FUKUDAREPORT

Annual Report for the 92 Termnd

January 1, 2018 – December 31, 2018

To the Shareholders of Fukuda Corporation

Fukuda Corporation
Stock code: 1899

Introduction

We strive first and foremost to satisfy
our multiple stakeholders.

We would like to extend our greetings to all of our shareholders,
Katsuyuki Fukuda Masanori Araaki
Chairman &President &and take this opportunity to express our sincere gratitude
Representative Director
Representative Director
for your continuing support.
We hereby present our business results for the 92nd term ended on December 31, 2018.
By upholding the basic principle of “Creating an environment where people, nature and society can coexist” andadhering to the Fukuda Group Spirit of “Always sincere from now until the next century and beyond,” the Fukuda Groupdraws on its comprehensive strengths and sincerity to form strong bonds with those that we love and cherish, in order toprotect their lives and livelihoods. The Company’s management philosophy is: “To value people and the environment, andaim to create inspirational value based on a corporate structure designed to face challenges.” To this end, the entire
company is working together as one, with our highest priority being the satisfaction of all of our stakeholders, including
our customers, shareholders, business partners, local community and employees.
The Company’s business results for the fiscal year under review are shown below. While today’s increasingly global
society is fraught with unexpected risks, we will aim to enhance our corporate value and maintain the Group’s
management base as a united corporate group so that we may further continue to meet the expectations of ourshareholders.
We sincerely hope you will grant us your continued support and guidance going forward.
March 2019
Financial Highlights
Net sales(Unit: Million yen)

172,749

173,928

90th term

1

167,659

91st term

92nd term

Operating income(Unit: Million yen)

9,695

90th term

Ordinary income(Unit: Million yen)

9,888
7,991

8,055

91st term

92nd term

90th term

8,190

8,410

91st term

92nd term

Business environment for the fiscal year under review
During the fiscal year under review, the Japanese economy continued to make a moderate recovery, partly thanks to steady corporate
production activities and a sustained improvement in corporate earnings. Meanwhile, personal consumption is also experiencing a moderate upturn
supported by a positive employment and income environment, notwithstanding a temporary slump in consumer sentiment due to a series ofnatural disasters.
In the construction industry, investment in public works construction was supported by an increase in demand for maintenance and renewal
works on aging facilities, despite an abatement in orders related to the Tokyo Olympics and Paralympics and a decrease in new capital
expenditures. Investment in construction by the private sector remained strong, against a backdrop of ample corporate cash flow, with anincreasing trend towards rationalization and labor-saving investment in response to labor shortages, as well as robust investment in theconstruction of facilities for accepting the increasing number of visitors to Japan, reflecting rising income levels among emerging nations in Asia.
Consolidated business results for the fiscal year under review
Under these conditions, the Fukuda Group has worked to further strengthen its operating base, improve the efficiency of construction works andraise productivity in order to pursue corporate value. The Group steadily implemented measures in the Medium-Term Business Plan, of which theyear under review was the final year, and generally succeeded in achieving the planned performance. As a result, the consolidated business results
for the fiscal year under review were as follows.
Net sales increased 3.7% year on year to more than ¥173.9 billion, as Group companies expanded their revenue mainly from building renewals
and civil engineering maintenance and renewal works.
In terms of profit, gross profit decreased by 0.8% year on year to more than ¥17.7 billion as construction project gross profit margins fellcompared to the previous year, due to an increasingly competitive business environment and a drop in net sales in the real estate business.
However, the Group strived to reduce selling expenses, general and administrative expenses, and operating income increased by 0.8% year on
year to over ¥8.0 billion.
Net income attributable to owners of the parent increased by 8.7% year on year to over ¥5.6 billion, due to a substantial increase in the Group’s
share of profit of entities accounted for using equity method, as well as the receipt of compensation for expropriation.
Outlook for the next fiscal year
Going forward, the Japanese economy is expected to enter a stronger phase in its recovery, with improvements in the employment and income
environments, and growth in corporate earnings. However, there is a risk that a slowdown in overseas economies may impact exports, causing adownturn in corporate performance. In addition, it is predicted that consumption tax increases will weaken personal consumption.
In the construction industry, investment in public works construction is predicted to increase, as work on disaster prevention and mitigation
measures begins in earnest. Stable demand is expected to continue in the order environment mainly in major metropolitan areas, backed byredevelopment and the construction of new lodging facilities and logistics facilities. However, an increasingly harsh order environment is expected inregional areas, where a tight supply-demand balance for materials and labor, as well as a trend towards the concentration of construction in urban
areas, have led to a steep increase in construction costs.
In response to these conditions, the Group has established the “Medium-Term Business Plan (2019-2021)” with 2019 as its first year. As
construction companies adapted to meet the needs of society and customers, the Group will strive to enhance productivity and work
environments, to maximize utilization of management resources, secure and nurture talent, and thus increase corporate value

