FUKUDAREPORT

Annual Report forrd
the 93 Term
January 1, 2019 – December 31, 2019

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 93rd term ended on December 31, 2019.
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 2020
Financial Highlights
Net sales
167,659(Unit: Million yen)

173,928

182,088(Forecast)

91st term 92nd term 93rd term 94th term

1

Operating income

182,000

7,991

8,055

(Unit: Million yen)

8,055

7,500

(Forecast)

91st term 92nd term 93rd term 94th term

Ordinary income
8,190

8,410

(Unit: Million yen)

8,350

7,600

(Forecast)

91st term 92nd term 93rd term 94th term

Business environment for the fiscal year under review
The Japanese economy continued to make a moderate recovery thanks to sustained high levels of corporate earnings as
a result of cost-cutting efforts, despite a continued downturn in exports caused by weakness in overseas economies.
Meanwhile, personal consumption is also experiencing a moderate upturn, despite a temporary slump due to factors suchas a lull following the rush in demand that preceded the consumption tax hike.
In the construction industry, capital investment continued to increase, driven primarily by demand for maintenance andrenewal works on aging facilities, investment in building renovations and redevelopment in major metropolitan areas, as wellas rationalization and labor-saving investment in response to labor shortages. There was also robust investment in theconstruction of accommodation and other facilities for accepting visitors to Japan.
Consolidated business results for the fiscal year under review
The consolidated business results for the fiscal year under review were as follows. Net sales increased 4.7% year on year
to more than ¥182.0 billion, due to an increase in construction business brought forward from the previous fiscal year,
despite a decrease in new orders received.
In terms of profit, gross profit increased by 1.7% year on year to more than ¥18.0 billion, growing at a slower rate than net
sales due to the effect of a decrease in construction project gross profit margins amid an increasingly competitive businessenvironment. Operating income remained at over ¥8.0 billion, the same level as the previous fiscal year, due to an increase in
selling, general and administrative expenses such as labor costs.
Net income attributable to owners of the parent decreased by 3.0% year on year to over ¥5.4 billion, as non-operating
income and extraordinary income fell due to a decrease in the Group’s share of profit of entities accounted for using equity
method and the absence of the compensation for expropriation that was recorded in the previous fiscal year.
However, the Group steadily implemented measures in the Medium-Term Business Plan, of which the year under review
was the initial year, and generally succeeded in achieving the planned performance.
Outlook for the next fiscal year
Going forward, in the construction industry, investment in public works construction, primarily maintenance and renewal, ispredicted to continue to increase, while stable demand is also expected to continue in the order environment for private
sector investment. However, an increasingly harsh order environment is expected in regional areas, where a tight supplydemand balance caused by labor shortages, 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, as construction companies adapted to meet the needs of society and customers, theGroup will strive to enhance productivity and work environments, maximize utilization of management resources, secure andnurture talent, increase corporate value, and thus achieve the goals of the “Medium-Term Business Plan 2021,” which theGroup established in 2019.

Net income attributable to owners of the parent
5,191

91st term

5,643

92nd term

5,475

93rd term(Unit: Million yen)Orders (non-consolidated)
151,387

5,000(Forecast)

94th term

122,680

91st term

92nd term(Unit: Million yen)

123,000

120,847(Forecast)

93rd term

94th 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
Narrow down new revenue bases for Group companies
Secure and diversify talent
Create worksites to provide safe, high-quality services
Be trusted as Fukuda Group

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
Net sales (hundred million yen)
Consolidated

Operating income (hundred million yen)
Non-consolidated

Consolidated

Non-consolidated

1,820

1,820

1,890

1,199

1,210

1,235

80

75

79

55

56

58

2019

2020

2021

2019

2020

2021

2019

2020

2021

2019

2020

2021

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

Joetsu CityJX Nippon Real Estate Corporation and Daiwa Lease Co., Ltd.

Tentative name: Joetsu City Gymnastics Arena Construction Project(Niigata Prefecture)

Tentative name: Frespo Hibarigaoka Construction Project (Tokyo)

Anabuki Kosan Inc.

Otemon Gakuin Educational Foundation

Tentative name: Alphastates Narukozaka Construction Project(Shizuoka Prefecture)

Otemon Gakuin Elementary School New East Wing Construction Projectand Associated Works (Osaka Prefecture)

INOAC CORPORATIONLANDIC HOLDINGS Co., LTD.

