Integrated Report

KYUDENKO REPORT

2022

1. Introduction

Contents

Corporate Philosophy

1. Introduction

3. CSR/Corporate Governance
02

Message from the President

03

Growth Trajectory of Kyudenko

07

2. Vision and Strategy
Value Creation Process

09

Long-term Vision13

Mid-term Management Plan

15

Initiatives for Promoting Sustainability Management 17
Promotion of Environmental Management: Initiatives
19
based on TCFD Recommendations
Human Resource Strategy Linked to Management
23
Strategy

35

Workplace and Labor Environment

36

Coexistence with Local Communities/Track and
Field Team37

our engineering strength and create a new value.

Initiatives for Safety

38

3 We aim to create a mutual respecting environment

Initiatives for Technology Development

39

Corporate Governance

41

Message from the Outside Directors

46

Management Team of Kyudenko

49

4. Data Section
Financial and Non-financial Highlights

53

10-year Financial Summary

55

DX Initiatives

25

Report on Financial Results and Financial Analysis

57

Business of Kyudenko

27

Consolidated Balance Sheet, Consolidated
Statement of Income, Consolidated Statement of
Cash Flows

59

Corporate Profile and Stock Information

62

Business Locations

63

Technology Division (Electrical Work, HVAC andSanitary Facility Work)

27

Electric Power Division (Power Distribution Line
Work)

29

Green Innovation Business Unit (Renewable
Energy Generation Plant Work)31

Renewable Energy Generation Business

33

Overseas Business, PPP/PFI Business,
Olive Business

34

environmental solutions.

Basic Concept of CSR

1. Introduction

Corporate Philosophy/
Action Guidelines/Charter of Behavior

1 We contribute to society through providing agreeable
2 We keep challenging for sustainable development throughin Kyudenko which utilize and develop employees’ personality.
Action Guidelines(1) We will create the future environment with a new perspective(2) We will enhance technological force with creativity and ingenuity(3) We will appropriately accept and respond to customers’ voice(4) We will embrace teamwork in work(5) We will create a vibrant and bright workplace

Kyudenko Charter of Behavior
As an integrated utilities engineering service, we will create an environment that aims for ideal harmony of “people”,“environment”, and “technology”, and as a beneficial company that is trusted by society, we will respect human rights,
comply with the spirit of relevant laws, regulations, and international rules, and act voluntarily to fulfill our
responsibilities with a good social conscience, based on the following ten principles.
1. We will engage in the research and development of technologies that meet the requirements of society and customers
to enhance service, safety, quality, and value, pay due consideration to the protection of personal information andcustomers’ information, and provide integrated utilities that will earn our customers’ satisfaction and trust.
2. We will engage in fair, transparent, and free competition, conduct appropriate transactions, and maintain healthy, normal
relationships with politicians and governments.
3. We will disclose accurate corporate information proactively, fairly, and in a timely manner with the aim of practicing
corporate management that is open to all both within and outside the Company.
4. We will give our employees relaxing and enriched lives, ensure safe, comfortable, and open workplaces, and create a
corporate culture that is bright and vibrant, and respects the character, individuality, and diversity of our employees.

Editorial Policy
This report aims to create an opportunity for dialogue with shareholders, investors and other stakeholders, providing them with the Kyudenko Group’s initiatives
for enhancing its corporate value over the medium to long term. We have edited this report to provide an easy-to-understand overview of our business model,
business activities, growth strategies, and non-financial initiatives, with specific examples. We hope this report will help you better understand our Group.

Applicable Period and Scope
Period: April 2021 to March 2022. Including some activities before and after this period.
Scope: Kyudenko Group. Including some reports of Kyudenko alone.

Disclaimer
The financial results forecasts, future outlook, strategies, targets, etc. contained in this report, excluding those related to past or current facts,are forward-looking statements and are based on plans, expectations, and judgements on the basis of the information currently available to theCompany and certain assumptions considered to be reasonable. Therefore, please note that actual results may differ from these forecasts andother forward-looking statements due to changes in economic conditions and various other uncertain factors.

01

Kyudenko Corporation

5. Recognizing engagement in environmental issues as a common challenge for all humanity and an important mission in
our corporate activity, we will act voluntarily and proactively.
6. We will make active contributions to society as a good corporate citizen and strive to exist in harmony with local
communities.
7. We will resolutely confront any anti-social forces or organizations that pose a threat to the order and safety of civic
society.
8. In our international business activities, we will comply with international rules and local laws and regulations, respect
local culture and customs, strive to forge friendships and goodwill, and develop businesses that will contribute to thegrowth and prosperity of those local regions.
9. Recognizing that their role is to realize the spirit of this Charter, top management will set an example for others,
thoroughly disseminate the Charter among all concerned parties, constantly listen to feedback from within and outside
the Company, establish effective internal systems, and strive for the thorough observation of corporate ethics.
10. In the event of a situation that runs counter to this Charter, top management themselves will make their willingness tosolve the problem clear within and outside the Company, strive to solve the problem and prevent recurrences, disclose
information to the community swiftly and with accuracy, pursue accountability, and, having clarified authorities andresponsibilities, impose strict penalties, including on themselves.

KYUDENKO REPORT 202202

1. Introduction

Message from the President

Naofumi Sato
Executive Officer
Representative President

Kyudenko Group has a Long-term Vision toward its 100th anniversary.
Q The
Please tell us a bit about your sustainability initiatives.
Based on our Corporate Philosophy, the Kyudenko Group
has set out its Long-term V ision toward its 100th
anniversary in 2044 and is engaging in sustainability
initiatives. The Long-term Vision acts as a bridge thatlinks our Corporate Philosophy and Action Guidelines
with the Mid-term Management Plan (2020–2024), which
has been formulated as a milestone toward the realizationof the Long-term Vision.
Under the main theme of “Make Next – To Create Smiles for
the Future,” the Long-term Vision identifies materiality with aneye to various structural reforms and megatrends in societythat can be expected in the future. It sets forth Three
Contributions: “Solve social problems,” “Realize a carbon-freesociety,” and “Maintain and develop local public infrastructure.”
Materiality is identified from each of the ESG
perspectives, and then the items with high “expectations

from society” and “importance to our company” areidentified and specific initiatives are organized.
ESG is a social issue that must be resolved for a sustainable
future. For the Kyudenko Group, it is a risk that has asignificant impact on our business activities. At the same time,
we believe it is a crucial management issue that will lead toopportunities for growth. Although we periodically refinemateriality as times change and the environment surrounding
the Kyudenko Group evolves, our main theme, “To Create
Smiles for the Future,” will never change. Through ourbusiness activities, we will solve social issues, create social
value, and bring smiles to the faces of many people, while
broadening Kyudenko’s sphere of activities and enhancing its
economic value, which will lead to a steady increase incorporate value.

The Kyudenko Group leverages the expertise it has
accumulated in its main areas of business – power
distribution line, electrical, and HVAC and sanitary facility
work – in contributing to the maintenance and developmentof local public infrastructure. And, through the construction
and installation of renewable energy power generation plants
and the sale of electricity, we play a part in the realization of adecarbonized society. The Kyudenko Group’s businessactivities themselves have a very high affinity with theenvironment and society. We believe that the significance of
ESG in the Group is to put solid governance into effect andto push forward with our business activities.
With regard to environmental issues – including climatechange – we are accelerating our efforts not only to carry out
construction work but also to achieve our own carbon
neutrality. In 2021, we announced our endorsement of the
TCFD recommendations and set medium- to long-term goals
for reducing our greenhouse gas (GHG) emissions. This year,
we are also analyzing and disclosing the financial impact on
our business in line with the TCFD recommendations. We
intend to consider and implement further specific initiatives
to achieve carbon neutrality by 2050.

Q

With regard to society, we are not only striving through ourbusiness activities to solve social issues, but working toaugment our human capital, or employees. In 2021, we
introduced an employee engagement survey. Based on theinformation obtained from the results, we pinpoint issues thathinder the improvement of engagement and implement
initiatives as appropriate. As I noted earlier, for the KyudenkoGroup, “human resources” are our greatest capital. Throughthe engagement survey, we intend to implement prompt,
sustained efforts to increase the number of employees whoare enthusiastic about their jobs and to develop a firm
relationship of trust between the Company and its
employees.
Finally, in terms of governance, I believe that my primaryrole is to manage the Company with effective governance sothat we can steadily move our business forward while at thesame time fulfilling our accountability to society. This fiscal
year, as a first step toward this goal, we bolstered ourorganizational structure by shifting to a company with Audit
and Supervisory Committee. We will continue to work torealize fair and transparent governance.

1. Introduction

We contribute to
the creation of a sustainable
society throughour business activities.

would like to ask you a little more in depth about ESG.
Q IPleasetell us about ESG as it relates to the Kyudenko Group.

Next, please tell us about your Mid-term Management Plan (FY2020–FY2024).
The Group is now in the second half of the Mid-term Plan that started in FY2020.
We’d first like to ask about your progress so far.

This Mid-term Management Plan got underway amid extremely
difficult operating conditions, as we were faced with theunprecedented situation of the spread of COVID-19. This
triggered postponement or review of capital investment, mainly
by customers in the service and manufacturing industries,
which in turn led to a decline in orders and delays inconstruction progress. Even in such a business environment,these elements had been factored into the plans for the year,
and while sales fell slightly short of the plan, we succeeded insecuring profits in excess of expectations.
In FY2021, the second year of the Plan, the key theme was“Adaptation to environmental changes and realization ofrecovery.” To achieve the goal of 500 billion yen in net sales –the Mid-term Management Plan target – it is extremely
important to accumulate orders. Accordingly, we focused on“strengthening and expanding the order base,” particularly withregard to orders that had declined in the first year. This enabled
us to win large orders, primarily in Kyushu, for hospitals,
redevelopment of major station buildings, data centers, andother large-scale projects. This led to a significant year-on-yearincrease in orders received.
I’d like to express my gratitude to our employees for their
united efforts in pursuing our business activities during these
two tumultuous years in the business environment.

Transition of Business Performance and Forecast for the year ending March 31, 2023 (Consolidated)(unit: million yen, lower row is the ratio to sales)

Q What are the keys to achieving sustainability?
We believe that the foundation for bringing our vision to
fruition is people. To date, human resources have supported
the growth of the Kyudenko Group. In fact, the expansion of
our business in recent years has been driven by ouremphasis on the worksites – the front line of our business –and the systematic hiring of new graduate engineers tobolster our construction capability. We consider that themost significant factor was our systematic and aggressive
efforts to secure human resources through M&A and othermeans.
The world environment is changing at a dizzying pace, but
the idea that company growth is not possible without humanresources will remain unchanged for the Kyudenko Group.
We will continue our active recruitment of human resources.
In the interest of the sustainable growth of the KyudenkoGroup, it is important not only to hire people but also tocultivate them. In recent years, changes have taken place invarious social structures amid megatrends such as theadvancement of digitalization, growing awareness of ESG,

03

Kyudenko Corporationand the diversification of values and needs. And this change
has been dramatically accelerated by the pandemic. For the
Kyudenko Group to create new value and solve various
social issues against the backdrop of such an environmental
change, it is important to develop human resources who cangenerate innovative ideas or boldly take on any challenge,
rather than just keeping pace with the changing time. The
Kyudenko Group has set forth a profile of “ideal humanresources,” which is a common goal for all employees, andstrives to achieve this goal through training. “Ideal humanresources” also indicates the Company’s commitment tofostering a work environment in which employees can fully
demonstrate their capabilities. As stated in our Corporate
Philosophy, “We aim to create a mutual respecting
environment in Kyudenko which utilize and develop
employees’ personality,” we must make further efforts tofoster a work environment that makes the most of people
and to develop human resources to nurture them.

The year ended March 31, 2021

The year ended March 31, 2022

Year-on-yearcomparison

Year-on-yearcomparison

Results

Net sales

391,901

Gross profit

56,631

Operating profit

32,998

Ordinary profit

35,906

Profit attributable to owners ofparent25,042

Orders

325,158(100.0%)(14.5%)(8.4%)(9.2%)(6.4%)

Results

91.4%

376,563

94.2%

57,361

91.6%

33,13792.9%

36,82895.4%

26,21664.1%

375,474(100.0%)(15.2%)(8.8%)(9.8%)(7.0%)The year ending March 31, 2023
(planned)Year-on-year
Plancomparison

96.1%

460,000

101.3%

63,000100.4%

34,500102.6%

37,000104.7%

25,000115.5%

427,000(100.0%)(13.7%)(7.5%)(8.0%)(5.4%)

122.2%
109.8%
104.1%
100.5%
95.4%
113.7%KYUDENKO REPORT 202204

1. Introduction

Message from the President
is the progress of the “three reforms” set forth in the Mid-term Management Plan,
Q Whatincluding efforts to date and their results?
have established a DX Promotion Department to promotestreamlining and labor-saving operations and fully
leverage IT to create new innovations. Over the past two
years, the Company has continued its reforms, focusing
on using digital technology to improve the efficiency of
existing operations. Measures include having internal
systems in place and providing smartphones to all
employees. We will continue to complete various projects
toward improving operational efficiency. Going forward,
our aim will be to create businesses that offer new value
to our customers and society.
Finally, regarding the “Reform of governance,” as I
noted earlier, we have transitioned to a company with
Audit and Supervisory Committee. We believe that, byincreasing the ratio of Outside Directors on the Board of
Directors to 50%, and by having Outside Directors
comprise the majority of each of the Nomination
and Remuneration Advisory Committees, we will be able
to further strengthen the supervisory function of theBoard of Directors and enhance the corporate
governance system.

about the “development of new business fields,” an initiative carried over from the
Q Whatprevious Mid-term Management Plan?
We established the Green Innovation Business Unit in
July 2021 to serve as the engine to drive forward thedevelopment of new business areas. The movement
towards carbon neutrality is accelerating. Seeing there a l i z a t i o n o f a c a r b o n - f re e s o c i e t y a s a g ro w t hopportunity, in addition to orders and construction ofrenewable energy generation plants which we alreadyengaged in, we are striving to strengthen our business inthe areas of energy conservation and creation.
We also consider M&A and capital and operational
alliances as options to expand our business domain. In
the preceding fiscal year, we made Chuorika KougyoCo., Ltd. a subsidiary and formed a capital andoperational alliance with Central General Development
Co., Ltd. Chuorika Kougyo Co., Ltd., founded a century

ago, is a company that installs disaster prevention
systems. We recognize the growing importance of thebusiness of Chuorika Kougyo Group amid the frequencyof natural disasters in recent years. We believe that bycollaborating with the Kyudenko Group – which handles
infrastructure – by leveraging our respective strengths,
we can continue to grow while contributing to society.
Central General Development Co., Ltd. has a trackrecord in the real estate business in regional urban
areas. The Kyudenko Group has completed only a few
construction projects in the condominium field, so weare in the process of building a relationship with thecompany through a capital and operational alliance inorder to capture related business.

05

Kyudenko Corporation

The most important issues facing the Group in the third year (FY2022)

Large-scale projects

Soaring material
and labor costs• Tenjin Big Bang
• Urban area redevelopment• Semiconductor-related
plants, etc.

Most important initiatives

Improve productivity by implementing
business reforms
1. Thorough review of business processes
2. Promotion of fundamental work stylereform (optimal operation of all departments
throughout the company)

Secureorderacquisition

Secureprofits

Secureconstruction
progress

3. Effective utilization of construction forces(strengthening of personnel structure toenable company-wide cross-function)
Promote price negotiations to reflect risingmaterial and labor costs

are the keys to achieving the numerical targets for the final year of the Mid-term
Q WhatManagement Plan?
Concerning the achievement of the numerical targets of the
final year of our plan, the efforts we are making toward
reaching our goal of 500.0 billion yen in net sales include
securing orders related to a number of major projects in theworks in the Kyushu region – including the Tenjin Big Bang
project in Fukuoka – and large-scale redevelopment projects
planned in the Tokyo metropolitan area. We will aim to increase
net sales by conducting construction work while firmly
managing the process toward completion. Furthermore, as
stated in the Japanese government’s Sixth Strategic Energy
Plan, the ratio of renewable energy in the mix is expected toincrease. Therefore, we will aggressively pursue construction
orders for wind power and biomass power generation in
addition to the solar power that we have been using. We
further intend to focus on achieving our target of 500.0 billion
yen by accumulating small- and medium-sized projects throughcommunity-based efforts, which has always been our strength.
Next, regarding ordinary profit of 50.0 billion yen (ordinary
profit ratio of 10% or more), we feel that we are approaching
the target level, with an ordinary profit ratio of 9.8% in thepreceding fiscal year. As construction projects continue togrow in scale, it has become more important than ever tosecure profitability at the time of order receipt and to manage
processes during construction. Business offices, branch
offices, and the head office work cooperatively to closely
monitor the situation at each site, while promptly sending
support personnel to sites where schedules are tight toprevent cost increases. Added to this, we will aim to achieve
the target by continuing to implement front loading and othermeasures to improve profit margins.
Finally, with regard to the target return on invested capital(ROIC) of 10% or more, we strive to make effective use offunds by always being aware of our financing costs andinvesting in businesses that can be expected to generate
returns in excess of these costs, while taking risks into
consideration. Specifically, we will practice capital efficiencyconscious management by strengthening our construction
capabilities in the core business areas of power distributionline, electrical, and HVAC and sanitary work, investing in
growth businesses such as the renewable energy field
to develop new business areas, and investing in DX toenhance productivity.

a gaze toward the next Mid-term Management Plan, what is your outlook for the
Q Withbusiness environment?

Q What are some of the priority issues you will focus on in this third year of the Plan?
In pursuit of the final objectives of the Mid-termManagement Plan, the theme for the current fiscal year –the third year of the plan – is the “practice businessreforms adapted to changes in the environment.”
While major projects such as urban area redevelopment
including Tenjin Big Bang in Fukuoka – Kyudenko’s
hometown – and expansion of semiconductor-related
plants are scheduled for this fiscal year, there are also
concerns about material price hikes and delivery delays
due to the implementation by major countries of
economic sanctions against Russia and the impact of thepandemic on the supply chain, as well as outsourcing
costs being driven upward by a shortage of labor in theconstruction industry.
To overcome these challenges, we need to ensure thatw e re c e i v e o rd e r s f o r o u r t a r g e t p ro j e c t s . T i g h t l ymanaging construction progress should enable us tosecure a steady stream of profits. Therefore, to address
the biggest challenges we face, we have set two of our“Practice business reforms adapted to changes in the environment”

1. Introduction

The main theme of this Mid-term Management Plan is“establish a management foundation for sustainablegrowth,” and the subtitle is “realization of the threereforms.” Since assuming the position of President, I havepersonally implemented a variety of initiatives based ont h e b e l i e f t h a t , i n a d d i t i o n t o i m p ro v i n g b u s i n e s s
performance, building a foundation is the most importantelement in realizing this goal.
As an example, regarding the “Reform of construction
capability,” while continuing to actively recruit engineers,
we are also focusing on diversifying our recruitment
methods – including mid-career recruitment, semi-recent
graduates, and re-employment programs – in order tosecure human resources that can immediately contributeto the workforce. In terms of training, as part of efforts toprevent young employees from leaving the Company, we
reviewed the on-the-job training (OJT) system for young
employees and established a new OJT Supporter system
to provide general support for elders, and clarified ininternal rules that we should make use of the entire
workplace in the training of young employees.
Next, with regard to the “Reform of productivity,” we

FY2022 theme:

most important initiatives for this fiscal year as “improving
productivity by implementing business reforms” and“promoting price negotiations to reflect rising material andlabor costs,” and we are devoting all of our efforts tothem.
In concrete terms, the sales and technology divisions
will conduct unified sales activities to ensure that orders
are received for target projects. At the same time, we will
not only continue front loading and other measures toimprove profit margins, but also promote pricenegotiations that reflect rising materials and outsourcing
costs from the negotiation stage, with the aim of securing
profits. Moreover, we properly allocate construction
capability to ensure progress is made in construction.
We recognize that the current fiscal year is an important
year that will determine whether or not we will achieve theg o a l s o f o u r M i d - t e r m M a n a g e m e n t P l a n . We a redetermined to achieve the plan’s numerical targets bysteadily implementing the aforementioned initiatives.

Regarding the environment for FY2025 and beyond, we expect
demand for replacement and renewal of buildings erectedduring the high economic growth period, redevelopment around
Hakata Station in Fukuoka, and in the Tokyo metropolitan area
to continue to buoy orders. Moreover, we are certain thatdemand for the construction of renewable energy power plants
toward achieving carbon neutrality by 2050 will serve as a
tailwind for the Kyudenko Group. As regards small- andmedium-sized community-based projects, the Group views
them as an opportunity to further expand its share of themarket, as the shortage of workers and leaders at competitors
is becoming a serious issue.

In such an environment, human resources are absolutely
essential. We have hired consistently, even during past
recessions. This has led to us having earned the trust of
schools and communities, and has become one of the Group’s
strengths, even as challenges continue in recruiting. We willcontinue to actively recruit by leveraging our strengths, while
focusing on new recruitment methods—such as year-roundrecruitment—in order to secure human resources, whereas until
now we have generally hired at fixed times.

Q In closing, do you have a message for all stakeholders?
The Kyudenko Group has started moving toward 2044, the100th anniversary of its founding. For this very reason, we
will convey firmly to our shareholders, investors, and all otherstakeholders progress in the direction in which the KyudenkoGroup is heading, such as the Long-term Vision and Mid-term Management Plan built on our corporate philosophy,
and conduct our business activities with unwavering
determination. We sincerely hope that you will continue tooffer your support to the Kyudenko Group going forward.

KYUDENKO REPORT 2022

06

1. Introduction

Growth Trajectory of Kyudenko

Sales■Power distribution line work ■Electrical work ■HVAC and sanitary facility work ■Solar power plant work
(FY 2024: renewable energy business, etc.)● Ordinary profit■Others

Sales(Million Yen)

500,000

billion yen
Ordinary profit(Million Yen)

Sales

Origin of our logo

2012
Abenomics

1991
Collapse of the
bubble economy

300,000

2016
Introduction of negative interest rates
The 2016 Kumamoto Earthquake

2008
Global financial
crisis

1995
Great Hanshin-Awaji Earthquake

75,000408.1

billion yen
1. Introduction

Our logo is based on the letter “K”, the initial of Kyudenko, and represents a corporate image that aims
at an optimal harmony of“People = red”,“Environment = green” and“Engineering Skill = blue”.
The cuboid extending toward the upper right direction symbolizes our will to pursue dynamic growth.

400,000

500.0

2020
COVID-19 pandemic

60,000

Sales

315.9

billion yen

45,000

Sales

215.0

2007
Postal service
privatization

billion yen

2011Great East Japan
Earthquake

1986~1991
Bubble economy

200,000

30,000
Sales

105.1

billion yen

15,000100,000

0

1944

0

1980

1985

1995

2000

2005

2010

2015

2020

2022 2024(plan)

25 years from 1944

25 years from 1970

25 years from 1995

25 years from 2020

Foundation phase when Kyudenko
was born as a company engaging inelectrical and power distribution line
work across the Kyushu region

Establishment and growth phase of a
firm management base, with stocklisting and the 50th anniversary

Growth phase during which theCompany expanded its operations in
the metropolitan area and entered therenewable energy field

Acceleration phase to realize
sustainability by the 100th anniversary

Kyudenko was established in December 1944 as “Kyushu
Denki Koji Corporation” (former Kyudenko) by integrating
fourteen electric work companies in Kyushu.
December 1944 Established Kyushu Denki Koji Corporation
October 1945 Opened Tokyo Satellite OfficeJune1947 Concluded an agreement on contracted
power distribution line work with Kyushu
Haiden Co, Ltd. (current Kyushu ElectricPower Company, Incorporated)July
1964 Started operation of HVAC and sanitaryfacility work
February 1965 Opened Osaka Office

07

1990

Kyudenko Corporation

The Company was listed on the Fukuoka Stock Exchange andOsaka Exchange (second section) in November 1968, anddesignated to the first section of the Tokyo Stock Exchange andOsaka Exchange in September 1972. In December 1989, thecompany name was changed to the current “Kyudenko,” and it
marked the 50th anniversary in 1994.
November 1968 Listed on the Fukuoka Stock Exchange andthe Second Section of the Osaka Stock
Exchange
September1972 Designated to the First Sections of the Tokyo
Stock Exchange and the Osaka Stock
ExchangeMarch1987 Issued the first series of unsecured
convertible bond of 10.0 billion yen
December 1989 Changed the company name to Kyudenko
Corporation

In July 2008, the Company established Tokyo Head Office andstrengthened its management foundation in the metropolitan
area. Prompted by the Act on Special Measures Concerning
Procurement of Electricity from Renewable Energy Sources byElectricity Utilities (also known as the “FIT law”) that went into
effect in 2012, the Company entered the renewable energy
field on a full scale.
June
July
March

2008 Introduced the Executive Officer System
2008 Established Tokyo Head Office2012 Newly established a training center, Kyudenko
AcademyApril
2012 Newly established the Tohoku regional officeMarch2015 Issued the second series of unsecured
convertible bond of 10.0 billion yen
December 2019 Marked the 75th Anniversary(target)(FY)

The Company has set out its Long-term Vision toward its 100th
anniversary in 2044. To bring this Long-term Vision to life, theCompany has formulated a new Mid-term Management Plan as agoal to be achieved by FY2024 and is making its utmost efforts.
April2020 Published the Mid-term Management Plan
(2020-2024)
October 2020 Newly established the DX Promotion
Department
July2021 Newly established the Green Innovation
Business Unit
July
2021 Newly established the Diversity Promotion
Preparation Office
December 2021 Set the Medium- to Long-term Environmental
Management Goals and endorsed the TCFD
recommendations at the same timeApril
2022 Newly established the Environmental
Management Promotion Unit
April
2022 Established the Sustainability Promotion
Committee
KYUDENKO REPORT 202208

2. Vision and Strategy

Value Creation Process

Corporate Philosophy
1. We contribute to society through providing agreeable environmental solutions.
2. We keep challenging for sustainable development through our engineering strength andcreate a new value.
3. We aim to create a mutual respecting environment in Kyudenko which utilize and develop
employees’ personality.

