assets

Notes and accounts
payable-trade

12,436

10,317

Notes receivable-trade

2,163

2,357

Accounts receivable-trade

7,275

6,645

Electronically recordedmonetary claims

Electronically recorded
obligations

1,594

2,233

Merchandise and finished
goods

990

1,794

Work in process and partlyfinished construction

6,970

7,423

Raw materials and supplies

1,695

1,657

－

14

1,002

1,279

（0）

（1）

34,12733,723

Other
Allowance for doubtful
accounts
Total current assets
Non-current assets

5,227

5,945

Machinery, equipment andvehicles (net)

1,256

1,292

Tools, furniture andfixtures (net)Land
Lease assets (net)11,839Intangible assets
Goodwill

266

130

Other

769

889

1,036

1,020

Total intangible assets
Investments and otherassetsInvestment securities

4,336

3,488

Investments in capital

15

7Long-term loans receivable

8

14

864

981

Other

1,152

1,183

Allowance for doubtful
accounts

（131）

（130）

Total investments andother assets

6,246

5,544

Total non-current assets

17,951

18,40452,07952,127

Deferred tax assets

Total assets

97 N ikko Corpo ra te R epo r t 2 0 2 3

8,447

9,288

Operating income

2,053

1,028

Interest income

2

2

518

265

Dividends income

123

104

Accounts payable-other

664

644

Foreign exchange gains

77

158

17

17

Outsourcing service income

49

－

4,405

3,713

Other

82

64

Provision for bonuses

483

417

Total non-operating income

335

330

Provision for directors'
bonuses

76

76

Interest expenses

50

77

Provision for loss on order
received

35

Loss on disposal of non-current assets

0－Compensation for damage

14

6

Dismantlement and removal costs

24－

Down payments
Contract liabilities

172

559

492

15,774

15,338

1,583

2,449

Deferred tax liabilities

70

Provision for directors'
retirement benefits

182

235

Non-current liabilities
Long-term loans payable

Total non-current liabilities

10,66910,317

Selling, general and administrative expenses

Income taxes payable

Other

Total property, plant andequipment

29,34810,500

3,312

0
236

28,346Gross profit

2,229

1
134

Cost of sales

Short-term loans payable

3,878

Construction in progress

39,665

2,355

3,577

81

38,846

2,783

405

72

Net sales

Accounts payable-factoring

399

Right-of-use assets (net)2022 (fiscal year)

858

Total current liabilities

Buildings and structures
(net)

3,012

（million yen）

2021

868

Other

Property, plant andequipment

3,132

Assets2022 (fiscal year)

Current liabilities

Cash and cash equivalents

Forward exchange contracts

2021

Consolidated Statement of Income

Retirement benefit-related
liabilities

Total liabilities

Net assets

2,126

2,166

354

333

4,254

5,184

20,02920,5232021

2022 (fiscal year)

Shareholders' equity
Capital stock

9,197

9,197

Capital surplus

7,925

7,934

Retained earnings

13,755

13,628Treasury stock

（784）

（760）

Total shareholders’ equity

30,09329,999

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities

1,453

1,177

Foreign currency translation
adjustment

560

582

Non-operating income

Non-operating expenses

Other

25

18

Total non-operating expenses

114

102

2,274

1,255

Gain on sales of investment securities

326

564

Total extraordinary income

326

564

Ordinary income
Extraordinary income

Extraordinary loss
Loss due to COVID-19－

23

Impairment losses－

104

Loss on sales of investment securities

0

－

0

127

2,599

1,693

Income taxes-current

944

745

Income taxes-deferred

40

6Total income taxes

985

751

1,614

941

Total extraordinary loss
Net income before income taxes

Net income
Loss attributable to non-controlling interests

（34）

（78）

Net income attributable to owners of parent

1,649

1,020

Consolidated Statement of Comprehensive Income

Net income（million yen）

2021

2022 (fiscal year)

1,614

941

（139）

（275）

290

13

Other comprehensive income
Valuation difference on available-for-sale securities

Accumulated retirement
benefit-related adjustment

（104）

（115）

Foreign currency translation adjustment

Total accumulated othercomprehensive income

Retirement benefit-related adjustment

10

（11）

1,910

1,644

Total other comprehensive income

161

（273）

Non-controlling interests

46

（40）

1,775

667

Total net assets

32,05031,604

Total liabilities and net
assets52,07952,127

Comprehensive income attributable to owners of the parent

1,804

755

Comprehensive income attributable to non-controlling interests

（28）

（87）

Comprehensive income(Breakdown)