Net income attributable to owners of the parent(Unit: Million yen)Orders (non-consolidated)

8,482

5,191

90th term(Unit: Million yen)

151,387

91st term

5,643

92nd term

116,450

122,68090th term

91st term

92nd term2Medium-Term Business Plan 2021
Customers(businesses andindividuals)
Shareholders
andinvestors

Administrative
agencies

Aiming to be the number
one company for multiple
stakeholder satisfaction~ Towards sustained corporate growth ~Other businesses
in the same industry,groups andorganizations

Employees(families andretirees)

Business
partners

The Medium-Term Business Plan 2021 has been
established to realize the Group’s long-term vision
for the next decade.

Environment
and
local
communities

Long-term Vision 2025
A century of history and tradition;
New challenges for the next 100 years

The Group’s Future Ideal

Previous
Medium-TermBusiness Plan
2018
 ring about a recoveryBin performance
Capture incoming
ordersStrengthen
financialfoundations

3

New
Medium-TermBusiness Plan 2021
 ransform the businessT
portfolio
Create new revenue
basesSecure and diversify
talent evelop nation-wide through strong
Dconsolidated management, to be more thanjust a regional construction company
Create customer satisfaction through quality
and safetyBe a corporate group with advanced
technical and proposal capabilities
Secure superior talent and develop an
environment where they can flourish
Establish win-win relationships with all
stakeholders

5 Measures

Transform the portfolio of existing businesses
Adjust the respective weights of the construction, civil engineering and paving businesses according to social needs(transition from new construction to maintenance and renewal, from low-productivity properties to high-productivity
properties and business areas)

Narrow down new revenue bases for Group companies
Develop new businesses utilizing knowhow from construction and real estate businesses

Secure and diversify talent
Hire and educate diverse talent for the accumulation of intellectual capital
Enhance work-life balance to secure talent
Engage in talent exchange between Group companies

Create worksites to provide safe, high-quality services
Work together with partner businesses to provide customers and local communities with high-quality services
Enhance Group brand strength through providing a high level of additional value

Be trusted as Fukuda Group
Enhance sensitivity to legal and regulatory compliance
Make a suitable contribution to local communities (through taxes, employment, local contributions, tackling environmental issues etc.)

Numerical Targets
Net sales… ¥189.0 billion / Fukuda Corporation non-consolidated… ¥123.5 billion

Operating income… ¥7.9 billion / Fukuda Corporation non-consolidated… ¥5.8 billion
Equity ratio

Interest-bearing liabilities

Dividend payout ratio

ROE

Dividend on equity ratio (DOE)

50.0%¥2.0billion

20.0%

8.0%

1.6%
4

Main projects completed in the fiscal year under review
Construction

5

Niigata Prefecture

Shijinkai Kenotokorozawa Hospital

Niigata Commercial High School Gymnasium Construction Project (Niigata Prefecture)

Kenotokorozawa Hospital Expansion and Renovation Project (Saitama Prefecture)

Nissin Chemical Industry Co., Ltd.

Fuyo General Lease Co. Ltd.