The Group’s Vision for 2044 (100th anniversary)
Make Next: To Create Smiles for the Future
Four megatrends that the
Kyudenko Group is watchingclosely

1. Transition to a decentralizedenergy society
2. Increased environmental
awareness

Sources of Value Creation (INPUT)

Human capitalBusiness Activities (OUTPUT)

Business Portfolio (FY2022 Plan)

Mid-term Management Plan (FY2020–FY2024)

Long-term Vision (100th anniversary)

Practice business reforms adapted
to changes in the environment

Establish a managementfoundation for sustainable growth~Realization of the three reforms~

The role we will play tocreate a sustainable society
Three Contributions

Others(equipment sales,energy generation
business, etc.)13.0 billion yen

Sales:

HVAC andsanitary
facility
work:

139.0

billion yen

Natural capital

Electrical
work:

460.0

Contribute to the realization of affluent life by leveraging ourengineering strength and taking on the challenge of solving
various social problems

Reform ofgovernance

Reform ofproductivity

260.0

billion yen

billion yen
Renewable energy
generation plant
construction:

77.0 billion yen

SocialrelationshipcapitalSolve social problems

Reform ofconstruction
capability

Powerdistribution
line work:

48.0 billion yen

Manufacturing
capitalIntellectual
capitalNew Value Creation (OUTCOME)

2. Vision and Strategy

Financial
capital3. Demographic change anddiversified working styles
4. Advancement of digital technology

Realize a carbon-free society
Issues carried overfrom the previous
Mid-term
Management Plan

Promotion ofenvironmental
management

Contribute to the realization of a carbon-free society throughclean energy

Maintain and develop local public infrastructure
Sales: 460.0 billion yen

KPI

Operating profit: 34.5 billion yen
Orders: 427.0 billion yen

KPI

Sales: 500.0 billion yen
Ordinary profit: 50.0 billion yen

Contribute to the maintenance and development of local
infrastructure through stable power supply, facility works,
urban development, etc.

(Ordinary profit ratio of over 10.0%)

ROIC: Over 10.0%

Fo un d a t i o n t o S u p p o r t Va l u e C re a t i o n

Corporate Governance09

Kyudenko Corporation

Human Resources

KYUDENKO REPORT 2022

10

2. Vision and Strategy

Value Creation Process
Sources of Value Creation: Six Types of Capital
The Kyudenko Group practices CSV management while efficiently combining various sources of value
creation capital to enhance the social and economic value created through these efforts. The enhanced value

Manufacturing
capitalBusiness locations in Japan(Head office, branch offices, and business offices)

124 (as of April 1, 2022)

will reinforce the capital of the Kyudenko Group, enabling it to create new and greater value. We will continue
We believe that our strength lies in the ability to anticipate needs, provide maintenance, and respond quickly
in case of emergency by developing community-based
business activities and being close to our customers,
which affords them a sense of security.

to repeat this cycle, which will lead in turn to the sustainable enhancement of our corporate value.

With the aim of increasing shareholder value over the
medium to long term through sustainable growth, we
strive to maintain the level of shareholders’ equity inpreparation for future risks while also investing in
growth. We have set our target for ROIC—one of ourmanagement indicators—at 10% or more.

Total assets

378.3 billion yen(Year ended March 31, 2022)

Operating profit

ROE

Human
capital
In line with our conviction that people are one of ourmost valuable assets, we provide employees
opportunities to improve their capabilities anddemonstrate the results of their training to advance theCompany and ensure every employee has a rewarding
job and achieves self-actualization, with the aim offurther growing employees and advancing the Company
further. In recent years, we have also focused on
ensuring the diversity of our workforce.

Net assets

241.1 billion yen(Year ended March 31, 2022)

Ordinary profit

33.1 billion yen

36.8 billion yen(Year ended March 31, 2022)(Year ended March 31, 2022)

11.4%(Year ended March 31, 2022)

ROIC

9.4%

(Year ended March 31, 2022)

Number of Group employees
10,425 (as of March 31, 2022)(persons engaged)
Number of employees (non-consolidated)
6,473 (as of March 31, 2022)(persons engaged)
Number of female employees
584 (as of March 31, 2022)(non-consolidated)
Number of women in managerial positions
14 (as of March 31, 2022)(non-consolidated)
Number of training held
Number of participants (cumulative)

Intellectual
capital

Kyudenko Corporation(Number of patents held) 25 patents, 1 utility model
6 patents pending(as of July 2022)

The R&D activities of the Kyudenko Group are mainly
conducted by the Technology Development Department.
This department is responsible for verifying and introducing advanced technologies and business tools aheadof the Group companies, and for solving technical problems in the worksites and company-wide deployment.

SocialrelationshipcapitalThe Kyudenko Group’s business is built on a relationshipof trust based on harmonious coexistence and dialogue
with all stakeholders, including shareholders, business
partners, and community members.

Research and development costs
267 million yen (Year ended March 31, 2022)

Coexistence with local communities
A community program, dedicating contributing activities to the
local community
Once/year
Sports class by the Kyudenko Track and Field Team
Once/year
Promoting communication with shareholders and investors
Individual meetings with investors
Total: 226 (Year ended March 31, 2022)
Briefings for individual investors 7 (Year ended March 31, 2022)

216 (Year ended March 31, 2022)
4,974 (Year ended March 31, 2022)

Naturalcapital
We construct and operate renewable energy power
plants, thereby contributing to the preservation of the
global environment. Moreover, we aim to achieve virtually zero CO2 emissions from our business activities by
2050.

11

(Note) Number of consolidated subsidiaries

2. Vision and Strategy

Financial
capital60 (as of April 1, 2022)

Number of Group companies

Medium- to long-term environmental management goals
Achieve carbon neutrality by 2050
Endorsement of TCFD recommendations
Investment in renewable energy power generation plants(Year ended March 31, 2022)

Deals operated by the Group 54
Deals through investment in equity 61

KYUDENKO REPORT 2022

12

2. Vision and Strategy

Long-term Vision: Make Next — To Create Smiles for the FutureWith an eye on future megatrends and with our corporate philosophy as a pillar of our business, the Kyudenko Group has formulated its long-term vision with a focus on seizing business opportunities and expanding
business in the expected social environment 100 years after its foundation (2044). We have also defined ourrole in creating a sustainable society (which we call the “Three Contributions”) and our basic stance toachieve the vision.
We will instill and pass on this long-term vision as the “Kyudenko-ism” philosophy company-wide, and make
improvements to it as we evolve with the times and in response to changes in our surrounding environment.

Identification of Megatrends
Megatrends(1) Advent of a decentralizedenergy society•Utility 3.0•Local energy•Carbon-free society•RE100(3) Demographic change and diversified
working styles•Population decline and aging society•Freelancing(4) Advancement of digitaltechnology

Business opportunities(1) Transition from large-scale to local small-scale powertransmission and distribution networks(2) The electricity market will go from a monopolistic to a freemarket(3) Increase in renewable energy generation(4) Increase in importance of developing technology to store
electricity(5) Increase in need for EMS know-how(1) Localized EMS needs(2) Enter urban development business, such as smart cities(3) Roll out local services that include not only power
distribution line and facility work, but also electricity sales
business, service water, waste water, telecommunications,waste treatment, etc.
(4) Battery recycling factory, recycling business(5) New business opportunities as an environmental
restoration company(1) Focus more on the renewable energy business field (e.g., wind
power and biomass power)(2) Provide complete service that includes installation,
maintenance, removal, and disposal of renewable energy
facilities(3) Establish technology to reuse/recycle solar panel waste, andtranslate to business(4) New business opportunities as an environmental restorationcompany(1) Acceleration of locally self-sufficient decentralized energy due
to depopulation of rural areas associated with population
decline and spread of renewable energy, storage batteries, etc.
(2) Maintenance of infrastructure in depopulated areas of
Kyushu(3) Carrying out projects to resolve challenges such as theincrease of foreign workers in Japan, shortage of workers
in the agriculture and livestock industry, and increasing
aged population(4) Proactively roll out businesses outside Japan with a focus
on Asia(1) AI-based design and construction management(2) Construction at worksites performed by robots(3) Improvement of virtual education/training and safety
management with AR/VR(4) Creation of new businesses using digital technology(1) With the increase in demand for the renewable energy
business, opportunities will expand where we can takeadvantage of our accumulated experience and businessexpertise in renewable energy construction(2) Companies with the goal of procuring 100% renewableenergy will increase(1) Securing human resources will become more difficult(2) Increase of foreign workers in Japan(3) Reduction of construction market(4) Influx of people into urban areas and depopulation of ruralareas(1) Construction drawings will be prepared by AI(2) A large portion of manufacturing work will be carried out
by robots(3) Education and training with AR/VR will be possible•Use of AI and robots•AR, VR, etc.

Corporate Philosophy

To Create Smiles for the Future

The role we will play to create asustainable society
Three Contributions

I. Solve social problems

Contribute to the realization of affluent life byleveraging our engineering strength and taking on thechallenge of solving various social problems

II. Realize a carbon-free society

Solve social
problems
Sustainable
Maintain andsociety
Realize adevelop local publiccarbon-free
infrastructuresociety

Contribute to the realization of a carbon-free society
through clean energy

III. Maintain and develop local public infrastructure
Contribute to the maintenance and development oflocal infrastructure through the stable supply ofelectricity, facility work, urban development, etc.

Basic stance to achieve our vision
Contribute to realizing a circular society

Explore and enrich our engineering strength

Balance both social value and economic value

Create new value through DX

by solving social problems through corporate
activities (practice CSV management)

Promote Diversity
Reinforce alliances

Targets we should achieve, priority issues, and specificExpand and strengthen a wide range of technology fields thatmeet customers’ expectations
Improve efficiency and sophistication of construction at worksites
and create new businesses with digital technology
Create an appealing company full of diverse employees
Develop technological innovations and create businesses
by promoting open innovation

Mid-term Management Plan 2024 measures to be taken by 2024 to realize our long-term vision
13

Kyudenko Corporation

unique characteristics of the Kyudenko Group. We also
believe it will help boost employee motivation since
employees will be able to see how their day-to-day
tasks address global social and environmental problems
by picturing where we want to be as a company.

Involvement in Projects that Solve Social
Problems

Creating service packages that leverage ourstrengths, such as electrical, HVAC andsanitary facility work, and power distribution
line work.

We will actively participate in projects and businesses where we canleverage our strengths, such as our engineering strength, to address
problems faced by local communities and society as a whole, such as
the declining birthrate and increasing aged population in Japan andglobal food problems.

Example: Kyudenko plant factory modelSpecific examples
Revitalization of agriculture and livestock production (plant factories,
livestock farms)
Support for foreign workers (shared houses, vocational schools)● Services for the elderly (health support, nursing care facilities)

Expansion of Renewable Energy andEnergy Conservation, and Entry into
Recycling BusinessSolar power
generation system

Expand to other countries to help
solve hunger problems

HVAC &
temperature
controlequipment
Water
treatment
systemSubstationequipment
Indoor wiring Power
source control system

Expansion of renewableenergy sources such as
wind and biomass

Provision of solar panel life
cycle service that includes
recycling of solar panels
Solar power generation

Recycling andreuse of solar
panelsWind power
generation

Specific examples
New renewable energy sources such as wind and biomass
Control services for energy storage, EMS, etc.
Recycling and reuse of solar panel waste, etc.

Establish a business model thatspans the Japanese market

LED lighting

Powerdistribution
facilities

We will expand the renewable energy field, such as wind and biomass
power, and contribute to realizing a carbon-free society by expanding
our businesses into the environmental field, such as the recycling andreuse of solar panels.

ZEB ZEH
Biomass power Biomass power Control services for energy storage,
generation
generation
EMS, etc. Development of(wood)(garbage)energy-saving systems, etc.

Carbon-free society

Building Local Infrastructure andProviding Public Services

Our Long-term Vision Based on Megatrends

Long-term Vision

When formulating our long-term vision, we envisioned
what kind of businesses we could do in the future byleveraging our technology and expertise.
While this is an ambitious goal that lays out where wewant to be in the long term by our 100th anniversary in
2044, we believe it is achievable by leveraging the

2. Vision and Strategy(2) Increased environmental
awareness

Environment and its impact

Future Businesses

We will evolve into a company that provides total support for local
communities’ energy infrastructure and services by expanding ourbusiness from merely building basic infrastructure such as electricity,waterworks, and telecommunications to also providing local public
services and engaging in smart city and other initiatives to create
comfortable communities.
Specific examples
Smart city
PFI, concession
Power transmission
Public services such as water supply and sewerage, and waste treatment facilities
Telecommunication infrastructure
Disaster prevention infrastructure facilities

Introducing Digital Technology
We will improve sophistication, save labor, and increase efficiency inoperations, education, and training related to construction atworksites, including design and construction management, by
introducing cutting-edge technologies such as AI and IoT, and create
new businesses and business models that leverage digital technology.

Specific examples
Preparing construction drawings with BIM/CIM
Improving operational efficiency with AI construction management systems
Supporting worksites with drones
Implementing powered suits
Virtual training with VR goggles
Services to support health and watch over the elderly

Step

Pursue electrical, HVAC, andpower distribution line work.

Local energy facility company

Step

Build wastewater and waste
treatment facilities

Local utility company

Step

Participate in smart city andother town planning initiatives

Local town planning company

Supply energy and provide
public services to local
communities

Local comprehensive service
company

1
2
3

Step

4

AI-based design and construction management
AI Surveying and Construction
Management Drones
Preparation of construction
drawings (AI, BIM/CIM)
AI Construction
Management System

On-site construction by robot
Drones for materialtransport
Remote operation(construction equipment
and work vehicles)
Robots and powered suits
for construction work

Advancement of business operations
and creation of new businessthrough digital technology
Detection and diagnosis
of signs of failure
Collection, storage andanalysis of building andequipment data
Health Support Services

New business creation using digital technology

Construction Management
Training Using AR Smart Glasses
Virtual hands-on training facilities(e.g., Kyudenko Academy)
Training on the installation of power
distribution lines using VR goggles

AR/VR virtual experiential education and training

KYUDENKO REPORT 2022

14

2. Vision and Strategy

Mid-term Management Plan (FY2020–FY2024)
Establish a management foundation for sustainable growth~Realization of the three reforms~
corporate structure” that can win the competition evenin an economic recession.
Specifically, we will work on three reforms. “Reform of
construction capability” will secure engineers who
s u p p o r t c o re b u s i n e s s e s , re v i e w c o n s t r u c t i o nmanagement methods, and assign engineers toappropriate positions. “Reform of productivity” will
improve quality and cost competitiveness, which are thesource of our competitive edge, and promote work stylereform. “Reform of governance” will work for thecreation of a clean and highly transparent corporate
culture. Through the three reforms, we aim for dramatic
growth and development by the final year of this Midterm Management Plan and by the subsequent 100th
anniversary (2044).
We have implemented many initiatives up to thepreceding fiscal year—the second year of our Mid-termManagement Plan—and we feel that we are seeing
tangible results to a certain extent. Meanwhile, we
recognize the need for continued efforts to achieve ourobjectives for the final year of the plan, as we are finding
new issues, as well as gaps in progress and results
among initiatives.

Specific initiatives
・Strengthen hiring of engineers based on a long-term workforce plan
・Reduce the turnover rate of young engineers by reviewing technical education
・Establish a system to ensure the timely and optimal deployment of all technicians
・Review the construction management system by strengthening and utilizing theTechnology Management Department
・Promote multifunctional workers

ESG

Specific initiatives to date・Review on-the-job training for young employees
・Introduce digital training support tools(learning management system (LMS))・Implement employee engagement initiatives
SocialReform ofproductivity

Reform ofgovernanceInitiatives
carried overfrom
the previous
Mid-term
Management
Plan・Review the company-wide and departmental training systems
・Achieve optimal personnel rotation for the entire company
・Promote rationalization and labor saving through the use of
cutting-edge technology and IT
・Realize business reforms

・Establish DX Promotion Department
・Upgrade infrastructure by providing all
employees with smartphones
・Launch efforts to create innovation throughindustry-academia collaboration

・Implement measures to prevent recurrence of fraud・Strengthen and thoroughly implement a governance system basedon the Kyudenko Corporate Governance Guidelines

・Establish Business Administration Department
・Shift to a company with an Audit andSupervisory Committee
・Move to Prime Market

・Deepen measures to improve profit margins
・Strengthen and expand the order base of the domestic facility work
industry・Strengthen the profitability of power distribution line work
・Develop new business areas
・Create an attractive workplace environment
・Improve corporate value

Promoting・Establish a basic policy and materialities regarding sustainability
environmental
・Disclose information in line with TCFD recommendations
management

・Establish the Green Innovation Business Unit・Establish the Diversity Promotion Office・Implement M&As and capital and operational
alliances
・Introduce Kyudenko EMS for the first time
domestically・Setting medium- to long-term environmental
management goals
・Endorsement of TCFD recommendations
・Establish Environmental Management Promotion
Unit and Sustainability Promotion Committee

managing construction progress should enable theCompany to secure a steady stream of profits.
Therefore, to address the biggest challenges we face,
we have set two of our most important initiatives as“improving productivity by implementing businessreforms” and “promoting price negotiations to reflect
rising material and labor costs.”
In concrete terms, the sales and technology divisions
will conduct unified sales activities to ensure that orders
are received for target projects. At the same time, wewill not only continue front loading and other measures
to improve profit margins, but also promote pricenegotiations that reflect rising materials and outsourcing
costs from the negotiation stage, with the aimof securing profits. Moreover, we will properly
allocate construction capability to ensure progress ismade in construction.

Specific initiatives and relevance to the SDGs

Environment
Initiatives

Reform ofconstruction
capability

In pursuit of the final objectives of the Mid-termManagement Plan, the theme for the current fiscal year—
the third year of the plan—is the “practice businessreforms adapted to changes in the environment.”
Moreover, in light of the current situation we are facing thisfiscal year, we have also separately established the mostimportant issues.
This fiscal year, major projects are planned, including
the Tenjin Big Bang in Fukuoka, Kyudenko’s hometown,
urban area redevelopment, and semiconductor-related
plants. On the other hand, there are also concerns
about economic sanctions being enacted against
Russia by major countries, material price hikes anddelivery delays due to the impact of the pandemic on
the supply chain, and rising labor costs caused byconstruction industry labor shortages.
To overcome these challenges, we need to ensurethat we receive orders for our target projects. Tightly

2. Vision and Strategy

The Kyudenko Group reviewed and analyzed theachievements of the previous Mid-term Management Plancovering the five-year period up to FY2019, sorted out
what challenges the Group should continue to work on,
and has formulated the new Mid-term Management Plan
as a goal to be achieved by FY2024 in the process of along-term strategy based on the Corporate Philosophy.
While we hope the pandemic is gradually winding to aclose, this Mid-term Management Plan—including
numerical targets for the final year of the plan—does notreflect the impact of this change. While we are committed
to the achievement of its targets, we may review the Midterm Management Plan if necessary.
The main theme of this Mid-term Management Plan is“Establish a management foundation for sustainablegrowth ~ Realization of the three reforms ~”. Based on
the achievements and lessons of the previous Mid-termManagement Plan, we recognize that for the renewed
growth of the Kyudenko Group, creating a base tosupport the growth should be the top priority. As wesecure and maintain the volume of orders for electrical,
HVAC, and sanitary facility works commensurate withour current construction capability, we will make ourutmost efforts to create a “strong and muscular

Third-year initiatives

Key challenges

Specific initiatives in the Mid-termManagement Plan

Promotion of anenvironment-conscious
town planning・Strengthen initiatives for concessions, PPP and PFI businesses(Participation in waterworks, waste treatment plants, airports/ports,
public facilities, etc.)
・Develop new business areas (real estate, agricultural revitalization, etc.)

Enhance energy-saving
and energy-creating
technologies

・Expand the renewable energy power generation business・Expand energy services (ES) business・Strengthen Kyudenko EMS business (Indonesia)

Ensuring construction
quality and safe

・Maintain a stable power supply through the construction of power
distribution lines
・Increase productivity
・Promote research and development of advanced technologies and IT(promotion of labor saving and rationalization)
・Eliminate significant work-related injuries

SDGs

Continuing stable
・Strengthen hiring of engineers (diversify recruitment)
recruitment and promoting ・Reconstruct a development plan that leads to dreams, a sense ofachievement, and confidence
human resource
development
・Develop executives and next-generation leaders
Creating a fulfilling andrewarding work
environment

・Reduce the turnover rate of young engineers
・Secure holidays and reduce overtime work through thorough work
style reforms
・Promote Diversity

Strengthening and・Implement measures to prevent recurrence of fraud

Governance implementing compliance ・Strengthen and thoroughly implement a governance system based on
management

the Kyudenko Corporate Governance Guidelines

Numerical targets for the final year
(consolidated)(Billion Yen)
Plan for FY2024

Net sales
Breakdown Power distribution lines

500.0
50.0

Electrical work and HVAC and sanitary works

334.0

Renewable energy and ES business, etc.

81.0

Others35.0

Ordinary profit
Ordinary profit ratio

Return on invested capital (ROIC)

50.0

Road map of sales plan
Target for
the final year:

Final year
for the previous
Mid-term Plan:
428.9 billion yen

67.8(Solar power: 59.3)

Plan
460.0 billion yen

81.0(Solar power: 17.0)

391.9 billion yen

61.5(Solar power: 54.5)

376.5 billion yen

54.4(Solar power: 46.6)

191.0

157.7

129.9

Over 10.0%

Over 10.0%

500.0 billion yen

149.1

148.4

116.0

108.9

143.0

46.9

45.8

45.7

26.7
2019

19.5
2020

18.9
2021

50.0
35.0
2022

2023

2024

Mid-term Management Plan (2020-2024)■Renewable energy and ES business, etc. ■Electrical Work ■HVAC and sanitary facility work
■Power distribution line work ■Others

15

Kyudenko Corporation

KYUDENKO REPORT 2022

16

2. Vision and Strategy

Initiatives for Promoting Sustainability Management
Basic Sustainability Policy

Important Issues (Materialities) and Orientation of Measures

Governance System

Discussion and reporting

Instructions, advice, and supervision

Management Meeting
Discussion and reporting

Stakeholders

Information
disclosure

Dialogue

Instructions, advice, and supervision

Sustainability Promotion Committee
Create a basic policy for sustainability promotion, identify materialities, and formulate, promote,and evaluate an action plan based on this policy.
Meets at least twice a year in principle
Composition: Chairperson, President; Vice Chairperson, Vice President (in charge of corporate
strategic planning); Committee Members, Persons appointed by the Chairperson
Secretariat: Environmental Management Promotion Unit

Materiality Identification Process
Step 1

Identifysocial issues

Prioritizesocial issues

We selected social issues
from those identified in Step 1
to be prioritized based on a
two-axis assessment of“importance to society” and“importance to the Company.”

Step 3

Considerimportantissues

The working team examined
the important issues andselected 27 items from theperspective of what requires
our focus with respect to thepriority social issues identified
in Step 2.
Further discussion led to thelist being narrowed down to
11 items, and we thenobtained the consultant’s
advice to confirm the validityof the list.

Step 4

Identify
importantissuesThe 11 issues agreed upon in
Step 3 are identified asimportant issues after
deliberation by theS u s t a i n a b i l i t y P ro m o t i o n
Committee—chaired by the
President—and approved by
the Management Meeting and
the Board of Directors.

Contribute to energy conservation*

B

Promote energy saving related construction (proposals for energy efficiency
improvement (ES) construction, EV charging equipment, ZEB, energy saving
equipment, etc.)

Kyudenko to achieve carbon neutrality by 2050*

B

Respond to TCFD and reduce our own CO2 emissions

Create an environment that embraces diverse values
and maximizes individual capabilities

D

Promote diversity and inclusion, build diverse and flexible work styles, andrespect human rights

Occupational safety Create rewarding workplaces with safety as theand healthhighest priority

E

Eliminate critical disasters, promote health and productivity management, improve
employee engagement

Education andtraining

Strengthen the overall human capacity (businessperformance, human capacity, creativity (thinking skills))

D

Strengthen human resource development and build diverse career maps

Communities

Maintain and develop local infrastructure throughstable supply of electricity and facility work, etc.

C

Maintain and develop social infrastructure through existing businesses

Disaster prevention

Use our technical capabilities to contribute to infrastructuredevelopment that is resistant to natural disasters

C

Disaster-resistant urban development, disaster recovery, support for areas
affected by disasters, community contribution activities

Innovation

Create new value through technological development andactive collaborationA

Create new business areas, improve productivity, promote investment in
DX and technology development, promote open innovation, promote M&A

Waste

Contribute to the formation of a circular society

A

Promote 3R (reduce, reuse, recycle), promote green purchasingE

Enhance corporate governance, ensure compliance, implement information
security management, strengthen risk management, ensure fair transactionsin the supply chain

Organizational governanceAnti-corruption
Compliance
Implement fair and transparent business practices
Fair business practices
Anti-competitive behavior(Notes) 1. (*) Items related to the environment: Disclose information based on the recommendations of the TCFD (Task Force on Climate-Related Financial Disclosures).
2. System diagram: A: Solve social problems B: Realize a carbon-free society C: Maintain and develop local public infrastructure D: Strengthening human capital E:
Strengthening a sound management base
3. Important issues (materialities) will be reviewed as necessary depending on future changes in the social situation.