N i kko C o r p o rate R ep o r t 2 0 2 3 98

Stock Information

Consolidated Statement of Cash Flows（million yen）

2021

2022 (fiscal year)

Cash flow from operating activities
Net income before income taxes

2,599

1,693

Depreciation and amortization

745

944

Amortization of goodwill

14

46

（5）

（0）

71

22

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in retirement benefit-related adjustment

（9）

52

（126）

（107）

50

77

Foreign exchange losses (gains)

（72）

（15）

Loss (gain) on sales and valuation of investment securities

（325）

（564）

Decrease (increase) in notes and accounts receivable-trade

1,653

（196）

（1,583）（1,156）

（28）

（204）

Increase (decrease) in provision for directors' retirement benefits
Interest and dividends income
Interest expenses

Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable-trade
Impairment losses
Increase (decrease) in contract liabilities
Other

－

104

1,172

（708）

（1,006）

（696）

3,150

（709）

126

139

（50）

（77）

（1,002）

（997）

2,224

（1,644）

（47）

（47）

47

47

（423）

（22）

Proceeds from sales and redemption of investment securities

754

1,002

Purchase of property, plant and equipment and intangible assets（1,697）（2,174）Purchase of shares of subsidiaries resulting in change in scope of consolidation

（733）

－

Payments for acquisition of businesses

（127）

－

Payments of loans receivable

（4）

（10）

Collection of loans receivable

7

5

Other

60

（26）

（2,165）（1,226）

SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Cash flow from operating activities
Cash flow from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of investment securities

Cash flow from investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable

（125）

968

Proceeds from long-term loans payable

1,099

1,084

Repayment of long-term loans payable

（46）

（187）

51

－

Proceeds from sale of shares of subsidiaries not resulting inchange in scope of consolidation
Purchase of treasury stock－（0）

Repayments of finance lease obligations－（7）（1,260）（1,147）

（282）

710

Cash dividends paid
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents

CORPORATE DATA

Stock overview（as of March 31, 2023）

Major shareholders（top 10）
Name

Financial instruments exchange where the stock is listed
Tokyo Stock Exchange Prime Market
6306
Securities code
State of issuance Total number of shares authorized for issuance:
150,000,000 shares
Total number of outstanding shares:
40,000,000 shares(including 1,723,300 treasury shares)

Number of shares per unit 100 shares
Number of shareholders 14,541
Transfer agent Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212
Fiscal year
From April 1 to March 31
Ordinary General Shareholders’ Meeting
June (record date: March 31)
Registration deadline for year-end dividend payment：
March 31
Registration deadline for interim dividend payment：
September 30

6,027

15.75

The Master Trust Bank of Japan, Ltd. (trust account)

3,848

10.05

Nikko Employees' Shareholding Association 1,776

4.64

Sumitomo Mitsui Banking Corporation

1,203

3.14

Custody Bank of Japan, Ltd. (trust account)

938

2.45

Nippon Life Insurance Company

855

2.23

Sumitomo Life Insurance Company

745

1.95

The Hyakujushi Bank, Ltd.

683

1.78

Meiji Yasuda Life Insurance Company

648

1.69

Nakanishi Electric Co., Ltd.

621

1.62

17,345

45.31

Total

Nikko holds treasury shares totaling 1,723,000, which are excluded from the above major
shareholders. Shareholding ratios are the number of shares held divided by the total number ofoutstanding shares less the number of treasury shares, rounded off to second decimal place.

Composition of shareholder types（％）
Individuals and others
Other Japanese corporations

（％）

100

9.26

9.67

80

16.5
0.92

16.63
0.42

60

30.73

29.84

42.6

43.44

Financial institutions

Stock performance comparison（TSR: total shareholder return, %）Financial instruments business operators

Foreign corporations, etc.