Nissin Chemical Industry Co., Ltd. Factory Headquarters Office Building
Construction Project (Fukui Prefecture)

Tentative name: Nakamura-ku Tsubaki-cho Building Project (Aichi Prefecture)

AEON RETAIL CO., LTD.

Anabuki Kosan Inc.

AEON Sendai Oroshimachi Construction Project

Tentative name: Alphasmart Nishikokubun II Construction Project(Fukuoka Prefecture)Civil Engineering

Niigata Prefecture

Niigata Prefecture

Niigata Prefecture

National Route 345 Disaster Prevention and Safety(Public Disaster Prevention)
Ashidani Falling Rock Countermeasures Project (Niigata Prefecture)

Iwafune Port Disaster Prevention and Safety Grant(Renewal and Dredging)
South Groin (Correction) Project (Niigata Prefecture)

Niigata Port (Higashi Ko-ku) Minamihama Breakwater Embankment (1)Wave Dissipation Block Manufacture and Placement Project(Niigata Prefecture)

Ministry of Land, Infrastructure, Transport andTourism Hokuriku Regional Development Bureau
Shinanogawa River Downstream Kumanomori Irrigation Pumping
Station External Construction Project (Niigata Prefecture)

Hitachi, Ltd.

Miyagi Prefecture

Kisarazu Civil Engineering Construction Project(Chiba Prefecture)

Okinotagawa River Disaster Recovery Project
Number 2 (Miyagi Prefecture)

Main orders and completed projects for the fiscal year under review
OrdersCompleted projects

Ministry of Land, Infrastructure, Transport and Tourism Chubu Regional Development Bureau

Hitachi, Ltd.

2018 Tokai-Kanjo Expressway Gifu Yamagata Number 1 Tunnel East Area Project

Kisarazu Civil Engineering Construction Project

Tokyo Electric Power Company Holdings, Inc.
Kashiwazaki-Kariwa Nuclear Power Station Specific Severe Accidents
Countermeasure Facilities Building Construction Project (Ominato Side)

AEON TOWN Co., Ltd.
Tentative name: AEON TOWN Fujimino Construction Project

Koshi City Takaba Land Division Readjustment Association
Koshi City Takaba Land Division Readjustment Project

DAIWA HOUSE INDUSTRY CO., LTD.
Tentative name: Royal Parks ER BANDAI Project

Kashii Teriha Project Consortium

AEON RETAIL CO., LTD.

Tentative name: Kashii Teriha Project (Urban Palace Teriha Construction Project)

Tentative name: AEON Sendai Oroshimachi Construction Project6

Consolidated Financial Statements
Consolidated Balance Sheet (Unit: Million yen, rounded down to the nearest million yen)

Consolidated Statement of Income (Unit: Million yen, rounded down to the nearest million yen)

92th term
91th term(as of December 31, 2018) (as of December 31, 2017)

92th term
91th term(January 1, 2018 - December 31, 2018) (January 1, 2017 - December 31, 2017)

AssetsCurrent assets

90,98690,428Non-current assets

34,85034,494

Total assets

125,836

124,923

Current liabilities

54,06556,917

Non-current liabilities

8,504

8,620

Total liabilities

62,56965,53862,09857,313

Accumulated other comprehensive income

576

1,461

Valuation difference on available-for-sale securities

792

1,389

9

22

225

49

591

610

Total net assets

63,26659,385

Total liabilities and net assets

125,836

124,923

Liabilities

Net assets
Shareholders’ equity

Revaluation reserve for landRemeasurements of defined benefit plans
Non-controlling interests

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary income
Extraordinary losses
Income before income taxes and minority interests
Income taxes – current
Income taxes – deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

173,928
156,165
17,762
9,707
8,055
545
191
8,410
220
180
8,451
2,506
270
5,673
29
5,643

167,659
149,750
17,908
9,916
7,991
366
168
8,190
74
186
8,079
2,287
522
5,269
78
5,191