Sustainability System Diagram
Corporate Philosophy
Long-term Vision

A: Solve social problems
Create new value through technologicaldevelopment and active collaboration● Contribute to the formation of a circular society●

B: Realize a carbon-freesociety
Contribute to the spread andexpansion of clean energy● Contribute to energy conservation● Kyudenko to achieve carbon neutrality
by 2050●

C: Maintain and develop
local public infrastructure
Maintain and develop local
infrastructure through stable supplyof electricity and facility work, etc.
● Use our technical capabilities tocontribute to infrastructure developmentthat is resistant to natural disasters●(Corresponds to Corporate
Philosophy 3) Foundation to
Support Value Creation

Regarding social issues, we
identified items that are
relevant to our business basedon those listed in the GRI
Standards, ISO 26000, andSDGs—all global standards—
as well as examples fromother companies and advice
from our consultants.

Step 2

Promote energy creation related construction and projects (solar, wind, biomass,
PPA, EMS, etc.)

Orientation of measures

D: Strengthening human capital
Create an environment that embraces diverse values and maximizes individual capabilities● Strengthen the overall human capacity (business performance, human capacity, creativity(thinking skills))●

E. Strengthening a sound management base●●(Corresponds to Corporate
Philosophy 1 and 2)
Value Creation by Business

Head office (each division, department and office), Tokyo Head Office,branches, regional offices and business offices, affiliated companies

B(Corresponds to the Three Contributions of
the Long-term Vision)

Presentation of policies and plans,
and provision of information

Planning, progress management,
and reporting of results

Governance (G)Board of Directors

Contribute to the spread and expansion of clean energy*

Climate change
Decarbonizedsociety
EnergySDGs

2. Vision and Strategy

Based on the corporate philosophy, the Kyudenko Group will create a sustainable society andimprove the corporate value of the Group by solving social issues through its business activities.

SystemdiagramDiversity, Labor
practices,
Employment, HumanrightsSociety (S)Basic Policy

Important issues (materialities)

Social challenges

Environment (E)We operate our business under the Corporate Philosophy: “1. We contribute to society through providing agreeable
environmental solutions.” “2. We keep challenging for sustainable development through our engineering strength and create a
new value.” “3. We aim to create a mutual respecting environment in Kyudenko which utilize and develop employees’
personality.” In addition, we have formulated a long-term vision for our 100th anniversary (2044), under which we aim to deliver
both social and economic value by working to solve social problems, realize a carbon-free society, and maintain and develop
local public infrastructure.
In accordance with this corporate philosophy and long-term vision, we have established a Basic Sustainability Policy andimportant issues (materialities) in order to focus more on improving corporate value from a long-term perspective while taking
into consideration factors such as the global environment, society, and the economy.
In the future, the Group will contribute to the creation of a sustainable society by promoting a planned and proactive
approach to important issues (materialities) under the Basic Sustainability Policy.

Create rewarding workplaces with safety as the highest priority
Implement fair and transparent business practices

New Mid-term Management Plan (FY2020–FY2024)
17

Kyudenko Corporation

KYUDENKO REPORT 2022

18

2. Vision and Strategy

Promotion of Environmental Management:
Initiatives based on TCFD Recommendations

3) Scenario analysis results and measures in response

In line with our Corporate Philosophy and Long-term Vision, we are working to solve
various social issues related to sustainability by leveraging our technological prowess as
an integrated utilities engineering company. This includes the construction of facilities
related to energy conservation and clean energy, and disaster-resistant infrastructure.
In December 2021, we set the Medium- to Long-term Environmental Management Goals and endorsed therecommendations of the Task Force on Climate-related Financial Disclosure (TCFD), recognizing that addressing
environmental issues including climate change is one of important issues (materialities).
We will continue to enhance our efforts to realize a sustainable society and disclose information in accordance with theframework proposed by the TCFD recommendations.

GovernanceThe contents of such matters will be discussed andreported to the Management Meeting, and importantmatters among them will be discussed and reported to theBoard of Directors.
The Board of Directors monitors and provides necessary
instructions and advice to the Management Meeting,which in turn offers the same to the Sustainability
Promotion Committee on climate change and othersustainability plans and measures.
(The Governance System chart is shown on page 17.)Category

Strategy

Step 2

Step 1Degree ofimpact

Scope

Kyudenko (non-consolidated), alldomestic segment businesses

Reference year

FY2030FY2040FY2050

Envisioned scenarios

2°C (*1) and 4°C

1.5°C and 4°C

1.5°C and 4°C

The Sustainable Development Scenario (SDS) of the IEA and the RCP2.6 Scenario of the IPCC were selected as the 2°C rise scenario.1, 2 The IEA’s
Stated Policies Scenario (STEP) and the IPCC’s RCP8.5 scenario were selected as the 4°C rise scenario.
1: IEA: International Energy Agency
2: IPCC: Intergovernmental Panel on Climate Change

2) Proceeding with scenario analysis
For the analysis, we established a working team comprising members from related divisions to examine risks andopportunities for each of the categories proposed under the TCFD recommendations regarding changes in the external
environment expected in FY2030, the reference year.
Policies and law

MarketTechnology

Reputation

Acute

Chronic

Migration risk
Physical risk

Financial impact

Opportunities

Resource efficiency

MarketEnergy source

Resilience

Products and services(Source: Prepared by the Company, based on “Practical guide for Scenario Analysis in line with the TCFD recommendations 3rd edition” from the Ministry of theEnvironment, Government of Japan)

Kyudenko Corporation

Countermeasuresconsumption

Recycling andother regulations● Replace existing equipment with high-efficiency air

1

Cost increases due tointroduction of carbon tax(energy costs, material
procurement costs)

Large

2

Increase capital investment inconversion to renewableenergydegree of priority
Short toMedium Medium medium ● Consider introduction of Kyudenko EMS2
term ● Verify hydrogen production and storage using renewable

3

Increase in material procurement
costs in line with the developmentof the circular economy

Introduction ofcarbon pricing(carbon tax)

Migration risk

Kyudenko Group including overseas
consolidated subsidiaries, all segment
businesses

4

Impactperiod● Promote initiatives to reduce fossil fuel-derived energy

Step 3

Kyudenko Group including domestic
consolidated subsidiaries, and all
domestic segment businesses(*1) We will continue to analyze and study measures on the basis of the 1.5°C rise scenario.

19

Projected financial impact

21) Preconditions for scenario analysis
We conducted a scenario analysis to assess the impact of climate change-related risks and opportunities on our businesses,
strategies, and financial plans, and to consider measures we might take in response.
The following three preconditions were selected for the analysis.
We have examined this issue under the preconditions of Step 1. From Step 2 onward, we will enhance information
disclosure, reviewing it as appropriate depending on the situation.

Risks

No.

measures such as installing heat-resistant equipment atwork sites. We will also actively promote work style
re f o r m s t o c re a t e a m o re c o m f o r t a b l e w o r k i n genvironment.
At the same time, we will actively contribute todecarbonization and low carbon through the businesses
we undertake, while also achieving business growth. The
Company will accelerate new technology development
and the improvement of technical capabilities related toenergy creation and energy conservation-related
construction, and build an organization and structure
capable of coping with growing demand. Beyond existing
business areas, we will work to develop new areas for
decarbonization, low carbon, and the creation of arecycling-oriented society. Moreover, we will respond to
the growing demand for disaster prevention and mitigation
measures and leverage our technology and expertise inproposing disaster-resistant urban development. With theaim of maximizing our contribution to early recovery in theevent of a weather-related disaster, we will develop
equipment and technology while improving our internalorganization and strengthening our communication systemwith related agencies.
We will continue to regularly conduct scenario analysis
to identify climate change-related risks and opportunities,
enact measures to address them, and reflect them in ourbusiness plans.

2. Vision and Strategy

In April 2022, the Company established the Sustainability
Promotion Committee, which is chaired by the President
and consists of executives and leaders of related divisions
appointed by the chairperson. The purpose of theCommittee is to address various issues surrounding
sustainability, including efforts to cope with climate change.
The Sustainability Promotion Committee deliberates on
the basic policy for sustainability promotion, identificationof materialities, and formulation, promotion, and evaluationof action plans based on this policy. (Meets at least twicea year in principle)

The 2°C rise scenario assumes a society in which carbon
pricing is introduced in developed countries and someemerging countries. The 4°C rise scenario, meanwhile,
assumes a society in which current climate change
measures continue in developed countries and GHG
emissions are not reduced globally.
Under the 2°C rise scenario, stricter carbon regulationsin Japan will drive energy costs and procurement costs formaterials upward. Meanwhile, as the move toward
decarbonization accelerates, we expect to see increased
demand for businesses related to renewable energy andenergy conservation. Under the 4°C rise scenario, demandfor businesses related to renewable energy and energy
conservation will grow, but at a more moderate rate thanthe 2°C rise scenario. Regarding the degree of temperature
increase and the severity of weather events such as
typhoons and floods, we assume that the difference fromthe 2°C rise scenario will not be significant in 2030.
Based on the results of the scenario analysis, we looked
at measures to minimize climate change-related risks andmaximize opportunities. We will respond to the tighteningof decarbonization- and low carbon-related regulations byaugmenting various initiatives to reduce consumption offossil fuel-derived energy and by introducing energy-saving
equipment. In response to the negative impact on theworking environment of rising average temperatures, wewill seek to improve the working environment throughMediumSmall to longterm

conditioning, introduce energy-saving equipment anddevices, and develop and introduce AI-based air conditioning
controllers● Establish material procurement system in cooperation with
Q-mast1● Strengthen collection of the latest material price informationand share it promptly among related parties● Invest capital efficiently based on cost-effectiveness andenergy and utilization of exhaust heat

Medium ● Establish procurement route for recycled materials in

Medium Medium to longcooperation with Q-mast1
term ● Promote the 3Rs (reduce, reuse, recycle)● Promote research into low carbon, decarbonization, andrecycling technologies, etc.

Increased
replacement costfor low-carbon
technologies andproducts● Create innovation through industry-academia collaboration4and tie-ups with startup companies
Short to ●Increased R&D costs to acquire Medium Medium medium
Utilize subsidies from Japan’s Ministry of the Environment
new technologies
and the New Energy and Industrial Technology Development
term
Organization (NEDO)● Conduct joint feasibility study and other projects withcompanies and municipalities that are active indecarbonization“medium,”and“small”
Degree of impact: Assessing the financial impact on our business in terms of“large,”
Impact period (time frame during which impact is expected to manifest): short term, within the next three years (–2025); medium term, over the next three
to eight years (2026–2030); long term, eight years and beyond (2031–)

1 Q-mast
2 Kyudenko EMS

A consolidated subsidiary of the Company, Q-mast’s main business is the sale of construction materials, machinery, and equipment
for electric and HVAC facility.
A renewable energy generation-side energy management system, not building or facility-side system.
A system that can control multiple power generation sources̶including solar, wind, small-scale hydro̶in a comprehensive manner
and, together with storage batteries, stably transmit power to the demand side around the clock.
The EMS allows stable transmission of electricity̶even to fragile micro-grids in locations such as remote islands̶and can be used
as a base-load power source. In Japan, the Company can offer a wide range of proposals that extend beyond disaster prevention,such as supplying 100% renewable energy to buildings for normal operation as well as ensuring the availability of electric power intimes of disaster (resilience).
KYUDENKO REPORT 2022

20

2. Vision and Strategy

Category

No.

Projected financial impact

Degree ofimpact2

5

AcuteIntensificationof extreme
weather
6

4

Risk management
ImpactperiodCountermeasures● Gather up-to-date information on hazard maps and disasterPhysical risk

Increased costs related tocompany-owned facilities
and construction sites
damaged in weather
disasters

Short to ● Consider risk reduction measures for facilities located in
Medium Medium medium
high-risk areas
term ● Consider building a construction cooperative structure in

Damage to the Company’ssolar power generation
facilities resulting from adisaster

Short to ●Inspect hazardous areas and implement disaster prevention
Medium Medium medium
measuresterm

prevention and mitigation measures

conjunction with construction cooperative associations in theevent of a disasterFor climate change-related risks and opportunities
identified in line with TCFD recommendations, we will
incorporate each countermeasure into the Mid-termManagement Plan, develop and implement them in thepolicies and business plans of each division and branch
office, and periodically review them to avoid or mitigate
risks and expand opportunities for profit.

The identification and assessment of the risks posed byclimate change to the Company and consideration of
measures to address those risks are led by theEnvironmental Management Promotion Unit anddeliberated by the Sustainability Promotion Committee
through cross-departmental discussions.
Matters deliberated by the Sustainability Promotion
Committee are discussed and reported to the Management
Meeting and the Board of Directors as necessary.

Indicators and targets● Consider and introduce new heat countermeasures toChronic

Increase inaveragetemperature

8

3 Construction RX Consortium

Decrease in electricity sales
revenue due to higher
temperatures resulting inlower power generation at
the company’s solar power
generation facilities

Large

Small

Large

reduce the occurrence of heat stroke and health hazards atwork sites
Medium ● Ensure proper labor management and formulate a support
to longsystem for construction workers
term ● Strengthen the Company’s appeal and corporate promotion
to students● Promote consideration and introduction of advanced
initiatives of the Construction RX Consortium3

Medium ● Remote monitoring to measure the volume of electricity
Small to long
generated and detect abnormal values and fault locations at an
term
early stage

2030

Reduce CO2 emissions intensity per sales of completed construction by at least 50% (compared to 2013)

2050

Achieve carbon neutrality

2. Vision and Strategy

7

Increased costs to address
labor shortages anddeclining productivity
resulting from deteriorating
work environments atconstruction sites

Action items toward achieving these goals● Introduction of EMS into Kyudenko Academy● Deployment of EVs and chargers (special vehicles for construction that cannot be replaced are not eligible)● Environmentally friendly capital investment in equipment related to office buildings● Utilization of graduate feed-in tariffs (FITs) (assets at the end of project period)

Formed in September 2021 by 16 general contractors. With the aim of improving the productivity and appeal of the industry, theConsortium works to increase efficiency and reduce labor at construction sites, including cooperation in technological development in theareas of construction robots and IoT. RX is short for “robotics transformation.” As of November 22, 2022, the Consortium comprised 27
full members and 112 cooperating members (Kyudenko is a cooperating member).

● R&D through industry-academia collaboration

CO2 emissions per 100 million yen of net sales
Category

No.

Projected financial impact

Degree ofimpact2

1

Development andexpansion of
low-carbon
products andservices;
recycling
regulations, etc.

2

Opportunities

3

Spread of nextgeneration
technologies

45Disasterprevention,
mitigation, andnational resilience
initiatives

21

Kyudenko Corporation

64

Impactperiod6.0Countermeasures

Increase in sales and profit due
to growing demand for energy
creation-related construction
Short toand business (solar power
Large Large medium
generation including PPA,
term
● Reinforce internal organizational structure to cope withonshore and offshore windgrowing demand
power generation, biomass● Develop new technologies and augment technicalpower generation, EMS, etc.)
capabilities
Increase in sales due to● Utilize company-owned renewable energy facilities (following
growing demand in the energy
expiration of FIT)
Short toconservation field (energy
Large Medium medium ● Promote optimal energy-saving system proposals
efficiency improvement (ES)term ● Facilitate planning and proposal of water reuse systems inconstruction, EV charging
sewage treatment facilities and private factories
facilities, ZEB, etc.)
Increase in sales and profit due
Short toto higher demand for
Medium Medium medium
construction work related totermwater reuse
Promote new businesses
MediumMedium Medium to long ● Establish an internal support system for new businesses
utilizing next-generation
term
technologies● Reinforce the liaison system with internal organization andrelevant agencies to facilitate rapid disaster recovery
Short toContribute to rapid recovery
Large Large medium ● Development of work equipment and tools that contribute tofrom disasters
term
rapid recovery● Kyudenko EMS proposal
Increase in sales due to● Establish an internal organizational structure capable of coping
growing demand for disasterprevention and mitigation
with growing demand
MediumSmall Small to long ● Make technical proposals to municipalities on disastermeasures in response to thetermincreasing frequency andresistant urban development (measures to prevent andseverity of weather-related
mitigate disaster impact)
disasters

5.0
4.0
3.0
2.0
1.0
0.0

FY2013

FY2019FY2020

FY2021

FY2030(reference year)

CO2 emissions volume
Unit

FY2013 (1)FY2019

Scope１

t-CO2

9,059

7,670

6,816

6,947

-2,112－

Scope2

t-CO2

5,677

5,094

5,163

5,262

-415

－

Kyudenko (non-consolidated) / total

t-CO2

14,736

12,764

11,97912,209-2,527－

Net sales

100 million yen

2,597

3,651

3,374

3,226

+629

－

Intensity

t-CO2/
100 million yen

5.67

3.50

3.55

3.78

-1.89

2.83

Intensity unit reduction rate(compared with FY2013)

%

－

-38.2

-37.3

-33.3

－

-50

Scope1: Direct greenhouse gas (GHG) emissions generated by business activities
Scope2: Indirect emissions resulting from the use of electricity, heat, and steam
supplied by external entities
Scope3: Indirect emissions other than Scope 1 and Scope 2 (emissions by othercompanies related to the activities of the Company)

FY2020

FY2021 (2)(2) - (1)FY2030Intensity: (Scope 1 + Scope 2) / Kyudenko’s non-consolidated net
sales (t-CO2/100 million yen)

*The Company will work to expand the scope, including Scope 3.

KYUDENKO REPORT 2022

22

2. Vision and Strategy

Human Resource Strategy Linked to Management Strategy
Basic Concept of Human Resources Strategy
Our corporate philosophy is to “aim to create a mutual
respecting environment in Kyudenko which utilize anddevelop employees’ personality.” Based on this, wehave established a policy on developing humanresources — our most important management
resource — and formulated the Human Resource
Development Charter to instill the policy in all
employees. In line with our conviction that people are
one of our most valuable assets, we provide
employees opportunities to improve their capabilities
and demonstrate the results of their training toadvance the Company and ensure every employee
has a rewarding job and achieves self-actualization,with the aim of further growing employees andadvancing the Company further.
In the management strategy process of the Midterm Management Plan, for us to achieve the reformof our construction capability and reform of
productivity, we believe it is necessary to link humanresources strategy to management strategy and toengage in it with a sense of speed. To this end, weare implementing specific measures.

Human Resource
Development Charter

Mid-term Management Plan FY2020-FY2024
Establish a management foundation for sustainable growth

Realization of the three reforms

To nurture and bring out thepotential of people, one ofour most valuable assets
Build character and develop
skills through work experienceand education
Evaluate human resource
development efforts fairly
Train and support with the
responsibility to develop
subordinates and otheryoung employees
Continue to take onchallenges, bearing the
responsibility for their own
growthReform of construction
capability

Reform of productivity

Strengthen hiring of engineers
based on a long-term workforce
plan
Reduce the turnover rate ofyoung engineers by reviewing
technical education
Establish a system to ensure thetimely and optimal deployment of
all technicians

Review the company-wide anddepartmental training systems
Achieve optimal personnel
rotation for the entire company
Promote rationalization andlabor saving through the use of
cutting-edge technology and IT
Realize business reforms

Review the construction
management system bystrengthening and utilizing theTechnology Management
Department
Promote multifunctional workers

Ideal human resources
Human resources who havea sense of mission and pridein contributing to society andsatisfying customers
Human resources who
accurately grasp thechanging times andcustomer needs with superb
expertise to adapt to them
Human resources who arewilling to make improvements,
take on the challenge todevelop their abilities, and canthink, make decisions, and act
on their own
Human resources who canwork and ensure safetywith emphasis on trust
relationships and teamwork
Human resources who candevelop subordinates andjunior colleagues withaffection and discipline andlet them demonstrate theirabilities

Securing Human Resources
Recruitment of human resources

The Kyudenko Group has long actively recruited humanresources with a focus on engineers and technicians. In theimmediate term, we have established a numerical target for
the Mid-term Management Plan of 500.0 billion yen in net
sales, and we are focusing our efforts on securing humanresources to achieve this goal. Securing human resources isa matter of urgency in the construction industry, which issuffering serious labor shortages. As part of our efforts tostrengthen recruitment, we are employing a variety ofmethods to secure outstanding human resources fromdiverse fields. In addition to the recruitment of new graduatesstraight out of university, these methods include the boosting
our mid-career hires who will be immediately work-ready, therecruitment of semi-recent graduates (targeting applicants
who have graduated no more than three years previously),referral recruitment, and re-employment programs.

Scheme for continued employment of retired employeesWith the legislative amendments that came into force in April
2021, companies are now required to make efforts to ensure
the employment of employees until the age of 70. In addition,
the number of retired employees who have been re-employedby the Company is expected to exceed 1,000 in the near
future. Against this background, we are currently reviewing
our scheme for the continued employment of retired
employees. With this review, focusing on kindling a desire towork in those retired employees and providing them with avariety of options, we are considering building a scheme thatwill incorporate a job-based employment element.

Development of Human Resources
Strengthen OJT for young employees

In FY2021, as part of our review of technical education in thereform of our construction capability in the Mid-termManagement Plan, we rebuilt our OJT system for young
employees, to clarify in our internal rules that employee
education will take place throughout the entire workplace. In
April 2022, we started implementing the Learning
Management System (LMS) as a digital training support tool.
Our aim in the use of LMS is to enable more systematic skills
improvement and career development, and we are working toenhance employee education through the visualization of theirdevelopment status (level) and individual abilities (skills).

Next-generation Leader Development Program

Human
Resource
Strategy

23

Securing Human
Resources

Development of
Human Resources•

Mid-career hires••

Hiring of semi-recent
graduates•

Referral recruitment•

Re-employment
programs•

Scheme for continued
employment of retired
employees
etc.

Kyudenko Corporation

Strengthen OJT for young
employees• Develop next-generation
leaders• QC activities• Introduce digital training
support tools• Personnel evaluation
system that recognizes
the fact that employees
take on new challenges
etc.

Engagement

Diversity

Introduce employee
engagement survey• Establish Promotion
Committee for Work
Style Reform• Smart casual dress code(year round)• Promote Health andProductivity
Management•

etc.

Promote diversity(awareness raising)• Develop diverse talentand facilitate their active
participation (promotionof women’s active
participation, support forbalancing work andhome, etc.)• Establish appealing
workplace environments
etc.
•

Labor Environment•

Operational efficiency
improvements throughDX•

Flextime system•

Promotion of remote
work

In FY2015, we launched the “Next-generation Leader
Development Program” to develop future executives andboost the field of executive candidates who will be able todrive the Company’s management. The Program develops
employees who are able to take a bird’s-eye view of the
Kyudenko Group when they are in managerial positions,mainly through personnel rotations (career path) and education(training). Participants are divided into senior executive, special
management, and management tiers for the purpose of thisprogram. Selected members come together four or five times
a year at our training facility, Kyudenko Academy, where they
engage in discussions on management issues while gaining
the knowledge necessary for management. In the final
session, they present a business proposal to the
managements. To date, a cumulative total of 250 candidates
have been selected for this program, which has led to thedevelopment of executive personnel, with executives anddirectors being appointed from among their number.

QC activities
etc.

To train employees to “think” on a day-to-day basis, we arerolling out initiatives for problem-solving using quality control(QC) techniques in branch offices and business offices acrossthe country. The aim is to equip employees with the ability tothink and solve issues that they have respectively identified,
as well as the ability to clearly express their opinions after
listening to and understanding what others say. Whileachieving results through this activity is important, the greateraim is to foster the ability to discover hints that may lead tothe next step in the process.

Personnel evaluation system that recognizes thefact that employees take on new challenges
To spread a culture that encourages employees to take on
new challenges, we introduced a new personnel evaluation
system in FY2019. The system recognizes the fact that
employees took on new challenges. Employees set targets
that are difficult to achieve; the level of achievement, theprocess, and specific actions they took are evaluated froma multifaceted perspective; and the results of their selfdriven actions are reflected in their remuneration andhuman resource management.

Employee Engagement
In July 2021, we launched an employee engagement
survey, using the engagement measurement tool, Wevox,
to strengthen the relationship of trust between employees
and the Company. In April 2022, the target of the survey
was expanded to include all employees.
Using the results of these monthly surveys, we visualize
the strengths and weaknesses of individual departments
and learn about how rewarding employees feel their workis, their stress levels, their interpersonal relationships atwork, and other aspects through numerical data. To builda rewarding work environment, we will promote activities
to improve the organization and encourage discussions,with the aims of increasing the number of employees whoare enthusiastic about their work and creating workplaceenvironments where such employees can fully
demonstrate their abilities.

2. Vision and Strategy

Corporate Philosophy and Vision

Main Initiatives

Promoting Diversity
In addition to establishing the Basic Policy on Promoting
Diversity under the Corporate Philosophy and the Kyudenko
Charter of Behavior, we have set specific targets for thepromotion of women, non-Japanese employees, and midcareer hires to management positions.
Recognizing the empowerment of women as a particularly
urgent issue, we have assembled a cross-departmental teamthat deliberates on specific initiatives toward solving issues
related to the promotion of the active participation of women.
*Please refer to the Company’s website for details on
the Basic Policy.
https://www.kyudenko.co.jp/en/initiatives/en_diversity.
html*Specific initiatives to promote the active participation of
women are also shown on page 36.

Labor Environment
Operational efficiency improvements through DX
With the new DX Promotion Department established in
October 2020 at the center, we are pursuing operational
streamlining and labor-saving initiatives. To date, we havetaken actions such as establishing internal systems andproviding company-issue smartphones to all employees,
in our efforts to improve the efficiency of existing
operations through the use of digital technologies. We willcontinue to accomplish a variety of projects aimed at the
improvement of operational efficiency.
Flextime system
The Company has introduced a flextime system. This new
system has a set “core time” of between 10:00 a.m. and3:00 p.m. during which employees must be at work, andthe hours outside that core time are considered as “flexible
time,” in which employees may choose their own start andfinish times in 30-minute increments.
Work-from-home (remote work) system
Our work-from-home system aims to improve employees’
private lives and enable them to work in a more productive
way, through the establishment of workstyles for individual
employees and the promotion of a better balance between
work and child care or nursing care. The other aims of thissystem are to ensure the business continuity of the Company
and the safety of employees in the event of an emergency.
KYUDENKO REPORT 2022

24

Human2. Vision and Strategy

Initiatives for Digital Transformation (DX)
Since its establishment in October 2020, the DX Promotion Department has promoted initiatives to enhance thecorporate value of the Kyudenko Group with digital technologies in order to achieve “reform of productivity,” oneof the three reforms in the Mid-term Management Plan.
The Kyudenko Group promotes DX with the aim of generating wide-ranging transformation, including efficiency
improvements, in an effort to enhance the corporate value of the Group, by breaking down the barriers, such as
regulations, authority, and organizations, that inevitably result from changes in existing organizations andoperations due to digitalization, involving all employees in the process.
Kyudenko has been certified as a DX-certified operator by the Ministry of Economy, Tradeand Industry.