3.59
13.93
0.94

3.23
15.36
1.09

3.25
14.55
0.82

28.07

28.83

26.37

25.37

49.95

52.71

6.83
13.91
1.24

0

2017

2018

2019

2020

53.95

2021

56.01

2022

1 year

3 year

5 year10 year(End of Mar.
2022 to end of
Mar. 2023)(End of Mar.
2020 to end of
Mar. 2023)(End of Mar.
2018 to end of
Mar. 2023)(End of Mar.
2013 to end of
Mar. 2023)

Nikko
shares

9.4

19.4

68.7

132.1

TOPIX

5.8

53.4

31.8

142.1

Machinery
index

8.6

67.1

29.3

152.6

Investment
period40
20

Number of Nikko shares held (1,000 shares) Shareholding ratio (%)

Nikko Trading-Partner Shareholding Association(FY)

Trend of share price and trading volume over the past 10 years  （March 2013 – March 2023）

The above table shows total shareholder return including dividends
as of the end of March 2023 in the cases of investment made a year
ago, three years ago, five years ago, and 10 years ago.

● Share price1000 (yen)
800
600
400
200
0

2014/1

2015/1

2016/1

2017/1

2018/1

2019/1

2020/12021/12022/12023/1 (ﬁscal year)

2015/1

2016/1

2017/1

2018/1

2019/1

2020/12021/12022/12023/1 (ﬁscal year)● Trading volume

600 (10,000 shares)
500
400
300
200
100
0

2014/1● Valuation of share priceMar. 2019

Mar. 2020

Mar. 2021

Mar. 2022

Mar. 2023

Year-end share price (yen)

481

609

731

607

634

PBR (times)

0.6

0.8

0.9

0.7

0.8

168

41

ROE (%)

4.4

5.2

6.8

5.2

3.2

（54）

（2,118）PER (times)

13.7

14.8

13.5

14.1

23.8

Cash and cash equivalents at beginning of year

12,444

12,389Dividend yield (%)

2.5

6.6

4.5

4.9

4.7

Cash and cash equivalents at end of year

12,38910,270Year-end market cap (mil. yen)

19,24024,36029,24024,28025,360Net increase (decrease) in cash and cash equivalents

99 N ikko Corpo ra te R epo r t 2 0 2 3

N i kko C o r p o rate R ep o r t 2 0 2 3 100

Company Overview and Offices and Sites

Summary of Subsidiaries

Company Overview (as of March 31, 2023)
Japanese name
日工株式会社
English name
Nikko Co., Ltd
Head office address	1013-1, Eigashima, Okubo-cho, Akashi,
Hyogo Prefecture 
674-8585
Tel.
+81-78-947-3131
Corporate website
https://www.nikko-net.com/en/
Representative	Masaru Tsuji, President and Representative Director
Established
August 13, 1919
Capital stock
9,197.6 million yen (as of March 31, 2023)
Number of employees	1,064 (consolidated), 600 (non-consolidated)
Business segments	Asphalt plant-related business (AP)
Concrete plant-related business (BP)
Environmental equipment and 
conveyor-related business
Other business
Akashihead office

Tokyo Business Division

Nikko Electronics Co., Ltd.

Manufacture and sale of control systems,
covering processes from circuit designingto manufacturing of control panels,
switchboards and monitoring panels

Nikko Machinery Co., Ltd.

●Factories
Head office factoryTokyo factory
Satte factory
Kakogawa factory
Fukusaki factory
Sec head office factory
Nikko Machinery head office factory
Nikko Electronics head office factory
Maekawa Kogyosho head office factory
Nikko Shanghai head office factory
Nikko Machinery Kansai factory
Ube Kohki head office factory
Maeda Kiko head office factory●Branches and sales offices
Hokkaido branch
Tohoku branch
Kanto branch
Chubu branch
Osaka branchChu-shikoku branch
Kyushu branch
Okinawa branch
Hoku-shinetsu branch
Niigata sales office
Wangan sales office
Yokohama sales office
Shikoku sales office
Minami-kyushu sales office●Service centers/stations
Tokyo service center
Akashi service centerTokyo mobile center
Morioka service station
Hokuriku service station
Akashi service station
Okayama service station
Shimonoseki parts center

Net sales breakdown
by business segment (FY 2022)

Other business
21.0%

Environment- andconveyor-related
business 7.3%

AP-related
Net salesbusiness
39,665 million yen
43.7%

BP-related business
28.0%

AP: Asphalt plant
BP: Batching plant (concrete plant)