Consolidated Statement of Cash Flows (Unit: Million yen, rounded down to the nearest million yen)
92th term
91th term(January 1, 2018 - December 31, 2018) (January 1, 2017 - December 31, 2017)

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting
from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period

3,300
3,119
1,023
7,443
30,301

15,406
1,803
975
12,627
17,538—135

22,85830,301

Consolidated Statement of Changes in Equity (January 1, 2018 – December 31, 2018) (Unit: Million yen, rounded down to the nearest million yen)

Balance as of January 1, 2018
Changes of items during the period
Dividends of surplus
Net income attributable to owners of the parent
Purchase of treasury shares
Disposal of treasury shares
Reversal of revaluation reserve for land
Net changes of items during the period
other than shareholders’ equity
Total changes of items during the period
Balance as of December 31, 20187

Capitalstock

Shareholders’ equity
CapitalRetained
Treasury
surplusearnings
shares

5,158

6,132

46,766

744

887
5,643
155
137

32
12

—
5,158

32
6,165

4,769
51,53517761

Accumulated other comprehensive income
NonTotal shareholders’ Valuation difference on Revaluation Remeasurements of Accumulated other controllinginterests
equityavailable-for-sale securities reserve for land defined benefit plans comprehensive income

57,313

1,389

22

49

1,461

610

887
5,643
155
170
12

4,784
62,098

Total net
assets59,385
887
5,643
155
170
12

597

12

275

885

18

903

597
792

12
9

275
225

885
576

18
591

3,881
63,266

Business Overview/Subsidiaries
In addition to the construction orders and projects undertaken

Construction by the Company, FUKUDA ROAD CONSTRUCTION CO., LTD.
businessand 21 other subsidiaries, and TAKAKEN CO., LTD. and fourother affiliates are also engaged in construction orders and¥158,710million projects, as well as the rental and manufacturing/sales ofRatio of net sales by
consolidated business

91.3%

construction-related materials and equipment, some of which
are ordered by the Company.

Real estatebusiness¥2,639million

In addition to the business undertaken by the Company in realestate sales, leasing and development, FUKUDA ASSET &SERVICE CO., LTD. and three other subsidiaries, as well as anaffiliate, TAKAKEN CO., LTD., and another affiliate are also
engaged in the real estate business.

Otherbusiness¥12,578million

FUKUDA ROAD CONSTRUCTION CO., LTD. and four othersubsidiaries are engaged in the lease, manufacture and sale ofproducts other than those related to construction projects, andthe Company purchases and leases products from thosecompanies. Another subsidiary, Design Workshop Co., Ltd., isengaged in the management of welfare facilities.

1.5%

7.2%

Murakami Pavement Products Co., Ltd.
Founded in July 1969, Murakami Pavement Products Co., Ltd.
fully utilizes its location at the northern end of Niigata Prefecture
for its asphalt plant. Sales are centered around Murakami Citybut also extend into part of Yamagata Prefecture. Murakami
Pavement Products Co., Ltd. has an extensive delivery record inlandscape and specialized paving, and the company espousesa management philosophy of “gaining customer satisfaction withproducts and services based on the pursuit of high quality andtechnique” and “contributing to the development of the local
community through trustworthy corporate activities.” Thecompany is also engaged in energy-efficient driving to reduce
environmental impact, and actively promotes sales of recycled
and warm mix asphalt, playing its part in a sustainable society.
Representative
President & Representative Director Yukio Tamura
Address
1035 Miyanoshita, Murakami City, Niigata Prefecture
Date of Establishment July 1969
Capital¥10 million
Employees
7
Nature of Business Manufacture and sales of asphalt mix
Manufacture and sales of recycled roadbed materials
Intermediate processing of industrial waste(As waste materials)

8Topics

TOPICS

1“Company with Excellent Record of Construction Projects” Certification

Certified by the Ministry of Land, Infrastructure, Transport and Tourism
as a “Company with Excellent Record of Construction Projects”

The Company received certification and an award as a Company
with Excellent Record of Construction Projects for Fiscal 2018 fromthe Hokuriku Regional Development Bureau of the Ministry of Land,
Infrastructure, Transport and Tourism. This certification systemselects and certifies companies
with an excellent rating inconstruction projectcompletions for civilengineering projects completed
within the past two years.
The Company’s technicalcapabilities in regard toconstruction and quality control
have been rated highly, and theCompany has received thiscertification for the sixth
consecutive year.