■ IT talent development targets
Develop 10% (approximately 700 employees) of all
employees as digital talent in FY2024

Operational Innovation DX
Digitalization of Processes and Data

Purposes of worksite remote work
1. Productivity improvement using digital technologies

Business Expansion DX
Integrated Utility DX

After the digitalization of processes and data, operational innovation DX
and integrated utility DX will be promoted simultaneously, and thosetechnologies will be linked to business expansion DX.

With the assumption that information security measures
to ensure the safe use of company data is a key challenge
for DX promotion in the Kyudenko Group, we conduct
security education and training and awareness-raising
activities for employees on a regular basis.
In addition to ongoing initiatives, such as reviews of
security policy and the improvement of information security
systems, to be prepared for cyber security risks, we will
strengthen in-house security infrastructure technologically.
■ Initiatives for cyber security measures
Virus protection (early detection of ransomware)
Protection against unauthorized access, data loss
prevention, data tampering prevention, etc.
Reinforcement of monitoring systems••

Example of Operational Innovation DX Initiatives (Formulation of Ideal Work Processes)

25

Kyudenko Corporation

AI and robotics can be used for
operational support.
Infrastructure improvements
will increase telecommunication
speeds.
Construction DX such as
BIM and IoT will be used fully.

■ Initiatives for worksite remote work
As initiatives for operational support and accident
prevention at worksites, the DX Promotion Department,
Power Distribution Department, Electrical Engineering
Department, HVAC and Plumbing Engineering Department,
Safety Management Department, and Technology
Development Department are working together to develop
initiatives.

Conceptual diagram of DX initiatives•

Not stopping at productivity reform alone, DX in the
Kyudenko Group will thoroughly eliminate waste through thedevelopment of digital infrastructure and operational reforms
for the introduction of systems. This will enable both reformof construction capability and reform of governance, two of
the three pillars of the Mid-term Management Plan. It will
also respond to the looming “Year 2024 Problem” in theconstruction industry (regulated cap on overtime work). In
addition, we plan to establish systems for the use of datathat will allow us to compete and win against othercompanies.
Major initiatives for this include the efficient allocation of
construction capabilities through data and the locking in of
our subcontracting firms by continuously placing orders, toexpand the construction capability of the Group, including
our subcontracting firms. Other plans include theintroduction of a platform for outsourcing and procurement
operations to achieve the digitization (paperless) of those
operations, the accumulation of purchasing and operator
data, the lightening of the workload of the staff in charge ofthese operations, and the strengthening governance (greatertransparency of business negotiations and order placement).

Things will change with DX.
We will make that change happen.
Remote supervision and work
support will become the norm.

Business will not be
disrupted even in the eventof an emergency.
There will be flexibility of
remote work and decentralized
work.

Paper output and placing ofseals on paper documents
will be reduced.

Examples of Integrated Utility DX Initiatives (Further Strengthening of Integrated Utility Works)

For Further Promotion of Digitalization
The digital infrastructure development that took place in
FY2021 has made it possible to access company datafrom a variety of devices.
Securing human resources in both qualitative andquantitative terms is a matter of urgency for theacceleration of digitalization. We are pursuing initiatives forthe prompt development of “DX talent,” IT experts who arealso familiar with field operations, and “digital talent,” whowill promote local digitalization.

Technical

Society (environment) will change

Companies will beconnected to each other digitally.

Other major initiatives for favorable competition with other companies
Building of P&L administration system
Introduce a system that will eliminate the decline in reliability of numericalinformation due to interdepartmental inconsistencies in and duplication of
profit and loss administration figures, as well as contributing to swifterbusiness decisions.
Introduction of talent management system
Introduce a system for the central management and company-wide
sharing of human resources information to enable the maximization of
performance, by finding and procuring talent and placing the right people
in the right positions.
Rebuilding of
estimation system
Reform of
Rebuild and optimize theconstruction
existing estimation
capability
system, once the sales
and technology divisions
The three pillars ofhave defined the ideal
the Mid-term
form such a system
Management
should take.
Reform ofReform ofPlanproductivity
governanceConceptual image

2. Vision and Strategy

The Kyudenko Group will drive operational reforms anddigital technologies to not only increase productivity
through operational efficiency improvements, but also
create unprecedented business models and value, andstrive to enhance corporate value further by offering newvalue to customers and society.
We are currently working on the digitalization ofprocesses and data and the review of our work processes.
Looking ahead to transforming our corporate culture, inthe future, we would like to also strengthen our corporate
structure and profitability to enable us to beat thecompetition in Japan and around the globe in order toadapt to Society 5.0, where cyber and physical spaces will
be highly integrated.

Work processes that are suited
to the location will enable work
to be done efficiently.

Technology (worksites) will change

The Kyudenko Group’s DX Vision

SocialThere will be a greater diversity ofPeople will be able to work work styles, including work fromWork styles (work processes) will change
and study anywhere.
home.
Digital talent will be developed, andworksite support will beenhanced.

(including reduction in work hours)(1) Reduce workload of staff in charge of worksites(2) Improve efficiency of on-site operations by sharing
information among workers(3) Contribute to improvement of safety management andquality control(4) Enhance support systems for young workers
2. Consideration of proactive use of new technologies(1) Consider use of existing wearable devices, etc.
(2) Reform on-site operations with development of new
wearable devices

Contents of specific initiatives

F

Finished project

O Ongoing projectC

Project under consideration

Use of company-issue smartphones by all employees

Development of remote work environment(Create an internal digital environment)(Create an internal digital environment)

Distribute company-issue smartphones toall employees
O Use of e-mail, chat functions, and filesharing
O Build business card management system
O Use in safety and worksite management

Use of cloud functions for e-mail and fileservers
O Mobile PC distribution plan
O Reinforce internal infrastructure environment
F Boost teleconferences and web conferences

Reevaluation of work processes (1)Reevaluation of work processes (2)Building of company-wide shared databases(Reevaluate processes and reform operations with digital technology)(Reevaluate processes and reform operations with digital technology)(Reevaluate processes and reform operations with digital technology)

F

F

Replace accounting system

F

F

Introduce Learning Management System (LMS)O Reevaluate power distribution system

C Introduce talent management system

C Reevaluate sales system

O Replace attendance, personnel and payroll

C Reevaluate purchasing system
C Reevaluate estimation and construction

systems

systems

Improve operational efficiency with paperless and seal-less operations(Create an internal digital environment)
F

Eliminate use of paper at executive meetings

O Standardize various conference materials
O Eliminate need to place seals on paper

documents and develop document
workflow
O Prepare for reevaluation of intranet

O Building of company-wide shared

databases
C Build shared operations database
C Expand past data analysis functions

O Build P&L administration system
O Introduce outsourcing operations platform

Research and introduction/verification of AI

Promotion of use of construction DX

Development and placement of digital talent(Promotion of use of latest technology)(Promotion of use of latest technology)(Establishment of systems and development of talent to support digitalization)

O Introduce AI air-conditioning control

O Information exchange with industry peers

O Plan for reinforcement and development ofsystemC Research and study for use of AI
O Cooperation with start-ups

O Cooperation with general contractors anddesign firms
O Research and study of BIM and largescale VDI

DX Promotion Department staff
O Plan for appointment and development oflocal DX promotion staff
C Digital literacy improvement plan for all

employees

KYUDENKO REPORT 2022

26

2. Vision and Strategy

Business of Kyudenko

Technology Division (Electrical Work, HVAC andSanitary Facility Work)
Kazuhiro Suyama

Our Business
responses when they have problems. We consider thisability to give our customers peace of mind to be one of
our strengths. Moreover, Kyudenko is the only company
ranked in the top 10 in sales in both the electrical work
industry and the HVAC and sanitary facility work industry.
By accepting orders and executing construction work forboth types of work in a single package, we are able todeliver all kinds of facility works as a one-stop service. This
allows us to reduce costs and propose total solutions,
including energy management and energy conservation
proposals. We consider this to be another of Kyudenko’s
strengths.
In recent years, we have been expanding our businessoutside the Kyushu region, with a focus on themetropolitan area. We have been involved in theconstruction of numerous symbolic buildings to date,giving rise to a virtuous circle in which this track record hashelped us to win subsequent orders.

Transition of Business Performance (Excluding Renewable Energy Work)
The year ended March 31, 2022

Sales

269.5 billion yen(down 1.3% year on year)[Breakdown] Electrical work 150.1 billion yen (down 0.1% year on year)
HVAC and sanitary facility work 119.4 billion yen (down 2.8% year on year)

Orders284.6 billion yen(up 9.9% year on year)[Breakdown] Electrical work
152.8 billion yen (up 8.8% year on year)
HVAC and sanitary facility work 131.7 billion yen (up 11.2% year on year)

Strengths
Strong trust relationships with customers built
through community-based business operations
Industry-leading mobilization capabilities enabled bycontinuous recruitment of engineers and techniciansEngineering capabilities and construction trackrecord that enable us to provide one-stop facility
work for both electrical work and HVAC andsanitary facility work
etc.

Opportunities
Acquisition of orders and construction of largescale redevelopment projects in Fukuoka, theCompany’s hometown
Participation in urban development projects, such as
smart cities
Demand for construction of semi-conductor
factories in Kyushu
etc.

27

Kyudenko Corporation

Sales (Billion Yen)

Orders (Billion Yen)

Electrical work
HVAC and sanitary facility work

322.0

349.6
312.4

283.5 294.2 273.0

269.5

126.4

134.7

122.8

119.4

139.0

150.2

126.4

118.5

131.7

147.5

157.1

159.6

150.2

150.1

183.0

162.1

154.2

140.5

152.8

202.1

2018

2019

2020

2021

2022
(Forecast)

2018

2019

2020

2021

2022
(Forecast)

280.5

259.0

284.6

Weaknesses
Competition from existing specialized construction
companies in telecommunication, water treatment
and waste disposal facility-related works
Increase in productivity with further establishmentof digital infrastructureetc.

Threats
Declining profitability due to price competition
among industry peers
Difficulties in securing labor due to a fall in thenumber of workers in the construction industry
Loss of opportunities to win orders as customers cut
back on capital investments due to epidemics, etc.
Declining profitability due to soaring raw material
prices and delivery delays
etc.

Managing Executive Officer
General Manager, Technology Div.

To achieve the numerical targets in the Mid-term Management Plan, the Technology Division places top priority on two major
challenges, namely increasing the profit margin of large projects and the expansion of small- and medium-sized projects.
For the former, in 2022, we revised the profit margin improvement measures developed in 2019, and we are devoting
efforts to increasing the profit margin of large projects in particular. It is normal for large-scale projects to span long periodsof time, from obtaining information about the project to the completion of construction work. We are implementing profit
margin improvement measures that focus on the two areas of pre-order and post-order processes.
Specifically, before accepting an order, we clarify the details of the target project at an early stage and apply front loading
as soon as possible. Participation in such projects from the initial design stages allows us to make effective proposals,
which means that, when it later comes to concluding contracts, we can accept the orders with terms that are
advantageous to us. Clarifying the target project also allows us to negotiate and place orders with our subcontracting
companies at an early stage. This achieves stability of order placement to our subcontractors, enabling us to strengthen
the construction system. After order acquisition, the worksite, branch office and Head Office work in tandem to improve
profit margins even further, by sharing work information such as the dispatch of support teams that anticipate the state ofprogress and speed of the construction work, and information about additions and changes to the ordered work.
In recent years, construction projects have tended to be larger, characterized by the Tenjin Big Bang project in our
hometown of Fukuoka, and large-scale redevelopment projects in the metropolitan area. We will continue these measuresin our efforts to achieve even further improvement of profit margins.
Next, in terms of the expansion of small- and medium-sized projects, we have offices throughout the Kyushu region,
where we engage in community-based business operations. Much of our community-based business operations are insmall- and medium-sized projects, with relatively small net sales per project. Nevertheless, their profit margins are relatively
high because the order often comes directly from the client, and they contribute a valuable source of income for our
Company. As an example of measures to expand these small- and medium-sized projects, the Head Office plays a leadingrole in the optimal deployment of staff to ensure our resources are not disproportionately allocated to the kinds of large
projects mentioned above. By securing a certain number of employees to work on small- and medium-sized projects, wewill maintain and expand our work volumes in a stable manner, in an effort to further strengthen and enhance ourfoundations for order acquisition.

2. Vision and Strategy

The electrical, HVAC and sanitary facility work departments
deliver facilities that satisfy our customers through theconstruction of all types of buildings related to people’s
lives, including commercial buildings, office buildings,
hospitals, and factories. We provide solutions to ourcustomers’ problems, from proposals to construction
tailored to their needs, not only for construction andexpansion of buildings but also for renewal works ofexisting facilities. We offer safe and reliable services,supporting our customers through after-sales service after
the construction is complete, providing preventive
maintenance services and responding promptly to theirrequests.
With around 110 offices, including branch offices andbusiness offices throughout the Kyushu region, Kyudenko
engages in community-based business activities in our
mission to protect the region’s lifelines. Staying close to
our customers enables us to anticipate their needs and to
take immediate action on maintenance and otherConstruction Case

Provision of both electric work and
HVAC and sanitary facility work in asingle package[Dejima Messe Nagasaki: New construction]
Dejima Messe Nagasaki was established in an aim to takeadvantage of Nagasaki’s past of communicating
information to the world, and create a new platform forinteraction in a city that brings about and nurturesinteraction. With the Convention Hall that allows sociallydistanced seating arrangements and the installation oflarge-capacity, high-speed communication lines, the facility
is available not only for online conferences but also
e-sports and other special events. In line with theconstruction of Dejima Messe Nagasaki, Hilton Nagasaki
and Nagasaki Broadcasting Company were also
developed in an integrated manner on the adjacent site.
Hilton Nagasaki has 200 guest rooms, the Executive
Lounge, a fitness gym, hot baths, and other facilities, andis expected to contribute significantly to an increase in theguest population as a new landmark hotel of Nagasaki.
The Kyudenko Group won orders for both the electrical
work and HVAC and sanitary facility work for this facility ina single package. With our outstanding engineering
capabilities and abundant experience, we successfullycompleted construction and delivery within theconstruction period.
KYUDENKO REPORT 2022

28

2. Vision and Strategy

Business of Kyudenko

Electric Power Division (Power Distribution Line Work)
Our Businessperformed) and indirect live-wire work (a technique for performing work without directly touching high-voltage lines),
we have been providing power line installation services
while maintaining the customers’ power supply since the1980s, ahead of the rest of the country.
More recently, we are focusing on the further expansion of our business fields, such as interconnecting line
work related to the construction of renewable energy
generation plants, which are becoming popular on anational scale, and sales, design, estimation, and construction work for underground distribution line works. At
the same time, we are also stepping up our efforts ontechnological development and the popularization of digital technologies for improved operational efficiency, inorder to reduce costs and improve safety and construction quality.

Transition of Business Performance
Sales (Billion Yen)

Orders (Billion Yen)

The year ended March 31, 2022

Sales

45.7 billion yen

47.7 46.9
45.7

45.7 48.0

47.4 47.5
45.6

45.6 48.0(0.0% year on year)

Orders45.6

billion yen(0.0% year on year)

Takahiro Hokahori
Managing Executive Officer
General Manager, Electric Power Div.

In this fiscal year, which marks the halfway point of the Mid-term Management Plan, the power distribution department is prioritizing its efforts to ensure safety, strengthen systems for increasing order volumes, and promote DX.
An essential aspect of the first of these, ensuring safety, is the development of human resources. I believe that it is essential
to develop human resources who are sure to follow the rules to avoid accidents and to develop leaders who will be able toprotect their subordinates from injury. To this end, for human resources development, we are developing and updating our training curricula for group training at Kyudenko Academy and education at business offices, to enhance their contents.
In addition, this fiscal year, as tools for ensuring worksite safety, we introduced the use of tablets to conduct pre-work meetings and started using safety patrol systems. The use of tablets enables workers to review videos of similar work and view theoperation guidelines, ensuring the communication of hazardous points and other critical information. The results of worksite
patrols by safety instructors are stored as data in the safety patrol system, enabling the visualization of the characteristics ofeach work group and their safety instruction history. By analyzing and communicating this data, we aim to eliminate potential
risk factors.
Secondly, to strengthen our systems for increasing order volumes, we launched the Power Infrastructure Section this fiscal
year. This new department aims to acquire orders from new fields, such as underground distribution line works for the removalof utility poles, interconnecting private line works associated with renewable energy generation plant construction, and theinstallation of EV quick chargers. We will strive to expand our business by acquiring orders not only in Kyushu but also from other parts of the country.
Finally, for the promotion of DX, we are working to improve the respective efficiency of on-site workers and construction
managers with DX.
For on-site workers, we are building systems for the promotion of work style reform and improvement of productivity. This will
involve workers using the aforementioned tablets to check design documents on site and to input, send and receive data of
construction record and equipment inspection.
For construction managers, we are building a power distribution core system in an effort to automate the aggregation andanalysis of various data and the production of reference materials. In doing so, we will strive to improve operational efficiency
and management systems.

2. Vision and Strategy

As a company that undertakes contracted works from
Kyushu Electric Power Transmission and Distribution Co.,
Inc., the power distribution department engages in the
installation and maintenance of overhead distribution
equipment. This includes the installation of special high-voltage transmission lines, high-voltage transmission lines,
low-voltage transmission lines, and related devices, theinstallation of drop wires and meters, and the installation ofcommunication cables to build automatic control systems
for distribution lines. In particular, in the event of typhoons
and other natural disasters, we leverage our technologicalcapabilities and mobilization capabilities to engage in theearly restoration of power.
Using techniques such as the outage-less electrical
work (a technique for using bypass cables, generators,
and other means to avoid outages while work is being

Work Scenes
2018

Strengths
High levels of technical capabilities to protect thelifelines of all customers
Unrivalled mobilization capabilities with over 2,000
workers that enable speedy restoration in theevent of a natural disaster
Development and improvement of tools andconstruction methods to increase safety andefficiency of onsite work
etc.

Opportunities
Growth in underground distribution line works
associated with the replacement demand of aging
power distribution facilities and the push for theremoval of utility poles
Acquisition of orders for power distribution andunderground distribution line works from newcustomers in line with the advent of a decentralized energy society
Expansion of construction fields in light of thedrive for electricity resilience (dispatch workers
across Japan for disaster recovery)
etc.

29

Kyudenko Corporation

2019

2020

2021

2022

(Forecast)

2018

2019

2020

2021

2022

Disaster recovery

Underground distribution line work

(Forecast)

Weaknesses
Construction volume depends on capital investment trends of clients
etc.

Threats
Securing human resources due to such factors as
an aging population with declining birth rates
Deteriorating working environment for workers due
to frequency of outside work
etc.

Indirect live-wire work

Work to bury power lines has been moving forward in downtown
and sightseeing areas from the standpoint of ensuring safe, pleasant spaces for pedestrians, preventing urban accidents, andimproving the urban landscape as well as from social request.
And in recent years, growing awareness of disaster prevention
has focused attention on underground facilities from the perspective of maintaining infrastructure. The work we perform includes
removing utility poles, installing conduit for a range of underground equipment, and installing and connecting cables. In thisway, we put our extensive technical capabilities in undergroundlines to work in an effort to create an environment in which residents can enjoy safety and security.
KYUDENKO REPORT 202230

2. Vision and Strategy

Business of Kyudenko

Green Innovation Business Unit (Renewable Energy Generation Plant Work)
Our Business
Based on our core business units, namely, electrical,
HVAC and sanitary facility, and power distribution line
works, we are working to expand construction workand maintenance and management operations ofrenewable energy generation plants, such as solar
and wind power.
Since the introduction of the feed-in tariff (FIT)
scheme in 2012, Kyudenko has been focusing particularly on winning orders for and engaging in EPC work
for mega solar power plants and on the expansion of
our business area beyond Kyushu to the Chugoku/
Kansai area and the Tohoku area. With cumulative
orders totaling more than 600 billion yen, this businesshas grown into one of the major pillars of Kyudenko’sbusiness.

In addition to receiving orders for power plant construction work, we are also involved in the renewable energy
business as an operator.
We view the Japanese Government’s 2050 Carbon
Neutral Declaration as a significant opportunity for ourbusiness operations. Against the background of national
policy, the Green Innovation Business Unit is working to
expand its business fields even further, including promoting the introduction of third-party models (corporate PPA,
leases, etc.), EMS, and storage batteries.
In response to customers’ diversifying needs, we will
engage in the green innovation business to solve problems
in environmental management and to realize a carbon-freesociety, making the most of the technological capabilities
and expertise that we have accumulated over the years.

The year ended March 31, 2022

Sales
OrdersSales (Billion Yen)

Orders (Billion Yen)

(Figures in brackets below represent
solar power generation work)(Figures in brackets below represent
solar power generation work)

77.0

178.9
[176.5]

66.4

49.1

billion yen(down 16.0% year on year)

57.0[59.3]

58.4[54.5][48.3]

49.1[46.6]

45.1 billion yen(up 21.0% year on year)

45.1

46.0

[42.8][45.3]

20.4

29.4[18.2]

2018

Strengths

2019

2020

2021

2022

(Forecast)

2018

2019

2020

2021

2022

(Forecast)Vice President Executive Officer
General Manager, Green Innovation Business Unit
Representative Director

Seeing the Japanese Government’s 2050 Carbon Neutral Declaration in October 2020 and the trend toward the realizationof a carbon-free society as growth opportunities, the Green Innovation Business Unit was established in July 2021 as an organization for the integrated handling of the renewable energy business.
In our business unit, we hope to create social value earned by solving social problems and economic value that will enhance
profit. To achieve the targets of the Mid-term Management Plan, we are focusing on two areas in particular. They are the expansion of the renewable energy business to replace mega solar and the development of new business fields.
Firstly, as demand for construction of mega solar power plants wanes due to the contraction of the FIT scheme, instead, weare aiming to further develop and win orders for wind and biomass power generation facilities. One area that we want to focus
on in particular is the development of a smart city that will combine Kyudenko’s own renewable energy (solar power, wind power, biomass) with new, small and medium-sized renewable energy facilities. To achieve carbon neutrality, we want to promote
initiatives for the local production and local consumption of energy and connect them to the enhancement of social value.
For our second focal area, the development of new business fields, we are examining the respective fields of energy
creation, energy saving, and energy storage. We will work to expand corporate PPA through the “self-consumption model” inthe energy creation field, and the “energy service business” in the energy saving field. In the energy storage field, the designof systems that combine FIT solar with storage batteries is under consideration, and we are monitoring developments in thisarea as a new business opportunity. We aim to expand installation of the Kyudenko EMS that we developed with our proprietary energy management system, with energy creation, saving and storage technologies. In February 2022, we installed the
Kyudenko EMS at Ogi City Hall in Saga Prefecture, our first in Japan. We hope to use this as an opportunity to develop new
business fields, such as the resilience business for municipalities nationwide and the installation of off-grid systems in remoteisland areas.

Weaknesses

Excellent development capability generated from
community-based business operations, and tightconnections with partners in other industries
Construction know-how accumulated with a
top-drawer track record of construction works inJapan, as well as abundant contracts
Established systems for long-term project management/maintenance and management
etc.

Insufficient expertise in civil engineering business
Insufficient technology accumulated for new
renewable energy facilities
Insufficient research and development initiatives insuch areas as battery technology
etc.

Construction Case (Kyudenko EMS)First Kyudenko EMS project in Japan
Project to Strengthen Disaster Prevention Functions of
Ogi City Hall in Saga Prefecture
City Hall

Opportunities

Threats

Further increase in demand for renewable energy
due to a boost in decarbonization activities in
response to the Government’s 2050 Carbon
Neutral Declaration
Demand for renewable energy as a business
continuity plan (BCP) measure and as power
supply facilities at a regional level
Promotion of Kyudenko EMS domestically fornational resilienceetc.

Private power line

31

Kyudenko Corporation“Yumeria”

Collapse of power generation facilities hit by
natural disasters such as heavy rain
Solar power generation
538.2kWp

Declining profitability due to price competition
among industry peers
Declining profitability due to soaring material
prices against the backdrop of higher commodity
prices and a weaker yen
etc.

Business Track Record (renewable energy generation plants)

Miya River Watarai Solar Park

2. Vision and Strategy

Transition of Business Performance

Masaaki Jono

Kushima Wind Power Generation Plant

Kirishima Wood Biomass Power Co., Ltd.

BEMSElectric power system

EMS
Flow of electricity
Data communication and control

Storage batteries
3,456kWh

Construction overview
This project is an off-grid power supply system in which all electricity for Ogi City Hall is
supplied by renewable energy. This is the first case of the application of the resilience
program to strengthen disaster prevention bases that is being promoted by the national
government. Ogi City Hall is the first municipality in Japan to introduce a self-sufficient
power supply system, in which all electricity is generated from renewable energy and usedin the building without being fed back into the grid.