101 N ikko Corpo ra te R epo r t 2 0 2 3Group companies
Nikko Electronics Corp.
Nikko Machinery Co., Ltd.
Tombo Industry Co., Ltd.
Nikko Sec Co., Ltd.
Nikko Kosan Co., Ltd.
Maekawa Kogyosho Co., Ltd.
Ube Kohki Co., Ltd. (a group company since March 2022)
Matsuda Kikou K.K. (a group company since July 2022)
Nikko (Shanghai) Construction Machinery Co., Ltd.
Nikko Asia (Thailand) Co.,Ltd
Nikko NilKhosol Co., Ltd. (established in June 2020)

Net sales (mil. yen)
FY 2018 1,669

FY 2019 1,727

FY 2020 1,661

FY 2021 1,642

FY 2022 1,726

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

7

1

94

80.1%

79.4%

Net sales (mil. yen)
FY 2018 1,765

FY 2019 2,124

FY 2020 2,391

FY 2021 2,416

FY 20221,816

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

5

0

46

32.9%

35.1%

FY 2018 1,519

FY 2019 1,692

FY 2020 1,738

FY 2021 1,531

FY 2022 1,377

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

5

0

30

2.2%

0.1%

FY 2018 688

FY 2019 660

FY 2020 690

FY 2021 743

FY 2022 757

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

5

0

15

1.1%

0.8%

FY 2018 439

FY 2019 466

FY 2020 361

FY 2021 353

FY 2022 432

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

4

0

16

3.1%

2.7%

FY 2018 471

FY 2019 471

FY 2020 420

FY 2021 476

FY 2022 460

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

3

1

11

33.9%

35.9%

FY 2022Net sales (mil. yen)

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2022

2,175

5

0

47

0.5%

FY 2018 3,468

FY 2019 3,756

FY 2020 3,632

FY 2021 3,956

FY 2022 4,990

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

Percentage of sales
to Nikko in FY 2021

Percentage of sales
to Nikko in FY 2022

4

2

106

3.4%

3.2%

Nikko Asia (Thailand)Co., Ltd.

FY 2021Net sales (mil. yen)

FY 2022Net sales (mil. yen)

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

162

377

4

2

11

Nikko NilkhosolCo., Ltd.

FY 2021Net sales (mil. yen)

FY 2022Net sales (mil. yen)

Number of
directors

Number of employees
concurrently holding
position at parent

Number of
employees

28

193

4

0

88

Manufacture and sale of construction
equipment and flooding preventive
equipment, including floodgates andwaterproof boards

Nikko Sec Co., Ltd.

Manufacture and sale of temporary
equipment and machinery forconstruction work, material handlingmachines, and computer-related
equipment

Tombo Industry Co., Ltd.

Manufacture and sale of soil farming
tools and gardening supplies, including
shovels and scoops, and concrete
mixers for mixing and kneading

Net sales (mil. yen)

Net sales (mil. yen)

Net sales (mil. yen)

Maekawa KogyoshoCo., Ltd.

Manufacture and sale ofcrushing plant, equipment, etc.

Nikko Kosan Co., Ltd.

Services related to housing
renovation, property insurance
agency, life insurance agent andreal estate

Ube Kohki Co., Ltd.

Manufacture and installation ofvarious plant facilities, design,
manufacture and sale of gas holders,and development, manufacture andsale of solar LED lightings, etc.

Nikko (Shanghai)Construction MachineryCo., Ltd.

Manufacture and sale of asphalt / recycling
plants and anti-pollution devices

Overseas bases
Taiwan branch (Taiwan) Opened in February 1997
Nikko (Shanghai) Construction Machinery Co., Ltd. 
Established in April 2001
Nikko (Shanghai) Construction Machinery Co., Ltd.
Beijing office (opened in August 1998)
Nikko Asia (Thailand) Co., Ltd. (established in February 2020)
Nikko NilKhosol Co., Ltd. (established in June 2020)

CORPORATE DATA

Net sales (mil. yen)

Net sales (mil. yen)

N i kko C o r p o rate R ep o r t 2 0 2 3 102

Making the world a resilient and gentle place.

For inquiries about this report, please contact:

IR Team, Financial Division, Nikko Co., Ltd.

October 2023

1013-1, Eigashima, Okubo-cho,
Akashi, Hyogo Prefecture 674-8585
Tel: +81-78-947-3141
Email: IR-nikko@nikko-net.co.jp