TOPICSTOPICSIR Information Session for Individual Investors

an IR Information Session for
2 HeldIndividual Investors (Sendai)

The Company hosted an IR information session targeted towards
individual investors in Sendai City, Miyagi Prefecture. Participants
were informed about the history and construction achievements ofFukuda Group and the Company, as well as their businessperformance, and the information session was a great success,extending past its planned timeframe.

The Conclusion of an Academic-Industrial Collaboration Agreement

3 Concluded an “Agreement on Systematic Academic-Industrial Collaboration”
The Company concluded an “Agreement on Systematic
Academic-Industrial Collaboration” with Niigata University.
This is the first ever collaboration agreement with Niigata
University in the construction industry. The Company will
fully utilize its ‘achievements in collaborative research’and ‘person-to-person ties’ with Niigata University to strive
for innovation in ‘technology’ and ‘people’ through closer
systematic collaboration, as well as participating in the
nurture of talented individuals who will play an importantpart in the future, thus contributing to society and the local
community.

9

Corporate Data
Company Profile (as of December 31, 2018)
Established:

January 1902

Founded:December 1927

Capital:Employees:

5,158,408,496 yen
858

Consolidated subsidiaries: 17 (including FUKUDA ROAD CONSTRUCTION CO., LTD.)
Main offices:

Directors and Executive Officers (as of March 28, 2019)
Chairman &Representative Director Katsuyuki Fukuda
Chairman of the Board
President &Representative Director Masanori Araaki
President of the Board
Vice President &Representative Director
Wataru Ishikawa
Vice President of the Board
Director &Executive Officer

Ryoichi Soma

Director &Executive Officer

Masahiro Masuko

Director &Executive Officer

Takeshi Yamamoto

Main Branch & Branches

Director &Executive Officer

Shinichi Otsuka

Niigata Main Branch (Chuo-ku, Niigata),

Director

Kenichi Yazawa

Tokyo Main Branch (Chiyoda-ku, Tokyo),

Director

Yoshinao Nakata

Tohoku Branch (Aoba-ku, Sendai),

Senior Executive
Officer

Chihiro Oiwa

Head office3-10 Ichibanboridoricho, Chuo-ku, Niigata
Tel: 025-266-9111 (Main line)

Nagoya Branch (Naka-ku, Nagoya),
Osaka Branch (Kita-ku, Osaka),
Kyushu Branch (Hakata-ku, Fukuoka),
Chuetsu Branch (Nagaoka, Niigata Prefecture),
Hokkaido Branch (Chuo-ku, Sapporo)
Sales Offices
Morioka, Chiba, Yokohama, Murakami,
Jouetsu, Hiroshima and six other locations(Note) Shibata Sales Office opened on April 1, 2016.

Main subsidiaries: FUKUDA ROAD CONSTRUCTION CO., LTD.

Senior Executive
Officer

Shoichi Takakuwa

Executive Officer

Tsuyoshi Tamiya

Executive Officer

Kazunori Konno

Executive Officer

Katsuhiko Iwasaki

Full-Time Audit &Supervisory Board Koichi Yakuwa
MemberAudit &
Supervisory Board Tetsuya Sunada
MemberAudit &
Supervisory Board Michiaki Miyajima
MemberNotes:
1.	Messrs. Kenichi Yazawa and Yoshinao Nakata are Outside Directors pursuant to Article 2,
Paragraph 15 of the Companies Act.
2.	Messrs. Tetsuya Sunada and Michiaki Miyajima are Outside Audit & Supervisory Board
Members pursuant to Article 2, Paragraph 16 of the Companies Act

Stock Information (as of December 31, 2018)
Total Number of Shares Authorized to be Issued: 20,000,000 shares
Total Number of Shares Outstanding (excluding treasury shares):8,898,706 shares

Number of Shareholders:

4,758

Major Shareholders
Name of shareholder

Number of shares held
(thousands)

Shareholding ratio (%)

688

7.7

KOWA Co., Ltd.