Main functions and benefits of installed equipment
Solar power generation, storage battery, EMS equipment
Generated and stored power is controlled automatically by the EMS. All electricity used in
the municipal building is supplied byrenewable energy.
Air conditioning equipment, lighting
equipment, BEMS equipment
Energy-saving equipment is linked to the
BEMS, which achieves energy savings andreduces the load on the solar power generationequipment.
Normal use
Output and battery storage of the generated
electricity is controlled by the EMS to meetdemand. The power is supplied to powerreceiving and transforming facilities within themunicipal building.
Surplus electricity generated when thebuilding is closed on weekends and holidays
is supplied to the welfare center, “Yumeria.”
Emergency use
The system supplies power charged instorage batteries.
It can supply power to the municipal
building for up to 72 hours.
Electricity is also supplied to the welfare
center, “Yumeria,” which serves as anevacuation center.
KYUDENKO REPORT 2022

32

2. Vision and Strategy

Business of Kyudenko

Business of Kyudenko

Renewable Energy Generation Business

Overseas BusinessWe construct, own, and operate solar power and wind power generation plants and engage in the business of selling

Kyudenko launched its overseas business in 1979 and has since participated in many projects in regions including
Asia, Africa, the Middle East, and Europe, building up a track record in construction work. Despite a period of
temporary stagnation from the 1990s, we established the International Business Division in 2011 and decided to makea foray into Southeast Asia, which continues to have one of the highest growth rates in the world.
Currently, over 800 employees work in eight countries and regions: Singapore, Malaysia, Vietnam, Thailand,
Indonesia, Myanmar, Bangladesh, and Taiwan. We develop businesses in a wide range of fields, including facility work
such as electrical, HVAC and plumbing, plant engineering business, environmental analysis business, EMS, andrenewable energy business.

electricity using the FIT scheme. We also jointly participate in the business of generating and selling solar power, wind
power and biomass power through equity investment and anonymous partnership.

Investment in Solar Power and Wind Power Generation Plants and Business Performance
Sales (Billion Yen) (Sales of other business)■ Solar power (Operated by the Group)■ Wind power (Operated by the Group)
5.1
4.4

0.9

0.9

2017

2018

4.8

0.8

0.8

Number of
power plants

4.6
70.7

3.9

4.0

2019

2020

49

92MW

87MW

Under construction

—

—

—

Plan

—

—

—

Total

49

92MW

87MW

Deals through investment in equity

2021

Profit (Billion Yen) (Operated by the Group: operating profit, equity investment: non-operating income)■ Solar power (Operated by the Group)■ Wind power (Operated by the Group)■ Solar/wind power (Equity investment)
3.2
3.1
2.9
2.7

0.7
1.2
2017

1.3
2018

1.4
2019

1.6

2020

Operation output (MW) (Plants in operation only)■ Solar power (Operated by the Group)■ Wind power (Operated by the Group)336■ Solar/wind power (Equity investment)
278
261
233
206
148
131
110

33

In operation

51

624MW

169MW

Under construction

3

602MW

110MW

Plan

—

—

—

Total

54

1,227MW

279MW

0.0
1.7

Investment in wind power plants(as of March 31, 2021)

Deals operated by the Group
Number of
power plants

2021

350

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

5

39MW

39MW

Under construction

—

—

—

Plan

—

—

—

Total

5

39MW

39MW

Deals through investment in equity
219

38

38

38

38

39

85

92

92

92

92

2017

2018

2019

2020

2021

Kyudenko Corporation

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

1.0
0.1

0.1

0.1

0.0

1.5

1.6

1.4

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

Number of
power plants

1.9

Pick-Up

Deals operated by the Group

4.8

4.0

(as of March 31, 2022)

Number of
power plants

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

5

145MW

50MW

Under construction

1

7MW

2MW

Plan

1

15MW

3MW

Total

7

167MW

55MW

Participation in an integrated aquaculture and solar
power generation project in Taiwan
This project had been under consideration by a consortium that included
Kyudenko, and the planned site was approved as a special zone by the
Taiwanese government in August 2022. The integrated aquaculture and solar
power generation concept involves installing solar panels on aquaculture pondsthat farm shrimps, clams, and other marine produce, to create a symbiosis
between the fishing industry and power generation. The output will be sold tothe public utility, Taiwan Power Company, after approval under the local feed-in
tariffs (FIT) scheme. The Taiwanese government plans to have 30GW of solar
power by 2030, with 4GW produced through solar installations on aquaculture
ponds by 2025, identifying this concept in particular as a new method of solar
power generation. Amid the active progress being made in the introduction ofrenewable energy in Taiwan, this project has attracted particular attention fromthe Taiwanese government and is also in consistent with the government’s
policy. The project will also contribute to regional revitalization through the revivalof the fishing industry in underpopulated areas.

Power generation project overview
Business company
WG MANIES SOLAR Energy Co., Ltd.
Power plant
Wanggong Duan, Fangyuan Township,
location
Changhua County (approx. 72ha)
Generation capacity Approx. 55MW
Start of operation

FY2024 (planned)

Power selling period

20 years

2. Vision and Strategy

4.2

3.5

Investment in solar power plants

Conceptual image of an integrated aquaculture and solar power plant

PPP/PFI Business
Orders for PPP/PFI projects (as of March 2022)
A public-private partnership (PPP) is a scheme where the public andprivate sectors work together to provide public services. A private
Participated as a representative company
15 projects
finance initiative (PFI) is a typical method of PPP. PFI aims to provide
Participated as a constituent company
28 projects
public services efficiently and effectively by using the private sector’sParticipated as a cooperating company
5 projects
funds and expertise in the design, construction, maintenance,Total
48 projects
management and operation of public facilities and having the private
sector take the lead in providing public services.
Leveraging the management expertise and engineering strength established as a community-based provider ofintegrated utilities engineering services, the Kyudenko Group participates in a number of PPP/PFI projects, which areconsidered as new methods of social capital development in public works.

Olive Business
The decline in the primary industry is one of the major social
problems Japan is faced with. We, as a community-based
company, therefore wondered if there was any way we could
play a part in revitalizing the primary industry—specifically byturning the industry into the sixth industry and creating abusiness model that seamlessly incorporates production,
processing, and sales. We thus set an eye on olives since wesaw a potential in them as a tourism resource. Olives can beused for a wide range of food products and cosmetics,
embody a lovely image of an orchard tree in the
Mediterranean region and are also considered as a symbol ofpeace. The olive business was launched in Amakusa City,
Kumamoto Prefecture in February 2010.
Adhering to our long-term vision, we will continue to address
various problems in society and local communities andcontribute to the realization of affluent life through our olive
business.

Creating a sixth industry model within a local community

Production
Grow olives in our own orchard

Processing

Extract olive oil in the orchard
within 24 hours

Harvest fruit from mid-September
to mid-October every year

Sales

Sell at stores

KYUDENKO REPORT 2022

34

3. CSR/Corporate Governance

Basic Concept of CSR

Workplace and Labor Environment

The Company believes its CSR is to contribute to society based on corporate
governance through the creation of a comfortable environment as well as to practice
the “Corporate Philosophy” for the purpose of sustainable growth of Kyudenko.
Toward “Specific CSR Initiatives” with “Consistent Values” and “Implementation of Philosophy”
The Corporate Philosophy has represented the purpose ofbusinesses and the reason of existence of Kyudenko,
even before the concept of “CSR” was recognized by theCompany, and all business activities of the Company arebased on this Corporate Philosophy. In terms of “CSR”, it
can be said that the Company’s Corporate Philosophy
exactly verbalizes the “social responsibilities” that theCompany should take. Accordingly, practicing the
Corporate Philosophy at the site where business activities
are performed is believed to realize CSR of the Company.
In this way, the “Corporate Philosophy” that represents
the purpose of businesses and the reason of existence ofKyudenko, and “Action Guidelines” based on the
Corporate Philosophy are our “consistent values” that will
never change in the future.

In order to practice the “consistent values”, specificissues from long-term, medium-term and annual
perspectives are incorporated into the “Long-term Vision”,“Mid-term Management Plan” and “Basic Management
Policy for the Fiscal Year” respectively, and these plans are
regarded as “implementation of philosophy”.
Placing these plans at the core, “specific CSR initiatives”
are taken in six categories: “IR information”, “quality
management and customer satisfaction”, “environmental
activities and creation of comfortable environment”,“workplace and labor environment” and “coexistence withlocal communities” together with “CSR management” as
the foundation of CSR.

Consistent values

Action Guidelines

The Kyudenko Group defines work style reform as a“reform for the Company and its employees to growtogether, aiming to create new values and realize aprosperous life”. Since FY2017, with the Promotion
Committee for Work Style Reform established directly
under the President, we have strived to work in timeeffective ways by incorporating innovative technologies
and ideas unhindered by existing modes.
We believe what is important in work style reform is not
merely eliminating long working hours, but also aiming to
improve productivity by creating new technologies andimproving operational efficiency. This will result in reducing
long working hours, which will in turn enable further
improvement in pay. By making these efforts, we strive toensure sustainable growth so that employees can enjoy
economic affluence.
(Main Initiatives Taken to Date)
Operational reforms
WorkingsystemAwareness raising

Fundamental reexamination of work processes
Streamlining and labor-saving of operations through DX
Company-wide efforts to leave office on time, setting a day to promote taking paid leave,
and introduction of the system where employees can choose when to take long holiday
Remote working
Development of the work style reform manual and provision of position-based training sessions* System under which employees can choose when to take longholidayThis is a system which allows employees for whom it is difficult to takesummer or other long holiday due to requests from customers or otherreasons during the period prescribed by the Company for that
purpose to transfer the holiday to another holiday period so that they
can take long holiday.

Promoting Health and Productivity Management
We consider our employees’ health to be an importantmanagement resource, and in FY2018, we established the“Health and Productivity Management Declaration”. We actively
initiate support for our employees’ proactive health promotion

activities and promote organizational health activities in order
to raise employee awareness of “putting health first” as well as
achieving “a work environment with peace of mind” and“creating a happy and agreeable work environment”.

3. CSR/Corporate GovernanceCorporate
Philosophy

Promotion of Work Style Reform

Walking event “Aru-Fes” organized by Kyudenko Health Insurance Union“Aru-Fes” is a walking event using the health portal site “MY HEALTH WEB,” which Kyudenko
Health Insurance Union operates. This is an initiative in which participants enter the number of steps
on the website to compete each other, allowing them to make walking a fun habit. This year marked
the fourth round of this event, for which many employees have registered.

Long-term Vision

Implementation ofphilosophy

Mid-term Management Plan
Basic Management Policy for the Fiscal YearIR
information

Environmental
Quality control
Workplace andactivities andand customer creation of comfortablelaborsatisfaction
environment
environment

Coexistencewith local
communities

Specific CSR initiatives

CSR management
Corporate Philosophy

1. We contribute to society through providing agreeable
environmental solutions.
We strive for the creation of a rich human environment, aiming for
an optimal harmony of “People”, “Environment” and “Engineering
Skill” as an Integrated Utilities Engineering Service Company with abroad perspective.
2. We keep challenging for sustainable development through ourengineering strength and create a new value.
We make efforts for research and development of technologies that
anticipate the needs of the times, and engage in businesses that
respond to the trust and expectations of clients as a forward-looking
company at all times.
3. We aim to create a mutual respecting environment in Kyudenko
which utilize and develop employees’ personality.
We foster a vibrant and enriched corporate culture throughrespecting the personality and enhancing the abilities of eachindividual based on a philosophy that the corporation is people.

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Kyudenko Corporation

Action Guidelines

1. We will create the future environment
with a new perspective
2. We will enhance technological force withcreativity and ingenuity
3. We will appropriately accept and respondto customers’ voice
4. We will embrace teamwork in work
5. We will create a vibrant and brightworkplace

Promoting the Active Participation of WomenIn March 2022, we launched “Women’s Active
Participation Promotion Team” whose members werechosen from company-wide employees. The main
objective of this team, which consists of 31 members intotal, is to formulate initiatives towards solving issues inpromoting the active participation of women and develop
women leaders. Team members are divided into fivegroups to discuss the five topics: “awareness-raising andcorporate culture building,” “developing various careermaps,” “expanding support to balance work and childcare/family care,” “Increasing the ratio of female
employees,” and “diverse and flexible work style.” Whateach group has discussed will be reflected in the specificmeasures after being presented to the management team.

Voices of Participants
Haruna Ando, DX Planning Team, DX
Promotion Department
I have served as an engineer in the electrical
work department for ten years. With thiscareer of mine, what I feel now is that “theCompany will be for sure a workplace wherefemale employees shine.” There are three reasons for this.
First, female employees have been selected as site agents forlarge-scale projects. I, too, was selected as a site agent in mysixth year. Second, the increased division and specialization ofback office services has resulted in greater career options as
our life stages change. Third, the enforcement of theregulations limiting overtime work in 2024 will serve as a great
opportunity to eliminate a physical disadvantage over male
employees. As a member of the Women’s Active Participation
Promotion Team, I would like to come up with new ideas for
initiatives for my future juniors, utilizing my own experience asan engineer.
Ai Yonaha, Accounting Department,
Finance Division
Kyudenko is a company which respect“people.” Companies in the constructionindustry tend to focus their attention on
supporting engineers who directly contribute to business results.
However, the Company has included “promoting the active
participation of women” in its corporate goals, and I am
genuinely pleased with this. Because the Company was sincere
about creating an opportunity to promote the active participationof women, I feel that we, this team, need to work on our
initiatives with burning passion to respond to that sincerity.
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3. CSR/Corporate GovernanceCoexistence with Local Communities/Track and Field TeamA Community Program, Dedicating Contributing Activities to the Local Community
Kyudenko believes that it is its social duty as a member of the local community
to participate in social contribution activities. We designate a certain period in
mid-October every year as a community program period, dedicating contributing
activities to the local community, during which we engage in contribution
activities rooted in the community, such as cleaning/equipment inspection
activities at community and cultural facilities using its aerial work vehicles andblood donation and provision of bazaar items to welfare facilities. We have also
cooperated in community activities, such as by donating crime-prevention
equipment, emergency goods to cope with disasters and traffic crossing flags toadministrative agencies. This year, in addition to our existing activities, we
conducted activities such as cooperating in “The Green Donation” which will be
used for forest development and environmental education as part of moreenhanced environmental preservation activities, and donating “stainless bottles”
to the prefectures where our branch offices are located from our wish to promoterefillable bottles thereby reducing plastic waste.
This year marked the 54th round of such activities, which have become familiar as acore of the Kyudenko Group’s social contribution activities, and widely known and wellregarded within and outside the company.

Track and Field Team

Contributing to the Local Community

Kyudenko Sports Class for Children
Every year, as part of our social contribution activities, wehold a local-based sports event with support mainly frommembers of the Kyudenko Track and Field Team. Like inthe previous year, we regrettably refrained from holding theevent due to the spread of COVID-19 this year.
Last year, we produced video programs featuringlectures on running by the members of our Track and Field
Team and posted them on Kyudenko’s official YouTube
channel.

Safety is a company’s most important social responsibility that deserves the highest priority. With the basic
philosophy of “Safety takes precedence over everything; Safety and health are the foundation for management
and a major premise of all activities”, the Kyudenko Group ensures all employees thoroughly implement ‘thinking
and practicing’ safety on their own to prevent accidents.
At the beginning of each fiscal year, the Group formulates the Basic Plan for Safety and Health Management. To
carry out and operate the plan in an appropriate manner, the Group runs a PDCA cycle, voluntarily andcontinuously, based on the Occupational Safety and Health Management System (OSHMS). We aim to raise thelevel of safety and health across the Company through effective implementation and development of safety andhealth activities.
Please refer to the Company’s website for details on
initiatives for safety.
https://www.kyudenko.co.jp/approach/safety/(Japanese)

Eliminating Work-Related Accidents

A community program, dedicating contributing
activities to the local community

Taking into account the accident occurred in FY2021, we work to strengthen oursafety management activities in FY2022 by ensuring that “general safety andhealth managers” responsible for safety and health management at offices and“forepersons and safety and health managers” who are appointed by heads ofoffices and implement safety and health management in the front line are welleducated and instructed.
We provide position-based training delivered by lecturers inside and outside the Groupto not only the Group’s employees but also those who belong to our subcontracting
companies at our education facility (Kyudenko Academy) in a planned manner. In
Kyudenko Academy
particular, we aim to improve safety management abilities and construction capabilities ofyoung engineers and technicians.
For situations where it is difficult to provide group training, we also built a new online education environment utilizing learning
management system (LMS).
In addition to improving our safety management skills, we work to eliminate work-related accidents by ensuring that eachworker understands the necessity of “compliance with work safety standards” and “risks of non-compliance” and complies
with those standards.

3. CSR/Corporate GovernanceBacked by a 69-year history since its establishment, theKyudenko Track and Field Team trains daily aiming to win
the Men’s and Women’s All Japan Industrial Teams Ekiden
and produce Olympics athletes, with the purpose of“enhancing the corporate image of Kyudenko”, “boosting
employee morale”, and “contributing to society”, based on
close ties with the local community.
In the past, the Kyudenko Track and Field Team has
produced Japan national team members of the Olympics
and World Athletics Championships and many otherinternational games. In addition, the Team has participatedin the All Japan Industrial Teams Men’s Ekiden (Gunma)
held on January 1 for 47 consecutive years (the longest
record of all participating teams) and has participated in
the All Japan Industrial Teams Women’s Ekiden (Miyagi) 30
times. We will continue to work hard to produce more
Japan national team members and win the Men’s andWomen’s All Japan Industrial Teams Ekiden.

Initiatives for Safety

Safety Management Activities through the Use of Digital Technology
Enhanced safety patrols utilizing image
management tools
We enhance safety patrollers’ knowledge and awareness by
ensuring they carry 360-degree cameras and having
managers at the relevant offices, branches and head officecheck the camera footage and suggest and instruct them
about unsafe situations and actions.
Since the footage allows us to check the 360-degree view,
we utilize them in managing working processes and quality.

Education for improving danger sensitivity
utilizing virtual reality
We ensure compliance with work safety standards andrelated laws and regulations by using VR to help workers
visually experience the risky work which is difficult toexperience in the real world, and increase their ability to sense
danger.
This prevents us from being stuck with the traditional
education for improving danger sensitivity, helping us toenhance safety awareness.

Motion system

VR simulation

VR video

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Kyudenko Corporation

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3. CSR/Corporate GovernanceInitiatives for Technology Development
Based on the Corporate Philosophy of “keep challenging for sustainable development through our engineeringstrength and create a new value,” we promote further technical development and improvement of quality in theenvironment, energy, and renewal work fields. By responding to the trust and expectations of customers as well as
proactively deploying business in new fields and markets, we aim to improve corporate value while responding tochanges in the social structure in a timely manner.

Technology Development at Kyudenko
Based on the main theme of the Mid-term Management Plan,“Establish a management foundation for sustainable growth—
Realization of the three reforms—,” our Technology
Development Department solves various challenges as a
general engineering company, and creates value for the futuresociety through development of cutting-edge technologies topromote sustainable growth. It assumes a role of verifying andintroducing cutting-edge technologies and operational tools

first within the company and solving on-site technical issues
before rolling out, while cooperating with other departments
and divisions. As part of our efforts to contribute to creating asustainable society and achieve SDGs goals, it also works ontechnology creation through cooperation between industry
and academia and securing human resources to promote“creation of new value for the future society,” “improvement ofcorporate value,” and “improvement of operational efficiency.”

Use of Cutting-Edge Technologies that Support Activities at Worksites

3D measurement data and 3D models

Analysis results of air flow simulations

In addition, starting from FY2022, as part of initiatives
for construction DX promoted by the Ministry of Land,
Infrastructure, Transport and Tourism, we conduct tests on
surveys using state-of-the-art industrial drones with laser
scanners, and explore the application of them for the fieldsof power distribution line, electrical, HVAC and sanitaryfacility works.
Furthermore, toward the realization of a carbon-freesociety and use and promotion of DX (digitaltransformation), we registered as a ZEB (Net Zero Energy
Building) Planner (in January 2022), and work to develop a
HVAC heat source control optimization system using AI forlarge-scale facilities and buildings.

Surveys using drones

Combining universities’ multifaceted knowledge andcutting-edge technologies with our experience andknow-how in the construction industry, we strive to solve
social problems which are becoming more diversified andcomplicated. In the rapidly changing social environment
where social problems are becoming more diversified
and complicated such as “realization of a carbon-freeComprehensive Collaboration with Kyushu University
In December 2021, we concluded a Comprehensive
Collaboration Agreement with Kyushu University with theaim of “creating innovation toward solving social
problems.” This collaboration specifically consists of thefollowing four items: (1) research and development ofadvanced technology leading to the realization of acarbon-free society, (2) research and development toimprove efficiency and sophistication of construction atworksites with digital technology, (3) conversion of an idea
or plan into reality and cultivation of new businesses, and(4) establishment of new symbiotic models using mutual
resources (such as research, personnel and equipment).
In FY2022, we started to work on “improvement ofsophistication and labor-saving in design, construction
and survey using robotic technology.”

CO2emissionsvolumeparameters, and issues such as succession oftechnologies dependent on individuals and lack ofsuccessors have arisen.
In light of this background, we are in project partnershipwith GRID INC. which has unique state-of-the-art AI
technology, under which we work to jointly develop “HVAC
heat source control optimization system” by combining
our “HVAC system related technology in the building
equipment field” with GRID INC.’s “digital twin/AIoptimized technology based on abundant experience inthe social infrastructure field.” In FY 2022, we introduced
this system at some stores for trial, and based on the
results of this trial, we will roll out marketing activities.

For the purpose of effectively using combustion ash emitted
from the wood biomass power plant operated by the Group,
we work to explore the recycling of combustion ash as
materials for fertilizers, examine its effectiveness as fertilizer
for plant cultivation, and look for suitable crops for which thefertilizer uses. The results of our initiatives in FY2021
confirmed that combustion ash fertilizer is usable as
substitute for potassium fertilizer.
Leveraging these, we will promote the improvement of
economics of each industry and the revitalization of local
communities, aiming to complement the establishment ofa circular society in realizing a carbon-free society theGroup is working on.

-8.0% to -10.7%

In addition, from FY2022, we started a new initiative for
examining the cultivation of “fast-growing Japanesepaulownia” to explore the wood which is used as sourceof fuel at the wood biomass power plant. Since “fastgrowing Japanese paulownia” grows faster than traditional
paulownia, and has properties to absorb CO2 three times
as much compared to cedar and cypress, it is expected tohelp ensure local and stable supplies of wood. Therefore,
this initiative is positioned as key to establishing a circularsociety and realizing a carbon-free society.

Cooperating universities

HarvestingSound
cultivationof forests

Transporting

Wood chip plantFuel
companies
CO2 absorption

CO2 emission

Wood biomass power plant

Thinning
Chipprocessing

Crop
production

Pruning

Energycost

Creation of innovation toward solving social problems

Effective Use of Combustion Ash from Wood Biomass Power Plant

Power
plantsMowing

-5.1% to -13.6%

This initiative is scheduled to run for three years. Goingforward, from the perspective of realizing a carbon-freesociety, we will further expand the scope of collaborative
cooperation in planning, design and R&D areas, thereby
leading to our further development and evolution incooperation with our Corporate Strategic Planning
Division, DX Promotion Department, Technology Division
and Green Innovation Business Unit.

Image of the comprehensive collaboration

HVAC Heat Source Control Using AI Technology for Large Stores
While the initiatives for reducing CO2 emissions toward
decarbonization are being rapidly accelerated, it is required
to reduce CO2 emissions by 51% (compared to 2013) in“Commercial Industry” which includes large-scale facilities
and buildings, in order to achieve the government-set goal
to reduce greenhouse gas emissions by 46% by 2030 andfurther aim for 50% reduction. To realize CO2 emissions
reduction in “Commercial Industry,” it is key how to
optimize HVAC heat source control since energy
consumption by HVAC systems accounts for a large partof the total energy consumption. Meanwhile, HVAC heatsource control at large-scale facilities and buildings has
been traditionally conducted by maintenance personnel,
leveraging their experience and intuition to adjusts o c i e t y ” a n d “ u s e a n d p ro m o t i o n o f D X ( d i g i t a ltransformation),” we will accelerate our initiatives forcooperation between industry and academia, aiming tocreate innovation toward solving social problems bycombining universities’ multifaceted knowledge andcutting-edge technologies with our experience andknow-how in the construction industry.

3. CSR/Corporate Governance

We are carrying out efforts towards labor-saving ofoperations by introducing to worksites ICT and IT such as
cloud mobile cameras, laser line generators and 3D laser
scanners. In the design phase, we implement air flow andtemperature simulations that visualize the energy-saving
effects and structural analysis simulations to evaluate thestrength of steel cradles for piping and equipment for use
in the preliminary examination of advanced HVAC quality
and optimal cradle structures. With the use of visuallyoriented platforms such as 3D-CAD and BIM (building
information modeling) to respond to the future moreadvanced design, we facilitate consensus building among
related parties to ensure smooth progress of projects andimprovement of construction quality.

Initiatives for Cooperation between Industry and Academia

Cultivating
Tree
planting

Recycling ofbark andcombustion ash

University of Miyazaki
We examine the effectiveness of
combustion ash as fertilizer for plantcultivation, and the cultivation of
fast-growing paulownia.
National Institute of Technology,
Kagoshima College
We look for suitable crops andexplore the branding of“environmentally circulating fertilizer.”

Local production andconsumption
Revitalization of local communities
Makingfertilizer

Hiroshima University
We explore the recycling of
combustion ash with enriched
potassium components which is
obtained from selectively collecting
the f iner combus tion a sh, a smaterials for fertilizers.