Tentative name: INOAC CORPORATION Tsukidate Plant Rigid Workshop
Construction Project (Miyagi Prefecture)

Tentative name: Nagaoka 2-chome Plan Construction Project(Fukuoka Prefecture)Civil Engineering

Niigata Prefecture

Niigata Prefecture

Niigata Port (Nishi Ko-ku)
Revetment Disaster Recovery (Waste Landfill Revetment No.2)
Construction Project (Niigata Prefecture)

Sado Ring Road Major Regional Road Takegahana Bypass
Tentative name: Takegahana Tunnel Construction Project(Niigata Prefecture)

Fukushima Prefecture

Ministry of Land, Information, Transport andTourism, Kyushu Regional Development Bureau

Public Disaster Recovery (Restoration) Project (Coastal)(Fukushima Prefecture)

Ministry of Land, Infrastructure, Transport andTourism Hokuriku Regional Development Bureau

Tateno Area Slope Excavation and Other Works(Kumamoto Prefecture)

Niigata Coast Kineicho No.4 Headland 4th External Construction
Project (Niigata Prefecture)

Fukuoka Prefecture
Kurume, Ukiha Industrial Park Development Project (Area 2)(Fukuoka Prefecture)

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

DAIWA HOUSE INDUSTRY CO., LTD.

Tokyo Metropolitan Government

Tentative name: DPL Urawa Misono Construction Project

Ariake Arena (Tentative Name) (27) Construction Project

JA Niigata Kouseiren

Fuyo General Lease Co. Ltd.

JA Niigata Kouseiren Murakami General Hospital Relocation Project

Tentative name: Koami-cho 16-ban Hotel Construction Project, Nihonbashi,
Chuo-ku

Ministry of Land, Infrastructure, Transport and Tourism
Hokuriku Regional Development Bureau
Ohkouzu Diversion Channel New 2nd Groundsill Reconstruction Phase I Project

Tokyo Bureau of Sewerage
Higashi-Ogu Purification Center – Ogu Main Line for Ogu System Pump RoomOperation Construction ProjectNiigata Prefecture
Sado Ring Road Major Regional Road Takegahana Bypass (Tentative Name)
Takegahana Tunnel Construction Project

Miyagi Prefecture
Sakanamachi Road Reconstruction 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)

93rd term
92th term(as of December 31, 2019) (as of December 31, 2018)

93rd term
92th term(January 1, 2019 - December 31, 2019) (January 1, 2018 - December 31, 2018)

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

AssetsCurrent assets

104,203

90,675

Non-current assets

35,34335,157

Total assets

139,546

125,832

Current liabilities

62,88054,064Non-current liabilities

8,531

8,501

Total liabilities

71,41262,56566,69762,098

Accumulated other comprehensive income

840

576

Valuation difference on available-for-sale securities

853

792

Revaluation reserve for land75

9Remeasurements of defined benefit plans

63

225

596

591

Total net assets

68,13463,266

Total liabilities and net assets

139,546

125,832

Liabilities

Net assets
Shareholders’ equity

Non-controlling interests

182,088
164,018
18,06910,014
8,055
413
117
8,350
176
240
8,286
2,825
57
5,519
43
5,475

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

Consolidated Statement of Cash Flows (Unit: Million yen, rounded down to the nearest million yen)
93rd term
92th term(January 1, 2019 - December 31, 2019) (January 1, 2018 - December 31, 2018)

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

1,151
1,849
3,314
313
22,858

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

23,171

22,858

Consolidated Statement of Changes in Equity (January 1, 2019 – December 31, 2019) (Unit: Million yen, rounded down to the nearest million yen)

Balance as of January 1, 2019
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, 20197

Capitalstock

Shareholders’ equity
CapitalRetained
Treasury
surplusearnings
shares

5,158

6,165

51,535

761

978
5,475
57
78

3
85

5,158

3
6,162

4,582
56,11820741

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

62,098

792

9

225

576

591

978
5,475
57
74
85

4,599
66,697

Total net
assets63,266
978
5,475
57
74
85

61

85

288

264

4

268

61
853

85
75

288
63

264
840

4
596

4,868
68,134

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

Construction by the Company, FUKUDA ROAD CONSTRUCTION CO., LTD.
businessand 22 other subsidiaries, and TAKAKEN CO., LTD. and four
affiliates are also engaged in construction orders and¥178,925million otherprojects, as well as the rental and manufacturing/sales ofRatio of net sales by
consolidated business

98.3%

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

Real estatebusiness¥2,511million

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¥651million

FUKUDA ROAD CONSTRUCTION CO., LTD. and four othersubsidiaries are engaged in the lease, manufacture and sale ofproducts other than those related to construction projects.
Another subsidiary, Design Workshop Co., Ltd., is engaged in
the management of welfare facilities.

1.4%

0.3%
IT Support Inc.

IT Support Inc. was establishedin January, 2003, as the Fukuda
Group’s shared IT division.
With the management
philosophy of “aiming for
genuine end-user support for IT
environments,” the company
offers meticulous support
throughout the IT life-cycle frominstallation to disposal, renting
out PCs and servers mainly foruse by employees of theGroup. It also provides support
for the construction of network
environments and the installation of various types of software, andassists companies in various ways such as the installation ofmulti-function printers and other peripheral devices, to ensure
good working environments.
IT Support Inc. also offers these services to customers outside
the Group, and will continue to strive daily to increase the numberof customers using its services.
(The main office of IT Support Inc. was relocated from Kawagishicho, Chuo-ku
to Shichikuyama, Chuo-ku in November 2019.)