(Public Interest Incorporated
Foundation) Fukuda Ikueikai

FUKUDA HOUSING CO., LTD.

THE DAISHI BANK, LTD.

439

4.9

Naomi Fukuda

431

4.9

Fuji Fukuda

326

3.7

Kazuko Ozawa

321

3.6

RECS CORPORATIONFUKUDA ASSET & SERVICE CO., LTD.
NigataZouen Corporation
FUKUDA RENEWAL CORPORATION
Kita Nihon Construction Material Leasing Co., Ltd.
Re Earth Corporation

Note: Shareholding ratio is calculated after deducting the number of treasury shares (89,405
shares).The number of treasury shares does not include the shares of the Company(60,500 shares) held by Trust & Custody Services Bank, Ltd. (trust account E) as thetrust assets of the Employee Stock Ownership Plan (J-ESOP) and Board Benefit Trust(BBT).

10

Information for Shareholders
Fiscal Year:

From January 1 to December 31

Ordinary General March
Meeting of
Shareholders:Record Date

Stock Transfer Agent /Account Management
Institution for Special
Accounts:

Ordinary General Meeting of Shareholders:
December 31
Year-End Dividend: December 31
Interim Dividend: June 30

Shareholder Benefit Program
To express our gratitude for the constant support of ourshareholders and with the aim of encouraging shareholders tomaintain their shareholding over a long period, the Company
has introduced a Shareholder Benefit Program.
Number ofshares held

Shareholder
benefit

200 shares A ¥2,000
or moreQUO card

Mitsubishi UFJ Trust and Banking Corporation
Contact Information
Mitsubishi UFJ Trust and Banking Corporation
Stock Transfer Agency Department
1-1 Nikkocho, Fuchu, Tokyo
Tel: 0120-232-711 (Toll-free)
Addressee
Shin-Tokyo PostOffice,Po box No.29,
Tokyo 137-8081 Japan

Number of
Shares Per Unit:

100

Listed on:First Section of Tokyo Stock Exchange

200 shares A ¥5,000
or moreQUO card

Benefit criteria
Shareholder benefit presented inaccordance with the details
registered or recorded in the
Shareholder Registry as ofDecember 31 each year.
Shareholder benefit presented inaccordance with the details(registered or recorded three times
or more in the Shareholder
Registry) for shares held for one
year or more.

Presentation period: Scheduled to be sent in late March each year

Method of Public Public notices will be made electronically.
Notice:However, when electronic public notices cannot
be made due to circumstances beyond ourcontrol, we will post a notice in the Nihon Keizai
Shimbun.
URL for Public Notices: http://www.fkd.co.jp/
Notes:
Procedures for matters such as change of address of shareholders andrequests for purchase of shares are, in principle, accepted by theaccount management institution (securities company, etc.) where
shareholders have their accounts. Please contact the securities company

FUKUDA Corporation Search

http://www.fkd.co.jp/

where you have your account. These procedures are not handled by the
Stock Transfer Agent (Mitsubishi UFJ Trust and Banking Corporation).
Procedures related to shares recorded in special accounts are handledby Mitsubishi UFJ Trust and Banking Corporation as the accountmanagement institution. Shareholders are therefore requested to contact
the account management institution (Mitsubishi UFJ Trust and Banking
Corporation) for the aforementioned special accounts.
The services are also provided at nationwide branches of Mitsubishi UFJ
Trust and Banking Corporation.

Head office: 3-10 Ichibanboridoricho,
Chuo-ku, Niigata
Tel: 025-266-9111 (Main line)