Sale*Calculated with the assumption that energy consumption reduction effect due to “shorter operating hours” approximately equals to CO2 emission reduction effect, energy cost effectTotal expected effect of “improved operational efficiency” and “shorter operating hours” obtained from trial experiments at three facilities
Image of wood biomass power generation and combustion ash circulation

39

Kyudenko Corporation

KYUDENKO REPORT 2022

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3. CSR/Corporate GovernanceCorporate GovernanceCorporate Governance Basic Policy
Execution of operations and oversight function of the Board of Directors

The Kyudenko Group aims for (1) sustainable growth andlong-term increase of our corporate value through therealization of our Corporate Philosophy, (2) support andtrust by stakeholders including shareholders, customers
and local community, and (3) realization of appropriate andefficient corporate management. Consequently, weestablished the Kyudenko Corporate Governance
Guidelines, and we will continue to work to realize the best
possible corporate governance.
Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/
cg_guideline.html (Japanese)

Corporate governance system
With the resolution at the Annual General Meeting of
Shareholders held in June 2022, the Company transitioned
from a Company with Audit & Supervisory Board to a
Company with Audit and Supervisory Committee. By
adopting the Executive Officer system, we separate the“decision-making and oversight function” and the“execution of operations function” of the Board of Directors
to reinforce corporate governance as well as to practiceefficient and speedy management. In addition, theExecutive Officers who execute operations are conferredwith necessary authorities to draw a clear line between the“oversight responsibility” of Directors and the “execution
responsibility” of Executive Officers.
We use the current system judging that the proper
functioning of our corporate governance system isensured by the presence of Outside Directors, whoprovide guidance and advice based on their extensive
experience as corporate managers and broad knowledge
in a global perspective and monitor overall managementfrom an independent standpoint.

Corporate governance system
General Meeting of Shareholders
Election/Dismissal

Election/Dismissal
Cooperation

Accounting Auditor

Audit andElection/Dismissal

Audit
and
oversight

Supervisory
Committee

Audit and Supervisory Committee’ s Office

Board of Directors
8 Directors

Consultation

Nomination/Remuneration Advisory Committee
8 Directors(including 3 Independent Outside Directors)

Recommendation(including 6 Independent Outside Directors)(excluding Directors serving as Audit
and Supervisory Committee Members)

4 Directors serving as Audit and Supervisory Committee Members

Audit
Cooperation Cooperation

Audit

Accounting audit

ReportInstruction/Report

Internal Control Committee

Cooperation(Secretariat: Business Administration Department)

Compliance Committee

FY2021

FY2022

Internal Directors

Internal Directors
Directors

10
Outside Directors
FemalePercentage of Outside Directors

Management Meeting

Kyudenko Corporation

50.0%

Measures

1) Reconsider the structure of the Advisory
Committees, in view of the opinion that somemeans to ensure the appropriateness of theiractivities is necessary.
2) Consider and implement specific measures inview of the opinion that it is desirable to provide
training opportunities, such as seminars, on a
Director’s responsibilities and corporate
governance repeatedly and regularly, taking
account also of changes of directors.
3) Consider and implement additional measures toimprove communication with shareholders(investors).

Instruction

41

Percentage of Outside Directors

1) Appropriate involvement and advice of theAdvisory Committees
2) Director training
3) Communication with shareholders (investors)

ReportExecution of operations

3

IssuesBusiness Administration Department

Group companies

Directors serving as Audit andSupervisory Committee Members:

The Company has concluded an audit contract for with
Ernst & Young ShinNihon LLC. Two of the audit firm’s
certified public accountants carried out the accounting
audit, neither of whom has audited the Company for morethan seven consecutive years. In the year ended March 31,
2022 (the 94th fiscal year), the Company paid 61 million
yen as fees for the audit and certification services. There isno special interest between the Company and Ernst &Young ShinNihon LLC or the Engagement Partners.
The group of assistants for the audit services wascomposed of 8 certified public accountants, 16 persons
who have passed the certified public accountant
examination, and 24 others.

Report Instruction

Divisions, offices, branch offices, and business offices

3

We conducted an evaluation of the Board of Directors basedon a questionnaire distributed to all board members in March2022.
The purpose of the annual evaluation is to regularly verify
whether the Board of Directors is functioning properly, andtake appropriate measures such as correcting problems andenhancing strengths in order to ensure the board carries out
its role and responsibilities effectively.
Based on the questionnaire survey results, issues and points
for improvement are identified and shared to improve theeffectiveness of the Board of Directors going forward.

Director and Executive Officer in charge

Development of compliance system
Compliance education
Risk management(excluding Directors serving
as Audit and Supervisory
Committee Members):

Accounting audit(Secretariat: Business Administration Department)Internal audit

1

The Company’s Audit and Supervisory Committee consists offour members, one full-time and three outside, including one
with ample knowledge and expertise in finance andaccounting.
The Company has established the Audit and Supervisory
Committee’s Office with Audit and Supervisory Officer anddedicated staff members, which assists the duties of the
Audit and Supervisory Committee and its members tofacilitate efficient audit activities. The Audit and Supervisory
Officer and the employees assigned to the Audit andSupervisory Committee’s Office execute their duties under the
direction and orders of the Audit and Supervisory Committee.
Their personnel matters are discussed in advance with the
Audit and Supervisory Committee.
The Audit and Supervisory Committee receives regular
reports from Ernst & Young ShinNihon LLC, the Company’s
accounting auditor, regarding the outline of accounting audit
plans and audit results, and the two parties exchange
information and views with each other as necessary. The
Audit and Supervisory Committee also strives to ensure
independence from management and the effectiveness ofaudits by the accounting auditor by exercising its authority,
including to make decisions regarding the selection of theaccounting auditor.
The Audit and Supervisory Committee strives to conduct
audit activities efficiently with the assistance from the Audit
and Supervisory Officer and the Audit and Supervisory
Committee’s Office, while seeking to improve corporate
governance by strengthening cooperation with thedepartment in charge of internal audits (Business
Administration Department), interviewing and exchanging
views with the department on the results of internal audits it
has conducted. The Business Administration Department andthe Audit and Supervisory Committee work in cooperation
with each other: the Department, for example, conducts
investigations into questions regarding internal control raisedin accounting audits by the accounting auditor and reports
the results to the Committee.

Overview of the results of evaluation of Board of Directors effectivenessAppointment and dismissal

Executive Officer Representative President

5

Director serving as an Audit andSupervisory Committee Member:
Outside Directors
Directors

3

23.1%

(excluding Directors serving
as Audit and Supervisory
Committee Members):

FY2021 Board of Directors effectiveness evaluation
Evaluation
The Board of Directors was concluded to be
resulteffective based on the analysis of the survey results.

(3 Independent Outside Directors)

AssistanceComposition of the Board of Directors

Audit by the Audit and Supervisory Committee

3. CSR/Corporate GovernanceTo reinforce corporate governance as well as to practiceefficient and speedy management, the Company adopts the
Executive Officer system where the Board of Directors
determines important matters and oversees execution ofoperations, while the Executive Officers engage in theexecution of operations based on decisions made by the
Board of Directors. The number of Directors of the Company
is 12 (including one female), of which six are Outside Directors
designated as Independent Officers. The Company hasentered into an agreement with all Outside Directors to limit
their liability for damages pursuant to Article 423, Paragraph
1 of the Companies Act to the amount stipulated by laws andregulations. The Company’s Articles of Incorporation stipulatethat the number of Directors of the Company (excluding
Directors serving as Audit and Supervisory Committee
Members) shall not exceed thirteen (13), the number of
Directors of the Company serving as Audit and Supervisory
Committee Members shall not exceed six (6), Directors shallbe appointed at general meetings of shareholders while
making a distinction between Directors who are Audit andSupervisory Committee Members and the other Directors,
Directors shall be appointed by a resolution adopted by amajority of the votes of the shareholders present at themeeting, where shareholders holding 1/3 or more of the total
voting rights of the shareholders who may exercise the voting
rights are in attendance, and no cumulative voting shall beapplied in a resolution for appointment of Directors. They
further stipulate that unless otherwise provided for in laws
and regulations, the Company shall determine the mattersprovided in the items under Article 459, Paragraph 1 of theCompanies Act, such as dividend of retained earnings, not by
resolution of a general meeting of shareholders, but by
resolution of the Board of Directors, to pursue a flexible
capital and dividend policy.
Aside from the meeting of the Board of Directors which isheld basically once a month, the Company has set up theManagement Meeting comprising Chairman, President, Vice
Presidents, Executive Officers appointed by the Chairperson,and other members deemed necessary by the Chairperson,
which meets once a week as a body to discuss matterswhich require prior discussion and matters on importantbusiness execution. Main matters for deliberation at theBoard of Directors meeting include the establishment, reform
and abolition of important organizations, important personnel
matters, and other matters for its resolution as stipulated in
the Regulations of the Board of Directors, on which themeeting has discussions and makes decisions.
The Company also holds the Meeting of Branch Office
General Managers 11 times a year as a place to make reports
on execution of operations, raise management issues,
discuss measures to be taken, and facilitate the sharing of
information concerning the management policy and plans,
which comprises Chairman, President, Vice Presidents,
Representative of Tokyo Head Office, Branch Office General
Managers, Executive Officers appointed by the Chairperson,and other members deemed necessary by the Chairperson.

Internal audit
The Business Administration Department that is
responsible for conducting internal audits evaluates
whether management activities of each department/
division are performed according to the management
policy, and audits whether such activities are appropriately
processed according to internal rules such as regulations,administrative authority, and manuals to report the audit
results and measures for improvement to the Internal
Control Committee (chaired by the Executive Officer andPresident). The Executive Officer in charge of internal audit
also reports the matters discussed at the Internal Control
Committee meetings to the Board of Directors. The
Business Administration Department not only gives advice
and recommendations for improvement to audited bodies
but also takes follow-up action for improvement as
necessary.

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3. CSR/Corporate GovernanceCompliance system
The Compliance Committee (chaired by the Executive
Officer and President) is established to determine thebasic policy and activities for compliance, prepare plans,confirm the implementation method, and discuss
measures, etc. The Business Administration Department
draws up and amends Compliance Regulations andmanuals while continuously conducting complianceeducation as a division in charge of compliance, and the
Kyudenko Group Compliance Desk is also available fordirect reporting and consultation by employees. Any
information received at this compliance desk isinvestigated, analyzed and organized, and then reported
to the Compliance Committee as well as the Board of
Directors.

Preventing corruption

Supply chain management
In the construction industry in which the Kyudenko Group
operates, cooperation with construction subcontractors isessential for supply chain management. Thus, we requirecompliance with laws and regulations, prevention ofcorruption, elimination of anti-social forces andorganizations, and adherence to our safety standards inthe construction contract clauses and health and safety
pledges that we conclude with construction

43

Kyudenko Corporation

Nomination Advisory Committee
In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Boardof Directors, the Company has established the Nomination
Advisory Committee consisting of three or more members,
a majority of whom are Independent Outside Directors.
Based on the standard for officer nomination/dismissal
proposals and the list of skills required of the Board of
Directors (Skills Matrix), the Committee resolves proposals
for the General Meeting of Shareholders concerning thenomination of candidates for Directors and dismissal of
Directors (excluding Directors serving as Audit andSupervisory Committee Members), matters concerning
Director’s titles including the representative authority, andelection and dismissal of Executive Officers including intitle, and submits its decisions to the Board of Directors.

Remuneration Advisory Committee
In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Boardof Directors, the Company has established theRemuneration Advisory Committee consisting of three ormore members, a majority of whom are Independent
Outside Directors. The Committee drafts a “proposal to besubmitted to shareholders’ meeting concerning revision of
total annual remuneration for Directors,” which is
submitted to the General Meeting of Shareholders upon
resolution by the Board of Directors. The Committee also
resolves “revision of annual basic remuneration for
Directors (excluding Directors serving as Audit andSupervisory Committee Members) by position,”“assessment and revision of incentive portion of
remuneration for Directors (excluding Directors serving as
Audit and Supervisory Committee Members),” “revision ofannual basic remuneration for Executive Officers by
position” and “assessment and revision of target
management regarding incentive portion of remuneration
for Executive Officers,” which are submitted to the Boardof Directors.

Outside Officers
The number of Outside Directors of the Company is six, ofwhich three are elected as Outside Directors serving as
Audit and Supervisory Committee Members. They havebeen confirmed to fall under none of the grounds fordisqualification prescribed by the Independence Standards
for Outside Officers established by the Company anddeemed to have no conflict of interest with generalshareholders of the Company. The Company thus has filed
a notification to designate them as Independent Officers
stipulated by the Tokyo Stock Exchange.
The Company has entered into an agreement with all
Outside Directors to limit their liability for damages
pursuant to Article 423, Paragraph 1 of the Companies
Act to the amount stipulated by laws and regulations.

Independence Standards for Outside Officers
An Outside Officer is determined to be independent by the Company ifnone of the following attributes applies to:Internal Control System

1

A person who is an executive of the Company or a group company of the Company
or was an executive of the Company or a group company of the Company within thepast 10 years prior to his/her appointment as an Outside Officer.

The Company has in place and operates a system tosecure compliance with laws and regulations and the
Articles of Incorporation in the execution of duties byDirectors, and a system necessary to secure
appropriateness of the operations of the Kyudenko Group(internal control system).

2

A person who is an executive of a corporation that is a business partner of the Company, and in any ofthe most recent three past fiscal years of the Company, has made payments to the Company
representing more than 2% of non-consolidated net sales of the Company in that fiscal year; or a person
who is an executive of a financial institution, which provides indispensable financing to the Company, andcannot be easily replaced because of the Company’s reliance on the financing from such institution.

Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/internal_control.html (Japanese)3

A person who is an executive of a corporation of which the Company is a business
partner, and in any of the most recent three past fiscal years of the Company, hasreceived payments from the Company representing more than 5% of nonconsolidated net sales of such corporation in its most recent fiscal year.

4

A person who received remuneration exceeding 10 million yen directly from the Company
in any of the most recent three past fiscal years of the Company for providing professional
services concerning law, accounting, tax affairs, or consulting services to the Company(excluding compensation as Director of the Company) (If the recipient of such
remuneration is an organization, a person who is affiliated with such organization).

5

A person who belongs to an organization or an entity that received a donation or aid
exceeding 10 million yen per year on average over the most recent three past fiscal
years of the Company.

6

A person who is an executive of a corporation, etc. that is a shareholder of theCompany which substantially owns 10% or more of the voting rights of the Company.

The Outside Officer himself/herself, his/her spouse, or his/her relative
within the second degree of kinship:*“Executive” means an executive director, executive officer, other staff members
or employee.

Remuneration for Directors
As remuneration for Directors (excluding Directors serving
as Audit and Supervisory Committee Members), under the“performance-based remuneration system for Directors”
adopted by the Company, only the basic amount of annual
monetary remuneration of Directors determined by theirpositions is paid (on monthly basis) within the scope of thetotal amount of remuneration resolved at the General
Meeting of Shareholders, while a variable part (25%) of thebase amount is added to or deducted from theirremuneration in the following year as an incentive portion
depending on the level of achievement of “consolidated
operating profit,” with the aim of enhancing corporate
value over the medium to long term. Solely a fixed amountof remuneration with no incentive portion is paid to
Outside Directors as their role is to oversee managementfrom an independent standpoint.
With respect to individual remuneration, theRemuneration Advisory Committee checks and discusses
whether the level and structure of remuneration under thecurrent system is appropriate, and submits its
recommendation to the Board of Directors. The Board of
Directors, after reviewing the recommendation, delegates
the Executive Officer and President to determine theamount of individual remuneration of each Director.
The remuneration for Directors serving as Audit andSupervisory Committee Members comprises solely a fixedamount in view of the importance of independent andobjective viewpoint toward management, and the amountof remuneration for each Director serving as Audit andSupervisory Committee Member is determined throughdiscussions among the Directors serving as Audit andSupervisory Committee Members.
The Kyudenko Officers Shareholding Association wasestablished as part of the incentives that reflect theCompany’s medium- to long-term performance andpotential risk in officer remuneration and for the purpose ofletting the officers share value with shareholders. As
members of the Association, Directors purchase shares of
the Company at more than a certain rate of the amount ofannual remuneration.

Our Initiatives Concerning the
Corporate Governance Code
The Company is working to improve its corporate
governance. As a company listed on the Tokyo Stock
Exchange (TSE), the Company aims to achieve sustained
growth and increase its corporate value in the medium- tolong-term by complying with each of the principles of the
Corporate Governance Code set forth in TSE’s Securities
Listing Regulations, while explaining the reasons for not
implementing part of the principles, and disclosing
pertinent information.

3. CSR/Corporate Governance

Reflecting seriously on our past misconduct, and in orderto restore public trust, we are strongly pressing ahead withgovernance reform in our Mid-term Management Plan. We
are working to cultivate a compliance-conscious corporate
culture across the Group, establishing Compliance
Manual, providing regular training and creating
whistleblower contact points, among others.
The Kyudenko Group prohibits any giving, offering, or
promising of improper advantage to public agencies andother business partners, whether in Japan or overseas,
and also prohibits any complicity in or aiding and abettingof such activities. The Group also prohibits the provision ofany excessive gift or entertainment to business partners
beyond the extent reasonable under social convention (aswell as the receipt of such gift or entertainment frombusiness partners), which is explicitly stipulated in thesection on “Prohibition of bribery and improper gift andentertainment” of the Compliance Manual.
The Company has introduced a “whistleblowing system(internal reporting system)” where stakeholders both within
and outside the Company can report or consult on
unlawful conduct or harassment and other significant
wrongdoing. The Business Administration Department
serves as the internal contact point while the legal counselof the Company accepts reports and consultations fromoutside the Company, to ensure prompt and appropriate
action in the event of whistleblowing.
In accordance with the amendment of the Whistleblower
Protection Act in June 2022, the Business Administration
Department, which is in charge of this system, manages
and keeps personal information of the whistleblowers andcontent of the reports or consultations in strict
confidentiality, and prohibits any unfair treatment due towhistleblowing. Upon receipt of a report or consultation,
we immediately work to grasp its content and check
whether or not it constitutes an issue, and take corrective
measures if necessary.

subcontractors as a prerequisite for any subcontract.
We will work together with suppliers, especially withconstruction subcontractors, to meet the requests ofsociety including for compliance with laws and regulations
as a supply chain as a whole.

Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/cg_
efforts.html (Japanese)

Disclosure of Information to and Communication
with Shareholders and Investors
Disclosure system
The Company fully realizes that disclosing corporate
information to investors in a timely and appropriate mannerconstitutes a fundamental part of a healthy securities
market, and strives for the enhancement of internal
systems to appropriately disclose corporate information
speedily, accurately and fairly in accordance with the Fair
Disclosure Rule.

Enhancement of communication
The IR activities of the Company are conducted by the
Finance Division, which is in charge of IR, in cooperation
with the Business Administration Department, Corporate
Strategic Planning Division, and General Affairs Division topromote communication with stakeholders including
shareholders. The IR activities are promoted to ensuretransparency of corporate activities and enhance thesoundness of management by disclosing financial
statements, securities reports, and other documents forwhich disclosure is required by the stock exchange as wellas important facts to shareholders and investors in a timely
and appropriate manner, in addition to publishing theGroup’s management policy, business activities,
compliance activities, social contribution activities, andvarious other information on the website and theIntegrated Report.
Executive Officer and President and Officer responsible
for finance hold a financial results briefing for analysts and

KYUDENKO REPORT 2022

44

3. CSR/Corporate Governance

Message from the Outside Directors
institutional investors twice a year, and materials for thebriefing are disclosed on the Company’s website. The
Company also holds individual briefings and responds tointerviews for analysts and institutional investors, andholds briefings for individual investors as necessary. The
summary of such financial results briefings and individual
briefings is reported at the Management Meeting and theBoard of Directors meeting to share the information with
Directors. The Company formulates disclosure policies onshareholder communications and discloses information on
the Company’s website accordingly. With regard to the
management of insider information, the Company has
established the Regulations on the Restriction of Insider
Trading and is training all officers and employees on thismatter to ensure rigorous control of information.
Communication with shareholders and investors is
restricted during the silent period, or the several weeks
prior to the release of financial results.

IR activities (FY2021)
Financial results briefing

2 times

Sumio Kuratomi Director (part-time)

Conference with overseas investors

3 times

Career summary

Briefings for individual investors

7 times

Individual meetings, other226 times

Company with Audit and Supervisory Committee (after transition)
Board of Directors

Company with Audit & Supervisory Board

Audit and Supervisory Committee

Company with Audit and Supervisory Committee

Auditing body

•Audit & Supervisory Board•Audit and Supervisory Committee

Composition of theauditing body•Three (3) or more Audit & Supervisory Board Members,
majority of which are Outside Audit & Supervisory Board
Members•Appointment of full-time member(s) is a requirement.

•Three (3) or more Audit and Supervisory Committee Members,
majority of which are Outside Audit and Supervisory Committee
Members•Appointment of full-time member(s) is voluntary.

Election method•Audit & Supervisory Board Members are elected, separatelyfrom Directors, at the General Meeting of Shareholders.

•Audit and Supervisory Committee Members are elected, separatelyfrom Directors who are not Audit and Supervisory Committee
Members, at the General Meeting of Shareholders.

Dismissal method•Dismissed at the General Meeting of Shareholders (special
resolution)•Dismissed at the General Meeting of Shareholders (special
resolution)

Term of office•Directors: one (1) year (Two (2) years under the Companies
Act. The Company sets a shorter term under its Articles ofIncorporation.)•Audit & Supervisory Board Members: four (4) years(shortening of term is not permitted.)•Directors who are not Audit and Supervisory Committee
Members: one (1) year (statutory)•Audit & Supervisory Board Members do not have voting
rights on the Board of Directors.

•Audit and Supervisory Committee Members have voting rights
on the Board of Directors.
•Audit and Supervisory Committee Members have the right tostate an opinion on the election/dismissal, resignation, andremuneration of Directors who are not Audit and Supervisory
Committee Members.
•Elect at least one (1) member who has ample knowledge andexpertise in finance and accounting on the Audit and Supervisory
Committee. [CG Code]

Other•Elect at least one (1) member who has ample knowledge andexpertise in finance and accounting on the Audit &Supervisory Board. [CG Code]

45

Kyudenko Corporation

Director and Managing Executive Officer, General Manager, Corporate
Planning Div., NISHI-NIPPON RAILROAD CO., LTD.

June 2013

Representative Director and President, NISHI-NIPPON RAILROAD CO., LTD.

June 2016

Representative Director and President Executive Officer, NISHI-NIPPONRAILROAD CO., LTD.
Director, the Company (to the present)•Audit and Supervisory Committee Members: two (2) years(shortening of term is not permitted.)

Representative Director and Chairman, NISHI-NIPPON RAILROAD CO., LTD.
(to the present)

As an Outside Director, I am conscious of expressing myhonest opinions from external perspectives. For example,
compliance that includes internal control is a theme related
to the very foundations of management. While I appreciatethat the Company has put many initiatives in place toachieve thorough compliance, led mainly by the Business
Administration Department, as the Company’s businessareas expand to encompass other areas such as themetropolitan and Kansai areas, it may become moredifficult to keep an eye on them from Kyushu. I do believethat it would be better if we could proceed withdiscussions such as on the creation of mechanisms toeliminate such factors of uncertainty before they become
an issue.
It is my seventh year since I became an Outside Director,
and I believe that the effectiveness of the Board of
Directors has improved every year. When I was first
appointed, there were times when I found the Board of
Directors meetings to be a little quiet. More recently,
however, the Outside Directors, including myself, havebeen able to gain a better understanding, thanks to thecareful briefings provided by staff in the departments
responsible for explaining the agenda. I also appreciate
the creation of an environment that makes it easier for us
to ask questions and express our opinions. I have been
asking for the opportunity to tour work sites for some time,and hope this will be considered in the future. Naturally, it
is impossible to gain a full picture from documents alone.
Watching the people working hard on site and observing
training will, I believe, help to improve effectiveness evenfurther.
The Mid-term Management Plan launched in FY2020
represents a challenge under the unprecedented
circumstances of the COVID-19 pandemic. The Mid-termManagement Plan calls for “the establishment of amanagement foundation.” To achieve this, we need to bequick to detect changes in the environment, such as the
pandemic, and to take the lead in implementing measuresin response to those changes. If we can establish the
management foundations, we should come close toachieving our numerical targets as a matter of course.
For some time now, I have been aware of the greatvalue that the Kyudenko Group places in its people.
During the period of the Mid-term Management Plan aswell, the Company has undertaken a number of peoplefocused investments and initiatives, particularly wonderful
initiatives such as boosting workplace training programsfor young employees, implementing employee
engagement initiatives, and establishing the Diversity
Promotion Office. Employees are crucial to the sustainablegrowth of the Company. I hope that these efforts will be
continued in the future, and that their results andeffectiveness will be followed up and reported regularly to
the Board of Directors.
To realize sustainability in 2044, the 100th anniversary of
the Group, I hope everyone will remain constantly aware of
two things: “contribution to society” and “the growth of the
Kyudenko Group.” I recognize the Kyudenko Group as acorporate group that contributes to society through its
business activities in areas that are essential to therealization of a sustainable society. This includes the fieldof renewable energy, in addition to the Group’s main
businesses of power distribution line work, electrical work,and HVAC and sanitary facility works. I also believe that
we can achieve sustainable growth by identifying thisenvironment as a business opportunity and expanding
specific initiatives and images more broadly. The promotionof DX will have a key role to play as the foundation of thatvision. Currently, the DX Promotion Department is playing
a central role in priority efforts to improve operational
efficiency. Going forward, I hope to see this step up a gear,so that every employee can gain a greater sense that our
corporate culture is changing as they work to create newwork styles.
It is not hard to imagine that, in the 20 years or so
between now and 2044, the Kyudenko Group will bebuffeted by a range of environmental changes. Whentimes and societies change, past experiences of successand common wisdoms will no longer apply. By bringing
together diverse forces and wisdom from inside andoutside the Group, without being constrained by the past,and continuing to take on challenges that have a sense ofscale from new perspectives, new business opportunities
are sure to emerge.