Representative
President & Representative Director Kinichi Uchiyama
Address
7-12-2 Shichikuyama, Chuo-ku, Niigata
Date of Establishment January 2003
Capital¥20 million
Homepagehttps://www.itsupport-inc.com/
Nature of Business PC rental and support
Server and network construction
Software installation support

8

Topics

TOPICS

Certified as “Company with Excellent Record of Construction Projects” for 7 years runningby the Ministry of Land, Infrastructure, Transport and Tourism
1 Certified
as a “Company with Excellent Record of Construction Projects”
The Company received
certification and an award as a
Company with Excellent Recordof Construction Projects for
Fiscal 2019 from the Hokuriku
Regional Development Bureauof the Ministry of Land,
Infrastructure, Transport andTourism. This is the seventh
consecutive year that theCompany has received thiscertification, attesting to thecontinuity and stability of its
technical capabilities in regard
to construction and quality
control.

TOPICSTOPICSIR Information Session for Individual Investors

2 Held an IR Information Session in Osaka

The Company hosted an IR information session for around 40
individual investors in Osaka City, Osaka Prefecture. Sessions suchas these are being held around Japan.

Developed Productivity Tools in Collaboration with an IT Company

3 Developed “Te-S Assistant” Utilizing SfM Technology for Work Progress Control

Wireless LAN
Image capture
Automated data transfer
Point cloud production
Evaluation & plotting

9

The Company, in collaboration with an IT company, developed“Te-S Assistant,” a tool aimed at enhancing the efficiency ofmountain tunnel construction work management. The “Te-SAssistant” provides visualization and guidance for the state ofcompletion of tunnel excavation, through photogrammetry utilizing
SfM (Structure from Motion) technology. Until now, employees had
to judge by sight whether excavation was being carried out in asuitable form to ensure appropriate conformity with the crosssection design. There was thus the risk that the planned tunnel
cross-section would not be achieved due to insufficient excavation,or conversely, that too much excavation would lead to losses
through the need for additional work and concrete lining.
Moreover, there was the physical danger of rock face collapse. The“Te-S Assistant” was developed to provide a method of ensuring
efficient and safe tunnel form excavation.

Corporate Data
Company Profile (as of December 31, 2019)
Established:

January 1902

Founded:December 1927

Capital:5,158,408,496 yen

Employees:

898

Chairman &Representative Director Katsuyuki Fukuda
Chairman of the Board

Executive Officer

President &Representative Director Masanori Araaki
President of the Board

Executive Officer

Executive Officer

Executive Officer

Kiyomi Ozaki
Hiroyuki Oiki
Mikio Yamamoto
Hiroshi Shimizu
Satoshi Yugami
Tsuyoshi Tamiya
Kazunori Konno
Katsuhiko Iwasaki

Vice President &Representative Director
Wataru Ishikawa
Vice President of the Board

Executive Officer

Director &Executive Officer

Ryoichi Soma

Executive Officer

Director &Executive Officer

Masahiro Masuko

Executive Officer

Head officeDirector &Executive Officer

Takeshi Yamamoto

3-10 Ichibanboridoricho, Chuo-ku, Niigata

Full-Time Audit &Supervisory Board Koichi Yakuwa
MemberDirector &Executive Officer

Shinichi Otsuka

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

Directors and Executive Officers (as of March 26, 2020)

Tel: 025-266-9111 (Main line)
Main Branch & Branches
Niigata Main Branch (Chuo-ku, Niigata),
Tokyo Main Branch (Chiyoda-ku, Tokyo),
Tohoku Branch (Aoba-ku, Sendai),
Nagoya Branch (Naka-ku, Nagoya),
Osaka Branch (Kita-ku, Osaka),
Kyushu Branch (Hakata-ku, Fukuoka),
Chuetsu Branch (Nagaoka, Niigata Prefecture),

Kenichi Yazawa
Yoshinao Nakata
Vice President of the Board Hideaki Fujiyama
Executive Officer
Yutaka Yamaga
Executive Officer
Shuichi Sunada
Director
Director

Executive Officer

Full-Time Audit &Supervisory Board Shoichi Takakuwa
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, 2019)

Hokkaido Branch (Chuo-ku, Sapporo)

Total Number of Shares Authorized to be Issued: 20,000,000 shares

Sales Offices

Total Number of Shares Outstanding (excluding treasury shares):

Morioka, Chiba, Yokohama, Murakami,

Number of Shareholders:

Jouetsu, Hiroshima and six other locations

Major Shareholders

Main subsidiaries: FUKUDA ROAD CONSTRUCTION CO., LTD.

Name of shareholder

8,911,369 shares
5,607

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

4.8

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 (76,742
shares).The number of treasury shares does not include the shares of the Company(70,300 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)