KYUDENKO REPORT 2022

3. CSR/Corporate Governance

Audit & Supervisory Board

June 2011

April 2021

The Audit and Supervisory Committee of the Company comprises four
members, namely myself in my full-time capacity and three Outside Directors.
As a statutory independent body that fulfills part of the supervisory function of
the Company in conjunction with the Board of Directors and oversees the
Directors’ execution of their duties under the mandate of shareholders, the Audit
and Supervisory Committee is responsible for establishing good corporate
governance systems through the proper execution of its duties.
Shinji Kato
The Audit and Supervisory Committee is also called on to perform a greatersupervisory function than ever over management, through effective auditing in
Director, Audit and Supervisory
close collaboration with the internal audit division and the accounting auditor, as well
Committee Member
as the evaluation of the Directors’ activities.
Based on the annual audit plan, I am currently conducting on-site audits of all
branch offices with the Audit and Supervisory Officer and the dedicated staff who have been allocated to the Audit andSupervisory Committee’s Office. In addition to auditing compliance with laws and regulations and the Articles ofIncorporation, the legality and adequacy of accounting, and the status of establishing and operation of internal control
systems, we conduct interviews and hold discussions about the status of implementation of various initiatives stated in the
Mid-term Management Plan and the Basic Management Policy. The results of these interviews and discussions arereported to the Audit and Supervisory Committee to share them with the other Audit and Supervisory Committee Members
who are also Outside Directors and to deepen their awareness of management issues and key audit-related issues. I also
actively express my opinions to the management executives while communicating well with the Directors and other officers.
The Members of the Audit and Supervisory Committee remain cognizant of our responsibility to perform our roles andduties appropriately and enhance the effectiveness of audits by organically combining the respective roles held by each
Audit and Supervisory Committee Member. In doing so, we will avert risks and contribute to the achievement of thecompany’s sound and sustainable growth and to the creation of medium-to long-term corporate value.

Board of Directors

Director and Executive Officer, General Manager, City Development BusinessDiv., NISHI-NIPPON RAILROAD CO., LTD.

June 2016

Message from an Audit and Supervisory Committee Member

Company with Audit & Supervisory Board (previous)

June 200846

3. CSR/Corporate Governance

Message from the Outside Directors

Message from the Outside Directors

Hiroko Shibasaki Director (part-time)

47

Kyudenko Corporation

Career summary

Career summary

April 2012

June 2005

Managing Officer, TOYOTA MOTOR CORPORATION

June 2011

Director and Senior Managing Executive Officer, DAIHATSU MOTOR CO.,LTD.

Executive Officer and General Manager of Fukuoka Chuo Branch, TOKIOMARINE & NICHIDO FIRE INSURANCE CO., LTD.

April 2015

Managing Executive Officer, TOKIO MARINE & NICHIDO FIRE INSURANCE
CO., LTD.

April 2018

Advisor, TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD.

June 2019

Outside Director, Audit and Supervisory Committee Member, MAZDA
MOTOR CORPORATION (to the present)

June 2021

Director, the Company (to the present)

culture in which everyone can do properly what they arenaturally supposed to do as a person and in which
everyone can make the right decisions at all times. This, I
believe, must be the starting point, or the foundation, of
any person engaging in their work.
For the development of company, the people who will
support that development are critical. The KyudenkoGroup considers its people not as resources, but asassets. The Kyudenko Group’s Corporate Philosophy is to“aim to create a mutual respecting environment in
Kyudenko which utilize and develop employees’
personality.” This is exactly what I also believe.
In the three years of the COVID-19 pandemic,
employees’ awareness toward work has also changed,
and their focus has shifted from the way that they work
toward “job satisfaction” and “the company’s raisond’être.” Every individual employee demonstrates his or her
own strengths, identifies problems, and takes on thechallenge of solving them. I hope that they will find job
satisfaction in the repetition of this cycle. Having said that,
there are times when they may not be aware of their own
strengths. This is exactly what supervisors are for, and it isimportant for them to communicate closely with theirsubordinates on a day-to-day basis. If supervisors engage
in their work with vitality and a sense of reward, this will
surely be conveyed to other employees.
In June, I was given an opportunity to present a seminaras a part of the Group’s diversity initiatives. This event was
originally targeted at female employees, but I encouraged
their supervisors to attend as well, which many of themdid. When I read the results of the supervisors’ survey, I
felt that many of them have a sense of pride and passion
in their work at the Kyudenko Group. On the other hand, Ialso felt that, while they have expectations for their female
subordinates, they also seem to feel a sense of conflictand bewilderment when it comes to nurturing them.
Instead of lumping them all together in a single category of“women,” I believe it is important to focus on thecharacteristics and potential of female employees as
individuals. I hope that supervisors will interact with theirfemale subordinates with just such an awareness.
In the modern day, with the bewildering changes in theenvironment surrounding companies, the Group must
keep the directions and challenges they should headtoward constantly in sight and create a sustainable future
as a united force. I hope to see the Group be proactive indrawing up a vision for its own future, namely what kind ofcompany it wants to become with what kind of structureby the 100th anniversary in 2044, and I look forward to
helping the Group in this regard.

June 2013

Vice President and Director, DAIHATSU MOTOR CO., LTD.

June 2015
June 2018

Representative Director and President, TOYOTA MOTOR KYUSHU, INC.
Representative Director and Chairman, TOYOTA MOTOR KYUSHU, INC.

June 2022

Director, the Company (to the present)

I am honored to have been appointed as Outside Director
at the Annual General Meeting of Shareholders in June thisyear. I will strive to perform my role from an external
perspective, leveraging my experience to contribute to thesound growth and development of the Kyudenko Group.
To this end, I would like to mention two points that I
have in mind.
The first is to “never neglect responses toward futurechanges.” This is a belief that I held when I was engaged
in company management myself. My reason for
mentioning this is that there is a natural tendency for moretime to be spent dealing with current situations. As an
Outside Director, I will strive to be on the lookout forchanges that need to be noted, convey information about
them, and express my opinions.
I have looked at the Group’s Long-term Vision toward its
100th Anniversary and the Mid-term Management Plan
2020–2024, and I have found their contents to beconsistent and excellent. They present policies, plans, andkey initiatives toward the future of the Kyudenko Group
from various angles and their content is extensive,
including the Corporate Philosophy, the Action Guidelines,
and the Charter of Behavior on which those policies,
plans, and initiatives will be based. However, just as they
started, unforeseeable changes toward the future,including the pandemic, emerged. Further, as is wellknown, we are currently witnessing great changes ininternational circumstances, both in politics and theeconomy. The impact of these developments has caused
various changes in the conditions and environments that
had been assumed, such as the reexamination ofcompany supply chains, factories’ return to Japan, anddiscussions about the path toward carbon neutrality.
Changes generate business opportunities, but they may
also bring major management risks. I would like to posequestions from that perspective.
The second point I would like to mention concerns myrole in the diversity of the Board of Directors as part ofcorporate governance. In my frontline career, I was
engaged in domestic marketing and product planning at
TOYOTA MOTOR CORPORATION. At the risk of sounding
old-fashioned, as a marketing person, I had experience ofthe 4Ps (Product, Price, Promotion, Place).
For a long time, I have frequently been asked thequestion, ‘Why is Toyota so strong?’ Thinking about it, I
have reached my own conclusion that Toyota’s greatest
strength is probably its outstanding management of bothneeds and resources. In earlier times, Toyota was divided
into Toyota Motor Sales (needs) and Toyota Motor(resources), so I assume that this historical backgroundhas much to do with the way in which Toyota refined its
capabilities in this regard. Based on its businessdescription, the Kyudenko Group would be positioned on
the resources side, and its structure has engineering at its
core. In other words, when the Group considers acustomer’s needs, in general, it is in a position that makes
it more likely to see those needs from the perspective of
the resources side. In this regard, I hope to fulfill my role byraising issues from a marketing perspective, to ensure that
the Group is able to balance both needs and resources. I
will also keep that point in mind from the viewpoint of
ensuring the diversity of the Board of Directors.
The three contributions that the Group declared in thelong-term vision for its 100th anniversary, namely (1) tosolve social problems, (2) to realize a carbon-free society,and (3) to maintain and develop local public infrastructure,are precisely the themes that are being called for globally,
including SDGs and ESG. Namely, the direction in which
the Company is heading and its lines of business are
consistent with society’s needs. This means it has goodcompatibility with those needs, in that the more thebusiness expands, the more the Group will contribute tosociety. In this regard, we can say that the conditions areripe for the significant advancement of the KyudenkoGroup. If we put CSV management into practice withwell-balanced management of needs and resources,
engagement will naturally increase, and we can hold highhopes for the high-quality development of the Company.
To this end, I want to see compliance with the Charter of
Behavior and, as a premise to that, I hope for a culture of
openness, cheerful workplaces, and interactive
communications in the Company.
I look forward to seeing the Kyudenko Group address
the opportunities of the times squarely and taking a great
leap into the future.

KYUDENKO REPORT 2022

3. CSR/Corporate Governance

Since joining the Board of Directors last year, it has been
my wish to offer things that I have noticed, such as issues
and risks regarding the Mid-term Management Plan andmore immediate measures and initiatives, always from theperspective of stakeholders, to help the Kyudenko Groupto be a company that will grow with certainty with the trustof society. In any company organization, there is atendency for many matters to be handled in verticallydemarcated divisions, such as departments and sections,and for work to be handled as discrete “points.” When I
make recommendations as an Outside Director, I want tohear what the different sections have to say so that I may
verify whether or not the measures taken by individualorganizational units, namely these “points,” are being
connected in “lines” from the side (horizontally).
Regarding the Board of Directors, I am grateful to beable to deepen my understanding thanks to appropriate
measures being taken, such as briefings on the agenda
before and on the day of meetings and follow-up at a later
date. In particular, while on the one hand, I have a senseof hope in the grand mission to improve global social
issues, such as the renewable energy field, as a business
opportunity, on the other hand, depending on the project,
there can be challenges. As such, I always encourage
myself to study hard and to ask questions with interest.
I can see that considerable efforts are being placed into
corporate governance and systems are being established,such as the establishment of the Business Administration
Department. On the other hand, at a time when the
Kyudenko Group is expanding its business operations
away from a focus on the Kyushu region alone, extending
them nationwide to include the metropolitan area, Tohoku,
and Kansai, I sense a need for the Group to establish
mechanisms and systems that will enable it to keep aproper eye on more distant regions. In addition, it will also
be important to improve productivity in a functionalmanner in response to this expansion of the Group’sbusiness operations. Although several initiatives, such as
OJT and digital education support tools, have been put inplace, there is a limit to what human power alone canachieve. While the Kyudenko Group has established the
DX Promotion Department and is pursuing initiatives, I
believe that it needs to accelerate these initiatives evenfurther and start implementing, as soon as possible,
measures that will give employees on the frontlines at theworksites a real sense that things have changed becauseof DX.
Even if we set various rules one after another, this will
not easily lead to thorough compliance. It is important for
employees, both individually and mutually, to create a

Tatsuya Kaneko Director (part-time)48

3. CSR/Corporate GovernanceManagement Team of Kyudenko
Directors

Naofumi Sato

Shinji Kato

Yukinori Michinaga

Director and Chairman

Executive Officer
Representative President

Director
Audit and Supervisory
Committee Member

Director
Audit and Supervisory Committee
Member (part-time)

Hideki Takei

Kazuyuki Ishibashi

Toru Yoshizako

Hidetoshi Soeda

Representative Director
Vice President Executive Officer

Representative Director
Vice President Executive Officer

Representative, Tokyo Head Office

Responsible for overall operations, corporate
strategic planning, and DX promotion

Director
Audit and Supervisory Committee
Member (part-time)

Director
Audit and Supervisory Committee
Member (part-time)

Masaaki Jono

Sumio Kuratomi

Representative Director
Vice President Executive Officer

Director (part-time)

Skills Matrix of the Board of Directors
NameGeneral Manager, Green Innovation Business
Unit
Responsible for overall technology and overallsales

3. CSR/Corporate GovernanceMatsuji Nishimura

Positions and responsibilities

Nomination
Advisory
Committee

Remuneration
Advisory
Committee Corporate management/ Finance/
Management strategy Accounting

Expected skill areas
Legal/Riskmanagement

HR and laboraffairs/HR
development

Sales/
MarketingTechnology/ Sustainability/
R&D/Safety
ESG/DX

Globalexperience

Director andMatsuji Nishimura Chairman

Executive Officer

Naofumi Sato Representative President
Representative Director

Hideki Takei Vice President Executive Officer
Representative Director

Hiroko Shibasaki

Tatsuya Kaneko

Director (part-time)

Director (part-time)

Kazuyuki Ishibashi Vice President Executive Officer
Representative Director

Masaaki Jono Vice President Executive Officer
OutsideSumio Kuratomi Director
Hiroko Shibasaki Director

Independent
OutsideTatsuya Kaneko Director
Shinji Kato

Director
Audit and Supervisory Committee Member
Director

Full-time
OutsideIndependent

Director
Audit and Supervisory Committee Member

Independent

Director

Hidetoshi Soeda Audit and Supervisory Committee Member

Kyudenko Corporation

OutsideIndependent

Yukinori Michinaga Audit and Supervisory Committee Member
Toru Yoshizako

49

Independent

FemaleOutsideOutsideIndependentKYUDENKO REPORT 2022

50

3. CSR/Corporate GovernanceManagement Team of Kyudenko
Executive Officers (excluding those who concurrently serve as Directors)

Kyudenko Corporation

Tadatsugu
Kitagawa

Keizo
Fukui

Noriaki
Shibata

Masakiyo
Amakawa

Satoshi
Kobayashi

Senior Managing
Executive Officer

Senior Managing
Executive Officer

Managing Executive
Officer

Executive Officer

Executive Officer

Executive Officer

General Manager, SalesDiv.

General Manager, Fukuoka
Branch Office

Responsible for businessadministration (legal,
compliance, and internal
control) and finance

Deputy General Manager,
Technology Div.

Deputy General Manager,
Green Innovation Business
Unit and General Manager,
Infrastructure Business Div.

Seconded to Chuorika KougyoCo., Ltd.

Hidehiro
Furukawa

Tomoyuki
OshimaKazuhiro
SuyamaTomoyuki
Soeda

Eiji
Funatsu

HideakiUshijima

Managing Executive
OfficerManaging Executive
OfficerManaging Executive
Officer

Executive Officer

Executive Officer

Executive Officer

Deputy General Manager,
Sales Div.

General Manager, Sales Div.,Tokyo Head Office
Responsible for technology

General Manager, Technology
Div.
Responsible for procurement

Responsible for corporate
strategic planning

General Manager, Oita
Branch Office

Reporting to Green Innovation
Business Unit

Takahiro
Hokahori

Katsuhisa
Kinoshita

Yasuyoshi
Takenaka

Kenji
MoritaHitoshiYasukawa

Akira
ShirouzuManaging Executive
OfficerManaging Executive
Officer

Senior Executive
Officer

Executive Officer

Executive Officer

Executive Officer

General Manager, Kumamoto
Branch Office

General Manager, Kitakyushu
Branch Office

Responsible for Electric PowerDiv.

Responsible for Secretarial
Office, human resources
and labor affairs, andgeneral affairs

General Manager, Finance Div.

General Manager, ElectricPower Div.
Responsible for safety

Ryoji
ManabeYoichiSato

YujiroKishidaHiroyuki
Yamashita

TakashiIshimatsu

Senior Executive
Officer

Senior Executive
Officer

Executive Officer

Executive Officer

Executive Officer

General Manager, Tokyo
Branch Office,Tokyo Head Office

Reporting to Sales Div.

Deputy General Manager,
Green Innovation Business
Unit and General Manager,
International Business
Department, Technology Div.

Seconded to Ergotech Co.,
Ltd.

General Manager, Technology
Div., Tokyo Head Office

Shinji
Mitsuyama

Masahiro
TomoikeExecutive Officer

Executive Officer

General Manager, Kagoshima
Branch Office

General Manager, Nagasaki
Branch Office

KYUDENKO REPORT 2022

3. CSR/Corporate Governance

51

Yasuhiro
Yamamoto52

4. Data Section

Financial and Non-financial Highlights
Financial information

Non-financial information

Sales by region (consolidated, excluding power distribution line work) (unit: million yen)
■ 2020.3 ■ 2021.3 ■ 2022.3

Orders by region (consolidated, excluding power distribution line work) (unit: million yen)
■ 2020.3 ■ 2021.3 ■ 2022.3

1.7

350,336

247,851
213,156
200,952494

209,222

Kansai and Chugoku

14.0

17,311
18,530Overseas

14.5

Kyushu9.4
9.0
6.5
2017.39.6
7.0
2018.39.8
9.0
6.5
2019.3

9.0

9.2

8.4

8.4

6.1

6.4

2020.32021.32022.3

1,449

4,447

7
2017.3

8

9

16

16

16

2018.32019.32020.32021.32022.3

Promotion of mid-career hires to managerial positions (non-consolidated)■ Number of mid-career hires in managerial positions (unit: persons)● Percentage of mid-career hires in managerial positions and above (unit: %)
10.0

1,557

3,508

4,822

4,877

4,691

7.5

7.7

1,447

1,279

7

8

11

10

10

3

3

3

4

5

5

5

2017.32018.32019.32020.32021.32022.3

10.6

Results of mid-career recruitment (non-consolidated) (unit: persons)■ Number of mid-career hires ● Ratio of mid-career hires (unit: %)
27.9

29.1
152

8.1
93

99

111

4,205

4,031

61

3,916

4,049

13.3

14.2

63

60

62
9.1

8.4

36

38

1,048

938

883

790

827

774

2017.32018.32019.32020.32021.32022.3

EPS, cash dividends (consolidated) (unit: yen)
■ Net profit per share (EPS) ■ Cash dividends per share ● Payout ratio (unit: %)
25.2
21.4

356.8926.7
375.1727.0
370.00327.2228.3

353.482017.32018.32019.32020.32021.32022.3

Employment rate of employees with disabilities (non-consolidated) (unit: %)27.0● Employment rate of employees with disabilities ● Statutory employment rate
■ Number of employees with disabilities (unit: persons)
130.0
117.0

370.05

122.0

1,066

38

135

188

-42

70

2019.32020.32021.32022.32017.390

100

2018.32019.3

100

100

100

2.2

2.2
2.2

1.8

2.2
2.0

2.3

2.3

2.3

2.2

2019.32020.32021.32022.3

9,752

9,862

9,921

10,092

10,425

1,652

1,775

1,800

1,838

1,841

1,916

4,070

4,078

4,055

4,038

4,036

4,028

3,480

3,899

4,007

4,045

4,215

4,481

2017.32018.32019.32020.32021.32022.3

9,202

112.0

2018.3

Number of employees (consolidated, employed) (unit: persons)■ Engineers ■ Technicians ■ Salespersons, administrative staff, etc.

128.5

96.5

2.0

2017.3

4. Data Section

-101

1,412

11

81

2.4
1

15

8.9

56
3,233

15

8

1,143

962

1,468

774

876

10

15

7.0

1,024

369

575

1.0

1,733

1,748

9.8
8.8

Overseas

Status of power generation business (consolidated, operated by the Group) (unit: million yen)

5,089

Status of power generation business (consolidated, equity investment) (unit: million yen)

1,450

Kansai and Chugoku

15.2■ Non-operating income (wind power) ■ Non-operating income (solar power)
1,583

Kanto, Tohoku and Chubu

5,117
1,873
6,004

■ Sales (wind power) ■ Sales (solar power) ● Operating profit

4,282
10.3

558

1.7
584

Current number of non-Japanese employees (non-consolidated) (unit: persons)■ Regular employees ■ Non-regular employees

17,585

4,878
5,259

15.7
14.8

84,578

6,791

Transition of profit ratio (consolidated) (unit: %)● Gross profit ratio ● Operating profit ratio ● Ordinary profit ratio ● Net profit margin
15.2

539
1.2

527

1.7

97,90377,851
21,66930,617
23,600

Kanto, Tohoku and Chubu

0.9

182,467

89,251
82,884
83,895

KyushuRatio of women in managerial positions (non-consolidated) (unit: %)■ Number of female employees (unit: persons) ■ Number of women in managerial positions (unit: persons)● Percentage of women in managerial positions and above (unit: %)-368
2017.32018.3

ROE, ROIC (consolidated) (unit: %)2020.32021.32022.3

Capital investment, depreciation and amortization (consolidated) (unit: million yen)

● ROE ● ROIC■ Capital investment ■ Depreciation and amortization2017.62018.62019.62020.62021.62022.6

Results of periodic recruitment (non-consolidated) (unit: persons)■ Engineers ■ Technicians ■ Salespersons, administrative staff, etc.

Number of training held and number of participants (unit: times and persons)
Number of training held ● Academy ● Non-Academy (including web)
Number of participants ■ Academy ■ Non-Academy (including web)
204

17.8
16.8

371

7,469
5,449

14.0
13.0

13.2

13.1
11.7

12.1
10.0

2017.353

2018.3

Kyudenko Corporation

2019.3

29

27

15.6

2020.32021.3

5,512
4,245

6,074
4,353

5,961
4,148

11.4

5,739

21

360

30

24

159

195

157

142

336
30

186

5,667
1,134

5,970
1,488

2019.32020.32021.3

1,237

5,974

2022.3

4,974

1,128

131
2,882

185

2018.3

5,635

200

95
70

2017.3

191

164

3,586

9.4
2022.3

362

5,791
4,403

199

416

412

2017.41882018.4184

2019.4194

2020.4200

2021.4

76

80

69

2,941
85

55

142
2022.4

1,001

4,533

4,482

4,398

4,846

1,881

2,033

2017.32018.32019.32020.32021.32022.3KYUDENKO REPORT 2022

54

4. Data Section

10-year Financial Summary
Financial item
(Unit: million yen)

2013.32014.32015.32016.32017.32018.32019.32020.32021.32022.3

239,282

279,310

315,949

311,346

341,771

360,872

408,143

428,939

391,901

376,563

Operating profit

4,371

7,136

16,75725,19730,732

34,72636,74736,022

32,99833,137

Ordinary profit

5,744

8,908

18,16327,55132,18737,34239,92438,64335,90636,828

Profit attributable to owners of parent

2,882

3,681

11,517

17,901

22,29725,296

26,691

26,24525,042

26,216

Capital investment

6,034

14,226

7,606

6,127

7,469

4,245

4,353

4,148

3,586

4,403

Depreciation and amortization

3,631

4,305

5,262

5,475

5,449

5,512

6,074

5,961

5,739

5,791

Research and development costs

275

313

288

255

235

286

326

290

254

267

Cash flows from operating activities

4,871

12,767

19,117

10,77614,18730,016

26,054

38,222

9,184

5,252

Cash flows from investing activities(6,103)(14,456)(11,816)(13,597)(17,951)(3,830)(11,298)(12,136)(4,232)(7,536)

Free cash flow

(1,231)(1,688)7,300(2,820)(3,763)

26,185

14,75526,086

4,951(2,284)

730

733

1,190

2,295

3,732

5,635

7,108

7,099

7,084

7,086

Net assets

95,95094,438104,658

113,199

141,503

164,139

182,176

197,442

221,741

241,194

Total assets

211,944

225,727

254,861

261,985

300,261

324,919357,271368,482

366,532

378,396

Interest-bearing debt

15,96625,31933,93931,98636,12820,07819,18917,854

15,772

14,259

Sales

Cash dividends paid

(Unit: yen)

39.46

51.95

174.54272.45327.22356.89375.17370.00353.48370.05

Net assets per share

1,300.23

1,405.38

1,555.33

1,693.45

1,995.00

2,269.48

2,534.46

2,761.07

3,102.61

3,375.43

Cash dividends per share

10

13

25

45

70

90

100

100

100

100

Operating profit ratio (%)

1.8

2.6

5.3

8.1

9.0

9.6

9.0

8.4

8.4

8.8

Net profit margin (%)

1.2

1.3

3.6

5.7

6.5

7.0

6.5

6.1

6.4

7.0

Gross profit margin (%)

9.1

9.1

11.7

14.5

15.2

15.7

14.8

14.0

14.5

15.2

Return on equity (ROE) (%)

3.1

3.9

11.9

16.7

17.8

16.8

15.6

14.0

12.1

11.4

Return on asset (ROA) (%)

1.4

1.6

4.7

6.9

7.9

8.1

7.8

7.2

6.8

7.0

Return on invested capital (ROIC) (%)

2.5

3.9

8.5

11.9

13.0

13.2

13.1

11.7

10.0

9.4

Equity ratio (%)

44.8

41.1

40.3

42.4

46.6

49.7

50.5

53.1

60.0

63.2

Total asset turn over (times)

1.1

1.2

1.3

1.2

1.2

1.1

1.1

1.2

1.1

1.0

Payout ratio (%)

25.3

25.0

14.3

16.5

21.4

25.2

26.7

27.0

28.3

27.0

Kyudenko Corporation

KYUDENKO REPORT 2022

4. Data Section

55

Net profit per share56

4. Data Section

Report on Financial Results and Financial Analysis
closely with field personnel to manage construction andboost profits while taking advantage of digital technologies
to offset a decline in sales.

(1) Overview of financial results for the year ended
March 31, 2022
In the fiscal year ended March 31, 2022, businessactivities came under the pressure of constraints resulting
from the COVID-19 pandemic, which has continued since2020. The Group experienced delayed starts and progressin some large projects.
Recognizing the realities of this business environment
and taking into account a summary of FY2020 as the firstyear of the current Mid-term Management Plan (whichlasts for five years, from FY2020 to FY2024), the Groupidentified FY2021, the second year of the plan, as the yearof “adaptation to environmental changes and realization ofrecovery.” As a result, we established the following key
priorities and worked together to make progress towards
their realization: “Strengthen and expand the order base of
the domestic facility work industry,” “Deepen measures toimprove profit margins,” “Strengthen human resource
development,” “Promote DX,” “Strengthen governance,”
and “Eliminate significant work-related accidents.”
This approach yielded the following results during the
fiscal year under review.

Other business
Sales decreased by 2,447 million yen (16.8% decrease) to12,123 million yen as compared to the fiscal year ended
March 31, 2021, due to declines in the renewable energy
and software development businesses.
Segment income (operating profit) increased by 130
million yen (5.5% increase) to 2,501 million yen ascompared to the fiscal year ended March 31, 2021, as
improved profitability in the business hotel and other facility
management business and higher profit margins in thematerials and equipment sales business.
Sales decreased by 2,372 million yen due to theapplication of the Accounting Standard for Revenue
Recognition and other accounting standards.
(2) Overview of financial position as of March 31, 2022
Overview of assets, liabilities and net assets
AssetsCurrent assets increased by 4,405 million yen to 216,979
million yen as compared to March 31, 2021, as a result offactors such as an increase in notes receivable, accounts
receivable on completed construction contracts and otheraccounts receivable and an increase in raw materials andsupplies.
Fixed assets increased by 7,458 million yen to 161,416
million yen as compared to March 31, 2021, as a result offactors such as an increase in asset for retirement benefits.
As a result, total assets increased by 11,863 million yen
to 378,396 million yen as compared to March 31, 2021.
Liabilities
Current liabilities decreased by 1,915 million yen to123,446 million yen as compared to March 31, 2021, as aresult of factors such as decreases in electronicallyrecorded obligations and advances received on
uncompleted construction contracts.
Long-term liabilities decreased by 5,674 million yen to
13,754 million yen as compared to March 31, 2021, as aresult of factors such as transferring long-term debt toshort-term borrowings.
As a result, total liabilities decreased by 7,589 million
yen to 137,201 million yen as compared to March 31,
2021.

(3) Overview of cash flows for the year ended March
31, 2022
Cash and cash equivalents (hereinafter referred to as“Cash” as of March 31, 2022 decreased by 12,008 million
yen to 37,791 million yen as compared to March 31, 2021.
Cash flows from operating activities
Cash provided by operating activities was 5,252 million yen(a decrease of 3,931 million yen in cash inflow as comparedto the fiscal year ended March 31, 2021). This was mainly
due to profit before income taxes exceeding income taxes
paid and increase in inventories.
Cash flows from investing activities
Cash used in investing activities was 7,536 million yen (anincrease of 3,304 million yen in cash outflow as comparedto the fiscal year ended March 31, 2021). This was mainly
due to purchase of investments in securities and purchaseof property and equipment.
Cash flows from financing activities
Cash used in financing activities was 10,191 million yen(an increase of 127 million yen in cash outflow ascompared to the fiscal year ended March 31, 2021). Thiswas mainly due to cash dividends paid.
(4) Future outlook
Concerning the Group’s outlook with regard to the
COVID-19 pandemic, we expect business activities tocontinue to be constrained to a certain extent by the
implementation of anti-infection measures. That said, we
accept that current conditions are likely to embody thenew, post-COVID normal and recognize the need toaddress anticipated effects on such aspects of ouroperations as sales, price competition, and construction
delays.
At the same time, economic sanctions imposed in
response to Russia’s invasion of Ukraine and otherimpacts are pushing up the prices of a variety of goods
and services, including energy and food, and like others
the Group is seeing increases in the cost of materials andequipment and delays in delivery times. In addition,

intensification of competition for orders and a trend
towards ever-larger construction projects are fuelingconcerns with regard to the impact on future profitability.
Recognizing the realities of this environment, the Group
has set “practice business reforms adapted to changes inthe environment” as the theme for FY2022, the third yearof its Mid-term Management Plan, and it is working
steadily to resolve the social issues it has identified as wellas the priority issues set forth in the Plan.
The Group has identified a number of environmental
changes that will affect its operations in FY2022, including“the new, post-COVID normal,” “carbon neutrality,”“environmental management,” “large-scale urban
developments such as the Tenjin Big Bang project,”“semiconductor-related construction,” and “the war in
Ukraine.” Going forward, we will undertake “businessreforms” that accommodate those changes as weembrace “the challenges posed by new ideas and values.”
Specifically, we will work to “improve productivity by
utilizing DX and simplifying workflows,” to “increase
corporate value through diversity,” and to “create an
attractive workplace environment through work stylereform.”Despite the fact that earning orders for the “Tenjin Big
Bang” and other urban redevelopment projects and forlarge, semiconductor-related projects will be essential as
we look to maintain and expand the scale of ourbusinesses, material and labor costs are soaring. To getpast these challenges, it will be critical to reliably earnorders for the projects we target, to carefully manage
progress in associated construction, and to secure profits.
To that end, we have identified “improving productivity
by implementing business reforms” and “promoting pricenegotiations to reflect rising material and labor costs” as
our two top-priority initiatives for FY2022, and we will be
dedicating our full resources to their implementation.
Specifically, we will pursue radical work style reforms,
including by thoroughly reassessing business processes
and optimizing company-wide and departmental
operations; work to make effective use of our construction
capabilities by strengthening efforts to build personnel
structures that enable approaches that cut horizontally
across the Company; and conduct price negotiations thatreflect soaring material prices.

4. Data Section

Facility work
The value of orders received increased by 50,315 million
yen (15.5% increase) to 375,474 million yen as comparedto the fiscal year ended March 31, 2021, as sales andtechnology divisions adopted a unified approach to sales
in order to earn orders for large redevelopment projects
and projects that had been delayed due to the COVID-19
pandemic, both of which we had identified as priority
areas.
Sales decreased by 12,891 million yen (3.4% decrease)to 364,440 million yen as compared to the fiscal year
ended March 31, 2021, as a result of challenges including
delays in the start of construction of large solar
installations and difficulty making progress due to delays inprocurement resulting from material and equipment
shortages and a comparatively large number of projects
for which we recognize revenue based on progress thatremain in the early stages of construction.
Segment income (operating profit) increased by 42
million yen (0.1% increase) to 30,528 million yen ascompared to the fiscal year ended March 31, 2021, as
renewed implementation of existing measures conceived
to improve profitability combined with efforts by the Head
Office’s Technology Management Department to work

Net assets
Total net assets increased by 19,453 million yen to241,194 million yen as compared to March 31, 2021, as aresult of factors such as the recording of profit attributableto owners of parent.

(unit: million yen, lower row is composition ratio)(unit: million yen, lower row is the ratio to sales)

Gross profit
Operating profit
Ordinary profit
Profit attributable to owners of parent

Net profit per share

57

Kyudenko Corporation

391,901

376,563(100.0%)(100.0%)56,631

57,361(14.5%)(15.2%)

32,99833,137(8.4%)(8.8%)

35,90636,828(9.2%)(9.8%)

25,042

26,216(6.4%)(7.0%)

353.48 yen(100.0%)101.3%
100.4%
102.6%
104.7%

370.05 yen

60,000(14.6%)

35,000(8.5%)

37,700(9.2%)

25,500(6.2%)

Current assets

Progress
91.8%

AssetsResults

The year ended March 31, 2022
Year-on-year
Plancomparison
410,000
96.1%

94.7%
97.7%

Fixed assets
Total assets

95.6%

Current liabilities
Liabilities

Sales

The year ended
March 31, 2021

Long-term liabilities
Total liabilities

102.8%
Total net assets

359.94 yen

Total liabilities and net
assetsMarch 31, 2021

March 31, 2022

212,574

216,979(58.0%)(57.3%)

153,957

161,416(42.0%)(42.7%)

366,532

378,396(100.0%)(100.0%)125,361

123,446(34.2%)(32.6%)

19,42913,754(5.3%)(3.6%)

144,790

137,201(39.5%)(36.3%)

221,741

241,194(60.5%)(63.7%)

366,532

378,396(100.0%)(100.0%)

Increase/decrease

Major reason for increase/decrease

4,405

Raw materials and supplies +8,211
Notes receivable, accounts receivable on completed construction
contracts and other accounts receivable +5,970
Cash on hand and in banks (11,883)

7,458

Asset for retirement benefits +5,570
Investments in securities (2,019)

11,863(1,915)

Short-term borrowings +5,090
Advances received on uncompleted construction contracts (3,918)(5,674)Long-term debt (6,646)(7,589)19,453Retained earnings +19,054

11,863KYUDENKO REPORT 2022

58

4. Data Section

Consolidated Balance Sheet

Consolidated Statement of Income(Unit: million yen)March 2021

March 2022

AssetsMarch 2021

Cash on hand and in banks

50,90539,021

63,55966,669Notes receivable, accounts receivable
on completed construction contracts
and other accounts receivable

Notes payable, accounts payable on construction
contracts and other accounts payable

130,705

136,676

Electronically recorded
obligations

23,59322,078

Short-term borrowings

1,774

6,865

Income taxes payable

7,145

7,309

—

987

Costs of uncompleted
construction

5,910

5,592

Merchandise

1,040

1,107

Advances received on uncompleted
construction contracts

22,790

Provision for loss on
construction contracts

Raw materials and supplies

14,57915,381

11,463

60

187

Other current assets

9,451

10,838Other current liabilities

13,845

8,872

Allowance for doubtful
accounts

(18)

(34)

Total current liabilities

125,361

123,446

Total current assets

212,574

216,979

Fixed assets
Property and equipment

FY2020

FY2021

364,440

Net sales

Current liabilities

Short-term investments(Unit: million yen)March 2022

Liabilities

Current assets

Construction contracts

377,331

Other

14,57012,123

Total net sales

391,901

376,563

Cost of sales
Construction contracts

324,266

310,615

Other

11,003

8,586

Total cost of sales

335,269

319,201
53,824Gross profit
Construction contracts

53,064

Other

3,567

3,536

Total gross profit

56,631

57,361

Selling, general and administrative expenses

23,63324,224

Operating profit

32,99833,137

Non-operating incomeLong-term liabilities
Long-term debt

10,1403,494

Lease obligations

2,711

2,782

Interest income

91

48

Dividend income

723

747

Equity in earnings of affiliates
Gain on investments in partnership

694

1,514

1,054

910
329

Buildings and structures

70,68173,060

Provision for retirement benefits for
directors (and other officers)

300

328

Machinery, vehicles, tools,
furniture and fixtures

40,77141,059Rent income

313

Liability for retirement benefits

4,051

4,015

Other

884

775

Land

28,887

29,677

Other long-term liabilities

2,225

3,134

Total non-operating income

3,760

4,326

Leased assets

7,190

7,628

Total long-term liabilities

19,42913,754

Interest expenses

411

387

Construction in progress

1,061

1,112

Extra retirement payments

90

84

Accumulated depreciation(67,894)(71,694)

80,69880,844

Intangible assets
Goodwill—

755

Customer related assets

—

1,739

Other intangible assets

1,729

1,873

Total intangible assets

1,729

4,368

Long-term loans receivable
Asset for retirement benefits
Deferred tax assets
Other
Allowance for doubtful
accounts
Total investments and otherassetsTotal fixed assets
Total assets

Kyudenko Corporation

63,194

61,175

144,790

137,201

Shareholders’ equity
Common stock

12,561

12,561

Capital surplus

12,987

12,987Retained earnings

195,601

214,655

Treasury stock

675

Provisions of allowance for doubtful accounts subsidiary

236

35

Other

109

52

Total non-operating expenses

853

635

35,90636,828

Payment fees

Net assets

Total shareholders’ equity

Investments and other assets
Investments in securities

Total liabilities

Non-operating expenses

(8)

(9)

221,141

240,194

Accumulated othercomprehensive loss

Ordinary profit
Extraordinary income
Gain on sales of property and equipment

55

4Gain on sales of investments in securities

1,294

811

Total extraordinary income

1,350

816

Extraordinary loss
Loss on disposal and sales of fixed assets

184

286

Loss on sales of investments in securities

66

36

Impairment loss on investments in securities

133

489

Penalty89—

Total extraordinary loss

472

811

Unrealized holding gain on
securities

3,998

1,848

Unrealized loss on hedging
instruments

(381)

(218)

Translation adjustments

105

208

Profit before income taxes

36,78436,833

5,279

Retirement benefit liability
adjustments(5,057)(2,898)

Income taxes – current

11,337

11,365(1,764)(979)

Total accumulated othercomprehensive loss

(1,334)(1,059)

Income taxes – deferred

258

(871)

Total income taxes

Non-controlling interests

2,059

10,49376,203

1,933

11,596

71,530

Profit25,18826,339161,416

Total net assets

221,741

241,194

1,256

313

554

6,124

3,507

4,288

4,781

153,957
366,532

378,396

Total liabilities and net assets

366,532

378,396

4. Data Section

Total property andequipment

59(Unit: million yen)

Profit attributable to non-controlling interests
Profit attributable to owners of parent

145

123

25,042

26,216KYUDENKO REPORT 2022

60

4. Data Section

Consolidated Statement of Cash Flows

Corporate Profile and Stock Information
Corporate profile(Unit: million yen)

FY2020

FY2021

Corporate Name Kyudenko Corporation
Established
December 1, 1944
Head Office
1-23-35 Nanokawa, Minamiku, Fukuoka city,
815-0081 JAPAN
Tel: +81-92-523-1691
Fax: +81-92-524-3269
Capital12,561 million yen
Number of(Consolidated) 10,425(Non-consolidated) 6,473
Employees

Cash flows from operating activities
Profit before income taxes

36,78436,833

Depreciation and amortization

5,739

5,791

Increase (decrease) in allowance for doubtful accounts

233

(152)

Increase in retirement benefit asset—(2,860)(3,343)

(907)

48

123

(1,054)(910)

Interest and dividend income

(814)

(796)

Interest expenses

411

387

Foreign exchange gain

(60)

(126)

Equity in earnings of affiliates(431)(1,201)Gain on sales of property and equipment, net

(29)

(4)

Loss on disposal of fixed assets

157

282

Impairment loss on investments in securities

133

489

Gain on sales of investments in securities(1,228)(775)

Decrease (increase) in notes and accounts receivable on completed construction contracts

8,915(4,786)

Decrease in liability for retirement benefits and provision for retirement benefits for directors (and other officers)
Increase in provision for loss on construction contracts
Gain on investments in partnership

Construction
Approved by Minister of Land, Infrastructure, Transport Major Offices
Business License and Tourism (Sp.29) No.1659
Electrical Contracting Work Civil Engineering BusinessTelecommunications
Architectural andEngineering
Construction Business
Firefighting Facilities Work Paving Work
Plumbing Work
Scaffolding and Excavation
Machinery, Equipment, and Business
Facility Work
Steel Structure Work
Water Supply Facilities
Interior Finishing Business
Work
Sanitation Facilities Work

Stock information
Every year from April 1 to March 31 in the following year

Total number of authorized shares

250,000,000 shares

Held every year in June

Total outstanding shares

70,864,961 shares

Number of shareholders

7,372

Record date of dividends
payment

Year-end March 31
Interim September 30

Method of public noticeElectronic public notice will be posted on the Company’s website(https://www.kyudenko.co.jp). However, if an electronic public
notice cannot be made due to an accident or other unavoidable
reason, it will be posted on the Nihon Keizai Shimbun.

Stock exchange listing

Prime Market of Tokyo Stock Exchange
Fukuoka Stock Exchange

1,374

585

Stock index

JPX-Nikkei Index 400(8,266)

Securities code

1959

(Decrease) increase in notes and accounts payable on construction contracts(14,206)

153

Category of business

Construction

Decrease in advances received on uncompleted construction contracts(8,043)(3,923)

Trading unit of shares

100 shares

Shareholder registry

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo

(11)

(2)

Increase (decrease) in consumption taxes, net

4,020(6,036)

Other, net

3,706

2,298

Subtotal

19,335

16,193793

796Interest expenses paid

(411)

(387)

(10,533)(11,350)

9,184

5,252

(1,137)(1,352)

Income taxes paid
Net cash provided by operating activities

administrator
Office of administrator

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property and equipment
Proceeds from sales of property and equipment
Payments of disposal of property, plant and equipment

921

1,732

(2,945)(3,931)

103

169

(4)

(210)

Purchase of investments in securities(6,458)(4,817)

Proceeds from sales of investments in securities

6,534

3,992

Purchase of shares of subsidiaries resulting in change in scope of consolidation—(2,871)

Payments for sale of subsidiaries’ shares resulting in changes in scope of consolidation

(47)

—

Payments of long-term loans receivable

(167)

(127)

Collection of long-term loans receivable

93

153

Other, net(1,124)(273)

Net cash used in investing activities(4,232)(7,536)

Net decrease in short-term borrowings

(5)

(34)

Proceeds from long-term debt

55—

Repayments of long-term debt

(1,769)(1,811)(0)(1)

Cash flows from financing activities

Purchase of treasury stock
Cash dividends paid

(7,084)(7,086)

Cash dividends paid to non-controlling shareholders

(4)

(2)

Repayments to non-controlling shareholders

(21)

(22)

Purchase of subsidiaries’ shares not resulting in changes in scope of consolidation(1)—

Other, net(1,232)(1,233)

Net cash used in financing activities(10,064)(10,191)

(51)

301

Net decrease in cash and cash equivalents(5,164)(12,175)

Cash and cash equivalents at the beginning of the year

54,96449,800—166

49,80037,791

Effect of exchange rate changes on cash and cash equivalents

Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation
Cash and cash equivalents at the end of the year

Stock Transfer Agency Business Planning Dept., Sumitomo Mitsui
Trust Bank, Limited
https://www.smtb.jp/personal/procedure/agency/(Mailing address)
2-8-4 Izumi, Suginami-ku, Tokyo, 168-0063(Contact number)Phone 0120-782-031 (toll-free in Japan)[Weekdays 9:00-17:00]

Major shareholders(as of March 31, 2022)
Number of shares held
(thousand shares)

Name

Shareholding ratio (%)

15,980
7,156
4,159
3,249
3,133
1,911
1,306
1,300
1,287
1,142

Kyushu Electric Power Company, Incorporated
The Master Trust Bank of Japan, Ltd. (trust account)
Custody Bank of Japan, Ltd. (trust account)
THE NISHI-NIPPON CITY BANK, LTD.
The Bank of Fukuoka, Ltd.
Kyudenko Employees Shareholding Association
SSBTC CLIENT OMNIBUS ACCOUNT
Kyudenko Labor Union
THE BANK OF NEW YORK MELLON 140044
Nishi-Nippon Railroad Co., Ltd.

22.55
10.10
6.38
4.58
4.42
2.70
1.84
1.83
1.82
1.61

Note: Shareholding ratio is calculated excluding treasury stock (671 shares).

Distribution of shares(as of March 31, 2022)

Individuals and others
6,912
10,214 thousand shares (14.4%)

Other domestic corporations
110
21,600 thousand shares (30.5%)

Foreign individuals
264
14,390 thousand shares (20.3%)

Financial institutions
50
23,751 thousand shares (33.5%)

Securities companies
35
908 thousand shares (1.3%)

Treasury stock 1
0 thousand shares (0.0%)

4. Data Section

Interest and dividend income received(as of March 31, 2022)

Annual general meeting ofshareholders(12,964)

Decrease in long-term accounts payable

Status of sharesFiscal year

Increase in inventories

Decrease in costs of uncompleted construction contracts[Japan]Kagoshima Branch Office
Head Office
Kumamoto Branch Office
Tokyo Head Office
Fukuoka Branch Office Nagasaki Branch Office
Saga Branch Office
Kitakyushu Branch
Kansai Branch Office
OfficeOkinawa Branch Office
Oita Branch OfficeMiyazaki Branch Office Uku Project Development
OfficePolicy on dividends of surplus and trend of dividends
Policy on dividends of surplus
With respect to profit distribution, we will strive to maintain a soundfinancial position and make appropriate returns to shareholders whilestrengthening our management base to improve performance andsecuring internal reserves necessary for further business expansion.
With respect to dividends, we will meet the expectations of ourshareholders by maintaining continuous and stable dividend payment,
based on a consolidated payout ratio target of 25%, comprehensively
considering the business environment, performance, and financial
condition.

Trend of dividends
2018.32019.32020.32021.32022.32023.3(forecast)Interim dividends

40 yen50 yen50 yen50 yen50 yen50 yenYear-end dividends

50 yen50 yen50 yen50 yen50 yen50 yenTotal

90 yen

100 yen

100 yen

100 yen

100 yen

100 yenRating information(as of March 31, 2022)

Name of rating institution

Name of rating

RatingRating and Investment Information, Inc. (R&I)

issuer ratingA-

Trend of stock price/volume
Kyudenko stock price

Nikkei 225 stock price
(Yen)

(Yen)

6,000

30,0004,000

20,0002,000

10,00000Volume(Thousand shares)

1,200
600
0
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2016
2018
2019
2020
2021
2022
2017

61

Kyudenko Corporation(year)KYUDENKO REPORT 2022

62

4. Data Section

Business Locations
Facility work

Overseas Locations

Material sales

Real estate

Software development

Power generation

OthersDomestic Locations
Japan Head Office
Uku Project Development Office
Nagasaki Branch Office
Saga Branch Office
Head Office, Fukuoka Branch Office andFukuoka regional office

Kyulien Environment Improving Co., Ltd.
Line of business: Environmental analysis, electrical works

Kyudenko (THAILAND) Co., Ltd.
Line of business: Electrical works, HVAC and sanitaryfacility works and energy-saving works

Kitakyushu Branch Office

Kyudenko Vietnam Co., Ltd.
Line of business: Electrical works, HVAC and sanitaryfacility works and consulting service on construction technology

Oita Branch Office

Kyudenko Malaysia Sdn. Bhd.

Kumamoto Branch OfficeMiyazaki Branch Office
Kagoshima Branch OfficeLine of business: Electrical works, HVAC and sanitaryfacility works and fire prevention facility works

Kyudenko South East Asia Pte. Ltd.
Line of business: Regional headquarter of Kyudenko’s

Tohoku regional officeoverseas business development in South East Asia region,
operating support to local subsidiaries

Saitama regional office
Tokyo Head Office andTokyo regional office
Yokohama regional office

Asia Projects Engineering Pte. Ltd. (APECO)ＡＰＥＣＯLine of business: Plant installation works,

maintenance and EPC works and district cooling facilities works

Nagoya regional officeKansai Branch Office
Kobe regional office

Kyudenko Indonesia Rep. OfficeLine of business: Diffusion and commercialization of EMS

Myanmar Branch Office

Chugoku regional officeLine of business: Electrical works, HVAC and sanitary facility works

Yamaguchi regional office
Okinawa Branch Officekyu-denko home, Inc.

Facility work

Choei Co., Ltd.

No.49, Ln.90, Gong 5th Rd., Longtan District, Taoyuan City, Taiwan

Material sales

Q-mast Co., Ltd.

Facility work

Chohoku densetsu Co., Ltd.

Facility work

Setsubihoshu center Co., Ltd.

Facility work

Kyusetsukougyou Co., Ltd.

SoftwareAutomation technology Co., Ltd.

Kyudenko Malaysia Sdn. Bhd.

OthersNet medical center Co., Ltd

Otherskyudenko hokuzan kanko Co., Ltd.

59-8 The Boulevard, Mid Valley City, No.1, Medan Syed Putra Utara 59200 Kuala Lumpur Malaysia

OthersPortal Co., Ltd.

Facility work

Jinnouchikoumuten Co., Ltd.

Others

Kyudenko friendly Co., Ltd.

Facility work

Ariake densetsu Co., Ltd.

Others

Bayside place hakata Co., Ltd.

Kyudenko Vietnam Co., Ltd.

Facility work

Kakusokukeisou Co., Ltd.

No.170, Tran Quang Khai st., Tan Dinh Ward, District 1, Ho Chi Minh City, Vietnam

Facility work

Fukuoka densetsu.Co., Ltd.

Facility work

Chikugo densetsu Co., Ltd.

Facility work

Fukuto densetsu Co., Ltd.

Facility work

Kyukousogosetsubi Co., Ltd.

Kyudenko (Thailand) Co., Ltd.

Facility work

Fukusetsu Co., Ltd.

Facility work

Kyutie Co., Ltd.

Unit 16B, Floor 16, Bangnathani Building, 1/33, Soi Bangna-Trad 34, Bangna Sub-district, Bangna District, Bangkok

Facility work

Kitasetsu Co., Ltd.

Facility work

Chuorika Kougyo Co., Ltd. (8 other companies)

ThailandFacility work

Nagasaki

Real estate

VietnamFacility work

Oita
Singapore
Facility work

Asia Projects Engineering Pte. Ltd.
32 Penjuru Road, Singapore 609136

Facility work

(as of March 31, 2022)

Kyulien Environment Improving Co., Ltd.

Malaysia
Facility work

Domestic consolidated subsidiaries (52 companies)
Fukuoka

TaiwanOthers(as of March 31, 2022)

Kyudenko South East Asia Pte. Ltd.
32 Penjuru Road, Singapore 609136

4. Data Section

Overseas group companies

Saga

MiyagiPower generation Natori mega solar kyudenko green kikaku limited liability
partnership
Tokyo

Chiba

Facility work

Oita densetsu Co., Ltd.

Facility work

Fusokogyo Co., Ltd.

Kanagawa

Facility work

Facility work

Meikousha Co., Ltd.

Ibaraki

Facility work

Miyaei Co., Ltd.

Facility work

MiyazakiKagoshima

Facility work

Syoueidensetsu Co., Ltd.
Ergotech Co., Ltd.
Seiwakougyou Co., Ltd.

Fukushima

OthersThree in Co., Ltd.

Facility work

Minamikyushu densetsu Co., Ltd.

Facility work

Kaei densetsu, Co., Ltd.

Facility work

Koteradengyo Co., Ltd.

Facility work

Kyukinsetsubikogyo Co., Ltd

Facility work

Kawachikougyou Co., Ltd.

Power generation Shibushi mega solar power generation Co., Ltd.
Power generation Kagoshima solar farm, Co., Ltd.

Facility work

Sanyudensetsu Co., Ltd.

Osaka

Okinawa
Facility work

Ryuhou Engineering Corporation

Kumamoto

63

Kyudenko Corporation

Facility work

Yuei densetsu Co., Ltd.

Facility work

Kuma densetsu Co., Ltd.

Facility work

Higo-setubi Co., Ltd.

KYUDENKO REPORT 2022

64

Kyudenko Corporation
1-23-35 Nanokawa, Minamiku, Fukuoka city, 815-0081 JAPAN
Tel: +81-92-523-1691 Website: https://www.kyudenko.co.jp/
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